G.R. No.
164195               October 12, 2010 On February 14, 1997, AFC and HPI filed separate petitions for
APO FRUITS CORPORATION and HIJO PLANTATION,
INC., Petitioners,
vs.
LAND BANK OF THE PHILIPPINES, Respondent.
RESOLUTION
BRION, J.:
We resolve the petitioners’ motion for reconsideration addressing our
Resolution of December 4, 2009 whose dispositive portion directs:
WHEREFORE, the Court denies the petitioners’ second motion for
reconsideration (with respect to the denial of the award of legal interest and
attorney’s fees), and reiterates the decision dated February 6, 2007 and the
resolution dated December 19, 2007 of the Third Division.
For a fuller and clearer presentation and appreciation of this Resolution,
we hark back to the roots of this case.
Factual Antecedents
Apo Fruits Corporation (AFC) and Hijo Plantation, Inc. (HPI), together also
referred to as petitioners, were registered owners of vast tracks of land;
AFC owned 640.3483 hectares, while HPI owned 805.5308 hectares. On
October 12, 1995, they voluntarily offered to sell these landholdings to the
government via Voluntary Offer to Sell applications filed with the
Department of Agrarian Reform (DAR).
On October 16, 1996, AFC and HPI received separate notices of land
acquisition and valuation of their properties from the DAR’s Provincial
Agrarian Reform Officer (PARO). At the assessed valuation of ₱165,484.47
per hectare, AFC’s land was valued at ₱86,900,925.88, while HPI’s
property was valued at ₱164,478,178.14. HPI and AFC rejected these
valuations for being very low.
In its follow through action, the DAR requested the Land Bank of the
Philippines (LBP) to deposit ₱26,409,549.86 in AFC’s bank account and
₱45,481,706.76 in HPI’s bank account, which amounts the petitioners
then withdrew. The titles over AFC and HPI’s properties were thereafter
cancelled, and new ones were issued on December 9, 1996 in the name of
the Republic of the Philippines.
determination of just compensation with the DAR Adjudication Board
(DARAB). When the DARAB failed to act on these petitions for more than
three years, AFC and HPI filed separate complaints for determination and
payment of just compensation with the Regional Trial Court (RTC) of
Tagum City, acting as a Special Agrarian Court. These complaints were
subsequently consolidated.
On September 25, 2001, the RTC resolved the consolidated cases, fixing
the just compensation for the petitioners’ 1,338.6027 hectares of land 1 at
₱1,383,179,000.00, with interest on this amount at the prevailing market
interest rates, computed from the taking of the properties on December 9,
1996 until fully paid, minus the amounts the petitioners already received
under the initial valuation. The RTC also awarded attorney’s fees.
LBP moved for the reconsideration of the decision. The RTC, in its order of
December 5, 2001, modified its ruling and fixed the interest at the rate of
12% per annum from the time the complaint was filed until finality of the
decision. The Third Division of this Court, in its Decision of February 6,
2007, affirmed this RTC decision.
On motion for reconsideration, the Third Division issued its Resolution of
December 19, 2007, modifying its February 6, 2007 Decision by deleting
the 12% interest due on the balance of the awarded just compensation.
The Third Division justified the deletion by the finding that the LBP did not
delay the payment of just compensation as it had deposited the pertinent
amounts due to AFC and HPI within fourteen months after they filed their
complaints for just compensation with the RTC. The Court also considered
that AFC had already collected approximately ₱149.6 million, while HPI
had already collected approximately ₱262 million from the LBP. The Third
Division also deleted the award of attorney’s fees.
All parties moved for the reconsideration of the modified ruling. The Court
uniformly denied all the motions in its April 30, 2008 Resolution. Entry of
Judgment followed on May 16, 2008.
Notwithstanding the Entry of Judgment, AFC and HPI filed the following
motions on May 28, 2008: (1) Motion for Leave to File and Admit Second
Motion for Reconsideration; (2) Second Motion for Reconsideration, with
respect to the denial of the award of legal interest and attorney’s fees; and
(3) Motion to Refer the Second Motion for Reconsideration to the Honorable
Court En Banc.
The Third Division found the motion to admit the Second Motion for
Reconsideration and the motion to refer this second motion to the Court
En Banc meritorious, and accordingly referred the case to the Court En
Banc. On September 8, 2009, the Court En Banc accepted the referral.
The Court En Banc Resolution
On December 4, 2009, the Court En Banc, by a majority vote, denied the
petitioners’ second motion for reconsideration based on two
considerations.
First, the grant of the second motion for reconsideration runs counter to
the immutability of final decisions. Moreover, the Court saw no reason to
recognize the case as an exception to the immutability principle as the
petitioners’ private claim for the payment of interest does not qualify as
either a substantial or transcendental matter or an issue of paramount
public interest.
Second, on the merits, the petitioners are not entitled to recover interest on
the just compensation and attorney’s fees because they caused the delay
in the payment of the just compensation due them; they erroneously filed
their complaints with the DARAB when they should have directly filed
these with the RTC acting as an agrarian court. Furthermore, the Court
found it significant that the LBP deposited the pertinent amounts in the
petitioners’ favor within fourteen months after the petitions were filed with
the RTC. Under these circumstances, the Court found no unreasonable
delay on the part of LBP to warrant the award of 12% interest.
The Chico-Nazario Dissent
Justice Minita V. Chico-Nazario,2 the ponente of the original December 19,
2007 Resolution (deleting the 12% interest), dissented from the Court En
Banc’s December 4, 2009 Resolution.
On the issue of immutability of judgment, Justice Chico-Nazario pointed
out that under extraordinary circumstances, this Court has recalled
entries of judgment on the ground of substantial justice. Given the special
circumstances involved in the present case, the Court En Banc should
have taken a second hard look at the petitioners’ positions in their second
motion for reconsideration, and acted to correct the clearly erroneous
December 19, 2007 Resolution.
Specifically, Justice Chico-Nazario emphasized the obligation of the State,
in the exercise of its inherent power of eminent domain, to pay just
compensation to the owner of the expropriated property. To be just, the
compensation must not only be the correct amount to be paid; it must also
be paid within a reasonable time from the time the land is taken from the
owner. If not, the State must pay the landowner interest, by way of
damages, from the time the property was taken until just compensation is
fully paid. This interest, deemed a part of just compensation due, has been
established by prevailing jurisprudence to be 12% per annum.
On these premises, Justice Nazario pointed out that the government
deprived the petitioners of their property on December 9, 1996, and paid
the balance of the just compensation due them only on May 9, 2008. The
delay of almost twelve years earned the petitioners interest in the total
amount of ₱1,331,124,223.05.
Despite this finding, Justice Chico-Nazario did not see it fit to declare the
computed interest to be totally due; she found it unconscionable to apply
the full force of the law on the LBP because of the magnitude of the
amount due. She thus reduced the awarded interest to ₱400,000,000.00,
or approximately 30% of the computed interest.
The Present Motion for Reconsideration
In their motion to reconsider the Court En Banc’s December 4, 2009
Resolution (the present Motion for Reconsideration), the petitioners
principally argue that: (a) the principle of immutability of judgment does
not apply since the Entry of Judgment was issued even before the lapse of
fifteen days from the parties’ receipt of the April 30, 2008 Resolution and
the petitioners timely filed their second motion for reconsideration within
fifteen days from their receipt of this resolution; (b) the April 30, 2008
Resolution cannot be considered immutable considering the special and
compelling circumstances attendant to the present case which fall within
the exceptions to the principle of immutability of judgments; (c) the legal
interest due is at 12% per annum, reckoned from the time of the taking of
the subject properties and this rate is not subject to reduction. The power
of the courts to equitably reduce interest rates applies solely to liquidated
damages under a contract and not to interest set by the Honorable Court
itself as due and owing in just compensation cases; and (d) the Honorable
Court’s fears that the interest payments due to the petitioners will produce
more harm than good to the system of agrarian reform are misplaced and
are based merely on conjectures.
The Comment of the Land Bank of the Philippines
The LBP commented on the petitioners’ motion for reconsideration on April
28, 2010. It maintained that: (a) the doctrine of immutability of the
decisions of the Supreme Court clearly applies to the present case; (b) the
LBP is not guilty of undue delay in the payment of just compensation as
the petitioners were promptly paid once the Court had determined the final
value of the properties expropriated; (c) the Supreme Court rulings invoked
by the petitioners are inapplicable to the present case; (d) since the
obligation to pay just compensation is not a forbearance of money, interest
should commence only after the amount due becomes ascertainable or
liquidated, and the 12% interest per annum applies only to the liquidated
amount, from the date of finality of judgment; (e) the imposition of 12%
interest on the balance of P971,409,831.68 is unwarranted because there
was no unjustified refusal by LBP to pay just compensation, and no
contractual breach is involved; (f) the deletion of the attorney’s fees
equivalent to 10% of the amount finally awarded as just compensation is
proper; (g) this case does not involve a violation of substantial justice to
justify the alteration of the immutable resolution dated December 19, 2007
that deleted the award of interest and attorney’s fees.
The Court’s Ruling
We find the petitioners’ arguments meritorious and accordingly GRANT
the present motion for reconsideration.
Just compensation – a Basic Limitation on the State’s
Power of Eminent Domain
At the heart of the present controversy is the Third Division’s 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 Resolution’s 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 ₱411,769,168.32. 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 State’s 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 State’s 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 ₱251,379,104.02,11 the RTC, acting as a special
agrarian court, determined the actual value of the petitioners’ landholdings
to be ₱1,383,179,000.00. 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 ₱1,131,799,897.00 – 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 ₱71,891,256.62 into the
petitioners’ accounts (₱26,409,549.86 for AFC and ₱45,481,706.76 for
HPI) at the time the landholdings were taken, these amounts were mere
partial payments that only amounted to 5% of the ₱1,383,179,000.00
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 LBP’s actual deposit could not be said to be
substantial even from the original LBP valuation of ₱251,379,103.90.
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 Court’s previous
ruling in National Power Corporation v. Angas16 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
Court’s 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.]1avvphi1
We subsequently upheld Republic’s 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 LBP’s 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 loss25 since what is involved is
the takeover of private property under the State’s 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 owner’s 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 LBP’s
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 ₱411,769,168.32 (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
government’s land reform program; they themselves submitted their
Voluntary Offer to Sell applications to the DAR, and they fully cooperated
with the government’s 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 DAR’s 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 government’s 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 Court’s 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 farmer-beneficiaries, 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 LBP’s 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 LBP’s arguments on the applicability of cases imposing 12% interest
The LBP claims in its Comment that our rulings in Republic v. Court of
Appeals,26 Reyes v. National Housing Authority, 27 and Land Bank of the
Philippines v. Imperial,28 cannot be applied to the present case.
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 Republic involved 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 Court’s 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 LBP’s 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 country’s 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
government’s 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. LBP’s point of
distinction is that just compensation was immediately paid in the present
case upon the Court’s 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 LBP’s 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 NHA’s 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 Court’s deliberations on the
present case, we feel it appropriate to discuss the Justice Minita Chico-
Nazario’s dissent from the Court’s 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 ₱1,331,124,223.05 to ₱400,000,000.00. 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 colleague’s 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 HPI’s 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 LBP’s 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 government’s 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
₱1,383,179,000.00) and the amount of ₱411,769,168.32 already paid to
the petitioners. The difference between these figures amounts to the
remaining balance of ₱971,409,831.68 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 (₱1,331,124,223.05), computed as follows:
Just Compensation ₱971,409,831.68
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
₱1,331,124,223.0535
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,37 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. Romillo42 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:
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 all-important 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.]
55
We made the same recognition in Barnes,  on the underlying premise
that a court’s 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 duty-bound 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.
Attorney’s Fees
We are fully aware that the RTC has awarded the petitioners attorney’s
fees when it fixed the just compensation due and decreed that interest of
12% should be paid on the balance outstanding after the taking of the
petitioners’ landholdings took place. The petitioners, however, have not
raised the award of attorney’s fees as an issue in the present motion for
reconsideration. For this reason, we shall not touch on this issue at all in
this Resolution.
WHEREFORE, premises considered, we GRANT the petitioners’ motion
for reconsideration. The Court En Banc’s Resolution dated December 4,
2009, as well as the Third Division’s Resolutions dated April 30, 2008 and
December 19, 2007, are hereby REVERSED and SET ASIDE.
The respondent Land Bank of the Philippines is hereby ORDERED to pay
petitioners Apo Fruits Corporation and Hijo Plantation, Inc. interest at the
rate of 12% per annum on the unpaid balance of the just compensation,
computed from the date the Government took the properties on December
9, 1996, until the respondent Land Bank of the Philippines paid on May 9,
2008 the balance on the principal amount.
Unless the parties agree to a shorter payment period, payment shall be in
monthly installments at the rate of ₱60,000,000.00 per month until the
whole amount owing, including interest on the outstanding balance, is
fully paid.
Costs against the respondent Land Bank of the Philippines.
SO ORDERED.
ARTURO D. BRION
Associate Justice