Ortigas & Co. sold lots in its subdivision with restrictions that they be used for residential purposes only. Feati Bank later bought the lots and began construction for a bank, violating the restrictions. Ortigas sued, claiming the restrictions were part of its development plan. However, the court held that while contracts cannot normally be impaired, local governments have broad police powers to promote community welfare. The municipality had previously declared the area a commercial zone through Resolution 27, allowing Feati Bank's construction despite the original restrictions. The resolution was a valid exercise of police power that superseded the contractual obligations between Ortigas and the original buyers.
Ortigas & Co. sold lots in its subdivision with restrictions that they be used for residential purposes only. Feati Bank later bought the lots and began construction for a bank, violating the restrictions. Ortigas sued, claiming the restrictions were part of its development plan. However, the court held that while contracts cannot normally be impaired, local governments have broad police powers to promote community welfare. The municipality had previously declared the area a commercial zone through Resolution 27, allowing Feati Bank's construction despite the original restrictions. The resolution was a valid exercise of police power that superseded the contractual obligations between Ortigas and the original buyers.
Ortigas & Co. sold lots in its subdivision with restrictions that they be used for residential purposes only. Feati Bank later bought the lots and began construction for a bank, violating the restrictions. Ortigas sued, claiming the restrictions were part of its development plan. However, the court held that while contracts cannot normally be impaired, local governments have broad police powers to promote community welfare. The municipality had previously declared the area a commercial zone through Resolution 27, allowing Feati Bank's construction despite the original restrictions. The resolution was a valid exercise of police power that superseded the contractual obligations between Ortigas and the original buyers.
nullify or supersede the contractual obligations assumed by the defendant.
G.R. No. L-24670
14 December 1979
Santos, J.
FACTS:
Ortigas and Co. is engaged in real estate
business developing and selling lots to the public. It sold to Augusto Padilla and Natividad Angeles Lots Nos. 5 and 6, Block 31 of the Highway Hills Subdivision, Mandaluyong by sale on instalments. The vendees then transferred their rights and interests over the aforesaid lots in favour of one Emma Chavez. The agreements of sale on instalment and the deeds of sale contained the restriction that The parcel of land subject of this deed of sale shall be used by the Buyer exclusively for residential purposes, and she shall not be entitled to take or remove soil, stones or gravel from it or any other lots belonging to the Seller.
Feati Bank and Trust Co. later bought said lots
from Emma Chavez in the name of Republic Flour Mills. Ortigas and Co. claims that the restrictions were imposed as part of its general building scheme designed for the beautification and development of the Highway Hills Subdivision which forms part of its big landed estate. Feati Bank, on the other hand, maintains that the area along the western part of EDSA from Shaw Boulevard to Pasig River has been declared a commercial and industrial zone, per Resolution No. 27 s-1960 of the Municipal Council of Mandaluyong, Rizal. Later on, Feati Bank commenced construction on the said lots for a building devoted to banking purposes. It refused to comply with the demands of Ortigas & Co. to stop the said construction.
HELD:
Yes. While non-impairment of contracts is
constitutionally guaranteed, the rule is not absolute, since it has to be reconciled with the legitimate exercise of police power, i.e. the power to prescribe regulations to promote the health, morals, peace, education, good order or safety of the general welfare of the people. This general welfare clause shall be liberally interpreted in case of doubt, so as to give more power to local governments in promoting the economic conditions, social welfare and material progress of the people in the community. The only exceptions under Section 12 of the Local Autonomy Act (R.A. 2264) are existing vested rights arising out of a contract between a province, city or municipality on one hand and a third party on the other hand. Said case is not present in this petition.
Resolution No. 27 s-1960 declaring the western
part of EDSA as an industrial and commercial zone was passed in the exercise of police power to safeguard or promote the health, safety, peace, good order and general welfare of the people in the locality.