Under Section 1 of Executive Order No. 405, series of 1990, petitioner LBP is charged with the initial responsibility of determining the value of lands placed under land reform and the just compensation to be paid for their taking. Through a notice of voluntary offer to sell (VOS) submitted by the landowner, accompanied by the required documents, the DAR evaluates the application and determines the land’s suitability for agriculture. The LBP likewise reviews the application and the supporting documents and determines the valuation of the land. Thereafter, the DAR issues the Notice of Land Valuation to the landowner. 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.
The 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.
Section 17 of R.A. No. 6657 provides:
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 nonpayment of taxes or loans secured from any government financing institution on the said land shall be considered as additional factors to determine its valuation.
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 powers 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. (Emphasis supplied.)
In the case at bar, while the SAC found the formula provided in DAR AO No. 5 applicable in determining the amount of just compensation, it disagreed with petitioner on the correct amount of Selling Price (SP) of palay and valuation of the irrigation canal and road. Petitioner contends that as a result of the erroneous application of DAR AO No. 5 by the SAC and CA, the amount of compensation had tremendously and unduly increased from P4,669,259.92 to P6,293,635.50. The difference of P1,624,375.58 would definitely be hurtful to the State’s Agrarian Reform Fund, of which petitioner is a mere custodian or trustee.
Private respondent maintains that the CA correctly applied the provisions of DAR AO No. 5 when it read Item II.B with II.B.1 which allows the use of data on selling price coming from other government and private entities “knowledgeable in the concerned industry.” Consequently, the government support price of palay as certified by the NFA and actual buying price reflected in the two receipts issued by a private buyer, may be used as basis for selling price in computing the CNI, without violating DAR AO No. 5.
The SAC, using P9.00 as SP, computed the CNI per hectare as follows:
CNI = AGP x SP) x 20%
CNI = (240 x 50 x 9.00) x 20%
CNI = 180,000
On the other hand, petitioner’s computation used P6.75, the average selling price within the 12-months prior to its receipt of private respondent’s claim folder (CF), as SP and came up with CNI of P135,000.00 per hectare. Petitioner indicated the date of receipt of the CF as June 1, 2001. As to the P6.75 per kg. SP, petitioner based it on the following data provided by MARO Rodolfo B. Cabuyadao of Ramon, Isabela:
May 2001……………………………… N/A
March 2001……………………………. 7.60
February 2001…………………………. 8.30
January 2001…………………………… N/A
December 2000………………………… N/A
October 2000…………………………… 5.00
The certification issued by the MARO, however, contained a notation that the SP for October and November 2000 was below normal due to continuous rains and typhoons experienced during these months. For that reason, the SAC and CA were of the view that petitioner should not have relied on the data provided by the MARO, and instead used the P9.00 government support price reflected in the NFA Certification dated September 25, 2001 and receipts issued by a private entity (Republic Cereal Corporation). The CA was emphatic that DAR AO No. 5 itself recognizes the data coming from other government regulatory agencies and private entities.
Item II of DAR AO No. 5 provides the following guidelines:
A. There shall be one basic formula for the valuation of lands covered by VOS or CA:
LV= (CNI x 0.6) + (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 shall be used if all the three factors are present, relevant, and applicable.
A.1 When the CS factor is not present and CNI and MV are applicable, the formula shall be:
LV = (CNI x 0.9) + (MV x 0.1)
x x x x
A.7 In all of the above, the computed value using the applicable formula shall in no case exceed the LO’s offer in case of VOS.
The LO’s offer shall be grossed up from the date of offer up to the date of receipt of CF by LBP from DAR.
A.8 For purposes of this Administrative Order, the date of receipt of CF by LBP from DAR shall mean the date when the CF is determined by the LBP-LVLCO to be complete with all the required documents and valuation inputs duly verified and validated, and ready for final computation/processing.
x x x x
B. Capitalized Net Income (CNI) — This shall refer to the
difference between the gross sales (AGP x SP)
and total cost of operations (CO) capitalized at
Expressed in equation form:
(AGP x SP) – CO
Where: CNI = Capitalized Net Income
AGP = Annual Gross Production corresponding to the latest available 12-months’ gross production immediately preceding the date of FI.
SP = The average of the latest available 12-months’ selling prices prior to the date of receipt of the CF by LBP for processing, such prices to be secured from the Department of Agriculture (DA) and other appropriate regulatory bodies or, in their absence, from the Bureau of Agricultural Statistics. If possible, SP data shall be gathered for the barangay or municipality where the property is located. In the absence thereof, SP may be secured within the province or region.
x x x x
B.1 Industry data on production, cost of operations and selling price shall be obtained from government/private entities. Such entities shall include, but not [be] limited to, the Department of Agriculture (DA), the Sugar Regulatory Authority (SRA), the Philippine Coconut Authority (PCA) and other private persons/entities knowledgeable in the concerned industry.
B.2 The landowner shall submit a statement of net income derived from the land subject of acquisition. This shall include, among others, total production and cost of operations on a per crop basis, selling price/s (farm gate) and such other data as may be required. These data shall be validated/verified by the Department of Agrarian Reform and Land Bank of the Philippinesfield personnel. The actual tenants/farmworkers of the subject property will be primary source of information for purposes of verification or, if not available, the tenants/farmworkers of adjoining property.
In case of failure by the landowner to submit the statement within fifteen (15) days from the date of receipt of letter-request as certified by the Municipal Agrarian Reform Office (MARO) or the data stated therein cannot be verified/validated, DAR and LBP may 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.
x x x x
D. In the Computation of Market Value per Tax Declaration (MV), the most recent tax Declaration (TD) and Schedule of Unit Market Values (SUMV) issued prior to receipt of CF by LBP shall be considered. The Unit Market Value (UMV) shall be grossed up from the date of its effectivity up to the date of receipt of CF by LBP from DAR for processing, in accordance with item II.A.9.
x x x x
E. Valuation of Improvements (non-crop) shall be undertaken by LBP.
F. The landowner shall not be compensated or paid for improvements introduced by third parties such as the government, farmer-beneficiaries or others.
x x x x (Emphasis supplied.)
There being no available information on Comparable Sales (CS), the applicable formula is LV= (CNI x 0.90) + (MV per TD x 0.10). To determine the CNI in this case, the LBP gathered the necessary data on annual gross production (AGP), selling price (SP) of palay, net income rate and land use.
As clearly stated in DAR AO No. 5, the SP for purposes of computing the CNI, must be the average of the latest available 12-months selling prices prior to the date of receipt of the claim folder by LBP, to be secured from the DA, Bureau of Agricultural Statistics or other appropriate regulatory bodies. Thus, the selling price of P9.00 submitted by private respondent sourced from the NFA (March-August and September-February without indicating the year) and private buyer (March and October 2001) cannot be used as it was not the average obtained within the period referred to in DAR AO No. 5 (July 2000 to May 2001). Besides, such selling price was gathered fromSantiagoCity and not theMunicipality ofRamon where the properties are located, contrary to DAR AO No. 5. Said provision also states that the data from the province or region may be used only in the absence of selling prices from the municipality or barangay.
We declared in Land Bank of the Philippines v. Celada that the DAR was tasked to issue the rules and regulations to carry out the “details” of Section 17 of R.A. No. 6657. It can be safely presumed that the fluctuations in the selling price of palay were already taken into consideration since only the average of these available prices within the 12 months prior to the receipt of the CF, will be used in computing the CNI. Hence, the SAC and CA clearly erred in completely disregarding the data provided by the MARO simply because it contained a notation that the figures indicated for two months (October and November 2000) were not normal due to typhoons.
On the exclusion of the NIA irrigation canal and road, we find untenable petitioner’s argument that said portions do not form part of the compensable area. It is true that Item II F of DAR AO No. 5 provides that those improvements introduced by the government, farmer-beneficiaries and other third parties, shall not be paid. However, as correctly ruled by the CA, what is being compensated is not the cost or value of the improvements introduced by the government but the value of the whole land taken under the CARP law. This does not mean that those portions are being separately valued as claimed by petitioner.
Moreover, compensating the land upon which those improvements were built is consistent with the principle that the equitable distribution and ownership of land sought to be achieved through CARP is undertaken “with due regard to the rights of landowners to just compensation.” Petitioner’s interpretation of Item II.F of DAR AO No. 5 would only lead to absurd and unjust consequences for the landowner whose landholding – a substantial portion thereof — is not being covered by the CARP and yet, the landowner is deprived of its use while the farmer-beneficiaries benefit from the present improvements (irrigation canal and road) on the property taken. Hence, we fully agree with the private respondent in arguing that:
Verily, Petitioner’s suggestion that Metraco should not be compensated for the canal and road that are being used by the farmer-tillers notwithstanding that the same are already registered in the name of the Republic of the Philippines is dangerous as it would be tantamount to taking private property without due process of law and without payment of just compensation in violation of the constitution.
We must stress, at this juncture, that the taking of private lands under the agrarian reform program partakes of the nature of an expropriation proceeding. In a number of cases, we have stated that just compensation in expropriation proceedings represents 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. To compensate is to render something which is equal in value to that taken or received.
In sum, we find petitioner’s valuation sufficiently substantiated and in accordance with Section 17 of R.A. No. 6657 and DAR AO No. 5, series of 1998, except that the portions of the landholdings occupied by the NIA water system and road should also be included in the total compensable area.