Land Bank of the Philippines vs. Spouses Rene I. Latog and Nelda Lucero

In determining just compensation for lands covered by the Comprehensive Agrarian Reform Law, courts must consider the factors in Section 17 of R.A. No. 6657 and the applicable DAR formulas, which partake of the nature of statutes. Courts may exercise judicial discretion to deviate from these formulas, but only if the deviation is supported by a clear, reasoned explanation grounded in evidence on record.

Spouses Rene I. Latog and Nelda Lucero voluntarily offered to sell two parcels of land in Iloilo to the Department of Agrarian Reform for acquisition under R.A. No. 6657. The Land Bank of the Philippines, acting as financial intermediary, valued the land using an alternate formula from DAR Administrative Order No. 5, Series of 1998, which the landowners rejected. The dispute over just compensation progressed through administrative and judicial channels.

• Nature of the Action: The case originated from a complaint for judicial determination of just compensation filed by landowners Spouses Latog after rejecting the valuation made by the Land Bank of the Philippines (LBP) for their landholdings acquired under the Comprehensive Agrarian Reform Program (CARP).
• The Valuation Dispute: Respondents voluntarily offered to sell two parcels of land (16.1089 hectares) for P150,000.00 per hectare. LBP, using an alternate formula (LV = CNI x 0.90 + MV x 0.10) from DAR A.O. No. 5, Series of 1998, recommended a lower valuation.
• RTC Proceedings: The RTC, acting as a Special Agrarian Court, did not strictly apply any DAR formula. It considered various factors, including the owner's offer price and the factors in Section 17 of R.A. No. 6657, and fixed just compensation at P605,291.91 with 12% interest per annum.
• CA Proceedings: The CA deleted the interest award but increased the just compensation to P611,445.41, reasoning that the DAR formula is not mandatory.
• Supreme Court Finding: The Supreme Court found that the records lacked sufficient evidence and justification for LBP's use of the alternate formula and for the lower courts' own valuations. Neither court discussed the presence or absence of the formula's components (CNI, CS, MV).

• Application of DAR Formula: Petitioner LBP argued that the RTC violated the mandatory formula for valuation prescribed in DAR A.O. No. 5, Series of 1998, in connection with Section 17 of R.A. No. 6657.
• Error in Awarding Interest: LBP contended that the RTC erred in awarding 12% interest per annum, as the determination of just compensation does not fall under the concept of legal interest defined in Article 2209 of the Civil Code.

• Entitlement to Just Compensation: Respondents maintained that the just compensation should be based on their offered price of P150,000.00 per hectare, which they argued was the fair value.
• Defense of RTC Valuation: Respondents implicitly defended the RTC's judicial determination of just compensation, which considered multiple factors beyond a strict formulaic application.

• Application of Valuation Formula: Whether the Court of Appeals erred in affirming the RTC's valuation of just compensation, which deviated from the DAR-prescribed formulas without sufficient evidentiary basis or reasoned justification.
• Award of Interest: Whether the award of legal interest on the just compensation was proper.

• Application of Valuation Formula: The CA erred. The determination of just compensation is a judicial function, but courts must consider the factors in Section 17 of R.A. No. 6657 and the applicable DAR formulas. While courts may exercise discretion to deviate from the formulas, such deviation must be clearly explained and supported by evidence on record. Here, both lower courts failed to provide such justification, and the record was insufficient for the Supreme Court to make a final valuation. The case was remanded for further evidence.
• Award of Interest: The CA correctly deleted the award of 12% interest. The dispositive portion of the Supreme Court's decision did not reinstate it, affirming the deletion.

• Determination of Just Compensation under R.A. No. 6657 — Just compensation is the full and fair equivalent of the property taken. Section 17 of R.A. No. 6657 lists the factors for its determination. The DAR formulas implementing these factors partake of the nature of statutes and carry a presumption of legality. Courts must consider these formulas but may deviate therefrom in the exercise of judicial discretion, provided the deviation is supported by a reasoned explanation based on evidence.

• "Out of regard for the DAR's expertise as the concerned implementing agency, courts should henceforth consider the factors stated in Section 17 of RA 6657, as amended, as translated into the applicable DAR formulas in their determination of just compensation... If, in the exercise of their judicial discretion, courts find that a strict application of said formulas is not warranted... they may deviate or depart therefrom, provided that this departure or deviation is supported by a reasoned explanation grounded on the evidence on record." — This passage from Alfonso v. Land Bank of the Philippines, cited by the Court, establishes the controlling rule on the interplay between judicial discretion and administrative formulas in just compensation cases.

• Alfonso v. Land Bank of the Philippines, 801 Phil. 217 (2016) — Controlling precedent that established the rule that DAR formulas must be considered by courts, which may deviate only with a reasoned, evidence-based explanation.
• Land Bank of the Philippines v. American Rubber Corporation, 715 Phil. 154 (2013) — Cited for the definition of "just compensation" as the full and fair equivalent of the property taken.
• Land Bank of the Philippines v. Prado Verde Corporation, 837 Phil. 286 (2018) — Cited for the principle that courts are not at liberty to deviate from the DAR basic formula without ample factual and reasoned justification.

• Section 17, Republic Act No. 6657 (Comprehensive Agrarian Reform Law of 1988) — Provides the statutory factors that must be considered in determining just compensation for lands acquired under CARP.
• DAR Administrative Order No. 5, Series of 1998 — Prescribes the specific formulas for land valuation under CARP, including the main formula (LV = CNI x 0.60 + CS x 0.30 + MV x 0.10) and alternate formulas when certain factors are not present.

• Justice Caguioa (Chairperson)
• Justice Inting
• Justice Dimaampao
• Justice Singh