FIRST DIVISION

G.R. No. 182431 November 17, 2010

LAND BANK OF THE PHILIPPINES, Petitioner,

vs.
ESTHER ANSON RIVERA, ANTONIO G. ANSON AND CESAR G. ANSON, Respondents.

PEREZ, J.:

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, if 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 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 interests 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.

FACTS:

Rivera are the co-owners of a parcel of agricultural land and later transferred in their
names under Transfer Certificate of Title that was placed under the coverage of Operation
Land Transfer pursuant to Presidential Decree No. 27.
After the Department of Agrarian Reform (DAR) directed payment, LBP approved the
payment of P265,494.20, exclusive of the advance payments made in the form of lease
rental amounting to P75,415.88 but inclusive of 6% increment of P191,876.99 pursuant
to DAR Administrative Order No. 13, series of 1994.

Rivera instituted Civil Case No. 94-03 FOR DETERMINATION AND PAYMENT OF JUST
COMPENSATION BEFORE THE REGIONAL TRIAL COURT (RTC), claiming that the
landholding involved was irrigated with two cropping seasons a year with an average
gross production per season of 100 cavans of 50 kilos/hectare, equivalent of 200
cavans/year/hectare; and that the fair market value of the property was not less that
P130,000.00/hectare, or P2,668,302.00 for the entire landholding of 20.5254 hectares.

LBP filed its answer, stating that rice and corn lands placed under the coverage of
Presidential Decree No. 27 were governed and valued in accordance with the provisions
of Executive Order No. 228 etc.

The RTC rendered its decision, holding: THE JUST COMPENSATION OF THE LAND
PARTLY COVERED BY TCT NO. T-95690 IS FIXED AT PHP1,297,710.63.

Land Bank of the Philippines is hereby ordered to pay Esther Anson, Cesar Anson and
Antonio Anson the aforesaid value of the land, plus interest of 12% per annum or
Php194.36 per day effective October 7, 2004, until the value is fully paid, in cash or in
bond or in any other mode of payment at the option of the landowners in accordance with
Sec. 18, RA 6657.

LBP filed MR – DENIED

LBP next filed a petition for Review to the Court of Appeals then the DECISION DATED
OCTOBER 6, 2004 is MODIFIED, ordering petitioner LAND BANK OF THE PHILIPPINES
to pay to the respondents just compensation (inclusive of interests as of October 6, 2004)
in the amount of P823,957.23, plus interest of 12% per annum on the amount of
P515,777.57, or P61,893.30 per annum, beginning October 7, 2004 until the just
compensation is fully paid in accordance with this decision.

The Court of Appeals pointed out that:

Pursuant to AO 13, considering that the landholding involved herein was tenanted prior
to October 21, 1972, the rate of 6% per annum is imposed, compounded annually from
October 21, 1972 until October 21, 1994, the date of the effectivity of AO 13.

Beyond October 21, 1994, only the simple rate of 6% per annum interest is imposable
until October 6, 2004 (the date of the rendition of the decision of the RTC) on the total
value (that is, P164,059.26 plus the compounded increments up to October 21, 1994) but
minus the lease rentals of P75,415.88.

Only the simple rate of 6% is applicable up to then because the obligation to pay was not
founded on a written agreement that stipulated a different rate of interest. From October
7, 2004 until the full payment, the simple interest rate is raised to 12% per annum.
The reason is that the amount thus determined had by then acquired the character of
forbearance in money.

LBP disagreed with the imposition of 12% interest and its liability to pay the costs of suit.
It filed a motion for reconsideration which was denied in the court of appeal’s resolution
dated March 18, 2008.

Issues:

Whether or not it is valid or lawful to award 12% rate of interest per annum in favor of
respondents notwithstanding the 6% rate interest per annum compounded annually
prescribed under DAR A.O. No. 13, series of 1994, DAR A.O. NO. 02, series of 2004,
and DAR A.O. NO. 06, series of 2008 xxx from November 1994 up to the time of actual
payment.

Issue 1:
At the outset, the Court notes that the parcels of land subject matter of this case were
acquired under In the instant case, while the subject lands were acquired under
Presidential Decree No. 27, the complaint for just compensation was only lodged before
the court on 23 November 2000 or long after the passage of Republic Act No. 6657 in
1998.

Therefore, Section 17 of Republic Act No. 6657 should be the principal basis of the
computation for just compensation.

Citing Republic v. Court of Appeals, the Court affirmed the award of 12% interest on just
compensation due to the landowner. The court decreed:

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, if 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 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 interests 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.

Conformably with the foregoing resolution, this Court rules that a 12% interest per annum
on just compensation, due to the respondents, from the finality of this decision until its
satisfaction, is proper.

WHEREFORE, premises considered, the petition is GRANTED. The decision of the Court of
Appeals in CA G.R. SP No. 87463 dated 9 October 2007 is AFFIRMED with
the MODIFICATION that LBP is hereby held exempted from the payment of costs of suit. In all
other respects, the Decision of the Court of Appeals is AFFIRMED.

Dalawa ka issue ang gi-discuss sa case. Isali ko na lang din.

Issue:

Whether or not it is valid or lawful to adjudge petitioner LBP, which is performing a

governmental function, liable for costs of suit.

Petitioner argument:

It performs a governmental function when it disburses the Agrarian Reform Fund to satisfy
awards of just compensation. Hence, it cannot be made to pay costs in eminent domain
proceedings.

NHA’s argument:
The NHA contends that it is exempt from paying all kinds of fees and charges, because
it performs governmental functions.

Court’s decision:
The Court agrees. LBP does not need to pay cost. It performs governmental functions.

While it has not always been easy to distinguish governmental from proprietary functions,
the Court's declaration in the Decision quoted above is not without basis. Indeed, the
characterization of governmental functions has veered away from the traditional
constituent-ministrant classification that has become unrealistic, if not obsolete.
Justice Isagani A. Cruz avers: "[I]t is now obligatory upon the State itself to promote social
justice, to provide adequate social services to promote a rising standard of living, to afford
protection to labor to formulate and implement urban and agrarian reform programs, and
to adopt other measures intended to ensure the dignity, welfare and security of its citizens.
These functions, while traditionally regarded as merely ministrant and optional,
have been made compulsory by the Constitution."

The relevant provision of the Rules of Court states: RULE 142, “No costs shall be allowed
against the Republic of the Philippines unless otherwise provided by law.”

Based from jurisprudence, LBP is an agency created primarily to provide financial support
in all phases of agrarian reform pursuant to Section 74 of Republic Act (RA) No. 3844
and Section 64 of RA No. 6657.

It is vested with the primary responsibility and authority in the valuation and compensation
of covered landholdings to carry out the full implementation of the Agrarian Reform
Program.

It is evident from the afore-quoted jurisprudence that the role of LBP in the CARP is more
than just the ministerial duty of keeping and disbursing the Agrarian Reform Funds.

As the Court had previously declared, the LBP is primarily responsible for the valuation
and determination of compensation for all private lands. It has the discretion to approve
or reject the land valuation and just compensation for a private agricultural land placed
under the CARP. In case the LBP disagrees with the valuation of land and determination
of just compensation by a party, the DAR, or even the courts, the LBP not only has the
right, but the duty, to challenge the same, by appeal to the Court of Appeals or to this
Court, if appropriate.