CONTRACT CLAUSE

Conference of Maritime Agencies, Inc. vs. POEA

Facts:
Petitioner Conference of Maritime Manning Agencies, Inc., an incorporated association of licensed
Filipino manning agencies, and its co-petitioners, all licensed manning agencies which hire
and recruit Filipino seamen for and in behalf of their respective foreign ship-owner-principals, urge us to
annul Resolution No. 01, series of 1994, of the Governing Board" of the POEA and
POEA Memorandum Circular No. 05.
Petitioners contend that POEA does not have the power and authority to fix and promulgate rates
affecting death and workmen's compensation of Filipino seamen working in ocean-going vessels; only
Congress can.
Governing Board Resolution No. 1: the POEA Governing Board resolves to amend and increase the
compensation and other benefits as specified under Part II, Section. C, paragraph 1 and Section L,
paragraphs 1 and 2 of the POEA Standard Employment Contract for Seafarers

Issue/Held: WON the POEA can promulgate rules by virtue of delegation of legislative power. Yes.

Ratio:
The constitutional challenge of the rule-making power of the POEA-based on
impermissible
delegation of legislative power had been, as correctly contented by the public respondents, brushed
aside by this Court in Eastern Shipping Lines, Inc. vs. POEA.
o The governing Board of the Administration (POEA) shall promulgate the necessary rules and
regulations to govern the exercise of the adjudicatory functions of the Administration (POEA).
o To many of the problems attendant upon present-day undertakings, the legislature may not have
the competence to provide the required direct and efficacious not to say, specific solutions. These
solutions may, however, be expected from its delegates, who are supposed to be experts in the
particular fields assigned to them.
While the making of laws is a non-delegable power that pertains exclusively to
Congress,
nevertheless, the latter may constitutionally delegate the authority to promulgate rules and regulations
to implement a given legislation and effectuate its policies, for the reason that the legislature finds it
impracticable, if not impossible, to anticipate situations that may be met in carrying the law into effect.
All that is required is that the regulation should be germane to the objects and purposes of the law;
that the regulation be not in contradiction to but in conformity with the standards prescribed by the
law.
(Principle of Subordinate Legislation)
That the challenged resolution and memorandum circular, which merely further amended
the previous Memorandum Circular No. 02, strictly conform to the sufficient and valid standard of "fair and
equitable employment practices" prescribed in E.O. No. 797 can no longer be disputed

Home Building & Loan Assn. v. Blaisdell

Brief Fact Summary. The Appellant, Home Building & Loan Assn. (Appellant), contests a Minnesota law
that prevents mortgage holders from foreclosing on mortgages for a period of two-years.

Synopsis of Rule of Law. A state law may impair the contractual obligations of private parties when
there is a legitimate state interest and justification.

Facts. In response to the Depression, the Minnesota legislature passed the Minnesota Mortgage
Moratorium Law. This law allowed homeowners to seek relief from foreclosure proceedings. Sales could
be postponed and periods of redemption extended except for those loans that were made after the
passage of the law.

Issue. Does this provision violate the Contract Clause of the United States Constitution (Constitution) by
impairing the obligations between private parties in contracts?

Held. No. The state was justified under the circumstance of the Depression to extend foreclosure timing
to protect the economic interests of the state and its citizens. The Depression was a proper emergency
situation that warranted the action by Minnesota. The legislation addressed a legitimate government
purpose. The contracts affected by this legislation are limited and it does not arbitrarily affect all mortgage
contracts. The time extensions are not unreasonable. The law is temporary in operation.

Discussion. The Supreme Court of the United States (Supreme Court) provides a description of
contractual impairment as that which releases a person from contractual obligation. Generally, a state is
not permitted to interfere with private contracts. But, if the state can provide sufficient justification for the
interference (such as safeguarding the community for health or economic reasons), then the law will likely
be constitutional.

Lozano vs Martinez Digest

Facts:

Petitioners were charged with violation of Batas Pambansa Bilang 22 (Bouncing Check Law). They
moved seasonably to quash the informations on the ground that the acts charged did not constitute an
offense, the statute being unconstitutional. The motions were denied by the respondent trial courts,
except in one case, wherein the trial court declared the law unconstitutional and dismissed the case. The
parties adversely affected thus appealed.

Issue:
1. Whether or not BP 22 is violative of the constitutional provision on non-imprisonment due to debt
2. Whether it impairs freedom of contract
3. Whether it contravenes the equal protection clause

Held:
1. The enactment of BP 22 is a valid exercise of the police power and is not repugnant to the
constitutional inhibition against imprisonment for debt. The gravamen of the offense punished by BP 22 is
the act of making and issuing a worthless check or a check that is dishonored upon its presentation for
payment. It is not the non-payment of an obligation which the law punishes. The law is not intended or
designed to coerce a debtor to pay his debt. The thrust of the law is to prohibit, under pain
of penal sanctions, the making of worthless checks and putting them in circulation. Because of its
deleterious effects on the public interest, the practice is proscribed by the law. The law punishes the act
not as an offense against property, but an offense against public order.

Unlike a promissory note, a check is not a mere undertaking to pay an amount of money. It is
an order addressed to a bank and partakes of a representation that the drawer has funds
on deposit against which the check is drawn, sufficient to ensure payment upon its presentation to the
bank. There is therefore an element of certainty or assurance that the instrument will be paid upon
presentation. For this reason, checks have become widely accepted as a medium of payment in trade
and commerce. Although not legal tender, checks have come to be perceived as convenient substitutes
for currency in commercial and financial transactions. The basis or foundation of such perception is
confidence. If such confidence is shaken, the usefulness of checks as currency substitutes would be
greatly diminished or may become nil. Any practice therefore tending to destroy that confidence should be
deterred for the proliferation of worthless checks can only create havoc in trade circles and the banking
community.

The effects of the issuance of a worthless check transcends the private interests of the parties directly
involved in the transaction and touches the interests of the community at large. The mischief it creates is
not only a wrong to the payee or holder, but also an injury to the public. The harmful practice of putting
valueless commercial papers in circulation, multiplied a thousand fold, can very wen pollute the channels
of trade and commerce, injure the banking system and eventually hurt the welfare of society and the
public interest.

2. The freedom of contract which is constitutionally protected is freedom to enter into lawful contracts.
Contracts which contravene public policy are not lawful. Besides, we must bear in mind that checks can
not be categorized as mere contracts. It is a commercial instrument which, in this modem day and age,
has become a convenient substitute for money; it forms part of the banking system and therefore not
entirely free from the regulatory power of the state.

3. There is no substance in the claim that the statute in question denies equal protection of the laws or is
discriminatory, since it penalizes the drawer of the check, but not the payee. It is contended that the
payee is just as responsible for the crime as the drawer of the check, since without
the indispensable participation of the payee by his acceptance of the check there would be no crime. This
argument is tantamount to saying that, to give equal protection, the law should punish both the swindler
and the swindled. The petitioners posture ignores the well-accepted meaning of the clause equal
protection of the laws. The clause does not preclude classification of individuals, who may be accorded
different treatment under the law as long as the classification is not unreasonable or arbitrary.
Ortigas & Co. vs Feati Bank & Trust Co.
Facts:
On March 4, 1952, Ortigas sold Lot 5 and 6, Block 31 of the Highway Hills Subdivision at Mandaluyong to
Augusto Padilla y Angeles and Natividad Angeles. The latter transferred their rights in favour of Emma
Chavez, upon completion of payment a deed was executed with stipulations, one of which is that the use
of the lots are to be exclusive for residential purposes only. This was annotated in the Transfer Certificate
of Titles No. 101509 and 101511. Feati then acquired Lot 5 directly from Emma Chavez and Lot 6 from
Republic Flour Mills. On May 5, 1963, Feati started construction of a building on both lots to be devoted
for banking purposes but could also be for residential use. Ortigas sent a written demand to stop
construction but Feati continued contending that the building was being constructed according to the
zoning regulations as stated in Municipal Resolution 27 declaring the area along the West part of EDSA to
be a commercial and industrial zone. Civil case No. 7706 was made and decided in favour of Feati.

Issue:
Whether or not Resolution number 27 declaring Lot 5 and 6 to be part of an industrial and commercial
zone is valid considering the contract stipulation in the Transfer Certificate of Titles.

Held:
Resolution No. 27 prevails over the contract stipulations. Section 3 of RA 2264 of the Local Autonomy Act
empowers a Municipal Council to adopt zoning and subdivision ordinances or regulations for the
Municipality. Section 12 or RA 2264 states that implied power of the municipality should be liberally
construed in its favour, to give more power to the local government in promoting economic conditions,
social welfare, and material progress in the community. This is found in the General Welfare Clause of
the said act. Although non-impairment of contracts is constitutionally guaranteed, it is not absolute since it
has to be reconciled with the legitimate exercise of police power, e.g. the power to promote health,
morals, peace, education, good order or safety and general welfare of the people. Resolution No. 27 was
obviously passed in exercise of police power to safeguard health, safety, peace and order and the general
welfare of the people in the locality as it would not be a conducive residential area considering the amount
of traffic, pollution, and noise which results in the surrounding industrial and commercial establishments.

Decision dismissing the complaint of Ortigas is AFFIRMED.

West Coast Hotel Co. v. Parrish

Brief Fact Summary. Washington instituted a state wage minimum for women and minors. The
Appellant, West Coast Hotel (Appellant), paid the Appellee, Parrish (Appellee), less than this minimum.
Synopsis of Rule of Law. Wage and hour laws generally do not violate the Due Process Clause of the
United States Constitution (Constitution).

Facts. The Appellee was a maid who worked for less than the state minimum of $14.50 per 48-hour
week. She brought suit to recover the difference in pay from the Appellant.

Issue. Is the fixing of minimum wages for women and minors constitutional?

Held. Yes. This case overrules Adkins v. Childrens Hospital.

The exploitation of a class of workers who are at a disadvantaged bargaining position is in the best
interest of the health of the worker and economic health of the community.

Discussion. The Supreme Court of the United States (Supreme Court) reverts to reasoning that women
are in an inferior position and need to be protected from those who might try to take advantage of the
situation. Furthermore, the state is justified in adopting such legislation to protect the rest of the
community from the burden of supporting economically disadvantaged workers. It is important to note that
the Depression colored the Supreme Courts analysis.