The Supreme Court has affirmed that Land Bank of the Philippines (LBP) is liable for interest on the unpaid balance of just compensation in agrarian reform cases. The Court clarified that the imposition of interest is a matter of law to ensure landowners are placed in as good a position as of the date of taking, and it’s not negated by LBP’s initial valuation deposit. This ruling underscores the principle that landowners must receive full and prompt payment for their land, as required by the Constitution.

Balancing Agrarian Reform and Landowner Rights: A Case of Just Compensation

This case involves a dispute over the just compensation for 69.3857 hectares of land owned by Alfredo Hababag, Sr. and subsequently his heirs, which were subjected to agrarian reform. The central legal question revolves around whether Land Bank of the Philippines (LBP) is liable for interest on the unpaid balance of just compensation, and from what date that interest should be reckoned. The heart of the matter is ensuring that landowners receive just and timely compensation when their properties are taken for public use.

The factual backdrop involves the valuation of the Hababag landholdings, with the Regional Trial Court (RTC) initially setting a compensation based on the Income Productivity Approach. However, the Court of Appeals (CA) overturned this decision, opting instead for the Department of Agrarian Reform (DAR) formula, deemed more reflective of the factors outlined in Section 17 of Republic Act No. 6657 (RA 6657), also known as the Comprehensive Agrarian Reform Law. This divergence in valuation methods led to a significant difference between the initial valuation and the final just compensation, triggering the dispute over interest liability.

LBP argued that it should not be liable for interest because it promptly deposited the initial valuation and because the difference between the initial valuation and the final just compensation was not substantial. The Supreme Court rejected this argument, citing the landmark case of Apo Fruits Corporation vs. LBP, emphasizing that the **substantive payments made by LBP does not negate the landowners interest due to them under the law and established jurisprudence** The Court firmly stated that interest accrues as a matter of law to compensate landowners for the delay in receiving the full value of their property.

In Apo Fruits, the Supreme Court elucidated the principle of just compensation, stating:

[T]he 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.”

The Court also underscored the purpose of agrarian reform, noting that public interest is best served when government agencies conscientiously handle their responsibilities, thereby contributing to the credibility of the land reform program. It’s not simply about the government’s benefit, it’s about ensuring fairness and equity to the landowners affected by the program.

The Supreme Court also tackled the issue of when the interest should start accruing. The court clarified that the interest shall be pegged at the rate of twelve percent (12%) per annum (p.a.) on the unpaid balance, reckoned from the time of taking, or the time when the landowner was deprived of the use and benefit of his property. After June 30, 2013 it was lowered to six percent (6%) p.a. until full payment.

The Court defined the “time of taking” as when title is transferred to the Republic of the Philippines (Republic), or emancipation patents are issued by the government. However, because there was no concrete evidence to show that the Republic had indeed transferred title/s, The Court remanded the records of the case to the Regional Trial Court of Sorsogon City, Branch 52 (RTC), and DIRECTED:

1. The LBP to furnish the RTC certified true copies of the Republic’s title/s; and
2. The RTC to compute the correct amount of legal interests due to the Heirs of Alfredo Hababag, Sr. reckoned from the date of the issuance of the Republic’s title/s.

FAQs

What was the key issue in this case?	The key issue was whether Land Bank of the Philippines (LBP) was liable for interest on the unpaid balance of just compensation for land acquired under agrarian reform.
What is just compensation in agrarian reform cases?	Just compensation refers to the full and fair equivalent of the property taken from a landowner, ensuring they are not impoverished by the land reform program. It must also be paid promptly.
Why did the Supreme Court rule in favor of the landowners?	The Court ruled in favor of the landowners because the LBP had not fully paid the just compensation, and interest is due to compensate for the delay in payment from the time of taking.
What does “time of taking” mean in this context?	“Time of taking” refers to the point when the landowner is deprived of the use and benefit of their property, typically when title is transferred to the Republic or when emancipation patents are issued.
What is the significance of the Apo Fruits case?	The Apo Fruits case established that interest runs as a matter of law from the time of taking to ensure the landowner is placed in as good a position as money can accomplish.
What is the role of the Department of Agrarian Reform (DAR) in this case?	The DAR’s formula for valuation was used by the Court of Appeals to determine the just compensation, which was upheld by the Supreme Court.
What interest rates are applicable in this case?	The applicable interest rate is 12% per annum from the time of taking until June 30, 2013, and 6% per annum thereafter until full payment.
What is the next step after the Supreme Court’s decision?	The case was remanded to the Regional Trial Court (RTC) for the computation of the correct amount of legal interest due to the Heirs of Alfredo Hababag, Sr., based on the date of issuance of the Republic’s titles.

The Supreme Court’s resolution reinforces the principle that just compensation must be truly just and promptly paid, upholding the rights of landowners in agrarian reform cases. Land Bank is obligated to ensure landowners receive full compensation, including interest for any delays, to uphold the integrity and fairness of the agrarian reform program.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Land Bank Philippines vs. Alfredo Hababag, Sr., G.R. Nos. 172387-88, June 08, 2016