The landowner in this case had a parcel of agricultural land in Camarines Sur which was taken in 1984 under Presidential Decree No. 27,1Entitled 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 (approved on 21 October 1972). then distributed to the farmer-beneficiaries. The Department of Agrarian Reform fixed just compensation of the said land at P66,214.03 using the formula provided under Executive Order No. 228, Series of 1987.2Entitled 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 OF PRESIDENTIAL DECREE NO. 27; AND PROVIDING FOR THE MANNER OF PAYMENT BY THE FARMER BENEFICIARY AND MODE OF COMPENSATION TO THE LANDOWNER (approved on 17 July 1987).
On 30 August 2000 and 17 December 2003, respectively, the landowner was issued Agrarian Reform Bond No. 0079665 in the amount of P11,674.59 representing the initial valuation of the taken land and AR Bond No. 0079666 in the amount of P30,428.83 representing the 6% increment under Presidential Decree No. 27 and Executive Order No. 228, and paid cash in the total amount of P4,678.16.
The landowner found the valuation unreasonable, which is why he filed a petition for summary administrative proceedings for the determination of just compensation of the taken land before the Office of the Provincial Agrarian Reform Adjudicator.
On 27 March 2001, the Office of the Provincial Agrarian Reform Adjudicator fixed just compensation in the amount of P1,147,466.73 24, using the formula, LV = AGP x 2.5 x GSP. However, in arriving at such values, the Office of the Provincial Agrarian Reform Adjudicator used the recent government support price for corn of P300.00/cavan (P6.00/kilo) as certified by the National Food Authority Provincial Manager of Camarines Sur, instead of the P31.00/cavan provided under Section 23SECTION 2. Henceforth, the valuation of rice and corn lands covered by Presidential Decree No. 27 shall be based on the average gross production determined by the Barangay Committee on Land Production in accordance with Department Memorandum Circular No. 26, Series of 1973, and related issuances and regulations of the Department of Agrarian Reform. The average gross production per hectare shall be multiplied by 2.5, the product of which shall be multiplied by P35.00, the government support price for 1 cavan of 50 kilos of palay on 21 October 1972, or P31.00, the government support price for 1 cavan of 50 kilos of corn on 21 October 1972, and the amount arrived at shall be the value of the rice and corn land, as the case may be, for the purpose of determining its cost to the farmer and compensation to the landowner. of Executive Order No. 228.
Hence, the Office of the Provincial Agrarian Reform Adjudicator no longer applied the 6% annual incremental interest granted under Department of Agrarian Reform Administrative Order No. 13, Series of 1994.4Entitled RULES AND REGULATIONS GOVERNING THE GRANT OF INCREMENT OF 6% YEARLY INTEREST COMPOUNDED ANNUALLY ON LANDS COVERED BY PRESIDENTIAL DECREE NO. 27 AND EXECUTIVE ORDER NO. 228 (approved on 27 October 1994). In a letter dated 5 September 2001, the landowner unconditionally accepted and called for the immediate payment of the valuations for the land.
Dissatisfied with the Office of the Provincial Agrarian Reform Adjudicator’s valuation, the Land Bank of the Philippines instituted a complaint for the determination of just compensation before the Regional Trial Court, averring that the said office erred in disregarding the formula provided under Executive Order No. 228.
In an Order dated 17 March 2010, the Regional Trial Court directed the Land Bank of the Philippines to submit a revaluation for the land in accordance with the factors set forth under the Comprehensive Agrarian Reform Law of 1988,5Republic Act No. 6657, as amended; Entitled AN ACT INSTITUTING A COMPREHENSIVE AGRARIAN REFORM PROGRAM TO PROMOTE SOCIAL JUSTICE AND INDUSTRIALIZATION, PROVIDING THE MECHANISM FOR ITS IMPLEMENTATION, AND FOR OTHER PURPOSES (approved on 10 June 1988). as implemented by Department of Agrarian Reform Administrative Order No. 1, Series of 2010.6Entitled RULES AND REGULATIONS ON VALUATION AND LANDOWNERS COMPENSATION INVOLVING TENANTED RICE AND CORN LANDS UNDER PRESIDENTIAL DECREE (P.D.) NO. 27 AND EXECUTIVE ORDER (E.O.) NO. 228 which took effect on 1 July 2009.
The Land Bank of the Philippines complied and reached an amount of P1,155,223.41, as recomputed value of the land. The landowner accepted the said computation.
On 22 June 2011, the Regional Trial Court rendered a decision adopting and approving the Land Bank of the Philippines’ uncontested revaluation the land in the amount of P1,155,223.41, as well as ordering its payment to landowner in accordance with Section 18 of Comprehensive Agrarian Reform Law of 1988, minus the initial valuation that had already been paid to him.
The landowner moved for reconsideration, contending that the Regional Trial Court failed to order an additional payment of 12% interest in his favor, reckoned from the time his land was taken from him by the government in 1972 and distributed to the farmer beneficiaries until full payment of the just compensation.
In an Order dated 31 August 2011, the Regional Trial Court granted the said motion and awarded 12% interest computed from 26 June 2000, when the Land Bank of the Philippines approved the payment of the initial valuation for the land up to the date the decision was rendered, or a total amount of P1,437,669.75.
The Regional Trial Court modified its 31 August 2011 Order, by way of its Order dated 10 October 2011, holding that the 12% interest should be reckoned from 1 January 2010 until full payment since the revaluation the land already included the required 6% annual incremental interest under Department of Agrarian Reform Administrative Order No. 13, Series of 1994,7This Administrative Order granted an annual interest of 6% to lands covered under Presidential Decree No. 27 and Executive Order No. 228 compounded yearly from taking until November 1994. The reason is had the landowner been paid from the time of the taking of his land and the money deposited in a bank, the money would have earned the same interest rate compounded annually as authorized under banking laws, rules and regulations. Department of Agrarian Reform Administrative Order No. 2, Series of 2004,8Entitled AMENDMENT TO ADMINISTRATIVE ORDER NO. 13, SERIES OF 1994 ENTITLED RULES AND REGULATIONS GOVERNING THE GRANT OF INCREMENT OF 6% YEARLY INTEREST COMPOUNDED ANNUALLY ON LANDS COVERED BY PRESIDENTIAL DECREE NO. 27 AND EXECUTIVE ORDER NO. 228’” dated 4 November 2004. This extended the grant of the 6% incremental annual interest up to December 2006. and Department of Agrarian Reform Administrative Order No. 6, Series of 2008,9Entitled AMENDMENT TO DAR ADMINISTRATIVE ORDER NO. 2., SERIES OF 2004 ON THE GRANT OF INCREMENT OF 6% YEARLY INTEREST COMPOUNDED ANNUALLY ON LANDS COVERED BY PRESIDENTIAL DECREE NO. 27 AND EXECUTIVE ORDER NO. 228 dated 28 July 2008. This further extended the grant of the six percent (6%) incremental annual interest up to 31 December 2009. from the time of taking until December 31, 2009.
Is the landowner entitled to the payment of annual interest of 12% on the unpaid balance of just compensation, even if he was already granted the 6% annual incremental interest prescribed under Department of Agrarian Reform Order Nos.
- 13, Series of 1994;
- 02, Series of 2004; or
- 06, Series of 2008?
Yes.
The Supreme Court ruled that in expropriation cases, interest is imposed if there is delay in the payment of just compensation to the landowner since the obligation is deemed to be an effective forbearance on the part of the State.
The Court pegged said interest at the rate of 12% per annum on the unpaid balance of the just compensation, reckoned from the time of taking, or the time when the landowner was deprived of the use and benefit of his property, such as when title is transferred to the Republic, or emancipation patents are issued by the government, until full payment.
The Court clarified that, unlike the 6% annual incremental interest allowed in the above-mentioned department orders, this 12% annual interest is not granted on the computed just compensation. Rather, it is a penalty imposed for damages incurred by the landowner due to the delay in its payment.
The reason is that just compensation also embraces, not only the correct determination of the amount to be paid to the landowner, but also the payment of the land within a reasonable time from its taking, as otherwise, compensation cannot be considered “just,” for the owner is made to suffer the consequence of being immediately deprived of his land while being made to wait for years before actually receiving the amount necessary to cope with his loss. Said the Court:
Just compensation is defined as the full and fair equivalent of the property taken from its owner by the expropriator. 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.
The concept of just compensation embraces not only the correct determination of the amount to be paid to the owners of the land, but also payment within a reasonable time from its taking. Without prompt payment, compensation cannot be considered “just” inasmuch as the property owner is made to suffer the consequences of being immediately deprived of his land while being made to wait for a decade or more before actually receiving the amount necessary to cope with his loss.
While prompt payment of just compensation requires the immediate deposit and release to the landowner of the provisional compensation as determined by the Department of Agrarian Reform, it does not end there. Verily, it also encompasses the payment in full of the just compensation to the landholders as finally determined by the courts. Thus, it cannot be said that there is already prompt payment of just compensation when there is only a partial payment thereof, as in this case.
N.B.:
Beginning 1 July 2013, the rate of six percent (6%) interest per annum shall be imposed until full payment, under the modification introduced by BSP-MB Circular No. 799 as affirmed in Nacar v. Gallery Frames, G.R. No. 189871, August 13, 2013.
Further reading:
- Land Bank of the Philippines v. Santos, G.R. No. 213863 & 214021, January 27, 2016.
