Land Bank of the Philippines vs. Santiago, Jr.

When the agrarian reform process remains incomplete and is overtaken by R.A. 6657, just compensation must be determined under Section 17 of R.A. 6657, with P.D. 27 and E.O. 228 having only suppletory effect.

Emiliano F. Santiago owned an 18.5615-hectare parcel of land in Laur, Nueva Ecija, covered by TCT No. NT-60359. Pursuant to the government’s Operation Land Transfer (OLT) Program under Presidential Decree No. 27, the Department of Agrarian Reform (DAR) acquired 17.4613 hectares of the property. To determine just compensation, the Land Bank of the Philippines (LBP) and DAR used the formula under P.D. 27 and E.O. 228, which multiplies the average gross production (AGP) by 2.5 and the government support price (GSP). Using the 1972 GSP of ₱35.00 per cavan of palay, LBP computed the land value at ₱135,482.12. This amount was reserved in trust for Santiago’s heirs in 1992 and released in 1998, along with a 6% incremental interest. Respondent Emiliano R. Santiago, Jr., while agreeing with the AGP of 3,915 cavans, contested the use of the 1972 GSP, arguing that the 1998 GSP of ₱400.00 should be applied.

• The Subject Property: An 18.5615-hectare parcel of land in Laur, Nueva Ecija, registered under the name of Emiliano F. Santiago and covered by TCT No. NT-60359.
• Acquisition under P.D. 27: The DAR acquired 17.4613 hectares of the property under the OLT Program. LBP and DAR computed just compensation using the formula mandated by P.D. 27 and E.O. 228 (Land Value = Average Gross Production x 2.5 x Government Support Price). The AGP was pegged at 90 cavans for the irrigated portion and 44.33 cavans for the unirrigated portion, totaling 3,915 cavans. Using the 1972 GSP of ₱35.00 per cavan, the total land value was computed at ₱135,482.12.
• Payment and Dispute: The preliminary compensation of ₱135,482.12 was reserved in trust for Santiago's heirs in 1992 and released in 1998, alongside an additional ₱353,122.62 representing a 6% incremental interest compounded annually. Respondent filed a petition for approval and appraisal of just compensation before the SAC. While agreeing with the AGP of 3,915 cavans, respondent contended that the 1998 GSP of ₱400.00 should be utilized instead of the 1972 GSP, and that the 6% compounded annual interest should be imposed on the principal amount for 26 years.

• Applicable Valuation Formula: Petitioner argued that the formula prescribed under P.D. 27 and E.O. 228 is the exclusive formula for computing just compensation of lands acquired under P.D. 27, requiring the GSP to be pegged at the time of taking in 1972.
• Imposition of Interest: Petitioner maintained that DAR Administrative Order No. 13, which provides for a 6% incremental interest compounded annually, should govern the grant of interest, not the 6% legal interest imposed by the SAC.

• Applicable Valuation Formula: Respondent countered that the 1998 GSP of ₱400.00 should be used in the computation, as payment of the preliminary compensation was made in 1998 and not in 1972.
• Imposition of Interest: Respondent argued that the original award of 12% legal interest should be reinstated, as the unreasonable delay in the payment of just compensation constitutes forbearance of money.

• Applicable Valuation Formula: Whether the Court of Appeals can disregard the formula prescribed under P.D. 27 and E.O. 228 in fixing the just compensation of lands acquired under P.D. 27.
• Imposition of Interest: Whether the Court of Appeals erred in affirming the grant of 6% interest to the respondent.

• Applicable Valuation Formula: The formula under R.A. 6657 must be applied. When the agrarian reform process remains incomplete and is overtaken by R.A. 6657, just compensation should be determined under R.A. 6657, with P.D. 27 and E.O. 228 having only suppletory effect. Both the taking and valuation here occurred after R.A. 6657 took effect, and the issue of just compensation remains unsettled. The SAC's mere substitution of a higher GSP into the P.D. 27 formula was erroneous; the case must be remanded for reception of evidence under Section 17 of R.A. 6657 and DAR AO No. 02-09.
• Imposition of Interest: The proper interest is 12% per annum. Delay in the payment of just compensation in agrarian cases constitutes forbearance of money on the part of the State. Pursuant to Eastern Shipping Lines, the interest due on forbearance of money is 12% per annum, computed from the time of taking until actual payment.

• Determination of Just Compensation under R.A. 6657 vs. P.D. 27 — When the agrarian reform process is incomplete and overtaken by R.A. 6657, just compensation must be determined and the process concluded under R.A. 6657, with P.D. 27 and E.O. 228 having only suppletory effect. The SAC cannot disregard the factors and formula translated by the DAR in its implementing rules.
• Interest on Just Compensation as Forbearance — The delay in the payment of just compensation in expropriation and agrarian reform cases constitutes forbearance of money by the State, warranting the imposition of a 12% per annum legal interest from the time of taking until actual payment.

• "When the acquisition process under PD 27 remains incomplete and is overtaken by RA 6657, the process should be completed under RA 6657, with PD 27 and EO 228 having suppletory effect only. This means that PD 27 applies only insofar as there are gaps in RA 6657; where RA 6657 is sufficient, PD 27 is superseded."
• "The constitutional limitation of 'just compensation' is considered to be the sum equivalent to the market value of the property... if property is taken for public use before compensation is deposited with the court having jurisdiction over the case, the final compensation must include interest on its just value to be computed from the time the property is taken to the time when compensation is actually paid or deposited with the court."

• Land Bank of the Philippines v. Natividad — Followed. Ruled that seizure of landholding did not take place on the effectivity of P.D. 27 but on payment of just compensation; thus, R.A. 6657 applies when the process is overtaken by it.
• Gabatin v. Land Bank of the Philippines — Distinguished/Superseded in part. Held that GSP should be pegged at the time of taking (1972), but this was superseded by Natividad where the process was incomplete upon the effectivity of R.A. 6657.
• Eastern Shipping Lines, Inc. v. Court of Appeals — Followed. Established the guidelines for the award of interest, specifically that a 12% per annum interest applies when the obligation constitutes a forbearance of money.
• Land Bank of the Philippines v. Puyat — Followed. Reiterated that when the acquisition process under P.D. 27 remains incomplete and is overtaken by R.A. 6657, the process should be completed under R.A. 6657.

• Section 17, Republic Act No. 6657 (as amended) — Enumerates the factors to be considered in determining just compensation (cost of acquisition, current value, nature, actual use, income, sworn valuation, tax declarations, assessment by government assessors, social and economic benefits, non-payment of taxes/loans). Applied as the mandatory standard for valuation, superseding the P.D. 27 formula.
• Presidential Decree No. 27 and Executive Order No. 228 — Prescribe the formula for land valuation (AGP x 2.5 x GSP). Applied suppletorily, as R.A. 6657 supersedes it where sufficient.
• Section 5, Republic Act No. 9700 (CARPER Law) — Provides that previously acquired lands wherein valuation is subject to challenge shall be completed and resolved pursuant to Section 17 of R.A. 6657 (prior to its amendment by R.A. 9700). Applied to confirm that the old Section 17 of R.A. 6657 governs the case.
• DAR Administrative Order No. 02-09 — Implementing rules of R.A. 9700. Applied to mandate that claim folders received by LBP prior to July 1, 2009, shall be valued in accordance with the old Section 17 of R.A. 6657.

Sereno, C.J. (Chairperson), Carpio, Villarama Jr., Reyes.