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.

DECISION

PEREZ , J : p

This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure led by Petitioner Land Bank of the Philippines (LBP) assailing the Decision
1 of the Court of Appeals dated 9 October 2007 in CA G.R. SP No. 87463, ordering the
payment by LBP of just compensation and interest in favor of respondents Esther
Anson Rivera, Antonio G. Anson and Cesar G. Anson, and at the same time directed LBP
to pay the costs of suit. Likewise assailed is the Resolution 2 of the Court of Appeals
dated 18 March 2008 denying the Motion for Reconsideration of LBP. 3
The respondents are the co-owners of a parcel of agricultural land embraced by
Original Certi cate of Title No. P-082, and later transferred in their names under
Transfer Certi cate of Title No. T-95690 that was placed under the coverage of
Operation Land Transfer pursuant to Presidential Decree No. 27 in 1972. Only 18.8704
hectares of the total area of 20.5254 hectares were subject of the coverage.
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. 4
On 1 December 1994, the respondents instituted Civil Case No. 94-03 for
determination and payment of just compensation before the Regional Trial Court (RTC),
Branch 3 of Legaspi City, 5 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 led its answer, 6 stating that rice and corn lands placed under the coverage
of Presidential Decree No. 27 7 were governed and valued in accordance with the
provisions of Executive Order No. 228 8 as implemented by DAR Administrative Order
No. 2, Series of 1987 and other statutes and administrative issuances; that the
administrative valuation of lands covered by Presidential Decree No. 27 and Executive
Order No. 228 rested solely in DAR and LBP was the only nancing arm; that the funds
that LBP would use to pay compensation were public funds to be disbursed only in
accordance with existing laws and regulations; that the supporting documents were
not yet received by LBP; and that the constitutionality of Presidential Decree No. 27 and
Executive Order No. 228 was already settled. AICTcE

On 6 October 2004, the RTC rendered its decision, holding:

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 ACCORDINGLY, 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. 9

LBP led a Motion for Reconsideration 1 0 which the RTC denied in its Order
dated 29 October 2004. 1 1
LBP next led a petition for Review to the Court of Appeals docketed as CA G.R.
SP No. 87463. The Court of Appeals rendered a decision dated 9 October 2007, the
fallo of which reads: 1 2
WHEREFORE, 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.

In arriving at its computation, the Court of Appeals explained:

In computing the just compensation of the property, pursuant to Executive Order
No. 228, Sec. 2 thereof, the formula is —

LV = AGP x 2.5 x GSP x A

(LV is Land Valuation; AGP is Average Gross Production; GSP is Government

Support Price and A is the Area of the Land)

WHERE: AGP = 99.36 cavans per hectare

GSP = Php35.00 per cavan
A = 18.8704 hectares
COMPUTATION:
LV = (99.36 x 2.5 x 35.00) 18.8704
LV = 8,694 x 18.8704
LV = Php164,059.26

With increment of 6% interest per annum compounded annually beginning

October 21, 1972 until October 21, 1994 and immediately after said date with 12%
interest per annum until the value is fully paid in accordance with extant
jurisprudence, computed as follows:
To be compounded annually at 6% per annum from October 21, 1972 up to
October 24, 1994. The formula is — SAEHaC

CA = P(1+R)n

(CA is Compounded Amount; P is Principal; R is Rate; and n is the number of

years)

WHERE: P = Php164,059.26
R = 6% per annum
N = 22 years
COMPUTATION:
CA = 164,059.26 x (1+06) 22
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 CA = 164,059.26 x (1.06) 22
CA = 164,059.26 x 3.60353741
CA = Php591,193.68

Plus simple interest of 12% per annum from October 22, 1994 up to October 21,
2003, the formula of which is:

I=PxRxT

(I is the Interest; P is the Principal; R is the Rate and T is the time)

WHERE: P = Php591,193.68
R = 12% per annum
T = 9 years
COMPUTATION:
I = 591,193.68 x 12 x 9
I = 70,943.24 x 9
I = Php638,489.18

(Plus interest of 12% per annum from October 22, 2003 up to October 6, 2004 or a
period of 350 days)

I = (591,193.68 x .12) x 350

——————————
350
I = 194.3605 x 350
I = Php68,027.77
———————
Total Interest Php706,516.95
===========

RECAPITULATION:

Compounded Php591,193.68
Amount
Total Interest 706,516.95
—————————
TOTAL AMOUNT Php1,297,710.63
=============
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 a forbearance in money. 1 3

LBP disagreed with the imposition of 12% interest and its liability to pay the
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 costs of suit. It led a Motion for Reconsideration which was denied in the Court of
Appeals' Resolution dated 18 March 2008.
The Court of Appeals held:
We DENY the petitioner's motion for partial reconsideration for the following
reasons, to wit:
1.Anent the rst ground, the decision of October 9, 2007 has explained in detail
why the obligation of the petitioner should be charged 12% interest. Considering
that the motion fails to persuasively show that a modi cation of the decision
thereon would be justified, we reject such ground for lack of merit.SDHITE

2.Regarding costs of suit, they are allowed to the prevailing party as a matter of
course, unless there be special reasons for the court to decree otherwise (Sec. 1,
Rule 43, Rules of Court). In appeals, the Court has the power to render judgment
for costs as justice may require (Sec. 2, Rule 142, Rules of Court).
In view of the foregoing, the award of costs to the respondents was warranted
under the circumstances. 1 4

Before this Court, LBP raises the same issues for resolution:
I.Is it valid or lawful to award 12% rate of interest per annum in favor of
respondents notwithstanding the 6% rate of 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, ". . . from November 1994 up to the
time of actual payment?
II.Is it valid or lawful to adjudge petitioner LBP, which is performing a
governmental function, liable for costs of suit? 1 5

At the outset, the Court notes that the parcels of land subject matter of this case
were acquired under Presidential Decree No. 27, but the complaint for just
compensation was led in the RTC on 1 December 1994 after Republic Act No. 6657
already took into effect. 1 6 Thus, our pronouncement in LBP v. Soriano 1 7 nds
application. We quote:
. . . [I]f just compensation is not settled prior to the passage of Republic Act No.
6657, it should be computed in accordance with the said law, although the
property was acquired under Presidential Decree No. 27. The xing of just
compensation should therefore be based on the parameters set out in Republic
Act No. 6657, with Presidential Decree No. 27 and Executive Order No. 228 having
only suppletory effect.
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 . As a matter of
fact, the factors enumerated therein had already been translated into a basic
formula by the DAR pursuant to its rule-making power under Section 49 of
Republic Act No. 6657. The formula outlines in DAR Administrative Order No. 5,
series of 1998 should be applied in computing just compensation, thus:
LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1)

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 Where: LV = Land Value
CNI = Capitalized Net Income
CS = Comparable Sales
MV = Market Value per Tax Declaration
In the case before Us, the just compensation was computed based on Executive
Order No. 228, which computation the parties do not contest. Consequently, we
reiterate our rule in LBP v. Soriano that "while we uphold the amount derived from the
old formula, since the application of the new formula is a matter of law and thus, should
be made applicable, the parties are not precluded from asking for any additional
amount as may be warranted by the new formula." 1 8 cSCTID

That settled, we now proceed to resolve the issue of the propriety of the
imposition of 12% interest on just compensation awarded to the respondents. The
Court of Appeals imposed interest of 12% per annum on the amount of P515,777.57
beginning 7 October 2004, until full payment.
We agree with the Court of Appeals.
In Republic v. Court of Appeals, 1 9 we af rmed 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
xed 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 xed 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 nal
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 ne, 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.
The Bulacan trial court, in its 1979 decision, was correct in imposing interest 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 uctuation and in ation
of the value of the currency over time. 2 0

We similarly upheld Republic's 12% per annum interest rate on the unpaid
expropriation compensation in the following cases: Reyes v. National Housing
Authority, 2 1 Land Bank of the Philippines v. Wycoco, 2 2 Republic v. Court of Appeals, 2 3
Land Bank of the Philippines v. Imperial, 2 4 Philippine Ports Authority v. Rosales-
Bondoc, 2 5 Nepomuceno v. City of Surigao, 2 6 and Curata v. Philippine Ports Authority.
27

Conformably with the foregoing resolution, this Court rules that a 12% interest
per annum on just compensation, due to the respondents, from the nality of this
decision until its satisfaction, is proper. 2 8
We now proceed to the issue of whether or not the Court of Appeals correctly
adjudged LBP liable to pay the cost of suit.
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 According to LBP, 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.
LBP cites Sps. Badillo v. Hon. Tayag, 2 9 to further bolster its claim that it is
exempt from the payment of costs of suit. The Court in that case made the following
pronouncement:
On the other hand, the NHA contends that it is exempt from paying all kinds of
fees and charges, because it performs governmental functions. It cites Public
Estates Authority v. Yujuico, which holds that the Public Estates Authority (PEA), a
government-owned and controlled corporation, is exempt from paying docket fees
whenever it files a suit in relation to its governmental functions.
ETHIDa

We agree. People's Homesite and Housing Corporation v. Court of Industrial

Relations declares that the provision of mass housing is a governmental function:
Coming now to the case at bar, We note that since 1941 when the National
Housing Commission (predecessor of PHHC, which is now known as the National
Housing Authority [NHA] was created, the Philippine government has pursued a
mass housing and resettlement program to meet the needs of Filipinos for decent
housing. The agency tasked with implementing such governmental program was
the PHHC.
These can be gleaned from the provisions of Commonwealth Act 648, the charter
of said agency.

We rule that the PHHC is a governmental institution performing governmental

functions.

This is not the rst time We are ruling on the proper characterization of housing
as an activity of the government. In the 1985 case of National Housing
Corporation v. Juco and the NLRC (No. L-64313, January 17, 1985, 134 SCRA
172), We ruled that housing is a governmental function.
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 classi cation 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." 3 0

We agree with the LBP. The relevant provision of the Rules of Court states:
Rule 142
Costs
Section 1.Costs ordinarily follow results of suit. — Unless otherwise provided
in these rules, costs shall be allowed to the prevailing party as a matter
of course but the court shall have power, for special reasons adjudge that either
party shall pay the costs of an action, or that the same be divided, as may be
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 equitable. No costs shall be allowed against the Republic of the
Philippines unless otherwise provided by law .

In Heirs of Vidad v. Land Bank of the Philippines, 3 1 this Court extensively

discussed the role of LBP in the implementation of the agrarian reform program.
LBP is an agency created primarily to provide nancial 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 may agree with the DAR and the land owner as to
the amount of just compensation to be paid to the latter and may also disagree
with them and bring the matter to court for judicial determination. cCAIDS

xxx xxx xxx

To the contrary, the Court had already recognized in Sharp International
Marketing v. Court of Appeals that the LBP plays a signi cant role under the
CARL and in the implementation of the CARP, thus:
As may be gleaned very clearly from EO 229, the LBP is an essential part of the
government sector with regard to the payment of compensation to the landowner.
It is, after all, the instrumentality that is charged with the disbursement of public
funds for purposes of agrarian reform. It is therefore part, an indispensable cog, in
the governmental machinery that xes and determines the amount compensable
to the landowner. Were LBP to be excluded from that intricate, if not sensitive,
function of establishing the compensable amount, there would be no amount "to
be established by the government" as required in Sec. 6, EO 229. This is precisely
why the law requires the [Deed of Absolute Sale (DAS)], even if already approved
and signed by the DAR Secretary, to be transmitted still to the LBP for its
review, evaluation and approval.
It needs no exceptional intelligence to understand the implications of this
transmittal. It simply means that if LBP agrees on the amount stated in the DAS,
after its review and evaluation, it becomes its duty to sign the deed. But not until
then. For, it is only in that event that the amount to be compensated shall have
been "established" according to law. Inversely, if the LBP, after review and
evaluation, refuses to sign, it is because as a party to the contract it does not give
its consent thereto. This necessarily implies the exercise of judgment on
the part of LBP, which is not supposed to be a mere rubber stamp in the
exercise. Obviously, were it not so, LBP could not have been made a distinct
member of [Presidential Agrarian Reform Council (PARC)], the super body
responsible for the successful implementation of the CARP. Neither would it have
been given the power to review and evaluate the DAS already signed by the DAR
Secretary. If the function of the LBP in this regard is merely to sign the DAS
without the concomitant power of review and evaluation, its duty to
"review/evaluate" mandated in Adm. Order No. 5 would have been a mere surplus
age, meaningless, and a useless ceremony.
xxx xxx xxx
Even more explicit is R.A. 6657 with respect to the indispensable role of LBP in the
determination of the amount to be compensated to the landowner. Under Sec. 18
thereof, "the LBP shall compensate the landowner in such amount as may be
agreed upon by the landowner and the DAR and LBP , in accordance with
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 the criteria provided in Secs. 16 and 17, and other pertinent provisions hereof, or
as may be finally determined by the court, as the just compensation for the land."
xxx xxx xxx
It must be observed that once an expropriation proceeding for the acquisition of
private agricultural lands is commenced by the DAR, the indispensable role of
Land Bank begins.
xxx xxx xxx
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. 3 2 CSIDTc

It is clear from the above discussions that since LBP is performing a

governmental function in agrarian reform proceeding, it is exempt from the payment of
costs of suit as provided under Rule 142, Section 1 of the Rules of Court.
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 . No costs.
SO ORDERED .
Corona, C.J., Velasco, Jr., Leonardo-de Castro and Peralta, * JJ., concur.

Footnotes

*Per Special Order No. 913, Associate Justice Diosdado M. Peralta is designated as additional
member in place of Associate Justice Mariano C. Del Castillo who is on official leave.
1.Penned by Associate Justice Lucas P. Bersamin (now a member of this Court), with Associate
Justices Portia Aliño Hormachuelos and Estela M. Perlas-Bernabe, concurring. Rollo, pp.
50-62.
2.Id. at 82-83.
3.Id. at 7.
4.Memorandum of the Petitioner.
5.Rollo, p. 139.

6.Id. at 146.
7.Entitled, "Decreeing the Emancipation of Tenants from the Bondage of the Soil Transferring
to Them the Ownership of the Land They Till and Providing the Instruments and
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 Mechanism Therefor."
8.Declaring full land ownership to quali ed farmer bene ciaries covered by Presidential Decree
No. 27. Determining the value of remaining unvalued rice and corn lands subject to
Presidential Decree No. 27 and providing for the manner of payment by the farmer
beneficiary and modes of compensation to the landowners.

9.Id. at 122.
10.Id. at 124.
11.Id. at 123.
12.Id. at 10-20.
13.Id. at 56-57.

14.Id. at 62.
15.Id. at 6.
16.Comprehensive Agrarian Reform Law (CARL), which took effect on 15 June 1988.
17.G.R. Nos. 180772 and 180776, 6 May 2010; s ee also Land Bank of the Philippines v.
Gallego, Jr., G.R. No. 173226, 20 January 2009, 576 SCRA 680; Land Bank of the
Philippines v. Heirs of Asuncion Añonuevo Vda. De Santos, G.R. No. 179862, 3
September 2009, 598 SCRA 115.

18.Land Bank of the Philippines v. Soriano, id.

19.433 Phil. 106 (2002).
20.Id. at 122-123.
21.443 Phil. 603 (2003).

22.464 Phil. 83 (2004).

23.494 Phil. 494 (2005).
24.G.R. No. 157753, 12 February 2007, 515 SCRA 449.
25.G.R. No. 173392, 24 August 2007, 531 SCRA 198.
26.G.R. No. 146091, 28 July 2008, 560 SCRA 41.

27.G.R. Nos. 154211-12, 22 June 2009, 590 SCRA 214.

28.National Housing Authority v. Heirs of Guivelondo, G.R. No. 166518, 16 June 2009, 589
SCRA 213, 222 citing Republic v. Court of Appeals, supra note 19.
29.448 Phil. 606 (2003).
30.Id. at 617-618.
31.G.R. No. 166461, 30 April 2010.
32.Id.

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