G.R. No. 202384 - Equitable PCI Bank, Inc. vs. South Rich Acres, Inc.

Case Summary (G.R. No. 202384)

Factual Background

South Rich Acres, Inc. (SRA) and Top Service, Inc. alleged ownership of seven parcels constituting a private road network known as Marcos Alvarez Avenue, which runs from Alabang-Zapote Road to the boundary of Bacoor, Cavite. The companies presented several Transfer Certificates of Title and deeds of absolute sale to establish ownership and alleged that, since 1960, they had granted rights of way to other landowners for compensation. The Sangguniang Panlungsod of the City of Las Pinas enacted City Ordinance No. 343-97 declaring the whole length of Marcos Alvarez Avenue a public road. Royal South Subdivision, later represented by Royal Asia Multi-Properties, Inc. (RAMPI) and subsequently by Equitable PCI Bank, Inc. (EPCIB/BDO) as successor-in-interest, used Marcos Alvarez Avenue for ingress and egress.

Trial Court Proceedings

SRA and Top Service filed a Petition for Declaratory Relief and Damages in RTC Branch 253, Las Pinas City, seeking annulment of City Ordinance No. 343-97 and preliminary injunctive relief. The City of Las Pinas did not deny private ownership of the lots but asserted the avenue was government property. RAMPI intervened to defend the ordinance. The RTC issued a writ of preliminary injunction enjoining the ordinance’s effectivity. In a Decision dated April 30, 2004, the RTC declared City Ordinance No. 343-97 invalid and unconstitutional for taking private property without just compensation and denied SRA and Top Service’s damages claim against EPCIB for lack of merit. The RTC granted RAMPI’s request to annotate a notice of lis pendens on the titles of the Royal South Subdivision, a notation later continued against EPCIB/BDO when it succeeded RAMPI.

Court of Appeals Decision

On BDO’s appeal, the Court of Appeals in its Decision dated March 9, 2012 affirmed the RTC’s declaration that City Ordinance No. 343-97 was unconstitutional for effecting a taking without just compensation. The CA held that the City had not pleaded the exercise of police power and that, in any event, the ordinance effected a taking that falls under eminent domain, requiring compensation under Art. III, Sec. 9, 1987 Constitution. The CA rejected BDO’s argument that PD 957 as amended by PD 1216 automatically vested subdivision open spaces and roads in the local government, relying on later precedent that a private owner cannot be compelled to donate property. The CA ordered the Register of Deeds of Las Pinas City to cancel the notices of lis pendens annotated on all TCTs of the Royal South Subdivision project and denied other reliefs urged by BDO.

The Parties’ Contentions Before the Supreme Court

BDO contended that the CA erred in declaring City Ordinance No. 343-97 unconstitutional and argued that the ordinance was a valid exercise of police power necessary for the public welfare and therefore did not require payment of just compensation. SRA and Top Service argued that the CA correctly upheld the RTC and further contended that the CA erred in ordering cancellation of the lis pendens on BDO’s titles. They asserted that the RTC order to annotate lis pendens had become final and that the annotation protected the public and potential purchasers from future litigation.

Issues Presented

The consolidated petitions presented whether City Ordinance No. 343-97 validly converted privately owned lots comprising Marcos Alvarez Avenue into a public road under the City’s police power, and whether the Court of Appeals properly ordered cancellation of the notices of lis pendens on titles of properties owned by BDO which were not the subject lots in the action.

Legal Reasoning of the Supreme Court

The Court denied both petitions and affirmed the Court of Appeals. The Court held that City Ordinance No. 343-97 effected an unlawful taking of private property without just compensation. The Court reiterated the established distinction between police power and eminent domain: police power authorizes regulation or restriction of the use of property for public welfare without appropriation of property rights and normally does not require compensation; eminent domain is the power to take or appropriate private property for public use and requires payment of just compensation under Art. III, Sec. 9, 1987 Constitution. The Court found no evidence that the subject lots had been donated, conveyed, or otherwise acquired by the City prior to the ordinance’s enactment. The Court rejected BDO’s reliance on PD 957, as amended by PD 1216, to argue automatic vesting of subdivision roads in local government, citing prevailing jurisprudence that the compulsion to donate under Section 31 of PD 957 cannot be sustained and that developers retain the freedom to donate or not donate such lands. The Court also explained that public use or tolerance of public passage over private subdivision roads does not convert private property into public

Case Syllabus (G.R. No. 202384)

Parties and Procedural Posture

Equitable PCI Bank, Inc. (now Banco de Oro Unibank, Inc.) filed a petition for review in G.R. No. 202384 assailing the Court of Appeals Decision dated March 9, 2012 and Resolution dated June 20, 2012 in CA-G.R. CV No. 91117.
South Rich Acres, Inc. and Top Service, Inc. filed a Petition for Review on Certiorari in G.R. No. 202397 challenging the same CA Decision and Resolution.
City of Las Pinas is respondent in the trial court action and did not appeal the RTC decision that declared City Ordinance No. 343-97 unconstitutional.
Royal Asia Multi-Properties, Inc. (RAMPI) intervened in the RTC proceedings and later assigned its rights in the Royal South Subdivision to EPCIB/BDO, resulting in EPCIB/BDO’s substitution as intervenor-defendant.
The petitions were consolidated for resolution before the Court of Appeals and subsequently before the Supreme Court with both petitions denied and the CA Decision and Resolution affirmed.

Key Factual Allegations

South Rich Acres, Inc. alleged ownership of seven parcels comprising the private road network collectively known as Marcos Alvarez Avenue.
Top Service, Inc. previously owned and transferred titles for several of the subject lots to SRA and presented Transfer Certificates of Title and deeds of sale to establish ownership.
City Ordinance No. 343-97, enacted by the Sangguniang Panlungsod of Las Pinas on July 2, 1997, declared Marcos Alvarez Avenue a public road.
Developers and other landowners historically secured rights of way from SRA and Top Service and paid compensation for use of the private road since the 1960s.
RAMPI and later EPCIB/BDO used Marcos Alvarez Avenue for ingress and egress to the Royal South Subdivision and relied on the city ordinance in resisting payments claimed by SRA and Top Service.

Issues Presented

Whether City Ordinance No. 343-97 validly transformed the privately owned lots comprising Marcos Alvarez Avenue into public property without payment of just compensation.
Whether the City of Las Pinas properly invoked police power to support the ordinance and thereby avoid the obligation to pay just compensation.
Whether the annotation of notices of lis pendens on the titles of the Royal South Subdivision project owned by EPCIB/BDO was proper and necessary to protect the rights of SRA and Top Service.

Trial Court Ruling

The Regional Trial Court, Branch 253, Las Pinas City, in a Decision dated April 30, 2004 declared City Ordinance No. 343-97 invalid and unconstitutional for taking property without just compensation.
The RTC denied SRA and Top Service’s claim for damages against EPCIB/BDO for lack of merit.
The RTC granted an earlier prayer for a writ of preliminary injunction enjoining the effectivity and implementation of City Ordinance No. 343-97.

Court of Appeals Ruling

The Court of Appeals in its Decision dated March 9, 2012 affirmed the RTC insofar as it declared City Ordinance No. 343-97