Default Standard of Care

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Default standard of care; Diligence of a good father of a family as default for obligation to give – A person who is obliged to give something is also required to take care of it with the proper diligence of “a good father of a family” except if there is a different standard of care required by law or through a stipulation of the parties.[1]

Canlas v. Court of Appeals
G.R. No. 112160, 28 February 2000

Complainants Sps. Osmundo S. Canlas and Angelina Canlas filed a Complaint for annulment of real estate mortgage against defendants Vicente Mañosca, Asian Savings Bank, among others. Previously, complainant Osmundo and defendant Mañosca decided to enter into a venture. In order to raise capital needed for the business, complainant Osmundo executed a Special Power of Attorney (SPA) authorizing defendant Mañosca to mortgage two parcels of land located at Parañaque. Subsequently, complainant agreed to sell the properties to defendant Mañosca for Php850,000.00 with a portion thereof considered as defendant Mañosca’s share in the starting capital. Thus, complainant delivered the transfer certificate of titles to defendant Mañosca despite the latter not having paid yet for the complete purchase price. With the help of impostors who posed as the Sps. Canlas, defendant Mañosca mortgaged the properties to a lawyer. Later on, with the assistance of the impostors again, defendant Mañosca obtained a loan from defendant Asian Savings Bank with the properties mortgaged as security. When defendant Mañosca defaulted on the loan, the bank extrajudicially foreclosed the mortgaged.

HELD: Asian bank was liable. “For not observing the degree of diligence required of banking institutions, whose business is impressed with public interest, respondent Asian Savings Bank has to bear the loss sued upon.” Banks are required to observe diligence more than that of a good father of a family.“The business of a bank is affected with public interest, holding in trust the money of the depositors, which bank deposits the bank should guard against loss due to negligence or bad faith, by reason of which the bank would be denied the protective mantle of the land registration law, accorded only to purchases or mortgagees for value and in good faith.

The bank did not observe the requisite diligence in confirming and verifying the real identity of the impostors. “It is worthy to note that not even a single identification card was exhibited by the said impostors to show their true identity; and yet, the bank acted on their representations simply on the basis of the residence certificates bearing signatures which tended to match the signatures affixed on a previous deed of mortgage to a certain Atty. Magno, covering the same parcels of land in question.”

It is evident that the bank “fell short of the responsibility of the bank to observe more than the diligence of a good father of a family. The negligence of respondent bank was magnified by the fact that the previous deed of mortgage (which was used as the basis for checking the genuineness of the signatures of the suppose Canlas spouses) did not bear the tax account number of the spouses, as well as the Community Tax Certificate of Angelina Canlas. But such fact notwithstanding, the bank did not require the impostors to submit additional proof of their true identity.”

Best Legal Practices

  • Observe standard of care required – Businesses should exercise the standard of care (or degree of diligence) required by law for their respective industries if there is no contractual stipulation.

Same; Diligence of a good father of a family as default for obligation to do – A person who is obliged to perform an obligation is required to observe the diligence of “a good father of a family” if the law or contract does not state the diligence which is to be observed in the performance thereof.[2]

[1] Ibid. Article 1164.

[2] Ibid. Paragraph 2, Article 1173.

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