PHILIPPINE NATION BANK VS FILEMON REMIGIO,GR NO.

78508
Ankash Sohail Butt

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

HELD:
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.