LBP v. Honeycomb Farms (G.R. No. 169903; February 29, 2012)


Honeycomb Farms Corporation (Honeycomb Farms) was the registered owner of two parcels of agricultural land in Cataingan, Masbate. Honeycomb Farms voluntarily offered these parcels of land, with a total area of 495.1374 hectares, to the Department of Agrarian Reform (DAR) for coverage under the Comprehensive Agrarian Reform Law (CARL). From the entire area offered, the government chose to acquire only 486.0907 hectares.

The Land Bank of the Philippines (LBP), as the agency vested with the responsibility of determining the land valuation and compensation for parcels of land acquired pursuant to the CARL, and using the guidelines set forth in DAR Administrative Order (AO) No. 17, series of 1989, as amended by DAR AO No. 3, series of 1991, fixed the value of these parcels of land.

When Honeycomb Farms rejected the LBPs and the DARs valuation for being too low, Honeycomb Farms filed a case with the RTC, acting as a Special Agrarian Court (SAC), against the DAR Secretary and the LBP, praying that it be compensated for its landholdings in the amount of P12,440,000.00, with damages and attorneys fees.

The RTC constituted a Board of Commissioners to aid the court in determining the just compensation for the subject properties. Since the Board of Commissioners could not reach a common valuation for the properties, the RTC made its own valuation. First, the RTC took judicial notice of the fact that a portion of the land, measuring approximately 10 hectares, is commercial land, since it is located a few kilometers away from Sitio Curvada, Pitago, Cataingan, Masbate, which is a commercial district. The lower court thus priced the 10 hectares at P100,000.00 per hectare and the remaining 476 hectares at P32,000.00 per hectare. Both parties appealed to the CA.

The LBP argued that the RTC committed a serious error when it disregarded the formula for fixing just compensation embodied in DAR AO No. 6, series of 1992, as amended by DAR AO No. 11, series of 1994. The LBP also argued that the RTC erred in taking judicial notice that 10 hectares of the land in question is commercial land.

In contrast, Honeycomb Farms maintains that the DAR AOs were issued merely to serve as guidelines for the DAR and the LBP in administratively fixing the valuation to be offered by the DAR to the landowner for acceptance or rejection. However, it is not mandatory for courts to use the DAR AOs to fix just compensation as this would amount to an administrative imposition on an otherwise purely judicial function and prerogative of determination of just compensation for expropriated lands specifically reserved by the Constitution to the courts.

The CA affirmed with modification the assailed RTC judgment with respect to the computation of the amount fixed by the trial court and the award of attorneys fees is deleted.

ISSUES: Did the CA commit a serious error of law when it failed to apply the mandatory formula for determining just compensation fixed in DAR AO No. 11, series of 1994?

Did the RTC correctly take judicial notice of the nature of the subject land?

HELD: It is the RTC, sitting as a SAC, which has the power to determine just compensation for parcels of land acquired by the State, pursuant to the agrarian reform program. In Land Bank of the Philippines v. Sps. Banal, the DAR, as the administrative agency tasked with the implementation of the agrarian reform program, already came up with a formula to determine just compensation which incorporated the factors enumerated in Section 17 of RA 6657.In Landbank of the Philippines v. Celada, the Court emphasized the duty of the RTC to apply the formula provided in the applicable DAR AO to determine just compensation, stating that: While [the RTC] 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 DAR's duty to issue rules and regulations to carry out the object of the law. [The] DAR [Administrative Order] precisely "filled in the details" of Section 17, R.A. No. 6657 by providing a basic formula by which the factors mentioned therein may be taken into account. The [RTC] was at no liberty to disregard the formula which was devised to implement the said provision.

These rulings plainly impose on the RTC the duty to apply the formula laid down in the pertinent DAR administrative regulations to determine just compensation. Clearly, the CA and the RTC acted with grievous error when they disregarded the formula laid down by the DAR, and chose instead to come up with their own basis for the valuation of the subject land.


While the lower court is not precluded from taking judicial notice of certain facts, it must exercise this right within the clear boundary provided by Section 3, Rule 129 of the Rules of Court.

The classification of the land is obviously essential to the valuation of the subject property, which is the very issue in the present case. The parties should thus have been given the opportunity to present evidence on the nature of the property before the lower court took judicial notice of the commercial nature of a portion of the subject landholdings. GRANTED.