G.R. No. 157753 ; February 12, 2007
LAND BANK OF THE PHILIPPINES, Petitioner, vs. JUAN H. IMPERIAL, Respondent.

FACTS

Respondent Juan H. Imperial owned five parcels of agricultural land in Albay, totaling 156.1000 hectares, placed under the Operation Land Transfer of the agrarian reform program. The lands were distributed to farmer-beneficiaries on October 21, 1972. In 1994, Imperial filed a complaint for determination and payment of just compensation. A commission was created to determine valuation, and after proceedings, the Regional Trial Court, acting as a Special Agrarian Court, fixed just compensation at ₱2,185,241.50 for a compensable area of 151.7128 hectares, excluding 4.3832 hectares used for right of way, barrio site, or feeder road, and computed the value from December 4, 1989.
The Court of Appeals set aside the trial court’s decision. It ordered the case remanded for reevaluation of compensation, including the portions identified as feeder road, right of way, and barrio site, but excluding areas retained by Imperial as owner-cultivator. Crucially, the appellate court ruled that legal interest at 6% per annum should be imposed, reckoned from the date of compensable taking on October 21, 1972. Petitioner Land Bank assails this ruling.

ISSUE

The principal issues are: (1) whether a 6% annual interest should be included in computing just compensation for lands taken under P.D. No. 27; and (2) whether areas used as feeder road, right of way, and barrio site should be considered compensable.

RULING

The Supreme Court modified the decision of the Court of Appeals. On the first issue, the Court ruled that the imposition of interest is in the nature of damages for the delay in payment, not part of the land valuation itself. For agrarian reform cases where just compensation is not paid promptly, the landowner is entitled to interest as a form of damages to compensate for the income he would have made had he been paid immediately. The legal interest of 6% per annum is proper, but it should be computed from the date of taking, October 21, 1972, only until June 30, 2009. From July 1, 2009, until full payment, the interest rate shall be 12% per annum, conforming to established jurisprudence on the matter.
On the second issue, the Court affirmed the appellate court’s ruling that the areas used as feeder road, right of way, and barrio site should be included in the computation of just compensation. The taking of these portions for public use constitutes an exercise of eminent domain. Therefore, the landowner is entitled to payment for these areas as they form part of the property expropriated under the agrarian reform program. The case was remanded to the trial court for proper recomputation of just compensation in accordance with these principles.