SECOND DIVISION

DEPARTMENT OF AGRARIAN REFORM, represented by OIC-Secretary NASSER C. PANGANDAMAN,

Petitioner,

-versus-

MANOLO V. GODUCO,[1]

Respondent.

G.R. No. 174007

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

LAND BANK OF THE PHILIPPINES,

Petitioner,

-versus-

MANOLO V. GODUCO,

Respondent.

G.R. No. 181327

Present:

CARPIO, J.,

Chairperson,

BRION,

PEREZ,

SERENO, and

REYES, JJ.

Promulgated:

June 27, 2012

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

D E C I S I O N

In as much as the old concept of land ownership by a few has spawned valid and legitimate grievances that gave rise to violent conflict and social tension,

The redress of such legitimate grievances being one of the fundamental objectives of the New Society,

Reformation must start with the emancipation of the tiller of the soil from his bondage.[2]

But these reformation and emancipation need not be at the detriment of the landowners, for they too are part of this Society.

PEREZ, J.:

Before the Court are two Petitions for Review on Certiorari[3] filed by the Department of Agrarian Reform (DAR) and the Land Bank of the Philippines (LBP).

DAR is appealing the Decision[4] of the Tenth Division of the Court of Appeals (CA) in CA-G.R. SP No. 89542 dated 26 January 2006 and the Resolution of the same Division dated 7 August 2006 which resulted in the affirmance of the Decision of the Regional Trial Court (RTC) of Cabanatuan City designated as the Special Agrarian Court. The dispositive portion of the assailed decision reads:

WHEREFORE, premises considered, the Petition is hereby DENIED and is accordingly DISMISSED for lack of merit.[5]

The other petitioner LBP, is appealing the Decision[6] of the Third Division in CA-G.R. SP No. 89429 of the CA dated 31 July 2007 and the Resolution of the said Division dated 8 January 2008 which resulted in the affirmance with modification of the Decision of the aforementioned Special Agrarian Court. The dispositive portion of the assailed decision reads:

WHEREFORE, the petition is partially GRANTED. The assailed Decision is AFFIRMED WITH MODIFICATION in that the 6% interest per annum is deleted.[7]

The facts as gathered by this Court follow:

Manolo Goduco (Goduco) is the only heir of Illuminada Villanueva Vda. De Goduco, the registered owner of several parcels of land located at Pambuan, Gapan City, Nueva Ecija covered by TCT Nos. NT-119140 and NT-119143 issued by the Registry of Deeds of the province.[8]

LBP is the financial intermediary for the Comprehensive Agrarian Reform Program (CARP) as designated under Section 64 of R.A. 6657.

DAR is the lead implementing agency of the CARP. It undertakes land tenure improvement and development of program beneficiaries.

Pursuant to the Operation Land Transfer Program of the government under Presidential Decree (P.D.) No. 27, the mentioned parcels of land were placed under the program and were distributed by DAR to the qualified farmer-beneficiaries upon issuance of their respective Emancipation Patents on 29 December 1994[9] and 13 June 1996.[10] Farmer Edilberto R. Mendoza was issued TCT No. E.P. 79440 with an area of 17,890 square meters and TCT No. E.P.79442 with an area of 8,588 square meters, while farmer Ernesto Carriaga was issued with TCT No. E.P. 84260 with an area of 10, 956 square meters, TCT No. E.P. 86567 with an area of 2,844 square meters and TCT No. E.P. 86568 with an area of 9,336 square meters.

Thereafter, LBP fixed the value of the land as payment of just compensation as follows:

For TCT No. EP 79440 - P14,871.06

For TCT No. E.P.79442 - P 7,138.77

For TCT No. E.P. 84260 - P 4,709.66

For TCT No. E.P. 86567 - P3,902.33

For TCT No. E.P. 86568 - P4,133.00

Dissatisfied with the valuation, Goduco filed a Petition for Determination of Just Compensation of the subject lands before the RTC of Cabanatuan City acting as Special Agrarian Court on 7 March 2000. He also filed a similar petition before the offices of DAR and LBP. In his petition before the court, he alleged that LBP fixed the valuation of the parcels of land without his or his mothers knowledge. He contended that the valuation amounting to a measely aggregate of P34,754.82 is highly inadequate and is confiscatory of their properties for the fair market value of the land can be pegged at least P400,000.00 per hectare. Finally, he added that the selling price of agricultural lands is at P1,000,000.00 per hectare.[11]

LBP, in its Answer, justified its valuation of the land by asserting that it was in strict adherence with P.D. No. 27 and Executive Order (E.O.) No. 228[12] and maintained that these provisions continue to be valid and constitutional. The pertinent provision of P.D. No. 27 states:

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.

The relevant portion of E.O. No. 228 reads:

Sec. 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 regulations 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.

DAR also filed its Answer and basically reiterated the arguments of LBP on the constitutionality and applicability of P.D. No. 27 and E.O. No. 228.[13]

At the trial, Goduco presented as witnesses Adoracion Khan and Conrado Roberto. He also testified to prove the value of the land as basis for just compensation.

Adoracion Khan testified that she is the administrator of the land owned by Filoteo G. Jacinto and Nelia Fuentebella which is near the land of Goduco. She added that the land of Jacinto and Fuentebella which has an area of 23,489 square meters, was sold for P1,500,000.00. She further opined that the land of Goduco could command a higher price because it is adjacent to the main canal of the National Irrigation Authority (NIA).[14]

Conrado Roberto, one of the land tenants of Goduco, testified that he bought a parcel of land with an area of 21,000 square meters from Goduco for P187,000.00 He described that the land he bought was inferior to the land in dispute, which can be sold for a higher price of P800,000.00. He also opined that the land of Goduco is near the irrigation canal, hence, can command a higher selling price.[15]

Lastly, Goduco himself testified that the land could be sold for P1,500,000.00 based on the price offered to him for the land. He presented pictures of a mango orchard, a road network, irrigation canals and of the municipal road adjacent to the land to substantiate his contention that the value of the land is much more than the assessment determined by LBP.[16]

LBP, on its part, presented its Field Attorney Atty. Alfredo B. Pandico, Jr. who testified that he handled the agrarian case of the parcels of land registered under the name of Illuminada Goduco.[17]

Lily San Luis, the banks Claims Processing and Payment Division Officer, testified that she handled the case of the contested parcels of land and explained the process observed by the bank in such cases. LBP also presented as its documentary evidence the Claims Processing Form where the valuation of the parcels of land was indicated.[18]

DAR offered in evidence a document dated 12 November 1981 showing the average gross production of the parcels of land of Goduco.[19]

The special agrarian court did not follow the price assessment of DAR. The dispositive portion of its 12 January 2005 decision[20] reads:

WHEREFORE, all premises considered, judgment is hereby rendered ordering the defendant Department of Agrarian Reform through the defendant Land Bank of the Philippines to pay petitioner Manolo Goduco the total amount of Four Hundred Ninety Six Thousand One Hundred Forty (P496,140.00) Philippine Currency, representing the just compensation of the property with a total area of 4.9614 hectares, situated in Pambuan, Gapan, Nueva Ecija, covered by TCT No. NT-119140 and TCT No. NT-119143 with 6% legal interest per annum from the date of taking on May 24, 1995 until fully paid.[21]

The trial court explained that the P100,000.00 per hectare valuation of the land followed the provisions of Section 17 of R.A. 6657. It also considered the condition and the location of the land which is irrigated and accessible to the municipal road. The notarized documents indicating the selling price of the neighboring parcels were also given weight by the court. Even if not put in issue before it, the trial court imposed interest computed from the date of taking of the land.[22]

Both the DAR and the LBP filed appeals before the CA.

DAR in its Petition for Review[23] before the Tenth Division of the CA raised as its sole assignment of error that the agrarian court erred when it ruled that the date of taking of subject property was 24 May 1995. Similarly, the arguments of LBP before the Third Division pertain to the alleged error of the lower court in fixing the value of the land based on the factors under R.A. 6657 even if the land was acquired under P.D. No. 27. It likewise argued that it was an error to grant 6% legal interest from the date of taking until full payment of the just compensation.

In CA-G.R. SP No. 89542, the Tenth Division of the CA ruled that the lands were acquired under R.A. 6657. Hence, the valuation factors under this law determine the just compensation.[24]

In CA-G.R. SP No. 89429, the Third Division of the CA[25] affirmed the trial court. The appellate court reasoned out that while the just compensation remains undetermined and unpaid, the agrarian process is not yet complete. Therefore, what will apply in determining just compensation is R.A. 6657; not P.D. No. 27 or E.O. No. 228. It ruled however, that the trial court erred in the imposition of 6% interest, which as provided by Administrative No. 13, is granted only under P.D. No. 27.

In its petition before this Court, DAR repeats the arguments that the applicable law is P.D. No. 27 and not R.A. 6657 and that the date of taking of the land was on 21 October 1972 and not in 1995. The DAR insists that the lands were covered by the Operation Land Transfer Program under P.D. No. 27, therefore, the date of the taking of the land must be 21 October 1972.

LBP, in its petition, also insists that the formula that should apply is the one prescribed under P.D. No. 27 and E.O. No. 228. It argues against the application of R.A. 6657 on properties acquired under the Operation Land Transfer Program of P.D. No. 27.

To summarize, LBP and DAR raise as issues the following:

First, which law will govern the valuation of land covered by the emancipation patents, P.D. No. 27 and E.O. No. 228 or R.A. 6657?

Second, what is the reckoning date for determining just compensation?

Third and last, should interest be imposed from the date of taking?

The Courts Ruling

First and Second Issues: Applicable law and reckoning point

Both the LBP and DAR are adamant in their contention that the agrarian reform process is complete even if there is no payment yet of just compensation. It is further posited that to apply R.A. 6657 to the P.D. No. 27-acquired properties is improper for it will result in the retroactive application of R.A. 6657.

We disagree.

The first references are relevant provisions of the laws relied upon by the parties.

P.D. No. 27[26] provides that:

E.O. No. 228[27] is the issuance on payment of land covered by P.D. No. 27:

Upon the other hand is the CARP statute of 10 June 1998. R.A. 6657[28] provides:

Section 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 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.

The determination of just compensation for land covered by the Reform Program which spawned the issues about the covering law and the process of coverage has been discussed amply enough for present guidance.

In Land Bank of the Philippines v. Natividad,[29] it was ruled that the agrarian reform process is still incomplete if the just compensation to be paid has yet to be settled. In that case, Land Bank argued that the property was acquired for purposes of agrarian reform on 21 October 1972, the time of the effectivity of P.D. No. 27, ergo just compensation should be based on the value of the property as of that time and not at the time of possession in 1993. However, the Court ruled otherwise. It held that the agrarian reform process is still incomplete as the just compensation to be paid private respondents has yet to be settled.

This ruling on the completion of the reform process was reiterated in the case of Land Bank of the Philippines v. Ferrer[30] where the Court upheld the position of the appellate court that the land shall be considered taken only upon payment of just compensation because it would complete the agrarian reform process.

Evidently in this case where the conflict is exactly on just compensation, the agrarian reform process has yet to be completed.

What petitioner wants is a departure from standing jurisprudence as these relate to the issue of the applicable law on just compensation.

We are not prepared to do so.

It was during the pendency of the process, or, in other words, when no payment has as yet been made, when R.A. 6657 became the law on land reform valuation. Evidently, the application of R.A. 6657 on the then present circumstance is not, contrary to petitioners positions, violative of the principle of prospectivity of statutes.

In fact, R.A. 6657 did not repeal P.D. No. 27 and E.O. Nos. 228 and 229. Instead, it gave the Decree and the Order suppletory effect.

Section 75. Suppletory Application of Existing Legislation. The provisions of Republic Act No. 3844 as amended, Presidential Decree Nos. 27 and 266 as amended, Executive Order Nos. 228 and 229, both Series of 1987; and other laws not inconsistent with this Act shall have suppletory effect.[31]

Such is the ruling in Paris v. Alfeche[32] where the Court ruled that considering the passage of R.A. 6657 before the completion of the application of the agrarian reform process to the subject lands, the same should now be completed under the said law, with P.D. No. 27 and E.O. No. 228 having suppletory effect.

In Land Bank of the Philippines v. Natividad,[33] we reiterated that since the reform process is still incomplete because the payment has not been settled yet and considering the passage of R.A. 6657, just compensation should be determined and the process concluded under the said law.

Further reiterations were made in Land Bank of the Philippines v. Estanislao[34] and LBP v. J. L. Jocson and Sons,[35] to quote:

This Court held in Land Bank of the Philippines v. Natividad that seizure of landholdings or properties covered by P.D. No. 27 did not take place on October 21, 1972, but upon the payment of just compensation. Taking into account the passage in 1988 of R.A. No. 6657 pending the settlement of just compensation, this Court concluded that it is R.A. No. 6657 which is the applicable law, with P.D. No. 27 and E.O. 228 having only suppletory effect.

Land Bank's contention that the property was acquired for purposes of agrarian reform on October 21, 1972, the time of the effectivity of PD 27, ergo just compensation should be based on the value of the property as of that time and not at the time of possession in 1993, is likewise erroneous. In Office of the President, Malacaang, Manila v. Court of Appeals, we ruled that the seizure of the landholding did not take place on the date of effectivity of PD 27 but would take effect on the payment of just compensation.

Under the factual circumstances of this case, the agrarian reform process is still incomplete as the just compensation to be paid private respondents has yet to be settled. Considering the passage of Republic Act No. 6657 (RA 6657) before the completion of this process, the just compensation should be determined and the process concluded under the said law. Indeed, RA 6657 is the applicable law, with PD 27 and EO 228 having only suppletory effect, conformably with our ruling in Paris v. Alfeche.

The same interpretation was arrived at in the subsequent decisions in Land Bank of the Philippines v. Heirs of Eleuterio Cruz;[36] in Land Bank of the Philippines v. Ferrer;[37] and more recently in the Land Bank of the Philippines v. Araneta.[38]

Clearly, by law and jurisprudence, R.A. 6657, upon its effectivity, became the primary law in agrarian reform covering all the then pending and uncompleted processes; and P.D. No. 27 and E.O. No. 228 are only suppletory to the said law.

Pursuant to the rule-making power of DAR under Section 49 of Republic Act No. 6657, a formula was outlined in DAR Administrative Order No. 5, series of 1998 in computing just compensation[39] for lands subject of acquisition whether under voluntary offer to sell (VOS) or compulsory acquisition (CA),[40] to wit:

LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1)

Where: LV = Land Value

CNI = Capitalized Net Income

CS = Comparable Sales

MV = Market Value per Tax Declaration

The above formula shall be used if all three factors are present, relevant and applicable.

A1. When the CS factor is not present and CNI and MV are applicable, the formula shall be:

LV = (CNI x 0.9) + (MV x 0.1)

A2. When the CNI factor is not present, and CS and MV are applicable, the formula shall be:

LV = (CS x 0.9) + (MV x 0.1)

A3. When both the CS and CNI are not present and only MV is applicable, the formula shall be:

LV = MV x 2

In no case shall the value of the land using the formula MV x 2 exceed the lowest value of land within the same estate under consideration or within the same barangay or municipality (in that order) approved by LBP within one (1) year from receipt of claimfolder.

This formula has been repeatedly applied in Land Bank of the Philippines v. Barrido;[41] Land Bank of the Philippines v. Esther Rivera;[42] and Land Bank of the Philippines v. Department of Agrarian Reform.[43]

The formula was not followed by the trial court in this case. It said:

In arriving at a valuation of the property in question, the Court will have to approximate which is just and equitable under the premises, using the evidence, testimonial and documentary, given by the parties and witnesses as there is still no hard and fast rule by which the Court could exactly determine its actual value.[44]

The application of the formula is mandated by law. However, the presence of absence of one or more factors in the formula and the amounts that correspond to the present factors must be the determined by the Special Agrarian Court as the trier of facts. A remand to the trial court is needed.

One final but important point: As we at the outset clarified, the repeated rulings that the land reform process is completed only upon payment of just compensation relate to the issue of the applicable law on just compensation. The disposition that the seizure of the landholding would take effect on the payment of just compensation since it is only at that point that the land reform process is completely refers to property acquired under P.D. No. 27 but which remained unpaid until the passage of R.A. 6657. We said that in such a situation R.A. 6657 is the applicable law. But if the seizure is during the effectivity of R.A. 6657, the time of taking should follow the general rule in expropriation cases where the time of taking is the time when the State took possession of the same and deprived the landowner of the use and enjoyment of his property xxx. We here repeat Land Bank of the Philippines v. Livioco:[45]

There are agrarian cases which hold that just compensation should be valued at the time of payment, (Office of the President v. Court of Appeals, 413 Phil. 711, 716 (2001); Landbank of the Philippines v. Estanislao, G.R. No. 166777, July 10, 2007, 527 SCRA 181, 187; Landbank of the Philippines v. JL Jocson and Sons, G.R. No. 180803, October 23, 2009, 604 SCRA 373, 380-381) these decisions are not applicable in the case at bar. Said cases involved the issue of choosing between an earlier law (Presidential Decree No. 27, by which the property was acquired) and a later law (RA 6657, which was enacted while the issue of just compensation in these cases was still pending). The Court ruled that the seizure of the properties covered by PD No. 27 did not occur upon the effectivity of PD 27 but upon the actual payment of just compensation. Since the prevailing law at the time of payment was already RA 6657, the landowners have the right to be compensated under the new law.

As aptly summarized in Landbank of the Philippines v. Natividad (G.R. No. 127198, May 16, 2005, 458 SCRA 441, 451-452):

Land Banks contention that the property was acquired for purposes of agrarian reform on October 21, 1972, the time of the effectivity of PD 27, ergo just compensation should be based on the value of the property as of that time and not at the time of possession in 1993, is likewise erroneous. In Office of the President, Malacaang, Manila v. Court of Appeals, we ruled that the seizure of the landholding did not take place on the date of effectivity of PD 27 but would take effect on the payment of just compensation.

Unlike the above-cited cases, Liviocos property was acquired and to be paid under only one law, i.e., RA 6657. There is no situation here which requires the Court to choose between the law prevailing at the time of acquisition and the law prevailing at the time of payment.

Since Liviocos property was acquired under RA 6657 and will be valued under RA 6657, the question regarding the time of taking should follow the general rule in expropriation cases where the time of taking is the time when the State took possession of the same and deprived the landowner of the use and enjoyment of his property.

Third Issue: Imposition of Interest

The issue regarding interest is also jurisprudentially settled. In Land Bank of the Philippines v. Chico,[46] the Court ruled that when just compensation is determined under R.A. 6657, no incremental, compounded interest of six percent (6%) per annum shall be assessed. The interest applies only to lands taken under P.D. No. 27 and E.O. No. 228, pursuant to Administrative Order No. 13, Series of 1994 (A.O. No. 13) [as amended by A.O. No. 06, Series of 1998], and not Sec. 26 of R.A. 6657.

There are Decisions[47] by this Court where it granted interest at 12% on the award. To clarify, this incremental interest is not granted on the computed just compensation. Rather, it is a penalty imposed for damages incurred by the landowner due to the delay in payment of just compensation. Thus, did the Court say:

In some expropriation cases, the Court allowed the imposition of said interest [12%], the same was in the nature of damages for delay in payment which in effect makes the obligation on the part of the government one of forbearance.[48]

WHEREFORE, premises considered, the Court hereby RESOLVES:

1. To DENY both appeals;

2. To ORDER the remand of the case to the trial court for the computation of the just compensation based on the formula under Administrative Order No. 05, Series of 1998 issued pursuant to R.A. 6657; and

3. To DELETE the interest imposed on just compensation.

SO ORDERED.

JOSE PORTUGAL PEREZ

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO

Senior Associate Justice

Chairperson

ARTURO D. BRION

Associate Justice

MARIA LOURDES P. A. SERENO

Associate Justice

BIENVENIDO L. REYES

Associate Justice

CERTIFICATION

I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

ANTONIO T. CARPIO

Senior Associate Justice

(Per Section 12, R.A. 296,

The Judiciary Act of 1948, as amended

[1] Now substituted by his wife Belen Goduco and son Luis Goduco.

[3] Rollo (G.R. No. 174007), pp. 8-26 and Rollo (G.R. No. 181327), pp. 28-58.

[4] Penned by Associate Justice Andres B. Reyes, Jr. with Associate Justices Rosmari D. Carandang and Monina Arevalo-Zearosa, concurring. Rollo (G.R. No. 174007), pp. 28-37.

[6] Penned by Associate Justice Portia Alio-Hormachuelos with Associate Justices Lucas P. Bersamin and Estela M. Perlas-Bernabe (now both members of the Court), concurring. Rollo (G. R. No. 181327), pp. 69-80.

[11] CA rollo (CA-G.R. SP No. 89542), pp. 40-47.

[12] CA rollo (CA-G.R. SP No. 89429), pp. 106-108.

[13] CA rollo (CA-G.R. SP No. 89542), pp. 52-55.

[14] RTC Decision. Rollo (G.R. No. 174007), p. 61.

[20] CA rollo (CA-G.R. SP No. 89429), pp. 49-56.

[23] Rollo (G.R. No. 174007), p. 53; CA rollo (CA-G.R. No. SP No. 89542), p. 16.

[26] Decreeing the Emancipation of Tenants from the Bondage of the Soil, Transferring to them the Ownership of the Land they Till and Providing the Instruments and Mechanism therefor. 21 October 1972.

[27] Declaring Full Land Ownership to Qualified Farmer Beneficiaries Covered by Presidential Decree No. 27; Determining the Value of Remaining Unvalued Rice and Corn Lands Subject to P.D. No. 27; and Providing for the Manner of Payment by the Farmer Beneficiary and Mode of Compensation to the Landowner, 17 July 1987.

[28] An Act Instituting a Comprehensive Agrarian Reform Program to Promote Social Justice and Industrialization, Providing the Mechanism for its Implementation, and for other Purposes, 10 June 1988.

[30] G.R. No. 172230, 2 February 2011, 641 SCRA 414, 422.

[34] G.R. No. 166777, 10 July 2007, 527 SCRA 181, 187.

[35] G.R. No. 180803, 23 October 2009, 604 SCRA 373, 381-382.

[36] G.R. No. 175175, 29 September 2008, 567 SCRA 31.

[37] Supra note 30.

[39] Land Bank of the Philippines v. Soriano, G.R. Nos. 180772 and 180776, 6 May 2010, 620 SCRA 347, 353.

[40] Administrative Order No. 05, Series of 1998 entitled Revised Rules and Regulations Governing the Valuation of Lands Voluntarily or Compulsory Acquired Pursuant to R.A. No. 6657.

[41] G.R. No. 183688, 18 August 2010, 628 SCRA 454.

[42] G.R. No. 182431, 17 November 2010, 635 SCRA 285.

[43] G.R. No. 171840, 4 April 2011, 647 SCRA 152.

[44] RTC Decision. Rollo (G.R. No. 174007), p.66.

[45] G.R. No. 170685, 22 September 2010, 631 SCRA 86.

[47] Land Bank of the Philippines v. Escandor, G.R. No. 171685, 632 SCRA 504; 11 October 2010; Land Bank of the Philippines v. Celada, 515 Phil. 467 (2006).