Citibank, N.A.

and Investors Finance Corporation

vs Modesta R. Sabeniano
G.R. No. 156132

FACTS:
Citibank is a banking corporation duly authorized to do commercial
banking activities and perfoem trust functions in the Philippines.
Investors Finance Corporation, which did business under the name and
style of FNCB Finance, was an affiliate company of petitioner Citibank,
specifically handling money market placements for its clients.
Sabeniano was a client of both Citibank and FNCB Finance.
Respondent filed a complaint against petitioners claiming that she
has substantial deposits with them, the proceeds of which were
supposedly transferred automatically and directly to her account with
Citibank and that allegedly petitioner refused to so despite demands.
Petitioner alleged that respondent has several loans from Citibank
and by default, it exercised its right to set-off respondents outstanding
loans with her deposits and money. Trial court declared the said act of
petitioner illegal, and null and void and ordered the petitioner to return
the amount plus interest. On the other hand, trial court ordered
respondent to pay Citibank her debt.
The Court of Appeals affirmed the trial courts decision entirely in
favor of the respondent.
ISSUE:
Whether or not compensation was warranted with regard to loan and
deposit account.
HELD:
The court held, YES.
Article 1278 states that Compensation shall take place when two
persons, intheir own right, are creditors and debtors of each other. And in
order for that compensation to be proper, it is necessary: (1) that each one of
the obligors be bound principally, and that he be at the same time a principal
creditor of the other, (2) That both debts consists in a sum of money, or if the
things due are consumable, they be of the same kind, and also of the same
quality if the latter has been stated, (3) That the two debts are due, (4) That
they be liquidated and demandable, and (5) That neither of them there be

any retention or controversy, commenced

communicated in due time to the debtor.

by

third

persons

and

Thus, the petition is partly granted with modification. Citibank is

ordered to return to the respondent the principal amount and was ordered to
refund the remittance from respondents Citibank-Geneva account since
such remittance was declared illegal, and null and void, using the Philippine
currency or its equivalent based on the exchange rate at the time of
payment. Citibank was also ordered to pay respondent moral damages,
exemplary damages and attorneys fees. Respondent was ordered to pay
petitioner the balance of her outstanding loans and interest.