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31 National Development Company and New Agrix vs.

Philippine VeteransBank (192 SCRA 257)

Nature of the Case:

PETITION to review the decision of the Regional Trial Court of Calamba, Laguna, Br. 34.

Facts:

Agrix Marketing, Inc. (Agrix) executed in favor of respondent a real estate mortgage over three parcels of
land. Agrix later on went bankrupt. In order to rehabilitate the company, then President Marcos issued
Presidential Decree 1717 which mandated, among others, the extinguishment of all the mortgages and
liens attaching to the property of Agrix, the creation of Agrix Claims Committee to process claims against
the company and the creation of New Agrix, Inc. Respondent filed a claim against the company before
the Committee. Petitioners however filed a petition with the RTC of Calamba, Laguna invoking the
provision of the law which cancels all mortgage liens against it. Respondent took measures to
extrajudicially foreclose the real estate mortgage, to which petitioners opposed by filing another case in
the same court to stop the foreclosure. These cases were consolidated. The RTC held in favor of the
respondent on the ground of unconstitutionality of the decree; mainly violation of the separation of
powers, impairment of obligation of contracts, and violation of the equal protection clause. Hence, this
petition.

Issue: Is the creation of New Agrix valid?

Ruling:

The case actually involves questions regarding the valid exercise of police power, violation of due
process, impairment of contracts but on top of all this, the question on the legality of New Agrix.

New Agrix, Inc. was created by special decree notwithstanding the provision of Article XIV, Section 4 of
the 1973 (Now Article XII, Section 16, 1987 Constitution), then in force, that:

SEC. 4. The Batasang Pambansa shall not, except by general law, provide for the formation, organization,
or regulation of private corporations, unless such corporations are owned or controlled by the
Government or any subdivision or instrumentality thereof.4
The new corporation is neither owned nor controlled by the government. The National Development
Corporation was merely required to extend a loan of not more than P10,000,000.00 to New Agrix, Inc.
Pending payment thereof, NDC would undertake the management of the corporation, but with the
obligation of making periodic reports to the Agrix board of directors. After payment of the loan, the said
board can then appoint its own management. The stocks of the new corporation are to be issued to the old
investors and stockholders of AGRIX upon proof of their claims against the abolished corporation. They
shall then be the owners of the new corporation. New Agrix, Inc. is entirely private and so should have
been organized under the Corporation Law in accordance with the above-cited constitutional provision.