Just Compensation in Agrarian Cases: Evidence Rules and Interest Lessons from Land Bank v. Macaraeg

The valuation of land under the Comprehensive Agrarian Reform Program is one of the most litigated areas in Philippine law. When the government takes private property for agrarian reform, the Constitution guarantees the owner "just compensation"—a fair exchange for what was lost. But determining what is "just" often sparks years of dispute between landowners and the Land Bank of the Philippines (Land Bank), the government's financial intermediary.

In Land Bank of the Philippines v. Milagros De Jesus-Macaraeg (G.R. No. 244213, September 14, 2021), the Supreme Court settled a valuation dispute that had dragged on for nearly two decades. The case offers practical lessons not only on how courts compute just compensation but also on how parties should present evidence—and what happens when they rely on unverified or self-serving data.

Facts of the Case

Milagros De Jesus-Macaraeg owned a 15.1836-hectare parcel of land in Davao City. In 2002, 7.1838 hectares were placed under CARP pursuant to Republic Act No. 6657. The Department of Agrarian Reform and Land Bank valued the property at P65,756.61 per hectare, or P472,382.33 total, using the formula under DAR Administrative Order No. 5 (DAR AO5). Macaraeg rejected the offer, and Land Bank deposited the amount in her name.

After administrative proceedings failed to settle the value, the case reached the Regional Trial Court sitting as a Special Agrarian Court (RTC-SAC). Land Bank, however, failed to appear at the hearing to present its evidence. Macaraeg, meanwhile, presented her own valuation based on an appraisal by Asian Appraisal Corp., plus testimony from her husband, Ramon Macaraeg, who claimed the property produced 46,666 kilos of pineapple per hectare.

The RTC-SAC fixed just compensation at P20.00 per square meter. On appeal, the Court of Appeals remanded the case for recomputation. During the new proceedings, Land Bank submitted a revised valuation of P777,880.40, using data from the Bureau of Agricultural Statistics (BAS): an annual gross production (AGP) of 8,901.28 kilos per hectare and a selling price of P7.96 per kilo.

The RTC-SAC again ruled against Land Bank, using the 46,666-kilo AGP figure. The Court of Appeals reduced the selling price to P2.50 per kilo and fixed just compensation at P1,271,523.91. Both parties appealed to the Supreme Court.

The Issue: What Evidence Should Courts Trust?

The central question was which AGP figure to use: the 46,666 kilos per hectare from Macaraeg's husband, or the 8,901.28 kilos from BAS data.

The Supreme Court sided with Land Bank. The Court noted that the 46,666-kilo figure was "unverified" and came from a position paper prepared by Macaraeg's husband—someone "who could hardly be considered as an independent, let alone, reliable or credible appraiser." In contrast, the BAS data reflected production within twelve months before the field inspection, consistent with the definition of AGP under DAR AO5.

This ruling underscores a basic evidentiary principle: courts give greater weight to data from official, independent sources than to self-serving submissions, especially from interested parties.

The Ruling: Applying the DAR AO5 Formula

The Supreme Court applied the valuation formula under DAR AO5. Since no comparable sales data existed, the applicable formula was:

Land Value = (Capitalized Net Income x 0.9) + (Market Value x 0.1)

The Capitalized Net Income (CNI) is computed as:

CNI = (AGP x SP - Cost of Operations) ÷ 0.12

Where cost of operations could not be verified, DAR AO5 allows an assumed net income rate of 20%.

Using the BAS data, the Court computed:

• AGP = 8,901.28 kilos per hectare
• SP = P7.96 per kilo
• CNI = (8,901.28 x P7.96 x 0.20) ÷ 0.12 = P118,090.31 per hectare

With a market value of P20,012.96 per hectare, the land value came to P108,282.58 per hectare. Multiplied by the 7.1838-hectare area, the total just compensation was P777,880.40.

Notably, the Court bound Land Bank to its own admission that P7.96 was the applicable selling price, since it had consistently used that figure after the remand.

Interest on Delayed Payment

Land Bank argued it should not pay interest because its initial deposit constituted prompt payment. The Supreme Court disagreed.

Citing Land Bank of the Philippines v. Uy and Apo Fruits Corporation v. Land Bank of the Philippines, the Court explained that just compensation includes not only the correct amount but also payment within a reasonable time. When payment is delayed, interest becomes due "as compliance with the constitutional mandate on eminent domain and as a basic measure of fairness."

Applying Nacar v. Gallery Frames, the Court imposed:

• 12% interest per annum from March 3, 2003 (when Macaraeg withdrew the initial deposit) until June 30, 2013
• 6% interest per annum from July 1, 2013 until fully paid

The interest applied only to the balance of P305,498.07 (P777,880.40 minus the P472,382.33 already paid).

Practical Takeaways

• Official data beats self-serving estimates. Courts favor figures from agencies like the BAS over unverified submissions from interested parties, especially relatives of the landowner.
• The DAR AO5 formula governs. Valuation follows a defined formula: LV = (CNI x 0.9) + (MV x 0.1) when comparable sales data is unavailable. The CNI uses the latest 12-month production and selling prices before field inspection.
• Parties are bound by their admissions. Land Bank's consistent use of P7.96 as the selling price prevented it from later arguing for a different figure.
• Interest is part of just compensation. Delayed payment triggers legal interest—12% before July 1, 2013, and 6% thereafter—on the unpaid balance.
• Failing to appear at hearings has consequences. Land Bank's initial failure to present evidence allowed the landowner's valuation to stand at the trial level, prolonging the dispute.

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