G.R. No. 193455. June 13, 2016.
NATIONAL POWER CORPORATION, PETITIONER, VS. HEIRS OF GREGORIO RAMORAN, ET AL., RESPONDENTS.

FACTS

The National Power Corporation (NPC) filed a complaint for eminent domain on February 10, 1995, to expropriate land in Sual, Pangasinan, for a power plant project. The complaint initially covered 67,984 square meters under OCT No. P-8665. NPC deposited the assessed value and was granted a writ of possession on March 2, 1995. During proceedings, intervenors claimed an interest, revealing the total land area was actually 91,212 square meters, which NPC had taken possession of. The trial court, via a commissioners’ committee, fixed just compensation. A partial compromise agreement in 2000 resolved payment for the initial 67,984-square-meter portion. The just compensation for the remaining 23,228 square meters was later set by the RTC at ₱1,675,290 in 2007.
The RTC ordered NPC to pay this amount with legal interest at 12% per annum from the filing of the complaint. NPC moved for reconsideration, arguing the rate should only be 6% per annum, citing precedent that expropriation is not a loan. The RTC denied the motion, and the Court of Appeals affirmed the 12% interest rate, characterizing the delayed payment as a forbearance of money.

ISSUE

Whether the Court of Appeals correctly imposed a 12% per annum legal interest rate on the unpaid just compensation for the expropriated property.

RULING

The Supreme Court modified the interest rate imposition but affirmed the finding of delay. The legal logic proceeds from the nature of just compensation in expropriation. The Court clarified that the obligation to pay just compensation upon taking private property is effectively a forbearance of money on the part of the State. When payment is delayed, the property owner is deprived of the income the money could have earned. Following established jurisprudence, such delay warrants the imposition of interest as a form of damages to ensure the owner receives the full and fair equivalent of the property at the time of taking, compensating for the constant fluctuation and inflation of currency value over time.
Consequently, the applicable interest rate is 12% per annum from the time of taking until June 30, 2013, pursuant to the Court’s ruling in Republic v. Court of Appeals and the Eastern Shipping Lines guidelines. However, in accordance with Bangko Sentral ng Pilipinas Monetary Board Circular No. 799, the legal rate for loans or forbearance of money was reduced to 6% per annum effective July 1, 2013. Therefore, the interest rate shall be 6% from July 1, 2013, until full payment. The Court also adjusted the starting date for interest accrual to March 2, 1995—the date the writ of possession was issued and NPC took possession—not the filing date of the complaint. The Court found no merit in NPC’s claim of no unjustified delay, upholding the factual findings of the lower courts that payment for the 23,228-square-meter portion was indeed delayed, as the taking preceded the deposit and final determination of its compensation.