Land Bank of the Philippines vs. Wycoco

A Special Agrarian Court possesses original and exclusive jurisdiction over petitions for determination of just compensation under R.A. No. 6657 and may properly acquire jurisdiction even without prior completion of DARAB summary administrative proceedings, provided the LBP has performed its initial valuation function under E.O. No. 405; however, a valuation based solely on judicial notice of market value, taken without notice and hearing to the parties and without considering the factors relevant to fair market value, is void and necessitates remand.

Feliciano F. Wycoco was the registered owner of a 94.1690-hectare unirrigated and untenanted rice land in Licab, Nueva Ecija, covered by Transfer Certificate of Title No. NT-206422. Under the Comprehensive Agrarian Reform Program (CARP) established by Republic Act No. 6657, Wycoco voluntarily offered to sell the land to the Department of Agrarian Reform (DAR). Executive Order No. 405, Series of 1990, charged the Land Bank of the Philippines (LBP) with the initial responsibility of determining the value of lands placed under land reform and the just compensation to be paid for their taking. The statutory procedure involves DAR's evaluation of the voluntary offer to sell, LBP's determination of valuation, issuance of a Notice of Land Valuation, and—where the landowner rejects the offer—a summary administrative proceeding before the DARAB, after which the landowner may bring the matter to the Regional Trial Court sitting as a Special Agrarian Court.

Feliciano F. Wycoco was the registered owner of a 94.1690-hectare unirrigated and untenanted rice land situated in the Sitios of Ablang, Saguingan and Pinamunghilan, Barrio of San Juan, Licab, Nueva Ecija, covered by Transfer Certificate of Title No. NT-206422. In line with the government's Comprehensive Agrarian Reform Program, Wycoco voluntarily offered to sell the land to the Department of Agrarian Reform for ₱14.9 million. After DAR's evaluation and LBP's determination of just compensation, a notice of intention to acquire 84.5690 hectares of the property was sent to Wycoco in November 1991, initially for ₱1,342,667.46. The amount was later raised to ₱2,594,045.39 and, upon review, modified to ₱2,280,159.82. The area DAR offered to acquire excluded idle lands, a river, and a road located within the property.

Wycoco rejected the offer, prompting DAR to indorse the case to the DARAB for the fixing of just compensation in a summary administrative proceeding, docketed as VOS Case No. 232 NE 93. The DARAB requested LBP to open a trust account in Wycoco's name and deposited the compensation offered by DAR. In the meantime, the property was distributed to farmer-beneficiaries. On March 29, 1993, the DARAB required the parties to submit their respective memoranda or position papers. Wycoco, however, decided not to file the required pleadings and instead filed, on April 13, 1993, a complaint for determination of just compensation with the Regional Trial Court of Cabanatuan City, Branch 23, acting as a Special Agrarian Court, docketed as Agrarian Case No. 91 (AF), impleading DAR and LBP as party-defendants. On March 9, 1994, the DARAB dismissed the administrative case to give way to the court's determination of just compensation, recognizing the landowner's option to bring the matter directly to the Special Agrarian Court.

After a pre-trial on October 3, 1994, the parties agreed that the only issue was the determination of just compensation and opted to submit simultaneous memoranda instead of conducting trial. Wycoco presented his Transfer Certificate of Title, the Notice of Land Valuation dated June 18, 1992, and a letter dated July 10, 1992 rejecting the counter-offer of LBP and DAR. DAR and LBP presented the Land Valuation Worksheets. On November 14, 1995, the trial court rendered judgment in favor of Wycoco, ruling that it could take judicial notice of the prevailing market value of agricultural lands in Licab, Nueva Ecija—pegged at ₱135,000.00 to ₱150,000.00 per hectare—without receiving evidence on the matter. It fixed compensation at ₱142,500.00 per hectare for the entire 94.1690 hectares, totaling ₱13,419,082.00, and awarded actual damages for unrealized profits of ₱29,663,235.00 plus ₱8,475,210.00 for every calendar year until full payment, including legal interest. DAR and LBP separately appealed to the Court of Appeals. DAR's petition was dismissed and became final. LBP's petition was likewise dismissed but later modified to deduct the value of a 3.3672-hectare portion previously sold by Wycoco to the Republic. Wycoco then filed a petition for mandamus before the Supreme Court seeking execution of the trial court's decision and the inhibition of Judge Rodrigo S. Caspillo, while LBP elevated its case on review.

• Jurisdiction and Exhaustion of Administrative Remedies: LBP argued that the trial court acting as a Special Agrarian Court could not assume jurisdiction over Agrarian Case No. 91 (AF) and render judgment without an initial administrative determination of just compensation by the DARAB pursuant to Section 16 of R.A. No. 6657, over LBP's timely objection, and in violation of the rule on exhaustion of administrative remedies and forum shopping.
• Evidentiary Basis of Valuation: LBP maintained that the just compensation determined by the trial court was not supported by substantial evidence, being based only on judicial notice of the alleged prevailing market value of land taken without notice and hearing in violation of Rule 129 of the Rules of Court.
• Scope of Acquisition: LBP contended that the trial court could not require it to compensate portions of Wycoco's property which were not declared by DAR for acquisition, nor suitable for agriculture, nor capable of distribution to farmer-beneficiaries under CARP.
• Award of Interest and Unrealized Profits: LBP argued that the trial court could not award legal interest on the principal and unrealized profits of ₱29,663,235.00 from the time of acquisition plus ₱8,475,210.00 annually thereafter, considering that the same had no legal basis and that Wycoco retained title to his property despite DAR's notice of acquisition.
• Execution Pending Appeal: LBP asserted that the trial court had invalidly granted execution pending appeal on the allegedly good reason of Wycoco's advanced age and weak health, contrary to applicable jurisprudence and considering that Wycoco was not destitute.
• Execution and Inhibition (Wycoco's Mandamus Petition): Wycoco, as petitioner in G.R. No. 146733, prayed that the RTC decision in Agrarian Case No. 91 (AF) be executed and that Judge Rodrigo S. Caspillo be compelled to inhibit himself from hearing the case.

• Jurisdiction: Whether the Regional Trial Court, acting as Special Agrarian Court, validly acquired jurisdiction over the case for determination of just compensation without a prior administrative determination by the DARAB.
• Evidentiary Basis of Valuation: Whether the just compensation arrived at by the trial court was supported by evidence, given that it was based on judicial notice of prevailing market value taken without notice and hearing.
• Scope of Acquisition: Whether Wycoco could compel DAR to purchase the entire land subject of the voluntary offer to sell, including portions not declared for acquisition or unsuitable for agriculture.
• Interest and Damages: Whether the awards of interest and actual damages for unrealized profits were valid.

• Jurisdiction: Yes. The Special Agrarian Court properly acquired jurisdiction over Wycoco's complaint, its original and exclusive jurisdiction over just compensation determinations under Section 57 of R.A. No. 6657 not being defeated by the absence of a completed DARAB proceeding, especially where LBP had performed its initial valuation function and the DARAB itself dismissed the administrative case.
• Evidentiary Basis of Valuation: No. The valuation was not supported by evidence, the trial court having taken judicial notice of market value without notice and hearing to the parties and without considering the factors relevant to fair market value, in violation of Section 3, Rule 129 of the Rules of Court. Remand was necessary.
• Scope of Acquisition: No. DAR could not be compelled to purchase the entire property, the power to determine whether land falls within CARP coverage being essentially lodged with DAR, and the non-acquisition of portions unsuitable for agriculture providing no justification to compel acquisition of the whole area.
• Interest and Damages: The award of 12% interest per annum was valid from the time the trust account was opened until conversion to a valid cash or bond deposit, the trust account having been an invalid mode of payment; however, the award of actual damages for unrealized profits was deleted for failure to present competent proof.

• Jurisdiction: Sections 50 and 57 of R.A. No. 6657 must be construed in harmony: while Section 50 vests DAR with primary jurisdiction over agrarian reform matters, Section 57 grants Special Agrarian Courts original and exclusive jurisdiction over all petitions for determination of just compensation. The valuation of property in eminent domain is essentially a judicial function that cannot be lodged with administrative agencies. Rule XIII, Section 11 of the DARAB's own New Rules of Procedure acknowledges this by providing that the adjudicator's decision on land valuation shall be brought directly to the RTC sitting as a Special Agrarian Court. In Land Bank of the Philippines vs. Court of Appeals, the Court held that direct resort to the Special Agrarian Court is valid, because any effort to convert the RTC's original jurisdiction into appellate jurisdiction would be contrary to Section 57 and void. In the present case, although no summary administrative proceeding was held before the DARAB, LBP had performed its legal mandate of initially determining the value of Wycoco's land pursuant to E.O. No. 405. Moreover, DAR and LBP's conformity to the pre-trial order—which limited the issue to determination of just compensation—estopped them from questioning the court's jurisdiction. The issue of exhaustion of administrative remedies was also rendered moot by the DARAB's dismissal of the administrative case in recognition of the court's power.

• Evidentiary Basis of Valuation: Section 3, Rule 129 of the Rules of Court requires that when a court intends to take judicial notice of a matter on its own initiative, it must announce its intention and allow the parties to be heard thereon. The trial court failed to apprise the parties of its intention to take judicial notice of the prevailing market value of agricultural lands in Licab, Nueva Ecija. Since the valuation of Wycoco's property was the very issue in the case, the trial court should have allowed the parties to present evidence rather than assuming a valuation without basis. While market value may be one basis for determining just compensation, it cannot be arbitrarily arrived at without considering factors such as the cost of acquisition, the current value of like properties, size, shape, location, and tax declarations. None of these factors were considered. The power to take judicial notice must be exercised with caution, especially where a vast tract of land is involved; the mere personal knowledge of the judge is not the judicial knowledge of the court. Because these factors were not considered, remand for proper determination of just compensation was necessary.

• Scope of Acquisition: The power to determine whether a parcel of land may come within the coverage of CARP is essentially lodged with the DAR. That Wycoco would suffer damages from DAR's non-acquisition of the approximately 10-hectare portion found unsuitable for agriculture is no justification to compel DAR to acquire the whole area. The DAR's determination of suitability for agricultural distribution is an administrative function that the courts will not override.

• Interest and Damages: In Land Bank of the Philippines vs. Court of Appeals, the Court struck down DAR Administrative Circular No. 9, Series of 1990, which allowed trust accounts in lieu of the cash or LBP bond deposit required under Section 16(e) of R.A. No. 6657. The trust account opened by LBP in Wycoco's name was therefore an invalid mode of payment and must be converted to a deposit account, retroactively, to rectify the error and grant the landowner the benefits concomitant to payment in cash or LBP bonds. Because the replacement of the trust account with cash or bonds did not ipso facto cure the lack of compensation—since the determination of compensation was marred by lack of due process—imposition of 12% interest per annum was in order, in the nature of damages for delay, making the government's obligation one of forbearance. The interest should run from the time LBP opened the trust account up to the time it was actually converted into cash and LBP bond deposit accounts, with the basis being the just compensation ultimately determined by the Special Agrarian Court upon remand. Conversely, the award of actual damages for unrealized profits was deleted because the amount of loss must be proven with a reasonable degree of certainty through competent proof or the best evidence obtainable, such as receipts or documentary proof, none of which was presented.

• Original and Exclusive Jurisdiction of Special Agrarian Courts over Just Compensation — Under Section 57 of R.A. No. 6657, Special Agrarian Courts have original and exclusive jurisdiction over all petitions for determination of just compensation to landowners. This jurisdiction cannot be converted into appellate jurisdiction by administrative rules; any effort to do so is void. Direct resort to the Special Agrarian Court is valid even without completion of DARAB proceedings, provided LBP has performed its initial valuation function under E.O. No. 405. The DARAB's own rules acknowledge this by providing that the adjudicator's decision on land valuation shall be brought directly to the RTC.

• Judicial Notice Requires Notice and Hearing — Under Section 3, Rule 129 of the Rules of Court, a court intending to take judicial notice of a matter on its own initiative must announce its intention and allow the parties to be heard thereon. Judicial notice is not judicial knowledge; the mere personal knowledge of the judge is not the judicial knowledge of the court. The power must be exercised with caution, especially where a vast tract of land is involved, and every reasonable doubt should be resolved in the negative.

• Invalidity of Trust Accounts as Mode of Payment under CARP — Section 16(e) of R.A. No. 6657 specifically requires that the deposit of just compensation be made only in "cash" or "LBP bonds." DAR Administrative Circular No. 9, Series of 1990, which allowed trust accounts, was struck down as void for exceeding DAR's rule-making authority. Trust accounts must be converted to deposit accounts retroactively to rectify the error and grant landowners the benefits of valid payment.

• Interest as Damages for Delay in Just Compensation — Where there is delay in tendering valid payment of just compensation, imposition of 12% interest per annum is proper, the obligation becoming one of forbearance. Interest cannot be imposed where there was prompt and valid payment. The replacement of an invalid trust account with cash or bonds does not ipso facto cure the lack of compensation where the determination was marred by lack of due process.

• Proof of Actual Damages for Unrealized Profits — The amount of loss for unrealized profits must not only be capable of proof but must be proven with a reasonable degree of certainty, premised upon competent proof or the best evidence obtainable, such as receipts or other documentary proof. Absent such proof, the claim cannot be granted.

• Estoppel by Pre-Trial Order — A party's conformity to a pre-trial order limiting the issues estops that party from later questioning the court's jurisdiction. The pre-trial order controls the subsequent course of action.

• "It is clear from Sec. 57 that the RTC, sitting as a Special Agrarian Court, has 'original and exclusive jurisdiction over all petitions for the determination of just compensation to landowners.' This 'original and exclusive' jurisdiction of the RTC would be undermined if the DAR would vest in administrative officials original jurisdiction in compensation cases and make the RTC an appellate court for the review of administrative decisions." — This passage, quoted from Land Bank of the Philippines vs. Court of Appeals, articulates the canonical formulation of the Special Agrarian Court's original and exclusive jurisdiction over just compensation, frequently cited in subsequent agrarian reform jurisprudence.

• "Judicial notice is not judicial knowledge. The mere personal knowledge of the judge is not the judicial knowledge of the court, and he is not authorized to make his individual knowledge of a fact, not generally or professionally known, the basis of his action." — This passage defines the critical distinction between judicial notice and personal judicial knowledge, explaining why the trial court's valuation based on the judge's own awareness of market prices was invalid.

• "It follows that the interest in the form of damages cannot be applied where there was prompt and valid payment of just compensation. Conversely, where there was delay in tendering a valid payment of just compensation, imposition of interest is in order." — This passage establishes the principle that interest in just compensation cases functions as damages for delay, applicable only where the government's valid tender of payment was delayed.

• Republic vs. Court of Appeals, 331 Phil. 1071 (1996) — Controlling precedent establishing that Special Agrarian Courts have original and exclusive jurisdiction over two categories of cases: petitions for determination of just compensation and prosecution of criminal offenses under R.A. No. 6657. Section 50 must be construed in harmony with Section 57, with just compensation cases excepted from DAR's plenitude of power because valuation in eminent domain is essentially a judicial function.

• Land Bank of the Philippines vs. Court of Appeals, 376 Phil. 252 (1999) — Followed. Held that direct resort to the Special Agrarian Court is valid, and that any effort to transfer original jurisdiction over just compensation to DAR adjudicators and convert the RTC's jurisdiction into appellate review would be contrary to Section 57 and void.

• Land Bank of the Philippines vs. Court of Appeals, 319 Phil. 246 (1995) — Followed. Struck down DAR Administrative Circular No. 9, Series of 1990, as void for allowing trust accounts in lieu of the cash or LBP bond deposit required under Section 16(e) of R.A. No. 6657. This ruling formed the basis for converting Wycoco's trust account into a valid deposit account retroactively.

• EPZA vs. Dulay, G.R. No. L-59603, 4 April 1987, 149 SCRA 305 — Cited as supporting authority for the principle that valuation of property in eminent domain is essentially a judicial function.

• Sumulong vs. Guerrero, G.R. No. L-48685, 30 September 1987, 154 SCRA 461 — Cited as supporting authority for the principle that valuation of property in eminent domain is essentially a judicial function.

• B.H. Berkenkotter & Co. vs. Court of Appeals, G.R. No. 89980, 14 December 1992, 216 SCRA 584 — Cited for the proposition that market value cannot be arbitrarily arrived at without considering factors such as cost of acquisition, current value of like properties, size, shape, location, and tax declarations.

• State Prosecutor vs. Judge Muro, A.M. No. RTJ-92-876, 19 September 1994, 236 SCRA 505 — Cited for the distinction between judicial notice and judicial knowledge, and the caution required in exercising the power of judicial notice.

• Magat, Jr. vs. Court of Appeals, G.R. No. 124221, 4 August 2000, 337 SCRA 298 — Cited for the requirement that actual damages for unrealized profits must be proven with a reasonable degree of certainty through competent proof or the best evidence obtainable.

• Section 50, Republic Act No. 6657 (Comprehensive Agrarian Reform Law of 1988) — Vests DAR with primary jurisdiction to determine and adjudicate agrarian reform matters and exclusive original jurisdiction over all matters involving the implementation of agrarian reform, except those falling under the jurisdiction of the DA and DENR. Construed in harmony with Section 57 to exclude just compensation cases from DAR's jurisdiction.

• Section 57, Republic Act No. 6657 — Grants Special Agrarian Courts original and exclusive jurisdiction over all petitions for determination of just compensation to landowners and prosecution of criminal offenses under the Act. Applied as the controlling basis for upholding the trial court's jurisdiction over Wycoco's complaint.

• Section 16(e), Republic Act No. 6657 — Requires that the deposit of just compensation be made only in "cash" or "LBP bonds." Applied to invalidate the trust account opened by LBP and to mandate conversion to a valid deposit account retroactively.

• Section 1, Executive Order No. 405, Series of 1990 — Charges LBP with the initial responsibility of determining the value of lands placed under land reform and the just compensation to be paid. Applied to show that LBP had performed its initial valuation function, satisfying the precondition for the Special Agrarian Court's exercise of jurisdiction.

• Section 3, Rule 129, Rules of Court — Governs judicial notice and requires that a court intending to take judicial notice on its own initiative must announce its intention and allow the parties to be heard. Applied to invalidate the trial court's valuation based on judicial notice taken without notice and hearing.

• Rule XIII, Section 11, New Rules of Procedure of the DARAB — Provides that the adjudicator's decision on land valuation and preliminary determination of just compensation shall not be appealable to the Board but shall be brought directly to the RTC sitting as a Special Agrarian Court. Cited as acknowledgment by the DARAB itself of the court's power.

• Rule 18, Section 7, 1997 Revised Rules on Civil Procedure — Provides that a pre-trial order controls the subsequent course of action. Applied to estop DAR and LBP from questioning the trial court's jurisdiction after conforming to the pre-trial order.

• Article III, Section 9, 1987 Constitution — Provides that private property shall not be taken for public use without just compensation. Cited as the constitutional basis for the landowner's right to just and valid compensation.

Davide, Jr., C.J. (Chairman), Panganiban, Carpio, and Azcuna, JJ.