PHILIPPINE SUPREME
COURT
DECISIONS
Republic
of the Philippines
SUPREME
COURT
Manila
FIRST DIVISION
GOVERNMENT
SERVICE
INSURANCE SYSTEM (GSIS),
Petitioner,
G.R.
No.
157860
December 1, 2003 - versus -
THE PROVINCE OF
TARLAC,
Respondent.
D E C I S I O N
YNARES-SANTIAGO,
J.:chanroblesvirtuallawlibrary
This is a Petition for
Review under Rule 45 of the Rules of Court, seeking the reversal of the
Decision of the Court of Appeals dated November 28, 2002[1]
and Resolution dated April 8, 2003.[2]chanrobles virtuallaw libraryred
The facts are undisputed.cralaw:red
On March 26, 1996, the
Sangguniang Panlalawigan of Tarlac passed Resolution No. 068-96, which
authorized and approved the conversion of Urquico Memorial Athletic
Field
into a Government Center, as well as the segregation and donation of
portions
of said land to different government agencies for the purpose of
constructing
or relocating their office buildings. After receiving two letters of
invitation
regarding the project, the Government Service Insurance System (GSIS)
decided
to put up an office at the site.[3]chanrobles virtuallaw libraryred
Thus, Tarlac Governor
Margarita Cojuangco issued a Notice of Construction on December 13,
1996,
for the building of the GSIS office on the designated lot.[4]
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The Province of Tarlac
and the GSIS then executed a Memorandum of Agreement (MOA) on December
13, 1997, whereby the Province of Tarlac donated the said lot to the
GSIS
subject to the conditions stipulated therein. On the same date, the
Province
executed a Deed of Donation over the subject lot in favor of the GSIS,
which was duly accepted by the latter. As stipulated in the MOA, the
GSIS
donated P2,000,000.00 to the Province of Tarlac as financial assistance.[5]
chanrobles virtuallaw libraryred
On September 17, 1997,
the City of Tarlac issued a building permit to the GSIS for the
construction
of its office. The Sangguniang Panlalawigan then passed Resolution No.
013-97, which reiterated the authority granted to Gov. Cojuangco by
Resolution
No. 068-96.[6]chanrobles virtuallaw libraryred
Subsequently, Gov. Jose
Yap was elected as the new chief executive of Tarlac, and he officially
entered upon his duties on July 1, 1998. He wrote a letter to the GSIS,
inviting the latter to reevaluate their respective positions with
respect
to the MOA of December 13, 1997. Evidently, Gov. Yap was of the opinion
that the provisions of the Deed of Donation were unfair to the
Province.
Later, the Provincial Administrator wrote the GSIS, demanding the
payment
of P33,590,000.00 representing the balance of the value of the lot
donated,
which the GSIS refused to pay.[7]chanrobles virtuallaw libraryred
On March 11, 1999, the
Province of Tarlac then filed a Complaint against the GSIS for
declaration
of nullity of donation and memorandum of agreement, recovery of
possession
and enforcement of Article 449 in relation to Articles 450 and 451 of
the
Civil Code, and damages, before the Regional Trial Court of Tarlac
City,
Branch 63.[8]
During the pre-trial, the parties agreed to submit the case for
decision
on the basis of the pleadings and annexes submitted by the parties,
since
only legal issues were involved.chanrobles virtuallaw libraryred
On August 25, 1999,
the trial court rendered its decision in favor of the validity of the
donation
to the GSIS and dismissed the complaint for declaration of nullity of
donation
and memorandum of agreement, recovery of possession and enforcement of
Article 449 in relation to Articles 450 and 451 of the Civil Code, and
damages filed by the Province of Tarlac.chanrobles virtuallaw libraryred
Respondent Province
of Tarlac appealed to the Court of Appeals,[9]
which rendered a decision on November 28, 2002, the dispositive portion
of which states:chanroblesvirtuallawlibrary
chanrobles virtuallaw libraryred
WHEREFORE,
the assailed decision is hereby REVERSED and SET ASIDE. The deed of
donation
and Memorandum of Agreement both dated April 30, 1997 between the
parties
is hereby declared NULL and VOID. Petitioner is ORDERED to reimburse
respondent
all the necessary and useful expenses respondent incurred on the
property.chanrobles virtuallaw libraryred
SO ORDERED.[10]
Petitioner GSIS
filed the instant petition raising a sole assignment of error:chanrobles virtual law library
WHETHER THE COURT OF
APPEALS ERRED IN HOLDING THAT THE DEED OF DONATION AND MEMORANDUM OF
AGREEMENT
ARE NULL AND VOID.[11]
In deciding the instant
case, the Court of Appeals relied on Section 381 of Republic Act No.
7160,
better known as the Local Government Code of 1991, which provides:chanroblesvirtuallawlibrarychanrobles virtuallaw libraryred
Section
381.
Transfer Without Cost. — Property which has become unserviceable or is
no longer needed may be transferred without cost to another office,
agency,
subdivision or instrumentality of the national government or another
local
government unit at an appraised valuation determined by the local
committee
on awards. Such transfer shall be subject to the approval of the
sanggunian
concerned making the transfer and by the head of the office, agency,
subdivision,
instrumentality or local government unit receiving the property.chanrobles virtuallaw libraryred
In effect, the
appellate
court ruled that the donation of the subject property by the Province
of
Tarlac to the GSIS was void, because it was executed without first
securing
an appraised valuation of the property from the local committee on
awards.[12]chanrobles virtuallaw libraryred
On the other hand, petitioner
insists that the donation is perfectly valid, stating that there is
nothing
in the Local Government Code which expressly states that the lack of an
appraised valuation renders the subject transfer void. Further, it
contends
that at best, an appraised valuation is merely a formal and procedural
requisite, the lack of which cannot overturn substantive and vested
rights.[13]chanrobles virtuallaw libraryred
Considering that the
assailed donation is clearly onerous, the rules on contracts will apply.[14]
Pertinently, the Civil Code expressly defines the different kinds of
void
and inexistent contracts, to wit:chanroblesvirtuallawlibrarychanrobles virtuallaw libraryred
Art. 1409.
The following contracts are inexistent and void from the beginning:chanroblesvirtuallawlibrary
(1) Those whose
cause,
object or purpose is contrary to law, morals, good customs, public
order
or public policy;
(2) Those which are
absolutely simulated or fictitious;chanrobles virtuallaw libraryred
(3) Those whose cause
or object did not exist at the time of the transaction;chanrobles virtuallaw libraryred
(4) Those whose
object
is outside the commerce of men;chanrobles virtuallaw libraryred
(5) Those which
contemplate
an impossible service;chanrobles virtuallaw libraryred
(6) Those where the
intention of the parties relative to the principal object of the
contract
cannot be ascertained;
(7) Those expressly
prohibited or declared void by law.chanrobles virtuallaw libraryred
These contracts
cannot be ratified. Neither can the right to set up the defense of
illegality
be waived.
chanrobles virtuallaw libraryred
A transfer of real
property by a local government unit to an instrumentality of government
without first securing an appraised valuation from the local committee
on awards does not appear to be one of the void contracts enumerated in
the afore-quoted Article 1409 of the Civil Code. Neither does Section
381
of the Local Government Code expressly prohibit or declare void such
transfers
if an appraised valuation from the local committee on awards is not
first
obtained.
chanrobles virtuallaw libraryred
The freedom of contract
is both a constitutional and statutory right and to uphold this right,
courts should move with all the necessary caution and prudence in
holding
contracts void.[15]
Furthermore, a duly executed contract carries with it the presumption
of
validity.[16]
In the assailed decision, the Court of Appeals simply ruled that the
absence
of a prior appraised valuation by the local committee on awards
rendered
the donation null and void. This, to our mind, did not sufficiently
overcome
the presumption of validity of the contract, considering that there is
no express provision in the law which requires that the said valuation
is a condition sine qua non for the validity of a donation.chanrobles virtuallaw libraryred
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There being a perfected
contract, the Province of Tarlac, through Gov. Yap, cannot revoke or
renounce
the same without the consent of the other party. From the moment of
perfection,
the parties are bound not only to the fulfillment of what has been
expressly
stipulated but also to all the consequences which, according to their
nature,
may be in keeping with good faith, usage, and law.[17]
The contract has the force of law between the parties and they are
expected
to abide in good faith by their respective contractual commitments.
Just
as nobody can be forced to enter into a contract, in the same manner,
once
a contract is entered into, no party can renounce it unilaterally or
without
the consent of the other. It is a general principle of law that no one
may be permitted to change his mind or disavow and go back upon his own
acts, or to proceed contrary thereto, to the prejudice of the other
party.[18]chanrobles virtuallaw libraryred
WHEREFORE, in view of
the foregoing, the petition is GRANTED. The Decision of the Court of
Appeals
dated November 28, 2002 and its Resolution dated April 8, 2003 are
REVERSED
and SET ASIDE. The Decision of the Regional Trial Court of Tarlac City,
Branch 63, dated August 25, 1999 is REINSTATED. No costs.cralaw:red
SO ORDERED.chanrobles virtuallaw libraryred
Davide, Jr., C.J.,
Panganiban, Carpio and Azcuna, JJ., concur.chanrobles virtuallaw libraryred
____________________________
Endnotes:chanroblesvirtuallawlibrary
[1]
Rollo, p. 24; penned by Associate Justice Oswaldo D. Agcaoili,
concurred
in by Associate Justices Eliezer R. Delos Santos and Regalado E.
Maambong.
[2]
Id., p. 37.chanrobles virtuallaw libraryred
[3]
Id., p. 25.chanrobles virtuallaw libraryred
[4]
Id., p. 25.chanrobles virtuallaw libraryred
[5]
Id., p. 25.chanrobles virtuallaw libraryred
[6]
Id., p. 25.chanrobles virtuallaw libraryred
[7]
Id., pp. 25–26.chanrobles virtuallaw libraryred
[8]
Id., p. 24.chanrobles virtuallaw libraryred
[9]
Id., p. 26.chanrobles virtuallaw libraryred
[10]
Id., p. 35.chanrobles virtuallaw libraryred
[11]
Id., p. 8.chanrobles virtuallaw libraryred
[12]
Id., p. 34.chanrobles virtuallaw libraryred
[13]
Id., p. 17.chanrobles virtuallaw libraryred
[14]
Civil Code, art. 733; Ganuelas v. Cawed, G.R. No. 123968, 24 April
2003.chanrobles virtuallaw libraryred
[15]
Gabriel v. Monte de Piedad, 71 Phil. 497 (1941), cited in IV TOLENTINO,
COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES 412
(1991).
[16]
Ramos v. Heirs of Honorio Ramos, Sr., G.R. No. 140848, 25 April 2002.chanrobles virtuallaw libraryred
[17]
Civil Code, art. 1315, cited in Metro Manila Development Corporation v.
Jancom Environmental Corporation, G.R. No. 147465, 30 January 2002.chanrobles virtuallaw libraryred
[18]
Metro Manila Development Corporation v. Jancom Environmental
Corporation,
G.R. No. 147465, 30 January 2002.chanrobles virtuallaw libraryred
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