Armando Alano v.

Planter’s Development Bank, as successor-in-interest of Maunlad

Savings and Loan Assoc., Inc.
Facts:
Armando Alano and his brother Agapito Alano, Jr. bought a residential house at Quezon
City. The title to it was not immediately transferred to them because the duplicate and original
copies were destroyed by a fire that gutted the Quezon City Hall Bldg.
Agapito died, leaving behind his wife, Lydia, and their four legitimate children, who
adjudicated to themselves the property in QC. The title to that property was reconstituted and
registered solely in their names. This prompted Armando to execute an affidavit of adverse claim,
which was annotated on the title.
Lydia filed with the RD of QC an affidavit of cancellation of adverse claim, causing the
cancellation of the annotated adverse claim on the title. A new title was also issued solely in
Lydia’s name by virtue of a deed of absolute sale allegedly executed by her children in her favor.
Slumberworld, Inc., represented by its president, Javier, and treasurer, Lydia, then obtained a loan
from Maunlad Savings and Loan Assoc., Inc. (Maunlad) secured by a real estate mortgage (REM)
over the subject property.
Armando then filed a complaint, seeking, among others, the nullification of the REM with
respect to his share. He alleged that Maunlad was not a mortgagee in good faith as it failed to
exercise due diligence in inspecting and ascertaining the status of the mortgaged property.
Maunlad argued that it has no obligation to look beyond the title considering there was no
adverse claim annotated on the present title and that since the property was occupied by Lydia,
there was no need to verify the extent of her possessory rights.
Issue:
Whether Maunlad was an innocent mortgagee in good faith
Ruling:
Maunlad 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. Imbued with
public interest, they “are expected to be more cautious than ordinary individuals.” 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/s thereof. Failure to do so makes them mortgages in bad faith.
Here, Maunlad 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.
 BPI Family Savings Bank, Inc. v. First Metro Investment Corp.
Facts:
First Metro Investment Corp. (FMIC), through its Exec. VP Ong, opened a current account
and deposited a check of 100 million pesos with BPI Family Bank (BPI FB). BPI FB, through its
branch manager Sebastian, guaranteed the payment of 17% per annum interest of the 100 million.
FMIC, in turn, assured BPI FB that it will maintain its deposit for a period of one year on condition
that the 17% per annum interest be paid in advance. Such interest was paid upon clearance of
FMIC’s check deposit.
Later, however, BPI FB transferred 80 million from FMIC’s current account to Tevesteco
Arrastre – Stevedoring, Inc. on the basis of an authority to debit signed by Ong and David, FMIC’s
senior manager. FMIC denied having authorized the transfer of its funds, claiming Ong’s and
David’s signatures were falsified. It then issued a BPI FB check for 86 million payable to itself
and drawn on its deposit to recover immediately its deposit. BPI FB, however, dishonored the
check as it was drawn against insufficient funds.
FMIC then filed a civil case against BPI FB. The RTC ruled in its favor, and the CA
affirmed the decision with modification that BPI FB’s liability is 65 million plus interest at 17%
per annum.
BPI FB appealed, arguing that the CA erred in awarding 17% per annum interest since
FMIC’s deposit was not a special savings account similar to a time deposit but is actually a demand
deposit, withdrawable upon demand, proscribed from earning interest under CB Circular 777.
Issue:
Whether the deposit was intended to be a time deposit or a demand deposit
Ruling:
The parties intended the deposit be treated as an interest-earning time deposit not
withdrawable any time. The communications between Sebastian and Ong showed that both agreed
that the deposit was non-withdrawable for one year upon payment in advance of the 17% per
annum interest. Clearly, they intended the deposit as a time deposit to earn 17% per annum interest
and to remain intact until its maturity.
Time deposit is defined as “one the payment of which cannot legally be required within
such specified number of days” while demand deposits are “all those liabilities of the Bangko
Sentral and of other banks which are denominated in Philippine currency and are subject to
payment in legal tender upon demand by the presentation of (depositor’s) checks.”
While a month and so from the deposit date, FMIC demanded withdrawal of 86 million, it
was made as a result of the fraudulent and unauthorized transfer by BPI FB of its 80 million deposit
to Tevesteco. Such was a normal reaction to a bank’s failure in its fiduciary duty to treat a
depositor’s account with the highest degree of care. In this case, the withdrawal before the one-
year maturity date did not change the nature of its time deposit to a demand deposit.
 BPI v. Tarcila Fernandez
Facts:
Tarcila, with her husband Manuel and their children, opened four joint and/or accounts
with BPI, subject to the conditions that (1) pre-termination prior to maturity is subject to BPI’s
discretion, and if it is allowed, it is subject to interest penalty and that (2) endorsement and
presentation of the certificate of deposit is necessary for renewal or termination of deposit.
Sometime later, Tarcila went to BPI to pre-terminate the joint accounts, bringing with her
the certificates of deposit. BPI refused the request and insisted on contacting Manuel, alleging
that this is an integral part of its standard operating procedure.
Shortly after Tarcila left, Manuel arrived and likewise requested pre-termination. He
claimed that he lost the certificates of deposit. BPI acceded to his request, believed Manuel’s
claim, and requested that he accomplish BPI’s pro forma affidavit of loss. Manuel returned two
days later and submitted the affidavit of loss and an indemnity agreement that he and Sian executed,
discharging BPI from liability in connection with the pre-termination. The proceeds were then
released to Manuel.
Tarcila never received her share in the deposits. She demanded from BPI the amounts due,
but it remained unheeded. She then filed a complaint for damages against BPI, alleging bad faith
in allowing the pre-termination based on Manuel’s affidavit of loss when the bank had actual
knowledge that she had possession of the certificates of deposit.
BPI argued that it possessed the discretion to decline Tarcila’s request since pre-
termination was done prior to maturity dates; it was merely exercising its rights.
The RTC ruled in Tarcila’s favor, opining that the and/or nature of the accounts indicate
active solidarity that entitled any of the holders to demand payment from BPI, so since Tarcila
made the first demand, payment should have been made to her, pursuant to Art. 1214 of NCC.
The CA affirmed the decision, ruling that as a co-depositor and solidary creditor, BPI did not enjoy
the prerogative to determine the source of funds and to refuse payment to Tarcila on this basis;
BPI acted in bad faith in allowing Manuel to pre-terminate and in facilitating the swift funneling
of funds to Sian, which allowed Manuel to withdraw them.
Issue:
Whether BPI breached its obligation under the certificates of deposit
Ruling:
BPI breached its obligation under the certificates of deposit.
A certificate of deposit is a written acknowledgment by a bank or banker of the receipt of
a sum of money on deposit which the bank or banker promises to pay to the depositor, to the order
of the depositor, or to some other person or his order, whereby the relation of debtor and creditor
between the bank and the depositor is created. In particular, the certificates of deposit contain
provisions on the amount of interest, period of maturity, and manner of termination. Specifically,
they stressed that endorsement and presentation of the certificate of deposit is indispensable to
their termination. Thus, BPI may only terminate the certificates of deposit after it has diligently
completed two steps: ensuring the identity of the account holder and demanding the surrender of
the certificates of deposit.
BPI substantially breached its obligations to the prejudice of Tarcila as it allowed the
termination of the accounts without demanding the surrender of the certificates of deposits. Worse,
BPI even had actual knowledge that the certificates of deposit were in Tarcila's possession, yet it
chose to release the proceeds to Manuel on the basis of a falsified affidavit of loss, in gross
violation of the terms of the deposit agreements.
A bank acts at its peril when it pays deposits evidenced by a certificate of deposit, without
its production and surrender after proper indorsement. As a rule, one who pleads payment has the
burden of proving it. Even where the plaintiff must allege non-payment, the general rule is that
the burden rests on the defendant to prove payment, rather than on the plaintiff to prove payment.
The debtor has the burden of showing with legal certainty that the obligation has been discharged
by payment.