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
- Petitioners incurred a secured loan of ₱6,800 on January 2, 1953, due January 2, 1954.
- The loan is secured by a real estate mortgage.
- Florentino holds Backpay Acknowledgment No. 1721 in the amount of ₱22,896.33 under RA 897.
- 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
Case Syllabus (G.R. No. 175578)
Facts of the Case
- Petitioners, Marcelino B. Florentino and Lourdes T. Zandueta, are indebted to the Philippine National Bank in the principal sum of ₱6,800 plus interest, incurred January 2, 1953 and due January 2, 1954.
- The loan is secured by a real estate mortgage on certain properties.
- Marcelino B. Florentino holds Backpay Acknowledgment No. 1721 dated October 6, 1954, for ₱22,896.33 issued under Republic Act No. 897 (approved June 20, 1953).
- On December 27, 1953, petitioners offered to discharge their bank indebtedness using Florentino’s backpay certificate.
- On December 29, 1953, the Philippine National Bank refused to accept the backpay certificate as payment of the debt.
- The case was submitted to the Court of First Instance of La Union on an agreed statement of facts.
Statutory Provision Involved
- Section 2 of Republic Act No. 897 (amending section 2 of Republic Act No. 304) provides for acknowledgment of backpay claims by the Treasurer of the Philippines, issuance of notice, and redemption by the Government within ten years without interest.
- The same section allows, upon application and under Secretary of Finance rules, issuance of a certificate of indebtedness up to the amount needed to pay existing obligations to the Government, its branches or instrumentalities, corporations owned or controlled by it, any citizen of the Philippines, or any association or corporation organized under Philippine law “who may be willing to accept the same for such settlement.”
Legal Issue
- Whether the qualifying clause “who may be willing to accept the same for such settlement” in section 2 of Republic Act No. 897 applies to all antecedents listed (the Government, its branches or instrumentalities, government-owned or -controlled corporations, and private persons or asso