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Philippine Banking Corporation (PhilBank) vs.

Arturo Dy, Bernardo

Dy, Jose Delgado and Cipriana Delgado

G.R. No. 183774 November 14, 2012


The spouses Delgado entered into an agreement with a certain Cecilia

Tan for the purchase of the formers property by the latter to be paid in
installment, or from time to time, until the Sps. Delgado are ready to execute
a deed of sale and transfer the title to Tan upon full payment. Tan however
later on found out that the property had already been transferred to the
name of the Dys and had been mortgaged to Philbank. Tan filed an action for
specific performance and annulment of the title of the Dys. The Delgados
contend that there was no perfected sale between them and Tan as she did
not agree on the selling price and that the sale and transfer of the property
of the Dys was fictitious and was only made in order for the Dys to enable
the Delgados to mortgage the property and obtain a loan from PhilBank. The
Delgados contend that PhilBank is not a mortgagee in good faith as it was
aware of the fictitious nature of the sale of the porerty. While PHilBank avers
that they are a mortgagee in good faith and should not be held liable to any
of the parties for damages. Tan subsequently abandoned her claim on the
property and the sale between the Dys and Delgados have been rules as
void which has become final and executory.


Is PhilBank a mortgagee in good faith?


A finding of negligence must always be contextualized in line with the

attendant circumstances of a particular case. As aptly held in Philippine
National Bank v. Heirs of Estanislao Militar, "the diligence with which the law
requires the individual or a corporation at all times to govern a particular
conduct varies with the nature of the situation in which one is placed, and
the importance of the act which is to be performed." Thus, without
diminishing the time-honored principle that nothing short of extraordinary
diligence is required of banks whose business is impressed with public
interest, Philbank's inconsequential oversight should not and cannot serve as
a bastion for fraud and deceit.
To be sure, fraud comprises "anything calculated to deceive, including all
acts, omissions, and concealment involving a breach of legal duty or
equitable duty, trust, or confidence justly reposed, resulting in damage to
another, or by which an undue and unconscientious advantage is taken of
another." In this light, the Dys' and Sps. Delgado's deliberate simulation of
the sale intended to obtain loan proceeds from and to prejudice Philbank
clearly constitutes fraudulent conduct. As such, Sps. Delgado cannot now be
allowed to deny the validity of the mortgage executed by the Dys in favor of
Philbank as to hold otherwise would effectively sanction their blatant bad
faith to Philbank's detriment. As the Dys and Delgados conspired together to
induce PhilBank in mortgaging the property through fraud, PHilBank cannot
be considered as negligent or a mortgagee in bad faith.