THIRD
DIVISION
|
CITIBANK, N.A. (Formerly First
Petitioners, - versus- MODESTA R.
SABENIANO,
Respondent. |
|
G.R. No.
156132 Present: YNARES-SANTIAGO, J., Chairperson, AUSTRIA-MARTINEZ, CALLEJO,
SR., and CHICO-NAZARIO,
JJ. Promulgated: |
x-
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - -x
CHICO-NAZARIO, J.:
On
IN VIEW OF
THE FOREGOING, the instant Petition
is PARTLY GRANTED. The assailed Decision of the Court of Appeals in
CA-G.R. No. 51930, dated 26 March 2002, as already modified by its Resolution,
dated 20 November 2002, is hereby AFFIRMED WITH MODIFICATION, as follows
–
1. PNs No. 23356 and 23357 are DECLARED subsisting and
outstanding. Petitioner Citibank is ORDERED
to return to respondent the principal amounts of the said PNs,
amounting to Three Hundred Eighteen Thousand Eight Hundred Ninety-Seven Pesos
and Thirty-Four Centavos (P318,897.34) and Two Hundred Three Thousand
One Hundred Fifty Pesos (P203,150.00), respectively, plus the stipulated
interest of Fourteen and a half percent (14.5%) per annum, beginning 17 March
1977;
2. The
remittance of One Hundred Forty-Nine Thousand Six Hundred Thirty Two US Dollars
and Ninety-Nine Cents (US$149,632.99) 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 to respondent the said amount, or its equivalent in
Philippine currency using the exchange rate at the time of payment, plus the
stipulated interest for each of the fiduciary placements and current accounts
involved, beginning 26 October 1979;
3. Petitioner
Citibank is ORDERED to pay respondent moral damages in the amount of
Three Hundred Thousand Pesos (P300,000.00); exemplary damages in the
amount of Two Hundred Fifty Thousand Pesos (P250,000.00); and attorney’s
fees in the amount of Two Hundred Thousand Pesos (P200,000.00); and
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 One Million Sixty-Nine Thousand Eight Hundred
Forty-Seven Pesos and Forty Centavos (P1,069,847.40), inclusive of
interest. These outstanding loans shall
continue to earn interest, at the rates stipulated in the corresponding PNs, from
Subsequent thereto, respondent Modesta R. Sabeniano filed an
Urgent Motion to Clarify and/or Confirm Decision with Notice of Judgment on 20
October 2006; while, petitioners Citibank, N.A. and FNCB Finance[2] filed their
Motion for Partial Reconsideration of the foregoing Decision on 6 November
2006.
The facts of the case, as determined by this
Court in its Decision, may be summarized as follows.
Respondent was a client of petitioners. She had several deposits and market
placements with petitioners, among which were her savings account with the
local branch of petitioner Citibank (Citibank-Manila[3]);
money market placements with petitioner FNCB Finance; and dollar accounts with
the P1,920,000.00, all
of which had become due and demandable by May 1979. Despite repeated demands by petitioner Citibank,
respondent failed to pay her outstanding loans.
Thus, petitioner Citibank used respondent’s deposits and money market
placements to off-set and liquidate her outstanding obligations, as follows –
|
Respondent’s outstanding
obligation (principal and interest as of
|
|
|
|
Less: |
Proceeds from
respondent’s money market placements |
|
|
|
with petitioner FNCB Finance (principal
and interest as of |
(1,022,916.66) |
|
|
Deposits in respondent’s
bank accounts with petitioner |
|
|
|
Citibank |
(31,079.14) |
|
|
Proceeds of respondent’s
money market placements and |
|
|
|
dollar accounts with Citibank-Geneva
(peso equivalent |
|
|
|
as of |
(1,102,944.78) |
|
Balance of respondent’s
obligation |
|
|
Respondent, however, denied having any
outstanding loans with petitioner Citibank.
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.
Hence, respondent sought to recover her deposits and money market
placements.
Respondent instituted a complaint for
“Accounting, Sum of Money and Damages” against petitioners, docketed as Civil
Case No. 11336, before the Regional Trial Court (RTC) of
WHEREFORE, in view of all the foregoing, decision is
hereby rendered as follows:
(1) Declaring as illegal, null and void the setoff
effected by the defendant Bank [petitioner Citibank] of plaintiff’s [respondent
Sabeniano] dollar deposit with Citibank, Switzerland,
in the amount of US$149,632.99, and ordering the said defendant [petitioner
Citibank] to refund the said amount to the plaintiff with legal interest at the
rate of twelve percent (12%) per annum, compounded yearly, from 31 October 1979
until fully paid, or its peso equivalent at the time of payment;
(2) Declaring the plaintiff [respondent Sabeniano] indebted to the defendant Bank [petitioner
Citibank] in the amount of P1,069,847.40 as of 5 September 1979 and
ordering the plaintiff [respondent Sabeniano] to pay
said amount, however, there shall be no interest and penalty charges from the
time the illegal setoff was effected on 31 October 1979;
(3) Dismissing all other claims and counterclaims
interposed by the parties against each other.
Costs against the defendant Bank.
All the parties appealed the afore-mentioned RTC
Decision to the Court of Appeals, docketed as CA-G.R. CV No. 51930. On
Wherefore,
premises considered, the assailed
1. Declaring as illegal, null and void the
set-off effected by the defendant-appellant Bank of the plaintiff-appellant’s
dollar deposit with Citibank, Switzerland, in the amount of US$149,632.99, and
ordering defendant-appellant Citibank to refund the said amount to the
plaintiff-appellant with legal interest at the rate of twelve percent (12%) per
annum, compounded yearly, from 31 October 1979 until fully paid, or its peso
equivalent at the time of payment;
2. 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;
3. As defendants-appellants failed to
account the following plaintiff-appellant’s money market placements, savings
account and current accounts, the former is hereby ordered to return the same,
in accordance with the terms and conditions agreed upon by the contending
parties as evidenced by the certificates of investments, to wit:
(i) Citibank
NNPN Serial No. 023356 (Cancels and Supersedes NNPN No. 22526) issued on P318,897.34
with 14.50% interest p.a.;
(ii) Citibank NNPN Serial No. 23357 (Cancels
and Supersedes NNPN No. 22528) issued on P203,150.00 with 14.50 interest
p.a.;
(iii)
FNCB NNPN Serial No. 05757 (Cancels
and Supersedes NNPN No. 04952), issued on 02 June 1977, P500,000.00 with
17% interest p.a.;
(iv) FNCB NNPN Serial No. 05758 (Cancels and
Supersedes NNPN No. 04962), issued on 02 June 1977, P500,000.00 with 17%
interest per annum;
(v) The Two Million (P2,000,000.00)
money market placements of Ms. Sabeniano with the
Ayala Investment & Development Corporation (AIDC) with legal interest at
the rate of twelve percent (12%) per annum compounded yearly, from 30 September
1976 until fully paid;
4. Ordering defendants-appellants to
jointly and severally pay the plaintiff-appellant the sum of FIVE HUNDRED
THOUSAND PESOS (P500,000.00) by way of moral damages, FIVE HUNDRED
THOUSAND PESOS (P500,000.00) as exemplary damages, and ONE HUNDRED
THOUSAND PESOS (P100,000.00) as attorney’s fees.
Acting on petitioners’ Motion for Partial Reconsideration,
the Court of Appeals issued a Resolution,[6] dated
20 November 2002, modifying its earlier Decision, thus –
WHEREFORE,
premises considered, 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.
The
challenged
Since the Court of Appeals Decision, dated
Among the numerous grounds raised by petitioners in their Motion for Partial
Reconsideration, this Court shall address and discuss herein only particular
points that had not been considered or discussed in its Decision. Even in consideration of these points though,
this Court remains unconvinced that it should modify or reverse in any way its
disposition of the case in its earlier Decision.
As to the off-setting or compensation of
respondent’s outstanding loan balance with her dollar deposits in
Citibank-Geneva
Petitioners’ take
exception to the following findings made by this Court in its Decision, dated
Without
the Declaration of Pledge, petitioner Citibank had no authority to demand the
remittance of respondent’s 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.
Petitioners maintain that respondent’s Declaration of Pledge, by virtue
of which she supposedly assigned her dollar accounts with Citibank-Geneva as
security for her loans with petitioner Citibank, is authentic and, thus, valid
and binding upon respondent. Alternatively,
petitioners aver that even without said Declaration of Pledge, the off-setting
or compensation made by petitioner Citibank using respondent’s dollar accounts
with Citibank-Geneva to liquidate the balance of her outstanding loans with
Citibank-Manila was expressly authorized by respondent herself in the
promissory notes (PNs) she signed for her loans, as
well as sanctioned by Articles 1278 to 1290 of the Civil Code. This alternative argument is anchored on the
premise that all branches of petitioner Citibank in the
Petitioners
call the attention of this Court to the following provision found in all of the
PNs[7]
executed by respondent for her loans –
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.
It is the petitioners’ contention that the term “Citibank, N.A.” used
therein should be deemed to refer to all branches of petitioner Citibank in the
Philippines and abroad; thus, giving petitioner Citibank the authority to apply
as payment for the PNs even respondent’s dollar
accounts with Citibank-Geneva. Still
proceeding from the premise that all branches of petitioner Citibank should be
considered as a single entity, then it should not matter that the respondent
obtained the loans from Citibank-Manila and her deposits were with
Citibank-Geneva. Respondent should be
considered the debtor (for the loans) and creditor (for her deposits) of the
same entity, petitioner Citibank. Since
petitioner Citibank and respondent were principal creditors of each other, in
compliance with the requirements under Article 1279 of the Civil Code,[8] then
the former could have very well used off-setting or compensation to extinguish
the parties’ obligations to one another.
And even without the PNs, off-setting or
compensation was still authorized because according to Article 1286 of the
Civil Code, “Compensation takes place by operation of law, even though the
debts may be payable at different places, but there shall be an indemnity for
expenses of exchange or transportation to the place of payment.”
Pertinent provisions of Republic Act No. 8791,
otherwise known as the General Banking Law of 2000, governing bank branches are
reproduced below –
SEC. 20.
Bank Branches. – Universal or commercial banks may open branches
or other offices within or outside the
Branching by all other banks shall be
governed by pertinent laws.
A bank may, subject to prior approval of the
Monetary Board, use any or all of its branches as outlets for the presentation
and/or sale of the financial products of its allied undertaking or its
investment house units.
A bank authorized to establish branches or
other offices shall be responsible for all business conducted in such branches
and offices to the same extent and in the same manner as though such business
had all been conducted in the head office.
A bank and its branches and offices shall be treated as one unit.
x x x x
SEC. 72.
Transacting Business in the
The conduct of offshore banking business in
the
x x x x
SEC. 74.
Local Branches of Foreign Banks. – In case of a foreign bank
which has more than one (1) branch in the
SEC. 75.
Head Office Guarantee. –
In order to provide effective protection of the interests of the depositors and
other creditors of Philippine branches of a foreign bank, the head office of
such branches shall fully guarantee the prompt payment of all liabilities of
its Philippine branch.
Residents and citizens of the
Republic Act No. 7721,
otherwise known as the Foreign Banks Liberalization Law, lays down the policies
and regulations specifically concerning the establishment and operation of
local branches of foreign banks.
Relevant provisions of the said statute read –
Sec. 2.
Modes of Entry. - The Monetary Board may authorize foreign banks to operate
in the Philippine banking system through any of the following modes of entry: (i) by acquiring, purchasing or owning up to sixty percent
(60%) of the voting stock of an existing bank; (ii) by investing in up to sixty
percent (60%) of the voting stock of a new banking subsidiary incorporated
under the laws of the Philippines; or (iii) by establishing branches with full
banking authority: Provided, That a foreign bank may avail itself of only one
(1) mode of entry: Provided, further, That a foreign bank or a Philippine
corporation may own up to a sixty percent (60%) of the voting stock of only one
(1) domestic bank or new banking subsidiary.
Sec. 5.
Head Office Guarantee. - The head office of foreign bank branches shall
guarantee prompt payment of all liabilities of its Philippine branches.
It is true that the afore-quoted Section 20 of the General Banking Law of
2000 expressly states that the bank and its branches shall be treated as one
unit. It should be pointed out, however,
that the said provision applies to a universal[9] or
commercial bank,[10]
duly established and organized as a Philippine corporation in accordance with
Section 8 of the same statute,[11] and
authorized to establish branches within or outside the
The General
Banking Law of 2000, however, does not make the same categorical statement as
regards to foreign banks and their branches in the
The Home Office Guarantee is included in Philippine statutes clearly for the protection of the interests of the depositors and other creditors of the local branches of a foreign bank.[12] Since the head office of the bank is located in another country or state, such a guarantee is necessary so as to bring the head office within Philippine jurisdiction, and to hold the same answerable for the liabilities of its Philippine branches. Hence, the principle of the singular identity of that the local branches and the head office of a foreign bank are more often invoked by the clients in order to establish the accountability of the head office for the liabilities of its local branches. It is under such attendant circumstances in which the American authorities and jurisprudence presented by petitioners in their Motion for Partial Reconsideration were rendered.
Now the
question that remains to be answered is whether the foreign bank can use the
principle for a reverse purpose, in order to extend the liability of a client
to the foreign bank’s Philippine branch to its head office, as well as to its
branches in other countries. Thus, if a
client obtains a loan from the foreign bank’s Philippine branch, does it
absolutely and automatically make the client a debtor, not just of the
Philippine branch, but also of the head office and all other branches of the
foreign bank around the world? This
Court rules in the negative.
There being
a dearth of Philippine authorities and jurisprudence on the matter, this Court,
just as what petitioners have done, turns to American authorities and
jurisprudence. American authorities and
jurisprudence are significant herein considering that the head office of
petitioner Citibank is located in
Unlike
Philippine statutes, the American legislation explicitly defines the relations
among foreign branches of an American bank.
Section 25 of the United States Federal Reserve Act[13]
states that –
Every
national banking association operating foreign branches shall conduct the
accounts of each foreign branch independently of the accounts of other foreign
branches established by it and of its home office, and shall at the end of each
fiscal period transfer to its general ledger the profit or loss accrued at each
branch as a separate item.
Contrary to petitioners’
assertion that the accounts of Citibank-Manila and Citibank-Geneva should be
deemed as a single account under its head office, the foregoing provision
mandates that the accounts of foreign branches of an American bank shall be
conducted independently of each other.
Since the head office of petitioner Citibank is in the
The
circumstances in the case of McGrath v. Agency of Chartered Bank of
The structure of international banking houses such as
Chartered bank defies one rigorous description.
Suffice it to say for present analysis, branches or agencies of
an international bank have been held to be independent entities for a variety
of purposes (a) deposits payable only at branch where made; Mutaugh v. Yokohama Specie Bank, Ltd., 1933,
149 Misc. 693, 269 N.Y.S. 65; Bluebird
Undergarment Corp. v. Gomez, 1931, 139 Misc. 742, 249 N.Y.S. 319; (b)
checks need be honored only when drawn on branch where deposited; Chrzanowska v. Corn Exchange Bank, 1916, 173
App. Div. 285, 159 N.Y.S. 385, affirmed 1919, 225 N.Y. 728, 122 N.E. 877;
subpoena duces tecum on
foreign bank’s record barred; In re Harris, D.C.S.D.N.Y. 1939, 27 F. Supp.
480; (d) a foreign branch separate for collection of forwarded paper; Pan-American
Bank and Trust Company v. National City Bank of New York, 2 Cir., 1925, 6
F. 2d 762, certiorari denied 1925, 269 U.S. 554, 46 S. Ct. 18, 70 L. Ed.
408. Thus in law there is
nothing innately unitary about the organization of international banking
institutions.
Defendant, upon its oral argument and in its brief,
relies heavily on Sokoloff v. National City
Bank of New York, 1928, 250 N.Y. 69, 164 N.E. 745, as authority for the
proposition that Chartered Bank, not the Hamburg or New York Agency, is
ultimately responsible for the amounts owing its German customers and,
conversely, it is to Chartered Bank that the German firms owe their
obligations. The Sokoloff
case, aside from its violently different fact situation, is centered on the
legal problem of default of payment and consequent breach of contract by a
branch bank. It does not stand
for the principle that in every instance an international bank with branches is
but one legal entity for all purposes. The defendant concedes in its brief (p. 15)
that there are purposes for which the various agencies and branches of
Chartered Bank may be treated in law as separate entities. I fail to see the applicability of Sokoloff either as a guide to or authority for the
resolution of this problem. The facts
before me and the cases catalogued supra lend weight to the view that we
are dealing here with Agencies independent of one another.
x x x
x
I hold that for instant purposes the Hamburg Agency
and defendant were independent business entities, and the attempted setoff may
not be utilized by defendant against its debt to the German firms obligated to
the Hamburg Agency.
Going back to the instant Petition, although
this Court concedes that all the Philippine branches of petitioner Citibank
should be treated as one unit with its head office, it cannot be persuaded to
declare that these Philippine branches are likewise a single unit with the
Geneva branch. It would be stretching
the principle way beyond its intended purpose.
Therefore, this Court maintains its original position
in the Decision that the off-setting or compensation of respondent’s loans with
Citibank-Manila using her dollar accounts with Citibank-Geneva cannot be
effected. The parties cannot be
considered principal creditor of the other.
As for the dollar accounts, respondent was the creditor and
Citibank-Geneva was the debtor; and as for the outstanding loans, petitioner
Citibank, particularly Citibank-Manila, was the creditor and respondent was the
debtor. Since legal compensation was not
possible, petitioner Citibank could only use respondent’s dollar accounts with
Citibank-Geneva to liquidate her loans if she had expressly authorized it to do
so by contract.
Respondent cannot be deemed to have authorized
the use of her dollar deposits with Citibank-Geneva to liquidate her loans with
petitioner Citibank when she signed the PNs[16] for
her loans which all contained the provision that –
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.
As has been established in
the preceding discussion, “Citibank, N.A.” can only refer to the local branches
of petitioner Citibank together with its head office. Unless there is any showing that respondent
understood and expressly agreed to a more far-reaching interpretation, the
reference to Citibank, N.A. cannot be extended to all other branches of
petitioner Citibank all over the world.
Although theoretically, books of the branches form part of the books of
the head office, operationally and practically, each branch maintains its own
books which shall only be later integrated and balanced with the books of the
head office. Thus, it is very possible
to identify and segregate the books of the Philippine branches of petitioner
Citibank from those of Citibank-Geneva, and to limit the authority granted for
application as payment of the PNs to respondent’s
deposits in the books of the former.
Moreover, the PNs can be
considered a contract of adhesion, the PNs being in
standard printed form prepared by petitioner Citibank. Generally, stipulations in a contract come
about after deliberate drafting by the parties thereto, there are certain
contracts almost all the provisions of which have been drafted only by one
party, usually a corporation. Such contracts are called contracts of adhesion,
because the only participation of the party is the affixing of his signature or
his "adhesion" thereto. This
being the case, the terms of such contract are to be construed strictly against
the party which prepared it.[17]
As for the supposed Declaration of Pledge of
respondent’s dollar accounts with Citibank-Geneva as security for the loans,
this Court stands firm on its ruling that the non-production thereof is fatal
to petitioners’ cause in light of respondent’s claim that her signature on such
document was a forgery. It bears to note
that the original of the Declaration of Pledge is with Citibank-Geneva, a
branch of petitioner Citibank. As
between respondent and petitioner Citibank, the latter has better access to the
document. The constant excuse forwarded
by petitioner Citibank that Citibank-Geneva refused to return possession of the
original Declaration of Pledge to Citibank-Manila only supports this Court’s
finding in the preceding paragraphs that the two branches are actually
operating separately and independently of each other.
Further, petitioners keep playing up the fact
that respondent, at the beginning of the trial, refused to give her specimen
signatures to help establish whether her signature on the Declaration of Pledge
was indeed forged. Petitioners seem to
forget that subsequently, respondent, on advice of her new counsel, already
offered to cooperate in whatever manner so as to bring the original Declaration
of Pledge before the RTC for inspection.
The exchange of the counsels for the opposing sides during the hearing
on 24 July 1991 before the RTC reveals the apparent willingness of respondent’s
counsel to undertake whatever course of action necessary for the production of
the contested document, and the evasive, non-committal, and uncooperative
attitude of petitioners’ counsel.[18]
Lastly, this Court’s ruling striking down the
Declaration of Pledge is not entirely based on respondent’s allegation of
forgery. In its Decision, this Court
already extensively discussed why it found the said Declaration of Pledge
highly suspicious and irregular, to wit –
First of all, it escapes this Court why petitioner
Citibank took care to have the Deeds of Assignment of the PNs
notarized, yet left the Declaration of Pledge unnotarized. This Court would think that petitioner
Citibank would take greater cautionary measures with the preparation and
execution of the Declaration of Pledge because it involved respondent’s “all
present and future fiduciary placements” with a Citibank branch in another
country, specifically, in
Second, petitioner Citibank was unable to establish the
date when the Declaration of Pledge was actually executed. The photocopy of the Declaration of Pledge
submitted by petitioner Citibank before the RTC was undated. It presented only a photocopy of the pledge
because it already forwarded the original copy thereof to Citibank-Geneva when
it requested for the remittance of respondent’s dollar accounts pursuant
thereto. Respondent, on the other hand,
was able to secure a copy of the Declaration of Pledge, certified by an officer
of Citibank-Geneva, which bore the date
Third,
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. Was a mistake made by whoever filled-out the
form? Yes, it could be a
possibility. Nonetheless, considering
the value of such a document, the mistake as to a significant detail in the
pledge could only be committed with gross carelessness on the part of
petitioner Citibank, and raised serious doubts as to the authenticity and due
execution of the same. 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.
Lastly, 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 respondent’s 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.
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.
As to the value of the dollar deposits in
Citibank-Geneva ordered refunded to respondent
In case petitioners are still ordered to refund
to respondent the amount of her dollar accounts with Citibank-Geneva,
petitioners beseech this Court to adjust the nominal values of respondent’s
dollar accounts and/or her overdue peso loans by using the values of the
currencies stipulated at the time the obligations were established in 1979, to
address the alleged inequitable consequences resulting from the extreme and
extraordinary devaluation of the Philippine currency that occurred in the
course of the Asian crisis of 1997.
Petitioners base their request on Article 1250 of the Civil Code which
reads, “In case an extraordinary inflation or deflation of the currency
stipulated should supervene, the value of the currency at the time of the
establishment of the obligation shall be the basis of payment, unless there is
an agreement to the contrary.”
It is well-settled that Article 1250 of the
Civil Code becomes applicable only when there is extraordinary inflation or
deflation of the currency. Inflation has
been defined as the sharp increase of money or credit or both without a
corresponding increase in business transaction. There is inflation when there
is an increase in the volume of money and credit relative to available goods
resulting in a substantial and continuing rise in the general price level.[19] In Singson
v. Caltex (Philippines), Inc.,[20] this
Court already provided a discourse as to what constitutes as extraordinary
inflation or deflation of currency, thus –
We
have held extraordinary inflation to exist when there is a decrease or increase
in the purchasing power of the Philippine currency which is unusual or beyond
the common fluctuation in the value of said currency, and such increase or
decrease could not have been reasonably foreseen or was manifestly beyond the
contemplation of the parties at the time of the establishment of the
obligation.
An
example of extraordinary inflation, as cited by the Court in Filipino Pipe
and Foundry Corporation vs. NAWASA, supra, is that which happened to
the deutschmark in 1920. Thus:
"More recently, in the 1920s, Germany experienced a case of hyperinflation. In early 1921, the value of the German mark was 4.2 to the U.S. dollar. By May of the same year, it had stumbled to 62 to the U.S. dollar. And as prices went up rapidly, so that by October 1923, it had reached 4.2 trillion to the U.S. dollar!" (Bernardo M. Villegas & Victor R. Abola, Economics, An Introduction [Third Edition]).
As reported, "prices were going up every week, then every day, then every hour. Women were paid several times a day so that they could rush out and exchange their money for something of value before what little purchasing power was left dissolved in their hands. Some workers tried to beat the constantly rising prices by throwing their money out of the windows to their waiting wives, who would rush to unload the nearly worthless paper. A postage stamp cost millions of marks and a loaf of bread, billions." (Sidney Rutberg, "The Money Balloon", New York: Simon and Schuster, 1975, p. 19, cited in "Economics, An Introduction" by Villegas & Abola, 3rd ed.)
The
supervening of extraordinary inflation is never assumed. The party alleging it
must lay down the factual basis for the application of Article 1250.
Thus,
in the Filipino Pipe case, the Court acknowledged that the voluminous
records and statistics submitted by plaintiff-appellant proved that there has
been a decline in the purchasing power of the Philippine peso, but this
downward fall cannot be considered "extraordinary" but was simply a
universal trend that has not spared our country. Similarly, in Huibonhoa vs. Court of Appeals, the Court
dismissed plaintiff-appellant's unsubstantiated allegation that the Aquino assassination in 1983 caused building and
construction costs to double during the period July 1983 to February 1984. In Serra
vs. Court of Appeals, the Court again did not consider the decline in the
peso's purchasing power from 1983 to 1985 to be so great as to result in an
extraordinary inflation.
Like
the Serra and Huibonhoa
cases, the instant case also raises as basis for the application of Article
1250 the Philippine economic crisis in the early 1980s --- when, based on
petitioner's evidence, the inflation rate rose to 50.34% in 1984. We hold that there is no legal or factual
basis to support petitioner's allegation of the existence of extraordinary
inflation during this period, or, for that matter, the entire time frame of 1968
to 1983, to merit the adjustment of the rentals in the lease contract dated
Rather,
we adopt with approval the following observations of the Court of Appeals on
petitioner's evidence, especially the NEDA certification of inflation rates
based on consumer price index:
xxx (a) from the period 1966 to 1986, the official inflation rate never exceeded 100% in any single year; (b) the highest official inflation rate recorded was in 1984 which reached only 50.34%; (c) over a twenty one (21) year period, the Philippines experienced a single-digit inflation in ten (10) years (i.e., 1966, 1967, 1968, 1969, 1975, 1976, 1977, 1978, 1983 and 1986); (d) in other years (i.e., 1970, 1971, 1972, 1973, 1974, 1979, 1980, 1981, 1982, 1984 and 1989) when the Philippines experienced double-digit inflation rates, the average of those rates was only 20.88%; (e) while there was a decline in the purchasing power of the Philippine currency from the period 1966 to 1986, such cannot be considered as extraordinary; rather, it is a normal erosion of the value of the Philippine peso which is a characteristic of most currencies.
"Erosion"
is indeed an accurate description of the trend of decline in the value of the
peso in the past three to four decades.
Unfortunate as this trend may be, it is certainly distinct from the
phenomenon contemplated by Article 1250.
Moreover,
this Court has held that the effects of extraordinary inflation are not to be
applied without an official declaration thereof by competent authorities.
The burden of proving that there had been
extraordinary inflation or deflation of the currency is upon the party that
alleges it. Such circumstance must be
proven by competent evidence, and it cannot be merely assumed. In this case, petitioners presented no proof as
to how much, for instance, the price index of goods and services had risen
during the intervening period.[21] All the information petitioners provided was
the drop of the U.S. dollar-Philippine peso exchange rate by 17 points from
June 1997 to January 1998. While the
said figure was based on the statistics of the Bangko
Sentral ng Pilipinas (BSP), it is also significant to note that
the BSP did not categorically declare that the same constitute as an
extraordinary inflation. The existence of extraordinary inflation must be
officially proclaimed by competent authorities, and the only competent
authority so far recognized by this Court to make such an official proclamation
is the BSP.[22]
Neither can this Court, by merely taking
judicial notice of the Asian currency crisis in 1997, already declare that
there had been extraordinary inflation.
It should be recalled that the
Furthermore, it is incontrovertible that
Article 1250 of the Civil Code is based on equitable considerations. Among the maxims of equity are (1) he who
seeks equity must do equity, and (2) he who comes into equity must come with
clean hands. The latter is a frequently stated maxim which is also expressed in
the principle that he who has done inequity shall not have equity.[23] Petitioner Citibank, hence, cannot invoke
Article 1250 of the Civil Code because it does not come to court with clean
hands. The delay in the recovery[24] by
respondent of her dollar accounts with Citibank-Geneva was due to the unlawful
act of petitioner Citibank in using the same to liquidate respondent’s
loans. Petitioner Citibank even
attempted to justify the off-setting or compensation of respondent’s loans
using her dollar accounts with Citibank-Geneva by the presentation of a highly
suspicious and irregular, and even possibly forged, Declaration of Pledge.
The damage caused to respondent of the
deprivation of her dollar accounts for more than two decades is unquestionably
relatively more extensive and devastating, as compared to whatever damage
petitioner Citibank, an international banking corporation with undoubtedly
substantial capital, may have suffered for respondent’s non-payment of her
loans. It must also be remembered that
petitioner Citibank had already considered respondent’s loans paid or liquidated
by
As to respondent’s Motion to Clarify and/or Confirm
Decision with Notice of Judgment
Respondent, in her Motion,
is of the mistaken notion that the Court of Appeals Decision, dated
This Court clarifies that its affirmation of the Decision of the Court of Appeals, as modified, is only to the extent that it recognizes that petitioners had liabilities to the respondent. However, this Court’s Decision modified that of the appellate court’s by making its own determination of the specific liabilities of the petitioners to respondent and the amounts thereof; as well as by recognizing that respondent also had liabilities to petitioner Citibank and the amount thereof.
Thus, for purposes of
execution, the parties need only refer to the dispositive
portion of this Court’s Decision, dated
As the last point, there is no merit in
respondent’s Motion for this Court to already declare its Decision, dated
IN VIEW OF THE FOREGOING, petitioners’ Motion for Partial Reconsideration
of this Court’s Decision, dated
SO ORDERED.
|
|
MINITA
V. CHICO-NAZARIO
Associate Justice |
WE
CONCUR:
Associate Justice
Chairperson
Associate Justice
Associate Justice
ATTESTATION
I attest that the conclusions in the above
Resolution were reached in consultation before the case was assigned to the
writer of the opinion of the Court’s Division.
CONSUELO YNARES-SANTIAGO
Associate
Justice
Chairperson, Third Division
CERTIFICATION
Pursuant to Section 13, Article VIII
of the Constitution, and the Division Chairperson’s Attestation, it is hereby
certified that the conclusions in the above Resolution were reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.
REYNATO S. PUNO
Chief Justice
[1] Penned by Associate Justice Minita V. Chico-Nazario with Chief Justice Artemio V. Panganiban, Associate Justices Consuelo Ynares-Santiago, Ma. Alicia Austria-Martinez, and Romeo J. Callejo, concurring; rollo, Vol. II, pp. 1897-1898.
[2] Petitioner Investors’ Finance Corporation, did business under the name and style of FNCB Finance. As noted in the Decision, it is now, by virtue of a merger, doing business as part of its successor-in-interest, BPI Finance Corporation. However, the said petitioner shall be referred to herein as FNCB Finance, consistent with the reference used in the Decision.
[3] “
[4] Penned by Judge Manuel D. Victorio, Records, Vol. III, pp. 1607-1621.
[5] Penned by Associate Justice Andres B. Reyes, Jr. with Associate Justices Conrado M. Vasquez, Jr. and Amelita G. Tolentino, concurring; rollo, Vol. I, pp. 365-366.
[6] Penned by Associate Justice Andres B. Reyes, Jr. with Associate Justices Conrado M. Vasquez, Jr. and Amelita G. Tolentino, concurring; id. at 374.
[7] Exhibits “18” to “26,” defendants’ folder of exhibits, pp. 83-91.
[8] Article 1279 of the Civil Code reads –
ART. 1279. In order that compensation may be proper, it is necessary:
(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are consumable, they be of at the same kinds, and also of the same quality if the latter has been stated;
(3) That the two debts are due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor.
[9] A universal bank shall have the authority to exercise, in addition to the powers authorized for a commercial bank in Section 29, the powers of an investment house as provided in existing laws and the power to invest in non-allied enterprises as provided in this Act. (The General Banking Law of 2000, Section 23)
[10] A commercial bank shall have, in addition to the general powers incident to corporations, all such powers as may be necessary to carry on the business of commercial banking, such as accepting drafts and issuing letters of credit; discounting and negotiating promissory notes, drafts, bills of exchange, and other evidence of debt; accepting or creating demand deposits; receiving other types of deposits and deposit substitutes; buying and selling foreign exchange and gold or silver bullion; acquiring marketable bonds and other debt securities; and extending credit, subject to such rules as the Monetary Board may promulgate. These rules may include the determination of bonds and other debt securities eligible for investment, the maturities and aggregate amount of such investment, the maturities and aggregate amount of investment. (The General Banking Law of 2000, Section 29)
[11] The full text of Section 8 of the General Banking Law of 2000 is as follows –
SEC. 8. Organization. – The Monetary Board may authorize the organization of a bank or quasi-bank subject to the following conditions:
8.1. That the entity is a stock corporation;
8.2. That its funds are obtained from the public, which shall mean twenty (20) or more persons; and
8.3. That the minimum capital requirements prescribed by the Monetary Board for each category of banks are satisfied.
No new commercial bank shall be established within three (3) years from the effectivity of this Act. In the exercise of the authority granted herein, the Monetary Board shall take into consideration their capability in terms of their financial resources and technical expertise and integrity. The bank licensing process shall incorporate an assessment of the bank’s ownership structure, directors and senior management, its operating plan and internal controls as well as its projected financial condition and capital base.
[12] See Section 75, the General Banking Law of 2000.
[13] 12 U.S.C.A., § 604.
[14] 6 F. 2d 762. (1925); See also Republic of China v. National City Bank of New York, 208 F. 2d 627 (1954).
[15] 104 F. Supp. 964 (1952).
[16] Supra note 7.
[17] BPI Credit Corp. vs. Court of Appeals , G.R. No. 96755, 4 December 1991, 204 SCRA 601, 616.
[18] See TSN, Vol. XII,
[19] Huibonhoa v. Court of Appeals, 378 Phil. 386, 410 (1999).
[20] 396 Phil. 245, 253-255 (2000).
[21] Sangrador
v. Valderrama, G.R. No. L-79552,
[22] Ramos v. Court of Appeals, G.R.
No. 119872,
[23] Pilapil v. Garchitorena, G.R. No. 128790, 25 November 1998, 299 SCRA 343, 359; University of the Philippines v. Hon. Catungal, Jr., G.R. No. 121863, 5 May 1997, 272 SCRA 221, 237.
[24] See Gatlabayan v. Ramirez, 134 Phil. 267, 272 (1968).
[25] Munez v. Court of Appeals, G.R. No. L-46010, 23 July 1987, 152 SCRA 197, 201-202, in relation to Section 10, Rule 51 of the revised Rules of Court, which provides –
SEC. 10. Entry of judgments and final resolutions. – If no appeal or motion for new trial or reconsideration is filed within the time provided in these Rules, the judgment or final resolution shall forthwith be entered by the clerk in the book of entries of judgments. The date when the judgment or final resolution becomes executory shall be deemed as the date of its entry. The record shall contain the dispositive part of the judgment or final resolution and shall be signed by the clerk, with a certificate that such judgment or final resolution has become final and executory.