Land Bank of the Philippines v. Navarro

Courts must consider the factors stated in Section 17 of RA 6657, as amended, and as translated into the applicable DAR basic formulas, in their determination of just compensation for properties covered by the agrarian reform law, and may deviate therefrom only upon a reasoned explanation grounded on the evidence on record.

Lina Navarro is the daughter of Antonio Buenaventura and stepdaughter of Jovita Buenaventura. Antonio and Jovita co-owned Lot No. 6561, an agricultural land of 29.0772 hectares in Catalunan Grande, Davao City, covered by OCT No. P-2182. Upon Antonio's death, the property was partitioned between Jovita (75% pro-indiviso share) and Lina (25% pro-indiviso share). In 1988, the government expropriated 21.890 hectares of the property under Presidential Decree No. 27, the DAR valuing it at ₱49,025.15 based on a Landowner-Tenant Production Agreement and Farmer's Undertaking executed between Jovita and the tenant-beneficiaries. Jovita accepted payment for her share, but Lina rejected the tender of ₱12,256.29 for her 25% share as confiscatory and unrealistic.

Lina Navarro is the daughter of Antonio Buenaventura and stepdaughter of Jovita Buenaventura. Antonio and Jovita owned Lot No. 6561, Cad-174 of the Guianga Cadastre in Catalunan Grande, Davao City — an agricultural land of 29.0772 hectares covered by OCT No. P-2182. When Antonio died, Jovita was appointed administratrix of his estate in Special Proceeding Case No. 1920. Lot No. 6561 was partitioned between Jovita, who received a 75% pro-indiviso share, and Lina, who received the remaining 25% pro-indiviso share.

Sometime in 1988, the government, pursuant to its land transfer program under PD 27, expropriated a portion of Lot No. 6561. The DAR valued the expropriated property at ₱49,025.15 based on the Landowner-Tenant Production Agreement and Farmer's Undertaking executed between Jovita and the farmer-beneficiaries. LBP concurred with this valuation. Out of the ₱49,025.15, Jovita was paid ₱36,768.86 for her share. Lina rejected the tender of ₱12,256.29 for her 25% share, considering it confiscatory, unrealistic, and violative of her rights to just compensation and due process.

On August 9, 1995, Lina filed a petition with the Special Agrarian Court for the fixing of just compensation against the DAR and LBP. She alleged that the DAR valued the property at only ₱0.17 per sq. m. and asked the SAC to consider comparable sales of similarly situated lots. LBP denied that the valuation was confiscatory, asserting that the property was valued in accordance with PD 27 as amended by EO 228, and that since the property was not physically subdivided between Jovita and Lina, the portion belonging to Lina could not yet be identified. The DAR claimed its valuation was fair and just under Section 17 of RA 6657 and moved to dismiss for failure to exhaust administrative remedies.

During pre-trial on May 30, 2002, the parties submitted a Stipulation of Facts. Item No. 1 stated that out of the total 29.0772 hectares, 21.890 hectares were covered by the DAR under PD 27, as shown by TCT Nos. EP-221 to EP-234. Item No. 2 stated that of the 21.890 hectares, 6.5006 hectares were paid directly by the tenants to Jovita, representing a portion of her 75% share. Item No. 3 stated that the remaining 15.2999 hectares were paid for by the government through LBP. Item No. 4 stated that Lina's share for which just compensation should be fixed is 5.4725 hectares (25% of 21.890 hectares). The SAC issued its Decision on June 17, 2002, ruling in favor of Lina and fixing just compensation at ₱10.00 per sq. m. using the market value approach, with 12% per annum interest from June 13, 1988.

Both parties appealed to the CA. Lina claimed the valuation was too low and that the SAC erred in ruling she did not claim attorney's fees. LBP questioned the date of taking, the valuation formula used, and the imposition of legal interest. While the appeal was pending, Lina filed a motion for execution pending appeal, which the CA granted. LBP complied partially, paying for only 3.8249 hectares, asserting that this was the only area rightfully belonging to Lina. The CA required the parties to submit memoranda on the hectarage issue. Lina claimed a typographical error — the total area should have been 21.8005 hectares, not 21.890 hectares — and that the parties' Stipulation of Facts already settled her compensable share at 5.4501 hectares. LBP insisted that Lina's 25% share should be based only on the 15.2999 hectares financed by the government, since the 6.5006 hectares were directly paid by the tenants to Jovita.

The CA, in its June 25, 2009 Decision, denied the appeal and affirmed the SAC with modification, reducing Lina's compensable area to 5.4501 hectares and directing LBP to pay for the remaining portion at ₱10.00 per sq. m. plus 12% per annum interest from June 13, 1988. The CA held that RA 6657, particularly Section 17, should govern the determination of just compensation, since the amount to be paid was still unsettled when RA 6657 was enacted. The CA denied LBP's motion for reconsideration in its March 18, 2011 Resolution. LBP filed the present petition.

• Compensable Area: Petitioner argued that Lina's compensable share should only be 3.824975 hectares, asserting that since the property was not yet partitioned, Jovita's transfer of 6.5006 hectares to tenant-farmers necessarily included Lina's 25% pro-indiviso share, pursuant to Article 493 of the Civil Code.
• Estoppel: Petitioner maintained that it could not be estopped by the Stipulation of Facts because any act violating Article 493 is illegal, and estoppel cannot be predicated on an illegal act.
• Valuation Formula: Petitioner initially argued that just compensation should be fixed under the PD 27 valuation formula, but later abandoned this theory upon the passage of RA 9700, asserting instead that while Section 17 of RA 6657 applies, the SAC failed to actually apply it and the pertinent DAR administrative orders.
• Legal Interest: Petitioner argued that the imposition of 12% legal interest was erroneous because there was no delay on its part, as it was Lina who refused to accept payment, and that the courts a quo failed to provide factual and legal bases for the grant of interest.

• Confiscatory Valuation: Respondent argued that the DAR's valuation of ₱0.17 per sq. m. was ridiculously low, confiscatory, unrealistic, and violative of her rights to just compensation and due process, and asked the SAC to consider comparable sales of similarly situated lots.
• Exhaustion of Administrative Remedies: Respondent contended that the doctrine of exhaustion of administrative remedies was not applicable to her action.
• Procedural Bar: Respondent maintained that the issue of non-compliance with DAR AO No. 5 was not raised by LBP during trial or on appeal and thus LBP was barred from raising it for the first time before the Supreme Court.
• Property Value: Respondent asserted that the value of the property as of 1988 was ₱20.00 per sq. m., as established by the testimonies of duly licensed real estate appraisers she presented as witnesses.

• Compensable Area: Whether the CA erred in holding that Lina's compensable share in the property is 5.4725 hectares (corrected to 5.4501 hectares).
• Just Compensation Valuation: Whether the just compensation fixed by the SAC and affirmed by the CA is correct.
• Legal Interest: Whether the CA erred in upholding the imposition of 12% interest over the compensation awarded.

• Compensable Area: No. The CA did not err; Lina's compensable area is 5.4501 hectares, representing her 25% pro-indiviso share in the 21.8005 hectares covered by agrarian reform, as bound by the parties' Stipulation of Facts and Article 493 of the Civil Code.
• Just Compensation Valuation: No. The valuation of ₱10.00 per sq. m. was reversed for failure to apply Section 17 of RA 6657, as amended, and the applicable DAR basic formula; the case was remanded for recomputation.
• Legal Interest: No, but modified. The imposition of legal interest was warranted due to the delay in payment, but the rate was modified to 12% per annum from June 13, 1988 to June 30, 2013, and 6% per annum from July 1, 2013 until full payment, pursuant to Nacar vs. Gallery Frames and BSP Monetary Board Circular No. 799, series of 2013.

• Compensable Area: The Court first resolved a typographical error in the Stipulation of Facts: the total area placed under agrarian reform was 21.8005 hectares, not 21.890 hectares. This was established by adding up the areas covered by EPs 221 to 234 and confirmed by the internal consistency of the Stipulation itself — subtracting 6.5006 from 21.8005 yields exactly 15.2999, matching Item No. 3, whereas subtracting from 21.890 yields 15.3894, which does not. The correction was permissible under the palpable mistake exception to the conclusiveness of judicial admissions, as recognized in Atlas Consolidated Mining & Development Corporation vs. Commissioner of Internal Revenue. Lina's 25% pro-indiviso share is therefore 5.4501 hectares. LBP's argument that Article 493 of the Civil Code precluded recognizing Lina's share was rejected: the Stipulation of Facts merely identified Lina's undivided interest (her "ideal or abstract quota"), not a definite portion with specific metes and bounds, which would require actual partition. Under Article 493, a co-owner has full ownership of his or her pro-indiviso share and may alienate it. Since the LBP admitted in the Stipulation that the 6.5006 hectares were chargeable to Jovita's 75% share, and did not allege palpable mistake, it was bound by that admission and could not now argue that a proportionate part should be charged to Lina's 25% share.

• Just Compensation Valuation: When the agrarian reform process under PD 27 remains incomplete and is overtaken by RA 6657 — such as when just compensation has yet to be settled — just compensation should be determined under RA 6657, with PD 27 and EO 228 applying only suppletorily. This principle was reinforced by Section 5 of RA 9700, which provides that all previously acquired lands wherein valuation is subject to challenge shall be resolved pursuant to Section 17 of RA 6657, as amended. Section 17 enumerates specific factors (cost of acquisition, value of standing crop, current value of like properties, nature, actual use and income, sworn valuation by the owner, tax declarations, government assessors' assessment, and 70% of BIR zonal valuation) which the DAR translated into a basic formula under DAR AO No. 5, series of 1998, and subsequent administrative orders. In Alfonso vs. Land Bank of the Philippines, the Court gave full constitutional presumptive weight to Section 17 and the DAR formulas, holding that courts must consider them and may deviate only upon a reasoned explanation grounded on the evidence. The SAC, however, wantonly disregarded Section 17 and the DAR formula, relying solely on the "market value approach" which it deemed a "fairer gauge." The CA sustained this without testing whether the SAC applied the appropriate formula. Because the SAC's valuation did not comply with the statutory guidelines, it was reversed. However, since the Supreme Court is not a trier of facts and the record contained insufficient data to arrive at a proper valuation, the case was remanded to the SAC for recomputation in accordance with Section 17 and the pertinent DAR regulations. The Court also rejected Lina's argument that LBP was barred from raising the DAR AO No. 5 issue for the first time on appeal, finding that exceptions to the rule against raising new issues on appeal applied — specifically, plain error, jurisprudential developments, and matters of public policy.

• Legal Interest: The imposition of legal interest was warranted because the property was taken for public use on June 13, 1988 without payment of just compensation, and even the offer of payment on March 11, 1993 — five years after the taking — was delayed. Citing National Power Corporation vs. Manalastas, the Court reiterated that if property is taken before compensation is deposited, the final compensation must include interest on its just value from the time of taking to the time of actual payment, to place the owner in as good a position as before the taking. The award of interest is in the nature of damages for delay, making the government's obligation one of forbearance. The CA was correct in upholding the imposition of interest, but the rate was modified in conformity with Nacar vs. Gallery Frames: 12% per annum from June 13, 1988 to June 30, 2013, and 6% per annum from July 1, 2013 until full payment, pursuant to BSP Monetary Board Circular No. 799, series of 2013. Amounts already received by Lina pursuant to the writ of execution pending appeal were to be deducted from the recomputed amount.

• Mandatory Application of Section 17 of RA 6657 and DAR Formulas — Courts must consider the factors stated in Section 17 of RA 6657, as amended, and as translated into the applicable DAR basic formulas in determining just compensation for agrarian reform properties. Courts may deviate from strict application of the formulas only when a reasoned explanation grounded on the evidence on record supports such departure. The Court applied this doctrine by reversing the SAC's valuation, which relied solely on the market value approach without considering Section 17 or the DAR formula, and remanded the case for recomputation in strict conformity with Alfonso vs. Land Bank of the Philippines.

• Conclusiveness of Judicial Admissions and the Palpable Mistake Exception — Facts stipulated during pre-trial are considered judicial admissions, legally binding on the parties making them. A party may not unilaterally rescind them even if placed at a disadvantageous position. However, the rule admits of two exceptions: (1) when the admission was made through palpable mistake, and (2) when no such admission was in fact made. The Court applied this doctrine by correcting the stipulated total area from 21.890 to 21.8005 hectares, finding that a palpable mistake was committed in the arithmetical computation and typing of the area, as confirmed by the EPs and the internal consistency of the Stipulation of Facts.

• Co-Owner's Right Over Pro-Indiviso Share Under Article 493 of the Civil Code — Each co-owner has full ownership of his or her part and of the fruits and benefits pertaining thereto, and may alienate, assign, or mortgage it, and even substitute another person in its enjoyment, except when personal rights are involved. The effect of such alienation or mortgage, with respect to the co-owners, is limited to the portion that may be allotted to the alienating co-owner upon partition. The Court applied this doctrine by holding that Jovita's transfer of 6.5006 hectares to tenant-farmers was chargeable to her own 75% pro-indiviso share and did not include Lina's 25% share, since a co-owner may alienate her undivided interest without affecting the co-owners' shares.

• Undivided Interest vs. Definite Portion — The undivided interest of a co-owner is the "ideal or abstract quota" or "proportionate share" in the co-owned property, while the definite portion refers to specific metes and bounds allocated only upon partition. The Court applied this distinction by holding that the Stipulation of Facts, in stating Lina's 25% share as 5.4501 hectares, merely identified her undivided interest and did not determine a definite portion ahead of actual partition, thus not violating Article 493.

• Interest as Damages for Delay in Payment of Just Compensation — When property is taken for public use before compensation is deposited with the court, the final compensation must include interest on its just value from the time of taking to the time of actual payment, to place the owner in as good a position as before the taking. The award of interest is imposed in the nature of damages for delay, making the government's obligation one of forbearance. The Court applied this doctrine by sustaining the imposition of legal interest, modifying the rate to 12% per annum from June 13, 1988 to June 30, 2013, and 6% per annum from July 1, 2013 until full payment.

• "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." — This passage, quoted from Alfonso vs. Land Bank of the Philippines, articulates the controlling doctrine on the mandatory consideration of Section 17 factors and DAR formulas in fixing just compensation, and is the ratio decidendi for reversing the SAC's valuation.

• "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." — This passage defines the scope of judicial discretion in agrarian just compensation cases: courts retain the power to make a final determination but must justify any deviation from the DAR formulas.

• "If property is taken for public use before compensation is deposited with the court having jurisdiction over the case, the final compensation must include interests on its just value to be computed from the time the property is taken to the time when compensation is actually paid or deposited with the court." — This passage, quoted from National Power Corporation vs. Manalastas, states the rule on legal interest as an integral component of just compensation when payment is delayed, and is the basis for sustaining the award of interest.

• "The undivided interest of a co-owner is also referred to as the 'ideal or abstract quota' or 'proportionate share.' On the other hand, the definite portion of the land refers to specific metes and bounds of a co-owned property." — This passage, quoted from Cabrera vs. Ysaac, establishes the distinction between undivided interest and definite portion, which was central to rejecting LBP's argument that the Stipulation of Facts violated Article 493 of the Civil Code.

• Alfonso vs. Land Bank of the Philippines, G.R. Nos. 181912 and 183347, November 29, 2016 — Controlling precedent. The Court relied on this case for the rule that courts must consider Section 17 of RA 6657 and the DAR basic formulas in determining just compensation, and may deviate only upon a reasoned explanation. The case was remanded for recomputation in strict conformity with this ruling.

• Atlas Consolidated Mining & Development Corporation vs. Commissioner of Internal Revenue, G.R. No. 134467, November 17, 1999 — Applied. The Court relied on this case for the palpable mistake exception to the conclusiveness of judicial admissions, using it to correct the stipulated total area from 21.890 to 21.8005 hectares.

• Cabrera vs. Ysaac, G.R. No. 166790, November 19, 2014 — Applied. The Court relied on this case for the distinction between undivided interest and definite portion in co-ownership, holding that the Stipulation of Facts merely identified Lina's undivided interest and did not violate Article 493 of the Civil Code.

• National Power Corporation vs. Manalastas, G.R. No. 196140, January 27, 2016 — Applied. The Court cited this case for the rule that legal interest must be imposed on just compensation from the time of taking to the time of actual payment, to place the owner in as good a position as before the taking.

• Nacar vs. Gallery Frames, G.R. No. 189871, August 13, 2013 — Applied. The Court relied on this case to modify the legal interest rate from a uniform 12% to 12% per annum from June 13, 1988 to June 30, 2013, and 6% per annum from July 1, 2013 until full payment, pursuant to BSP Monetary Board Circular No. 799, series of 2013.

• Land Bank of the Philippines vs. Heirs of Angel T. Domingo, G.R. No. 168533, February 4, 2008 — Followed. Cited by the CA for the rule that determination of just compensation for lands taken under PD 27 should be made under Section 17 of RA 6657, with PD 27 and EO 228 having suppletory effect; the Supreme Court concurred with this application.

• Land Bank of the Philippines vs. Natividad, G.R. No. 127198, May 16, 2005 — Followed. Cited alongside Domingo for the same rule on the applicability of RA 6657 to lands originally taken under PD 27 when just compensation remains unsettled.

• Section 17, Republic Act No. 6657 (Comprehensive Agrarian Reform Law of 1988) — Enumerates the factors for determining just compensation: cost of acquisition, value of standing crop, current value of like properties, nature, actual use and income, sworn valuation by the owner, tax declarations, assessment by government assessors, and 70% of BIR zonal valuation, translated into a basic formula by the DAR, with social and economic benefits and nonpayment of taxes or loans as additional factors. The Court held that the SAC's failure to apply this provision and the DAR formula rendered its valuation defective, warranting remand.

• Section 5, Republic Act No. 9700 — Provides that all previously acquired lands wherein valuation is subject to challenge by landowners shall be completed and finally resolved pursuant to Section 17 of RA 6657, as amended. The Court found this provision applicable, confirming that the case falls under its coverage and that Section 17 governs the determination of just compensation.

• Article 493, Civil Code of the Philippines — Provides that each co-owner has full ownership of his or her part and may alienate, assign, or mortgage it, with the effect limited to the portion allotted upon partition. The Court applied this provision to hold that Jovita could alienate her 75% pro-indiviso share without affecting Lina's 25% share, and that the Stipulation of Facts identifying Lina's share did not violate this article.

• DAR AO No. 5, series of 1998; AO No. 2, series of 2009; AO No. 1, series of 2010; DAR AO No. 7, series of 2011 — Administrative orders translating Section 17 factors into a basic formula: LV = (CNI × 0.60) + (CS × 0.30) + (MV × 0.10), with modifications when fewer factors are present. The Court held that the SAC should have applied the formula prevailing at the time of its decision (DAR AO No. 5, series of 1998) and directed the trial court on remand to conform to the guidelines in Alfonso.

• BSP Monetary Board Circular No. 799, series of 2013 — Reduced the legal interest rate from 12% to 6% per annum effective July 1, 2013. The Court applied this circular to modify the interest rate on the just compensation award, imposing 12% from June 13, 1988 to June 30, 2013, and 6% from July 1, 2013 until full payment.

Bersamin, C.J. (Chairperson), Del Castillo (Working Chairperson), and Gesmundo, JJ., concurred. Carandang, J., was on official leave.