Land Bank of the Philippines v. Ferrer

G.R. No. 172230, 179421 (February 2, 2011)

SC: Just compensation for agri land must match current market values; agrarian reform unfinished.

Facts:

On October 11, 2000, Magin V. Ferrer, Antonio V. Ferrer, and Ramon V. Ferrer (the Ferrers), represented by their attorney-in-fact, Rafael Villarosa, filed a Petition for Determination and Payment of Just Compensation against the Land Bank of the Philippines (LBP) before the Regional Trial Court (RTC) in Agrarian Case No. 1142-G. The Ferrers claimed to be the absolute owners pro-indiviso of an 11.7297-hectare agricultural land in Bagong Bayan, San Jose, Nueva Ecija, which they inherited from their deceased mother, Liberata Villarosa. They alleged that an Emancipation Patent covering 3.5773 hectares of the land was issued to Alfredo Carbonel without just compensation.

The LBP assessed the just compensation at P132,685.67, approximately P12,050.00 per hectare, which the Ferrers contended was unreasonably low. They argued that the compensation should be at least P250,000.00 per hectare, totaling P2,930,000.00, based on the land's irrigated status and strategic location.

In contrast, the LBP and the Department of Agrarian Reform (DAR) contended that the land was under the Operation Land Transfer (OLT) Program, thus the provisions of Presidential Decree (P.D.) No. 27 and Executive Order (E.O.) No. 228 should apply. They argued that the just compensation should be determined based on the value of the land as of 1972, when the land was tenanted and devoted to rice production.

The RTC appointed three commissioners to assess the just compensation. On September 27, 2004, the RTC ruled that the just compensation for 4.6203 hectares of the land was P208,000.00 per hectare, totaling P961,022.50. The LBP and DAR filed motions for reconsideration, which were denied, leading them to appeal to the Court of Appeals (CA).

The CA affirmed the RTC's decision, ruling that Republic Act (R.A.) No. 6657, the Comprehensive Agrarian Reform Law, should govern the determination of just compensation, rather than P.D. No. 27. The CA reasoned that the agrarian reform process was incomplete as just compensation had not been settled, and thus R.A. No. 6657 applied.

Legal Issues:

The primary legal issue was whether the Court of Appeals erred in ruling that R.A. No. 6657, rather than P.D. No. 27/E.O. No. 228, should apply in determining just compensation for the agricultural land in question.

Arguments Presented:

  • Petitioners (LBP and DAR):

    • Argued that P.D. No. 27 and E.O. No. 228 should govern the determination of just compensation since the land was tenanted and devoted to rice production as of October 21, 1972.
    • Contended that R.A. No. 6657 applies only to non-tenanted rice and corn lands and that the OLT program under P.D. No. 27 operates separately from the Comprehensive Agrarian Reform Program (CARP) under R.A. No. 6657.
    • Asserted that the appointment of commissioners was unnecessary as the formula for just compensation was already provided under P.D. No. 27.

  • Respondents (Ferrers):

    • Supported the CA's ruling that R.A. No. 6657 was applicable in fixing just compensation.
    • Argued that the agrarian reform process was incomplete, and thus just compensation should be determined under R.A. No. 6657.

Court's Decision and Legal Reasoning:

The Supreme Court upheld the CA's decision, affirming that R.A. No. 6657 should govern the determination of just compensation. The Court reiterated that the agrarian reform process remains incomplete until just compensation is settled. It emphasized that R.A. No. 6657 is the applicable law, with P.D. No. 27 and E.O. No. 228 having only a suppletory effect.

The Court cited previous rulings establishing that just compensation should be determined based on the current value of the property at the time of payment, rather than the value at the time of taking. It highlighted that it would be inequitable to compute just compensation based on 1972 values, given that the government and farmer-beneficiaries had already benefited from the land.

The Court also addressed the appointment of commissioners, stating that the issue was not properly raised in the lower courts but affirmed that their appointment was appropriate under R.A. No. 6657.

Significant Legal Principles Established:

  1. R.A. No. 6657 governs the determination of just compensation for agricultural lands under the agrarian reform program, particularly when the process is incomplete.
  2. P.D. No. 27 and E.O. No. 228 have a suppletory effect to R.A. No. 6657 and do not apply when just compensation has not been settled.
  3. Just compensation must reflect the current value of the property at the time of payment, not the value at the time of taking.