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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 of land situated in the City of Manila. To secure the payment of said balance of P4,800, a first mortgage over the same parcels of land has been constituted in favor of Rutter. The deed of sale having been registered, a new title was issued in favor of Placido J. Esteban with the mortgage duly annotated on the back thereof. Esteban failed to pay the two installments as agreed upon, as well as the interest that had accrued thereon, and so on 2 August 1949, Rutter instituted an action in the Court of First Instance (CFI) Manila to recover the balance due, the interest due thereon, and the attorney's fees stipulated in the contract. The complaint also contains a prayer for the sale of the properties mortgaged in accordance with law. Esteban admitted averments of the complaint but set up defense on the moratorium clause embodied in RA 342 (approved 26 July 1948), allowing a war sufferer 8 years from the settlement of his claim by the Philippine War Damage Commission. After a motion for summary judgment has been presented by Esteban, and the requisite evidence submitted covering the relevant facts, the court rendered judgment dismissing the complaint holding that the obligation which Rutter seeks to enforce is not yet demandable under the moratorium law. Rutter filed a motion for reconsideration wherein he raised for the first time the constitutionality of the moratorium law, but the motion was denied. Rutter appealed. Issue: Whether Republic Act 342 is unconstitutional for being violative of the constitutional provision forbidding the impairment of the obligation of contracts. Held: Statutes declaring a moratorium on the enforcement of monetary obligations are not of recent enactment. These moratorium laws are not new. Moratorium laws have been adopted "during times of financial distress, especially when incident to, or caused by, a war." The Moratorium Law is a valid exercise by the State of its police power, being an emergency measure. Although conceding that the obligations of the contract were impaired, the impairment was within the police power of the State as that power was called into exercise by the public economic emergency which the legislature had found to exist. Not only is the constitutional provision (contract clause) qualified by the measure of control which the State retains over remedial processes, but the State also continues to possess authority to safeguard the vital interest of its people. It does not matter that legislation appropriate to that end "has the result of modifying or abrogating contracts already in effect." Not only are existing laws read into contracts in order to fix obligations as between the parties, but the reservation of essential attributes of sovereign power is also read into contracts as a postulate of the legal order. The policy of protecting contracts against impairment presupposes the maintenance of a government by virtue of which contractual relations are worth while, a government which retains adequate authority to secure the peace and good order of society. Some of these laws, however, have also been declared "void as to contracts made before their passage where the suspension of remedies prescribed is indefinite or unreasonable in duration." The true test, therefore, of the constitutionality of a moratorium statute lies in the determination of the period of suspension of the remedy. It is required that such suspension be definite and reasonable, otherwise it would be violative of the constitution. Herein, obligations had been pending since 1945 as a result of the issuance of Executive Orders 25 and 32 and at present their enforcement is still inhibited because of the enactment of Republic Act 342 and would continue to be unenforceable during the 8-year period granted to prewar debtors to afford them an opportunity to rehabilitate themselves, which in plain language means that the creditors would have to observe a vigil

of at least 12 years before they could effect a liquidation of their investment dating as far back as 1941. This period seems to be unreasonable, if not oppressive. While the purpose of Congress is plausible, and should be commended, the relief accorded works injustice to creditors who are practically left at the mercy of the debtors. Their hope to effect collection becomes extremely remote, more so if the credits are unsecured. And the injustice is more patent when, under the law, the debtor is not even required to pay interest during the operation of the relief. Thus, the Court declared that the continued operation and enforcement of Republic Act 342 at the present time is unreasonable and oppressive, and should not be prolonged a minute longer, and the same should be declared null and void and without effect. This also holds true as regards Executive Orders 25 and 32, considering that said Orders contain no limitation whatsoever in point of time as regards the suspension of the enforcement and effectivity of monetary obligations. This pronouncement is most especially needed in view of the revival clause embodied in said Act if and when it is declared unconstitutional or invalid. Ortigas v. Feati [GR L-24670, 14 December 1979] En Banc, Santos (J): 7 concur, 2 took no part Facts: Ortigas, Madrigal & Sia is a limited partnership and Feati Bank and Trust Co., is a corporation duly organized and existing in accordance with the laws of the Philippines. Ortigas is engaged in real estate business, developing and selling lots to the public, particularly the Highway Hills Subdivision along EDSA, Mandaluyong. On 4 March 1952, Ortigas, as vendor, and Augusto Padilla and Natividad Angeles, as vendees, entered in separate agreements of sale on installments over two parcels of land. On 19 July 1962, the vendees transferred their rights and interests over the lots in favor of Emma Chavez. Both agreements contained stipulations or restrictions as to the removal of soil, the materials of the buildings, and sanitary installations, which were annotated in the TCTs with the Rizal Registry of Deeds. Feati Bank eventually acquired said lots on 23 July 1962, one bought directly from Chavez, and the other from Republic Flour Mills (to whom Chavez sold it previously). On 5 May 1963, Feati Bank began laying the foundation and commenced the construction of a building to be devoted to banking purposes, but which could also be devoted to, and used exclusively for, residential purposes. The following day, Ortigas demanded that Feati Bank stop the construction of the commercial building on the lots, claiming that the restrictions annotated were imposed as part of its general building scheme designated for the beautification and development of Highway Hills Subdivision. Feati Bank refused to comply with the demand, contending that the building was being constructed in accordance with the zoning regulations (Resolution 27, dated 4 February 1960 by Municipal Council of Mandaluyong), that it has filed building and planning permit applications with the municipality of Mandaluyong, and that it had accordingly obtained building and planning permits to proceed with the construction. Ortigas filed the complaint with the lower court (Civil Case 7706), seeking the issuance of "a writ of preliminary injunction to prevent the construction of a commercial bank building in the premises in view of the building restrictions annotated in the Feati Bank's TCTs. The trial court dismissed the complaint holding that the restrictions were subordinate to Municipal Resolution 27, rendering the restrictions ineffective and unenforceable. On 2 March 1965, Ortigas filed a motion for reconsideration. The trial court denied the motion for reconsideration in its order of 26 March 1965. On 2 April 1965 Ortigas filed its notice of appeal, its record on appeal, and a cash appeal bond. On 14 April 1965, the appeal was given due course

by the appellate court and the records of the case were elevated directly to the Supreme Court, since only questions of law were raised. Issue: Whether the constitutional guarantee of non-impairment of contracts is absolute. Held: 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 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," the exercise of the power may be judicially inquired into and corrected only if it is capricious, whimsical, unjust or unreasonable, there having been a denial of due process or a violation of any other applicable constitutional guarantee. Police power "is elastic and must be responsive to various social conditions; it is not confined within narrow circumscriptions of precedents resting on past conditions; it must follow the legal progress of a democratic way of life. Public welfare when clashing with the individual right to property should prevail through the state's exercise of its police power. Herein, the municipality of Mandaluyong exercised police power to safeguard or promote the health, safety, peace, good order and general welfare of the people in the locality. EDSA, a main traffic artery which runs through several cities and municipalities in the Metro Manila area, supports an endless stream of traffic and the resulting activity, noise and pollution are hardly conducive to the health, safety or welfare of the residents in its route. Having been expressly granted the power to adopt zoning and subdivision ordinances or regulations, the Municipal Council of Mandaluyong was reasonably justified under the circumstances in passing the subject resolution. 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. Further, laws and reservation of essential attributes of sovereign power are read into contracts agreed upon by the parties. Not only are existing laws read into contracts in order to fix obligations as between the parties, but the reservation of essential attributes of sovereign power is also read into contracts as a postulate of the legal order. The policy of protecting contracts against impairments presupposes the maintenance of a government by virtue of which contractual relations are worthwhile, a government which retains adequate authority to secure the peace and good order of society. The law forms part of, and is read into, every contract, unless clearly excluded therefrom in those cases where such exclusion is allowed. Tiro v. Hontanosas [GR L-32312, 25 November 1983] Second Division, Abad Santos (J): 5 concur, 1 took no part Facts: Zafra Financing Enterprise extended loans to public school teachers in Cebu City and the teachers concerned executed promissory notes and special powers of attorney in favor of Zafra to take and collect their salary checks from the Division Office in Cebu City of the Bureau of Public Schools. Aurelio Tiro, Superintendent of Schools in Cebu City, forbade the collection of checks by persons other than the employees concerned with Circular 21 (series of 1969, Memorandum Order 93 of the Executive Office dated 5 February 1968 was quoted) dated 5 December 1969. Zafra sued Tiro with the now defunct Court of First Instance (CFI) Cebu (Civil Case 11616). Zafra sought to compel Tiro to honor the special powers of attorney, to declare Circular 21 to be illegal, and to make Tiro pay attorneys fees and damages. The trial court granted the prayer but the claim for money was disallowed on the ground that he acted in

good faith in implementing Circular 21. Tiro seeks in the petition for review before the Supreme Court a reversal of the trial courts decision. Issue: Whether Circular 21 impairs the obligations of contracts between Zafra Financing Enterprise and the teachers. Held: The salary check of a government officer or employee such as a teacher does not belong to him before it is physically delivered to him. Until that time the check belongs to the Government. Accordingly, before there is actual delivery of the check, the payee has no power over it; he cannot assign it without the consent of the Government. The Circular, further, is authorized by relevant statutes such as the Revised Administrative Code (Section 79b, Power to regulate) and the Magna Carta for Teachers (RA 4670, Section 21, Deductive prohibited). The Circular does not impair the obligation of contracts with the teachers as the Circular does not prevent Zafra from collecting the loans but merely makes the Government a non-participant in their collection. BANAT v. COMELEC August 7, 2009 Facts: This is a petition for Prohibition with a prayer for the issuance of a temporary restraining order or a writ of preliminary injunction filed by petitioner Barangay Association for National Advancement and Transparency (BANAT) Party List (petitioner) assailing the constitutionality of Republic Act No. 9369 (RA 9369) and enjoining respondent Commission on Elections (COMELEC) from implementing the statute. RA 9369 is a consolidation of Senate Bill No. 2231 and House Bill No. 5352 passed by the Senate on 7 December 2006 and the House of Representatives on 19 December 2006.On 23 January 2007, less than four months before the 14 May 2007 local elections. On 7 May 2007, petitioner, a duly accredited multi-sectoral organization, filed this petition for prohibition alleging that RA 9369 violated Section 26(1), Article VI of the Constitution. Petitioner also assails the constitutionality of Sections 34, 37, 38, and 43 of RA 9369.According to petitioner, these provisions are of questionable application and doubtful validity for failing to comply with the provisions of the Constitution. Petitioner argues the following: 1. the title of RA 9369 is misleading because it speaks of poll automation but contains substantial provisions dealing with the manual canvassing of election returns. Petitioner also alleges that Sections 34, 37, 38, and 43are neither embraced in the title nor germane to the subject matter of RA 9369. 2. Sections 37 and 38 violate the Constitution by impairing the powers of the Presidential Electoral Tribunal (PET) and the Senate Electoral Tribunal (SET).According to petitioner, under the amended provisions, Congress as the National Board of Canvassers for the election of President and Vice President (Congress), and the COMELEC en banc as the National Board of Canvassers (COMELEC en banc), for the election of Senators may now entertain pre-proclamation cases in the election of the President, Vice President, and Senators. Petitioner concludes that in entertaining pre-proclamation cases, Congress and the COMELEC en banc undermine the independence and encroach upon the jurisdiction of the PET and the SET.

3. Section 43 is unconstitutional because it gives the other prosecuting arms of the government concurrent power with the COMELEC to investigate and prosecute election offenses. 4. section 34 which fixes the per diem of poll watchers of the dominant majority and dominant minority parties at Pon election day. Petitioner argues that this violates the freedom of the parties to contract and their right to fix the terms and conditions of the contract they see as fair, equitable and just. Petitioner adds that this is a purely private contract using private funds which cannot be regulated by law. Issue/s: Whether or not RA 9369 is unconstitutional. -Sections 37 and 38 violate Section 17, Article VI and Paragraph 7, Section 4, Article VII of the Constitution; -Section 43 violates Section 2(6), Article IX-C of the Constitution. -Section 34 violates Section 10, Article III of the Constitution. Ruling: The petition is denied.RA 9369 is constitutional. 1. RA 9369 is an amendatory act entitled An Act Amending Republic Act No. 8436, Entitled An Act Authorizing the Commission on Elections to Use an Automated Election System in the May 11, 1998 National or Local Elections and in Subsequent National and Local Electoral Exercises, to Encourage Transparency, Credibility, Fairness and Accuracy of Elections, Amending for the Purpose Batas Pambansa Blg. 881, as Amended, Republic Act No. 7166 and Other Related Election Laws, Providing Funds Therefor and For Other Purposes. Clearly, the subject matter of RA 9369 covers the amendments to RA 8436, Batas Pambansa Blg. 881 (BP 881),Republic Act No. 7166 (RA 7166),and other related election laws to achieve its purpose of promoting transparency, credibility, fairness, and accuracy in the elections. The provisions of RA 9369 assailed by petitioner deal with amendments to specific provisions of RA 7166 and BP 881, specifically: (1) Sections 34, 37 and 38 amend Sections 26, 30 and 15 of RA 7166, respectively; and(2) Section 43 of RA 9369 amends Section 265 of BP 881.Therefore, the assailed provisions are germane to the subject matter of RA 9369 which is to amend RA 7166 and BP 881, among others. 2. The COMELEC maintains that the amendments introduced by Section 37 pertain only to the adoption and application of the procedures on pre-proclamation controversies in case of any discrepancy, incompleteness, erasure or alteration in the certificates of canvass. The COMELEC adds that Section 37 does not provide that Congress and the COMELEC en banc may now entertain pre-proclamation cases for national elective posts. 3. Section 2(6), Article IX-C of the Constitution vests in the COMELEC the power to investigate and, where appropriate, prosecute cases of violations of election laws, including acts or omissions constituting election frauds, offenses, and malpractices. COMELEC has the exclusive power to conduct

preliminary investigations and prosecute election offenses, it likewise authorizes the COMELEC to avail itself of the assistance of other prosecuting arms of the government. In the 1993 COMELEC Rules of Procedure, the authority of the COMELEC was subsequently qualified and explained. 4. The OSG argues that petitioner erroneously invoked the non-impairment clause because this only applies to previously perfected contracts. In this case, there is no perfected contact and, therefore, no obligation will be impaired. Both the COMELEC and the OSG argue that the law is a proper exercise of police power and it will prevail over a contract. According to the COMELEC, poll watching is not just an ordinary contract but is an agreement with the solemn duty to ensure the sanctity of votes. The role of poll watchers is vested with public interest which can be regulated by Congress in the exercise of its police power. The OSG further argues that the assurance that the poll watchers will receive fair and equitable compensation promotes the general welfare. The OSG also states that this was a reasonable regulation considering that the dominant majority and minority parties will secure a copy of the election returns and are given the right to assign poll watchers inside the polling precincts. Chavez v. COMELEC (437 SCRA 415) --- where the Supreme Court ruled that commercial billboards put up pursuant to a contract prior to elections cannot be maintained once the product endorser runs for public office. Petitioner Chavez, on various dates, entered into formal agreements with certain establishments to endorse their products. On August 18, 2003, he authorized a certain Andrew So to use his name and image for 96 North, a clothing company. Petitioner also signed Endorsement Agreements with Konka International Plastics Manufacturing Corporation and another corporation involved in the amusement and video games business, G-Box. These last two agreements were entered into on October 14, 2003 and November 10, 2003, respectively. Pursuant to these agreements, three billboards were set up along the Balintawak Interchange of the North Expressway. One billboard showed petitioner promoting the plastic products of Konka International Plastics Manufacturing Corporation, and the other two showed petitioner endorsing the clothes of 96 North. One more billboard was set up along Roxas Boulevard showing petitioner promoting the game and amusement parlors of G-Box. On December 30, 2003, however, petitioner filed his certificate of candidacy for the position of Senator under Alyansa ng Pag-asa, a tripartite alliance of three political parties: PROMDI, REPORMA, and Aksyon Demokratiko. On January 6, 2004, respondent COMELEC issued Resolution No. 6520, which contained Section 32, the provision assailed herein. On January 21, 2004, petitioner was directed to comply with the said provision by the COMELEC's Law Department. He replied, on January 29, 2004, by requesting the COMELEC that he be informed as to how he may have violated the assailed provision. He sent another letter dated February 23, 2004, this time asking the COMELEC that he be exempted from the application of Section 32, considering that the billboards adverted to are mere product endorsements and cannot be construed as paraphernalia for premature campaigning under the rules. The COMELEC answered petitioner's request by issuing another letter, dated February 27, 2004, wherein it ordered him to remove or cause the removal of the billboards, or to cover them from public view pending the approval of his request.

Feeling aggrieved, petitioner Chavez asks this Court that the COMELEC be enjoined from enforcing the assailed provision. ISSUES: He urges this Court to declare the assailed provision unconstitutional as the same is allegedly (1) a gross violation of the non-impairment clause; (2) an invalid exercise of police power; (3) in the nature of an ex-post facto law; (4) contrary to the Fair Elections Act; and (5) invalid due to overbreadth. Is Section 32 of COMELEC Resolution No. 6520 an invalid exercise of police power?

HELD: This Court takes a contrary view. Police power, as an inherent attribute of sovereignty, is the power to prescribe regulations to promote the health, morals, peace, education, good order, or safety, and the general welfare of the people.1 To determine the validity of a police measure, two questions must be asked: (1) Does the interest of the public in general, as distinguished from those of a particular class, require the exercise of police power? and (2) Are the means employed reasonably necessary for the accomplishment of the purpose and not unduly oppressive upon individuals? A close examination of the assailed provision reveals that its primary objectives are to prohibit premature campaigning and to level the playing field for candidates of public office, to equalize the situation between popular or rich candidates, on one hand, and lesser-known or poorer candidates, on the other, by preventing the former from enjoying undue advantage in exposure and publicity on account of their resources and popularity. The latter is a valid reason for the exercise of police power as held in National Press Club v. COMELEC,2 wherein the petitioners questioned the constitutionality of Section 11(b) of Republic Act No. 6646, which prohibited the sale or donation of print space and air time "for campaigning or other political purposes," except to the COMELEC. The obvious intention of this provision is to equalize, as far as practicable, the situations of rich and poor candidates by preventing the former from enjoying the undue advantage offered by huge campaign "war chests." This Court ruled therein that this objective is of special importance and urgency in a country which, like ours, is characterized by extreme disparity in income distribution between the economic elite and the rest of society, and by the prevalence of poverty, with so many of our population falling below the poverty line. Under the Omnibus Election Code, "election campaign" or "partisan political activity" is defined as an act designed to promote the election or defeat of a particular candidate or candidates to a public office. Activities included under this definition are: xxx (5) Directly or indirectly soliciting votes, pledges or support for or against a candidate.3 (underscoring ours) It is true that when petitioner entered into the contracts or agreements to endorse certain products, he acted as a private individual and had all the right to lend his name and image to these products. However, when he filed his certificate of candidacy for Senator, the billboards featuring his name and image assumed partisan political character because the same indirectly promoted his candidacy. Therefore, the COMELEC was acting well within its scope of powers when it required petitioner to discontinue the display of the subject billboards. If the subject billboards were to be allowed, candidates for public office whose name and image are used to advertise commercial products would have more opportunity to make themselves known to the electorate, to the disadvantage of other candidates who

do not have the same chance of lending their faces and names to endorse popular commercial products as image models. This, without a doubt, would be a circumvention of the rule against premature campaigning: Sec. 80. Election campaign or partisan political activity outside campaign period. It shall be unlawful for any person, whether or not a voter or candidate, or for any party, or association of persons, to engage in an election campaign or partisan political activity except during the campaign period. x x x 4 Article IX (C) (4) of the Constitution provides: Sec. 4. The Commission may, during the election period, supervise or regulate the enjoyment or utilization of all franchises or permits for the operation of transportation and other public utilities, media of communication or information, all grants, special privileges, or concessions granted by the Government or any subdivision, agency, or instrumentality thereof, including any government-owned or controlled corporation or its subsidiary. Such supervision or regulation shall aim to ensure equal opportunity, time, and space, and the right to reply, including reasonable, equal rates therefor, for public information campaigns and forums among candidates in connection with the objective of holding free, orderly, honest, peaceful, and credible elections. Under the abovementioned Constitutional provision, the COMELEC is expressly authorized to supervise or regulate the enjoyment or utilization of all media communication or information to ensure equal opportunity, time, and space. All these are aimed at the holding of free, orderly, honest, peaceful, and credible elections. Neither is Section 32 of Resolution No. 6520 a gross violation of the non-impairment clause. The nonimpairment clause of the Constitution must yield to the loftier purposes targeted by the Government.5 Equal opportunity to proffer oneself for public office, without regard to the level of financial resources one may have at his disposal, is indeed of vital interest to the public. The State has the duty to enact and implement rules to safeguard this interest. Time and again, this Court has said that contracts affecting public interest contain an implied reservation of the police power as a postulate of the existing legal order. This power can be activated at anytime to change the provisions of the contract, or even abrogate it entirely, for the promotion or protection of the general welfare. Such an act will not militate against the impairment clause, which is subject to and limited by the paramount police power. Petitioner also claims that Section 32 of Resolution No. 6520 is in the nature of an ex post facto law. Section 32, although not penal in nature, defines an offense and prescribes a penalty for said offense. Laws of this nature must operate prospectively, except when they are favorable to the accused. It should be noted, however, that the offense defined in the assailed provision is not the putting up of "propaganda materials such as posters, streamers, stickers or paintings on walls and other materials showing the picture, image or name of a person, and all advertisements on print, in radio or on television showing the image or mentioning the name of a person, who subsequent to the placement or display thereof becomes a candidate for public office." Nor does it prohibit or consider an offense the entering of contracts for such propaganda materials by an individual who subsequently becomes a candidate for public office. One definitely does not commit an offense by entering into a contract with private parties to use his name and image to endorse certain products prior to his becoming a candidate for public office. The offense, as expressly prescribed in the assailed provision, is the non-removal of the

described propaganda materials three (3) days after the effectivity of COMELEC Resolution No. 6520. If the candidate for public office fails to remove such propaganda materials after the given period, he shall be liable under Section 80 of the Omnibus Election Code for premature campaigning. Indeed, nowhere is it indicated in the assailed provision that it shall operate retroactively. There is, therefore, no ex post facto law in this case. Next, petitioner urges that Section 32 is a violation of the Fair Elections Act. Petitioner's argument is not tenable. It only regulates their use to prevent premature campaigning and to equalize, as much as practicable, the situation of all candidates by preventing popular and rich candidates from gaining undue advantage in exposure and publicity on account of their resources and popularity.11 Moreover, by regulating the use of such election propaganda materials, the COMELEC is merely doing its duty under the law. Finally, petitioner contends that Section 32 of COMELEC Resolution No. 6520 is invalid because of overbreadth. A statute or regulation is considered void for overbreadth when it offends the constitutional principle that a governmental purpose to control or prevent activities constitutionally subject to State regulations may not be achieved by means that sweep unnecessarily broadly and thereby invade the area of protected freedoms.12The provision in question is limited in its operation both as to time and scope. It only disallows the continued display of a person's propaganda materials and advertisements after he has filed a certificate of candidacy and before the start of the campaign period. Said materials and advertisements must also show his name and image. There is no blanket prohibition of the use of propaganda materials and advertisements. During the campaign period, these may be used subject only to reasonable limitations necessary and incidental to achieving the purpose of preventing premature campaigning and promoting equality of opportunities among all candidates. The provision, therefore, is not invalid on the ground of overbreadth. WHEREFORE, the petition is DISMISSED and Section 32 of COMELEC Resolution No. 6520 is declared valid and constitutional.