JUST COMPENSATION

IN
AGRARIAN REFORM

1
 1987 CONSTITUTION
Article XIII, Sec. 4
 “The State shall, by law, undertake an agrarian
reform program founded on the right of farmers and
regular farmworkers who are landless, to own directly
or collectively the lands they till or, in the case of other
farmworkers, to receive a just share of the fruits
thereof. To this end, the State shall encourage and
undertake the just distribution of all agricultural lands,
subject to such priorities and reasonable retention
limits as the Congress may prescribe, taking into
account ecological, developmental, or equity
considerations, and subject to the payment of just
compensation. In determining retention limits, the
State shall respect the right of small landowners. The
State shall further provide incentives for voluntary
land-sharing.”
2
RA 6657, THE CARP LAW

 15 June 1988

 Coverage:
“The Comprehensive Agrarian Reform
Law of 1988 shall cover, regardless of
tenurial arrangement and commodity
produced, all public and private agricultural
lands as provided in Proclamation No. 131
and Executive Order No. 229, including other
lands of the public domain suitable for
agriculture.” (Sec. 4)
3
RA 3844, AGRICULTURAL LAND
REFORM CODE

 8 August 1963
 Abolished share tenancy relationship and
provides for the expropriation of certain
agricultural lands for resale to qualified
beneficiaries
 Created Land Bank of the Philippines to
finance the acquisition by the Government of
landed estates for division and resale to small
landholders, as well as the purchase of the
landholding by the agricultural lessee from the
landowner
4
PD 27, OPERATION LAND TRANSFER

 21 October 1972

 Covers private agricultural lands

primarily devoted to rice and corn

5
EO 228
 17 July 1987
 Declared qualified farmer beneficiaries as full owners of
the land as of 21 October 1972
 Provides for the valuation mechanism for lands acquired
pursuant to PD 27

 FORMULA UNDER EO 228

LV = (2.5 x AGP x P35/31) x A

Where:
 LV = Land Value
 AGP = Average Gross Production/hectare
 P35/31 = Government Support Price for one (1)
cavan of palay/corn in 1972
6
 A = Total area of the land
Proclamation No. 131

 22 July 1987

 Instituted the CARP

7
EO 229

 22 July 1987

 Provides the mechanism for the

implementation of the CARP

8
Association of Small Landowners in the
Philippines vs. Secretary of Agrarian Reform
(G.R. No. 78742, En Banc, 14 July 1989)

“WHEREFORE, the Court holds as follows:

1. R.A. No. 6657, P.D. No. 27, Proc. No.

131, and E.O. Nos. 228 and 229 are
SUSTAINED against all the constitutional
objections raised in the herein petitions.
x x x”
9
1987 CONSTITUTION
Article XIII, Sec. 4
“ The State shall, by law, undertake an agrarian
reform program founded on the right of farmers and
regular farmworkers who are landless, to own directly
or collectively the lands they till or, in the case of other
farmworkers, to receive a just share of the fruits
thereof. To this end, the State shall encourage and
undertake the just distribution of all agricultural lands,
subject to such priorities and reasonable retention
limits as the Congress may prescribe, taking into
account ecological, developmental, or equity
considerations, and subject to the payment of just
compensation. In determining retention limits, the
State shall respect the right of small landowners. The
State shall further provide incentives for voluntary
land-sharing.”
10
STAKEHOLDERS IN
AGRARIAN REFORM

 Farmer-Beneficiaries

 Landowners

 Government

11
JUST COMPENSATION
The just and complete equivalent of the
loss which the owner of the thing
expropriated has to suffer by reason of the
expropriation.
The compensation given to the owner is
just compensation if he receives for his
property a sum equivalent to its market
value.

City of Manila vs. Estrada,

25 Phil 208 (1913)
12
MARKET VALUE
It is the price fixed by the buyer and the
seller in the open market in the usual and
ordinary course of legal trade and competition;
the price and value of the article established or
shown by sale, public or private, in the ordinary
course of business; the fair value of property
as between one who desires to purchase and
one who desires to sell.

City of Manila vs. Estrada

25 Phil 208 (1913) 13
1987 Constitution
Article III, Sec. 9

“Private property shall not be taken

for public use without just
compensation.”

14
1987 Constitution
Article XIII, Sec. 4
“The State shall, by law, undertake an agrarian reform
program founded on the right of farmers and regular
farmworkers, who are landless, to own directly and
indirectly the lands they till or, in the case of other
farmworkers, to receive a just share of the fruits thereof.
To this end, the State shall encourage and undertake the
just distribution of all agricultural lands, subject to such
priorities and reasonable retention limits as the Congress
may prescribe, taking into account ecological,
developmental, or equity considerations, and subject to
the payment of just compensation. In determining
retention limits, the State shall respect the rights of small
landowners. The State shall further provide incentives for
voluntary land-sharing.
15
1987 Constitution

Article III – Bill of Rights

It is a guarantee that there are certain areas of a

person’s life, liberty, and property which governmental
power may not touch.

Article XIII – Social Justice

The goal of social justice is closer regulation of the

acquisition, ownership, use, and disposition of property in
order to achieve a more equitable distribution of wealth
and political power.

Fr. Joaquin G. Bernas, S.J.

The 1987 Philippine Constitution
16
A Reviewer-Primer
 “In trying to determine just
compensation for purposes of agrarian
reform, we must remember that we have
to look at this in the context of the Article
where it is. It is in the Article on Social
Justice, and the thrust of this Article is
precisely to make it easier for the
disadvantaged to be able to obtain
land.” *
- Fr. Joaquin G. Bernas, SJ
*The 1987 Constitution of the Philippines, A Commentary, 2003 Ed., p. 1203
17
 “When pursuant to an agrarian reform
mandate that is intended to reduce
inequalities, as social justice commands,
land is taken for redistribution, is the action
taken by the state pure eminent domain or
is it not eminent domain mixed with the
exercise of police power? But it is
established jurisprudence that loss incurred
due to the state’s exercise of police power
is not compensable. It would seem
therefore that compensation in
expropriation for land reform should be
approached differently than under the
Bill of Rights when property is taken for
traditional purposes.” *
- Fr. Joaquin G. Bernas, SJ
18
 *Ibid, p. 1205
Association of Small Landowners in the
Philippines vs. Secretary of Agrarian Reform
(G.R. No. 78742, En Banc, 14 July 1989)
“What we deal with here is a revolutionary
kind of expropriation.

The expropriation before us affects all private

agricultural lands whenever found and of
whatever kind as long as they are in excess of
the maximum retention limits allowed their owners.
This kind of expropriation is intended for the
benefit not only of a particular community or of a
small segment of the population but of the entire
Filipino nation, from all levels of our society, from
the impoverished farmer to the land-glutted owner.
x x x”

 -J. Isagani Cruz

19
Sec. 17, RA 6657
“In determining just compensation, the cost of
acquisition of the land, the value of the standing crop,
the current value of like properties, its nature, actual use
and income, the sworn valuation by the owner, the tax
declarations, the assessment made by government
assessors, and seventy percent (70%) of the zonal
valuation of the Bureau of Internal Revenue (BIR),
translated into a basic formula by the DAR shall
be considered, subject to the final decision of the
proper court. The social and economic benefits
contributed by the farmers and the farmworkers and by
the Government to the property as well as the
nonpayment of taxes or loans secured from any
government financing institution on the said land shall
be considered as additional factors to determine its
valuation."
20
Sec. 49, RA 6657

“The PARC and the DAR shall have

the power to issue rules and
regulations, whether substantive or
procedural, to carry out the objects and
purposes of this Act. Said rules shall take
effect ten (10) days after publication in
two (2) national newspapers of general
circulation.”
21
DAR AO No. 5, Series of 1998
“There shall be one basic formula for the valuation
of lands covered by VOS or CA:
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”
22
LandBank vs. Banal
(G.R. No. 143276, 3rd Division, 20 July 2004)

“(I)n determining the valuation of the

subject property, the trial court shall consider
the factors provided under Section 17 of RA
6657, as amended x x x. The formula
prescribed by the DAR in Administrative Order
No. 6, Series of 1992, as amended by DAR
Administrative Order No. 11, Series of 1994,
shall be used in the valuation of land”.

- J. Sandoval-Guttierez
23
LandBank vs. Celada
(G.R. No. 164876, 1st Division, 23 January 2006)

“DAR AO No. 5, s. of 1998 precisely “filled

in the details” of Section 17, RA 6657 by
providing a basic formula by which the factors
mentioned therein may be taken into account”.

“SAC was at no liberty to disregard the

formula which was devised to implement the
said provision”.

- J. Ynares-Santiago
24
LandBank vs. Lim and Cabochan
(G.R. No. 171941, En Banc, 2 August 2007)


“In Land Bank of the Philippines v. Spouses

Banal, this Court underscored the mandatory
nature of Section 17 of RA 6657 and DAR
AO 6-92, as amended by DAR AO 11-94.
xxx”

“And in LBP v. Celada, this Court set aside

the valuation fixed by the RTC of Tagbilaran,
which was based solely on the valuation of
neighboring properties, because it did not
apply the DAR valuation formula.
xxx”
25
LandBank vs. Lim and Cabochan
(G.R. No. 171941, En Banc, 2 August 2007)

“Consequently, as the amount of

P2,232,868 adopted by the RTC in its
December 21, 2001 Order was not based on
any of the mandatory formulas prescribed in
DAR AO 6-92, as amended by DAR AO 11-94,
the Court of Appeals erred when it affirmed
the valuation adopted by the RTC.”

- J. Carpio Morales

26
Some Cases Reiterating the Doctrine
in Banal, Celada and Lim that Adherence to the
Formula Prescribed by the DAR is Mandatory
 LBP v. Wycoco (G. R. No. 140160, 14 January 2003)
 Sps. Zoleta, et al. v. Hon. Andres Reyes, et al. (G. R.
No. 169054, 31 August 2003)
 De Castro, et al. v. LBP (G. R. No. 168026, 03 August
2005)
 Meneses v. DAR Secretary, et al. (G. R. No. 156304,
23 October 2006)
 LBP vs. Heirs of Eleuterio Cruz (G.R. No. 175175,
September 29, 2008)
 Land Bank of the Philippines v. Dumlao (G.R. No.
167809, November 27, 2008)
 Allied Bank Corporation v. Land Bank of the
Philippines (G.R. No. 175422, March 13, 2009)
27
…continued
 Land Bank of the Philippines v. Heirs of
Honorato De Leon (G.R. No. 164025, May 8,
2009)
 LBP v. Belista (G. R. No. 164631, 26 June
2009)
 LBP v. Kumassie Plantation Co., (G.R. No.
177404, December 4, 2009)
 LBP v. Alpasan, Jr. (G. R. No. 188221, 03
February 2010)
 LBP v. Escandor (G. R. No. 171685, 11
October 2010)
 LBP v. Barrido (G.R. No. 183688, August 18,
2010)
28
Case where the Supreme Court
departed from the doctrine
 APO FRUITS CORPORATION and
HIJO PLANTATION, INC., vs. COURT
OF APPEALS (G.R. No. 164195,
February 6, 2007)

29
 More Supreme Court cases since 2004
were decided in accordance with the
doctrine espoused in Banal, Celada and
Lim Cabochan

 Only case decided by the Supreme

Court En Banc involving the issue of
how just compensation in land reform is
to be computed is LBP vs. Lim and
Cabochan
30
DATE OF TAKING
(Section 2, Rule 67 of the Rules of Court)

 General Rule in Expropriation

Proceedings:

 Filing of the complaint

 Due notice to owner
 Deposit of Compensation

31
TAKING UNDER RA 6657
Secs. 16 (e) & 24, par. 2, RA 6657, as amended

 Payment to LO

 Deposit , in case of rejection

 Issuance of title in the name of RP

32
TAKING UNDER PD 27

 October 21, 1972

 Locsin vs. Valenzuela, 194 SCRA 194;

 Ass’n of Small Landowners vs. Sec. of Agrarian
Reform, G.R. Nos. 78742, 79310, 79744 & 79777, 14
July 1989;
 LBP vs. David C. Naval, et al., G.R. No. 122231, 27
November 1995;
 NPC vs. Chiong, G.R. No. 152436, 20 June 2003
 Gabatin vs. LBP, G.R. No. 148223, 25 November 2004
33
 Formula upheld where taking is October
21, 1972 is the formula under PD 27/EO
228.

LV = (2.5 x AGP x P35/31) x A

34
Variance in the Reckoning of Date of
Taking

 Upon payment of just compensation

judicially determined

 OP, et al. vs. CA, G.R. No. 131216, 19

July 2001
 LBP vs. Estanislao, G.R. No. 166777,
10 July 2007

35
 Date of issuance of EPs

 LBP vs. Domingo, G.R. No. 168533, 4

February 2008;
 LBP vs. Dumlao, G.R. No. 167809, 27
November 2008;
 DAR vs. Tiongson, G.R. No. 171674, 4
August 2009;

36
Effect of Change in Date of Taking

Formula under RA 6657 is to be used,

resulting in higher valuation. Rationale is
because the agrarian reform process is not
yet complete when RA 6657 took effect on
15 June 1988.

LV = (CNI x .60) + (CS x .30) + (MV x .10)

37
Reason for Divergent PD 27
Rulings on the Date of Taking
 Courts have recognized that the
determination of the value of the
land as of October 21, 1972 will
result in a low valuation and fixing
the date of taking on a later date,
and in accordance with RA 6657,
will increase the valuation.
38
Relevance of PD 27 Jurisprudence Today

 RA 9700 (July 1, 2009), rendered the

issue on date of taking for PD 27-acquired
lands moot and academic.

 Section 5 of RA 9700 - all previously-

acquired lands subject to challenge should
be finally resolved in accordance with
Section 17 of RA 6657, as amended.

39
 DAR AO No. 1, series of 2010 - provides
that the reckoning date of the AGP and
SP inputs needed in the computation
shall be June 30, 2009; provides the
legal formula in the computation:

LV = (CNI x .60) + (CS x .30) + (MV x .10)

Or
LV = (CNI x .90) + (MV x .10)

40
AMOUNT TO BE DEPOSITED
Section 16 (a), (b), (d), & (e) of RA 6657

“(a) x x x Said notice shall contain the offer of the

DAR to pay a corresponding value in accordance
with the valuation set forth in Sections 17, 18, and
other pertinent provisions hereof.

(b) Within thirty (30) days from the date of receipt

of written notice by personal delivery or registered
mail, the landowners, his administrator, or
representative shall inform the DAR of his
acceptance or rejection of the offer.”
41
 continued…

(c) If the landowner accepts the offer of the DAR, the

LBP shall pay the landowner the purchase price of the land
within thirty (30) days after he executes and delivers a
deed of transfer x x x

(e) “Upon receipt by the landowner of the

corresponding payment or in case of rejection or no
response from the landowner, upon the deposit with an
accessible bank designated by the DAR of the
compensation in cash or in LBP bonds in accordance
with this Act, the DAR shall take immediate possession
of the land and shall request the proper Register of
Deeds to issue a Transfer Certificate of Title (TCT) in
the name of the Republic of the Philippines. The DAR
shall thereafter proceed with the redistribution of the land to
qualified beneficiaries.”
42

LBP v. Arieta Tan
(G.R. No. 161834, August 23, 2010)

“The amount of ‘offer’ which the DAR gives

to the landowner as compensation for his land,
as mentioned in Section 16 (b) and (c), is based
on the initial valuation by the LBP. This then is
the amount which may be accepted or rejected
by the landowner under the procedure
established in Section 16. Perforce, such initial
valuation by the LBP also becomes the basis
of the deposit of provisional compensation
pending final determination of just
compensation, in accordance with sub-
paragraph (e).”
43
 AMOUNT THAT CAN BE WITHDRAWN

LBP v. Josefina Lubrica,

(G.R. No. 177190, February 23, 2011)

“Clearly, therefore, it is the initial valuation

made by the DAR and LBP that is contained in
the letter-offer to the landowner under Sec. 16(e),
said valuation of which must be deposited
and released to the landowner prior to taking
possession of the property.”

44
Sec. 18, RA 6657
“The LBP shall compensate the
landowner in such amounts as may be
agreed upon by the landowner and the
DAR and the LBP, in accordance with
the criteria provided for in Sections 16
and 17, and other pertinent provisions
hereof, or as may be finally
determined by the court, as the just
compensation for the land.”
45
Sec. 16, RA 6657

“Any party who disagrees with the

decision may bring the matter to the
court of proper jurisdiction for final
determination of just compensation.”

46
Sec. 57, RA 6657
“The Special Agrarian Courts shall have
original and exclusive jurisdiction over all
petitions for the determination of just
compensation to landowners, and the
prosecution of all criminal offenses under this
Act. The Rules of Court shall apply to all
proceedings before the Special Agrarian
Courts, unless modified by this Act.”

47
 DAR Adjudication Board (DARAB)

“Section 16. Procedure for Acquisition of

Private Lands. —
xxx
(d) In case of rejection or failure to reply, the
DAR shall conduct summary administrative
proceedings to determine the compensation for
the land requiring the landowner, the LBP and
other interested parties to submit evidence as to
the just compensation for the land, within fifteen
(15) days from the receipt of the notice. xxx”
(RA 6657)
48
Sec 50, RA 6657
Quasi-Judicial Power of the DAR. – The DAR is
hereby vested with primary jurisdiction to
determine and adjudicate agrarian reform matters
and shall have exclusive original jurisdiction over
all matters involving the implementation of
agrarian reform, except those falling under the
exclusive jurisdiction of the Department of
Agriculture (DA) and the Department of
Environment and Natural Resources (DENR).

49
DARAB Rules of Procedures

1. 2009

2. 2003

3. 1994

50
DARAB and SAC’s Jurisdiction
Philippine Veterans Bank v. CA
(G.R. No. 132767. January 18, 2000)

No contradiction in the jurisdiction of

DARAB and SAC

Proceedings before the DARAB is

administrative while the proceedings
before SAC is judicial
51
LBP vs. Wycoco
(G.R. No. 140160, 13 January 2004)

 Direct resort to SAC is valid

 SAC is not an appellate court of DARAB

 Summary administrative proceedings

before the DARAB is not necessary prior
to filing before the SAC
52
LBP vs. Belista
(G.R. No. 164631, 26 June 2009)

Party need not appeal the

Adjudicator’s decision to the DARAB
before it can file a petition for
determination of just compensation
before the SAC.

53
Land Bank of the Philippines v. Celada
(G.R. No. 164876, 23 January 2006)

APO Fruits and HIJO Plantation, Inc., vs.

CA (G.R. No. 164195, 6 February 2007)

Notwithstanding the pendency of a

just compensation case before the
DARAB, a party may file a petition
before the SAC

54
Time to File Original Action Before
the SAC
 Philippine Veterans Bank v. CA
(G.R. No. 132767, January 18, 2000)

 LBP vs. Raymunda Martinez

(G.R. No. 169008, July 31, 2008)

Although the proceedings before the SAC is not

appellate in nature the petition for the fixing of
just compensation should be filed within 15 days
period from receipt of the adverse DARAB
decision.
55
Sec. 60, RA 6657

“An appeal may be taken from the decision of

the Special Agrarian Courts by filing a petition
for review with the Court of Appeals within
fifteen (15) days from receipt of notice of the
decision; otherwise, the decision shall become
final.

An appeal from the decision of the Court of

Appeals, or from any order, ruling or decision of
the DAR, as the case may be, shall be by a
petition for review with the Supreme Court
within a non-extendible period of fifteen (15)
days from receipt of a copy of said decision.”
56
LBP vs. Arlene De Leon
G.R. No. 143275, 20 March 2003
“We ruled that the Rules of Court does not
categorically prescribe ordinary appeal as the exclusive
mode of appeal from decisions of Special Agrarian Courts.
The reference by Section 61 to the Rules of Court in fact
even supports the mode of a petition for review as the
appropriate way to appeal decisions of the Special
Agrarian Courts. x x x

“WHEREFORE, the motion for reconsideration dated

October 16, 2002 and the supplement to the motion for
reconsideration dated November 11, 2002 are
PARTIALLY GRANTED. While we clarify that the Decision
of this Court dated September 10, 2002 stands, our ruling
therein that a petition for review is the correct mode of
appeal from decisions of Special Agrarian Courts shall
apply only to cases appealed after the finality of this
Resolution.” 57
ARF is solely answerable for just
compensation to landowner

 Sec. 63, RA 6657, as amended by RA

9700

 “xxx all just compensation payments to

landowners, including execution of
judgments therefor, shall only be
sourced from the Agrarian Reform Fund;”

58
INTEREST ON JUST
COMPENSATION

1. When there is no delay in payment.

2. When there is a delay in payment.

59
WHEN THERE IS NO DELAY

Cash portion – prevailing savings rate

Bond portion – interest rate aligned with

the 91-day TB rates (Section 18, RA
6657, as amended)

60
WHEN THERE IS DELAY

 Art. 2209, Civil Code

 CB Circular 416

 Eastern Shipping vs. CA

(G.R. No. 168453, 13 March 2009)

61
APO-HIJO VS. LBP
(G.R No. 164195, 12 April 2011)

 Forbearance of money

 12% interest

62
PECULIAR CIRCUMSTANCES
IN APO-HIJO VS. LBP
 Market value upheld over value determined
under DAR valuation guidelines

 SC decided case on the merits when issue on

appeal is procedural

 2nd MR of APO elevated to the SC En Banc

and given due course inspite of Entry of
Judgment.
63
 3rd MR of APO given due course without
2/3 vote of the Justices pursuant to SC
Internal Rules of Procedure

 Payment of just compensation classified

as forbearance of money to justify 12%
interest

64
THANK YOU!

65