G.R. No. 188046 ; July 24, 2013
LAND BANK OF THE PHILIPPINES, Petitioner, vs. AMERICAN RUBBER CORPORATION, Respondent.

FACTS

American Rubber Corporation voluntarily offered its 940-hectare rubber plantation in Basilan for agrarian reform. The Department of Agrarian Reform (DAR) acquired 888.6489 hectares, with Land Bank of the Philippines (LBP) valuing it at ₱55,682,832.67. Respondent rejected this valuation. After DAR deposited the preliminary compensation and partially cancelled the titles, and with the DAR Adjudication Board (DARAB) failing to act on the valuation dispute for over two years, respondent filed a petition for judicial determination of just compensation before the Regional Trial Court sitting as a Special Agrarian Court (SAC).
The SAC denied LBP’s motion to dismiss, which argued non-exhaustion of administrative remedies. It then constituted a Board of Commissioners, which conducted an ocular inspection and gathered data from government agencies and local inquiries. The Commissioners found the land was predominantly productive rubber plantation with supporting infrastructure and recommended a just compensation of ₱115,372,206. The SAC adopted this recommendation in its Order.

ISSUE

Whether the SAC erred in fixing just compensation without applying the valuation formula prescribed under DAR administrative orders.

RULING

The Supreme Court upheld the SAC’s determination. The Court ruled that while DAR administrative orders provide a framework for initial valuation, the final determination of just compensation is a judicial function. The SAC is not strictly bound by the DAR formula, especially when it leads to a valuation incongruent with the property’s fair market value at the time of taking. The constitutional standard of “just compensation” is the full and fair equivalent of the property, considering all relevant factors such as the property’s nature, actual use, income, and sworn valuation by owners.
In this case, the SAC correctly exercised its discretion by relying on the comprehensive Commissioners’ Report, which was based on an ocular inspection, evidence of the land’s high productivity as an operational rubber plantation, and prevailing market values in the area. The Court found no abuse of discretion, as the SAC’s valuation was supported by substantial evidence and reflected the property’s true economic potential, thereby satisfying the constitutional mandate. The fact that respondent had withdrawn the preliminary deposit did not estop it from seeking a higher valuation, as such withdrawal was without prejudice to the final judicial determination.