Case Summary (G.R. No. 244247)
Petitioner
Philippine National Bank, holder of a real-estate mortgage securing a P450 loan granted July 19, 1939, maturing July 19, 1944. Initiated extra-judicial foreclosure in July 1959 to recover outstanding debt.
Respondent
Francisca Serrano de Agbayani, borrower and mortgagor. Filed suit August 10, 1959, to enjoin the Provincial Sheriff and halt foreclosure, alleging the fifteen-year prescription period had lapsed.
Key Dates
– Loan granted: July 19, 1939; matured July 19, 1944
– Prescription period: 15 years from maturity
– Executive Order No. 32 (debt moratorium): March 10, 1945
– Republic Act No. 342 (extension of moratorium): July 26, 1948
– Rutter v. Esteban decision (invalidating moratorium): May 18, 1953
– Extra-judicial foreclosure commenced: July 13, 1959
– Lower court decision enjoining foreclosure: January 27, 1960
– Supreme Court decision reversing lower court: April 29, 1971
Applicable Law
– 1935 Philippine Constitution (supremacy of fundamental law)
– Civil Code of the Philippines (1949), Art. 7: judicial declaration of unconstitutionality renders a statute void but acknowledges its prior operation as a fact with legal consequences
– Executive Order No. 32 (1945) and Republic Act No. 342 (1948) as moratorium laws suspending debt enforcement
– Jurisprudential doctrine on tolling of prescription during valid moratoria
Factual Background and Procedural History
In 1939 PNB loaned respondent P450, secured by a duly registered mortgage. The loan matured July 19, 1944. No collection efforts were made until July 13, 1959, when PNB initiated extra-judicial foreclosure. Respondent sued on August 10, 1959, contending that the 15-year prescriptive period had already run. The trial court granted a permanent injunction, rejecting the bank’s plea that moratorium periods under EO 32 and RA 342 (later declared unconstitutional) tolled prescription.
Lower Court’s Misapplication of Constitutional Doctrine
The trial court held that once a statute or executive order is declared unconstitutional, it is void ab initio and “creates no rights or duties,” thereby refusing to recognize any tolling effect during the moratorium. In so doing, the court neglected the established doctrine that although unconstitutional measures lose their normative force upon judicial nullification, their prior operation remains an operative fact with legal consequences.
Doctrine on Effect of Statutes Declared Unconstitutional
Under Civil Code Article 7, and long-standing jurisprudence, an unconstitutional enactment is inoperative from the moment of judicial pronouncement but remains valid until then, necessitating compliance and giving rise to rights and obligations during its effective period. This ensures fairness by acknowledging actions taken in reliance on a law later invalidated. The Supreme Court has consistently applied this principle to preserve consequences flowing from the statute’s operation before nullification.
Validity and Subsequent Invalidity of Moratorium Legislation
Executive Order 32 (March 10, 1945) and Republic Act 342 (July 26, 1948) lawfully suspended debt enforcement to address wartime emergencies, satisfying the rational-basis standard for police-power measures. By 1953, changed circumstances rendered RA 342—and by extension EO 32—unreasonable and oppressive, leading the Court in Rutter v. Esteban to declare them unco
...continue readingCase Syllabus (G.R. No. 244247)
Facts
- On July 19, 1939, Francisca Serrano de Agbayani obtained a ₱450 loan from the Philippine National Bank, secured by a real estate mortgage over her Pangasinan property (T.C.T. No. 11275), payable on July 19, 1944.
- By November 27, 1959, the unpaid balance had grown to ₱1,294.00.
- On July 13, 1959, the Bank instituted extrajudicial foreclosure proceedings with the Provincial Sheriff of Pangasinan.
- On August 10, 1959, plaintiff filed suit against both the Bank and the Sheriff, alleging that the mortgage obligation had prescribed fifteen years after its July 19, 1944 maturity.
- The trial court issued a writ of preliminary injunction against the Sheriff, which was later made permanent.
Procedural History
- The trial court enjoined the foreclosure sale, holding that moratorium measures later declared unconstitutional created no rights or duties and thus did not toll prescription.
- The Philippine National Bank appealed, contending that the period of suspension under Executive Order No. 32 (March 10, 1945) and Republic Act No. 342 (1948)—both later invalidated—should be excluded from the 15-year prescriptive computation.
- The Supreme Court granted certiorari to determine the proper effect of those moratorium measures on prescription.
Issue
- Whether the moratorium period under Executive Order No. 32 and Republic Act No. 342, later declared void, must be deducted from the computation of the fifteen-year prescriptive period for the extrajudicial foreclosure of plaintiff’s mortgage.
Doctrine on the Effect of an Invalid Statute
- An unconstitutional act “confers no rights; it imposes no duties; it is in legal contemplation as inoperative as though it had never been” (Norton v. Shelby County, 118 US 425 [1886]).
- Nevertheless, the operative existence of a statute or executive order prior to adjudication is a fact