Land Bank v. Phil-Agro
REITERATIONFacts
The Antecedents: This case concerns the valuation of 19 parcels of land, totaling 267.0043 hectares, registered under the name of Phil-Agro Industrial Corporation (respondent). These landholdings were placed under the compulsory coverage of the Comprehensive Agrarian Reform Program (CARP) by the Department of Agrarian Reform (DAR). The Land Bank of the Philippines (petitioner) initially offered P2,139,996.57 as compensation, which the respondent rejected, leading to a dispute over the determination of just compensation. Procedural History: The respondent filed an Amended Complaint with the Regional Trial Court (RTC) seeking P26,700,000.00 in just compensation. The parties agreed to a commission to determine the fair market value. The respondent's commissioner proposed P63,045,000.00, while the petitioner's commissioner suggested P11,640,730.68. The RTC adopted the Chairman's valuation of P20,589,373.00. On appeal, the Court of Appeals (CA) modified the RTC's decision, reducing the compensation to P11,640,730.68 and ordering the petitioner to pay interest. The CA later amended its decision, modifying the interest rates and reckoning point. The Petition: The petitioner filed a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the CA's Amended Decision. The sole issue raised by the petitioner is the propriety of the CA's award of 1% per annum on the amount of just compensation, reckoned from September 16, 1992. The petitioner argues that this interest is not warranted, particularly in light of its initial deposit and the subsequent appeal.
Issue(s)
Whether the award of 1% per annum interest on the amount of just compensation counted from September 16, 1992, is proper. Whether there was delay in the payment of just compensation entitling the respondent to legal interest, and if so, from what date should the interest be reckoned.
Ruling
The petition is partly granted. The Amended Decision of the Court of Appeals is affirmed with modification. Land Bank is ordered to pay Phil-Agro ₱11,640,730.68 as just compensation. Legal interest shall be pegged at twelve percent (12%) per annum, reckoned from the time of taking on September 16, 1992. Thereafter, or beginning July 1, 2013, until fully paid, just compensation shall earn interest at the new legal rate of six percent (6%) per annum.
Ratio Decidendi
On the propriety of the award of 1% per annum interest: The Court ruled that the award of 1% per annum interest to cover the increase in value of real properties is not proper. Citing National Power Corporation v. Elizabeth Manalastas and Bea Castillo, the Court held that the delay in the payment of just compensation is sufficiently recompensed through the payment of interest on the market value of the land as of the time of taking. The rationale for imposing interest is to compensate the landowner for the income they would have made had they been properly compensated at the time of taking, and to limit the opportunity loss of the owner. Therefore, an additional interest for inflation or increase in value is unnecessary as the legal interest already serves this compensatory purpose. On the existence of delay in payment and the reckoning point of legal interest: The Court found that delay in the payment of just compensation occurred and cannot be disputed. Although Land Bank claimed to have made a deposit of its initial valuation, this amount (₱2,139,996.57) was significantly lower than the final adjudged just compensation (₱11,640,730.68). The respondent was deprived of its lands since September 16, 1992, with the issuance of Certificates of Land Ownership Award (CLOA), and had not yet received full payment of the principal amount. The Court reiterated that the mere deposit of a provisional compensation, especially when substantially less than the final valuation, does not satisfy the requirement of prompt payment and full compensation. The landowner is entitled to be placed in as good a position as money can accomplish as of the date of taking. Therefore, legal interest should be reckoned from the time of taking, which is September 16, 1992, the date of CLOA issuance, until full payment.
Main Doctrine
The landowner is entitled to legal interest on the unpaid balance of just compensation from the time of taking until full payment, to compensate for the income lost due to the delay. A mere deposit of an amount significantly lower than the final adjudged just compensation does not absolve the government from the charge of delay.