Ortigas & Co. Ltd. v.

CA

FACTS
Ortigas & Co. (Ortigas) sold to Emilia Hermoso (Hermoso) a parcel of land, with the
condition that only a single-family residential building shall be erected on the same.
o A few years later, the MMDA issued a zoning ordinance which effectively
reclassified the land bought by Hermoso from residential to commercial.
Hermoso leased the land to Ismael Mathay III (Mathay), who then constructed a single-
storey commercial building on the land.
o Ortigas sued Hermoso for breach of contract and prayed for the demolition of the
building.
o Mathay was subsequently impleaded as a respondent.
The lower court ruled in favor of Ortigas.
o Mathays MR denied; he filed a special civil action for certiorari, ascribing grave
abuse of discretion on the part of the lower court judge.
o CA granted, hence this review on certiorari filed by Ortigas.

ISSUE + RULING
May the zoning ordinance impair contracts entered prior to its effectivity? (also: Is Mathay a real
party-in-interest considering that he is a mere lessee and there is no privity of contract between
him and Ortigas?) YES.
The zoning ordinance, as a valid exercise of police power may be given effect over any
standing contract.
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.
o Police power legislation is applicable not only to future contracts, but equally to
those already in existence.
o 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.
Sangalang vs. IAC: the Supreme Court already upheld subject ordinance as a legitimate
police power measure.