G.R. No. 192345 March 29, 2017
LAND BANK OF THE PHILIPPINES, Petitioner vs. SPOUSES ESTEBAN and CRESENCIA CHU, Respondents

FACTS

Respondents Spouses Chu owned two agricultural parcels in Sorsogon acquired under the agrarian reform program. The first, 14.9493 hectares, was acquired under P.D. No. 27 and initially valued by petitioner Land Bank of the Philippines (LBP) at ₱177,657.98. The second, 7.7118 hectares, was acquired under R.A. No. 6657 and valued at ₱263,928.57. The Spouses Chu rejected these valuations. The Provincial Agrarian Reform Adjudicator (PARAD) recomputed the values to ₱983,663.94 for the P.D. 27 land and ₱1,542,360.00 for the R.A. 6657 land, considering factors like comparable sales and a municipal resolution declaring the area as an industrial zone.
Dissatisfied, LBP filed a Petition for Determination of Just Compensation with the Regional Trial Court (RTC), sitting as a Special Agrarian Court (SAC). The RTC, in its decision, fixed just compensation at ₱1,155,173.00 for the P.D. 27 land and ₱2,313,478.00 for the R.A. 6657 land. The RTC arrived at these figures by adding the PARAD’s valuation to an additional ₱100,000.00 per hectare, which it justified based on the land’s “potentials” for industrial development and economic multiplier effects. The Court of Appeals affirmed the RTC decision, prompting LBP’s appeal to the Supreme Court.

ISSUE

Whether the RTC, as a Special Agrarian Court, erred in its determination of just compensation by considering the land’s “potentials” for future industrial use and adding a flat rate per hectare on that basis.

RULING

The Supreme Court ruled in favor of LBP, reversing the CA and RTC decisions. The legal logic is anchored on the proper application of the factors for determining just compensation as mandated by law. For lands acquired under R.A. No. 6657, just compensation must be determined pursuant to Section 17 of the law and the formula outlined in DAR Administrative Order No. 5, series of 1998. This formula considers specific factors like the land’s cost, current value, nature, actual use, and income. The Court emphasized that “actual use” refers to the use at the time of the taking, not potential future use.
The RTC’s addition of ₱100,000.00 per hectare based on the property’s “potentials” was a reversible error. The valuation was improperly influenced by speculative future industrial conversion, which is not among the factors enumerated in Section 17 of R.A. No. 6657. The municipal resolution declaring the area for potential industrial use does not, by itself, alter the land’s actual, agricultural character at the time of acquisition. Just compensation must be based on the property’s condition and use as of the time of taking. Consequently, the case was remanded to the RTC to recompute just compensation strictly in accordance with the governing law and applicable DAR formula, using the property’s actual data and without considering speculative future potential.