G.R. No. L-66826 August 19, 1988
BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. THE INTERMEDIATE APPELLATE COURT and ZSHORNACK, respondents.

FACTS

The original defendant was Commercial Bank and Trust Company (COMTRUST), later absorbed by petitioner Bank of the Philippine Islands (BPI). Private respondent Rizaldy Zshornack maintained dollar savings and peso current accounts with COMTRUST. On October 27, 1975, COMTRUST’s assistant branch manager, Virgilio Garcia, accomplished an application for a US$1,000 dollar draft payable to Leovigilda Dizon, indicating it was to be charged to Zshornack’s dollar account. The corresponding draft was issued. Zshornack discovered the unauthorized debit and demanded an explanation. The bank inconsistently claimed the peso equivalent was either given to Zshornack’s brother, Ernesto Zshornack Jr., during an unrelated transaction, or was used to fund Zshornack’s peso current account per a supposed agreement.
For the second cause of action, on December 8, 1975, Zshornack entrusted US$3,000 in cash to COMTRUST for safekeeping, as evidenced by a receipt. The bank failed to return the money upon demand. The trial court ruled for Zshornack on both counts, and the Intermediate Appellate Court modified the decision, absolving the bank from liability for the US$3,000 but ordering restoration of the US$1,000 and awarding damages. BPI appealed to the Supreme Court.

ISSUE

1. Whether BPI (as successor to COMTRUST) is liable for the unauthorized withdrawal of US$1,000 from Zshornack’s dollar account.
2. Whether Zshornack can recover the US$3,000 entrusted to the bank for safekeeping.
3. Whether the award of damages was proper.

RULING

1. On the first cause of action (US$1,000 withdrawal): Yes, BPI is liable. The Court found the bank’s justifications untenable and inconsistent. The claim that the peso equivalent was paid to Ernesto Zshornack Jr. failed, as Ernesto is a separate juridical person from the depositor Rizaldy, and the unrelated encashment of a cashier’s check did not justify the debit. The alternative claim of an agreement to fund the peso account was unsupported by evidence; the records showed the withdrawn amount financed a dollar draft for a third party, with no proof of crediting to Zshornack’s peso account. The withdrawal was unauthorized, making the bank liable for restoration with interest.
2. On the second cause of action (US$3,000 safekeeping): No, Zshornack cannot recover. The transaction constituted a depositum (contract for mere safekeeping) of foreign exchange. However, Central Bank Circular No. 20 required Philippine residents to sell foreign exchange to authorized agents within one business day. The agreement to safekeep the dollars without such sale violated this mandatory/prohibitory law. Under Article 1411 of the Civil Code, both parties being in pari delicto (in equal fault) for an illegal contract, neither has a cause of action against the other. The only remedy lies with the State to prosecute the violation.
3. On damages: The award of P8,000 as litigation expenses and attorney’s fees was sustained as reasonable, stemming from the bank’s failure to restore the US$1,000 and return the US$3,000, which compelled the suit.
The Supreme Court modified the appellate decision, ordering BPI to restore US$1,000 with interest and pay P8