Ortigas & Co., Limited Partnership vs. Feati Bank and Trust Co.

FACTS

In March 1952, Ortigas – plaintiff and vendor entered into an agreements of sale over two parcels of land, known as Lots Nos. 5 and 6, Block 31, of the Highway Hills Subdivision, situated at Mandaluyong, Rizal with Augusto Padilla y Angeles and Natividad Angeles, as vendees. The vendees transferred their rights to Emma Chavez and upon completion of payment, executed a deed of sale and agreement which contained stipulations and restrictions as follows : (1) Land shall be used by the Buyer exclusively for residential purposes (2) All buildings and other improvements must be of strong materials and properly painted, modern sanitary installations, and be at a distance of less than 2 meters from the boundary line.

Feati Bank, defendant – appellee acquired Lots Nos. 5 and 6 which included the building restrictions annotated therein. Restrictions were imposed as part of its general building scheme designed for the beautification and development of the Highway Hills Subdivision. However, area along the western part of Epifanio de los Santos Avenue (EDSA) from Shaw Boulevard to Pasig River, has been declared a commercial and industrial zone, per Resolution No. 27, dated February 4, 1960 of the Municipal Council of Mandaluyong, Rizal.

Feati Bank, began laying the foundation and commenced the construction of a building on Lots Nos. 5 and 6, to be devoted to banking purposes and to be used for residential purposes. Plaintiff-appellant demanded in writing that defendant-appellee stop the construction of the commercial building on the said lots. The latter refused to comply with the demand, contending that the building was being constructed in accordance with the zoning regulations, defendant-appellee having filed building and planning permit applications with the Municipality of Mandaluyong, and it had accordingly obtained building and planning permits to proceed with the construction.

Ortigas & Co. filed a complaint restraining defendants from continuing or completing the construction of a commercial bank building in the premises due to the non-compliance with the building restrictions annotated on TCT.

The trial court dismissed the complaint, holding that the subject restrictions were subordinate to Municipal Resolution No. 27.

The plaintiff contend that the Municipal Council had (no) power to nullify the contractual obligations assumed by the defendant corporation.

ISSUE

1. Whether or not the Resolution No. 27 is a valid exercise of police power; and
2. Whether or not the said Resolution can nullify or supersede the contractual obligations assumed by defendant-appellee.

HELD

1. YES. However the question of validity of Resolution No. 27 was not raised by the plaintiff  but assuming arguendo, the Court opines that its posture is unsustainable . Section 3 of R.A. No. 2264, otherwise known as the Local Autonomy Act, empowers a Municipal Council “to adopt zoning and subdivision ordinances or regulations” for the municipality. Clearly, the law does not restrict the exercise of the power through an ordinance. Therefore, granting that Resolution No. 27 is not an ordinance, it certainly is a regulatory measure within the intendment or ambit of the word “regulation” under the provision. The same section further mandates that the general welfare clause 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.
2. YES. It should be stressed, that 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. Resolution No. 27, declaring the western part of Highway 54, now E. de los Santos Avenue (EDSA, for short) from Shaw Boulevard to the Pasig River as an industrial and commercial zone, was obviously passed by the Municipal Council of Mandaluyong, Rizal 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.

“A grantor may lawfully insert in his deed conditions or restrictions which are not against public policy and do not materially impair the beneficial enjoyment of the estate.” Applying the principle just stated to the present controversy, We can say that since it is now unprofitable, nay a hazard to the health and comfort, to use Lots Nos. 5 and 6 for strictly residential purposes, defendants-appellees should be permitted, on the strength of the resolution promulgated under the police power of the municipality, to use the same for commercial purposes. Thus, the state, in order to promote the general welfare, may interfere with personal liberty, with property, and with business and occupations. Persons may be subjected to all kinds of restraints and burdens, in order to secure the general comfort health and prosperity of the state and to this fundamental aim of our Government, the rights of the individual are subordinated. Police power legislation then is not likely to succumb to the challenge that thereby contractual rights are rendered nugatory.

DISPOSITIVE PORTION

IN VIEW OF THE FOREGOING, the decision appealed from, dismissing the complaint, is hereby AFFIRMED. Without pronouncement as to costs.

SO ORDERED.

DOCTRINE

Police Power – “the power to prescribe regulations to promote the health, morals, peace, education, good order or safety and general welfare of the people.” Invariably described as “the most essential, insistent, and illimitable of powers” and “in a sense, the greatest and most powerful attribute of government.”

“Nor is the concept of the general welfare static. Needs that were narrow or parochial a century ago may be interwoven in our day with the well-being of the nation. What is critical or urgent changes with the times.”

The motives behind the passage of the questioned resolution being reasonable, and it being a “legitimate response to a felt public need,”not whimsical or oppressive, the non-impairment of contracts clause of the Constitution will not bar the municipality’s proper exercise of the power.

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