Philippine Supreme Court Resolutions > Year 2007 > November 2007 Resolutions > [G.R. No. 171941 : November 13, 2007] LAND BANK OF THE PHILIPPINES V. LUZ LIM AND PURITA LIM CABOCHAN:

Quoted hereunder; for your information, is a resolution of the Court En Banc dated November 13, 2007

G.R. No. 171941 - Land Bank of the Philippines v. Luz Lim and Purita Lim Cabochan

Before this Court is the Motion for Partial Reconsideration with Clarification filed by petitioner Land Bank of the Philippines (LBP) praying that this Court reconsider its Decision dated August 2, 2007 which ordered the remand of the case to the Regional Trial Court (RTC) for computation of just compensation.

Specifically, LBP assails this Court's ruling that "[t]he- amount determined by the RTC would be the basis of the interest income on the cash and bond deposits due respondents from the time of the taking of the property up to the time of actual payment of just compensation," and argues that

4. The amount that was deposited by LBP in the name of herein respondents already earned interest based on the nature of the deposit: (a) the cash portion which earned interest at the highest prevailing rate from the date of deposit or booking; and (b) the bond portion which earned interest aligned with 91-day treasury bill rates from the date of the DAR order to deposit pursuant to Sec. 18(4)(a) of RA 6657 x x x.

x x x x

5. Outside, of the legislated interest on LBP bonds and the normal banking interest rates on savings for cash deposit, there is no obligation on the part of LBP to pay additional interest. In other words, the interest earnings for the deposited compensation is clearly defined by law, thus, there is no need to impose the payment of interest outside than what is mandated by RA 6657.

x x x x

7. It bears stressing that the provisions of the New Civil Code with respect to legal interest cannot be applied by way of analogy to the instant case. I While legal interest may be awarded for forbearance of money pursuant to Article 2209 of the New Civil Code, the same applies to a contract of loan, a situation ENTIRELY DIFFERENT from the instant case which involves the determination of just compensation on CARP-covered lands.

x x x x

10. Even assuming arguendo that the amount of compensation to be finally fixed by the courts would be higher than the amount actually received by herein respondents, LBP respectfully submits that the award of interest, if any, should not be made to retroact from the date of initial booking or deposit. Article 2213 of the New Civil Code provides:

"ART. 2213. Interest cannot be recovered upon unliquidated claims or damages, except when the demand can be established with reasonable certainty, x x x

11. Under the foregoing provision, penalty interest for delay can be charged only from the time the amount of the claim is determined, fixed or liquidated. In the instant case, the difference in the compensation payable to herein respondents, if any, is determined, fixed or liquidated only when the decision has become final and executory, giving rise to the obligation of LBP to pay by depositing the amount of the compensation to the account of the landowners/respondents. Thus, unless there is a final and executory decision, LBP is not obligated to pay interest to the respondents as it cannot be considered in delay in the payment of the compensation. In any event, the amount already received by the respondents can no longer be the subject of any award of interest.^[1] (Underscoring supplied)

Under Republic Act No. 6657, in case the landowner does not accept the initial offer of the Department of Agrarian Reform (DAR), the amount of just compensation is determined in summary administrative proceedings.^[2] The determination made in these proceedings is only preliminary unless accepted by all parties concerned.^[3] However, while the landowner is allowed to question such preliminary determination of just compensation before the proper court for final determination,^[4] the government may nevertheless take possession of, and title to the expropriated land upon deposit with an accessible bank of the compensation, as preliminarily determined, in cash and/or in LBP bonds.^[5] The constitutionality of this procedure was upheld by this Court, over the challenge that it is violative of due process, in Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform,^[6] viz:

The last major challenge to CARP is that the landowner is divested of his property even before actual payment to him in full of just compensation, in contravention of a well-accepted principle of eminent domain.

The recognized rule, indeed, is that title to the property expropriated shall pass from the owner to the expropriator only upon full payment of the just compensation. Jurisprudence on this settled principle is consistent both here and in other democratic jurisdictions, xxx

x x x x

Our own Supreme Court has held in Visayan Refining Co. v. Camus and Paredes, that:

If the laws which we have exhibited or cited in the preceding discussion are attentively examined it will be apparent that the method of expropriation adopted in this jurisdiction is such as to afford absolute reassurance that no piece of land can be finally and irrevocably taken from an unwilling owner until compensation is paid. . .

x x x x

The CARP Law xxx conditions the transfer of possession and ownership of the land to the government on receipt by the landowner of the corresponding payment or the deposit by the DAR of the compensation in cash or LBP bonds with an accessible bank. Until then, title also remains with the landowner. No outright change of ownership is contemplated either.

Hence, the argument that the assailed measures violate due process by arbitrarily transferring title before the land is fully paid for must also be rejected. (Emphasis and underscoring supplied)

From the foregoing disquisition in Association of Small Farmers in the Philippines, Inc., while this Court rejected the constitutional challenge because1 R.A. No. 6657 requires prior deposit of compensation before actual transfer of title, it also reiterated that there must first be full payment of just compensation before transfer of title. In other words, the prior deposit must constitute full payment.

Ideally, the compensation as preliminarily determined and deposited would be equivalent to the compensation as finally determined by the courts, because under that situation, there would actually be full payment of just compensation prior to the transfer of title. But what if the preliminary amount is less than the final amount determined by the court? In such case, the landowner should be placed in a position where it was as if he or she or it received the full amount of just compensation at the time of the taking and, the way to do this, given the silence of the law on the matter, is to compute from the time of the taking the interest due on the difference.

The LBP's position that the computation of interest should not retroact to the time of initial deposit even if the amount of just compensation finally determined is greater than that preliminarily determined is thus devoid of merit.

Respecting the rate of interest, indeed, outside of the legislated interest on LBP bonds and the normal banking interest rates on savings for cash deposit, there is no obligation on the part of the LBP to pay additional interest - and this is precisely why this Court awarded no such additional interest, but only that "interest income on the cash and bond deposits due respondents" i.e. only such interest income mandated by Section 18 of R.A. No. 6657 as being due respondents.

Had the LBP been more circumspect in its analysis of LBP v. Wycoco^[7] which was cited in the Decision under reconsideration, it would not have misunderstood the Decision as ordering the payment of 12% interest, such interest having been awarded in said case by the Court to rectify the error of the DAR in opening a trust account instead of depositing cash and LBP bonds in favor of the landowner. No such error was committed in the present case. However, independent of the award of 12% interest, this Court also ruled in Wycoco that the amount determined by the Special Agrarian Court would be the basis of the interest income on the cash and the bond deposits due the landowner from the time of taking up to the time of actual payment of just compensation. This was the ruling cited in the Decision under reconsideration.

In sum, this Court's pronouncement that "[t]he amount determined by. the RTC would be the basis of the interest income on the cash and bond deposits due respondents from the time of the taking of the property up to the time of actual payment of just compensation" simply means as follows:

1. If the amount finally determined as just compensation is equal to the amount preliminarily determined, then no additional amounts shall be due respondents.
   
   
2. If the amount finally determined as just compensation is greater than the amount preliminarily determined, then respondents shall be entitled to the difference, plus interest on such difference to be computed from the time of the taking of the property up to the time of actual payment. The rates of interest shall be the legislated interest on LBP bonds and the normal banking interest rates on savings for cash deposit.
   

WHEREFORE, in light of the foregoing discussions, the Motion for Partial Reconsideration is DENIED.

Sandoval-Gutierrez, on official leave.

Endnotes:

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^[1] Rollo, pp. 190 to 194. Underscoring supplied. Emphasis and underscoring omitted from the original.

^[2] R.A. No. 6657, Section 16 (d).

^[3] Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform, G.R. No. 78742, July 14, 1989, 175 SCRA 343, 382.

^[4] R.A. No. 6657, Section 16 (f).

^[5] Id., Section 16(d).

^[6] G.R. No. 78742, July 14, 1989, 175 SCRA 343, 389 to 391.

^[7] 464 Phil. 83 (2004).