THIRD DIVISION
G.R. No. 187423, February 28, 2018
LANDBANK OF THE PHILIPPINES, Petitioner, v. EDNA MAYO ALCANTARA AND HEIRS OF CRISTY MAYO ALCANTARA, Respondents.
R E S O L U T I O N
MARTIRES, J.:
Petitioner Land Bank of the Philippines (LBP) assails,1 by way of a petition for review by certiorari2 the Decision3 dated 31 October 2008 and the Resolution4 dated 8 April 2009, of the Court of Appeals (CA) in CA-G.R. SP No. 99852, whereby the appellate court affirmed with modification the Decision5 dated 3 April 2007, and the Order6 dated 4 July 2007, of the Regional Trial Court of Lucena City (RTC), sitting as Special Agrarian Court (SAC) in Civil Case No. 99-134.
The assailed ruling involves the determination of just compensation for a piece of agricultural land acquired by the government in 1998 for the Comprehensive Agrarian Reform Program (CARP) under Republic Act (R.A.) No. 6657.7 The SAC determined that just compensation for the land was P2,267,620.00, a valuation based on its fair market value. The CA sustained this determination. LBP insisted before the CA, as it insists before this Court, that the valuation should be based on the basic formula set by the Department of Agrarian Reform (DAR) in its pertinent administrative orders; hence, just compensation for respondents' land should be P1,210,252.96.
We required8 the parties to file their respective comment and reply. They complied.9
The average number of coconut trees is 120 trees per hectare intercropped with bananas at 400 hills per hectare. The average annual production per hectare of the subject property is: palay (40 cav.), cocos (12,000 nuts) and bananas (36,000 pcs) and the net income per hectare is: palay (P12,000.00), cocos (P12,000.00) and bananas (P10,800.00). The fifth page of the same report gives the unit values per SUMV (schedule of unit market value): cocal with banana P26,250.00 (3rd class), unirrigated Riceland P24,500.00 (1st class) and banana land P26,250.00 (3rd class).31
Considering the evidence in this case, the Court finds that the computation of the Land Bank based on the production data or income approach of the coconut land of [respondents] would not result in just compensation for the landowner, since, as the PCA Conservation Officer observed, there were many trees the age of which was from 70 to 100 years old, and were therefore senile and unproductive but were in fact productive as coco lumber (TSN of 17 March 2005, p. 5). Verily, the income approach will not result in just compensation for the property owner, since the trees are no longer fruit-bearing but can command a higher price for other purposes. As a matter of fact, as the Municipal assessor pointed out on the witness stand, the property has been converted into a subdivision, and the subdivision lots are now sold at P30 to P40 per square meter. By simple mathematical computation, this would total P300,000 to P400,000 per hectare ASIDE from income derived from the sale of the coconut trunks as coco lumber.
x x x x
The Government cannot insist on adopting a uniform policy of production income in computing the remuneration for property under coverage of the CARP. To do so in this case will be anomalous and will result in a definite disadvantage to the landowner and forfeit his right to obtain for his property just compensation that is "substantial, and ample", in the words of the Supreme Court. The fact that the property is now a subdivision shows that the income approach is no longer relevant, because the land, which is no longer productive has in fact increased its value three hundredfold, when converted to other uses.
There is evidence in this case that in Brgy. Tamisian where [respondents'] property is located [at] Barangay Kapasiyahan Blg. 4 places the price of coconut land at P100,000.00 per hectare including improvements. If we multiply the 22.6762 hectares of plaintiffs by P100,000.00 per hectare we arrive at the amount of P2.2676 million.
WHEREFORE, in view of the foregoing considerations, the valuation of [respondents'] property by the Land Bank in the amount of P1,210,252.96 based on the income approach is hereby set aside and valuation therefor based on the fair market value, is fixed at P2,267,600.00 for the 22.6762 hectares as the just compensation for [respondents'] property. The amount shall earn interest reckoned from the notice of land valuation and acquisition on February 9, 1998.33
Before the [c]ourt is [d]efendant Land Bank's motion for reconsideration of this [c]ourt's decision finding just compensation for [respondents'] property in the amount of P2,267,600.00 from Land Bank's finding of P1,210,252.96, on the main contention that the Decision does not conform with Administrative Order No. 5, series of 1998 of the DAR, nor Sec. 17 of R.A. 6657.
The formula under DAR A.O. No. 5, series of 1998 states:
LV = (CNI x 0.60) + (CS x 0.30) + (MV x 0.10)
Where:
LV = Land Value CNI = Capitalized Net Income CS = Comparable Sales MV = Market Value per Tax Declaration
The above formula shall be used if all the three factors are present, relevant and applicable.
The [c]ourt finds however that the land subject of this case is no longer productive, as the trees are over 100 years old and are more productive if utilized as coconut lumber that as a matter of fact the property at present has been converted or part thereof converted into a subdivision.
The [c]ourt finds therefore, that gauged by the above formula, the CNI (capitalized net income) and comparable sales (CS) are not present, and therefore, the formula cannot be considered relevant nor applicable.
On the other hand, Sec. 17 of R.A 6657 provides as follows:Sec. 17. Determination of Just Compensation. In determining just compensation, the cost of acquisition of the land, the current value of like properties, its nature, actual use and income, the sworn valuation by the owner, the tax declarations, and assessments made by the government assessors, should 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.
Kapasiyahan Blg. 4 of Barangay Tamisian closely approximates the requirement of "current value of like properties" specified above, testified to by Nelia Cortez, Municipal Assessor of Tiaong, Quezon, for no less than 21 years.
The [c]ourt finds her testimony forthright and unbiased and finds that she has a working knowledge of the duties and functions of her office as she cites the revisions of tax declarations and their specific dates. Her testimony, however, that the price per square meter of the property now a subdivision is now P20 to P30 was not followed by the [c]ourt because a) there is no evidence as to how big a portion of the 22 hectares has been converted into such a residential subdivision, and b) the compensation should be reckoned indeed at the time of taking and not at the time of its enhancement.
The land was taken at the time of coverage while it was agricultural land. On the estimate of the number of coconut trees found by the [c]ourt, the [c]ourt took particular notice that it was Land Bank's evidence (Exh. 4) that the average number of coconut trees per hectare is 150 and not only 120.
The [c]ourt takes judicial notice of the fact that at 8 meters distance between the trees, a hectare may be planted to an average of 200 coconut trees.
Kapasiyahan Blg. 4 of the Barangay Tamisian submitted to the Municipal Assessor of Tiaong, Quezon, is a more accurate estimation of the current value of property in Brgy. Tamisian regardless of the age of the trees as the valuation was culled from the different landowners and barangay captains who have firsthand knowledge of the situation in their barangays.
A.O. No. 5 Series of 1998 itself recognizes in its prefatory statement that just compensation is mandated by the Constitution (Art. XIII, par. 3 no. 4) that both Proclamation No. 131 and R.A 6657 provides that the principle in Agrarian Reform is "a more equitable distribution and ownership of land, with due regard to the rights of landowners to just compensation" that under Supreme Court jurisprudence, just compensation is the fair market value of the land or the price at which a buyer will pay without coercion and a seller will accept without compulsion.
The Administrative Order admits that valuation is "not an exact science but an exercise fraught with inexact estimates. What is important, it emphasizes, is that the land value approximates as closely as possible, what is broadly considered to be just."
The [c]ourt finds in this case, that the blind application of the formula under A.O. 5, series of 1998 will not result in just compensation for the landowner. At hindsight, it will even encourage the cutting of the trees sans government supervision, by landowners and farmworkers alike. Just Compensation, as stressed in the case of Association of Small Landowners vs. Sec. of Agrarian Reform (175 SCRA 343) "is the full and fair equivalent of the property taken from is owner... the equivalent to be rendered for the property shall be real, substantial, full, ample."
The motion for reconsideration is therefore DENIED as it veers away from the very intent of Sec. 17 of R.A. 6657 and considering that the factors set down by Administrative Order No. 5, Series of 1998 are no longer obtaining in view of the conditions of the property at the time of taking.35
WHEREFORE, the assailed dispositions are AFFIRMED with MODIFICATION. The award of twelve percent (12%) interest per annum shall only be imposed on the deficiency or the difference between the amount of the just compensation assigned by the Regional Trial Court, Br. 56 of Lucena City, Quezon, in its April 3, 2007 decision, and the amount already paid to the Private Respondents, computed from April 29, 1998 until the amount due is fully paid. No costs.37
- Whether or not the valuation factors under Section 17 of RA 6657 and the legal formula provided for under DAR A.O. No. 6, series of 1992, as amended by DAR A.O. No. 11, series of 1994, are MANDATORY insofar as lands acquired under R.A. No. 6657 are concerned; and
- Whether or not interest on the compensation can still be validly imposed when prompt payment had already been made.[39
7.05. The aforesaid administrative orders, which have the force and effect of law, were observed by LBP in computing the value of the subject property using the following formula:
LV = (CNI X 0.9) + (CS X 0.3) + (MV X 0.1)
LV=Land ValueCNI=Capitalized Net IncomeCS=Comparable SalesMV=Market Value per Tax Declaration
The above formula shall be used if all of the three factors are present, relevant and applicable.
A.1 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)
A.2 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)
A.3 When both CS and CNI are not present, and only MV is applicable, the formula shall be:
LV = MV x 2
7.06. Following the above formula, the total value of the subject property amounted to P1,210,252.96, computed as follows:
For Cocal/Banana Land Area = 21.3687 has. CNI = P58,401.71/ha. MV = P24,208.80/ha. ULV/ha = (CNI x 0/90) + (MV x 0.10) = (P58,401.71 x 0.90) + (P24,208.80 x 0.10) = P52,561.54 + P2,420.88 = P54,982.42/ha. LV = ULV/ ha. x area = P54,982.42 x 21.3687 has. = P1,174,902.84 For Banana Land Area = 1.0075 has CNI = P13,495.62/ha. MV = P24,208.80/ha. ULV/ha = (CNI x 0.90) + (MV x 0.10) = (P13,495.62 x 0.90) + (P24,208.80 x 0.10) = P12,146.06 + P2,420.88 = P14,566.94/ha. LV = ULV/ha. x area = P14,566.94 x 1.0075 has. = P14,676.19 For Unirrigated Riceland Area = 0.3000 has. CNI = P73,489.58/ ha. MV = P22,594.88/ ha. ULV/ha = (CNI x 0.90) + (MV x 0.10) = (P73,489.58 x 0.90) + (P22,594.88 x 0.10) = P66,140.62 x P2,259.49 P68,913.11/ha LV = ULV/ ha. x area = P68,913.11 x 0.3000 has. = P20,673.93 Summary of Computation: Cocal/Banana Land = P1,174,902.84 Banana Land = P14,676.19 Unirritaged Riceland = P20,673.93 TOTAL = P1,210,252.96[41 (emphasis in the original)
7.23. The amount that was deposited by LBP in the name of respondents (representing the compensation that was rejected) already earned interest based on the nature of the deposit: ((a) the cash portion earned interest at the highest prevailing rate from the date of deposit or booking pursuant to existing DAR order and LBP policies; and (b) the bond portion which earned interest aligned with 91-day treasury bill rates from the date of the DAR order to deposit pursuant to Sec. 18 (4) (a) of RA 6657. Thus:Sec. 18. Valuation and Mode of Compensation. x x x7.24. Outside of the legislated interest on LBP bonds and the normal banking interest rates on savings for cash deposit, there is no obligation on the part of the LBP or the Government to pay interest. In other words, the interest earning for the deposited compensation is clearly defined by law, thus, there is no need to impose additional interest. "The interest earnings accruing on the deposit account of landowners would suffice to compensate them pending payment of just compensation."49 (emphasis, italics and underlining in the original)
(4) LBP bonds, which shall have the following features:
a) Market interest rates aligned with 91-day treasury bill rates. Ten percent (10%) of the face value of the bonds shall mature every year from the date of issuance until the tenth (10th) year: Provided, That should the landowner choose to forego the cash portion, whether in full or in part, he shall be paid correspondingly in LBP bonds. "
First, in determining just compensation, courts are obligated to apply both the compensation valuation factors enumerated by the Congress under Section 17 of R.A. No. 6657 and the basic formula laid down by the DAR. x x x [.]
x x x x
Second, the formula, being an administrative regulation issued by the DAR pursuant to its rule-making and subordinate legislation power under R.A. No. 6657, has the force and effect of law. Unless declared invalid in a case where its validity is directly put in issue, courts must consider their use and application. x x x [.]
x x x x
Third, courts, in the exercise of their judicial discretion, may relax the application of the formula to fit the peculiar circumstances of a case. They must, however, clearly explain the reason for any deviation; otherwise, they will be considered in grave abuse of discretion. x x x [.]
x x x x
When acting within the parameters set by the law itself, the RTC-SACs, however, are not strictly bound to apply the DAR formula to its minute detail, particularly when faced with situations that do not warrant the formula's strict application; they may, in the exercise of their discretion, relax the formula's application to fit the factual situations before them. They must, however, clearly explain the reason for any deviation from the factors and formula that the law and the rules have provided.
The situation where a deviation is made in the exercise of judicial discretion should at all times be distinguished from a situation where there is utter and blatant disregard of the factors spelled out by law and by the implementing rules. For in [the latter case], the RTC-SAC's action already amounts to grave abuse of discretion for having been taken outside of the contemplation of the law.56
The RTC's computation being different from the [LBP's] does not make the same erroneous. It is explicit in DAR AO No. 6 that land valuation is not an exact science but an exercise fraught with inexact estimates requiring integrity, conscientious and prudence on the part of those responsible for it. The determination of just compensation cannot simply be arrived at by strict reliance on the formula laid down in the administrative orders. The formula used by [LBP] as basis for the computation serves only as a guideline and that the ultimate determination of just compensation must be made by the courts. Otherwise, to adhere to the formula mechanically would be to abdicate a duty placed in the courts of determining the question of just compensation. 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.58 x x x
Exhibits Description Purpose x x x x "3" Average Coconut Production
(wholenut) Offered for the purpose of showing that PCA data on production and farmgate prices were used in the valuation of LOs property. "4'" Average Coconut Production
(copra terms ) "5" Farmgate Prices of wholenuts; all 3 are certified by the Acting Provincial Coconut Development Manager "6" Certification signed by Municipal Agriculturist Pedro R. Gayeta on monthly production of different crops. Offered for the purpose of showing that Dept. of Agriculture data were used in the valuation of other improvements found on LOs property. "7" Certification of same official on monthly ave. farmgate price for different crops. "8'" General Revision 1997 data from the Provincial Assessor of Quezon signed by Assistant Provincial Assessor Isagani C. Atienza. Offered to prove that assessors data were used in the valuation of plaintiff LOs property and improvements. "9" Schedule of Market Values classified into different crops, productivity and location adjustment from the Provincial Assessor's Office. Offered to prove that Land Bank used data from concerned government agencies as called for under RA 6657, in land valuation. x x x x
Endnotes:
1Rollo, pp. 14-48.
2 Under Rule 45 of the Rules of Court.
3Rollo, pp. 57-70; penned by Associate Justice Normandie B. Pizarro, and concurred in by Associate Justices Edgardo P. Cruz and Fernanda Lampas Peralta.
4 Id. at 71-72.
5Rollo, pp. 134-142; penned by Judge Norma Chionglo-Sia.
6 Id. at 143-145.
7 Also known as the Comprehensive Agrarian Reform Law.
8Rollo, p. 232.
9 Id. at 250-263, Comment; Id. at 274-281, Reply.
10 Id. at 134; the Special Agrarian Court in its Decision refers to them as "Edna Alcantara Mayo" and "Cristy Alcantara Mayo."
11 Id. at 58; in TCT No. T-211445, the location of the agricultural land is also named as Barrio Quipot. Id. at 134.
12 Id. at 58.
13 Id. at 135.
14 Id. at 58 and 189.
15 Id. at 173.
16 Id. at 167; docketed as DARAB Case No. V-0408-031-98 and titled "In the Matter of Land Valuation of Agricultural Land Under Compulsory Acquisition owned by Christie & Edna A. Mayo with Title No. T-211445 Located at Tamisian, Tiaong, Quezon."
17 Section 16 (d) of R.A. No. 6657 states:Section 16. Procedure for Acquisition of Private Lands. — For purposes of acquisition of private lands, the following procedures shall be followed:18Rollo, p. 20.
x x x x
(d) In case of rejection or failure to reply, the DAR shall conduct summary administrative proceedings to determine the compensation for the land requiring the landowner, the LBP and other interested parties to submit evidence as to the just compensation for the land, within fifteen (15) days from the receipt of the notice. After the expiration of the above period, the matter is deemed submitted for decision. The DAR shall decide the case within thirty (30) days after it is submitted for decision.
19 Also known as the Revised Rules and Regulations Governing the Valuation of Lands Voluntarily Offered or Compulsorily Acquired Pursuant to R.A. No. 6657.
20Rollo, p. 167.
21 Id. at 167 to 169; Penned by Provincial Adjudicator Marcocheo S. Camporedondo. The dispositive of the DARAB Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered:
- Dismissing the instant protest for lack of merit;
- Ordering the Land Bank of the Philippines to pay herein landowner the amount of One Million Two Hundred Ten Thousand Two Hundred Fifty-Two Pesos & Ninety-Six Centavos (P1,210,252.96) as just compensation of the 22.6762 hectares, more or less, covered by TCT No. T-21145; and
- Ordering further the Clerk of the Board to cause the immediate transmission of the Claim Folder to DAR Operations for further appropriate action.
22 Id. at 168.
23 Id. at 170-174.
24 Id. at 173-174.
25 Id. at 180-183
26 Id. at 135-136.
27 Id. at 136-137.
28 Id. at 138.
29 Id.
30 Id. at 139-140.
31 Id. at 139.
32 Id. at 187-189.
33 Id. at 141-142.
34 Id. at 146-153; Motion for Reconsideration.
35 Id. at 143-145.
36 Id. at 100-133; filed under Rule 42 of the Rules of Court dated 10 August 2007, and docketed as CA-G.R. SP No. 99852.
37 Id. at 69.
38 Id. at 73-87.
39 Id. at 23.
40 Id. at 25-27.
41 Id. at 25-27.
42 Id. at 27.
43 Id. at 31.
44 478 Phil. 701 (2004).
45 Phil. 467 (2006).
46 555 Phil. 831 (2007).
47Rollo, pp. 35-40.
48 Id. at 44-46.
49 Id. at 41-42 citing LBP v. Wycoco, 464 Phil. 83 (2004).
50 Id. at 47.
51 Id. at 254.
52 Id. at 256.
53 Id. at 255.
54 Id. at 275-277.
55 G.R. Nos. 181912 & 183347, 29 November 2016.
56 See also Mateo et al. v. DAR, et al., G.R. No. 186339, 15 February 2017.
57Rollo, pp. 143-145.
58 Id. at 65-66.
59 Id. at 178.
60 G.R. No. 170506, 11 January 2017.
61Rollo, p. 143.
62 Id. at 142
63 Id.
64 See R.A. No. 6657, Section 65.
65 See R.A. No. 7160, Section 20.
66Rollo, pp. 136-137.
67 Id. at 144.
68 634 Phil. 9 (2010).
69LBP v. Heirs of Spouses Encinas, 686 Phil. 48, 55 (2012).
70Rollo, pp. 187-188.
71Mateo v. DAR, et al., supra note 56.
72Rollo, p. 135.
73 Id. at 58 and 189.