EN BANC
November 29, 2016
G.R. Nos. 181912 & 183347
RAMON M. ALFONSO, Petitioner
vs.
LAND BANK OF THE PHILIPPINES and DEPARTMENT OF AGRARIAN REFORM, Respondents
D E C I S I O N
JARDELEZA, J.:
The main issue presented in this case concerns the legal duty of the courts, in the determination of just compensation under Republic Act No. 6657,1 (RA 6657), in relation to Section 17 of RA 6657 and the implementing formulas of the Department of Agrarian Reform (DAR).
The Court En Banc reaffirms the established jurisprudential rule, that is: until and unless declared invalid in a proper case, courts have the positive legal duty to consider the use and application of Section 17 and the DAR basic formulas in determining just compensation for properties covered by RA 6657. When courts, in the exercise of its discretion, find that deviation from the law and implementing formulas is warranted, it must clearly provide its reasons therefor.
The Case
This is a petition for review on certiorari of the Decision2 and Resolution,3 dated July 19, 2007 and March 4, 2008, respectively, of the Court of Appeals in CA-G.R. SP No. 90615 and CA-G.R. SP No. 90643. The Court of Appeals granted the individual petitions filed by the DAR and the Land Bank of the Philippines (LBP) and set aside the Decision4 dated May 13, 2005 of the Regional Trial Court fixing the total amount of ₱6,090,000.00 as just compensation.5
The Facts
Cynthia Palomar (Palomar) was the registered owner of two (2) parcels of land. One is located in San Juan, Sorsogon City, with an area of 1.6530 hectares covered by Transfer Certificate of Title (TCT) No. T-21136,6 and the other in Bibincahan, Sorsogon City, with an area of 26.2284 hectares covered by TCT No. T-23180.7
Upon the effectivity of RA 6657, the DAR sought to acquire Palomar’s San Juan and Bibincahan properties at a valuation of ₱36,066.27 and ₱792,869.06,8 respectively. Palomar, however, rejected the valuations.
Land Valuation Case Nos. 68-01 and 70-01 were consequently filed before the DAR Provincial Adjudication Board (Board) for summary determination of just compensation. In the meantime, or on April 16, 2001, Palomar sold her rights over the two properties to petitioner Ramon M. Alfonso (Alfonso ).9
Upon orders from the Board, the parties submitted their position papers and evidence to support their respective proposed valuations. On June 20, 2002, Provincial Adjudicator Manuel M. Capellan issued Decisions10 in Land Valuation Case Nos. 68-01 and 70-01.
Applying DAR Administrative Order No. 5, Series of 1998, (DAR AO No. 5 [1998]), Provincial Adjudicator Capellan valued the properties as follows:
San Juan Property:
| Land Value | = | CNI x 0.9 + MV x 0.1 |
| Thus: | ||
| 666.67 kls AGP / FIR 16.70 ASP / PCA data | ||
| CNI | = | 666.67 x 16.70 x .70 – .12 x 0.9 |
| = | 58,450.29 | |
| MV | = | 30,600 x 1.2 x .90 + 70 x 150.00 x 1.2 x .90 x 0.1 |
| = | 4,438.80 | |
| Land Value | = | 58,450.29 + 4,438.80 |
| = | 62,889.09 x 1.6530hectares | |
| = | 103,955.6611 |
Bibincahan Property:
| Land Value | = | CNI x 0.9 + MV x 0.1 |
| Thus: | ||
| = | 3>952 kls AGP /FIR 16.70 ASP /PCA data | |
| CNI | = | 952 x 16.70 x .70 – .12 x 0.9 |
| = | 83,466.59 | |
| MV | = | 30,600 x 1.2 x .90 + 90 x 150.00 x 1.2 x .90 x 0.1 |
| = | 4,762.80 | |
| Land Value | = | 83,466.59 + 4,762.80 |
| = | 88,229.39 x 26.2284 hectares | |
| = | 2,314,115.7312 |
Respondent LBP, as the CARP financial intermediary pursuant to Section 64 of RA 6657,13 filed a motion seeking for a reconsideration of the Provincial Adjudicator’s valuations. This was denied in an Order14 dated September 13, 2002.
Both the LBP15 and Alfonso16 filed separate actions for the judicial determination of just compensation of the subject properties before Branch 52 of the Regional Trial Court, sitting as Special Agrarian Court (SAC), of Sorsogon City. These actions were docketed as Civil Case No. 2002-7073 and Civil Case No. 2002-7090, respectively. Upon Alfonso’s motion, the cases were consolidated on December 10, 200217 and Amado Chua (Chua) of Cuervo Appraisers, Inc. was appointed Commissioner who was ordered to submit his report (Cuervo Report) within thirty (30) days.18
Trial on the merits ensued, with each party presenting witnesses and documentary evidence to support their respective case. Aside from presenting witnesses, the LBP submitted as evidence the following documents: Field Investigation Report, Land Use Map and Market Value per Ocular Inspection for each of the affected properties.19 Alfonso, for his part, submitted as evidence the Cuervo Report and the testimony of Commissioner Chua.20
In his appraisal of the properties, Commissioner Chua utilized two approaches in valuing the subject properties, the Market Data Approach (MDA) and the Capitalized Income Approach (CIA), due to their “different actual land use.”21 He opined that “the average of the two indications reasonably represented the just compensation (fair market value) of the land with productive coconut trees”:22
| Site | Unit Land Value (Php/Sq.M.)23 | ||
| Market Data Approach (MDA) | Capitalized Income Approach (CIA) | Average (rounded to the nearest tens) | |
| 1 | Php 25 | Php 18.1125 | 22 |
| 2 | Php 22 | Php 17.1275 | 20 |
He thereafter computed the final land value as follows:24
| Area (Sq.m.) | Unit Land Value (Php) | Just Compensation (Fair Market Value) | |
| Site 1 | |||
| Coconut Land | 15,765 | 22 | Php 346,830 |
| Residential Land | 600 | 160 | 96,000 |
| Irrigation Canal | 165 | * | * |
| Total for Site 1 – | 16,530 sq.m | Php 442,830 | |
| Site 2 | |||
| Coconut Land | 258,534 | 20 | Php 5,170,680 |
| Residential Land | 3,000 | 160 | 480,000 |
| Irrigation Canal | 750 | * | * |
| Total for Site 2 – | 262,284 sq.m | Php 5,650,680 | |
| Grand Total | |||
| (Sites 1 & 2) – | 278,814 sq.m. | Php 6,093,510 | |
| Say – | Php 6,094,000 |
Ruling of the SAC
On May 13, 2005, the SAC rendered its Decision. Finding the valuations of both the LBP and the Provincial Adjudicator to be “unrealistically low,”25 the SAC adopted Commissioner Chua’s valuation as set out in the Cuervo Report. It also held that the ‘provisions of Section 2, Executive Order No. 228 (EO 228) were mere “guiding principles” which cannot substitute the court’s judgment “as to what amount [of just compensation] should be awarded and how to arrive at such amount.”26 The dispositive portion of the SAC’s Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered:
1) Fixing the amount of FOUR HUNDRED FORTY-TWO THOUSAND EIGHT HUNDRED THIRTY PESOS ([₱]442,830.00)[ ], Philippine currency for Site 1 with an area of 16,530 sq. m. covered by TCT No. T-21136 situated at San Juan, Sorsogon City and the amount of FIVE MILLION SIX HUNDRED FIFTY THOUSAND SIX HUNDRED EIGHTY [PESOS] ([₱]5,650,680.00) Philippine currency for Site 2 with an area of 262,284 sq. m. covered by TCT No. T-23180 situated at Bibincahan, Sorsogon City or a total amount of SIX MILLION NINETY THOUSAND PESOS ([₱]6,090,000.00) for the total area of 278,814 sq.m. in the name of Cynthia Palomar/Ramon M. Alfonso which property was taken by the government pursuant to the Agrarian Reform Program of the government as provided by R.A. 6657.
2) Ordering the Petitioner Land Bank of the Philippines to pay the Plaintiff/Private Respondent the amount of FOUR HUNDRED FORTY-TWO THOUSAND EIGHT HUNDRED THIRTY PESOS ([₱]442,830.00) and the amount of FIVE MILLION SIX HUNDRED FIFTY THOUSAND AND SIX HUNDRED EIGHTY PESOS ([₱]5,650,680.00) or the total amount of SIX MILLION NINETY THOUSAND PESOS ([₱]6,090,000.00) Philippine currency for Lots 1604 and 2161 respectively, in the manner provided by R.A. 6657 by way of full payment of the said just compensation after deducting whatever amount previously received by the private respondents from the Petitioner Land Bank of the Philippines as part of the just compensation.
3) Without pronouncement as to costs.
SO ORDERED.27
In an Order28 dated July 5, 2005, the SAC denied the motions filed by the LBP and the DAR seeking reconsideration of the Decision. These government agencies filed separate petitions for review before the Court of Appeals.
In its petition, docketed as CA-G.R. SP No. 90615, the LBP faulted the SAC for giving considerable weight to the Cuervo Report and argued that the latter’s valuation was arrived at in clear violation of the provisions of RA 6657, DAR AO No. 5 (1998), and the applicable jurisprudence.29
According to the LBP, there is nothing in Section 17 of RA 6657 which provides that capitalized income of a property can be used as a basis in determining just compensation. Thus, when the SAC used the capitalized income of the properties as basis for valuation, “it actually modified the valuation factors set forth by RA 6657.”30
The DAR, for its part, imputed error on the part of the SAC for adopting “the average between the Market Data Approach and Capitalized Income Approach as the just compensation of subject landholdings.”31
Ruling of the Court of Appeals
In its challenged Decision dated July 19, 2007, the Court of Appeals found that the SAC failed to observe the procedure and guidelines provided under DAR AO No. 5 (1998). It consequently granted the petitions filed by the LBP and the DAR and ordered the remand of the case to the SAC for the determination of just compensation in accordance with the DAR basic formula.32
Alfonso filed a motion seeking reconsideration of the Court of Appeals’ Decision.33 Finding no cogent reason to reverse its earlier Decision, the Court of Appeals denied Alfonso’s motion.34
Hence, this petition.
Issue
As stated in the outset, the issue sought to be resolved in this case involves the legal duty of the courts in relation to Section 17 and the implementing DAR formulas. Otherwise stated, are courts obliged to apply the DAR formula in cases where they are asked to determine just compensation for property covered by RA 6657?
The resolution of the issue presented is fairly straightforward given the established jurisprudence on the binding character of the DAR formulas. During the course of the deliberations of this case, however, concerns were strongly raised (by way of dissents and separate concurring opinion) on the propriety of maintaining the present rule.
This case presents an opportunity for the Court en banc not only to reaffirm the prevailing doctrine, but also expound, more explicitly and unequivocally, on our understanding of the exercise of our “judicial function” in relation to legislatively-defined factors and standards and legislatively-provided regulatory schemes.
Ruling of the Court
We GRANT the petition in part.
The ruling of the Court will thus be divided into four (4) component parts.
To provide context for proper understanding, Part I will discuss the history of Philippine land reform, with emphasis on the development, over the years, of the manner of fixing just compensation, as well as the development of jurisprudence on the same.
In Part II, the Court will evaluate the challenged CA ruling based on the law and prevailing jurisprudence.
Part III will address all issues raised by way of dissents and separate concurring opinion against the mandatory application of the DAR formulas. It will also discuss (1) primary jurisdiction and the judicial function to determine just compensation; (2) how the entire regulatory scheme provided under RA 6657 represents reasonable policy choices on the part of Congress and the concerned administrative agency, given the historical and legal context of the government’s land reform program; and (3) how matters raised in the dissents are better raised in a case directly challenging Section 17 and the resulting DAR formulas. We shall also show how the current valuation scheme adopted by the DAR is at par with internationally-accepted valuation standards.
Part IV will conclude by affirming the law, the DAR regulations and prevailing jurisprudence which, save for a successful direct challenge, must be applied to secure certainty and stability of judicial decisions.
I. Contextual Background
A. History of Philippine land reform laws
Section 4, Article XIII of the Constitution provides:
Sec. 4. The State shall, by law, undertake an agrarian reform program founded on the right of farmers and regular farmworkers, who are landless, to own directly or collectively the lands they till or, in the, case of other farmworkers, to receive a just share of the fruits thereof. To this end, the State shall encourage and undertake the just distribution of all agricultural lands, subject to such priorities and reasonable retention limits as the Congress may prescribe, taking into account ecological, developmental, or equity considerations, and subject to the payment of just compensation. In determining retention limits, the State shall respect the right of small landowners. The State shall further provide incentives for voluntary land-sharing.
Congress first attempted to provide for land reform in 1955, when it enacted Republic Act No. 1400, or the Land Reform Act of 1955 (RA 1400). Its scope was limited to the expropriation of private agricultural lands in excess of 300 hectares of contiguous area, if held by a natural person, and those in excess of 600 hectares if owned by corporations.35 With respect to determining just compensation, it provided that the courts take into consideration the following:
(a) Prevailing prices of similar lands in the immediate area;
(b) Condition of the soil, topography, and climate hazards;
(c) Actual production;
(d) Accessibility; and
(e) Improvements.36
Afterwards, Congress enacted Republic Act No. 3844, otherwise known as the Agricultural Land Reform Code of 1963 (RA 3844). Its scope, though expanded, was limited by an order of priority based on utilization and area.37 Just compensation under this law was based on the annual lease rental income, without prejudice to the other factors that may be considered.38
On October 21, 1972, then President Ferdinand Marcos issued Presidential Decree No. 2739 (PD 27). It provided for a national land reform program covering all rice and com lands.40 This was a radical shift in that, for the first time in the history of land reform, its coverage was national, compulsorily covering all rice and com lands. Even more radical, however, is its system of land valuation. Instead of providing factors to be considered in the determination of just compensation, similar to the system under RA 1400 and RA 3844, PD 27 introduced a valuation process whereby just compensation is determined using a fzxed mathematical formula provided within the law itself. The formula was also exclusively production based, that is, based only on the income of the land.
Under PD 27, landowner’s compensation was capped to 2.5 times the annual yield, as follows:
Land Value = Average harvest of 3 normal crop years x (2.5)
Notably, this valuation scheme under PD 27 closely resembled those applied in agrarian reform programs earlier implemented in other Asian countries. In Taiwan, for example, compensation was capped at 2.5 times the annual yield of the main crop, when the land values at the time averaged four to six times the annual yield.41 South Korea, which commenced its land reform program sometime in the 1940s, on the , other hand, capped compensation at 1.25 times the value of the annual yield, when the land values at the time averaged five times the annual yield.42 In Japan, the price for the acquisition of agricultural land under its land reform program, at one point, “could not be greater than forty times the ‘official rental value’ (chintai-kakaku) of rice fields or forty-eight times the ‘official rental value’ of dry fields x x x.”43
While the constitutionality of PD 27 was upheld in the cases of De Chavez v. Zobel44 and Gonzales v. Estrella,45 these cases did not rule on the validity of the mathematical valuation formula employed.
Under President Corazon C. Aquino’s Executive Order No. 228 (EO 228) issued on July 17, 1987, the system under PD 27 was more or less retained for purposes of valuing the remaining unvalued rice and com lands. Land value under EO 228 was computed based on the average gross production (AGP) multiplied by 2.5, the product of which shall be multiplied by either ₱35.00 or ₱31.00, the Government Support Price (GSP) for one cavan of palay or corn, respectively. Thus:
Land Value= (AGP x 2.5) x GSP46
On June 10, 1988, RA 6657 was enacted implementing a comprehensive agrarian reform program (CARP). Unlike PD 27 which covered only rice and com lands, CARP sought to cover all public and private agricultural lands. It was (and remains to be) an ambitious endeavor, targeting an estimated 7 .8 million hectares of land for acquisition and redistribution to landless farmer and farmworker beneficiaries.47
B. Regulatory scheme to determine just compensation under RA 665 7
With an undertaking of such magnitude, the Congress set up a regulatory scheme for the determination of just compensation founded on four major features.
First, under Section 17 of RA 6657, Congress identified factors to be considered in the determination of just compensation in the expropriation of agricultural lands. This Section reads:
Sec. 17. 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.
Second, under Section 49, Congress vested the DAR and the Presidential Agrarian Reform Council (PARC)48 with the power to issue rules and regulations, both substantive and procedural, to carry out the objects and purposes of the law:
Sec. 49. Rules and Regulations. -The PARC and the DAR shall have the power to issue rules and regulations, whether substantive or procedural, to carry out the objects and purposes of this Act. Said rules shall take effect ten (10) days after publication in two (2) national newspapers of general circulation.
It is on the basis of this section that the DAR would issue its basic formulas.
Third, under Section 16(d) and (f), Congress gave the DAR primary jurisdiction to conduct summary administrative proceedings to determine and decide the compensation for the land, in case of disagreement between the DAR/LBP and the landowners:
Sec. 16. Procedure for Acquisition of Private Lands. – For purposes of acquisition of private lands, the following procedures shall be followed:
xxx
(d) In case of rejection or failure to reply, the DAR shall conduct summary administrative proceedings to determine the compensation for the land requiring the landowner, the LBP and other interested parties to submit evidence as to the just compensation for the land, within fifteen (15) days from the receipt of the notice. After the expiration of the above period, the matter is deemed submitted for decision. The DAR shall decide the case within thirty (30) days after it is submitted for decision.
xxx
(f) Any party who disagrees with the decision may bring the matter to the court of proper jurisdiction for final determination of just compensation.
Fourth, to implement Section 16(f), Congress provided for the judicial review of the DAR preliminary determination of just compensation. Under Sections 56 and 57, it vested upon designated Special Agrarian Courts the special original and exclusive jurisdiction over all petitions for the determination of just compensation to landowners:
Sec. 56. Special Agrarian Court. – The Supreme Court shall designate at least one (1) branch of the Regional Trial Court (RTC) within each province to act as a Special Agrarian Court. The Supreme Court may designate more branches to constitute such additional . Special Agrarian Courts as may be necessary to cope with the number of agrarian cases in each province. In the designation, the Supreme Court shall give preference to the Regional Trial Courts which have been assigned to handle agrarian cases or whose presiding judges were former judges of the defunct Court of Agrarian Relations. The Regional Trial Court (RTC) judges assigned to said courts shall exercise said special jurisdiction in addition to the regular jurisdiction of their respective courts. The Special Agrarian Courts shall have the powers and prerogatives inherent in or belonging to the Regional Trial Courts.
Sec. 57. Special Jurisdiction. – The Special Agrarian Courts shall have original and exclusive jurisdiction over all petitions for the determination of just compensation to landowners, and the prosecution of all 1 criminal offenses under this Act. The Rules of Court shall apply to all proceedings before the Special Agrarian Courts, unless modified by this Act. The Special Agrarian Courts shall decide all appropriate cases under their special jurisdiction within thirty (30) days from submission of the case for decision.
We shall later on show how this regulatory scheme provided by Congress (and implemented by the DAR) is a reasonable policy choice given the grand scale of the government’s agrarian reform program.
C. Development of the DAR basic formula
On March 8, 1989, the DAR issued Administrative Order No. 649 (DAR AO No. 6 [1989]), its first attempt to translate the factors laid down by Congress in Section 17 into a formula.
Making use of “the multi-variable approach which subsumes the ten factors mentioned under Section 17,” the DAR set out a formula to estimate “a composite value based on land market price, assessor’s market value and landowner’s declared value.”50 Reduced to equation form, the formulation is as follows:
| Total Land Value | = | MV + AMV + DV3 |
| where: | ||
| Market Value (MV) | = | Refers to the latest and comparable transactions within the municipality/province/region, depending on availability of data. Mortgages which take into account bank exposures shall also be considered in computing for this value. |
| Assessor’s Market Value (AMV) | = | Refers to the assessment made by government assessors. |
| Declared Value (DV) | = | Refers to the landowner’s declaration under EO 229 or RA 6657.51 |
Between June 1988 to December 1989, the University of the Philippines Institute of Agrarian Studies (UP-IAS) conducted an agrarian reform study, which analyzed, among others, the land valuation scheme of the government under DAR AO No. 6 (1989).52
The UP-IAS study, which Justice Leonen cites in his dissenting opinion, criticized DAR AO No. 6 (1989) for averaging the values based on the land market price, assessor’s market value and landowner’s declared value. The UP-IAS study said:
If agricultural lands are to be distributed to landless farmers and farmworkers for agricultural purposes, then landowners should be compensated for their lands based on its agricultural potential. The appropriate formula, therefore, is to value land based only on production/productivity. The land valuation on PD 27, which stipulates that the value is equivalent to 2.5 x average production of tl:1ree preceding normal croppings is a classic illustration of simplicity and productivity-based land valuation.53 (Emphasis supplied.)
According to the study, the AMV component had no cut-off date, while the MV factor had no guidelines for determining comparable sales, which makes the DAR formula prone to manipulation.54 It thus suggested control measures to prevent manipulation of the existing formula, including the setting of cut-off dates for AMV and guidelines for comparable sales.55 It went on to suggest that “x x x major components could be assigned weights with more emphasis attached to the production-based value. Should the declared value be unavailable, then the value should be based only on the components that are available, rather than employ the maximum limit, that is, assuming DV to be equivalent to the sum of the other components. x x x”56
It was also around this time that the infamous Garchitorena estate deal was exposed. Under this deal, land acquired privately for only ₱3.1 Million in 1988 was proposed to be purchased by the DAR a year later at “an extremely inflated price” of ₱62.5 Million.57 In his book A Captive Land: The Politics of Agrarian Reform in the Philippines, Dr. James Putzel wrote:
Under the compensation formula finally included in the law and the early [guidelines] of DAR, landowners could secure even more than [market value] compensation for their lands. x x x With the passage of [RA 6657] in June 1988, DAR decided that the value of land would be determined by averaging three estimates of market value: the ‘assessed market value’ (AMV) reported in a landowner’s most recent tax declaration, the ‘market value’ (MV) as an average of three sales of comparable land in the vicinity of a landholding inflated by the consumer price index, and the owner’s own ‘declaration of fair market value’ (DMV) made during the government’s land registration programme, Listasaka I and 11, between 1987 and 1988. While the compensation formula included a safeguard against extreme [overvaluation] in the owner’s own declaration, it still permitted compensation at up to 33 per cent more than the market value x x x.
Such a compensation formula might have guaranteed against excessive compensation, in terms of the [market value] criteria enunciated in the law, if state institutions like DAR or the tax bureau[ ] were immune to landowner influence. However, DAR officials were urged to demonstrate results by closing as many deals as possible with landowners. There were several ways in which the formula was abused. First, DAR officials often chose to establish market value (MV) as an average of three sales of highly-valued land, labelling the sales as ‘comparable.’ The arbitrary character of their choice along with the tendency for land speculation demonstrated the unsoundness of using ‘comparable sales’ as an element in the compensation formula. Secondly, landowners were able to pay just one tax instalment on the basis of an inflated land value and thus raise the level of ‘assessed market value’ (AMV). The nearer that assessed value was to the market value, the higher could be their own declared value and the resulting compensation. There was no obligation for landowners to pay unpaid tax arrears at the inflated level, but beneficiaries who received the land would be required to pay taxes at this level. Thirdly, because DAR officials discussed with landowners the level of comparable sales being chosen, landowners could both influence that choice and plan the most advantageous level for their ‘declared market value’ (DMV). The formula was therefore extremely susceptible to abuse by the landowners and opened the door to corrupt practices by DAR officials.58
Within the same year, DAR Administrative Order No. 1759 (DAR AO No. 17 [1989]) was issued revising the land valuation formula under DAR AO No. 6 (1989). This revision appears to be a reaction to the recent developments, with the new formula reflecting lessons learned from the Garchitorena estate scandal and the UP-IAS study’s comments and suggested improvements.
Under DAR AO No. 17 (1989), the DAR laid down guidelines for the determination of the Comparable Sales (CS) component,60 provided a cut-off date for Market Value per Tax Declaration (MV),61 and placed greater weight to productivity through the Capitalized Net Income (CNI) factor, among others. Thus:
Land Value= (CS x 0.3) + (CNI x 0.4) + (MV x 0.3)
Where:
| CS | = | Comparable Sales |
| CNI | = | Capitalized Net Income |
| MV | = | Market Value per Tax Declaration62 |
In case of unavailability of figures for the three main factors, the DAR, in keeping with the UP-IAS study, also came up with alternate formulas using the available components, always with more weight given to CNI, the production-based value.
On April 25, 1991, the capitalization rate (relevant for the CNI factor) was lowered from 20% to 16%.63 This decrease was presumably made for the benefit of the landowners, considering a lower capitalization rate results to a higher CNI valuation.
The next major change in the basic formula came with the issuance of DAR Administrative Order No. 664 (DAR AO No. 6 [1992]) on October 30, 1992, which, among others, gave even more weight to the CNI factor, and further lowering the capitalization rate to 12%.65
This basic formula66 was retained under DAR AO No. 5 (1998), issued on April 15, 1998. Parenthetically, DAR AO No. 5 (1998) gave landowners the opportunity to take part in the valuation process, including participation in the DAR’s field investigations67 and submission of statements as to the income claimed to , be derived from the property (whether from the crop harvest/lease of the property).68 It is only when the landowner fails to submit the statement, or the claimed value cannot be validated from the actual inspection of the property, that the DAR and the LBP are allowed to “adopt any applicable industry data or, in the absence thereof, conduct an industry study on the specific crop which will be used in determining the production, cost and net income of the subject landholding.”69
Recognizing that not all agricultural properties are always similarly circumstanced, the DAR also introduced alternative CNI formulas which can be applied depending on a property’s peculiar situation. There were CNI formulas for when a land is devoted to intercropping, or the practice of planting seasonal or other permanent crop/s between or under existing permanent or seasonal crops70 and to account for lease contracts.71 There are existing valuation guidelines which also take into account the types of crops found in the property sought to be covered, i.e., Cavendish bananas,72 sugarcane,73 rubber,74 and standing commercial trees,75 among others.
D. First extension of life of CARP
Ten (10) years after RA 6657, the CARP’s Land Acquisition and Distribution component was still far from finished. Thus, in 1998, Congress enacted Republic Act No. 853276 (RA 8532), extending the CARP implementation for another ten (10) years and providing funds augmentation of ₱50 billion.77 This additional allocation of funds expired in June 2008. In Joint Resolution No. 1 approved by both Houses of Congress in January 2009, Congress temporarily extended CARP to until June 2009.78
E. Republic Act No. 9700 and the amendment
of Section 17 of RA 6657
By the end of June 2009, there was still a substantial balance (about 1.6 million hectares for distribution) from the projected target.79 So, on August 7, 2009, Congress passed Republic Act No. 970080 (RA 9700), extending the program to June 30, 2014. It also amended Section 17 to read:
Sec. 17. Determination of Just Compensation. – In determining just compensation, the cost of acquisition of the land, the value of the standing crop, the current value of like properties, its nature, actual use and income, the sworn valuation by the owner, the tax declarations, the assessment made by government assessors, and seventy percent (70%) of the zonal valuation of the Bureau of Internal Revenue (BIR), translated into a basic formula by the DAR shall be considered, subject to the final decision of the proper court. 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. (Italics, emphasis and underscoring supplied.)
To implement the amendments to Section 17, the DAR issued, among others, DAR Administrative Order No. 181 (DAR AO No. 1 [2010]) and Administrative Order No. 782 (DAR AO No. 7 [2011]). Despite retaining the basic formula for valuation, these administrative orders introduced a change in the reckoning date of average gross product (AGP) and selling price (SP), both of which are relevant to the CNI factor, to June 30, 2009.83 The MV factor was also amended and adjusted to the fair market value equivalent to seventy percent (70%) of the Bureau of Internal Revenue (BIR) zonal valuation.84 The basic formula under DAR AO No. 7 (2011) appears to be the prevailing land formula to date.
F. Constitutional challenge to RA 665 7
Shortly after the enactment of RA 6657, its constitutionality was challenged in a series of cases filed with the Court. Among other objections, landowners argued that entrusting to the DAR the manner of fixing just compensation violated judicial prerogatives. This claim was unanimously rejected in our landmark holding in Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform (Association):85
Objection is raised, however, to the manner of fixing the just compensation, which it is claimed is entrusted to the administrative authorities in violation of judicial prerogatives. Specific reference is made to Section 16(d), which provides that in case of the rejection or disregard by the owner of the offer of the government to buy his land –
x x x [T]he DAR shall conduct summary administrative proceedings to determine the compensation for the land by requiring the landowner, the LBP and other interested parties to submit evidence as to the just compensation for the land, within fifteen (15) days from the receipt of the notice. After the expiration of the above period, the matter is deemed submitted for decision. The DAR shall decide the case within thirty (30) days after it is submitted for decision.
To be sure, the determination of just compensation is a function addressed to the courts of justice and may not be usurped by any other branch or official of the government. [EPZA v. Dulay] resolved a challenge to several decrees promulgated by President Marcos providing that the just compensation for property under expropriation should be either the assessment of the property by the government or the sworn valuation thereof by the owner, whichever was lower. In declaring these decrees unconstitutional, the Court held through Mr. Justice Hugo E. Gutierrez, Jr.:
The method of ascertaining just compensation under the aforecited decrees constitutes impermissible encroachment on judicial prerogatives. It tends to render this Court inutile in a matter which under this Constitution is reserved to it for final determination.
Thus, although in an expropriation proceeding the court technically would still have the power to determine the just compensation for the property, following the applicable decrees, its task would be relegated to simply stating the lower value of the property as declared either by the owner or the assessor. As a necessary consequence, it would be useless for the court to appoint commissioners under Rule 67 of the Rules of Court. Moreover, the need to satisfy the due process clause in the taking of private property is seemingly fulfilled since it cannot be said that a judicial proceeding was not had before the actual taking. However, the strict application of the decrees during the proceedings would be nothing short of a mere formality or charade as the court has only to choose between the valuation of the owner and that of the assessor, and its choice is always limited to the lower of the two. The court cannot exercise its discretion or independence in determining what is just or fair. Even a grade school pupil could substitute for the judge insofar as the determination of constitutional just compensation is concerned.
x x x
In the present petition, we are once again confronted with the same question of whether the courts under P.D. No. 1533, which contains the same provision on just compensation as its predecessor decrees, still have the power and authority to determine just compensation, independent of what is stated by the decree and to this effect, to appoint commissioners for such purpose.
This time, we answer in the affirmative.
x x x
It is violative of due process to deny the owner the opportunity to prove that the valuation in the tax documents is unfair or wrong. And it is repulsive to the basic concepts of justice and fairness to allow the haphazard work of a minor bureaucrat or clerk to absolutely prevail over the judgment of a court promulgated only after expert commissioners have actually viewed the property, after evidence and arguments pro and con have been presented, and after all factors and considerations essential to a fair and just determination have been judiciously evaluated.
A reading of the aforecited Section 16(d) will readily show that it does not suffer from the arbitrariness that rendered the challenged decrees constitutionally objectionable. Although the proceedings are described as summary, the landowner and other interested parties are nevertheless allowed an opportunity to submit evidence on the real value of the property. But more importantly, the determination of the just compensation by the DAR is not by any means final and conclusive upon the landowner or any other interested party, for Section 16(f) clearly provides:
Any party who disagrees with the decision may bring the matter to the court of proper jurisdiction for final determination of just compensation.
The determination made by the DAR is only preliminary unless accepted by all parties concerned. Otherwise, the courts of justice will still have the right to review with finality the said determination in the exercise of what is admittedly a judicial function.86 (Emphasis and underscoring supplied. Citations omitted.)
G.Controlling doctrines after Association
Since this landmark ruling in Association, the Court has, over the years, set forth a finely wrought body of jurisprudence governing the determination of just compensation under RA 6657. This body of precedents is built upon three strands of related doctrines.
First, in determining just compensation, courts are obligated to apply both the compensation valuation factors enumerated by the Congress under Section 17 of RA 6657,87 and the basic formula laid down by the DAR.88 This was the holding of the Court on July 20, 2004 when it decided the case of Landbank of the Philippines v. Banal89 (Banal) which involved the application of the DAR-issued formulas. There, we declared:
While the determination of just compensation involves the exercise of judicial discretion, however, such discretion must be discharged within the bounds of the law. Here, the RTC wantonly disregarded R.A. 6657, as amended, and its implementing rules and regulations (DAR Administrative Order No. 6, as amended by DAR Administrative Order No. 11).
x x x In determining the valuation of the subject property, the trial court shall consider the factors provided under Section 17 of R.A. 6657, as amended, mentioned earlier. The formula prescribed by the DAR in Administrative Order No. 6, Series of 1992, as amended by DAR Administrative Order No. 11, Series of 1994, shall be used in the valuation of the land. Furthermore, upon its own initiative, or at the instance of any of the parties, the trial court may, appoint one or more commissioners to examine, investigate and ascertain facts relevant to the dispute.90 (Emphasis and underscoring supplied.)
Banal would thereafter be considered the landmark case on binding character of the DAR formulas. It would be cited in the greatest number of subsequent cases involving the issue of application of the DAR-issued formulas in the determination of just compensation.91
Second,the formula, being an administrative regulation issued by the DAR pursuant to its rule-making and subordinate legislation power under RA 6657, has the force and effect of law. Unless declared invalid in a case where its validity is directly put in issue, courts must consider their use and application.92 In Land Bank of the Philippines v. Celada93 (Celada), we held:
As can be gleaned from above ruling, the SAC based its valuation solely on the observation that there was a “patent disparity” between the price given to respondent and the other landowners. We note that it did not apply the DAR valuation formula since according to the SAC, it is Section 17 of RA No. 6657 that “should be the principal basis of computation as it is the law governing the matter.” The SAC further held that said Section 17 “cannot be superseded by any administrative order of a government agency,” thereby implying that the valuation formula under DAR Administrative Order No. 5, Series of 1998 (DAR AO No. 5,s. of 1998), is invalid and of no effect.
While SAC is required to consider the acquisition cost of the land, the current value of like properties, its nature, actual use and income, the sworn valuation by the owner, the tax declaration and the assessments made by the government assessors to determine just compensation, it is equally true that these factors have been translated into a basic formula by the DAR pursuant to its rule-making power under Section 49 of RA No. 6657. As the government agency principally tasked to implement the agrarian reform program, it is the DAR’s duty to issue rules and regulations to carry out the object of the law. DAR AO No. 5, s. of 1998 precisely “filled in the details” of Section 17, RA No. 6657 by providing a basic formula by which the factors mentioned therein may be taken into account. The SAC was at no liberty to disregard the formula which was devised to implement the said provision.
It is elementary that rules and regulations issued by administrative bodies to interpret the law which they are entrusted to enforce, have the force of law, and are entitled to great respect. Administrative issuances partake of the nature of a statute and have in their favor a presumption of legality. As such, court cannot ignore administrative issuances especially when, as in this case, its validity was not put in issue. Unless an administrative order is declared invalid, court have no option but to apply the same.94 (Emphasis and underscoring supplied.)
Third, courts, in the exercise of their judicial discretion, may relax the application of the formula to fit the peculiar circumstances of a case. They must, however, clearly explain the reason for any deviation; otherwise, they will be considered in grave abuse of discretion.95 This rule, set forth in Land Bank of the Philippines v. Yatco Agricultural Enterprises96 (Yatco), was a qualification of the application of Celada, to wit:
That the RTC-SAC must consider the factors mentioned by the law (and consequently the DAR’s implementing formula) is not a novel concept. In Land Bank of the Philippines v. Sps. Banal, we said that the RTC-SAC must consider the factors enumerated under Section 17 of R.A. No. 6657, as translated into a basic formula by the DAR, in determining just compensation.
We stressed the RTC-SAC’s duty to apply the DAR formula in determining just compensation in Landbank of the Philippines v. Celada and reiterated this same ruling in Land Bank of the Philippines v. Lim, Land Bank of the Philippines v. Luciano, and Land Bank of the Philippines v. Colarina, to name a few.
In the recent case of Land Bank of the Philippines v. Honeycomb Farms Corporation, we again affirmed the need to apply Section 17 of R.A. No. 6657 and DAR AO 5-98 in just compensation cases. There, we considered the CA and the R TC in grave error when they opted to come up with their own basis for valuation and completely disregarded the DAR formula. The need to apply the parameters required by the law cannot be doubted; the DAR’s administrative issuances, on the other hand, partake of the nature of statutes and have in their favor a presumption of legality. Unless administrative orders are declared invalid or unless the cases before them involve situations these administrative issuances do not cover, the courts must apply them.
In other words, in the exercise of the Court’s essentially judicial function of determining just compensation, the RTC-SACs are not granted unlimited discretion and must consider and apply the R.A. No. 6657 – enumerated factors and the DAR formula that reflect these factors. These factors and formula provide the uniform framework or structure for the computation of the just compensation for a property subject to agrarian reform. This uniform system will ensure that they do not arbitrarily fix an amount that is absurd, baseless and even contradictory to the objectives of our agrarian reform laws as just compensation. This system will likewise ensure that the just compensation fixed represents, at the very least, a close approximation of the full and real value of the property taken that is fair and equitable for both the farmer-beneficiaries and the landowner.
When acting within the parameters set by the law itself, the RTC-SACs, however, are not strictly bound to apply the DAR formula to its minute detail, particularly when faced with situations that do not warrant the formula’s strict application; they may, in the exercise of their discretion, relax the formula’s application to fit the factual situations before them. They must, however, clearly explain the reason for any deviation from the factors and formula that the law and the rules have provided.
The situation where a deviation is made in the exercise of judicial discretion should at all times be distinguished from a situation where there is utter and blatant disregard of the factors spelled out by law and by the implementing rules. For in such a case, the RTC-SAC’s action already amounts to grave abuse of discretion for having been taken outside of the contemplation of the law.97 (Emphasis and underscoring supplied.)
Prescinding from Association, the cases of Banal, Celada and Yatco combined provide the three strands of controlling and unifying doctrines governing the determination of just compensation in agrarian reform expropriation.
For clarity, we restate the body of rules as follows: The factors listed under Section 17 of RA 6657 and its resulting formulas provide a uniform framework or structure for the computation of just compensation which ensures that the amounts to be paid to affected landowners are not arbitrary, absurd or even contradictory to the objectives of agrarian reform. Until and unless declared invalid in a proper case, the DAR formulas partake of the nature of statutes, which under the 2009 amendment became law itself, and thus have in their favor the presumption of legality, such that courts shall consider, and not disregard, these formulas in the determination of just compensation for properties covered by the CARP. When faced with situations which do not warrant the formula’s strict application, courts may, in the exercise of their judicial discretion, relax the formula’s application to fit the factual situations before them, subject only to the condition that they clearly explain in their Decision their reasons (as borne by the evidence on record) for the deviation undertaken. It is thus entirely allowable for a court to allow a landowner’s claim for an amount higher than what would otherwise have been offered (based on an application of the formula) for as long as there is evidence on record sufficient to support the award.
In Part II, we shall evaluate the challenged rulings of the Court of Appeals based on the foregoing guidelines.
II. The SAC deviated, without reason or explanation, from Sect. 17 and
the DAR-issued formula when it adopted the Cuervo Report
Petitioner Alfonso challenges the Decision of the Court of Appeals which reversed the SAC’s findings for failing to observe the procedure and guidelines provided under the relevant DAR rule.98
Applying DAR AO No. 5 (1998), the LBP and the DAR considered the following in its valuation of Alfonso’s properties: (1) data from the Field Investigation Reports conducted on the properties;99 (2) data from the Philippine Coconut Authority (PCA) as to municipal selling price for coconut in the Sorsogon Province;100 and (3) the Schedule of Unit Market Value (SUMV).101
Due to the absence of relevant comparable sales transactions in the area,102 the DAR and the LBP used the following formula:
LV = (CNI x 0.9) + (MV x 0.1)
It valued the San Juan and Bibincahan properties at ₱39,974.22103 and ₱792,869.06,104 respectively.
The SAC, in its Decision dated May 13, 2005, rejected this valuation for being “unrealistically low”105 and instead adopted Commissioner Chua’s Cuervo Report, which valued the San Juan and Bibincahan properties at the “more realistic” amounts of ₱442,830.00 and ₱5,650,680.00, respectively.106
That the SAC’s adoption of the Cuervo Report valuation constitutes deviation from Section 17 and the prescribed formula is fairly evident.
Commissioner Chua employed a different formula, other than that set forth in DAR AO No. 5 (1998), to compute the valuation. While the DAR-issued formula generally uses the three (3) traditional approaches to value, each with assigned weights, Commissioner Chua chose to apply only two approaches, namely, the Market Data Approach (MDA) and the Capitalized Income Approach (CIA)107 and averaged the indications resulting from the two approaches. He thereafter concluded that the result “reasonably represented the just compensation (fair market value) of the land with productive coconut trees.”108
In addition, in his computation of the CNI factor, Commissioner Chua used, without any explanation, a capitalization rate of eight percent (8% ),109 instead of the twelve percent (12%) rate provided under DAR AO No. 5 (1998).
As earlier explained, deviation from the strict application of the DAR formula is not absolutely proscribed. For this reason, we find that the Court of Appeals erred in setting aside the SAC’s Decision on the mere fact of deviation from the prescribed legislative standards and basic formula. Yatco teaches us that courts may, in the exercise of its judicial discretion, relax the application of the DAR formula, subject only to the condition that the reasons for said deviation be clearly explained.
In this case, the SAC, in adopting the Cuervo Report valuation, merely said:
Considering all these factors, the valuation made by the Commissioner and the potentials of the property, the Court considers that the valuation of the Commissioner as the more realistic appraisal which could be the basis for the full and fair equivalent of the property taken from the owner while the Court finds that the valuation of the [LBP] as well as the Provincial Adjudicator of Sorsogon in this (sic) particular parcels of land for acquisition are unrealistically low.110 (Emphasis and underscoring supplied.)
The statement that the government’s valuation is “unrealistically low,” without more, is insufficient to justify its deviation from Section 17 and the implementing DAR formula.111 There is nothing in the SAC’s Decision to show why it found Commissioner Chua’s method more appropriate for purposes of appraising the subject properties, apart from the fact that his method yields a much higher (thus, in its view, “more realistic”) result.
The Cuervo Report itself does not serve to enlighten this Court as to the reasons behind the non-application of the legislative factors and the DAR-prescribed formula.
For example, the Cuervo Report cited a number of “comparable sales” for purposes of its market data analysis.112 Aside from lack of proof of fact of said sales, the Report likewise failed to explain how these purported “comparable” sales met the guidelines provided under DAR AO No. 5 (1998). The relevant portion of DAR AO No. 5 (1998) reads:
II. C.2 The criteria in the selection of the comparable sales transaction (ST) shall be as follows:
a. When the required number of STs is not available at the barangay level, additional STs may be secured from the municipality where the land being offered/covered is situated to complete the required three comparable STs. In case there are more STs available than what is required at the municipal level, the most recent transactions shall be considered. The same rule shall apply at the provincial level when no STs are available at the municipal level. In all cases, the combination of STs sourced from the barangay, municipality and province shall not exceed three transactions.
b. The land subject of acquisition as well as those subject of comparable sales transactions should be similar in topography, land use, i.e., planted to the same crop. Furthermore, in case of permanent crops, the subject properties should be more or less comparable in terms of their stages of productivity and plant density.
c. The comparable sales transactions should have been executed within the period January 1, 1985 to June 15, 1988, and registered within the period January l, 1985, to September 13, 1988.
d. STs shall be grossed up from the date of registration up to the date of receipt of CF by LBP from DAR for processing, in accordance with Item II.A.9. (Emphasis and underscoring supplied.)
To this Court’s mind, a reasoned explanation from the SAC to justify its deviation from the foregoing guidelines is especially important considering that both the DAR and the LBP were unable to find sales of comparable nature.
Worse, further examination of the cited sales would show that the same far from complies with the guidelines as to the cut-off dates provided under the DAR AO No. 5 (1998). The purported sales were dated between November 28, 1989 (at the earliest) to March 12, 2002 (at the latest),113 whereas DAR AO No. 5 (1998) had already and previously set the cut-off between June to September of 1988. We also note that these purported sales involve much smaller parcels of land (the smallest involving only 100 square meters). We can hardly see how these sales can be considered “comparable” for purposes of determining just compensation for the subject land.
Neither was there any explanation as to the glaring discrepancies between the government and Commissioner Chua’s factual findings. Where, for example, the DAR and the LBP claim an average yield of 666.67kg/ha.114 and 952kgs./ha.,115 the Cuervo Report asserts 1,656 kgs./ha. and 1,566 kgs./ha.,116 for the San Juan and Bibincahan properties, respectively. Where the government alleges an average selling price of ₱5.58 for coconuts,117 the Cuervo Report claims ₱l2.50.118 The Cuervo Report, however, is completely bereft of evidentiary support by which the SAC could have confirmed or validated the statements made therein. In contrast, the valuations submitted by the DAR and the LBP were amply supported by the relevant PCA data, SFMV and Field Investigation Reports.
Considering the foregoing, we cannot but conclude that the SAC committed the very thing cautioned about in Yatco, that is, “utter and blatant disregard of the factors spelled out by the law and by the implementing rules.”119 In this sense, we AFFIRM the Court of Appeals’ finding of grave abuse of discretion and order the REMAND of the case to the SAC for computation of just compensation in accordance with this Court’s ruling in Yatco.
Part III shall now address the concerns raised in the dissents.
III. The Dissents/Separate Concurring Opinion
A. Summary of issues raised Dissents/Separate Concurring Opinion
Justice Leonen proposes that this Court abandon the doctrines in Banal and Celada, arguing that Section 17 of RA 6657 and DAR AO No. 5 (1998) are unconstitutional to the extent they suggest that the basic formula is mandatory on courts.120 His principal argument is grounded on the premise that determination of just compensation is a judicial function. Along the same lines, Justice Carpio cites Apo Fruits Corporation v. Court of Appeals (Apo Fruits)121 to support his view that the basic formula “does not and cannot strictly bind the courts.”122 Justice Velasco, for his part, calls for a revisit of the decided cases because a rule mandating strict application of the DAR formula could only straitjacket the judicial function. Justice Carpio also raises an issue of statutory construction.123 He argues that Section 17 and DAR AO No. 5 (1998) apply only when the landowner and the tenant agree on the proffered value, but not otherwise.
B. Dissents as indirect constitutional attacks
At this juncture, we emphasize that petitioner Alfonso never himself questioned the constitutionality of Section 17 of RA No. 6657 and the DAR Administrative Order implementing the same. The main thrust of Alfonso’s petition concerns itself only with the non-binding nature of Section 17 of RA 6657 and the resulting DAR formula in relation to the judicial determination of the just compensation for his properties.
Petitioner is a direct-injury party who could have initiated a direct attack on Section 17 and DAR AO No. 5 (1998). His failure to do so prevents this case from meeting the “case and controversy” requirement of Angara.124 It also deprives the Court of the benefit of the “concrete adverseness which sharpens the presentation of issues upon which the court depends for illumination of difficult constitutional questions.”125
The dissents are, at their core, indirect attacks on the constitutionality of a provision of law and of an administrative rule or regulation. This is not allowed under our regime of judicial review. As we held in Angara v. Electoral Commission,126 our power of judicial review is limited:
x x x [T]o actual cases and controversies to be exercised after full opportunity of argument by the parties, and limited further to the constitutional question raised or the very lis mota presented. Any attempt at abstraction could only lead to dialectics and barren legal questions and to sterile conclusions unrelated to actualities. Narrowed as its function is in this manner, the judiciary does not pass upon questions of wisdom, justice or expediency of legislation. More than that, courts accord the presumption of constitutionality to legislative enactments, not only because the legislature is presumed to abide by the Constitution but also because the judiciary in the determination of actual cases and controversies must reflect the wisdom and justice of the people as expressed through their representatives in the executive and legislative departments of the government.127 (Emphasis supplied.)
Our views as individual justices cannot make up for the deficiency created by the petitioner’s failure to question the validity and constitutionality of Section 17 and the DAR formulas. To insist otherwise will be to deprive the government (through respondents DAR and LBP) of their due process right to a judicial review made only “after full opportunity of argument by the parties.”128
Most important, since petitioner did not initiate a direct attack on constitutionality, there is no factual foundation of record to prove the invalidity or unreasonableness of Sectionl 7 and DAR AO No. 5 (1998). This complete paucity of evidence cannot be cured by the arguments raised by, and debated among, members of the Court. As we held in Ermita-Malate Hotel and Motel Operators Association, Inc. v. City Mayor of Manila:129
It admits of no doubt therefore that there being a presumption of validity, the necessity for evidence to rebut it is unavoidable, unless the statute or ordinance is void on its face, which is not the case here. The principle has been nowhere better expressed than in the leading case of O’Gorman& Young v. Hartford Fire Insurance Co., where the American Supreme Court through Justice Brandeis tersely and succinctly summed up the matter thus: “[t]he statute here questioned deals with a subject clearly within the scope of the police power. We are asked to declare it void on the ground that the specific method of regulation prescribed is unreasonable and hence deprives the plaintiff of due process of law. As underlying questions of fact may condition the constitutionality of legislation of this character, the presumption of constitutionality must prevail in the absence of some factual foundation of record for overthrowing the statute.” No such factual foundation being laid in the present case, the lower court deciding the matter on the pleadings and the stipulation of facts, the presumption of validity must prevail and the judgment against the ordinance set aside.130 (Emphasis and underscoring supplied.)
Issues on the constitutionality or validity of Section 17 of RA 6657 and DAR AO No. 5 (1998) not having been raised by the petitioner, much less properly pleaded and ventilated, it behooves the Court to apply, not abandon, Banal, Celada and Yatco, and postpone consideration of the dissents’ arguments in a case directly attacking Section 17 of RA 6657 and DAR AO No. 5 (1998).
If, however, left unanswered, the objections now casting Section 17 and the DAR formulas in negative light might be used as bases for the abandonment of the rule established in Banal and clarified in Yatco. The net practical effect, whether intended or not, of such a course of action would be to strip the implementing DAR regulations of all presumption of validity. We would then place upon the government the burden of proving the formula’s appropriateness in every case, as against the valuation method chosen by the landowner, whatever it may be. It would allow the landowner to cherry-pick, so to speak, a factor or set of factors to support a proposed valuation method. As the case below has shown, such a process has allowed the SAC to conclude, without explanation, that Commissioner Chua’s higher valuation was “more realistic” than the government’s “ridiculously low” valuation and, therefore, in its opinion, more just.
Allowing the SAC to arrive at a determination of just compensation based on open-ended standards like “more realistic” and “ridiculously low” bodes ill for the future of land reform implementation. One can only imagine the havoc such a ruling, made in the name of ensuring absolute freedom of judicial discretion, would have on the government’s agrarian reform program and the social justice ends it seeks to further. It could open the floodgates to the mischief of the Garchitorena estate scandal where, to borrow terms used by the SAC in this case, a property acquired at a “ridiculously low” cost of ₱3.1 million was proposed to be purchased by the DAR for the “more realistic” amount of ₱6.09 million.
We thus feel compelled to address these issues, if only to assure those directly affected, that the law and the implementing DAR regulations are reasonable policy choices made by the Legislative and Executive departments on how best to implement the law, hence, the heavy premium given their application.
C. Primary jurisdiction and the judicial power/function to determine just compensation
Section 1, Article VIII of the 1987 Constitution131 provides that “judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable.”
The right of a landowner to just compensation for the taking of his or her private property is a legally demandable and enforceable right guaranteed by no less than the Bill of Rights, under Section 9, Article III of the Constitution.132 The determination of just compensation in cases of eminent domain is thus an actual controversy that calls for the exercise of judicial power by the courts. This is what the Court means when it said that “[t]he determination of ‘just compensation’ in eminent domain cases is a judicial function.”133
Before RA 6657, the courts exercised the power to determine just compensation under the Rules of Court. This was true under RAs 1400 and 3844 and during the time when President Marcos in Presidential Decree No. 1533 attempted to impermissibly restrict the discretion of the courts, as would be declared void in EPZA v. Dulay (E-PZA). RA 6657 changed this process by providing for preliminary determination by the DAR of just compensation.
Does this grant to the DAR of primary jurisdiction to determine just compensation limit, or worse, deprive, courts of their judicial power? We hold that it does not. There is no constitutional provision, policy, principle, value or jurisprudence that places the determination of a justiciable controversy beyond the reach of Congress’ constitutional power to require, through a grant of primary jurisdiction, that a particular controversy be first referred to an expert administrative agency for adjudication, subject to subsequent judicial review.
In fact, the authority of Congress to create administrative agencies and grant them preliminary jurisdiction flows not only from the exercise of its plenary legislative power,134 but also from its constitutional power to apportion and diminish the jurisdiction of courts inferior to the Supreme Court.135
Tropical Homes, Inc. v. National Housing Authority,136 has settled that “[t]here is no question that a statute may vest exclusive original jurisdiction in an administrative agency over certain disputes and controversies falling within the agency’s special expertise.”137
In San Miguel Properties, Inc. v. Perez,138 we explained the reasons why Congress, in its judgment, may choose to grant primary jurisdiction over matters within the erstwhile jurisdiction of the courts, to an agency:
The doctrine of primary jurisdiction bas been increasingly called into play on matters demanding the special competence of administrative agencies even if such matters are at the same time within the jurisdiction of the courts. A case that requires for its determination the expertise, specialized skills, and knowledge of some administrative board or commission because it involves technical matters or intricate questions of fact, relief must first be obtained in an appropriate administrative proceeding before a remedy will be supplied by the courts although the matter comes within the jurisdiction of the courts. The application of the doctrine does not call for the dismissal of the case in the court but only for its suspension until after the matters within the competence of the administrative body are threshed out and determined.
To accord with the doctrine of primary jurisdiction, the courts cannot and will not determine a controversy involving a question within the competence of an administrative tribunal, the controversy having been so placed within the special competence of the administrative tribunal under a regulatory scheme. In that instance, the judicial process is suspended pending referral to the administrative body for its view on the matter in dispute. Consequently, if the courts cannot resolve a question that is within the legal competence of an administrative body prior to the resolution of that question by the latter, especially where the question demands the exercise of sound administrative discretion requiring the special knowledge, experience, and services of the administrative agency to ascertain technical and intricate matters of fact, and a uniformity of ruling is essential to comply with the purposes of the regulatory statute administered, suspension or dismissal of the action is proper. 139 (Emphasis and underscoring supplied.)
Rule 43 of the Revised Rules of Court, which provides for a uniform procedure for appeals from a long list of quasi-judicial agencies to the Court of Appeals, is a loud testament to the power of Congress to vest myriad agencies with the preliminary jurisdiction to resolve controversies within their particular areas of expertise and experience.
In fact, our landmark ruling in Association has already validated the grant by Congress to the DAR of the primary jurisdiction to determine just compensation. There, it was held that RA 6657 does not suffer from the vice of the decree voided in EPZA,140 where the valuation scheme was voided by the Court for being an “impermissible encroachment on judicial prerogatives.”141 In EPZA, we held:
The method of ascertaining just compensation under the aforecited decrees constitutes impermissible encroachment on judicial prerogatives. It tends to render this Court inutile in a matter which under the Constitution is reserved to it for final determination.
x x x [T]he strict application of the decrees during the proceedings would be nothing short of a mere formality or charade as the court has only to choose between the valuation of the owner and that of the assessor, and its choice is always limited to the lower of the two. The court cannot exercise its discretion or independence in determining what is just or fair. Even a grade school pupil could substitute for the judge insofar as the determination of constitutional just compensation is concerned.142
Unlike EPZA, and in answer to the question raised in one of the dissents,143 the scheme provided by Congress under RA 6657 does not take discretion away from the courts in determining just compensation in agrarian cases. Far from it. In fact, the DAR valuation formula is set up in such a way that its application is dependent on the existence of a certain set of facts, the ascertainment of which falls within the discretion of the court.
Applied to the facts of this case, and confronted with the LBP/DAR valuation and the court-appointed commissioner’s valuation, it was entirely within the SAC’s discretion to ascertain the factual bases for the differing amounts and decide, for itself, which valuation would provide just compensation. If, in its study of the case, the SAC, for example, found that the circumstances warranted the application of a method of valuation different from that of the DAR’s, it was free to adopt any other method it deemed appropriate (including the Cuervo method), subject only to the Yatco requirement that it provide a reasoned explanation therefor.
As pointed out earlier in this Opinion, however, the SAC in this case simply adopted the Cuervo valuation as the “more realistic” amount and rejected the DAR/LBP valuation for being “unrealistically low.” In fact, there is nothing in its Decision to indicate that the SAC actually looked into the evidentiary bases for the opposing valuations to satisfy itself of the factual bases of each. This, in tum, explains the utter dearth of explanation for the stark inconsistencies between Commissioner Chua and the DAR/LBP’s factual findings. Thus, and with all due respect, it is quite incorrect to say that the present rule requiring strict application of the DAR formula completely strips courts of any discretion in determining what compensation is just for properties covered by the CARP.
More importantly, in amending Section 1 7 of RA 665 7, Congress provided that the factors and the resulting basic formula shall be “subject to the final decision of the proper court.” Congress thus clearly conceded that courts have the power to look into the “justness” of the use of a formula to determine just compensation, and the “justness” of the factors and their weights chosen to flow into it.
In fact, the regulatory scheme provided by Congress in fact sets the stage for a heightened judicial review of the DAR’s preliminary determination of just compensation pursuant to Section 17 of RA 6657. In case of a proper challenge, SACs are actually empowered to conduct a de nova review of the DAR’s decision. Under RA 6657, a full trial is held where SA Cs are authorized to (1) appoint one or more commissioners,144 (2) receive, hear, and retake the testimony and evidence of the parties, and (3) make findings of fact anew.145 In other words, in exercising its exclusive and original jurisdiction to determine just compensation under RA 6657, the SAC is possessed with exactly the same powers and prerogatives of a Regional Trial Court (RTC) under Rule 67 of the Revised Rules of Court.
In such manner, the SAC thus conducts a more exacting type of review, compared to the procedure provided either under Rule 43 of the Revised Rules of Court, which governs appeals from decisions of administrative agencies to the Court of Appeals, or under Book VII, Chapter 4, Section 25146 of the Administrative Code of 1987,147 which provides for a default administrative review process. In both cases, the reviewing court decides based on the record, and the agency’s findings of fact are held to be binding when supported by substantial evidence.148 The SAC, in contrast, retries the whole case, receives new evidence, and holds a full evidentiary hearing.
Having established that the regulatory scheme under RA 6657 does not, in principle, detract from (but rather effectuates) the exercise of the judicial function, we shall now show how the DAR valuation process is at par with internationally-accepted valuation practices and standards.
H. DAR Valuation process is at par with international standards
Valuation is not an exact science.149 In clear recognition of the inherent difficulty such a task entails, the DAR declared:
Just compensation in regard to land cannot be an absolute amount disregarding particularities of productivity, distance to the marketplace and so on.1âwphi1 Hence, land valuation is not an exact science but an exercise fraught with inexact estimates requiring integrity, conscientiousness and prudence on the part of those responsible for it. What is important ultimately is that the land value approximates, as closely as possible, what is broadly considered to be just.150
Nevertheless, there are existing standards which are observed to ensure the competence and integrity of valuation practice. At present, we have the Philippine Valuation Standards (PVS), or the reference standards for local government assessors and other agencies undertaking property valuations.151 The PVS are, in turn, based on the International Valuation Standards (IVS), also known as the Generally Accepted Valuation Principles (GAVP). The IVS represents the internationally accepted best practices in the valuation profession and were formulated by the International Valuations Standards Committee (IVSC).152
Of note is the IVSC’s stature in the valuation profession. Composed of professional valuation associations from around the world, the IVSC is a non-governmental organization (NGO) member of the United Nations which provides advice and counsel relating to valuation and seeks to coordinate its Standards and work programs with related professional discipline in the public interest, and cooperates with international agencies in determining and promulgating new standards. It was granted Roster status with the United Nations Economic and Social Council in May 1985.153
There also exists a process which allows for a systematic procedure154 to be followed in answering questions about real property value:
| Part One: Definition of the Problem | ||||||
| Identification of client/intended users | Intended use of appraisal | Purpose of appraisal (including definition of value) | Date of opinion of value | Identification of characteristics of property (including location and property rights to be valued) | Extra-ordinary assumptions | Hypo-thetical conditions |
| Part Two: Scope of Work | ||||||
| Part Three: Data Collection and Property Description | ||||||
| Market Area Data | Subject Property Data | Comparable Property Data | ||||
| General characteristics of region, city and neighborhood | Specific characteristics of land and improvements, personal property, business assets, etc. | Sales, listings, offerings, vacancies, cost and depreciation, income and expenses, capitalization rates, etc. | ||||
| Part IV. Data Analysis | ||||||
| Market Analysis | Highest and Best Use Analysis | |||||
| Demand studies Supply studies Marketability studies | Site as though vacant Ideal improvement Property as improved | |||||
| Part V. Land Value Opinion | ||||||
| Part VI. Application of the Approaches to Value | ||||||
| Cost | Sales Comparison | Income | ||||
| Part VII. Reconciliation of Value Indications and Final Opinion of Value | ||||||
| Part VIII. Report of Defined Value |
Based on the foregoing, the process involves, among others, utilizing one or more valuation approaches, with each individual approach producing a particular value indication,155 and thereafter, reconciling the different value indications to arrive at “a supported opinion of defined value.”156
The valuation process is applied to develop a well-supported opinion of a defined value based on an analysis of pertinent general and specific data. Appraisers develop an opinion of property value with specific appraisal procedures that reflect the different approaches to data analysis.157
The PVS and the IVS, discussed earlier, list three market-based valuation approaches: the sales comparison approach, the income capitalization approach and the cost approach.158
The sales comparison approach considers the sales of similar or substitute properties and related market data, and establishes a value estimate by processes involving comparison. In general, a property being valued is compared with sales of similar properties that have been transacted in the market.159
In the income capitalization approach, income and expense data relating to the property being valued are considered and value is estimated through a capitalization process.1âwphi1 Capitalization relates income (usually a net income figure) and a defined value type by converting an income amount into a value estimate. This process may consider direct relationships (known as capitalization rates), yield or discount rates (reflecting measures of return on investment), or both.160
The cost approach considers the possibility that, as an alternative to the purchase of a given property, one could acquire a modem equivalent asset that would provide equal utility. In a real estate context, this would involve the cost of acquiring equivalent land and constructing an equivalent new structure. Unless undue time, inconvenience and risk are involved, the price that a buyer would pay for the asset being valued would not be more than the cost of the modem equivalent. Often the asset being valued will be less attractive than the cost of the modem equivalent because of age or obsolescence.161
These approaches are used in all estimations of value.162 Depending on the circumstances attendant to each particular case, one or more of these approaches may be used.
The final analytical step in the valuation process is the reconciliation of the value indications derived into a single peso figure or a range into which the value will most likely fall:
In the valuation process, more than one approach to value is usually applied, and each approach typically results in a different indication of value. If two or more approaches are used, the appraiser must reconcile at least two value indications. Moreover, several value indications may be derived in a single approach. x xx
x x x Resolving the differences among various value indications is called reconciliation. x x x163 (Emphasis supplied.)
Reconciliation requires appraisal judgment and a careful, logical analysis of the procedures that lead to each value indication. Appropriateness, accuracy and quantity of evidence are the criteria with which an appraiser forms a meaningful, defensible and credible final opinion of value.164
The valuation process concludes with a final report/opinion of value. This reported value is the appraiser’s opinion165 and reflects the experience and judgment that has been applied to the study of the assembled data.166
For a well-supported opinion of a defined value, however, there must be an analysis of pertinent general and specific data167 using an accepted and systematic valuation process. Following the generally accepted valuation process, there is an application of the appropriate approaches to value and, where multiple approaches have been employed, the reconciliation of the different value indications to arrive at a final opinion of value. Reconciliation, in large part, relies on the proper application of appraisal techniques and the appraiser ‘s judgment and experience.168
The Philippines has kept abreast with the internationally-recognized and accepted standards for valuation practice.
As previously discussed, we already have the PVS used by local government assessors and other agencies in conducting property valuations.169 There is also Republic Act No. 9646 (RA 9646), otherwise known as the Real Estate Service Act of the Philippines, which mandates the conduct of licensure examinations to ensure the technical competence, responsibility and professionalism of real estate practitioners in general (including appraisers, in particular).170
Actual valuation reforms to overcome the “multiplicity of fragmented policies and regulations which have previously characterized both the public and private sectors”171 have also been undertaken. In April 2010, the Department of Finance (DOF) issued a Mass Appraisal Guidebook for the “operationalization and practical application of the Philippine Valuation Standards.”172 The PVS also appear in the Manual on Real Property Appraisal and Assessment Operations published by the DOF as guidelines to aid local assessors in discharging their functions.173
A Valuation Reform Act174 is currently being proposed to harmonize valuation in both public and private sectors by providing uniform valuation standards which “shall conform with generally accepted international valuation standards and principles.”175
The existence of these standards and measures highlights the emerging importance of valuation, not only in the context of land reform implementation, but as a profession, with high standards of competence, a distinct body of knowledge continually augmented by contributions of practitioners, and a code of ethics and standards of practice with members willing to be subject to peer review.176
An examination of the terms of the DAR issuances would show that the implementing agency has indeed taken pains to ensure that its valuation system is at par with local and international valuation standards. The pertinent portion of DAR AO No. 7 (2011) reads:
Section 85. Formula for Valuation.1âwphi1 The basic formula for the valuation of lands covered by VOS or CA shall be:
LV = (CNI x 0.60) +(CS x 0.30) + (MV x 0.10)
Where:
| LV | = | Land Value |
| CNI | = | Capitalized Net Income (based on land use and productivity) |
| CS | = | Comparable Sales (based on fair market value equivalent to 70% of BIR Zonal Value) |
| MV | = | Market Value per Tax declaration (based on Government assessment) |
The CS factor refers to the Market Data Approach under the standard appraisal approaches which is based primarily on the principle of substitution where a prudent individual will pay no more for a property than it would cost to purchase a comparable substitute property. This factor is determined by the use of 70% of the BIR zonal valuation.
The CNI factor, on the other hand, refers to the Income Capitalization Approach under the standard appraisal approaches which is considered the most applicable valuation technique for income-producing properties such as agricultural landholdings. Under this approach, the value of the land is determined by taking the sum of the net present value of the streams of income, in perpetuity, that will be forgone by the LO due to the coverage of his landholding under CARP.
The MV factor is equivalent to the Market Data Approach, except that this is intended for taxation purposes only. (Emphasis and underscoring supplied.)
The administrative order’s express reference to “standard appraisal approaches,” namely the Market Data Approach and the Income Capitalization Approach, as discussed earlier, is in line with the PVS and the IVS/GAVP.
1. The whole regulatory scheme provided under RA 6657 (and operationalized through the DAR formulas) are reasonable policy choices to best implement the purposes of the law
The whole regulatory scheme provided under RA 6657 (and implemented through the DAR formulas) are reasonable policy choices made by the Congress and the DAR on how best to implement the purposes of the CARL. These policy choices, in the absence of contrary evidence, deserve a high degree of deference from the Court.
On the Section 17 enumeration. Congress, in adopting Section 17, opted for the enumeration of multiple factors provided under RAs 1400 and 3844, to replace the exclusively production based formula provided in PD 27. The Court cannot now fault Congress for not enumerating all possible valuation factors, a task even this Court cannot conceivably achieve, and use the Congress’ limitation as a reason to void the enumeration.
On the use of a formula. In the absence of evidence of record to the contrary, it is reasonable to assume that DAR decided that a formula is a practical method to arrive at a determination of just compensation due the landowner. This became necessary considering the multiple factors laid down by the Congress in Section 17. For one, the formulas provide a concrete, uniform and consistent equation, applicable to all agricultural land nationwide, regardless of their location. It thus assures prompt, consistent and even-handed implementation by limiting the exercise of discretion by DAR officials. We have also earlier noted how formulas worked in the agrarian reform programs of other Asian countries. Finally, we have also noted how the absence of a formula resulted in the Garchitorena estate scandal. The Garchitorena estate scandal underscores the wisdom of deferring to the DAR’s choice to use a formula in its judgment, “uniformity of ruling is essential to comply with the purposes of [RA 6657].”177
On the choice of the formula’s components and their weights. DAR reformulated its formulas every so often as it gained experience in its implementation. We can see from AO No. 5 (1998) that the DAR finally settled on two approaches to value: the income capitalization approach and the sales comparison approach, represented under the CNI and CS factors, respectively. While the cost approach was excluded, market value of the land as per tax declaration of the owner (MV) is nevertheless considered. DAR also decided on the relative weights to allocate to each component.
The inclusion of the CNI as a component factor was id apparent reaction to the suggestion of the UP-IAS study, which roundly[ criticized DAR AO No. 6 (1989) for not having considered the production income of the land. While the same study recommended that the appropriate formula should “value land based only on production/productivity,”178 the DAR, however, chose to also consider comparable sales and market value as per tax declaration. This is in keeping with the mandate of Section 17 which provided that “current value of like properties” and “the sworn valuation by the owner, the tax declarations,” and the “assessment made by government assessors” shall also be considered.
We note that while “cost of acquisition of the land” was also included as a factor to be considered in determining just compensation, it was not included as a component in the basic formula. Again, in the absence of contrary evidence of record, it is reasonable to assume that the DAR acted, on the knowledge that most agricultural lands are inherited. This makes their acquisition cost nil. To include the same as a component of the formula would only serve to reduce the resulting value, much to the prejudice of the landowner.179
On the formula as DAR ‘s expert opinion. The general function of an appraisal or valuation exercise is to develop an opinion of a certain type of value.180 This process, though subjective, is amenable to a rigorous process that should result in a considered opinion of value. As earlier discussed, there is an application of the generally accepted approaches to value and, where multiple approaches have been employed, the reconciliation of the different value indications to arrive at a final opinion of value.181 In this case, the DAR, applying the law and using the accepted valuation process and approaches to value, acted no different from a valuation appraiser and gave an opinion as to what components make up the right formula.
Similar to the valuation profession which recognizes that the integrity and credibility of a valuation opinion rests in large part on the appraiser’s judgment and experience,182 the DAR’s choices on the formula’s component parts and their corresponding weights was based on its expertise, judgment and actual experience in the field of agrarian reform. We have taken pains to show how the DAR formula, and valuation process, is consistent and at par with recognized, international relation processes. There is no contrary evidence of record.
We shall now discuss the detailed arguments of the dissents as they relate to the DAR formulas.
J. Responses to specific arguments in the Dissents and Separate Concurring Opinion
Justice Leonen asserts that the Congress and the DAR failed to capture all the factors183 (if not the “important,”184 “highly influential,”185 and “critical”186 ones) to fully determine market value. Since the listing of factors in Section 17 is incomplete, any formula derived therefrom would also (and necessarily) be incomplete for purposes of arriving at just compensation.
We note that Justice Leonen cites the UP-IAS study in his dissent. This study analyzed the DAR formula under DAR AO No. 06 (1989). Our case now involves the DAR formula under DAR AO No. 5 (1998). Not only is the latter formula completely different from that under DAR AO No. 6 (1989), it has, as earlier discussed, already “improved” on the formula by incorporating the suggestions and recommendations of the UP-IAS study cited.
Furthermore, Justice Leonen did not point to a complete or exhaustive listing of factors upon which he based his assertion of the law’s incompleteness. Neither did he show how courts are to actually approach valuation (in the absence of Section 17 and the implementing DAR formula) as to avoid “underrating the effect of each property’s peculiarities.”187
Even granting, for the sake of argument, that there is an infinite number of factors that can be considered in the valuation of property, we see no conceptual inconsistency between applying a formula to determine just compensation and giving all attendant factors due consideration.
This is evident when one considers the indispensability of the approaches to value in any estimation of value.188 Following the generally-accepted valuation process, after all relevant market area data, subject property data and comparable property data have been gathered and analyzed,189 the approaches to value will be applied190 and the resulting value indications reconciled191 to arrive at a final opinion of value. Thus, while there can arguably be an infinite number of factors that can be considered for purposes of determining a property’s value, they would all ultimately be distilled into any one of the three valuation approaches. In fact, and as part of their discipline, appraisers are expected to “apply all the approaches that are applicable and for which there is data.”192
Justice Leonen also seems to favor the use of the discounted cash flow (DCF)/discounted future income method (a variant of the yield capitalization technique) where the present DAR basic formula makes use of the direct capitalization technique.193 He thereafter equates this to a lack of consideration for future income and ventures that, in turn, might be the reason why landowners always feel that the DAR/LBP assessment is severely undervalued.194
We disagree. Direct capitalization and yield capitalization are both methods used in the income capitalization approach to value.
Direct capitalization is distinct from yield capitalization x x x in that the former does not directly consider the individual cash flows beyond the first year. Although yield capitalization explicitly calculates year-by-year effects of potentially changing income patterns, changes in the original investment’s value, and other considerations, direct capitalization processes a single year’s income into an indication of value. x x x195
In fact, and applied to the same set of facts, use of either method can be expected to produce similar results:
x x x Either direct capitalization or yield capitalization may correctly produce a supportable indication of value when based on relevant market information derived from comparable properties, which should have similar income-expense ratios, land value-to-building value ratios, risk characteristics, and future expectations of income and value changes over a typical holding period. A choice of capitalization method does not produce a different indication of value under this circumstance.196 (Emphasis supplied.)
Selection of the appropriate income capitalization method to use depends on the attendant circumstances. While direct capitalization is used when properties are already operating on a stabilized basis, it is not useful where the property sought to be valued is going through an initial lease-up or when income and/or expenses are expected to change in an irregular pattern over time. In the latter case, yield capitalization techniques are considered to be more appropriate.197
In fact, the DAR uses yield capitalization methods where, based on its experience, such method is appropriate. In Joint Memorandum Circular No. 07, Series of 1999, for example, the DAR and the LBP revised their initial valuation guidelines for rubber plantations, to wit:
I. PREFATORY STATEMENT
The rubber plantation income models presented under the old rubber Land Valuation Guideline (LVG No. 6, Series of 1990) recognized the income of rubber plantations based on processed crumb rubber. However, recent consultations with rubber authorities (industry, research, etc.) disclosed that the standard income approach to valuation should measure the net income or productivity of the land based on the farm produce (in their raw forms) and not on the entire agri-business income enhanced by the added value of farm products due to processing. Hence, it is more appropriate to determine the Capitalized Net Income (CNI) of rubber plantations based on the actual yield and farm gate prices of raw products (field latex and cuplump) and the corresponding cost of production.
There is also a growing market for old rubber trees which are estimated to generate net incomes ranging between ₱20,000 and ₱30,000 per hectare or an average of about ₱100 per tree, depending on the remaining stand of old trees at the end of its economic life. This market condition for old rubber trees was not present at the time LVG No. 6, Series of 1990, was being prepared. (The terminal or salvage value of old rubber trees was at that time pegged at only ₱6,000 per hectare, representing the amount then being paid by big landowners to contractors for clearing and uprooting old trees.)
LVG No. 6, Series of 1990, was therefore revised to address the foregoing considerations and in accordance with DAR Administrative Order (AO) No. 05, Series of 1998. (Emphasis and underscoring supplied.)
What can be fairly inferred from the DAR’s adoption of the direct capitalization method in its formula is the operational assumption198 that the agricultural properties to be valued are, in general, operating on a stabilized basis, or are expected to produce on a steady basis. This choice of capitalization method is a policy decision made by the DAR drawn, we can presume, from its expertise and actual experience as the expert administrative agency.
Justice Velasco, for his part, calls for a revisit of the established rule on the ground that the same “have veritably rendered hollow and ineffective the maxim that the determination of just compensation is a judicial function.”199 According to him, the view that application of the DAR formulas cannot be made mandatory on courts is buttressed by: (1) Section 50 of RA 6657 which expressly provides that petitions for determination of just compensation fall within the original and exclusive jurisdiction of the SACs;200 (2) Land Bank of the Philippines v. Belista201 which already settled that petitions for the determination of just compensation are excepted from the cases falling under the DAR’s special original and exclusive jurisdiction under Section 57 of RA 6657; and (3) Heirs of Lorenzo and Carmen Vidad v. Land Bank of the Philippines, (Heirs of Vidad)202 which held that the DAR’s process of valuation under Section 16 of RA 6657 is only preliminary, the conclusion of which is not a precondition for purposes of invoking the SAC’s original and exclusive jurisdiction to determine just compensation.
Justice Velasco correctly pointed out this Court’s statement in Belista excepting petitions for determination of just compensation from the list of cases falling within the DAR’s original and exclusive jurisdiction.203 Justice Velasco is also correct when he stated that the Court, in Heirs of Vidad, summarized and affirmed rulings which “invariably upheld the [SAC’s] original and exclusive jurisdiction x x x notwithstanding the seeming failure to exhaust administrative remedies before the DAR.”204 Later on, he would point out, again correctly, the seemingly conflicting rulings issued by this Court regarding the imposition upon the courts of a formula to determine just compensation.
We acknowledge the existence of statements contained in our rulings over the years which may have directly led to the inconsistencies in terms of the proper interpretation of the CARL. As adverted to earlier in this Opinion, this Court thus takes this case as a good opportunity to affirm, for the guidance of all concerned, what it perceives to be the better jurisprudential rule.
Justice Velasco reads both Belista and Heirs of Vidad as bases to show that SACs possess original and exclusive jurisdiction to determine just compensation, regardless of prior exercise by the DAR of its primary jurisdiction.
We do not disagree with the rulings in Belista and Heirs of Vidad, both of which acknowledge the grant of primary jurisdiction to the DAR, subject to judicial review. We are, however, of the view that the better rule would be to read these seemingly conflicting cases without having to disturb established doctrine.
Belista, for example, should be read in conjunction with Association, the landmark case directly resolving the constitutionality of RA 6657. In Association, this Court unanimously upheld the grant of jurisdiction accorded to the DAR under Section 16 to preliminarily determine just compensation. This grant of primary jurisdiction is specific, compared to the general grant of quasi-judicial power to the DAR under Section 50. Belista, which speaks of exceptions to the general grant of quasi-judicial power under Section 50, cannot be read to extend to the specific grant of primary jurisdiction under Section 16.
Heirs of Vidad should also be read in light of our ruling in Land Bank of the Philippines v. Martinez,205 another landmark case directly and affirmatively resolving the issue of whether the DAR’ s preliminary determination (of just compensation) can attain finality. While the determination of just compensation is an essentially judicial function, Martinez teaches us that the administrative agency’s otherwise preliminary determination may become conclusive not because judicial power was supplanted by the agency’s exercise of primary jurisdiction but because a party failed to timely invoke the same. The Court said as much in Heirs of Vidad:
It must be emphasized that the taking of property under RA 6657 is an exercise of the State’s power of eminent domain. The valuation of property or determination of just compensation in eminent domain proceedings is essentially a judicial function which is vested with the courts and not with administrative agencies. When the parties cannot agree on the amount of just compensation, only the exercise of judicial power can settle the dispute with binding effect on the winning and losing parties. On the other hand, the determination of just compensation in the RARAD/DARAB requires the voluntary agreement of the parties. Unless the parties agree, there is no settlement of the dispute before the RARAD/DARAB, except if the aggrieved party fails to file a petition for just compensation on time before the RTC.206 (Emphasis and underscoring supplied.)
Considering the validity of the grant of primary jurisdiction, our ruling in Heirs of Vidal should also be reconciled with the rationale behind the doctrine of primary jurisdiction. In this sense, neither landowner nor agency can disregard the administrative process provided under the law without offending the already established doctrine of primary jurisdiction:
x x x [I]n cases raising issues of fact not within the conventional experience of judges or cases requiring the exercise of administrative discretion, agencies created by Congress for regulating the subject matter should not be passed over. This is so even though the facts after they have been appraised by specialized competence serve as a premise for legal consequences to be judicially defined. Uniformity and consistency in the regulation of business entrusted to a particular agency are secured, and the limited functions of review by the judiciary are more rationally exercised, by preliminary resort for ascertaining and interpreting the circumstances underlying legal issues to agencies that are better equipped than courts by specialization, by insight gained through experience, and by more flexible procedure.207 (Emphasis supplied.)
Arguing against the binding nature of the DAR formula, Justice Carpio, in his Separate Concurring Opinion, cites Apo Fruits208 which held, to wit:
What is clearly implicit, thus, is that the basic formula and its alternatives-administratively determined (as it is not found in Republic Act No. 6657, but merely set forth in DAR AO No. 5, Series of 1998)-although referred to and even applied by the courts in certain instances, does not and cannot strictly bind the courts. x x x209
The argument of Apo Fruits that the DAR formula is a mere administrative order has, however, been completely swept aside by the amendment to Section 17 under RA 9700. To recall, Congress amended Section 17 of RA 6657 by expressly providing that the valuation factors enumerated be “translated into a basic formula by the DAR x x x.” This amendment converted the DAR basic formula into a requirement of the law itself. In other words, the formula ceased to be merely an administrative rule, presumptively valid as subordinate legislation under the DAR’s rule-making power. The formula, now part of the law itself, is entitled to the presumptive constitutional validity of a statute.210More important, Apo Fruits merely states that the formula cannot “strictly” bind the courts. The more reasonable reading of Apo Fruits is that the formula does not strictly apply in certain circumstances. Apo Fruits should, in other words, be read together with Yatco.
Justice Carpio also raises an issue of statutory construction of Section 18 of RA 6657 in relation to Section 17. Section 18 reads:
Sec. 18. Valuation and Mode of Compensation. –The LBP shall compensate the landowner in such amounts as may be agreed upon by the landowner and the DAR and the LBP, in accordance with the criteria provided for in Sections 16 and 1 7, and other pertinent provisions hereof, or as may be finally determined by the court, as the just compensation for the land.
The Justice reads Section 18 to mean that Section 17 and the implementing DAR formula operate only to qualify the offer to be made by the DAR and the LBP to the landowner. Section 17 is not a qualifying imposition on the court in its determination of just compensation. Stated differently, where there is disagreement on the issue of just compensation, Section 17 and the basic formula do not apply.
We disagree. Sections 16, 17 and 18 should all be read together in context211 as to give effect to the law.212 This is the essence of the doctrines we laid down in Banal, Celada and Yatco.
Section 16 governs the procedure for the acquisition of private lands. The relevant provision reads:
Sec. 16. Procedure for Acquisition of Private Lands. – For purposes of acquisition of private lands, the following procedures shall be followed:
(a) After having identified the land, the landowners and the beneficiaries, the DAR shall send its notice to acquire the land to the owners thereof, by personal delivery or registered mail, and post the same in a conspicuous place in the municipal building and barangay hall of the place where the property is located. Said notice shall contain the offer of the DAR to pay a corresponding value in accordance with the valuation setforth in Sections 17, 18, and other pertinent provisions hereof.x x x (Emphasis supplied.)
It is clear from the foregoing provision that the procedure for acquisition of private land is commenced by the DAR’s notice of acquisition and offer of compensation to the landowner. At such point, the DAR does not know whether the landowner will accept its offer. Section 16(a), however, states without qualification that the DAR shall make the offer in accordance with Sections 17 and 18. In case the landowner does not reply or rejects the offer, then the DAR initiates summary administrative proceedings to determine just compensation, subject to the final determination of the court. In the summary proceedings, the DAR offer remains founded on the criteria set forth in Section 17. Section 16(a) did not distinguish between the situation where the landowner accepts the DAR’s offer and where he/she does not. Section 17, as amended, itself also did not distinguish between a valuation arrived at by agreement or one adjudicated by litigation. Where the law does not distinguish, we should not distinguish.213
Section 18, on the other hand, merely recognizes the possibility that the landowner will disagree with the DAR/LBP’s offer. In such case, and where the landowner elevates the issue to the court, the court needs to rule on the offer of the DAR and the LBP. Since the government’s offer is required by law to be founded on Section 1 7, the court, in exercising judicial review, will necessarily rule on the DAR determination based on the factors enumerated in Section 17.
Now, whether the court accepts the determination of the DAR will depend on its exercise of discretion. This is the essence of judicial review. That the court can reverse, affirm or modify the DARJLBP’s determination cannot, however, be used to argue that Section 18 excuses observance from Section 17 in cases of disagreement.
Finally, there is no cogent policy or common sense reason to distinguish. Worse, this reading flies in the face of the contemporaneous interpretation and implementation given by the DAR and the LBP to Sections 16, 17 (as amended) and 18. DAR AO No. 5 (1998) expressly provides that the basic formula applies to both voluntary offers to sell and to compulsory acquisition.214
K. The matters raised by the dissents are better resolved in a proper case
directly challenging Section 17 of RA 6657 and the resulting DAR
formulas
The following central issues of fact underlying many of the arguments raised by the dissents are better raised in a case directly impugning the validity of Section 17 and the DAR formulas:
(1) Whether, under the facts of a proper case, the use of a basic formula (based on factors enumerated by Congress) to determine just compensation is just and reasonable.
Evidence must be taken to determine whether, given the scale of the government’s agrarian reform program, the DAR and the LBP (and later, Congress) acted justly and within reason in choosing to implement the law with the enumeration of factors in Section 17 and the use of a basic formula, or, whether, under the facts, it is more just and reasonable to employ a case to case method of valuation.
A core and triable question of fact is whether the DAR and the LBP can effectively and fairly implement a large scale land reform program without some guide to canalize the discretion of its employees tasked to undertake valuation. Otherwise stated, how can the DAR and the LBP commence CARP implementation if the different DAR and LBP employees tasked with making the offer, and spread nationwide, are each given complete discretion to determine value from their individual reading of Section 17? This will resolve the factual underpinnings of the argument advanced that the valuation factors enumerated in Section 17 apply only where there is agreement on value as between the DAR/LBP and the landowner. But not when there is disagreement.
(2) Whether, under the facts of a proper case, the enumeration of the factors in Section 17 and the resulting formula, are themselves just and reasonable.
To resolve this, there must be a hearing to determine: (a) whether, following generally-accepted valuation principles, the enumeration under Section 17 is sufficient or under-inclusive; (2) how the DAR arrived at selecting the components of the formula and their assigned weights; (3) whether there are fairer or more just and reasonable alternatives, or combinations of alternatives, respecting valuation components and their weights; and (4) whether the DAR properly computes or recognizes net present value under the CNI factor, and whether DAR employs a fair capitalization rate in computing CNI.
All things considered, it is important that the DAR and the LBP be heard so that they can present evidence on the cost and other implications of doing away with the use of a basic formula, or using a different mix of valuation components and weights.
IV Conclusion
The detennination of just compensation is a judicial function. The “justness” of the enumeration of valuation factors in Section 17, the “justness” of using a basic formula, and the “justness” of the components (and their weights) that flow into the basic formula, are all matters for the courts to decide. As stressed by Celada, however, until Section 17 or the basic formulas are declared invalid in a proper case, they enjoy the presumption of constitutionality. This is more so now, with Congress, through RA 9700, expressly providing for the mandatory consideration of the DAR basic formula. In the meantime, Yatco, akin to a legal safety net, has tempered the application of the basic formula by providing for deviation, where supported by the facts and reasoned elaboration.
While concededly far from perfect, the enumeration under Section 17 and the use of a basic formula have been the principal mechanisms to implement the just compensation provisions of the Constitution and the CARP for many years. Until a direct challenge is successfully mounted against Section 17 and the basic formulas, they and the collective doctrines in Banal, Celada and Yatco should be applied to all pending litigation involving just compensation in agrarian reform. This rule, as expressed by the doctrine of stare decisis, necessary for securing certainty and stability of judicial decisions, thus:
Time and again, the Court has held that it is a very desirable and necessary judicial practice that when a court has laid down a principle of law as applicable to a certain state of facts, it will adhere to that principle and apply it to all future cases in which the facts are substantially the same. Stare decisis et non quieta movere. Stand by the decisions and disturb not what is settled. Stare decisis simply means that for the sake of certainty, a conclusion reached in one case should be applied to those that follow if the facts are substantially the same, even though the parties may be different. It proceeds from the first principle of justice that, absent any powerful countervailing considerations, like cases ought to be decided alike. Thus, where the same questions relating to the same event have been put forward by the parties similarly situated as in a previous case litigated and decided by a competent court, the rule of stare decisis is a bar to any attempt to relitigate the same issue.215
This Court thus for now gives full constitutional presumptive weight and credit to Section 17 of RA 6657, DAR AO No. 5 (1998) and the resulting DAR basic formulas. To quote the lyrical words of Justice Isagani Cruz in Association:
The CARP Law and the other enactments also involved in these cases have been the subject of bitter attack from those who point to the shortcomings of these measures and ask that they be scrapped entirely. To be sure, these enactments are less than perfect; indeed, they should be continuously re-examined and rehoned, that they may be sharper instruments for the better protection of the farmer’s rights. But we have to start somewhere. In the pursuit of agrarian reform, we do not tread on familiar ground but grope on terrain fraught with pitfalls and expected difficulties. This is inevitable. The CARP Law is not a tried and tested project. On the contrary, to use Justice Holmes’s words, “it is an experiment, as all life is an experiment,” and so we learn as we venture forward, and, if necessary, by our own mistakes. We cannot expect perfection although we should strive for it by all means. Meantime, we struggle as best we can in freeing the farmer from the iron shackles that have unconscionably, and for so long, fettered his soul to the soil.216
For the guidance of the bench, the bar, and the public, we reiterate the rule: Out of regard for the DAR’s expertise as the concerned implementing agency, courts should henceforth consider the factors stated in Section 17 of RA 6657, as amended, as translated into the applicable DAR formulas in their determination of just compensation for the properties covered by the said law. If, in the exercise of their judicial discretion, courts find that a strict application of said formulas is not warranted under the specific circumstances of the case before them, they may deviate or depart therefrom, provided that this departure or deviation is supported by a reasoned explanation grounded on the evidence on record. In other words, courts of law possess the power to make a final determination of just compensation.217
A final note
We must be reminded that the government (through the administrative agencies) and the courts are not adversaries working towards different ends; our roles are, rather, complementary. As the United States Supreme Court said in Far East Coeference v. United States:218
x x x [C]ourt and agency are not to be regarded as wholly independent and unrelated instrumentalities of justice, each acting in the performance of its prescribed statutory duty without regard to the appropriate function of the other in securing the plainly indicated objects of the statute. Court and agency are the means adopted to attain the prescribed end, and, so far as their duties are defined by the words of the statute, those words should be construed so as to attain that end through coordinated action. Neither body should repeat in this day the mistake made by the courts of law when equity was struggling for recognition as an ameliorating system of justice; neither can rightly be regarded by the other as an alien intruder, to be tolerated if must be, but never to be encouraged or aided by the other in the attainment of the common aim.219 (Emphasis supplied.)
The Congress (which wrote Section 1 7 and funds the land reform land acquisition), the DAR (author of DAR AO No. 5 [1998] and implementer of land reform), and the LBP (tasked under EO 405 with the valuation of lands) are partners to the courts. All are united in a common responsibility as instruments of justice and by a common aim to enable the farmer to “banish from his small plot of earth his insecurities and dark resentments and “rebuild in it the music and the dream.”220 Courts and government agencies must work together if we are to achieve this shared objective.
WHEREFORE, the petition is PARTIALLY GRANTED. Civil Case Nos. 2002-7073 and 2002-7090 are REMANDED to the Special Agrarian Court for the determination of just compensation in accordance with this ruling.
SO ORDERED.
FRANCIS H. JARDELEZA
Associate Justice
WE CONCUR:
See concurring separate opinion
MARIA LOURDES P.A. SERENO
Chief Justice
EN BANC
August 8, 2017
G.R. No. 190004
LAND BANK OF THE PIDLIPPINES, Petitioner,
vs.
EUGENIO DALAUTA, Respondent
D E C I S I O N
MENDOZA, J.:
This petition for review on certiorari under Rule 45 seeks to review, reverse and set aside the September 18, 2009 Decision1 of the Court of Appeals-Cagayan de Oro (CA) in CA-G.R. SP No. 01222-MIN, modifying the May 30, 2006 Decision2 of the Regional Trial Court, Branch 5, Butuan City (RTC), sitting as Special Agrarian Court (SAC), in Civil Case No. 4972 – an action for determination of just compensation.
The Facts
Respondent Eugenio Dalauta (Dalauta) was the registered owner of an agricultural land in Florida, Butuan City, with an area of 25.2160 hectares and covered by Transfer Certificate of Title (TCT) No. T-1624. The land was placed by the Department of Agrarian Reform (DAR) under compulsory acquisition of the Comprehensive Agrarian Reform Program (CARP) as reflected in the Notice of Coverage,3 dated January 17, 1994, which Dalauta received on February 7, 1994. Petitioner Land Bank of the Philippines (LBP) offered ₱192,782.59 as compensation for the land, but Dalauta rejected such valuation for being too low.4
The case was referred to the DAR Adjudication Board (DARAB) through the Provincial Agrarian Reform Adjudicator (PARAD) of Butuan City. A summary administrative proceeding was conducted to determine the appropriate just compensation for the subject property. In its Resolution,5 dated December 4, 1995, the PARAD affirmed the valuation made by LBP in the amount of ₱192,782.59.
On February 28, 2000, Dalauta filed a petition for determination of just compensation with the RTC, sitting as SAC. He alleged that LBP’s valuation of the land was inconsistent with the rules and regulations prescribed in DAR Administrative Order (A.O.) No. 06, series of 1992, for determining the just compensation of lands covered by CARP’s compulsory acquisition scheme.
During the trial, the SAC constituted the Board of Commissioners (Commissioners) tasked to inspect the land and to make a report thereon. The Report of the Commissioners,6 dated July 10, 2002, recommended that the value of the land be pegged at ₱100,000.00 per hectare. With both Dalauta and the DAR objecting to the recommended valuation, the SAC allowed the parties to adduce evidence to support their respective claims.
Dalauta’s Computation
Dalauta argued that the valuation of his land should be determined using the formula in DAR A.O. No. 6, series of 1992, which was Land Value (LV) = Capitalized Net Income (CNI) x 0.9 + Market Value (MV) per tax declaration x 0.1, as he had a net income of ₱350,000.00 in 1993 from the sale of the trees that were grown on the said land. Norberto C. Fonacier (Fonacier), the purchaser of the trees, testified that he and Dalauta executed their Agreement7 before Atty. Estanislao G. Ebarle, Jr., which showed that he undertook to bear all expenses in harvesting the trees and to give Dalauta the amount of ₱350,000.00 as net purchase payment, for which he issued a check. He said that it was his first and only transaction with Dalauta. Fonacier also claimed that a portion of Dalauta’s land was planted with corn and other trees such as ipil-ipil, lingalong, and other wild trees.
During his cross-examination, Dalauta clarified that about 2,500 trees per hectare were planted on about twenty-one (21) hectares of his land, while the remaining four (4) hectares were reserved by his brother for planting com. He also claimed to have replanted the land with gemelina trees, as advised by his lawyer, after Fonacier harvested the trees in January 1994. Such plants were the improvements found by the Commissioners during their inspection. Dalauta added that he had no tenants on the land. He prayed that the compensation for his land be pegged at ₱2,639,566.90.
LBP’s Computation
LBP argued that the valuation of Dalauta’s land should be determined using the formula LV= MVx 2, which yielded a total value of ₱192,782.59 for the 25.2160 hectares of Dalauta’s land.
LBP claimed that during the ocular inspection/investigation, only 36 coconut trees existed on the subject land; that three (3) hectares of it were planted with corn; and the rest was idle with few second-growth trees. To support its claim, LBP presented, as witnesses, Ruben P. Penaso (Penaso), LBP Property Appraiser of CDO Branch, whose basic function was to value the land covered by CARP based on the valuation guidelines provided by DAR; and Alex G. Carido (Carido), LBP Agrarian Operation Specialist of CDO Branch, whose function was to compute the value of land offered by a landowner to the DAR, using the latter’s guidelines.
Based on Penaso’s testimony, 3.0734 hectares of the subject land were planted with com for family consumption while the 22.1426 hectares were idle, although there were second-growth trees thereon. He reported that the trees had no value and could be considered as weeds. Likewise, Penaso indicated “none” under the column of Infrastructures in the report, although there was a small house made of wood and cut logs in the center of the corn land. He posited that an infrastructure should be made of concrete and hollow blocks. Penaso stated that the sources of their data were the guide, the BARC representative, and the farmers from the neighboring lots. On cross-examination, he admitted that there were coconut trees scattered throughout the land; that he did not ask the guide about the first-growth trees or inquire from the landowner about the land’s income; and that he used the land’s market value as reflected in its 1984 tax declaration.8
Per testimony of Carido, the valuation of Dalauta’s land was computed in September 1994 pursuant to the Memorandum Request to Value the Land9 addressed to the LBP president. He alleged that the entries in the Claims Valuation and Processing Forms were the findings of their credit investigator. Carido explained that they used the formula L V = MV x 2 in determining the value of Dalauta’s land because the land had no income. The land’s com production during the ocular inspection in 1994 was only for family consumption. Hence, pursuant to DAR A.O. No. 6, series of 1992, the total value of Dalauta’s land should be computed as LV = MV x 2, where MV was the Market Value per Tax Declaration based on the Tax Declaration issued in 1994.10 Carido explained that:
xxx using the formula MV x 2, this is now the computation. Land Value= Market Value (6,730.07) x 2 = 13,460.14 – this is the price of the land per hectare, x the area of corn land which is 3.0734, we gave the total Land Value for corn ₱41,368.39. For Idle Land, the Market Value which is computed in the second page of this paper is P3,419.07 by using the formula MV x 2 = ₱3,419.07 x 2, we come up with the Land Value per hectare = 6,838.14 multiplied by the area of the idle land which is 22.1426 hectares. The total Land Value for idle is ₱151,414.20. Adding the total Land Value for corn and idle, we get the grand total of ₱192,782.59, representing the value of the 25.2160 hectares.11
On cross and re-cross-examinations, Carido admitted that there were different ways of computing the land value under DAR A.O. No. 6. He claimed that no CNI and/or Comparable Sales (CS) were given to him because the land production was only for family consumption, hence, CNI would not apply. Further, he explained that the net income and/or production of the land within twelve (12) months prior to the ocular inspection was considered in determining the land value.12
The Ruling of the SAC
On May 30, 2006, the SAC rendered its decision as follows:
WHEREFORE, AND IN VIEW OF ALL OF THE FOREGOING, DAR and LBP are directed to pay to:
1.) Land Owner Mr. Eugenio Dalauta the following:
a. Two Million Six Hundred Thirty Nine Thousand Five Hundred Fifty Seven (₱2,639,557.oo) Pesos, Philippine Currency, as value of the Land;
b. One Hundred Thousand (₱100,ooo.oo) Pesos, Philippine Currency for the farmhouse;
c. One Hundred Fifty Thousand (₱150,000.00) Pesos, Philippine Currency, as reasonable attorney’s fees;
d. Fifty Thousand (₱50,000.00) Pesos, Philippine Currency as litigation expenses;
2.) The Members of the Board of Commissioners:
a. Ten Thousand (P10,ooo.oo) Pesos, Philippine Currency for the Chairman of the Board;
b. Seven Thousand Five Hundred (₱7,500.00) Pesos, Philippine Currency for each of the two (2) members of the Board;
SO ORDERED.13
The SAC explained its decision in this wise:
Going over the records of this case, taking into consideration the Commissioners Report which is replete with pictures of the improvements introduced which pictures are admitted into evidence not as illustrated testimony of a human witness but as probative evidence in itself of what it shows (Basic Evidence, Bautista, 2004 Edition), this Court is of the considered view that the Report (Commissioners) must be given weight.
While LBP’s witness Ruben P. Penaso may have gone to the area, but he did not, at least, list down the improvements. The members of the Board of Commissioners on the other hand, went into the area, surveyed its metes and bounds and listed the improvements they found including the farmhouse made of wood with galvanized iron roofing (Annex “C”, Commissioner’s Report, p. 132, Record)
All told, the basic formula for the valuation of lands covered by Voluntary Offer to Sell and Compulsory Acquisition is:
LV = (CNI x o.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 Declaration
The above formula is used if all the three (3) factors are present, relevant and applicable. In any case, the resulting figure in the equation is always multiplied to the number of area or hectarage of land valued for just compensation.
Whenever one of the factors in the general formula is not available, the computation of land value will be any of the three (3) computations or formulae:
LV = (CNI x 0.9) + (MV x 0.1)
(If the comparable sales factor is missing)
LV = (CS x 0.9) + (MV x 0.1)
(If the capitalize net income is unavailable)
LV = MV x 2 (If only the market value factor is available)
(Agrarian Law and Jurisprudence as compiled by DAR and UNDP pp. 94-95)
Since the Capitalized Net Income in this case is available, the formula to be used is:
LV = (CNI x 0.9) + (MVx 0.1)
Whence:
LV = (₱350,000.00/.12 x 0.9) + (₱145,570 x 0.1)
= (₱2,916,666.67 x 0.9) + (₱145,557.oo) [sic]
= ₱2,625,000.00 + ₱14,557.00
= ₱2,639,557.00 plus ₱100,000.00 for the Farmhouse.14
Unsatisfied, LBP filed a motion for reconsideration, but it was denied by the SAC on July 18, 2006.
Hence, LBP filed a petition for review under Rule 42 of the Rules of Court before the CA, arguing: 1] that the SAC erred in taking cognizance of the case when the DARAB decision sustaining the LBP valuation had long attained finality; 2] that the SAC erred in taking judicial notice of the Commissioners’ Report without conducting a hearing; and 3] that the SAC violated Republic Act (R.A.) No. 665715 and DAR A.O. No. 6, series of 1992, in fixing the just compensation.
The CA Ruling
In its September 18, 2009 Decision, the CA ruled that the SAC correctly took cognizance of the case, citing LBP v. Wycoco16 and LBP v. Suntay.17 It reiterated that the SAC had original and exclusive jurisdiction over all petitions for the determination of just compensation. The appellate court stated that the original and exclusive jurisdiction of the SAC would be undermined if the DAR would vest in administrative officials the original jurisdiction in compensation cases and make the SAC an appellate court for the review of administrative decisions.18
With regard to just compensation, the CA sustained the valuation by the SAC for being well within R.A. No. 6657, its implementing rules and regulations, and in accordance with settled jurisprudence. The factors laid down under Section 17 of R.A. No. 6657, which were translated into a basic formula in DAR A.O. No. 6, series of 1992, were used in determining the value of Dalauta’s property. It stated that the courts were not at liberty to disregard the formula which was devised to implement Section 1 7 of R.A. No. 6657. The CA, however, disagreed with the SAC’s valuation of the farmhouse, which was made of wood and galvanized iron, for it was inexistent during the taking of the subject land.19
The appellate court also disallowed the awards of attorney’s fees and litigation expenses for failure of the SAC to state its factual and legal basis. As to the award of commissioner’s fees, the CA sustained it with modification to conform with Section 15, Rule 14120 of the Rules of Court. Considering that the Commissioners worked for a total of fifteen (15) days, the CA ruled that they were only entitled to a fee of ₱3,000.00 each or a total of ₱9,000.00.21 The dispositive portion reads:
WHEREFORE, in view of all the foregoing, the instant petition is PARTIALLY GRANTED, and the assailed Decision dated May 30, 2006 of the RTC, Branch 5, Butuan City, in Civil Case No. 4972, is hereby MODIFIED as follows: (1) the compensation for the farmhouse (₱100,000.00), as well as the awards for attorney’s fees (₱150,000.00) and litigation expenses (₱50,000.00), are hereby DELETED; and (2) the members of the Board of Commissioners shall each be paid a commissioner’s fee of Three Thousand Pesos (₱3,000.00) by petitioner Land Bank of the Philippines. The assailed Decision is AFFIRMED in all other respect.
SO ORDERED.22
Not in conformity, LBP filed this petition raising the following:
ISSUES
1. Whether or not the trial court had properly taken jurisdiction over the case despite the finality of the PARAD Resolution.
2. Whether or not the trial court correctly computed the just compensation of the subject property.
The Court’s Ruling
Primary Jurisdiction of the DARAB
and Original Jurisdiction of the SAC
Jurisdiction is defined as the power and authority of a court to hear, try and decide a case.23 Jurisdiction over the subject matter is conferred only by the Constitution or the law.24 The courts, as well as administrative bodies exercising quasi-judicial functions, have their respective jurisdiction as may be granted by law. In connection with the courts’ jurisdiction vis-a-vis jurisdiction of administrative bodies, the doctrine of primary jurisdiction takes into play.
The doctrine of primary jurisdiction tells us that courts cannot, and will not, resolve a controversy involving a question which is within the jurisdiction of an administrative tribunal, especially where the question demands the exercise of sound administrative discretion requiring the special knowledge, experience and services of the administrative tribunal to determine technical and intricate matters of fact.25
In agrarian reform cases, primary jurisdiction is vested in the DAR, more specifically, in the DARAB as provided for in Section 50 of R.A. No. 6657 which reads:
SEC. 50. Quasi-Judicial Powers of the DAR. – The DAR is hereby vested with primary jurisdiction to determine and adjudicate agrarian reform matters and shall have exclusive original jurisdiction over all matters involving the implementation of agrarian reform, except those falling under the exclusive jurisdiction of the Department of Agriculture (DA) and the Department of Environment and Natural Resources (DENR). [Emphasis supplied]
Meanwhile, Executive Order (E.O.) No. 229 also vested the DAR with (1) quasi-judicial powers to determine and adjudicate agrarian reform matters; and (2) jurisdiction over all matters involving the implementation of agrarian reform, except those falling under the exclusive original jurisdiction of the Department of Agriculture and the Department of Environment and Natural Resources.26
On the other hand, the SACs are the Regional Trial Courts expressly granted by law with original and exclusive jurisdiction over all petitions for the determination of just compensation to landowners. Section 57 of R.A. No. 6657 provides:
SEC. 57. Special Jurisdiction. – The Special Agrarian Courts shall have original and exclusive jurisdiction over all petitions for the determination of just compensation to landowners, and the prosecution of all criminal offenses under this Act. The Rules of Court shall apply to all proceedings before the Special Agrarian Courts, unless modified by this Act.
The Special Agrarian Courts shall decide all appropriate cases under their special jurisdiction within thirty (30) days from submission of the case for decision. [Emphases supplied]
Adhering thereto, in Land Bank of the Philippines v. Heir of Trinidad S. V da. De Arieta,27 it was written:
In both voluntary and compulsory acquisitions, wherein the landowner rejects the offer, the DAR opens an account in the name of the landowner and conducts a summary administrative proceeding. If the landowner disagrees with the valuation, the matter may be brought to the RTC, acting as a special agrarian court. But as with the DAR-awarded compensation, LBP’s valuation of lands covered by CARL is considered only as an initial determination, which is not conclusive, as it is the RTC, sitting as a Special Agrarian Court, that should make the final determination of just compensation, taking into consideration the factors enumerated in Section 17 of R.A. No. 6657 and the applicable DAR regulations. xxx.28 [Emphases and underscoring supplied]
The DARAB Rules and
Subsequent Rulings
Recognizing the separate jurisdictions of the two bodies, the DARAB came out with its own rules to avert any confusion. Section 11, Rule XIII of the 1994 DARAB Rules of Procedure reads:
Land Valuation Determination and Payment of Just Compensation. – The decision of the Adjudicator on land valuation and preliminary determination and payment of just compensation shall not be appealable to the Board but shall be brought directly to the Regional Trial Courts designated as Special Agrarian Courts within fifteen (15) days from receipt of the notice thereof. Any party shall be entitled to only one motion for reconsideration. [Emphasis supplied]
The Court stamped its imprimatur on the rule in Philippine Veterans Bank v. CA (Veterans Bank);29 LBP v. Martinez (Martinez); 30 and Soriano v. Republic (Soriano). 31 In all these cases, it was uniformly decided that the petition for determination of just compensation before the SAC should be filed within the period prescribed under the DARAB Rules, that is, “within fifteen (15) days from receipt of the notice thereof.” In Philippine Veterans Bank, it was written:
There is nothing contradictory between the provision of §so granting the DAR primary jurisdiction to determine and adjudicate “agrarian reform matters” and exclusive original jurisdiction over “all matters involving the implementation of agrarian reform,” which includes the determination of questions of just compensation, and the provision of §57 granting Regional Trial Courts “original and exclusive jurisdiction” over (1) all petitions for the determination of just compensation to landowner, and (2) prosecutions of criminal offenses under R.A. No. 6657. The first refers to administrative proceedings, while the second refers to judicial proceedings. Under R.A. No. 6657, the Land Bank of the Philippines is charged with the preliminary determination of the value of lands placed under land reform program and the compensation to be paid for their taking. It initiates the acquisition of agricultural lands by notifying the landowner of the government’s intention to acquire his land and the valuation of the same as determined by the Land Bank. Within 30 days from receipt of notice, the landowner shall inform the DAR of his acceptance or rejection of the offer. In the event the landowner rejects the offer, a summary administrative proceeding is held by the provincial (PARAD), the regional (RARAD) or the central (DARAB) adjudicator, as the case may be, depending on the value of the land, for the purpose of determining the compensation for the land. The landowner, the Land Bank, and other interested parties are then required to submit evidence as to the just compensation for the land. The DAR adjudicator decides the case within 30 days after it is submitted for decision. If the landowner finds the price unsatisfactory, he may bring the matter directly to the appropriate Regional Trial Court.
To implement the provisions of R.A. No. 6657, particularly §50 thereof, Rule XIII, §u of the DARAB Rules of Procedure provides:
Land Valuation Determination and Payment of Just Compensation. – The decision of the Adjudicator on land valuation and preliminary determination and payment of just compensation shall not be appealable to the Board but shall be brought directly to the Regional Trial Courts designated as Special Agrarian Courts within fifteen (15) days from receipt of the notice thereof. Any party shall be entitled to only one motion for reconsideration.
As we held in Republic v. Court of Appeals,32 this rule is an acknowledgment by the DARAB that the power to decide just compensation cases for the taking of lands under R.A. No. 6657 is vested in the courts. It is error to think that, because of Rule XIII, §n, the original and exclusive jurisdiction given to the courts to decide petitions for determination of just compensation has thereby been transformed into an appellate jurisdiction. It only means that, in accordance with settled principles of administrative law, primary jurisdiction is vested in the DAR as an administrative agency to determine in a preliminary manner the reasonable compensation to be paid for the lands taken under the Comprehensive Agrarian Reform Program, but such determination is subject to challenge in the courts.
The jurisdiction of the Regional Trial Courts is not any less “original and exclusive” because the question is first passed upon by the DAR, as the judicial proceedings are not a continuation of the administrative determination. For that matter, the law may provide that the decision of the DAR is final and unappealable.
Nevertheless, resort to the courts cannot be foreclosed on the theory that courts are the guarantors of the legality of administrative action.
Accordingly, as the petition in the Regional Trial Court was filed beyond the 15-day period provided in Rule XIII, §u of the Rules of Procedure of the DARAB, the trial court correctly dismissed the case and the Court of Appeals correctly affirmed the order of dismissal. xxx33 [Emphases and underscoring supplied; Citations omitted]
Any uncertainty with the foregoing ruling was cleared when the Court adhered to the Veterans Bank ruling in its July 31, 2008 Resolution in Land Bank v. Martinez:34
On the supposedly conflicting pronouncements in the cited decisions, the Court reiterates its ruling in this case that the agrarian reform adjudicator’s decision on land valuation attains finality after the lapse of the 15-day period stated in the DARAB Rules. The petition for the fixing of just compensation should therefore, following the law and settled jurisprudence, be filed with the SAC within the said period. This conclusion, as already explained in the assailed decision, is based on the doctrines laid down in Philippine Veterans Bank v. Court of Appeals and Department of Agrarian Reform Adjudication Board v. Lubrica. [Emphases and underscoring supplied]
Jurisdiction of the SAC
is Original and Exclusive;
The Courts Ruling in Veterans
Bank and Martinez should be
Abandoned
Citing the rulings in Veterans and Martinez, the LBP argues that the PARAD resolution already attained finality when Dalauta filed the petition for determination of just compensation before the RTC sitting as SAC. The petition was filed beyond the 15-day prescriptive period or, specifically, more than five (5) years after the issuance of the PARAD Resolution.
This issue on jurisdiction and prescription was timely raised by LBP as an affirmative defense, but the SAC just glossed over it and never really delved on it. When the issue was raised again before the CA, the appellate court, citing LBP v. Wycoco35 and LBP v. Suntay,36 stressed that the RTC, acting as SAC, had original and exclusive jurisdiction over all petitions for the determination of just compensation. It explained that the original and exclusive jurisdiction of the SAC would be undermined if the DAR would vest in administrative officials the original jurisdiction in compensation cases and make the SAC an appellate court for the review of administrative decisions.37
The Court agrees with the CA in this regard. Section 9, Article III of the 1987 Constitution provides that “[p]rivate property shall not be taken for public use without just compensation.” In Export Processing Zone Authority v. Dulay,38 the Court ruled that the valuation of property in eminent domain is essentially a judicial function which cannot be vested in administrative agencies. “The executive department or the legislature may make the initial determination, but when a party claims a violation of the guarantee in the Bill of Rights that private property may not be taken for public use without just compensation, no statute, decree, or executive order can mandate that its own determination shall prevail over the court’s findings. Much less can the courts be precluded from looking into the ‘justness’ of the decreed compensation. “39 Any law or rule in derogation of this proposition is contrary to the letter and spirit of the Constitution, and is to be struck down as void or invalid. These were reiterated in Land Bank of the Philippines v. Montalvan,40 when the Court explained:
It is clear from Sec. 57 that the RTC, sitting as a Special Agrarian Court, has “original and exclusive jurisdiction over all petitions for the determination of just compensation to landowners.” This “original and exclusive” jurisdiction of the RTC would be undermined if the DAR would vest in administrative officials original jurisdiction in compensation cases and make the RTC an appellate court for the review of administrative decisions. Thus, although the new rules speak of directly appealing the decision of adjudicators to the RTCs sitting as Special Agrarian Courts, it is clear from Sec. 57 that the original and exclusive jurisdiction to determine such cases is in the RTCs. Any effort to transfer such jurisdiction to the adjudicators and to convert the original jurisdiction of the RTCs into appellate jurisdiction would be contrary to Sec. 57 and therefore would be void. Thus, direct resort to the SAC by private respondent is valid.
It would be well to emphasize that the taking of property under R.A. No. 6657 is an exercise of the power of eminent domain by the State.1âwphi1 The valuation of property or determination of just compensation in eminent domain proceedings is essentially a judicial function which is vested with the courts and not with administrative agencies. Consequently, the SAC properly took cognizance of respondent’s petition for determination of just compensation. [Emphases and underscoring supplied]
Since the determination of just compensation is a judicial function, the Court must abandon its ruling in Veterans Bank, Martinez and Soriano that a petition for determination of just compensation before the SAC shall be proscribed and adjudged dismissible if not filed within the 15-day period prescribed under the DARAB Rules.
To maintain the rulings would be incompatible and inconsistent with the legislative intent to vest the original and exclusive jurisdiction in the determination of just compensation with the SAC. Indeed, such rulings judicially reduced the SAC to merely an appellate court to review the administrative decisions of the DAR. This was never the intention of the Congress.
As earlier cited, in Section 57 of R.A. No. 6657, Congress expressly granted the RTC, acting as SAC, the original and exclusive jurisdiction over all petitions for the determination of just compensation to landowners. Only the legislature can recall that power. The DAR has no authority to qualify or undo that. The Court’s pronouncement in Veterans Bank, Martinez, Soriano, and Limkaichong, reconciling the power of the DAR and the SAC essentially barring any petition to the SAC for having been filed beyond the 15-day period provided in Section 11, Rule XIII of the DARAB Rules of Procedure, cannot be sustained. The DAR regulation simply has no statutory basis.
On Prescription
While R.A. No. 6657 itself does not provide for a period within which a landowner can file a petition for the determination of just compensation before the SAC, it cannot be imprescriptible because the parties cannot be placed in limbo indefinitely. The Civil Code settles such conundrum. Considering that the payment of just compensation is an obligation created by law, it should only be ten (10) years from the time the landowner received the notice of coverage. The Constitution itself provides for the payment of just compensation in eminent domain cases.41 Under Article 1144, such actions must be brought within ten (10) years from the time the right of action accrues. Article 1144 reads:
Art. 1144. The following actions must be brought within ten years from the time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment. (n)
Nevertheless, any interruption or delay caused by the government like proceedings in the DAR should toll the running of the prescriptive period. The statute of limitations has been devised to operate against those who slept on their rights, but not against those desirous to act but cannot do so for causes beyond their control.42
In this case, Dalauta received the Notice of Coverage on February 7, 1994.43 He then filed a petition for determination of just compensation on February 28, 2000. Clearly, the filing date was well within the ten year prescriptive period under Article 1141.
Concurrent Exercise of
Jurisdiction
There may be situations where a landowner, who has a pending administrative case before the DAR for determination of just compensation, still files a petition before the SAC for the same objective. Such recourse is not strictly a case of forum shopping, the administrative determination being not resjudicata binding on the SAC.44 This was allowed by the Court in LBP v. Celada45 and other several cases. Some of these cases were enumerated in Land Bank of the Philippines v. Umandap46 as follows:
1. In the 1999 case of Land Bank of the Philippines v. Court of Appeals,47 we held that the SAC properly acquired jurisdiction over the petition to determine just compensation filed by the landowner without waiting for the completion of DARAB’s re-evaluation of the land.
2. In the 2004 case of Land Bank of the Philippines v. Wycoco, 48 we allowed a direct resort to the SAC even where no summary administrative proceedings have been held before the DARAB.
3. In the 2006 case of Land Bank of the Philippines v. Celada,49 this Court upheld the jurisdiction of the SAC despite the pendency of administrative proceedings before the DARAB. x x x. xxxx
4. In the 2009 case of Land Bank of the Philippines v. Belista,50 this Court permitted a direct recourse to the SAC without an intermediate appeal to the DARAB as mandated under the new provision in the 2003 DARAB Rules of Procedure. We ruled:
Although Section 5, Rule XIX of the 2003 DARAB Rules of Procedure provides that the land valuation cases decided by the adjudicator are now appealable to the Board, such rule could not change the clear import of Section 57 of RA No. 6657 that the original and exclusive jurisdiction to determine just compensation is in the RTC. Thus, Section 57 authorizes direct resort to the SAC in cases involving petitions for the determination of just compensation. In accordance with the said Section 57, petitioner properly filed the petition before the RTC and, hence, the RTC erred in dismissing the case. Jurisdiction over the subject matter is conferred by law. Only a statute can confer jurisdiction on courts and administrative agencies while rules of procedure cannot.51
Nevertheless, the practice should be discouraged. Everyone can only agree that simultaneous hearings are a waste of time, energy and resources. To prevent such a messy situation, a landowner should withdraw his case with the DAR before filing his petition before the SAC and manifest the fact of withdrawal by alleging it in the petition itself. Failure to do so, should be a ground for a motion to suspend judicial proceedings until the administrative proceedings would be terminated. It is simply ludicruous to allow two procedures to continue at the same time.
On Just Compensation
Upon an assiduous assessment of the different valuations arrived at by the DAR, the SAC and the CA, the Court agrees with the position of Justice Francis Jardeleza that just compensation for respondent Dalauta’s land should be computed based on the formula provided under DAR-LBP Joint Memorandum Circular No. 11, series of 2003 (JMC No. 11 (2003)). This Memorandum Circular, which provides for the specific guidelines for properties with standing commercial trees, explains:
The Capitalized Net Income (CNI) approach to land valuation assumes that there would be uniform streams of future income that would be realized in perpetuity from the seasonal/permanent crops planted to the land. In the case of commercial trees (hardwood and soft wood species), however, only a one-time income is realized when the trees are due for harvest. The regular CNI approach in the valuation of lands planted to commercial trees would therefore not apply.52 (Emphasis and underscoring supplied.)
During the proceedings before the SAC, Dalauta testified that he derived a net income of ₱350,000.00 in 1993 from the sale to Fonacier of falcata trees grown in the property. He presented the following evidence to bolster his claim of income: (1) Agreement between Dalauta and Fonacier over the sale of falcata trees;53 (2) copy of deposit slip of amount of ₱350,000.00;54 and (3) Certification from Allied Bank as to fact of deposit of the amount of ₱350,000.00 on November 15, 1993.55
Dalauta’s sale of falcata trees indeed appears to be a one-time transaction. He did not claim to have derived any other income from the property prior to receiving the Notice of Coverage from the DAR in February 1994. For this reason, his property would be more appropriately covered by the formula provided under JMC No. 11 (2003).
JMC No. 11 (2003) provides for several valuation procedures and formulas, depending on whether the commercial trees found in the land in question are harvestable or not, naturally grown, planted by the farmer-beneficiary or lessee or at random. It also provides for the valuation procedure depending on when the commercial trees are cut (i.e., while the land transfer claim is pending or when the landholding is already awarded to the farmer-beneficiaries).
Dalauta alleges to have sold all the falcata trees in the property to Fonacier in 1993.56 After Fonacier finished harvesting in January 1994, he claims that, per advice of his lawyer, he immediately caused the date of effectivity of this Joint Memorandum Circular x x x.” It is submitted, however, that applying the above formula to compute just compensation for respondent’s land would be the most equitable course of action under the circumstances. Without JMC No. 11 (2003), Dalauta’s property would have to be valued using the formula for idle lands, the CNI and CS factors not being applicable. Following this formula, just compensation for Dalauta’s property would only amount to ₱225,300.00, computed as follows:
LV = MVx2
Where:
LV = Land Value
MV = Market Value per Tax Declaration*
• For the area planted to corn,
₱7,740.00/hectare
• For idle/pasture land, ₱3,890/hectare
Thus:
For the 4 hectares planted to corn:
LV = (P7, 7 40/hectare x 4 hectares) x 2
= ₱61,920.00
For the 21 hectares of idle/pasture land:
LV = (₱3,890/hectare x 21) x 2
= ₱163,380.00
Total Land Value = P61,920.00 + Pl63,380.00
= P225,300.00
As above stated, the amount would be more equitable if it would be computed pursuant to JMC No. 11 (2003). Moreover, the award shall earn legal interest. Pursuant to Nacar v. Gallery Frames,57 the interest shall be computed from the time of taking at the rate of twelve percent (12%) per annum until June 30, 2013. Thereafter, the rate shall be six percent (6%) per annum until fully paid.
WHEREFORE, the Court hereby DECLARES that the final determination of just compensation is a judicial function; that the jurisdiction of the Regional Trial Court, sitting as Special Agrarian Court, is original and exclusive, not appellate; that the action to file judicial determination of just compensation shall be ten (10) years from the time of the taking; and that at the time of the filing of judicial determination, there should be no pending administrative action for the determination of just compensation.
As to the just compensation, the September 18, 2009 Decision of the Court of Appeals decreeing payment of ₱2,639,557 .00 as the value of the subject property is SET ASIDE. Let the case be remanded to the Regional Trial Court, Branch 5, Butuan City, sitting as Special Agrarian Court, for purposes of computing just compensation in accordance with JMC No. 11 (2003) and this disposition.
The amount shall earn legal interest from the time of taking at the rate of twelve percent (12%) per annum until June 30, 2013. Thereafter, the rate shall be six percent (6%) per annum until fully paid.
SO ORDERED.
JOSE CATRAL MENDOZA
Associate Justice
WE CONCUR:
MARIA LOURDES P.A. SERENO
Chief Justice
Chairperson
| ANTONIO T. CARPIO Associate Justice | PRESBITERO J. VELASCO, JR. Associate Justice |
| TERESITA J. LEONARDO-DE CASTRO Associate Justice | DIOSDADO M. PERALTA Associate Justice |
| LUCAS P. BERSAMIN Associate Justice | MAARIANO C. DEL CASTILLO Associate Justice |
| ESTELA M. PERLAS-BERNABE Associate Justice | See separate concurring opinion MARVIC M.V.F. LEONEN Associate Justice |
| FRANCIS H. JARDELEZA Associate Justice | I join J. Jardeleza ALFREDO BENJAMIN S. CAGUIOA Associate Justice |
| SAMUEL R. MARTIRES Associate Justice | NOEL G. TIJAM Associate Justice |
ANDRES B. REYES, JR.
Associate Justice
C E R T I F I C A T I O N
Pursuant to the Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.
MARIA LOURDES P.A. SERENO
Chief Justice
THIRD DIVISION
G.R. No. 211666 February 25, 2015
REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS, Petitioners, vs.
ARLENE R. SORIANO, Respondent.
D E C I S I O N
PERALTA, J.:
Before the Court is a petition for review under Rule 45 of the Rules of Court assailing the Decision1 dated November 15, 2013 and Order2 dated March 10, 2014 of the Regional Trial Court (RTC), Valenzuela City, Branch 270, in Civil Case No. 140-V-10.
The antecedent facts are as follows:
On October 20, 2010, petitioner Republic of the Philippines, represented by the Department of Public Works and Highways (DPWH), filed a Complaint3 for expropriation against respondent Arlene R. Soriano, the registered owner of a parcel of land consisting of an area of 200 square meters, situated at Gen. T De Leon, Valenzuela City, and covered by Transfer Certificate of Title (TCT) No. V-13790.4 In its Complaint, petitioner averred that pursuant to Republic Act (RA) No. 8974, otherwise known as “An Act to Facilitate the Acquisition of Right-Of-Way, Site or Location for National Government Infrastructure Projects and for other Purposes,” the property sought to be expropriated shall be used in implementing the construction of the North Luzon Expressway (NLEX)- Harbor Link Project (Segment 9) from NLEX to MacArthur Highway, Valenzuela City.5
Petitioner duly deposited to the Acting Branch Clerk of Court the amount of ₱420,000.00 representing 100% of the zonal value of the subject property. Consequently, in an Order6 dated May 27, 2011, the RTC ordered the issuance of a Writ of Possession and a Writ of Expropriation for failure of respondent, or any of her representatives, to appear despite notice during the hearing called for the purpose.
In another Order7 dated June 21, 2011, the RTC appointed the following members of the Board of Commissioners for the determination of just compensation: (1) Ms. Eunice O. Josue, Officer-in-Charge, RTC, Branch 270, Valenzuela City; (2) Atty. Cecilynne R. Andrade, Acting Valenzuela City Assessor,City Assessor’s Office, Valenzuela City; and (3) Engr. Restituto Bautista, of Brgy. Bisig,Valenzuela City. However, the trial court subsequently revoked the appointment of the Board for their failure to submit a report as to the fair market value of the property to assist the court in the determination of just compensation and directed the parties to submit their respective position papers.8 Thereafter, the case was set for hearing giving the parties the opportunity to present and identify all evidence in support of their arguments therein. According to the RTC, the records of the case reveal that petitioner adduced evidence to show that the total amount deposited is just, fair, and equitable. Specifically, in its Position Paper, petitioner alleged that pursuant to a Certification issued by the Bureau of Internal Revenue (BIR), Revenue Region No. 5, the zonal value of the subject property in the amount of ₱2,100.00 per square meter is reasonable, fair, and just to compensate the defendant for the taking of her property in the total area of 200 square meters.9 In fact, Tax Declaration No. C-018-07994, dated November 13, 2009 submitted by petitioner, shows that the value of the subject property is at a lower rate of ₱400.00per square meter. Moreover, as testified to by Associate Solicitor III Julie P. Mercurio, and as affirmed by the photographs submitted, the subject property is poorly maintained, covered by shrubs and weeds, and not concretely-paved. It is located far from commercial or industrial developments in an area without a proper drainage system, can only be accessed through a narrow dirt road, and is surrounded by adjacent dwellings of sub-standard materials.
Accordingly, the RTC considered respondent to have waived her right to adduce evidence and to object to the evidence submitted by petitioner for her continued absence despite being given several notices to do so.
On November 15, 2013, the RTC rendered its Decision, the dispositive portion of which reads: WHEREFORE, with the foregoing determination of just compensation, judgment is hereby rendered:
1) Declaring plaintiff to have lawful right to acquire possession of and title to 200 square meters of defendant Arlene R. Soriano’s parcel of land covered by TCT V-13790 necessary for the construction of the NLEX – Harbor Link Project(Segment 9) from NLEX to MacArthur Highway Valenzuela City;
2) Condemning portion to the extent of 200 square meters of the above-described parcel of land including improvements thereon, if there be any, free from all liens and encumbrances;
3) Ordering the plaintiff to pay defendant Arlene R. Soriano Php2,100.00 per square meter or the sum of Four Hundred Twenty Thousand Pesos (Php420,000.00) for the 200 square meters as fair, equitable, and just compensation with legal interest at 12% per annum from the taking of the possession of the property, subject to the payment of all unpaid real property taxes and other relevant taxes, if there be any;
4) Plaintiff is likewise ordered to pay the defendant consequential damages which shall include the value of the transfer tax necessary for the transfer of the subject property from the name of the defendant to that of the plaintiff;
5) The Office of the Register of Deeds of Valenzuela City, Metro Manila is directed to annotate this Decision in Transfer Certificate of Title No. V-13790 registered under the name of Arlene R. Soriano.
Let a certified true copy of this decision be recorded in the Registry of Deeds of Valenzuela City.
Records of this case show that the Land Bank Manager’s Check Nos. 0000016913 dated January 21, 2011 in the amount of Php400,000.00 and 0000017263 dated April 28, 2011 in the amount of Php20,000.00 issued by the Department of Public Works and Highways (DPWH) are already stale. Thus, the said Office is hereby directed to issue another Manager’s Check in the total amount Php420,000.00 under the name of the Office of the Clerk of Court, Regional Trial Court, Valenzuela City earmarked for the instant case.10
Petitioner filed a Motion for Reconsideration maintaining that pursuant to Bangko Sentral ng Pilipinas (BSP) Circular No. 799, Series of 2013, which took effect on July 1, 2013, the interest rate imposed by the RTC on just compensation should be lowered to 6% for the instant case falls under a loan or forbearance of money.11 In its Order12 dated March 10, 2014, the RTC reduced the interest rate to 6% per annum not on the basis of the aforementioned Circular, but on Article 2209 of the Civil Code, viz.:
However, the case of National Power Corporation v. Honorable Zain B. Angas is instructive.
In the aforementioned case law, which is similar to the instant case, the Supreme Court had the occasion to rule that it is well-settled that the aforequoted provision of Bangko Sentral ng Pilipinas Circular applies only to a loan or forbearance of money, goods or credits. However, the term “judgments” as used in Section 1 of the Usury Law and the previous Central Bank Circular No. 416, should be interpreted to mean only judgments involving loan or forbearance of money, goods or credits, following the principle of ejusdem generis. And applying said rule on statutory construction, the general term “judgments” can refer only to judgments in cases involving loans or forbearance of any money, goods, or credits. Thus, the High Court held that, Art. 2209 of the Civil Code, and not the Central Bank Circular, is the law applicable.
Art. 2009 of the Civil Code reads:
“If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum.”
Further in that case, the Supreme Court explained that the transaction involved is clearly not a loan or forbearance of money, goods or credits but expropriation of certain parcels of land for a public purpose, the payment of which is without stipulation regarding interest, and the interest adjudged by the trial court is in the nature of indemnity for damages. The legal interest required to be paid on the amount of just compensation for the properties expropriated is manifestly in the form of indemnity for damages for the delay in the payment thereof. It ultimately held that Art. 2209 of the Civil Code shall apply.13
On May 12, 2014, petitioner filed the instant petition invoking the following arguments:
I.
RESPONDENT IS NOT ENTITLED TO THE LEGAL INTEREST OF 6% PER ANNUM ON THE AMOUNT OF JUST COMPENSATION OF THE SUBJECT PROPERTY AS THERE WAS NO DELAY ON THE PART OF PETITIONER.
II.
BASED ON THE NATIONAL INTERNAL REVENUE CODE OF 1997 AND THE LOCAL GOVERNMENT CODE, IT IS RESPONDENT’S OBLIGATION TO PAY THE TRANSFER TAXES.
Petitioner maintains that if property is taken for public use before compensation is deposited with the court having jurisdiction over the case, the final compensation must include interests on its just value computed from the time the property is taken up to the time when compensation is actually paid or deposited with the court.14 Thus, legal interest applies only when the property was taken prior to the deposit of payment with the court and only to the extent that there is delay in payment. In the instant case, petitioner posits that since it was able to deposit with the court the amount representing the zonal value of the property before its taking, it cannot be said to be in delay, and thus, there can be no interest due on the payment of just compensation.15 Moreover, petitioner alleges that since the entire subject property was expropriated and not merely a portion thereof, it did not suffer an impairment or decrease in value, rendering the award of consequential damages nugatory. Furthermore, petitioner claims that contrary to the RTC’s instruction, transfer taxes, in the nature of Capital Gains Tax and Documentary Stamp Tax, necessary for the transfer of the subject property from the name of the respondent to that of the petitioner are liabilities of respondent and not petitioner.
The petition is partly meritorious.
At the outset, it must be noted that the RTC’s reliance on National Power Corporation v. Angasis misplaced for the same has already been overturned by our more recent ruling in Republic v. Court of Appeals,16 wherein we held that the payment of just compensation for the expropriated property amounts to an effective forbearance on the part of the State, to wit:
Aside from this ruling, Republic notably overturned the Court’s previous ruling in National Power Corporation v. Angas which held that just compensation due for expropriated properties is not a loan or forbearance of money but indemnity for damages for the delay in payment; since the interest involved is in the nature of damages rather than earnings from loans, then Art. 2209 of the Civil Code, which fixes legal interest at 6%, shall apply.
In Republic, the Court recognized that the just compensation due to the landowners for their expropriated property amounted to an effective forbearance on the part of the State. Applying the Eastern Shipping Lines ruling, the Court fixed the applicable interest rate at 12% per annum, computed from the time the property was taken until the full amount of just compensation was paid, in order to eliminate the issue of the constant fluctuation and inflation of the value of the currency over time. In the Court’s own words:
The Bulacan trial court, in its 1979 decision, was correct in imposing interest[s] on the zonal value of the property to be computed from the time petitioner instituted condemnation proceedings and “took” the property in September 1969. This allowance of interest on the amount found to be the value of the property as of the time of the taking computed, being an effective forbearance, at 12% per annum should help eliminate the issue of the constant fluctuation and inflation of the value of the currency over time.
We subsequently upheld Republic’s 12% per annum interest rate on the unpaid expropriation compensation in the following cases: Reyes v. National Housing Authority, Land Bank of the Philippines v. Wycoco, Republic v. Court of Appeals, Land Bank of the Philippines v. Imperial, Philippine Ports Authority v. Rosales-Bondoc, and Curata v. Philippine Ports Authority.17 Effectively, therefore, the debt incurred by the government on account of the taking of the property subject of an expropriation constitutes a forbearance18 which runs contrary to the trial court’s opinion that the same is in the nature of indemnity for damages calling for the application of Article 2209 of the Civil Code. Nevertheless, in line with the recent circular of the Monetary Board of the Bangko Sentral ng Pilipinas (BSP-MB) No. 799, Series of 2013, effective July 1, 2013, the prevailing rate of interest for loans or forbearance of money is six percent (6%) per annum, in the absence of an express contract as to such rate of interest.
Notwithstanding the foregoing, We find that the imposition of interest in this case is unwarranted in view of the fact that as evidenced by the acknowledgment receipt19 signed by the Branch Clerk of Court, petitioner was able to deposit with the trial court the amount representing the zonal value of the property before its taking. As often ruled by this Court, the award of interest is imposed in the nature of damages for delay in payment which, in effect, makes the obligation on the part of the government one of forbearance to ensure prompt payment of the value of the land and limit the opportunity loss of the owner.20 However, when there is no delay in the payment of just compensation, We have not hesitated in deleting the imposition of interest thereon for the same is justified only in cases where delay has been sufficiently established.21
The records of this case reveal that petitioner did not delay in its payment of just compensation as it had deposited the pertinent amount in full due to respondent on January 24, 2011, or four (4) months before the taking thereof, which was when the RTC ordered the issuance of a Writ of Possession and a Writ of Expropriation on May 27, 2011. The amount deposited was deemed by the trial court to be just, fair, and equitable, taking into account the well-established factors in assessing the value of land, such as its size, condition, location, tax declaration, and zonal valuation as determined by the BIR. Considering, therefore, the prompt payment by the petitioner of the full amount of just compensation as determined by the RTC, We find that the imposition of interest thereon is unjustified and should be deleted.
Similarly, the award of consequential damages should likewise be deleted in view of the fact that the entire area of the subject property is being expropriated, and not merely a portion thereof, wherein such remaining portion suffers an impairment or decrease in value, as enunciated in Republic of the Philippines v. Bank of the Philippine Islands,22 thus:
x x x The general rule is that the just compensation to which the owner of the condemned property is entitled to is the market value. Market value is that sum of money which a person desirous but not compelled to buy, and an owner willing but not compelled to sell, would agree on as a price to be paid by the buyer and received by the seller. The general rule, however, is modified where only a part of a certain property is expropriated. In such a case, the owner is not restricted to compensation for the portion actually taken, he is also entitled to recover the consequential damage, if any, to the remaining part of the property.
x x x x
No actual taking of the building is necessary to grant consequential damages. Consequential damages are awarded if as a result of the expropriation, the remaining property of the owner suffers from an impairment or decrease in value. The rules on expropriation clearly provide a legal basis for the award of consequential damages. Section 6 of Rule 67 of the Rules of Court provides:
x x x The commissioners shall assess the consequential damages to the property not taken and deduct from such consequential damages the consequential benefits to be derived by the owner from the public use or public purpose of the property taken, the operation of its franchise by the corporation or the carrying on of the business of the corporation or person taking the property. But in no case shall the consequential benefits assessed exceed the consequential damages assessed, or the owner be deprived of the actual value of his property so taken.
In B.H. Berkenkotter & Co. v. Court of Appeals, we held that:
To determine just compensation, the trial court should first ascertain the market value of the property, to which should be added the consequential damages after deducting therefrom the consequential benefits which may arise from the expropriation. If the consequential benefits exceed the consequential damages, these items should be disregarded altogether as the basic value of the property should be paid in every case.23
Considering that the subject property is being expropriated in its entirety, there is no remaining portion which may suffer an impairment or decrease in value as a result of the expropriation. Hence, the award of consequential damages is improper.
Anent petitioner’s contention that it cannot be made to pay the value of the transfer taxes in the nature of capital gains tax and documentary stamp tax, which are necessary for the transfer of the subject property from the name of the respondent to that of the petitioner, the same is partly meritorious.
With respect to the capital gains tax, We find merit in petitioner’s posture that pursuant to Sections 24(D) and 56(A)(3) of the 1997 National Internal Revenue Code (NIRC), capital gains tax due on the sale of real property is a liability for the account of the seller, to wit:
Section 24. Income Tax Rates–
x x x x
(D) Capital Gains from Sale of Real Property. –
(1) In General. – The provisions of Section 39(B) notwithstanding, a final tax of six percent (6%) based on the gross selling price or current fair market value as determined in accordance with Section 6(E) of this Code, whichever is higher, is hereby imposed upon capital gains presumed to have been realized from the sale, exchange, or other disposition of real property located in the Philippines, classified as capital assets, including pacto de retro sales and other forms of conditional sales, by individuals, including estates and trusts: Provided, That the tax liability, if any, on gains from sales or other disposition of real property to the government or any of its political subdivisions or agencies or to government-owned or controlled corporations shall be determined either under Section 24(A)or under this Subsection, at the option of the taxpayer.
x x x x
Section 56. Payment and Assessment of Income Tax for Individuals and Corporations. – (A) Payment of Tax –
x x x x
(3) Payment of Capital Gains Tax. – The total amount of tax imposed and prescribed under Section 24 (c), 24(D), 27(E)(2), 28(A)(8)(c) and 28(B)(5)(c) shall be paid on the date the return prescribed therefor is filed by the person liable thereto: Provided, That if the seller submits proof of his intention to avail himself of the benefit of exemption of capital gains under existing special laws, no such payments shall be required : Provided, further, That in case of failure to qualify for exemption under such special laws and implementing rules and regulations, the tax due on the gains realized from the original transaction shall immediately become due and payable, subject to the penalties prescribed under applicable provisions of this Code: Provided, finally, That if the seller, having paid the tax, submits such proof of intent within six (6) months from the registration of the document transferring the real property, he shall be entitled to a refund of such tax upon verification of his compliance with the requirements for such exemption.
Thus, it has been held that since capital gains is a tax on passive income, it is the seller, not the buyer, who generally would shoulder the tax.24 Accordingly, the BIR, in its BIR Ruling No. 476-2013, dated December 18, 2013, constituted the DPWH as a withholding agent to withhold the six percent (6%) final withholding tax in the expropriation of real property for infrastructure projects. As far as the government is concerned, therefore, the capital gains tax remains a liability of the seller since it is a tax on the seller’s gain from the sale of the real estate.25
As to the documentary stamp tax, however, this Court finds inconsistent petitioner’s denial of liability to the same. Petitioner cites Section 196 of the 1997 NIRC as its basis in saying that the documentary stamp tax is the liability of the seller, viz.:
SECTION 196. Stamp Tax on Deeds of Sale and Conveyances of Real Property. – On all conveyances, deeds, instruments, or writings, other than grants, patents or original certificates of adjudication issued by the Government, whereby any land, tenement or other realty sold shall be granted, assigned, transferred or otherwise conveyed to the purchaser, or purchasers, or to any other person or persons designated by such purchaser or purchasers, there shall be collected a documentary stamp tax, at the rates herein below prescribed, based on the consideration contracted to be paid for such realty or on its fair market value determined in accordance with Section 6(E) of this Code, whichever is higher: Provided, That when one of the contracting parties is the Government, the tax herein imposed shall be based on the actual consideration: (a) When the consideration, or value received or contracted to be paid for such realty, after making proper allowance of any encumbrance, does not exceed One thousand pesos (₱1,000), Fifteen pesos (₱15.00).
(b) For each additional One thousand pesos (₱1,000), or fractional part thereof in excess of One thousand pesos (₱1,000) of such consideration or value, Fifteen pesos (₱15.00).
When it appears that the amount of the documentary stamp tax payable hereunder has been reduced by an incorrect statement of the consideration in any conveyance, deed, instrument or writing subject to such tax the Commissioner, provincial or city Treasurer, or other revenue officer shall, from the assessment rolls or other reliable source of information, assess the property of its true market value and collect the proper tax thereon.
Yet, a perusal of the provision cited above does not explicitly impute the obligation to pay the documentary stamp tax on the seller. In fact, according to the BIR, all the parties to a transaction are primarily liable for the documentary stamp tax, as provided by Section 2 of BIR Revenue Regulations No. 9-2000, which reads:26
SEC. 2. Nature of the Documentary Stamp Tax and Persons Liable for the Tax. –
(a) In General. – The documentary stamp taxes under Title VII of the Code is a tax on certain transactions.1âwphi1 It is imposed against “the person making, signing, issuing, accepting, or transferring” the document or facility evidencing the aforesaid transactions. Thus, in general, it may be imposed on the transaction itself or upon the document underlying such act. Any of the parties thereto shall be liable for the full amount of the tax due: Provided, however, that as between themselves, the said parties may agree on who shall be liable or how they may share on the cost of the tax.
(b) Exception. – Whenever one of the parties to the taxable transaction is exempt from the tax imposed under Title VII of the Code, the other party thereto who is not exempt shall be the one directly liable for the tax.27
As a general rule, therefore, any of the parties to a transaction shall be liable for the full amount of the documentary stamp tax due, unless they agree among themselves on who shall be liable for the same.
In this case, there is no agreement as to the party liable for the documentary stamp tax due on the sale of the land to be expropriated. But while petitioner rejects any liability for the same, this Court must take note of petitioner’s Citizen’s Charter,28 which functions as a guide for the procedure to be taken by the DPWH in acquiring real property through expropriation under RA 8974. The Citizen’s Charter, issued by petitioner DPWH itself on December 4,2013, explicitly provides that the documentary stamp tax, transfer tax, and registration fee due on the transfer of the title of land in the name of the Republic shall be shouldered by the implementing agency of the DPWH, while the capital gains tax shall be paid by the affected property owner.29 Thus, while there is no specific agreement between petitioner and respondent, petitioner’s issuance of the Citizen’s Charter serves as its notice to the public as to the procedure it shall generally take in cases of expropriation under RA 8974. Accordingly, it will be rather unjust for this Court to blindly accede to petitioner’s vague rejection of liability in the face of its issuance of the Citizen’s Charter, which contains a clear and unequivocal assumption of accountability for the documentary stamp tax. Had petitioner provided this Court with more convincing basis, apart from a mere citation of an indefinite provision of the 1997 NIRC, showing that it should be respondent-seller who shall be liable for the documentary stamp tax due on the sale of the subject property, its rejection of the payment of the same could have been sustained. WHEREFORE, premises considered, the instant pet1t10n 1s PARTIALLY GRANTED. The Decision and Order, dated November 15, 2013 and March 10, 2014, respectively, of the Regional Trial Court, Valenzuela City, Branch 270, in Civil Case No. 140-V-10 are hereby MODIFIED, in that the imposition of interest on the payment of just compensation as well as the award of consequential damages are deleted. In addition, respondent Arlene R. Soriano is ORDERED to pay for the capital gains tax due on the transfer of the expropriated property, while the documentary stamp tax, transfer tax, and registration fee shall be for the account of petitioner.
SO ORDERED.
DIOSDADO M. PERALTA
Associate Justice
WE CONCUR:
PRESBITERO J. VELASCO, JR.
Associate Justice
Chairperson
| MARTIN S. VILLARAMA, JR. Associate Justice | BIENVENIDO L. REYES Associate Justice |
See separate concurring opinion
MARVIC M.V.F. LEONEN*
Associate Justice
A T T E S T A T I O N
I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.
PRESBITERO J. VELASCO, JR.
Associate Justice
Chairperson, Third Division
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.
MARIA LOURDES P.A. SERENO
Chief Justice
Footnotes
* Designated Acting Member, in lieu of Associate Justice Francis H. Jardeleza, per Raffle dated September 8, 2014.
1 Penned by Judge Evangeline M. Francisco; Annex “A” to Petition, rollo, pp. 27-32.
2 Annex “B” to Petition, id. at 33-34.
3 Annex “D” to Petition, id. at 38-49.
4 Annex “E” to Petition, id. at 50.
5 Id. at 27.
6 Annex “G” to Petition, id. at 53.
7 Annex “H” to Petition, id. at 54.
8 Annex “I” to Petition, id. at 55.
9 Id. at 28.
10 Rollo, pp. 30-32.
11 Id. at 33.
12 Supra note 2.
13 Rollo, pp. 33-34. (Citations omitted)
14 Republic of the Philippines v. Court of Appeals, et al., 433 Phil. 106, 122 (2002).
15 Rollo, p. 16.
16 Supra note 13.
17 Apo Fruits Corporation and Hijo Plantation, Inc. v. Land Bank of the Philippines, 647 Phil. 251, 274-275 (2010). (Emphasis supplied)
18 Sy v. Local Government of Quezon City, G.R. No. 202690, June 5, 2013, 697 SCRA 621, 631.
19 Rollo, p. 67.
20 Land Bank of the Philippines v. Rivera, G.R. No. 182431, February 27, 2013, 692 SCRA 148, 153, citing Land Bank of the Philippines v. Celada, 515 Phil. 467, 484 (2006) citing Land Bank of the Philippines v. Wycoco, 464 Phil. 83, 100 (2004), further citing Reyes v. National Housing Authority, 443 Phil. 603 (2003).
21 Land Bank of the Philippines v. Escandor, et. al.,647 Phil. 20, 30 (2010), citing Land Bank of the Philippines v. Celada, 515 Phil. 467, 484 (2006); 479 SCRA 495, 512; see also Apo Fruits Corporation and Hijo Plantation, Inc. v. Court of Appeals and Land Bank of the Philippines, 622 Phil. 215, 238 (2009).
22 G.R. No. 203039, September 11, 2013, 705 SCRA 650.
23 Republic v. Bank of the Philippine Islands, supra, at 664-666. (Citations omitted; emphasis ours)
24 Fort Bonifacio Development Corporation v. Commissioner of Internal Revenue, G.R. No. 173425, September 4, 2012, 679 SCRA 566, 586, citing Fort Bonifacio Development Corporation v. Commissioner of Internal Revenue,602 Phil. 100, 123 (2009).
25 Chua v. Court of Appeals, 449 Phil. 25, 50 (2003).
26 Philacor Credit Corporation v. Commissioner of Internal Revenue, G.R. No. 169899, February 6, 2013, 690 SCRA 28, 38, citing BIR Revenue Regulations No. 9-2000, November 22, 2000.
27 Emphasis ours.
28 http://www.dpwh.gov.ph/pdf/DPWH%20Citizen’s%20Charter.pdf. (last accessed February 12, 2015).
29 DPWH Citizen’s Charter, id., p. 22.
FIRST DIVISION
G.R. No. 168732 June 29, 2007
NATIONAL POWER CORPORATION, petitioner,
vs. LUCMAN G. IBRAHIM, OMAR G. MARUHOM, ELIAS G.MARUHOM, BUCAY G. MARUHOM, FAROUK G. MARUHOM, HIDJARA G. MARUHOM, ROCANIA G. MARUHOM, POTRISAM G. MARUHOM, LUMBA G. MARUHOM, SINAB G. MARUHOM, ACMAD G. MARUHOM, SOLAYMAN G. MARUHOM, MOHAMAD M. IBRAHIM, and CAIRONESA M. IBRAHIM, respondents.
D E C I S I O N
AZCUNA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to annul the Decision1 dated June 8, 2005 rendered by the Court of Appeals (CA) in C.A.-G.R. CV No. 57792.
The facts are as follows:
On November 23, 1994, respondent Lucman G. Ibrahim, in his personal capacity and in behalf of his co-heirs Omar G. Maruhom, Elias G. Maruhom, Bucay G. Maruhom, Mamod G. Maruhom, Farouk G. Maruhom, Hidjara G. Maruhom, Rocania G. Maruhom, Potrisam G. Maruhom, Lumba G. Maruhom, Sinab G. Maruhom, Acmad G. Maruhom, Solayman G. Maruhom, Mohamad M. Ibrahim and Caironesa M. Ibrahim, instituted an action against petitioner National Power Corporation (NAPOCOR) for recovery of possession of land and damages before the Regional Trial Court (RTC) of Lanao del Sur.
In their complaint, Ibrahim and his co-heirs claimed that they were owners of several parcels of land described in Survey Plan FP (VII-5) 2278 consisting of 70,000 square meters, divided into three (3) lots, i.e. Lots 1, 2, and 3 consisting of 31,894, 14,915, and 23,191 square meters each respectively. Sometime in 1978, NAPOCOR, through alleged stealth and without respondents’ knowledge and prior consent, took possession of the sub-terrain area of their lands and constructed therein underground tunnels. The existence of the tunnels was only discovered sometime in July 1992 by respondents and then later confirmed on November 13, 1992 by NAPOCOR itself through a memorandum issued by the latter’s Acting Assistant Project Manager. The tunnels were apparently being used by NAPOCOR in siphoning the water of Lake Lanao and in the operation of NAPOCOR’s Agus II, III, IV, V, VI, VII projects located in Saguiran, Lanao del Sur; Nangca and Balo-i in Lanao del Norte; and Ditucalan and Fuentes in Iligan City.
On September 19, 1992, respondent Omar G. Maruhom requested the Marawi City Water District for a permit to construct and/or install a motorized deep well in Lot 3 located in Saduc, Marawi City but his request was turned down because the construction of the deep well would cause danger to lives and property. On October 7, 1992, respondents demanded that NAPOCOR pay damages and vacate the sub-terrain portion of their lands but the latter refused to vacate much less pay damages. Respondents further averred that the construction of the underground tunnels has endangered their lives and properties as Marawi City lies in an area of local volcanic and tectonic activity. Further, these illegally constructed tunnels caused them sleepless nights, serious anxiety and shock thereby entitling them to recover moral damages and that by way of example for the public good, NAPOCOR must be held liable for exemplary damages.
Disputing respondents’ claim, NAPOCOR filed an answer with counterclaim denying the material allegations of the complaint and interposing affirmative and special defenses, namely that (1) there is a failure to state a cause of action since respondents seek possession of the sub-terrain portion when they were never in possession of the same, (2) respondents have no cause of action because they failed to show proof that they were the owners of the property, and (3) the tunnels are a government project for the benefit of all and all private lands are subject to such easement as may be necessary for the same.2
On August 7, 1996, the RTC rendered a Decision, the decretal portion of which reads as follows:
WHEREFORE, judgment is hereby rendered:
1. Denying plaintiffs’ [private respondents’] prayer for defendant [petitioner] National Power Corporation to dismantle the underground tunnels constructed between the lands of plaintiffs in Lots 1, 2, and 3 of Survey Plan FP (VII-5) 2278;
2. Ordering defendant to pay to plaintiffs the fair market value of said 70,000 square meters of land covering Lots 1, 2, and 3 as described in Survey Plan FP (VII-5) 2278 less the area of 21,995 square meters at ₱1,000.00 per square meter or a total of ₱48,005,000.00 for the remaining unpaid portion of 48,005 square meters; with 6% interest per annum from the filing of this case until paid;
3. Ordering defendant to pay plaintiffs a reasonable monthly rental of ₱0.68 per square meter of the total area of 48,005 square meters effective from its occupancy of the foregoing area in 1978 or a total of ₱7,050,974.40.
4. Ordering defendant to pay plaintiffs the sum of ₱200,000.00 as moral damages; and
5. Ordering defendant to pay the further sum of ₱200,000.00 as attorney’s fees and the costs.
SO ORDERED.3
On August 15, 1996, Ibrahim, joined by his co-heirs, filed an Urgent Motion for Execution of Judgment Pending Appeal. On the other hand, NAPOCOR filed a Notice of Appeal by registered mail on August 19, 1996. Thereafter, NAPOCOR filed a vigorous opposition to the motion for execution of judgment pending appeal with a motion for reconsideration of the Decision which it had received on August 9, 1996.
On August 26, 1996, NAPOCOR filed a Manifestation and Motion withdrawing its Notice of Appeal purposely to give way to the hearing of its motion for reconsideration.
On August 28, 1996, the RTC issued an Order granting execution pending appeal and denying NAPOCOR’s motion for reconsideration, which Order was received by NAPOCOR on September 6, 1996.
On September 9, 1996, NAPOCOR filed its Notice of Appeal by registered mail which was denied by the RTC on the ground of having been filed out of time. Meanwhile, the Decision of the RTC was executed pending appeal and funds of NAPOCOR were garnished by respondents Ibrahim and his co-heirs.
On October 4, 1996, a Petition for Relief from Judgment was filed by respondents Omar G. Maruhom, Elias G. Maruhom, Bucay G. Maruhom, Mamod G. Maruhom, Farouk G. Maruhom, Hidjara G. Maruhom, Potrisam G. Maruhom and Lumba G. Maruhom asserting as follows:
1) they did not file a motion to reconsider or appeal the decision within the reglementary period of fifteen (15) days from receipt of judgment because they believed in good faith that the decision was for damages and rentals and attorney’s fees only as prayed for in the complaint:
2) it was only on August 26, 1996 that they learned that the amounts awarded to the plaintiffs represented not only rentals, damages and attorney’s fees but the greatest portion of which was payment of just compensation which in effect would make the defendant NPC the owner of the parcels of land involved in the case;
3) when they learned of the nature of the judgment, the period of appeal has already expired;
4) they were prevented by fraud, mistake, accident, or excusable negligence from taking legal steps to protect and preserve their rights over their parcels of land in so far as the part of the decision decreeing just compensation for petitioners’ properties;
5) they would never have agreed to the alienation of their property in favor of anybody, considering the fact that the parcels of land involved in this case were among the valuable properties they inherited from their dear father and they would rather see their land crumble to dust than sell it to anybody.4
The RTC granted the petition and rendered a modified judgment dated September 8, 1997, thus:
WHEREFORE, a modified judgment is hereby rendered:
1) Reducing the judgment award of plaintiffs for the fair market value of ₱48,005,000.00 by 9,526,000.00 or for a difference by ₱38,479,000.00 and by the further sum of ₱33,603,500.00 subject of the execution pending appeal leaving a difference of 4,878,500.00 which may be the subject of execution upon the finality of this modified judgment with 6% interest per annum from the filing of the case until paid.
2) Awarding the sum of ₱1,476,911.00 to herein petitioners Omar G. Maruhom, Elias G. Maruhom, Bucay G. Maruhom, Mahmod G. Maruhom, Farouk G. Maruhom, Hidjara G. Maruhom, Portrisam G. Maruhom and Lumba G. Maruhom as reasonable rental deductible from the awarded sum of ₱7,050,974.40 pertaining to plaintiffs.
3) Ordering defendant embodied in the August 7, 1996 decision to pay plaintiffs the sum of ₱200,000.00 as moral damages; and further sum of ₱200,000.00 as attorney’s fees and costs.
SO ORDERED.5
Subsequently, both respondent Ibrahim and NAPOCOR appealed to the CA.
In the Decision dated June 8, 2005, the CA set aside the modified judgment and reinstated the original Decision dated August 7, 1996, amending it further by deleting the award of moral damages and reducing the amount of rentals and attorney’s fees, thus:
WHEREFORE, premises considered, herein Appeals are hereby partially GRANTED, the Modified Judgment is ordered SET ASIDE and rendered of no force and effect and the original Decision of the court a quo dated 7 August 1996 is hereby RESTORED with the MODIFICATION that the award of moral damages is DELETED and the amounts of rentals and attorney’s fees are REDUCED to ₱6,888,757.40 and ₱50,000.00, respectively.
In this connection, the Clerk of Court of RTC Lanao del Sur is hereby directed to reassess and determine the additional filing fee that should be paid by Plaintiff-Appellant IBRAHIM taking into consideration the total amount of damages sought in the complaint vis-à-vis the actual amount of damages awarded by this Court. Such additional filing fee shall constitute a lien on the judgment.
SO ORDERED.6
Hence, this petition ascribing the following errors to the CA:
(a) RESPONDENTS WERE NOT DENIED THE BENEFICIAL USE OF THEIR SUBJECT PROPERTIES TO ENTITLE THEM TO JUST COMPENSATION BY WAY OF DAMAGES;
(b) ASSUMING THAT RESPONDENTS ARE ENTITLED TO JUST COMPENSATION BY WAY OF DAMAGES, NO EVIDENCE WAS PRESENTED ANENT THE VALUATION OF RESPONDENTS’ PROPERTY AT THE TIME OF ITS TAKING IN THE YEAR 1978 TO JUSTIFY THE AWARD OF ONE THOUSAND SQUARE METERS (₱1000.00/SQ. M.) EVEN AS PAYMENT OF BACK RENTALS IS ITSELF IMPROPER.
This case revolves around the propriety of paying just compensation to respondents, and, by extension, the basis for computing the same. The threshold issue of whether respondents are entitled to just compensation hinges upon who owns the sub-terrain area occupied by petitioner.
Petitioner maintains that the sub-terrain portion where the underground tunnels were constructed does not belong to respondents because, even conceding the fact that respondents owned the property, their right to the subsoil of the same does not extend beyond what is necessary to enable them to obtain all the utility and convenience that such property can normally give. In any case, petitioner asserts that respondents were still able to use the subject property even with the existence of the tunnels, citing as an example the fact that one of the respondents, Omar G. Maruhom, had established his residence on a part of the property. Petitioner concludes that the underground tunnels 115 meters below respondents’ property could not have caused damage or prejudice to respondents and their claim to this effect was, therefore, purely conjectural and speculative.7
The contention lacks merit.
Generally, in an appeal by certiorari under Rule 45 of the Rules of Court, the Court does not pass upon questions of fact. Absent any showing that the trial and appellate courts gravely abused their discretion, the Court will not examine the evidence introduced by the parties below to determine if they correctly assessed and evaluated the evidence on record.8 The jurisdiction of the Court in cases brought to it from the CA is limited to reviewing and revising the errors of law imputed to it, its findings of fact being as a rule conclusive and binding on the Court.
In the present case, petitioner failed to point to any evidence demonstrating grave abuse of discretion on the part of the CA or to any other circumstances which would call for the application of the exceptions to the above rule. Consequently, the CA’s findings which upheld those of the trial court that respondents owned and possessed the property and that its substrata was possessed by petitioner since 1978 for the underground tunnels, cannot be disturbed. Moreover, the Court sustains the finding of the lower courts that the sub-terrain portion of the property similarly belongs to respondents. This conclusion is drawn from Article 437 of the Civil Code which provides:
ART. 437. The owner of a parcel of land is the owner of its surface and of everything under it, and he can construct thereon any works or make any plantations and excavations which he may deem proper, without detriment to servitudes and subject to special laws and ordinances. He cannot complain of the reasonable requirements of aerial navigation.
Thus, the ownership of land extends to the surface as well as to the subsoil under it. In Republic of the Philippines v. Court of Appeals,9 this principle was applied to show that rights over lands are indivisible and, consequently, require a definitive and categorical classification, thus:
The Court of Appeals justified this by saying there is “no conflict of interest” between the owners of the surface rights and the owners of the sub-surface rights. This is rather strange doctrine, for it is a well-known principle that the owner of a piece of land has rights not only to its surface but also to everything underneath and the airspace above it up to a reasonable height. Under the aforesaid ruling, the land is classified as mineral underneath and agricultural on the surface, subject to separate claims of title. This is also difficult to understand, especially in its practical application.
Under the theory of the respondent court, the surface owner will be planting on the land while the mining locator will be boring tunnels underneath. The farmer cannot dig a well because he may interfere with the mining operations below and the miner cannot blast a tunnel lest he destroy the crops above. How deep can the farmer, and how high can the miner go without encroaching on each others rights? Where is the dividing line between the surface and the sub-surface rights?
The Court feels that the rights over the land are indivisible and that the land itself cannot be half agricultural and half mineral. The classification must be categorical; the land must be either completely mineral or completely agricultural.
Registered landowners may even be ousted of ownership and possession of their properties in the event the latter are reclassified as mineral lands because real properties are characteristically indivisible. For the loss sustained by such owners, they are entitled to just compensation under the Mining Laws or in appropriate expropriation proceedings.10
Moreover, petitioner’s argument that the landowners’ right extends to the sub-soil insofar as necessary for their practical interests serves only to further weaken its case. The theory would limit the right to the sub-soil upon the economic utility which such area offers to the surface owners. Presumably, the landowners’ right extends to such height or depth where it is possible for them to obtain some benefit or enjoyment, and it is extinguished beyond such limit as there would be no more interest protected by law.11
In this regard, the trial court found that respondents could have dug upon their property motorized deep wells but were prevented from doing so by the authorities precisely because of the construction and existence of the tunnels underneath the surface of their property. Respondents, therefore, still had a legal interest in the sub-terrain portion insofar as they could have excavated the same for the construction of the deep well. The fact that they could not was appreciated by the RTC as proof that the tunnels interfered with respondents’ enjoyment of their property and deprived them of its full use and enjoyment, thus:
Has it deprived the plaintiffs of the use of their lands when from the evidence they have already existing residential houses over said tunnels and it was not shown that the tunnels either destroyed said houses or disturb[ed] the possession thereof by plaintiffs? From the evidence, an affirmative answer seems to be in order. The plaintiffs and [their] co-heirs discovered [these] big underground tunnels in 1992. This was confirmed by the defendant on November 13, 1992 by the Acting Assistant Project Manager, Agus 1 Hydro Electric Project (Exh. K). On September 16, 1992, Atty. Omar Maruhom (co-heir) requested the Marawi City Water District for permit to construct a motorized deep well over Lot 3 for his residential house (Exh. Q). He was refused the permit “because the construction of the deep well as (sic) the parcels of land will cause danger to lives and property.” He was informed that “beneath your lands are constructed the Napocor underground tunnel in connection with Agua Hydroelectric plant” (Exh. Q-2). There in fact exists ample evidence that this construction of the tunnel without the prior consent of plaintiffs beneath the latter’s property endangered the lives and properties of said plaintiffs. It has been proved indubitably that Marawi City lies in an area of local volcanic and tectonic activity. Lake Lanao has been formed by extensive earth movements and is considered to be a drowned basin of volcano/tectonic origin. In Marawi City, there are a number of former volcanoes and an extensive amount of faulting. Some of these faults are still moving. (Feasibility Report on Marawi City Water District by Kampsa-Kruger, Consulting Engineers, Architects and Economists, Exh. R). Moreover, it has been shown that the underground tunnels [have] deprived the plaintiffs of the lawful use of the land and considerably reduced its value. On March 6, 1995, plaintiffs applied for a two-million peso loan with the Amanah Islamic Bank for the expansion of the operation of the Ameer Construction and Integrated Services to be secured by said land (Exh. N), but the application was disapproved by the bank in its letter of April 25, 1995 (Exh. O) stating that:
“Apropos to this, we regret to inform you that we cannot consider your loan application due to the following reasons, to wit:
That per my actual ocular inspection and verification, subject property offered as collateral has an existing underground tunnel by the NPC for the Agus I Project, which tunnel is traversing underneath your property, hence, an encumbrance. As a matter of bank policy, property with an existing encumbrance cannot be considered neither accepted as collateral for a loan.”
All the foregoing evidence and findings convince this Court that preponderantly plaintiffs have established the condemnation of their land covering an area of 48,005 sq. meters located at Saduc, Marawi City by the defendant National Power Corporation without even the benefit of expropriation proceedings or the payment of any just compensation and/or reasonable monthly rental since 1978.12
In the past, the Court has held that if the government takes property without expropriation and devotes the property to public use, after many years, the property owner may demand payment of just compensation in the event restoration of possession is neither convenient nor feasible.13 This is in accordance with the principle that persons shall not be deprived of their property except by competent authority and for public use and always upon payment of just compensation.14
Petitioner contends that the underground tunnels in this case constitute an easement upon the property of respondents which does not involve any loss of title or possession. The manner in which the easement was created by petitioner, however, violates the due process rights of respondents as it was without notice and indemnity to them and did not go through proper expropriation proceedings. Petitioner could have, at any time, validly exercised the power of eminent domain to acquire the easement over respondents’ property as this power encompasses not only the taking or appropriation of title to and possession of the expropriated property but likewise covers even the imposition of a mere burden upon the owner of the condemned property.15 Significantly, though, landowners cannot be deprived of their right over their land until expropriation proceedings are instituted in court. The court must then see to it that the taking is for public use, that there is payment of just compensation and that there is due process of law.16
In disregarding this procedure and failing to recognize respondents’ ownership of the sub-terrain portion, petitioner took a risk and exposed itself to greater liability with the passage of time. It must be emphasized that the acquisition of the easement is not without expense. The underground tunnels impose limitations on respondents’ use of the property for an indefinite period and deprive them of its ordinary use. Based upon the foregoing, respondents are clearly entitled to the payment of just compensation.17 Notwithstanding the fact that petitioner only occupies the sub-terrain portion, it is liable to pay not merely an easement fee but rather the full compensation for land. This is so because in this case, the nature of the easement practically deprives the owners of its normal beneficial use. Respondents, as the owners of the property thus expropriated, are entitled to a just compensation which should be neither more nor less, whenever it is possible to make the assessment, than the money equivalent of said property.18
The entitlement of respondents to just compensation having been settled, the issue now is on the manner of computing the same. In this regard, petitioner claims that the basis for the computation of the just compensation should be the value of the property at the time it was taken in 1978. Petitioner also impugns the reliance made by the CA upon National Power Corporation v. Court of Appeals and Macapanton Mangondato19 as the basis for computing the amount of just compensation in this action. The CA found that “the award of damages is not excessive because the ₱1000 per square meter as the fair market value was sustained in a case involving a lot adjoining the property in question which case involved an expropriation by [petitioner] of portion of Lot 1 of the subdivision plan (LRC) PSD 116159 which is adjacent to Lots 2 and 3 of the same subdivision plan which is the subject of the instant controversy.”20
Just compensation has been understood to be the just and complete equivalent of the loss21 and is ordinarily determined by referring to the value of the land and its character at the time it was taken by the expropriating authority.22 There is a “taking” in this sense when the owners are actually deprived or dispossessed of their property, where there is a practical destruction or a material impairment of the value of their property, or when they are deprived of the ordinary use thereof. There is a “taking” in this context when the expropriator enters private property not only for a momentary period but for more permanent duration, for the purpose of devoting the property to a public use in such a manner as to oust the owner and deprive him of all beneficial enjoyment thereof.23 Moreover, “taking” of the property for purposes of eminent domain entails that the entry into the property must be under warrant or color of legal authority.24
Under the factual backdrop of this case, the last element of taking mentioned, i.e., that the entry into the property is under warrant or color of legal authority, is patently lacking. Petitioner justified its nonpayment of the indemnity due respondents upon its mistaken belief that the property formed part of the public dominion.
This situation is on all fours with that in the Mangondato case. NAPOCOR in that case took the property of therein respondents in 1979, using it to build its Aqua I Hydroelectric Plant Project, without paying any compensation, allegedly under the mistaken belief that it was public land. It was only in 1990, after more than a decade of beneficial use, that NAPOCOR recognized therein respondents’ ownership and negotiated for the voluntary purchase of the property.
In Mangondato, this Court held:
The First Issue: Date of Taking or Date of Suit?
The general rule in determining “just compensation” in eminent domain is the value of the property as of the date of the filing of the complaint, as follows:
“Sec. 4. Order of Condemnation. When such a motion is overruled or when any party fails to defend as required by this rule, the court may enter an order of condemnation declaring that the plaintiff has a lawful right to take the property sought to be condemned, for the public use or purpose described in the complaint, upon the payment of just compensation to be determined as of the date of the filing of the complaint. x x x” (Italics supplied).
Normally, the time of the taking coincides with the filing of the complaint for expropriation. Hence, many ruling of this Court have equated just compensation with the value of the property as of the time of filing of the complaint consistent with the above provision of the Rules. So too, where the institution of the action precedes entry to the property, the just compensation is to be ascertained as of the time of filing of the complaint.
The general rule, however, admits of an exception: where this Court fixed the value of the property as of the date it was taken and not the date of the commencement of the expropriation proceedings.
In the old case of Provincial Government of Rizal vs. Caro de Araullo, the Court ruled that “x x x the owners of the land have no right to recover damages for this unearned increment resulting from the construction of the public improvement (lengthening of Taft Avenue from Manila to Pasay) from which the land was taken. To permit them to do so would be to allow them to recover more than the value of the land at the time it was taken, which is the true measure of the damages, or just compensation, and would discourage the construction of important public improvements.”
In subsequent cases, the Court, following the above doctrine, invariably held that the time of taking is the critical date in determining lawful or just compensation. Justifying this stance, Mr. Justice (later Chief Justice) Enrique Fernando, speaking for the Court in Municipality of La Carlota vs. The Spouses Felicidad Baltazar and Vicente Gan, said, “x x x the owner as is the constitutional intent, is paid what he is entitled to according to the value of the property so devoted to public use as of the date of taking. From that time, he had been deprived thereof. He had no choice but to submit. He is not, however, to be despoiled of such a right. No less than the fundamental law guarantees just compensation. It would be injustice to him certainly if from such a period, he could not recover the value of what was lost. There could be on the other hand, injustice to the expropriator if by a delay in the collection, the increment in price would accrue to the owner. The doctrine to which this Court has been committed is intended precisely to avoid either contingency fraught with unfairness.”
Simply stated, the exception finds the application where the owner would be given undue incremental advantages arising from the use to which the government devotes the property expropriated — as for instance, the extension of a main thoroughfare as was in the case in Caro de Araullo. In the instant case, however, it is difficult to conceive of how there could have been an extra-ordinary increase in the value of the owner’s land arising from the expropriation, as indeed the records do not show any evidence that the valuation of P1,000.00 reached in 1992 was due to increments directly caused by petitioner’s use of the land. Since the petitioner is claiming an exception to Rule 67, Section 4, it has the burden in proving its claim that its occupancy and use — not ordinary inflation and increase in land values — was the direct cause of the increase in valuation from 1978 to 1992.
Side Issue: When is there “Taking” of Property?
But there is yet another cogent reason why this petition should be denied and why the respondent Court should be sustained. An examination of the undisputed factual environment would show that the “taking” was not really made in 1978.
This Court has defined the elements of “taking” as the main ingredient in the exercise of power of eminent domain, in the following words:
“A number of circumstances must be present in “taking” of property for purposes of eminent domain: (1) the expropriator must enter a private property; (2) the entrance into private property must be for more than a momentary period; (3) the entry into the property should be under warrant or color of legal authority; (4) the property must be devoted to a public use or otherwise informally appropriated or injuriously affected; and (5) the utilization of the property for public use must be in such a way to oust the owner and deprive him of all beneficial enjoyment of the property.”(Italics supplied)
In this case, the petitioner’s entrance in 1978 was without intent to expropriate or was not made under warrant or color of legal authority, for it believed the property was public land covered by Proclamation No. 1354. When the private respondent raised his claim of ownership sometime in 1979, the petitioner flatly refused the claim for compensation, nakedly insisted that the property was public land and wrongly justified its possession by alleging it had already paid “financial assistance” to Marawi City in exchange for the rights over the property. Only in 1990, after more than a decade of beneficial use, did the petitioner recognize private respondent’s ownership and negotiate for the voluntary purchase of the property. A Deed of Sale with provisional payment and subject to negotiations for the correct price was then executed. Clearly, this is not the intent nor the expropriation contemplated by law. This is a simple attempt at a voluntary purchase and sale. Obviously, the petitioner neglected and/or refused to exercise the power of eminent domain.
Only in 1992, after the private respondent sued to recover possession and petitioner filed its Complaint to expropriate, did petitioner manifest its intention to exercise the power of eminent domain. Thus the respondent Court correctly held:
“If We decree that the fair market value of the land be determined as of 1978, then We would be sanctioning a deceptive scheme whereby NAPOCOR, for any reason other than for eminent domain would occupy another’s property and when later pressed for payment, first negotiate for a low price and then conveniently expropriate the property when the land owner refuses to accept its offer claiming that the taking of the property for the purpose of the eminent domain should be reckoned as of the date when it started to occupy the property and that the value of the property should be computed as of the date of the taking despite the increase in the meantime in the value of the property.”
In Noble vs. City of Manila, the City entered into a lease-purchase agreement of a building constructed by the petitioner’s predecessor-in-interest in accordance with the specifications of the former. The Court held that being bound by the said contract, the City could not expropriate the building. Expropriation could be resorted to “only when it is made necessary by the opposition of the owner to the sale or by the lack of any agreement as to the price.” Said the Court:
“The contract, therefore, in so far as it refers to the purchase of the building, as we have interpreted it, is in force, not having been revoked by the parties or by judicial decision. This being the case, the city being bound to buy the building at an agreed price, under a valid and subsisting contract, and the plaintiff being agreeable to its sale, the expropriation thereof, as sought by the defendant, is baseless. Expropriation lies only when it is made necessary by the opposition of the owner to the sale or by the lack of any agreement as to the price. There being in the present case a valid and subsisting contract, between the owner of the building and the city, for the purchase thereof at an agreed price, there is no reason for the expropriation.” (Italics supplied)
In the instant case, petitioner effectively repudiated the deed of sale it entered into with the private respondent when it passed Resolution No. 92-121 on May 25, 1992 authorizing its president to negotiate, inter alia, that payment “shall be effective only after Agus I HE project has been placed in operation.” It was only then that petitioner’s intent to expropriate became manifest as private respondent disagreed and, barely a month, filed suit.25
In the present case, to allow petitioner to use the date it constructed the tunnels as the date of valuation would be grossly unfair. First, it did not enter the land under warrant or color of legal authority or with intent to expropriate the same. In fact, it did not bother to notify the owners and wrongly assumed it had the right to dig those tunnels under their property. Secondly, the “improvements” introduced by petitioner, namely, the tunnels, in no way contributed to an increase in the value of the land. The trial court, therefore, as affirmed by the CA, rightly computed the valuation of the property as of 1992, when respondents discovered the construction of the huge underground tunnels beneath their lands and petitioner confirmed the same and started negotiations for their purchase but no agreement could be reached.26
As to the amount of the valuation, the RTC and the CA both used as basis the value of the adjacent property, Lot 1 (the property involved herein being Lots 2 and 3 of the same subdivision plan), which was valued at ₱1,000 per sq. meter as of 1990, as sustained by this Court in Mangondato, thus:
The Second Issue: Valuation
We now come to the issue of valuation.
The fair market value as held by the respondent Court, is the amount of ₱1,000.00 per square meter. In an expropriation case where the principal issue is the determination of just compensation, as is the case here, a trial before Commissioners is indispensable to allow the parties to present evidence on the issue of just compensation. Inasmuch as the determination of just compensation in eminent domain cases is a judicial function and factual findings of the Court of Appeals are conclusive on the parties and reviewable only when the case falls within the recognized exceptions, which is not the situation obtaining in this petition, we see no reason to disturb the factual findings as to valuation of the subject property. As can be gleaned from the records, the court-and-the-parties-appointed commissioners did not abuse their authority in evaluating the evidence submitted to them nor misappreciate the clear preponderance of evidence. The amount fixed and agreed to by the respondent appellate Court is not grossly exorbitant. To quote:
“Commissioner Ali comes from the Office of the Register of Deeds who may well be considered an expert, with a general knowledge of the appraisal of real estate and the prevailing prices of land in the vicinity of the land in question so that his opinion on the valuation of the property cannot be lightly brushed aside.
“The prevailing market value of the land is only one of the determinants used by the commissioners’ report the other being as herein shown:
x x x
x x x
“Commissioner Doromal’s report, recommending P300.00 per square meter, differs from the 2 commissioners only because his report was based on the valuation as of 1978 by the City Appraisal Committee as clarified by the latter’s chairman in response to NAPOCOR’s general counsel’s query.”
In sum, we agree with the Court of Appeals that petitioner has failed to show why it should be granted an exemption from the general rule in determining just compensation provided under Section 4 of Rule 67. On the contrary, private respondent has convinced us that, indeed, such general rule should in fact be observed in this case.27
Petitioner has not shown any error on the part of the CA in reaching such a valuation. Furthermore, these are factual matters that are not within the ambit of the present review.
WHEREFORE, the petition is DENIED and the Decision of the Court of Appeals in C.A.-G.R. CV No. 57792 dated June 8, 2005 is AFFIRMED.
No costs.
SO ORDERED.
ADOLFO S. AZCUNA
Associate Justice
WE CONCUR:
REYNATO S. PUNO
Chairperson
Chief Justice
| (On Leave) *ANGELINA SANDOVAL-GUTIERREZ Associate Justice | RENATO C. CORONA Associate Justice |
CANCIO C. GARCIA
Associate Justice
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.
REYNATO S. PUNO
Chief Justice
G.R. No. 113194 March 11, 1996
NATIONAL POWER CORPORATION, petitioner, vs.
COURT OF APPEALS and MACAPANTON MANGONDATO, respondents.
PANGANIBAN, J.:p
At what point in time should the value of the land subject of expropriation be computed: at the date of the “taking'” or the date of the filing of the complaint for eminent domain? This is the main question posed by the parties in this petition for review on certiorari assailing the Decision1 of the Court of Appeals2 which affirmed in toto the decision of the Regional Trial Court of Marawi City3 . The dispositive portion of the decision of the trial court reads:4
WHEREFORE, the prayer in the recovery case for Napocor’s surrender of the property is denied but Napocor is ordered to pay monthly rentals in the amount of P15,000.00 from 1978 up to July 1992 with 12% interest per annum from which sun the amount of P2,199,500.00 should be deducted; and the property is condemned in favor of Napocor effective July 1992 upon payment of the fair market value of the property at One Thousand (P1,000.00) Pesos per square meter or a total of Twenty-One Million Nine Hundred Ninety-five Thousand (P21,995.000.00) Pesos.
SO ORDERED. Cost against NAPOCOR.
The Facts
The facts are undisputed by both the petitioner and the private respondent,5 and are quoted from the Decision of the respondent Court6, as follows:
In 1978, National Power Corporation (NAPOCOR), took possession of a 21,995 square meter land which is a portion of Lot 1 of the subdivision plan (LRC) Psd-116159 situated in Marawi City, owned by Mangondato, and covered by Transfer Certificate Title No. T-378-A, under the mistaken belief that it forms part of the public land reserved for use by NAPOCOR for hydroelectric power purposes under Proclamation No. 1354 of the President of the Philippines dated December 3, 1974.
NAPOCOR alleged that the subject land was until then possessed and administered by Marawi City so that in exchange for the city’s waiver and quitclaim of any right over the property, NAPOCOR had paid the city a “financial assistance” of P40.00 per square meter.
In 1979, when NAPOCOR Started building its Agus I (HE Hydroelectric Plant) Project, Mangondato demanded compensation from NAPOCOR. NAPOCOR refused to compensate insisting that the property is public land and that it had already paid “financial assistance” to Marawi City in exchange for the rights over the property.
Mangondato claimed that the subject land is his duly registered private property covered by Transfer Certificate of Title No. T-378-A in his name, and that he is not privy to any agreement between NAPOCOR and Marawi City and that any payment made to said city cannot be considered as payment to him.
More than a decade later NAPOCOR acceded to the fact that the property belongs to Mangondato.
At the outset, in March, 1990, NAPOCOR’s regional legal counsel, pursuant to Executive Order No. 329 dated July 11, 1988 requested Marawi City’s City Appraisal Committee to appraise the market value of the property in Saduc, Marawi City affected by the infrastructure projects of NAPOCOR without specifying any particular land-owner . The City Appraisal Committee in its Minutes dated March 8, 1990, fixed the fair market value as follows:7
Land Fair Market Value Per Sq. M.
Price Per Sq. M. Price per Sq. M.
Along the City Not in the City
National Highway National Highway
P150 Residential Lot P100
P250 Commercial Lot P180
P300 Industrial Lot P200
On July 13, 1990, NAPOCOR’s National Power Board (hereafter NAPOCOR’s board) passed Resolution No. 90-225 resolving to pay Mangondato P100.00 per square meter for only a 12,132 square meter portion of the subject property plus 12% interest per annum from 1978. However, in the August 7, 1990 board meeting, confirmation of said resolution was deferred to allow NAPOCOR’s regional legal counsel to determine whether P100.00 per square meter is the fair market value. (Records, Civil Case No. 606-92 p. 45).
On August 14, 1990, NAPOCOR’s board passed Resolution No. 90-316 resolving that Mangondato be paid the base price of P40.00 per square meter for the 12,132 square meter portion (P485,280,001 plus 12% interest per annum from 1978 (P698,808.00) pending the determination whether P100.00 per square meter is the fair market value of the property (id.).
Pursuant to the aforementioned resolution Mangondato was paid P1,184,088.00 (id., p. 58).
NAPOCOR’s regional legal counsel’s findings embodied in 2 memoranda to NAPOCOR’s general counsel (dated January 29, 1991 and February 19, 1991) state that Mangondato’s property is classified as industrial, that the market value of industrial lots In Marawi City when NAPOCOR took possession is P300,00 for those along the national highway and that on the basis of recent Supreme Court decisions, NAPOCOR has to pay not less than P300.00 square meter. NAPOCOR’s general counsel incorporated the foregoing findings in his report to the board plus the data that the area possessed by NAPOCOR is 21,995 square meters, and that the legal rate of interest per annum from the time of the taking of the property alleged to be in 1978, is 12%, but recommended to the board that the fair market value of the property is P100.00 per square meter; NAPOCOR’s board on May 17, 1991 passed Resolution No. 91,247 resolving to pay Mangondato P100.00 per square meter for the property excluding 12% interest per annum (id., pp. 50-52).
In a letter dated December 17, 1991, Mangondato disagreed with the NAPOCOR board’s Resolution No. 91-247 pegging the compensation for his land at P100.000 per square meter without interest from 1978. Mangondato submitted that the fair market value of his land is even more than the P300.00 (per) square meter stated in the City Appraisal Report but that for expediency, he is willing to settle for P300.00 per square meter plus 12% interest per annum from 1978 (id., pp. 53-59).
In another letter dated February 4, 1992, Mangondato reiterated his disagreement to the P100.00 per square meter compensation without interest. At the same time, to get partial payment, he asked that he be paid in the meantime, P100.00 per square meter without prejudice to pursuing his claim for the proper and just compensation plus interest thereon (id., p. 60).
On February 12, 1992, NAPOCOR’s general counsel filed a memorandum for its president finding no legal impediment if they, in the meantime were to pay Mangondato P100.00 per square meter without prejudice to the final determination of the proper and just compensation by the board inasmuch as the regional counsel submitted to him (general counsel) 2 memoranda stating that the appraisal of industrial lots in Marawi City when NAPOCOR took possession is P300.00 per square meter for those along the national highway and P200.00 per square meter for those not along the highway, and that NAPOCOR has to pay not less than P300.00 per square meter plus 12% interest on the basis of recent Supreme Court decisions. Further, the general counsel submitted that since the board has already set the purchase price at P100.00 per square meter (Resolution No. 91-247), NAPOCOR would not be prejudiced thereby (id., pp. 60-62).
In March, 1992, the parties executed a Deed of Sale Of A Registered Property where NAPOCOR acceded to Mangondato’s request of provisional payment of P100.00 per square meter excluding interest and without prejudice to Mangondato’s pursuance of claims for just compensation and interest. Mangondato was paid P1,015,412.00 in addition to the P,184,088.00 earlier paid to him by NAPOCOR which payments total P2,199,500.00 for the 12,995 square meter land (Records, Civil Case No. 610-92, pp. 85-87).
In his letter to NAPOCOR’s president dated April 20, 1992, Mangondato asked for the payment of P300.00 per square meter plus 12% interest per annum from 1978. NAPOCOR’s president, in his memorandum to the board dated April 24, 1993 recommended the approval of Mangodato’s request (Records, Civil Case No. 605-92, pp. 63-69).
On May 25, 1992, NAPOCOR’s board passed Resolution No. 92-121 granting its president the authority to negotiate for the payment of P100.00 per square meter for the land plus 12% interest per annum from 1978 less the payments already made to Mangondato and to Marawi City on the portion of his land, and with the provisos that said authorized payment shall be effected only after Agus I HE Project has been placed in operation and that said payment shall be covered by a deed of absolute sale with a quitclaim executed by Mangondato (id., pp. 70-71).
On July 7, 1992, Mangondato filed before the lower court Civil Case No. 605-92 against NAPOCOR seeking to recover the possession of the property described in the complaint as Lots 1 and 3 of the subdivision plan (LRC) Psd-116159 against NAPOCOR, the payment of a monthly rent of P15,000.00 from 1978 until the surrender of the property, attorney’s fees and costs, and the issuance of a temporary restraining order and a writ of preliminary mandatory injunction to restrain NAPOCOR from proceeding with any construction and/or improvements on Mangondato’s land or from committing any act of dispossession (id., pp. 1-8).
The temporary restraining order was issued by the lower court. Anent the prayer for the writ of preliminary mandatory injunction, NAPOCOR filed its Opposition thereto on July 23, 1992 (id., pp. 17-20).
Before the lower court could resolve the pending incident on the writ of preliminary mandatory injunction, and instead of filing a motion to dismiss, NAPOCOR, on July 27, 1992, filed also before the lower court, Civil Case No. 610-92 which is a Complaint for eminent domain against Mangondato over the subject property (Records, Civil Case No. 610-92, pp. 1-3) .
On the same date Mangondato filed his Manifestation in Lieu of Answer contending that the negotiations for payment made by NAPOCOR were “virtual dictations” on a ”take it or leave it” basis; that he was given the “run-around” by NAPOCOR for 15 years; so that there was no agreement reached as to payment because of NAPOCOR’s insistence of its own determination of the price; that he treats the P2,199,500.00 so far received by him as partial payment for the rent for the use of his property. Mangondato prayed that he be compensated in damages for the unauthorized taking and continued possession of his land from 1978 until the filing of the Complaiant (sic) in the expropriation case; that should the lower court order the expropriation of the subject property, that the just compensation for the land be reckoned from the time of the filing of the expropriation case; that the expropriation case can be consolidated with the recovery of possession case; that the restraining order issued in the recovery of possession case be maintained and a writ of preliminary injunction be at once issued against NAPOCOR; and that the NAPOCOR be ordered to deposit the value of the land as provisionally determined by the lower court (id., pp. 4-5).
Upon agreement of the parties, the 2 cases were ordered consolidated and the lower court appointed the following commissioners; Atty. Saipal Alawi, representing the lower court; Atty. Connie Doromal, representing NAPOCOR; and Mr. Alimbsar A. Ali, from the City Assessor’s Office to ascertain and report to the court the just compensation (id., pp. 6-7).
The lower court ordered NAPOCOR to deposit with the Philippine National Bank the amount of P10, 997,500.00, provisionally fixing the value of the land at P500.00 per square meter P100.00 lower than the assessed value of the land appearing in Tax Declaration No. 0873 for 1992 which was used as basis by the lower court (id., p. 8).
In its Motion for Reconsideration of the Order For Provisional Deposit[,] NAPOCOR opposed the provisional value quoted by the lower court saying that the basis of the provisional value of the land should be the assessed value of the property as of the time of the taking which in this case is 1978 when the assessed value of the land under Tax Declaration No. 7394 was P100 per square meter (id., pp. 28-32). In reply, Mangondato filed his Opposition to Motion For Reconsideration Of the Order For Provisional Deposit (id., pp. 44-46). However, the lower court did not rule on the provisional value to be deposited and chose to go right into the determination of just compensation on that the “provisional valuation could not be decided without going into the second phase of expropriation case which is the determination by the court of the just compensation for the property soguht (sic) to be taken (NPC vs. Jocson, supra)” (Decision, p. 5.)
On August 5, 1992, Mangondato filed a Motion To Dismiss in the expropriation case alleging that NAPOCOR filed its Complaint for eminent domain not for the legitimate aim of pursuing NAPOCOR’s business and purpose but to legitimize a patently illegal possession and at the same time continue dictating its own valuation of the property. Said motion was however, later withdrawn by Mangondato (id., pp. 37-39 and 47).
In the meanwhile, the commissioners filed their respective reports. On July 28, 1992, Commissioner Doromal filed his report recommending a fair market value of P300.00 per square meter as of November 23, 1978, (id., pp. 11-27). On August 6, 1992, Commissioners Alawi and Ali filed their joint report recommending a fair market value of P1,000.00 per square meter as of 1992 (id., pp. 40-42).
After the parties filed their respective comments to commissioners’ reports. On August 21, 1992, the lower court rendered its decision denying Mangondato recovery of possession of the property but ordering NAPOCOR to pay a monthly rent of P15,000.00 from 1978 up to July 1992 with 12% interest per annum and condemning the property in favor of NAPOCOR effective July, 1992 upon payment of P1,000.00 per square meter or a total of P21,995,000.00 as just compensation.
Mangondato filed a Motion For Partial Execution Pending Appeal which was granted by the lower court in an Order dated September 15, 1992 (id., pp. 151-152 and 157-160). However, on appeal by NAPOCOR via a Petition For Certiorari in CA-G.R. SP No. 28971 to this Court, said Order was annulled and set aside (Rollo, pp. 30-37).
NAPOCOR filed a Motion For Reconsideration of the decision alleging that the fair market value of the property at the time it was taken allegedly in 1978 is P40.00 per square meter. After Mangondato filed his Opposition To Motion For Reconsideration the lower court denied NAPOCOR’s motion for reconsideration in an Order date September 15, 1992 (Records, Civil Case No. 610-92, pp. 145-149).
In the meanwhile, on August 7, 1992, Mangondato filed and Ex-Parte Manifestation To Correct Clerical Error of Description of Property submitting that Lot 3 which does not form part of the subject property was included in the Complaint because clerical error inadvertently committed by the typist who continuously copied the description of the property covered by Transfer Certificate of Title No. T-378-A, and thus praying that the portion of the Complaint describing Lot 3 be deleted (Records, Civil Case No. 605-92, p. 22).
On August 12, 1992, the intervenors filed their Motion For Intervention and Intervention claiming interest against each of the parties on the ground that Lot 3 which is included in the Complaint has since been conveyed by Mangondato to their predecessors-in-interest and that they are entitled to just compensation from NAPOCOR is entitled to expropriate the entire area described in the Complaint (id., pp. 23-34).
In an Order dated August 19, 1992 the lower court granted intervenor’s Motion For Intervention (id., p. 72).
On August 25, 1992, the lower court ordered the delegation of the portion in the Complaint describing Lot 3 and declared that intervenors’ Motion For Intervention has become moot (id., p. 82).
On October 13, 1992 the intervenors filed their Motion To Reconsider the Order Of August 25, 1992 and the Decision Dated August 21, 1992 which was however denied by the lower court in an Order dated November 26, 1992 (id., pp. 162-184).
The Issues
Two errors were raised before this Court by the petitioner, thus:8
ASSIGNMENT OF ERRORS
THE RESPONDENT COURT ERRED IN AFFIRMING THAT THE JUST COMPENSATION FOR THE PROPERTY IS ITS VALUE IN 1992, WHEN THE COMPLAINT WAS FILED, AND NOT ITS VALUE IN 1978, WHEN THE PROPERTY WAS TAKEN BY PETITION.
THE COURT ERRED IN FIXING THE VALUE OF JUST COMPENSATION AT P1,000.00 PER SQUARE METER INSTEAD OF P40.00 PER SQUARE METER.
The petitioner summarized the two issues it raised by asking “whether or not the respondent court was justified in deviating from the wall-settled doctrine that just compensation is the equivalent of the value of the property taken for public use reckoned from the time of taking;”9 in his Comment, private respondent worded the issues as follows 10:
. . . As stated by the respondent court, Napocor, in its appeal —
. . .avers that the taking of the property (sic) should not be reckoned as of the year 1992 when NAPOCOR filed its Complaint for eminent domain but as of the year 1978 when it took possession of the property, and that the just compensation, determined as it should be, on the basis of the value of the property as of 1978, as P40.00 per square meter.
The petitioner, after failing to persuade both lower courts, reiterated before us its proposition (with cited cases) “that when the taking of property precedes the filing of the judicial proceeding, the value of the property at the time it was taken shall be the basis for the payment of just compensation”. 11
The First Issue: Date of Taking or Date of Suit?
The general rule in determining “just compensation” in eminent domain is the value of the property as of the date of the filing of complaint, as follows 12:
Sec. 4. Order of Condemnation. When such a motion is overruled or when any party fails to defend as required by this rule, the court may enter an order of condemnation declaring that the plaintiff has a lawful right to take the property sought to be condemned, for the public use or purpose described in the complaint, upon the payment of just compensation to, be determined as of the date of the filing of the complaint. . . . (Emphasis supplied).
Normally, the time of the taking coincides with the filing of the complaint for expropriation. Hence, many rulings of this Court have equated just compensation with the value of the property as of the time of filing of the complaint consistent with the above provision of the Rules. So too, where the institution of the action precedes entry into the property, the just compensation is to be ascertained as of the time of the filing of the complaint. 13
The general rule, however, admits of an exception where this Court fixed the value of the property as of the date, it was taken and not at the date of the commencement of the expropriation proceedings.
In the old case of Provincial Government of Rizal vs. Caro de
Araullo 14, the Court ruled that “. . . the owners of the land have no right to recover damages for this unearned increment resulting from the construction of the public improvement (lengthening of Taft Avenue from Manila to Pasay) for which the land was taken. To permit them to do so would be to allow them to recover more than the value of the land at the time when it was taken, which is the true measure of the damages, or just compensation, and would discourage the construction of important public improvements.”
In subsequent cases 15 the Court, following the above doctrine, invariably held that the time of taking is the critical date in determining lawful or just compensation. Justifying this stance, Mr. Justice (later Chief Justice) Enrique Fernando, speaking for the Court in Municipality of La Carlota vs. The Spouses Felicidad Baltazar and Vicente Gan 16, said, “. . . the owner as is the constitutional intent, is paid what he is entitled to according to the value of the property so devoted to public use as of the date of the taking. From that time, he had been deprived thereof. He had no choice but to submit. He is not, however, to be despoiled of such a right. No less than the fundamental law guarantee’s just compensation. It would be an injustice to him certainly if from such a period, he could not recover the value of what was lost. There could be on the other hand, injustice to the expropriator if by a delay in the collection, the increment in price would accrue to the owner. The doctrine to which this Court has been committed is intended precisely to avoid either contingency fraught with unfairness.”
Simply stated, the exception finds application where the owner would be given undue incremental advantages arising from the use to which the government devotes the property expropriated — as for instance, the extension of a main thoroughfare as was the case in Caro de Araullo. In the instant case, however, it is difficult to conceive of how there could have been an extra-ordinary increase in the value of the owner’s land arising from the expropriation, as indeed the records do not show any evidence that the valuation of P1,000.00 reached in 1992 was due to increments directly caused by petitioner’s use of the land. Since the petitioner is claiming an exception to Rule 67, Section 4, 17 it has the burden of proving its claim that its occupancy and use — not ordinary inflation and increase in land values — was the direct cause of the increase in valuation from 1978 to 1992.
Side Issue: When is There, “Taking” of Property?
But there is yet another cogent reason why this petition should be denied and why the respondent Court should be sustained. An examination of the undisputed factual environment would show that the “taking” was not really made in 1973.
This Court has defined the elements of ”taking” as the main ingredient in the exercise of power of eminent domain, 18 in the following words:
A number of circumstances must be present in the “taking” of property for purposes of eminent domain: (1) the expropriator must enter a private property; (2) the entrance into private property must be for more than a momentary period; (3) the entry into the property should be under warrant or color of legal authority; (4) the property must be devoted to a public use or otherwise informally appropriated or injuriously affected; and (5) the utilization of the property for public use must be in such a way to oust the owner and deprive him of all beneficial enjoyment of the property. (Emphasis supplied)
In this case, the petitioner’s entrance in 1978 was without intent to expropriate or was not made under warrant or color of legal authority, for it believed the property was public land covered by proclamation No. 1354. When the private respondent raised his claim of ownership sometime in 1979, the petitioner flatly refused the claim for compensation, nakedly insisted that the property was public land and wrongly justified its possession by alleging it had already paid “financial assistance” to Marawi City in exchange for the rights over the property. Only in 1990, after more than a decade of beneficial use, did the petitioner recognize private respondent’s ownership and negotiate for the voluntary purchase of the property. A Deed of Sale with provisional payment and subject to negotiations for the correct price was then executed. Clearly, this is not the intent nor the expropriation contemplated by law. This is a simple attempt at a voluntary purchase and sale. Obviously, the petitioner neglected and/or refused to exercise the power of eminent domain.
Only in 1992, after the private respondent sued to recover possession and petitioner filed its Complaint to expropriate, did petitioner manifest its intention to exercise the power of eminent domain. Thus, the respondent Court correctly held: 19
If We decree that the fair market value of the land be determined as of 1978, then We would be sanctioning a deceptive scheme whereby NAPOCOR, for any reason other than for eminent domain would occupy another’s property and when later pressed for payment, first negotiate for a low price and then conveniently expropriate the property when the landowner refuses to accept its offer claiming that the taking of the property for the purpose of eminent domain should be reckoned as of the date when it started to occupy the property and that the value of the property should be computed as of the date of the taking despite the increase in the meantime in the value of the property.
In Noble vs. City of Manila,20 the City entered into a lease-purchase agreement of a building constructed by the petitioner’s predecessor-in-interest in accordance with the specifications of the former. The Court held that being bound by the said contract, the City could not expropriate the building. Expropriation could be reported to “only when it is made necessary by the opposition of the owner to the sale or by the lack of any agreement as to the price”. Said the Court:
The contract, therefore, in so far as it refers to the purchase of the building, as we have interpreted it, is in force, not having been revoked by the parties or by judicial decision. This being the case, the city being bound to buy the building at an agreed price, under a valid and subsisting contract, and the plaintiff being agreeable to its sale, the expropriation thereof, as sought by the defendant, is baseless. Expropriation lies only when it is made necessary by the opposition of the owner to the sale or by the lack of any agreement as to the price. There being in the present case a valid and subsisting contract, between the owner of the building and the city, for the purchase thereof at an agreed price, there is no reason for the expropriation. (Emphasis supplied).
In the instant case, petitioner effectively repudiated the deed of sale it entered into with the private respondent when it passed Resolution No. 92-121 on May 25, 1992 authorizing its president to negotiate, inter alia, that payment” shall be effected only after Agus I HE project has been placed in operation”. It was only then that petitioner’s intent to expropriate became manifest as private respondent disagreed and, barely a month after, filed suit.
The Second Issue: Valuation
We now come to the issue of valuation.
The fair market value as held by the respondent Court, is the amount of P1,000.00 per square meter. In an expropriation case where the principal issue is the determination of just compensation, as is the case here, a trial before Commissioners is indispensable to allow the parties to present the evidence on the issue of just compensation.21 Inasmuch as determination of just compensation in eminent domain cases is a judicial function 22 and factual findings of the Court of Appeals are conclusive on the parties and reviewable only when the case falls within the recognized exceptions 23, which is not the situation obtaining in this petition, we see no reason to disturb the factual findings as to valuation of the subject property. As can be gleaned from the record, the court-and-the-parties-appointed commissioners did not abuse their authority in evaluating the evidence submitted to them nor misappreciate the clear preponderance of evidence. The amount fixed and agreed to by the respondent appellate Court is not grossly exorbitant. 24 To quote: 25
Commissioner Ali comes from the Office of the Register of Deeds who may well be considered an expert, with a general knowledge of the appraisal of real estate and the prevailing prices of land in the vicinity of the land in question so that his opinion on the valuation of the property cannot be lightly brushed aside.
The prevailing market value of the land is only one of the determinants used by the commissioners’ report the others being as herein shown:
xxx xxx xxx
Commissioner Doromal’s report, recommending P300.00 per square meter, differs from the 2 commissioners only because his report was based on the valuation as of 1978 by the City Appraisal Committee as clarified by the latter’s chairman in response to NAPOCOR’s general counsel’s query (id., pp. 128-129).
In sum, we agree with the Court of Appeals that petitioner has failed to show why it should be granted an exemption from the general rule in determining just compensation provided under Section 4 of Rule 67. On the contrary, private respondent has convinced us that, indeed, such general rule should in fact be observed in this case.
WHEREFORE, the petition is hereby DISMISSED and the judgment appealed from AFFIRMED, except as to the interest on the monthly rentals. which is hereby reduced from twelve percent to the legal rate of six percent (6%) per annum. Costs against the petitioner.
SO ORDERED.
Narvasa, C.J., Davide, Jr., Melo and Francisco, JJ., concur.
Footnotes
1 Rollo, pp. 24-40.
2 CA-G.R. CV No. 39353, decided by the Fifth Division composed of J. Cezar D. Francisco, ponente, and JJ. Manuel C. Herrera (chairman) and Buenaventura J. Guerrero.
3 12th Judicial Region, Branch VIII, Marawi City in two (2) consolidated cases: Civil Case No. 605-92 and Civil Case No. 610-92.
4 Rollo, p. 24-A.
5 Ibid., pp. 74 & 93.
6 Ibid., pp. 24-A-33.
7 Ibid., p. 75.
8 Ibid., p. 10.
9 Ibid., pp. 93-94.
10 Ibid., p. 50.
11 Ibid., p . 94.
12 Section 4, Rule 69 of the Revised Rules of Court.
13 B. H. Berkenkotter & Co. vs. Court of Appeals, 216 SCRA 584, 587 (December 14, 1992); Republic of the Philippines vs. Philippine National Bank, 1 SCRA 957 (April 21, 1961).
14 58 Phil. 308, 316 (August 16, 1933).
15 Provincial Government of Rizal vs. Caro de Araullo, supra, at p. 317; Republic of the Philippines vs. Lara, et al., 96 Phil. 170 (November 29, 1954); Alfonso vs. Pasay City, 106 Phil. 1017 (January 30, 1960); Municipality of La Carlota vs. The Spouses Felicidad Baltazar and Vicente Gan, infra.
16 45 SCRA 235 (May 30, 1972).
17 Supra.
18 Republic vs. Vda. de Castellvi, 58 SCRA 336, 337 (August 15, 1974).
19 Rollo, p. 36.
20 67 Phil. 1 (December 24, 1938).
21 Manila Electric Company vs. Pineda, 206 SCRA 196 (February 13, 1992).
22 National Power Corporation vs. Jocson, 206 SCRA 520 (February 25, 1992).
23 Coca-Cola Bottlers Philippines, Inc. vs. Court of Appeals, 229 SCRA 533 (January 27, 1994).
24 Republic vs. Court of Appeals, 154 SCRA 428, 430 (September 30, 1987).
25 Rollo, pp. 36-38.
FIRST DIVISION
G.R. No. 165828 August 24, 2011
NATIONAL POWER CORPORATION, Petitioner,
vs.
HEIRS OF MACABANGKIT SANGKAY, namely: CEBU, BATOWA-AN, SAYANA, NASSER, MANTA, EDGAR, PUTRI , MONGKOY*, and AMIR, all surnamed MACABANGKIT, Respondents.
D E C I S I O N
BERSAMIN, J.:
Private property shall not be taken for public use without just compensation.
– Section 9, Article III, 1987 Constitution
The application of this provision of the Constitution is the focus of this appeal.
Petitioner National Power Corporation (NPC) seeks the review on certiorari of the decision promulgated on October 5, 2004,1 whereby the Court of Appeals (CA) affirmed the decision dated August 13, 1999 and the supplemental decision dated August 18, 1999, ordering NPC to pay just compensation to the respondents, both rendered by the Regional Trial Court, Branch 1, in Iligan City (RTC).
Antecedents
Pursuant to its legal mandate under Republic Act No. 6395 (An Act Revising the Charter of the National Power Corporation), NPC undertook the Agus River Hydroelectric Power Plant Project in the 1970s to generate electricity for Mindanao. The project included the construction of several underground tunnels to be used in diverting the water flow from the Agus River to the hydroelectric plants.2
On November 21, 1997, the respondents, namely: Cebu, Bangowa-an, Sayana, Nasser, Manta, Edgar, Putri, Mongkoy and Amir, all surnamed Macabangkit (Heirs of Macabangkit), as the owners of land with an area of 221,573 square meters situated in Ditucalan, Iligan City, sued NPC in the RTC for the recovery of damages and of the property, with the alternative prayer for the payment of just compensation.3 They alleged that they had belatedly discovered that one of the underground tunnels of NPC that diverted the water flow of the Agus River for the operation of the Hydroelectric Project in Agus V, Agus VI and Agus VII traversed their land; that their discovery had occurred in 1995 after Atty. Saidali C. Gandamra, President of the Federation of Arabic Madaris School, had rejected their offer to sell the land because of the danger the underground tunnel might pose to the proposed Arabic Language Training Center and Muslims Skills Development Center; that such rejection had been followed by the withdrawal by Global Asia Management and Resource Corporation from developing the land into a housing project for the same reason; that Al-Amanah Islamic Investment Bank of the Philippines had also refused to accept their land as collateral because of the presence of the underground tunnel; that the underground tunnel had been constructed without their knowledge and consent; that the presence of the tunnel deprived them of the agricultural, commercial, industrial and residential value of their land; and that their land had also become an unsafe place for habitation because of the loud sound of the water rushing through the tunnel and the constant shaking of the ground, forcing them and their workers to relocate to safer grounds.
In its answer with counterclaim,4 NPC countered that the Heirs of Macabangkit had no right to compensation under section 3(f) of Republic Act No. 6395, under which a mere legal easement on their land was established; that their cause of action, should they be entitled to compensation, already prescribed due to the tunnel having been constructed in 1979; and that by reason of the tunnel being an apparent and continuous easement, any action arising from such easement prescribed in five years.
Ruling of the RTC
On July 23, 1998, an ocular inspection of the land that was conducted by RTC Judge Mamindiara P. Mangotara and the representatives of the parties resulted in the following observations and findings:
a. That a concrete post which is about two feet in length from the ground which according to the claimants is the middle point of the tunnel.
b. That at least three fruit bearing durian trees were uprooted and as a result of the construction by the defendant of the tunnel and about one hundred coconuts planted died.
c. That underground tunnel was constructed therein.5
After trial, the RTC ruled in favor of the plaintiffs (Heirs of Macabangkit),6 decreeing:
WHEREFORE, premises considered:
1. The prayer for the removal or dismantling of defendant’s tunnel is denied. However, defendant is hereby directed and ordered:
a)To pay plaintiffs’ land with a total area of 227,065 square meters, at the rate of FIVE HUNDRED (₱500.00) PESOS per square meter, or a total of ONE HUNDRED THIRTEEN MILLION FIVE HUNDRED THIRTY TWO THOUSAND AND FIVE HUNDRED (₱113,532,500.00), PESOS, plus interest, as actual damages or just compensation;
b) To pay plaintiff a monthly rental of their land in the amount of THIRTY THOUSAND (₱30,000.00) PESOS from 1979 up to July 1999 with 12% interest per annum;
c)To pay plaintiffs the sum of TWO HUNDRED THOUSAND (₱200,000.00) PESOS, as moral damages;
d) To pay plaintiffs, the sum of TWO HUNDRED THOUSAND (₱200,000.00) PESOS, as exemplary damages;
e)To pay plaintiffs, the sum equivalent to 15% of the total amount awarded, as attorney’s fees, and to pay the cost.
SO ORDERED.
The RTC found that NPC had concealed the construction of the tunnel in 1979 from the Heirs of Macabangkit, and had since continuously denied its existence; that NPC had acted in bad faith by taking possession of the subterranean portion of their land to construct the tunnel without their knowledge and prior consent; that the existence of the tunnel had affected the entire expanse of the land, and had restricted their right to excavate or to construct a motorized deep well; and that they, as owners, had lost the agricultural, commercial, industrial and residential value of the land.
The RTC fixed the just compensation at ₱500.00/square meter based on the testimony of Dionisio Banawan, OIC-City Assessor of Iligan City, to the effect that the appraised value of the adjoining properties ranged from ₱700.00 to ₱750.00, while the appraised value of their affected land ranged from ₱400.00 to ₱500.00. The RTC also required NPC to pay rentals from 1979 due to its bad faith in concealing the construction of the tunnel from the Heirs of Macabangkit.
On August 18, 1999, the RTC issued a supplemental decision,7 viz:
Upon a careful review of the original decision dated August 13, 1999, a sentence should be added to paragraph 1(a) of the dispositive portion thereof, to bolster, harmonize, and conform to the findings of the Court, which is quoted hereunder, to wit:
“Consequently, plaintiffs’ land or properties are hereby condemned in favor of defendant National Power Corporation, upon payment of the aforesaid sum.”
Therefore, paragraph 1(a) of the dispositive portion of the original decision should read, as follows:
a) To pay plaintiffs’ land with a total area of 227,065 square meters, at the rate of FIVE HUNDRED (₱500.00) PESOS per square meter, or a total of ONE HUNDRED THIRTEEN MILLION FIVE HUNDRED THIRTY TWO THOUSAND AND FIVE HUNDRED (₱113,532,500.00) PESOS, plus interest, as actual damages or just compensation; Consequently, plaintiffs’ land or properties are hereby condemned in favor of defendant National Power Corporation, upon payment of the aforesaid sum;
This supplemental decision shall be considered as part of paragraph 1(a) of the dispositive portion of the original decision.
Furnish copy of this supplemental decision to all parties immediately.
SO ORDERED.
On its part, NPC appealed to the CA on August 25, 1999.8
Earlier, on August 18, 1999, the Heirs of Macabangkit filed an urgent motion for execution of judgment pending appeal.9 The RTC granted the motion and issued a writ of execution,10 prompting NPC to assail the writ by petition for certiorari in the CA. On September 15, 1999, the CA issued a temporary restraining order (TRO) to enjoin the RTC from implementing its decision. The Heirs of Macabangkit elevated the ruling of the CA (G.R. No. 141447), but the Court upheld the CA on May 4, 2006.11
Ruling of the CA
NPC raised only two errors in the CA, namely:
I
THE COURT A QUO SERIOUSLY ERRED IN RULING THAT NAPOCOR’S UNDERGROUND TUNNEL IN ITS AGUS RIVER HYDRO-ELECTRIC PLANT PROJECT TRAVERSED AND/OR AFFECTED APPELLEES’ PROPERTY AS THERE IS NO CLEAR EVIDENCE INDUBITABLY ESTABLISHING THE SAME
II
THE COURT A QUO SERIOUSLY ERRED IN GRANTING APPELLEES’ CLAIMS IN THEIR ENTIRETY FOR GRANTING ARGUENDO THAT NAPOCOR’S UNDERGROUND TUNNEL INDEED TRAVERSED APPELLEE’S PROPERTY, THEIR CAUSE OF ACTION HAD ALREADY BEEN BARRED BY PRESCRIPTION, ESTOPPEL AND LACHES
On October 5, 2004, the CA affirmed the decision of the RTC, holding that the testimonies of NPC’s witness Gregorio Enterone and of the respondents’ witness Engr. Pete Sacedon, the topographic survey map, the sketch map, and the ocular inspection report sufficiently established the existence of the underground tunnel traversing the land of the Heirs of Macabangkit; that NPC did not substantiate its defense that prescription already barred the claim of the Heirs of Macabangkit; and that Section 3(i) of R.A. No. 6395, being silent about tunnels, did not apply, viz:
As regard Section 3(i) of R.A. No. 6395 (An Act Revising the Charter of the National Power Corporation), it is submitted that the same provision is not applicable. There is nothing in Section 3(i) of said law governing claims involving tunnels. The same provision is applicable to those projects or facilities on the surface of the land, that can easily be discovered, without any mention about the claims involving tunnels, particularly those surreptitiously constructed beneath the surface of the land, as in the instant case.
Now, while it is true that Republic Act No. 6395 authorizes NAPOCOR to take water from any public stream, river, creek, lake, spring or waterfall in the Philippines for the realization of the purposes specified therein for its creation; to intercept and divert the flow of waters from lands of riparian owners (in this case, the “Heirs”), and from persons owning or interested in water which are or may be necessary to said purposes, the same Act expressly mandates the payment of just compensation.
WHEREFORE, premises considered, the instant appeal is hereby DENIED for lack of merit. Accordingly, the appealed Decision dated August 13, 1999, and the supplemental Decision dated August 18, 1999, are hereby AFFIRMED in toto.
SO ORDERED.12
Issue
NPC has come to the Court, assigning the lone error that:
THE APPELLATE COURT ERRED ON A QUESTION OF LAW WHEN IT AFFIRMED THE DECISION AND SUPPLEMENTAL DECISION OF THE COURT A QUO DIRECTING AND ORDERING PETITIONER TO PAY JUST COMPENSATION TO RESPONDENTS.
NPC reiterates that witnesses Enterone and Sacedon lacked personal knowledge about the construction and existence of the tunnel and were for that reason not entitled to credence; and that the topographic and relocation maps prepared by Sacedon should not be a basis to prove the existence and location of the tunnel due to being self-serving.
NPC contends that the CA should have applied Section 3(i) of Republic Act No. 6395, which provided a period of only five years from the date of the construction within which the affected landowner could bring a claim against it; and that even if Republic Act No. 6395 should be inapplicable, the action of the Heirs of Macabangkit had already prescribed due to the underground tunnel being susceptible to acquisitive prescription after the lapse of 10 years pursuant to Article 620 of the Civil Code due to its being a continuous and apparent legal easement under Article 634 of the Civil Code.
The issues for resolution are, therefore, as follows:
(1) Whether the CA and the RTC erred in holding that there was an underground tunnel traversing the Heirs of Macabangkit’s land constructed by NPC; and
(2) Whether the Heirs of Macabangkit’s right to claim just compensation had prescribed under section 3(i) of Republic Act No. 6395, or, alternatively, under Article 620 and Article 646 of the Civil Code.
Ruling
We uphold the liability of NPC for payment of just compensation.
1.
Factual findings of the RTC,
when affirmed by the CA, are binding
The existence of the tunnel underneath the land of the Heirs of Macabangkit, being a factual matter, cannot now be properly reviewed by the Court, for questions of fact are beyond the pale of a petition for review on certiorari. Moreover, the factual findings and determinations by the RTC as the trial court are generally binding on the Court, particularly after the CA affirmed them.13 Bearing these doctrines in mind, the Court should rightly dismiss NPC’s appeal.
NPC argues, however, that this appeal should not be dismissed because the Heirs of Macabangkit essentially failed to prove the existence of the underground tunnel. It insists that the topographic survey map and the right-of-way map presented by the Heirs of Macabangkit did not at all establish the presence of any underground tunnel.
NPC still fails to convince.
Even assuming, for now, that the Court may review the factual findings of the CA and the RTC, for NPC to insist that the evidence on the existence of the tunnel was not adequate and incompetent remains futile. On the contrary, the evidence on the tunnel was substantial, for the significance of the topographic survey map and the sketch map (as indicative of the extent and presence of the tunnel construction) to the question on the existence of the tunnel was strong, as the CA correctly projected in its assailed decision, viz:
Among the pieces of documentary evidence presented showing the existence of the said tunnel beneath the subject property is the topographic survey map. The topographic survey map is one conducted to know about the location and elevation of the land and all existing structures above and underneath it. Another is the Sketch Map which shows the location and extent of the land traversed or affected by the said tunnel. These two (2) pieces of documentary evidence readily point the extent and presence of the tunnel construction coming from the power cavern near the small man-made lake which is the inlet and approach tunnel, or at a distance of about two (2) kilometers away from the land of the plaintiffs-appellees, and then traversing the entire and the whole length of the plaintiffs-appellees’ property, and the outlet channel of the tunnel is another small man-made lake. This is a sub-terrain construction, and considering that both inlet and outlet are bodies of water, the tunnel can hardly be noticed. All constructions done were beneath the surface of the plaintiffs-appellees’ property. This explains why they could never obtain any knowledge of the existence of such tunnel during the period that the same was constructed and installed beneath their property.14
The power cavern and the inlet and outlet channels established the presence of the underground tunnel, based on the declaration in the RTC by Sacedon, a former employee of the NPC.15 It is worthy to note that NPC did not deny the existence of the power cavern, and of the inlet and outlet channels adverted to and as depicted in the topographic survey map and the sketch map. The CA cannot be faulted for crediting the testimony of Sacedon despite the effort of NPC to discount his credit due to his not being an expert witness, simply because Sacedon had personal knowledge based on his being NPC’s principal engineer and supervisor tasked at one time to lay out the tunnels and transmission lines specifically for the hydroelectric projects,16 and to supervise the construction of the Agus 1 Hydroelectric Plant itself17 from 1978 until his retirement from NPC.18 Besides, he declared that he personally experienced the vibrations caused by the rushing currents in the tunnel, particularly near the outlet channel.19 Under any circumstances, Sacedon was a credible and competent witness.
The ocular inspection actually confirmed the existence of the tunnel underneath the land of the Heirs of Macabangkit. Thus, the CA observed:
More so, the Ocular inspection conducted on July 23, 1998 further bolstered such claim of the existence and extent of such tunnel. This was conducted by a team composed of the Honorable Presiding Judge of the Regional Trial Court, Branch 01, Lanao del Norte, herself and the respective lawyers of both of the parties and found that, among others, said underground tunnel was constructed beneath the subject property.20
It bears noting that NPC did not raise any issue against or tender any contrary comment on the ocular inspection report.
2.
Five-year prescriptive period under Section 3(i) of Republic Act No. 6395 does not apply to claims for just compensation
The CA held that Section 3(i) of Republic Act No. 6395 had no application to this action because it covered facilities that could be easily discovered, not tunnels that were inconspicuously constructed beneath the surface of the land.21
NPC disagrees, and argues that because Article 63522 of the Civil Code directs the application of special laws when an easement, such as the underground tunnel, was intended for public use, the law applicable was Section 3(i) of Republic Act No. 6395, as amended, which limits the action for recovery of compensation to five years from the date of construction. It posits that the five-year prescriptive period already set in due to the construction of the underground tunnel having been completed in 1979 yet.
Without necessarily adopting the reasoning of the CA, we uphold its conclusion that prescription did not bar the present action to recover just compensation.
Section 3 (i) of Republic Act No. 6395, the cited law, relevantly provides:
Section 3. Powers and General Functions of the Corporation. – The powers, functions, rights and activities of the Corporation shall be the following:
xxx
(i) To construct works across, or otherwise, any stream, watercourse, canal, ditch, flume, street, avenue, highway or railway of private and public ownership, as the location of said works may require:Provided, That said works be constructed in such a manner as not to endanger life or property; And provided, further, That the stream, watercourse, canal ditch, flume, street, avenue, highway or railway so crossed or intersected be restored as near as possible to their former state, or in a manner not to impair unnecessarily their usefulness. Every person or entity whose right of way or property is lawfully crossed or intersected by said works shall not obstruct any such crossings or intersection and shall grant the Board or its representative, the proper authority for the execution of such work. The Corporation is hereby given the right of way to locate, construct and maintain such works over and throughout the lands owned by the Republic of the Philippines or any of its branches and political subdivisions. The Corporation or its representative may also enter upon private property in the lawful performance or prosecution of its business and purposes, including the construction of the transmission lines thereon; Provided, that the owner of such property shall be indemnified for any actual damage caused thereby;Provided, further, That said action for damages is filed within five years after the rights of way, transmission lines, substations, plants or other facilities shall have been established; Provided, finally, That after said period, no suit shall be brought to question the said rights of way, transmission lines, substations, plants or other facilities;
A cursory reading shows that Section 3(i) covers the construction of “works across, or otherwise, any stream, watercourse, canal, ditch, flume, street, avenue, highway or railway of private and public ownership, as the location of said works may require.” It is notable that Section 3(i) includes no limitation except those enumerated after the term works. Accordingly, we consider the term works as embracing all kinds of constructions, facilities, and other developments that can enable or help NPC to meet its objectives of developing hydraulic power expressly provided under paragraph (g) of Section 3.23 The CA’s restrictive construal of Section 3(i) as exclusive of tunnels was obviously unwarranted, for the provision applies not only to development works easily discoverable or on the surface of the earth but also to subterranean works like tunnels. Such interpretation accords with the fundamental guideline in statutory construction that when the law does not distinguish, so must we not.24 Moreover, when the language of the statute is plain and free from ambiguity, and expresses a single, definite, and sensible meaning, that meaning is conclusively presumed to be the meaning that the Congress intended to convey.25
Even so, we still cannot side with NPC.
We rule that the prescriptive period provided under Section 3(i) of Republic Act No. 6395 is applicable only to an action for damages, and does not extend to an action to recover just compensation like this case. Consequently, NPC cannot thereby bar the right of the Heirs of Macabangkit to recover just compensation for their land.
The action to recover just compensation from the State or its expropriating agency differs from the action for damages. The former, also known as inverse condemnation, has the objective to recover the value of property taken in fact by the governmental defendant, even though no formal exercise of the power of eminent domain has been attempted by the taking agency.26 Just compensation is the full and fair equivalent of the property taken from its owner by the expropriator. The measure is not the taker’s gain, but the owner’s loss. The word just is used to intensify the meaning of the word compensation in order to convey the idea that the equivalent to be rendered for the property to be taken shall be real, substantial, full, and ample.27 On the other hand, the latter action seeks to vindicate a legal wrong through damages, which may be actual, moral, nominal, temperate, liquidated, or exemplary. When a right is exercised in a manner not conformable with the norms enshrined in Article 1928 and like provisions on human relations in the Civil Code, and the exercise results to the damage of another, a legal wrong is committed and the wrongdoer is held responsible.29
The two actions are radically different in nature and purpose. The action to recover just compensation is based on the Constitution30 while the action for damages is predicated on statutory enactments. Indeed, the former arises from the exercise by the State of its power of eminent domain against private property for public use, but the latter emanates from the transgression of a right. The fact that the owner rather than the expropriator brings the former does not change the essential nature of the suit as an inverse condemnation,31 for the suit is not based on tort, but on the constitutional prohibition against the taking of property without just compensation.32 It would very well be contrary to the clear language of the Constitution to bar the recovery of just compensation for private property taken for a public use solely on the basis of statutory prescription.
Due to the need to construct the underground tunnel, NPC should have first moved to acquire the land from the Heirs of Macabangkit either by voluntary tender to purchase or through formal expropriation proceedings. In either case, NPC would have been liable to pay to the owners the fair market value of the land, for Section 3(h) of Republic Act No. 6395 expressly requires NPC to pay the fair market value of such property at the time of the taking, thusly:
(h) To acquire, promote, hold, transfer, sell, lease, rent, mortgage, encumber and otherwise dispose of property incident to, or necessary, convenient or proper to carry out the purposes for which the Corporation was created: Provided, That in case a right of way is necessary for its transmission lines, easement of right of way shall only be sought: Provided, however, That in case the property itself shall be acquired by purchase, the cost thereof shall be the fair market value at the time of the taking of such property.
This was what NPC was ordered to do in National Power Corporation v. Ibrahim,33 where NPC had denied the right of the owners to be paid just compensation despite their land being traversed by the underground tunnels for siphoning water from Lake Lanao needed in the operation of Agus II, Agus III, Agus IV, Agus VI and Agus VII Hydroelectric Projects in Saguiran, Lanao del Sur, in Nangca and Balo-I in Lanao del Norte and in Ditucalan and Fuentes in Iligan City. There, NPC similarly argued that the underground tunnels constituted a mere easement that did not involve any loss of title or possession on the part of the property owners, but the Court resolved against NPC, to wit:
Petitioner contends that the underground tunnels in this case constitute an easement upon the property of the respondents which does not involve any loss of title or possession. The manner in which the easement was created by petitioner, however, violates the due process rights of respondents as it was without notice and indemnity to them and did not go through proper expropriation proceedings. Petitioner could have, at any time, validly exercised the power of eminent domain to acquire the easement over respondents’ property as this power encompasses not only the taking or appropriation of title to and possession of the expropriated property but likewise covers even the imposition of a mere burden upon the owner of the condemned property. Significantly, though, landowners cannot be deprived of their right over their land until expropriation proceedings are instituted in court. The court must then see to it that the taking is for public use, that there is payment of just compensation and that there is due process of law.34
3.
NPC’s construction of the tunnel
constituted taking of the land, and
entitled owners to just compensation
The Court held in National Power Corporation v. Ibrahim that NPC was “liable to pay not merely an easement fee but rather the full compensation for land” traversed by the underground tunnels, viz:
In disregarding this procedure and failing to recognize respondents’ ownership of the sub-terrain portion, petitioner took a risk and exposed itself to greater liability with the passage of time. It must be emphasized that the acquisition of the easement is not without expense. The underground tunnels impose limitations on respondents’ use of the property for an indefinite period and deprive them of its ordinary use. Based upon the foregoing, respondents are clearly entitled to the payment of just compensation. Notwithstanding the fact that petitioner only occupies the sub-terrain portion, it is liable to pay not merely an easement fee but rather the full compensation for land. This is so because in this case, the nature of the easement practically deprives the owners of its normal beneficial use. Respondents, as the owner of the property thus expropriated, are entitled to a just compensation which should be neither more nor less, whenever it is possible to make the assessment, than the money equivalent of said property.35
Here, like in National Power Corporation v. Ibrahim, NPC constructed a tunnel underneath the land of the Heirs of Macabangkit without going through formal expropriation proceedings and without procuring their consent or at least informing them beforehand of the construction. NPC’s construction adversely affected the owners’ rights and interests because the subterranean intervention by NPC prevented them from introducing any developments on the surface, and from disposing of the land or any portion of it, either by sale or mortgage.
Did such consequence constitute taking of the land as to entitle the owners to just compensation?
We agree with both the RTC and the CA that there was a full taking on the part of NPC, notwithstanding that the owners were not completely and actually dispossessed. It is settled that the taking of private property for public use, to be compensable, need not be an actual physical taking or appropriation.36 Indeed, the expropriator’s action may be short of acquisition of title, physical possession, or occupancy but may still amount to a taking.37 Compensable taking includes destruction, restriction, diminution, or interruption of the rights of ownership or of the common and necessary use and enjoyment of the property in a lawful manner, lessening or destroying its value.38 It is neither necessary that the owner be wholly deprived of the use of his property,39 nor material whether the property is removed from the possession of the owner, or in any respect changes hands.40
As a result, NPC should pay just compensation for the entire land. In that regard, the RTC pegged just compensation at ₱500.00/square meter based on its finding on what the prevailing market value of the property was at the time of the filing of the complaint, and the CA upheld the RTC.
We affirm the CA, considering that NPC did not assail the valuation in the CA and in this Court. NPC’s silence was probably due to the correctness of the RTC’s valuation after careful consideration and weighing of the parties’ evidence, as follows:
The matter of what is just compensation for these parcels of land is a matter of evidence. These parcels of land is (sic) located in the City of Iligan, the Industrial City of the South. Witness Dionisio Banawan, OIC- City Assessor’s Office, testified, “Within that area, that area is classified as industrial and residential. That plaintiffs’ land is adjacent to many subdivisions and that is within the industrial classification. He testified and identified Exhibit “AA” and “AA-1”, a Certification, dated April 4, 1997, showing that the appraised value of plaintiffs land ranges from ₱400.00 to ₱500.00 per square meter (see, TSN, testimony of Dionisio Banawan, pp. 51, 57, and 71, February 9, 1999). Also, witness Banawan, testified and identified Two (2) Deeds of Sale, marked as Exhibit “AA-2” and “AA-3,[“] showing that the appraised value of the land adjoining or adjacent to plaintiff land ranges from ₱700.00 to ₱750.00 per square meter. As between the much lower price of the land as testified by defendant’s witness Gregorio Enterone, and that of the City Assessor of Iligan City, the latter is more credible. Considering however, that the appraised value of the land in the area as determined by the City Assessor’s Office is not uniform, this Court, is of the opinion that the reasonable amount of just compensation of plaintiff’s land should be fixed at FIVE HUNDRED (500.00) PESOS, per square meter. xxx.41
The RTC based its fixing of just compensation ostensibly on the prevailing market value at the time of the filing of the complaint, instead of reckoning from the time of the taking pursuant to Section 3(h) of Republic Act No. 6395. The CA did not dwell on the reckoning time, possibly because NPC did not assign that as an error on the part of the RTC.
We rule that the reckoning value is the value at the time of the filing of the complaint, as the RTC provided in its decision. Compensation that is reckoned on the market value prevailing at the time either when NPC entered or when it completed the tunnel, as NPC submits, would not be just, for it would compound the gross unfairness already caused to the owners by NPC’s entering without the intention of formally expropriating the land, and without the prior knowledge and consent of the Heirs of Macabangkit. NPC’s entry denied elementary due process of law to the owners since then until the owners commenced the inverse condemnation proceedings. The Court is more concerned with the necessity to prevent NPC from unjustly profiting from its deliberate acts of denying due process of law to the owners. As a measure of simple justice and ordinary fairness to them, therefore, reckoning just compensation on the value at the time the owners commenced these inverse condemnation proceedings is entirely warranted.
In National Power Corporation v. Court of Appeals,42 a case that involved the similar construction of an underground tunnel by NPC without the prior consent and knowledge of the owners, and in which we held that the basis in fixing just compensation when the initiation of the action preceded the entry into the property was the time of the filing of the complaint, not the time of taking,43 we pointed out that there was no taking when the entry by NPC was made “without intent to expropriate or was not made under warrant or color of legal authority.”
4.
Awards for rentals, moral damages, exemplary
damages, and attorney’s fees are deleted
for insufficiency of factual and legal bases
The CA upheld the RTC’s granting to the Heirs of Macabangkit of rentals of ₱ 30,000.00/month “from 1979 up to July 1999 with 12% interest per annum” by finding NPC guilty of bad faith in taking possession of the land to construct the tunnel without their knowledge and consent.
Granting rentals is legally and factually bereft of justification, in light of the taking of the land being already justly compensated. Conformably with the ruling in Manila International Airport Authority v. Rodriguez,44 in which the award of interest was held to render the grant of back rentals unwarranted, we delete the award of back rentals and in its place prescribe interest of 12% interest per annum from November 21, 1997, the date of the filing of the complaint, until the full liability is paid by NPC. The imposition of interest of 12% interest per annum follows a long line of pertinent jurisprudence,45 whereby the Court has fixed the rate of interest on just compensation at 12% per annum whenever the expropriator has not immediately paid just compensation.
The RTC did not state any factual and legal justifications for awarding to the Heirs of Macabangkit moral and exemplary damages each in the amount of ₱200,000.00. The awards just appeared in the fallo of its decision. Neither did the CA proffer any justifications for sustaining the RTC on the awards. We consider the omissions of the lower courts as pure legal error that we feel bound to correct even if NPC did not submit that for our consideration. There was, to begin with, no factual and legal bases mentioned for the awards. It is never trite to remind that moral and exemplary damages, not by any means liquidated or assessed as a matter of routine, always require evidence that establish the circumstances under which the claimant is entitled to them. Moreover, the failure of both the RTC and the CA to render the factual and legal justifications for the moral and exemplary damages in the body of their decisions immediately demands the striking out of the awards for being in violation of the fundamental rule that the decision must clearly state the facts and the law on which it is based. Without the factual and legal justifications, the awards are exposed as the product of conjecture and speculation, which have no place in fair judicial adjudication.
We also reverse and set aside the decree of the RTC for NPC to pay to the Heirs of Macabangkit “the sum equivalent to 15% of the total amount awarded, as attorney’s fees, and to pay the cost.” The body of the decision did not state the factual and legal reasons why NPC was liable for attorney’s fees. The terse statement found at the end of the body of the RTC’s decision, stating: “xxx The contingent attorney’s fee is hereby reduced from 20% to only 15% of the total amount of the claim that may be awarded to plaintiffs,” without more, did not indicate or explain why and how the substantial liability of NPC for attorney’s fees could have arisen and been determined.
In assessing attorney’s fees against NPC and in favor of the respondents, the RTC casually disregarded the fundamental distinction between the two concepts of attorney’s fees — the ordinary and the extraordinary. These concepts were aptly distinguished in Traders Royal Bank Employees Union-Independent v. NLRC,46 thuswise:
There are two commonly accepted concepts of attorney’s fees, the so-called ordinary and extraordinary. In its ordinary concept, an attorney’s fee is the reasonable compensation paid to a lawyer by his client for the legal services he has rendered to the latter. The basis of this compensation is the fact of his employment by and his agreement with the client.
In its extraordinary concept, an attorney’s fee is an indemnity for damages ordered by the court to be paid by the losing party in a litigation. The basis of this is any of the cases provided by law where such award can be made, such as those authorized in Article 2208, Civil Code, and is payable not to the lawyer but to the client, unless they have agreed that the award shall pertain to the lawyer as additional compensation or as part thereof.
By referring to the award as contingency fees, and reducing the award from 20% to 15%, the RTC was really referring to a supposed agreement on attorney’s fees between the Heirs of Macabangkit and their counsel. As such, the concept of attorney’s fees involved was the ordinary. Yet, the inclusion of the attorney’s fees in the judgment among the liabilities of NPC converted the fees to extraordinary. We have to disagree with the RTC thereon, and we express our discomfort that the CA did not do anything to excise the clearly erroneous and unfounded grant.
An award of attorney’s fees has always been the exception rather than the rule. To start with, attorney’s fees are not awarded every time a party prevails in a suit.47 Nor should an adverse decision ipso facto justify an award of attorney’s fees to the winning party.48 The policy of the Court is that no premium should be placed on the right to litigate.49 Too, such fees, as part of damages, are assessed only in the instances specified in Art. 2208, Civil Code.50 Indeed, attorney’s fees are in the nature of actual damages.51 But even when a claimant is compelled to litigate with third persons or to incur expenses to protect his rights, attorney’s fees may still be withheld where no sufficient showing of bad faith could be reflected in a party’s persistence in a suit other than an erroneous conviction of the righteousness of his cause.52 And, lastly, the trial court must make express findings of fact and law that bring the suit within the exception. What this demands is that the factual, legal or equitable justifications for the award must be set forth
not only in the fallo but also in the text of the decision, or else, the award should be thrown out for being speculative and conjectural.53
Sound policy dictates that even if the NPC failed to raise the issue of attorney’s fees, we are not precluded from correcting the lower courts’ patently erroneous application of the law.54 Indeed, the Court, in supervising the lower courts, possesses the ample authority to review legal matters like this one even if not specifically raised or assigned as error by the parties.
5.
Attorney’s fees under quantum meruit principle
are fixed at 10% of the judgment award
Based on the pending motions of Atty. Macarupung Dibaratun and Atty. Manuel D. Ballelos to assert their respective rights to attorney’s fees, both contending that they represented the Heirs of Macabangkit in this case, a conflict would ensue from the finality of the judgment against NPC.
A look at the history of the legal representation of the Heirs of Macabangkit herein provides a helpful predicate for resolving the conflict.
Atty. Dibaratun was the original counsel of the Heirs of Macabangkit. When the appeal was submitted for decision in the CA,55 Atty. Ballelos filed his entry of appearance,56 and a motion for early decision.57 Atty. Ballelos subsequently filed also a manifestation,58 supplemental manifestation,59
reply,60 and ex parte motion reiterating the motion for early decision.61 It appears that a copy of the CA’s decision was furnished solely to Atty. Ballelos. However, shortly before the rendition of the decision, Atty. Dibaratun filed in the CA a motion to register attorney’s lien,62 alleging that he had not withdrawn his appearance and had not been aware of the entry of appearance by Atty. Ballelos. A similar motion was also received by the Court from Atty. Dibaratun a few days after the petition for review was filed.63 Thus, on February 14, 2005,64 the Court directed Atty. Dibaratun to enter his appearance herein. He complied upon filing the comment.65
Amir Macabangkit confirmed Atty. Dibaratun’s representation through an ex parte manifestation that he filed in his own behalf and on behalf of his siblings Mongkoy and Putri.66 Amir reiterated his manifestation on March 6, 2006,67 and further imputed malpractice to Atty. Ballelos for having filed an entry of appearance bearing Amir’s forged signature and for plagiarism, i.e., copying verbatim the arguments contained in the pleadings previously filed by Atty. Dibaratun.68
On September 11, 2008, Atty. Ballelos submitted two motions, to wit: (a) a manifestation and motion authorizing a certain Abdulmajeed Djamla to receive his attorney’s fees equivalent of 15% of the judgment award,69 and (b) a motion to register his attorney’s lien that he claimed was contingent.70
Both Atty. Dibaratun and Atty. Ballelos posited that their entitlement to attorney’s fees was contingent. Yet, a contract for a contingent fees is an agreement in writing by which the fees, usually a fixed percentage of what may be recovered in the action, are made to depend upon the success in the effort to enforce or defend a supposed right. Contingent fees depend upon an express contract, without which the attorney can only recover on the basis of quantum meruit.71 With neither Atty. Dibaratun nor Atty. Ballelos presenting a written agreement bearing upon their supposed contingent fees, the only way to determine their right to appropriate attorney’s fees is to apply the principle of quantum meruit.
Quantum meruit – literally meaning as much as he deserves – is used as basis for determining an attorney’s professional fees in the absence of an express agreement.72 The recovery of attorney’s fees on the basis of quantum meruit is a device that prevents an unscrupulous client from running away with the fruits of the legal services of counsel without paying for it and also avoids unjust enrichment on the part of the attorney himself.73 An attorney must show that he is entitled to reasonable compensation for the effort in pursuing the client’s cause, taking into account certain factors in fixing the amount of legal fees.74
Rule 20.01 of the Code of Professional Responsibility lists the guidelines for determining the proper amount of attorney fees, to wit:
Rule 20.1 – A lawyer shall be guided by the following factors in determining his fees:
a) The time spent and the extent of the services rendered or required;
b) The novelty and difficult of the questions involved;
c) The important of the subject matter;
d) The skill demanded;
e) The probability of losing other employment as a result of acceptance of the proffered case;
f) The customary charges for similar services and the schedule of fees of the IBP chapter to which he belongs;
g) The amount involved in the controversy and the benefits resulting to the client from the service;
h) The contingency or certainty of compensation;
i) The character of the employment, whether occasional or established; and
j) The professional standing of the lawyer.
In the event of a dispute as to the amount of fees between the attorney and his client, and the intervention of the courts is sought, the determination requires that there be evidence to prove the amount of fees and the extent and value of the services rendered, taking into account the facts determinative thereof.75 Ordinarily, therefore, the determination of the attorney’s fees on quantum meruit is remanded to the lower court for the purpose. However, it will be just and equitable to now assess and fix the attorney’s fees of both attorneys in order that the resolution of “a comparatively simple controversy,” as Justice Regalado put it in Traders Royal Bank Employees Union-Independent v. NLRC,76 would not be needlessly prolonged, by taking into due consideration the accepted guidelines and so much of the pertinent data as are extant in the records.
Atty. Dibaratun and Atty. Ballelos each claimed attorney’s fees equivalent to 15% of the principal award of ₱113,532,500.00, which was the amount granted by the RTC in its decision. Considering that the attorney’s fees will be defrayed by the Heirs of Macabangkit out of their actual recovery from NPC, giving to each of the two attorney’s 15% of the principal award as attorney’s fees would be excessive and unconscionable from the point of view of the clients. Thus, the Court, which holds and exercises the power to fix attorney’s fees on a quantum meruit basis in the absence of an express written agreement between the attorney and the client, now fixes attorney’s fees at 10% of the principal award of ₱113,532,500.00.
Whether it is Atty. Dibaratun or Atty. Ballelos, or both, who should receive attorney’s fees from the Heirs of Macabangkit is a question that the Court must next determine and settle by considering the amount and quality of the work each performed and the results each obtained.
Atty. Dibaratun, the attorney from the outset, unquestionably carried the bulk of the legal demands of the case. He diligently prepared and timely filed in behalf of the Heirs of Macabangkit every pleading and paper necessary in the full resolution of the dispute, starting from the complaint until the very last motion filed in this Court. He consistently appeared during the trial, and examined and cross-examined all the witnesses presented at that stage of the proceedings. The nature, character, and substance of each pleading and the motions he prepared for the Heirs of Macabangkit indicated that he devoted substantial time and energy in researching and preparing the case for the trial. He even advanced ₱250,000.00 out of his own pocket to defray expenses from the time of the filing of the motion to execute pending appeal until the case reached the Court.77 His representation of all the Heirs of Macabangkit was not denied by any of them.
We note that Atty. Dibaratun possessed some standing in the legal profession and in his local community. He formerly served as a member of the Board of Director of the Integrated Bar of the Philippines (IBP), Lanao del Norte-Iligan City Chapter, and was an IBP national awardee as Best Legal Aid Committee Chairman. He taught at Mindanao State University College of Law Extension. He was a Municipal Mayor of Matungao, Lanao del Norte, and was enthroned Sultan a Gaus.
In contrast, not much about the character and standing of Atty. Ballelos, as well as the nature and quality of the legal services he rendered for the Heirs of Macabangkit are in the records. The motions he filed in the
Court and in the CA lacked enlightening research and were insignificant to the success of the clients’ cause. His legal service, if it can be called that, manifested no depth or assiduousness, judging from the quality of the pleadings from him. His written submissions in the case appeared either to have been lifted verbatim from the pleadings previously filed by Atty. Dibaratun, or to have been merely quoted from the decisions and resolutions of the RTC and the CA. Of the Heirs of Macabangkit, only Cebu, Batowa-an, Sayana, Nasser, Manta, Mongkoy78 and Edgar gave their consent to Atty. Ballelos to appear in their behalf in the CA, which he did despite Atty. Dibaratun not having yet filed any withdrawal of his appearance. The Court did not receive any notice of appearance for the Heirs of Macabangkit from Atty. Ballelos, but that capacity has meanwhile become doubtful in the face of Amir’s strong denial of having retained him.1avvphil
In fairness and justice, the Court accords full recognition to Atty. Dibaratun as the counsel de parte of the Heirs of Macabangkit who discharged his responsibility in the prosecution of the clients’ cause to its successful end. It is he, not Atty. Ballelos, who was entitled to the full amount of attorney’s fees that the clients ought to pay to their attorney. Given the amount and quality of his legal work, his diligence and the time he expended in ensuring the success of his prosecution of the clients’ cause, he deserves the recognition, notwithstanding that some of the clients might appear to have retained Atty. Ballelos after the rendition of a favorable judgment.79
Atty. Ballelos may claim only from Cebu, Batowa-an, Sayana, Nasser, Manta and Edgar, the only parties who engaged him. The Court considers his work in the case as very minimal. His compensation under the quantum meruit principle is fixed at ₱5,000.00, and only the Heirs of Macabangkit earlier named are liable to him.
WHEREFORE, the Court AFFIRMS the decision promulgated on October 5, 2004 by the Court of Appeals, subject to the following MODIFICATIONS, to wit:
(a) Interest at the rate of 12% per annum is IMPOSED on the principal amount of ₱113,532,500.00 as just compensation, reckoned from the filing of the complaint on November 21, 1997 until the full liability is paid;
(b) The awards of ₱30,000.00 as rental fee, ₱200,000.00 as moral damages, and ₱200,000.00 as exemplary damages are DELETED; and
(c) The award of 15% attorney’s fees decreed to be paid by National Power Corporation to the Heirs of Macabangkit is DELETED.
The Court PARTLY GRANTS the motion to register attorney’s lien filed by Atty. Macarupung Dibaratun, and FIXES Atty. Dibaratun’s attorney’s fees on the basis of quantum meruit at 10% of the principal award of ₱113,532,500.00.
The motion to register attorney’s lien of Atty. Manuel D. Ballelos is PARTLY GRANTED, and Atty. Ballelos is DECLARED ENTITLED TO RECOVER from Cebu, Batowa-an, Sayana, Nasser, Manta and Edgar, all surnamed Macabangkit, the amount of ₱5,000.00 as attorney’s fees on the basis of quantum meruit.
Costs of suit to be paid by the petitioner.
SO ORDERED.
LUCAS P. BERSAMIN
Associate Justice
WE CONCUR:
RENATO C. CORONA
Chief Justice
Chairperson
| TERESITA J. LEONARDO-DE CASTRO Associate Justice | MARIANO C. DEL CASTILLO Associate Justice |
MARTIN S. VILLARAMA, JR.
Associate Justice
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.
RENATO C. CORONA
Chief Justice
Footnotes
* Substituted by Josefina Salvador Macabangkit, his surviving wife, and children Malic, Paisal, Michelle and Mongkoy, all surnamed Macabangkit, per the Resolution dated October 20, 2008, at rollo, p. 526.
1 Rollo, pp. 51-63; penned by Associate Justice Arturo G. Tayag (retired), with Associate Justice Estela M. Perlas-Bernabe and Associate Justice Edgardo A. Camello concurring.
2 CA rollo, p. 22.
3 Original Records, pp. 1-6; the suit was docketed as Civil Case No. 4094 and was entitled Heirs of Macabangkit Sangkay, namely: Cebu, Batowa-an, Sayana, Nasser, Manta, Edgar, Putri, Mongkoy, and Amir, all surnamed Macabangkit, v. National Power Corporation.
4 Id., pp. 43-45.
5 Id., p. 64.
6 Id., pp. 143-163.
7 Id., p. 164.
8 Id., p. 175.
9 Id., pp. 165-170.
10 Id., pp. 200-202.
11 See Heirs of Macabangkit Sangkay v. National Power Corporation, G.R. No. 141447, May 4, 2006, 489 SCRA 401.
12 Rollo, pp. 62-63.
13 National Power Corporation v. Court of Appeals, G.R. No. 106804, August 12, 2004, 436 SCRA 195, 208.
14 Rollo, pp. 59-66.
15 TSN dated March 2, 1999, pp. 16-32.
16 Id., pp. 10-11.
17 Id., pp. 58-59.
18 Id., pp. 80-81.
19 Id., pp. 102-106.
20 Rollo, p. 60.
21 Id., p. 62.
22 Article 635. All matters concerning easements established for public or communal use shall be governed by the special laws and regulations relating thereto, and, in the absence thereof, by the provisions of this Title (550).
23 Section 3. xxx
xxx
(g). To construct, operate and maintain power plants, auxiliary plants, dams, reservoirs, pipes, mains, transmission lines, power stations and substations, and other works for the purpose of developing hydraulic power from any river, creek, lake, spring and waterfall in the Philippines and supplying such power to the inhabitants thereof; xxx.
24 Philippine Telegraph & Telephone Corporation v. National Labor Relations Commission, G.R. No. 147002, April 15, 2005, 456 SCRA 264, 279; David v. Cordova, G.R. No. 152992, July 28, 2005, 464 SCRA 384, 402.
25 National Food Authority (NFA) v. Masada Security Agency, Inc., G.R. No. 163448, March 8, 2005, 453 SCRA 70, 79.
26 According to 29A CJS, Eminent Domain, §381: “Inverse condemnation is a cause of action against a governmental defendant to recover the value of property which has been taken in fact by the governmental defendant, even though no formal exercise of the power of eminent domain has been attempted by the taking agency. While the typical taking occurs when the government acts to condemn property in the exercise of its power of eminent domain, the entire doctrine of inverse condemnation is predicated on the proposition that a taking may occur without such formal proceedings. The phrase “inverse condemnation,” as a common understanding of that phrase would suggest, simply describes an action that is the “inverse” or “reverse” of a condemnation proceeding.”
27 National Power Corporation v. Manubay Agro-Industrial Development Corporation, G.R. No. 150936, August 18, 2004, 437 SCRA 60, 68.
28 Article 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith.
29 Cebu Country Club, Inc. v. Elizagaque, G.R. No. 160273, January 18, 2008, 542 SCRA 65, 74-75.
30 Constitution, Article III, Section 9.
31 29A CJS, Eminent Domain, §381, citing State v. Hollis, 379 P.2d 750, 93 Ariz. 200; Marin Municipal Water District v. City of Mill Valley, 1 Dist., 249 Cal. Rptr. 469, 202 C.A.3d 1161;
32 29A CJS, Eminent Domain, §381, citing Schultz v. United States, Cl.Ct., 5 Cl.Ct. 412; Rose v. City of Coalinga, 5 Dist., 236 Cal. Rptr. 124, 190 C.A. 3d 1627; Adams v. City of Atlanta, 322 S.E.2d 730, 253 Ga. 581; State v. Malone, Civ. App., 168 S.W.2d 292.
33 G.R. No. 168732, June 29, 2007, 526 SCRA 149.
34 Id., p. 163.
35 Id., pp. 163-164; See also National Power Corporation v. Manubay Agro-Industrial Development Corporation, G.R. No. 150936, August 18, 2004, 437 SCRA 60, where it was held that even an easement of right-of-way that effectively limits the owner’s right to use the land for an indefinite period of time, thus depriving the owner of the normal use of the land, warranted the payment of just compensation that must be neither more nor less than the monetary equivalent of the land.
36 29A CJS, Eminent Domain,§82, citing Stearns v. Smith, D.C.Tex, 551 F. Supp. 32; Wright v. Shugrue, 425 A.2d 549, 178 Conn. 710; Horstein v. Barry, App., 560 A.2d 530; and Gasque v. Town of Conway, 8 S.E.2d 871, 194 S.C. 15.
37 Id., citing United States v. General Motors Corporation, Ill., 65 S Ct. 357, 323 US 373, 89 L. Ed. 311; and Midwest Video Corporation v. F.C.C., C.A.8, 571 F.2d 1025, affirmed 99 S.Ct. 1435, 440 US 689, 59 L. E.2d 692.
38 Id., citing United States v. Dickinson, W.Va., 67 S.Ct. 1382, 331 US 745, 91 L.Ed. 1789; Portsmouth Harbor Land & Hotel Co. v. United States, Ct.Cl., 43 S.Ct. 135, 260 US 327, 67 L.Ed. 287; Bernstein v. Bush, 177 P.2d 913, 29 C.2d 773.
39 Id., citing Eaton v. Boston, C. & M.R. Co., 51 N.H.504; Lea v. Louisville, & N.R. Co., 188 S.W. 215, 135 Tenn. 560.
40 Id., citing Frustuck v. City of Fairfax, 28 Cal. Rptr. 357, 212 C.A.2d 345; Midgett v. North Carolina State Highway Commission, 132 S.E.2d 599, 260 N.C. 241; Morrison v. Clakamas Country, 18 P.2d 814, 141 Or. 564.
41 Original Records, pp. 161-162.
42 G.R. No. 113194, March 11, 1996, 254 SCRA 577.
43 Id., p. 588.
44 G.R. No. 161836, February 28, 2006, 483 SCRA 619.
45 Apo Fruits Corporation v. Land Bank of the Philippines, G.R. No. 164195, October 12, 2010, 632 SCRA 727; Curata v. Philippine Ports Authority, G.R. No. 154211-12, June 22, 2009, 590 SCRA 214; Philippine Ports Authority v. Rosales-Bondoc, G.R. No. 173392, August 24, 2007, 531 SCRA 198; Land Bank v. Imperial, G.R. No. 157753, February 12, 2007, 515 SCRA 449; Republic v. Court of Appeals, G.R. No. 147245, March 31, 2005, 454 SCRA 516; Land Bank v. Wycoco, G.R. No. 140160, January 13, 2004, 419 SCRA 67; Reyes v. National Housing Authority, G.R. No. 147511, January 20, 2003, 395 SCRA 494; Republic v. Court of Appeals, G.R. No. 146587, July 2, 2002, 383 SCRA 611; Eastern Shipping Lines, Inc. v. Court of Appeals, G.R. No. 97412, July 12, 1994, 234 SCRA 78.
46 579 SCRA 509 G.R. No. 120592, March 14, 1997, 269 SCRA 733, 740. The ruling has been cited in Masmud v. National Labor Relations Commission (First Division), G.R. No. 183385, February 13, 2009, 579 SCRA 509 and Orocio v. Anguluan, G.R. Nos. 179892-93, January 30, 2009, 577 SCRA 53, among others.
47 Ballesteros v. Abion, February 9, 2006, 143361, 482 SCRA 23, 39; Car Cool Philippines, Inc. v. Ushio Realty and Development Corporation, G.R. No. 138088, January 23, 2006, 479 SCRA 404; Filipinas Broadcasting Network, Inc. v. Ago Medical and Educational Center-Bicol Christian College of Medicine, G.R. No. 141994, January 17, 2005, 448 SCRA 413.
48 “J” Marketing Corporation v. Sia, Jr., 349 Phil 513, 518; 285 SCRA 580, 584.
49 Frias v. San Diego-Sison, G.R. No. 155223, April 3, 2009, 520 SCRA 244, 259-260; Country Bankers Insurance Corporation v. Lianga Bay and Community Multi-purpose Cooperative, Inc., G.R. No. 136914, January 25, 2002, 374 SCRA 653; Ibaan Rural Bank, Inc. v. Court of Appeals, G.R. No. 123817, December 17, 1999, 321 SCRA 88; Morales v. Court of Appeals, G.R. No. 117228, June 19, 1997, 274 SCRA 282, 309; Philippine Air Lines v. Miano, G.R. No. 106664, March 8, 1995, 242 SCRA 235, 240; Firestone Tire & Rubber Co. of the Phils. v. Ines Chaves & Co., Ltd., No. L-17106, October 19, 1966, 18 SCRA 356,358.
50 Article 2208. In the absence of stipulation, attorney’s fees and expenses of litigation, other than judicial costs, cannot be recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendant’s act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid, just and demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;
(8) In actions for indemnity under workmen’s compensation and employer’s liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that attorney’s fees and expenses of litigation should be recovered.
In all cases, the attorney’s fees and expenses of litigation must be reasonable.
51 Fores vs. Miranda, 105 Phil., 266.
52 Felsan Realty & Development Corporation v. Commonwealth of Australia, G.R. No. 169656, October 11, 2007, 535 SCRA 618, 631-632; ABS-CBN Broadcasting Corporation v. Court of Appeals, G.R. No. 128690, January 21, 1999, 301 SCRA 572, 601.
53 Villanueva v. Salvador, G. R. No. 139436, January 25, 2006, 480 SCRA 39, 52; Mindex Resources Development v. Morillo, G.R. No. 138123, March 12, 2002, 379 SCRA 144, 157; Valiant Machinery & Metal Corporation v. NLRC, G.R. No. 105877, January 25, 1996, 252 SCRA 369; Scott Consultants and Resource Development Corporation v. Court of Appeals, G.R. No. 112916, March 16, 1995, 242 SCRA 393, 406.
54 See De Ouano v. Republic, G.R. No. 168770, February 9, 2011; Brent Hospital Inc. v. NLRC, G.R. No. 117593, July 10, 1998, 292 SCRA 304 (the Court deleted the award of attorney’s fees although not raised as an issue).
55 CA Rollo, p. 154.
56 Id., pp. 162-163.
57 Id., pp. 156-160.
58 Id., pp. 164-165.
59 Id., pp. 166-168.
60 Id., pp. 181-185.
61 Id., pp. 186-187.
62 Id., pp. 213-219.
63 Rollo, pp. 141-154.
64 Id., pp. 267-268.
65 Id., pp. 328-347.
66 Id., pp. 180-181.
67 Id., pp. 430-435.
68 Amir Macabangkit also denied having authorized one Mrs. Manta Macabangkit Lao to represent him in negotiating, collecting and receiving his share in the pending action, and thereby denied, revoked and terminated any Special Power of Attorney in favor of Lao.
69 Rollo, pp. 493-494.
70 Id., pp. 495-505.
71 Agpalo, Legal and Judicial Ethics (2009), p. 408.
72 Garcia v. Bala, A.C. No. 5039, November 25, 2005, 476 SCRA 85, 95.
73 Pineda v. De Jesus, G.R. No. 155224, August 23, 2006, 499 SCRA 608, 612.
74 Garcia v. Bala, supra note 72.
75 Agpalo, op. cit., p. 418.
76 G.R. No. 120592, March 14, 1997, 269 SCRA 733, 753-754.
77 Rollo, pp. 143-144.
78 Atty. Ballelos’ right to represent Mongkoy was terminated by Mongkoy’s death. Thereafter, the heirs of Mongkoy called on Atty. Dibaratun for their appropriate substitution and representation in the action.
79 Agpalo, op. cit., p. 397.
Real LexEcon 