LAND BANK OFTHE PHILIPPINES, Petitioner,
vs.
HONEYCOMB FARMS CORPORATION, Respondent.
G.R. No. 166259
November 12, 2012
(Supreme Court, Second Division)
Facts:
Honeycomb Farms Corp. (HFC)
voluntarily offered their two parcels of land to the Department of Agrarian
Reform (DAR) for P 10,480,000.00 or P 21,165.00. The Landbank of the
Philippines (LBP) used the guidelines set forth in DAR Administrative Order
(AO) No. 17 series of 1989 as amended by DAR AO No. 3 series of 1991 to fix the
value of these lands. HFC rejected the valuation. The voluntary offer to sell
was referred to the DAR adjudication Board. The Regional adjudicator fixed the
value of landholdings at P 5,324,529.00. HFC filed a case with the Regional
Trial Court (RTC)of Masbate acting as Special Agrarian Court against the DAR
Secretary and LBP, praying to compensate HFC for its landholdings amounting to
P 12,440,000.00. In its amended complaint, HFC increased the valuation P
20,000,000.00. LBP, on the other hand, revalued the land under TCT No. T-2872
at P 1,373,244.78, which was formerly fixed at P 2,527,749.60; and TCT No.
T-2549 at P 1,513,097.57, which was previously fixed at P 2,796,800.00. The RTC
made its own valuation when the Board of Commissioners could not agree on the common
valuation. The RTC took judicial notice of the fact that a portion of 10
hectares of that land is a commercial land because it is near the commercial district
of Cataingan, Masbate.
Both parties appealed to
the Court of Appeals (CA). HFC argued that the government illegally failed to
pay just compensation pursuant when LBP opened trust account in its behalf
which is contrary to existing jurisprudence. LBP on the other hand argued that
the RTC erred when it disregarded the formula set forth in DAR AO No. 6 series
of 1992 as amended by DAR AO No. 11 series of 1994 and in declaring the 10
hectares of that land as a commercial land. The CA decided in favor of HFC. CA
held that the lower courts are not bound by the factors enumerated in Section
17 of RA 6657 which are mere guide in determining just compensation. Also, the
valuation by LBP based on the formula was too low and, therefore, confiscatory.
LBP argued that the CA erred in not applying the formula based on law and that
the land taken pursuant to the State’s agrarian reform program involves both
the exercise of the State’s power of eminent domain and the police power of the
State. Consequently, the just compensation for land taken for agrarian reform
should be less than the just compensation given in the ordinary exercise of
eminent domain. Hence, this petition.
ISSUES:
- Whether the RTC erred when it made its own
valuation and disregarded the DAR formula/ Whether application of DAR’s
formula is mandatory in determining Just Compensation, hence the RTC and
CA erred when both disregarded the same;
- Whether the compensation to be paid should be
less than the market value of the property because the taking was not done
in LBP’s traditional exercise of the power of eminent domain;
- Whether a hearing is necessary before the RTC
can take judicial notice of the nature of the land; and
- Whether payment through trust account is
valid.
HELD:
Petition GRANTED.
Mandatory application of the DAR formula
To
guide the RTC in its function as Special Agrarian Court, Section 17 of RA 6657
enumerates the factors that have to be taken into consideration to accurately
determine just compensation. This provision states:
Section 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.
In
Land Bank of the Philippines v. Sps.
Banal, the DAR, as the administrative agency tasked with the implementation
of the agrarian reform program, already came up with a formula to determine just
compensation which incorporated the factors enumerated in Section 17 of RA
6657. The Supreme Court said:
These factors [enumerated
in Section 17] have been translated into a basic formula in DAR Administrative
Order No. 6, Series of 1992, as amended by DAR Administrative Order No. 11,
Series of 1994, issued pursuant to the DAR's rule-making power to carry out the
object and purposes of R.A. 6657, as amended.
In
Landbank of the Philippines v. Celada,
The Supreme Court emphasized the duty of the RTC to apply the formula provided
in the applicable DAR AO to determine just compensation, stating that:
While [the RTC] 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 R.A. 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. [The] DAR [Administrative
Order] precisely "filled in the details" of Section 17, R.A. No. 6657
by providing a basic formula by which the factors mentioned therein may be
taken into account. The [RTC] 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, courts cannot ignore
administrative issuances especially when, as in this case, its validity was not
put in issue. Unless an administrative order is declared invalid, courts have
no option but to apply the same.
The
Supreme Court reiterated the mandatory application of the formula in the
applicable DAR administrative regulations in Land Bank of the Philippines v. Lim, Land Bank of the Philippines v. Heirs of Eleuterio Cruz, and Land Bank of the Philippines v. Barrido. In
Barrido, The Supreme Court was
explicit in stating that:
While the determination of just compensation is
essentially a judicial function vested in the RTC acting as a Special Agrarian
Court, the judge cannot abuse his discretion by not taking into full
consideration the factors specifically identified by law and implementing
rules. Special Agrarian Courts are
not at liberty to disregard the formula laid down in DAR A.O. No. 5, series of
1998, because unless an administrative order is declared invalid, courts have
no option but to apply it. The courts cannot ignore, without
violating the agrarian law, the formula provided by the DAR for the
determination of just compensation.
These
rulings plainly impose on the RTC the duty to apply the formula laid down in
the pertinent DAR administrative regulations to determine just compensation.
Clearly, the CA and the RTC acted with grievous error when they disregarded the
formula laid down by the DAR, and chose instead to come up with their own
basis for the valuation of the subject land.
The compensation to be paid should not be less than the market value of
the property although the taking was not done in LBP’s traditional exercise of
the power of eminent domain.
The Supreme Court discredit
the argument of LBP that since the taking done by the government for purposes
of agrarian reform is not a traditional exercise of the power of eminent domain
but one which is done in pursuance of social justice and which involves the
State’s police power, the just compensation to be paid to the landowners for
these parcels of agricultural land should be less than the market value of the
property.
When the State exercises
its inherent power of eminent domain, the Constitution imposes the
corresponding obligation to compensate the landowner for the expropriated
property. This principle is embodied in Section 9, Article III of the
Constitution, which provides: "Private property shall not be taken for
public use without just compensation."
When
the State exercises the power of eminent domain in the implementation of its
agrarian reform program, the constitutional provision which governs is Section 4,
Article XIII of the Constitution, which provides that 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.
Notably,
this provision also imposes upon the State the obligation of paying the
landowner compensation for the land taken, even if it is for the government’s
agrarian reform purposes. Specifically, the provision makes use of the phrase
“just compensation,” the same phrase used in Section 9, Article III of the
Constitution. That the compensation mentioned here pertains to the fair and
full price of the taken property.
The
Supreme Court brushed aside the LBP’s attempt to differentiate just
compensation paid in what it terms as “traditional” exercise of eminent domain
and eminent domain in the context of agrarian reform in Apo Fruits Corporation and Hijo Plantation, Inc. v. Land Bank of the
Philippines, thus:
To our mind, nothing is inherently contradictory in the
public purpose of land reform and the right of landowners to receive just
compensation for the expropriation by the State of their properties. That the
petitioners are corporations that used to own large tracts of land should not
be taken against them. As Mr. Justice Isagani Cruz eloquently put it:
[S]ocial justice – or any
justice for that matter – is for the deserving, whether he be a millionaire in
his mansion or a pauper in his hovel. It is true that, in case of reasonable
doubt, we are called upon to tilt the balance in favor of the poor, to whom the
Constitution fittingly extends its sympathy and compassion. But never is it
justified to prefer the poor simply because they are poor, or to reject the
rich simply because they are rich, for justice must always be served, for poor
and rich alike, according to the mandate of the law.
Hearing is necessary before RTC takes judicial notice of nature of land
.
While the lower court is
not precluded from taking judicial notice of certain facts, it must exercise
this right within the clear boundary provided by Section 3, Rule 129 of the
Rules of Court, which provides:
Section 3. Judicial
notice, when hearing necessary. – During the trial, the court, on its own
initiative, or on request of a party, may announce its intention to take
judicial notice of any matter and allow the parties to be heard thereon.
After the trial, and before
judgment or on appeal, the proper court, on its own initiative, or on request
of a party, may take judicial notice of any matter and allow the parties to be
heard thereon if such matter is decisive of a material issue in the case.
The classification of the
land is obviously essential to the valuation of the subject property, which is
the very issue in the present case. The parties should thus have been given the
opportunity to present evidence on the nature of the property before the lower
court took judicial notice of the commercial nature of a portion of the subject
landholdings. As we said in Land Bank of
the Phils. v. Wycoco:
The power to take judicial
notice is to be exercised by courts with caution especially where the case involves
a vast tract of land. Care must be taken that the requisite notoriety
exists; and every reasonable doubt on the subject should be promptly resolved
in the negative. To say that a court will take judicial notice of a
fact is merely another way of saying that the usual form of evidence will be
dispensed with if knowledge of the fact can be otherwise
acquired. This is because the court assumes that the matter is so
notorious that it will not be disputed. But judicial notice is
not judicial knowledge. The mere personal knowledge of the judge is not the
judicial knowledge of the court, and he is not authorized to make his
individual knowledge of a fact, not generally or professionally known, the
basis of his action.
In these lights, we find
that a remand of this case to the court of origin is necessary for the
determination of just compensation, in accordance with the formula stated in DAR AO No. 6, series of 1992, as amended by
DAR AO No. 11, series of 1994, which are the applicable issuances on fixing just
compensation.
Payment through Trust Account is invalid.
In Land Bank of the
Phil. v. CA, the Supreme Court struck down as void DAR Administrative
Circular No. 9, Series of 1990, providing for the opening of trust accounts in
lieu of the deposit in cash or in bonds contemplated in Section 16(e) of RA
6657 and said:
It is very explicit x x x
[from Section 16(e)] that the deposit must be made only in “cash” or in “LBP
bonds.” Nowhere does it appear nor can it be inferred that the deposit can be
made in any other form. If it were the intention to include a “trust account”
among the valid modes of deposit, that should have been made express, or at
least, qualifying words ought to have appeared from which it can be fairly
deduced that a “trust account” is allowed. In sum, there is no ambiguity in
Section 16(e) of RA 6657 to warrant an expanded construction of the term
“deposit.”
x x x x
In the present suit, the
DAR clearly overstepped the limits of its power to enact rules and regulations
when it issued Administrative Circular No. 9. There is no basis in allowing the
opening of a trust account in behalf of the landowner as compensation for his
property because, as heretofore discussed, Section 16(e) of RA 6657 is very
specific that the deposit must be made only in “cash” or in “LBP bonds.” In the
same vein, petitioners cannot invoke LRA Circular Nos. 29, 29-A and 54 because
these implementing regulations cannot outweigh the clear provision of the law.
Respondent court therefore did not commit any error in striking down
Administrative Circular No. 9 for being null and void.
