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Ortigas & Co. vs. FEATI Bank G.R. No. L-24670 Dec. 14, 1979 Facts

This case involves a dispute over building restrictions on two lots owned by FEATI Bank. Ortigas & Co. developed the subdivision and included restrictions designating the lots as residential. FEATI Bank wanted to build a commercial bank building. The court ruled that (1) the municipality's resolution declaring the area a commercial zone was a valid exercise of police power and (2) the resolution could override the contractual building restrictions between the parties. The municipality's power to promote public welfare through zoning superseded any impairment of contracts from the restrictions.

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69 views

Ortigas & Co. vs. FEATI Bank G.R. No. L-24670 Dec. 14, 1979 Facts

This case involves a dispute over building restrictions on two lots owned by FEATI Bank. Ortigas & Co. developed the subdivision and included restrictions designating the lots as residential. FEATI Bank wanted to build a commercial bank building. The court ruled that (1) the municipality's resolution declaring the area a commercial zone was a valid exercise of police power and (2) the resolution could override the contractual building restrictions between the parties. The municipality's power to promote public welfare through zoning superseded any impairment of contracts from the restrictions.

Uploaded by

Jakie Cruz
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Ortigas & Co. vs.

FEATI Bank
G.R. No. L-24670
Dec. 14, 1979

FACTS:
Plaintiff (formerly known as "Ortigas, Madrigal y Cia") is a limited partnership and
defendant Feati Bank and Trust Co., is a corporation duly organized and existing in accordance
with the laws of the Philippines. Plaintiff is engaged in real estate business, developing and
selling lots to the public, particularly the Highway Hills Subdivision along Epifanio de los Santos
Avenue, Mandaluyong, Rizal.
Plaintiff, as vendor, and Augusto Padilla y Angeles and Natividad Angeles, as vendees,
entered into separate agreements of sale on instalments over two parcels of land, known as
Lots Nos. 5 and 6, Block 31, of the Highway Hills Subdivision, situated at Mandaluyong, Rizal.
On July 19, 1962, the said vendees transferred their rights and interests over the aforesaid lots
in favour of one Emma Chavez. Upon completion of payment of the purchase price, the plaintiff
executed the corresponding deeds of sale in favour of Emma Chavez.
Eventually, defendant-appellee acquired Lots Nos. 5 and 6, with TCT Nos. 101613 and
106092 issued in its name, respectively and the building restrictions were also annotated
therein. Defendant-appellee bought Lot No. 5 directly from Emma Chavez, "free from all liens
and encumbrances as stated in Annex 'D', while Lot No. 6 was acquired from Republic Flour
Mills through a "Deed of Exchange," in the name of Republic Flour Mills likewise contained the
same restrictions, although defendant-appellee claims that Republic Flour Mills purchased the
said Lot No. 6 "in good faith free from all liens and encumbrances," as stated in the Deed of
Sale between it and Emma Chavez.
Plaintiff-appellant claims that the restrictions annotated on TCTs were imposed as part of
its general building scheme designed for the beautification and development of the Highway
Hills Subdivision which forms part of the big landed estate of plaintiff-appellant where
commercial and industrial sites are also designated or established.
Defendant-appellee, upon the other hand, maintains that the area along the western part
of Epifanio de los Santos Avenue (EDSA) from Shaw Boulevard to Pasig River, has been
declared a commercial and industrial zone. It alleges that plaintiff-appellant 'completely sold and
transferred to third persons all lots in said subdivision facing Epifanio de los Santos Avenue"
and the subject lots thereunder were acquired by it only on July 23, 1962 or more than two (2)
years after the area ... had been declared a commercial and industrial zone ...
On the basis of the foregoing facts, Civil Case No. 7706, supra, was submitted in the lower
court for decision. The complaint sought, among other things, the issuance of "a writ of
preliminary injunction ... restraining and enjoining defendant, its agents, assigns, and those
acting on its or their behalf from continuing or completing the construction of a commercial bank
building in the premises ... involved, with the view to commanding the defendant to observe and
comply with the building restrictions annotated in the defendant's transfer certificate of title."
ISSUE:
(1) Whether Resolution No. 27 s-1960 is a valid exercise of police power; and
(2) Whether the said Resolution can nullify or supersede the contractual obligations
assumed by defendant-appellee.

RULING:
1. Yes, an examination of Section 12 of the same law which prescribes the rules for its
interpretation likewise reveals that the implied power of a municipality should be "liberally
construed in its favor" and that "any fair and reasonable doubt as to the existence of the power
should be interpreted in favor of the local government and it shall be presumed to exist." The
same section further mandates that the general welfare clause 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 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," in which case the original terms and
provisions of the contract should govern. The exceptions, clearly, do not apply in the case at
bar.
2. Yes. With regard to the contention that said resolution cannot nullify the contractual
obligations assumed by the defendant-appellee – referring to the restrictions incorporated in the
deeds of sale and later in the corresponding Transfer Certificates of Title issued to defendant-
appellee – it should be stressed, that 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.
It is, therefore, clear that even if the subject building restrictions were assumed by the
defendant-appellee as vendee of Lots Nos. 5 and 6, in the corresponding deeds of sale, and
later, in Transfer Certificates of Title Nos. 101613 and 106092, the contractual obligations so
assumed cannot prevail over Resolution No. 27, of the Municipality of Mandaluyong, which has
validly exercised its police power through the said resolution. Accordingly, the building
restrictions, which declare Lots Nos. 5 and 6 as residential, cannot be enforced.

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