Government Service Insurance System v. Province of Tarlac
REITERATIONFacts
The Antecedents: The Sangguniang Panlalawigan of Tarlac authorized the conversion of the Urquico Memorial Athletic Field and the donation of portions to government agencies. The Government Service Insurance System (GSIS) accepted an invitation to build an office on a designated lot. Governor Margarita Cojuangco issued a Notice of Construction, and subsequently, a Memorandum of Agreement (MOA) and a Deed of Donation were executed on December 13, 1997, wherein the Province of Tarlac donated the lot to GSIS, and GSIS donated P2,000,000.00 to the Province as financial assistance. A building permit was issued to GSIS on September 17, 1997. Upon the election of Governor Jose Yap, he questioned the fairness of the donation, and the Provincial Administrator demanded payment for the balance of the lot's value, which GSIS refused. Procedural History: The Province of Tarlac filed a Complaint for declaration of nullity of donation and MOA, recovery of possession, and damages. The Regional Trial Court (RTC) ruled in favor of the validity of the donation and dismissed the complaint. The Province appealed to the Court of Appeals (CA), which reversed the RTC decision, declaring the deed of donation and MOA null and void, and ordering GSIS to reimburse expenses incurred on the property. The Petition: GSIS filed a petition for review, assailing the CA's decision holding the deed of donation and MOA as null and void.
Issue(s)
Whether the Court of Appeals erred in holding that the Deed of Donation and Memorandum of Agreement are null and void. Whether the absence of a prior appraised valuation from the local committee on awards renders a transfer of property by a local government unit to a government instrumentality void.
Ruling
The petition is GRANTED. The Decision of the Court of Appeals dated November 28, 2002, and its Resolution dated April 8, 2003, are REVERSED and SET ASIDE. The Decision of the Regional Trial Court of Tarlac City, Branch 63, dated August 25, 1999, is REINSTATED.
Ratio Decidendi
On the issue of the validity of the Deed of Donation and Memorandum of Agreement: The Court held that the Court of Appeals erred in declaring the deed of donation and MOA null and void. The appellate court relied on Section 381 of Republic Act No. 7160 (Local Government Code of 1991), which requires an appraised valuation for property transfers without cost. However, the Supreme Court found that this section does not expressly state that the lack of an appraised valuation renders the transfer void. The Court emphasized that freedom of contract is a constitutional and statutory right, and courts must exercise caution in declaring contracts void. A duly executed contract carries a presumption of validity, which the Court of Appeals did not sufficiently overcome by merely pointing to the absence of a prior appraised valuation. The Court further noted that the donation, being onerous, is governed by the rules on contracts, and Article 1409 of the Civil Code enumerates specific grounds for void contracts, none of which directly apply to the absence of an appraised valuation in this context. Therefore, the donation was considered valid. On the issue of whether the absence of a prior appraised valuation renders the transfer void: The Court ruled that the absence of a prior appraised valuation from the local committee on awards does not render the transfer of property by a local government unit to a government instrumentality void. While Section 381 of the Local Government Code mentions such valuation, it does not provide that its absence is a ground for nullity. The Court reiterated that such a requirement is a procedural requisite, not a condition sine qua non for the validity of the donation, especially when the contract is perfected and carries the presumption of validity. The Court stressed that parties to a perfected contract are bound by its terms and consequences, and unilateral revocation or renunciation without the consent of the other party is not permitted. The Province of Tarlac could not revoke the donation without GSIS's consent, as the contract had the force of law between them.
Main Doctrine
A donation of property by a local government unit to a government instrumentality, even if onerous, is not rendered void by the absence of a prior appraised valuation from the local committee on awards, as Section 381 of the Local Government Code does not expressly declare such transfers void for lack of such valuation, and a duly executed contract carries the presumption of validity.