#1. ARMANDO V.

ALANO
vs. PLANTER'S DEVELOPMENT BANK, as Successor-in-Interest of
MAUNLAD SAVINGS and LOAN ASSOCIATION, INC. GR. No. 171628  

FACTS: Armando V. Alano and his brother Agapito V. Alano, Jr.,

inherited form their father a parcel of land located at Gov. Forbes St.,
Sampaloc, Manila

Armando executed a SPA authorizing his brother to sell their property in

Manila. The brothers then bought a house located at No. 60 Encarnacion
St., BF Homes, Quezon City out of the proceeds. The title of the Quezon
City property was not transferred to them because the title was destroyed
by a fire that gutted the Quezon City Hall Building.

Agapito V. Alano, Jr. died leaving behind his wife Lydia and four
legitimate children, who adjudicated the property to themselves. The title
to the property was reconstituted and registered in the names of Lydia
and her four children. Armando execute an Affidavit of Adverse
Claim which was annotated on the reconstituted title. But because of the
assurance of his nieces, Armando agreed to delay the filing of a case in
court.

Lydia then filed with the Register of Deeds of Quezon City an Affidavit of
Cancellation of Adverse Claim, which caused the cancellation of the
adverse claim of Armando. Lydia then caused the title to be issued on
her name by virtue of a Deed of Absolute Sale allegedly executed by her
children in her favor.

Lydia representing Slumberworld Inc. obtained from Maunlad Savings

and Loan Association, Inc. a loan of ₱2.3 million, secured by a Real
Estate Mortgage over the property.

Armando filed a Complaint against Lydia, Maunlad Savings and Loan

Association, Inc. and the Register of Deeds of Quezon City before the
RTC. Armando sought the cancellation of TCT No. 90388, the issuance of
a new title in his name for his one-half share of the Quezon City
property, and the nullification of real estate mortgage insofar as his one-
half share.

The RTC ruled in favor of Armando declaring him owner of the half of the
property. He moved for partial consideration but to no avail. He appealed
before the CA but was denied.The CA found Maunlad Savings and Loan
Association, Inc. to be a mortgagee in good faith since it took the
necessary precautions to ascertain the status of the property sought to
be mortgaged as well as the identity of the mortgagor by conducting an
ocular inspection of the property and requiring the submission of
documents, such as the latest tax receipts and tax clearance.

Issue: Whether Maunlad Savings Inc was a mortgagee in good faith.

Ruling: Maunlad Savings and Loan Association, Inc. is not a mortgagee

in good faith.

The general rule that a mortgagee need not look beyond the title does not
apply to banks and other financial institutions as greater care and due
diligence is required of them.48 Imbued with public interest, they "are
expected to be more cautious than ordinary individuals." 49 Thus, before
approving a loan, the standard practice for banks and other financial
institutions is to conduct an ocular inspection of the property offered to
be mortgaged and verify the genuineness of the title to determine the real
owner or owners thereof.50 Failure to do so makes them mortgagees in
bad faith.

In this case, petitioner contends that Maunlad Savings and Loan

Association, Inc. failed to exercise due diligence in inspecting and
ascertaining the status of the mortgaged property because during the
ocular inspection, the credit investigator failed to ascertain the actual
occupants of the subject property and to discover petitioner’s apartment
at the back portion of the subject property.

#2. CHINA BANKING CORPORATION (CBC) v. MARIA G. LAGON, GR

NO. 160843, Jul 11, 2006

Facts: Sometime in 1981, Jao applied for a loan on CBC for P300,000
secured by a parcel of land in Mariveles Street, Quezon City. The land
was in the name of Maria Lagon. Jao represented that he had a special
power of attorney, which he used previously to mortgage the same
property to Metrobank. He proposed that the proceeds of the loan be
used to pay P83,496.21 to Metrobank. CBC paid the Metrobank loan and
the mortgage in favor of Metrobank was cancelled.

CBC granted Jao a loan line of P1,000,000, secured by a mortgage on the

lot covered by TCT No. T-30817. He first borrowed P300,000. Under the
same loan line, Jao availed of four additional loans, P300,000, P500,000,
P50,000, and P50,000 The proceeds of the loan were applied to the
obligations of respondent Maria with the Rural Bank of Ilagan, Inc. and
of Jao with the Vizcaya Savings and Loan Association, Inc. The latter was
secured by mortgages over the lots covered by TCT Nos. T-56875 and T-
11593, both owned by Maria.

The loans of Jao matured but were unpaid. Thus, petitioner CBC
prepared petitions for extra-judicial foreclosure of the mortgaged
properties, naming Maria and Jao as defendants. No foreclosure took
place because the Regional Trial Court of Bayombong, Nueva Vizcaya,
Branch 27, upon filing of the Lagons, issued a temporary restraining
order preventing the holding of the auction sale. Jao died while the cases
were still on trial before Branch 27. Respondent Maria Lagon died in
1995.

Branch 27 dismissed the complaints finding that there was sufficient

evidence that the signatures were authentic.

The Lagons filed an appeal to the CA. The CA reversed the decision of the
RTC declaring the SPA of Maria Lagon is not authentic.

Issue: Whether CBC was a mortgagee in good faith

Ruling: …petitioner could not be considered a mortgagee in good faith. It

had knowledge that respondent was in the United States at the time the
SPAs were allegedly executed, yet, it did not question their due
execution. Though petitioner is not expected to conduct an exhaustive
investigation on the history of the mortgagor's title, it cannot be excused
from the duty of exercising the due diligence required of a banking
institution.[14] Banks are expected to exercise more care and prudence
than private individuals in their dealings, even those that involve
registered lands, for their business is affected with public interest.[15]

#3. SPOUSES EMILIANO L. JALBAY, SR. AND MAMERTA C. JALBAY,

PETITIONERS, VS. PHILIPPINE NATIONAL BANK,
RESPONDENT. G.R. No. 177803, August 03, 2015

Facts:

On June 11, 1988, the TCT of the Jalbay property was destroyed when
the Office of the Quezon City Register of Deeds was gutted by fire. Upon
reconstitution, the title was issued in the name of Spouses Jalbay and
because they were working and residing abroad, the title was released to
their daughter, Virginia Agus.

In 1993, Virginia and Danilo Agus applied for a loan with PNB to acquire
additional funds for their garments business. As a security, spouses
Agus constituted a real estate mortgage over the property, which they
represented as being owned by siblings Emiliano Jalbay, Jr., and
Teresita Jalbay-Cinco.  The spouses failed to settle their loan obligation
and PNB foreclosed the mortgage over the property. PNB emerged as the
highest bidder at the public auction.

The Spouses Jalbay learned about the mortgage and foreclosure of their
property during their vacation. Contending that the real estate mortgage
and the proceedings for its foreclosure were invalid for lack of consent of
the real registered owners, the Spouses Jalbay filed a complaint against
PNB before the Quezon City RTC. They also sought to prevent the bank
from consolidating its ownership over the parcel of land during the
pendency of the case.

The RTC declared the real estate mortgage as null and void and the
foreclosure proceedings without force and effect. PNB and the Spouses
Agus appealed the case before the CA. On November 29, 2006, the
appellate court reversed and set aside the decision of the RTC and
ordered the dismissal of the complaint.

The Spouses Jalbay thus filed a Motion for Reconsideration but the same
was denied. In reversing the RTC Decision, the CA held that PNB
followed standard banking practices in allowing the assailed loan. 
According to it, PNB cannot be said to have acted with haste in approving
the loan application since the bank caused the subject property to be
inspected and appraised, and even conducted a careful credit
investigation on the Spouses Agus, Emiliano, Jr., and Cinco. The case
then went to the SC.

Issue: Whether PNB exercised due diligence

Ruling: Verily, PNB exerted the necessary diligence in granting the loan
and entering into the assailed real estate mortgage.  Not only did it
require Emiliano, Jr., Cinco, and the Spouses Agus to submit their
biodata, duly accomplished loan application and the TCT covering the
mortgaged lot, it likewise caused the subject property to be inspected
and appraised, and conducted a thorough credit investigation on the
persons of the borrowers.

True, banks, in handling real estate transactions, are required to exert a

higher degree of diligence, care, and prudence than individuals.  Unlike
private individuals, it is expected to exercise greater care and prudence
in its dealings, including those involving registered lands.  A banking
institution is expected to exercise due diligence before entering into a
mortgage contract.  Indeed, there is a situation where, despite the fact
that the mortgagor is not the owner of the mortgaged property, his title
being fraudulent, the mortgage contract and any foreclosure sale arising
therefrom are given effect by reason of public policy.  This is the doctrine
of "the mortgagee in good faith," wherein buyers or mortgagees dealing
with property covered by a Torrens Certificate of Title are no longer
required to go beyond what appears on the face of the title. However, the
rule that persons dealing with registered lands can rely solely on the
certificate of title is not applicable to banks.  Thus, before approving a
loan application, it is a standard operating practice for these institutions
to conduct an ocular inspection of the property offered for mortgage and
to verify the veracity of the title to determine its real owners.  An ocular
inspection is necessary to protect the true owner of the property as well
as innocent third parties with a right, interest or claim thereon from a
usurper who may have acquired a fraudulent certificate of title.

Here, the Court finds that PNB has complied with the required degree of
diligence, prudence, and care in dealing with the mortgagor.  There was
also no sign or circumstance which could have possibly triggered
suspicion on the bank’s part.  Aside from the fact that the certificate of
title to the subject lot is authentic and issued in the name of Emiliano
Jalbay, he also appeared to have been the one occupying said property. 
Hence, there is no compelling reason to depart from the assailed rulings
of the appellate court.

CITIBANK, N.A.vs.SPS. LUIS and CARMELITA CABAMONGAN and

their sons LUISCABAMONGAN, JR. and LITO
CABAMONGAN, Respondents.G.R. No. 146918             May 2, 2006

FACTS: Spouses Luis and Carmelita Cabamongan opened a joint

"and/or" foreign currency time deposit in trust for their sons Luis, Jr.
and Lito at the Citibank, N.A., Makati branch in the amount of
$55,216.69 for a term of 182 days. On November 10, 1993, a person
claiming to be Carmelita went to the Makati branch and pre-terminated
the said foreign currency time deposit by presenting a passport, a Bank
of America Versatele Card, an ATM card and a Mabuhay Credit
Card. She filled up the necessary forms for pre-termination of deposits
with the assistance of Account Officer Yeye San Pedro. While the
transaction was being processed, she was casually interviewed by San
Pedro about her personal circumstances and investment plans. The
impostor failed to surrender the original Certificate of Deposit so she
executed a notarized release and waiver document in favor of Citibank,
pursuant to Citibank's internal procedure. The release and waiver
document was not notarized on that same day but the money was given
to the person withdrawing.

San Pedro saw that the impostor left behind an identification card. San
Pedro called up Carmelita's listed address on the same day to have the
card picked up. Marites received San Pedro's call and was stunned
because Carmelita was in the United States. The Cabamongan spouses
work and reside in California. Marites then called Carmelita to inform
her about what happened. The Cabamongan spouses were shocked at
the news. Sometime on June 10 and 16, 1993, someone broke inside the
couple's residence. They reported that only Carmelita's jewelry box was
missing, but later they discovered that other items, such as their
passports, bank deposit certificates, including the subject foreign
currency deposit, and identification cards were also
missing. Cabamongan spouses filed a complaint against Citibank before
the Regional Trial Court of Makati for Specific Performance with
Damages. The RTC decided in favor of the Cabamongan spouses.

Issue: Whether Citibank exercised due diligence in the transaction.

Ruling: The Court has repeatedly emphasized that, since the banking
business is impressed with public interest, of paramount importance
thereto is the trust and confidence of the public in general.
Consequently, the highest degree of diligence40 is expected,41 and high
standards of integrity and performance are even required, of it. 42 By the
nature of its functions, a bank is "under obligation to treat the accounts
of its depositors with meticulous care, 43 always having in mind the
fiduciary nature of their relationship." 44

In this case, it has been sufficiently shown that the signatures of

Carmelita in the forms for pretermination of deposits are forgeries.
Citibank, with its signature verification procedure, failed to detect the
forgery. Its negligence consisted in the omission of that degree of
diligence required of banks. The Court has held that a bank is "bound to
know the signatures of its customers; and if it pays a forged check, it
must be considered as making the payment out of its own funds, and
cannot ordinarily charge the amount so paid to the account of the
depositor whose name was forged."45 Such principle equally applies here.