Case Digest: Land Bank v. Montinola-Escarilla and Co

G.R. No. 178046 : June 13, 2012




Montinola-Escarilla and Co., Inc. (MECO) is the owner of a parcel of agricultural land situated in Esperanza, Agusan del Sur out of which 159.0881 hectares were acquired by the government in 1995 under R.A. No. 6657 (Comprehensive Agrarian Reform Law of 1988).

Petitioner Land Bank of the Philippines (LBP) initially valued the subject land at P823,204.08 but respondent rejected the valuation. Pending summary administrative proceedings for determination of just compensation before the DAR, MECO filed a complaint for determination of just compensation before the RTC, which constituted a four-member Board of Commissioners (Board of Commissioners) to evaluate and appraise the just compensation for the subject property covering 4.4825 hectares of rainfed rice land and 154.6056 hectares of idle land.Meanwhile, the DAR/RARAD rendered a Decision dated December 29, 1998 fixing the just compensation at P823,204.08.

On the other hand, the Board of Commissioners was not able to come up with a unified valuation of the subject property. One commissioner adopted the findings and recommendation of MECO's appraiser, Asian Appraisal Co., Inc., while another commissioner adopted the valuation of petitioner LBP. The remaining two commissioners submitted their Commissioners' Report recommending the amount of P4,615,194.00.

On October 8, 2002, the RTC, rendered a Decision fixing the just compensation of the property atP7,927,660.60. In the Decision dated August 18, 2006, the CA set aside the RTC's valuation for failure to give due consideration to the factors enumerated in Section 17 of R.A. No. 6657. While it observed that LBP considered some factors, not all the factors were taken into account and substantiated.

ISSUE: Whether or not the CA erred in adopting the valuation in the Commissioners' Report?

HELD: The decision of the Court of Appeals is set aside.

For purposes of determining just compensation, the fair market value of an expropriated property is determined by its character and price at the time of taking. In the implementation of R.A. No. 6657, Section 17 provides the manner by which just compensation is determined, thus:

Section 17. Determination of Just Compensation. In determining just compensation, the cost of acquisition of the land, the current value of 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.

The potential use of the expropriated property is only considered in cases where there is a great improvement in the general vicinity of the expropriated property, but should never control the determination of just compensation.

In the present case, Investigation Report dated September 28, 1994, both the RTC and the CA considered the subject property actual use at the time of appraisal, and reclassified the property, as follows: 143.5528 hectares of 3rd class cornland and 15.4305 hectares of 3rd class cocoland. The RTC and the CA ignored the fact that, at the time of the ocular inspection in September 1994, a substantial portion of the subject property was idle and abandoned, but the farmer-beneficiaries "were already starting to cultivate their designated area of occupancy as evidenced by the cutting of trees and some has (sic) already started to plant corn, bananas and other crops." Under DAR A.O. No. 11, Series of 1994, "(t)he landowner shall not be compensated or paid for improvements introduced by third parties such as the government, farmer-beneficiaries or others." Hence, it was erroneous to reclassify the acquired property into cornland and cocoland "based on plaintiff's (MECO) evidence" considering that the improvements were introduced by the farmer-beneficiaries. At most, they may be considered only as economic benefits contributed by the farmers and farmworkers to the property in determining its valuation pursuant to Section 17 of R.A. No. 6657.

The records of the case are REMANDED to the court a quo for determination of just compensation.