G.R. No. L-1729; July 23, 1949
EVERETT STEAMSHIP CORPORATION, plaintiff-appellee, vs. BANK OF THE PHILIPPINE ISLANDS, defendant-appellant.

FACTS

Plaintiff Everett Steamship Corporation, a corporation with majority American and British stockholders, maintained a pre-war deposit with defendant Bank of the Philippine Islands (BPI). The balance was P53,175.51 as of December 29, 1941. During the Japanese occupation, the plaintiff’s officers were interned. In 1943, the Japanese Military Administration issued ZAI Order No. 257, directing local banks to transfer all deposit accounts of “hostile people” (including enemy corporations) to the Bank of Taiwan, Ltd., as depositary of the Bureau of Enemy Property Custody. In compliance, BPI transferred the plaintiff’s deposit balance to the Bank of Taiwan. After liberation, the plaintiff presented a check to BPI for the amount, but BPI refused payment, citing the forced transfer. The plaintiff sued to recover the deposit.

ISSUE

Whether the transfer of the plaintiff’s deposit by BPI to the Bank of Taiwan, under compulsion of a Japanese military order, constituted a valid payment that released BPI from its obligation to the plaintiff.

RULING

Yes. The Supreme Court, applying the doctrine in Haw Pia vs. China Banking Corporation, ruled that the Japanese Military Administration’s order did not effect a confiscation of the plaintiff’s credit but a mere sequestration of enemy private property. The transfer of the deposit to the Bank of Taiwan, as the designated custodian, was therefore a valid payment by BPI. Consequently, BPI’s obligation to the plaintiff was extinguished. The judgment of the lower court ordering BPI to pay the plaintiff was reversed, and BPI was absolved from the complaint.

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