The Supreme Court held that when determining just compensation for lands acquired under the Comprehensive Agrarian Reform Program (CARP), courts must strictly adhere to the valuation guidelines set forth in Republic Act No. 6657 and the administrative orders issued by the Department of Agrarian Reform (DAR). This means courts cannot disregard the formulas provided by the DAR in its administrative orders for calculating just compensation, ensuring a uniform and legally sound approach to land valuation.

Balancing Land Reform and Landowner Rights: A Case of Fair Valuation

This case revolves around the valuation of agricultural lands compulsorily acquired by the government under the Comprehensive Agrarian Reform Program (CARP). Respondents Glenn and Gerome Y. Escandor, along with Emilio D. Escandor and Violeta Yap, owned several parcels of land in Davao del Sur. In 1995, the Department of Agrarian Reform (DAR) placed these lands under CARP, triggering the process of determining just compensation for the landowners. The Land Bank of the Philippines (LBP), acting as the financial intermediary, initially valued the properties at P927,895.97 and P849,611.01, respectively. Disagreeing with LBP’s valuation, the landowners filed complaints before the Regional Trial Court (RTC) of Davao City, sitting as a Special Agrarian Court (SAC), seeking a more accurate determination of just compensation.

The SAC rendered a decision favoring the landowners, awarding them significantly higher amounts than the LBP’s initial valuation. The SAC’s decision hinged on the market value approach, which it deemed more equitable than the income value formula used by the DAR. Unsatisfied, the LBP appealed to the Court of Appeals (CA), arguing that the SAC had erred in disregarding the valuation factors prescribed by Republic Act (R.A.) No. 6657 and its implementing regulations. The CA remanded the case back to the SAC, directing the court to recompute the just compensation based on the value of the properties at the time of taking, including interest from the time the property was taken until the compensation was actually paid. LBP then elevated the issue to the Supreme Court.

At the heart of the controversy lies the interpretation and application of Section 17 of R.A. No. 6657, which outlines the factors to be considered in determining just compensation. This section states:

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.

The Supreme Court emphasized that while the determination of just compensation is a judicial function, courts must consider the factors outlined in Section 17 of R.A. No. 6657, as translated into a basic formula by the DAR in its administrative orders. These administrative orders provide a structured approach to land valuation, ensuring consistency and fairness in the implementation of CARP. The Court cited several precedents, including Land Bank of the Philippines v. Sps. Banal, which affirmed the applicability of DAR AO No. 06, series of 1992, as amended by DAR AO No. 11, series of 1994, in fixing just compensation.

Furthermore, the Court referenced Land Bank of the Philippines v. Celada, highlighting that the factors enumerated in Section 17 of R.A. No. 6657 had been translated into a basic formula by the DAR. The formula outlined in DAR AO No. 05, series of 1998, should be applied in computing just compensation, namely:

LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1)
Where:	LV = Land Value CNI = Capitalized Net Income CS = Comparable Sales MV = Market Value per Tax Declaration

The Supreme Court also addressed the issue of interest on the final compensation, disagreeing with the CA’s position that it is automatically awarded in agrarian cases. The Court cited Land Bank of the Philippines v. Celada, where it was held that interest is in the nature of damages for delay in payment. In this case, since the LBP had promptly deposited the compensation in cash and bonds, there was no delay that would justify the payment of interest.

The Court emphasized that Special Agrarian Courts (SACs) are not at liberty to disregard the formula laid down in DAR A.O. No. 5, series of 1998. Unless an administrative order is declared invalid, courts have no option but to apply it. The courts cannot ignore, without violating the agrarian law, the formula provided by the DAR for the determination of just compensation. This ensures that the process of determining just compensation is grounded in a systematic and legally sound framework, as established by the DAR pursuant to its mandate under the agrarian reform law.

FAQs

What was the central legal issue in this case?	The primary issue was whether the Special Agrarian Court (SAC) properly determined the just compensation for land acquired under the Comprehensive Agrarian Reform Program (CARP), specifically regarding adherence to valuation guidelines provided in R.A. No. 6657 and DAR administrative orders.
What is just compensation in the context of agrarian reform?	Just compensation refers to the fair and full equivalent for the loss sustained by the landowner due to the compulsory acquisition of their property under agrarian reform laws; it is intended to ensure that landowners are not unduly deprived of their property without proper remuneration.
What is the role of the Department of Agrarian Reform (DAR) in determining just compensation?	The DAR is primarily responsible for establishing valuation guidelines and formulas to be used in determining just compensation for lands acquired under CARP, ensuring consistency and fairness in the valuation process.
Can courts deviate from the DAR’s valuation guidelines?	While the final determination of just compensation is a judicial function, courts are generally required to adhere to the valuation guidelines and formulas established by the DAR, unless such guidelines are proven invalid or unconstitutional.
What factors are considered in determining just compensation under R.A. No. 6657?	Key factors include the cost of land acquisition, the current value of similar properties, the nature and actual use of the land, the owner’s sworn valuation, tax declarations, and government assessments, as well as the social and economic benefits contributed by farmers and the government.
Is interest automatically awarded on just compensation?	No, interest is not automatically awarded. It is typically granted only if there has been a delay in the payment of just compensation, serving as damages to compensate the landowner for the delay.
What is DAR Administrative Order No. 5, series of 1998?	DAR AO No. 5, series of 1998, is a regulation that provides the revised rules and regulations governing the valuation of lands voluntarily offered or compulsorily acquired under R.A. No. 6657, outlining the specific formula to be used in calculating just compensation.
What happens if a landowner disagrees with the initial valuation of their land?	Landowners can file a complaint with the Special Agrarian Court (SAC) to seek a judicial determination of just compensation, allowing them to present evidence and arguments to support their claim for a higher valuation.

In conclusion, the Supreme Court’s decision underscores the importance of adhering to the established legal framework for determining just compensation in agrarian reform cases. By requiring strict compliance with R.A. No. 6657 and DAR administrative orders, the Court aims to ensure fairness and consistency in the valuation process, balancing the interests of landowners and 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. GLENN Y. ESCANDOR, ET AL., G.R. No. 171685, October 11, 2010