G.R. No. 165585 & 176982; November 20, 2013
Government Service Insurance System vs. Prudential Guarantee and Assurance, Inc., et al.

FACTS

Prudential Guarantee and Assurance, Inc. (PGAI) filed a complaint for sum of money against the Government Service Insurance System (GSIS) before the Regional Trial Court (RTC). The claim arose from a reinsurance agreement where GSIS, having insured properties for the National Electrification Administration (NEA), reinsured 95% of the risk with PGAI. GSIS paid the first three quarterly premiums but failed to pay the fourth and final premium. PGAI moved for judgment on the pleadings, arguing GSIS’s Answer admitted the material facts of the contract and the unpaid premium.
The RTC granted the motion and ordered GSIS to pay. GSIS appealed. PGAI then moved for execution pending appeal, which the RTC also granted, leading to garnishment orders against GSIS funds held by respondent banks. GSIS contested both the judgment on the pleadings and the execution pending appeal, arguing its funds were exempt from garnishment under its charter.

ISSUE

The core issues were: (1) whether the RTC correctly rendered a judgment on the pleadings; and (2) whether the RTC correctly allowed execution pending appeal and garnishment of GSIS funds.

RULING

The Supreme Court affirmed the CA rulings, upholding both the judgment on the pleadings and the execution pending appeal. On the first issue, the Court held that a judgment on the pleadings was proper under Rule 34 of the Rules of Court. GSIS’s Answer admitted the crucial facts: the existence of the reinsurance contract, the payment of the first three premiums, and the non-payment of the fourth. Its defenses—such as the claim that non-payment rendered the contract ineffective or that it acted merely as a conduit—were unavailing as they constituted mere conclusions of law or general denials that did not tender a genuine issue. The Court cited Section 77 of the Insurance Code but clarified, following Makati Tuscany Condominium Corp. v. CA, that an insurance policy remains valid even with installment premium payments, and the insurer has a cause of action to collect the unpaid balance.
On the second issue, the Court ruled that execution pending appeal was justified under Rule 39, Section 2(a), due to superior circumstances demanding urgency. GSIS’s appeal was deemed dilatory as its liability was clear from its own admissions. Furthermore, the Court found that the GSIS funds subjected to garnishment were not exempt. The exemption under Section 39 of the GSIS Act ( Republic Act No. 8291 ) applies only to trust funds held for members’ benefits, not to corporate or disposable funds in its general coffers used for business operations like reinsurance. The garnished funds fell into the latter category. Thus, the orders for execution pending appeal and the corresponding garnishment were valid.