G.R. No. 217137 . January 16, 2023.
LAND BANK OF THE PHILIPPINES, PETITIONER, VS. PARAMOUNT FINANCE CORPORATION, RESPONDENT.

FACTS

Rolando Yu mortgaged a 75-hectare parcel of land in Tagabukud, Mati, Davao Oriental (Tagabukud property) to Paramount Finance Corporation (Paramount Finance) as security for a loan. Upon Yu’s default, Paramount Finance foreclosed and purchased the property at auction, but a new title in its name was never issued. In 1991, the property was placed under the compulsory coverage of the Comprehensive Agrarian Reform Program ( Republic Act No. 6657 ). The Land Bank of the Philippines (Land Bank) preliminarily computed just compensation at ₱642,770.10 based on 60 hectares, after a survey found 15 hectares had an 18-degree slope and were thus potentially exempt from coverage under Section 10 of R.A. No. 6657 . The Department of Agrarian Reform (DAR) Adjudication Board approved this amount, which Land Bank deposited. However, the DAR subsequently cancelled the original title and issued a new Certificate of Land Ownership Award (CLOA) covering the entire 75 hectares to farmer-beneficiaries. Paramount Finance filed a Petition for Review with the Regional Trial Court, sitting as a Special Agrarian Court (SAC), contesting the compensation. The SAC appointed three commissioners to determine the property’s value. Commissioner Marcelino U. Rubia valued it at ₱1,193,327.00 based on its “present situation.” The other two commissioners valued it at ₱3,750,000.00 using the zonal value and Market Value Approach. The SAC ruled that just compensation should be based on the entire 75 hectares because the government took all of it, and adopted Commissioner Rubia’s valuation of ₱1,193,327.00. Both parties appealed. The Court of Appeals affirmed the SAC’s decision. Land Bank filed a Petition for Review before the Supreme Court.

ISSUE

Whether the lower courts properly determined the Tagabukud property’s value for just compensation.

RULING

The Supreme Court PARTLY GRANTED the Petition. The ruling was modified.
1. On the Coverage of the 15-Hectare Portion: The Supreme Court held that the lower courts erred in ordering payment of just compensation for the entire 75 hectares. Under Section 10 of R.A. No. 6657 , lands with an 18% slope or over are exempt from compulsory coverage unless already developed. Since it was established that 15 hectares of the property had an 18-degree slope, this portion should have been excluded from coverage. Following the precedent in Land Bank v. Spouses Montalvan, the Court ruled that the 15-hectare portion must be returned to Paramount Finance. The costs for segregation and titling shall be borne by the State. Paramount Finance retains the right to seek damages for the wrongful titling of the excluded portion in a separate proceeding.
2. On the Valuation Method and Date of Taking: The Supreme Court affirmed the lower courts’ use of an alternative method of valuation. The SAC correctly found that the basic formula under DAR administrative orders was inapplicable due to the lack of evidence for its required factors, such as comparable sales. The Court also upheld the valuation based on the property’s “present situation” as of the time the commissioners conducted their appraisal, noting that just compensation must be determined as of the time of taking, which is when the landowner was deprived of the property. In this case, the taking was deemed to have occurred when the CLOA was issued to the farmer-beneficiaries in 1994. The commissioners’ appraisal in 2004 was considered a reasonable approximation of the property’s value at the time of taking, as no evidence was presented to show a drastic change in value between 1994 and 2004.
3. On the Prayer for Increased Compensation: The Supreme Court did not grant Paramount Finance’s belated plea for an increase in compensation to at least ₱1,500,000.00, as this argument was not properly raised in the lower courts.
DISPOSITIVE PORTION:
WHEREFORE, the Petition is PARTLY GRANTED. The Court of Appeals Decision and Resolution are MODIFIED. The just compensation for the Tagabukud property is SET at ₱1,193,327.00, payable only for the 60-hectare portion properly covered by agrarian reform. The 15-hectare portion with an 18-degree slope is ORDERED RETURNED to respondent Paramount Finance Corporation. The costs for the segregation and titling of the 15-hectare portion shall be borne by the State. Respondent Paramount Finance Corporation shall have the right to seek damages for the wrongful titling of the 15-hectare parcel of land covered by Transfer Certificate of Title No. CLOA No. 1235 in an appropriate proceeding.