Nartates v. Government Service Insurance System
REITERATIONFacts
1. The Antecedents: The underlying dispute concerns the foreclosure of a property mortgaged by petitioner Marina D. Nartates and her late husband to the Government Service Insurance System (GSIS). The petitioner alleges that the foreclosure proceedings were invalid, that the foreclosure included properties not covered by the mortgage, and that a writ of possession was improperly issued. The petitioner also claims that part of the building foreclosed was constructed on land not included in the mortgage, leading to a claim of deprivation of property without due process. 2. Procedural History: The petitioner filed a complaint (Civil Case No. 108846) in the Court of First Instance of Manila, Branch III, seeking to annul the foreclosure proceedings. This complaint was dismissed by the trial court, which ruled that the matter of the writ of possession fell under the jurisdiction of Branch IV. Separately, the GSIS filed an ex-parte petition for a writ of possession (LRC Record No. 11546) with the Court of First Instance of Manila, Branch IV, which was initially granted, subject to a bond. The petitioner sought to annul this writ, but her petition and subsequent motion for reconsideration were denied. The petitioner appealed these denials to the Supreme Court. 3. The Petition: The petitioner seeks review of the dismissal of her complaint to annul the foreclosure proceedings and the denial of her petition to annul the writ of possession. The consolidated petitions argue that the foreclosure was invalid because it included portions of a building constructed on land not mortgaged to the GSIS. The petitioner contends that the writ of possession was improperly issued before the redemption period expired and while the validity of the foreclosure was being contested. The petitioner invokes the Supreme Court's appellate jurisdiction to correct these alleged procedural and substantive errors by the lower courts.
Issue(s)
Whether the extrajudicial foreclosure proceedings were valid despite a portion of the foreclosed building standing on land not included in the mortgage. Whether the writ of possession was validly issued.
Ruling
The petitions are dismissed. The foreclosure proceedings are deemed valid, and the writ of possession was properly issued, subject to the condition that GSIS pay the fair market value of the parcels of land not covered by the mortgage on which portions of the building stand.
Ratio Decidendi
On the validity of the foreclosure proceedings: The Court found no merit in the petitioner's claim that the foreclosure was null and void because a portion of the building stood on land not mortgaged to GSIS. While Lot 109 was included in the mortgage contract, its registration was delayed because it was untitled and subject to a lien from the Bureau of Lands. Petitioner later obtained title but did not deliver it to GSIS, compelling GSIS to file an adverse claim. Furthermore, petitioner completed the building's construction without GSIS's knowledge or consent, allowing portions to encroach on Lot 109 and another adjacent lot (TCT No. 120922). The Court held that petitioner's conduct violated Article 19 of the Civil Code, which mandates acting with justice, giving everyone his due, and observing honesty and good faith. Her failure to deliver the title to Lot 109 and her unauthorized construction on adjacent lots precluded her from questioning the foreclosure's legality. Equity also supported the foreclosure, as petitioner's actions were not in good faith. The Court clarified that PD 385 mandated foreclosure for loans with 20% arrearages and did not grant a right to restructuring upon payment of that percentage; GSIS, as creditor, could set terms for restructuring. The Court found no irregularity in the foreclosure proceedings themselves, which were conducted in accordance with law. On the validity of the writ of possession: The Court found no merit in the contention that the writ of possession was invalid. Although issued before the redemption period expired, it was conditioned upon GSIS posting a bond. Crucially, the redemption period expired without petitioner exercising her right of redemption. The respondent court, which issued the writ, had also excluded the portion of the building standing on land not covered by the mortgage from the writ's enforcement. Therefore, the issuance and enforcement of the writ, with the exclusion of the disputed portion, were deemed proper.
Main Doctrine
The foreclosure of a mortgage, even if a portion of the mortgaged building stands on land not included in the mortgage, is not necessarily void, especially when the mortgagor's conduct, such as failing to deliver titles or encroaching on adjacent lots without consent, violates principles of justice and good faith. The creditor may be required to pay the fair market value of the land not covered by the mortgage.