G.R. No. 175393 & 177731, December 18, 2009
GOVERNMENT SERVICE INSURANCE SYSTEM, Petitioner, vs. THE REGIONAL TRIAL COURT OF PASIG CITY, BRANCH 71, CRESENCIANO RABELLO, JR., SHERIFF IV, RTC-BRANCH 71, PASIG CITY; AND EDUARDO M. SANTIAGO, SUBSTITUTED BY HIS WIDOW, ROSARIO ENRIQUEZ VDA. DE SANTIAGO, Respondents.

(Consolidated with G.R. No. 177731: GOVERNMENT SERVICE INSURANCE SYSTEM, Petitioner, vs. HON. CELSO LAVIÑA, Presiding Judge, RTC, Pasig City, Branch 71, CRESENCIANO RABELLO, JR., Sheriff, RTC-71, PASIG CITY, and EDUARDO M. SANTIAGO, substituted by his widow, ROSARIO ENRIQUEZ VDA. DE SANTIAGO, Respondents.)

FACTS

Spouses Jose C. Zulueta and Soledad Ramos obtained loans from the Government Service Insurance System (GSIS) secured by a real estate mortgage on several parcels of land. The mortgage expressly excluded 78 lots from the coverage. Due to the spouses’ default, GSIS extrajudicially foreclosed the mortgages in 1974, consolidated its title in 1975, and later disposed of the properties, including the excluded lots. Antonio Vic Zulueta, the spouses’ successor-in-interest, transferred his rights to the excluded lots to Eduardo M. Santiago in 1990. Santiago filed an action for reconveyance against GSIS. After trial, the Regional Trial Court (RTC) of Pasig City, Branch 71, rendered a decision on December 17, 1997, ordering GSIS to reconvey the 78 excluded lots to Santiago (substituted by his widow, Rosario Enriquez Vda. de Santiago, upon his death) or pay their fair market value if reconveyance was not possible. This decision was affirmed by the Court of Appeals and subsequently by the Supreme Court in G.R. No. 155206 , which became final and executory on February 24, 2004.
On April 2, 2004, private respondent filed a motion for execution. The RTC, in an Order dated April 27, 2004, granted the motion and fixed the current fair market value of the lots at ₱35,000 per square meter, totaling ₱1,166,165,000. A writ of execution was issued on April 28, 2004. The sheriff served the writ on GSIS and issued notices of garnishment on several banks. GSIS filed a motion to quash the writ, arguing exemption from execution under Section 39 of Republic Act No. 8291 (GSIS Act of 1997), lack of opportunity to contest the order, and that the valuation was unrealistic. The RTC denied the motion to quash in an Order dated May 13, 2004.
GSIS filed a special civil action for certiorari and prohibition with the Court of Appeals (CA-G.R. SP No. 84079). The CA, in a Decision dated August 3, 2006, partially granted the petition. It affirmed the RTC’s orders but modified the valuation, ruling that the RTC should have determined the fair market value at the time of its decision (December 17, 1997) or at the time of payment if the lots could not be reconveyed, not at the time of execution. The CA also held that GSIS funds were not exempt from execution for a money judgment arising from a proprietary act. The CA denied GSIS’s motion for reconsideration.
Subsequently, the RTC issued an Order on September 12, 2006, directing the parties to submit their respective computations of the fair market value as of December 17, 1997. In an Order dated November 20, 2006, the RTC, noting the parties’ failure to agree, set the case for a hearing to receive evidence on the fair market value. GSIS filed the present petitions: G.R. No. 175393 (a Petition for Certiorari and Prohibition seeking to annul the RTC Orders of November 20, 2006 and September 12, 2006 and to restrain the sheriff) and G.R. No. 177731 (a Petition for Review on Certiorari seeking to reverse the CA Decision of August 3, 2006 and its Resolution denying reconsideration). The Supreme Court consolidated the petitions.

ISSUE

The core issue is whether the funds and properties of the GSIS are exempt from execution to satisfy the money judgment in favor of private respondent.

RULING

The Supreme Court ruled that the funds and properties of the GSIS are exempt from execution.
The Court held that Section 39 of Republic Act No. 8291 explicitly states that all government funds, including those of the GSIS, are exempt from any tax, fee, assessment, or other charge, and more importantly, shall be “exempt from attachment, garnishment, execution, or any other process whatsoever.” This exemption is absolute and applies regardless of whether the liability arises from a governmental or proprietary function. The law makes no distinction.
The Court rejected the argument that the exemption only applies to the GSIS’s social insurance funds and not to its other assets. The statutory language is clear and comprehensive, covering “all government funds.” The GSIS, as a government entity created by law to administer a social insurance system for government employees, holds government funds in trust. Allowing execution against these funds would impair the GSIS’s ability to fulfill its statutory mandate and jeopardize the welfare of its members.
The Court distinguished this case from those involving government-owned or controlled corporations (GOCCs) without similar express statutory immunity. The GSIS’s exemption is expressly provided by its charter. The Court also clarified that the final and executory judgment against GSIS is not rendered ineffectual; the judgment remains valid and enforceable, but the mode of execution must respect the statutory exemption. The private respondent may seek satisfaction through other lawful means not prohibited by law.
Consequently, the Supreme Court:
1. GRANTED the petition in G.R. No. 177731. The Decision and Resolution of the Court of Appeals dated August 3, 2006 and April 27, 2007, respectively, were REVERSED and SET ASIDE. The Orders of the RTC dated April 27, 2004 and May 13, 2004, and the Writ of Execution dated April 28, 2004, were ANNULLED and SET ASIDE.
2. GRANTED the petition in G.R. No. 175393 . The Orders of the RTC dated September 12, 2006 and November 20, 2006 were ANNULLED and SET ASIDE.
3. The notices of garnishment issued by the sheriff were declared NULL and VOID.
4. The RTC was directed to determine the proper mode of enforcing the final and executory judgment in Civil Case No. 59439 in a manner consistent with the exemption of GSIS funds from execution.