EN BANC
[ G.R. No. 164195, October 12, 2010 ]APO FRUITS CORPORATION v. LAND BANK OF PHILIPPINES +
APO FRUITS CORPORATION AND HIJO PLANTATION, INC., PETITIONERS, VS. LAND BANK OF THE PHILIPPINES, RESPONDENT.
R E S O L U T I O N
APO FRUITS CORPORATION v. LAND BANK OF PHILIPPINES +
APO FRUITS CORPORATION AND HIJO PLANTATION, INC., PETITIONERS, VS. LAND BANK OF THE PHILIPPINES, RESPONDENT.
R E S O L U T I O N
BRION, J.:
We resolve the petitioners' motion for reconsideration addressing our Resolution of December 4, 2009 whose dispositive portion directs:
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 P165,484.47 per hectare, AFC's land was valued at P86,900,925.88, while HPI's property was valued at P164,478,178.14. 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 P26,409,549.86 in AFC's bank account and P45,481,706.76 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.
On February 14, 1997, AFC and HPI filed separate petitions for 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 P1,383,179,000.00, 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 P149.6 million, while HPI had already collected approximately P262 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 P1,331,124,223.05.
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 P400,000,000.00, 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 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 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:
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 LBP's 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:
Aside from this ruling, Republic notably overturned the Court's 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 Court's own words:
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 loss[25] 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 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 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:
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 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 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 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:
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:
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]
Similarly, in de Guzman v. Sandiganbayan,[53] we had occasion to state:
We made the same recognition in Barnes,[55] 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 P60,000,000.00 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.
Carpio Morales, Velasco, Jr., Del Castillo, Villarama, Jr., Perez, Mendoza, and Sereno, JJ., concur.
Carpio and Abad, JJ., on wellness leave.
Corona, C.J., and Nachura, JJ., joins the dissent of J. Bersamin.
Leonardo-De Castro, J., maintain my vote in the December 4, 2009 Resolution.
Bersamin, J., I dissent.
Peralta, J., on leave.
[1] While the petitioners owned a total of 1,454.8791 hectares based on the landholdings stated in this Court's February 6, 2007 Decision, the RTC, in its decision, fixed just compensation for 1,388.6027 hectares of land.
[2] Retired from the Court on December 5, 2009.
[3] See Masikip v. City of Pasig, G.R. No. 136349, January 23, 2006, 479 SCRA 391, citing Visayan Refining Co. v. Camus, 40 Phil. 550, 558-559 (1919).
[4] See Manapat v. Court of Appeals, G.R. Nos. 110478, 116176 and 116491-503, October 15, 2007, 536 SCRA 32.
[5] See Heirs of Alberto Saguitan v. City of Mandaluyong, G.R. No. 135087, March 14, 2000, 328 SCRA 137.
[6] Id., citing City of Manila v. Chinese Community of Manila, 40 Phil. 349 (1919).
[7] The authority to exercise the power of eminent domain was expressly conferred to the Philippine Government through Section 63 of the Philippine Bill of 1902, which states:
Section 74 of the same law, which deals with the authority of the Philippine Government to grant franchises and concessions, provides:
More specifically, Section 3 of the Jones Act (of 1916) provides that "[p]rivate property shall not be taken for public use without just compensation."
See Visayan Refining Co. v. Camus, supra note 3.
[8] We derived the concept of "just compensation" from the last clause of the Fifth Amendment to the United States Constitution, which reads: "No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation."
The Fifth Amendment does not prohibit the government from taking its citizens' property; rather, it merely prohibits the government from taking property without paying just compensation. (26 Am. Jur. 2d Eminent Domain § 3, citing Diamond Bar Cattle Co. v. U.S., 168 F.3d 1209 [10th Cir. 1999].) It is designed to secure compensation, not to limit governmental interference with property rights. (Id., citing Preseault v. I.C.C., 494 U.S. 1, 110 S. Ct. 914, 108 L. Ed. 2d 1 [1990].) It prevents the legislature (and other government actors) from depriving private persons of vested property rights except for a "public use" and upon payment of "just compensation." (Id., citing Landgraf v. USI Film Products, 511 U.S. 244, 114 S. Ct. 1522, 128 L. Ed. 2d 229 [1994].)
[9] G.R. No. 157206, June 27, 2008, 556 SCRA 102, 116-117.
[10] Id.
[11] P86,900,925.88 for the land of AFC and P164,478,178.14 for HPI.
[12] Land Bank v. Rodriguez, G.R. No. 148892, May 6, 2010.
[13] Land Bank of the Philippines v. Orilla, supra note 9, at 117.
[14] G.R. No. 146587, July 2, 2002, 383 SCRA 611.
[15] Id. at 622-623.
[16] G. R. Nos. 60225-26, May 8, 1992, 208 SCRA 542.
[17] In Eastern Shipping Lines, Inc. v. Court of Appeals (G.R. No. 97412, July 12, 1994, 234 SCRA 78), we said:
[18] Supra note 12.
[19] G.R. No. 147511, January 20, 2003, 395 SCRA 494.
[20] G.R. No. 140160, January 13, 2004, 419 SCRA 67.
[21] G.R. No. 147245, March 31, 2005, 454 SCRA 516.
[22] G.R. No. 157753, February 12, 2007, 515 SCRA 449.
[23] G.R. No. 173392, August 24, 2007, 531 SCRA 198.
[24] G.R. No. 154211-12, June 22, 2009, 590 SCRA 214.
[25] Province of Tayabas v. Perez, 66 Phil. 467; J.M. Tuazon & Co., Inc. v. Land Tenure Administration, No. L-21064, February 18, 1970, 31 SCRA 413; Municipality of Daet v. Court of Appeals, No. L-35861, October 18, 1979, 93 SCRA 503; Manotok v. National Housing Authority, No. L-55166, May 21, 1987, 150 SCRA 89.
[26] Supra note 14.
[27] Supra note 19.
[28] Supra note 22.
[29] Supra note 14.
[30] Decreeing the Emancipation of Tenants from the Bondage of the Soil, Transferring to Them the Ownership of the Land They Till and Providing the Instruments and Mechanisms Therefor.
[31] Rules and Regulations Governing the Grant of Increment of Six Percent (6%) Yearly Interest Compounded Annually on Lands Covered by Presidential Decree No. 27 and Executive Order No. 228 (Effective October 21, 1994). Amended by DAR AO No. 02, series of 2004 (Issued on November 4, 2004).
[32] Article 1229 states: "The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor."
[33] Republic v. Juan, G.R. No. L-24740, July 30, 1979, 92 SCRA 26; citing 30 CJS 230.
[34] See Parent-Teachers' Association of St. Mathew Christian Academy v. Metropolitan Bank and Trust Co., G.R. No. 176518, March 2, 2010, citing Tirazona v. Philippine EDS Techno-Service, Inc. (PET, Inc.), G.R. No. 169712, January 20, 2009, 576 SCRA 625, 626.
[35] Rollo, p. 1337.
[36] Equitable Banking Corp. v. Sadac, G.R. No. 164772, June 8, 2006, 490 SCRA 380, 416-417.
[37] G.R. No. 82467, June 29, 1989, 174 SCRA 510.
[38] G.R. No. L-72670, September 12, 1986, 144 SCRA 43.
[39] G.R. No. L-63318, August 18, 1984, 131 SCRA 200.
[40] G.R. No. L-26112, October 4, 1971, 41 SCRA 422.
[41] G.R. No. L-58011, November 18, 1983, 125 SCRA 577.
[42] G.R No. L-64276, August 12, 1986, 143 SCRA 396.
[43] G.R. No. L-18452, May 20, 1966, 17 SCRA 207.
[44] G.R. No. 125451, January 20, 2000, 322 SCRA 741.
[45] 434 Phil. 753 (2002).
[46] G.R. No. 162335, December 18, 2008, 574 SCRA 468.
[47] 482 Phil. 903 (2004).
[48] Id. at 915.
[49] Oral arguments at the Supreme Court, Hacienda Luisita case, G.R. No. 171101, August 26, 2010.
[50] Gregorio v. Court of Appeals, G.R. No. L-43511, July 28, 1976, 72 SCRA 121; Mc Entee v. Manotoc, G.R. No. L-14968, October 27, 1961, 3 SCRA 279; Lim Tanhu v. Ramolete, G.R. No. L-40098, August 29, 1975, 66 SCRA 441.
[51] G.R. No. 127596, September 24, 1998, 292 SCRA 38.
[52] Id. at 51-52.
[53] 326 Phil. 182 (1996).
[54] Id. at 191.
[55] Supra note 47.
D I S S E N T
BERSAMIN, J.:
By their motion for reconsideration, the petitioners seek the review and setting aside of the resolution dated December 4, 2009,[1] whereby the Court disposed as follows:
The petitioners contend that the doctrine of immutability of judgment does not apply because of the several special and compelling considerations exempting them from the application of the doctrine, namely: (a) that they suffered substantial injustice from the patently unjust denial of interest; (b) that their case, being impressed with public interest, had transcendental importance; and (c) that the fact that the Court en banc had accepted the referral by the Third Division indicated that the case deserved another review. They insist that the legal interest due on the just compensation paid to them should be 12% per annum, a rate that was not subject to reduction.
The majority vote to grant the motion for reconsideration. Alas, I cannot join the majority.
I dissent.
The resolution dated December 19, 2007 promulgated by the Third Division (deleting the award of interest of 12% per annum on the just compensation and the award of attorney's fees) already attained finality. Entry of judgment was in fact issued on May 16, 2008.
In order to accord with the doctrine of immutability of judgment, the resolution dated December 4, 2009 rejected the petitioners' second motion for reconsideration (with respect to the denial of the award of legal interest and attorney's fees), pointing out that granting the motion would render nugatory the time-honored doctrine of immutability; that none of the recognized exceptions to the doctrine of immutability applied to the petitioners; that even if the reopening of the final judgment was allowed, the petitioners were still not entitled to recover interest on the just compensation because there had been no delay in paying their just compensation; and that granting the motion would produce more harm than good, considering that such reopening of a final judgment would surely open the floodgates to petitions for the resurrection of litigations long ago settled.
I concede that the immutability doctrine admits several exceptions, such as: (a) the correction of clerical errors; (b) the nunc pro tunc entries that cause no prejudice to any party; (c) void judgments; and (d) whenever circumstances transpire after the finality of the decision rendering its execution unjust and inequitable. Yet, my review of the arguments raised in the petitioners' motion for reconsideration discloses no compelling reason to deviate from the holding that none of the exceptions applies herein. Consequently, I urge that we should continue to hold that the matters involved herein were different from any of those involved in the exceptions. I do not think that the petitioners established the existence of any of the special and compelling considerations that supposedly exempted this case from the application of the immutability doctrine.
Neither was it unjust to deny interest to the petitioners, who were not entitled to interest in the face of the showing that Land Bank of the Philippines (LBP) had not unduly delayed paying their just compensation.
In this regard, I consider worth reiterating the following relevant portions of the questioned resolution of December 4, 2009, to wit:
As far as I am concerned, nothing in the motion for reconsideration effectively refutes the aforequoted ratiocination rendered in the resolution of December 4, 2009. With LBP not being guilty of delay in paying to the petitioners their just compensation, any plea of suffering substantial injustice from the denial of interest should be justifiably rejected.
Lastly, I cannot bring myself to agree that this case is impressed at all with public interest, involving as it does only a "private claim for interest and attorney's fees which cannot even be classified as unprecedented," which "does not qualify either as a substantial or transcendental matter, or as an issue of paramount public interest for no special or compelling circumstance was present to warrant the relaxation of the doctrine of immutability in favor of the petitioners."[3]
ACCORDINGLY, I vote to deny the petitioners' motion for reconsideration and to uphold the resolution dated December 4, 2009.
[1] Rollo, pp. 1428-1448.
[2] Id., pp. 1440-1446; all underscorings are part of the original text.
[3] Id., p. 1439
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.
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 P165,484.47 per hectare, AFC's land was valued at P86,900,925.88, while HPI's property was valued at P164,478,178.14. 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 P26,409,549.86 in AFC's bank account and P45,481,706.76 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.
On February 14, 1997, AFC and HPI filed separate petitions for 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 P1,383,179,000.00, 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 P149.6 million, while HPI had already collected approximately P262 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.
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.
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 P1,331,124,223.05.
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 P400,000,000.00, or approximately 30% of the computed interest.
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 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.
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 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 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 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 LBP's 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 Court's 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 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.]
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 loss[25] 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 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 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 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 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 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]
|
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 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 P60,000,000.00 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.
Carpio Morales, Velasco, Jr., Del Castillo, Villarama, Jr., Perez, Mendoza, and Sereno, JJ., concur.
Carpio and Abad, JJ., on wellness leave.
Corona, C.J., and Nachura, JJ., joins the dissent of J. Bersamin.
Leonardo-De Castro, J., maintain my vote in the December 4, 2009 Resolution.
Bersamin, J., I dissent.
Peralta, J., on leave.
[1] While the petitioners owned a total of 1,454.8791 hectares based on the landholdings stated in this Court's February 6, 2007 Decision, the RTC, in its decision, fixed just compensation for 1,388.6027 hectares of land.
[2] Retired from the Court on December 5, 2009.
[3] See Masikip v. City of Pasig, G.R. No. 136349, January 23, 2006, 479 SCRA 391, citing Visayan Refining Co. v. Camus, 40 Phil. 550, 558-559 (1919).
[4] See Manapat v. Court of Appeals, G.R. Nos. 110478, 116176 and 116491-503, October 15, 2007, 536 SCRA 32.
[5] See Heirs of Alberto Saguitan v. City of Mandaluyong, G.R. No. 135087, March 14, 2000, 328 SCRA 137.
[6] Id., citing City of Manila v. Chinese Community of Manila, 40 Phil. 349 (1919).
[7] The authority to exercise the power of eminent domain was expressly conferred to the Philippine Government through Section 63 of the Philippine Bill of 1902, which states:
That the Government of the Philippine Islands is hereby authorized, subject to the limitations and conditions prescribed in this Act, to acquire, require, hold, maintain, and convey title to real and personal property, and may acquire real estate for public uses by the exercise of the right of eminent domain. (Act of Congress of July 1, 1902.)
Section 74 of the same law, which deals with the authority of the Philippine Government to grant franchises and concessions, provides:
That the Government of the Philippine Islands may grant franchises, privileges, and concessions, including the authority to exercise the right of eminent domain for the construction and operation of works of public utility and service x x x: Provided, That no private property shall be taken for any purpose under this section without just compensation paid or tendered therefor x x x.
More specifically, Section 3 of the Jones Act (of 1916) provides that "[p]rivate property shall not be taken for public use without just compensation."
See Visayan Refining Co. v. Camus, supra note 3.
[8] We derived the concept of "just compensation" from the last clause of the Fifth Amendment to the United States Constitution, which reads: "No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation."
The Fifth Amendment does not prohibit the government from taking its citizens' property; rather, it merely prohibits the government from taking property without paying just compensation. (26 Am. Jur. 2d Eminent Domain § 3, citing Diamond Bar Cattle Co. v. U.S., 168 F.3d 1209 [10th Cir. 1999].) It is designed to secure compensation, not to limit governmental interference with property rights. (Id., citing Preseault v. I.C.C., 494 U.S. 1, 110 S. Ct. 914, 108 L. Ed. 2d 1 [1990].) It prevents the legislature (and other government actors) from depriving private persons of vested property rights except for a "public use" and upon payment of "just compensation." (Id., citing Landgraf v. USI Film Products, 511 U.S. 244, 114 S. Ct. 1522, 128 L. Ed. 2d 229 [1994].)
[9] G.R. No. 157206, June 27, 2008, 556 SCRA 102, 116-117.
[10] Id.
[11] P86,900,925.88 for the land of AFC and P164,478,178.14 for HPI.
[12] Land Bank v. Rodriguez, G.R. No. 148892, May 6, 2010.
[13] Land Bank of the Philippines v. Orilla, supra note 9, at 117.
[14] G.R. No. 146587, July 2, 2002, 383 SCRA 611.
[15] Id. at 622-623.
[16] G. R. Nos. 60225-26, May 8, 1992, 208 SCRA 542.
[17] In Eastern Shipping Lines, Inc. v. Court of Appeals (G.R. No. 97412, July 12, 1994, 234 SCRA 78), we said:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum.No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.
[18] Supra note 12.
[19] G.R. No. 147511, January 20, 2003, 395 SCRA 494.
[20] G.R. No. 140160, January 13, 2004, 419 SCRA 67.
[21] G.R. No. 147245, March 31, 2005, 454 SCRA 516.
[22] G.R. No. 157753, February 12, 2007, 515 SCRA 449.
[23] G.R. No. 173392, August 24, 2007, 531 SCRA 198.
[24] G.R. No. 154211-12, June 22, 2009, 590 SCRA 214.
[25] Province of Tayabas v. Perez, 66 Phil. 467; J.M. Tuazon & Co., Inc. v. Land Tenure Administration, No. L-21064, February 18, 1970, 31 SCRA 413; Municipality of Daet v. Court of Appeals, No. L-35861, October 18, 1979, 93 SCRA 503; Manotok v. National Housing Authority, No. L-55166, May 21, 1987, 150 SCRA 89.
[26] Supra note 14.
[27] Supra note 19.
[28] Supra note 22.
[29] Supra note 14.
[30] Decreeing the Emancipation of Tenants from the Bondage of the Soil, Transferring to Them the Ownership of the Land They Till and Providing the Instruments and Mechanisms Therefor.
[31] Rules and Regulations Governing the Grant of Increment of Six Percent (6%) Yearly Interest Compounded Annually on Lands Covered by Presidential Decree No. 27 and Executive Order No. 228 (Effective October 21, 1994). Amended by DAR AO No. 02, series of 2004 (Issued on November 4, 2004).
[32] Article 1229 states: "The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor."
[33] Republic v. Juan, G.R. No. L-24740, July 30, 1979, 92 SCRA 26; citing 30 CJS 230.
[34] See Parent-Teachers' Association of St. Mathew Christian Academy v. Metropolitan Bank and Trust Co., G.R. No. 176518, March 2, 2010, citing Tirazona v. Philippine EDS Techno-Service, Inc. (PET, Inc.), G.R. No. 169712, January 20, 2009, 576 SCRA 625, 626.
[35] Rollo, p. 1337.
[36] Equitable Banking Corp. v. Sadac, G.R. No. 164772, June 8, 2006, 490 SCRA 380, 416-417.
[37] G.R. No. 82467, June 29, 1989, 174 SCRA 510.
[38] G.R. No. L-72670, September 12, 1986, 144 SCRA 43.
[39] G.R. No. L-63318, August 18, 1984, 131 SCRA 200.
[40] G.R. No. L-26112, October 4, 1971, 41 SCRA 422.
[41] G.R. No. L-58011, November 18, 1983, 125 SCRA 577.
[42] G.R No. L-64276, August 12, 1986, 143 SCRA 396.
[43] G.R. No. L-18452, May 20, 1966, 17 SCRA 207.
[44] G.R. No. 125451, January 20, 2000, 322 SCRA 741.
[45] 434 Phil. 753 (2002).
[46] G.R. No. 162335, December 18, 2008, 574 SCRA 468.
[47] 482 Phil. 903 (2004).
[48] Id. at 915.
[49] Oral arguments at the Supreme Court, Hacienda Luisita case, G.R. No. 171101, August 26, 2010.
[50] Gregorio v. Court of Appeals, G.R. No. L-43511, July 28, 1976, 72 SCRA 121; Mc Entee v. Manotoc, G.R. No. L-14968, October 27, 1961, 3 SCRA 279; Lim Tanhu v. Ramolete, G.R. No. L-40098, August 29, 1975, 66 SCRA 441.
[51] G.R. No. 127596, September 24, 1998, 292 SCRA 38.
[52] Id. at 51-52.
[53] 326 Phil. 182 (1996).
[54] Id. at 191.
[55] Supra note 47.
BERSAMIN, J.:
By their motion for reconsideration, the petitioners seek the review and setting aside of the resolution dated December 4, 2009,[1] whereby the Court disposed as follows:
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.
SO ORDERED.
The petitioners contend that the doctrine of immutability of judgment does not apply because of the several special and compelling considerations exempting them from the application of the doctrine, namely: (a) that they suffered substantial injustice from the patently unjust denial of interest; (b) that their case, being impressed with public interest, had transcendental importance; and (c) that the fact that the Court en banc had accepted the referral by the Third Division indicated that the case deserved another review. They insist that the legal interest due on the just compensation paid to them should be 12% per annum, a rate that was not subject to reduction.
The majority vote to grant the motion for reconsideration. Alas, I cannot join the majority.
I dissent.
The resolution dated December 19, 2007 promulgated by the Third Division (deleting the award of interest of 12% per annum on the just compensation and the award of attorney's fees) already attained finality. Entry of judgment was in fact issued on May 16, 2008.
In order to accord with the doctrine of immutability of judgment, the resolution dated December 4, 2009 rejected the petitioners' second motion for reconsideration (with respect to the denial of the award of legal interest and attorney's fees), pointing out that granting the motion would render nugatory the time-honored doctrine of immutability; that none of the recognized exceptions to the doctrine of immutability applied to the petitioners; that even if the reopening of the final judgment was allowed, the petitioners were still not entitled to recover interest on the just compensation because there had been no delay in paying their just compensation; and that granting the motion would produce more harm than good, considering that such reopening of a final judgment would surely open the floodgates to petitions for the resurrection of litigations long ago settled.
I concede that the immutability doctrine admits several exceptions, such as: (a) the correction of clerical errors; (b) the nunc pro tunc entries that cause no prejudice to any party; (c) void judgments; and (d) whenever circumstances transpire after the finality of the decision rendering its execution unjust and inequitable. Yet, my review of the arguments raised in the petitioners' motion for reconsideration discloses no compelling reason to deviate from the holding that none of the exceptions applies herein. Consequently, I urge that we should continue to hold that the matters involved herein were different from any of those involved in the exceptions. I do not think that the petitioners established the existence of any of the special and compelling considerations that supposedly exempted this case from the application of the immutability doctrine.
Neither was it unjust to deny interest to the petitioners, who were not entitled to interest in the face of the showing that Land Bank of the Philippines (LBP) had not unduly delayed paying their just compensation.
In this regard, I consider worth reiterating the following relevant portions of the questioned resolution of December 4, 2009, to wit:
No Interest is Due Unless There is Delay
In Payment of Just Compensation
Even assuming, for the sake of argument, that the Court allows the reopening of a final judgment, AFC and HPI are still not entitled to recover interest on the just compensation and attorney's fees.
xxx xxx xxx
In Land Bank of the Philippines v. Wycoco, however, the Court came to explicitly rule that interest is to be imposed on the just compensation only in case of delay in its payment, which fact must be sufficiently established. Significantly, Wycoco was moored on Article 2209, Civil Code, which provides:
Article 2209. If the obligation consists in the payment of money and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum. (1108)
The history of this case proves that Land Bank did not incur delay in the payment of the just compensation. As earlier mentioned, after the petitioners voluntarily offered to sell their lands on October 12, 1995, DAR referred their VOS applications to Land Bank for initial valuation. Land Bank initially fixed the just compensation at P165,484.47/hectare, that is, P86,900,925.88, for AFC, and P164,478,178.14, for HPI. However, both petitioners rejected Land Bank's initial valuation, prompting Land Bank to open deposit accounts in the petitioners' names, and to credit in said accounts the amounts equivalent to their valuations. Although AFC withdrew the amount of P26,409,549.86, while HPI withdrew P45,481,706.76, they still filed with DARAB separate complaints for determination of just compensation. When DARAB did not act upon their complaints for more than three years, AFC and HPI commenced their respective actions for determination of just compensation in the Tagum City RTC, which rendered its decision on September 25, 2001.
It is true that Land Bank sought to appeal the RTC's decision to the CA, by filing a notice of appeal; and that Land Bank filed in March 2003 its petition for certiorari in the CA only because the RTC did not give due course to its appeal. Any intervening delay thereby entailed could not be attributed to Land Bank, however, considering that assailing an erroneous order before a higher court is a remedy afforded by law to every losing party, who cannot thus be considered to act in bad faith or in an unreasonable manner as to make such party guilty of unjustified delay. As stated in Land Bank of the Philippines v. Kumassie Plantation:
The mere fact that LBP appealed the decisions of the RTC and the Court of Appeals does not mean that it deliberately delayed the payment of just compensation to KPCI. x x x It may disagree with DAR and the landowner as to the amount of just compensation to be paid to the latter and may also disagree with them and bring the matter to court for judicial determination. This makes LBP an indispensable party in cases involving just compensation for lands taken under the Agrarian Reform Program, with a right to appeal decisions in such cases that are unfavorable to it. Having only exercised its right to appeal in this case, LBP cannot be penalized by making it pay for interest.The Third Division justified its deletion of the award of interest thuswise:
AFC and HPI now blame LBP for allegedly incurring delay in the determination and payment of just compensation. However, the same is without basis as AFC and HPI's proper recourse after rejecting the initial valuations of respondent LBP was to bring the matter to the RTC acting as a SAC, and not to file two complaints for determination of just compensation with the DAR, which was just circuitous as it had already determined the just compensation of the subject properties taken with the aid of LBP.The foregoing justification remains correct, and is reiterated herein.[2]
In Land Bank of the Philippines v. Wycoco, citing Reyes v. National Housing Authority and Republic v. Court of Appeals, this Court held that the interest of 12% per annum on the just compensation is due the landowner in case of delay in payment, which will in effect make the obligation on the part of the government one of forbearance. On the other hand, interest in the form of damages cannot be applied, where there was prompt and valid payment of just compensation. Thus:
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, it being 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 interests 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 interests 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.It is explicit from LBP v. Wycoco that interest on the just compensation is imposed only in case of delay in the payment thereof which must be sufficiently established. Given the foregoing, we find that the imposition of interest on the award of just compensation is not justified and should therefore be deleted.
xxx 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. Article 1250 of the Civil Code, providing that, in case of extraordinary inflation or deflation, the value of the currency at the time of the establishment of the obligation shall be the basis for the payment when no agreement to the contrary is stipulated, has strict application only to contractual obligations. In other words, a contractual agreement is needed for the effects of extraordinary inflation to be taken into account to alter the value of the currency.
It must be emphasized that "pertinent amounts were deposited in favor of AFC and HPI within fourteen months after the filing by the latter of the Complaint for determination of just compensation before the RTC". It is likewise true that AFC and HPI already collected P149.6 and P262 million, respectively, representing just compensation for the subject properties. Clearly, there is no unreasonable delay in the payment of just compensation which should warrant the award of 12% interest per annum in AFC and HPI's favor.
As far as I am concerned, nothing in the motion for reconsideration effectively refutes the aforequoted ratiocination rendered in the resolution of December 4, 2009. With LBP not being guilty of delay in paying to the petitioners their just compensation, any plea of suffering substantial injustice from the denial of interest should be justifiably rejected.
Lastly, I cannot bring myself to agree that this case is impressed at all with public interest, involving as it does only a "private claim for interest and attorney's fees which cannot even be classified as unprecedented," which "does not qualify either as a substantial or transcendental matter, or as an issue of paramount public interest for no special or compelling circumstance was present to warrant the relaxation of the doctrine of immutability in favor of the petitioners."[3]
ACCORDINGLY, I vote to deny the petitioners' motion for reconsideration and to uphold the resolution dated December 4, 2009.
[1] Rollo, pp. 1428-1448.
[2] Id., pp. 1440-1446; all underscorings are part of the original text.
[3] Id., p. 1439