G.R. No. 190004 , August 8, 2017
Land Bank of the Philippines, Petitioner, vs. Eugenio Dalauta, Respondent

FACTS

Respondent Eugenio Dalauta owned a 25.2160-hectare agricultural land in Butuan City placed under compulsory acquisition by the DAR in 1994. Petitioner Land Bank of the Philippines (LBP) valued the land at ₱192,782.59, which Dalauta rejected as too low. The Provincial Agrarian Reform Adjudicator affirmed LBP’s valuation. Dalauta subsequently filed a petition for determination of just compensation with the Regional Trial Court (RTC) sitting as a Special Agrarian Court (SAC).
During the SAC proceedings, Dalauta claimed his land had a net income of ₱350,000.00 in 1993 from the sale of trees, arguing that just compensation should be computed using the formula under DAR Administrative Order (A.O.) No. 6, series of 1992: Land Value (LV) = [Capitalized Net Income (CNI) x 0.9] + [Market Value (MV) per Tax Declaration x 0.1]. LBP, however, insisted the land was non-income producing, with corn cultivation only for family consumption, and thus applied the formula LV = MV x 2, resulting in its initial valuation. The SAC adopted the Commissioners’ report recommending a value of ₱100,000.00 per hectare. On appeal, the Court of Appeals modified this, applying the CNI formula and fixing just compensation at ₱2,639,566.90.

ISSUE

Whether the Court of Appeals correctly applied the CNI formula under DAR A.O. No. 6, series of 1992, in determining the just compensation for Dalauta’s land.

RULING

The Supreme Court denied LBP’s petition and affirmed the Court of Appeals’ decision. The Court held that the determination of just compensation is a judicial function, and the SAC is not strictly bound by DAR administrative formulas but must consider all relevant factors under Republic Act No. 6657 , including the land’s nature, actual use, income, and sworn valuation by the owner. The legal logic centered on the proper application of the applicable DAR formula based on the evidence of the land’s income-producing capacity.
The Court found that Dalauta sufficiently proved the land generated income through the sale of trees in 1993, a fact within the 12-month period preceding the ocular inspection as required by the guidelines. LBP’s own witnesses admitted they did not inquire about the land’s income from the landowner. Consequently, the presence of a proven CNI mandated the use of the formula LV = (CNI x 0.9) + (MV x 0.1), not the MV x 2 formula for non-income producing land. The Court emphasized that just compensation must be the full and fair equivalent of the property taken, and the CNI, as a factor, reflects the land’s productivity and economic potential. The appellate court’s computation, which was based on the established CNI and the market value per tax declaration, was therefore upheld as a proper exercise of judicial discretion in arriving at the correct just compensation.