Land Bank of the Philippines vs. Lajom

Just compensation in agrarian reform cases where the PD 27 process was overtaken by RA 6657 must be determined under RA 6657, with PD 27 and EO 228 applying only suppletorily, and must be valued at the time of taking reckoned from the issuance of emancipation patents. The RTC, sitting as a Special Agrarian Court, must consider the factors enumerated in Section 17 of RA 6657, as amended, and is not strictly bound by DAR formulae in exercising its judicial function of determining just compensation.

Jose T. Lajom and his mother Vicenta Vda. De Lajom were registered owners of several parcels of land with an aggregate area of 27 hectares in Alua, San Isidro, Nueva Ecija, covered by TCT No. NT-70785. In 1991, a 24-hectare portion was placed under the government's Operation Land Transfer Program pursuant to Presidential Decree No. 27, the "Tenants Emancipation Decree." The Department of Agrarian Reform, through the Land Bank of the Philippines, offered to pay Lajom specific amounts as just compensation based on the DAR valuation. The dispute centers on which law governs the valuation—PD 27 and EO 228, or RA 6657 (the Comprehensive Agrarian Reform Law of 1988), which took effect on June 15, 1988—and on the proper reckoning point for determining the time of taking.

Jose T. Lajom and his mother Vicenta Vda. De Lajom were the registered owners of several parcels of land with an aggregate area of 27 hectares, more or less, located at Alua, San Isidro, Nueva Ecija, covered by Transfer Certificate of Title No. NT-70785. Sometime in 1991, a 24-hectare portion of the subject land was placed under the government's Operation Land Transfer Program pursuant to Presidential Decree No. 27, the "Tenants Emancipation Decree," as amended. The Department of Agrarian Reform, through the Land Bank of the Philippines, offered to pay Lajom the following amounts as just compensation: (a) ₱19,434.00 for 11.3060 hectares; (b) ₱17,505.65 for 2.4173 hectares; and (c) ₱80,733.45 for 10.3949 hectares.

Despite non-payment of the offered just compensation, DAR granted twelve Emancipation Patents between 1994 and 1998 in favor of the farmer-beneficiaries: Vicente Dela Cruz, Donato Magno, Eutiquio Gablao, Ricardo Bulos, Proceso Julian, Ceferino Dela Cruz, Rufino Gripal, Simplicio Pataleta, Jovita Vda. De Bondoc, and Julian Pataleta. Lajom rejected the DAR valuation and filed an amended petition for determination of just compensation and cancellation of land transfers against the DAR, the LBP, and the farmer-beneficiaries. He alleged that the DAR erroneously applied the provisions of PD 27 and EO 228, which had been repealed by Section 17 of RA 6657, and that the Barrio Committee on Land Production resolution fixing the average gross production at 120 cavans of palay per hectare per year was falsified. The LBP, for its part, agreed with the DAR valuation and insisted that PD 27 and EO 228 were never abrogated by RA 6657.

The RTC rejected the DAR valuation and, using the formula Land Value = (AGP x 2.5 Hectares x Government Support Price x Area) under PD 27 and EO 228, fixed just compensation at ₱3,858,912.00 with 6% p.a. legal interest from 1991 until fully paid. The RTC set the AGP at 160 cavans of palay per hectare per year, taking judicial notice of increased production due to modern farm technology, and pegged the GSP at ₱400.00 per certification from the National Food Authority as of 1991. The CA affirmed with modification, deleting the 6% interest award and imposing 12% p.a. interest by way of damages from March 11, 2004 until fully paid, finding it inequitable to determine just compensation based on PD 27 and EO 228 guidelines since the actual taking occurred in 1991.

• Retroactive Application of RA 6657: The LBP contended that the CA committed reversible error in retroactively applying the provisions of RA 6657 to land acquired under PD 27 and EO 228.
• Reckoning Point of Just Compensation: The LBP argued that the CA erred in reckoning the period to determine just compensation on the date of actual payment instead of the date of taking.
• Imposition of Interest: The LBP contended that the CA erred in imposing interest at the rate of 12% p.a. on the just compensation award in the nature of damages from March 11, 2004 until full payment.

• Deletion of 6% Interest: Lajom, through his representatives, raised the sole question of whether the CA erred in deleting the award of 6% interest p.a. on the just compensation award from the time of taking until full payment.

• Applicable Law: Whether the provisions of RA 6657 should be applied retroactively to land acquired under PD 27 and EO 228.
• Reckoning Point of Taking: Whether the time of taking for purposes of computing just compensation should be reckoned from the date of actual payment or from the issuance of the emancipation patents.
• Compliance with Section 17 Factors: Whether the RTC properly determined just compensation considering the factors enumerated under Section 17 of RA 6657, as amended.
• Imposition of Interest: Whether the CA erred in deleting the 6% p.a. interest award and imposing 12% p.a. interest by way of damages on the just compensation award.

• Applicable Law: Yes, RA 6657 applies. Where the agrarian reform process under PD 27 remains incomplete and is overtaken by RA 6657, just compensation should be determined and the process concluded under RA 6657, with PD 27 and EO 228 applying only suppletorily.
• Reckoning Point of Taking: The time of taking is reckoned from the issuance dates of the emancipation patents, which were issued between 1994 and 1998, not from the date of actual payment or from 1991 as the lower courts used.
• Compliance with Section 17 Factors: No. The RTC failed to consider the factors enumerated in Section 17 of RA 6657, as amended, and therefore the valuation was rejected and the case remanded for a new determination.
• Imposition of Interest: The interest awards by both lower courts were set aside. On remand, the RTC may impose legal interest at 12% p.a. from the time of taking until June 30, 2013, and at 6% p.a. from July 1, 2013 until fully paid, conformably with Bangko Sentral ng Pilipinas Monetary Board Circular No. 799, Series of 2013.

• Applicable Law: Case law instructs that when the agrarian reform process under PD 27 remains incomplete and is overtaken by RA 6657—such as when the just compensation due the landowner has yet to be settled—such just compensation should be determined and the process concluded under RA 6657, with PD 27 and EO 228 applying only suppletorily. Where RA 6657 is sufficient, PD 27 and EO 228 are superseded. Records show that even before Lajom filed his petition in May 1993, RA 6657 had already taken effect on June 15, 1988. The emancipation patents were issued prior to the filing of the petition, and both the taking and the valuation of the subject portion occurred after the passage of RA 6657. The matters pertaining to the correct just compensation award were still in contention at the time RA 6657 took effect; thus, its provisions should have been applied.

• Reckoning Point of Taking: It is fundamental that just compensation should be determined at the time of the property's taking. Taking may be deemed to occur at the time emancipation patents are issued by the government. An emancipation patent constitutes the conclusive authority for the issuance of a Transfer Certificate of Title in the name of the grantee. It is from the issuance of an emancipation patent that the grantee can acquire the vested right of ownership in the landholding, subject to the payment of just compensation to the landowner. Since the emancipation patents in this case were issued between 1994 and 1998, the just compensation should be reckoned therefrom, being considered the "time of taking" or the time when the landowner was deprived of the use and benefit of his property.

• Compliance with Section 17 Factors: While the LBP is charged with the initial responsibility of determining the value of lands placed under the land reform, its valuation is considered only as an initial determination and is not conclusive. It is the RTC, sitting as a Special Agrarian Court, which should make the final determination of just compensation in the exercise of its judicial function. The RTC is required to consider the factors enumerated in Section 17 of RA 6657, as amended: 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, as well as the social and economic benefits contributed by the farmers and farmworkers and by the Government. After a punctilious review of the records, the Court found that none of these factors had been considered by the RTC. The valuation was therefore rejected, and the case was remanded for a new determination. The evidence must conform to Section 17 of RA 6657, as amended, prior to its amendment by RA 9700, which should not be applied retroactively to pending cases.

• Imposition of Interest: The RTC may impose interest on the just compensation award as may be justified by the circumstances of the case and in accordance with prevailing jurisprudence. Legal interest in expropriation cases is allowed where there was delay in the payment of just compensation, deeming the same to be an effective forbearance on the part of the State. This incremental interest is not granted on the computed just compensation; rather, it is a penalty imposed for damages incurred by the landowner due to the delay in its payment. Legal interest shall be pegged at 12% p.a. from the time of taking until June 30, 2013, and at 6% p.a. from July 1, 2013 until fully paid, conformably with Bangko Sentral ng Pilipinas Monetary Board Circular No. 799, Series of 2013. The RTC is reminded that while it should take into account the various formulae created by the DAR, it is not strictly bound thereby, as the determination of just compensation is a judicial function that cannot be unduly restricted.

• Suppletory Application of PD 27 and EO 228 — Where the agrarian reform process under PD 27 remains incomplete and is overtaken by RA 6657, such as when the just compensation due the landowner has yet to be settled, just compensation should be determined and the process concluded under RA 6657, with PD 27 and EO 228 applying only suppletorily. Where RA 6657 is sufficient, PD 27 and EO 228 are superseded. The Court applied this doctrine because the emancipation patents were issued and the valuation occurred after RA 6657 took effect on June 15, 1988.

• Reckoning Point of Taking in Agrarian Reform — The date of taking of the subject land for purposes of computing just compensation should be reckoned from the issuance dates of the emancipation patents. An emancipation patent constitutes the conclusive authority for the issuance of a Transfer Certificate of Title in the name of the grantee, and it is from its issuance that the grantee acquires the vested right of ownership in the landholding, subject to the payment of just compensation to the landowner. The Court applied this doctrine to fix the reckoning point between 1994 and 1998, when the emancipation patents were issued.

• Judicial Function of Just Compensation Determination — The determination of just compensation is a judicial function vested in the regional trial court acting as a Special Agrarian Court, not in administrative agencies. While courts should be mindful of the different formulae created by the DAR in arriving at just compensation, they are not strictly bound to adhere thereto if the situations before them do not warrant it. The SAC must be able to reasonably exercise its judicial discretion in the evaluation of the factors for just compensation, which cannot be arbitrarily restricted by a formula dictated by the DAR.

• Legal Interest as Damages for Delay — Legal interest in expropriation cases is not granted on the computed just compensation; rather, it is a penalty imposed for damages incurred by the landowner due to the delay in its payment. The Court clarified that this incremental interest is an effective forbearance on the part of the State, pegged at 12% p.a. from the time of taking until June 30, 2013, and at 6% p.a. from July 1, 2013 until fully paid.

• "Case law instructs that when the agrarian reform process under PD 27 remains incomplete and is overtaken by RA 6657, such as when the just compensation due the landowner has yet to be settled, as in this case, such just compensation should be determined and the process concluded under RA 6657, with PD 27 and EO 228 applying only suppletorily." — This passage states the controlling doctrine on the applicable law for determining just compensation in agrarian reform cases where the PD 27 process was overtaken by RA 6657.

• "The date of taking of the subject land for purposes of computing just compensation should be reckoned from the issuance dates of the emancipation patents. An emancipation patent constitutes the conclusive authority for the issuance of a Transfer Certificate of Title in the name of the grantee. It is from the issuance of an emancipation patent that the grantee can acquire the vested right of ownership in the landholding, subject to the payment of just compensation to the landowner." — This passage, quoted from LBP v. Heirs of Angel T. Domingo, establishes the reckoning point for the time of taking in agrarian reform cases.

• "To clarify, this incremental interest is not granted on the computed just compensation; rather, it is a penalty imposed for damages incurred by the landowner due to the delay in its payment." — This passage clarifies the nature of legal interest imposed in expropriation cases, distinguishing it from an increment on the just compensation itself.

• "As a final word, the Court would like to emphasize that while the agrarian reform program was undertaken primarily for the benefit of our landless farmers, this undertaking should, however, not result in the oppression of landowners by pegging the cheapest value for their lands." — This passage articulates the policy balance between agrarian reform objectives and the constitutional protection of landowners' property rights.

• LBP vs. Heirs of Angel T. Domingo, 567 Phil. 593 (2008) — Controlling precedent establishing that the date of taking for purposes of computing just compensation should be reckoned from the issuance dates of the emancipation patents.
• LBP vs. Santiago, Jr., G.R. No. 182209, October 3, 2012, 682 SCRA 264 — Cited for the doctrine that where the agrarian reform process under PD 27 remains incomplete and is overtaken by RA 6657, just compensation should be determined under RA 6657.
• LBP vs. Heirs of Maximo Puyat, G.R. No. 175055, June 27, 2012, 675 SCRA 233 — Cited for the proposition that where RA 6657 is sufficient, PD 27 and EO 228 are superseded, and for the principle that the determination of just compensation is a judicial function that cannot be unduly restricted by DAR formulae.
• LBP vs. Livioco, G.R. No. 170685, September 22, 2010, 631 SCRA 86 — Cited for the definition of "time of taking" as the time when the landowner was deprived of the use and benefit of his property, and for the allowance of legal interest in expropriation cases.
• DAR vs. Goduco, G.R. Nos. 174007 and 181327, June 27, 2012, 675 SCRA 187 — Cited for the clarification that incremental interest is a penalty imposed for damages incurred by the landowner due to delay in payment, not an increment on the just compensation.
• Nacar vs. Gallery Frames, G.R. No. 189871, August 13, 2013, 703 SCRA 439 — Cited for the modification of interest rates conformably with Bangko Sentral ng Pilipinas Monetary Board Circular No. 799, Series of 2013.
• Secretary of the Department of Public Works and Highways vs. Tecson, G.R. No. 179334, July 1, 2013, 700 SCRA 243 — Cited for the fundamental principle that just compensation should be determined at the time of the property's taking.
• LBP vs. Spouses Chico, 600 Phil. 272 (2009) — Cited for the principle that the agrarian reform program should not result in the oppression of landowners by pegging the cheapest value for their lands.

• Section 17, Republic Act No. 6657 — The provision enumerating the factors to be considered in determining just compensation: cost of acquisition of the land, current value of like properties, nature, actual use and income, sworn valuation by the owner, tax declarations, and assessment made by government assessors, plus social and economic benefits contributed by farmers and farmworkers and by the Government. The Court found that the RTC failed to consider these factors and remanded the case for a new determination.
• Section 5, Republic Act No. 9700 — The provision further amending Section 17 of RA 6657, declaring 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 held that RA 9700 should not be applied retroactively to pending cases filed before its effectivity.
• Presidential Decree No. 27 — The "Tenants Emancipation Decree" under which the subject portion was initially placed under the Operation Land Transfer Program. The Court held that its provisions apply only suppletorily where RA 6657 is sufficient.
• Executive Order No. 228, Series of 1997 — The issuance providing guidelines for valuation under PD 27. The Court held that it applies only suppletorily where RA 6657 is sufficient.
• Bangko Sentral ng Pilipinas Monetary Board Circular No. 799, Series of 2013 — The circular modifying the rules respecting interest rates, which the Court applied to peg legal interest at 6% p.a. from July 1, 2013 until fully paid.

Antonio T. Carpio (Chairperson), Presbitero J. Velasco, Jr., Mariano C. Del Castillo, and Jose Portugal Perez.