CASE BrieF NO. 2017-0611

CASE: Land Bank of the Philippines vs. Eugenio Dalauta [G.R. No. 190004 August 8, 2017]

PONENTE: JusticeJose Catral Mendoza

SUBJECT:

  1. Remedial Law:
    i. Jurisdiction – DARAB; R.A. No. 6657;
    ii. Eminent Domain – Just Compensation;
    iii. Primary Jurisdiction
  2. Civil Law: Prescriptive Period Article 1144
  3. Constitutional law: Power of Eminent Domain

“The valuation of property or determination of just compensation in eminent domain proceedings is essentially a judicial function which is vested with the courts and not with administrative agencies.”


FACTS:

Eugenio Dalauta (Dalauta) was the registered owner of an agricultural land in Florida, Butuan City. The land was placed by the Department of Agrarian Reform (DAR) under compulsory acquisition of the Comprehensive Agrarian Reform Program (CARP). Thus, Dalauta received on February 7, 1994 a Notice of Coverage notifying him that his land was subject of expropriation. Land Bank of the Philippines (LBP) offered ₱192,782.59 as compensation for the land, but Dalauta rejected such valuation for being too low.

The case was referred to the DAR Adjudication Board (DARAB). A summary administrative proceeding was conducted to determine the appropriate just compensation for the subject property. In its Resolution, the PARAD affirmed the valuation made by LBP in the amount of ₱192,782.59.

Dalauta filed a petition for determination of just compensation with the RTC, sitting as Special Agrarian Court (SAC).

Dalauta argued that the valuation of his land should be determined using the formula in DAR A.O. No. 6, series of 1992, which was Land Value (LV) = Capitalized Net Income (CNI) x 0.9 + Market Value (MV) per tax declaration x 0.1, as he had a net income of ₱350,000.00 in 1993 from the sale of the trees that were grown on the said land to Norberto C. Fonacier.

On May 30, 2006, the SAC rendered its decision pegging the just compensation in the amount of ₱2,639,557.00, higher than the value made by LBP.

Unsatisfied, LBP filed a motion for reconsideration, but it was denied by the SAC.

Hence, LBP filed a petition for review under Rule 42 of the Rules of Court before the CA, arguing, among others that the SAC erred in taking cognizance of the case when the DARAB decision sustaining the LBP valuation had long attained finality and that the SAC violated Republic Act (R.A.) No. 6657 and DAR A.O. No. 6, series of 1992, in fixing the just compensation.

The CA ruled that the SAC correctly took cognizance of the case. It ruled that the SAC had original and exclusive jurisdiction over all petitions for the determination of just compensation.  

ISSUES

A. Whether or not the trial court had properly taken jurisdiction over the case despite the finality of the PARAD Resolution.

B. What is the prescriptive period for filing a petition for the determination of just compensation before the SAC?

C. Did Dalauta file his petition within the prescribed period?

D. What is the proper value of just compensation of the subject property?

RULING:

A.       In agrarian reform cases, primary jurisdiction is vested in the DAR, more specifically, in the DARAB as provided for in Section 50 of R.A. No. 6657 which reads:

SEC. 50. Quasi-Judicial Powers of the DAR. – The DAR is hereby vested with primary jurisdiction to determine and adjudicate agrarian reform matters and shall have exclusive original jurisdiction over all matters involving the implementation of agrarian reform, except those falling under the exclusive jurisdiction of the Department of Agriculture (DA) and the Department of Environment and Natural Resources (DENR).

On the other hand, the SACs are the Regional Trial Courts expressly granted by law with original and exclusive jurisdiction over all petitions for the determination of just compensation to landowners. Section 57 of R.A. No. 6657 provides:

SEC. 57. Special Jurisdiction. – The Special Agrarian Courts shall have original and exclusive jurisdiction over all petitions for the determination of just compensation to landowners, and the prosecution of all criminal offenses under this Act. The Rules of Court shall apply to all proceedings before the Special Agrarian Courts, unless modified by this Act.

The Special Agrarian Courts shall decide all appropriate cases under their special jurisdiction within thirty (30) days from submission of the case for decision.

Recognizing the separate jurisdictions of the two bodies, the DARAB came out with its own rules to avert any confusion. Section 11, Rule XIII of the 1994 DARAB Rules of Procedure reads:

Land Valuation Determination and Payment of Just Compensation. – The decision of the Adjudicator on land valuation and preliminary determination and payment of just compensation shall not be appealable to the Board but shall be brought directly to the Regional Trial Courts designated as Special Agrarian Courts within fifteen (15) days from receipt of the notice thereof. Any party shall be entitled to only one motion for reconsideration.

Section 9, Article III of the 1987 Constitution provides that “private property shall not be taken for public use without just compensation.” In Export Processing Zone Authority v. Dulay, the Court ruled that the valuation of property in eminent domain is essentially a judicial function which cannot be vested in administrative agencies. “The executive department or the legislature may make the initial determination, 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 court’s findings. Much less can the courts be precluded from looking into the ‘justness’ of the decreed compensation. “

It is clear from Sec. 57 that the RTC, sitting as a Special Agrarian Court, has “original and exclusive jurisdiction over all petitions for the determination of just compensation to landowners.” This “original and exclusive” jurisdiction of the RTC would be undermined if the DAR would vest in administrative officials original jurisdiction in compensation cases and make the RTC an appellate court for the review of administrative decisions. Thus, although the new rules speak of directly appealing the decision of adjudicators to the RTCs sitting as Special Agrarian Courts, it is clear from Sec. 57 that the original and exclusive jurisdiction to determine such cases is in the RTCs. Any effort to transfer such jurisdiction to the adjudicators and to convert the original jurisdiction of the RTCs into appellate jurisdiction would be contrary to Sec. 57 and therefore would be void. Thus, direct resort to the SAC by Dalauta is valid.

It would be well to emphasize that the taking of property under R.A. No. 6657 is an exercise of the power of eminent domain by the State. The valuation of property or determination of just compensation in eminent domain proceedings is essentially a judicial function which is vested with the courts and not with administrative agencies. Consequently, the SAC properly took cognizance of Dalauta’s petition for determination of just compensation.

Since the determination of just compensation is a judicial function, the Court must abandon its ruling in Veterans Bank, Martinez and Soriano that a petition for determination of just compensation before the SAC shall be proscribed and adjudged dismissible if not filed within the 15-day period prescribed under the DARAB Rules.

B.       While R.A. No. 6657 itself does not provide for a period within which a landowner can file a petition for the determination of just compensation before the SAC, it cannot be imprescriptible because the parties cannot be placed in limbo indefinitely. The Civil Code settles such conundrum. Considering that the payment of just compensation is an obligation created by law, it should only be ten (10) years from the time the landowner received the notice of coverage. The Constitution itself provides for the payment of just compensation in eminent domain cases. Under Article 1144, such actions must be brought within ten (10) years from the time the right of action accrues. Article 1144 reads:

Art. 1144. The following actions must be brought within ten years from the time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.

Nevertheless, any interruption or delay caused by the government like proceedings in the DAR should toll the running of the prescriptive period. The statute of limitations has been devised to operate against those who slept on their rights, but not against those desirous to act but cannot do so for causes beyond their control.

C.       Dalauta received the Notice of Coverage on February 7, 1994. He then filed a petition for determination of just compensation on February 28, 2000. Clearly, the filing date was well within the ten year prescriptive period under Article 1141.

D.      The Court agrees with the position of Justice Francis Jardeleza that just compensation for Dalauta’s land should be computed based on the formula provided under DAR-LBP Joint Memorandum Circular No. 11, series of 2003 (JMC No. 11 (2003)). This Memorandum Circular, which provides for the specific guidelines for properties with standing commercial trees, explains:

The Capitalized Net Income (CNI) approach to land valuation assumes that there would be uniform streams of future income that would be realized in perpetuity from the seasonal/permanent crops planted to the land. In the case of commercial trees (hardwood and soft wood species), however, only a one-time income is realized when the trees are due for harvest. The regular CNI approach in the valuation of lands planted to commercial trees would therefore not apply.

During the proceedings before the SAC, Dalauta testified that he derived a net income of ₱350,000.00 in 1993 from the sale to Fonacier of falcata trees grown in the property.

Dalauta’s sale of falcata trees indeed appears to be a one-time transaction. He did not claim to have derived any other income from the property prior to receiving the Notice of Coverage from the DAR in February 1994. For this reason, his property would be more appropriately covered by the formula provided under JMC No. 11 (2003).

NOTA BENE:

Please note the following observation of the Supreme Court:

“There may be situations where a landowner, who has a pending administrative case before the DAR for determination of just compensation, still files a petition before the SAC for the same objective. Such recourse is not strictly a case of forum shopping, the administrative determination being not resjudicata binding on the SAC. This was allowed by the Court in LBP v. Celada and other several cases. Some of these cases were enumerated in Land Bank of the Philippines v. Umandap as follows:

  1. In the 1999 case of Land Bank of the Philippines v. Court of Appeals, we held that the SAC properly acquired jurisdiction over the petition to determine just compensation filed by the landowner without waiting for the completion of DARAB’s re-evaluation of the land.
  2.  In the 2004 case of Land Bank of the Philippines v. Wycoco, we allowed a direct resort to the SAC even where no summary administrative proceedings have been held before the DARAB.
  3. In the 2006 case of Land Bank of the Philippines v. Celada, this Court upheld the jurisdiction of the SAC despite the pendency of administrative proceedings before the DARAB. x x x. xxxx
  4. In the 2009 case of Land Bank of the Philippines v. Belista, this Court permitted a direct recourse to the SAC without an intermediate appeal to the DARAB as mandated under the new provision in the 2003 DARAB Rules of Procedure. We ruled:

Although Section 5, Rule XIX of the 2003 DARAB Rules of Procedure provides that the land valuation cases decided by the adjudicator are now appealable to the Board, such rule could not change the clear import of Section 57 of RA No. 6657 that the original and exclusive jurisdiction to determine just compensation is in the RTC. Thus, Section 57 authorizes direct resort to the SAC in cases involving petitions for the determination of just compensation. In accordance with the said Section 57, petitioner properly filed the petition before the RTC and, hence, the RTC erred in dismissing the case. Jurisdiction over the subject matter is conferred by law. Only a statute can confer jurisdiction on courts and administrative agencies while rules of procedure cannot.

Nevertheless, the practice should be discouraged. Everyone can only agree that simultaneous hearings are a waste of time, energy and resources. To prevent such a messy situation, a landowner should withdraw his case with the DAR before filing his petition before the SAC and manifest the fact of withdrawal by alleging it in the petition itself. Failure to do so, should be a ground for a motion to suspend judicial proceedings until the administrative proceedings would be terminated. It is simply ludicruous to allow two procedures to continue at the same time.

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THINGS DECIDED:

A) The Special Agrarian Courts have original and exclusive jurisdiction over all petitions for the determination of just compensation to landowners, and the prosecution of all criminal offenses under R.A. 6657.

B) In Export Processing Zone Authority v. Dulay, the Court ruled that the valuation of property in eminent domain is essentially a judicial function which cannot be vested in administrative agencies. 

C) The executive department or the legislature may make the initial determination, 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 court’s findings. Much less can the courts be precluded from looking into the ‘justness’ of the decreed compensation.

D) It is clear from Sec. 57 that the RTC, sitting as a Special Agrarian Court, has “original and exclusive jurisdiction over all petitions for the determination of just compensation to landowners.” This “original and exclusive” jurisdiction of the RTC would be undermined if the DAR would vest in administrative officials original jurisdiction in compensation cases and make the RTC an appellate court for the review of administrative decisions. Thus, although the new rules speak of directly appealing the decision of adjudicators to the RTCs sitting as Special Agrarian Courts, it is clear from Sec. 57 that the original and exclusive jurisdiction to determine such cases is in the RTCs. Any effort to transfer such jurisdiction to the adjudicators and to convert the original jurisdiction of the RTCs into appellate jurisdiction would be contrary to Sec. 57 and therefore would be void.

E) The valuation of property or determination of just compensation in eminent domain proceedings is essentially a judicial function which is vested with the courts and not with administrative agencies. 

F) Considering that the payment of just compensation is an obligation created by law, it should only be ten (10) years from the time the landowner received the notice of coverage (applying Art. 1144 of the NCC). 

G) A landowner should withdraw his case with the DAR before filing his petition for the determination of just compensation before the SAC and manifest the fact of withdrawal by alleging it in the petition itself. Failure to do so, should be a ground for a motion to suspend judicial proceedings until the administrative proceedings would be terminated.


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