Facts:
- In 1979, Second Lieutenant Dominador dela Cena Torres, Jr. entered into a Deed of Conditional Sale (DCS) with ARB Construction Co., Inc. for a low-cost housing unit, financed by a GSIS housing loan payable through salary deductions.
- Less than a year later, on September 2, 1980, Dominador died in a helicopter crash while on a ferry mission. He died single and without issue, survived by his parents.
- GSIS sent notices regarding unpaid amortizations and potential foreclosure to Dominador’s last address, unaware of his death.
- Dominador’s brother, petitioner Felimon Torres, claimed the housing loan should be deemed paid through Sales Redemption Insurance (SRI). GSIS denied this, stating Dominador never underwent required medical exams or paid SRI premiums.
- In 2005, GSIS issued a Notice of Cancellation of the DCS. Felimon filed a petition with the GSIS Board seeking consolidation of title in his name.
- The GSIS Board, Court of Appeals, and Supreme Court all found the housing loan was not covered by SRI due to lack of medical exams and premium payments.
Issue:
Whether Dominador’s DCS was covered by SRI and whether cancellation of the DCS was warranted.
Ruling:
- The Supreme Court affirmed that Dominador’s DCS was not covered by SRI, as he did not undergo required medical exams or pay premiums.
- However, the Court ruled that cancellation of the DCS was unwarranted. It directed that Felimon, as Dominador’s sole heir, be allowed to apply for restructuring of the outstanding loan under GSIS Board Resolution No. 48 and Policy and Procedural Guidelines No. 232-13 on Housing Loan Remedial and Restructuring Program.
- The Court emphasized the principles of good faith in contracts and the GSIS mandate to provide social security benefits. It noted both parties demonstrated good faith – GSIS in its patience before cancellation and offering remedial options, and Felimon in his willingness to pay the outstanding balance.
- The case was remanded to the GSIS Board to determine appropriate loan restructuring for Felimon to fully pay the outstanding obligations on Dominador’s housing loan account.