The Supreme Court’s decision in Land Bank of the Philippines v. Enrique Livioco underscores the importance of accurately valuing land based on its actual use at the time of taking for just compensation purposes under the Comprehensive Agrarian Reform Program (CARP). The Court ruled that land validly acquired under CARP should be valued as agricultural land, regardless of its potential for future conversion or reclassification. This ensures fair compensation to landowners while upholding the social policy of agrarian reform, preventing unjust enrichment at the expense of farmer-beneficiaries who ultimately bear the cost of land valuation.

From Sugarland to Subdivision: Determining Just Compensation in Agrarian Reform

This case revolves around a dispute over the just compensation for a 30.6329-hectare parcel of sugarland owned by Enrique Livioco in Mabalacat, Pampanga. Livioco voluntarily offered his land to the Department of Agrarian Reform (DAR) under the CARP, seeking P30.00 per square meter. Land Bank of the Philippines (LBP), the financial intermediary for CARP, valued the land at P3.21 per square meter, based on its agricultural use. Livioco rejected this valuation, arguing that the land had become predominantly residential, entitling him to a higher compensation. The central legal question is whether the land should be valued based on its actual agricultural use at the time of taking or its potential residential use due to surrounding developments and reclassification efforts.

The case unfolded with Livioco seeking a reevaluation of the compensation two years later, arguing that the land value had appreciated. His request was denied, and DAR proceeded to take possession of the property, awarding Certificates of Land Ownership Award (CLOAs) to 26 farmer-beneficiaries. Livioco’s subsequent legal challenges to cancel the CLOAs and recover his property were unsuccessful, with courts affirming the validity of the compulsory acquisition. Upon DAR’s request, LBP adjusted the valuation to P770,904.54 for 24.2088 hectares, informing Livioco that the payment was deposited in cash and agrarian reform bonds.

Unsatisfied with what he deemed an unfairly low valuation, Livioco filed a petition for judicial determination of just compensation. He argued that the area had become predominantly residential between 1990 and 2000. To support his claim, Livioco presented certifications indicating the property’s suitability for residential resettlement or socialized housing, as well as a sworn valuation estimating the property’s market value at P700.00 per square meter. The RTC ruled in favor of Livioco, setting the just compensation at P700.00 per square meter, a decision affirmed by the Court of Appeals.

LBP appealed, asserting that the property should be valued as agricultural land since it was acquired under CARP. They maintained that the assumption of residential use was speculative and that the lower courts erred in valuing the land as of 1997 instead of the time of taking in 1988. LBP argued that the lower courts disregarded factors under Section 17 of RA 6657, which stipulates the determination of just compensation. Livioco countered that LBP was raising a question of fact and that courts were not bound by administrative agencies’ findings, asserting that LBP’s valuation was unsubstantiated.

The Supreme Court reversed the Court of Appeals’ decision, emphasizing that for just compensation, the fair market value of an expropriated property is determined by its character, price, and the time of actual taking. The Court clarified that the property’s character refers to its actual use at the time of taking, not its potential uses. “In expropriation cases (including cases involving lands for agrarian reform), the property’s character refers to its actual use at the time of taking, not its potential uses.” In this case, Livioco himself admitted that his property was agricultural when he offered it to DAR in 1988.

Moreover, previous court decisions had conclusively determined that the property was validly acquired under RA 6657 and distributed to agrarian reform beneficiaries. Since RA 6657 applies only to agricultural lands, the property should be treated and valued as such. The Court held that the lower courts erred in considering the property as residential without any evidence of DAR approval for land conversion. The Supreme Court referenced Section 65 of RA 6657, which says:

Section 65. Conversion of Lands.  – After the lapse of five years from its award, when the land ceases to be economically feasible and sound for agricultural purposes, or the locality has become urbanized and the land will have a greater economic value for residential, commercial or industrial purposes, the DAR, upon application of the beneficiary or the landowner, with due notice to the affected parties, and subject to existing laws, may authorize the reclassification or conversion of the land and its disposition:  Provided, That the beneficiary shall have fully paid his obligation.

The Court emphasized that valuing the property as residential would contradict the social policy of agrarian reform, potentially burdening farmer-beneficiaries with exorbitant land valuations. The court also disregarded Mt. Pinatubo eruption as a valid ground to change the nature of the land from agricultural to residential stating that, “there was no conversion order from DAR, or even an application for conversion with DAR, to justify the CA’s decision to treat the property as residential.“

Furthermore, the Supreme Court found that the lower courts disregarded Section 17 of RA 6657, which outlines the factors for determining just compensation. By requiring the reception of additional evidence, the trial court had demonstrated awareness of these factors but failed to receive relevant evidence before ruling on the case. Citing Section 17 of RA 6657, the Court wrote:

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 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.

The Supreme Court noted that several factors were not properly considered, such as the cost of acquisition, the current value of like properties (agricultural lands), and the actual use and income of the property. The court also found LBP’s valuation lacking proper substantiation, emphasizing that LBP must prove the correctness of its claims.

Consequently, the Supreme Court remanded the case to the trial court for the reception of evidence and determination of just compensation in accordance with Section 17 of RA 6657. The trial court was instructed to value the property as agricultural land, adhering to the doctrine that just compensation must be valued at the time of taking (1994). It was clarified that the evidence presented must be based on values prevalent in 1994 for like agricultural lands, conforming to Section 17 of RA 6657 and relevant DAR Administrative Orders.

The court emphasized that proper valuation must adhere to existing guidelines and that the court must exercise judicial discretion. With the guidance of these orders, courts can better establish compensation based on the factors laid out in Section 17 of RA 6657. The decision provides clear guidelines for the trial court to follow during the remand, including considering prevailing jurisprudence on interest, rejecting the practice of earmarking funds and opening trust accounts as valid payment, and addressing any amounts already withdrawn by the respondent.

FAQs

What was the key issue in this case?	The key issue was whether the respondent’s land should be valued as agricultural or residential property for just compensation under the Comprehensive Agrarian Reform Program (CARP). The resolution of this issue hinged on determining the appropriate valuation method under agrarian reform laws.
Why did the Supreme Court reverse the Court of Appeals’ decision?	The Supreme Court reversed the CA’s decision because the lower courts erroneously valued the land as residential without DAR approval for conversion, and disregarded Section 17 of RA 6657, which provides the factors for determining just compensation. The Supreme Court emphasized that these factors are imperative when deciding land disputes.
What is the significance of Section 17 of RA 6657?	Section 17 of RA 6657 outlines the factors that must be considered in determining just compensation for land acquired under CARP, including the cost of acquisition, current value of like properties, nature, actual use and income of the land. These must be considered to determine just compensation.
When should the land be valued for just compensation purposes?	The land should be valued at the time of taking, which is when the landowner was deprived of the use and benefit of the property. The exact date of taking depends on the circumstances and supporting evidence.
What is the role of the Land Bank of the Philippines (LBP) in determining just compensation?	LBP acts as the financial intermediary for CARP and provides an initial valuation of the land. However, this valuation is not conclusive, and the courts have the final authority to determine just compensation.
What evidence should be presented to determine the value of agricultural land?	Evidence should be presented to show the cost of acquisition, current value of like agricultural properties, the nature, actual use and income of the land. Furthermore, all evidence must conform to Section 17 of RA 6657 and relevant DAR Administrative Orders.
What is the impact of land reclassification on just compensation?	Reclassification alone does not automatically change the land’s valuation for just compensation. A DAR conversion order is required to change the land’s classification from agricultural to another use.
What happens if the landowner has already withdrawn the deposited amount?	If the landowner has already withdrawn the amount deposited by LBP, that amount should be deducted from the final land valuation determined by the court. This prevents unjust enrichment.
What are the implications for farmer-beneficiaries?	Valuing land as agricultural ensures that farmer-beneficiaries are not burdened with exorbitant land valuations that they cannot afford, which could lead to the loss of their landholdings. This decision directly affects farmer beneficiaries.

In conclusion, Land Bank of the Philippines v. Enrique Livioco clarifies the proper valuation of land under CARP, emphasizing the importance of actual land use at the time of taking and adherence to Section 17 of RA 6657. This decision ensures fair compensation to landowners while safeguarding the interests of farmer-beneficiaries and the overall objectives of agrarian reform.

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. Enrique Livioco, G.R. No. 170685, September 22, 2010