G.R. No. 170245 , July 1, 2013
The Heirs of Spouses Domingo Tria and Consorcia Camano Tria, Petitioners, vs. Land Bank of the Philippines and Department of Agrarian Reform, Respondents.

FACTS

The deceased spouses Tria owned a 32.3503-hectare agricultural land in Camarines Sur. In 1972, pursuant to Presidential Decree No. 27, the government took 25.3830 hectares for distribution to tenant-beneficiaries. Land Bank offered compensation of ₱182,549.98 in 1990, which the heirs rejected, filing a complaint before the Regional Trial Court (RTC) of Naga City claiming just compensation of ₱2,700,000.00. During trial, the heirs moved for partial judgment to receive Land Bank’s offered amount. The RTC granted this but later amended its order to specify payment of ₱18,549.98 in cash plus interest and ₱164,000.00 in bonds plus interest, which Land Bank complied with, paying a total of ₱309,444.97 in cash and ₱43,524.00 in bonds.
Three commissioners were appointed to determine just compensation, each using a different valuation formula. They averaged their figures to recommend ₱1,151,166.51, but this was not accepted. The RTC, in its 1995 Decision, instead used a modified formula based on Executive Order No. 228, applying the 1994 government support price (GSP) for palay. The Court of Appeals initially affirmed this but, upon reconsideration, reversed itself in an Amended Decision, applying the Supreme Court’s ruling in Gabatin v. Land Bank which fixed the GSP at the 1972 rate of ₱35.00 per cavan.

ISSUE

Whether the Court of Appeals erred in applying the 1972 government support price for palay, instead of the 1994 price, in computing just compensation for land taken under P.D. No. 27.

RULING

Yes. The Supreme Court granted the petition, reversing the CA Amended Decision and reinstating the RTC’s 1995 Decision. The Court held that just compensation must be the full and fair equivalent of the property taken at the time of taking, which is ordinarily its market value at that time. However, for properties taken under P.D. No. 27 where the government failed to pay promptly, the determination of just compensation is not strictly limited to the 1972 valuation.
The Court emphasized that the constitutional guarantee of just compensation aims to indemnify the owner fully. When there is a significant delay between the taking and the actual payment, as in this case spanning over two decades, simply applying the 1972 GSP of ₱35.00 would be grossly inequitable and confiscatory. The RTC correctly used the 1994 GSP of ₱300.00 per cavan in its computation to account for the drastic increase in the price of palay and the prolonged deprivation of the owners. The Gabatin doctrine was not controlling here, as its application would result in manifest injustice. The Court affirmed that the judicial determination of just compensation must consider all relevant factors to arrive at a fair valuation, not merely adhere to a rigid, outdated formula that fails to reflect economic realities and adequately compensate the landowner.