Expropriation and Just Compensation: Understanding Legal Interest in Philippine Law

The government may take private property for public use, but the Constitution requires it to pay just compensation. When payment is delayed, the law entitles the landowner to legal interest on the unpaid balance. In Republic v. Tamparong, Jr. (G.R. No. 232169, March 8, 2023), the Supreme Court clarified how that interest should be computed—and underscored the heavy cost of government delay.

The Facts of the Case

In 1999, the Department of Public Works and Highways (DPWH) filed an expropriation complaint to acquire a 7,555-square meter property in Cagayan de Oro City for the Cagayan de Oro Third Bridge project. The property belonged to Casimiro Tamparong, Jr.

In November 2000, the trial court issued an order of expropriation and placed the government in possession of the property. But it took years of litigation before the court fixed the just compensation at PHP 3,500 per square meter in January 2010, with legal interest from the taking of possession until full payment. The government paid a provisional deposit of PHP 9,443,750, but the remaining balance was not settled.

At the execution stage, the DPWH computed the balance using a 6% interest rate from the time of taking. Tamparong, then over 80 years old and bedridden, initially agreed just to get paid. But when payment still did not come, he asked the court to recompute using the correct rate. The trial court fixed interest at 12% per annum. The Court of Appeals affirmed. The government appealed to the Supreme Court.

The Issue

The central question: Was the imposition of 12% legal interest on the unpaid balance of just compensation proper?

The Ruling

The Supreme Court answered yes, with one clarification on the applicable rates.

The Court reiterated that just compensation means full payment of the property's value immediately upon taking. When the government takes property before paying the final amount, the landowner suffers not only the loss of the land but also its use and fruits. To be "just," compensation must include legal interest on the difference between the final adjudged amount and the provisional payment.

The Court rejected the government's argument that its provisional payments excused it from paying interest. Citing Evergreen Manufacturing Corporation v. Republic (817 Phil. 1048 [2017]), the Court held that an initial payment does not excuse the government from paying interest on the difference between the adjudged amount and that initial payment. The provisional payment scheme under Republic Act No. 8974 merely allows the government to take the property quickly for infrastructure projects; it does not displace the constitutional mandate of full and fair compensation.

The Correct Interest Rates

The Court clarified the applicable rates based on established jurisprudence:

• 12% per annum from the taking of the property (the date of the writ of possession) until June 30, 2013
• 6% per annum from July 1, 2013 until full payment

This reflects the reduction of the legal interest rate on loans and forbearance of money from 12% to 6% under Bangko Sentral ng Pilipinas Circular No. 799, effective July 1, 2013. The Court applied this rule to the unpaid balance from November 29, 2000 (when the government took possession) through June 30, 2013 at 12%, and 6% thereafter.

The Government's Delay Was Not Excusable

The Court found the DPWH's computation misleading. The government computed interest at 6% from the time of taking—a rate that only became the prevailing legal interest on July 1, 2013. Before that, the correct rate was 12%. The government also computed interest only up to a fixed date, even though the award required interest until full payment.

The Court also noted the human cost: Tamparong died in December 2018 after more than 22 years of waiting, without fully enjoying the fruits of his property. As the Court put it, "What more injustice can be caused to landowners who, up to the time of their death, were not able to fully enjoy the benefits of the land taken from them by the government than to shortchange them with the delay in the payment of just compensation."

Practical Takeaways

• Interest is part of just compensation. Landowners are entitled to legal interest on the unpaid balance from the date of taking, not from the finality of judgment.
• Know the rates. The applicable rate is 12% per annum from the taking until June 30, 2013, and 6% per annum from July 1, 2013 onward.
• Provisional payments do not stop interest. The government's initial deposit does not excuse it from paying interest on the difference between the final award and the amount already paid.
• Check government computations carefully. In this case, the DPWH's computation used the wrong rate and an arbitrary cut-off date. Landowners or their counsel should verify that interest is computed from the proper date at the proper rate.
• Delay has real consequences. Courts will not reward government intransigence in paying just compensation, especially when the landowner is elderly or in poor health.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.