G.R. No. 180062 ; May 5, 2010
GOVERNMENT SERVICE INSURANCE SYSTEM, Petitioner, vs. BOARD OF COMMISSIONERS (2nd DIVISION), BOARD OF COMMISSIONERS OF THE HOUSING AND LAND USE REGULATORY BOARD (HLURB) HLURB NATIONAL CAPITAL REGION FIELD OFFICE, SPOUSES MARCELINO H. DE LOS REYES and ALMA T. DE LOS REYES, and NEW SAN JOSE BUILDERS, INC., Respondents.

FACTS

New San Jose Builders, Inc. (NSJBI) mortgaged several properties, including a specific condominium unit, to GSIS to secure a loan. NSJBI subsequently sold that same unit to the spouses De los Reyes. After NSJBI defaulted on the loan, GSIS foreclosed the mortgage and purchased the properties at auction. The spouses De los Reyes, upon discovering the mortgage and foreclosure, filed a complaint with the HLURB against NSJBI and GSIS. They sought, among other reliefs, an order for GSIS to release the mortgage on their unit and to restrain GSIS from consolidating its title.
The HLURB Arbiter granted the spouses’ motion for a Cease and Desist Order. GSIS appealed to the HLURB Board of Commissioners, arguing that Presidential Decree No. 385 prohibits courts from issuing restraining orders against government financial institutions in foreclosure cases. The HLURB Second Division affirmed the Arbiter, ruling PD 385 inapplicable to post-foreclosure consolidation and noting the mortgage violated PD 957 for lack of prior HLURB approval.

ISSUE

The primary issues were: (1) Whether the HLURB Second Division had the authority to decide the appeal, and (2) Whether the Cease and Desist Order (a form of preliminary injunction) was properly issued against GSIS.

RULING

The Supreme Court denied GSIS’s petition and affirmed the lower rulings. On the procedural issue, the Court held the HLURB Second Division validly exercised jurisdiction. Executive Order No. 648 grants the HLURB Board the authority to adopt rules of procedure. The 2004 HLURB Rules provided for appeals to be decided by the Board sitting en banc or by division. Given the Board’s composition—with several ex-officio members—practicality necessitated allowing divisions to decide cases. Thus, the Second Division’s cognizance of the motion for reconsideration was proper.
On the substantive issue, the Court upheld the issuance of the injunctive relief. It agreed that PD 385, which mandates foreclosure and limits injunctions, applies only to the foreclosure process itself, not to the subsequent act of consolidating title. Since the act sought to be enjoined was the consolidation, the prohibition under PD 385 did not apply. Furthermore, the Court found the requisites for a preliminary injunction were present, as the spouses demonstrated a clear right to the property purchased in good faith and a urgent necessity to prevent irreparable injury from the consolidation of title by GSIS. The injunction was therefore a valid exercise of discretion to preserve the status quo pending resolution of the main case on the validity of the mortgage and sale.