G.R. No. 213161 - Land Bank of the Philippines vs. Spouses Latog

Case Summary (G.R. No. 213161)

Factual Background

The controversy concerned two contiguous parcels in Cabatangan, Lambunao, Iloilo, identified as Lot Nos. 6003 and 6004, aggregating 16.1089 hectares and covered by Transfer Certificate of Title No. T-86890 in the names of the respondents. The respondents made a voluntary offer to sell the parcels to the Department of Agrarian Reform at P150,000 per hectare, the offer dated February 4, 1998. Pursuant to its role as financial intermediary under Section 64 of R.A. No. 6657 and Section 74 of R.A. No. 3844, Land Bank of the Philippines evaluated the properties and recommended just compensation using an alternate DAR formula, arriving at separate valuations for Lot Nos. 6003 and 6004.

Trial Court Proceedings

Respondents rejected LBP’s valuation and sought remedy before the Provincial Agrarian Reform Adjudication Board, which affirmed LBP’s recommendation by Resolution dated April 15, 2002. Thereafter respondents filed a complaint for judicial determination of just compensation in the RTC. The RTC, acting as a special agrarian court, declined strict adherence to any single DAR formula and considered the factors enumerated in Section 17 of R.A. No. 6657, the owners’ asking price, and tax valuations. The RTC fixed just compensation at P605,291.91 for the 16.1089 hectares, awarded twelve percent interest per annum from December 1, 2001 until full payment, and ordered the five percent cash incentive under Section 19 of R.A. No. 6657.

Court of Appeals Proceedings

Land Bank of the Philippines filed a petition for review with the Court of Appeals, arguing chiefly that the RTC erred by not applying the valuation formula in DAR A.O. No. 5, series of 1998, and that legal interest under Article 2209 of the Civil Code did not apply to this determination. The CA modified the RTC award by increasing the just compensation to P611,445.41 and deleting the twelve percent per annum interest, but otherwise affirmed the RTC’s decision. The CA denied LBP’s motion for reconsideration.

Issues Presented

The Supreme Court was called upon to determine whether the CA erred in affirming with modification the RTC Decision, whether the DAR formulas were mandatory in the assessment of just compensation for lands covered by CARP, whether LBP properly applied an alternate formula, and whether the awards of interest were legally sustainable.

Supreme Court Ruling

The Court granted the petition in part by reversing and setting aside the CA Decision dated March 15, 2013 and the CA Resolution dated June 17, 2014, and remanding Civil Case No. 02-27157 to the RTC, Branch 34, Iloilo City, for reception of additional evidence on the issue of just compensation in accordance with the Court’s directives.

Legal Basis and Reasoning

The Court reaffirmed that just compensation under agrarian reform law is the full and fair equivalent of the property taken and that Section 17 of R.A. No. 6657 lists the guideposts to be considered in valuation. The Court reiterated the principle stated in Alfonso v. Land Bank of the Philippines that the factors of Section 17, as operationalized by the DAR formulas, provide a uniform framework which courts must consider and not disregard, and that deviation is permissible only with a clear, reasoned explanation grounded in the evidence. The Court set out the principal formula in DAR A.O. No. 5, series of 1998 — LV = (CNI x 0.60) + (CS x 0.30) + (MV x 0.10) — and the alternate formula used when comparable sales (CS) are absent — LV = (CNI x 0.90) + (MV x 0.10). The Court found the records deficient because LBP did not adequately justify the inapplicability of the CS factor nor supply sufficient evidence to support its use of the alternate formula, and the RTC did not discuss the presence or absence of CNI, CS, and MV when it departed from the formula. The Court stressed that determination of just compensation is a judicial function requiring reliable and actual data; however, because the Supreme Court is not a trier of facts it could not make the factual findings necessary to resolve the valuation dispute.

Disposition and Remand

Because neither the RTC nor the CA produced competent evidence sufficient to susta

Case Syllabus (G.R. No. 213161)

Parties and Procedural Posture

Land Bank of the Philippines filed a Petition for Review on Certiorari under Rule 45, Rules of Court from the Court of Appeals' judgment in CA-G.R. SP No. 03197.
Spouses Rene I. Latog and Nelda Lucero were the registered owners of the subject lands and the respondents in the petition.
The case arose from a complaint for judicial determination of just compensation filed in the Regional Trial Court, Branch 34, Iloilo City, in Civil Case No. 02-27157.
The Provincial Agrarian Reform Adjudication Board rendered a Resolution affirming LBP’s valuation before the RTC proceedings.
The RTC acted as a special agrarian court and rendered judgment fixing just compensation and awarding interest and an incentive payment.
The Court of Appeals affirmed the RTC decision with modifications and deleted the award of interest.
The Supreme Court entertained the present petition and reviewed the CA Decision dated March 15, 2013 and Resolution dated June 17, 2014.

Key Factual Allegations

The disputed properties consisted of Lot Nos. 6003 and 6004 with an aggregate area of 16.1089 hectares more or less and were covered by TCT No. T-86890 in the name of the respondents.
The respondents made a voluntary offer to sell the subject properties to the Department of Agrarian Reform at P150,000.00 per hectare for a total of P2,400,000.00, more or less.
Land Bank of the Philippines initially recommended just compensation of P137,570.68 for Lot No. 6003 and P167,674.63 for Lot No. 6004 using the alternate DAR formula LV = (CNI x 0.90) + (MV x 0.10).
The RTC did not apply any particular DAR formula and instead considered factors enumerated in Section 17, R.A. No. 6657 and fixed just compensation at P605,291.91 for the 16.1089 hectares.
The RTC awarded 12% interest per annum from December 1, 2001 until full payment and ordered payment of the additional five percent cash incentive under Section 19, R.A. No. 6657.
The Court of Appeals adjusted the RTC valuation to P611,445.41 and deleted the 12% interest award.

Statutory Framework

R.A. No. 6657 governs the determination of just compensation for lands covered by the Comprehensive Agrarian Reform Program.
Section 17, R.A. No. 6657 prescribes the factors to be considered in determining just compensation, including acquisition cost, current value of like properties, actual use and income, owner's sworn valuation, tax declarations, governmental assessments, social and economic benefits, and nonpayment of taxes or loans.
Section 19, R.A. No. 6657 authorizes an additional five percent cash payment as incentive to landowners who voluntarily offered their land for acquisition.
DAR A.O. No. 5, series of 1998 prescribed the DAR formulas for computing land value, including the basic formula LV = (CNI x 0.60) + (CS x 0.30) + (MV x 0.10) and the alternate formula LV = (CNI x 0.90) + (MV x 0.10) when comparable sales are not present.
Article 2209 of the Civil Code was invoked by petitioner in contesting the award of legal interest on the determination of just compensation.

Lower Court Rulings

The Provincial Agrarian Reform Adjudication Board affirmed LBP’s recommended valuation in a Resolution dated April 15, 2002.
The RTC, in its Decision dated September 28, 2007, fixed just c