due process emininet domain (part 2)

1improvements on the same. These improvements had also been taxdeclared.[4] SECOND DIVISION REPUBLIC OF THE PHILIPPINES, G.R. No. 185091 REPRESENTED BY THE DEPARTMENT OF EDUCATION DIVISION OF LIPA CITY (FOR PANINSINGIN PRIMARY SCHOOL), Petitioner, Present: CARPIO, J., Chairperson - versus ABAD, VILLARAMA, JR.,* PEREZ,** and MENDOZA, JJ. PRIMO MENDOZA andMARIA LUCERO, Respondents. Promulgated: August 8, 2010 x -------------------------------------------------------------------- x DECISION ABAD, J.: This case is about the propriety of filing an ejectment suit against the Government for its failure to acquire ownership of a privately owned property that it had long used as a school site and to pay just compensation for it. The Facts and the Case Paninsingin Primary School (PPS) is a public school operated by petitioner Republic of the Philippines (the Republic) through the Department of Education. PPS has been using 1,149 square meters of land in Lipa City, Batangas since 1957 for its school. But the property, a portion of Lots 1923 and 1925, were registered in the name of respondents Primo and Maria Mendoza (the Mendozas) under Transfer Certificate of Title (TCT) T-11410.[1] On March 27, 1962 the Mendozas caused Lots 1923 and 1925 to be consolidated and subdivided into four lots, as follows: Lot 1 292 square meters in favor of Claudia Dimayuga Lot 2 292 square meters in favor of the Mendozas Lot 3 543 square meters in favor of Gervacio Ronquillo; and Lot 4 1,149 square meters in favor of the City Government of Lipa[2] As a result of subdivision, the Register of Deeds partially cancelled TCT T-11410 and issued new titles for Lots 1 and 3 in favor of Dimayuga and Ronquillo, respectively. Lot 2 remained in the name of the Mendozas but no new title was issued in the name of the City Government of Lipa for Lot 4.[3] Meantime, PPS remained in possession of the property. The Mendozas claim, on the other hand, that although PPS sought permission from them to use the property as a school site, they never relinquished their right to it. They allowed PPS to occupy the property since they had no need for it at that time. Thus, it has remained registered in their name under the original title, TCT T-11410, which had only been partially cancelled. On November 6, 1998 the Mendozas wrote PPS, demanding that it vacate the disputed property.[5] When PPS declined to do so, on January 12, 1999 the Mendozas filed a complaint with the Municipal Trial Court in Cities (MTCC) of Lipa City in Civil Case 0002-99 against PPS for unlawful detainer with application for temporary restraining order and writ of preliminary injunction.[6] On July 13, 1999 the MTCC rendered a decision, dismissing the complaint on ground of the Republics immunity from suit.[7] The Mendozas appealed to the Regional Trial Court (RTC) of Lipa City which ruled that the Republics consent was not necessary since the action before the MTCC was not against it.[8] In light of the RTCs decision, the Mendozas filed with the MTCC a motion to render judgment in the case before it.[9] The MTCC denied the motion, however, saying that jurisdiction over the case had passed to the RTC upon appeal.[10] Later, the RTC remanded the case back to the MTCC,[11] which then dismissed the case for insufficiency of evidence.[12] Consequently, the Mendozas once again appealed to the RTC in Civil Case 2001-0236. On June 27, 2006 the RTC found in favor of the Mendozas and ordered PPS to vacate the property. It held that the Mendozas had the better right of possession since they were its registered owners. PPS, on the other hand, could not produce any document to prove the transfer of ownership of the land in its favor.[13] PPS moved for reconsideration, but the RTC denied it. The Republic, through the Office of the Solicitor General (OSG), appealed the RTC decision to the Court of Appeals (CA) in CA-G.R. SP 96604 on the grounds that: (1) the Mendozas were barred by laches from recovering possession of the school lot; (2) sufficient evidence showed that the Mendozas relinquished ownership of the subject lot to the City Government of Lipa City for use as school; and (3) Lot 4, Pcs5019 has long been declared in the name of the City Government since 1957 for taxation purposes.[14] In a decision dated February 26, 2008, the CA affirmed the RTC decision.[15] Upholding the Torrens system, it emphasized the indefeasibility of the Mendozas registered title and the imprescriptible nature of their right to eject any person occupying the property. The CA held that, this being the case, the Republics possession of the property through PPS should be deemed merely a tolerated one that could not ripen into ownership. The CA also rejected the Republics claim of ownership since it presented no documentary evidence to prove the transfer of the property in favor of the government. Moreover, even assuming that the Mendozas relinquished their right to the property in 1957 in the governments favor, the latter never took steps to have the title to the property issued in its name or have its right as owner annotated on the Mendozas title. The CA held that, by its omissions, the Republic may be

1

The Republic claimed that, while no title was issued in the name of the City Government of Lipa, the Mendozas had relinquished to it their right over the school lot as evidenced by the consolidation and subdivision plan. Further, the property had long been tax-declared in the name of the City Government and PPS built significant, permanent

DUE PROCESS AND EMINENT DOMAIN CASES | CONSTITUTIONAL LAW 2

2held in estoppel to claim that the Mendozas were barred by laches from bringing its action. With the denial of its motion for reconsideration, the Republic has taken recourse to this Court via petition for review on certiorari under Rule 45. The Issue Presented The issue in this case is whether or not the CA erred in holding that the Mendozas were entitled to evict the Republic from the subject property that it had used for a public school. The Courts Ruling A decree of registration is conclusive upon all persons, including the Government of the Republic and all its branches, whether or not mentioned by name in the application for registration or its notice.[16] Indeed, title to the land, once registered, is imprescriptible.[17] No one may acquire it from the registered owner by adverse, open, and notorious possession.[18] Thus, to a registered owner under the Torrens system, the right to recover possession of the registered property is equally imprescriptible since possession is a mere consequence of ownership. Here, the existence and genuineness of the Mendozas title over the property has not been disputed. While the consolidation and subdivision plan of Lots 1923 and 1925 shows that a 1,149 square meter lot had been designated to the City Government, the Republic itself admits that no new title was issued to it or to any of its subdivisions for the portion that PPS had been occupying since 1957.[19] That the City Government of Lipa tax-declared the property and its improvements in its name cannot defeat the Mendozas title. This Court has allowed tax declarations to stand as proof of ownership only in the absence of a certificate of title.[20] Otherwise, they have little evidentiary weight as proof of ownership.[21] The CA erred, however, in ordering the eviction of PPS from the property that it had held as government school site for more than 50 years. The evidence on record shows that the Mendozas intended to cede the property to the City Government of Lipa permanently. In fact, they allowed the city to declare the property in its name for tax purposes. And when they sought in 1962 to have the bigger lot subdivided into four, the Mendozas earmarked Lot 4, containing 1,149 square meters, for the City Government of Lipa. Under the circumstances, it may be assumed that the Mendozas agreed to transfer ownership of the land to the government, whether to the City Government of Lipa or to the Republic, way back but never got around to do so and the Republic itself altogether forgot about it. Consequently, the Republic should be deemed entitled to possession pending the Mendozas formal transfer of ownership to it upon payment of just compensation. The Court holds that, where the owner agrees voluntarily to the taking of his property by the government for public use, he thereby waives his right to the institution of a formal expropriation proceeding covering such property. Further, as the Court also held in Eusebio v. Luis,[22] the failure for a long time of the owner to question the lack of expropriation proceedings covering a property that the government had taken constitutes a waiver of his right to gain back possession. The Since the MTCC did not have jurisdiction either to evict the Republic from the land it had taken for public use or to hear and adjudicate the Mendozas right to just compensation for it, the CA should have ordered the complaint for unlawful detainer dismissed without prejudice to their filing a proper action for recovery of such compensation. WHEREFORE, the Court partially GRANTS the petition, REVERSES the February 26, 2008 decision and the October 20, 2008 resolution of the Court of Appeals in CA-G.R. 96604, and ORDERS the dismissal of respondents Primo and Maria Mendozas action for eviction before the Municipal Trial Court in Cities of Lipa City in Civil Case 0002-99 without prejudice to their filing an action for payment of just compensation against the Republic of the Philippines or, when appropriate, against the City of Lipa. SO ORDERED. FIRST DIVISION LAND BANK OF THE PHILIPPINES, Petitioner, G.R. No. 170685 Present: CORONA, C. J., Chairperson, CARPIO MORALES, VELASCO, JR., DEL CASTILLO, and PEREZ, JJ. Mendozas remedy is an action for the payment of just compensation, not ejectment. In Republic of the Philippines v. Court of Appeals,[23] the Court affirmed the RTCs power to award just compensation even in the absence of a proper expropriation proceeding. It held that the RTC can determine just compensation based on the evidence presented before it in an ordinary civil action for recovery of possession of property or its value and damages. As to the time when just compensation should be fixed, it is settled that where property was taken without the benefit of expropriation proceedings and its owner filed an action for recovery of possession before the commencement of expropriation proceedings, it is the value of the property at the time of taking that is controlling.[24]

- versus -

ENRIQUE LIVIOCO, Promulgated: Respondent. September 22, 2010 x------------------------------------------x DECISION DEL CASTILLO, J. When the evidence received by the trial court are irrelevant to the issue of just compensation and in total disregard of the requirements provided under Section 17 of the Comprehensive Agrarian Reform Law, the Court is left with no evidence on record that could aid in the proper resolution of the case. While remand is frowned upon for obviating the speedy dispensation of justice, it becomes necessary to ensure compliance with the law and to give everyone the landowner, the farmers, and the State their due.

2


3This is a Petition for Review under Rule 45, assailing the August 30, 2005 Decision[1] of the Court of Appeals (CA), as well as its December 5, 2005 Resolution[2] in CA-GR SP No. 83138. The dispositive portion of the assailed Decision reads as follows: WHEREFORE, premises considered, the petition is DENIED. The Decision dated January 29, 2004 and the Order dated March 16, 2004 of the RTC, Branch 56, Angeles City in Civil Case No. 10405 are hereby AFFIRMED.[3] Factual Antecedents Petitioner Land Bank of the Philippines (LBP) is the government financial institution[4] established to aid in the implementation of the Comprehensive Agrarian Reform Program (CARP) as well as to act as financial intermediary of the Agrarian Reform Fund.[5] Respondent Enrique Livioco (Livioco) was the owner of 30.6329 hectares of sugarland[6] located in Dapdap, Mabalacat, Pampanga. Sometime between 1987 and 1988,[7] Livioco offered his sugarland to the Department of Agrarian Reform (DAR) for acquisition under the CARP at P30.00 per square meter, for a total of P9,189,870.00. The voluntary-offer-to-sell (VOS) form[8] he submitted to the DAR indicated that his property is adjacent to residential subdivisions and to an international paper mill.[9] The DAR referred Liviocos offer to the LBP for valuation.[10] Following Section 17 of Republic Act (RA) No. 6657 and DAR Administrative Order No. 17, series of 1989,[11] as amended by Administrative Order No. 3, series of 1991,[12] the LBP set the price at P3.21 per square meter or a total of P827,943.48 for 26 hectares.[13] Livioco was then promptly informed of the valuation[14] and that the cash portion of the claim proceeds have been kept in trust pending [his] submission of the [ownership documentary] requirements.[15] It appears however that Livioco did not act upon the notice given to him by both government agencies. On September 20, 1991, LBP issued a certification to the Register of Deeds of Pampanga that it has earmarked the amount of P827,943.48 as compensation for Liviocos 26 hectares.[16] It was only two years later[17] that Livioco requested for a reevaluation of the compensation on the ground that its value had already appreciated from the time it was first offered for sale.[18] The request was denied by Regional Director Antonio Nuesa on the ground that there was already a perfected sale.[19] The DAR proceeded to take possession of Liviocos property. In 1994, the DAR awarded Certificates of Land Ownership Award (CLOAs) covering Liviocos property to 26 qualified farmer-beneficiaries.[20] Livioco filed separate complaints to cancel the CLOAs and to recover his property but the same proved futile. The first case he filed in 1995 was for quieting of title, recovery of possession and damages against the DAR, LBP, Register of Deeds, and the farmerbeneficiaries.[21] In its final and executory Decision,[22] the CA sustained the validity of the CLOAs.[23] The relevant portions of the Decision read: What matters most is the fact that the requirements for Compulsory Acquisition of private lands, especially the indispensable ones, to wit: (1) valuation of the subject property by the proper government agency which is the LBP; (2) DARs Notice of Land Valuation to petitioner and; (3) most importantly, the deposit of the amount of land valuation in the name of petitioner after he rejected the said amount, were substantially complied with in the instant case. Considering therefore that there was material and substantial compliance with the requirements for the Compulsory Acquisition of the subject land, the acquisition of the same is indubitably in order and in accordance with law.[24] Livioco then filed in 1998 a petition for reconveyance before the DAR Regional Office.[25] The case eventually reached the CA, which dismissed the petition on the ground that the validity of the compulsory acquisition had already been decided with finality in the earlier CA case, to wit: As the disputed property was eventually acquired through Compulsory Acquisition, its reconveyance to the petitioners was properly disallowed by the DAR. The certifications by other government agencies that the land was identified as a resettlement area [are] of no avail as the DAR is vested with primary jurisdiction to determine and adjudicate agrarian reform matters and has exclusive original jurisdiction over all matters involving the implementation of agrarian reform. xxxx Indeed, it is to the best interest of the public that the litigation regarding the reconveyance of the disputed property between the same parties for the same grounds must come to an end, the matter having [been] already fully and fairly adjudicated by the DAR, this Court and the Supreme Court which had declined to disturb the judgment of this Court.[26] Upon the request of DAR, LBP made two amendments to the valuation. At first, they reduced the acquired area from 30.6329 hectares to 23.9191 hectares. Later, they increased the acquired area to 24.2088 hectares. The remaining 6.4241 hectares of the property was determined as not compensable because this comprised a residential area, a creek, road, and a chapel.[27] The total value for 24.2088 hectares was P770,904.54. Livioco was informed on August 8, 2001 that the payment was already deposited in cash and agrarian reform bonds and may be withdrawn upon submission of the documentary requirements.[28] Unable to recover his property but unwilling to accept what he believes was an outrageously low valuation of his property, Livioco finally filed a petition for judicial determination of just compensation against DAR, LBP, and the CLOA holders before Branch 56 of the Regional Trial Court (RTC) of Angeles City on December 18, 2001.[29] He maintained that between 1990 and 2000, the area where his property is located has become predominantly residential hence he should be paid his propertys value as such. To prove that his property is now residential, Livioco presented a Certification from the Office of the Municipal Planning and Development Coordinator of the Municipality of Mabalacat that, as per zoning ordinance, Liviocos land is located in an area where the dominant land use is residential.[30] He also presented certifications from the Housing and Land Use Regulatory Board,[31] the Mt. Pinatubo Commission,[32] and the National Housing Authority[33] that his property is suitable for a resettlement area or for socialized housing. None of these plans pushed through.

3


4Livioco then presented evidence to prove the value of his property as of 2002. According to his sworn valuation, his property has a market value of P700.00/square meter.[34] He also presented the Bureau of Internal Revenue (BIR) zonal value for residential lands in Dapdap, as ranging from P150.00 to P200.00/square meter.[35] He then presented Franklin Olay (Olay), chief appraiser of the Rural Bank of Mabalacat, who testified[36] and certified[37] that he valued the property at P800.00 per square meter, whether or not the property is residential. Olay explained that he arrived at the said value by asking the buyers of adjacent residential properties as to the prevailing selling price in the area.[38] There was also a certification from the Pinatubo Project Management Office that Liviocos property was valued at P300.00/square meter.[39] Livioco prayed that just compensation be computed at P700.00/square meter.[40] Only LBP filed its Answer[41] and participated in the trial. It justified the P3.21/square meter valuation of the property on the ground that it was made pursuant to the guidelines in RA 6657 and DAR Administrative Order No. 3, series of 1991. LBP objected to respondents theory that his property should be valued as a residential land because the same was acquired for agricultural purposes, not for its potential for conversion to other uses.[42] LBP presented its agrarian affairs specialist who testified[43] that, due to the increase in the acquired area, she was assigned to amend the claim of Livioco. She computed the total value thereof at P770,904.54, using the DAR Administrative Order No. 3, series of 1991.[44] The only other witness of LBP was its lawyer, who explained the legal basis for the DAR administrative orders and the factors for land valuation provided in Section 17 of RA 6657.[45] Ruling of the Regional Trial Court Apparently aware that neither party presented relevant evidence for the proper computation of the just compensation, the trial court issued its April 2, 2003 Order requiring the reception of additional evidence: A perusal of the record of this case as well as the evidence adduced by the parties shows that the facts required for the proper computation and/or determination of just compensation for the plaintiffs property i.e., land value of the property in accordance with the Listasaka, capitalized net income, comparable sales and market value pursuant to the corresponding tax declaration, are unavailable and insufficient. WHEREFORE, for the Court to properly determine and fix the just compensation to be accorded to [respondents] property, the reopening of this case for the purpose of the presentation of additional evidence is hereby ordered. Let the reception of aforesaid additional evidence be set on April 22, 2003 at 8:30 am. x x x x[46] Based on the records, the next hearing took place on July 10, 2003 where none of the parties presented additional evidence, whether testimonial or documentary.[47] Nevertheless, the trial court proceeded to rule in favor of Livioco: WHEREFORE, premises considered, the Court hereby renders judgment in favor of the [respondent], Enrique Livioco, and against the Department of Agrarian Reform and the Land Bank of the Philippines with a determination that the just compensation of Liviocos property, consisting of 24.2088 hectares located at Mabalacat, Pampanga is worth Php700.00 per square meter. Defendants Department of Agrarian Reform and Land Bank of the Philippines are, therefore, ordered to pay [respondent] the amount of Php700.00 per square meter multiplied by 24.2088 hectares representing the entire area taken by the government from the plaintiff.[48] The trial court was of the opinion that Livioco was able to prove the higher valuation of his property with a preponderance of evidence. In contrast, there was a dearth of evidence to support LBPs P3.21 per square meter valuation of the property. Not a singledocumentary evidence was presented to substantiate its valuation. LBP sought a reconsideration[49] of the adverse decision arguing that the court should have considered the factors appearing in Section 17. It stressed that in failing to consider the propertys productive capacity (capitalized net income), the court placed the farmerbeneficiaries in a very difficult position. They would not be able to pay off the just compensation for their lands because it is valued way beyond its productive capacity. The same was denied by the trial court.[50] Upon respondents motion, the lower court ordered LBP on March 29, 2004 to release as initial cash down payment the amount of P827,943.48, inclusive of legal interest accruing from the time of taking on September 20, 1991 (the date when LBP informed the Register of Deeds that it has earmarked the said amount in favor of Livioco).[51] LBP sought a reconsideration of the said order. It clarified that the just compensation deposited by LBP in the account of respondent was only P770,904.54 for the 24.2088 hectares. It likewise asked that the release of the deposit be subject to respondents compliance with the release requirements of the ownership documents.[52] The records are silent as to the courts action on the motion as well as to the execution of this order. Ruling of the Court of Appeals[53] Petitioner turned to the CA to no avail. The CA affirmed the trial courts decision in toto. First it held that factual findings of the trial courts are entitled to respect. It held that the factors for determining just compensation, set out in Section 17 of RA 6657, were all considered by the trial court in arriving at its decision. It stated that among the relevant evidence considered were Liviocos sworn valuation, tax declarations, zonal value, actual use of the property, and the socio-economic benefits contributed by the government to the property. It likewise noted that the taking of Liviocos property coincided with the Mt. Pinatubo eruption in 1991, which event affected its valuation.[54] Pursuant to Section 18(1)(b) of RA 6657, the CA ordered LBP to pay 30% of the purchase price in cash, while the balance may be paid in government financial instruments negotiable at any time.[55] A motion for reconsideration[56] was filed on September 29, 2005, which was denied in a Resolution[57] dated December 5, 2005. Hence, this petition. Petitioners arguments

4


5concepts when it affirmed the trial courts decision? We find that it did not. As to the character of the property The trial and appellate courts valued respondents property as a residential land worth P700.00 per square meter. They considered the use for the property as having changed from agricultural in 1988 (when Livioco offered it to DAR) to residential by 2002 (allegedly due to the eruption of Mt. Pinatubo). Both courts erred in treating the land as residential and accepting the change in the character of the property, without any proof that authorized land conversion had taken place. In expropriation cases (including cases involving lands for agrarian reform), the propertys character refers to its actual use at the time of taking,[69] not its potential uses.[70] Respondent himself admitted that his property was agricultural at the time he offered it for sale to DAR in 1988. In his letter to the DAR in 1988, respondent manifested that his land is agricultural and suitable for agricultural purposes, although it stood adjacent to residential properties.[71] Moreover, it has been conclusively decided by final judgment in the earlier cases[72] filed by respondent that his property was validly acquired under RA 6657 and validly distributed to agrarian reform beneficiaries. Since the coverage of RA 6657 only extends to agricultural lands, respondents property should be conclusively treated as an agricultural land and valued as such. The lower courts erred in ruling that the character or use of the property has changed from agricultural to residential, because there is no allegation or proof that the property was approved for conversion to other uses by DAR. It is the DAR that is mandated by law to evaluate and to approve land use conversions[73] so as to prevent fraudulent evasions from agrarian reform coverage. Even reclassification[74] and plans for expropriation[75] by local government units (LGUs) will not ipso facto convert an agricultural property to residential, industrial or commercial. Thus, in the absence of any DAR approval for the conversion of respondents property or an actual expropriation by an LGU, it cannot be said that the character or use of said property changed from agricultural to residential. Respondents property remains agricultural and should be valued as such. Hence, the CA and the trial court had no legal basis for considering the subject propertys value as residential. Respondents evidence of the value of his land as residential property (which the lower courts found to be preponderant) could, at most, refer to the potential use of the property. While the potential use of an expropriated property is sometimes considered in cases where there is a great improvement in the general vicinity of the expropriated property,[76] it should never control the determination of just compensation (which appears to be what the lower courts have erroneously done). The potential use of a property should not be the principal criterion for determining just compensation for this will be contrary to the well-settled doctrine that the fair market value of an expropriated property is determined by its character and its price at the time of taking, not its potential uses. If at all, the potential use of the property or its adaptability for conversion in the future is a factor, not the ultimate in determining just compensation.[77] The proper approach should have been to value respondents property as an agricultural land, which value may be adjusted in light of the improvements in the Municipality of Mabalacat. Valuing the property as a residential land (as the lower courts have done) is not the

In this Petition before us, LBP assails the CAs assent to the valuation of Liviocos property as a residential land. It maintains that it is not the States policy to purchase residential land. Since the property was acquired under the CARP, it had to be valued as an agricultural land.[58] Moreover, the assumption that Liviocos property has a residential use is entirely speculative and baseless because none of the government plans to use it as a residential land was carried out.[59] LBP also assails the Decision of the trial court which valued the land as of 1997 when the rule is that just compensation must be valued at the time of taking, which in this case was in 1988. By considering events that transpired after 1988, the court obviously relied on factors that were not in existence at the time of taking.[60] LBP further argues that the trial court should have given more weight to its land valuation because it is the authorized agency recognized by the legislature as having expertise on the matter.[61] LBP insists that the Claim Valuation and Processing Form that it presented before the appellate court clearly established the area covered, the land use or crop planted, the average price/hectare and the total value of the subject land. LBP describes this document as clear and convincing evidence of the correctness of its valuation.[62] LBP likewise assails the lower courts valuation on the ground that they disregarded the factors set out in Section 17 of RA 6657 for the determination of just compensation. It argues that the factors stated in that provision are exclusive and the courts cannot consider factors that are not included therein.[63] Respondents arguments Respondent argues that by seeking a review of the just compensation, LBP is raising a question of fact, which entails an examination of the probative value of the evidence presented by the parties.[64] He points out that LBP is merely reiterating the arguments already presented in its motion for reconsideration before the CA, which makes the instant petition dilatory.[65] Respondent then argues that, with respect to the determination of just compensation, courts are not bound by the findings of administrative agencies such as LBP. Courts are the final authority in this matter. LBPs valuation is only preliminary and it has the duty to prove to the trial courts the veracity of its valuation. In the instant case, the trial court decided based on the evidence presented but found LBPs valuation unsubstantiated.[66] He then prays for the dismissal of the instant petition for review.[67] Issue Was the compensation for respondents property determined in accordance with law? Our Ruling

5

For purposes of just compensation, the fair market value of an expropriated property is determined by its character and its price at the time of taking.[68] There are three important concepts in this definition the character of the property, its price, and the time of actual taking. Did the appellate court properly consider these three


6correct approach, for reasons explained above. It would also be contrary to the social policy of agrarian reform, which is to free the tillers of the land from the bondage of the soil without delivering them to the new oppression of exorbitant land valuations. Note that in lands acquired under RA 6657, it is the farmer-beneficiaries who will ultimately pay the valuations paid to the former land owners (LBP merely advances the payment).[78] If the farmer-beneficiaries are made to pay for lands valued as residential lands (the valuation for which is substantially higher than the valuation for agricultural lands), it is not unlikely that such farmers, unable to keep up with payment amortizations, will be forced to give up their landholdings in favor of the State or be driven to sell the property to other parties. This may just bring the State right back to the starting line where the landless remain landless and the rich acquire more landholdings from desperate farmers. The CA also erroneously considered the Mt. Pinatubo eruption in 1991 as converting the use for respondents property from agricultural to residential. We find no basis for the appellate courts conclusion. First, as already explained, there was no conversion order from DAR, or even an application for conversion with DAR, to justify the CAs decision to treat the property as residential. Second, respondent himself testified that his property was not affected by the volcanic ashfall,[79] which can only mean that its nature as an agricultural land was not drastically affected. The Mt. Pinatubo eruption only served to make his property attractive to government agencies as a resettlement area, but none of these government plans panned out; hence, his property remained agricultural. Third, the circumstance that respondents property was surrounded by residential subdivisions was already in existence when he offered it for sale sometime between 1987 and 1988. The VOS form that respondent accomplished described his property as being located adjacent to residential subdivisions. It was not therefore a drastic change caused by volcanic eruption. All together, these circumstances negate the CAs ruling that the subject property should be treated differently because of the natural calamity. As to the price: Applying Section 17 of RA 6657 The trial and appellate courts also erred in disregarding Section 17 of RA 6657[80] in their determination of just compensation. Section 17 of RA 6657 provides: Sec. 17.Determination of Just Compensation. In determining just compensation, the cost of acquisition of the land, the current value of the like properties, its nature, actual use and income, the sworn valuation by the owner, the tax declarations, and the assessments made by government assessors shall be considered. The social and economic benefits contributed by the farmers and the farmworkers and by the Government to the property as well as the non-payment of taxes or loans secured from any government financing institution on the said land shall be considered as additional factors to determine its valuation. Jurisprudence is replete with reminders to special agrarian courts to strictly adhere to the factors set out in Section 17 of RA 6657.[81] rule on the case without actually receiving such relevant evidence. Instead, the trial court, as affirmed by the CA, ruled in favor of respondent based on preponderance of evidence, regardless of the fact that the evidence presented by respondent were not really relevant to the factors mentioned in section 17 of RA 6657. The CA ruled that the trial court took into account all the factors in Section 17 of RA 6657. We disagree. Going over the factors in Section 17, it is clear that almost all were not properly considered and some positively ignored. For instance: (a) The cost of acquisition was not even inquired into. It would not have been difficult to require respondent to present evidence of the propertys price when he acquired the same. (b) As to the nature of the property, it has already been explained that the lower courts erroneously treated it as residential rather than agricultural. (c) Also, no heed was given to the current value of like properties. Since respondents property is agricultural in nature, like properties in this case would be agricultural lands, preferably also sugarcane lands, within the municipality or adjacent municipalities. But the chief appraiser of the Rural Bank of Mabalacat testified that he considered the value of adjacent residential properties, not like properties as required under the law. Comparing respondents agricultural property to residential properties is not what the law envisioned. (d) The factor of actual use and income of the property was also ignored; what was instead considered was the propertys potential use. Thus, we cannot accept the valuation by the lower courts, as it is not in accordance with Section 17 of RA 6657. It was based on respondents evidence which were irrelevant or off-tangent to the factors laid down by Section 17. However, we also cannot accept the valuation proffered by LBP for lack of proper substantiation. LBP argues that its valuation should be given more weight because it is the recognized agency with expertise on the matter, but this same argument had been struck down in Landbank of the Philippines v. Luciano.[82] The Court ruled that LBPs authority is only preliminary and the landowner who disagrees with the LBPs valuation may bring the matter to court for a judicial determination of just compensation. The RTCs, organized as special agrarian courts, are the final adjudicators on the issue of just compensation.[83] We have ruled in several cases that in determining just compensation, LBP must substantiate its valuation. In Luciano, the Court held: LAND BANKs valuation of lands covered by CARL is considered only as an initial determination, which is not conclusive, as it is the RTC, sitting as a SAC, that should make the final determination of just compensation, taking into consideration the factors enumerated in Section 17 of RA 6657 and the applicable DAR regulations. Land Banks valuation had to be substantiated during the hearing before it could be considered sufficient in accordance with Section 17 of RA 6657 and DAR AO No. x x x[8 It is not enough that the landowner fails to prove a higher valuation for the property; LBP must still prove the correctness of its claims.[85] In the absence of such substantiation, the case may have to be remanded for the reception of evidence.[86] In the case at bar, we find that LBP did not sufficiently substantiate its valuation. While LBP insists that it strictly followed the statutory provision and its relevant implementing guidelines in arriving at its

6

By issuing its April 2, 2003 Order requiring the reception of additional evidence, the trial court revealed its awareness of the importance of adhering to Section 17 of RA 6657. It recognized that the evidence presented by the parties were insufficient to arrive at the just compensation and that the necessary evidence were unavailable for its consideration. For some reason, however, the trial court proceeded to


7valuation, the Court notes the lack of evidence to prove the veracity of LBPs claims. LBP merely submitted its computation to the court without any evidence on record, whether documentary or testimonial, that would support the correctness of the values or data used in such computation. LBP presented two of its officials, but their testimonies were hardly of any use. The first witness only testified that she prepared the documents, computed the value, and had the same approved by her superior. The other testified that LBP follows Section 17 of RA 6657 and the relevant administrative orders in arriving at its valuations. LBP also offered in evidence the Claims Valuation and Processing Form to show the total valuation[87] of the property. The effort was however futile because LBP did not prove the correctness of the values or data contained in the said Form. The computation in the Form may be mathematically correct, but there is no way of knowing if the values or data used in the computation are true. For this Court to accept such valuation would be jumping to a conclusion without anything to support it.[88] Remand of the case Given that both parties failed to adduce evidence of the propertys value as an agricultural land at the time of taking, it is premature for the Court to make a final decision on the matter. The barren records of this case leave us in no position to resolve the dispute. Not being a trier of facts, the Court cannot also receive new evidence from the parties that would aid in the prompt resolution of this case. We are thus constrained to remand the case to the trial court for the reception of evidence and determination of just compensation in accordance with Section 17 of RA 6657. Guidelines in the remand of the case The trial court should value the property as an agricultural land. It is reminded to adhere strictly to the doctrine that just compensation must be valued at the time of taking. The time of taking[89] is the time when the landowner was deprived of the use and benefit of his property, such as when title is transferred to the Republic. In the instant case, the records are silent as to the date when title was transferred to the Republic. However, we can take guidance from the findings contained in the final and executory decision in CAGR SP No. 45486, which ruled on the validity of the DAR acquisition and is binding on both Livioco and LBP. The said Decision states that between 1993 and 1994, the Republic[,] through DAR[,] took possession of the subject portion of [Liviocos] land and awarded the same to [agrarian reform beneficiaries] who were issued Certificates of Land Ownership Award sometime in 1994.[90] So as not to lose time in resolving this issue, the Court declares that the evidence to be presented by the parties before the trial court for the valuation of the property must be based on the values prevalent in 1994 for like agricultural lands. The evidence must conform to Section 17 of RA 6657 and, as far as practicable, to DAR Administrative Order No. 6, series of 1992, as amended by DAR Administrative Order No. 11, series of 1994.[91] Given the expertise of the DAR on the matter, due reliance on DAR Administrative Orders is encouraged; but, as the Administrative Orders themselves recognize, there are situations where their application is not practicable or possible. If the cited factors in the DAR Administrative Order are absent, irrelevant, or unavailable, the trial court should exercise judicial discretion and make its own computation of the just compensation based on the factors set in Section 17 of RA 6657. The trial court may impose interest on the just compensation[92] as may be warranted by the circumstances of the case and based on prevailing jurisprudence. The trial court is reminded that the practice of earmarking funds and opening trust accounts has been rejected by the Court for purposes of effecting payment;[93] hence, it must not be considered as valid payment. In the event that the respondent had already withdrawn the amount deposited in the LBP as required by the trial courts March 29, 2004 Order,[94] the withdrawn amount should be deducted from the final land valuation to be paid by LBP. In case the release required by the trial courts March 29, 2004 Order has not yet been effected, the trial courts first order of business should be to require LBPs immediate compliance therewith.[95] WHEREFORE, premises considered, the petition is DENIED insofar as it seeks to have the Land Bank of the Philippines valuation of the subject property sustained. The assailed August 30, 2005 Decision of the Court of Appeals and its December 5, 2005 Resolution in CA-G.R. SP No. 83138 are REVERSED and SET ASIDE for lack of factual and legal basis. Civil Case No. 10405 is REMANDED to Branch 56 of the Regional Trial Court[96] of Angeles City for reception of evidence on the issue of just compensation. The trial court is directed to determine the just compensation in accordance with the guidelines set in this Decision. The trial court is further directed to conclude the proceedings and to submit to this Court a report on its findings and recommended conclusions within sixty (60) days from notice of this Decision.[97] SO ORDERED. EN BANC APO FRUITS CORPORATION and HIJO PLANTATION, INC., Petitioners versus LAND BANK OF THE PHILIPPINES, Respondent. G.R. No. 164195 Present: CORONA, C.J., *CARPIO, CARPIO MORALES, velasco, JR., NACHURA, leonardo-de castro, brion, **PERALTA, BERSAMIN, DEL CASTILLO, ***ABAD, VILLARAMA, JR.,

7


8perez, mendoza, and sereno, JJ. Promulgated: October 12, 2010 x----------------------------------------------------------------------x RESOLUTION BRION, J.: We resolve the petitioners motion for reconsideration addressing our Resolution of December 4, 2009 whose dispositive portion directs: WHEREFORE, the Court denies the petitioners second motion for reconsideration (with respect to the denial of the award of legal interest and attorneys fees), and reiterates the decision dated February 6, 2007 and the resolution dated December 19, 2007 of the Third Division. For a fuller and clearer presentation and appreciation of this Resolution, we hark back to the roots of this case. Factual Antecedents Apo Fruits Corporation (AFC) and Hijo Plantation, Inc. (HPI), together also referred to as petitioners, were registered owners of vast tracks of land; AFC owned 640.3483 hectares, while HPI owned 805.5308 hectares. On October 12, 1995, they voluntarily offered to sell these landholdings to the government via Voluntary Offer to Sell applications filed with the Department of Agrarian Reform (DAR). On October 16, 1996, AFC and HPI received separate notices of land acquisition and valuation of their properties from the DARs Provincial Agrarian Reform Officer (PARO). At the assessed valuation of P165,484.47 per hectare, AFCs land was valued at P86,900,925.88, while HPIs property was valued at P164,478,178.14. HPI and AFC rejected these valuations for being very low. In its follow through action, the DAR requested the Land Bank of the Philippines (LBP) to deposit P26,409,549.86 in AFCs bank account and P45,481,706.76 in HPIs bank account, which amounts the petitioners then withdrew. The titles over AFC and HPIs properties were thereafter cancelled, and new ones were issued on December 9, 1996 in the name of the Republic of the Philippines. On February 14, 1997, AFC and HPI filed separate petitions for determination of just compensation with the DAR Adjudication Board (DARAB). When the DARAB failed to act on these petitions for more than three years, AFC and HPI filed separate complaints for determination and payment of just compensation with the Regional Trial Court (RTC) of Tagum City, acting as a Special Agrarian Court. These complaints were subsequently consolidated. On September 25, 2001, the RTC resolved the consolidated cases, fixing the just compensation for the petitioners 1,338.6027 hectares of land[1] at P1,383,179,000.00, with interest on this amount at the prevailing market interest rates, computed from the taking of the properties on December 9, 1996 until fully paid, minus the amounts the petitioners already received under the initial valuation. The RTC also awarded attorneys fees. LBP moved for the reconsideration of the decision. The RTC, in its order of December 5, 2001, modified its ruling and fixed the interest at the rate of 12% per annum from the time the complaint was filed until finality of the decision. The Third Division of this Court, in its Decision of February 6, 2007, affirmed this RTC decision. On motion for reconsideration, the Third Division issued its Resolution of December 19, 2007, modifying its February 6, 2007 Decision by deleting the 12% interest due on the balance of the awarded just compensation. The Third Division justified the deletion by the finding that the LBP did not delay the payment of just compensation as it had deposited the pertinent amounts due to AFC and HPI within fourteen months after they filed their complaints for just compensation with the RTC. The Court also considered that AFC had already collected approximately P149.6 million, while HPI had already collected approximately P262 million from the LBP. The Third Division also deleted the award of attorneys fees. All parties moved for the reconsideration of the modified ruling. The Court uniformly denied all the motions in its April 30, 2008 Resolution. Entry of Judgment followed on May 16, 2008. Notwithstanding the Entry of Judgment, AFC and HPI filed the following motions on May 28, 2008: (1) Motion for Leave to File and Admit Second Motion for Reconsideration; (2) Second Motion for Reconsideration, with respect to the denial of the award of legal interest and attorneys fees; and (3) Motion to Refer the Second Motion for Reconsideration to the Honorable Court En Banc. The Third Division found the motion to admit the Second Motion for Reconsideration and the motion to refer this second motion to the Court En Banc meritorious, and accordingly referred the case to the Court En Banc. On September 8, 2009, the Court En Banc accepted the referral. The Court En Banc Resolution On December 4, 2009, the Court En Banc, by a majority vote, denied the petitioners second motion for reconsideration based on two considerations. First, the grant of the second motion for reconsideration runs counter to the immutability of final decisions. Moreover, the Court saw no reason to recognize the case as an exception to the immutability principle as the petitioners private claim for the payment of interest does not qualify as either a substantial or transcendental matter or an issue of paramount public interest. Second, on the merits, the petitioners are not entitled to recover interest on the just compensation and attorneys fees because they caused the delay in the payment of the just compensation due them; they erroneously filed their complaints with the DARAB when they should have directly filed these with the RTC acting as an agrarian court. Furthermore, the Court found it significant that the LBP deposited the pertinent amounts in the petitioners favor within fourteen months after the petitions were filed with the RTC. Under these circumstances, the Court found no unreasonable delay on the part of LBP to warrant the award of 12% interest. The Chico-Nazario Dissent

8


9Justice Minita V. Chico-Nazario,[2] the ponente of the original December 19, 2007 Resolution (deleting the 12% interest), dissented from the Court En Bancs December 4, 2009 Resolution. On the issue of immutability of judgment, Justice Chico-Nazario pointed out that under extraordinary circumstances, this Court has recalled entries of judgment on the ground of substantial justice. Given the special circumstances involved in the present case, the Court En Banc should have taken a second hard look at the petitioners positions in their second motion for reconsideration, and acted to correct the clearly erroneous December 19, 2007 Resolution. Specifically, Justice Chico-Nazario emphasized the obligation of the State, in the exercise of its inherent power of eminent domain, to pay just compensation to the owner of the expropriated property. To be just, the compensation must not only be the correct amount to be paid; it must also be paid within a reasonable time from the time the land is taken from the owner. If not, the State must pay the landowner interest, by way of damages, from the time the property was taken until just compensation is fully paid. This interest, deemed a part of just compensation due, has been established by prevailing jurisprudence to be 12% per annum. On these premises, Justice Nazario pointed out that the government deprived the petitioners of their property on December 9, 1996, and paid the balance of the just compensation due them only on May 9, 2008. The delay of almost twelve years earned the petitioners interest in the total amount of P1,331,124,223.05. Despite this finding, Justice Chico-Nazario did not see it fit to declare the computed interest to be totally due; she found it unconscionable to apply the full force of the law on the LBP because of the magnitude of the amount due. She thus reduced the awarded interest to P400,000,000.00, or approximately 30% of the computed interest. The Present Motion for Reconsideration In their motion to reconsider the Court En Bancs December 4, 2009 Resolution (the present Motion for Reconsideration), the petitioners principally argue that: (a) the principle of immutability of judgment does not apply since the Entry of Judgment was issued even before the lapse of fifteen days from the parties receipt of the April 30, 2008 Resolution and the petitioners timely filed their second motion for reconsideration within fifteen days from their receipt of this resolution; (b) the April 30, 2008 Resolution cannot be considered immutable considering the special and compelling circumstances attendant to the present case which fall within the exceptions to the principle of immutability of judgments; (c) the legal interest due is at 12% per annum, reckoned from the time of the taking of the subject properties and this rate is not subject to reduction. The power of the courts to equitably reduce interest rates applies solely to liquidated damages under a contract and not to interest set by the Honorable Court itself as due and owing in just compensation cases; and (d) the Honorable Courts fears that the interest payments due to the petitioners will produce more harm than good to the system of agrarian reform are misplaced and are based merely on conjectures. the present case; (b) the LBP is not guilty of undue delay in the payment of just compensation as the petitioners were promptly paid once the Court had determined the final value of the properties expropriated; (c) the Supreme Court rulings invoked by the petitioners are inapplicable to the present case; (d) since the obligation to pay just compensation is not a forbearance of money, interest should commence only after the amount due becomes ascertainable or liquidated, and the 12% interest per annum applies only to the liquidated amount, from the date of finality of judgment; (e) the imposition of 12% interest on the balance of P971,409,831.68 is unwarranted because there was no unjustified refusal by LBP to pay just compensation, and no contractual breach is involved; (f) the deletion of the attorneys fees equivalent to 10% of the amount finally awarded as just compensation is proper; (g) this case does not involve a violation of substantial justice to justify the alteration of the immutable resolution dated December 19, 2007 that deleted the award of interest and attorneys fees. The Courts Ruling We find the petitioners arguments meritorious and accordingly GRANT the present motion for reconsideration. Just compensation a Basic Limitation on the States Power of Eminent Domain At the heart of the present controversy is the Third Divisions December 19, 2007 Resolution which held that the petitioners are not entitled to 12% interest on the balance of the just compensation belatedly paid by the LBP. In the presently assailed December 4, 2009 Resolution, we affirmed the December 19, 2007 Resolutions findings that: (a) the LBP deposited pertinent amounts in favor of the petitioners within fourteen months after they filed their complaint for determination of just compensation; and (b) the LBP had already paid the petitioners P411,769,168.32. We concluded then that these circumstances refuted the petitioners assertion of unreasonable delay on the part of the LBP. A re-evaluation of the circumstances of this case and the parties arguments, viewed in light of the just compensation requirement in the exercise of the States inherent power of eminent domain, compels us to re-examine our findings and conclusions. Eminent domain is the power of the State to take private property for public use.[3] It is an inherent power of State as it is a power necessary for the States existence; it is a power the State cannot do without.[4] As an inherent power, it does not need at all to be embodied in the Constitution; if it is mentioned at all, it is solely for purposes of limiting what is otherwise an unlimited power. The limitation is found in the Bill of Rights[5] that part of the Constitution whose provisions all aim at the protection of individuals against the excessive exercise of governmental powers. Section 9, Article III of the 1987 Constitution (which reads No private property shall be taken for public use without just compensation.) provides two essential limitations to the power of eminent domain, namely, that (1) the purpose of taking must be for public use and (2) just compensation must be given to the owner of the private property. It is not accidental that Section 9 specifies that compensation should be just as the safeguard is there to ensure a balance property is not to be taken for public use at the expense of private interests; the public,

9

The Comment of the Land Bank of the Philippines The LBP commented on the petitioners motion for reconsideration on April 28, 2010. It maintained that: (a) the doctrine of immutability of the decisions of the Supreme Court clearly applies to


10through the State, must balance the injury that the taking of property causes through compensation for what is taken, value for value. Nor is it accidental that the Bill of Rights is interpreted liberally in favor of the individual and strictly against the government. The protection of the individual is the reason for the Bill of Rights being; to keep the exercise of the powers of government within reasonable bounds is what it seeks.[6] The concept of just compensation is not new to Philippine constitutional law,[7] but is not original to the Philippines; it is a transplant from the American Constitution.[8] It found fertile application in this country particularly in the area of agrarian reform where the taking of private property for distribution to landless farmers has been equated to the public use that the Constitution requires. In Land Bank of the Philippines v. Orilla,[9] a valuation case under our agrarian reform law, this Court had occasion to state: Constitutionally, "just compensation" is the sum equivalent to the market value of the property, broadly described as the price fixed by the seller in open market in the usual and ordinary course of legal action and competition, or the fair value of the property as between the one who receives and the one who desires to sell, it being fixed at the time of the actual taking by the government. Just compensation is defined as the full and fair equivalent of the property taken from its owner by the expropriator. It has been repeatedly stressed by this Court that the true measure is not the taker's gain but the owner's loss. The word "just" is used to modify the meaning of the word "compensation" to convey the idea that the equivalent to be given for the property to be taken shall be real, substantial, full and ample.[10] [Emphasis supplied.] In the present case, while the DAR initially valued the petitioners landholdings at a total of P251,379,104.02,[11] the RTC, acting as a special agrarian court, determined the actual value of the petitioners landholdings to be P1,383,179,000.00. This valuation, a finding of fact, has subsequently been affirmed by this Court, and is now beyond question. In eminent domain terms, this amount is the real, substantial, full and ample compensation the government must pay to be just to the landowners. fair exchange of values at the time of taking; in fact, the LBPs actual deposit could not be said to be substantial even from the original LBP valuation of P251,379,103.90.

Thus, the deposits might have been sufficient for purposes of the immediate taking of the landholdings but cannot be claimed as amounts that would excuse the LBP from the payment of interest on the unpaid balance of the compensation due. As discussed at length below, they were not enough to compensate the petitioners for the potential income the landholdings could have earned for them if no immediate taking had taken place. Under the circumstances, the State acted oppressively and was far from just in their position to deny the petitioners of the potential income that the immediate taking of their properties entailed. Just Compensation from the Prism of the Element of Taking. Apart from the requirement that compensation for expropriated land must be fair and reasonable, compensation, to be just, must also be made without delay.[12] Without prompt payment, compensation cannot be considered "just" if the property is immediately taken as the property owner suffers the immediate deprivation of both his land and its fruits or income. This is the principle at the core of the present case where the petitioners were made to wait for more than a decade after the taking of their property before they actually received the full amount of the principal of the just compensation due them.[13] What they have not received to date is the income of their landholdings corresponding to what they would have received had no uncompensated taking of these lands been immediately made. This income, in terms of the interest on the unpaid principal, is the subject of the current litigation. We recognized in Republic v. Court of Appeals[14] the need for prompt payment and the necessity of the payment of interest to compensate for any delay in the payment of compensation for property already taken. We ruled in this case that: The constitutional limitation of just compensation is considered to be the sum equivalent to the market value of the property, broadly described to be the price fixed by the seller in open market in the usual and ordinary course of legal action and competition or the fair value of the property as between one who receives, and one who desires to sell, i[f] fixed at the time of the actual taking by the government. Thus, if property is taken for public use before compensation is deposited with the court having jurisdiction over the case, the final compensation must include interest[s] on its just value to be computed from the time the property is taken to the time when compensation is actually paid or deposited with the court. In fine, between the taking of the property and the actual payment, legal interest[s] accrue in order to place the owner in a position as good as (but not better than) the position he was in before the taking occurred.[15] [Emphasis supplied.] Aside from this ruling, Republic notably overturned the Courts previous ruling in National Power Corporation v. Angas[16] which held that just compensation due for expropriated properties is not a loan or forbearance of money but indemnity for damages for the delay in payment; since the interest involved is in the nature of damages rather

Significantly, this final judicial valuation is far removed from the initial valuation made by the DAR; their values differ by P1,131,799,897.00 in itself a very substantial sum that is roughly four times the original DAR valuation. We mention these valuations as they indicate to us how undervalued the petitioners lands had been at the start, particularly at the time the petitioners landholdings were taken. This reason apparently compelled the petitioners to relentlessly pursue their valuation claims all they way up to the level of this Court.

10

While the LBP deposited the total amount of P71,891,256.62 into the petitioners accounts (P26,409,549.86 for AFC and P45,481,706.76 for HPI) at the time the landholdings were taken, these amounts were mere partial payments that only amounted to 5% of the P1,383,179,000.00 actual value of the expropriated properties. We point this aspect out to show that the initial payments made by the LBP when the petitioners landholdings were taken, although promptly withdrawn by the petitioners, could not by any means be considered a


11than earnings from loans, then Art. 2209 of the Civil Code, which fixes legal interest at 6%, shall apply. In Republic, the Court recognized that the just compensation due to the landowners for their expropriated property amounted to an effective forbearance on the part of the State. Applying the Eastern Shipping Lines ruling,[17] the Court fixed the applicable interest rate at 12% per annum, computed from the time the property was taken until the full amount of just compensation was paid, in order to eliminate the issue of the constant fluctuation and inflation of the value of the currency over time. In the Courts own words: The Bulacan trial court, in its 1979 decision, was correct in imposing interest[s] on the zonal value of the property to be computed from the time petitioner instituted condemnation proceedings and took the property in September 1969. This allowance of interest on the amount found to be the value of the property as of the time of the taking computed, being an effective forbearance, at 12% per annum should help eliminate the issue of the constant fluctuation and inflation of the value of the currency over time.[18] [Emphasis supplied.] We subsequently upheld Republics 12% per annum interest rate on the unpaid expropriation compensation in the following cases: Reyes v. National Housing Authority,[19] Land Bank of the Philippines v. Wycoco,[20] Republic v. Court of Appeals,[21] Land Bank of the Philippines v. Imperial,[22] Philippine Ports Authority v. RosalesBondoc,[23] and Curata v. Philippine Ports Authority.[24] These were the established rulings that stood before this Court issued the currently assailed Resolution of December 4, 2009. These would be the rulings this Court shall reverse and de-establish if we maintain and affirm our ruling deleting the 12% interest on the unpaid balance of compensation due for properties already taken. Under the circumstances of the present case, we see no compelling reason to depart from the rule that Republic firmly established. Let it be remembered that shorn of its eminent domain and social justice aspects, what the agrarian land reform program involves is the purchase by the government, through the LBP, of agricultural lands for sale and distribution to farmers. As a purchase, it involves an exchange of values the landholdings in exchange for the LBPs payment. In determining the just compensation for this exchange, however, the measure to be borne in mind is not the taker's gain but the owner's loss[25] since what is involved is the takeover of private property under the States coercive power. As mentioned above, in the value-forvalue exchange in an eminent domain situation, the State must ensure that the individual whose property is taken is not shortchanged and must hence carry the burden of showing that the just compensation requirement of the Bill of Rights is satisfied. The owners loss, of course, is not only his property but also its incomegenerating potential. Thus, when property is taken, full compensation of its value must immediately be paid to achieve a fair exchange for the property and the potential income lost. The just compensation is made available to the property owner so that he may derive income from this compensation, in the same manner that he would have derived income from his expropriated property. If full compensation is not paid for property taken, then the State must make up for the shortfall in the earning potential immediately lost due to the taking, and the absence of replacement property from which income can be derived; interest on the unpaid compensation becomes due as compliance with the constitutional mandate on eminent domain and as a basic measure of fairness. In the context of this case, when the LBP took the petitioners landholdings without the corresponding full payment, it became liable to the petitioners for the income the landholdings would have earned had they not immediately been taken from the petitioners. What is interesting in this interplay, under the developments of this case, is that the LBP, by taking landholdings without full payment while holding on at the same time to the interest that it should have paid, effectively used or retained funds that should go to the landowners and thereby took advantage of these funds for its own account. From this point of view, the December 19, 2007 Resolution deleting the award of 12% interest is not only patently and legally wrong, but is also morally unconscionable for being grossly unfair and unjust. If the interest on the just compensation due in reality the equivalent of the fruits or income of the landholdings would have yielded had these lands not been taken would be denied, the result is effectively a confiscatory action by this Court in favor of the LBP. We would be allowing the LBP, for twelve long years, to have free use of the interest that should have gone to the landowners. Otherwise stated, if we continue to deny the petitioners present motion for reconsideration, we would illogically and without much thought to the fairness that the situation demands uphold the interests of the LBP, not only at the expense of the landowners but also that of substantial justice as well. Lest this Court be a party to this monumental unfairness in a social program aimed at fostering balance in our society, we now have to ring the bell that we have muted in the past, and formally declare that the LBPs position is legally and morally wrong. To do less than this is to leave the demands of the constitutional just compensation standard (in terms of law) and of our own conscience (in terms of morality) wanting and unsatisfied. The Delay in Payment Issue Separately from the demandability of interest because of the failure to fully pay for property already taken, a recurring issue in the case is the attribution of the delay. That delay in payment occurred is not and cannot at all be disputed. While the LBP claimed that it made initial payments of P411,769,168.32 (out of the principal sum due of P1,383,179,000.00), the undisputed fact is that the petitioners were deprived of their lands on December 9, 1996 (when titles to their landholdings were cancelled and transferred to the Republic of the Philippines), and received full payment of the principal amount due them only on May 9, 2008. In the interim, they received no income from their landholdings because these landholdings had been taken. Nor did they receive adequate income from what should replace the income potential of their landholdings because the LBP refused to pay interest while withholding the full amount of the principal of the just compensation due by claiming a grossly low valuation. This sad state continued for more than a decade. In any language and by any measure, a lengthy delay in payment occurred. An important starting point in considering attribution for the delay is that the petitioners voluntarily offered to sell their landholdings to the governments land reform program; they themselves submitted their Voluntary Offer to Sell applications to the DAR, and they fully

11


12cooperated with the governments program. The present case therefore is not one where substantial conflict arose on the issue of whether expropriation is proper; the petitioners voluntarily submitted to expropriation and surrendered their landholdings, although they contested the valuation that the government made. Presumably, had the landholdings been properly valued, the petitioners would have accepted the payment of just compensation and there would have been no need for them to go to the extent of filing a valuation case. But, as borne by the records, the petitioners lands were grossly undervalued by the DAR, leaving the petitioners with no choice but to file actions to secure what is justly due them. The DARs initial gross undervaluation started the cycle of court actions that followed, where the LBP eventually claimed that it could not be faulted for seeking judicial recourse to defend the governments and its own interests in light of the petitioners valuation claims. This LBP claim, of course, conveniently forgets that at the root of all these valuation claims and counterclaims was the initial gross undervaluation by DAR that the LBP stoutly defended. At the end, this undervaluation was proven incorrect by no less than this Court; the petitioners were proven correct in their claim, and the correct valuation more than five-fold the initial DAR valuation was decreed and became final. All these developments cannot now be disregarded and reduced to insignificance. In blunter terms, the government and the LBP cannot now be heard to claim that they were simply protecting their interests when they stubbornly defended their undervalued positions before the courts. The more apt and accurate statement is that they adopted a grossly unreasonable position and the adverse developments that followed, particularly the concomitant delay, should be directly chargeable to them. To be sure, the petitioners were not completely correct in the legal steps they took in their valuation claims. They initially filed their valuation claim before the DARAB instead of immediately seeking judicial intervention. The DARAB, however, contributed its share to the petitioners error when it failed or refused to act on the valuation petitions for more than three (3) years. Thus, on top of the DAR undervaluation was the DARAB inaction after the petitioners landholdings had been taken. This Courts Decision of February 6, 2007 duly noted this and observed: It is not controverted that this case started way back on 12 October 1995, when AFC and HPI voluntarily offered to sell the properties to the DAR. In view of the failure of the parties to agree on the valuation of the properties, the Complaint for Determination of Just Compensation was filed before the DARAB on 14 February 1997. Despite the lapse of more than three years from the filing of the complaint, the DARAB failed to render a decision on the valuation of the land. Meantime, the titles over the properties of AFC and HPI had already been cancelled and in their place a new certificate of title was issued in the name of the Republic of the Philippines, even as far back as 9 December 1996. A period of almost 10 years has lapsed. For this reason, there is no dispute that this case has truly languished for a long period of time, the delay being mainly attributable to both official inaction and indecision, particularly on the determination of the amount of just compensation, to the detriment of AFC and HPI, which to date, have yet to be fully compensated for the properties which are already in the hands of farmer-beneficiaries, who, due to the lapse of time, may have already converted or sold the land awarded to them.

Verily, these two cases could have been disposed with dispatch were it not for LBPs counsel causing unnecessary delay. At the inception of this case, DARAB, an agency of the DAR which was commissioned by law to determine just compensation, sat on the cases for three years, which was the reason that AFC and HPI filed the cases before the RTC. We underscore the pronouncement of the RTC that the delay by DARAB in the determination of just compensation could only mean the reluctance of the Department of Agrarian Reform and the Land Bank of the Philippines to pay the claim of just compensation by corporate landowners. To allow the taking of landowners properties, and to leave them empty-handed while government withholds compensation is undoubtedly oppressive. [Emphasis supplied.] These statements cannot but be true today as they were when we originally decided the case and awarded 12% interest on the balance of the just compensation due. While the petitioners were undisputedly mistaken in initially seeking recourse through the DAR, this agency itself hence, the government committed a graver transgression when it failed to act at all on the petitioners complaints for determination of just compensation. In sum, in a balancing of the attendant delay-related circumstances of this case, delay should be laid at the doorsteps of the government, not at the petitioners. We conclude, too, that the government should not be allowed to exculpate itself from this delay and should suffer all the consequences the delay caused. The LBPs arguments on the applicability of cases imposing 12% interest The LBP claims in its Comment that our rulings in Republic v. Court of Appeals,[26] Reyes v. National Housing Authority,[27] and Land Bank of the Philippines v. Imperial,[28] cannot be applied to the present case. According to the LBP, Republic is inapplicable because, first, the landowners in Republic remained unpaid, notwithstanding the fact that the award for just compensation had already been fixed by final judgment; in the present case, the Court already acknowledged that pertinent amounts were deposited in favor of the landowners within 14 months from the filing of their complaint. Second, while Republic involved an ordinary expropriation case, the present case involves expropriation for agrarian reform. Finally, the just compensation in Republic remained unpaid notwithstanding the finality of judgment, while the just compensation in the present case was immediately paid in full after LBP received a copy of the Courts resolution We find no merit in these assertions. As we discussed above, the pertinent amounts allegedly deposited by LBP were mere partial payments that amounted to a measly 5% of the actual value of the properties expropriated. They could be the basis for the immediate taking of the expropriated property but by no stretch of the imagination can these nominal amounts be considered pertinent enough to satisfy the full requirement of just compensation i.e., the full and fair equivalent of the expropriated property, taking into account its income potential and the foregone income lost because of the immediate taking.

12


13We likewise find no basis to support the LBPs theory that Republic and the present case have to be treated differently because the first involves a regular expropriation case, while the present case involves expropriation pursuant to the countrys agrarian reform program. In both cases, the power of eminent domain was used and private property was taken for public use. Why one should be different from the other, so that the just compensation ruling in one should not apply to the other, truly escapes us. If there is to be a difference, the treatment of agrarian reform expropriations should be stricter and on a higher plane because of the governments societal concerns and objectives. To be sure, the government cannot attempt to remedy the ills of one sector of society by sacrificing the interests of others within the same society. Finally, we note that the finality of the decision (that fixed the value of just compensation) in Republic was not a material consideration for the Court in awarding the landowners 12% interest. The Court, in Republic, simply affirmed the RTC ruling imposing legal interest on the amount of just compensation due. In the process, the Court determined that the legal interest should be 12% after recognizing that the just compensation due was effectively a forbearance on the part of the government. Had the finality of the judgment been the critical factor, then the 12% interest should have been imposed from the time the RTC decision fixing just compensation became final. Instead, the 12% interest was imposed from the time that the Republic commenced condemnation proceedings and took the property. The LBP additionally asserts that the petitioners erroneously relied on the ruling in Reyes v. National Housing Authority. The LBP claims that we cannot apply Reyes because it involved just compensation that remained unpaid despite the finality of the expropriation decision. LBPs point of distinction is that just compensation was immediately paid in the present case upon the Courts determination of the actual value of the expropriated properties. LBP claims, too, that in Reyes, the Court established that the refusal of the NHA to pay just compensation was unfounded and unjustified, whereas the LBP in the present case clearly demonstrated its willingness to pay just compensation. Lastly, in Reyes, the records showed that there was an outstanding balance that ought to be paid, while the element of an outstanding balance is absent in the present case. Contrary to the LBPs opinion, the imposition of the 12% interest in Reyes did not depend on either the finality of the decision of the expropriation court, or on the finding that the NHAs refusal to pay just compensation was unfounded and unjustified. Quite clearly, the Court imposed 12% interest based on the ruling in Republic v. Court of Appeals that x x x if property is taken for public use before compensation is deposited with the court having jurisdiction over the case, the final compensation must include interest[s] on its just value to be computed from the time the property is taken to the time when compensation is actually paid or deposited with the court. In fine, between the taking of the property and the actual payment, legal interest[s] accrue in order to place the owner in a position as good as (but not better than) the position he was in before the taking occurred.[29] This is the same legal principle applicable to the present case, as discussed above. is the rationale for imposing the 12% interest in order to compensate the petitioners for the income they would have made had they been properly compensated for their properties at the time of the taking. Finally, the LBP insists that the petitioners quoted our ruling in Land Bank of the Philippines v. Imperial out of context. According to the LBP, the Court imposed legal interest of 12% per annum only after December 31, 2006, the date when the decision on just compensation became final. The LBP is again mistaken. The Imperial case involved land that was expropriated pursuant to Presidential Decree No. 27,[30] and fell under the coverage of DAR Administrative Order (AO) No. 13.[31] This AO provided for the payment of a 6% annual interest if there is any delay in payment of just compensation. However, Imperial was decided in 2007 and AO No. 13 was only effective up to December 2006. Thus, the Court, relying on our ruling in the Republic case, applied the prevailing 12% interest ruling to the period when the just compensation remained unpaid after December 2006. It is for this reason that December 31, 2006 was important, not because it was the date of finality of the decision on just compensation.

The 12% Interest Rate and the Chico-Nazario Dissent To fully reflect the concerns raised in this Courts deliberations on the present case, we feel it appropriate to discuss the Justice Minita ChicoNazarios dissent from the Courts December 4, 2009 Resolution. While Justice Chico-Nazario admitted that the petitioners were entitled to the 12% interest, she saw it appropriate to equitably reduce the interest charges from P1,331,124,223.05 to P400,000,000.00. In support of this proposal, she enumerated various cases where the Court, pursuant to Article 1229 of the Civil Code,[32] equitably reduced interest charges. We differ with our esteemed colleagues views on the application of equity. While we have equitably reduced the amount of interest awarded in numerous cases in the past, those cases involved interest that was essentially consensual in nature, i.e., interest stipulated in signed agreements between the contracting parties. In contrast, the interest involved in the present case runs as a matter of law and follows as a matter of course from the right of the landowner to be placed in as good a position as money can accomplish, as of the date of taking.[33] Furthermore, the allegedly considerable payments made by the LBP to the petitioners cannot be a proper premise in denying the landowners the interest due them under the law and established jurisprudence. If the just compensation for the landholdings is considerable, this compensation is not undue because the landholdings the owners gave up in exchange are also similarly considerable AFC gave up an aggregate landholding of 640.3483 hectares, while HPIs gave up 805.5308 hectares. When the petitioners surrendered these sizeable landholdings to the government, the incomes they gave up were likewise sizeable and cannot in any way be considered miniscule. The incomes due from these properties, expressed as interest, are what the government should return to the petitioners after the government took over their lands without full payment of just compensation. In other words, the value of the landholdings themselves should be equivalent to the principal sum of the just compensation due; interest is due and should be paid to compensate for the unpaid balance of this principal

13

While the LBP immediately paid the remaining balance on the just compensation due to the petitioners after this Court had fixed the value of the expropriated properties, it overlooks one essential fact from the time that the State took the petitioners properties until the time that the petitioners were fully paid, almost 12 long years passed. This


14sum after taking has been completed. This is the compensation arrangement that should prevail if such compensation is to satisfy the constitutional standard of being just. Neither can LBPs payment of the full compensation due before the finality of the judgment of this Court justify the reduction of the interest due them. To rule otherwise would be to forget that the petitioners had to wait twelve years from the time they gave up their lands before the government fully paid the principal of the just compensation due them. These were twelve years when they had no income from their landholdings because these landholdings have immediately been taken; no income, or inadequate income, accrued to them from the proceeds of compensation payment due them because full payment has been withheld by government. If the full payment of the principal sum of the just compensation is legally significant at all under the circumstances of this case, the significance is only in putting a stop to the running of the interest due because the principal of the just compensation due has been paid. To close our eyes to these realities is to condone what is effectively a confiscatory action in favor of the LBP. That the legal interest due is now almost equivalent to the principal to be paid is not per se an inequitable or unconscionable situation, considering the length of time the interest has remained unpaid almost twelve long years. From the perspective of interest income, twelve years would have been sufficient for the petitioners to double the principal, even if invested conservatively, had they been promptly paid the principal of the just compensation due them. Moreover, the interest, however enormous it may be, cannot be inequitable and unconscionable because it resulted directly from the application of law and jurisprudence standards that have taken into account fairness and equity in setting the interest rates due for the use or forebearance of money. If the LBP sees the total interest due to be immense, it only has itself to blame, as this interest piled up because it unreasonably acted in its valuation of the landholdings and consequently failed to promptly pay the petitioners. To be sure, the consequences of this failure i.e., the enormity of the total interest due and the alleged financial hemorrhage the LBP may suffer should not be the very reason that would excuse it from full compliance. To so rule is to use extremely flawed logic. To so rule is to disregard the question of how the LBP, a government financial institution that now professes difficulty in paying interest at 12% per annum, managed the funds that it failed to pay the petitioners for twelve long years. It would be utterly fallacious, too, to argue that this Court should tread lightly in imposing liabilities on the LBP because this bank represents the government and, ultimately, the public interest. Suffice it to say that public interest refers to what will benefit the public, not necessarily the government and its agencies whose task is to contribute to the benefit of the public. Greater public benefit will result if government agencies like the LBP are conscientious in undertaking its tasks in order to avoid the situation facing it in this case. Greater public interest would be served if it can contribute to the credibility of the governments land reform program through the conscientious handling of its part of this program. As our last point, equity and equitable principles only come into full play when a gap exists in the law and jurisprudence.[34] As we have shown above, established rulings of this Court are in place for full application to the present case. There is thus no occasion for the equitable consideration that Justice Chico-Nazario suggested. The Amount Due the Petitioners as Just Compensation

As borne by the records, the 12% interest claimed is only on the difference between the price of the expropriated lands (determined with finality to be P1,383,179,000.00) and the amount of P411,769,168.32 already paid to the petitioners. The difference between these figures amounts to the remaining balance of P971,409,831.68 that was only paid on May 9, 2008. As above discussed, this amount should bear interest at the rate of 12% per annum from the time the petitioners properties were taken on December 9, 1996 up to the time of payment. At this rate, the LBP now owes the petitioners the total amount of One Billion Three Hundred Thirty-One Million One Hundred Twenty-Four Thousand Two Hundred Twenty-Three and 05/100 Pesos (P1,331,124,223.05), computed as follows: Just Compensation P971,409,831.68 Legal Inte

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