CASE No.

Citibank vs. Sabeniano

GR. No. 156132, October 16, 2006

Doctrine (Best Evidence Rule):

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. Any other substitutionary evidence is
likewise admissible without need for accounting for the original.

Facts:

The present petition relates to the civil case filed by the respondent against the petitioners.
The petitioners (Citibank and FNCB Finance) are affiliate companies, with the latter handling
money market placements for the former. The respondent (Modesta R. Sabeniano) was a
client of both petitioners Citibank and FNCB Finance. Respondent had deposits and money
market placements with Citibank and FNCB respectively.

The issue arose when as respondent alleged, petitioners refused to return her deposits and
the proceeds of her money market placements despite her repeated demands, thus,
compelling respondent to file Civil Case No. 11336 against petitioners for “Accounting, Sum of
Money and Damages”. The petitioner claimed as a defense that the respondent had
outstanding loans with the petitioner, and that the deposits (both peso deposit and dollar
deposit with Citibank, Switzerland) and money market placements with the petitioner (FNCB
Finance) were off-set with the outstanding loans pursuant to the Declaration of Pledge and the
Deeds of Assignment executed by respondent in favor of the petitioners.

The RTC declared as illegal, null and void the set-off effected by the petitioner bank with
regards to the dollar deposit in Citibank Switzerland, ordering the refund of the same to the
respondent. The RTC also declared the respondent Sabeniano to still be indebted to the
petitioner bank in the amount of P1,069,847.40 and to pay said amount.

Both parties appealed to the CA which affirmed with modification the previous ruling of the
RTC. The notable finding of the CA is that the petitioners in this case failed to establish by
competent evidence the alleged indebtedness of the respondent thus, the set-off made by the
petitioner banks were without basis and were void. This is due to the fact that only photocopies
and microfilm copies of the Promissory Notes (PN), Manager’s Checks (MC) as well as letters
were presented by the petitioner to establish the existence of respondent Sabeniano’s loans.
The CA found such evidence presented to be in violation of the Best Evidence Rule stated
under the Rules of Court, Rule 130, Section 3.

Issue:
Whether or not the existence of the loans were not duly established due to the violation of the
Best Evidence Rule.

Ruling:

The Court ruled that the Best Evidence Rule will not apply to the present case, this is due to
the fact that the same rule only applies when the subject of the inquiry is the contents of the
document. 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. Any other substitutionary evidence is
likewise admissible without need for accounting for the original.

With that said, the Court did not violate the best evidence rule when it considered and weighed
in evidence the photocopies and microfilm copies of the PNs, MCs, and letters submitted by
the petitioners to establish the existence of respondent’s loans, since the terms or contents of
these documents were never the point of contention in the Petition at bar. The respondent only
alleges that the first set of PNs were non-existent and the second set of PNs were only
simulated. As to the MCs, the respondent denied the receipt of some and admitted receipt of
the other MCs but for another purpose. Respondent further admitted that she personally wrote
the letters to Mr. Tan (representative of Petitioner Bank). Thus, respondent questioned the
documents as to their existence or execution, or when the former is admitted, as to the
purpose for which the documents were executed, matters which are, undoubtedly, external to
the documents, and which had nothing to do with the contents thereof. Hence the Best
Evidence Rule will not apply. The Court even further stated that even if the Best Evidence Rule
were made to apply in the present case, it is to be noted that the reason why the petitioner
cannot present the original documents to establish the loans of the respondent was due to the
fire that broke out on the 7th floor of the office building of the petitioner Citibank; the same floor
housed all of the documents related not only to the present case but also to other legal
proceedings involving the petitioner, and there was no showing that the fire was intentionally
set. With that said, even if the best evidence rule is made to apply in the present case, it will fall
under the exceptions as set forth under Rule 130, Sec. 5 which states that “When the original
document has been lost or destroyed, or cannot be produced in court, the offeror, upon proof
of its execution or existence and the cause of its unavailability without bad faith on his part,
may prove its contents by a copy, or by a recital of its contents in some authentic document, or
by the testimony of witnesses in the order stated. The execution of the original copies of the
documents were established through the testimonies of witnesses, such as Mr. Tan, before
whom most of the documents were personally, executed by respondent. Testimonies of the
account officer in its Marketing Department, to the pre-processor, to the signature verifier, to
the processor was also introduced. Hence, the execution/existence of the original documents
will still be proven.

The final ruling of the Court is that the set-off made by the petitioner regarding the Peso
deposit account with the petitioner Citibank was valid as this right is duly set under the Civil
Code Arts. 1278 and 1279. the set-off of the money market placements with the FNCB
Finance were also valid by virtue of a notarized Deed of Assignment. While the set-off made
by the petitioner with regard to the dollar deposit with Citibank Switzerland was not valid
because the Court found the Declaration of Pledge, which is the alleged source of authority of
the petitioner to apply the foreign deposit to the outstanding loan of the respondent to be
invalid since the petitioner cannot produce the original thru its own fault (the original is in
custody of Citibank Switzerland, and there were no proof of any substantial effort from the
petitioner to obtain the same). Hence the Court found that the petitioner had no authority to
apply the dollar deposit to the outstanding loan of the respondent.