G.R. No. L-13777; June 30, 1960
PHILIPPINE NATIONAL BANK, plaintiff-appellee, vs. CORNELIO S. RUPERTO and JUANA S. RUPERTO, defendants-appellants.

FACTS

On November 24, 1948, defendants-appellants Cornelio S. Ruperto and Juana S. Ruperto executed a promissory note in favor of plaintiff-appellee Philippine National Bank (PNB) for P2,500.00. After making partial payments totaling P250.00, they failed to pay the balance. PNB filed a collection suit on August 1, 1951. As a defense, the defendants alleged that Cornelio Ruperto had offered to tender payment of the balance using his Backpay Certificate No. 139765, issued on June 23, 1949, and that PNB was reluctant to accept this tender since November 10, 1951. They prayed that PNB be compelled to accept the backpay certificate, that they be exempted from interest after the refusal, and that the note be cancelled. The case experienced several postponements. The trial court rendered its decision on February 21, 1958, rejecting the defense. It held that Republic Act No. 1576 , approved on June 16, 1956 (which amended PNB’s charter to prohibit acceptance of backpay certificates for obligations contracted after RA 304), was the applicable law at the time of decision, not Republic Act No. 897 . The court sentenced the defendants to pay the balance with interest and attorney’s fees. Defendants appealed directly to the Supreme Court.

ISSUE

Whether the defendants-appellants have the right to compel PNB to accept their backpay certificate as payment for their loan obligation.

RULING

No. The Supreme Court affirmed the trial court’s decision. The debt was contracted on November 24, 1948. Republic Act No. 304 , approved on June 18, 1948, allowed the use of backpay certificates only for obligations “subsisting at the time of the approval of this Act.” Since the loan was contracted after RA 304’s approval, the defendants could not validly seek to discharge it under that law. Their alleged tenders in 1951 and 1952 were therefore invalid under the then reigning statute. Although Republic Act No. 897 (approved June 20, 1953) amended RA 304 and allowed payment for obligations “subsisting at the time of the approval of this Act,” the record contained no proof that the debtors made a demand for application during RA 897’s effectivity before it was repealed by RA 1576 on June 16, 1956. RA 1576 prohibited PNB from accepting backpay certificates for pre-existing obligations. Even construing the amended answer (filed September 19, 1957) as an offer to apply the certificate, it was made too late as RA 1576 was already in force. The Court further held that RA 1576 is not an ex post facto law, as that principle applies only to criminal proceedings, and it did not impair the obligation of contracts since the loan was contracted before the effectivity of RA 897.