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GR NO.78508 PHILIPPINE NATION BANK VS FILEMON REMIGIO Case Digest

TITLE: PHILIPPINE NATION BANK VS FILEMON REMIGIO GR NO.78508
VITUG,J.:

FACTS: On 25 August 1967, Remigio obtained from PNB a P65,000 loan secured by a real estate mortgage covering 5 parcels of land in Isabela. On November 17, 1970 Remigio defaulted hence PNB extrajudicially foreclosed on the mortgage and acquired the encumbered assets for P87,082. However the sheriff’s sale was only registered with the register of deeds on October 11, 1972, two years after the said sale.
On Oct 21, 1972, P.D. No. 27 was enacted into law which mandated an agrarian reform. Pursuant thereto, an "Operation Land Transfer Program" was launched and among the areas it covered were the parcels of land in the mortgage contract between Remigio and PNB. This in effect transferred the rights of the plaintiff to the tenants-beneficiaries in favor of the Land Bank of the Philippines.

ISSUE:
1. WON the said mortgaged lands were still under Remigio’s right of redemption when PD 27 was enacted.

2. WON application of PD 27 in the case at bar would be a violation of the non-impairment clause of the Constitution

HELD:
1. Yes, when P.D. No. 27, was enacted on 21 October 1972, the parcels of land in dispute were clearly still subject to Remigio’s right of redemption. In the foreclosure of real property by banking institutions, as well as in the extrajudicial foreclosure by any other mortgagee, the mortgagor could redeem the property within one year from date of registration of the deed of sale in the appropriate Registry of Deeds and not on date of foreclosure.
2. No, although P.D. No. 27 had the effect of impairing the obligation of the duly executed mortgage contracts affecting said lands. There is no question, however, that the land reform program of the government under P.D. No. 27), was undertaken in the exercise of the police power of the state. It is settled that the one limitation on the contract clause arises from the police power; the reason being that public welfare is superior to private rights. The situation here, is like that in eminent domain proceedings, where the state expropriates private property for public use, and the only condition to be complied with is the payment of just compensation. Technically, the condemnation proceedings do not impair the contract to destroy its obligations, but merely appropriate or take for public use. As the Land Bank is obliged to settle the obligations secured by the mortgage, the mortgagee is not left without any compensation.

This Court, likewise, in a number of cases has expressed the dictum that police power subordinates the non-impairment clause of the Constitution.


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