Serrano de Agbayani v PNB FACTS: In 1939, Agbayani borrowed P450 from PNB secured by a realty mortgage.

In 1944, the loan matured but PNB could not collect because it was at this time of the war. In 1945, Pres.Osmena issued the Debt Moratorium Law (EO #32), suspending the payment of loans for four years due to the ravages of war. In 1948, RA 342 extended the Debt Moratorium Law for another eight years (up to 1956). In 1953, however, the SC declared RA 342 as unconstitutional in the case of Rutter v Esteban. In 1959, PNB filed a suit for payment of the loan. ISSUE: W ON the action prescribed? HELD: If we take the orthodox view, the action has prescribed, since the declaration of RA 342 as unconstitutional retroacted to 1945 when EO 32 was first issued. Between 1944 when the loan matured and 1959, when PNB collected the loan, 15 years had elapsed. [The orthodox view was announced by Mr. J. Field, in the case of Norton vs. Shelby County where the court held that: "xxx. An unconstitutional act is not a law; it confers no rights; it imposes nod u t i e s ; i t a f f o r d s n o p r o t e c t i o n ; i t c r e a t e s n o o f f i c e ; i t i s , i n l e g a l c o n t e m p l a t i o n , inoperative, as if it had not been passed.

But if we take the unorthodox view, as the SC did, the action could still prosper. The period from 1945 when the law was promulgated, to 1953 when it was declared unconstitutional should not be counted for the purpose of prescription since the Debt Moratorium Law was operative during this time. In effect, only 7 years had elapsed (1944-45, 1953-59). Indeed, it would be unjust to punish the creditor who could not collect prior to 1953 because the Debt Moratorium Law was effective, only to be told later that his respect for anapparently valid law made him lose his right to collect. Art. 7 of the Civil Code which provides that, "When the courts d e c l a r e a l a w t o b e inconsistent with the Constitution, the former shall be void and the latter shall govern." seems to be the orthodox view on the matter.