Yared v. Land Bank
REITERATIONFacts
The Antecedents: Petitioners were the registered owners of a parcel of land (TCT No. ST-27) with an area of 134.895 hectares. In 1996, the property was placed under the Comprehensive Agrarian Reform Program (CARP) for compulsory acquisition. Land Bank initially valued the property at P7,067,426.91 and deposited this amount. Petitioners, dissatisfied with the valuation, initiated a case before the DARAB. DARAB directed Land Bank to recompute the valuation. Land Bank submitted a re-evaluation of P11,366,366.15 in November 2011. After over seven years of inaction, DARAB, on July 1, 2008, rejected Land Bank's re-evaluation and reverted to the initial valuation of P7,067,426.91. Procedural History: Petitioners filed a Petition for the Determination of Just Compensation before the RTC, praying for the determination of just compensation, legal interest on the unpaid balance due to delay, and attorney's fees. The RTC recomputed the just compensation to P18,604,478.00, finding that Land Bank failed to consider other relevant factors in its valuation. The RTC awarded legal interest of 12% per annum from September 25, 1996, attorney's fees, exemplary damages, and commissioner's fees. The Court of Appeals (CA) affirmed the RTC's decision with modification, deleting the award of legal interest, exemplary damages, and attorney's fees, citing the absence of delay and bad faith on the part of Land Bank. The Petition: Petitioners seek to set aside the CA's decision, arguing that the CA erred in deleting the award of legal interest despite the incurred delay by the government.
Issue(s)
Whether or not legal interest shall be imposed on the unpaid balance of P11,537,478.00 reckoned from the time of taking until full payment of just compensation.
Ruling
The petition is granted. The Court reversed the Court of Appeals' decision and reinstated the Regional Trial Court's award of legal interest. Land Bank of the Philippines is directed to pay the remaining balance of P11,537,478.00 at a rate of twelve percent (12%) legal interest per annum from September 25, 1996, until June 30, 2013, and at a rate of six percent (6%) legal interest per annum from July 1, 2013, until full payment of just compensation.
Ratio Decidendi
On the imposition of legal interest on the unpaid balance of just compensation: The Court held that legal interest shall be imposed on the unpaid balance of just compensation in expropriation cases when there is delay in payment. The concept of just compensation requires full and fair equivalent of the property paid within a reasonable time from its taking. Without prompt payment, compensation is not "just" because the owner suffers the consequences of immediate deprivation while waiting for payment. The Court reiterated that it is presumed there is delay if the government fails to pay the full amount of just compensation on the date of taking. To equalize the effect of losing the income-generating potential of the property, an interest on the unpaid compensation is imposed from the time of taking until full payment. The Court found that the petitioners had waited for almost 12 long years from the time of taking until they were fully paid, which constitutes a delay justifying the imposition of legal interest. The Court also rejected Land Bank's argument that the deposited amount was already earning interest, stating that the lost opportunity in the interest-earning potential of the difference between the initial valuation and the final amount adjudged is too substantial to be considered full compensation. The Court applied the established jurisprudence that the obligation to compensate landowners is deemed an effective forbearance on the part of the State, necessitating the award of interest as damages for delay in payment. The Court further clarified the applicable interest rates, imposing 12% per annum from the time of taking until June 30, 2013, and 6% per annum thereafter, in line with BSP-MB Circular No. 799, series of 2013, as affirmed in Nacar v. Gallery Frames, et al.
Main Doctrine
Legal interest shall be imposed on the unpaid balance of just compensation in expropriation cases when there is delay in payment from the time of taking until full payment, to compensate the landowner for lost income-generating potential.