G.R. No. 168453 March 13, 2009
Land Bank of the Philippines, Petitioner, vs. Hernando T. Chico and Lorna Chico, in her capacity as Attorney-In-Fact, Respondents.

FACTS

The property subject of the controversy is an 8.30274-hectare portion of irrigated rice land in Nueva Ecija, covered by TCT No. N-188935 in the name of respondent Hernando T. Chico. The Department of Agrarian Reform (DAR) took the subject property and transferred the title to farmer-beneficiaries, with Emancipation Patents issued in their favor on December 27, 1994, without prior notice to respondent and without payment of just compensation. Respondent filed an Amended Petition for Fixing Just Compensation before the Regional Trial Court sitting as a Special Agrarian Court (SAC). The DAR claimed respondent was notified of the property’s coverage under the Operation Land Transfer program and that compensation was agreed at ₱10,000.00 per hectare pursuant to a Landowner-Tenant Production Agreement (LTPA). Petitioner Land Bank of the Philippines (LBP) argued it had no legal obligation to finance the transfer because no land transfer claim was endorsed by DAR for processing and payment, suggesting the transfer may have been through a Voluntary Land Transfer scheme. The SAC ruled the ₱10,000.00 per hectare price could not be sustained due to lack of concrete proof of voluntary agreement and fixed just compensation at ₱1,660,540.00 with 12% annual interest. The Court of Appeals affirmed with modification, reducing the just compensation to ₱1,482,340.00 after deducting advance lease rentals and imposing 6% annual interest from the time of taking. LBP filed the present petition.

ISSUE

1. Whether the Court of Appeals erred in sustaining the SAC’s order for LBP to pay just compensation in the absence of a land transfer claim endorsed by DAR.
2. Assuming LBP is liable, whether the Court of Appeals erred in using factors under Section 17 of Republic Act No. 6657 to determine just compensation instead of the valuation formula under Presidential Decree No. 27, Executive Order No. 228, and the LTPA.
3. Whether the Court of Appeals erred in awarding 6% interest per annum from the time of taking until full payment.

RULING

1. The Supreme Court ruled that the absence of a land transfer claim folder does not absolve LBP from its obligation to pay just compensation. The taking of the property for agrarian reform is an exercise of eminent domain, and the payment of just compensation is a judicial function. The SAC properly acquired jurisdiction over the petition for determination of just compensation. LBP, as the financial intermediary for the Comprehensive Agrarian Reform Program, is liable to pay the compensation as adjudged.
2. The Supreme Court ruled that the determination of just compensation must be in accordance with Republic Act No. 6657. While the property was acquired under Presidential Decree No. 27, the provisions of Republic Act No. 6657 apply, with Presidential Decree No. 27 and Executive Order No. 228 having only suppletory effect. The LTPA, which pegged compensation at ₱10,000.00 per hectare, was correctly disregarded by the lower courts due to lack of concrete proof that respondent voluntarily agreed to it, as evidenced by his filing of the petition for just compensation.
3. The Supreme Court ruled that the imposition of interest is in order when there is a delay in the payment of just compensation. The legal rate of interest at the time of taking was 6% per annum. However, in accordance with DAR Administrative Order No. 13, Series of 1994, which provides for an increment of 6% per year compounded annually on the compensation due under Presidential Decree No. 27 and Executive Order No. 228, the interest should be computed at 6% per annum compounded annually from the date of taking until full payment. The Court modified the CA decision accordingly.