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DOJ OPINION NO. 109, s. 1991
July 25, 1991

 

Hon. Benjamin T. Leong
Department of Agrarian Reform
Elliptical Road, Diliman
Quezon City

 

S i r :

        This refers to your request for opinion on the proposal of Justice Fernando Santiago regarding the valuation of lands subject of voluntary offer to sell (VOS) or compulsory acquisition under R.A. No. 6657, otherwise known as the Comprehensive Agrarian Reform Law (CARL).

        You state that the proposal of Justice Santiago would amend the land valuation formula under DAR Administrative Order No. 17-90 which is presently being applied by the Department of Agrarian Reform Program (DAR) and the Land Bank of the Philippines (LBP) in determining land values under the Comprehensive Agrarian Reform Program (CARP). You further state that while the formula under A.O. No. 17 "tries to capture all the factors mentioned under Section 17 of R.A. No. 6657", the formula of Justice Santiago "does not capture the factors explicitly mentioned under Section 17 of R.A. No. 6657", and that its adoption "might be questioned on legal grounds for failure to comply with the mandate of the law".

        The abovementioned land valuation formula of Justice Santiago, as embodied in his Memorandum for the Presidential Agrarian Reform Council dated March 17, 1991 in connection with his voluntary offer to sell (VOS) and those of other landowners, is as follows:

"Land Value = Annual Lease Rental x 13.75"

        The above formula is explained as thus:

"The proposed Land Value is equal to the Principal which the Annual Rental can pay in full in thirty years at 6% interest per annum or in 13.75 years if no interest is charged against the farmer beneficiary, thus:

Annual Rental = Annual Amortization

Stated in another way, the factor 13.75 is the number of years the tenant beneficiary has to pay rental to pay the total price of the land".

        Section 17 of R.A. No. 6657 enumerates the factors/criteria to be considered in determining just compensation. It provides:

"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 the government assessors shall be considered. The social and economic benefits contributed by the farmers and the farm-workers 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".

        Notwithstanding the above provision, however, it is believed that DAR and LBP are not confined in their determination of just compensation to the factors/criteria set forth in said provision. Firstly, Section 16, paragraph (a) expressly provides that DAR shall include in its notice of acquisition to the landowner an offer to pay a corresponding value in accordance with the valuation set forth in Sections 17, 18, and other pertinent provisions hereof", while Section 18 also provides that the "LBP shall compensate the landowner in such amount as may be agreed upon by the landowner and the DAR and the LBP in accordance with the criteria provided for in Sections 16 and 17 and other pertinent provisions hereof, or as may be finally determined by the court as the just compensation for the land". Section 16, paragraph (d) likewise provides that in case of rejection or failure of the landowner to reply to the notice and offer of DAR, the DAR shall conduct summary administrative proceedings to determine just compensation by requiring the landowner, the LBP and other interested parties to submit evidence as to the just compensation for the land. All of these provisions imply that the criteria mentioned in Section 17 do not provide hard-and-fast rules which must be strictly adhered to by DAR and LBP in determining just compensation. Notably, while Section 17 provides that the factors/criteria mentioned therein "shall be considered" in determining just compensation, it does not expressly state that only these factors/criteria, and no others, shall be considered.

        Secondly, the matter of just compensation is essentially judicial in nature and, as such, the power to make a final determination of what is just compensation pertains exclusively to the court, and this power cannot be usurped by any other branch or official of the government (Ass'n of Small Landowners in the Philippines, Inc. vs. Secretary of Agrarian Reform, 175 SCRA 343). The factors/criteria set forth in Section 17, and in Section 18 and other pertinent provisions for that matter, should be deemed as mere standards to guide the proper officials in determining just compensation, but should in no case control or limit such determination, the ultimate consideration being that the compensation be the "full and fair equivalent of the property taken by its owner by the expropriator" (ibid).

        In fine, it is believed that there could be no serious legal objection to the proposal of Justice Santiago if it be determined that it best approximates the value of the loss to the landowners concerned (J.M. Tuazon Co. vs. Land Tenure Administration, 31 SCRA 413). In every case, what should control is the "just-ness" of the proposal taking into account the "revolutionary" nature of the expropriation under the CARL (see Ass'n of Small Landowners vs. Sec. of Agrarian Reform, supra, at pp. 385 & 386), which necessarily calls for some measure of liberality in the application of the law to the end that the rights secured to both landowners and tenant-beneficiaries under the Constitution and the CARL are protected, respected and upheld.

        Parenthetically, the Santiago formula is nothing new. In Japan, the validity of a numerical formula for determining just compensation at forty times the "official rental" of rice fields was upheld by the Japanese Supreme Court relying on a provision in the Japanese Constitution which imbues ownership of property with a distinct social function. It reads: "Ownership of property impose obligations. Its use shall be in the public good. Private property may be taken by the State for public use upon just compensation". A provision of the same tenor and import is found in Article XII, Section 6 of our own (1987) Constitution. (See article of Joaquin G. Bernas, S.J. entitled "Galunggong and land valuation", The Manila Chronicle, July 20-26, 1991, p. 4.)

        It bears to repeat that the factors/criteria to be considered in determining just compensation as provided in Section 17, supra, are deemed to be but statutory guideposts. As stated by the Supreme Court in the case just cited —

"But more importantly, the determination of the just compensation by the DAR is not by any means final and conclusive upon the landowner or any other interested party, for Section 16(f) clearly provides:

"Any party who disagrees with the decision may bring the matter to the court or proper jurisdiction for final determination of just compensation". (175 SCRA 381-382).

        In an earlier case, the Supreme court ruled that the "value to the owner, or the loss caused to him, and not the value to the condemn or, is what needs to be taken into consideration in expropriation proceedings. Neither should the fact that the land is desired for a particular public use be considered, for the main factor involved in an expropriation is that the owner is entitled to just compensation" (Republic v. Nable-Lichauco, 14 SCRA 682).

        In EPZA vs. Dulay, 149 SCRA 305, the Supreme Court stressed:

"Just compensation means the value of the property at the time of the taking. It means a fair and full equivalent for the loss sustained. All the facts as to the condition of the property and its surroundings, its improvements and capabilities should be considered". (Emphasis supplied).

        Please be guided accordingly.

 

SILVESTRE H. BELLO III

Acting Secretary



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Quezon City, Philippines
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