Republic v. Macabagdal
REITERATIONFacts
1. The Antecedents: The Republic of the Philippines, represented by the Department of Public Works and Highways (DPWH), initiated an expropriation proceeding to acquire a 200-square meter lot for the construction of the C-5 Northern Link Road Project (NLEX Segment 8.1). The lot was registered in the name of Leonor Macabagdal. The respondent did not oppose the expropriation and received a provisional deposit. 2. Procedural History: The DPWH filed a complaint for expropriation in the Regional Trial Court (RTC) of Valenzuela City. A writ of possession was issued, and the DPWH deposited P550,000.00 as provisional compensation. The RTC appointed commissioners who recommended P9,000.00 per square meter as just compensation. The RTC adopted this recommendation, ordering the DPWH to pay the balance and imposing a 12% per annum interest on the unpaid amount from the time of taking until full payment. The DPWH appealed to the Court of Appeals (CA), questioning the amount of just compensation and the interest rate, arguing for a 6% per annum rate. The CA affirmed the RTC's decision. 3. The Petition: The Republic of the Philippines filed a petition for review on certiorari with the Supreme Court, assailing the CA's decision. The primary issue raised is whether the CA erred in affirming the RTC's imposition of a 12% per annum interest on the unpaid balance of just compensation. The petitioner argues that the applicable interest rate should be 12% per annum from the filing of the complaint until June 30, 2013, and thereafter 6% per annum until full payment, citing BSP-MB Circular No. 799, Series of 2013.
Issue(s)
Whether the CA committed reversible error in affirming the RTC's imposition of interest at the rate of twelve percent (12%) per annum on the unpaid balance of just compensation, computed from the time of the taking of the subject lot until full payment. Whether the applicable rate of interest should be twelve percent (12%) per annum from the filing of the complaint until June 30, 2013, and thereafter, six percent (6%) per annum until full payment; and from which date should the legal interest commence.
Ruling
The petition is partly meritorious. The Court affirmed the CA decision with the modification that the legal interest on the unpaid balance of just compensation shall be computed at twelve percent (12%) per annum from the date of taking on May 5, 2008, to June 30, 2013, and thereafter, at six percent (6%) per annum until full payment.
Ratio Decidendi
On the imposition of legal interest: The Court reiterated that the purpose of just compensation is to compensate the owner for the loss of property, measured by its market value at the time of taking. The owner's loss includes not only the property but also its income-generating potential. Therefore, full compensation must be paid immediately. When the State delays payment of the full just compensation, it amounts to an effective forbearance of money, entitling the landowner to interest on the unpaid balance. This interest compensates for the unRaid balance of the principal sum after the taking has been completed, ensuring full compliance with the constitutional mandate of just compensation. On the applicable rate and commencement of legal interest: The Court clarified that the twelve percent (12%) per annum rate of legal interest is applicable only until June 30, 2013. Thereafter, the legal interest rate shall be six percent (6%) per annum, in line with Bangko Sentral ng Pilipinas (BSP) Monetary Board (MB) Circular No. 799, Series of 2013. This circular governs the rate of interest in the absence of stipulation and has been consistently applied to forbearances of money in expropriation cases. Cases decided prior to the effectivity of BSP-MB Circular No. 799 on July 1, 2013, are inapplicable. The Court clarified that legal interest shall commence not from the date of the filing of the complaint, but from the date of the issuance of the Writ of Possession, which is May 5, 2008. This is because the date of the writ of possession marks the actual deprivation of property, establishing the basis for the accrual of legal interest. Therefore, it is from this date that the State's delay in paying the full just compensation can be established, warranting the imposition of interest.
Main Doctrine
In expropriation cases, legal interest on the unpaid balance of just compensation is imposed as damages for the State's delay in payment, constituting an effective forbearance of money. The rate of legal interest is twelve percent (12%) per annum from the date of taking until June 30, 2013, and thereafter, six percent (6%) per annum until full payment, in accordance with BSP-MB Circular No. 799, Series of 2013.