Citibank vs Sabeniano Case Digest

Citibank and Investors Finance Corporation, petitioner

vs.
Modesta Sabeniano, respondent.
6 February 2007, G.R. No. 156132

FACTS:
Citibank (petitioner) is a banking corporation duly authorized under the laws of the USA to do
commercial banking activities in the Philippines and Switzerland.
Sabeniano (respondent) was a client of Citibank and FNCB Finance. She had several deposits and
market placements with petitioners, among which were her (1) savings account with Citibank-Manila, (2)
money market placements with FNCB Finance, and (3) dollar accounts with Citibank-Geneva.
Respondent incurred loans from petitioner aggregating to a total of P 2,156,940.58 which became
demandable on October 1979. When she defaulted, petitioner exercised its right of compensation (Art.
1278 Civil Code) to set-off respondent’s obligations with her deposits and money including those
contained in the dollar accounts with Citibank-Geneva.
The RTC declared the act illegal, null and void, and ordered the petitioner to refund the amount
plus interest, and respondent, on the other hand, to pay petitioner her indebtedness. The CA affirmed the
decision entirely in favor of the respondent.

ISSUE:
Whether petitioner may exercise its right to set-off respondent’s loan with her deposits and
money in Citibank-Geneva.

RULING:
No. Setting-off of respondent’s loan is not possible because the right to compensation is
unavailable.
Citibank-Manila and Citibank-Geneva are separate entities. Branches or agencies of international
banks have been held to be independent entities for a variety of purposes.
In the dollar accounts, the creditor was the respondent and the debtor was Citibank-Geneva. In
the outstanding loans, the creditor was Citibank-Manila and the debtor was the respondent. Thus, legal
compensation is not possible because the debtor in the first obligation and the creditor in the second are
two different entities. Citibank-Manila could not use respondent’s dollar account with Citibank-Geneva to
liquidate her loans without her express authorization.