G.R. No.

71169 December 22, 1988

JOSE D. SANGALANG and LUTGARDA D. SANGALANG, petitioners, FELIX C.

GASTON and DOLORES R. GASTON, JOSE V. BRIONES and ALICIA R. BRIONES,
and BEL-AIR VILLAGE ASSOCIATION, INC., intervenors-petitioners,
vs.
INTERMEDIATE APPELLATE COURT, and AYALA CORPORATION, respondents.

FACTS:

Bel-Air Village was owned and developed into a residential subdivision by Makati
Developmental Corp. that merges with the appellant Ayala Corporation in which the area were
restricted for residential use only and not for commercial use with regards to the DEEDS
RESTRICTION. On April 4, 1975, the municipal Council of Makati enacted its ordinance No.
81 for the zone modification which was the said village was classified as class A Residential
Zone. However, the center line of Jupiter Street that belongs to Bel-Air Village became a
common boundary between the Residential Zone and Administrative Office Zone. Subsequently,
Ordinance No. 81-01was enacted to adjust the boundary of Bel-Air which does not include the
center line of Jupiter street, and to use the said same as residential and commercial in use. The
Municipal Officials in Makati ordered to remove the gates and boundaries constructed which
includes the Jupiter Street for the public, in order to decongest the traffic. The petitioners, who
were home owners in the said village and members of BAVA, filed a complaint against the
developer Ayala Corporation for a breach of contract, in which the court of first instance ordered
the developer to reconstruct the perimeter wall and to pay the cost for damages. However, upon
appeal by the developer, the Court of Appeals reversed the lower court’s decision on the grounds
that it was not supported by facts.

ISSUE: Whether or not, the DEED RESTRICTION can be overridden by a subsequent

municipal Ordinance in relation to the non-impairment of contracts?

RULING:

Yes. The “deed restriction” can be overridden by a subsequent municipal ordinance.

The “deed restriction” of Bel-Air village is valid and enforceable. However, like all other
contracts, this can be overridden, which it will depend on the needs of the greater number of
people in a State, in the exercise of police power. Our jurisdiction guarantees sanctity of contract
and is said to be the "law between the contracting parties, but it cannot contravene 'law, morals,
good customs, public order, or public policy. Non-impairment contracts is constitutionally
guaranteed, in order 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. However, the rule is not absolute, since it has
to be reconciled with the legitimate exercise of police power. The exercise of police power can
be judicially inquired if it is unjust and unreasonable, and can violate due process and equal
protection.
 In the present case, Bel-Air village has a “deed restriction” that their area that includes
the Jupiter Street, is strictly for residential and not commercial in use in which this was approved
by the BAVA and as well as the developer. However, the municipal of Makati enacted an
ordinance no. 81 and no. 81-01in the exercise of police power which makes the Jupiter Street a
public in nature. The purpose of the ordinance is to ease the traffic in that area because there are
number of commercial establishments that erected across Bel-Air village which was owned by
Ayala Corporation. The objective of the ordinance is for the benefit of the general welfare, and
has not shown to be oppressive, and unreasonable. Hence, the ordinance enacted is a valid
exercise of police power.