Interest on Just Compensation in Philippine Expropriation: The Tamparong Rule

The Supreme Court has reaffirmed that landowners are entitled to legal interest on unpaid just compensation in expropriation proceedings, clarifying the applicable rates. In Republic v. Tamparong, Jr. (G.R. No. 232169, March 8, 2023), the Court addressed a common problem: what happens when the government takes private property but delays full payment of the compensation owed. The ruling provides clear guidance on how interest should be computed, protecting the constitutional right to just compensation.

The Facts of the Case

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

In November 2000, the trial court issued an Order of Expropriation and immediately placed the government in possession of the property. However, the determination of just compensation took years. It was only in January 2010 that the court fixed the value at PHP 3,500 per square meter, totaling PHP 26,442,500. The government had already paid PHP 9,443,750 as a provisional deposit.

After the judgment became final, the parties disagreed on how to compute the remaining balance—specifically, what interest rate should apply. The DPWH computed interest at 6% per annum from the time of taking, while Tamparong insisted on 12% per annum. The trial court and the Court of Appeals both ruled in favor of the 12% rate, prompting the government to appeal to the Supreme Court.

The Legal Issue

The central question was whether the imposition of 12% legal interest on the unpaid balance of just compensation was proper, and how the interest should be computed.

The Court's Ruling

The Supreme Court denied the government's petition and affirmed the lower courts' rulings, with a modification on the applicable interest rates.

The Court emphasized that under Section 9, Article III of the 1987 Constitution, no property shall be taken for public use without just compensation. When the government takes property but delays full payment, the landowner suffers not only the loss of the land but also its use, fruits, and income. To remedy this, legal interest accrues on the difference between the final adjudged amount and the provisional payment.

Citing Evergreen Manufacturing Corporation v. Republic (817 Phil. 1048 [2017]), the Court ruled that the government's initial payment does not excuse it from paying interest on the difference between the adjudged amount and the initial payment. The provisional payment scheme under Republic Act No. 8974 only allows the government to take immediate possession pending final determination of just compensation—it does not extinguish the obligation to pay the full amount with interest.

The Applicable Interest Rates

The Court clarified the interest rates that apply in expropriation cases:

• 12% per annum from the time of taking (when the government was placed in possession) until June 30, 2013
• 6% per annum from July 1, 2013 until full payment

This two-tiered rate follows the Bangko Sentral ng Pilipinas (BSP) Circular No. 799, which reduced the legal interest on loans and forbearance of money from 12% to 6% effective July 1, 2013. The interest is not consensual but runs "as a matter of law" from the right of the landowner to be placed in as good a position as money can accomplish as of the date of taking.

The Government's Delay Was Not Excusable

The Court rejected the government's argument that Tamparong caused the delay by refusing to accept payment. The DPWH's computation was flawed—it applied 6% interest from the time of taking when the prevailing rate at that time was 12%, and it computed interest only up to a fixed date rather than until full payment.

The Court noted that Tamparong, who was 89 years old and bedridden, agreed to the government's offer only out of desperation to receive payment. Despite court-ordered mediation, the government failed to settle even the amount it had itself computed. Tamparong died in December 2018 without receiving his full compensation—more than 22 years after the government took his property.

Practical Takeaways

• Landowners are entitled to interest on unpaid just compensation from the date of taking until full payment, not just from the date of judgment.
• The applicable rates are 12% per annum from the date of taking until June 30, 2013, and 6% per annum from July 1, 2013 onward, per BSP Circular No. 799.
• Provisional payments do not extinguish interest obligations—the government must pay interest on the difference between the final adjudged amount and any initial payment.
• The date of taking is typically the date the government is placed in possession of the property, such as through a writ of possession.
• Government agencies cannot unilaterally compute interest in a manner inconsistent with prevailing jurisprudence; landowners should verify computations against the established rates.

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