In Land Bank of the Philippines v. Ma. Aurora [Rita] Del Rosario and Irene Del Rosario, the Supreme Court addressed the proper computation of just compensation for land acquired under the Comprehensive Agrarian Reform Program (CARP). The Court clarified that just compensation must be based on the property’s value at the time of taking, and it reiterated the importance of timely payment. It also emphasized the application of the correct Department of Agrarian Reform (DAR) administrative orders in determining the fair market value of agricultural land and the rightful imposition of legal interest. This decision serves to protect landowners’ rights to receive full and fair compensation when their properties are acquired for agrarian reform purposes.

From Copra to Constitution: When is ‘Just Compensation’ Really Just?

This case revolves around a dispute over the just compensation owed to Ma. Aurora and Irene del Rosario for their 39.1248-hectare agricultural land in Albay, which was placed under CARP. The Land Bank of the Philippines (LBP) and the landowners disagreed on the valuation of the property, particularly concerning the prevailing market price of copra (dried coconut) and the applicable interest rates. The central legal question is how to fairly determine the amount of just compensation in land reform cases, considering the timing of the taking, the relevant factors outlined in Republic Act (RA) No. 6657, and the applicable administrative orders issued by the DAR.

The facts are straightforward. The Del Rosario sisters owned agricultural land that fell under CARP coverage. LBP initially valued the land at Php34,994.36 per hectare, offering Php1,172,369.21 as just compensation, which the sisters rejected. This led to legal proceedings to determine the appropriate amount. The Provincial Agrarian Reform Adjudicator (PARAD) initially set the compensation higher, but LBP contested this valuation, leading to further appeals and court decisions. The Regional Trial Court (RTC) and the Court of Appeals (CA) both grappled with the correct valuation method, time of taking, and applicable interest rates, ultimately arriving at different figures. The central disagreement revolved around which DAR Administrative Order (AO) should apply (DAR AO No. 5, s. of 1998 or DAR AO No. 2, s. 2009 and No. 1, s. of 2010) and how to calculate the capitalized net income (CNI) from copra production.

The Supreme Court’s decision hinged on the principle that just compensation must reflect the property’s value at the time of taking. The Court emphasized that the “taking” occurred when the Republic took title to the land, specifically on November 26, 2001. This date is crucial because it determines which laws and administrative orders are applicable. Because the taking occurred in 2001, RA 6657 (prior to its amendment by RA 9700, or the CARPER Law) and DAR AO No. 5, s. of 1998 are the governing legal frameworks. The Court rejected the lower court’s use of data from 2002 and 2003 because these dates are irrelevant to the property’s value at the time of taking. The Supreme Court referenced Section 17 of RA 6657, which lists factors for determining just compensation, including the cost of acquisition, current value of like properties, nature, actual use, income, and tax declarations.

The Court scrutinized the Court of Appeals’ computation of the capitalized net income (CNI), particularly its use of the average selling price of copra from 1998 to 2003. According to the Supreme Court, DAR AO No. 5, s. of 1998 dictates that the selling price (SP) component of the CNI should be based on the average of the latest available 12-months’ selling prices prior to the date of receipt of the Claim Folder by LBP. Since the LBP received the claim folder in 2001, the average selling price of copra for that year (Php688.75 per 100 kilos) should have been used, not the multi-year average adopted by the Court of Appeals. Therefore, the Supreme Court reverted to the 2001 average price, resulting in a lower capitalized net income and, consequently, a lower overall valuation of the land.

The Court then recalculated the just compensation using the correct figures and the formula prescribed in DAR AO No. 5, s. of 1998. This involved computing the average selling price of copra, the capitalized net income, the market value per tax declaration, and the land value per hectare. By applying these figures, the Court arrived at a final just compensation amount of Php1,310,563.37. The Land Bank had already paid the Del Rosario sisters Php1,172,369.21, leaving a balance of Php138,194.16. Crucially, the Supreme Court affirmed the imposition of legal interest on the unpaid balance. Citing Apo Fruits Corporation, et al. v. Land Bank of the Philippines, the Court reiterated that the right to just compensation includes the right to be paid on time. The interest is intended to compensate landowners for the income they would have earned if they had received the full amount of just compensation at the time of taking.

The Court then clarified the interest rate to be applied. The balance of Php138,194.16 was to accrue interest at twelve percent (12%) per annum from the time of taking on November 26, 2001, until June 30, 2013. From July 1, 2013, until fully paid, the balance due would earn interest at the new legal rate of six percent (6%) per annum. This adjustment reflects the changes in legal interest rates as outlined in Nacar v. Gallery Frames, et al. This demonstrates the Court’s attention to detail and its commitment to ensuring that landowners are fully compensated for the delay in payment, adhering to established legal principles and precedents.

FAQs

What was the key issue in this case?	The key issue was determining the proper amount of just compensation for land acquired under CARP, specifically focusing on the correct valuation method and applicable interest rates. The court had to decide which DAR administrative order to apply and how to calculate the capitalized net income.
When was the “time of taking” in this case?	The Supreme Court determined the time of taking to be November 26, 2001, which is the date when the Republic took title to the land. This date is crucial because it determines which laws and administrative orders are applicable for calculating just compensation.
Which DAR Administrative Order applied to this case?	Because the taking occurred in 2001, the Supreme Court ruled that DAR AO No. 5, s. of 1998 was the applicable administrative order. This order prescribes the formula for calculating just compensation at that time.
How should the selling price of copra be calculated?	According to DAR AO No. 5, s. of 1998, the selling price (SP) should be based on the average of the latest available 12-months’ selling prices prior to the date of receipt of the Claim Folder by LBP. In this case, it should be the 2001 average.
What was the final amount of just compensation determined by the Supreme Court?	The Supreme Court fixed the just compensation at Php1,310,563.37, after recalculating based on the correct application of DAR AO No. 5, s. of 1998. This was less the amount already paid.
Was the Land Bank required to pay interest on the unpaid balance?	Yes, the Supreme Court affirmed the imposition of legal interest on the unpaid balance. This is to compensate the landowners for the delay in receiving full payment.
What were the applicable interest rates?	The unpaid balance accrued interest at 12% per annum from November 26, 2001, until June 30, 2013, and at 6% per annum from July 1, 2013, until full payment.
What factors are considered in determining just compensation?	Section 17 of RA 6657 lists factors such as the cost of acquisition, current value of like properties, nature, actual use, income, tax declarations, and assessment made by government assessors. These all contribute to determining the overall valuation.

In conclusion, the Supreme Court’s decision in Land Bank of the Philippines v. Ma. Aurora [Rita] Del Rosario and Irene Del Rosario provides essential clarity on the proper method for computing just compensation in CARP cases. By emphasizing the importance of valuing the property at the time of taking and adhering to the correct DAR administrative orders, the Court ensures that landowners receive fair and timely compensation for their land.

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. MA. AURORA [RITA] DEL ROSARIO AND IRENE DEL ROSARIO, G.R. No. 210105, September 02, 2019