Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 167809 November 27, 2008
LAND BANK OF THE PHILIPPINES, petitioner,
vs.
JOSEFINA R. DUMLAO, A. FLORENTINO R. DUMLAO, JR., STELLA DUMLAO-ATIENZA, and NESTOR R. DUMLAO,
represented by Attorney-In-Fact, A. Florentino R. Dumlao, Jr., respondents.
DECISION
REYES, R.T., J.:
IN determining just compensation for lands covered by the government’s Operation Land Transfer, which law applies –
Presidential Decree (PD) No. 271 or Republic Act (RA) No. 66572 known as the Comprehensive Agrarian Reform (CARP) Law?
This and other related questions are brought to the Court via this petition for review on certiorari3 of the Decision4 of the Court of
Appeals (CA) granting each of respondents a five-hectare retention area and ordering petitioner to pay them One Hundred Nine
Thousand Pesos (P109,000.00) per hectare for the excess of the retained area.
The Facts
Respondents Josefina R. Dumlao, A. Florentino R. Dumlao, Jr., Stella Dumlao-Atienza, and Nestor R. Dumlao, heirs of the
deceased Florentino G. Dumlao, were the co-owners of several parcels of agricultural land with an aggregate area of 32.2379
hectares situated at Villaverde, Nueva Vizcaya.
The properties are covered by: (1) Transfer Certificate of Title (TCT) No. T-1180 with an area of 11.33 hectares;5 (2) TCT No.
41508 consisting of 6.2201 hectares;6 (3) TCT No. 41507 with an area of 4.0001 hectares;7 (4) TCT No. 41506 consisting of
3.9878 hectares;8 (5) TCT No. 41504 consisting of 5.0639 hectares; and (6) TCT No. 41505 with an area of 1.6360 hectares.
The properties were placed under Operation Land Transfer by the Department of Agrarian Reform (DAR). 9 However, the definite
time of actual taking was not stated.10
Pursuant to PD No. 27 and Executive Order (EO) No. 228,11 a preliminary valuation was made by the DAR on the landholdings
covered by TCT Nos. 41504 and T-1180 with a total area of 16.3939 hectares. Finding the valuation to be correct, petitioner
bank informed respondents of the said valuation.12 Payments were then deposited in the name of the landowners.13 Meanwhile,
processing of the properties covered by the other four (4) titles, namely, TCT Nos. 41505, 41506, 41507 and 41508, remains
pending with the DAR.14
On July 9, 1995, respondents filed a Complaint15 before the Regional Trial Court (RTC) in Nueva Vizcaya, Branch 28, 16 for
determination of just compensation for their properties. It was claimed, inter alia, that they were not paid their just compensation
for the properties despite issuance of certificates of land transfer to farmer-beneficiaries by the DAR.17 They prayed for the
appointment of three (3) competent and disinterested commissioners who would determine and report to the court the just
compensation of their landholdings based on their current fair market value, without prejudice to their retention rights. They also
asked for payment of actual and moral damages, attorney’s fees, and costs of suit. 18
In its Answer, the DAR, represented by the Municipal Agrarian Reform Office (MARO) and Provincial Agrarian Reform Office
(PARO), posited that the complaint lacked a cause of action and that the RTC did not have jurisdiction. Under Section 50 of RA
No. 6657, it is the Department of Agrarian Reform Adjudication Board (DARAB) which is vested with primary and original
jurisdiction over land valuation, while the RTC as a Special Agrarian Court may review the DARAB’s decision.19
Petitioner, which was impleaded as defendant in the valuation case before the trial court, likewise filed its Answer, raising a
similar line of defense.20 Petitioner added that while payment for the properties covered by TCT Nos. T-1180 and T-41504 were
already deposited in trust for respondents, the claimfolders for the remaining four properties is still with the DAR. Thus, the filing
of the complaint against petitioner was premature.
After the termination of pre-trial conference, respondent Atty. A. Florentino Dumlao, Jr. submitted his affidavit on which he was
cross-examined. Following the submission of their testimonial and documentary evidence, respondents rested their case.
Upon motion of respondents, the RTC, on April 15, 1998, appointed Atty. John D. Balasya, Clerk of Court, as commissioner. He
was mandated to "receive, examine, and ascertain valuation of the properties." 21 Believing that the valuation of the properties is
not commensurate to their true value and, hence, not a "just" compensation, Atty. Balasya stated in his Commissioner’s Report
dated July 21, 1998,22 that:
The evidences submitted by the parties as well as those gathered by the undersigned show that only two (2) parcels of
land were valued under Presidential Decree No. 27. The parcels of land are located in Nagbitin, Villaverde, Nueva
Vizcaya and per Exhibit "O," the unirrigated riceland in Nagbitin are considered first class agricultural lands. Under Tax
Ordinance No. 96-45 adopting and authorizing the 1996 Schedule of Fair Market Values for the Different Classes of Real
Property in Nueva Vizcaya (Exhibit "G" and Exhibit "G-1") the market value of first class unirrigated Riceland in the
Municipality of Villaverde is P109,000.00 Per Department Order No. 56-97 dated May 27, 1997 issued by the Department
of Finance, Re: Implementation of the Revised Zonal Values of Real Properties in all Municipalities under the jurisdiction
of Revenue District Office No. 14 (Bayombong, Nueva Vizcaya), Revenue Region No. 3, Tuguegarao, Cagayan for
Internal Revenue Tax purposes, the zonal value of land in other Barangays in Villaverde is P60.00/square meter.
In summary, the undersigned believes that the valuation of respondents Land Bank of the Philippines and the Department
of Agrarian Reform is not commensurate to the definition of just compensation x x x. 23
RTC Ruling
On October 14, 1998, the RTC issued a decision,24 the fallo of which reads:
WHEREFORE, the Court hereby orders the remand of the case with respect to TCT Nos. 1180 and T-41504 to the
proper DAR agency for further proceedings and orders the dismissal of the case with respect to TCT Nos. T-41508, T-
41507, T-41506, and T-41505 for having been prematurely filed, there being no preliminary valuation made yet on the
said parcels of land. No pronouncement as to costs.
SO ORDERED.25
Respondents moved for reconsideration. Consequently, on December 21, 1998, the trial court modified 26 its decision in the
following manner:
WHEREFORE, premises considered, in the higher interest of justice, the Court MODIFIES its October 14, 1998 decision
by ordering plaintiffs to adduce additional evidence to support their contentions under PD 27/EO 228 within 30 days from
receipt of this Order furnishing a copy thereof to the defendants who are given 15 days from receipt to comment thereon.
Thereafter, the matter shall be deemed submitted for resolution.
SO ORDERED.27
Instead of adducing additional evidence, respondents filed a motion for reconsideration of the trial court’s December 21, 1998
order. Positing that the additional evidence required by the court pertains to the formula under PD No. 27, respondents insisted
on P109,000.00 per hectare, the market value of the properties, as just compensation.28 Accordingly, the trial court, on March
18, 1999, issued another order,29 the dispositive portion of which states:
WHEREFORE, premises considered, the Court hereby sets the just compensation in the amount of P6,912.50 per
hectare for lot covered by TCT No. T-1180 and the amount provided for in the Land Valuation Summary and Farmers
Undertaking for lot covered by TCT No. T-41504 to be paid to the plaintiffs with interest from the time of the taking until
fully paid.
SO ORDERED.30
CA Disposition
Dissatisfied with the March 18, 1999 RTC Order, respondents appealed to the CA. On February 16, 2005, the CA rendered a
decision31 modifying the trial court’s ruling, viz.:
WHEREFORE, in view of the foregoing, the trial court’s decision is hereby MODIFIED. The plaintiffs-appellants’ right of
retention is recognized. Plaintiffs-appellants Josefina, A. Florentino, Jr. and Stella, all surnamed Dumlao are each entitled
to retain five (5) hectares pursuant to the provisions of R.A. 6657.
The excess in area after application of the right of retention is valued at One Hundred Nine Thousand (P109,000.00)
Pesos per hectare with interest at the prevailing rate from the time of taking until fully paid.
No costs.
SO ORDERED.32
The CA declared that the definite time of the actual taking of the subject properties is not certain.33 Further, there is no doubt that
the transfer of the subject landholdings is governed by PD No. 27. 34 However, after the passage of RA No. 6657, the formula
relative to valuation under PD No. 27 no longer applies.35 The appellate court held:
The trial court, therefore, in the determination of just compensation is not confined within the valuation provisions of P.D.
27. It can depart from it so long as the valuation assigned on the land transferred is within the meaning of the phrase
"just compensation" provided for in J.M. Tuazon Co. vs. Land Tenure Administration (31 SCRA 413).36
Relying on the Commissioner’s Report, the CA assigned the lower value of P109,000.00 per hectare as just compensation for
the subject properties.37
Issues
Petitioner bank has resorted to the present recourse, imputing to the CA the following errors:
A.
WHEN THE CHALLENGED DECISION ADHERED TO THE COMMISSIONER’S REPORT AND FIXED THE VALUEOF
THE LANDHOLDINGS AT P109,000.00 PER HECTARE WITH INTEREST AT THE PREVAILING RATE FROM THE
TIME OF TAKING UNTIL FULLY PAID, WORKING A MODIFICATION OF THE LEGALLY PRESCRIBED BASIC
FORMULA FOR DETERMINING THE JUST COMPENSATION OF LANDS ACQUIRED THROUGH OPERATION LAND
TRANSFER (OLT), CONTRARY TO THE CLEAR MANDATE OF PD 27/EO 228.
B.
WHEN THE CHALLENGED DECISION DECLARED THAT OCTOBER 21, 1972 CANNOT BE DEEMED AS THE DATE
OF TAKING OF THE SUBJECT PROPERTIES.
C.
WHEN THE CHALLENGED DECISION DECLARED THAT RESPONDENTS’ ENTIRE LANDHOLDINGS ARE
COVERED BY PD 27 AND THAT RESPONDENTS JOSEFINA, A. FLORENTINO, JR., AND STELLA ARE ENTITLED
TO RETAIN FIVE (5) HECTARES EACH.38 (Underscoring supplied)
Our Ruling
The just compensation due to respondents should be determined under the provisions of RA No. 6657.
Petitioner asserts that since the properties were acquired pursuant to PD No. 27, the formula for computing just compensation
provided by said decree and EO No. 228 should apply. Respondents, on the other hand, insist on the application of RA No. 6657
with respect to the computation.
Petitioner is mistaken. The 1987 Constitution, specifically Article XIII on Social Justice and Human Rights, mandates the State’s
adoption of an agrarian reform program for the benefit of the common people.39 The recognition of the need for genuine land
reform, however, started earlier. PD No. 27, issued on October 21, 1972, more than a decade before the enactment of the 1987
Constitution, provided for the compulsory acquisition of private lands for distribution among tenant-farmers and specified the
maximum retention limits for landowners.40
The agrarian reform thrust was further energized with the enactment of EO No. 228 on July 17, 1987, when full land ownership
was declared in favor of the beneficiaries of PD No. 27. The executive issuance also provided for the valuation of still unvalued
covered lands, as well as the manner of their payment. On July 22, 1987, Presidential Proclamation No. 131, instituting a
comprehensive agrarian reform program, as well as EO No. 22941 providing the mechanics for its implementation, were likewise
enacted.42
When the Philippine Congress was formally reorganized, RA No. 6657, otherwise known as the Comprehensive Agrarian Reform
Law of 1988, was immediately enacted. It was signed by President Corazon Aquino on June 10, 1988. This law, while
considerably changing the earlier presidential issuances, including PD No. 27 and EO No. 228, nevertheless gave them
suppletory effect insofar as they are not inconsistent with its provisions. 43
On one hand, PD No. 27 provides the formula to be used in arriving at the exact total cost of the acquired lands: 44
For the purpose of determining the cost of the land to be transferred to the tenant-farmer pursuant to this Decree, the
value of the land shall be equivalent to two and one half (2-1/2) times the average harvest of three normal crop
years immediately preceding the promulgation of this Decree.
The total cost of the land, including interest at the rate of six (6) per centum per annum, shall be paid by the tenant in
fifteen (15) years of fifteen (15) equal annual amortizations. (Emphasis supplied)
Implementing the formula under PD No. 27, EO No. 228 states:
SECTION 2. Henceforth, the valuation of rice and corn lands covered by P.D. No. 27 shall be based on the average
gross production determined by the Barangay Committee on Land Production in accordance with Department
Memorandum Circular No. 26, series of 1973 and related issuances and regulation of the Department of Agrarian
Reform. The average gross production per hectare shall be multiplied by two and a half (2.5), the product of
which shall be multiplied by Thirty-Five Pesos (P35.00), the government support price for one cavan of 50 kilos
of palay on October 21, 1972, or Thirty-One Pesos (P31.00), the government support price for one cavan of 50 kilos of
corn on October 21, 1972, and the amount arrived at shall be the value of the rice and corn land, as the case may
be, for the purpose of determining its cost to the farmer and compensation to the landowner. (Emphasis supplied)
Thus, under PD No. 27 and EO No. 228, the formula for computing the Land Value (LV) or Price Per Hectare (PPH) of rice and
corn lands is:
2.5 x AGP45 x GSP46 = LV or PPH
The parameters of PD No. 27 and EO No. 228 are manifestly different from the guidelines provided by RA No. 6657 for
determining just compensation. Section 17 of RA No. 6657 is explicit:
Sec. 17. Determination of Just Compensation. – In determining just compensation, the cost of acquisition of the land,
the current value of the like properties, its nature, actual use and income, the sworn valuation by the owner, the tax
declarations, and the assessment made by government assessors shall be considered. The social and economic benefits
contributed by the farmers and the farmworkers and by the Government to the property as well as the non-payment of
taxes or loans secured from any government financing institution on the said land shall be considered as additional
factors to determine its valuation.
Due to the divergent formulae or guidelines presented by these laws, a number of cases have already been brought to the Court
regarding which law applies in computing just compensation for landholdings acquired under PD No. 27. On this score, the Court
has repeatedly held that if just compensation was not settled prior to the passage of RA No. 6657, it should be computed in
accordance with said law, although the property was acquired under PD No. 27.
In the recent Land Bank of the Philippines v. Heirs of Angel T. Domingo,47 We rejected the DAR’s valuation of just compensation
based on the formula provided by PD No. 27 and EO No. 228. We held then that Section 17 of RA No. 6657 is applicable. The
latter law, being the latest law in agrarian reform, should control.
When RA 6657 was enacted into law in 1988, the agrarian reform process in the present case was still incomplete as
the amount of just compensation to be paid to Domingo had yet to be settled. Just compensation should therefore be
determined and the expropriation process concluded under RA 6657.
Guided by this precept, just compensation for purposes of agrarian reform under PD 27 should adhere to
Section 17 of RA 6657 x x x.
In Land Bank of the Philippines v. Estanislao,48 the Court ruled that taking into account the passage of RA No. 6657 in 1988
pending the settlement of just compensation, it is that law which applies to landholdings seized under PD No. 27, with said decree
and EO No. 288 having only suppletory effect. Prior to that declaration, the Court already decreed in Land Bank of the Philippines
v. Natividad,49 citing Paris v. Alfeche,50 that:
Under the factual circumstances of this case, the agrarian reform process is still incomplete as the just compensation to
be paid private respondents has yet to be settled. Considering the passage of Republic Act No. 6657 (6657) before the
completion of the process, the just compensation should be determined and the process concluded under the said law.
Indeed, RA 6657 is the applicable law, with PD 27 and EO 228 having only suppletory effect, conformably with our ruling
in Paris v. Alfeche.51
Agrarian reform is a revolutionary kind of expropriation. 52 The recognized rule in expropriation is that title to the expropriated
property shall pass from the owner to the expropriator only upon full payment of the just compensation. 53 Thus, payment of just
compensation to the landowner is indispensable.
In fact, Section 4, Article XIII of the 1987 Constitution mandates that the redistribution of agricultural lands shall be subject to the
payment of just compensation. The deliberations of the 1986 Constitutional Commission on this subject reveal that just
compensation should not do violence to the Bill of Rights but should also not make an insurmountable obstacle to a successful
agrarian reform program. Hence, the landowner’s right to just compensation should be balanced with agrarian reform.54
In the case under review, the agrarian reform process was not completed. The just compensation to be paid respondents was
not settled prior to the enactment of RA No. 6657, the law subsequent to PD No. 27 and EO No. 228. In fact, the non-payment
of just compensation is precisely the reason why respondents filed a petition for the determination of just compensation before
the RTC on July 13, 1995.
The records do not show when respondents or their father, Florentino Dumlao, was formally notified of the expropriation. The
records, however, bear out that the bank sent Florentino Dumlao a letter stating that it had approved the land transfer claim
involving that property covered by TCT No. T-1180 on November 5, 1990. Moreover, the various Land Valuation Summary and
Farmers Undertakings showing the valuation of the land transferred to the farmers-beneficiaries were approved on May 17,
198955 and July 21, 1989.56 It is thus crystal clear that even after the passage of RA No. 6657 in 1988, neither petitioner nor the
DAR had settled the matter of just compensation with respondents as landowners.
Besides, RA No. 6657 applies to rice and corn lands covered by PD No. 27. In Paris v. Alfeche,57 the Court explained:
Considering the passage of RA 6657 before the completion of the application of the agrarian reform process to the
subject lands, the same should now be completed under the said law, with PD 27 and EO 228 having only suppletory
effect. This ruling finds support in Land Bank of the Philippines v. CA, wherein the Court stated:
"We cannot see why Sec. 18 of RA 6657 should not apply to rice and corn lands under PD 27. Section 75
of RA 6657 clearly states that the provisions of PD 27 and EO 228 shall only have a suppletory effect. Section
7 of the Act also provides –
Sec. 7. Priorities. – The DAR, in coordination with the PARC shall plan and program the acquisition and
distribution of all agricultural lands through a period of ten (10) years from the effectivity of this Act.
Lands shall be acquired and distributed as follows:
Phase One: Rice and Corn lands under P.D. 27; all idle or abandoned lands; all private lands voluntarily
offered by the owners for agrarian reform; x x x and all other lands owned by the government devoted
to or suitable for agriculture, which shall be acquired and distributed immediately upon the effectivity of
this Act, with the implementation to be completed within a period of not more than four (4) years.
This eloquently demonstrates that RA 6657 includes PD 27 lands among the properties which the DAR
shall acquire and distribute to the landless. And to facilitate the acquisition and distribution thereof,
Secs. 16, 17, and 18 of the Act should be adhered to. In Association of Small Landowners of the Philippines
v. Secretary of Agrarian Reform, this Court applied the provisions (of) RA 6657 to rice and corn lands when it
upheld the constitutionality of the payment of just compensation for PD 27 lands through the different modes
stated in Sec. 18." (Emphasis supplied)
Verily, there is nothing to prevent Section 17 of RA No. 6657 from being applied to determine the just compensation for lands
acquired under PD No. 27.
In Natividad,58 the Court ruled that the DAR’s failure to determine the just compensation for a considerable length of time made
it inequitable to follow the guidelines provided by PD No. 27 and EO No. 228. Hence, RA No. 6657 should apply. The same
rationale was followed in Meneses v. Secretary of Agrarian Reform.59 There, the Court noted that despite the lapse of more than
thirty (30) years since the expropriation of the property in 1972, petitioners had yet to benefit from it, while the farmer-beneficiaries
were already harvesting the property’s produce. Thus, RA No. 6657 was applied instead of PD No. 27 in determining just
compensation.
In Meneses, the Court compared the conflicting rulings in Gabatin v. Land Bank of the Philippines,60 cited by petitioner, and Land
Bank of the Philippines v. Natividad.61 This Court affirmed Natividad, stating that it would be more equitable to apply the same
due to the circumstances obtaining, i.e. the more than 30-year delay in the payment of just compensation.
The application of RA No. 6657 due to the inequity faced by landowners continued in Lubrica v. Land Bank of the
Philippines.62 The landowners were also deprived of their properties in 1972 but had yet to receive their just compensation even
after the passage of RA No. 6657. Since the landholdings were already subdivided and distributed to the farmer-beneficiaries,
the Court, speaking through Justice Consuelo Ynares-Santiago, deemed it unreasonable to compute just compensation using
the values at the time of taking in 1972 as dictated by PD No. 27, and not at the time of payment pursuant to RA No. 6657.
We find no cogent reason not to apply the same ratiocination here. In the case at bar, emancipation patents, and eventually,
transfer certificates of title, were issued to the farmer-beneficiaries63 at least twenty-eight (28) years ago. On March 16, 1990,
the DAR acknowledged that the property covered by TCT No. T-1180 had already been distributed to farmer-beneficiaries
through emancipation patents. As early as June 10, 1975, a portion of the same property was conveyed to a certain Rosalina
Abon, although this was not annotated on the owner’s title.64
Needless to say, respondents have already been deprived of the use and dominion over their landholdings for a substantial
period of time. In the interim, petitioner bank has abjectly failed to pay, much less to determine, the just compensation due to
respondents. The law clearly recognizes that the exact value of lands taken under PD No. 27, or the just compensation to be
given to the landowner must be determined with certainty before the land titles are transferred. 65 Petitioner’s gross failure to
compensate respondents for loss of their land, while transferring the same to the farmer-beneficiaries, make it unjust to determine
just compensation based on the guidelines provided by PD No. 27 and EO No. 228.
Accordingly, just compensation should be computed in accordance with RA No. 6657 in order to give full effect to the principle
that the recompense due to the landowner should be the full and fair equivalent of the property taken from the owner by the
expropriator. 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, and ample.66
The determination of just compensation is a function addressed to the courts of justice and may not be usurped by any other
branch or official of the government.67 However, the determination made by the trial court, which relied solely on the formula
prescribed by PD No. 27 and EO No. 228, is grossly erroneous. The amount of P6,912.50 per hectare, which is based on the
DAR valuation of the properties "at the time of their taking in the 1970s," 68 does not come close to a full and fair equivalent of the
property taken from respondents.
Meanwhile, the CA’s act of setting just compensation in the amount of P109,000.00 would have been a valid exercise of this
judicial function, had it followed the mandatory formula prescribed by RA No. 6657. However, the appellate court merely chose
the lower of two (2) values specified by the commissioner as basis for determining just compensation, namely: (a) P109,000.00
per hectare as the market value of first class unirrigated rice land in the Municipality of Villaverde; and (b) P60.00 per square
meter as the zonal value of the land in other barangays in Villaverde. This is likewise erroneous because it does not adhere to
the formula provided by RA No. 6657.
It cannot be overemphasized that the just compensation to be given to the owner cannot be assumed and must be determined
with certainty.69 Its determination involves the examination of the following factors specified in Section 17 of RA No. 6657, as
amended, namely: (1) the cost of acquisition of the land; (2) the current value of the properties; (3) its nature, actual use, and
income; (4) the sworn valuation by the owner; (5) the tax declarations; (6) the assessment made by government assessors; (7)
the social and economic benefits contributed by the farmers and the farmworkers and by the government to the property; and (8)
the non-payment of taxes or loans secured from any government financing institution on the said land, if any. 70
Section 17 was converted into a formula by the DAR through Administrative Order (AO) No. 6, Series of 1992,71 as amended by
AO No. 11, Series of 1994,72 the pertinent portions of which provide:
A. There shall be one basic formula for the valuation of lands covered by [Voluntary Offer to Sell] or [Compulsory
Acquisition] regardless of the date of offer or coverage of the claim:
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)
A.2 When the CNI factor is not present, and CS and MV are applicable, the formula shall be:
LV = (CS x 0.9) + (MV x 0.1)
A.3 When both the CS and CNI are not present and only MV is applicable, the formula shall be:
LV = MV x 2
In no case shall the value of the land using the formula MV x 2 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.
xxxx
A.6 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) shall be:
Grossed-up Valuation Input x Regional Consumer Price
=
Valuation input Index (RCPI) Adjustment Factor
The RCPI Adjustment Factor shall refer to the ratio of RCPI for the month issued by the National Statistics Office as of
the date when the claimfolder (CF) was received by LBP from DAR for processing or, in its absence, the most recent
available RCPI for the month issued prior to the date of receipt of CF from DAR and the RCPI for the month as of the
date/effectivity/registration of the valuation input. Expressed in equation form:
RCPI RCPI for the Month as of the Date of Receipt
Adjustment = of Claimfolder by LBP from DAR or the Most
Factor recent RCPI for the Month Issued Prior to the
 Date of RCPI Receipt of CF
___________
RCPI for the Month Issued as of the
Date/Effectivity/Registration of the Valuation
Input
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 12%.
Expressed in equation form:
CNI = (AGP x SP) – CO
___________
.12

Where: CNI = Capitalized Net Income

AGP = Latest available 12-month's gross production

immediately preceding the date of offer in case of
VOS or date of notice of coverage in case of CA.

SP = The average of the latest available 12 month’s selling

prices prior to the date of receipt of the claimfolder 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 from the barangay or
municipality where the property is located. In the
absence thereof, SP 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% shall be used. Landholdings planted to
coconut which are productive at the time of
offer/coverage shall continue to use the 70% NIR.
DAR and LBP shall continue to conduct joint industry
studies to establish the applicable NIR for each crop
covered under CARP.

.12 = Capitalization Rate

xxxx
C. CS shall refer to any one or the average of all the applicable sub-factors, namely, ST, AC and MVM:
Where: ST = Sales Transactions as defined under Item C.2

AC = Acquisition Cost as defined under Item C.3

MVM = Market Value Based on Mortgage as defined under

Item C.4
xxxx
D. In the computation of Market Value per Tax Declaration (MV), the most recent Tax Declaration (TD) and Schedule of
Unit Market Value (SMV) issued prior to receipt of claimfolder 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 claimfolder by LBP from DAR for processing,
in accordance with item II.A.A.6. (Emphasis and underscoring supplied)
While the determination of just compensation involves the exercise of judicial discretion, such discretion must be discharged
within the bounds of the law.73 The DAR, as the government agency principally tasked to implement the agrarian reform program,
has the duty to issue rules and regulations to carry out the object of the law. The DAR administrative orders precisely filled in the
details of Section 17 of RA No. 6657 by providing a basic formula by which the factors mentioned in the provision may be taken
into account.74 Special agrarian courts are not at liberty to disregard the formula devised to implement the said provision because
unless an administrative order is declared invalid, courts have no option but to apply it. 75
In his Report, the Commissioner merely specified the market value of first class unirrigated ricelands in the municipality where
the properties are located, as well as the zonal value of lands in other barangays in the same municipality. For their part,
respondents attempted to prove the following: market value of unirrigated ricelands for the Municipality of Villaverde, set
at P109,000.00 per hectare, pursuant to Sangguniang Bayan Tax Ordinance No. 96-45;76 annual production of unirrigated
ricefields in Villaverde, at 80 cavans during "palagad" cropping, and 101 cavans under regular cropping; 77 government support
price for palay for the period October 1, 1990 to October 1995 at P6.00 per kilo, and from November 1, 1995 to the time of the
filing of the petition at P8.00 per kilo.78
However, the records do not bear out if these factors are the only ones relevant, present and applicable in this case, so that
just compensation can now be computed by the Court based on the formula provided by the DAR administrative orders. Based
on the evidence adduced, it appears that market value and comparable net income (CNI) are being proved. However, CNI cannot
be computed in the absence of information regarding cost of operations.79
We are thus compelled to remand the case to the court a quo to determine the final valuation of respondents’ properties. The
trial court is mandated to consider the factors provided under Section 17 of RA No. 6657, as translated into the formula prescribed
by DAR AO No. 6-92, as amended by DAR AO No. 11-94.
Furthermore, upon its own initiative, or at the instance of any of the parties, the RTC may again appoint one or more
commissioners to examine, investigate and ascertain facts relevant to the dispute including the valuation of properties and to file
a written report with the RTC.80
We next address the second issue – date of taking.
The "taking" of the properties for the purpose of computing just compensation should be reckoned from the date of
issuance of emancipation patents, and not on October 21, 1972, as petitioner insists. The nature of the land at that time
determines the just compensation to be paid.81
We cannot sustain petitioner’s position that respondents’ properties were statutorily taken on October 21, 1972, the date of
effectivity of PD No. 27; that on that date, respondents were effectively deprived of possession and dominion over the land; and
that when EO No. 228 fixed the basis in determining land valuation using the government support price of P35.00 for one cavan
of 50 kilos of palay on October 21, 1972, it was consistent with the settled rule that just compensation is the value of the property
at the time of the taking.82
In Association of Small Landowners v. Secretary of Agrarian Reform,83 the Court held that title to the property expropriated shall
pass from the owner to the expropriator only upon full payment of just compensation. The Court further held that:
It is true that P.D. No. 27 expressly ordered the emancipation of tenant-farmer as [of] October 21, 1972 and declared
that he shall be deemed the owner of a portion of land consisting of a family-sized farm except that no title to the land
owned by him was to be actually issued to him unless and until he had become a full-fledged member of a duly recognized
farmer’s cooperative. It was understood, however, that full payment of just compensation also had to be made
first, conformably to the constitutional requirement.84 (Emphasis supplied)
In Land Bank of the Philippines v. Estanislao,85 the Court declared that seizure of landholdings or properties covered by PD No.
27 did not take place on October 21, 1972, but upon the payment of just compensation.
Land Bank’s contention that the property was acquired for purposes of agrarian reform on October 21, 1972, the time of
the effectivity of PD 27, ergo just compensation should be based on the value of the property as of that time and not at
the time of possession in 1993, is likewise erroneous. In Office of the President, Malacañang, Manila v. Court of Appeals,
we ruled that the seizure of the landholding did not take place on the date of effectivity of PD 27 but would take effect
on the payment of just compensation.86 (Emphasis in the original)
However, for purposes of computing just compensation, this Court recently declared in Land Bank of the Philippines v. Heirs of
Angel T. Domingo87 that the time of taking should be reckoned from the issue dates of emancipation patents.
The date of taking of the subject land for purposes of computing just compensation should be reckoned from
the issuance dates of the emancipation patents. An emancipation patent constitutes the conclusive authority for the
issuance of a Transfer Certificate of Title in the name of the grantee. It is from the issuance of an emancipation patent
that the grantee can acquire the vested right of ownership in the landholding, subject to the payment of just compensation
to the landowner.88 (Emphasis supplied)
It is undisputed that emancipation patents were issued to the farmer-beneficiaries. However, their issuance dates are not shown.
As such, the trial court should determine the date of issuance of these emancipation patents in order to ascertain the date of
taking and proceed to compute the just compensation due to respondents, in accordance with RA No. 6657.
Now, to the third and final issue.
Respondents are entitled to payment of just compensation even on those properties which have not been processed
by the DAR.
Petitioner admits that of respondents’ landholdings, only those covered by TCT Nos. T-1180 and T-41504, totaling 16.3939
hectares, were processed and initially valued by the DAR. Pending initial processing by the DAR of the remaining landholdings,
petitioner posits that it cannot be made to pay the amount of P109,000.00 per hectare for those covered by TCT Nos. 41508,
41507, 41506, and 41505, with an aggregate area of 17.2379 hectares.
The argument is specious for three reasons.
First, the determination of just compensation is judicial in nature. The DAR’s land valuation is only preliminary and is not, by any
means, final and conclusive upon the landowner or any other interested party. In the exercise of its functions, the courts still have
the final say on what the amount of just compensation will be.89
In Natividad, the Court held that:
[T]here is nothing contradictory between the DAR’s primary jurisdiction to determine and adjudicate agrarian reform
matters and exclusive original jurisdiction over all matters involving the implementation of agrarian reform, which includes
the determination of questions of just compensation, and the original and exclusive jurisdiction of regional trial
courts over all petitions for the determination of just compensation. The first refers to administrative proceedings,
while the second refers to judicial proceedings.
In accordance with settled principles of administrative law, primary jurisdiction is vested in the DAR to determine in
a preliminary manner the just compensation for the lands taken under the agrarian reform program, but such
determination is subject to challenge before the courts. The resolution of just compensation cases for the taking of lands
under agrarian reform is, after all, essentially a judicial function.
Thus, the trial court did not err in taking cognizance of the case as the determination of just compensation is a function
addressed to the courts of justice.90 (Emphasis supplied)
In fact, the law does not make the DAR valuation absolutely binding as the amount payable by petitioner. A reading of Section
1891 of RA No. 6657 shows that it is the courts, not the DAR, which make the final determination of just compensation.
Accordingly, RA No. 6657 directs petitioner to pay the DAR’s land valuation only if the landowner, the DAR and petitioner agree
on the amount of just compensation. Otherwise, the amount determined by the special agrarian court as just compensation shall
be paid by petitioner. Corollarily, there is no reason for petitioner to wait for the DAR valuation of the properties, if the court has
already determined the just compensation due to respondents.
Second, to wait for the DAR valuation despite its unreasonable neglect and delay in processing the four properties’ claimfolders
is to violate the elementary rule that payment of just compensation must be within a reasonable period from the taking of
property. Cosculluela v. Court of Appeals92 could not have been clearer:
Just compensation means not only the correct determination of the amount to be paid to the owner of the land
but also the payment of the land within a reasonable time from its taking. Without prompt payment, compensation
cannot be considered "just" for the property owner is made to suffer the consequence of being immediately deprived of
his land while being made to wait for a decade or more before actually receiving the amount necessary to cope with his
loss. x x x.93 (Emphasis supplied)
In the case at bar, the properties have long been expropriated by the government and their fruits enjoyed by the farmer-
beneficiaries. Respondent have been made to wait for decades for payment of their recompense. They were not even allowed
to withdraw the amount claimed to have been deposited with petitioner bank on their behalf. It would certainly be iniquitous to
wait for the DAR to process the properties covered by the four other titles before the special agrarian court can finally determine
the amount of their just compensation.94
Third, while the DAR is vested with primary jurisdiction to determine in a preliminary manner the amount of just compensation,
the circumstances of this case militate against the application of the doctrine of primary jurisdiction.
The principle of exhaustion of administrative remedies is a relative one and is flexible depending on the peculiarity and
uniqueness of the factual and circumstantial settings of a case. It is disregarded: (1) when there is a violation of due process; (2)
when the issue involved is purely a legal question; (3) when the administrative action is patently illegal and amounts to lack or
excess of jurisdiction; (4) when there is estoppel on the part of the administrative agency concerned; (5) when there is irreparable
injury; (6) when respondent is a department secretary whose acts, as an alter ego of the President, bears the implied and
assumed approval of the latter; (7) when to require exhaustion of administrative remedies would be unreasonable; (8)
when it would amount to a nullification of a claim; (9) when the subject matter is a private land in land case proceedings; (10)
when the rule does not provide a plain, speedy and adequate remedy; (11) when there are circumstances indicating the
urgency of judicial intervention, and unreasonable delay would greatly prejudice the complainant; (12) when no
administrative review is provided by law; (13) where the rule of qualified political agency applies; and (14) when the issue of non-
exhaustion of administrative remedies has been rendered moot.95
Here, to require exhaustion of administrative remedies would be unreasonable. What is more, judicial intervention is necessary
so as not to unduly prejudice the landowners. Respondents have long been deprived of their landholdings, yet compensation
has been withheld from them. Accordingly, to make respondents wait for the DAR to process the claimfolders of the remaining
four properties would be unreasonable, unjust and manifestly prejudicial to them.
Respondents are entitled to the right of retention over their lands.
The right of retention is constitutionally guaranteed, subject to qualification by the legislature. It serves to mitigate the effects of
compulsory land acquisition by balancing the rights of the landowner and the tenant and by implementing the doctrine that social
justice was not meant to perpetrate an injustice against the landowner. A retained area, as its name denotes, is land which is not
supposed to anymore leave the landowner’s dominion, thus sparing the government from the inconvenience of taking land only
to return it to the landowner afterwards, which would be a pointless process. 96
The opinion of the MARO97 that respondents are not entitled to retain areas out of their landholdings because they applied for
the same after the grace period set by the government98 fails to persuade. A landowner whose land was taken pursuant to PD
No. 27 has a right to retain seven hectares of land, provided that the landowner is cultivating the area or will now cultivate
it.99 Those who did not avail of their rights of retention under PD No. 27 are entitled to exercise the same under Section 6 100 of
RA No. 6657.101 Landowners may still avail of their retention rights notwithstanding the August 27, 1985 deadline imposed by
DAR AO No. 1, Series of 1985. In Daez v. Court of Appeals,102 the Court, citing Association of Small Landowners, Inc. v.
Secretary of Agrarian Reform,103 disregarded said deadline and sustained the landowner’s retention rights. Notably, under RA
No. 6657, landowners who do not personally cultivate their lands are no longer required to do so in order to qualify for the
retention of an area not exceeding five hectares. Instead, they are now required to maintain the actual tiller of the area retained,
should the latter choose to remain in those lands.104 Verily, there is no impediment to the exercise by respondents of their
retention rights under RA No. 6657.
In sum, We rule that:
1. The provisions of RA No. 6657 apply in determining the just compensation due to respondents for the taking of their property.
However, the value of P109,000.00, based on the property’s market value and assigned by the CA as just compensation, is
erroneous. The trial court is thus directed to receive evidence pertaining to the factors to be considered in determining just
compensation, in accordance with DAR AO No. 6, Series of 1992, as amended by AO No. 11, Series of 1994.
2. For purposes of computing just compensation, the date of issuance of emancipations is deemed the date of taking, not October
21, 1972.
3. Respondents are entitled to payment of just compensation on their entire landholdings covered by Operation Land Transfer,
except for the five hectares of retention area each of them are entitled to.
WHEREFORE, the petition is DENIED. The case is REMANDED to the court a quo for final determination of just compensation
due to respondents.
SO ORDERED.
 THIRD DIVISION
G.R. No. 190482, December 09, 2015
DEPARTMENT OF AGRARIAN REFORM, REPRESENTED BY MS. FRITZI C. PANTOJA IN HER CAPACITY AS PROVINCIAL
AGRARIAN REFORM OFFICER OF LAGUNA, Petitioner, v. IGMIDIO D. ROBLES, RANDY V. ROBLES, MARY KRIST B.
MALIMBAN, ANNE JAMAICA G. ROBLES, JOHN CARLO S. ROBLES AND CHRISTINE ANN V. ROBLES, Respondents.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court, seeking to reverse and set aside the
Court of Appeals (CA) Decision1 dated May 29, 2009 and its Resolution2 dated December 2, 2009 in CA-G.R. SP No. 104896.

The facts are as follows: chanRoblesvi rt ual Lawlib rary

During his lifetime, Eduardo Reyes, married to Nenita P. Reyes, was the registered owner of certain properties located at Barangay
Ambiling, Magdalena, Laguna, covered by Transfer Certificate of Title (TCT) Nos. T-85055 and T-116506, with areas of about
195,366 and 7,431 square meters (sq. m.), respectively. He later caused the subdivision of the land covered by TCT No. T-85055
into five (5) lots.

On April 17, 1997, Eduardo sold the said properties to respondents, as follows:
1. Igmidio D. Robles - Lot 6-B-1 of TCT No. T-85055, 38,829 sq. m.;

2. Randy V. Robles - Lot 6-B-2 of TCT No. T-85055, 39,896 sq. m.;

3. Mary Krist B. Malimban - Lot No 6-B-3 of TCT No. T-85055, 38,904 sq. m.;

4. Anne Jamaca G. Robles - Lot No. 6-B-4 of TCT No. T-85055, 38,595 sq. m.;

5. John Carlo S. Robles - Lot No. 6-B-5 of TCT No. T-85055, 39,142 sq. m.; and

6. Christine Anne V. Robles - Lot No. 3-1-2-C-2-G-3 of TCT No. T-116506, 7,431 sq. m.
On May 3, 2005, the deeds of absolute sale covering the properties were duly registered with the Registry of Deeds for the
Province of Laguna in the names of respondents under the following TCT Nos.:
1. Igmidio D. Robles - TCT No. T-238504;

2. Randy V. Robles - TCT No. T-238305;

3. Mary Krist B. Malimban - TCT No. T-238506: chanRoblesvi rtua lLawl ibra ry

4. Anne Jamaca G Robles - TCT No. T-238507;

5. John Carlo S. Robles - TCT No. T-238503; and

6. Christine Anne V. Robles - TCT No. 238502.

On May 26, 2006, petitioner Department of Agrarian Reform (DAR) Region IV-A Laguna Provincial Office, represented by Fritzi C.
Pantoja in her capacity as Provincial Agrarian Reform Officer II (PARO), filed Petition for Annulment of Deeds of Absolute Sale and
Cancellation of Transfer Certificates of Title Nos. T-238502, T-238503, T-238504, T-238505, T-238506 and T-238507. It alleged
that the deeds of absolute sale were executed by Eduardo without prior DAR clearance under Administrative Order No. 01-89,
series of 1989,3 in violation of Section 6, paragraph 44 of Republic Act (R.A.) No. 6657, otherwise known as the Comprehensive
Agrarian Reform Law of 1988, as amended (CARL).

On September 9, 2006, respondents received a Summons and Notice of Hearing, together with a copy of the said petition from
the Office of the Provincial Adjudicator, Department of Agrarian Reform Adjudication Board (DARAB), Region IV, requiring them to
answer the petition and appear for the initial preliminary conference set on October 10, 2006. Thus, they filed their Answer and
Supplemental Answer to the petition.

On October 10 and 23, 2006, Julieta R. Gonzales and Nenita Reyes, the surviving spouse and the daughter of Eduardo,
respectively, filed a motion to dismiss on the ground that the DARAB has no jurisdiction over the nature of the action and the
subject matter of the case, and that the DAR has no cause of action against them.

On November 2, 2006, respondents filed a Manifestation adopting the motion to dismiss filed by Julieta and Nenita.

On November 30, 2006, the DARAB Provincial Adjudicator issued a Resolution denying the motion to dismiss for lack of merit.

Julieta and Nenita filed a motion for reconsideration.

At the hearing on January 24, 2008, respondents, through counsel, manifested that they are joining the motion for
reconsideration filed by Julieta and Nenita.

On February 7, 2008, the Provincial Adjudicator issued another Resolution dismissing the case against Julieta and Nenita for lack
of cause of action, but not against respondents.

Respondents then filed their motion to reconsider the Resolution dated February 7, 2008 and to defer the preliminary conference
set on March 13, 2008.

On June 26, 2008, the Provincial Adjudicator issued a Resolution denying respondents' motion for reconsideration, and setting the
preliminary conference anew on August 28, 2008.

Aggrieved by the Provincial Adjudicator's Resolutions, respondents filed with the CA a petition for review under Rule 43 of the
Rules of Court.

On May 29, 2009, the CA rendered the assailed Decision, the dispositive portion of which reads:
WHEREFORE, the instant petition is GRANTED. The three (3) questioned Resolutions of the PARAD dated 30 November 2006, 7
February 2008 and 26 June 2008 are all REVERSED AND SET ASIDE. The DAR's petition before the PARAD is
hereby DISMISSEDfor lack of jurisdiction.

SO ORDERED.5 ChanRoblesVi rtualaw lib rary

In dismissing the DAR's petition for annulment of deeds of sale and cancellation of titles before the PARAD for lack of jurisdiction,
the CA held:
In this case before us, the DAR's petition before the PARAD sought to annul the deeds of absolute sale as well as the subsequently
issued torrens titles. Surprisingly, however, the said petition was not brought for or on behalf of any purported tenants, farmworkers
or some other beneficiaries under RA 6657. While the said petition claimed, without any supporting documents/evidence however,
that DAR was in the process of generating CLOAs for the said landholding, it did subsequently admit that the same petition does not
seek to place the subject land "immediately under CARP" but rather to annul the conveyance of the original owner in favor of the
petitioners since this was allegedly in violation of RA 6657. Without any averment of some tenurial arrangement/relationship between
the original owner and some definite leaseholder, tenant or CARL beneficiary plus the admission that the land has not yet been
placed under CARP, neither DARAB nor its adjudicators would have jurisdiction over a simple case of annulment of sale and
cancellation of title. Considering that the subject landholding were sold to petitioners way before any notice of coverage was ever
issued and torrens titles have subsequently been issued in their favor, it is the regular courts who should determine if indeed there
were certain violations of the law which would justify annulment of the sales and cancellation of the titles.

Still on the said notice of coverage, a review of the pertinent documents reveals that the same was not issued to the present owners
but to the heirs of the late Eduardo Reyes. Thus, not only was the notice of coverage belatedly issued to the wrong person/s for the
said heirs to whom the notice of coverage was issued were in fact dismissed from the original petition before the PARAD. Next, DAR
argues that a notice of coverage need not be issued to the present owners/petitioners otherwise it would validate or recognize the
purported irregular or illegal transfer or conveyance. We find it foolhardy for DAR to argue this way when the very fact of issuance
of the notice of coverage was one of its main anchors in its petition for annulment and cancellation of title before the PARAD.

DAR also cites Section 4 of RA 6657 which refers to the scope of CARL. While the scope under the said provision is quite
encompassing, the same will not automatically include every agricultural land. In Dandoy v. Tongson, the High Tribunal was explicit,
"(T)he fact that Lot No. 294 is an agricultural land does not ipso facto make it an agrarian dispute within the jurisdiction of the
DARAB. For the present case to fall within the DARAB jurisdiction, there must exist a tenancy relationship between the parties. An
allegation that an agricultural tenant tilled the land in question does not make the case an agrarian dispute."
Again, the High Court reiterated the necessity of a tenurial arrangement/relationship in order for a case to be classified as an
agrarian dispute within the jurisdiction of the DARAB or its adjudicators. While we are mindful not to preempt any subsequent inquiry
on the matter, we would just like to take note of the fact that petitioners also offered documents to show that the subject land/s
were free of any tenants at the time these were sold to them. Even without ruling on the authenticity of this evidence, the same
further casts doubt on the existence of any tenurial arrangement or relationship which could or may bring the present controversy
into the folds of the DARAB.

Besides, RA 6657, particularly Section 16 thereof, lays down the very procedure for the acquisition of private lands for coverage of
the CARL. And DAR's belated issuance of the notice of coverage miserably falls short of the above-cited procedures.

It is very clear that the relief sought by the DAR, annulment of the contracts and cancellation of titles, would necessarily involve the
adjustment/adjudication of the private rights of the parties to the sale, which is beyond the jurisdiction of the DARAB to resolve.6ChanRoble sVirt ualawli bra ry

The DAR filed a motion for reconsideration, but the CA denied it in a Resolution7 dated December 2, 2009.

Dissatisfied with the CA Decision, the DAR filed a petition for review on certiorari raising the sole issue, to wit:
WHETHER OR NOT THE DAR ADJUDICATION BOARD HAS JURISDICTION OVER ANNULMENT OF DEEDS OF ABSOLUTE SALE AND
THE SUBSEQUENT CANCELLATION OF TITLES INVOLVING LANDS UNDER THE ADMINISTRATION AND DISPOSITION OF THE
DEPARTMENT OF AGRARIAN REFORM.8 ChanRoblesVi rtua lawlib rary

Citing the DAR Memorandum Circular No. 2,9 Series of 2001,10 the DAR argues that its petition for annulment of deeds of sale and
cancellation of titles falls under the jurisdiction of the DARAB; and that such jurisdiction is not limited to agrarian disputes, but
also on other matters or incident involving the implementation of all agrarian laws. Invoking Section 1,11 Rule II of the 2003
DARAB Rules of Procedure, it questions the CA ruling that disputes cognizable by the DARAB are limited to those which involve
some kind of tenurial arrangement/relationship, and that only lands under the administration and disposition of the DAR or the
Land Bank of the Philippines (LBP) are subject to the DARAB jurisdiction.

The DAR also claims that the CA overlooked that the notices of coverage issued by the Municipal Agrarian Reform Officer (MARO)
of Magdalena, Laguna, were duly served to the heirs of Eduardo, namely, Julieta and Nenita. It stresses that despite claiming no
interest as successors over the subject properties in their motion to dismiss filed before the DARAB, the letter of Atty. Norberto
Gonzales dated February 21, 2005 to MARO Cuaresma showed that Julieta and Nenita were opposing the coverage of the said
properties under the CARL. It thus concludes that the subject properties were placed under the coverage of the compulsory
acquisition scheme of the CARL.

The DAR further takes exception to the CA ruling that the notice of coverage was issued to the heirs of Eduardo, instead of the
present owners, respondents. It explains that only after such notice was issued to the said heirs in 2005 and upon verification with
the Register of Deeds that it found out that the property was already transferred to respondents. It further argues that the notice
of coverage need not be issued to the present title holders (respondents) because if such notice will be issued to them, then it
would validate or recognize the purported irregular or illegal transfer or conveyance.

Finally, the DAR contends that under Section 4 of RA 6657, the CARP covers, among other things, all private lands devoted to or
suitable for agriculture, regardless of the agricultural products raised or that can be raised thereon, and that such provision makes
no qualification that only lands issued with notice of coverage are covered. Applying the statutory construction principle of exclusio
unius est exclusio alterius, it posits that there being no showing that the subject agricultural lands are exempted from the CARP,
then they are covered and deemed under the administration and disposition of the DAR. Hence, its petition for annulment of deeds
of sale and cancellation of titles is cognizable by the DARAB.

On the other hand, respondents counter that the CA did not err in dismissing for lack of jurisdiction DAR's petition for annulment
of deeds of sale and cancellation of titles before the DARAB because such case neither involves an agrarian dispute nor does the
case concern; an agricultural land under the administration and disposition of the DAR or the LBP. Citing the definition of "agrarian
dispute" under Section 3 (d)12 of R.A. No. 6657 and jurisprudence to the effect that there must exist a tenancy relationship
between the parties for DARAB to have jurisdiction over a case, respondents point out that the petition was not brought for and on
behalf of any purported tenants, farmworker or some other beneficiaries and the notice of coverage was belatedly issued to the
wrong persons, the heirs of Eduardo, and not to them who are the present owners. Hence, there was no valid notice of coverage
to place the properties within the coverage of agrarian reform and of DARAB's jurisdiction.

Respondents also reject as inaccurate and misleading petitioner's contention that the DARAB has jurisdiction over cases involving
the sale of agricultural lands and those cases involving the annulment or rescission of deeds of sale, and the cancellation of titles
pertaining to such lands, pursuant to Section 1 (1.5) and (1.9), Rule II of the 2003 DARAB Rules of Procedure.13 They insist that
for the Adjudicator to have jurisdiction over a case, the agricultural land involved—unlike the subject properties—must be under
the coverage of the CARL or other agrarian laws, or under the administration and disposition of the DAR or the LBP, i.e., the land
involved must already be taken or acquired for CARP purposes for distribution to qualified farmer-beneficiaries.

Respondents stress that the certificates of title of Eduardo and the derivative TCTs issued to them were all free from liens and
encumbrances, and that there was no annotation of any disposition of the properties or limitation on the use thereof by virtue of,
or pursuant to Presidential Decree (P.D.) No. 27, CARL or any other law or regulations on agrarian reform inscribed on the titles.
They argue that since no such annotations, like a notice of coverage or acquisition by DAR, were inscribed on Eduardo's titles
which will caution respondents and/or the Register of Deeds of the Province of Laguna from registering the titles and deeds, prior
DAR clearance is unnecessary. Thus, the properties embraced by Eduardo's titles are outside the coverage of CARP and
registerable.

Lastly, respondents claim to be innocent purchasers in good faith and for value because they bought the subject properties and
paid a full and fair price without notice of some other person's claim on or interest in them. They also seek refuge under Section
32 of P.D. No. 1529 which provides that after the expiration of one (1) year from and after the date of entry of the decree of
registration, not only such decree but also the corresponding certificate of title, becomes incontrovertible and infeasible, and
cannot be altered, modified, cancelled, or subject to any collateral attack, except in a direct proceeding in accordance with law.

The petition is meritorious.

In resolving the sole issue of whether or not the DARAB has jurisdiction over the DAR's petition for annulment of deeds of sale and
cancellation of titles, the Court is guided by the following rules on jurisdiction laid down in Heirs of Julian dela Cruz v. Heirs of
Alberto Cruz:14
It is axiomatic that the jurisdiction of a tribunal, including a quasi-judicial officer or government agency, over the nature and subject
matter of a petition or complaint is determined by the material allegations therein and the character of the relief prayed for,
irrespective of whether the petitioner or complainant is entitled to any or all such reliefs. Jurisdiction over the nature and subject
matter of an action is conferred by the Constitution and the law, and not by the consent or waiver of the parties where the court
otherwise would have no jurisdiction over the nature or subject matter of the action. Nor can it be acquired through, or waived by,
any act or omission of the parties. Moreover, estoppel does not apply to confer jurisdiction to a tribunal that has none over the
cause of action. The failure of the parties to challenge the jurisdiction of the DARAB does not prevent the court from addressing the
issue, especially where the DARAB's lack of jurisdiction is apparent on the face of the complaint or petition.

Indeed, the jurisdiction of the court or tribunal is not affected by the defenses or theories set up by the defendant or respondent in
his answer or motion to dismiss. Jurisdiction should be determined by considering not only the status or the relationship of the
parties but also the nature of the issues or questions that is the subject of the controversy. If the issues between the parties are
intertwined with the resolution of an issue within the exclusive jurisdiction of the DARAB, such dispute must be addressed and
resolved by the DARAB. The proceedings before a court or tribunal without jurisdiction, including its decision, are null and void,
hence, susceptible to direct and collateral attacks.15ChanRoblesVirtualawli bra ry

In Department of Agrarian Reform v. Paramount Holdings Equities, Inc.,16 the Court defined the limits of the quasi-judicial power
of DARAB, thus:
The jurisdiction of the DARAB is limited under the law, as it was created under Executive Order (E.O.) No. 129-A specifically to
assume powers and functions with respect to the adjudication of agrarian reform cases under E.O. No. 229 and E.O. No. 129-A.
Significantly, it was organized under the Office of the Secretary of Agrarian Reform. The limitation on the authority of it to mere
agrarian reform matters is only consistent with the extent of DAR's quasi-judicial powers under R.A. No. 6657 and E.O. No. 229,
which read:
SECTION 50 [of R.A. No. 6657]. Quasi-Judicial Powers of the DAR.—The DAR is hereby vested with the primary jurisdiction to
determine and adjudicate agrarian reform matters and shall have exclusive original jurisdiction over all matters involving the
implementation of agrarian reform except those falling under the exclusive jurisdiction of the Department of Agriculture (DA) and
the Department of Environment and Natural Resources (DENR).

SECTION 17 [of E.O. No. 229]. Quasi-Judicial Powers of the DAR.—The DAR is hereby vested with quasi-judicial powers to
determine and adjudicate agrarian. reform matters, and shall have exclusive original jurisdiction over all matters involving
implementation of agrarian reform, except those falling under the exclusive original jurisdiction of the DENR and the Department
of Agriculture (DA).17ChanRoblesVirtualawli bra ry

In Sta. Rosa Realty Development Corporation v. Amante,18 the Court pointed out that the jurisdiction of the DAR under the
aforequoted provisions is two-fold. The first is essentially executive and pertains to the enforcement and administration of the
laws, carrying them into practical operation and enforcing their due observance, while the second is quasi-judicial and involves the
determination of rights and obligations of the parties.

At the time the petition for annulment of deeds of sale and cancellation of titles was filed on May 26, 2006, the administrative
function of the DAR was governed by Administrative Order No. 03, Series of 2003 which provides for the 2003 Rules of Procedure
for Agrarian Law Implementation (ALI) Cases. Under said Rules of Procedure, the Regional Director19 has primary jurisdiction over
all ALI cases, while the DAR Secretary20 has appellate jurisdiction over such cases. Section 2 of the said Rules provides:
Section 2. ALI Cases. These Rules shall govern all cases arising from or involving: cha nRoblesvi rtua lLaw lib rary

2.1 Classification and identification of landholdings for coverage under the agrarian reform program and the initial issuance of
Certificate of Land Ownership Awards (CLOAs) and Emancipation Patents (EPs), including protests or oppositions thereto and
petitions for lifting of such coverage.
2.2 Classification, identification, inclusion, exclusion, qualification or disqualification of potential/actual farmer-beneficiaries;
2.3 Subdivision surveys of land under Comprehensive Agrarian Reform Program (CARP)
2.4 Recall, or cancellation of provisional release rentals, Certificates of Land Transfers (CLTs), and CARP Beneficiary Certificates
(CBCs) in cases outside the purview of Presidential Decree (P.D.) No. 816, including the issuance, recall or cancellation of
Emancipation Patents (EPs) or Certificates of Land Ownership Awards (CLOAs) not yet registered with the Register of Deeds;
2.5 Exercise of the right of retention by the landowner;
2.6 Application for exemption from coverage under Section 10 of RA 6657;
2.7 Application for exemption pursuant to Department of Justice (DOJ) Opinion No. 44 (1990)
2.8 Exclusion from CARP coverage of agricultural land used for livestock, swine, and poultry raising;
2.9 Cases of exemption/exclusion of fishpond and prawn farms from the coverage of CARP pursuant to RA 7881;
2.10 Issuance of Certificate of Exemption for land subject to Voluntary Offer to Sell (VOS) and Compulsory Acquisition (CA) found
unsuitable for agricultural purposes;
2.11 Application for conversion of agricultural land to residential, commercial, industrial or other non agricultural uses and
purposes including protests or oppositions thereto;
2.12 Determination of rights of agrarian reform beneficiaries to homelots;
2.13 Disposition of excess area of the tenant's/farmer-beneficiary's landholdings;
2.14 Increase in area of tillage of a tenant/farmer-beneficiary;
2.15 Conflict of claims in landed estates administered by the DAR and its predecessors; and
2.16 Such other agrarian cases, disputes, matters or concerns referred to it by the Secretary of the DAR.
On the other hand, in the exercise of its quasi-judicial function, the DAR, through its adjudication arm, i.e., the DARAB and its
regional and provincial adjudication boards, adopted the 2003 DARAB Rules of Procedure. Under Section 2, Rule II of the said Rules
of Procedure, the DARAB shall have exclusive appellate jurisdiction to review, reverse, modify, alter, or affirm resolutions, orders,
and decisions of its Adjudicators who have primary and exclusive original jurisdiction over the following cases:
Rule II
Jurisdiction of the Board and its Adjudicators

SECTION 1. Primary and Exclusive Original Jurisdiction. — The Adjudicator shall have primary and exclusive original jurisdiction to
determine and adjudicate the following cases: cha nRoblesv irt ual Lawlib rary

1.1 The rights and obligations of persons, whether natural or juridical, engaged in the management, cultivation, and use of all
agricultural lands covered by Republic Act (RA) No. 6657, otherwise known as the Comprehensive Agrarian Reform Law (CARL),
and other related agrarian laws;
1.2 The preliminary administrative determination of reasonable and just compensation of lands acquired under Presidential Decree
(PD) No. 27 and the Comprehensive Agrarian Reform Program (CARP);
1.3 The annulment or cancellation of lease contracts or deeds of sale or their amendments involving lands under the
administration and disposition of the DAR or Land Bank of the Philippines (LBP);
1.4 Those cases involving the ejectment and dispossession of tenants and/or leaseholders;
1.5 Those cases involving the sale, alienation, pre-emption, and redemption of agricultural lands under the coverage of the CARL
or other agrarian laws;
1.6 Those involving the correction, partition, cancellation, secondary and subsequent issuances of Certificates of Land Ownership
Award (CLOAs) and Emancipation-Patents (EPs) which are registered with the Land Registration Authority;
1.7 Those cases involving the review of leasehold rentals;
1.8 Those cases involving the collection of amortizations on payments for lands awarded under PD No. 27, as amended, RA No.
3844, as amended, and RA No. 6657, as amended, and other related laws, decrees, orders, instructions, rules, and regulations, as
well as payment for residential, commercial, and industrial lots within the settlement and resettlement areas under the
administration and disposition of the DAR;
1.9 Those cases involving the annulment or rescission of lease contracts and deeds of sale, and the cancellation or amendment of
titles pertaining to agricultural lands under the administration and disposition of the DAR and LBP; as well as EPs issued under PD
266, Homestead Patents, Free Patents, and miscellaneous sales patents to settlers in settlement and' re-settlement areas under
the administration and disposition of the DAR;
1.10 Those cases involving boundary disputes over lands under the administration and disposition of the DAR and the LBP, which
arc transferred, distributed, and/or sold to tenant-beneficiaries and are covered by deeds of sale, patents, and certificates of title;
1.11 Those cases involving the determination of title to agricultural lands where this issue is raised in an agrarian dispute by any
of the parties or a third person in connection with the possession thereof for the purpose of preserving the tenure of the
agricultural lessee or actual tenant-farmer or farmer-beneficiaries and effecting the ouster of the interloper or intruder in one and
the same proceeding; and
1.12 Those cases previously falling under the original and exclusive jurisdiction of the defunct Court of Agrarian Relations under
Section 12 of PD No. 946 except those cases falling under the proper courts or other quasi-judicial bodies;
1.13 Such other agrarian cases, disputes, matters or concerns referred to it by the Secretary of the DAR.
Section 3, Rule II of the 2003 DARAB Rules of Procedure further states that the Adjudicator or the Board shall have no jurisdiction
over matters involving the administrative implementation of R.A. No. 6657, otherwise known as the Comprehensive Agrarian
Reform Law of 1988 and other agrarian laws as enunciated by pertinent rules and administrative orders, which shall be under the
exclusive prerogative of and cognizable by the Office of the Secretary of the DAR in accordance with his issuances.

Meanwhile, the Regional Trial .Courts (RTCs) have not been completely divested of jurisdiction over agrarian reform
matters.21 Section 56 of RA 6657 confers "special jurisdiction" on "Special Agrarian Courts," which are RTCs designated by the
Court — at least one (1) branch within each province — to act as such. As Special Agrarian Courts (SACs), these RTCs have,
according to Section 57 of the same law, original and exclusive jurisdiction over "all-petitions for the determination of just
compensation to land-owners" and "the prosecution of all criminal offenses under . . [the] Act."22

In order to determine in accordance with the foregoing provisions which among the DARAB and the Office of the Secretary of DAR,
and the SACs has jurisdiction over the nature and subject matter of the petition for annulment of the deeds of sale executed by
Eduardo in favor of respondents and the cancellation of the TCTs issued to them, it is necessary to examine the following
allegations therein and the character of the relief sought, irrespective whether the petitioner is entitled thereto:23
4.1 The late Eduardo Reyes was the original registered owner of TCT 85055 and TCT 116506, an agricultural
land situated at Brgy. Ambling, Magdalena, Laguna, consisting of 195,366 sq. meters and 7,431 sq. meters, respectively.

4.2 The land described under TCT 85055 was issued a notice of coverage under the Compulsory Acquisition (CA) scheme pursuant
to Section 7 of R.A. 6657. Subdivision plan over this property has been approved and the DAR is now on the process of generating
the Certificate of Land Ownership Award (CLOA) to the qualified recipient of the government's land reform program. However,
pending processing of the case folder, the DAR Municipal Office in Magdalena received on September 8, 2005 a letter coming from
Atty. Homer Antazo, the alleged counsel of Igmidio Robles and Christina Robles informing the MAR Office of the subsequent sale of
the property in their favor attaching documents in support of their claim. It was only then, after proper verification with the
Register of Deeds that the DAR found out that indeed the properties under TCT-T-85055 and TCT T-116506 were all
conveyed and transferred in favor of the herein private respondents by well intentioned deeds of absolute sale
executed in 1997. xxx Subsequently, by virtue of such deeds of sale the Registry of Deeds caused the cancellation of
TCT T-85055 and TCT 116506 and the issuance of new titles in private respondents' favor without securing the
necessary clearance from the DAR as mandated under Administrative Order No. 1 series of 1989. xxx The said titles
were issued arbitrarily and in clear violation of Section 6 of R.A. 6657, hence null and void. xxx

4.3 Public respondent Registry of Deeds might [have] overlooked the transaction entered into and misplaced knowledge on these
big track of landholdings when it proceeded with the registration of the deeds of sale and the subsequent cancellation of TCT
85055 and TCT 116506.

4.4 The Registry of Deeds was probably not aware and mindful on the extent of properties of Eduardo Reyes, that it
exceeded more than the retention limit but, thru machinations and crafty action exerted to by the parties to accomplish an
evil end, the immediate cancellation was brought to completion.

4.5 Hence, because it was tainted with fraud and bad faith, said certificate of titles cannot enjoy the presumption of having been
issued by the register of deeds in the regular performance of its official duty;
4.6 That, as a consequence of swift and speedy cancellation of TCT 85055 and TCT 116506 and the instantaneous issuance of
titles, the DAR, because of this intervening development cannot now continue with the generation of CLOA, prompting the filing of
the instant petition.
5. PRAYER

WHEREFORE, above premises considered, it is most respectfully prayed of this Honorable Adjudication Board that after due notice
and hearing, judgment be rendered annulling the Deeds of Absolute Sale executed by the late Eduardo Reyes in favor of the
herein private respondents and the subsequent cancellation of the issued transfer certificate of titles.

Petitioner likewise pray for such other relief and remedies as this Honorable Board may deem just and equitable under the
premises.24

Although no tenancy or agrarian relationship between the parties can be gleaned from the allegations of the petition in order to be
considered an agrarian dispute within the DARAB's jurisdiction, the Court notes that the petition is anchored on the absence of a
clearance for the sale and registration of the subject agricultural lands in favor of respondents, as required by DAR Administrative
Order No. 1, series of 1989 (A.O. No. 01-89)25 or the Rules and Procedures Governing Land Transaction. Clearly, such petition
involves the matter of implementation of agrarian laws which is, as a general rule, within the primary jurisdiction of the DAR
Regional Director.

It bears stressing that while the rule is that DARAB's jurisdiction is limited to agrarian disputes where tenancy relationship
between the parties exists, Section 50 of R.A. No. 6657 and Section 17 of E.O. No. 229 both plainly state that the DAR is vested
with the primary jurisdiction to determine and adjudicate agrarian reform matters. It is also noteworthy that while Section
3(d)26 of R.A. No. 6657 defined the term "agrarian dispute," no specific definition was given by the same law to the term "agrarian
reform matters." In view thereof, the Court cannot restrict the DARAB's quasi-judicial jurisdiction only to those involving agrarian
disputes where tenancy relationship exists between the parties, for it should also include other "agrarian reform matters" which do
not fall under the exclusive jurisdiction of the Office of the Secretary of DAR, the Department of Agriculture and the Department of
Environment and Natural Resources, as well as the Special Agrarian Courts.
Although they are not deemed as "agrarian disputes" falling under the DARAB's jurisdiction, "[s]uch other agrarian cases,
disputes, matters or concerns" referred to the Adjudicator by the Secretary of the DAR pursuant to Section 1 (1.13), Rule II of the
2003 DARAB Rules of Procedure, are still considered as "agrarian reform matters." A case in point is the DAR's petition for
annulment of deeds of sale and annulment of titles executed in violation of the provision Section 6, par. 4 of RA 6657. Despite
being an agrarian law implementation case, the Secretary of the DAR expressly referred jurisdiction over such petition to the
Provincial Adjudicator of the DARAB through Memorandum Circular (M.C.) No. 02-0127 on the Guidelines on Annulment of Deeds
of Conveyance of Lands Covered by the Comprehensive Agrarian Reform Program (CARP) Executed in Violation of Section 6,
Paragraph 4 of Republic Act (RA) No. 6657. Section 4 of DAR M.C. No. 02-01 pertinently provides:
b) The Chief, Legal Division, of the Provincial Agrarian Reform Office, shall have the following responsibilities:
1. Upon receipt of the MARO report, determine whether or not there was illegal transfer of agricultural lands pursuant to Sec. 6,
par. 4 of RA 6657;

2. If there was illegal transfer, file a petition for annulment of the deed of conveyance in behalf of the PARO before
the Provincial Agrarian Reform Adjudicator (PARAD). The petition shall state the material facts constituting the violation and
pray for the issuance of an order from the PARAD directing the ROD to cancel the deed of conveyance and the TCT generated as a
result thereof. As legal basis therefor, the petition shall cite Section 50 of RA 6657 and Rule II, Section 1(c) and (e) of the [1994]
DARAB New Rules of Procedure;28 ChanRoble sVirtualawl ibra ry

Concededly, the properties subject of the petition for annulment of deeds of sale and cancellation of titles cannot be considered as
lands under the administration of the DAR or LBP, i.e., those already acquired for CARP purposes and distributed to qualified
farmer-beneficiaries.29 Hence, such petition is outside the DARAB jurisdiction under Section 1 (1.9),30 Rule II of the 2003 DARAB
Rules of Procedure.

Nevertheless, it can be gathered from the allegations in the petition that the subject properties Eduardo conveyed and transferred
to respondents are agricultural lands in excess of the 5-hectare (50,000 sq. m.) retention limit of the CARL, and that the
corresponding TCTs were later issued and registered in their names without the necessary clearance under DAR A.O. No. 1, series
of 1989.

In Sarne v. Hon. Maquiling,31 the Court construed the phrase "agricultural lands under the coverage of the CARP" under Section
1(e),32 in relation to Section 1 (c),33 Rule II of the 1994 DARAB Rules of Procedure, which are similarly-worded as Sections 1 (1.3)
and (1.5), Rule II of the 2003 DARAB Rules of Procedure, thus:34
It is clear that the jurisdiction of the DARAB in this case is anchored on Section 1, paragraph (e), Rule II of the [1994] DARAB
New Rules of Procedure covering agrarian disputes involving the sale, alienation, mortgage, foreclosure, preemption and
redemption of agricultural lands under the coverage of the CARP or other agrarian laws. There is nothing in the provision from
which it can be inferred that the jurisdiction of the DARAB is limited only to agricultural lands under the administration and
disposition of DAR and LBP. We should not distinguish where the law does not distinguish. The phrase "agricultural lands
under the coverage of the CARP" includes all private lands devoted to or suitable for agriculture, as defined under
Section 4 of R.A. No. 6657. It is worthy to note that in the enumeration defining the DARAB's jurisdiction, it is only in paragraph
(c), that is, cases involving the annulment or cancellation of lease contracts or deeds of sale or their amendments involving lands,
that the phrase "involving lands under the administration and disposition of the DAR or LBP" is used. That the same proviso does
not appear in paragraph (e), which is the basis of respondents' cause of action, could only mean that it was never intended to be
so limited. xxx35
ChanRob les Vi rtualaw lib rary

Contrary to the view of the CA and the respondents, therefore, a notice of coverage is not necessary in order for the DARAB to
have jurisdiction over a case that involves the sale or alienation of agricultural lands "under the coverage of the CARP" pursuant to
Section 1 (1.5),36 Rule II of the 2003 DARAB Rules of Procedure, as such phrase includes all private lands devoted to or suitable
for agriculture, as defined under Section 4 of R.A. No. 6657:
CHAPTER II
Coverage.

Section 4. Scope. — The Comprehensive Agrarian Reform Law of 1989 shall cover, regardless of tenurial arrangement and
commodity produced, all public and private agricultural lands, as provided in Proclamation No. 131 and Executive Order No. 229,
including other lands of the public domain suitable for agriculture.

More specifically the following lands are covered by the Comprehensive Agrarian Reform Program:
(a) All alienable and disposable lands of the public domain devoted to or suitable for agriculture. No reclassification of forest or
mineral lands to agricultural lands shall be undertaken after the approval of this Act until Congress, taking into account ecological,
developmental and equity considerations, shall have determined by law, the specific limits of the public domain.
(b) All lands of the public domain in excess of the specific limits as determined by Congress in the preceding paragraph;

(c) All other lands owned by the Government devoted to or suitable for agriculture; and

(d) All private lands devoted to or suitable for agriculture regardless of the agricultural products raised or that can be raised
thereon.
In light of the principle that jurisdiction over the subject matter and nature of the petition is conferred by law and determined by
the material allegations therein, and is not affected by the defenses or theories set up in the respondent's answer or motion to
dismiss, the Court finds that the DAR's petition for annulment of deeds of sale and cancellation of titles falls under the jurisdiction
of the PARAD under Section 1 (1.5), Rule II of the 2003 DARAB Rules of Procedure, as it contains sufficient allegations to the
effect it involves sales of agricultural lands under the coverage of the CARL.

To be sure, the Court does not undermine the significance of the notice of coverage for purposes of acquisition of lands under the
CARP. A letter informing a landowner that his/her land is covered by CARP, and is subject to acquisition and distribution to
beneficiaries, and that he/she has rights under the law, including the right to retain 5 hectares, the notice of coverage first sprung
from DAR A.O. No. 12, Series of 1989,37 to fill in the gap under Section 16 of the CARL on the identification process of lands
subject to compulsory acquisition. In Roxas & Co., Inc. v. Court of Appeals,38 the Court stressed the importance of such notice as
a step designed to comply with the requirements of administrative due process:
The importance of the first notice, i.e., the Notice of Coverage and the letter of invitation to the conference, and its actual conduct
cannot be understated. They are steps designed to comply with the requirements of administrative due process. The
implementation of the CARL is an exercise of the State's police power and the power of eminent domain. To the extent that the
CARL prescribes retention limits to the landowners, there is an exercise of police power for the regulation of private property in
accordance with the Constitution. But where, to carry out such regulation, the owners are deprived of lands they own in excess of
the maximum area allowed, there is also a taking under the power of eminent domain. The taking contemplated is not a mere
limitation of the use of the land. What is required is the surrender of the title to and physical possession of the said excess and all
beneficial rights accruing to the owner in favor of the farmer beneficiary. The Bill of Rights provides that "if no person shall be
deprived of life, liberty or property without due process of law." The CARL was not intended to take away property without due
process of law. The exercise of the power of eminent domain requires that due process be observed in the taking of private
property.39ChanRob les Virtualawl ibra ry

Given that the notices of coverage were issued to the wrong persons, the heirs of the former owner, Eduardo, instead of
respondents who are the present owners of the subject properties, the DAR can hardly be faulted for such mistake. It bears
emphasis that while Eduardo executed the corresponding deeds of absolute sale in favor of respondents as early as April 17, 1997,
it was only on May 3, 2005 that said deeds were registered in the names of respondents. Meantime, in view of the death of
Eduardo on October 28, 2000, the DAR had no choice but to send the Notices of Coverage dated September 8, 2004 and
November 23, 2004 to his heirs, Julieta and Nenita, respectively. While said deeds of sale are binding between the said heirs of
Eduardo and respondents, the DAR could not have been aware thereof for lack of registration which is the operative act that binds
or affects the land insofar as third persons are concerned. Thus, the DAR cannot be blamed for erroneously issuing such notices to
the said heirs because it merely relied on available public records at the Register of Deeds, showing that the original landowner of
the said properties is the late Eduardo.

For its part, despite the DAR's allegation that it only found out that the subject properties were already conveyed and transferred
in favor of respondents when its Municipal Office in Magdalena, Laguna, received on September 8, 2005 a letter from the counsel
of respondent Igmedio Robles and Christina Robles; it should be deemed to have constructive notice of said deeds only from the
time of their registration on May 3, 2005. From the date of such registration, the DAR should have also issued respondents notices
of coverage pursuant to DAR M.C. No. 18-04 (Clarificatory Guidelines on the Coverage, Acquisition and Distribution of Agricultural
Lands Subject of Conveyance Executed in Violation of Sec. 6, Par. 4 of R.A. No. 6657) which modified DAR M.C. No. 02-01,
3. Notwithstanding the pendency of the investigation and/or the petition for annulment of deed of conveyance, the DAR shall issue
a notice of coverage to both old and new landowner/s in order for the LBP to proceed with the valuation of the property. For this
purpose, the DAR Provincial or Regional Office and the Land Bank of the Philippines may execute an agreement for purposes of
issuing memorandum of valuation and certificate of deposit to be held in trust for the rightful owner/s.
The Court, however, holds that the DAR cannot be taken to task for failing to issue notices of coverage to respondents because
the land areas of the subject properties sold to them, respectively, are all within the 5-hectare (50,000 sq. m.) retention limit.
Respondents cannot, therefore, contend that a notice of coverage is necessary in order for a land to be considered under the
coverage of the CARP for purposes of filing a petition under DAR M.C. No. 02-01 in relation to violation of Section 6, paragraph 4
of RA 6651. To sustain respondents' contention would subvert the objectives of the said provision to prevent circumvention of the
retention limits set by law on ownership of agricultural lands after the effectivity of CARL on June 15, 1988, and to prevent the
landowner from evading CARP coverage. Hence, the Court cannot uphold such contention, as it would ultimately defeat the
purpose of the agrarian reform program of achieving social justice through equitable distribution of large landholdings to tenants
or farmers tilling the same.

Furthermore, at the time of the sale of the subject properties on April 17, 1997, there were existing tenants thereon as shown by
the Deeds of Surrender of Tenancy Rights40 dated July 10, 1997 later executed in favor of the buyers, respondents Igmidio and
Cristina Robles. Then, in identically-worded certifications dated August 29, 1997, the BARC Chairman and the Barangay Chairman
of Ambiling, Magdalena, Laguna, both stated that the property covered by TCT No. 85055 with an area of 195,366 sq. m. is a
coconut land without any tenant and may be converted into an industrial, resort, low-cost housing or residential
subdivision.41 Without ruling on the validity of the deeds of surrender of tenancy rights, the Court finds that the execution thereof
subsequent to that of the deeds of sale, alongside the certifications of the BARC Chairman and Barangay Chairman, casts doubt on
the validity of the transfer and conveyance of the subject properties as a ploy to circumvent the retention limits and. coverage
under the CARP.

It is noteworthy that in Department of Agrarian Reform v. Paramount Holdings Equities, Inc.,42 the Court had resolved in the
negative the issue of whether or not the DARAB has jurisdiction over a dispute that seeks the nullification of the sale of
agricultural lands because (1) the PARO's petition failed to sufficiently allege any tenurial or agrarian relations and to indicate an
agrarian dispute, and (2) the said lands had not been the subject of any notice of coverage under the CARP.

Despite the fact that the same jurisdictional issue is involved in this case, the Court's ruling in Paramountis inapplicable because of
the difference between the material allegations in the PARO's petitions in both cases.

Given that the PARO's petition in this case likewise failed to allege any tenancy or agrarian relations and to indicate an agrarian
dispute, and its cause of action is merely founded on the absence of a clearance to cover the sale and registration of the subject
lands, it bears emphasis that the D ARAB'S jurisdiction is not limited to agrarian disputes where tenancy relationship between the
parties exists. Under Section 1 (1.13),43 Rule II of the 2003 DARAB Rules of Procedure, the DARAB also has jurisdiction over
agrarian reform matters referred to it by the Secretary of DAR, such as the PARO's petition for annulment of deeds of sale and
annulment of titles filed pursuant to DAR A.O. No. 01-8944 and DAR M.C. No. 02-0145for violation of the legal requirement for
clearances in the sale and transfer of agricultural lands.

In contrast to Paramount where it is undisputed that the subject lands had not been subject of any notice of coverage under the
CARP, the PARO's petition in this case alleged that one of the subject lands was issued a notice of coverage.46 At any rate, the
Court holds that such notice is unnecessary in order for the DARAB to have jurisdiction over a case that involves the sale of
"agricultural lands under the coverage of the CARP," arsuant to Section 1 (1.5),47 Rule II of the 2003 DARAB Rules of Procedure.
As held in Sarne v. Maquiling,48 the said phrase includes all private lands devoted to or suitable for agi iculture, as defined under
Section 449 of RA No. 6657. In view of the rule that jurisdiction over the subject matter and nature of the petition is determined by
the allegations therein and the character of the relief prayed for, irrespective of whether the petitioner entitled to any or all such
reliefs,50 the Court finds that the PARO's petition for annulment of sale and cancellation of titles falls under the jurisdiction of the
DARAB, as it contains allegations to the effect that it involves sales of agricultural lands under the coverage of the CARL.

Significantly, unlike in this case where the transfer of the subject properties appears to have been done to evade the retention
limits and coverage under CARP, the Court found the original petition in Paramount dismissible on the merits as the records clearly
showed that the subject lands were already classified as "industrial" long before the effectivity of the CARL.

The Court also overrules respondents' argument that the subject properties are outside the coverage of CARP and registerable,
since no annotation of any disposition of the properties or limitation on the use thereof by virtue of, or pursuant to P.D. No. 27,
CARL or any other law or regulations on agrarian reform was inscribed on Eduardo's titles and their derivative titles. Quite the
contrary, TCT Nos. T-85055 and T-116506 under the name of Eduardo contain provisions stating that he is the owner thereof in
fee simple, subject to the encumbrances mentioned in Section 39 of Act No. 496, or the Land Registration Act,51 and Section 44 of
P.D. 1529, or the Property Registration Decree, respectively.

Section 39 of Act No. 496 and Section 44 of P.D. No. 1529 similarly provide for statutory liens which subsist and bind the whole
world, even without the benefit of registration under the Torrens System:
Section 39. Every applicant receiving a certificate of title in pursuance of a decree of registration, and every subsequent purchaser
of registered land who takes a certificate of title for value in good faith, shall hold the same free of all encumbrance except those
noted on said certificate, and any of the following encumbrances which may be subsisting, namely: chanRoble svi rtual Lawli bra ry

First. Liens, claims, or rights arising or existing under the laws or Constitution of the United States or of the
Philippine Islands which the statutes of the Philippine Islands cannot require to appear of record in the registry. x x
x52

SEC. 44. Statutory liens affecting title. - Every registered owner receiving a certificate of title in pursuance of a decree of
registration, and every subsequent purchaser of registered land taking a certificate of title for value and in good faith, shall hold
the same free from all encumbrances except those noted in said certificate and any of the following encumbrances which may be
subsisting, namely: x x x

Fourth. Any disposition of the property or limitation on the use thereof by virtue of, or pursuant to, Presidential
Decree No. 27 or any other law or regulations on agrarian reform. 53 ChanRoble sVirt ualawli bra ry

The Court is of the view that the provision on retention limits under Section 6 of RA 6657 constitutes as statutory liens on
Eduardo's titles, which were carried over to respondents' derivative titles, even if no such annotations were inscribed on all of the
said titles. In particular, such statutory liens pertain to paragraph 4 of Section 6 of RA 6657 in relation to Section 73 of the same
law, which read:
Section 6. Retention Limits. — Except as otherwise provided in this Act, no person may own or retain, directly or indirectly, any
public or private agricultural land, the size of which shall vary according to factors governing a viable family-size farm, such as
commodity produced, terrain, infrastructure, and soil fertility as determined by the Presidential Agrarian Reform Council (PARC)
created hereunder, but in no case shall retention by the landowner exceed five (5) hectares. Three (3) hectares may be awarded
to each child of the landowner, subject to the following qualifications: (1) that he is at least fifteen (15) years of age; and (2) that
he is actually tilling the land or directly managing the farm: provided, that landowners whose lands have been covered by
Presidential Decree No. 27 shall be allowed to keep the areas originally retained by them thereunder: provided, further; that
original homestead grantees or their direct compulsory heirs who still own the original homestead at the time of the approval of
this Act shall retain the same areas as long as they continue to cultivate said homestead.

xxxx

Upon the effectivity of this Act, any sale, disposition, lease, management, contract or transfer of possession of private
lands executed by the original landowner in violation of the Act shall be null and void: provided, however, that those
executed prior to this Act shall be valid only when registered with the Register of Deeds within a period of three (3) months after
the effectivity of this Act. Thereafter, all Registers of Deeds shall inform the Department of Agrarian Reform (DAR) within thirty
(30) days of any transaction involving agricultural lands in excess of five (5) hectares.

Section 73. Prohibited Acts and Omissions. — The following are prohibited: (a) The ownership or possession, for the
purpose of circumventing the provisions of this Act, of agricultural lands in excess of the total retention limits or
award ceilings by any person, natural or juridical, except those under collective ownership by farmer-beneficiaries.

xxxx

(e) The sale, transfer, conveyance or change of the nature of lands outside of urban centers and city limits either in
whole or in part after the effectivity of this Act. The date of the registration of the deed of conveyance in the Register of
Deeds with respect to titled lands and the date of the issuance of the tax declaration to the transferee of the property with respect
to unregistered lands, as the case may be. shall be conclusive for the purpose of this Act.54 ChanRoblesVirt ualawli bra ry

As Eduardo's titles contain such statutory liens, respondents have imputed knowledge that the transfer of the subject properties in
excess of the landowner's 5-hectare (50,000 sq. m.) retention limit under the CARL could have been illegal as it appears to
circumvent the coverage of CARP. Thus, until the PARAD has decided with finality the DAR's petition for annulment of deeds of
sale and cancellation of titles for alleged violation of Section 6, paragraph 4 of RA 6657, respondents cannot claim that they are
innocent purchasers for value and in good faith.

There is also no merit in respondents' contention that the TCTs issued in their favor have become incontrovertible and
indefeasible, and can no longer be altered, canceled or modified or subject to any collateral attack after the expiration of one (1)
year from the date of entry of the decree of registration, pursuant to Section 32 of P.D. No. 1529. In Heirs of Clemente Ermac v.
Heirs of Vicente Ermac,55 the Court clarified the foregoing principle in this wise:
While it is true that Section 32 of PD 1529 provides that the decree of registration becomes incontrovertible after a year, it does
not altogether deprive an aggrieved party of a remedy in law. The acceptability of the Torrens System would be impaired, if it is
utilized to perpetuate fraud against the real owners.

Furthermore, ownership is not the same as a certificate of title. Registering a piece of land under the Torrens System does not
create or vest title, because registration is not a mode of acquiring ownership. A certificate of title is merely an evidence of
ownership or title over the particular property described therein. Its issuance in favor of a particular person does not foreclose the
possibility that the real property may be co-owned with persons not named in the certificate, or that it may be held in trust for
another person by the registered owner.56 ChanRob les Virtualawl ibra ry

In Lacbayan v. Samoy, Jr.,57 the Court noted that what cannot be collaterally attacked is the certificate of title, and not the title
itself:
x x x The certificate referred to is that document issued by the Register of Deeds known as the TCT. In contrast, the title referred
to by law means ownership which is, more often than not, represented by that document, xxx Title as a concept of ownership
should not be confused with the certificate of title as evidence of such ownership although both, are interchangeably used.
In this case, what is being assailed in the DAR's petition for annulment of deeds of sale and cancellation of titles is the legality of
the transfer of title over the subject properties in favor of respondents, and not their corresponding TCTs, due to the absence of
DAR clearance and for possible violation of Section 6, paragraph 4 of R.A. No. 6657.

All told, the CA erred in dismissing for lack of jurisdiction the DAR's petition for annulment of deeds of sale and cancellation of
titles before the PARAD, and in holding that it is the regular courts that should determine if indeed there were violations of the
agrarian laws which would justify the grant of such petition. As can be determined from the allegations of the petition, the DARAB
has jurisdiction over such case which involves agrarian reform matters under Section 1 (1.5)58 and (1.13),59 Rule II of the 2003
DARAB Rules of Procedure.

WHEREFORE, the petition is GRANTED, and the Court of Appeals Decision dated May 29, 2009 and its Resolution dated
December 2, 2009 in CA-G.R. SP No. 104896, are REVERSED and SET ASIDE. The Resolutions dated February 7, 2008 and June
26, 2008 of the Provincial Adjudicator of the Department of Agrarian Reform Adjudication Board, Region IV-A, are REINSTATED.
The said Adjudicator is ORDEREDto proceed with dispatch in the resolution of the Petition for Annulment of Deeds of Sale and
Cancellation of TCT Nos. T-238504, T-238505, T-238506, T-238507, T-238503, and T-238502, docketed as DARAB Case No. R-
0403-0032-0037-06.

SO ORDERED. chanroblesvi rtua llawli bra ry

 THIRD DIVISION
May 30, 2016
G.R. No. 190520
LAND BANK OF THE PHILIPPINES, Petitioner,
vs.
SPOUSES ANTONIO AND CARMEN AVANCEÑA, Respondents.
DECISION
PERALTA, J.:
Before us in a petition for review on certiorari filed by petitioner Land Bank of the Philippines seeking to annul and set aside
the Decision1 dated August 11, 2008 of the Court of Appeals (CA) isued in CA-G.R. CV No. 00067 directiong thit to pay
twelve percent 912%) interest per anum for delay in the payment of just compensation. Also assailed is the CA
Resolution2 dated December 1, 2009 denying reconsideration thereof.
Respondents-Spouses Antonio and Carmen Avanceña were the registered owners of a parcel of agricultural land situated
at Sanghan, Cabadbaran, Agusan del Norte covered by Transfer Certificate of Title No. RT-2937 containing an area of
205.0074 hectares. In 1988, respondents spouses voluntarily offered to sell their land to the government under the
Comprehensive Agrarian Reform Program (CARP), which consisted of 160.2532 hectares of the land. In 1991, petitioner
Land Bank of the Philippines initially valued the subject lot at Pl,877,516.09 based on the guidelines prescribed in DAR
Administrative Order No. 17, Series of 1989. Upon recomputation in 1994 and based on DAR AO No. 6, Series of 1992,
as amended, by DAR AO No. 11, Series of 1994, the land was revalued at P3,337,672.78 but respondents rejected the
valuation. Petitioner deposited the difference in the cash portion between the revalued amount and the initial valuation of
P 1,877,516.09 in trust for the respondents on July 24, 1996. The parties brought the matter of valuation to the Department
of Agrarian Reform Adjudication Board (DARAB), Caraga Regional Office, which affirmed petitioner's second valuation.
Respondents-spouses filed with the Regional Trial Court, acting as a Special Agrarian Court (SAC), a complaint for
determination of just compensation, docketed as Civil Case No. 4507. They prayed for a valuation of no less than
P200,000.00 per hectare for the subject lot or in the alternative, to appoint Commissioners to determine the just
compensation; and that they be allowed to withdraw the valuation amount that petitioner had deposited for them including
the earned interest, pending the court's final valuation. Petitioner filed its Answer alleging that the valuation was computed
based on the factors enumerated in Section 17 of Republic Act No. (R.A.) 6657, the Comprehensive Agrarian Reform Law.
While the complaint was pending, petitioner made a reevaluation of the property using the valuation prescribed by DAR
AO 5, series of 1998 which yielded the amount of P9,057,180.32.
On March 29, 2000, the SAC issued its Decision,3 the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered directing the defendants Land Bank of the Philippines
(LBP) and the Department of Agrarian Reform (DAR) to pay plaintiffs the following:
1. The sum of Twenty Million Four Hundred Seventy-Five Thousand, Seven Hundred Seventy-Five (P20,475,775)
Pesos for the 160.253 hectares [of] land with its improvements with six (6%) percent legal interest thereon, less
the provisional deposits from April 1991 until actually paid;
2. The sum of One Hundred Thousand (Pl00,000) Pesos, as Attorneys' fees;
3. The sum of One Hundred Thousand (Pl 00,000) Pesos, litigation expenses; 4. All other claims and counterclaims
are dismissed for lack of merit.
SO ORDERED.4
Petitioner's motion for reconsideration was denied, hence it appealed the decision with the CA. In the meantime,
respondents spouses moved for the execution of the RTC decision pending appeal5 which was granted in a Resolution6
dated October 2, 2000; thus, the writ of execution was issued and implemented. 1âw phi1

On August 11, 2008, the CA issued the assailed decision, the decretal portion of which reads:
WHEREFORE, in view of all the foregoing, the instant appeal is hereby GRANTED and the assailed March 29, 2006
decision of the Regional Trial Court (RTC), 10111 Judicial Region, Branch 5, Butuan City, in Civil Case No. 4507, is hereby
SET ASIDE. Consequently, this case is remanded to the court a quo for the recomputation of just compensation. In
determining the valuation of the subject property, the factors provided under Section 17 of R.A. 6657 shall be considered
in accord with the formula prescribed in DAR Administrative Order No. 5, Series of 1998. Moreover, the just compensation
due the [S]pouses Avancena should bear 12% interest per annum from the time title to the property was transferred in the
name of the government up to the time that LBP deposited the amount of its valuation for the subject land under the
account of the appellees. The basis of the 12% interest would be the just compensation that would be determined by the
court a quo after remand of the instant case.
SO ORDERED.7
Petitioner filed a motion for partial reconsideration arguing that the CA erred in awarding interest at the rate of 12% p.a.
reckoned from the time title to property was transferred in the name of the government to the time petitioner deposited the
valuation in July 1996. It argued that upon receipt of the DAR order of deposit, it immediately deposited the cash portion
of the initial valuation of P 1,877 ,516.09 on October 17, 1991, thus it never incurred delay as the title to the subject lot was
transferred in the name of the government only in December 1991.
On December 1, 2009, the CA issued its resolution denying the motion for reconsideration. It found that nowhere in the
records showed that petitioner made a deposit of Pl,877,516.09 on October 17,1991.
Dissatisfied, petitioner is now before us alleging that:
THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN AWARDING INTEREST AT
THE RATE OF 12% PER ANNUM FROM THE TIME TITLE TO THE PROPERTY WAS TRANSFERRED IN THE NAME
OF THE GOVERNMENT IN 1991 UP TO THE TIME LBP ALLEGEDLY DEPOSITED THE VALUATION IN 1996.8
Petitioner claims that it deposited cash and bonds for the initial valuation of Pl,877, 516.09 on October 17, 1991. It attached
in this petition a Certification9 dated October 22, 1991 which stated that the cash and bonds due the respondents-spouses
have been earmarked by petitioner for respondents spouses on October 17, 1991. It argues that such deposit was the
basis for the DAR to take possession of the prope1iy and caused the issuance of the title in the name of the government
in December 1991, pursuant to Section 16 ( e) of RA 6657, thus, it did not incur any delay in depositing the amounts due
the respondents-spouses which can validly justify the payment of interest.
Petitioner cites the case of Apo Fruits Corporation et al. v. CA10 saying that we have categorically declared therein that
payment of interest for delay cannot be applied where there is prompt and valid payment of just compensation as initially
determined, as subsequently determined after revaluation, and even if the amount was later on increased pursuant to the
court's judgment.
Petitioner further contends that despite the pendency of the case with the CA, the RTC issued a Writ of Execution dated
March 9, 2000 directing petitioner to pay the RTC's valuation of P20,475,775.00 plus legal interest thereon at the rate of
6% per annum from April 1991 until fully paid; that since such valuation was, however, set aside by the CA in its assailed
decision, there is now a huge possibility that the recomputed value will be much lower than P20,475,775.00; that the
advance payment it made amounting to P23,416,772.55 may have exceeded the value of the subject land so that there is
a need for respondents spouses to return the difference between its valuation of P9,057,182.30 and the advance payment.
We are not persuaded.
The CA found that the title to respondents spouses' land was canceled and a new title was issued in the name of the
Republic of the Philippines in December 1991, but there was no showing that petitioner had made payments prior to the
taking of the land.
Thus, there was delay in the payment of just compensation which entitles the respondents spouses to the payment of
interest from the time the property was transferred in the name of the government in December 1991 up to the time
petitioner deposited the valuation in the account of the respondents-spouses in July 1996. We agree with the CA that
petitioner should pay interest for the delay in the payment of just compensation. However, such payment of interest should
be computed up to the full payment of just compensation.
Petitioner argues that it had made a deposit on October 17, 1991, i.e., prior to the cancellation of the title of the respondents-
spouses, and submitted with us a Certification dated October 22, 1991 issued by the
petitioner's Bonds Servicing Department stating that it had earmarked the sum of Pl,877,516.09 in cash and in LBP bonds
as compensation for the parcel of lands covered by RT-2937 in the name of respondents spouses on October 17, 1991
pursuant to RA 6657 through voluntary offer. However, such certification was not among those that the petitioner offered
as evidence during the trial.11 More importantly, We had rejected the practice of earmarking funds and opening trust
accounts for purposes of effecting payment, hence, the law12 requires payment of just compesation in cash or Land Bank
of the Philippines (LBP) bonds, not by trust account.13
The certificate of title to respondents-spouses' land was canceled and a new certificate was issued in the government's
name in December 1991 without giving the former just compensation for such taking. We have allowed the grant of interest
in expropriation cases where there is delay in the payment of just compensation. 14 We recognize that the owner's loss is
not only his property but also its income-generating potential.15 Thus, when property is taken, full compensation of its value
must immediately be paid to achieve a fair exchange for the property and the potential income lost.16 The rationale for
imposing the interest is to compensate the landowners for the income they would have made had they been properly
compensated for their properties at the time of the taking.17
In Republic v. CA,18 we held:
The constitutional limitation of "just compensation" is considered to be the sum equivalent to the market value of the
property, broadly described to be the price fixed by the seller in open market in the usual and ordinary course of legal
action and competition or the fair value of the property as between one who receives, and one who desires to sell it, fixed
at the time of the actual taking by the government. Thus, if property is taken for public use before compensation is deposited
with the court having jurisdiction over the case, the final compensation must include interests on its just value to be
computed from the time the property is taken to the time when compensation is actually paid or deposited with the court.
In fine, between the taking of the property and the actual payment, legal interests accrue in order to place the owner in a
position as good as (but not better than) the position he was in before the taking occurred.
The Bulacan trial court, in its 1979 decision, was correct in imposing interests on the zonal value of the property to be
computed from the time petitioner instituted condemnation proceedings and "took" the property in September 1969. This
allowance of interest on the amount found to be the value of the property as of the time of the taking computed, being an
effective forbearance, at 12% per annum should help eliminate the issue of the constant fluctuation and inflation of the
value of the currency over time. Article 1250 of the Civil Code, providing that, in case of extraordinary inflation or deflation,
the value of the currency at the time of the establishment of the obligation shall be the basis for the payment when no
agreement to the contrary is stipulated, has strict application only to contractual obligations. In other words, a contractual
agreement is needed for the effects of extraordinary inflation to be taken into account to alter the value of the currency.19
Thus, the CA did not err in imposing interest on the just compensation which will be detennined after the remand of the
case to the SAC. The interest should be computed from December 1991 up to the full payment of just compensation and
not only up to the time petitioner deposited the valuation in 1996 as the CA ruled. The concept of just compensation
embraces not only the correct determination of the amount to be paid to the owners of the land, but also payment within a
reasonable time from its taking.20 Without prompt payment, compensation cannot be considered "just" inasmuch as the
property owner is made to suffer the consequences of being immediately deprived of his land while being made to wait for
a decade or more before actually receiving the amount necessary to cope with loss.21
The award of interest is imposed in the nature of damages for delay in payment which, in effect, makes the obligation on
the part of the government one of forbearance to ensure prompt payment of the value of the land and limit the opportunity
loss of the owner.22 The just compensation due respondents-spouses shall earn legal interest at the rate of 12% per annum
computed from the time of taking in December 1991 until June 30, 2013.23 And from July 1, 2013 until full payment, the
interest will be at the new legal rate of 6% per annum, in accordance with the revisions governing the rate of interest
established by Bangko Sentral ng Pilipinas Monetary Board Circular No. 799,24 Series of 2013.25 The amount which
petitioner had already paid respondents-spouses by virtue of the RTC's Order granting the issuance of the Writ of Execution
dated October 2, 2000 shall be deducted from the amount of the just compensation which will be awarded after the remand
of this case.
Petitioner's reliance on our Third Division's December 19, 2007 Resolution in the case of Apo Fruits Corporation v.
CA26 wherein we declared that the payment of interest for the delay of payment cannot be applied where there is prompt
and valid payment of just compensation as initially determined, even if the amount of just compensation was later on
increased pursuant to the Court's judgment, is misplaced. We found then that as Land Bank had deposited pertinent
amounts in favor of the landowners within fourteen months after the latter filed their complaint for determination of just
compensation with the SAC, there was no unreasonable delay in the payment of just compensation which entitled the
landowners to the payment of 12% interest per annum on the unpaid just compensation.
However, such resolution was subsequenlty reversed and set aside in our En Banc Resolution dated October 12, 2010
where we granted the landowners' motion for reconsideration. We ordered the Land Bank to pay the landowners an interest
at the rate of 12% per annum on the unpaid balance of the just compensation, computed from the date the Government
took the properties on December 9, 1996, until the respondent Land Bank fully paid the balance of the principal amount on
May 9, 2008. We ruled that notwithstanding that the Land Bank had immediately paid the remaining unpaid balance of the
just compensation as finally determined by the court, however, 12 long years had passed before the landowners were fully
paid. Thus, the landowners were entitled to legal interest from the time of the taking of the property until the actual payment
in order to place the owner in a position as good as, but not better than, the position he was in before the taking
occurred.27 The imposition of such interest was to compensate the landowners for the income they would have made had
they been properly compensated for their prope1iies at the time of the taking.28 Thus, we held:
Let it be remembered that shorn of its eminent domain and social justice aspects, what the agrarian land reform program
involves is the purchase by the government, through the LBP, of agricultural lands for sale and distribution to farmers. As
a purchase, it involves an exchange of values the landholdings in exchange for the LBPs payment. In determining the just
compensation for this exchange, however, the measure to be borne in mind is not the taker's gain but the owner's
loss_since what is involved is the takeover of private property under the States coercive power. As mentioned above, in
the value-for-value exchange in an eminent domain situation, the State must ensure that the individual whose property is
taken is not shortchanged and must hence carry the burden of showing that the just compensation requirement of the Bill
of Rights is satisfied.
The owner's loss, of course, is not only his property but also its income-generating potential. Thus, when property is taken,
full compensation of its value must immediately be paid to achieve a fair exchange for the property and the potential income
lost. The just compensation is made available to the property owner so that he may derive income from this compensation,
in the same manner that he would have derived income from his expropriated property. If full compensation is not paid for
property taken, then the State must make up for the shortfall in the earning potential immediately lost due to the taking,
and the absence of replacement prope1iy from which income can be derived; interest on the unpaid compensation
becomes due as compliance with the constitutional mandate on eminent domain and as a basic measure of fairness.29
As in the Apo case, respondents-spouses voluntarily offered to sell their land pursuant to the government's land reform
program, however, the valuation made by the LBP on the land was rejected by the former for being undervalued.
Respondents-spouses had to resmi to the filing of the case with the RTC, sitting as SAC, for the determination of just
compensation of their land. It has already been 25 years but respondents-spouses have not received the full amount of
the just compensation due them, and fu1iher delay can be expected with the remand of the case to the SAC for the
recomputation of the just compensation. Thus, the long delay entitles them to the payment of interest to compensate for
the loss of income due to the taking.30
Petitioner's claim for reimbursement of the amount it had already paid to respondents-spouses by virtue of the writ of
execution pending appeal then issued by the SAC is not meritorious. The recomputed amount of just compensation due
the respondents-spouses shall only be determined after the remand of the case to the SAC. It would only be that time
which would establish whether the payment made to them was more than the just compensation that they are entitled to.
There is also no basis for petitioner to claim that respondents-spouses are merely entitled to provisionally receive its
valuation of ~9,057,182.30 pending the final determination of the just compensation. Notably, the CA's decision rejected
petitioner's valuation as well, thus:
It has been stated in a number of cases that in computing the just compensation for expropriation proceedings, it is the
value of the land at the time of the taking which should be taken into consideration. This being so, then in determining the
value of the land for the payment of just compensation, the time of taking should be the basis.
In the case at bar, the court a quo failed to consider the value and the character of the land at the time it was taken by the
government in 1991. Instead, the former assessed the market value of the idle portion of the subject lot as a riceland. Yet,
per LBP's Field Investigation Report (FIR) prepared in 1990, the subject lot was not yet devoted to rice or corn at that time,
although its idle portion was classified as suitable for said crops. Also, in computing the value of the land, the court
a quo considered the land's appreciation value from the time of taking in 1991 up to the filing of the case in 1997 and of
appellee 's potential profit from the land's suitability to rice and corn, which We find to be contrary to the settled criterion in
determining just compensation. Hence erroneous.
The foregoing pronouncements do not, however, mean that We favor LBP's valuation of P9,057,10.32 for the subject
lot. The same is found to be non-reflective of just compensation because the Tax Declaration used by LBP in fixing the
1âw phi 1

market value of the land in its initial valuation for the year 1986, as indicated in the FIR. Additionally, no evidence was
adduced to show that LBP used the correct tax declaration (TD), which should be the 1991 TD, in fixing the market value
in its latest computation of the land's valuation.
Notably, LBP's initial valuation of the land in 1991 was Pl,877,516.09 and became P3,337,672.78 after recomputation in
1994, pursuant to DAR AO No. 11, Series of 1994. During the pendency of the case in court, DAR AO No. 5 series of 1998
was issued; hence, LBP accordingly recomputed its valuation and came up with the amount of P9,057,180.32 (the amount
of P.8,955,269.16 constitutes the value of the land while P101,913.14 was the value of the legal easement).
Albeit LBP claims to have faithfully observed and applied the prescribed formula in DAR AO No. 5, series of 1998, in its
recomputation of the land's valuation, it adduced no evidence, like the official computation sheets, to show that the latest
valuation of the land was indeed arrived at using the prescribed formula and that the correct documents indicating the
factors enumerated in Section 17 of RA 6657 were actually considered. Hence We cannot accpet LBP’s latest valuation
as well.
Consequently, We deem it proper to remand this case to the court a quo for a recomputation of the just compensation. x x
x31
Therefore, until the SAC had finally detennined the just compensation due the respondents-spouses upon remand of the
case, it could not be said that the payment made by virtue of the writ of execution pending appeal had exceeded the value
of the subject property.
Moreover, assuming arguendo that the amount paid by virtue of the execution pending appeal would be more than the
recomputed amount of the just compensation, any excess amount should be returned to petitioner as provided under
Section 5, Rule 39 of the Rules of Court, to wit:
Section 5. Effect of reversal of executed judgment. - Where the executed judgment is reversed totally or partially, or
annulled, on appeal or otherwise, the trial court may, on motion, issue such orders of restitution or reparation of damages
as equity and justice may warrant under the circumstances.
WHEREFORE, the dispositive portion of the Decision dated August 11, 2008 of the Court of Appeals in CA-G.R. CV No.
00067 is hereby modified and shall now read as follows:
WHEREFORE, in view of all the foregoing, the instant appeal is hereby GRANTED and the assailed March 29, 2006
decision of the Regional Trial Court (RTC), 10th Judicial Region, Branch 5, Butuan City, in Civil Case No. 4507, is hereby
SET ASIDE. Consequently, this case is remanded to the court a quo for the recomputation of just compensation. The
interest on the recomputed just compensation should be computed from December 1991 up to the payment of the full
amount of just compensation less whatever amounts received by the respondents-spouses.
SO ORDERED.