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
 A = Total area of the land 6
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
A Reviewer-Primer 16
 “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
 *Ibid, p. 1205

18
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
xx

(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