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*
No. L­24670. December 14, 1979.

ORTIGAS & CO., LIMITED PARTNERSHIP, plaintiff­

appellant, vs. FEATI BANK AND TRUST CO., defendant­
appellee.

Appeal; The appellee has no duty to make assignments of

error.—The defendant­appellee submitted its counter­assignment
of errors. In this connection, We already had occasion to hold in
Relativo v. Castro that “(I)t is not incumbent on the appellee, who
occupies a purely defensive position, and is seeking no affirmative
relief, to make assignments of error.”
Same; An assignment of error can include only questions that
were raised in the trial court.—In the first place, the validity of
the said resolution was never questioned before it. The rule is
that the question of law or of fact which may be included in the
appellant’s assignment of errors must be those which have been
raised in the court below, and are within the issues framed by the
parties. The object of requiring the parties to present all questions
and issues to the lower court before they can be presented to the
appellate court is to enable the lower court to pass thereon, so
that the appellate court upon appeal may determine whether or
not such ruling was erroneous.
Local Governments; Municipalities are empowered by law to
adopt zoning ordinances and regulations.—Section 3 of R.A. No.
2264 otherwise known as the Local Autonomy Act, empowers a
Municipal Council” to adopt zoning and subdivision ordinances or
regulations” for the municipality. Clearly, the law does not
restrict the exercise of the power through an ordinance.
Therefore, granting that Resolution No. 27 is not an ordinance, it
certainly is a regulatory measure within the intendment or ambit
of the word “regulation” under the provision. As a matter of fact
the same section declares that the power exists “(A)ny provision of
law to the contrary notwithstanding x x x.”
Same; An exception to the general welfare powers delegated to

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municipalities is when the exercise of it’s powers will conflict with

vested rights arising from its contracts.—The only exceptions
under

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* EN BANC

534

534 SUPREME COURT REPORTS ANNOTATED

Ortigas & Co., Limited Partnership vs. Feati Bank and Trust Co.

Section 12 are existing vested rights arising out of a contract

between a “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 no apply in the case at bar.
Same; Police Power; Contracts; Land Registration; The police
power is superior to contractual stipulations between parties on the
use of lands sold by subdivisions even if said conditions are
annotated on the Torrens Title.—With regard to the contention
that said resolution cannot nullify the contractual obligations
assumed by the defendant­appellee—referring to the restrictions
incorporated in the deeds of sale and later in the corresponding
Transfer Certificates of Title issued to defendant­appellee—it
should be stressed, that while non­impairment of contracts is
constitutionally guaranteed, the rule is not absolute, since 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.
Same; Same; Same; Same;—Resolution No. 27, S­1960

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declaring the western part of Highway 54, now E. de los Santos

Avenue (EDSA, for short) from Shaw Boulevard to the Pasig River
as an industrial and commercial zone, was obviously passed by
the Municipal Council of Mandaluyong, Rizal 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.
Judicial notice may be taken of the conditions prevailing in the
area, especially where Lots Nos. 5 and 6 are located. The lots
themselves not only front the highway; industrial and commercial
complexes have flourished about the place. EDSA, a main traffic
artery which runs through several cities and municipalities in the
Metro Manila are, supports an endless stream of traffic and the
resulting activity, noise and pollution are hardly conducive to the
health, safety or welfare of the residents in its route. Having been
expressly granted the power to adopt zoning and subdivision
ordinances or regulations, the municipality of Man­

535

VOL. 94, DECEMBER 14, 1979 535

Ortigas & Co., Limited Partnership vs. Feati Bank and Trust Co.

daluyong, through its Municipal Council, was reasonably, if not

perfectly, justified under the circumstances, in passing the subject
resolution.
Same; Same; Same; Statutory Construction; Foreign
Jurisprudence; American decisions and authorities are not per se
controlling in the Philippines.—In the first place, the views set
forth in American decisions and authorities are not per se
controlling in the Philippines, the laws of which must necessarily
be construed in accordance with the intention of its own
lawmakers and such intent may be deduced from the language of
each law and the context of other local legislation related thereto.

Fernando, C.J., concurring:

Police Power; Contracts; Balancing the police power with the

exercise of property rights may be called for in certain instances.
—Reference was made in the opinion of the Court to Philippine
American Life Insurance Company v. Auditor General The ponente
in that case was Justice Sanchez. A concurrence came from me. It

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contained this qualification: “It cannot be said, without rendering

negatory the constitutional guarantee of non­impairment, and for
that matter both the equal protection and due process clauses
which equally serve to protect property rights, that at the mere
invocation of the police power, the objection on non­impairment
grounds automatically loses forces. Here, as in other cases where
governmental authority may trench upon property rights, the
process of balancing, adjustment or harmonization is called for.”
Same; Same; Same;—This is the concluding paragraph of my
concurrence in the Philippine American Life Insurance Co. case:
“If emphasis be therefore laid, as this concurring opinion does, on
the pressing and inescapable need for such an approach whenever
a possible collision between state authority and an assertion of
constitutional right to property may exist, it is not to depart from
what sound constitutional orthodoxy dictates. It is rather to abide
by what is compels. In litigations of this character the, perhaps
much more so than in other disputes, where there is a reliance on
a constitutional provision, the judiciary cannot escape what
Holmes fitly referred to as the sovereign prerogative of choice, the
exercise of which might possibly be impugned if there be no
attempt, however slight, at such an effort of adjusting or
reconciling the respective

536

536 SUPREME COURT REPORTS ANNOTATED

Ortigas & Co., Limited Partnership vs. Feati Bank and Trust Co.

claims of state regulatory power and constitutionally protected

rights.”
Same; Same; Constitutional Law; The claim to property rights
based on the non­impairment clause has a lesser weight under the
present Constitution, vis a vis the police power.—The only point I
would wish to add is that in the process of such balancing and
adjustment, the present Constitution, the Philippine American
Life Insurance Co. decision having been promulgated under the
1935 Charter, leaves no doubt that the claim to property rights
based on the non­impairment clause has a lesser weight. For as
explicitly provided by our present fundamental law: “The State
shall promote social justice to ensure the dignity, welfare, and

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security of all the people. Towards this end, the State shall
regulate the acquisition, ownership, use, enjoyment, and
disposition of private property, and equitably diffuse property
ownership and profits.
Same; Same; Same; Arrangements dealing with property
rights are not impressed with sanctity.—More specifically, such
covenants are an important means of ordering one aspect of
property relationships. Through them, there could be delimitation
of land use rights. It is quite understandable why the law should
ordinarily accord them deference. It does so, it has been said, both
on grounds of morality and utility. Nonetheless, there are limits
to the literal enforcement of their terms. To the extent that they
ignore technological or economic progress, they are not
automatically entitled to judicial protection. Clearly, they must
“speak from one point of time to another.” The parties, like all
mortals, do not have the power of predicting the future with
unfailing certainty. In cases therefore were societal welfare calls
for police power legislation, the parties adversely affected should
realize that arrangements dealing with property rights are not
impressed with sanctity. That approach, in my view, was the
guiding principle of the opinion of the Court. Hence my full and
entire concurrence.

Barredo, J., concurring:

Police Power; Contracts; It is public knowledge that the place

in question is already a commercial area.—I concur. I hold it is a
matter of public knowledge that the place in question is
commercial. It would be worse if the same were to be left as
residential and all around are already commercial.

537

VOL. 94, DECEMBER 14, 1979 537

Ortigas & Co., Limited Partnership vs. Feati Bank and
Trust Co.

Abad Santos, J., dissenting:

Police Power; The municipal ordinance in question was not

exacted pursuant to the police power of the municipality of
Mandaluyong. Its effect to the case at bar is to replace the peace of

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a residential area with the turmoil of commerce and pollution of

industry setting back efforts of the Metro Manila Governor to
improve the quality of life.—But Resolution No. 27, cannot be
described as promotive of the health, morals, peace, education,
good order or safety and general welfare of the people of
Mandaluyong. On the contrary, its effect is the opposite. For the
serenity, peace and quiet of a residential section would be the
resolution be replaced by the chaos, turmoil and frenzy of
commerce and industry. Where there would be no industrial and
noise pollution these bane of so­called progress would now
pervade and suffocate the environment of the detriment of the
ecology. To characterize the ordinance as an exercise of police
power would be retrogressive. It will set back all the efforts of the
Ministry of Human Settlements to improve the quality of life
especially in Metro Manila. It will make Metro Manila, not the
city of man as envisioned by its Governor but a city of commerce
and industry.

APPEAL from the decision of the Court of First Instance of

Rizal Reyes, J.

The facts are stated in the opinion of the Court.

     Ramirez & Ortigas for appellant.
     Tañada, Teehankee & Carreon for appellee.

SANTOS, J.:

An appeal interposed on June 23, 1965 by plaintiff­

appellant, Ortigas & Co., Limited Partnership, from the
decision of the Court of First Instance of Rizal, Branch VI,
at Pasig, Hon. Andres Reyes presiding, which dismissed its
complaint in Civil Case No. 7706, entitled, “Ortigas &
Company, Limited Partnership, plaintiff, v. Feati Bank and
Trust Company, defendant,” for lack of merit.
The following facts—a reproduction of the lower court’s
findings, which, in turn, are based on a stipulation of facts
538

538 SUPREME COURT REPORTS ANNOTATED

Ortigas & Co., Limited Partnership vs. Feati Bank and
Trust Co.

entered into by the parties—are not disputed. Plaintiff

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(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 Subdivision1 along Epifanio
de los Santos Avenue, Mandaluyong, Rizal.
On March 4, 1952, plaintiff, as vendor, and Augusto
Padilla y Angeles and Natividad Angeles, as vendees,
entered into separate agreements of sale on installments
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 favor of one Emma Chavez. Upon completion of
payment of the purchase price, the plaintiff executed the
corresponding deeds of sale in favor of Emma Chavez. Both
the agreements (of sale on installment) and the deeds of
sale contained the stipulations or restrictions that:

“1. 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.
2. All buildings and other improvements (except the
fence) which may be constructed at any time in said
lot must be, (a) of strong materials and properly
painted, (b) provided with modern sanitary
installations connected either to the public sewer or
to an approved septic tank, and (c) shall not be at a
distance of less2 than two (2) meters from its
boundary lines.”

The above restrictions were later annotated in TCT Nos.

101509 and 101511 of the Register of Deeds of Rizal,
covering3 the said lots and issued in the name of Emma
Chavez.
Eventually, defendant­appellee acquired Lots Nos. 5 and
6, with TCT Nos. 101613 and 106092 issued in its name,
respec­

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1 Record on Appeal, p. 110.

2 Id., pp. 4­5. Emphasis supplied.
3 Id., pp. 111­112.

539

VOL. 94, DECEMBER 14, 1979 539

Ortigas & Co., Limited Partnership vs. Feati Bank and
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tively, and
4
the building restrictions were also annotated
therein. Defendant­appellee bought Lot No. 5 directly from
Emma Chavez, “free 5from all liens and encumbrances as
stated in Annex ‘D’,” while Lot No. 6 was acquired from
Republic
6
Flour Mills through a “Deed of Exchange,” Annex
“E”. TCT No. 101719 in the name of Republic Flour Mills
likewise contained the same restrictions, although
defendant­appellee claims that Republic Flour Mills
purchased the said Lot No. 6 “in good faith, free from all
liens and 7encumbrances,” as stated in the Deed of Sale,
Annex “F” between it and Emma Chavez.
Plaintiff­appellant claims that the restrictions
annotated on TCT Nos. 101509, 101511, 101719, 101613,
and 106092 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 plaintiff­appellant where commercial
8
and
industrial sites are also designated or established.
Defendant­appellee, 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,
per Resolution No. 27, dated February 94, 1960 of the
Municipal Council of Mandaluyong, Rizal. It alleges that
plaintiff­appellant “completely sold and transferred to third
persons all lots 10in 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 x x x11had been declared a commercial
and industrial zone x x x.” f

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4 Id., p. 112.
5 Id., p. 80.
6 Id., p. 86,
7 Id., p. 94.
8 Id., pp. 112­113.
9 Id., pp. 60 and 113.
10 Brief for Defendant­Appellee, p. 2.
11 Id., p. 3.

540

540 SUPREME COURT REPORTS ANNOTATED

Ortigas & Co., Limited Partnership vs. Feati Bank and
Trust Co.

On or about May 5, 1963, defendant­appellee began laying

the foundation and commenced the construction of a
building on Lots Nos. 5 and 6, to be devoted to banking
purposes, but which defendant­appellee claims could also
be devoted to, and used exclusively for, residential
purposes. The following day, plaintiff­appellant demanded
in writing that defendant­appellee stop the construction of
the commerical building on the said lots. The latter refused
to comply with the demand, contending that the building
was being constructed in accordance with the zoning
regulations, defendant­appellee having filed building and
planning permit applications with the Municipality of
Mandaluyong, and it had accordingly obtained building
12
and
planning permits to proceed with the construction.
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 x x x 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
x x x 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.”
In deciding the said case, the trial court considered, as
the fundamental issue, whether or not the resolution of the
Municipal Council of Mandaluyong declaring Lots Nos. 5
and 6, among others, as part of the commercial and

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industrial zone of the municipality, prevailed over the

building restrictions
13
imposed by plaintiff­appellant on the
lots in question. The records do not show that a writ of
preliminary injunction was issued.
The trial court upheld the defendant­appellee and
dismissed the complaint, holding that the subject
restrictions were subordinate to Municipal Resolution No.
27, supra. It

________________

12 Record on Appeal, pp. 113­114.

13 Id., p. 114.

541

VOL. 94, DECEMBER 14, 1979 541

Ortigas & Co., Limited Partnership vs. Feati Bank and
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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 along Epifanio de los Santos Avenue as a
commercial and industrial zone, and held that the same
rendered “ineffective and unenforceable” 14 the restrictions in
question as against defendant­appellee. The trial court
decision further emphasized that it “assumes said
resolution to be valid, considering that there is no issue
raised by either 15
of the parties as to whether the same is
null and void. ”
On March 2, 1965, plaintiff­appellant 16
filed a motion for
reconsideration of the above decision, which motion 17was
opposed by defendant­appellee on March 17, 1965. It
averred, among others, in the motion for reconsideration
that defendant­appellee “was duty bound to comply with
the conditions of the contract of sale in its favor, which
conditions were duly annotated in the Transfer Certificates
of Title issued in her (Emma Chavez) favor.” It also invited
the trial court’s attention to its claim that “. . . the
Municipal Council had (no) power to nullify the contractual
18
obligations assumed by the defendant corporation. ”

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The trial court denied the

19
motion for reconsideration in
its order of March 26, 1965.
On April 2, 1965 plaintiff­appellant filed its notice of
appeal from the decision dismissing the complaint and
from the order of March 26, 1965 denying the motion for
reconsideration,
20
its record on appeal, and a cash appeal
21
bond. On April 14, the appeal was given due course and
the records of the case were

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14 Id., pp. 114­115.

15 Id., p. 114.
16 Id., p. 116.
17 Id., p. 118.
18 Id., p. 117.
19 Id., p. 127.
20 Id., pp. 127­129.
21 Id., p. 130.

542

542 SUPREME COURT REPORTS ANNOTATED

Ortigas & Co., Limited Partnership vs. Feati Bank and
Trust Co.

elevated directly
22
to this Court, since only questions of law
are raised.
Plaintiff­appellant alleges in its brief that the trial court
erred—

I. When it sustained the view that Resolution No. 27, series

of 1960 of the Municipal Council of Mandaluyong, Rizal
declaring Lots Nos. 5 and 6, among others, as part of the
commercial and industrial zone, is valid because it did so
in the exercise of its police power; and
II. When it failed to consider whether or not the Municipal
Council had the power to nullify the contractual
obligations assumed by defendant­appellee and when it
did not make a finding that the building was erected along
the property line, when it should have been erected two
23
meters away from said property line.

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The defendant­appellee submitted its counter­assignment

of errors. In this connection,
24
We already had occasion to
hold in Relativo v. Castro that “(I)t is not incumbent on
the appellee, who occupies a purely defensive position, and
is seeking no affirmative relief, to make assignments of
error.”
The only issues to be resolved, therefore, are: (1)
whether Resolution No. 27 s­1960 is a valid exercise of
police power; and (2) whether the said Resolution can
nullify or supersede the contractual obligations assumed by
defendant­appellee.
1. The contention that the trial court erred in sustaining
the validity of Resolution No. 27 as an exercise of police
power is without merit. In the first place, the validity of the
said resolution was never questioned before it. The rule is
that the question of law or of fact which may be included in
the appellant’s assignment of errors must be those which
have been raised in the court 25
below, and are within the
issues framed by the parties. The object of requiring the
parties to present all questions and issues to the lower
court before they can be

_______________

22 Ibid.
23 See Brief for Defendant­Appellee, pp. 30­31.
24 76 Phil. 563, 567 (1946).
25 Sec. 18, Rule 46, Revised Rules of Court; Tan Machan v. De la
Trinidad 3 Phil. 684, (1946).f

543

VOL. 94, DECEMBER 14, 1979 543

Ortigas & Co., Limited Partnership vs. Feati Bank and
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presented to the appellate court is to enable the lower court

to pass thereon, so that the appellate court upon appeal
may determine whether or not such ruling was erroneous.
The requirement is in furtherance of justice 26in that the
other party may not be taken by surprise. The rule
against the practice of blowing “hot and cold” by assuming
one position in the trial court and another on appeal will,
27
in the words of Elliot, prevent deception. For it is well­

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27
in the words of Elliot, prevent deception. 28 For it is well­
settled that
29
issues 30
or defenses not raised or properly
litigated or pleaded in the Court below cannot be raised
or entertained on appeal.
In this particular case, the validity of the resolution was
admitted, at least impliedly, in the stipulation of facts
below, when plaintiff­appellant did not dispute the same.
The only controversy then as stated by the trial court was
“. . . whether or not the resolution of the Municipal Council
of Mandaluyong x x x which declared Lots Nos. 4 and 5
among others, as a part of the commercial and industrial
zone of the municipality, prevails over the restrictions 31
constituting as encumbrances on the lots in question.”
Having admitted the validity of the subject resolution
below, even if impliedly, plaintiff­appellant cannot now
change its position on appeal.
But, assuming arguendo that it is not yet too late in the
day for plaintiff­appellant to raise the issue of the
invalidity of the municipal resolution in question, We are of
the opinion that its

________________

26 Francisco, The Revised Rules of Court. Vol. III, 1968 Ed., p. 648,
citing Jones v. Seymour, 95 Art. 593, 597, 130 S.W. 560.
27 Id., pp. 638­649, cit Elliot on Appellate Procedure, 416­417.
28 Sumerariz, et al. vs. Development Bank of the Philippines, et al., L­
23764, Dec. 26, 1967, 21 SCRA 1374; San Miguel Brewery, et al., vs. Vda.
de Joves, et al., L­24258, June 26, 1968, 23 SCRA 1093, 1097. See also
Tuason vs. Hon. Arca, et al., L­24346, June 29, 1968, 23 SCRA 1308, 1312.
29 Plaridel Surety and Ins. Co. vs. Commissioner of Internal Revenue,
L­21520, Dec. 11, 1967, 21 SCRA 1187.
30 Manila Port Service, et al. vs. Court of Appeals, et al., L­21890,
March 29, 1968, 22 SCRA 1364.
31 Record on Appeal, p. 114.

544

544 SUPREME COURT REPORTS ANNOTATED

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posture is unsustainable. Section 3 of R.A. No. 2264,

32
otherwise known as the Local Autonomy Act, empowers a

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32
otherwise known as the Local Autonomy Act, empowers a
Municipal Council “to adopt 33
zoning and subdivision
ordinances or regulations” for the municipality. Clearly,
the law does not restrict the exercise of the power through
an ordinance. Therefore, granting that Resolution No. 27 is
not an ordinance, it certainly is a regulatory measure
within the intendment or ambit of the word “regulation”
under the provision. As a matter of fact the same section
declares that the power exists “(A)ny provision of law to the
contrary notwithstanding x x x.” 34
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 “(A)ny 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

_______________

32 Sec. 3 reads:

Sec. 3. Additional powers of provincial boards, municipal boards or city councils

and municipal and regularly organized municipal district councils.

xxx

Power to adopt zoning and planning ordinances.—Any provision of law to the

contrary notwithstanding Municipal Boards or City Councils in cities, and
Municipal Councils in municipalities are hereby authorized to adopt zoning and
subdivision ordinances or regulations for their respective cities and municipalities
subject to the approval of the City Mayor or Municipal Mayor, as the case may be.
Cities and municipalities may, however, consult the National Planning
Commission on matters pertaining to planning and zoning. (Emphasis supplied).

33 Emphasis supplied.
34 The full text of Section 12 follows:

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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. With regard to the contention that said resolution
cannot nullify the contractual obligations assumed by the
defendant­appellee—referring to the restrictions
incorporated in the deeds of sale and later in the
corresponding Transfer Certificates of Title issued to
defendant­appellee—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,
35
good order or safety and general welfare of the
people.” Invariably described as36 “the most essential,
insistent, and illimitable of powers” and “in a

_______________

“SEC. 12. Rules for the Interpretation of the Local Autonomy Act.—

1. Implied power of a province, a city or municipality shall be liberally

construed in its favor. Any fair and reasonable doubt as to the existence of
the power should be interpreted infavor of the local government and it
shall be presumed to exist.
2. The general welfare clause be liberally interpreted in case of local
governments in promoting the economic condition, social welfare and
material progress of the people in the community.
3. Vested rights existing at the time of the promulgation of this arising out of
a contract between a province, city or municipality on one hand and third
party on the other, should be governed by the original terms and provisions
of the same, and in no case would this act infringe existing right.”

35 Primicias vs. Fugoso, 80 Phil. 77 (1948).

36 Smith Bell & Co. v. Natividad, 40 Phil. 136 (1919), citing earlier
authorities, Justice Malcolm ponente.

546

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sense, the greatest

37
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 a38violation of any other applicable
constitutional guarantee. As this Court held through
Justice Jose P. Bengzon in Philippine
39
Long Distance
Company vs. City of Davao, et al. police power “is elastic
and must be responsive to various social conditions; it is
not confined within narrow circumscriptions of precedents
resting on past conditions; it must follow the legal progress
of a democratic way of life.” We were even more emphatic
in Vda.
40
de Genuino vs. The Court of Agrarian Relations, et
al., when We declared: “We do not see why public welfare
when clashing with the individual right to property should
not be made to prevail through the state’s exercise of its
police power.”
Resolution No. 27, s­1960 declaring the western part of
Highway 54, now E. de los Santos Avenue (EDSA, for
short) from Shaw Boulevard to the Pasig River as an
industrial and commercial zone, was obviously passed by
the Municipal Council of Mandaluyong, Rizal 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. Judicial notice may be taken of the
conditions prevailing in the area, especially where Lots
Nos. 5 and 6 are located. The lots themselves not only front
the highway; industrial and commercial complexes have
flourished about the place. EDSA, a main traffic artery
which runs through several cities and municipalities in the
Metro Manila area, supports an endless stream of traffic
and the resulting activity, noise and pollution are hardly
conducive

_______________

37 Edu v. Ericta, L­3206, Oct. 24, 1970, 35 SCRA 487, Justice Fernando,
now Chief Justice, speaking for the court.
38 See Ermita­Malate Hotel and Motel Operators Association, Inc. v.

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City Mayor of Manila, L­24693, July 31, 1967, 20 SCRA 849, Justice
Fernando, now Chief Justice, also wrote the decision for the Court.
39 L­23080, Oct. 20, 1965, 15 SCRA 244, 247­248.
40 L­25035, Feb. 26, 1968, 22 SCRA 792, 797.

547

VOL. 94, DECEMBER 14, 1979 547

Ortigas & Co., Limited Partnership vs. Feati Bank and
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to the health, safety or welfare of the residents in its route.

Having been expressly granted the power to adopt zoning
and subdivision ordinances or regulations, the municipality
of Mandaluyong, through its Municipal Council, was
reasonably, if not perfectly, justified under the
circumstances, in passing the subject resolution.
The scope of police power keeps expanding as civilization
advances, stressed this Court, speaking thru Justice
41
Laurel
in the leading case of Calalang v. Williams, et al. Thus—

“As was said in the case of Dobbins v. Los Angeles (195 US 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 future,
because of changed situation, the growth of population or other
causes, become a menace to the public health and welfare, and be
required to yield to the public good.’ And in People v. Pomar (46
Phil. 440), it was observed that ‘advancing civilization is bringing
within the scope of police power of the state today things which
were not thought of as being with in such power yesterday. The
development of civilization, the rapidly increasing population, the
growth of public opinion, with an increasing desire on the part of
the masses and of the government to look after and care for the
interests of the individuals of the state, have brought within the
police power many questions for regulation which formerly were
42
not so considered.” (Emphasis, supplied.)

Thus, the state, in order to promote the general welfare,

may interfere with personal liberty, with property, and
with business and occupations. Persons may be subjected
to all kinds of restraints and burdens, in order to secure
43
the
general comfort health and prosperity of the state and to
this fundamental aim of our44Government, the rights of the
individual are subordinated.

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The need for reconciling the non­impairment clause of

the Constitution and the valid exercise of police power may
also be

_______________

41 70 Phil. 726 (1940).

42 Id., p. 734; Emphasis supplied.
43 Id., p. 733, citing U.S. v. Gomez Jesus, 31 Phil. 218 (1915).
44 Id., p. 733.

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45
gleaned from Helvering v. Davis wherein Mr. Justice
Cardozo, speaking for the Court, resolved the conflict
“between one welfare and another, between particular and
general,” thus—

“Nor is the concept of the general welfare static. Needs that were
narrow or parochial a century ago may be interwoven in our day
with the well­being of the nation. What is critical or urgent
46
changes with the times.”

The motives behind the passage of the questioned

resolution being reasonable, and it47 being a “legitimate
response to a felt public need,” not whimsical or
oppressive, the non­impairment of contracts clause of the
Constitution will not bar the municipality’s proper exercise
of the power. Now Chief Justice Fernando puts it aptly
when he declared: “Police power legislation then is not
likely to succumb to the challenge
48
that thereby contractual
rights are rendered nugatory. ”
Furthermore, We restated 49
in Philippine American Life
Ins. Co. v. Auditor General that laws and reservation of
essential attributes of sovereign power are read into
contracts agreed upon by the parties. Thus—

“Not only are existing laws read into contracts in order to fix
obligations as between the parties, but the reservation of essential
attributes of sovereign power is also read into contracts as a

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postulate of the legal order. The policy of protecting contracts

against impairments presupposes the maintenance of a
government by virtue of which contractual relations are
worthwhile—a government which retains adequate authority to
secure the peace and good order of society.”

_______________

45 301 U.S. 619 (1937).

46 Emphasis supplied.
47 Edu v. Ericta, supra, p. 489.
48 Fernando on the Philippine Constitution, 1974 ed., p. 558.
49 L­19255, January 18, 1968, 22 SCRA 135, citing Home Building and
Loan Association v. Blaisedell, 78 L. ed., 413, 428.

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Ortigas & Co., Limited Partnership vs. Feati Bank and
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Again, We held in Liberation

50
Steamship Co., Inc. v. Court
of Industrial Relations, through Justice J.B.L. Reyes, that
“x x x the law forms part of, and is read into, every
contract, unless clearly excluded therefrom in those cases
where such exclusion is allowed.” The decision in Maritime 51
Company of the Philippines v. Reparations Commission,
written for the Court by Justice Fernando, now Chief
Justice, restates the rule.
One last observation. Appellant has placed unqualified
52
reliance on American jurisprudence and authorities to
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 and authorities are not per se controlling in the
Philippines, the laws of which must necessarily be
construed in accordance with the intention of its own
lawmakers and such intent may be deduced from the
language of each law and 53 the context of other local
legislation related thereto. and Burgess, et al. v.
55
Magarian, et al., two of the cases cited by plaintiff­

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55
Magarian, et al., two of the cases cited by plaintiff­
appellant, lend support to the conclusion reached by the
trial court, i.e. that the municipal resolution
supersedes/supervenes over the contractual undertaking
between the parties. Dolan v. Brown, states that “Equity
will not, as a rule, enforce a restriction upon the use of
property by injunction where the property has so changed in
character and environment as to make it unfit or
unprofitable for use should the restriction be enforced, but
will, in such a case, leave the complainant to whatever
remedy he

_______________

50 L­25389­90, June 27, 1968, 28 SCRA 1115, citing Manresa, Comm.

Vol. 8, part 2 (5th Ed.) p. 535.
51 L­29203, July 26, 1971, 40 SCRA 75.
52 Brief for Plaintiff­Appellant, pp. 9­17.
53 Proctor & Gamble Philippine Manufacturing Corporation vs.
Commissioner of Customs, L­24173, May 23, 1968, 23 SCRA 691.
54 170 NE 425, 428 Illinois (1930).
55 243 NW 356, 358­359 Iowa (1932).

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Ortigas & Co., Limited Partnership vs. Feati Bank and
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56
may have at law. ” (Emphasis supplied.) Hence, the
remedy of injunction in Dolan vs. Brown was denied on the
specific holding that “A grantor may lawfully insert in his
deed conditions or restrictions which are not against public
policy and do not materially57
impair the beneficial
enjoyment of the estate.” Applying the principle just
stated to the present controversy, We can say that since it
is now unprofitable, nay a hazard to the health and
comfort, to use Lots Nos. 5 and 6 for strictly residential
purposes, defendants­appellees should be permitted, on the
strength of the resolution promulgated under the police
power of the municipality, to use the same for commercial
purposes. In Burgess v. Magarian, et al. it was held that
“restrictive covenants running with the land are binding on

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all subsequent purchasers x x x.” However, Section 23 of

the zoning ordinance involved therein contained a proviso
expressly declaring that the ordinance was not intended “to
interfere with or abrogate or annul any easements, 58
covenants or other agreement between parties.” In the
case at bar, no such proviso is found in the subject
resolution.
It is, therefore, clear that even if the subject building
restrictions were assumed by the defendant­appellee 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.
IN VIEW OF THE FOREGOING, the decision appealed
from, dismissing the complaint, is hereby AFFIRMED.
Without pronouncement as to costs.
SO ORDERED.

          Makasiar, Antonio, Concepcion, Jr., Fernandez,

Guerrero, De Castro and Melencio­Herrera, JJ., concur.

_______________

56 Op. Cit. at p. 427.

57 Id., id
58 Op. Cit. at p. 358.

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*
     Teehankee and Aquino, JJ., took no part.
          Barredo, J., concur. I hold it is a matter of public
knowledge that the place in question is commercial. It
would be worse if the same were to be left as residential
and all around are already commercial.
     Abad Santos, J., dissent in a separate opinion.

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FERNANDO, C.J., Concurring:

The exhaustive and lucid opinion of the Court penned by

Justice Guillermo S. Santos commends itself for approval. I
feel no hesitancy, therefore, in yielding concurrence. The
observation, however, in the dissent of Justice Vicente
Abad Santos relative to restrictive covenants calls, to my
mind, for further reflection as to the respect to which they
are entitled whenever police power legislation, whether on
the national or local level, is assailed. Before doing so,
however, it may not be amiss to consider further the effect
of such all­embracing attribute on existing contracts.
1. Reference was made in the opinion of the Court to
Philippine
1
American Life Insurance Company v. Auditor
General. The ponente in that case was Justice Sanchez. A
concurrence came from me. It contained this qualification:
“It cannot be said, without rendering nugatory the
constitutional guarantee of non­impairment, and for that
matter both the equal protection and due process clauses
which equally serve to protect property rights, that at the
mere invocation of the police power, the objection on non­
impairment grounds automatically loses force. Here, as in
other cases where governmental authority may trench
upon property rights, the process2 of balancing, adjustment
or harmonization is called for.” After referring to three
leading United States Supreme Court decisions,
3
Home
Building and Loan Association v. Blaisdell,

_______________

1 L­19244, January 18, 1968, 22 SCRA 135.

2 Ibid, 148.
3 290 US 398 (1934).
* Justice Teehankee was co­counsel for defendant­appellee.

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4
Nebbia v. New5
York, and Norman v. Baltimore and Ohio
Railroad Co., I stated: “All of the above decisions reflect

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the view that an enactment of a police power measure does

not per se call for the overruling of objections based on
either due process or non­impairment based on either due
process or non­impairment grounds. There must be that
balancing, or adjustment, or harmonization of the
conflicting claims posed by an exercise of state regulatory
power on the one hand and assertion of rights to property,
whether of natural or of juridical persons, on the other.
That is the only way by which the constitutional
guarantees may serve the high ends that call for their
inclusion in the Constitution and thus effectively6 preclude
any abusive exercise of governmental authority.” Nor did
my concurrence stop there: “In the opinion of the Blaisdell
case, penned by the then Chief Justice Hughes, there was
this understandable stress on balancing or harmonizing,
which is called for in litigations of this character: ‘The
policy of protecting contracts against impairment
presupposes the maintenance of a government by virtue of
which contractual relations are worthwhile—a government
which retains adequate authority to secure the peace and
good order of society. This principle of harmonizing the
constitutional prohibition with the necessary residuum of
state power has had progressive recognition in the
decisions of this Court.’ Also to the same effect:
‘Undoubtedly, whatever is reserved of state power must be
consistent with the fair intent of the constitutional
limitation of that power. The reserve power cannot be
construed so as to destroy the limitation, nor is the
limitation to be construed to destroy the reserved power in
its essential aspects. They must be construed in harmony
with each other. This principle precludes a construction
which would permit the State to adopt as its policy the
repudiation of debts or the destruction of contracts or the
denial of means to enforce them. But it does not follow that
conditions may not arise in

_______________

4 291 US 502 (1934).

5 294 US 240 (1935).
6 Ibid, 151­152.

553

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VOL. 94, DECEMBER 14, 1979 553

Ortigas & Co., Limited Partnership vs. Feati Bank and
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which a temporary restraint of enforcement may be

consistent with the spirit and purpose of the constitutional
provision and thus be found to be within the range of the
reserved power of the State to protect the vital interests of
the community.’ Further on, Chief Justice Hughes likewise
stated: ‘It is manifest from this review of our decisions that
there has been a growing appreciation of public needs and
of the necessity of finding ground for a rational 7compromise
between individual rights and public welfare.’” This is the
concluding paragraph of my concurrence in the Philippine
American Life Insurance Co. case: “If emphasis be
therefore laid, as this concurring opinion does, on the
pressing and inescapable need for such an approach
whenever a possible collision between state authority and
an assertion of constitutional right to property may exist, it
is not to depart from what sound constitutional orthodoxy
dictates. It is rather to abide by what is compels. In
litigations of this character then, perhaps much more so
than in other disputes, where there is a reliance on a
constitutional provision, the judiciary cannot escape what
Holmes fitly referred to as the sovereign prerogative of
choice, the exercise of which might possibly be impugned if
there be no attempt, however slight, at such an effort of
adjusting or reconciling the respective claims of state 8
regulatory power and constitutionally protected rights.”
I adhere to such a view. This is not to say that there is a
departure therefrom in the able and scholarly opinion of
Justice Santos. It is merely to stress what to my mind is a
fundamental postulate of our Constitution. The only point I
would wish to add is that in the process of such balancing
and adjustment, the present Constitution, the Philippine
American Life Insurance Co. decision having been
promulgated under the 1935 Charter, leaves no doubt that
the claim to property rights based on the non­impairment
clause has a lesser weight. For as explicitly provided by our
present fundamental law: “The State shall promote social
justice to ensure the dignity, welfare, and security of all the
people. Towards this end, the

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_______________

7 Ibid, 152­153.
8 Ibid, 155.

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State shall regulate the acquisition, ownership, use,

enjoyment, and disposition of private property, 9
and
equitably diffuse property ownership and profits.”
2. Now as to restrictive convenants, accurately included
by Hart and Sacks10
under the category of “private directive
arrangements.” Through them people are enable to agree
on how to order their affairs. They could be utilized to
govern their affairs. They could be utilized to govern their
future conduct. It is a well­known fact that the common
law relies to a great extent on such private directive
arrangements to attain a desirable social condition. More
specifically, such covenants are an important means of
ordering one aspect of property relationships. Through
them, there could be delimitation of land use rights. It is
quite understandable why the law should ordinarily accord
them deference. It does so, it has been said, both on
grounds of morality and utility. Nonetheless, there are
limits to the literal enforcement of their terms. To the
extent that they ignore technological or economic progress,
they are not automatically entitled to judicial protection.
Clearly, 11
they must “speak from one point of time to
another.” The parties, like all mortals, do not have the
power of predicting the future with unfailing certainty. In
cases therefore where societal welfare calls for police power
legislation, the parties adversely affected should realize
that arrangements dealing with property rights are not
impressed with sanctity. That approach, in my view, was
the guiding principle of the opinion of the Court. Hence my
full and entire concurrence.

ABAD SANTOS, J: Dissenting—

I dissent. Although Resolution No. 27, series of 1960, of the

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Municipal Council of Mandaluyong, Rizal, is valid until

otherwise declared, I do not believe that its enactment was
by virtue of the police power of that municipality. I do not
here dispute the concept of police power as stated in
Primicias vs.

_______________

9 Article II, Section 6 of the Constitution.

10 H. Hart and A. Sacks, The Legal Process, 124.
11 Ibid, 125.

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Fugoso, 80 Phil. 77 (1948) for as a matter of fact I accept it.

And I agree also that it is elastic and must be responsive to
various social conditions, etc. as ruled in PLDT vs. City of
Davao, L­23080, Oct. 26, 1965, 15 SCRA 244. But
Resolution No. 27, cannot be described as promotive of the
health, morals, peace, education, good order or safety and
general welfare of the people of Mandaluyong. On the
contrary, its effect is the opposite. For the serenity, peace
and quite of a residential section would by the resolution be
replaced by the chaos, turmoil and frenzy of commerce and
industry. Where there would be no industrial and noise
pollution these bane of so­called progress would now
pervade and suffocate the environment to the detriment of
the ecology. To characterize the ordinance as an exercise of
police power would be retrogressive. It will set back all the
efforts of the Ministry of Human Settlements to improve
the quality of life especially in Metro Manila. It will make
Metro Manila, not the city of man as envisioned by its
Governor but a city of commerce and industry.
Considering, therefore, that Resolution No. 27 was not
enacted in the legitimate exercise of police power, it cannot
impair the restrictive covenants which go with the lands
that were sold by the plaintiff­appellant. I vote for the
reversal of the appealed decision.
Decision Affirmed.

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Notes.—The City Council has authority to close city

streets and to vacate or withdraw the same from public
use. (Cebu Oxygen & Acetylene Co., Inc. vs. Berciles, 66
SCRA 481).
The Municipal Government may charge parking fees on
vehicles that stop and load and unload on public streets.
(City of Ozamis vs. Lumapas, 65 SCRA 33).
Presidential Decree No. 345 applies with respect to the
management of a city market rather than Presidential
Decree No. 231 or the Local Tax Code as the former is of
later enactment. (Asiatic Integrated Corp. vs. Alikpala, 67
SCRA 60).
A municipal corporation must abide by it’s contract with
private persons. (City of Zamboanga vs. Alvares, 68 SCRA
142).

——o0o——

556

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Pamintuan vs. Court of Appeals

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