The Supreme Court ruled that the Land Bank of the Philippines (LBP) must base its deposit of provisional compensation to landowners on its initial land valuation, not the higher amount determined by the Department of Agrarian Reform Adjudication Board (DARAB). This decision clarifies the process for land acquisition under the Comprehensive Agrarian Reform Program (CARP) and protects the Agrarian Reform Fund from potentially excessive payouts prior to final judicial determination of just compensation. By reaffirming LBP’s role in initial valuation, the Court ensures a more financially sustainable and equitable implementation of agrarian reform.

Whose Valuation Counts? Land Bank’s Initial Offer vs. DARAB’s Higher Assessment

This case revolves around a dispute over the correct amount of provisional compensation that Land Bank of the Philippines (LBP) is required to deposit when a landowner rejects the government’s initial offer for land acquired under the Comprehensive Agrarian Reform Program (CARP). The respondent, heir of Trinidad S. Vda. de Arieta, owned a parcel of agricultural land, part of which was covered by CARP. She proposed a price of P2,000,000.00 per hectare, but LBP valued the land at P1,145,806.06, or P76,387.57 per hectare, which was rejected. LBP deposited the offered amount as provisional compensation. Subsequently, the DARAB fixed the compensation at P10,294,721.00, significantly higher than LBP’s initial valuation. The central legal question is whether the provisional deposit should be based on LBP’s initial valuation or the DARAB-determined amount.

The Regional Trial Court (RTC), acting as a Special Agrarian Court (SAC), ordered LBP to deposit the DARAB-determined amount. The Court of Appeals (CA) affirmed the SAC’s order, leading LBP to file a petition for review on certiorari with the Supreme Court, arguing that the initial valuation should be the basis for the provisional deposit. The Supreme Court granted the petition, reversing the CA’s decision. The Court’s analysis hinged on interpreting Section 16 of Republic Act (R.A.) No. 6657, the CARP Law, particularly concerning the procedure for acquiring private lands. Section 16 outlines the steps involved, from the initial notice to acquire land to the final determination of just compensation by the courts.

The Court emphasized that the offer made by the Department of Agrarian Reform (DAR) to the landowner, as mentioned in Section 16 (b) and (c), is based on the initial valuation by the LBP. This valuation is the starting point for negotiations and the basis for the provisional compensation if the landowner rejects the offer. To support its interpretation, the Supreme Court examined the sequence of events outlined in Section 16. Sub-paragraphs (a) through (c) detail the process of offering compensation, and only sub-paragraph (e) discusses the deposit of compensation. The Court reasoned that this deposit is directly linked to the initial offer made by DAR, based on LBP’s valuation, and not the subsequent determination by the DARAB.

SEC. 16. Procedure for Acquisition of Private Lands. — For purposes of acquisition of private lands, the following procedures shall be followed:

(e) Upon receipt by the landowner of the corresponding payment or in case of rejection or no response from the landowner, upon the deposit with an accessible bank designated by the DAR of the compensation in cash or in LBP bonds in accordance with this Act, the DAR shall take immediate possession of the land and shall request the proper Register of Deeds to issue a Transfer Certificate of Title (TCT) in the name of the Republic of the Philippines. The DAR shall thereafter proceed with the redistribution of the land to the qualified beneficiaries.

Furthermore, the Supreme Court underscored the role of LBP in the land valuation process. Section 18 of R.A. No. 6657 provides that LBP shall compensate the landowner in such amount as may be agreed upon by the landowner and the DAR and the LBP, or as may be finally determined by the court. The Court stated that the LBP is charged with the initial responsibility of determining the value of lands placed under land reform and the compensation to be paid for their taking. The court cited Republic v. Court of Appeals, emphasizing the LBP’s indispensable role once expropriation proceedings commence, a function further solidified by Executive Order (EO) No. 405.

EO No. 405, issued by President Corazon Aquino, transferred the primary responsibility for land valuation from the DAR to the LBP to accelerate program implementation. The intent was to tap into the LBP’s professional expertise in appraising agricultural properties. The Court also highlighted irregularities in land valuations that previously plagued the CARP implementation, necessitating a more financially prudent approach. The court quoted EO 405, Section 1:

SECTION 1. The Land Bank of the Philippines shall be primarily responsible for the determination of the land valuation and compensation for all private lands suitable for agriculture under either the Voluntary Offer to Sell (VOS) or Compulsory Acquisition (CA) arrangements as governed by Republic Act No. 6657. The Department of Agrarian Reform shall make use of the determination of the land valuation and compensation by the Land Bank of the Philippines, in the performance of [its] functions.

Building on this principle, the Supreme Court discussed the procedural steps for land valuation and compensation under DAR Administrative Order (AO) No. 02, series of 1996, which supports the view that LBP’s initial valuation is the basis for the provisional compensation deposit. According to the AO, the LBP determines the land valuation, prepares a Memorandum of Valuation, Claim Folder Profile and Valuation Summary (MOV-CFPVS), and sends it to the DAR Provincial Office (DARPO). The DARPO then sends a Notice of Land Valuation and Acquisition to the landowner. If the landowner rejects the offered price, the DARPO forwards a Request to Deposit the compensation proceeds to LBP, before requesting the DARAB to conduct administrative proceedings. The Court emphasized that this deposit is made by LBP either before or simultaneously with the conduct of the summary administrative proceedings, without awaiting the termination of the proceedings or rendition of judgment by the DARAB/RARAD/PARAD.

This approach contrasts with the CA’s interpretation, which would require the government to wait for the termination of the summary administrative proceeding before taking possession of the land. The Supreme Court found this interpretation impractical and inconsistent with the intent of the CARP Law. Furthermore, the Court noted that the DARAB Rules of Procedure do not require the delivery or deposit of provisional compensation based on the PARAD/RARAD/DARAB judgment. Section 10, Rule XIX of the DARAB 2003 Rules only allows execution of judgments for compensation which have become final and executory. The absence of such a requirement further underscores LBP’s primary responsibility to submit an initial valuation, which then forms the basis for the provisional deposit.

The Court also addressed the respondent’s contention that LBP should have appealed the RARAD’s decision to the Board, as prescribed by Section 5, Rule XIX of the 2003 DARAB Rules of Procedure. The Court clarified that the 2003 DARAB Rules were not yet in effect when the case was filed. The applicable rule was Section 2, Rule XIV (Judicial Review) of the Revised Rules of the Department of Agrarian Reform Adjudication Board, which allows decisions on land valuation or just compensation to be brought directly to the Special Agrarian Court for final judicial determination. Thus, LBP’s filing of a petition before the SAC was the correct course of action.

In conclusion, the Supreme Court held that LBP had duly complied with the requirement of depositing provisional compensation under Section 16 (e) of R.A. No. 6657 and DAR AO No. 02, series of 1996, by depositing its initial valuation. This decision clarifies the procedure for land acquisition under CARP, ensuring that provisional compensation is based on LBP’s initial valuation, pending final judicial determination of just compensation.

FAQs

What was the key issue in this case?	The central issue was determining the correct amount of provisional compensation the Land Bank of the Philippines (LBP) must deposit when a landowner rejects the initial valuation for land acquired under CARP. Should it be LBP’s initial offer or the higher amount determined by the DARAB?
What did the Supreme Court decide?	The Supreme Court ruled that the LBP should base the provisional compensation deposit on its initial valuation of the land, not the higher amount determined by the DARAB. This clarifies the process for land acquisition under the Comprehensive Agrarian Reform Program (CARP).
Why is LBP responsible for the initial valuation?	Executive Order No. 405 designates LBP as primarily responsible for determining land valuation and compensation to leverage its professional expertise in appraising agricultural properties. This aims to streamline the land acquisition process and ensure financial prudence.
What happens after the landowner rejects the initial offer?	If the landowner rejects the initial offer, the DAR conducts summary administrative proceedings to determine compensation, and the LBP deposits the amount of its initial valuation as provisional compensation. The DARAB’s decision can then be appealed to the Special Agrarian Court.
What is the purpose of the provisional compensation?	The provisional compensation allows the government to take immediate possession of the land and proceed with its redistribution to qualified beneficiaries, even while the final determination of just compensation is pending. This ensures the continuous implementation of CARP.
Did the DARAB decision become final in this case?	No, the DARAB decision did not become final because the LBP correctly brought the matter to the Special Agrarian Court for final judicial determination. The applicable rules at the time allowed for direct appeals to the SAC in just compensation cases.
What administrative order supports the Court’s decision?	DAR Administrative Order No. 02, series of 1996, reinforces the view that the LBP’s initial valuation becomes the basis of the provisional compensation deposit. The administrative order outlines the steps for land valuation and compensation, supporting the court’s ruling.
What are the implications of this ruling for landowners?	Landowners receive provisional compensation based on LBP’s initial valuation, allowing the government to proceed with land redistribution. However, landowners retain the right to challenge the valuation in court and seek a final determination of just compensation.
What are the implications of this ruling for LBP?	The ruling reaffirms LBP’s primary role in land valuation and clarifies the basis for provisional compensation deposits. This helps LBP manage the Agrarian Reform Fund more effectively and ensures a more financially sustainable implementation of CARP.

This Supreme Court decision provides crucial clarification on the procedures for land acquisition under CARP, particularly concerning the basis for provisional compensation. By affirming the Land Bank of the Philippines’ role in initial valuation, the Court ensures a more financially sustainable and equitable implementation of agrarian reform, balancing the interests of landowners and land reform beneficiaries.

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. HEIR OF TRINIDAD S. VDA. DE ARIETA, G.R. No. 161834, August 11, 2010