#3 EN BANC

G.R. No. 164195 October 12, 2010

APO FRUITS CORPORATION and HIJO PLANTATION, INC.,

Petitioners,
vs.
LAND BANK OF THE PHILIPPINES, Respondent.
PONENTE: BRION, J.:
Facts:
On 12 October 1995, petitioners (AFC & HPI) voluntarily offered to sell (VOS) their
respective registered tracks of land to the government. On 16 October 1996, they were
notified by the PARO of the acquisition and valuation of P86.9M (AFC) and P164.5M
(HPI) to which petitioners rejected for being very low. Accordingly, the respondent bank
deposited P26.4M (AFC) and P45.5M (HPI) to petitioners bank account which they
withdrew after. On 9 December 1996, titles over the lands were cancelled and new ones
were issued in the name of the Republic.
When DARAB failed to act for three years on the petitions for determination and
payment of just compensation, petitioners filed the petitions with RTC Tagum. On 25
September 2001, it fixed the amount of just compensation and an interest at market rate
computed from the taking of the properties (9 December 1996). When the respondent
moved for reconsideration, the RTC modified its ruling on 5 December 2001 fixing the
interest at 12% per annum from the time the complaint was filed until finality of the
decision.
On 6 February 2007, the Third Division of SC affirmed RTC decision but, upon motion
for reconsideration, it was modified on 19 December 2007 deleting the 12% interest due
on the balance of just compensation. All parties moved for reconsideration of the
modified ruling but was denied. On 16 May 2008, Entry of Judgment followed.
Notwithstanding the Entry of Judgment, petitioners still filed a motion to admit the
Second Motion for Reconsideration and motion to refer the second motion to Court En
Banc.
The Court En Banc accepted the referral. But on 4 December 2009, it denied the
petitioners second motion for reconsideration on the ground that the motion runs counter
to the immutability of final decisions and that it has no reason to recognize the case as an
exception to the immutability principle. Thus, petitioners filed the present motion for
reconsideration to reconsider its 4 December 2009 Resolution arguing among others that
the principle of immutability of judgment does not apply. LBP, on the other hand,
contends that the principle of immutability applies to the case.
Issue:
Whether or not the exception to the principle of immutability of final judgment is present
in the case so as to warrant the grant of the present motion for reconsideration.

Ruling:
YES. Petitioners Motion for Reconsideration is Granted.
The Immutability of Judgment Issue
As a rule, a final judgment may no longer be altered, amended or modified, even if
the alteration, amendment or modification is meant to correct what is perceived to be an
erroneous conclusion of fact or law and regardless of what court, be it the highest Court of
the land, rendered it.[36] In the past, however, we have recognized exceptions to this rule
by reversing judgments and recalling their entries in the interest of substantial justice and
where special and compelling reasons called for such actions.
Notably, in San Miguel Corporation v. National Labor Relations Commission,
Galman v. Sandiganbayan,[38] Philippine Consumers Foundation v. National
Telecommunications Commission,[39] and Republic v. de los Angeles,[40] we reversed our
judgment on the second motion for reconsideration, while in Vir-Jen Shipping and
Marine Services v. National Labor Relations Commission,[41] we did so on a third motion
for reconsideration. In Cathay Pacific v. Romillo[42] and Cosio v. de Rama,[43] we modified
or amended our ruling on the second motion for reconsideration. More recently, in the
cases of Munoz v. Court of Appeals,[44] Tan Tiac Chiong v. Hon. Cosico,[45]Manotok IV v.
Barque,[46] and Barnes v. Padilla,[47] we recalled entries of judgment after finding that
doing so was in the interest of substantial justice. In Barnes, we said:
[37]

x x x Phrased elsewise, a final and executory judgment can no longer be

attacked by any of the parties or be modified, directly or indirectly, even
by the highest court of the land.
However, this Court has relaxed this rule in order to serve
substantial justice considering (a) matters of life, liberty, honor or
property, (b) the existence of special or compelling circumstances,
(c) the merits of the case, (d) a cause not entirely attributable to the fault
or negligence of the party favored by the suspension of the rules, (e) a lack
of any showing that the review sought is merely frivolous and dilatory,
and (f) the other party will not be unjustly prejudiced thereby.
Invariably, rules of procedure should be viewed as mere tools
designed to facilitate the attainment of justice. Their strict and rigid
application, which would result in technicalities that tend to frustrate
rather than promote substantial justice, must always be eschewed. Even
the Rules of Court reflects this principle. The power to suspend or even
disregard rules can be so pervasive and compelling as to alter even that
which this Court itself had already declared to be final. [48] [Emphasis
supplied.]

That the issues posed by this case are of transcendental importance is not hard to discern
from these discussions. A constitutional limitation, guaranteed under no less than the allimportant Bill of Rights, is at stake in this case: how can compensation in an eminent
domain be just when the payment for the compensation for property already taken has
been unreasonably delayed? To claim, as the assailed Resolution does, that only private
interest is involved in this case is to forget that an expropriation involves the government
as a necessary actor. It forgets, too, that under eminent domain, the constitutional limits
or standards apply to government who carries the burden of showing that these standards
have been met. Thus, to simply dismiss this case as a private interest matter is an
extremely shortsighted view that this Court should not leave uncorrected.
As duly noted in the above discussions, this issue is not one of first impression in
our jurisdiction; the consequences of delay in the payment of just compensation have
been settled by this Court in past rulings. Our settled jurisprudence on the issue alone
accords this case primary importance as a contrary ruling would unsettle, on the flimsiest
of grounds, all the rulings we have established in the past.
More than the stability of our jurisprudence, the matter before us is of
transcendental importance to the nation because of the subject matter involved agrarian
reform, a societal objective that the government has unceasingly sought to achieve in the
past half century. This reform program and its objectives would suffer a major setback if
the government falters or is seen to be faltering, wittingly or unwittingly, through lack of
good faith in implementing the needed reforms. Truly, agrarian reform is so important to
the national agenda that the Solicitor General, no less, pointedly linked agricultural lands,
its ownership and abuse, to the idea of revolution. [49] This linkage, to our mind, remains
valid even if the landowner, not the landless farmer, is at the receiving end of the
distortion of the agrarian reform program.
As we have ruled often enough, rules of procedure should not be applied in a very
rigid, technical sense; rules of procedure are used only to help secure, not override,
substantial justice.[50] As we explained in Ginete v. Court of Appeals:[51]
Let it be emphasized that the rules of procedure should be
viewed as mere tools designed to facilitate the attainment of justice.
Their strict and rigid application, which would result in technicalities that
tend to frustrate rather than promote substantial justice, must always be
eschewed. Even the Rules of Court reflect this principle. The power to
suspend or even disregard rules can be so pervasive and compelling as to
alter even that which this Court itself has already declared to be final, as
we are now constrained to do in the instant case.
xxxx
The emerging trend in the rulings of this Court is to afford every
party litigant the amplest opportunity for the proper and just determination
of his cause, free from the constraints of technicalities. Time and again,
this Court has consistently held that rules must not be applied rigidly so as
not to override substantial justice.[52] [Emphasis supplied.]

Similarly, in de Guzman v. Sandiganbayan,[53] we had occasion to state:

The Rules of Court was conceived and promulgated to set forth
guidelines in the dispensation of justice but not to bind and chain the hand
that dispenses it, for otherwise, courts will be mere slaves to or robots of
technical rules, shorn of judicial discretion. That is precisely why courts in
rendering justice have always been, as they ought to be, conscientiously
guided by the norm that when on the balance, technicalities take a
backseat against substantive rights, and not the other way
around. Truly then, technicalities, in the appropriate language of Justice
Makalintal, "should give way to the realities of the situation. [54] [Emphasis
supplied.]
We made the same recognition in Barnes,[55] on the underlying premise that a
courts primordial and most important duty is to render justice; in discharging the duty to
render substantial justice, it is permitted to re-examine even a final and executory
judgment.
Based on all these considerations, particularly the patently illegal and erroneous
conclusion that the petitioners are not entitled to 12% interest, we find that we are dutybound to re-examine and overturn the assailed Resolution. We shall completely and
inexcusably be remiss in our duty as defenders of justice if, given the chance to make the
rectification, we shall let the opportunity pass.
***** (DISCUSSION OF THE REASON FOR EXCEPTION) ******
Just compensation a Basic limitation on the States Power of Eminent Domain
At the heart of the present controversy is the Third Divisions December 19, 2007
Resolution which held that the petitioners are not entitled to 12% interest on the balance
of the just compensation belatedly paid by the LBP. In the presently assailed December 4,
2009 Resolution, we affirmed the December 19, 2007 Resolutions findings that: (a) the
LBP deposited pertinent amounts in favor of the petitioners within fourteen months after
they filed their complaint for determination of just compensation; and (b) the LBP had
already paid the petitioners P411,769,168.32. We concluded then that these circumstances
refuted the petitioners assertion of unreasonable delay on the part of the LBP.
A re-evaluation of the circumstances of this case and the parties arguments, viewed in
light of the just compensation requirement in the exercise of the States inherent power of
eminent domain, compels us to re-examine our findings and conclusions.
Eminent domain is the power of the State to take private property for public use. [3] It is an
inherent power of State as it is a power necessary for the States existence; it is a power
the State cannot do without.[4] As an inherent power, it does not need at all to be

embodied in the Constitution; if it is mentioned at all, it is solely for purposes of limiting

what is otherwise an unlimited power. The limitation is found in the Bill of Rights [5] that
part of the Constitution whose provisions all aim at the protection of individuals against
the excessive exercise of governmental powers.
Section 9, Article III of the 1987 Constitution (which reads No private property shall be
taken for public use without just compensation.) provides two essential limitations to the
power of eminent domain, namely, that (1) the purpose of taking must be for public
use and (2) just compensation must be given to the owner of the private property.
It is not accidental that Section 9 specifies that compensation should be just as the
safeguard is there to ensure a balance property is not to be taken for public use at the
expense of private interests; the public, through the State, must balance the injury that the
taking of property causes through compensation for what is taken, value for value.
Nor is it accidental that the Bill of Rights is interpreted liberally in favor of the individual
and strictly against the government. The protection of the individual is the reason for the
Bill of Rights being; to keep the exercise of the powers of government within reasonable
bounds is what it seeks.[6]
The concept of just compensation is not new to Philippine constitutional law,[7] but is not
original to the Philippines; it is a transplant from the American Constitution. [8] It found
fertile application in this country particularly in the area of agrarian reform where the
taking of private property for distribution to landless farmers has been equated to the
public use that the Constitution requires. In Land Bank of the Philippines v. Orilla,[9] a
valuation case under our agrarian reform law, this Court had occasion to state:
Constitutionally, "just compensation" is the sum equivalent to the market value of
the property, broadly described as the price fixed by the seller in open market in the usual
and ordinary course of legal action and competition, or the fair value of the property as
between the one who receives and the one who desires to sell, it being fixed at the time of
the actual taking by the government. Just compensation is defined as the full and fair
equivalent of the property taken from its owner by the expropriator. It has been
repeatedly stressed by this Court that the true measure is not the taker's gain but the
owner's loss. The word "just" is used to modify the meaning of the word "compensation"
to convey the idea that the equivalent to be given for the property to be taken shall be
real, substantial, full and ample.[10] [Emphasis supplied.]
In the present case, while the DAR initially valued the petitioners landholdings at a total
of P251,379,104.02,[11] the RTC, acting as a special agrarian court, determined the actual
value of the petitioners landholdings to be P1,383,179,000.00. This valuation, a finding
of fact, has subsequently been affirmed by this Court, and is now beyond question. In
eminent domain terms, this amount is the real, substantial, full and ample compensation
the government must pay to be just to the landowners.

Significantly, this final judicial valuation is far removed from the initial valuation made
by the DAR; their values differ by P1,131,799,897.00 in itself a very substantial sum
that is roughly four times the original DAR valuation. We mention these valuations as
they indicate to us how undervalued the petitioners lands had been at the start,
particularly at the time the petitioners landholdings were taken. This reason apparently
compelled the petitioners to relentlessly pursue their valuation claims all they way up to
the level of this Court.
While the LBP deposited the total amount of P71,891,256.62 into the petitioners accounts
(P26,409,549.86 for AFC and P45,481,706.76 for HPI) at the time the landholdings were
taken, these amounts were mere partial payments that only amounted to 5% of
the P1,383,179,000.00 actual value of the expropriated properties. We point this aspect
out to show that the initial payments made by the LBP when the petitioners landholdings
were taken, although promptly withdrawn by the petitioners, could not by any means be
considered a fair exchange of values at the time of taking; in fact, the LBPs actual deposit
could not be said to be substantial even from the original LBP valuation
of P251,379,103.90.
Thus, the deposits might have been sufficient for purposes of the immediate taking of the
landholdings but cannot be claimed as amounts that would excuse the LBP from the
payment of interest on the unpaid balance of the compensation due. As discussed at
length below, they were not enough to compensate the petitioners for the potential
income the landholdings could have earned for them if no immediate taking had taken
place. Under the circumstances, the State acted oppressively and was far from just in their
position to deny the petitioners of the potential income that the immediate taking of their
properties entailed.
Just Compensation from the Prism of the Element of Taking.
Apart from the requirement that compensation for expropriated land must be fair and
reasonable, compensation, to be just, must also be made without delay. [12] Without
prompt payment, compensation cannot be considered "just" if the property is immediately
taken as the property owner suffers the immediate deprivation of both his land and its
fruits or income.
This is the principle at the core of the present case where the petitioners were made to
wait for more than a decade after the taking of their property before they actually
received the full amount of the principal of the just compensation due them. [13] What
they have not received to date is the income of their landholdings corresponding to
what they would have received had no uncompensated taking of these lands been
immediately made. This income, in terms of the interest on the unpaid principal, is the
subject of the current litigation.

We recognized in Republic v. Court of Appeals[14] the need for prompt payment

and the necessity of the payment of interest to compensate for any delay in the payment
of compensation for property already taken. We ruled in this case that:
The constitutional limitation of just compensation is considered to be the sum
equivalent to the market value of the property, broadly described to be the price fixed by
the seller in open market in the usual and ordinary course of legal action and competition
or the fair value of the property as between one who receives, and one who desires to sell,
i[f] fixed at the time of the actual taking by the government. Thus, if property is taken
for public use before compensation is deposited with the court having jurisdiction
over the case, the final compensation must include interest[s] on its just value to be
computed from the time the property is taken to the time when compensation is
actually paid or deposited with the court. In fine, between the taking of the property
and the actual payment, legal interest[s] accrue in order to place the owner in a
position as good as (but not better than) the position he was in before the taking
occurred.[15] [Emphasis supplied.]
Aside from this ruling, Republic notably overturned the Courts previous ruling
in National Power Corporation v. Angas[16] which held that just compensation due for
expropriated properties is not a loan or forbearance of money but indemnity for damages
for the delay in payment; since the interest involved is in the nature of damages rather
than earnings from loans, then Art. 2209 of the Civil Code, which fixes legal interest at
6%, shall apply.
In Republic, the Court recognized that the just compensation due to the landowners
for their expropriated property amounted to an effective forbearance on the part of
the State. Applying the Eastern Shipping Lines ruling,[17] the Court fixed the applicable
interest rate at 12% per annum, computed from the time the property was taken until the
full amount of just compensation was paid, in order to eliminate the issue of the constant
fluctuation and inflation of the value of the currency over time. In the Courts own words:
The Bulacan trial court, in its 1979 decision, was correct in imposing interest[s] on the
zonal value of the property to be computed from the time petitioner instituted
condemnation proceedings and took the property in September 1969. This allowance of
interest on the amount found to be the value of the property as of the time of the
taking computed, being an effective forbearance, at 12% per annum should help
eliminate the issue of the constant fluctuation and inflation of the value of the
currency over time.[18] [Emphasis supplied.]
We subsequently upheld Republics 12% per annum interest rate on the unpaid
expropriation compensation in the following cases: Reyes v. National Housing Authority,
[19]
Land Bank of the Philippines v. Wycoco,[20] Republic v. Court of Appeals,[21] Land Bank
of the Philippines v. Imperial,[22] Philippine Ports Authority v. Rosales-Bondoc,
[23]
and Curata v. Philippine Ports Authority.[24]

These were the established rulings that stood before this Court issued the currently
assailed Resolution of December 4, 2009. These would be the rulings this Court shall
reverse and de-establish if we maintain and affirm our ruling deleting the 12%
interest on the unpaid balance of compensation due for properties already taken.
Under the circumstances of the present case, we see no compelling reason to depart from
the rule that Republic firmly established. Let it be remembered that shorn of its eminent
domain and social justice aspects, what the agrarian land reform program involves is
the purchase by the government, through the LBP, of agricultural lands for sale and
distribution to farmers. As a purchase, it involves an exchange of values the landholdings
in exchange for the LBPs payment. In determining the just compensation for this
exchange, however, the measure to be borne in mind is not the taker's gain but the
owner's loss[25] since what is involved is the takeover of private property under the
States coercive power. As mentioned above, in the value-for-value exchange in an
eminent domain situation, the State must ensure that the individual whose property is
taken is not shortchanged and must hence carry the burden of showing that the just
compensation requirement of the Bill of Rights is satisfied.
The owners loss, of course, is not only his property but also its income-generating
potential. Thus, when property is taken, full compensation of its value must immediately
be paid to achieve a fair exchange for the property and the potential income lost. The just
compensation is made available to the property owner so that he may derive income from
this compensation, in the same manner that he would have derived income from his
expropriated property. If full compensation is not paid for property taken, then the State
must make up for the shortfall in the earning potential immediately lost due to the taking,
and the absence of replacement property from which income can be derived; interest on
the unpaid compensation becomes due as compliance with the constitutional mandate on
eminent domain and as a basic measure of fairness.
In the context of this case, when the LBP took the petitioners landholdings without the
corresponding full payment, it became liable to the petitioners for the income the
landholdings would have earned had they not immediately been taken from the
petitioners. What is interesting in this interplay, under the developments of this case, is
that the LBP, by taking landholdings without full payment while holding on at the same
time to the interest that it should have paid, effectively used or retained funds that
should go to the landowners and thereby took advantage of these funds for its own
account.
From this point of view, the December 19, 2007 Resolution deleting the award of 12%
interest is not only patently and legally wrong, but is also morally unconscionable for
being grossly unfair and unjust. If the interest on the just compensation due in reality the
equivalent of the fruits or income of the landholdings would have yielded had these lands
not been taken would be denied, the result is effectively a confiscatory action by this
Court in favor of the LBP. We would be allowing the LBP, for twelve long years, to have
free use of the interest that should have gone to the landowners. Otherwise stated, if we

continue to deny the petitioners present motion for reconsideration, we would

illogically and without much thought to the fairness that the situation demands
uphold the interests of the LBP, not only at the expense of the landowners but also
that of substantial justice as well.
Lest this Court be a party to this monumental unfairness in a social program aimed at
fostering balance in our society, we now have to ring the bell that we have muted in the
past, and formally declare that the LBPs position is legally and morally wrong. To do less
than this is to leave the demands of the constitutional just compensation standard (in
terms of law) and of our own conscience (in terms of morality) wanting and unsatisfied.
The Delay in Payment Issue
Separately from the demandability of interest because of the failure to fully pay for
property already taken, a recurring issue in the case is the attribution of the delay.
That delay in payment occurred is not and cannot at all be disputed. While the LBP
claimed that it made initial payments of P411,769,168.32 (out of the principal sum due of
P1,383,179,000.00), the undisputed fact is that the petitioners were deprived of their
lands on December 9, 1996 (when titles to their landholdings were cancelled and
transferred to the Republic of the Philippines), and received full payment of the
principal amount due them only on May 9, 2008.
In the interim, they received no income from their landholdings because these
landholdings had been taken. Nor did they receive adequate income from what should
replace the income potential of their landholdings because the LBP refused to pay interest
while withholding the full amount of the principal of the just compensation due by
claiming a grossly low valuation. This sad state continued for more than a decade. In any
language and by any measure, a lengthy delay in payment occurred.
An important starting point in considering attribution for the delay is that the petitioners
voluntarily offered to sell their landholdings to the governments land reform
program; they themselves submitted their Voluntary Offer to Sell applications to the
DAR, and they fully cooperated with the governments program. The present case
therefore is not one where substantial conflict arose on the issue of whether expropriation
is proper; the petitioners voluntarily submitted to expropriation and surrendered their
landholdings, although they contested the valuation that the government made.
Presumably, had the landholdings been properly valued, the petitioners would have
accepted the payment of just compensation and there would have been no need for them
to go to the extent of filing a valuation case. But, as borne by the records, the petitioners
lands were grossly undervalued by the DAR, leaving the petitioners with no choice but to
file actions to secure what is justly due them.

The DARs initial gross undervaluation started the cycle of court actions that followed,
where the LBP eventually claimed that it could not be faulted for seeking judicial
recourse to defend the governments and its own interests in light of the petitioners
valuation claims. This LBP claim, of course, conveniently forgets that at the root of all
these valuation claims and counterclaims was the initial gross undervaluation by DAR
that the LBP stoutly defended. At the end, this undervaluation was proven incorrect by no
less than this Court; the petitioners were proven correct in their claim, and the correct
valuation more than five-fold the initial DAR valuation was decreed and became final.
All these developments cannot now be disregarded and reduced to insignificance. In
blunter terms, the government and the LBP cannot now be heard to claim that they were
simply protecting their interests when they stubbornly defended their undervalued
positions before the courts. The more apt and accurate statement is that they adopted a
grossly unreasonable position and the adverse developments that followed, particularly
the concomitant delay, should be directly chargeable to them.
To be sure, the petitioners were not completely correct in the legal steps they took in their
valuation claims. They initially filed their valuation claim before the DARAB instead of
immediately seeking judicial intervention. The DARAB, however, contributed its share to
the petitioners error when it failed or refused to act on the valuation petitions for more
than three (3) years. Thus, on top of the DAR undervaluation was the DARAB inaction
after the petitioners landholdings had been taken. This Courts Decision of February 6,
2007 duly noted this and observed:
It is not controverted that this case started way back on 12 October 1995, when
AFC and HPI voluntarily offered to sell the properties to the DAR. In view of the failure
of the parties to agree on the valuation of the properties, the Complaint for Determination
of Just Compensation was filed before the DARAB on 14 February 1997. Despite the
lapse of more than three years from the filing of the complaint, the DARAB failed to
render a decision on the valuation of the land. Meantime, the titles over the properties of
AFC and HPI had already been cancelled and in their place a new certificate of title was
issued in the name of the Republic of the Philippines, even as far back as 9 December
1996. A period of almost 10 years has lapsed. For this reason, there is no dispute that
this case has truly languished for a long period of time, the delay being mainly
attributable to both official inaction and indecision, particularly on the determination of
the amount of just compensation, to the detriment of AFC and HPI, which to date, have
yet to be fully compensated for the properties which are already in the hands of farmerbeneficiaries, who, due to the lapse of time, may have already converted or sold the land
awarded to them.
Verily, these two cases could have been disposed with dispatch were it not for
LBPs counsel causing unnecessary delay. At the inception of this case, DARAB, an
agency of the DAR which was commissioned by law to determine just compensation, sat
on the cases for three years, which was the reason that AFC and HPI filed the cases
before the RTC. We underscore the pronouncement of the RTC that the delay by

DARAB in the determination of just compensation could only mean the reluctance
of the Department of Agrarian Reform and the Land Bank of the Philippines to pay
the claim of just compensation by corporate landowners.
To allow the taking of landowners properties, and to leave them empty-handed
while government withholds compensation is undoubtedly oppressive. [Emphasis
supplied.]
These statements cannot but be true today as they were when we originally decided the
case and awarded 12% interest on the balance of the just compensation due. While the
petitioners were undisputedly mistaken in initially seeking recourse through the DAR,
this agency itself hence, the government committed a graver transgression when it failed
to act at all on the petitioners complaints for determination of just compensation.
In sum, in a balancing of the attendant delay-related circumstances of this case, delay
should be laid at the doorsteps of the government, not at the petitioners. We conclude,
too, that the government should not be allowed to exculpate itself from this delay and
should suffer all the consequences the delay caused.
The LBPs arguments on the applicability of cases imposing 12% interest
The LBP claims in its Comment that our rulings in Republic v. Court of Appeals,
Reyes v. National Housing Authority,[27] and Land Bank of the Philippines v. Imperial,
[28]
cannot be applied to the present case.
[26]

According to the LBP, Republic is inapplicable because, first, the landowners

in Republic remained unpaid, notwithstanding the fact that the award for just
compensation had already been fixed by final judgment; in the present case, the Court
already acknowledged that pertinent amounts were deposited in favor of the landowners
within 14 months from the filing of their complaint. Second, while Republicinvolved an
ordinary expropriation case, the present case involves expropriation for agrarian
reform. Finally, the just compensation in Republic remained unpaid notwithstanding the
finality of judgment, while the just compensation in the present case was immediately
paid in full after LBP received a copy of the Courts resolution
We find no merit in these assertions.
As we discussed above, the pertinent amounts allegedly deposited by LBP were
mere partial payments that amounted to a measly 5% of the actual value of the properties
expropriated. They could be the basis for the immediate taking of the expropriated
property but by no stretch of the imagination can these nominal amounts be considered
pertinent enough to satisfy the full requirement of just compensation i.e.,the full and fair
equivalent of the expropriated property, taking into account its income potential and the
foregone income lost because of the immediate taking.

We likewise find no basis to support the LBPs theory that Republic and the
present case have to be treated differently because the first involves a regular
expropriation case, while the present case involves expropriation pursuant to the countrys
agrarian reform program. In both cases, the power of eminent domain was used and
private property was taken for public use. Why one should be different from the other, so
that the just compensation ruling in one should not apply to the other, truly escapes us. If
there is to be a difference, the treatment of agrarian reform expropriations should be
stricter and on a higher plane because of the governments societal concerns and
objectives. To be sure, the government cannot attempt to remedy the ills of one sector of
society by sacrificing the interests of others within the same society.
Finally, we note that the finality of the decision (that fixed the value of just
compensation) in Republic was not a material consideration for the Court in awarding the
landowners 12% interest. The Court, in Republic, simply affirmed the RTC ruling
imposing legal interest on the amount of just compensation due. In the process, the Court
determined that the legal interest should be 12% after recognizing that the just
compensation due was effectively a forbearance on the part of the government. Had the
finality of the judgment been the critical factor, then the 12% interest should have been
imposed from the time the RTC decision fixing just compensation became
final. Instead, the 12% interest was imposed from the time that the Republic commenced
condemnation proceedings and took the property.
The LBP additionally asserts that the petitioners erroneously relied on the ruling
in Reyes v. National Housing Authority. The LBP claims that we cannot
apply Reyes because it involved just compensation that remained unpaid despite the
finality of the expropriation decision. LBPs point of distinction is that just compensation
was immediately paid in the present case upon the Courts determination of the actual
value of the expropriated properties. LBP claims, too, that in Reyes, the Court established
that the refusal of the NHA to pay just compensation was unfounded and unjustified,
whereas the LBP in the present case clearly demonstrated its willingness to pay just
compensation. Lastly, in Reyes, the records showed that there was an outstanding balance
that ought to be paid, while the element of an outstanding balance is absent in the present
case.
Contrary to the LBPs opinion, the imposition of the 12% interest in Reyes did not depend
on either the finality of the decision of the expropriation court, or on the finding that the
NHAs refusal to pay just compensation was unfounded and unjustified. Quite clearly, the
Court imposed 12% interest based on the ruling in Republic v. Court of Appeals that x x x
if property is taken for public use before compensation is deposited with the court having
jurisdiction over the case, the final compensation must include interest[s] on its just
value to be computed from the time the property is taken to the time when
compensation is actually paid or deposited with the court. In fine, between the taking of
the property and the actual payment, legal interest[s] accrue in order to place the owner
in a position as good as (but not better than) the position he was in before the taking

occurred.[29] This is the same legal principle applicable to the present case, as discussed
above.
While the LBP immediately paid the remaining balance on the just compensation due to
the petitioners after this Court had fixed the value of the expropriated properties, it
overlooks one essential fact from the time that the State took the petitioners properties
until the time that the petitioners were fully paid, almost 12 long years passed. This is the
rationale for imposing the 12% interest in order to compensate the petitioners for the
income they would have made had they been properly compensated for their properties at
the time of the taking.
Finally, the LBP insists that the petitioners quoted our ruling in Land Bank of the
Philippines v. Imperial out of context. According to the LBP, the Court imposed legal
interest of 12% per annum only after December 31, 2006, the date when the decision on
just compensation became final.
The LBP is again mistaken. The Imperial case involved land that was expropriated
pursuant to Presidential Decree No. 27, [30] and fell under the coverage of DAR
Administrative Order (AO) No. 13.[31] This AO provided for the payment of a 6% annual
interest if there is any delay in payment of just compensation. However, Imperial was
decided in 2007 and AO No. 13 was only effective up to December 2006. Thus, the
Court, relying on our ruling in the Republic case, applied the prevailing 12% interest
ruling to the period when the just compensation remained unpaid after December 2006. It
is for this reason that December 31, 2006 was important, not because it was the date of
finality of the decision on just compensation.
The 12% Interest Rate and the Chico-Nazario Dissent
To fully reflect the concerns raised in this Courts deliberations on the present case, we
feel it appropriate to discuss the Justice Minita Chico-Nazarios dissent from the Courts
December 4, 2009 Resolution.
While Justice Chico-Nazario admitted that the petitioners were entitled to the 12%
interest, she saw it appropriate to equitably reduce the interest charges
from P1,331,124,223.05 to P400,000,000.00. In support of this proposal, she enumerated
various cases where the Court, pursuant to Article 1229 of the Civil Code, [32] equitably
reduced interest charges.
We differ with our esteemed colleagues views on the application of equity.
While we have equitably reduced the amount of interest awarded in numerous cases in
the past, those cases involved interest that was essentially consensual in nature, i.e.,
interest stipulated in signed agreements between the contracting parties. In contrast, the
interest involved in the present case runs as a matter of law and follows as a matter of

course from the right of the landowner to be placed in as good a position as money can
accomplish, as of the date of taking.[33]
Furthermore, the allegedly considerable payments made by the LBP to the
petitioners cannot be a proper premise in denying the landowners the interest due them
under the law and established jurisprudence. If the just compensation for the
landholdings is considerable, this compensation is not undue because the
landholdings the owners gave up in exchange are also similarly considerable AFC
gave up an aggregate landholding of 640.3483 hectares, while HPIs gave up 805.5308
hectares. When the petitioners surrendered these sizeable landholdings to the
government, the incomes they gave up were likewise sizeable and cannot in any way be
considered miniscule. The incomes due from these properties, expressed as interest, are
what the government should return to the petitioners after the government took over their
lands without full payment of just compensation. In other words, the value of the
landholdings themselves should be equivalent to the principal sum of the just
compensation due; interest is due and should be paid to compensate for the unpaid
balance of this principal sum after taking has been completed. This is the compensation
arrangement that should prevail if such compensation is to satisfy the constitutional
standard of being just.
Neither can LBPs payment of the full compensation due before the finality of the
judgment of this Court justify the reduction of the interest due them. To rule otherwise
would be to forget that the petitioners had to wait twelve years from the time they gave
up their lands before the government fully paid the principal of the just compensation due
them. These were twelve years when they had no income from their landholdings because
these landholdings have immediately been taken; no income, or inadequate income,
accrued to them from the proceeds of compensation payment due them because full
payment has been withheld by government.
If the full payment of the principal sum of the just compensation is legally significant at
all under the circumstances of this case, the significance is only in putting a stop to the
running of the interest due because the principal of the just compensation due has been
paid. To close our eyes to these realities is to condone what is effectively a confiscatory
action in favor of the LBP.
That the legal interest due is now almost equivalent to the principal to be paid is not per
se an inequitable or unconscionable situation, considering the length of time the interest
has remained unpaid almost twelve long years. From the perspective of interest income,
twelve years would have been sufficient for the petitioners to double the principal, even if
invested conservatively, had they been promptly paid the principal of the just
compensation due them. Moreover, the interest, however enormous it may be, cannot be
inequitable and unconscionable because it resulted directly from the application of
law and jurisprudence standards that have taken into account fairness and equity in
setting the interest rates due for the use or forebearance of money.

If the LBP sees the total interest due to be immense, it only has itself to blame, as this
interest piled up because it unreasonably acted in its valuation of the landholdings and
consequently failed to promptly pay the petitioners. To be sure, the consequences of this
failure i.e., the enormity of the total interest due and the alleged financial hemorrhage the
LBP may suffer should not be the very reason that would excuse it from full compliance.
To so rule is to use extremely flawed logic. To so rule is to disregard the question of how
the LBP, a government financial institution that now professes difficulty in paying
interest at 12% per annum, managed the funds that it failed to pay the petitioners for
twelve long years.
It would be utterly fallacious, too, to argue that this Court should tread lightly in
imposing liabilities on the LBP because this bank represents the government and,
ultimately, the public interest. Suffice it to say that public interest refers to what will
benefit the public, not necessarily the government and its agencies whose task is to
contribute to the benefit of the public. Greater public benefit will result if government
agencies like the LBP are conscientious in undertaking its tasks in order to avoid the
situation facing it in this case. Greater public interest would be served if it can
contribute to the credibility of the governments land reform program through the
conscientious handling of its part of this program.
As our last point, equity and equitable principles only come into full play when a gap
exists in the law and jurisprudence.[34] As we have shown above, established rulings of
this Court are in place for full application to the present case. There is thus no occasion
for the equitable consideration that Justice Chico-Nazario suggested.
The Amount Due the Petitioners as Just Compensation
As borne by the records, the 12% interest claimed is only on the difference between the
price of the expropriated lands (determined with finality to be P1,383,179,000.00) and the
amount of P411,769,168.32 already paid to the petitioners. The difference between these
figures amounts to the remaining balance of P971,409,831.68 that was only paid on May
9, 2008.
As above discussed, this amount should bear interest at the rate of 12% per annum
from the time the petitioners properties were taken on December 9, 1996 up to the
time of payment. At this rate, the LBP now owes the petitioners the total amount of One
Billion Three Hundred Thirty-One Million One Hundred Twenty-Four Thousand Two
Hundred Twenty-Three and 05/100 Pesos (P1,331,124,223.05), computed as follows:
Just Compensation P971,409,831.68
Legal Interest from 12/09/1996
To 05/09/2008 @ 12%/annum
12/09/1996 to 12/31/1996 23 days 7,345,455.17

01/01/1997 to 12/31/2007 11 years 1,282,260,977.82

01/01/2008 to 05/09/2008 130 days 41,517,790.07
P1,331,124,223.05[35]
- Digested [15 November 2016, 09:53]