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GOVERNMENT SERVICE INSURANCE SYSTEM v. CA

FACTS:

The case involves a construction project agreement between Queen's Row Subdivision, Inc. (QRSI) and the Government Service Insurance System (GSIS) wherein GSIS extended a financing loan to QRSI for the construction and development of a residential subdivision. QRSI then entered into a construction contract with private respondent Valencia for various phases of land development in the subdivision. After completing the contract, Valencia demanded payment from QRSI, but the latter refused to pay. Valencia then filed a complaint for a sum of money with prayer for a writ of preliminary attachment. During the trial, Valencia clarified that he was not seeking any relief against the personal funds of GSIS. The trial court rendered a decision ordering QRSI to pay Valencia a sum of money and requiring GSIS to hold and deliver the amounts granted to QRSI as payment to Valencia. Valencia filed a motion for execution pending appeal, which was granted. However, the writs issued were returned unsatisfied, prompting Valencia to file a motion to examine debtors. The trial court ordered an officer of GSIS to appear and testify. Valencia filed a petition to cite GSIS in contempt for its failure to comply with the writ of execution. The trial court issued an order directing GSIS to comply with the writ of execution and partially paid Valencia while a motion for reconsideration was pending. Another alias writ of execution was later issued, and a notice of garnishment was served upon GSIS.

This case involves a dispute between the Government Service Insurance System (GSIS) and Queen's Row Subdivision, Inc. (QRSI). QRSI obtained a loan from Valencia and Valeriano Espiritu, and a decision was rendered ordering QRSI to pay the said loan. Subsequently, Valencia and Valeriano Espiritu obtained a writ of execution to enforce the decision. The Sheriff served a notice of garnishment on GSIS, directing it to turn over any funds it has in its possession or control belonging to QRSI. GSIS, however, submitted an answer stating that it is not a debtor of QRSI and that it has no credits or monies belonging to QRSI. GSIS claimed that it is, in fact, the biggest creditor of QRSI.

The trial court ruled that GSIS was holding funds for QRSI and ordered GSIS to pay Valencia and Valeriano Espiritu after deducting previous payments. GSIS's motion for reconsideration was denied by the trial court. An alias writ of execution was issued, and notices of garnishment were served on GSIS and the Philippine National Bank. GSIS filed a motion for reconsideration and a Notice of Appeal Ad Cautelam. The trial court denied GSIS's motion for reconsideration. GSIS then filed a petition for certiorari and prohibition with the Court of Appeals, seeking to set aside the trial court's orders. The Court of Appeals dismissed the petition, stating that the trial court's decision had already become final. Unsatisfied, GSIS filed a petition for review with the Supreme Court, but it was denied for lack of merit.

The case involves a dispute between the petitioner, Government Service Insurance System (GSIS), and the respondent, Valencia. GSIS and Valencia entered into a contract for the construction of housing units. The contract was governed by PD 1594, which provided for progress payments and the withholding of retention money. The housing units were constructed by Valencia and sold by GSIS to its members.

Valencia filed a case against GSIS for the collection of unpaid balance and interests. The trial court issued an order directing GSIS to deposit or pay the principal amount, with 12% simple interest per annum and attorney's fees, within five days. The court computed the amounts due and payable based on the contract and PD 1594.

GSIS opposed the amount due, specifically the interests imposed. The trial court issued a supplemental order fixing the rate of interest at 12% to 21%, based on Central Bank Circulars. GSIS filed a motion for reconsideration, which was denied by the trial court.

GSIS then filed a petition for certiorari and prohibition before the Court of Appeals to nullify the trial court's orders. The Court of Appeals rendered a decision in favor of GSIS, finding that the trial court committed grave abuse of discretion in requiring GSIS to pay the amount imposed.

ISSUES:

  1. Whether the trial court erred in computing the interest to be paid by the petitioner.

  2. Whether the trial court erred in ordering the petitioner to pay the total amount without considering the funds it holds for Queen's Row Subdivision, Inc.

  3. Whether the petition is barred by prior judgment and estoppel.

  4. Whether the Court of Appeals erred in reversing its own decision.

  5. Whether the petitioner can only be held liable for the obligations of Queen's Row Subdivision, Inc.

  6. Whether the trial court acted without jurisdiction or with grave abuse of discretion when ordering the petitioner to pay interests and attorney's fees.

  7. Whether the doctrine of res judicata is applicable in this case.

  8. Whether the orders of the trial court, fixing the rates of interest on the judgment amounts, vary the tenor of the judgment.

  9. Whether Central Bank Circular No. 416, which prescribes the interest rate at twelve percent (12%) per annum, is applicable in this case.

  10. Whether Central Bank Circulars Nos. 494, 586, 705, and 783 are applicable in this case.

  11. Whether the respondent court erred in reversing its previous decision.

  12. Whether the petitioner is estopped from questioning the twelve percent (12%) interest.

RULING:

  1. Yes, the trial court erred in computing the interest to be paid by the petitioner. According to the decision of the respondent Court of Appeals, the trial court disregarded the clear language of the decision sought to be executed, which only orders the petitioner to pay the funds it holds for Queen's Row Subdivision, Inc. The petitioner is not directly liable to the private respondent and should not be tasked to pay the interest on the principal amounts.

  2. Yes, the trial court erred in ordering the petitioner to pay the total amount without considering the funds it holds for Queen's Row Subdivision, Inc. The decision specifically limits the petitioner's liability to the extent of the amounts it holds for Queen's Row Subdivision, Inc. The trial court should have conducted a preliminary inquiry into the funds held by the petitioner before ordering payment beyond such amount.

  3. The petition is not barred by prior judgment and estoppel as the judgments in previous cases did not involve and rule on the rates of interest chargeable against the petitioner.

  4. The Court of Appeals erred in reversing its own decision.

  5. The petitioner can only be held liable for the obligations of Queen's Row Subdivision, Inc. to the extent of what it holds, retains, or has granted in favor of Queen's Row Subdivision.

  6. The trial court acted without jurisdiction or with grave abuse of discretion when ordering the petitioner to pay interests and attorney's fees.

  7. The doctrine of res judicata is not applicable in this case. The issue raised in the present case is not identical to any of the issues posed and resolved in previous cases. Therefore, the application of res judicata is irrelevant.

  8. The orders of the trial court, fixing the rates of interest on the judgment amounts, vary the tenor of the judgment. The petitioner's liability, as stated in the dispositive portion of the judgment, is limited to holding and delivering the amount it has granted to, retained, and obtained for the co-defendant. The trial court cannot direct the petitioner to pay interest and attorney's fees as it would vary the tenor of the judgment and increase its liability. The writ of execution must conform substantially to every essential particular of the judgment.

  9. Central Bank Circular No. 416 does not apply in this case because it only applies to interest for loans or forbearances of money, goods, or credits. The case does not involve loans or forbearances.

  10. Central Bank Circulars Nos. 494, 586, 705, and 783 are also not applicable in this case. These circulars either prescribe ceilings on the rates of interest on loans and yields on purchases of instruments, or fix the effective rate of interest on loans or forbearances of money, goods, or credit. They do not cover the present case.

  11. The respondent court's decision, which set aside the previous orders and remanded the case for further proceedings, is in accord with the law and jurisprudence. The court erred in reversing its previous decision.

  12. The petitioner, being a government instrumentality, is not estopped from questioning the twelve percent (12%) interest due to the general rule that the government is not estopped by errors of its officials. The fiduciary character of the petitioner's management further reinforces this rule.

PRINCIPLES:

  • A party can only be held liable to pay interest if there is a contractual relationship that directly imposes such liability.

  • Liability for the payment of a judgment can be limited to the extent of the funds held by a third party for the judgment debtor.

  • Res judicata does not apply if the previous judgments did not involve and rule on the specific issues raised in the present case.

  • The court may reverse its own decision if there is a clear mistake or error in the previous decision.

  • A judgment must be executed within the limits of what the petitioner holds, retains, or has granted.

  • The trial court should exercise jurisdiction properly and not act with grave abuse of discretion.

  • Doctrine of res judicata: The four requisites for the application of res judicata are (1) the presence of a final former judgment, (2) the former judgment is by a court having jurisdiction over the subject matter and the parties, (3) the former judgment is a judgment on the merits, and (4) there is, between the first and the second actions, identity of parties, subject matter, and causes of action.

  • Order of execution of a final judgment: An order of execution of a final judgment is generally not appealable. However, it is subject to two exceptions: (1) when the order of execution varies or tends to vary the tenor of the judgment, and (2) when the terms of the judgment are not clear enough that there remains room for their interpretation by the trial court.

  • Writ of execution: A writ of execution must conform substantially to every essential particular of the judgment. Execution not in harmony with the judgment is invalid. It must conform, especially, to that ordained or decreed in the dispositive portion of the decision.

  • Central Bank Circular No. 416 applies only to interest for loans or forbearances of money, goods, or credits.

  • Central Bank Circulars Nos. 494, 586, 705, and 783 prescribe ceilings on the rates of interest on loans and yields on purchases of instruments.

  • The government is not estopped by errors, mistakes, or omissions of its officials or agents.

  • The fiduciary character of the government's management warrants stricter standards.