2 Other Issues in Expropriation Cases

(Aside from whether or not the expropriator possesses the power of eminent domain and whether the taking is for public use...) The two main issues, thus, for determination of this Court are the date of the taking of the property and the amount of just compensation.

First, it is settled that the property was taken on 9 December 1996, when a Certificate of Title was issued in favor of the Republic of the Philippines, and the Certificates of Title of AFC and HPI were cancelled. The farmer-beneficiaries themselves took possession of the subject properties on 2 January 1997.

Second, on payment of just compensation, the Supreme Court has previously held:

Eminent domain is an inherent power of the State that enables it to forcibly acquire private lands intended for public use upon payment of just compensation to the owner. Obviously, there is no need to expropriate where the owner is willing to sell under terms also acceptable to the purchaser, in which case an ordinary deed of sale may be agreed upon by the parties. It is only where the owner is unwilling to sell, or cannot accept the price or other conditions offered by the vendee, that the power of eminent domain will come into play to assert the paramount authority of the State over the interests of the property owner. Private rights must then yield to the irresistible demands of the public interest on the time-honored justification, as in the case of the police power, that the welfare of the people is the supreme law. But for all its primacy and urgency, the power of expropriation is by no means absolute (as indeed no power is absolute). The limitation is found in the constitutional injunction that "private property shall not be taken for public use without just compensation" and in the abundant jurisprudence that has evolved from the interpretation of this principle. Basically, the requirements for a proper exercise of the power are: (1) public use and (2) just compensation.

Section 57 of Republic Act No. 6657 (Comprehensive Agrarian Reform Law) provides:

SEC. 57. Special Jurisdiction. – The Special Agrarian Courts shall have original and exclusive jurisdiction over all petitions for the determination of just compensation to landowners, and the prosecution of all criminal offenses under this Act. The Rules of Court shall apply to all proceedings before the Special Agrarian Courts, unless modified by this Act.

The Special Agrarian Courts shall decide all appropriate cases under their special jurisdiction within thirty (30) days from submission of the case for decision.

To implement the provisions of Republic Act No. 6657, Rule XIII, Section 11 of the DARAB Rules of Procedure, provides:

Land Valuation and Preliminary Determination and Payment of Just Compensation. – The decision of the Adjudicator on land valuation and preliminary determination and payment of just compensation shall not be appealable to the Board but shall be brought directly to the Regional Trial Courts designated as Special Agrarian Courts within fifteen (15) days from receipt of the notice thereof. Any party shall be entitled to only one motion for reconsideration.

The next question now crops up, who shall determine just compensation? It is now settled that the valuation of property in eminent domain is essentially a judicial function which is vested with the RTC acting as Special Agrarian Court. The same cannot be lodged with administrative agencies and may not be usurped by any other branch or official of the government.

The Supreme Court now comes to the issue of just compensation.

LBP argues that the trial court’s valuation of the subject landholdings has incorporated irrelevant and/or immaterial factors such as the schedule of market values given by the City Assessor of Tagum, the comparative sales of adjacent lands and the commissioners’ report.

Section 17 of Republic Act No. 6657, which is particularly relevant, providing as it does the guideposts for the determination of just compensation, reads, as follows:

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 farm-workers 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.

The RTC provided the following elucidation in its assailed decision:

The recommendation of the Commissioners’ Report for a value of ₱85.00 per sq.m. or ₱850,000.00 per hectare (sic) is founded on evidence. The schedule of market values of the City of Tagum as per its 1993 and 1994 Revision of Assessment and Property Classification (Exhibit "J-6" and "CC-6") give the lowest value for residential land at ₱100/sq.m. for 4th class residential land in 1993. In 1994, it gave the lowest value of ₱80.00/sq.m. for barangay residential lot. It appears that certain portions of the land in question have been classified as Medium Industrial District (Exhibit "J-4" and "CC-4"). The lowest value as for industrial land, 3rd class in a barangay is ₱130.00 sq.m. The average of these figures, using the lowest values in Exhibit "6" and "CC-6" yields the figure of ₱103.33 which is even higher by 22.2% than that recommended by the Commissioners. It is even of judicial notice that assessments made by local governments are much lower than real market value. Likewise, the value of the improvements thereon, not even considered in the average of ₱103.33. If considered, this will necessarily result in a higher average value.

In said Appraisal Report, mention has been made on "improvements," and our Supreme Court in Republic vs. Gonzales, 50 O.G. 2461, decreed the rule, as follows:

If such improvements are permanent in character, consisting of good paved road, playgrounds, water system, sewerage and general leveling of the land suitable for residential lots together with electric installations and buildings, the same are important factors to consider in determining the value of the land. The original cost of such improvements may be considered, with due regard to the corresponding depreciation. (Davao vs. Dacudao, L-3741, May 8, 1952).
Note should be taken that in said Appraisal Report, permanent improvements on plaintiffs’ lands have been introduced and found existing, e.g., all weather-road network, airstrip, pier, irrigation system, packing houses, among others, wherein substantial amount of capital funding have been invested in putting them up.

This Court, however, notes that the comparative sales (Exhibits "A" to "F") referred to in the Appraisal Report are sales made after the taking of the land in 1996. However, in the offer of evidence, the plaintiff offered additional comparative sales of adjacent land from late 1995 to early 1997, ranging from a high of ₱580.00/sq.meter in September 1996 (Exhibit "L-4" for plaintiff Apo and "EE-4" for plaintiff Hijo) to a low of ₱146.02/sq.meter in October 1997 (Exhibits "L-2" and "EE-2"). The other sales in 1996 were in January 1996 for ₱530.00/sq.meter ( Exhs. "L-3" and "EE-3") and in December 1996 for ₱148.64/sq.meter (Exhs. "L-2" and "EE-1"). On the other hand, the sale in December 1995 (Exhs. "L-5" and "EE-5") was made for ₱530.00/sq.meter." The average selling price based on the foregoing transaction is ₱386.93/sq.meter. The same is even higher by around 350% than the recommended value of ₱85.00, as per the Commissioners’ Report.

The Cuervo Appraisal Report, on the other hand, gave a value of ₱84.53/sq. meter based on the Capitalized Income Approach. The said approach considered only the use of the land and the income generated from such use.

The just compensation for the parcels of land under consideration, taking into account the Schedule of Market Values given by the City Assessor of Tagum (Exhs. "J-6" for Apo "CC-6" for Hijo), the comparative sales covering adjacent lands at the time of taking of subject land, the Cuervo Report, and the Appraisal Report is hereby fixed at ₱103.33/sq.meter.

The valuation given by Cuervo and the Appraisal Report of ₱84.53 and ₱85.00, respectively, in this Court’s judgment, is the minimum value of the subject landholdings and definitely cannot in anyway be the price at which plaintiffs APO and/or HIJO might be willing to sell, considering that the parcels of land adjacent thereto were sold at much higher prices, specifically from a low of ₱146.02/sq.meter to a high of ₱580.00. The average of the lowest value under the 1993 and 1994 Revision of Assessment and Property Classification (Exhibits "J-6" and "CC-6") were already at ₱103.33/sq.meter, even without considering the improvements introduced on the subject landholdings.

Moreover, the Commission made the findings that "portions of the land subject of th(e) report may x x x increase to ₱330.00/sq.meter, specifically th(e) strips of land surrounding the provincial roads" and made the conclusion that "(c)learly, the value recommended by th(e) Commission, which is only about ₱85.00/sq.meter is way below the x x x assessed values, which effectively was fixed (as early as) 1994 or earlier than the Voluntary Offer to Sell of the above plaintiffs’ properties." In the absence of any evidence to the contrary, the said assessed values are presumed to be prevailing [in] December 1996, the time of taking of plaintiffs’ landholdings. The Commission further stated that the average of the said "assessed values as submitted by the City Assessor of Tagum City (is) ₱265.00/sq.meter." This Court, therefore, finds it unfair that the just compensation for the subject landholdings should only be fixed at ₱85.00/sq.meter.

It is similarly true, however, that the determination of just compensation cannot be made to the prejudice of defendants or the government for that matter.

Thus, the selling price of ₱580.00/sq. meter nor the average selling price of ₱386.93/sq. meter or the average assessed value of ₱265.00/sq. meter cannot be said to be the value at which defendants might be willing to buy the subject landholdings.

This Court, therefore, finds the price of ₱103.33/sq. meter for the subject landholdings fair and reasonable for all the parties. Said value is even lower than the lowest selling price of ₱148.64 for sale of adjacent land at the time of the taking of the subject landholdings [in] December 1996. It approximates, however, the average of the lowest values under the 1993 and 1994 Revision of Assessment and Property Clarification (Exhs. "J-6" and "CC-6") of ₱103.33. The said figure will further increase, if the Court will further consider the improvements introduced by plaintiffs, which should be the case. Moreover, the said value of ₱103.33/sq. meter is more realistic as it does not depart from the government recognized values as specified in the 1993 and 1994 Revised Assessment and Property Classification of Tagum City. This Court finds the evidence of the plaintiffs sufficient and preponderant to establish the value of ₱103.33/sq. meter.

The trial court further rationalized its award thus: It may be admitted that plaintiffs’ properties are agricultural; however, it is simply beyond dispute that in going about the task of appraising real properties, as in the instant cases, "all the facts as to the condition of the property and its surroundings, its improvements and capabilities, may be shown and considered in estimating its value." (Manila Railroad Company vs. Velasquez, 32 Phil. 287, 314). It is undeniable that plaintiffs’ agricultural lands as borne out from the records hereof, and remaining unrebutted, shows that all weather-roads network, airstrip, pier, irrigation system, packing houses, and among numerous other improvements are permanently in place and not just a measly, but substantial amounts investments have been infused. To exclude these permanent improvements in rendering its valuation of said properties would certainly be less than fair. x x x.

The plaintiffs’ agricultural properties are just a stone’s throw from the residential and/or industrial sections of Tagum City, a fact defendants-DAR and LBP should never ignore. The market value of the property (plus the consequential damages less consequential benefits) is determined by such factors as the value of like properties, its actual or potential use, its size, shape and location as enunciated in B.H. Berkenkotter & Co. vs. Court of Appeals, 216 SCRA 584 (1992). To follow Defendants-DAR and LBP logic, therefore, would in effect restrict and delimit the broad judicial prerogatives of this Court in determining and fixing just compensation of properties taken by the State.

Proceedings before the Panel of Commissioners revealed that permanent improvements as mentioned above exist inside the lands subject of this complaints. It was also established during the trial proper upon reception of the evidence of the plaintiffs which clearly revealed the character, use and valuation of the lands surrounding the properties involved in these cases, indicating the strategic location of the properties subject of these cases. The findings being that surrounding properties have been classified as residential, commercial or industrial. And yet defendant-LBP refused to acknowledge the factual basis of the findings of the Panel of Commissioners and insisted on its guideline in determining just compensation. x x x.

In arriving at its valuation of the subject properties, the RTC conducted a thorough and meticulous examination of all determining factors. It did not rely merely on the report of Commissioners nor on the Cuervo appraiser’s report. It took into consideration the schedule of market values of the City of Tagum per its 1993 and 1994 Revision of Assessment and Property Clasisification, value of the permanent improvements thereon, as well as comparative sales of adjacent lands from early 1995 to early 1997, among other factors.

Contrary to LBP’s claim, the above factors are neither irrelevant nor immaterial. When the trial court arrived at the valuation of a landowner’s property taking into account its nature as irrigated land, location along the highway, market value, assessor’s value and the volume and value of its produce, such valuation is considered in accordance with Republic Act No. 6657.

Even the Commissioners’ report which the trial court took into consideration may not be dismissed as irrelevant. In the first place the trial court acting as a special agrarian court is authorized to appoint commissioners to assist in the determination of just compensation. In this case the Commissioners’ report was submitted only after ocular inspections were conducted on the landholdings to give them a better idea of their real value.

Conspicuously, the trial court did not merely rely solely on the appraisal report submitted by the Commissioners. The trial court conducted hearings for the purpose of receiving the parties’ evidence.

Clearly evident from the records of this case is that in the proceedings before the Commission constituted by the RTC of Tagum City, Branch 2, to fix the just compensation for the properties, the LBP and the DAR were given all the opportunities to justify their stances. Thus:

[T]he Commission set another hearing on February 23, 2001 at 9:00 a.m. at the Function Room, Marbella mansion, Rizal Street, Davao City, to give the LBP the opportunity to present evidence. The LBP counsels, Attys. Batingana and Sembrano, instead of presenting witnesses and other evidence, manifested that they will submit a position paper within fifteen (15) days from the date of the hearing. This was granted by the Chairman of the Commission, who also gave the plaintiff the opportunity to submit within five (5) days, if they so desire, their rejoinder.

Inspite of the lapse of the period, the LBP failed to file its position paper. x x x x

The plaintiffs have presented evidence to establish the value of their properties before the Court-appointed Commissioners, as well as before this Court. The Commissioners who acted and performed their assigned tasks under their Oaths of Office are deemed a surrogate or extension of the Court itself. (Secs. 3 and 4, Rule 32 of the 1997 Rules of Civil Procedure). Defendant-DAR and Defendant-LBP failed to present evidence during the hearings set by the Commissioners on February 5, 2001, and February 23, 2001, for the presentation of their evidence. This Court gave Defendant Land Bank and Defendant DAR additional opportunities to present evidence. Defendant Land Bank and DAR asked for extensions to submit their evidence in its motion dated July 27, 2001, which was granted by the Court. All exhibits and other documents offered in evidence were admitted, after which this Court issued an order that these two cases were submitted for resolution.

Given the already exhaustive analysis made by the RTC, this Court is convinced that the trial court correctly determined the amount of just compensation due to AFC and HPI. (G.R. No. 164195; December 19, 2007)