1. [Citibank, N.A. (Formerly First National City Bank) vs.

Sabeniano, 504 SCRA 378(2006)]

Actions; Pleadings and Practice; Forum Shopping; Motions for
Extension of Time; The Petition for Review would constitute the
initiatory pleading before the Supreme Court, upon the timely filing
of which, the case before the Court commences, much in the same
way a case is initiated by the filing of a Complaint before the trial
courtand, without such a Petition, there is technically no case
before the Court; A Motion for Extension of Time within which to file
a Petition for Review does not serve the same purpose as the
Petition for Review itself.Although it may seem at first glance that
respondent was simultaneously seeking recourse from the Court of
Appeals and this Court, a careful and closer scrutiny of the details
of the case at bar would reveal otherwise. It should be recalled that
respondent did nothing more in G.R. No. 152985 than to file with
this Court a Motion for Extension of Time within which to file her
Petition for Review. For unexplained reasons, respondent failed to
submit to this Court her intended Petition within the reglementary
period. Consequently, this Court was prompted to issue a
Resolution, dated 13 November 2002, declaring G.R. No. 152985
terminated, and the therein assailed Court of Appeals Decision final
and executory. G.R. No. 152985, therefore, did not progress and
respondents appeal was unperfected. The Petition for Review
would constitute the initiatory pleading before this Court, upon the
timely filing of which, the case before this Court commences; much
in the same way a case is initiated by the filing of a Complaint
before the trial court. The Petition for Review establishes the
identity of parties, rights or causes of action, and relief sought from
this Court, and without such a Petition, there is technically no case
before this Court. The Motion filed by respondent seeking extension
of time within which to file her Petition for Review does not serve
the same purpose as the Petition for Review itself. Such a Motion
merely presents the important dates and the justification for the
additional time requested for, but it does not go into the details of
the appealed case. Without any particular idea as to the
assignments of error or the relief respondent intended to seek from
this Court, in light of her failure to file her Petition for Review, there
is actually no second case involving the same parties, rights or
causes of action, and relief sought, as that in CA-G.R. CV No.
51930.
Same; Same; Same; Certification Against Forum Shopping;
Contents; The Certification against Forum Shopping is required to

be attached to the initiatory pleading.It should also be noted that

the Certification against Forum Shopping is required to be attached
to the initiatory pleading, which, in G.R. No. 152985, should have
been respondents Petition for Review. It is in that Certification
wherein respondent certifies, under oath, that: (a) she has not
commenced any action or filed any claim involving the same issues
in any court, tribunal or quasi-judicial agency and, to the best of
her knowledge, no such other action or claim is pending therein; (b)
if there is such other pending action or claim, that she is presenting
a complete statement of the present status thereof; and (c) if she
should thereafter learn that the same or similar action or claim has
been filed or is pending, she shall report that fact within five days
therefrom to this Court. Without her Petition for Review, respondent
had no obligation to execute and submit the foregoing Certification
against Forum Shopping. Thus, respondent did not violate Rule 7,
Section 5 of the Revised Rules of Court; neither did she mislead this
Court as to the pendency of another similar case.
Appeals; Findings of fact of the Court of Appeals are conclusive
upon the Supreme Court; Exceptions.It is already a well-settled
rule that the jurisdiction of this Court in cases brought before it
from the Court of Appeals by virtue of Rule 45 of the Revised Rules
of Court is limited to reviewing errors of law. Findings of fact of the
Court of Appeals are conclusive upon this Court. There are,
however, recognized exceptions to the foregoing rule, namely: (1)
when the findings are grounded entirely on speculation, surmises,
or conjectures; (2) when the interference made is manifestly
mistaken, absurd, or impossible; (3) when there is grave abuse of
discretion; (4) when the judgment is based on a misapprehension of
facts; (5) when the findings of fact are conflicting; (6) when in
making its findings, the Court of Appeals went beyond the issues of
the case, or its findings are contrary to the admissions of both the
appellant and the appellee; (7) when the findings are contrary to
those of the trial court; (8) when the findings are conclusions
without citation of specific evidence on which they are based; (9)
when the facts set forth in the petition as well as in the petitioners
main and reply briefs are not disputed by the respondent; and (10)
when the findings of fact are premised on the supposed absence of
evidence and contradicted by the evidence on record.
Judges; That the trial court judge who decided a case is not the
same judge who heard the case and received the evidence is of
little consequence when the records and transcripts of stenographic
notes (TSNs) are complete and available for consideration by the

former.What deserves stressing is that, in this jurisdiction, there

exists a disputable presumption that the RTC Decision was
rendered by the judge in the regular performance of his official
duties. While the said presumption is only disputable, it is
satisfactory unless contradicted or overcame by other evidence.
Encompassed in this presumption of regularity is the presumption
that the RTC judge, in resolving the case and drafting his Decision,
reviewed, evaluated, and weighed all the evidence on record. That
the said RTC judge is not the same judge who heard the case and
received the evidence is of little consequence when the records and
transcripts of stenographic notes (TSNs) are complete and available
for consideration by the former.
Evidence; Admissions; Documentary Evidence; Promissory Notes;
By the admission of the genuineness and due execution of an
instrument is meant that the party whose signature it bears admits
that he signed it or that it was signed by another for him with his
authority, that at the time it was signed it was in words and figures
exactly as set out in the pleading of the party relying on it, that the
document was delivered, and that any formal requisites required by
law, are waived by him; The effect of an admission is such that in
the case of a promissory note a prima facie case is made for the
plaintiff which dispenses with the necessity of evidence on his part
and entitles him to a judgment on the pleadings unless a special
defense of new matter, such as payment, is interposed by the
defendant.Petitioner Citibank did not deny the existence nor
questioned the authenticity of PNs No. 23356 and 23357 it issued
in favor of respondent for her money market placements. In fact, it
admitted the genuineness and due execution of the said PNs, but
qualified that they were no longer outstanding. In Hibberd v. Rohde
and McMillian, 32 Phil. 476, this Court delineated the consequences
of such an admissionBy the admission of the genuineness and
due execution of an instrument, as provided in this section, is
meant that the party whose signature it bears admits that he
signed it or that it was signed by another for him with his authority;
that at the time it was signed it was in words and figures exactly as
set out in the pleading of the party relying upon it; that the
document was delivered; and that any formal requisites required by
law, such as a seal, an acknowledgment, or revenue stamp, which
it lacks, are waived by him. Hence, such defenses as that the
signature is a forgery (Puritan Mfg. Co. vs. Toti & Gradi, 14 N. M.,
425; Cox vs. Northwestern Stage Co., 1 Idaho, 376; Woollen vs.
Whitacre, 73 Ind., 198; Smith vs. Ehnert, 47 Wis., 479; Faelnar vs.
Escao, 11 Phil. Rep., 92); or that it was unauthorized, as in the
case of an agent signing for his principal, or one signing in behalf of

a partnership (Country Bank vs. Greenberg, 127 Cal., 26; Henshaw

vs. Root, 60 Inc., 220; Naftzker vs. Lantz, 137 Mich., 441) or of a
corporation (Merchant vs. International Banking Corporation, 6 Phil
Rep., 314; Wanita vs. Rollins, 75 Miss., 253; Barnes vs. Spencer &
Barnes Co., 162 Mich., 509); or that, in the case of the latter, that
the corporation was authorized under its charter to sign the
instrument (Merchant vs. International Banking Corporation, supra);
or that the party charged signed the instrument in some other
capacity than that alleged in the pleading setting it out (Payne vs.
National Bank, 16 Kan., 147); or that it was never delivered (Hunt
vs. Weir, 29 Ill., 83; Elbring vs. Mullen, 4 Idaho, 199; Thorp vs.
Keokuk Coal Co., 48 N.Y., 253; Fire Association of Philadelphia vs.
Ruby, 60 Neb., 216) are cut off by the admission of its genuineness
and due execution. The effect of the admission is such that in the
case of a promissory note a prima facie case is made for the
plaintiff which dispenses with the necessity of evidence on his part
and entitles him to a judgment on the pleadings unless a special
defense of new matter, such as payment, is interposed by the
defendant (Papa vs. Martinez, 12 Phil. Rep., 613; Chinese Chamber
of Commerce vs. Pua To Ching, 14 Phil. Rep., 222; Banco EspaolFilipino vs. McKay & Zoeller, 27 Phil. Rep., 183). x x x
Same; Obligations and Contracts; Payments; As a general rule, one
who pleads payment has the burden of proving iteven where the
plaintiff must allege non-payment, the general rule is that the
burden rests on the defendant to prove payment, rather than on
the plaintiff to prove non-payment.Since the genuineness and
due execution of PNs No. 23356 and 23357 are uncontested,
respondent was able to establish prima facie that petitioner
Citibank is liable to her for the amounts stated therein. The
assertion of petitioner Citibank of payment of the said PNs is an
affirmative allegation of a new matter, the burden of proof as to
such resting on petitioner Citibank. Respondent having proved the
existence of the obligation, the burden of proof was upon petitioner
Citibank to show that it had been discharged. It has already been
established by this Court thatAs a general rule, one who pleads
payment has the burden of proving it. Even where the plaintiff must
allege non-payment, the general rule is that the burden rests on
the defendant to prove payment, rather than on the plaintiff to
prove non-payment. The debtor has the burden of showing with
legal certainty that the obligation has been discharged by payment.
When the existence of a debt is fully established by the evidence
contained in the record, the burden of proving that it has been
extinguished by payment devolves upon the debtor who offers such
defense to the claim of the creditor. Where the debtor introduces

some evidence of payment, the burden of going forward with the

evidenceas distinct from the general burden of proofshifts to
the creditor, who is then under the duty of producing some
evidence of non-payment.
Same; Witnesses; Taking into consideration the substantial length
of time between the transactions and the witnesses testimonies,
as well as the undeniable fact that bank officers deal with multiple
clients and process numerous transactions during their tenure, the
Court is reluctant to give much weight to such bank officials
testimonies regarding the payment of promissory notes and the use
of the proceeds thereof for opening time deposit accountsthe
Court finds it implausible that they should remember, after all these
years, the particular transaction with respondent involving her
promissory notes and her time deposit accounts.Before anything
else, it should be noted that when Mr. Pujedas testimony before
the RTC was made on 12 March 1990 and Mr. Tans deposition in
Hong Kong was conducted on 3 September 1990, more than a
decade had passed from the time the transactions they were
testifying on took place. This Court had previously recognized the
frailty and unreliability of human memory with regards to figures
after the lapse of five years. Taking into consideration the
substantial length of time between the transactions and the
witnesses testimonies, as well as the undeniable fact that bank
officers deal with multiple clients and process numerous
transactions during their tenure, this Court is reluctant to give
much weight to the testimonies of Mr. Pujeda and Mr. Tan regarding
the payment of PNs No. 23356 and 23357 and the use by
respondent of the proceeds thereof for opening TD accounts. This
Court finds it implausible that they should remember, after all these
years, this particular transaction with respondent involving her PNs
No. 23356 and 23357 and TD accounts. Both witnesses did not give
any reason as to why, from among all the clients they had dealt
with and all the transactions they had processed as officers of
petitioner Citibank, they specially remembered respondent and her
PNs No. 23356 and 23357. Their testimonies likewise lacked details
on the circumstances surrounding the payment of the two PNs and
the opening of the time deposit accounts by respondent, such as
the date of payment of the two PNs, mode of payment, and the
manner and context by which respondent relayed her instructions
to the officers of petitioner Citibank to use the proceeds of her two
PNs in opening the TD accounts.

Same; Preponderance of Evidence; Words and Phrases;

Preponderant evidence means that, as a whole, the evidence
adduced by one side outweighs that of the adverse party.After
going through the testimonial and documentary evidence
presented by both sides to this case, it is this Courts assessment
that respondent did indeed have outstanding loans with petitioner
Citibank at the time it effected the off-set or compensation on 25
July 1979 (using respondents savings deposit with petitioner
Citibank), 5 September 1979 (using the proceeds of respondents
money market placements with petitioner FNCB Finance) and 26
October 1979 (using respondents dollar accounts remitted from
Citibank-Geneva). The totality of petitioners evidence as to the
existence of the said loans preponderates over respondents.
Preponderant evidence means that, as a whole, the evidence
adduced by one side outweighs that of the adverse party.
Banks and Banking; Checks; Managers Checks (MCs) are drawn by
the banks manager upon the bank itself and regarded to be as
good as the money it represents.It bears to emphasize that the
proceeds of the loans were paid to respondent in MCs, with the
respondent specifically named as payee. MCs checks are drawn by
the banks manager upon the bank itself and regarded to be as
good as the money it represents. Moreover, the MCs were crossed
checks, with the words Payees Account Only.
Same; Same; Crossed Checks; A crossed check cannot be
presented to the drawee bank for payment in cashthe check can
only be deposited with the payees bank which, in turn, must
present it for payment against the drawee bank in the course of
normal banking hours; The crossed check can only be deposited
and the drawee bank may only pay to another bank in the payees
or indorsers account.In general, a crossed check cannot be
presented to the drawee bank for payment in cash. Instead, the
check can only be deposited with the payees bank which, in turn,
must present it for payment against the drawee bank in the course
of normal banking hours. The crossed check cannot be presented
for payment, but it can only be deposited and the drawee bank
may only pay to another bank in the payees or indorsers account.
The effect of crossing a check was described by this Court in
Philippine Commercial International Bank v. Court of Appeals, 350
SCRA 446 (2001)[T]he crossing of a check with the phrase
Payees Account Only is a warning that the check should be
deposited in the account of the payee. Thus, it is the duty of the
collecting bank PCI Bank to ascertain that the check be deposited

in payees account only. It is bound to scrutinize the check and to

know its depositors before it can make the clearing indorsement
all prior indorsements and/or lack of indorsement guaranteed.
Same; Same; Same; Presumptions; Given that a check is more than
just an instrument of credit used in commercial transactions for it
also serves as a receipt or evidence for the drawee bank of the
cancellation of the said check due to payment, then, the possession
by the drawee bank of the said Managers Checks (MCs), duly
stamped Paid gives rise to the presumption that the said
Managers Checks (MCs) were already paid out to the intended
payee.The crossed MCs presented by petitioner Bank were
indeed deposited in several different bank accounts and cleared by
the Clearing Office of the Central Bank of the Philippines, as
evidenced by the stamp marks and notations on the said checks.
The crossed MCs are already in the possession of petitioner
Citibank, the drawee bank, which was ultimately responsible for the
payment of the amount stated in the checks. Given that a check is
more than just an instrument of credit used in commercial
transactions for it also serves as a receipt or evidence for the
drawee bank of the cancellation of the said check due to payment,
then, the possession by petitioner Citibank of the said MCs, duly
stamped Paid gives rise to the presumption that the said MCs
were already paid out to the intended payee, who was in this case,
the respondent.
Same; Same; Same; Same; It is presumed that private transactions
have been fair and regular, and that the ordinary course of
business has been followed.This Court finds applicable herein the
presumptions that private transactions have been fair and regular,
and that the ordinary course of business has been followed. There
is no question that the loan transaction between petitioner Citibank
and the respondent is a private transaction. The transactions
revolving around the crossed MCsfrom their issuance by
petitioner Citibank to respondent as payment of the proceeds of
her loans; to its deposit in respondents accounts with several
different banks; to the clearing of the MCs by an independent
clearing house; and finally, to the payment of the MCs by petitioner
Citibank as the drawee bank of the said checksare all private
transactions which shall be presumed to have been fair and regular
to all the parties concerned. In addition, the banks involved in the
foregoing transactions are also presumed to have followed the
ordinary course of business in the acceptance of the crossed MCs

for deposit in respondents accounts, submitting them for clearing,

and their eventual payment and cancellation.
Same; Same; Same; Same; Where checks crossed for payees
account only were actually deposited, cleared, and paid, then the
presumption would be that the said checks were properly deposited
to the account of the payee, who was clearly named as such in the
checks; The mere fact that the Managers Checks (MCs) do not bear
the payees signature at the back does not negate deposit thereof
in her account.Respondent denied ever receiving MCs No. 220701
and 226467. However, considering that the said checks were
crossed for payees account only, and that they were actually
deposited, cleared, and paid, then the presumption would be that
the said checks were properly deposited to the account of
respondent, who was clearly named the payee in the checks.
Respondents bare allegations that she did not receive the two
checks fail to convince this Court, for to sustain her, would be for
this Court to conclude that an irregularity had occurred somewhere
from the time of the issuance of the said checks, to their deposit,
clearance, and payment, and which would have involved not only
petitioner Citibank, but also BPI, which accepted the checks for
deposit, and the Central Bank of the Philippines, which cleared the
checks. It falls upon the respondent to overcome or dispute the
presumption that the crossed checks were issued, accepted for
deposit, cleared, and paid for by the banks involved following the
ordinary course of their business. The mere fact that MCs No.
220701 and 226467 do not bear respondents signature at the back
does not negate deposit thereof in her account. The liability for the
lack of indorsement on the MCs no longer fall on petitioner
Citibank, but on the bank who received the same for deposit, in this
case, BPI Cubao Branch. Once again, it must be noted that the MCs
were crossed, for payees account only, and the payee named in
both checks was none other than respondent. The crossing of the
MCs was already a warning to BPI to receive said checks for deposit
only in respondents account. It was up to BPI to verify whether it
was receiving the crossed MCs in accordance with the instructions
on the face thereof. If, indeed, the MCs were deposited in accounts
other than respondents, then the respondent would have a cause
of action against BPI.
Same; Same; Same; A check, whether a managers check or
ordinary check, is not legal tender, and an offer of a check in
payment of a debt is not a valid tender of payment and may be
refused receipt by the obligee or creditor.Mr. Tan, in his

deposition, further explained that provisional receipts were issued

when payment to the bank was made using checks, since the
checks would still be subject to clearing. The purpose for the
provisional receipts was merely to acknowledge the delivery of the
checks to the possession of the bank, but not yet of payment. This
bank practice finds legitimacy in the pronouncement of this Court
that a check, whether an MC or an ordinary check, is not legal
tender and, therefore, cannot constitute valid tender of payment. In
Philippine Airlines, Inc. v. Court of Appeals, 181 SCRA 557 (1990),
this Court elucidated that: Since a negotiable instrument is only a
substitute for money and not money, the delivery of such an
instrument does not, by itself, operate as payment (Sec. 189, Act
2031 on Negs. Insts.; Art. 1249, Civil Code; Bryan Landon Co. v.
American Bank, 7 Phil. 255; Tan Sunco, v. Santos, 9 Phil. 44; 21
R.C.L. 60, 61). A check, whether a managers check or ordinary
check, is not legal tender, and an offer of a check in payment of a
debt is not a valid tender of payment and may be refused receipt
by the obligee or creditor. Mere delivery of checks does not
discharge the obligation under a judgment. The obligation is not
extinguished and remains suspended until the payment by
commercial document is actually realized (Art. 1249, Civil Code,
par. 3).
Same; Loans; Words and Phrases; Booking the loan means
recording it in the General Ledger.Ms. Cristina Dondoyano, who
worked at petitioner Citibank as a loan processor, was responsible
for booking respondents loans. Booking the loans means recording
it in the General Ledger. She explained the procedure for booking
loans, as follows: The account officer, in the Marketing Department,
deals directly with the clients who wish to borrow money from
petitioner Citibank. The Marketing Department will forward a loan
booking checklist, together with the borrowing clients PNs and
other supporting documents, to the loan pre-processor, who will
check whether the details in the loan booking checklist are the
same as those in the PNs. The documents are then sent to
Signature Control for verification of the clients signature in the
PNs, after which, they are returned to the loan pre-processor, to be
forwarded finally to the loan processor. The loan processor shall
book the loan in the General Ledger, indicating therein the client
name, loan amount, interest rate, maturity date, and the
corresponding PN number. Since she booked respondents loans
personally, Ms. Dondoyano testified that she saw the original PNs.
In 1986, Atty. Fernandez of petitioner Citibank requested her to
prepare an accounting of respondents loans, which she did, and
which was presented as Exhibit 120 for the petitioners. The

figures from the said exhibit were culled from the bookings in the
General Ledger, a fact which respondents counsel was even willing
to stipulate.
Evidence; Preponderance of Evidence; Words and Phrases; While it
is well-settled that the term preponderance of evidence should
not be wholly dependent on the number of witnesses, there are
certain instances when the number of witnesses becomes the
determining factor.This Court finds that the preponderance of
evidence supports the existence of the respondents loans, in the
principal sum of P1,920,000.00, as of 5 September 1979. While it is
well-settled that the term preponderance of evidence should not
be wholly dependent on the number of witnesses, there are certain
instances when the number of witnesses become the determining
factorThe preponderance of evidence may be determined, under
certain conditions, by the number of witnesses testifying to a
particular fact or state of facts. For instance, one or two witnesses
may testify to a given state of facts, and six or seven witnesses of
equal candor, fairness, intelligence, and truthfulness, and equally
well corroborated by all the remaining evidence, who have no
greater interest in the result of the suit, testify against such state of
facts. Then the preponderance of evidence is determined by the
number of witnesses. (Wilcox vs. Hines, 100 Tenn. 524, 66 Am. St.
Rep., 761.)
Same; Best Evidence Rule; Words and Phrases; In general, the best
evidence rule requires that the highest available degree of proof
must be produced, and, 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 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 readsSEC. 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.
Same; Same; Even with respect to documentary evidence, the best
evidence rule applies only when the content of such document is
the subject of the inquiry.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 thusBut 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
Same; A basic rule of evidence states that evidence that one did
or did not do a certain thing at one time is not admissible to prove
that he did or did not do the same or similar thing at another time,
but it may be received to prove a specific intent or knowledge,
identity, plan, system, scheme, habit, custom or usage, and the
like.While the Court of Appeals can take judicial notice of the
Decision of its Third Division in the Dy case, it should not have
given the said case much weight when it rendered the assailed
Decision, since the former does not constitute a precedent. The
Court of Appeals, in the challenged Decision, did not apply any
legal argument or principle established in the Dy case but, rather,
adopted the findings therein of wrongdoing or misconduct on the
part of herein petitioner Citibank and Mr. Tan. Any finding of
wrongdoing or misconduct as against herein petitioners should be
made based on the factual background and pieces of evidence
submitted in this case, not those in another case. It is apparent that
the Court of Appeals took judicial notice of the Dy case not as a
legal precedent for the present case, but rather as evidence of

similar acts committed by petitioner Citibank and Mr. Tan. A basic

rule of evidence, however, states that, Evidence that one did or
did not do a certain thing at one time is not admissible to prove
that he did or did not do the same or similar thing at another time;
but it may be received to prove a specific intent or knowledge,
identity, plan, system, scheme, habit, custom or usage, and the
like. The rationale for the rule is explained thusThe rule is
founded upon reason, public policy, justice and judicial
convenience. The fact that a person has committed the same or
similar acts at some prior time affords, as a general rule, no logical
guaranty that he committed the act in question. This is so because,
subjectively, a mans mind and even his modes of life may change;
and, objectively, the conditions under which he may find himself at
a given time may likewise change and thus induce him to act in a
different way. Besides, if evidence of similar acts are to be
invariably admitted, they will give rise to a multiplicity of collateral
issues and will subject the defendant to surprise as well as confuse
the court and prolong the trial.
Banks and Banking; Compensation; Compensation takes place by
operation of law.There is little controversy when it comes to the
right of petitioner Citibank to compensate respondents outstanding
loans with her deposit account. As already found by this Court,
petitioner Citibank was the creditor of respondent for her
outstanding loans. At the same time, respondent was the creditor
of petitioner Citibank, as far as her deposit account was concerned,
since bank deposits, whether fixed, savings, or current, should be
considered as simple loan or mutuum by the depositor to the
banking institution. Both debts consist in sums of money. By June
1979, all of respondents PNs in the second set had matured and
became demandable, while respondents savings account was
demandable anytime. Neither was there any retention or
controversy over the PNs and the deposit account commenced by a
third person and communicated in due time to the debtor
concerned. Compensation takes place by operation of law,
therefore, even in the absence of an expressed authority from
respondent, petitioner Citibank had the right to effect, on 25 June
1979, the partial compensation or off-set of respondents
outstanding loans with her deposit account, amounting to
P31,079.14.
Evidence; Notarial Law; On the evidentiary value of notarized
documents, it should be recalled that the notarization of a private
document converts it into a public one and renders it admissible in

court without further proof of its authenticity.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 thatSEC. 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. Significant herein is this Courts elucidation in
De Jesus v. Court of Appeals, 217 SCRA 307 (1993), which reads
On the evidentiary value of these documents, it should be recalled
that the notarization of a private document converts it into a public
one and renders it admissible in court without further proof of its
authenticity (Joson vs. Baltazar, 194 SCRA 114 [1991]). This is so
because a public document duly executed and entered in the
proper registry is presumed to be valid and genuine until the
contrary is shown by clear and convincing proof (Asido vs. Guzman,
57 Phil. 652 [1918]; U.S. vs. Enriquez, 1 Phil. 241 [1902]; Favor vs.
Court of Appeals, 194 SCRA 308 [1991]). As such, the party
challenging the recital of the document must prove his claim with
clear and convincing evidence (Diaz vs. Court of Appeals, 145 SCRA
346 [1986]).
Same; Same; The certificate of acknowledgment in notarized Deeds
of Assignment constitutes prima facie evidence of the execution
thereof.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.
Same; Pledge; Although the pertinent documents were entitled
Deeds of Assignment, they were, in reality, more of a pledge.

Petitioner Citibank was only acting upon the authority granted to it

under the foregoing Deeds when it finally used the proceeds of PNs
No. 20138 and 20139, paid by petitioner FNCB Finance, to partly
pay for respondents outstanding loans. Strictly speaking, it did not
effect a legal compensation or off-set under Article 1278 of the Civil
Code, but rather, it partly extinguished respondents obligations
through the application of the security given by the respondent for
her loans. Although the pertinent documents were entitled Deeds
of Assignment, they were, in reality, more of a pledge by
respondent to petitioner Citibank of her credit due from petitioner
FNCB Finance by virtue of her money market placements with the
latter. According to Article 2118 of the Civil CodeART. 2118. If a
credit has been pledged becomes due before it is redeemed, the
pledgee may collect and receive the amount due. He shall apply
the same to the payment of his claim, and deliver the surplus,
should there be any, to the pledgor.
Same; Same; Conflict of Laws; Processual Presumptions; Words and
Phrases; In the absence of any allegation and evidence presented
of the specific rules and laws governing the constitution of a pledge
in Geneva, Switzerland, they will be presumed to be the same as
Philippine local or domestic lawsthis is known as processual
presumption.Certain principles of private international law should
be considered herein because the property pledged was in the
possession of an entity in a foreign country, namely, CitibankGeneva. In the absence of any allegation and evidence presented
by petitioners of the specific rules and laws governing the
constitution of a pledge in Geneva, Switzerland, they will be
presumed to be the same as Philippine local or domestic laws; this
is known as processual presumption.
Same; Best Evidence Rule; Forgery; When a document is assailed
on the basis of forgery, the best evidence rule applies; 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 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
appliesBasic 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.
Same; Presumptions; It is presumed that evidence willfully
suppressed by a party would be adverse to said party if the
evidence is produced.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.

Appeals; Review of matters, even those not assigned as errors in

the appeal, may be authorized if the consideration thereof is
necessary in arriving at a just decision of the case, and there is a
close interrelation between the omitted assignment of error and
those actually assigned and discussed by the appellant.While it is
true that the general rule is that only errors which have been stated
in the assignment of errors and properly argued in the brief shall be
considered, this Court has also recognized exceptions to the
general rule, wherein it authorized the review of matters, even
those not assigned as errors in the appeal, if the consideration
thereof is necessary in arriving at a just decision of the case, and
there is a close interrelation between the omitted assignment of
error and those actually assigned and discussed by the appellant.
Thus, the Court of Appeals did not err in awarding the damages
when it already made findings that would justify and support the
said award.
Banks and Banking; Banking is impressed with public interest and
its fiduciary character requires high standards of integrity and
performancea bank is under the obligation to treat the accounts
of its depositors with meticulous care whether such accounts
consist only of a few hundred pesos or of millions of pesos.
Although this Court appreciates the right of petitioner Citibank to
effect legal compensation of respondents local deposits, as well as
its right to the proceeds of PNs No. 20138 and 20139 by virtue of
the notarized Deeds of Assignment, to partly extinguish
respondents outstanding loans, it finds that petitioner Citibank did
commit wrong when it failed to pay and properly account for the
proceeds of respondents money market placements, evidenced by
PNs No. 23356 and 23357, and when it sought the remittance of
respondents dollar accounts from Citibank-Geneva by virtue of a
highly-suspect Declaration of Pledge to be applied to the remaining
balance of respondents outstanding loans. It bears to emphasize
that banking is impressed with public interest and its fiduciary
character requires high standards of integrity and performance. A
bank is under the obligation to treat the accounts of its depositors
with meticulous care whether such accounts consist only of a few
hundred pesos or of millions of pesos. The bank must record every
single transaction accurately, down to the last centavo, and as
promptly as possible. Petitioner Citibank evidently failed to exercise
the required degree of care and transparency in its transactions
with respondent, thus, resulting in the wrongful deprivation of her
property.

Damages; The award of moral damages is meant to compensate

for the actual injury suffered by a party, not to enrich her.For the
mental anguish, serious anxiety, besmirched reputation, moral
shock and social humiliation suffered by the respondent, the award
of moral damages is but proper. However, this Court reduces the
amount thereof to P300,000.00, for the award of moral damages is
meant to compensate for the actual injury suffered by the
respondent, not to enrich her.
CHICO-NAZARIO, J.:
On 16 October 2006, this Court promulgated its Decision 1 in the
above-entitled case, the dispositive portion of which reads
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 ORDEREDto 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
respondents
Citibank-Geneva
accounts to petitioner Citibank in Manila, and the application
of the same against respondents 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 attorneys
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 5 September 1979 until
payment thereof.
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 Finance2 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-Manila3 ); money market placements with petitioner FNCB
Finance; and dollar accounts with the Geneva branch of petitioner
Citibank (Citibank-Geneva). At the same time, respondent had
outstanding loans with petitioner Citibank, incurred at CitibankManila, the principal amounts aggregating to 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 respondents
deposits and money market placements to off-set and liquidate her
outstanding obligations, as follows
Respondents outstanding obligation (principal and interest as of
26 October 1979)
Les

Proceeds from respondents money market placements with

s:

petitioner FNCB Finance (principal and interest as of 5

September 1979)
Deposits in respondents bank accounts with petitioner
Citibank
Proceeds of respondents money market placements and
dollar accounts with Citibank-Geneva (peso equivalent as of
26 October 1979)

Balance of respondents 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 Makati City. After
trial proper, which lasted for a decade, the RTC rendered a
Decision4 on 24 August 1995, the dispositive portion of which reads

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 plaintiffs
[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 26 March
2002, the appellate court promulgated its Decision, 5 ruling entirely
in favor of respondent, to wit
Wherefore, premises considered, the assailed 24 August
1995 Decision of the court a quo is hereby AFFIRMED with
MODIFICATION, as follows:
1. Declaring as illegal, null and void the set-off effected by
the defendant-appellant Bank of the plaintiff-appellants
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 plaintiffappellant, 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-appellants 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:

10

(i) Citibank NNPN Serial No. 023356 (Cancels and

Supersedes NNPN No. 22526) issued on 17 March
1977, P318,897.34 with 14.50% interest p.a.;
(ii) Citibank NNPN Serial No. 23357 (Cancels and
Supersedes NNPN No. 22528) issued on 17 March
1977, 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 attorneys 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 Decisions dispositive portion is hereby
ordered DELETED.
The
challenged
26
March
2002 Decision of
is AFFIRMED with MODIFICATION.

the

Court

Since the Court of Appeals Decision, dated 26 March 2002, as

modified by the Resolution of the same court, dated 20 November
2002, was still principally in favor of respondent, petitioners filed
the instant Petition for Review on Certiorari under Rule 45 of the
Revised Rules of Court. After giving due course to the instant
Petition, this Court promulgated on 16 October 2006 its Decision,
now
subject
of
petitioners
Motion
for
Partial
Reconsideration.1awphi1.net
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 respondents 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 16 October 2006, disallowing the offsetting or compensation of the balance of respondents outstanding
loans using her dollar deposits in Citibank-Geneva
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.
Petitioners maintain that respondents 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 respondents 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

11

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 Philippines and abroad are part of a single worldwide corporate
entity and share the same juridical personality. In connection
therewith, petitioners deny that they ever admitted that CitibankManila and Citibank-Geneva are distinct and separate entities.
Petitioners call the attention of this Court to the following provision
found in all of the PNs7 executed by respondent for her loans

SEC. 20. Bank Branches. Universal or commercial banks may

open branches or other offices within or outside the Philippines
upon prior approval of the Bangko Sentral.
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.

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.

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.

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
respondents 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."

SEC. 72. Transacting Business in the Philippines. The entry of

foreign banks in the Philippines through the establishment of
branches shall be governed by the provisions of the Foreign Banks
Liberalization Act.

Pertinent provisions of Republic Act No. 8791, otherwise known as

the General Banking Law of 2000, governing bank branches are
reproduced below

xxxx

The conduct of offshore banking business in the Philippines shall be

governed by the provisions of Presidential Decree No. 1034,
otherwise known as the "Offshore Banking System Decree."
xxxx
SEC. 74. Local Branches of Foreign Banks. In case of a foreign
bank which has more than one (1) branch in the Philippines, all
such branches shall be treated as one (1) unit for the purpose of
this Act, and all references to the Philippine branches of foreign
banks shall be held to refer to such units.
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.

12

Residents and citizens of the Philippines who are creditors of a

branch in the Philippines of a foreign bank shall have preferential
rights to the assets of such branch in accordance with existing
laws.
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 universal9 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 Philippines.
The General Banking Law of 2000, however, does not make the
same categorical statement as regards to foreign banks and their
branches in the Philippines. What Section 74 of the said law
provides is that in case of a foreign bank with several branches in
the country, all such branches shall be treated as one unit. As to
the relations between the local branches of a foreign bank and its
head office, Section 75 of the General Banking Law of 2000 and
Section 5 of the Foreign Banks Liberalization Law provide for a

"Home Office Guarantee," in which the head office of the foreign

bank shall guarantee prompt payment of all liabilities of its
Philippine branches. While the Home Office Guarantee is in accord
with the principle that these local branches, together with its head
office, constitute but one legal entity, it does not necessarily
support the view that said principle is true and applicable in all
circumstances.
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 banks 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 banks
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 New York, United States of
America (U.S.A.).
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 Act13 states that

13

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 CitibankManila 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 U.S.A., then it is bound to treat its
foreign branches in accordance with the said provision. It is only at
the end of its fiscal period that the bank is required to transfer to its
general ledger the profit or loss accrued at each branch, but still
reporting it as a separate item. It is by virtue of this provision that
the Circuit Court of Appeals of New York declared in Pan-American
Bank and Trust Co. v. National City Bank of New York 14 that a
branch is not merely a tellers window; it is a separate business
entity.
The circumstances in the case of McGrath v. Agency of Chartered
Bank of India, Australia & China 15 are closest to the one at bar. In
said case, the Chartered Bank had branches in several countries,
including one in Hamburg, Germany and another in New York,
U.S.A., and yet another in London, United Kingdom. The New York
branch entered in its books credit in favor of four German firms.
Said credit represents collections made from bills of exchange
delivered by the four German firms. The same four German firms
subsequently became indebted to the Hamburg branch. The
London branch then requested for the transfer of the credit in the
name of the German firms from the New York branch so as to be
applied or setoff against the indebtedness of the same firms to the
Hamburg branch. One of the question brought before the U.S.
District Court of New York was "whether or not the debts and the
alleged setoffs thereto are mutual," which could be answered by
determining first whether the New York and Hamburg branches of
Chartered Bank are individual business entities or are one and the
same entity. In denying the right of the Hamburg branch to setoff,
the U.S. District Court ratiocinated that

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 banks 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.
xxxx
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.

The structure of international banking houses such as Chartered

bank defies one rigorous description. Suffice it to say for present

14

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 respondents 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
respondents 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 farreaching 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 respondents 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 respondents 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 respondents 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 CitibankManila only supports this Courts 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
respondents 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 Courts ruling striking down the Declaration of Pledge is
not entirely based on respondents allegation of forgery. In its

15

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 respondents "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.
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 CitibankGeneva when it requested for the remittance of respondents 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 24 September
1979. Respondent, however, presented her passport and plane
tickets to prove that she was out of the country on the said date
and could not have signed the pledge. Petitioner Citibank insisted
that the pledge was signed before 24 September 1979, but could
not provide an explanation as to how and why the said date was
written on the pledge. Although Mr. Tan testified that the
Declaration of Pledge was signed by respondent personally before
him, he could not give the exact date when the said signing took
place. It is important to note that the copy of the Declaration of
Pledge submitted by the respondent to the RTC was certified by an
officer of Citibank-Geneva, which had possession of the original
copy of the pledge. It is dated 24 September 1979, and this Court
shall abide by the presumption that the written document is truly
dated. Since it is undeniable that respondent was out of the country
on 24 September 1979, then she could not have executed the
pledge on the said 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

16

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.
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 respondents
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

17

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 July 16, 1968.
Although by petitioner's evidence there was a decided decline in
the purchasing power of the Philippine peso throughout this period,
we are hard put to treat this as an "extraordinary inflation" within
the meaning and intent of Article 1250.
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. dollarPhilippine 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 Philippines
likewise experienced economic crisis in the 1980s, yet this Court
did not find that extraordinary inflation took place during the said

18

period so as to warrant the application of Article 1250 of the Civil

Code.

As to respondents Motion to Clarify and/or Confirm Decision with

Notice of Judgment

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
respondents loans. Petitioner Citibank even attempted to justify
the off-setting or compensation of respondents loans using her
dollar accounts with Citibank-Geneva by the presentation of a
highly suspicious and irregular, and even possibly forged,
Declaration of Pledge.

Respondent, in her Motion, is of the mistaken notion that the Court

of Appeals Decision, dated 26 March 2002, as modified by the
Resolution of the same court, dated 20 November 2002, would be
implemented or executed together with this Courts Decision.

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
respondents non-payment of her loans. It must also be
remembered that petitioner Citibank had already considered
respondents loans paid or liquidated by 26 October 1979 after it
had fully effected compensation thereof using respondents deposits
and money market placements. All this time, respondents dollar
accounts are unlawfully in the possession of and are being used by
petitioner Citibank for its business transactions. In the meantime,
respondents businesses failed and her properties were foreclosed
because she was denied access to her funds when she needed
them most. Taking these into consideration, respondents dollar
accounts with Citibank-Geneva must be deemed to be subsisting
and continuously deposited with petitioner Citibank all this while,
and will only be presently withdrawn by respondent. Therefore,
petitioner Citibank should refund to respondent the U.S.
$149,632.99 taken from her Citibank-Geneva accounts, 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.

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 Courts
Decision modified that of the appellate courts 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 Courts Decision, dated 16 October 2006,
should it already become final and executory, without any further
modifications.
As the last point, there is no merit in respondents Motion for this
Court to already declare its Decision, dated 16 October 2006, final
and executory. A judgment becomes final and executory by
operation of law and, accordingly, the finality of the judgment
becomes a fact upon the lapse of the reglementary period without
an appeal or a motion for new trial or reconsideration being
filed.25 This Court cannot arbitrarily disregard the reglementary
period and declare a judgment final and executory upon the mere
motion of one party, for to do so will be a culpable violation of the
right of the other parties to due process.
IN VIEW OF THE FOREGOING, petitioners Motion for Partial
Reconsideration of this Courts Decision, dated 16 October 2006,
and respondents Motion for this Court to declare the same
Decision already final and executory, are both DENIED for lack of
merit.
SO ORDERED.

19

3. [Baviera vs. Paglinawan, 515 SCRA 170(2007)]

G.R. No. 168380

February 8, 2007

DECISION
SANDOVAL-GUTIERREZ, J.:
Before us are two consolidated Petitions for Review on Certiorari
assailing the Decisions of the Court of Appeals in CA-G.R. SP No.
873281 and in CA-G.R. SP No. 85078.2
The common factual antecedents of these cases as shown by the
records are:
Manuel Baviera, petitioner in these cases, was the former head of
the HR Service Delivery and Industrial Relations of Standard
Chartered Bank-Philippines (SCB), one of herein respondents. SCB
is a foreign banking corporation duly licensed to engage in banking,
trust, and other fiduciary business in the Philippines. Pursuant to
Resolution No. 1142 dated December 3, 1992 of the Monetary
Board of the Bangko Sentral ng Pilipinas (BSP), the conduct of
SCBs business in this jurisdiction is subject to the following
conditions:
1. At the end of a one-year period from the date the SCB
starts its trust functions, at least 25% of its trust accounts
must be for the account of non-residents of the Philippines
and that actual foreign exchange had been remitted into the
Philippines to fund such accounts or that the establishment
of such accounts had reduced the indebtedness of residents
(individuals or corporations or government agencies) of the
Philippines to non-residents. At the end of the second year,
the above ratio shall be 50%, which ratio must be observed
continuously thereafter;
2. The trust operations of SCB shall be subject to all existing
laws, rules and regulations applicable to trust services,
particularly the creation of a Trust Committee; and
3. The bank shall inform the appropriate supervising and
examining department of the BSP at the start of its
operations.

20

Apparently, SCB did not comply with the above conditions. Instead,
as early as 1996, it acted as a stock broker, soliciting from local
residents foreign securities called "GLOBAL THIRD PARTY MUTUAL
FUNDS" (GTPMF), denominated in US dollars. These securities were
not registered with the Securities and Exchange Commission (SEC).
These were then remitted outwardly to SCB-Hong Kong and SCBSingapore.

Meanwhile, on August 17, 1998, the BSP directed SCB not to

include investments in global mutual funds issued abroad in its
trust investments portfolio without prior registration with the SEC.

SCBs counsel, Romulo Mabanta Buenaventura Sayoc and Delos

Angeles Law Office, advised the bank to proceed with the selling of
the foreign securities although unregistered with the SEC, under
the guise of a "custodianship agreement;" and should it be
questioned, it shall invoke Section 723 of the General Banking Act
(Republic Act No.337).4 In sum, SCB was able to sell GTPMF
securities worth around P6 billion to some 645 investors.

However, notwithstanding its commitment and the BSP directive,

SCB continued to offer and sell GTPMF securities in this country.
This prompted petitioner to enter into an Investment Trust
Agreement with SCB wherein he purchased US$8,000.00 worth of
securities upon the banks promise of 40% return on his investment
and a guarantee that his money is safe. After six (6) months,
however, petitioner learned that the value of his investment went
down to US$7,000.00. He tried to withdraw his investment but was
persuaded by Antonette de los Reyes of SCB to hold on to it for
another six (6) months in view of the possibility that the market
would pick up.

However, SCBs operations did not remain unchallenged. On July

18, 1997, the Investment Capital Association of the Philippines
(ICAP) filed with the SEC a complaint alleging that SCB violated the
Revised Securities Act,5particularly the provision prohibiting the
selling of securities without prior registration with the SEC; and that
its actions are potentially damaging to the local mutual fund
industry.
In its answer, SCB denied offering and selling securities, contending
that it has been performing a "purely informational function"
without solicitations for any of its investment outlets abroad; that it
has a trust license and the services it renders under the
"Custodianship Agreement" for offshore investments are authorized
by Section 726 of the General Banking Act; that its clients were the
ones who took the initiative to invest in securities; and it has been
acting merely as an agent or "passive order taker" for them.
On September 2, 1997, the SEC issued a Cease and Desist Order
against SCB, holding that its services violated Sections 4(a) 7 and
198 of the Revised Securities Act.
Meantime, the SEC indorsed ICAPs complaint and its supporting
documents to the BSP.
On October 31, 1997, the SEC informed the Secretary of Finance
that it withdrew GTPMF securities from the market and that it will
not sell the same without the necessary clearances from the
regulatory authorities.

On August 31, 1998, SCB sent a letter to the BSP confirming that it
will withdraw third-party fund products which could be directly
purchased by investors.

Meanwhile, on November 27, 2000, the BSP found that SCB failed
to comply with its directive of August 17, 1998. Consequently, it
was fined in the amount of P30,000.00.
The trend in the securities market, however, was bearish and the
worth of petitioners investment went down further to only
US$3,000.00.
On October 26, 2001, petitioner learned from Marivel Gonzales,
head of the SCB Legal and Compliance Department, that the latter
had been prohibited by the BSP to sell GPTMF securities. Petitioner
then filed with the BSP a letter-complaint demanding compensation
for his lost investment. But SCB denied his demand on the ground
that his investment is "regular."
On July 15, 2003, petitioner filed with the Department of Justice
(DOJ), represented herein by its prosecutors, public respondents, a
complaint charging the above-named officers and members of the
SCB Board of Directors and other SCB officials, private respondents,
with syndicated estafa, docketed as I.S. No. 2003-1059.
For their part, private respondents filed the following as countercharges against petitioner: (1) blackmail and extortion, docketed as

21

I.S. No. 2003-1059-A; and blackmail and perjury, docketed as I.S.

No. 2003-1278.
On September 29, 2003, petitioner also filed a complaint for perjury
against private respondents Paul Simon Morris and Marivel
Gonzales, docketed as I.S. No. 2003-1278-A.

He also filed with the Court of Appeals a separate petition for

certiorari assailing the DOJ Resolution dismissing I.S. No. 2004-229
for violation of the Securities Regulation Code. This petition was
docketed as CA-G.R. SP No. 87328. Petitioner claimed that the DOJ
acted with grave abuse of discretion tantamount to lack or excess
of jurisdiction in holding that the complaint should have been filed
with the SEC.

On December 4, 2003, the SEC issued a Cease and Desist Order

against SCB restraining it from further offering, soliciting, or
otherwise selling its securities to the public until these have been
registered with the SEC.

On January 7, 2005, the Court of Appeals promulgated its Decision

dismissing the petition.1avvphi1.net It sustained the ruling of the
DOJ that the case should have been filed initially with the SEC.

Subsequently, the SEC

settlement.1awphi1.net

amicable

Petitioner filed a motion for reconsideration but it was denied in a

Resolution dated May 27, 2005.

On January 20, 2004, the SEC lifted its Cease and Desist Order and
approved the P7 million settlement offered by SCB. Thereupon, SCB
made a commitment not to offer or sell securities without prior
compliance with the requirements of the SEC.

Meanwhile, on February 21, 2005, the Court of Appeals rendered its

Decision in CA-G.R. SP No. 85078 (involving petitioners charges
and respondents counter charges) dismissing the petition on the
ground that the purpose of a petition for certiorari is not to
evaluate and weigh the parties evidence but to determine whether
the assailed Resolution of the DOJ was issued with grave abuse of
discretion tantamount to lack of jurisdiction. Again, petitioner
moved for a reconsideration but it was denied in a Resolution of
November 22, 2005.

and

SCB

reached

an

On February 7, 2004, petitioner filed with the DOJ a complaint for

violation of Section 8.19 of the Securities Regulation Code against
private respondents, docketed as I.S. No. 2004-229.
On
February
23,
2004,
the
DOJ
rendered
its
Joint
Resolution10 dismissing petitioners complaint for syndicated estafa
in I.S. No. 2003-1059; private respondents complaint for blackmail
and extortion in I.S. No. 2003-1059-A; private respondents
complaint for blackmail and perjury in I.S. No. 2003-1278; and
petitioners complaint for perjury against private respondents
Morris and Gonzales in I.S. No. 2003-1278-A.
Meanwhile, in a Resolution11 dated April 4, 2004, the DOJ dismissed
petitioners complaint in I.S. No. 2004-229 (violation of Securities
Regulation Code), holding that it should have been filed with the
SEC.
Petitioners motions to dismiss his complaints were denied by the
DOJ. Thus, he filed with the Court of Appeals a petition for
certiorari, docketed as CA-G.R. SP No. 85078. He alleged that the
DOJ acted with grave abuse of discretion amounting to lack or
excess of jurisdiction in dismissing his complaint for syndicated
estafa.

Hence, the instant petitions for review on certiorari.

For our resolution is the fundamental issue of whether the Court of
Appeals erred in concluding that the DOJ did not commit grave
abuse of discretion in dismissing petitioners complaint in I.S. 2004229 for violation of Securities Regulation Code and his complaint in
I.S. No. 2003-1059 for syndicated estafa.
G.R. No 168380
Re: I.S. No. 2004-229
For violation of the Securities Regulation Code
Section 53.1 of the Securities Regulation Code provides:
SEC. 53. Investigations, Injunctions and Prosecution of Offenses.

22

53. 1. The Commission may, in its discretion, make such

investigation as it deems necessary to determine whether any
person has violated or is about to violate any provision of this Code,
any rule, regulation or order thereunder, or any rule of an
Exchange, registered securities association, clearing agency, other
self-regulatory organization, and may require or permit any person
to file with it a statement in writing, under oath or otherwise, as the
Commission shall determine, as to all facts and circumstances
concerning the matter to be investigated. The Commission may
publish information concerning any such violations and to
investigate any fact, condition, practice or matter which it may
deem necessary or proper to aid in the enforcement of the
provisions of this Code, in the prescribing of rules and regulations
thereunder, or in securing information to serve as a basis for
recommending further legislation concerning the matters to which
this Code relates: Provided, however, That any person requested or
subpoenaed to produce documents or testify in any investigation
shall simultaneously be notified in writing of the purpose of such
investigation: Provided, further, That all criminal complaints for
violations of this Code and the implementing rules and
regulations enforced or administered by the Commission
shall be referred to the Department of Justice for
preliminary investigation and prosecution before the proper
court: Provided, furthermore, That in instances where the law
allows independent civil or criminal proceedings of violations
arising from the act, the Commission shall take appropriate action
to implement the same: Provided, finally; That the investigation,
prosecution, and trial of such cases shall be given priority.
The Court of Appeals held that under the above provision, a
criminal complaint for violation of any law or rule administered by
the SEC must first be filed with the latter. If the Commission finds
that there is probable cause, then it should refer the case to the
DOJ. Since petitioner failed to comply with the foregoing procedural
requirement, the DOJ did not gravely abuse its discretion in
dismissing his complaint in I.S. No. 2004-229.
A criminal charge for violation of the Securities Regulation Code is a
specialized dispute. Hence, it must first be referred to an
administrative agency of special competence, i.e., the SEC. Under
the doctrine of primary jurisdiction, courts will not determine a
controversy involving a question within the jurisdiction of the
administrative tribunal, where the question demands the exercise
of sound administrative discretion requiring the specialized

knowledge and expertise of said administrative tribunal to

determine technical and intricate matters of fact. 12 The Securities
Regulation Code is a special law. Its enforcement is particularly
vested in the SEC. Hence, all complaints for any violation of the
Code and its implementing rules and regulations should be filed
with the SEC. Where the complaint is criminal in nature, the SEC
shall indorse the complaint to the DOJ for preliminary investigation
and prosecution as provided in Section 53.1 earlier quoted.
We thus agree with the Court of Appeals that petitioner committed
a fatal procedural lapse when he filed his criminal complaint
directly with the DOJ. Verily, no grave abuse of discretion can be
ascribed to the DOJ in dismissing petitioners complaint.
G.R. No. 170602
Re: I.S. No. 2003-1059 for
Syndicated Estafa
Section 5, Rule 110 of the 2000 Rules of Criminal Procedure, as
amended, provides that all criminal actions, commenced by either
a complaint or an information, shall be prosecuted under the
direction and control of a public prosecutor. This mandate is
founded on the theory that a crime is a breach of the security and
peace of the people at large, an outrage against the very
sovereignty of the State. It follows that a representative of the
State shall direct and control the prosecution of the offense. 13 This
representative of the State is the public prosecutor, whom this
Court described in the old case of Suarez v. Platon,14 as:
[T]he representative not of an ordinary party to a controversy, but
of a sovereignty whose obligation to govern impartially is as
compelling as its obligation to govern at all; and whose interest,
therefore, in a criminal prosecution is not that it shall win a case,
but that justice shall be done. As such, he is in a peculiar and very
definite sense a servant of the law, the twofold aim of which is that
guilt shall not escape or innocence suffers.
Concomitant with his authority and power to control the
prosecution of criminal offenses, the public prosecutor is vested
with the discretionary power to determine whether a prima
facie case exists or not.15 This is done through a preliminary

23

investigation designed to secure the respondent from hasty,

malicious and oppressive prosecution. A preliminary investigation is
essentially an inquiry to determine whether (a) a crime has been
committed; and (b) whether there is probable cause that the
accused is guilty thereof.16 In Pontejos v. Office of the
Ombudsman,17probable cause is defined as such facts and
circumstances that would engender a well-founded belief that a
crime has been committed and that the respondent is probably
guilty thereof and should be held for trial. It is the public prosecutor
who determines during the preliminary investigation whether
probable cause exists. Thus, the decision whether or not to dismiss
the criminal complaint against the accused depends on the sound
discretion of the prosecutor.
Given this latitude and authority granted by law to the investigating
prosecutor, the rule in this jurisdiction is that courts will not
interfere with the conduct of preliminary investigations or
reinvestigations or in the determination of what constitutes
sufficient probable cause for the filing of the corresponding
information against an offender. 18 Courts are not empowered to
substitute their own judgment for that of the executive
branch.19 Differently stated, as the matter of whether to prosecute
or not is purely discretionary on his part, courts cannot compel a
public prosecutor to file the corresponding information, upon a
complaint, where he finds the evidence before him insufficient to
warrant the filing of an action in court. In sum, the prosecutors
findings on the existence of probable cause are not subject
to review by the courts, unless these are patently shown to
have been made with grave abuse of discretion.20
Grave abuse of discretion is such capricious and whimsical exercise
of judgment on the part of the public officer concerned which is
equivalent to an excess or lack of jurisdiction. The abuse of
discretion must be as patent and gross as to amount to an evasion
of a positive duty or a virtual refusal to perform a duty enjoined by
law, or to act at all in contemplation of law, as where the power is
exercised in an arbitrary and despotic manner by reason of passion
or hostility.21

The Court of Appeals held that petitioners evidence is insufficient

to establish probable cause for syndicatedestafa. There is no
showing from the record that private respondents herein did induce
petitioner by false representations to invest in the GTPMF
securities. Nor did they act as a syndicate to misappropriate his
money for their own benefit. Rather, they invested it in accordance
with his written instructions. That he lost his investment is not their
fault since it was highly speculative.
Records show that public respondents examined petitioners
evidence with care, well aware of their duty to prevent material
damage to his constitutional right to liberty and fair play.
In Suarez previously cited, this Court made it clear that a public
prosecutors duty is two-fold. On one hand, he is bound by his oath
of office to prosecute persons where the complainants evidence is
ample and sufficient to show prima facie guilt of a crime. Yet, on
the other hand, he is likewise duty-bound to protect innocent
persons from groundless, false, or malicious prosecution.22
Hence, we hold that the Court of Appeals was correct in dismissing
the petition for review against private respondents and in
concluding that the DOJ did not act with grave abuse of discretion
tantamount to lack or excess of jurisdiction.
On petitioners complaint for violation of the Securities Regulation
Code, suffice it to state that, as aptly declared by the Court of
Appeals, he should have filed it with the SEC, not the DOJ. Again,
there is no indication here that in dismissing petitioners complaint,
the DOJ acted capriciously or arbitrarily.
WHEREFORE, we DENY the petitions and AFFIRM the assailed
Decisions of the Court of Appeals in CA-G.R. SP No. 87328 and in
CA-G.R. SP No. 85078.
Costs against petitioner.
SO ORDERED.

In determining whether the DOJ committed grave abuse of

discretion, it is expedient to know if the findings of factof herein
public prosecutors were reached in an arbitrary or despotic manner.

24

5. [Caltex (Philippines), Inc. vs. Court of Appeals, 212 SCRA

448(1992)]

Commercial Law; Negotiable Instruments Law; Requisites for an

instrument to become negotiable.Section 1 of Act No. 2031,
otherwise known as the Negotiable Instruments Law, enumerates
the requisites for an instrument to become negotiable, viz: (a) It
must be in writing and signed by the maker or drawer; (b) Must
contain an unconditional promise or order to pay a sum certain in
money; (c) Must be payable on demand, or at a fixed or
determinable future time; (d) Must be payable to order or to bearer;
and (e) Where the instrument is addressed to a drawee, he must be
named or otherwise indicated therein with reasonable certainty.
Same; Same; Same; The negotiability or non-negotiability of an
instrument is determined from the writing that is from the face of
the instrument itself.On this score, the accepted rule is that the
negotiability or non-negotiability of an instrument is determined
from the writing, that is, from the face of the instrument itself. In
the construction of a bill or note, the intention of the parties is to
control, if it can be legally ascertained. While the writing may be
read in the light of surrounding circumstances in order to more
perfectly understand the intent and meaning of the parties, yet as
they have constituted the writing to be the only outward and visible
expression of their meaning, no other words are to be added to it or
substituted in its stead. The duty of the court in such case is to
ascertain, not what the parties may have secretly intended as
contradistinguished from what their words express, but what is the
meaning of the words they have used. What the parties meant
must be determined by what they said.
Same; Same; Same; An instrument is negotiated when it is
transferred from one person to another in such a manner as to
constitute the transferee the holder thereof and a holder may be
the payee or indorsee of a bill or note who is in possession of it or
the bearer thereof.Under the Negotiable Instruments Law, an
instrument is negotiated when it is transferred from one person to
another in such a manner as to constitute the transferee the holder
thereof, and a holder may be the payee or indorsee of a bill or note,
who is in possession of it, or the bearer thereof. In the present case,
however, there was no negotiation in the sense of a transfer of the
legal title to the CTDs in favor of petitioner in which situation, for
obvious reasons, mere delivery of the bearer CTDs would have
sufficed. Here, the delivery thereof only as security for the

purchases of Angel de la Cruz (and we even disregard the fact that

the amount involved was not disclosed) could at the most
constitute petitioner only as a holder for value by reason of his lien.
Accordingly, a negotiation for such purpose cannot be effected by
mere delivery of the instrument since, necessarily, the terms
thereof and the subsequent disposition of such security, in the
event of non-payment of the principal obligation, must be
contractually provided for.
Same; Same; Same; Where the holder has a lien on the instrument
arising from contract, he is deemed a holder for value to the extent
of his lien.The pertinent law on this point is that where the holder
has a lien on the instrument arising from contract, he is deemed a
holder for value to the extent of his lien. As such holder of collateral
security, he would be a pledgee but the requirements there-for and
the effects thereof, not being provided for by the Negotiable
Instruments Law, shall be governed by the Civil Code provisions on
pledge of incorporeal rights.
Civil Law; Estoppel; Under the doctrine of estoppel, an admission or
representation is rendered conclusive upon the person making it
and cannot be denied or disproved as against the person relying
thereon.In a letter dated November 26, 1982 addressed to
respondent Security Bank, J.Q. Aranas, Jr., Caltex Credit Manager,
wrote: x x x These certificates of deposit were negotiated to us by
Mr. Angel dela Cruz to guarantee his purchases of fuel products
(Italics ours.) This admission is conclusive upon petitioner, its
protestations notwithstanding. Under the doctrine of estoppel, an
admission or representation is rendered conclusive upon the person
making it, and cannot be denied or disproved as against the person
relying thereon. A party may not go back on his own acts and
representations to the prejudice of the other party who relied upon
them. In the law of evidence, whenever a party has, by his own
declaration, act, or omission, intentionally and deliberately led
another to believe a particular thing true, and to act upon such
belief, he cannot, in any litigation arising out of such declaration,
act, or omission, be permitted to falsify it.
Same; Same; An issue raised for the first time on appeal and not
raised timely in the proceedings in the lower court is barred by
estoppel.As
respondent
court
correctly
observed,
with
appropriate citation of some doctrinal authorities, the foregoing
enumeration does not include the issue of negligence on the part of
respondent bank. An issue raised for the first time on appeal and
not raised timely in the proceedings in the lower court is barred by

25

estoppel. Questions raised on appeal must be within the issues

framed by the parties and, consequently, issues not raised in the
trial court cannot be raised for the first time on appeal.

Total
===== ========

Remedial Law; Pre-trial; The determination of issues at a pretrial

conference bars the consideration of other questions on appeal.
Pre-trial is primarily intended to make certain that all issues
necessary to the disposition of a case are properly raised. Thus, to
obviate the element of surprise, parties are expected to disclose at
a pre-trial conference all issues of law and fact which they intend to
raise at the trial, except such as may involve privileged or
impeaching matters. The determination of issues at a pre-trial
conference bars the consideration of other questions on appeal.

2. Angel dela Cruz delivered the said certificates of time (CTDs)

to herein plaintiff in connection with his purchased of fuel
products from the latter (Original Record, p. 208).

REGALADO, J.:
This petition for review on certiorari impugns and seeks the
reversal of the decision promulgated by respondent court on March
8, 1991 in CA-G.R. CV No. 23615 1 affirming with modifications, the
earlier decision of the Regional Trial Court of Manila, Branch
XLII, 2 which dismissed the complaint filed therein by herein
petitioner against respondent bank.
The undisputed background of this case, as found by the court a
quo and adopted by respondent court, appears of record:
1. On various dates, defendant, a commercial banking
institution, through its Sucat Branch issued 280 certificates of
time deposit (CTDs) in favor of one Angel dela Cruz who
deposited with herein defendant the aggregate amount of
P1,120,000.00, as follows: (Joint Partial Stipulation of Facts and
Statement of Issues, Original Records, p. 207; Defendant's
Exhibits 1 to 280);
CTD
Dates Serial Nos. Quantity Amount
22
26
2
4
5
5
5
8
9
9
9

Feb.
Feb.
Mar.
Mar.
Mar.
Mar.
Mar.
Mar.
Mar.
Mar.
Mar.

82
82
82
82
82
82
82
82
82
82
82

90101
74602
74701
90127
74797
89965
70147
90001
90023
89991
90251

to
to
to
to
to
to
to
to
to
to
to

CTD
90120
74691
74740
90146
94800
89986
90150
90020
90050
90000
90272

20
90
40
20
4
22
4
20
28
10
22

P80,000
360,000
160,000
80,000
16,000
88,000
16,000
80,000
112,000
40,000
88,000

280

P1,120,000

3. Sometime in March 1982, Angel dela Cruz informed Mr.

Timoteo Tiangco, the Sucat Branch Manger, that he lost all the
certificates of time deposit in dispute. Mr. Tiangco advised said
depositor to execute and submit a notarized Affidavit of Loss, as
required by defendant bank's procedure, if he desired
replacement of said lost CTDs (TSN, February 9, 1987, pp. 4850).
4. On March 18, 1982, Angel dela Cruz executed and delivered
to defendant bank the required Affidavit of Loss (Defendant's
Exhibit 281). On the basis of said affidavit of loss, 280
replacement CTDs were issued in favor of said depositor
(Defendant's Exhibits 282-561).
5. On March 25, 1982, Angel dela Cruz negotiated and obtained
a loan from defendant bank in the amount of Eight Hundred
Seventy Five Thousand Pesos (P875,000.00). On the same date,
said depositor executed a notarized Deed of Assignment of
Time Deposit (Exhibit 562) which stated, among others, that he
(de la Cruz) surrenders to defendant bank "full control of the
indicated time deposits from and after date" of the assignment
and further authorizes said bank to pre-terminate, set-off and
"apply the said time deposits to the payment of whatever
amount or amounts may be due" on the loan upon its maturity
(TSN, February 9, 1987, pp. 60-62).
6. Sometime in November, 1982, Mr. Aranas, Credit Manager of
plaintiff Caltex (Phils.) Inc., went to the defendant bank's Sucat
branch and presented for verification the CTDs declared lost by
Angel dela Cruz alleging that the same were delivered to herein
plaintiff "as security for purchases made with Caltex Philippines,
Inc." by said depositor (TSN, February 9, 1987, pp. 54-68).
7. On November 26, 1982, defendant received a letter
(Defendant's Exhibit 563) from herein plaintiff formally
informing it of its possession of the CTDs in question and of its
decision to pre-terminate the same.
8. On December 8, 1982, plaintiff was requested by herein
defendant to furnish the former "a copy of the document

26

evidencing the guarantee agreement with Mr. Angel dela Cruz"

as well as "the details of Mr. Angel dela Cruz" obligation against
which plaintiff proposed to apply the time deposits (Defendant's
Exhibit 564).
9. No copy of the requested documents was furnished herein
defendant.
10. Accordingly, defendant bank rejected the plaintiff's demand
and claim for payment of the value of the CTDs in a letter dated
February 7, 1983 (Defendant's Exhibit 566).
11. In April 1983, the loan of Angel dela Cruz with the defendant
bank matured and fell due and on August 5, 1983, the latter
set-off and applied the time deposits in question to the payment
of the matured loan (TSN, February 9, 1987, pp. 130-131).
12. In view of the foregoing, plaintiff filed the instant complaint,
praying that defendant bank be ordered to pay it the aggregate
value of the certificates of time deposit of P1,120,000.00 plus
accrued interest and compounded interest therein at 16% per
annum, moral and exemplary damages as well as attorney's
fees.
After trial, the court a quo rendered its decision dismissing the
instant complaint. 3
On appeal, as earlier stated, respondent court affirmed the lower
court's dismissal of the complaint, hence this petition wherein
petitioner faults respondent court in ruling (1) that the subject
certificates of deposit are non-negotiable despite being clearly
negotiable instruments; (2) that petitioner did not become a holder
in due course of the said certificates of deposit; and (3) in
disregarding the pertinent provisions of the Code of Commerce
relating to lost instruments payable to bearer. 4
The instant petition is bereft of merit.
A sample text of the certificates of time deposit is reproduced
below to provide a better understanding of the issues involved in
this recourse.

SECURITY
AND
6778
Ayala
Metro
SUCAT
CERTIFICATE
Rate 16%

TRUST
Ave.,
Makati
Manila,
OFFICEP
OF

BANK
COMPANY
No.
90101
Philippines
4,000.00
DEPOSIT

Date of Maturity FEB. 23, 1984 FEB 22, 1982,

19____
This is to Certify that B E A R E R has
deposited in this Bank the sum
of PESOS: FOUR THOUSAND ONLY,
SECURITY BANK SUCAT OFFICE P4,000
& 00 CTS Pesos, Philippine Currency,
repayable
to
said
depositor 731
days. after date, upon presentation
and surrender of this certificate, with
interest at the rate of 16% per
cent per annum.
(Sgd. Illegible) (Sgd. Illegible)

AUTHORIZED SIGNATURES

Respondent court ruled that the CTDs in question are nonnegotiable instruments, nationalizing as follows:
. . . While it may be true that the word "bearer"
appears rather boldly in the CTDs issued, it is
important to note that after the word "BEARER"
stamped on the space provided supposedly for the
name of the depositor, the words "has deposited" a
certain amount follows. The document further
provides that the amount deposited shall be
"repayable to said depositor" on the period indicated.
Therefore, the text of the instrument(s) themselves
manifest with clarity that they are payable, not to
whoever purports to be the "bearer" but only to the
specified person indicated therein, the depositor. In
effect, the appellee bank acknowledges its depositor
Angel dela Cruz as the person who made the deposit
and further engages itself to pay said depositor the
amount indicated thereon at the stipulated date. 6

27

We disagree with these findings and conclusions, and hereby hold

that the CTDs in question are negotiable instruments. Section 1 Act
No. 2031, otherwise known as the Negotiable Instruments Law,
enumerates the requisites for an instrument to become
negotiable, viz:
(a) It must be in writing and signed by the maker or
drawer;
(b) Must contain an unconditional promise or order to
pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or
determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee,
he must be named or otherwise indicated therein
with reasonable certainty.
The CTDs in question undoubtedly meet the requirements of the
law for negotiability. The parties' bone of contention is with regard
to requisite (d) set forth above. It is noted that Mr. Timoteo P.
Tiangco, Security Bank's Branch Manager way back in 1982,
testified in open court that the depositor reffered to in the CTDs is
no other than Mr. Angel de la Cruz.
xxx xxx xxx
Atty. Calida:
q In other words Mr. Witness, you are saying that per books
of the bank, the depositor referred (sic) in these certificates
states that it was Angel dela Cruz?
witness:
a Yes, your Honor, and we have the record to show that
Angel dela Cruz was the one who cause (sic) the amount.
Atty. Calida:
q And no other person or entity or company, Mr. Witness?
witness:
a None, your Honor.
xxx xxx xxx

Atty. Calida:
q Mr. Witness, who is the depositor identified in all of these
certificates of time deposit insofar as the bank is concerned?
witness:
a Angel dela Cruz is the depositor. 8
xxx xxx xxx
On this score, the accepted rule is that the negotiability or nonnegotiability of an instrument is determined from the writing, that
is, from the face of the instrument itself. 9 In the construction of a
bill or note, the intention of the parties is to control, if it can be
legally ascertained. 10 While the writing may be read in the light of
surrounding circumstances in order to more perfectly understand
the intent and meaning of the parties, yet as they have constituted
the writing to be the only outward and visible expression of their
meaning, no other words are to be added to it or substituted in its
stead. The duty of the court in such case is to ascertain, not what
the parties may have secretly intended as contradistinguished from
what their words express, but what is the meaning of the words
they have used. What the parties meant must be determined by
what they said. 11
Contrary to what respondent court held, the CTDs are negotiable
instruments. The documents provide that the amounts deposited
shall be repayable to the depositor. And who, according to the
document, is the depositor? It is the "bearer." The documents do
not say that the depositor is Angel de la Cruz and that the amounts
deposited are repayable specifically to him. Rather, the amounts
are to be repayable to the bearer of the documents or, for that
matter, whosoever may be the bearer at the time of presentment.
If it was really the intention of respondent bank to pay the amount
to Angel de la Cruz only, it could have with facility so expressed
that fact in clear and categorical terms in the documents, instead
of having the word "BEARER" stamped on the space provided for
the name of the depositor in each CTD. On the wordings of the
documents, therefore, the amounts deposited are repayable to
whoever may be the bearer thereof. Thus, petitioner's aforesaid
witness merely declared that Angel de la Cruz is the depositor
"insofar as the bank is concerned," but obviously other parties not
privy to the transaction between them would not be in a position to
know that the depositor is not the bearer stated in the CTDs.
Hence, the situation would require any party dealing with the CTDs
to go behind the plain import of what is written thereon to unravel

28

the agreement of the parties thereto through facts aliunde. This

need for resort to extrinsic evidence is what is sought to be avoided
by the Negotiable Instruments Law and calls for the application of
the elementary rule that the interpretation of obscure words or
stipulations in a contract shall not favor the party who caused the
obscurity. 12
The next query is whether petitioner can rightfully recover on the
CTDs. This time, the answer is in the negative. The records reveal
that Angel de la Cruz, whom petitioner chose not to implead in this
suit for reasons of its own, delivered the CTDs amounting to
P1,120,000.00 to petitioner without informing respondent bank
thereof at any time. Unfortunately for petitioner, although the CTDs
are bearer instruments, a valid negotiation thereof for the true
purpose and agreement between it and De la Cruz, as ultimately
ascertained, requires both delivery and indorsement. For, although
petitioner seeks to deflect this fact, the CTDs were in reality
delivered to it as a security for De la Cruz' purchases of its fuel
products. Any doubt as to whether the CTDs were delivered as
payment for the fuel products or as a security has been dissipated
and resolved in favor of the latter by petitioner's own authorized
and responsible representative himself.

the alleged indebtedness of Angel de la Cruz to plaintiff and (b)

whether or not it issued a receipt showing that the CTDs were
delivered to it by De la Cruz as payment of the latter's alleged
indebtedness to it, plaintiff corporation opposed the motion. 18 Had
it produced the receipt prayed for, it could have proved, if such
truly was the fact, that the CTDs were delivered as payment and
not as security. Having opposed the motion, petitioner now labors
under the presumption that evidence willfully suppressed would be
adverse if produced. 19
Under the foregoing circumstances, this disquisition in Intergrated
Realty Corporation, et al. vs. Philippine National Bank, et al. 20 is
apropos:
. . . Adverting again to the Court's pronouncements in Lopez,
supra, we quote therefrom:

In a letter dated November 26, 1982 addressed to respondent

Security Bank, J.Q. Aranas, Jr., Caltex Credit Manager, wrote: ". . .
These certificates of deposit were negotiated to us by Mr. Angel
dela Cruz to guarantee his purchases of fuel products" (Emphasis
ours.) 13 This admission is conclusive upon petitioner, its
protestations notwithstanding. Under the doctrine of estoppel, an
admission or representation is rendered conclusive upon the person
making it, and cannot be denied or disproved as against the person
relying thereon. 14 A party may not go back on his own acts and
representations to the prejudice of the other party who relied upon
them. 15 In the law of evidence, whenever a party has, by his own
declaration, act, or omission, intentionally and deliberately led
another to believe a particular thing true, and to act upon such
belief, he cannot, in any litigation arising out of such declaration,
act, or omission, be permitted to falsify it. 16

The character of the transaction between the parties is to be

determined by their intention, regardless of what language
was used or what the form of the transfer was. If it was
intended to secure the payment of money, it must be
construed as a pledge; but if there was some other
intention, it is not a pledge. However, even though a
transfer, if regarded by itself, appears to have been
absolute, its object and character might still be qualified and
explained by contemporaneous writing declaring it to have
been a deposit of the property as collateral security. It has
been said that a transfer of property by the debtor to a
creditor, even if sufficient on its face to make an absolute
conveyance, should be treated as a pledge if the debt
continues in inexistence and is not discharged by the
transfer, and that accordingly the use of the terms ordinarily
importing conveyance of absolute ownership will not be
given that effect in such a transaction if they are also
commonly used in pledges and mortgages and therefore do
not unqualifiedly indicate a transfer of absolute ownership,
in the absence of clear and unambiguous language or other
circumstances excluding an intent to pledge.

If it were true that the CTDs were delivered as payment and not as
security, petitioner's credit manager could have easily said so,
instead of using the words "to guarantee" in the letter aforequoted.
Besides, when respondent bank, as defendant in the court below,
moved for a bill of particularity therein 17 praying, among others,
that petitioner, as plaintiff, be required to aver with sufficient
definiteness or particularity (a) the due date or dates of payment of

Petitioner's insistence that the CTDs were negotiated to it begs the

question. Under the Negotiable Instruments Law, an instrument is
negotiated when it is transferred from one person to another in
such a manner as to constitute the transferee the holder
thereof, 21 and a holder may be the payee or indorsee of a bill or
note, who is in possession of it, or the bearer thereof. 22 In the
present case, however, there was no negotiation in the sense of a

29

transfer of the legal title to the CTDs in favor of petitioner in which

situation, for obvious reasons, mere delivery of the bearer CTDs
would have sufficed. Here, the delivery thereof only as security for
the purchases of Angel de la Cruz (and we even disregard the fact
that the amount involved was not disclosed) could at the most
constitute petitioner only as a holder for value by reason of his lien.
Accordingly, a negotiation for such purpose cannot be effected by
mere delivery of the instrument since, necessarily, the terms
thereof and the subsequent disposition of such security, in the
event of non-payment of the principal obligation, must be
contractually provided for.

Art. 1625. An assignment of credit, right or action shall produce

no effect as against third persons, unless it appears in a public
instrument, or the instrument is recorded in the Registry of
Property in case the assignment involves real property.
Respondent bank duly complied with this statutory requirement.
Contrarily, petitioner, whether as purchaser, assignee or lien holder
of the CTDs, neither proved the amount of its credit or the extent of
its lien nor the execution of any public instrument which could
affect or bind private respondent. Necessarily, therefore, as
between petitioner and respondent bank, the latter has definitely
the better right over the CTDs in question.

The pertinent law on this point is that where the holder has a lien
on the instrument arising from contract, he is deemed a holder for
value to the extent of his lien. 23 As such holder of collateral
security, he would be a pledgee but the requirements therefor and
the effects thereof, not being provided for by the Negotiable
Instruments Law, shall be governed by the Civil Code provisions on
pledge of incorporeal rights, 24 which inceptively provide:

Finally, petitioner faults respondent court for refusing to delve into

the question of whether or not private respondent observed the
requirements of the law in the case of lost negotiable instruments
and the issuance of replacement certificates therefor, on the
ground that petitioner failed to raised that issue in the lower
court. 28

Art. 2095. Incorporeal rights, evidenced by negotiable

instruments, . . . may also be pledged. The instrument proving
the right pledged shall be delivered to the creditor, and if
negotiable, must be indorsed.

On this matter, we uphold respondent court's finding that the

aspect of alleged negligence of private respondent was not
included in the stipulation of the parties and in the statement of
issues submitted by them to the trial court. 29 The issues agreed
upon by them for resolution in this case are:

Art. 2096. A pledge shall not take effect against third persons if
a description of the thing pledged and the date of the pledge do
not appear in a public instrument.
Aside from the fact that the CTDs were only delivered but not
indorsed, the factual findings of respondent court quoted at the
start of this opinion show that petitioner failed to produce any
document evidencing any contract of pledge or guarantee
agreement between it and Angel de la Cruz. 25 Consequently, the
mere delivery of the CTDs did not legally vest in petitioner any right
effective against and binding upon respondent bank. The
requirement under Article 2096 aforementioned is not a mere rule
of adjective law prescribing the mode whereby proof may be made
of the date of a pledge contract, but a rule of substantive law
prescribing a condition without which the execution of a pledge
contract cannot affect third persons adversely. 26
On the other hand, the assignment of the CTDs made by Angel de
la Cruz in favor of respondent bank was embodied in a public
instrument. 27 With regard to this other mode of transfer, the Civil
Code specifically declares:

1. Whether or not the CTDs as worded are negotiable

instruments.
2. Whether or not defendant could legally apply the amount
covered by the CTDs against the depositor's loan by virtue of
the assignment (Annex "C").
3. Whether or not there was legal compensation or set off
involving the amount covered by the CTDs and the depositor's
outstanding account with defendant, if any.
4. Whether or not plaintiff could compel defendant to
preterminate the CTDs before the maturity date provided
therein.
5. Whether or not plaintiff is entitled to the proceeds of the
CTDs.
6. Whether or not the parties can recover damages, attorney's
fees and litigation expenses from each other.
As respondent court correctly observed, with appropriate citation of
some doctrinal authorities, the foregoing enumeration does not

30

include the issue of negligence on the part of respondent bank. An

issue raised for the first time on appeal and not raised timely in the
proceedings in the lower court is barred by estoppel. 30 Questions
raised on appeal must be within the issues framed by the parties
and, consequently, issues not raised in the trial court cannot be
raised for the first time on appeal. 31
Pre-trial is primarily intended to make certain that all issues
necessary to the disposition of a case are properly raised. Thus, to
obviate the element of surprise, parties are expected to disclose at
a pre-trial conference all issues of law and fact which they intend to
raise at the trial, except such as may involve privileged or
impeaching matters. The determination of issues at a pre-trial
conference bars the consideration of other questions on appeal.32
To accept petitioner's suggestion that respondent bank's supposed
negligence may be considered encompassed by the issues on its
right to preterminate and receive the proceeds of the CTDs would
be tantamount to saying that petitioner could raise on appeal any
issue. We agree with private respondent that the broad ultimate
issue of petitioner's entitlement to the proceeds of the questioned
certificates can be premised on a multitude of other legal reasons
and causes of action, of which respondent bank's supposed
negligence is only one. Hence, petitioner's submission, if accepted,
would render a pre-trial delimitation of issues a useless exercise. 33
Still, even assuming arguendo that said issue of negligence was
raised in the court below, petitioner still cannot have the odds in its
favor. A close scrutiny of the provisions of the Code of Commerce
laying down the rules to be followed in case of lost instruments
payable to bearer, which it invokes, will reveal that said provisions,
even assuming their applicability to the CTDs in the case at bar, are
merely permissive and not mandatory. The very first article cited by
petitioner speaks for itself.

Art 548. The dispossessed owner, no matter for what cause it

may be, may apply to the judge or court of competent
jurisdiction, asking that the principal, interest or dividends due
or about to become due, be not paid a third person, as well as
in order to prevent the ownership of the instrument that a
duplicate be issued him. (Emphasis ours.)
xxx xxx xxx
The use of the word "may" in said provision shows that it is not
mandatory but discretionary on the part of the "dispossessed
owner" to apply to the judge or court of competent jurisdiction for
the issuance of a duplicate of the lost instrument. Where the
provision reads "may," this word shows that it is not mandatory but
discretional. 34The word "may" is usually permissive, not
mandatory. 35 It is an auxiliary verb indicating liberty, opportunity,
permission and possibility. 36
Moreover, as correctly analyzed by private respondent, 37 Articles
548 to 558 of the Code of Commerce, on which petitioner seeks to
anchor
respondent
bank's
supposed
negligence,
merely
established, on the one hand, a right of recourse in favor of a
dispossessed owner or holder of a bearer instrument so that he
may obtain a duplicate of the same, and, on the other, an option in
favor of the party liable thereon who, for some valid ground, may
elect to refuse to issue a replacement of the instrument.
Significantly, none of the provisions cited by petitioner categorically
restricts or prohibits the issuance a duplicate or replacement
instrument sans compliance with the procedure outlined therein,
and none establishes a mandatory precedent requirement therefor.
WHEREFORE, on the modified premises above set forth, the petition
is DENIED and the appealed decision is hereby AFFIRMED.
SO ORDERED.

31