VOL.

539, NOVEMBER 28, 2007 69

Panlilio vs. Citibank, N.A.
*
G.R. No. 156335. November 28, 2007.

SPOUSES RAUL and AMALIA PANLILIO, petitioners, vs.

CITIBANK, N.A., respondent.

Obligations and Contracts; Contracts have the force of law between

the parties and must be complied with in good faith.—The DIMA,
Directional Letter and COIs are evidence of the contract between the parties
and are binding on them, following Article 1159 of the Civil Code which
states that contracts have the force of law between the parties and must be
complied with in good faith. In particular, petitioner Amalia affixed her
signatures on the DIMA, Directional Letter and TIA, a clear evidence of her
consent which, under Article 1330 of the same Code, she cannot deny
absent any evidence of mistake, violence, intimidation, undue influence or
fraud.

Same; Banks and Banking; Investment management activities may be

exercised by a banking institution.—The DIMA, Directional Letter, TIA and
COIs, read together, establish the agreement between the parties as an
investment management agreement, which created a principal-agent
relationship between petitioners as principals and respondent as agent for
investment purposes. The agreement is not a trust or an ordinary bank
deposit; hence, no trustor-trustee-beneficiary or even borrower-lender
relationship existed between petitioners and respondent with respect to the
DIMA account. Respondent purchased the LTCPs only as agent of
petitioners; thus, the latter assumed all obligations or inherent risks entailed
by the transaction under Article 1910 of the Civil Code, which provides:
Article 1910. The principal must comply with all the obligations which the
agent may have contracted within the scope of his authority. As for any
obligation wherein the agent has exceeded his power, the principal is not
bound except when he ratifies it expressly or tacitly. The transaction is
perfectly legal, as investment management activities may be exercised by a
banking institution, pursuant to Republic Act No. 337 or the General
Banking Act of 1948, as amended, which was the law then in effect.

_______________

* THIRD DIVISION.

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70 SUPREME COURT REPORTS ANNOTATED

Panlilio vs. Citibank, N.A.

Same; Same; Contracts of Adhesion; It is highly improbable that

someone fairly educated and with investment experience would sign a
document in blank or without reading it first.—The Court finds no proof to
sustain petitioners’ contention that the DIMA and Directional Letter
contradict other papers on record, or were signed in blank, or had
unauthorized intercalations. Petitioners themselves admit that Amalia signed
the DIMA and the Directional Letter, which bars them from disowning the
contract on the belated claim that she signed it in blank or did not read it
first because of the “fine print.” On the contrary, the evidence does not
support these latter allegations, and it is highly improbable that someone
fairly educated and with investment experience would sign a document in
blank or without reading it first. Petitioners owned various businesses and
were clients of other banks, which omits the possibility of such carelessness.
Even more damning for petitioners is that, on record, Amalia admitted that it
was not her habit to sign in blank and that the contents of the documents
were explained to her before she signed.

Same; Same; Same; “Fine Print” Argument; The “fine print”

argument is unavailing where, although the print may have looked smaller
than average, they were nevertheless of the same size throughout the
documents, so that no part or provision is hidden from the reader.—As to
the allegation that the documents were in “fine print,” the Court notes that
although the print may have looked smaller than average, they were
nevertheless of the same size throughout the documents, so that no part or
provision is hidden from the reader. The Court also takes judicial notice that
the print is no smaller than those found in similar contracts in common
usage, such as insurance, mortgage, sales contracts and even ordinary bank
deposit contracts. In the documents in question, the provisions hurtful to
petitioners’ cause were likewise in no smaller print than the rest of the
document, as indeed they were even highlighted either in bold or in all caps.
This disposes of the argument that they were designed to hide their
damaging nature to the signatory. The conclusion is that the print is readable
and should not have prevented petitioners from studying the papers before
their signing. Considering petitioners’ social stature, the nature of the
transaction and the amount of money involved, the Court presumes that
petitioners exercised adequate care and diligence in studying the contract
prior to its execution.

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VOL. 539, NOVEMBER 28, 2007 71

Panlilio vs. Citibank, N.A.

Same; Same; Same; Interpretation of Contracts; While any ambiguity,

obscurity or doubt in a contract of adhesion is construed or resolved strictly
against the party who prepared it, it is also equally obvious that in a case
where no such ambiguity, obscurity or doubt exists, no such construction is
warranted.—Sweet Lines, 83 SCRA 361 (1978), further expounded that the
validity and/or enforceability of contracts of adhesion will have to be
determined by the peculiar circumstances obtaining in each case and the
nature of the conditions or terms sought to be enforced. Thus, while any
ambiguity, obscurity or doubt in a contract of adhesion is construed or
resolved strictly against the party who prepared it, it is also equally obvious
that in a case where no such ambiguity, obscurity or doubt exists, no such
construction is warranted. This was the case in the DIMA and the
Directional Letter signed by Amalia in the instant controversy.

Same; Same; Same; It is the rule that contracts of adhesion are upheld
unless they are in the nature of a patently lopsided deal where blind
adherence is not justified by other factual circumstances.—In addition, it
has been held that contracts of adhesion are not necessarily voidable. The
Court has consistently held that contracts of adhesion, wherein one party
imposes a ready-made form of contract on the other, are contracts not
entirely prohibited, since the one who adheres to the contract is in reality
free to reject it entirely; if he adheres, he gives his consent. It is the rule that
these contracts are upheld unless they are in the nature of a patently lopsided
deal where blind adherence is not justified by other factual circumstances.

Same; Same; Taxation; The ITF (“in trust for”) device allows the
children to obtain the money without the need of paying estate taxes in case
the parents meet a premature death.—The Court gives credence to
respondent’s explanation that the word “TRUST” appearing on the TIA
simply means that the account is to be handled by the bank’s trust
department, which handles not only the trust business but also the other
fiduciary business and investment management activities of the bank, while
the “ITF” or “in trust for” appearing on the other documents only signifies
that the money was invested by Amalia in trust for her two children, a
device that she uses even in her ordinary deposit accounts with other banks.
The ITF device allows the children to obtain the money without need of
paying estate taxes in case Amalia meets a premature death. However, it

72

72 SUPREME COURT REPORTS ANNOTATED

Panlilio vs. Citibank, N.A.

creates a trustee-beneficiary relationship only between Amalia and her

children, and not between Amalia, her children, and Citibank.

Same; Same; Agency; Principals in an agency relationship are solely

obliged to observe the solemnity of the transaction entered into by the agent
on their behalf, absent any proof that the latter acted beyond its authority,
and concomitant to this obligation is that the principal also assumes the
risks that may arise from the transaction; Bank regulations prohibit banks
from guaranteeing profits or the principal in an investment management
account.—Having bound themselves under the contract as earlier discussed,
petitioners are governed by its provisions. Petitioners as principals in an
agency relationship are solely obliged to observe the solemnity of the
transaction entered into by the agent on their behalf, absent any proof that
the latter acted beyond its authority. Concomitant to this obligation is that
the principal also assumes the risks that may arise from the transaction.
Indeed, as in the instant case, bank regulations prohibit banks from
guaranteeing profits or the principal in an investment management account.
Hence, the CA correctly dismissed petitioners’ complaint against
respondent.

PETITION for review on certiorari of the decision and resolution of

the Court of Appeals.
The facts are stated in the opinion of the Court.
     Acosta & Fernandez Law Firm for petitioners.
     Angara, Abello, Concepcion, Regala and Cruz Law Offices for
respondent.

AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under
1 Rule
45 of the Rules of Court, seeking to reverse the Deci-sion of the
Court of Appeals (CA) dated May 28, 2002 in CA-

_______________

1 Penned by Justice Wenceslao I. Agnir, Jr. with the concurrence of Justices B.A.
Adefuin-De La Cruz and Regalado E. Maambong, Rollo, p. 69.

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Panlilio vs. Citibank, N.A.

G.R. CV No. 66649 and its Resolution of December 11, 2002, which
reversed and set aside the Decision of the Regional Trial Court
(RTC) of Makati City. 2

The case originated as a Complaint for a sum of money and

damages, filed with the RTC of Makati City on March 2, 1999, by
the spouses Raul and Amalia Panlilio (petitioners) against Citibank
N.A. (respondent).
The factual antecedents are as follows:
On October 10, 1997, petitioner Amalia Panlilio (Amalia) visited
respondent’s Makati City office and deposited one million pesos
(PhP1 million) in the bank’s “Citihi” account,3 a fixed-term savings
account with a higher-than-average interest. On the same day,
Amalia also opened a current or checking account with respondent,4
to which interest earnings of the Citihi account were to be credited.
Respondent assigned one of its employees, Jinky Suzara Lee5 (Lee),
to personally transact with Amalia and to handle the accounts.
Amalia opened the accounts as ITF or “in trust for” accounts, as
they were intended to benefit her minor children, Alejandro King
Aguilar and Fe 6Emanuelle C. Panlilio, in case she would meet an
untimely death. To open these accounts, Amalia 7 signed two
documents: a Relationship Opening Form (ROF) and8 an Investor
Profiling and Suitability Questionnaire (Questionnaire).
Amalia’s initial intention was to invest the money in a Citibank
product called the Peso Repriceable Promissory Note (PRPN), a
product which had a higher interest. However, as

_______________

2 Records, pp. 1-10.

3 Records, pp. 1, 58, 228, 519.
 4 Id.
5 Id., at p. 57.
6 Id., at pp. 58, 228.
7 Exhibit “A,” Records, p. 348; Exhibit “1,” Records, pp. 737-738.
8 Exhibit “B,” Records, p. 349; Exhibit “2,” Records, p. 739.

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74 SUPREME COURT REPORTS ANNOTATED

Panlilio vs. Citibank, N.A.

the PRPN was not available

9 that day, Amalia put her money in the
Citihi savings account.
More than a month later, or on November 28, 1997, Amalia
phoned Citibank saying she wanted to place an investment, this time
in the amount of three million pesos (PhP3 million). Again, she
spoke with Lee, the bank employee, who introduced her to
Citibank’s various investment offerings. After the phone
conversation, apparently decided on where to invest the money,
Amalia went to Citibank bringing a PCIBank check in the amount of
three million pesos (PhP3 million). During the visit, Amalia
instructed Lee on what to do with the PhP3 million. Later, she
learned that out of the said amount, PhP2,134,635.87 was placed by
Citibank in a Long-Term Commercial Paper (LTCP), a debt
instrument that paid a high interest, issued 10 by the corporation
Camella and Palmera Homes (C&P Homes). The rest of the money
was placed11 in two PRPN accounts, in trust for each of Amalia’s two
children.
Allegations differ between petitioners and respondent as to
whether Amalia 12 instructed Lee to place the money in the LTCP of
C&P Homes.
An LTCP is an evidence of indebtedness, with a maturity period
of more13 than 365 days, issued by a corporation to any person or

entity. It is in effect a loan obtained by a14corporation (as borrower)

from the investing public (as lender) and is one of many
instruments that investment banks can legally buy on behalf of their
clients, upon the latter’s express in-

_______________

9 Records, pp. 518-519.

10 Records, pp. 2, 59, 233, 525.
11 Id., at pp. 233, 525.
 12 Id., at pp. 3, 47; 230, 523.
13 Securities and Exchange Commission (SEC) New Rules on the Registration of
Long-Term Commercial Papers (LTCP), Sec. 2(a), as cited in respondent’s
Memorandum, Rollo, p. 459.
14 Records, p. 499.

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VOL. 539, NOVEMBER 28, 2007 75

Panlilio vs. Citibank, N.A.
15

structions, for investment purposes. LTCPs’ attraction is that they

usually have higher yields than most investment instruments. In the
case of the LTCP issued by C&P Homes, the gross interest 16rate was
16.25% per annum at the time Amalia made her investment.
On November 28, 1997, the day she made the PhP3million
investment, Amalia signed the following documents:17 a Directional
Investment Management18 Agreement (DIMA), Term Investment 19
Application (TIA), and Directional Letter/Specific Instructions.
Key features of the DIMA and the Directional Letter are provisions
that essentially clear Citi-bank of any obligation to guarantee the
principal and interest of the investment, absent fraud or negligence
on the latter’s part. The provisions likewise state that all risks are to
be assumed by the investor (petitioner).
As to the amount invested, only PhP2,134,635.87 out of the PhP3
million brought by Amalia was placed in the LTCP since, according 20

to Lee, this was the only amount of LTCP then available.

According to Lee, the balance of the PhP3 million was placed in two
PRPN accounts,21 each one in trust for Amalia’s two children, per her
instructions.
Following this investment, respondent claims to have 22 regularly
sent confirmations of investment (COIs) to petitioners. A COI is a
one-page, computer generated document informing the customer of
the investment earlier made with the bank. The first of these COIs
was received by petitioners on or

_______________

15 Section 72 of Republic Act No. 337, as amended, or the General Banking Act;
Bangko Sentral ng Pilipinas (BSP) Manual of Regulations for Banks, Sec. X409.6.
16 Records, pp. 2, 523.
17 Exhibit “3,” Records, p. 740.
18 Exhibit “4,” Records, p. 741.
 19 Exhibit “5,” Records, p. 742.
20 Records, p. 525.
21 Id.
22 Id., at pp. 61-65, 528.

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76 SUPREME COURT REPORTS ANNOTATED

Panlilio vs. Citibank, N.A.

about December 9, 1997, as admitted23by Amalia, which is around a

week after the investment was made. Respondent claims that other
succeeding COIs were sent to and received by petitioners.
Amalia claims to have called Lee as soon as she received the first
COI in December 1997, and demanded 24 that the investment in LTCP
be withdrawn and placed in a PRPN. Respondent, however, denies
this, claiming that Amalia merely called 25 to clarify provisions in the
COI and did not demand a withdrawal.
On August 6, 1998, petitioners met with respondent’s other
employee, Lizza Colet, to preterminate the LTCP and their other
investments. Petitioners were told that as to the LTCP, liquidation
could be made only if there is a willing buyer, a prospect which
could be difficult at that time because of the economic crisis. Still,
petitioners signed three
26 sets of Sales Order Slip to sell the LTCP and

left these with Colet.

On August 18, 1998, Amalia, through counsel, sent her first
formal, written demand to respondent 27 “for a withdrawal of her
investment as soon as possible.” The same was followed by
another letter
28 dated September 7, 1998, which reiterated the same
demands. In answer to the letters, respondent noted that the
investment had a 2003 maturity, was not a deposit, and thus, its
return to the investor was not guaranteed by respondent; however, it
added that the LTCP may be

_______________

23 Direct Testimony of Amalia Panlilio, Records, p. 233; Exhibit “6.” The

Complaint states the date of receipt as on or about Decem-ber 8, 1997, Records, p. 2.
24 Direct Testimony of Amalia Panlilio, Records, p. 233.
25 Direct Testimony of Jinky Lee, Records, p. 534.
26 Direct Testimony of Lizza Colet-Vallente, Records, pp. 554-555; Direct
Testimony of Amalia Panlilio, Records, p. 235.
27 Exhibit “Z,” Records, pp. 172-173, 339; Exhibit “19,” Records, pp. 758-759.
 28 Exhibit “Z-1,” Records, pp. 174-175; Exhibit “20,” Records, pp. 760-761.

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Panlilio vs. Citibank, N.A.

sold prior to maturity and had in fact been put up for sale, but such
sale was29 “subject to the availability of buyers in the secondary
market.” At that time, respondent was not able to find a buyer for
the LTCP. As this response did not satisfy petitioners, Amalia again
wrote respondent, this time a final demand letter dated September
21, 1998,30asking for a reconsideration and a return of the money she
invested. In reply, respondent wrote a letter dated October 12, 1998
stating that despite efforts to sell the LTCP, no willing buyers were
found and that even if a buyer would come 31 later, the price would be
lower than Amalia’s original investment.
Thus, petitioners filed with the RTC their complaint against
respondent for a sum
32 of money and damages.

The Complaint essentially demanded a return of the investment,

alleging that Amalia never instructed respondent’s employee Lee to
invest the money in an LTCP; and that far from what Lee executed,
Amalia’s instructions were to invest the money in a “trust account”
with an “interest of around 16.25% with a term of 91 days.” Further,
petitioners alleged that it was only later, or on December 8, 1997,
when Amalia received the first confirmation of investment (COI)
from respondent, that she and her husband learned of Lee’s infidelity
to her orders. The COI allegedly informed petitioners that the money
was placed in an LTCP of C&P Homes with a maturity in 2003, and
that the investment was not guaranteed by respondent. Petitioners
also claimed that as soon as Amalia received the COI, she
immediately called Lee; however, the latter allegedly convinced her
to ignore the COI, that C&P Homes was an Ayala company, that the
investment was secure, and that it could be easily “withdrawn”;
hence, Amalia decided not to immediately “withdraw” the
investment. Sev-

_______________

29 Exhibit “Z-2,” Records, p. 176; Exhibit “21,” Records, p. 762.

30 Exhibit “Z-3,” Records, pp. 177-178; Exhibit “22,” Records, pp. 763-762.
31 Exhibit “Z-4,” Records, p. 180; Exhibit “24,” Records, p. 766.
32 Records, pp. 1-8.
 78

78 SUPREME COURT REPORTS ANNOTATED

Panlilio vs. Citibank, N.A.

eral months later, or on August 6, 1998, petitioners allegedly wanted

to “withdraw” the investment to buy a property; however, they failed
to do so, since respondent told them the LTCP had not yet matured,
and that no buyers were willing to buy it. Hence, they sent various
demand letters to respondent, asking for a return of their money; and
when these went unheeded,
33 they filed the complaint.
In its Answer, respondent admitted that, indeed, Amalia was its
client and that she invested the amounts stated in the complaint.
However, respondent disputed the claim that Amalia opened a “trust
account” with a “request for an interest rate of around 16.25% with a
term of 91 days;” instead, respondent presented documents stating
that Amalia opened a “directional investment management account,”
with investments to be made in C&P Homes’ LTCP with a 2003
maturity. Respondent disputed allegations that it violated petitioners’
express instructions. Respondent likewise denied that Amalia, upon
her receipt of the COI, immediately called respondent and protested
the investment in LTCP, its 2003 maturity and Citibank’s lack of
guarantee. According to respondent, no such protest was made and
petitioners actually decided to liquidate their investment only
months later, after the newspapers reported that Ayala Land, Inc. was
cancelling plans to invest in C&P Homes.
The rest of respondent’s Answer denied (1) that it convinced
Amalia not to liquidate or “withdraw” her investment or to ignore
the contents of the COI; (2) that it assured Amalia that the
investment could be easily or quickly “withdrawn” or sold; (3) that
it misrepresented that C&P was an Ayala company, implying that
C&P had secure finances; and (4) that respondent had been
unfaithful to and in breach of its contractual obligations.

_______________

33 Records, pp. 44-90.

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Panlilio vs. Citibank, N.A.
After trial, the RTC rendered its Decision, dated February 16,
2000, the dispositive portion of which states:

“The foregoing considered, the court hereby rules in favor of plaintiffs and
order defendant to pay:

1. The sum of PhP2,134,635.87 representing the actual amount

deposited by plaintiffs with defendant plus interest corresponding
to time deposit during the time material to this action from date of
filing of this case until fully paid;
2. The sum of PhP300,000.00 representing moral damages;
3. The sum of PhP100,000.00 representing attorney’s fees;
4. Costs.
35
SO ORDERED.”

The RTC upheld all the allegations of petitioners and concluded that
Amalia never instructed Citibank to invest the money in an LTCP.
Thus, the RTC found Citibank in violation of its contractual and
fiduciary duties and held it liable to return the money invested by
petitioners plus damages.
Respondent appealed to the CA.
On appeal, in its Decision promulgated on May 28, 2002, the CA
reversed the Decision of the RTC, thus:

“WHEREFORE, premises considered, the assailed decision dated 16

February 2000 is REVERSED and SET 36 ASIDE and a new one entered
DISMISSING Civil Case No. 99-500.”

The CA held that with respect to the amount of PhP2,134,635.87,

the account opened by Amalia was an investment management
account; as a result, the money invested was the sole and exclusive
obligation of C&P Homes,

_______________

34 Id., at pp. 1111-1115.

35 Records, p. 1115.
36 Rollo, pp. 69-91.

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80 SUPREME COURT REPORTS ANNOTATED

Panlilio vs. Citibank, N.A.
the issuer of the LTCP,37 and was not guaranteed or insured by herein

respondent Citibank; that Amalia opened such an account as

evidenced by the documents she executed with Citibank, namely, the
Directional Investment Management Agreement (DIMA), Term
Investment Application (TIA), and Directional Letter/Specific
Instructions, which were all dated November 28, 1997, the day
Amalia brought the money to Citibank. Further, the CA brushed
aside petitioners’ arguments that Amalia failed to understand the true
nature of the LTCP investment, and that she failed to read the
documents as they were written in fine print. The CA ruled that
petitioners could not seek the court’s aid to extricate them from their
contractual obligations. Citing jurisprudence, the CA held that the
courts protected only those who were innocent victims of fraud, and
not those who simply made bad bargains or exercised unwise
judgment.
On petitioners’ motion for reconsideration,38 the CA reiterated its
ruling and denied the motion in a Resolution dated December 11,
2002.
Thus, the instant petition which raises issues, summarized as
follows: (1) whether petitioners are bound by the terms and
conditions of the Directional Investment Management Agreement
(DIMA), Term Investment Application (TIA), Directional
Letter/Specific Instructions, and Confirmations of Investment
(COIs); (2) and whether petitioners are entitled to take back the
money they invested from respondent bank; or stated differently,
whether respondent is obliged to return the money to petitioners
upon their demand prior to maturity.
Petitioners contend that they are not bound by the terms and
conditions of the DIMA, Directional Letter and COIs because these 39
were inconsistent with the TIA and other documents they signed.
Further, they claim that the DIMA

_______________

37 Id., at p. 82.
38 Rollo, pp. 93-97.
39 Id., at p. 26.

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Panlilio vs. Citibank, N.A.
and the Directional letter were signed40 in blank or contained
unauthorized intercalations by Citibank. Petitioners argue that
contrary to the contents of the documents, they did not instruct
Citibank to invest in an LTCP 41 or to put their money in such high-
risk, long-term instruments.
The Court notes the factual nature of the questions raised in the
petition. Although the general rule is that only questions of 42law are
entertained by the Court in petitions for review on certiorari, as the
Court is not43tasked to repeat the lower courts’ analysis or weighing
of evidence, there are instances when the Court may resolve factual
issues, such as (1) when the trial court misconstrued facts and
circumstances of substance
44 which if considered would alter the
outcome of the case; and 45 (2) when the findings of facts of the CA

and the trial court differ.

In the instant case, the CA completely reversed the findings of
facts of the trial court on the ground that the RTC failed to
appreciate certain facts and circumstances.46 Thus, applying the
standing jurisprudence on the matter, the Court proceeded to
examine the evidence on record.

_______________

40 Id., at p. 26.
41 Id., at p. 34.
42 RULES OF COURT, Rule 45, Sec. 1; Samala v. Court of Appeals, 467 Phil.
563, 568; 423 SCRA 142, 145 (2004).
43 Potenciano v. Reynoso, 449 Phil. 396, 405; 401 SCRA 391, 397 (2003).
44 Arcilla v. Court of Appeals, 463 Phil. 914, 924; 418 SCRA 487, 496 (2003).
45 National Housing Authority v. Court of Appeals, G.R. No. 148830, April 13,
2005, 456 SCRA 17, 24.
46 Cebu Shipyard and Engineering Works, Inc. v. William Lines, Inc., 366 Phil.
439, 452; 306 SCRA 762, 775 (1999); In the case, the Court stated that:
There are instances when the findings of fact of the trial court and/or Court of
Appeals may be reviewed by the Supreme Court, such as

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82 SUPREME COURT REPORTS ANNOTATED

Panlilio vs. Citibank, N.A.

The Court’s Ruling

The Court finds no merit in the petition. After a careful examination
of the records, the Court affirms the CA’s ruling for being more in
accord with the facts and evidence on record.
On the first issue of whether petitioners are bound by the terms
and conditions of the DIMA, TIA, Directional Letter and COIs, the
Court holds in the affirmative and finds for respondent.
The DIMA, Directional Letter and COIs are evidence of the
contract between the parties and are binding on them, following
Article 1159 of the Civil Code which states that contracts have the
force of law between the parties and must be com-

_______________

(1) when the conclusion is a finding grounded entirely on speculation, surmises

and conjectures;
(2) when the inference made is manifestly mistaken, absurd or impossible;
(3) where there is a grave abuse of discretion;
(4) when the judgment is based on a misapprehension of facts;
(5) when the findings of fact are conflicting;
(6) when the Court of Appeals, in making its findings, went beyond the issues of
the case and the same is contrary to the admissions of both appellant and
appellee;
(7) when the findings are contrary to those of the trial court;
(8) when the findings of fact are conclusions without citation of specific
evidence on which they are based;
(9) when the facts set forth in the petition as well as in the petitioners’ main and
reply briefs are not disputed by the respondents; and
(10) when the findings of fact of the Court of Appeals are premised on the
supposed absence of evidence and contradicted by the evidence on record.

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Panlilio vs. Citibank, N.A.
47

plied with in good faith. In particular, petitioner Amalia affixed her

signatures on the DIMA, Directional Letter and TIA, a clear
evidence of her consent which, under Article 1330 of the same
Code, she cannot deny absent any evidence
48 of mistake, violence,
intimidation, undue influence or fraud.
As the documents have the effect of law, an examination is in
order to reveal what underlies petitioners’ zeal to exclude these from
consideration.
Under the DIMA, the following provisions appear:

“4. Nature of Agreement—THIS AGREEMENT IS AN AGENCY AND NOT

A TRUST AGREEMENT. AS SUCH, THE PRINCIPAL SHALL AT ALL
TIMES RETAIN LEGAL TITLE TO THE FUNDS AND PROPERTIES
SUBJECT OF THE ARRANGEMENT.
THIS AGREEMENT IS FOR FINANCIAL RETURN AND FOR THE
APPRECIATION OF ASSETS OF THE ACCOUNT. THIS AGREEMENT
DOES NOT GUARANTEE A YIELD, RETURN OR INCOME BY THE
INVESTMENT MANAGER. AS SUCH, PAST PERFORMANCE OF THE
ACCOUNT IS NOT A GUARANTY OF FUTURE PERFORMANCE AND
THE INCOME OF INVESTMENTS CAN FALL AS WELL AS RISE
DEPENDING ON PREVAILING MARKET CONDITIONS.
IT IS UNDERSTOOD THAT THIS INVESTMENT MANAGEMENT
AGREEMENT IS NOT COVERED BY THE PHILIPPINE DEPOSIT
INSURANCE CORPORATION (PDIC) AND THAT LOSSES, IF ANY,
SHALL BE FOR THE ACCOUNT OF THE PRINCIPAL. (Italics applied.)
xxxx
6. Exemption from Liability.—In the absence of fraud, bad faith, or
gross or willful negligence on the part of the INVESTMENT MANAGER
or any person acting in its behalf, the INVESTMENT

_______________

47 Art. 1159. Obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith.
48 Art. 1330. A contract where consent is given through mistake, violence, intimidation,
undue influence, or fraud is voidable.

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84 SUPREME COURT REPORTS ANNOTATED

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MANAGER shall not be liable for any loss or damage to the Portfolio
arising out of or in connection with any act done or omitted or caused to be
done or omitted by the INVESTMENT MANAGER pursuant to the terms
and conditions herein agreed upon, and pursuant to and in accordance with
the written instructions of the PRINCIPAL to carry out the powers, duties
and purposes for which this Agreement is executed. The PRINCIPAL will
hold the INVESTMENT MANAGER free and harmless from any liability,
claim, damage or fiduciary responsibility that may arise from any
investment made pursuant to this Agreement and to such letters or
instructions under Paragraph 3 hereof due to the default, bankruptcy or
insolvency of the Borrower/Issuer or the Broker/Dealer handling the
transaction and or their failure in any manner to comply with any of their
obligations under the aforesaid transactions, it being the PRINCIPAL’S
understanding and intention that the investments/reinvestments under this
account shall be strictly for his/its account and risk except as indicated
above.
The INVESTMENT MANAGER shall manage the Portfolio with the
skill, care, prudence, and diligence necessary under the prevailing
circumstances that a good father of the family, acting in a like capacity and
familiar with such matters, would exercise in the conduct of an enterprise of
like character and with similar aims. (Italics supplied.)
xxxx
11. Withdrawal of Income/Principal—Subject to availability of funds
and taking into consideration the commitment of this account to third
parties, the PRINCIPAL may withdraw the income/principal of the Portfolio
or portion thereof upon request or application thereof from the Bank. The
INVESTMENT MANAGER shall not be required to inquire as to the
income/principal so withdrawn from the Portfolio. Any income of the
Portfolio not withdrawn shall be accumulated and added 49 to the principal of
the Portfolio for further investment and reinvestment.” (Italics supplied.)

Under the Directional Letter, which constituted petitioners’

instructions to respondent, the following provisions are found:

_______________

49 Exhibit “3,” Records, p. 740.

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“In the absence of fraud, bad faith or gross or willful negligence on your
part or any person acting in your behalf, you shall not be held liable for any
loss or damage arising out of or in connection with any act done or
performed or caused to be done or performed by you pursuant to the terms
and conditions of our Agreement. I/We shall hold you free and harmless
from any liability, claim, damage, or fiduciary responsibility that may arise
from this investment made pursuant to the foregoing due to the default,
bankruptcy or insolvency of the Borrower/Issuer, or the Broker/Dealer
handling the aforesaid transactions/s, it being our intention and
understanding that the investment/reinvestment under these transaction/s
shall be strictly for my/our account and risk.
In case of default of the Borrower/Issuers, we hereby authorize you at
your sole option, to terminate the investment/s therein and deliver to us the
securities/loan documents then constituting the assets of my/our DIMA/trust
account with you for me/us to undertake the necessary
50 legal action to
collect and/or recover from the borrower/issuers.” (Italics supplied.)

The documents, characterized by the quoted provisions, generally

extricate respondent from liability in case the investment is lost.
Accordingly, petitioners assumed all risks and the task of collecting
from the borrower/issuer C&P Homes.
In addition to the DIMA and Directional Letter, respondent also
sent petitioners the COIs on a regular basis, the first of which was
received by petitioners on December 9, 1997. The COIs have the
following provisions in common:

xxxx  
NATURE OF TRANSACTION INVESTMENT IN LTCP
NAME OF BORROWER/ISSUER C&P HOMES
xxxx  
TENOR 91 DAYS
xxxx  
MATURITY DATE 11/05/03
xxxx  

_______________

50 Exhibit “5,” Records, p. 742.

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86 SUPREME COURT REPORTS ANNOTATED

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OTHERS REPRICEABLE EVERY 91 DAYS

PURSUANT TO THE BANGKO SENTRAL REGULATIONS, THE

PRINCIPAL AND INTEREST OF YOUR INVESTMENT ARE
OBLIGATIONS OF THE BORROWER AND NOT OF THE BANK.
YOUR INVESTMENT IS NOT A DEPOSIT AND IS NOT
GUARANTEED BY CITIBANK N.A.

xxxx

Please examine this Confirmation and notify us in writing within seven

(7) days from receipt hereof of any deviation from your prior conformity to
the investment. If no notice is received by us within this period, this
Confirmation shall be deemed correct and approved by you, and we shall be
released and discharged as51to all items, particulars, matters and things set
forth in this Confirmation.”

Petitioners
52 admit receiving only the first COI on December 8,
1997. The evidence on record, however, supports respondent’s
contentions that petitioners
53 received
54 the three other COIs
55 on
February 12, 1998, May 14, 1998, and August 14,561998, before
petitioners’ first demand letter dated August 18, 1998.
The DIMA, Directional Letter, TIA and COIs, read together,
establish the agreement between the parties as an investment
management agreement, which created a principal-agent relationship
between petitioners as principals and

_______________

51 Exhibits “6,” Records, p. 743; Exhibit “7,” Records, p. 744; Exhibit “9,”
Records, p. 746; and Exhibit “17,” Records, p. 756.
52 The Complaint, records, p. 2, states that the first COI was received “on or about
December 8, 1997; while in the Direct Testimony of Amalia Panlilio, Records, p. 233,
Amalia claims receipt of the first COI on December 9, 1997. Meanwhile, the Direct
Testimony of Jinky Suzara Lee, Records, p. 528, states that Amalia received the first
COI by personal delivery on December 8, 1997.
53 Exhibit “8,” Records, p. 745.
54 Exhibit “10,” Records, p. 747.
55 Exhibit “18,” Records, p. 757; TSN July 6, 1999, pp. 46-47.
56 Exhibit “Z,” Records, pp. 172-173, 339; Exhibit “19,” Records, pp. 758-759.

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respondent as agent for investment purposes. The agreement is not a

trust or an ordinary bank deposit; hence, no trustor-trustee-
beneficiary or even borrower-lender relationship existed between
petitioners and respondent with respect to the DIMA account.
Respondent purchased the LTCPs only as agent of petitioners; thus,
the latter assumed all obligations or inherent risks entailed by the
transaction under Article 1910 of the Civil Code, which provides:

“Article 1910. The principal must comply with all the obligations which the
agent may have contracted within the scope of his authority.
As for any obligation wherein the agent has exceeded his power, the
principal is not bound except when he ratifies it expressly or tacitly.”

The transaction is perfectly legal, as investment management

activities may be exercised by a banking institution, pursuant to
Republic Act No. 337 or the General Banking Act of 1948, as
amended, which was the law then in effect. Section 72 of said Act
provides:

“Sec. 72. In addition to the operations specifically authorized elsewhere in

this Act, banking institutions other than building and loan associations may
perform the following services:

(a) Receive in custody funds, documents, and valuable objects, and

rent safety deposit boxes for the safeguarding of such effects;
(b) Act as financial agent and buy and sell, by order of and for the
account of their customers, shares, evidences of indebtedness
and all types of securities;
(c) Make collections and payments for the account of others and
perform such other services for their customers as are not
incompatible with banking business.
(d) Upon prior approval of the Monetary Board, act as managing agent,
adviser, consultant or administrator of investment
management/advisory/consultancy accounts.

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88 SUPREME COURT REPORTS ANNOTATED

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The banks shall perform the services permitted under subsections (a),
(b) and (c) of this section as depositories or as agents. Accordingly, they
shall keep the funds, securities and other effects which they thus receive
duly separated and apart from the bank’s own assets and liabilities.
The Monetary Board may regulate the operations authorized by this
section in order to insure that said operations do not endanger the interests
of the depositors and other creditors of the banks. (Emphasis supplied.)
while Section 74 prohibits banks from guaranteeing obligations of
any person, thus:

“Sec. 74. No bank or banking institution shall enter, directly, or

indirectly into any contract of guaranty or suretyship, or shall
guarantee the interest or principal of any obligation of any person,
copartnership, association, corporation or other entity. The provisions of
this section shall, however, not apply to the following: (a) borrowing of
money by banking institution through the rediscounting of receivables; (b)
acceptance of drafts or bills of exchange (c) certification of checks; (d)
transactions involving the release of documents attached to items received
for collection; (e) letters of credit transaction, including stand-by
arrangements; (f) repurchase agreements; (g) shipside bonds; (h) ordinary
guarantees or indorsements in favor of foreign creditors where the principal
obligation involves loans and credits extended directly by foreign
investment purposes; and (i) other transactions which the Monetary Board
may, by regulation, define or specify as not covered by the prohibition.”
(Emphasis supplied.)

Nothing also taints the legality of the LTCP bought in behalf of

petitioners. C&P Homes’ LTCP was duly registered with the
Securities and Exchange Commission while 57 the issuer was
accredited by the Philippine Trust Committee.
The evidence also sustains respondent’s claim that its trust
department handled the account only because it was the department
tasked to oversee the trust, and other fiduciary and

_______________

57 Rollo, p. 462.

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58

investment management services of the bank. Contrary to

petitioners’ claim, this did not mean that petitioners opened a “trust
account.” This is consistent with Bangko Sentral ng Pilipinas (BSP)
regulations, specifically the Manual of Regulations for Banks
(MORB), which groups a bank’s trust, and other fiduciary and
investment management activities under the same set of regulations,
to wit:
 PART FOUR: TRUST, OTHER FIDUCIARY BUSINESS AND
INVESTMENT MANAGEMENT ACTIVITIES

xxxx
Sec. X402 Scope of Regulations.—These regulations shall govern the
grant of authority to and the management, administration and conduct of
trust, other fiduciary business and investment management activities (as
these terms are defined in Sec. X403) of banks. The regulations are divided
into three (3)
Sub-Parts where:

A. Trust and Other Fiduciary Business shall apply to banks authorized

to engage in trust and other fiduciary business including investment
management activities;
B. Investment Management Activities shall apply to banks without
trust authority but with authority to engage in investment
management activities; and
C. General Provisions shall apply to both.

xxxx
Sec. X403 Definitions.—For purposes of regulating the operations of
trust and other fiduciary business and investment management activities,
unless the context clearly connotes otherwise, the following shall have the
meaning indicated.

a. Trust business shall refer to any activity resulting from a trustor-

trustee relationship (trusteeship) involving the appointment of a
trustee by a trustor for the administration, holding, management of
funds and/or properties of the trustor by the trustee for the use,
benefit or advantage of the trustor or of others called beneficiaries.

_______________

58 Records, pp. 787-789.

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90 SUPREME COURT REPORTS ANNOTATED

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b. Other fiduciary business shall refer to any activity of a trust-

licensed bank resulting from a contract or agreement whereby
the bank binds itself to render services or to act in a
representative capacity such as in an agency, guardianship,
 administratorship of wills, properties and estates, executorship,
receivership, and other similar services which do not create or
result in a trusteeship. It shall exclude collecting or paying
agency arrangements and similar fiduciary services which are
inherent in the use of the facilities of the other operating
departments of said bank. Investment management activities,
which are considered as among other fiduciary business, shall
be separately defined in the succeeding item to highlight its
being a major source of fiduciary business.
c. Investment management activity shall refer to any activity
resulting from a contract or agreement primarily for financial
return whereby the bank (the investment manager) binds itself
to handle or manage investible funds or any investment
portfolio in a representative capacity as financial or managing
agent, adviser, consultant or administrator of financial or
investment management, advisory, consultancy or any similar
arrangement which does not create or result in a trusteeship.”
(Emphasis supplied.)

The Court finds no proof to sustain petitioners’ contention that the

DIMA and Directional Letter contradict other papers on record, or 59

were signed in blank, or had unauthorized intercalations.

Petitioners themselves admit that Amalia signed the DIMA and the
Directional Letter, which bars them from disowning the contract on
the belated claim that she signed
60 it in blank or did not read it first
because of the “fine print.” On the contrary, the evidence does not
support these latter allegations, and it is highly improbable that
someone fairly educated and with investment experience
61 would sign
a document in blank or without reading it first. Petitioners owned

_______________

59 Rollo, p. 26.
60 Id., at p. 37.
61 TSN, July 6, 1999, p. 13.

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various businesses and were clients

62 of other banks, which omits the
possibility of such carelessness. Even more damning for petitioners
is that, on record, Amalia admitted that it was not her habit to sign in
blank and that the63contents of the documents were explained to her
before she signed.
Testimonial evidence and the complaint itself contained
allegations that petitioners’ reason for transferring their money
64 from
local banks to respondent is because it is safer to do so, a clear
indicia of their intelligence and keen business sense which they
could not have easily surrendered upon meeting with respondent.
Nothing irregular or illegal attends the execution or construction
of the DIMA and the Directional Letter, as their provisions merely
conform with BSP regulations governing these types of transactions.
Specifically, the MORB mandates that65 investment managers act as
agents, not as trustees, of the investor; that the investment manager 66

is prohibited from guaranteeing returns on the funds or properties;

that a written document should state that the account is67not covered
by the PDIC; and that losses are to be borne by clients. That these
legal requirements were communicated to petitioners is evident in
Amalia’s
68 signatures on the documents and in testimony to this
effect.
As to the allegation that the documents were in “fine print,” the
Court notes that although the print may have looked smaller than
average, they were nevertheless of the same size throughout the
documents, so that no part or provision is hidden from the reader.
The Court also takes judicial

_______________

62 TSN, July 6, 1999, p. 14-19; TSN, July 16, 1999, pp. 6-8.
63 TSN, July 6, 1999, p. 38.
64 TSN, July 6, 1999, pp. 17-19; Records, p. 1.
65 BSP Manual of Regulations for Banks, Sec. X403(c).
66 BSP Manual of Regulations for Banks, Sec. X407.
67 BSP Manual of Regulations for Banks, Sec. X411.1(b)(6).
68 Direct Testimony of Jinky Lee, Records, p. 527; TSN, July 6, 1999, p. 38.

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92 SUPREME COURT REPORTS ANNOTATED

Panlilio vs. Citibank, N.A.

notice that the print is no smaller than those found in similar

contracts in common usage, such as insurance, mortgage, sales
contracts and even ordinary bank deposit contracts. In the
documents in question, the provisions hurtful to petitioners’ cause
were likewise in no smaller print than the rest of the document, as
indeed they were even highlighted either in bold or in all caps. This
disposes of the argument that they 69 were designed to hide their
damaging nature to the signatory. The conclusion is that the print is
readable and should not have prevented petitioners from studying
the papers before their signing. Considering petitioners’ social
stature, the nature of the transaction and the amount of money
involved, the Court presumes that petitioners exercised adequate 70

care and diligence in studying the71 contract prior to its execution.

In Sweet Lines, Inc. v. Teves, the Court pronounced the general
rule regarding contracts of adhesion, thus:

“x x x there are certain contracts almost all the provisions of which have
been drafted only by one party, usually a corporation. Such contracts are
called contracts of adhesion, because the only participation of the other
party is the signing of his signature or his ‘adhesion’ thereto. Insurance
contracts, bills of lading, contracts of sale of lots on the installment plan fall
into this category.
x x x it is drafted only by one party, usually the corporation, and is
sought to be accepted or adhered to by the other party x x x who cannot
change the same and who are thus made to adhere hereto on the ‘take it or
leave it’ basis.
x x x it is hardly just and proper to expect the passengers to examine
their tickets received from crowded/congested counters, more often than not
during rush hours, for conditions that may be printed thereon, much less
charge them with having consented to the conditions, so printed, especially
if there are a number of such conditions in fine print, as in this case.”

_______________

69 Tan v. Court of Appeals, G.R. No. 48049, June 29, 1989, 174 SCRA 403, 409.
70 RULES OF COURT, Rule 131, Sec. 3, Par. (d).
71 No. L-37750, May 19, 1978, 83 SCRA 361, 368-371.

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72

However, Sweet Lines further expounded that the validity and/or

enforceability of contracts of adhesion will have to be determined by
the peculiar circumstances obtaining in each case73 and the nature of
the conditions or terms sought to be enforced. Thus, while any
ambiguity, obscurity or doubt in a contract of adhesion is 74 construed

or resolved strictly against the party who prepared it, it is also

equally obvious that in a case where no such ambiguity, obscurity or
doubt exists, no such construction is warranted. This was the case in
the DIMA and the Directional Letter signed by Amalia in the instant
controversy.
The parties to this case only disagree on whether petitioners were
properly informed of the contents of the documents. But as earlier
stated, petitioners were free to read and study the contents of the
papers before signing them, without compulsion to sign immediately
or even days after, as indeed the parties were even free not to sign
the documents at all. Unlike in Sweet Lines, where the plaintiffs had
no choice but to take the services of monopolistic transport
companies during rush hours, in the instant case, petitioners were
under no such pressure; petitioners were free to invest anytime and
through any of the dozens of local and foreign banks in the market.
In addition, it has been held that contracts of adhesion are not
necessarily voidable. The Court has consistently held that contracts
of adhesion, wherein one party imposes a ready-made form of
contract on the other, are contracts not entirely

_______________

72 Sweet Lines, Inc. v. Teves, supra note 71.

73 Sweet Lines, Inc. v. Teves, supra note 71, at p. 368.
74 CIVIL CODE, Art. 1377; Bay View Hotel v. Ker and Co., Ltd., G.R. No. L-
28237, August 31, 1982, 116 SCRA 327, 334; Eastern Shipping Lines Inc. v.
Margarine-Verkaufs-Union GmbH, G.R. No. L-31087, September 27, 1979, 93 SCRA
257, 262; Eastern Assurance and Surety Corp. v. Intermediate Appellate Court, G.R.
No. 69450, November 22, 1989, 179 SCRA 561, 568; Orient Air Services and Hotel
Representatives v. Court of Appeals, G.R. No. 76931, May 29, 1991, 197 SCRA 645,
655.

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94 SUPREME COURT REPORTS ANNOTATED

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prohibited, since the one who adheres to the contract is 75in reality
free to reject it entirely; if he adheres, he gives his consent. It is the
rule that these contracts are upheld unless they are in the nature of a
patently lopsided deal 76where blind adherence is not justified by other
factual circumstances.
 Petitioners
77 insist that other
78 documents
79 Amalia signed—that is,
the ROF, Questionnaire and TIA —contradict the DIMA and
Directional Letter. Specifically, they argue that under the ROF and
the Questionnaire, they manifested an intent to invest only in a time
deposit in the medium term of over a year to three years, with no 80

risk on the capital, or with returns in line with a time deposit.

However, this contention is belied by the evidence and testimony on
record. Respondent explains that investors fill up the ROF and
Questionnaire only when 81they first visit the bank and only for the
account they first opened, as confirmed by the evidence on record
and the fact that there were no subsequent ROFs and Questionnaires
presented by petitioners.
The ROF and Questionnaire were filled up when the PhP1
million “Citihi” savings account was opened by Amalia on October
10, 1997, during her first visit to the bank. When Amalia returned
more than a month later on November 28, 1997, a change in her
investment attitude occurred in that she wanted to invest an even
bigger amount (PhP3 million) and her interest had shifted to high-
yield but riskier long-

_______________

75 Ong Yiu v. Court of Appeals, G.R. No. L-40597, June 29, 1979, 91 SCRA 223,
231; Saludo, Jr. v. Court of Appeals, G.R. No. 95536, March 23, 1992, 207 SCRA
498, 528; Maersk Line v. Court of Appeals, G.R. No. 94761, May 17, 1993, 222
SCRA 108, 116.
76 Pan American World Airways, Inc. v. Rapadas, G.R. No. 60673, May 19, 1992,
209 SCRA 67, 75.
77 Exhibit “A,” Exhibits “1” and “1-C.”
78 Exhibit “B,” Exhibit “2.”
79 Exhibit “4,” Records, p. 741.
80 Rollo, p. 38.
81 TSN, August 18, 1999, pp. 74-76.

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term instruments like PRPNs and LTCPs. When Amalia proceeded

to sign new documents like the DIMA and the Directional Letter for
the LTCP investment, despite their obviously different contents from
those she was used to signing for ordinary deposits, she essentially
confirmed that she knew what she was agreeing to and that it was
different from all her previous transactions.
In addition, even the ROF and Questionnaire signed by Amalia
during the first visit contained provisions that clearly contradict
petitioners’ claims. The ROF contained the following:

“I/We declare the above information to be correct. I/We hereby

acknowledge to have received, read, understood and agree to be bound by
the general terms and conditions applicable and governing my/our
account/s and/or investment/s which appear in a separate
brochure/manual as well as separate documents relative to said
account/s and/or investment/s. Said terms and conditions shall likewise
apply to all our existing and future account/s and/or investment/s with
Citibank. I/We hereby further authorize Citibank to open additional
account/s and/or investment/s in the future with the same account title as
contained in this relationship opening form subject to the rules governing
the aforementioned account/s and/or investment/s and the terms and
conditions therein or herein. I/We agree to notify you in writing of any 82
change in the information supplied in this relationship opening form.”
(Emphasis supplied.)

while the Questionnaire had the following provisions:

“I am aware that investment products are not bank deposits or other

obligations of, or guaranteed or insured by Citibank N.A., Citicorp or their
affiliates. I am aware that the principal and interest of my investments
are obligations of the borrower/issuer. They are subject to risk and
possible loss of principal. Past performance is not indicative of future
performance. In addition, invest-

_______________

82 Exhibit “1-c-3,” Records, p. 738.

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96 SUPREME COURT REPORTS ANNOTATED

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ments are not covered by the Philippine Deposit Insurance 83

Corporation(PDIC) or the Federal Deposit Insurance Corporation (FDIC).”

which do not need further elaboration on the matter.

Petitioners contend that the Term Investment Application (TIA),
viz.:

_______________

83 Exhibit “B,” and “2,” Records, pp. 350, 739 (dorsal).

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84
INTEREST RATE around 16.25% Term 91 days
(Emphasis supplied.)    

clearly contradicts the DIMA, Directional Letter and COIs.

Petitioners insist that the amount PhP3 million in the TIA does not
tally with the actual value of the investment which appeared on the
first COI, which was PhP2,134,635.87. Petitioners add that the TIA’s
interest rate of “around 16.25%” with the term “91 days” contradicts
the COI’s interest
85 rate of 16.95% with a tenor of 75 days repriceable
after 91 days. Further, petitioners claim that the word “TRUST”
inscribed on the TIA obviously meant 86 that they opened a trust
account, and not any other account.
The explanation of respondent is plausible. Only
PhP2,134,635.87 out of the PhP3 million was placed in the LTCP
since this was the only amount of LTCP then available, while the
balance was placed in two PRPN accounts, 87each one in trust for
Amalia’s two children, upon her instructions. The disparity in the
interest rate is also explained by the fact that
88 the 16.95% rate placed
in the COI is gross and not net interest, and that it is subject to
repricing every 91 days.
The Court gives credence to respondent’s explanation that the
word “TRUST” appearing on the TIA simply means that the account
is to be handled by the bank’s trust department, which handles not
only the trust business but also the other fiduciary business and
investment management activities of the bank, while the “ITF” or
“in trust for” appearing on the other documents only signifies that
the money was invested by Amalia in trust for her two children, a
device89that she uses even in her ordinary deposit accounts with other
banks. The
_______________

84 Exhibit “4,” Records, p. 742.

85 Rollo, p. 43.
86 Rollo, p. 44.
87 Records, p. 525.
88 TSN, August 18, 1999, p. 77.
89 TSN, July 6, 1999, p. 27; Records, p. 522.

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98 SUPREME COURT REPORTS ANNOTATED

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ITF device allows the children to obtain the money without need of 90

paying estate taxes in case Amalia meets a premature death.

However, it creates a trustee-beneficiary relationship only between
Amalia and her children, and not between Amalia, her children, and
Citibank.
All the documents signed by Amalia, including the DIMA and
Directional Letter, show that her agreement with respondent is one
of agency, and not a trust.
The DIMA, TIA, Directional Letter and COIs, viewed altogether,
establish without doubt the transaction between the parties, that on
November 28, 1997, with PhP3 million in tow, Amalia opened an
investment management account with respondent, under which she
instructed the latter as her agent to invest the bulk of the money in
LTCP.
Aside from their bare allegations, evidence that supports
petitioners’ contentions that no such deal took place, or that the
agreement was different, simply does not exist in the records.
Petitioners were experienced and intelligent enough to be able to
demand and sign a different document to signify their real intention;
but no such document exists. Thus, petitioners’ acts and omissions
negate their allegations that they were essentially defrauded by the
bank.
Petitioners had other chances to protest respondent’s alleged
disregard of their instructions. The COIs sent by respondent to
petitioners encapsulate the spirit of the DIMA and Directional Letter,
with the proviso that should there be any deviations from
petitioners’ instructions, they may inform respondent in writing
within seven days. Assuming arguendo that respondent violated the
instructions, petitioners did not file a single timely written protest,
however, despite their admission that they received the first COI on
December 8,

_______________

90 TSN, July 6, 1999, p. 27; Records, p. 522.

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91

1997. It took eight months for petitioners to formally demand the

return of their investment
92 through their counsel in a letter dated
August 18, 1998. The letter, however, did not even contest the
placement of the money in an LTCP, but merely its maturity in the
year 2003. Prior to the letter, it has been
93 shown that petitioners
94 had
received COIs
95 on February 12, 1998, May 14, 1998, and August
14, 1998, and in between, petitioners never demanded a return of
the money they invested.
Petitioners’ acts and omissions strongly indicate that they in fact
conformed to the agreement in the months after the signing. In that
period, they were receiving their bank statements and earning
interest from the investment, as in fact, C&P Homes under the LTCP
continuously paid96 interest even up to the time the instant case was
already on trial. When petitioners finally contested the contract
months after its signing, it was suspiciously during the time when
newspaper reports came out that C&P Homes’ stock had plunged in
value and97that Ayala Land was withdrawing its offer to invest in the
company. The connection is too obvious to ignore. It is reasonable
to conclude that petitioners’ repudiation of the agreement was
nothing more than an afterthought, a reaction to the negative events
in the market and an effort to flee from a losing investment.

_______________

91 The Complaint, Records, p. 2, states that the first COI was received “on or about
December 8, 1997; while in the Direct Testimony of Amalia Panlilio, Records, p. 233,
Amalia claims receipt of the first COI on December 9, 1997. Meanwhile, the Direct
Testimony of Jinky Suzara Lee, Records, p. 528, states that Amalia received the first
COI by personal delivery on December 8, 1997.
92 Exhibit “Z,” Records, pp. 172-173, 339; Exhibit “19,” Records, pp. 758-759.
93 Exhibits “7” and “8,” Records, pp. 744-745.
94 Exhibits “9” and “10,” Records, pp. 746- 747.
 95 Exhibits “17” and “18,” Records, pp. 756-757.
96 Exhibits “E” to “N-1,” Records, pp. 353 to 395, 532.
97 Exhibits “11,” “12,” “13,” and “14,” Records, pp. 748-751.

100

100 SUPREME COURT REPORTS ANNOTATED

Panlilio vs. Citibank, N.A.

Anent the second issue, whether petitioners are entitled to recover

from respondent the amount of PhP2,134,635.87 invested under the
LTCP, the Court agrees with the CA in dismissing the complaint
filed by petitioners.
Petitioners may not seek a return of their investment directly
from respondent at or prior to maturity. As earlier explained, the
investment is not a deposit and is not guaranteed by respondent.
Absent any fraud or bad faith, the recourse of petitioners in the
LTCP is solely against the issuer, C&P Homes, and only upon
maturity. The DIMA states, thus:

11. Withdrawal of Income/Principal—Subject to availability of funds

and taking into consideration the commitment of this account to third
parties, the PRINCIPAL may withdraw the income/principal of the
Portfolio or portion thereof upon request or application thereof from
the Bank. The INVESTMENT MANAGER shall not be required to inquire
as to the income/principal so withdrawn from the Portfolio. Any income of
the Portfolio not withdrawn shall be accumulated and added to98the principal
of the Portfolio for further investment and reinvestment.” (Emphasis
supplied.)

It is clear that since the money is committed to C&P Homes via

LTCP for five years, or until 2003, petitioners may not seek its
recovery from respondent prior to the lapse of this period.
Petitioners must wait and meanwhile just be content with receiving
their interest regularly. If petitioners want the immediate return of
their investment before the maturity date, their only way is to find a
willing buyer to purchase the LTCP at an agreed price, or to go
directly against the issuer C&P Homes, not against the respondent.
The nature of the DIMA and the other documents signed by the
parties calls for this condition. The DIMA states that respondent is a
mere agent of petitioners and that losses from both the principal and
interest of the investment are strictly

_______________
 98 Exhibit “3,” Records, p. 740.

101

VOL. 539, NOVEMBER 28, 2007 101

Panlilio vs. Citibank, N.A.

on petitioners’ account. Meanwhile, the Directional Letter clearly

states that the investment is to be made in99 an LTCP which, by
definition, has a term of more than 365 days. Prior to the expiry of
the term, which in the case of the C&P Homes LTCP is five years,
petitioners may not claim back their investment, especially not from
respondent bank.
Having bound themselves under the contract as earlier discussed,
petitioners are governed by its provisions. Petitioners as principals in
an agency relationship are solely obliged to observe the solemnity of
the transaction entered into by the agent on their
100 behalf, absent any

proof that the latter acted beyond its authority. Concomitant to this
obligation is that the principal
101 also assumes the risks that may arise
from the transaction. Indeed, as in the instant case, bank
regulations prohibit banks from guaranteeing
102 profits or the principal
in an investment management account. Hence, the CA correctly
dismissed petitioners’ complaint against respondent.
WHEREFORE, the Petition is DENIED. For lack of evidence,
the Decision of the Court of Appeals dated May 28, 2002 and its
Resolution of December 11, 2002, are AFFIRMED.
Costs against the petitioners.

_______________

99 Securities and Exchange Commission (SEC) New Rules on the Registration of

Long-Term Commercial Papers (LTCP) state, thus:

Section 2. Definitions.—For purposes of these Rules, the following definition shall apply:
a) Long-term commercial papers shall refer to evidence of indebtedness of any corporation
to any person or entity with maturity period of more than 365 days.

100 CIVIL CODE, Art. 1910.

101 CIVIL CODE, Art. 1174.
102 BSP Manual of Regulations for Banks, Secs. X403(c); X407; and X411.1(b)
(6).

102
 102 SUPREME COURT REPORTS ANNOTATED
National Housing Authority vs. Pascual

SO ORDERED.

          Ynares-Santiago (Chairperson), Chico-Nazario, Nachura

and Reyes, JJ., concur.

Petition denied, judgment and resolution affirmed.

Notes.—The Supreme Court can take judicial notice of the

pernicious practice involving virtual contracts of adhesion
entrapping innocent buyers through default clauses guaranteeing
huge monetary windfalls for the developers in the event their buyers
default by failing to come up with certain requirements. (Realty
Exchange Venture Corporation vs. Sendino, 233 SCRA 665 [1994])
Employment agreements are usually contracts of adhesion, and
any ambiguity in its provisions is generally resolved against the
party who drafted the document. (Magellan Capital Management
Corporation vs. Zosa, 355 SCRA 157 [2001])

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