The Supreme Court clarified how to determine just compensation for land expropriated under agrarian reform when the claim was filed before Republic Act No. 9700 (RA 9700) took effect. The Court held that the valuation should be based on the law and Department of Agrarian Reform (DAR) regulations in place before RA 9700’s amendments. This means considering the property’s value at the time of taking and applying the factors outlined in the old Section 17 of Republic Act No. 6657, also known as the “Comprehensive Agrarian Reform Law of 1988.” The case was sent back to the lower court to reassess compensation using the correct legal framework, protecting landowners’ rights and promoting fairness in land reform.

From Rice Fields to Courtrooms: Determining Fair Value in Land Reform

This case revolves around a 135-hectare portion of agricultural land in Camarines Sur, owned by the heirs of Pablo Feliciano, Jr. In 1972, this land was placed under Presidential Decree No. 27 (PD 27), which aimed to emancipate tenants by transferring land ownership to them. Certificates of Land Transfer were issued to tenant-beneficiaries, and the Land Bank of the Philippines (LBP) was tasked with determining and paying just compensation to the landowners. The crux of the legal battle lies in determining the proper valuation of the land, specifically which set of rules and regulations should apply.

The DAR initially valued the land at P1,301,498.09, which the Feliciano heirs rejected. Subsequently, the LBP deposited this amount in their name, and it was later released. Disagreement over the proper valuation formula persisted, leading to a series of legal challenges. The heirs eventually assigned their rights to Victoria Aida Reyes Espiritu, who continued the legal fight. The Regional Trial Court (RTC) initially directed the LBP to revalue the land according to DAR Administrative Order No. 1, Series of 2010 (DAR AO 1, Series of 2010), which implemented amendments introduced by RA 9700. Espiritu accepted the revalued amount but sought 12% annual interest due to delays in payment. The RTC then imposed a 12% annual interest on the unpaid balance from January 1, 2010, until full payment, a decision that sparked further appeals.

The Court of Appeals (CA) modified the RTC’s decision, applying a 12% annual interest from July 1, 2009, up to the finality of its decision. However, upon reconsideration, the CA amended its ruling again, stating that since the LBP had already paid the principal amount, it was only liable for interest accruing from July 1, 2009, until December 13, 2011, when the payment was made. This led to the Supreme Court, where the central question was whether the CA correctly determined just compensation. The Supreme Court then pointed out the importance of the date when the claim folder was received by the LBP. The Court cited the RA 9700 which provides that:

with respect to land valuation, all Claim Folders received by LBP prior to July 1, 2009 shall be valued in accordance with Section 17 of R.A. No. 6657 prior to its amendment by R.A. No. 9700

The Supreme Court emphasized that when the acquisition process began under PD 27 but was not completed before the enactment of the Comprehensive Agrarian Reform Law of 1988 (RA 6657), the determination of just compensation should conclude under RA 6657. Furthermore, the fair market value should be based on the property’s character and price at the time of taking, considering factors such as acquisition cost, current value of similar properties, nature and use of the land, and other elements outlined in Section 17 of RA 6657.

The Court referred to the “cut-off rule” established in Land Bank of the Philippines v. Kho, clarifying that DAR AO 1, series of 2010, which was issued to implement RA 9700, applies only to claims where the claim folders were received by the LBP on or after July 1, 2009. The Court explained that because the claim folder in this case was received by the LBP on December 2, 1997, the RTC should have calculated just compensation using the DAR regulations that were in effect before the amendment of RA 6657 by RA 9700. The failure to do so constituted a misapplication of the relevant laws and regulations.

Even though the RTC, acting as a Special Agrarian Court (SAC), has the authority to deviate from the DAR’s valuation formula, it must provide a clear and justified explanation for doing so. In this instance, neither the RTC nor the CA considered the date the claim folder was received nor provided reasons for deviating from the DAR formula. The Supreme Court also laid emphasis on the date of taking of the land. Citing the case, the Court said:

Just compensation must be valued at the time of taking, or the time when the owner was deprived of the use and benefit of his property, in this case, when emancipation patents were issued in the names of the farmer beneficiaries in 1989.

The Court thus ordered the case to be remanded to the RTC for a proper determination of just compensation, following the guidelines set forth in its decision. The RTC was instructed to consider the values prevalent at the time of taking for similar agricultural lands and apply the guidelines in Section 17 of RA 6657 as it existed before the RA 9700 amendments.

The Supreme Court also addressed the issue of interest on the just compensation. It stated that interest may be awarded based on the circumstances of the case and prevailing jurisprudence. The Court clarified that the legal interest rate on the unpaid balance should be 12% per annum from the time of taking in 1989 until June 30, 2013, and 6% per annum from July 1, 2013, until fully paid, following the amendment introduced by Bangko Sentral ng Pilipinas-Monetary Board Circular No. 799, Series of 2013. The Court emphasized that it is crucial to follow the DAR’s guidelines when determining just compensation, but the courts have the final say.

In summary, the Supreme Court reversed the CA’s decision and remanded the case to the RTC for a reevaluation of just compensation. This reevaluation must adhere to the legal framework that existed before the amendments introduced by RA 9700, considering the date of taking, comparable land values, and applicable interest rates.

FAQs

What was the key issue in this case?	The key issue was whether the Court of Appeals correctly determined just compensation for land acquired under agrarian reform, specifically regarding the application of RA 9700’s amendments. The Supreme Court needed to clarify which set of laws and regulations should apply to the valuation of the land.
What is the "cut-off rule" mentioned in the decision?	The “cut-off rule” refers to DAR AO 2, Series of 2009, which states that all claim folders received by the LBP before July 1, 2009, should be valued according to Section 17 of RA 6657 before its amendment by RA 9700. This means the amendments introduced by RA 9700 do not apply to these earlier claims.
When is the "time of taking" for determining just compensation?	The "time of taking" is when the landowner was deprived of the use and benefit of their property. In this case, it was when the emancipation patents were issued in the names of the farmer-beneficiaries in 1989.
What interest rates apply to unpaid just compensation?	The legal interest rate is 12% per annum from the time of taking in 1989 until June 30, 2013, and 6% per annum from July 1, 2013, until fully paid, as per Bangko Sentral ng Pilipinas-Monetary Board Circular No. 799, Series of 2013.
What factors should the RTC consider when reevaluating just compensation?	The RTC should consider the values prevalent at the time of taking for similar agricultural lands and the guidelines set forth in Section 17 of RA 6657 as it existed before the RA 9700 amendments. The RTC should ensure the evidence presented are based on the values at the time of taking.
Can the RTC deviate from the DAR’s valuation formula?	Yes, the RTC, acting as a Special Agrarian Court, has the authority to deviate from the DAR’s valuation formula. However, it must provide a clear and justified explanation for doing so, based on the specific circumstances of the case.
What was the effect of remanding the case to the RTC?	Remanding the case to the RTC means the lower court must reevaluate the just compensation using the correct legal framework. This includes receiving new evidence and following the guidelines set by the Supreme Court to ensure a fair valuation.
Why did the Supreme Court reverse the Court of Appeals’ decision?	The Supreme Court reversed the Court of Appeals because the CA failed to apply the correct legal framework for determining just compensation. Specifically, the CA did not properly account for the fact that the claim folder was received by the LBP before RA 9700 took effect.

This decision underscores the importance of adhering to the correct legal framework when determining just compensation in agrarian reform cases. By clarifying the applicability of RA 9700’s amendments, the Supreme Court seeks to ensure fairness and equity for both landowners and farmer-beneficiaries. The Court’s ruling serves as a reminder to lower courts to carefully consider the specific facts and circumstances of each case and to provide clear justifications for any deviations from established valuation formulas.

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: HEIRS OF PABLO FELICIANO, JR. VS. LAND BANK PHILIPPINES, G.R. No. 215290, January 11, 2017