G.R. No. 167809 - LAND BANK OF THE PHILIPPINES v. JOSEFINA R. DUMLAO, ET AL.
[G.R. NO. 167809 : November 27, 2008]
LAND BANK OF THE PHILIPPINES, Petitioner, v. JOSEFINA R. DUMLAO, A. FLORENTINO R. DUMLAO, JR., STELLA DUMLAO-ATIENZA, and NESTOR R. DUMLAO, represented by Attorney-In-Fact, A. Florentino R. Dumlao, Jr., Respondents.
D E C I S I O N
REYES, R.T., J.:
IN determining just compensation for lands covered by the government's Operation Land Transfer, which law applies - Presidential Decree (PD) No. 271 or Republic Act (RA) No. 66572 known as the Comprehensive Agrarian Reform (CARP) Law?cralawred
This and other related questions are brought to the Court via this Petition for Review on Certiorari 3 of the Decision4 of the Court of Appeals (CA) granting each of respondents a five-hectare retention area and ordering petitioner to pay them One Hundred Nine Thousand Pesos (
P109,000.00) per hectare for the excess of the retained area.
Respondents Josefina R. Dumlao, A. Florentino R. Dumlao, Jr., Stella Dumlao-Atienza, and Nestor R. Dumlao, heirs of the deceased Florentino G. Dumlao, were the co-owners of several parcels of agricultural land with an aggregate area of 32.2379 hectares situated at Villaverde, Nueva Vizcaya.
The properties are covered by: (1) Transfer Certificate of Title (TCT) No. T-1180 with an area of 11.33 hectares;5 (2) TCT No. 41508 consisting of 6.2201 hectares;6 (3) TCT No. 41507 with an area of 4.0001 hectares;7 (4) TCT No. 41506 consisting of 3.9878 hectares;8 (5) TCT No. 41504 consisting of 5.0639 hectares; and (6) TCT No. 41505 with an area of 1.6360 hectares.
The properties were placed under Operation Land Transfer by the Department of Agrarian Reform (DAR).9 However, the definite time of actual taking was not stated.10
Pursuant to PD No. 27 and Executive Order (EO) No. 228,11 a preliminary valuation was made by the DAR on the landholdings covered by TCT Nos. 41504 and T-1180 with a total area of 16.3939 hectares. Finding the valuation to be correct, petitioner bank informed respondents of the said valuation.12 Payments were then deposited in the name of the landowners.13 Meanwhile, processing of the properties covered by the other four (4) titles, namely, TCT Nos. 41505, 41506, 41507 and 41508, remains pending with the DAR.14
On July 9, 1995, respondents filed a Complaint15 before the Regional Trial Court (RTC) in Nueva Vizcaya, Branch 28,16 for determination of just compensation for their properties. It was claimed, inter alia, that they were not paid their just compensation for the properties despite issuance of certificates of land transfer to farmer-beneficiaries by the DAR.17 They prayed for the appointment of three (3) competent and disinterested commissioners who would determine and report to the court the just compensation of their landholdings based on their current fair market value, without prejudice to their retention rights. They also asked for payment of actual and moral damages, attorney's fees, and costs of suit.18
In its Answer, the DAR, represented by the Municipal Agrarian Reform Office (MARO) and Provincial Agrarian Reform Office (PARO), posited that the complaint lacked a cause of action and that the RTC did not have jurisdiction. Under Section 50 of RA No. 6657, it is the Department of Agrarian Reform Adjudication Board (DARAB) which is vested with primary and original jurisdiction over land valuation, while the RTC as a Special Agrarian Court may review the DARAB's decision.19
Petitioner, which was impleaded as defendant in the valuation case before the trial court, likewise filed its Answer, raising a similar line of defense.20 Petitioner added that while payment for the properties covered by TCT Nos. T-1180 and T-41504 were already deposited in trust for respondents, the claimfolders for the remaining four properties is still with the DAR. Thus, the filing of the complaint against petitioner was premature.
After the termination of pre-trial conference, respondent Atty. A. Florentino Dumlao, Jr. submitted his affidavit on which he was cross-examined. Following the submission of their testimonial and documentary evidence, respondents rested their case.
Upon motion of respondents, the RTC, on April 15, 1998, appointed Atty. John D. Balasya, Clerk of Court, as commissioner. He was mandated to "receive, examine, and ascertain valuation of the properties."21 Believing that the valuation of the properties is not commensurate to their true value and, hence, not a "just" compensation, Atty. Balasya stated in his Commissioner's Report dated July 21, 1998,22 that:
The evidences submitted by the parties as well as those gathered by the undersigned show that only two (2) parcels of land were valued under Presidential Decree No. 27. The parcels of land are located in Nagbitin, Villaverde, Nueva Vizcaya and per Exhibit "O," the unirrigated riceland in Nagbitin are considered first class agricultural lands. Under Tax Ordinance No. 96-45 adopting and authorizing the 1996 Schedule of Fair Market Values for the Different Classes of Real Property in Nueva Vizcaya (Exhibit "G" and Exhibit "G-1") the market value of first class unirrigated Riceland in the Municipality of Villaverde is
P109,000.00 Per Department Order No. 56-97 dated May 27, 1997 issued by the Department of Finance, Re: Implementation of the Revised Zonal Values of Real Properties in all Municipalities under the jurisdiction of Revenue District Office No. 14 (Bayombong, Nueva Vizcaya), Revenue Region No. 3, Tuguegarao, Cagayan for Internal Revenue Tax purposes, the zonal value of land in other Barangays in Villaverde is P60.00/square meter.
In summary, the undersigned believes that the valuation of respondents Land Bank of the Philippines and the Department of Agrarian Reform is not commensurate to the definition of just compensation x x x.23
On October 14, 1998, the RTC issued a decision,24 the fallo of which reads:
WHEREFORE, the Court hereby orders the remand of the case with respect to TCT Nos. 1180 and T-41504 to the proper DAR agency for further proceedings and orders the dismissal of the case with respect to TCT Nos. T-41508, T-41507, T-41506, and T-41505 for having been prematurely filed, there being no preliminary valuation made yet on the said parcels of land. No pronouncement as to costs.
Respondents moved for reconsideration. Consequently, on December 21, 1998, the trial court modified26 its decision in the following manner:
WHEREFORE, premises considered, in the higher interest of justice, the Court MODIFIES its October 14, 1998 decision by ordering plaintiffs to adduce additional evidence to support their contentions under PD 27/EO 228 within 30 days from receipt of this Order furnishing a copy thereof to the defendants who are given 15 days from receipt to comment thereon. Thereafter, the matter shall be deemed submitted for resolution.
Instead of adducing additional evidence, respondents filed a motion for reconsideration of the trial court's December 21, 1998 order. Positing that the additional evidence required by the court pertains to the formula under PD No. 27, respondents insisted on
P109,000.00 per hectare, the market value of the properties, as just compensation.28 Accordingly, the trial court, on March 18, 1999, issued another order,29 the dispositive portion of which states:
WHEREFORE, premises considered, the Court hereby sets the just compensation in the amount of
P6,912.50 per hectare for lot covered by TCT No. T-1180 and the amount provided for in the Land Valuation Summary and Farmers Undertaking for lot covered by TCT No. T-41504 to be paid to the plaintiffs with interest from the time of the taking until fully paid.
Dissatisfied with the March 18, 1999 RTC Order, respondents appealed to the CA. On February 16, 2005, the CA rendered a decision31 modifying the trial court's ruling, viz.:
WHEREFORE, in view of the foregoing, the trial court's decision is hereby MODIFIED. The plaintiffs-appellants' right of retention is recognized. Plaintiffs-appellants Josefina, A. Florentino, Jr. and Stella, all surnamed Dumlao are each entitled to retain five (5) hectares pursuant to the provisions of R.A. 6657.
The excess in area after application of the right of retention is valued at One Hundred Nine Thousand (
P109,000.00) Pesos per hectare with interest at the prevailing rate from the time of taking until fully paid.
The CA declared that the definite time of the actual taking of the subject properties is not certain.33 Further, there is no doubt that the transfer of the subject landholdings is governed by PD No. 27.34 However, after the passage of RA No. 6657, the formula relative to valuation under PD No. 27 no longer applies.35 The appellate court held:
The trial court, therefore, in the determination of just compensation is not confined within the valuation provisions of P.D. 27. It can depart from it so long as the valuation assigned on the land transferred is within the meaning of the phrase "just compensation" provided for in J.M. Tuazon Co. v. Land Tenure Administration (31 SCRA 413).36
Relying on the Commissioner's Report, the CA assigned the lower value of
P109,000.00 per hectare as just compensation for the subject properties.37
Petitioner bank has resorted to the present recourse, imputing to the CA the following errors:
WHEN THE CHALLENGED DECISION ADHERED TO THE COMMISSIONER'S REPORT AND FIXED THE VALUE OF THE LANDHOLDINGS AT
P109,000.00 PER HECTARE WITH INTEREST AT THE PREVAILING RATE FROM THE TIME OF TAKING UNTIL FULLY PAID, WORKING A MODIFICATION OF THE LEGALLY PRESCRIBED BASIC FORMULA FOR DETERMINING THE JUST COMPENSATION OF LANDS ACQUIRED THROUGH OPERATION LAND TRANSFER (OLT), CONTRARY TO THE CLEAR MANDATE OF PD 27/EO 228.
WHEN THE CHALLENGED DECISION DECLARED THAT OCTOBER 21, 1972 CANNOT BE DEEMED AS THE DATE OF TAKING OF THE SUBJECT PROPERTIES.
WHEN THE CHALLENGED DECISION DECLARED THAT RESPONDENTS' ENTIRE LANDHOLDINGS ARE COVERED BY PD 27 AND THAT RESPONDENTS JOSEFINA, A. FLORENTINO, JR., AND STELLA ARE ENTITLED TO RETAIN FIVE (5) HECTARES EACH.38 (Underscoring supplied)cralawlibrary
The just compensation due to respondents should be determined under the provisions of RA No. 6657.
Petitioner asserts that since the properties were acquired pursuant to PD No. 27, the formula for computing just compensation provided by said decree and EO No. 228 should apply. Respondents, on the other hand, insist on the application of RA No. 6657 with respect to the computation.
Petitioner is mistaken. The 1987 Constitution, specifically Article XIII on Social Justice and Human Rights, mandates the State's adoption of an agrarian reform program for the benefit of the common people.39 The recognition of the need for genuine land reform, however, started earlier. PD No. 27, issued on October 21, 1972, more than a decade before the enactment of the 1987 Constitution, provided for the compulsory acquisition of private lands for distribution among tenant-farmers and specified the maximum retention limits for landowners.40
The agrarian reform thrust was further energized with the enactment of EO No. 228 on July 17, 1987, when full land ownership was declared in favor of the beneficiaries of PD No. 27. The executive issuance also provided for the valuation of still unvalued covered lands, as well as the manner of their payment. On July 22, 1987, Presidential Proclamation No. 131, instituting a comprehensive agrarian reform program, as well as EO No. 22941 providing the mechanics for its implementation, were likewise enacted.42
When the Philippine Congress was formally reorganized, RA No. 6657, otherwise known as the Comprehensive Agrarian Reform Law of 1988, was immediately enacted. It was signed by President Corazon Aquino on June 10, 1988. This law, while considerably changing the earlier presidential issuances, including PD No. 27 and EO No. 228, nevertheless gave them suppletory effect insofar as they are not inconsistent with its provisions.43
On one hand, PD No. 27 provides the formula to be used in arriving at the exact total cost of the acquired lands:44
For the purpose of determining the cost of the land to be transferred to the tenant-farmer pursuant to this Decree, the value of the land shall be equivalent to two and one half (2-1/2) times the average harvest of three normal crop years immediately preceding the promulgation of this Decree.
The total cost of the land, including interest at the rate of six (6) per centum per annum, shall be paid by the tenant in fifteen (15) years of fifteen (15) equal annual amortizations. (Emphasis supplied)cralawlibrary
Implementing the formula under PD No. 27, EO No. 228 states:
SECTION 2. Henceforth, the valuation of rice and corn lands covered by P.D. No. 27 shall be based on the average gross production determined by the Barangay Committee on Land Production in accordance with Department Memorandum Circular No. 26, series of 1973 and related issuances and regulation of the Department of Agrarian Reform. The average gross production per hectare shall be multiplied by two and a half (2.5), the product of which shall be multiplied by Thirty-Five Pesos (
P35.00), the government support price for one cavan of 50 kilos of palay on October 21, 1972, or Thirty-One Pesos ( P31.00), the government support price for one cavan of 50 kilos of corn on October 21, 1972, and the amount arrived at shall be the value of the rice and corn land, as the case may be, for the purpose of determining its cost to the farmer and compensation to the landowner. (Emphasis supplied)cralawlibrary
Thus, under PD No. 27 and EO No. 228, the formula for computing the Land Value (LV) or Price Per Hectare (PPH) of rice and corn lands is:
2.5 x AGP45 x GSP46 = LV or PPH
The parameters of PD No. 27 and EO No. 228 are manifestly different from the guidelines provided by RA No. 6657 for determining just compensation. Section 17 of RA No. 6657 is explicit:
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.
Due to the divergent formulae or guidelines presented by these laws, a number of cases have already been brought to the Court regarding which law applies in computing just compensation for landholdings acquired under PD No. 27. On this score, the Court has repeatedly held that if just compensation was not settled prior to the passage of RA No. 6657, it should be computed in accordance with said law, although the property was acquired under PD No. 27.
In the recent Land Bank of the Philippines v. Heirs of Angel T. Domingo,47 We rejected the DAR's valuation of just compensation based on the formula provided by PD No. 27 and EO No. 228. We held then that Section 17 of RA No. 6657 is applicable. The latter law, being the latest law in agrarian reform, should control.
When RA 6657 was enacted into law in 1988, the agrarian reform process in the present case was still incomplete as the amount of just compensation to be paid to Domingo had yet to be settled. Just compensation should therefore be determined and the expropriation process concluded under RA 6657.
Guided by this precept, just compensation for purposes of agrarian reform under PD 27 should adhere to Section 17 of RA 6657 x x x.
In Land Bank of the Philippines v. Estanislao,48 the Court ruled that taking into account the passage of RA No. 6657 in 1988 pending the settlement of just compensation, it is that law which applies to landholdings seized under PD No. 27, with said decree and EO No. 288 having only suppletory effect. Prior to that declaration, the Court already decreed in Land Bank of the Philippines v. Natividad,49 citing Paris v. Alfeche,50 that:
Under the factual circumstances of this case, the agrarian reform process is still incomplete as the just compensation to be paid private respondents has yet to be settled. Considering the passage of Republic Act No. 6657 (6657) before the completion of the process, the just compensation should be determined and the process concluded under the said law. Indeed, RA 6657 is the applicable law, with PD 27 and EO 228 having only suppletory effect, conformably with our ruling in Paris v. Alfeche.51
Agrarian reform is a revolutionary kind of expropriation.52 The recognized rule in expropriation is that title to the expropriated property shall pass from the owner to the expropriator only upon full payment of the just compensation.53 Thus, payment of just compensation to the landowner is indispensable.
In fact, Section 4, Article XIII of the 1987 Constitution mandates that the redistribution of agricultural lands shall be subject to the payment of just compensation. The deliberations of the 1986 Constitutional Commission on this subject reveal that just compensation should not do violence to the Bill of Rights but should also not make an insurmountable obstacle to a successful agrarian reform program. Hence, the landowner's right to just compensation should be balanced with agrarian reform.54
In the case under review, the agrarian reform process was not completed. The just compensation to be paid respondents was not settled prior to the enactment of RA No. 6657, the law subsequent to PD No. 27 and EO No. 228. In fact, the non-payment of just compensation is precisely the reason why respondents filed a petition for the determination of just compensation before the RTC on July 13, 1995.
The records do not show when respondents or their father, Florentino Dumlao, was formally notified of the expropriation. The records, however, bear out that the bank sent Florentino Dumlao a letter stating that it had approved the land transfer claim involving that property covered by TCT No. T-1180 on November 5, 1990. Moreover, the various Land Valuation Summary and Farmers Undertakings showing the valuation of the land transferred to the farmers-beneficiaries were approved on May 17, 198955 and July 21, 1989.56 It is thus crystal clear that even after the passage of RA No. 6657 in 1988, neither petitioner nor the DAR had settled the matter of just compensation with respondents as landowners.
Besides, RA No. 6657 applies to rice and corn lands covered by PD No. 27. In Paris v. Alfeche,57 the Court explained:
Considering the passage of RA 6657 before the completion of the application of the agrarian reform process to the subject lands, the same should now be completed under the said law, with PD 27 and EO 228 having only suppletory effect. This ruling finds support in Land Bank of the Philippines v. CA, wherein the Court stated:
"We cannot see why Sec. 18 of RA 6657 should not apply to rice and corn lands under PD 27. Section 75 of RA 6657 clearly states that the provisions of PD 27 and EO 228 shall only have a suppletory effect. Section 7 of the Act also provides '
Sec. 7. Priorities. - The DAR, in coordination with the PARC shall plan and program the acquisition and distribution of all agricultural lands through a period of ten (10) years from the effectivity of this Act. Lands shall be acquired and distributed as follows:
Phase One: Rice and Corn lands under P.D. 27; all idle or abandoned lands; all private lands voluntarily offered by the owners for agrarian reform; x x x and all other lands owned by the government devoted to or suitable for agriculture, which shall be acquired and distributed immediately upon the effectivity of this Act, with the implementation to be completed within a period of not more than four (4) years.
This eloquently demonstrates that RA 6657 includes PD 27 lands among the properties which the DAR shall acquire and distribute to the landless. And to facilitate the acquisition and distribution thereof, Secs. 16, 17, and 18 of the Act should be adhered to. In Association of Small Landowners of the Philippines v. Secretary of Agrarian Reform, this Court applied the provisions (of) RA 6657 to rice and corn lands when it upheld the constitutionality of the payment of just compensation for PD 27 lands through the different modes stated in Sec. 18." (Emphasis supplied)cralawlibrary
Verily, there is nothing to prevent Section 17 of RA No. 6657 from being applied to determine the just compensation for lands acquired under PD No. 27.
In Natividad,58 the Court ruled that the DAR's failure to determine the just compensation for a considerable length of time made it inequitable to follow the guidelines provided by PD No. 27 and EO No. 228. Hence, RA No. 6657 should apply. The same rationale was followed in Meneses v. Secretary of Agrarian Reform.59 There, the Court noted that despite the lapse of more than thirty (30) years since the expropriation of the property in 1972, petitioners had yet to benefit from it, while the farmer-beneficiaries were already harvesting the property's produce. Thus, RA No. 6657 was applied instead of PD No. 27 in determining just compensation.
In Meneses, the Court compared the conflicting rulings in Gabatin v. Land Bank of the Philippines,60 cited by petitioner, and Land Bank of the Philippines v. Natividad.61 This Court affirmed Natividad, stating that it would be more equitable to apply the same due to the circumstances obtaining, i.e. the more than 30-year delay in the payment of just compensation.
The application of RA No. 6657 due to the inequity faced by landowners continued in Lubrica v. Land Bank of the Philippines.62 The landowners were also deprived of their properties in 1972 but had yet to receive their just compensation even after the passage of RA No. 6657. Since the landholdings were already subdivided and distributed to the farmer-beneficiaries, the Court, speaking through Justice Consuelo Ynares-Santiago, deemed it unreasonable to compute just compensation using the values at the time of taking in 1972 as dictated by PD No. 27, and not at the time of payment pursuant to RA No. 6657.
We find no cogent reason not to apply the same ratiocination here. In the case at bar, emancipation patents, and eventually, transfer certificates of title, were issued to the farmer-beneficiaries63 at least twenty-eight (28) years ago. On March 16, 1990, the DAR acknowledged that the property covered by TCT No. T-1180 had already been distributed to farmer-beneficiaries through emancipation patents. As early as June 10, 1975, a portion of the same property was conveyed to a certain Rosalina Abon, although this was not annotated on the owner's title.64
Needless to say, respondents have already been deprived of the use and dominion over their landholdings for a substantial period of time. In the interim, petitioner bank has abjectly failed to pay, much less to determine, the just compensation due to respondents. The law clearly recognizes that the exact value of lands taken under PD No. 27, or the just compensation to be given to the landowner must be determined with certainty before the land titles are transferred.65 Petitioner's gross failure to compensate respondents for loss of their land, while transferring the same to the farmer-beneficiaries, make it unjust to determine just compensation based on the guidelines provided by PD No. 27 and EO No. 228.
Accordingly, just compensation should be computed in accordance with RA No. 6657 in order to give full effect to the principle that the recompense due to the landowner should be the full and fair equivalent of the property taken from the owner by the expropriator. The measure is not the taker's gain but the owner's loss. The word "just" is used to intensify the meaning of the word "compensation" to convey the idea that the equivalent to be rendered for the property to be taken shall be real, substantial, full, and ample.66
The determination of just compensation is a function addressed to the courts of justice and may not be usurped by any other branch or official of the government.67 However, the determination made by the trial court, which relied solely on the formula prescribed by PD No. 27 and EO No. 228, is grossly erroneous. The amount of
P6,912.50 per hectare, which is based on the DAR valuation of the properties "at the time of their taking in the 1970s,"68 does not come close to a full and fair equivalent of the property taken from respondents.
Meanwhile, the CA's act of setting just compensation in the amount of
P109,000.00 would have been a valid exercise of this judicial function, had it followed the mandatory formula prescribed by RA No. 6657. However, the appellate court merely chose the lower of two (2) values specified by the commissioner as basis for determining just compensation, namely: (a) P109,000.00 per hectare as the market value of first class unirrigated rice land in the Municipality of Villaverde; and (b) P60.00 per square meter as the zonal value of the land in other barangays in Villaverde. This is likewise erroneous because it does not adhere to the formula provided by RA No. 6657.
It cannot be overemphasized that the just compensation to be given to the owner cannot be assumed and must be determined with certainty.69 Its determination involves the examination of the following factors specified in Section 17 of RA No. 6657, as amended, namely: (1) the cost of acquisition of the land; (2) the current value of the properties; (3) its nature, actual use, and income; (4) the sworn valuation by the owner; (5) the tax declarations; (6) the assessment made by government assessors; (7) the social and economic benefits contributed by the farmers and the farmworkers and by the government to the property; and (8) the non-payment of taxes or loans secured from any government financing institution on the said land, if any.70
Section 17 was converted into a formula by the DAR through Administrative Order (AO) No. 6, Series of 1992,71 as amended by AO No. 11, Series of 1994,72 the pertinent portions of which provide:
A. There shall be one basic formula for the valuation of lands covered by [Voluntary Offer to Sell] or [Compulsory Acquisition] regardless of the date of offer or coverage of the claim:
LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1)
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.
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 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 the 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 claimfolder.
x x x
A.6 The basic formula in the grossing-up of valuation inputs such as LO's Offer, Sales Transaction (ST), Acquisition Cost (AC), Market Value Based on Mortgage (MVM) and Market Value per Tax Declaration (MV) shall be:
Grossed-up Valuation input
Valuation Input x Regional Consumer Price Index (RCPI) Adjustment Factor
The RCPI Adjustment Factor shall refer to the ratio of RCPI for the month issued by the National Statistics Office as of the date when the claimfolder (CF) was received by LBP from DAR for processing or, in its absence, the most recent available RCPI for the month issued prior to the date of receipt of CF from DAR and the RCPI for the month as of the date/effectivity/registration of the valuation input. Expressed in equation form:
RCPI for the Month as of the Date of Receipt of Claimfolder by LBP from DAR or the Most recent RCPI for the Month Issued Prior to the Date of RCPI Receipt of CF
RCPI for the Month Issued as of the Date/Effectivity/Registration of the Valuation Input
B. Capitalized Net Income (CNI) - This shall refer to the difference between the gross sales (AGP x SP) and total cost of operations (CO) capitalized at 12%.
Expressed in equation form:
CNI = (AGP x SP) - CO
Capitalized Net Income
Latest available 12-month's gross production immediately preceding the date of offer in case of VOS or date of notice of coverage in case of CA.
The average of the latest available 12 month's selling prices prior to the date of receipt of the claimfolder 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 from the barangay or municipality where the property is located. In the absence thereof, SP may be secured within the province or region.
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 offer/coverage shall continue to use the 70% NIR. DAR and LBP shall continue to conduct joint industry studies to establish the applicable NIR for each crop covered under CARP.
x x x
C. CS shall refer to any one or the average of all the applicable sub-factors, namely, ST, AC and MVM:
Sales Transactions as defined under Item C.2
Acquisition Cost as defined under Item C.3
Market Value Based on Mortgage as defined under Item C.4
x x x
D. In the computation of Market Value per Tax Declaration (MV), the most recent Tax Declaration (TD) and Schedule of Unit Market Value (SMV) issued prior to receipt of claimfolder by LBP shall be considered. The Unit Market Value (UMV) shall be grossed up from the date of its effectivity up to the date of receipt of claimfolder by LBP from DAR for processing, in accordance with item II.A.A.6. (Emphasis and underscoring supplied)cralawlibrary
While the determination of just compensation involves the exercise of judicial discretion, such discretion must be discharged within the bounds of the law.73 The DAR, as the government agency principally tasked to implement the agrarian reform program, has the duty to issue rules and regulations to carry out the object of the law. The DAR administrative orders precisely filled in the details of Section 17 of RA No. 6657 by providing a basic formula by which the factors mentioned in the provision may be taken into account.74 Special agrarian courts are not at liberty to disregard the formula devised to implement the said provision because unless an administrative order is declared invalid, courts have no option but to apply it.75
In his Report, the Commissioner merely specified the market value of first class unirrigated ricelands in the municipality where the properties are located, as well as the zonal value of lands in other barangays in the same municipality. For their part, respondents attempted to prove the following: market value of unirrigated ricelands for the Municipality of Villaverde, set at
P109,000.00 per hectare, pursuant to Sangguniang Bayan Tax Ordinance No. 96-45;76 annual production of unirrigated ricefields in Villaverde, at 80 cavans during "palagad" cropping, and 101 cavans under regular cropping;77 government support price for palay for the period October 1, 1990 to October 1995 at P6.00 per kilo, and from November 1, 1995 to the time of the filing of the petition at P8.00 per kilo.78
However, the records do not bear out if these factors are the only ones relevant, present and applicable in this case, so that just compensation can now be computed by the Court based on the formula provided by the DAR administrative orders. Based on the evidence adduced, it appears that market value and comparable net income (CNI) are being proved. However, CNI cannot be computed in the absence of information regarding cost of operations.79
We are thus compelled to remand the case to the court a quo to determine the final valuation of respondents' properties. The trial court is mandated to consider the factors provided under Section 17 of RA No. 6657, as translated into the formula prescribed by DAR AO No. 6-92, as amended by DAR AO No. 11-94.
Furthermore, upon its own initiative, or at the instance of any of the parties, the RTC may again appoint one or more commissioners to examine, investigate and ascertain facts relevant to the dispute including the valuation of properties and to file a written report with the RTC.80
We next address the second issue - date of taking.
The "taking" of the properties for the purpose of computing just compensation should be reckoned from the date of issuance of emancipation patents, and not on October 21, 1972, as petitioner insists. The nature of the land at that time determines the just compensation to be paid.81
We cannot sustain petitioner's position that respondents' properties were statutorily taken on October 21, 1972, the date of effectivity of PD No. 27; that on that date, respondents were effectively deprived of possession and dominion over the land; and that when EO No. 228 fixed the basis in determining land valuation using the government support price of
P35.00 for one cavan of 50 kilos of palay on October 21, 1972, it was consistent with the settled rule that just compensation is the value of the property at the time of the taking.82
In Association of Small Landowners v. Secretary of Agrarian Reform,83 the Court held that title to the property expropriated shall pass from the owner to the expropriator only upon full payment of just compensation. The Court further held that:
It is true that P.D. No. 27 expressly ordered the emancipation of tenant-farmer as [of] October 21, 1972 and declared that he shall be deemed the owner of a portion of land consisting of a family-sized farm except that no title to the land owned by him was to be actually issued to him unless and until he had become a full-fledged member of a duly recognized farmer's cooperative. It was understood, however, that full payment of just compensation also had to be made first, conformably to the constitutional requirement.84 (Emphasis supplied)cralawlibrary
In Land Bank of the Philippines v. Estanislao,85 the Court declared that seizure of landholdings or properties covered by PD No. 27 did not take place on October 21, 1972, but upon the payment of just compensation.
Land Bank's contention that the property was acquired for purposes of agrarian reform on October 21, 1972, the time of the effectivity of PD 27, ergo just compensation should be based on the value of the property as of that time and not at the time of possession in 1993, is likewise erroneous. In Office of the President, Malacañang, Manila v. Court of Appeals, we ruled that the seizure of the landholding did not take place on the date of effectivity of PD 27 but would take effect on the payment of just compensation.86 (Emphasis in the original)
However, for purposes of computing just compensation, this Court recently declared in Land Bank of the Philippines v. Heirs of Angel T. Domingo87 that the time of taking should be reckoned from the issue dates of emancipation patents.
The date of taking of the subject land for purposes of computing just compensation should be reckoned from the issuance dates of the emancipation patents. An emancipation patent constitutes the conclusive authority for the issuance of a Transfer Certificate of Title in the name of the grantee. It is from the issuance of an emancipation patent that the grantee can acquire the vested right of ownership in the landholding, subject to the payment of just compensation to the landowner.88 (Emphasis supplied)cralawlibrary
It is undisputed that emancipation patents were issued to the farmer-beneficiaries. However, their issuance dates are not shown. As such, the trial court should determine the date of issuance of these emancipation patents in order to ascertain the date of taking and proceed to compute the just compensation due to respondents, in accordance with RA No. 6657.
Now, to the third and final issue.
Respondents are entitled to payment of just compensation even on those properties which have not been processed by the DAR.
Petitioner admits that of respondents' landholdings, only those covered by TCT Nos. T-1180 and T-41504, totaling 16.3939 hectares, were processed and initially valued by the DAR. Pending initial processing by the DAR of the remaining landholdings, petitioner posits that it cannot be made to pay the amount of
P109,000.00 per hectare for those covered by TCT Nos. 41508, 41507, 41506, and 41505, with an aggregate area of 17.2379 hectares.
The argument is specious for three reasons.
First, the determination of just compensation is judicial in nature. The DAR's land valuation is only preliminary and is not, by any means, final and conclusive upon the landowner or any other interested party. In the exercise of its functions, the courts still have the final say on what the amount of just compensation will be.89
In Natividad, the Court held that:
[T]here is nothing contradictory between the DAR's primary jurisdiction to determine and adjudicate agrarian reform matters and exclusive original jurisdiction over all matters involving the implementation of agrarian reform, which includes the determination of questions of just compensation, and the original and exclusive jurisdiction of regional trial courts over all petitions for the determination of just compensation. The first refers to administrative proceedings, while the second refers to judicial proceedings.
In accordance with settled principles of administrative law, primary jurisdiction is vested in the DAR to determine in a preliminary manner the just compensation for the lands taken under the agrarian reform program, but such determination is subject to challenge before the courts. The resolution of just compensation cases for the taking of lands under agrarian reform is, after all, essentially a judicial function.
Thus, the trial court did not err in taking cognizance of the case as the determination of just compensation is a function addressed to the courts of justice.90 (Emphasis supplied)cralawlibrary
In fact, the law does not make the DAR valuation absolutely binding as the amount payable by petitioner. A reading of Section 1891 of RA No. 6657 shows that it is the courts, not the DAR, which make the final determination of just compensation.
Accordingly, RA No. 6657 directs petitioner to pay the DAR's land valuation only if the landowner, the DAR and petitioner agree on the amount of just compensation. Otherwise, the amount determined by the special agrarian court as just compensation shall be paid by petitioner. Corollarily, there is no reason for petitioner to wait for the DAR valuation of the properties, if the court has already determined the just compensation due to respondents.
Second, to wait for the DAR valuation despite its unreasonable neglect and delay in processing the four properties' claimfolders is to violate the elementary rule that payment of just compensation must be within a reasonable period from the taking of property. Cosculluela v. Court of Appeals92 could not have been clearer:
Just compensation means not only the correct determination of the amount to be paid to the owner of the land but also the payment of the land within a reasonable time from its taking. Without prompt payment, compensation cannot be considered "just" for the property owner is made to suffer the consequence of being immediately deprived of his land while being made to wait for a decade or more before actually receiving the amount necessary to cope with his loss. x x x.93 (Emphasis supplied)cralawlibrary
In the case at bar, the properties have long been expropriated by the government and their fruits enjoyed by the farmer-beneficiaries. Respondent have been made to wait for decades for payment of their recompense. They were not even allowed to withdraw the amount claimed to have been deposited with petitioner bank on their behalf. It would certainly be iniquitous to wait for the DAR to process the properties covered by the four other titles before the special agrarian court can finally determine the amount of their just compensation.94
Third, while the DAR is vested with primary jurisdiction to determine in a preliminary manner the amount of just compensation, the circumstances of this case militate against the application of the doctrine of primary jurisdiction.
The principle of exhaustion of administrative remedies is a relative one and is flexible depending on the peculiarity and uniqueness of the factual and circumstantial settings of a case. It is disregarded: (1) when there is a violation of due process; (2) when the issue involved is purely a legal question; (3) when the administrative action is patently illegal and amounts to lack or excess of jurisdiction; (4) when there is estoppel on the part of the administrative agency concerned; (5) when there is irreparable injury; (6) when respondent is a department secretary whose acts, as an alter ego of the President, bears the implied and assumed approval of the latter; (7) when to require exhaustion of administrative remedies would be unreasonable; (8) when it would amount to a nullification of a claim; (9) when the subject matter is a private land in land case proceedings; (10) when the rule does not provide a plain, speedy and adequate remedy; (11) when there are circumstances indicating the urgency of judicial intervention, and unreasonable delay would greatly prejudice the complainant; (12) when no administrative review is provided by law; (13) where the rule of qualified political agency applies; and (14) when the issue of non-exhaustion of administrative remedies has been rendered moot.95
Here, to require exhaustion of administrative remedies would be unreasonable. What is more, judicial intervention is necessary so as not to unduly prejudice the landowners. Respondents have long been deprived of their landholdings, yet compensation has been withheld from them. Accordingly, to make respondents wait for the DAR to process the claimfolders of the remaining four properties would be unreasonable, unjust and manifestly prejudicial to them.
Respondents are entitled to the right of retention over their lands.
The right of retention is constitutionally guaranteed, subject to qualification by the legislature. It serves to mitigate the effects of compulsory land acquisition by balancing the rights of the landowner and the tenant and by implementing the doctrine that social justice was not meant to perpetrate an injustice against the landowner. A retained area, as its name denotes, is land which is not supposed to anymore leave the landowner's dominion, thus sparing the government from the inconvenience of taking land only to return it to the landowner afterwards, which would be a pointless process.96
The opinion of the MARO97 that respondents are not entitled to retain areas out of their landholdings because they applied for the same after the grace period set by the government98 fails to persuade. A landowner whose land was taken pursuant to PD No. 27 has a right to retain seven hectares of land, provided that the landowner is cultivating the area or will now cultivate it.99 Those who did not avail of their rights of retention under PD No. 27 are entitled to exercise the same under Section 6100 of RA No. 6657.101 Landowners may still avail of their retention rights notwithstanding the August 27, 1985 deadline imposed by DAR AO No. 1, Series of 1985. In Daez v. Court of Appeals,102 the Court, citing Association of Small Landowners, Inc. v. Secretary of Agrarian Reform,103 disregarded said deadline and sustained the landowner's retention rights. Notably, under RA No. 6657, landowners who do not personally cultivate their lands are no longer required to do so in order to qualify for the retention of an area not exceeding five hectares. Instead, they are now required to maintain the actual tiller of the area retained, should the latter choose to remain in those lands.104 Verily, there is no impediment to the exercise by respondents of their retention rights under RA No. 6657.
In sum, We rule that:
1. The provisions of RA No. 6657 apply in determining the just compensation due to respondents for the taking of their property. However, the value of
P109,000.00, based on the property's market value and assigned by the CA as just compensation, is erroneous. The trial court is thus directed to receive evidence pertaining to the factors to be considered in determining just compensation, in accordance with DAR AO No. 6, Series of 1992, as amended by AO No. 11, Series of 1994.
2. For purposes of computing just compensation, the date of issuance of emancipations is deemed the date of taking, not October 21, 1972.
3. Respondents are entitled to payment of just compensation on their entire landholdings covered by Operation Land Transfer, except for the five hectares of retention area each of them are entitled to.
WHEREFORE, the petition is DENIED. The case is REMANDED to the court a quo for final determination of just compensation due to respondents.
1 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 Mechanisms Therefor. Issued on October 21, 1972.
2 Effective on June 15, 1988.
3 Rules of Civil Procedure (1997), Rule 45.
4 Rollo, pp. 3-23. Penned by Associate Justice Arcangelita M. Romilla-Lontok, with Associate Justices Rodrigo V. Cosico and Danilo B. Pine, concurring. Dated February 16, 2005.
5 Registered in the names of Florentino G. Dumlao and Josefina R. Dumlao.
6 Registered in the name of A. Florentino R. Dumlao, Jr.
7 Registered in the name Stella R. Dumlao-Atienza.
8 Registered in the name of Stella R. Dumlao-Atienza.
9 Rollo, p. 61.
10 Id. at 68.
11 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 of PD No. 27, and Providing for the Manner of Payment by the Farmer Beneficiary and Mode of Compensation to the Landowner. Issued on July 17, 1987.
12 Rollo, p. 32.
13 Id. at 63.
14 Id. at 32.
15 Entitled Josefina R. Dumlao, A. Florentino R. Dumlao, Jr., Stella Dumlao-Atienza, Nestor R. Dumlao, represented by Attorney-In-Fact, A. Florentino R. Dumlao, Jr. v. Rafael R. Alcazar, The Municipal Agrarian Reform Officer, Villaverde, Nueva Vizcaya, The Provincial Agrarian Reform Officer of Nueva Vizcaya, Land Bank of the Philippines, Solano Branch, Nueva Vizcaya. Docketed as Case No. 6000.
16 Sitting as Special Agrarian Court.
17 Rollo, p. 61.
18 Id. at 61-62.
19 Id. at 62.
21 Id. at 63.
22 Records, pp. 147-149.
23 Id. at 148-149.
24 CA rollo, pp. 135-138.
25 Id. at 137-138.
26 Id. at 139-140.
27 Id. at 140.
28 Records, pp. 192-193.
29 CA rollo, pp. 141-142.
30 Id. at 142.
31 Supra note 4.
32 Rollo, pp. 73-74.
33 Id. at 68.
34 Id. at 68.
35 Id. at 70.
36 Id. at 71.
37 Id. at 72.
38 Id. at 37.
39 SEC. 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.
40 Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform, G.R. NOS. 78742, 79310, 79744 & 79777, July 14, 1989, 175 SCRA 343, 353-354.
41 Providing the Mechanisms for the Implementation of the Comprehensive Agrarian Reform Program.
42 Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform, supra at 354.
43 Id.; Republic Act No. 6657, Sec. 75.
44 Paris v. Alfeche, G.R. No. 139083, August 30, 2001, 364 SCRA 110, 121.
45 Average gross production.
46 Government support price.
47 G.R. No. 168533, February 4, 2008.
48 G.R. No. 166777, July 10, 2007, 527 SCRA 181.
49 G.R. No. 127198, May 16, 2005, 458 SCRA 441.
50 Supra note 44.
51 Land Bank of the Philippines v. Natividad, supra at 451-452.
52 Paris v. Alfeche, supra note 44, at 386.
53 Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform, supra note 40, at 389-390, citing Kennedy v. Indianapolis, 103 US 599, 26 L. Ed. 550; Rubottom v. Mclure, 4 Blkf. 508; Rexford v. Knight, 11 NY 314; Visayan Refining Co. v. Camus and Paredes, 40 Phil. 550 (1919).
54 Land Bank of the Philippines v. Heirs of Angel T. Domingo, supra note 47.
55 Rollo, p. 114; Exhibit "2-b."
56 Id. at 116-117; Exhibits "3-b" and "3-c."
57 Supra note 44.
58 Supra note 49.
59 G.R. No. 156304, October 23, 2006, 505 SCRA 90.
60 G.R. No. 148223, November 25, 2004, 444 SCRA 176.
61 Supra note 49.
62 G.R. No. 170220, November 20, 2006, 507 SCRA 415.
63 Rollo, p. 61.
64 Records, p. 79; Exhibit "J."
65 Paris v. Alfeche, supra note 44.
66 Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform, supra note 40, at 378-379.
67 Id. at 380.
68 Records, p. 195.
69 Paris v. Alfeche, supra note 44.
70 Land Bank of the Philippines v. Banal, G.R. No. 143276, July 20, 2004, 434 SCRA 543, 550-551; Lubrica v. Land Bank of the Philippines, supra note 62, at 424.
71 Rules and Regulations Amending the Valuation of Lands Voluntarily Offered and Compulsorily Acquired as Provided for Under Administrative Order No. 17, Series of 1989, as Amended, Issued Pursuant to Republic Act No. 6657. Issued on October 30, 1992.
72 Revising the Rules and Regulations Covering the Valuation of Lands Voluntarily Offered or Compulsorily Acquired As Embodied in Administrative Order No. 6, Series of 1992. Issued on September 13, 1994.
73 Land Bank of the Philippines v. Banal, supra note 70, at 549-554, cited in Land Bank of the Philippines v. Lim, G.R. No. 171941, August 2, 2007, 529 SCRA 129, 135.
74 Land Bank of the Philippines v. Celada, G.R. No. 164876, January 23, 2006, 479 SCRA 495, 507.
76 Records, pp. 74-76, Exhibit "G."
77 Id. at 81; Exhibit "K."
78 Id. at 82; Exhibit "N."
79 DAR AO No. 06, Series of 1992, Sec. II(B), as amended by DAR AO No. 11, Series of 1994, Sec. 4.
80 Land Bank of the Philippines v. Lim, supra note 73, at 142.
81 National Power Corporation v. Chiong, G.R. No. 152436, June 20, 2003, 404 SCRA 527.
82 Rollo, p. 236.
83 Supra note 40.
84 Id. at 390.
85 Supra note 48, citing Land Bank v. Natividad, supra note 49.
86 Land Bank of the Philippines v. Estanislao, id. at 187.
87 Supra note 47.
89 Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform, supra note 40, at 382.
90 Land Bank of the Philippines v. Natividad, supra note 49, at 450-451.
91 Section 18. Valuation and Mode of Compensation. - The LBP shall compensate the landowner in such amount as may be agreed upon by the landowner and the DAR and the LBP in accordance with the criteria provided for in Secs. 16 and 17 and other provisions hereof, or as may be finally determined by the court, as the just compensation for the land. (Emphasis supplied)cralawlibrary
92 G.R. No. L-77765, August 15, 1998, 164 SCRA 393.
93 Cosculluela v. Court of Appeals, id. at 400.
94 See Meneses v. Secretary of Agrarian Reform, supra note 59.
95 Province of Zamboanga del Norte v. Court of Appeals, G.R. No. 109853, October 11, 2000, 342 SCRA 549.
96 Daez v. Court of Appeals, G.R. No. 133507, February 17, 2000, 325 SCRA 856.
97 Records, pp. 79-80; Exhibit "J." Dated March 16, 1990.
98 Id. at 80.
99 Presidential Decree No. 27.
100 Section 6. Retention Limits. - Except as otherwise provided in this Act, no person may own or retain, directly, any public or private agricultural land, the size of which shall vary according to factors governing a viable family-sized farm, such as commodity produced, terrain, infrastructure, and soil fertility as determined by the Presidential Agrarian Reform Council (PARC) created hereunder, but in no case shall the retention by the landowner exceed five (5) hectares. Three (3) hectares may be awarded to each child of the landowner, subject to the following qualifications: (1) that he is at least fifteen (15) years of age; and (2) that he is actually tilling the land or directly managing the farm: Provided, That landowners whose lands have been covered by Presidential Decree No. 27 shall be allowed to keep the area originally retained by them thereunder; Provided, further, That original homestead grantees or direct compulsory heirs who still own the original homestead at the time of the approval of this Act shall retain the same areas as long as they continue to cultivate said homestead.
The right to choose the area to be retained, which shall be compact or contiguous, shall pertain, to the landowner: Provided, however, That in case the area selected for retention by the landowner is tenanted, the tenant shall have the option to choose whether to remain therein or be a beneficiary in the same or another agricultural land with similar or comparable features. In case the tenant chooses to remain in the retained area, he shall be considered a leaseholder and shall lose his right to be a beneficiary under this Act. In case the tenant chooses to be a beneficiary in another agricultural land, he loses his right as a leaseholder to the land retained by the landowner. The tenant must exercise this option within a period of one (1) year from the time the landowner manifests his choice of the area for retention. (Emphasis supplied)cralawlibrary
101 Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform, supra note 40, at 392.
102 G.R. No. 133507, February 17, 2000, 325 SCRA 856.
103 Supra note 40.
104 Paris v. Alfeche, supra note 44, at 124.
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