GR 184406; (March, 2012) (Digest)
G.R. No. 184406; March 14, 2012
LAND BANK OF THE PHILIPPINES, Petitioner, vs. PERFECTO OBIAS, ET. AL., Respondents.
FACTS
Pursuant to the Operation Land Transfer under Presidential Decree No. 27, an aggregate area of 34.6958 hectares of agricultural land owned by the Obias family in Camarines Sur was distributed to farmer-beneficiaries. The Department of Agrarian Reform (DAR) computed the just compensation at ₱1,397,578.72 using the formula under P.D. No. 27 and Executive Order No. 228. The landowners contested this valuation as inadequate and filed a complaint for determination of just compensation before the Regional Trial Court (RTC) acting as a Special Agrarian Court. The RTC fixed just compensation at ₱91,657.50 per hectare, for a total of ₱3,180,130.29. Both parties appealed to the Court of Appeals.
The Court of Appeals vacated the RTC decision. Applying the formula from P.D. No. 27 and E.O. No. 228, and using the government support price for palay at the time of taking as held in Gabatin v. Land Bank, the appellate court fixed the total compensation at ₱371,015.20. It further ordered the Land Bank of the Philippines (LBP) to pay this amount plus interest at 6% per annum, compounded annually, from October 21, 1972 until fully paid.
ISSUE
Whether the Court of Appeals erred in ordering the payment of 6% interest compounded annually “until fully paid” instead of only “until the time of actual payment” as defined under DAR Administrative Order No. 13, as amended.
RULING
The Supreme Court denied LBP’s petition and affirmed the Court of Appeals. The Court held that while administrative issuances like DAR A.O. No. 13 have the force of law and enjoy a presumption of legality, they are not absolute and remain subject to judicial review and interpretation. The core legal principle is that just compensation is not merely the correct valuation but also payment without delay. The constitutional guarantee of just compensation requires that the landowner be paid contemporaneously with the taking; any delay mandates the payment of interest for the period of delay to compensate for the foregone income.
The Court ruled that limiting the interest period only until the “time of actual payment” as technically defined by the administrative order—the date LBP approves and deposits payment—would be contrary to the essence of just compensation. Such a definition could result in the interest stopping at the bank’s unilateral act of deposit, even if the landowner has not actually received the funds due to pending compliance with documentary requirements. True “full payment” occurs only when the landowner actually receives the compensation. Therefore, the appellate court correctly ordered interest to run until full payment is received by the landowners, ensuring they are compensated for the entire period of deprivation. This interpretation aligns with the constitutional mandate and prevailing jurisprudence.