Lack of payment

The Comprehensive Agrarian Reform Law of 1988 (R.A. 6657) provides that before a private agricultural land may be awarded to the farmer beneficiaries, ownership and possession of the land must first be acquired by the State from the landowner. This transfer of ownership and possession is conditioned upon receipt by the land owner of the corresponding payment in cash or in Land Bank of the Philippines (LBP) bonds deposited by the Department of Agrarian Reform (DAR) with an accessible bank it has designated. Will the opening of a trust account in favor of the land owner certifying that the amount of compensation has been reserved /earmarked be considered as "payment"? This is one of the questions raised and answered in this case of Kiko and his four other siblings (Kiko et. al.)

Kiko et.al. were the registered owners of a vast tract of land planted with sugarcane, rice and corn containing an area of 99.3 hectares and covered by TCT No. T-402203. Said land was already being considered by DAR for compulsory acquisition pursuant to RA 6657. But on May 8, 1989, Kiko as owner and for and in behalf of the other co-owners wrote DAR offering the same for acquisition under the Voluntary Offer to Sell (VOS) scheme for the price of P500,000 per hectare or a total sum of P53,256,400.

No action was taken by DAR on said offer until June 25, 1993 when Kiko et. al. received a Notice of Valuation from DAR valuing the property in the amount of P4,826,742.35. On July 8,1993, Kiko et.al. rejected the amount offered for being unreasonably below the fair market value of the land. They likewise withdrew their VOS alleging that the land was no longer suitable for agriculture and had been reclassified by HLURB as residential/commercial/industrial. Nevertheless, they said that if DAR would still insist on acquiring the land, they were exercising their right of retention to 79 hectares divided among the co-owners at 5 hectares and 3 hectares each to their 13 children.

In view of Kiko et.al.’s rejection, the DAR requested the LBP on July 22, 1993 to open a trust account in favor of Kiko and his siblings, the amount of P4,826,743.35 representing the assessed value of the property. A certification was subsequently issued by the LBP stating that the said sum had been "reserved/earmarked" as compensation for the 99.3 hectares land of Kiko and his siblings under the CARP VOS scheme. The cash portion of P1,834,162.10 was placed with the Trust Department but no release of payment in cash or bonds had been effected.

Thereafter, on August 30, 1993, the DAR issued a collective Certificate of Land Ownership Award (CLOA) over the subject property. As a consequence, TCT No. CLOA-1424 was issued by the Register of Deeds in favor of 53 beneficiaries who were members of the Agrarian Reform Beneficiaries Association (ARBA). Was DAR correct in issuing the CLOA?

No. Before the CLOA can be issued, there must be payment of just compensation and initial transfer of title to the property in the name of the Republic of the Philippines. In this case the DAR immediately issued the CLOA to ARBA without first registering the property with the Register of Deeds in the name of the Republic. This administrative irregularity was made even worse by the fact that Kiko et.al. were not given just compensation yet.

The kind of compensation to be paid the landowner is specific. The deposit must be made only in cash or LBP bonds. DAR’s opening of trust account deposits in the name of Kiko and his siblings with the LBP does not constitute payment under the law. Trust deposits are not cash or LBP bonds. Even a replacement of the trust account with cash or LBP bonds does not ipso facto cure the lack of compensation; for essentially, the determination of this compensation was marred by lack of due process. In fact, in the entire acquisition process, DAR disregarded the basic requirement of administrative due process (Heirs of Tantoco et. al. vs. Court of Appeals et. al. G.R. 149621, May 5, 2006).

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