G.R. No. 196707 - Spouses Mercado vs. Land Bank of the Philippines

Petitioners, spouses Nilo and Erlinda Mercado, were registered owners of 9.8940 hectares of agricultural land in Kilate, Toril, Davao City covered by Transfer Certificate of Title (TCT) No. T-44107.
Respondent, Land Bank of the Philippines (LBP), is a government financial institution and the financial intermediary for the Comprehensive Agrarian Reform Program (CARP).

The Provincial Agrarian Reform Office (PARO) of Davao City informed petitioners that 5.2624 hectares of their property (subject portion) would be covered under CARP. Petitioners were offered P287,227.16 as just compensation.
Petitioner Nilo rejected this valuation, claiming fair market value was P250,000.00 per hectare based on:

The sale of the remaining 4.6316 hectares, which was less productive and hilly, for P250,000.00 per hectare;
The subject portion being flat, suited for agriculture, improved, and near an eco-tourism area.

Summary administrative proceedings sustained respondent’s valuation. Nilo appealed to the Department of Agrarian Reform Adjudication Board (DARAB), which dismissed the appeal for lack of jurisdiction, directing the case to be brought before the Regional Trial Court (RTC) acting as Special Agrarian Court (SAC).

Petitioners filed a complaint for just compensation before the RTC-SAC seeking P250,000.00 per hectare for the subject portion and rental payments from farmer-beneficiaries.
Farmer-beneficiaries and the DAR answered, asserting they were no longer tenants but qualified beneficiaries and that rental issues belonged to DARAB. Respondent maintained its valuation complied with DAR Administrative Order (A.O.) No. 5 and Section 17 of RA 6657.

Revenue Officer testified zonal value in 2002 was P40.00 per square meter;
Records custodian presented lease contract between Apo Land Corporation and farmer-beneficiaries;
Witnesses described agricultural improvements and land use;
Nilo testified to crops planted, improvements, and lease arrangements;
Nilo alleged he paid real estate taxes and protested low valuation payment.

Agrarian Affairs Specialist testified there was no comparable sales information;
Property appraiser inspected property, noted agricultural use and flat terrain;
Appraiser used formula per DAR A.O. No. 5 based on production data (copra yield).

The RTC held the factors under Section 17 of RA 6657 and DAR formula are guideposts but the court has discretion.
Respondent’s motion for reconsideration was denied.

CA reversed the RTC ruling, reinstating the valuation by respondent and DAR Regional Adjudicator.
CA emphasized mandatory application of formula under DAR A.O. No. 5 in computing just compensation.
CA found RTC failed to explain the basis for P25.00 per square meter valuation, disregarded formula, and lacked evidence to rebut respondent’s valuation.
CA computed same valuation as respondent using DAR A.O. No. 5 formula and respondent’s data.

Petitioners filed the instant Petition for Review on Certiorari to the Supreme Court.

Whether the RTC-SAC erred in fixing just compensation at P25.00 per square meter instead of applying the valuation formula under DAR A.O. No. 5 and factors in Section 17 of RA 6657.
Whether the CA correctly reversed the RTC and reinstated respondent’s valuation based on DAR A.O. No. 5 formula despite the evidence presented by petitioners.
The proper standard for judicial determination of just compensation in agrarian reform cases and the applicability of the DAR formula as binding or merely a guideline.