TL;DR

The Supreme Court upheld the use of Department of Agrarian Reform (DAR) formulas for calculating just compensation in land acquisition under the Comprehensive Agrarian Reform Program (CARP). This means that courts must generally adhere to these formulas unless there is a clear and justified reason to deviate, ensuring a standardized approach to land valuation and protecting agrarian reform objectives. Landowners are entitled to just compensation, but this compensation must be determined using the established DAR framework, which balances landowner rights with the goals of equitable land distribution.

Fair Price or Formulaic Fix? The Balancing Act of Just Compensation in Agrarian Reform

The heart of agrarian reform lies in the concept of just compensation – ensuring landowners receive a fair price for their land while enabling equitable distribution to landless farmers. This case of JMA Agricultural Development Corporation v. Land Bank of the Philippines revolves around the correct methodology for determining this “just compensation.” At its core, the dispute questions whether Regional Trial Courts, acting as Special Agrarian Courts (SACs), can deviate from the valuation formulas established by the Department of Agrarian Reform (DAR), or if these formulas are binding in determining the financial recompense landowners receive when their land is acquired for agrarian reform purposes.

JMA Agricultural Development Corporation owned a large sugarcane plantation in Negros Occidental, which was covered by CARP. The Land Bank of the Philippines (LBP), acting as the financial intermediary for CARP, initially valued the land at P17,500,914.92 based on DAR formulas. JMA rejected this valuation, arguing it was far too low and did not reflect the true just compensation. The DAR Adjudication Board (DARAB) then increased the valuation to P21,584,218.06. Dissatisfied, JMA escalated the matter to the Special Agrarian Court, seeking a significantly higher compensation of P26,213,791.26, claiming the land was undervalued due to the use of outdated data in the DAR’s formula. The SAC sided with JMA, using more recent data to arrive at a higher valuation. However, the Court of Appeals reversed the SAC decision, reinstating the Land Bank’s valuation, leading to the present Supreme Court appeal.

The Supreme Court’s analysis hinged on Section 17 of Republic Act No. 6657 (CARP law), which outlines factors for determining just compensation, including land acquisition cost, current value of similar properties, nature, actual use, and income. DAR Administrative Order No. 5 (AO No. 5) operationalizes these factors by providing specific valuation formulas. The formula in question, used for sugarlands, is: Land Value (LV) = [Capitalized Net Income (CNI) x 0.90] + [Market Value per Tax Declaration (MV) x 0.10]. CNI, in turn, depends on Annual Gross Production (AGP) and Selling Price (SP), with DAR AO No. 5 specifying the periods for data collection: AGP is based on the latest 12 months before field inspection, and SP is the average of the latest 12 months before claim folder receipt by LBP.

The SAC deviated from this formula by using data from July 2002, the date of land title transfer, arguing that just compensation should reflect the value at the time of taking. The Supreme Court disagreed, emphasizing that DAR formulas are not mere guidelines but have the force of law unless invalidated. The Court clarified that while SACs have judicial discretion to deviate, such deviation requires clear justification. In this case, the SAC’s reliance on the Land Bank of the Philippines v. Chico case was misplaced, as Chico involved unique circumstances not present here. The Supreme Court underscored that the DAR formulas are designed to balance landowner rights with the objectives of agrarian reform, and these formulas already account for market fluctuations by using average prices over a period, not just a single date.

The Court reiterated the principle from Alfonso v. Land Bank of the Philippines:

Until and unless declared invalid in a proper case, the DAR formulas partake of the nature of statutes, which under the 2009 amendment became law itself, and thus have in their favor the presumption of legality, such that courts shall consider, and not disregard, these formulas in the determination of just compensation for properties covered by the CARP.

This reinforces that SACs must generally adhere to the DAR formulas, and deviations are exceptions requiring strong evidentiary and legal basis. The Supreme Court ultimately sided with the Court of Appeals, affirming the Land Bank’s valuation and emphasizing the binding nature of DAR’s valuation formulas. However, the Court modified the ruling to include a legal interest of 12% per annum from the time of taking (July 31, 2002) until June 30, 2013, and 6% per annum thereafter until full payment, aligning with prevailing jurisprudence on legal interest rates.

FAQs

For inquiries regarding the application of this ruling to specific circumstances, please contact Atty. Gabriel Ablola through gaboogle.com or via email at connect@gaboogle.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: JMA AGRICULTURAL DEVELOPMENT CORPORATION V. LAND BANK OF THE PHILIPPINES, G.R. No. 206026, July 10, 2019