G.R. No. 156132 - Citibank, N.A. vs. Sabeniano

Case Summary (G.R. No. 156132)

Key Dates and Procedural Posture

Complaint filed by respondent: 8 August 1985. RTC decision: 24 August 1995. Court of Appeals decision: 26 March 2002 (modified by CA resolution of 20 November 2002). Respondent filed an unperfected motion for extension (G.R. No. 152985) and did not file a petition for review; petitioners’ petition (G.R. No. 156132) was reinstated and reviewed by the Supreme Court.

Nature of the Dispute and Reliefs Sought

Respondent alleged substantial deposits and money market placements with petitioners which were not returned upon demand. Petitioners asserted respondent obtained multiple loans secured by (a) a Declaration of Pledge over her Citibank-Geneva dollar accounts and (b) Deeds of Assignment over her FNCB money market placements; when respondent defaulted, petitioners offset loans against those assets. Relief sought by respondent: accounting, recovery of deposits/placements, and damages. Petitioners sought dismissal and damages for alleged wrongful suit.

Factual Matrix — Deposits, Placements, and Promissory Notes

Respondent had multiple Philippine peso money market placements with Citibank and FNCB, and dollar fiduciary placements/current accounts with Citibank-Geneva. Key contested instruments included Citibank PNs No. 23356 and 23357 (P318,897.34 and P203,150.00 respectively), FNCB PNs (variously renumbered up to PNs No. 20138 and 20139), and a supposed Declaration of Pledge executed in favor of Citibank to secure indebtedness.

Procedural History and Appeals

RTC found the bank’s set-off of respondent’s Geneva dollar deposit illegal and ordered partial refunds, while declaring respondent indebted to bank in a specified amount. All parties appealed. The Court of Appeals largely ruled for respondent, declaring that Citibank failed to establish indebtedness, and ordered return of several placements and awarded moral, exemplary damages and attorney’s fees. The Supreme Court reviewed the petitioners’ assignments of error and the appellate factual findings.

Jurisdictional and Procedural Issues — Finality and Forum Shopping

The Court clarified that respondent’s unperfected motion for extension that resulted in a declaration of finality applied only to respondent’s unperfected appeal (G.R. No. 152985) and did not bind petitioners’ separate petition (G.R. No. 156132). On forum shopping, the Court found no willful or deliberate forum shopping by respondent because she did not file an initiating petition with the Supreme Court and therefore did not violate the certification requirement attached to an initiatory pleading.

Scope of Review — Questions of Fact

Although Rule 45 ordinarily limits Supreme Court review to errors of law, the Court recognized established exceptions permitting review of findings of fact (e.g., when findings are conflicting with trial court, based on conjecture, misapprehension, or when no substantial evidence supports findings). Given conflicting factual findings between the RTC and Court of Appeals, the Court proceeded to re-evaluate the evidence.

Findings on Promissory Notes PNs No. 23356 and 23357 (Citibank)

Citibank admitted the genuineness and due execution of PNs No. 23356 and 23357; that admission established a prima facie case obligating Citibank to prove payment. Citibank failed to produce credible documentary proof of payment or to present original supporting documents (documentary trail ended with the PNs). Witness testimony from bank officers about payment and conversion to time deposits lacked sufficient detail and suffered from memory frailties given the long lapse of time. Supreme Court held PNs No. 23356 and 23357 remained subsisting and ordered Citibank to return their principal amounts with the stipulated 14.5% p.a. interest, beginning 17 March 1977.

Findings on FNCB Money Market Placements and Deeds of Assignment

Respondent’s placements with FNCB evolved through roll-overs into later PNs (ultimately PNs No. 20138 and 20139). Petitioner FNCB produced documentary evidence (checks and bookkeeping entries) showing payment, cancellation and reinvestment resulting in PNs 20138 and 20139, and ultimately Check No. 100168 (P1,022,916.66) payable to Citibank as full payment for those PNs. Citibank relied on notarized Deeds of Assignment (and certified copies from the National Archives) executed by respondent that assigned those FNCB placements as security; these notarial documents carried a prima facie presumption of due execution. The Court found the Deeds of Assignment valid and that Citibank lawfully collected pledged funds from FNCB and applied them to respondent’s indebtedness pursuant to the assignment (conceptually application of pledged credit under Art. 2118), rendering the use of proceeds from PNs 20138 and 20139 valid against respondent’s loans.

Findings on Savings and Current Accounts

Both trial and appellate courts consistently recognized only P31,079.14 from respondent’s savings account as available and applied against loans; Supreme Court treated that finding as binding and limited respondent’s recovery accordingly on that account.

Findings on Citibank-Geneva Dollar Accounts and Declaration of Pledge

Citibank-Geneva’s computation showed transfer of US$149,632.99 to Citibank-Manila on 25–26 October 1979. Citibank in Manila claimed a Declaration of Pledge authorized remittance of respondent’s Geneva funds to satisfy indebtedness. The Supreme Court found the Declaration of Pledge highly suspicious and irregular: the form copy in Citibank-Manila was undated and internally inconsistent (pledgor/pledgee fields wrongly filled), the certified copy from Citibank-Geneva bore date 24 September 1979 which respondent’s travel documents showed she could not have signed, and the original pledge was not produced despite court orders. Because (a) the pledge was not notarized and thus lacked the presumptions of notarized instruments, (b) Citibank failed to produce the original document and did not satisfactorily explain Citibank-Geneva’s refusal, and (c) the documented anomalies and respondent’s denial of the signature (claim of forgery), the Court held Citibank willfully suppressed evidence and the remittance and application of US$149,632.99 were illegal, null and void. Citibank was ordered to refund that amount (or peso equivalent) plus stipulated interest from 26 October 1979.

Application of Compensation and Pledge / Legal Principles

The Court applied Civil Code rules on compensation (Arts. 1278–1279) and pledge/assignment principles (Art. 2118). Compensation by operation of law was valid as to respondent’s local deposit (P31,079.14) because the parties were mutual principal debtor-creditors and obligations were liquidated and demandable. Compensation did not apply to FNCB placements or Geneva dollar accounts because those assets were owed by different legal entities; instead Citibank relied on assignments/pledges. Deeds of Assignment (notarized) conferred authority to collect and apply FNCB proceeds; in contrast, the defective Declaration of Pledge gave no lawful authority to withdraw funds from Citibank-Geneva.

Evidentiary Rules — Best Evidence and Availability of Originals

The Court clarified the proper scope of the best evidence rule: it applies when the contents of a document are the subject of inquiry. Where the issue concerns existence, execution, or circumstances surrounding execution, secondary evidence or testimony may be admissible. The Court accepted microfilm and photocopy evidence of PNs and manager’s checks because originals were destroyed in a fire (documented), or certified copies from national repositories were presented; conversely, the copy of the Declaration of Pledge had no probative value because Citibank failed to show diligent efforts to secure the original or to account for its unavailability without bad faith.

Rejection of Reliance on Dy Case by Court of Appeals

Case Syllabus (G.R. No. 156132)

Case Citation and Bench

Supreme Court of the Philippines, First Division, G.R. No. 156132, Decision promulgated October 16, 2006; reported at 535 Phil. 384.
Decision authored by Justice Chico‑Nazario; concurred in by Chief Justice Panganiban (Chairperson), and Justices Ynares‑Santiago, Austria‑Martinez, and Callejo, Sr.

Parties and Identities

Petitioners:
- Citibank, N.A. (formerly First National City Bank), a U.S. banking corporation licensed to do commercial banking and trust functions in the Philippines.
- Investors’ Finance Corporation, doing business as FNCB Finance (affiliate handling money market placements; by merger now part of BPI Card Finance Corporation). Referred to in the decision as FNCB Finance.
Respondent:
- Modesta R. Sabeniano, a client of both petitioners, claimant of multiple deposits and money market placements, including dollar accounts in Citibank‑Geneva and placements with Ayala Investment and Development Corporation (AIDC).

Nature and Relief Sought

Trial court action titled Civil Case No. 11336: Complaint for Accounting, Sum of Money and Damages filed by respondent against petitioners.
Respondent alleged wrongful refusal by petitioners to return deposits and proceeds of money market placements despite repeated demands.
Petitioners sought dismissal, and counter‑claimed damages and attorney’s fees, alleging valid loans and valid setoff/compensation pursuant to promissory notes, deeds of assignment, and a declaration of pledge.

Procedural History (Key Dates and Filings)

Complaint filed: 8 August 1985; Amended Complaint filed 9 October 1985.
Petitioners’ joint Answer filed 12 September 1985; Answer to Amended Complaint filed 6 November 1985.
Trial with multiple witnesses and extensive documentary exhibits; case tried over many years and before four different RTC judges.
RTC Decision in Civil Case No. 11336 rendered 24 August 1995 by Judge Manuel D. Victorio.
All parties appealed to the Court of Appeals, docketed CA‑G.R. CV No. 51930.
Court of Appeals Decision dated 26 March 2002 (affirmed with modification RTC decision; awarded respondent various sums and ordered returns).
Court of Appeals Resolution dated 20 November 2002 (partially granted petitioners’ Motion for Reconsideration: deleted one paragraph of CA decision).
Respondent filed Motion for Extension of Time before the Supreme Court (docketed G.R. No. 152985), failed to perfect a petition; Supreme Court declared that docket terminated and CA decision final and executory only as to respondent (Resolution dated 13 November 2002).
Petitioners filed Petition for Review under Rule 45 to the Supreme Court docketed G.R. No. 156132; initially denied for missing Certification Against Forum Shopping, later reinstated upon compliance.

RTC Findings (Dispositive Portions as Rendered 24 August 1995)

Declared illegal and void the setoff of respondent’s Citibank‑Geneva dollar deposit of US$149,632.99 and ordered refund with legal interest at 12% p.a. from 31 October 1979, compounded yearly, or peso equivalent at payment.
Declared respondent indebted to Citibank in P1,069,847.40 as of 5 September 1979 and ordered her to pay that amount with no interest and penalty charges from the time the illegal setoff was effected (31 October 1979).
Dismissed all other claims and counterclaims. Costs against defendant bank.

Court of Appeals Disposition (26 March 2002; modified 20 November 2002)

Affirmed with modification:
- Declared illegal the setoff of US$149,632.99 and ordered Citibank to refund said amount with 12% p.a. compounded yearly from 31 October 1979 or peso equivalent at payment.
- Declared the setoff of P1,069,847.40 without legal and factual basis because Citibank failed to establish indebtedness.
- Ordered return of specified money market placements, savings and current accounts in listed amounts and with specified interest terms (detailed list of instruments and amounts included).
- Ordered defendants jointly and severally to pay respondent P500,000.00 moral damages, P500,000.00 exemplary damages, and P100,000.00 attorney’s fees.
Court of Appeals later (20 November 2002) partially granted Motion for Reconsideration and deleted one sub‑paragraph (Sub‑paragraph (V) paragraph 3) of its dispositive portion (removal related to one money market placement with AIDC).

Issues Presented to the Supreme Court

Whether Court of Appeals committed reversible error in (a) its factual findings on indebtedness, setoff and accounting; (b) admittance/weight of documentary evidence; (c) application of the best evidence rule; (d) reliance on the Dy case (CA‑G.R. CV No. 15934) and its findings; and (e) award of damages.
Procedural: whether respondent’s earlier Motion for Extension (G.R. No. 152985) caused the CA decision to become final and executory as to all parties and whether respondent committed forum shopping.

Jurisdictional and Procedural Determinations

Supreme Court clarified that its Resolution in G.R. No. 152985 (13 November 2002) declaring the CA decision final and executory pertained only to respondent Sabeniano (who failed to perfect a petition) and did not bind petitioners who filed their own timely procedural actions (G.R. No. 156132). Thus the instant petition by petitioners was properly considered.
Court found no sufficient basis to hold respondent liable for forum shopping:
- Respondent only filed a Motion for Extension of Time (not a Petition) in G.R. No. 152985 and failed to perfect a petition; a Motion for Extension is not the initiatory pleading and did not require the Certification Against Forum Shopping; respondent’s subsequent participation in CA pleadings did not constitute acts of forum shopping in the circumstances presented.

Standard of Review and Exceptions for Fact Review

General rule: Supreme Court, reviewing Court of Appeals decisions under Rule 45, is limited to errors of law; findings of fact are normally conclusive.
Exceptions permitting Supreme Court to re‑evaluate facts were recognized and invoked where applicable, including:
- Findings grounded on speculation, absurdity, or impossibility;
- Findings in conflict with trial court;
- Findings beyond issues on appeal;
- Findings premised on supposed absence of evidence but contradicted by record;
- Grave abuse of discretion, misapprehension of facts, conflicting findings, and other enumerated exceptions.
Several of the exceptions applied to the present Petition, prompting re‑examination of facts and evidence.

Factual Matrix — Respondent’s Assets and Placements (as recognized by Court of Appeals / SC)

Dollar deposit with Citibank‑Geneva: US$149,632.99 (remitted to Citibank Manila 26 October 1979 by Citibank‑Geneva according to Geneva computation).
Money market placements with Citibank (PN Nos. 23356 and 23357, each canceling earlier PNs): P318,897.34 (PN 23356) and P203,150.00 (PN 23357), both at 14.5% p.a. (issued 17 March 1977).
Money market placements with FNCB Finance (PN Nos. 5757 and 5758 later superseded by 8167 and 8169, then rolled into PNs 20138 and 20139): record shows principal amounts P500,000.00 and P500,000.00 with various interest rates during different rollovers; proceeds of PNs 20138 & 20139 totaled P1,022,916.66 on 3 September 1979.
Money market placement with AIDC: P2,000,000.00 (CA awarded legal interest 12% p.a. from 30 Sept 1976 in CA decision later modified).
Savings/current account recognized for offset: P31,079.14.

Documentary and Testimonial Evidence (Petitioners’ and Respondent’s)

Petitioners’ documentary evidence and reliance:
- Numerous promissory notes (PNs) in two sets (first set issued mid‑1978; second set as renewals Jan‑Apr 1979), Deeds of Assignment (dated 2 March 1978, 9 March 1978, and 25 August 1978), Declaration of Pledge (photocopy undated in Citibank Manila files; respondent produced certified copy dated 24 September 1979 from Citibank‑Geneva), Manager’s Checks (MCs) and microfilmed originals, bank booking entries and General Ledger entries, letters (e.g., Tan to respondent 5 April 1979; Tan’s 28 Sept 1979 notice), checks and clearing stamps.
- Witnesses: Mr. Francisco A. Tan (account manager, deposition in Hong Kong 3 Sept 1990), Mr. Herminio Pujeda (officer‑in‑charge of loans and placements; RTC testimony 1990), Ms. Cristina Dondoyano (loan processor who booked loans), Ms. Teresita Glorioso (microfilming/control procedures), Ms. Renee Rubio (longtime bank officer familiar with loan booking and credit committee policies).
- Evidence of fire (7 Oct 1987) destroying original documents kept in Control Division; Certification by Chief of Arson Investigation Section dated 17 Jan 1991.
Respondent’s documentary and testimonial evidence:
- Deposit slips, bank statements, formal offers, personal checks, provisional receipts (No. 19471 dated 11 Aug 1978; No. 12723 dated 10 Nov 1978) allegedly evidencing payments, handwritten notes and computations, certified copy of Declaration of Pledge from Citibank‑Geneva dated 24 Sept 1979, passport and plane tickets showing absence from Philippines on 24 Sept 1979.
- Respondent’s testimony denying execution of certain PNs (first set except PN No. 34534), alleging simulated loans for DBP stratagem, and asserting prior payment of some loans or their satisfaction by application of securities.

Trial Court (RTC) Evaluation of Evidence (Selected Findings)

RTC found respondent’s testimony insufficient to establish simulation of PNs and Deeds of Assignment; held that respondent had received proceeds of loans and that Deeds of Assignment and PNs were genuine and notarized (public documents), establishing a past due obligation reduced by application of money market placements, leaving P1,069,847.40 as balance as of 5 Sept 1979.
RTC credited documentary microfilm evidence and bank officers’ testimonies to establish genuineness and booking of PNs, Deeds of Assignment, and payments as recorded.

Supreme Court’s Re‑evaluation of Facts (Key Conclusions)

The Court accepted the general principle that a judge who did not try