G.R. No. 244213, September 14, 2021
Land Bank of the Philippines, Petitioner, vs. Milagros De Jesus-Macaraeg, Respondent.

FACTS

Respondent Milagros De Jesus-Macaraeg is the registered owner of a 15.1836-hectare parcel of land in Davao City. In 2002, 7.1838 hectares were placed under the Comprehensive Agrarian Reform Program (CARP). The Department of Agrarian Reform (DAR) and petitioner Land Bank of the Philippines (Land Bank) valued the property at P472,382.33 based on DAR Administrative Order No. 5 (DAR AO5), series of 1998. Milagros rejected the offer. Land Bank deposited the amount. The DAR Adjudication Board (DARAB) later valued the property at P1,280,099.20. Land Bank filed a case with the Regional Trial Court sitting as a Special Agrarian Court (RTC-SAC). The RTC-SAC initially fixed just compensation at P20.00 per square meter. On appeal, the Court of Appeals remanded the case for recomputation. In the subsequent RTC-SAC proceedings, Land Bank submitted a recomputed valuation of P777,880.40, using an Annual Gross Production (AGP) of 8,901.28 kilos of pineapple per hectare and a Selling Price (SP) of P7.96 per kilo based on Bureau of Agricultural Statistics (BAS) data. The RTC-SAC, however, set just compensation at P2,765,727.08, using an AGP of 46,666 kilos per hectare (from the DARAB resolution) and an SP of P5.00 per kilo. The Court of Appeals reversed, fixing just compensation at P1,271,523.91. It reduced the SP to P2.50 per kilo but affirmed the AGP of 46,666 kilos per hectare. It also awarded legal interest at 6% per annum. Land Bank filed the present petition, arguing the AGP should be 8,901.28 kilos per hectare and opposing the award of interest.

ISSUE

1. What is the correct computation of just compensation for the subject property, specifically regarding the determination of the Annual Gross Production (AGP) and Selling Price (SP)?
2. Is the award of legal interest on the just compensation proper?

RULING

1. The Supreme Court partly granted the petition. It held that the Court of Appeals erred in using an AGP of 46,666 kilos per hectare, as this figure was unverified and based on the self-serving submission of Milagros’ husband. Applying DAR AO5, the AGP must correspond to the latest 12-month gross production immediately preceding the date of Field Investigation. Land Bank’s data from the BAS, showing an AGP of 8,901.28 kilos per hectare for the relevant period, complied with this rule and was more reliable. The Court also found the SP of P7.96 per kilo, as presented by Land Bank based on BAS data, to be consistent with DAR AO5 requirements. Using the formula LV = (CNI x 0.9) + (MV x 0.1), where the Market Value (MV) per hectare was P20,012.96 (as affirmed by the Court of Appeals and unassailed by the parties), and computing the Capitalized Net Income (CNI) with the correct AGP and SP, the Supreme Court fixed the final just compensation at P777,880.40.
2. Yes, the award of legal interest is proper. The Court held that just compensation is not merely the correct determination of the amount but also payment without delay. The initial deposit made by Land Bank did not constitute full and prompt payment, as the amount was significantly lower than the final valuation. Legal interest is imposed to compensate the landowner for the income she would have made had she been properly compensated at the time of taking. The Court modified the interest rate in accordance with Nacar v. Gallery Frames: twelve percent (12%) per annum from March 3, 2003 (the date Milagros withdrew the initial deposit, deemed the time of taking) until June 30, 2013, and six percent (6%) per annum from July 1, 2013 until fully paid. This interest shall be imposed on the balance of P305,498.07 (P777,880.40 final just compensation less the initial deposit of P472,382.33).