One of the recurring constitutional tensions in land use regulation and infrastructure development is the blurred line between police power and eminent domain. Government agencies and local government units often invoke public welfare, regulation, or urban necessity to justify interference with private property rights. Yet the Constitution draws a critical distinction: regulation may be allowed without compensation, but taking requires the payment of just compensation.
This distinction was strongly reaffirmed by the Supreme Court in Banco de Oro v. South Rich Acres, G.R. Nos. 202384 and 202397, decided on May 4, 2021.
The case arose from a dispute involving Marcos Alvarez Avenue in Las Piñas City. South Rich Acres, Inc. (SRA) and Top Service, Inc. owned several parcels of land comprising the road. Over time, the road became heavily used by motorists and residents, eventually functioning as an important access route within the area.
Invoking public welfare and long public use, the City Government of Las Piñas enacted City Ordinance No. 343-97 declaring Marcos Alvarez Avenue a public road. The City essentially argued that the ordinance was merely a regulatory measure under the State’s police power, especially considering the public character the road had already assumed through years of use.
SRA and Top Service challenged the ordinance, arguing that the City had effectively deprived them of ownership and control of their property without payment of just compensation. Meanwhile, Equitable PCI Bank — now Banco de Oro Unibank, Inc. — intervened and supported the City’s position, arguing that subdivision roads had already become public under laws such as.
The Supreme Court rejected these arguments and declared the ordinance unconstitutional.
The Court ruled that the City’s action was not a mere regulation under police power, but an actual taking of private property for public use. Although the road had long been used by the public, the property remained privately titled. Declaring it public through ordinance effectively transferred the beneficial use and control of the property to the public without payment of compensation.
The decision is significant because it sharply clarifies the constitutional distinction between police power and eminent domain.
Police power allows the State to regulate property to promote public welfare, safety, health, and order. Regulation may impose restrictions on how property is used, but ownership remains with the private owner. Since the government merely regulates rather than appropriates the property, compensation is generally unnecessary.
Eminent domain, however, is fundamentally different. It involves the actual taking or appropriation of private property for public use. Once government action effectively deprives the owner of dominion, beneficial use, control, or economic value of the property, the Constitution requires payment of just compensation.
In Banco de Oro v. South Rich Acres, the Court concluded that the ordinance crossed the line from regulation into appropriation. The ordinance did not simply regulate traffic or impose land use restrictions. It effectively converted privately owned property into public property without compensation. The Court viewed the measure as a classic example of eminent domain disguised as police power.
The ruling sends an important warning to local government units and public agencies. Government cannot avoid the constitutional requirements of eminent domain by simply labeling an act as regulation or public welfare legislation. The nature of governmental action is determined not by its title, but by its actual effect on property rights.
This issue is not merely theoretical. It frequently surfaces in actual governance and land use discussions. In one discussion involving an LGU, a public official advocated the use of police power as a basis for utilizing private property for public purposes without compensation. The conversation highlighted how easily the distinction between police power and eminent domain can become blurred in practice, particularly when public infrastructure, access roads, easements, open spaces, or urban development objectives are involved.
This is precisely why the Banco de Oro ruling is highly instructive for LGU executives, planners, assessors, engineers, lawyers, and real estate practitioners alike.
The danger arises when governmental bodies attempt to justify what is effectively a taking under the language of regulation or public welfare. In practice, LGUs may invoke police power to justify road access, public use corridors, environmental restrictions, or land use controls without fully appreciating that certain measures may already constitute compensable taking under the Constitution.
The Supreme Court reminds us that courts will always look beyond labels and examine the actual effect of governmental action on property rights. A measure framed as zoning regulation, traffic management, environmental control, or public welfare legislation may still amount to eminent domain if it effectively converts private property into public use or substantially deprives the owner of beneficial ownership and economic utility.
For LGU executives, the case serves as a constitutional governance guidepost. Public purpose alone does not automatically validate uncompensated intrusion into private property rights. Constitutional safeguards remain applicable even when the intended objective is beneficial to the public.
For real estate practitioners, appraisers, consultants, and lawyers, the distinction is equally important in advising clients, evaluating government actions, assessing damages, and determining whether a governmental measure has crossed the line from regulation into compensable taking.
The case is especially relevant today as infrastructure expansion, urban redevelopment, environmental regulation, and public utility projects increasingly intersect with private property rights. The pressure to accelerate public projects often creates institutional temptation to blur constitutional boundaries in the name of efficiency or public necessity.
But the Constitution imposes limits.
The power of eminent domain remains one of the most intrusive powers of the State because it authorizes the compulsory taking of private property. For this reason, the constitutional guarantee of just compensation serves not merely as a procedural requirement, but as a safeguard against arbitrary deprivation of property.
Banco de Oro v. South Rich Acres reinforces a fundamental constitutional principle: police power cannot be used as a shortcut to acquire private property without compensation. Once regulation crosses the line into appropriation, the State must comply with the constitutional safeguards governing eminent domain.
For further reading, here is the link of the case.
Banco de Oro v. South Rich Acres
Real LexEcon 