APO FRUITS CORPORATION and HIJO PLANTATION, INC. , petitioners, vs.

LAND BANK
OF THE PHILIPPINES, respondent.

FACTS
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 DAR's Provincial Agrarian Reform Officer (PARO). At the assessed
valuation of P165,484.47 per hectare, AFC's land was valued at P86,900,925.88, while HPI's
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 AFC's bank account and P45,481,706.76 in HPI's bank account,
which amounts the petitioners then withdrew. The titles over AFC and HPI's 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 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.

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.

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
attorney's fees; and (3) Motion to Refer the Second Motion for Reconsideration to the
Honorable Court En Banc.

On December 4, 2009, the Court En Banc, by a majority vote, denied the petitioners' second
motion for reconsideration based on two considerations. 1. 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. 2. On the merits, the petitioners
are not entitled to recover interest on the just compensation and attorney's 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.

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.

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

ISSUE

Whether the Third Division erred in its 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

RULING

The Court GRANT the petitioners' motion for reconsideration.

The Court En Banc's Resolution dated December 4, 2009, as well as the Third Division's
Resolutions dated April 30, 2008 and December 19, 2007, are hereby REVERSED and SET
ASIDE.

The respondent Land Bank of the Philippines is hereby ORDERED to pay petitioners Apo Fruits
Corporation and Hijo Plantation, Inc. interest at the rate of 12% per annum on the unpaid
balance of the just compensation, computed from the date the Government took the properties
on December 9, 1996, until the respondent Land Bank of the Philippines paid on May 9, 2008
the balance on the principal amount

Unless the parties agree to a shorter payment period, payment shall be in monthly installments
at the rate of P60,000,000.00 per month until the whole amount owing, including interest on the
outstanding balance, is fully paid. Costs against the respondent Land Bank of the Philippines.
SO ORDERED

The concept of "just compensation" is not new to Philippine constitutional law, but is not original
to the Philippines; it is a transplant from the American Constitution. 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 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. 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. 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. 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

In Republic v. Court of Appeals 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
alreadytaken.
“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[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.
The Court's previous ruling in National Power Corporation v. Angas 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 than earnings from loans, then Art. 2209 of the Civil Code, which fixes legal
interest at 6%, shall apply.

Applying the Eastern Shipping Lines ruling, 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.

The owner's loss is not only his property but also its income-generating 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 LBP's 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

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. Verily, these two cases could have been disposed with dispatch were it not
for LBP's 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.

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 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