Title
Apo Fruits Corporation vs. Land Bank of the Philippines
Case
G.R. No. 164195
Decision Date
Oct 12, 2010
Landowners AFC and HPI contested DAR's low land valuation under agrarian reform. SC ruled they are entitled to 12% interest on unpaid just compensation from 1996-2008, citing unreasonable delay and constitutional rights.
voluntary sale
landholdings
government
A

Case Summary (G.R. No. 164195)

Factual Background

AFC owned 640.3483 hectares and HPI owned 805.5308 hectares. They filed Voluntary Offer to Sell applications with the Department of Agrarian Reform. The DAR’s Provincial Agrarian Reform Officer assessed the land at P165,484.47 per hectare. At that valuation the DAR deposited P26,409,549.86 for AFC and P45,481,706.76 for HPI into bank accounts, sums the petitioners withdrew. Titles were cancelled and new titles issued in the name of the Republic on December 9, 1996. The petitioners disputed the DAR valuation and pursued administrative petitions with the DAR Adjudication Board, then filed complaints with the Regional Trial Court of Tagum City after DARAB failed to act for over three years.

Trial and Appellate Proceedings

The RTC, acting as a Special Agrarian Court, fixed just compensation for the consolidated holdings at P1,383,179,000.00 on September 25, 2001 and awarded interest and attorney’s fees. The RTC modified its prior ruling on December 5, 2001 by fixing interest at twelve percent per annum from filing until finality. The Third Division affirmed the RTC decision on February 6, 2007. On reconsideration the Third Division, by Resolution dated December 19, 2007, deleted the twelve percent interest on the balance and removed attorney’s fees. The Court denied subsequent motions on April 30, 2008; Entry of Judgment followed on May 16, 2008. Petitioners filed a second motion for reconsideration and a motion to refer that motion En Banc. The Third Division referred the case and the Court En Banc accepted the referral.

Issues Presented

Whether the petitioners are entitled to legal interest at twelve percent per annum on the unpaid balance of just compensation from the date of taking on December 9, 1996 until payment on May 9, 2008. Whether the Court should recall and set aside its prior resolutions notwithstanding the doctrine of immutability of judgment. Whether attorney’s fees should be awarded remained an issue reserved by the Court because petitioners did not press it in the present reconsideration motion.

The Parties’ Contentions

The petitioners argued that the immutability rule did not bar relief because the Entry of Judgment issued before the lapse of fifteen days from receipt of the April 30, 2008 Resolution, and because special and compelling circumstances required correction in the interest of substantial justice. They maintained that just compensation includes interest at twelve percent per annum from the date of taking and that such interest is not an equitable subject for reduction. The LBP countered that the immutability doctrine applied; that it had not unduly delayed payment because it deposited the initial “pertinent amounts” and later paid the balance promptly after the Court fixed valuation; that interest on compensation accrues only when the amount becomes liquidated and that Article 2209’s legal interest or a six percent rate should apply; and that deletion of attorney’s fees was proper.

The Court’s Disposition

The Court granted the petitioners’ motion for reconsideration. It reversed and set aside the Court En Banc Resolution of December 4, 2009 and the Third Division Resolutions of April 30, 2008 and December 19, 2007. The Court ordered LBP to pay legal interest at twelve percent per annum on the unpaid balance of just compensation, computed from December 9, 1996 (date of taking) until May 9, 2008 (date payment of the balance was made). The Court computed the total due as P1,331,124,223.05. The Court directed payment in monthly installments of P60,000,000.00 until fully paid, unless the parties agree otherwise. Costs were taxed against LBP. The Court expressly declined to rule on attorney’s fees because petitioners did not raise that matter in the present motion.

Legal Basis and Reasoning — Just Compensation and Interest

The Court reiterated that eminent domain is an inherent power of the State and that Art. III, Sec. 9, 1987 Constitution requires both public use and just compensation. The Court emphasized that just compensation must be “real, substantial, full and ample” and must be paid without unreasonable delay. The Court relied on its precedents, particularly Republic v. Court of Appeals, where it recognized that compensation withheld after a taking constitutes an effective forbearance and that legal interest at twelve percent per annum is appropriate to offset currency fluctuation and to place the owner, as nearly as possible, in the position held prior to taking. The Court treated interest here as part of just compensation necessary to compensate the landowner for the lost income-generating potential of the land.

Application to the Present Case — Delay and Attribution

The Court found that the DAR’s initial valuations grossly undervalued the land and that the amounts LBP deposited at the time of taking equaled only about five percent of the judicially fixed just compensation. The Court characterized those deposits as partial and insufficient to excuse the State’s obligation to pay interest on the unpaid balance. The Court further found that delay was attributable to government entities: DAR’s gross undervaluation and DARAB’s inaction for more than three years initiated the litigation and produced prolonged delay, and LBP defended the undervaluation in litigation. On this basis the Court concluded that the delay in full payment was chargeable to the government and that the petitioners were entitled to twelve percent per annum interest from the date of taking until payment.

Rejection of LBP’s Distinctions and of Equitable Reduction

The Court rejected LBP’s argument that agrarian reform cases differ from ordinary expropriation cases for purposes of interest. The Court held that the power of eminent domain and the constitutional protection of just compensation apply equally. The Court also rejected the suggestion that equity under Article 1229 of the Civil Code justified reduction of the interest. The Court explained that equitable reduction has been applied where contractual penalty clauses are involved. By contrast, the legal interest in this context “runs as a matter of law” to effectuate constitutional just compensation. The Court therefore refused to reduce the computed interest as Justice Chico‑Nazario had proposed in her dissent to the earlier Resolution.

Calculation of the Amount Due

The Court accepted the principal balance of P971,409,831.68 as the difference between the final judicial valuation of P1,383,179,000.00 and prior payments of P411,769,168.32. At twelve percent per annum from December 9, 1996 to May 9, 2008, the Court computed interest at P359,714,391.37, yielding a total due of P1,331,124,223.05. The Court ordered monthly payments of P60,000,000.00 unless the parties agree to a different schedule.

Immutability of Judgment — Exceptions and Their Application

The Court acknowledged the general rule of the immutability of judgment but reiterated established exceptions where reversal or recall of entries is permitted in the interest of substantial justice and when special and compelling circumstances exist. The Court catalogued prior instances in which final judgments were recalled or modified and held that the present case warranted relaxation of immutability. The Court viewed the matter as involving a constitutional limitation in the Bill of Rights, settled jurisprudence concerning interest as part of just compensation, and consequences

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