Just Compensation in Agrarian Reform: When Courts May Deviate From DAR Valuation Guidelines

The Supreme Court has long recognized that determining just compensation in agrarian reform cases is a judicial function. But when a court chooses to disregard the valuation guidelines set by the Department of Agrarian Reform (DAR), it must explain why. In Land Bank of the Philippines v. Briones-Blanco (G.R. No. 213199, March 27, 2019), the Court clarified this duty and remanded a case where the trial court failed to justify its deviation.

The Case: A Landowner Disputes DAR's Valuation

The respondents were co-owners of a 55.9729-hectare agricultural land in Misamis Occidental. The DAR placed the property under the Comprehensive Agrarian Reform Law (RA No. 6657), and Land Bank valued it at P18,284.28 per hectare for the coconut land portion and P8,738.50 per hectare for the rice land portion—roughly P1.80 per square meter.

Disputing this valuation, the landowners filed a petition for judicial determination of just compensation before the Regional Trial Court, sitting as a Special Agrarian Court (SAC).

The RTC's Valuation and the Appeal

The SAC constituted a Board of Commissioners, but the members submitted conflicting reports. One commissioner valued the land at P30,000 per hectare; another at P8,000 per hectare; and a third mirrored the DAR and Land Bank figures.

In September 2009, the RTC fixed just compensation at P4.00 per square meter or P40,000 per hectare. It arrived at this figure by taking a median of valuations from the Agrarian Reform Operations Center, Cuervo Appraisers, Inc., and local real estate brokers. The Court of Appeals affirmed, holding that strict adherence to DAR Administrative Order No. 5 is not required.

The Issue: Deviation Without Explanation

Land Bank appealed to the Supreme Court, questioning the RTC's disregard of the DAR valuation formula.

The Court explained that just compensation in expropriation cases is the full and fair equivalent of the property taken from its owner—the measure being the owner's loss, not the taker's gain.

Section 17 of RA No. 6657 lists the factors courts must consider: cost of acquisition, current value of like properties, nature, actual use and income, sworn valuation by the owner, tax declarations, and government assessors' assessments. DAR AO No. 5 provides a formula: LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1), where LV is land value, CNI is capitalized net income, CS is comparable sales, and MV is market value per tax declaration.

The Ruling: Guidelines Are Not Optional

The Supreme Court ruled that while courts are not confined to strictly applying the DAR formula, they may relax its application only when warranted by the circumstances and only if the court clearly explains its reasons for deviating.

In this case, the RTC failed to do so. The Court noted several problems:

• The RTC's valuation was based on prevailing prices in 2006, but the land was taken in 2000.
• The RTC offered no explanation for departing from the DAR guidelines.
• The RTC merely considered the rules and concluded a different value without stating why the formula was inapplicable.

Citing prior cases, the Court emphasized that a reasoned explanation is "indispensable." The DAR formulas provide a uniform framework that ensures compensation is not arbitrary or absurd. Until declared invalid, these formulas "partake of the nature of statutes" and enjoy a presumption of legality.

Because the RTC failed to explain its deviation, and because neither party presented satisfactory evidence of the property's value as of the time of taking, the Court reversed the CA decision and remanded the case for proper determination of just compensation.

Practical Takeaways

• Courts may deviate from DAR valuation formulas, but only when the circumstances warrant it and with a clear, evidence-based explanation.
• Just compensation is measured as of the time of taking, not at some later date when prices may have changed.
• The DAR formula is not optional: it enjoys a presumption of legality and must be considered, even if not strictly applied.
• Landowners and Land Bank alike should present complete evidence of property value as of the date of taking to avoid remand and delay.
• A SAC's failure to explain its deviation from DAR guidelines is reversible error, as the Supreme Court demonstrated in this case.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.