The Case
Before the Court is a Motion for Reconsideration^[1] filed by the Land Bank of the Philippines (LBP) alleging error on the part of this Court in affirming the award of 12% interest on just compensation due to the landowner.

The Facts
We reiterate the facts from the assailed 17 November 2010 Decision:

The respondents are the co-owners of a parcel of agricultural land embraced by Original Certificate of Title No. P-082, and later transferred in their names under Transfer Certificate of Title No. T-95690 that was placed under the Operation Land Transfer pursuant to Presidential Decree No. 27 in 1972.  Only 18.8704 hectares of the total area of 20.5254 hectares were subject of the coverage.

After the Department of Agrarian Reform (DAR) directed payment, LBP approved the payment of P265,494.20, exclusive of the advance payments made in the form of lease rental amounting to P75,415.88 but inclusive of 6% increment of P191,876.99 pursuant to DAR Administrative Order No. 13, series of 1994.

On 1 December 1994, the respondents instituted Civil Case No. 94-03 for determination and payment of just compensation before the Regional Trial Court (RTC), Branch 3 of Legaspi City, claiming that the landholding involved was irrigated with two cropping seasons a year with an average gross production per season of 100 cavans of 50 kilos/hectare, equivalent of 200 cavans/year/hectare; and that the fair market value of the property was not less than P130,000.00/hectare, or P2,668,302.00 for the entire landholding of 20.5254 hectares.

LBP filed its Answer, stating that rice and corn lands placed under the coverage of Presidential Decree No. 27 [PD 27]^[2] were governed and valued in accordance with the provisions of Executive Order No. 228 [EO 228]^[3]  as implemented by DAR Administrative Order No. 2, Series of 1987 and other statutes and administrative issuances; that the administrative valuation of lands covered by [PD 27] and [EO 228] rested solely in DAR and LBP was the only financing arm; that the funds that LBP would use to pay compensation were public funds to be disbursed only in accordance with existing laws and regulations; that the supporting documents were not yet received by LBP; and that the constitutionality of [PD 27] and [EO 228] was already settled.^[4]

The Trial Court's Ruling

On 6 October 2004, the trial court rendered its decision which reads:

ACCORDINGLY, the just compensation of the land partly covered by TCT No. T-95690 is fixed at Php1,297,710. 63.  Land Bank of the Philippines is hereby ordered to pay Esther Anson, Cesar Anson and Antonio Anson the aforesaid value of the land, plus interest of 12% per annum or Php194.36 per day effective October 7, 2004, until the value is fully paid, in cash or in bond or in any other mode of payment at the option of the landowners in accordance with Sec. 18, R.A. 6657.^[5]

Discontented, LBP filed an appeal before the Court of Appeals (CA). It argued that the trial court erred in disregarding the lease rentals already paid by the farmer beneficiaries as part of the just compensation as well as the imposition of 12% interest despite the increment of 6% interest allowed under the EO 228 and DAR Administrative Order (A.O.) No. 13 Series of 1994 (A.O. 13-94).

The Court of Appeals' Ruling
The appellate court partly granted the petition of the LBP, the fallo of the decision reading:

WHEREFORE, the DECISION DATED OCTOBER 6, 2004 is MODIFIED, ordering petitioner LAND BANK OF THE PHILIPPINES to pay to the respondents just compensation (inclusive of interests as of October 6, 2004) in the amount of P823, 957.23, plus interest of 12% per annum in the amount of P515, 777.57 or P61, 893.30 per annum, beginning October 7, 2004 until just compensation is fully paid in accordance with this decision.

Costs of suit to be paid by the petitioner.^[6]

In its petition^[7] before this Court, LBP alleged error in the imposition of 12% interest per annum beginning from 7 October 2004 until full payment of just compensation for subject property and the liability of the bank for costs of suit.

17 November 2010 Decision
In its argument, LBP cited the applicability of the DAR A.O. No. 2, Series of 2004 (A.O. 02-04) which provides for the 6% interest imposition to the just compensation until actual payment.  Further, it added that the 12% interest finds application in cases of undue delay, which is not present in the case. As to the payment of costs, the bank argued that it was performing a governmental function when it disbursed the Agrarian Reform Fund (ARF) as the financial intermediary of the agrarian program of the government.

In our 17 November 2010 Decision, this Court partly granted the prayers of LBP and deleted the costs adjudged.  We agreed that the bank was indeed performing a governmental function in agrarian reform proceeding pursuant to Section 1, Rule 142^[8] of the Rules of Court.^[9]  However, we upheld the imposition of 12% interest on the just compensation beginning 7 October 2004 until full payment.  We anchored our decision following the ruling in Republic of the Philippines v. Court of Appeals.^[10]

As a conclusion, the Court rendered the assailed decision which reads:

WHEREFORE, premises considered, the petition is GRANTED.  The decision of the Court of Appeals in C.A. G.R. SP No. 87463 dated 9 October 2007 is AFFIRMED with the MODIFICATION that LBP is hereby held exempted from the payment of costs of suit.  In all other respects, the Decision of the Court of Appeals is AFFIRMED.  No costs.^[11]

Aggrieved, LBP filed this present Motion for Reconsideration and argued once again the erroneous imposition of 12% interest.  The bank reiterated its previous argument that the imposition is justifiable only in case of undue delay in the payment of just compensation.^[12]  It argued^[13] against the application of the A.O. No. 6, Series of 2008 (A.O. 06-08)^[14] to the instant case because it claims that the 6% interest does not apply to agricultural lands valued under R.A. 6657, such as the subject properties, following the Court's ruling in Land Bank of the Philippines v. Chico.^[15]

We deny the prayers of LBP.

In many cases^[16] decided by this Court, it has been repeated time and again that the award of 12% interest is imposed in the nature of damages for delay in payment which in effect makes the obligation on the part of the government one of forbearance. This is to ensure prompt payment of the value of the land and limit the opportunity loss of the owner that can drag from days to decades.

In this case, LBP is adamant in contending that the landowners were promptly paid of their just compensation.  It argues that, "there is no factual finding whatsoever indicating undue delay on the part of LBP."^[17]

We disagree.

It is true that LBP approved the amount of P265,494.20 in favor of the landowners on 23 August 2004.^[18] However, that amount is way below the amount that should have been received by the landowners based on the valuations adjudged by the agrarian court, CA and this Court.  To be considered as just compensation, it must be fair and equitable and the landowners must have received it without any delay.^[19]

The contention that there can be no delay when there is a deposit of the amount of the government valuation in favor of the landowners was also the same argument raised in the second Motion for Reconsideration addressing the 12 October 2010 and 23 November 2010 Resolutions in Apo Fruits^[20] case.  LBP contended then that landowners APO Fruits and Hijo Plantation did not suffer from any delay in payment since the LBP made partial payments prior to the taking of the parcels of land.  The Court there ruled that twelve years passed after the Government took the properties, before full payment was settled.  The Court took into account that the partial payment made by LBP only amounted to 5% of the actual value of property.^[21]

Similar to Apo Fruits, the delay in this case is traceable to the undervaluation of the property of the government.  Had the landholdings been properly valued, the landowners would have accepted the payment and there would have been no need for a judicial determination of just compensation.^[22]  The landowners could not possibly accept P265,494.20 as full payment for their entire 18 hectare-property.  It must be noted that the landowners, since the deprivation of their property, have been waiting for four decades to get the just compensation due to them.

As in several other just compensation cases, respondents faced the difficult problem whether to accept a low valuation or file a case for determination of just compensation before the court.  Before the choice is made, and for a longer period if the judicial course is taken, the landowners already are deprived of the income that could have been yielded by their lands.

The Imperial case^[23] is an applicable precedent.

Juan H. Imperial (Imperial) was the owner of five parcels of land with a total land area of 151.7168 hectares.  Upon the effectivity of P.D. No. 27 and EO 228, the parcels of land were placed under the Land Reform Program and distributed to the farmer-beneficiaries on 21 October 1972.  On 20 July 1994, Imperial filed a complaint for determination and payment of just compensation before the Agrarian Court of Legazpi City, Albay.  As the amount fixed by the agrarian court was found to be inacceptable by the parties, the case went up all the way to the Supreme Court.  Before this Court, LBP claimed that a 6% annual interest in the concept of damages should not be imposed because (1) the delay in the payment of the just compensation was not its fault, and (2) DAR A.O. No. 13 already provides for the payment of a 6% annual interest, compounded annually, provided that the just compensation is computed in accordance with its prescribed formula.^[24]  The Court partly granted the claim of LBP and directed the trial court to re-compute the just compensation by using the formula prescribed by DAR A.O. No. 13, as amended, which imposed a 6% interest compounded annually from the date of the compensable taking on 21 October 1972 until 31 December 2006; and thereafter, at the rate of 12% per annum, until full payment is made.^[25]  This is to mean that from 1 January 2007 onwards, there shall be an imposition of 12% interest per annum until full payment in the nature of damages for the delay.  The reason given was that it would be inequitable to determine the just compensation based solely on the formula provided by DAR A.O. No. 13, as amended. Just compensation does not only pertain to the amount to be paid to the owners of the land, but also its payment within a reasonable time from the taking of the land; hence the imposition of interest in the nature of damages for the delay.^[26]

In this case, LBP pointed out the error made by this Court in Imperial in determining the extent of the period of applicability of the 6% compounded interest.^[27]  It asserts that:

"Based on the foregoing, this Court deemed the day after the expiration of DAR A.O. No. 13, meaning 1 January 2007, as the date of finality, constraining it to impose the 12% interest per annum.

However, beyond the knowledge of the Supreme Court, a subsequent DAR A.O. extended the applicability of the imposition of 6% interest compounded annually from 1 January 2007 until [31] December 2009.

Following the new DAR A.O., only 6% interest compounded annually would have been the correct interest to be imposed.  This was not imposed, however, simply because the day after 31 December 2006 or 01 January 2007 was deemed by the Supreme Court as the date of finality, leading to the imposition of 12% interest."^[28]

Contrary to the position of LBP, this Court did not commit a mistake in not applying the extension thru A.O. 06-08 of the 6% interest until 31 December 2009. It must be understood that at the time of the promulgation of the Imperial Decision on 12 February 2007, A.O. 06-08 was not yet effective, as it was signed only on 30 July 2008.

Likewise, it is erroneous for LBP to anchor its motion on the contention that the 6% interest compounded annually does not apply to agricultural lands valued under R.A. 6657 such as the subject properties.^[29]  The fact is that the valuation in the instant case was under P.D. 27 and E.O. 228, as adjudged by the trial court, because even if at the time of valuation R.A. 6657 was already effective, the respondents failed to present any evidence on the valuation factors under Section 17 of R.A. 6657.

The Computation
The purpose of A.O. No. 13 is to compensate the landowners for unearned interests.  Had they been paid in 1972 when the Government Support Price (GSP) for rice and corn was valued at P35.00 and P31.00, respectively, and such amounts were deposited in a bank, they would have earned a compounded interest of 6% per annum.  Thus, if the [Provincial Agrarian Reform Adjudicator] [(]PARAD[)] used the 1972 GSP, then the product of (2.5 x Average Gross Production (AGP) x P35.00 or P31.00) could be multiplied by (1.06) to determine the value of the land plus the additional 6% compounded interest it would have earned from 1972.^[30]

Following A.O. 13-94, the 6% yearly interest compounded annually shall be reckoned from 21 October 1972 up to the effectivity date of this Order which was on 21 October 1994.  However, A.O. 02-04^[31] extended the period of application of 6% interest from 21 October 1972 up to the time of actual payment but not later than December 2006.  Then, under A.O. 06-08,^[32] the application of 6% interest was further until 31 December 2009.  It must be noted that the term "actual payment" in the administrative orders is to be interpreted as "full payment" pursuant to the ruling in Land Bank of the Philippines v. Obias^[33] and Land Bank of the Philippines v. Soriano.^[34]

The amount of land value of P164,059.26 was already settled before the lower courts.^[35] There is no need for a new computation.

Applying the rules under A.O. 13-94, A.O. 02-04 and A.O. 06-08 the formula to determine the increment of 6% interest per annum compounded annually beginning  21 October 1972 up to 31 December 2009 is:

CI = P (1+R) ⁿ
(CI as compounded interest; P as the Principal; R is the Rate of 6% and n = number of years from date of tenancy starting from.)

Where:

P = P164,059. 26

R = 6%

n = 37 years

COMPUTATION:

CI      =   P (1+R) ⁿ

=  P164,059.26 (1+ 6%) ^{37 years}

=  P164,059. 26 (1.06) ^{37 years}

=  P1,252,770.80

Then we add the compounded interest to the land value P164,059.26:

Compounded Amount = Land Value + Compounded Interest

= P164,059.26 + P1,252,770.80

= P1,416,830.06

To compute the compounded amount to be paid, we subtract the amount of lease rental of P75,415.88 as adjudged by the appellate court to the compounded amount:^[36]

Compounded Amount = P1,416,830.06 less P75,415.88

= P1,341,414.18

We add a simple interest of 12% to the compounded amount from 31 December 2009 until the promulgation of this decision due to the delay incurred by LBP in not paying the full just compensation to the Spouses:

I = P x R x T

(I = Interest, R = Rate, T = Time)

Where:

P = Compounded Amount

R = 12%

T = 31 December 2009 to 31 December 2012

1. COMPUTATION: 31 December 2009 to 31 December 2012

I = P x R x T

I = (Compounded Amount) (.12) (3 years)

I = P1,341,414.18 (.12) (3years)

I = P482,909.1048

2. COMPUTATION: 31 December 2012 to 20 February 2013

I = P x R x T

 = (Compounded Amount) (12% interest) x No. of Days

365 days

 = (Compounded Amount) (.12) x 50 days

365 days

 = (P1,341,414.18) (.12) x 50 days

365 days

 = P160,969.69 x 50 days

365

 = P441.01 x 50 days

 = P 22,050.50

Final Just Compensation = Compounded Amount + Interest

= P1,341,414.18 + P482,909.1048+ P22,050.50

= P1,846,373.70

WHEREFORE, premises considered, we PARTIALLY GRANT the petitioner's Motion for Reconsideration. The Decision dated 17 November 2010 of the Court's First Division is hereby MODIFIED.

The petitioner Land Bank of the Philippines is hereby ORDERED to pay Esther Anson Rivera, Antonio G. Anson and Cesar G. Anson P1,846,373.70 as final just compensation plus interest at the rate of 12% per annum from the finality of this decision until full payment.

SO ORDERED.

Carpio,^* Velasco, Leonardo-De Castro, (Acting Chairperson), and Peralta, JJ., concur.

---

^* Additional member per raffle dated 7 November 2012.

^[1] Rollo, pp. 392-409.

^[2] Presidential Decree No. 27, October 21, 1972, 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 MECHANISM THEREFOR.

^[3] EXECUTIVE ORDER NO. 228, July 17, 1987, DECLARING FULL LAND OWNERSHIP TO QUALIFIED FARMER BENEFICIARIES COVERED BY PRESIDENTIAL DECREE NO. 27: DETERMINING THE VALUE OF REMAINING UNVALUED RICE AND CORN LANDS SUBJECT TO PRESIDENTIAL DECREE. NO. 27; AND PROVIDING FOR THE MANNER OF PAYMENT BY THE FARMER BENEFICIARY AND MODES OF COMPENSATION TO  THE LANDOWNERS.

^[4] Rollo, pp. 379-380.

^[5] Id. at 122.

^[6] Id. at 59.

^[7] Petition for Review on Certiorari. Id. at  25-49.

^[8] Section 1. Cost ordinarily follow results of suit. Unless otherwise provided in these rules, cost shall be allowed to the prevailing party as a matter of course, but the court shall have power, for special reasons, to adjudge that either party shall pay the costs of an action, or that the same be divided, as may be equitable. No costs shall be allowed against the Republic of the Philippines unless otherwise provided by law. (Emphasis supplied)

^[9] Rollo, p. 390.

^[10] 433 Phil. 106 (2002).

^[11] Rollo, p. 390.

^[12] Id. at 393-395.

^[13] Paragraph 2.34, Motion for Reconsideration. Id. at 402.

^[14] This extended application is through an administrative order better known as A.O. No. 6, Series of 2008 which provides that a grant of six percent (6%) increment shall be reckoned from 21 October 1972 up to the time of actual payment but not later than 31 December 2009.

^[15] G.R. No. 168453, 13 March 2009, 581 SCRA 226.

^[16] Land Bank of the Philippines v. Celada, 515 Phil. 467, 484 (2006) citing Land Bank of the Philippines v. Wycoco, G.R. No. 140160, 13 January 2004, 419 SCRA 67, 80 further citing Reyes v. National Housing Authority, G.R. No. 147511, 20 January 2003, 395 SCRA 494.

^[17] Paragraph 2.15, Motion for Reconsideration. Rollo, p. 397.

^[18] Id. at 175.

^[19] Apo Fruits Corporation v. Land Bank of the Philippines, G.R. No. 164195, 5 April 2011, 647 SCRA 207, 222.

^[20] Id.

^[21] Id. at 222-223.

^[22] Apo Fruits Corporation v. Land Bank Philippines, G.R. No. 164195, 10 October 2012, 632 SCRA 727, 749.

^[23] Land Bank of the Philippines v. Imperial, G.R. No. 157753, 12 February 2007, 515 SCRA 449.

^[24] Id. at 456.

^[25]  WHEREFORE, the instant petition is DENIED for lack of merit.  The assailed Decision  dated November 23, 2001, of the Court of Appeals in CA-G.R. CV No. 68980 which set aside the Decision dated August 4, 2000, of the Regional Trial Court of Legazpi City, Branch 3, acting as a Special Agrarian Court in Agrarian Case No. 94-01, is AFFIRMED WITH MODIFICATION.

Let the records of this case be immediately REMANDED to the trial court for recomputation of the correct just compensation for the lands taken, including the portions  identified as feeder road, right of way, and barrio site, but excluding the portion or portions retained by respondent as owner-cultivator. The trial court is hereby DIRECTED to use the formula prescribed by DAR A.O. No. 13, as amended, which imposed a 6% interest, compounded annually, from the date of the compensable taking on October 21, 1972, until December 31, 2006; and thereafter, at the rate of 12% per annum, until full payment is made.

Id. at 459-460.

^[26] Id. at 458.

^[27] Rollo, pp. 401-402.

^[28] Id.

^[29] Paragraph 2.34, Motion for Reconsideration. Id. at 402.

^[30] Gabatin v. Land Bank of the Philippines, 486 Phil. 366, 384-385 (2004).

^[31] Item III, No. 03 of A.O. No. 13, Series of 1994, is hereby amended to read as follows:

The grant of six percent (6%) yearly interest compounded annually shall be reckoned as follows:

3.1  Tenanted as of 21 October 1972 and covered under OLT

- From 21 October 1972 up to the time of actual payment but not later than December 2006

^[32] . AMENDMENT

1. The grant of six percent (6%) increment shall be reckoned as follows:

FROM		TO
3.1 Tenanted as of 21 October 1972 and covered under OLT		3.1 Tenanted as of 21 October 1972 and covered under OLT
	From 21 October 1972 up to the time of actual payment but not later than 31 December 2006		From 21 October 1972 up to the time of actual payment but not later than 31 December 2009

^[33] G.R. No. 184406, 14 March 2012, 668 SCRA 265.

^[34] G.R. Nos. 180772 and 180776, 6 May 2010, 620 SCRA 347.

^[35] Rollo, pp. 57 and 121.

^[36] Id. at 58.