When determining just compensation for land acquired under agrarian reform, courts must consider factors outlined in Section 17 of Republic Act No. 6657, as amended, and translated into a formula by the Department of Agrarian Reform (DAR). This case clarifies that even when land acquisition began under Presidential Decree No. 27, if the valuation is still under dispute when RA 6657 took effect, the latter law’s provisions, including the DAR’s valuation formulas, must be applied. The Supreme Court emphasized that courts should only deviate from these formulas with reasoned explanations based on evidence.

From Fields to Formulas: Ensuring Fair Value in Land Reform

This case involves a dispute over just compensation for a 21.8005-hectare agricultural land in Davao City, part of which was expropriated by the government under Presidential Decree No. 27. Lina Navarro, co-owner of the property, contested the initial valuation offered by Land Bank of the Philippines (LBP), arguing it was far below market value. The legal question at the heart of the case is whether the just compensation should be determined based on PD 27’s valuation formula or under Republic Act No. 6657, which was enacted while the compensation issue was still unresolved.

The central issue revolved around which law should govern the determination of just compensation. LBP initially argued that PD 27, the law in effect at the time of the taking, should apply. However, the Supreme Court affirmed the Court of Appeals’ ruling that RA 6657, as amended by RA 9700, should govern because the valuation was still under challenge when RA 6657 took effect. Section 5 of RA 9700 mandates that all previously acquired lands where valuation is subject to challenge by landowners shall be completed and finally resolved pursuant to Section 17 of RA 6657, as amended.

The Court emphasized that Section 17 of RA 6657 provides specific factors for determining just compensation, including the cost of acquisition, the value of standing crops, the current value of like properties, its nature, actual use and income, the sworn valuation by the owner, tax declarations, government assessments, and 70% of the Bureau of Internal Revenue (BIR) zonal valuation. These factors are translated into a basic formula by the DAR, as outlined in various administrative orders. The Court referenced the case of Alfonso v. Land Bank of the Philippines, underscoring the mandatory character of applying Section 17 and the DAR formula.

Out of regard for the DAR’s expertise as the concerned implementing agency, courts should henceforth consider the factors stated in Section 17 of RA 6657, as amended, as translated into the applicable DAR formulas in their determination of just compensation for the properties covered by the said law. If, in the exercise of their judicial discretion, courts find that a strict application of said formulas is not warranted under the specific circumstances of the case before them, they may deviate or depart therefrom, provided that this departure or deviation is supported by a reasoned explanation grounded on the evidence on record.

However, the Court found that the SAC failed to properly apply these factors and instead relied on a “market value approach,” which it deemed a “fairer gauge.” The Supreme Court rejected this approach, holding that the SAC and CA erred by not adhering to the statutory guidelines for fixing just compensation. Because the record lacked sufficient data to determine the property’s valuation accurately, the Court remanded the case to the SAC for recomputation of just compensation, directing the trial court to strictly follow the ruling and guidelines in Alfonso v. Land Bank of the Philippines.

Another key issue concerned the area of land for which Lina Navarro was entitled to compensation. LBP argued that Navarro should only be compensated for 3.824975 hectares, while Navarro claimed entitlement to 5.4725 hectares. The disagreement stemmed from a stipulation of facts entered into by the parties during pre-trial. The Court sided with Navarro, upholding the CA’s finding that her compensable area was 5.4501 hectares (adjusted from the initial stipulation due to a correction in the total area covered by agrarian reform).

The Court clarified that the stipulation of facts, which stated that Lina’s 25% share was equivalent to 5.4725 hectares, did not mean that a specific or definite portion was determined ahead of the property’s actual partition. Instead, it merely provided for the undivided interest of Lina. The Court rejected LBP’s argument that a co-owner cannot validly transfer land without partitioning the property first. Article 493 of the Civil Code allows a co-owner to alienate, assign, or mortgage their undivided share, even to the extent of substituting a third person in its enjoyment.

Finally, the Court addressed the issue of legal interest on the compensation awarded to Navarro. LBP argued that there was no delay on its part because Navarro refused to accept the initial payment. The Court disagreed, noting that the property was taken for public use without payment of just compensation. Given the delay in offering payment, the Court upheld the imposition of interest on the final amount of just compensation. However, it modified the rate of legal interest to 12% per annum from the time of taking on June 13, 1988, until June 30, 2013, and 6% per annum from July 1, 2013, until full payment, in accordance with Nacar v. Gallery Frames and Bangko Sentral ng Pilipinas Monetary Board Circular No. 799.

This decision highlights the importance of adhering to the statutory guidelines and DAR formulas when determining just compensation in agrarian reform cases. It also clarifies the rights of co-owners to alienate their undivided shares of property and confirms the government’s obligation to pay legal interest for delays in compensating landowners for expropriated property. This case ensures that landowners receive fair and just compensation in accordance with current laws, reflecting the true value of their property at the time of taking.

FAQs

What was the key issue in this case?	The main issue was determining which law (PD 27 or RA 6657) should govern the valuation of just compensation for land acquired under agrarian reform, where the valuation was still under dispute when RA 6657 took effect.
What is just compensation in agrarian reform?	Just compensation refers to the fair and equivalent value of the land at the time of taking, ensuring that landowners are adequately compensated for the property expropriated for public use, as mandated by the Constitution.
What factors does RA 6657 consider in determining just compensation?	RA 6657 considers the cost of acquisition, value of standing crops, current value of like properties, nature, actual use, income, owner’s valuation, tax declarations, government assessments, and zonal valuation by the BIR, translated into a basic formula by the DAR.
What is the significance of the DAR formula?	The DAR formula, derived from Section 17 of RA 6657, provides a standardized method for calculating just compensation, ensuring uniformity and fairness in land valuation across different cases. Courts must generally adhere to this formula unless specific circumstances warrant a deviation with reasoned explanation.
How does this case affect landowners whose properties were taken under PD 27?	If the issue of just compensation was not yet resolved when RA 6657 took effect, landowners are entitled to have their compensation determined under the provisions of RA 6657, which often results in a higher valuation than under the older PD 27.
What is the legal interest rate applicable in this case?	The legal interest rate is 12% per annum from the time of taking (June 13, 1988) until June 30, 2013, and 6% per annum from July 1, 2013, until full payment, in accordance with prevailing jurisprudence.
Can a co-owner sell their share of a property without partition?	Yes, a co-owner can alienate, assign, or mortgage their undivided share of a co-owned property without prior partition, as per Article 493 of the Civil Code, allowing them to transfer their interest to another party.
What happens if the government delays in paying just compensation?	The government is liable to pay legal interest on the just compensation amount, calculated from the time of taking until the final payment, to compensate the landowner for the delay and loss of opportunity.

In conclusion, this case underscores the judiciary’s role in ensuring that just compensation for land acquired under agrarian reform is determined fairly, transparently, and in accordance with the law. By remanding the case for recomputation of just compensation, the Supreme Court reaffirmed its commitment to protecting landowners’ rights while advancing the goals of agrarian reform.

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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 v. Navarro, G.R. No. 196264, June 06, 2019