THE IMPAIRMENT CLAUSE Art 3, Sec. 10. No law impairing the obligation of contracts shall be passed.

RUTTER VS ESTEBAN Facts: On August 20,1941 Rutter sold to Esteban two parcels of land situated in the Manila for P9,600 of which P4,800were paid outright, and the balance was made payable as follows: P2,400 on or before August 7, 1942, andP2,400 on or before August 27, 1943, with interest at the rate of 7 percent per annum. To secure the payment ofsaid balance of P4,800, a first mortgage has been constituted in favor of the plaintiff. Esteban failed to pay the twoinstallments as agreed upon, as well as the interest that had accrued and so Rutter instituted an action to recoverthe balance due, the interest due and the attorney's fees. The complaint also contains a prayer for sale of theproperties mortgaged in accordance with law. Esteban claims that this is a prewar obligation contracted and thathe is a war sufferer, having filed his claim with the Philippine War Damage Commission for the losses he hadsuffered as a consequence of the last war; and that under section 2 of RA 342(moratorium law), payment of hisobligation cannot be enforced until after the lapse of eight years. The complaint was dismissed. A motion forrecon was made which assails the constitutionality of RA 342. 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 thecourts or the legislature. Its essence is the application of police power. The economic interests of the State may justify the exercise of its continuing and dominant protective power notwithst anding interference with contracts.The question is not whether the legislative action affects contracts incidentally, or directly or indirectly, butwhether the legislation is addressed to a legitimate end and the measures taken are reasonable and appropriateto that end. However based on the Presidents general SONA and consistent with what the Court believes to be as the only course dictated by justice, fairness and righteousness, declared that the continued operation and enforcement ofRA 342 at the present time is unreasonable and oppressive, and should not be prolonged should be declared nulland void and without effect. This holds true as regards Executive Orders Nos. 25 and 32, with greater force andreason considering that said Orders contain no limitation whatsoever in point of time as regards the suspension ofthe enforcement and effectivity of monetary obligations