Citibank v.
Sabeniano banking and credit facilities it extended to her, in the aggregate
G.R. No. 156132 | October 16, 2006 | Chico-Nazario
SUMMARY: Sabeniano obtained several loans from Citibank, secured by a
Declaration of Pledge for her dollar accounts in Geneva, and Deeds of
Assignment for her money market placements. When she defaulted, Citibank
off-set her balance with her account deposit with Citibank, with the money
market placements pursuant to the Deed of Pledge, and her dollar accounts
per the Declaration of Pledge. Sabeniano thus filed a complaint questioning
the propriety of the off-set made by Citibank.
DOCTRINE: 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.
BPI further stamped its guarantee on the back of the checks to the effect that,PROCEDURAL HISTORY
"All prior endorsement and/or Lack of endorsement guaranteed."
Thus, BPI became the indorser of the MCs, and assumed all the warranties of
an indorser, specifically, that the checks were genuine and in all respects what
they purported to be; that it had a good title to the checks; that all prior parties
had capacity to contract; and that the checks were, at the time of their
indorsement, valid and subsisting.
FACTS:
 The subjects of this petition are the loans which respondent obtained
from July 1978 to January 1979, appropriately covered by PNs (first
set), with an aggregate principal amount of P1,920,000.00.
o All the PNs stated that the purpose of the loans covered thereby
is “To liquidate existing obligation,” except for PN No. 34534,
which stated for its purpose “personal investment.”
 Respondent secured her foregoing loans with petitioner Citibank by
executing Deeds of Assignment of her money market placements with
petitioner FNCB Finance.
o On 2 March 1978, respondent executed in favor of petitioner
Citibank a Deed of Assignment of PN No. 8169, which was
issued by petitioner FNCB Finance, to secure payment of the
credit and banking facilities extended to her by petitioner
Citibank, in the aggregate principal amount of P500,000.00.
o On 9 March 1978, respondent executed in favor of petitioner
Citibank another Deed of Assignment, this time, of PN No. 8167,
also issued by petitioner FNCB Finance, to secure payment of
the credit and banking facilities extended to her by petitioner
Citibank, in the aggregate amount of P500,000.00.
 When PNs No. 8167 and 8169 matured and were rolled-over to PNs No.
20138 and 20139, respondent executed new Deeds of Assignment, in
favor of petitioner Citibank, on 25 August 1978.
o According to the more recent Deeds, respondent assigned PNs
No. 20138 and 20139, to petitioner Citibank as security for the
principal amount of P500,000.00 per Deed.
 Respondent failed to pay the second set of PNs upon their maturity, an
exchange of letters ensued between respondent and/or her
representatives, on one hand, and the representatives of petitioners, on
the other…
 By 5 September 1979, respondent’s outstanding and past due
obligations to petitioner Citibank totaled P2,123,843.20 (principal +
interests).
o Relying on respondent’s Deeds of Assignment, petitioner
Citibank applied the proceeds of respondent’s money
market placements with petitioner FNCB Finance, as well as
her deposit account with petitioner Citibank, to partly
liquidate respondent’s outstanding loan balance.
 On 8 August 1985, Respondent filed a Complaint against petitioners.
o Claimed to have substantial deposits and money market
placements with the petitioners, as well as money market
placements with the Ayala Investment and Development
Corporation (AIDC), the proceeds of which were supposedly
deposited automatically and directly to respondent’s accounts
with petitioner Citibank.
o Respondent alleged that petitioners refused to return her
deposits and the proceeds of her money market placements
despite her repeated demands.
 Ten years after the filing of the Complaint on 8 August 1985, a Decision
was rendered, stating:
WHEREFORE, in view of all the foregoing, decision is hereby rendered as follows:
(1) Declaring as illegal, null and void the set-off effected by the defendant Bank
[petitioner Citibank] of plaintiff’s [respondent Sabeniano] dollar deposit with Citibank,
Switzerland, in the amount of US$149,632.99, and ordering the said defendant [petitioner
Citibank] to refund the said amount to the plaintiff with legal interest at the rate of twelve
percent (12%) per annum, compounded yearly, from 31 October 1979 until fully paid, or its
peso equivalent at the time of payment;
(2) Declaring the plaintiff [respondent Sabeniano] indebted to the defendant
Bank [petitioner Citibank] in the amount of P1,069,847.40 as of 5 September 1979 and
ordering the plaintiff [respondent Sabeniano] to pay said amount, however, there shall be
no interest and penalty charges from the time the illegal set-off was effected on 31 October
1979…
 All the parties appealed the foregoing Decision of the RTC to the Court
of Appeals…
o On 26 March 2002, the Court of Appeals rendered its
Decision affirming with modification the RTC Decision…
and ruling entirely in favor of respondent… Both parties
opted to bring this case to the SC for review.
ISSUE/S & RATIO:
1. W/N Citibank was able establish by preponderance of evidence the
existence of respondent’s loans? YES
 Respondent did have outstanding loans with petitioner Citibank at the  BPI further stamped its guarantee on the back of the checks to the
time it effected the off-set or compensation. The totality of petitioner’s effect that, "All prior endorsement and/or Lack of endorsement
evidence as to the existence of the said loans preponderates over guaranteed."
respondent’s. o Thus, BPI became the indorser of the MCs, and assumed all
o The P1,920,000 outstanding obligation had been sufficiently the warranties of an indorser, specifically, that the checks
documented by petitioner Citibank. were genuine and in all respects what they purported to be;
 Second set of PNs is a mere renewal of the prior loans originally that it had a good title to the checks; that all prior parties
covered by the first set of PNs except for PN No. 34534. The first set had capacity to contract; and that the checks were, at the
of PNs is supported, in turn, by the existence of the Manager’s Checks time of their indorsement, valid and subsisting.
that represent the proceeds received by the respondent. o So even if the MCs deposited by BPI's client, whether it be
 Proceeds of the loans were paid to respondent in manager’s checks, by respondent herself or some other person, lacked the
with respondent specifically named as payee. necessary indorsement, BPI, as the collecting bank, is
o These checks are drawn by the bank’s manager upon the bank bound by its warranties as an indorser and cannot set up
itself and regarded as good as money it represents. the defense of lack of indorsement as against petitioner
o The checks were also crossed checks, with the words “Payees Citibank, the drawee bank.
Account Only.”
 These crossed checks were indeed deposited in several different bank RULING: Petitioner is partially granted.
accounts and cleared by the Clearing Office. The crossed checks were
already in possession of petitioner Citibank as drawee bank which was
ultimately responsible for the payment of the amounts.
o Given the possession was already with Citibank, duly
stamped “Paid” then it gives rise to the presumption the
checks were already paid out to the intended payee -> in
this case respondent.
 These presumptions are disputable and may be contradicted and
overcome by other evidence. Respondent was unable to present
sufficient and credible evidence to dispute these presumptions.
o Respondent’s bare allegations that she did not receive the
checks fail to convince the Court that an irregularity had
occurred somewhere
 The mere fact that the Manager’s checks do not bear respondent’s
signature at the back does not negate deposit thereof in her account.
o 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.
o Once again, it must be noted that the MCs were crossed, for
payee's 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 respondent's 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 respondent's, then the respondent
would have a cause of action against BPI.