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PNB v. Office of The President

The Supreme Court ruled that the Office of the President did not violate Article 4 of the Civil Code by applying Presidential Decree 957 (P.D. 957) retroactively. While P.D. 957 did not expressly provide for retroactivity, the Court found the clear intent was to protect innocent lot buyers, like the private respondents. The Court determined P.D. 957 was meant to cover real estate mortgages executed before its enactment. Furthermore, certain provisions of P.D. 957 have retroactive effect by their terms and impact prior contracts and transactions. The Court favored applying the law retroactively to protect the private respondents over the petitioner bank.

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113 views2 pages

PNB v. Office of The President

The Supreme Court ruled that the Office of the President did not violate Article 4 of the Civil Code by applying Presidential Decree 957 (P.D. 957) retroactively. While P.D. 957 did not expressly provide for retroactivity, the Court found the clear intent was to protect innocent lot buyers, like the private respondents. The Court determined P.D. 957 was meant to cover real estate mortgages executed before its enactment. Furthermore, certain provisions of P.D. 957 have retroactive effect by their terms and impact prior contracts and transactions. The Court favored applying the law retroactively to protect the private respondents over the petitioner bank.

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Nympha Andres
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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PNB vs Office of the President

G.R. No. 104528. January 18, 1996

FACTS
Private respondents are buyers and agreed to pay on installment subdivision
lots from the developer, Marikina Village, Inc. However, the subdivision developer
mortgaged the lots to petitioner bank, PNB, thus making the latter the owner of the
lots. Without the knowledge of the said mortgage, the respondents constructed their
houses in the lot.
The private respondents, then, filed a case which HLURB in a decision dated
October 28, 1988, ruled that PNB may collect from prvate respondents only the
"remaining amortization in accordance to land purchase agreements they had
previously entered into with Marikina Village, Inc." and cannot compel private
respondents to pay all over again for the lots they had already bought from said
subdivision developer. HLURB and Office of the President both affirmed the
decision.
Petitioner bank raised to the Supreme Court that the Office of the President
erred in applying P.D. 957 because the law was enacted after the execution of the
subject mortgage. Petitioner emphasized Article 4 of the Civil Code which states
that "laws shall have no retroactive effect." The petitioner also stated that they
are not privy to contracts between private respondents and mortgagor-subdivision
developer, hence, not entitled to accept respondents' remaining amortization.

ISSUES
Whether or not the Office of the President violated Article 4 of the Civil
Code in applying PD 957 retroactively.

RULING
The Court that denied the petition of PNB for failing to show any reversible
error or grave abuse of discretion in the earlier decisions. The Court stated that
while

However, it is obvious and indubitable that P.D. 957 was intended to cover even
those real estate mortgages, like the one at issue here, executed prior to its
enactment, and such intent (as succinctly captured in the preamble quoted below)
must be given effect if the laudable purpose of protecting innocent purchasers is
to be achieved:chanrobles.com : virtual lawlibrary

"WHEREAS, it is the policy of the State to afford its inhabitants the requirements
of decent human settlement and to provide them with ample opportunities for
improving their quality of life;

While P.D. 957 did not expressly provide for retroactivity in its entirety, yet the
same can be plainly inferred from the unmistakable intent of the law to protect
innocent lot buyers from scheming subdivision developers. As between these small
lot buyers and the gigantic financial institutions which the developers deal with,
it is obvious that the law as an instrument of social justice - must favor the
weak.

Indeed, the petitioner Bank had at its disposal vast resources with which it could
adequately protect its loan activities, and therefore is presumed to have conducted
the usual "due diligence" checking and ascertained (whether thru ocular inspection
or other modes of investigation) the actual status, condition, utilization and
occupancy of the property offered as collateral. It could not have been unaware
that sthe property had been built on by small lot buyers. On the other hand,
private respondents obviously were powerless to discover the attempt of the land
developer to hypothecate the property being sold to them. It was precisely in order
to deal with this kind of situation that P.D. 957 was enacted, its very essence and
intendment being to provide a protective mantle over helpless citizens who may fall
prey to the razzmatazz of what P.D. 957 termed "unscrupulous subdivision and
condominium sellers."

Likewise noteworthy are certain provisions of P.D. 957, which themselves constitute
strong arguments in favor of the retroactivity of P.D. 957 as a whole. These are
Sections 20, 21 and 23 thereof, which by their very terms have retroactive effect
and will impact upon even those contracts and transactions entered into prior to
P.D. 957�s enactment

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