G.R. No. L-16223-25 - Reotan vs. National Rice and Corn Corp.

The spouses Deang acquired a housing loan from GSIS in December 1969 amounting to P8,500.00, with maturity set on December 23, 1979.
The loan was secured by a real estate mortgage over the spouses’ property, evidenced by Transfer Certificate of Title No. 14926-R, and the spouses deposited the owner’s duplicate copy of the title with GSIS as required by the mortgage deed.

On January 19, 1979, eleven months before the due date of the loan, the spouses Deang settled the debt and requested the release of the owner’s duplicate copy of the title to secure another loan for house renovation and business purposes.
GSIS personnel, however, were unable to locate the original duplicate copy despite a diligent search.

Convinced that the duplicate copy was lost, GSIS initiated reconstitution proceedings before the Court of First Instance of Pampanga during 1979.
Following the judicial process, on June 22, 1979, GSIS issued a certificate of release of mortgage, and by June 26, 1979, it secured and released the reconstituted duplicate copy of the title to the spouses Deang.

On July 6, 1979, the spouses Deang filed a complaint with the Court of First Instance, Angeles City, alleging that the delay in returning the original duplicate hindered them from securing a subsequent loan, causing them financial detriment.
The trial court ruled in favor of the spouses, finding that the loss of the duplicate copy in GSIS’s custody constituted negligence on the part of GSIS’s employee. The judgment ordered GSIS to pay temperate damages of P20,000.00, attorney’s fees of P15,000.00, legal interest, and costs.
On August 30, 1995, GSIS appealed the decision, but the Court of Appeals, on September 21, 1998, affirmed the lower court’s judgment, excepting the award of attorney’s fees.

The main contention is not about state immunity or the general suability of GSIS but centers on whether GSIS is liable for damages due to the negligence of its employee in failing to return the owner’s duplicate copy of the title in a timely manner.
The dispute involves the conflict between reliance on provisions of quasi-delict (Article 2176) versus contractual obligations (Article 1170 and Article 2201 of the Civil Code).

Whether GSIS, as a government-owned and controlled corporation (GOCC) primarily performing governmental functions, is liable for the negligent act of its employee in failing to return the owner’s duplicate copy of the title.

Does the doctrine of state immunity from suit or the specific civil liability standard contained in Article 2180 of the Civil Code shield GSIS from liability in this case?
Is the loss and delay attributable to negligence or an enforceable breach of its contractual obligation to return the title?

Whether the legal basis for GSIS’s liability should be considered under quasi-delict or under contractual obligation principles.

The trial court and Court of Appeals treated the issue as one of quasi-delict by considering negligence, while GSIS insisted on a proper contractual interpretation of its obligations.
The issue also extends to whether GSIS’s conduct amounts to negligence within the scope of its assigned tasks, thus triggering liability for the natural and probable consequences of the breach.

Whether the award of temperate damages of P20,000.00 is appropriate given the circumstances and the nature of GSIS’s failure.
Whether attorney’s fees, though initially awarded, are justifiable under the established legal criteria for damages in such contractual disputes.