Citibank N.A. vs. Sabeniano
G.R. No. 156132 | Date: February 6, 2007|PONENTE: J. Chico-Nazario | Digest by: Alex
DOCTRINE: Extinguishment of Obligations - Payment Currency and Value - The valuing of
the currency at the time of the establishment of the obligation as basis of payment
can only be done in cases of extraordinary inflation or deflation, which must be
competently proven by the party-in-interest.
RELEVANT PROVISION: Article 1250. In case of 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.
o Modesta Sabeniano (respondent) was a client of Citibank (petitioner). She had
several deposits and market placements with Citibank:
Savings account with Citibank-Manila
Money market placements with FNCB Finance (under Citibank)
Dollar accounts with Citibank-Geneva
o Sabeniano had outstanding loans with Citibank-Manila, amounting to P1,920,000.00
which were due and demandable by May 1979. However, Sabeniano failed to pay
these outstanding loans.
o Citibank then used Sabeniano's deposits and money market placements to off-set
and liquidate her obligations.
o Sabeniano sought to recover her deposits and money market placements.
o The RTC, CA and the SC's first decision on this case (the current case is a decision
based on the Motion for Partial Reconsideration of Citibank) all ruled in favor of
ISSUE, HELD AND RATIO DECIDENDI: [RELEVANT TO LESSON]
1) WON the SC should adjust the nominal values of Sabeniano's account by using the
values of currencies in 1979, as stipulated at the time of the obligation?
NOTE: The reason why Citibank prays for this is because the SC is saying that Citibank
should pay what they unlawfully took from Sabeniano the amount AT THE TIME OF THE
PAYMENT. This is in contrast with Art. 1250's "at the time of the establishment of the
obligation". I think the reason for why Citibank raises this provision is that it would make it
cheaper for them to pay Sabeniano "at the time of the establishment of the obligation" (which
was back in 1979) rather than what the SC is ordering, which is at the time of the payment
(which is, at the time of this decision, in 2007).
NO. Though Citibank-Manila invokes Art. 1250 of the Civil Code, the provision becomes
applicable only when there is extraordinary inflation or deflation of currency.
o Inflation = sharp increase of money or credit or both, without a corresponding
increase in business transaction.
o SC held in Singson v. Caltex that what constitutes as an "extraordinary inflation
or deflation of currency" is 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/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.
SC rules that Sabeniano's dollar accounts with Citibank-Geneva must be deemed to be
subsisting and continuously deposited with Citibank-Manila all this while, and will
only be withdrawn by Sabeniano herself.
Therefore, Citibank-Manila should refund to Sabeniano the $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 October 26, 1979 (time of
The supervening of extraordinary inflation is NEVER assumed. It must be competently
proven by the parties for Art. 1250 to apply.
Although the US Dollar - Philippine Peso exchange rate dropped by 17 points from June
1997 to 1998, the Bangko Sentral ng Pilipinas (BSP) did not categorically declare that
the same constitutes as an extraordinary inflation.
o Existence of extraordinary inflation must be officially proclaimed by competent
authorities such as the BSP. SC cannot declare extraordinary inflation.
o Art. 1250 is based on equity. Citibank does not come to the SC with clean hands,
because the delay in the recovery of Sabeniano's dollar accounts with CitibankGeneva was due to the unlawful act of Citibank-Manila in using the dollar
accounts to liquidate Sabeniano's loans.
o Sabeniano's businesses failed and her properties were foreclosed because of
RULING: IN VIEW OF THE FOREGOING, Citibank's Motion for Partial Reconsideration is
DENIED for lack of merit.
2) WON Sabeniano's "Declaration of Pledge" (meaning she supposedly assigned her
dollar accounts with Citibank-Geneva as security for her loans with Citibank-Manila)
is valid and binding upon respondent?
NO. Citibank branches worldwide do not form one single unit with branches in different
countries. Only Citibank branches in the Philippines form one single unit. The off-setting
or compensation of Sabeniano's loans with Citibank-Manila using her dollar accounts
with Citibank-Geneva cannot be effected.