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COMSAVINGS BANK v. SPS. DANILO

FACTS:

The respondents applied for a housing loan under the Unified Home Lending Program (UHLP) to build their house on their residential lot. They entered into a construction contract with GCB Builders and facilitated their loan application with Comsavings Bank, an NHMFC-accredited originator. The construction remained incomplete and various deficiencies were discovered. Respondents filed a complaint against GCB Builders and Comsavings Bank for breach of contract and damages. Later, they amended their complaint to include NHMFC as an additional defendant. They sought various reliefs, including completion of the house, damages, and attorney's fees. GCB Builders, Comsavings Bank, and NHMFC filed separate answers to the complaint. The RTC ruled in favor of respondents and held that GCB Builders and NHMFC were jointly liable for damages and rental payments. It also ordered completion of the house, payment of damages, and suspension of the collection of amortization payments. GCB Builders, Comsavings Bank, and NHMFC appealed the RTC decision to the CA. The CA affirmed the trial court's decision, but absolved NHMFC of liability and reduced the amount of damages awarded to respondents.

ISSUES:

  1. Whether Comsavings Bank is jointly and severally liable with GCB Builders and NHMFC to pay respondents actual, moral, and exemplary damages, as well as attorney's fees.

  2. Whether Comsavings Bank's liability is based on its purchase of loan agreement with NHMFC or on the Civil Code provisions on damages and negligence.

  3. Whether Comsavings Bank was grossly negligent in its dealings with respondents.

  4. Whether Comsavings Bank is liable for its negligence in releasing the loan to GCB Builders without properly verifying the authenticity of the submitted pictures.

  5. Whether Comsavings Bank is liable for damages.

RULING:

  1. The Court of Appeals held that Comsavings Bank was jointly and severally liable with GCB Builders and NHMFC to pay respondents damages and attorney's fees. Comsavings Bank's appeal was denied, and the decision of the lower courts was affirmed with modifications. The Court ruled that Comsavings Bank committed misrepresentations by submitting false documents to NHMFC and violated the warranties contained in the purchase of the loan agreement. Comsavings Bank's participation in the Unified Home Lending Program undermined its purpose and caused damage to the respondents. The Court deleted the finding of NHMFC's liability but maintained the award of damages and reduced the amounts of moral and exemplary damages.

  2. Comsavings Bank's liability is not based on its purchase of loan agreement with NHMFC. The liability of Comsavings Bank towards respondents is based on Article 20 and Article 1170 of the Civil Code. This means that Comsavings Bank is liable for damages due to its willful or negligent act causing damage to another, and for its fraud, negligence, or delay in performing its obligations.

  3. Comsavings Bank was grossly negligent in its dealings with respondents. It did not exercise the required diligence and integrity in its transactions. It made respondents sign a certificate of acceptance/completion despite the construction of the house not yet even starting. This act was irregular and fraudulent. Comsavings Bank gained financially from the pre-signing of the certificate while respondents were prejudiced by the incomplete and defective construction of the house.

  4. Yes, Comsavings Bank is liable for its negligence. It failed to exercise due diligence in verifying the authenticity of the submitted pictures before releasing the loan to GCB Builders and submitting the pictures to NHMFC for reimbursement.

  5. Comsavings Bank is liable for damages. Moral damages in the amount of P100,000.00 and exemplary damages in the amount of P50,000.00 are awarded. However, the award of actual damages is not warranted. Instead, temperate damages in the amount of P25,000.00 are awarded. Attorney's fees in the amount of P30,000.00 are also awarded.

PRINCIPLES:

  • Joint and several liability: When two or more persons are found responsible for a particular obligation, they can be held jointly and severally liable, meaning that they are individually responsible for the whole obligation and any one of them may be held liable for the full amount.

  • Misrepresentation: Providing false or misleading information can lead to liability if it results in damages to another party.

  • Violation of warranties: Warranties contained in agreements can create obligations and liabilities for the parties involved.

  • Banking institutions like Comsavings Bank are obliged to exercise the highest degree of diligence and high standards of integrity in their transactions due to the public interest involved.

  • Gross negligence connotes want of care in the performance of one's duties and involves a thoughtless disregard of consequences without exerting any effort to avoid them.

  • In cases of willful or negligent acts causing damage to another and breach of obligations, liability for damages may arise under Article 20 and Article 1170 of the Civil Code.

  • A bank should exercise the highest degree of diligence in giving irreproachable service, as it is affected with public interest.

  • Moral damages may be awarded to compensate for physical suffering, mental anguish, fright, anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injuries unjustly caused.

  • Exemplary damages are awarded to set an example for the public good, especially for banks which have a sworn profession of diligence and meticulousness.

  • To justify an award for actual damages, there must be competent proof of the actual amount of loss, usually in the form of receipts.

  • When the amount of pecuniary loss cannot be proven with certainty, temperate damages may be awarded as a substitute for actual damages.

  • Attorney's fees may be awarded when exemplary damages are awarded or when the plaintiff incurred expenses to protect their interest due to the defendant's act or omission.