25. Serrano de Agbayani vs. PNB, 38 SCRA 429 (Effects of Declaration of Unconstitutionality of a statute)

Serrano de Agbayani v PNB

FACTS:In 1939, Agbayani borrowed P450 from PNB secured by a realty mortgage. In1 9 4 4 , t h e l o a n m a t u r e d b u t P N B
c o u l d n o t c o l l e c t b e c a u s e i t w a s a t t h i s ti m e o f   t h e w a r .   I n
1 9 4 5 ,   P r e s . O s m e n a   i s s u e d t h e D e b t M o r a t o r i u m L a w (EO #32),
s u s p e n d i n g t h e p a y m e n t o f l o a n s f o r f o u r y e a r s d u e t o t h e r a v a g e s of war. In 1948, RA 342 extended
the Debt Moratorium Law for another eight years (upto 1956). In 1953, however, the SC declared RA 342 as unconstitutional in the case ofR u tt e r
v E s t e b a n . I n 1 9 5 9 , P N B fi l e d a s u i t f o r p a y m e n t o f t h e l o a n .

I S S U E : W O N t h e a c ti o n p r e s c r i b e d ?

HELD:If we take the orthodox view, the action has prescribed, since the declarationof RA 342 as unconstitutional retroacted to 1945 when EO 32 was first issued.
Between1944 when the loan matured and 1959, when PNB collected the loan, 15 yearsh a d e l a p s e d . [ T h e o r t h o d o x v i e w w a s
a n n o u n c e d b y M r . J . F i e l d , i n t h e c a s e of Norton vs. Shelby County where the court held
that:

" x x x . A n u n c o n s ti t u ti o n a l a c t i s n o t a l a w ; i t c o n f e r s n o
r i g h t s ; i t i m p o s e s n o d u ti e s ; i t a ff o r d s n o
p r o t e c ti o n ; i t   c r e a t e s n o o ffi c e ;   i t i s ,
i n   l e g a l   c o n t e m p l a ti o n , i n o p e r a ti v e ,   a s   i f i t   h a d   n o t   b e e n   p a s s e d .

B u t i f w e t a k e t h e u n o r t h o d o x v i e w , a s t h e S C d i d , t h e a c ti o n
c o u l d sti ll prosper. The period from 1945 when the law was promulgated, to 1953 when it w a s d e c l a r e d
u n c o n s ti t u ti o n a l s h o u l d n o t b e c o u n t e d f o r t h e p u r p o s e o f p r e s c r i p ti o n s i n c e t h e D e b t
M o r a t o r i u m L a w w a s o p e r a ti v e d u r i n g t h i s ti m e . I n e ff e c t , o n l y 7 y e a r s h a d e l a p s e d ( 1 9 4 4 -
45, 1953-59). Indeed, it would be unjust to p u n i s h t h e c r e d i t o r w h o c o u l d n o t
c o l l e c t p r i o r t o 1 9 5 3 b e c a u s e t h e D e b t M o r a t o r i u m L a w w a s
e ff e c ti v e , o n l y t o b e t o l d l a t e r t h a t h i s r e s p e c t f o r anapparently valid law
made him lose his right to collect. 

Art. 7 of the Civil Code which provides that, "When the courtsd e c l a r e   a   l a w   t o   b e   i n c o n s i s t e n t   w i t h   t h e   C o n s ti t u ti o
n ,   t h e   f o r m e r   s h a l l   b e   v o i d and the latter shall govern." seems to be the orthodox view on the matter

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