Land Bank of the Philippines vs. Tayko

The just compensation for corn land voluntarily offered under the Comprehensive Agrarian Reform Program must be determined using the valuation factors in Section 17 of Republic Act No. 6657 and the formula prescribed in DAR Administrative Order No. 5, Series of 1998, not the formula under Presidential Decree No. 27. The time of taking for valuation purposes is the moment the landowner is deprived of the use and benefit of the property, which occurs when the certificate of title is cancelled and a new title is issued in the name of the Republic.

The heirs of the late spouses Josefa Tayko Guingona and Mauro Tayko owned an estate planted to sugar, corn, rice, and coconut in Barangay Casalaan, Siaton, Negros Oriental. In January 1995, the landowners offered a 481.0932-hectare portion for voluntary coverage under the Comprehensive Agrarian Reform Program at an offer price of ₱150,000.00 per hectare. After ocular inspection, 360.0932 hectares were recommended for CARP coverage, comprising 295.5 hectares of sugar land, 60.0932 hectares of corn land, and 4.5 hectares of coconut land. A valuation dispute arose when the Land Bank of the Philippines fixed just compensation at a figure the landowners rejected, triggering administrative and judicial proceedings that ultimately reached the Supreme Court on the limited issues of the proper valuation formula for the corn land, the relevant time of taking, and the imposable interest.

• Offer for Voluntary Coverage and Ocular Inspection: On January 15, 1995, the respondent-heirs of the late spouses Josefa Tayko Guingona and Mauro Tayko offered a portion of their estate covered by TCT Nos. OV-9869, OV-9871, and OV-9875, with a total area of 481.0932 hectares, for voluntary coverage under the Comprehensive Agrarian Reform Program (CARP). The offer price was ₱150,000.00 per hectare. Representatives of the Land Bank of the Philippines (LBP), the Department of Agrarian Reform (DAR), and the Barangay Agrarian Reform Committee conducted an ocular inspection. On June 17, 1997, the inspection team recommended excluding 121 hectares and covering the remaining 360.0932 hectares, consisting of 295.5 hectares of sugar land, 60.0932 hectares of corn land, and 4.5 hectares of coconut land.

• LBP’s Initial Valuation and Deposit: The claim folders were transmitted to LBP on November 26, 1997. Nearly six years later, on May 19, 2003, the Claims Valuation and Processing Form was prepared. LBP subsequently issued a Memorandum of Valuation and Claim Folder Profile & Valuation Summary dated November 25, 2003, valuing the 360.0932 hectares at ₱32,804,751.62. On December 18, 2003, LBP deposited the preliminary payment in cash and bonds, and a memorandum of the deposit was annotated on the titles.

• Cancellation of Titles and Issuance of New Titles: On December 30, 2003, the certificates of title in the names of the landowners were cancelled, and new transfer certificates of title were issued in the name of the Republic of the Philippines.

• Rejection and Administrative Adjudication: The landowners rejected LBP’s valuation and filed a Petition for Determination and Fixing of Just Compensation before the Regional Agrarian Reform Adjudicator (RARAD), docketed as RARAD VII-N-1281-1283-2004. They argued that the valuation should have used production data and values at the time the claim folders were transmitted to LBP in 2003, not the 1997 ocular inspection data, and claimed just compensation of ₱63,738,314.29. In a Resolution dated March 8, 2006, the RARAD adopted the landowners’ valuation. The DAR Adjudication Board (DARAB) affirmed the RARAD on appeal. For the 60.0932-hectare corn land, the RARAD/DARAB applied the formula under Presidential Decree No. 27: Land Value = Average Gross Production x 2.5 x Selling Price, resulting in ₱6,309,786.00.

• Proceedings before the RTC-SAC and the Court of Appeals: LBP elevated the case to the RTC, sitting as a Special Agrarian Court (RTC-SAC), which on May 17, 2011 fixed just compensation at ₱143,774,384.67. The Court of Appeals reversed the RTC-SAC, affirmed the DARAB’s corn-land valuation, and remanded the sugar-land valuation for reception of evidence on Annual Gross Production and selling prices for crop year 2003–2004. LBP’s motion for reconsideration was denied, prompting the present petition solely on the corn-land valuation and the imposition of legal interest.

• Valuation Formula for Corn Land: LBP argued that the Court of Appeals erred in affirming the DARAB valuation that used the formula under Presidential Decree No. 27. The acquisition was made under Republic Act No. 6657; therefore, the valuation must be based on the factors in Section 17 of R.A. No. 6657 and the formula prescribed in DAR Administrative Order No. 5, Series of 1998.

• Imposition of Legal Interest: LBP questioned the imposition of legal interest on the unpaid balance, contending that the interest was either unwarranted or improperly computed.

• Applicable Production Data: The landowners maintained that the valuation should use production data and values at the time the claim folders were transmitted to the LBP Head Office in 2003, not the earlier 1997 ocular inspection data, and that the DARAB’s valuation of the corn land was correct.

• Propriety of Interest: Respondents countered that legal interest was proper from the time of taking due to the delay in payment and the loss of income occasioned by the taking.

• Valuation Formula: Whether the Court of Appeals erred in affirming the DARAB’s valuation of the corn land that used the formula under Presidential Decree No. 27, despite the acquisition being made under Republic Act No. 6657.

• Time of Taking: Whether the time of taking for valuation purposes is December 18, 2003 (the date of the provisional deposit) or December 30, 2003 (the date the certificates of title were cancelled and new titles issued to the Republic).

• Legal Interest: Whether legal interest was properly imposed, and if so, from what date and at what rates.

• Valuation Formula: The corn land was acquired under a voluntary offer to sell pursuant to the Comprehensive Agrarian Reform Program governed by Republic Act No. 6657. The valuation must therefore be determined using the factors enumerated in Section 17 of R.A. No. 6657 and the formula in DAR Administrative Order No. 5, Series of 1998, not the formula under Presidential Decree No. 27. The RARAD/DARAB erroneously applied the P.D. No. 27 formula, and the Court of Appeals erred in affirming that valuation. Consequently, the award of ₱6,306,786.00 for the corn land was deleted, and the case remanded for recomputation in strict accordance with the correct legal parameters.

• Time of Taking: The time of taking is the moment the landowner is deprived of the use and benefit of the property. That occurs upon the cancellation of the owner’s title and the issuance of a new title in the name of the Republic. Because the titles were cancelled and new titles issued on December 30, 2003, that date — not the earlier deposit date of December 18, 2003 — constitutes the time of taking. All production data and values must therefore be reckoned as of December 30, 2003, and the applicable DAR administrative order is also determined by this date.

• Legal Interest: The imposition of legal interest on the unpaid balance of just compensation was warranted. The delay in payment effectively constituted a forbearance of money, entitling the landowners to interest to compensate for lost income and the erosion of the currency’s value. Interest runs from the time of taking (December 30, 2003) at twelve percent (12%) per annum until June 30, 2013. From July 1, 2013, until the finality of the Resolution, the rate is six percent (6%) per annum, in accordance with Bangko Sentral ng Pilipinas – Monetary Board Circular No. 799, Series of 2013. Thereafter, the total amount of just compensation shall earn six percent (6%) per annum from finality until full payment.

• Definition of Just Compensation — Just compensation is the full and fair equivalent of the property taken; it must be real, substantial, full, and ample. A wide range of factors must be considered to approximate the real and full value of the land.

• Judicial Determination of Just Compensation — The determination of just compensation is a judicial function. Special Agrarian Courts are required to consider the factors identified by law and implementing rules, including the guidelines and formulae prescribed by the DAR. Judicial discretion is not unbridled but must be exercised within the metes and bounds of the law.

• Valuation Factors under Section 17, R.A. No. 6657 — The factors include the cost of acquisition, current value of like properties, nature, actual use and income, sworn valuation by the owner, tax declarations, assessments by government assessors, and social and economic benefits contributed by farmers and the government.

• DAR A.O. No. 5, Series of 1998 Formula Hierarchy — The basic formula is LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1). If Comparable Sales (CS) is not present, LV = (CNI x 0.9) + (MV x 0.1). If Capitalized Net Income (CNI) is not present, LV = (CS x 0.9) + (MV x 0.1). If both CS and CNI are absent, LV = MV x 2.

• Time of Taking — The time of taking is the date when the landowner is deprived of the use and benefit of the property, which is when title is transferred to the Republic. It determines not only the relevant production data and values but also the applicable DAR administrative order.

• Interest on Just Compensation — When payment of just compensation is delayed, interest accrues as compensation for lost income and to address currency devaluation. Interest is imposed only on the unpaid balance (the difference between the final adjudged amount and the initial provisional deposit). The rates follow the two-tiered structure: 12% p.a. from the time of taking until June 30, 2013, and 6% p.a. from July 1, 2013 until finality; thereafter, the total amount earns 6% p.a. until full payment.

• "Just compensation is defined as the full and fair equivalent of the property taken from its owner by the expropriator. The word ‘just’ modifies the term compensation, which means that the equivalent to be given for the property to be taken shall be real, substantial, full, and ample." — This encapsulates the constitutional standard that guided the remand.

• "The exercise of judicial discretion is not unbridled, but must be discharged within the metes and bounds of the law." — The passage underscores why the lower courts’ reliance on the P.D. No. 27 formula was erroneous.

• "In determining just compensation it is imperative to consider the nature and character of the land at the time of taking or the time when the owner was deprived of the use and benefit of the property, such as when title is transferred in the name of the Republic of the Philippines." — The core ratio on fixing the relevant valuation date.

• Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform, 256 Phil. 777 (1989) — Cited for the definition of just compensation as the full and fair equivalent of the property taken.

• Land Bank of the Philippines v. Heirs of Barrameda, G.R. No. 221216, July 13, 2020 — Followed for the proposition that R.A. No. 6657 applies to corn lands subject of agrarian reform; reiterated that just compensation must be real, substantial, full, and ample.

• Land Bank of the Philippines v. Luciano, 620 Phil. 442 (2009) — Applied for the rule that when a property is acquired under R.A. No. 6657, the valuation must be based on Section 17 thereof and not on P.D. No. 27.

• Land Bank of the Philippines v. Villegas, G.R. No. 224760, October 6, 2021 — Relied upon for the time of taking as the date of title transfer, and for the rule that interest accrues on the unpaid balance.

• Republic v. Heirs of Bonifacio, G.R. No. 226734, May 10, 2021; Republic v. Sps. Goloyuco, G.R. No. 222551, June 19, 2019 — Used to support the two-tiered interest rate structure and its prospective application.

• Section 17, Republic Act No. 6657 (Comprehensive Agrarian Reform Law of 1988) — Enumerates the factors for determining just compensation: cost of acquisition, current value of like properties, nature, actual use and income, sworn valuation, tax declarations, assessments, and the social and economic benefits contributed by farmers and the government. The provision mandated the remand for valuation of the corn land under these factors.

• DAR Administrative Order No. 5, Series of 1998 — Provides the basic formula and its variants for computing land value based on Capitalized Net Income, Comparable Sales, and Market Value per Tax Declaration. The RTC-SAC was directed to apply this formula on remand using data as of the time of taking.

• Presidential Decree No. 27 — Its formula (Land Value = Average Gross Production x 2.5 x Selling Price) was erroneously used by the DARAB. The Court clarified it does not apply to acquisitions under R.A. No. 6657.

• Bangko Sentral ng Pilipinas – Monetary Board Circular No. 799, Series of 2013 (Section 1) — Established the new legal interest rate of 6% per annum effective July 1, 2013, applied prospectively to determine the interest from that date until finality of the Resolution.

Inting, Dimaampao, and Singh, JJ., concurred. Caguioa, J., concurred with a separate opinion (not reproduced in the decision).