Ortigas vs Feati 1

G.R. No. L-24670 December 14, 1979 Eventually, defendant-appellee acquired Lots Nos. 5 and 6,
ORTIGAS & CO., LIMITED PARTNERSHIP, plaintiff- with TCT Nos. 101613 and 106092 issued in its name,
appellant, vs. FEATI BANK AND TRUST CO., defendant- respectively and the building restrictions were also annotated
appellee. therein. Defendant-appellee bought Lot No. 5 directly from
Emma Chavez, "free from all liens and encumbrances as
SANTOS, J.: stated in Annex 'D', 5 while Lot No. 6 was acquired from
Republic Flour Mills through a "Deed of Exchange," Annex
ABOUT THE CASE: An appeal interposed on June 23, 1965 "E". 6 TCT No. 101719 in the name of Republic Flour Mills
by plaintiff-appellant, Ortigas & Co., Limited Partnership, likewise contained the same restrictions, although defendant-
from the decision of the Court of First Instance of Rizal, appellee claims that Republic Flour Mills purchased the said
Branch VI, at Pasig, Hon. Andres Reyes presiding, which Lot No. 6 "in good faith. free from all liens and
dismissed its complaint in Civil Case No. 7706, entitled, encumbrances," as stated in the Deed of Sale, Annex "F" 7
"Ortigas & Company, Limited Partnership, plaintiff, v. Feati between it and Emma Chavez.
Bank and Trust Company, defendant," for lack of merit.
Plaintiff-appellant claims that the restrictions annotated on
The following facts — a reproduction of the lower court's TCT Nos. 101509, 101511, 101719, 101613, and 106092 were
findings, which, in turn, are based on a stipulation of facts imposed as part of its general building scheme designed for
entered into by the parties are not disputed. Plaintiff (formerly the beautification and development of the Highway Hills
known as "Ortigas, Madrigal y Cia") is a limited partnership Subdivision which forms part of the big landed estate of
and defendant Feati Bank and Trust Co., is a corporation duly plaintiff-appellant where commercial and industrial sites are
organized and existing in accordance with the laws of the also designated or established.
Philippines. Plaintiff is engaged in real estate business,
developing and selling lots to the public, particularly the Defendant-appellee, upon the other hand, maintains that the
Highway Hills Subdivision along Epifanio de los Santos area along the western part of Epifanio de los Santos Avenue
Avenue, Mandaluyong, Rizal. (EDSA) from Shaw Boulevard to Pasig River, has been
declared a commercial and industrial zone, per Resolution No.
FACTS: On March 4, 1952, plaintiff, as vendor, and Augusto 27, dated February 4, 1960 of the Municipal Council of
Padilla y Angeles and Natividad Angeles, as vendees, entered Mandaluyong, Rizal. It alleges that plaintiff-appellant
into separate agreements of sale on installments over two 'completely sold and transferred to third persons all lots in said
parcels of land, known as Lots Nos. 5 and 6, Block 31, of the subdivision facing Epifanio de los Santos Avenue" and the
Highway Hills Subdivision, situated at Mandaluyong, Rizal. subject lots thereunder were acquired by it "only on July 23,
On July 19, 1962, the said vendees transferred their rights and 1962 or more than two (2) years after the area ... had been
interests over the aforesaid lots in favor of one Emma Chavez. declared a commercial and industrial zone ...
Upon completion of payment of the purchase price, the
plaintiff executed the corresponding deeds of sale in favor of On or about May 5, 1963, defendant-appellee began laying the
Emma Chavez. Both the agreements (of sale on installment) foundation and commenced the construction of a building on
and the deeds of sale contained the stipulations or restrictions Lots Nos. 5 and 6, to be devoted to banking purposes, but
that: which defendant-appellee claims could also be devoted to, and
used exclusively for, residential purposes. The following day,
1. The parcel of land subject of this deed of sale shall be plaintiff-appellant demanded in writing that defendant-
used the Buyer exclusively for residential purposes, and she appellee stop the construction of the commercial building on
shall not be entitled to take or remove soil, stones or gravel the said lots. The latter refused to comply with the demand,
from it or any other lots belonging to the Seller. contending that the building was being constructed in
accordance with the zoning regulations, defendant-appellee
2. All buildings and other improvements (except the having filed building and planning permit applications with
fence) which may be constructed at any time in said lot must the Municipality of Mandaluyong, and it had accordingly
be, (a) of strong materials and properly painted, (b) provided obtained building and planning permits to proceed with the
with modern sanitary installations connected either to the construction.
public sewer or to an approved septic tank, and (c) shall not be
at a distance of less than two (2) meters from its boundary On the basis of the foregoing facts, Civil Case No. 7706,
lines. supra, was submitted in the lower court for decision. The
complaint sought, among other things, the issuance of "a writ
The above restrictions were later annotated in TCT Nos. of preliminary injunction ... restraining and enjoining
101509 and 101511 of the Register of Deeds of Rizal, defendant, its agents, assigns, and those acting on its or their
covering the said lots and issued in the name of Emma behalf from continuing or completing the construction of a
Chavez. commercial bank building in the premises ... involved, with
the view to commanding the defendant to observe and comply
 Ortigas vs Feati 2
with the building restrictions annotated in the defendant's commercial and industrial zone, is valid because it did so in
transfer certificate of title." the exercise of its police power; and

In deciding the said case, the trial court considered, as the II. When it failed to consider whether or not the
fundamental issue, whether or not the resolution of the Municipal Council had the power to nullify the contractual
Municipal Council of Mandaluyong declaring Lots Nos. 5 and obligations assumed by defendant-appellee and when it did not
6, among others, as part of the commercial and industrial zone make a finding that the building was erected along the
of the municipality, prevailed over the building restrictions property line, when it should have been erected two meters
imposed by plaintiff-appellant on the lots in question. The away from said property line.
records do not show that a writ of preliminary injunction was
issued. The defendant-appellee submitted its counter-assignment of
errors. In this connection, We already had occasion to hold in
The trial court upheld the defendant-appellee and dismissed Relativo v. Castro that "(I)t is not incumbent on the appellee,
the complaint, holding that the subject restrictions were who occupies a purely defensive position, and is seeking no
subordinate to Municipal Resolution No. 27, supra. It affirmative relief, to make assignments of error, "
predicated its conclusion on the exercise of police power of
the said municipality, and stressed that private interest should
"bow down to general interest and welfare. " In short, it
upheld the classification by the Municipal Council of the area ISSUE:
along Epifanio de los Santos Avenue as a commercial and
industrial zone, and held that the same rendered "ineffective The only issues to be resolved, therefore, are: (1) whether
and unenforceable" the restrictions in question as against Resolution No. 27 s-1960 is a valid exercise of police power;
defendant-appellee. The trial court decision further and (2) whether the said Resolution can nullify or supersede
emphasized that it "assumes said resolution to be valid, the contractual obligations assumed by defendant-appellee.
considering that there is no issue raised by either of the parties
as to whether the same is null and void. 1. The contention that the trial court erred in sustaining
the validity of Resolution No. 27 as an exercise of police
On March 2, 1965, plaintiff-appellant filed a motion for power is without merit. In the first place, the validity of the
reconsideration of the above decision, which motion was said resolution was never questioned before it. The rule is that
opposed by defendant-appellee on March 17, 1965. It averred, the question of law or of fact which may be included in the
among others, in the motion for reconsideration that appellant's assignment of errors must be those which have
defendant- appellee "was duty bound to comply with the been raised in the court below, and are within the issues
conditions of the contract of sale in its favor, which conditions framed by the parties. The object of requiring the parties to
were duly annotated in the Transfer Certificates of Title issued present all questions and issues to the lower court before they
in her (Emma Chavez) favor." It also invited the trial court's can be presented to the appellate court is to enable the lower
attention to its claim that the Municipal Council had (no) court to pass thereon, so that the appellate court upon appeal
power to nullify the contractual obligations assumed by the may determine whether or not such ruling was erroneous. The
defendant corporation." requirement is in furtherance of justice in that the other party
may not be taken by surprise. The rule against the practice of
The trial court denied the motion for reconsideration in its blowing "hot and cold" by assuming one position in the trial
order of March 26, 1965. court and another on appeal will, in the words of Elliot,
prevent deception. For it is well-settled that issues or defenses
On April 2, 1965 plaintiff-appellant filed its notice of appeal not raised or properly litigated or pleaded in the Court below
from the decision dismissing the complaint and from the order cannot be raised or entertained on appeal.
of March 26, 1965 denying the motion for reconsideration, its
record on appeal, and a cash appeal bond." On April 14, the SC DISCUSSION and RULING:
appeal was given due course and the records of the case were
elevated directly to this Court, since only questions of law are In this particular case, the validity of the resolution was
raised. admitted at least impliedly, in the stipulation of facts below.
when plaintiff-appellant did not dispute the same. The only
Plaintiff-appellant alleges in its brief that the trial court erred controversy then as stated by the trial court was whether or not
— the resolution of the Municipal Council of Mandaluyong ...
which declared lots Nos. 4 and 5 among others, as a part of the
I. When it sustained the view that Resolution No. 27, commercial and industrial zone of the municipality, prevails
series of 1960 of the Municipal Council of Mandaluyong, over the restrictions constituting as encumbrances on the lots
Rizal declaring Lots Nos. 5 and 6, among others, as part of the in question. Having admitted the validity of the subject
 Ortigas vs Feati 3
resolution below, even if impliedly, plaintiff-appellant cannot legal progress of a democratic way of life." We were even
now change its position on appeal. more emphatic in Vda. de Genuino vs. The Court of Agrarian
Relations, et al., when We declared: "We do not see why
But, assuming arguendo that it is not yet too late in the day for public welfare when clashing with the individual right to
plaintiff-appellant to raise the issue of the invalidity of the property should not be made to prevail through the state's
municipal resolution in question, We are of the opinion that its exercise of its police power.
posture is unsustainable. Section 3 of R.A. No. 2264,
otherwise known as the Local Autonomy Act," empowers a Resolution No. 27, s-1960 declaring the western part of
Municipal Council "to adopt zoning and subdivision highway 54, now E. de los Santos Avenue (EDSA, for short)
ordinances or regulations"; for the municipality. Clearly, the from Shaw Boulevard to the Pasig River as an industrial and
law does not restrict the exercise of the power through an commercial zone, was obviously passed by the Municipal
ordinance. Therefore, granting that Resolution No. 27 is not an Council of Mandaluyong, Rizal in the exercise of police
ordinance, it certainly is a regulatory measure within the power to safeguard or promote the health, safety, peace,
intendment or ambit of the word "regulation" under the good order and general welfare of the people in the
provision. As a matter of fact, the same section declares that locality, Judicial notice may be taken of the conditions
the power exists "(A)ny provision of law to the contrary prevailing in the area, especially where lots Nos. 5 and 6 are
notwithstanding ... " located. The lots themselves not only front the highway;
industrial and commercial complexes have flourished about
An examination of Section 12 of the same law which the place. EDSA, a main traffic artery which runs through
prescribes the rules for its interpretation likewise reveals that several cities and municipalities in the Metro Manila area,
the implied power of a municipality should be "liberally supports an endless stream of traffic and the resulting activity,
construed in its favor" and that "(A)ny fair and reasonable noise and pollution are hardly conducive to the health, safety
doubt as to the existence of the power should be interpreted in or welfare of the residents in its route. Having been expressly
favor of the local government and it shall be presumed to granted the power to adopt zoning and subdivision ordinances
exist." The same section further mandates that the general or regulations, the municipality of Mandaluyong, through its
welfare clause be liberally interpreted in case of doubt, so as to Municipal 'council, was reasonably, if not perfectly, justified
give more power to local governments in promoting the under the circumstances, in passing the subject resolution.
economic conditions, social welfare and material progress of
the people in the community. The only exceptions under The scope of police power keeps expanding as civilization
Section 12 are existing vested rights arising out of a contract advances, stressed this Court, speaking thru Justice Laurel in
between "a province, city or municipality on one hand and a the leading case of Calalang v. Williams et al., Thus-
third party on the other," in which case the original terms and
provisions of the contract should govern. The exceptions, As was said in the case of Dobbins v. Los Angeles (195 US
clearly, do not apply in the case at bar. 223, 238 49 L. ed. 169), 'the right to exercise the police power
is a continuing one, and a business lawful today may in the
2. With regard to the contention that said resolution cannot future, because of changed situation, the growth of population
nullify the contractual obligations assumed by the defendant- or other causes, become a menace to the public health and
appellee – referring to the restrictions incorporated in the welfare, and be required to yield to the public good.' And in
deeds of sale and later in the corresponding Transfer People v. Pomar (46 Phil. 440), it was observed that
Certificates of Title issued to defendant-appellee – it should be 'advancing civilization is bringing within the scope of police
stressed, that while non-impairment of contracts is power of the state today things which were not thought of as
constitutionally guaranteed, the rule is not absolute, since it being with in such power yesterday. The development of
has to be reconciled with the legitimate exercise of police civilization), the rapidly increasing population, the growth of
power, i.e., "the power to prescribe regulations to promote the public opinion, with an increasing desire on the part of the
health, morals, peace, education, good order or safety and masses and of the government to look after and care for the
general welfare of the people. Invariably described as "the interests of the individuals of the state, have brought within
most essential, insistent, and illimitable of powers" and "in a the police power many questions for regulation which
sense, the greatest and most powerful attribute of government, formerly were not so considered. (Emphasis, supplied.)
the exercise of the power may be judicially inquired into and
corrected only if it is capricious, 'whimsical, unjust or Thus, the state, in order to promote the general welfare, may
unreasonable, there having been a denial of due process or a interfere with personal liberty, with property, and with
violation of any other applicable constitutional guarantee. As business and occupations. Persons may be subjected to all
this Court held through Justice Jose P. Bengzon in Philippine kinds of restraints and burdens, in order to secure the general
Long-Distance Company vs. City of Davao, et al. police comfort health and prosperity of the state and to this
power "is elastic and must be responsive to various social fundamental aim of our Government, the rights of the
conditions; it is not, confined within narrow circumscriptions individual are subordinated.
of precedents resting on past conditions; it must follow the
 Ortigas vs Feati 4
The need for reconciling the non-impairment clause of the other local legislation related thereto. 53 and Burgess, et al v.
Constitution and the valid exercise of police power may also Magarian, et al., 55 two Of the cases cited by plaintiff-
be gleaned from Helvering v. Davis 45 wherein Mr. Justice appellant, lend support to the conclusion reached by the trial
Cardozo, speaking for the Court, resolved the conflict court, i.e. that the municipal resolution supersedes/supervenes
"between one welfare and another, between particular and over the contractual undertaking between the parties. Dolan v.
general, thus — Brown, states that "Equity will not, as a rule, enforce a
restriction upon the use of property by injunction where the
Nor is the concept of the general welfare static. Needs that property has so changed in character and environment as to
were narrow or parochial a century ago may be interwoven in make it unfit or unprofitable for use should the restriction be
our day with the well-being of the nation What is critical or enforced, but will, in such a case, leave the complainant to
urgent changes with the times. 46 whatever remedy he may have at law. 56 (Emphasis supplied.)
Hence, the remedy of injunction in Dolan vs. Brown was
The motives behind the passage of the questioned resolution denied on the specific holding that "A grantor may lawfully
being reasonable, and it being a " legitimate response to a felt insert in his deed conditions or restrictions which are not
public need," 47 not whimsical or oppressive, the non- against public policy and do not materially impair the
impairment of contracts clause of the Constitution will not bar beneficial enjoyment of the estate. 57 Applying the principle
the municipality's proper exercise of the power. Now Chief just stated to the present controversy, We can say that since it
Justice Fernando puts it aptly when he declared: "Police power is now unprofitable, nay a hazard to the health and comfort, to
legislation then is not likely to succumb to the challenge that use Lots Nos. 5 and 6 for strictly residential purposes,
thereby contractual rights are rendered nugatory." 48 defendants- appellees should be permitted, on the strength of
the resolution promulgated under the police power of the
Furthermore, We restated in Philippine American Life Ins. Co. municipality, to use the same for commercial purposes. In
v. Auditor General49 that laws and reservation of essential Burgess v. Magarian et al. it was, held that "restrictive
attributes of sovereign power are read into contracts agreed covenants running with the land are binding on all subsequent
upon by the parties. Thus — purchasers ... " However, Section 23 of the zoning ordinance
involved therein contained a proviso expressly declaring that
Not only are existing laws read into contracts in order to fix the ordinance was not intended "to interfere with or abrogate
obligations as between the parties, but the reservation of or annul any easements, covenants or other agreement
essential attributes of sovereign power is also read into between parties." 58 In the case at bar, no such proviso is
contracts as a postulate of the legal order. The policy of found in the subject resolution.
protecting contracts against impairments presupposes the
maintenance of a government by virtue of which contractual It is, therefore, clear that even if the subject building
relations are worthwhile – a government which retains restrictions were assumed by the defendant-appellee as vendee
adequate authority to secure the peace and good order of of Lots Nos. 5 and 6, in the corresponding deeds of sale, and
society. later, in Transfer Certificates of Title Nos. 101613 and
106092, the contractual obligations so assumed cannot prevail
Again, We held in Liberation Steamship Co., Inc. v. Court of over Resolution No. 27, of the Municipality of Mandaluyong,
Industrial Relations, 50 through Justice J.B.L. Reyes, that ... which has validly exercised its police power through the said
the law forms part of, and is read into, every contract, unless resolution. Accordingly, the building restrictions, which
clearly excluded therefrom in those cases where such declare Lots Nos. 5 and 6 as residential, cannot be enforced.
exclusion is allowed." The decision in Maritime Company of
the Philippines v. Reparations Commission, 51 written for the IN VIEW OF THE FOREGOING, the decision appealed from,
Court by Justice Fernando, now Chief Justice, restates the rule. dismissing the complaint, is hereby AFFIRMED. "without
pronouncement as to costs.
One last observation. Appellant has placed unqualified
reliance on American jurisprudence and authorities 52 to SO ORDERED.
bolster its theory that the municipal resolution in question
cannot nullify or supersede the agreement of the parties
embodied in the sales contract, as that, it claims, would impair
the obligation of contracts in violation of the Constitution.
Such reliance is misplaced.

In the first place, the views set forth in American decisions