G.R. Nos. 181912 & 183347, November 29, 2016
Cynthia Palomar (Palomar) was the registered owner of two (2) parcels of land. One is located in San Juan, Sorsogon City, with an area of 1.6530 hectares, and the other is in Bibincahan, Sorsogon City, with an area of 26.2284 hectares. The DAR sought to acquire Palomar’s San Juan and Bibincahan properties at a valuation of P36,066.27 and P792,869.06, respectively. Palomar, however, rejected the valuations.
Land Valuation Case Nos. 68-01 and 70-01 were consequently filed before the DAR Provincial Adjudication Board (Board) for summary determination of just compensation. Upon orders from the Board, the parties submitted their position papers and evidence to support their respective proposed valuations. On June 20, 2002, Provincial Adjudicator Manuel M. Capellan issued Decisions in Land Valuation Case Nos. 68-01 and 70-01 and provide valuations of the properties.
SAC Decision: Finding the valuations of both the LBP and the Provincial Adjudicator to be “unrealistically low,” and adopting Commissioner Chua’s valuation as set out in the Cuervo Report. It also held that the provisions of Section 2, Executive Order No. 228 (EO 228) were mere “guiding principles” which cannot substitute the court’s judgment “as to what amount [of just compensation] should be awarded and how to arrive at such amount
Court of Appeals: found that the SAC failed to observe the procedure and guidelines provided under DAR AO No. 5 (1998). It consequently granted the petitions filed by the LBP and the DAR and ordered the remand of the case to the SAC for the determination of just compensation in accordance with the DAR basic formula
Issue:
- WON the courts obliged to apply the DAR formula in cases where they are asked to determine just compensation for property covered by RA 6657?
- WON the DAR formula lack of consideration for future income and ventures
Ruling:
- Yes. The determination of just compensation is a judicial function. The “justness” of the enumeration of valuation factors in Section 17, the “justness” of using a basic formula, and the “justness” of the components (and their weights) that flow into the basic formula, are all matters for the courts to decide. Until Section 17 or the basic formulas are declared invalid in a proper case, they enjoy the presumption of constitutionality. RA 9700 expressly provides for the mandatory consideration of the DAR basic formula. In the meantime, Yatco, akin to a legal safety net, has tempered the application of the basic formula by providing for deviation, where supported by the facts and reasoned elaboration. Until a direct challenge is successfully mounted against Section 17 and the basic formulas, they and the collective doctrines in Banal, Celada, and Yatco should be applied to all pending litigation involving just compensation in agrarian reform.
- Negative. The CNI factor of the DAR Formula refers to the Income Capitalization Approach under the standard appraisal approaches which is considered the most applicable valuation technique for income-producing properties such as agricultural landholdings. Under this approach, the value of the land is determined by taking the sum of the net present value of the streams of income, in perpetuity, that will be forgone by the landowner due to the coverage of his landholding under CARP.
Further, DAR uses yield capitalization methods where, based on its experience, such a method is appropriate. The DAR in its Joint Memorandum Circular No. 07, Series of 1999 states that “it is more appropriate to determine the Capitalized Net Income (CNI) of rubber plantations based on the actual yield and farm gate prices of raw products and the corresponding cost of production.” This choice of capitalization method is a policy decision made by the DAR drawn, we can presume, from its expertise and actual experience as the expert administrative agency.
Therefore, the DAR formula considers the future income
Real LexEcon 