Just Compensation in Agrarian Reform: A Closer Look at the Supreme Court’s Approach

Land Bank of the Philippines v. Milagros De Jesus-Macaraeg, G.R. No. 244213, September 14, 2021

Imagine waking up one day to find that the land you’ve cultivated for years is suddenly taken away under the Comprehensive Agrarian Reform Program (CARP). The promise of just compensation is the only solace, but how is it determined? The Supreme Court’s decision in the case of Land Bank of the Philippines v. Milagros De Jesus-Macaraeg sheds light on this critical issue, affecting countless landowners across the Philippines.

This case revolves around Milagros De Jesus-Macaraeg, a landowner whose property was acquired under CARP. The central legal question was how to accurately calculate just compensation for her land, a process that involves multiple factors and can lead to significant disputes between landowners and the government.

Understanding the Legal Framework of Just Compensation

In the Philippines, just compensation is a constitutional right enshrined in Section 9, Article III of the 1987 Constitution, which states, “Private property shall not be taken for public use without just compensation.” This principle is further detailed in Republic Act No. 6657, also known as the Comprehensive Agrarian Reform Law (CARL), which outlines the factors to be considered in determining just compensation.

Section 17 of RA 6657 lists several factors, including the cost of acquisition, current value of like properties, nature, actual use and income of the property, sworn valuation by the owner, tax declarations, and government assessments. Additionally, social and economic benefits contributed by farmers and farmworkers, as well as non-payment of taxes or loans, are considered.

The Department of Agrarian Reform (DAR) has translated these factors into a formula under DAR Administrative Order No. 5 (DAR AO5), which calculates the Land Value (LV) as follows:

LV = (Capitalized Net Income x 0.6) + (Comparable Sales x 0.3) + (Market Value per Tax Declaration x 0.1)

This formula adjusts based on the availability of data, emphasizing the importance of accurate and verifiable information in the valuation process.

The Journey of Milagros De Jesus-Macaraeg

Milagros De Jesus-Macaraeg owned a 15.1836-hectare parcel of land in Davao City, of which 7.1838 hectares were placed under CARP in 2002. The DAR and Land Bank initially valued her property at P65,756.61 per hectare, totaling P472,382.33, an offer she rejected. Land Bank then deposited this amount in her name.

An administrative proceeding before the DAR Adjudication Board (DARAB) valued the property at P1,280,099.20, but Land Bank appealed to the Regional Trial Court (RTC) sitting as a Special Agrarian Court (SAC). Despite Land Bank’s absence during the hearing, Milagros presented her valuation of P3,055,000.00 based on an appraisal by Asian Appraisal Corp.

The RTC-SAC initially fixed just compensation at P20.00 per square meter and awarded P100,000.00 in attorney’s fees. However, the Court of Appeals (CA) remanded the case for proper computation, eventually setting the just compensation at P1,271,523.91 with 6% annual interest.

Land Bank appealed to the Supreme Court, challenging the use of certain figures in the valuation. The Supreme Court reviewed the factual findings due to conflicting valuations and adjusted the Capitalized Net Income (CNI) calculation, leading to a revised just compensation of P777,880.40.

Key reasoning from the Supreme Court includes:

“The Court of Appeals erred in fixing just compensation at P1,271,523.91… The RTC-SAC enjoys original and exclusive jurisdiction to determine just compensation for lands acquired for purposes of agrarian reform.”

“The concept of just compensation embraces not only the correct determination of the amount to be paid to the owners of the land, but also payment within a reasonable time from its taking.”

Implications for Future Agrarian Reform Cases

The Supreme Court’s decision underscores the importance of using verifiable data in calculating just compensation. Landowners and government agencies must ensure that all figures used in the valuation process are based on reliable sources, such as the Bureau of Agricultural Statistics (BAS), to avoid disputes and delays.

For landowners, this ruling emphasizes the need to engage independent appraisers and to document the property’s income and market value accurately. Businesses involved in agriculture should also take note of the potential for legal challenges and the importance of prompt and fair compensation.

Key Lessons:

• Ensure all data used in valuation is verifiable and sourced from credible institutions.
• Engage independent appraisers to support your valuation claims.
• Be prepared for a potentially lengthy legal process and consider legal representation.

Frequently Asked Questions

What is just compensation under agrarian reform?

Just compensation is the fair market value paid to landowners whose properties are acquired under the Comprehensive Agrarian Reform Program. It must reflect the property’s true value and be paid promptly.

How is just compensation calculated?

Just compensation is calculated using a formula that considers the property’s capitalized net income, comparable sales, and market value per tax declaration. Adjustments are made based on available data.

Can landowners challenge the government’s valuation?

Yes, landowners can challenge the valuation through administrative proceedings and, if necessary, appeal to the Special Agrarian Court and higher courts.

What happens if the government delays payment?

Delays in payment can result in the imposition of legal interest on the outstanding amount, ensuring that landowners are compensated for the time value of money.

What should landowners do to prepare for potential land acquisition under CARP?

Landowners should maintain accurate records of their property’s income, engage independent appraisers, and be ready to defend their valuation in legal proceedings.

ASG Law specializes in agrarian reform and property law. Contact us or email hello@asglawpartners.com to schedule a consultation.