Landbank of the Philippines v American Rubber Corp. GR No. 188046; July 24, 2013; Villarama, Jr.

, J; *bracketed case Doctrine: In determining value of land in expropriation proceedings under RA 6657 (Agrarian Reform Law), RTC acting as Special Agrarian Court, was at no liberty to disregard the formula of DAR by which the factors in Sec 17 of the law may be taken into account. While the determination of just compensation is essentially a judicial function vested in RTC acting as Special Agrarian Court, judge cannot abuse his discretion by not taking into full consideration the factors specifically identified by law and implementing rules. SAC are not at liberty to disregard formula laid down in DAR AO 5 s. of 1998 because unless AO is declared invalid, courts have no option but to apply it. FACTS: American Rubber is a registered owner of two parcels of lands in Brgy Baluno, Isabela City, Basilan. Land # 1: 927.9366 ha Land # 2: 12.7970 ha

January 1988: American Rubber voluntary offered to sell said parcels of land and another property, with improvements for P105, 732, 921.00. It then changed its offer to sale of only the two parcels of land at P83, 346.77/ha. Land # 1: 927.9366 ha = P76, 928, 492.00 Land # 2: 12.7970 ha = P1, 066, 588.60

Department of Agrarian Reform (DAR) initially acquired 835.0771 hectares of land from American rubber with average valuation of P64, 288.16/ha It subsequently acquired additional 37.7301 ha. At P62,660.10/ha Total: 888.6489 ha = P55, 682, 832.67

American Rubber initially rejected DARs offer based on Landbanks valuation. Claim was then endorsed to the DAR adjudication board (DARAB) for summary administrative proceedings. Landbank was asked to deposit amount fixed as compensation (P55, 682, 832. 67) DAR Secretary then issued orders for partial cancellation of American Rubbers title and issuance of new TCT to Landbank over areas taken in the name of Rep PH on Aug 7, 2000. DAR then issued Cert of Land Ownership Award in favor of agrarian reform beneficiaries.

Due to DARABs inaction for 2 years, American Rubber filed with RTC (Special Agrarian Court) of Pagadian City a suit for judicial determination of just compensation. Landbank filed a motion to dismiss: non-exhaustion of administrative remedies there was still a pending case before the DARAB plus American Rubber has already withdrawn and collected from the amount Landbank deposited.

RTC (SAC) however denied the motion to dismiss and continued with the case. It designated 3 commissioners, pursuant to Rules of Court.

Commissioners Report Ocular inspection conducted by the 3 members with both contending parties. Both parcels are predominantly planted with rubber (290-295 trees/ha); smaller portion of rice, cacao, coffee, black pepper, and coconuts; plant nurseries, office buildings; airstrip of about 10 ha; plantation roads of about 27 ha; parcels of land located 8 km away from city proper. During the inspection, occupants/workers and adjoining owners were asked and revealed that selling price of rubber land were at P120, 000 P150,000/ Govt agencies (City Assessor, Reg of Deeds, DAR, BIR) said reasonable selling price is P90,000 P150,000. Landbank submitted a Valuation Summary of property while American Rubber submitted an appraisal report by Cuervo Appraisers, Inc. Recommendation: Just compensation of property fixed at P115, 372, 206.

RTC (SAC) issued order adopting the Commissioners recommendation. CA affirmed RTC (SAC) with modification that ruling of RTC as to treasury bills rate deleted. ISSUE: WON RTC (SAC)s valuation of the property (adopting Commissioners report) was in accordance with the legally prescribed valuation factors prescribed under the law (particularly Sec 17 of RA 6657 Comprehensive Agrarian Reform Law) NO. RATIO: Landbank Arg: CA erred in affirming RTC (SAC) valuation which merely adopted the Commisioners Report which in turn merely relied on American Rubbers appraiser, Cuervo Appraisers Inc. using a different criteria. Cuervo relied on the market data and income approach no basis was shown how such criteria conformed to statutory and regulatory requirements RTC (SAC) valuation also violated Admin Order 5 of DAR stating that computed value shall in no case exceed the landownerss offer in case of VO. American Rubber only offered to sell at P83, 346.77/ha. The SAC arrived at a value 55.66% higher than the offer.

American Rubber arg: SAC appointed commissioners dwelled on the market data, income and residual value approach. Data gathered under such approaches basically encompassed or embraced most if not all of the factors enumerated in Sec 17 of RA 6657, in relation to relevant DAR Admin Orders. Supreme Court: Sec 17 of RA 6657 enumerates several factors to be considered by RTC in determining just compensation to be paid to landowner. Said factors are: 1) Acquisition cause of land; 2) current value of properties; 3)nature, actual use and income; 4) sworn valuation by owners; 5) tax declarations; 6) assessment by govt assessors; 7) social and economic benefits cont ributed by the farmers and farmworkers and by the govt to the property; 8) non-payment of taxes or loans owing to any govt financing institution on the land if any;

These factors have translated by DAR under relevant issuance into a basic formula: LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1) o LV = land value

o o o

CNI = Capitalized net income CS = Comparable sales MV = Market value per tax declaration

The mandatory application by the RTC of said formula in accordance with DAR admin order and circulars have been settled by this Court, in a long line of jurisprudence (LBP v Honeycomb Farms, LBP v Sps Banal, LBP v Celada, LBP v Lim, LBP v Heirs of Eleuterio Cruz, LBP v Barrido) In LBP v Banal: DAR as the admin agency tasked with implementation of agrarian reform program already came up with formula to determine just compensation which incorporated Sec 17 factors of RA 6657, in DAR AO 6, s. of 1992, as amended. Said AO was issued pursuant to DARs rule-making power to carry out the object and purposes of RA 6657. LBP v Celada: Rules and regulations by agency to interpret the law which they are tasked to enforce have the force of law. DAR AO precisely filled in the details of Sec 17 of RA 6657 by providing a basic formula by which the factors in Sec 17 may be taken into account. RTC was at no liberty to disregard the formula which was devised to implement said provision of the law. LBP v Barrido: While the determination of just compensation is essentially a judicial function vested in RTC acting as Special Agrarian Court, judge cannot abuse his discretion by not taking into full consideration the factors specifically identified by law and implementing rules. SAC are not at liberty to disregard formula laid down in DAR AO 5 s. of 1998 because unless AO is declared invalid, courts have no option but to apply it. Basically: CA and RTC erred in disregarding the formula and coming up with their own basis for valuation of the land. Market data, income and residual value approaches do not conform to the guidelines set forth in DAR AO 4 and other related issuances. American Rubbers valuation is therefore wrong. (and in effect, the Commisioners and RTC (SAC)

Landbanks valuation is also wrong because it did not consider data on Comparative Sales (CS in the formula) at the time of the taking. Other Guidelines in Just Compensation: Just compensation: full and fair equivalent of the property taken from its owner by the expropriator, at the time of its taking o Measure is not the takers gain but the owners loss. o Time of taking when landowner was deprived of the use and benefit of his property (ex when title was transferred to the Rep of PH) not when judgment for the expropriation case was rendered.

HELD: Petition granted; case remanded back to RTC (SAC) for computation of just compensation in accordance with Sec 17 of RA 6657, DAR Administrative Order 5, s. 1998, and other applicable DAR issuances.