Ortigas & Co. v. CA, GR 126102, 4 December 2000

Ortigas & Co. v. CA, GR 126102, 4 December 2000 
 
 FACTS: 

• August 25 1976: Petitioner Ortigas & Co sold a parcel of land located in Greenhills Subdivision IV, San Juan, Metro Manila to Emilia Hermoso, of which the contract of sale provided that: 1. (1) be used exclusively for residential purposes only, and not more than one single-family residential building will be constructed thereon; 6. The BUYER shall not erect any sign or billboard on the roof for advertising purposes; 11. No single-family residential building shall be erected until the building plans, specification have been approved by the SELLER; 14....restrictions shall run with the land and shall be construed as real covenants until December 31, 2025 when they shall cease and terminate.
• 1981: MMC Ordinance No. 81-01 also known Comprehensive Zoning Area for the National Capital region was enacted by the Metropolitan Manila Commission (now Metropolitan Development Authority) to classify as a commercial area a portion of Ortigas Avenue from Madison to Roosevelt Streets of Greenhills subdivision where the lot is located
• June 8, 1984: private respondent Ismael Mathay III leased a lot from Hermoso and constructed a single-story commercial building for Greenhills Autohaus Inc., a car sales company which was not stated in the lease contract
• January 18, 1995: Ortigas & Co filed a complaint against Hermoso seeking the demolition of the said construction as it violated the conditions in the contract and prohibiting Mathay from constructing the commercial building and or engaging in commercial activity, which later on Mathay was impleaded as he has a 10% interest in the lot. But he denied knowledge about the restrictions.
• Mathay then filed with the CA a special civil action for certiorari asserting that MMC Ordinance No. 81-01 classified the area where the lot was located as commercial area and said ordinance must be read into the Deed of Sale as a concrete exercise of police power. But Ortigas and Company averred on the contrary.
• The CA then held that the said ordinance effectively nullified the contract’s restrictions allowing only residential use of the property in question.
• The petitioner then moved for reconsideration, but was then. Hence the petition.

 
ISSUE/S: 
Whether or not the ordinance impaired the stipulated restrictions in the contract prior to its effectivity
 
RULING: 
YES. The court held that statutes in exercise of valid police power must be read into every contract. Noteworthy, in Sangalang vs. Intermediate Appellate Court,13 we already upheld MMC Ordinance No. 81-01 as a legitimate police power measure. chanrobles virtual law library
The trial courts reliance on the Co vs. IAC,14 is misplaced. In Co, the disputed area was agricultural and Ordinance No. 81-01 did not specifically provide that it shall have retroactive effect so as to discontinue all rights previously acquired over lands located within the zone which are neither residential nor light industrial in nature,[15 and stated with respect to agricultural areas covered that the zoning ordinance should be given prospective operation only.16 The area in this case involves not agricultural but urban residential land. Ordinance No. 81-01 retroactively affected the operation of the zoning ordinance in Greenhills by reclassifying certain locations therein as commercial. Moreover, statutes in exercise of valid police power must be read into every contract.