Land Bank of the Philippines vs. Pacita Agricultural Multi-Purpose Cooperative, Inc.

Where lands were taken under Presidential Decree No. 27 but the agrarian reform process remained incomplete and just compensation had not been paid for a considerable length of time, just compensation should be determined under Republic Act No. 6657, with Presidential Decree No. 27 and Executive Order No. 228 having only suppletory effect.

Petitioner Land Bank of the Philippines is the government financial institution involved in compensating landowners under the agrarian reform program. Respondent Pacita Agricultural Multi-Purpose Cooperative, Inc. acquired the subject property from Ayungon Agricultural Corporation, the registered owner of eight parcels of land in Barangay Ayungon, La Carlota City, Negros Occidental. The property had been placed under the Department of Agrarian Reform’s Operation Land Transfer pursuant to Presidential Decree No. 27 and distributed to farmer-beneficiaries, with Certificates of Land Transfer and Emancipation Patents issued. Republic Act No. 6657, the Comprehensive Agrarian Reform Law of 1988, later provided the governing agrarian reform framework and declared that PD 27, EO 228, and EO 229 have suppletory effect.

The eight parcels of land at the center of the case are located in Barangay Ayungon, La Carlota City, Negros Occidental, with an aggregate area of 34.95 hectares, more or less. They were previously covered by Transfer Certificates of Title No. T-567, No. T-1203, No. T-1204, No. T-1205, No. T-1208, No. T-1209, No. T-1210, and No. T-1213 of the Registry of Deeds for the City of La Carlota in the name of Ayungon Agricultural Corporation (AAC). Sometime in 1972, the Department of Agrarian Reform (DAR) acquired the subject property under its Operation Land Transfer Program pursuant to Presidential Decree No. 27. The property was thereafter distributed to farmer-beneficiaries; from 1978 to 1983, Certificates of Land Transfer were issued to them, and from 1986 to 1990, the corresponding Emancipation Patents were granted.

On 10 February 1986 and 3 March 1987, petitioner Land Bank of the Philippines (LBP) paid AAC ₱35,778.70, the value of only two of the eight parcels—those covered by TCTs No. T-567 and No. T-1205. On 28 May 1987, respondent Pacita Agricultural Multi-Purpose Cooperative, Inc. purchased the subject property from AAC. By the latter part of 1987, respondent inquired from LBP about the balance of payment for the six other parcels. On 13 November 1987, LBP, through Assistant Vice President Ruben V. Mabagos, sent a letter stating that the value of the remaining parcels was pegged at ₱148,172.21. Respondent refused to accept this valuation.

In the interim, Republic Act No. 6657 was signed into law and took effect on 15 June 1988 after publication in two newspapers of general circulation. It covered all public and private agricultural lands, placed rice and corn lands under Presidential Decree No. 27 in Phase One of the acquisition and distribution program, and provided in Section 75 that PD 27, Executive Order No. 228, Executive Order No. 229, and other laws not inconsistent with RA 6657 shall have suppletory effect. On 12 August 1994, LBP sent respondent a Memorandum reiterating that the value of the remaining property was ₱148,172.21 and requiring documentary requirements for full payment. Respondent, through counsel, protested the proposed value and requested a revaluation. In October 1994, the DAR issued Administrative Order No. 13, Series of 1994, imposing on the value of land not yet paid to the landowner an increment of 6% yearly interest, compounded from the date of coverage, with 21 October 1972 as the earliest date, up to 21 October 1994. LBP then adjusted its proposed valuation to ₱537,538.34. Respondent still rejected the amount, contending that LBP committed a mistake in computing the increment.

On 18 September 1995, respondent filed a Petition for Land Valuation and Determination of Just Compensation before the Regional Trial Court of Negros Occidental against LBP. The case was docketed as SPL. CAR CASE NO. 95-08 and raffled to Branch 54, the designated Special Agrarian Court (SAC). In an Order dated 24 January 1996, the SAC allowed amendment of the Petition to include the DAR and the farmer-beneficiaries as additional respondents. In its Amended Petition, respondent prayed that the just compensation to be paid by LBP for the rest of the subject property be fixed at ₱2,763,622.50 or higher; in the alternative, it prayed that Executive Order No. 228 and A.O. No. 13 be declared unconstitutional for violating the due process clause and the principle of just compensation.

The record showed that the subject property had already been distributed to the farmer-beneficiaries, who since then had exclusively possessed the same and harvested its produce, and that Emancipation Patents were eventually issued in their favor. Even after the lapse of 23 years—from 1972, when the DAR took the property, until 1995, when respondent filed its Petition before the SAC—the full payment of just compensation due respondent had yet to be made by LBP.

• Retroactive Application of RA 6657: Petitioner argued that the Court of Appeals erred in retroactively applying Republic Act No. 6657 to land acquired under Presidential Decree No. 27 and Executive Order No. 228, disregarding those laws and Gabatin vs. Land Bank of the Philippines. It maintained that the taking was deemed effected on 21 October 1972, so just compensation should be based on the value at the time of taking, and that respondent would be protected by the 6% yearly compounded interest under DAR A.O. No. 13.
• Judicial Notice of Government Support Price: Petitioner contended that the Court of Appeals failed to take mandatory judicial notice of the government support price for palay prescribed in PD 27 and EO 228, which was ₱35.00 for one cavan of 50 kilos.
• Suppletory Effect and Hierarchy: Petitioner maintained that although Section 75 of RA 6657 gives PD 27 and EO 228 suppletory effect, those issuances are not inferior to RA 6657 and were not superseded by it, citing Sigre vs. Court of Appeals for the proposition that the laws operate distinctly.

• Just Compensation: Respondent sought a judicial determination of just compensation for the remaining property at ₱2,763,622.50 or higher.
• Revaluation and Computation: Respondent protested LBP’s proposed valuation and requested a revaluation, and later rejected the adjusted amount of ₱537,538.34 on the ground that LBP committed a mistake in computing the increment.
• Constitutionality of EO 228 and A.O. No. 13: In the alternative, respondent prayed that Executive Order No. 228 and A.O. No. 13 be declared unconstitutional for violating the due process clause and the principle of just compensation.

• Applicable Law and Retroactivity: Whether the Court of Appeals erred in applying Republic Act No. 6657 to determine just compensation for land acquired under Presidential Decree No. 27 and Executive Order No. 228, instead of using the value at the time of taking in 1972.
• Judicial Notice of Government Support Price: Whether the Court of Appeals failed to take mandatory judicial notice of the government support price for palay under PD 27 and EO 228 at ₱35.00 per cavan of 50 kilos.
• Suppletory Effect and Hierarchy of Laws: Whether the Court of Appeals treated PD 27 and EO 228 as inferior to RA 6657 despite Section 75 and the rule that these laws operate distinctly.

• Applicable Law and Retroactivity: Yes. Just compensation should be determined under RA 6657, with PD 27 and EO 228 having only suppletory effect, because the agrarian reform process remained incomplete and payment had been delayed for decades.
• Judicial Notice of Government Support Price: No. The petition was without merit; because RA 6657 governs the computation, the PD 27/EO 228 government support price of ₱35.00 per cavan is not the controlling valuation.
• Suppletory Effect and Hierarchy of Laws: No. PD 27 and EO 228 are not inferior, but they have only suppletory effect; RA 6657 is the applicable law where the process remains incomplete.

• Applicable Law and Retroactivity: Under PD 27, EO 228, and A.O. No. 13, land value for palay is computed as LV = 2.5 x AGP x GSP x (1.06)^n, where AGP is average gross production, ₱35 is the 1972 government support price for palay, and n is the number of years from tenancy to the effectivity of A.O. No. 13. Under RA 6657, Section 18 requires LBP to compensate the landowner in the amount agreed upon by the landowner, DAR, and LBP or as finally determined by the court; Section 17 lists factors for just compensation. Gabatin held that taking was deemed effected on 21 October 1972 and the GSP should be pegged at the time of taking. However, the Court noted that after Gabatin it decided several cases finding it more equitable to determine just compensation based on the value at the time of payment, foremost of which is Land Bank of the Philippines vs. Natividad. Natividad held that the seizure of the landholding did not take place on the date of effectivity of PD 27 but would take effect on payment of just compensation; where the agrarian reform process is still incomplete and RA 6657 was passed before completion, just compensation should be determined under RA 6657, with PD 27 and EO 228 having only suppletory effect. Meneses and Lubrica adhered to Natividad. In the instant case, DAR acquired the property in 1972, distributed it to farmer-beneficiaries who possessed it and harvested its produce, and EPs were issued, yet full payment had not been made even after 23 years. These circumstances made it more equitable for the SAC to determine just compensation using values at the time of payment. The Court thus affirmed the CA’s remand for recomputation under Sections 16, 17, and 18 of RA 6657.
• Judicial Notice of Government Support Price: The Court did not sustain this assigned error. Although it set out the PD 27, EO 228, and A.O. No. 13 formula and the ₱35.00 GSP for palay, it held that those issuances had only suppletory effect in this case. Because the CA correctly remanded the case for recomputation under RA 6657, the failure to take judicial notice of the PD 27/EO 228 GSP did not affect the governing legal standard. The petition was without merit.
• Suppletory Effect and Hierarchy of Laws: Section 75 of RA 6657 expressly provides that PD 27, EO 228, EO 229, and other laws not inconsistent with RA 6657 shall have suppletory effect. The Court did not declare PD 27 and EO 228 inferior; it held that RA 6657 was the applicable law because the agrarian reform process was incomplete and payment had been delayed. The CA’s reliance on RA 6657, including Sections 16, 17, and 18, was affirmed. The Court also cited Association of Small Landowners in the Philippines, Inc. vs. Secretary of Agrarian Reform, where RA 6657 was applied to rice and corn lands and the payment of just compensation for PD 27 lands through the modes in Section 18 was upheld.

• Just Compensation in Agrarian Reform — Just compensation is the full and fair equivalent of the property taken from its owner by the expropriator, real, substantial, full and ample. Under Section 17 of RA 6657, the court considers the cost of acquisition, current value of like properties, nature, actual use and income, sworn valuation by the owner, tax declarations, government assessments, and social and economic benefits contributed by farmers and farmworkers and by the government, as well as non-payment of taxes or loans. The Court applied these factors by requiring recomputation under RA 6657 rather than the outdated PD 27/EO 228 values.
• Taking Occurs Upon Payment of Just Compensation — In agrarian expropriation, the seizure of the landholding does not take place on the date of effectivity of PD 27 but takes effect on the payment of just compensation. The Court applied this rule because the property had been taken in 1972 but remained unpaid for 23 years, leaving the agrarian reform process incomplete.
• Suppletory Effect of PD 27 and EO 228 — Under Section 75 of RA 6657, PD 27, EO 228, EO 229, and other laws not inconsistent with RA 6657 have suppletory effect only. The Court held that RA 6657 was the primary law for determining just compensation in this case, with PD 27 and EO 228 merely suppletory.
• Equity in Delayed Compensation — Where the DAR fails to determine just compensation for a considerable length of time, it is inequitable to compute compensation based on PD 27 and EO 228 values at the time of taking; values at the time of payment should be used. The Court applied this to the 23-year delay.
• Judicial Prerogative to Determine Just Compensation — The determination of just compensation is a judicial prerogative; PD 27 and EO 228 may serve as guiding principles or factors but do not substitute the court’s judgment. The CA’s remand to the SAC for recomputation under RA 6657 was affirmed.
• Applicability of RA 6657 to PD 27 Lands — RA 6657 includes PD 27 lands among the properties the DAR shall acquire and distribute, and where the agrarian reform process remains incomplete, just compensation should be determined under RA 6657. The Court applied this to the subject property.

• "Under the factual circumstances of this case, the agrarian reform process is still incomplete as the just compensation to be paid private respondents has yet to be settled. Considering the passage of Republic Act No. 6657 (RA 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, conformably with our ruling in Paris v. Alfeche." — This passage, adopted from Land Bank of the Philippines vs. Natividad, states the controlling rule that RA 6657 governs where the agrarian reform process remains incomplete, 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." — This passage supplies the equity rationale for departing from the time-of-taking valuation and defines just compensation as the full and fair equivalent of the property taken.
• "These circumstances, the same as in Natividad and Meneses, make it more equitable for the SAC to determine the just compensation due the respondent for the remainder of the subject property using values at the time of its payment." — This passage applies the Natividad and Meneses rulings to the case’s facts, where the property had been distributed and enjoyed by farmer-beneficiaries while payment remained outstanding.

• Gabatin vs. Land Bank of the Philippines, G.R. No. 148223, 25 November 2004, 444 SCRA 176 — Cited by petitioner for the rule that taking is deemed effected on 21 October 1972 and the government support price should be pegged at the time of taking. The Court acknowledged Gabatin but did not apply it, noting later cases that found it more equitable to use values at the time of payment.
• Land Bank of the Philippines vs. Natividad, G.R. No. 127198, 16 May 2005, 458 SCRA 441 — Followed. It held that seizure of the landholding did not take place on the effectivity of PD 27 but would take effect on payment of just compensation, and that RA 6657 applies with PD 27 and EO 228 having only suppletory effect.
• Meneses vs. Secretary of Agrarian Reform, G.R. No. 156304, 23 October 2006, 505 SCRA 90 — Followed. It applied Natividad and held that RA 6657 should apply where more than 30 years had passed and the landowners had yet to benefit from the expropriation.
• Lubrica vs. Land Bank of the Philippines, G.R. No. 170220, 20 November 2006, 507 SCRA 415 — Followed. It adhered to Natividad and held that expropriation takes effect on payment of just compensation, not on the effectivity of PD 27.
• Office of the President, Malacañang, Manila vs. Court of Appeals, 413 Phil. 711 — Cited in Natividad for the rule that seizure of the landholding did not take place on the date of effectivity of PD 27 but would take effect on payment of just compensation.
• Association of Small Landowners in the Philippines, Inc. vs. Secretary of Agrarian Reform, 175 SCRA 343 — Cited for the constitutionality of PD 27 and EO 228 and for the rule that full payment of just compensation must be made before ownership is transferred; RA 6657 was applied to rice and corn lands.
• Paris vs. Alfeche, 416 Phil. 473 — Cited in Natividad for the suppletory effect of PD 27 and EO 228 under RA 6657.
• Heirs of Francisco R. Tantoco, Sr. vs. Court of Appeals, 489 SCRA 590 — Cited in Lubrica for the rule that expropriation of landholdings covered by RA 6657 takes place not on the effectivity of the Act but on payment of just compensation.

• Presidential Decree No. 27 — Decreed the emancipation of tenants from the bondage of the soil, transferred to them ownership of the land they till, and provided the instruments and mechanism therefor. The subject property was acquired by the DAR under Operation Land Transfer pursuant to this decree.
• Executive Order No. 228 — Declared full land ownership to qualified farmer-beneficiaries covered by PD 27, determined the value of remaining unvalued rice and corn lands, and provided the manner of payment by the farmer-beneficiary and mode of compensation to the landowner. Section 2 sets the formula using average gross production multiplied by 2.5 and by ₱35 for palay or ₱31 for corn. It was applied only as a suppletory issuance.
• Executive Order No. 229 — Provided the mechanism for the implementation of the Comprehensive Agrarian Reform Program. It is among the laws given suppletory effect by Section 75 of RA 6657.
• Republic Act No. 6657 — The Comprehensive Agrarian Reform Law of 1988. Section 2 states the policy of social justice and equitable distribution with due regard for just compensation; Section 4 covers all public and private agricultural lands; Section 7 places rice and corn lands under PD 27 in Phase One; Sections 16, 17, and 18 govern acquisition, determination of just compensation, and compensation by LBP; Section 75 gives suppletory effect to PD 27, EO 228, EO 229, and other laws not inconsistent with the Act. The Court held that just compensation should be determined under this law.
• Administrative Order No. 13, Series of 1994 — Imposed on the value of land not yet paid to the landowner an increment of 6% yearly interest compounded annually from the date of coverage, with 21 October 1972 as the earliest date, up to 21 October 1994. It was used in LBP’s adjusted valuation but did not control because RA 6657 governed.
• Rule 45, Rules of Court — Governed the Petition for Review on Certiorari filed by LBP before the Supreme Court.
• Rule 41, Rules of Court — Governed respondent’s appeal from the Special Agrarian Court to the Court of Appeals.

• Consuelo Ynares-Santiago
• Ma. Alicia Austria-Martinez
• Antonio Eduardo B. Nachura
• Teresita J. Leonardo-De Castro

No separate concurring opinions are reflected in the text.