Apo Fruits Corporation and Hijo Plantation, Inc. vs. Land Bank of the Philippines

In eminent domain proceedings, just compensation must include legal interest at 12% per annum calculated from the time of taking until full payment to place the owner in as good a position as before the taking; the doctrine of immutability of final judgments may be relaxed to serve substantial justice in cases involving constitutional limitations and transcendental public interest.

The case stems from the government's agrarian reform program where petitioners, corporate landowners, voluntarily offered to sell their agricultural lands to the government. The dispute arose from the gross undervaluation of the lands by the Department of Agrarian Reform (DAR) and the subsequent delay in payment of the full and fair equivalent of the expropriated properties, lasting almost twelve years from the actual taking until full payment of the principal.

• Petitioners Apo Fruits Corporation (AFC) and Hijo Plantation, Inc. (HPI) were registered owners of 640.3483 hectares and 805.5308 hectares of agricultural land, respectively.
• On October 12, 1995, they voluntarily offered to sell their landholdings to the government under the Voluntary Offer to Sell (VOS) program of the Department of Agrarian Reform (DAR).
• On October 16, 1996, DAR issued notices of land acquisition and valuation at P165,484.47 per hectare, totaling P251,379,104.02 for both properties, which petitioners rejected as grossly undervalued.
• Land Bank deposited P71,891,256.62 (P26.4M for AFC, P45.4M for HPI) representing initial valuation, which petitioners withdrew; these amounts represented only approximately 5% of the final determined value.
• On December 9, 1996, titles were cancelled and new ones issued in the name of the Republic of the Philippines, marking the actual taking of the properties.
• On February 14, 1997, petitioners filed petitions for determination of just compensation with the DAR Adjudication Board (DARAB), which failed to act for over three years.
• Petitioners subsequently filed complaints with the Regional Trial Court (RTC) of Tagum City acting as a Special Agrarian Court (SAC), which were consolidated.
• On September 25, 2001, the RTC fixed just compensation at P1,383,179,000.00 (more than five times the DAR valuation) and awarded 12% interest and attorney's fees.
• The RTC modified its decision on December 5, 2001, fixing interest at 12% per annum from the filing of the complaint.
• The Supreme Court Third Division affirmed the RTC decision on February 6, 2007.
• On December 19, 2007, the Third Division modified its decision, deleting the award of 12% interest and attorney's fees, finding no unreasonable delay by LBP.
• On April 30, 2008, the Third Division denied all motions for reconsideration.
• Entry of Judgment was issued on May 16, 2008.
• On May 28, 2008, petitioners filed a Second Motion for Reconsideration, which was referred to the Court En Banc on September 8, 2009.
• On December 4, 2009, the Court En Banc denied the Second Motion for Reconsideration, upholding the deletion of interest.
• On October 12, 2010, the Court En Banc granted the present Motion for Reconsideration.

• The doctrine of immutability of judgment does not apply because the Entry of Judgment was issued prematurely and because the case involves special and compelling circumstances of transcendental importance affecting constitutional rights to property and just compensation.
• The legal interest due is 12% per annum reckoned from the time of taking (December 9, 1996) until full payment, and this rate is not subject to equitable reduction as it is imposed by law and jurisprudence as part of constitutional just compensation, not by contract.
• The delay in payment was attributable to the government (DAR's gross undervaluation and DARAB's inaction for over three years), not to the petitioners' initial filing with DARAB.
• The Court's fear that awarding interest would harm the agrarian reform program is misplaced and based on conjecture; the interest merely compensates for the income lost during the twelve-year delay.

• The doctrine of immutability of judgment clearly applies as the decision had attained finality with Entry of Judgment, and no special or compelling circumstances exist to justify an exception.
• There was no undue delay in the payment of just compensation as LBP deposited "pertinent amounts" within fourteen months after the filing of the complaint and paid the full balance immediately after the Court fixed the valuation.
• The cases cited by petitioners (Republic v. Court of Appeals, Reyes v. National Housing Authority) are inapplicable because they involved situations where compensation remained unpaid despite finality of judgment, whereas here payment was made promptly after valuation was fixed.
• Interest should only commence from the finality of the judgment fixing just compensation, not from the time of taking, since the obligation was not liquidated until then.
• The deletion of attorney's fees was proper because no bad faith or unjustified refusal to pay was established.

• Procedural Issues:
  • Whether the doctrine of immutability of judgment bars the grant of the second motion for reconsideration.
  • Whether the Court may recall an Entry of Judgment to serve substantial justice.
• Substantive Issues:
  • Whether petitioners are entitled to legal interest on the unpaid balance of just compensation.
  • Whether the legal interest should be computed from the time of taking or from the finality of the judgment determining just compensation.
  • Whether the 12% interest rate may be equitably reduced under Article 1229 of the Civil Code.

• Procedural:
  • The Court granted the motion for reconsideration, reversing the December 4, 2009 Resolution. The doctrine of immutability of judgment is not absolute and admits exceptions where substantial justice requires relaxation of the rule, particularly in cases involving constitutional rights (just compensation), matters of life, liberty, honor or property, and transcendental public interest such as agrarian reform.
• Substantive:
  • The Court ordered LBP to pay petitioners interest at the rate of 12% per annum on the unpaid balance of P971,409,831.68, computed from December 9, 1996 (date of taking) until May 9, 2008 (date of full payment), totaling P1,331,124,223.05.
  • The 12% interest is due as part of just compensation to indemnify the landowners for the income lost from the time their properties were taken until full payment was made, placing them in as good a position as before the taking.
  • The interest runs as a matter of law and is not subject to equitable reduction under Article 1229 of the Civil Code because it is not a contractual penalty but a constitutional requirement to satisfy the "just" compensation standard.
  • The delay was attributable to the government (DAR's gross undervaluation and DARAB's failure to act for three years), not to the petitioners' filing with DARAB.

• Just Compensation in Eminent Domain — Defined as the full and fair equivalent of the property taken, which must be real, substantial, full and ample; includes not only the correct amount but also prompt payment, with interest for any delay to compensate for lost income potential.
• Immutability of Judgment Exception — The rule that final judgments may no longer be altered yields to the higher interest of substantial justice when special and compelling circumstances exist, particularly involving constitutional rights and transcendental public interest.
• Interest on Unpaid Just Compensation — Legal interest at 12% per annum accrues from the time of taking until full payment as the just compensation constitutes an effective forbearance by the State; this places the owner in as good a position as before the taking.
• Equitable Reduction Inapplicable — Article 1229 of the Civil Code (equitable reduction of penalties) applies only to contractual obligations and liquidated damages, not to interest imposed by law as part of constitutional just compensation.

• "Just compensation is defined as the full and fair equivalent of the property taken from its owner by the expropriator... the equivalent to be given for the property to be taken shall be real, substantial, full and ample."
• "Between the taking of the property and the actual payment, legal interest[s] 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."
• "To allow the taking of landowners' properties, and to leave them empty-handed while government withholds compensation is undoubtedly oppressive."
• "Rules of procedure should be viewed as mere tools designed to facilitate the attainment of justice. Their strict and rigid application, which would result in technicalities that tend to frustrate rather than promote substantial justice, must always be eschewed."

• Republic v. Court of Appeals (G.R. No. 146587, July 2, 2002) — Established that interest on just compensation must be computed from the time of taking until actual payment at 12% per annum to compensate for the effective forbearance by the State.
• Eastern Shipping Lines, Inc. v. Court of Appeals (G.R. No. 97412, July 12, 1994) — Applied to fix the interest rate at 12% per annum for forbearance of money in the absence of stipulation.
• Land Bank of the Philippines v. Orilla (G.R. No. 157206, June 27, 2008) — Cited for the definition of just compensation as the sum equivalent to the market value of the property at the time of taking.
• Reyes v. National Housing Authority (G.R. No. 147511, January 20, 2003) — Followed for the rule that 12% interest applies to unpaid just compensation from the time of taking.
• Barnes v. Padilla (G.R. No. 164779, October 5, 2004) — Cited for the exceptions to the doctrine of immutability of judgment when substantial justice requires relaxation of the rule.
• Land Bank of the Philippines v. Wycoco (G.R. No. 140160, January 13, 2004) — Distinguished by the majority; relied upon by the dissent for the proposition that interest is due only in case of delay.

• Section 9, Article III of the 1987 Constitution — Provides that no private property shall be taken for public use without just compensation; the constitutional basis for the award of interest to satisfy the "just" requirement.
• Article 2209 of the Civil Code — Fixes legal interest at 6% per annum in the absence of stipulation for obligations not constituting a loan or forbearance; superseded by the constitutional requirement and jurisprudence establishing 12% for eminent domain cases.
• Article 1229 of the Civil Code — Provides for equitable reduction of penalties; held inapplicable to legal interest imposed as a matter of law in eminent domain cases.

• Chico-Nazario, J. — In her dissent from the December 4, 2009 Resolution (of which she was the ponente of the December 19, 2007 Resolution deleting interest), she argued that the petitioners were entitled to 12% interest but proposed an equitable reduction to P400,000,000.00 (approximately 30% of the computed interest) on the ground that the full amount was unconscionable; the majority rejected this view and awarded the full computed interest of P1.33 billion.

• Bersamin, J. — Maintained that the doctrine of immutability of judgment should apply as there were no special and compelling circumstances to justify an exception; argued that there was no delay by LBP in paying just compensation as it deposited amounts within fourteen months after the filing of the complaint and paid the balance immediately after the Court fixed the valuation; contended that the case involved only a private claim for interest, not a transcendental matter of public interest. Chief Justice Corona and Justice Nachura joined this dissent. Justice Leonardo-De Castro maintained her vote in the December 4, 2009 Resolution.