Comsavings Bank (now GSIS Family Bank) v. Sps Danilo and G.R. No.

170942
Estrella Capistrano
28 August 2013 Bersamin, J.
TOPIC IN SYLLABUS: Diligence Required of Banks: A banking institution serving as an originating bank for the Unified
Home Lending Program (UHLP) of the Government owes a duty to observe the highest degree of diligence and a high
standard of integrity and performance in all its transactions with its clients because its business is imbued with public
interest.

SUMMARY: Sps. Capistrano contracted with GCB Builders for the construction of a house on their lot. This was to be
financed through the NHHMFC’s UHLP program, with Comsavings Bank as the originating bank. To facilitate the loan
application, Comsavings had Estrella Capistrano sign several documents, among them a certificate of acceptance of a
house (despite construction not yet starting at the time it was signed); later, Comsavings also accepted pictures from GCB
Builders of a completed house despite these not being signed, i.e. not authenticated, by the Sps. Comsavings turned
these documents/certificate/unsigned pictures over to NHMFC causing the latter to release the proceeds of the loan. GCB
eventually failed to construct the house. NHMFC demanded payment of amortization from the Sps. Sps. sued GCB,
Comsavings and NHMFC for breach of contract of the construction house and damages. Comsavings appealed, denying
liability.

HELD: Comsavings is solidarily liable with GCB Builders and NHMFC because it failed to observe the diligence required
of it as a banking institution, imbued with public interest. In fact, COmsavings was guilty gross negligence: it required the
Sps to sign a certificate before the house was completed knowing the purpose of the certificate was to affirm that
construction had been completed, and it turned over pictures of the house submitted by GBC to NHMFC despite these
pictures being unsigned by the Sps, and without first checking if it was really the fully-constructed house subject of the
contract. Because of Comsavings’ representations to NHMFC, NHMFC released the loan proceeds, which it required the
Sps. to pay, even if their house had not yet been fully constructed.

PROCEDURAL ANTECEDENTS: Appeal by Comsavings Bank of the decision of the CA, affirming with modification the
decision of the RTC finding Comsavings Bank liato the Sps. Capistrano for damages.

FACTS:
 Sps. Danilo and Estrella Capistrano (Sps. Capistrano) owned a residential lot 1 in Bacoor, Cavite. Wanting to build
their own house on the lot, they availed of the Unified Home Lending Program implemented by the National Home
Mortgage Finance Corporation (NHMFC).
o 28 May 1992: Sps. Capistrano executed a construction contract with Carmencita Cruz-Bay of GCB Builders
(total contract price: P265k) for GCB Builders to complete construction w/in 75 days
o To finance the construction, GCB Builders facilitated their loan application 2 with Comsavings Bank, an
NHMFC-accredited originator.
o 28 May 1992: Sps. Capistrano executed a deed of assignment of P300k proceeds of the loan from Comsavings
Bank in favor of GCB Builders
o 2 July 1992: Comsavings Bank informed Estrella Capistrano of the need to sign various documents as
part of the requirements of the release of the loan, among them a certificate of house completion and
acceptance. Comsavings Bank also gave Estrella a letter addressed to GCB Builders, informing the latter that
the Sps. had complied with the preliminary requirements of the UHLP, and were qualified to avail of the loan,
subject to certain terms and conditions.3
o 10 August 1992: Comsavings Bank informed Sps. Capistrano of the approval of an interim financing loan
(P260k), to be paid out of the proceeds of the NHMFC loan.
o 9 October 1992: GCB Builders received from Comsavings Bank the amount of the interim financing loan in four
releases from Aug.7 to Oct. 9.
 In late Sept. 1992, after Comsavings Bank released the total amount of the interim loan, Sps. Capistrano
inquired from GCB Builders when the house would be completed. Cruz-Bay gave several excuses for delay
(including rainy season), promised to finish the construction, but 1992 ended with construction remaining unfinished.

1
200 sq meters, Lot 8 of Block 4 of the Infant Jesus Subdivision in Bacoor, Cavite, covered by TCT 316885
2
The Sps. Capistrano submitted their record of employment, amount of their income, clearance from SSS to the effect that they had no existing loans, and othe
requirements for the loan application
3
the signing of mortgage documents, 100% completion of the construction of the housing unit, original certificate of occupancy permit and certification of
completion, and submission of house pictures signed by the borrower at the back.
Kaks Alampay CASE #145
 Feb 1993: Sps. Capistrano demanded completion of the house. Cruz-Bay asked for P25k additional to finish
construction. When Sps. Capistrano asked for a breakdown, considering that the loan from Comsavings Bank had
been more than the contract price, GCB Counsel sent a demand letter for an additional construction cost of P52,
511.59.
 30 May 1993: Sps Capistrano received a letter from NHMFC advising them to start paying the monthly
amortizations, considering their loan had been released on 20 April 1993 directly to Comsavings Bank.
 1 June 1993: Estrella, upon visiting the construction site, found the house unfinished: no doorknobs, no toilet
bath floor (portion of house still in soil), no toilet or bathroom fixtures, cracks in wall plaster, kitchen sink had no
plumbing features.
 5 July 1993: Sps. Capistrano wrote NHMFC protesting the demand for amortization payments considering
they had not signed any certification of completion and acceptance, and even if there were such a
certification, it would have been forged. 14 July 1993, Sps. Capistrano wrote to NHMFCC requesting an ocular
inspection of the construction site.
 11 Nov. 1993: Att.y. Corona, Manager of Colateral Verification and External Examination Dept. of NHMFC,
informed counsel of Sps. Capistrano of the inspection of the construction site conducted on 4 August 1993 4
 12 July 1993: Sps Capistrano sued GCB Builders and Comsaving Bank for breach of contract and damages,
praying that they be ordered solidarily liable to:
o finish construction of the house according to the plans and specifications agreed upon
o pay the equivalent of the mortgage value in excess of contract price (P38, 450)
o actual damages for expenses incurred as breach of contract
o exemplary damages
o the Sps. Capistrano amended their complaint to implead NHMFC as additional defendant, praying that NHMFC
be ordered to hold in abeyance its demand for amortization payment until the case had been fully adjudged.
 RTC: in favor of the Sps. Capistrano
o Although the loan had been completely released, the construction of the house was not completed – it remained
in the possession of GCB Builders, which had leased it to another person – thus GCB alone is liable for monthly
rentals, but all defendants are liable for the actual damages, moral damages, exemplary damages and attorney’s
fees, as well as to complete construction of the house.
o GCB Builders had breached the construction contract
o NHMFC had approved the gross amount of P303,450 for the loan and released P289k to Comsavings Bank
o NHMFC equally liable with the other defendants for having released loan proceeds with Comsavings Bank
without verifying whether construction had already been completed, indicating that NHMFC had connived with
co-defendants in the irregular release of the loan proceeds.
 CA: affirmed RTC:
o Comsavings Bank’s liability is solidary with GCB Builders since it committed misrepresentations in
obtaining the mortgage loan from NHMFC:
 Comsavings Bank asked Estrella to sign various documents for the release of the loan, including a
certificate of house completion and acceptance which, upon Comsavings’ representation was signed by the
spouses even if the house was not yet started, in violation of one of the conditions for the approval of the
loan, namely “100% completion of construction of the housing unit”
 the loan documents submitted by Comsavings to NHMFC were false – to show that the house had
been completed, they submitted a photo of toilet and bath with plumbing and fixtures installed when the truth
was no such fixtures had been installed; COmsavings also submitted photos of wall tiles with a wrong color
(mustard or brown in the photo, as opposed to the white tiles that were actually installed)
 by submitting false or forged documents, Comsavings Bank violated the warranties contained in the
purchase of the loan agreement with NHMFC – NHMFC issued a Check with the amount of
P1,382,806.63. The agreement provides that “the housing loan extended to the appellees would be
reelased to and received by Comsavings Bank, and the latter warrants the genuiness of all loan
documents submitted to NHMFC.”
 Cruz, owner and proprietor of GCB Builders, admitted that she is not even an accredited builder of housing
units under UHLP of NHMFC, yet Comsavings allowed GCB Builders to participate in the UHLP Program.

ISSUES:
1. WON Comsavings Bank should be made solidarily liable with NHMFC and GCB Builders. YES.
4
1) That the subject unit is being occupied by tenant, a certain Mr. Mark Inanil;;
2) That the toilet/bath and kitchen counter are not installed with Plumbing fixtures;;
3) That there are no door knobs on bedroom and no handles on Kitchen cabinet;;
4) That the toilet bath has no concrete flooring and the tiles has no end/corner cappings;; and
5) That there are hairline cracks on flooring

Kaks Alampay CASE #145

COMSAVINGS BANK’s ARGUMENTS:5
1. Insists that it is not liable, arguing that it committed no misrepresentation in making Sps. Capistrano sign the
certificate of house acceptance despite the construction not yet having started – the Sps. Capistrano agreed to pre-
sign the certificate, and were not forced to, and this signing was for convenience, and it was made clear to the Sps.
that the certificate would be submitted to NHMFC only after the completion of the house. Practice of pre-signing
documents was not expressly prohibited, as they were not induced to pre-sign.

1. Comsavings’ liability is not from breach of warranties under the loan agreement, since these warranties were in favor of
NHMFC and not the Sps. Instead, Comsavings’ liability towards the Sps. Capistrano is based on Art. 20 6 and Art.
11707 of the Civil Code.
 DOCTRINE: A banking institution like Comsavings Bank is obliged to exercise the highest degree of
diligence as well as high standards of integrity and performance in all its transactions because its
business is imbued with public interest. The stability of banks largely depends on the confidence of the
people in the honesty and efficiency of banks. (PNB v. Pike)
 GROSS NEGLIGENCE: want of care in the performance of one’s duties. It is characterized by the want of even
slight care, acting or omitting to act in a situation where there is duty to act, not inadvertently, but willfully and
intentionally, with a conscious indifference to consequences insofar as the other persons may be effected. It
evinces a thoughtless disregard of consequences without exerting any effort to avoid them.
 APPLIED: Comsavings Bank was grossly negligent when it did not comply with its legal obligation to exercise the
required diligence and integrity.
o As the banking institution serving as originator under the UHLP and maker of the certificate of
acceptance/completion, it was fully aware that the purpose of the certificate was to affirm that the house had
been completely constructed – to present the ceritifcate to the Sps. prior to the completion of the house was
an irregular act per se because it contravened the purpose of the certificate.
o Sps. Capistrano were prejudiced because their house was incomplete, yet NHMFC demanded payment of
monthly amortizations. Comsavings should not have made the Sps. pre-sign the certificate until they had
confirmed the completion of construction.
o No proof on record shows that Sps. Capistrano had been given an option not to pre-sign the certificate. The
loan officer of Comsavings, and its sole witness during trial, did not attest to such option not to pre-sign.
Estrella mentioned nothing about the “convenience” claim, testifying only that she was told by Comsavings to
sign several documents, including the certificate, as these were needed for the loan.
o The submission of pictures of a fully-constructed house bearing the signatures of respondents on the dorsal
sides was a requirement for the release of the loan by Comsavings Bank to GCB Builders, and for the
Comsavings Bank’s reimbursement of the loan from NHMFC. The signatures were to authenticate the
pictures. GCB Builders submitted pictures of a different house sans the signatures of Sps Capistrano on the
dorsal side, yet Comsavings Bank accepted the pictures unsigned and released the loan to GCB Builders,
turning the pictures over to NHMFC for reimbursement of the loan. Comsavings should have first checked
whether the pictures carried the Sps Capistrano’s signatures, and whether the house depicted in the pictures
were really the house of the respondents.

2. Comsavings Bank is also liable for damages.

o Moral and exemplary damages are warranted. For the former, Sps. Capistrano suffered sleepless nights
(husband worked in Saudi Arabia to pay the loan used for the construction of the family home), and the wife,
as attorney-in-fact of Danilo in matters concerning the loan transaction, was alone in seeing the construction,
causing her anxiety. Exemplary damages are sustained and justified by the initial carelessness of
Comsavings and aggravated by its lack of promptness in repairing its error.
o Actual damages are not warranted because Sps. did not submit documentary proof. Although, since it cannot
be denied that they suffered substantial losses, temperate damages are awarded.

HELD: CA affirmed in all aspects, except with modification as to deletion of actual damages, and the award instead of
temperate damages.

5
6
Article 20. Every person who, contrary to law, willfully or negligently causes damage to another, shall indemnify the latter for the same.

7
Article 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the
tenor thereof, are liable for damages.

Kaks Alampay CASE #145