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LBP vs.

BANAL
G.R. No. 143276
20 July 2004
F: Respondent spouses Banal were registered owners of a 19.3422-has of an agricultural land in Basud,
Camarines Norte. A portion of the land consisting of 6.2330-has [5.4730-has of which is planted to
coconut & 0.76-has planted to palay] was compulsorily acquired by DAR through CARL.

Petitioner LBP made the valuation of the said property:


o 5.4730 of coconut land = P148,675.19
o 0.7600 of riceland = P25,243.36
o Total value = P173,918.55

Respondent spouses rejected the valuation. Thus, a summary administrative proceeding was conducted
before the PARAD, to determine the value of the land. PARAD affirmed the valuation of LBP.

Respondents then filed with the RTC a petition for determination of just compensation & prayed for a
compensation of P100,000.00 per hectare for both coconut & riceland, or an aggregate amount of
P623,000.00.

RTC ruled that the just compensation for the coconut land was at P657,137.00 & for the riceland at
P46,000.00, or a total of P703,137.00. The trial court used the following formula:
o Coconut land:
Average Gross Production (AGP) x 0.70 x 9.70 (price per kilo of coconut) = Net Income
NI / 6% = Price Per Hectare (PPH) applying the capitalization formula under RA3844

o Rice land
2.5 x AGP x Govt. Support Price (GSP) = Land Value (LV) or PPH, using the formula
under EO 228
AGP x 6% compounded annually for 26 years x GSP = Interest, pursuant to DAR A.O
No. 13, Series of 1994

On appeal, the CA affirmed in toto the ruling of the trial court.

I: Whether or not the valuation of the land correctly computed.


H: NO.
R: In determining just compensation, the RTC is required to consider several factors enumerated in Sec.
17 of RA 6657, as amended:
o Cost of acquisition of the land;
o Current value of like properties;
o Nature of the property;
o Actual use;
o Income;
o Sworn valuation by the owner;
o Tax declarations;
o Assessment by government assessors;

Such factors have been translated into a basic formula in DAR A. O. No. 6, Series of 1992, as amended
by DAR A. O. No. 11, Series of 1994:

o LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1)

The above formula shall be used if all 3 factors are present, relevant & applicable
LV = Land Value; CNI = Capitalized Net Income; CS = Comparable Sales; MV = Market Value
per Tax Declaration

o If CS is not present and CNI & MV are applicable, the formula shall be:
LV = (CNI x 0.9) + (MV x 0.1)

o If CNI is not present, and CS & MV are applicable, the formula shall be:
LV = (CS x 0.9) + (MV x 0.1)

o If both CS & CNI are not present and only MV is applicable, the formula shall be:
LV = MV x 2

In the case at bar, the RTC failed to observe the basic rules of procedure & the fundamental
requirements in determining just compensation for the property.
o First, it dispensed with the hearing & merely ordered the parties to submit their respective
memoranda. Such action is grossly erroneous since the determination of just compensation
involves the examination of the factors specified in Sec. 17, RA 6657, as amended.
o Second, it merely took judicial notice of the average production figures in another pending case
& applied the same to the present case without conducting a hearing & worse, without the
knowledge or consent of the parties. Well settled is the rule that courts are not authorized to
take judicial notice of the contents of the records of other cases even when said cases have been
tried or are pending in the same court or before the same judge.
o Lastly, it erred in applying the formula prescribed under EO 228 & RA 3844, as amended, in
determining the valuation of the property; & in granting compounded interest pursuant to DAR
A. O. No. 13, Series of 1994.

It must be stressed that EO 228 covers private agricultural lands primarily devoted to rice & corn, while
RA 3844 governs agricultural leasehold relations between the person who furnishes the landholding,
either as owner, civil law lessee, usufructuary, or legal possessor, & the person who personally cultivates
the same. Here, the land is planted to coconut & rice and does not involve agricultural leasehold
relation. What the trial court should have applied is the formula in DAR A. O. No. 6, as amended by
DAR A. O. No. 11.

As regards the award of compounded interest, suffice it to state that DAR A. O. No. 13, Series of 1994
does not apply to the subject land but to those lands taken under PD 27 & EO 228 whose owners have
not been compensated. In this case, the property is covered by RA 6657, as amended, & respondents
have been paid the provisional compensation thereof, as stipulated during the pre-trial.

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