Title
Florentino vs. Philippine National Bank
Case
G.R. No. L-8782
Decision Date
Apr 28, 1956
Petitioners offered a backpay certificate to settle a PNB loan; PNB refused. SC ruled the certificate must be accepted, reversing the lower court, as the law mandates government entities to honor such payments.

Case Summary (G.R. No. 175578)

Petitioners and Respondent

Petitioners/Appellants: Marcelino B. Florentino and Lourdes T. Zandueta
Respondent/Appellee: Philippine National Bank

Key Dates

– Loan contracted: January 2, 1953
– Loan due: January 2, 1954
– Backpay certificate issued: October 6, 1954
– Offer to pay by certificate: December 27, 1953
– Bank’s refusal: December 29, 1953
– Decision date: April 28, 1956

Applicable Law and Constitutional Basis

– Republic Act No. 897 (amending section 2 of RA 304) governs issuance and redemption of backpay certificates, permitting their use to settle certain outstanding obligations.
– 1935 Philippine Constitution, Contracts Clause: prohibits impairment of contractual obligation by law.

Agreed Statement of Facts

  1. Petitioners incurred a secured loan of ₱6,800 on January 2, 1953, due January 2, 1954.
  2. The loan is secured by a real estate mortgage.
  3. Florentino holds Backpay Acknowledgment No. 1721 in the amount of ₱22,896.33 under RA 897.
  4. Petitioners offered the certificate in full payment on December 27, 1953; the bank refused on December 29, 1953.

Legal Issue

Does the clause “who may be willing to accept the same for such settlement” in section 2 of RA 897 qualify only the last antecedent (“any citizen of the Philippines, or any association or corporation organized under the laws of the Philippines”) or all antecedents, including the Government and its instrumentalities?

Respondent’s Argument

The bank contends that the qualifying phrase extends to all antecedents—government branches, corporations owned or controlled by the Government, and private entities—thereby allowing petitioners to require any of these entities to accept backpay certificates in settlement of debts.

Petitioners’ Argument

Petitioners maintain that, as a matter of grammar and legislative intent, the qualifier applies solely to the last antecedent (private citizens or associations). They argue that compelling private parties to accept a government promissory certificate at a below-market rate would unconstitutionally impair private contracts.

Legislative History and Purpose

Congressional debates clarify that the amendatory bill aimed to permit backpay certificates to discharge obligations in favor of the Government and its instrumentalities. There was no need to legislate acceptance by willing private parties, indicating the qualifier was meant to limit acceptance to government entities.

Constitutional Considerations

If private creditors were compelled to accept backpay certificates, their contractual rights would be impaired, contravening the 1935 Constitution’s protection against laws that impair contractual obligations.

Precedents and Official Opinions

– Diokno v. Rehabilitation Finance Corporation (91 Phil. 608, 1952): distinguished on facts, as the debt there arose after RA 304’s enactment, making acceptance discretionary.
– Secretary of Justice Opinion No. 228 (1948): held that “who may be willing to accept the same f

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