G.R. No. 196412, July 19, 2017
LAND BANK OF THE PHILIPPINES, Petitioner, v. MIGUEL OMENGAN, Respondent.
D E C I S I O N
Petitioner Land Bank of the Philippines1 (LBP) challenges through this Petition for Review2 under Rule 45 the Decision3 dated January 6, 2011 and Resolution4 dated April 7, 2011 of the Court of Appeals (CA) in CA-G.R. SP No. 110387, which affirmed with modification the Decision5 dated January 6, 2009 of the Regional Trial Court (RTC) of Bulanao, Tabuk City, Kalinga, Branch 25, sitting as Special Agrarian Court (RTC-SAC).
In its assailed decision and resolution, the CA upheld the RTC-SAC's valuation of just compensation but reduced the interest thereon from twelve percent (12%) to six percent (6%) per annum.
For Unirrigated RicelandThe Claim Folder and Processing Form were prepared and on October 18, 2000, payment for the property was approved and DAR accordingly made an offer to respondent.9
Area = 6.001 has.
CNI = P36,020.83/ha.
MV = P22,086.63/ha.
ULV/ha. = (CNI X .90) + (MV X .10)
= (P36,020.83 X .90) + (P22,076.63 X .10)
= P32,418.74 + P2,208.66
LV = ULV/ha x area
= P34,627.40 x 6.0001 has.
For Idle Land
Area = 4.000 has.
MV = P1,469.64/ha.
ULV/ha. = MV x 2
= P1,469.64 X 2
LV = ULV/ha. x area
= P2,939.28 x 4.000 has.
WHEREFORE, premises considered, the valuation of the subject property by the LBP is hereby MODIFIED. Subject landholding's valuation should be increased to Php326,918.20 plus legal interests.However, on motion for reconsideration (MR), the PARAD in a Resolution17 dated September 12, 2005 reversed the Decision dated July 14, 2005 and instead adopted petitioner's valuation of Php 264,458.74.
Applying the formula for the 6 hectares:However, on the ground that the subject property is considered as one of Tabuk City's potential growth area for urban expansion, the RTC-SAC granted an additional valuation of Php 40,000 per ha or an additional MV of Php 400,000, for a total just compensation of Php 706,850 for the 10.001 has.P256,500.00 X 0.9 = P230,850.00Therefore, the land valuation is P266,850.00
+ P360,000.00 X 0.1 = P36,000.00
Applying the formula for the 4 hectares:P40,000.00 x 0.9 = P36,000.00The land valuation then is P40,000.00.24
+ P40,000.00 x 0.1 = P4,000.00
IN THE LIGHT OF THE FOREGOING PREMISES, the just compensation of the 10.001 hectares of agricultural land situated at Nambaran, Tabuk, Kalinga and embraced under Transfer Certificate of Title No. T-10172 issued in the registered name of Miguel Omengan is P706,850.00 plus legal interest of 12% from the date of compensable taking until full payment is made.Petitioner's MR26 was similarly denied by the RTC-SAC in its Resolution27 dated July 31, 2009. Undaunted, petitioner elevated the case to the CA arguing that the RTC-SAC failed to comply with the mandatory formula prescribed under Section 17 of Republic Act (R.A.) No. 665728 and DAR Administrative Order (A.O.) No. 5,29 Series of 1998.30 Petitioner also disputed the imposition of 12% interest in the absence of delay.31
WHEREFORE, based on the foregoing, the Petition for Review is GRANTED. The Decision, dated January 6, 2009, and Resolution dated July 31, 2009, issued by the Regional Trial Court of Bulanao, Tabuk City, Kalinga, Branch 25 in Agrarian Case No. 13 is AFFIRMED with modification reducing the interest rate from 12% to 6%.Petitioner's MR37 was similarly rebuked by the CA, in its Resolution38 dated April 7, 2011. Hence, resort to the instant petition.
[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 x x x:The above pronouncement is but a reflection of the Court's unwavering sentiment as enunciated in the seminal case of EPZA v. Dulay, et al.,49 that the determination of just compensation is, and remains, a judicial function.
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.48
In the recent cases of Land Bank of the Philippines v. Yatco Agricultural Enterprises, Land Bank of the Phlippines v. Peralta, and Deartment of Agrarian Reform v. Spouses Diosdado Sta. Romana and Resurreccion O. Ramos, the Court has made declarations as to the determination of just compensation.Emphatically, the Court En Bane held in the case of Ramon M. Alfonso v. LBP and Department of Agrarian Reform,52 and also in LBP, et al. v. Heirs of Lorenzo Tanada and Expedita Ebarle,53 that:
In Yatco, the Court stated that the determination of just compensation is a judicial function and the RTC, acting as SAC, has the original and exclusive power to determine just compensation. It was also emphasized therein that in the exercise of its function, the RTC must be guided by the valuation factors under Section 17 of RA 6657, translated into a basic formula embodied in DAR A.O. No.5. The factors under RA 6657 and the formula under DAR A.O. No. 5 serve as guarantees that the compensation arrived at would not be absurd, baseless, arbitrary or contradictory to the objectives of the agrarian reform laws. However, the Court clarified that the RTC may relax the application of the DAR formula, if warranted by the circumstances of the case and provided the RTC explains its deviation from the factors or formula above mentioned.
In Peralta, the Court confirmed the mandatory character of the guidelines under Section 17 of RA 6657 and restated that the valuation factors under RA 6657 had been translated by the DAR into a basic formula as outlined in DAR A.O. No. 5.
In Sta. Romana, it was held that the RIC is not strictly bound by the formula created by the DAR, if the situations before it do not warrant its application. The RTC cannot be arbitrarily restricted by the formula outlined by the DAR. While the DAR provides a formula, "it could not have been its intention to shackle the courts into applying the formula in every instance."
Summarizing the pronouncements in the above-cited cases, the rule is that the RTC must consider the guidelines set forth in Section 17 of RA 6657 and as translated into a formula embodied in DAR A.O. No.5. However, it may deviate from these factors/formula if the circumstances warrant or, as stated in Sta. Romana, "if the situations before it do not warrant its application." In such a case, the RTC, as held in Yatco, must clearly explain the reason for deviating from the aforesaid factors or formula.51 (Emphasis ours and citations omitted)
For clarity, we restate the body of rules as follows: The factors listed under Section 17 of RA 6657 and its resulting formulas provide a uniform framework or structure for the computation of just compensation which ensures that the amounts to be paid to affected landowners are not arbitrary, absurd or even contradictory to the objectives of agrarian reform. Until and unless declared invalid in a proper case, the DAR formulas partake of the nature of statutes, which under the 2009 amendment became law itself, and thus have in their favor the presumption of legality, such that courts shall consider, and not disregard, these formulas in the determination of just compensation for properties covered by the CARP. When faced with situations which do not warrant the formula's strict application, courts may, in the exercise of their judicial discretion, relax the formula's application to fit the factual situations before them, subject only to the condition that they clearly explain in their Decision their reasons (as borne by the evidence on record) for the deviation undertaken. It is thus entirely allowable for a court to allow a landowner's claim for an amount higher than what would otherwise have been offered (based on an application of the formula) for as long as there is evidence on record sufficient to support the award.54 (Emphasis in the original)It is therefore inaccurate to argue that the RTC-SAC is mandated to strictly follow the formula, when the RTC-SAC, in the exercise of an essentially judicial function and discretion, can deviate therefrom subject to the jurisprudential limitation that the factual situation calls for it and that the RTC-SAC clearly explains the reason for such deviation.55
Sec. 17. Determination of Just Compensation. - In determining just compensation, the cost of acquisition of the land, the current value of the like properties, its nature, actual use and income, the sworn valuation by the owner, the tax declarations, and the assessment made by government assessors shall be considered. The social and economic benefits contributed by the farmers and the farmworkers and by the Government to the property as well as the non-payment of taxes or loans secured from any government financing institution on the said land shall be considered as additional factors to determine its valuation.As translated into formula, the pertinent provisions of DAR A.O. No. 5-98 provides:
A. There shall be one basic formula for the valuation of lands covered by VOS or CA:Considering that no Comparable Sales (CS) was reported,56 the RTC-SAC ostensibly used the basic formula prescribed in paragraph A1 of DAR A.O. No. 5-98, i.e., LV = (CNI x 0.9) + (MV x 0.1).
LV = (CNI X 0.6) + (CS X 0.3) + (MV X 0.1)
LV= Land Value
CNI = Capitalized Net Income
CS = Comparable Sales
MV = Market Value per Tax Declaration
The above formula shall be used if all three factors are present, relevant, and applicable.
A1. When the CS factor is not present and CNI and MV are applicable, the formula shall be:
LV = (CNI X 0.9) + (MV X 0.1)
A2. When the CNI factor is not present, and CS and MV are applicable, the formula shall be:
LV = (CS X 0.9)+ (MV X 0.1)
A3. When both the CS and CNI are not present and only MV is applicable, the formula shall be:
LV = MV x 2
In no case shall the value of idle land using the formula MV x 2 exceed the lowest value of land within the same estate under consideration or within the same barangay or municipality (in that order) approved by LBP within one (1) year from receipt of claim folder. (Emphasis supplied)
AGP = Average Gross Production corresponding to the latest available 12 months' gross production immediately preceding the date of FI (field investigation)Petitioner argues that the RTC-SAC erred in computing the CNI as the Average Gross Production (AGP) was not based on the latest available 12 months' gross production immediately preceding the date of field investigation. Per petitioner's computation, the AGP of the six has of unirrigated riceland is 3,325 k only or 66.5 cavans.60 However, the basis of such figure was not shown by petitioner and was even disproved by respondent's testimony that the property produces 80 to 100 cavans per ha. The RTC-SAC's determination of the AGP to be 90 cavans or 4,500 k per year is thus reasonable.
SP = Selling Price (the average of the latest available 12 months selling prices prior to the date of receipt of the CF (claim folder) by LBP for processing, such prices to be secured from the Department of Agriculture (DA) and other appropriate regulatory bodies or, in their absence, from the Bureau of Agricultural Statistics. If possible, SP data shall be gathered for the barangay or municipality where the property is located. In the absence thereof, SP may be secured within the province or region.
CO = Cost of Operations
Whenever the cost of operations could not be obtained or verified, an assumed net income rate (NIR) of 20% shall be used. Landholdings planted to coconut which are productive at the time of FI shall continue to use the assumed NIR of 70 %. DAR and LBP shall continue to conduct joint industry studies to establish the applicable NIR for each crop covered under CARP.
0.12 = Capitalization rate59
(ULV) per ha of the unirrigated riceland should be:With respect to the remaining four has, the parties agree that the same is cogonal. While respondent testified that it is also planted with fruitbearing trees, bananas, cassava, and camote, he failed to establish the aggregate value of the crops produced. Thus, we cannot adopt the RTCSAC's valuation of the cogon land as Php 10,000 per ha for obvious lack of factual support. Moreover, the RTC-SAC could not have arrived at the CNI of the idle land (which it computed at Php 40,000) considering that the AGP and SP factors are not present.
ULV = [Php71,250 (.90)] + [Php60,000 (.10)]
= Php64,125 + Php6,000
LV = Php70,125(6.001)
ULV = Php10,000 x 2We also note that, in addition to the foregoing, the RTC-SAC granted an MV of Php 40,000 per ha for the entire area or an additional Php 400,000 to be paid as just compensation because it took into consideration the property's potential to be an area ideal for urban expansion. Such additional valuation cannot be sustained as the measure of the value of the property should be at the time when the loss resulted, i.e., as of the time of taking in March 2000. What is more, such additional valuation cannot be considered "just" for lack of reliable and actual data to support the same. Trial courts are reminded, time and again, to be circumspect in its evaluation of just compensation due the property owner, considering that eminent domain cases involve the expenditure of public funds.63
LV = Php20,000(4.000)
In other words, the just compensation due to the landowners amounts to an effective forbearance on the part of the state-a proper subject of interest computed from the time the property was taken until the full amount of just compensation is paid-in order to eradicate the issue of the constant variability of the value of the currency over time. In the Court's own words:In the instant case, the interest is to be imposed only on the balance of the final just compensation, i.e., the final just compensation (Php 500,820.125) less the amount of the initial valuation (Php 219,524.98) or Php 281,295.145. Since petitioner's initial valuation had been contested, and it has been subsequently determined that the expropriated property had been undervalued, an interest on the balance or the difference between the amount already paid and the final just compensation is proper.The Bulacan trial court, in its 1979 decision, was correct in imposing interest[s] on the zonal value of the property to be computed from the time petitioner instituted condemnation proceedings and "took" the property in September 1969. This allowance of interest on the amount found to be the value of the property as of the time of the taking computed, being an effective forbearance, at 12% per annum should help eliminate the issue of the constant fluctuation and inflation of the value of the currency over time x x x.65
1 A government financial institution organized and existing by virtue of Republic Act No. 3844 or the Agricultural Land Reform Code and is the financial intermediary for the Comprehensive Agrarian Reform Program.
2Rollo, pp. 9-49.
3 Penned by Associate Justice Antonio L. Villamor, concurred in by Associate Justices Jose C. Reyes, Jr. and Franchito N. Diamante; id. at 53-64.
4 Id. at 67-68.
5 Penned by Judge Marcelino K. Wacas; id. at 121-126.
6 Id. at 121, 173.
7 Id. at 224.
8 Id. at 15.
10 Id. at 16.
11 Id. at 174.
12 Issued by Adjudicator Marivic C. Casabar; id. at 174-183.
13 Id. at 182.
15 Id. at 182-183.
16 Id. at 183.
17 Id. at 167; computation not extant on records.
18 Id. at 168.
19 Id. at 124.
20 Id. at 123.
21 Id. at 124.
22 Id. at 125.
24 Id. at 126.
26 Id. at 131-147.
27 Id. at 127-130.
28 Otherwise known as the Comprehensive Agrarian Reform Law of 1998.
29 Revised Rules And Procedures Governing The Acquisition Of Agricultural Lands Subject Of Voluntary Offer To Sell And Compulsorily Acquisition Pursuant To Republic Act No. 6657.
30 Id. at 104.
31 Id. at 106.
32 Id. at 53-64.
33 As amended by DAR A.O. No. 5, Series of 1998.
34Rollo, p. 58.
35 Id. at 62-63.
36 Id. at 63.
37 Id. at 268-279.
38 Id. at 67-68.
39 Id. at 33.
40Article III. Bill of Rights
Section 9. Private property shall not be taken for public use without just compensation.
Article XII. National Economy and Patrimony
Section 18. The State may, in the interest of national welfare or defense, establish and operate vital industries and, upon payment of just compensation, transfer to public ownership utilities and other private enterprises to be operated by the Government.
Article XIII. Social Justice and Human Rights
Section 4. The State shall, by law, undertake an agrarian reform program founded on the right of farmers and regular farmworkers who are landless, to own directly or collectively the lands they till or, in the case of other farmworkers, to receive a just share of the fruits thereof. To this end, the State shall encourage and undertake the just distribution of all agricultural lands, subject to such priorities and reasonable retention limits as the Congress may prescribe, taking into account ecological, developmental, or equity considerations, and subject to the payment of just compensation. In determining retention limits, the State shall respect the right of small landowners. The State shall further provide incentives for voluntary land-sharing. (Emphasis supplied)
41National Power Corporation v. Spouses Zabala, G.R. No. 173520, January 30, 2013, citing Republic v. Rural Bank of Kabacan, Inc., G.R. No. 185124, January 25, 2012, 664 SCRA 233, 244; National Power Corporation v. Manubay Agro-Industrial Development Corporation, 480 Phil. 470, 479 (2004).
42LBP v. Montalvan, G.R. No. 190336, June 27, 2012, citing LBP v. Court of Appeals, 376 Phil. 252 (1999); and LBP v. Celada, 515 Phil. 467 (2006).
43 Section 57 of R.A, No. 6657 pertinently provides:Sec. 57. Special Jurisdiction. - The Special Agrarian Courts shall have original and exclusive jurisdiction over all petitions for the determination of just compensation to landowners, and the prosecution of all criminal offenses under this Act. The Rules of Court shall apply to all proceedings before the Special Agrarian Courts, unless modified by this Act.44LBP v. Yatco Agricultural Enterprises, G.R. No. 172551, January 15, 2014.
45 Id. See also LBP v. Sps. Banal, 478 Phil 701, 709-710 (2004); LBP v. Celada, 515 Phil 467, 477 (2006); LBP v. Lim, G.R. No. 171941, August 2, 2007, 529 SCRA 129, 134-136; LBP v. Luciano, G.R. No. 165428, November 25, 2009, 605 SCRA 426, 434-436; LBP v. Colarina, G.R. No. 176410, September 1, 2010, 629 SCRA 614, 624-632.
46 Supra note 40.
47 G.R. No. 175055, June 27, 2012, 675 SCRA 233.
49 G.R. No. L-59603, April 29, 1987.
50 G.R. No. 196707, June 17, 2015.
52 G.R. Nos. 181912 & 183347, November 29, 2016.
53 G.R. No. 170506, January 11, 2017.
55 In LBP v. Castro, G.R. No. 189125, August 28,2013, the Court found that the RTC-SAC erred because of, among others, the "unexplained disregard for the guide administrative formula, neglecting such factors as capitalized net income, comparable sales, and market value per tax declaration."
56See Field Investigation Report; rollo, p. 200.
57 Item II-B of DAR A.O. No. 5-98.
60 at 1 cavan = 50 k
61 Php 71,250 = (4,500 X Php 9.50) X .20 / .12
62Rollo, p. 174.
63Republic v. Asia Pacific Integrated Steel Corporation, G.R. No. 192100, March 12, 2014, 719 SCRA 50.
64Secretary of the Department of Public Works and Highways, et al. v. Spouses Tecson, G.R. No. 179334, April 21, 2015 (Resolution on Motion for Reconsideration).
66 The pertinent portion of which reads:
The Monetary Board, in its Resolution No. 796 dated 16 May 2013, approved the following revisions governing the rate of interest in the absence of stipulation in loan contracts, thereby amending Section 2 of Circular No. 905, Series of 1982:
Section 1. The rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed in judgments, in the absence of an express contract as to such rate of interest, shall be six percent (6%) per annum.
Section 2. In view of the above, Subsection X305.1 of the Manual of Regulations for Banks and Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial Institutions are hereby amended accordingly.
This Circular shall take effect on 1 July 2013.
67 CB Circular No. 905 which took effect on December 22, 1982, particularly Section 2 thereof states:
Sec. 2. The rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed in judgments, in the absence of express contract as to such rate of interest, shall continue to be twelve per cent (12%) per annum.
68Rollo, p. 44.