Landbank of the Philippines vs. Alcantara

Courts determining just compensation for CARP lands must consider and apply both the factors in Section 17 of R.A. No. 6657 and the basic DAR formula, and may relax the formula only upon a clear, evidence-supported explanation; otherwise deviation constitutes grave abuse of discretion. LBP valuations, though entitled to respect, must still be substantiated with data obtaining at the time of taking, and legal interest is due only where payment was delayed.

Land Bank of the Philippines acts as the financial intermediary of the Comprehensive Agrarian Reform Program under Republic Act No. 6657, tasked with initial land valuation under formulas prescribed by the Department of Agrarian Reform. Section 16(d) of the law confers primary jurisdiction on the DAR to conduct summary administrative proceedings for preliminary compensation, subject to judicial determination by the Regional Trial Court sitting as Special Agrarian Court. Until declared invalid, DAR administrative orders on valuation partake of the nature of statutes.

Respondents Edna Mayo Alcantara and the heirs of Cristy Mayo Alcantara were registered owners of 34.0807 hectares of agricultural land in Barangay Tamisian, Tiaong, Quezon, covered by Transfer Certificate of Title No. T-211445. On 9 February 1998, the DAR issued a Notice of Land Valuation and Acquisition over 22.6762 hectares thereof for CARP coverage. Pursuant to DAR A.O. No. 6, series of 1992, as amended by A.O. No. 11, series of 1994, LBP valued the acquired portion at ₱1,210,252.96, which was deposited in respondents' name on 24 March 1998.

Respondents did not oppose acquisition but protested valuation before the DAR Adjudication Board, Region IV, which conducted summary proceedings under Section 16(d) of R.A. No. 6657. During those proceedings respondents moved for revaluation under DAR A.O. No. 5, series of 1998, which yielded an even lower ₱976,875.85. On 16 August 1999 the DARAB dismissed the protest, finding respondents failed to present clear and convincing evidence while LBP established the factors for valuation under DAR A.O. No. 6, series of 1992, as amended.

Thereafter respondents filed a complaint dated 8 September 1999 before the SAC for judicial determination, praying for ₱2,267,620.00 based on fair market value. According to the prosecution of their claim, the land was planted with around 3,200 coconut, mango and banana trees, with many coconuts about 100 years old; a prospective buyer had offered ₱100,000.00 to ₱120,000.00 per hectare, and Barangay Kapasiyahan Blg. 4 fixed coconut land in Tamisian at ₱100,000.00 per hectare. Their witnesses included Renato Robles, Municipal Assessor Nelia V. Cortez who said she saw the property converted into a subdivision with electricity and cemented roads, businessman Victor Vasquez who priced coconut trunks at ₱750.00 per tree as lumber, and PCA Coconut Conservation Officer Nicasio Gutierrez who testified that at 8 by 8 meters spacing the density should be 150 to 160 trees per hectare, many old yet productive as lumber, but that newly planted four-year-old trees from PCA seedlings outnumbered old trees. LBP, for its part, presented Field Investigation Division Chief Januario Bondad and bank personnel Desideria Leonor to show valuation by income approach, supported by a Field Investigation Report showing per hectare averages of 120 coconut trees intercropped with 400 hills of banana, annual production of palay (40 cavans), coconuts (12,000 nuts) and bananas (36,000 pieces), net incomes of ₱12,000.00, ₱12,000.00 and ₱10,800.00 respectively, and unit values per schedule of unit market value, plus PCA and Department of Agriculture data on production and farmgate prices.

The SAC credited respondents and fixed just compensation at ₱2,267,600.00, or 22.6762 hectares multiplied by ₱100,000.00 per hectare under Kapasiyahan Blg. 4, reasoning that the income approach would deny just compensation because senile trees were more valuable as lumber and the land had allegedly become a subdivision worth ₱300,000.00 to ₱400,000.00 per hectare. The CA sustained the amount but limited 12% interest to the deficiency from 29 April 1998.

• Mandatory Formula: Petitioner argued that the valuation factors under Section 17 of R.A. No. 6657 and the legal formula under DAR A.O. No. 6, series of 1992, as amended by DAR A.O. No. 11, series of 1994, are mandatory for CARP lands, having the force and effect of law and corresponding to the statutory factors.
• Expertise and Deference: Petitioner maintained that LBP has expertise in CARP valuation whose findings are entitled to great respect and binding absent grave error, as shown by its detailed computation yielding ₱1,210,252.96 for cocal/banana land, banana land, and unirrigated riceland.
• Agrarian vs. Eminent Domain: Petitioner argued that just compensation in agrarian reform differs from ordinary eminent domain because expropriation is both eminent domain and police power, so compensation may be less than market value.
• Jurisprudence: Petitioner maintained that the SAC disregarded Section 17 and relied solely on fair market value, contrary to LBP vs. Spouses Banal, LBP vs. Celada, and LBP vs. Luz Lim, which warn against readily disregarding the DAR basic formula.
• Interest: Petitioner argued that interest has no legal basis where prompt payment was made by 24 March 1998 deposit, and that the cash portion already earned highest prevailing savings interest and the bond portion earned 91-day treasury bill-aligned interest under Section 18(4)(a), so additional interest is unwarranted.

• Consideration of Factors: Respondents countered that neither the CA nor the SAC ignored DAR A.O. No. 6, series of 1992, as amended, because the SAC meticulously looked into the factors affecting valuation.
• Initial Valuation Only: Respondents argued that DAR A.O. No. 6, series of 1992, as amended, was issued solely for initial determination of value, not just compensation, containing clerical details directed only to DAR and LBP personnel to guide administration.
• Judicial Prerogative: Respondents maintained that nothing in the order binds courts, whose determination is governed by the Rules of Court; mandatory application would unconstitutionally expand DAR rule-making and abdicate the judicial function of fixing just compensation, though the orders deserve great respect.
• Inadequacy of LBP Valuation: Respondents argued that the evidence showed LBP's valuation would not result in just compensation, justifying the SAC's independent valuation.

• Mandatory Application of Formula: Whether the valuation factors under Section 17 of R.A. No. 6657 and the legal formula under DAR A.O. No. 6, series of 1992, as amended by DAR A.O. No. 11, series of 1994, are mandatory insofar as lands acquired under R.A. No. 6657 are concerned, such that the SAC reversibly erred in rejecting the formula.
• Interest on Compensation: Whether interest on the compensation can still be validly imposed when prompt payment had already been made.

• Mandatory Application of Formula: Yes, in the sense stated in Alfonso vs. LBP. Courts must consider and apply both Section 17 factors and the DAR basic formula unless invalidated, relaxing it only with clear, evidence-supported justification.
• Interest on Compensation: No. Interest was unwarranted because LBP deposited the valuation on 24 March 1998 shortly after the 9 February 1998 notice, leaving no delay constituting forbearance.

• Mandatory Application of Formula: Reaffirming Alfonso vs. LBP, the basic DAR formulas partake of statutes until declared invalid, imposing a positive legal duty to consider their use; courts may relax application to fit peculiar circumstances but must clearly explain deviation, otherwise grave abuse of discretion exists, distinguished from utter and blatant disregard outside the law's contemplation. Here both lower courts rejected the formula, the CA treating it as mere guideline, while the SAC used no calculation at all and relied solely on Kapasiyahan Blg. 4's ₱100,000.00 per hectare without explaining how the figure was derived. The two proffered justifications failed: unproductivity was contradicted by testimony that newly planted trees outnumbered old trees and by uncontroverted Field Investigation Report data showing palay, coconut and banana production and net income, since many old trees does not mean all trees infertile; and alleged conversion to subdivision rested solely on the assessor's say-so without DAR Secretary authorization under Section 65 or zoning reclassification under Section 20 of R.A. No. 7160, and in any event market value alone cannot exclusively govern CARP compensation. Hence blatant disregard of Section 17 was shown, requiring the SAC valuation to be struck down. LBP's valuation, however, could not be adopted because under Heirs of Lorenzo and Carmen Vidad vs. LBP it must be substantiated and pegged at time of taking, yet most supporting documents in its Formal Offer were undated with no declaration they were gathered in 1998 or a proximate prior period, necessitating remand for summary proceedings on timeliness strictly under Section 17 and DAR A.O. No. 6, as amended.
• Interest on Compensation: Legal interest in expropriation is allowed only where delay makes just compensation an effective forbearance by the State. No delay occurred, the Notice having issued 9 February 1998 and deposit having followed 24 March 1998. The order to pay interest was therefore annulled and set aside.

• Just compensation in agrarian reform; mandatory consideration of DAR formula — Determination of just compensation is judicial, but courts are obligated to apply both the Section 17 factors and the DAR basic formula, which has force of law unless declared invalid. Applied here to invalidate a valuation based solely on barangay market price without calculation under the formula.
• Relaxation vs. blatant disregard — RTCs sitting as SACs may relax the DAR formula's minute details to fit factual situations, provided deviation is clearly explained; unexplained utter disregard amounts to grave abuse of discretion. Applied to find the SAC's reliance on alleged senility and conversion, unsupported by evidence, was blatant disregard rather than permissible relaxation.
• Substantiation and time of taking — LBP's valuation must be substantiated as in accord with Section 17 and DAR orders, with data reasonably obtaining at time of taking, not filing, pendency, or judgment. Applied to refuse adoption of LBP's ₱1,210,252.96 figure where exhibits were undated, requiring remand to verify 1998 or proximate-period data.
• Interest in expropriation — Legal interest is warranted only upon delay in payment of just compensation, deemed forbearance by the State. Applied to delete interest where deposit followed the notice within about six weeks.
• Land use conversion — Agricultural land allegedly converted to residential use requires DAR Secretary authorization and, where relevant, zoning reclassification; bare testimony of physical appearance is insufficient, and residential market price cannot exclusively dictate CARP compensation. Applied to reject the subdivision-value rationale.

• "that until and unless declared invalid in a proper case, the basic formulas contained in DAR administrative orders partake of the nature of statutes; hence, courts have the positive legal duty to consider, and not disregard, their use and application in the determination of just compensation for agricultural lands covered by R.A. No. 6657." — States the reaffirmed Alfonso rule imposing mandatory consideration of the DAR formula.
• "When acting within the parameters set by the law itself, the RTCSACs, however, are not strictly bound to apply the DAR formula to its minute detail, particularly when faced with situations that do not warrant the formula's strict application; they may, in the exercise of their discretion, relax the formula's application to fit the factual situations before them." — Defines the limited scope for judicial relaxation, conditioned on clear explanation for deviation.
• "In previous cases, the Court allowed the grant of legal interest in expropriation cases where there was delay in the payment since the just compensation due to the landowners was deemed to be an effective forbearance on the part of the State." — States the doctrinal basis for denying interest absent delay in this case.

• Alfonso vs. LBP, G.R. Nos. 181912 & 183347, 29 November 2016 — Controlling En Banc precedent reaffirming mandatory consideration of Section 17 factors and DAR formula and the three guidelines on application, relaxation, and grave abuse.
• Mateo et al. vs. DAR, et al., G.R. No. 186339, 15 February 2017 — Cited as reiterating Alfonso guidelines and supporting interest only upon delay.
• LBP vs. Heirs of Tanada and Ebarle, G.R. No. 170506, 11 January 2017 — Cited for requiring well-reasoned, evidence-supported justification for deviation from the DAR formula.
• Heirs of Lorenzo and Carmen Vidad vs. LBP, 634 Phil. 9 (2010) — Required LBP valuation to be substantiated for accord with Section 17 and DAR orders; basis for remand.
• LBP vs. Heirs of Spouses Encinas, 686 Phil. 48, 55 (2012) — Established valuation must be pegged at time of taking.
• LBP vs. Spouses Banal, 478 Phil. 701 (2004); LBP vs. Celada; LBP vs. Luz Lim, 555 Phil. 831 (2007) — Invoked by LBP as warning courts not to readily disregard the DAR basic formula.
• LBP vs. Wycoco, 464 Phil. 83 (2004) — Cited by LBP for proposition that interest earnings on deposit suffice pending payment.
• Association of Small Landowners vs. Sec. of Agrarian Reform, 175 SCRA 343 — Quoted by SAC for just compensation as full, fair, real, substantial, and ample equivalent.

• Section 17, R.A. No. 6657 — Lists cost of acquisition, current value of like properties, nature, actual use and income, sworn valuation, tax declarations, assessments, social and economic benefits, and non-payment of taxes or loans; courts must consider all factors, not market value alone, hence SAC's exclusive reliance on Kapasiyahan Blg. 4 was illegal.
• Section 16(d), R.A. No. 6657 — Provides DAR summary administrative proceedings upon rejection or failure to reply to determine preliminary compensation; basis for DARAB proceedings in DARAB Case No. V-0408-031-98.
• Section 18(4)(a), R.A. No. 6657 — Provides LBP bonds bear market interest aligned with 91-day treasury bill rates with 10% annual maturity; cited by LBP to argue deposited compensation already earns legislated interest.
• DAR A.O. No. 6, series of 1992, as amended by A.O. No. 11, series of 1994 — Prescribes LV = (CNI x 0.90) + (CS x 0.30) + (MV x 0.10) with variants when factors absent; LBP's pleaded computation followed this formula to reach ₱1,210,252.96.
• DAR A.O. No. 5, series of 1998 — Revised valuation rules with LV = (CNI x 0.60) + (CS x 0.30) + (MV x 0.10); invoked for respondents' requested revaluation yielding ₱976,875.85 and discussed by SAC.
• Section 65, R.A. No. 6657; Section 20, R.A. No. 7160 — Require DAR Secretary authorization and zoning ordinance for conversion/reclassification; absence of both undermined the claimed subdivision conversion.

Presbitero J. Velasco, Jr., Chairperson, Lucas P. Bersamin, Marvic M.V.F. Leonen, and Alexander G. Gesmundo, Associate Justices, concurred. No separate concurring reasoning of significance appears in the text.