In a ruling concerning just compensation under the Comprehensive Agrarian Reform Program (CARP), the Supreme Court has reiterated the importance of valuing expropriated land at the time of taking. This means the fair market value should be determined when the landowner was deprived of the use and benefit of their property. This decision serves as a reminder for Special Agrarian Courts (SACs) to adhere strictly to the guidelines set forth in Section 17 of Republic Act No. 6657, as amended, prior to its further amendment by Republic Act No. 9700, when determining just compensation for lands acquired under CARP, ensuring fairness to both landowners and the State.

From Coconut Lands to Courtrooms: Determining Fair Value in Agrarian Reform

This case revolves around a dispute over the just compensation for two parcels of coconut land owned by the Heirs of Fernando Alsua (respondents), which were acquired by the government under the CARP. The Land Bank of the Philippines (LBP) and the respondents disagreed on the valuation of the land, leading to a legal battle that eventually reached the Supreme Court. At the heart of the matter lies the proper application of Section 17 of RA 6657, which outlines the factors that must be considered when determining just compensation for expropriated land.

The factual backdrop reveals that the respondents’ lands, identified as Lot Nos. 5114 and 5362, were placed under CARP through a voluntary offer to sell (VOS) scheme. Following a field investigation, the LBP determined that a portion of Lot No. 5114 (6.6435 hectares) and the entirety of Lot No. 5362 (9.7719 hectares) were suitable for acquisition. Subsequently, the titles were transferred to the Republic of the Philippines represented by the DAR. The LBP initially valued the acquired portions at P170,164.48 and P455,386.27, respectively, using a two-factor formula under DAR Administrative Order (A.O.) No. 6, series of 1992, as amended. The respondents rejected this valuation, prompting the LBP to deposit these amounts as provisional compensation.

The Office of the Provincial Adjudicator later fixed the just compensation at P388,102.37 for Lot No. 5114 and P1,036,276.89 for Lot No. 5362. Dissatisfied with this determination, the LBP filed a petition with the Regional Trial Court (RTC), acting as a Special Agrarian Court (SAC), seeking to uphold its original valuation. The RTC initially ordered a re-investigation based on RA 9700 and DAR A.O. No. 1, series of 2010, which the LBP contested, arguing that these were inapplicable as the claim folders were received before July 1, 2009.

The RTC ultimately fixed the just compensation at P660,425.17 for Lot No. 5114 and P820,256.51 for Lot No. 5362, applying RA 9700 and DAR A.O. No. 1, series of 2010, and utilizing production data or values within the twelve-month period preceding June 30, 2009. The LBP appealed this decision to the Court of Appeals (CA), which set aside the RTC’s ruling and remanded the case for proper determination of just compensation, emphasizing the need to consider the factors enumerated in Section 17 of RA 6657, as amended.

The Supreme Court, in its analysis, emphasized that while RA 9700 amended certain provisions of RA 6657, it clarified that the said law shall not apply to claims/cases where the claim folders were received by the LBP prior to July 1, 2009. According to Item VI of DAR A.O. No. 2, series of 2009. In such a situation, just compensation shall be determined in accordance with Section 17 of RA 6657, as amended, prior to its further amendment by RA 9700. The factors to determine just compensation are:

“(a) the acquisition cost of the land, (b) the current value of like properties, (c) the nature and actual use of the property, and the income therefrom, (d) the owner’s sworn valuation, (e) the tax declarations, (f) the assessment made by government assessors, (g) the social and economic benefits contributed by the farmers and the farmworkers, and by the government to the property, and (h) the nonpayment of taxes or loans secured from any government financing institution on the said land, if any, must be equally considered.”

The Court noted that the RTC should have computed the just compensation using pertinent DAR regulations applying Section 17 of RA 6657, as amended, prior to its further amendment by RA 9700, instead of adopting the formula under DAR A.O. No. 1, series of 2010. Jurisprudence holds that courts are obligated to apply both the compensation valuation factors enumerated by the Congress under Section 17 of RA 6657 and the formula laid down by the DAR. Nonetheless, the RTC, acting as a SAC, is not strictly bound by the different formula created by the DAR since the valuation of property or the determination of just compensation is essentially a judicial function which is vested with the courts, and not with the administrative agencies.

The Supreme Court underscored the judicial function of determining just compensation, stating that Special Agrarian Courts (SACs) are not strictly bound by the formulas created by the DAR. However, the Court added a caveat: “it must explain and justify in clear terms the reason for any deviation from the prescribed factors and the applicable formula grounded on the evidence on record.” This requirement ensures that deviations are not arbitrary but are based on a thorough assessment of the specific circumstances of each case.

In the case at hand, the Court found that the CA correctly ruled that the just compensation for the subject lands should be valued in accordance with Section 17 of RA 6657, as amended, prior to its further amendment by RA 9700. The Court also agreed with the CA’s determination of the date of taking which is on June 28, 1996 for Lot No. 5362 and on February 13, 2001 for Lot No. 5114 when the TCTs were issued in the name of the Republic. Thus, the valuation of the subject lands must be based on the values prevalent on such time of taking for like agricultural lands.

Ultimately, the Supreme Court denied the LBP’s petition and affirmed the CA’s decision to remand the case to the RTC for the proper determination of just compensation. This decision reinforces the principle that just compensation in agrarian reform cases must be determined by considering all relevant factors under Section 17 of RA 6657, as amended, and that the valuation should reflect the fair market value of the land at the time of taking.

The decision holds significant implications for landowners whose properties are subject to agrarian reform. It underscores their right to receive just compensation based on a fair and comprehensive assessment of the land’s value at the time it was taken. It also serves as a reminder to the LBP and other relevant agencies to conduct thorough and accurate valuations that take into account all relevant factors.

FAQs

What is the main legal issue in this case?	The main legal issue is determining the just compensation for land acquired under the Comprehensive Agrarian Reform Program (CARP), specifically focusing on the valuation date and the factors to be considered.
What is the “time of taking” in relation to just compensation?	The “time of taking” refers to the point when the landowner is deprived of the use and benefit of their property. In this case, it’s when the titles were transferred to the Republic of the Philippines.
What is Section 17 of RA 6657?	Section 17 of RA 6657 outlines the factors that must be considered when determining just compensation for land acquired under CARP, including acquisition cost, current value of like properties, and the nature and actual use of the property.
When does RA 9700 apply to land valuation cases?	RA 9700, which amended RA 6657, generally applies to cases where the claim folders were received by the LBP after July 1, 2009. For cases prior to this date, the original provisions of RA 6657 apply.
Are Special Agrarian Courts (SACs) bound by DAR’s valuation formulas?	While SACs should consider DAR’s valuation formulas, they are not strictly bound by them. The determination of just compensation is a judicial function, but deviations from the formulas must be justified.
What did the Court of Appeals rule in this case?	The Court of Appeals set aside the RTC’s decision and remanded the case. The CA said the RTC had not considered all the factors listed in Section 17 of RA 6657 when deciding on just compensation.
What was Land Bank of the Philippines (LBP)’s role in this case?	The LBP was responsible for valuing the land and providing compensation to the landowners. They contested the valuations set by the Provincial Adjudicator and the RTC, leading to the appeal.
What happens when there is a delay in the payment of just compensation?	If there’s a delay in paying just compensation, legal interest may be awarded. It serves as compensation to the landowner for the State’s delayed payment.

The Supreme Court’s decision in this case clarifies the process for determining just compensation in agrarian reform cases. By emphasizing the importance of the time of taking and the factors outlined in Section 17 of RA 6657, the Court ensures that landowners receive fair compensation for their expropriated properties. This ruling provides guidance for Special Agrarian Courts and reinforces the principles of fairness and equity in the implementation of agrarian reform laws.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: LAND BANK OF THE PHILIPPINES, VS. HEIRS OF FERNANDO ALSUA, G.R. No. 219623, March 27, 2023