#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,[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. 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: 
 
 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.
x x x x
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 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. 

***** (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 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
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,[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 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]