FACTS:

The spouses Raul and Amalia Panlilio filed a complaint against Citibank N.A., claiming that Amalia opened a fixed-term savings account and a current account with the bank. The accounts were intended to benefit their minor children in case of Amalia's death. Amalia initially intended to invest the money in a different product, but due to its unavailability, she deposited the money in the fixed-term savings account. It is disputed whether Amalia instructed a bank employee to place a portion of the money in a Long-Term Commercial Paper (LTCP) issued by CP Homes. The bank claims to have regularly sent confirmations of investment (COIs) to the Panlilios. The Panlilios attempted to preterminate their investments but were informed of the difficulty due to the economic crisis. The Panlilios then sent demand letters to the bank for withdrawal of their investments, but the bank responded that the investments were not guaranteed and had a designated maturity date.

Amalia and her husband claimed that they instructed Citibank's employee to invest the money in a trust account with a specific interest rate and maturity. However, when they received the COI, they discovered the money was invested in a long-term commercial paper (LTCP) with a different maturity date and was not guaranteed by Citibank. Citibank denied violating the Panlilios' instructions and claimed that Amalia opened a "directional investment management account" with investments to be made in CP Homes' LTCP. The trial court ruled in favor of the Panlilios, but the Court of Appeals (CA) reversed the decision, stating that the investment was the exclusive obligation of CP Homes and not guaranteed by Citibank.

The petitioners in this case sought the return of their investments, arguing that the investment agreements were inconsistent with other documents they signed and contained unauthorized intercalations by the bank. They claimed that they did not authorize the bank to invest their money in high-risk, long-term instruments. The trial court ruled in favor of the bank, but the CA completely reversed the decision, stating that certain facts and circumstances were not properly appreciated. The petitioners then filed a petition for review with the Court, raising issues regarding the enforceability of the investment agreements and their entitlement to the return of their investments prior to maturity.

ISSUES:

1. Whether petitioners are bound by the terms and conditions of the DIMA, TIA, Directional Letter, and COIs.

2. Whether there was a trustor-trustee-beneficiary relationship between petitioners and respondent.

3. Whether respondent exceeded its authority in purchasing the LTCPs.

4. Whether the LTCPs purchased by respondent were legal.

5. Whether or not the DIMA and Directional Letter were irregularly executed.

6. Whether or not the provisions of the DIMA and Directional Letter conform with BSP regulations.

7. Whether or not the print size of the documents prevented petitioners from studying the papers before signing.

8. Whether the contracts signed by the petitioners were contracts of adhesion.

9. Whether the contracts of adhesion are valid and enforceable.

10. Whether the other documents signed by Amalia contradict the contracts.

11. Whether the ROF and Questionnaire contained provisions that contradict the claims of the petitioners.

12. Whether the TIA is relevant to the case.

13. Whether there is a contradiction between the terms stated in the Trust and Investment Agreement (TIA) and the first Confirmation of Investment (COI) regarding the amount, interest rate, and type of account opened.

14. Whether petitioners are entitled to recover the investment amount placed under the Long Term Custodial Placement (LTCP) scheme.

15. Whether petitioners are entitled to recover the amount they invested under the Long-Term Credit Paper (LTCP) directly from the respondent bank.

16. Whether the recourse of petitioners in the LTCP is solely against the issuer, C P Homes, and only upon maturity.

RULING:

1. The Court holds in the affirmative and finds for respondent. The DIMA, Directional Letter, TIA, and COIs are evidence of the contract between the parties and are binding on them. Petitioner Amalia's affixing of her signatures on the said documents is clear evidence of her consent, which she cannot deny, absent any evidence of mistake, violence, intimidation, undue influence, or fraud. The documents have the effect of law, and therefore, petitioners are bound by their terms and conditions.

2. No trustor-trustee-beneficiary relationship existed between petitioners and respondent. The agreement between the parties was an investment management agreement, creating a principal-agent relationship.

3. Respondent did not exceed its authority in purchasing the LTCPs as it acted as an agent of petitioners. Petitioners assumed all obligations and risks of the transaction.

4. The LTCPs purchased were legal as C P Homes' LTCP was duly registered and the issuer was accredited by the Philippine Trust Committee.

5. The Court finds no proof to sustain the contention that the DIMA and Directional Letter were irregularly executed. Petitioners' admission that they signed the documents bars them from disowning the contract based on belated claims of signing in blank or not reading it first.

6. The provisions of the DIMA and Directional Letter are in conformity with BSP regulations governing such transactions. The MORB mandates that investment managers act as agents, not as trustees, prohibits guaranteeing returns on funds, requires a written statement that the account is not covered by the PDIC, and states that losses are to be borne by clients.

7. The print size of the documents, although smaller than average, is readable and the provisions were not designed to hide their damaging nature. Petitioners, considering their social stature and the nature of the transaction, should have exercised adequate care and diligence in studying the contract before executing it.

8. The contracts signed by the petitioners were held to be contracts of adhesion.

9. Contracts of adhesion are not necessarily voidable and can be upheld unless they are patently lopsided deals.

10. The other documents signed by Amalia do not contradict the contracts as they were signed at different times and for different investments.

11. The ROF and Questionnaire contained provisions that support the claims of the respondents and contradict the claims of the petitioners.

12. The TIA is not relevant to the case.

13. The Court gives credence to the respondent's explanation that the disparity in the terms between the TIA and the COI is due to the fact that only a portion of the investment amount was placed in the LTCP, while the rest was placed in two PRPN accounts. The interest rate stated in the COI is also gross and subject to repricing every 91 days.

14. Petitioners are not entitled to recover the investment amount placed under the LTCP. Their acts and omissions, such as receiving bank statements and interest payments, without timely protesting or demanding a return of their investment, indicate their conformity to the agreement. Petitioners' repudiation of the contract was seen as an afterthought triggered by negative market events.

15. Petitioners may not seek a return of their investment directly from respondent at or prior to maturity. The investment is not a deposit and is not guaranteed by respondent. The recourse of petitioners in the LTCP is solely against the issuer, C P Homes, and only upon maturity.

16. Petitioners must wait for the maturity of the LTCP before they can seek the return of their investment from the issuer. 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.

PRINCIPLES:

• Contracts have the force of law between the parties and must be complied with in good faith (Article 1159, Civil Code).

• Consent, once given without any vices or defects, cannot be denied or set aside (Article 1330, Civil Code).

• A principal must comply with all obligations contracted by the agent within the scope of authority under Article 1910 of the Civil Code.

• Investment management activities may be exercised by a banking institution pursuant to Republic Act No. 337.

• Banks may act as agents and perform services for their customers that are not incompatible with banking business, subject to regulation by the Monetary Board.

• Banks are prohibited from guaranteeing obligations of any person, except for specific transactions enumerated in Section 74 of Republic Act No. 337.

• Trust business is an activity resulting from a trustor-trustee relationship, involving the administration, holding, and management of funds and/or properties of the trustor for the use, benefit, or advantage of the trustor or beneficiaries.

• Investment management activity refers to the handling or management of investible funds or any investment portfolio by a bank in a representative capacity as a financial or managing agent, advisor, consultant, or administrator, which does not create or result in a trusteeship.

• Contracts of adhesion are contracts where almost all provisions have been drafted only by one party and the other party's only participation is signing or adhering to the contract.

• Contracts of adhesion are contracts where one party imposes a ready-made form of contract on the other.

• Contracts of adhesion are upheld unless they are patently lopsided deals.

• In contracts of adhesion, any ambiguity, obscurity, or doubt is construed strictly against the party who prepared it.

• Contracts of adhesion are valid and enforceable as long as the party adhering to the contract gives their consent.

• Contracts of adhesion can be rejected entirely if the party does not wish to adhere to them.

• Contracts of adhesion can still be binding even if the other party did not thoroughly read or understand the terms and conditions.

• The validity and enforceability of contracts of adhesion depend on the peculiar circumstances and nature of the conditions or terms.

• Contracts of adhesion are not necessarily voidable.

• Documents signed at different times and for different investments may have different contents and do not necessarily contradict each other.

• Contracts are to be interpreted based on the entirety of their provisions and not on isolated phrases or stipulations.

• The term "TRUST" appearing on the TIA does not necessarily mean the creation of a trust relationship between the parties but refers to the handling of the account by the bank's trust department.

• In determining the intention of the parties, their acts and omissions, as well as the surrounding circumstances, are considered.

• For a party to claim fraud, there must be clear and convincing evidence to support the allegation.

• Absent any fraud or bad faith, the recourse of investment account holders in an LTCP is solely against the issuer and only upon maturity.

• Bank regulations prohibit banks from guaranteeing profits or the principal in an investment management account.

• Principal in an agency relationship is solely obliged to observe the transaction entered into by the agent on their behalf, absent any proof that the agent acted beyond its authority.

• Petitioners assume the risks that may arise from the transaction they entered into.