PNB vs. Office of the President

PHILIPPINE NATIONAL BANK, Petitioner,
vs.
OFFICE OF THE PRESIDENT, HOUSING AND LAND USE REGULATORY BOARD (HLURB), ALFONSO MAGLAYA, ANGELINA MAGLAYA P. REYES, JORGE C. BERNARDINO, CORAZON DE LEON, VICTORIANO ACAYA, FLORENCIA CULTURA, MARIA CAMPOS, ERNESTO SARMIENTO, SANTIAGO TAMONAN, APOLONIA TADIAQUE, SIMEON DE LEON, NATIVIDAD J. CRUZ, NATIVIDAD B. LORESCO, FELICIDAD GARCIA, ANA ANITA TAN, LUCAS SERVILLION, JOSE NARAWAL, represented by their duly authorized Attorney-in-Fact, CORAZON DE LEON AND SPOUSES LEOPOLDO AND CARMEN SEBASTIAN, Respondents.

G.R. No. 104528
January 18, 1996

FACTS:

Private respondents were the buyers on installment of subdivision lots from the subdivision developer, Marikina Village Inc. Notwithstanding the land purchase agreements it executed over said lots, the subdivision developer mortgaged the lots in favor of the petitioner, PNB. Unaware of this mortgage, private respondents continued to pay and constructed their houses on the lots in question. The subdivision developer defaulted and PNB foreclosed on the mortgage and became the new owner of the said lots.

Private respondents filed suits before the HLURB Office of Appeals, Adjudication and Legal Affairs (OAALA) which ruled that PNB, as the new owner, can collect only the remaining amortizations from the private respondents in accordance with the agreements entered into with the subdivision developer and cannot compel them to pay all over again for the lots they bought, without prejudice from seeking relief from the subdivision developer.

The HLURB affirmed the decision. The Office of the President, invoking P.D. 957, likewise concurred with the HLURB. Petitioner argued that P.D 957 cannot be applied as the said law was enacted only on July 12, 1976, while the subject mortgage was executed on December 18, 1975.

ISSUE:

Whether P.D. 957 may be applied to the mortgage contract which was executed prior to its enactment.

HELD:

YES. 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 the 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.

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