G.R. No. 170245



Heirs of Tria v. Land Bank of the Phils., et al., G.R. No. 170245, 1 July 2013 ♦ Decision, Peralta [J] ♦ Separate Opinion, Leonen [J] Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 170245 July 1, 2013 THE HEIRS OF SPOUSES DOMINGO TRIA AND CONSORCIA CAMANO TRIA, PETITIONERS, vs. LAND BANK OF THE PHILIPPINES AND DEPARTMENT OF AGRARIAN REFORM, RESPONDENTS. D E C I S I O N PERALTA, J.: Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the Amended Decision¹ of the Court of Appeals (CA), dated October 25, 2005. The facts follow. During their lifetime, the deceased spouses Domingo Tria and Consorcia Camano owned a parcel of agricultural land located at Sangay, Camarines Sur, with an area of 32.3503 hectares. By virtue of Presidential Decree (PD) No. 27, which mandated the emancipation of tenant-farmers from the bondage of the soil, the Government, sometime in 1972, took a sizeable portion of the deceased spouses’ property with a total area of 25.3830 hectares. Thereafter, respondent Department of Agrarian Reform (DAR) undertook the distribution and eventual transfer of the property to thirty tenant-beneficiaries. In due time, individual Emancipation Patents were issued by respondent DAR in favor of the tenant-beneficiaries. Pursuant to Section 2 of Executive Order (EO) No. 228, respondent Land Bank of the Philippines (LBP) made an offer on November 23, 1990 to pay petitioners, by way of compensation for the land, the total amount of ₱182,549.98, broken down as follows: ₱18,549.98 of which would be in cash, and the remaining ₱164,000.00 to be satisfied in the form of LBP Bonds.² Not satisfied with the LBP’s valuation of their property, petitioners rejected their offer and filed a Complaint before the Regional Trial Court (RTC) of Naga City claiming that the just compensation for their property is ₱2,700,000.00. During trial, petitioners filed a Motion for Partial Judgment praying that respondent LBP pay them the amount of ₱182,549.98 pursuant to its previous offer. Hence, the RTC issued a Partial Judgment³ on December 22, 1992 ordering respondent LBP to pay the amount of ₱182,549.98. Consequently, respondent LBP filed a Motion for Reconsideration against said Partial Judgment on the ground that the RTC’s Order for it to immediately pay the amount of ₱182,549.98 is not in accord with the provisions of Section 3 of EO No. 228 which requires payment of just compensation partially in cash and gradually through LBP Bonds. Hence, the RTC issued an Order⁴ granting respondent LBP’s motion for reconsideration, to wit: WHEREFORE, partial judgment is hereby rendered ordering Defendant Land Bank of the Philippines to pay the "Heirs of Domingo Tria and Consorcia Camano" the following amounts: EIGHTEEN THOUSAND FIVE HUNDRED FORTY-NINE and 98/100 (₱18,549.98) PESOS, Philippine Currency, plus interest earned from investment securities at the shortest time and at the highest rate possible in accordance with Executive Order No. 12; and ONE HUNDRED SIXTY-FOUR THOUSAND (₱164,000.00) PESOS, Philippine Currency, plus interest thereon at market rates of interest that are aligned with 90-day treasury bill rates, computed from date of approval of the claim of the said spouses. This partial judgment shall be without prejudice to further proceedings to determine the just compensation and other claims due the Heirs of the deceased Spouses Domingo Tria and Consorcia Camano as provided by law. In compliance with the RTC’s Order, respondent LBP paid petitioners the total amount of ₱309,444.97 in the form of manager’s checks, and the amount of ₱43,524.00 in the form of LBP Bonds, representing the cash portion with interest earned from investment securities, and bond payment of the just compensation for the expropriated property, respectively.⁵ In the course of the proceedings, the RTC appointed three Commissioners to compute and recommend to the court the just compensation to be paid for the expropriated property. In their report, each of the three Commissioners adopted a different formula in their valuation for the expropriated property: (1) the Commissioner representing respondent LBP adopted the mode of computation provided under EO No. 228; (2) the Commissioner representing petitioners adopted the Sales Value Analysis Formula; and (3) the Commissioner representing the trial court used the Assessor’s Schedule of Value Formula. In order to resolve the differences in their computation, the Commissioners obtained the average of their respective valuations and made a final recommendation of ₱1,151,166.51 for the entire expropriated property. However, neither the parties nor the RTC found the computation of the Commissioners acceptable. Resultantly, in a Decision⁶ dated August 23, 1995, the RTC made its own computation by using the formula used by the Commissioner representing the LBP with the slight modification that it used the government support price (GSP) for one cavan of palay in 1994 as multiplier. Not in conformity with the RTC’s ruling, respondents interposed an appeal before the CA. On March 31, 2004, the CA rendered a Decision⁷ affirming the RTC’s ruling. It held that the formula and computation adopted by the RTC are well in accord with the working principles of fairness and equity, and likewise finds ample support from the recent pronouncement of the Supreme Court on the matter of determination of just compensation. Nevertheless, upon a motion for reconsideration filed by respondents, the CA reversed itself and issued an Amended Decision⁸ dated October 25, 2005, reversing its earlier ruling favoring the RTC’s decision. In its Amended Decision, the CA heavily relied in the Gabatin v. Land Bank of the Philippines⁹ (Gabatin) ruling wherein this Court fixed the rate of the GSP for one cavan of palay at ₱35.00, the value of the corresponding produce at the time the property was taken in 1972. Accordingly, petitioners filed before this Court a petition for review on certiorari assailing the Amended Decision rendered by the CA. Petitioners, therefore, cite the following arguments in their petition: JUST COMPENSATION IS A JUDICIAL ISSUE NOT AN ADMINISTRATIVE ISSUE. IF APPLYING THE PROVISIONS OF EO NO. 228 WOULD RESULT TO UNJUST COMPENSATION, THE DISTINCTION BETWEEN ACTUAL TAKING AND ACTUAL PAYMENT WOULD BE OF NO MOMENT AND IRRELEVANT. RIGHT TO PROPERTY IS A FRAMEWORK OF A WELL-ORDERED SOCIETY AND THIS COURT MUST PROTECT IT FROM CONFISCATION WITHOUT JUST COMPENSATION. THE COURT’S ASSERTION OF ITS ROLE AS THE FINAL ARBITER OF INDIVIDUAL’S RIGHTS GUARANTEED BY THE CONSTITUTION AGAINST GOVERNMENT OPPRESSION FAR OUTWEIGHS ANY FINANCIAL RIPPLE THAT MAY BE CAUSED BY OVERTURNING THE DOCTRINE IN GABATIN V. COURT OF APPEALS. THE AWARD BY THE TRIAL COURT IN 1995 MUST BE INCREMENTED WITH INTEREST OF 12% PER ANNUM.¹⁰ Ultimately, this Court is called upon to determine the issue of whether or not the CA erred in ruling that the valuation of the property for purposes of determining just compensation should be based on the GSP at the time the property was taken in 1972, in accordance with the Gabatin case. Petitioners insist that the CA erred in relying on the case of Gabatin. They assert that the true guidepost in property taking, whether under the police power of the state or under its eminent domain, is "just compensation." Petitioners maintain that the jurisprudential definition of just compensation means just and complete equivalent of the loss which the owner of the property expropriated has to suffer by reason of it. Hence, they argue that the valuation offered by respondent LBP at ₱9,243.50 per hectare in 1972 could have represented the fair market value of its landholdings had the same been actually paid in that same year. However, since the same was never really paid, it would be totally unjust if the valuation offered by respondent LBP in 1972 be paid in 1995. Conversely, respondent LBP contends that the CA correctly ruled in ordering the RTC to compute and fix the just compensation for the expropriated agricultural lands, strictly in accordance with the mode of computation prescribed in the Gabatin case. It stresses that when EO No. 228 fixed the basis in determining the value of the land using the GSP for one cavan of palay on October 21, 1972 at ₱35.00, it was merely in cognizance of the settled rule that just compensation is the value of the property at the time of the taking. For its part, respondent DAR supports respondent LBP’s contention that the CA did not commit reversible error when it reconsidered its decision and remanded the case to the court of origin for the determination of just compensation based on the formula set forth in the Gabatin case. We find for petitioners. In Land Bank of the Philippines v. Pacita Agricultural Multi-Purpose Cooperative, Inc.,¹¹ we ruled that since the Gabatin case, this Court had already decided several cases in which it found more equitable to determine just compensation based on the GSP of palay at the current price or the value of said property at the time of payment. In this case, the Court used the standard laid down in Section 17 of Republic Act No. 6657¹² (RA No. 6657) as a guidepost in the determination of just compensation in relation to the GSP of palay, viz.: In Gabatin v. Land Bank of the Philippines, the formula under Presidential Decree No. 27, Executive Order No. 228 and A.O. No. 13 was applied. In Gabatin, the crux of the case was the valuation of the GSP for one cavan of palay. In said case, the SAC fixed the government support price (GSP) of palay at the current price of ₱400 as basis for the computation of the payment, and not the GSP at the time of taking in 1972. On appeal therein by respondent Land Bank of the Philippines, the Court of Appeals reversed the ruling of the SAC. The case was then elevated to this Court, wherein therein petitioners set forth, inter alia, the issue of whether just compensation in kind (palay) shall be appraised at the price of the commodity at the time of the taking or at the time it was ordered paid by the SAC. The Court declared that the reckoning period should be the time when the land was taken in 1972, based on the following ratiocination. x x x x Since Gabatin, however, the Court has decided several cases in which it found it more equitable to determine just compensation based on the value of said property at the time of payment, foremost of which is Land Bank of the Philippines v. Natividad, cited by the Court of Appeals in its Decision assailed herein. In Natividad, the parcels of agricultural land involved were acquired from their owners for purposes of agrarian reform on 21 October 1972, the time of the effectivity of Presidential Decree No. 27. Still, as late as the year 1993, the landowners were yet to be paid the value of their lands. Thus, the landowners filed a petition before the trial court for the determination of just compensation. The trial court therein ruled in favor of the landowners, declaring that Presidential Decree No. 27 and Executive Order No. 228 were mere guidelines in the determination of just compensation. Said court likewise fixed the just compensation on the basis of the evidence presented on the valuation of the parcels of land in 1993, not the value thereof as of the time of the acquisition in 1972. Therein petitioner Land Bank of the Philippines sought a review of the Decision of the trial court before this Court. This Court found that the petition for review of therein petitioner Land Bank of the Philippines was unmeritorious, to wit: Land Bank’s contention that the property was acquired for purposes of agrarian reform on October 21, 1972, the time of 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, Malacañang, 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. [416 Phil. 473.] x x x x It would certainly be inequitable to determine just compensation based on the guideline provided by PD 27 and EO 228 considering the DAR’s failure to determine the just compensation for a considerable length of time. That just compensation should be determined in accordance with RA 6657, and not PD 27 or EO 228, is especially imperative considering that just compensation should be the full and fair equivalent of the property taken from its owner by the expropriator, the equivalent being real, substantial, full and ample.¹³ In Meneses v. Secretary of Agrarian Reform, the Court applied its ruling in Natividad. x x x On the issue of the payment of just compensation, the Court adjudged: x x x x As previously noted, the property was expropriated under the Operation Land Transfer scheme of P.D. No. 27 way back in 1972. More than 30 years have passed and petitioners are yet to benefit from it, while the farmer-beneficiaries have already been harvesting its produce for the longest time. Events have rendered the applicability of P.D. No. 27 inequitable. Thus, the provisions of R.A. No. 6657 should apply in this case. In the even more recent case, Lubrica v. Land Bank of the Philippines, the Court also adhered to Natividad, viz.: The Natividad case reiterated the Court’s ruling in Office of the President v. Court of Appeals [413 Phil. 711] that the expropriation of the landholding did not take place on the effectivity of P.D. No. 27 on October 21, 1972 but seizure would take effect on the payment of just compensation judicially determined. Likewise, in the recent case of Heirs of Francisco R. Tantoco, Sr. v. Court of Appeals [489 SCRA 590], we held that expropriation of landholdings covered by R.A. No. 6657 takes place, not on the effectivity of the Act on June 15, 1988, but on the payment of just compensation.¹⁴ Additionally, in the more recent case of Land Bank of the Philippines v. Heirs of Maximo Puyat and Gloria Puyat,¹⁵ the Court again adhered to the ruling laid down in the abovementioned case. Here, the Court ruled that when the government takes property pursuant to PD No. 27, but does not pay the landowner his just compensation until after RA No. 6657 has taken effect in 1998, it becomes more equitable to determine just compensation using RA No. 6657 and not EO No. 228. Hence, the valuation of the GSP of palay should be based on its value at the time it was ordered paid by the SAC. Considering that the present case involves a similar factual milieu as the aforementioned cases, the Court deems it more equitable to determine just compensation due the petitioners using values pursuant to the standard laid down in Section 17 of RA No. 6657. Here, the property of the deceased spouses was placed under the land reform program in October 1972, and since then the land was parceled out and distributed to some 30 tenant-beneficiaries by respondents without effecting immediate and prompt payment. Clearly, the tenant-beneficiaries have already benefited from the land, while petitioners wait in vain to be paid. Unfortunately, it was only 19 years after the land was distributed by respondents that there was an action on the part of respondents to pay petitioners. Also worth emphasizing is the observation made by the RTC – What the Court considers as unfair, however, is that portion of Section 2 of Executive Order No. 228 which fixed at ₱35.00 the price per cavan of 50 kilos of palay, which amount was the government support price for palay in 1972 when P.D. No. 27 took effect. What made the said portion of Executive Order No. 228 unfair and unjust is the fact that the landowner was not paid in 1972 and he has been deprived of his 25% share in the net harvest since 1972, until now. Eduardo Ico, the [C]ommissioner representing the defendant Land Bank of the Philippines, modified the formula prescribed in Executive Order No. 228, by getting the average of the following values: (1) the total value of the land based upon the government support price of ₱35.00 with interest of six (6%) per cent per annum, compounded annually from 1972 until 1994; and (2) the total value of the land based upon the present government support price of ₱300.00 per cavan. The Court finds that the said modification of the formula has no basis in fact and in law. To let the value of the land earn interest of 6% per annum would be fair enough had the price of palay remained the same. The fact, however, was that the price of palay had increased 857 times from 1972 to 1994, whereas 6% interest would mean only an increase of 138 times from 1972 to 1995. The Court does not see the justification for getting the average between the government support prices in 1972 and in 1995.¹⁶ Needless to say, petitioners have been deprived of the use and dominion over their landholdings for a substantial period of time, while respondents abjectly failed to pay the just compensation due the petitioners. WHEREFORE, in light of the foregoing, the Petition for Review on Certiorari is GRANTED. The Amended Decision of the Court of Appeals dated October 25, 2005 is hereby REVERSED and SET ASIDE, and the Decision of the Regional Trial Court, dated August 23, 1995, is hereby AFFIRMED and REINSTATED. SO ORDERED. Velasco, Jr., (Chairperson), Abad, Mendoza, and Leonen, JJ., concur. July 22, 2013 N O T I C E OF J U D G M E N T Sirs/Mesdames: Please take notice that on ___July 1, 2013___ a Decision, copy attached herewith, was rendered by the Supreme Court in the above-entitled case, the original of which was received by this Office on July 22, 2013 at 2:30 p.m. Very truly yours, (SGD) LUCITA ABJELINA SORIANO Division Clerk of Court Footnotes ¹ Penned by Associate Justice Rosmari D. Carandang, with Associate Justices Eugenio S. Labitoria and Martin S. Villarama, Jr. (now a member of this Court), concurring; rollo, pp. 42-46. ² Id. at 48-49. ³ Id. at 62-63. ⁴ CA rollo, pp. 74-76. ⁵ Rollo, p. 50. ⁶ Id. at 56-61. ⁷ Id. at 47-55. ⁸ Id. at 42-46. ⁹ 486 Phil. 366 (2004). ¹⁰ Rollo, pp. 23, 29, 33-35, 38 ¹¹ G.R. No. 177607, January 19, 2009, 576 SCRA 291, 306. ¹² AN ACT INSTITUTING A COMPREHENSIVE AGRARIAN REFORM PROGRAM TO PROMOTE SOCIAL JUSTICE AND INDUSTRIALIZATION, PROVIDING THE MECHANISM FOR ITS IMPLEMENTATION, AND FOR OTHER PURPOSES, Effective June 10, 1988. x x x x Sec. 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 farm workers 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. (Emphasis supplied) ¹³ Emphases supplied. ¹⁴ Land Bank of the Philippines v. Pacita Agricultural Multi-Purpose Cooperative, Inc., supra note 11, at 306-309. ¹⁵ G.R. No. 175055, June 27, 2012. ¹⁶ Rollo, pp. 58-59. (Emphasis supplied.) The Lawphil Project - Arellano Law Foundation