1

CITIBANK MANILA & FCNB FINANCE V SABENIANO (2006)

Pet for review on certiorari, 45
Petitioners: Citibank, FNCB Finance
Respondent: Modesta Sabeniano (client of both companies)



1. 1976 (findings of SC) Sabeniano made money market placements with Citibank, there were several roll
overs. Citibank claimed it her the amount and she denied receiving it.
2. 1978- Sabeniano was granted several loans by Citibank for which she executed promissory notes
[finding of SC- totality of Citibanks evidence] .
3. January 1979: The aggregate principal amount Sabeniano owed to Citibank reached Php1.9M
(sufficiently documented)
4. Sabeniano default- failed to pay upon maturity of the loans and hence they were rolled-over several
times. Sabeniano executed new Promissory Notes. As security for the loans, Sabeniano executed
the following
o Deed of Assignment in favor of Citibank wherein she assigned her rights to her money
market placements in FNCB Finance, 500k + another deed of assignment for 500k
o Alleged Declaration of Pledge (dated Sept 1979), wherein she pledged in favor of Citibank
all present & future funding placements she has with Citibank Switzerland
-petitioners copy undated while the Citibank Geneva Officers copy was dated Sept 24,
1979
5. 1979, Sabenianos obligations totaled to Php2.1M and became due: Citibank applied the proceeds of
her money placements in FNCB to her loan, her deposit account with Citibank Manila, as well as
those in her deposit accounts in Citibank Switzerland
Citibank version
Citibank claimed there was an exchange of letters after default. Sabeniano allegedly issued a Comtrust
chec, followed by a telegram, then 2 eltters authorizing Citibank to debit the outstanding loan. DONE.
Followed by letter from Citibank to sabeniano of status of loans, still remaining obligations of 1M.Citibank
sent letter to Sabeniano re. set off of Geneva accounts- fire gutted 7
th
floof or Citibank.
Sabeniano version
Sabienao denied having any outstanding loans with petitioner Citibank. Admitted she borrowed but
extinguished= presented payment of provisional receipts for first set of PNSs. She likewise denied that she
was duly informed of the off-setting or compensation thereof made by petitioner Citibank using her deposits
and money market placements with petitioners. Claimed that simulated loans were bec she was had a
pending loan app with DBP.
Sabieano instituted a complaint for "Accounting, Sum of Money and Damages" before RTC. Filed an
Amended Complaint to include deposits and money market placements she left out.
Answer of Citibank MTD,she has deposits and money market placements but this was used to set of
her loans (evidences by PNs and secured by Pledge and Assignment), exercised right to set-off after
informing her,
RTC: declared the act of setting-off illegal, null and void. Citibank refund $149k amounts plus interest.
Sabeniano pay Citibank 1M, for her indebtedness.

CA: affirmed the decision with modification. Citibank refund $149k amounts plus interest. BUT Citibak did
not prove that Sabeniano was indebted to her so no need to pay it 1m.


SC:
Preponderance of evidence! As a whole evidence adduced by Petiitoners outweighs that of respondents.
Sabeniano had outstanding loans with Citibanj at the time it effected the offset or compensation (using the
savings account, using proceeds of money market placements, and dollar accounts) Outstanding obligation
of 1.9 M. Citibank paid proceeds of loan through manager checks (crossed)


WON RTC violated best evidence rule? NO

Sabeniano denies liabity on 2
nd
set of PN-not substantiated
CITIBANK supported by testimony of officers, available docus, treated PNs as regular loans,
Booking procedure, microfilm of original copies of all bank documents (placed in vault)

2
CA dismissed the documentary evidence submitted by Citibank bec, did not conform with best evidence rule
(highest degree of proof available for docs)
Sc: RTC did not violate the best evidence rule whne it considered and weighed in evidence the
photocopies, microfilm copies of the PNs, MCs and letters submitted by Citibank to establish the
existence of the loans
Terms or contents of docs were never in contention

Sabeniano claims:
that the first set never existed, while the 2
nd
were executed to cover simulated loan transactions.
MCS- either denied receipt f them or admitted receipt f the others for another purpose.
The exchange of letters were merely a ruse of the simulated loans- questioned as to existence or execution,
nothing to do with contnets

130(5):
execution or existene of original copieso f docs was established through the testimonies of the
witnesses such as Tan before whome the docs were executed by sabeniano
original PNs went through the loan booking system
original PNs seen by processors, etc.
FNCB claimed to lose the original copies when it moved to a new office.
Citibank- original copies of PNs were returned to borrower upon liquidation, were still looking for docs in
warehouse to explain delay but not absence or loss. Fire broke out- no showing that intentionaly set.
Sufficient to allow presentation of photocopies and micropfilm copies of PNs, MCs as SECONDARY
EVIDENCE to establish existence of loans (as EXCEPTION to best evidence rule)
ISSUES:
1. WON Citibank had the authority to set off Sabenianos loan with the money placements. YES
2. WON Citibank had the authority to set off the loans with her Citibank Switzerland dollar account. NO
No issue as to existence of Sabenianos loan obligations to Citibank. Proven sufficiently.

MONEY MARKET PLACEMENTS WITH CITIBANK
1976 (findings of SC) Sabeniano made money market placements with Citibank, there were several roll
overs. The genuineness and due execution of the PNs are uncontested, Sabeniano was able to establish
prima facie that Citibank is liable to her for the amounts.
Citibank claim: already paid the principal amounts of the PNs upon maturity and used it to open 2 time
deposit accounts.
Paper trial ends with the 2 PNs, presented 2 officers (decade later), oral testimony but no details re.
opening of time deposit account, date of payment of PNs, mode of payment
Evidence of opening of account never presented or more part of records of case. Mr Pujeda attempted
to present a Xerox copy- blurred and hardly readable, asked for continuance but never mentioned it
failed to prove that the PNS had been paid.1978
SC: PNs are still outstanding and Citibank is liable to Sabeniano for the amounts stated
These obligations are separate and distinct from the obligation of petitioner FNCB finance arising from
the money market placements with Citibank

MONEY MARKET PLACEMENTS WITH FNCB

FNCB presented 4 checks as proof of payment of the principal amounts of the 2 PNs. Sabeniano
admitted the issuance of the checks but qualifications proceeds were turned over to Citibank. Did not
clarify circumstances on this,
Citibank claimed that the proceeds (500k and 600k) were used to liquidate outstanding proceeds

Requisites of a valid compensation
1278: Compensation shall take place when 2 persons are creditors and debtors of each other
1279: In order that compensation may take place, it is necessary:
a. That each one of the obligors be bound principally, and that he be at the same time a principal
creditor of the other
b. That both debts consist in a sum of money, of if the things due are consumable, that they be of
the same kind and quality
c. That the 2 debts are due
d. That they be liquidated and demandable
e. That over neither of them there be any retention or controversy, commenced by third persons
and communicated in due time to the debtor.
3

Issue #1: WON Citibank had the authority to set off Sabenianos loan with the money placements.
YES

At or after the maturity of this note, or when same becomes due under any of the provisions hereof, any
money, stocks, bonds, or other property of any kind whatsoever, on deposit or otherwise, to the credit of the
undersigned on the books of CITIBANK, N.A. in transit or in their possession, may without notice be applied
at the discretion of the said bank to the full or partial payment of this note.


A. Compensation of outstanding loans with her deposit account with Citibank. VALID THROUGH
COMPENSATION- worth 31k
Deeds of assignment of money market placements were notarized = public docs, admissible in
evidence
She denied ever executing them, but here is proof that she did
Sabeniano admitted executing them but claimed that the loans for which they were executed were already
paid
Requisites for valid compensation/set-off present.
Citibank was Sabenianos creditor with regard to the loan, loan was due
Sabeniano is Citibanks creditor with regard to her deposit account (viewed as mutuum or simple loan),
savings account was demandable at any time
Citibank had the right to effect the set off of Sabenianos loan with her deposit account amounting to
Php31K

B. Compensation of outstanding loan with the FNCB money market placements amounting to
Php1.02M. VALID PLEDGE
Not compensation because they were not creditors and debtors bound principally to each other at
the same time.
Money market placements: Saebiano was creditor and FNCB was debtor
Outstading loans: Saebiano debtor and Citibank was creditor

BUT! Authorized to do so based on the Deed of Assignment which was in the nature of a PLEDGE
executed by Sabeniano which gave the bank the authority to use as security for her loans her money market
placements with FNCB.
The money placements were given as security for her loan obligations, obligation was partly
extinguished through the application of the security given for her loans. Pledge by Saebiano to Citibank
of her credit due from FNCB by virtue of her money market placements.
Art. 2118- if credit pledged becomes overdue, pledgee may collect and receive the amount due. Apply
the same to payment of his claim, deliver surplus to pledgor (if any) Her notes matured on Sept 1979,
without them redeemed by Saebiano so Citibank could collected from FNCB the proceeds amounting to
1M and applied the same to the loans leaving no surplus.

DESPITE THE COMPENSATION AND PLEDGE STILL REMAINING BALANCE OF 1.06M THUS
ISSUE #2

Issue #2: WON Citibank had the authority to set off the loans with her Citibank Switzerland dollar
account. NO

Court believed computation of Geneva Bank, $150k because her computation was self preserving, issue of
WON she was entitlted to the return o the amount. Did not appeal

Compensation of outstanding loan with Sabenianos dollar accounts in Citibank Geneva ($150K).
NOT VALID

SABENIANO CLAIMED IT WAS A FORGERY
-denied that it was her signature, best evidence rule applies
-best evidence is the instrument itself
-fact of forgery can only be established by comparing the alleged forged signature nad the authentic and
genuine signature
-comparison based on a mere Xerox copy or reproduction of the document cannot produce reliable results

4
PRESUMPTION evidence willfully suppressed would be adverse to the party if produced
-several attempts orders by RTC for Citibank to produce docs, did not, claimed that it was with Citiabank of
Geneva
-did not prove that it exerted diligence or the reason why Citibank Geneva refused to give it back

NO AUTHOIRTY TO DEMAND REMITTANCE OF DOLLAR ACCOUNTS WITH GENEVA BANK

Citibank failed to prove due execution and authenticity of the Declaration of pledge.
The declaration was not notarized (though notarization not required, it would have proven due
execution) odd because Deeds of Assignment of promissory notes were authorized vs. this which
involved respondents all present and future fiduciary placements with Citibank brank
Date the declaration was allegedly executed by Sabeniano (24 Sept 1979), her passports and plane
tickets show that the was actually out of the country (copy of the Citibank Geneva) vs. Citibank copy
was undated
The Declaration of pledge was irregularly filled out:
The pledge was in a standard printed form. It was constituted in favor of Citibank, N.A., otherwise
referred to therein as the Bank. It should be noted, however, that in the space which should have
named the pledgor, the name of petitioner Citibank was typewritten, to wit
The pledge right herewith constituted shall secure all claims which the Bank now has or in the future
acquires against Citibank, N.A., Manila (full name and address of the Debtor), regardless of the legal
cause or the transaction (for example current account, securities transactions, collections, credits,
payments, documentary credits and collections) which gives rise thereto, and including principal, all
contractual and penalty interest, commissions, charges, and costs.
The pledge, therefore, made no sense, the pledgor and pledgee being the same entity.
- The parties in these transactions were evidently not the principal creditor of each other.
- dollar accounts: Saebiano was the creditor and Citibank-Geneva is the debtor;
outstanding loans: Citibank was the creditor and Saebiano was the debtor.
Citibank & Citibank Geneva are 2 distinct entities.

SUMMARY:
1. Citibank is ORDERED to return to respondent the principal amounts of the 2 PNs, amounting to
318k and 203k plus the stipulated interest of Fourteen and a half percent (14.5%) per annum,
beginning 1977 March
2. remittance US$149k from respondent's Citibank-Geneva accounts to petitioner Citibank in Manila,
and the application of the same against respondent's outstanding loans with the latter,
is DECLARED illegal, null and void. Petitioner Citibank is ORDERED to refund.
3. Citibank is ORDERED to pay moral damages 300k and Atty fees 200k
4. Respondent is ORDERED to pay petitioner Citibank the balance of her outstanding loans, which,
from the respective dates of their maturity to 5 September 1979, was computed to be in the sum of
1.6 M inclusive of interest. These outstanding loans shall continue to earn interest, at the rates
stipulated in the corresponding PNs, from 5 September 1979 until payment thereof

Citibank v Sabeniano (2007)
Best Evidence Rule // J. Chico-Nazario

[RESOLUTION ON MOTION FOR RECONSIDERATION]

In the first case, the Court declared that the declaration of pledge between FNCB Finance and Sabeniano
was irregular.

The pledge was for the Geneva-Dollar Accounts of Sabeniano in favor of Citibank. The effect was that they
cannot apply the proceeds to her loan, they had to refund the amount to Sabeniano.

Now, Citibank files an MR stating that the SC erred in declaring the pledge null and void.

Contention of Citibank
The pledge of the Geneva dollar acounts is authentic, hence, valid and binding upon respondent
Even without pledge, set-off was allowed under the terms in the PNs.
This alternative argument is anchored on the premise that all branches of petitioner Citibank in the
Philippines and abroad are part of a single worldwide corporate entity and share the same juridical
personality.
5
In connection therewith, petitioners deny that they ever admitted that Citibank-Manila and Citibank-
Geneva are distinct and separate entities.

DISPOSITIVE: MR DENIED.

(Short story of MR: Sabeniano claimed in the first case that it was forged. But Citibank did not show proof
that it was not, they refused to give the original which is important because the contents are at issue and
forgery was imputed, best evidence rule must apply. They submitted photocopies and until now still did
not give reason why they cannot produce it, nor show proof that it was procured through diligent efforts from
the Geneva branch. Hence, presumption that evidence willfully supressed is adverse to the party who
is supposed to offer the same)



FULL DISCUSSION:

SC DISCUSSION ON PLEDGE IN THE 2006 CASE:
It was irregularly filled-out
The pledge was in a standard printed form
Pledgor and pledgee is the same entity

Actual pledge quoted:
The pledge right herewith constituted shall secure all claims which the Bank now has or in the future
acquires against Citibank, N.A., Manila (full name and address of the Debtor), regardless of the legal
cause or the transaction (for example current account, securities transactions, collections, credits,
payments, documentary credits and collections) which gives rise thereto, and including principal, all
contractual and penalty interest, commissions, charges, and costs.

The pledge, therefore, made no sense, the pledgor and pledgee being the same entity.
The Court said that there was a possibility of a mistake. But since the amounts considered are so high, it is
gross negligence this casts doubt as to the due execution of the pledge.
The SC said that the Declaration of Pledge had passed through the hands of several bank officers in the
country and abroad, yet, surprisingly and implausibly, no one noticed such a glaring mistake.

Sabeniano also denied having executing the same. She alleges that her signature was forged.

BEST EVIDENCE RULE APPLIED IN THIS CASE
The subject of the inquiry is the contents of a document, hence, no evidence is admissible other than the
original, especially because there was an allegation of forgery

Re: Forgery
Must be proved by clear, positive and convincing evidence.
Burden is on the party alleging the forgery
The best evidence of a forged signature in an instrument is the instrument itself reflecting the
alleged forged signature.
The fact of forgery can only be established by a comparison between the alleged forged signature and the
authentic and genuine signature of the person whose signature is theorized upon to have been forged.

Without the original document containing the alleged forged signature, one cannot make a definitive
comparison which would establish forgery.
A comparison based on a mere xerox copy or reproduction of the document under controversy
cannot produce reliable results.

Sabeniano made several attempts to have the original copy of the pledge produced before the RTC so as
to have it examined by experts.
Citibank failed to comply with the production of the original Declaration of Pledge despite RTC
demands

It is admitted that Citibank-Geneva had possession of the original copy of the pledge.

6
Citibank did not present any evidence to convince the SC that it exerted diligent efforts to secure
the original in the possession of Geneva nor give a reason why Geneva branch did not give it back
when it is vital for Citibanks case

There is thus no justification to allow the presentation of a mere photocopy of the Declaration of Pledge in
lieu of the original, and the photocopy of the pledge presented by petitioner Citibank has nil probative value.

Presumption: Willfully supressed the original pledge adverse to them
In addition, even if this Court cannot make a categorical finding that respondents signature on the original
copy of the pledge was forged, it is persuaded that petitioner Citibank willfully suppressed the presentation
of the original document, and takes into consideration the presumption that the evidence willfully suppressed
would be adverse to Citibank if produced.

As far as the Declaration of Pledge is concerned, petitioners failed to submit any new evidence or argument
that was not already considered by this Court when it rendered its Decision