The Case. - LAND BANK OF THE PHILIPPINES V. EUSEBIO, JR. (G.R. NO.

160143)

Facts- 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.

Issue- Whether the RTC-SAC committed grave abuse of discretion in the determination
of just compensation for the property.

Held- YES.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 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

Doctrine Learned- the RTC-SAC the original and exclusive jurisdicti on to

determine just compensati on for lands taken pursuant to the State’s agrarian reform
program.