LANDBANK OF THE PHILIPPINES v. JOSE T. LAJOM, et al.

G.R. No. 184982, 20 August 2014,SECOND DIVISION (Perlas-Bernabe, J.)

Legal interest, in expropriation cases where there was delay in the payment of just
compensation, is not granted on the computed just compensation; rather, it is a penalty imposed for
damages incurred by the landowner due to the delay in its payment.

A big portion of the land owned by Jose T. Lajom, and his mother, Vicenta
Vda. De Lajom, was placed under the government’s Operation Land Transfer
Program pursuant to P.D. 27 otherwise known as the “Tenant’s Emancipation
Decree”. The Department of Agriculture (DAR), through the Land Bank of the
Philippines (LBP), offered to pay Lajom just compensation but despite its non-
payment, DAR has already granted twelve (12) Emancipation Patents. Lajom
rejected the DAR valuation and alleged that computation of just compensation must
be based on the provision of RA 6657, the “Comprehensive Agrarian Reform Law
of 1988” and not P.D. 27 and/or E.O. 228. LBP alleged that P.D. 27 and E.O. 228
were never abrogated by the passage of RA 6657.

The Regional Trial Court (RTC) rejected the DAR valuation and, under
P.D. 27 and E.O. 228, fixed the just compensation at the total amount of
P2,858,912.00, with legal interest at the rate of 6% p.a. from 1991, when the subject
portion was actually expropriated, until fully paid. The Court of Appeals (CA)
affirmed with modification the RTC Decision. It applied the provisions of RA 6657
as basis in the computation of just compensation, deleted the award of 6% interest
p.a. and ordered petitioner LBP to pay 12% interest on the just compensation by
way of damages from the time of issuance of emancipation patents until fully paid.

ISSUES:

Is interest computed on the just compensation in the nature of damages

when the government delay in its payment?

RULING:

Yes. The Court has previously allowed the grant of legal interest in
expropriation cases where there was delay in the payment of just compensation,
deeming the same to be an effective forbearance on the part of the State. To clarify,
this incremental interest is not granted on the computed just compensation; rather,
it is a penalty imposed for damages incurred by the landowner due to the delay in its
payment.

Thus, legal interest shall be pegged at the rate of 12% p.a. from the time of
taking until June 30, 2013. Thereafter, or beginning July 1, 2013, until fully paid, just
compensation shall earn interest at the new legal rate of 6% p.a., conformably with
the modification on the rules respecting interest rates introduced by Bangko Sentral
ng Pilipinas Monetary Board Circular No. 799, Series of 2013.

UST Law Review, Vol. LIX, No. 1, May 2015