Award of 12% interest on the unpaid balance of compensation

Let it be remembered that shorn of its eminent domain and social justice aspects, what the agrarian land reform program involves is the purchase by the government, through the Land Bank of the Philippines, of agricultural lands for sale and distribution to farmers. As a purchase, it involves an exchange of values - the landholdings in exchange for Land Bank's payment. In determining the just compensation for this exchange, however, the measure to be borne in mind is not the taker's gain but the owner's loss since what is involved is the takeover of private property under the State's coercive power. The owner's loss, of course, is not only his property but also its income-generating potential. Thus, when property is taken, full compensation of its value must immediately be paid to achieve a fair exchange for the property and the potential income lost. If full compensation is not paid for property taken, then the State must make up for the shortfall in the earning potential immediately lost due to the taking, and the absence of replacement property from which income can be derived; interest on the unpaid compensation becomes due as compliance with the constitutional mandate on eminent domain and as a basic measure of fairness (APO Fruits Corporation & Hijo Plantation, Inc., v. Land Bank of the Philippines, G.R. No. 164195. October 12, 2010).