LAND BANK OF THE PHILIPPINES, PETITIONER, VS. HEIRS OF SPOUSES JORJA RIGOR-SORIANO AND MAGIN SORIANO, NAMELY: MARIVEL S. CARANDANG AND JOSEPH SORIANO, RESPONDENTS.

Land Bank of the Philippines versus Heirs of Spouses Jorja Rigor-Soriano and Magin Soriano

The Case

This is an appeal by the Land Bank of the Philippines against the Heirs of Spouses Jorja Rigor-Soriano and Magin Soriano, namely Marivel S. Carandang and Joseph Soriano. The action began as a claim for just compensation over two agricultural parcels that had been placed under Operation Land Transfer, and it matters for two reasons. First, it shows how the courts fix just compensation when the agrarian reform process is still incomplete. Second, and more importantly for the Bar candidate, it is a clean illustration of a judicial compromise — a contract by which the parties end a pending litigation — and of how the Supreme Court treats such an agreement when it is submitted for approval.

Procedural History

The respondents commenced an action for just compensation before the Regional Trial Court of Cabanatuan City, Branch 23, sitting as a Special Agrarian Court. After trial, the trial court rendered judgment ordering Land Bank to pay just compensation of 1,227,571.10 pesos, plus six percent legal interest per annum from the date of taking, which it fixed as October 25, 1999, until fully paid. Both Land Bank and the respondents moved for reconsideration, but the trial court denied their motions. A clerical error in the dispositive portion naming the landowner as Manolo Goduco was later corrected to name Marivel S. Carandang and Joseph Soriano.

Land Bank appealed to the Court of Appeals, which affirmed the trial court. The Court of Appeals held that the agrarian reform process was still incomplete because just compensation had yet to be settled, and that Republic Act No. 6657 governed, with Presidential Decree No. 27 and Executive Order No. 228 having only suppletory effect. It found the trial court's valuation supported by Section 17 of Republic Act No. 6657. Land Bank's motion for reconsideration was denied, and Land Bank came to the Supreme Court by petition for review on certiorari.

Facts

The respondents are the children of the late Spouses Jorja Rigor-Soriano and Magin Soriano, who owned two parcels of land in Nueva Ecija: one of 10.9635 hectares in Poblacion and Talabutab, General Natividad, and another of 4.1224 hectares in Macabucod, Aliaga. The properties became subject to Operation Land Transfer.

Land Bank and the Department of Agrarian Reform valued the properties at 10,000 pesos per hectare. The respondents contended that this was too low, claiming the lands were irrigated and yielded 150 cavans per hectare per season for at least two seasons a year, and asked that the valuation be pegged at 1,800,000 pesos based on Administrative Order No. 61, Series of 1992, and Republic Act No. 6657. Land Bank insisted that Presidential Decree No. 27 and Executive Order No. 228 governed, that the properties had been taken in 1972 and redistributed to farmer-beneficiaries, and that its role was only to pay the valuations fixed by the Department of Agrarian Reform.

While the case was pending in the Supreme Court, Land Bank revalued the properties under Department of Agrarian Reform Administrative Order No. 1, Series of 2010, and communicated the new valuations to the respondents for unconditional acceptance. The parties then executed an Agreement dated November 29, 2012, acknowledging receipt of the increased amounts and manifesting that these represented the fair, full and just compensation for the properties, and asking the Court to approve the Agreement as its disposition of the petition.

Issues

• Whether or not the Court of Appeals erred in disregarding the ruling on the date of taking of lands under Presidential Decree No. 27 and Executive Order No. 228.
• Whether or not the lands were deemed taken by operation of law on October 21, 1972, the date of effectivity of Presidential Decree No. 27.
• Whether or not the government support price for palay of 35 pesos under Presidential Decree No. 27 and Executive Order No. 228 is subject to mandatory judicial notice.

Applicable Provisions

Article 2028 of the Civil Code defines a compromise:

A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced.

This is the provision the Court uses to characterize the parties' Agreement as a judicial compromise, because its object is to put an end to a litigation already commenced.

Section 17 of Republic Act No. 6657, which the Court of Appeals applied in upholding the valuation, provides:

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

This enumerates the factors for fixing just compensation and supplies the standard against which the trial court's valuation was measured.

Ruling

The Court did not reach the merits of the assigned errors. Instead, it treated the Agreement as a compromise freely and voluntarily entered into for the purpose of finally settling the dispute. Under Article 2028 of the Civil Code, a compromise is a contract perfected by mutual consent. A judicial compromise, while immediately binding between the parties upon execution, is not executory until approved by the court and reduced to a judgment. Its validity depends on compliance with the requisites and principles of contracts, and its terms must not be contrary to law, morals, good customs, public policy and public order.

Reviewing the terms of the Agreement, the Court found it to be a judicial compromise because the parties intended it to terminate their pending litigation by fully settling their dispute. The respondents had expressly signified their unconditional or absolute acceptance and full receipt of the amounts as just compensation, and the parties considered the case closed and terminated. With that, the ultimate objective of the action to determine just compensation was achieved.

Doctrine

A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced. It is judicial when the objective is to put an end to a pending litigation, and extrajudicial when the objective is to avoid one. Being a contract, it is perfected by mutual consent, but a judicial compromise, though immediately binding between the parties upon execution, is not executory until approved by the court and reduced to a judgment. Its validity depends on compliance with the requisites and principles of contracts, and its terms must not be contrary to law, morals, good customs, public policy and public order. Where the parties submit such an agreement for approval and it complies with the law, the Court approves it and renders judgment in accordance with its terms.

Disposition

The Court approved the Agreement, declared the appeal closed and terminated, and ordered that no costs be assessed against either party.

Remember This

Memorize this line: a judicial compromise is immediately binding upon execution but not executory until approved by the court and reduced to a judgment. Examiners use this case to test the nature and requisites of a compromise under Article 2028 of the Civil Code, and to test whether a pending agrarian just compensation case may be validly terminated by the parties' agreement.