Narratives

Constitutional Law II
Michael Vernon Guerrero Mendiola 2005 Shared under Creative Commons AttributionNonCommercial-ShareAli e !"0 #hili$$ines license"

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%utter v" )steban *G% L-!+0,- ., Ma/ .05!1 2 . 3rti&as v" 4eati *G% L-256+0- .5 7ecember .0+01 2 2 Villanueva v" Castaneda *G% L-6.!..- 2. Se$tember .0,+1 2 ! San&alan& v" Intermediate A$$ellate Court 8IAC9 *G% +..60- 22 7ecember .0,,1 2 5 3rti&as v" Court o( A$$eals *G% .26.02- 5 7ecember 20001 2 + Abella v" NL%C *G% +.,.!- 20 :ul/ .0,+1 2 , 'iro v" ;ontanosas *G% L-!2!.2- 25 November .0,!1 2 0 Caleon v" A&us 7evelo$ment Cor$" *G% ++!65- + A$ril .0021 2 .0 Meralco v" La&una *G% .!.!50- 5 Ma/ .0001 2 .0

This collection contains nine (9) cases summarized in this format by Michael Vernon M. Guerrero (as a senior law student) during the First Semester school year !""#$!""% in the &olitical 'aw (e)iew class under *ean Mariano Magsalin +r. at the ,rellano -ni)ersity School of 'aw (,-S'). .om/iled as &*F Se/tember !"0!. 1erne Guerrero entered ,-S' in +une !""! and e)entually graduated from ,-S' in !""%. 2e /assed the &hili//ine bar e3aminations immediately after (,/ril !""4).

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112 Rutter v. Esteban [GR L-3708, 18 May 1953] En Banc, Bautista-Angelo (J): 6 concur, 1 concurs with dispositive part Facts On 20 August 1941, Royal L. Rutter sold to Placido J. Esteban 2 parcels o land situated in t!e "ity o #anila. $o secure t!e pay%ent o said balance o P4,&00, a irst %ortgage o'er t!e sa%e parcels o land !as been constituted in a'or o Rutter. $!e deed o sale !a'ing been registered, a ne( title (as issued in a'or o Placido J. Esteban (it! t!e %ortgage duly annotated on t!e bac) t!ereo . Esteban ailed to pay t!e t(o install%ents as agreed upon, as (ell as t!e interest t!at !ad accrued t!ereon, and so on 2 August 1949, Rutter instituted an action in t!e "ourt o *irst +nstance ,"*+- #anila to reco'er t!e balance due, t!e interest due t!ereon, and t!e attorney.s ees stipulated in t!e contract. $!e co%plaint also contains a prayer or t!e sale o t!e properties %ortgaged in accordance (it! la(. Esteban ad%itted a'er%ents o t!e co%plaint but set up de ense on t!e %oratoriu% clause e%bodied in RA /42 ,appro'ed 20 July 194&-, allo(ing a (ar su erer & years ro% t!e settle%ent o !is clai% by t!e P!ilippine 1ar 2a%age "o%%ission. A ter a %otion or su%%ary 3udg%ent !as been presented by Esteban, and t!e re4uisite e'idence sub%itted co'ering t!e rele'ant acts, t!e court rendered 3udg%ent dis%issing t!e co%plaint !olding t!at t!e obligation (!ic! Rutter see)s to en orce is not yet de%andable under t!e %oratoriu% la(. Rutter iled a %otion or reconsideration (!erein !e raised or t!e irst ti%e t!e constitutionality o t!e %oratoriu% la(, but t!e %otion (as denied. Rutter appealed. !ssue 1!et!er Republic Act /42 is unconstitutional or being 'iolati'e o t!e constitutional pro'ision orbidding t!e i%pair%ent o t!e obligation o contracts. "e#$ 5tatutes declaring a %oratoriu% on t!e en orce%ent o %onetary obligations are not o recent enact%ent. $!ese %oratoriu% la(s are not ne(. #oratoriu% la(s !a'e been adopted 6during ti%es o inancial distress, especially (!en incident to, or caused by, a (ar.6 $!e #oratoriu% La( is a 'alid e7ercise by t!e 5tate o its police po(er, being an e%ergency %easure. Alt!oug! conceding t!at t!e obligations o t!e contract (ere i%paired, t!e i%pair%ent (as (it!in t!e police po(er o t!e 5tate as t!at po(er (as called into e7ercise by t!e public econo%ic e%ergency (!ic! t!e legislature !ad ound to e7ist. 8ot only is t!e constitutional pro'ision ,contract clause- 4uali ied by t!e %easure o control (!ic! t!e 5tate retains o'er re%edial processes, but t!e 5tate also continues to possess aut!ority to sa eguard t!e 'ital interest o its people. +t does not %atter t!at legislation appropriate to t!at end 6!as t!e result o %odi ying or abrogating contracts already in e ect.6 8ot only are e7isting la(s read into contracts in order to i7 obligations as bet(een t!e parties, but t!e reser'ation o essential attributes o so'ereign po(er is also read into contracts as a postulate o t!e legal order. $!e policy o protecting contracts against i%pair%ent presupposes t!e %aintenance o a go'ern%ent by 'irtue o (!ic! contractual relations are (ort! (!ile, a go'ern%ent (!ic! retains ade4uate aut!ority to secure t!e peace and good order o society. 5o%e o t!ese la(s, !o(e'er, !a'e also been declared 6'oid as to contracts %ade be ore t!eir passage (!ere t!e suspension o re%edies prescribed is inde inite or unreasonable in duration.6 $!e true test, t!ere ore, o t!e constitutionality o a %oratoriu% statute lies in t!e deter%ination o t!e period o suspension o t!e re%edy. +t is re4uired t!at suc! suspension be de inite and reasonable, ot!er(ise it (ould be 'iolati'e o t!e constitution. 9erein, obligations !ad been pending since 194: as a result o t!e issuance o E7ecuti'e Orders 2: and /2 and at present t!eir en orce%ent is still in!ibited because o t!e enact%ent o Republic Act /42 and (ould continue to be unen orceable during t!e &;year period granted to pre(ar debtors to a ord t!e% an opportunity to re!abilitate t!e%sel'es, (!ic! in plain language %eans t!at t!e creditors (ould !a'e to obser'e a 'igil o at least 12 years be ore t!ey could e ect a li4uidation o t!eir in'est%ent dating as ar bac) as 1941. $!is period see%s to be unreasonable, i not oppressi'e. 1!ile t!e purpose o "ongress is plausible, and s!ould be co%%ended, t!e relie accorded (or)s in3ustice to creditors (!o are practically le t at t!e %ercy o t!e debtors. $!eir !ope to e ect collection beco%es e7tre%ely re%ote, %ore so i t!e credits are unsecured. And t!e in3ustice is %ore patent (!en, under t!e la(, t!e debtor is not e'en re4uired to pay interest during t!e operation o t!e relie . $!us, t!e "ourt declared t!at t!e continued operation and en orce%ent o Republic Act /42 at t!e present ti%e is unreasonable and oppressi'e, and s!ould not be prolonged a %inute longer, and t!e sa%e s!ould be
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declared null and 'oid and (it!out e ect. $!is also !olds true as regards E7ecuti'e Orders 2: and /2, considering t!at said Orders contain no li%itation (!atsoe'er in point o ti%e as regards t!e suspension o t!e en orce%ent and e ecti'ity o %onetary obligations. $!is pronounce%ent is %ost especially needed in 'ie( o t!e re'i'al clause e%bodied in said Act i and (!en it is declared unconstitutional or in'alid. 113 %rt&'as v. Feat& [GR L-2()70, 1( *ece+ber 1979] En Banc, Santos (J): 7 concur, too! no part Facts Ortigas, #adrigal < 5ia is a li%ited partners!ip and *eati =an) and $rust "o., is a corporation duly organi>ed and e7isting in accordance (it! t!e la(s o t!e P!ilippines. Ortigas is engaged in real estate business, de'eloping and selling lots to t!e public, particularly t!e 9ig!(ay 9ills 5ubdi'ision along E25A, #andaluyong. On 4 #arc! 19:2, Ortigas, as 'endor, and Augusto Padilla and 8ati'idad Angeles, as 'endees, entered in separate agree%ents o sale on install%ents o'er t(o parcels o land. On 19 July 1902, t!e 'endees trans erred t!eir rig!ts and interests o'er t!e lots in a'or o E%%a "!a'e>. =ot! agree%ents contained stipulations or restrictions as to t!e re%o'al o soil, t!e %aterials o t!e buildings, and sanitary installations, (!ic! (ere annotated in t!e $"$s (it! t!e Ri>al Registry o 2eeds. *eati =an) e'entually ac4uired said lots on 2/ July 1902, one boug!t directly ro% "!a'e>, and t!e ot!er ro% Republic *lour #ills ,to (!o% "!a'e> sold it pre'iously-. On : #ay 190/, *eati =an) began laying t!e oundation and co%%enced t!e construction o a building to be de'oted to ban)ing purposes, but (!ic! could also be de'oted to, and used e7clusi'ely or, residential purposes. $!e ollo(ing day, Ortigas de%anded t!at *eati =an) stop t!e construction o t!e co%%ercial building on t!e lots, clai%ing t!at t!e restrictions annotated (ere i%posed as part o its general building sc!e%e designated or t!e beauti ication and de'elop%ent o 9ig!(ay 9ills 5ubdi'ision. *eati =an) re used to co%ply (it! t!e de%and, contending t!at t!e building (as being constructed in accordance (it! t!e >oning regulations ,Resolution 2?, dated 4 *ebruary 1900 by #unicipal "ouncil o #andaluyong-, t!at it !as iled building and planning per%it applications (it! t!e %unicipality o #andaluyong, and t!at it !ad accordingly obtained building and planning per%its to proceed (it! t!e construction. Ortigas iled t!e co%plaint (it! t!e lo(er court ,"i'il "ase ??00-, see)ing t!e issuance o 6a (rit o preli%inary in3unction to pre'ent t!e construction o a co%%ercial ban) building in t!e pre%ises in 'ie( o t!e building restrictions annotated in t!e *eati =an).s $"$s. $!e trial court dis%issed t!e co%plaint !olding t!at t!e restrictions (ere subordinate to #unicipal Resolution 2?, rendering t!e restrictions ine ecti'e and unen orceable. On 2 #arc! 190:, Ortigas iled a %otion or reconsideration. $!e trial court denied t!e %otion or reconsideration in its order o 20 #arc! 190:. On 2 April 190: Ortigas iled its notice o appeal, its record on appeal, and a cas! appeal bond. On 14 April 190:, t!e appeal (as gi'en due course by t!e appellate court and t!e records o t!e case (ere ele'ated directly to t!e 5upre%e "ourt, since only 4uestions o la( (ere raised. !ssue 1!et!er t!e constitutional guarantee o non;i%pair%ent o contracts is absolute. "e#$ 1!ile non;i%pair%ent o contracts is constitutionally guaranteed, t!e rule is not absolute, since it !as to be reconciled (it! t!e legiti%ate e7ercise o police po(er, i.e., 6t!e po(er to prescribe regulations to pro%ote t!e !ealt!, %orals, peace, education, good order or sa ety and general (el are o t!e people.6 +n'ariably described as 6t!e %ost essential, insistent, and illi%itable o po(ers6 and 6in a sense, t!e greatest and %ost po(er ul attribute o go'ern%ent,6 t!e e7ercise o t!e po(er %ay be 3udicially in4uired into and corrected only i it is capricious, (!i%sical, un3ust or unreasonable, t!ere !a'ing been a denial o due process or a 'iolation o any ot!er applicable constitutional guarantee. Police po(er 6is elastic and %ust be responsi'e to 'arious social conditions@ it is not con ined (it!in narro( circu%scriptions o precedents resting on past conditions@ it %ust ollo( t!e legal progress o a de%ocratic (ay o li e. Public (el are (!en clas!ing (it! t!e indi'idual rig!t to property s!ould pre'ail t!roug! t!e state.s e7ercise o its police po(er. 9erein, t!e %unicipality o #andaluyong e7ercised police po(er to sa eguard or pro%ote t!e !ealt!, sa ety, peace, good order and general (el are o t!e people in t!e locality. E25A, a %ain tra ic artery (!ic! runs t!roug! se'eral cities and %unicipalities in t!e #etro #anila area, supports an endless strea% o tra ic and t!e resulting acti'ity, noise and pollution are !ardly conduci'e to t!e !ealt!, sa ety or (el are o t!e residents in its route.
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9a'ing been e7pressly granted t!e po(er to adopt >oning and subdi'ision ordinances or regulations, t!e #unicipal "ouncil o #andaluyong (as reasonably 3usti ied under t!e circu%stances in passing t!e sub3ect resolution. $!e %oti'es be!ind t!e passage o t!e 4uestioned resolution being reasonable, and it being a 6legiti%ate response to a elt public need,6 not (!i%sical or oppressi'e, t!e non;i%pair%ent o contracts clause o t!e "onstitution (ill not bar t!e %unicipality.s proper e7ercise o t!e po(er. *urt!er, la(s and reser'ation o essential attributes o so'ereign po(er are read into contracts agreed upon by t!e parties. 8ot only are e7isting la(s read into contracts in order to i7 obligations as bet(een t!e parties, but t!e reser'ation o essential attributes o so'ereign po(er is also read into contracts as a postulate o t!e legal order. $!e policy o protecting contracts against i%pair%ents presupposes t!e %aintenance o a go'ern%ent by 'irtue o (!ic! contractual relations are (ort!(!ile, a go'ern%ent (!ic! retains ade4uate aut!ority to secure t!e peace and good order o society. $!e la( or%s part o , and is read into, e'ery contract, unless clearly e7cluded t!ere ro% in t!ose cases (!ere suc! e7clusion is allo(ed. 11( ,&##anueva v. -astane$a [GR L-)1311, 21 .e/te+ber 1987] "irst #ivision, $ru% (J): & concur, 1 on leave' Facts On ? 8o'e%ber 1901, t!e %unicipal council o 5an *ernando ,Pa%panga- adopted Resolution 21& aut!ori>ing so%e 24 %e%bers o t!e *ernandino Anited #erc!ants and $raders Association ,*A#$A- to construct per%anent stalls and sell along #ercado street, on a strip o land %easuring 12 by ?? %eters ,talipapa-. $!e action (as protested on 10 8o'e%ber 1901 by *elicidad Billanue'a, *ernando "aisip, Antonio Liang, *elina #iranda, Ricardo Puno, *lorencio La7a, and Rene Oca%po ,clai%ing t!at t!ey (ere granted pre'ious aut!ori>ation by t!e %unicipal go'ern%ent to conduct business t!erein-, in "i'il "ase 2040, (!ere t!e "ourt o *irst +nstance ,"*+- Pa%panga, =ranc! 2, issued a (rit o preli%inary in3unction t!at pre'ented t!e *A#$A %e%bers ro% constructing t!e said stalls until inal resolution o t!e contro'ersy. On 1& January 1904, (!ile t!e case (as pending, t!e %unicipal council o 5an *ernando adopted Resolution 29, (!ic! declared t!e sub3ect area as 6t!e par)ing place and as t!e public pla>a o t!e %unicipality,6 t!ereby i%pliedly re'o)ing Resolution 21& ,series o 1901-. On 2 8o'e%ber 190&, Judge Andres ". Aguilar decided t!e a oresaid case and !eld t!at t!e land occupied by Billanue'a, et. al., being public in nature, (as beyond t!e co%%erce o %an and t!ere ore could not be t!e sub3ect o pri'ate occupancy. $!e (rit o preli%inary in3unction (as %ade per%anent. $!e decision (as not en orced as t!e petitioners (ere not e'icted ro% t!e place. $!e nu%ber o 'endors in t!e area ,talipapa- ballooned to 200. $!e area deteriorated increasingly to t!e great pre3udice o t!e co%%unity in general, as t!e %a)es!i t stalls render t!e area as 'irtual ire trap. $!e proble% estered or so%e %ore years under a presu%ably uneasy truce a%ong t!e protagonists, none o (!o% %ade any %o'e, or so%e reason. On 12 January 19&2, t!e Association o "oncerned "iti>ens and "onsu%ers o 5an *ernando iled a petition or t!e i%%ediate i%ple%entation o Resolution 29, to restore t!e property to its original and custo%ary use as a public pla>a. Acting t!ereon a ter an in'estigation conducted by t!e %unicipal attorney, O+" ,O ice o t!e #ayor- Bicente #acalino issued on 14 June 19&2 a resolution re4uiring t!e %unicipal treasurer and t!e %unicipal engineer to de%olis! t!e stalls beginning 1 July 19&2. $!e Billanue'a, et. al. iled a petition or pro!ibition (it! t!e "*+ Pa%panga ,"i'il "ase 04?0- on 20 June 19&2. $!e 3udge denied t!e petition on 19 July 19&2, and t!e %otion or reconsideration on : August 19&2, pro%pting Billanue'a, et. al. to ile a petition on certiorari (it! t!e 5upre%e "ourt. Paterno Cue'arra, (!o replaced #acalino as O+" o 5an *ernando, (as i%pleaded. !ssue 1!et!er t!e Ordinance i%pairs t!e alleged lease contracts bet(een t!e %ar)et stall 'endors occupying t!e %unicipal pla>a and t!e Co'ern%ent. "e#$ A public pla>a is beyond t!e co%%erce o %an and so cannot be t!e sub3ect o lease or any ot!er contractual underta)ing. $!e lease o a public pla>a o a %unicipality in a'or o a pri'ate person is null and 'oid. A pla>a cannot be used or t!e construction o %ar)et stalls, specially o residences, and t!at suc! structures constitute a nuisance sub3ect to abate%ent according to la(. $o(n pla>as are properties o public do%inion, to be de'oted to public use and to be %ade a'ailable to t!e public in general. $!ey are outside t!e
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co%%erce o %an and cannot be disposed o or e'en leased by t!e %unicipality to pri'ate parties. Also, a portion o a public side(al) is li)e(ise beyond t!e co%%erce o %an. Any contract entered into in connection (it! t!e side(al), is ipso acto null and ultra 'ires. $!e side(al) (as intended or and (as used by t!e public, in going ro% one place to anot!er. $!e streets and public places o t!e city s!all be )ept ree and clear or t!e use o t!e public, and t!e side(al)s and crossings or t!e pedestrians, and t!e sa%e s!all only be used or occupied or ot!er purposes as pro'ided by ordinance or regulation@ stalls bloc) t!e ree passage o pedestrians resulting to clogged (it! 'e!icular tra ic. On t!e ot!er !and, police po(er under t!e general (el are clause aut!ori>es t!e %unicipal council to enact suc! ordinances and %a)e suc! regulations, not repugnant to la(, as %ay be necessary to carry into e ect and disc!arge t!e po(ers and duties con erred upon it by la( and suc! as s!all see% necessary and proper to pro'ide or t!e !ealt! and sa ety, pro%ote t!e prosperity, i%pro'e t!e %orals, peace, good order, co% ort, and con'enience o t!e %unicipality and t!e in!abitants t!ereo , and or t!e protection o property t!erein. $!us, police po(er cannot be surrendered or bargained a(ay t!roug! t!e %ediu% o a contract. E'ery contract a ecting t!e public interest su ers a congenital in ir%ity in t!at it contains an i%plied reser'ation o t!e police po(er as a postulate o t!e e7isting legal order. $!is po(er can be acti'ated at any ti%e to c!ange t!e pro'isions o t!e contract, or e'en abrogate it entirely, or t!e pro%otion or protection o t!e general (el are. 5uc! an act (ill not %ilitate against t!e i%pair%ent clause, (!ic! is sub3ect to and li%ited by t!e para%ount police po(er. 115 .an'a#an' v. !nter+e$&ate 0//e##ate -1urt 2!0-3 [GR 711)9, 22 *ece+ber 1988]4 a#s1 5e#-0&r ,&##a'e 0ss1c&at&1n !nc. 250,03 vs. !nter+e$&ate 0//e##ate -1urt [GR 7(37)], 5e#-0&r ,&##a'e 0ss1c&at&1n !nc. 250,03 vs. -1urt 16 0//ea#s [GR 7)39(], 5e#-0&r ,&##a'e 0ss1c&at&1n !nc. 250,03 vs. -1urt 16 0//ea#s [GR 78182], an$ , 5e#-0&r ,&##a'e 0ss1c&at&1n !nc. 250,03 vs. -1urt 16 0//ea#s [GR 82281] En Banc, Sar(iento (J): 1) concur, 1 on leave, & too! no part Facts *+, 7116-. =el;Air Billage is located nort! o =uendia A'enue e7tension across a stretc! o co%%ercial bloc) ro% Reposo 5treet in t!e (est up to Dodiac 5treet in t!e east. 1!en =el;Air Billage (as planned, t!is bloc) bet(een Reposo and Dodiac 5treets ad3oining =uendia A'enue in ront o t!e 'illage (as designated as a co%%ercial bloc). =el;Air Billage (as o(ned and de'eloped into a residential subdi'ision in t!e 19:0s by #a)ati 2e'elop%ent "orporation ,#2"-, (!ic! in 190& (as %erged (it! Ayala "orporation. 5pouses 5angalang reside at 110 Jupiter 5t. bet(een #a)ati A'e. and Reposo 5t.@ 5pouses Caston reside at 04 Jupiter 5t. bet(een #a)ati A'e. and Dodiac 5t.@ 5pouses =riones reside at 00 Jupiter 5t.@ (!ile =el;Air Billage Association, +nc. ,=ABA- is t!e !o%eo(ners. association in =el;Air Billage (!ic! ta)es care o t!e sanitation, security, tra ic regulations and general (el are o t!e 'illage. $!e lots (!ic! (ere ac4uired by t!e 5angalangs, t!e Castons, t!e =rioneses in 1900, 19:? and 19:&, respecti'ely, all sold by #2" sub3ect to certain conditions and ease%ents contained in 2eed Restrictions (!ic! or%ed a part o eac! deed o sale ,i.e. being auto%atic %e%bers o =el;Air Association (!o %ust abide by t!e rules and regulations laid do(n by t!e Association Eas per sanitation, security and general (el are o t!e co%%unityF@ t!at lots cannot be subdi'ided and only used or residential purposes@ t!at single a%ily !ouse be constructed in single lot@ no co%%ercial or ad'ertising signs placed or erected on t!e lot@ no ar% ani%als allo(ed, pets allo(ed@ ease%ent o 2 %eters (it!in lot@ lot not used or i%%oral or illegal trade or acti'ity@ grass al(ays tri%%ed@ Restrictions in orce or :0 years starting 1: January 19:?-. #2" constructed a ence on t!e co%%ercial bloc) along Jupiter 5treet in 1900, alt!oug! it (as not part o t!e original plan. $!e ence (as partially destroyed in 19?0 due to a typ!oon. $!e ence (as subse4uently rebuilt by t!e Ayala. Jupiter 5treet (as (idened in 19?2, and t!e ence !ad to be destroyed. Apon re4uest o =ABA, t!e (all (as rebuilt inside t!e boundary o t!e co%%ercial bloc). Ayala inally decided to subdi'ide and sell t!e lots in t!e co%%ercial bloc) bet(een =uendia and Jupiter. =ABA re4uested con ir%ation o use o t!e co%%ercial lots. On /0 June 19?2, Ayala li)e(ise in or%ed =ABA t!at in a e( %ont!s it s!all subdi'ided and sell t!e co%%ercial lots bordering t!e nort! side o =uendia A'enue E7tension ro% Reposo 5t. up to Dodiac 5t. 2eed restrictions ,building !a'ing set bac) o 19 %eters, and %atters RE entrances and e7its- are i%posed in suc! co%%ercial lots to !ar%oni>e and blend (it! t!e de'elop%ent and (el are o =el;Air Billage. Ayala urt!er applied or special %e%bers!ip
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in =ABA o t!e co%%ercial lot o(ners, t!e application sub%itted to =ABAGs board o go'ernors or decision. On 2: 5epte%ber 19?2, !eig!t li%itations or buildings (ere increased ro% 12.: %eters to 1: %eters and Jupiter street is (idened by /.: %eters. $!e (idening o t!e street reduced t!e association dues to be re%itted to =ABA, inas%uc! t!at it no( applies to ?0,?20 s4.%. rat!er t!an &1,:90 s4.%. 2ue rates !a'e increased ro% P0.:Hs4.% in 19?2 to P/Hs4.% in 19&0. On 4 April 19?:, #a)ati enacted Ordinance &1, pro'iding or t!e >oni ication o #a)ati, (!ic! classi ied =el;Air Billage as a "lass A Residential Done, (it! its boundary in t!e sout! e7tending to t!e center line o Jupiter 5treet ,"!apter /, Article 1, 5ection /.0/, paragrap! *-. $!e =uendia A'enue e7tension area (as classi ied as Ad%inistrati'e O ice Done (it! its boundary in t!e 8ort!; 8ort! East E7tending also up to t!e center line o Jupiter 5treet ,"!apter /, Article 1, 5ection /.0:, paragrap! "-. $!e Residential Done and t!e Ad%inistrati'e O ice Done !a'e a co%%on boundary along t!e center line o Jupiter 5treet. $!e >oning (as later ollo(ed under t!e "o%pre!ensi'e Doning Ordinance or t!e 8ational "apital Region adopted by t!e #etro #anila "o%%ission as Ordinance &1;01 on 14 #arc! 19&1, (it! %odi ication t!at =el;Air Billage is si%ply bounded in t!e 5out!;5out!east by Jupiter 5treet, and t!e bloc); deep strip along t!e nort!(est side o =uendia A'enue E7tension ro% Reposo to E25A as 9ig! +ntensity "o%%ercial Done. Ander t!e >oning classi ication, Jupiter 5treet is a co%%on boundary o =el;Air Billage and t!e co%%ercial >one. On 1? January 19??, t!e O ice o t!e #ayor o #a)ati directed =ABA, in t!e interest o public (el are and purpose o easing tra ic congestion, t!e opening o t!e A%apola ,Estrella; #ercedes@ Pal%a gate;Billena-, #ercedes ,E25A;+%eldaHA%apola 3unction-, Dodiac ,#ercedes;=uendia-, Jupiter ,Dodiac;Reposo, connecting #etropolitan a'enue to Pasong $a%o and B. "ru> e7tension-, 8eptune ,#a)ati a'e.;Reposo-, Orbit ,*.DobelH "andelaria intersection IJupiter Paseo de Ro7as@ #ercedes;=uendiastreets o =el;Air Billage or public use. On 10 *ebruary, =ABA replied, e7pressing concern o t!e residents about t!e opening o t!e streets to general public and re4uesting t!e inde inite postpone%ent o t!e plan to open Jupiter 5t. to public 'e!icles. =ABA, !o(e'er, 'oluntarily opened t!e ot!er streets. On 12 August 19??, t!e %unicipal o icials o #a)ati allegedly opened, destroyed and re%o'ed t!e gates constructed at t!e corner o Reposo 5t. and Jupiter 5t. as (ell as gatesH ences constructed at Jupiter 5treet and #a)ati A'enue orcibly@ t!ereby opening Jupiter street to public tra ic. +ncreased tra ic (as obser'ed along Jupiter 5treet a ter its opening to public use. Purc!asers o t!e co%%ercial lots started constructing t!eir respecti'e buildings and de%olis!ed t!e ence or (all (it!in t!e boundary o t!eir lots. #any o(ners constructed t!eir o(n ences and (alls and e%ployed t!eir o(n security guards. On 2? January 19?&, Ayala donated t!e entire Jupiter 5treet ro% #etropolitan A'enue to Dodiac 5treet to =ABA. 1it! t!e opening o t!e entire Jupiter street to public tra ic, t!e residential lots located in t!e nort!ern side o Jupiter 5treet ceased to be used or purely residential purposes, and beca%e co%%ercial in c!aracter. On 29 October 19?9, spouses 5angalang iled an action or da%ages against Ayala predicated on bot! breac! o contract and on tort or 4uasi;delict. A supple%ental co%plaint (as later iled by t!e 5angalangs to aug%ent t!e relie s prayed or in t!e original co%plaint because o alleged super'ening e'ents (!ic! occurred during t!e trial o t!e case. "lai%ing to be si%ilarly situated, spouses Caston, =riones, and =ABA inter'ened in t!e case. $!e "*+ Pasig rendered a decision in a'or o t!e 5angalangs a(arding t!e% P:00,000 as actual and conse4uential da%ages, P2# as %oral da%ages, P:00,000 as e7e%plary da%ages, P100,000 as attorneyGs ees, and t!e cost o suit. $!e inter'enors Caston and =riones (ere a(arded P400,000 as conse4uential da%ages, P:00,000 as %oral da%ages, P:00,000 as e7e%plary da%ages, P:0,000 as attorneyGs ees, and t!e cost o suit@ eac!. +nter'enor =ABA (as a(arded t!e sa%e e7cept or %oral da%ages. $!e da%ages a(arded bear legal interest ro% t!e iling o t!e co%plaint. Ayala (as also ordered to restoreHreconstruct t!e peri%eter (all at t!e original position in 1900 at its o(n e7pense (it!in 0 %ont!s ro% inality o 3udg%ent. On appeal, t!e "ourt o Appeals re'ersed and set aside t!e decision or not being supported by acts and la( on t!e %atter@ and entered anot!er, dis%issing t!e case or lac) o cause o action@ (it!out pronounce%ent as to costs. 5angalang appealed. *+, 7/&76. $!e =el;Air Billage Association ,=ABA- iled and action to en orce t!e restrictions stipulated in t!e deeds o sale e7ecuted by t!e Ayala "orporation. =ABA originally broug!t t!e co%plaint in t!e R$" #a)ati, principally or speci ic per or%ance, =ABA alleging t!at Rosario de Jesus $enorio allo(ed "ecilia Con>al'e> to occupy and con'ert t!e !ouse at 00 Jupiter 5treet into a restaurant, (it!out its )no(ledge and consent, and in 'iolation o t!e deed restrictions (!ic! pro'ide t!at t!e lot and building t!ereon %ust be used
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only or residential purposes upon (!ic! t!e prayed; or %ain relie (as or $enorio and Con>al'es to per%anently re rain ro% using t!e pre%ises as co%%ercial and to co%ply (it! t!e ter%s o t!e 2eed Restrictions. $!e trial court dis%issed t!e co%plaint on a procedural ground, i.e., pendency o an identical action, "i'il "ase /2/40 ,=ABA '. $enorio-. $!e "ourt o Appeals a ir%ed, and !eld, in addition, t!at Jupiter 5treet 6is classi ied as 9ig! density co%%ercial ,";/- >one as per "o%pre!ensi'e Doning Ordinance &1;01 or 8"R ollo(ing its o(n ruling in A";CR 00049 ,=ABA '. 9y;Land Realty < 2e'elop%ent "orp.-. =ABA appealed. *+, 76&-/. 5pouses Eduardo Ro%ualde> and =uena $ioseco are t!e o(ners o a !ouse and lot located at 10& Jupiter 5t ,$"$ //2/94, Registry o 2eeds Ri>al-.At t!e ti%e t!ey ac4uired t!e sub3ect !ouse and lot, se'eral restrictions (ere already annotated on t!e re'erse side o t!eir title. $!e restriction,s- re%ain in orce or :0 years ro% 1: January 19:?, unless sooner cancelled in its entirety by 2H/ 'ote o t!e %e%bers in good standing o t!e =el;Air Billage Association ,=ABA-. 9o(e'er, t!e Association %ay ro% ti%e to ti%e, add ne( ones, a%end or abolis! particular restrictions or parts t!ereo by %a3ority rule. 2uring t!e early part o 19?9, =ABA noted t!at certain reno'ations and constructions (ere being %ade by t!e spouses on t!e pre%ises. $!e latter ailed to in or% =ABA o t!e acti'ity, e'en upon re4uest, t!at pro%pted =ABA to send its c!ie security o icer to 'isit t!e pre%ises on 2/ #arc! 19?9 and ound out t!at t!e spouses (ere putting up a ba)e and co ee s!op. $!e spouses (ere re%inded t!at t!ey (ere 'iolating t!e deed restriction, but t!e latter proceeded (it! t!e construction o t!e ba)e s!op. On /0 April 19?9, =ABA (rote t!e spouses to desist ro% using t!e pre%ises or co%%ercial purposes, (it! t!reat o suit. 2espite t!e (arning, t!e spouses proceeded (it! t!e construction o t!eir ba)e s!op. $!e trial court ad3udged in a'or o =ABA. On appeal, t!e "ourt o Appeals re'ersed t!e decision on t!e strengt! o its !olding in A";CR 00049. =ABA ele'ated t!e %atter to t!e 5upre%e "ourt by a petition or re'ie( on certiorari. $!e "ourt initially denied t!e petition or lac) o %erit, or (!ic! =ABA soug!t a reconsideration. Pending resolution, t!e case (as re erred to t!e 5econd 2i'ision and t!erea ter, to t!e "ourt En =anc en consulta. Per Resolution, dated 29 April 19&&, t!e case (as consolidated (it! CR ?4/?0 and &22&1. *+, 7010 . 2olores *illey leased !er building and lot situated at 20: Reposo 5treet to t!e ad'ertising ir% J. Ro%ero and Associates, in alleged 'iolation o deed restrictions (!ic! stipulated t!at *illey.s lot could only be used or residential purposes. $!e =el;Air Billage Association ,=ABA- soug!t 3udg%ent ro% t!e lo(er court ordering t!e *illey and J.Ro%ero to per%anently re rain ro% using t!e pre%ises in 4uestion as co%%ercial and to co%ply (it! t!e ter%s o t!e deed restrictions. $!e trial court granted t!e relie soug!t or by =ABA (it! t!e a additional i%position o e7e%plary da%ages o P:0,000.00 and attorney.s ees o P10,000.00. $!e trial court ga'e e%p!asis to t!e restricti'e clauses contained in *illey.s deed o sale ro% =ABA, (!ic! %ade t!e con'ersion o t!e building into a co%%ercial one a 'iolation. Appeal (as %ade clai%ing t!at t!e restrictions in t!e deed o sale are out%oded. =ABA on t!e ot!er !and relied on a rigid interpretation o t!e contractual stipulations agreed upon (it! *illey, in e ect arguing t!at t!e restrictions are 'alid ad in initu%. $!e "ourt o Appeals o'erturned t!e lo(er court, obser'ing t!at J. Ro%ero < Associates !ad been gi'en aut!ority to open a co%%ercial o ice by t!e 9u%an 5ettle%ents Regulatory "o%%ission. ECR &22&1F Bioleta #oncal, o(ner o a parcel o land (it! a residential !ouse constructed t!ereon situated at 104 Jupiter 5treet, leased !er property to #a3al 2e'elop%ent "orporation, (it!out t!e consent o t!e =el;Air Billage Association ,=ABA-. 5!e purc!ased t!e lot ro% #a)ati 2e'elop%ent "orporation. $!e lot in 4uestion is restricted to be used or residential purposes only as part o t!e deed restrictions annotated on its title. +t is on t!e sa%e side o t!e street (!ere t!ere are restaurants, clinics, place%ent or e%ploy%ent agencies and ot!er co%%ercial or business establis!%ents. $!ese establis!%ents, !o(e'er, (ere sued by =ABA in t!e proper court. $!e trial court dis%issed t!e =ABA.s co%plaint, a dis%issal a ir%ed on appeal. $!e appellate court declared t!at t!e opening o Jupiter 5treet to !u%an and 'e!icular tra ic, and t!e co%%erciali>ation o t!e #unicipality o #a)ati in general, (ere circu%stances t!at !ad %ade co%pliance by #oncal (it! t!e a oresaid 6deed restrictions6 6e7tre%ely di icult and unreasonable, a de'elop%ent t!at !ad e7cused co%pliance altoget!er under Article 120? o t!e "i'il "ode. =ABA appealed.
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.71rt Facts CR ?4/?0, ?0/94, ?&1&2, and &22&1 are e orts to en orce t!e 6deed restrictions6 against speci ic residents o Jupiter 5treet and, (it! respect to CR ?&1&2, Reposo 5treet. $!e residents !a'e allegedly con'erted t!eir residences into co%%ercial establis!%ents ,a restaurant in CR ?4/?0, a ba)ery and co ee s!op in CR ?0/94, an ad'ertising ir% in CR ?&1&2@ and a construction co%pany, apparently, in CR &22&1in 'iolation o t!e said restrictions. $!eir %ot!er case, CR ?1109 is, on t!e ot!er !and, a petition to !old t!e 'endor itsel , Ayala "orporation , or%erly #a)ati 2e'elop%ent "orporation-, liable or tearing do(n t!e peri%eter (all along Jupiter 5treet t!at !ad t!ereto ore closed its co%%ercial section ro% t!e residences o =el;Air Billage and us!ering in, as a conse4uence, t!e ull 6co%%erciali>ation6 o Jupiter 5treet, in 'iolation o t!e 'ery restrictions it !ad aut!ored. $!e "ourt o Appeals dis%issed all : appeals on t!e basis pri%arily o its ruling in A";CR 00049, 6=el;Air Billage, +nc. '. 9y;Land Realty 2e'elop%ent "orporation, et al.,6 in (!ic! t!e appellate court e7plicitly re3ected clai%s under t!e sa%e 6deed restrictions6 as a result o Ordinance &1 enacted by t!e Co'ern%ent o t!e #unicipality o #a)ati, as (ell as "o%pre!ensi'e Doning Ordinance &101 pro%ulgated by t!e #etropolitan #anila "o%%ission, (!ic! t(o ordinances allegedly allo(ed t!e use o Jupiter 5treet bot! or residential and co%%ercial purposes. +t (as li)e(ise !eld t!at t!ese t(in %easures (ere 'alid as a legiti%ate e7ercise o police po(er. !ssue 1!et!er t!e constitutional guarantee on non;i%pair%ent o contracts can be raised as a deterrent to t!e e7ercise o police po(er. "e#$ All contracts are sub3ect to t!e o'erriding de%ands, needs, and interests o t!e greater nu%ber as t!e 5tate %ay deter%ine in t!e legiti%ate e7ercise o police po(er. $!e "ourt guarantees sanctity o contract and is said to be t!e 6la( bet(een t!e contracting parties,6 but (!ile it is so, it cannot contra'ene 6la(, %orals, good custo%s, public order, or public policy.6 Abo'e all, it cannot be raised as a deterrent to police po(er, designed precisely to pro%ote !ealt!, sa ety, peace, and en!ance t!e co%%on good, at t!e e7pense o contractual rig!ts, (!ene'er necessary. Police po(er is t!e po(er to prescribe regulations to pro%ote t!e !ealt!, %orals, peace, education, good order or sa ety and general (el are o t!e people. +n'ariably described as 6t!e %ost essential, insistent, and illi%itable o po(ers6 and 6in a sense, t!e greatest and %ost po(er ul attribute o go'ern%ent,6 t!e e7ercise o t!e po(er %ay be 3udicially in4uired into and corrected only i it is capricious, (!i%sical, un3ust or unreasonable, t!ere !a'ing been a denial o due process or a 'iolation o any ot!er applicable constitutional guarantee. Police po(er is elastic and %ust be responsi'e to 'arious social conditions@ it is not con ined (it!in narro( circu%scriptions o precedents resting on past conditions@ it %ust ollo( t!e legal progress o a de%ocratic (ay o li e. Public (el are, (!en clas!ing (it! t!e indi'idual rig!t to property, s!ould be %ade to pre'ail t!roug! t!e state.s e7ercise o its police po(er. 9erein, t!e ##" Ordinance represents a legiti%ate e7ercise o police po(er, as t!e ordinance is neit!er capricious or arbitrary or unreasonable@ but t!at it is based on co%pelling interests o general (el are. $!e restricti'e ease%ents are si%ilar to any ot!er contract, and s!ould not deter t!e 'alid e7ercise o police po(er. $!e ##" !as reclassi ied Jupiter 5treet into a J!ig! density co%%ercial >one, pursuant to Ordinance &1;01. 5angalang, =ABA, et. al., t!us !a'e no cause o action on t!e strengt! alone o said Jdeed restrictions.K 11) %rt&'as v. -1urt 16 0//ea#s [GR 12)102, ( *ece+ber 2000] Second #ivision, 1uisu(2ing (J): / concur Facts On 2: August 19?0, Ortigas < "o%pany sold to E%ilia 9er%oso, a parcel o land located in Creen!ills 5ubdi'ision +B, 5an Juan, #etro #anila ,$"$ 0?/?- (it! conditions duly annotated on t!e certi icate o title issued to E%ilia. +n 19&1, t!e #etropolitan #anila "o%%ission ,no( ##2A- enacted ##" Ordinance &1;01 ,"o%pre!ensi'e Doning Area or t!e 8ational "apital Region-, (!ic! reclassi ied as a co%%ercial area a portion o Ortigas A'enue ro% #adison to Roose'elt 5treets o Creen!ills 5ubdi'ision (!ere t!e lot is located. On & June 19&4, +s%ael #at!ay +++ leased t!e lot ro% E%ilia 9er%oso and J.P. 9er%oso Realty "orp.. $!e lease contract did not speci y t!e purposes o t!e lease. $!ereupon, #at!ay constructed a single story co%%ercial building or Creen!ills Auto!aus, +nc., a car sales co%pany. On 1&
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January 199:, Ortigas iled a co%plaint against E%ilia 9er%oso (it! t!e R$" Pasig ,=ranc! 201, "i'il "ase 049/1-, see)ing t!e de%olition o t!e said co%%ercial structure or !a'ing 'iolated t!e ter%s and conditions o t!e 2eed o 5ale. $!e co%plaint (as later a%ended to i%plead +s%ael C. #at!ay +++ and J.P. 9er%oso Realty "orp., (!ic! !a'e 10L interest in t!e lot. +n !is ans(er, #at!ay +++ denied any )no(ledge o t!e restrictions on t!e use o t!e lot and iled a cross;clai% against t!e 9er%osos. On 10 June 199:, t!e trial court issued t!e (rit o preli%inary in3unction. On 29 June 199:, #at!ay +++ %o'ed to set aside t!e in3uncti'e order, but t!e trial court denied t!e %otion. #at!ay +++ t!en iled (it! t!e "A a special ci'il action or certiorari ,"A;CR 5P /919/-, ascribing to t!e trial court gra'e abuse o discretion in issuing t!e (rit o preli%inary in3unction. 9e clai%ed t!at ##" Ordinance &1;01 classi ied t!e area (!ere t!e lot (as located as co%%ercial area and said ordinance %ust be read into t!e 2: August 19?0 2eed o 5ale as a concrete e7ercise o police po(er. Ortigas < "o%pany a'erred t!at restrictions duly annotated on t!e title %ust pre'ail o'er t!e ordinance. On 2: #arc! 1990, t!e appellate court granted t!e petition, nulli ied and set aside t!e assailed orders. $!e appellate court !eld t!at t!e ##" Ordinance e ecti'ely nulli ied t!e restrictions allo(ing only residential use o t!e property in 4uestion. Ortigas seasonably %o'ed or reconsideration, but t!e appellate court denied it on 1/ August 1990. Ortigas iled t!e petition or re'ie(. !ssue 1!et!er ordinances, in e7ercise o police po(er, be gi'en retroacti'e e ect and i%pair 'ested rig!ts and contracts. "e#$ +n general, la(s are to be construed as !a'ing only prospecti'e operation. Le7 prospicit, non respicit. E4ually settled, only la(s e7isting at t!e ti%e o t!e e7ecution o a contract are applicable t!ereto and not later statutes, unless t!e latter are speci ically intended to !a'e retroacti'e e ect. A later la( (!ic! enlarges, abridges, or in any %anner c!anges t!e intent o t!e parties to t!e contract necessarily i%pairs t!e contract itsel and cannot be gi'en retroacti'e e ect (it!out 'iolating t!e constitutional pro!ibition against i%pair%ent o contracts. One e7ception in'ol'es police po(er. A la( enacted in t!e e7ercise o police po(er to regulate or go'ern certain acti'ities or transactions could be gi'en retroacti'e e ect and %ay reasonably i%pair 'ested rig!ts or contracts. Police po(er legislation is applicable not only to uture contracts, but e4ually to t!ose already in e7istence. 8on;i%pair%ent o contracts or 'ested rig!ts clauses (ill !a'e to yield to t!e superior and legiti%ate e7ercise by t!e 5tate o police po(er to pro%ote t!e !ealt!, %orals, peace, education, good order, sa ety, and general (el are o t!e people. #oreo'er, statutes in e7ercise o 'alid police po(er %ust be read into e'ery contract. ##" Ordinance &1;01 is a legiti%ate police po(er %easure as pre'iously !eld in 5angalang 's. +A". $!us, ollo(ing t!e ruling in Ortigas < "o., Ltd. 's. *eati =an) < $rust "o., 94 5"RA :// ,19?9-, t!e contractual stipulations annotated on t!e $orrens $itle %ust yield to t!e ordinance. 1!en t!at stretc! (as reclassi ied, t!e restrictions in t!e contract o sale (ere dee%ed e7tinguis!ed by t!e retroacti'e operation o t!e >oning ordinance and could no longer be en orced. 1!ile P!ilippine legal syste% up!olds t!e sanctity o contract so t!at a contract is dee%ed la( bet(een t!e contracting parties, nonet!eless, stipulations in a contract cannot contra'ene 6la(, %orals, good custo%s, public order, or public policy.6 Ot!er(ise suc! stipulations (ould be dee%ed null and 'oid. 117 0be##a v. 8LR- [GR 71813, 20 9u#y 1987] En Banc, 3aras (J): 1& concur Facts On 2? June 1900, Rosalina Pere> Abella leased a ar% land in Ponte'erde, 8egros Occidental ,9acienda 2anao;Ra%ona- or a period o 10 years, rene(able, at !er option, or anot!er 10 years. On 1/ August 19?0, s!e opted to e7tend t!e lease contract or anot!er 10 years. 2uring t!e e7istence o t!e lease, s!e e%ployed Ricardo 2ionele 5r., a regular ar% (or)er since 1949 and pro%oted to "abo in 190/, and Ro%eo Muitco, a regular e%ployee since 190& and pro%oted to "abo in 8o'e%ber o sa%e year. Apon t!e e7piration o !er lease!old rig!ts, Abella dis%issed 2ionele and Muitco and turned o'er t!e !acienda to t!e o(ners t!ereo on : October 19&1, (!o continued t!e %anage%ent, culti'ation and operation o t!e ar%. On 20 8o'e%ber 19&1, 2ionele and Muitco iled a co%plaint against t!e Abella at t!e #inistry o Labor and E%ploy%ent, =acolod "ity 2istrict O ice, or o'erti%e pay, illegal dis%issal and reinstate%ent (it!
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bac)(ages. A ter t!e parties !ad presented t!eir respecti'e e'idence, Labor Arbiter Lucas, in a 2ecision dated 10 July 19&2, ruled t!at t!e dis%issal is (arranted by t!e cessation o business, but granted t!e t(o, separation pay, applying Article 2&4 o t!e Labor "ode. On appeal on 11 August 19&2, t!e 8ational Labor Relations "o%%ission ,8LR"-, in a Resolution dated & April 19&:, a ir%ed t!e decision and dis%issed t!e appeal or lac) o %erit. On 22 #ay 19&:, Abella iled a %otion or reconsideration but t!e sa%e (as denied in a resolution dated 10 June 19&:. Abella iled t!e petition or re'ie( on certiorari be ore t!e 5upre%e "ourt. !ssue 1!et!er Article 2&4 o t!e Labor "ode, pro'iding or t!e rig!ts o t!e e%ployees under t!e circu%stances o ter%ination, 'iolate t!e constitutional guarantee against i%pair%ent o obligations and contracts. "e#$ Article 2&4 o t!e Labor "ode, (!ic! pro'ides or t!e rig!ts o t!e e%ployees under t!e circu%stances o ter%ination, did not 'iolate t!e constitutional guarantee against i%pair%ent o obligations and contracts. $!e pro!ibition to i%pair t!e obligation o contracts is not absolute and un4uali ied. $!e pro!ibition is general, a ording a broad outline and re4uiring construction to ill in t!e details. $!e pro!ibition is not to read (it! literal e7actness li)e a %at!e%atical or%ula or it pro!ibits unreasonable i%pair%ent only. +n spite o t!e constitutional pro!ibition t!e 5tate continues to possess aut!ority to sa eguard t!e 'ital interests o its people. Legislation appropriate to sa eguard said interest %ay %odi y or abrogate contracts already in e ect. *or not only are e7isting la(s read into contracts in order to i7 t!e obligations as bet(een t!e parties but t!e reser'ation o essential attributes o so'ereign po(er is also read into contracts as a postulate o t!e legal order. All contracts %ade (it! re erence to any %atter t!at is sub3ect to regulation under t!e police po(er %ust be understood as %ade in re erence to t!e possible e7ercise o t!at po(er. Ot!er(ise, i%portant and 'aluable re or%s %ay be precluded by t!e si%ple de'ice o entering into contracts or t!e purpose o doing t!at (!ic! ot!er(ise %ay be pro!ibited. +n order to deter%ine (!et!er legislation unconstitutionally i%pairs contract o obligations, no unc!anging yardstic), applicable at all ti%es and under all circu%stances, by (!ic! t!e 'alidity o eac! statute %ay be %easured or deter%ined, !as been as!ioned, but e'ery case %ust be deter%ined upon its o(n circu%stances. Legislation i%pairing t!e obligation o contracts can be sustained (!en it is enacted or t!e pro%otion o t!e general good o t!e people, and (!en t!e %eans adopted %ust be legiti%ate, i.e. (it!in t!e scope o t!e reser'ed po(er o t!e state construed in !ar%ony (it! t!e constitutional li%itation o t!at po(er. #oreo'er, to co%e under t!e constitutional pro!ibition, t!e la( %ust e ect a c!ange in t!e rig!ts o t!e parties (it! re erence to eac! ot!er and not (it! re erence to non;parties. 118 :&r1 v. "1ntan1sas [GR L-32312, 25 81ve+ber 1983] 5econd 2i'ision, Abad 5antos ,J-N : concur, 1 too) no part Facts Da ra *inancing Enterprise e7tended loans to public sc!ool teac!ers in "ebu "ity and t!e teac!ers concerned e7ecuted pro%issory notes and special po(ers o attorney in a'or o Da ra to ta)e and collect t!eir salary c!ec)s ro% t!e 2i'ision O ice in "ebu "ity o t!e =ureau o Public 5c!ools. Aurelio $iro, 5uperintendent o 5c!ools in "ebu "ity, orbade t!e collection o c!ec)s by persons ot!er t!an t!e e%ployees concerned (it! "ircular 21 ,series o 1909, #e%orandu% Order 9/ o t!e E7ecuti'e O ice dated : *ebruary 190& (as 4uoted- dated : 2ece%ber 1909. Da ra sued $iro (it! t!e no( de unct "ourt o *irst +nstance ,"*+"ebu ,"i'il "ase 11010-. Da ra soug!t to co%pel $iro to !onor t!e special po(ers o attorney, to declare "ircular 21 to be illegal, and to %a)e $iro pay attorneyGs ees and da%ages. $!e trial court granted t!e prayer but t!e clai% or %oney (as disallo(ed on t!e ground t!at !e acted in good ait! in i%ple%enting "ircular 21. $iro see)s in t!e petition or re'ie( be ore t!e 5upre%e "ourt a re'ersal o t!e trial courtGs decision. !ssue 1!et!er "ircular 21 i%pairs t!e obligations o contracts bet(een Da ra *inancing Enterprise and t!e teac!ers. "e#$ $!e salary c!ec) o a go'ern%ent o icer or e%ployee suc! as a teac!er does not belong to !i% be ore it is p!ysically deli'ered to !i%. Antil t!at ti%e t!e c!ec) belongs to t!e Co'ern%ent. Accordingly, be ore
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t!ere is actual deli'ery o t!e c!ec), t!e payee !as no po(er o'er it@ !e cannot assign it (it!out t!e consent o t!e Co'ern%ent. $!e "ircular, urt!er, is aut!ori>ed by rele'ant statutes suc! as t!e Re'ised Ad%inistrati'e "ode ,5ection ?9b, Po(er to regulate- and t!e #agna "arta or $eac!ers ,RA 40?0, 5ection 21, 2educti'e pro!ibited-. $!e "ircular does not i%pair t!e obligation o contracts (it! t!e teac!ers as t!e "ircular does not pre'ent Da ra ro% collecting t!e loans but %erely %a)es t!e Co'ern%ent a non;participant in t!eir collection. 119 -a#e1n v. 0'us *eve#1/+ent -1r/. [GR 773)5, 7 0/r&# 1992] 4hird #ivision, Bidin (J): & concur, 1 on leave Facts Agus 2e'elop%ent "orporation ,A2"- is t!e o(ner o a parcel o land located at Lealtad, 5a%paloc, #anila, (!ic! it leased to Rita "aleon or a %ont!ly rental o P1&0.00. A2" constructed on t!e lot leased a 4;door apart%ent building. 1it!out t!e consent o A2", "aleon sub;leased 2 o t!e 4 doors o t!e apart%ent to Rolando Cue'arra and *elicisi%a Estrada or a %ont!ly rental o P/:0.00 eac!. Apon learning o t!e sub; lease, A2" t!roug! counsel de%anded in (riting t!at "aleon 'acate t!e leased pre%ises. *or "aleonGs ailure to co%ply (it! t!e de%and, A2" iled a co%plaint or e3ect%ent (it! #etropolitan $rial "ourt ,#$"- o #anila ,=ranc! 12-, citing t!e pro'isions o =atas Pa%bansa 2:, 5ection :, as ground, (!ic! is t!e unaut!ori>ed sub;leasing o part o t!e leased pre%ises to t!ird persons (it!out securing t!e consent o t!e lessor (it!in t!e re4uired 00;day period ro% t!e pro%ulgation o t!e ne( la( ,=P 2:-. A ter trial, t!e court a 4uo rendered its decision ordering "aleon and all persons clai%ing possession under !er ,a- to 'acate t!e pre%ises alluded to in t!e co%plaint@ ,b- to re%o'e (!ate'er i%pro'e%ent s!e introduced on t!e property@ ,cto pay A2" t!e a%ount o P2,000.00 as attorney.s ees@ and ,d- to pay t!e costs. "aleon appealed t!e decision to t!e Regional $rial "ourt ,R$"- and on 24 8o'e%ber 19&0, t!e R$" a ir%ed in toto t!e decision o t!e #$". $!e R$" decision (as appealed to t!e "ourt o Appeals or re'ie(. $!e appellate court, on 2& January 19&?, dis%issed t!e petition outrig!t or not being pri%a acie %eritorious. "aleon iled t!e petition or re'ie( on certiorari (it! t!e 5upre%e "ourt. !ssue 1!et!er legislation, appropriate to sa eguard 'ital interests o t!e people, %ay %odi y or abrogate contracts already in e ect. "e#$ $!e constitutional guaranty o non;i%pair%ent o obligations o contract is li%ited by and sub3ect to t!e e7ercise o police po(er o t!e 5tate in t!e interest o public !ealt!, sa ety, %orals and general (el are. +n spite o t!e constitutional pro!ibition, t!e 5tate continues to possess aut!ority to sa eguard t!e 'ital interests o its people. Legislation appropriate to sa eguarding said interest %ay %odi y or abrogate contracts already in e ect. E'ery contract a ecting public interest su ers a congenital in ir%ity in t!at it contains an i%plied reser'ation o t!e police po(er as a postulate o t!e e7isting legal order. $!is po(er can be acti'ated at anyti%e to c!ange t!e pro'isions o t!e contract, or e'en abrogate it entirely, or t!e pro%otion or protection o t!e general (el are. 5uc! an act (ill not %ilitate against t!e i%pair%ent clause, (!ic! is sub3ect to and li%ited by t!e para%ount police po(er. =atas Pa%bansa 2:, 6An Act Regulating Rentals o 2(elling Anits or o Land On 1!ic! Anot!er.s 2(elling is Located and *or Ot!er Purposes6 s!o(s t!at t!e sub3ect %atter is t!e regulation o rentals and is intended only or d(elling units (it! speci ied %ont!ly rentals constructed be ore t!e la( beca%e e ecti'e. =P 2: is deri'ed ro% P2 20 (!ic! !as been declared by t!e "ourt as a police po(er legislation, applicable to leases entered into prior to 14 July 19?1 ,e ecti'ity date o RA 0:/9-, so t!at t!e applicability t!ereo to e7isting contracts cannot be denied. 120 Mera#c1 v. La'una [GR 131359, 5 May 1999] 4hird #ivision, 5itug (J): / concur Facts On 'arious dates, certain %unicipalities o t!e Pro'ince o Laguna, including, =iOan, 5ta. Rosa, 5an Pedro, Luisiana, "alauan and "abuyao, by 'irtue o e7isting la(s t!en in e ect, issued resolutions t!roug! t!eir respecti'e %unicipal councils granting ranc!ise in a'or o t!e #anila Electric "o%pany ,#eralco- or
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t!e supply o electric lig!t, !eat and po(er (it!in t!eir concerned areas. On 19 January 19&/, #eralco (as li)e(ise granted a ranc!ise by t!e 8ational Electri ication Ad%inistration to operate an electric lig!t and po(er ser'ice in t!e #unicipality o "ala%ba, Laguna. On 12 5epte%ber 1991, Republic Act ?100 ,1991 Local Co'ern%ent "ode ELC"F- (as enacted to ta)e e ect on 1 January 1992 en3oining local go'ern%ent units to create t!eir o(n sources o re'enue and to le'y ta7es, ees and c!arges, sub3ect to t!e li%itations e7pressed t!erein, consistent (it! t!e basic policy o local autono%y. Pursuant to t!e pro'isions o t!e "ode, Laguna enacted Pro'incial Ordinance 01;92, e ecti'e 1 January 199/, (!ic! pro'ided a *ranc!ise $a7 ,5ection 2.09-. On t!e basis o t!e ordinance, Pro'incial $reasurer sent a de%and letter to #eralco or t!e corresponding ta7 pay%ent. #eralco paid t!e ta7 under protest. A or%al clai% or re und (as t!erea ter sent by #eralco to t!e Pro'incial $reasurer o Laguna clai%ing t!at t!e ranc!ise ta7 it !ad paid and continued to pay to t!e 8ational Co'ern%ent pursuant to P2 ::1 ,5ection 1- already included t!e ranc!ise ta7 i%posed by t!e Pro'incial $a7 Ordinance. On 2& August 199:, t!e clai% or re und o #eralco (as denied in a letter signed by Co'ernor Lina. +n denying t!e clai%, t!e pro'ince relied on a %ore recent la(, RA ?100 ,1991 LC"-, t!an t!e old decree in'o)ed by #eralco ,P2 ::1-. On 14 *ebruary 1990, #eralco iled (it! t!e Regional $rial "ourt ,R$"- o 5ta. "ru>, Laguna, a co%plaint or re und, (it! a prayer or t!e issuance o a (rit o preli%inary in3unction andHor $RO, against t!e Pro'ince o Laguna and =ala>o in !is capacity as t!e Pro'incial $reasurer o Laguna. $!e trial court, in its assailed decision o /0 5epte%ber 199?, dis%issed t!e co%plaint and declared t!e ordinance 'alid, binding, reasonable, and en orceable. 9ence, t!e petition. !ssue 1!et!er t!e (it!dra(al o ta7 e7e%ption to #eralco by t!e local go'ern%ent unit ,pro'ince- 'iolates t!e non;i%pair%ent clause o t!e "onstitution. "e#$ $!e Local Co'ern%ent "ode o 1991 !as incorporated and adopted, by and large, t!e pro'isions o t!e no( repealed Local $a7 "ode ,P2 2/1 pursuant to 5ection 2, Article P+, 19?/ "onstitution@ in e ect since 1 July 19?/-. $!e 1991 "ode e7plicitly aut!ori>es pro'incial go'ern%ents, not(it!standing 6any e7e%ption granted by any la( or ot!er special la( to i%pose a ta7 on businesses en3oying a ranc!ise ,5ection 1/?-. +ndicati'e o t!e legislati'e intent to carry out t!e "onstitutional %andate o 'esting broad ta7 po(ers to local go'ern%ent units, t!e Local Co'ern%ent "ode !as e ecti'ely (it!dra(n ta7 e7e%ptions or incenti'es t!ereto ore en3oyed by certain entities ,5ection 19/-. 1!ile ta7 e7e%ptions contained in special ranc!ises are in t!e nature o contracts and a part o t!e induce%ent or carrying on t!e ranc!ise, t!ese e7e%ptions, ne'ert!eless are ar ro% being strictly contractual in nature. "ontractual ta7 e7e%ptions, in t!e real sense o t!e ter% and (!ere t!e non;i%pair%ent clause o t!e "onstitution can rig!tly be in'o)ed, are t!ose agreed to by t!e ta7ing aut!ority in contracts, suc! as t!ose contained in go'ern%ent bonds or debentures, la( ully entered into by t!e% under enabling la(s in (!ic! t!e go'ern%ent, acting in its pri'ate capacity, s!eds its cloa) o aut!ority and (ai'es its go'ern%ental i%%unity. $ruly, ta7 e7e%ptions o t!is )ind %ay not be re'o)ed (it!out i%pairing t!e obligations o contracts. $!ese contractual ta7 e7e%ptions, !o(e'er, are not to be con used (it! ta7 e7e%ptions granted under ranc!ises. A ranc!ise parta)es t!e nature o a grant (!ic! is beyond t!e pur'ie( o t!e non;i%pair%ent clause o t!e "onstitution. +ndeed, Article P++, 5ection 11, o t!e 19&? "onstitution, li)e its precursor pro'isions in t!e 19/: and t!e 19?/ "onstitutions, is e7plicit t!at no ranc!ise or t!e operation o a public utility s!all be granted e7cept under t!e condition t!at suc! pri'ilege s!all be sub3ect to a%end%ent, alteration or repeal by "ongress as and (!en t!e co%%on good so re4uires. +ndeed, Article P++, 5ection 11, o t!e 19&? "onstitution is e7plicit t!at no ranc!ise or t!e operation o a public utility s!all be granted e7cept under t!e condition t!at suc! pri'ilege s!all be sub3ect to a%end%ent, alteration or repeal by "ongress as and (!en t!e co%%on good so re4uires.

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