Sps. Mercado v.

Land Bank of the Philippines

GRN 196707, June 17, 2015
Second Division; J. Del Castillo
Facts:
The Provincial Agrarian Reform Office (PARO) informed petitioners
spouses Mercado that 5.2624 hectares of their property shall be placed
under CARP, for which they were offered 287,227.16 as just
compensation. Petitioners contested the valuation. They claimed that
they just sold a piece of that property, which was the hilly and
uncultivated portion at 25.0/sqm; their property is flat, easy to
cultivate, and is near an ecotourism area.
When it reached the RTC-SAC, the court ruled for petitioners and fixed
the just compensation at 25.0/sqm. The CA reversed the RTC-SAC.
The appellate court said that that the RTC-SAC must mandatorily apply
the formula in DAR A.O. No. 5. If so applied, the valuation by
respondent bank at 287,227.16 would be correct.
Issue: How is just compensation computed?
Held:
Just compensation must be arrived at pursuant to the guidelines set forth
in Section 17 of RA 6657 and outlined in a formula provided in DAR
A.O. No. 5. If the RTC finds these guidelines inapplicable, it must
clearly explain the reasons for deviating therefrom and for using other
factors or formula in arriving at the reasonable just compensation for the
property expropriated. As provided:
SECTION 17. Determination of Just Compensation. In determining
just compensation, the cost of acquisition of the land, the current value
of the like properties, its nature, actual use and income, the sworn
valuation by the owner, the tax declarations, and the assessment made by
government assessors shall be considered. The social and economic
benefits contributed by the farmers and the farmworkers and by the
Government to the property as well as the non-payment of taxes or loans
secured from any government financing institution on the said land shall
be considered as additional factors to determine its valuation.
On the other hand, the formula under DAR A.O. No. 5 reads:

LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1)

Where: LV = Land Value
CNI = Capitalized Net Income
CS = Comparable Sales
MV = Market Value per
In this case, the RTC did not state the basis for arriving at 25.0/sqm
valuation. The CA merely took into account the production or income of
the property without looking at other factors. Thus, the case must be
remanded in the RTC for reception of evidence to make a determination
of just compensation.