January 2009 - Philippine Supreme Court Decisions/Resolutions
G.R. No. 173226 - LAND BANK OF THE PHILIPPINES v. MANUEL O. GALLEGO, JR., ET AL.
[G.R. NO. 173226 : January 20, 2009]
LAND BANK OF THE PHILIPPINES, Petitioner, v. MANUEL O. GALLEGO, JR., VELASCO, JR., and JOSEPH L. GALLEGO and CHRISTOPHER GALLEGO, Respondents.
D E C I S I O N
This instant Petition for Review on Certiorari 1 under Rule 45 of the 1997 Rules of Civil Procedure seeks the reversal of the Decision2 and Resolution3 of the Court of Appeals in CA-G.R. SP No. 77676. The Court of Appeals' Decision modified the amount of just compensation awarded by the Regional Trial Court (RTC) sitting as a Special Agrarian Court, Branch 29, Cabanatuan City to respondents for the expropriation of their property for the comprehensive agrarian reform program of the Department of Agrarian Reform (DAR), while the Resolution denied petitioner's motion for reconsideration of the Decision.
The following factual antecedents are undisputed and are matters of record:
Respondents Manuel O. Gallego, Jr., Joseph L. Gallego and Christopher L. Gallego are the co-owners of several parcels of agricultural lands located in Barangay Sta. Rita and Barangay Concepcion in Cabiao, Nueva Ecija. The lands have an aggregate area of 142.3263 hectares and are covered by Transfer Certificate of Title Nos. T-139629, T-139631 and T-139633.4
Sometime in 1972, the DAR placed a portion of the property under the coverage of Presidential Decree No. 27 (P.D. No. 27). However, the DAR and respondents failed to agree on the amount of just compensation, prompting respondents to file on 10 December 1998 a petition before the RTC of Cabanatuan City.5 The petition, docketed as Agrarian Case No. 127-AF, named the DAR and herein petitioner Land Bank of the Philippines (LBP) as respondents and prayed that just compensation be fixed in accordance with the valuation formula under P.D. No. 27 based on an Average Gross Production of 109.535 cavans per hectare including interest at 6% compounded annually as provided under PARC Resolution No. 92-24-1.6
Petitioner LBP filed an answer, averring that only 76.8324 hectares and not 89.5259 hectares as was alleged in the petition were placed under the coverage of P.D. No. 27 and that just compensation should be determined based on an Average Gross Production of 65 cavans and/or 56.6 cavans per hectare which were the values at the time of taking of the property. Although the DAR did not file an answer, it was represented at the hearings by a certain Atty. Benjamin T. Bagui.7
During the course of the hearing of the petition, the coverage of respondents' lands had expanded to a bigger area. In order to conform to the increase in the area placed under agrarian reform, respondents filed on 14 October 2002 an amended petition, stating that as certified by the Municipal Agrarian Reform Office (MARO) of Cabiao, Nueva Ecija, 122.8464 hectares of the property had already been placed under the operation of P.D. No. 27. In the answer filed by the DAR as well as during the pre-trial, the counsels for DAR and petitioner LBP stipulated that the property subject of the petition was irrigated and had a total area of 120 hectares, more or less.8
After the pre-trial conference, the trial court issued an Order dated 08 November 2002,9 embodying the agreed stipulation that the property placed under agrarian reform had an area of 120 hectares, more or less, and directing the MARO of Cabiao, Nueva Ecija to submit the records pertaining to the exact landholdings already processed and acquired by petitioner LBP. In a Supplemental Pre-Trial Order dated 25 November 2002,10 the trial court stated that in view of the parties' agreement that the property was irrigated and had an area of 120 hectares, the only factual issue to be resolved would be the correct Average Gross Production, based on which just compensation would be fixed.11
On 14 March 2003, the trial court rendered a Decision,12 adopting respondents' formula which was based on an Average Gross Production of 121.6 cavans per hectare. The dispositive portion of the RTC Decision reads:
WHEREFORE, judgment is hereby rendered in favor of the petitioners, and the Land Bank of the Philippines is ordered to pay the petitioners Manuel O. Gallego, Joseph L. Gallego and Christopher L. Gallego in a manner set forth in Sections 17 and 18 of R.A. No. 6657 (Comprehensive Land Reform Code) the total amount of
P52,209,720.00 as the just compensation for 122.8464 hectares of ricelands distributed and awarded to tenants-beneficiaries surveyed, described and subdivided into lots with corresponding lot numbers, and areas as indicated in the Summary of Farmer-Beneficiaries and Lot Distribution in Gallego Estate, consisting of six (6) pages, which is annexed hereto and made part of this Decision, including all improvements of roads and irrigation canals therein existing. The amount of P1,179,027.00 or whatever amount the Land Bank of the Philippines has paid to the Gallegos as initial or provisional valuation shall be deducted from the amount of P52,209,720.00.
In arriving at the amount of just compensation, the trial court adopted the formula prescribed in P.D. No. 27, which fixed the land value as equivalent to 2.5 multiplied by the Government Support Price of palay multiplied by the Average Gross Production per hectare of the three preceding agricultural years. The trial court used the values of
P500.00 as Government Support Price for palay and 121.6 cavans per hectare as Average Gross Production of respondents' property. Applying Article 195814 of the Civil Code, the trial court also imposed "interest in kind" payable from 1972 to 2002 by multiplying by 1.8 the Average Gross Production of palay of 121.6 cavans per hectare multiplied by 2.5.
Both petitioner LBP and the DAR separately moved for the reconsideration of the trial court's Decision. In its Order dated 28 April 2003, the trial court denied both motions.15
Only petitioner LBP appealed from the trial court's Decision. According to petitioner LBP, the trial court erred in applying values that had no basis in law instead of adopting the Average Gross Production established by the Barangay Committee on Land Production under DAR Circular No. 26, series of 1973, and the mandated Government Support Price of
P35 per cavan of palay under Section 2 of Executive Order (E.O.) No. 228.
Upon motion by respondents, the Court of Appeals issued a Resolution on 5 November 2004, ordering the release of
P2,000,000.00 in favor of respondents as partial execution of the Decision of the trial court. The appellate court allowed the partial execution on the grounds that respondent Manuel Gallego was in need of an urgent medical operation and that there was no longer any question that respondents were entitled to just compensation.16
The Court of Appeals rendered the assailed Decision on 29 September 2005.17 The appellate court agreed that the values applied by the trial court in fixing just compensation had no legal basis because the formula under P.D. No. 27 and E.O. No. 228 mandated a Government Support Price of
P35.00 per cavan of palay. It also held that the imposition of interest based on Article 1958 of the Civil Code was improper because said article does not apply to the expropriation of land but contemplates cases of simple loan or mutuum.
According to the Court of Appeals, the peculiar circumstances of the case persuaded the appellate court to fix just compensation based on the current market value of the subject property on the premise that the provisions of P.D. No. 27 and E.O. No. 228 serve only as guiding principles and are not conclusive on the courts. The appellate court fixed the property's value at the current market rate of
P25.00 per square meter similar to that of other properties located in Barangay Sta. Rita and Barangay Concepcion.
The dispositive portion of the Decision reads:
WHEREFORE, the foregoing considered, the assailed Decision is hereby MODIFIED in that the award in the amount of
P52,209,720.00 as just compensation for 122.8464 hectares of ricelands is hereby REDUCED to THIRTY MILLION SEVEN HUNDRED ELEVEN THOUSAND SIX HUNDRED PESOS ( P30,711,600.00) computed based on the current fair market value of the expropriated parcels of land at the rate of P25.00 per square meter.
The amount of One Million One Hundred Seventy Nine Thousand and Twenty Seven Pesos (
P1,179,027.00) or whatever amount the petitioner has paid to the Gallegos as initial or provisional valuation, as well as the Two Million Pesos ( P2,000,000.00) already released pursuant to this Court's Resolution dated 5 November 2004 as partial execution of the court a quo's decision shall be deducted from the foregoing award.18
Petitioner LBP sought reconsideration but was denied in a Resolution dated 23 June 2006. Hence, the instant petition, raising the following issues:
1. IS IT LAWFUL OR VALID FOR THE COURT A QUO AND THE APPELLATE COURT TO USE THE ALLEGED CURRENT MARKET VALUE IN DETERMINING SUBJECT PROPERTY'S JUST COMPENSATION, IN EFFECT RETROACTIVELY APPLYING R.A. NO. 6657 IN OBVIOUS CONTRAVENTION OF P.D. NO. 27/E.O. NO. 228.
2. IS IT LAWFUL OR VALID FOR THE COURT A QUO AND THE APPELLATE COURT TO USE AN INEXISTENT GOVERNMENT SUPPORT PRICE ALLEGEDLY IN THE AMOUNT OF FIVE HUNDRED PESOS (
P500.00) IN APPARENT VIOLATION OF THE LEGISLATED GOVERNMENT SUPPORT PRICE (GSP) AMOUNTING TO THIRTY FIVE PESOS ( P35.00) FOR EVERY CAVAN OF 50 KILOS OF PALAY?cralawred
3. IS IT LAWFUL OR VALID FOR THE APPELLATE COURT TO REQUIRE THE RELEASE OF TWO MILLION PESOS (PhP 2,000,000.00), WHICH DOES NOT CONSTITUTE AS THE INITIAL AMOUNT OF VALUATION FOR SUBJECT PROPERTY, IN FAVOR OF RESPONDENTS?19
On 26 July 2006, the Court issued a Resolution requiring the LBP Legal Department, the counsel for petitioner LBP, to submit proof of written conformity of the Office of the Government Corporate Counsel (OGCC) to represent petitioner LBP in the instant petition to conform to the Court's directive in Land Bank of the Philippines v. Teresita Panlilio-Luciano.20 Pursuant to said Resolution, the LBP Legal Department submitted through a Compliance/Manifestation21 a copy of the Letter of Authority issued by the OGCC authorizing Atty. Rafael L. Berbaño and Atty. Jose Marie A. Quimboy to appear as collaborating counsels in all LBP cases. The OGCC likewise filed a Manifestation and Motion22 stating its conformity to the appearance of the LBP Legal Department on behalf of petitioner LBP and formally entering its appearance as collaborating counsel for petitioner LBP. In a Resolution dated 13 November 2006, the Court noted the separate manifestations of the OGCC and the LBP Legal Department and directed respondents to file a comment on the petition.23
Contrary to respondents' claim, the petition is accompanied by a valid verification and certification of non-forum shopping. Annexed to the petition is a special power of attorney24 issued by Wilfredo C. Maldia, Officer-In-Charge, Agrarian and Domestic Banking Sector of the LBP pursuant to Board Resolution No. 03-077. In the resolution, the LBP Board of Directors approved the designation of any LBP lawyer as attorney-in-fact to appear before the courts in all cases where LBP is a party.25 Pursuant thereto, Attys. Berbaño and Quimboy were constituted as duly authorized representatives and attorneys-in-fact in the instant case with full power to sign the verification of non-forum shopping.26
After petitioner filed a reply27 to respondents' comment, respondents filed a Motion for Partial Execution, praying for the release of
P3,179,027.00 by way of partial execution of judgment, alleging that no partial execution of the award to respondents had been effected so far notwithstanding the Court of Appeals' Resolution dated 05 November 2004 and Decision dated 29 September 2005. Thereafter, respondents filed a Supplemental Comment dated 24 March 2008. For its part, petitioner LBP filed a Comment dated 10 April 2008 on respondents' Motion for Partial Execution and a Reply to respondents' Supplemental Comment.
Now to the core issue of just compensation.
Citing Gabatin v. Land Bank of the Philippines,28 petitioner LBP argues that respondents' property was acquired under the effectivity of P.D. No. 27 and E.O. No. 228; thus, the formula provided therein should apply in fixing just compensation. Petitioner also pointed out the trial court's failure to take judicial notice of the mandated Government Support Price of
P35.00 per cavan for palay at the time of taking in 1972.
The petition lacks merit.
The Court has already ruled on the applicability of agrarian laws, namely, P.D. No. 27/E.O. No. 228 in relation to Republic Act (R.A.) No. 6657, in prior cases concerning just compensation.
In Paris v. Alfeche,29 the Court held that the provisions of R.A. No. 6657 are also applicable to the agrarian reform process of lands placed under the coverage of P.D. No. 27/E.O. No. 228, which has not been completed upon the effectivity of R.A. No. 6657. Citing Land Bank of the Philippines v. Court of Appeals,30 the Court in Paris held that P.D. No. 27 and E.O. No. 228 have suppletory effect to R.A. No. 6657, to wit:
We cannot see why Sec. 18 of RA [No.] 6657 should not apply to rice and corn lands under PD [No.] 27. Section 75 of RA [No.] 6657 clearly states that the provisions of PD [No.] 27 and EO [No.] 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 (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 of 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 (emphasis supplied).
This eloquently demonstrates that RA [No.] 6657 includes PD [No.] 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 [No.] 27 lands through the different modes stated in Sec. 18.31
Particularly, in Land Bank of the Philippines v. Natividad,32 where the agrarian reform process in said case "is still incomplete as the just compensation to be paid private respondents has yet to be settled," the Court held therein that just compensation should be determined and the process concluded under R.A. No. 6657.33
The retroactive application of R.A. No. 6657 is not only statutory34 but is also founded on equitable considerations. In Lubrica v. Land Bank of the Philippines,35 the Court declared that it would be highly inequitable on the part of the landowners therein to compute just compensation using the values at the time of taking in 1972, and not at the time of payment, considering that the government and the farmer-beneficiaries have already benefited from the land although ownership thereof has not yet been transferred in their names. The same equitable consideration is applicable to the factual milieu of the instant case. The records show that respondents' property had been placed under the agrarian reform program in 1972 and had already been distributed to the beneficiaries but respondents have yet to receive just compensation due them.
The Court of Appeals fixed the just compensation based on the current market value of adjacent properties, citing the "peculiar circumstances" of the case. The appellate court, however, failed to cite any legal or factual basis in support of its conclusion. Quite the contrary, the law and jurisprudence on the determination of just compensation of agrarian lands are settled; they are different from the thrust of the appellate court.
For the purpose of determining just compensation, Section 17 of R.A. No. 6657 states:
SECTION 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 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.
While the SAC is required to consider the acquisition cost of the land, the current value of like properties, its nature, actual use and income, the sworn valuation by the owner, the tax declaration and the assessments made by the government assessors to determine just compensation, it is equally true that these factors have been translated into a basic formula by the DAR pursuant to its rule-making power under Section 49 of R.A. No. 6657.36 In Land Bank of the Philippines v. Celada,37 the Court upheld the applicability of DAR Administrative Order (A.O.) No. 5, series of 1998 in determining just compensation.
Likewise, in Land Bank of the Philippines v. Banal,38 the Court ruled that the applicable formula in fixing just compensation is DAR A.O. No. 6, series of 1992, as amended by DAR A.O. No. 11, series of 1994, then the governing regulation applicable to compulsory acquisition of lands, in recognition of the DAR's rule-making power to carry out the object of R.A. No. 6657. Because the trial court therein based its valuation upon a different formula and did not conduct any hearing for the reception of evidence, the Court ordered a remand of the case to the SAC for trial on the merits.
The mandatory application of the aforementioned guidelines in determining just compensation has been reiterated recently in Land Bank of the Philippines v. Lim,39 where the Court ordered the remand of the case to the SAC for the determination of just compensation strictly in accordance with DAR A.O. No. 6, series of 1992, as amended.
In line with the pronouncement in Celada, respondents argue that the just compensation should be based on DAR A.O. No. 5, series of 1998, which requires values for Capitalized Net Income, Comparable Sales and Market Value. Thus, respondents attached to the comment an appraisal report of the fair market value of the properties. Using the figures therein, respondents arrived at the value of
P78,195,694.07 as just compensation.
The appraisal report, however, does not form part of the records of the case; thus, it has no probative weight. Any evidence that a party desires to submit for the consideration of the court must be formally offered by him, otherwise, it is excluded and rejected. Evidence not formally offered before the trial court cannot be considered on appeal, for to consider it at such stage will deny the other parties their right to rebut it.40 Although respondents are correct in asserting that DAR A.O. No. 5, series of 1998 is the governing formula in determining the just compensation in the case at bar, the evidence on record is not sufficient to determine the parameters required under DAR A.O. No. 5, series of 1998. Hence, the remand of the case to the appropriate court below is necessary also in order to allow respondents to properly present their evidence and petitioner to submit controverting evidence. This Court is not a trier of facts.
To gain time and accelerate the final disposition of this case, the Court deems it best pro hac vice to commission the Court of Appeals as its agent to receive and evaluate the evidence of the parties. Its mandate is to ascertain the just compensation due in accordance with this Decision, applying Sec. 17 of R.A. No. 6657, DAR A.O. No. 5 of 1992, as amended, and the prevailing jurisprudence.41
The remand of cases before this Court to the Court of Appeals for the reception of further evidence is not a novel procedure. It is sanctioned by the Rules of Court.42 In fact, the Court availed of the procedure in quite a few cases.43
Respondents likewise pray for the partial execution of the judgment pending appeal. They aver that the agrarian reform process has remained pending for the past 35 years from the time of the expropriation of the subject properties and that the original owner had died while one of the respondents is in need of urgent medical attention.
The execution of a judgment before becoming final by reason of appeal is recognized. However, this highly exceptional case must find itself firmly founded upon good reasons warranting immediate execution. For instance, execution pending appeal was granted by this Court where the prevailing party is of advanced age and in a precarious state of health and the obligation in the judgment is non-transmissible, being for support, or where the judgment debtor is insolvent. Execution pending appeal was also allowed by this Court where defendants were exhausting their income and have no other property aside from the proceeds of the subdivision lots subject of the action.44
In Borja v. Court of Appeals,45 the Court allowed the execution of the money judgment pending the resolution of the appeal on the merits. The Court noted that the circumstance of the case constituted a good reason to allow execution of the challenged judgment pending appeal. The Court explained, thus:
x x x The case has been dragging for more than ten years since it was filed in 1979, with no early resolution of the appeal in sight. The elevation of the records alone from the trial court took all of six years. The proceedings in the appellate court will entail further delay. The petitioner has grown old with the case and is now 76 years of age. He fears he may no longer be in this world when the case is finally decided.
x x x
The important point is that if the appealed judgment is annulled, the complaint of the petitioner will have to be tried anew and will probably be appealed whatever its outcome. It will take years again before it is finally decided. By that time, the petitioner may be facing a different judgment from a Court higher than an earthly tribunal. The decision on his complaint, even if it be in his favor, will become meaningless as far as he himself is concerned.46
The circumstances in Borja are similar to those in the instant case. The records show that almost 36 years have elapsed since the lands have been taken away from respondents but they have yet to receive the just compensation of the property in full. The original owner had died and one of the respondents is in need of urgent medical attention. There is no doubt that respondents are entitled to just compensation for their lands which obviously cannot be lower than the amount of
P30,711,600.00 awarded by the Court of Appeals in the appealed decision. It is but first and proper that respondents' request be granted in view of the considerable period of time that has transpired since the taking in tandem with humanitarian considerations.
WHEREFORE, the instant Petition for Review on Certiorari is DENIED and the decision and resolution of the Court of Appeals in CA-G.R. SP No. 77676 are REVERSED and SET ASIDE. Agrarian Case No. 127-AF is REMANDED to the Court of Appeals, which is directed to receive evidence and determine with dispatch the just compensation due respondents strictly in accordance with Sec. 17 of R.A. No. 6657, DAR A.O. No. 5, series of 1998, as amended, and the prevailing jurisprudence. The Court of Appeals is directed to conclude the proceedings and submit to this Court a report on its findings and recommended conclusions within forty-five (45) days from notice of this Decision. The Court of Appeals is further directed to raffle this case immediately upon receipt of this Decision.
The Court by way of execution pending appeal of this Decision hereby ORDERS petitioner to pay to respondents the amount of
P30,711,600.00 awarded by the Court of Appeals, less whatever amounts they have been paid thus far.
This Decision is immediately executory.
1 Rollo, pp. 23-53.
2 Dated 29 September 2005 and penned by J. Josefina Guevara-Salonga, Chairperson of the Special Sixth Division, and concurred in by JJ. Hakim S. Abdulwahid and Fernanda Lampas Peralta; id. at 7.
3 Dated 23 June 2006; id. at 18-19.
4 Id. at 8.
6 Id. at 196.
7 Id. at 201.
8 Id. at 9.
9 Records (Vol 1), p. 176.
10 CA rollo' p. 79.
11 Rollo, p. 10.
12 Id. at 107-115.
13 Id. at 114-115.
14 Civil Code, Art. 1958. In the determination of the interest, if it is payable in kind, its value shall be appraised at the current price of the products or goods at the time and place of payment.
15 Rollo, p. 10.
16 CA rollo, pp. 216-216A.
17 Supra note 2.
18 Supra note 2 at 15.
19 Supra note 1 at 35.
20 G.R. No. 165428, 17 January 2005.
21 Rollo, pp. 212-215.
22 Id. at 221-223.
23 Id. at 229-230.
24 Id. at 187.
25 Id. at 277.
26 Id. at 187.
27 Id. at 255-276.
28 486 Phil. 366 (2004).
29 416 Phil. 473 (2001).
30 378 Phil. 1248 (1999).
31 Paris v. Alfeche, supra note 29 at 488-489.
32 G.R. No. 127198, 16 May 2005, 458 SCRA 441.
33 Id. at 451.
34 See Republic Act No. 6657, Section 75. Suppletory Application of Existing Legislation. 'The provisions of Republic Act Number 3844, as amended, Presidential Decree Numbers 27 and 266 as amended, Executive Order Numbers 228 and 229, both Series of 1987, and other laws not inconsistent with this Act shall have suppletory effect.
35 G.R. No. 170220, 20 November 2006, 507 SCRA 415.
36 Land Bank of the Philippines v. Celada, G.R. No. 164876, 23 January 2006, 479 SCRA 495, 506-507.
37 G.R. No. 164876, 23 January 2006, 479 SCRA 495.
38 478 Phil. 701 (2004).
39 G.R. No. 171941, 02 August 2007, 529 SCRA 129.
40 436 Phil. 699 (2002).
41 See Land Bank of the Philippines v. Lim, G.R. No. 171941, 2 August 2007; 529 SCRA 129, 141-142.
42 Revised Rules of Court, Rule 46, Sec. 6.
43 See Republic v. Court of Appeals, 359 Phil. 530 (1998); Manotok Realty Inc., et al. v. CLT Realty Development Corporation, G.R. No. 123346, December 14, 2007, 540 SCRA 304.
44 David v. Court of Appeals, 342 Phil. 387, 390-391 (1997).
45 G.R. No. 95667, 08 May 1991, 196 SCRA 847.
46 Id. at 850.