Velasco v. Apostol

LAURA VELASCO and GRETA ACOSTA v. JUDGE SERGIO APOSTOL and MAHARLIKA INSURANCE

1989 / Regalado

FACTS

On 27 Nov 1973, around 230 PM, Laura Velasco and Greta Acosta were riding in Velasco’s Mercury car when an N/S taxicab driven by Dominador Santos [registered in the name of Alice Artuz, c/o Norberto Santos] crossed the center island towards their direction, and collided with their car at the left front part. The taxicab tried to return to its original lane, but was unable to climb the island. It backtracked, hitting again Velasco’s car in the left near portion, causing the latter's back portion to turn toward the center hitting a jeepney on its right, which was travelling along their side.

                Velasco and Acosta sued the taxicab driver and its registered owners, claiming actual, moral and exemplary damages plus attorney's fees. Maharlika Insurance was impleaded as a defendant in an amended complaint, with an allegation that the N/S taxicab was insured against third party liability for 20k with Maharlika at the time of the accident.

Maharlika claimed that there was no cause of action against it because at the time of the accident, the alleged insurance policy was not in force due to non-payment of the premium. It further averred that even if the taxicab had been insured, the complaint would still be premature since the policy provides that the insurer would be liable only when the insured becomes legally liable.

RTC ruled in favor of Velasco and Acosta, finding that the proximate cause of the accident was the taxicab driver’s negligence. However, Maharlika was exonerated on the ground that the policy was not in force for failure to pay the initial premium and for their concealment of a material fact. The payment was accepted by Maharlika without any knowledge that the risk insured against had already occurred since such fact was concealed by the insured and was not revealed to Maharlika.

The accident occurred on 27 Nov 1973 while the initial premium was paid only on 11 Dec 1973. Velasco and Acosta maintain that in spite of this late payment, the policy is binding because there was an implied agreement to grant a credit extension so as to make the policy effective. To them, the subsequent acceptance of the premium and delivery of the policy estops Maharlika from asserting that the policy is ineffective.

ISSUE & HOLDING

WON Maharlika Insurance is liable. NOT LIABLE. RTC JUDGMENT AFFIRMED.

RATIO

It should be noted that this controversy arose under the aegis of the old insurance law, Act No. 2427, as amended. The former insurance law, which applies to this case, provided that:

An insurer is entitled to the payment of premium as soon as the thing insured is exposed to the peril insured against, unless there is clear agreement to grant the insured credit extension of the premium due. No policy issued by an insurance company is valid and binding unless and until the premium thereof has been paid.

The insurance policy in question would be valid and binding notwithstanding the non-payment of the premium if there was a clear agreement to grant to the insured credit extension. Such agreement may be express or implied.

SC finds no cogent proof of any such implied agreement. Had there really been a credit extension, the insured would not have had any apprehension or hesitation to inform Maharlika at the time of or before the payment of the premium that an accident for which the insurer may be held liable had already happened. Under such circumstances, notice alone is necessary and the insured need not pay the premium because whatever premium may have been due may already be deducted upon the satisfaction of the loss under the policy. Velasco and Acosta failed to point out any other circumstances showing that prepayment of premium was not intended to be insisted upon. They have thus failed to discharge the burden of proving their allegation of the existence of the purported credit extension agreement.

                SC noted that in the present law, Section 77 of the Insurance Code of 1978 has deleted the clause "unless there is clear agreement to grant the insured credit extension of the premium due" which was involved in this controversy.

The fact withheld could not have influenced Maharlika in entering into the supposed contract or in estimating the character of the risk or in fixing the rate premium, because no such contract existed at the time of the accident. There was nothing to rescind at that point in time. What should be apparent from such actuations of the taxicab owner/s is the presence of bad faith on their part, a reprehensible disregard of the principle that insurance contracts are uberrimae fidae and demand the most abundant good faith. 

UCPB General Insurance v. Masagana Telamart (2001)

UCPB GENERAL INSURANCE [UCPB] v. MASAGANA TELAMART [Masagana]

2001 / Davide, Jr.

FACTS [SEE 1999 CASE DIGEST FOR THE OTHER FACTS]

CA disagreed with UCPB’s stand that Masagana’s tender of payment of the premiums on 13 July 1992 did not result in the renewal of the policies, having been made beyond the effective date of renewal as provided under Policy Condition No. 26:

Renewal Clause. -- Unless the company at least 45 days in advance of the end of the policy period mails or delivers to the assured at the address shown in the policy notice of its intention not to renew the policy or to condition its renewal upon reduction of limits or elimination of coverages, the assured shall be entitled to renew the policy upon payment of the premium due on the effective date of renewal.

The following facts have been established:

1.  For years, UCPB had been issuing fire policies to th Masagana, and these policies were annually renewed.

2.  UCPB had been granting Masagana a 60-90-day credit term within which to pay the premiums on the renewed policies.

3.  There was no valid notice of non-renewal of the policies, as there is no proof that the notice sent by ordinary mail was received by Masagana, and the copy allegedly sent to Zuellig was ever transmitted to Masagana.

4.  The premiums for the policies were paid by Masagana within the 60- 90-day credit term and were duly accepted and received by UCPB’s cashier.

ISSUE & HOLDING

WON IC 77 must be strictly applied to UCPB’s advantage despite its practice of granting a 60- to 90-day credit term for the payment of premiums. NO. MASAGANA WINS THIS TIME. 1999 DECISION SET ASIDE; CA DECISION AFFIRMED

RATIO

SEC. 77.  An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril insured against.  Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid, except in the case of a life or an industrial life policy whenever the grace period provision applies.

This was formerly Act 2427, Section 72:

SEC. 72.  An insurer is entitled to payment of premium as soon as the thing insured is exposed to the peril insured against, unless there is clear agreement to grant the insured credit extension of the premium due.  No policy issued by an insurance company is valid and binding unless and until the premium thereof has been paid. (Underscoring supplied)

IC 77 does not restate the portion of IC 72 expressly permitting an agreement to extend the period to pay the premium.  However, there are exceptions to IC 77.

1. In case of a life or industrial life policy whenever the grace period provision applies [Sec. 77]
2. Any acknowledgment of the receipt of premium is conclusive evidence of payment [Sec. 78]
3. If the parties have agreed to the payment in installments of the premium and partial payment has been made at the time of loss [Makati Tuscany Condominium v. CA]
4. The insurer may grant credit extension for the payment of the premium [Makati Tuscany Condominium] 
5. Estoppel

IC 77 merely precludes the parties from stipulating that the policy is valid even if premiums are not paid, but does not expressly prohibit an agreement granting credit extension, and such an agreement is not contrary to morals, good customs, public order or public policy. [Makati Tuscany Condominium v. CA]

ON EXCEPTION #4. If the insurer has granted the insured a credit term for the payment of the premium and loss occurs before the expiration of the term, recovery on the policy should be allowed even though the premium is paid after the loss but within the credit term.

It would be unjust and inequitable if recovery on the policy would not be permitted against UCPB, which had consistently granted a 60-90-day credit term for the payment of premiums despite its full awareness of IC 77.  Estoppel bars it from taking refuge under said section, since Masagana relied in good faith on such practice.  

UCPB General Insurance v. Masagana Telamart (1999)

UCPB GENERAL INSURANCE [UCPB] v. MASAGANA TELAMART [Masagana]

1999 / Pardo

FACTS

In 1991, UCPB issued 5 fire insurance policies covering Masagana Telamart’s various properties for the period from 22 May 1991 to 22 May 1992.

On March 1992 [~2 months before policy expiration], UCPB evaluated the policies and decided not to renew them upon expiration of their terms on 22 May 1992.  UCPB advised Masagana’s broker of its intention not to renew the policies. On April 1992 [~1 month before policy expiration], UCPB gave written notice to Masagana of the non-renewal of the policies. On June 1992 [policy already expired], Masagana’s property covered by 3 UCPB-issued policies was razed by fire.

On 13 July 1992, Masagana presented to UCPB’s cashier 5 manager's checks, representing premium for the renewal of the policies for another year.

It was only on the following day, 14 July 1992, when Masagana filed with UCPB a formal claim for indemnification of the insured property razed by fire. On the same day, UCPB returned the 5 manager's checks, and rejected Masagana’s claim since the policies had expired and were not renewed, and the fire occurred on 13 June 1992 (or before tender of premium payment).

            Masagana filed a civil complaint for recovery of the face value of the policies covering the insured property razed by fire. RTC ruled in favor of Masagana, as it found it to have complied with the obligation to pay the premium; hence, the replacement-renewal policy of these policies are effective and binding for another year [22 May 1992 – 22 May 1993].

            CA affirmed RTC, holding that following previous practice, Masagana was allowed a 60-90 day credit term for the renewal of its policies, and that the acceptance of the late premium payment suggested that payment could be made later.

ISSUE & HOLDING

WON the fire insurance policies had expired on 22 May 1992, or had been extended or renewed by an implied credit arrangement though actual payment of premium was tendered on a later date after the occurrence of the risk insured against [fire]. FIRE INSURANCE POLICIES HAD EXPIRED

RATIO

An insurance policy, other than life is not valid and binding until actual payment of the premium.  Any agreement to the contrary is void. The parties may not agree expressly or impliedly on the extension of credit or time to pay the premium and consider the policy binding before actual payment.

The case of Malayan Insurance v. Cruz-Arnaldo cited by the CA is not applicable. In that case, payment of the premium was made on before the occurrence of the fire.  In the present case, the payment of the premium for renewal of the policies was tendered a month after the fire occurred.  Masagana did not even give UCPB a notice of loss within a reasonable time after occurrence of the fire.

CA DECISION REVERSED 

Philippine Rabbit Bus Lines v. Phil-American Forwarders

PHILIPPINE RABBIT BUS LINES and FELIX PANGALANGAN v. PHIL-AMERICAN FORWARDERS, ARCHIMEDES BALINGIT, and FERNANDO PINEDA

1975 / Aquino / Appeal from CFI order

FACTS

Pineda recklessly drove a freight truck [owned by Phil-American Forwarders] along the national highway at Pampanga, and the truck bumped the PRBL bus driven by Pangalangan. As a result, Pangalangan suffered injuries and the bus was damaged and could not be used for 79 days, thus depriving PRBL of earnings amounting to P8,665.51. Balingit was the manager of Phil-American Forwarders.

PRBL and Pangalangan filed a complaint for damages against Phil-American Forwarders, Balingit, and Pineda. Defendants said Balingit was not Pineda's employer. Balingit moved that the complaint against him be dismissed on the ground that PRBL and Pangalangan had no cause of action against him. CFI dismissed the complaint against Balingit, on the ground that he is not the manager of an establishment as contemplated in NCC 2180.

ISSUE AND HOLDING

WON the terms "employers" and "owners and managers of an establishment or enterprise" embrace the manager of a corporation owning a truck, the reckless operation of which allegedly resulted in the vehicular accident from which the damage arose. NO.

RATIO

Those terms do not include the manager of a corporation. It may be gathered from the context of NCC 2180 that the term "manager" ("director" in the Spanish version) is used in the sense of "employer". Hence, no tortious or quasi-delictual liability can be imposed on Balingit as manager of Phil-American Forwarders, in connection with the vehicular accident in question, because he himself may be regarded as an employee or dependiente of Phil-American Forwarders.

CFI AFFIRMED

Amadora v. CA

AMADORA v. CA

G.R. No. L-44745, Apr. 15, 1988

The setting is the Colegio-de San Jose Recoletos, which was NOT a school of arts and trades but an academic institution of learning. A few days before the commencement exercises, student Alfredo Amadora went to school to finish his physics experiment as a prerequisite for graduation. When he was in the auditorium, he was shot to death by his classmate Pablito Daffon.

Pablito was convicted of homicide thru reckless imprudence. Alfredo’s parents filed a civil action for damages under NCC 2180 against the school, its rector, the high school principal, the dean of boys, the physics teacher, together with Pablito and two other students, through their parents. The complaint against the students was dropped.

CONTENTIONS ON CUSTODY

• PETITIONERS: AMADORA UNDER SCHOOL’S CUSTODY. He was in school to show his physics experiment as a graduation prerequisite.
• RESPONDENTS: AMADORA NOT UNDER SCHOOL’S CUSTODY. Semester already ended.

THE GUN ISSUE

Days before the incident, the dean of the boys confiscated from Gumban an unlicensed pistol but later returned it to him without making a report to the principal or taking any further action. PETITIONERS contend that this was the same pistol, as Gumban was one of Daffon’s companions when the latter fired the gun that killed Amadora, and that Amadora would not have been killed if the gun was not returned by the dean of the boys.

RULING OF COURTS

CFI held the remaining defendants liable. CA, however, reversed CFI and all defendants were absolved. CA found that NCC 2180 was not applicable since the school was not a school of arts and trades. It also held that the students were not in the school’s custody at the time of the incident since the semester already ended. In addition, there was no clear identification of the gun, and that the defendant exercised the necessary diligence in preventing injury.

ISSUES & HELD (aka QUICK SUMMARY OF FINDINGS)

1. Does NCC 2180 also cover establishments that are NOT schools of arts and trades? – YES
2. When is the offending student supposed to be in the school’s custody? – As long as he is under the control and influence of the school and within its premises, whether the semester has not yet begun or has already ended. Alfredo still under custody
3. Who is liable for the injury? – None of the respondents is liable for the injury inflicted by Pablito on Alfredo

RULING

1.     The school CANNOT be held directly liable under NCC 2180.

Three cases were cited: Exconde, Mercado, and Palisoc.

What you need to know in Exconde

• Student boarded a jeep, took over its wheel and drove it recklessly that it turned turtle, resulting to the death of two of its passengers.
• This decision, penned by Justice Angelo exculpated the school on the ground that it was not a school of arts and trades.
• Justice Reyes said that the school authorities should be held liable.
• Liability was imposed on teachers in general, and heads of schools of arts and trades in particular. The clause “of establishments of arts and trades” should apply only to heads.

What you need to know in Mercado

• A student cut a classmate with a razor blade during recess time in school.
• Exconde was reiterated in this case (the school was exculpated on the ground that it was not a school of arts and trades).
• The custody requirement was not proved as it “contemplates a situation where the student lives and boards with the teacher, such that the control, direction and influences on the pupil supersede those of the parent.”

What you need to know in Palisoc

• A student was killed by a classmate with fist blows in the laboratory of the school.
• The head of the school and the teacher-in-charge were held liable together with the wrongdoer, even though the latter was not boarding in the school.
• The ponencia, Justice Teehankee, said, “There is nothing in the law that requires that for such liability to attach, the pupil or student who commits the tortious act must live an board in the school,” as erroneously held in Exconde and Mercado.

 The case at hand – Amadora

• The school has been directly impleaded unlike in Exconde and Mercado.
• The school is an academic institution of learning, unlike in Palisoc wherein the school was an arts and trade school.

 Q: Does NCC 2180 also cover establishments that are NOT schools of arts and trades? – YES

GENERAL RULE. Where the school is academic rather than technical or vocational in nature, responsibility for the tort committed by the student will attach to the teacher in charge of the student, following the first part of NCC 2180. In the case of establishments of arts and trades, it is the head that should be answerable as an exception to the general rule.

                Following the canon of reddendo singula singulis, “teachers” should apply to the words “pupils and students” and “heads of establishments of arts and trades” to the word “apprentices.”

On the differences between academic and non-academic schools

There is no substantial distinction between the academic and the non-academic schools insofar as torts committed by their students are concerned. The same vigilance is expected from the teacher over the students under his control and supervision, whatever the nature of the school where he is teaching. The teacher should not be able to excuse himself by simply showing that he is teaching in an academic school where, on the other hand, the head would be held liable if the school were non-academic.

                HOWEVER, why is it that for academic schools, the teacher is the one held liable, while for non-academic / arts and trade schools, the head is the one held liable? The answer can be traced to the fact that historically, the head exercised a closer tutelage over his pupils than the head of an academic school because of the apprenticeship system they employed. This distinction no longer holds at present but until NCC 2180 is changed, it should be interpreted according to its clear and original mandate.

2.     At the time the incident occurred, Alfredo was still in the custody of the school authorities.

Q: When is the offending student supposed to be in the school’s custody? – As long as he is under the control and influence of the school and within its premises, whether the semester has not yet begun or has already ended

On the teacher-in-charge and custody

The teacher-in-charge, who is the one designated by a superior to exercise supervision over pupils for a particular subject or section, is the one who must be held liable, in the same way that parents are responsible for the child when he is in their custody. It is not necessary that at the time of the injury, the teacher is physically present to be in a position to prevent it. Custody refers to the influence exerted on the child and the discipline instilled in him because of such influence. For the injuries caused by the student, the teacher and not the parent shall be held responsible if the tort was committed within the premises of the school at any time when its authority could be validly exercised over him.

                The rector, high school principal and the dean of boys CANNOT be held liable because none of them was the teacher-in-charge as defined, and they were only exercising general authority over the student body. Evidence did not disclose who the teacher-in-charge of Pablito was. The mere fact that Alfredo went to school to finish / submit his physics project DID NOT necessarily make the physics teacher the teacher-in-charge.

                In the absence of a teacher-in-charge, it is probably the dean of boys who should be held liable, since there was evidence that he had earlier confiscated an unlicensed gun from a student and returned it to the latter without reporting to authorities. HOWEVER, it has not been showed that said gun was the same that Pablito used to shoot Alfredo; hence, said fact does not necessarily link the dean to the shooting.

On the defense of exercising due diligence of a good father of a family

The school, teacher-in-charge, or the head may exculpate themselves by proving that they exercised the diligence of a good father of a family or bonus paterfamilias. The school can show this in selecting the head or its teachers and the appropriate supervision over them in the custody and instruction of the pupils pursuant to the rules and regulations for the maintenance of discipline among them.

Such defense is also available to the teacher or the head of the school of arts and trades directly held to answer for the tort committed by the student. As long as the defendant can show that he had taken the necessary precautions to prevent the injury complained of, he can exonerate himself from the liability imposed by Article 2180. The teacher will be held liable not only when he is acting in loco parentis for the law does not require that the offending student be of minority age. Unlike the parent, who will be liable only if his child is still a minor, the teacher is held answerable by the law for the act of the student under him regardless of the student's age. The Court is disposed not to expect from the teacher the same measure of responsibility imposed on the parent for their influence over the child is not equal in degree. The parent can expect more obedience from the child because the latter's dependence on him is greater than on the teacher.

                However, assuming that the physics teacher was the teacher-in-charge, there is NO SHOWING that he was negligent in enforcing discipline upon Pablito or that he waived observance or condoned the non-observance of school rules and regulations. Respondents have proved that they had exercised due diligence, through the enforcement of the school regulations, in maintaining that discipline.

OPINIONS

Concurring and dissenting opinion of Justice Melencio-Herrera

• Disagrees with the restricted meaning given to the term teacher as “teacher-in-charge”
• The philosophy of law is that whoever stands in loco parentis will have the same duties and obligations as parents whenever in such a standing. As long as pupils and students remain in their custody, they shall be held liable for the former’s tortious acts.

 Concurring opinion of Justice Gutierrez

• There is a need for a major amendment, if not a complete scrapping, of the paragraph in NCC 2180 that refers to teachers or heads of establishments of arts and trades in relation to pupils and students or apprentices
• No more masters, apprentices in schools of arts and trades
• Teachers are often no longer objects of veneration who are given due to substitute parents

Tamargo v. CA

MACARIO, CELSO, and AURELIA TAMARGO v. CA, RTC JUDGE RUBIO, VICTOR and CLARA BUNDOC

1992 / Feliciano / Petition for review of CA decision

In 1981, Sps. Rapisura filed a petition to adopt 10 year old Adelberto Bundoc. A year later, on October 1982, Adelberto shot Jennifer Tamargo with an air rifle causing injuries that led to her death. The adoption petition was granted on November 1982.

A civil complaint for damages was filed against Sps. Bundoc [Adelberto’s natural parents with whom he was living at the time of the incident] by Jennifer’s adopting parent, Macario, as well as her natural parents, Sps. Tamargo. Criminal information for homicide through reckless imprudence was filed against Adelberto, but he was acquitted and exempted from criminal liability since he acted without discernment.

                Sps. Bundoc claim that Sps. Rapisura [adopting parents] are the indispensable parties to the action since parental authorities shifted to the latter from the moment the petition for adoption was filed. However, Sps. Tamargo claim that parental authority of Sps. Bundoc had not ceased nor been relinquished by the filing and granting of the petition since Adelberto was then living with his natural parents.

                RTC dismissed Sps. Tamargo’s complaint and ruled that Sps. Bundoc were not indispensable parties to the action. CA dismissed Sps. Tamargo’s petition, since they lost their right to appeal.

PARENTAL LIABILITY UNDER VICARIOUS LIABILITY OR “IMPUTED NEGLIGENCE”

• Law imposes civil liability upon father (or mother, if father is dead or incapacitated) for any damages that may be caused by a minor child who lives with them [NCC 2180]
•  – A person is not only liable for torts he committed, but also for torts committed by others with whom he has a certain relationship and for whom he is responsible
• Cangco cited to explain basis for doctrine of vicarious liability
• Legislature elected to limit extra-contractual liability to cases in which moral culpability can be directly imputed to persons to be charged; failure to exercise due care in one’s own acts, selecting, controlling agents or servants, controlling persons who, by reason of their status, occupy a position of dependency with respect to the person made liable for their conduct
• Civil law assumes that when an unemancipated child living with its parents commits a tortious act, the parents were negligent in the performance of their legal and natural duty to closely  supervise the child who is in their custody and control à Parental liability anchored upon parental authority coupled with presumed parental dereliction (willful negligence) in the discharge of the duties accompanying such authority

« SPS. BUNDOC [NATURAL PARENTS] WERE INDISPENSABLE PARTIES TO THE ACTION

• Adelberto’s voluntary act of shooting Jennifer gave rise to a cause of action on quasi-delict against him [NCC 2176]
• Shooting occurred when parental authority was still lodged in Sps. Bundoc [natural parents], so they are the indispensable parties to the action since they had actual custody of Adelberto
• Court did not give credence to the following contentions / legal bases of Sps. Bundoc
• PD 603 (Child and Youth Welfare Code), Article 36 – Decree of adoption shall be entered, which shall be effective as of the date the original petition was filed
• PD 603, Article 39 – An effect of adoption is the dissolution of the authority vested in the natural parents
• Court’s legal bases
• PD 603, Article 58 – Torts—Parents and guardians are responsible for the damage caused by the child under their parental authority in accordance with the Civil Code
• FC 221 – Parents […] exercising parental authority shall be civilly liable for the injuries and damages caused by the acts or omissions of their unemancipated children living in their company […]

« NO PRESUMPTION OF PARENTAL DERELICTION ON THE PART OF THE ADOPTING PARENTS COULD HAVE ARISEN SINCE ADELBERTO WAS NOT SUBJECT TO THEIR CONTROL AT THE TIME THE TORT WAS COMMITTED

• PD 603, Article 58 provides that parental authority is provisionally vested in the adopting parents during the period of trial custody because the adopting parents are given actual custody of the child during such period
• In this case, trial custody period had NOT YET BEGUN or had NOT YET BEEN COMPLETED at the time of the shooting; in any case, actual custody was then with his NATURAL PARENTS

PETITION GRANTED; CA DECISION REVERSED AND SET ASIDE; CASE REMANDED TO RTC

Canlas v. CA

SPS. OSMUNDO and ANGELINA CANLAS v. CA, ASIAN SAVINGS BANK, MAXIMO CONTRERAS and VICENTE MAÑOSCA / 2000 / Purisima / Petition for review on certiorari of a CA decision

Canlas and Mañosca decided to venture in business. To raise capital, Canlas executed an SPA authorizing Mañosca to mortgage 2 parcels of land. Eventually, Canlas agreed to sell these to Mañosca for 850k. Canlas delivered the TCTs, and Mañosca issued postdated checks (40k, 460k), but the check for 460k was not sufficiently funded.

            Mañosca was able to mortgage the parcels of land to an Atty. Magno with the help of impostors who misrepresented themselves as Sps. Canlas [fake couple]. Mañosca was granted a 500k loan by Asian Savings Bank [ASB] with the involvement of the fake couple. [TOWARDS THE END OF THE CASE, it was said that Canlas was with Mañosca when the latter submitted documents for the loan application. Mañosca showed Canlas several TCTs, which were collaterals for the loan, and Canlas was confident that his parcels of land were not involved. However, Mañosca used Sps. Canlas’ parcels of land as collaterals. A 200k check was released, and Canlas received it as payment of the parcels of land he sold to Mañosca.]

The loan was not paid so the mortgage was foreclosed. Canlas wrote to ASB, saying that the execution of the mortgage was without their authority, so steps should be taken to annul the mortgage. Canlas also wrote the sheriff to cancel the auction sale; however, the sale pushed through.

            Sps. Canlas instituted a case for annulment of deed of real estate mortgage [REM], with prayer for the issuance of a writ of preliminary injunction. RTC issued an order restraining the sheriff from issuing the Certificate of Sheriff’s Sale, and it annulled the REM. CA reversed RTC, holding that the REM was valid, that Sps. Canlas are not entitled to relief because of their negligence. CA said ASB exercised due diligence in granting loan application, and that it did not act with bad faith.

ASB DID NOT OBSERVE REQUIRED DILIGENCE IN VERIFYING COUPLE’S IDENTITY

• Degree of diligence required of banks more than that of a good father of a family in keeping with their responsibility to exercise necessary care and prudence in dealing even on a registered or titled property.
• Business of a bank affected with public interest. Banks hold in trust their depositors’ money, so banks should guard against loss due to negligence or bad faith. Hence, banks would be denied the protective mantle of the land registration law, which is accorded only to purchasers or mortgagees for value and in good faith.
• Impostors did not present any ID to show their identity, yet ASB acted on their representations simply based on the residence certificates, bearing signatures that matched the affixed signatures on the REM to Atty. Magno. [According to the testimony of ASB’s AVP, the loan was already approved (basis is Mañosca’s FS), and the REM was just used as basis to check the genuineness of the signatures.] What is worse is that the REM did not bear the spouses’ tax account number, as well as Angelina Canlas’ Community Tax Certificate.

LAST CLEAR CHANCE DOCTRINE APPLICABLE; ASB MUST SUFFER RESULTING LOSS

• LONG DEFINITION. Where both parties are negligent, but the negligent act of one is appreciably later in point of time than that of the other, or where it is impossible to determine whose fault or negligence brought about the occurrence of the incident, the one who had the last clear opportunity to avoid the impending harm but failed to do so, is chargeable with the consequence arising therefrom
• SHORT DEFINITION. The antecedent negligence of a person does not preclude recovery of damages caused by the supervening negligence of the latter, who had the last fair chance to prevent the impending harm by the exercise of due diligence.
• Assuming Canlas was negligent, what was his fault? He gave Mañosca the opportunity to perpetrate the fraud by entrusting to the latter TCTs of the parcels of land (even though Mañosca did not pay yet!). HOWEVER, ASB had the last clear chance to prevent the fraud, by faithfully complying with the bank requirement of ascertaining the identity of persons transacting with them.
• Canlas’ negligence made him undeserving of an award of attorney’s fees.

PROPERTY LESSON: A CONTRACT OF MORTGAGE MUST BE CONSTITUTED ONLY BY THE PROPERTY’S ABSOLUTE OWNER, SO A MORTGAGE CONSTITUTED BY AN IMPOSTOR IS VOID