CONSTI 2: CASE DIGESTS || REGADO
HOME BUILDING & LOAN ASSN. V BLAISDELL
Facts:
 Appellants contest the validity of Chapter 339 of Minnesota Mortgage Law for
being repugnant to the contract clause and due process clause
Important parts
 Provides that, during the emergency declared to exist, relief may be had through
authorized judicial proceedings with respect to foreclosures of mortgages, and execution
sales, of real estate; that sales may be postponed and periods of redemption may be
extended.
 The Act does not apply to mortgages subsequently made, nor to those made previously
which shall be extended for a period ending more than a year after the passage of the Act
(Part One, § 8).
 There are separate provisions in Part Two relating to homesteads, but these are to apply
"only to cases not entitled to relief under some valid provision of Part One."
 The Act is to remain in effect "only during the continuance of the emergency and in
no event beyond May 1, 1935.
 " No extension of the period for redemption and no postponement of sale is to be allowed
which would have the effect of extending the period of redemption beyond that date. Part
Two, § 8.
 Part One, § 4, authorizing the District Court of the county to extend the period of
redemption from foreclosure sales "for such additional time as the court may deem
just and equitable," subject to the above described limitation.
 The extension is to be made upon application to the court, on notice, for an order
determining the reasonable value of the income on the property involved in the sale,
or, if it has no income, then the reasonable rental value of the property, and
directing the mortgagor"to pay all or a reasonable part of such income or rental
value, in or toward the payment of taxes, insurance, interest, mortgage . . .
indebtedness at such times and in such manner"
Appellees applied to the District Court of Hennepin County for an order extending
the period of redemption from a foreclosure sale of a lot they owned a lot in
Minneapolis which they had mortgaged to appellant;
 by reason of their default, the mortgage had been foreclosed and sold to
appellant on May 2, 1932, for $3,700.98;
 that, because of the economic depression appellees had been unable to obtain a
new loan or to redeem, and that, unless the period of redemption were
extended, the property would be irretrievably lost, and that the reasonable value
of the property greatly exceeded the amount due on the mortgage, including all
liens, costs and expenses.
 Appellant objected to the introduction of evidence upon the ground that the
statute was invalid under the federal and state constitutions, and moved that the
petition be dismissed
 The court found that the time to redeem would expire on May 2, 1933, under
the laws of the State as they were in effect when the mortgage was made and
when it was foreclosed; that the reasonable value of the income on the property,
and the reasonable rental value, was $40 a month; that the bid made by
appellant on the foreclosure sale, and the purchase price, were the full amount
of the mortgage indebtedness, and that there was no deficiency after the sale;
that the reason total amount of the purchase price, with taxes and insurance
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premiums subsequently paid by appellant, but exclusive of interest from the
date of sale, was $4,056.39.
 Although conceding that the obligations of the mortgage contract were
impaired, the court decided that what it thus described as an impairment was,
notwithstanding the contract clause of the Federal Constitution, within the
police power of the State as that power was called into exercise by the public
economic emergency which the legislature had found to exist.
 present nationwide and worldwide business and financial crisis has the same
results as if it were caused by flood, earthquake, or disturbance in nature.
Unable to adequately relieve the want and suffering, and congress has found it
necessary to step in and attempt to remedy the situation by federal aid. Millions
of the people's money were and are yet tied up in closed banks and in business
enterprises (J; Olsen)
ISSUE: WON MORATORIUM LAW ASSAILED IS VALID
HELD: YES
 The statute does not impair the integrity of the mortgage indebtedness.
 The obligation for interest remains. The statute does not affect the validity of
the sale or the right of a mortgagee-purchaser to title in fee, or his right to
obtain a deficiency judgment if the mortgagor fails to redeem within the
prescribed period.
 Aside from the extension of time, the other conditions of redemption are
unaltered.
 While the mortgagor remains in possession, he must pay the rental value as that
value has been determined, upon notice and hearing, by the court. The rental
value so paid is devoted to the carrying of the property by the application of the
required payments to taxes, insurance, and interest on the mortgage
indebtedness.
 While the mortgagee-purchaser is debarred from actual possession, he has, so
far as rental value is concerned, the equivalent of possession during the
extended period.
 Emergency does not create power. Emergency does not increase granted power
or remove or diminish the restrictions imposed upon power granted or reserved.
 While emergency does not create power, emergency may furnish the occasion
for the exercise of power.
 The constitutional question presented in the light of an emergency is whether
the power possessed embraces the particular exercise of it in response to
particular conditions.
 The power of changing the relative situation of debtor and creditor, of
interfering with contracts, a power which comes home to every man, touches
the interest of all, and controls the conduct of every individual in those
thingsXXX, as to break in upon the ordinary intercourse of society, and destroy
all confidence between man and man.
 The obligation of a contract is "the law which binds the parties to perform their
agreement."
 "The distinction between the obligation of a contract and the remedy given by
the legislature to enforce that obligation has been taken at the bar, and exists in
the nature of things.
 CONSTI 2: CASE DIGESTS || REGADO
 Without impairing the obligation of the contract, the remedy may certainly be
modified as the wisdom of the nation shall direct."
 The obligations of a contract are impaired by a law which renders them invalid,
or releases or extinguishes them and impairment, as above noted, has been
predicated of laws which, without destroying contracts, derogate from
substantial contractual rights.
 "The general doctrine of this court on this subject may be thus stated: in modes
of proceeding and forms to enforce the contract, the legislature has the control,
and may enlarge, limit, or alter them, provided it does not deny a remedy or so
embarrass it with conditions or restrictions as seriously to impair the value of
the right."
 None of these case, and we have cited those upon which appellant chiefly
relies, is directly applicable to the question now before us in view of the
conditions with which the Minnesota statute seeks to safeguard the interests of
the mortgagee-purchaser during the extended period.
 "But into all contracts, whether made between States and individuals, or
between individuals only, there enter conditions which arise not out of the
literal terms of the contract itself; they are superinduced by the preexisting and
higher authority of the laws of nature, of nations or of the community to which
the parties belong;
 Every contract is made in subordination to them, and must yield to their
control, as conditions inherent and paramount, wherever a necessity for their
execution shall occur."
 The economic interests of the State may justify the exercise of its continuing
and dominant protective power notwithstanding interference with contracts.
 Undoubtedly, whatever is reserved of state power must be consistent with the
fair intent of the constitutional limitation of that power. The reserved 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
 Applying the criteria established by our decisions we conclude:
1.) An emergency existed in Minnesota which furnished a proper occasion for
the exercise of the reserved power of the State to protect the vital interests
of the community. The declarations of the existence of this emergency by
the legislature and by the Supreme Court of Minnesota cannot be regarded
as a subterfuge, or as lacking in adequate basis.
2.) The legislation was addressed to a legitimate end, that is, the legislation
was not for the mere advantage of particular individuals, but for the
protection of a basic interest of society.
3.) Mortgages of unquestionable validity -- the relief afforded and justified by
the emergency, in order not to contravene the constitutional provision,
could only be of a character appropriate to that emergency, and could be
granted only upon reasonable conditions.
4.) The conditions upon which the period of redemption is extended do not
appear to be unreasonable. As already noted, the integrity of the mortgage
indebtedness is not impaired; interest continues to run; the validity of the
sale and the right of a mortgagee-purchaser to title or to obtain a
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deficiency judgment if the mortgagor fails to redeem within the extended
period are maintained, and the conditions of redemption, if redemption
there be, stand as they were under the prior law. The mortgagor, during the
extended period, is not ousted from possession, but he must pay the rental
value of the premises as ascertained in judicial proceedings, and this
amount is applied to the carrying of the property and to interest upon the
indebtedness.
RUTTER V. ESTEBAN
Facts:
 On 1941 Rutter sold to Esteban two parcels of land situated in the Manila for
P9,600 of which P4,800 were paid outright, and the balance was made payable
as follows: P2,400 on or before August 7, 1942, and P2,400 on or before
August 27, 1943, with interest at the rate of 7 percent per annum.
 To secure the payment of said balance of P4,800, a first mortgage has been
constituted in favor of the plaintiff.
 Esteban failed to pay the two installments as agreed upon, as well as the
interest that had accrued and so Rutter instituted an action to recover the
balance due, the interest due and the attorney's fees. The complaint also
contains a prayer for sale of the properties mortgaged in accordance with law.
 Esteban claims as a defense, the Moratorium clause embodied in RA 342 that
this is a prewar obligation contracted and that he is a war sufferer, having filed
his claim with the Philippine War Damage Commission for the losses he had
suffered as a consequence of the last war; and that under section 2 of RA
342(moratorium law), payment of his obligation cannot be enforced until after
the lapse of eight years from the settlement of his claim by the PH War
Damage Commission .
 The complaint was dismissed the claim which plaintiff seeks to enforce since it
is not yet demandable
Issue: Whether or Not RA 342 unconstitutional on non-impairment clause grounds.
Held: Yes.
 The moratorium is postponement of fulfillment of obligations decreed by the
state through the medium of the courts or the legislature. Its essence is the
application of police power.
 The true test of constitutionality of a moratorium law lies in the determination
of period of suspension of remedy. Suspension should be definite and
reasonable otherwise it violates the constitution.
 The economic interests of the State may justify the exercise of its continuing
and dominant protective power notwithstanding interference with contracts.
 The question is not whether the legislative action affects contracts incidentally,
or directly or indirectly, but whether the legislation is addressed to a legitimate
end and the measures taken are reasonable and appropriate to that end.
 Impairment should only refer to the remedy and not the substantive right.
 State may postpone the enforcement of obligation but I cannot desroy it by
making the remedy futile.
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 Police power may only be invoked and justified by an emergency, temporary in  The Labor Arbiter ruled that the dismissal was warranted by the cessation of
nature and can only be exercised upon reasonable conditions in order that It business, but the respondents are entitled to separation pay, invoking Art. 284
may not infringe Constitutional provision against impairment of contracts. of the Labor Code, as amended.
 8 year periodis unreasonable, if not oprressive.  NLRC affirmed the decision
 Their hope to effect collection becomes extremely remote, more so if credits  Petitioner claims that aforequoted provision violates the constitutional
are not secured. guarantee against impairment of obligations and contracts because when she
 The debtor is not even required to pay interest during the operation of relief leased the Hacienda Danao-Ramona, neither she nor the lessor contemplated
unlike similar statutes in the US the creation of obligation to pay separation pay to workers at the end of the
 Based on the President’s general SONA and consistent with what the Court lease
believes to be as the only course dictated by justice, fairness and righteousness, ISSUE
declared that the continued operation and enforcement of RA 342 at the present Whether or not private respondents are entitled to separation pay.
time is unreasonable and oppressive, and should not be prolonged should be HELD: YES
declared null and void and without effect.  The Court upheld the ruling of the Labor Arbiter that Article 284 is the
 This holds true as regards Executive Orders Nos. 25 and 32, with greater force applicable law in this case.
and reason considering that said Orders contain no limitation whatsoever in
point of time as regards the suspension of the enforcement and effectivity of Art 284 (Closure of Establishments) : TERMINATION
monetary obligations. Due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or
HOME BUILDING CASE RUTHER CASE the closing or cessation of operation of the establisment or undertaking unless the closing is for
VALID INVALID the purpose of circumventing the provisions of this title,
The extension is to be made upon application payment of his obligation cannot be enforced  by serving a written notice on the workers and the Ministry of Labor and Employment at
to the court, on notice, for an order until after the lapse of eight years from the least one (1) month before the intended date thereof.
determining the reasonable value of the settlement of his claim by the PH War In case of termination due to the installation of labor-saving devices or redundancy, the worker
income on the property involved in the sale, Damage Commission affected thereby shall be
or, if it has no income, then the reasonable  entitled to a separation pay equivalent to at least his one (1) month pay or to at least one
rental value of the property, and directing the (1) month pay for every year of service, whichever is higher.
mortgagor"to pay all or a reasonable part of In case of retrenchment to prevent losses and in cases of closure or cessation of operations
such income or rental value, in or toward the of establishment or undertaking not due to serious business losses or financial reverses,
payment of taxes, insurance, interest,  the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2)
mortgage . . . indebtedness at such times and month pay for every year of service whichever is higher. A fraction of at least six (6)
in such manner" months shall be considered one (1) whole year.

 Purpose of Art 284 : protection of employment whose employment is

ABELLA V. NLRC
Facts:
 Petitioner Abella leased a farmland known as Hacienda Danao-Ramona from
Ramona for a period of 10 years and renewable for another 10 years at the
option of the former.
 Abella hired the private respondents Quitco and Dionele.
 Abella renewed the lease for another ten years.
 At the expiration of the lease, she dismissed both private respondents and
turned over the hacienda to the owners.
 Private respondents filed a complaint against petitioner for overtime pay,
reinstatement, and illegal dismissal.
terminated because of closure of establishment and reduction of personnel
 Without said law, employees like private respondents will lose the benefits to
which they are entitled for 33 years of service, in case of Dionele and 14 years
in the case of Quitco.
 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.
 Although they are absorbed by the new management, in 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
 It is well-settled that in the implementation and interpretation of the provisions
of the Labor Code and its implementing regulations, the workingman's welfare
should be the primordial and paramount consideration.

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 It is the kind of interpretation which gives meaning and substance to the liberal
and compassionate spirit of the law as provided for in Article 4 of the New
Labor Code which states that "all doubts in the implementation and
interpretation of the provisions of this Code including its implementing rules
and regulations shall be resolved in favor of labor."
 The policy is to extend the applicability of the decree to a greater number of
employees who can avail of the benefits under the law, which is in consonance
with the avowed policy of the State to give maximum aid and protection to
labor.
PRESLEY V. BEL-AIR VILLAGE ASSOCIATION INC
FACTS
 A complaint for specific performance and damages with preliminary injunction
was filed by Bel-Air Vilage Association (BAVA) against Teofilo Almendras
and Rosario Almendras (they are now deceased and substituted by Enedina
Presley) for violation of the Deed Restrictions of Bel-Air Subdivision that the
subject house and lot shall be used only for residential and not for commercial
purposes and for non-payment of association dues to plaintiff BAVA
amounting to Php 3,803.55
 The Almendras were registered owners of a house and lot in said Village, and
were also members of BAVA pursuant to the Deed Restrictions.
 Presley, as lessee of the property, is owner and operator of “Hot Pan de Sal
Store” located in the same address.
 When BAVA came to know of the existence of Pan de Sal, it sent a letter to
the defendants asking them to desist from operating the store.
 Under the existing Deed of Restrictions, Bel-Air Subdivision is classified as a
purely residential area,
 Almendras contended that there was no written contract between him and
BAVA;
 only a consensual contract existed whereby Almendras regularly pays his dues
and assessments to BAVA for such services as security, garbage collection and
maintenance and repair of Jupiter St. When the services were withdrawn by
BAVA, there was no more reason for the latter to demand payment od such
dues and assessments.
 Trial court rendered decision in favor of BAVA, affirmed by CA.
ISSUE
WON Bel-Air Village is considered residential for the purposes of enjoining
petitioners from continuing their Pan de Sal Store - No
HELD: NO
 Bel-Air Village is considered a commercial zone.
 BAVA assails the Court’s decision in the Sangalang case.1 It avers that due to
the multitude of issues raised and numerous pleadings filed by the different
contending parties, the Court was misled and erred in concluding that Jupiter
St. was classified as a “high density commercial zone” when in fact, it is still
considered as a residential zone.
1
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 The court has carefully examined the pleadings but have found no reason to
reconsider the Sangalang doctrine.
 Private respondents failed to present any proofs to substantiate claim that
Jupiter Street is still classified as a residential zone
 No new zoning reclassification, ordinance, certification was brought to the
attention of the court
 Deed of Restrictions is valid can be enforced against the petitioner. Deed of
Restrictions is in nature a contractual obligation freely entered into by plaintiffs
 However, these contractual stipulations can be impaired if necessary to
reconcile with the legitimate exercise of police power.
 In Sangalang, the court held that as far as Bel-Air subdivision is concerned,
they are valid and enforceable. But they are subject to the overriding demands,
needs, and interests of the greater number as the State may determine in the
legitimate exercise of police power, so it cannot contravene law, morals, good
customs, public order or public policy.
 Jupiter Street has been highly commercialized since the passage of Ordinance
81-01.
 The records indicate that commercial buildings, offices, restaurants, and stores
have already sprouted in the area.
MINERS ASSOCIATION OF THE PHILIPPINES V FACTORAN JR
Doctrine:
Congress, in exercise of Police Power can amend/modify/alter mining leases
agreement to achieve the purpose of the Constitution
Facts:
 Former President Cory Aquino, exercising legislative power, issued EO211
prescribing the interim procedures in the processing and approval of
exploration, development and utilization of minerals. To implement the act,
Secretary of DENR promulgated AO No. 57 and 82.
 On 25 July 1987 the then President Aquino issued EO279 authorizing the
DENR SECRETARY to negotiate and conclude joint venture, co-production,
production sharing, development and those agreements involving technical or
financial assistance by foreign owned corporations for large scale exploration,
development and utilization of Minerals. (EDU)
 Pursuant to Sec 6 of EO 279, the DENR issued AO No.57 which provides that
all existing mining leases or agreements which were granted AFTER the
affectivity of the 1987 Constitution, except small scale mining leases and those
pertaining to sand and gravel and quarry resources covering an area of 20
hectares or less, shall be converted into production sharing agreement within
one year from the effectivity of the guidelines.
 On 20 November 1990, Sec of DENR issued EO No. 82 laying down the
Procedural Guidelines on the award of mineral Production sharing agreement.
 Sec 3 of this order provides the person or entities required to submit a
LETTER OF INTENT and MINERAL PRODUCTION SHARING
AGREEMENT within 2 years from the effectivity of AO No.57 or until 17 July
1991.
 CONSTI 2: CASE DIGESTS || REGADO
 Failure to do so within the prescribed period shall cause the abandonment of
mining, quarry, gravel and sand.
 The Miners Association Inc assailed the validity of the above-mentioned
issuances and alleged the following:
- Sec of DENR issued both AO57 and 82 in excess of their rule-making
power under Section 6 of EO279.
- The orders violate the non-impairment of contracts provision under
the bill of rights on the ground the AO57 unduly pre-terminates
existing mining leases and other mining agreements and automatically
converts them into production-sharing agreements within one year
from its effectivity date.
- AO No.82 declares that failure to submit the LETTER OF INTENT and
Mineral Production Sharing Agreement within 2 years from the date of
effectivity of said guidelines shall cause an abandonment of their mining,
quarry, sand and gravel permits.
 November 1991, Continental Marble Corp sought to intervene in the cases
alleging that the TRO issued by the Court, the DENR Regional Office in San
Fernando Pampanga refused to renew its Mines Temporary Permit and claimed
further that its rights and interest are prejudicially affected by AO No.57 and
82.
Issue:
WON AO57 and 82 have the effect of abrogating the existing mining laws and
unduly preterminate the existing mining leases and agreements.
Held: No.
 PD No. 463, as amended, pertains to the old system of EDU of natural
resources through license, concession or lease which has been disallowed by
Article XII, Sec 2 of the 1987 Philippine Constitution. By virtue of this
constitutional mandate and its implementing laws, the provisions dealing with
license, concession or leases ceased to operate as the governing laws.
 In other words, in all areas of administration and management of mineral lands,
the provision of PD463, as amended and other existing laws still govern.
 Upon the effectivity of the 1987 Consti on 2 February 1987, the State assumed
a more dynamic role in EDU.
 Article XII, Section 2 explicitly ordains that EDU shall under the full control
and supervision of the State.
 Given these considerations, there is no clear showing that the DENR Sec has
transcended the bounds demarcated in the EO279 for the exercise of his rule-
making power.
 Article XII, Sec 2 of the 1987 Consti does not apply retroactively to license,
concession or lease granted by the government under the 1973 Consti or before
the effectivity of the present Constitution. The intent to apply prospectively was
stressed during the deliberations in the Constitutional Commission.
 AO No. 57 applies only to all existing mining leases or agreements which were
granted after the effectivity of the 1987 Consti pursuant to EO No. 211.
 It bears to mention that under the text of EO211, there is a reservation clause
which provides that the privileges as well as the terms and conditions of all
existing mining leases or agreements granted after the effectivity of the
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present constitution shall be subject to any and all modification or
alterations which the Congress may adopt.
 Well settled is the rule that regardless of the reservation clause, mining leases
or agreements granted by state, are subject to alterations through reasonable
exercise of police power. (Ongsiako v. Gamboa)
 Hence, the strictures of the non-impairment of contract clause do not apply to
the aforesaid mining leased or agreements after the effectivity of the 1987
Constitution
 The State in the exercise of police power may not be precluded by the
constitutional restriction on non-impairment of contracts.
 Police power being co-extensive with the necessities of the case and the
demands of public interest.
ORTIGAS & CO., LIMITED PARTNERSHIP AND FEATI BANK AND
TRUST
Doctrine: Municipal Council of Mandaluyong declaring thee western part:
Industrial and Commercial Zone: Exercise of Police power; Activity, Noise and
pollution affect health, safety and welfare of residents
Facts:
 Ortigas and Co. is engaged in real estate business developing and selling lots to
the public particularly the Highway Hills subdivision along EDSA,
Mandaluyong
 It sold to Augusto Padilla and Natividad Angeles Lots Nos. 5 and 6, Block 31
of the Highway Hills Subdivision.
 The vendees then transferred their rights and interests over the aforesaid lots in
favor of Chavez.
 The agreements of sale on installment and the deeds of sale contained the
restriction that “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.”
 Above restriction were later annotated in TCT covering said lots
 Eventually defendant appellant, acquired Lots 5 and 6, while Lot 6; Lot 6 was
acquired from Republic Flour Mills through a deed of exchange.
 Ortigas and Co. claims that the restrictions were imposed as part of its general
building scheme designed for the beautification and development of the
Highway Hills Subdivision which forms part of its big landed estate.
 Feati Bank, on the other hand, maintains that the area along the western part of
EDSA from Shaw Boulevard to Pasig River has been declared a commercial
and industrial zone, per Resolution No. 27 s-1960 of the Municipal Council of
Mandaluyong, Rizal.
 Later on, Feati Bank commenced construction on the said lots for a building
devoted to banking purposes. It refused to comply with the demands of Ortigas
& Co. to stop the said construction.
 A civil case was subsequently filed, for the issuance of writ of preliminary
injunction, restraining and enjoining defendant from continuing or completing
the construction of said commercial building
 CONSTI 2: CASE DIGESTS || REGADO
 TC: In favor of Defendant-Appellees. It stated that Municipality has police
power and stressed that private interest must bow down to general interest and
welfare; the same rendered ineffective and unenforceable the restrictions in
question as against defendant appellee
ISSUE:
WON Resolution No. 27 s-1960 can nullify or supersede the contractual obligations
assumed by the defendant.
HELD:Yes.
 Sec 3 of RA 2264 (Local Autonomy Act) empowers Municipal Council to
adopt the zoning and subdivision ordinances or regulations for the
municipality.
 Sec 12 Implied power of a municipality should be liberally construed in its
favor. It gives the power to local government : promoting economic conditions,
social welfare and material progress of people in the community
 The only exception to Sec 12 : existing vested right arising out of contract
between a “province, city or municipality on one hand and a third party on the
other.” The exception clearly do not apply in the case at bar
 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, good order or safety of the general welfare of the people.”
 Police power : the most essential, insistent and illimitable powers and in sense,
the greatest and most powerful attribute of government.
 Resolution No. 27 s-1960 declaring the western part of EDSA as an industrial
and commercial zone was passed 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.
 State in order to promote 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 general comfort health and
prosperity of states.
 Reservation of essential attributes of sovereign power is also read into contracts
as a postulate of legal order.

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