Land Bank of the Philippines vs. Ferrer

When the agrarian reform process involving lands covered by Presidential Decree No. 27 remains incomplete—that is, just compensation has not yet been determined and paid—upon the effectivity of Republic Act No. 6657, the determination of just compensation shall be governed by RA No. 6657, with PD No. 27 and EO No. 228 having only suppletory effect pursuant to Section 75 of RA No. 6657.

The case involves the determination of just compensation for agricultural lands inherited by the Ferrer siblings from their deceased mother. The lands were tenanted and devoted to rice production in 1972 when PD No. 27 was issued, placing them under the Operation Land Transfer (OLT) Program. Decades later, an Emancipation Patent was issued to a tenant-beneficiary without payment of just compensation to the landowners, prompting the filing of a petition for the determination and payment of just compensation and raising the fundamental issue of which agrarian reform law applies to determine the valuation.

• Magin V. Ferrer, Antonio V. Ferrer, and Ramon V. Ferrer (the Ferrers) are the absolute owners pro-indiviso of an 11.7297-hectare parcel of agricultural land located in Bagong Bayan, San Jose, Nueva Ecija, which they inherited from their mother Liberata Villarosa who died intestate on January 23, 1968.
• The subject land was tenanted and devoted to rice production as of October 21, 1972, the date of effectivity of Presidential Decree No. 27, thereby placing it under the Operation Land Transfer Program.
• An Emancipation Patent covering 3.5773 hectares of the subject land was issued in the name of Alfredo Carbonel, one of the tenant-occupants, without payment of just compensation to the Ferrers.
• The Land Bank of the Philippines fixed the just compensation at P132,685.67 (approximately P12,050.00 per hectare) based on the guidelines of PD No. 27 and EO No. 228, utilizing the 1972 valuation formula.
• The Ferrers contested the valuation, asserting that the just compensation should be computed at P250,000.00 per hectare (totaling P2,930,000.00 for the entire property) based on the guidelines of RA No. 6657, citing that the land was irrigated and strategically located.
• The RTC appointed three commissioners to determine the amount of just compensation, who submitted written reports recommending valuation based on current market values under RA No. 6657.
• On September 27, 2004, the RTC rendered a decision fixing just compensation at P208,000.00 per hectare for 4.6203 hectares (totaling P961,022.50), applying the provisions of RA No. 6657 rather than PD No. 27.

• The LBP and DAR argued that PD No. 27, as reaffirmed by EO No. 228, should exclusively apply in determining just compensation because the subject property was tenanted and devoted to rice production in 1972, and these laws prescribe the specific formula for valuing such lands based on 1972 prices.
• They contended that RA No. 6657 applies only prospectively to ricelands and cornlands not tenanted as of October 21, 1972, and does not cover lands already subject to the OLT program under PD No. 27.
• They maintained that the OLT program under PD No. 27 operates separately and distinctly from the Comprehensive Agrarian Reform Program under RA No. 6657, as Congress intended existing government programs to be treated distinctly from the new CARP acquisition scheme.
• They argued that there was no legal basis for the RTC to appoint commissioners because there were no long accounts or difficult questions of fact requiring expert determination, and the formula for just compensation was already explicitly provided under PD No. 27 and EO No. 228.

• The Ferrers adopted the Court of Appeals' ruling that it did not err in applying the provisions of RA No. 6657 in fixing just compensation for the subject property.
• They maintained that the agrarian reform process was incomplete when RA No. 6657 took effect because just compensation had not been determined or paid, thereby bringing the case under the coverage of the later law.

• Procedural Issues:
  • Whether the Regional Trial Court erred in appointing commissioners to determine just compensation.
• Substantive Issues:
  • Whether Republic Act No. 6657 or Presidential Decree No. 27/Executive Order No. 228 should govern the determination of just compensation for the subject agricultural land placed under the Operation Land Transfer Program in 1972 but where payment remained undetermined and unpaid upon the effectivity of RA No. 6657.

• Procedural:
  • The Supreme Court ruled that the issue regarding the appointment of commissioners was not properly raised and ventilated in the trial courts as it was raised only for the first time on appeal. Nevertheless, the Court held that even if the issue were properly raised, the appointment of commissioners was proper because the applicable law is RA No. 6657, which provides for such procedure in determining just compensation.
• Substantive:
  • The Court denied the petitions and affirmed the Court of Appeals' ruling that RA No. 6657 governs the determination of just compensation.
  • The Court held that the agrarian reform process is deemed incomplete if just compensation has not yet been settled or paid to the landowners, regardless of whether the land was placed under the coverage of PD No. 27 in 1972.
  • Since the subject property was placed under the agrarian reform program in 1972 but the landowners had not received just compensation by the time RA No. 6657 took effect, the process remained incomplete, and RA No. 6657 became the applicable law.
  • The Court cited Section 75 of RA No. 6657, which provides that PD No. 27 and EO No. 228 shall have only suppletory effect to RA No. 6657.
  • The Court emphasized that it would be highly inequitable and unjust to determine compensation based on 1972 values under PD No. 27 considering the government's failure to determine just compensation for a considerable length of time, and considering that the government and farmer-beneficiaries have already benefited from the land while the landowners have yet to receive payment.
  • Just compensation must be the full and fair equivalent of the property taken from its owner by the expropriator, the equivalent being real, substantial, full, and ample.

• Applicability of RA No. 6657 to Incomplete PD No. 27 Cases — When the agrarian reform process involving lands covered by PD No. 27 remains incomplete (i.e., just compensation has not yet been determined and paid) upon the effectivity of RA No. 6657, the latter law applies to determine just compensation, with the former having only suppletory effect.
• Suppletory Effect of PD No. 27 and EO No. 228 — Pursuant to Section 75 of RA No. 6657, the provisions of PD No. 27 and EO No. 228 shall have suppletory effect to RA No. 6657, meaning they apply only to fill gaps where RA No. 6657 is silent or insufficient.
• Full and Fair Equivalent Standard — 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, not merely nominal or illusory.
• Equitable Considerations in Delayed Payment — It is inequitable to compute just compensation using the values at the time of taking in 1972 when payment has been delayed for decades, considering that the government and farmer-beneficiaries have already benefited from the land while the landowners have been deprived of its use and income.

• "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. Indeed, RA 6657 is the applicable law, with PD 27 and EO 228 having only suppletory effect."
• "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."
• "It would be highly inequitable on the part of the landowners therein to compute just compensation using the values at the time of taking in 1972, and not at the time of payment, considering that the government and the farmer-beneficiaries have already benefited from the land although ownership thereof has not yet been transferred in their names."

• Land Bank of the Philippines v. Hon. Eli G. C. Natividad — Controlling precedent establishing that RA No. 6657 applies to determine just compensation when the agrarian reform process is incomplete (just compensation not yet settled) upon the effectivity of the law.
• Paris v. Alfeche — Cited for the rule that the provisions of RA No. 6657 are applicable to the agrarian reform process of lands placed under the coverage of PD No. 27/E.O. No. 228 which had not been completed upon the effectivity of RA No. 6657.
• Land Bank of the Philippines v. Court of Appeals — Cited for the principle that PD No. 27 and EO No. 228 have suppletory effect to RA No. 6657.
• Association of Small Landowners of the Philippines v. Secretary of Agrarian Reform — Cited regarding the application of RA No. 6657 provisions to rice and corn lands and the constitutionality of payment modes.
• Land Bank of the Philippines v. Manuel O. Gallego, Jr. — Recent precedent reaffirming the applicability of RA No. 6657 to incomplete PD No. 27 cases.
• Lubrica v. Land Bank of the Philippines — Cited for the equitable principle that using 1972 values when payment is delayed is highly inequitable to landowners.
• Land Bank of the Philippines v. Rizalina Gustilo Barrido and Heirs of Romeo Barrido — Recent case reaffirming the doctrine that RA No. 6657 applies to incomplete agrarian reform processes.
• Land Bank of the Philippines v. Enrique Livioco — Recent case reaffirming the same doctrine regarding the applicability of RA No. 6657.

• Section 17 of Republic Act No. 6657 — Provides the factors to be considered in determining just compensation, including cost of acquisition, current value of like properties, nature, actual use and income, sworn valuation by the owner, tax declarations, and government assessment, as well as social and economic benefits contributed by farmers and the government.
• Section 75 of Republic Act No. 6657 — States that the provisions of PD No. 27 and EO No. 228 shall have suppletory effect to RA No. 6657.
• Section 7 of Republic Act No. 6657 — Provides priorities for land acquisition, specifically including rice and corn lands under PD No. 27 among the properties to be acquired and distributed under CARP.
• Section 18 of Republic Act No. 6657 — Cited in relation to the modes of payment for just compensation applicable to PD No. 27 lands.
• Presidential Decree No. 27 — The Emancipation Decree of Tenants issued on October 21, 1972, placing tenanted rice and corn lands under the Operation Land Transfer Program.
• Executive Order No. 228 — Declaring full land ownership to qualified farmer-beneficiaries covered by PD No. 27 and determining the value of remaining unvalued rice and corn lands based on the 1972 value.