Diokno v. Rehabilitation Finance Corp.

GR NO. L-4712
FACTS OF THE CASE
Plaintiff is the holder of a backpay certificate worth P75,857.14 that was issued by the Treasurer of
the Philippines under the provisions of Republic Act No. 304 (Backpay Law). As of November
1950, plaintiff had an outstanding loan of P47,355.28 with Rehabilitation Finance Corp. The loan was
secured by a mortgage on the Plaintiffs property and had an annual interest rate of 4%.
Plaintiff seeks to compel the Respondent Corporation to accept his backpay certificate in lieu of
payment for his outstanding loan. Meanwhile, Respondent contends that such form of payment is
contrary to the provisions set forth by section 2 of R.A. No. 304:
Section 2, Republic Act No. 304
. . . And provided, also, That investment funds or banks or other financial institutions
owned or controlled by the Government shall, subject to the availability of loanable
funds, and any provision of the their charters, articles of incorporation's, by-laws, or rules
and regulations to the contrary notwithstanding, accept or discount at not more than two
per centum per annum for ten years such certificate for the following purposes only: (1)
the acquisition of real property for use as the applicant's home, or (2) the building or
construction of the residential house of the payee of said certificate: . . .
ISSUE
Whether or not the Plaintiff can use his backpay certificate to pay off his outstanding loan to
Respondent Corporation
HELD
No.
Despite usage of the phrase shall accept or discount in section 2 of R.A. No. 304, the provision
is not mandatory.
The condition imposed for accepting or discounting certificates is the availability of loanable funds.
Plaintiff contends that Respondent Corporation has enough available funds and thus meets the
condition stipulated to accept his backpay certificate. However, it can be readily seen from the
financial data of Respondent Corporation that they did not have enough cash balance available.
If the word shall as used in section 2 of R.A. No. 304, were to make the acceptance and discounting
of certificates mandatory, such would bring about the suspension of the activities of Respondent
Corporation due to lack of available funds. It could not have been the intention of Congress to disrupt
the whole scheme of rehabilitation envisioned by the Rehabilitation Act (law governing Respondent
Corporation) by its passage of Section 2 of the Backpay Law.
STATUTORY CONSTRUCTION:
It is true that in its ordinary signification, the word shall is imperative. However, the rule is
not absolute. It may be construed as may when so required by the context or by the intention
of the statute.