G.R. No. 178046 ; June 13, 2012
LAND BANK OF THE PHILIPPINES, Petitioner, vs. MONTINOLA-ESCARILLA AND CO., INC., Respondent.

FACTS

Respondent Montinola-Escarilla and Co., Inc. (MECO) owned 159.0881 hectares of agricultural land in Agusan del Sur, which the government acquired in 1995 under the Comprehensive Agrarian Reform Program (CARP). Petitioner Land Bank of the Philippines (LBP) initially valued the land at ₱823,204.08, which MECO rejected. MECO subsequently filed a complaint for determination of just compensation before the Regional Trial Court (RTC), which acted as a Special Agrarian Court.
The RTC constituted a Board of Commissioners to appraise the property. The Board failed to reach a unified valuation. Two commissioners, however, submitted a joint report recommending ₱4,615,194.00 as just compensation, noting the land was cultivated and had improvements. The RTC, in its 2002 Decision, disregarded this and fixed compensation at ₱7,927,660.60, reclassifying the land as corn and coconut land based on alleged evidence of its actual use, and awarded attorney’s fees. LBP appealed, arguing the RTC ignored the factors under Section 17 of RA 6657 and the property’s condition at the time of taking.

ISSUE

Whether the Court of Appeals erred in adopting the valuation in the Commissioners’ Report and in deleting the award of attorney’s fees.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals’ Decision. The core principle in determining just compensation is the fair market value of the property at the time of its taking. Section 17 of RA 6657 enumerates specific factors for this determination, including the land’s nature, actual use, and income. The potential use of the property is considered only when there is a great improvement in its general vicinity and should not control the valuation.
Here, both the RTC and the CA erred by reclassifying the property based on its alleged “actual use” at the time of appraisal, rather than its condition at the time of taking in 1995. The Field Investigation Report clearly indicated that at the time of inspection in 1994, a substantial portion was idle and abandoned, with only 4.4825 hectares as rainfed riceland. The reclassification to corn and coconut land was unsupported and speculative. However, the Court found that the Commissioners’ Report, which formed the basis of the CA’s valuation, was itself flawed as it also appeared to consider the land’s condition post-taking. Despite this, the Court sustained the CA’s adoption of the ₱4,615,194.00 valuation. It held that LBP, as the petitioner, failed to sufficiently prove that this amount was arrived at without basis or was grossly excessive. The burden was on LBP to show a clear error, which it did not discharge. Consequently, the award of attorney’s fees was correctly deleted for lack of legal basis.