G.R. No. 167000 and G.R. No. 169971, June 8, 2011
GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS), Petitioner, vs. GROUP MANAGEMENT CORPORATION (GMC) AND LAPU-LAPU DEVELOPMENT & HOUSING CORPORATION (LLDHC), Respondents. / GROUP MANAGEMENT CORPORATION (GMC), Petitioner, vs. LAPU-LAPU DEVELOPMENT & HOUSING CORPORATION (LLDHC) and GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS), Respondents.

FACTS

Lapu-Lapu Development & Housing Corporation (LLDHC) was the registered owner of 78 parcels of land in Lapu-Lapu City. On February 4, 1974, LLDHC and the Government Service Insurance System (GSIS) entered into a Project and Loan Agreement, secured by a real estate mortgage over the lots. Due to LLDHC’s failure to fulfill its obligations, GSIS foreclosed the mortgage, acquired the lots at public auction, and consolidated its ownership.
On February 26, 1980, GSIS executed a Deed of Conditional Sale over the lots to Group Management Corporation (GMC). An amendment was later executed to reflect a reduced purchase price after the total area was found to be less than initially specified.
On April 23, 1980, LLDHC filed a complaint for Annulment of Foreclosure against GSIS before the RTC of Manila (Civil Case No. R-82-3429). On November 3, 1989, GMC filed a complaint for Specific Performance against GSIS before the RTC of Lapu-Lapu City (Civil Case No. 2203-L) to compel execution of a final deed of sale, as it had fully paid the price. LLDHC intervened in this case. GSIS defended itself by invoking a Commission on Audit (COA) Memorandum dated April 3, 1989, which purportedly disallowed the sale for being at a price lower than GSIS’s acquisition cost.
On February 24, 1992, the Lapu-Lapu RTC ruled in favor of GMC, ordering GSIS to execute the final deed of sale and deliver the titles. It dismissed LLDHC’s complaint-in-intervention for lack of legal standing and held the COA Memorandum inadmissible and inapplicable. Both LLDHC and GSIS filed notices of appeal, which were dismissed by the trial court on December 6, 1993.
Subsequently, on May 10, 1994, the Manila RTC in Civil Case No. R-82-3429 annulled the foreclosure by GSIS, ordered the cancellation of GSIS’s titles, and directed their reversion to LLDHC, subject to LLDHC paying GSIS the loan balance.
Armed with the Manila RTC decision, LLDHC filed a Petition for Annulment of Judgment of the Lapu-Lapu RTC decision before the Court of Appeals (CA-G.R. SP No. 34696), which was dismissed on December 29, 1994. This dismissal became final.
Later, on March 11, 2004, the Lapu-Lapu RTC, in the execution proceedings of its 1992 decision, issued an order directing the issuance of new certificates of title in GMC’s name and cancelling the existing ones in GSIS’s name. LLDHC and GSIS challenged this order before the Court of Appeals through separate petitions.

ISSUE

The core legal issue, arising from the conflicting decisions of the Manila RTC and the Lapu-Lapu RTC, is which decision has become final and executory and thus governs the rights of the parties over the subject properties.

RULING

The Supreme Court ruled in favor of GMC. The decision of the Lapu-Lapu RTC in Civil Case No. 2203-L (the specific performance case) had attained finality and must be upheld.
The Court held that the Lapu-Lapu RTC decision became final and executory after the dismissal of LLDHC’s and GSIS’s notices of appeal on December 6, 1993, and the subsequent final dismissal of LLDHC’s Petition for Annulment of Judgment (CA-G.R. SP No. 34696) on December 29, 1994. In contrast, the Manila RTC decision in the foreclosure annulment case (Civil Case No. R-82-3429) was appealed by GSIS and was still pending review (eventually reaching the Supreme Court as G.R. No. 118772) at the time the Lapu-Lapu RTC issued its execution orders. A decision that is pending appeal is not final and cannot constitute a legal basis for suspending the execution of a separate judgment that has already attained finality.
The principle of “the law of the case” applies to the final and executory Lapu-Lapu RTC decision. This doctrine means that whatever is once irrevocably established as the controlling legal rule or decision between the same parties in the same case continues to be the law of the case, whether correct on general principles or not, so long as the facts on which such decision was predicated continue to be the facts of the case before the court. The Lapu-Lapu RTC’s findings on the validity of the GSIS-GMC sale and the inadmissibility of the COA Memorandum constitute the law of the case.
Furthermore, the Court found that the COA Memorandum was correctly disregarded by the trial court. It was a mere photocopy not meeting the best evidence rule, and its contents were not properly testified to. More importantly, the sale of foreclosed assets (acquired assets) by GSIS is exempt from COA’s pre-audit or prior approval under its own rules, as such disposal is part of GSIS’s charter-granted powers.
Therefore, the Court affirmed the orders of the Lapu-Lapu RTC directing the execution of its 1992 final and executory decision in favor of GMC. The petition in G.R. No. 167000 (GSIS’s petition) was denied, and the petition in G.R. No. 169971 (GMC’s petition) was granted. The Court of Appeals decision in CA-G.R. SP No. 84382, which had annulled the Lapu-Lapu RTC’s execution orders, was reversed and set aside.