G.R. No. 210422 - Land Bank of the Philippines vs. Spouses Cortez

The case involves petitioner Land Bank of the Philippines (LBP) and respondent spouses Lydia and Carlos Cortez, owners of a coconut land.
The property is identified as Lot 181893, Cad. 56, located at Villahermosa, Daraga, Albay, originally covering approximately 16.5415 hectares under TCT No. T-45714.
Only 6.0004 hectares of the subject property were found fit for acquisition under the Comprehensive Agrarian Reform Program (CARP).

On January 5, 2000, spouses Cortez offered the property for acquisition under CARP.
A notice of coverage was issued by the Department of Agrarian Reform (DAR) in April 2000.
A field investigation was conducted on April 24, 2000, by LBP together with DAR and local agrarian reform officials.
The investigation determined that only 6.004 hectares (later computed as 6.0004 hectares) were eligible for acquisition.
On September 26, 2001, DAR sent a Memorandum Request to Value Land to LBP, and the corresponding claims folder was received on September 27, 2001.

LBP conducted the land valuation using the two-factor formula prescribed in DAR Administrative Order (AO) No. 5, Series of 1998.
The computation involved using production data and selling prices. However, instead of following the prescribed reckoning dates in AO No. 5, the RTC used June 30, 2009 – a date drawn from AO No. 1, Series of 2010 – as the presumptive date of taking.
LBP’s preliminary valuation resulted in a computed land value at P106,542.98 based on the formula, which combined the Capitalized Net Income (CNI) and Market Value (MV) factors.
Spouses Cortez rejected LBP’s preliminary determination. Consequently, the amount was deposited in their names as provisional compensation on December 20, 2001 pursuant to Section 16(e) of R.A. No. 6657.

The dispute was elevated to the Department of Agrarian Reform Adjudication Board (DARAB), which rendered a decision fixing the compensation at P183,273.93.
LBP, finding the DARAB’s computation lacking in transparency regarding its computation basis, filed a Petition for Determination of Just Compensation before the Regional Trial Court (RTC) of Legazpi City, Branch 3.
The RTC, acting as a Special Agrarian Court, eventually fixed the compensation at P397,958.41, basing its computation on a recalibration of the production data using the period preceding June 30, 2009.

Although the DAR AO No. 5, Series of 1998 provides specific parameters on reckoning periods for Annual Gross Production (AGP) and Selling Prices (SP), the RTC deviated by employing the presumptive date of taking from AO No. 1, Series of 2010 to “currentize” the valuation in light of inflation.
The RTC’s computation recalculated the value by:

Deriving the average production per hectare based on revised figures (using a 12-month period ending June 30, 2009).
Applying the two-factor formula – where 90% weight is given to the CNI (determined by AGP, SP, and a net income rate of 70%) and 10% weight to MV.

The final computed land value was multiplied by the acquisition area (6.0004 hectares) to arrive at P397,958.41.

LBP filed a motion for reconsideration with the RTC, which was denied.
The Court of Appeals (CA) later affirmed the RTC’s decision in its ruling dated July 9, 2013, without specifically addressing the propriety of the RTC’s modification of the production data reckoning dates.
LBP then moved for reconsideration in the CA en banc, which was again denied and eventually led to the present petition for review on certiorari before the Supreme Court.

LBP argued that the RTC improperly applied AO No. 1, Series of 2010 in a case governed by R.A. No. 6657, as the acquisition was made under a voluntary offer scheme rather than under PD No. 27 or EO No. 228.
The petitioner maintained that using June 30, 2009 as the presumptive date of taking deviated from the reckoning periods prescribed by AO No. 5, Series of 1998.
LBP further disputed the imposition of interest at 12% per annum, claiming that the provisional compensation deposit already made should have precluded such imposition.

Whether the RTC, in determining just compensation, has the discretion to modify the prescribed reckoning periods in AO No. 5, Series of 1998 by adopting the presumptive date of taking (June 30, 2009) drawn from AO No. 1, Series of 2010.
Whether such deviation amounts to an abuse of discretion given that the acquisition was subject to R.A. No. 6657 (with its prescribed guidelines) and not subject to the amendments or the instruments applicable to compulsory acquisitions under PD No. 27 and EO No. 228.

Whether the use of recalibrated production data and selling prices, as of a period different from that prescribed in AO No. 5, can be justified in determining the fair market value and just compensation due.
Whether the RTC’s “currentization” of valuation to counteract the erosion of purchasing power due to inflation properly addresses the “undeserved diminution of value.”

Whether the imposition of legal interest at an annual rate of 12% (and subsequently 6% for later periods) on the unpaid balance of just compensation is proper, considering that provisional compensation had already been deposited.