Just Compensation
Definition
Just compensation means the equivalent for the value of the property at the
time of its taking. It means a fair and full equivalentfor the loss
sustained. All the facts as to the condition of the property and its
surroundings, its improvements and capabilities should be considered. (Export Processing Zone Authority vs. Dulay, 149 SCRA 305 [1987]).
Just
compensation is defined as the full and fair equivalent of the property taken
from its owner by the expropriator. It has been repeatedly stressed by this
Court that 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" to convey the idea that the equivalent to be rendered
for the property to be taken shall be real, substantial, full, ample.
As
held in Republic of the Philippines v. Castellvi, there is
compensable taking when the following conditions concur: (1) the expropriator
must enter a private property; (2) the entry must be for more than a momentary
period; (3) the entry must be under warrant or color of authority; (4) the
property must be devoted to 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 as to oust the owner and deprive him of beneficial
enjoyment of the property. All these are envisioned in the measures before us
(at 378, 379).
(T)he
content and manner of the just compensation provided for in the afore-quoted
Section 18 of the CARP Law is not violative of the Constitution. We do not mind
admitting that a certain degree of pragmatism has influenced our decision on
this issue, but after all this Court is not a cloistered institution removed
from the realities and demands of society or oblivious to the need for its
enhancement. The Court is as acutely anxious as the rest of our people to see
the goal of agrarian reform achieved at last after the frustrations and
deprivations of our peasant masses during all these disappointing decades. We
are aware that invalidation of the said section will result in the
nullification of the entire program, killing the farmer's hopes even as they
approach realization and resurrecting the spectre of discontent and dissent in
the restless countryside. That is not in our view the intention of the
Constitution, and that is not what we shall decree today" (at 388).
Determination of Just Compensation
Under Sec. 17 of RA 6657, the factors
considered in the determination of just compensation are:
a) cost
of acquisition;
b) current
value of like properties;
c) nature
of land;
d) actual
use;
e) income;
f) sworn
valuation by the landowner;
g) tax
declaration;
h) assessment
by government assessors;
i) social
and economic benefits contributed by farmers and farmworkers and by the
government; and
j) non-payment
of taxes or loans secured from government financing institutions on land.
The provisions of RA 6657 on just
compensation do not provide hard-and-fast rules which must be strictly adhered
to by DAR and the LBP in determining just compensation.
Notably,
while Section 17 provides that the factors/criteria mentioned therein
"shall be considered" in determining just compensation, it does not
expressly state that only these factors/criteria, and no others, shall be
considered.
. .
. The factors/criteria set forth in Section 17, and in Section 18 and other
pertinent provisions for that matter, should be deemed as mere standards to
guide the proper officials in determining just compensation, but should in no
case control or limit such determination, the ultimate consideration being that
the compensation be the "full and fair equivalent of the property taken
from its owner by the expropriator".
. .
. In every case, what should control is the "just-ness" of the
proposal taking into account the "revolutionary" nature of the
expropriation under the CARL. (DOJ Opinion No. 109 (1991))."
Valuation or Computation
General formula
The basic formula for the valuation of lands covered by Voluntary Offer to Sell
and Compulsory Acquisition is:
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 is used if all the three (3) factors
are present, relevant, and applicable (DAR Admin. O. No. 5 [1998]). 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.
To illustrate the formula wherein all of the factors above mentioned are
present:
Area
: 3
hectares
Capitalized Net Income : P24,900
Market
Value : P10,000 Comparable Sales : P 5,000
The
land value is : LV = (24,900 x 0.6) + (5,000 x 0.3) + (10,000 x 0.1)
=
(14,940) + (1,500) + (1,000)
=
(17,440) x (3 hectares)
=
P 52,320
Computation of land value
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 capitalized net income is unavailable]
LV
= MV x 2
[if
only the market value factor is available]
In case the comparable sales factor (CS) is relevant or applicable, the land
value is computed in accordance with the general formula where MV is based on
the lowest productivity classification of the land.
In every case, the value of idle land using the formula MV x 2 should not
exceed the lowest value of land within the same estate under consideration or
within the same barangay or municipality (in that order) approved by LBP within
one (1) year from receipt of claimfolder (DAR Admin. O. No. 5 [1998]).
Computation of land value under certain conditions
Valuation of lands planted to permanent but not yet fruit-bearing crops
There are times when the land being valued is planted to permanent crops which
are not yet productive or not yet fruit-bearing at the time of the Field
Investigation (FI) of the land. The land value is equivalent to the value of
the land plus the cumulative development cost (CDC) of the crop from land
preparation up to the time of FI. In equation form, the land value can be
computed as:
LV
= (MV x 2) + CDC
Where:
a) The
market value (MV) to be used is the applicable unit market value (UMV)
classification of idle land.
b) The
cumulative development cost (CDC) is grossed-up from the date of FI up to the
date of LBP Claim Folder (CF) receipt for processing but in no case should the
grossed-up CDC exceed the current CDC data based on industry.
In case the CDC data provided by the landowner could not be verified, DAR and
LBP should secure the said data from concerned agency/ies or, in the absence
thereof, should establish the same.
However, the resulting land value should not exceed the value of productive
land similar in terms of crop and plant density within the estate under
consideration or within the same barangay or municipality (in that order)
approved by LBP within one (1) year from receipt of CF (DAR Admin. O. No. 5 [1998]).
Lands
with permanent but not yet productive crops introduced by farmer-beneficiaries
When the permanent but not yet fruit-bearing crops are introduced by the
farmer-beneficiaries, the land valuation formula used is the same as if only
the MV is available provided the MV used is the applicable UMV classification of
idle land. In equation form:
LV
= MV x 2
In any case, the resulting land value should not exceed the value of productive
land similar in terms of crop and plant density within the estate under
consideration or within the same barangay or municipality (in that order)
approved by LBP within one (1) year from receipt of CF. And in case the CS is
relevant or applicable, the land value is computed in accordance with the
general formula where MV is based on the applicable classification of the land
(DAR Admin. O. No. 5 [1998]).
Use
of Salvage Value on valuation of lands planted to permanent but no longer
productive or ready for cutting crops
When lands being valued are planted to permanent but no longer productive or
the crops are ready for cutting, the computation considers the applicable UMV
classification of idle land plus the salvage value of the standing trees at the
time of the FI. In equation form:
LV = (MV x 2) + Salvage Value
But the resulting land value should not exceed the value of productive land
similar in terms of crop and plant density within the estate under
consideration or within the same barangay or municipality (in that order)
approved by LBP within one (1) year from receipt of CF. In case where CS is
relevant or applicable, the land value is computed in accordance with the
general formula where MV is based on the lowest productivity classification of
the land (DAR Admin. O. No. 5 [1998]).
Land value under Voluntary Offer to Sell
In VOS, the computed value using the applicable formula should not exceed the
landowner's offer. The landowner's offer is grossed up from the date of the
offer up to the date of receipt of CF by LBP from DAR for processing. The date
of receipt of CF by LBP from DAR means 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.
Factors of Land Value
Computation of Capitalized Net Income
Capitalized Net Income refers to the difference between the product of the
gross sales and selling prices (AGP x SP) and total cost of operations (CO)
capitalized at 12%.
Expressed
in equation form:
(AGP
x SP) - CO
CNI
= ———————————
0.12
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
= (selling prices) 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 is gathered from the barangay or municipality
where the property is located. In the absence thereof, selling prices may be
secured within the province or region.
CO
= Cost of Operations
Whenever the cost of operations could not be obtained or verified, an assumed
net income rate (NIR) of 20% is used. Landholdings planted to coconut which are
productive at the time of FI will continue to use the assumed NIR of 70%. DAR
and LBP will continue to conduct joint industry studies to establish the
applicable NIR for each crop covered under CARP.
0.12
= Capitalization Rate
To illustrate the computation of capitalized net income:
Number
of coconut trees : 95 trees/hectare
Selling
Prices : P6.74/kg.
Hence:
AGP
= 95 trees/ha. x 30 nuts/tree 4.5 nuts/kg. = 633.33 kg.
CNI
=
633.33 kg. x 6.74/kg. x 70% NIR for coconut land
——————————————————————
12
%
=
P24,900.56/hectare
Comparable Sales
Comparable sales refers to any one or the average of all the applicable
sub-factors, namely sales transactions (ST), acquisition cost (AC) and market
value based on mortgage (MVM):
Where:
ST = (Peso Value of Sales Transactions)
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 applies 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 should 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 1
January 1985 to 15 June 988, and registered within the period 1 January 1985 to
13 September 1988.
d) STs
are grossed up from the date of registration up to the date of receipt of CF by
LBP from DAR for processing.
AC or Acquisition Cost is deemed relevant when the property subject of acquisition
was acquired through purchase or exchange with another property within the
period 1 January 1985 to 15 June 1988 and registered within the period 1
January 1985 to 13 September 1988, and the condition of said property is still
substantially similar from the date of purchase or exchange to the date of FI.
AC is grossed up from the date of registration of the deed of sale/exchange up
to the date of receipt of CF by LBP from DAR for processing.
MVM or Market Value Based on Mortgage. For MVM to be relevant or applicable,
the property subject of acquisition should have been mortgaged as of 15 June
1988 and the condition of the property is still substantially similar up to the
date of FI. MVM refers to the latest available appraised value of the property
(DAR Admin. O. No. 5 [1998]).
Market Value
MV or Market Value per Tax Declaration is the latest Tax Declaration (TD) and
Schedule of Unit Market Value (SUMV) issued prior to receipt of CF by LBP. The
Unit Market Value (UMV) is grossed-up from the date of its effectivity up to
the date of receipt of CF by LBP from DAR processing.
Formula in Grossing-Up of Valuation Inputs
The basic formula in the grossing-up of valuation inputs such as LO's Offer,
Sales Transaction (ST), Acquisition Cost (AC), Market Value Based on Mortgage
(MVM) and Market Value per Tax Declaration (MV) is:
Grossed-up
Valuation
Input = Valuation Input x Regional Consumer
Price
Index (RCPI) Adjustment Factor
The various valuation inputs are multiplied with the RCPI
Adjustment Factor. The RCPI Adjustment Factor refers to the ratio of the most
recent available RCPI for the month issued by the National Statistics Office as
of the date when the CF was received by LBP from DAR for processing and the
RCPI for the month as of the date/effectivity/registration of the valuation
input. Expressed in equation form:
Most
Recent RCPI for the Month as of the Date
of
Receipt of CF by LBP from DAR
RCPI
Adjustment Factor = —————————————————
RCPI
for the Month Issued as of the Date/
Effectivity/Registration
of the Valuation Input
(DAR
Admin. O. No. 5 [1998])
Valuation of deferred commercial farms
The formulae provided under DAR AO 5 (1998) are used in the computation
of valuation for deferred commercial farms (DAR Adm. O. No. 9 [1998]).
Valuation of lands of corporate farms
Agricultural lands owned by corporate farms are valued by considering the
following factors:
a) factors
for the determination of just compensation; and
Valuation of lands planted to sugarcane
There is a different computation for valuation of lands planted to sugarcane
because of the so-called "ratooning". In the valuation of lands
planted to sugar, the effects of ratooning are considered. Ratooning is the
cutting of the straw close to the ground at harvesting time after all the
standing water has been drained out to allow the young tillers to sprout out of
the rootstocks and develop into mature normal bearing plants in three or four
months with the aid of fertilizer, manure or compost (Rep. Act No. 1199 [1954], sec. 5, par.
[g-2]).
The method of ratooning affects land valuation of the property. Majority of
sugar planters practice at least up to two (2) ratoons. This method reduces the
cost of production for sugar planters. Hence, the computation of the land value
is adjusted.
Valuation of rubber plantations
Under the old rubber land valuation guideline or the Land Valuation Guidelines
No. 6 (1990), the recognized income of rubber plantations is based on processed
crumb rubber. Under one of the latest guidelines, the standard income approach
to valuation, measures 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. It
appropriately determines the Capitalized Net Income 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.
Furthermore, the growing market for old rubber trees which was not considered
in the old LVG is now considered.
There are also other several situations which are considered in the computation
of just compensation for rubber plantations. There are rubber claims pending
with the Department of Agrarian Reform Adjudication Board (DARAB) for reasons
such as landowner's rejection of the valuation but the plantation remains under
the management of the landowner. Due to the time gap between the original date
of FI and the date of DARAB's order to recompute the property (during which
period, the age and productivity of the trees change), the valuation should be
made on the basis of the age and productivity of the trees at the time of
recomputation (Joint DAR-LBP Memo. Circ. No. 8,
[1999]).
Compensation for Mt. Pinatubo areas
Under Joint DAR-LBP AO 3 (1994),
agricultural lands affected by the Mt. Pinatubo eruptions have been classified
into three categories based on the NEDA Region III Geographic Information
System Database, to wit:
Under the Category I, are those areas actually affected by the lahar and
pyroclastic deposits, including those areas which have become silted, eroded or
continuously flooded for an indefinite period of time.
Under the Category II, are those areas not yet affected but have the
possibility of being actually affected.
Under the Category III, are those areas actually covered or affected by ashfall
but which remain productive.
The general rule is, lands under Category III shall be acquired and landowners
shall be compensated. While compensation of lands under Categories I and II
shall be effected under the following conditions:
a) Claims
have been approved by the LBP and:
• Transfer
Certificate of Title was already registered in the name of RP on or before the
issuance of the same administrative order; or
• Partial
payment was already effected.
b) Emancipation
Patents/Certificates of Land Ownership Award have been registered on or before
12 June 1991 regardless of whether or not the claimfolder is with the LBP.
Summary Administrative Proceedings
Land Bank of the Philippines
The Land Bank of the Philippines is primarily responsible for the determination
of the land valuation and compensation for all private lands suitable for
agriculture under either the voluntary offer to sell or compulsory acquisition
arrangement as governed by RA 6657. The DAR makes use of the
determination of the land valuation and compensation by the LBP, in the
performance of its functions (Exec. Order. No. 405 [1990],
sec. 1).
Public participation
There are several provisions of laws which encourage public participation in
the determination of land valuation, namely:
a)
Sec. 3 of EO 129-A states:
. .
. partnership between government and organization of farmers and farmworkers in
agrarian reform policy formulation, program implementation and evaluation shall
be institutionalized . . .
b)
Sec. 18 of RA 6657 provides:
The
LBP shall compensate the landowners in such amount as may be agreed upon by the
landowner and the DAR and the LBP . . .
c)
DAR AO 14 (1990) emphasizes Sec. 47 of RA 6657 on BARC's assistance in the
initial determination of the value of the land.
Preliminary determination of just compensation cases
The summary administrative proceeding is conducted before the Provincial
Agrarian Reform Adjudicator if the compensation offered does not exceed two (2)
million pesos; or before the Regional Agrarian Reform Adjudicator if the government's
offer is more than two (2) million pesos but does not exceed five (5) million
pesos; or before the Department of Agrarian reform Adjudication Board if the
offer is more than five (5) million pesos (DAR Adm. Order No. 8 [1993]).
Under DAR MC 1 (1995), valuation
cases involving PD 27 lands are
cognizable only by the Secretary of DAR (reiterating Sec. 12 ofPD 946 [1976]). But in the recent case
of Land Bank of the Phils. vs. CA, G.R. No.
128557, 29 December 1999, the Supreme Court declared that it was an
error for the Secretary of Agrarian Reform to issue DAR MC 1 (1995) directing the DARAB to
refrain from hearing valuation cases involving PD 27 lands. It is the DARAB which has
the authority to determine the initial valuation of lands involving agrarian
reform pursuant to Sec 1 (b), Rule II, 1994 Revised Rule of the DARAB although
such valuation may only be considered preliminary as the final determination of
just compensation is vested in the courts.
The PARAD's, RARAD's, or DARAB's summary administrative proceeding is merely a
preliminary determination of the just compensation due to the landowner. The
landowner has the right to question such preliminary determination of the
Adjudication Board before the Special Agrarian Courts.
The
Regional Trial Courts have not been completely divested of jurisdiction over
agrarian reform matters. Section 56 of RA 6657, on the other hand, confers
"special jurisdiction" on "Special Agrarian Courts", which
are Regional Trial Courts designated by the Supreme Court — at least one (1)
branch within each province — to act as such. These Regional Trial Courts qua Special
Agrarian Courts have, according to Section 57 of the same law, original and
exclusive jurisdiction over: 1) "all petitions for the determination of
just compensation to land-owners," and 2) "the prosecution of all
criminal offenses under . . . (the) Act (at 890). Vda. de Tangub vs. CA,
191 SCRA 885 (1990)
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, such determination of just compensation
by the DAR, as earlier stated is by no 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"Magana
vs. Estrella, 201 SCRA 536 (1991).
In Phil. Veterans Bank vs. Court of
Appeals, G.R. No. 132767, 18 January 2000, petitioner Bank argued that
the DAR Adjudicators have no jurisdiction to determine just compensation for
the taking of lands under CARP because such jurisdiction is vested in Regional
Trial Courts designated as Special Agrarian Courts. Hence, Petitioner could
file its petition with the RTC beyond the 15-day period of appeal from the
decision of the DAR Adjudicator. The RTC dismissed the petition of Petitioner
for being filed beyond the 15-day period for appeal. The Supreme Court
reiterated its ruling inRepublic vs. Court of Appeals, supra, and
said:
. .
. 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, S 11, the original and
exclusive jurisdiction given to the courts to decide petitions for
determination of just compensation has already 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 the matter, the law may provide that the decision of the DAR
is final and unappealable. Nevertheless, resort to courts cannot be foreclosed
on the theory that courts are the guarantors of the legality of administrative
action.
Under Sec. 2 of EO 228, land valuation
shall be based on the Average Gross Production (AGP) as determined by the
Barangay Committee on Land Production (BCLP). The formula is:
Rice
Lands LV = AGP x 2.5 x P 35 *
Corn
Lands LV = AGP x 2.5 x P 31**
*
government support price for one cavan of 50 kilos of palay on October 21, 1972
**
government support price for one cavan of 50 kilos of corn on October 21, 1972
Lease rentals paid to the landowner by the farmer-beneficiary after 21 October
1972 shall be considered as advance payment for the land.
The factor of government support price provided under EO 228does not undervalue PD 27 lands. Under DAR AO 13 (1994), an increment of 6% yearly
interest compounded annually on lands covered by PD 27 and EO 228 is granted. The formula is:
(Computed
land value using the original formula) x (1.06)n
where
: n = number of years from date of tenancy up to effectivity date
The landowners qualified to receive the compensation based on the increment
formula are:
a) Those
whose lands are actually tenanted as of October 21, 1972 or thereafter and
Operation Land Transfer (OLT) covered;
b) Those
who opted for government financing thru LBP as the mode of compensation; and
c) Those
who have not yet been paid for the value of the land.
For those who were partially paid, the yearly increment of 6% compounded
annually shall only be applied to the unpaid balance. According to the above
mentioned administrative issuance, the said grant of increment is reckoned from
the effectivity date of PD 27 or date when the
land was actually tenanted up to the effectivity date of DAR AO 13 (1994) or up
to 27 October 1994 only. It seems the grant of increment cannot be applied
after this effectivity date even if the actual payment can be had after 27
October 1994.
In the case of Benosa vs. CA, G.R. No. 122231, 27 November
1995, on the issue of granting interest to the landowner, it was held:
It
is settled that the landowners are entitled to legal interest on the amount
payable from the time the property was taken until full payment is made (National
Power Corporation vs. Angas, 208 SCRA 542; Commissioner of Public Highways vs.
Burgos, supra; Ortula vs. Republic, 22 SCRA 477; Republic vs. Delente, supra).
DAR Administrative Order No. 13, series of 1994 which grants increment of 6%
yearly interest compounded annually on lands covered by P.D. No. 27 and E.O.
No. 228, squarely recognizes the above rule and thus applies to the private
respondents.
In LBP vs. CA, supra, the
Supreme Court decided not to apply the 6% increment to the valuation because
the Court of Appeals affirmed the PARAD's use of the 1992 Gross Selling Price
in the valuation of the private respondent's land (following the ruling in the
Court of Appeals case of Galeon vs. Pastoral, CA-G.R. No. 23168; Rollo,
p. 36)
Mode of Compensation
It
cannot be denied from these cases that the traditional medium for the payment
of just compensation is money and no other. And so, conformably, has just
compensation been paid in the past solely in that medium. However, we do not
deal here with thetraditional exercise of the power of eminent
domain. This is not an ordinary expropriation where only a specific property of
relatively limited area is sought to be taken by the State from its owner for a
specific and perhaps local purpose. What we deal with here is arevolutionary kind
of expropriation.
The
expropriation before us affects all private agricultural lands wherever found
and of whatever kind as long as they are in excess of the maximum retention
limits allowed their owners. This kind of expropriation is intended for the
benefit not only of a particular community or of a small segment of the
population but of the entire Filipino nation, from all levels of our society,
from the impoverished farmer to the land-glutted owner. Its purpose does not
cover only the whole territory of this country but goes beyond in time to the
foreseeable future, which it hopes to secure and edify with the vision and the
sacrifice of the present generation of Filipinos. Generations yet to come are
as involved in this program as we are today, . . . .
Accepting
the theory that payment of the just compensation is not always required to be
made fully in money, we find further that the proportion of cash payment to the
other things of value constituting the total payment, as determined on the
basis of the areas of the lands expropriated, is not unduly oppressive upon the
landowner. It is noted that the smaller the land, the bigger the payment in
money, primarily because the small landowner will be needing it more than the
big landowners, who can afford a bigger balance in bonds and other things of
value. No less importantly, the government financial instruments making up the
balance of the payment are "negotiable at any time". The other modes,
which are likewise available to the landowner at his option, are also not
unreasonable because payment is made in shares of stock, LBP bonds, other
properties or assets, tax credits, and other things of value equivalent to the
amount of just compensation.
The
recognized rule indeed, is that title to the property expropriated shall pass
from the owner to the expropriator only upon full payment of the just
compensation. Jurisprudence on this settled principle is consistent both here
and in other democratic jurisdictions" (at 386, 388 and 389).
Cash Payment
Under Sec. 18 of RA 6657, the proportion of
payment in cash, dependent on the area/hectarage of the land valued is subject
to the following:
a) above
50 hectares, insofar as the excess hectarage is concerned = 25% cash
b) above
24 hectares and up to 50 hectares = 30% cash
c) 24
hectares and below = 35% cash
For voluntary offer to sell, the cash portion is increased by 5%.
Payment in kind
Landowners may be paid with:
a) Shares
of stock in government owned or controlled corporation, LBP preferred shares,
physical assets or other qualified investments.
b) Tax
credits; or
c) LBP
bonds
Features of LBP bonds
The new ten (10)-year LBP bonds have attractive features which are more
acceptable and marketable than the other investment instruments. As provided
under Sec. 18 of RA 6657, these features
are:
1) Its
market interest rates are aligned with 91-day treasury bill rates, net of
applicable final withholding tax, payable twice a year — six months from date
of issue and every six months thereafter.
2) One-tenth
of the bond's face value matures every year from date of issue up to the tenth
year.
3) The
bond is fully guaranteed by the national government.
4) The
bond is non-denominated. Upon request, it can be split according to amounts
desired by the bondholder.
5) The
bonds are highly transferable and negotiable. Such LBP bonds may be used by the
landowner, his successors in interest or his assigns, up to the amount of their
face value, for any of the following:
a) Acquisition
of land or other real properties of the government, including assets under the
Asset Privatization Program and other assets foreclosed by government financial
institutions in the same province or region where the lands for which the bonds
were paid are situated;
b) Acquisition
of shares of stock of government-owned or controlled corporations or shares of
stock owned by the government in private corporations;
c) Substitution
for surety or bail bonds for the provisional release of accused persons, or
performance bonds;
d) Security
for loans with any government financial institution, provided the proceeds of
the loans shall be invested in an economic enterprise, preferably in a
small-and medium-scale industry, in the same province or region as the land for
which the bonds are paid;
e) Payment
for various taxes and fees to government; Provided, That the use of these bonds
for these purposes will be limited to a certain percentage of the outstanding
balance of the financial instruments: Provided, further, That the PARC shall
determine the percentage mentioned above;
f) Payment
for tuition fees of the immediate family of the original bondholder in
government universities, colleges, trade schools, and other institutions;
g) Payment
for fees of the immediate family of the original bondholder in government
hospitals; and
h) Such
other uses as the PARC may from time to time allow.
The 100% face value and negotiability of LBP bonds are well described in the
case of Gonzales vs. GSIS, 107
SCRA 492 (1981). Petitioner filed a petition for mandamus to compel
the respondent Government Service Insurance System (GSIS) to accept 6%
interest-bearing bonds issued by the Land Bank of the Philippines at their par
or face value as payment for petitioners' outstanding housing loan. The act of
the GSIS in discounting the LBP bonds was found invalid. The Court ruled:
Land
Bank bonds are certificates of indebtedness, approved by the Monetary Board of
the Central Bank, fully tax-exempt both as to principal and income, and bear
interest at the rate of 6% per annum redeemable at the option of the Land Bank
at or before maturity, which in no case shall exceed 25 years. They are fully
negotiable and unconditionally guaranteed by the Government of the Republic of
the Philippines. These bonds are deemed contracts and the obligations resulting
therefrom fall within the purview of the non-impairment clause of the
Constitution, and any impairment thereof may take any encroachment in any
respect upon the obligation and cannot be permitted. Thus, the value of these
bonds cannot be diminished by any direct or indirect act, particularly, since
said bonds are fully guaranteed by the Government of the Republic of the
Philippines. They are issued not in the open market nor for the captive market
of landowners and to facilitate the speedy transfer of lands to the
tenant-farmers in support of the land reform program of the Government. They
are not ordinary commercial paper in that sense subject to discounting (at 498,
499 and 502).
Mode of Payment for PD 27 Landowners
The landowners shall be paid in any of the following modes, at their option (Exec. Order No. 228 [1987], sec. 3):
a) Bond
payment over ten (10) years, with ten percent (10%) of the value of the land
payable immediately in cash, and the balance in the form of LBP bonds bearing
market rates of interest that are aligned with 90-day treasury bills rates, net
of applicable final withholding tax. One-tenth of the face value of the bonds
shall mature every year from the date of issuance until the tenth year.
The
LBP bonds issued hereunder shall be eligible for the purchase of government
assets to be privatized.
b) Direct
payment in cash or in kind by the farmer-beneficiaries with the terms to be
mutually agreed upon by the beneficiaries and landowners and subject to the
approval of the DAR; and
c) Other
modes of payment as may be prescribed or approved by the PARC.
Under Sec. 9 of EO 229, landowners who
voluntarily offer to sell their lands are given the same incentive given
to PD 27 landowners
under EO 228, which is the
exemption from the payment of capital gains tax and other taxes and fees.
