322 Phil. 6
PANGANIBAN, J.:
1. The Office of the President erred in applying P.D. 957 because said law was enacted only on July 12, 1976, while the subject mortgage was executed on December 18, 1975; andNormally, pursuant to Article 4 of the Civil Code, "(1)aws shall have no retroactive effect, unless the contrary is provided." However, it is obvious and indubitable that P.D. 957 was intended to cover even those real estate mortgages, like the one at issue here, executed prior to its enactment, and such intent (as succinctly captured in the preamble quoted below) must be given effect if the laudable purpose of protecting innocent purchasers is to be achieved:
2. Petitioner Bank is not privy to the contracts between private respondents and mortgagor-subdivision developer, hence, the Office of the President erred in ordering petitioner Bank to accept private respondents’ remaining amortizations and issue the corresponding titles after payment thereof.
"WHEREAS, it is the policy of the State to afford its inhabitants the requirements of decent human settlement and to provide them with ample opportunities for improving their quality of life;While P.D. 957 did not expressly provide for retroactivity in its entirety, yet the same can be plainly inferred from the, unmistakable intent of the law to protect innocent lot buyers from scheming subdivision developers. As between these small lot buyers and the gigantic financial institutions which the developers deal with, it is obvious that the law -- as an instrument of social justice -- must favor the weak. Indeed, the petitioner Bank had at its disposal vast resources with which it could adequately protect its loan activities, and therefore is presumed to have conducted the usual "due diligence" checking and ascertained (whether thru ocular inspection or other modes of investigation) the actual status, condition, utilization and occupancy of the property offered as collateral. It could not have been unaware that the property had been built on by small lot buyers. On the other hand, private respondents obviously were powerless to discover the attempt of the land developer to hypothecate the property being sold to them. It was precisely in order to deal with this kind of situation that P.D. 957 was enacted, its very essence and intendment being to provide a protective mantle over helpless citizens who may fall prey to the razzmatazz of what P.D. 957 termed "unscrupulous subdivision and condominium sellers."
"WHEREAS, numerous reports reveal that many real estate subdivision owners, developers, operators, and/or sellers have reneged on their representations and obligations to provide and maintain properly subdivision roads, drainage, sewerage, water systems, lighting systems, and other similar basic requirements, thus endangering the health and safety of home and lot buyers;
"WHEREAS, reports of alarming magnitude also show cases of swindling and fraudulent manipulations perpetrated by unscrupulous subdivision and condominium sellers and operators, such as failure to deliver titles to the buyers or titles free from liens and encumbrances, and to pay real estate taxes, and fraudulent sales of the same subdivision lots to different innocent purchasers for value;"[1] (Italics supplied).
"The intent of a statute is the law. If a statute is valid it is to have effect according to the purpose and intent of the lawmaker. The intent is the vital part, the essence of the law, and the primary rule of construction is to ascertain and give effect to the intent. The intention of the legislature in enacting a law is the law itself, and must be enforced when ascertained, although it may not be consistent with the strict letter of the statute. Courts will not follow the letter of a statute when it leads away- from the true intent and purpose of the legislature and to conclusions inconsistent with the general purpose of the act. Intent is the spirit which gives life to a legislative enactment. In construing statutes the proper course is to start out and follow the true intent of the legislature and to adopt that sense which harmonizes best with the context and promotes in the fullest manner the apparent policy and, objects of the legislature."[3]Truly, this Court cannot allow the injustice that will be wrought by a strictly prospective application of the law. Little people who have toiled for years through blood and tears would be deprived of their homes through no fault of their own. As the Solicitor General, in his comment, argues:
"Verily, if P.D. 957 were to exclude from its coverage the aforecited mortgage contract, the vigorous regulation which PD. 957 seeks to impose on unconscientious subdivision sellers will be translated into a feeble exercise of police power just because the iron hand of the State cannot particularly touch mortgage contracts badged with the fortunate accident of having been constituted prior to the enactment of P.D. 957. Indeed, it would be illogical in the extreme if P.D. 957 is to be given full force and effect and yet, the fraudulent practices and manipulations it seeks to curb in the first instance can nevertheless be liberally perpetrated precisely because PD. 957 cannot be applied to existing antecedent mortgage contracts. The legislative intent could not have conceivably permitted a loophole which all along works to the prejudice of subdivision lot buyers (private respondents)."[4]Likewise noteworthy are certain provisions of P.D. 957, which themselves constitute strong arguments in favor of the retroactivity of PD. 957 as a whole. These are Sections 20, 21 and 23 thereof, which by their very terms have retroactive effect and will impact upon even those contracts and transactions entered into prior to PD. 9575 enactment:
"SEC. 20. Time of Completion.-- Every owner or developer shall construct and provide the facilities, improvements, infrastructures and other forms of development, including water supply and lighting facilities, which are offered and indicated in the approved subdivision or condominium plans, brochures, prospectus, printed matters, letters or in any form of advertisement, within one year from the date of the issuance of the license for the subdivision or condominium project or such other period of time as may be fixed by the Authority.As for objections about a possible violation of the impairment clause, we find the following statements of Justice Isagani Cruz enlightening and pertinent to the case at bench:
"SEC. 21. Sales Prior to Decree.-- In cases of subdivision lots or condominium units sold or disposed of prior to the effectivity of this Decree, it shall be incumbent upon the owner or developer of the subdivision or condominium project to complete compliance with his or its obligations as provided in the preceding section within two years from the date of this Decree unless otherwise extended by the Authority or unless an adequate performance bond is filed in accordance with Section 6 hereof.
"Failure of the owner or developer to comply with the obligations under this and the preceding provisions shall constitute a violation punishable under Section 38 and 39 of this Decree.
"SEC. 23. Non-Forfeiture of Payments.--No installment payment made by a buyer in a subdivision or condominium project for the lot or unit he contracted to buy shall be forfeited in favor of the owner or developer when the buyer, after due notice to the owner or developer, desists from further payment due to the failure of the owner or developer to develop the subdivision or condominium project according to the approved plans and within the time limit for complying with the same. Such buyer may, at his option, be reimbursed the total amount paid including amortization interests but excluding delinquency interests, with interest thereon at the legal rate." (Italics supplied)
"Despite the impairment clause, a contract valid at the time of its execution may be legally modified or even completely invalidated by a subsequent law. If the law is a proper exercise of the police power, it will prevail over the contract.This Court ruled along similar lines in Juarez vs. Court of Appeals[6]:
"Into each contract are read the provisions of existing law and, always, a reservation of the police power as long as the agreement deals with a matter affecting the public welfare. Such a contract, it has been held, suffers a congenital infirmity, and this is its susceptibility to change by the legislature as a postulate of the legal order."[5]
"The petitioner complains that the retroactive application of the law would violate the impairment clause. The argument does not impress. The impairment clause is now no longer inviolate; in fact, there are many who now believe it is an anachronism in the present-day society. It was quite useful before in protecting the integrity of private agreements from government meddling, but that was when such agreements did not affect the community in general. They were indeed purely private agreements then. Any interference with them at that time was really an unwarranted intrusion that could properly struck down.The decision of the Court of Appeals in Breta and Hamor vs. Lao, et al.[7], penned by then Court of Appeals Associate Justice Jose A. R. Melo, now a respected member of this Court, is persuasive, the. factual circumstances therein being of great similarity to the antecedent facts of the case at bench:
"But things are different now. More and more, the interests of the public have become involved in what are supposed to be still private agreements, which have as a result been removed from the protection of the impairment clause. These agreements have come within the embrace of the police power, that obtrusive protector of the public interest. It is a ubiquitous policeman indeed. As long as the contract affects the public welfare one way or another so as to require the interference of the State, then must the police power be asserted, and prevail, over the impairment clause."
"Protection must be afforded small homeowners who toil and save if only to purchase on installment a tiny home lot they can call their own. The consuming dream of every Filipino is to be able to buy a lot, no matter how small, so that he may somehow build a house. It has, however, been seen of late that these honest, hard-living individuals are taken advantage of, with the delivery of titles delayed, the subdivision facilities, including the most essential such as water installations not completed, or worse yet, as in the instant case, after almost completing the payments for the property and after constructing a house, the buyer is suddenly confronted by the stark reality, contrived or otherwise, in which another person would now appear to be owner.By the foregoing citation, this Court thus adopts by reference the foregoing as part of this Decision.
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"We cannot over emphasize the fact that the BANK cannot barefacedly argue that simply because the title or titles offered as security were clean of any encumbrance or lien, that it was thereby relieved of taking any other step to verify the over-reaching implications should the subdivision be auctioned on foreclosure. The BANK could not have closed its eyes that it was dealing over a subdivision where there were already houses constructed. Did it not enter the mind of the responsible officers of the BANK that there may even be subdivision residents who have almost completed their installment payments?" (Id., pp. 7 & 9).
"SEC. 18. Mortgages. -- No mortgage on any unit or lot shall be made by the owner or developer without prior written approval of the Authority. Such approval shall not be granted unless it is shown that the proceeds of the mortgage loan shall be used for the development of the condominium or subdivision project and effective measures have been provided to ensure such utilization. The loan value of each lot or unit covered by the mortgage shall be determined and the buyer thereof, if any, shall be notified before the release of the loan. The buyer may, at his option, pay his installment for the lot or unit directly to the mortgagee who shall apply the payments to the corresponding mortgage indebtedness secured by the particular lot or unit being paid for, with a view to enabling said buyer to obtain title over the lot or unit promptly after full payment thereof." (Italics supplied)Privity of contracts as a defense does not apply in this case for the law explicitly grants to the buyer the option to pay the installment payment for his lot or unit directly to the mortgagee (petitioner), which is required to apply such payments to reduce the corresponding portion of the mortgage indebtedness secured by the particular lot or unit being paid for. And, as stated earlier, this is without prejudice to petitioner Bank’s seeking relief against the subdivision developer.