AGRARIAN LAW AND SOCIAL

LEGISLATION

LAND VALUATION AND

LANDOWNERS COMPENSATION

I. JUST COMPENSATION

I. JUST
COMPENSATION
A. Legal Basis of Landowners Compensation
1. Section 9, Article III of the 1987 Constitution

Private property
shall not be taken
for public use
without just
compensation.

I. JUST
COMPENSATION
A. Legal Basis of Landowners Compensation
2. Section 4, Article XIII of the Agrarian and
Natural Resources Reform
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.

I. JUST
COMPENSATION
B. What is JUST COMPENSATION?

It is defined, in a general sense and as

a concept under the Bill of Rights as:
1. The FMV of the property of the property as
between one who receives and one who desire to
sell;
2. The FMV or the price which a buyer will pay
without coercion and a seller will accept without
compulsion;

I. JUST
COMPENSATION
B. What is JUST COMPENSATION?

In some jurisprudence, it is defined as:

Association of Small Landowners in the Philippines vs.
Secretary of Agrarian Reform
xxx the full and fair equivalent of the property
taken from its owner by the expropriator. xxx the
measure is not the takers gain in the owners loss.
The word just is used to intensify the meaning of the
word compensation to convey the idea that the
equivalent to be rendered for the property to be
taken shall be real, substantial, full and ample.

I. JUST
COMPENSATION
B. What is JUST COMPENSATION?

In some jurisprudence, it is defined as:

EPZA vs Dulay, 1987

The equivalent for the value of the property at

the time of its taking. It means a fair and full
equivalent for the loss sustained. All the facts as to
the condition of the property and its surroundings,
its improvements and capabilities should be
considered.

I. JUST
COMPENSATION
B. What is JUST COMPENSATION?
DAR Administrative Order No 06, 1992

Just compensation xxx cannot be an absolute

amount disregarding particularities, distance to the
marketplace, and so on. xxx, land valuation is not a
exact science but an exercise fraught estimates
requiring integrity, conscientiousness and prudence on
the part of those responsible for it. What is
important
ultimately
is
that
the
land
value
approximates, as closely as possible, what is broadly
considered to be just xxx.

I. JUST
COMPENSATION
C. How is JUST COMPENSATION determine?

RA 6557
Section 17 provides that:
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
declaration, the assessment made by the 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 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.

I. JUST
COMPENSATION
D. Are the factors under Section 17 exclusive?

No. RA 6557 does not expressly state that only

such factors/criteria and no oters shall be
considered,, hence, such factors/criteria should be
deemed as mere standards. These factors are
considered
standards
to
guide
officials
in
determining just compensation but these should
not control or limit such determination.
-Small Landowneers Association vs Secretary of
Agrarian

I. JUST
COMPENSATION
E. When is the compensable taking?
In the case of Republic of the Philippines vs Castellvi, there is
compensable taking when the following conditions concur:
1.The

expropriator must enter a private property;

2.The

entry must be for more than a momentary period;

3.The

entry must be under warrant or color of authority;

4.the

property must be devoted to public use or otherwise

informally appropriated or injuriously affected; and

5.The

utilization of the property for public use must be in such a

way as to oust the owner and deprive him of beneficial
enjoyment of the property.

I. JUST
COMPENSATION
F. Who is responsible for computing land values/
just compensation?

Executive Order No. 405, June 14, 1990

The LAND BANK OF THE PHILIPPINES has the
responsibility of determining the land value of
properties covered by land reform.

I. JUST
COMPENSATION
G. What is the nature of determination of just
compensation?

The
final
determination of just
compensation
is
a
judicial function. The
LBP
merely conducts
administrative valuation
which
may
be
considered in the court
of proper jurisdiction.
- Magana vs Paitan,
1990

I. JUST
COMPENSATION
H. Is it Executive? Legislative? Judicial?

Illustrative case:
LBP vs Kumassie Plantation Company, Inc.
xxx
while
the
determination
of
just
compensation is essentially a judicial function
which is vested in the RTC acting as a Special
Agrarian
Court
,
the
SC
disregarded
the
determination of just compensation made in the
RTC in LBP vs Banal, LBP vs Celadan and LBP vs Lim
because the judge gravely abused his discretion by
not taking into full consideration the factors
specifically identified by law.

I. JUST
COMPENSATION
I. When is the reckoning period for the determination of
just compensation?

Is it at the time of taking?

I. JUST
COMPENSATION
I. When is the reckoning period for the determination of
just compensation?

The date of taking of the subject land for

the purposes of computing just compensation
should be reckoned from the date of issuance
of the emancipation patents.
Illustrative case:
DAR vs Tongson
LBP vs Estanilao

I. JUST
COMPENSATION
J. What law applies in the determination of Just
compensation?

LBP vs Abello, cited in DAR vs Tongson

xxx under the factual circumstances of the
case, the agrarian reform process is still
incomplete as the just compensation to be paid
respondents has yet to be settled. Considering the
passage of RA 6657 before the completion of this
process, the just compensation should be
determined and the process concluded under the
said law. Indeed, this cour has time and again
upheld the applicability of RA 6657, with PD 27 and
EO 228 having only suppletory effect, conformably
with our ruling in Paris vs Alfeche xxx.

II. LAND VALUATION THROUGH THE

YEARS
A. Under EO No. 228 and DAR AO No. 13, s 1994

> EO No. 228 took effect on July 17, 1987 and

provided for the valuation mechanism for lands
acquired pursuant to PD 27. Lease rentals paid to
the landowner by the farmer-beneficiary after
October 21, 1972 shall be considered as advance
payment for the land.

II. LAND VALUATION THROUGH THE

YEARS
A. Under EO No. 228 and DAR AO No. 13, s 1994

Formula under EO No. 228:

LV for Riceland = (2.5 X AGP X P33.00) X A
LV for Cornland = (2.5 X AGP X P31.00) X A
Where:
LV is land value
AGP is the Average Gross production
P33.00 is the government support price for one cavan of palay in 1972
P31.00 is the government support price for one cavan of corn in 1972
A is the total area of the land acquired

II. LAND VALUATION THROUGH THE

YEARS
A. EO No. 228 and DAR AO No. 13, s 1994
> DAR AO No. 13 was issued providing for
the guidelines on the grant of an increment of 6%
yearly interest compounded annually based on
the land value as determined in the EO 228
formula reckoned from the date when the land
was actually tenanted OR from October 21, 1972
UNTIL October 27, 1994.
> DAR AO No. 13 was the governments
answer to the problem/issue that PD 27 lands
were grossly undervalued resulting to landowners
rejection of the computed value for their land.

II. LAND VALUATION THROUGH THE

YEARS
A. EO No. 228 and DAR AO No. 13, s 1994
Formula under DAR AO 13:
LV WITH INCREMENT = (Computed LV under
EO 228 formula) X (1.06)n
Where:
N is the number of years from the date of tenancy up to October 27,
1994
In case of landowners who were partially paid, the yearly interest of
6% compounded annually shall be applied only to the unpaid balance.
For landowners claims which were previously approved for payment by
Land Bank, the landowners shall still be entitled to the difference.

II. LAND VALUATION THROUGH THE

YEARS
B. Valuation under RA 6657, DAR AO 6, s of 1992,
DAR AO 11, s of 1994 and DAR AO 5, s of 1998

> DAR AO 06 took effect on October 30, 1992 and

gave more weight on the net income factor
substantially raising the land value of covered lands.
> DAR AO 06 provides that there shall be one
basic formula for the valuation of lands covered by
voluntary offer to sell (VOS) or compulsory acquisition
(CA) regardless of the date of offer or coverage of the
claim which is:

II. LAND VALUATION THROUGH THE

YEARS
B. Valuation under RA 6657, DAR AO 6, s of 1992,
DAR AO 11, s of 1994 and DAR AO 5, s of 1998

Formula under DAR AO 06:

LV = (CNI x 0.6) + (MV x 0.1)
Where:
LV is land valuation per hectare which resulting value shall ultimately be
multiplied by the total area to be acquired and valued;
CNI is Capitalized Net Income which refers to the difference between the
Gross Sales (AGP x Selling Price) and the cost of operations capitalized
at 12%.
CS is the Comparable Sales which refers to any one or the average of all
the applicable subfactors such as sales transactions, acquisition cost,
and market value based on mortgage

II. LAND VALUATION THROUGH THE

YEARS
C. Is adherence to the formula prescribed by
DAR mandatory?

Adherence to the formula prescribed by DAR is

MANDATORY.
Based
on
the
following
jurisprudence:
Land Bank vs Lim Cabochan, GR No. 171941,
August 2, 2007
xxx in LBP vs Spouses Banal, this court
underscored the mandatory nature of Section 17 of RA
6657 and DAR AO 6-1992, as amended by DAR AO 111994 xxx and in LBP vs 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

II. LAND VALUATION THROUGH THE

YEARS
C. Is adherence to the formula prescribed by
DAR mandatory?

LBP vs Banal, GR No. 143276, July 20, 2004

In determining the valuation of the subject
property, the trial court shall consider the factors
provided under Section 17 of RA 6557, as amended
xxx. The formula prescribed by the DAR in AO 6, 1992
as amended by DAR AO 11, 1994, shall be used in the
valuation of land.

II. LAND VALUATION THROUGH THE

YEARS
C. Is adherence to the formula prescribed by
DAR mandatory?

LBP vs Celada, GR No. 164876, January 26,

2006
DAR AO 5-1998 precisely filled-in the details of
Section 17, RA 6557 by providing a basic formula by
which the factors therein may be taken into account.
Xxx SAC was at no liberty to disregard the formula
which was devised to implement the provision xxx.

II. LAND VALUATION THROUGH THE

YEARS
D. Valuation under RA 9700 (CARPER)
> RA 9700 took effect on August 7, 2009 extending the
implementation of CARP until June 30, 2014.
> RA 9700 provides that all previously acquired lands
SUBJECT TO CHALLENGE should be finally resolved in
accordance with Section 17 of RA 6557, as amended.

III. LANDOWNERS' COMPENSATION

A. What happens after the LBP has
determined the initial valuation of the
land?

Accept or Reject?

III. LANDOWNERS' COMPENSATION

B. Payment mode if the LO ACCEPTS the valuation

> Landowners are paid through combination

of Cash and in Kind.
> Payment in kind may be paid with:
1.

Shares of stock in government owned and

controlled corporations, LBP preferred
shares, physical assets or other qualified
investments;

2.

Tax credits; or

III. LANDOWNERS' COMPENSATION

C. Payment mode
What is the proportionate amount of cash
and bond?
AREA

CASH PORTION

BOND PORTION

Above 50 hectares

25% of land value

75% of land value

Above 24 hectares and

u to 50 hectares

30% of land value

70% of land value

24 hectares and below

35% of land value

65% of land value

III. LANDOWNERS' COMPENSATION

C. Payment mode
Why is the whole amount of valuation NOT
paid in cash?
> Full payment in cash is not feasible
because such will tremendously increase the
current funding requirements for CARP
which the government can ill afford at
present. Furthermore, this will infuse a large
amount of money into the economy which
could result in inflation as cited in the case
of Small Landowners Association of the
Philippines vs Secretary of Agrarian Reform.

III. LANDOWNERS' COMPENSATION

D. Payment mode if the LO REJECTS the valuation

> The DAR will refer the case to DARAB

for summary administrative proceeding.
Illustrative case
LBP vs Banal.

AGRARIAN LAW AND SOCIAL

LEGISLATION

John Patrick Guzman

Leonida Fernandez
Rambee Aggabao
Espie Rose Macarubbo
Dhayan Velasco
Alfa Gatchalian

AGRARIAN LAW AND SOCIAL

LEGISLATION

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