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PNB vs. Office of The President G.R. No. 104528. January 18, 1996. PANGANIBAN, J.

Private respondents bought land from a subdivision developer and constructed homes on the lots, but were unaware that the developer had mortgaged the lots to Petitioner Philippine National Bank (PNB). When the developer defaulted, PNB foreclosed on the mortgage and became owner of the lots. The Office of the President ruled that PNB could only collect remaining payments from buyers' original purchase agreements and could not require full repayment. PNB argued that Presidential Decree 957, which supported this ruling, should not apply retroactively. However, the Supreme Court found that the decree could be inferred to cover prior mortgages in order to protect buyers, and that contracts can be modified by subsequent laws exercising police power for public welfare.

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518 views2 pages

PNB vs. Office of The President G.R. No. 104528. January 18, 1996. PANGANIBAN, J.

Private respondents bought land from a subdivision developer and constructed homes on the lots, but were unaware that the developer had mortgaged the lots to Petitioner Philippine National Bank (PNB). When the developer defaulted, PNB foreclosed on the mortgage and became owner of the lots. The Office of the President ruled that PNB could only collect remaining payments from buyers' original purchase agreements and could not require full repayment. PNB argued that Presidential Decree 957, which supported this ruling, should not apply retroactively. However, the Supreme Court found that the decree could be inferred to cover prior mortgages in order to protect buyers, and that contracts can be modified by subsequent laws exercising police power for public welfare.

Uploaded by

sahara lockwood
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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.

PANGANIBAN, J.:
Private respondents were buyers on installment of subdivision lots from Marikina
Village, Inc. (represented by spouses Antonio and Susana Astudillo). On
December 18, 1975, said subdivision developer mortgaged the lots in favor of
petitioner, Philippine National Bank, notwithstanding the land purchase
agreements over said lots. Unaware of this mortgage, private respondents duly
complied with their obligations and constructed their houses on the lots in
question.
Subsequently, the subdivision developer defaulted and PNB foreclosed on the
mortgage. As highest bidder at the foreclosure sale, the bank became owner of
the lots.
In a decision rendered on October 28, 1988 ruled that PNB without prejudice to
seeking relief against Marikina Village, Inc. may collect from private respondents
only the "remaining amortization, in accordance with the 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. On May 2, 1989, the Housing
and Land Use Regulatory Board affirmed this decision. On July 12, 1976, P.D.
957, "The Subdivision and Condominium Buyers’ Protective Decree" was
enacted, concurring with HLURB.
ISSUE:
Whether or not the Office of the President erred in applying P.D. 957
retroactively?
RULINGS:

No, the Office of the President did not err in applying P.D. 957 retroactively on
subject mortgage executed on December 18, 1975. Generally, pursuant to
Article 4 of the Civil Code, laws shall have no retroactive effect, unless the
contrary is provided. While P.D. 957 did not expressly provide for its retroactivity,
it may be inferred that the intent of the law was to cover even those real estate
mortgages, executed prior to its enactment, to protect innocent lot buyers from
"unscrupulous subdivision and condominium sellers”.
Despite the impairment clause, a contract valid at the time of its execution may
be legally modified or even completely invalidated by a subsequent law. If the
law is a proper exercise of the police power, it will prevail over the contract. Into
each contract are read the provisions of existing law and, always, a reservation
of the police power as long as the agreement deals with a matter affecting the
public welfare.
PHILIPPINE NATIONAL BANK v. OFFICE OF THE PRESIDENT
5. CONSTITUTIONAL LAW; CONSTITUTION, NON-IMPAIRMENT
CLAUSE: CAN NOT PREVAIL OVER POLICE POWER OF THE
STATE. — Despite the Impairment clause, a contract valid at the time of
its execution may be legally modified or even completely invalidated by
a subsequent law. If the law is a proper exercise of the police power, it
will prevail over the contract. Into each contract are read the provisions
of existing law and, always, a reservation of the police power as long as
the agreement deals with a matter affecting the public welfare. Such a
contract, it has been held, suffers a congenital infirmity, and this is its
susceptibility to change by the legislature as a postulate of the legal
order.

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