Land Bank of the Philippines vs. Milagros De Jesus-Macaraeg

Just compensation for lands acquired under the Comprehensive Agrarian Reform Program must be computed in accordance with the formula prescribed under DAR Administrative Order No. 5, series of 1998, using the Annual Gross Production corresponding to the latest available 12-months' gross production immediately preceding the date of field investigation, and the average of the latest available 12-months' selling prices prior to the date of receipt of the claim folder by the Land Bank for processing. The Court may review factual findings of lower tribunals when their valuations are cogently at variance with each other.

Respondent Milagros De Jesus-Macaraeg is the registered owner of a 15.1836-hectare parcel of land in Cawayan, Calinan, Davao City, covered by TCT No. T-77552. In 2002, 7.1838 hectares of the property were placed under the Comprehensive Agrarian Reform Program (CARP) pursuant to Republic Act No. 6657. The Department of Agrarian Reform (DAR) and Land Bank valued the property under DAR Administrative Order No. 5, series of 1998, which prescribes the basic formula for land valuation. The property is part of the same tract of land formerly owned by Marcela de Jesus, whose heirs had a prior compromise agreement with Land Bank in Civil Case No. 28,340-00.

Respondent Milagros De Jesus-Macaraeg is the registered owner of a 15.1836-hectare parcel of land in Cawayan, Calinan, Davao City under TCT No. T-77552. In 2002, 7.1838 hectares of the subject land were placed under the Comprehensive Agrarian Reform Program (CARP) pursuant to RA 6657. The DAR and Land Bank valued the property at P65,756.61 per hectare, or a total of P472,382.33, in accordance with the basic formula under DAR Administrative Order No. 5, series of 1998. Land Bank offered this amount to Milagros, who rejected it, and Land Bank thereafter deposited the amount under her name.

An administrative proceeding before the DARAB was conducted to fix the amount of just compensation. By Resolution dated February 19, 2003, the DAR Adjudicator valued the property at P1,280,099.20, and Land Bank's motion for reconsideration was denied. Land Bank brought the case to the RTC-SAC via Civil Case No. 29,824-2003. Land Bank did not appear during the scheduled hearing for presentation of its evidence. Milagros presented her valuation of P3,055,000.00 per the appraisal of Asian Appraisal Corp., and offered the testimony of Ramon Macaraeg, head of the technical service unit of the Alcantara group, who claimed to have conducted a study on the property's pineapple production in 2002. According to Ramon, the average production of pineapple then was 46,666 kilos per hectare, and the average price based on agricultural statistics was P15.00 per kilo. Ramon is the husband of Milagros. On March 3, 2003, Milagros withdrew the initial deposit of just compensation made by Land Bank.

By Decision dated February 21, 2005, the RTC-SAC fixed just compensation at P20.00 per square meter and awarded P100,000.00 as attorney's fees. On Land Bank's appeal, the Court of Appeals, by Decision dated October 25, 2011, remanded the case to RTC-SAC for proper computation of just compensation and deleted the award of attorney's fees. During the new round of proceedings, Land Bank submitted a recomputed valuation using available data from the BAS in the amount of P777,880.40, including an adjustment of the AGP to 8,901.28 kilos of pineapple per hectare, priced at P7.96 per kilo.

Under Decision dated August 26, 2014, the RTC-SAC ordered Land Bank to pay P2,765,727.08 as just compensation with 12% interest per annum, setting the AGP at 46,666 kilos per hectare based on the DARAB Resolution, setting the SP at P5.00 per kilo, and pegging the MV at P50.00 per square meter based on zonal valuation. The Court of Appeals reversed, reducing the SP to P2.50 per kilo based on Land Bank's initial offer, adjusting the MV to P20,012.96 per hectare using the assessed value rather than zonal value, affirming the AGP of 46,666 kilos per hectare, and fixing just compensation at P1,271,523.91 less the initial deposit. The Court of Appeals also reduced the legal interest to 6% per annum in accordance with Nacar vs. Gallery Frames.

• AGP Computation: Land Bank argued that pursuant to DAR AO5, the AGP must correspond to the latest 12-month gross production immediately preceding the field investigation, which was done in May 2003, and should therefore be 8,901.28 kilos per hectare based on BAS data, not the self-serving submission of Milagros' husband.
• SP Application: Land Bank insisted on the amount of P777,880.40 as just compensation, where the AGP is 8,901.28 kilos per hectare and the SP is P7.96 per kilo.
• Legal Interest: Land Bank opposed the award of 6% interest per annum, asserting that it did not incur delay in payment, citing Land Bank of the Philippines vs. Alcantara and Land Bank of the Philippines vs. Celada, and arguing that the timely deposit of its initial valuation should be considered prompt payment of just compensation.

• Valuation: Milagros posited that the property should be valued at P210,000.00 per hectare based on the compromise agreement between the heirs of Marcela de Jesus (including herself) and Land Bank in Civil Case No. 28,340-00, since the property is part of the same tract of land owned by Marcela prior to its coverage by CARP.
• Legal Interest: Milagros defended the award of 6% legal interest per annum, as she had been waiting for seventeen years to receive just compensation from the government.

• AGP Determination: Whether the Court of Appeals erred in using 46,666 kilos per hectare as the Annual Gross Production in computing just compensation.
• SP Determination: Whether the Selling Price of P2.50 per kilo used by the Court of Appeals should be adjusted.
• Legal Interest: Whether the award of legal interest on the unpaid balance of just compensation was proper.

• AGP Determination: Yes. The Court of Appeals erred in using 46,666 kilos per hectare as the AGP, as this figure was unverified and based on the position paper of Milagros' husband. The AGP should be fixed at 8,901.28 kilos per hectare, in accordance with the definition of AGP under DAR AO5, based on BAS data for the twelve months before field inspection on May 3, 2002.
• SP Determination: Yes. The SP used by the Court of Appeals ought to be adjusted to P7.96 per kilo, as Land Bank had consistently used this figure since the case was remanded and is bound by its own admission.
• Legal Interest: No. The award of legal interest was proper, as the right to be paid just compensation includes the right to be paid on time. The interest rate was adjusted to 12% per annum from March 3, 2003 until June 30, 2013, and 6% per annum thereafter until fully paid, in accordance with Nacar vs. Gallery Frames.

• AGP Determination: The Court noted that under Rule 45 of the Rules of Court, only questions of law may be raised, but an exception exists when the judgment is based on misapprehension of facts or when the factual findings of the tribunals below are conflicting. Here, since the valuation of the Court of Appeals was cogently at variance with the valuation of the RTC-SAC, the Court reviewed the factual findings. The Court found that the 46,666 kilos per hectare figure used by the Court of Appeals was unverified, as it came from the position paper of Milagros' husband, who could hardly be considered an independent, reliable, or credible appraiser. In contrast, Land Bank obtained data from the BAS pertaining to pineapple production within twelve months before field inspection on May 3, 2002, which yielded 8,901.28 kilos per hectare. This figure was in accordance with the definition of AGP under DAR AO5.
• SP Determination: The RTC-SAC had set the SP at P5.00 per kilo, which the Court of Appeals reduced to P2.50 per kilo based on Land Bank's initial offer of P472,382.33. However, Land Bank itself later corrected this figure after the case was remanded, increasing its offer to P777,880.40 using P7.96 as the SP, a datum also obtained from the BAS. Since Land Bank had consistently used P7.96 as SP since the remand and even in the present petition, the Court bound Land Bank to its own admission. Applying the formula CNI = (AGP x SP x 0.20) / 0.12, the CNI was computed at P118,090.31 per hectare. Using the formula LV = (CNI x 0.9) + (MV x 0.1), the land value was computed at P108,282.58 per hectare, and the total land value at P777,880.40 for 7.1838 hectares.
• Legal Interest: The Court rejected Land Bank's claim that the timely deposit of its initial valuation should be considered prompt payment. Citing Land Bank of the Philippines vs. Uy and Apo Fruits Corporation vs. Land Bank of the Philippines, the Court held that the concept of just compensation embraces not only the correct determination of the amount to be paid to the owners of the land, but also payment within a reasonable time from its taking. Without prompt payment, compensation cannot be considered "just" because the property owner is made to suffer the consequences of being immediately deprived of land while being made to wait before actually receiving the amount necessary to cope with the loss. Since Land Bank had already paid P472,382.33, which Milagros withdrew on March 3, 2003, the balance of P305,498.07 was subject to legal interest. In accordance with Nacar vs. Gallery Frames, the Court adjusted the interest rate to 12% per annum from March 3, 2003 until June 30, 2013, and 6% per annum thereafter until fully paid.

• Just Compensation Includes Timely Payment — The concept of just compensation embraces not only the correct determination of the amount to be paid to the owners of the land, but also payment within a reasonable time from its taking. Without prompt payment, compensation cannot be considered "just" because the property owner suffers the consequences of being immediately deprived of land while waiting to receive the amount necessary to cope with the loss. The Court applied this doctrine in affirming the award of legal interest on the unpaid balance of just compensation.
• DAR AO5 Valuation Formula — Under DAR Administrative Order No. 5, series of 1998, the basic formula for land valuation is LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1), which adjusts when one or two factors other than MV are missing. When the CS factor is not present and CNI and MV are applicable, the formula is LV = (CNI x 0.9) + (MV x 0.1). The CNI is computed as (AGP x SP) - CO divided by 0.12, where AGP corresponds to the latest available 12-months' gross production immediately preceding the date of field investigation, and SP is the average of the latest available 12-months' selling prices prior to the date of receipt of the claim folder by the Land Bank for processing. The Court applied this formula in computing just compensation at P777,880.40.
• Admission Binding on Party — A party is bound by its own admissions. Land Bank had consistently used P7.96 per kilo as the SP since the case was remanded to the RTC-SAC and even in the present petition, so the Court bound Land Bank to this admission in computing the CNI.

• "The concept of just compensation embraces not only the correct determination of the amount to be paid to the owners of the land, but also payment within a reasonable time from its taking." — This passage from Land Bank of the Philippines v. Uy, citing Apo Fruits Corporation v. Land Bank of the Philippines, articulates the doctrine that prompt payment is an essential component of just compensation, supporting the award of legal interest.
• "The owner's loss, of course, is not only his property but also its income-generating potential. Thus, when property is taken, full compensation of its value must immediately be paid to achieve a fair exchange for the property and the potential income lost." — This passage from Apo Fruits Corporation v. Land Bank of the Philippines explains the rationale for imposing interest on unpaid just compensation as a basic measure of fairness.
• "In stark contrast, Land Bank obtained data from the BAS pertaining to the production of pineapples within twelve (12) months before field inspection on May 3, 2002. Based on these data, the AGP should be fixed at 8,901.28 kilos per hectare. The Court finds this figure to be in accordance with the definition of AGP under DAR AO5." — This passage states the Court's ruling on the proper AGP to be used in the valuation formula, rejecting the unverified figure from the respondent's husband.

• Nacar vs. Gallery Frames, 716 Phil. 267 (2013) — Controlling precedent on the applicable legal interest rates; the Court adjusted the interest rate to 12% per annum from March 3, 2003 until June 30, 2013, and 6% per annum thereafter until fully paid.
• Land Bank of the Philippines vs. Uy, G.R. No. 221313, December 5, 2019 — Cited for the doctrine that just compensation includes payment within a reasonable time from taking.
• Apo Fruits Corporation vs. Land Bank of the Philippines, 647 Phil. 251 (2010) — Cited for the principle that interest on unpaid just compensation is a basic requirement of fairness, as the property owner's loss includes the income-generating potential of the property.
• Land Bank of the Philippines vs. Alcantara, 826 Phil. 687 (2018) — Cited by Land Bank for the proposition that timely deposit of initial valuation should be considered prompt payment; the Court did not adopt this argument.
• Land Bank of the Philippines vs. Celada, 515 Phil. 467 (2006) — Cited by Land Bank on the same proposition regarding prompt payment; the Court did not adopt this argument.
• Land Bank of the Philippines vs. Spouses Chu, 808 Phil. 179 (2017) — Cited for the exception to the rule that the Court is not a trier of facts, allowing review of factual findings when the judgment is based on misapprehension of facts or when factual findings of tribunals below are conflicting.
• Land Bank of the Philippines vs. Omengan, 813 Phil. 901 (2017) — Cited for the proposition that RTC-SAC must consider the factors enumerated under Section 17 of RA 6657 in fixing just compensation.

• Section 17, Republic Act No. 6657 — The provision enumerates the factors to be considered in determining just compensation: cost of acquisition, 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 noted that RTC-SAC must take these factors into consideration in fixing just compensation.
• Rule 45, Rules of Court — The provision limits appeals to questions of law, as the Court is not a trier of facts. The Court applied the exception allowing review of factual findings when the judgment is based on misapprehension of facts or when the factual findings of the tribunals below are conflicting.
• DAR Administrative Order No. 5, Series of 1998 — The regulation prescribes the basic formula for valuation of lands covered by VOS or CA: LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1), with adjustments when one or two factors are missing. The Court applied the formula LV = (CNI x 0.9) + (MV x 0.1) since the CS factor was not present, and defined AGP and SP for purposes of computing CNI.

Gesmundo, C.J. (Chairperson), M. Lopez, and J. Lopez, JJ., concurred. Caguioa, J., filed a Separate Opinion.

• Justice Caguioa — Filed a Separate Opinion, the contents of which are not detailed in the provided text.