Philippine Supreme Court Resolutions > Year 2010 > September 2010 Resolutions > [G.R. No. 186200 : September 01, 2010] LAND BANK OF THE PHILIPPINES V. SPOUSES ARNULFO AND EVELYN ESCARCHA AND RURAL BANK OF PILAR, INC.:

Please take notice that the Court, Second Division, issued a Resolution dated 01 September 2010 which reads as follows:

G.R. No. 186200 (Land Bank of the Philippines v. Spouses Arnulfo and Evelyn Escarcha and Rural Bank of Pilar, Inc.). - For resolution is the petition for review on certiorari of the Court of Appeals (CA) Decision dated August 28, 2008 and Resolution dated January 28, 2009, ordering the remand of the case for determination of just compensation to the trial court.

Respondents, spouses Arnulfo and Evelyn Escarcha, were the registered owners of seven parcels of land located in Loreto, Castilla, Sorsogon, which were then mortgaged to respondent Rural Bank of Pilar, Inc. When Republic Act No. 6657 took effect the Department of Agrarian Reform (DAR) compulsorily acquired a 37.436-hectare portion of the said properties.

Petitioner Land Bank of the Philippines valued the properties at P133,170.25, using the formulas:

LV = MV x 2	[for idle and cogonal lands] and
LV = (CNI x .90) + (MV x .10)	[for lands planted with rootcrops/rice]

where

CNI = [Annual Gross Production (AGP) x Selling Price (SP) x Net Income Rate (NRI)]/.12

MV = Unit Market Value (UMV) x Location Adjustment Factor (LAP) x Regional Consumer Price Index (RCPI)

Respondents found the valuation too low; hence, they submitted the issue of just compensation to the Provincial Adjudicator. In the meantime, the properties were foreclosed and sold to respondent bank as the highest bidder.

Initially, the Provincial Adjudicator affirmed petitioner's valuation of the subject properties. Upon respondent bank's motion for reconsideration, the Provincial Adjudicator, taking into consideration the comparable sale transaction of similar nearby properties, increased the valuation of the properties to P30,000.00 per hectare or a total of P1,146,505.50.
Petitioner moved for reconsideration, but the motion was denied.

Petitioner then filed an Action for Determination of Just Compensation with the Regional Trial Court (RTC) of Sorsogon City.

On May 3, 2006, the RTC rendered a decision, fixing just compensation at P955,097.00. The court noted that Sanggunian Panlalawigan Resolution No. 73-99 fixed the fair market value of agricultural land within the Municipality of Castilla at P25;500.00. The court afso took note of the amount paid by respondent bank during the public auction, plus.the capital gains tax and the documentary stamp tax paid. Thus, in fixing the amount of just compensation, it considered the amount of P25,500.00 per hectare as fair and just compensation for the subject properties.^[1]

In an Order dated August 4, 2006, the RTC denied petitioner's motion for reconsideration.^[2]

On August 28, 2008, the CA rendered a decision, setting aside the RTC decision dated May 3, 2006 and its Order dated August 4, 2006, and remanding the case to the RTC for further proceedings.^[3]

According to the CA, the RTC should not have disregarded the formula under DAR Administrative Order (A.O.) No. 6, Series of 1992, as amended, and fixed the value of the properties based on Sangguniang Panlalawigan Resolution No. 73-99 and the price/taxes paid by the respondent bank during the foreclosure sale. Nonetheless, it rejected petitioner's valuation of the subject properties, noting that, in computing the Market Value per Tax Declaration (MV), petitioner merely relied on the Field Investigation Report (FIR) which, however, lacked the data on the unit market value from the municipal assessor's office.

In a Resolution^[4] dated January 28. 2009, the CA denied petitioner's motion for reconsideration.

Petitioner filed this petition for review, insisting that its valuation of the subject properties is in accordance with the formula prescribed by DAR AO No. 5, Series of 1998 (which superseded DAR A.O. No. 6, Series of 1992, as amended by A.O. No. 11, Series of 1994). Petitioner admits that the information on market value per Schedule of Unit Market Value (SUMV) was not reflected in Section F of the FIR, but it points out that the applicable unit market values for particular land use were adopted in the final computation of MV. It derived the said unit market values from the latest SUMV for the Province of Sorsogon, effective January 1997, prior to its receipt of claim folders.

We find no reversible error in the assailed decision.

Indeed, in Land Bank of the Philippines v. Celada,^[5] the Court had already pronounced the mandatory nature of the formula laid down in DAR A.O. No. 5, Series of 1998, thus:

As the government agency principally tasked to implement the agrarian reform program, it is the DAR's duty to issue rules and regulations to carry out the object of the law. DAR A.O. No. 5, s. of 1998 precisely "filled in the details" of Section 17, RA No. 6657 by providing a basic formula by which the factors mentioned therein may be taken into account. The SAC was at no liberty to disregard the formula which was devised to implement the said provision.

xxx Administrative issuances partake of the nature of a statute and have in their favor a presumption of legality. As such, courts cannot ignore administrative issuances especially when, as in this case, its validity-was not put in issue. Unless an administrative order is declared invalid, courts have no option but to apply the same.^[6]

We subscribe to the CA's finding that petitioner's valuation of the subject properties does not sufficiently satisfy the provisions of DAR A.O. No. 5, Series of 1998. For this reason, we likewise reject petitioner's valuation of the properties and adopt the following findings of the CA:

In this regard, LBP referred to CARP [Fjorm No. 3, otherwise known as the Field Investigation Report (FIR) in arriving at MV. However, a perusal of said FIR shows that it lacks the unit market value obtained from the municipal assessor's office. In fact, the data in Section F (Market Value per Tax Declaration) of the FIR forms submitted by LBP are incomplete as LBP only provided inputs for the Actual Land Use per FIR (Ha.) thereby leaving the table for Unit Values per SUMV, blank. To Our mind, such pertinent data should have been supplied because the market values of the land with rice, rootcrops and [cogon], within the subject properties (and even if it is idle) are actually what one needs to determine the just compensation of the subject properties.^[7]

Petitioner explains that, although it did not indicate in the FIR. the unit market value, .it nonetheless applied the pertinent unit market value (UMV) based on the SUMV for the Province of Sorsogon in the final computation. We are not satisfied with the explanation. DAR A.O. No. 5, Series of 1998 provides that both the most recent Tax Declaration and the SUMV issued prior to the receipt of claim folder by LBP shall be considered. It also specifically provides that the UMV shall be grossed up from the date of its effectivity up to the date of receipt of the claim folder by petitioner, thus:

D. In the computation of Market Value pet Tax (MV), the most recent Tax Declaration (TD) and Schedule of "Unit Market Value (SUMV) issued prior to receipt of CF 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 CF by LBP from DAR for processing, in accordance with Item II.A.9.

D.1 In case the area as appealing in the TD differs from the findings per actual FI, the latter FI shall prevail.

D.2 In case the land classification/land use per FI differs from that reflected in the TD, the result of the actual FI shall prevail and the UMV of the land classification per FI shall be obtained from the municipal assessor's office concerned.

Item II.A.9 provides:

A.9 The basic formula in the grossing-up of valuation inputs such as ... Market Value per Tax Declaration (MV) shall be:

Grossed-up	=	Valuation input x Regional Consumer Price Index (RCPI) Adjustment Factor
Valuation Input

The RCPI Adjustment Factor shall refer to the ratio of the most recent available RCPI for the month issued by the National Statistics Office as of the date when the CF was received by LBP from DAR for processing and the RCPI for the month as of the date/effectivity/registration of the valuation input. Expressed in equation form:

RCPI Adjustment  Factor �����	=	Most recent RCPI for the Month as of the Date of Receipt of CF by LBP from DAR
		-------------------------------------------------------------------------------------
		RCPI for the Month Issued as of the Date/Effectivity/Registration of the Valuation Input

Moreover, there is a need to review the formula utilized by petitioner in computing the market value. Petitioner's formula includes a location adjustment factor, which does not seem to be consistent with the abovecited formula.

WHEREFORE, the petition is DENIED. The CA Decision dated August 28, 2008 and Resolution dated January 28, 2009 are AFFIRMED. Peralta, J., on official leave; Bersamin, J., designated additional member per S.O. No. 882.

SO ORDERED.

Endnotes:

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^[1] Rollo, p. 142.

^[2] Id. at 148.

^[3] Id. at 80.

^[4] Id. at 84-86.

^[5] G.R. No. 164876, January 23, 2006, 479 SCRA 495.

^[6] Id. at 507.

^[7] Rollo, p. 77.