DUE PROCESS AND EMINENT DOMAIN

G.R. No. 181562-63

October 2, 2009

SPOUSES CIRIACO and ARMINDA ORTEGA, Petitioners,

vs.
CITY OF CEBU, Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 181583-84
CITY OF CEBU, Petitioner,
vs.
SPOUSES CIRIACO and ARMINDA ORTEGA, Respondents.
DECISION
NACHURA, J.:
These are consolidated petitions for review on certiorari filed by petitioners Ciriaco and
Arminda Ortega (Spouses Ortega) in G.R. Nos. 181562-63 and petitioner City of Cebu
(Cebu City) in G.R. Nos. 181583-84 assailing the Decision of the Court of Appeals (CA) in
the similarly consolidated petitions docketed as CA-G.R. SP No. 80187 and CA-G.R. SP
No. 00147, respectively.1
The facts, summarized by the CA, follow.
Spouses Ciriaco and Arminda Ortega x x x are the registered owners of a parcel of land
known as Lot No. 310-B, situated in Hipodromo, Cebu City, with an area of 5,712 square
meters and covered by Transfer Certificate of Title No. 113311, issued by the Register of
Deeds of the City of Cebu.
One-half of the above described land is occupied by squatters. On September 24, 1990,
[the Spouses Ortega] filed an ejectment case against the squatters before the Municipal
Trial Court in Cities (MTCC) of Cebu City, which rendered decision in favor of [the spouses
Ortega]. The case eventually reached the Supreme Court, which affirmed the decision of
the MTCC. The decision of the MTCC became final and executory, and a writ of execution
was issued on February 1, 1994.
On May 23, 1994, the Sangguniang Panglungsod of [Cebu City] enacted City Ordinance
No. 1519, giving authority to the City Mayor to expropriate one-half (1/2) portion (2,856
square meters) of [the spouses Ortegas] land (which is occupied by the squatters), and
appropriating for that purpose the amount of P3,284,400.00 or at the price of ONE
THOUSAND ONE HUNDRED FIFTY PESOS (P1,150.00) per square meter. The amount
will be charged against Account No. 8-93-310, Continuing Appropriation, Account No. 1018918-334, repurchase of lots for various projects. The value of the land was determined by

the Cebu City Appraisal Committee in Resolution No. 19, series of 1994, dated April 15,
1994.
Pursuant to said ordinance, [Cebu City] filed a Complaint for Eminent Domain [before the
Regional Trial Court (RTC), Branch 23, Cebu City] against [the spouses Ortega], docketed
as Civil Case No. CEB-16577.
On March 13, 1998, the [RTC] issued an order declaring that [Cebu City] "has the lawful
right to take the property subject of the instant case, for public use or purpose described in
the complaint upon payment of just compensation."
Based on the recommendation of the appointed Commissioners (one of whom was the City
Assessor of [Cebu City], the [RTC] issued another Order dated May 21, 1999, fixing the
value of the land subject to expropriation at ELEVEN THOUSAND PESOS (P11,000.00) per
square meter and ordering [Cebu City] to pay [Spouses Ortega] the sum of THIRTY ONE
MILLION AND FOUR HUNDRED SIXTEEN THOUSAND PESOS (P31,416,000.00) as just
compensation for the expropriated portion of Lot No. 310-B.
The Decision of the [RTC] became final and executory because of [Cebu Citys] failure to
perfect an appeal on time, and a Writ of Execution was issued on September 17, 1999 to
enforce the courts judgment. Upon motion of [the Spouses Ortega], the [RTC] issued an
Order dated March 11, 2002, quoted as follows:
"Reading of the aforestated resolution shows that the City Council of Cebu approved
Ordinance No. 1519 appropriating the sum of P3,284,400.00 for payment of the subject lot
chargeable to Account No. 101-8918-334.
"In view thereof, the above-mentioned sum is now subject for execution or garnishment for
the same is no longer exempt from execution."
[Cebu City] filed an Omnibus Motion to Stay Execution, Modification of Judgment and
Withdrawal of the Case, contending that the price set by the [RTC] as just compensation to
be paid to [the Spouses Ortega] is way beyond the reach of its intended beneficiaries for its
socialized housing program. The motion was denied by the [RTC]. [Cebu Citys] Motion for
Reconsideration was likewise denied.
By virtue of the Order of the [RTC], dated July 2, 2003, x x x Sheriff Benigno B. Reas[,] Jr.
served a Notice of Garnishment to Philippine Postal Bank, P. del Rosario and Junquera
Branch Cebu City, garnishing [Cebu Citys] bank deposit therein.
Hence, [Cebu City] filed the instant Petition for Certiorari before [the CA] (CA-G.R. SP NO.
80187).
During the pendency of x x x CA-G.R. SP NO. 80187, [Cebu City] filed before the [RTC] a
Motion to Dissolve, Quash or Recall the Writ of Garnishment, contending that Account No.
101-8918-334 mentioned in Ordinance No. 1519 is not actually an existing bank account
and that the garnishment of [Cebu Citys] bank account with Philippine Postal Bank was
illegal, because government funds and properties may not be seized under writ of execution

or garnishment to satisfy such judgment, on obvious reason of public policy. The [RTC]
issued an Order dated March 8, 2004, denying said motion. [Cebu Citys] Motion for
Reconsideration was also denied.
[The Spouses Ortega] filed an Ex-Parte Motion to Direct the New Manager of Philippine
Postal Bank to Release to the Sheriff the Garnished Amount, which was granted by the
[RTC]. [Cebu City] filed a Motion for Reconsideration, but the same was denied.
Hence, [Cebu City] filed another Petition for Certiorari (CA-G.R. SP NO. 00147) [with the
Court of Appeals].2
Ruling on the petitions for certiorari, the CA disposed of the cases, to wit:
WHEREFORE, all the foregoing premises considered, the instant Petitions for Certiorari are
hereby PARTIALLY GRANTED. The assailed Orders of the [RTC] [Assailed Orders dated
March 11, 2002 and July 2, 2003, respectively, in CA-G.R SP NO. 80187] are hereby
ANNULLED AND SET ASIDE insofar as they denied [Cebu Citys] Motion to Stay
Execution, but they are hereby AFFIRMED insofar as they denied [Cebu Citys] Motion to
Modify Judgment and Withdraw from the Expropriation Proceedings. Furthermore, the
assailed Orders of the [RTC dated March 8, 2004 in CA-G.R. SP NO. 00147] are hereby
ANNULLED AND SET ASIDE. Let the Decision of the [RTC] be executed in a manner
prescribed by applicable law and jurisprudence.
SO ORDERED.3
Hence, these consolidated appeals by petitioners Cebu City and the Spouses Ortega
positing the following issues:
1. Whether the CA erred in affirming the RTCs denial of Cebu Citys Omnibus
Motion to Modify Judgment and to be Allowed to Withdraw from the Expropriation
Proceedings.
2. Whether the deposit of Cebu City with the Philippine Postal Bank, appropriated for
a different purpose by its Sangguniang Panglungsod, can be subject to garnishment
as payment for the expropriated lot covered by City Ordinance No. 1519.
We deny both petitions.
On the first issue, the CA did not err in affirming the RTCs Order that the expropriation case
had long been final and executory. Consequently, both the Order of expropriation and the
Order fixing just compensation by the RTC can no longer be modified. In short, Cebu City
cannot withdraw from the expropriation proceedings.
Section 4, Rule 67 of the Rules of Court on Expropriation provides:
SEC. 4. Order of expropriation. If the objections to and the defenses against the right of
the plaintiff to expropriate the property are overruled, or when no party appears to defend as
required by this Rule, the court may issue an order of expropriation declaring that the

plaintiff has a lawful right to take the property sought to be expropriated, for the public use
or purpose described in the complaint, upon the payment of just compensation to be
determined as of the date of the taking of the property or the filing of the complaint,
whichever came first.
A final order sustaining the right to expropriate the property may be appealed by any party
aggrieved thereby. Such appeal, however, shall not prevent the court from determining the
just compensation to be paid.
After the rendition of such an order, the plaintiff shall not be permitted to dismiss or
discontinue the proceeding except on such terms as the court deems just and equitable.
Plainly, from the aforequoted provision, expropriation proceedings speak of two (2) stages,
i.e.:
1. Determination of the authority of the plaintiff to exercise the power of eminent
domain and the propriety of its exercise in the context of the facts involved in the
suit. This ends with an order, if not of dismissal of the action, of condemnation [or
order of expropriation] declaring that the plaintiff has the lawful right to take the
property sought to be condemned, for the public use or purpose described in the
complaint, upon the payment of just compensation to be determined as of the date of
the filing of the complaint; and
2. Determination by the court of the just compensation for the property sought to be
taken.4
We held in the recent case of Republic v. Phil-Ville Development and Housing
Corporation5 that:
[A]n order of expropriation denotes the end of the first stage of expropriation. Its end then
paves the way for the second stagethe determination of just compensation, and,
ultimately, payment. An order of expropriation puts an end to any ambiguity regarding the
right of the petitioner to condemn the respondents properties. Because an order of
expropriation merely determines the authority to exercise the power of eminent domain and
the propriety of such exercise, its issuance does not hinge on the payment of just
compensation. After all, there would be no point in determining just compensation if, in the
first place, the plaintiffs right to expropriate the property was not first clearly established.6
Conversely, as is evident from the foregoing, an order by the trial court fixing just
compensation does not affect a prior order of expropriation. As applied to the case at bar,
Cebu City can no longer ask for modification of the judgment, much less, withdraw its
complaint, after it failed to appeal even the first stage of the expropriation proceedings.
Cebu City is adamant, however, that it should be allowed to withdraw its complaint as the
just compensation fixed by the RTC is too high, and the intended expropriation of the
Spouses Ortegas property is dependent on whether Cebu City would have sufficient funds
to pay for the same.

We cannot subscribe to Cebu Citys ridiculous contention.

It is well-settled in jurisprudence that the determination of just compensation is a judicial
prerogative.7 In Export Processing Zone Authority v. Dulay,8 we declared:
The determination of "just compensation" in eminent domain cases is a judicial function.
The executive department or the legislature may make the initial determinations but when a
party claims a violation of the guarantee in the Bill of Rights that private property may not be
taken for public use without just compensation, no statute, decree, or executive order can
mandate that its own determination shall prevail over the courts findings. Much less can the
courts be precluded from looking into the "just-ness" of the decreed compensation.
We, therefore, hold that P.D. No. 1533, which eliminates the courts discretion to appoint
commissioners pursuant to Rule 67 of the Rules of Court, is unconstitutional and void. To
hold otherwise would be to undermine the very purpose why this Court exists in the first
place.
Likewise, in the recent cases of National Power Corporation v. dela Cruz9 and Forfom
Development Corporation v. Philippine National Railways,10 we emphasized the primacy of
judicial prerogative in the ascertainment of just compensation as aided by the appointed
commissioners, to wit:
Though the ascertainment of just compensation is a judicial prerogative, the appointment of
commissioners to ascertain just compensation for the property sought to be taken is a
mandatory requirement in expropriation cases. While it is true that the findings of
commissioners may be disregarded and the trial court may substitute its own estimate of
the value, it may only do so for valid reasons; that is, where the commissioners have
applied illegal principles to the evidence submitted to them, where they have disregarded a
clear preponderance of evidence, or where the amount allowed is either grossly inadequate
or excessive. Thus, "trial with the aid of the commissioners is a substantial right that may
not be done away with capriciously or for no reason at all."
As regards the second issue raised by the Spouses Ortega, we quote with favor the CAs
disquisition thereon, to wit:
While the claim of [the Spouses Ortega] against [Cebu City] is valid, the [RTC] cannot, by
itself, order the City Council of [Cebu City] to enact an appropriation ordinance in order to
satisfy its judgment.
The proper remedy of [the Spouses Ortega] is to file a mandamus case against [Cebu City]
in order to compel its Sangguniang Panglungsod to enact an appropriation ordinance for the
satisfaction of [the Spouses Ortegas] claim. This remedy is provided in the case of
Municipality of Makati v. Court of Appeals, which provides:
Nevertheless, this is not to say that private respondent and PSB are left with no legal
recourse. Where a municipality fails or refuses, without justifiable reason[s], to effect
payment of a final money judgment rendered against it, the claimant may avail of the
remedy of mandamus in order to compel the enactment and approval of the necessary

appropriation ordinance, and the corresponding disbursement of municipal funds therefor. x

x x.
xxxx
The Sangguniang Panglungsod of [Cebu City] enacted Ordinance No. 1519, appropriating
the sum ofP3,284,400.00 for payment of just compensation for the expropriated land,
chargeable to Account No. 101-8918-334.
Pursuant to such ordinance, the [RTC] issued an order dated March 11, 2002, which was
the basis for the issuance of the Writ of Garnishment, garnishing [Cebu Citys] bank account
with Philippine Postal Bank.
However, Philippine Postal Bank issued a Certification dated February 7, 2005, certifying
that Account No. 8-93-310 (Continuing Account) and Account No. 101-8918-334 intended
for purchase of lot for various projects are not bank account numbers with Philippine Postal
Bank.
It is a settled rule that government funds and properties may not be seized under writs of
execution or garnishment to satisfy judgments, based on obvious consideration of public
policy. Disbursements of public funds must be covered by the corresponding appropriation
as required by law. The functions and public services rendered by the State cannot be
allowed to be paralyzed or disrupted by the diversion of public funds from their legitimate
and specific objects, as appropriated by law.
In Municipality of Makati v. Court of Appeals, x x x where the Municipality of Makati enacted
an ordinance appropriating certain sum of money as payment for the land the municipality
expropriated, chargeable to Account No. S/A 265-537154-3 deposited in PNB Buendia
Branch, the Supreme Court held that the trial court has no authority to garnish the
Municipalitys other bank account (Account No. S/A 263-530850-7) in order to cover the
deficiency in Account No. S/A 265-537154-3, even if both accounts are in the same branch
of the PNB. In said case, the Supreme Court held:
Absent any showing that the municipal council of Makati has passed an ordinance
appropriating from its public funds an amount corresponding to the balance due under the
RTC decision dated June 4, 1987, less the sum ofP99,743.94 deposited in Account No. S/A
265-537154-3, no levy under execution may be validly effected on the public funds of
petitioner deposited in Account No. S/A 263-530850-7.
The foregoing rules find application in the case at bar. While the Sangguniang Panglungsod
of petitioner enacted Ordinance No. 1519 appropriating the sum of P3,284,400.00 for
payment of just compensation for the expropriated land, such ordinance cannot be
considered as a source of authority for the [RTC] to garnish [Cebu Citys] bank account with
Philippine Postal Bank, which was already appropriated for another purpose. [Cebu Citys]
account with Philippine Postal Bank was not specifically opened for the payment of just
compensation nor was it specifically appropriated by Ordinance No. 1519 for such purpose.
Said account, therefore, is exempt from garnishment.
1avvphi1

Since the [RTC] has no authority to garnish [Cebu Citys] other bank accounts in order to
satisfy its judgment, consequently, it has no authority to order the release of [Cebu Citys]
other deposits with Philippine Postal Bank x x x.11
Even assuming that Cebu City Ordinance No. 1519 actually appropriated the amount
of P3,284,400.00 for payment of just compensation thus, within the reach of a writ of
garnishment issued by the trial court12 there remains the inescapable fact that the
Philippine Postal Bank account referred to in the ordinance does not actually exist, as
certified to by the Bank. Accordingly, no writ of garnishment may be validly issued against
such non-existent account with Philippine Postal Bank. This circumstance translates to a
situation where there is no valid appropriation ordinance.
WHEREFORE, the petitions in G.R. Nos. 181562-63 and 181583-84 are hereby DENIED.
The Decision of the Court of Appeals in CA-G.R. SP Nos. 80187 and 00147 is AFFIRMED.
No pronouncement as to costs.
SO ORDERED.

LAND BANK OF THE PHILIPPINES,

Petitioner,
- versus JOSE MARIE M. RUFINO, NILO M. RESURRECCION, ARNEL M.
ATANACIO and SUZETTE G. MATEO,
Respondents,
DEPARTMENT OF AGRARIAN REFORM, represented by OICSECRETARY NASSER C. PANGANDAMAN,
Petitioner,
- versus JOSE MARIE M. RUFINO, NILO M. RESURRECCION, ARNEL M.
ATANACIO and SUZETTE G. MATEO,
Respondents

CARPIO MORALES, J.:

Challenged in these consolidated Petitions for Review is the December 15,
2005 Decision of the Court of Appeals[1] in CA-G.R. CV No. 69640 affirming with
modification that of Branch 52 of the Regional Trial Court (RTC) of Sorsogon
in Civil Case No. 98-6438 setting the valuation of respondents 138.4018-hectare

land taken under the Comprehensive Agrarian Reform Program (CARP)

at P29,926,000, exclusive of the value of secondary crops thereon.
Respondents Jose Marie M. Rufino (Rufino), Nilo M. Resurreccion
(Resureccion), Arnel M. Atanacio (Atanacio), and Suzette G. Mateo (Suzette) are
the registered owners in equal share of a parcel of agricultural land situated in
Barangay San Benon, Irosin, Sorsogon, with an area of 239.7113 hectares covered
by Transfer Certificate of Title (TCT) No. T-22934.[2]
By respondents claim, in 1989, they voluntarily offered the aforesaid
property to the government for CARP coverage at P120,000 per hectare. Acting
thereon, petitioner Department of Agrarian Reform (DAR) issued a Notice of Land
Valuation and Acquisition dated October 21, 1996 declaring that out of the total
area indicated in the title, 138.4018 hectares was subject to immediate
acquisition at a valuation of P8,736,270.40 based on the assessment of petitioner
Land Bank of the Philippines (LBP).
Respondents having found the valuation unacceptable, the matter was
referred by the provincial agrarian reform officer of Sorsogon to the DAR
Adjudication Board (DARAB) for the conduct of summary administrative
proceedings to determine just compensation.[3]
By Decision of November 21, 1997,[4] the DARAB sustained LBPs
valuation upon respondents failure to present any evidence to warrant an increase
thereof.
Meanwhile, upon the DARs application, accompanied with LBPs
certification of deposit of payment, the Register of Deeds of Sorsogon partially
cancelled TCT No. T-22934 corresponding to the 138.4018-hectare covered area
(hereafter the property) and issued TCT No. T-47571 in the name of the Republic
of the Philippines (the Republic). The Republic thereupon subdivided the property

into 85 lots for distribution to qualified farmer-beneficiaries under Republic Act

No. 6657 (RA 6657) or the Comprehensive Agrarian Reform Law of 1988.[5]
On February 23, 1998, respondents lodged with Branch 52 of the Sorsogon
RTC (acting as a Special Agrarian Court) a complaint for determination of just
compensation against Ernesto Garilao, in his capacity as then DAR Secretary, and
LBP. Respondents contended that LBPs valuation was not the full and fair
equivalent of the property at the time of its taking, the same having been offered in
1989 at P120,000 per hectare.[6]
LBP countered that the property was acquired by the DAR for CARP
coverage in 1993 by compulsory acquisition and not by respondents voluntary
offer to sell; and that it determined the valuation thereof in accordance with RA
6657 and pertinent DAR regulations.[7]
The DAR Secretary argued that LBPs valuation was properly based on
DAR issuances.[8]
The trial court appointed the parties respective nominated commissioners to
appraise the property.
Commissioner Jesus S. Empleo, LBPs nominee, appraised the property
based on, among other things, the applicable DAR issuances, average gross
production, and prevailing selling prices of the crops planted thereon which
included coconut, abaca, coffee, and rice. He arrived at a valuation
of P13,449,579.08.[9]
Commissioner Amando Chua of Cuervo Appraisers, Inc., respondents
nominee, used the market data approach which relies primarily on sales and
listings of comparable lots in the neighborhood. Excluding the secondary crops
planted thereon, he valued the property at P29,925,725.[10]

At the witness stand, Eugenio Mateo, Sr. (Mateo), attorney-in-fact of

respondents Rufino, Resurreccion, and Atanacio, declared that Commissioner
Chua erroneously considered the secondary crops as merely enhancing the demand
for the property without them significantly increasing its value; and that the coffee
intercropping on the property which yielded an estimated profit of P3,000,000,
spread over a 12-year period, should be considered in the determination of just
compensation.[11]
By Decision of July 4, 2000,[12] the trial court found the market data
approach to be more realistic and consistent with law and jurisprudence on the full
and fair equivalent of the property. Applying the average rate of P216,226 per
hectare, it arrived at a valuation of the 138.4018-hectare property
at P29,926,000, to which it added P8,000,000 representing 50% of the value of
trees, plants, and other improvements thereon, bringing the total to P37,926,000. It
disposed thus:
WHEREFORE, premises considered, judgment is hereby rendered to
wit:
a) Fixing the Just Compensation of the entire 138.4018 hectares for
acquisition covered by TCT No. T-22934 in the total amount of
THIRTY SEVEN MILLION NINE HUNDRED TWENTY-SIX
THOUSAND (Php37,926,000.00) Pesos Philippine Currency, less
the amount previously deposited in trust with the Land Bank which
was already received by the plaintiffs.
b) The Land Bank of the Philippines is hereby ordered to pay the
landowners-plaintiffs the afore-cited amount less the amount
previously paid to them in the manner provided by law.
c) Without pronouncement as to costs.

LBP filed a Motion for Reconsideration, while the DAR filed a Notice of
Appeal. By Order dated August 21, 2000, the trial court denied the motion of
LBP,[13] prompting it to also file a Notice of Appeal.[14]
By consolidated Decision of December 15, 2005,[15] the Court of Appeals
sustained the trial courts valuation of P29,926,000 as just compensation.
The appellate court found that, among other things, it would be specious to
rely on the DARs computation in ostensible compliance with its own issuances;
that Commissioner Empleo failed to consider available sales data of comparable
properties in the locality; and that the value of secondary crops should be excluded
as the same is inconclusive in view of conflicting evidence.
Petitioners and respondents filed their respective Motions for
Reconsideration which were denied by the appellate court by Resolution of
November 28, 2006.[16] Hence, petitioners LBP and DAR separately sought
recourse to this Court through the present Petitions for Review, which were
consolidated in the interest of uniformity of rulings on related cases.
In G.R. No. 175644, LBP maintains that its valuation of the property
at P13,449,579.08 was based on the factors mentioned in RA 6657 and formula
prescribed by the DAR; that its determination should be given weight as it has the
expertise to do the same; and that the taking of private property for agrarian reform
is not a traditional exercise of the power of eminent domain as it also involves the
exercise of police power, hence, part of the loss is not compensable.[17]
In G.R. No. 175702, the DAR avers that the valuation sustained by the
appellate court was determined in contravention of the criteria set by RA 6657 and
relevant jurisprudence.[18]
Respondents, for their part, posit in their consolidated Comment[19] that
factual findings of the trial court, when affirmed by the appellate court, are

conclusive; and that the just compensation due them should be equivalent to the
market value of the property.
In determining the just compensation due owners of lands taken for CARP
coverage, the RTC, acting as a Special Agrarian Court, should take into account
the factors enumerated in Section 17 of RA 6657, as amended, to wit:
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
farmworkers 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. (Emphasis supplied)

The DAR, being the government agency primarily charged with the
implementation of the CARP, issued Administrative Order No. 6, Series of 1992
(DAR AO 6-92), as amended by DAR Administrative Order No. 11, Series of
1994 (DAR AO 11-94), translating the factors mentioned in Section 17 of RA
6657 into a basic formula, presented as follows:
LV = (CNI x 0.6) + ( CS x 0.3) + (MV x 0.1)
Where: LV = Land Value
CNI = Capitalized Net Income
CS = Comparable Sales
MV = Market Value per Tax Declaration
The above formula shall be used if all the three factors are present,
relevant, and applicable.
A.1. When the CS factor is not present and CNI and MV are applicable,
the formula shall be:
LV = (CNI x 0.9) + (MV x 0.1)

A.2. When the CNI factor is not present, and CS and MV are applicable,
the formula shall be:
LV = (CS x 0.9) + (MV x 0.1)
A.3. When both the CS and CNI are not present and only MV is
applicable, the formula shall be:
LV = MV x 2

The threshold issue then is whether the appellate court correctly upheld the
valuation by the trial court of the property on the basis of the market data
approach, in disregard of the formula prescribed by DAR AO 6-92, as amended.
The petitions are partly meritorious.
While the determination of just compensation is essentially a judicial
function which is vested in the RTC acting as a Special Agrarian Court, the Court,
in LBP v. Banal,[20] LBP v. Celada,[21] and LBP v. Lim,[22] nonetheless disregarded
the RTCs determination thereof when, as in the present case, the judge did not
fully consider the factors specifically identified by law and implementing rules.
In LBP v. Banal,[23] the Court ruled that the factors laid down in Section 17
of RA 6657 and the formula stated in DAR AO 6-92, as amended, must be adhered
to by the RTC in fixing the valuation of lands subjected to agrarian reform:
In determining just compensation, the RTC is required to consider
several factors enumerated in Section 17 of R.A. 6657, as amended,
thus:
xxxx
These factors have been translated into a basic formula in [DAO
6-92], as amended by [DAO 11-94], issued pursuant to the DAR's rulemaking power to carry out the object and purposes of R.A. 6657, as
amended.

xxxx
While the determination of just compensation involves the
exercise of judicial discretion, however, such discretion must be
discharged within the bounds of the law. Here, the RTC wantonly
disregarded R.A. 6657, as amended, and its implementing rules and
regulations. ([DAO 6-92], as amended by [DAO 11-94]).
xxxx
WHEREFORE, . . . The trial judge is directed to observe strictly
the procedures specified above in determining the proper valuation of
the subject property. (Underscoring supplied)

And in LBP v. Celada,[24] the Court was emphatic that the RTC is not at liberty to
disregard the DAR valuation formula which filled in the details of Section 17 of
RA 6657, it being elementary that rules and regulations issued by administrative
bodies to interpret the law they are entrusted to enforce have the force of law.
In fixing the just compensation in the present case, the trial court, adopting
the market data approach on which Commissioner Chua relied,[25] merely put
premium on the location of the property and the crops planted thereon which are
not among the factors enumerated in Section 17 of RA 6657. And the trial court
did not apply the formula provided in DAR AO 6-92, as amended. This is a clear
departure from the settled doctrine regarding the mandatory nature of Section 17 of
RA 6657 and the DAR issuances implementing it.
Not only did Commissioner Chua not consider Section 17 of RA 6657 and
DAR AO 6-92, as amended, in his appraisal of the property. His conclusion that
the market data approach conformed with statutory and regulatory requirements is
bereft of basis.
Resolving in the negative the issue of whether the RTC can resort to any
other means of determining just compensation, aside from Section 17 of RA 6657

and DAR AO 6-92, as amended, this Court, in LBP v. Lim,[26] held that Section 17
of RA 6657 and DAR AO 6-92, as amended, are mandatory and not mere guides
that the RTC may disregard.
Petitioners maintain that the correct valuation
is P13,449,579.08 as computed by Commissioner Empleo.

of

the

property

The pertinent provisions of Item II of DAR AO 6-92, as amended by DAR

AO 11-94, read:
A.
There shall be one basic formula for the valuation of lands
covered by [Voluntary Offer to Sell] or [Compulsory Acquisition]
regardless of the date of offer or coverage of the claim:
LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1)
Where: LV = Land Value
CNI = Capitalized Net Income
CS = Comparable Sales
MV = Market Value per Tax Declaration
The above formula shall be used if all the three factors are
present, relevant and applicable.
A.1. When the CS factor is not present and CNI and MV are
applicable, the formula shall be:
LV = (CNI x 0.9) + (MV x 0.1)
xxxx
A.5 For purposes of this Administrative Order, the date of
receipt of claimfolder by LBP from DAR shall mean the date
when the claimfolder is determined by the LBP to be complete
with all the required documents and valuation inputs duly verified
and validated, and is ready for final computation/processing.
A.6 The basic formula in the grossing-up of valuation inputs
such as . . . Market Value per Tax Declaration (MV) shall be:

Grossed-up =
Valuation Input

Valuation input x
Regional Consumer Price
Index (RCPI) Adjustment
Factor

The RCPI Adjustment Factor shall refer to the ratio of RCPI for the
month issued by the National Statistics Office as of the date when the
claimfolder (CF) was received by LBP from DAR for processing or, in
its absence, the most recent available RCPI for the month issued prior to
the date of receipt of CF from DAR and the RCPI for the month as of
the date/effectivity/registration of the valuation input. Expressed in
equation form:

RCPI
Adjustment
Factor

RCPI for the Month as of the

Date of Receipt of Claimfolder
by LBP from DAR or the Most
recent RCPI for the Month
Issued Prior to the Date of
Receipt of CF

RCPI for the Month Issued as of

the Date/Effectivity/Registration
of the Valuation Input

B.
Capitalized Net Income (CNI) This shall refer to the
difference between the gross sales (AGP x SP) and total cost of
operations (CO) capitalized at 12%.
Expressed in equation form:
CNI =

(AGP x SP) - CO

.12
Where: CNI =
Capitalized Net Income
AGP = Latest available 12-month's gross production
immediately preceding the date of offer in case of
VOS or date of notice of coverage in case of CA.
SP

The average of the latest available 12month's selling prices prior to the date of receipt
of the claimfolder by LBP for processing, such
prices to be secured from the Department of

Agriculture (DA) and other appropriate regulatory

bodies or, in their absence, from the Bureau of
Agricultural Statistics. If possible, SP data shall be
gathered from the barangay or municipality where
the property is located. In the absence thereof, SP
may be secured within the province or region.
CO

.12

Cost of Operations
Whenever the cost of operations could not be
obtained or verified, an assumed net income rate
(NIR) of 20% shall be used. Landholdings planted to
coconut which are productive at the time of
offer/coverage shall continue to use the 70% NIR.
DAR and LBP shall continue to conduct joint
industry studies to establish the applicable NIR for
each crop covered under CARP.
Capitalization Rate
xxxx

D.

In the computation of Market Value per Tax Declaration (MV),

the most recent Tax Declaration (TD) and Schedule of Unit
Market Value (SMV) issued prior to receipt of claimfolder by
LBP shall be considered. The Unit Market Value (UMV) shall be
grossed up from the date of its effectivity up to the date of receipt
of claimfolder by LBP from DAR for processing, in accordance
with item II.A.A.6. (Emphasis and italics supplied)

In thus computing Capitalized Net Income (CNI), the Average Gross

Production (AGP) of the latest available 12 months immediately preceding the date
of offer in case of voluntary offer to sell or date of notice of coverage in case
of compulsory acquisition, and the average Selling Price (SP) of the latest
available 12 months prior to the date of receipt of the claimfolder by LBP for
processing, should be used.
While these dates-bases of computation are not clearly indicated in the
records (as the mode of acquisition is in fact disputed), the date of offer (assuming
the acquisition was by voluntary offer to sell) would have to be sometime in 1989,

the alleged time of voluntary offer to sell; whereas the date of notice of
coverage (assuming the acquisition was compulsory) would be sometime prior to
October 21, 1996, which is the date of the Notice of Land Valuation and
Acquisition, because under DAR Administrative Order No. 9, series of 1990,[27] as
amended by DAR Administrative Order No. 1, series of 1993, the notice of
coverage precedes the Notice of Land Valuation and Acquisition.
And the claimfolder would have been received by LBP in or before 1997,
the year the property was distributed to agrarian reform beneficiaries,[28] because
land distribution is the last step in the procedure prescribed by the above-said DAR
administrative orders. Hence, the data for the AGP should pertain to a period in
1989 (in case of voluntary offer to sell) or prior to October, 1996 (in case of
compulsory acquisition),while the data for the SP should pertain to 1997 or
earlier.
Commissioner Empleo, however, instead used available data within the 12month period prior to his ocular inspection in October 1998 for the AGP,[29] and
the average selling price for the period January 1998 to December 1998 for the
SP,[30] contrary to DAR AO 6-92, as amended.
Furthermore, the Regional Consumer Price Index (RCPI) Adjustment
Factor, which is used in computing the market value of the property, is the ratio of
the RCPI for the month when the claimfolder was received by LBP, to the RCPI
for the month of the registration of the most recent Tax Declaration and Schedule
of Unit Market Value[31] issued prior to receipt of claimfolder by LBP. Consistent
with the previous discussion, the applicable RCPIs should therefore be dated 1997
or earlier.
Again, Commissioner Empleo instead used RCPI data for January 1999 in
computing the RCPI Adjustment Factor,[32] contrary to DAR AO 6-92, as
amended.

Parenthetically, Commissioner Empleo testified[33] that his computations

were based on DAR Administrative Order No. 5, series of 1998.[34] This
Administrative Order took effect only on May 11, 1998, however, hence, the
applicable valuation rules in this case remain to be those prescribed by DAR AO 692, as amended by DAR AO 11-94.
But even if the 1998 valuation rules were applied, the data for the AGP
would still pertain to a period prior to October 1996, the revised reference date
being the date of the field investigation which precedes the Notice of Land
Valuation and Acquisition; while the data for the SP and the RCPIs would still
pertain to 1997 or earlier, there being no substantial revisions in their reference
dates.
Finally, as reflected earlier, Commissioner Empleo did not consider in his
computation the secondary crops planted on the property (coffee, pili, cashew,
etc.), contrary to DAR AO 6-92, as amended, which provides that the [t]otal
income shall be computed from the combination of crops actually produced on the
covered land whether seasonal or permanent.[35]

IN FINE, the valuation asserted by petitioners does not lie.

While the Court is minded to write finis to this protracted litigation by itself
computing the just compensation due respondents, the evidence on record is not
sufficient for the purpose. The Court is thus constrained to remand the case for
determination of the valuation of the property by the trial court, which is mandated
to consider the factors provided under Section 17 of RA 6657, as amended, and as
translated into the formula prescribed in DAR AO 6-92, as amended by DAR AO
11-94.
The trial court may, motu proprio or at the instance of any of the parties,
again appoint one or more commissioners to ascertain facts relevant to the dispute

and file a written report thereof. The amount determined by the trial court would
then be the basis of interest income on the cash and bond deposits due respondents
from the time of the taking of the property up to the time of actual payment of just
compensation.[36]
WHEREFORE,
the
challenged Decision
of
the
Court
of
Appeals is REVERSED and SET
ASIDE. Civil
Case
No.
98-6438 is
REMANDED to Branch 52 of the Sorsogon RTC which is directed to determine
with dispatch the just compensation due respondents strictly in accordance with the
procedures specified above.
SO ORDERED.

G.R. No. 162474

October 13, 2009

HON. VICENTE P. EUSEBIO, LORNA A. BERNARDO, VICTOR ENDRIGA, and the CITY
OF PASIG, Petitioners,
vs.
JOVITO M. LUIS, LIDINILA LUIS SANTOS, ANGELITA CAGALINGAN, ROMEO M. LUIS,
and VIRGINIA LUIS-BELLESTEROS,* Respondents.
DECISION
PERALTA, J.:
This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court,
praying that the Decision1of the Court of Appeals (CA) dated November 28, 2003, affirming
the trial court judgment, and the CA Resolution2dated February 27, 2004, denying
petitioners motion for reconsideration, be reversed and set aside.
The antecedent facts are as follows:
Respondents are the registered owners of a parcel of land covered by Transfer Certificate
of Title Nos. 53591 and 53589 with an area of 1,586 square meters. Said parcel of land was
taken by the City of Pasig sometime in 1980 and used as a municipal road now known as A.
Sandoval Avenue, Barangay Palatiw, Pasig City. On February 1, 1993, the Sanggunian of
Pasig City passed Resolution No. 15 authorizing payments to respondents for said parcel of
land. However, the Appraisal Committee of the City of Pasig, in Resolution No. 93-13 dated

October 19, 1993, assessed the value of the land only at P150.00 per square meter. In a
letter dated June 26, 1995, respondents requested the Appraisal Committee to
consider P2,000.00 per square meter as the value of their land.
One of the respondents also wrote a letter dated November 25, 1994 to Mayor Vicente P.
Eusebio calling the latters attention to the fact that a property in the same area, as the land
subject of this case, had been paid for by petitioners at the price of P2,000.00 per square
meter when said property was expropriated in the year 1994 also for conversion into a
public road. Subsequently, respondents counsel sent a demand letter dated August 26,
1996 to Mayor Eusebio, demanding the amount of P5,000.00 per square meter, or a total
of P7,930,000.00, as just compensation for respondents property. In response, Mayor
Eusebio wrote a letter dated September 9, 1996 informing respondents that the City of
Pasig cannot pay them more than the amount set by the Appraisal Committee.
Thus, on October 8, 1996, respondents filed a Complaint for Reconveyance and/or
Damages (Civil Case No. 65937) against herein petitioners before the Regional Trial Court
(RTC) of Pasig City, Branch 155. Respondents prayed that the property be returned to them
with payment of reasonable rental for sixteen years of use atP500.00 per square meter,
or P793,000.00, with legal interest of 12% per annum from date of filing of the complaint
until full payment, or in the event that said property can no longer be returned, that
petitioners be ordered to pay just compensation in the amount of P7,930,000.00 and rental
for sixteen years of use at P500.00 per square meter, or P793,000.00, both with legal
interest of 12% per annum from the date of filing of the complaint until full payment. In
addition, respondents prayed for payment of moral and exemplary damages, attorneys fees
and costs.
After trial, the RTC rendered a Decision3 dated January 2, 2001, the dispositive portion of
which reads as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of the
plaintiffs and against the defendants:
1. Declaring as ILLEGAL and UNJUST the action of the defendants in taking the
properties of plaintiffs covered by Transfer Certificates of Title Nos. 53591 and
53589 without their consent and without the benefit of an expropriation proceedings
required by law in the taking of private property for public use;
2. Ordering the defendants to jointly RETURN the subject properties to plaintiffs with
payment of reasonable rental for its use in the amount of P793,000.00 with legal
interest at the rate of 6% per annum from the filing of the instant Complaint until full
payment is made;
3. In the event that said properties can no longer be returned to the plaintiffs as the
same is already being used as a public road known as A. Sandoval Avenue, Pasig
City, the defendants are hereby ordered to jointly pay the plaintiffs the fair and
reasonable value therefore at P5,000.00 per square meter or a total ofP7,930,000.00
with payment of reasonable rental for its use in the amount of P500.00 per square

meter or a total of P793,000.00, both with legal interest at the rate of 6% per annum
from the filing of the instant Complaint until full payment is made; and
4. Ordering the defendants to jointly pay the plaintiffs attorneys fees in the amount
of P200,000.00.
No pronouncement as to costs.
SO ORDERED.
Petitioners then appealed the case to the CA, but the CA affirmed the RTC judgment in its
Decision dated November 28, 2003.
1avv phi 1

Petitioners motion for reconsideration of the CA Decision was denied per Resolution dated
February 27, 2004.
Hence, this petition where it is alleged that:
I. PUBLIC RESPONDENT COURT ERRED IN UPHOLDING THE RULING OF THE
LOWER COURT DESPITE THE APPARENT LACK OF JURISDICTION BY
REASON OF PRESCRIPTION OF PRIVATE RESPONDENTS CLAIM FOR JUST
COMPENSATION;
II. PUBLIC RESPONDENT COURT ERRED IN FIXING THE FAIR AND
REASONABLE
COMPENSATION
FOR
RESPONDENTS
PROPERTY
AT P5,000.00 PER SQUARE METER DESPITE THE GLARING FACT THAT AT
THE TIME OF TAKING IN THE YEAR 1980 THE FAIR MARKET VALUE WAS
PEGGED BY AN APPRAISAL COMMITTEE AT ONE HUNDRED SIXTY PESOS
(PHP160.00);
III. PUBLIC RESPONDENT COURT ERRED IN UPHOLDING THE JUDGMENT OF
THE LOWER COURT AWARDING THE AMOUNT OF P793,000.00 AS
REASONABLE RENTAL FOR THE USE OF RESPONDENTS PROPERTY IN
SPITE OF THE FACT THAT THE SAME WAS CONVERTED INTO A PUBLIC
ROAD BY A PREVIOUSLY ELECTED MUNICIPAL MAYOR WITHOUT
RESPONDENTS REGISTERING ANY COMPLAINT OR PROTEST FOR THE
TAKING AND DESPITE THE FACT THAT SUCH TAKING DID NOT PERSONALLY
BENEFIT THE PETITIONERS BUT THE PUBLIC AT LARGE; AND
IV. PUBLIC RESPONDENT COURT OF APPEALS ERRED IN AFFIRMING
THE P200,000.00 AWARD FOR ATTORNEYS FEES TO THE PRIVATE
RESPONDENTS COUNSEL DESPITE THE ABSENCE OF NEGLIGENCE OR
INACTION ON THE PART OF PETITIONERS RELATIVE TO THE INSTANT CLAIM
FOR JUST COMPENSATION.4
At the outset, petitioners must be disabused of their belief that respondents action for
recovery of their property, which had been taken for public use, or to claim just
compensation therefor is already barred by prescription. In Republic of the Philippines v.

Court of Appeals,5 the Court emphasized "that where private property is taken by the
Government for public use without first acquiring title thereto either through expropriation or
negotiated sale, the owners action to recover the land or the value thereof does not
prescribe." The Court went on to remind government agencies not to exercise the power of
eminent domain with wanton disregard for property rights as Section 9, Article III of the
Constitution provides that "private property shall not be taken for public use without just
compensation." 6
The remaining issues here are whether respondents are entitled to regain possession of
their property taken by the city government in the 1980s and, in the event that said property
can no longer be returned, how should just compensation to respondents be determined.
These issues had been squarely addressed in Forfom Development Corporation v.
Philippine National Railways,7which is closely analogous to the present case. In said earlier
case, the Philippine National Railways (PNR) took possession of the private property in
1972 without going through expropriation proceedings. The San Pedro-Carmona Commuter
Line Project was then implemented with the installation of railroad facilities on several
parcels of land, including that of petitioner Forfom. Said owner of the private property then
negotiated with PNR as to the amount of just compensation. No agreement having been
reached, Forfom filed a complaint for Recovery of Possession of Real Property and/or
Damages with the trial court sometime in August 1990.
In said case, the Court held that because the landowner did not act to question the lack of
expropriation proceedings for a very long period of time and even negotiated with the PNR
as to how much it should be paid as just compensation, said landowner is deemed to have
waived its right and is estopped from questioning the power of the PNR to expropriate or the
public use for which the power was exercised. It was further declared therein that:
x x x recovery of possession of the property by the landowner can no longer be allowed on
the grounds of estoppel and, more importantly, of public policy which imposes upon the
public utility the obligation to continue its services to the public. The non-filing of the case for
expropriation will not necessarily lead to the return of the property to the landowner. What is
left to the landowner is the right of compensation.
x x x It is settled that non-payment of just compensation does not entitle the private
landowners to recover possession of their expropriated lot.8
Just like in the Forfom case, herein respondents also failed to question the taking of their
property for a long period of time (from 1980 until the early 1990s) and, when asked during
trial what action they took after their property was taken, witness Jovito Luis, one of the
respondents, testified that "when we have an occasion to talk to Mayor Caruncho we
always asked for compensation."9 It is likewise undisputed that what was constructed by the
city government on respondents property was a road for public use, namely, A. Sandoval
Avenue in Pasig City. Clearly, as in Forfom, herein respondents are also estopped from
recovering possession of their land, but are entitled to just compensation.

Now, with regard to the trial courts determination of the amount of just compensation to
which respondents are entitled, the Court must strike down the same for being contrary to
established rules and jurisprudence.
The prevailing doctrine on judicial determination of just compensation is that set forth in
Forfom.10 Therein, the Court ruled that even if there are no expropriation proceedings
instituted to determine just compensation, the trial court is still mandated to act in
accordance with the procedure provided for in Section 5, Rule 67 of the 1997 Rules of Civil
Procedure, requiring the appointment of not more than three competent and disinterested
commissioners to ascertain and report to the court the just compensation for the subject
property. The Court reiterated its ruling in National Power Corporation v. Dela Cruz11 that
"trial with the aid of commissioners is a substantial right that may not be done away with
capriciously or for no reason at all."12 It was also emphasized therein that although
ascertainment of just compensation is a judicial prerogative, the commissioners findings
may only be disregarded or substituted with the trial courts own estimation of the propertys
value only if the commissioners have applied illegal principles to the evidence submitted to
them, where they have disregarded a clear preponderance of evidence, or where the
amount allowed is either grossly inadequate or excessive. Thus, the Court concluded in
Forfom that:
The judge should not have made a determination of just compensation without first having
appointed the required commissioners who would initially ascertain and report the just
compensation for the property involved. This being the case, we find the valuation made by
the trial court to be ineffectual, not having been made in accordance with the procedure
provided for by the rules.13
Verily, the determination of just compensation for property taken for public use must be
done not only for the protection of the landowners interest but also for the good of the
public. In Republic v. Court of Appeals,14 the Court explained as follows:
The concept of just compensation, however, does not imply fairness to the property owner
alone. Compensation must be just not only to the property owner, but also to the public
which ultimately bears the cost of expropriation.15
It is quite clear that the Court, in formulating and promulgating the procedure provided for in
Sections 5 and 6, Rule 67, found this to be the fairest way of arriving at the just
compensation to be paid for private property taken for public use.
With regard to the time as to when just compensation should be fixed, it is settled
jurisprudence that where property was taken without the benefit of expropriation
proceedings, and its owner files an action for recovery of possession thereof before the
commencement of expropriation proceedings, it is the value of the property at the time of
taking that is controlling.16 Explaining the reason for this rule in Manila International Airport
Authority v. Rodriguez,17 the Court, quoting Ansaldo v. Tantuico, Jr.,18 stated, thus:
The reason for the rule, as pointed out in Republic v. Lara, is that

. . . [w]here property is taken ahead of the filing of the condemnation proceedings, the value
thereof may be enchanced by the public purpose for which it is taken; the entry by the
plaintiff upon the property may have depreciated its value thereby; or, there may have been
a natural increase in the value of the property from the time the complaint is filed, due to
general economic conditions. The owner of private property should be compensated only
for what he actually loses; it is not intended that his compensation shall extend beyond his
loss or injury. And what he loses is only the actual value of his property at the time it is
taken. This is the only way that compensation to be paid can be truly just; i.e., just not only
to the individual whose property is taken,' 'but to the public, which is to pay for it.19
In this case, the trial court should have fixed just compensation for the property at its value
as of the time of taking in 1980, but there is nothing on record showing the value of the
property at that time. The trial court, therefore, clearly erred when it based its valuation for
the subject land on the price paid for properties in the same location, taken by the city
government only sometime in the year 1994.
However, in taking respondents property without the benefit of expropriation proceedings
and without payment of just compensation, the City of Pasig clearly acted in utter disregard
of respondents proprietary rights. Such conduct cannot be countenanced by the Court. For
said illegal taking, the City of Pasig should definitely be held liable for damages to
respondents. Again, in Manila International Airport Authority v. Rodriguez,20 the Court held
that the government agencys illegal occupation of the owners property for a very long
period of time surely resulted in pecuniary loss to the owner. The Court held as follows:
Such pecuniary loss entitles him to adequate compensation in the form of actual or
compensatory damages, which in this case should be the legal interest (6%) on the value of
the land at the time of taking, from said point up to full payment by the MIAA. This is based
on the principle that interest "runs as a matter of law and follows from the right of the
landowner to be placed in as good position as money can accomplish, as of the date of the
taking."
The award of interest renders unwarranted the grant of back rentals as extended by the
courts below. In Republic v. Lara, et al., the Court ruled that the indemnity for rentals is
inconsistent with a property owners right to be paid legal interest on the value of the
property, for if the condemnor is to pay the compensation due to the owners from the time
of the actual taking of their property, the payment of such compensation is deemed to
retroact to the actual taking of the property; and, hence, there is no basis for claiming
rentals
from
the
time
of
actual
taking.http://127.0.0.1:7860/source/2006.zip%3e17e,df|2006/FEB2006/161836.htm
_ftn#_ftn More explicitly, the Court held in Republic v. Garcellano that:
The uniform rule of this Court, however, is that this compensation must be, not in the form
of rentals, but by way of 'interest from the date that the company [or entity] exercising the
right of eminent domain take possession of the condemned lands, and the amounts granted
by the court shall cease to earn interest only from the moment they are paid to the owners
or deposited in court x x x.
xxxx