PNB VS OPP

G.R. No. 104528 January 18, 1996

Facts:

 Private respondents were buyers on installment of subdivision lots from Marikina Village, Inc.

 Subdivision developer mortgaged the lots to petitioner, Philippine National Bank (PNB), without
the knowledge of private respondents.

 PNB foreclosed on the mortgage and became the owner of the lots as the highest bidder at the
foreclosure sale.

 Private respondents complied with their obligations as lot buyers and constructed houses on the
lots.

 Private respondents filed suits against PNB, and the HLURB ruled that PNB could collect only the
remaining amortizations, not compel private respondents to pay again for the lots.

Issue:

1. Did the Office of the President err in applying P.D. 957, considering the mortgage was executed
before its enactment?

2. Can PNB, not being a party to the contracts between private respondents and the mortgagor-
subdivision developer, be ordered to accept remaining amortizations and issue titles?

Supreme Court's Ruling:

1. Yes. The Court held that while laws generally do not have retroactive effects, the intent of P.D.
957 to protect innocent lot buyers from unscrupulous subdivision developers, as stated in its
preamble, justifies its retroactive application. The Court emphasized the legislative intent to
favor the weak against powerful financial institutions, and the need to protect small lot buyers
who may fall prey to fraudulent practices.

2. Yes. P.D. 957, specifically Section 18, imposes an obligation on PNB as the mortgagee to accept
payments of remaining unpaid amortizations from private respondents. Privity of contracts is
not a defense, as the law allows buyers to pay directly to the mortgagee, and PNB can seek relief
against the subdivision developer separately.

The Court urged PNB to consider larger issues, including social justice and the protection of human
rights, in alignment with the Constitution, emphasizing the bank's role as an instrument for
implementing state policies.

The petition was denied for failure to show reversible error or grave abuse of discretion in the assailed
decision.