G.R. No. L-18287 & G.R. No. L-18155; March 30, 1963
TRINIDAD J. FRANCISCO, plaintiff-appellee and appellant, vs. GOVERNMENT SERVICE INSURANCE SYSTEM, defendant-appellant and appellee.

FACTS

Trinidad J. Francisco obtained a loan from the Government Service Insurance System (GSIS), secured by a mortgage on her property, the Vic-Mari Compound. Due to arrears, GSIS extrajudicially foreclosed the mortgage and purchased the property at the foreclosure sale. Subsequently, Francisco’s father, Atty. Vicente J. Francisco, sent a letter to GSIS proposing to pay P30,000 and for GSIS to administer the property, applying the rental income to settle the arrears and future amortizations. GSIS replied via telegram stating its board had “APPROVED YOUR REQUEST RE REDEMPTION.” Relying on this, Francisco paid the P30,000, which GSIS accepted and receipted. She also later remitted collected rentals to GSIS, which accepted these payments as well. However, GSIS later claimed the redemption period had lapsed and consolidated title in its name, prompting Francisco to sue for specific performance and damages.

ISSUE

The primary issue is whether the exchange of correspondence and subsequent acceptance of payments created a valid contract for redemption, thereby nullifying GSIS’s consolidation of title.

RULING

The Supreme Court ruled in favor of Francisco, affirming the trial court’s decision to declare the consolidation of title null and void and to order GSIS to abide by the redemption contract. The legal logic is grounded in the principles of offer and acceptance constituting a perfected contract. GSIS’s telegram stating its board had “APPROVED YOUR REQUEST RE REDEMPTION” was an unequivocal and unconditional acceptance of the material terms of Atty. Francisco’s proposal. This acceptance perfected a binding contract of redemption. GSIS’s subsequent conduct in accepting the P30,000 payment and several months of rental remittances, issuing official receipts for them, constituted clear ratification of the agreement and estopped it from denying the contract’s existence. The Court held that GSIS could not unilaterally revert to its rights under the foreclosure after having agreed to a new arrangement and having accepted benefits under it. The contract effectively novated the previous foreclosure status, entitling Francisco to redeem the property under the agreed terms. Regarding Francisco’s separate appeal for damages, the Court affirmed the denial. Compensatory damages were not awarded due to lack of competent and certain evidence of actual loss. Moral damages were denied as the breach was not malicious or fraudulent, and exemplary damages were unavailable as no other damages were awarded. Attorney’s fees were also properly denied due to the absence of gross bad faith by GSIS.