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G.R. No. 168967 February 12, 2010

CITY OF ILOILO represented by HON. JERRY P. TREAS, City Mayor, Petitioner,vs.

HON. LOLITA CONTRERAS-BESANA, Presiding Judge, Regional Trial Court, Branch 32, and ELPIDIOJAVELLANA,Respondents.

D E C I S I O N

DEL CASTILLO,J.:

It is arbitrary and capricious for the government to initiate expropriation proceedings, seize a persons property,

allow the order of expropriation to become final, but then fail to justly compensate the owner for over 25 years.

This is government at its most high-handed and irresponsible, and should be condemned in the strongest possible

terms. For its failure to properly compensate the landowner, the City of Iloilo is liable for damages.

Factual Antecedents

The essential facts are not in dispute.

On September 18, 1981, petitioner filed a Complaint4for eminent domain against private respondent Elpidio T.

Javellana (Javellana) and Southern Negros Development Bank, the latter as mortgagee. The complaint sought to

expropriate two parcels of land known as Lot Nos. 3497-CC and 3497-DD registered in Javellanas name under

Transfer Certificate of Title (TCT) No. T-44894 (the Subject Property) to be used as a school site for Lapaz High

School.5Petitioner alleged that the Subject Property was declared for tax purposes in Tax Declaration No. 40080 to

have a value of P60.00 per square meter, or a total value of P43,560.00. The case was docketed as Civil Case No.

14052 and raffled to then Court of First Instance of Iloilo, Branch 7.

On December 9, 1981, Javellana filed hisAnswer6where he admitted ownership of the Subject Property but denied

the petitioners avowed public purpose of the sought-for expropriation, since the City of Iloilo already had an

existing school site for Lapaz High School. Javellana also claimed that the true fair market value of his property wasno less than P220.00 per square meter.

7

On May 11, 1982, petitioner filed a Motion for Issuance of Writ of Possession, alleging that it had deposited the

amount of P40,000.00 with the Philippine National Bank-Iloilo Branch. Petitioner claimed that it was entitled to the

immediate possession of the Subject Property, citing Section 1 of Presidential Decree No. 1533,8after it had

deposited an amount equivalent to 10% of the amount of compensation. Petitioner attached to its motion a

Certification issued by Estefanio C. Libutan, then Officer-in-Charge of the Iloilo City Treasurers Office, stating that

said deposit was made.9

Javellana filed an Opposition to theMotion for the Issuance of Writ of Possession10

citing the same grounds he

raised in his Answerthat the city already had a vast tract of land where its existing school site was located, and

the deposit of a mere 10% of the Subject Propertys tax valuation was grossly inadequate.

On May 17, 1983, the trial court issued an Order11

which granted petitionersMotion for Issuance of Writ of

Possessionand authorized the petitioner to take immediate possession of the Subject Property. The court ruled:

Premises considered, the Motion for the Issuance of a Writ of Possession dated May 10, 1982, filed by plaintiff is

hereby granted. Plaintiff is hereby allowed to take immediate possession, control and disposition of the properties

known as Lot Nos. 3497-CC and 3497-DD x x x.12

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Thereafter, a Writ of Possession13

was issued in petitioners favor, and petitioner was able to take physical

possession of the properties sometime in the middle of 1985. At no time has Javellana ever denied that the Subject

Property was actually used as the site of Lapaz National High School. Aside from the filing by the private

respondent of hisAmended Answeron April 21, 1984,14

the expropriation proceedings remained dormant.

Sixteen years later, on April 17, 2000, Javellana filed an Ex Parte Motion/Manifestation, where he alleged that

when he finally sought to withdraw the P40,000.00 allegedly deposited by the petitioner, he discovered that nosuch deposit was ever made. In support of this contention, private respondent presented a Certification from the

Philippine National Bank stating that no deposit was ever made for the expropriation of the Subject

Property.15

Private respondent thus demanded his just compensation as well as interest. Attempts at an amicable

resolution and a negotiated sale were unsuccessful. It bears emphasis that petitioner could not present any

evidencewhether documentary or testimonialto prove that any payment was actually made to private

respondent.

Thereafter, on April 2, 2003, private respondent filed a Complaint16

against petitioner for Recovery of Possession,

Fixing and Recovery of Rental and Damages. The case was docketed as Civil Case No. 03-27571, and raffled to

Branch 28 of the Iloilo City Regional Trial Court. Private respondent alleged that since he had not been

compensated for the Subject Property, petitioners possession was illegal, and he was entitled to recovery of

possession of his lots. He prayed that petitioner be ordered to vacate the Subject Property and pay rentalsamounting to P15,000.00 per month together with moral, exemplary, and actual damages, as well as attorneys

fees.1avvphi1

On May 15, 2003, petitioner filed its Answer,17

arguing that Javellana could no longer bring an action for recovery

since the Subject Property was already taken for public use. Rather, private respondent could only demand for the

payment of just compensation. Petitioner also maintained that the legality or illegality of petitioners possession of

the property should be determined in the eminent domain case and not in a separate action for recovery of

possession.

Both parties jointly moved to consolidate the expropriation case (Civil Case No. 14052) and the case for recovery of

possession (Civil Case No. 03-27571),18

which motion was granted by the trial court in an Order dated August 26,

2003.19

On November 14, 2003, a commission was created to determine the just compensation due to Javellana.20

On November 20, 2003, private respondent filed a Motion/Manifestation dated November 19, 2003 claiming that

before a commission is created, the trial court should first order the condemnation of the property, in accordance

with the Rules of Court. Javellana likewise insisted that the fair market value of the Subject Property should be

reckoned from the date when the court orders the condemnation of the property, and not the date of actual

taking, since petitioners possession of the property was questionable.21

Before petitioner could file its Comment,

the RTC issued an Order dated November 21, 2003 denying the Motion.22

Undeterred, Javellana filed on November 25, 2003, an Omnibus Motion to Declare Null and Void the Order of May

17, 1983 and toRequire Plaintiff to Deposit 10% or P254,000.00. Javellana claimed that the amount is equivalent to

the 10% of the fair market value of the Subject Property, as determined by the Iloilo City Appraisal Committee in

2001, at the t ime when the parties were trying to negotiate a settlement.23

First Assailed Order

On December 12, 2003, the RTC issued the First Assailed Order, which nullified the Order dated May 17, 1983

(concerning the issuance of a writ of possession over the Subject Property). The trial court ruled:

x x x the Order dated May 17, 1983 is hereby declared null and void and the plaintiff [is] hereby ordered to

immediately deposit with the PNB the 10% of the just compensation after the Commission shall have rendered its

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report and have determined the value of the property not at the time it was condemned but at the time the

complaint was filed in court.24

(Emphasis ours)

Second Assailed Order

x x x the Order dated May 17, 1983 is hereby declared null and void and the plaintiff [is] hereby ordered to

immediately deposit with the PNB the 10% of the just compensation after the Commission shall have rendered itsreport and have determined the value of the property not at the time it was condemned but at the time this order

was issued. (Underscoring in original text)

Third Assailed Order

The Order dated June 15, 2004 among other things stated that parties and counsels must be bound by the

Commissioners Report regarding the value of the propertynot at the time it was condemned but at the time this

order was issued.

Petitioners Arguments

Petitioner is before us claiming that (1) the trial court gravely abused its discretion amounting to lack or excess of

jurisdiction in overturning the Order dated May 17, 1983, which was already a final order; and (2) just

compensation for the expropriation should be based on the Subject Propertys fair market value either at the time

of taking or filing of the complaint.

Private Respondents Arguments

Private respondent filed his Comment on October 3, 2005,31

arguing that (1) there was no error of jurisdiction

correctible by certiorari; and (2) that the Assailed Orders were interlocutory orders that were subject to

amendment and nullification at the discretion of the court.

Issues

There are only two questions we need answer, and they are not at all novel. First, does an order of expropriation

become final? Second, what is the correct reckoning point for the determination of just compensation?

Our Ruling

Expropriation proceedings have two stages. The first phase ends with an order of dismissal, or a determination

that the property is to be acquired for a public purpose.32

Either order will be a final order that may be appealed by

the aggrieved party.33

The second phase consists of the determination of just compensation.34

It ends with an

order fixing the amount to be paid to the landowner. Both orders, being final, are appealable.35

An order of condemnation or dismissal is final, resolving the question of whether or not the plaintiff has properly

and legally exercised its power of eminent domain.36Once the first order becomes final and no appeal thereto is

taken, the authority to expropriate and its public use can no longer be questioned.37

1avvphi1

Javellana did not bother to file an appeal from the May 17, 1983 Order which granted petitionersMotion for

Issuance of Writ of Possession and which authorized petitioner to take immediate possession of the Subject

Property. Thus, it has become final, and the petitioners right to expropriate the property for a public use is no

longer subject to review. On the first question, therefore, we rule that the trial court gravely erred in nullifying the

May 17, 1983 Order.

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We now turn to the reckoning date for the determination of just compensation. Petitioner claims that the

computation should be made as of September 18, 1981, the date when the expropriation complaint was filed. We

agree.

In a long line of cases, we have constantly affirmed that:

x x x just compensation is to be ascertained as of the time of the taking, which usually coincides with thecommencement of the expropriation proceedings. Where the institution of the action precedes entry into the

property, the just compensation is to be ascertained as of the time of the filing of the complaint.38

WHEREFORE, the petition is GRANTED. The Orders of the Regional Trial Court of Iloilo City, Branch 32 in Civil CaseNo. 14052 and Civil Case No. 03-27571 dated December 12, 2003, June 15, 2004, and March 9, 2005 are

hereby ANNULLED and SET ASIDE.

The Regional Trial Court of Iloilo City, Branch 32 is DIRECTED to immediately determine the just compensation due

to private respondent Elpidio T. Javellana based on the fair market value of the Subject Property at the time Civil

Case No. 14052 was filed, or on September 18, 1981 with interest at the legal rate of six percent (6%) per annum

from the time of filing until full payment is made.

The City of Iloilo is ORDERED to pay private respondent the amount of P200,000.00 as exemplary damages.

SO ORDERED.

REPUBLIC OF THE PHILIPPINES, G.R. No. 185091REPRESENTED BY THEDEPARTMENT OF EDUCATIONDIVISION OF LIPA CITY (FORPANINSINGIN PRIMARY SCHOOL),

Petitioner, Present:

CARPIO,J., Chairperson,- versus - ABAD,

VILLARAMA, JR.,*

PEREZ,**

and

MENDOZA,JJ.

PRIMO MENDOZA andMARIA LUCERO, Promulgated:

Respondents.

August 8, 2010

x --------------------------------------------------------------------------------------- x

DECISION

ABAD,J.:

This case is about the propriety of filing an ejectment suit against the Government for its failure to acquire

ownership of a privately owned property that it had long used as a school site and to pay just compensation for it.

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The Facts and the Case

Paninsingin Primary School (PPS) is a public school operated by petitioner Republic of the Philippines (the

Republic) through the Department of Education. PPS has been using 1,149 square meters of land in Lipa City,

Batangas since 1957 for its school. But the property, a portion of Lots 1923 and 1925, were registered in the name

of respondents Primo and Maria Mendoza (the Mendozas) under Transfer Certificate of Title (TCT) T-

11410.[1]

On March 27, 1962 the Mendozas caused Lots 1923 and 1925 to be consolidated and subdivided into four

lots, as follows:

Lot 1292 square meters in favor of Claudia DimayugaLot 2292 square meters in favor of the Mendozas

Lot 3543 square meters in favor of Gervacio Ronquillo; and

Lot 41,149 square meters in favor of the City Government of Lipa[2]

As a result of subdivision, the Register of Deeds partially cancelled TCT T-11410 and issued new titles for

Lots 1 and 3 in favor of Dimayuga and Ronquillo, respectively. Lot 2 remained in the name of the Mendozas but no

new title was issued in the name of the City Government of Lipa for Lot 4.[3]

Meantime, PPS remained in

possession of the property.

The Republic claimed that, while no title was issued in the name of the City Government of Lipa,

the Mendozas had relinquished to it their right over the school lot as evidenced by the consolidation and

subdivision plan. Further, the property had long been tax-declared in the name of the City Government and PPS

built significant, permanent improvements on the same. These improvements had also been tax -declared.[4]

The Mendozas claim, on the other hand, that although PPS sought permission from them to use the property

as a school site, they never relinquished their right to it. They allowed PPS to occupy the property since they had

no need for it at that time. Thus, it has remained registered in their name under the original title, TCT T-11410,

which had only been partially cancelled.

On November 6, 1998 the Mendozas wrote PPS, demanding that it vacate the disputed property.[5]

When

PPS declined to do so, on January 12, 1999 the Mendozas filed a complaint with the Municipal Trial Court in Cities

(MTCC) of Lipa City in Civil Case 0002-99 against PPS for unlawful detainer with application for temporary

restraining order and writ of preliminary injunction.[6]

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On July 13, 1999 the MTCC rendered a decision, dismissing the complaint on ground of the Republics

immunity from suit.[7]

The Mendozas appealed to the Regional Trial Court (RTC) of Lipa City which ruled that the

Republics consent was not necessary since the action before the MTCC was not against it .[8]

In light of the RTCs decision, the Mendozas filed with the MTCC a motion to render judgment in the case

before it.[9]

The MTCC denied the motion, however, saying that jurisdiction over the case had passed to the RTC

upon appeal.[10]

Later, the RTC remanded the case back to the MTCC,[11]

which then dismissed the case for

insufficiency of evidence.[12]

Consequently, the Mendozas once again appealed to the RTC in Civil Case 2001-0236.

On June 27, 2006 the RTC found in favor of the Mendozas and ordered PPS to vacate the property. It held

that the Mendozas had the better right of possession since they were its registered owners. PPS, on the other

hand, could not produce any document to prove the transfer of ownership of the land in its favor.[13]

PPS moved

for reconsideration, but the RTC denied it.

The Republic, through the Office of the Solicitor General (OSG), appealed the RTC decision to the Court of

Appeals (CA) in CA-G.R. SP 96604 on the grounds that: (1) the Mendozas were barred by laches from recovering

possession of the school lot; (2) sufficient evidence showed that the Mendozas relinquished ownership of the

subject lot to the City Government of Lipa City for use as school; and (3) Lot 4, Pcs-5019 has long been declared in

the name of the City Government since 1957 for taxation purposes.[14]

In a decision dated February 26, 2008, the CA affirmed the RTC decision.[15] Upholding the Torrens

system, it emphasized the indefeasibility of the Mendozas registered title and the imprescriptible nature of their

right to eject any person occupying the property. The CA held that, this being the case, the Republics possession

of the property through PPS should be deemed merely a tolerated one that could not ripen into ownership.

The CA also rejected the Republics claim of ownership since it presented no documentary evidence to

prove the transfer of the property in favor of the government. Moreover, even assuming that

the Mendozas relinquished their right to the property in 1957 in the governments favor, the latter never took

steps to have the title to the property issued in its name or have its right as owner annotated on the Mendozas

title. The CA held that, by its omissions, the Republic may be held in estoppel to claim that theMendozas were

barred by laches from bringing its action.

With the denial of its motion for reconsideration, the Republic has taken recourse to this

Court viapetition for review on certiorariunder Rule 45.

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The Issue Presented

The issue in this case is whether or not the CA erred in holding that the Mendozas were entitled to evict

the Republic from the subject property that it had used for a public school.

The Courts Ruling

A decree of registration is conclusive upon all persons, including the Government of the Republic and all

its branches, whether or not mentioned by name in the application for registration or its notice.[16]

Indeed, title to

the land, once registered, is imprescriptible.[17]

No one may acquire it from the registered owner by adverse, open,

and notorious possession.[18]

Thus, to a registered owner under the Torrens system, the right to recover

possession of the registered property is equally imprescriptible since possession is a mere consequence of

ownership.

Here, the existence and genuineness of the Mendozas title over the property has not been

disputed. While the consolidation and subdivision plan of Lots 1923 and 1925 shows that a 1,149 square meter lot

had been designated to the City Government, the Republic itself admits that no new title was issued to it or to any

of its subdivisions for the portion that PPS had been occupying since 1957.[19]

That the City Government of Lipa tax-declared the property and its improvements in its name cannot

defeat the Mendozas title. This Court has allowed tax declarations to stand as proof of ownership only in the

absence of a certificate of title.[20] Otherwise, they have little evidentiary weight as proof of ownership.[21]

The CA erred, however, in ordering the eviction of PPS from the property that it had held as government

school site for more than 50 years. The evidence on record shows that the Mendozas intended to cede the

property to the City Government of Lipa permanently. In fact, they allowed the city to declare the property in its

name for tax purposes. And when they sought in 1962 to have the bigger lot subdivided into four,

the Mendozas earmarked Lot 4, containing 1,149 square meters, for the City Government of Lipa. Under the

circumstances, it may be assumed that the Mendozas agreed to transfer ownership of the land to the government,

whether to the City Government of Lipa or to the Republic, way back but never got around to do so and the

Republic itself altogether forgot about it. Consequently, the Republic should be deemed entitled to possession

pending the Mendozas formal transfer of ownership to it upon payment of just compensation.

The Court holds that, where the owner agrees voluntarily to the taking of his property by the government

for public use, he thereby waives his right to the institution of a formal expropriation proceeding covering such

property. Further, as the Court also held in Eusebio v. Luis,[22]

the failure for a long time of the owner to question

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the lack of expropriation proceedings covering a property that the government had taken constitutes a waiver of

his right to gain back possession. The Mendozas remedy is an action for the payment of just compensation, not

ejectment.

In Republic of the Philippines v. Court of Appeals ,[23]the Court affirmed the RTCs power to award just

compensation even in the absence of a proper expropriation proceeding. It held that the RTC can determine just

compensation based on the evidence presented before it in an ordinary civil action for recovery of possession of

property or its value and damages. As to the time when just compensation should be fixed, it is settled that where

property was taken without the benefit of expropriation proceedings and its owner filed an action for recovery of

possession before the commencement of expropriation proceedings, it is the value of the property at the time of

taking that is controlling.[24]

Since the MTCC did not have jurisdiction either to evict the Republic from the land it had taken for public

use or to hear and adjudicate the Mendozas right to just compensation for it, the CA should have ordered the

complaint for unlawful detainer dismissed without prejudice to their filing a proper action for recovery of such

compensation.

WHEREFORE, the Court partially GRANTSthe petition, REVERSESthe February 26, 2008 decision and the

October 20, 2008 resolution of the Court of Appeals in CA-G.R. 96604, and ORDERSthe dismissal of respondents

Primo and Maria Mendozas action for eviction before the Municipal Trial Court in Cities of Lipa City in Civil Case

0002-99 without prejudice to their filing an action for payment of just compensation against the Republic of the

Philippines or, when appropriate, against the City of Lipa.

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LAND BANK OF THE PHILIPPINES, G.R. No. 170685Petitioner, Present:

CORONA, C. J., Chairperson,

CARPIO MORALES,

- versus - VELASCO, JR.,

DEL CASTILLO, and

PEREZ,JJ.

ENRIQUE LIVIOCO, Promulgated:Respondent. September 22, 2010

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

D E C I S I O N

DEL CASTILLO,J.

When the evidence received by the trial court are irrelevant to the issue of just compensation and in total disregard of

the requirements provided under Section 17 of the Comprehensive Agrarian Reform Law, the Court is left with no evidence on

record that could aid in the proper resolution of the case. While remand is frowned upon for obviating the speedy

dispensation of justice, it becomes necessary to ensure compliance with the law and to give everyone the landowner, the

farmers, and the Statetheir due.

This is a Petition for Review under Rule 45, assailing the August 30, 2005 Decisio n[1]

of the Court of Appeals (CA), as well

as its December 5, 2005 Resolution[2]

in CA-GR SP No. 83138. The dispositive portion of the assailed Decision reads as follows:

WHEREFORE, premises considered, the petition is DENIED. The Decision dated January 29, 2004

and the Order dated March 16, 2004 of the RTC, Branch 56, Angeles City in Civil Case No. 10405 are hereby

AFFIRMED.[3]

Factual Antecedents

Petitioner Land Bank of the Philippines (LBP) is the government financial institution[4]

established to aid in the

implementation of the Comprehensive Agrarian Reform Program (CARP) as well as to act as financial intermediary of the

Agrarian Reform Fund.[5]

Respondent Enrique Livioco (Livioco) was the owner of 30.6329 hectares of sugarland[6]

located in Dapdap, Mabalacat,

Pampanga. Sometime between 1987 and 1988,[7]

Livioco offered his sugarland to the Department of Agrarian Reform (DAR)

for acquisition under the CARP at P30.00 per square meter, for a total of P9,189,870.00. The voluntary-offer-to-sell (VOS)

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form[8]

he submitted to the DAR indicated that his property is adjacent to residential subdivisions and to an international paper

mill.[9]

The DAR referred Liviocos offer to the LBP for valuation.[10]

Following Section 17 of Republic Act (RA) No. 6657 and DAR

Administrative Order No. 17, series of 1989,[11]as amended by Administrative Order No. 3, series of 1991,[12]the LBP set the

price at P3.21 per square meter or a total of P827,943.48 for 26 hectares .[13]

Livioco was then promptly informed of the

valuation[14]

and that the cash portion of the claim proceeds have been kept in trust pending *his+ submission of the

*ownership documentary+ requirements.[15]

It appears however that Livioco did not act upon the notice given to him by both

government agencies. On September 20, 1991, LBP issued a certification to the Register of Deeds of Pampanga that it has

earmarked the amount of P827,943.48 as compensation for Liviocos 26 hectares.[16]

It was only two years later[17]

that Livioco requested for a reevaluation of the compensation on the ground that its value

had already appreciated from the time it was first offered for sale.[18]

The request was denied by Regional Director Antonio

Nuesa on the ground that there was already a perfected sale.[19]

The DAR proceeded to take possession of Liviocos property. In 1994, the DAR awarded Certificates of Land Ownership

Award (CLOAs) covering Liviocos property to 26 qualified farmer-beneficiaries.[20]

Livioco filed separate complaints to cancel the CLOAs and to recover his property but the same proved futile. The first

case he filed in 1995 was for quieting of title, recovery of possession and damages against the DAR, LBP, Register of Deeds, and

the farmer-beneficiaries.[21]

In its final and executory Decision,[22]

the CA sustained the validity of the CLOAs.[23]

The relevant

portions of the Decision read:

What matters most is the fact that the requirements for Compulsory Acquisition of private lands,

especially the indispensable ones, to wit: (1) valuation of the subject property by the proper government

agency which is the LBP; (2) DARs Notice of Land Valuation to petitioner and; (3) most importantly, the

deposit of the amount of land valuation in the name of petitioner after he rejected the said amount, were

substantially complied with in the instant case.

Considering therefore that there was material and substantial compliance with the requirements

for the Compulsory Acquisition of the subject land, the acquisition of the same is indubitably in order and

in accordance with law.[24]

Livioco then filed in 1998 a petition for reconveyance before the DAR Regional Office.[25]

The case eventually reached the

CA, which dismissed the petition on the ground that the validity of the compulsory acquisition had already been decided with

finality in the earlier CA case, to wit:

As the disputed property was eventually acquired through Compulsory Acquisition, its

reconveyance to the petitioners was properly disallowed by the DAR. The certifications by other

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government agencies that the land was identified as a resettlement area [are] of no avail as the DAR is

vested with primary jurisdiction to determine and adjudicate agrarian reform matters and has exclusive

original jurisdiction over all matters involving the implementation of agrarian reform.

x x x x

Indeed, it is to the best interest of the public that the litigation regarding the reconveyance of thedisputed property between the same parties for the same grounds must come to an end, the matter

having [been] already fully and fairly adjudicated by the DAR, this Court and the Supreme Court which had

declined to disturb the judgment of this Court.[26]

Upon the request of DAR, LBP made two amendments to the valuation. At first, they reduced the acquired area from

30.6329 hectares to 23.9191 hectares. Later, they increased the acquired area to 24.2088 hectares. The remaining 6.4241

hectares of the property was determined as not compensable because this comprised a residential area, a creek, road, and a

chapel.[27]

The total value for 24.2088 hectares was P770,904.54. Livioco was informed on August 8, 2001 that the payment

was already deposited in cash and agrarian reform bonds and may be withdrawn upon submission of the documentaryrequirements.

[28]

Unable to recover his property but unwilling to accept what he believes was an outrageously low valuation of his

property, Livioco finally filed a petition for judicial determination of just compensation against DAR, LBP, and the CLOA holders

before Branch 56 of the Regional Trial Court (RTC) of Angeles City on December 18, 2001.[29]

He maintained that between 1990

and 2000, the area where his property is located has become predominantly residential hence he should be paid his propertys

value as such. To prove that his property is now residential, Livioco presented a Certification from the Office of the Municipal

Planning and Development Coordinator of the Municipality of Mabalacat that, as per zoning ordinance, Liviocos land is located

in an area where the dominant land use is residential.[30]

He also presented certifications from the Housing and Land Use

Regulatory Board,[31]

the Mt. Pinatubo Commission,[32]

and the National Housing Authority[33]

that his property is suitable for a

resettlement area or for socialized housing. None of these plans pushed through.

Livioco then presented evidence to prove the value of his property as of 2002. According to his sworn valuation, his

property has a market value of P700.00/square meter.[34]

He also presented the Bureau of Internal Revenue (BIR) zonal value

for residential lands in Dapdap, as ranging from P150.00 to P200.00/square meter.[35]

He then presented Franklin Olay (Olay),

chief appraiser of the Rural Bank of Mabalacat, who testified[36]

and certified[37]

that he valued the property at P800.00 per

square meter, whether or not the property is residential. Olay explained that he arrived at the said value by asking the buyers

of adjacent residential properties as to the prevailing selling price in the area.[38]

There was also a certification from the

Pinatubo Project Management Office that Liviocos property was valued atP300.00/square meter.[39]

Livioco prayed that just

compensation be computed at P700.00/square meter.[40]

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Only LBP filed its Answer[41]

and participated in the trial. It justified the P3.21/square meter valuation of the property on

the ground that it was made pursuant to the guidelines in RA 6657 and DAR Administrative Order No. 3, series of 1991. LBP

objected to respondents theory that his property should be valued as a residential land because the same was acquired for

agricultural purposes, not for its potential for conversion to other uses.[42]

LBP presented its agrarian affairs specialist who

testified[43]that, due to the increase in the acquired area, she was assigned to amend the claim of Livioco. She computed the

total value thereof at P770,904.54, using the DAR Administrative Order No. 3, series of 1991.[44]

The only other witness of LBP

was its lawyer, who explained the legal basis for the DAR administrative orders and the factors for land valuation provided in

Section 17 of RA 6657.[45]

Ruling of the Regional Trial Court

Apparently aware that neither party presented relevant evidence for the proper computation of the just compensation,

the trial court issued its April 2, 2003 Order requiring the reception of additional evidence:

A perusal of the record of this case as well as the evidence adduced by the parties shows that the

facts required for the proper computation and/or determination of just compensation for the plaintiffs

property i.e., land value of the property in accordance with the Listasaka, capitalized net income,

comparable sales and market value pursuant to the corresponding tax declaration, are unavailable and

insufficient.

WHEREFORE, for the Court to properly determine and fix the just compensation to be accorded to

*respondents+ property, the reopening of this case for the purpose of the presentation of additional

evidence is hereby ordered.

Let the reception of aforesaid additional evidence be set on April 22, 2003 at 8:30 am.

x x x x[46]

Based on the records, the next hearing took place on July 10, 2003 where none of the parties presented additional evidence,

whether testimonial or documentary.[47]

Nevertheless, the trial court proceeded to rule in favor of Livioco:

WHEREFORE, premises considered, the Court hereby renders judgment in favor of the

[respondent], Enrique Livioco, and against the Department of Agrarian Reform and the Land Bank of the

Philippines with a determination that the just compensation of Liviocos property, consisting of 24.2088

hectares located at Mabalacat, Pampanga is worth Php700.00 per square meter.

Defendants Department of Agrarian Reform and Land Bank of the Philippines are, therefore,

ordered to pay [respondent] the amount of Php700.00 per square meter multiplied by 24.2088 hectares

representing the entire area taken by the government from the plaintiff.[48]

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The trial court was of the opinion that Livioco was able to prove the higher valuation of his property with a preponderance of

evidence. In contrast, there was a dearth of evidence to support LBPsP3.21 per square meter valuation of the property. Not a

single documentary evidence was presented to substantiate its valuation.

LBP sought a reconsideration[49]of the adverse decision arguing that the court should have considered the factors

appearing in Section 17. It stressed that in failing to consider the propertys productive capacity (capitalized net income), the

court placed the farmer-beneficiaries in a very difficult position. They would not be able to pay off the just compensation for

their lands because it is valued way beyond its productive capacity. The same was denied by the trial court.[50]

Upon respondents motion, the lower court ordered LBP on March 29, 2004 to release as initial cash down payment the

amount of P827,943.48, inclusive of legal interest accruing from the time of taking on September 20, 1991 (the date when LBP

informed the Register of Deeds that it has earmarked the said amount in favor of Livioco).[51]

LBP sought a reconsideration of the said order. It clarified that the just compensation deposited by LBP in the

account of respondent was only P770,904.54 for the 24.2088 hectares. It likewise asked that the release of the deposit be

subject to respondents compliance with the release requirements of the ownership documents.[52]

The records are silent as to

the courts action on the motion as well as to the execution of this order.

Ruling of the Court of Appeals[53]

Petitioner turned to the CA to no avail. The CA affirmed the trial courts decisionin toto. First it held that factual findings

of the trial courts are entitled to respect. It held that the factors for determining just compensation, set out in Section 17 of RA

6657, were all considered by the trial court in arriving at its decision. It stated that among the relevant evidence considered

were Liviocos sworn valuation, tax declarations, zonal value, actual use of the property, and the socio-economic benefits

contributed by the government to the property. It likewise noted that the taking of Liviocos property coincided withthe Mt.

Pinatubo eruption in 1991, which event affected its valuation.[54]

Pursuant to Section 18(1)(b) of RA 6657, the CA ordered LBP

to pay 30% of the purchase price in cash, while the balance may be paid in government financial instruments negotiable at any

time.[55]

A motion for reconsideration[56]

was filed on September 29, 2005, which was denied in a Resolution[57]

dated December

5, 2005.

Hence, this petition.

Petitioners arguments

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Our Ruling

For purposes of just compensation, the fair market value of an expropriated property is determined by its character and

its price at the time of taking.[68] There are three important concepts in this definitionthe character of the property, its price,

and the time of actual taking. Did the appellate court properly consider these three concepts when it affirmed the trial courts

decision? We find that it did not.

As to the character of the property

The trial and appellate courts valued respondents property as a residentialland worth P700.00 per square

meter. They considered the use for the property as having changed from agricultural in 1988 (when Livioco offered it to DAR)

to residential by 2002 (allegedly due to the eruption of Mt. Pinatubo). Both courts erred in treating the land as residential and

accepting the change in the character of the property, without any proof that authorized land conversion had taken place.

In expropriation cases (including cases involving lands for agrarian reform), the propertys character refers to its actual

use at the time of taking,[69]

not its potential uses.[70]

Respondent himself admitted that his property was agriculturalat the time

he offered it for sale to DAR in 1988. In his letter to the DAR in 1988, respondent manifested that his land is agricultural and

suitable for agricultural purposes, although it stood adjacent to residential properties.[71]

Moreover, it has been conclusively

decided by final judgment in the earlier cases[72]

filed by respondent that his property was validly acquired under RA 6657 and

validly distributed to agrarian reform beneficiaries. Since the coverage of RA 6657 only extends to agricultural lands,

respondents property should be conclusively treated as anagriculturalland and valued as such.

The lower courts erred in ruling that the character or use of the property has changed from agricultural to residential,

because there is no allegation or proof that the property was approved for conversion to other uses by DAR. It is the DAR that

is mandated by law to evaluate and to approve land use conversions[73]

so as to prevent fraudulent evasions from agrarian

reform coverage. Even reclassification[74]

and plans for expropriation[75]

by local government units (LGUs) will not ipso

factoconvert an agricultural property to residential, industrial or commercial. Thus, in the absence of any DAR approval for the

conversion of respondents property or an actual expropriation by an LGU, it cannot be said that the character or use of said

property changed from agricultural to residential. Respondents property remains agricultural and should be valued as

such. Hence, the CA and the trial court had no legal basis for considering the subject propertys value asresidential.

Respondents evidence of the value of his land asresidentialproperty (which the lower courts found to be preponderant)

could, at most, refer to the potential use of the property. While the potential use of an expropriated property is sometimes

considered in cases where there is a great improvement in the general vicinity of the expropriated property ,[76]

it should never

control the determination of just compensation (which appears to be what the lower courts have erroneously done). The

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potential use of a property should not be the principal criterion for determining just compensation for this will be contrary to

the well-settled doctrine that the fair market value of an expropriated property is determined by its character and its price at

the time of taking, not its potential uses. If at all, the potential use of the property or its adaptability for conversion in the

future is a factor, not the ultimate in determining just compensation.[77]

The proper approach should have been to value respondents property as anagricultural land, which value may be

adjusted in light of the improvements in the Municipality of Mabalacat. Valuing the property as a residentialland (as the lower

courts have done) is not the correct approach, for reasons explained above. It would also be contrary to the social policy of

agrarian reform, which is to free the tillers of the land from the bondage of the soil without delivering them to the new

oppression of exorbitant land valuations. Note that in lands acquired under RA 6657, it is the farmer-beneficiaries who will

ultimately pay the valuations paid to the former land owners (LBP merely advances the payment) .[78]

If the farmer-beneficiaries

are made to pay for lands valued as residential lands (the valuation for which is substantially higher than the valuation for

agricultural lands), it is not unlikely that such farmers, unable to keep up with payment amortizations, will be forced to give up

their landholdings in favor of the State or be driven to sell the property to other parties. This may just bring the State right back

to the starting line where the landless remain landless and the rich acquire more landholdings from desperate farmers.

The CA also erroneously considered the Mt. Pinatubo eruption in 1991 as converting the use for respondents property

from agricultural to residential. We find no basis for the appellate courts conclusion. First, as already explained, there was no

conversion order from DAR, or even an application for conversion with DAR, to justify the CAs decision to treat the property as

residential. Second, respondent himself testified that his property was not affected by the volcanic ashfall,[79]

which can only

mean that its nature as an agricultural land was not drastically affected. The Mt. Pinatubo eruption only served to make his

property attractive to government agencies as a resettlement area, but none of these government plans panned out; hence,

his property remained agricultural. Third, the circumstance that respondents property was surrounded by residential

subdivisions was already in existence when he offered it for sale sometime between 1987 and 1988. The VOS form that

respondent accomplished described his property as being located adjacent to residential subdivisions. It was not therefore a

drastic change caused by volcanic eruption. All together, these circumstances negate the CAs ruling that the subject property

should be treated differently because of the natural calamity.

As to the price: Applying Section 17 of RA 6657

The trial and appellate courts also erred in disregarding Section 17 of RA 6657[80]

in their determination of just

compensation. Section 17 of RA 6657 provides:

Sec. 17. Determination of Just Compensation. In determining just compensation, the cost of

acquisition of the land, the current value of the like properties, its nature, actual use and income, the sworn

valuation by the owner, the tax declarations, and the assessments made by government assessors shall be

considered. The social and economic benefits contributed by the farmers and the farmworkers and by the

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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.

Jurisprudence is replete with reminders to special agrarian courts to strictly adhere to the factors set out in Section 17 of RA

6657.[81]

By issuing its April 2, 2003 Order requiring the reception of additional evidence, the trial court revealed its awareness of

the importance of adhering to Section 17 of RA 6657. It recognized that the evidence presented by the parties were insufficient

to arrive at the just compensation and that the necessary evidence were unavailable for its consideration. For some reason,

however, the trial court proceeded to rule on the case without actually receiving such relevant evidence. Instead, the trial

court, as affirmed by the CA, ruled in favor of respondent based on preponderance of evidence, regardless of the fact that the

evidence presented by respondent were not really relevant to the factors mentioned in section 17 of RA 6657.

The CA ruled that the trial court took into account all the factors in Section 17 of RA 6657. We disagree. Going over the

factors in Section 17, it is clear that almost all were not properly considered and some positively ignored. For instance: (a) The

cost of acquisition was not even inquired into. It would not have been difficult to require respondent to present evidence of

the propertys price when he acquired the same. (b) As to the nature of the property, it has already been explained that the

lower courts erroneously treated it as residential rather than agricultural. (c) Also, no heed was given to the current value of

like properties. Since respondents property is agricultural in nature, like properties in this case would be agricultural lands,

preferably also sugarcane lands, within the municipality or adjacent municipalities. But the chief appraiser of the Rural Bank of

Mabalacat testified that he considered the value of adjacentresidentialproperties, not like properties as required under the

law. Comparing respondents agricultural property to residential properties is not what the law envisioned. (d) The factor of

actual use and income of the property was also ignored; what was instead considered was the propertys potential use.

Thus, we cannot accept the valuation by the lower courts, as it is not in accordance with Section 17 of RA 6657. It was

based on respondents evidence which wereirrelevant or off-tangent to the factors laid down by Section 17.

However, we also cannot accept the valuation proffered by LBP for lack of proper substantiation.

LBP argues that its valuation should be given more weight because it is the recognized agency with expertise on the

matter, but this same argument had been struck down in Landbank of the Philippines v. Luciano.[82]

The Court ruled that

LBPs authority is only preliminary and the landowner who disagrees with the LBPs valuation may bring the matter to court fo r

a judicial determination of just compensation. The RTCs, organized as special agrarian courts, are the final adjudicators on the

issue of just compensation.[83]

We have ruled in several cases that in determining just compensation, LBP must substantiate its

valuation. In Luciano, the Court held:

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LAND BANKs valuation of lands covered by CARL is considered only as an initial determination, which is not

conclusive, as it is the RTC, sitting as a SAC, that should make the final determination of just compensation,

taking into consideration the factors enumerated in Section 17 of RA 6657 and the applicable DAR

regulations. Land Banks valuation had to be substantiated during the hearing before it could be

considered sufficient in accordance with Section 17 of RA 6657and DAR AO No. x x x[84]

It is not enough that the landowner fails to prove a higher valuation for the property; LBP must still prove the correctness of its

claims.[85]

In the absence of such substantiation, the case may have to be remanded for the reception of evidence.[86]

In the case at bar, we find that LBP did not sufficiently substantiate its valuation. While LBP insists that it strictly

followed the statutory provision and its relevant implementing guidelines in arriving at its valuation, the Court notes the lack of

evidence to prove the veracity of LBPs claims. LBP merely submitted its com