Spouses Jalbay vs.

PNB
Facts: The TCT of the subject property owned by spouses Emiliano and Mamerta Jalbay was destroyed when a fire
gutted the Office of the Quezon City Register of Deeds. Upon reconstitution, the title was issued in the name of the
Jalbays. Because they were then based abroad, the title was released to their daughter, Virginia Agus. Subsequently,
Virginia and her husband applied for a loan with PNB for their garments business. They constituted a real estate
mortgage (REM) over the subject property. Upon failing to pay their loan, PNB foreclosed the mortgage and emerged as
the highest bidder at the public auction.
When the Jalbays learned about the mortgage and foreclosure of their property, they filed a complaint before the
RTC against PNB since the REM was undertaken without their consent as the real registered owners. The RTC declared
the REM as null and void and the foreclosure proceedings without force and effect. This ruling was reversed by the CA.
The MR of the Jalbays was denied. They posit that PNB did not act with diligence when it approved the loan.
Issue: Whether PNB is a mortgagee in GF.
Held: Yes. PNB exerted the necessary diligence in granting the loan and entering into the assailed real estate mortgage. It
required the borrowers to submit their biodata, duly accomplished loan application and the TCT covering the mortgaged
lot. It also caused the inspection and appraisal of the subject property as well the credit investigation on the borrowers.
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. 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.
Philippine Commercial International Bank (PCIB) vs. CA
Facts: Ford Philippines drew and issued a Citibank check worth 4.7M in favor of the CIR as payment for its percentage
taxes. The check was deposited with PCIB. Upon presentment with Citibank, the proceeds of the check was paid to PCIB,
however, the CIR never received the payment. The CIR informed Ford that the checks were encashed by unauthorized
persons, hence, Ford must pay its taxes. Investigations revealed that the check was recalled by Godofredo Rivera, the
General Ledger Accountant of Ford. With his instruction, PCIB replaced the check with two of its own Manager’s Checks.
Allegedly, members of a syndicate later deposited these with another bank. Ford filed a complaint against Citibank and
PCI Bank before the RTC. It ruled Citibank and PCI Bank solidarily liable to pay the amount stated in the check. Upon
appeal to the CA, only PCIB was held liable.
Issue: Whether PCI Bank is negligent for failing to exercise the diligence required of a bank
Held: Yes. PCIB failed to verify the authority of Mr. Rivera to negotiate the checks. The neglect of PCIB employees to
verify whether his letter requesting for the replacement of the Citibank Check was duly authorized, showed lack of care
and prudence required in the circumstances.
PCIB is authorized to collect the payment of taxpayers in behalf of the BIR. As an agent of BIR, PCIB is duty bound to
consult its principal regarding the unwarranted instructions given by the payor or its agent.
By the very nature of the work of banks, the degree of responsibility, care and trustworthiness expected of their
employees and officials is far greater than those of ordinary clerks and employees. Banks are expected to exercise the
highest degree of diligence in the selection and supervision of their employees.