DBP vs CAPULONG

Development Bank of the Philippines (DBP) granted a loan to Asialand Development

Corporation (ADC) in the amount of P16,000,000.00 for the purpose of real estate development.
To secure the loan, a mortgage was constituted. Gregorio Capulong, who purchased five (5)
lots by way of a Contract to Sell. For failure of ADC to pay its obligation, the DBP extrajudicially
foreclosed the mortgage. ADC failed to redeem the foreclosed properties within the redemption
period. Capulong filed a Complaint against ADC.

Capulong alleged that it did not inform him of the mortgage; and that despite his full payment, it
refused to deliver to him the titles to the properties.

DBP interposed that the loan to ADC was granted at the time when the mortgaged property was
not yet subdivided into individual lots and when there were as yet no end-buyers. It foreclosed
the property pursuant to the Loan Agreement and the Mortgage Contract signed by them.

HELD: DBP should have considered that it was dealing with a property subject of a real estate
development project. DBP should have aware that there is a need to verify whether any part of
the property was already intended to be the subject of any other contract involving buyers or
potential buyers. The DBP cannot be deemed to be an innocent mortgagee. It should not have
relied only on the representation of ADC that it had secured all requisite permits and licenses
from the government agencies concerned.

PNB vs MILITAR

Spouses Jalbuna mortgaged to Philippine National Bank (PNB) as security for a loan. When
they defaulted, PNB extrajudicially foreclosed the mortgage and sold the lot at public auction,
with PNB as the highest bidder. Title thereto was consolidated in the name of PNB. PNB sold
the lot to spouses Johnny and Nona Lucero. They filed an ejectment case against Tranquilina,
Azucena, Freddie and Eduardo, all surnamed Militar, the actual occupants therein. Tranquilina,
Azucena, Freddie and Eduardo filed a complaint against spouses Jalbuna, PNB, and spouses
Lucero for Reconveyance of Title, Annulment of Sale, Cancellation of Titles and Damages.

PNB claimed that it was a mortgagee in good faith and for value; that the title of spouses
Jalbuna was free from all liens and encumbrances when they secured the loan; and that it
conducted verification and inspection of the property before granting the loan.

Spouses Lucero alleged that the complaint was commenced without the real party in interest;
that the cause of action has prescribed; and that they were innocent purchasers in good faith
and for value.

HELD: We affirm the Court of Appeals finding that petitioners were not mortgagee or buyers in
good faith. The banks are expected to exercise more care and prudence than private individuals
in their dealings, even those involving registered lands, for their business is affected with public
interest. PNB was remiss in the exercise of due diligence required of a banking institution,
hence it cannot be considered as mortgagee in good faith. Neither could spouses Lucero be
considered buyers in good faith. As respondents neighbors, they could have verified the status
of the property they were buying by inquiring from the possessors thereof. This, they failed to
do; hence they cannot be considered buyers in good faith.
 TIO vs ABAYATA

Respondents (ABAYATA) alleged that through machinations, defendant Benjamin Lasola

(Lasola) was able to register the property in his name under Transfer Certificate and mortgage it
to secure a loan from the Commercial Rural Bank of Tabogon (Cebu), Inc. (Rural Bank). In turn,
the Rural Bank foreclosed the mortgage and sold the property to petitioners. Petitioners and the
Rural Bank filed their respective Answers claiming that they were innocent purchasers for value
and in good faith.

The principal issue in this case is whether petitioners are innocent purchasers for value and in
good faith.

Lasola posited that he is the owner of the property and is entitled to its possession by virtue of
the Deed of Sale executed between him and the respondents' predecessor-in-interest,
Celedonio Abayata.

HELD: The Court finds that ownership of the property has already been legitimately transferred
to petitioners who are innocent purchasers for value and in good faith. The Rural Bank is a
mortgagee in bad faith. Records confirm that the Rural Bank did not exercise the due diligence
required of banking and financial institutions before entering into the mortgage contract with
Lasola. . The very fact that the lot was not in the possession of the Lasolas should have put the
defendant bank on guard and prompted it to make a more thorough inquiry into the ownership of
the lot. Rural Bank relied on the representation of Banjamin Lasola that the residents on the lot
were squatters. There is no showing that it inquired from the residents themselves as to who the
real owners were, something it would have done if it were reasonably diligent and prudent in
verifying the true ownership of the lot.