G.R. No. 172352 & G.R. Nos. 172387-88. June 08, 2016.
LAND BANK OF THE PHILIPPINES, PETITIONER, VS. ALFREDO HABABAG, SR., SUBSTITUTED BY HIS HEIRS, RESPONDENTS. / ALFREDO HABABAG, SR., SUBSTITUTED BY HIS HEIRS, PETITIONERS, VS. LAND BANK OF THE PHILIPPINES AND THE DEPARTMENT OF AGRARIAN REFORM, RESPONDENTS.

FACTS

The case involves the determination of just compensation for 69.3857 hectares of land owned by Alfredo Hababag, Sr., acquired under the Comprehensive Agrarian Reform Program (CARP). The Land Bank of the Philippines (LBP) made an initial valuation and payment of ₱1,237,850.00. Dissatisfied, the landowners sought judicial determination. The Regional Trial Court (RTC) fixed a higher amount using the Income Productivity Approach. On appeal, the Court of Appeals (CA) set just compensation at ₱2,398,487.24 using the DAR formula under Section 17 of RA 6657, and imposed legal interest on the unpaid balance. The Supreme Court, in a September 16, 2015 Decision, affirmed the CA’s valuation and the imposition of interest but modified the applicable interest rate per BSP-MB Circular No. 799.
LBP filed a Motion for Reconsideration, seeking to be discharged from paying legal interest. It argued there was no delay, as it promptly deposited the initial valuation, and that the difference between the initial payment and the final compensation was not substantial, citing Apo Fruits Corporation vs. LBP. It also sought clarification on the date of taking from which to compute interest should its motion be denied.

ISSUE

The primary issue is whether the LBP is liable to pay legal interest on the unpaid balance of the just compensation. A secondary issue is the determination of the correct date of taking for computing such interest.

RULING

The Supreme Court denied LBP’s Motion for Reconsideration and upheld its liability for legal interest. The Court clarified that the imposition of interest is a matter of law and is integral to the constitutional concept of just compensation, which requires the landowner to be placed in a position as good as that which they occupied before the taking. Citing Apo Fruits, the Court emphasized that the substantiality of the initial payment is irrelevant; what is decisive is that full payment was not made upon the taking of the property. Just compensation is the principal sum, and interest compensates for the unpaid balance of this principal from the time of taking until full payment. Since the final just compensation (₱2,398,487.24) exceeded the amount initially paid (₱1,237,850.00), an unpaid balance existed, mandating the imposition of interest. The Court reiterated that “prompt payment” under agrarian law means payment in full of the just compensation at the time of taking.
Regarding the date of taking, the Court ruled it is the date when title to the property is transferred to the Republic of the Philippines. As the records did not clearly show this date, the Court remanded the case to the RTC. It directed the LBP to furnish certified copies of the Republic’s titles and ordered the RTC to compute the legal interest, to be reckoned from the date of issuance of those titles. The applicable interest rate is twelve percent (12%) per annum from the date of taking until June 30, 2013, and six percent (6%) per annum thereafter until full payment, consistent with Nacar v. Gallery Frames.