GREGORIO H. REYES and CONSUELO PUYAT-REYES, vs. THE HON. with the respondent bank.

he respondent bank. Instead, the relationship involved was that of

COURT OF APPEALS and FAR EAST BANK AND TRUST COMPANY a buyer and seller, that is, between the respondent bank as the seller of
G.R. No. 118492, August 15, 2001 the subject foreign exchange demand draft, and PRCI as the buyer of the
DE LEON, JR., J.: same, with the 20th Asian Racing Conference Secretariat in Sydney,
Australia as the payee thereof.
Doctrine:
The higher degree of diligence is not expected to be exerted by Comsavings Bank vs Spouses Capistrano
banks in commercial transactions that do not involve fiduciary G.R. No. 170942. August 28, 2005.
relationship. BERSAMIN, J.

Facts: DOCTRINE:
Petitioner applied with the respondent bank for a foreign A banking institution is obliged to exercise the highest degree of
exchange demand draft in Australian Dollars. The Bank did not have an diligence as well as high standards of integrity and performance in all its
Australian dollar account in any bank in Sydney so by way of transactions because its business is imbued with public interest.
accommodation the bank offered a roundabout way which arrangement
has been customarily resorted to since the 1960’s and the procedure has FACTS:
proven to be problem-free; the respondent would draw a demand draft Respondent Spouses Danilo and Estrella Capistrano availed the
against Westpac Bank in Sydney and have the latter reimburse itself from Unified Home Lending Program (UHLP) implemented by the National
the US Dollar Account of the respondent Bank in Westpac Bank in New Home Mortgage Finance Corporation (NHMFC) through an accredited-
York. The petitioner agreed and a Foreign exchange demand draft was originator Comsavings Bank. As part of the requirements for the release
issued, however, the same was dishonored twice in Australia when it was of the loan, Comsavings Bank made Capistrano signed various documents,
presented. Petitioner then filed a complaint for damages before the RTC including a ‘Certificate of House Completion and Acceptance.’ After
of Makati on the ground that the respondent bank should have exercised compliance with the preliminary requirements of the UHLP, an interim
a higher degree of diligence with the transaction. financing loan in the amount of ₱260,000.00, which amount was to be
paid out of the proceeds from NHMFC, was approved and released to the
Issue: construction contractor GCB Builders. Thereafter, while the construction
Whether or not the higher degree of diligence imposed upon is still ongoing and the house was still unfinished, Capistrano received a
banks is applicable in this case. letter from NHMFC advising them to pay their monthly amortizations for
the said loan. Respondents protested to said demand contending that the
Ruling: ‘Certificate of Completion and Acceptance’ passed to NHMFC was only
No, the rule is the degree of diligence required of banks, is more pre-signed and the construction remained not completed, hence it
than that of a good father of a family where the fiduciary nature of their prompted Capistrano to file a complaint against Comsavings Bank and
relationship with their depositors is concerned, but the same higher GCB Builders for the breach of contract.
degree of diligence is not expected to be exerted by banks in commercial
transactions that do not involve fiduciary relationship with their ISSUE:
depositors. Whether or not Comsavings Bank exercised the degree of
diligence required of a banking institution.
Considering the foregoing, the respondent bank was not required
to exert more than the diligence of a good father of a family in regard to RULING:
the sale and issuance of the subject foreign exchange demand draft. The No, a banking institution like Comsavings Bank serving as an
case at bar does not involve the handling of petitioners’ deposit, if any, originating bank for the Unified Home Lending Program (UHLP) of the
Government owes a duty to observe the highest degree of diligence and a effectivity of mortgage and damages against the Monesets, Bundalo and
high standard of integrity and performance in all its transactions with its the Bank.
clients because its business is imbued with public interest, to which it
failed to do. Issue:
Whether or not banks can merely rely on the certificate of title of
In accordance with Article 20 and Article 1170 of the Civil Code, the mortgaged property.
Comsavings Bank is liable for the damages for their misrepresentations in
obtaining the mortgage loan from NHMFC in the name of the respondents Ruling:
as it submitted false loan documents, such as photographs of the Banks cannot merely rely on certificates of title in ascertaining the
completed house, and made the respondent signed the ‘Certificate of status of mortgaged properties; as their business is impressed with public
House Completion and Acceptance’ even if the construction of the house interest, they are expected to exercise more care and prudence in their
had not yet started. Hence, it had prejudiced the respondents as they are dealings than private individuals. Indeed, the rule that persons dealing
demanded payment for the loan despite the non-completion of the house. with registered lands can rely solely on the certificate of title does not
These acts of Comsavings Bank were irregular per se and there is no apply to banks.
question that it was grossly negligent with its dealings with the
respondents because it did not comply with is legal obligation to exercise
the required diligence and integrity. PHILIPPINE NATIONAL BANK (PNB) vs. JUAN F. VILLA
G.R. No. 213241, August 1, 2016
PEREZ, J.
Ursal vs. Court of Appeals
G.R. No. 142411. October 14, 2005 DOCTRINE:
AUSTRIA-MARTINEZ, J. The banking system is an indispensable institution in the modern
world and plays a vital role in the economic life of every civilized nation.
Doctrine: Hence, the highest degree of diligence is expected, and high standards of
The business of the banks is impressed with public interest. They integrity and performance are even required, of it.
are expected to exercise more care and prudence in their dealings than
private individuals. FACTS:
Spouses Reynaldo Comista and Erlinda Gamboa Comista (Spouses
Facts: Comista) are the previous owners of the foreclosed mortgaged real
The spouses Jesus and Cristita Moneset (Monesets), the registered property that has been transferred to Juan F. Vila (Villa) by way of public
owners of the subject property, executed a “Contract to Sell Lot & House” auction. Despite the lapse of the redemption period and the fact of
in favor of petitioner Winifreda Ursal. Ursal paid the down payment and issuance of a Certificate of Final Sale to Villa, the Spouses were
took possession of the property but after paying six monthly installments, nonetheless allowed to buy back the subject property. Villa filed an action
petitioner stopped paying due to the Monesets’ failure to deliver to her for nullification of redemption, transfer of title and damages against the
the transfer certificate of title of the property as per their agreement. Spouses Comista, the court ruled in favor of the respondent. However, the
Unknown to Ursal, the Monesets executed an absolute deed of sale in Sheriff could not successfully enforce the decision because the certificate
favor of Dr. Rafael Canora, Jr. over the said property and thereafter of title covering the subject property was no longer registered under the
executed another sale, this time with pacto de retro with Restituto names of the Spouses Comista, as it was found out that during the
Bundalo, and was also mortgaged with respondent Rural Bank of Larena. interregnum the Spouses were able to secure a loan from the petitioner
For the failure of the Monesets to pay the loan, the Bank served a notice PNB using the same property subject of litigation as security.
of extrajudicial foreclosure. Ursal filed an action for declaration of non-
ISSUE: issuance of a new title under TCT No. NT-5773, in the name of Roman
Whether or not petitioner exercised greater care and prudence Andres, one of the children and his wife, Lydia Echaus-Andres, who later
required to a bank by the law before it had entered into a mortgage mortagaged the property to PNB wherein no objection was made, even
contract. after the mortgage had been cancelled. Consequently, the Nueva Ecija RTC
cancelled the guardianship and transferred ownership of the properties
RULING: of the deceased, Roman and Lydia Andres, to their only living heir,
No, before approving a loan application, it is a standard operating Reynaldo Andres, who used the title and mortgaged the property to PNB,
practice for these institutions to conduct an ocular inspection of the
without the consent of Onofre Andres. As a result, Petitioner Onofre
property offered for mortgage and to verify the genuineness of the title to
Andres, uncle of Reynaldo filed a complaint for cancellation of title and
determine the real owner thereof. Here, petitioner PNB has failed to
exercise the requisite due diligence in ascertaining the status and reconveyance of the property alleging that title in mortgagor's name was
condition of the property being offered to it as security for the loan before based on a falsified document denominated as “Self-Adjudication of Sole
it approved the same. Heir” executed by Reynaldo and his mother who is still living at that time.
PNB denied the material allegations in the complaint arguing that it
The banking system is an indispensable institution in the modern conducted an investigation on the property. The trial court ruled in favor
world and plays a vital role in the economic life of every civilized nation. of Onofre by voiding all derivative titles from TCT No. NT-7267 while the
Whether as mere passive entities for the safekeeping and saving of money Court of Appeals modified this decision by declaring as valid and existing
or as active instruments of business and commerce, banks have become titile in PNB’s name.
an ubiquitous presence among the people, who have come to regard them
with respect and even gratitude and, most of all, confidence. ISSUE:
Consequently, the highest degree of diligence is expected, and high Whether or not a valid title in favor of PNB can be derived from
standards of integrity and performance are even required, of it. these void titles.

ONOFRE ANDRES v. PHILIPPINE NATIONAL BANK RULING:

G.R. No. 173548, October 15, 2014 Yes. While it is settled that a simulated deed of sale is null and void
LEONEN, J. and therefore, does not convey any right that could ripen into a valid title,
it has been equally ruled that, for reasons of public policy, the subsequent
DOCTRINE: nullification of title to a property is not a ground to annul the contractual
A bank that accepts a mortgage based upon a title which appears right which may have been derived by a purchaser, mortgagee or other
valid on its face and after exercising the requisite care, prudence, and transferee who acted in good faith. The court upholds the Court of
diligence appropriate to the public interest character of its business can Appeals’ findings that PNB complied with the standard operating practice
be deemed a mortgagee in good faith. The subsequent consolidation of of banks, which met the requisite level of diligence, when it sent Gerardo
title in its name after a valid foreclosure shall be respected Pestaño to conduct an ocular inspection of the property and verify the
notwithstanding later proof showing that the title was based upon a void status of its ownership and title. Banks, as businesses impressed with
transaction. public interest, must exercise greater care, prudence, and due diligence in
all their property dealings. Consequently, PNB is a mortgagee in good
FACTS: faith. The title resulting from the foreclosure sale, therefore, is to be
Spouses Victor and Filomena Andres owns a parcel of land which protected. The bank is an innocent purchaser for value.
was extrajudicially partitioned by his widow and his children upon the
death of Victor and resulted to the cancellation of TCT No. NT-7267 and
 Philippine National Bank vs. Corpuz PNB is not an ordinary mortgagee; it is a bank. Banks are expected to be
G.R. No. 180945. February 12, 2010. more cautious than ordinary individuals in dealing with lands, even
ABAD, J. registered ones, since the business of banks is imbued with public
interest. It is of judicial notice that the standard practice for banks before
Doctrine: approving a loan is to send a staff to the property offered as collateral and
Banks are expected to be more cautious than ordinary individuals verify the genuineness of the title to determine the real owner or owners.
in dealing with lands, even registered ones, since the business of banks is
imbued with public interest.
ANNA MARIE L. GUMABON vs. PHILIPPINE NATIONAL BANK
Facts: G.R. No. 202514. July 25, 2016.
Mercedes Corpuz delivered her owner’s duplicate copy of TCT J. BRION
32815 to Dagupan City Rural Bank as security against any liability she
might incur as its cashier, which she later left and went to United States, Doctrine:
however, without Corpuz’s knowledge and consent, Natividad Alano, the Fiduciary Nature - A bank treats the accounts of its depositors
rural bank’s manager, turned over Corpuz’s title to Julita Camacho and with meticulous care, always having in mind the fiduciary nature of their
Amparo Callejo. relationship. Fiduciary nature of banking that requires high standards of
integrity and performance.
Alano, Camacho, and Callejo prepared a falsified deed of sale,
making it appear that Corpuz sold her land to one “Mary Bondoc” and Facts:
caused the registration of the deed of sale, resulting in the cancellation of This case is a petition for review on certiorari filed by Anna Marie
TCT 32815 and the issuance of TCT 63262 in Bondoc’s name. Subsequent Gumabon assailing the decision and resolution of the Court of Appeals.
transfers were made to Rufo and Teresa Palaganas and to Virgilio and The CA reversed the Regional Trial Court ruling favoring Anna Marie.
Elene Songcuan, which resulted in the issuance of TCT 63528. Finally, the Anna Marie filed a complaint for recovery of sum of money and damages
Songcuans took out a loan of P1.1 million from petitioner Philippine before the RTC against the Philippine National Bank and the PNB Delta
National Bank (PNB) and, to secure payment, they executed a real estate branch manager Silverio Fernandez. The case stemmed from the PNB’s
mortgage on their title. refusal to release Anna Marie’s money in a consolidated savings account
and in two foreign exchange time deposits, evidenced by Foreign
A complaint was filed by Corpuz against Mary Bondoc, the Exchange Certificates of Time Deposit.
Palaganases, the Songcuans, and petitioner PNB, asking for the annulment
of the layers of deeds of sale covering the land, the cancellation of TCTs Issue:
63262, 63466, and 63528, and the reinstatement of TCT 32815 in her Whether or not PNB is liable to Anna Marie for its negligent acts
name. as a banking institution.

Issue: Ruling:
Whether or not petitioner PNB is a mortgagee in good faith, Yes, PNB is liable for its negligence as a banking institution. The
entitling it to its lien on the title to the property in dispute. Court ruled that Section 2 of Republic Act No. 8791 declares the State’s
recognition of the "fiduciary nature of banking that requires high
Ruling: standards of integrity and performance." It cannot be overemphasized
No, PNB is not a mortgagee in good faith. As a rule, the Court that the banking business is impressed with public interest, hence, the
would not expect a mortgagee to conduct an exhaustive investigation of trust and confidence of the public to the industry is given utmost
the history of the mortgagor’s title before he extends a loan. But petitioner importance. Thus, the bank is under obligation to treat its depositor’s
accounts with meticulous care, having in mind the nature of their
relationship. The bank is required to assume a degree of diligence higher
than that of a good father of a family. Coming now to the issue at hand - Since petitioner is a non-bank
financial intermediary, it is subject to 10% VAT for the tax years 1996 to
FIRST PLANTERS PAWNSHOP, INC., vs. CIR 2002; however, with the levy, assessment and collection of VAT from non-
G.R. No. 174134, July 30, 2008, bank financial intermediaries being specifically deferred by law, then
AUSTRIA-MARTINEZ, J. petitioner is not liable for VAT during these tax years and beginning 2004
up to the present, by virtue of R.A. No. 9238, petitioner is no longer liable
Doctrine: for VAT but it is subject to percentage tax on gross receipts from 0% to 5
It need not be elaborated that pawnshops are non-banks/banking %, as the case may be.
institutions. Moreover, the nature of their business activities partakes
that of a financial intermediary in that its principal function is lending. Philippine Deposit Insurance Corporation vs. Citibank
G.R. No. 170290, April 11, 2012
Facts: MENDOZA, J.
First Planters Pawnshop, Inc. (petitioner) contests the deficiency
value-added tax imposed upon it by the Bureau of Internal Revenue (BIR) Doctrine:
for the year 2000. The core of petitioner's argument is that it is not a Foreign banks; A branch has no separate legal personality from
lending investor within the purview of Section 108(A) of the National the parent bank.
Internal Revenue Code (NIRC), as amended, and therefore not subject to
value-added tax (VAT). Facts:
Philippine Deposit Insurance Corporation (PDIC), a government
In a Pre-Assessment Notice petitioner was informed by the BIR instrumentality, conducted an examination of the books of account of
that it has an existing tax deficiency on its VAT liabilities for the year 2000, Citibank and Bank of America (BA) which are both duly organized and
the deficiency assessment was at P541,102.79 for VAT Petitioner existing under the laws of the United States of America and duly licensed
protested the assessment for lack of legal and factual bases. Petitioner to do business in the Philippines. During the examination of the books,
subsequently received a Formal Assessment Notice directing payment. PDIC discovered that both banks received from their head offices huge
Petitioner sought reconsideration but this was denied by the CTA En Banc. amount of dollars which were not reported to PDIC as deposit liabilities
subject to assessment for insurance. Believing that litigation would
Issue: inevitably arise from this dispute, Citibank and BA each filed a petition for
Whether petitioner, engaged in pawnshop business, is liable to declaratory relief, stating that the money placements they received from
pay the deficiency assessment atP541,102.79 for VAT? their head office and other foreign branches were not deposits and did not
give rise to insurable deposit liabilities under Sections 3 and 4 of R.A. No.
Ruling: 3591 (the PDIC Charter) and, as a consequence, the deficiency
No, R.A. No. 9238 classified pawnshops as Other Non-bank assessments made by PDIC were improper and erroneous. The cases were
Financial Intermediaries. then consolidated. RTC ruled in favor of the Citibank and BA, which was
affirmed by the Court of Appeals, hence, the present case.
The nature of their business activities partakes that of a financial
intermediary in that its principal function is lending. That pawnshops are Issue:
to be treated as non-bank financial intermediaries is further bolstered by Whether the funds placed in the Philippine branch by the head
the fact that pawnshops are under the regulatory supervision of the office and foreign branches are insurable deposits under the PDIC Charter
Bangko Sentral ng Pilipinas and covered by its Manual of Regulations for and, are subject to assessment for insurance premiums.
Non-Bank Financial Institutions.
Ruling:
No. The Court explained the manner by which a foreign
corporation can establish its presence in the Philippines – it may choose
to incorporate its own subsidiary as a domestic corporation, in which case
such subsidiary would have its own separate and independent legal
personality to conduct business in the country. In the alternative, it may
create a branch in the Philippines, which would not be a legally
independent unit, and simply obtain a license to do business in
the Philippines.

In the case of Citibank and BA, it is apparent that they both did not
incorporate a separate domestic corporation to represent its business
interests in the Philippines. Thus, being one and the same entity, the funds
placed by the respondents in their respective branches in
the Philippines should not be treated as deposits made by third parties
subject to deposit insurance under the PDIC Charter.