Case Digest: ORTIGAS & CO. vs. FEATI BANK

ORTIGAS & CO. LIMITED PARTNERSHIP vs. FEATI BANK AND TRUST CO.

G.R. No. L-24670               14 December 1979

Santos, J.

FACTS:

Ortigas and Co. is engaged in real estate business developing and selling lots to the public.  It sold to Augusto Padilla and Natividad Angeles Lots Nos. 5 and 6, Block 31 of the Highway Hills Subdivision, Mandaluyong by sale on instalments.  The vendees then transferred their rights and interests over the aforesaid lots in favour of one Emma Chavez.  The agreements of sale on instalment and the deeds of sale contained the restriction that “The parcel of land subject of this deed of sale shall be used by the Buyer exclusively for residential purposes, and she shall not be entitled to take or remove soil, stones or gravel from it or any other lots belonging to the Seller.” 

Feati Bank and Trust Co. later bought said lots from Emma Chavez in the name of Republic Flour Mills.  Ortigas and Co. claims that the restrictions were imposed as part of its general building scheme designed for the beautification and development of the Highway Hills Subdivision which forms part of its big landed estate.  Feati Bank, on the other hand, maintains that the area along the western part of EDSA from Shaw Boulevard to Pasig River has been declared a commercial and industrial zone, per Resolution No. 27 s-1960 of the Municipal Council of Mandaluyong, Rizal.  Later on, Feati Bank commenced construction on the said lots for a building devoted to banking purposes.  It refused to comply with the demands of Ortigas & Co. to stop the said construction.

ISSUE:

Whether or not Resolution No. 27 s-1960 can nullify or supersede the contractual obligations assumed by the defendant.

HELD:

Yes.  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 of the general welfare of the people.”  This general welfare clause shall be liberally interpreted in case of doubt, so as to give more power to local governments in promoting the economic conditions, social welfare and material progress of the people in the community.  The only exceptions under Section 12 of the Local Autonomy Act (R.A. 2264) are existing vested rights arising out of a contract between a province, city or municipality on one hand and a third party on the other hand.  Said case is not present in this petition. 

Resolution No. 27 s-1960 declaring the western part of EDSA as an industrial and commercial zone was passed in the exercise of police power to safeguard or promote the health, safety, peace, good order and general welfare of the people in the locality.