B.

POLICE POWER
Definition; Scope and Characteristics

Ortigas and Co. v. CA

GR 126102, 12/4/00
FACTS:
Ortigas & Co. sold to Emilia Hermoso a parcel of land located in Greenhills Subdivision,
San Juan with several restrictions in the contract of sale that said lot be used exclusively for
residential purposes, among others, until December 31, 2025. Later, a zoning ordinance was
issued by MMC (now MMDA) reclassifying the area as commercial. Private respondent (Ismael
Mathay III) leased the subject lot from Hermoso and built a single storey building for Greenhills
Autohaus, Inc., a car sales company. Ortigas & Co. filed a petition a complaint which sought the
demolition of the constructed car sales company to against Hermoso as it violated the terms
and conditions of the Deed of Sale. Trial court ruled in favor of Ortigas & Co. Mathay raised the
issue to the Court of Appeals from which he sought favorable ruling. Hence, the instant petition.

ISSUE:
Whether or not the zoning ordinance may impair contracts entered prior to its effectivity.

HELD:
Yes. The zoning ordinance, as a valid exercise of police power may be given effect over any
standing contract. Hence, petition is denied.

RATIO:
A law enacted in the exercise of police power to regulate or govern certain activities or
transactions could be given retroactive effect and may reasonably impair vested rights or
contracts. Police power legislation is applicable not only to future contracts, but equally to those
already in existence. Non-impairment of contracts or vested rights clauses will have to yield to
the superior and legitimate exercise by the State of police power to promote the health, morals,
peace, education, good order, safety, and general welfare of the people. Moreover, statutes in
exercise of valid police power must be read into every contract. Noteworthy, in Sangalang vs.
Intermediate Appellate Court, the Supreme Court already upheld subject ordinance as a
legitimate police power measure.