G.R. No. 183901, July 09, 2014 - DEPARTMENT OF AGRARIAN REFORM, Petitioner, v. SALUD GACIAS BERIÑA,1 CESAR GACIAS, NORMA GACIAS TANDOC,2 LYDIA LEANDER GACIAS, AND GREGORIO MEDEN GACIAS, Respondents.; G.R. NO. 183931 - LAND BANK OF THE PHILIPPINES, Petitioner, v. SALUD GACIAS BERIÑA, CESAR GACIAS, NORMA GACIAS TANDOC, LYDIA LEANDER GACIAS, AND GREGORIO MEDEN GACIAS, Respondents.
Assailed in these consolidated3
petitions for review on certiorari4
are the Decision5
dated March 28, 2008 and the Resolution6
dated July 25, 2008 rendered by the Court of Appeals (CA) in CA-G.R. CV No. 71533 which affirmed with modification the Decision7
dated November 6, 2000 of the Regional Trial Court of Sorsogon, Sorsogon, Branch 52 (RTC) in Civil Case No. 98-6521, fixing the just compensation for respondents’ 8-hectare (ha.) land at ?735,562.05 and ordering the Land Bank of the Philippines (LBP) to pay the said amount in the manner provided by law.The Facts
Respondents Salud G. Beriña (Salud), Cesar Gacias (Cesar), Norma G. Tandoc (Norma), Lydia Leander Gacias (Lydia), and Gregorio Meden Gacias (Meden) are among the eight (8) children of the late spouses Sabiniano and Margarita Gacias (Sps. Gacias),8
whose 12.6866 has.9
and 16.8080 has. of other agricultural lands,11
located in Barangays Carriedo and Buenavista, respectively, in Irosin, Sorsogon, were placed under the government’s Operation Land Transfer (OLT) Program,12
pursuant to Presidential Decree No. (PD) 27,13
otherwise known as the “Tenants Emancipation Decree,” as amended.
Records show that prior to the effectivity of PD 27 on October 21, 1972, Sps. Gacias executed individual deeds of sale in favor of their children (Gacias Heirs), namely, Alicia G. Barboño, Helen G. Tandoc, Teresita G. Paje, and respondents Salud, Cesar, Norma, and Lydia, and a 1980 deed of sale to respondent Meden, conveying portions of the aforesaid lands. The deeds of sale executed prior to October 21, 1972, however, were notarized in 1973, and registered only in 1979.14cralawred
The Gacias Heirs filed a petition for retention of the portions conveyed to them which was favorably granted by the Regional Director of the Department of Agrarian Reform (DAR), Region V, except for Meden’s portion.15
On appeal, however, the DAR Secretary declared that the said lands are within the coverage of the OLT Program under PD 27 and upheld the emancipation patents (EPs)/certificates of land transfer (CLTs) issued in the interim in favor of the farmers-beneficiaries thereon, namely, Julia Galan, Liberato Presdado, Jose Presdado,16
and Gualter Enano.17
The DAR Secretary ruled that the conveyances made by Sps. Gacias to their children were ineffectual,18
considering that: (a) the deeds of sale, while executed prior to October 21, 1972, were registered only in 1979;19
and (b) the tenants cultivating the subject landholdings still recognize the previous owner, Margarita Gacias, and not respondents, as the owner thereof,20
contrary to the requirements of DAR Memorandum dated May 7, 1982.21cralawred
It appears that the DAR had initially valued the 8-ha. portion of the aforesaid riceland (subject portion) at P77,000.0022
(DAR valuation), using the formula under Executive Order No. (EO) 22823
dated July 17, 1987, i.e.
, Land Value = Average Gross Product (AGP) x 2.5 x P35.00 x area
. Under this formula, the government support price (GSP) for one (1) cavan of 50 kilos of palay was pegged at P35.00, which is the GSP set on the date of the effectivity of PD 27 on October 21, 1972.
On November 18, 1998,24
respondents filed a Complaint25
for Determination of Just Compensation before the RTC, docketed as Civil Case No. 98-6521, averring that the initial DAR valuation was unconscionably low, considering that every ha. of riceland has an average produce of 120 sacks of palay every harvest season.26cralawred
In its answer, the DAR maintained that the subject portion had already been valued under PD 27 and EO 228, and, thus, prayed for the dismissal of the complaint.27
On the other hand, the LBP averred that respondents had no cause of action against it for the reason that the DAR had not forwarded any claim folder over the subject portion for processing and payment.28cralawredThe RTC Ruling
On November 6, 2000, the RTC rendered a Decision29
rejecting the DAR valuation and fixing the just compensation of the subject portion at P735,562.05, using the formula Land Value = (AGP x 2) x 2.5 x P35.00 x Has
The RTC pegged the AGP at 220 cavans/year31
and imposed interests at the rate of 6% per annum (p.a.) compounded from 1972.32
It pointed out that the determination of just compensation is a judicial prerogative and that the provisions of EO 228 are not binding upon the courts but, at best, serve as mere guiding principles or one of the factors in determining just compensation, and which may not substitute the court’s own judgment as to what amount should be awarded and how to arrive at such amount.33cralawred
The RTC computed the net amount due to respondents by determining the total land value of the subject 8 ha. land which amounted to P844,657.05, inclusive of 6% interest compounded annually from 1972 to 2000, deducting therefrom the rentals paid by the farmers-beneficiaries from 1972 to 1987 in the total amount of P109,095.00.34cralawred
Respondents, the DAR, and the LBP filed separate motions for reconsideration which were, however, denied in an Order35
dated February 28, 2001. In this relation, the RTC pointed out that the absence of claim folder is of no moment because the LBP “being the agency tasked with the responsibility of paying the landowners the just compensation for lands taken for agrarian purposes, x x x should have made sure that the proper claim folder is in their hands at the outset of the case.”36cralawred
Dissatisfied, the parties elevated the matter before the CA via an appeal, docketed as CA-G.R. CV No. 71533.The CA Ruling
In a Decision37
dated March 28, 2008, the CA affirmed the RTC Decision with the modification imposing legal interest at the rate of 12% p.a. on the compensation award upon its finality until full payment.
In upholding the AGP set by the RTC, the CA explained that the “normal crop year,” contemplated under PD 27, is the value assigned by the barangay multiplied by the two harvest-seasons per year in the locality of Irosin, Sorsogon.38
On the other hand, it sustained the imposition of interest on the total land value considering the delay in the payment of just compensation, but increased the same to the rate of 12% p.a. in line with prevailing jurisprudence.39cralawred
The motions for reconsideration filed by the DAR and the LBP were denied in a Resolution40
dated July 25, 2008, hence, the instant consolidated petitions. Subsequently, the DAR filed manifestations41
adopting the LBP’s petition in G.R. No. 183931 as its petition in G.R. No. 183901.The Issues Before the Court
The essential issues for the Court’s resolution are whether or not the CA committed reversible error in: (a
) directing the LBP to pay the amount of P735,562.05 as just compensation for the subject portion despite the absence of the land transfer claim/claim folder for processing and payment; (b
) affirming the RTC Decision doubling the AGP as a factor in the formula in computing the just compensation; and (c
) imposing legal interest at the rate of 12% p.a. on the compensation award from finality of the judgment until full payment.The Court’s Ruling
The consolidated petitions are meritorious.
Settled is the rule that when the agrarian reform process is still incomplete, as in this case where payment for the subject portion acquired under PD 27 has yet to be made, just compensation should be determined and the process be concluded under Republic Act No. (RA) 6657,42
otherwise known as “Comprehensive Agrarian Reform Law of 1988,”43
with PD 27 and EO 228 having mere suppletory effect. This means that PD 27 and EO 228 only apply when there are gaps
in RA 6657; where RA 6657 is sufficient, PD 27 and EO 228 are superseded.44cralawred
The procedure for the determination of just compensation under RA 6657, as summarized by this Court in LBP v. Sps. Banal
commences with the LBP determining the value of the lands under the land reform program. Using the LBP’s valuation, the DAR makes an offer to the landowner through a notice of coverage and acquisition pursuant to Section 16(a)46
of RA 6657. If the landowner accepts the offer, the LBP shall pay him the purchase price of the land after he executes and delivers a deed of transfer and surrenders the certificate of title in favor of the government. In case the landowner rejects the offer, the DAR adjudicator conducts summary administrative proceedings to determine the compensation for the land by requiring the landowner, the LBP, and other interested parties to submit evidence in this relation. A party who disagrees with the decision of the DAR adjudicator may bring the matter to the Regional Trial Court designated as a Special Agrarian Court (SAC) for final determination of just compensation.47cralawred
In the present case, the LBP avers that the DAR has not forwarded to it the corresponding claim folder which is purportedly a mandatory requirement in order that the payment for the acquired lands may be disbursed.48
Nonetheless, it cannot be denied that the subject portion had already been expropriated considering (a
) the DAR’s admission that it had already valued the same under PD 27 and EO 228,49
) the issuance of EPs and/or CLTs to some of the tenants-beneficiaries,50
thereby dispossessing the Gacias Heirs of their property without just compensation. Certainly, the Gacias Heirs’ entitlement to just compensation for the taking of their property cannot be disregarded by the mere absence of the claim folders asserted in this case, as otherwise, the Court would be abetting the perpetration of a grave injustice against them,51
occasioned by the undue delay and unjustified failure of the DAR to forward to the LBP the said folders even after the taking of the subject portion and the issuance of the EPs and/or CLTs to some of the tenants-beneficiaries.
It bears noting, however, that the portions conveyed by Sps. Gacias to their children were previously declared by the DAR Secretary to be within the coverage of the OLT Program under PD 27, holding that the said conveyances were ineffectual for failure to comply with the requisites of DAR Memorandum dated May 7, 1982.52
Corollarily, the subject portion was placed under the OLT Program under the name of the original owner, and the RTC, in an Order dated July 22, 2000, directed the DAR Provincial Agrarian Reform Office of Sorsogon, Sorsogon to forward the claim folder of Sabiniano Gacias
to the LBP.53cralawred
While the LBP is charged54
with the initial responsibility of determining the value of lands placed under the land reform program and the compensation to be paid for their taking,55
guided by the records/ documents contained in the claim folders,56
it must be emphasized that its valuation is considered only as an initial determination, which is not conclusive. Verily, it is the Regional Trial Court, sitting as a Special Agrarian Court, that should make the final determination of just compensation57
and which has the final say on what the amount of just compensation will be58
pursuant to the well-settled rule that the determination of just compensation is a judicial function.59
This rule notwithstanding, a review of the records, nonetheless, impels the Court to order the remand of the case
to the RTC considering the failure of both the RTC and the CA to consider the factors enumerated under Section 17 of RA 6657, as amended, in determining the just compensation for the subject portion.
Just compensation is defined as the full and fair equivalent of the property taken from its owner by the expropriator.60
For purposes of determining just compensation, the fair market value of an expropriated property is determined by its character
and its price
at the time of taking.61
In addition, the factors enumerated under Section 17 of RA 6657, as amended,62i.e
) the acquisition cost of the land, (b) the current value of like properties, (c
) the nature and actual use of the property and the income therefrom, (d
) the owner’s sworn valuation, (e
) the tax declarations, (f
) the assessment made by government assessors, (g
) the social and economic benefits contributed by the farmers and the farmworkers, and by the government to the property, and (h
) the non-payment of taxes or loans secured from any government financing institution on the said land, if any, must be equally considered.
The Court has gone over the records and observed that none of the aforementioned factors were even considered and found inapplicable by the RTC and the CA. As such, the Court is led to conclude that the valuation arrived at was not in accordance with the factors enumerated under Section 17 of RA 6657, as amended, thus, necessitating the remand as aforementioned. To this end, the RTC is hereby directed to observe the following guidelines in the remand of the case:1. Compensation must be valued at the time of taking
, or the time when the landowner was deprived of the use and benefit of his property, such as when title is transferred in the name of the Republic of the Philippines.63
Hence, the evidence to be presented by the parties before the trial court for the valuation of the subject portion must be based on the values prevalent at such time of taking for like agricultural lands.64cralawred2. The evidence must conform with Section 17 of RA 6657, as amended, prior to its amendment by RA 9700
. It bears pointing out that while Congress passed RA 9700 on July 1, 2009, further
amending certain provisions of RA 6657, as amended, among them, Section 17, and declaring “(t)hat all previously acquired lands wherein valuation is subject to challenge by landowners shall be completed and finally resolved pursuant to Section 17 of [RA 6657], as amended,”65
the law should not be retroactively applied to pending claims/cases.
With this in mind, the Court, cognizant of the fact that the instant consolidated petitions for review on certiorari
were filed in August 2008, or long before the passage of RA 9700, finds that Section 17 of RA 6657, as amended, prior to its further amendment by RA No. 9700, should control the challenged valuation
.66cralawred3. The Regional Trial Court may impose interest on the just compensation as may be warranted by the circumstances of the case and based on prevailing jurisprudence.67
In previous cases, the Court has allowed the grant of legal interest in expropriation cases where there is delay in the payment since the just compensation due to the landowners was deemed to be an effective forbearance on the part of the State.68
Legal interest shall be pegged at the rate of 12% p.a. from the time of taking until June 30, 2013 only. Thereafter, or beginning July 1, 2013, until fully paid, the just compensation due the landowners shall earn interest at the new legal rate of 6% p.a. in line with the amendment introduced by BSP-MB Circular No. 799,69
series of 2013.70cralawred4.
The Regional Trial Court is reminded, however, that while it should take into account the different formula created by the DAR in arriving at the just compensation for the subject portion, it is not strictly bound thereto if the situations before it do not warrant their application
As held in LBP v. Heirs of Maximo Puyat
[T]he determination of just compensation is a judicial function; hence, courts cannot be unduly restricted in their determination thereof. To do so would deprive the courts of their judicial prerogatives and reduce them to the bureaucratic function of inputting data and arriving at the valuation. While the courts should be mindful of the different formulae created by the DAR in arriving at just compensation, they are not strictly bound to adhere thereto if the situations before them do not warrant it. Apo Fruits Corporation v. Court of Appeals thoroughly discusses this issue, to wit:ChanRoblesVirtualawlibraryWHEREFORE,
“x x x [T]he basic formula and its alternatives–administratively determined (as it is not found in Republic Act No. 6657, but merely set forth in DAR AO No. 5, Series of 1998)–although referred to and even applied by the courts in certain instances, does not and cannot strictly bind the courts. To insist that the formula must be applied with utmost rigidity whereby the valuation is drawn following a strict mathematical computation goes beyond the intent and spirit of the law. The suggested interpretation is strained and would render the law inutile. Statutory construction should not kill but give life to the law. As we have established in earlier jurisprudence, the valuation of property in eminent domain is essentially a judicial function which is vested in the regional trial court acting as a SAC, and not in administrative agencies. The SAC, therefore, must still be able to reasonably exercise its judicial discretion in the evaluation of the factors for just compensation, which cannot be arbitrarily restricted by a formula dictated by the DAR, an administrative agency. Surely, DAR AO No. 5 did not intend to straightjacket the hands of the court in the computation of the land valuation. While it provides a formula, it could not have been its intention to shackle the courts into applying the formula in every instance. The court shall apply the formula after an evaluation of the three factors, or it may proceed to make its own computation based on the extended list in Section 17 of Republic Act No. 6657, which includes other factors[.] x x x.”72
the consolidated petitions are GRANTED
. The Decision dated March 28, 2008 and the Resolution dated July 25, 2008 rendered by the Court of Appeals in CA-G.R. CV No. 71533 upholding the valuation of the 8-hectare portion of the riceland made by the Regional Trial Court of Sorsogon, Sorsogon, Branch 52 which did not consider the factors enumerated under Section 17 of Republic Act No. 6657, as amended, are hereby REVERSED
and SET ASIDE
. Civil Case No. 98-6521 is thus REMANDED to the said trial court for reception of evidence on the issue of just compensation in accordance with the guidelines set in this Decision. It is further directed to conduct the proceedings in said case with reasonable dispatch and to submit to the Court a report on its findings and recommended conclusions within sixty (60) days from notice of this Decision.SO ORDERED.Carpio, (Chairperson), Brion, Del Castillo,
and Perez, JJ.,
1 “Berina” in some parts of the records.
2 “Tandco” in some parts of the records.
3 See Resolution dated March 18, 2009; rollo (G.R. No. 183931), pp. 166-167.
4 Petition for Review on Certiorari of LBP (Rollo [G.R. No. 183931], pp. 15-44); See DAR’s Manifestation dated September 16, 2008 and December 12, 2008 (Rollo [G.R. No. 183901], pp. 8-10 and 18-20, respectively).
5Rollo (G.R. No. 183931), pp. 47-56. Penned by Associate Justice Apolinario D. Bruselas, Jr., with Associate Justices Rebecca De Guia-Salvador and Vicente S. E. Veloso, concurring.
6 Id. at 58.
7 Id. at 102-106. Penned by Judge Honesto A. Villamor.
8 Id. at 48.
9 Id. at 79.
10 Covered by five (5) Original Certificates of Title Nos. 16325, 14237, 18325, 18256, and 18374; id. at 20. See also id. at 104.
11 Id. at 79.
12 Id. at 48.
13 Entitled “DECREEING THE EMANCIPATION OF TENANTS FROM THE BONDAGE OF THE SOIL, TRANSFERRING TO THEM THE OWNERSHIP OF THE LAND THEY TILL AND PROVIDING THE INSTRUMENTS AND MECHANISM THEREFOR.”
14 See rollo (G.R. No. 183931), pp. 81-83.
15 Id. at 80.
16 Id. at 84. Julia Galkan, Liberato Presado and Jose Presado in some parts of the recordS; id. at 102.
17 Id. at 84.
18 Id. at 83.
19 Id. at 82.
20 See id. at 83-84.
21 DAR Memorandum dated May 7, 1982 pertinently provides:ChanRoblesVirtualawlibrary
With respect to transfers of ownership of lands covered by P.D. No. 27 executed prior to October 21, 1972, you shall be guided by the following:
Transfers of ownership of lands covered by a Torrens Certificate of Title duly executed prior to October 21, 1972 but not registered with the Register of Deeds concerned before said date in accordance with the Land Registration Act (Act No. 496) shall not be considered a valid transfer of ownership insofar as the tenant-farmers are concerned and therefore the land shall be placed under Operation Land Transfer.
x x x x
In order that the foregoing transfers of ownership mentioned in the preceding two paragraphs may be binding upon the tenants, such tenants should have knowledge of such transfers/conveyance prior to October 21, 1972, have recognized the persons of the new owners, and have been paying rentals/amortizations to such new owners. (Italics and underscoring supplied)
22Rollo (G.R. No. 183931), p. 127.
23 Entitled “DECLARING FULL LAND OWNERSHIP TO QUALIFIED FARMER BENEFICIARIES COVERED BY PRESIDENTIAL DECREE NO. 27: DETERMINING THE VALUE OF REMAINING UNVALUED RICE AND CORN LANDS SUBJECT TO P.D. NO. 27; AND PROVIDING FOR THE MANNER OF PAYMENT BY THE FARMER BENEFICIARY AND MODE OF COMPENSATION TO THE LANDOWNER.”
24Rollo (G.R. No. 183931), p. 20.
25 Id. at 85-87.
26 Id. at 86.
27 Id. at 20.
28 Id. at 21.
29 Id. at 102-106.
30 Id. at 104.
32 Id. at 105.
34 Id. at 105-106.
35 Id. at 111-114.
36 Id. at 113.
37 Id. at 47-56.
38 Id. at 52.
39 Id. at 53.
40 Id. at 58.
41 Dated September 16, 2008 and December 12, 2008 (Rollo [G.R. No. 189301], pp. 8-10 and 18-20, respectively).
42LBP v. Santiago, Jr., G.R. No. 182209, October 3, 2012, 682 SCRA 264, 277.
43 Entitled “AN ACT INSTITUTING COMPREHENSIVE AGRARIAN REFORM PROGRAM TO PROMOTE SOCIAL JUSTICE AND INDUSTRIALIZATION, PROVIDING THE MECHANISM FOR ITS IMPLEMENTATION, AND FOR OTHER PURPOSES.”
44 See LBP v. Heirs of Maximo Puyat, G.R. No. 175055, June 27, 2012, 675 SCRA 233, 243.
45 478 Phil. 700 (2004).
46 Section 16. Procedure for Acquisition of Private Lands. — For purposes of acquisition of private lands, the following procedures shall be followed:ChanRoblesVirtualawlibrary
(a) After having identified the land, the landowners and the beneficiaries, the DAR shall send its notice to acquire the land to the owners thereof, by personal delivery or registered mail, and post the same in a conspicuous place in the municipal building and barangay hall of the place where the property is located. Said notice shall contain the offer of the DAR to pay a corresponding value in accordance with the valuation set forth in Sections 17, 18, and other pertinent provisions hereof.47LBP v. Sps. Banal, supra note 45, at 708-709.
48Rollo (G.R. No. 183931), pp. 26-27.
49 Id. at 20.
50 Id. at 84.
51 See LBP v. Spouses Chico, 600 Phil. 272, 286-287 (2009).
52 See rollo (G.R. No. 183931), pp. 83-84. In Vales v. Galinato (G.R. No. 180134, March 5, 2014), the Court has summarized the requisite under the said Memorandum in this wise:ChanRoblesVirtualawlibrary
Tersely put, the May 7, 1982 DAR Memorandum provides that tenants should (a) have actual knowledge of unregistered transfers of ownership of lands covered by Torrens Certificate of Titles prior to October 21, 1972, (b) have recognized the persons of the new owners, and (c) have been paying rentals/amortization to such new owners in order to validate the transfer and bind the tenants to the same.53Rollo (G.R. No. 183931), p. 29. The said RTC Order, however, was not appended to either of the petitions.
54 Under EO 405, entitled “VESTING IN THE LAND BANK OF THE PHILIPPINES THE PRIMARY RESPONSIBILITY TO DETERMINE THE LAND VALUATION AND COMPENSATION FOR ALL LANDS COVERED UNDER REPUBLIC ACT NO. 6657, KNOWN AS THE COMPREHENSIVE AGRARIAN REFORM LAW OF 1988.” Issued by former President Corazon C. Aquino on June 14, 1990.
55 Section 1 of EO 405 provides:ChanRoblesVirtualawlibrary
Section 1. The Land Bank of the Philippines shall be primarily responsible for the determination of the land valuation and compensation for all private lands suitable for agriculture under either the Voluntary Offer to Sell (VOS) or Compulsory Acquisition (CA) arrangement as governed by Republic Act No. 6657. The Department of Agrarian Reform shall make use of the determination of the land valuation and compensation by the Land Bank of the Philippines, in the performance of its functions.56 See Operating Procedures under DAR Administrative Order No. 02-96 dated August 6, 1996, re: REVISED RULES AND PROCEDURES GOVERNING THE ACQUISITION OF AGRICULTURAL LANDS SUBJECT OF VOLUNTARY OFFER TO SELL AND COMPULSORY ACQUISITION PURSUANT TO REPUBLIC ACT NO. 6657.
x x x x
57 See LBP v. Heir of Trinidad S. Vda. de Arieta, G.R. No. 161834, August 11, 2010, 628 SCRA 43, 66.
58LBP v. Escandor, G.R. No. 171685, October 11, 2010, 632 SCRA 504, 512.
59 See LBP v. Dumlao, 592 Phil. 486, 504 (2008).
60LBP v. Orilla, 578 Phil. 663, 676 (2008).
61 LBP v. Livioco, G.R. No. 170685, September 22, 2010, 631 SCRA 86, 100.
62 See LBP v. Santiago, Jr., supra note 42, at 275-276.
63LBP v. Livioco, supra note 61, at 112-113.
64 See id. at 114.
65 See Section 5 of RA 9700 which further amended Section 7 of RA 6657, as amended on the “Priorities” in the acquisition and distribution of agricultural lands.
66 See citation in LBP v. Livioco, supra note 61, at 107-108.
67 Id. at 116.
68 See LBP v. Santiago, Jr., supra note 42, at 282-283.
69 Rate of interest in the absence of stipulation; dated June 21, 2013.
70 See Nacar v. Gallery Frames, G.R. No. 189871, August 13, 2013, 703 SCRA 439, 454-456.
71LBP v. Heirs of Maximo Puyat, supra note 44, at 250.
72 Id. at 250-251; citations omitted.