GSIS vs.

CA
G.R. No. L-52478 | 30 October 1986
FACTS
Sps. Medina applied for a loan with GSIS in the amount of P600,000. But only P350,000 had been approved (BR
5041) subject to the conditions:
a. that 9% per annum shall be the interest rate, compounded monthly;
b. that the loan shall be repayable in 10 years at a monthly mortization of
P4,433.65 including principal and interest, and that any installment or amortization due and unpaid shall
bear an interest of 9%/12 per month.
nd
The Office of the Economic Coordinator, in a 2 Indorsement, further reduced the approved amount to
P295,000. The Medinas accepted the reduced amount, executed a promissory note and a REM in favor of GSIS. On
June 6, 1962, the approved loan was restored to P350,000 and was denominated as Account No. 31055.
As a consequence, the Medinas subsequently executed an Amendment of Real Estate Mortgage. Upon
application by the Medinas, GSIS adopted Resolution No. 121, as amended by Resolution No. 348, granting an
additional loan of P230,000 on the security of the same mortgaged properties and additional properties. The loan was
denominated as Account No. 31442.
Beginning 1965, the Medinas defaulted in their payments and in 1967, they began defaulting in the payment
of their fire insurance premiums. On May 3, 1974, GSIS informed the debtors that they had arrearages in the amount
of P575,652.42 as of April 18, 1974 and demanded payment within 7 days, otherwise, it would foreclose the
mortgage.
On Apr. 21, 1975, GSIS applied for foreclosure of the mortgage. The Medinas filed a complaint, praying for
the issuance of a restraining order or writ of PI, but no such RO or WPI was issued in view of PD No. 385. On Apr. 25,
1975, the Medinas made a last partial payment in the amount of P209, 662.80.
The properties of the medinas were sold at public auction with GSIS as the highest bidder. Hence, the
Medinas filed an amended complaint, praying for the declaration of nullity of their 2 REM contracts with the GSIS, as
well as of the EJ foreclosure proceedings, and for the refund of excess payments, damages and AF.
TC: N&V + Medinas to pay GSIS P1,611.12 in fully payment of their obligation with 9% p.a. interest from
Dec. 11, 1975
CA: Affirmed: GSIS to reimburse P9,580 OP and pay Sp Medina P3,000 AF and P1,000 litigation exp;
SC: PRC ; MR: due course

ISSUE # 1
WON the CA erred in holding that the amendment of the REM dated July 6, 1962 superseded the mortgage
contract dated Apr. 4, 1962, particularly wrt the compounding of interest
HELD
Said Amendment was never intended to completely supersede the mortgage contract dated April 4, 1962. In
fact, GSIS, as a matter of policy, imposes uniform terms and conditions for all its real estate loans, particularly with
respect to compounding of interest.
GSIS: Did not supersede; amended only wrt the amount secured thereby and the amount of monthly
amortizations; others deemed rewritten
Medinas: no express stipulation on the compounded interest OP
o The difference in the computation lies in the inclusion of the compounded interest as demanded by the GSIS
on the one hand and the exclusion thereof, as insisted by the Medinas on the other.

ISSUE # 2
WON the CA erred in sustaining the Sp. Medinas claim of OP, by crediting the fire insurance proceeds in the
sum of P11,152.02 to the total payment made by said spouses as of Dec. 11, 1975

HELD
YES. The plaintiffs were not entitled to a credit of P19,381.07 as FI proceeds, as they were only entitled to and were
credited with P11,152.02.

ISSUE # 3
WON the CA erred in holding that the interest rates on the loan accounts of the Medinas are usurious

HELD
NO. Usury Law applies only to interest by way of compensation for the use or forbearance of money. Interest by way
of damages is governed by Article 2209 of the Civil Code

ISSUE # 4:
WON the CA erred in affirming the annulment of the subject EJ foreclosure and sheriffs Certificate of Sale
HELD
Since the Medinas failed to settle their accounts with the GSIS, the latter had a perfect right to foreclose the
mortgage.

Reversed and set asideVALID.