Development Bank of the Philippines v. Court of Appeals
REITERATIONFacts
The Antecedents: The Development Bank of the Philippines (DBP) entered into a sales agreement with the Philippine Homesite and Housing Corporation (PHHC) for 159 lots. DBP paid a down payment, but the sale could not be registered as the subdivision plan was pending approval. Subsequently, PHHC approved a sale of two of these lots to spouses Honesto G. Nicandro and Elisa F. Nicandro. PHHC officials were aware that these lots were part of the DBP transaction. The sales agreement with DBP was later annotated on the title. The Nicandros attempted to register their sale, but were initially demurred. DBP then registered adverse claims on the lots. The validity of the DBP-PHHC transaction was questioned, with the Secretary of Justice opining that DBP lacked the power to undertake the housing project and that the transaction violated Republic Act No. 85. The Office of the President directed DBP to revoke its resolution authorizing the purchase. Despite this, DBP proceeded with annotating its sales agreement upon learning the subdivision plan was recorded. DBP's subsequent request for new titles was denied. This Court, in a prior ruling (G.R. No. L-16448), held that DBP's annotation constituted sufficient notice to bind third parties. Later, Republic Act No. 3147 amended Section 23 of Republic Act No. 85, allowing DBP to provide housing for its officials and employees. Procedural History: The Nicandros filed an action for rescission of the sale to DBP and cancellation of its title, alleging the purchase was ultra vires and illegal. Alternatively, they sought payment of the properties' value from PHHC. The trial court and the Court of Appeals granted the rescission. This Court, in a prior decision, overturned the lower courts' rulings, holding that Republic Act No. 3147 retroactively cured the lack of authority and violation of law. The Petition: The respondent spouses filed a motion for reconsideration, arguing that the application of retroactivity was inappropriate given their acquired vested right and that the Court's decision evaded the real issue.
Issue(s)
Whether Republic Act No. 3147, enacted after the void contract between DBP and PHHC, could retroactively cure the illegality and validate the transaction, thereby impairing the vested rights of the Nicandros. Whether the contract between DBP and PHHC was void ab initio due to being expressly prohibited by law and against public policy. Whether the doctrine of pari delicto applies to the Nicandros, preventing them from asserting their rights.
Ruling
The Court resolved to reconsider and set aside its decision of February 28, 1980, and in lieu thereof, rendered judgment denying the petition for review, without costs.
Ratio Decidendi
On the retroactivity of Republic Act No. 3147 and vested rights: The Court found that its previous decision was incomplete in not fully examining the implications of the retroactivity theory. It clarified that while curative laws are retrospective, they cannot impair vested rights acquired in compliance with existing laws. The Court noted that Article 4 of the Civil Code explicitly states that laws have no retroactive effect unless the contrary is provided. The Court found no evidence that Republic Act No. 3147 was intended to remedy the specific problem spawned by the facts of this case, making its application based on mere surmise. Furthermore, applying retroactivity would violate the constitutional injunction against deprivation of vested rights. On the void nature of the contract between DBP and PHHC: The Court reiterated that contracts expressly prohibited by law or declared void by law are inexistent and void from the beginning, and cannot be ratified. Section 23 of Republic Act No. 85, as originally enacted, was a mandatory prohibitory provision with penal sanctions for its violation. Therefore, the contract between PHHC and DBP was void ab initio. PHHC could not waive such invalidity, and the contract was as if it never existed. The Court emphasized that Article 1409 of the Civil Code clearly states that contracts expressly prohibited by law are void and cannot be ratified. On the application of pari delicto: The Court held that the doctrine of pari delicto cannot be invoked when disallowing the illegal transaction would enhance public policy. The prohibition against an officer or employee borrowing money from the employer-bank is intrinsically against public policy. The Court reasoned that the deprivation of any right of action to PHHC vis-a-vis DBP does not carry with it the loss of the right of action by a third party, like the Nicandros, who predicated their transaction on the premise that the agreement between DBP and PHHC was non-existent. It would be unjust to deprive the Nicandros of their right, especially since PHHC was guided by opinions of the Secretary of Justice and the President's directive when it transacted with them. Therefore, the Nicandros were not barred by pari delicto.
Main Doctrine
A curative statute, while retrospective, cannot impair vested rights acquired in compliance with existing laws. Contracts expressly prohibited by law are void from inception and cannot be ratified, nor can their invalidity be waived, especially when such prohibition is against public policy.