1/4/2016

G.R.No.L23127

TodayisMonday,January04,2016

RepublicofthePhilippines
SUPREMECOURT
Manila
ENBANC

G.R.No.L23127April29,1971
FRANCISCOSERRANODEAGBAYANI,plaintiffappellee,
vs.
PHILIPPINENATIONALBANKandTHEPROVINCIALSHERIFFOFPANGASINAN,defendants,PHILIPPINE
NATIONALBANK,defendantappellant.
DionisioE.Moyaforplaintiffappellee.
RamonB.delosReyesfordefendantappellant.

FERNANDO,J.:
Acorrectappreciationofthecontrollingdoctrineastotheeffect,ifany,tobeattachedtoastatutesubsequently
adjudgedinvalid,isdecisiveofthisappealfromalowercourtdecision.PlaintiffFranciscoSerranodeAgbayani,
now appellee, was able to obtain a favorable judgment in her suit against defendant, now appellant Philippine
NationalBank,permanentlyenjoiningtheotherdefendant,theProvincialSheriffofPangasinan,fromproceeding
withanextrajudicialforeclosuresaleoflandbelongingtoplaintiffmortgagedtoappellantBanktosecurealoan
declared no longer enforceable, the prescriptive period having lapsed. There was thus a failure to sustain the
defenseraisedbyappellantthatifthemoratoriumunderanExecutiveOrderandlateranActsubsequentlyfound
unconstitutional were to be counted in the computation, then the right to foreclose the mortgage was still
subsisting. In arriving at such a conclusion, the lower court manifested a tenacious adherence to the inflexible
viewthatanunconstitutionalactisnotalaw,creatingnorightsandimposingnoduties,andthusasinoperative
as if it had never been. It was oblivious to the force of the principle adopted by this Court that while a statute's
repugnancytothefundamentallawdeprivesitofitscharacterasajuridicalnorm,itshavingbeenoperativeprior
toitsbeingnullifiedisafactthatisnotdevoidoflegalconsequences.Aswillhereafterbeexplained,suchafailing
of the lower court resulted in an erroneous decision. We find for appellant Philippine National Bank, and we
reverse.
There is no dispute as to the facts. Plaintiff obtained the loan in the amount of P450.00 from defendant Bank
dated July 19, 1939, maturing on July 19, 1944, secured by real estate mortgage duly registered covering
property described in T.C.T. No. 11275 of the province of Pangasinan. As of November 27, 1959, the balance
due on said loan was in the amount of P1,294.00. As early as July 13 of the same year, defendant instituted
extrajudicialforeclosureproceedingsintheofficeofdefendantProvincialSheriffofPangasinanfortherecovery
ofthebalanceoftheloanremainingunpaid.PlaintiffcounteredwithhissuitagainstbothdefendantsonAugust
10,1959,hermainallegationbeingthatthemortgagesoughttobeforeclosedhadlongprescribed,fifteenyears
havingelapsedfromthedateofmaturity,July19,1944.Shesoughtandwasabletoobtainawritofpreliminary
injunction against defendant Provincial Sheriff, which was made permanent in the decision now on appeal.
DefendantBankinitsanswerprayedforthedismissalofthesuitasevenonplaintiff'sowntheorythedefenseof
prescriptionwouldnotbeavailableiftheperiodfromMarch10,1945,whenExecutiveOrderNo.321 was issued,
toJuly26,1948,whenthesubsequentlegislativeact2extendingtheperiodofmoratoriumwasdeclaredinvalid,weretobe
deductedfromthecomputationofthetimeduringwhichthebanktooknolegalstepsfortherecoveryoftheloan.Asnoted,
thelowercourtdidnotfindsuchcontentionpersuasiveanddecidedthesuitinfavorofplaintiff.

Hencethisappeal,which,asmadeclearattheoutset,possessesmerit,therebeingafailureonthepartofthe
lowercourttoadheretotheapplicableconstitutionaldoctrineastotheeffecttobegiventoastatutesubsequently
declaredinvalid.
1.Thedecisionnowonappealreflectstheorthodoxviewthatanunconstitutionalact,forthatmatteranexecutive
http://www.lawphil.net/judjuris/juri1971/apr1971/gr_23127_1971.html

1/4

1/4/2016

G.R.No.L23127

order or a municipal ordinance likewise suffering from that infirmity, cannot be the source of any legal rights or
duties. Nor can it justify any official act taken under it. Its repugnancy to the fundamental law once judicially
declared results in its being to all intents and purposes a mere scrap of paper. As the new Civil Code puts it:
"When the courts declare a law to be inconsistent with the Constitution, the former shall be void and the latter
shall govern. Administrative or executive acts, orders and regulations shall be valid only when they are not
contrarytothelawsoftheConstitution.3 It is understandable why it should be so, the Constitution being supreme and
paramount.Anylegislativeorexecutiveactcontrarytoitstermscannotsurvive.

Suchaviewhassupportinlogicandpossessesthemeritofsimplicity.Itmaynothoweverbesufficientlyrealistic.
Itdoesnotadmitofdoubtthatpriortothedeclarationofnullitysuchchallengedlegislativeorexecutiveactmust
have been in force and had to be complied with. This is so as until after the judiciary, in an appropriate case,
declares its invalidity, it is entitled to obedience and respect. Parties may have acted under it and may have
changedtheirpositions.Whatcouldbemorefittingthanthatinasubsequentlitigationregardbehadtowhathas
beendonewhilesuchlegislativeorexecutiveactwasinoperationandpresumedtobevalidinallrespects.Itis
nowacceptedasadoctrinethatpriortoitsbeingnullified,itsexistenceasafactmustbereckonedwith.Thisis
merelytoreflectawarenessthatpreciselybecausethejudiciaryisthegovernmentalorganwhichhasthefinalsay
on whether or not a legislative or executive measure is valid, a period of time may have elapsed before it can
exercisethepowerofjudicialreviewthatmayleadtoadeclarationofnullity.Itwouldbetodeprivethelawofits
qualityoffairnessandjusticethen,iftherebenorecognitionofwhathadtranspiredpriortosuchadjudication.
In the language of an American Supreme Court decision: "The actual existence of a statute, prior to such a
determination [of unconstitutionality], is an operative fact and may have consequences which cannot justly be
ignored.Thepastcannotalwaysbeerasedbyanewjudicialdeclaration.Theeffectofthesubsequentrulingasto
invalidity may have to be considered in various aspects, with respect to particular relations, individual and
corporate,andparticularconduct,privateandofficial."4Thislanguagehasbeenquotedwithapprovalinaresolutionin
Araneta v. Hill5 and the decision in Manila Motor Co., Inc. v. Flores.6 An even more recent instance is the opinion of
JusticeZaldivarspeakingfortheCourtinFernandezv.CuervaandCo.7

2.Suchanapproachallthemorecommendsitselfwheneverpolicepowerlegislationintendedtopromotepublic
welfare but adversely affecting property rights is involved. While subject to be assailed on due process, equal
protectionandnonimpairmentgrounds,allthatisrequiredtoavoidthecorrosionofinvalidityisthattherational
basisorreasonablenesstestissatisfied.Thelegislatureonthewholeisnotlikelytoallowanenactmentsuffering,
toparaphraseCardozo,fromtheinfirmityofoutrunningtheboundsofreasonandresultinginsheeroppression.
It may be of course that if challenged, an adverse judgment could be the result, as its running counter to the
Constitutioncouldstillbeshown.Inthemeanwhilethough,inthenormalcourseofthings,ithasbeenactedupon
by the public and accepted as valid. To ignore such a fact would indeed be the fruitful parent of injustice.
Moreover,asitsconstitutionalityisconditionedonitsbeingfairorreasonable,whichinturnisdependentonthe
actual situation, never static but subject to change, a measure valid when enacted may subsequently, due to
alteredcircumstances,bestrickendown.
That is precisely what happened in connection with Republic Act No. 342, the moratorium legislation, which
continued Executive Order No. 32, issued by the then President Osmea, suspending the enforcement of
paymentofalldebtsandothermonetaryobligationspayablebywarsufferers.SoitwasexplicitlyheldinRutterv.
Esteban8 where such enactment was considered in 1953 "unreasonable and oppressive, and should not be prolonged a
minutelonger,and,therefore,thesameshouldbedeclarednullandvoidandwithouteffect."9Atthetimeoftheissuanceof
the above Executive Order in 1945 and of the passage of such Act in 1948, there was a factual justification for the
moratorium. The Philippines was confronted with an emergency of impressive magnitude at the time of her liberation from
theJapanesemilitaryforcesin1945.Businesswasatastandstill.Hereconomylayprostrate.Measures,radicalmeasures,
werethendevisedtotideheroveruntilsomesemblanceofnormalcycouldberestoredandanimprovementinhereconomy
noted.Nowonderthenthatthesuspensionofenforcementofpaymentoftheobligationsthenexistingwasdeclaredfirstby
executiveorderandthenbylegislation.TheSupremeCourtwasrightthereforeinrejectingthecontentionthatonitsface,
the Moratorium Law was unconstitutional, amounting as it did to the impairment of the obligation of contracts. Considering
thecircumstancesconfrontingthelegitimategovernmentuponitsreturntothePhilippines,somesuchremedialdevicewas
needed and badly so. An unyielding insistence then on the rights to property on the part of the creditors was not likely to
meetwithjudicialsympathy.Timepassedhowever,andconditionsdidchange.

WhenthelegislationwasbeforethisCourtin1953,thequestionbeforeitwasitssatisfyingtherationalbasistest,
notasofthetimeofitsenactmentbutasofsuchdate.Clearly,ifthenitwerefoundunreasonable,therightto
nonimpairment of contractual obligations must prevail over the assertion of community power to remedy an
existingevil.TheSupremeCourtwasconvincedthatsuchindeedwasthecase.AsstatedintheopinionofJustice
BautistaAngelo:"Butweshouldnotlosesightofthefactthattheseobligationshadbeenpendingsince1945asa
result of the issuance of Executive Orders Nos. 25 and 32 and at present their enforcement is still inhibited
becauseoftheenactmentofRepublicActNo.342andwouldcontinuetobeunenforceableduringtheeightyear
periodgrantedtoprewardebtorstoaffordthemanopportunitytorehabilitatethemselves,whichinplainlanguage
means that the creditors would have to observe a vigil of at least twelve (12) years before they could affect a
liquidation of their investment dating as far back as 1941. This period seems to us unreasonable, if not
http://www.lawphil.net/judjuris/juri1971/apr1971/gr_23127_1971.html

2/4

1/4/2016

G.R.No.L23127

oppressive. While the purpose of Congress is plausible, and should be commended, the relief accorded works
injusticetocreditorswhoarepracticallyleftatthemercyofthedebtors.Theirhopetoeffectcollectionbecomes
extremelyremote,moresoifthecreditsareunsecured.Andtheinjusticeismorepatentwhen,underthelawthe
debtorisnotevenrequiredtopayinterestduringtheoperationoftherelief,unlikesimilarstatutesintheUnited
States.10Theconclusiontowhichtheforegoingconsiderationsinevitablyledwasthatasofthetimeofadjudication,itwas
apparentthatRepublicActNo.342couldnotsurvivethetestofvalidity.ExecutiveOrderNo.32shouldlikewisebenullified.
Thatbeforethedecisiontheywerenotconstitutionallyinfirmwasadmittedexpressly.Thereisallthemorereasonthento
yieldassenttothenowprevailingprinciplethattheexistenceofastatuteorexecutiveorderpriortoitsbeingadjudgedvoid
isanoperativefacttowhichlegalconsequencesareattached.

3.Preciselythoughbecauseofthejudicialrecognitionthatmoratoriumwasavalidgovernmentalresponsetothe
plightofthedebtorswhowerewarsufferers,thisCourthasmadeclearitsviewinaseriesofcasesimpressivein
theirnumberandunanimitythatduringtheeightyearperiodthatExecutiveOrderNo.32andRepublicActNo.
342wereinforce,prescriptiondidnotrun.SoithasbeenheldfromDayv.CourtofFirst
Instance,11decidedin1954,toRepublicv.Hernaez,12handeddownonlylastyear.Whatisdeplorableisthatasofthe
timeofthelowercourtdecisiononJanuary27,1960,atleasteightdecisionshadleftnodoubtastotheprescriptiveperiod
being tolled in the meanwhile prior to such adjudication of invalidity. 13 Speaking of the opposite view entertained by the
lower court, the present Chief Justice, in Liboro v. Finance and Mining Investments Corp. 14 has categorized it as having
been"explicitlyandconsistentlyrejectedbythisCourt."15

The error of the lower court in sustaining plaintiff's suit is thus manifest. From July 19, 1944, when her loan
matured,toJuly13,1959,whenextrajudicialforeclosureproceedingswerestartedbyappellantBank,thetime
consumedissixdaysshortoffifteenyears.Theprescriptiveperiodwastolledhowever,fromMarch10,1945,the
effectivityofExecutiveOrderNo.32,toMay18,1953,whenthedecisionofRutterv.Estebanwaspromulgated,
covering eight years, two months and eight days. Obviously then, when resort was had extrajudicially to the
foreclosure of the mortgage obligation, there was time to spare before prescription could be availed of as a
defense.
WHEREFORE, the decision of January 27, 1960 is reversed and the suit of plaintiff filed August 10, 1959
dismissed.Nocosts.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Teehankee, Barredo, Villamor, and
Makasiar,JJ.,concur.

Footnotes
1UnderExecutiveOrderNo.32providingforadebtmoratorium,itwasspecificallystated:
"EnforcementofpaymentofalldebtsandothermonetaryobligationspayablewithinthePhilippines,
exceptdebtsandothermonetaryobligationsenteredintoinanyareaafterdeclarationby
PresidentialProclamationthatsuchareahasbeenfreedfromenemyoccupationandcontrol,is
temporarilysuspendedpendingactionbytheCommonwealthGovernment."ExecutiveOrderNo.32
wasissuedonMarch10,1945.ExecutiveOrderNo.32amendedExecutiveOrderNo.25(1944).
2AccordingtothedeclarationofpolicyinRepublicActNo.342(1948),ExecutiveOrderNo.32
remainsinfullforceandeffectforthewarsufferersasforthemtheemergencycreatedbythelast
warwasstillexistent.Thencamethisspecificprovision:"Alldebtsandothermonetaryobligations
payablebyprivatepartieswithinthePhilippinesoriginallyincurredorcontractedbeforeDecember8,
1941,andstillremainingunpaid,anyprovisionorprovisionsinthecontractcreatingthesameorin
anysubsequentagreementaffectingsuchobligationtothecontrarynotwithstanding,shallnotbedue
anddemandableforaperiodofeight(8)yearsfromandaftersettlementofthewardamageclaimof
thedebtorbytheUnitedStatesPhilippineWarDamageCommission,withoutprejudice,however,to
anyvoluntaryagreementwhichtheinterestedpartiesmayenterintoaftertheapprovalofthisActfor
thesettlementofsaidobligations."
Sec.2.
3ART.7.IntheclassiclanguageofJusticeField:"AnunconstitutionalActisnotalawitconfersno
rightsitimposesnodutiesitaffordsnoprotectionitcreatesnoofficeitisinlegalcontemplationas
inoperativeasthoughithadneverbeen."Nortonv.ShellyCounty,118US425(1886).
4ChicotCountyDrainageDist.v.BaxterStatesBank308US371,374(1940).
593Phil.1002(1953).
699Phil.738(1956).
http://www.lawphil.net/judjuris/juri1971/apr1971/gr_23127_1971.html

3/4

1/4/2016

G.R.No.L23127

7L21114,Nov.28,1967,21SCRA1095.
893Phil.68(1953).Rutterv.Estebanwassubsequentlycitedinthefollowingcases:Aranetav.Hill,
93Phil.1002(1953)Londresv.NationalLifeInsuranceCo.,94Phil.627(1954)Dizonv.Ocampo,
94Phil.803(1954)DeLeonv.Ibaez,95Phil.119(1954)PicornellandCo.v.Cordovan95Phil.
632(1954)Bergv.Teus,96Phil.102(1954)Herrerav.Arellano,97Phil.776(1955)ChuaLamko
v.Dioso,97Phil.821(1955)RioyCiav.Sandoval,100Phil.407(1956)Gonzagav.Rehabilitation
FinanceCorp.,100Phil.892(1957)PacificCommercialCo.v.Aquino,100Phil.961(1957)
BachrachmotorCo.,Inc.v.ChuaTuaHian,101Phil.194(1957)Liborov.FinanceandMining
InvestmentCorp.,102Phil.4891957)RioyCompaniav.Jolkipli105Phil.447(1959)Peoplev.
Jolliffe105Phil.677(1959)UyHooandCo.,Inc.v.Tan,105Phil.717(1959)CompaniaMaritima
v.CourtofAppealsandLibby,McNeillandLibby(Phil.),Inc.,108Phil.469(1960).
9Ibid.,p.82.ThesameconclusionobtainsintheopinionoftheCourtasregardsExecutiveOrder
No.32.
10Ibid.,p.77.
1194Phil.816.
12L24137,January30,1970,31SCRA219,citingRepublicv.Grijaldo,L20240,December31,
1965,15SCRA681Republicv.Rodriguez,L18967,January31,1966,16SCRA53Nielsonand
Co.,Inc.v.LepantoConsolidatedMiningCo.,L21601,December28,1968,26SCRA540.
13Dayv.CourtofFirstInstanceofTarlac,94Phil.816(1954)Montillav.PacificCommercial
Company,98Phil.133(1955)PacificCommercialCo.v.Aquino,100Phil.961(1957)Bachrach
MotorCo.,Inc.v.ChuaTuaTian101Phil.184(1957)Liborov.FinanceandMiningInvestment
Corp.,102Phil.489(1957)RioyCompaniav.Jolkipli,105Phil.447(1959)Peoplev.Jollifee,105
Phil.677(1959)UyHoo&Co.,Inc.v.Tan,105Phil.716(1959).
14102Phil.489(1957).
15Ibid.,p.493.
TheLawphilProjectArellanoLawFoundation

http://www.lawphil.net/judjuris/juri1971/apr1971/gr_23127_1971.html

4/4