Title
Land Bank of the Philippines vs. Del Prado Ledesma, Inc.
Case
G.R. No. 229079
Decision Date
Jun 30, 2021
A 2,225-sqm land in Bulacan, foreclosed by DBP, was placed under CARP in 1998. Disputes over just compensation led to RTC and CA rulings, later remanded by SC for proper valuation under RA 6657, emphasizing judicial independence and timely payment.
del prado ledesma inc
just compensation
sugarcane property
A

Case Summary (G.R. No. 86100-03)

Factual Background

The land originally belonged to Spouses Angel Armando and Remedios Martin (Spouses Angel and Remedios) under TCT No. 39413(M). In 1979, the spouses mortgaged the property to DBP to secure loans totaling P400,000.00. After default, the property was foreclosed in 1990, and DBP acquired it as the highest bidder. Title was consolidated in DBP’s name on January 13, 1992, due to the spouses’ failure to redeem.

In 1998, a portion of the property measuring 1,567 sq.m. was placed under CARP pursuant to RA No. 6657, as amended. On May 13, 1998, LBP received from the DAR Provincial Agrarian Reform Office (PARO) of Bulacan a request to determine the value of the property for purposes of payment of just compensation. LBP proposed compensation of P11,922.32 to DBP, based on its valuation process. DBP rejected this amount and the matter proceeded to the Provincial Agrarian Reform Adjudicator (PARAD) through a summary proceeding.

DBP argued before the PARAD that the property was outside the scope of RA No. 6657 because parts were residential and not devoted to agriculture, and because it was not a tenanted agricultural land. In its Decision dated December 29, 2003, the PARAD assumed jurisdiction and sustained LBP’s valuation. DBP’s motion for reconsideration was denied by PARAD Resolution dated January 24, 2005. DBP then appealed to the DAR Adjudication Board (DARAB), which affirmed the PARAD ruling in a Decision dated December 10, 2007.

Following the administrative determinations, DBP filed a Petition for Determination of Just Compensation before the RTC of Malolos City, Bulacan, in its capacity as a SAC.

Proceedings Before the RTC as a Special Agrarian Court

DBP maintained that the DARAB-affirmed LBP valuation was “grossly erroneous and highly prejudicial” to DBP’s interests. DBP presented witnesses and evidence, including Leonardo L. Simangan (DBP Project Evaluation Officer V), who conducted an appraisal inspection when the property was offered as collateral and issued an appraisal report stating a valuation of P2,100.00/sq.m., corresponding to P3,290,700.00 for the CARP-covered 1,567 sq.m. portion. DBP likewise presented Michael D. Lora (DBP Account Officer, Asset Management Department), whose appraisal report addressed valuation “as of August 8, 1979 to May 29, 2009,” stating a valuation of P133,500.00 as of August 8, 1979.

LBP presented Mina Grace Francisco, an LBP Property Appraiser and Officer-in-Charge of its Claims Processing Valuation and Payment Division. Francisco testified that LBP used the valuation guidelines and formula under DAR AO No. 5-98. Under the basic formula, land value (LV) is computed as LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1). LBP, however, used an alternative formula, LV = (CNI x 0.9) + (MV x 0.1), because no comparable sales transaction was available on record with the Register of Deeds that would meet DAR AO No. 5-98 criteria to apply the CS factor.

LBP explained the derivation of the CNI factor by using industry data where DBP allegedly did not submit a statement of net income, applying an assumed net income rate and using figures sourced from government sources. LBP likewise computed the MV factor using factors drawn from the provincial assessor’s Base Unit Market Value for riceland-unirrigated secured from tax declaration data and applied location and market value adjustment using RCPI factors. After applying the LV computation and multiplying by the CARP-covered area, LBP arrived at the amount of P11,922.32 for the 1,567 sq.m. portion.

The RTC, in its Decision dated December 10, 2013, discussed jurisdictional points concerning the RTC’s role as SAC and noted that its proceedings were not a mere continuation of administrative determinations by the DAR agencies. Despite this, the RTC sustained the valuation derived from LBP’s methodology and held that the courts could not disregard DAR AO No. 5-98 unless invalidated. The RTC fixed just compensation at P11,922.32, ordered LBP to pay the same to DBP with adjustments for any amount previously received, and made no costs ruling.

Appellate Review in the Court of Appeals

DBP and LBP both sought reconsideration before the CA, but the CA denied both motions in a Resolution dated January 11, 2017. In its Decision dated August 11, 2016, the CA affirmed the RTC ruling with modification.

The CA rejected DBP’s valuation method. It characterized DBP’s appraisal reports as not aligned with DAR AO No. 5-98, and it observed that DBP’s computations were largely based on DBP’s internal policy and on an appraisal date not tied to the time of taking relevant to the expropriation framework.

For LBP’s part, the CA found that LBP’s valuation was consistent with the formula and guidelines of DAR AO No. 5-98, but it identified an inaccuracy in the computation of the CNI component. Using the Field Investigation Report, the CA treated the production cycle as having four months per crop cycle with three production periods per year, yielding an average production of 90 cavans or 4,500 kg per crop cycle per hectare. From this, the CA computed the annual AGP per hectare as 270 cavans or 13,500 kg per year. Applying the same formula used by LBP, the CA computed just compensation at P18.85/sq.m., or a total of P29,544.01 for the CARP-covered portion. The CA also imposed legal interest on the unpaid difference from the taking until June 30, 2013, and thereafter at a different rate until full payment.

The CA ultimately modified the RTC award by increasing the value from P11,922.32 to P29,544.01, and it ordered LBP to pay the remaining balance of P17,621.69 with specified interest rates.

The Parties’ Contentions in the Supreme Court

In G.R. No. 229274, DBP maintained that the CA gravely erred when it relied solely on LBP’s valuation grounded on DAR AO No. 5-98. DBP argued that DAR issuances are administrative guidelines and not binding on courts, and it urged that the proper valuation should use DBP’s methodology based on fair market value, particularly under the Market Data Approach. DBP described this as similar to the alternative DAR AO formula where comparable sales (CS) would be used together with market value (MV).

In G.R. No. 229289, LBP insisted that its computation of CNI was correct. LBP also faulted the CA’s award of interest, arguing that no interest should accrue because it had already deposited a provisional compensation based on its valuation.

Legal Basis and Reasoning of the Supreme Court

The Supreme Court reiterated the “well-settled rule” that the determination of just compensation is a judicial function vested with the RTC as SAC, not with administrative agencies. While the RTC must operate within the parameters set by governing law and rules, the Court emphasized that the courts may consider the implementing agency’s expertise through DAR AO No. 5-98. Still, the courts are not bound to apply formulaic computation without exercising judicial assessment.

The Court stressed that Section 17 of RA No. 6657, as amended, enumerates valuation factors that cannot be unjustifiably disregarded. These factors include the cost of acquisition of the land, the current value of like properties, the nature, actual use, and income, the owner’s sworn valuation, tax declarations, and the assessment made by government assessors, plus social and economic benefits and the non-payment of taxes or loans secured from government financing institutions. The Court clarified that while the DAR AO formulas should be taken into account due to the DAR’s role as implementing agency, courts retain authority to relax strict application when warranted by case circumstances, provided they explain the deviation. The Court held that the “justness” of valuation factors, formula selection, and weights are matters for courts to decide.

Applying these principles, the Supreme Court found that both the RTC and CA sustained LBP’s valuation “on the sole ground” that LBP’s computation conformed to DAR AO No. 5-98. The Court held that the lower courts disregarded the specific Section 17 factors and did not conduct a sufficiently independent judicial determination or verification of the genuineness and veracity of the figures and values used.

A key reason for this conclusion was the absence of an income statement from DBP, which led LBP to source significant inputs from “industry data” allegedly supplied by the DA and the Bureau of Agricultural Statistics, and to apply them through the formula. The Court noted that the valuation data (including RCPI-related figures allegedly issued by the NSO) were not supported by competent evidence showing certifications from the relevant government agencies for the specific amounts and industry data used. The Court recognized that DAR AO No. 5-98 permits use of industry data from government agencies, and that LBP has initial responsibility to determine value. However, the Court characterized LBP’s valuation as an initial determination, not a conclusive one. The court, clothed with the power and duty to make the final determination, cannot simply rely on administrative computations without the evidentiary verification necessary for a judicial conclusion.

The Court further refused to adopt DBP’s computation because it relied on appraisal values developed in 2009, rather than at the time of taking in 1998. It reiterated the controlling principle that just compensation must be valued at the time of taking, or when the landowner was deprived of the use and benefit of the property. Accordingly, evidence presented for valuation must reflect values prevalent at the time of taking for similar agricultural lands.

On the award of interest, the Supreme Court rejected LBP’s position that prompt provisional payment barred interest. The Court held that just compensation encompasses not only fair valuation but also timely payment in full as finally determined by the court. Therefore, even if provisional compensation had been promptly deposited, delay still exists whe

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