1. Citibank and Investors Finance Corporation vs.

Modesta Sabeniano
FACTS:
Modesta Sabeniano is a client of Citibank and FNCB Finance. On February 1978,
Sabeniano obtained a loan of Php 200,000 from Citibank. This loan was followed
with several other loans – some were paid, while some were not. Those that were not
paid upon maturity were rolled over, reflecting a total unpaid loan of Php
1,069,847.40 as of September 1979.
These loans were secured by Sabeniano’s money market placements with FNCB
Finance through a Deed of Assignment plus a Declaration of Pledge which states
that all present and future fiduciary placements held in her personal and/or joint
name with Citibank Switzerland, will secure all claims that Citibank may have or, in
the future, acquire against her.
The Deeds of Assignment were duly notarized, while the Declaration of Pledge was
not notarized and Citibank’s copy was undated, while that of Sabeniano bore the
date, September 24, 1979.
Since Sabeniano failed to pay her obligations to Citibank, the latter sent demand
letters to request payment. Her total unpaid loan initially amounted to Php
2,123,843.20 (inclusive of interests).
Still failing to pay, Citibank executed the Deeds of Assignment and used the
proceeds of Sabeniano’s money market placement from FNCB Finance which totaled
Php 1,022,916.66 and her deposits with Citibank which totaled Php 31,079.14 to set-
off her loan.
This reduced the unpaid balance to Php 1,069,847.40 as previously mentioned.
Since the loan remains unpaid, Citibank proceeded to execute the Declaration of
Pledge and remitted a total of $149,632.99 from Sabeniano’s Citibank-Geneva
accounts to off-set the loan.
Sabeniano then filed a complaint against Citibank for damages and specific
performance (for proper accounting and return of the remitted proceeds from her
personal accounts). She also contended that the proceeds of 2 promissory notes
(PN) from her money market placements with Citibank were rolled over or reinvested
into the petitioner bank, and these should also be returned to her.
Regarding the execution of the pledge, the RTC declared this illegal, null and void.
Citibank was ordered to return the $149,632.99 to Sabeniano’s Citibank-Geneva
account with a legal interest of 12% per annum. The RTC also ordered Sabeniano to
pay her outstanding loan to Citibank without interests and penalty charges.
Both parties appealed to the CA which affirmed the RTC’s decision, but further ruled
entirely in favor of Sabeniano – holding that Citibank failed to establish her
indebtedness and that all the executed deeds should be returned to her account. The
case has now reached the Supreme Court.
ISSUE: Whether or not Citibank’s execution of deeds and pledge to off-set
Sabeniano’s loan was valid and legal.
RULING:
The Supreme Court reversed the CA’s findings regarding Sabeniano’s Citibank loan
as this was properly documented and sufficient in evidence. Thus, the execution of
deeds was valid, especially that the agreement was duly notarized, signed and
prepared in accordance with the law.
The court also ordered Citibank to return the amount of P318,897.34 and
P203,150.00 plus 14.5% per annum to Sabeniano. This is the total amount from the
2 PNs which were executed despite being reinvested in said bank. The bank was
also ordered to pay moral damages of P300,000, exemplary damages for P250,000,
attorney’s fees of P200,000.
The SC however affirmed the RTC’s decision regarding the pledge. Being a separate
entity, Citibank cannot exercise automatic remittance from Sabeniano’s Citibank
Geneva account to off-set her outstanding loan.
The court also noted that the pledge was filled out irregularly – it was not notarized
and Citibank’s copy bore no date. The original copy was not also produced in court.
Regarding Sabeniano’s obligation, the Supreme Court affirmed RTC’s decision and
ordered her to pay the remaining balance of her loan which amounts to
P1,069,847.40 as of 5 September 1979. These loans continue to earn interest based
on the maturity date that were agreed and stipulated upon by the parties.