LBP vs HEIRS OF ELEUTERIO CRUZ

G.R. No. 175175. September 29, 2008

FACTS:
 Eleuterio Cruz is the registered owner of an unirrigated riceland situated in Lakambini, Tuao, Cagayan.
 Of the total 13.7320 hectares of respondents' landholding, an area of 13.5550 hectares was placed by the
government under the coverage of the operation land transfer program under PD 27.
 LBP pegged the value of the acquired landholding at P106,935.76 based on the guidelines set forth under PD 27
and EO 228.
 Respondents rejected LBP's valuation and instituted an action for a summary proceeding for the preliminary
determination of just compensation before the PARAD.
 In 1999, the PARAD rendered a decision fixing the just compensation in the amount of P80,000.00 per hectare.
 LBP sought reconsideration but was unsuccessful.
 In 2000, petitioner LBP filed a petition for the determination of just compensation before the RTC of Tuguegarao
City.
 LBP, through the head of the LBP Evaluation Division of Land Owner's Compensation Department, and the Chief of
PARAD-Cagayan, states that they computed the valuation of respondents' landholdings based on the formula set
forth in PD 27, EO 228 and AO 13, series of 1994 and arrived at the value of P106,935.76 and that the subject
landholding was tenanted and covered by production agreements between the owner and various tenants.
 LBP also contended that the subject landholding had an average production of 25 and 40 cavans per hectare
annually.
 However, the heirs of Eleuterio Cruz counterclaimed that the subject landholding was planted with rice two or three
times a year and had a production capacity of 80 to 100 cavans per hectare and that the current market value of the
property was between P150,000.00 to P200,000.00 per hectare.
 The RTC ruled in favour of the petitioner LBP, fixing the just compensation to P80,000.00.
 Not satisfied, petitioner LBP elevated the case before the CA to determine just compensation and the total land
area as well as the amount of just compensation adjudged by the RTC.
 CA affirmed the RTC decision. Hence, this recourse.

ISSUE: Whether the formula set forth in P.D. 27/E.O. 228 should be applied in fixing just compensation since
respondents' landholding was acquired under P.D. No. 27?

HELD:

NO. The RTC should determine with dispatch the just compensation due respondents strictly in accordance with DAR
A.O. No. 5, series of 1998. The Court explained that while under P.D. No. 27 tenant farmers are already deemed
owners of the land they till, they are still required to pay the cost of the land before the title is transferred to them and
that pending the payment of just compensation, actual title to the tenanted land remains with the landowner.

In Paris v. Alfeche, the application of the process of agrarian reform was still incomplete thus, the Court held therein that
with the passage of R.A. No. 6657 before its completion, the process should now be completed under R.A. No. 6657,
with P.D. No. 27 and E.O. No. 228 applying only suppletorily.

The amount of just compensation due to respondents had not yet been settled by the time R.A. No. 6657 became
effective. Following the aforementioned pronouncement in Paris, the fixing of just compensation should therefore be
based on the parameters set out in R.A. No. 6657, with P.D. No. 27 and E.O. No. 228 having only suppletory effect.

In Land Bank of the Philippines v. Celada, the Court ruled that the factors enumerated under Section 17, R.A. No. 6657
had already been translated into a basic formula by the Department of Agrarian Reform (DAR) pursuant to its rule-
making power under Section 49 of R.A. No. 6657. Thus, the Court held in Celada that the formula outlined in DAR A.O.
No. 5, series of 1998 30 should be applied in computing just compensation.