Dizon, Mary Rose E.

LAND BANK OF THE PHILIPPINES (LBP) vs. SORIANO

DOCTRINE: FORMULA The Court determined that the new formula by the DAR is bereft of
adequate data, upholding the amount derived from the old formula. However, the Court said that
since the application of the new formula is a matter of law and thus, should be made applicable,
the parties are not precluded from asking for any additional amount as may be warranted by the
new formula. The courts, in the exercise of their functions, have the final say on the amount of
just compensation.
TAKING The concept of just compensation embraces not only the correct determination of the
amount to be paid to the owners of the land, but also payment within a reasonable time from its
taking. Without prompt payment, compensation cannot be considered just inasmuch as the
property owner is made to suffer the consequences of being immediately deprived of his land while
being made to wait for a decade or more before actually receiving the amount necessary to cope
with his loss.
FACTS: A Petition for Review on Certiorari filed by LBP seeking to annul the Decision
and Resolution of the Court of Appeals (CA) in two cases herein where the main
controversy is the determination of just compensation for lands covered by the
Comprehensive Agrarian Reform Program (CARP).
Respondents Domingo and Mamerto Soriano are registered owners of parcels of rice
lands in Oas, Albay. 18.28 hectares out of 18.92 hectares of said lands were placed under
Operations Land Transfer and CARP as per PD No. 27 and RA No. 6657
[Comprehensive Agrarian Reform Law (CARL)]. The LBP computed the total value of
the lands as Php 490,602.89. Respondents were not satisfied with the valuation and thus
a Complaint was lodged with the RTC for the determination of just compensation,
alleging that they are entitled to an amount not less than Php 4.5M as just compensation.
The RTC ordered LBP to pay respondents Php 849,584.94, as computed under the
formula prescribed by EO No. 228 in determining the valuation of the property, i.e.
Land Value = Ave. Gross Production x 2.5 x Govt Support Price. Also, the court upheld
the award of compounded interest: xxx the subject lands were taken under PD 27 and were
covered by Operation Land Transfer, making the aforecited Administrative Order applicable.
Hence, the Petitioners SORIANOs are entitled to the 6% compounded interest per annum from
the date of taking on 21 October 1972 until full payment of the just compensation. Both parties
disagreed with the decision and both appealed with the CA. CA affirmed the judgment
of the RTC.
ISSUES: (1) Should the formula under EO No. 228 apply in this case?
(2) Should the interest be computed from: (a) the time of taking until the full payment of
just compensation is made; or (b) from the date when the LBP approves payment of the
land transfer claim and deposits the compensation proceeds in the name of the
landowner in cash and in bonds?
HELD + RATIO: (1) Yes. With the passage of RA No. 6657 or the CARL in 1998, new
guidelines were set for the determination of the just compensation. Two divergent
formulae arose which made the Court decide that if just compensation is not settled

Dizon, Mary Rose E.

prior to the passage of the RA No. 6657, it should be computed in accordance with the
said law, although the property was acquired under PD No. 27. However, the Court
determined that the proper valuation by the DAR is bereft of adequate data,
upholding the amount derived from the old formula even though the lands were
acquired under PD No. 27 and the complaint for just compensation was only set up on
November 23, 2000 or long after RA No. 6657 in 1988 and the factors enumerated in RA
No. 6657 were already considered in a basic formula by the DAR pursuant to its rulemaking power under RA No. 6657, i.e. Land Value = (Capitalized Net Income x 0.6) +
(Comparable Sales x 0.3) + (Market Value per Tax Declaration x 0.1). However, the Court
said that since the application of the new formula is a matter of law and thus, should be
made applicable, the parties are not precluded from asking for any additional amount as
may be warranted by the new formula.
(2) The imposition of interest should be computed from the time of the taking. The
concept of just compensation embraces not only the correct determination of the
amount to be paid to the owners of the land, but also payment within a reasonable
time from its taking. Without prompt payment, compensation cannot be considered
just inasmuch as the property owner is made to suffer the consequences of being
immediately deprived of his land while being made to wait for a decade or more
before actually receiving the amount necessary to cope with his loss. The intent of
DAR Administrative Order No. 5, where LBP relied on regarding the computation of
interest, was to address a situation where a number of landholdings remain unpaid in
view of the non-acceptance by the landowners of the compensation due to low
valuation. Had the landowner been paid from the time of taking his land and the money
deposited in a back, the money would have earned the same interest rate compounded
annually as authorized by banking laws, rules and regulations. Thus, the 6% interest rate
be imposed from the time of taking up to the time of full payment of just compensation.
The DARs decision is only preliminary and is not final and conclusive. The courts, in
the exercise of their functions, have the final say on the amount of just compensation.
Hence, the computation by the RTC is sustained. Petition is DENIED.