Interest payments borne by government, not by farmers-beneficiaries
Nor do we find any merit in the LBP’s assertion that the large amount of just compensation that we awarded the petitioners, together with the amount of interest due, would necessarily result in making the farmers- beneficiaries endure another form of bondage – the payment of an exorbitant amount for the rest of their lives.
As the petitioners correctly pointed out, the government’s liability for the payment of interest to the landowner for any delay attributable to it in paying just compensation for the expropriated property is entirely separate and distinct from the farmers-beneficiaries’ obligations to pay regular amortizations for the properties transferred to them.
Republic Act No. 6657 (The Comprehensive Agrarian Reform Law, or CARL) provides for the specific source of funding to be used by the government in implementing the agrarian reform program; this funding does not come directly from the payments made by the farmers-beneficiaries.
More to the point, under the CARL, the amount the farmers-beneficiaries must pay the LBP for their land is, for the most part, subsidized by the State and is not equivalent to the actual cost of the land that the Department of Agrarian Reform paid to the original landowners. Section 26, Chapter VII of the CARL provides:
SEC. 26. Payment by Beneficiaries. – Lands awarded pursuant to this Act shall be paid for by the beneficiaries to the LBP in thirty (30) annual amortizations at six percent (6%) interest per annum. The payments for the first three (3) years after the award may be at reduced amounts as established by the PARC: Provided, That the first five (5) annual payments may not be more than five percent (5%) of the value of the annual gross productions paid as established by the DAR. Should the scheduled annual payments after the fifth year exceed ten percent (10) of the annual gross production and the failure to produce accordingly is not due to the beneficiary’s fault, the LBP may reduce the interest rate or reduce the principal obligation to make the payment affordable.
Interpreting this provision of the law, DAR Administrative Order No. 6, Series of 1993 provides:
- As a general rule, land awarded pursuant to E.O. 229 and R.A. 6657 shall be repaid by the Agrarian Reform Beneficiary (ARB) to LANDBANK in thirty (30) annual amortizations at six (6%) percent interest per annum. The annual amortization shall start one year from date of Certificate of Landownership Award (CLOA) registration.
- The payments by the ARBs for the first three (3) years shall be two and a half percent (2.5%) of AGP [Annual Gross Production] and five percent (5.0%) of AGP for the fourth and fifth years. To further make the payments affordable, the ARBs shall pay ten percent (10%) of AGP or the regular amortization, whichever is lower, from the sixth (6th) to the thirtieth (30th) year.
Clearly, the payments made by the farmers-beneficiaries to the LBP are primarily based on a fixed percentage of their annual gross production, or the value of the annual yield/produce of the land awarded to them. The cost of the land will only be considered as the basis for the payments made by the farmers-beneficiaries when this amount is lower than the amount based on the annual gross production. Thus, there is no basis for the LBP to claim that our ruling has violated the letter and spirit of the social justice provision of the 1987 Constitution. On the contrary, our ruling is made in accordance with the intent of the 1987 Constitution.