ORTIGAS & CO. LTD., petitioner, vs. THE COURT OF APPEALS and ISMAEL G. MATHAY III, respondents G.R.

No. 126102, De e!"e# $, 2000 Facts: Petitioner Ortigas & Company sold to Emilia Hermoso, a parcel of land known located in Greenhills San Juan, etro anila! "he contract of sale pro#ided that the lot$ %! &e used e'clusi#ely(for residential purposes only, and not more than one single)family residential &uilding will &e constructed thereon! *! "he +,-E. shall not erect(any sign or &ill&oard on the roof(for ad#ertising purposes /! 0o single)family residential &uilding shall &e erected(until the &uilding plans, specification(ha#e &een appro#ed &y the SE11E. 2! .estrictions shall run with the land and shall &e construed as real co#enants until 3ecem&er /%, *4*5 when they shall cease and terminate( "hese and the other conditions were duly annotated on the certificate of title issued to Emilia! "he etropolitan anila Commission 6now etropolitan anila 3e#elopment 7uthority8 enacted C Ordinance 0o! 9%)4%, also known as the Comprehensi#e :oning 7rea for the 0ational Capital .egion! "he ordinance reclassified as a commercial area a portion of Ortigas 7#enue from adison to .oose#elt Streets of Greenhills Su&di#ision where the lot is located! Pri#ate respondent ;smael athay ;;; leased the lot from Emilia Hermoso and J!P! Hermoso .ealty Corp! "he lease contract did not specify the purposes of the lease! "hereupon, pri#ate respondent constructed a single story commercial &uilding for Greenhills 7utohaus, ;nc!, a car sales company! Petitioner filed a complaint against Emilia Hermoso which sought the demolition of the said commercial structure for ha#ing #iolated the terms and conditions of the 3eed of Sale! Complainant prayed for the issuance of a temporary restraining order to prohi&it petitioner from constructing the commercial &uilding and<or engaging in commercial acti#ity on the lot! ;n his answer, athay ;;; denied any knowledge of the restrictions on the use of the lot and filed a cross)claim against the Hermosos! "he trial court issued the writ of preliminary in=unction! in=uncti#e order, &ut the trial court denied the motion! athay ;;; mo#ed to set aside the

athay ;;; then filed with the Court of 7ppeals ascri&ing to the trial court gra#e a&use of discretion in issuing the writ of preliminary in=unction! He claimed that C Ordinance 0o! 9%) 4% classified the area where the lot was located as commercial area and said ordinance must &e read into the 7ugust *5, %>?@ 3eed of Sale as a concrete e'ercise of police power! Ortigas and Company a#erred that inasmuch as the restrictions on the use of the lot were duly annotated on the title it issued to Emilia Hermoso, said restrictions must pre#ail o#er the ordinance, specially since these restrictions were agreed upon &efore the passage of C Ordinance 0o! 9%)4%! Issue: AO0 the C Ordinance 0o! 9%)4% nullified the &uilding restriction imposing e'clusi#e residential use on the property Ruling: "he trial court o&ser#ed that the contract of sale was entered into in 7ugust %>?@, while the Boning ordinance was enacted only in arch %>9%! "he trial court reasoned that since pri#ate respondent had failed to show that C Ordinance 0o! 9%)4% had retroacti#e effect, %a&d o#d&nan e %'o()d "e *&+en ,#o%,e -&+e a,,)& a-&on on). citing Co vs. Intermediate Appellate Court, 162 SCRA 39 !19""#. ;n general, laws are to &e construed as ha#ing only prospecti#e operation! 1e' prospicit, non respicit! ECually settled, on). )a/% e0&%-&n* a- -'e -&!e o1 -'e e0e (-&on o1 a on-#a - a#e a,,)& a")e -'e#e-o and no- )a-e# %-a-(-e%, (n)e%% -'e )a--e# a#e %,e &1& a)). &n-ended -o 'a+e #e-#oa -&+e e11e -. 7 later law which enlarges, a&ridges, or in any manner changes the intent of the parties to the contract necessarily impairs the contract itself and cannot &e gi#en retroacti#e effect without #iolating the constitutional prohi&ition against impairment of contracts!

2(-, -'e 1o#e*o&n* ,#&n &,)e% do ad!&- o1 e#-a&n e0 e,-&on%. One &n+o)+e% ,o)& e ,o/e# ! 7 )a/ ena -ed &n -'e e0e# &%e o1 ,o)& e ,o/e# -o #e*()a-e o# *o+e#n e#-a&n a -&+&-&e% o# -#an%a -&on% o()d "e *&+en #e-#oa -&+e e11e - and !a. #ea%ona"). &!,a&# +e%-ed #&*'-% o# on-#a -%. Police power legislation is applica&le not only to future contracts, &ut eCually to those already in e'istence! 0onimpairment of contracts or #ested rights clauses will ha#e to yield to the superior and legitimate e'ercise &y the State of police power to promote the health, morals, peace, education, good order, safety, and general welfare of the people! oreo#er, statutes in e'ercise of #alid police power must &e read into e#ery contract! 0oteworthy, in Sangalang vs. Intermediate Appellate Court, we already upheld MMC O#d&nan e No. 31401 a% a )e*&-&!a-e ,o)& e ,o/e# !ea%(#e. "he trial courtDs reliance on the Co #s! ;7C, is misplaced! ;n Co, the disputed area was agricultural and Ordinance 0o! 9%)4% did not specifically pro#ide that Eit shall ha#e retroacti#e effect so as to discontinue all rights pre#iously acCuired o#er lands located within the Bone which are neither residential nor light industrial in nature,F and stated with respect to agricultural areas co#ered that Ethe Boning ordinance should &e gi#en prospecti#e operation only!F "he area in this case in#ol#es not agricultural &ut ur&an residential land! O#d&nan e No. 31401 #e-#oa -&+e). a11e -ed -'e o,e#a-&on o1 -'e 5on&n* o#d&nan e &n G#een'&))% ". #e )a%%&1.&n* e#-a&n )o a-&on% -'e#e&n a% o!!e# &a). Gollowing our ruling in Ortigas & Co!, 1td! #s! Geati +ank & "rust Co!, >2 SC.7 5// 6%>?>8, the contractual stipulations annotated on the "orrens "itle, on which Ortigas relies, must yield to the ordinance! Ahen that stretch of Ortigas 7#enue from .oose#elt Street to adison Street was reclassified as a commercial Bone &y the etropolitan anila Commission in arch %>9%, the #e%-#& -&on% &n -'e on-#a - o1 %a)e "e-/een O#-&*a% and He#!o%o, )&!&-&n* a)) on%-#( -&on on -'e d&%,(-ed )o- -o %&n*)e41a!&). #e%&den-&a) "(&)d&n*%, /e#e dee!ed e0-&n*(&%'ed ". -'e #e-#oa -&+e o,e#a-&on o1 -'e 5on&n* o#d&nan e and o()d no )on*e# "e en1o# ed. Ahile our legal system upholds the sanctity of contract so that a contract is deemed law &etween the contracting parties, nonetheless, stipulations in a contract cannot contra#ene Elaw, morals, good customs, pu&lic order, or pu&lic policy!F Otherwise such stipulations would &e deemed null and #oid! .espondent court correctly found that the trial court committed in this case a gra#e a&use of discretion amounting to want of or e'cess of =urisdiction in refusing to treat Ordinance 0o! 9%) 4%