Ortigas & Co. v. CA (G.R. No. 126102.

December 4, 2000)

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.

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.