G.R. No. L-19771; February 27, 1964
TEOFILO C. RODRIGUEZ, petitioner, vs. DEVELOPMENT BANK OF THE PHILIPPINES, respondent.

FACTS

Petitioner Teofilo C. Rodriguez entered into a loan agreement with the Rehabilitation Finance Corporation (RFC, now DBP) in May 1953 for P14,000.00, payable in installments and to be released in stages. The first release of P5,000.00 was received by Rodriguez on May 27, 1953. The subsequent releases, covering the remaining P9,000.00, were availed of and received by him after June 1953, specifically in July 1953 and thereafter, pursuant to conditions in the agreement making further releases contingent upon construction progress and fund availability.
Rodriguez offered to pay his entire obligation using his backpay certificate as early as 1954, but respondent DBP refused to accept it for the full amount, accepting only P5,000.00 in backpay and leaving a balance. Rodriguez filed a mandamus action to compel DBP to accept his backpay certificate for the full remaining obligation. The case was submitted for decision based on a Stipulation of Facts.

ISSUE

Whether the entire P14,000.00 loan obligation was a “subsisting obligation” on June 20, 1953, the date of approval of Republic Act No. 897 (which authorized payment of obligations subsisting at its approval using backpay certificates), thereby obligating DBP to accept the backpay certificate for the full balance, or only the P5,000.00 actually released and received by that date.

RULING

The Supreme Court affirmed the trial court’s dismissal, ruling that only the P5,000.00 released in May 1953 was a subsisting obligation on June 20, 1953. The legal logic is anchored on the nature of the loan agreement as an executory contract. The Court analyzed the stipulation, noting that the agreement provided for conditional subsequent releases dependent on factors like construction completion and availability of funds. Petitioner became liable only for each specific amount upon its actual release and his execution of a corresponding promissory note.
Consequently, the P9,000.00 released after June 20, 1953, could not be considered an obligation subsisting on that critical date. Since Section 2 of Republic Act No. 897 only compelled government financial institutions to accept backpay certificates for obligations subsisting at the time of the Act’s approval, DBP could not be compelled to accept the certificate for amounts released after June 20, 1953. The Court distinguished the inapplicable precedent of Sabelino v. RFC, as that case involved an indisputably pre-existing mortgage indebtedity. The petition was denied for lack of merit.