Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-7140 December 22, 1955

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee,

Quimbo, Mendiola & Quimbo for appellant.

LABRADOR, J.:

This is an appeal from the judgment of the Court of First Instance of Samar, finding Esteban Zeta
guilty of a violation of Republic Act No. 145 (which took effect on June 14, 1947), for having solicited,
charged demanded and collected a fee or compensation of P300 for assisting on Eugenio Albiza in
the preparation, presentation and prosecution of his claim for benefits under the laws of the United
States.

Eugenio Albiza, an enlisted man of the Philippine Army and later of the United States Armed Forces
in the Far East (USAFFE), suffered disability in the course of rendering services for the army in
Aparri, Cagayan in the year 1942. On November 6, 1946, he promised to pay Mr. Esteban Zeta 5
per cent of any mount he may receive as a result of his claim for backpay, insurance or any other
privileges granted by law (Exhibit 1). Zeta prepared the necessary papers for disability compensation
and as a result Albiza received the sum of P5,919 from the United States Veterans Administration. In
pursuance of the contract, Albiza paid Zeta the sums of P200 on June 7, 1951 and P100 on June
11, 1951.

The law in force at the time of the execution of that agreement (Exhibit 1) was Commonwealth Act
No. 675, section 11 of which provides as follows:

No attorney, agent, or other person in charge of the preparation, filing, or pursuing of any
claim for arrears in pay and allowances under this Act shall demand or charge for his
services fees more than five per centum of the total money value of such arrears in pay and
allowances, and said fees shall become due and demandable only after the payment of the
said arrears in pay and allowances is received by the widow or orplan entitled thereto. The
retention or deduction of any amount from any such arrears in pay and allowances for the
payment of fees for such services is prohibited A violation of any provision of this section
shall be punished by imprisonment of from 6 months to 1 year, or by a fine of from six
hundred to one thousand pesos, or by both such imprisonment and fine,

But on June 14, 1947, Republic Act No. 145 was passed. It provides:
 Any person assisting a claimant in the preparation, presentation and prosecution of his claim
for benefits under the laws of the United States administered by the United States Veterans
Administration who shall, directly or indirectly, solicit, contract for, charge, or receive,m or
who shall attempt to solicit, contract for, charge, or receive any fee or compensation
exceeding twenty pesos in any one claim, or who shall collect his fee before the claim is
actually paid to a beneficiary or claimant, shall be deemed guilty of an offense and upon
conviction therof shall for every offense be fined not exceeding one thousand pesos or
imprisonment not exceeding two years or both, in the discretion of the court.lawphi1.net

The trial court held that upon the passage of Republic Act No. 145, the agreement for the payment
of a 5 per cent fee on the amount collected was voided and compliance therewith became illegal; so
it sentenced the defendant-appellant to pay a fine of P200, to indemnify Eugenio Albiza in the sum of
P280, or suffer subsidiary imprisonment in case of insolvency, and to pay the costs.

On this appeal, defendant-appellant's counsel contends that the application of Republic Act No. 145
to the defendant-appellant for having charged and collected the fee of 5 per cent is an infringement
of the constitutional prohibition against ex post facto laws. And the case of U.S. vs. Diaz Conde, et
al., 42 Phil., 766, is cited for the principle that law impairing the obligations of a contract is null and
void; that a law must be construed prospectively, not retroactively, so that if it is legal at its
inceptionit can not be declared illegal by subsequent legislation, otherwise the sanctity of contracts
will be impaired in violation of the organic law. In this case the defendant-appellant had collected
interest in the years 1915 and 1916 at the rate of 5 per cent per month, an interest in excess of that
authorized by the Usury Law (Act No. 2655), which took effect In May, 1916, and the court held that
the collection of the said interest was legal at the time it was made and that it cannot be declared
illegal by any subsequent legislation. This case is not exactly in point, because when the Usury Law
was passed the interest had already been collected; whereas in the case at bar the collection of the
fee was effected after Republic Act No. 145 had been passed. The claim that said Act is an ex post
facto law is not fully justified because although the services were rendered before the Act took effect,
collection for said services did not take place until after the law became effective.

In defense of the judgment of conviction, the Solicitor General argues that contracts are not beyond
the reach of legislation by Congress in the proper exercise of the police power of the State, and as
Republic Act No. 145 was enacted in pursuance thereto, its applicability to the appellant must be
sustained; that the rights of defendant-appellant under the contract, Exhibit 1, had not become
absolute at the time of the enactment of Republic Act No. 154, because the agreed fee had not been
collected, so that the non-impairment of contracts clause of the Constitution is not applicable thereto.

Without passing upon the above arguments of both parties, we note that it does not appear from the
language of the law itself, or from any other circumstances, that the Legislature had intended to give
its provisions any retroactive effect such as to affect contracts entered into under the sanction of the
previous law (Commonwealth Act No. 675). We must, therefor, consider it prospective, not
retroactive.

. . . The presumption, however, is that all laws operate prospectively only and only when the
legislative has clearly indicated its intention that the law operate retroactively will the courts
so apply it. Retroactive operation will more readily be ascribed to legislation that is curative
or legalizing than to legislation which may disadvantageously, though legally, effect past
relations and transactions. (2 Sutherland Statutory Construction, p. 243.).

. . . Beginning with Kent's dictum in Dash vs. Van Kleeck, it has been continuously reaffirmed
that 'The rule is that statutes are prospective, and will not be construed to have retroactive
 operation, unless the language employed in the enactment is so clear it will admit of no other
construction.(Id., p. 135.).

Besides, it should not be interpreted in a manner that would render its application violative of a
constitutional inhibition.

Strict construction to prevent retroactive operation has often been applied in order that the
statute would not violate contract obligations or interfere with vested rights. The principal
explanation offered by the courts, however, is that the statute must be construed so as to
sustain its constitutionality and thus prospective operation will be presumed where a
retroactive operation would produce invalidity. (2 Sutherland Statutory Construction, supra,
p. 135.).lawphi1.net

It is also argued that the right of appellant to collect the 5 per cent fee was contingent merely and did
not become absolute, complete and unconditional until the compensation benefits had been
collected and said right is not protected by the non-impairment clause of the Constitution. A
renowned authority on statutory construction, however states that the distinction between vested and
absolute rights is not helpful, and that "a better way to handle the problem" is "to declare those
statutes attempting to affect rights which the court finds to be unalterable, invalid as arbitrary and
unreasonable, thus lacking in due process" some courts having recognized that the real issue in the
reasonableness of the particular enactment (Sutherland Statutory Construction, Vol. 2, pp. 121-122).
The 5 per cent fee fixed in Commonwealth Act No. 675 is to Us not unreasonable. Services were
rendered thereunder to complainant's benefit. The right to the fees accrued upon such rendition.
Only the payment of the fee was contingent upon the approval of the claim; therefore, the right was
not contingent. For a right to accrue is one thing; enforcement thereof by actual payment is another.
The subsequent law enacted after the rendition of the services should not as a matter of simple
justice affect the agreement, which was entered into voluntarily by the parties as expressly directed
in the previous law. To apply the new law to the case of the defendant-appellant such as to deprive
him of the agreed fee would be arbitrary and unreasonable as destructive of the inviolability of
contracts, and therefore invalid as lacking in due process; to penalize him for collecting such fees,
repugnant to our sense of justice. Such could not have been the legislative intent in the enactment of
Republic Act 145.

In resume, we hold that Republic Act No. 145 must be given prostective application only, and may
not be given retroactive effect such as to affect rights that had accrued under a contract expressly
sanctioned by a previous law (C. A. 675). The judgment appealed from is hereby reversed and the
defendant-appellant, acquitted, with costs de oficio. So ordered.

Paras, C. J., Bengzon, Padilla, Montemayor, Reyes, A., Jugo, Bautista Angelo, Concepcion, and
Reyes, J. B. L., JJ., concur.