Land Bank of the Philippines vs. Del Moral, Inc.

When payment of just compensation for lands expropriated under agrarian reform is delayed for a considerable period, the taking is deemed to have occurred at the time of judicial determination of compensation, and just compensation must be computed based on the fair market value prevailing at the time of payment, not at the time of taking in 1972, applying Section 17 of Republic Act No. 6657 and allowing courts to deviate from administrative formulas when warranted by the evidence.

Del Moral, Inc., a domestic family corporation, was the registered owner of several parcels of land in Pangasinan with a total area of 125.2717 hectares, originally used as tobacco farmlands. In 1972, 102.9766 hectares were placed under the coverage of Presidential Decree No. 27, which emancipated tenants from the bondage of the soil. Executive Order No. 228, issued in 1987, provided the mechanism for determining the value of rice and corn lands subject to the decree. The Department of Agrarian Reform computed the just compensation at P342,917.81 (approximately P3,329.30 per hectare) based on the 1972 government support price for palay. In 1992, Land Bank of the Philippines informed Del Moral of the approval of this monetary claim. Del Moral rejected the valuation as grossly inadequate, leading to a 35-year lapse without effective payment.

• Nature of the Property: Del Moral, Inc. owned 125.2717 hectares of agricultural land in Pangasinan, originally devoted to tobacco farming.
• Coverage under PD 27: In 1972, 102.9766 hectares were placed under the coverage of Presidential Decree No. 27, which mandated the emancipation of tenants and transfer of land ownership.
• Initial Valuation: Pursuant to Executive Order No. 228 (1987), the Department of Agrarian Reform computed the just compensation at P342,917.81 based on the average gross production in 1972 multiplied by government support prices. Land Bank approved this valuation in 1992 and deposited the amount in cash and agrarian reform bonds.
• Rejection of Valuation: Del Moral rejected the valuation as grossly inadequate and unreasonably low, noting that the equivalent was roughly P3,329.30 per hectare.
• Judicial Determination: On April 26, 2002, Del Moral filed a petition for the proper determination of just compensation. It presented an Appraisal Report dated March 21, 2005 by licensed real estate appraiser Manrico Alhama, which considered the area, technical descriptions, proximity to urban centers, infrastructure, and current land use, establishing a significantly higher market value.
• RTC Valuation: The RTC relied on the expert testimony and appraisal report, applying the formula in DAR Administrative Order No. 5 (Series of 1998) to fix just compensation at P216,104,385.00 (approximately P2,098,522.57 per hectare), representing the current fair market value.
• Damages Award: The RTC found that Del Moral had been deprived of productive use of the land since 1972, making it impossible to determine actual losses with certainty, and awarded P90 million in temperate damages and P10 million in nominal damages, plus six percent legal interest from finality of judgment until full payment.
• Parallel Appeals: Both DAR and Land Bank appealed separately to the Court of Appeals. The DAR's petition was denied by the Supreme Court on procedural grounds and attained finality. Land Bank's separate appeal remained pending and was decided consistently with the DAR's case, leading to the present petition.

• Res Judicata Inapplicable: Land Bank argued that it was not impleaded as a party in CA-G.R. SP No. 98373 (the DAR's appeal) and thus could not be bound by the finality of that judgment, as the dismissal of the DAR's petition in G.R. No. 181183 did not operate to bind non-parties.
• Mootness by RA 9700: The enactment of Republic Act No. 9700 (2009), amending Section 7 of Republic Act No. 6657, allegedly mooted the issue of which formula to apply, as the amendment mandated that all previously acquired lands with challenged valuation be resolved pursuant to Section 17 of RA 6657.
• Improper Valuation Methodology: The computation by the lower courts was erroneous because it was based solely on the current fair market value without considering the mandatory factors under Section 17 of RA 6657 (acquisition cost, sworn valuation by owner, mortgage value, tax declarations, and social/economic benefits contributed by farmers).
• No Delay or Bad Faith: There was no unreasonable delay warranting damages because Land Bank had deposited the determined compensation in 1992; the delay was attributable to Del Moral's rejection of the valuation. Land Bank acted merely as a custodian implementing legal guidelines, without bad faith or culpable omission.
• Incompatibility of Damages: Temperate and nominal damages are incompatible and cannot be awarded concurrently; furthermore, damages cannot be paid from the Agrarian Reform Fund, which is limited to just compensation payments.
• Legal Interest Improper: The imposition of legal interest was contested as unwarranted under the circumstances.

• Law of the Case: Del Moral maintained that the judgment in G.R. No. 181183 (denying DAR's appeal) had attained finality and constituted the law of the case, which could no longer be disturbed by collateral attack.
• Substantial Identity of Parties: Land Bank and DAR shared a community of interest as government agencies representing the expropriator; thus, Land Bank was bound by the final judgment against DAR under the principle of res judicata.
• Correctness of Valuation: The computation based on current fair market value was in accordance with controlling jurisprudence (Lubrica v. Land Bank, Natividad). Land Bank failed to present contrary evidence regarding market value, rendering Del Moral's appraisal report conclusive.
• Delay and Damages: The 35-year deprivation of property without just compensation justified the award of temperate damages for pecuniary loss that could not be proved with certainty, and the imposition of legal interest was proper to compensate for the delay.

• Res Judicata: Whether Land Bank of the Philippines is bound by the final and executory judgment against the Department of Agrarian Reform in CA-G.R. SP No. 98373 regarding the computation of just compensation and damages.
• Just Compensation: Whether the just compensation to be paid to Del Moral was properly computed based on the fair market value at the time of judicial determination rather than at the time of taking in 1972.
• Damages and Interest: Whether the awards for temperate and nominal damages, as well as the legal interest imposed, are proper.

• Res Judicata: Land Bank is bound by the final judgment in the DAR's appeal. The four requisites of res judicata concur: (1) a final judgment exists (the RTC decision affirmed by the CA in the DAR's case, which became final after the Supreme Court denied the DAR's petition in G.R. No. 181183); (2) the RTC and CA had jurisdiction over the subject matter and parties; (3) the judgment was on the merits; and (4) there is substantial identity of parties (Land Bank and DAR share a community of interest as government representatives in the expropriation), subject matter (the same 102.9766 hectares), and causes of action (determination of just compensation). Under Section 47(b), Rule 39 of the Rules of Court, the judgment is conclusive between the parties and their privies.
• Just Compensation: The computation based on the fair market value prevailing at the time of judicial determination is correct. When payment is not effected immediately after taking, the taking is deemed to occur at the time of judicial determination of compensation. After 35 years of deprivation without payment, applying the 1972 values under PD 27 and EO 228 would result in a "confiscatory taking." Republic Act No. 6657 applies because the agrarian reform process remained incomplete when the law took effect. Republic Act No. 9700 does not apply retroactively to claims approved before July 1, 2009 (Del Moral's claim was approved in 1992). While courts should consider DAR formulas, the determination of just compensation is a judicial function vested in the Special Agrarian Courts, which may deviate from administrative formulas with a reasoned explanation grounded on evidence. The RTC properly relied on the uncontradicted expert appraisal report establishing current market value.
• Damages and Interest: Temperate damages of P10 million are affirmed because Del Moral suffered pecuniary loss from the deprivation of the land since 1972, the amount of which could not be proved with certainty. However, nominal damages of P1 million are deleted because temperate and nominal damages are incompatible and cannot be granted concurrently. Legal interest at six percent per annum from the finality of judgment until full payment is affirmed.

• Res Judicata — The doctrine bars relitigation of a claim or issue where there is (1) a final judgment or order; (2) jurisdiction of the court over the subject matter and parties; (3) a judgment on the merits; and (4) identity of parties, subject matter, and causes of action. Only substantial identity of parties is required; privity exists where parties have a community of interest in the subject matter.
• Taking in Agrarian Reform Cases — When payment of just compensation is not effected immediately after the taking of the property, the taking is deemed to have occurred on the date of payment of just compensation as judicially determined. Just compensation must then be computed based on the market value prevailing at the time of payment, not at the time of taking, to avoid confiscatory results.
• Applicability of RA 6657 to PD 27 Lands — Where the agrarian reform process (including determination of just compensation) is incomplete at the time of RA 6657's effectivity, the process is concluded under RA 6657, with PD 27 and EO 228 having only suppletory application.
• Judicial Function in Valuation — The determination of just compensation is a judicial function vested in the courts, not administrative agencies. While courts must consider the factors in Section 17 of RA 6657 and applicable DAR formulas, they may deviate therefrom when strict application is unwarranted, provided the deviation is supported by a reasoned explanation grounded on the evidence.
• Incompatibility of Temperate and Nominal Damages — Temperate damages (awarded when pecuniary loss is proven but the amount cannot be determined with certainty) and nominal damages (awarded to vindicate a right) are incompatible and cannot be awarded concurrently for the same act or omission.

• "When payment of just compensation is not effected immediately after the taking of the property, then just compensation must be computed on the basis of the market value of the landholding prevailing at the time of payment."
• "Just compensation should be determined in accordance with R.A. No. 6657, and not P.D. No. 27 or E.O. No. 228 considering that just compensation is the full and fair equivalent of the property taken from its owner by the expropriator, the equivalent being real, substantial, full, and ample."
• "The determination of just compensation is a judicial function which cannot be curtailed or limited by legislation, much less by an administrative rule."
• "Temperate or moderate damages may be recovered if pecuniary loss has been suffered but the amount cannot be proved with certainty from the nature of the case."

• Lubrica v. Land Bank of the Philippines, 537 Phil. 571 (2006) — Controlling precedent holding that where there is long delay in payment of just compensation, the computation must be based on the fair market value at the time of payment, and that RA 6657 applies to PD 27 lands where the reform process is incomplete.
• Land Bank of the Philippines v. Natividad, 497 Phil. 737 (2005) — Reiterated the doctrine that the taking is deemed to occur at the time of payment when there is considerable delay, and that applying 1972 values after 30 years would be inequitable.
• Office of the President v. Court of Appeals, 413 Phil. 711 (2001) — Established that the expropriation is not deemed to have taken place upon the effectivity of PD 27 if just compensation has not been paid.
• Land Bank of the Philippines v. Spouses Chu, 808 Phil. 179 (2017) — Held that RA 9700 applies prospectively to landholdings yet to be acquired, and that courts may deviate from DAR formulas with reasoned explanation.
• Alfonso v. Land Bank of the Philippines, 801 Phil. 217 (2016) — Affirmed that courts possess the power to make final determination of just compensation and may depart from DAR formulas with reasoned explanation.

• Section 17, Republic Act No. 6657 (Comprehensive Agrarian Reform Law) — Enumerates the factors for determining just compensation: cost of acquisition, current value of like properties, nature, actual use and income, sworn valuation by owner, tax declarations, government assessment, social and economic benefits contributed by farmers and government, and non-payment of taxes or loans.
• Section 7, Republic Act No. 6657, as amended by Republic Act No. 9700 — Provides that previously acquired lands wherein valuation is subject to challenge shall be completed and resolved pursuant to Section 17; the Transitory Provision of DAR AO No. 02-09 clarifies this applies prospectively to claims received by LBP on or after July 1, 2009.
• Section 47, Rule 39 of the Rules of Civil Procedure — Provides for the effect of judgments as a bar to subsequent actions involving the same claim, demand, or cause of action (res judicata).
• Article 2224, Civil Code of the Philippines — Defines temperate or moderate damages as recoverable when pecuniary loss has been suffered but the amount cannot be proved with certainty.

Peralta, C.J., Inting, and Delos Santos, JJ.