Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 164876             January 23, 2006

LAND BANK OF THE PHILIPPINES, Petitioner,
vs.
LEONILA P. CELADA, Respondent.

D E C I S I O N

YNARES-SANTIAGO, J.:

Respondent Leonila P. Celada owns 22.3167 hectares of agricultural land situated in Calatrava, Carmen, Bohol registered under TCT No. 16436,1 of which 14.1939 hectares was identified in 1998 by the Department of Agrarian Reform (DAR) as suitable for compulsory acquisition under the Comprehensive Agrarian Reform Program (CARP). The matter was then indorsed to petitioner Land Bank of the Philippines (LBP) for field investigation and land valuation.

In due course, LBP valued respondent’s land at P2.1105517 per square meter for an aggregate value of P299,569.61.2 The DAR offered the same amount to respondent as just compensation, but it was rejected. Nonetheless, on August 27, 1999, LBP deposited the said sum in cash and bonds in the name of respondent.3

Pursuant to Section 16(d) of Republic Act (RA) No. 6657 or the Comprehensive Agrarian Reform Law of 1988, the matter was referred to the DAR Adjudication Board (DARAB), Region VII-Cebu City, for summary administrative hearing on determination of just compensation. The case was docketed as DARAB Case No. VII-4767-B-990.

While the DARAB case was pending, respondent filed, on February 10, 2000, a petition4 for judicial determination of just compensation against LBP, the DAR and the Municipal Agrarian Reform Officer (MARO) of Carmen, Bohol, before the Regional Trial Court of Tagbilaran City. The same was docketed as Civil Case No. 6462 and raffled to Branch 3, the designated Special Agrarian Court (SAC). Respondent alleged that the current market value of her land is at least P150,000.00 per hectare based on the following factors:

14.1. The land in question has been mortgaged to the defunct Rural Bank of San Miguel (Bohol), Inc., for P1,220,000.00 on July 23, 1998 since it was appraised at P15.00 per square meter;

14.2. Agricultural lands in said barangay are priced ranging from P140,000.00 to P150,000.00 per hectare and current land transactions reveal said price range;

14.3. The land in question is titled or registered property, cultivated and fully developed with rice5 and corn occupying the greater portion thereof;

14.4. The topography of the land, its soil condition, climate and productivity of surrounding lots justify the just compensation requested or asked for;

14.5. Even the class and base unit market value for agricultural lands in Bohol is about thirty (30) times higher than the price offered per hectare by DAR/LBP.6

On April 27, 2000, LBP filed its Answer7 raising non-exhaustion of administrative remedies as well as forum-shopping as affirmative defense. According to petitioner, respondent must first await the outcome of the DARAB case before taking any judicial recourse; that its valuation was arrived at by applying the formula prescribed by law whereas respondent’s was based only on the "current value of like properties".

The DAR and the MARO likewise filed an Answer8 averring that the determination of just compensation rests exclusively with the LBP. Thus, they are not liable to respondent and are merely nominal parties in the case.

Meanwhile, the DARAB Provincial Adjudicator (PARAD) issued an Order9 dated April 12, 2000 affirming the valuation made by LBP. Respondent failed to appear in the DARAB case despite due notice.

On June 4, 2001, the SAC issued an order resolving petitioner’s affirmative defense in this wise:

WHEREFORE, the Affirmative Defense of x x x Land Bank is hereby denied. Besides, in the mind of the court, the recourse to the DARAB is x x x of no moment since it is only conciliatory to the parties.

Upon agreement of the parties, the pre-trial is reset to June 11, 2001 at 9:00 in the morning.

SO ORDERED.10

Thereafter, a pre-trial conference was conducted11 and trial on the merits ensued. On March 1, 2003, the SAC rendered judgment as follows:

WHEREFORE, in view of all the foregoing, the Court hereby fixes the compensation of the land of petitioner at P2.50 per square meter or a total of P354,847.50 for the portion of 14.1939 hectares subject of compulsory acquisition under the CARP which it believes just, fair and equitable under the present circumstances and which shall earn legal interest of twelve percent (12%) per annum from the time of its taking by the DAR. Furthermore, respondent Land Bank is hereby ordered to indemnify petitioner the amount of P10,000.00 for attorney’s fee and incidental expenses of P5,000.00 and costs.

SO ORDERED.12

LBP elevated the matter to the Court of Appeals which, however, dismissed the appeal outright on the following grounds:

1. The petition is not accompanied with an affidavit of service, although there is an explanation that respondent, respondent’s counsel and Judge Venancio J. Amila were furnished with copies of the petition by registered mail x x x.

2. Petitioner’s counsel indicated his IBP and PTR but not his Roll of Attorney’s Number x x x.

3. Copies of (a) PARAD Decision x x x adverted to in the petition which fixed the land valuation for just compensation at P299,569.11 and (b) petitioner’s Petition for Judicial Determination of Just Compensation filed with the Regional Trial Court of Tagbilaran City, Branch 3, were not attached as annexes, x x x.13

Upon denial of its motion for reconsideration,14 LBP filed the instant petition under Rule 45 of the Rules of Court, alleging that:

A

THE COURT OF APPEALS ERRED IN X X X RIGIDLY OR STRICTLY APPLYING PROCEDURAL LAW AT THE EXPENSE OF SUBSTANTIAL JUSTICE AND THE RIGHT TO APPEAL.

B

THE SAC A QUO ERRED IN ASSUMING JURISDICTION OVER THE PETITION FOR DETERMINATION OF JUST COMPENSATION WHILE ADMINISTRATIVE PROCEEDINGS IS ON-GOING BEFORE THE DARAB, REGION VII, CEBU CITY.

C

THE SAC A QUO ERRED IN FIXING THE JUST COMPENSATION OF THE LAND BASED NOT ON ITS ACTUAL LAND USE BUT ON THE VALUATION OF NEIGHBORING LANDS.

D

THE SAC A QUO ERRED IN AWARDING ATTORNEY’S FEES AND INCIDENTAL EXPENSES X X X.15

On the first assigned error, petitioner asserts that the Court of Appeals should have liberally construed the rules of procedure and not dismissed its appeal on technical grounds.

We agree with petitioner.

The Court of Appeals dismissed petitioner’s appeal on three technical grounds, namely: (a) lack of affidavit of service; (b) failure of counsel to indicate his Roll of Attorneys’ number; and (c) failure to attach material portions of the records. However, the lack of affidavit of service is not deemed fatal where the petition filed below is accompanied by the original registry receipts showing that the petition and its annexes were served upon the parties.16 On the other hand, the failure of counsel to indicate his Roll of Attorneys’ number would not affect respondent’s substantive rights, such that petitioner’s counsel could have been directed to comply with the latter requirement rather than dismiss the petition on purely technical grounds. As for petitioner’s failure to attach material portions of the records, we held in Donato v. Court of Appeals17 that:

[T]he failure of the petitioner to x x x append to his petition copies of the pleadings and other material portions of the records as would support the petition, does not justify the outright dismissal of the petition. It must be emphasized that the RIRCA (Revised Internal Rules of the Court of Appeals) gives the appellate court a certain leeway to require parties to submit additional documents as may be necessary in the interest of substantial justice. Under Section 3, paragraph d of Rule 3 of the RIRCA, the CA may require the parties to complete the annexes as the court deems necessary, and if the petition is given due course, the CA may require the elevation of a complete record of the case as provided for under Section 3(d)(5) of Rule 6 of the RIRCA x x x.18

An examination of the records and pleadings filed before the Court of Appeals reveals that there was substantial compliance with procedural requirements. Moreover, we have held time and again that cases should, as much as possible, be determined on the merits after the parties have been given full opportunity to ventilate their causes and defenses, rather than on technicality or some procedural imperfection.19 After all, technical rules of procedure are not ends in themselves but are primarily devised to help in the proper and expedient dispensation of justice. In appropriate cases, therefore, the rules may be construed liberally in order to meet and advance the cause of substantial justice.20

While a remand of the case to the appellate court would seem to be in order, we deem it proper to resolve the case on the merits if only to write finis to the present controversy.

We do not agree with petitioner’s submission that the SAC erred in assuming jurisdiction over respondent’s petition for determination of just compensation despite the pendency of the administrative proceedings before the DARAB. In Land Bank of the Philippines v. Court of Appeals,21 the landowner filed an action for determination of just compensation without waiting for the completion of the DARAB’s re-evaluation of the land. The Court nonetheless held therein that the SAC acquired jurisdiction over the action for the following reason:

It is clear from Sec. 57 that the RTC, sitting as a Special Agrarian Court, has ‘original and exclusive jurisdiction over all petitions for the determination of just compensation to landowners.’ This ‘original and exclusive’ jurisdiction of the RTC would be undermined if the DAR would vest in administrative officials original jurisdiction in compensation cases and make the RTC an appellate court for the review of administrative decision. Thus, although the new rules speak of directly appealing the decision of adjudicators to the RTCs sitting as Special Agrarian Courts, it is clear from Sec. 57 that the original and exclusive jurisdiction to determine such cases is in the RTCs. Any effort to transfer such jurisdiction to the adjudicators and to convert the original jurisdiction of the RTCs into appellate jurisdiction would be contrary to Sec. 57 and therefore would be void. Thus, direct resort to the SAC by private respondent is valid.22

It would be well to emphasize that the taking of property under RA No. 6657 is an exercise of the power of eminent domain by the State.23 The valuation of property or determination of just compensation in eminent domain proceedings is essentially a judicial function which is vested with the courts and not with administrative agencies.24 Consequently, the SAC properly took cognizance of respondent’s petition for determination of just compensation.

In the same vein, there is no merit to petitioner’s contention that respondent failed to exhaust administrative remedies when she directly filed the petition for determination of just compensation with the SAC even before the DARAB case could be resolved. The issue is now moot considering that the valuation made by petitioner had long been affirmed by the DARAB in its order dated April 12, 2000. As held in Land Bank of the Philippines v. Wycoco,25 the doctrine of exhaustion of administrative remedies is inapplicable when the issue is rendered moot and academic, as in the instant case.

With regard to the third assigned error, however, we agree with petitioner that the SAC erred in setting aside petitioner’s valuation of respondent’s land on the sole basis of the higher valuation given for neighboring properties. In this regard, the SAC held:

It appears from the evidence of petitioner that the neighboring lands of similar classification were paid higher than what was quoted to her land by respondent Land Bank as the value per square meter to her land was only quoted at P2.1105517 while the others which were of the same classification were paid by respondent Bank at P2.42 more or less, per square meter referring to the land of Consuelito Borja (Exh. D) and Cesar Borja (Exh. F). Furthermore, the land of petitioner was allegedly mortgaged for a loan of P1,200,000.00 before the Rural Bank of San Miguel, Bohol and that it was purchased by her from a certain Felipe Dungog for P450,000.00 although no documents therefor were shown to support her claim. Nevertheless, the Court finds a patent disparity in the price quotations by respondent Land Bank for the land of petitioner and that of the other landowners brought under CARP which could be caused by deficient or erroneous references due to the petitioner’s indifference and stubborn attitude in not cooperating with respondent bank in submitting the data needed for the evaluation of the property. x x x At any rate, the price quotation by respondent Land Bank on the land of the petitioner is low more so that it was done some four years ago, particularly, on June 22, 1998 (Exh. 1) and the same has become irrelevant in the course of time due to the devaluation of the peso brought about by our staggering economy.26

As can be gleaned from above ruling, the SAC based its valuation solely on the observation that there was a "patent disparity" between the price given to respondent and the other landowners. We note that it did not apply the DAR valuation formula since according to the SAC, it is Section 17 of RA No. 6657 that "should be the principal basis of computation as it is the law governing the matter".27 The SAC further held that said Section 17 "cannot be superseded by any administrative order of a government agency",28 thereby implying that the valuation formula under DAR Administrative Order No. 5, Series of 1998 (DAR AO No. 5, s. of 1998),29 is invalid and of no effect.

While SAC is required to consider the acquisition cost of the land, the current value of like properties, its nature, actual use and income, the sworn valuation by the owner, the tax declaration and the assessments made by the government assessors30 to determine just compensation, it is equally true that these factors have been translated into a basic formula by the DAR pursuant to its rule-making power under Section 49 of RA No. 6657.31 As the government agency principally tasked to implement the agrarian reform program, it is the DAR’s duty to issue rules and regulations to carry out the object of the law. DAR AO No. 5, s. of 1998 precisely "filled in the details" of Section 17, RA No. 6657 by providing a basic formula by which the factors mentioned therein may be taken into account. The SAC was at no liberty to disregard the formula which was devised to implement the said provision.

It is elementary that rules and regulations issued by administrative bodies to interpret the law which they are entrusted to enforce, have the force of law, and are entitled to great respect.32 Administrative issuances partake of the nature of a statute33 and have in their favor a presumption of legality.34 As such, courts cannot ignore administrative issuances especially when, as in this case, its validity was not put in issue. Unless an administrative order is declared invalid, courts have no option but to apply the same.

Thus, Section 17 of RA No. 6657 states:

SEC. 17. Determination of Just Compensation. – In determining just compensation, the cost of acquisition of the land, the current value of like properties, its nature, actual use and income, the sworn valuation by the owner, the tax declarations, and the assessment made by government assessors, shall be considered. The social and economic benefits contributed by the farmers and the farmworkers and by the Government to the property as well as the nonpayment of taxes or loans secured from any government financing institution on the said land shall be considered as additional factors to determine its valuation.

As stated earlier, the above provision is implemented through DAR AO No. 5, s. of 1998, which provides that:

A. There shall be one basic formula for the valuation of lands covered by VOS or CA:

LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1)

Where: LV = Land Value

CNI = Capitalized Net Income

CS = Comparable Sales

MV = Market Value per Tax Declaration

The above formula shall be used if all three factors are present, relevant, and applicable.

A1. 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)

A2. 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)

A3. 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 idle 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.

Accordingly, petitioner applied the formula under A1 above since the comparable sales factor ("CS factor") was not present. As observed by the SAC itself, respondent refused to cooperate with the local valuation office of petitioner and did not provide the necessary data to arrive at a proper "CS factor". DAR AO No. 5, s. of 1998 defines "CS factor" as follows:

C. CS shall refer to any one or the average of all the applicable sub-factors, namely ST, AC and MVM:

Where: ST = Peso Value of 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

x x x x

C.2. The criteria in the selection of the comparable sales transaction (ST) shall be as follows:

a. When the required number of STs is not available at the barangay level, additional STs may be secured from the municipality where the land being offered/covered is situated to complete the required three comparable STs. In case there are more STs available than what is required at the municipal level, the most recent transactions shall be considered. The same rule shall apply at the provincial level when no STs are available at the municipal level. In all cases, the combination of STs sourced from the barangay, municipality and province shall not exceed three transactions.

b. The land subject of acquisition as well as those subject of comparable sales transactions should be similar in topography, land use, i.e., planted to the same crop. Furthermore, in case of permanent crops, the subject properties should be more or less comparable in terms of their stages of productivity and plant density.

c. The comparable sales transactions should have been executed within the period January 1, 1985 to June 15, 1988, and registered within the period January 1, 1985, to September 13, 1988.

x x x x

C.3. Acquisition Cost (AC) – AC shall be deemed relevant when the property subject of acquisition was acquired through purchase or exchange with another property within the period January 1, 1985 to June 15, 1988 and registered within the period January 1, 1985 to September 13, 1988, and the condition of said property is still substantially similar from the date of purchase or exchange to the date of FI.

x x x x

C.4. Market Value Based on Mortgage (MVM) – For MVM to be relevant or applicable, the property subject of acquisition should have been mortgaged as of June 15, 1988 and the condition of the property is still substantially similar up to the date of FI. MVM shall refer to the latest available appraised value of the property.

In the case at bar, while respondent attempted to prove during the hearings before the SAC, comparable sales transactions, the acquisition cost of the property as well as its mortgage value, she failed to submit adequate documentary evidence to support the same. Consequently, there was nothing from which the "CS factor" could be determined.

In contrast, petitioner arrived at its valuation by using available factors culled from the Department of Agriculture and Philippine Coconut Authority,35 and by computing the same in accordance with the formula provided, thus –

COMPUTATION (Applicable Formula) : LV = 0.90 CNI + 0.10 MV

Comparable Land Transactions (P x x x x ____ ) = P x-x-x

Capitalized Net Income: Cassava 16,666.67 x 0.90 = 15,000.00

Corn/Coco 26,571.70 = 23,914.53

Market Value Cassava 8,963.78 x 0.10 = 896.38

per Tax Declaration: Corn/Coco 10,053.93 = 1,005.39

Computed Value per Hectare: Cassava – 15,896.38; Corn/Coco – 24,919.92

x x x

Value per hectare used: Cassava 15,896.38 x 6.0000 has. = 95,378.28

Corn/Coco 24,919.92 x 8.1939 has. = 204,191.33

Payment due to LO : P299, 569.61

The above computation was explained by Antero M. Gablines, Chief of the Claims, Processing, Valuation and Payment Division of the Agrarian Operations Center of the Land Bank, to wit:

ATTY. CABANGBANG: (On direct):

x x x x

q. What are the items needed for the Land Bank to compute?

a. In accordance with Administrative Order No. 5, series of 1998, the value of the land should be computed using the capitalized net income plus the market value. We need the gross production of the land and its output and the net income of the property.

q. You said "gross production". How would you fix the gross production of the property?

a. In that Administrative Order No. 5, if the owner of the land is cooperative, he is required to submit the net income. Without submitting all his sworn statements, we will get the data from the DA (Agriculture) or from the coconut authorities.

x x x x

q. In this recommended amount which you approved, how did you arrive at this figure?

a. We used the data from the Philippine (Coconut) Authority and the Agriculture and the data stated that Cassava production was only 10,000 kilos per hectare; corn, 2,000 kilos; and coconuts, 15.38 kilos per hectare. The data stated that in the first cropping of 1986, the price of cassava was P1.00 per kilo; corn was sold at P7.75 per kilo; and the Philippine Coconut Authority stated that during that time, the selling price of coconuts was P8.23 per kilo.

q. After these Production data and selling price, there is here a "cost of operation", what is this?

a. It is the expenses of the land owner or farmer. From day one of the cultivation until production. Without the land owner’s submission of the sworn statement of the income, production and the cost, x x x Administrative Order No. 5 states that x x x we will use 20% as the net income, meaning 80% of the production in peso. This is the cost of valuation.

q. 80 % for what crops?

a. All crops except for coconuts where the cost of expenses is only 20%.

q. Summing all these data, what is the value per hectare of the cassava?

a. The cassava is P15,896.38.

q. How about the corn x x x intercropped with coconuts?

a. P24,919.92.36

Under the circumstances, we find the explanation and computation of petitioner to be sufficient and in accordance with applicable laws. Petitioner’s valuation must thus be upheld.

Finally, there is no basis for the SAC’s award of 12% interest per annum in favor of respondent. Although in some expropriation cases, the Court allowed the imposition of said interest, the same was in the nature of damages for delay in payment which in effect makes the obligation on the part of the government one of forbearance.37 In this case, there is no delay that would justify the payment of interest since the just compensation due to respondent has been promptly and validly deposited in her name in cash and LBP bonds. Neither is there factual or legal justification for the award of attorney’s fees and costs of litigation in favor of respondent.

WHEREFORE, the instant petition is GRANTED. The Decision of the Regional Trial Court, Tagbilaran City, Branch 3 in Civil Case No. 6462 dated March 1, 2003 is REVERSED and SET ASIDE. A new judgment is entered fixing the just compensation for respondent’s land at P2.1105517 per square meter or a total of P299,569.61.

SO ORDERED.

CONSUELO YNARES-SANTIAGO
Associate Justice

WE CONCUR:

ARTEMIO V. PANGANIBAN
Chief Justice

MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice
ROMEO J. CALLEJO, SR.
Asscociate Justice

MINITA V. CHICO-NAZARIO
Associate Justice

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

ARTEMIO V. PANGANIBAN
Chief Justice


Footnotes

1 Rollo, pp. 101-102.

2 Id. at 70-74.

3 Id. at 135.

4 Id. at 76-80.

5 LBP determined that the land is planted to cassava, corn and coconuts.

6 Rollo, pp. 78-79.

7 Id. at 81-84.

8 Id. at 85-86.

9 Id. at 96.

10 Id. at 94. Per Judge Venancio T. Amila.

11 Id. at 95.

12 Id. at 113.

13 Id. at 63. Penned by Associate Justice Hakim S. Abdulwahid and concurred in by Associate Justices B.A. Adefuin-De la Cruz and Andres B. Reyes, Jr.

14 Id. at 66.

15 Id. at 34-35.

16 See Gutierrez v. Secretary of the Department of Labor and Employment, G.R. No. 142248, December 16, 2004, 447 SCRA 107, 118; and CA rollo, p. 14.

17 G.R. No. 129638, December 8, 2003, 417 SCRA 216.

18 Id. at 225-226.

19 See Al-Amanah Islamic Investment Bank of the Philippines v. Celebrity Travel and Tours, Incorporated, G.R. No. 155524, August 12, 2004, 436 SCRA 356, 366, citing Van Melle Phils., Inc. v. Endaya, G.R. No. 143132, September 23, 2003, 411 SCRA 528.

20 See Lao v. Court of Appeals, 382 Phil. 583, 603 (2000), quoting Rep. of the Phils. v. CA, 343 Phil. 428 (1997).

21 376 Phil. 252 (1999).

22 Id. at 262-263, citing Republic of the Philippines v. CA, 331 Phil. 1070 (1996).

23 See Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform, G.R. No. 78742, July 14, 1989, 175 SCRA 343, 373-374.

24 See Republic of the Philippines v. CA, supra at 1075, citing Export Processing Zone Authority v. Dulay, G.R. No. L-59603, April 29, 1987, 149 SCRA 305 and Sumulong v. Guerrero, G.R. No. L-48685, September 30, 1987, 154 SCRA 461.

25 G.R. No. 140160, January 13, 2004, 419 SCRA 67, 77, citing Land Bank of the Philippines v. Court of Appeals, supra.

26 Rollo, pp. 112-113.

27 Id. at 112.

28 Id.

29 Revised Rules and Regulations Governing the Valuation of Lands Voluntarily Offered or Compulsorily Acquired Pursuant to Republic Act No. 6657 (Effective May 11, 1998).

30 See Section 17, RA No. 6657.

31 See Land Bank of the Philippines v. Banal, G.R. No. 143276, July 20, 2004, 434 SCRA 543, 549-550.

32 See Philippine Administrative Law (1991 Ed.), Carlo L. Cruz, pp. 17-18, citing Rizal Empire Insurance Group v. NLRC, G.R. No. L-73140, May 29, 1987, 150 SCRA 565.

33 See Commissioner of Internal Revenue v. Solidbank Corporation, G.R. No. 148191, November 25, 2003, 416 SCRA 436, 448, citing Victorias Milling Co., Inc. v. Social Security Commission, 114 Phil. 555 (1962).

34 Philippine Administrative Law, supra at 29, citing Español v. Chairman, Philippine Veterans Administration, G.R. No. L-44616, June 29, 1985, 137 SCRA 314.

35 TSN, November 11, 2002, pp. 1 & 2.

36 Id.

37 Land Bank of the Philippines v. Wycoco, supra at 80, citing Reyes v. National Housing Authority, G.R. No. 147511, January 20, 2003, 395 SCRA 494.


The Lawphil Project - Arellano Law Foundation