Land Bank v. Lajom
REITERATIONFacts
The Antecedents: Jose T. Lajom and Vicenta Vda. De Lajom were registered owners of several parcels of land. A portion of this land was placed under the government's Operation Land Transfer Program pursuant to Presidential Decree No. 27 (PD 27). The Department of Agrarian Reform (DAR), through the Land Bank of the Philippines (LBP), offered a valuation for the land, which Lajom rejected. Despite non-payment of the offered compensation, DAR granted Emancipation Patents to farmer-beneficiaries. Lajom filed a petition for determination of just compensation, arguing that the valuation should be based on Republic Act No. 6657 (RA 6657) and not PD 27 or Executive Order No. 228 (EO 228), and that the basis for the DAR valuation (Barrio Committee on Land Production resolution) was falsified. Procedural History: The Regional Trial Court (RTC) rejected the DAR valuation and fixed just compensation at ₱3,858,912.00 with legal interest at 6% per annum from 1991. The RTC set the Average Gross Production (AGP) at 160 cavans per hectare and the Government Support Price (GSP) at ₱400.00 per cavan. The Court of Appeals (CA) affirmed with modification, deleting the 6% interest and imposing 12% interest per annum as damages from March 11, 2004, until fully paid. The CA found it inequitable to use PD 27 and EO 228 guidelines as the actual taking occurred in 1991, and thus RA 6657 should apply. However, it deleted the 6% interest because a higher GSP was used. The CA deemed 12% interest necessary as damages for delay. The Petition: Both Land Bank of the Philippines (LBP) and Jose T. Lajom (represented by his heirs) filed petitions for review on certiorari. LBP questioned the retroactive application of RA 6657, the reckoning date for just compensation, and the imposition of 12% interest. Lajom questioned the deletion of the 6% interest award.
Issue(s)
Whether the Court of Appeals erred in deleting the award of 6% interest per annum on the just compensation award and in imposing interest at the rate of 12% per annum on the just compensation award in the nature of damages from March 11, 2004, until full payment. Whether the Court of Appeals erred in retroactively applying the provisions of RA 6657 to land acquired under PD 27 and EO 228. Whether the Court of Appeals erred in reckoning the period to determine just compensation on the date of actual payment instead of the date of taking. Whether the RTC failed to consider the factors enumerated in Section 17 of RA 6657, as amended, prior to its amendment by RA 9700, and whether the RTC's discretion in determining just compensation was appropriately exercised.
Ruling
The petitions are meritorious. The Decision of the Court of Appeals is REVERSED and SET ASIDE. SP. Civil Case No. 1483-AF is REMANDED to the RTC for reception of evidence on the issue of just compensation in accordance with the guidelines set in this Decision. The RTC is directed to submit a report on its findings and recommended conclusions within sixty (60) days from notice.
Ratio Decidendi
On the imposition of interest: The Court clarified that interest imposed on just compensation is not an increment on the computed compensation but a penalty for damages incurred by the landowner due to delay in payment. The RTC may impose interest as justified by the circumstances. Legal interest is pegged at 12% per annum from the time of taking until June 30, 2013. Thereafter, from July 1, 2013, until fully paid, it shall earn interest at the new legal rate of 6% per annum, following Bangko Sentral ng Pilipinas Monetary Board Circular No. 799, Series of 2013. On the application of RA 6657: The Court held that when the agrarian reform process under PD 27 remains incomplete and is overtaken by RA 6657, such as when just compensation has yet to be settled, the determination and conclusion of the process should be under RA 6657. PD 27 and EO 228 apply only suppletorily. In this case, RA 6657 had already taken effect before Lajom filed his petition, and the emancipation patents were issued prior to the filing. Both the taking and valuation occurred after the passage of RA 6657, thus its provisions should govern. On the reckoning point for just compensation: The Court reiterated that just compensation must be determined at the time of the property's taking. Taking occurs when the landowner is deprived of the use and benefit of his property. In this case, taking is reckoned from the issuance dates of the emancipation patents, which occurred between 1994 and 1998. The Court emphasized that the LBP's valuation is only an initial determination and the RTC, as a Special Agrarian Court, makes the final determination. On the factors for determining just compensation and the RTC's discretion: The Court found that the RTC failed to consider the factors enumerated in Section 17 of RA 6657, as amended, prior to its amendment by RA 9700. These factors include the cost of acquisition, current value of like properties, nature, actual use and income, sworn valuation by the owner, tax declarations, assessments, social and economic benefits, and non-payment of taxes or loans. Therefore, the valuation pronounced by the RTC and affirmed by the CA was rejected. The Court reminded the RTC, sitting as a Special Agrarian Court, that while it should consider DAR formulae, it is not strictly bound by them if the situations do not warrant their application. The determination of just compensation is a judicial function, and the RTC cannot be unduly restricted by administrative formulae. It must exercise its judicial discretion in evaluating the factors for just compensation.
Main Doctrine
When the agrarian reform process under PD 27 remains incomplete and is overtaken by RA 6657, just compensation should be determined and concluded under RA 6657, with PD 27 and EO 228 applying only suppletorily. The time of taking for purposes of computing just compensation is reckoned from the issuance of emancipation patents, and interest imposed for delay in payment is a penalty for damages, not an increment on the computed compensation.