G.R. No.

202384, May 04, 2021 ]

EQUITABLE PCI BANK, INC. (NOW BANCO DE ORO UNIBANK, INC.), PETITIONER, VS. SOUTH RICH ACRES,
INC., TOP SERVICE, INC. AND THE CITY OF LAS PIÑAS, RESPONDENTS.
[G.R. No. 202397, May 4, 2021]
SOUTH RICH ACRES, INC. AND TOP SERVICE, INC., PETITIONERS, VS. EQUITABLE PCI BANK, INC. (NOW
BANCO DE ORO UNIBANK, INC.), RESPONDENT.
D E C I S I O N - INTING, J.:

This case involves the following consolidated petitions: (1) Petition for Review1 filed by Equitable
PCI Bank, Inc. (EPCIB) (now Banco de Oro Unibank, Inc. (BDO) docketed as G.R. No. 202384; and
(2) Petition for Review on Certiorari2 under Rule 45 of the Rules of Court filed by South Rich Acres,
Inc. (SRA) and Top Service, Inc., (Top Service) docketed as G.R. No. 202397. Both petitions assail
the Decision3 dated March 9, 2012 and the Resolution4 dated June 20, 2012 of the Court of
Appeals (CA) in CA-G.R. CV No. 91117.

The Antecedents

SRA and Top Service are corporations duly organized and existing under the laws of the Republic of
the Philippines.5

On the other hand, the City of Las Piñas is a corporate entity duly recognized and existing under the
laws of the Republic of the Philippines, particularly Republic Act No. (RA) 7160, otherwise known as
the "Local Government Code of 1991."6

On July 2, 1997, the Sangguniang Panlungsod of the City of Las Piñas enacted City Ordinance No.
343-97, Series of 1997 (City Ordinance No. 343-97), which declared Marcos Alvarez Avenue as a
public road.7 The Ordinance reads:

CITY ORDINANCE NO. 343-97

Series of 1997

"AN ORDINANCE DECLARING MARCOS ALVAREZ AVENUE FROM CONGRESSMAN FELIMON

C. AGUILAR AVENUE (ALABANG-ZAPOTE ROAD) TO THE BOUNDARY OF THE MUNICIPALITY
OF BACOOR, CAVITE AS PUBLIC ROAD.

"WHEREAS, Marcos Alvarez has become a busy avenue due to the volume of motor vehicles using
the same as alternative road from the Province of Cavite;

"WHEREAS, the constant use of Marcos Alvarez Avenue by motorists coming from the Province of
Cavite has aggravated the wear and tear of the same thereby necessitate [sic] the constant repair
and maintenance;

"WHEREAS, the status of Marcos Alvarez Avenue has long been accepted by the residents as well
as transients as public road;

"NOW, THEREFORE:

"BE IT ORDAINED by the Sangguniang Panglungsod of Las Piñas, Metro Manila, in session
assembled that:
SECTION 1. The whole length of Marcos Alvarez Avenue from Congressman Felimon C. Aguilar
Avenue (Alabang-Zapote Road) to the boundary of the Municipality of Bacoor, Province of Cavite, is
hereby declared Public Road.

SECTION" 2. This Ordinance shall take effect upon its approval.

x x x8 (Italics supplied.)

Subsequently, SRA and Top Service filed a Petition for Declaratory Relief and Damages with a
Prayer for Preliminary Injunction9 with Branch 253, Regional Trial Court (RTC), Las Piñas City
against the City of Las Piñas, docketed as Civil Case No. LP-97-0190 seeking to annul City
Ordinance No. 343-97.10

The petition alleged the following: SRA is the present legal owner of the seven parcels of land
(subject lots) which formed part of a private road network, collectively referred to as Marcos Alvarez
Avenue which stretches from Alabang-Zapote Road to the boundary of Brgy. Molino, Bacoor,
Cavite.11

SRA acquired the subject lots from Top Service through a legal assignment. On the other hand, Top
Service acquired the subject lots through a series of purchases from different private owners dating
back to 1959. Of the seven parcels of land, SRA and Top Service were able to present three
Transfer Certificates of Title (TCT) in the name of Top Service, particularly TCT No. S-34609,12 TCT
No. 413759,13 and TCT No. 230918414 and deeds of absolute sale pertaining to the other lots.15

Since 1960, other landowners and developers whose properties would necessarily make access
through Marcos Alvarez Avenue had secured from SRA and Top Service a right of way authority and
paid due compensation therefor.16 This further supports their theory of ownership of Marcos Alvarez
Road.

On September 10, 1997, the City of Las Piñas filed its Answer.17 It did not deny that the subject lots
were private properties. However, it asserted that Marcos Alvarez Avenue was already government
property, having been withdrawn from the commerce of man as an open space.18

In the meantime, the Royal South Subdivision makes use of Marcos Alvarez Avenue for ingress and
egress.19 Thus, on September 29, 1997, Royal Asia Multi-Properties, Inc. (RAMPI) filed a Motion for
Leave of Court to File Answer in Intervention20 on the ground that it has legal interest in the
upholding of the validity and constitutionality of City Ordinance No. 343-97 because SRA and Top
Service had been unjustifiably demanding payment from them for the use of Marcos Alvarez
Avenue.21 Specifically, RAMPI alleged that it was the owner and developer of the Royal South
Subdivision Project located at Sitio Mulawin, Bo. Talon, Pamplona, Las Piñas which uses Marcos
Alvarez Avenue. RAMPI further alleged that it was being accused by SRA and Top Service of
violating their rights as it relied on City Ordinance No. 343-97 instead of paying for the use of Marcos
Alvarez Avenue.22

Although the RTC denied the motion in its Resolution dated October 6, 1997, it reconsidered and set
it aside in another Resolution dated January 12, 1998.23

Attached to the aforesaid motion was RAMPI's Answer in Intervention [with Motion to Dismiss and
opposition to the Prayer for Preliminary Injunction].24 RAMPI asserted that City Ordinance 343-97
was enacted pursuant to Presidential Decree No. (PD) 121625 which amended PD 957, otherwise
known as The Subdivision And Condominium Buyers' Protective Decree. For RAMPI, under PD
1216, the open spaces and roads in residential subdivisions are beyond the commerce of men,
having been automatically and directly identified for public use and vested in favor of the then
Municipality of Las Piñas. It also cited the case of White Plains Ass'n., Inc. v. Judge
Legaspi,26 promulgated in 1991, to support its theory that, although the properties were registered
in the name of other private entities, open spaces of residential subdivisions are, by operation of law,
owned by the City of Las Piñas.27

On October 17, 1997, the RTC issued a Resolution which granted SRA and Top Service's prayer for
the issuance of a writ of preliminary injunction to enjoin the effectivity and implementation of City
Ordinance No. 343-97.28

On July 24, 2000, SRA and Top Service filed a Motion for Substitution of Parties with Motion to
Annotate Lis Pendens.29 The RTC granted the motions in its Resolution dated October 5, 2000.
Consequently, EPCIB substituted RAMPI as intervenor-defendant because all the rights and
interests over the Royal South Subdivision had already been transferred, conveyed, and assigned
by RAMPI to EPCIB. Likewise, the Register of Deeds of Las Piñas was directed to annotate a notice
of lis pendens in all the titles of Royal South Subdivision project.30

Subsequently, EPCIB filed its Answer on May 4, 2001.31

Meanwhile, the case proceeded to pre-trial, followed by trial on the merits.32

The RTC Ruling

In a Decision33 dated April 30, 2004, the RTC, first, declared City Ordinance No. 343-97 as invalid
and unconstitutional for taking the property without just compensation;34 and second, denied the
claim of SRA and Top Service for damages against EPCIB for lack of merit.35

SRA and Top Service filed a Motion for Partial Reconsideration36 dated May 25, 2004. On the other
hand, EPCIB filed a Notice of Appeal37 dated May 27, 2004 and a Motion to Cancel Notice of Lis
Pendens38 dated March 23, 2005. SRA and Top Service filed their Comment/Opposition (Re:
Motion to Cancel Notice of Lis Pendens)39 dated April 29, 2005.

Thereafter, in its Consolidated Order40 dated October 18, 2005, the RTC denied SRA and Top
Service's and EPCIB's respective motions and directed the transmission of the entire records to the
CA in view of EPCIB Notice of Appeal.

EPCIB then filed its Partial Motion for Reconsideration [Re: Consolidated Order dated October 18,
2005.41 On the other hand, SRA and Top Service filed their Notice of Appeal42 dated November 10,
2005.

In another Order43 dated January 10, 2006, the RTC: (a) denied EPCIB's Motion for Partial
Reconsideration of the Consolidated Order dated October 18, 2005, (b) noted SRA and Top
Service's Notice of Appeal, and (c) ordered the transmission of the records to the CA.44

In its Appellant's Brief45 filed before the CA on April 3, 2009 BDO, formerly EPCIB, maintained that
the RTC erred in: (a) invalidating City Ordinance No. 343-97; and (b) denying BDO's motion to lift or
cancel the notice of lis pendens on all certificates of title covering the affected Royal South
Subdivision properties.46
Meanwhile, CA rendered a Resolution47 dated April 28, 2009 dismissing SRA and Top Service's
appeal as the CA deemed it abandoned for failure to file the appellant's brief within the reglementary
period.48 The Resolution became final and executory on May 20, 2009.49

The CA Ruling

In the Decision50 dated March 9, 2012, the CA in CA-G.R. CV No. 91117 found BDO's appeal to be
partially meritorious.

The CA affirmed the RTC's: (a) declaration that City Ordinance No. 343-97 is unconstitutional, and
(b) finding that because the lots belonging to SRA and Top Service were neither expropriated nor
donated in favor of the City of Las Piñas, City Ordinance No. 343-97 violated the rights of SRA and
Top Service against confiscation of property without just compensation.51

The CA dismissed BDO's invocation of police power to maintain the constitutionality of City
Ordinance No. 343-97. It ruled that the City of Las Piñas never raised in its Answer the allegation
that the enactment of City Ordinance No. 343-97 was pursuant to the exercise of the local
government unit's police power. It further explained that when there is a taking or confiscation of
private property for public use, the State exercises not police power but some other inherent
power, i.e., eminent domain.52

The CA then declined to pass upon BDO's insinuation that as a result of declaring City Ordinance
No. 343-97 unconstitutional, an absurd situation will arise such that 1/3 portion of Marcos Alvarez
Avenue is classified as privately-owned, while the rest is classified as public property. The records
do not indicate that Marcos Alvarez Avenue only covered 1/3 of the properties of SRA and Top
Service.53

The CA also did not give credence to BDO's contention that the ownership of the lots was
automatically vested in favor of the City of Las Piñas purportedly by virtue of the obligation of owners
and developers of a subdivision under PD 1216 to provide adequate roads, alleys, and sidewalks;
and that for subdivision projects comprising of one hectare or more, the owners and developers
must reserve 30% of the gross area for open space which, upon completion, shall be donated to the
city or municipality.54 In dismissing BDO's contention, the CA relied on the subsequent 1998
Decision of the Court in White Plains Homeowners Asso., Inc. v. CA,55 wherein the Court quoted
the discussion of the CA therein of the relevant provisions of PD 957 and PD 1216 and ruled that a
private owner cannot be compelled to transfer, or donate one's property to the government.56

However, the CA found the annotation of notice of lis pendens on the titles of BDO's properties
improper because only the particular properties subject of litigation, which in this case are the
properties of SRA and Top Service, may be covered by a notice of lis pendens.57

The dispositive portion of the CA Decision provides:

WHEREFORE, in view of the foregoing premises, the instant appeal is hereby partially GRANTED.
Accordingly, the assailed Decision dated April 30, 2004 of Branch 253 of the Regional Trial Court of
the National Capital Judicial Region in Las Piñas City, Metro Manila in Civil Case No. LP-97-0190
with respect to the declaration that City Ordinance No. 343-97 issued by the city of Las Piñas is
invalid and unconstitutional is hereby AFFIRMED. However, this Court ORDERS the Register of
Deeds of Las Piñas City to cancel the notices of lis pendens annotated on all of the transfer
certificates of titles of the Royal South Subdivision project of the respondent-appellant Equitable PCI
Bank, now Banco de Oro Unibank, Inc..
 SO ORDERED.58

BOO, and SRA and Top Service filed their separate Motions for Partial Reconsideration59 of the CA
Decision dated March 9, 2012. However, the CA denied the motions in its Resolution60 dated June
20, 2012.

The Petitions

G.R. No. 202384

BDO maintains that the CA in CA-G.R. CV No. 91117 erred in finding City Ordinance No. 343-97
unconstitutional. BDO argues that City Ordinance No. 343-97 is a valid exercise of police power
without the need to pay just compensation as it served the interest of the public in general and was
reasonably necessary for the accomplishment of its intended purpose.61

G.R. No. 202397

SRA and Top Service maintain that the CA correctly upheld the trial court's invalidation of City
Ordinance No. 343-97 of the City of Las Piñas. SRA and Top Service argue that the City of Las
Piñas did not appeal from the RTC Decision dated April 3 0, 2004 which declared City Ordinance
No. 343-97 unconstitutional. Thus, as far as the City of Las Piñas is concerned, the RTC Decision
dated April 30, 2004 is already final and executory. On the other hand, BDO did not even have the
personality to question the RTC Decision dated April 30, 2004.62

However, SRA and Top Service argue that the CA erred in finding the lis pendens pertaining to the
case improper and in ordering the Register of Deeds of Las Piñas City to cancel the notices of lis
pendens annotated on all the TCTs of BDO on the Royal South Subdivision project. For SRA and
Top Service, the directive of the CA to cancel the lis pendens deviates from the purpose and
objective of an annotation of lis pendens which is to protect the general public by giving notice about
the pending controversy which necessarily affects real properties, and thus, save innocent persons
from any involvement in any future litigation concerning the properties. Moreover, the RTC
Resolution63 dated October 5, 2000 which allowed the annotation of the notice of lis pendens had
long become final and executory and could not be overturned a regular appeal.64

The parties then filed their respective comments to the petitions.65

The Court’s Ruling

The Court denies both petitions.

At the outset, the Court finds that the RTC Decision66 dated April 30, 2004 which declared City
Ordinance No. 343-97 unconstitutional has not yet attained finality. While the City of Las Piñas did
not appeal the RTC Decision, RAMPI, who was BDO's predecessor-in-interest and the Royal South
Subdivision's developer, successfully intervened in the trial court proceedings. Thereafter, BDO
appealed the RTC Decision.67 Suffice it to state that RAMPI and BDO had a legal interest in the
validity and constitutionality of City Ordinance No. 343-97 considering that the Royal South
Subdivision makes use of Marcos Alvarez Avenue for ingress and egress.

City Ordinance No. 343-97 is unconstitutional as it constitutes taking of the privately owned lots of
SRA without just compensation.
The Court finds City Ordinance No. 343-97 as unconstitutional for being an invalid exercise of police
power. A discussion on the distinctions between police power and eminent domain is proper.

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."68 Thus, "[u]nder the police power of the State, 'property rights of
individuals may be subjected to restraints and burdens in order to fulfill the objectives of the
government."'69 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 and of promoting the general welfare; for
instance, the confiscation of an illegally possessed article, such as opium and firearms."70

On the other hand, eminent domain is defined as "the inherent power of the State to take or
appropriate private property for public use."71 It must be emphasized however that as provided
under Section 9, Article III of the 1987 Constitution, "[p]rivate property should not be taken for public
use without just compensation." Thus, the exercise of eminent domain requires the payment of just
compensation to the owner.72

The Court explained in Manila Memorial Park, Inc., et al. v. Secretary of the Department of Social
Welfare and Dev't., et al.73 the distinctions between police power and eminent domain, as follows:

Traditional distinctions exist between police power and eminent domain.

In the exercise of police power, a property right is impaired by regulation, or the use of property is
merely prohibited, regulated or restricted to promote public welfare. In such cases, there is no
compensable taking, hence, payment of just compensation is not required. Examples of these
regulations are property condemned for being noxious or intended for noxious purposes (e.g., a
building on the verge of collapse to be demolished for public safety, or obscene materials to be
destroyed in the interest of public morals) as well as zoning ordinances prohibiting the use of
property for purposes injurious to the health, morals or safety of the community (e.g., dividing a city's
territory into residential and industrial areas). It has, thus, been observed that, in the exercise of
police power (as distinguished from eminent domain), although 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.

On the other hand, in the exercise of the power of eminent domain, property interests are
appropriated and applied to some public purpose which necessitates the payment of just
compensation therefor. Normally, the title to and possession of the property are transferred to the
expropriating authority. Examples include the acquisition of lands for the construction of public
highways as well as agricultural lands acquired by the government under the agrarian reform law for
redistribution to qualified farmer beneficiaries. However, it is a settled rule that the acquisition of title
or total destruction of the property is not essential for "taking" under the power of eminent domain to
be present. Examples of these include establishment of easements such as where the land owner is
perpetually deprived of his proprietary rights because of the hazards posed by electric transmission
lines constructed above his property or the compelled interconnection of the telephone system
between the government and a private company. In these cases, although the private property
owner is not divested of ownership or possession, payment of just compensation is warranted
because of the burden placed on the property for the use or benefit of the public.74

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.75 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.76
It bears emphasis that as observed by the CA in CA-G.R. CV No. 91117, before the enactment of
the city ordinance, SRA and Top Service retained ownership of the parcels of land. There is nothing
in the records to show that the subject lots have been donated or conveyed to, or legally acquired by
the City of Las Piñas. In fact, the City of Las Piñas did not contest SRA and Top Service's ownership
of the parcels of land prior to the city ordinance's enactment.

Notably, BDO relies on the CA's pronouncement in its Decision77 dated April 23, 2003 in South Rich
Acres, Inc. v. Royal Asia Multi-Properties, docketed as CA-G.R. SP No. 53392 wherein the CA
appeared to have made a finding of fact that Marcos Alvarez Avenue is being used by the public.
BDO quoted the CA Decision dated April 23, 2003 as follows:

We find no cogent reason to disturb the findings of fact made by the Office of the President in this
case. The Office of the President had, in fact, conducted an ocular inspection of the Marcos Alvarez
Avenue in order to determine the veracity of the fraudulent sale alleged by the petitioners.

In its Decision, the Office of the President, stated the following findings, to wit:

x x Moreover we find the HLURB decision to be purely conjectural and cannot pass the substantiality
of the evidence. Although the HLURB's lack of jurisdiction would have sufficed to dispose of
appellee's opposition to the License to Sell, the dearth of concrete evidence of a fraudulent sale
impels this Office to set aside the HLURB's decision. For an ocular inspection will readily show that
the Marcos-Alvarez Avenue is being used by the public. In fact, public utility vehicles, such as
jeepneys, taxis, tricycles, etc., freely traverse the road. As a vital link between the City of Las Piñas
and the Province of Cavite, the Marcos-Alvarez Avenue is being used not only by residents of both
Cavite and Las Piñas but also by anybody wanting to pass the road. Therefore, this is the status
quo. The City of Las Piñas has treated the same as a municipal public road use."78

The parties did not apprise the Court of the status or subsequent history of CA-G.R. SP No. 53392.
However, suffice it to state that a perusal alone of the CA Decision dated April 23, 2003 in CA-G.R.
SP No. 53392 shows nothing to indicate that the CA in CA-G.R. SP No. 53392 determined the City
of Las Piñas to be the owner of the lots subject of this case.

CA-G.R. SP No. 53392 originated from RAMPI's application with the Sangguniang Bayan of the then
Municipality of Las Piñas for the issuance of a Location Clearance and Development Permit with
respect to its Royal South Subdivision Project. SRA filed an opposition thereto, alleging that RAJ1PI
was unlawfully using or intended to use its private road network, Marcos Alvarez Avenue.
Subsequently, the Sangguniang Bayan of the then Municipality of Las Piñas granted RAMPI's
application. Thereafter, RAMPI filed an application for a License to Sell which was granted by the
HLURB Arbiter despite SRA's opposition. SRA elevated the matter to the HLURB Board of
Commissioners which, on March 6, 1997, reversed the HLURB Arbiter's decision, and ordered the
suspension of RAMPI's License to Sell. However, the Office of the President (OP), on appeal, ruled
in favor of RAMPI. The OP ruled that the HLURB was bereft of jurisdiction to resolve the issue on
the ownership of lands, and thus, declared the BLURB Board of Commissioners Decision without
force and effect.79

Thus, SRA filed a petition for review with the CA. It must be emphasized that the CA in CA-G.R. SP
No. 53392 resolved the issue of whether the absence of a grant of right of way in favor of RAMPI
was a justifiable ground to suspend, deny and/or revoke RAMPI's Certificate of Registration and
License to Sell.80

In the petition, one of SRA's arguments is that since Marcos Alvarez Avenue is a private road and, in
the absence of a right of way agreement, the lot buyers of RAMPI have no means of ingress and
egress, and thus, the sale to lot buyers is tantamount to fraudulent sale as the lot-buyers will
necessarily be prejudiced.81

However, the CA dismissed the petition. It particularly found SRA's above-stated argument as
untenable. The CA did not give merit to SRA's contention that the absence of a right of way
agreement could be concluded as a deliberate omission by RAMPI to defraud its subdivision lot
buyers. Thus, the CA found no reason to disturb the findings of the OP which include the following:
(1) there is no concrete evidence of a fraudulent sale being conducted by RAMPI; (2) an ocular
inspection shows that Marcos Alvarez Avenue is being used by the public; and (3) that the City of
Las Piñas has treated Marcos Alvarez Avenue for municipal public road use.82

Evidently, the CA's pronouncement in CA-G.R. SP No. 53392 that Marcos Alvarez Avenue is being
used by the public and that the City of Las Piñas has treated Marcos Alvarez Avenue for municipal
public road use is not determinative of the issue of whether SRA ceased to own the lots where
Marcos Alvarez Avenue is situated.

Equally important, the CA in CA-G.R. CV No. 91117 is correct in ruling that BDO cannot rely on PD
957, as amended by PD 1216, in arguing that the ownership of the subject lots was automatically
vested in favor of the City of Las Piñas. Section 31 of PD 957, as amended by PD 1216, provides:

SEC. 31. Roads, Alleys, Sidewalks and Open Spaces. — The owner as developer of a subdivision
shall provide adequate roads, alleys and sidewalks. For subdivision projects one (1) hectare or
more, the owner or developer shall reserve thirty percent (30%) of the gross area for open space.
Such open space shall have the following standards allocated exclusively for parks, playgrounds and
recreational use:

a. 9% of gross area for high density or social housing (66 to 100 family lot per gross hectare).

b. 7% of gross area for medium-density or economic housing (21 to 65 family lot per gross hectare).

c. 3.5 % of gross area low-density or pen market housing (20 family lots and below per gross
hectare).

These areas reserved for parks, playgrounds and recreational use shall be non-alienable public
lands, and non-buildable. The plans of the subdivision project shall include tree planting on such
parts of the subdivision as may be designated by the Authority.

Upon their completion as certified to by the Authority, the roads, alleys, sidewalks and
playgrounds shall be donated by the owner or developer to the city or municipality and it shall be
mandatory for the local governments to accept; provided, however, that the parks and playgrounds
may be donated to the Homeowners Association of the project with the consent of the city or
municipality concerned. No portion of the parks and playgrounds donated thereafter shall be
converted to any other purpose or purposes. (Italics supplied.)

The third paragraph of Section 31 provides that upon completion of the subdivision project, the
owner or developer shall donate the roads, alleys, sidewalks and playgrounds to the city or
municipality which shall accept the donation.83

However, in Rep. of the Phils. v. Sps. Llamas,84 the Court explained that the compulsion on the part
of the owner or developer to donate the roads, alleys, sidewalks and playgrounds in favor of the city
or municipality as provided under Section 31 of PD 957, as amended by PD 1216, cannot be
sustained as valid. The Court ruled that the more reasonable and logical position which maintains
the harmony between laws is that which maintains the subdivision owner's or developer's freedom to
donate or not to donate.

Thus, the Court sees no reason to disturb the findings of the CA in CA-G.R. CV No. 91117.

Given the foregoing, the Court finds that the declaration of the entirety of Marcos Alvarez Avenue as
a public road despite the fact that the subject lots are owned by SRA is an act of unlawful taking of
SRA's property. As correctly ruled by the CA in CA-G.R. CV No. 91117, the taking of SRA's property
without just compensation amounts to confiscation which is beyond the ambit of police power. While
BDO argues that the enactment of City Ordinance No. 343-97 is for the benefit of the public
particularly the residents of Las Piñas and Cavite, the constitutional prohibition on the taking of
private property for public use without just compensation prevents the City of Las Piñas from doing
so.

In Woodridge School, Inc. v. ARB Construction Co. Inc.,85 the Court adopted its ruling in Abellana,
Sr. v. Court of Appeals86 that "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."87 Otherwise, they remain to be private properties of the owner-
developer."88 Further, the Court ruled that ''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."89

Here, considering that City Ordinance No. 343-97 in effect deprived SRA of its ownership over the
subject lots without just compensation, the CA correctly upheld the RTC ruling that declared City
Ordinance No. 343-97 unconstitutional.

The cancellation of the Notice of Lis Pendens on all the TCTs of the Royal South Subdivision Project
of BDO is proper.

In Rep. of the Phils. v. Ravelo, et al.,90 the Court explained that "[l]is 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."91 A notice
of lis pendens is "[f]ounded upon public policy and necessity"92 and "is intended to keep the
properties in litigation within the power of the court until the litigation is terminated, and to prevent
the defeat of the judgment or decree by subsequent alienation."93

The rules governing the notice of lis pendens are found in Section 14, Rule 13 of the Rules of Court,
and Sections 76 and 77 of PD 1529, viz.:

SECTION 14. Notice of lis pendens. — In an action affecting the title or the right of possession of
real property, the plaintiff and the defendant, when affirmative relief is claimed in his answer, may
record in the office of the registry of deeds of the province in which the property is situated a notice
of the pendency of the action. Said notice shall contain the names of the parties and the object of the
action or defense, and a description of the property in that province affected thereby. Only from the
time of filing of such notice for record shall a purchaser, or encumbrancer of the property affected
thereby, be deemed to have constructive notice of the pendency of the action, and only of its
pendency against the parties designated by their real names.
The notice of lis pendens hereinabove mentioned may be cancelled only upon order of the court,
after proper showing that the notice is for the purpose of molesting the adverse party, or that it is not
necessary to protect the rights of the party who caused it to be recorded.

xxxx

SECTION 76. Notice of lis pendens. — No action to recover possession of real estate, or to quiet
title thereto, or to remove clouds upon the title thereof, or for partition, or other proceedings of any
kind in court directly affecting the title to land or the use or occupation thereof or the buildings
thereon, and no judgment, and no proceeding to vacate or reverse any judgment, shall have any
effect upon registered land as against persons other than the parties thereto, unless a memorandum
or notice stating the institution of such action or proceeding and the court wherein the same is
pending, as well as the date of the institution thereof, together with a reference to the number of the
certificate of title, and an adequate description of the land affected and the registered owner thereof,
shall have been filed and registered.

SECTION 77. Cancellation of lis pendens. — Before final judgment, a notice of lis pendens may be
cancelled upon order of the court, after proper showing that the notice is for the purpose of molesting
the adverse party, or that it is not necessary to protect the rights of the party who caused it to be
registered. It may also be cancelled by the Register of Deeds upon verified petition of the party who
caused registration thereof.

At any time after final judgment in favor of the defendant, or other disposition of the action such as to
terminate finally all rights of the plaintiff in and to the land and/or buildings involved, in any case in
which a memorandum or notice of lis pendens has been registered as provided in the preceding
section, the notice of lis pendens shall be deemed canceled upon the registration of a certificate of
the clerk of court in which the action or proceeding was pending stating the manner of disposal
thereof.

A litigant may avail himself of the notice of lis pendens in any of the following case: (a) an action to
recover possession of real estate; (b) an action to quiet title thereto; (c) an action to remove clouds
thereon; (d) an action for partition; and (e) any other proceedings of any kind in Court directly
affecting the title to the land or the use or occupation thereof or the building thereon.94

SRA's argument that the order of the RTC to annotate the notice of lis pendens on BDO's titles has
attained finality, and thus, can no longer be cancelled, is erroneous. As expressly provided under
ℒαwρhi ৷

Section 77 of PD 1529, before final judgment, the notice of lis pendens may be cancelled upon order
of the court after proper showing that the notice is for the purpose of molesting the adverse party, or
that it is not necessary to protect the rights of the party who caused it to be recorded.

On the other hand, after final judgment, the notice of lis pendens is rendered functus officio.95 Thus,
under Section 77 of PD 1529, in cases where there is already a final judgment, the notice of lis
pendens may be cancelled upon the registration of a certificate of the clerk of court in which the
action or proceeding was pending stating the manner of disposal thereof.

Here, before final judgment, the CA in CA-G.R. CV No. 91117 ordered the cancellation of the
annotation of the notice of lis pendens on BDO's titles. The Court affirms the disposition of the CA.
The Court finds that the annotation of the notice of lis pendens on BDO's titles is improper because
the lots owned by BDO are not the properties subject of litigation in this case and the annotation of
the notice of lis pendens on BDO's titles is not necessary to protect the rights of SRA. As correctly
ruled by the CA in CA-G.R. CV No. 91117, the issue involved in this case is the constitutionality of
City Ordinance No. 343-97 which declared Marcos Alvarez Avenue as a public road. Thus, the
properties in litigation in this case are the subject lots where Marcos Alvarez Avenue is situated and
not the lots in the Royal South Subdivision project which are owned by BDO.

WHEREFORE, the petitions in G.R. Nos. 202384 and 202397 are DENIED. The Decision dated
March 9, 2012 and the Resolution dated June 20, 2012 of the Court of Appeals in CA-G.R. CV No.
91117 are AFFIRMED.

SO ORDERED.

G.R. No. 179334 July 1, 2013

SECRETARY OF THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS and DISTRICT ENGINEER
CELESTINO R. CONTRERAS, Petitioners, vs. SPOUSES HERACLEO and RAMONA TECSON, Respondents.
D E C I S I O N - PERALTA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the Court of
Appeals (CA) Decision1 dated July 31, 2007 in CA-G.R. CV No. 77997. The assailed decision
affirmed with modification the Regional Trial Court (RTC)2 Decision3 dated March 22, 2002 in Civil
Case No. 208-M-95.

The case stemmed from the following factual and procedural antecedents:

Respondent spouses Heracleo and Ramona Tecson (respondents) are co-owners of a parcel of land
with an area of 7,268 square meters located in San Pablo, Malolos, Bulacan and covered by
Transfer Certificate of Title (TCT) No. T-430064 of the Register of Deeds of Bulacan. Said parcel of
land was among the properties taken by the government sometime in 1940 without the owners’
consent and without the necessary expropriation proceedings and used for the construction of the
MacArthur Highway.5

In a letter6 dated December 15, 1994, respondents demanded the payment of the fair market value
of the subject parcel of land. Petitioner Celestino R. Contreras (petitioner Contreras), then District
Engineer of the First Bulacan Engineering District of petitioner Department of Public Works and
Highways (DPWH), offered to pay the subject land at the rate of ₱0.70 per square meter per
Resolution of the Provincial Appraisal Committee (PAC) of Bulacan.7 Unsatisfied with the offer,
respondents demanded for the return of their property or the payment of compensation at the current
fair market value.8

As their demand remained unheeded, respondents filed a Complaint9 for recovery of possession with
damages against petitioners, praying that they be restored to the possession of the subject parcel of
land and that they be paid attorney’s fees.10 Respondents claimed that the subject parcel of land was
assessed at ₱2,543,800.00.11

Instead of filing their Answer, petitioners moved for the dismissal of the complaint on the following
grounds: (1) that the suit is against the State which may not be sued without its consent; (2) that the
case has already prescribed; (3) that respondents have no cause of action for failure to exhaust
administrative remedies; and (4) if respondents are entitled to compensation, they should be paid
only the value of the property in 1940 or 1941.12

On June 28, 1995, the RTC issued an Order13 granting respondents’ motion to dismiss based on the
doctrine of state immunity from suit. As respondents’ claim includes the recovery of damages, there
is no doubt that the suit is against the State for which prior waiver of immunity is required. When
elevated to the CA,14 the appellate court did not agree with the RTC and found instead that the
doctrine of state immunity from suit is not applicable, because the recovery of compensation is the
only relief available to the landowner. To deny such relief would undeniably cause injustice to the
landowner. Besides, petitioner Contreras, in fact, had earlier offered the payment of compensation
although at a lower rate.Thus, the CA reversed and set aside the dismissal of the complaint and,
consequently, remanded the case to the trial court for the purpose of determining the just
compensation to which respondents are entitled to recover from the government. 15 With the finality of
the aforesaid decision, trial proceeded in the RTC.

The Branch Clerk of Court was initially appointed as the Commissioner and designated as the
Chairman of the Committee that would determine just compensation,16 but the case was later
referred to the PAC for the submission of a recommendation report on the value of the subject
property.17 In PAC Resolution No. 99-007,18 the PAC recommended the amount of ₱1,500.00 per
square meter as the just compensation for the subject property.

On March 22, 2002, the RTC rendered a Decision,19 the dispositive portion of which reads:

WHEREFORE, premises considered, the Department of Public Works and Highways or its duly
assigned agencies are hereby directed to pay said Complainants/Appellants the amount of One
Thousand Five Hundred Pesos (₱1,500.00) per square meter for the lot subject matter of this case
in accordance with the Resolution of the Provincial Appraisal Committee dated December 19, 2001.

SO ORDERED.20

On appeal, the CA affirmed the above decision with the modification that the just compensation
stated above should earn interest of six percent (6%) per annum computed from the filing of the
action on March 17, 1995 until full payment.21

In its appeal before the CA, petitioners raised the issues of prescription and laches, which the CA
brushed aside on two grounds: first, that the issue had already been raised by petitioners when the
case was elevated before the CA in CA-G.R. CV No. 51454. Although it was not squarely ruled upon
by the appellate court as it did not find any reason to delve further on such issues, petitioners did not
assail said decision barring them now from raising exactly the same issues; and second, the issues
proper for resolution had been laid down in the pre-trial order which did not include the issues of
prescription and laches. Thus, the same can no longer be further considered. As to the propriety of
the property’s valuation as determined by the PAC and adopted by the RTC, while recognizing the
rule that the just compensation should be the reasonable value at the time of taking which is 1940,
the CA found it necessary to deviate from the general rule. It opined that it would be obviously unjust
and inequitable if respondents would be compensated based on the value of the property in 1940
which is ₱0.70 per sq m, but the compensation would be paid only today. Thus, the appellate court
found it just to award compensation based on the value of the property at the time of payment. It,
therefore, adopted the RTC’s determination of just compensation of ₱1,500.00 per sq m as
recommended by the PAC. The CA further ordered the payment of interest at the rate of six percent
(6%) per annum reckoned from the time of taking, which is the filing of the complaint on March 17,
1995.

Aggrieved, petitioners come before the Court assailing the CA decision based on the following
grounds:

I.
THE COURT OF APPEALS GRAVELY ERRED IN GRANTING JUST COMPENSATION TO
RESPONDENTS CONSIDERING THE HIGHLY DUBIOUS AND QUESTIONABLE
CIRCUMSTANCES OF THEIR ALLEGED OWNERSHIP OF THE SUBJECT PROPERTY.

II.

THE COURT OF APPEALS GRAVELY ERRED IN AWARDING JUST COMPENSATION TO

RESPONDENTS BECAUSE THEIR COMPLAINT FOR RECOVERY OF POSSESSION AND
DAMAGES IS ALREADY BARRED BY PRESCRIPTION AND LACHES.

III.

THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE TRIAL COURT’S DECISION
ORDERING THE PAYMENT OF JUST COMPENSATION BASED ON THE CURRENT MARKET
VALUE OF THE ALLEGED PROPERTY OF RESPONDENTS.22

Petitioners insist that the action is barred by prescription having been filed fifty-four (54) years after
the accrual of the action in 1940. They explain that the court can motu proprio dismiss the complaint
if it shows on its face that the action had already prescribed. Petitioners likewise aver that
respondents slept on their rights for more than fifty years; hence, they are guilty of laches. Lastly,
petitioners claim that the just compensation should be based on the value of the property at the time
of taking in 1940 and not at the time of payment.23

The petition is partly meritorious.

The instant case stemmed from an action for recovery of possession with damages filed by
respondents against petitioners. It, however, revolves around the taking of the subject lot by
petitioners for the construction of the MacArthur Highway. There is taking when the expropriator
enters private property not only for a momentary period but for a permanent duration, or for the
purpose of devoting the property to public use in such a manner as to oust the owner and deprive
him of all beneficial enjoyment thereof.24

It is undisputed that the subject property was taken by petitioners without the benefit of expropriation
proceedings for the construction of the MacArthur Highway. After the lapse of more than fifty years,
the property owners sought recovery of the possession of their property. Is the action barred by
prescription or laches? If not, are the property owners entitled to recover possession or just
compensation?

As aptly noted by the CA, the issues of prescription and laches are not proper issues for resolution
as they were not included in the pre-trial order. We quote with approval the CA’s ratiocination in this
wise:

Procedurally, too, prescription and laches are no longer proper issues in this appeal. In the pre-trial
order issued on May 17, 2001, the RTC summarized the issues raised by the defendants, to wit: (a)
whether or not the plaintiffs were entitled to just compensation; (b) whether or not the valuation
would be based on the corresponding value at the time of the taking or at the time of the filing of the
action; and (c) whether or not the plaintiffs were entitled to damages. Nowhere did the pre-trial order
indicate that prescription and laches were to be considered in the adjudication of the RTC. 25

To be sure, the pre-trial order explicitly defines and limits the issues to be tried and controls the
subsequent course of the action unless modified before trial to prevent manifest injustice. 26
Even if we squarely deal with the issues of laches and prescription, the same must still fail. Laches is
principally a doctrine of equity which is applied to avoid recognizing a right when to do so would
result in a clearly inequitable situation or in an injustice.27 This doctrine finds no application in this
case, since there is nothing inequitable in giving due course to respondents’ claim. Both equity and
the law direct that a property owner should be compensated if his property is taken for public
use.28 Neither shall prescription bar respondents’ claim following the long-standing rule "that where
private property is taken by the Government for public use without first acquiring title thereto either
through expropriation or negotiated sale, the owner’s action to recover the land or the value thereof
does not prescribe."29

When a property is taken by the government for public use, jurisprudence clearly provides for the
remedies available to a landowner. The owner may recover his property if its return is feasible or, if it
is not, the aggrieved owner may demand payment of just compensation for the land taken. 30 For
failure of respondents to question the lack of expropriation proceedings for a long period of time,
they are deemed to have waived and are estopped from assailing the power of the government to
expropriate or the public use for which the power was exercised. What is left to respondents is the
right of compensation.31 The trial and appellate courts found that respondents are entitled to
compensation. The only issue left for determination is the propriety of the amount awarded to
respondents.

Just compensation is "the fair value of the property as between one who receives, and one who
desires to sell, x x x fixed at the time of the actual taking by the government." This rule holds true
when the property is taken before the filing of an expropriation suit, and even if it is the property
owner who brings the action for compensation.32

The issue in this case is not novel.

In Forfom Development Corporation [Forfom] v. Philippine National Railways [PNR], 33 PNR entered
the property of Forfom in January 1973 for public use, that is, for railroad tracks, facilities and
appurtenances for use of the Carmona Commuter Service without initiating expropriation
proceedings.34 In 1990, Forfom filed a complaint for recovery of possession of real property and/or
damages against PNR. In Eusebio v. Luis,35 respondent’s parcel of land was taken in 1980 by the
City of Pasig and used as a municipal road now known as A. Sandoval Avenue in Pasig City without
the appropriate expropriation proceedings. In 1994, respondent demanded payment of the value of
the property, but they could not agree on its valuation prompting respondent to file a complaint for
reconveyance and/or damages against the city government and the mayor. In Manila International
Airport Authority v. Rodriguez,36 in the early 1970s, petitioner implemented expansion programs for
its runway necessitating the acquisition and occupation of some of the properties surrounding its
premises. As to respondent’s property, no expropriation proceedings were initiated. In 1997,
1âwphi1

respondent demanded the payment of the value of the property, but the demand remained
unheeded prompting him to institute a case for accion reivindicatoria with damages against
petitioner. In Republic v. Sarabia,37 sometime in 1956, the Air Transportation Office (ATO) took
possession and control of a portion of a lot situated in Aklan, registered in the name of respondent,
without initiating expropriation proceedings. Several structures were erected thereon including the
control tower, the Kalibo crash fire rescue station, the Kalibo airport terminal and the headquarters of
the PNP Aviation Security Group. In 1995, several stores and restaurants were constructed on the
remaining portion of the lot. In 1997, respondent filed a complaint for recovery of possession with
damages against the storeowners where ATO intervened claiming that the storeowners were its
lessees.

The Court in the above-mentioned cases was confronted with common factual circumstances where
the government took control and possession of the subject properties for public use without initiating
expropriation proceedings and without payment of just compensation, while the landowners failed for
a long period of time to question such government act and later instituted actions for recovery of
possession with damages. The Court thus determined the landowners’ right to the payment of just
compensation and, more importantly, the amount of just compensation. The Court has uniformly
ruled that just compensation is the value of the property at the time of taking that is controlling for
purposes of compensation. In Forfom, the payment of just compensation was reckoned from the
time of taking in 1973; in Eusebio, the Court fixed the just compensation by determining the value of
the property at the time of taking in 1980; in MIAA, the value of the lot at the time of taking in 1972
served as basis for the award of compensation to the owner; and in Republic, the Court was
convinced that the taking occurred in 1956 and was thus the basis in fixing just compensation. As in
said cases, just compensation due respondents in this case should, therefore, be fixed not as of the
time of payment but at the time of taking, that is, in 1940.

The reason for the rule has been clearly explained in Republic v. Lara, et al., 38 and repeatedly held
by the Court in recent cases, thus:

x x x "The value of the property should be fixed as of the date when it was taken and not the date of
the filing of the proceedings." For where property is taken ahead of the filing of the condemnation
proceedings, the value thereof may be enhanced by the public purpose for which it is taken; the
entry by the plaintiff upon the property may have depreciated its value thereby; or, there may have
been a natural increase in the value of the property from the time it is taken to the time the complaint
is filed, due to general economic conditions. The owner of private property should be compensated
only for what he actually loses; it is not intended that his compensation shall extend beyond his loss
or injury. And what he loses is only the actual value of his property at the time it is taken x x x. 39

Both the RTC and the CA recognized that the fair market value of the subject property in 1940 was
₱0.70/sq m.40 Hence, it should, therefore, be used in determining the amount due respondents
instead of the higher value which is ₱1,500.00. While disparity in the above amounts is obvious and
may appear inequitable to respondents as they would be receiving such outdated valuation after a
very long period, it is equally true that they too are remiss in guarding against the cruel effects of
belated claim. The concept of just compensation does not imply fairness to the property owner
alone. Compensation must be just not only to the property owner, but also to the public which
ultimately bears the cost of expropriation.41

Clearly, petitioners had been occupying the subject property for more than fifty years without the
benefit of expropriation proceedings. In taking respondents’ property without the benefit of
expropriation proceedings and without payment of just compensation, petitioners clearly acted in
utter disregard of respondents’ proprietary rights which cannot be countenanced by the Court. 42 For
said illegal taking, respondents are entitled to adequate compensation in the form of actual or
compensatory damages which in this case should be the legal interest of six percent (6%) per
annum on the value of the land at the time of taking in 1940 until full payment. 43 This is based on the
principle that interest runs as a matter of law and follows from the right of the landowner to be placed
in as good position as money can accomplish, as of the date of taking.44

WHEREFORE, premises considered, the pet1t10n is PARTIALLY GRANTED. The Court of Appeals
Decision dated July 31, 2007 in CAG.R. CV No. 77997 is MODIFIED, in that the valuation of the
subject property owned by respondents shall be F0.70 instead of ₱1,500.00 per square meter, with
interest at six percent ( 6o/o) per annum from the date of taking in 1940 instead of March 17, 1995,
until full payment.

SO ORDERED.