LAND BANK OF THE PHILIPPINES G.R. Nos.

180772
[LBP],
and 180776
Petitioner,

Present:

CARPIO, J.,

Chairperson,
- versus -
CORONA,*

DEL CASTILLO,

ABAD, and

PEREZ, JJ.

DOMINGO AND MAMERTO

SORIANO,
Promulgated:
Respondents.
May 6, 2010

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION

PEREZ, J.:

For consideration is a Petition for Review on Certiorari under Rule 45 of the

Rules of Court filed by the Land Bank of the Philippines (LBP) seeking the
annulment of the Decision1 dated 9 October 2007 and the Resolution2 dated 12
December 2007 issued by the Court of Appeals in CA-G.R. SP Nos. 89005 and
89288.

The controversy is hinged on the determination of just compensation for

land covered by the Comprehensive Agrarian Reform Program (CARP).

First, the antecedents.

1 * Per Resolution dated 25 June 2008, Associate Justice Renato C. Corona is designated
an additional member in place of Associate Justice Arturo D. Brion, who was then the
Director of Land Bank of the Philippines.

Penned by Associate Justice Myrna Dimaranan Vidal, and concurred in by Associate

Justices Jose L. Sabio, Jr. and Noel G. Tijam.

2 Rollo, pp. 86-87.

 Domingo and Mamerto Soriano (respondents) are the registered owners of
several parcels of rice land situated in Oas, Albay. Out of the 18.9163 hectares of
land3 owned by the respondents, 18.2820 hectares were placed under the
Operations Land Transfer and the CARP pursuant to Presidential Decree No. 27 4
and Republic Act No. 6657, otherwise known as the Comprehensive Agrarian
Reform Law.5

The LBP6 pegged the value of 18.0491 hectares of land at P482,363.957

(P133,751.65 as land value plus P348,612.30 incremental interest), while the
remaining 0.2329 hectare was computed at P8,238.94.8 Not satisfied with the

3 As stipulated in the pre-trial orders dated 14 January and 16 March 2004. CA rollo, pp.
122-127.

4 Entitled Decreeing The Emancipation Of Tenants From The Bondage Of The Soil
Transferring To Them The Ownership Of The Land They Till And Providing The
Instruments And Mechanism Therefor.

5 Rollo, p. 44.

6 Land Bank of the Philippines is a government banking institution designated under

Section 64 of Republic Act No. 6654 as the financial intermediary of the agrarian reform
program of the government. (See Land Bank of the Philippines v. De Leon, G.R. No.
164025, 8 May 2009). Under Section 1 of Executive Order No. 405, series of 1990, the
Land Bank of the Philippines is charged with the initial responsibility of determining the
value of lands placed under land reform and the just compensation to be paid for their
taking. (See Land Bank of the Philippines v. Luciano, G.R. No. 165428, 25 November
2009).

7 Rollo, p. 43.

8 Per Department of Agrarian Reform Adjudication Board Decision dated 7 May 2000.
Rollo, p. 22.
valuation, respondents, on 23 November 2000, instituted a Complaint 9 for judicial
determination of just compensation with the Regional Trial Court of Legazpi City, 10
sitting as a Special Agrarian Court (SAC). Respondents alleged that they are
entitled to an amount of not less than P4,500,000.00 as just compensation.11

On 21 February 2005, the SAC rendered a judgment, ordering LBP to pay

the respondents P894,584.94. The dispositive portion reads:

ACCORDINGLY, the just compensation of the 18.0491 hectares of irrigated

riceland is P133,751.79, plus increment of 6% per annum computed annually beginning
October 21, 1972, until the value is fully paid, and of the 0.2329 hectare of rain fed
riceland is P8,238.94 plus 12% interest per annum, beginning August 17, 1998, until the
value is fully paid or a total of P894,584.94 as of this date. Land Bank is ordered to pay
the landowners Domingo Soriano and Mamerto Soriano said amount/land value in
accordance with law.12

The SAC applied the formula prescribed under Executive Order No. 228 in
determining the valuation of the property, i.e., Land value = Average Gross
Production x 2.5 x Government Support Price. It likewise granted compounded
interest pursuant to Department of Agrarian Reform (DAR) Administrative Order

9 Id. at 194-198.

10 Presided by Judge Henry B. Basilla.

11 Rollo, p. 197.

12 Id. at 173.
No. 13, series of 1994, as amended by DAR Administrative Order No. 2, series of
2004.

Both parties disagreed with the trial courts valuation, prompting them to
file their respective appeals with the Court of Appeals. The appellate court,
however, affirmed the judgment of the trial court. It also upheld the award of
compounded interest, thus:

In the case at bar, the subject lands were taken under PD 27 and were covered
by Operation Land Transfer, making the aforecited Administrative Order applicable.
Hence, the Petitioners SORIANOs are entitled to the 6% compounded interest per
annum from the date of taking on 21 October 1972 until full payment of the just
compensation.13

LBP moved for reconsideration but it was denied by the Court of Appeals on
12 December 2007.

LBP filed the instant petition seeking to nullify the appellate courts decision
and resolution, particularly the amount awarded to respondents as just
compensation.

13 Id. at 30.
 Basic is the tenet that since respondents were deprived of their land, they
are entitled to just compensation. Under Executive Order No. 228, the formula
used to compute the land value is:

Land value = Average Gross Production (AGP) x 2.5

x Government Support Price (GSP)

With the passage of Republic Act (R.A.) No. 6657 or the CARL in 1988, new
guidelines were set for the determination of just compensation. In particular,
Section 17 provides, thus:

Determination of Just Compensation. In determining just compensation, the cost

of acquisition of the land, the current value of like properties, its nature, actual use and
income, the sworn valuation by the owner, the tax declarations, and the assessment
made by government assessors shall be considered. The social and economic benefits
contributed by the farmers and the farmworkers and by the Government to the property
as well as the non-payment of taxes or loans secured from any government financing
institution on the said land shall be considered as additional factors to determine its
valuation.

Consequently, two divergent formulae arose which prompted the Court to

come up with a categorical pronouncement that, if just compensation is not
settled prior to the passage of Republic Act No. 6657, it should be computed in
accordance with the said law, although the property was acquired under
Presidential Decree No. 27. The fixing of just compensation should therefore be
based on the parameters set out in Republic Act No. 6657, with Presidential
Decree No. 27 and Executive Order No. 228 having only suppletory effect. 14

In the instant case, while the subject lands were acquired under
Presidential Decree No. 27, the complaint for just compensation was only lodged
before the court on 23 November 2000 or long after the passage of Republic Act
No. 6657 in 1988. Therefore, Section 17 of Republic Act No. 6657 should be the
principal basis of the computation for just compensation. As a matter of fact, the
factors enumerated therein had already been translated into a basic formula by
the DAR pursuant to its rule-making power under Section 49 of Republic Act No.
6657. The formula outlined in DAR Administrative Order No. 5, series of 1998
should be applied in computing just compensation, thus:

LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1)

Where: LV = Land Value

CNI = Capitalized Net Income

CS = Comparable Sales

MV = Market Value per Tax Declaration15

14 Land Bank of the Philippines v. Heirs of Eleuterio Cruz, G.R. No. 175175, 29 September
2008, 567 SCRA 31, 37-38; Land Bank of the Philippines v. Heirs of Angel T. Domingo,
G.R. No. 168533, 4 February 2008, 543 SCRA 627, 638-639.

15 Land Bank of the Philippines v. Celada, G.R. No. 164876, 23 January 2006, 479 SCRA
495, 508.
 As much as this Court would like to determine the proper valuation based
on the formula cited above, the records of this case are bereft of adequate data.
To write finis to this case, we uphold the amount derived from the old formula.
However, since the application of the new formula is a matter of law and thus,
should be made applicable, the parties are not precluded from asking for any
additional amount as may be warranted by the new formula.

On to the more pertinent issue. LBP assails the imposition of 6% interest

rate on the 18.0491 hectares of lot valued at P133,751.65. It avers that the
incremental interest due to the respondents should be computed from the date of
taking on 21 October 1972, not up to full payment of just compensation but up to
the time LBP approved the payment of their just compensation claim and a
corresponding deposit of the compensation proceeds was made by the bank.
LBP relies on the provisions of DAR Administrative Order No. 13, series of 1994, as
amended, which substantially provides that the grant of 6% yearly interest
compounded annually shall be reckoned from 21 October 1972 up to the time of
actual payment but not later than December 2006. LBP stresses that under said
Administrative Order, time of actual payment is defined as the date when LBP
approves the payment of the land transfer claim and deposits the compensation
proceeds in the name of the landowner in cash and in bonds. In sum, LBP posits
that the appellate court departed from the express provision of DAR
Administrative Order No. 13, as amended, by imposing an interest to be reckoned
from the time of taking up to the actual payment of just compensation.16

Respondents counter that the award of interest until full payment of just
compensation was correctly adhered to by the lower courts in line with the Courts
ruling in Land Bank of the Philippines v. Imperial, 17 which found it inequitable to
determine just compensation based solely on the formula provided by DAR
Administrative Order No. 13, as amended. According to respondents, the award of
interest until full payment of just compensation is to ensure prompt payment.
Moreover, respondents claim that the date LBP approves the payment of the land
transfer claim and deposits the proceeds in the name of the landowner is not
tantamount to actual payment because on said date, the release of the amount is
conditioned on certain requirements.18

This issue has already been raised before the Court of Appeals by LBP, first,
in its petition for review and, second, in its motion for reconsideration. The Court
of Appeals, however, neglected to give a definitive ruling on the issue of
computation of interest and merely echoed the trial courts ruling that
respondents are entitled to the 6% compounded interest per annum from the
date of taking on 21 October 1972 until full payment of just compensation.

16 Rollo, pp. 48-51.

17 G.R. No. 157753, 12 February 2007, 515 SCRA 449.

18 Rollo, p. 372.
 At any rate, we cannot subscribe to the arguments of LBP.

Section 4, Article XIII of the 1987 Constitution, mandates that the

redistribution of agricultural lands shall be subject to the payment of just
compensation. The deliberations of the 1986 Constitutional Commission on this
subject reveal that just compensation should not do violence to the Bill of Rights,
but should also not make an insurmountable obstacle to a successful agrarian
reform program. Hence, the landowner's right to just compensation should be
balanced with agrarian reform.19

Administrative Order No. 13, as amended, was issued to compensate those

who were effectively deprived of their lands by expropriation. LBP relies on said
Administrative Order to justify its own computation of interest. A literal reading of
this Administrative Order seems to favor LBPs interpretation with respect to the
period covered by the interest rate. We quote the relevant portion of the
Administrative Order:

The grant of six percent (6%) yearly interest compounded annually shall be
reckoned as follows:

19 Land Bank of the Philippines v. Dumlao, G.R. No. 167809, 27 November 2008, 572
SCRA 108, 124.
 3.1 Tenanted as of 21 October 1972 and covered under OLT

- From 21 October 1972 up to the time of actual payment but not later than
December 2006

3.2 Tenanted after 21 October 1972 and covered under OLT

-From the date when the land was actually tenanted (by virtue of Regional Order
of Placement issued prior to August 18, 1987) up to the time of actual payment
but not later than December 2006

Time of actual payment is the date when the Land Bank of the Philippines (LBP)
approves payment of the land transfer claim and deposits the compensation proceeds in
the name of the landowner (LO) in cash and in bonds. The release of payment can be
claimed by the landowner upon compliance with the documentary requirements for
release of payment.20

However, as embodied in its Prefatory Statement, the intent of the

Administrative Order was precisely to address a situation where a number of
landholdings remain unpaid in view of the non-acceptance by the landowners of
the compensation due to low valuation. Had the landowner been paid from the
time of taking his land and the money deposited in a bank, the money would have
earned the same interest rate compounded annually as authorized under banking
laws, rules and regulations.21 The concept of just compensation embraces not only
the correct determination of the amount to be paid to the owners of the land, but
also payment within a reasonable time from its taking. Without prompt payment,
compensation cannot be considered "just" inasmuch as the property owner is

20 Rollo, p. 358.

21 Id. at 359.
made to suffer the consequences of being immediately deprived of his land while
being made to wait for a decade or more before actually receiving the amount
necessary to cope with his loss.22 To condition the payment upon LBPs approval
and its release upon compliance with some documentary requirements would
render nugatory the very essence of prompt payment. Therefore, to expedite the
payment of just compensation, it is logical to conclude that the 6% interest rate be
imposed from the time of taking up to the time of full payment of just
compensation.

Certainly, the trend of recent rulings bolsters this interpretation. In Forform

Development Corporation v. Philippine National Railways,23 the Philippine National
Railways was directed to file the appropriate expropriation action over the land in
question, so that just compensation due to its owner may be determined in
accordance with the Rules of Court, with interest at the legal rate of 6% per
annum from the time of taking until full payment is made. The Court in Manila
International Airport Authority v. Rodriguez 24 ordered just compensation for the
portion of respondents lot actually occupied by the runway, with interest thereon
at the legal rate of 6% per annum from the time of taking until full payment is
made.

22 Land Bank of the Philippines v. Orilla, G.R. No. 157206, 27 June 2008, 556 SCRA 103,
117.

23 G.R. No. 124795, 10 December 2008, 573 SCRA 350.

24 G.R. No. 161836, 28 February 2006, 483 SCRA 619.

 LBP also proffers that just compensation pertaining to the 0.2329 hectare
valued at P8,238.94 with no pronouncement as to interest per the Department of
Agrarian Reform Adjudication Board (DARAB) decision has already attained
finality, hence, it cannot be modified.25

Anent the DARAB decision relating to the 0.2329 hectare, suffice it to say
that the determination of just compensation is a judicial function. 26 The DAR's
land valuation is only preliminary and is not, by any means, final and conclusive
upon the landowner or any other interested party. In the exercise of their
functions, the courts still have the final say on what the amount of just
compensation will be.27 Hence, we sustain the computation reached by the trial
court.

WHEREFORE, the petition is DENIED. The Decision dated 9 October 2007

and the Resolution dated 12 December 2007 of the Court of Appeals in CA-G.R. SP

25 Rollo, p. 54.

26 Land Bank of the Philippines v. J.L. Jocson, G.R. No. 180803, 23 October 2009; Land
Bank of the Philippines v. Kumassie Plantation Company, Inc., G.R. Nos. 177404 and
178097, 25 June 2009; National Power Corporation v. Bongbong, G.R. No. 164079, 3
April 2007, 520 SCRA 290, 307; Land Bank of the Philippines v. Natividad, G.R. No.
127198, 16 May 2005, 458 SCRA 441, 450-451.

27 Land Bank of the Philippines v. Dumlao, supra note 19 at 128.

Nos. 89005 and 89288 are hereby AFFIRMED without prejudice to the right of the
parties for additional claims that may arise in the application of DAR
Administrative Order No. 5, series of 1998 in relation to R.A. No. 6657.

SO ORDERED.

JOSE PORTUGAL PEREZ

Associate Justice

WE CONCUR:
 ANTONIO T. CARPIO

Associate Justice

Chairperson

RENATO C. CORONA MARIANO C. DEL CASTILLO

Associate Justice Associate Justice

 ROBERTO A. ABAD

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in

consultation before the case was assigned to the writer of the opinion of the
Courts Division.

ANTONIO T. CARPIO

Associate Justice

Chairperson, Second Division

 CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division
Chairpersons Attestation, it is hereby certified that the conclusions in the above
Decision were reached in consultation before the case was assigned to the writer
of the opinion of the Courts Division.

REYNATO S. PUNO

Chief Justice