DEPARTMENT OF AGRARIAN REFORM (DAR), REPRESENTED BY HON. NASSER C. PANGANDAMAN, IN HIS CAPACITY AS DAR OIC-SECRETARY, PETITIONER, VS. CARMEN S. TONGSON, RESPONDENT.

Department of Agrarian Reform versus Tongson

The Case

This is a petition for review on certiorari brought by the Department of Agrarian Reform against Carmen S. Tongson, a landowner whose rice and corn lands in Davao City were taken under the agrarian reform program. The dispute is not about whether the land was taken, but about how much the landowner must be paid, and under which law that amount is computed. The case matters because it fixes two rules every agrarian law examinee must know: which valuation law governs when just compensation was never settled before the Comprehensive Agrarian Reform Law took effect, and which date counts as the date of taking.

Procedural History

Tongson filed a petition for the determination of just compensation before the Special Agrarian Court, Branch 15 of the Regional Trial Court of Davao City. That court formed a Board of Commissioners, which used the market-data approach and recommended seventy-five thousand pesos per hectare for the Bayabas properties and ninety thousand pesos per hectare for the Wangan property. The Special Agrarian Court then rendered judgment ordering the Department to pay twenty-five thousand pesos per hectare for the thirty hectares in Bayabas, Toril, and forty thousand pesos per hectare for the twenty hectares in Wangan, Calinan, each with legal interest from June 1, 1989 until fully paid.

The Department appealed to the Court of Appeals under Rule 41, arguing that the trial court should have applied Presidential Decree No. 27 and Executive Order No. 228 instead of the Comprehensive Agrarian Reform Law. The Court of Appeals dismissed the appeal, affirming the trial court with a modification of the commissioners' fees, and held that the Comprehensive Agrarian Reform Law governed, with the older agrarian laws having only suppletory application. The Department's motion for reconsideration was denied, so it elevated the matter to the Supreme Court by petition for review on certiorari under Rule 45.

Facts

Tongson owned four parcels of agricultural land in Davao City, three in Bayabas, Toril and one in Wangan, Calinan. The lands were devoted to rice and corn under lease-tenancy arrangements, so they fell under Presidential Decree No. 27, the Tenants Emancipation Decree.

In 1988 the Department offered to pay nine thousand pesos per hectare for the Bayabas properties. Tongson did not act on the offer because she was leaving for the United States for her husband's medical treatment. When she returned to Davao in 1989, she discovered that, except for the orchard and coconut portions, her properties had been taken over by the Department, which had fixed the acquisition cost at fifteen hundred pesos per hectare for Bayabas and eight hundred pesos per hectare for Wangan, and had issued emancipation patents to farmer-beneficiaries.

The Department insisted the lands were placed under the agrarian reform program after notice to her, and that the valuation followed Presidential Decree No. 27 in relation to Executive Order No. 228. Tongson then went to the Special Agrarian Court in 1993 to have just compensation determined.

Issues

• Whether or not just compensation for lands acquired under Presidential Decree No. 27, but not settled before the passage of Republic Act No. 6657, should be computed under Republic Act No. 6657 rather than under Presidential Decree No. 27 and Executive Order No. 228.
• Whether or not the date of taking, for purposes of computing just compensation, is the effectivity of Presidential Decree No. 27 or the date of issuance of the emancipation patents.

Applicable Provisions

Presidential Decree No. 27 provides the valuation formula the Department invoked:

For the purpose of determining the cost of the land to be transferred to the tenant-farmer pursuant to this Decree, the value of the land shall be equivalent to two and one half (2-1/2) times the average harvest of three normal crop years immediately preceding the promulgation of this Decree.

This ties the price to crop harvest at the time of the decree, which is why the Department wanted it applied.

Section 2 of Executive Order No. 228 implements that formula:

SECTION 2. Henceforth, the valuation of rice and corn lands covered by P.D. No. 27 shall be based on the average gross production determined by the Barangay Committee on Land Production in accordance with Department Memorandum Circular No. 26, series of 1973 and related issuances and regulation of the Department of Agrarian Reform. The average gross production per hectare shall be multiplied by two and a half (2.5), the product of which shall be multiplied by Thirty-Five Pesos (P35.00), the government support price for one cavan of 50 kilos of palay on October 21, 1972, or Thirty-One Pesos (P31.00), the government support price for one cavan of 50 kilos of corn on October 21, 1972, and the amount arrived at shall be the value of the rice and corn land, as the case may be, for the purpose of determining its cost to the farmer and compensation to the landowner.

This pegs value to the 1972 government support price, the very figure the Court refused to use.

Section 17 of Republic Act No. 6657 provides the competing standard:

Sec. 17. Determination of Just Compensation. - In determining just compensation, the cost of acquisition of the land, the current value of the like properties, its nature, actual use and income, the sworn valuation by the owner, the tax declarations, and the assessment made by government assessors shall be considered. The social and economic benefits contributed by the farmers and the farm workers and by the Government to the property as well as the non-payment of taxes or loans secured from any government financing institution on the said land shall be considered as additional factors to determine its valuation.

This is the market-data standard the Court held applicable to lands whose compensation was still unsettled when the law took effect.

Ruling

On the first issue, the Court ruled for Tongson. The parties did not dispute that the lands were acquired under Presidential Decree No. 27, nor that just compensation had not been settled before Republic Act No. 6657 took effect. The Court held that where just compensation was not settled prior to the passage of Republic Act No. 6657, it must be computed under that law, even though the property was acquired under Presidential Decree No. 27. The agrarian reform process was still incomplete because compensation remained unpaid, so the process must be concluded under the new law, with Presidential Decree No. 27 and Executive Order No. 228 having only suppletory effect. The Court stressed that just compensation must be the full and fair equivalent of the property taken, real, substantial, full and ample.

On the second issue, the Court rejected the Department's claim that the taking occurred on October 21, 1972, the date Presidential Decree No. 27 took effect. The Court held that the seizure of the landholding did not take place on the date of effectivity of the decree but would take effect upon payment of just compensation. The date of taking is reckoned from the issuance dates of the emancipation patents, because an emancipation patent is the conclusive authority for the issuance of a transfer certificate of title in the grantee's name, and it is from its issuance that the grantee acquires the vested right of ownership, subject to payment of just compensation.

Because the emancipation patents were not attached to the records, and the Court could only infer from portions of the trial court decision that they were issued in 1989, it could not fix the exact reckoning date. It therefore remanded the case to the Special Agrarian Court for reception of evidence on the date of the grant of the emancipation patents, which shall be the basis for computing just compensation under the market-data approach of Republic Act No. 6657.

Doctrine

First, if just compensation for land acquired under Presidential Decree No. 27 was not settled before the passage of Republic Act No. 6657, it must be computed under Republic Act No. 6657, with Presidential Decree No. 27 and Executive Order No. 228 having only suppletory application. Second, the date of taking for purposes of computing just compensation is not the effectivity of Presidential Decree No. 27 but the date of issuance of the emancipation patents, since it is from that issuance that the farmer-beneficiary acquires the vested right of ownership. These rules flow from Section 17 of Republic Act No. 6657, which supplies the market-data factors, and they displace the crop-harvest and 1972 support-price formulas of Presidential Decree No. 27 and Executive Order No. 228.

Disposition

The Court affirmed the Court of Appeals and remanded the records to the Special Agrarian Court, Branch 15 of the Regional Trial Court of Davao City, for further reception of evidence on the date of the grant of the emancipation patents, which shall serve as the basis for computing just compensation under the market-data approach of Republic Act No. 6657.

Remember This

Memorize this line: unsettled compensation under Presidential Decree No. 27 is computed under Republic Act No. 6657, reckoned from the issuance of the emancipation patents. Examiners use this case to test the suppletory role of Presidential Decree No. 27 and Executive Order No. 228 and the rule that the taking occurs upon payment of just compensation, not on October 21, 1972.