Just Compensation Interest Rates and Payment Delays in Agrarian Reform

The payment of just compensation in agrarian reform cases is not complete simply because the government eventually pays the landowner. When payment is delayed, interest accrues to make the landowner whole. The Supreme Court's decision in Land Bank of the Philippines v. Heirs of Barrameda (G.R. No. 221216, July 13, 2020) clarifies when that interest begins to run and at what rate, providing important guidance for landowners and practitioners alike.

The Facts of the Case

Leoncio Barrameda owned a 6.1415-hectare parcel of land in San Jose, Camarines Sur. After his death, the property passed to his heirs. A 5.7602-hectare portion was placed under the coverage of Presidential Decree No. 27 and distributed to three farmer-beneficiaries, with emancipation patents issued on April 16, 1990.

On September 20, 2000, the heirs filed a complaint for determination and payment of just compensation against the Department of Agrarian Reform and the Land Bank of the Philippines (LBP). They alleged that despite demands, the government failed to pay just compensation.

The RTC-Special Agrarian Court upheld LBP's valuation of P653,818.99 but found LBP guilty of delay, imposing 12% interest per annum reckoned from January 1998. The Court of Appeals affirmed with modification, ordering interest from the actual time of taking—the issuance of the emancipation patents on April 16, 1990. LBP eventually deposited the full amount on November 19, 2013.

The Issue

The case presented two questions: first, should interest on delayed just compensation be reckoned from the date of taking (April 16, 1990) or from July 1, 2009, when the updated valuation formula under DAR Administrative Order No. 01-10 took effect? Second, should the interest rate be 12% or 6% per annum?

The Ruling: Interest Runs from July 1, 2009

The Supreme Court partly granted LBP's petition. The Court held that interest should be reckoned from July 1, 2009, not from the date of taking in 1990.

The key reason: the just compensation in this case was computed using the formula under A.O. No. 01-10, which uses valuation factors updated as of June 30, 2009. These updated values already account for the landowner's loss from the time of taking up to that date. To impose interest from 1990 on top of these updated values would constitute a double imposition of interest.

The Court distinguished this from earlier cases involving DAR Administrative Order No. 13-94, which granted a 6% incremental interest based on 1972 values. In those cases, interest on delay could be imposed because the valuation itself did not account for the passage of time. Under A.O. No. 01-10, however, the updated values already compensate for the delay.

The Applicable Interest Rates

The Court then addressed the rate. Citing Eastern Shipping Lines, Inc. v. Court of Appeals and subsequent jurisprudence, the Court explained that delay in the payment of just compensation is a forbearance of money. As such, it earns legal interest.

The applicable rates are:

• 12% per annum from July 1, 2009 until June 30, 2013
• 6% per annum from July 1, 2013 (when BSP Circular No. 799 reduced the legal interest rate) until November 19, 2013, when LBP fully paid

Practical Takeaways

• Interest compensates for delay, not for the taking itself. When valuation factors are updated to a recent date, interest on delay runs only from that date forward to avoid double recovery.
• The reckoning date matters. For lands covered by P.D. No. 27 where valuation was completed under R.A. No. 6657, the date of taking is generally the issuance of emancipation patents. However, the applicable valuation formula may shift the interest reckoning date.
• Know which valuation formula applies. If just compensation was computed under A.O. No. 13-94 (using 1972 values), the 6% incremental interest covers the period up to a certain cutoff, and additional interest may run thereafter. Under A.O. No. 01-10, updated values already account for delay up to June 30, 2009.
• Interest rates changed in 2013. For forbearance of money, the rate is 12% per annum before July 1, 2013, and 6% per annum from that date onward, per BSP Circular No. 799.
• Payment must be prompt. Even when the amount of compensation is correct, unreasonable delay in payment triggers interest liability. Landowners deprived of their property are entitled to be placed in as good a position as if they had been paid on time.

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