The Supreme Court clarified that just compensation for land acquired under the Comprehensive Agrarian Reform Law (CARL), or Republic Act (RA) No. 6657, must be determined based on the factors enumerated in Section 17 of RA No. 6657, and related Department of Agrarian Reform (DAR) regulations, not Presidential Decree (PD) No. 27. This ruling ensures that landowners receive fair compensation reflecting the current value and use of their property at the time of taking, aligning with the constitutional mandate of just compensation.

When Agrarian Reform Meets Fair Value: Determining Just Compensation Under RA 6657

In this case, Teresita Panlilio Luciano voluntarily offered her agricultural lands to the government under CARL. Disagreement arose over the land valuation, with the Land Bank of the Philippines (LBP) initially applying DAR Administrative Order (AO) No. 17, series of 1989, and later DAR AO No. 6, series of 1992. Dissatisfied with LBP’s valuation, Luciano filed a petition with the Special Agrarian Court (SAC), arguing that AO No. 6, series of 1992, was illegally issued and seeking a higher compensation based on RA No. 3844. The central legal question revolved around which legal framework—PD No. 27 or RA No. 6657—should govern the determination of just compensation for lands voluntarily offered under CARL.

The Supreme Court emphasized the importance of adhering to the specific valuation factors outlined in Section 17 of RA No. 6657 when determining just compensation for lands acquired under this law. Section 17 explicitly details the factors to be considered:

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 farmworkers 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.

Building on this principle, the Court pointed out that these factors are translated into a basic formula in DAR Administrative Order No. 6, Series of 1992, as amended by DAR Administrative Order No. 11, Series of 1994. This formula provides a structured approach to calculating land value based on capitalized net income, comparable sales, and market value per tax declaration. The Court has consistently upheld the mandatory application of these guidelines to ensure a fair and accurate assessment of just compensation.

The Court noted that when landowners voluntarily offer their lands for sale under RA No. 6657, the valuation factors under Section 17 of RA No. 6657, and the formula under DAR AO No. 6, series of 1992, as amended by DAR AO No. 11, series of 1994, should be applied. The Supreme Court ruled against the lower courts’ decision to apply PD No. 27 suppletorily. The ruling clarifies that RA No. 6657, being the governing law for voluntary land sales, takes precedence in determining just compensation.

The Supreme Court acknowledged the Land Bank of the Philippines’ (LBP) role in the initial valuation process but underscored that its determination is not conclusive. The final determination of just compensation rests with the Regional Trial Court (RTC), acting as a Special Agrarian Court (SAC). This court must consider the factors enumerated in Section 17 of RA No. 6657 and the applicable DAR regulations. LBP’s valuation serves as a starting point, but it must be substantiated during hearings where all parties can present evidence.

In cases where the agrarian reform process under PD No. 27 is incomplete, and RA No. 6657 was enacted before the process was concluded, the Supreme Court has held that the just compensation should be determined and the process concluded under the latter law. This approach ensures that landowners receive compensation that reflects the current value of their property, rather than being limited to the outdated guidelines of PD No. 27 and EO No. 228. The Court emphasized that just compensation should be the full and fair equivalent of the property taken, providing landowners with real, substantial, full, and ample remuneration.

To ensure a fair and expeditious resolution, the Supreme Court remanded the case to the Court of Appeals (CA) to receive evidence and determine the just compensation due to Luciano. This decision recognizes the need for a thorough evaluation of the relevant factors under Section 17 of RA No. 6657 and DAR AO No. 6, series of 1992, as amended. By tasking the CA with this responsibility, the Court aims to accelerate the final disposition of the case while upholding the principles of just compensation.

FAQs

What was the key issue in this case?	The key issue was which legal framework—PD No. 27 or RA No. 6657—should govern the determination of just compensation for lands voluntarily offered under the Comprehensive Agrarian Reform Law (CARL).
What is just compensation under RA 6657?	Just compensation under RA 6657 is the fair market value of the land at the time of taking, considering factors like acquisition cost, current value of similar properties, land nature, actual use, income, owner’s valuation, tax declarations, and government assessments. It aims to provide landowners with full and fair remuneration for their property.
What factors are considered in determining just compensation?	Factors include the cost of land acquisition, current value of similar properties, the nature and actual use of the land, the landowner’s sworn valuation, tax declarations, and assessments made by government assessors, as outlined in Section 17 of RA No. 6657. Social and economic benefits from farmers and the government are also considered.
What is the role of the Land Bank of the Philippines (LBP)?	LBP is responsible for the initial determination of land value and just compensation under CARL. However, their valuation is not conclusive and is subject to review by the Special Agrarian Court (SAC).
What is the role of the Special Agrarian Court (SAC)?	The SAC, typically the Regional Trial Court, has the final say in determining just compensation. It considers the factors in Section 17 of RA 6657 and applicable DAR regulations, and can conduct hearings and receive evidence to make a fair determination.
How does DAR Administrative Order No. 6 factor in?	DAR Administrative Order No. 6 (as amended by AO No. 11) provides the formula for calculating land value based on capitalized net income, comparable sales, and market value per tax declaration. It is used in conjunction with the factors listed in Section 17 of RA 6657.
What happens if the landowner disagrees with the LBP valuation?	If a landowner disagrees with the LBP valuation, they can bring the matter to the SAC for judicial determination. The SAC will then conduct hearings, receive evidence, and determine the just compensation based on RA 6657 and related regulations.
Why was the case remanded to the Court of Appeals?	The case was remanded to the Court of Appeals to receive evidence from both parties and determine the just compensation due to the landowner, Teresita Panlilio Luciano, in accordance with Section 17 of RA No. 6657 and DAR AO No. 6, series of 1992, as amended.

This Supreme Court decision reinforces the importance of adhering to RA No. 6657 when determining just compensation for lands acquired under the Comprehensive Agrarian Reform Program. By emphasizing the specific valuation factors outlined in the law and related DAR regulations, the Court aims to ensure fairness and equity in the compensation process, protecting the rights of landowners while advancing the goals of agrarian reform.

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. Teresita Panlilio Luciano, G.R. No. 165428, November 25, 2009