In a dispute over land compensation, the Supreme Court sided with Land Bank of the Philippines (LBP), reiterating the strict adherence to the formula prescribed by the Department of Agrarian Reform (DAR) in valuing lands subject to agrarian reform. The Court emphasized that lower courts must consider factors specified in Republic Act No. 6657 and its implementing rules when determining just compensation, reinforcing the LBP’s valuation methods. This decision clarifies the importance of following established guidelines to ensure equitable compensation for landowners while promoting effective land reform.

Fair Price or Formula? Kumassie Plantation’s Battle Over Land Compensation

The case originated from the compulsory acquisition of 457.9952 hectares of land owned by Kumassie Plantation Company Incorporated (KPCI) by the Department of Agrarian Reform (DAR) for distribution to farmer-beneficiaries. LBP initially valued the land at P19,140,965.00, an amount KPCI deemed unreasonably low. Despite KPCI’s rejection, LBP deposited this sum in KPCI’s account, which KPCI later withdrew. Consequently, KPCI filed a complaint against LBP and DAR, seeking a just compensation of P160,000.00 per hectare. The central legal question revolves around whether the Regional Trial Court (RTC) and the Court of Appeals correctly determined the land valuation by considering the mandated factors.

The RTC initially ruled in favor of KPCI, fixing the land value at P100,000.00 per hectare, plus legal interest. However, the Court of Appeals affirmed the valuation but deleted the interest. Discontented with the appellate court’s decision, both LBP and KPCI appealed to the Supreme Court. LBP argued that the RTC and Court of Appeals did not adequately consider the factors enumerated in Section 17 of Republic Act No. 6657 and the valuation formula in DAR Administrative Order (DAO) No. 6. This section requires considering the cost of acquisition, current value of like properties, the nature, actual use and income of the land, the sworn valuation by the owner, the tax declarations, and the assessment made by government assessors.

Building on this principle, the Supreme Court referenced previous cases like Land Bank of the Philippines v. Banal, Land Bank of the Philippines v. Celada, and Land Bank of the Philippines v. Lim, emphasizing that special agrarian courts must judiciously resolve just compensation cases. These rulings reiterate the paramount importance of observing Section 17 of Republic Act No. 6657 and administrative orders issued by DAR. As emphasized in Land Bank of the Philippines v. Banal, the RTC is required to consider factors enumerated in Section 17 of Republic Act No. 6657, which have been translated into a basic formula in DAO 6-92, as amended by DAO 11-94. Such factors and formula must be strictly adhered to in determining land valuation. The court also emphasized the need to uphold regulations issued by administrative bodies to enforce the law, adding that “Courts cannot ignore administrative issuances especially when, as in this case, its validity was not put in issue.”

Conversely, the Supreme Court found LBP’s valuation to be in accordance with Republic Act No. 6657 and DAO No. 6, noting that the bank considered factors identified under Section 17 of the Act and computed the valuation using the formula in the DAO.

Specifically, DAO No. 6 states:

LV = (CNI x 0.6) + ( CS x 0.3) + (MV x 0.1)

Where LV equals land value, CNI is capitalized net income, CS is comparable sales, and MV is the market value per tax declaration. Due to specific circumstances, LBP adjusted the formula according to DAR guidelines. The final valuation of P41,792.94 per hectare, totaling P19,140,965.91, was therefore upheld by the court.

Regarding the matter of legal interest, KPCI had argued for its imposition due to alleged delays by LBP in paying just compensation. However, the Supreme Court dismissed this argument because there was no delay on LBP’s part, as the initial valuation had been deposited and made available to KPCI.

FAQs

What was the key issue in this case?	The key issue was determining the correct valuation of land compulsorily acquired by the government for agrarian reform purposes, specifically whether the lower courts properly applied the factors and formula prescribed by law and DAR regulations.
What did the Supreme Court decide?	The Supreme Court sided with Land Bank of the Philippines (LBP), upholding its original land valuation, stating that it adhered to the proper factors and formulas.
Why did the Supreme Court side with LBP?	The Court found that LBP’s valuation was consistent with Section 17 of Republic Act No. 6657 and DAR Administrative Order No. 6, considering relevant factors and applying the prescribed formula.
What factors are considered when determining just compensation?	Key factors include the cost of land acquisition, the current value of similar properties, the land’s nature, actual use, and income, owner’s valuation, tax declarations, and government assessors’ assessments, as stipulated in Section 17 of R.A. 6657.
What is DAR Administrative Order No. 6?	DAR Administrative Order No. 6 provides the formula and guidelines for determining land valuation in agrarian reform cases, translating factors in R.A. 6657 into a mathematical equation.
Did KPCI receive interest on the compensation?	No, the Supreme Court did not grant KPCI interest on the compensation, finding that LBP was not delayed in paying just compensation.
What was KPCI’s main argument for a higher valuation?	KPCI argued that the land was undervalued, seeking a just compensation of P160,000.00 per hectare, claiming the initial offer was unreasonably low.
What happens if a landowner disagrees with the LBP’s valuation?	If a landowner disagrees with the LBP’s valuation, they can bring the matter to the Regional Trial Court (RTC), acting as a Special Agrarian Court, for judicial determination.

In summary, the Supreme Court’s decision reinforces the mandatory nature of valuation guidelines set by Republic Act No. 6657 and related administrative orders, ensuring a structured and equitable approach to land valuation in agrarian reform. By emphasizing the strict adherence to prescribed formulas, this ruling aims to balance the interests of landowners and farmer-beneficiaries in the country’s agrarian reform program.

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. Kumassie Plantation Company Incorporated, G.R. No. 177404, June 25, 2009