In Land Bank of the Philippines vs. Heirs of Fernando Alsua, the Supreme Court addressed the proper valuation of land acquired under the Comprehensive Agrarian Reform Program (CARP). The Court ruled that just compensation must be determined based on the land’s value at the time of taking, which is when the landowner is deprived of the property’s use and benefit. Additionally, the Court clarified the application of Republic Act No. 9700, stating it does not apply retroactively to claims where the Land Bank of the Philippines (LBP) received claim folders before July 1, 2009. This decision emphasizes the importance of adhering to the specific guidelines outlined in Republic Act No. 6657 and ensuring fair compensation to landowners affected by agrarian reform.

Coconut Lands and Just Compensation: When Does the Taking Occur?

The case revolves around a dispute over the just compensation for two parcels of coconut land owned by the Heirs of Fernando Alsua, which were placed under CARP through a voluntary offer to sell (VOS) scheme. The Land Bank of the Philippines (LBP) and the Department of Agrarian Reform (DAR) initiated the acquisition process, leading to the cancellation of Fernando Alsua’s certificates of title and the issuance of new titles in the name of the Republic of the Philippines. 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 landowners rejected this valuation, leading to a series of administrative and judicial proceedings to determine the appropriate just compensation.

The central legal question is whether the Court of Appeals (CA) erred in setting aside the Regional Trial Court (RTC) decision and remanding the case for a proper determination of just compensation. The LBP argued that the CA incorrectly found that it failed to consider the factors under Section 17 of Republic Act No. 6657, as amended, and that the RTC, acting as a Special Agrarian Court (SAC), was bound by the DAR’s valuation formula. The respondents, on the other hand, contended that the LBP’s valuation was unacceptably low and that the SAC is not strictly bound by the DAR’s formula, as the determination of just compensation is a judicial function.

The Supreme Court addressed the core issue by emphasizing the importance of valuing expropriated property at the time of taking. The time of taking is defined as when the landowner is deprived of the use and benefit of their property, which in this case, occurred when the titles were transferred to the Republic. The Court highlighted that while Republic Act No. 9700 amended certain provisions of Republic Act No. 6657, the implementing rules clarified that Republic Act No. 9700 does not apply to claims where the LBP received the claim folders before July 1, 2009. In such cases, just compensation must be determined in accordance with Section 17 of Republic Act No. 6657, as amended, prior to its further amendment by Republic Act No. 9700.

Section 17 of Republic Act No. 6657 outlines several factors to be considered in determining just compensation:

“(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 stressed that the RTC should have computed just compensation using pertinent DAR regulations applying Section 17 of Republic Act No. 6657, as amended, prior to its amendment by Republic Act No. 9700, rather than adopting the formula under DAR A.O. No. 1, series of 2010. While courts are obligated to consider both the compensation valuation factors enumerated by Congress and the formula laid down by the DAR, the RTC, acting as a SAC, is not strictly bound by the DAR’s formula. This is because the valuation of property and the determination of just compensation is essentially a judicial function vested in the courts.

However, the Court also emphasized that any deviation from the prescribed factors and applicable formula must be explained and justified in clear terms, based on the evidence on record. In this case, the Supreme Court agreed with the Court of Appeals that the just compensation for the subject lands should be valued in accordance with Section 17 of Republic Act No. 6657, as amended, prior to its amendment by Republic Act No. 9700, since the claim folders were received by the LBP in October 1995. The Court also affirmed that the date of taking was 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.

The LBP claimed that its valuation was computed in accordance with Section 17 of Republic Act No. 6657, as amended, as implemented by DAR AO No. 5, series of 1998. However, the Court found that the LBP failed to show that the economic and social benefits of the subject lands and the current value of like properties were considered in arriving at its valuation. The Court stated that it could not uphold the LBP’s valuation of P625,550.75 as just compensation for the subject lands. The Court echoed that, “[t]he veracity of the facts and figures which it used in arriving at the amount of just compensation under the circumstances involves the resolution of questions of fact which is, as a rule, improper in a petition for review on certiorari.”

The Supreme Court concluded that there was a need to remand the case to the RTC for a determination of just compensation to ensure compliance with the law and to give everyone—the landowner, the farmers, and the State—their due. The Court directed the RTC to observe the following guidelines in the remand of the case:

1. Just compensation must be valued at the time of taking, which is when the titles to the subject lands were transferred in the name of the Republic on June 28, 1996, for Lot No. 5362, and on February 13, 2001, for Lot No. 5114. The evidence presented must be based on the values prevalent at the time of taking for similar agricultural lands.
2. Just compensation must be arrived at pursuant to the guidelines set forth in Section 17 of Republic Act No. 6657, as amended, prior to its amendment by Republic Act No. 9700. While the RTC should consider the different formulae created by the DAR, it is not strictly bound thereto if the situations before it do not warrant their application. Any deviation from these guidelines must be clearly explained.
3. Interest may be awarded as warranted by the circumstances and based on prevailing jurisprudence. Legal interest on the unpaid balance shall be pegged at 12% per annum from the time of taking until June 30, 2013, and 6% per annum from July 1, 2013, until fully paid.

The Court also stated that, “the valuation of the subject lands must be based on the values prevalent on such time of taking for like agricultural lands.” This means that the RTC must look at comparable sales and other relevant data from the relevant time periods to determine the fair market value of the property. The court also specified that, “interest may be awarded as may be warranted by the circumstances of the case and based on prevailing jurisprudence.” This acknowledges that landowners may be entitled to interest on the unpaid balance of just compensation, especially if there has been a delay in payment.

FAQs

What was the key issue in this case?	The key issue was the proper valuation of land acquired under the Comprehensive Agrarian Reform Program (CARP) and the applicability of Republic Act No. 9700 to pending claims. The Supreme Court clarified that just compensation should be based on the land’s value at the time of taking.
When is the “time of taking” in agrarian reform cases?	The “time of taking” is when the landowner is deprived of the use and benefit of the property, typically when the title is transferred to the Republic of the Philippines. This is the date the landowner ceases to benefit from the property.
Does Republic Act No. 9700 apply retroactively?	No, Republic Act No. 9700 does not apply retroactively to claims where the Land Bank of the Philippines (LBP) received the claim folders before July 1, 2009. In such cases, Republic Act No. 6657, as amended prior to Republic Act No. 9700, applies.
What factors should be considered in determining just compensation?	Section 17 of Republic Act No. 6657 outlines several factors, including the acquisition cost of the land, the current value of like properties, the nature and actual use of the property, and the income derived. It must also include the owner’s valuation of the land.
Is the Special Agrarian Court (SAC) strictly bound by DAR’s valuation formula?	While the SAC should consider the DAR’s valuation formula, it is not strictly bound by it. The determination of just compensation is a judicial function, and the SAC can deviate from the formula if warranted, provided it explains the reasons for doing so.
What happens if the LBP’s valuation is deemed insufficient?	If the LBP’s valuation is deemed insufficient, the case is typically remanded to the RTC, acting as a SAC, for a proper determination of just compensation. This ensures compliance with the law and fair treatment for all parties involved.
Can interest be awarded on just compensation?	Yes, interest can be awarded on just compensation, especially if there has been a delay in payment. The legal interest rate is typically 12% per annum from the time of taking until June 30, 2013, and 6% per annum from July 1, 2013, until fully paid.
What are the implications of remanding the case to the RTC?	Remanding the case to the RTC ensures that all relevant factors are considered in determining just compensation and that both the landowner and the government receive due process. This allows for a more accurate and fair valuation of the property.

This case underscores the judiciary’s role in safeguarding landowners’ rights while advancing agrarian reform. The Supreme Court’s decision reinforces the principle that just compensation must be fair and based on the land’s value at the time it was taken, ensuring equitable treatment for all parties involved. The guidelines provided by the court will aid in future land valuation disputes and promote a more consistent application 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