Government Service Insurance System v. Colarina
REITERATIONFacts
The Antecedents: Fifteen parcels of land, originally titled in the name of Associated Agricultural Activities, Inc. (AAA), were mortgaged to the Government Service Insurance System (GSIS). Upon AAA's failure to pay the loan, GSIS foreclosed the mortgage and was the highest bidder. The certificates of sale were registered in GSIS's name on May 19, 1988. Within the one-year redemption period, private respondent Conrado O. Colarina purchased the lots from AAA on December 8, 1988. He voluntarily offered to sell these properties to the Department of Agrarian Reform (DAR) on April 25, 1989, informing GSIS of this offer and stating that the government would assume the redemption price. He also offered to pay 20% of the repurchase price within 30 days, with the balance payable within one year. GSIS did not reply. After the redemption period expired without redemption, GSIS consolidated ownership. Subsequently, GSIS transferred the lots to the DAR pursuant to Executive Order No. 407, and titles were issued in the name of the Republic of the Philippines and then to farmer beneficiaries. Despite demands, the Land Bank of the Philippines (LBP) and DAR refused to determine and pay just compensation to private respondent. Procedural History: Private respondent filed a complaint for "Determination and Payment of Just Compensation." GSIS filed an Answer, asserting its lawful ownership and right to transfer the lots to DAR. GSIS later filed a motion to dismiss, arguing private respondent had no right to sell the lots as he only acquired the right to redeem, which he failed to exercise, thus he was not a real party in interest. Private respondent, in his opposition, did not dispute the failure to redeem but argued GSIS was a necessary party. The Regional Trial Court (RTC) dismissed the complaint for failure to state a cause of action. The Court of Appeals (CA) set aside the RTC orders and directed the RTC to proceed with the trial on the merits. The Petition: GSIS filed a petition for review with the Supreme Court, assailing the CA's decision and resolution.
Issue(s)
Whether the Court of Appeals erred in ruling that the trial court's decision was based on a conclusion despite the clear admission by respondent Colarina that the subject properties had been foreclosed by the petitioner and there was a failure to exercise the right of redemption during the one (1) year reglementary period. Whether the Court of Appeals erred in failing to take judicial notice that only registered landowners can avail themselves of the Voluntary Offer to Sell (VOS) under the Comprehensive Agrarian Reform Program (CARP). Whether the Court of Appeals erred when it ruled that the trial court "doubted" the veracity of the complaint, when in fact the trial court based its dismissal on the allegations in the complaint for failure to state a cause of action. Whether the Court of Appeals erred when it considered an annex not alleged or adduced in the trial court, and whether the private respondent had the right to sell and claim compensation.
Ruling
The petition is GRANTED. The October 28, 1996 Decision and the January 29, 1997 Resolution of the Court of Appeals are SET ASIDE. The March 13, 1996 and April 24, 1996 Orders of the Regional Trial Court of Masbate, Branch 48, are REINSTATED.
Ratio Decidendi
On the failure to redeem and its legal consequences: The Court held that private respondent failed to dispute the claim that he acquired only the right of redemption from AAA and that he never exercised this right within the redemption period. Consequently, ownership of the foreclosed properties consolidated in the name of petitioner GSIS. It is settled that after foreclosure, the mortgagor can only legally transfer the right to redeem and possession during the redemption period. Since private respondent failed to redeem, any right he may have acquired lost legal significance. Therefore, he had no personality to sue for the determination and payment of just compensation for lots that never became his property. On the Voluntary Offer to Sell (VOS) under CARP: While acknowledging that DAR Administrative Order No. 3, series of 1989, does not require the offeror to be the registered owner, the Court emphasized that private respondent failed to show that the DAR accepted and approved his offer to sell. The process for VOS involves review and evaluation by DAR officials, culminating in a written notice of acceptance to the landowner. Without this notice, private respondent could not presume acceptance and that the DAR would assume payment of the loan to GSIS. The Court cited the operating procedures for VOS, highlighting the necessity of a formal notice of acquisition from the DAR. On the nature of the motion to dismiss and the trial court's evaluation: The Court noted that petitioner filed its motion to dismiss after filing an Answer. While a motion to dismiss for failure to state a cause of action should ordinarily be based solely on the complaint, the RTC considered facts not stated in the complaint, effectively treating the motion as one for summary judgment. This was deemed tenable because private respondent's opposition did not tender a genuine issue, particularly his failure to deny the averment of non-redemption. The RTC could validly dispense with trial and proceed to a summary judgment based on the undisputed facts. On the right to sell and claim compensation: The Court concluded that private respondent had no right to sell what never became his property, nor could he demand compensation for something never bought from him. The lots were transferred to farmer beneficiaries not because of a sale from private respondent to DAR, but due to GSIS's transfer of ownership to DAR. Private respondent's claim was defeated by the consolidation of ownership in GSIS and its subsequent transfer to DAR, coupled with the lack of a formal acceptance of his offer to sell.
Main Doctrine
A party who fails to redeem foreclosed properties within the redemption period loses all rights over them, and therefore cannot claim ownership or demand just compensation for their subsequent transfer to the DAR, especially when the offer to sell was not formally accepted by the DAR.