LANDBANK OF THE PHILIPPINES, PETITIONER, VS. EDNA MAYO ALCANTARA AND HEIRS OF CRISTY MAYO ALCANTARA, RESPONDENTS.

Land Bank of the Philippines versus Edna Mayo Alcantara and Heirs of Cristy Mayo Alcantara

The Case

This is a petition for review on certiorari brought by the Land Bank of the Philippines against Edna Mayo Alcantara and the heirs of Cristy Mayo Alcantara, arising from the determination of just compensation for a parcel of agricultural land acquired by the government in 1998 under the Comprehensive Agrarian Reform Program. The respondents did not question the acquisition of their land; they questioned only its valuation. The case matters because it fixes the relationship between the courts and the executive department in fixing just compensation: the courts must apply both the factors enumerated by Congress in Section 17 of Republic Act Number 6657 and the basic formula laid down by the Department of Agrarian Reform, and may depart from that formula only upon a showing that its application would not yield just compensation.

Procedural History

The respondents filed a protest with the Department of Agrarian Reform Adjudication Board for Region Four, which conducted summary proceedings for the preliminary determination of just compensation. The Board upheld the valuation of the Land Bank. The respondents then filed a complaint for judicial determination of just compensation before the Regional Trial Court of Lucena City, sitting as a Special Agrarian Court. After trial, the Special Agrarian Court set aside the Land Bank's valuation and fixed just compensation at the fair market value. The Land Bank filed a motion for reconsideration, which was denied. The Land Bank appealed to the Court of Appeals, which affirmed the amount of just compensation but modified the award of interest, imposing twelve percent interest per annum only on the deficiency, computed from April 29, 1998 until full payment. The Court of Appeals denied the Land Bank's motion for reconsideration. Hence, the Land Bank filed the present petition for review before the Supreme Court.

Facts

The respondents were the registered owners of an agricultural land in Barangay Tamisian, Municipality of Tiaong, Quezon Province, originally composed of 34.0807 hectares. On February 9, 1998, the Department of Agrarian Reform issued a Notice of Land Valuation and Acquisition over 22.6762 hectares of the land. The Land Bank, as the financial intermediary of the program, valued the acquired portion at 1,210,252.96 pesos, applying the formula in its administrative orders, and deposited that amount in the respondents' name on March 24, 1998.

The respondents protested the valuation before the Adjudication Board, which upheld the Land Bank after finding that the respondents had failed to present clear and convincing evidence. The respondents then went to the Special Agrarian Court, insisting that just compensation should be based on fair market value and fixed at 2,267,620 pesos.

At trial, the respondents presented the Municipal Assessor of Tiaong, who testified that the Barangay Council had issued a resolution fixing the selling price of coconut lands in the barangay at 100,000 pesos per hectare, and that the property had since been converted into a subdivision. A Coconut Conservation Officer testified that many of the coconut trees were a hundred years old, senile yet productive as lumber, and that newly planted trees outnumbered the old ones. The Land Bank, for its part, presented witnesses who testified that its valuation used the income approach, based on the probable income a tenant beneficiary could generate from the land.

Issues

• Whether or not the valuation factors under Section 17 of Republic Act Number 6657 and the basic formula in the Department of Agrarian Reform administrative orders are mandatory for lands acquired under that law.
• Whether or not the Special Agrarian Court reversibly erred in rejecting the basic formula and fixing just compensation at fair market value.
• Whether or not interest on the compensation may still be imposed when prompt payment had already been made.

Applicable Provisions

Section 17 of Republic Act Number 6657 provides:

Section 17. Determination of Just Compensation. 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, the tax declarations, and assessments made by the government assessors, should 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 on the said land, shall be considered as additional factors to determine its valuation.

This is the statutory list of factors that the courts are obligated to consider in every valuation of agricultural land under the program.

Section 18 of Republic Act Number 6657, on the valuation and mode of compensation, provides in part:

Section 18. Valuation and Mode of Compensation. LBP bonds, which shall have the following features: a) Market interest rates aligned with 91-day treasury bill rates. Ten percent (10%) of the face value of the bonds shall mature every year from the date of issuance until the tenth (10th) year: Provided, That should the landowner choose to forego the cash portion, whether in full or in part, he shall be paid correspondingly in LBP bonds.

The Land Bank invoked this provision to argue that the interest earnings on the deposited compensation already suffice, so that no additional interest may be imposed.

Ruling

On the first issue, the Court held that there is merit in the petition, and that the basic formulas contained in the Department of Agrarian Reform administrative orders partake of the nature of statutes until and unless declared invalid in a proper case. Courts therefore have the positive legal duty to consider, and not disregard, their use and application. The Court reaffirmed the guidelines in Alfonso versus Land Bank of the Philippines: first, courts are obligated to apply both the valuation factors under Section 17 and the basic formula laid down by the Department; and second, the formula, being an administrative regulation issued pursuant to the mandate of the law, must be applied unless its application would not yield just compensation.

On the second issue, the Court found that the Special Agrarian Court had reversibly erred in rejecting the formula outright. The Court held that the Special Agrarian Court should have applied the formula and explained, with evidence, why its application would not result in just compensation, rather than simply substituting fair market value. The case was therefore remanded for the proper application of the formula and the statutory factors.

On the third issue, the Court ruled that the award of interest was proper only on the deficiency between the amount already deposited and the amount ultimately fixed as just compensation, computed from the date of taking until full payment, as the Court of Appeals had modified.

Doctrine

A Bar candidate must retain these rules. First, the basic formula in the Department of Agrarian Reform administrative orders has the force and effect of law until invalidated, and courts have a positive legal duty to apply it together with the factors in Section 17 of Republic Act Number 6657. Second, the formula is not absolutely mandatory in the sense that it can never be departed from; a court may deviate only upon a clear showing, supported by evidence, that its application would not yield just compensation. Third, just compensation must be real, substantial, full, and ample, measured as of the time of taking, not at the time of the property's later enhancement.

Disposition

The petition was partially granted; the case was remanded to the Special Agrarian Court for the proper application of the basic formula and the statutory factors, with interest imposed only on the deficiency from the date of taking until full payment.

Remember This

Memorize this line: the Department of Agrarian Reform valuation formula partakes of the nature of a statute, and courts must apply it together with the Section 17 factors unless its application would not yield just compensation. Examiners use this case to test whether you know that the formula is binding but not absolute, and that any departure must be justified by evidence.