FRANCISCO H. ESCAÑO, JR. AND LYDIA T. ESCAÑO, PETITIONERS, VS. COURT OF APPEALS AND LAND BANK OF THE PHILIPPINES, RESPONDENTS.

Escaño versus Court of Appeals

The Case

This is a petition for review on certiorari brought by spouses Francisco and Lydia Escaño against the Court of Appeals and the Land Bank of the Philippines. The Escaños owned agricultural land in Bohol and offered it to the government under the agrarian reform program. When they rejected the government's valuations as too low, they went to the Special Agrarian Court to ask for just compensation. The Land Bank objected, insisting that the administrative agencies must first finish their own valuation before any court may act. The case matters because it settles a question every agrarian law practitioner must answer: who has the final say over just compensation, the administrative agencies or the courts?

Procedural History

The Escaños filed a petition for just compensation before the Special Agrarian Court in Bohol. The Land Bank moved to dismiss on the grounds of failure to exhaust administrative remedies and lack of real parties in interest. The trial court denied the motion after the Escaños showed a confirmation of a deed of sale executed by the Development Bank of the Philippines in their favor. After pre-trial, the court issued a pre-trial order limiting the legal issue to the amount of just compensation and ordered the respondents to file responsive pleadings. The Land Bank then filed a second motion to suspend proceedings or dismiss, which the trial court also denied, finding that the Land Bank had been given sufficient opportunity to arrive at a true and proper valuation.

The Land Bank went to the Court of Appeals on a petition for certiorari, claiming that the trial court acted without jurisdiction or with grave abuse of discretion. The appellate court granted the petition, set aside the orders of the trial court, and ordered the dismissal of the petition before the Special Agrarian Court. The Escaños then elevated the matter to the Supreme Court by petition for review on certiorari.

Facts

The Escaños owned more than sixty-three hectares of agricultural land in Vallehermoso, Carmen, Bohol. They offered about fifty-nine hectares to the government through the Department of Agrarian Reform under a voluntary offer to sell. The provincial agrarian reform office twice computed the value of the land, and the Escaños twice rejected the amounts for being much lower than the actual fair value. After the second rejection, the Department stopped communicating with them. The Escaños claimed that during this hiatus, farm production fell sharply because the farmers were allegedly advised to deliberately reduce production to depress the land value.

On November 29, 1989, the Escaños filed their petition for just compensation before the Special Agrarian Court in Bohol. Earlier, on August 25, 1989, the Development Bank of the Philippines had confirmed a deed of sale in their favor, which answered the objection that they were not the registered owners.

On June 14, 1990, President Corazon Aquino issued Executive Order Number 405, which vested in the Land Bank the primary responsibility to determine land valuation and compensation for private agricultural lands under the voluntary offer to sell or compulsory acquisition arrangements governed by the Comprehensive Agrarian Reform Law. The Land Bank then moved to suspend or dismiss the proceedings, arguing that the case fell within the primary jurisdiction of the administrative agencies and that the Escaños had not exhausted administrative remedies. The trial court denied the motion, and the Court of Appeals reversed it.

Issues

• Whether or not the Special Agrarian Court had jurisdiction from the beginning to entertain the petition for determination of just compensation.
• Whether or not the pendency of the case before the Special Agrarian Court barred the Land Bank from filing its petition for certiorari before the Court of Appeals.
• Whether or not compliance with Executive Order Number 405 was a precondition to the filing of the petition for just compensation, even though the petition was filed before that order was issued.

Applicable Provisions

Section 1, Rule Seventeen of the Transitory Provisions of the Revised Rules of the Department of Agrarian Reform Adjudication Board provides:

SECTION 1. Transitory Provisions. All agrarian cases pending before the regular courts of law at the time of the effectivity of these Rules shall remain with such courts until their final termination.

This provision was invoked by the Court of Appeals to argue that the Special Agrarian Court could not feign jurisdiction, but the Supreme Court read the jurisdiction of the courts differently.

Section 50 of Republic Act Number 6657, as construed in the decision, provides:

Special Agrarian Courts which are Regional Trial Courts, are given original and exclusive jurisdiction over two categories of cases, to wit: (1) all petitions for the determination of just compensation to landowners and (2) the prosecution of all criminal offenses under Republic Act Number 6657.

This is the core provision: it vests original and exclusive jurisdiction over just compensation cases in the Special Agrarian Courts, not in the administrative agencies.

Ruling

On the first issue, the Court ruled that jurisdiction properly belongs to the Special Agrarian Court. The Court held that the Department of Agrarian Reform is an administrative agency which cannot be granted jurisdiction over cases of eminent domain, for such are takings under the Comprehensive Agrarian Reform Law, and over criminal cases. The valuation of property in eminent domain is essentially a judicial function which cannot be vested in administrative agencies. What agrarian adjudicators are empowered to do is only to determine in a preliminary manner the reasonable compensation to be paid to landowners, leaving to the courts the ultimate power to decide the question. It would subvert the original and exclusive jurisdiction of the Regional Trial Court for the Department to vest original jurisdiction in compensation cases in administrative officials and make the Regional Trial Court an appellate court for the review of administrative decisions.

On the second issue, the Court held that the Court of Appeals committed reversible errors of law in giving due course to the Land Bank's petition and in setting aside the orders of the trial court.

On the third issue, the Court found that the Escaños had complied with the procedural requirements up to the filing of their petition for just compensation. The Court noted that the Land Bank was apparently not notified nor consulted by the Department in fixing the first and second offers. The Notice of Acquisition was sent to the petitioners five months after the second offer, and only after they had already filed their petition. By that time, the Special Agrarian Court had already acquired jurisdiction over the controversy. The Land Bank had no basis to insist on dismissing or suspending the proceedings so it could first exercise its mandate, but nothing prevented it from participating in the judicial proceedings, and the trial court had rightly ordered it to submit responsive pleadings.

Doctrine

First, the Special Agrarian Courts, which are Regional Trial Courts, have original and exclusive jurisdiction over all petitions for the determination of just compensation to landowners and over the prosecution of all criminal offenses under the Comprehensive Agrarian Reform Law. Second, the valuation of property in eminent domain is essentially a judicial function and cannot be vested in administrative agencies. Third, agrarian adjudicators may only determine in a preliminary manner the reasonable compensation to be paid, leaving to the courts the ultimate power to decide the question. Fourth, once a court has acquired jurisdiction over a just compensation case, the Land Bank may no longer insist on suspending the proceedings to first exercise its administrative mandate; it may instead participate in the judicial proceedings.

Disposition

The petition was granted. The decision and resolution of the Court of Appeals were reversed and set aside, and the Special Agrarian Court was ordered to continue hearing the case without further delay, with no pronouncement as to costs.

Remember This

Memorize this line: the valuation of property in eminent domain is essentially a judicial function which cannot be vested in administrative agencies, and agrarian adjudicators may only make a preliminary determination of compensation. Examiners use this case to test jurisdiction over just compensation under the Comprehensive Agrarian Reform Law, and to test whether a landowner must first exhaust administrative remedies before going to the Special Agrarian Court.