SEC 10 No law impairing the obligation of contracts shall be passed.

Case RECIT READY ADDITIONAL INFO

Title/Year
Home Building & In 1933, Minnesota enacted the Mortgage Moratorium Law (Chapter 339, of the Laws * Case was decided during the Great
Loan Ass'n v. of Minnesota of 1933) in order to extend the time period in which borrowers could pay Depression, when US faced economic
Blaisdell (1934) back their debts on property to lenders, in response to large number of foreclosures. despair.
US CASE The extension had the effect of enlarging the mortgagors contrary to the terms of the * District Court – UNCONSTI ; Supreme
contract. Minnesota contends that it was merely exercising its police power, in lieu of Court of Minnesota – CONSTI; upheld
the ongoing Great Depression. Petitioners allege that it was a violation of the contract
clause in the Constitution.

The Court upheld its constitutionality. It held that economic interests of the state may
justify the exercise of its continuing and dominant protective power notwithstanding
interference with contracts. The obligation of a contract is not impaired by a law
modifying the remedy for its enforcement, but not so as to impair substantial rights
secured by the contract. It further contemplated that emergency does not create
power, nor does it diminsh the restrictions on power. However, it may furnish the
occasion for the exercise of power.
Rutter v. Royal Rutter sold to Placido Esteban two parcels of land in Manila, which was secured * SEC 2 OF RA 342: “All debts and other
Esteban (1953) by a mortgage, in which Esteban failed to pay on time. Rutter instituted charges against monetary obligations payable by private
Esteban in the CFI of Manila, to which Esteban used the defense of the moratorium parties within the Philippines originally
clause in RA 342, which put a hold on pre-war obligations. Sec 2 of RA 342 states that incurred or contracted before December 8,
the payment of his obligation cannot be enforced until the lapse of eight years from the 1941, and still remaining unpaid, any
settlement of his claim by the Philippine War Damage Commission, and that this peiod provision or provisions in the contract
has not yet expired therefore Rutter cannot ask for the fulfillment. creating the same or in any subsequent
agreement affecting such obligation to the
The Court has held that moratorium laws are not entirely unconstitutional, having been contrary notwithstanding, shall not be due
used in various legislations both abroad and here. However, some moratium laws have and demandable for a period of eight (8)
been held unconstitutional when the suspension period prescribed was indefinite or years from and after settlement of the war
unreasonable in duration. Thus, the constitutionality depends on this suspension period. damage claim of the debtor by the United
It would appear than when taking into account RA 342, and the other executive orders States Philippine War Damage
in place (EO 25 & 32), creditors would have to wait for at least 12 years before they Commission, without prejudice, however,
could effect a liquidation of investments dating from 1941. The law is heavily in favor of to any voluntary agreement which the
debtors, who do not even have to pay interest during the operation of the relief, which interested parties may enter into after the
is an injustice on the part of the creditors. It would appear that the emergency approval of this Act for the settlement of
contemplated in RA 342 is no longer present, the conditions of the country having said obligations. ”
improved since 1945. It would be unreasonable to uphold its constitutionality, as well
as that of EO 25 & 32.
Abella v. NLRC On June 27, 1960, Rosalina Abella leased a farm land in Monteverde, Negros * ART 284 & 285 provides for the rights of
(1987) Occidental, for 10 years, which she renewed on Aug 13, 1970. During the period of the employees under the circumstances of
lease, she employed Ricardo Dionele Sr. and Romeo Quitco, who were eventually termination.
promoted to Cabo in 1963 and 1968 respectively. When the lease ended, Abella
dismissed the two and turned over the land to the respective owners. Dionele and
Quitco filed charges against Abella with the Ministry of Labor and Employment in
Bacolod, for overtime pay, illegal dismissal, and reinstatement with backwages. Bacolod
District ruled that the dismissal was warranted by cessation of business, but granted
separation pay, based on BP 130 which amended Art 284 and 285 of the Labor Code*.
NLRC affirmed the decision, hence herein petition. Abella claims that since her lease
agreement expired, she is not liable for payment of separation pay, and neither could
she reinstate them in the farm as she was no longer the owner. She then contends the
constitutionality of Art 284 as amended by BP 130, as against the contract clause,
because when she leased the hacienda, neither she nor the lessor contemplated the
creation of obligation to pay separation pay to workers at the end of the lease.

COURT UPHELD NLRC DECISION. The purpose of Article 284 as amended is the protection of the
workers whose employment is terminated because of the closure of establishment and reduction of personnel.
Without said law, employees like private respondents in the case at bar will lose the benefits to which they are
entitled — for the thirty three years of service in the case of Dionele and fourteen years in the case of Quitco.
Although they were absorbed by the new management of the hacienda, in the absence of any showing that the
latter has assumed the responsibilities of the former employer, they will be considered as new employees and
the years of service behind them would amount to nothing. Moreover, to come under the constitutional
prohibition, the law must effect a change in the rights of the parties with reference to each other and not with
reference to non-parties. As correctly observed by the Solicitor General, Article 284 as amended refers to
employment benefits to farm hands who were not parties to petitioner's lease contract with the owner of
Hacienda Danao-Ramona. That contract cannot have the effect of annulling subsequent legislation designed to
protect the interest of the working class.
Presley v. Bel- Spouses Almendras, herein represented by Enedina Presley, were filed a complaint by * Sangalang v. IAC & Ayala, BAVA v. IAC
Air Village BAVA for violation of the Deed Restrictions of Bel-Air Subdivision that the subject house & Tenorio & Gonzalez, BAVA v. CA &
Association and lot shall be used only for residential and not for commercial purposes, as well as Spouses Romualdez, BAVA v. CA & Filley
(1991) non-payment of association dues. Presley is the lessee of the property (situated on & Romero Associates, BAVA v. CA, Moncal
Jupiter Street), and owner of the 'Hot Pan de Sal Store.' Trial court and CA ruled in and Majal Dev't Corp.
favor of BAVA.

The issues raised in this petition have already been dealt with in the consolidated
cases.* However, when CA had promulgated the decision, the Sangalang case had not
yet been resolved. In this instant petition, BAVA is assailing the Sangalang decision,
specifically that of Ordinance #81-01 passed by MMC (Metro Manila Commission), in
which the SC concluded that Jupiter Street was reclassified as a density commercial
zone, which BAVA claims is still a residential zone. The respondent court in the case at
bar was not at all entirely wrong in upholding the Deed of Restrictions annotated in the
title of the petitioners. It held that the provisions of the Deed of Restrictions are in the
nature of contractual obligations freely entered into by the parties. Undoubtedly, they
are valid and can be enforced against the petitioner. However, these contractual
stipulations on the use of the land even if said conditions are annotated on the torrens
title can be impaired if necessary to reconcile with the legitimate exercise of police
 power. As in the Sangalang case: “As far as the Bel-Air subdivision itself is concerned,
certainly, they are valid and enforceable. But they are, like all contracts, subject to the
overriding demands, needs, and interests of the greater number as the State may
determine in the legitimate exercise of police power. Our jurisdiction guarantees
sanctity of contract and is said to be the 'law between the contracting parties,' (Civil
Code, supra, art. 1159) but while it is so, it cannot contravene 'law, morals, good
customs, public order, or public policy.' (supra, art. 1306). Above all, it cannot be
raised as a deterrent to police power, designed precisely to promote health, safety,
peace, and enhance the common good, at the expense of contractual rights, whenever
necessary.”
Miners Ass'n v. PETITIONERS: Miners Association of the Philippines Cory issued the following:
Factoran ASSAILED PROVISION: DENR Admin Order 57 & 82 * EO 211: Prescribes interim procedures
(1995) WHY: It requires mining leases and agreements granted after the 1987 Constitution to for mining operations. (Interim: before the
be converted into production-sharing agreements within one year (AO 52); It requires institution of the 1987 Constitution)
persons/entities wishing to enter into mining leases afterwards to submit a letter of * EO 279: Authorizes DENR with to
intent and mineral production sharing agreement within 2 years from effectivity of negotiate/conclude joint-venture, co-
AO 57. production or production-sharing
HELD: agreements for mining operations. In line
* EO 211 has a reservation clause which reserves rights to mining agreements made with 1987 Constitution's concept of jura
after 1987 Consti regalia
* AO 57 applies only to mining agreements approved AFTER 1987 Constitution * JURA REGALIA:
* It does not automatically convert agreements into joint ventures/co- - all natural resources are owned by the
produce/production-sharing agreements State, which led to constitutional policy of
1.) Contract clause in Constitution is NOT absolute and is NOT to be read with literal full control and supervision of the
exactness State over such resources
2.) The contract clause is limited only to contracts which respect PROPERTY, SOME
OBJECT OR VALUE, and contracts which CONFER RIGHTS.
3.) Contract clause does NOT apply to statutes relating to public subjects within the
doman of general legislative powers of the state, involving public rights & public
welfare.
4.) Ramas v. CAR and Ramos: obligations of contracts must yield to a proper exercise
of police power when such power is exercised to preserve the security of the state and
means are reasonably necessary to accomplish it and are not arbitrary or oppressive.
5.) The exploration, development and utilization of the country's natural resources are
matters vital to public interrest and general welfare.

Ortigas v. Feati PETITIONERS: Ortigas & Co.

Bank (1979) ASSAILED PROVISION: Resolution #27, of Municipal Council of Mandaluyong.
 WHY: Ortigas & Co. is a real-estate business, and sold Lots 5 & 6 to Augusto and
Natividad Angeles, who then assigned rights to Emma Chavez, who then gave it to Feati
Bank. Feati Bank began construction on the two lots but was contested by Ortigas &
Co., who claims that there were restrictions on the TCTs of those lots, including the
ones acquired by Feati Bank, as part of Ortigas & Co.'s general building scheme for
Highway Hills Subdivision. Feati Bank attests that the area in which the lots are in have
been declared to be commercial and industrial zones, and that they have applied and
acquired permits to construct commercial buildings on the lot.
HELD: Constitutional guarantee of non-impairment of contracts is not absolute and
must give way to a legitimate exercise of police power.
Resolution No. 27, s-1960 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 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.
Juarez v. CA PETITIONER: Virginia Ocampo Juarez, sublessee * NOT AN EX POST FACTO LAW: not
(1992) ASSAILED PROVISION: BP 877 & its retroactivity penal. Not ex post facto. Lol @ u bits
WHY: Virginia Ocampo Juarez was previously the sublessee of a lot in Manila, which was
then leased under Sevillano Ocampo, then Angela Ocampo, then to Roberto Capuchino.
The lot's ownership was transferred to Susanna Realty Inc., then to now RESPONDENT
Cetus Development Corporation. Cetus filed for ejectment against petitioner on the
ground that the lessee had subleased the property without its consent, violative of BP
877. The original lease contract did not have a specific term, yet was paid for on a
monthly basis. She also alleges that BP 877 is an ex-post facto law.

HELD: Prior to BP 877, it could not apply (July 1 1985 was the effectivity). It is true
that the law could not have applied to her retroactively, however the contract was
renewed the month after, in Jul 1985, and BP 877 then could apply to her. It is now
1992. The law applies retroactively from the time BP 877 ended (Dec 31 1987) to the
time it was instituted (Jul 1 1985)

1.) Petitioner says the retroactive application of law is violative of the constitutional
guarantee to non-impairment of contracts-- NO, it is not absolute. Police power >
contracts.
2.) Housing is one of the most serious social problems of the country, and the
regulation of rentals is a continuing concern of the government.
Hacienda Luisita PETITIONER: Hacienda Luisita Incorporated
v. PARC (2011) ASSAILED PROVISION: PARC Resolution #2005-32-01 & Resolution #2006-34-01
Goldenway PETITIONER: Goldenway Merchandising Co
Merchandising ASSAILED PROVISION: Sec 47 of RA 8791
Corp v. WHY: Goldenway executed real estate mortage in favor of EPCI for properties in
Equitable PCI Valenzuela, Bulacan. Goldenway was unable to settle its obligation and foreclosure
Bank (2013) proceedings began, and the properties were sold for 3.5Million PHP in Dec 2000. The
sale was formally registered in Feb 2001. It was in Mar 2001 that Goldenway's legal
counsel offered to repurchase the properties by tendering a check, to which he was
informed that they could not because the certificate of sale had already been
registered. It was in Dec 2001 that they instituted action for specific performance and
damages, asserting that the one-year redemption period in Act #3135, instead of the
three-month period after foreclosure provided for in Sec 47 of RA 8791. The petitioner
claims that to apply RA 8791 would result in the impairment of obligation of contracts,
especially since the mortgage was executed in 1985.

HELD: 1.) The purpose of the non-impairment clause of the Constitution is to safeguard the integrity of
contracts against unwarranted interference by the State. As a rule, contracts should not be tampered with by
subsequent laws that would change or modify the rights and obligations of the parties.
2.) Impairment is anything that diminishes the efficacy of the contract. There is an impairment if a subsequent
law changes the terms of a contract/imposes new conditions/dispenses with those agreed upon/withdraws
remedies for the enforcement of the rights of the parties.
3.) Section 47 did not divest juridical persons of the right to redeem their foreclosed properties but only
modified the time for the exercise of such right by reducing the one-year period originally provided in Act No.
3135. The new redemption period commences from the date of foreclosure sale, and expires upon registration
of the certificate of sale or three months after foreclosure, whichever is earlier.
4.) There is likewise no retroactive application of the new redemption period because Section 47 exempts from
its operation those properties foreclosed prior to its effectivity (May 23 2000) and whose owners shall retain
their redemption rights under Act No. 3135.

Pryce Corp v. PETITIONER: Pryce Corp

China Banking
ASSAILED PROVISION: Rule 4 Sec 6 of the Interim Rules of Procedure on Corporate
Corp (2014)
Rehabilitation & PD 902-A; because neither of the two empowers commercial courts to
“render without force and effect valid contractual stipulations.”
WHY: A petition for corporate rehabilitation filed by petitioner Pryce Corporation on July
9, 2004 with the Regional Trial Court of Makati. The rehabilitation court found the
petition sufficient in form and substance and issued a stay order on July 13, 2004
appointing Gener T. Mendoza as rehabilitation receiver.
Mendoza as receiver, he was directed to evaluate and give recommendations on Pryce
Corporation’s proposed rehabilitation plan. Having denied the same, he submitted an
amended rehabilitation plan which the Court approved.
China Banking Corporation and Bank of the Philippine Islands, both creditors of Pryce
Corporation, opposed the approval of the said rehabilitation plan. They cited that such
plan violates the non-impairment clause and mutuality of contracts. However,
the Rehabilitation Court still confirmed the rehabilitation plan.
 China Bank and BPI filed their separate appeals. In China Bank’s case, the decision of
the rehabilitation court was reversed and set aside. However, in BPI’s case, the decision
of the rehabilitation court was sustained and affirmed.
Pryce Corporation also appealed to this court assailing the granting respondent China
Banking Corporation’s petition. Pryce Corporation argues that the issue on the validity
of the rehabilitation court orders is now res judicata.
Petitioner Pryce Corporation submits that the ruling in BPI v. Pryce Corporation
contradicts the present case, and it has rendered the issue on the validity and regularity
of the rehabilitation court orders as res judicata.
Second, petitioner Pryce Corporation contends that Rule 4, Section 6 of the Interim
Rules of Procedure on Corporate Rehabilitation does not require the rehabilitation court
to hold a hearing before issuing a stay order.

HELD: It is not impairment of obligations of contracts.

1.) Pacific Wide Realty & Dev't Corp v. PALI: Cannot invoke constitutional guarantee of
the impairment clause if the case does not involve a law or an executive issuance, as in
the case here.
2.) Corporate rehabilitation is a valid government/public concern. It successful
rehabilitation will benefit debtors, creditors, employees, and the economy.
The cram-down principle adopted by the Interim Rules does, in effect, dilute contracts.
When it permits the approval of a rehabilitation plan even over the opposition of
creditors, or when it imposes a binding effect of the approved plan on all parties
including those who did not participate in the proceedings, the burden of loss is shifted
to the creditors to allow the corporation to rehabilitate itself from insolvency.
Rather than let struggling corporations slip and vanish, the better option is to allow commercial courts to come
in and apply the process for corporate rehabilitation.

SEC 11 Free access to the courts and quasi-judicial bodies and adequate legal assistance shall not be denied to any person by
reason of poverty.
In Re: Letter of
Chief of PAO
(2013)