Land Bank Of The Philippines v. Nable

BERSAMIN, J.:

Land Bank of the Philippines (LBP) hereby assails the amount of ₱26,523,180.00 as just compensation for the taking of landowner Veronica Atega Nable's landholding pursuant to the Comprehensive Agrarian Reform Program (CARP) determined by the Regional Trial Court (RTC) as Special Agrarian Court (SAC) and affirmed by the Court of Appeals (CA). Antecedents Veronica Atega Nable (Nable) was the sole owner of a landholding consisting of three contiguous agricultural lots situated in Barangay Taligaman, Butuan City and covered by Original Certificate of Title (OCT) No. P-5 whose total area aggregated to 129.4615 hectares.1 She had inherited the landholding from her late parents, Spouses Pedro C. Atega and Adela M. Atega. In 1993, the Department of Agrarian Reform (DAR) compulsorily acquired a portion of the landholding with an area of 127.3365 hectares pursuant to Republic Act No. 6657 (Comprehensive Agrarian Reform Law of 1988, or CARL).2 LBP valued the affected landholding at only ₱ 5,125,036.05,3 but Nable rejected the valuation.4 On January 17, 2001, the Department of Agrarian Reform Adjudication Board (DARAB) affirmed the valuation of LBP.5 After DARAB denied her motion for reconsideration,6 Nable instituted against DAR and LBP a petition for the judicial determination of just compensation in the RTC in Butuan City, praying that the affected landholding and its improvements be valued at ₱ 350,000.00/hectare, for an aggregate valuation of ₱ 44,567,775.00.7 During pre-trial, the parties agreed to refer the determination of just compensation to a board of commissioners,8 who ultimately submitted a written report to the RTC on June 27, 2003 recommending ₱ 57,660,058.00 as the just compensation for Nable.9 On November 26, 2004, the RTC rendered its judgment, as follows: WHEREFORE, in the light of the foregoing consideration, this Court hereby renders judgment ordering the public defendants to pay the following: a) The total amount of ₱26,523,180.00 for the land and improvements; b) The 6% interest based on the total amount as Just Compensation to be reckoned at the time of taking that is January 1993; c) Commissioner's fee in the amount of ₱25,000.00; d) Attorney's Fee which is 10% percent of the total amount awarded as Just Compensation; and e) Litigation expenses.

SO ORDERED.10 The RTC later denied LBP's motion for reconsideration.11 On appeal, LBP urged in its petition for review that the RTC gravely erred as follows: I IN TOTALLY DISREGARDING DAR ADMINISTRATIVE ORDER (AO) NO. 11, S. OF 1994 AS AMENDED BY AO NO. 5, S. 1998 IN CONJUNCTION WITH SEC.

17, RA 6657 AND THE DECISION OF THE DARAB CENTRAL, QUEZON CITY [JC-RX-BUT-0055-CO-97] AND THE DECISION OF THE SUPREME COURT IN THE CASE OF VICENTE AND LEONIDAS BANAL VS. LANDBANK, G.R. NO. 143276 PROMULGATED ON 20 JULY 2004; II IN TAKING JUDICIAL NOTICE OF THE RESPONDENT'S CARETAKER AFFIDAVIT; FARMING EXPERIENCE"

AND "RULE OF THUMB METHOD OF CONVERSION" IN DEROGATION OF THE PRODUCTION DATA FROM THE DEPARTMENT OF AGRICULTURE, AND PHILIPPINE COCONUT AUTHORITY (PCA) USED BY LBP/DAR IN THE DETERMINATION OF JUST COMPENSATION; AND III IN (1) AWARDING SIX (6%) PERCENT INTEREST ON THE TOTAL AMOUNT OF JUST COMPENSATION; (2) COMMISSIONER'S FEES IN THE AMOUNT OF ₱25,000.00; AND (3) TEN (10%) ATTORNEY'S FEES OF THE TOTAL AMOUNT AWARDED. On August 17, 2006, the CA affirmed the RTC judgment with modifications,12 to wit: IN THE LIGHT OF THE FOREGOING, the petition for review is DENIED for lack of merit.

The assailed decision is AFFIRMED with MODIFICATION that the just compensation of the subject property is ₱36,159,855.00 less the amount of ₱5,125,036.05 paid by petitioner to private respondent. Petitioner Bank is hereby ORDERED to immediately pay: A] Respondent the remaining balance of ₱31,034,819.00 plus twelve (12%) percent per annum as interest (computed from the above remaining balance and from 1993 until full payment thereof); and B] Mr. Hospicio T. Suralta, Jr., Mr. Rogelio C. Virtudazo, and Mr. Simeon E. Avila, Jr. the sum of ₱25,000.00 as Commissioners' fee. The Writ of Preliminary Injunction issued is hereby DISSOLVED.

SO ORDERED. Upon denial of its motion for reconsideration on January 30, 2007,13 LBP has appealed by petition for review on certiorari. Issues LBP asserts that: A THE COURT OF APPEALS GRAVELY ERRED IN SUSTAINING THE SAC's DECISION WHICH TOTALLY DISREGARDED SEC.

17, RA 6657 IN CONJUNCTION WITH DAR ADMINISTRATIVE ORDER (AO) NO. 11, S. OF 1994 AS AMENDED BY AO NO. 5, S. 1998; THE DECISION OF THE DARAB CENTRAL, QUEZON CITY [JC-RX-BUT-0055-CO-97] AND THE DECISION OF THE SUPREME COURT IN THE CASE OF VICENTE AND LEONIDAS BANAL VS.

LANDBANK, G.R. NO. 143276 PROMULGATED ON 20 JULY 2004 AND LBP VS CELADA, G.R. NO. 164876 PROMULGATED ON 23 JANUARY 2006.

B THE COURT OF APPEALS GRAVELY ERRED IN SUSTAINING THE SAC's DECISION WHICH TAKE JUDICIAL NOTICE OF THE RESPONDENT'S OWN FACTORS OF VALUATION SUCH AS CARETAKER AFFIDAVIT; "FARMING EXPERIENCE" AND "RULE OF THUMB METHOD OF CONVERSION" WHICH ARE NOT RELATED TO OR NECESSARILY IMPLIED FROM THE FACTORS ENUMERATED UNDER SEC.

17, RA 6657 AND DAR AOs. C THE COURT OF APPEALS GRAVELY ERRED IN GIVING PROBATIVE VALUE AND JUDICIAL NOTICE TO THE BOARD OF COMMISSIONER'S REPORT WHICH IS NOT ONLY HEARSAY AND IRRELEVANT AS NO HEARING WAS CONDUCTED THEREON IN VIOLATION OF SEC. 3, RULE 129 OF THE RULES OF COURT AS THE PARTIES WERE REQUESTED TO SUBMIT THEIR RESPECTIVE MEMORANDA.

D THE COURT OF APPEALS GRAVELY ERRED IN AWARDING (1) TWELVE (12%) PER CENT INTEREST PER ANNUM COMPUTED FROM THE REMAINING BALANCE OF ₱31,034,819.00 FROM 1993 UNTIL FULL PAYMENT THEREOF; (2) COMMISSIONER'S FEES IN THE AMOUNT OF ₱25,000.00; AND (3) TEN (10%) PER CENT ATTORNEY'S FEES OF THE TOTAL AMOUNT AWARDED.14 Ruling The appeal lacks merit. I. The CA and the RTC did not disregard Section 17, Republic Act No. 6657, and DAR AO No. 5, Series of 1998 Section 4, Article XIII, of the Constitution has mandated the implementation of an agrarian reform program for the distribution of agricultural lands to landless farmers subject to the payment of just compensation to the landowners, viz: Section 4. The Sate shall, by law, undertake an agrarian reform program founded on the right of farmers and regular farmworkers, who are landless, to own directly or collectively the lands they till or, in the case of other farmworkers, to receive a just share of the fruits thereof.

To this end, the State shall encourage and undertake the just distribution of all agricultural lands, subject to such priorities and reasonable retention limits as the Congress may prescribe, taking into account ecological, developmental, or equity considerations, and subject to the payment of just compensation. In determining retention limits, the State shall respect the rights of small landowners. The State shall further provide incentives for voluntary land-sharing.

The Congress has later enacted Republic Act No. 6657 to implement the constitutional mandate. Section 17 of Republic Act No. 6657 has defined the parameters for the determination of the just compensation, 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 nonpayment 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 Congress has thereby required that any determination of just compensation should consider the following factors, namely: (a) the cost of the acquisition of the land; (b) the current value of like properties; (c) the nature, actual use and income of the land; (d) the sworn valuation by the owner; (e) the tax declarations; (f) the assessment made by government assessors; (g) the social and economic benefits contributed to the property by the farmers and farmworkers and by the Government; and (h) the fact of the non-payment of any taxes or loans secured from any government financing institution on the land. Pursuant to its rule-making power under Section 49 of Republic Act No. 6657,15 the Department of Agrarian Reform (DAR) promulgated DAR Administrative Order (AO) No. 6, Series of 1992, DAR AO No. 11, Series of 1994 (to amend AO No. 6), and DAR AO No. 5, Series of 1998 (to amend AO No. 11) ostensibly to translate the factors provided under Section 17 in a basic formula.

The formulae embodied in these AOs have been used in computing the just compensation upon taking into account all the factors stated in Section 17, supra. It is relevant to note that the Court has consistently regarded reliance on the formulae under these AOs to be mandatory.16 Of relevance here is DAR AO No. 5, whose formula of just compensation follows: A. II. The following rules and regulations are hereby promulgated to govern the valuation of lands subject of acquisition whether under voluntary offer to sell (VOS) or compulsory acquisition (CA).

A. There shall be one basic formula for the valuation of lands covered by VOS or CA: 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) A.3 When both the CS and CNI are not present and only MV is applicable, the formula shall be: LV = MV x 2. The RTC found that the entire landholding was prime coconut land located along the national highway planted to 95 fruit-bearing coconut trees per hectare, more or less, or a total of 12,153 fruit-bearing coconut trees. It ascertained Nable's just compensation by considering the affected landholding's nature, location, value and the volume of the produce, and by applying the formula under DAR AO No. 5, Series of 1998, viz: xxx Nonetheless, the said report (commissioners' report) impliedly belied the classification made by the defendants (DAR and LBP) by stating among others, that the land is fully cultivated contrary to the allegation that portion of which is an idle land.

While this Court may affirm, modify or disregard the Commissioner's Report, the Court may consider the number of listed coconut trees and bananas actually counted by the Board during their field inspection. xxx The Court is of the opinion that the actual production data not the government statistics is the most accurate data that should be used if only to reflect the true and fair equivalent value of the property taken by the defendant through expropriation. Considering the number of coconut trees to a high of 12,153 all bearing fruits, it would be contrary to farming experience involving coconuts to have an average production per month of 2,057.14 kilos without necessarily stating that the said land is classified as prime coconut land.

Apportioning the number of coconut trees to the total land area would yield, more or less 95 trees per hectare well within the classification of a prime coconut land. Even the settled rule of thumb method of conversion, 1000 kilos of nuts make 250 kilos copra resecada long before adopted by coconut farmers spells substantial difference.

The Court deems it more reasonable the production data submitted by the plaintiff supported by the affidavit of Mrs. Wilma Rubi, to wit: xxx Hence, the computation of the just compensation of the subject land, to wit: FORMULA: LV = (CNI X 0.6) + (CS X 0.3) + (MV X 0.1) WHERE: LV = Land Values CNI = Capitalized Net Income CS = Comparable Sales MV = Market Value per Tax Declaration Since the Comparable Sales factor is missing, the formula shall be as follows: LV = (CNI X 0.9) + (MV X 0.1) To compute the CNI, the following formula shall be used, to wit: CNI = (AGP X SP) - CO