G.R. No. 148223 ; November 25, 2004
FERNANDO GABATIN, JOSE GABATIN AND ALBERTO GABATIN, petitioners, vs. LAND BANK OF THE PHILIPPINES, respondent.

FACTS

Petitioners Fernando, Alberto, and Jose Gabatin were the registered owners of three parcels of rice land in Sariaya, Quezon, placed under the Operation Land Transfer program in 1989 pursuant to P.D. No. 27. The Department of Agrarian Reform (DAR) and respondent Land Bank of the Philippines (Land Bank) valued the lands using the formula under P.D. No. 27 and E.O. No. 228: Land Value (LV) = 2.5 x Average Gross Production (AGP) x Government Support Price (GSP). They fixed the GSP at P35.00 per cavan, the price of palay in 1972, the time of taking, resulting in a total valuation of P29,956.54. Petitioners rejected this and filed a case for determination of just compensation before the Special Agrarian Court (SAC).
The SAC, in its order, recomputed the just compensation using the same formula but applied the current price of palay at P400.00 per cavan at the time of payment, not the 1972 price, awarding petitioners P342,362.46. Only Land Bank appealed this decision to the Court of Appeals. Petitioners moved to dismiss the appeal, arguing it raised pure questions of law and that Land Bank, not being an indispensable party, could not appeal alone. The Court of Appeals denied the motion and reversed the SAC, ruling that the GSP must be pegged at the 1972 price of P35.00, with 6% compounded annual interest from 1972 until full payment.

ISSUE

The core issues are: (1) Whether the Court of Appeals had jurisdiction over Land Bank’s appeal from the SAC decision; (2) Whether Land Bank had the personality to appeal the SAC decision independently; and (3) Whether just compensation should be based on the price of palay at the time of taking in 1972 or at the time of payment.

RULING

The Supreme Court affirmed the Court of Appeals’ decision. On jurisdiction, the Court clarified that while Section 60 of R.A. No. 6657 prescribes a petition for review to the Court of Appeals as the mode of appeal from SAC decisions, Land Bank’s filing of an ordinary appeal under Rule 41 was a procedural lapse treated as a petition for review under Rule 42, which the appellate court correctly entertained. On Land Bank’s personality to appeal, the Court ruled Land Bank is a necessary party in just compensation cases as the financial intermediary mandated to fund agrarian reform; its interests would be directly affected by the SAC’s valuation, granting it independent authority to appeal.
On the substantive issue of valuation, the Court upheld the use of the GSP at the time of taking. The legal logic is anchored on the nature of just compensation, which is the value of the property at the time of its taking. For lands covered by P.D. No. 27, the taking is deemed to have occurred in October 1972. Therefore, the governing formula must utilize the GSP prevailing at that point. To compensate for the delay in payment, the law mandates payment of 6% interest per annum, compounded annually, from 1972 until full settlement. This interest serves to bridge the gap between the value at taking and the value at payment, ensuring the owner receives the full monetary equivalent at the time compensation is finally made. The SAC erred in directly using the current price, as this conflates the principal valuation with the interest component meant to address inflationary loss.