GR 181912; (November, 2016) (Digest)
G.R. No. 181912 & 183347, November 29, 2016
RAMON M. ALFONSO, Petitioner, vs. LAND BANK OF THE PHILIPPINES and DEPARTMENT OF AGRARIAN REFORM, Respondents.
FACTS
Cynthia Palomar owned two parcels of land in Sorsogon City placed under agrarian reform. The Department of Agrarian Reform (DAR) valued them at a total of ₱828,935.33, which Palomar rejected. She later sold her rights to Ramon M. Alfonso. The DAR Adjudication Board, applying the formula in DAR Administrative Order No. 5 (1998), fixed just compensation at approximately ₱2.4 million. Both Alfonso and the Land Bank of the Philippines (LBP) separately filed petitions for judicial determination before the Regional Trial Court (RTC), sitting as a Special Agrarian Court (SAC).
The SAC appointed a commissioner who, using the Market Data and Capitalized Income approaches, valued the properties at ₱6,094,000. The SAC adopted this valuation, finding the DAR and LBP valuations “unrealistically low,” and held that Executive Order No. 228’s guidelines were mere guiding principles. The Court of Appeals reversed the SAC Decision, ruling that the court failed to apply or even consider the mandatory factors in Section 17 of Republic Act No. 6657 and the DAR’s implementing formulas.
ISSUE
Whether the Special Agrarian Court erred in determining just compensation without applying or considering the factors and formulas under Section 17 of R.A. No. 6657 and the pertinent DAR administrative orders.
RULING
Yes. The Supreme Court affirmed the Court of Appeals and remanded the case to the SAC for proper determination. The Court reiterated the established rule that in determining just compensation for agrarian reform lands, courts are legally mandated to consider the factors enumerated in Section 17 of R.A. No. 6657 and the applicable DAR administrative formulas. These formulas, particularly DAR AO No. 5 (1998), provide the framework for computation, and courts must apply them as starting points.
The SAC committed a reversible error by completely disregarding this framework and relying solely on the commissioner’s report which used different valuation approaches. While courts ultimately exercise judicial discretion and are not strictly bound to the formulas, they have a positive duty to take them into account. Any deviation from the statutory factors and formulas must be justified by clear, cogent, and substantiated reasons rooted in the evidence on record. The SAC’s blanket rejection of the DAR formula as producing a low value, without explaining how the commissioner’s report related to the Section 17 factors, constituted an abdication of this duty. The valuation exercise must be rooted in the law’s specific criteria to ensure consistency and fairness.