Respondent Eusebio, Jr., owner of a 790.4-hectare parcel of land situated in Masbate, voluntarily offered to sell his land to the government through the Department of Agrarian Reform for P19.5 million. DAR offered to purchase the land for P3 million but it was rejected by respondent. Petitioner Land Bank made a revaluation of the land but was rejected again by respondent. Meanwhile, LBP opened a trust account in favor of Eusebio, and then the DAR immediately took physical possession of the property, had the TCT cancelled in favor of the Republic of the Philippines, and distributed the property to the farmer-beneficiaries. The parties then referred the determination of just compensation with the DARAB. Respondent still finding the valuation unacceptable, filed before the RTC-Special Agrarian Court an action for determination and payment of just compensation against DAR and LBP. During trial, separate valuation reports were submitted, with the DAR and LBP using the guidelines/formula under RA 6657 in their computation. In its judgment, the RTC-SAC brushed aside the valuations fixed by DAR and LBP, and found instead as considerable just compensation the amount (P25 million) prayed for by respondent. Both parties appealed, but CA affirmed the judgment in toto.
Whether the RTC-SAC committed grave abuse of discretion in the determination of just compensation for the property.
The determination of just compensation is essentially a judicial function that the Courts exercise within the parameters of the law; the RTC-SAC’s valuation in this case is erroneous for having been rendered outside the contemplation of the law.
In the exercise of the essentially judicial function of determining just compensation, the RTC-SAC is not granted unlimited discretion. It must consider and apply the R.A. No. 6657-enumerated factors and the DAR formula (that reflects these factors) as they provide the uniform framework or structure by which just compensation for property subject to agrarian reform should be determined.
A determination of just compensation based merely on “conscience” – a consideration entirely outside the contemplation of the law – is the precise situation that we find in this case. To be clear, other than in “conscience,” the RTC-SAC did not point to any particular consideration that impelled it to set the just compensation at ₱25 million. In fact, a reading of the RTC-SAC’s decision reveals a marked absence of any grounds by which it anchored its determination, more so of any explanation why it fixed the amount of ₱25 million. This marked absence of basis, taken together with these other considerations, convinced us that the RTC-SAC completely, even arbitrarily, relied on the amount that respondent prayed for in their complaint in fixing the property’s just compensation. This blind reliance on respondent’s prayer and the utter disregard of the prescribed factors and formula clearly amount to grave abuse of discretion for having been taken outside the contemplation of the law.
Thus, we set aside, as grave abuse of discretion, the just compensation of ₱25 million that the RTC-SAC fixed for Eusebio’s property. Accordingly, we likewise set aside, for grave error, the CA’s decision that affirmed in toto this RTC-SAC’s valuation.