G.R. No. 182209 - Land Bank of the Philippines vs. Santiago, Jr.

Land Bank of the Philippines (LBP), a government financial institution designated as the financial intermediary for the agrarian reform program under Republic Act No. 6657.
Acts in its capacity to effectuate the government’s land acquisition and compensation scheme under the agrarian reform program.

Emiliano R. Santiago, Jr., acting as the heir and administrator of Emiliano F. Santiago, the registered owner of an 18.5615‑hectare parcel of agricultural land in Laur, Nueva Ecija (TCT No. NT‑60359).
Represents the interests of the family in adjudicating the value of the subject property.

Under the Operation Land Transfer (OLT) Program governed by Presidential Decree No. 27, the Department of Agrarian Reform (DAR) acquired 17.4613 hectares of the subject property.
Valuation Formula:

The formula prescribed under P.D. No. 27 and Executive Order No. 228 was used by the LBP and DAR to compute the land value.
The formula:

Land Value (LV) = (Average Gross Production [AGP] per hectare) x 2.5 x Government Support Price (GSP)
Specific computation involved using 90 cavans (for the irrigated portion) and 44.33 cavans (for the unirrigated portion) per hectare to arrive at a total of 3,915 cavans of palay as the base land valuation.

In 1992, LBP reserved an amount of P135,482.12 in trust as just compensation for the heirs based on the computation using a GSP of P35.00, the rate prevailing in 1972.
This reserved sum was subsequently released to the heirs on April 28, 1998, with additional incremental interest payments made on May 21 and June 1, 1998 (amounting to P353,122.62) computed at 6% compounded annually for over two decades.

On November 20, 1998, respondent filed a petition with the Regional Trial Court (RTC) of Cabanatuan City, Branch 23 (sitting as a Special Agrarian Court – SAC Branch 23) to approve and appraise the just compensation.
The petition was docketed under Agrarian Case No. 125-AF.

The court ordered LBP to pay respondent a sum of P1,039,017.88, representing the balance of the land valuation, with a 12% legal interest from 1998 until full payment.
The ruling was premised on the contention that the computation using the historical GSP of P35.00 undervalued the property, given the prevailing rates in later years.

Respondent filed a motion for reconsideration on February 16, 2000, arguing for the use of a higher GSP (P400.00) and for the compounded 6% interest to apply from 1972 to 1998 (26 years).
Owing to a recusal by Judge Andres R. Amante, Jr. on February 10, 2000, the case was re-raffled to the RTC of Cabanatuan City, Branch 29 (SAC Branch 29).

Reaffirmed payment of P1,039,017.88 with legal interest reduced to 6% per annum.
Denied respondent’s claim for the additional compounded incremental interest of 6% on the ground that a higher GSP had already been utilized in computing the land value.
Ordered the return of the unacquired portion of the property since the government only acquired 17.4613 hectares.

Respondent’s petition for review before the Court was denied in a related case concerning the right to incremental interest.
Separately, LBP filed a Petition for Review questioning both the computation of just compensation and the legal interest granted.
The Court of Appeals (CA) in its September 28, 2007 decision affirmed the combined ruling of SAC Branch 23 as modified by SAC Branch 29 but later denied a motion for reconsideration on March 14, 2008.
LBP contended that the CA erred by not applying the prescribed formula under P.D. 27/EO 228 and by allowing a 6% legal interest instead of the proper rate.

Whether the Court of Appeals was correct in disregarding the prescribed valuation formula under Presidential Decree No. 27 and Executive Order No. 228 in computing the just compensation for agricultural lands.
Whether it is proper to shift from using the historical GSP (P35.00) to a higher, contemporaneous GSP (P300.00 or P400.00) in light of the passage and effectivity of Republic Act No. 6657, which governs the agrarian reform process.

Whether the award of a 6% legal interest per annum on the computed just compensation – instead of the 12% rate traditionally applicable for delays in payment – is appropriate.
Whether the additional compounded interest claim based on DAR AO No. 13 is justified in this context.