LBP v. Obias (G.R. No. 184406; March 14, 2012)


FACTS: Pursuant to the Operation Land Transfer (OLT) Program of P.D. No. 27, an aggregate area of 34.6958 hectares composing three parcels of agricultural land located at Himaao, Pili, Camarines Sur owned by Perfecto, Nellie, OFe, Gil, Edmundo and Nelly, all surnamed Obias, (landowners) were distributed to the farmers-beneficiaries namely: Victor Bagasina, Sr., Elena Benosa, Sergio Nagrampa, Claudio Galon, Prudencio Benosa, Santos Parro, Guillermo Breboneria, Flora Villamer, Felipe de Jesus, Mariano Esta, Benjamin Bagasina, Andres Tagum, Pedro Galon, Clara Padua, Rodolfo Competente, Roberto Parro, Melchor Brandes, Antonio Buizon, Rogelio Montero, Maria Villamer, Claudio Resari, Victor Bagasina, Jr., Francisco Montero and Pedro Montero.

As a result, the owners had to be paid just compensation for the property taken.The Department of Agrarian Reform, using the formula under P.D. 27 and E.O. 228, came up with a computation of the value of the acquired property atP1, 397,578.72.However, the amount was contested by the landowners as an inadequate compensation for the land. Thus, they filed a complaint for determination of just compensation before the RTC of Naga City, as the assigned Special Agrarian Court (SAC).

To ascertain the amount of just compensation, a committee was formed by the trial court.The Provincial Assessor recommended the above average value ofP40,065.31 per hectare as just compensation;LBP Representative Edgardo Malazarte recommended the amount ofP38,533.577 per hectare; andthe representative of the landowners, Atty. Fe Rosario P. Buevasubmitted aP180,000.00 per hectare valuation of the land.

However, none of these recommendations was adopted in the 3 October 2000 judgment of the trial court in fixing the just compensation at (P91,657.50) per hectare or in the total amount of P3,180,130.29. thus, directing the LBP to pay the said amount.

Both the landowners and LBP appealed before the CA.

On 31 January 2008, the appellate court vacated the decision of the trial court. It relied heavily on the Gabatin v. Land Bank of the Philippines (G.R. No. 148223, 25 November 2004) ruling wherein the Court fixed the rate of the government support price (GSP) for one cavan of palay at P35.00, the price of the palay at the time of the taking of the land. Following the formula,Land Value= 2.5 multiplied by the Average Gross Production (AGP) multiplied by the Government Support Price (GSP),provided by P.D. No. 27 and E.O. 228, the value of the total area taken will beP371,015.20 plus interest thereon at the rate of 6% interest per annum, compounded annually, starting 21 October 1972,until fully paid.

ISSUE: Did the CA err in ruling that the payment of interest shall be made until full payment of compensation?HELD: It is correct 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 statuteand have in their favor a presumption of legality.And a literal reading of A.O. No. 13, as amended, will be in favor of the LBP.

However, these administrative issuances or orders, though they enjoy the presumption of legalities, are still subject to the interpretation by the Supreme Court pursuant to its power to interpret the law.While rules and regulation issued by the administrative bodies have the force and effect of law and are entitled to great respect, courts interpret administrative regulations in harmony with the law that authorized them and avoid as much as possible any construction that would annul them as invalid exercise of legislative power.


To answer the contention of LBP that there should be no payment of interest when there is already a prompt payment of just compensation, the Court discussed that even though the LBP immediately paid the remaining balance on the just compensation due to the petitioners after the Court had fixed the value of the expropriated properties, it overlooks one essential fact from the time that the State took the petitioners properties until the time that the petitioners were fully paid, almost 12 long years passed. This is the rationale for imposing the 12% interest in order to compensate the petitioners for the income they would have made had they been properly compensated for their properties at the time of the taking.

This Court is not oblivious of the purpose of our agrarian laws particularly P.D. No. 27, that is, to emancipate the tiller of the soil from his bondage; to be lord and owner of the land he tills.

Section 4, Article XIII of the 1987 Constitution mandates that the State shall, by law, undertake an agrarian reform program founded on the right of farmers and regular farm workers who are landless, to own directly or collectively the lands they till or, in the case of other farm workers, to receive a just share of the fruits thereof. It also provides that the State shall encourage and undertake the just distribution of all agricultural lands subject to the payment of just compensation.

Further, the deliberations of the 1986 Constitutional Commission on this subject reveal that just compensation should not do violence to the Bill of Rights, but should also not make an insurmountable obstacle to a successful agrarian reform program. Hence, the landowner's right to just compensation should be balanced with agrarian reform.

The mandate of determination of just compensation is a judicial function,hence, the Court will exert all efforts to consider and interpret all the applicable laws and issuances in order to balance the right of the farmers to own a land subject to the award the proper and just compensation due to the landowners. The decision of the Court of Appeals is affirmed.