MARCELINO BUYCO, PETITIONER AND APPELLEE VS. PHILIPPINE NATIONAL BANK, ILOILO BRANCH, ILOILO CITY, RESPONDENT AND APPELLANT.

Buyco versus Philippine National Bank

The Case

This is a petition for mandamus filed by Marcelino Buyco against the Philippine National Bank, Iloilo Branch, to compel the bank to accept his backpay acknowledgment certificate as payment of his crop-loan obligation. The case matters because it fixes the rule on the retroactive effect of amendatory laws upon vested rights: a right already acquired and exercised before an amendment cannot be withdrawn by a later prohibition. It is a study in how the Court protects a right that had already crystallized, even where the law later changes the rules.

Procedural History

The case began in the Court of First Instance of Iloilo. On July 24, 1958, that court granted the petition and ordered the bank to give due course to the petitioner's vested right by accepting his backpay acknowledgment certificate as payment, with costs against the bank. The bank appealed. The case reached the Supreme Court on appeal from the judgment of the Court of First Instance, and the Supreme Court affirmed the judgment appealed from.

Facts

On April 24, 1956, Marcelino Buyco was indebted to the Philippine National Bank in the amount of 5,102 pesos and 90 centavos, plus interest, representing his deficit on his 1952 to 1953 crop loan. The loan was secured by a mortgage of real property. Buyco held Backpay Acknowledgment Certificate Number 4801, dated July 9, 1955, issued under Republic Act Number 897, in the amount of 22,227 pesos and 69 centavos, payable in thirty years.

On that same day, April 24, 1956, Buyco offered to pay the deficit with his backpay certificate. On July 18, 1956, the bank replied that since its motion for reconsideration in the Florentino case was still under consideration by the Supreme Court, it "cannot yet grant" his request. On February 15, 1957, after the Supreme Court had denied the bank's motion for reconsideration in that case, Buyco again wrote the bank, reiterating his request. On February 19, 1957, the bank answered that, in view of the amendment of its charter on June 16, 1956, by Republic Act Number 1576, it could not accept the certificate.

Buyco asked for reconsideration in a letter dated March 26, 1957, which was referred to the bank's Legal Department. In an opinion rendered on April 23, 1957, that department expressed the view that, notwithstanding the Supreme Court's decision, the bank could not accept the certificate because of the amendment of its charter. Hence the petition for mandamus.

Issues

• Whether or not the bank was obliged, at the time the offer was made on April 24, 1956, to accept the backpay acknowledgment certificate in payment of the obligation.
• Whether or not Republic Act Number 1576, amending the bank's charter, may be given retroactive effect so as to defeat the right already acquired by the petitioner.
• Whether or not mandamus is the proper remedy to compel the bank to accept the certificate.

Applicable Provisions

Article 4 of the New Civil Code provides:

Laws shall have no retroactive effect, unless the contrary is provided.

This is the anchor of the ruling: the amendatory charter of the bank, containing no retroactivity clause, operates only prospectively and cannot reach the right already vested in the petitioner.

Article 5 of the New Civil Code provides:

Acts executed against the provisions of mandatory or prohibitory laws shall be void, except when the law itself authorizes their validity.

The Court held this provision inapplicable, because the prohibitory amendment cannot be applied retroactively to an act that the law then allowed and in fact compelled.

Section 9-A of Republic Act Number 1576, amending the bank's charter, provides:

The Board of Directors shall have the power and authority: In its discretion, to accept assignment of payments, certificates of indebtedness of the government or other such similar securities: Provided, however, that the authority herein granted shall not be used as regards backpay certificates.

This is the amendatory prohibition whose prospective-only operation the Court affirmed.

Ruling

On the first issue, the Court held that on or before April 24, 1956, the right to have the certificate applied to the obligation already existed by virtue of Republic Act Number 897, which the Court had merely construed and clarified in the Florentino case. The bank's letter of July 18, 1956 showed it knew, or should have known, that a right was vested, only that its enforcement had to wait the resolution of the Court. A vested right is one that has become fixed or established and is no longer open to doubt or controversy.

On the second issue, the Court held that Republic Act Number 1576 has no retroactive effect. It contains no provision on retroactivity, and none may be implied from its language; it simply states its effectivity upon approval. The Court applied Article 4 of the New Civil Code and the rule that after an act is amended, the original act continues in force as to all rights that had accrued prior to the amendment. The law at the time of the offer allowed, and in fact compelled, the bank to accept the certificate. Article 5 of the New Civil Code finds no application, because the prohibitory amendment cannot be given retroactive effect.

On the third issue, the Court held that mandamus is the proper remedy, following the Florentino case.

Doctrine

A vested right is a right or interest that has become fixed or established and is no longer open to doubt or controversy. Under Article 4 of the New Civil Code, laws have no retroactive effect unless the contrary is provided; every doubt is resolved against retroactive effect, and this applies to amendments of statutes. After an act is amended, the original act continues in force with regard to all rights that had accrued prior to the amendment. Where the law at the time of the offer allowed and compelled the bank to accept the backpay certificate, a later prohibitory amendment cannot defeat that right, and mandamus lies to compel acceptance.

Disposition

The Supreme Court affirmed the judgment appealed from, with costs against the respondent bank, and held that mandamus is the proper remedy to compel the bank to accept the petitioner's backpay acknowledgment certificate as payment of his obligation.

Remember This

The single line to memorize: a later prohibitory amendment cannot retroactively destroy a right already vested when the offer was made. Examiners use this case to test the prospective operation of amendatory laws and the protection of vested rights under Article 4 of the New Civil Code.