Equitable PCI Bank, Inc. vs. South Rich Acres, Inc.

A local government ordinance that declares private property as public road without providing for just compensation constitutes an exercise of eminent domain, not police power, and is unconstitutional for violating the constitutional prohibition against taking private property without just compensation. The State cannot circumvent the requirement of just compensation by characterizing a direct appropriation of private property as a mere regulation under police power.

South Rich Acres, Inc. (SRA) and Top Service, Inc. owned seven parcels of land comprising Marcos Alvarez Avenue in Las Piñas City, acquired through purchase and assignment since 1959. Since 1960, other landowners and developers secured right-of-way authorities from SRA and Top Service for use of the road, paying compensation therefor. On July 2, 1997, the Sangguniang Panlungsod enacted City Ordinance No. 343-97 declaring the entirety of Marcos Alvarez Avenue a public road. Royal Asia Multi-Properties, Inc. (RAMPI), developer of the Royal South Subdivision which used the avenue for ingress and egress, was later substituted by Equitable PCI Bank (now Banco de Oro Unibank, Inc. or BDO) as intervenor-defendant.

• Nature of the Property: SRA and Top Service owned seven parcels of land comprising Marcos Alvarez Avenue, evidenced by Transfer Certificates of Title and deeds of absolute sale. The road stretched from Alabang-Zapote Road to the boundary of Bacoor, Cavite.
• The City Ordinance: On July 2, 1997, the City of Las Piñas enacted City Ordinance No. 343-97 declaring the entire length of Marcos Alvarez Avenue a public road, citing heavy traffic volume and wear and tear necessitating public maintenance.
• Prior Use and Agreements: Since 1960, other landowners and developers secured right-of-way authorities from SRA and Top Service for use of the road, paying compensation therefor.
• City's Position: In its Answer, the City of Las Piñas did not deny that the subject lots were private properties, but asserted that the avenue was already government property, having been withdrawn from the commerce of man as an open space.
• Intervention: RAMPI, developer of the Royal South Subdivision which relied on Marcos Alvarez Avenue for ingress and egress, intervened to uphold the ordinance, alleging SRA demanded payment for use of the road. BDO later substituted RAMPI after acquiring the subdivision.
• Trial Court Proceedings: The RTC enjoined implementation of the ordinance via preliminary injunction and subsequently declared it unconstitutional for taking private property without just compensation, though it denied SRA and Top Service's claim for damages against BDO.
• Appellate Proceedings: The CA affirmed the RTC's declaration of unconstitutionality, rejecting BDO's arguments based on police power and PD 957. However, the CA ordered the cancellation of the notice of lis pendens annotated on BDO's titles covering the Royal South Subdivision, finding these properties were not the subject of the litigation.

• Police Power (BDO): BDO maintained that City Ordinance No. 343-97 was a valid exercise of police power that served the public interest and was reasonably necessary, requiring no just compensation.
• Automatic Vesting (BDO): BDO argued that under PD 957, as amended by PD 1216, ownership of the roads was automatically vested in the City of Las Piñas upon completion of the subdivision, citing the obligation to donate roads to the local government.
• Public Use (BDO): BDO relied on a prior CA decision (CA-G.R. SP No. 53392) stating that Marcos Alvarez Avenue was being used by the public and treated by the City as a municipal public road.
• Finality of Lis Pendens Order (SRA and Top Service): SRA and Top Service argued that the CA erred in cancelling the lis pendens because the RTC order allowing annotation had become final and executory, and the annotation was necessary to protect the public and their rights.

• Unconstitutional Taking (SRA and Top Service): SRA and Top Service countered that the ordinance constituted taking without just compensation, as the City never acquired ownership through expropriation, donation, or purchase.
• Lack of Standing (SRA and Top Service): SRA and Top Service argued that BDO lacked personality to question the RTC decision declaring the ordinance unconstitutional, and that the City of Las Piñas (which did not appeal) was bound by the RTC ruling.
• Improper Lis Pendens (BDO): BDO argued that the annotation of lis pendens on all its titles was improper because only the specific properties of SRA and Top Service were subject of the litigation, not the entire Royal South Subdivision.

• Constitutionality of the Ordinance: Whether City Ordinance No. 343-97 constitutes a valid exercise of police power or an unconstitutional taking of private property without just compensation.
• Applicability of PD 957: Whether PD 957, as amended by PD 1216, automatically vests ownership of subdivision roads in the local government unit without donation or compensation.
• Lis Pendens: Whether the notice of lis pendens annotated on BDO's titles covering the Royal South Subdivision should be cancelled.

• Constitutionality of the Ordinance: City Ordinance No. 343-97 is unconstitutional. The declaration of private property as a public road, where ownership was neither donated nor expropriated with compensation, constitutes a taking under eminent domain, not a regulation under police power. The ordinance effectively deprived SRA and Top Service of ownership without just compensation, violating Article III, Section 9 of the 1987 Constitution.
• Applicability of PD 957: Ownership of roads under PD 957, as amended by PD 1216, is not automatically vested in the local government unit. The provision stating that roads "shall be donated" upon completion indicates a requirement for a voluntary act of donation, not a compulsory transfer without compensation. The local government cannot be compelled to accept, nor the owner compelled to donate, without the formalities of donation being satisfied.
• Lis Pendens: The notice of lis pendens on BDO's titles was properly ordered cancelled. Under Section 77 of PD 1529, a notice of lis pendens may be cancelled upon a showing that it is not necessary to protect the rights of the party who caused it to be recorded. Here, the litigation concerned only the constitutionality of the ordinance as it affected SRA and Top Service's lots; the Royal South Subdivision lots owned by BDO were not the subject of the controversy.

• Police Power vs. Eminent Domain — Police power is the inherent power of the State to regulate or restrain the use of liberty and property for public welfare without compensation, provided no property right is appropriated for public use. Eminent domain is the power to appropriate private property for public use, which requires just compensation. The test is whether the regulation merely restricts use or whether it appropriates the property or a right therein for public benefit. If the regulation amounts to a taking or confiscation, it is no longer police power but eminent domain.
• Taking Without Just Compensation — A local ordinance that declares private property as public and effectively transfers ownership or control to the government without compensation constitutes a taking requiring payment of just compensation under Article III, Section 9 of the Constitution.
• Lis Pendens — A notice of lis pendens is proper only in actions affecting title or possession of real property, and may be cancelled where the property annotated is not the subject of the litigation or where the notice is not necessary to protect the annotating party's rights.

• "Police power is defined as 'the inherent power of the State to regulate or to restrain the use of liberty and property for public welfare.'" — Distinguishing the nature of police power.
• "However, '[p]olice power does not involve the taking or confiscation of property, with the exception of a few cases where there is a necessity to confiscate private property in order to destroy it for the purpose of protecting peace and order...'" — Limiting police power to regulation rather than appropriation.
• "Thus, in police power, while the regulation affects the right of ownership, none of the bundle of rights which constitute ownership is appropriated for use by or for the benefit of the public." — The critical distinction from eminent domain.
• "However, when there is already a taking or confiscation of private property for public use, the State is no longer exercising police power, but eminent domain for which just compensation must be paid." — The rule on compensation.
• "The road lots in a private subdivision are private property, hence, the local government should first acquire them by donation, purchase, or expropriation, if they are to be utilized as a public road." — Citing Woodridge School on the nature of subdivision roads.
• "The use of the subdivision roads by the general public does not strip it of its private character. The road is not converted into public property by mere tolerance of the subdivision owner of the public's passage through it." — On public use not converting private property to public.
• "Lis pendens literally means 'a pending suit,' while a notice of lis pendens, inscribed in the certificate of title, is an announcement to the whole world that the covered property is in litigation, serving as a warning that one who acquires interest in the property does so at his own risk and subject to the results of the litigation." — Definition and purpose of lis pendens.

• Manila Memorial Park, Inc. v. Secretary of the Department of Social Welfare and Development, 722 Phil. 538 (2013) — Controlling precedent distinguishing police power from eminent domain; cited for the proposition that police power does not appropriate property rights while eminent domain does.
• Republic of the Philippines v. Spouses Llamas, 804 Phil. 264 (2017) — Followed; held that the compulsion to donate roads under PD 957/1216 cannot be sustained as valid and that the subdivision owner retains freedom to donate or not.
• Woodridge School, Inc. v. ARB Construction Co., Inc., 545 Phil. 83 (2007) — Followed; held that road lots in private subdivisions remain private until acquired by government through donation, purchase, or expropriation, and that public use does not convert private roads to public property.
• White Plains Homeowners Association, Inc. v. Court of Appeals, 358 Phil. 184 (1998) — Distinguished; while cited by intervenor for automatic vesting theory, the Court clarified that private owners cannot be compelled to transfer property to government without just compensation.

• Article III, Section 9, 1987 Constitution — Prohibits the taking of private property for public use without just compensation; applied to invalidate the ordinance constituting a taking without compensation.
• Presidential Decree No. 957, Section 31, as amended by Presidential Decree No. 1216 — Governs reservation and donation of roads and open spaces in subdivisions; interpreted to require actual donation, not automatic transfer, and that the "mandatory" acceptance by local governments does not negate the need for just compensation if taking occurs without donation.
• Rules of Court, Rule 13, Section 14 — Governs notice of lis pendens; cited for the requirement that the notice contain names of parties and description of property affected.
• Presidential Decree No. 1529 (Property Registration Decree), Sections 76 and 77 — Governs the annotation and cancellation of lis pendens; Section 77 specifically allows cancellation when the notice is not necessary to protect the rights of the annotating party.

Gesmundo, C.J., Perlas-Bernabe, Leonen, Caguioa, Hernando, Carandang, Zalameda, M. Lopez, Delos Santos, Gaerlan, Rosario, and J. Lopez, JJ.