The Supreme Court ruled that just compensation for land acquired under the Comprehensive Agrarian Reform Program (CARP) should be based on the property’s value at the time of taking, not when Presidential Decree No. 27 took effect. This means landowners are entitled to compensation reflecting current market values, ensuring fairer treatment in agrarian reform. The Court emphasized that the agrarian reform process isn’t complete until just compensation is settled, mandating the application of Republic Act No. 6657 for valuation.

From Rice Fields to Fair Value: Can Landowners Claim Current Compensation in Agrarian Reform?

This case revolves around a dispute over the just compensation for a 17.4613-hectare parcel of land in Laur, Nueva Ecija, owned by Emiliano R. Santiago, Jr. (respondent), acquired by the government under the Operation Land Transfer (OLT) Program of Presidential Decree No. 27. The Land Bank of the Philippines (LBP), as the financial intermediary, initially valued the land based on a formula prescribed by Presidential Decree No. 27 and Executive Order No. 228, using the government support price (GSP) of palay in 1972. However, the respondent argued that the just compensation should be based on the GSP at the time of actual payment in 1998, which was significantly higher.

The central legal question is whether the just compensation for land acquired under Presidential Decree No. 27 should be determined based on the value of the land at the time of taking (October 21, 1972, the effectivity date of P.D. No. 27) or at the time of actual payment, considering the enactment of Republic Act No. 6657, also known as the Comprehensive Agrarian Reform Law of 1988. The resolution of this issue has significant implications for landowners whose properties were acquired under agrarian reform programs, as it determines the amount of compensation they are entitled to receive.

LBP argued that the formula prescribed in Presidential Decree No. 27 and Executive Order No. 228 should be strictly applied, citing the case of Gabatin v. Land Bank of the Philippines, which held that the GSP should be pegged at the time of taking. However, the Supreme Court disagreed, referencing the case of Meneses v. Secretary of Agrarian Reform, which favored the application of Republic Act No. 6657 in computing just compensation for property expropriated under Presidential Decree No. 27.

The Court highlighted the principle established in Land Bank of the Philippines vs. Natividad, stating, “the seizure of the landholding did not take place on the date of effectivity of P.D. No. 27 but would take effect on the payment of just compensation.” This means that the agrarian reform process is still incomplete until the just compensation is settled. Considering the passage of Republic Act No. 6657 before the completion of this process, the Court held that the just compensation should be determined and the process concluded under the said law. Republic Act No. 6657 is the applicable law, with PD 27 and EO 228 having only suppletory effect.

To further clarify, the Court cited Section 17 of Republic Act No. 6657, which provides the following factors to consider in determining just compensation:

Sec. 17. Determination of Just Compensation. – In determining just compensation, the cost of acquisition of the land, the current value of like properties, its nature, actual use and income, the sworn valuation by the owner, the tax declarations, and the assessment made by government assessors shall be considered. The social and economic benefits contributed by the farmers and the farm-workers 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 Court also recognized Republic Act No. 9700, the CARPER Law, which further amended Republic Act No. 6657. The Court clarified that “previously acquired lands wherein valuation is subject to challenge shall be completed and resolved pursuant to Section 17 of Republic Act No. 6657, as amended.” This means that the old Section 17 under Republic Act No. 6657, prior to further amendment by Republic Act No. 9700, applies to cases where land valuation is under dispute.

Regarding the imposition of legal interest on the just compensation, the Court noted that the lower courts deviated from established jurisprudence by simply using a higher GSP in the computation of the respondent’s just compensation. The Court reiterated that it has allowed the grant of interest in expropriation cases where there is delay in the payment of just compensation. The interest imposed in case of delay in payments in agrarian cases is 12% per annum, as the imposition is in the nature of damages for delay in payment, which in effect makes the obligation on the part of the government one of forbearance.

Quoting Republic v. Court of Appeals, the Court emphasized that “if property is taken for public use before compensation is deposited with the court having jurisdiction over the case, the final compensation must include interest on its just value to be computed from the time the property is taken to the time when compensation is actually paid or deposited with the court.” The Court therefore deemed it proper to impose a 12% legal interest per annum, computed from the date of the “taking” of the subject property, on the just compensation to be determined by the SAC.

Considering that the SAC only considered the changing government support price for palay in determining just compensation, the Court remanded the case to the SAC for the reception of evidence and determination of just compensation in accordance with Section 17 of Republic Act No. 6657 and DAR AO No. 02-09, the latest DAR issuance on fixing just compensation.

The SAC was reminded to adhere strictly to the doctrine that just compensation must be valued at the time of taking and not at the time of the rendition of judgment. The Court also required the trial court to consider the following factors as enumerated in Section 17 of Republic Act No. 6657, as amended: the acquisition cost of the land; the current value of the properties; its nature, actual use, and income; the sworn valuation by the owner; the tax declarations; the assessment made by government assessors; the social and economic benefits contributed by the farmers and the farmworkers, and by the government to the property; and the non-payment of taxes or loans secured from any government financing institution on the said land, if any.

FAQs

What was the key issue in this case?	The key issue was determining whether just compensation for land acquired under P.D. 27 should be based on the land’s value at the time of taking or at the time of actual payment, especially with the enactment of R.A. 6657.
What did the Supreme Court rule?	The Supreme Court ruled that just compensation should be determined under R.A. 6657, considering the land’s value at the time of actual payment, ensuring a fairer valuation process.
Why was the case remanded to the lower court?	The case was remanded because the Special Agrarian Court (SAC) only considered the government support price of palay and not all the factors mandated by Section 17 of R.A. 6657.
What is the significance of R.A. 9700 (CARPER Law) in this case?	R.A. 9700 reaffirms that previously acquired lands with valuation challenges should be resolved under Section 17 of R.A. 6657, as amended, ensuring consistent application of valuation standards.
What interest rate applies to delayed payments of just compensation?	The Court imposed a 12% legal interest per annum, computed from the date of taking, on the just compensation to account for the delay in payment and ensure fair compensation.
What factors should the SAC consider in determining just compensation upon remand?	The SAC must consider factors like the acquisition cost, current value of properties, land’s nature and use, owner’s valuation, tax declarations, government assessments, and socio-economic benefits, as outlined in Section 17 of R.A. 6657.
What is the role of the Land Bank of the Philippines (LBP) in agrarian reform?	The LBP acts as the financial intermediary for the CARP, ensuring social justice objectives are prioritized in land valuation and compensation processes.
How does this ruling impact landowners affected by agrarian reform?	This ruling ensures that landowners receive just compensation based on current property values at the time of payment, protecting their rights and providing fairer financial outcomes.

This decision underscores the importance of adhering to updated valuation methods in agrarian reform, ensuring that landowners receive fair compensation reflective of current market values. It also reinforces the principle that delays in payment warrant the imposition of legal interest to offset the financial impact on landowners.

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. EMILIANO R. SANTIAGO, JR., G.R. No. 182209, October 03, 2012