PHILIPPINE NATIONAL BANK VS VILA

G.R. NO. 213241 | AUGUST 01, 2016

PEREZ, J.:
(Diligence Required of Banks)
FACTS:
Sometime in 1986, Spouses Reynaldo Cormsta and Erlinda Gamboa Cornista (Spouses
Cornista) obtained a loan from Traders Royal Bank and secured the same by mortgage of a
parcel of land with TCT title in their names by the R.O.D of Pangasinan. For failure to pay on
due, the mortgage was foreclosed. After the notice and publication, the subject property was sold
at the public auction where respondent Juan F. Vila (Vila) was declared the highest bidder. Vila
immediately took possession of the subject property however, he was prevented from
consolidating the ownership because the owner's copy was not turned over to him by the Sheriff.
Despite the lapse of the redemption period and the fact of issuance of a Certificate of Final Sale
to Vila, the Spouses Cormsta were nonetheless allowed to buy back the subject property.
Claiming that the Spouses Cornista already lost their right to redeem the subject property,
Vila filed an action for nullification of redemption against the Spouses Cornista and Alfredo
Vega in his capacity as the R.O.D of Pangasinan. RTC and CA both decided in favor of Vila. But
the Sheriff could not successfully enforce the decision because title was no longer registered to
Spouses Cornista because it was foreclosed by PNB as mortgage to their P532,000 loan. Vila
filed a case against Spouses Cornista and PNB before the RTC Pangasinan and sought for the
nullification of the TCT under PNB but the latter invoked they were mortgagee in good faith
because at the time it mortgaged, it was still free from any liens and encumbrances. RTC
rendered a decision in favor of Vila. CA affirmed the decision. Hence, the case.

ISSUES:
1. W/N PNB is a mortgagee in good faith;
2. W/N PNB is liable for damages.

RULING:
NO. There was no credible proof on the records could substantiate the claim of PNB that
a physical inspection of the property was conducted. The failure of the mortgagee to take
precautionary steps would mean negligence on his part and would thereby preclude it from
invoking that it is a mortgagee in good faith. When the purchaser or the mortgagee is a bank, the
rule on innocent purchasers or mortgagees for value is applied more strictly. Being in the
business of extending loans secured by real estate mortgage, banks are presumed to be familiar
with the rules on land registration. Having laid down that the PNB is not in good faith, they are
liable for the award of moral damages, exemplary damages, attorney's fees and costs of litigation
in favor of Vila.