Just Compensation/Land Valuation

Land Valuation under Operation Land Transfer (PD 27)

According to PD 27 for the purpose of determining the cost of the land to be

transferred to the tenantfarmer pursuant to PD 27, the value of the land shall
be equivalent to two and one-half (2 1/2) times the average harvest of three
normal crop years immediately preceding the promulgation the Decree.

Section 2 of E.O. No. 228

The valuation of rice and corn lands covered by P.D. No. 27 shall be based on
the average gross production determined by the Barangay Committee on Land
Production in accordance with Department Memorandum Circular No. 26,
Series of 1973, and related issuances and regulations of the Department of
Agrarian Reform. The average gross production per hectare shall be multiplied
by two and a half (2.5), the product of which shall be multiplied by Thirty Five
Pesos (P35.00), the government support price for one cavan of 50 kilos of palay
on October 21, 1972, or Thirty One Pesos (P31.00), the government support
price for one cavan of 50 kilos of corn on October 21, 1972, and the amount
arrived at shall be the value of the rice and corn land, as the case may be, for
the purpose of determining its cost to the farmer and compensation to the
landowner.

Sections 17 and 18, R.A. No. 6657

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.
Section IV D of DAR Adm. Order No. 2, s. 2009

Land Valuation and Landowner Compensation

1. The compensation for lands covered under R.A. No. 9700 shall be: a) the
amount determined in accordance with the criteria provided for in
Section 7 of the said law and existing guidelines on land valuation; or b)
the value based on the order of the DAR Adjudication Board (DARAB) or
the regular court, which has become final and executory.

The basic formula for the valuation of lands covered by VOS or CA shall
be:

LV = (CNI x 0.60) + (CS x 0.30) + (MV x 0.10)

Where LV =Land Value

:
CNI = Capitalized Net Income (based on land use and
productivity)
CS =Comparable Sales (based on FMV equiv. to 70% of BIR
Zonal Value)
MV =Market Value per Tax Declaration (based on Govt
assessment)

1.1 If three factors are present ATcEDS

When the CNI, CS and MV are present, the formula shall be:
LV = (CNI x 0.60) + (CS x 0.30) + (MV x 0.10)

1.2 If two factors are present

1.2.1 When the CS factor is not present and CNI and MV are
applicable, the formula shall be:

LV = (CNI x 0.90) + (MV x 0.10)

1.2.2 When the CNI factor is not present, and CS and MV

are applicable, the formula shall be:

LV = (CS x 0.90) + (MV x 0.10)

 1.2 If only one factor is present

When both the CS and CNI are not present and only MV is
applicable, the formula shall be:

LV = MV x 2

In no case shall the value of idle land using the formula (MV x 2) exceed
the lowest value of land within the same estate under consideration or within
the same barangay, municipality or province (in that order) approved by LBP
within one (1) year from receipt of Claim Folder (CF.)

The specific guidelines governing the valuation of lands under

voluntary offer to sell (VOS) or compulsory acquisition (CA) pursuant to R.A.
No. 6657, as amended by R.A. No. 9700 are provided in CARP-LAD Annex A of
this Order.

2. All previously acquired lands wherein valuation is subject to challenge by

landowners shall be completed and finally resolved pursuant to Section
17 of R.A. No. 6657, as amended.
In like manner, claims over tenanted rice and corn lands under P.D. No.
27 and Executive Order (E.O.) No. 228 whether submitted or not to the
Land Bank of the Philippines (LBP) and not yet approved for payment
shall be valued under R.A. No. 6657, as amended.
Landholdings covered by P.D. No. 27 and falling under Phase I of R.A.
No. 9700 shall be valued under R.A. No. 9700.
3. In cases of rejection, landowners may withdraw the original value of the
landholding as determined by the Department of Agrarian Reform (DAR)
and Land Bank of the Philippines (LBP) per Memorandum of Valuation
(MOV) and subsequently deposited in their names, subject to their
submission of the requirements for payment. ATESCc

When the LO later accepts the original value or as recomputed by the

LBP based on existing valuation guidelines, mere filing of a manifestation
by the LO as regards the acceptance of the original value or a joint
manifestation by the LO and the LBP on the recomputed value with the
DAR Adjudication Board (DARAB) shall automatically terminate the just
compensation case pending thereat.
4. Landowners, other than banks and financial institutions, who voluntarily
offer their lands for sale, shall be entitled to an additional five percent
(5%) cash payment.
 5. For landholdings which were conveyed after the effectivity of R.A. No.
6657, the LBP shall consider the transferor as the payee.
However, payment must be released to the LO-transferee if the LO-
transferor issues a Special Power of Attorney (SPA) or Deed of
Assignment in favor of the former
6. In the determination of the Annual Gross Production (AGP), Selling Price
(SP) and Cost of Operation (CO) to be used in the land valuation, the
audited financial statement filed with the Bureau of Internal Revenue
(BIR) shall be obtained by the DARMO from the LO fifteen (15) days prior
to the date of field investigation. If the landowner fails to submit the
same, the DAR and LBP may adopt applicable industry data or, in the
absence thereof, conduct an industry study on the specific crop.
7. Small portions or patches within the covered landholdings which are
determined to be less productive than the bigger portion during the
conduct of joint field investigation shall be valued based on the current
use of the adjacent portions, provided that said small portions or patches
shall not exceed 10% of the productive area.

Likewise, small portions or patches of landholdings above 18 percent

slope, undeveloped and of no use to the landowner shall be valued as idle
provided it shall not exceed 10% of the covered landholding.

Relevant Case
LAND BANK OF THE PHILIPPINES v. HON. ELI G. C. NATIVIDAD
G.R. No. 127198
16 May 2005
Facts:

On May 14, 1993, private respondents filed a petition before the trial
court for the determination of just compensation for their agricultural lands
situated in Pampanga, which were acquired by the government pursuant to
Presidential Decree No. 27 (PD 27).

After trial, the court rendered a decision in favor of petitioners and

against respondents, ordering respondents to pay these lands owned by
petitioners and which are the subject of acquisition by the State under its
landreform program, the amount of THIRTY PESOS (P30.00) per square meter,
as the just compensation due for payment for same lands of petitioners located
in San Vicente (or Camba), Arayat, Pampanga. DAR and Land Bank filed
separate motions for reconsideration which were denied by the trial court. Land
Bank consequently failed to file a timely appeal and the assailed Decision
became final and executory.

Land Bank then filed a Petition for Relief which the trial court, in its
denied because Land Bank lost a remedy in law due to its own negligence.
Land Bank filed a Reply insisting that equity considerations demand that it be
heard on substantive issues raised in its motion for reconsideration. The Court
gave due course to the petition and required the parties to submit their
respective memoranda where both parties complied.

Issues:

1. Whether or not the private respondents’ failed to exhaust administrative

remedies and the question of just compensation.
2. What should be used on determining the just compensation for the
property in question.

Ruling:

1. According to the Supreme Court, In accordance with settled principles of

administrative law, primary jurisdiction is vested in the DAR to
determine in preliminary manner the just compensation for the lands
taken under the agrarian reform program, but such determination is
subject to challenge before the courts. The resolution of just
compensation cases for the taking of lands under agrarian reform is,
after all, essentially a judicial function. Thus, the trial did not err in
taking cognizance of the case as the determination of just compensation
is a function addressed to the courts of justice.

2. On the second issue, the Supreme Court said that Land Bank’s
contention that the seizure of the landholding did not take place on the
date of effectivity of PD 27 but would take effect on the payment of just
compensation. Considering the passage of Republic Act No.6657 (RA
6657) before the completion of this process, the just compensation
should be determined and the process concluded under the said law. It
would certainly be inequitable to determine just compensation based on
the guideline provided by PD 27 and EO228 considering the DAR’s
failure to determine the just compensation for a considerable length of
time. That just compensation should be determined in accordance with
RA 6657, and not PD 27 or EO 228, is especially imperative considering
 that just compensation should be the full and fair equivalent of the
property taken from its owner by the expropriator, the equivalent being
real, substantial, full and ample.

Discussion:

In the case at bar, the trial court correctly pointed out that the computation of
just compensation should be determined at the time of the payment of just
compensation which is based on the law effective at that time. The trial court
correctly determined the amount of just compensation due private respondents
in accordance with, and guided by, RA 6657 and existing jurisprudence.

LAND BANK OF THE PHILIPPINES v. HEIRS OF JESUS ALSUA

G.R. No. 211351
04 February 2015

Facts:

Jesus Alsua (Jesus) owned a 62.1108 has. parcel of unregistered

agricultural land known as Lot No. situated in Albay, covered by Tax
Declaration No. 99-13-001-0067 in his name. On March 6, 1994, respondents
Heirs of Jesus Alsua and their representative Bibiano C. Sabino (respondents)
voluntarily offered to sell the entire parcel of land to the government under
Republic Act No. (RA) 6657, as amended but only 47.4535 has. Thereof,
consisting of 43.7158 has. of coco land and 3.7377 has. ofunirrigated riceland
(subject lands), were acquired. Upon receipt from the DAR of the Claim Folder
(CF) on April 20, 2001, albeit containing incomplete documents, petitioner
Land Bank of the Philippines (LBP) valued the subject lands at 1,369,708.02.

The LBP’s valuation approved on September 25, 2001. The DAR then
offered to respondents the LBP’s valuation as just compensation for the lands,
but the latter rejected the valuation. Thus, the LBP was prompted to deposit
the said amount in cash and in Agrarian Reform Bonds in respondents’ name.
After summary administrative proceedings for the determination of just
compensation, docketed as DARAB Casen. 05-01-0059-A’-2001, the Provincial
Agrarian Reform Adjudicator (PARAD), in a Decision fixed the value of the
subject lands at ₱5,479,744.15. The LBP moved for reconsideration but was
denied in a Resolution. LBP filed a petition determination of just compensation
before the Regional Trial Court of Legazpi City.
 In its decision the RTC rejected the valuation of both the LBP and the
PARAD and fixed thejust compensation for the subject lands at ₱4,245,820.53.
The CA also in its decision upon taking cognizance of the case, it fixed the just
compensation of the subject lands at 2,465,423.02, less the initial valuation
already paid in the amount of 1,369,708.02,plus legal interest at the rate of
12% p.a. from November 13, 2001 to June 30, 2013, and at 6% p.a. from July
1, 2013 until full satisfaction.

Issue:

How should the subject lands be valued in determining the just

compensation?

Ruling:

The Supreme Court held that settled is the rule that when the agrarian reform
process is still incomplete, such as in this case where the just compensation
due the landowner has yet to be settled, just compensation should be
determined and the process be concluded under RA 6657. For purposes of
determining just compensation, the fair market value of an expropriated
property is determined bits character and its price at the time of taking or the
"time when the landowner was deprived of the use and benefit of his property.
While the CA correctly held that just compensation shall be the price or value
of the property at the time it was taken from the owner and appropriated by the
government, or on November29, 2001, it, departed from the parameters
prescribed under DAR AO No. 5, series of 1998 in computing the capitalized
net income (CNI) in order to arrive at the land value (LV) for the subject lands.
To insist that the formula must be applied with utmost rigidity whereby the
valuation is drawn following a strict mathematical computation goes beyond
the intent and spirit of the law. The suggested interpretation is strained and
would render the law inutile. Statutory construction should not kill but give life
to the law. As we have established in earlier jurisprudence, the valuation of
property in eminent domain is essentially a judicial function which is vested in
the regional trial court acting as a SAC, and not in administrative agencies.

Discussion:

In the case at bar, the Supreme Court provided guidelines based on Section 17
of RA 6657 in determining the just compensation:
 1. Just compensation must be valued at the time of taking, or the "time
when the landowner was deprived ofthe use and benefit of his property.
2. The evidence must conform to Section 17 of RA 6657, as amended, prior
to its amendment by RA 9700.
3. The RTC may impose interest on the just compensation as may be
warranted by the circumstances of the case.
4. Finally, the RTC is advised that while it should be mindful of the
different formulae created by the DAR in arriving at just compensation, it
is not strictly bound to adhere thereto if the situations before it do not
warrant their application.

THE HEIRS OF SPOUSES DOMINGO TRIA AND CONSORCIA CAMANO TRIA

v. LAND
BANK OF THE PHILIPPINES AND DEPARTMENT OF AGRARIAN REFORM
G.R. No. 170245
01 JULY 2013

Facts:

During their lifetime, the deceased spouses Domingo Tria and Consorcia
Camano owned a parcel of agricultural land located at Camarines Sur, with an
area of 32.3503 hectares. By virtue of Presidential Decree (PD) No. 27, the
Government took a sizeable portion of the deceased spouses’ property with
total area of 25.3830 hectares. Thereafter, respondent Department of Agrarian
Reform (DAR) undertook the distribution and eventual transfer of the property
to thirty tenant-beneficiaries. In due time, individual Emancipation Patents
were issued by respondent DAR in favor of the tenantbeneficiaries. Pursuant to
Section 2 of Executive Order (EO) No. 228, respondent Land Bank of the
Philippines (LBP) made an offer on November 23, 1990 to pay petitioners, by
way of compensation for the land, the total amount of ₱182,549.98, broken
down as follows: ₱18,549.98 of which would be in cash, and the remaining
₱164,000.00 to be satisfied in the form of LBP Bonds.

Not satisfied with the LBP’s valuation of their property, petitioners

rejected their offer and filed a Complaint before the Regional Trial Court (RTC)
of Naga City claiming that the just compensation for their property is
₱2,700,000.00. During trial, petitioners filed a Motion for Partial Judgment
praying that respondent LBP pay them the amount of ₱182,549.98 pursuant to
its previous offer. Hence, the RTC issued a Partial Judgment on December 22,
1992ordering respondent LBP to pay the amount of ₱182,549.98 without
prejudice to further proceedings to determine the just compensation and other
claims due. In compliance with the RTC’s Order, respondent LBP paid
petitioners the total amount of ₱309,444.97 in the form of manager’s checks,
and the amount of ₱43,524.00 in the form of LBP Bonds, representing the cash
portion with interest earned from investment securities, and bond payment of
the just compensation for the expropriated property.

In the course of the proceedings, the RTC appointed three

Commissioners to compute and recommend to the court the just compensation
to be paid for the expropriated property. Each of the three Commissioners
adopted a different formula in their valuation for the expropriated property:

1. the Commissioner representing respondent LBP adopted the mode of

computation provided under EONo. 228;
2. the Commissioner representing petitioners adopted the Sales Value
Analysis Formula; and
3. the Commissioner representing the trial court used the Assessor’s
Schedule of Value Formula.

In order to resolve the differences in their computation, the

Commissioners obtained the average of their respective valuations and made a
final recommendation of ₱1,151,166.51 for the entire expropriated property.

Based on the report of the commissioners the RTC made its own
computation by using the formula used by the Commissioner representing the
LBP with the slight modification that it used the government support price
(GSP) for one cavan of palay in 1994 as multiplier.

The CA in its Decision affirmed the RTC’s ruling. It held that the formula
and computation adopted by the RTC are well in accord with the working
principles of fairness and equity, and likewise finds ample support from the
recent pronouncement of the Supreme Court on the matter of determination of
just compensation. But a motion for reconsideration filed by respondents, the
CA reversed itself and issued an Amended Decisio reversing its earlier ruling
favoring the RTC’s decision.

Issue:

How should the valuation for just compensation be computed in the case at
bar?
Ruling:

The Supreme Court found that the petition for review of therein petitioner
Land Bank of the Philippines was unmeritorious. Land Bank’s contention that
the property was acquired for purposes of agrarian reform on October 21,
1972, the time of effectivity of PD 27, ergo just compensation should be based
on the value of the property as of that time andnot at the time of possession in
1993, is erroneous. In the case of Office of the President, Malacañang, Manila
v. Courtof Appeals, the Supreme Court ruled that the seizure of the
landholding did not take place on the date of effectivity of PD 27 but would
take effect on the payment of just compensation. Under the factual
circumstances of the case at bar, the agrarian reform process is still incomplete
as the just compensation to be paid private respondents has yet to be settled.
Considering the passage of Republic Act No.6657 (RA 6657) before the
completion of this process, the just compensation should be determined and
the process concluded under the said law. Indeed, RA 6657 is the applicable
law, with PD 27 and EO 228 having only suppletory effect.

The Supreme Court also said that it would be inequitable to determine just
compensation based on the guideline provided by PD 27 and EO228
considering the DAR’s failure to determine the just compensation for a
considerable length of time. That just compensation should be determined in
accordance with RA 6657, and not PD 27 or EO 228, is especially imperative
considering that just compensation should be the full and fair equivalent of the
property taken from its owner by the expropriator, the equivalent being real,
substantial, full and ample.

Discussion:

In the case at bar since the owners of the land has been deprived of the use
and dominion over their landholdings for a substantial period of time, while
respondents abjectly failed to pay the just compensation due the petitioners, it
is only but proper that the just compensation be determined using the law in
effect at the time of payment of the said compensation and not at the time PD
27 became effective, consistent with the principles of equity.