BANKING.docx

Good faith on the certificate of title of the

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good faith on the certificate of title of the mortgagor of the property given as security and in the absence of any sign that might arouse suspicion, has no obligation to undertake further investigation." 86 The protection of innocent mortgagees for value finds support in the Land Registration Act: Then in Penullar v. PNB, this Court resolved a similar issue ruling that Section 38 of the Land Registration Act places an innocent mortgagee for value under the mantle of protection accorded to innocent purchasers for value. Furthermore, Section 39 of Act No. 496 provides that every person receiving a certificate of title in pursuance of a decree of registration, and every subsequent purchaser (or mortgagee) of registered land who takes a certificate of title for value in good faith, shall hold the same free of all encumbrance except those noted on said certificate. . . 87 (Citations omitted) Section 38 of Act No. 496 in what is now Section 32 of Presidential Decree No. 1529 reads: SEC. 32. Review of decree of registration; Innocent purchaser for value . — The decree of registration shall not be reopened or revised by reason of absence, minority, or other disability of any person adversely affected thereby, nor by any proceeding in any court for reversing judgments, subject, however, to the right of any person, including the government and the branches thereof, deprived of land or of any estate or interest therein by such adjudication or confirmation of title obtained by actual fraud, to file in the proper Court of First Instance a petition for reopening and review of the decree of registration not later than one year from and after the date of the entry of such decree of registration, but in no case shall such petition be entertained by the court where an innocent purchaser for value has acquired the land or an interest therein, whose rights may be prejudiced. Whenever the phrase "innocent purchaser for value" or an equivalent phrase occurs in this Decree, it shall be deemed to include an innocent lessee, mortgagee, or other encumbrancer for value. Upon the expiration of said period of one year, the decree of registration and the certificate of title issued shall become incontrovertible. Any person aggrieved by such decree of registration in any case may pursue his remedy by action for damages against the applicant or any other persons responsible for the fraud. However, the banking industry belongs to a different category than private individuals. Banks are considered businesses impressed with public interest, requiring "high standards of integrity and performance." 88 Consequently, banks must exercise greater care, prudence, and due diligence in their property dealings. The standard operating practice for banks when acting on a loan application is "to conduct an ocular inspection of the property offered for mortgage and to verify the genuineness of the title to determine the real owner(s) thereof." 89 Unlike in Cruz v. Bancom Finance Corporation cited by petitioners, 90 PNB complied with this standard operating practice.
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