G.R. No. 196412 July 19, 2017
LAND BANK OF THE PHILIPPINES, Petitioner vs. MIGUEL OMENGAN, Respondent

FACTS

Respondent Miguel Omengan was the registered owner of a 10.001-hectare agricultural land placed under the Comprehensive Agrarian Reform Program (CARP) in 2000. The Land Bank of the Philippines (LBP), as the financial intermediary, initially valued the property at Php 219,524.98. Omengan rejected this valuation. The Provincial Agrarian Reform Adjudicator (PARAD) initially modified the valuation upward but later reversed itself, adopting a figure closer to LBP’s original offer. This prompted Omengan to file a petition for judicial determination of just compensation before the Regional Trial Court sitting as a Special Agrarian Court (RTC-SAC).
The RTC-SAC, in computing just compensation, considered the factors under Section 17 of Republic Act No. 6657 and the formula in DAR Administrative Order No. 5, Series of 1998. It determined the capitalized net income (CNI) and market value (MV) for the property’s unirrigated riceland and idle land portions. The court also granted an additional valuation of Php 40,000 per hectare, citing the property’s potential for urban expansion, arriving at a total just compensation of Php 706,850 with 12% annual interest from the date of taking. The Court of Appeals affirmed the valuation but reduced the interest rate to 6% per annum.

ISSUE

Whether the RTC-SAC correctly determined the just compensation for the subject property.

RULING

Yes, the RTC-SAC correctly determined the just compensation. The Supreme Court affirmed the findings of the lower courts. It held that while the DAR formula is mandatory, the Special Agrarian Courts are not strictly bound to adhere to it if the formula alone would not achieve a truly equitable and fair valuation. The courts have the prerogative to consider other relevant factors to ensure just compensation, which is more than a mere mathematical computation. In this case, the RTC-SAC properly considered the factors enumerated in Section 17 of R.A. No. 6657 —such as the property’s use, income, and sworn valuation by the owner—and applied the basic DAR formula. The grant of an additional valuation was justified by the court’s finding, based on evidence, that the property was located in a potential growth area for urban expansion. This consideration falls within the ambit of “non-productivity” factors that the court may weigh to arrive at a fair and just amount.
Regarding the interest, the Supreme Court modified the CA decision. It ruled that legal interest is due on the just compensation to be paid for land taken under CARP. The interest serves to compensate the landowner for the income he would have made had he been properly paid at the time of taking. The Court affirmed the imposition of interest at the rate of twelve percent (12%) per annum from the date of taking in 2000 until June 30, 2013, and six percent (6%) per annum from July 1, 2013, until full payment, in accordance with prevailing jurisprudence and Bangko Sentral ng Pilipinas Circular No. 799. The petition was denied for lack of merit.