Agbayani v. Philippine National Bank
REITERATIONFacts
The Antecedents: Plaintiff Francisco Serrano de Agbayani obtained a loan of P450.00 from defendant Philippine National Bank (PNB) on July 19, 1939, secured by a real estate mortgage, maturing on July 19, 1944. As of November 27, 1959, the outstanding balance was P1,294.00. On July 13, 1959, PNB initiated extra-judicial foreclosure proceedings. Plaintiff filed a suit on August 10, 1959, alleging that the mortgage had prescribed, fifteen years having elapsed from its maturity date. Plaintiff obtained a preliminary injunction, which was made permanent by the lower court. Procedural History: The lower court permanently enjoined the Provincial Sheriff of Pangasinan from proceeding with the extra-judicial foreclosure sale, ruling that an unconstitutional act is inoperative and creates no rights or duties. The court rejected PNB's defense that the moratorium period under Executive Order No. 32 and Republic Act No. 342, subsequently found unconstitutional, should be counted in computing the prescriptive period, thus keeping the right to foreclose subsisting. The Petition: PNB appealed the decision, arguing that the lower court erred in not applying the principle that a statute declared unconstitutional, if operative prior to its nullification, has legal consequences, specifically in tolling the prescriptive period for foreclosure.
Issue(s)
Whether the lower court erred in holding that an unconstitutional statute creates no legal rights or duties and thus cannot affect the computation of prescriptive periods. Whether the period during which Executive Order No. 32 and Republic Act No. 342 (moratorium laws) were in effect should be excluded in the computation of the prescriptive period for the foreclosure of the mortgage.
Ruling
The Supreme Court reversed the decision of the lower court, finding for the defendant-appellant Philippine National Bank. The suit filed by the plaintiff was dismissed.
Ratio Decidendi
On the effect of an unconstitutional statute: The Court held that while an unconstitutional act is void and creates no rights or duties, its existence prior to its declaration of nullity is an operative fact that may have legal consequences. This principle acknowledges that prior to judicial declaration, such acts are presumed valid and must be complied with, and parties may have acted upon them. To ignore these consequences would be to deprive the law of fairness and justice. The Court cited Chicot County Drainage Dist. v. Baxter States Bank and Manila Motor Co., Inc. v. Flores in support of this doctrine. On the tolling of the prescriptive period due to moratorium laws: The Court ruled that the period during which Executive Order No. 32 and Republic Act No. 342 were in force should be excluded in the computation of the prescriptive period for the foreclosure of the mortgage. The Court reiterated its consistent ruling in numerous cases, such as Day v. Court of First Instance and Republic v. Hernaez, that prescription did not run during the period these moratorium laws were effective. The Court found that the lower court's failure to exclude this period led to an erroneous conclusion that the debt had prescribed. The period from March 10, 1945 (effectivity of EO 32) to May 18, 1953 (promulgation of Rutter v. Esteban), covering eight years, two months, and eight days, tolled the prescriptive period. Therefore, when foreclosure proceedings were initiated on July 13, 1959, the fifteen-year prescriptive period had not yet elapsed.
Main Doctrine
An unconstitutional statute, while inoperative as a juridical norm, is an operative fact that may have legal consequences, and its existence prior to its nullification must be reckoned with, particularly in tolling prescriptive periods.