Santiago v. Government Service Insurance System
REITERATIONFacts
The Antecedents: Petitioner Fernando Santiago entered into a Contract to Sell with the Government Service Insurance System (GSIS) for a property in Baguio City. Santiago failed to pay the monthly amortizations, resulting in significant arrears. He leased the property through intermediaries, and eventually, Spouses Rustico and Fe Santos occupied the premises. Fe Santos, upon discovering Santiago's arrears, applied to purchase the property from GSIS. GSIS sent demand letters to Santiago at his old address, which he claimed not to have received. GSIS eventually cancelled the Contract to Sell due to non-payment. Procedural History: The Regional Trial Court (RTC) ruled in favor of Santiago, declaring the Deed of Absolute Sale valid, ordering GSIS to refund interest charges and rentals paid by the Santos spouses, and ordering the Santos spouses to vacate the premises and pay damages. The Court of Appeals (CA) affirmed the RTC decision but deleted the award of moral and exemplary damages and attorney's fees, upholding the validity of the Deed of Absolute Sale and ruling that GSIS acted in good faith. The CA also held that the Santos spouses should pay fair rental value for their occupation. The Petition: Petitioner Santiago assailed the CA's rulings, arguing that GSIS acted in bad faith, that the Santos spouses' possession was not that of a lessee, and that the CA erred in reversing the award of moral and exemplary damages.
Issue(s)
Whether the Court of Appeals erred in ruling that respondent GSIS had acted in good faith. Whether the Court of Appeals erred in ruling that respondent Santos’ possession of the property is in the concept of a lessee. Whether the Court of Appeals’ reversal of the award of moral and exemplary damages is in accord with Supreme Court rulings.
Ruling
The petition is denied for lack of merit. The assailed Decision and Resolution of the Court of Appeals are affirmed.
Ratio Decidendi
On the issue of GSIS's good faith: The Supreme Court held that the factual issues raised by the petitioner regarding GSIS's good faith are precluded from review under Rule 45. However, even if considered, the Court agreed with the CA that GSIS acted in good faith. The petitioner was undeniably in arrears for 71 monthly amortizations, which, under the Contract to Sell, gave GSIS the right to automatically cancel the contract. Despite this, GSIS was lenient and even reinstated the petitioner's contract. The Court found no evidence of collusion or dishonest intent on the part of GSIS in its dealings with the petitioner or with Fe Santos. The fact that GSIS had the right to cancel the contract due to delinquency, yet chose to reinstate it, demonstrated fairness and absence of bad faith. On the issue of the Santos spouses' possession: The Supreme Court reiterated that the nature of the Santos spouses' possession is a question of fact, which is generally not subject to review in a petition for certiorari. The Court found that the petitioner himself admitted in his complaint that GSIS collected monthly rentals from Fe Santos, implying a lessee relationship. Furthermore, a letter from petitioner's authorized representatives indicated that Fe Santos was allowed to be a sub-tenant. Therefore, the CA's conclusion that the Santos spouses occupied the property as lessees was supported by the evidence and the petitioner's own admissions, establishing an implied lease agreement. On the deletion of damages: The Supreme Court upheld the CA's deletion of moral and exemplary damages. It is a settled principle that trial courts must state the factual bases for awarding such damages. The RTC Decision lacked any factual basis for the award of moral and exemplary damages. While moral damages do not require proof of pecuniary loss, the claimant must satisfactorily prove the factual basis and causal relation to the defendant's acts. Given that the Santos spouses were found to be lessees and the petitioner could recover fair rental value, additional damages were deemed unwarranted. Moreover, Article 2234 of the Civil Code bars exemplary damages when moral damages are not awarded.
Main Doctrine
The Supreme Court affirmed the Court of Appeals' ruling that the Government Service Insurance System (GSIS) acted in good faith in its dealings with the petitioner, upholding the automatic cancellation of the Contract to Sell due to the petitioner's failure to pay 71 monthly amortizations. The Court also affirmed the deletion of moral and exemplary damages, ruling that the petitioner could only recover fair rental value for the property's use and occupation by the respondents.