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FACTS: Petitioner Citibank, N.A.

(formerly known as the First National City Bank) is a banking corporation duly
authorized and existing under the laws of the United States of America and licensed to do commercial banking
activities and perform trust functions in the Philippines.

- Petitioner Investor’s Finance Corporation, which did business under the name and style of FNCB Finance,
was an affiliate company of petitioner Citibank. It is now, by virtue of a merger, doing business as part of its
successor-in interest, BPI Card Finance Corporation (FNCB).

- Respondent Modesta R. Sabeniano was a client of both petitioners Citibank and FNCB Finance. Regrettably,
the business relations among the parties subsequently went awry.

- Respondent filed a Complaint against petitioners claiming to have substantial deposits and money market
placements with the petitioners, as well as money market placements with the Ayala Investment and
Development Corporation (AIDC), the proceeds of which were supposedly deposited automatically and directly
to respondent’s accounts with petitioner Citibank.

- Respondent alleged that petitioners refused to return her deposits and the proceeds of her money market
placements despite her repeated demands. In turn, petitioners admitted that respondent had deposits and
money market placements with them, including dollar accounts in the Citibank branch in Geneva, Switzerland
(Citibank-Geneva).

- Petitioners further alleged that the respondent later obtained several loans from petitioner Citibank, for which
she executed Promissory Notes (PNs), and secured by (a) a Declaration of Pledge of her dollar accounts in
Citibank-Geneva, and (b) Deeds of Assignment of her money market placements with petitioner FNCB
Finance.

- When respondent failed to pay her loans despite repeated demands by petitioner Citibank, the latter
exercised its right to off-set or compensate respondent’s outstanding loans with her deposits and money
market placements.

- Petitioner Citibank supposedly informed respondent Sabeniano of the foregoing compensation through
letters. Petitioners were surprised when six years later, respondent and her counsel made repeated requests
for the withdrawal of respondent’s deposits and money market placements with petitioner Citibank. Thus,
petitioners prayed for the dismissal of the Complaint and for the award of damages.

- The parties failed to reach a compromise during the pre-trial hearing, trial proper ensued and the parties
proceeded with the presentation of their respective evidence. Ten years after the filing of the Complaint, the
following decisions were rendered:

 Declaring as illegal, null and void the set-off effected by the defendant Bank [petitioner Citibank]
of plaintiff’s [respondent Sabeniano] dollar deposit with Citibank, Switzerland.
 Declaring the plaintiff [respondent Sabeniano] indebted to the defendant Bank.
 Dismissing all other claims and counterclaims interposed by the parties against each other.

- Court of Appeals rendered its Decision affirming with modification the RTC Decision, stating that ‘’As
defendant-appellant Citibank failed to establish by competent evidence the alleged indebtedness of plaintiff-
appellant, the set-off of P1,069,847.40 in the account of Ms. Sabeniano is hereby declared as without legal and
factual basis’’.

G.R. No. 152985 (Modesta R. Sabeniano vs. Court of Appeals, et al.)


- Petitioner failed to file the intended petition for review on certiorari within the period which expired on May 3,
2002, the Court Resolves to DECLARE THIS CASE TERMINATED and DIRECT the Division Clerk of Court to
INFORM the parties that the judgment sought to be reviewed has become final and executory.

G.R. No. 156132

- The instant Motion for Reconsideration is PARTIALLY GRANTED as Sub-paragraph (V) paragraph 3 of the
assailed Decision’s dispositive portion is hereby ordered DELETED.

ISSUES:

(1) Whether or not the Court of Appeals erred in not considering the photocopies and microfilm copies of the
PNs, MCs, and letters submitted by the petitioners to establish the existence of respondent’s loans.

(2) Whether or not the Best Evidence rule applies in cases where a document is assailed on the basis of
forgery.

HELD:

(1) YES. The totality of petitioners’ evidence as to the existence of the said loans preponderates over
respondent’s. Preponderant evidence means that, as a whole, the evidence adduced by one side outweighs
that of the adverse party.

- In general, the best evidence rule requires that the highest available degree of proof must be
produced. Accordingly, for documentary evidence, the contents of a document are best proved by the
production of the document itself, to the exclusion of any secondary or substitutionary evidence.

- The best evidence rule has been made part of the revised Rules of Court, Rule 130, Section 3, which reads

SEC. 3. Original document must be produced; exceptions. When the subject of inquiry is
the contents of a document, no evidence shall be admissible other than the original document
itself, except in the following cases:
(a) When the original has been lost or destroyed, or cannot be produced in court, without
bad faith on the part of the offeror;
(b) When the original is in the custody or under the control of the party against whom the
evidence is offered, and the latter fails to produce it after reasonable notice;
(c) When the original consists of numerous accounts or other documents which cannot
be examined in court without great loss of time and the fact sought to be established from them
is only the general result of the whole; and
(d) When the original is a public record in the custody of a public officer or is recorded in
a public office.

As the afore-quoted provision states, the best evidence rule applies only when the subject of the inquiry is the
contents of the document. The scope of the rule is more extensively explained thus

But even with respect to documentary evidence, the best evidence rule applies only
when the content of such document is the subject of the inquiry. Where the issue is only as to
whether such document was actually executed, or exists, or on the circumstances relevant to or
surrounding its execution, the best evidence rule does not apply and testimonial evidence is
admissible (5 Moran, op. cit., pp. 76-66; 4 Martin, op. cit., p. 78). Any other substitutionary
evidence is likewise admissible without need for accounting for the original.

Thus, when a document is presented to prove its existence or condition it is offered not
as documentary, but as real, evidence. Parol evidence of the fact of execution of the documents
is allowed (Hernaez, et al. vs. McGrath, etc., et al., 91 Phil 565). x x x
- This Court did not violate the best evidence rule when it considered and weighed in evidence the
photocopies and microfilm copies of the PNs, MCs, and letters submitted by the petitioners to establish
the existence of respondents loans. The terms or contents of these documents were never the point of
contention in the Petition at bar. It was respondents position that the PNs in the first set (with the
exception of PN No. 34534) never existed, while the PNs in the second set (again, excluding PN No.
34534) were merely executed to cover simulated loan transactions. As for the MCs representing the
proceeds of the loans, the respondent either denied receipt of certain MCs or admitted receipt of the
other MCs but for another purpose. Respondent further admitted the letters she wrote personally or
through her representatives to Mr. Tan of petitioner Citibank acknowledging the loans, except that she
claimed that these letters were just meant to keep up the ruse of the simulated loans. Thus, respondent
questioned the documents as to their existence or execution, or when the former is admitted, as to the
purpose for which the documents were executed, matters which are, undoubtedly, external to the
documents, and which had nothing to do with the contents thereof.

Alternatively, even if it is granted that the best evidence rule should apply to the evidence presented by
petitioners regarding the existence of respondents loans, it should be borne in mind that the rule admits of the
following exceptions under Rule 130, Section 5 of the revised Rules of Court

SEC. 5. When the original document is unavailable. When the original document has
been lost or destroyed, or cannot be produced in court, the offeror, upon proof of its execution
or existence and the cause of its unavailability without bad faith on his part, may prove its
contents by a copy, or by a recital of its contents in some authentic document, or by the
testimony of witnesses in the order stated.

- The execution or existence of the original copies of the documents was established through the
testimonies of witnesses, such as Mr. Tan, before whom most of the documents were personally
executed by respondent. The original PNs also went through the whole loan booking system of
petitioner Citibank from the account officer in its Marketing Department, to the pre-processor, to the
signature verifier, back to the pre-processor, then to the processor for booking.

- The original PNs were seen by Ms. Dondoyano, the processor, who recorded them in the General
Ledger. Mr. Pujeda personally saw the original MCs, proving respondents receipt of the proceeds of her
loans from petitioner Citibank, when he helped Attys. Cleofe and Fernandez, the banks legal counsels,
to reconstruct the records of respondents loans. The original MCs were presented to Atty. Cleofe who
used the same during the preliminary investigation of the case, sometime in years 1986-1987. The
original MCs were subsequently turned over to the Control and Investigation Division of petitioner
Citibank.

- It was only petitioner FNCB Finance who claimed that they lost the original copies of the PNs when it moved
to a new office. Citibank did not make a similar contention; instead, it explained that the original copies of the
PNs were returned to the borrower upon liquidation of the loan, either through payment or roll-over. Petitioner
Citibank proffered the excuse that they were still looking for the documents in their storage or warehouse to
explain the delay and difficulty in the retrieval thereof, but not their absence or loss. The original documents in
this case, such as the MCs and letters, were destroyed and, thus, unavailable for presentation before the RTC
only on 7 October 1987, when a fire broke out on the 7th floor of the office building of petitioner Citibank. There
is no showing that the fire was intentionally set. The fire destroyed relevant documents, not just of the present
case, but also of other cases, since the 7th floor housed the Control and Investigation Division, in charge of
keeping the necessary documents for cases in which petitioner Citibank was involved.

- The foregoing would have been sufficient to allow the presentation of photocopies or microfilm
copies of the PNs, MCs, and letters by the petitioners as secondary evidence to establish the existence
of respondents loans, as an exception to the best evidence rule.
- The Court of Appeals did not consider these Deeds of Assignment because of petitioners failure to produce
the original copies thereof in violation of the best evidence rule. This Court again finds itself in disagreement in
the application of the best evidence rule by the appellate court.

To recall, the best evidence rule, in so far as documentary evidence is concerned, requires the
presentation of the original copy of the document only when the context thereof is the subject of inquiry in the
case. Respondent does not question the contents of the Deeds of Assignment. While she admitted the
existence and execution of the Deeds of Assignment, dated 2 March 1978 and 9 March 1978, covering PNs
No. 8169 and 8167 issued by petitioner FNCB Finance, she claimed, as defense, that the loans for which the
said Deeds were executed as security, were already paid. She denied ever executing both Deeds of
Assignment, dated 25 August 1978, covering PNs No. 20138 and 20139. These are again issues collateral to
the contents of the documents involved, which could be proven by evidence other than the original copies of
the said documents.

Moreover, the Deeds of Assignment of the money market placements with petitioner FNCB Finance
were notarized documents, thus, admissible in evidence. Rule 132, Section 30 of the Rules of Court provides
that

SEC. 30. Proof of notarial documents. Every instrument duly acknowledged or proved
and certified as provided by law, may be presented in evidence without further proof, the
certificate of acknowledgement being prima facie evidence of the execution of the instrument or
document involved.

The rule on the evidentiary weight that must be accorded a notarized document is clear and
unambiguous. The certificate of acknowledgement in the notarized Deeds of Assignment constituted prima
facie evidence of the execution thereof. Thus, the burden of refuting this presumption fell on respondent. She
could have presented evidence of any defect or irregularity in the execution of the said documents or raised
questions as to the verity of the notary publics acknowledgment and certificate in the Deeds. But again,
respondent admitted executing the Deeds of Assignment, dated 2 March 1978 and 9 March 1978, although
claiming that the loans for which they were executed as security were already paid. And, she assailed the
Deeds of Assignment, dated 25 August 1978, with nothing more than her bare denial of execution thereof,
hardly the clear and convincing evidence required to trounce the presumption of due execution of a notarized
document.

- Petitioners not only presented the notarized Deeds of Assignment, but even secured certified literal copies
thereof from the National Archives. Mr. Renato Medua, an archivist, working at the Records Management and
Archives Office of the National Library, testified that the copies of the Deeds presented before the RTC were
certified literal copies of those contained in the Notarial Registries of the notary publics concerned, which were
already in the possession of the National Archives. He also explained that he could not bring to the RTC the
Notarial Registries containing the original copies of the Deeds of Assignment, because the Department of
Justice (DOJ) Circular No. 97, dated 8 November 1968, prohibits the bringing of original documents to the
courts to prevent the loss of irreplaceable and priceless documents.

(2) YES. Respondent denied that it was her signature on the Declaration of Pledge. She claimed that the
signature was a forgery. When a document is assailed on the basis of forgery, the best evidence rule applies

Basic is the rule of evidence that when the subject of inquiry is the contents of a
document, no evidence is admissible other than the original document itself except in the
instances mentioned in Section 3, Rule 130 of the Revised Rules of Court. Mere
photocopies of documents are inadmissible pursuant to the best evidence rule. This is
especially true when the issue is that of forgery.

As a rule, forgery cannot be presumed and must be proved by clear, positive and convincing
evidence and the burden of proof lies on the party alleging 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.

Respondent made several attempts to have the original copy of the pledge produced before the RTC
so as to have it examined by experts. Yet, despite several Orders by the RTC, petitioner Citibank failed to
comply with the production of the original Declaration of Pledge. It is admitted that Citibank-Geneva had
possession of the original copy of the pledge. While petitioner Citibank in Manila and its branch in Geneva may
be separate and distinct entities, they are still incontestably related, and between petitioner Citibank and
respondent, the former had more influence and resources to convince Citibank-Geneva to return, albeit
temporarily, the original Declaration of Pledge.

- Petitioner Citibank did not present any evidence to convince this Court that it had exerted diligent efforts to
secure the original copy of the pledge, nor did it proffer the reason why Citibank-Geneva obstinately refused to
give it back, when such document would have been very vital to the case of petitioner Citibank. 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. 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
petitioner Citibank if produced.

Without the Declaration of Pledge, petitioner Citibank had no authority to demand the remittance of
respondents dollar accounts with Citibank-Geneva and to apply them to her outstanding loans. It cannot effect
legal compensation under Article 1278 of the Civil Code since, petitioner Citibank itself admitted that Citibank-
Geneva is a distinct and separate entity. As for the dollar accounts, respondent was the creditor and Citibank-
Geneva is the debtor; and as for the outstanding loans, petitioner Citibank was the creditor and respondent
was the debtor. The parties in these transactions were evidently not the principal creditor of each other.

Therefore, this Court declares that the remittance of respondents dollar accounts from Citibank-Geneva and
the application thereof to her outstanding loans with petitioner Citibank was illegal, and null and
void. Resultantly, petitioner Citibank is obligated to return to respondent the amount of US$149,632,99 from
her Citibank-Geneva accounts, or its present equivalent value in Philippine currency; and, at the same time,
respondent continues to be obligated to petitioner Citibank for the balance of her outstanding loans which, as
of 5 September 1979, amounted to P1,069,847.40.