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Laoag City, Ilocos Region, Philippines
Res Ipsa Loquitor

Tuesday, September 2, 2014

Central Mindanao University vs. Department of Agrarian Reform Adjudication Board 215 SCRA 86 (1992)

Central Mindanao University vs. Department of Agrarian Reform Adjudication Board 
215 SCRA 86 (1992)

Facts:
On 16 January 1958, President Carlos Garcia issued Proclamation No. 467 reserving for the Mindanao Agricultural College, now the CMU, a piece of land to be used as its future campus. In 1984, CMU embarked on a project titled "Kilusang Sariling Sikap" wherein parcels of land were leased to its faculty members and employees. Under the terms of the program, CMU will assist faculty members and employee groups through the extension of technical know-how, training and other kinds of assistance. In turn, they paid the CMU a service fee for use of the land. The agreement explicitly provided that there will be no tenancy relationship between the lessees and the CMU.
When the program was terminated, a case was filed by the participants of the "Kilusang Sariling Sikap" for declaration of status as tenants under the CARP. In its resolution, DARAB, ordered, among others, the segregation of 400 hectares of the land for distribution under CARP. The land was subjected to coverage on the basis of DAR's determination that the lands do not meet the condition for exemption, that is, it is not "actually, directly, and exclusively used" for educational purposes.

Issue:
Is the CMU land covered by CARP? Who determines whether lands reserved for public use by presidential proclamation is no longer actually, directly and exclusively used and necessary for the purpose for which they are reserved?

Held:
The land is exempted from CARP. CMU is in the best position to resolve and answer the question of when and what lands are found necessary for its use. The Court also chided the DARAB for resolving this issue of exemption on the basis of "CMU's present needs." The Court stated that the DARAB decision stating that for the land to be exempt it must be "presently, actively exploited and utilized by the university in carrying out its present educational program with its present student population and academic faculty" overlooked the very significant factor of growth of the university in the years to come.


uz Farms vs. Secretary of the Department of Agrarian Reform 192 SCRA 51 (1990)

Luz Farms vs. Secretary of the Department of Agrarian Reform 
192 SCRA 51 (1990)
Facts:
Petitioner Luz Farms is a corporation engaged in livestock and poultry business. It seeks to nullify Sec. 3 (b) and Sec. 11 of RA 6657 in so far as they apply to livestock and poultry business.
Held:
Sec. 3 (b) and Sec. 11 of RA 6657 are unconstitutional in so far as they include lands devoted to raising livestock, swine and poultry within its coverage. The use of land is incidental to but not the principal factor or consideration of productivity in this industry. The Supreme Court held that:
The transcripts of deliberations of the Constitutional Commission of 1986 on the meaning of the word "agricultural," clearly show that it was never the intention of the framers of the Constitution to include livestock and poultry industry in the coverage of the constitutionally-mandated agrarian reform program of the government.
The Committee adopted the definition of "agricultural land" as defined under Section 166 of RA 3844, as land devoted to any growth, including but not limited to crop lands, saltbeds, fishponds, idle and abandoned land (Record, CONCOM, August 7, 1986, Vol. III, p. 11).
The Supreme Court noted that the intention of the Committee to limit the application of the word "agriculture" is further shown by the proposal of Commissioner Jamir to insert the word "arable" to distinguish this kind of agricultural land from such lands as commercial and industrial lands and residential properties. The proposal, however, was not considered because the Committee contemplated that agricultural lands are limited to arable and suitable agricultural lands and therefore, do not include commercial, industrial and residential lands (Record, CONCOM, 7 August 1986, Vol. III, p. 30).

Moreover, in his answer to Commissioner Regalado's interpellation, Commissioner Tadeo clarified that the term "farmworker" was used instead of "agricultural worker" in order to exclude therein piggery, poultry and livestock workers (Record, CONCOM, August 2, 1986, Vol. II, p. 621).

Natalia Realty, Inc. vs. Department of Agrarian Reform 225 SCRA 278 (1993)

Natalia Realty, Inc. vs. Department of Agrarian Reform 
225 SCRA 278 (1993)
Facts:
Petitioner Natalia Realty, Inc. is the owner of a 125.0078-ha land set aside by Presidential Proclamation No. 1637 (1979) as townsite area for the Lungsod Silangan Reservation. Estate Developers and Investors Corporation (EDIC), the developer of the area, was granted preliminary approval and locational clearances by the then Human Settlements Regulatory Commission (HSRC) for the establishment of the Antipolo Hills Subdivision therein. In November 1990, a Notice of Coverage was issued by DAR on the undeveloped portion of the landholding. The developer filed its objections and filed this case imputing grave abuse of discretion to respondent DAR for including the undeveloped portions of its landholding within the coverage of CARP.
Issue:
Are lands already classified for residential, commercial or industrial use, and approved by HLURB and its precursor agencies prior to 15 June 1988, covered by RA 6657?
Held:

Sec. 4 of RA 6657 states that the CARL covers "regardless of tenurial arrangement and commodity produced, all public and private and agricultural lands" and as per the transcripts of the Constitutional Commission, "agricultural lands" covered by agrarian reform refers only to those which are "arable and suitable lands" and "do not include commercial, industrial and residential lands." The land subject of the controversy has been set aside for the Lungsod Silangan Reservation by Proclamation No. 1637 prior to the effectivity of RA 6657 and in effect converted these lands into residential use. Since the Natalia lands were converted prior to 15 June 1988, DAR is bound by such conversion, and thus it was an error to include these within the coverage of CARL.


Scope of CARP

Scope of CARP
     The Constitution in Sec. 4, Art. XIII, mandates the just distribution of all agricultural lands, subject to such priorities and reasonable retention limits that the Congress may prescribe, taking into account ecological, developmental or equity considerations and subject to the payment of just compensation.
     Prior to RA 6657, the operative law on land distribution was PD 27 (1972). However, PD 27 is limited in scope, covering only tenanted private agricultural lands primarily devoted to rice and corn operating under a system of share-crop or lease tenancy, whether classified as landed estate or not. The constitutional provision therefore expanded the scope of agrarian reform to cover all agricultural lands.
     RA 6657 operationalized this constitutional mandate and provides in Sec. 4 thereof that the CARP shall cover, regardless of tenurial arrangement and commodity produced, all public and private agricultural lands, as provided in Proclamation No. 131 and EO 229including other lands of the public domain suitable for agriculture. More specifically, the following lands are covered by CARP:
a)         All alienable and disposable lands of the public domain devoted to or suitable for agriculture;
b)         All lands of the public domain in excess of the specific limits as determined by Congress in Sec. 4 (a) of RA 6657;
c)         All other lands owned by the government devoted to or suitable for agriculture; and

d)         All private lands devoted or suitable for agriculture regardless of the agricultural products raised or that can be raised thereon (Rep. Act No. 6657 [1988], Sec. 4).


Comprehensive Agrarian Reform Program

The Comprehensive Agrarian Reform Program
     The Comprehensive Agrarian Reform Program (CARP) is implemented by Republic Act No. 6657 (1988) otherwise known as the "Comprehensive Agrarian Reform Law". Prior to its enactment on 10 June 1988, President Corazon C. Aquino issued Proclamation No. 131 (1987) instituting a comprehensive agrarian reform program, and Executive Order No. 229 (1987) providing the mechanics for its implementation. RA 6657 took effect on 15 June 1988.
While expressly repealing specific provisions of prior enactments on agrarian reform, RA 6657 provides that the provisions of RA 3844(1963), Presidential Decree No. 27 (1972) and PD 266 (1973), EO 228 (1987) and EO 229 (1987) and other laws not inconsistent with it shall have suppletory effect.
     RA 6657 was enacted pursuant to the constitutional mandate enshrined in Section 4, Art. XIII of the 1987 Constitution, which 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.
     The constitutionality of RA 6657 has been upheld in Association of Small Landowners v. Secretary of Agrarian Reform, 175 SCRA 342 (1989) and companion cases. The Supreme Court held that the requirement of public use has already been settled by the Constitution itself. It noted that "[n]o less than the 1987 Charter calls for agrarian reform which is the reason why private agricultural lands are to be taken from their owners, subject to the prescribed retention limits." (at 378)

     While RA 6657 itself has been held constitutional, the Supreme Court in a subsequent case, Luz Farms v. Secretary of Agrarian Reform, 192 SCRA 51 (1990), declared unconstitutional Sec. 3 (b), 10 and 11 thereof in so far as they include lands devoted to the raising of livestock, swine and poultry within its coverage. As a result of this ruling, Congress enacted RA 7881 (1995) amending these provisions and incorporating new provisions to existing ones. The amendments adopted the Luz doctrine by removing livestock, swine and poultry farms from CARP coverage.


Just Compensation (CARP)

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]).
     In the case of Association of Small Landowners in the Philippines, Inc. vs. Secretary of Agrarian Reform, supra, the Supreme Court further explained the meaning of "just compensation". It said:
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
b)         factors needed to stimulate the growth of cooperatives and participation of worker-beneficiaries (Rep. Act No. 6657[1988], sec. 17 in relation to DAR Adm. O. No. 5 [1998])
     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.
     The applicable guideline in the valuation of lands planted to sugarcane is the Joint DAR-LBP MC 15 (1999).
     Valuation of rubber plantations
     Valuation of rubber plantations are governed by Joint DAR-LBP MC 7 and 8 (1999).
     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:
•           Landowner has executed a Deed of Assignment, Warranty and Undertaking on or before the issuance of the Joint DAR-LBP Administrative Order No. 3, Series of 1994; or
•           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 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" (Association of Small Landowners in the Philippines, Inc. vs. Secretary of Agrarian Reform, 175 SCRA 345 [1989], at p. 382).
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.
Valuation of PD 27 Lands
     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
     Landowners may be paid in cash or in kind. Payment in kind is justified in the case of Association of Small Landowners of the Philippines, Inc. vs. Secretary of Agrarian Reform, 175 SCRA 343 (1989) as follows:
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.