Department of Agrarian Reform and Land Bank of the Philippines vs. Goduco

For land acquisitions under P.D. No. 27 where just compensation remained unpaid upon the effectivity of R.A. 6657, the agrarian reform process is incomplete. Just compensation must be determined under R.A. 6657, with P.D. No. 27 and E.O. No. 228 having suppletory effect.

The case stems from the government's agrarian reform programs. Lands owned by Manolo Goduco's predecessor were placed under the Operation Land Transfer program pursuant to P.D. No. 27 (1972). Emancipation Patents were issued to farmer-beneficiaries in the 1990s. The Land Bank of the Philippines (LBP) fixed a low valuation for the lands based on the formula in P.D. No. 27 and E.O. No. 228. The landowner, finding the valuation inadequate, filed a petition for determination of just compensation before the Special Agrarian Court (RTC).

• Filed in RTC (Special Agrarian Court) of Cabanatuan City.
• RTC ruled in favor of the landowner, applying R.A. 6657 factors and setting a higher valuation (P100,000/ha) with 6% interest from the date of taking.
• DAR and LBP separately appealed to the CA.
• The CA (in two separate divisions) affirmed the RTC's application of R.A. 6657 but one division deleted the 6% interest.
• DAR and LBP elevated the case to the SC via Petitions for Review on Certiorari.

• Manolo Goduco is the heir of the registered owner of several parcels of land in Nueva Ecija.
• The lands were covered by P.D. No. 27 and distributed to farmer-beneficiaries via Emancipation Patents issued in 1994 and 1996.
• LBP valued the lands at a total of P34,754.82 using the P.D. No. 27/E.O. No. 228 formula.
• Goduco filed a petition for just compensation, claiming the valuation was confiscatory and that the market value was at least P400,000 per hectare.
• At trial, Goduco presented evidence of higher sales prices for neighboring properties.
• The RTC set just compensation at P496,140.00 for 4.9614 hectares, applying Section 17 of R.A. 6657.

• The applicable law for valuation is P.D. No. 27 and E.O. No. 228, as the lands were acquired under the Operation Land Transfer program.
• Applying R.A. 6657 constitutes an improper retroactive application of a later law.
• The date of taking for valuation purposes is October 21, 1972 (effectivity of P.D. No. 27).
• The 6% interest imposed by the RTC is erroneous because it applies only under P.D. No. 27, not R.A. 6657.

• The valuation under P.D. No. 27/E.O. No. 228 is highly inadequate and confiscatory.
• Just compensation should be based on the fair market value, which is much higher, as evidenced by sales of adjacent properties.
• R.A. 6657 should apply as the agrarian reform process was not yet complete due to non-payment.

• Procedural Issues: N/A
• Substantive Issues:
  1. Whether the applicable law for determining just compensation is P.D. No. 27/E.O. No. 228 or R.A. 6657.
  2. What is the reckoning date for determining just compensation (time of taking).
  3. Whether interest should be imposed on the unpaid just compensation from the date of taking.

• Procedural: N/A
• Substantive:
  1. Applicable Law: R.A. 6657 is the applicable law. The agrarian reform process is incomplete until just compensation is paid. Since payment was not made before R.A. 6657 took effect, the process must be concluded under the new law, with P.D. No. 27 and E.O. No. 228 having suppletory effect per Section 75 of R.A. 6657.
  2. Reckoning Date: For properties acquired under P.D. No. 27 but paid under R.A. 6657, the "time of taking" is the time of actual payment of just compensation, not the effectivity of P.D. No. 27.
  3. Interest: The 6% interest imposed by the RTC is deleted. The incremental interest under A.O. No. 13 applies only to lands taken under P.D. No. 27/E.O. No. 228. Since R.A. 6657 governs, no such interest is warranted. Any interest (e.g., 12%) would be in the nature of damages for delay, which was not at issue here.
  4. Disposition: The petitions are denied. The case is remanded to the trial court for recomputation of just compensation using the formula in DAR Administrative Order No. 5, Series of 1998 (issued pursuant to R.A. 6657).

• Suppletory Application of Prior Agrarian Laws (Section 75, R.A. 6657) — Laws like P.D. No. 27 and E.O. No. 228 are not repealed by R.A. 6657 but have suppletory effect. The SC applied this to hold that while R.A. 6657 is primary, the older laws can fill gaps.
• Completion of Agrarian Reform Process upon Payment of Just Compensation — The SC reiterated that the seizure of landholdings under agrarian reform is not complete until just compensation is fully paid. This principle determines which law governs valuation.
• DAR Administrative Order No. 5, Series of 1998 Formula — The SC mandated the use of this formula for valuation under R.A. 6657. The formula is: LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1), with alternative formulas if certain factors are absent. The trier of fact must determine the presence and amounts of the factors.

• "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 before the completion of this process, the just compensation should be determined and the process concluded under the said law." (Citing LBP v. Natividad)
• "The application of the formula is mandated by law. However, the presence or absence of one or more factors in the formula and the amounts that correspond to the present factors must be determined by the Special Agrarian Court as the trier of facts. A remand to the trial court is needed."

• Land Bank of the Philippines v. Natividad — Controlling precedent that the agrarian reform process is incomplete without payment of just compensation, and thus R.A. 6657 applies if it intervenes.
• Paris v. Alfeche — Established that R.A. 6657 should complete the process for lands under P.D. No. 27, with the latter having suppletory effect.
• Land Bank of the Philippines v. Livioco — Distinguished cases where property was acquired under R.A. 6657 from those acquired under P.D. No. 27. For R.A. 6657 acquisitions, the "time of taking" follows the general expropriation rule (time of actual possession/dispossession).
• Land Bank of the Philippines v. Chico — Ruled that the 6% incremental interest under A.O. No. 13 applies only to P.D. No. 27 cases, not to valuations under R.A. 6657.

• Presidential Decree No. 27 — Original decree on land transfer; its valuation formula was argued for but held suppletory.
• Executive Order No. 228 — Implemented valuation under P.D. No. 27; also held suppletory.
• Republic Act No. 6657 (Comprehensive Agrarian Reform Law)
• Section 17 — Enumerates factors for determining just compensation (e.g., acquisition cost, current value, actual use, income).
• Section 75 — Provides for the suppletory effect of prior inconsistent laws, including P.D. No. 27 and E.O. No. 228.
• DAR Administrative Order No. 5, Series of 1998 — Provides the specific formula for computing land value under R.A. 6657.