Title
Land Bank of the Philippines vs. Palmares
Case
G.R. No. 192890
Decision Date
Jun 17, 2013
Respondents contested LBP's land valuation under RA 6657; SC remanded for recomputation, citing non-compliance with Section 17 and DAR guidelines.
just compensation
valuation
agricultural land
A

Case Summary (G.R. No. 192890)

Factual Background

Respondents inherited a 19.98-hectare agricultural land in Barangay Tagubang, Passi City, Iloilo, covered by TCT No. T-11311. In 1995, they voluntarily offered the land for sale to the government pursuant to RA 6657. As a consequence, the DAR acquired 19.1071 hectares of the entire area. LBP valued the acquired portion at P440,355.92. Respondents rejected this valuation.

Because respondents refused the proposed compensation, the Department of Agrarian Reform Adjudication Board (DARAB) conducted summary proceedings to determine just compensation. It adopted LBP’s valuation, and the government deposited the same amount as provisional compensation in respondents’ credit.

On August 17, 2001, respondents filed a petition for judicial determination of just compensation, docketed as Civil Case No. 01-26876, before the RTC of Iloilo City. During the pendency of that case, the trial court required LBP to recompute the value of the land. LBP complied and, through a Manifestation dated November 4, 2002, stated that its recomputed value increased from P440,355.92 to P503,148.97, but respondents still rejected the amount.

Trial Court Proceedings

On March 27, 2006, the RTC rendered a Decision fixing just compensation at P669,962.53 for the 19.1071 hectares taken by the government under RA 6657, and ordered LBP to pay the same plus 12% interest per annum from June 1995 until full payment. The RTC also applied Section 19 of RA 6657 by awarding an additional five percent (5%) cash incentive for voluntarily offering the land for sale.

In arriving at P669,962.53, the RTC used a computational method that took the average of two components: (1) the price per hectare computed by LBP in accordance with DAR guidelines, and (2) the market value per hectare reflected in the land’s 1997 tax declaration. It thus constructed a computation by category of land (corn, rice, and bamboo) using the LBP per-hectare value and the corresponding tax-declaration market value, averaged for each land type, multiplied by the respective hectares, and totaled the result to P669,962.53.

The Parties’ Contentions Before the CA

LBP appealed to the CA. It argued that the RTC computation did not properly consider the factors expressly enumerated in Section 17 of RA 6657. Section 17 instructs the determination of just compensation by considering, among others, the cost of acquisition, current value of like properties, the land’s nature, actual use, and income, the sworn valuation by the owner, tax declarations, and assessments made by government assessors, plus additional factors relating to social and economic benefits and non-payment of taxes or loans secured from government financing institutions, if any.

LBP also insisted, in its later motion for reconsideration, that its method already incorporated the market value per tax declaration in 1995 when the land was offered, consistent with DAR’s prescribed formula under DAR Administrative Order No. 6 (as amended by DAR Administrative Order No. 11). By contrast, the RTC used the market value in the 1997 tax declaration, which, according to LBP, produced a “double take up” of the market value per tax declaration.

Ruling of the Court of Appeals

On August 28, 2007, the CA affirmed the RTC’s award of just compensation as consonant with Section 17 of RA 6657 and the pertinent DAR administrative orders. The CA reasoned that determining just compensation in agrarian valuation proceedings is essentially a judicial function, and courts should not be rigidly limited by mathematical formulas.

However, the CA modified the interest award. It ordered that the 12% interest per annum apply only to the remaining balance of P229,606.61, computing the balance in light of the fact that LBP had already previously deposited P440,355.92 corresponding to its valuation.

The Issue Raised in LBP’s Motion for Reconsideration

In its motion for reconsideration, LBP maintained that it complied with the valuation framework under DAR administrative orders and that the RTC’s approach effectively duplicated the market value taken from tax declarations. It also pressed a procedural argument: during the pendency of the motion, LBP urgently moved for consolidation of the case with another CA case, CA-G.R. CEB SP No. 01845, involving Republic of the Philippines, represented by the Department of Agrarian Reform v. Virginia Palmares, et al. LBP explained that the DAR had filed a separate appeal of the March 27, 2006 RTC Decision before a different CA division, which rendered a Decision on September 28, 2007 ordering remand for determination of just compensation with at least three commissioners.

LBP, however, failed to attach a copy of the September 28, 2007 Decision in CA-G.R. CEB SP No. 01845 both to the urgent motion to consolidate and to the Supreme Court petition later filed. The CA denied LBP’s motion for reconsideration and urgent consolidation request in its June 29, 2010 Resolution.

LBP thereafter anchored its Supreme Court petition on three main allegations: first, that the CA erred in affirming with modification because the RTC’s computation allegedly did not follow the legally prescribed valuation factors under Section 17 of RA 6657 as translated into DAR formulas and as construed in jurisprudence; second, that the CA erred in holding LBP liable for 12% interest; and third, that the CA erred in failing to consolidate and remand in view of the September 28, 2007 CA ruling in CA-G.R. CEB SP No. 01845.

Legal Basis and Reasoning

The Supreme Court held that the petition had merit. It treated Section 17 of RA 6657 as the principal legal basis for determining just compensation, identifying the statutory factors that guide special agrarian courts. It also recognized that under the rule-making power granted by Section 49 of RA 6657, the DAR had translated the statutory factors into a basic valuation formula.

The Court focused on the RTC’s valuation method. It observed that the trial court found the total valuation of P440,355.92 by LBP and the DAR “unrealistically low,” based on computation under DAR AO No. 6 (1992), as amended by DAR AO No. 11 (1994). The RTC then proceeded by adding that valuation to the market value shown in the 1997 tax declaration, and it used the average of those values to arrive at P669,962.53.

The Supreme Court held that this method amounted to a deviation from the valuation formula required by law and DAR administrative orders. It reasoned that the “double take up” of market value per tax declaration as a valuation factor destroyed the rationale of the DAR’s formula. The Court drew a parallel to its earlier ruling in Land Bank of the Philippines v. Barrido (citing Land Bank of the Philippines v. Barrido, G.R. No. 183688, August 18, 2010), where it held that using a different formula—by considering an average between a DAR computation under valuation rules and the tax declaration market value—constituted an obvious departure from the law’s mandate and DAR administrative order.

While acknowledging that the determination of just compensation is a judicial function and that courts exercise discretion, the Supreme Court emphasized that the judge could not abuse discretion by failing to take into full consideration the factors identified by Section 17 of RA 6657 and the implementing DAR rules. It accepted LBP’s argument that market value in the basic DAR formula has only a limited weight, and that the weight scheme remains constant unless certain comparable sales or income factors are absent. It explained that when market value is “double counted,” the formula loses its internal allocation of weights and undermines the valuation approach that the Court described as production-based and tied to principles of affordability for agrarian beneficiaries.

Disposition: Consolidation and Remand

Because the RTC’s computation did not conform to the legally required valuation framework, the Supreme Court ordered procedural consolidation to avoid conflicting outcomes. It directed that the instant CA case (CA-G.R. CEB SP No. 01846) be consolidated with CA-G.R. CEB SP No. 01845, and it remanded the matter to the RTC of Iloilo City, Branch 34.

The Supreme Court ordered that on remand, the RTC should determine, with dispatch and with the assistance of at least three (3) commissioners, the just compensation due respondents in accordance with Section 17 of RA

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