DE AGBAYANI VS. PNB, G.R. NO.

L-23127 APRIL 29, 1971

FACTS:

Plaintiff obtained loan from defendant Bank dated July 19, 1939, maturing on
July 19, 1944, secured by real estate mortgage. However, in 1945, President Osmeña
issued Executive Order No. 32 and Republic Act 342 suspending the enforcement of
payment of all debts and monetary obligations payable by war sufferers.
Unfortunately, said laws were subsequently declared unconstitutional. On July 13
1959, defendant instituted extra-judicial foreclosure proceedings for the recovery of
the balance of the loan remaining unpaid. Plaintiff countered that the mortgage sought
to be foreclosed had long prescribed, fifteen years having elapsed from the date of
maturity on July 19, 1944. Defendant Bank in its answer, the defense of prescription
would not be available if the period from March 10, 1945, when Executive Order No.
32 was issued, to July 26, 1948, when the subsequent legislative act extending the
period of moratorium was declared invalid, were to be deducted from the computation
of the time during which the bank took no legal steps for the recovery of the loan.

Procedural History:

Nonetheless, lower court did not find such contention persuasive and decided the
suit in favor of plaintiff.

ISSUE:

Whether or not lower court failed to adhere to the applicable constitutional

doctrine as to the effect to be given to a statute subsequently declared invalid.

HELD:

Yes. Lower court failed to adhere to the applicable constitutional doctrine as to

the effect to be given to a statute subsequently declared invalid.

While it is true that administrative or executive acts, orders and regulations shall
be valid only when they are not contrary to the laws or the Constitution, its existence
as a fact must be reckoned with prior to its being nullified. Otherwise, it would
deprive the law of its quality of fairness and justice. Moreover, the prevailing
principle is that the existence of a statute or executive order prior to its being
adjudged void is an operative fact to which legal consequences are attached. In the
language of an American Supreme Court decision, the actual existence of a statute,
prior to such a determination of unconstitutionality, is an operative fact and may have
consequences which cannot justly be ignored. The past cannot always be erased by a
new judicial declaration. The effect of the subsequent ruling as to invalidity may have
to be considered in various aspects, with respect to particular relations, individual and
corporate, and particular conduct, private and official.

Moreover, prescription period tolled during the effectivity of Executive Order

No. 32 before the same were declared invalid. The Court has made clear its view in a
sense of cases impressive in their number and unanimity that during the eight-year
period that Executive Order No. 32 and Republic Act No. 312 were in force,
prescription did not run because of judicial recognition that moratorium was a valid
governmental response to the plight of the debtors who were war sufferers.

Analysis/Application:

In the case at bar, from July 19, 1944, when her loan matured, to July 13, 1959,
when extra-judicial foreclosure proceedings were started by appellant Bank, the time
consumed is six days short of fifteen years. When the report was had extrajudicially to
the foreclosure of the mortgage obligation, there was time to spare before the
prescription could be availed of as a defense by the plaintiff.

CONCLUSION:

Wherefore, the actual existence of a statute, prior to such a determination of

unconstitutionality, is an operative fact and may have consequences which cannot
justly be ignored. Prescription period tolled during the effectivity of Executive Order
No. 32 before the same were declared invalid. Thus, the decision of lower court is
reversed and the suit of plaintiff is dismissed.