FORMER FOURTH DIVISION
[CA-G.R. SP No. 23168. April 8, 1991.]
FELIPE GALEON, petitioner, vs. HON. EDELWINA PASTORAL, as Judge RTC of Butuan City, Branch 3 and DEPARTMENT OF AGRARIAN REFORM, respondents.
D E C I S I O N
MENDOZA, J p:
Petitioner Felipe C. Galeon was originally the owner of 12.7463 hectares of riceland in Baan, Butuan City, as evidenced by TCT No. 49 of the Register of Deeds of Butuan City. In 1976, the Ministry of Agrarian Reform placed 4.8983 hectares of his land under Operation Land Transfer, pursuant to P.D. No. 27 which decreed the emancipation of tenants in lands devoted to the production of rice and corn. The portion of his land placed under Operation Land Transfer was subsequently distributed to his tenants, Conrado Pablo, Arturo Medrano, and Maximino Heludo, to whom emancipation patents were issued in February of 1987. (Exhs. C, D, E and F)
On January 5, 1989, the Department of Agrarian Reform fixed the compensation for the 4.8983 hectares of land taken from petitioner at P18,284.11, of which 10% was to be paid in cash and the balance was to be paid in Land Bank bonds. The compensation was computed on the basis of 42.66 cavans of palay, as the average gross production per hectare, multiplied by 2.5 and the product multiplied by P35.00, which was the government support price per cavan of rice as of October 21, 1972. (Exh. J)
On May 17, 1989, petitioner filed a written protest against the compensation thus fixed for the taking of his land on the ground that he had not been given an opportunity to participate in the determination of such land value and that the amount offered by the government was not the fair market value of his riceland. (Annex G)
In reply, the Acting Director of the Bureau of Land Development (BLAD) explained that the valuation of petitioner's property was in accordance with the formula contained in Executive Order No. 228, dated July 17, 1987, of the President of the Philippines, which provides as follows:
SECTION 2. Henceforth, the valuation of rice and corn lands covered by P.D. No. 27 shall be based on the average gross production determined by the Barangay Committee on Land Production in accordance with Department Memorandum Circular No. 26, series of 1973, and related issuances and regulations of the Department of Agrarian Reform. The average gross production per hectare shall be multiplied by two and a half (2.5), the product of which shall be multiplied by Thirty Five Pesos (P35.00), the government support price for one cavan of 50 kilos of palay on October 21, 1972, or Thirty One Pesos (P31.00), the government support price for one cavan of 50 kilos of corn on October 21, 1972, and the amount arrived at shall be the value of the rice and corn land, as the case may be, for the purpose of determining its cost to the farmer and compensation to the landowner.
Lease rentals paid to the landowner by the farmer beneficiary after October 21, 1972, shall be considered as advance payment for the land. In the event of dispute with the landowner regarding the amount of lease rental paid by the farmer beneficiary, the Department of Agrarian Reform and the Barangay Committee Land Production concerned shall resolve the dispute within thirty (30) days from its submission pursuant to Department of Agrarian Reform Memorandum Circular No. 26, series of 1973, and other pertinent issuances. In the event a party questions in court the resolution of the dispute, the landowner's compensation claim shall still be processed for payment and the proceeds shall be he held in trust by the Trust Department of the Land Bank in accordance with the provisions of Section 5 hereof, pending the resolution of the dispute before the court.
The BLAD Director suggested that if petitioner did not agree to the valuation of his property he could take the matter to the courts for a determination of the just compensation for his land. (Exhs. H & I)
Accordingly, on October 4, 1989 petitioner brought this action in the Special Agrarian Court (Branch 3) at Butuan City for a determination of just compensation, invoking section 17, in relation to sections 56 and 57, of the Comprehensive Agrarian Reform Law of 1988 (Rep. Act No. 6657), by considering the current value of like properties.
Hearings were held during which the petitioner presented evidence that the current market value of lands in Nasipit, Agusan del Norte, in Buenavista, Agusan del Norte, and in Butuan City itself, which the government or its agencies had acquired under eminent domain, ranged from P20.00 to P1,500.00 per square meter (Exhs. K, L and N). In addition, petitioner testified his land had an income of 80 to 100 cavans per harvest, per hectare. SEHTAC
The trial court appointed a Provincial Appraisal Committee which recommended the payment of P18,376.64 per hectare for the land taken by the DAR from the petitioner. On the other hand, the respondent DAR insisted on the application of the formula embodied in E.O. No. 228, dated July 17, 1987. Applying this formula to the land taken from petitioner, the petitioner, according to the DAR, was entitled to only P3,734.50 per hectare, computed as follows:
AGP x 2.5 x P35 x area = Net Value
42.68 cavans x 2.5 x P35 x
4.8983 = Net Value
P3,734 x 4.8983 = Net Value
P18,292.70 = Net Value
Price per hectare = P3,734.50
Price for 4.8983 hectares = P18,292.70
In its decision of September 11, 1990, the trial court sustained the DAR's position on the ground that petitioner's land had been taken pursuant to P.D. No. 27, and, therefore, the formula embodied in E.O. No. 228 should be applied. The dispositive portion of the trial court's decision reads:
WHEREFORE, the just compensation or the price per hectare of the lot in dispute is P3,734.50 or a total of P18,292.70.
From this decision, petitioner has brought this appeal, raising several issues which will presently be discussed.
First. Petitioner contends that the applicable law for determining just compensation is the Comprehensive Agrarian Reform Law of 1988 (Rep. Act No. 6657) which provides:
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.
As already stated, petitioner presented in evidence the reports (Exhs. K, L, and N) of Provincial Appraisal Committees on the fair market value of properties which the government or its agencies had expropriated, to show that the current market value of lands in the area where his land is located is more than P3,734.50 per hectare, as fixed by the respondent DAR. In addition, petitioner testified that the yield per harvest per hectare of his land was from 80 to 100 cavans of palay (TSN, p. 12, May 22, 1990) and not 42.68 cavans per hectare as the Barrio Committee on Land Production (BCLP) had found.
The petitioner's contention is without merit. To begin with, it was by virtue of P.D. No. 27 that the petitioner's tenants were "deemed owner[s]" of the family-size farms they were cultivating as of October 21, 1972. It is true that, according to the Decree, "no title to the land owned by the tenant-farmer . . . [is to be] actually issued to a tenant-farmer unless and until he has become a full-fledged member of a duly recognized farmer's cooperative," and that, as far as the landowner is concerned, title remains with him, until he is compensated. Nonetheless, the fact is that because the tenants are "deemed" to have become owners of the land as of October 21, 1972, when the Decree was promulgated, the lease rentals paid by them after that date to the landowner are considered under E.O. No. 228, sec. 2 as advance payment for the lands.
Even if sec. 17 of the CARL were applied, the market value paid by the government in expropriating other lands in Agusan del Norte cannot be the basis for fixing the compensation to be paid in this case since the lands are not agricultural lands. What is more, those lands were taken by the government under ordinary expropriation proceedings, whereas the taking of agricultural lands under the government's land reform program is based on the combined exercise of the State's power of eminent domain and police power. The 1973 Constitution enjoined the State to "regulate the acquisition, ownership, use, enjoyment and disposition of private property, and [to] equitably diffuse property ownership and profits" (1973 Const. Art. II, Sec. 6), even as it mandated the State "to formulate and implement an agrarian reform program aimed at emancipating the tenant from the bondage of the soil." (Id., Art. XIV, Sec. 12) Similar provisions are found in the present Constitution. (Art. XIII, Sec. 1, par. 2 and Sec. 4) Thus, to the extent that agrarian reform laws limit the size of lands which landowners may retain, they partake of the exercise of police power. On the other hand, to the extent that they require the payment of just compensation, they reflect the nature of the taking as an exercise of the State's power of eminent domain.
There is, therefore, no basis for petitioner's insistence on the full application of the jurisprudence on just compensation under traditional expropriation, not to mention the fact that, according to the Provincial Appraisal Committee created by the trial court, in his tax declaration for 1978 petitioner placed the value of his land at only P1,882.00 per hectare, while the assessor's valuation for the same year placed it at P3,020.00 per hectare.
Second. Petitioner nonetheless argues that the income from his land is from 80 to 100 cavans per hectare per harvest and that since there are two harvests in a year, using the formula in E.O. No. 228, the value per hectare of his land is P17,500.00, computed as follows: 200 x 2.5 x P35.00 = P17,500.00. Hence, for 4.8983 hectares, he is entitled to the payment of P87,720.25 as just compensation.
On the other hand, the respondent DAR claims that the Barrio Committee on Land Program created under DAR Department Memorandum Circular No. 26, Series of 1973, determined that the average gross production for three normal crop years immediately preceding October 21, 1972 was 42.68. There is thus a dispute as to the average gross production. The trial court should have determined these conflicting claims, instead of simply accepting the respondent DAR's allegation to be correct. To be sure, the trial court dismissed the petitioner's allegation that the yield per harvest per hectare of his land was between 80 to 100 cavans of palay as self-serving. But neither was there proof submitted by the respondent DAR regarding production data used in determining the average gross production (AGP) of lands in the barrio where petitioner's land is located.
Nor is it correct to use P35.00 as government support price in 1989, considering that this figure represents the government support price per Cavan of palay on October 21, 1972. Certainly, by 1989 this figure had became unrealistic. Consequently, the trial court should also have received evidence on the question of what the government support price for every cavan of palay in 1989 was.
Indeed, in applying the formula contained in E.O. No. 228, account must be taken of the average gross production (AGP) and the actual government support price at the time of fixing the just compensation. Otherwise, to adhere to the formula mechanically would be to abdicate a duty placed in the courts of determining the question of just compensation in each case, taking into account existing conditions at the time. Thus, it has been held that the determination of what constitutes just compensation is inherently a judicial function which cannot be left to administrative officials. (EPZA vs. Dulay, 149 SCRA 305 (1987); Manotoc v. NHA, 150 SCRA (1987); Sumulong v. Guerrero, 154 SCRA 461 (1987); Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform, 175 SCRA 343 (1989)). AECacS
Indeed, in Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform, 175 SCRA 343 (1989), the validity of the provisions for just compensation in both E.O. No. 228 and P.D. 27 were sustained on the consideration that the formula on which respondent DAR relies represents only a guideline and that the ultimate determination of just compensation must be made by the courts, taking into account existing economic conditions. As the Supreme Court noted:
In connection with the determination of just compensation, the petitioners argue that the same may be made only by a court of justice and not by the President of the Philippines. They invoke the recent cases of EPZA v. Dulay [149 SCRA 305] and Manotok v. National Food Authority. [150 SCRA 89.]
The Solicitor General, as counsel for the Secretary of Agrarian Reform, admitted the force of this contention and only tried to defend the validity of the formula on the ground that it is "at best initial or preliminary only."
On the basis of this answer of the Solicitor General, the Supreme Court upheld the validity of P.D. No. 27 and E.O. No. 228 "against all the constitutional objections raised" in the case. Any other application of the formula for just compensation risks objection on constitutional grounds, let alone renders the statute void. For this reason, we hold that the final determination of compensation will have to be made by the courts and that in applying the formula in question, account must be taken of factors as of the time of the fixing of the compensation. Accordingly, this case should be remanded to the lower court for further proceedings to determine the average gross production and the government support price as of 1989 as well as the amounts of lease rentals which tenants may have paid to the landowner.
WHEREFORE, the decision appealed from is SET ASIDE and the case is REMANDED to the Special Agrarian Court for further proceedings in accordance with this decision. Without pronouncement as to costs.
SO ORDERED.
Chua and Victor, JJ ., concur.