POLILAWREV SARMIENTO 54 FUNDAMENTAL POWERS OF THE STATE

LAND BANK OF THE PHILIPPINES VS CA (1995) J. Ricardo Francisco

Summary
Pedro Yap, the heirs of Emiliano Santiago, and Agricultural Management & Development Corp. are
landowners whose landholdings were acquired by the Department of Agrarian Reform (DAR) and subjected
to transfer schemes to qualified beneficiaries under RA 6657 or the Comprehensive Agrarian Reform Law.
Aggrieved by the alleged lapses of DAR with respect to the valuation and payment of compensation for
their lands, they filed a petition for Certiorari and Mandamus with the SC. The SC referred the case to the
CA. The landowners raised two arguments one, the opening of trust accounts in lieu of depositing in cash
or bonds as a form of deposit is not valid under the CARL; second, they are entitled to withdraw the
amounts deposited in trust in their behalf pending the final resolution of the cases involving the final
valuation of their properties. The CA ruled in favour of the landowners.
The SC affirmed the CA decision. The law is clear that the deposit must be made only in cash or in
Landbank bonds. As regards the power of eminent domain, the SC said . . . within the context of the
State's inherent power of eminent domain, just compensation means not only the correct determination of
the amount to be paid to the owner of the land but also the payment of the land within a reasonable time
from its taking. Without prompt payment, compensation cannot be considered "just" for the property
owner is made to suffer the consequence 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.
Vigilance over the rights of the landowners is equally important because social justice cannot be
invoked to trample on the rights of property owners, who under our Constitution and laws are also entitled
to protection. As stated by Justice Isagani Cruz, social justice or any justice for that matter is for
the deserving, whether he be a millionaire in his mansion or a pauper in his hovel. It is true that, in case of
reasonable doubt, we are called upon to tilt the balance in favor of the poor, to whom the Constitution
fittingly extends its sympathy and compassion. But never is it justified to prefer the poor simply because
they are poor, or to reject the rich simply because they are rich, for justice must always be served, for poor
and rich alike, according to the mandate of the law.
Facts
Pedro Yap, the heirs of Emiliano Santiago, and Agricultural Management & Development Corp. are
landowners whose landholdings were acquired by the Department of Agrarian Reform (DAR) and
subjected to transfer schemes to qualified beneficiaries under RA 6657 or the Comprehensive
Agrarian Reform Law (CARL).
Pedro Yap alleges that without notice and without complying with the requirements of CARL to
deposit the compensation in cash and Landbank bonds in an accessible bank, DAR requested the
Register of Deeds of Leyte to cancel the transfer certificates of title of Yap in favour of the farmer
beneficiaries.
The heirs of Emiliano Santiago allege that without notice to them, the Landbank required the farmer
beneficiaries to pay rentals to the Landbank for the use of their (the heirs) farm lots (located in
Laur, Nueva Ecija) equivalent to 25% of the net harvest. Furthermore, the farmer beneficiaries
executed an Actual Tillers Deed of Undertaking. The DAR Regional Director issued an order directing
Landbank to pay the heirs directly or through a trust fund. The farmer beneficiaries stopped paying
rentals to the heirs after they signed the Actual Tillers Deed of Undertaking committing themselves
to pay rentals to Landbank.
Agricultural Mgt. & Devt Corp. alleges that a summary administrative proceeding was conducted
by the DARAB in Quezon City without notice to the landowners to determine compensation of its
property in San Francisco, Quezon City. With respect to its properties in Tabaco, Albay, the company
alleges that emancipation patents were issued but no action was taken by the DAR thereafter to fix
the compensation for said land. A trust account in the name of the corporation was subsequently
established.
The three landowners are all aggrieved by the lapses of DAR and Landbank with respect to the
valuation and payment of compensation for their land pursuant to CARL. More specifically, they
assert that:
1. First, Admin Order No. 9 was issued without jurisdiction and with grave abuse of discretion
because it permits the opening of trust accounts by the Landbank, in lieu of depositing in
cash or bonds in accessible bank designated by DAR the compensation for the land before it
is taken.

2. Second, it is wrong for DAR and Landbank to merely earmark, deposit in trust or reserve the
compensation for their land, for the law clearly mandates that before taking possession of the
property, the compensation must be deposited in cash or in bonds.
Defenses of DAR and Landbank:
o Admin Order No. 9 is a valid exercise of rule-making power. The issuance of Certificate of
Deposit was substantial compliance with CARL, as sanctioned by Association of Small
Landowners v. Secretary of Agrarian Reform.
o The issuance of Certificate of Deposit was in consonance with Circulars issued by the Land
Registration Authority.
Court of Appeals rendered a decision in favour of the three landowners.

Issue
1. In lieu of cash or bonds, is the opening of trust accounts, as a form of compensation for the
expropriated land, a valid form of deposit under the CARL? NO.
2. Pending the final valuation of their properties, are landowners entitled to withdraw the
amounts deposited in trust in their behalf? YES.
Held/Ratio
Issue 1
Sec. 16 (e)1 of CARL is very clear. It is very explicit therefrom that the deposit must be made only in
"cash" or in "LBP bonds". Nowhere does it appear nor can it be inferred that the deposit can be
made in any other form.
If it were the intention to include a "trust account" among the valid modes of deposit that should
have been made express, or at least, qualifying words ought to have appeared from which it can be
fairly deduced that a "trust account" is allowed. There is no ambiguity in Section 16(e) of CARL to
warrant an expanded construction of the term "deposit".
(Administrative Law) The conclusive effect of administrative construction is not absolute. Action of
an administrative agency may be disturbed or set aside by the judicial department if there is an
error of law, a grave abuse of power or lack of jurisdiction or grave abuse of discretion clearly
conflicting with either the letter or the spirit of a legislative enactment. In this regard, it must be
stressed that the function of promulgating rules and regulations may be legitimately exercised only
for the purpose of carrying the provisions of the law into effect. The power of administrative
agencies is thus confined to implementing the law or putting it into effect. Corollary to this is that
administrative regulations cannot extend the law and amend a legislative enactment, for settled is
the rule that administrative regulations must be in harmony with the provisions of the law. And in
case there is a discrepancy between the basic law and an implementing rule or regulation, it is the
former that prevails.
Issue 2
Position of DAR and Landbank: The right of the landowner to withdraw the amount deposited in his
behalf pertains only to the final valuation as agreed upon by the landowner, the DAR and the LBP or
that adjudged by the court. It has no reference to amount deposited in the trust account pursuant
to Section 16(e) in case of rejection by the landowner because the latter amount is only provisional
and intended merely to secure possession of the property pending final valuation. The contention is
premised on the alleged distinction between the deposit of compensation under Section 16(e) of RA
6657 and payment of final compensation as provided under Section 182.
o The CARP Law, for its part conditions the transfer of possession and ownership of the land to the
government on receipt by the landowner of the corresponding payment or the deposit by the DAR of
the compensation in cash or LBP bonds with an accessible bank. Until then, title also remains with the
landowner. No outright change of ownership is contemplated either. (Association of Small

Landowners v. Sec. of DAR)

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(e) Upon receipt by the landowner of the corresponding payment or, in case of rejection or no response from the
landowner, upon the deposit with an accessible bank designated by the DAR of the compensation in cash or in LBP
bonds in accordance with this Act, the DAR shall take immediate possession of the land and shall request the proper
Register of Deeds to issue a Transfer Certificate of Title (TCT) in the name of the Republic of the Philippines. . . .
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Sec. 18. Valuation and Mode of Compensation. The LBP shall compensate the landowner in such amount as may
be agreed upon by the landowner and the DAR and LBP in accordance with the criteria provided for in Sections 16 and
17 and other pertinent provisions hereof, or as may be finally determined by the court as the just compensation for the
land.

Lindain

The ruling the said case did not dispense with the settled rule that there MUST be full payments of
just compensation before the title to the expropriated property is transferred.
There should not be any distinction between the deposit of compensation under Section 16(e) of RA
6657 and the determination of just compensation under Section 18. To withhold the right of the
landowners to appropriate the amounts already deposited in their behalf as compensation for their
properties simply because they rejected the DAR's valuation, and notwithstanding that they have
already been deprived of the possession and use of such properties, is an oppressive exercise of
eminent domain. The irresistible expropriation of private respondents' properties was painful
enough for them. But petitioner DAR rubbed it in all the more by withholding that which rightfully
belongs to private respondents in exchange for the taking.
o It is unnecessary to distinguish between provisional compensation under Section 16(e) and
final compensation under Section 18 for purposes of exercising the landowners' right to
appropriate the same. The immediate effect in both situations is the same, the landowner is
deprived of the use and possession of his property for which he should be fairly and
immediately compensated.