BPS vs first metro investment corporation

Facts: FMIC through executive vice president Ong deposited 100 million with BPI through an
agreement with Jaime Sebastian branch manager of BPI in order to increase the deposit level of his
branch. FMIC will deposit 100m for one year with 17% interest per annum to be paid in advanced
which it did in the amount of 14,667,687.

On august 29,1989, bpi transferred 80 million from the account of FMIC to tevesco arrastre-
stevedoring (tevesteco) based on an authority to debit signed by ong and Theresa david, senior
manager of FMIC. Both ong and david denied the transfer claiming their signatures were falsified,
after which, FMIC issued a BPI FB check for 86 million payable to itself but was dishonoured as it was
drawn against insufficient funds. Then it filed a case for recovery of money with the RTC.

RTC ruled in favour of FMIC and such decision was affirmed by the CA.

Issue: whether the transaction entered into by ong and Sebastian is not valid considering that the
latter overstepped its authority into entering such agreement with ong.

whether the transaction entered into by ong and Sebastian is not valid considering that ong
was negligent in not inquiring into the authority of sebastian

Read also issues on interest.

Ruling: it is valid. We have held that if a corporation knowingly permits its officer, or any other
agent, to perform acts within the scope of an apparent authority, holding him out to the public as
possessing power to do those acts, the corporation will, as against any person who has dealt in good
faith with the corporation through such agent, be estopped from denying such authority.

"A bank holding out its officers and agent as worthy of confidence will not be permitted to profit by
the frauds which they may be enabled to perpetrate in the apparent scope of their employment; nor
will it be permitted to shirk its responsibility for such frauds, even though no benefit may accrue to
the bank therefrom. Accordingly, a banking corporation is liable to innocent third persons where the
representation is made in the course of its business by an agent acting within the general scope of
his authority even though the agent is secretly abusing his authority and attempting to perpetrate a
fraud upon his principal or some other person for his own ultimate benefit."

What transpires in the corporate board room is entirely an internal matter. Hence, petitioner may
not impute negligence on the part of respondent’s representative in failing to find out the scope of
authority of petitioner’s Branch Manager. Indeed, the public has the right to rely on the
trustworthiness of bank managers and their acts. Obviously, confidence in the banking system,
which necessarily includes reliance on bank managers, is vital in the economic life of our society.

Significantly, the transaction was actually acknowledged and ratified by petitioner when it paid
respondent in advance the interest for one year. Thus, petitioner is estopped from denying that it
authorized its Branch Manager to enter into an agreement with respondent’s Executive Vice
President concerning the deposit with the corresponding 17% interest per annum.
According to petitioner, had there been consolidation of these two cases, it would have been shown
that the ₱80 Million transferred to Tevesteco’s account were proceeds of a loan extended by
respondent FMIC to Tevesteco. Suffice it to state that as found by both the trial court and the
Appellate Court, petitioner’s transfer of respondent’s ₱80M to Tevesteco was unauthorized and
tainted with fraud.

Thus, we uphold the finding of both lower courts that petitioner failed to exercise that degree of
diligence required by the nature of its obligations to its depositors. A bank is under obligation to
treat the accounts of its depositors with meticulous care, whether such account consists only of a
few hundred pesos or of million of pesos.10 Here, petitioner cannot claim it exercised such a degree
of care required of it and must, therefore, bear the consequence.

Check marked with two parallel lines drawn diagonally across its face (usually on the upper left-
hand corner) with or without the words '&Co.' or 'not negotiable' between the lines. A crossed
check can only be deposited in a bank-account and (unlike a bearer check) cannot be cashed
over a bank's counter.

Promissory Note – unconditional promise to pay in writing made by one person to anther, signed by
the maker, engaging to pay on demand or a fixed determinable future time a sum certain in money
to order or bearer. When the note is drawn to maker’s own order, it is not complete until indorse by
him

Bill of Exchange – unconditional order in writing addressed by one person to another, signed by the
person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or
determinable future time a sum certain in money to order or to bearer.