Land Bank v. Prado Verde
REITERATIONFacts
The Antecedents: Prado Verde Corporation (Prado) filed an agrarian case for just compensation against Land Bank of the Philippines (Land Bank) for an agricultural land known as Lot 5834-A. The land, previously owned by Legazpi Oil Company, Inc., was bought by Prado in 1979 but remained registered in Legazpi Oil's name until registration of the deed of absolute sale in favor of Prado in 1980. A portion of the property was placed under the coverage of Operation Land Transfer under Presidential Decree (P.D.) No. 27 on December 4, 1995. As of August 2010, the landowner had not been compensated. Land Bank initially valued the property at ₱38,885.04, later revalued it to ₱59,457.05, and subsequently to ₱214,026.38 using the two-factor formula under Administrative Order (A.O.) No. 1, series of 2010, pursuant to Republic Act (R.A.) No. 9700. Prado rejected these valuations. Procedural History: The Regional Trial Court (RTC), acting as a Special Agrarian Court (SAC), fixed the just compensation at ₱294,495.20, applying the three-factor formula under A.O. No. 5, Series of 1998, as amended by A.O. No. 2, Series of 2009 and A.O. No. 1, Series of 2010. Both parties moved for reconsideration, which were denied. Each party filed a separate petition for review before the Court of Appeals (CA). The CA Sixth Division affirmed the RTC's decision in CA-G.R. SP No. 125525, while the CA First Division dismissed Land Bank's petition in CA-G.R. SP No. 125471. Separate petitions for review were filed before the Supreme Court, which were later consolidated. The Petition: Land Bank filed a petition for review questioning the CA's affirmation of the SAC's determination of just compensation and the order for immediate payment with interest. Prado also sought relief, arguing that Land Bank's revaluation was iniquitous and that the SAC failed to follow the mandate of Section 17 of R.A. No. 6657.
Issue(s)
Whether or not the Court of Appeals erred in affirming the SAC's determination of just compensation. Whether or not the Court of Appeals erred in affirming the judgment of the SAC ordering the immediate payment of its adjudged just compensation, with interest, even if the order is not yet final and executory.
Ruling
The Supreme Court found the petition filed by Land Bank partly meritorious. It set aside the assailed Decisions and Resolutions of the Court of Appeals and remanded the cases to the Special Agrarian Court for the determination of just compensation in accordance with the ruling. The Court ordered the application of the two-factor formula LV = (CNI x 0.90) + (MV x 0.10) under DAR A.O. No. 1, series of 2010, and specified the interest rates to be applied.
Ratio Decidendi
On the determination of just compensation: The Court held that the Special Agrarian Court (SAC) erred in applying the three-factor formula (LV = (CNI x 0.60) + (CS x 0.30) + (MV x 0.10)) prescribed under DAR A.O. No. 1, series of 2010. The subject properties are rice lands acquired under P.D. No. 27, and the DAR valuation was rejected by the landowner, placing the case under Item II. B of A.O. No. 1, series of 2010. Therefore, the correct formula to be used is the two-factor formula provided in Item IV. 1 of the same administrative order: LV = (CNI x 0.90) + (MV x 0.10). The SAC's attempt to use the three-factor formula was flawed because it did not properly consider the guidelines for the Comparable Sales (CS) factor, particularly the requirement for at least three sales transactions or alternative calculations when such transactions are unavailable. The SAC incorrectly derived the CS factor by merely multiplying the zonal value per square meter by 10,000 sq. m., which is not in accordance with the prescribed DAR guidelines. The Court agreed with Land Bank's computation using the two-factor formula, which yielded ₱214,026.38. On the payment of just compensation with interest: The Court affirmed that the imposition of interest on just compensation is proper. The delay in the payment of just compensation constitutes a forbearance of money and is necessarily entitled to earn interest to compensate the landowner for the income lost due to the immediate taking of the property. The Court reiterated that the concept of just compensation embraces not only the correct determination of the amount but also prompt payment. Therefore, the just compensation adjudged by the court shall earn an interest rate of 12% per annum from the time of taking until June 30, 2013, and 6% per annum from July 1, 2013, until finality of the decision. Thereafter, the total amount shall earn legal interest of 6% per annum from finality until fully paid, in line with prevailing jurisprudence.
Main Doctrine
The Special Agrarian Court (SAC) erred in applying the three-factor formula for just compensation when the case involved lands acquired under Presidential Decree No. 27, which should be valued using the two-factor formula prescribed by DAR Administrative Order No. 1, Series of 2010, specifically LV = (CNI x 0.90) + (MV x 0.10), for cases where the DAR valuation is rejected by the landowner and is undergoing a just compensation case in court. The imposition of interest on just compensation is proper from the time of taking until full payment.