Topic: Compensation in Mutuum
Citibank N.A. vs. Sabeniano
Facts:
Respondent Sabeniano was a client of Petitioner Citibank having several deposits and market placements
with petitioners, among which were her savings account with the local branch of petitioner Citibank
(Citibank-Manila ); money market placements with petitioner FNCB Finance; and dollar accounts with the
Geneva branch of petitioner Citibank (Citibank-Geneva).
Sabeniano, through a series of loans obtained a total of P1,920,000. 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.
The loans all became demandable by May 1979. Despite several demands for its payment, Sabeniano
failed to do so. Thus, petitioner Citibank used respondent’s deposits and money market placements to
off-set and liquidate her outstanding obligations.
Issue: Whether or not Citibank’s execution of deeds and pledge to off-set Sabeniano’s loan was valid and
legal.
Ruling: No.
Sec. 5 of RA 7721 provides that the head office of foreign bank branches shall guarantee prompt payment
of all liabilities of its Philippine branches. This stands to protect the interests of the depositors and other
creditors of the local branches of a foreign bank and not the other way around.
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.
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.
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 Geneva,
Switzerland. While there is no express legal requirement that the Declaration of Pledge had to be
notarized to be effective, even so, it could not enjoy the same prima facie presumption of due execution
that is extended to notarized documents, and petitioner Citibank must discharge the burden of proving
due execution and authenticity of the Declaration of Pledge