LAND BANK OF THE PHILIPPINES, PETITIONER, VS. ESPERANZA M. ESTEBAN, RESPONDENT.

This is a Petition for Review on
Certiorari^[1] under Rule 45 of the Rules of Court, seeking the
reversal and setting aside of the Decision^[2] dated November 10, 2010 and the
Resolution^[3]
dated July 14, 2011 of the Court of Appeals (CA) in CA-G.R. SP No.
01431. The assailed issuances affirmed the Consolidated Decision^[4] dated October 18, 2005
and Order^[5]
dated November 14, 2006 of Branch 27 of the Regional Trial Court of
Tandag, Surigao del Sur in Civil Case No. 1514, for fixing of just
compensation.

Antecedents

At the core of the instant controversy is an
untitled parcel
of land identified as Lot 2493, Cad. 537-D, located at Barangay Mahayag,
San Miguel, Surigao del Sur, comprising an area of 6.1833 hectares,
more or less, and covered by Tax Declaration (TD) No. B-16-12-236^[6] in the name of
respondent Esperanza M. Esteban (respondent).

Pursuant to Section 64^[7] of Republic Act (R.A.) No. 6657 otherwise known
as the Comprehensive Agrarian Reform Law of 1988, in relation to Section
74^[8] of R.A. No.
3844,^[9]
petitioner Land Bank of the Philippines (LBP) is the government
financial institution established to aid in the implementation of the
Comprehensive Agrarian Reform Program (CARP) as well as to act as
financial intermediary of the Agrarian Reform Fund.^[10]

On June 20, 1994, respondent made a voluntary offer to sell the subject
property to the Department of Agrarian Reform (DAR) for said agency’s
acquisition under R.A. No. 6657 at the price of P60,000.00 per hectare
or a total of P370,998.00. Following its evaluation of the subject
property, LBP’s Land Valuation Office XI issued on August 16, 1999 its
Claims Valuation and Processing Form No. LBP-XI-VO-95-6697^[11]
setting the just compensation for the subject property at P12,295.42
per hectare, or a total amount of P76,026.27 based on the following
formula:^[12]

		LV = MV x 2
Where:
	LV	= Land Value
	MV	= Market Value per Tax Declaration

Respondent, however, rejected LBP’s valuation. Thus, she
filed a Petition^[13] for judicial determination of just compensation
with the RTC on November 14, 2002.

During the trial, the RTC constituted a Board of
Commissioners
(BOC) to examine and appraise the subject property. Thereafter, the BOC
recommended the valuation of P43,327.16 per hectare, or a total amount
of P267,907.88, for the subject property.^[14]

On October 18, 2005, the RTC rendered judgment in favor of respondent.
The trial court noted that, as found by the BOC, the subject property
contained five hectares of unirrigated land that had already been
planted with palay while about one hectare thereof was idle. Thus, the
RTC disposed as follows:

WHEREFORE, judgment is hereby rendered in favor of the
petitioners and against respondents, determining and fixing the just
compensations for petitioners’ properties, as follows:

For Lot No. 2493, subject of Civil Case No. 1514, at
P43,327.16
per hectare or a total of P267,907.83 for the entire 6.1833 hectares;

For Lot No. 2665, subject of Civil Case No. 1515, at
P18,427.50
per hectare or a total of P168,251.13 for the entire 9.1306 hectares;

For Lot No. 2636, subject of Civil Case No. 1516, at
P43,327.16
per hectare or a total of P404,632.35 for the entire 9.3390 hectares.

Respondent LBP is ordered to pay to petitioners, within
fifteen
(15) days from finality of this Decision, the aforesaid amounts, the
mode of payments of which shall be in accordance with the provisions of
Section 18, Chapter VI of RA 6657.

No pronouncement as to cost.

SO ORDERED.^[15]

Aggrieved, LBP interposed a petition for review with the CA,

asserting that in fixing the amount of just compensation for the subject
property at P267,907.83, the RTC violated the formula for valuation as
stated in DAR Administrative Order (A.O.) No. 5, series of 1998, in
connection with Section 17 of R.A. No. 6657.

The CA,
however,
did not find any merit in LBP’s argument. In its herein assailed
decision, the appellate court ruled that the formula set forth by DAR
for the computation of just compensation is not mandatory; the courts
may, in the exercise of judicial discretion, set it aside. Moreover, the
CA found credence in the trial court’s evaluation of the subject
property’s location, land use and current sale value of the nearby
properties as important factors to be appreciated in arriving at its
fair market value. The CA thus decreed:

ACCORDINGLY, the petition is DENIED for lack of merit. The

Consolidated Decision dated 18 October 2005 of the court a quo is
AFFIRMED insofar as the valuation of Lot No. 2493 is concerned.

SO ORDERED.^[16]

LBP moved for reconsideration of the foregoing decision,
which the
CA denied in its herein assailed resolution dated July 14, 2011.

Hence, the present recourse.

Issue

This Court is now tasked with resolving whether or
not the CA erred in affirming the Decision of the RTC.

Ruling of the Court

The concept of just compensation was defined by
this Court in Land Bank of the Philippines v. American Rubber
Corp.^[17] in the following manner:

This Court has defined “just compensation” for parcels of
land
taken pursuant to the agrarian reform program as “the full and fair
equivalent of the property taken from its owner by the expropriator.”
The measure of compensation is not the taker’s gain but the owner’s
loss. Just compensation means the equivalent for the value of the
property at the time of its taking. It means a fair and full equivalent
value for the loss sustained. All the facts as to the condition of the
property and its surroundings, its improvements and capabilities should
be considered.^[18]

In setting the valuation of just compensation for lands that
are
covered by the Comprehensive Agrarian Reform Law of 1988, as amended,
Section 17 thereof provides for the guideposts that must be observed
therefor, viz.:

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 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 on the said land
shall be considered as additional factors to determine its valuation.

Succinctly, the factors enumerated under the foregoing
provision
are: (a) the acquisition cost of the land, (b) the current value of like
properties, (c) the nature and actual use of the property, and the
income therefrom, (d) the owner’s sworn valuation, (e) the tax
declarations, (j) the assessment made by government assessors, (g) the
social and economic benefits contributed by the farmers and the
farmworkers, and by the government to the property, and (b) the non­
payment of taxes or loans secured from any government financing
institution on the said land, if any, must be equally considered.^[19]

In Alfonso v. Land Bank of the Philippines, et
al.,^[20]
the Court emphatically made the following pronouncement:

For clarity, we restate the body of rules as follows: The
factors listed under Section 17 of RA 6657 and its resulting formulas
provide a uniform framework or structure for the computation of just
compensation which ensures that the amounts to be paid to affected
landowners are not arbitrary, absurd or even contradictory to the
objectives of agrarian reform. Until and unless declared invalid in a
proper case, the DAR formulas partake of the nature of statutes, which
under the 2009 amendment became law itself, and thus have in their favor
the presumption of legality, such that courts shall consider, and not
disregard, these formulas in the determination of just compensation for
properties covered by the CARP. When faced with situations which do not
warrant the formula’s strict application, courts may, in the exercise of
their judicial discretion, relax the formula’s application to fit the
factual situations before them, subject only to the condition that they
clearly explain in their Decision their reasons (as borne by the
evidence on record) for the deviation undertaken. It is thus entirely
allowable for a court to allow a landowner’s claim for an amount higher
than what would otherwise have been offered (based on an application of
the formula) for as long as there is evidence on record sufficient to
support the award.

x x x x

For the guidance of the bench, the bar, and the public, we

reiterate the rule: Out of regard for the DAR’s expertise as the
concerned implementing agency, courts should henceforth consider the
factors stated in Section 17 of RA 6657, as amended, as translated into
the applicable DAR formulas in their determination of just compensation
for the properties covered by the said law. If, in the exercise of their
judicial discretion, courts find that a strict application of said
formulas is not warranted under the specific circumstances of the case
before them, they may deviate or depart therefrom, provided that this
departure or deviation is supported by a reasoned explanation grounded
on the evidence on record. In other words, courts of law possess the
power to make a final determination of just compensation.^[21]

Veritably, the courts are not at liberty to deviate from the
DAR
basic formula, unless such deviations are amply supported by facts and
reasoned justification.^[22] This formula, as stated in DAR A.O. No. 5,
series of 1998, is as follows:

LV= (CNI x 0.60) + (CS x 0.30) + (MV x 0.10)
Where:
	LV	= Land Value
	CNI	= Capitalized Net Income
	CS	= Comparable Sales
	MV	=Market Value per Tax Declaration

The above-stated formula shall be used only if all the three
factors, i.e.,
CNI, CS, and MV, are present, relevant, and applicable. In case one or
two factors are not present, the said A.O. provides for alternate
formulas.^[23] In
the instant case, the parties resorted to the alternate formula of: LV=
MV x 2.

Following a thorough examination of the records, this Court
finds
that the RTC did not consider all of the factors enumerated in Section
17 of R.A. No. 6657. In the same vein, the LBP’s valuation also failed
to take into account all of the factors enumerated in the said
provision. It also failed to adduce any competent evidence to support
its valuation.

Accordingly, in accordance with this
Court’s ruling in Alfonso,
a remand of this case for reception of further evidence is necessary in
order for the trial court, acting as a special agrarian court, to
determine just compensation pursuant to Section 17 of R.A. No. 6657 and
the applicable DAR regulations.^[24]

WHEREFORE,
the Decision dated November 10, 2010 and the Resolution dated July 14,
2011 of the Court of Appeals in CA-G.R. SP No. 01431 are hereby
REVERSED and SET ASIDE. Civil Case
No. 1514 is REMANDED
to the Regional Trial Court of Tandag, Surigao del Sur, Branch 27, for
reception of evidence on the issue of just compensation in accordance
with this ruling.

SO
ORDERED.

Leonen (Chairperson),
Gesmundo, and Carandang, JJ., concur.

Zalameda, J., on official leave.

---

^[1]
Rollo, pp. 3-38.

^[2]
Id. at 42-52; penned
by Associate Justice Edgardo T. Lloren and concurred in by Associate
Justices Romulo V. Borja and Ramon Paul L. Hernando (now a Member of
this Court).

^[3] Id.
at 54-55; penned
by Associate Justice Edgardo T. Lloren and concurred in by Associate
Justices Romulo V. Borja and Carmelita Salandanan-Manahan.

^[4] Id.
at 104-108; penned by Presiding Judge Ermelindo G. Andal.

^[5]
Id. at 109-112.

^[6] Id.
at 150.

^[7]
Section 64.
Financial Intermediary for the CARP. – The Land Bank of the Philippines
shall be the financial intermediary for the CARP, and shall insure that
the social justice objectives of the CARP shall enjoy a preference among
its priorities.

^[8]
Sec. 74. Creation.—To
finance the acquisition by the Government of landed estates for
division and resale to small landholders, as well as the purchase of the
land-holding by the agricultural lessee from the landowner, there is
hereby established a body corporate to be known as the “Land Bank of the
Philippines”, hereinafter called the “Bank”, which shall have its
principal place of business in Manila The legal existence of the Bank
shall be for a period of fifty years counting from the date of the
approval hereof. The Bank shall be subject to such rules and regulations
as the Central Bank may from time to time promulgate.

^[9] AN
ACT TO ORDAIN THE
AGRICULTURAL LAND REFORM CODE AND TO INSTITUTE LAND REFORMS IN THE
PHILIPPINES, INCLUDING THE ABOLITION OF TENANCY AND THE CHANNELING OF
CAPITAL INTO INDUSTRY, PROVIDE FOR THE NECESSARY IMPLEMENTING AGENCIES,
APPROPRIATE FUNDS THEREFOR AND FOR OTHER PURPOSES.

^[10]
Land Bank of the Philippines v. Livioco, 645 Phil.
337 (2010).

^[11]
Rollo, pp. 134-137.

^[12]
Id. at 135.

^[13]
Id. at 145-149.

^[14]
Id. at 166.

^[15]
Id. at 108.

^[16]
Id. at 51.

^[17]
715 Phil. 154 (2013).

^[18]
Id. at 169.

^[19]
Land Bank of the Phils. v. Rural Bank of Hermosa (Bataan),
Inc., 814 Phil. 157, 165 (2017).

^[20]
801 Phil. 217 (2016).

^[21]
Id. at 282-322.

^[22]
Land Bank of the Philippines v. Prado Verde
Corporation, G.R. No. 208004, July 30, 2018.

^[23]
Land Bank of the Phils. v. Heirs of Jesus Alsua, 753
Phil. 323, 333 (2015).

^[24]
Land Bank of the Phils. v. Heirs of Lorenzo Tañada,
803 Phil. 103, 108-109 (2017).