G.R. No. 177607 January 19, 2009
LAND BANK OF THE PHILIPPINES, Petitioner, vs. PACITA AGRICULTURAL MULTI-PURPOSE COOPERATIVE, INC., represented by its President, AGNES CUENCA and its Manager, Hon. MARCELO AGUIRRE, JR., Respondents.

FACTS

The Department of Agrarian Reform (DAR) acquired eight parcels of land (aggregate area of 34.95 hectares) in Barangay Ayungon, La Carlota City, Negros Occidental, in 1972 under the Operation Land Transfer Program of Presidential Decree No. 27. The land was distributed to farmer-beneficiaries, with Certificates of Land Transfer issued from 1978 to 1983 and Emancipation Patents granted from 1986 to 1990. Petitioner Land Bank of the Philippines (LBP) paid the former owner, Ayungon Agricultural Corporation (AAC), only for two parcels in 1986 and 1987. Respondent Pacita Agricultural Multi-Purpose Cooperative, Inc. purchased the subject property from AAC on May 28, 1987. Respondent inquired about the balance for the six remaining parcels. LBP, via a letter dated November 13, 1987, valued the remaining land at ₱148,172.21, which respondent refused. Republic Act No. 6657 (Comprehensive Agrarian Reform Law) took effect on June 15, 1988. In a Memorandum dated August 12, 1994, LBP reiterated the valuation of ₱148,172.21 and required documentary submissions. Respondent protested and requested revaluation. In October 1994, DAR issued Administrative Order No. 13, Series of 1994, imposing a 6% yearly interest compounded annually from the date of coverage. LBP adjusted its valuation to ₱537,538.34 by adding the increment. Respondent rejected this amount, alleging a mistake in computation. Respondent filed a Petition for Land Valuation and Determination of Just Compensation before the Special Agrarian Court (SAC) on September 18, 1995. The SAC, in its Decision dated May 18, 2000, ordered LBP to pay for the remaining land based on the valuation prescribed in P.D. No. 27 and Executive Order No. 228, plus a 6% increment compounded annually from October 21, 1972. A Clarificatory Order dated June 22, 2000, specified the present accrued amount as ₱506,649.28. Respondent’s Motion for Reconsideration was denied. Respondent appealed to the Court of Appeals, which reversed the SAC Decision on December 12, 2005, finding the strict application of the P.D. No. 27 and E.O. No. 228 formula unjust and oppressive. LBP’s Motion for Reconsideration was denied by the Court of Appeals on April 20, 2007.

ISSUE

Whether the Court of Appeals erred in reversing the Special Agrarian Court’s Decision which strictly applied the valuation formula under Presidential Decree No. 27 and Executive Order No. 228 in determining just compensation for lands taken in 1972.

RULING

The Supreme Court denied the Petition and affirmed the Court of Appeals’ Decision. The Court held that the determination of just compensation is a judicial function. While P.D. No. 27 and E.O. No. 228 are constitutional and may serve as guiding principles, their strict application in this case would be inequitable. The lands were taken in 1972, but payment remained unresolved. Fixing the value based on 1972 government support prices (₱35 per cavan of palay) for payment decades later would result in injustice to the landowner. Just compensation must be fair, equitable, and consider not only the value at the time of taking but also all relevant factors, including current standards. The Court cited precedents (Land Bank of the Philippines v. Natividad, Land Bank of the Philippines v. Celada, Land Bank of the Philippines v. Banal, and Land Bank of the Philippines v. Lim) which uniformly held that the courts are not strictly bound by the formulas in P.D. No. 27, E.O. No. 228, or R.A. No. 6657 in determining just compensation. The SAC’s rigid adherence to the formula was a reversible error. The case was remanded to the SAC for proper determination of just compensation based on current standards and evidence.