THIRD DIVISION

LAND BANK OF G.R. No. 177404

THEPHILIPPINES,
Petitioner,

- versus

KUMASSIE PLANTATION
COMPANY INCORPORATED,
Respondent.
x-----------------------------------x
KUMASSIE PLANTATION G.R. No. 178097
COMPANY INCORPORATED,
Petitioner, Present:

YNARES-SANTIAGO, J.,
- versus - Chairperson,
CHICO-NAZARIO,
VELASCO, JR.,
LAND BANK OF NACHURA, and
THEPHILIPPINES and THE PERALTA, JJ.
SECRETARY OF THE
DEPARTMENT OF Promulgated:
AGRARIAN REFORM,
Respondents. June 25, 2009
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:
 Before Us are two consolidated Petitions for Review on Certiorari under
Rule 45 of the Rules of Court,[1] docketed as G.R. No. 177404 and G.R. No.
178097, assailing the Decision,[2] dated 24 November 2005, and
Resolution,[3] dated 30 March 2007, of the Court of Appeals in CA-G.R. CV No.
65923.

The undisputed facts are as follows:

Kumassie Plantation Company Incorporated (KPCI) is the registered owner

of 802.2906 hectares of agricultural land situated in Basiawan, Santa Maria, Davao
del Sur, and covered by Transfer Certificate of Title (TCT) No. 646.[4] In 1982,
KPCI and Philippine Cocoa Corporation (PCC) entered into a contract of lease
whereby the former agreed to lease the said land together with the improvements
thereon to the latter for a period of 25 years beginning 15 May
1982.[5] Subsequently, PCC executed a deed of assignment transferring all its rights
as lessee under the said contract of lease to Philippine Cocoa Estates Corporation
(PCEC) effective 31 December 1983.[6]

On 18 February 1992, a portion of the aforementioned land, measuring

457.9952 hectares, planted with coconuts and cocoa (subject land), was
compulsorily acquired by the Department of Agrarian Reform (DAR), Region XI,
Davao City, for distribution to farmer-beneficiaries pursuant to Republic Act No.
6657, otherwise known as the Comprehensive Agrarian Reform Law of
1988.[7] The DAR then requested the Land Bank of the Philippines (LBP) to
determine the value of the subject land.[8] LBP pegged the value of the subject land
at P19,140,965.00 or equivalent to P41,792.94 per hectare.[9] DAR offered to KPCI
said amount as compensation for the subject land,[10] but it was rejected by KPCI
for being unreasonably low.[11] Despite the rejection by KPCI of the valuation of
the subject land by LBP, the amount of P19,140,965.00 was deposited by LBP,
upon the instructions of DAR, in the name and for the account of KPCI. [12] KPCI
withdrew from LBP the entire amount in cash and bonds.[13]
 DAR then advised the Department of Agrarian Reform Adjudication Board
(DARAB), on 27 July 1994, to conduct a summary administrative proceeding for
the determination of the just compensation due KPCI for the subject land. [14] The
proceeding was docketed as DARAB Case No. JC-R-XI-DAV-OR-0017-CO. LBP
and KPCI later submitted their respective position papers with the DARAB.[15]

DAR next directed the Register of Deeds of Digos, Davao del Sur, on 26
September 1994, to cancel TCT No. 646 covering the subject land in the name of
KPCI and to issue a new TCT in the name of the Republic of
the Philippines.[16] After the issuance of a new TCT in the name of the Republic of
the Philippines, and again upon the request of the DAR, the Register of Deeds of
Digos, Davao del Sur, issued Certificates of Land Ownership Award (CLOAs) to
qualified farmer-beneficiaries.[17]

On 20 January 1997, KPCI filed with the Davao City Regional Trial Court
(RTC), Branch 15 (acting as a Special Agrarian Court), a Complaint against LBP
and the DAR for determination and payment of just compensation, docketed as
Civil Case No. 25,045-97.[18] KPCI implored the RTC to render judgment fixing
the just compensation for the subject land at P160,000.00 per hectare, or equivalent
to a total amount of P73,279,232.00, less the amount of P19,140,965.00 which
KPCI had previously withdrawn from LBP.[19]

Subsequently, LBP and the DAR filed with the RTC their respective
Answers contending that the Complaint was prematurely filed as KPCI failed to
exhaust administrative remedies; that KPCI was already paid just compensation for
the subject land, determined to be P41,792.94 per hectare, for a total amount
of P19,140,965.91; and that KPCI admitted in the Complaint having received such
amount from LBP. LBP asserted that it correctly calculated the value of the subject
land to be P19,140,965.91, applying the formula prescribed in DAR
Administrative Order (DAO) No. 6, Series of 1992, as amended by DAO No. 11,
Series of 1994. At the end of their respective Answers, both LBP and DAR sought
the dismissal of the Complaint of KPCI.[20]
 The RTC thereafter directed the parties to submit the names of their
respective nominees for commissioners in Civil Case No. 25,045-97.[21] KPCI
nominated Oliver A. Morales (Morales), President of Cuervo Appraisers
Incorporated,[22] while LBP submitted the name of a certain Engineer Romeo
Cabanial.[23] For its part, the DAR endorsed Tomasa L. Miranda (Miranda), a DAR
employee.[24] The RTC appointed Morales and Miranda as commissioners. The two
subsequently took their oaths of office as court-appointed commissioners.[25]

Meanwhile, the DARAB issued, on 19 May 1997, a Resolution in JC-R-XI-

DAV-OR-0017-CO, affirming the valuation of the subject land by the LBP.[26] The
DARAB found the LBP valuation of the subject land to be accurate and just, as it
was in harmony with the pertinent provisions of Republic Act No. 6657 and DAO
No. 6, Series of 1992, as amended.[27]

After trial in Civil Case No. 25,045-97, the RTC rendered its Decision on 18
February 1999, fixing the fair and reasonable value of the subject land
at P100,000.00 per hectare. In arriving at said valuation, the RTC considered the
location of the subject land, the nature of the trees planted thereon, and the reasons
stated in Morales appraisal report.The RTC then ordered LBP and DAR to pay
KPCI an amount equivalent to P100,000.00 per hectare as just compensation for
the subject land, plus legal interest computed from23 March 1994 until fully
paid.[28]

LBP filed with the RTC a Motion for Reconsideration of the foregoing
Decision;[29] while DAR filed a Notice of Appeal, manifesting that it would appeal
said RTC Decision to the Court of Appeals.[30]

On 23 July 1999, the RTC issued an Order denying the Motion for
Reconsideration of LBP.[31] Aggrieved, LBP filed its appeal with the Court of
Appeals, docketed as CA-G.R CV No. 65923.[32] LBP filed, on 27 September
2000, its Appellants Brief in CA-G.R CV No. 65923.[33] DAR joined the appeal of
LBP by filing, on 18 January 2001, in CA-G.R CV No. 65923, a Manifestation
adopting in toto the Appellants Brief of LBP.[34]
 On 24 November 2005, the Court of Appeals promulgated its Decision in
CA-G.R CV No. 65923, affirming with modification the appealed RTC Decision.
The appellate court sustained the finding of the RTC that the fair and reasonable
value of the subject land was P100,000.00 per hectare. Nevertheless, it ruled that
the imposition of legal interest should be deleted, as there was no delay on the part
of LBP in depositing the amount of P19,140,965.91 in the account of KPCI, which
amount was admittedly withdrawn by KPCI. The fallo of the Decision of the Court
of Appeals reads:

WHEREFORE, premises considered, the Decision of the Regional Trial

Court (RTC), 11th Judicial Region, Br. 15, Davao City is AFFIRMED with
MODIFICATION. As modified, as none should be awarded, the award of
interest is deleted. No costs.[35]

LBP and KPCI each filed its own Motion for Reconsideration of the 24
November 2005 Decision of the Court of Appeals,[36] but both Motions were
denied by the appellate court in its Resolution dated 30 March 2007.

Hence, LBP and KPCI separately sought recourse from this Court by virtue
of the Petitions for Review presently before us, docketed as G.R. No.
177404 and G.R. No. 178097, respectively. The two Petitions were consolidated
since they arose from the same set of facts.[37]

The procedure for the determination of compensation cases under Republic

Act No. 6657, as devised by this Court,[38] commences with the valuation by the
LBP of the lands taken by the State from private owners under the land reform
program. Based on the valuation of the land by the LBP, the DAR makes an offer
to the landowner through a written notice. In case the landowner rejects the offer, a
summary administrative proceeding is held and, afterwards, depending on the
value of the land, the Provincial Agrarian Reform Adjudicator (PARAD), the
Regional Agrarian Reform Adjudicator (RARAD), or the DARAB, fixes the price
to be paid for the said land. If the landowner still does not agree with the price so
fixed, he may bring the matter to the RTC, acting as Special Agrarian Court.

In the process of determining the just compensation due to landowners, it is

a necessity that the RTC takes into account several factors enumerated in Section
17 of Republic Act No. 6657, as amended, to wit:

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 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.

Being the government agency primarily charged with the implementation of

the agrarian reform program, DAR issued DAO No. 6, Series of 1992, as amended,
filling out the details necessary for the implementation of Section 17 of Republic
Act No. 6657. DAR translated the factors specified in Section 17 of Republic Act
No. 6657, into a basic formula, presented as follows in DAO No. 6, Series of 1992,
as amended:

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 its Petition docketed as G.R. No. 177404, LBP maintains that the RTC
and the Court of Appeals erred in their valuation of the subject land at P100,000.00
per hectare because both courts did not consider the factors enumerated in Section
17 of Republic Act No. 6657 and the formula for valuation of lands under DAO
No. 6, Series of 1992, as amended.[39]

While the determination of just compensation is essentially a judicial

function which is vested in the RTC acting as Special Agrarian Court, we,
nonetheless, disregarded the determination of just compensation made by the RTC
in Land Bank of the Philippines v. Banal,[40] Land Bank of the Philippines v.
Celada,[41] and in Land Bank of the Philippines v. Lim,[42] when, as in this case, the
judge gravely abused his discretion by not taking into full consideration the factors
specifically identified by law and implementing rules.

In several cases, we have reminded the special agrarian courts to resolve just
determination cases judiciously and with utmost observance of Section 17 of
Republic Act No. 6657 and the administrative orders issued by the DAR to
implement said statutory provision.

In Land Bank of the Philippines v. Banal,[43] we emphasized that the factors

laid down in Section 17 of Republic Act No. 6657 and the formula stated in DAO
No. 6, Series of 1992, as amended, must be adhered to by the RTC in fixing the
valuation of lands subjected to agrarian reform, thus:
 In determining just compensation, the RTC is required to consider several
factors enumerated in Section 17 of R.A. 6657, as amended, thus:

xxxx

These factors have been translated into a basic formula in [DAO 6-92], as
amended by [DAO 11-94], issued pursuant to the DARs rule-making power to
carry out the object and purposes of R.A. 6657, as amended.

xxxx
While the determination of just compensation involves the exercise of judicial
discretion, however, such discretion must be discharged within the bounds of the
law. Here, the RTC wantonly disregarded R.A. 6657, as amended, and its
implementing rules and regulations. ([DAO 6-92], as amended by [DAO 11-94]).

xxxx

WHEREFORE, x x x. The trial judge is directed to observe strictly the

procedures specified above in determining the proper valuation of the subject
property. (Emphasis ours.)

Again, in Land Bank of the Philippines v. Celada,[44] we stressed that the

special agrarian court cannot ignore, without violating Republic Act No. 6657, the
formula provided by the DAR for the determination of just compensation. We
rejected the valuation fixed by the RTC because it failed to follow the DAR
formula:

While [Special Agrarian Court] 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 assessors 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 R.A. No. 6657. As the government
agency principally tasked to implement the agrarian reform program, it is the
DARs duty to issue rules and regulations to carry out the object of the law. [DAO]
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 [Special Agrarian Court] 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. Administrative issuances partake of the nature of a
 statute and have in their favor a presumption of legality. 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. (Emphasis ours.)

Instead, we sustained the valuation made by the LBP, which was patterned
after the applicable administrative order issued by the DAR, viz:

[LBP] arrived at its valuation by using available factors culled from the
Department of Agriculture and Philippine Coconut Authority, 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

xxxx

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):

xxxx

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.

xxxx

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 owners 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.

Under the circumstances, we find the explanation and computation of

[LBP] to be sufficient and in accordance with applicable laws. [LBPs]
valuation must thus be upheld.[45] (Emphases ours.)

In Apo Fruits Corporation v. Court of Appeals,[46] we once more gave

paramount importance to the criteria inscribed in Section 17 of Republic Act No.
6657 and the pertinent DAOs. In sustaining therein the valuation of the special
agrarian court, we ratiocinated:

[T]he Court affirmed the due consideration given by the RTC of the factors
specified in Section 17, Republic Act No. 6657. Again, the proper valuation of
the subject premises was reached with clear regard for the acquisition cost of the
land, current market value of the properties, its nature, actual use and
income, inter alia factors that are material and relevant in determining just
compensation.These are the very same factors laid down in a formula by DAR
A.O. No. 5. Due regard was thus given by the RTC to Republic Act No. 6657,
DAR A.O. No. 5 and prevailing jurisprudence when it arrived at the value of just
compensation due to AFC and HPI in this case.

The Court En Banc in Land Bank of the Philippines v. Lim[47] was

confronted with the question of whether the RTC can resort to any other means of
determining just compensation aside from Section 17 of Republic Act No. 6657
and DAO No. 6, Series of 1992, as amended. The Court resolved the issue in the
negative and pronounced that Section 17 of Republic Act No. 6657 and DAO No.
6, Series of 1992, as amended, are mandatory and are not mere guides that the
RTC may disregard. Citing Banal and Celada, we held in Lim that:

In Land Bank of the Philippines v. Spouses Banal [434 SCRA 543], this
Court underscored the mandatory nature of Section 17 of RA 6657 and DAR
AO 6-92, as amended by DAR AO 11-94, x x x.

xxxx

And in LBP v. Celada [479 SCRA 495], this Court set aside the valuation
fixed by the RTC of Tagbilaran, which was based solely on the valuation of
 neighboring properties, because it did not apply the DAR valuation formula.
x x x.

xxxx

Consequently, as the amount of P2,232,868 adopted by the RTC in its

December 21, 2001 Order was not based on any of the mandatory formulas
prescribed in DAR AO 6-92, as amended by DAR AO 11-94, the Court of
Appeals erred when it affirmed the valuation adopted by the RTC. (Emphases
ours.)

In the instant case, the RTC did not pay particular attention to Section 17 of
Republic Act No. 6657 and DAO No. 6, Series of 1992, as amended. It merely
cited the location of the subject land, nature of the trees planted thereon, and
Morales appraisal report, as bases for fixing the value of the subject land
at P100,000.00 per hectare; which are not among the factors mentioned in Section
17 of Republic Act No. 6657. Also, the RTC did not apply the formula stated
under DAO No. 6, Series of 1992, as amended, in fixing the value of the subject
land. This undoubtedly constitutes an obvious departure from the settled doctrine
previously discussed herein regarding the mandatory nature of Section 17 of
Republic Act No. 6657 and DAO No. 6, Series of 1992, as amended.

Further, Morales, in his appraisal report, used the market data approach (a
method which based the value of the subject land on sales and listings of similar
properties situated within the area), and the income approach (a procedure which
based the value of the subject land on the potential net benefit that may be derived
from its ownership) in determining the value of the subject land.[48] Morales did not
explicitly state or even impliedly use Section 17 of Republic Act No. 6657 and
DAO No. 6, Series of 1992, as amended, in his appraisal report for the subject
land. Neither was there any foundation for concluding that the market data
approach and income approach conformed to statutory and regulatory
requirements. More importantly, Morales himself admitted during the trial that he
did not consider Republic Act No. 6657 and DAO No. 6, Series of 1992, as
amended, in his appraisal report for the subject land, despite being aware of the
said law and rules for a long time.[49] This being the case, the valuation of the
subject land, as contained in the appraisal report adopted by the RTC, cannot be
deemed to be in compliance with the requirements under Section 17 of Republic
Act No. 6657 and DAO No. 6, Series of 1992, as amended.
In contrast, LBP arrived at its valuation of the subject land by considering
the factors identified under Section 17 of Republic Act No. 6657, and by
computing the same in accordance with the formula in DAO No. 6, Series of 1992,
as amended. The meticulous calculations of LBP are reproduced below:

FORMULA USED IN THE VALUATION OF THE SUBJECT PROPERTY

The records show that Acquisition Cost (CA), Market Value based on Mortgage
(MVM) and Comparable Sales (CS) are not applicable. Hence, pursuant to
paragraph A.2 of DAR Adm. Order No. 6, Series of 1992, the applicable
formula in arriving at the land Value is: LV = (CNI x 0.9) + (MV [x] 0.1).

Considering that the subject property is covered by an existing lease contract, the
Lease Rental Income was also considered in the computation of the Capitalized
Net Income (CNI) by following the formula prescribed under paragraph B.7 of
Dar Adm. Order No. 6, Series of 1992, thus:

CNI = LRI
.12

DISCUSSION OF THE FORMULAE

The pertinent provisions of DAR Adm. Order No. 6, Series of 1992, reads:

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 = One years Average Gross Production immediately preceding the

date of offer in case of VOS or date of notice of coverage in case
of CA.
 SP = Selling price shall refer to average prices for the immediately
preceding calendar year from the date of receipt of the claimfolder
by LBP from DAR for processing secured from the Department of
Agriculture (DA) other appropriate regulatory bodies or in their
absence, from 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 not be obtained
or verified, and 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 x x x

12 = Capitalized Rate

B.1 Industry data on production, cost of operation, and selling price shall
be obtained from government/private entities. Such entities shall include,
but not limited to the Department of Agriculture (DA), the Sugar
Regulatory Authority (SRA), the Philippine Coconut Authority (PCA) and
other private persons/entities knowledgeable to the concerned industry.

B.2 The landowner shall submit a statement of net income derived from
the land subject of acquisition. This shall include among others, total
production and cost of operations on a per crop basis, selling price/s (farm
gate) and such other data as may be required.

xxxx

In case of failure by the landowner to submit the statement x x x or the

data stated therein cannot be verified/validated from the farmers, LBP may
adopt any available industry data or in the absence thereof may conduct an
industry study on the specific crop which will be used in determining the
production, cost and net income of the subject landholding.

xxxx

B.7 For landholdings planted to permanent crops which are covered by

existing lease contract, the following formula shall be used in the
computation of the CNI:

CNI/Ha. = LRI
.12
 Where: LRI = Lease Rental Income per Hectare/Year as stipulated under
the contract.

xxxx

c. In case the lease rental is a variable amount (e.g., progressively

increasing during the term of the lease), LRI is computed as follows:

Sum of Annual lease Rental per Hectare over

LRI = the remaining Term of the Lease Contract
Remaining Term of Lease, Years

xxxx

D. Market Value per Tax Declaration (MV) shall refer to the market value per
Tax Declaration (TD) issued before August 29, 1987 (effectivity of EO
229). The most recent set of values indicated in the latest schedule of unit
value (SMV) grossed-up for inflation rate from the date of effectivity up to
the date of receipt of claimfolder by LBP from DAR for processing.

CAPITALIZED NET INCOME

Re: AGP

LANDBANK adopted as AGP the average production indicated in the Contract of

Lease which is 44 metric tons of copra per month (net) or 528 metric tons a
year. Converted into kilos, the AGP per hectare is 658.12 kilos.

Re: Selling Price

As Selling Price, LANDBANK used the 1992 Philippine Coconut Authority Data
which is P6.87 per kilo as the same is the average price for the immediately
preceding calendar year from the date of receipt by LANDBANK of the
claimfolder from DAR for processing in 1993 pursuant to paragraph 5, Item B
of DAR Adm. Order No. 6, Series of 1992, above quoted.

Re: Capitalization Rate

A 12% capitalization rate was used in accordance with paragraph 8, Item B

of DAR Adm. Order No. 6, Series of 1992.

Using the foregoing as input, the CNI for copra is P37,677.37 per hectare (658.12
kilos x P6.87 per kilo / .12).

Cocoa was not included in the computation of the CNI because there is no
production data available. Further, the same was introduced by the lessee.
 Re: LRI

Pursuant to Item B, paragraph B.7, sub-paragraph c of DAR Adm. Order No. 6,

Series of 1992, LANDBANK computed the total lease rentals for the remaining
period of the lease contract (1994 to 2007 or 14 years). Thus, LRI = (690 x 4) +
(P680 x 5) + (P1,120 x 5) divided by 14 or P904.29 per hectare. Following the
formula: 12% over LRI (P904.29), the CNI per hectare (Lease Contract)
isP7,535.75.

MARKET VALUE PER TAX DECLARATION

In the computation of the market Value per Tax Declaration (MV), the unit
market values of both the land and the coconut trees were determined based on
the 1991 Schedule of Market Values for agricultural properties in Sta. Maria,
Davao del Sur. Per the said Schedule of Market Values, the subject property is
classified as third class cocoland and has a unit market value of P6,240.00 per
hectare while the cocotrees have a unit market value of P62.40 per tree.

The unit market values of both the land and the cocotrees were multiplied with the
location adjustment factor of 98% and the results were in turn multiplied with the
Consumer Price Index (1.1254). Thus, the total market value as adjusted for the
land is P6,882.05 per hectare and P4,129.23 for the cocotrees or a total
of P11,011.28 per hectare.

In summation:

CNI (copra) - P37,677.37 per ha.

CNI (Lease contract) - P 7,535.75 per ha.
Total CNI - P45,213.12 per ha.

MV (Land) - P 6,882.05 per ha.

MV (cocotree) - P 4,129.23 per ha.
Total MV - P11,011.28 per ha.

Following the formula: LV = CNI x 0.9 (P45,213.12 x 0.9) P40,691.81 + MV 0.1

(11,011.28 x 0.1) P1,101.13 x 457.9952 hectares, the total value of the area
subject to acquisition isP19,140,965.91.[50] (Emphases supplied).

We find the foregoing exhaustive explanation and thorough computations of

LBP to be sufficient and in accordance with Section 17 of Republic Act No. 6657
and DAO No. 6, Series of 1992, as amended. Hence, the Court affirms the
valuation by LBP of P41,792.94 per hectare, or a total of P19,140,965.91, for the
subject land.

Since we have already resolved the issue in G.R No. 177404, we shall now
discuss and determine the matters brought up in G.R. No. 178097.

In its Petition docketed as G.R. No. 178097, KPCI argues that the
imposition of legal interest as damages is warranted because LBP has delayed in
paying just compensation for the subject land. KPCI alleges that the act of LBP in
appealing the decisions of the RTC and the Court of Appeals reveals the intent of
the LBP to delay the payment of just compensation to KPCI.[51]

Given our finding that it is the valuation of the subject land by the LBP that
is correct and in compliance with the requirements of the law and administrative
rules and regulations, then the issue of interest, raised by KPCI in its Petition, has
actually become irrelevant. The amount of P19,140,965.91, representing the
valuation of LBP for the entire subject land, was deposited for the account of and
in the name of KPCI, which the latter had admittedly already withdrawn. The just
compensation for the subject land is, thus, already fully paid.

Even if we were still to address the issue of interest, we shall decide against
KPCI.

In expropriation cases, interest is due the landowner if there was delay in

payment. The imposition of interest was in the nature of damages for the delay in
payment, which in effect makes the obligation on the part of the government one of
forbearance. It follows that the interest in the form of damages cannot be applied
where there was prompt and valid payment of just compensation.[52] In Apo Fruits
Corporation v. Court of Appeals,[53] we stressed that interest on just compensation
is imposed only in case of delay in the payment thereof, which must be sufficiently
established.
 There is nothing in the records to show that LBP was delayed in the payment
of just compensation to KPCI. In fact, contrary to the claim of KPCI, it was paid
just compensation by LBP with dispatch.

The mere fact that LBP appealed the decisions of the RTC and the Court of
Appeals does not mean that it deliberately delayed the payment of just
compensation to KPCI.LBP is an agency created primarily to provide financial
support in all phases of agrarian reform pursuant to Section 74 of Republic Act No.
3844 and Section 64 of Republic Act No. 6657. It is vested with the primary
responsibility and authority in the valuation and compensation of covered
landholdings to carry out the full implementation of the Agrarian Reform
Program. It may agree with the DAR and the landowner as to the amount of just
compensation to be paid to the latter and may also disagree with them and bring
the matter to court for judicial determination.[54] This makes the LBP an
indispensable party in cases involving just compensation for lands taken under the
Agrarian Reform Program, with a right to appeal decisions in such cases that are
unfavorable to it. Having only exercised its right to appeal in this case, LBP cannot
be penalized by making it pay for interest.

WHEREFORE, in view of the foregoing:

1) The Petition of Land Bank of the Philippines in G.R. No. 177404

is GRANTED. The Decision, dated 24 November 2005, and Resolution, dated 30
March 2007, of the Court of Appeals in CA-G.R. CV No. 65923, are REVERSED
and SET ASIDE. The valuation of the subject land at P41,792.94 per hectare, for
a total of P19,140,965.91, by the Land Bank of the Philippines is APPROVED,
and such amount is DECLARED PAID IN FULL; and

2) The Petition of Kumassie Plantation Company Incorporated

is DENIED. No costs.

SO ORDERED.
 MINITA V. CHICO-NAZARIO
Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

PRESBITERO J. VELASCO, JR. ANTONIO EDUARDO B. NACHURA

Associate Justice Associate Justice

DIOSDADO M. PERALTA
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division
Chairpersons Attestation, 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 Courts Division.

REYNATO S. PUNO
Chief Justice

[1]
Rollo (G.R. No. 177404), pp. 33-55 and (G.R. No. 178097) pp. 29-49.
[2]
Penned by Associate Justice Normandie B. Pizarro with Associate Justices Edgardo A. Camello and Ricardo R.
Rosario, concurring; CA rollo, pp. 81-90.
[3]
Id. at 241-243.
[4]
Records, pp. 12-14.
[5]
Id. at 246-254.
[6]
Id. at 255-259.
[7]
Id. at 20.
[8]
Id. at 22; Executive Order No. 405, dated 14 June 1990, vests the Land Bank of the Philippines the primary
responsibility to determine the land valuation and compensation for all private lands covered by Republic
Act No. 6657. See Philippine Veterans Bank v. Court of Appeals, 379 Phil. 141, 145 (2000).
[9]
Records, p. 15.
[10]
Id. at 20.
[11]
Id. at 21.
[12]
Id. at 22.
[13]
Id. at 6.
[14]
Pursuant to Section 16(d) of Republic Act No. 6657.
[15]
CA rollo, p. 188; rollo (G.R. No. 177404), pp. 107-113.
[16]
Records, p. 22.
[17]
Id. at 23.
[18]
Id. at 1-11.
[19]
Id.
[20]
Id. at 77-83 and 95-97.
[21]
Id. at 73.
[22]
Id. at 75.
[23]
Id. at 81.
[24]
Id. at 83.
[25]
Id. at 92-93.
[26]
Id. at 217-222.
[27]
Id.
[28]
Id. at 346-355; The RTC failed to state the total amount payable to KPCI as just compensation, but considering
its valuation of the subject land at P100,000.00 per hectare, and the total area of the subject land which is
457.9552 hectares, then total just compensation would amount to P45,795,200.00. The RTC likewise failed
to mention subtracting from the total just compensation awarded the P19,149.965.91 already received by
KPCI.
[29]
Id. at 356-360.
[30]
Id. at 363.
[31]
Id. at 375.
[32]
CA rollo, pp. 16-33.
[33]
Id.
[34]
Id. at 73-74.
[35]
Id. at 90.
[36]
CA rollo, pp. 118-139.
[37]
Rollo (G.R. No. 178097), p. 159.
[38]
Land Bank of the Philippines v. Banal, G.R. No. 143276, 20 July 2004, 434 SCRA 543, 550-551.
[39]
Rollo, (G.R. No. 177404), pp. 42-53.
[40]
Supra note 38.
[41]
G.R. No. 164876, 23 January 2006, 479 SCRA 495.
[42]
G.R. No. 171941, 2 August 2007, 529 SCRA 129.
[43]
Supra note 38 at 549-554.
[44]
Supra note 41 at 506-507.
[45]
Id. at 510-512.
[46]
G.R. No. 164195, 30 April 2008, 553 SCRA 237, 247.
[47]
Supra note 42 at 134-136.
[48]
Records pp. 99-146.
[49]
TSN, 18 September 1997, pp. 37-38.
[50]
Rollo (G.R. No. 177404), pp. 108-113; CA rollo, pp. 332-335.
[51]
Rollo (G.R. No. 178097), pp. 42-44.
[52]
Apo Fruits Corporation v. Court of Appeals, G.R. No. 164195, 19 December 2007, 541 SCRA 117, 141; Land
Bank of the Philippines v. Wycoco, 464 Phil. 83, 100 (2004), citing Reyes v. National Housing Authority,
443 Phil. 603, 616 (2003) andRepublic v. Court of Appeals, 433 Phil. 106, 122-123 (2002).
[53]
Id. at 142.
[54]
Heirs of Roque F. Tabuena v. Land Bank of the Philippines, G.R. No. 180557, 26 September 2008, 566 SCRA
557, 566.