Facts:                        

The Municipality of Naga, by a resolution, closed a road which ran through the public market and Abella’s property and used the closed thoroughfare to expand the market. Constructions were made along the sidewalk of Abella's property and abutting to said property, facing P. Prieto Street, and extending out in the middle of the same street, hence depriving Abella's property of access to said street. Abella sought damages from the CFI of Camarines Sur, which ruled in her favor by ordering the municipality to pay P300 pesos for damages. Aggrieved, the municipality appealed to the SC. It contended it is not liable for damages as it acted and exercised its police power to preserve the peace and good order of the community and promote the general welfare."
  
Issue: 

Whether or not the municipality is liable for damages considering that it merely exercised its police power to preserve peace and good order of the community and promote general welfare. 

Held:

Yes. The municipality was not charged with any unlawful act, or with invading Abella’s property rights, it was not found guilty of any such acts. What is in issue in this case is the liability for damages. Sec. 2246 of the Revised Administrative Code provides: “No municipal road, street, etc. or any part thereof shall be closed without indemnifying any person.” The stipulation of facts admits that Abella was economically damaged and adversely affected by the conversion of P. Prieto Street into a market. Hence, the municipality must be held liable for damages. (Abella vs Municipality of Naga, G.R. No. L-3738, November 20, 1951)