G.R. No.

166833 November 30, 2006

FELIXBERTO CUBERO, NERISSA C. NATIVIDAD, JUDY U. LIM, MANUEL R. LAHOZ, SOTERO DIOLA
and BELLE CORPORATION, Petitioners,
vs.
LAGUNA WEST MULTI-PURPOSE COOPERATIVE, INC., and ATTY. ABRAHAM BERMUDEZ, in his
capacity as Registrar of Deeds, Tanauan City, Batangas Respondents.

DECISION

CARPIO MORALES, J.:

The present petition raises the issue of jurisdiction over the subject matter.

Individual petitioners Felixberto Cubero, Nerrisa1 C. Natividad, Judy U. Lim, Manuel R. Lahoz and
Sotero Diola are the registered owners of various parcels of land covered by twelve (12) Transfer
Certificates of Title (TCTs).2 The properties cover a total land area of about 78,178 square meters
located in Barangay Suplang, Tanauan, Batangas.

In August 2003, each of the individual petitioners entered into a Joint Venture Development
Agreement with co-petitioner Belle Corporation to develop the properties as part of an agricultural
farm lot subdivision project known as "Plantation Hills at Tagaytay Greenlands Phase I" (the
Project) for eventual sale to the public.3

With the development of the Project in full swing in mid-2004, respondent Laguna West Multi-
Purpose Cooperative, Inc. (Laguna West Cooperative) filed 9 ex-parte petitions4 with the Regional
Trial Court (RTC) of Tanauan City, for inscription of an adverse claim, the annotation of which the
Registrar of Deeds allegedly failed to carry over to the TCTs of individual petitioners under the
Property Registration Decree5 .

In its petitions before the RTC, respondent Laguna West Cooperative claimed that as early as April
1996 it entered into separate Joint Venture Agreements (JVAs) with the herein individual
petitioners’ predecessors-in-interest Zacarias P. Narvaez, Filizardo6 N. Contreras, Eladio Contreras,
Anacleto P. Narvaez, Victor P. Ortilla, Rafael Maranan, Felipe Maranan, Elino B. Mangubat, Joaquin
N. Olaes and Salvador Alberto;7 and that it registered the JVAs in August 2000 on the previous
owners’ titles by way of an Adverse Claim under Entry No. 199352 and/or 168016.

Laguna West Cooperative added that the petitions were filed to rectify the omission or error and to
protect its vested, subsisting and valid rights under the JVAs.

Accompanying the petitions were Notices of Lis Pendens8 addressed to the Register of Deeds,
Tanauan, Batangas.9

Getting wind of the petitions filed by Laguna West Cooperative, petitioners also filed a Complaint10
with the RTC of Tanauan, for "Annulment of Joint Venture Agreements with prayer for the issuance
of a TRO and/or writs of Preliminary Injunction and Preliminary Mandatory Injunction and for
Damages" against herein respondents Laguna West Cooperative and Atty. Abraham Bermudez11 in
the latter’s capacity as Registrar of Deeds of Tanauan.
In their Complaint, petitioners asserted that the April 1996 JVAs between Laguna West Cooperative
and individual petitioners’ predecessors-in-interest are void ab initio since they were executed
within the 10-year prohibitory period under Republic Act No. 6657 (Comprehensive Agrarian
Reform Law of 1988),12 the titles covering the properties having emanated from emancipation
patents granted in November 1988 pursuant to Presidential Decree No. 27.

Petitioners alleged too in their complaint that the JVAs fall under management contracts prohibited
under Republic Act No. 6657.

Invoking Article 140913 of the Civil Code, petitioners urged the RTC to declare the JVAs inexistent
and void for being contrary to law and public policy.

By Order of September 15, 2004, the RTC dismissed petitioners’ complaint, finding

. . . that [as] the JVAs cover or involve land grants under the Presidential Decree No. 27 and allied
agrarian reform laws, the Department of Agrarian Reform, through its adjudication board (DARAB),
has primary jurisdiction to determine the validity or invalidity thereof.14

For lack of merit, the RTC denied petitioners’ motion for reconsideration, hence, the present
petition for review on certiorari which raises a pure question of law.

The petition fails.

It is axiomatic that what determines the nature of an action, as well as which court has jurisdiction
over it, are the allegations in the complaint and the character of the relief sought.15 In the
determination of jurisdiction, the status or relationship of the parties, as well as the nature of the
question that is the subject of their controversy, is also considered.16

The Department of Agrarian Reform (DAR) is vested with primary jurisdiction to determine and
adjudicate agrarian reform matters, with exclusive original jurisdiction over all matters involving
the implementation of agrarian reform except those falling under the exclusive jurisdiction of the
Department of Agriculture and the Department of Environment and Natural Resources.17 Original
jurisdiction means jurisdiction to take cognizance of a cause at its inception, try it and pass
judgment upon the law and facts, while exclusive jurisdiction precludes the idea of co-existence and
refers to jurisdiction possessed to the exclusion of others.18

The DARAB has been created to assume the adjudicative powers and functions of the DAR.19 Thus,
the DARAB has been vested with jurisdiction to try and decide all agrarian disputes, cases,
controversies, and matters or incidents involving the implementation of the Comprehensive
Agrarian Reform Program (CARP).20 Its jurisdiction encompasses cases involving the "rights and
obligations of persons, whether natural or juridical, engaged in the management, cultivation and
use of all agricultural lands" covered by Republic Act No. 6657 and other agrarian laws.21

The RTC amplified its dismissal of petitioners’ complaint in this wise:

There is no question that the instant case does not involve agrarian dispute and that the parties
have no tenurial relationship. The Court dismissed the complaint not because the subject of the
questioned JVAs is an agricultural land as erroneously assumed by the plaintiffs. The complaint was
dismissed because it involves controversy or issue in the implementation of R.A. 6657 – that is –
whether or not the agricultural land beneficiaries has reneged its (sic) obligation by entering in the
joint venture agreements and whether the terms thereof are violative of Sections 27 and 73 of the
said Act including the restrictions annotated on the emancipation patents certificates[.]22
(Underscoring supplied)

The finding of the RTC that petitioners’ complaint does not involve an agrarian dispute is a narrow
and restrictive view of the nature of an agrarian dispute. In the recent case of Islanders CARP-
Farmers Beneficiaries Multi-Purpose Cooperative Development, Inc. v. Lapanday Agricultural and
Development Corp.,23 this Court elucidated on the scope of an agrarian dispute, viz:

The Department of Agrarian Reform Adjudication Board (DARAB) has jurisdiction to determine and
adjudicate all agrarian disputes involving the implementation of the Comprehensive Agrarian
Reform Law (CARL). Included in the definition of agrarian disputes are those arising from other
tenurial arrangements beyond the traditional landowner-tenant or lessor-lessee relationship.
Expressly, these arrangements are recognized by Republic Act No. 6657 as essential parts of
agrarian reform. Thus, the DARAB has jurisdiction over disputes arising from the instant Joint
Production Agreement entered into by the present parties.24 (Emphasis and underscoring
supplied).

In that case, the petitioner filed with the RTC a complaint for declaration of nullity of a Joint
Production Agreement.1â wphi1 Upon motion, the case was dismissed for lack of jurisdiction. The
Court of Appeals affirmed the dismissal. The petitioner elevated the matter to this Court,
contending that there being no tenancy or leasehold relationship between the parties, the case does
not constitute an agrarian dispute cognizable by the DARAB.

In denying the petition in Islanders, this Court held that while the relationship between the parties
was not one of tenancy or agricultural leasehold, the controversy nonetheless fell within the sphere
of agrarian disputes, citing, among other authorities, Department of Agrarian Reform v. Cuenca,25
which held:

All controversies on the implementation of the Comprehensive Agrarian Reform Program (CARP)
fall under the jurisdiction of the Department of Agrarian Reform (DAR), even though they raise
questions that are also legal or constitutional in nature. All doubts should be resolved in favor of the
DAR, since the law has granted it special and original authority to hear and adjudicate agrarian
matters.26

The JVAs subject of the petition for annulment of petitioners precisely involve the development and
utilization of the subject agricultural lands. As successors-in-interest of the beneficiaries of the
agricultural lands, individual petitioners seek to nullify the JVAs. Since the controversy involves the
rights and obligations of persons engaged in the management, cultivation and use of an agricultural
land covered by CARP, the case falls squarely within the jurisdictional ambit of the DAR.27

It bears emphasis that a resolution of the instant case principally entails a determination of the
alleged commission of prohibited acts under Sections 27 and 7328 of Republic Act No. 6645. In
cases where allegations of violation or circumvention of land reform laws have been raised, this
Court has declined to address them, it stating that petitioners must first plead their case with the
DARAB.29 There is no reason why this Court should now hold otherwise.

WHEREFORE, the petition is hereby DENIED.

SO ORDERED.
G.R. No. 164961 June 30, 2014

HECTOR L. UY, Petitioner,

vs.
VIRGINIA G. FULE; HEIRS OF THE LATE AMADO A. GARCIA, namely: AIDA C. GARCIA, LOURDES G.
SANTAYANA, AMANDO C. GARCIA, JR., MANUEL C. GARCIA, CARLOS C. GARCIA, and CRISTINA G.
MARALIT; HEIRS OF THE LATE GLORIA GARCIA ENCARNACION, namely: MARVIC G.
ENCARNACION, IBARRA G. ENCARNACION, MORETO G. ENCARNACION, JR., and CARINA G.
ENCARNACION; HEIRS OF THE LATE PABLO GARCIA, namely: BERMEDIO GARCIA, CRISTETA
GARCIA, HONORATO GARCIA, VICENTE GARCIA, PABLO GARCIA, JR., and TERESITA GARCIA; HEIRS
OF THE LATE ELISA G. HEMEDES, namely: ROEL G. HEMEDES, ELISA G. HEMEDES, ROGELIO G.
HEMEDES, ANDORA G. HEMEDES, and FLORA G. HEMEDES, Respondents.

DECISION

BERSAMIN, J.:

The decisive question here is whether or not the petitioner was a purchaser in good faith of the
property in litis. The standard is that for one to be a purchaser in good faith in the eyes of the law,
he should buy the property of another without notice that some other person has a right to, or
interest in, such property, and should pay a full and fair price for the same at the time of such
purchase, or before he has notice of the claim or interest of some other persons in the property.1 He
buys the property with the belief that the person from whom he receives the property was the
owner and could convey title to the property.2 Indeed, a purchaser cannot close his eyes to facts
that should put a reasonable man on his guard and still claim he acted in good faith.3

The Case

Under appeal by petition for review on certiorari is the decision promulgated on February 17,
2004,4 whereby the Court of Appeals upheld the judgment rendered in favor of the respondents on
June 30, 2000 by the Regional Trial Court, Branch 32,in Pili, Camarines Sur (RTC).5

Antecedents

The dispute herein involves the parcel of land registered under Transfer Certificate of Title (TCT)
No. 30111 of the Registry of Deeds of Camarines Sur with an area of 180,150square meters located
in San Agustin, Pili, Camarines Sur that was part of the vast tract of land covered by TCT No. 1128
registered in the name of the late Conrado Garcia. TCT No. 1128 was derived from Original
Certificate of Title (OCT) No. 854 registered on November 23, 1933 in the Registration Book of the
Register of Deeds of Camarines Sur pursuant to Decree No. 517240, No. 854, issued in LRC GLRO
Record No. 47802.

Upon the death of Conrado Garcia on November 23, 1972, his heirs entered into an extrajudicial
settlement of his estate, including the vast track of land. Thereafter, his heirs caused the
registration on March 7, 1973 of the vast track of land under TCT No. RT-8922 (16498), covering
Lot 1, PSU-81269 and Lot 2, PSU-81269.6

In September 1985, the Department of Agrarian Reform (DAR) engaged Geodetic Engr. Rolando A.
Sales (Engr. Sales) to conduct a survey of the disputed land, referring to it as Lot 562, Cad. 291 (Csd-
05-003874). Together with DAR Technologist Carmen Sorita and DAR Team Leader Julian F. Israel,
Engr. Sales issued a joint certification dated August 30, 1988 to the effect that the disputed land was
an "untitled" property owned by Conrado Garcia. The joint certification dated August 30, 1988 was
buttressed by the certification issued on January 30, 1989 by the Office of the Register of Deeds of
Camarines Sur to the effect that no title covering Lot 562, Cad. 291 (Csd-05-003874) appeared on
record. As a result, the disputed land was included in the Operation Land Transfer (OLT) program
of the DAR pursuant to Presidential Decree No. 27.

In 1988, the DAR and the Office of the Register of Deeds of Camarines Sur respectively issued
emancipation patents (EPs) and original certificates of title (OCTs) coveringthe disputed land to the
farmersbeneficiaries, namely: Catalino Alcaide, Mariano Ronda, Ponciano Ermita, Felipe Marcelo,
Salvador Pedimonte, Fabiana Pedimonte and Leonila Pedimonte (farmers-beneficiaries).7

In the interim, farmer-beneficiary Mariano Ronda sold his portion to Chisan Uy who then registered
his title thereto under TCT No. 29948 and TCT No. 29949 of the Registry of Deeds of Camarines Sur.
On the other hand, the heirs of farmer-beneficiary Mariano Ronda (Isabel Ronda, et al.) sold their
land to petitioner Hector Uy for ₱10 million. The petitioner registered his title thereto under TCT
No. 31436 and TCT No. 31437, both of the Registry of Deeds of Camarines Sur.

In 1997, TCT No. RT-8922 (16498)was cancelled following the partition of the property covered
therein.1â wphi1 Subsequently, TCT No. 30136 and TCT No. 30111 were issued in the names of
respondents heirs of the late Conrado Garcia. TCT No. 30111 covered the disputed land.8

In 1998, the President, acting through the DAR Secretary, issued EPs to the farmers-beneficiaries
pursuant to P.D. No. 27 and P.D. No. 266, to wit:

1. To Catalino Alcaide, OCT No. 8534 and OCT No. 8549, which were cancelled by TCT No. 29948
and TCT No. 29949 in the name of Chisan Uy;

2. To Mariano Ronda, OCT No. 9852 and OCT No. 9853, which were cancelled by TCT No. 301120
and TCT No. 301121; and, in turn, TCT No. 301120 and TCT No. 301121 were cancelled by TCT No.
31436 and TCT No. 31437 in the name of petitioner Hector Uy;

3. To Ponciano Ermita, OCT 8539;

4. To Felipe Marcelo, OCT No. 8542;

5. To Salvador Pedimonte, OCT Nos. 8545 and 8546;

6. To Fabiana Pedimonte, OCT No. 9848; and

7. To Leonila Pedimonte, OCT No. 9849.9

On December 21, 1998, the respondents filed a complaint for cancellation of titles, quieting of title,
recovery of possession, and damages against the DAR Secretary; the Municipal Agrarian Reform
Officer of Pili, Camarines Sur; DAR Technologist Carmen Sorita; DAR Team Leader Julian Israel;
Engr. Sales; and Regional Director Antonio Nuesa of DAR Regional Office No. V (public defendants)
and the farmer-beneficiaries (private defendants) in the Regional Trial Court (RTC) in Pili,
Camarines Sur, alleging that they had been denied due process; and that the titles of the defendants
(who included the petitioner)in the disputed land constituted clouds on their own title. They
prayed that the private defendants’ certificates of title, including those of their purchasers Chisan
Uy and the petitioner, be cancelled; that the private defendants be ordered to surrender the
possession of the disputed land to them; and that in default thereof the private defendants be
ordered to pay the fair market value of the property, with reparation for damages in either case.10

Ruling of the RTC

On June 30, 2000,11 the RTC resolved in favor of the respondents by finding that no notice of the
inclusion of the disputed land under the operation of P.D. No. 27 had been given to them. The RTC
decreed thusly:

IN VIEW OF THE FOREGOING CONSIDERATIONS, judgment is hereby rendered:

1. Declaring plaintiffs as the owners of the lands covered by TCT No. 30111 and declaring said title
as VALID, BINDING AND EFFECTIVE, against the whole world;

2. Declaring null and void all the proceedings taken by public defendants in the generation of the
certificates of land transfer and emancipation patents, on the bases of which the OCTs mentioned in
paragraphs 2 and 3 of this decision were issued by the Register of Deeds of Camarines Sur;

3. Ordering the Register of Deeds of Camarines Sur to cancel all the OCTs and TCTs mentioned in
paragraph 2 and 3 of this decision;

4. Ordering defendants whose titles were cancelled to surrender the possession of the lands
covered by their cancelled titles to the plaintiffs and condemning them to PERPETUAL SILENCE in
so far as TCT 30111 is concerned.

NO COSTS.

SO ORDERED.12

Decision of the CA

Isabel Ronda, et al. (heirs of deceased farmer-beneficiary Mariano S. Ronda), Catalino Alcaide, Julia
Casaysayan, Chisan Uy, and the petitioner appealed to the CA.

The defendant public officials did not appeal.13 Also not appealing were defendants farmers-
beneficiaries (with their respective OCTs) Spouses Salvador R. Pedimonte and Herminia Barrientos
(OCT Nos. 8545 and 8546); Spouses Angeles C. Ronda and Consolacion Pedimonte (OCT No. 9851);
Spouses Felipe Marcelo and Isabel Nacario (OCT No. 8542); Leonila S. Pedimonte (OCT No. 9849);
Ponciano Ermita (OCT No. 8539); and Fabiana R. Pedimonte (OCT No. 9848).14 Accordingly, on
September 5, 2003, the Clerk of Court of the RTC issued the certificate of finality as to them, as well
as a writ of partial execution.

Isabel Ronda, et al. raised the following errors on appeal, namely: (1) that the court a quo erred in
acquiring jurisdiction over the case; and (2) the court a quo erred in ordering the ejectment of the
appellants, heirs of deceased spouses, Mariano S. Ronda and Fidela Cortez-Ronda.15

On their part, Catalino Alcaide, Julia Casaysayan, and Chisan Uy claimed that the RTC erred in
assuming jurisdiction over the case when in fact it had no such jurisdiction; in holding that the titles
issued to the tenants Spouses Alcaides and Chisan Uy were void; and in holding that the
proceedings taken by the public defendants in generating the CLTs and EPs were void.16

In his appeal, the petitioner insisted that the RTC gravely erred in holding that he had not been an
innocent purchaser in good faith and for value; and in declaring void and ordering the cancellation
of TCT No. 31436 and TCT No. 31437, among others.17

For their part, the respondents asserted that the disputed land, being originally registered under
OCT No. 854, and later on under TCT No. 1128, and still later on under TCT No. RT-8922, and now
under TCT No. 30111, did not lose its character as registered land; and that as registered land, the
disputed land should not have been subject of another land registration proceeding from which the
EPs and the certificates of title of the private defendants could be derived.18

In its decision promulgated on February 17, 2004,19 the CA ruled in favor of respondents, viz:

WHEREFORE, this appeal is DENIED. The assailed Decisiondated June 30, 2000 of the Regional Trial
Court of Pili, Camarines Sur, Branch 32 in Civil Case No. P-2167 is hereby AFFIRMED.

SO ORDERED.

On the inclusion of the disputed land under the DAR’s OLT Program (P.D. No. 27), the CA observed:

Significantly, the disputed land was earlier extra-judicially settled by the plaintiffs-appellees as
heirs of the original owner. The disputed land was already titled to plaintiffs-appellees at the time
that public respondent DAR included it in the operation of PD No. 27. The DAR’s finding that the
same was an "untitled" property is belied not only by the records but, more so, by the failure of
defendants-appellants to refute plaintiffs-appellees’ assertion to the contrary.

Moreover, for a valid application of PD No. 27, the procedures outlined under PD No. 266 should
have been observed, among which is the duty of the Register of Deeds to notify the registered
owner concerning such application within a reasonable time. However, as found by the Trial Court,
no such notice was served on plaintiffs-appellees, precisely due to the erroneous premise that the
disputed land was "untitled property".

Prescinding from the said wrong premise that the disputed land was an untitled property, no
payment of just compensation was made to the registered owners. Such failure or absence of
payment violates the very law (PD 27) from which the titles of defendants were purportedly
derived. Hence, the land transfer initiated by the DAR involving the disputed land is not only
irregular but also unlawful for having been undertaken in violation of the law.

Moreover, a land covered by a title which is outstanding cannot be the subject of an application for
registration unless the existing title which has become indefeasible is first nullified by a proper
court proceeding. Consequently, the Emancipation Patents and the Certificates of Titles issued as a
result of the DAR’s Operation Land Transfer program over an already registered land have no legal
foundation or basis. Such subsequent titles must be cancelled because they cast clouds on the
earlier existing, valid and uncancelled title of plaintiffs-appellees. For all intents and purposes, they
are redundant titles that cannot supplant or supersede existing valid titles.20
On whether the petitioner and Chisan Uy had been purchasers in good faith and for value without
any notice of any defect in the title of the seller (i.e., the heirs of the farmers-beneficiaries), the CA
decreed:

We disagree. Even assuming arguendo that they had no notice of any defect in their transferors’
titles, and the lands sold to them should be included in the DAR’s Operation Land Transfer(OLT)
program, no valid title could have passed to them because the transfers are void under PD 27. PD
27 explicitly provides:

xxxx

Title to land acquired pursuant to this Decree or the Land Reform Program of the Government shall
not be transferable except by hereditary succession or to the Government in accordance with the
provisions of this Decree, the Code of Agrarian Reforms and other existing laws and regulations;

x x x x (Emphasis supplied)

Based on the above-quoted provision, appellant-purchasers Hector and Chisan Uy are clearly not
the qualified transferees of the lands sold to them.

More importantly, the policy of the State in passing PD 27 is to emancipate the tiller of the soil from
his bondage by transferring to him the ownership of the land he tills. The prohibition against its
transfer is for the purpose of preserving the land for the sole benefit and enjoyment of the farmer
and his family. To sustain the transfer of the lands to appellants-purchasers would clearly not
achieve that purpose. It would, in fact, defeat it.

The titles of appellant-purchasers Hector Uy and Chisan Uy are, therefore, voided. Ownership of the
lands unlawfully transferred to them, remains with plaintiffs-appellees. However, this is without
prejudice to whatever legal remedies these appellant-purchasers may avail to recover what they
had paid to their transferors.21

In its resolution of August 18, 2004 denying the petitioner’s motion for reconsideration, the CA,
citing Baltazar v. Court of Appeals,22 correctly observed:

The property subject of the said Baltazar case was titled in the name of the private respondent
Good Earth Enterprises, Inc. Petitioner therein, Baltazar, claimed ownership of the property, tracing
his rights from an alleged vast Spanish grant to one "Don Hermogenes Rodriguez, Governor General
of Intramuros, Manila" down to a deed of sale over the subject lots allegedly executed by one Pedro
Asedillo (for whose mother, Baltazar had been a tenant sharing in the rice harvest from the lots).
Baltazar filed a case for declaration of ownership and reconveyance, and was declared by the court
as the true owner of the property. Consequently, Good Earth’s title was cancelled and another one
issued in Baltazar’s name. Baltazar promptly sold the land to third parties. Good Earth filed a case
for annulment of judgment and reconveyance. Baltazar argued that his vendees are innocent
purchasers for value. The Supreme Court, in upholding Good Earth’s title, declared:

We might assume for the moment and for purposes of argument only that Baltazar’s vendees had
successfully proven they were purchasers in good faith and for value. Even so, as between two
persons both of whom are in good faith and both innocent of any negligence, the law must protect
and prefer the lawful holder of registered title over the transferee of a vendor bereft of any
transmissible rights. Under the foregoing principle derived from the above case law, Baltazar’s
vendees have no rights as against Good Earth. Their recourse is against Baltazar himself."
(Emphasis supplied.)23

xxxx

Like Baltazar, Hector and Chisan Uy’s transferors had no transmissible rights because their titles
were void, having emanated from an erroneous declaration that the property is untitled, and from
an irregular or procedurally flawed implementation of the agrarian reform law (as there was no
notice to the registered owner that the subject property would be placed under the Operation Land
Transfer program, and there was no payment of just compensation). Accordingly, Hector and
Chisan Uy’s titles are likewise void.24

Issues

Hence, the petitioner has appealed, along with Chisan Uy, Catalino Alcaide and Julia Casaysayan.
The petition for review on certiorari of Chisan Uy, Alcaide and Casaysayan was docketed as G.R. No.
165320, and that of petitioner Hector Uy as G.R. No. 164961.

On January 21, 2008, the Court promulgated a resolution in G.R. No. 165320, pertinently stating: x x
x It appearing that Atty. Nelson P. Paraiso, counsel for petitioners in G.R. No. 165320, failed to file
reply to the comment on the petition for review on certiorari as required in the Resolution dated 24
August 2005 within the extended period which expired on 01 December 2006, the petition is
hereby ordered DENIED for failure to comply with said resolution, which amounts to failure to
prosecute.

In any event, petitioner failed to sufficiently show that the Court of Appeals committed any
reversible error in the challenged decision and resolution as to warrant the exercise of this Court’s
discretionary appellate jurisdiction. Besides, the issues raised are factual in nature.25 As such, only
the petitioner’s appeal remains unresolved. Towards that end, he insists that the CA erred: (a) in
failing to find that he was an innocent purchaser for value who had the better right than the
respondents over the disputed land; and (b) in failing to find that the law applicable to the dispute
was R.A. No. 6657 (approved on June 10, 1988), not P. D. No. 27.26

The petitioner argues that he paid a full and fair price of ₱10,000,000.00 to Isabel Ronda, et al. for
the lots in dispute, said lots having a base market value of only ₱7,717,000.00;27 that all the
documents shown to him by the vendors (Isabel Ronda, et al.) did not indicate any defect in the title
or any claim by the respondents in the lots in dispute; that, accordingly, before he and the vendors
(Isabel Ronda, et al.) entered into the deed of sale, there was absolutely nothing in the documents
that showed any defect in the title conveyed to him; that, specifically, OCT No. 9852 and OCT No.
9853, which were on file in the Registry of Deeds, showed that the lots in dispute had been awarded
to a bona fide tenant-beneficiary as part of the land reform program, that is, OCT No. 9852 and OCT
No. 9853 showed that as early as November 21, 1997: (a) the encumbrance in favor of Land Bank of
the Philippines had been cancelled; (b) the records of the DAR indicated that Mariano Ronda had
been awarded OCT No. 9852 and OCT No. 9853 as the bona fide tenant-beneficiary; and (c) the
extra-judicial settlement revealed to him that he was then dealing with the children of Mariano
Ronda.28

The petitioner concludes that the absence of any irregularities in the documents presented to him,
coupled with the fact that it was Isabel Ronda, et al., not the respondents, who were then in the
possession of the lots in dispute, clearly evinced to him that he did not have to look beyond the
titles presented to him; that, consequently, he could not have been aware of the respondents’ claim
over the disputed lots;29 that he should be deemed an innocent purchaser for value because the
only time that he could have been charged with constructive notice of the respondents’ claim to the
lots in dispute was after the annotation of their adverse claim on the title of the lot, which they
made five months after the sale to him;30 and that according to Tenio-Obsequio v. Court of
Appeals,31 "the rule of law and justice that should apply in this case is that as between two
innocent persons, one of whom must suffer the consequences of a breach of trust, the one who
made it possible by his act of confidence must bear the loss. The right of the innocent purchaser for
value must be respected and protected, even if the seller obtained his title through fraud."32

Anent the applicability of P.D. No. 27,33 the petitioner contends that the RTC and the CA’s reliance
on P.D. No. 27 to support their rulings to the effect that the transfer to him had been void, in that
the alienation had not been made in favor of the Government or by hereditary succession, was
misplaced; that it was Section 2734 of R.A. No. 6657 (Comprehensive Agrarian Reform Law), not
P.D. No. 27, that should apply to the controversy;35 that Section 27 of R.A. No. 6657 amended P.D.
No. 27 in view of the former law’s repealing clause (Section 7636); and that, as a result, the
perpetual prohibition against transfer contained in P.D. No. 27 must be deemed inconsistent with
and repealed by Section 27 of R.A. No. 6657, which provides a prohibition for only 10 years.

According to the petitioner, the evidence established that Mariano Ronda had secured OCT No.
9852 and OCT No. 9853 on July 7, 1998; that the first transfer of the lots (from Mariano Ronda to
Isabela Ronda, et al.) by virtue of the deed of extra-judicial settlement had been by hereditary
succession, which was not in breach of either P.D. No. 27 or R.A. No. 6657; that the second transfer
of the lots on July 31, 1998, whereby Isabel Ronda, et al. sold the lots to the petitioner, was beyond
the ten-year prohibited period under Section 27 of R.A. No. 6657 due to said period having expired
on July 6, 1988; and that, consequently, the sale from Isabela Ronda, et al. to the petitioner was
outside the ambit of the ten-year prohibited period under Section 27 of R.A. No. 6657.37

The respondents counter, however, that their action for quieting of title was premised on the illegal
acquisition of their decreed and titled property by the DAR under its OLT Program as a result of the
DAR’s declaration of their property as "untitled" and "abandoned"; that their title did not lose its
character as "valid, existing, binding, effective, and uncancelled" since November 23, 1933,the time
when the OCT was issued; and that the DAR officials, by not appealing the RTC’s decision, were
implicitly "recognizing, acknowledging and admitting" the decision.38

The respondents deny the petitioner’s claim of good faith. They point out that he did not exercise
due diligence in examining the title of the heirs of Mariano Ronda given that said title had been
previously, but wrongfully, acquired through the OLT Program of the DAR; that the express
prohibition contained in OCT No. 9852 and OCT No. 9853, which the petitioner unavoidably saw,
made it clear that the lots thereby covered "shall not be transferred except by hereditary succession
or to the Government in accordance with the provisions of Presidential Decree No. 27", thereby
belying the petitioner’s assertion of being an innocent purchaser for value and in good faith;39 that
the nullity of the DAR proceedings and the void character of the OCTs issued by DAR did not
supersede the valid, existing, binding and uncancelled title of the respondent.40

Ruling of the Court

We affirm the decision of the CA.

We stated at the start that in determining whether or not a buyer of property is a purchaser in good
faith, he must show that he has bought the property without notice that some other person had a
right to, or interest in, such property, and he should pay a full and fair price for the same at the time
of his purchase, or before he had notice of the claim or interest of some other persons in the
property.41 He must believe that the person from whom he receives the property was the owner
and could convey title to the property,42 for he cannot close his eyes to facts that should put a
reasonable man on his guard and still claim he acted in good faith.43

In Bautista v. Silva,44 the Court enunciates the requisites for the buyer to be considered a
purchaser in good faith, viz:

A buyer for value in good faith is one who buys property of another, without notice that some other
person has a right to, or interest in, such property and pays full and fair price for the same, at the
time of such purchase, or before he has notice of the claim or interest of some other persons in the
property. He buys the property with the well- founded belief that the person from whom he
receives the thing had title to the property and capacity to convey it.

To prove good faith, a buyer of registered and titled land need only show that he relied on the face
of the title to the property. He need not prove that he made further inquiry for he is not obliged to
explore beyond the four corners of the title. Such degree of proof of good faith, however, is
sufficient only when the following conditions concur: first, the seller is the registered owner of the
land; second, the latter is in possession thereof; and third, at the time of the sale, the buyer was not
aware of any claim or interest of some other person in the property, or of any defect or restriction
in the title of the seller or in his capacity to convey title to the property. Absent one or two of the
foregoing conditions, then the law itself puts the buyer on notice and obliges the latter to exercise a
higher degree of diligence by scrutinizing the certificate of title and examining all factual
circumstances in order to determine the seller’s title and capacity to transfer any interest in the
property. Under such circumstance, it was no longer sufficient for said buyer to merely show that
he had relied on the face of the title; he must now also show that he had exercised reasonable
precaution by inquiring beyond the title. Failure to exercise such degree of precaution makes him a
buyer in bad faith.45

An examination of the deed of sale executed between Isabel Ronda, et al. and the petitioner
respecting the portions covered by TCT No. 31120 and TCT No. 31121 indicates that the TCTs were
issued only on August 17, 1998 but the deed of sale was executed on July 31, 1998. While it is true,
as the petitioner argues, that succession occurs from the moment of death of the decedent pursuant
to Article 777 of the Civil Code,46 his argument did not extend to whether or not he was a buyer in
good faith, but only to whether or not, if at all, Isabel Ronda, et al., as the heirs of Mariano Ronda,
held the right to transfer ownership over their predecessor’s property. The argument did not also
address whether or not the transfer to the petitioner was valid.

Evidently, the petitioner entered into the deed of sale without having been able to inspect TCT No.
31120 and TCT No. 31121 by virtue of such TCTs being not yet in existence at that time. If at all, it
was OCT No. 9852 and OCT No. 9853 that were available at the time of the execution of the deed of
sale, and such OCTs were presumably inspected by petitioner before he signed the deed of sale. It is
notable that said OCTs categorically stated that they were entered pursuant to an emancipation
patent of the Ministry of Agrarian Reform pursuant to the Operation Land Transfer (OLT) Program
of the government. Furthermore, said OCTs plainly recited the following prohibition: "…it shall not
be transferred except by hereditary succession or to the Government in accordance with the
provisions of Presidential Decree No. 27, Code of Agrarian Reforms of the Philippines and other
existing laws and regulations…."

The foregoing circumstances negated the third element of good faith cited in Bautista v. Silva, i.e.,
that "at the time of sale, the buyer was not aware of any claim or interest of some other person in
the property, or of any defect or restriction in the title of the seller or in his capacity to convey title
to the property." As we have ruled in Bautista v. Silva,47 the absence of the third condition put the
petitioner on notice and obliged him to exercise a higher degree of diligence by scrutinizing the
certificates of title and examining all factual circumstances in order to determine the seller’s title
and capacity to transfer any interest in the lots. Consequently, it is not sufficient for him to insist
that he relied on the face of the certificates of title, for he must further show that he exercised
reasonable precaution by inquiring beyond the certificates of title. Failure to exercise such degree
of precaution rendered him a buyer in bad faith. "It is a well-settled rule that a purchaser cannot
close his eyes to facts which should put a reasonable man upon his guard, and then claim that he
acted in good faith under the belief that there was no defect in the title of the vendor."48

The petitioner was not an innocent purchaser for value; hence, he cannot be awarded the disputed
land.1awp++i1

In view of the result thus reached by us, it becomes superfluous to settle the issue of which between
P.D.No. 27 and Section 27 of R.A. No. 6657 should control, and whether or not the R.A. No. 6657 has
repealed P.D. No. 27. Even so, the Court has expressly clarified that R.A. No. 6657 did not repeal or
supersede P.D. No. 27, stating in Sigre v. Court of Appeals:49

Finally, the Court need not belabor the fact that R.A. 6657 or the CARP Law operates distinctly from
P.D. 27. R.A. 6657 covers all public and private agricultural land including other lands of the public
domain suitable for agriculture as provided for in Proclamation No. 131 and Executive Order No.
229; while, P.D. 27 covers rice and corn lands. On this score, E.O. 229, which provides for the
mechanism of the Comprehensive Agrarian Reform Program, specifically states: "(P)residential
Decree No. 27, as amended, shall continue to operate with respect to rice and corn lands, covered
thereunder. xxx." It cannot be gainsaid, therefore, that R.A. 6657 did not repeal or supersede, in any
way, P.D. 27. And whatever provisions of P.D. 27 that are not inconsistent with R.A. 6657 shall be
suppletory to the latter, and all rights acquired by the tenant-farmer under P.D. 27 are retained
even with the passage of R.A. 6657.

WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision of the Court of
Appeals promulgated on February 1 7, 2004; and ORDER the petitioner to pay the costs of suit.

SO ORDERED.

G.R. No. 198770 November 12, 2012

AURELIA GUA-AN AND SONIA GUA-AN MAMON, Petitioners,

vs.
GERTRUDES QUIRINO, represented by ELMER QUIRINO, Respondent.

DECISION

PERLAS-BERNABE, J.:
Assailed in the instant Petition for Review on Certiorari under Rule 45 of the Rules of Court are the
Decision1 dated February 25, 2011 and Resolution2 dated September 15, 2011 rendered by the
Court of Appeals (CA) in CA-G.R. SP. No. 00589-MIN which set aside the December 29, 2004
Decision3 of the Department of Agrarian Reform Adjudication Board (DARAB) and afforded
respondent the preferential right of redemption over the subject landholdings.

The Factual Antecedents

Subject of the instant case is a 2.8800 hectare agricultural land situated in Batangan, Valencia,
Bukidnon known as Lot 0899, covered by Certificate of Land Transfer (CLT) No. 0-025227 in the
name of Prisco Quirino, Sr.+ (Prisco+) issued by the Ministry (now Department) of Agrarian

Reform on October 16, 1979 pursuant to Presidential Decree (P.D.) No. 27. On February 27, 1985,
Prisco+ executed a Deed of Conditional Sale (deed) covering the subject landholding to Ernesto
Bayagna (Ernesto) under the following conditions:

x x x that the condition of this sale is that I, Prisco Quirino, Sr. and my heirs hereby [reserve our]
right to redeem or repurchase the herein subject parcel of land by returning to Ernesto Bayagna or
his heirs the same amount of Forty thousand Pesos (P40,000.00), Philippine currency, after the
lapse of eight (8) years from the date of execution of this instrument and if the subject land is not
redeemed or repurchased after the said eight years, there shall be an automatic extension of four
(4) years from the date the [eighth] year expires, and if after the 4 term expires, and I, Prisco
Quirino, Sr., or my heirs still [fail] to redeem or repurchase the herein subject land, Ernesto
Bayagna or his heirs shall continue to possess and enjoy the subject land until it is finally redeemed
or repurchased. After the P40,000.00 is returned to Ernesto Bayagna or his heirs, the latter shall be
obligated to return peacefully the subject land without any tenant or lessee.4

Ernesto thereupon possessed and cultivated the subject land for more than 10 years before Prisco+
offered to redeem the same in 1996, which was refused. Instead, Ernesto allowed the former owner
of the land, petitioner Aurelia Gua-An (Aurelia), through her daughter, petitioner Sonia Gua-An
Mamon (Sonia), to redeem the lot. Subsequently, Prisco+ passed away.

On January 30, 1998, respondent Gertrudes Quirino, Prisco's widow, represented by their son,
Elmer, filed before the Office of the Agrarian Reform Regional Adjudicator (RARAD) a Complaint for
Specific Performance, Redemption, Reinstatement and Damages with Application for Writ of
Preliminary Injunction and TRO against Ernesto and petitioners.

In their Answer, petitioners averred that Prisco's+ right over the subject land was merely inchoate
for failure to establish payment of just compensation to the landowner; the deed was null and void
for being violative of the law and public policy; and that the failure to consign the redemption
money effectively bars the redemption prayed for.

For his part, Ernesto averred that he allowed petitioners to redeem the lot because Prisco+ failed to
appear on the agreed date for redemption and on the information that the subject land was
erroneously awarded to the latter.

On May 6, 1998, the RARAD dismissed the complaint for lack of merit.

The DARAB Ruling

In the Decision5 dated December 29, 2004, the DARAB denied respondent's appeal and declared
Prisco+ to have violated agrarian laws and of having abandoned the land by his failure to cultivate
the same continuously for a period of more than two (2) calendar years. It canceled CLT No. 0-
025227 in Prisco's+ name and ordered the Municipal Agrarian Reform Officer (MARO) to reallocate
the subject landholding to a qualified beneficiary.

The CA Ruling

On petition for review, the CA reversed and set aside6 the DARAB's decision. It ruled that the pacto
de retro sale between Prisco+ and Ernesto was a mere equitable mortgage, hence, not a prohibited
transaction under P.D. 27, which is limited to "transfers or conveyances of title to a landholding
acquired under the Land Reform Program of the Government." Having acquired the subject land as
a "qualified beneficiary," Prisco+ and his heirs possess security of tenure thereon and could not be
dispossessed thereof except for cause and only through a final and executory judgment. Thus, the
CA afforded the heirs of Prisco+ the preferential right of redemption over the subject landholding.

In the instant petition, petitioners insist that since respondent failed to tender and consign the
redemption money, the latter has no cause of action against them. Moreover, considering that
Prisco+ was not the absolute owner of the subject property, he cannot validly mortgage the same.
Besides, Prisco+ had lost his rights as a farmer-beneficiary when he transacted with Ernesto in
violation of the provisions of Section 73(f)7 of Republic Act (R.A.) No. 6657, as amended
(Comprehensive Agrarian Reform Law of 1988).

Our Ruling

The petition is meritorious.

It bears to stress that upon the promulgation of P.D. 27, farmer-tenants were deemed owners of the
land they were tilling and given the rights to possess, cultivate and enjoy the landholding for
themselves.8 Thus, P.D. 27 specifically prohibited any transfer of such landholding except to the
government or by hereditary succession. Section 279 of R.A. 6657 further allowed transfers to the
Land Bank of the Philippines (LBP) and to other qualified beneficiaries. Consequently, any other
transfer constitutes a violation of the above proscription and is null and void for being contrary to
law.10 Relevant on this point is Ministry of Agrarian Reform Memorandum Circular No. 7, series of
1979 which provides:

"Despite the x x x prohibition, x x x many farmer-beneficiaries of P.D. 27 have transferred their

ownership, rights and/or possession of their farms/homelots to other persons or have surrendered
the same to their former landowners. All these transactions/surrenders are violative of P.D. 27 and
therefore null and void."

A perusal of the Deed of Conditional Sale reveals the real intention of the parties not to enter into a
contract of sale but merely to secure the payment of the P40,000.00 loan of Prisco+. This is evident
from the fact that the latter was given the right to repurchase the subject property even beyond the
12-year (original and extended) period, allowing in the meantime the continued possession of
Ernesto pending payment of the consideration. Under these conditions and in accordance with
Article 160211 of the Civil Code, the CA did not err in adjudging the pacto de retro sale to be in
reality an equitable mortgage.
However, contrary to the finding of the CA, the subject transaction is covered by the prohibition
under P.D. No. 27 and R.A. No. 6657 which include transfer of possession of the landholding to the
vendee a retro, Ernesto, who, not being a qualified beneficiary, remained in possession thereof for a
period of eleven (11) years. Hence, notwithstanding such possession, the latter did not acquire any
valid right or title thereto, especially since he failed to take any positive measure to cause the
cancellation of Prisco's+ CLT No. 0-025227 despite the long lapse of time.

On the other hand, the redemption made by petitioner Aurelia was ineffective and void since
reversion of the landholding to the former owner is likewise proscribed under P.D. No. 27 in
accordance with its policy of holding such lands under trust for the succeeding generations of
farmers.12

However, while CLT No. 0-025227 remains in Prisco's+ name, the Court cannot turn a blind eye to
the fact that Prisco+ surrendered possession and cultivation of the subject land to Ernesto, not for a
mere temporary period, but for a period of 11 years without any justifiable reason. Such act
constituted abandonment despite his avowed intent to resume possession of the land upon
payment of the loan. As defined in DAR Administrative Order No. 2, series of 1994, abandonment is
a willful failure of the agrarian reform beneficiary, together with his farm household, "to cultivate,
till, or develop his land to produce any crop, or to use the land for any specific economic purpose
continuously for a period of two calendar years." It is a ground for cancellation by the DARAB of an
award to the agrarian reform beneficiary. Consequently, respondent and/or Prisco's+ heirs had lost
any right to redeem the subject landholding.

In fine, we find the DARAB Decision finding Prisco+ to have violated agrarian laws, canceling his
CLT and ordering the reallocation of the subject land to be more in accord with the law and
jurisprudence.

WHEREFORE, the assailed Decision dated February 25, 2011 and Resolution dated September 15,
2011 of the Court of Appeals in CA-G.R. SP. No. 00589-MIN are hereby SET ASIDE. The DARAB
Decision dated December 29, 2004 is REINSTATED.

SO ORDERED.

G.R. No. 172204 July 2, 2014

CATHAY METAL CORPORATION, Petitioner,

vs.
LAGUNA WEST MULTI-PURPOSE COOPERATIVE, INC., Respondent.

DECISION

LEONEN, J.:

The Rules of Court governs court procedures, including the rules on service of notices and
summons. The Cooperative Code p~ovisions on notices cannot replace the rules on summons
under the Rules of Court. Rule 14, Section 11 of the Rules of Court provides an-exclusive
enumeration of the persons authorized to receive summons for juridical entities. These persons are
the juridical entity's president, managing partner, general manager, corporate secretary, treasurer,
or in-house counsel.
This petition under Rule45 assails the Court of Appeals’ decision dated November 25, 2005, and its
resolution dated April 5, 2006. The Court of Appeals remanded the case to the trial court for
respondent’s presentation of evidence.

Respondent Laguna West Multi-Purpose Cooperative is a cooperative recognized under Republic

Act No. 6657 or the Comprehensive Agrarian Reform Law.1 It allegedly entered into a joint venture
agreement with farmer-beneficiaries through Certificates of Land Ownership Award (CLOA) in
Silang, Cavite.2 While respondent was negotiating with the farmer-beneficiaries, petitioner
CathayMetal Corporation entered into Irrevocable Exclusive Right to Buy (IERB) contracts with the
same farmerbeneficiaries.3 Under the IERB, the farmer-beneficiaries committed themselves to sell
to petitioner their agricultural properties upon conversion to industrial or commercial properties
or upon expiration of the period of prohibition from transferringtitle to the properties.4

In 1996, respondent caused the annotation of its adverse claim on the farmer-beneficiaries’
certificates of title.5

On November 9, 1998, the Department of Agrarian Reform issued an order converting the
properties from agricultural to mixed use.6

In 1999, petitioner and the farmer-beneficiaries executed contracts of sale of the properties.7
Transfer certificates of titlewere also issued in the name of petitioner in the same year.8 The
annotations in the original titles were copied to petitioner's titles.9

Respondent’s Vice-President, Orlando dela Peñ a, sent two letters dated March 20, 2000 and April
12, 2000 to petitioner, informing it of respondent’s claim to the properties.10 Petitioner did not
respond.11

On September 15, 2000,petitioner filed a consolidated petition for cancellation of adverse claims on
its transfer certificates of title with the Regional Trial Court of Tagaytay City.12 It served a copy of
the petition by registered mail to respondent's alleged official address at "Barangay Mayapa,
Calamba, Laguna."13 The petition was returned to sender because respondent could not be found
at that address.14 The postman issued a certification stating that the reason for the return was that
the "cooperative [was] not existing."15 Petitioner allegedly attempted to serve the petition upon
respondent personally.16 However, this service failed for the same reason.17

Upon petitioner's motion, the Regional Trial Court issued an order on December 15, 2000 declaring
petitioner’s substituted service, apparently by registered mail,18 to have been effected,19 thus:

Acting on the "Manifestation And Motion For Substituted Service" filed by petitioner Cathay Metal
Corporation, thru counsel, and finding the reasons therein statedto be meritorious, the same is
hereby GRANTED.

Accordingly, this Court hereby declares that substituted service of the Consolidated Petition for
Cancellation of Adverse Claim on the President of Laguna West Multi-Purpose Cooperative, Inc. has
been effected. The latter ishereby given a period of fifteen (15) days from the delivery of said
pleadings to the Clerk of Court within which to file their opposition to the Consolidated petition for
cancellation of adverse claim.20

Petitioner was later allowed to present its evidence ex parte.21

Upon learning that a case involvingits adverse claim was pending, respondent, through Mr. Orlando
dela Peñ a, filed a manifestation and motion, alleging that respondent never received a copy of the
summons and the petition.22 It moved for the service of the summons and for a copy of the petition
to be sent to No. 160, Narra Avenue, Looc, Calamba, Laguna.23

The Regional Trial Court granted respondent's manifestation and motion on March 16, 2001.24 It
ordered that respondent be furnished with a copy of the petition at its new address.25

Instead of furnishing respondent with a copy of the petition, petitioner filed on April 16, 2001 a
motion for reconsideration of the March 16, 2001 Regional Trial Court order.26 In its motion for
reconsideration, petitioner argued that the case was already submitted for decision after all of
petitioner’s evidence had been admitted, and a memorandum had been filed.27 Therefore, it was
too late for respondent to ask the court that it be furnished with a copy of the petition.28 Moreover,
because respondent was already in default, a manifestation and motion, without allegations of
grounds for a motion to lift order of default, would not give it personality to participate in the
proceedings.29 Petitioner sent a copy of the motion for reconsideration to respondent by
registered mail and set the motion for hearing on April 20, 2001.30 Respondent failed to appear
atthe hearing on the motion for reconsideration. On April 20, 2001, the Regional Trial Court
submitted the motion for resolution.31

Respondent received a copy of the motion for reconsideration after the hearing. On August 13,
2001, respondent filed a motion for leave to admit attached opposition32 and opposition to
petitioner’s motion for reconsideration of the March 16,2001 Regional Trial Court order.33
Respondent argued that since petitioner’s ex parte presentation of evidence was secured through
extrinsic fraud, there should be a new trial to give respondent a fair day in court.34 This was
opposed by petitioner on September 6, 2001.35 Petitioner emphasized its alleged compliance with
the Cooperative Code rule on notices and respondent’s failure to file its comment despite the
court’s order that approved petitioner’s substituted service.36 Petitioner further pointed out that it
had always questioned the authority of Mr. dela Peñ ato act for respondent.37

On January 16, 2003, the Regional Trial Court granted petitioner's motion for reconsideration.38 It
found that respondent's alleged representatives failed to prove their authorities to represent
respondent.39 It ruled that service should be made to the address indicated in its Cooperative
Development Authority Certificate of Registration.40 The case was declared submitted for
decision.41

Respondent filed a motion for reconsideration of the January 16, 2003 order of the Regional Trial
Court.42

On March 21, 2003, the Regional Trial Court issued a decision granting petitioner’s petition for
cancellation of annotations.43 The Register of Deeds of Cavite was ordered to cancel the
annotations onthe certificates of title.44

On April 3, 2003, the Regional Trial Court issued an order45 rescinding its March 21, 2003 decision
for having been prematurely rendered, thus:

This is regard to the Decision dated March 21, 2003 which the Court has rendered in this particular
case.
A review of the records show that the court for reasons unexplained, has committed an error in
judgment in rendering said decision unmindful of the fact thatthere is still a pending incident
(Oppositor Laguna’s Motion for Reconsideration) which has first to be resolved.

Fully aware that the error if allowed to remain unrectified would cause a grave injustice and deeply
prejudiced [sic] the herein respondent, the Court, faithfully adhering to the principle enunciated by
the Honorable Supreme Court in the case of Astraquilio vs Javier, 13 CRA 125 which provides that:

"It is one of the inherent powers of the court to amend and control its process and orders so as to
make them conformable to law and justice. This power includes the right to reverse itself, especially
when in its opinion it has committed an error or mistake in judgment, and that to adhere to its
decision will cause injustice to a party litigant."

do hereby, with deep and sincere apologies to the party-litigants, more particularly to the herein
respondent Laguna West Multi-Purpose Cooperative, Inc., RECALL and RESCIND its Decision which
was prematurely rendered.46

In an order dated May 26, 2003, the Regional Trial Court denied respondent’s motion for
reconsideration of the January 16, 2003 order.47

On June 23, 2003, the Regional Trial Court decided to grant48 petitioner's petition for cancellation
of annotation on the basis of the following facts:49

. . . These annotations were subsequently copied to the Transfer Certificates of Titles over the
parcels of land subject of this suit that were issued in the name of Cathay. . . . Upon verification,
Cathay found that Laguna did not file any claim against the farmer-beneficiaries or Cathay since the
time the annotations were made. . . . Moreover, affidavits of adverse claim and supporting
documents that Laguna supposedly submitted to the Register of Deeds of Cavite were certified
bythe Register of Deeds to be inexistent in the registry's vault. . . . Moreover, the Cooperative
Development Authority likewise certified that Laguna has been inoperative since 1992 and during
the period when the annotations were made in 1996. The Bureau ofPosts has also certified that
Laguna's office at Barangay Mayapa, Calamba, Laguna, its official address as indicated in its Articles
of Incorporation and Confirmation of Registration is "closed".50

According to the Regional Trial Court, since respondent was inoperative at the time when its
adverse claims were annotated, "there [was] no reason for [it] to believe that the person who
caused the annotations of adverse claim on the titles of the farmer-beneficiaries . . . was authorized
to do so."51

The Regional Trial Court ordered the Register of Deeds to cancel the annotations on the transfer
certificates of title.52 It held that Section 70 of Presidential Decree No. 1529 or the Property
Registration Decree declares that "an adverse claim is effective [only]for a period of thirty (30) days
and may be cancelled upon filing of a verified petition after the lapse of this period."53 Since the 30-
day period had already lapsed, the annotations were already the subject of cancellation.54

Respondent appealed to the Court of Appeals based on two grounds:

1) Petitioner-appellee secured the favorable orders of the lower court in fraud of appellant
LagunaWest by sending the petition, all other pleadings, and notices to its former address, thus,
denying its day in court; and
2) The trial court erred in applying the rule on substituted service, thus, it did not validly acquire
jurisdiction over the appellant.55

The Court of Appeals granted respondent's appeal on November 25, 2005. The dispositive portion
of the Court of Appeals' decision reads:

WHEREFORE, premises considered, the appeal is hereby granted. The case is ordered remanded for
appellant's presentation of evidence and thereafter, for the trial court to render judgment, albeit
with dispatch.56

The Court of Appeals ruled thatthere was no valid service of summons upon respondent in
accordance with Rule 14, Section 11 of the Revised Rules of Civil Procedure.57 Hence, the "court
acquire[d] no jurisdiction to pronounce a judgment in the case."58

The Court of Appeals denied petitioner's motion for reconsideration on April 5, 2006.59

The issue in this case is whether respondent was properly served with summons or notices of the
hearing on the petition for cancellation of annotations of adverse claim on the properties.

Petitioner emphasized the following points:

Summons was served upon respondentat its official registered address at Barangay Mayapa,
Calamba, Laguna.60 Since no one received the summons, petitioner insisted that the trial court
issue an order to effect substituted service.61 Respondent still did not file its answer.62

Later, a certain Orlando dela Peñ a would filea manifestation and motion dated February 27, 2001
purportedly on behalf of respondent.63 Mr. dela Peñ a claimed that he was an authorized
representative of respondent and that respondent was already holding office at No. 160, Narra
Avenue, Looc, Calamba, Laguna, which was not the official address of respondent.64 Mr. dela Peñ a
never submitted proof of his authority torepresent respondent. He was also never a memberof
respondent cooperative.65

However, Mr. dela Peñ a was stillallowed to file an answer or opposition.66 Petitioner filed a motion
for reconsideration opposing the order allowing him to file an answer or opposition on behalf of
respondent.67 Respondent failed to oppose this. He did not participate further.68 Later, a certain
Mr. Geriberto Dragon would claim to be an officer of respondent. He would file an opposition on its
behalf after the period to file an opposition had lapsed.69 Mr. Dragon alleged that respondent’s
address was at No. 167, Barangay Looc, Calamba, Laguna.70 Like Mr. dela Peñ a, Mr. Dragon had
never been a member or officer of respondent.71

Petitioner argued that Mr. dela Peñ a and Mr. Dragon never submitted proof of their authority to
represent respondent.72 They were never officers or members of respondent cooperative.73
Therefore, petitioner cannot be blamed for being skeptical about Mr. dela Peñ a’s and Mr. Dragon’s
claims of authority.74

Moreover, Mr. dela Peñ a and Mr. Dragon could not claim to have been authorized to represent
respondent because it was determined to be inoperative since 1992.75 In 2002, respondent was
dissolved by the Cooperative Development Authority.76
Petitioner’s motion for reconsideration of the trial court order allowing respondent to file an
answer or opposition to the petition for cancellation of annotation was granted because of Mr. dela
Peñ a’s and Mr. Dragon’s failure to show evidence ofauthority to act on behalf of respondent.77

Petitioner argued that summons could only be validly served to respondent’s official address as
indicated in its registration with the Cooperative Development Authority.78 This is because
respondent as a registered cooperative is governed by Republic Act No. 6938, a substantive law
that requires summons to be servedto respondent’s official address.79

Substantive law takes precedence over procedural rules.80

Petitioner cites Article 52 of Republic Act No. 6938:

Article 52. Address. – Every cooperative shall have an official postal address to which all notice and
communications shall be sent. Such address and every change thereof shall be registered with the
Cooperative Development Authority.

Further, petitioner argues that there is no law that requires parties to serve summons to "every
unsubstantiated address alleged by [a] party."81

Petitioner also argued that the Court of Appeals erred when it remanded the case for trial because
respondent already admitted that its adverse claims were based not on a right over the property
but on the "alarm[ing] . . . possibility of losing the deal"82 with the owners of the property. There
was no agreement yet vesting in respondent any right over the properties.83 Moreover, the
annotations on the title were made in 1996 when respondent was already inoperative.84

Meanwhile, respondent emphasized thatit entered into a joint venture agreement with the farmer-
beneficiaries.85 While in the process of negotiations, petitioner suddenly entered into the picture
by offering the farmer-beneficiaries an IrrevocableExclusive Right to Buy (IERB) contracts.86 It was
then that respondent caused the annotation of an adverse claim on the titles.87

Respondent, through its Vice President, Mr. dela Peñ a, wrote two letters between March and April
2000 relative to its adverse claims in an attempt to amicably settle what seemed then as a brewing
dispute.88 These letters were written on respondent’s letterheads indicating the address, No. 167,
Barangay Looc, Calamba, Laguna.89

Petitioner deliberately served summons upon respondent to its old address.90 Later, petitioner
would be allowed to present evidence ex parte.91

Moreover, respondent was unable to appear at the hearing on the motion for reconsideration of the
court order allowing respondent to file its answer or opposition. Basedon the records, respondent’s
failure to appear was due to petitioner setting the hearing on April 20, 2001 and mailing
respondent’s a copy of the motion on April 16, 2001 or just four (4) days before the hearing.92

Respondent filed a motion for leave to admit attached opposition to petitioner’s motion for
reconsideration. This was opposed by petitioner. Pending respondent’s motion for leave toadmit
attached opposition, the trial court already issued its order dated January 16, 2013, granting
petitioner’s motion for reconsideration of the order allowing respondent to file its answer or
opposition to the petition for cancellation of adverse claims.93
Respondent filed a motion for reconsideration of the order dated January 16, 2003. While the said
incidents were pending,the trial court rendered its decision dated March 21, 2003, granting
petitioner’s petition to cancel the annotations of adverse claims.94 This, according to respondent,
was a premature decision.95

The trial court rescinded the March 21, 2003 decision. On May 26, 2003, the trial court denied
respondent’s motion for reconsideration.96

Within the period allowed for respondent to file its petition for certiorari, the trial court rendered
judgment granting petitioner’s petition to cancel the annotations of adverse claims on the title.97

Respondent appealed to the Court of Appeals. The appellate court remanded the case to the lower
court so that respondent could be allowed to present evidence.98

Respondent argued that petitioner was not being fair when it served summons to respondent’s old
address despite knowledge of its actual address.99

Moreover, respondent argued that itsrights over the property should be best determined after
trial.100

According to respondent, had there been a trial, it would have:

4.2.1 Presented documentary evidence that its negotiation with the former landowners had earned
for it part-ownership of the properties, or at the very least, the exclusive authority to deal with
potential buyers or developers of the properties such as petitioner.

4.2.2 Offered in evidence the actual Joint Venture Agreements ("JVA") between the former
landowners and Laguna West whereby Laguna West had made partial payment of the former
landowners’ 40% share in the joint venture. Laguna Westhad thus acquired interest over the
properties, or had the same or better right than the registered owner thereof.

4.2.3 Proved by competent evidence that the annotation sought to be cancelled was not a simple
adverse claim but qualifies as a registration of an interest over the subject properties;

4.2.4 Presented Laguna West’s authorized representatives, Orlando dela Peñ a, Geriberto Dragon
and Ediza Saliva, and one or two of the original landowners to testify on their dealings with Laguna
West.

4.2.5 Called on the officers of the CD on questions about a cooperative’s address of record vis-à -vis
its actualaddress as known to the party that the cooperativehad previously been communicating
with, in this case, petitioner.101

We rule that respondent was not validly served with summons or notice of the hearing. However,
its annotations of adverse claims should be cancelled for being based on a future claim.

I
Respondent was not validly served with summons

Republic Act No. 6938 of 1990 or the Cooperative Code of the Philippines provides that
cooperatives are mandated to have an official postal address to which notices shall be sent, thus:
Art. 52. Address. – Every cooperative shall have an official postal address to which all notices and
communications shall be sent. Such address and every change thereof shall be registered with the
Cooperative Development Authority.

This provision was retained in Article 51 of RepublicAct No. 9520 or the Philippine Cooperative
Codeof 2008. Article 51 provides:

Art. 51. Address. Every cooperativeshall have an official postal address to which all notices and
communications shall be sent. Such address and every change thereof shall be registered with the
Authority.

Relying on the above provision, petitioner argued that respondent was sufficiently served with
summons and a copy of its petition for cancellation of annotations because it allegedly sent these
documents to respondent’s official address as registered with the Cooperative Development
Authority. Petitioner further argued that the Rules of Procedure cannot trump the Cooperative
Code with respect to notices. This is because the Cooperative Code is substantive law, as opposed to
the Rules of Procedure, which pertains only to matters of procedure.

Petitioner is mistaken.

The promulgation of the Rules of Procedure is among the powers vested only in this court. Article
VIII, Section 5(5) provides:

Sec. 5. The Supreme Court shall have the following powers:

....

(5) Promulgate rules concerning the protection and enforcement of constitutional rights, pleading,
practice, and procedure in all courts, the admission to the practice of law,the integrated bar, and
legal assistance to the underprivileged.Such rules shall provide a simplified and inexpensive
procedure for the speedy disposition of cases, shall be uniform for all courts of the same grade, and
shall not diminish, increase, or modifysubstantive rights. Rules of procedure of special courts and
quasi-judicial bodies shall remain effective unless disapproved by the Supreme Court.

This means that on matters relating toprocedures in court, it shall be the Rules of Procedure that
will govern. Proper court procedures shall be determined by the Rules as promulgated by this
court.

Service of notices and summons on interested parties in a civil, criminal, or special proceeding is
court procedure. Hence, it shall be governed by the Rules of Procedure.

The Cooperative Code provisions may govern matters relating to cooperatives’ activities as
administered by the Cooperative Development Authority. However, they are not procedural rules
that will govern court processes. A Cooperative Code provision requiring cooperatives to have an
official address to which all notices and communications shall be sent cannot take the place of the
rules on summonsunder the Rules of Court concerning a court proceeding.

This is not to say that the noticescannot be sent to cooperatives in accordance with the Cooperative
Code. Notices may be sent to a cooperative’s official address. However, service of notices sent to the
official address in accordance with the Cooperative Code may not be used as a defense for
violations of procedures, specially when such violation affects another party’s rights.

Section 11, Rule 14 of the Rules ofCourt provides the rule on service of summons upon a juridical
entity. It provides that summons may be served upon a juridical entity only through its officers.
Thus:

Sec. 11. Service upon domestic private juridical entity. – When the defendant is a corporation,
partnership or association organized under the laws of the Philippines with a juridical personality,
service may be made on the president, managing partner, general manager, corporate secretary,
treasurer, or in-house counsel.

We have already established that the enumeration in Section 11 of Rule 14 is exclusive.102 Service
of summons upon persons other than those officers enumerated in Section 11 is invalid.103 Even
substantial compliance is not sufficient service of summons.104

This provision of the rule does not limit service to the officers’ places of residence or offices. If
summons may not be served upon these persons personally at their residences or offices, summons
may be served upon any of the officers wherever they may be found.

Hence, petitioner cannot use respondent's failure to amend its Articles of Incorporation to reflect
its new address as an excuse from sending or attempting to send to respondent copies of the
petition and the summons. The Rules of Court provides that noticesshould be sent to the
enumerated officers. Petitioner failed to do this. Nonotice was ever sent to any of the enumerated
officers.

Petitioner insists that it should not be made to inquire further as to the whereabouts of respondent
after the attempt to serve the summons by registered mail to respondent’s address as allegedly
indicated in its Articles of Incorporation. The Rules does not provide that it needs to do so.
However, it provides for service by publication. Service by publication is available when the
whereabouts of the defendant is unknown. Section 14, Rule 14 of the Rules of Court provides:

Sec. 14. Service upon defendant whose identity or whereabouts are unknown. – In any action where
the defendant is designated as an unknown owner, or the like, or whenever his whereabouts are
unknown and cannot be ascertained by diligent inquiry, service may, by leave of court, be effected
upon him by publication in a newspaper of general circulation and in such places and for such time
as the court may order. (Emphasis supplied)

This is not a matter of acquiringjurisdiction over the person of respondent since this is an action in
rem. In an action in rem, jurisdiction over the person is not required as long asthere is jurisdiction
over the res. This case involves the issue of fair play and ensuring that parties are accorded due
process.

In this case, petitioner served summons upon respondent by registered mail and, allegedly, by
personal service at the office address indicated in respondent’s Certificate of Registration.
Summons was not served upon respondent’s officers. It was also not published in accordance with
the Rules of Court. As a result, respondent was not given an opportunity to present evidence, and
petitioner was able to obtain from the Regional Trial Court an order cancelling respondent’s
annotations of adverse claims.
Respondent was, therefore, not validly served with summons.

II
Respondent’s alleged non-
operation does not bar it from
authorizing a person to act on
its behalf in court
proceedings

Petitioner argues that failure to serve the summons upon respondent was due to respondent's non-
operation and failure to amend its Articles of Incorporation to reflectits new address. Petitioner's
conclusion that respondent was no longer operating was based only on the postmaster's
certification. According to the postmaster’s certification, it failed to serve the petition for
cancellation of annotation to respondent’s official address becauseof respondent’s nonexistence or
closure. Petitioner failed to consider that the postmaster was not in the position to make a reliable
statement as to the existence or closure of an entity.

Moreover, the Cooperative Development Authority's certification stating that respondent was not
submitting any financial report since 1992, which was proof of its non-operation, was a mere
statement of what was indicative of non-operation. It was not yet a conclusive statement that
respondent was not in operation.

In any case, even assuming that respondent was not operating, it might still exercise its powers as a
cooperative until it would get dissolved. Section 9 of Republic Act No. 6938 provides the powers
and capacities of registered cooperatives.

Section 9. Cooperative Powers and Capacities.- A cooperative registered under this Code shall have
the following powers and capacities:

(1) To sue and be sued in its cooperative name;

(2) Of succession;

(3) To amend its articles of cooperation in accordance with the provisions of this code;

(4) To adopt by-laws not contrary to law, morals or public policy, and to amend and repeal the
same in accordance with this Code;

(5) To purchase, receive, take orgrant, hold, convey, sell, lease, pledge, mortgage, and otherwise
deal with such real and personal property as the transaction of the lawful affairs of the cooperative
may reasonably and necessarily require, subject to the limitations prescribed by law and the
Constitution;

(6) To enter into division, mergeror consolidation, as provided in this Code;

(7) To join federations or unions, as provided in this Code;

(8) To accept and receive grants, donations and assistance from foreign and domestic sources; and
(9) To exercise such other powers granted in this Code or necessary to carry out its purpose or
purposes as stated in its articles of cooperation.

Prior to dissolution, a cooperative isentitled to the exercise of these powers. It may engage indeals
involving its properties or rights. It may cause the annotation of claims it deems to have in order to
protect such claim. Contrary to petitioner’s claim, respondent is not prevented from authorizing
persons to act on its behalf.

In any case, even if petitioner alleged that respondent was already dissolved by virtue of a
November7, 2002 resolution of Cooperative Development Authority, the relevant acts of
respondent had occurred before such resolution.

The resolution of the issue of representation could have facilitated the resolution of the case on the
merits.

III
The trial court could have
resolved the issue of
representation; premature
decisions elicit suspicion

The court must not trifle with jurisdictional issues. It is inexcusable that a case involving issues that
the trial court had full control of had to be elevated to this court for determination.

The trial court had every opportunityto resolve the validity of Mr. dela Peñ a’s and Mr. Dragon’s
alleged authority to act on behalf of respondent. The trial court had, in fact, already allowed
respondent to file its answer and oppose petitioner’s petitionfor cancellation of annotation. It could
have easily ordered Mr. dela Peñ a or Mr. Dragon to produce evidence of their authority to represent
respondent.

Moreover, there had been at least two motions for reconsideration filed before the trial court
finallydecided the petitioner’s petition for cancellation of annotation.

The first was filed by petitioner when the trial court granted respondent’s manifestation and
motion on March 16, 2001. The trial court could have heard the parties on the issue of
representation at this instance had it noted petitioner’s non-compliance with the rule that the
notice of hearing must "be served in such a manner as to ensure its receipt by the other party at
least three (3) days before the date of the hearing."105 Section 4, Rule 15 provides:

Sec. 4. Hearing of motion. – Except for motions which the court may act upon without prejudicing
the rights of the adverse party, every written motion shall be set for hearing by the applicant. Every
written motion required to be heard and the notice of the hearing thereof shall be served in such a
manner as to ensure its receipt by the other party at least three (3) days before the date of hearing,
unless the court for good cause sets the hearing on shorter notice.

In this case, petitioner set the case for hearing on April 20, 2001. It served a copy upon respondent
by registered mail only on April 16, 2001 or four (4) days before the set date for hearing. To be
covered by the three-day rule under Rule 15, Section 4, petitioner should ensure respondent’s
receipt of the notice by April 17, 2001. We take judicial notice that service by registered mail in our
jurisdiction does not take place in one day. Service of notice by registered mail only four (4) days
before the date of hearing, therefore, does not amount to ensuring the other party’s receipt at least
three (3) days before the hearing.

The second motion for reconsideration was filed by respondent when the Regional Trial Court
granted petitioner’s motion for reconsideration of its order of March 16, 2001.Hence, for the second
time, the trial court had an opportunity to hear whether Mr. dela Peñ a or Mr. Dragon was properly
authorized to act on behalf of respondent.

On one hand, nobody’s rights would have been prejudiced had respondent been allowed to prove
the alleged representatives’ authorities. On the other hand, there is a likelihood ofprejudice, in this
case, if the court relied purely on technicalities.

Thus, we reiterate this court’s ruling in Alonso v. Villamor:106

. . . In other words, [processes] are a means to an end. When they lose the character of the one and
become the other, the administration of justice is at fault and courts are correspondingly remiss in
the performance of their obvious duty.

. . . To take advantage of [a purely technical error] for other purposes than to cure it, does not
appeal to a fair sense of justice. Its presentation as fatal to [a party]’s case smacks of skill rather
than right. A litigation is not a game of technicalities in which one, more deeply schooled and skilled
in the subtle art of movement and position, entraps and destroys the other. It is, rather, a contest in
which each contending party fully and fairly lays before the court the facts in issue and then,
brushing aside as wholly trivial and indecisive all imperfections of form and technicalities of
procedure, asks that justice be done upon the merits. Lawsuits, unlike duels, are not to be won by a
rapier’s thrust. Technicality, when it deserts its proper office as anaid to justice and becomes its
great hindrance and chief enemy, deservesscant consideration from courts. There should be no
vested rights in technicalities. No litigant should be permitted to challenge a record of a court of
these Islands for defect of form when his substantial rights have not been prejudiced thereby.

Both motions for reconsideration filed in the trial court were opportunities to hear the parties on
the issue of representation and to ensure that all parties were given their fair opportunity to be
heard. The trial court ignored both opportunities and chose to rule based on technicalities to the
prejudice of respondent.

The rules cannot be interpreted asa means to violate due process rights. Courts should, as much as
possible, give parties the opportunity to present evidence as to their claims so that decisions will be
made based on the merits of the case.

The trial court issued a decision pending incidents yet to be resolved. We take this opportunity to
remind courtsthat the issuance of fair decisions is the heart of our functions. The judiciary is
expected to take seriously its task of crafting decisions with utmostjudiciousness. Premature
decisions only elicit suspicion of the courts and diminish our role as administrator of justice.

IV
Rights still under negotiations
are not adverse claims

Ordinarily, this case would be remanded to the trial court for the presentation of respondent’s
evidence. However, this case has been pending in this court for about eight (8) years.In the interest
of judicial economy and efficiency, and given that the court records are sufficient to make a
determination on the validity of respondent’s adverse claim, we shall rule on the issue. Respondent
had been assailing the lack of service of summons upon it and the resulting cancellation of its
alleged adverse claim on the titles. Its claim is anchored on its disrupted negotiations with the
farmer-beneficiaries involving the properties. In its memorandum filed on March 1, 2007,
respondent stated:

1.2 Some ten (10) years ago, Laguna West entered into [sic] Joint Venture Agreement ("JVA") with
various farmer-CLOA beneficiaries in the Kaong-Kalayugan area of Silang, Cavite for a total lot area
of Eight Hundred Fifty Five Thousand and Nine Hundred Fourteen (855,914) square meters.

1.3 To hold the CLOA beneficiaries to their commitment to submit their respective lots to the JVA,
Laguna West promised them a guaranteed share of 40% in the proceeds of the project.

1.4 But, while Laguna West was still in the process of finalizing the negotiations with these farmer-
beneficiaries, petitioner entered the picture by offering an alleged "Irrevocable Exclusive Right to
Buy (IERB)" contracts with the same farmer-landowners for the purpose of converting the subject
vast track [sic] of land into an industrial, commercial and residential area.

1.5 Alarmed with the possibility that it could lose the deal to a big and moneyed corporation,
Laguna Westcaused the annotation of adverse claims on the thirty-nine (39) TCTs in 1996.107
Respondent’s annotations on petitioner’s certificates of title are similarly worded, thus:

Entry No. . . . -AFFIDAVIT OF ADVERSE CLAIM- Covering the parcel of land described in this title as
per Affidavit of Adverse Claim executed by Calisto M. Dela Pena [sic] of Laguna West Multi-Purpose
Cooperative Inc., wherein the registered owner entered into a Joint Venture Agreement, as per
Affidavit ofAdverse Claim, subs. and sworn to before the Not. Public for . . ., a copy is on file in this
registry.

Date of inst.- . . . .

Date of inscription- . . . .

NOTE: The foregoing annotations were copied from TCT. . . .108

Another version of the annotation is worded as follows:

Entry No. . . . -ADVERSE CLAIM- Signed and executed by Calixto M. dela Pena [sic], president and
Chairman of Cooperative, [alleging] therein the existence of Joint Venture Agreement with the
registered owner and that there are aboutto dispose said lot, exec. before the Not. Public . . . Copy is
on file in this registry. Date of inst.- . . . . Date of inscription- . . . .109

NOTE: The foregoing annotations were copied from TCT. . . .

The purpose of annotations of adverse claims on title is to apprise the whole world of the
controversy involving a property. These annotations protect the adverse claimant's rights before or
during the pendency of a case involving a property. It notifies third persons that rights that may be
acquired with respect to a property are subject to the results of the case involving it.
Section 70 of Presidential Decree No. 1529 or the Property Registration Decree governs adverse
claims. It describes an adverse claim as a statement in writing setting forth a subsequent right or
interest claimed involving the property, adverse tothe registered owner. Thus:

Section 70. Adverse claim. – Whoever claims any part or interest in registered land adverse to the
registered owner, arising subsequent to the date of the original registration, may, if no other
provision is made in this Decree for registering the same, make a statement in writing setting forth
fully his alleged right or interest, and how or under whom acquired, a reference to the number of
the certificate of title of the registered owner, the name of the registered owner, and a description
of the land in which the right or interest is claimed.

The statement shall be signed and sworn to, and shall state the adverse claimant’s residence, and a
place at which all notices may be served upon him. This statement shall be entitled to registration
as an adverse claim on the certificate of title. The adverse claim shall be effective for a period of
thirty days from the date of registration. After the lapse ofsaid period, the annotation of adverse
claim may be cancelled upon filing of a verified petition therefor by the party in interest: Provided,
however, that after cancellation, no second adverse claim based on the same ground shall be
registered by the same claimant.

Before the lapse of thirty days aforesaid, any party in interest may file a petition in the court of First
Instance where the land is situated for the cancellation of the adverse claim, and the court shall
grant a speedy hearing upon the question of the validity of such adverse claim, and shall render
judgment as may be just and equitable. If the adverse claim is adjudged to be invalid, the
registration thereof shall be ordered cancelled. If, in any case, the court, after notice and hearing,
shall find that the adverse claim thus registered was frivolous, it may fine the claimant in an amount
not less than one thousand pesos nor more than five thousand pesos, in its discretion. Before the
lapse of thirty days, the claimant may withdraw his adverse claim by filing with the Register of
Deeds a sworn petition to that effect.

A claim based on a future right does notripen into an adverse claim as defined in Section 70 of
Presidential Decree No. 1529. A right still subject to negotiations cannot be enforced against a title
holder or against one that has a legitimate title to the property based on possession, ownership,
lien, or any valid deed of transfer.

Respondent’s claim was not based on any of those.1awp++i1 Its claim was based on a deal with the
CLOA farmer-beneficiaries, which did not materialize.

Respondent alleged that had there been a trial, it could have "[p]resented documentary evidence
that its negotiation with the former landowners had earned for it part-ownership of the properties,
or . . . the exclusive authority to deal with potential buyers or developers."110 Respondent
contradicts itself. For there to be a contract, there must be a meeting of the minds between the
parties. There could not have been any contract earning for respondent part-ownership or any right
since it was still undergoing negotiations with the farmer-beneficiaries. At that stage, meeting of the
minds was absent. The terms were not yet final. Hence, no right or obligation could attach to the
parties. In essence, parties cannot claim, much less make an adverse claim of any right, from terms
that are still under negotiations.

Respondent also alleged that had it been allowed to offer as evidence the joint venture agreement it
entered with the farmer-beneficiaries, it would have shown that it "had made partial payment of
the former landowners’ 40% share in the joint venture,"111 acquiring for itself an "interest over
the properties, or . . . better right than the registered owner[s]."112 Respondent was mistaken.

Republic Act No. 6657 or the Comprehensive Agrarian Reform Law prohibits its own
circumvention. The prohibition on disposition includes all rights relating to disposition such as sale,
and promise of sale of property upon the happening of conditions that remove the restrictions on
disposition.

Republic Act No. 6657 prohibits the sale, transfer, or conveyance of awarded lands within ten (10)
years, subject only to a few exceptions. Section 27 of the Act provides:

SECTION 27. Transferability of Awarded Lands. —Lands acquired by beneficiaries underthis Act
may not be sold, transferred or conveyed except through hereditary succession, or to the
government, or the LBP, or to other qualified beneficiaries for a period of ten (10) years: provided,
however, that the children or the spouse of the transferorshall have a right to repurchase the land
from the government or LBP withina period of two (2) years. Due notice of the availability of the
land shall be given by the LBP to the Barangay Agrarian Reform Committee (BARC) of the barangay
where the land is situated. The Provincial Agrarian Reform Coordinating Committee (PARCCOM) as
herein provided, shall, in turn, be given due notice thereof by the BARC.

If the land has not yet been fully paid by the beneficiary, the rights to the land may be transferred
orconveyed, with prior approval of the DAR, to any heir of the beneficiary or to any other
beneficiary who, as a condition for such transferor conveyance, shall cultivate the land himself.
Failing compliance herewith, the land shall be transferred to the LBP which shall give due notice of
the availability of the land in the manner specified in the immediately preceding paragraph.

In the event of such transfer to the LBP, the latter shall compensate the beneficiary in one lump sum
for the amounts the latter has already paid, together with the value of improvements he has made
on the land Republic Act No. 6657 also provides that the awarded lands may be converted to
residential, commercial,or industrial use if these are not economically feasible anymore or because
of urbanization, greater economic value will be derived with their conversion. Section 65 of the Act
provides:

SECTION 65. Conversion of Lands. — After the lapse of five (5) years from its award, when the land
ceases to be economically feasible and sound for agricultural purposes, or the locality has become
urbanized and the land will have a greater economic value for residential, commercial or industrial
purposes, the DAR, upon application of the beneficiary or the landowner, with due notice to the
affected parties, and subject to existing laws, may authorize the reclassification or conversion of the
land and its disposition: provided, that the beneficiary shall have fully paid his obligation.

These provisions imply the following on rules on sale of awarded lands:

1) Subject to a few exceptions, landsacquired by beneficiaries may be conveyed to non-beneficiaries

after ten (10) years.

2) Before the lapse of ten (10) years but after the lapse of five (5) years, a beneficiary may dispose
of the acquired land if it "ceases to be economically feasible and sound for agricultural purposes, or
the locality has become urbanized and the land will have a greater economic value"113 with its
residential, commercial, or industrial use.
These implications are easily abused. Hence, Republic Act No. 6657 included among the
prohibitions any act that will circumvent its provisions. Thus:

SECTION 73. Prohibited Acts and Omissions. — The following are prohibited: (a) The ownership or
possession, for the purpose of circumventing the provisions of this Act, of agricultural lands in
excess of the total retention limits or award ceilings by any person, natural or juridical, except those
under collective ownership by farmer-beneficiaries. (b) The forcible entry or illegal detainer by
persons who are not qualified beneficiaries under thisAct to avail themselves of the rights and
benefits of the Agrarian Reform Program. (c) The conversion by any landowner of his agricultural
land into any nonagricultural use with intent to avoid the application of this Act to his landholdings
and to dispossess his tenant farmers of the land tilled by them. (d) The willful prevention or
obstruction by any person, association or entity of the implementation of the CARP. (e) The sale,
transfer, conveyance or change of the nature of lands outside of urban centers and city limits either
in whole or in part after the effectivity of this Act. The date ofthe registration of the deed of
conveyance in the Register of Deeds with respect to titled lands and the date of the issuance ofthe
tax declaration to the transferee of the property with respect to unregistered lands, as the case may
be, shall be conclusive for the purpose of this Act. (f) The sale, transfer or conveyance by a
beneficiary of the right to use or any other usufructuary right over the land he acquired by virtue of
being a beneficiary, in order to circumvent the provisions of this Act. (Emphasis supplied)

The prohibition from disposition of the properties encompasses all rights relating to disposition,
including the right to convey ownership or to promise the sale and transfer of property from the
farmer-beneficiaries to anyone upon the happening of certain conditions that will remove the
conveyance restrictions.

The conveyance of the property withinthe prohibited period or before its conversion to non-
agricultural use isan outright violation of Republic Act No. 6657. Meanwhile, the promise of sale of
properties upon the happening of conditions that will remove restrictions carry with it an intent to
circumvent the provisions of Republic Act No. 6657. This law prohibits its circumvention.

In this case, the CLOAs were awarded to the farmer-beneficiaries between 1990 and 1992.114
Since the affidavit of adverse claim annotated on petitioner’s certificates of title was annotated in
1996 and the properties were converted only in 1998, respondent’sjoint venture agreement with
the farmer-beneficiaries could not have validly transferred rights to respondent.

The 10-year period of prohibition against conveyance had not yet lapsed at that time.1â wphi1
Neither were the properties already converted to non-agricultural use at that time. Respondent's
adverse claim, therefore, based on its alleged payment of the farmer-beneficiaries' 40% could not
be valid.

In sum, whether or not there were provisions on transfer of rights or promise to transfer rights in
the joint venture agreement, there could be no basis for respondent’s adverse claim. Lack of that
provision means that respondent does not have any valid claim or right over the properties at all.
Meanwhile, inclusion of such provision is illegal and, therefore, void.

This ruling is also applicable to petitioner, which entered into irrevocable exclusive right to buy
contracts from the farmer-beneficiaries. These contracts provided that the farmer-beneficiaries
committed themselves to selling their properties to petitioner upon expiration of the period of
prohibition to transfer or upon conversion of the properties from agricultural to industrial or
commercial use, whichever comes first. These contracts were execl!ted between farmer-
beneficiaries and petitioner during the period of prohibition and before the properties' conversion
from agricultural to mixed use. Upon conversion of the properties, these were immediately sold to
petitioner. Intent to circumvent the provisions of Republic Act No. 6657 is, therefore, apparent.
Petitioner's contracts are, therefore, also illegal and void. Hence, this decision is without prejudice
to the right of interested parties. to seek the cancellation of petitioner's certificates of title obtained
in violation of the law.

WHEREFORE, the petition is GRANTED. The Register of Deeds of Cavite is ORDERED to cancel the
annotations of adverse claims on the transfer certificates· of title.

SO ORDERED.

G.R. No. 162721 July 13, 2009

PETRONILA MAYLEM, Petitioner,

vs.
CARMELITA ELLANO and ANTONIA MORCIENTO, Respondents.

DECISION

PERALTA, J.:

This is a petition for review under Rule 45 of the Rules of Court, seeking the reversal of the
Decision1 of the Court of Appeals in CA-G.R. SP No. 70431, dated September 11, 2003, as well as the
Resolution2 dated February 23, 2004, which denied reconsideration. The assailed Decision
affirmed the Decision3 of the Department of Agrarian Reform Adjudication Board–Isabela in
DARAB Case No. 7725 which, in turn, affirmed the judgment4 of the Provincial Adjudicator in
DARAB Case No. II-1239-ISA’97 -- a case for recovery of possession of a piece of private agricultural
land.

Well-established are the following facts.

Since 1963, Bonifacio Abad had been tenanting a piece of private agricultural land less than a
hectare in size (0.8497 hectare) and situated in San Salvador, Santiago City, Isabela5 under a
leasehold agreement he had entered into with petitioner’s husband, Segundino Maylem, and the
latter’s parents. On January 8, 1988, or eight months before Segundino’s demise,6 the property was
awarded to Abad by operation of Presidential Decree (P.D.) No. 277 under Emancipation Patent
(EP) Nos. A-216347 and A-216348, which were issued by virtue of two certificates of land transfer
both dated August 25, 1980.8 The pieces of property were, in turn, respectively covered by
Transfer Certificate of Title (TCT) Nos. 0286689 and 028669, which were registered with the
Register of Deeds of Isabela on June 14, 1988.10 Sometime in 1990, petitioner persuaded Abad to
temporarily give to her for one year the possession of the land identified by EP No. A-216347 and
by the corresponding TCT No. 028668. Abad agreed, but after the lapse of the period, petitioner
refused to surrender possession despite repeated demands.11

It appears that petitioner had instituted a certain Francico Morsiento as tenant-farmer to cultivate
the subject land after Abad surrendered his possession,12 and that as early as 1990, petitioner had
been attempting to spare her landholdings from the operation of the agrarian reform laws. For one,
her 1991 correspondence with the Land Bank of the Philippines shows that she and her children, as
heirs of the deceased Segundino, refused to offer their land for distribution under the Operation
Land Transfer of the

government.13 It also appears that, sometime in November 1997, petitioner had filed with the
Office of the Secretary of the Department of Agrarian Reform (DAR) a petition for the retention of a
21,194-sq m landholding covered by TCT No. T-42515.14 The records show that said petition was
granted on November 30, 1999.15

In the meantime, as petitioner refused to return possession of the property, and when it came to
Abad’s knowledge that the same was mortgaged to a third person,16 Abad filed on December 5,
1997 a Complaint17 for recovery of possession with the Provincial Adjudicator of the DAR. In it, he
alleged that he had started tenanting the property since 1963, but upon the lapse of the one-year
period during which he temporarily surrendered possession thereof to petitioner, the latter refused
to return possession. Abad likewise alleged that he had brought the controversy to the DAR
Municipal Office, but no resolution had yet transpired in view of petitioner’s protest for the
exclusion of her properties from the coverage of the agrarian reform law. Instead of addressing the
allegations of Abad, petitioner, for her part, intimated that the proceedings be suspended until the
petition for the retention of her landholdings shall have been finally resolved.18

The Provincial Adjudicator, nevertheless, proceeded to dispose of the complaint and, on July 15,
1998, rendered a decision in favor of Abad. The Provincial Adjudicator upheld Abad’s right of
possession arising from ownership which had already been vested in him by virtue of the
emancipation patents issued in his name, together with the corresponding TCTs; hence, Abad being
the owner of the land, the agreement for the temporary surrender of the property was merely a
futile attempt by petitioner to defeat the former’s proprietary rights. The Provincial Adjudicator
also noted that petitioner’s petition for retention would not affect Abad’s right to the property.
Accordingly, petitioner was ordered to surrender the possession thereof to Abad.19

On appeal, the DARAB, in its January 17, 2001 Decision,20 adopted the findings and conclusions of
the Provincial Adjudicator.

Undaunted, petitioner lodged an appeal21 with the Court of Appeals (CA), but to no avail. In its
September 11, 2003 Decision, the appellate court dismissed the appeal and affirmed the decision of
the DARAB. The CA ruled that when the emancipation patent was issued in the name of Abad, the
latter became the absolute owner of the land in dispute; and that the subsequent registration
thereof validated the transfer and created a lien on the property, of which everyone was therefore
given constructive notice.22 It pointed out that Abad retained the rights he had acquired through
Presidential Decree (P.D.) No. 27 under the authority of Section 16 of Republic Act (R.A.) No.
6657.23 It concluded that Abad, as owner, would not be affected by the petition for retention.
Neither must he be deemed as having abandoned or surrendered the property, especially
considering that he was merely induced by petitioner to temporarily relinquish possession with the
assurance that it would be restored to him after a year.24 Finally, as to petitioner’s contention that
Abad’s complaint had already been barred by the three-year prescriptive period provided in the
law, the appellate court took exception therefrom on the basis of the social justice policy of
resolving doubts in favor of the disadvantaged farmer.25

With the denial of her motion for reconsideration,26 petitioner brought to this Court the present
recourse.
In this petition for review, petitioner advances the notion that while indeed EP No. A-216347 had
been issued in Abad’s name, the same was nevertheless recalled or cancelled when her petition for
retention was granted by the DAR. Hence, she believes that the said land may be validly
surrendered to her, especially in view of the waiver made by Abad of his rights thereto allegedly for
a total consideration of ₱57,000.00. Raising once again the issue of prescription, she laments that it
is patent from Abad’s complaint that the action had already prescribed when the complaint was
filed in 1997 and, hence, was dismissible on that ground.

For their part, respondents27 counter that there is no evidence showing that EP No. A-216347 was
recalled or cancelled by the DAR and, thus, Abad cannot be deemed to have abandoned the
landholding in favor of petitioner in a way that would sever the tenancy relationship, especially
considering that Abad merely surrendered possession of the land temporarily upon petitioner’s
promise to return the same to him after one year. Anent the issue of prescription, respondents aver
that it must be deemed to have been waived for failure of petitioner to timely raise the same before
the DARAB.

The petition is unmeritorious.

Prefatorily, it is needless to state that in appeals in agrarian cases, long-standing is the rule that
when the appellate court has confirmed that the findings of fact of the agrarian courts are borne out
by the records, such findings are conclusive and binding on this Court.28 In other words, issues of
fact that have already been decided by the DARAB and affirmed by the Court of Appeals, when
supported by substantial evidence, will not be interfered with by this Court or be reviewed anew,
except only upon a showing that there was fraud, collusion, arbitrariness, illegality, imposition or
mistake on the part of the department head or a total lack of substantial evidence to support the
decision.29 None of these circumstances which would otherwise require an independent factual
evaluation of the issues raised in the present petition, obtains in this case. On the contrary, we find
that the decision of the DARAB, as affirmed by the Court of Appeals, is substantially supported by
the evidence on record.

Central to the resolution of this petition is the undeniable fact that Abad had previously been
granted Emancipation Patent No. A-21347 covering the land in question, which, in turn, constituted
the basis for the issuance in his name of TCT No. T-028668. On this score, we agree with the ruling
of both the DARAB and the Court of Appeals that by reason of such grant, Abad became the absolute
owner in fee simple of the subject agricultural land.

Land transfer under P.D. No. 27 is effected in two stages: (1) the issuance of a certificate of land
transfer to a farmer-beneficiary as soon as the DAR transfers the landholding to him in recognition
of his being deemed an owner; and (2) the issuance of an emancipation patent as proof of full
ownership of the landholding upon full payment of the annual amortizations or lease rentals by the
farmer-beneficiary.30 No principle in agrarian reform law is indeed more settled than that the
issuance of an emancipation patent entitles the farmer-beneficiary to the vested right of absolute
ownership of the landholding, and it constitutes conclusive authority for the issuance of an original
or transfer certificate of title in his name. It presupposes that the grantee or beneficiary has,
following the issuance of a certificate of land transfer, already complied with all the preconditions
required under P.D. No. 27,31 and that the landowner has been fully compensated for his
property.32 And upon the issuance of title, the grantee becomes the owner of the landholding and
he thereby ceases to be a mere tenant or lessee.33 His right of ownership, once vested, becomes
fixed and established and is no longer open to doubt or controversy.34 Inescapably, Abad became
the owner of the subject property upon the issuance of the emancipation patents and, as such,
enjoys the right to possess the same—a right that is an attribute of absolute ownership.35

Concededly, petitioner has not, at any time since the start of the controversy, contested the fact that
since the issuance of EP No. A-216347 in favor of Abad, the same has subsisted and remained valid.
She, nevertheless, claims that Abad, in effect, abandoned the subject land in her favor when he
agreed in 1990 to surrender possession thereof to her, allegedly for a monetary consideration. We
are not convinced.

Abandonment or neglect, as a ground for the cancellation of an emancipation patent or certificate of

land award, according to Castellano v. Spouses Francisco,36 requires a clear and absolute intention
to renounce a right or a claim, or to abandon a right or property coupled with an external act by
which that intention is expressed or carried into effect. Intention to abandon, as held in Corpuz v.
Grospe,37 implies a departure, with the avowed intent of never returning, resuming or claiming the
right and the interest that have been abandoned. It consists in any one of these conditions: (a)
failure to cultivate the lot due to reasons other than the non-suitability of the land to agricultural
purposes, for at least two (2) calendar years, and to pay the amortizations for the same period; (b)
permanent transfer of residence by the beneficiary and his family, which has rendered him
incapable of cultivating the lot; or (c) relinquishment of possession of the lot for at least two (2)
calendar years and failure to pay the amortization for the same period.38 None of the instances
cited above obtains in this case.

As found by the Court of Appeals, it is thus implausible that the surrender of the land by Abad could
be interpreted as abandonment in contemplation of the law, in view of the understanding between
him and petitioner that the surrender of possession would be merely temporary. Suffice it to say
that the allegation of abandonment is negated by the undisputed fact that Abad actually demanded
the return of the property to him after the lapse of the one-year period. Indeed, petitioner’s act of
dispossessing Abad of the land awarded to him was merely calculated to impair the latter’s vested
right of ownership.39

More importantly, as holder of an emancipation patent, Abad is bound by the proscription against
transfers of land awards to third persons, which is prohibited by law. Paragraph 13 of P.D. No. 27
materially states:

Title to land acquired pursuant to this Decree or the Land Reform Program of the Government shall
not be transferable except by hereditary succession or to the Government in accordance with the
provisions of this Decree, the Code of Agrarian Reform and other existing laws and regulations.

This prohibition has been carried over to Section 27 of R.A. No. 6657, which provides:

Section 27. Transferability of Awarded Lands. – Lands acquired by beneficiaries under this Act may
not be sold, transferred or conveyed except through hereditary succession, or to the government, or
to the LBP (Land Bank of the Philippines), or to other qualified beneficiaries for a period of ten (10)
years: Provided, however, That the children or the spouse of the transferor, shall have a right to
repurchase the land from the Government or LBP within a period of two (2) years. x x x

Hence, even if we must assume that Abad for a consideration had waived his rights to the property
when he surrendered possession thereof to petitioner, such waiver is nevertheless ineffective and
void, because it amounts to a prohibited transfer of the land award. As the Court held in Lapanday
Agricultural & Development Corp. v. Estita,40 the waiver of rights and interests over landholdings
awarded by the government is invalid for being violative of agrarian reform laws.41 And in Torres
v. Ventura,42 the Court declared that the object of agrarian reform is to vest in the farmer-
beneficiary, to the exclusion of others, the rights to possess, cultivate and enjoy the landholding for
himself; hence, to insure his continued possession and enjoyment thereof, he is prohibited by law to
make any form of transfer except only to the government or by hereditary succession.43

Moreover, it bears stressing that petitioner has not shown that she had actually taken positive
measures to cause the cancellation of EP No. A-216347 or, at least, the certificate of land transfer
previously issued to Abad. Nowhere in the records does it appear that a direct action seeking the
cancellation of Abad’s emancipation patent or certificate of land transfer has ever been formally
filed with the DAR office. A charge of abandonment or neglect of land awards under the agrarian
reform program necessarily requires factual determination and evaluation by the DARAB, in which
is vested the exclusive and original jurisdiction over the cancellation of emancipation patents and
certificates of land award.44 In other words, the cancellation of an emancipation patent does not
ipso facto arise from the mere fact that the grantee has abandoned or neglected to cultivate the
land; such fact must be so declared and the consequent cancellation must be so ordered by
competent authority.451avvphi1

There is likewise no merit in petitioner’s averment that the November 30, 1998 Order46 of the
DAR, which granted her petition for retention, had the effect of canceling EP No. A-216347. To
begin with, in her petition for retention, it must be noted that there was no allegation that part of
the land sought to be retained included the property previously awarded to Abad, or that, at least,
petitioner was seeking to place under her retention rights properties that had already been
transferred to farmer-beneficiaries including those awarded to Abad. What is clear from the said
petition is that petitioner was seeking to spare from being further placed under the Operation Land
Transfer her remaining 2.9194-hectare landholding covered by TCT No.T-4251547—a title that is
different from any of the two TCTs that were issued in favor of Abad by virtue of his emancipation
patents.

More importantly, a perusal of the DAR Order reveals that nothing therein specifically cancelled or,
at least, ordered the cancellation of Abad’s EP No. A-216347.48 Hence, we fail to be swayed even by
petitioner’s reliance on a stipulation in a compromise agreement she allegedly entered into with
Abad, whereby they admitted that the DAR Order directed among others the cancellation of existing
emancipation patents included in the landholding subject of the petition for retention.49 Clearly,
these arguments are merely petitioner’s last-ditch attempt to defeat Abad’s right of ownership over
the subject property, which had been vested in him as early as January 8, 1988 when he was
awarded the emancipation patents.

Anent the issue of prescription, we find the ruling in Omadle v. Casuno50 to be instructive. That
case, likewise, involved a complaint for recovery of possession filed with the DARAB by farmers
who had already been issued emancipation patents. The complaint, however, was filed a year after
the three-year prescriptive period had lapsed, but the Court—noting that the complainants therein
had already acquired ownership over the property upon the issuance of the emancipation patents
in their names and, hence, had severed their tenancy relationship with the landowner—held that
the prescriptive period under the agrarian reform law did not apply to them. The Court said:

As to petitioners’ claim that respondents’ (complainants’) cause of action had prescribed, let it be
stressed that since respondents (complainants) have been issued Emancipation Patent No. A-
042463 and TCT No. ET-5184 as early as December 18, 1987, they can no longer be considered
tenants or lessees, but owners of the subject landholding. Obviously, Section 38 of R.A. No. 3844 on
prescription finds no application to their case.51

As a final note, it is useful to reiterate the appellate court’s conclusion that the registration of Abad’s
emancipation patents with the Register of Deeds in accordance with law had indeed put petitioner
on notice of the fact that Abad had already acquired a vested right of ownership of the landholding
under the agrarian reform law. This notwithstanding, inasmuch as registration is nothing more
than a mere species of notice, we need not further expound on this subject, since it is
overwhelmingly shown by the records and by petitioner’s own admissions that she had actual
knowledge of the fact that Abad became the absolute owner of the land in question merely upon the
issuance in his favor of EP Nos. A-216347 and A-216348. Hence, he and his heirs may no longer be
dispossessed of their rights of possession and ownership.

WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals in CA-G.R. SP
No. 70431, dated September 11, 2003, and its Resolution dated February 23, 2004, are AFFIRMED.

SO ORDERED.

March 29, 2017

G.R. No. 192345

LAND BANK OF THE PHILIPPINES, Petitioner

vs
SPOUSES ESTEBAN and CRESENCIA CHU,, Respondents

DECISION

DEL CASTILLO, J.:

Petitioner Land Bank of the Philippines (LBP) is assailing the January 18, 2010 Decision1 of the
Court of Appeals (CA) in CA G.R. SP No. 93518 over the amount of just compensation awarded to
respondents Esteban and Cresencia Chu, as well as its May 24, 2010 Resolution2 which denied
LBP's Motion for Reconsideration of the said Decision.

Factual Antecedents

Respondents were the registered owners of two parcels of agricultural land located in San Antonio,
Pilar, Sorsogon which were acquired by the government pursuant to its agrarian reform program.3
The first parcel of land covered by Transfer Certificate of Title (TCT) Nos. T-27060 and 27062 and
with an area of 14.9493 hectares (14.9493 has.) was acquired under Presidential Decree No. 274
(PD 27-acquired land) and initially valued by the LBP at ₱l77,657.98.5 The second parcel of land
covered by TCT No. T-27060 (pt.) was acquired under Republic Act No. 66576 (RA 6657-acquired
property) and has an area of 7.7118 hectares (7.7118 has.). LBP valued the same at ₱263,928.57.7

Respondents rejected LBP's valuation; hence summary administrative proceedings were conducted
before the Provincial Agrarian Reform Adjudication Board (PARAD) to determine the just
compensation. The administrative proceedings were docketed as Land Valuation Case No. LV-
30-'03 for the RA 6657-acquired property and Land Valuation Case No. LV-48-'03 for the PD 27-
acquired land.

Ruling of the Provincial Agrarian Reform Adjudicator

On April 11, 2003, the PARAD issued two separate Decisions8 recomputing the valuations arrived
at by the LBP. The PARAD recomputed the value of the RA 6657-acquired property at
₱1,542,360.00 (or ₱200,000.00/ha.) based on the comparable sales transaction of similar nearby
lots as well as Municipal Resolution No. 79, series of2002, declaring Hacienda Chu as industrial
area. In addition, it considered the subject property's good production, topography, and
accessibility. As regards the PD 27-acquired land, the PARAD valued the subject property at
₱983,663.94 using the formula: Land Value= AGP x ASP x 2.5 (or Average Gross Production of 75.2 x
Actual Support Price of ₱350.00 x 2.5).

LBP's Motion for Reconsideration was denied by the DARAB in its June 19, 2003 Order.9

Ruling of the Regional Trial Court (RTC) as Special Agrarian Court (SAC)

Dissatisfied, LBP filed a Petition for Determination of Just Compensation before the RTC of
Sorsogon City, Branch 52, docketed as Civil Case No. 2003- 7205.10

In its September 21, 2005 Decision,11 the RTC fixed the just compensation at ₱2,313,478.00 for the
RA 6657-acquired property and ₱1,155,173.00 for the PD 27-acquiredland.12

In arriving at these amounts, the RTC took cognizance of the factors considered by the LBP and the
PARAD. In addition, it considered the "potentials" of the subject properties, to wit:

The Court considers the decision of the Provincial Adjudicator of Sorsogon, the testimony of the
witnesses presented by the Private Respondent namely the Secretary of the Sangguniang Bayan and
the Municipal Assessor of the Municipality of Pilar, Sorsogon who testified on the Municipal
Ordinance/Resolution specifically declaring x x x the land of the private respondents including the
subject landholding x x x is the subject [of] Municipal Expansion for Agri-Economic Cum Industrial
Area. The Court also consider[ed] the applicable law and jurisprudence on the matter in arriving
[at] the just compensation of the subject property. The Court further consider[ed] the present
economic condition of the country as well as the present assessed value of the acquired property.
The suqject property is very near the industrial center that was planned by the local government
thus transforming the area adjacent to the acquired property into an economic hub of the province
of Sorsogon partly thru industrial program, eco-tourism development and agricultural productivity
into an Agri-Economic Zone to serve as the backbone of a comprehensive and sustainable program
of community[;] thus it will provide enormom: livelihood opportunities and tremendous economic
multiplier effect not only for residents of barangay San Antonio (Sapa) but also for the entire
citizenry of Pilar, Sorsogon.

According to the answer filed by the private respondents, the property is fully planted to coconut
(TCT-T-27060) and only more or less 20 meters away from the provincial road and is more or less
half [a] kilometer away from the barangay poblacion. These characteristics are likewise true [for]
TCT No. T- 27062. That the area covered under P.D. 27 yields an average of 73 sacks of clean palay
per harvest while that covered under R.A. 6657 x x x yields an average of 10 nuts per tree every 45
days at 110 fruit[-]bearing trees per hectare. For all the foregoing potentials of the property, the
Court not only took into consideration the amount of just compensation fixed by the Provincial
Adjudicator of Sorsogon but further took into account such potentials of the acquired property
which can command a price of not less than ₱l00,000.00 per hectare. The Provincial Adjudicator
valued the 7.7118 hectares acquired under TCT No. T-27060 [at] ₱l,542,360.00 under R.A. 6657
while that portion acquired inside the property titled under TCT No. T-27062 [at] ₱983,663.94
under P.D. 27 and considering the potentials of the. land in terms of the enormous livelihood
opportunities and tremendous economic multiplier effect not only for the residents of [B]arangay
San Antonio but also the entire municipality of Pilar, Sorsogon, the Court further valued the
acquired property in the amount of ₱l00,000.00 per hectare. Adding the value of the land in terms
of the fair market value as determined by the Provincial Adjudicator of Sorsogon, which includes
the value of the actual production of the coconut trees and the palay produced, to wit: ₱l,542,360.00
and ₱983,663.94 respectively and the potentials of the property [at] ₱l00,000.00 per hectare or the
value of ₱771,118.00 for the 7.7118 hectares and ₱l71,510.00 for the 1.7151 hectares, we get the
total of ₱2,313,478.00 as just compensation for the 7.7118 hectares and the just compensation in
the amount of ₱1,155,173.94 for the 1.7151 hectares.13

The dispositive portion of the RTC Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered:

1) Fixing the amount of TWO MILLION THREE HUNDRED THIRTEEN THOUSAND FOUR HUNDRED
SEVENTY EIGHT (₱2,313,478.00)14 Pesos, Philippine Currency for the 7.711815 hectares and the
amount of ONE MILLION ONE HUNDRED FIFTY FIVE THOUSAND AND ONE HUNDRED SEVENTY
THREE (₱l,155,173.00) Pesos, Philippine currency for the 1.7151 hectares,16 to be the just
compensation of said acquired portions which agricultural land are situated [in] San Antonio (Sapa)
Pilar, Sorsogon, covered by TCT No. T-27060 and TCT No. T-27062 in the name of the Sps. Esteban
and Cresencia Chu, which property was taken by the government pursuant to the Agrarian Reform
Program provided by R.A. 6657.

2) Ordering the Petitioner Land Bank of the Philippines to pay the Private Respondents the total
amount of just compensation in the sum of THREE MILLION FOUR HUNDRED SIXTY EIGHT
THOUSAND AND SIX HUNDRED FIFTY ONE (₱3,468,651.00) Pesos, Philippine currency, in the
manner provided by R.A. No. 6657 by way of full payment of the said just compensation after
deducting whatever amount previously received by the Private Respondents from the Petitioner
Land Bank as part of the just compensation.

3) Ordering the Private Respondents to pay whatever deficiency in the docket fees to the Clerk of
Court based on the valuation fixed by the Court.

4) Without pronouncement as to cost

SO ORDERED.17

LBP's motion for reconsideration18 was denied by the RTC in its Order19 dated February 13, 2006.

Ruling of the Court of Appeals

On appeal, the CA modified the RTC's ruling. The CA noted that the formula used by the PARAD (i.e.,
LV = AGP x ASP x 2.5) in computing the valuation for the PD 27-acquired land is correct. However,
the amount used for the ASP, which is P350, is erroneous. According to the CA, the mandated ASP in
Executive Order No. 22820 (EO 228) is only P35, not P350, pursuant to our ruling in Gabatin v.
Land Bank of the Philippines.21 Moreover, the CA opined that this formula remains applicable to
PD 27-acquired lands notwithstanding the passage of RA 6657, citing as basis EO 229.22 In
addition, interest at the rate of 12% per annum must be imposed to compensate for the delay.
Accordingly, it upheld LBP's valuation for the PD 27-acquired land at ₱177 ,657.98 but awarded
legal interest at the rate of 12% per annum.23

On the other hand, for the property acquired under RA 6657, the CA opined that Section 1 7 thereof,
as well as Department of Agrarian Reform Administrative Order No. 5,24 series of 1998 (DAR A.O.
05-98), must be considered in fixing just determination. As such, the formula to be used is LV ==
(CNI x 0.6) + (CS x 0.3) + (MV x 0.1) where LV is land value; CNI is capitalized net income; CS is
comparable sales; and, MV is market value per tax declaration. The alternative formula of LV = (CNI
x 0.9) + (MV x 0.1) may be used if the CS factor is not present. The CA found that although the LBP
used this formula, it, however, failed to consider the rising values of the lands in Pilar, Sorsogon
which resulted from the economic developments mentioned in the municipal resolution and the
current assessment of industrial lands in the area - this, despite the fact that evidence was
presented to show that comparable sales (the CS in the formula) have gone up to at least
₱200,000.00 per hectare. Thus, it affirmed the estimate that the RA 6657-acquired property may be
priced at ₱200,000.00 per hectare as fixed by the PARAD.25

The CA disposed of the case, thus:

IN VIEW OF THE FOREGOING, the RTC decision dated September 21, 2005 is modified in that:

1) Just compensation for the PD 27-acquired property of 14.9493 hectares shall be ₱l77,657.98
with interest of 12 percent per annum from November 1994 until paid, and

2) Just compensation for the RA 6657-acquired property of 7.7118 hectares shall be computed at
₱200,000 per hectare, or ₱l,542,360.

The petitioner is ordered to pay the respondents the amounts as set forth herein. All other aspects
of the decision stand.

SO ORDERED.26

The LBP filed a Motion for Reconsideration27 which was denied by the appellate court in its
Resolution dated May 24, 2010.

Thus, the present Petition for Review on Certiorari.

Issues

THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW WHEN:

INSOFAR AS THE RA 6657-ACQUIRED LAND, IT DISREGARDED THE VALUATION FACTORS UNDER

SECTION 17 OF RA 6657 AND THE PERTINENT DAR ADMINISTRATIVE ORDERS IN FIXING ITS
VALUE AT ₱l,542,360.00.

B.
INSOFAR AS THE PD 27-ACQUIRED LAND, IT REFUSED TO REMAND THE INSTANT CASE TO THE
TRIAL COURT FOR A RECOMPUTATION OF ITS VALUE PURSUANT TO SECTION 17 OF RA 6657, AS
AMENDED.

C.

IT IMPOSED THE PAYMENT OF INTEREST AT 12% PER ANNUM ON THE VALUE OF THE PD 27-
ACQUIRED LAND.28

LBP's Argument

The LBP posits that the appellate court improperly relied on extraneous factors, such as the rising
value of the lands in Pilar, Sorsogon, potentials of the subject property considering its strategic
location, livelihood opportunities and economic multiplier effect to the community, in determining
the just compensation for the subject properties. The LBP insists on the mandatory application of
RA 6657 vis-a-vis the formula provided in DAR A.O. No. 05-98.

Likewise, the LBP avers that the computation of the just compensation forthe PD 27-acquired land
must be revised in view of the enactment of RA 9700.29

In particular, Section 5 thereof provides that all previously acquired lands, the valuation of which is
subject to challenge by the landowners, shall be completed and finally resolved pursuant to Section
17 of RA 6657, as amended. LBP posits that the contested valuation of the PD 27-acquired land,
should now be computed in accordance with Section 17 of RA 6657, as amended; hence, the need to
remand the case to the RTC for a re-computation of its value.

Lastly, the LBP contends that the CA's award of 12% interest per annum is without basis. It posits
that with the enactment of RA 9700 vis-a-vis RA 6657, interest should no longer be imposed since
the valuation of the PD 27-acquired land would no longer be pegged at 1972 prices but would be
brought to current values pursuant to Section 5 of RA 9700 in relation to Section 17 of RA 6657, as
amended, vis-a-vis DAR A.O. Nos. 02-0930 and 01-10.31

Respondents did not file a comment to the Petition and were deemed to have waived the filing
thereof.32

Our Ruling

We grant the Petition in part.

Only questions of law may be raised in

a Petition for Review Under Rule 45,
exceptions thereto

Under Rule 45 of the Rules of Court, only questions of law may be raised as this Court is not a trier
of facts; it is not our function to re-examine and weigh anew the evidence of the parties. This Court
shall examine or evaluate the evidence again only in the exercise of its discretion and for
compelling reasons,33 as when the judgment is based on a misapprehension of facts and when the
findings of fact are conflicting.34 Here, we find that the judgment arrived at by the PARAD and the
RTC, which rulings were subsequently affirmed in toto and with modifications, respectively, by the
CA, as to the RA 6657-acquired property, was to some extent based on a misapprehension or
erroneous appreciation of facts. As regards the PARAD's and the CA's ruling, on one hand, and the
RTC's on the other, on the PD 27-acquired land, their findings thereon are conflicting.

Additionally, the PARAD's and the CA's reliance on PD 27 and its implementing rules, which formed
the basis of their respective Decisions, are now inapplicable thereto.

RA 6657-acquired property

The LBP correctly argued that consideration of the valuation factors under Section 17 of RA 6657
and the formula under DAR A.O. No. 05-9835 is mandatory in ascertaining just compensation for
purposes of agrarian reform cases. In Land Bank of the Philippines v. Gonzalez,36 we held that
although the determination of just compensation is fundamentally a judicial function vested in the
RTC, the judge must still exercise his discretion within the bounds of law. He ought to take into fall
consideration the factors specifically identified in RA 6657 and its implementing rules, as contained
under the pertinent Administrative Orders of the DAR, such as DAR A.O. No. 05-98, which contains
the basic formula of the factors enumerated under said law. He may not disregard the procedure
laid down therein because unless an administrative order is declared invalid courts have no option
but to apply it. Otherwise, the judge runs the risk of violating the agrarian reform law should he
choose not to use the formula laid down by the DAR for the determination of just compensation.
The Court reaffirmed this established jurisprudential rule in Alfonso v. Land Bank of the
Philippines37 when it categorically gave "full constitutional presumptive weight and credit to
Section 17 of RA6657, DARAO No. 5 (1998) and the resulting DAR basic formulas."38

The Court then made the following pronouncement:

For clarity, we restate the body of rules as follows: The factors listed under Section 17 of RA 6657
and its resulting formulas provide a uniform framework or structure for the computation of just
compensation which ensures that the amounts to be paid to affected landowners are not arbitrary,
absurd or even contradictory to the objectives of agrarian reform. Until and unless declared invalid
in a proper case, the DAR formulas partake of the nature of statutes, which under the 2009
amendment became law itself, and thus have in their favor the presumption of legality, such that
courts shall consider, and not disregard, these formulas in the determination of just compensation
for properties covered by the CARP. When faced with situations which do not warrant the formula's
strict application, courts may, in the exercise of their judicial discretion, relaxformula's application
to fit the factual situations before them, subject only to condition that they clearly explain in their
Decision their reasons (as borne by the evidence on record) for the deviation undertaken. It is thus
entirely allowable for a court to allow a landowner's claim for an amount higher than what would
otherwise have been offered (based on an application of the formula) for as long as there is
evidence on record sufficient to support the award.

xxxx

For the guidance of the bench, the bar, and the public, we reiterate the rule: Out of regard for the
DAR's expertise as the concerned implementing agency, courts should henceforth consider the
factors stated in Section 17 of RA 6657, as amended, as translated into the applicable DAR formulas
in their determination of just compensation for the properties covered by the said law. If, in the
exercise of their judicial discretion, courts find that a strict application of said formulas is not
warranted under the specific circumstances of the case before them, they may deviate or depart
therefrom provided that this departure or deviation is supported by a reasoned explanation
grounded on the evidence on record. In other words, courts of law possess the power to make a
final determination of just compensation.39

Be that as it may, we cannot sustain LBP's valuation of ₱263,928.57 as just compensation for the RA
6657-acquired property for failure to substantiate the same.

In Land Bank of the Philippines v. Livioco,40 we held that "in determining just compensation, LBP
must substantiate its valuation." This pronouncement is a reiteration of our ruling in Land Bank of
the Philippines v. Luciano41 that:

Clearly, Land Bank's valuation of lands covered by CARL is considered only as an initial
determination, which is not conclusive, as it is the RTC, sitting as a [SAC], that should make the final
determination of just compensation, taking into consideration the factors enumerated in Section 17
of RA 6657 and the applicable DAR regulations. Land Bank's valuation had to be substantiated
during the hearing before it could be considered sufficient in accordance with Section 17 of RA No.
6657 and DAR AO No. x x x (Emphasis supplied)

In this case, we hold that the LBP was not able to justify its valuation. Although the LBP maintained
that it stringently applied the pertinent law and its relevant implementing rules in arriving at its
computation, it failed to adduce sufficient evidence to prove the truthfulness or correctness of its
assertions. Its Formal Offer of Exhibits, and the reasons therefor, consisted only of the following:

1) Exhibit A-Field Investigation Report for the 7.7118 hectares

- To prove that an actual investigation of the area subject matter of the case was conducted and
participated by the personnel of the Department of Agrarian Reform, Land Bank of the Philippines
and the representative of the Agrarian Reform Committee that will show the actual condition of the
property at the time of the voluntary offer of the landowner of her property to the government;

2) Exhibit B - Market Value per Ocular Inspection for the 7.7118 hectares

- To prove where the location adjustment factor is taken which is used in the computation of
valuation

xxxx

4) Exhibit D - Claims Valuation and Processing Form for the 7.7118 hectares

- To show the detailed computation/valuation made on the properties subject matter of this case
under DAR Administrative Order No. 5, series of 1998 using the formula LV = (CNI x .90) + (MV x .
10)

- To show the date of receipt of LANDBANK of the claim folder from the Department of Agrarian
Reform which is used as the basis [in] determining the average price of the crops found in the
property at the time of the field investigation/ocular inspection

xxxx

7) Exhibit G - PCA Municipal Selling Price for Coconut (Sorsogon Province)

- T[o] show the average selling price of copra per kilo for the municipality of Pilar[,] Sorsogon for
the period October 2001 to September 2002 which is P9.97 per kilo.42 (Emphasis supplied)

The LBP used the formula LV = (CNI x. 90) + (MV x .10). Concededly, it was able to sufficiently
establish the Capitalized Net Income (CNI) factor43 of the formula. However, the same is not true
regarding the Market Value (MV) component thereof While the CNI factor, as computed in the
Claims Valuation and Processing Form (Claims Form), finds support from and can be adequately
explained by a simple perusal of the documents forming part of the records of this case,44 the MV
component, on the other hand, does not have any similar support and basis as a thorough search of
the records failed to produce the same.

The Claims Form, which the LBP insists embodies a detailed computation using the formula earlier
cited, did not reflect how the data and figures were arrived at and if they were indeed correct. The
LBP did not present any testimonial evidence before the RTC which could explain or corroborate
how it came up with the figures and what credence ought to be accorded to them. All that the
Claims Form showed is the LBP's computation, and nothing more. As we held in Land Bank of the
Philippines v. Livioco,45 "the computation in the Form may be mathematically correct, but there is
no way of knowing if the values or data used in the computation are true." For this reason we
cannot uphold the LBP's valuation. Besides, LB P's Formal Offer of Exhibits was admitted only when
respondents failed to offer any objection. In any case, even considering the absence of objection on
the part of respondents, LBP must still prove the basis and correctness of its computation. LBP
miserably failed in this regard.

We cannot agree to the valuations fixed by the PARAD and the RTC, valuations that found their way
into rulings that were affirmed in toto and with modification by the CA, respectively. These rulings
were arrived at in clear disregard of the formula set forth under DAR A.O. No. 05-98. As borne out
by their respective Decisions, these tribunals considered only the Comparable Sales (CS) factor to
the exclusion of the other factors, namely, the CNI and MY.

Aggravating the situation, the CS factor was not determined pursuant to the guidelines laid down in
DAR A.O. No. 05-98. Respondents merely submitted a notarized Deed of Absolute Sale between
them and Wilson Tarog reflecting an amount of ₱200,000.0046 per hectare. A second notarized
Deed of Voluntary Land Transfer executed between Rudy Balisalisa and Abegail Sapanza was
submitted fixing the amount per hectare at ₱241,462.00.47 Additionally, respondents proffered in
evidence Municipal Resolution No. 79, Series of2002,48 declaring the intent of Pilar, Sorsogon to
develop Hacienda Chu as an agri-economic-industrial site in accordance with its town expansion
program. All of these, however, are irrelevant as DAR A.O. No. 05-98 itself categorically enumerates
the guidelines for determining the CS factor, thus:

C. 1. The following rules shall be observed in the computation of CS:

a. As a general rule, there shall be at least three (3) Sales Transactions.

- At least one comparable sales transaction must involve land whose area is at least ten percent
(10%) of the area being offered or acquired but in no case less than one hectare. The other
transaction/s should involve land whose area is/are at least one hectare each.

b. If there are more than three (3) STs available in the same barangay, all of them shall be
considered.
c. If there are less than three (3) STs available, the use of STs may be allowed only if AC and/or
MVM are/is present.

xxxx

C. 2. The criteria in the selection of the comparable sales transactions (ST) shall be as follows:

a. When the required number of STs is not available at the barangay level, additional STs may be
secured from the municipality where the land being offered/covered is situated to complete the
required three comparable STs. In case there are more STs available than what is required at the
municipal level, the most recent transactions shall be considered. The same rule shall apply at the
provincial level when no STs are available at the municipal level. In all cases, the combination of STs
sourced from the barangay, municipality and province shall not exceed three transactions.

b. The land subject of acquisition as well as those subject of comparable sales transactions should
be similar in topography, land use, i.e., planted to the same crop. Furthermore, in case of permanent
crops, the subject properties should be more or less comparable in terms of their stages of
productivity and plant density.

c. The comparable sales transactions should have been executed within the period January 1, 1985
to June 15, 1988, and registered within the period January 1, 1985 to September 13, 1988.

d. STs shall be grossed up from the date of registration up to the date of receipt of CF by LBP from
DAR for processing, in accordance with Items II.A.9.

Respondents presented only two comparable sales transactions. This falls short of the
requirements of DARA.O. No. 05-98.

The PARAD erroneously considered the municipal resolution as the third comparable sales
transaction when it noted and held that:

x x x And, last is a Municipal Resolution No. 79 Series of 2002 declaring the entire Hacienda Chu [in]
San Antonio Sapa, Pilar, Sorsogon as Town Expansion and classified the same as an Industrial Area
(Annex "C"). That the subject property is very productive, with good location, very near x x x the
Poblacion, and, accessible by land and water x x x

It is a well-settled rule that in determining the valuation of the properties a comparable sale
transaction of similar nearby places is admissible in evidence x x x. Thus from the evidence
submitted by the landowner, the Board is convinced that the valuation by the Land Bank of the
Philippines is in fact unreasonable, considering that the subject property [has] good production,
topography and [is] accessible on both land and water. The Board however cannot grant the prayer
for Three Hundred Fifty Thousand Pesos per hectare considering that in comparable sales
transactions the Board can only grant the lowest among those presented as [evidence]. And,
therefore the Board can only grant the amount of Two Hundred Thousand Pesos per hectare
(Annex A).49 (Emphasis supplied)

The municipal resolution could not in any manner be regarded as a comparable sales transaction
precisely because no sale transaction ever took place. At best, the said resolution merely manifested
the formal intention of the local government of Pilar to acquire certain portions of the subject
properties.
Equally glaring is the fact that none of the tribunals below took into full consideration the factors
laid down in Section 17 of RA 6657 - a necessary requirement which no court of law is at liberty to
disregard if sound judicial discretion is to be exercised at all in determining just compensation.
Instead, this Court notes that the RTC, not to mention the CA, primarily took account of an
extraneous factor- potentials of the land- to justify the award of ₱200,000.00 per hectare.
Discounting respondents' evidence on the comparable sales transactions, the potentials of the
landholding may then be said to have become the main factor supporting the valuation thereof This
conclusion is even borne out by the Decisions of the PARAD, the RTC, and the CA whose discussions
centered thereon. However, this Court has a]ready reiterated in Land Bank of the Philippines v.
Livioco50 that, such factor, standing alone, has already been dismissed as improper basis for
assessing the just compensation in the expropriation of agricultural lands. Thus:

x x x While the potential use of an expropriated property is sometimes considered in cases where
there is a great improvement in the general vicinity of the expropriated property, it should never
control the determination of just compensation (which appears to be what the lower courts have
erroneously done). The potential use of a property should not be the principal criterion for
determining just compensation for this will be contrary to the well-settled doctrine that the fair
market value of an expropriated property is determined by its character and its price at the time of
taking, not its potential uses. If at all, the potential use of the property or its "adaptability for
conversion in the future is a factor, compensation.51 (Emphasis supplied)

Despite the foregoing, the PARAD, the RTC, and the CA, proceeded to rule in respondents' favor on
the basis of their evidence and, with meager evidence to support their pronouncements, pegged the
price of the RA 6657-acquired property at ₱200,000.00 and ₱300,000.00, respectively, per hectare.
We cannot uphold the same.

As may be gleaned from the above discussion, the respective evidence of both parties are
insufficient to enable this Court to come up with a correct computation on the just compensation to
which respondents are entitled. However, as this Court is not a trier of facts, this Court cannot
receive new evidence from the parties that would aid or assist it in the prompt resolution of this
case. Thus, this Court is constrained to remand the case to the RTC for the reception of evidence and
the determination of just compensation in accordance with our pronouncement in Alfonso v. Land
Bank of the Philippines.52

PD 27-acquired land

a. Remand case to the RTC for determination of just compensation

b. Award of interest

a. Remand case to the RTC for determination of just compensation

The appellate court also incorrectly ruled that the formula under EO 228 should be followed for
purposes of computing just compensation in relation to PD 27-acquired lands. Citing Land Bank of
the Philippines v. Imperial,53 the CA held that the guidelines provided under PD 27 and EO 228
remained operative despite the passage of RA 6657 given that EO 229 states that PD 27 shall
continue to operate with respect to rice and com lands.
In a number of cases, such as Land Bank of the Philippines v. Hon. Natividad,54 Lubrica v. Land
Bank of the Philippines,55 Land Bank of the Philippines v. Gallego, Jr.,56 Land Bank of the
Philippines v. Heirs of Jvfaximo and Gloria Puyat,57 and Land Bank of the Philippines v. Santiago,
Jr.,58 we definitively ruled that when the agrarian reform process is still incomplete as the just
compensation due the landowner has yet to be settled, just compensation should be determined,
and the process concluded, under Section 17 of RA 6657, which contains the specific factors to be
considered in ascertaining just compensation, viz.:

SECTION 17. Determination of Just Compensation. –

In determining just compensation, the cost of acquisition of the land, the current value of like
properties, its nature, actual use and income, the sworn valuation by the owner, the tax
declarations, the assessment made by government assessors shall be considered. The social and
economic benefits contributed by the fanners and the farmworkers and by the Government to the
property as well as the non-payment of taxes or loans secured from any government financing
institution on the said land shall be considered as additional factors to determine its valuation.

In Land Bank of the Philippines v. Gallego, Jr.,59 we explained that:

The Court has already ruled on the applicability of agrarian laws, namely, P.D. No. 27/E.O. No. 228
in relation to Republic Act (RA.) No. 6657, in prior Cases concerning just compensation.

In Paris v. Alfeche, the Court held that the provisions of R.A. No. 6657 are also applicable to the
agrarian reform process of lands placed under the coverage of P.D. No. 27/E.O. No. 228, which has
not been completed upon the effectivity of R.A. No. 6657. Citing Land Bank of the Philippines v.
Court of Appeals, the Court in Paris held that P.D. No. 27 and E.O. No. 228 have suppletory effect to
R.A. No. 6657, to wit:

We cannot see why Sec. 18 of RA [No.] 6657 should not apply to rice and com lands under PD [No.]
27. Section 75 of RA [No.] 6657 clearly states that the provisions of PD [No.] 27 and EO [No.] 228
shall only have a suppletory effect. Section 7 of the Act also provides -

Sec. 7. Priorities. The DAR, in coordination with the PARC shall plan and program the acquisition
and distribution of all agricultural lands through a period of (10) years from the effectivity of this
Act. Lands shall be acquired and distributed as follows:

Phase One: Rice and Com lands under P.D. 27; all idle or abandoned lands; all private lands
voluntarily offered by the owners of agrarian reform; x x x and all other lands owned by the
government devoted to or suitable foragriculture, Which shall be acquired and distributed
immediately upon the effectivity of this Act, with the implementation to be completed within a
period of not more than four (4) years x x x.

This eloquently demonstrates that RA [No.] 6657 includes PD [No.] 27 lands among the properties
which the DAR shall acquire and distribute to the landless. And to facilitate the acquisition and
distribution thereof, Secs. 16, 17 and 18 of the Act should be adhered to. In Association of Small
Landowners of the Philippines v. Secretary of Agrarian Reform[,] this Court applied the provisions
(of) RA 6657 to rice and com lands when it upheld the constitutionality of the payment of just
compensation for PD [No.] 27 lands through the different modes stated in Sec. 18.
Particularly, in Land Bank of the Philippines v. Natividad, where the agrarian reform process in said
case "is still incomplete as the just compensation to be paid private respondents has yet to be
settled," the Court held therein that just compensation should be determined and the process
concluded under R.A. No. 6657.

The retroactive application of RA. No. 6657 is not only statutory but is also founded on equitable
considerations. In Lubrica v. Land Bank of the Philippines, the Court declared that it would be
highly inequitable on the part of the landowners therein to compute just compensation using the
values at the time of taking in 1972, and not at the time of payment, considering that the
government and the fanner-beneficiaries have already benefited from the land although ownership
thereof has not yet been transferred in their names. The same equitable consideration is applicable
to the factual milieu of the instant case. The records show that respondents' property had been
placed under the agrarian reform program in 1972 and had already been distributed to the
beneficiaries but respondents have yet to receive just compensation due them. (Emphases
supplied)

It bears stressing that while this case was pending, Congress enacted RA 9700 entitled "An Act
Strengthening the Comprehensive Agrarian Reform Program [CARP], Extending the Acquisition and
Distribution of All Agricultural Lands, Instituting Necessary Reforms, Amending for the Purpose
Certain Provisions of Republic Act No. 6657, Othe1wise known as The Comprehensive Agrarian
Reform Law of 1988, as amended, and Appropriating Funds Therefor."

Significantly, just as RA 6657 had so provided, RA 9700 also provides that it shall apply even to PD
27-acquired lands, albeit those that are yet to be acquired and distributed by the DAR. It likewise
provided for further amendments to RA 6657, as amended, including Section 17 thereof: by
including two new factors in the determination of just compensation, namely (a) the value of the
standing crop and (b) seventy percent (70%) of the zonal valuation of the Bureau of Internal
Revenue, translated into a basic formula by the DAR, subject to the final decision of the proper
court.

Nevertheless, despite the enactment of RA 9700, we take the view that this case still falls within the
ambit of Section 17 of RA 6657, as amended. To emphasize, RA 9700 applies to landholdings that
are yet to be acquired and distributed by the DAR. In addition, RA 9700 itself contains the
qualification that "previously acquired lands wherein valuation is subject to challenge," such as the
landholding subject of this case, "shall be completed and resolved pursuant to Section 17 of RA
6657, as amended,"60 thus:

Section 5. Section 7 of Republic Act No. 6657, as amended, is hereby further amended to read as
follows:

SEC. 7. Priorities. - The DAR in coordination with the Presidential Agrarian Reform Council (PARC)
shall plan and program the final acquisition and distribution of all remaining unacquired and
undistributed agricultural lands from the effectivity of this Act until June 30, 2014. Lands shall be
acquired and distributed as follows:

Phase One: During the five (5)-year extension period hereafter all remaining lands above fifty (50)
hectares shall be covered for purposes of agrarian reform upon the effectivity of this Act. All private
agricultural lands of landowners with aggregate landholdings in excess of fifty (50) hectares which
have already been subjected to a notice of coverage issued on or before December 10, 2008; rice
and corn lands under Presidential Decree No. 27; all idle or abandoned lands; all private lands
voluntarily offered by the owners for agrarian reform: Provided, That with respect to voluntary
land transfer, only those submitted by June 30, 2009 shall he allowed Provided, further, That after
June 30, 2009, the modes of acquisition shall be limited to voluntary offer to sell and compulsory
acquisition: Provided, furthermore, That all previously acquired lands whereinvaluation is subject
to challenge by landowners shall be completed and finally resolved pursuant to Section 17 of
Republic Act No. 6657, as amended: x x x (Emphases supplied.)

Our ruling further finds support in DAR A.0. No. 02-09, the implementing rules of RA 9700, Chapter
VI (Transitory Provision) of which specifically provides:

VI. Transito1y Provision

With respect to cases where the Master List of ARBs has been :finalized on or before July 1, 2009
pursuant to Administrative Order No. 7, Series of2003, the acquisition and distribution of
landholdings shall continue to be processed under the provisions of R.A. No. 6657 prior to its
amendrp.ent by R.A. No. 9700.

However, with respect to land valuation, all Claim Folders received by LBP prior to July 1, 2009
shall be v:illued in accordance with Section 17 of RA. No. 6657 prior to its amendment by RA. No.
9700. (Emphasis supplied)

From the foregoing, it is evident that DAR A.O. No. 02-09 requires that landholdings, the claim
folders of which had been received by LBP prior to July 1, 2009, be valued pursuant to the old
Section 17 of RA 6657, as amended,61 or prior to its further amendment by RA 9700.

Here, the Claim Folder was received on November 27, 2002, as evidenced by the Memorandum
Request to Value the Land.62 Hence, by express mandate of RA 9700 vis-a-vis DAR A.O. No. 02-09,
Section 17 of RA 6657, as amended, shall apply for purposes of ascertaining just compensation.

This pronouncement finds support in the Court's ruling in Land Bank of the Philippines v. Kho,63
viz.:

Case law dictates that when the acquisition process under PD 27 is still incomplete, such as in this
case where the just compensation due to the landowner has yet to be settled, just compensation
should be determined and the process concluded under RA 6657, as amended.

For the purposes of determining just compensation, the fair market value of an expropriated
property is determined by its chan1cter and its price at the time of taking, or the time when the
landowner was deprived of the use and benefit of his property, such as when the title is transferred
in the name of the beneficiaries. In addition, the factors enumerated under Section 17 of RA 6657,
as amended, i.e., (a) the acquisition cost of the land, (b) the current value of like properties, (c) the
nature and actual use of the property, and the income therefrom, (d) the owner's sworn valuation,
(e) the tax declarations, (f) the a5sessment made by government assessors, (g) the social and
economic benefits contributed by the farmers and the farmworkers, and by the government to the
property, and (h) the nonpayment of taxes or loans secured from any government financing
institution on the said land, if any, must be equally considered.

However, it bears pointing out that while Congress passed RA 9700 cm August 7, 2009, further
amending certain provisions of RA 6657, as amended, among them, Section 17, and declaring '[t]hat
all previously acquired lands wherein valuation is subject to challenge by landowners shall be
completed and finally resolved pursuant to Section 17 of [RA 6657], as amended,' DAR AO 2, series
of2009, which is the implementing rules of RA 9700, had clarified that the said law shall not apply
to claims/cases where the claim folders were received by the LBP prior to July 1, 2009. In such
situation, just compensation shall be determined in accordance with Section 17 of RA 6657, as
amended, prior to its further amendment by RA 9700.

xxxx

It is significant to stress x x x that DAR AO 1, series of2010 which was issued in line with Section 31
of RA 9700 empowering the DAR to provide the necessary rules and regulations for its
implementation, became effective only subsequent to July J, 2009. Consequently, it cannot be
applied in the determination of just compensation for the subject land where the claim folders were
undisputedly received by the LBP m:Jor to July 1, 2009, and, as such, should be valued in
accordance with Section 17 of RA 665] prior to its further amendment by RA 9700 pursuant to the
cut-off date set under DAR AO 2, series of 2009 (cut-off rule). Notably, DAR AO 1, series of 2010 did
not expressly or impliedly repeal the cut-0.ff rule set under DAR AO 2, series of 2009, having made
no reference to any cut-off date with respect to land valuation for previously acquired lands under
PA 27 and EO 228 wherein valuation is subject to challenge by landowners. Consequently, the
application of DAR AO 1, series of 2010 should be, thus, limited to those where the claim folders
were received on or subsequent to July 1, 2009.

In this case, x x x [s]ince the claim folders were received by the LBP prior to July 1, 2009, the RTC
should have computed just compensation using pertinent DAR regulations applying Section 17 of
RA 6657 prior to its amendment by RA 9700 instead of adopting the new DAR issuance, absent any
cogent justifications otherwise. Therefore, as it stands, the RTC and the CA were duty-bound to
utilize the basic formula prescribed and laid down in pertinent DAR regulations existing prior to the
passage of RA 9700, to determine just compensation.

Nonetheless, the RTC, acting as a SAC, is reminded that it is not strictly bound by the different
[formulas] created by the DAR if the situations before it do not warrant their application. To insist
on a rigid application of the formula goes beyond the intent and spirit of the law, bearing in mind
that the valuation of property or the determination of just compensation is essentially a judicial
function which is vested with the courts, and not with administrative agencies. Therefore, the RTC
must still be able to reasonably exercise its judicial discretion in the evaluation of the factors for
just compensation, which cannot be restricted by a formula dictated by the DAR when faced with
situations that do not warrant its strict application. However, the RTC must explain and justify in
clear terms the reason for any deviation from the prescribed factors and formula. (Emphasis in the
original)

b. Award of interest

We also agree with the LBP's stance that the award of compounded interest is not proper. In Land
Bank of the Philippines v. Spouses Chico,64 we held that "when just compensation is determined
under R.A. No. 6657, no incremental, compounded interest of six percent (6%) per annum shall be
assessed x x x as the same applies only to lands taken under P.D. No. 27 and E.0. No. 228, pursuant
to DAR A.O. No. [13-94], x x x and not Sec. 26 of R.A. No. 6657 x x x."

The rationale for this is explained in Land Bank of the Philippines v. Court of Appeals65 to wit: that
DAR A.O. No. 13-94 aims to compensate the landowners for unearned interests because had
payment been made in 1972 when the GSP for rice was pegged at ₱35.00, and this amount was
deposited in a bank, it would have earned a compounded interest of 6% per annum:

x x x Thus, if the PARAD used the 1972 GSP, then the product of (2.5 x AGP x ₱35 x x x) could be
multiplied by (l.06)n to determine the value of the land plus the additional 6% compounded
interest it would have earned from 1972. However, since the PARAD already increased the GSP
from ₱35.00 to ₱300.00/cavan of palay x x x, there is no more need to add any interest thereon,
much less compound it To the extent that it granted 6% compounded interest to private
respondent Jose Pascual, the Court of Appeals erred.66 (Emphasis supplied)

If upon remand of this case the LBP is found to be in delay in the payment of just compensation,
then it is bound to pay interest. In Land Bank of the Philippines v. Santiago, Jr.,67 we ruled that
interest may be awarded in expropriation cases, particularly where delay attended the payment of
just compensation. There, we categorically stressed that the interest imposed in case of delay in
payments in agrarian cases is in the nature of damages for delay in payment which, "in effect,
makes the obligation on the part of the government one of forbearance."68 Upon this point, nothing
could be any clearer than our pronouncement in Land Bank of the Philippines v. Santiago, Jr., thus:

Quoting Republic v. Court of Appeals this Court, in Land Bank of the Philippines v. Rivera, held:

The constitutional limitation of just compensation is considered to be the sum equivalent to the
market value of the property, broadly described to be the price fixed by the seller in open market in
the usual and ordinary course of legal action and competition or the fair value of the property as
between one who receives, and one who desires to sell, if fixed at the time of the actual taking by
the government. Thus, if property is taken for public use before compensation is deposited with the
court having jurisdiction over the case, the final compensation must include interest on its just
value to be computed from the time the property is taken to the time when compensation is
actually paid or deposited with the court. In fine, between the taking of the property and actual
payment, legal interests accrue in order to place the owner in a position as good as (but not better
than) the position he was in before the taking occurred.

xxxx

The Court, in Republic, recognized that the just compensation due to the landowners for their
expropriated property amounted to an effective forbearance on the part of the State. x x x69
(Emphases supplied)

Be that as it may, the LBP is bound to pay interest at 12% per annum "from the time of taking until
June 30, 2013. Thereafter, or beginning July 1, 2013, until fully paid, the just compensation due the
landowners shall earn interest at the new legal rate of 6% per annum x x x.70 In Nacar v. Galley
Frames,71 citing Eastern Shipping Lines v. Court of Appeals72 which has been modified to reflect
Bangko Sentral ng Pilipinas-Monet.ary Board Circular No. 799,73 we held that:

x x x [T]he guidelines laid down in the case of Eastern Shipping Lines are accordingly modified to
embody BSP-MB Circular No. 799, as follows:

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-
delicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII
on "Damages" of the Civil Code govern in determining the measure of recoverable damages.
II. With regard particularly to an award of interest in the concept of actual and compensatory
damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:

l. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded.
In the absence of stipulation, the rate of interest shall be 6% per annum to be computed from
default, i.e., from judicial or extra judicial demand under and subject to the provisions of Article
1169 of the Civil Code.1â wphi1 (Emphasis supplied)

Against the foregoing backdrop, a 12% interest per annum computed from the date of the taking of
the subject property until June 30, 2013, and 6% interest per annum from July 1, 2013 until fully
paid, on the just compensation to be ascertained by the RTC, shall be imposed although not
specifically prayed for by respondents. In Prince Transport, Inc. v. Garcia,74 citing BPI Family Bank
v. Buenaventura,75 we recognized that "the general prayer is broad enough to justify [the grant] of
a remedy different from or together with the specific remedy" sought. Moreover, we stressed in
Prince Transport, Inc. v. Garcia that even if a specific remedy is not prayed for, we may confer on
the party the proper relief if the facts alleged in the complaint and the evidence presented so
warrant as "[t]he prayer in the complaint for other reliefs equitable and just in the premises
justifies the grant of a relief not otherwise specifically prayed for."76 This is the situation here.

Guidelines in the remand of the case

The Court notes that the date of taking of both of respondents' property cannot be reasonably
ascertained from the records of the case as neither the pleadings filed by the parties nor the
Decisions rendered by the lower tribunals contained any allegations nor findings thereon. Thus, the
Court hereby resolves to order the RTC to determine the date of taking - it being an indispensable
component of just compensation - of the subject landholdings. Accordingly, the LBP may submit in
evidence the Certificates of Land Ownership Award (for the RA 6657-acquired property) and
Emancipation Patents (for the PD 27-acquired land), which are conclusive proof of actual taking of
the properties, granted to the farmer-beneficiaries of said lands. Alternatively, it may present the
Notice of Coverage, Notice of Valuation, Letter of Invitation to A Preliminary Conference and Notice
of Acquisition issued by the DAR to confirm symbolic compulsory taking of the RA 6657-acquired
property.77

It bears emphasis that despite the enactment of RA 9700, the determination of just compensation
for both landholdings shall be pursuant to Section 17 of RA 6657, as amended, in view of the
qualifications imposed by RA 9700.

It must be reiterated too that the factors laid down in Section 17 of RA 6657, as amended, and the
formula as translated by the DAR in its implementing rules, are mandatory and may not be
disregarded by the RTC. Both parties are reminded that they ought to present evidence in
accordance with the requirements set forth in the relevant DAR issuances. For this reason, this
Court restates that even if the landowner fails to prove a higher amount as just compensation, the
LBP must substantiate its valuation and prove the correctness of its claims. Naturally, it behooves
the LBP to present clear and convincing documentary and, if necessary, testimonial, evidence to
justify its valuation and how this was arrived at.

Moreover, as regards the RA 6657-acquired property, the RTC must be reminded that although the
potential use of an expropriated property may be factored in, especially in instances where there is
a significant improvement in the locality of the expropriated property, that factor, however, should
not be the controlling component in the determination of just compensation. Otherwise, it will run
afoul of the well-settled principle that the fair market value of an expropriated property is
determined essentially by its character and by its price at the time of taking, not by its potential
uses.1â wphi1

Finally, the RTC may not award compounded interest on the PD 27- acquired land, considering that
RA 6657, which is now applicable even to landholdings covered by PD 27, does not itself expressly
grant it; what is allowed is the grant of interest in the nature of delay in payment of just
compensation. Hence, the LBP is obliged to pay interest at 12% per annum from the date of taking
until June 30, 2013, and 6% per annum from July l, 2013 until fully paid, in the event it is found to
be in delay in the payment of just compensation.

WHEREFORE, the Petition is hereby PARTLYI GRANTED. The January 18, 2010 Decision and May
24, 2010 Resolution of the Court of Appeals in CA-G.R. SP No. 93518 are REVERSED and SET ASIDE.
Land Valuation Case Nos. LV-30-'03 and LV-48-'03 are hereby REMANDED to the Regional Trial
Court of Sorsogon City, Branch 52, for the determination of the just compensation strictly in
accordance 'With the guidelines set forth in this Decision.

SO ORDERED.

G.R. No. 200454 October 22, 2014

HOLY TRINITY REALTY & DEVELOPMENT CORPORATION, Petitioner,

vs.
VICTORIO DELA CRUZ, LORENZO MANALAYSAY, RICARDO MARCELO, JR. and LEONCIO DE
GUZMAN, Respondents.

DECISION

BERSAMIN, J.:

Land on which no agricultural activity is being conducted is not subject to the coverage of either
Presidential Decree No. 27 or Republic Act No. 6657 (Comprehensive Agrarian Reform Law).

The Case

The petitioner appeals the decision promulgated on July 27, 2011,1 whereby the Court of Appeals
(CA) reversed the decision issued by the Office of the President (OP) on March 1, 2010,2 and
reinstated the order of the OIC-Regional Director of the Department of Agrarian Reform in Regional
Office III rendered on August 18, 2006.3

Antecedents

Subject of the controversy is a parcel of land located in Brgy. Dakila, Malolos, Bulacan (Dakila
property) registered in the name of Freddie Santiago under Transfer Certificate of Title (TCT) No.
T-103698 of the Registry of Deeds of Bulacan with an area of 212,500 square meters. The Dakila
property used to be tenantedby Susana Surio,Cipriano Surio, Alfonso Espiritu, Agustin Surio,
Aurelio Surio, Pacifico Eugenio, Godofredo Alcoriza, Lorenza Angeles, Ramon Manalad, Toribio
Hernandez, Emerciana Montealegre, Pedro Manalad, Celerino Ramos and Cecilia L. Martin,4 but in
August 1991, these tenants freely and voluntarily relinquished their tenancy rights infavor of
Santiago through their respective sinumpaang pahayag5 in exchange for some financial assistance
and individual homelots titled and distributed in their names, as follows:6

TCT No. Name of Tenant/Successor Area

(sq. m.)
T-73006 Susana Surio 186
T-73007 Cipriano Surio 150
T-73008 Alfonso Espiritu 300
T-73009 Agustin Surio 300
T-73010 Aurelio Surio 264
T-73011 Pacifico Eugenio 300
T-73012 Godofredo Alcoriza 300
T-73013 Lorenza Angeles 300
T-73014 Ramon Manalad 300
Toribio M. Hernandez 300
Emerciana Montealegre 300
Pedro Manalad 300
T-73015 Celerino Ramos 300
T-73016 Cecilia L. Martin 300
T-73017 Pablo dela Cruz 300
T-73018 Aurelio dela Cruz 300
T-73019 Julita Leoncio 300
Anicia L. de Guzman
T-73020 Ramon Centeno 300
T-73021 Miguel Centeno 300
TOTAL 4,500
On September 17, 1992, the petitioner purchased the remaining 208,050 square meters of the
Dakila property from Santiago,7 and later caused the transfer of the title to its name as well as
subdivided the Dakila property into six lots,8 to wit:

TCT No.
Area
(sq. m.)
81618
50,000
81619
50,000
81620
50,000
81621
54,810
73022
2,401
73023
839
TOTAL
208,050
The petitioner then developed the property by dumping filling materials on the topsoil, and by
erecting a perimeter fence and steel gate. It established its field office on the property.9

On March 4, 1998, the Sanggunian Bayan ng Malolos passed Municipal Resolution No. 16-98
reclassifying four of the six subdivided lots belonging to the petitioner, to wit:

MUNICIPAL RESOLUTION NO. 16-98

A RESOLUTION RE-CLASSIFYING AS RESIDENTIAL LOTS THE FOUR (4) PARCELS OF LAND

SEPARATELY COVERED BY TCT NO. 81618, TCT NO. 81619, TCT NO.81620 AND TCT NO. 81621
CONTAINING AN AREAOF 50,000 SQ MTS,50,000 SQ. MTS, 50,000 SQ M (sic) AND 54,810 SQ M (sic)
RESPECTIVELY ALL LOCATED AT DAKILA, MALOLOS, BULACAN REGISTERED IN THE NAME OF
THE HOLY TRINITY REALTY AND DEVELOPMENT CORPORATION

WHEREAS, Ms. Jennifer M. Romero, Auditor Representative of Holy Trinity Realty and Development
Corporation in [her] letter to the Sangguniang Bayan made a request for re-classification of four
parcel(s) of land registered in the name of Holy Trinity and Development Corporation under TCT
NO. 81618, TCT NO. 81619, TCT NO. 81620 AND TCT NO. 81621 with an area of 50,000 sq. m.,
50,000 sq. m., 50,000 sq. m. AND 54,810 sq. m. respectively all located at Dakila, Malolos, Bulacan.

WHEREAS, after an ocular inspection of the subject lots and matured deliberation, the Sangguniang
Bayan found merit in the request for the following reasons, thus:

1. The Properties are untenanted;

2. That they are not fitted (sic) for agricultural use for lack of sufficient irrigation;

3. There are improvements already introduce[d] on the property by its owner like construction of
subdivision roads;

4. Lack of oppositor to the intend[ed] subdivision project on the properties by its owner;

5. That they are more suitable for residential use considering their location vi[s]-à-vi[s] with (sic)
the residential lots in the area.

NOW THEREFORE, on motion of Hon. Romeo L. Maclang as seconded by all Sangguniang Bayan
members present, RESOLVED, as is hereby resolved to re-classify into residential properties four
(4) parcels of land separately covered by TCT NO. 81618, TCT NO. 81619, TCT NO. 81620 AND TCT
NO. 81621 of the Registry of Deeds of Bulacan, containing an area of 50,000 sq. m. respectively,
registered in ownership of Holy Trinity and Development Corporation located and adjacent to one
another in Barangay Dakila of this Municipality pursuant to the power vested to this Sangguniang
[sic] by the Local Government Code of the Philippines.

RESOLVED further that the owner and/or developer of the said property shall provide adequate
[illegible] to protect the adjacent lots and its owners from any inconvenience and prejudice caused
by the development of the above mentioned property.

APPROVED.10
Consequently, the Municipal Planning and Development Office (MPDO) of Malolos, Bulacan issueda
Certificate of Eligibility for Conversion (Certificate of Zoning Conformance),11 as well as a
Preliminary Approval and Locational Clearance infavor of the petitioner for its residential
subdivision project on the Dakila property.12

On August 23, 1999, the petitioner purchased from Santiago another parcel of land with an area of
25,611 located in Barangay Sumapang Matanda, Malolos, Bulacan (Sumapang Matanda property)
and covered by TCT No. T-103697 of the Registry of Deeds of Bulacan.13

In April 2006, a certain Silvino Manalad and the alleged heirs of Felix Surio wrote to the Provincial
Agrarian Reform Officer (PARO) of Bulacan to request an investigation of the sale of the Dakila
property.14 This was followed by the letter request of Sumapang Matanda Barangay Agrarian
Reform Council (BARC) Chairman Numeriano L. Enriquez to place the Dakila property within the
coverage of Operation Land Transfer (OLT) pursuant to Presidential Decree No. 27, which was
docketed as A-0302-0608-06, A.R. Case No. LSD-0324’06.15

Several days later, the DAR Provincial Office of Bulacan filed a petition to annul the sale of the
Dakilaproperty with the Provincial Agrarian Reform Adjudicator (PARAD) of Bulacan, docketed as
DARAB Case No. R-03-02-2873’06.

Ruling of the DAR Regional Office

On August 18, 2006, the OIC-Regional Director in San Fernando, Pampanga issued an order
granting the letter request of BARC Chairman Enriquez in A-0302-0608-06, A.R. Case No. LSD-
0324’06,16 viz:

WHEREFORE, in the light of the foregoing premises and for the reason indicated therein, this Office
resolves to give due course to this instant request. Accordingly, the MARO and PARO concerned are
hereby DIRECTED to place within the ambit of PD 27/RA 6657 the following titles TCT Nos. T-
81618, T-81619, T-81620, T-81621, T-81622 and T-73023, all situated at Sumapang Matanda,
Malolos City, Bulacan, registered in the name of Holy Trinity Realty and Development Corporation
for distribution to qualified farmer beneficiary (sic).

Finally, the DAR reserves the right to cancel or withdraw this Order in case of misrepresentation of
facts material to its issuance and for violation of pertinent agrarian laws including applicable
implementing guidelines or rules and regulations.

SO ORDERED.17

The OIC-Regional Director opined that the sale of the Dakila property was a prohibited transaction
under Presidential Decree No. 27, Section 6 of Republic Act No. 665718 and DAR Administrative
Order No. 1, Series of 1989; and that the petitioner was disqualified from acquiring land under
Republic Act No. 6657 because it was a corporation.19

Aggrieved, the petitioner assailed the order through its Motion to Withdraw/Quash/Set Aside,20
citing lack of jurisdiction and denial of due process. It argued that the letter request was in the
nature of a collateral attack on its title.
Pending resolution of the Motion to Withdraw/Quash/Set Aside, the Register of Deeds issued
emancipation patents (EPs) pursuant to the order of the OIC-Regional Director. The petitioner’s
titles were canceled and EPs were issued to the respondents as follows:21

TCT No. Emancipation

Patent No. Beneficiary/iesArea
(sqm)
T-2007-EP22 00783329 Victorio dela Cruz 50,000
T-2008-EP23 00783330 Lorenzo Manalaysay 50,000
T-2009-EP24 00783331 Ricardo Marcelo, Jr. 50,000
T-2010-EP25 00783332 Leoncio de Guzman 54,810
T-2011-EP26 00783334 Gonzalo Caspe 2,401
T-2012-EP27 00783333 839
Almost two months after the EPs were issued, the OIC-Regional Director denied the petitioner’s
motion for reconsideration.28

Ruling of the DAR Secretary

The petitioner appealed to the DAR Secretary, submitting that: (1) the letter request for coverage
under Presidential Decree No. 27 and the subsequent filing of the petition for annulment of sale in
the DARAB constituted forum shopping; and (2) the EPs were prematurely issued.

On November 22, 2007, DAR Secretary Nasser C. Pangandaman issued an order denying the
appeal,29 and holding that forum shopping was not committed because the causes of action in the
letter request and the action for cancellation of the deed of sale before the DARAB were distinct and
separate; that the EPs were regularly issued; and that the resolution of the DARAB would not in any
manner affect the validity of the EPs.

Ruling on the petitioner’s motion for reconsideration, the DAR Secretary said that the Dakila
property was not exempt from the coverage of Presidential Decree No. 27 and Republic Act No.
6657 because Municipal Resolution No. 16-98 did not change or reclassify but merely re-zoned the
Dakila property.30

Ruling of the Office of the President

On March 1, 2010, the Office ofthe President (OP) reversed the ruling of DAR Secretary
Pangandaman upon its finding that the Dakila property had ceased to be suitable for agriculture,
and had been reclassified as residential land pursuant to Municipal Resolution No. 16-98, thus:31

We find merit in the appeal.

Under Section 3 (c) of RA 6657, agricultural lands refer to lands devoted to agriculture as conferred
inthe said law and not classified as industrial land. Agricultural lands are only those lands which are
arable or suitable lands that do not include commercial, industrial and residential lands.

In this case, the subject land holdings are not agricultural lands but rather residential lands. The
lands are located in a residential area. Likewise, there are agricultural activities within or near the
area. Even today, the areas in question continued (sic) to be developed as a residential community,
albeit at a snail’s pace. This can be readily gleaned from the fact that both the City Assessor of
Malolos and the Provincial Assessor of Bulacan have considered these lands as residential for
taxation purposes.

Based on the foregoing, it is clear that appellant’s landholding cannot in any language be considered
as "agricultural lands." These lots were intended for residential use. They ceased to be agricultural
lands upon approval of Municipal Resolution No. 16-98. The authority of the municipality (now
City) of Malolos to issue zoning classification is an exercise of its police power, not the power of
eminent domain. Section 20, Chapter 2, Title I of RA 7160 specifically empowers municipal and/or
city councils to adopt zoning and subdivision ordinances or regulations within its territorial
jurisdiction. A zoning ordinance/resolution prescribes, defines, and apportions a given political
subdivision into specific land uses as present and future projection of needs. The power of the local
government to convert or reclassify agricultural lands to non-agricultural lands is not subject to the
approval of the Department of Agrarian Reform.

It bears stressing that in his Decision dated April 30, 2002, as affirmed by the Department of
Agrarian Reform Adjudication Board (DARAB) in its Resolution dated March 17, 2006, Bulacan
Provincial Adjudicator Toribio Ilao, Jr., declared that the properties were not tenanted and/or
agricultural and that the alleged farmers-occupants are mere squatters thereto. These decision and
resolution were not appealed by the farmers-occupants and, as such, it became final and executory.
By declaring, in its assailed Order of November 22, 2007, that the properties subject of the suit,
were agricultural lands, the DAR Secretary thereby reversed the said DARAB rulings, issued more
than a year before, and nullified Resolution No. 16-98 of the Municipal Council of Malolos, approved
nine (9) years earlier, on March 4, 1998. Thus, the DAR Secretary acted with grave abuse of
discretion amounting to excess or lack of jurisdiction.

IN VIEW OF THE FOREGOING, the appeal is hereby GRANTED. Accordingly, the November 22, 2007
Order and February 22, 2008 Resolution of the Department of Agrarian Reform are hereby
REVERSED and SET ASIDE.

SO ORDERED.32

The respondents moved to reconsider, but the OP denied their motion for reconsideration. Hence,
they appealed to the CA by petition for review.33

Ruling of the CA

In the now assailed decision promulgated on July 27, 2011,34 the CA reversed and set aside the
decision of the OP. It declared that prior to the effectivity of Republic Act No. 6657 onJune 15, 1988
and even after the passage of Municipal Resolution No. 16-98 on March 4, 1998, the Dakila property
was an agricultural land; that there was no valid reclassification because Section 20 of Republic Act
No. 7160 (The Local Government Code) and Memorandum Circular No. 54 required an ordinance,
not a resolution; and that findings of the DAR on the Dakila property being an agricultural land
should be respected,35 subject to the clarification to the effect that its determination was only
limited to the issue of whether the Dakila property was an agricultural land covered by Republic
Act No. 6657.

The petitioner sought reconsideration but its motion for that purpose was denied.36

Hence, this appeal by petition for review on certiorari.

Issues

The petitioner presents the following issues for our consideration:

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRONEOUSLY OMITTED TO RULE

UPON, ALBEIT WITHOUT CITING ANY VALID REASONS, THE VARIOUS INTERRELATED ISSUES
PROFFERED IN PETITIONER’S COMMENT RELATIVE TO DAR’S INCLUSION OF THE SUBJECT
DAKILA PROPERTY UNDER THE COVERAGE OF THE AGRARIAN REFORM LAW, TO WIT: A.)
RESPONDENT-GRANTEES OF EMANCIPATION PATENTS FROM DAR ARE NOT LEGITIMATE
TENANTS OF THE DAKILA PROPERTY; B.) THE SALE AND TRANSFER OF TITLES IN THE NAME OF
PETITIONER HAVE NOT HERETOFORE BEEN NULLIFIED EITHER BY THE DARAB CENTRAL
OFFICE OR THE REGULAR COURTS; C.) THE BONAFIDE TENANTS OF THE DAKILA PROPERTY
HAVE VALIDLY SURRENDERED THEIR TENANCY RIGHTS IN FAVOR OFPETITIONER’S
PREDECESSORIN-INTEREST; D.) THE DAKILA PROPERTY WAS NO LONGER TENANTED AND,
FURTHER, WAS NO LONGER SUITABLE TO AGRICULTURE, AT THE TIME OF ITS COVERAGE
UNDER AGRARIAN REFORM, ITS ACTUAL USE BEING ALREADY RESIDENTIAL

II

WHETHER OR NOT THE HONORABLE COURT OF APPEALS LIKEWISE ERRED IN FAILING TO RULE
ON THE ILLEGALITY OF THE MANNER BY WHICH THE DAR CAUSED THE SUMMARY COVERAGE
OF THE DAKILA PROPERTY UNDER THE CARP, ITS EXTRA-JUDICIAL CANCELLATION OF
PETITIONER’S TITLES WITHOUT DUE PROCESS OF LAW, AND ITS PREMATURE ISSUANCE OF
EMANCIPATION PATENTS IN FAVOR OF RESPONDENTS

III

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRONEOUSLY APPLIED THE

PROVISIONS OF RA 6657 IN RESOLVING THE SUBJECT PETITION, EVEN THOUGH THE DAR
PLACED THE SUBJECT DAKILA PROPERTY UNDER THE COVERAGE OF PRESIDENTIAL DECREE NO.
27

IV.

WHETHER OR NOT HEREIN RESPONDENT’S PETITION FOR REVIEW A QUO OUGHT TO HAVE
BEEN DISMISSED OUTRIGHT BY THE HONORABLE COURT OFAPPEALS FOR FAILURE TO COMPLY
WITH SECTION 4, RULE 7 OF THE 1997 REVISED RULES OF CIVIL PROCEDURE.37

The petitioner argues that the CA ignored issues vital to the complete determination of the parties’
respective rights over the Dakila property.

Firstly, the CA should have ruled on the propriety of issuing the EPs. In view of the pending petition
beforethe DARAB, the DAR should have withheld the issuance of the EPs. Even granting that a final
decision had already been rendered by the DARAB, the issuance of the EPs remained

premature inasmuch as the DAR had not yet commenced any court proceedings for the cancellation
of the petitioner’s title. Accordingly, the petitioner’s title remained indefeasible and could not be
disturbed by the collateral orders by the OIC-Regional Director and the DAR Secretary.
Secondly, the petitioner was deprived of due process because the requirements of notice and the
conduct of a public hearing and a field investigation were not strictly complied with by the DAR
pursuant to Republic Act No. 6657 and DAR Administrative Order No. 12, Series of 1998. Thirdly,
the CA erred in placing the Dakila property under the coverage of Republic Act No. 6657 when the
order of the OIC-Regional Director applied the provisions of Presidential Decree No. 27. The two
laws should be differentiated from each other; on one hand, Presidential Decree No. 27 required the
beneficiary to be a tenant-farmer of an agricultural land devoted to rice or corn, while on the other
Republic Act No. 6657 was relatively broader and covered all public and private agricultural lands
regardless of the tenurial arrangement and the commodity produced. Lastly, the CA should have
dismissed the respondents’ petition for review due to its defective certification, pointing to the
verification having been executed by the respondents despite the letter request having been signed
by BARC Chairman Enriquez; and assailing the verification for containing the statement that the
allegations therein were based on their "knowledge and belief" instead of their "personal
knowledge and authentic records" as required by the Rules of Court.

The respondents countered that: (1) the CA correctly set aside the issue of whether or not they
were qualified beneficiaries, because that was not the issue raised in the letter request; (2) the CA
could not have ruled on the validity of the sale of the Dakila property in light of the pending action
in the DARAB; (3) it was within the jurisdiction of the DAR to determine whether or not the
respondents were qualified beneficiaries; (4) the waivers by the tenants were illegal; and (5) the
issuance of the EPs was a necessary consequence of placing the Dakila property under the coverage
of Presidential Decree No. 27.

In view of the foregoing, the Court needs to consider and resolve the following:

1. Did the CA gravely err in limiting its decision to the issue of whether or not the Dakila property
was subject to the coverage of Republic Act No. 6657?

2. Was the Dakila property agricultural land within the coverage of Republic Act No. 6657 or
Presidential Decree No. 27?

3. Was the issuance of the EPs pursuant to the August 16, 2006 order of the DAR Regional Office
proper?

Ruling

We reverse the CA, and reinstate the decision of the OP.

I. Procedural Issue

We first resolve the issue of the supposedly defective verification.

The verification of a petition is intended to secure an assurance that the allegations contained in the
petition have been madein good faith, are true and correct and not merely speculative.38 This
requirement affects the form of the pleading, and its non-compliance will not render the pleading
defective. It is a formal, not a jurisdictional requisite.39 The courts may order the correction of the
pleading if the verification is lacking, and may even act on an unverified pleading if doing sowill
serve the ends of justice.40
Under the foregoing, the CA rightly allowed the petition for review of the respondents despite the
statement that the allegations therein were based on their "knowledge and belief." We underscore
thatthe defect was even lifted upon the voluntary submission by the respondents themselves of
their corrected verification in order to comply with the Rules of Court.

We cannot also subscribe to the argument that the respondents were not appropriate parties to
sign the verification. They were, considering that when the DAR issued the EPs, they became the
real parties in interest in the proceedings, giving them the requisite personality to sign the
verification. Moreover, there is no question that the party himself need not sign the verification, for
it was enough that the party’s representative, lawyer, or any person who personally knew the truth
of the facts alleged in the pleadings could sign the verification.41 In any event, the respondents, as
the identified beneficiaries, had legal standing and interest to intervene to protect their rights or
interests under Republic Act No. 6657. This is clear from Section 19 of Republic Act No. 9700,42
which amended Republic Act No. 6657 by adding Section 50-A, to wit:

Section 19. Section 50of Republic Act No. 6657, as amended, is hereby further amended by adding
Section 50-A to read as follows:

Section 50-A. Exclusive Jurisdiction on Agrarian Dispute. – x x x

In cases where regular courtsor quasi-judicial bodies have competent jurisdiction, agrarian reform
beneficiaries or identified beneficiaries and/or their associations shall have legal standing and
interest to intervene concerning their individual or collective rights and/or interests under the
CARP.

xxxx

II. Courts can pass upon matters related to the issues raised by the parties

As a general rule, appellate courts are precluded from discussing and delving into issues that are
not raised by the parties. The pertinent rule is Section 8, Rule 51 of the Rules of Court, to wit:

Section 8. Questions that may be decided. – No error which does not affect the jurisdiction over the
subject matter or the validity of the judgment appealed from or the proceedings therein will be
considered unless stated in the assignment of errors, or closely related to or dependent on an
assigned error and properly argued in the brief, save as the court may pass upon plain errors and
clerical errors.

In Philippine National Bank v. Rabat,43 the Court explained how this rule operates, thus:

In his book, Mr. Justice Florenz D. Regalado commented on this section, thus:

1. Sec. 8, which is an amendment of the former Sec. 7 of this Rule, now includes some substantial
changes in the rules on assignment of errors. The basic procedural rule is that only errors claimed
and assigned by a party will be considered by the court, except errors affecting its jurisdiction over
the subject matter. To this exception has now been added errors affecting the validity ofthe
judgment appealed from or the proceedings therein.
Also, even if the error complained of by a party is not expressly stated in his assignment of errors
butthe same is closely related to or dependent on an assigned error and properly argued in his
brief, such error may now be considered by the court. These changes are of jurisprudential origin.

2. The procedure in the Supreme Court being generally the same as that in the Court of Appeals,
unless otherwise indicated (see Secs. 2 and 4, Rule 56), it has been held that the latter is clothed
with ample authority to review matters, even if they are not assigned as errors on appeal, if it finds
that their consideration is necessary in arriving at a just decision of the case. Also, an unassigned
error closely related to an error properly assigned (PCIB vs. CA, et al., L-34931, Mar. 18, 1988), or
upon which the determination of the question raised by error properly assigned is dependent, will
be considered by the appellate court notwithstanding the failure to assign it as error (Ortigas, Jr. vs.
Lufthansa German Airlines, L-28773, June 30, 1975; Soco vs. Militante,et al., G.R. No. 58961, June 28,
1983).

It may also be observed that under Sec. 8 of this Rule, the appellate court is authorized to consider a
plain error, although it was not specifically assigned by the appellant (Dilag vs. Heirs of
Resurreccion, 76 Phil. 649), otherwise it would be sacrificing substance for technicalities.44
(Emphasis supplied)

Conformably with the foregoing, the CA is vested with sufficient authority and discretion to review
matters, not assigned as errors on appeal, if it finds that consideration thereof isnecessary in
arriving at a complete and just resolution of the case or to serve the interests of justice or to avoid
dispensing piecemeal justice.45 In fact, the CA is possessed with inherent authority to review
unassigned errors that are closely related to an error properly raised, or upon which the
determination of the error properly assigned is dependent, or where it finds that consideration
thereof is necessary in arriving at a just decision of the case.46

It cannot be gainsaid that the validity of the EPs was closely intertwined with the issue of whether
the Dakila property was covered by the agrarian reform laws. When the CA declared that the Dakila
property came within the coverage of Republic Act No. 6657, the CA barely scraped the surface and
left more questions unresolved rather than writing finison the matter. To recall, this case originated
from the letter of BARC Chairman Enriquez requesting that the Dakila property be placed under the
OLT pursuant to Presidential Decree No. 27. But, as the petitioner correctly argues, the two laws,
although similarly seeking to alleviate the plight of landless farmers or farmworkers from the
bondage of tilling the soil, are distinct from each other. Republic Act No. 6657 is broader in scope
than Presidential Decree No. 27, for the former applies to all agricultural lands in which agricultural
activities are conducted, while the latter requires that the covered agricultural land betenanted and
primarily devoted to rice or corn cultivation.

In Sigre v. Court of Appeals,47 the Court also stated:

[T]he Court need not belabor the fact that R.A. 6657 or the CARP Law operates distinctly from P.D.
27. R.A. 6657 covers all public and private agricultural land including other lands of the public
domain suitable for agriculture as provided for in Proclamation No. 131 and Executive Order No.
229; while, P.D. 27 covers rice and corn lands. On this score, E.O. 229, which provides for the
mechanism of the Comprehensive Agrarian Reform Program, specifically states: "(P)residential
Decree No. 27, as amended, shall continue to operate with respect to rice and corn lands, covered
thereunder. x x x" It cannot be gainsaid, therefore, that R.A. 6657 did notrepeal or supersede, in any
way, P.D. 27. And whatever provisions of P.D. 27 that are not inconsistent with R.A. 6657 shall be
suppletory to the latter, and all rights acquired by the tenant-farmer under P.D. 27 are retainedeven
with the passage of R.A. 6657.48

In addition, the tenurial instruments issued to agrarian reform beneficiaries differ under these
laws. Ownership of the beneficiary under Presidential Decree No. 27 is evidenced by an EP while a
certificate of land ownership award (CLOA) is issued under Republic Act No. 6657. For this reason,
the CA could not have simply set aside the issue of whether the EPs issued to the respondents were
validly made by the DAR considering its declaration that the Dakila property was subject to
Republic Act No. 6657.

III. The Dakila property was not an agricultural land within the coverage of R.A.No. 6657 or P.D. No.
27

The CA declared that the Dakila property as an agricultural land; and that there was no valid
reclassification under Municipal Resolution No. 16-98 because the law required an ordinance, not a
resolution.

We agree in part with the CA.

Under Republic Act No. 7160, local government units, such as the Municipality of Malolos, Bulacan,
are vested with the power to reclassify lands. However, Section 20, Chapter II, Title I of Republic Act
No. 7160 ordains:

Section 20. Reclassification of Lands. – (a) A city or municipality may, through an ordinance passed
by the sanggunian after conducting public hearings for the purpose, authorize the reclassification of
agricultural lands and provide for the manner of their utilization or disposition in the following
cases: (1) when the land ceases to be economically feasible and sound for agricultural purposes as
determined by the Department of Agriculture or(2) where the land shall have substantially greater
economic value for residential, commercial, or industrial purposes, as determined by the
sanggunian concerned: x x x. (Emphasis supplied)

Clearly, an ordinance is required in order to reclassify agricultural lands, and such may only be
passed after the conduct of public hearings.

The petitioner claims the reclassification on the basis of Municipal Resolution No. 16-98. Given the
foregoing clarifications, however, the resolution was ineffectual for that purpose. A resolution was a
mere declaration of the sentiment or opinionof the lawmaking body on a specific matter that was
temporary in nature, and differed from an ordinance in that the latter was a law by itself and
possessed a general and permanent character.49 We also note that the petitioner did not show if
the requisite public hearings were conducted at all.In the absence of any valid and complete
reclassification,therefore, the Dakila property remained under the category of an agricultural land.

Nonetheless, the Dakila property was not an agricultural land subject to the coverage of Republic
Act No. 6657 or Presidential Decree No. 27.

Verily, the basic condition for land tobe placed under the coverage of Republic Act No. 6657 is that
it must either be primarily devoted to or be suitable for agriculture.50 Perforce, land that is not
devoted to agricultural activity is outside the coverage of Republic Act No. 6657.51 An agricultural
land, according to Republic Act No. 6657, is one that is devoted to agricultural activity and not
classified as mineral, forest, residential, commercial or industrial land.52 Agricultural activity
includes the "cultivation of the soil, planting of crops, growing of fruit trees, raising livestock,
poultry or fish, including the harvesting of such farm products; and other farm activities and
practices performed by a farmer in conjunction with such farming operations doneby persons
whether natural or juridical."53

Consequently, before land may be placed under the coverage of Republic Act No. 6657, two
requisites must be met, namely: (1) that the land must be devoted to agricultural activity; and (2)
that the land must not be classified as mineral, forest, residential, commercial orindustrial land.
Considering that the Dakila property has not been classified as mineral, forest, residential,
commercial or industrial, the second requisite is satisfied. For the first requisite tobe met, however,
there must be a showing that agricultural activity is undertaken on the property.

It is not difficult to see why Republic Act No. 6657 requires agricultural activity in order to classify
land as agricultural. The spirit of agrarian reform laws is not to distribute lands per se, but to
enable the landless to own land for cultivation. Thisis why the basic qualification laid down for the
intended beneficiary is to show the willingness, aptitude and ability to cultivate and make the land
as productive as possible.54 This requirement conforms with the policy direction set in the 1987
Constitution to the effect that agrarian reform laws shall be founded on the right of the landless
farmers and farmworkers to own, directly or collectively, the lands they till.55 In Luz Farms v.
Secretary of the Department of Agrarian Reform,56 we even said that the framers of the
Constitution limited agricultural lands to the "arable and suitable agricultural lands."

Here, no evidence was submitted to show that any agricultural activity – like cultivation of the land,
planting of crops, growing of fruit trees, raising of livestock, or poultry or fish, including the
harvesting of such farm products, and other farm activities and practices – were being performed
on the Dakila property in order to subject it to the coverage of Republic Act No. 6657. We take
particular note that the previous tenants had themselves declared that they were voluntarily
surrendering their tenancy rights because the land was not conducive to farming by reason of its
elevation, among others.57 Also notable is the second Whereas Clause of Municipal Resolution No.
16-98, which mentioned that the Dakila property was not fit for agricultural use due to lack of
sufficient irrigation and that it was more suitable for residential use, thus:

WHEREAS, after an ocular inspection of the subject lots and matured deliberation, the Sangguniang
Bayan found merit in the request for the following reasons, thus:

1. The properties are untenanted;

2. That they are not fitted [sic] for agricultural use for lack of sufficient irrigation;

3. There are improvements already introduce[d] on the property by its owner like construction of
subdivision roads;

4. Lack of oppositor to the intend[ed] subdivision project on the properties by its owner;

5. That they are more suitable for residential use considering their location viz-a-viz (sic) with (sic)
the residential lots in the area.58 (Emphasis supplied)

The terse statement by the OIC-Regional Director that the Dakila property would still be subject to
Republic Act No. 6657 should Presidential Decree No. 27 be inapplicable59 did not meet the
requirements under Republic Act No. 6657. Section 7 of Republic Act No. 6657 identified rice and
corn lands subject to Presidential Decree No. 27 for priority distribution in the first phase and
implementation ofthe CARP. Insofar as the interplay of these two laws was concerned, the Court has
said that during the effectivity of the Republic Act No. 6657and in the event of incomplete
acquisition under Presidential Decree No. 27, the former should apply, with the provisions of the
latter and Executive Order No. 22860 having only suppletory effect.61

Even if we supplemented the provisions of Presidential Decree No. 27, the outcome is still the same,
because the Dakila property was still not within the scope of the law. For land to be covered under
Presidential Decree No. 27, it must be devoted to rice or corn crops, and there must be a system of
share-crop or lease-tenancy obtaining therein. If either requisite is absent, the land must be
excluded. Hence, exemption from coverage followed when the land was not devoted to rice or corn
even if it was tenanted; or the land was untenanted even though it was devoted to rice or corn.62
Based on these conditions, the DAR Regional Office erred in subjecting the Dakila property under
the OLT.

The first requirement, that the land be devoted to rice or corn cultivation, was not sufficiently
established. In this regard, the OIC-Regional Director inaccurately based his holding on the report
submitted by the Legal Services Division that—

[P]ortion of the property embraced under TCT No. 103697 with an area of 2.5611 hectares more or
less, was placed under PD [No.] 27 and subsequently an approved survey plan (Psd-03-020270) has
been prepared which was then the basis of the issuance of titles in favor of Felix Surio and Silvino
Manalad under EP Nos. 345262 and 342561. On the other hand, the land subject of this controversy
was, likewise, subdivided and now covered by an approved plan ASP No. Psd-031410-066532.63

What can be gathered from the report of the Legal Services Division was that the land owned by the
petitioner and covered by Presidential Decree No. 27 was the Sumapang Matanda property under
TCT No. 103697. As to the Dakila property, we can only infer from the report that it was merely
subdivided. The report did not mention whatsoever the agricultural activities performed in the
Dakila property. Nor was there a finding that the Dakila property was devoted to either rice or corn
cultivation as to justify its coverage under Presidential Decree No. 27. Such a finding was necessary,
for the Court has observed in Solmayor v. Arroyo:64

Although this Court will not disregard the evidence presented by petitioners that the land is
devotedto rice and corn crops in 1993, when the ocular inspection by the DAR personnel was
conducted, it must be noted that around the time of the passage of Presidential Decree No. 27 up to
1978, when the subject property was placed under the coverage of Operation Land Transfer, the
available evidence issued and certified by the different government agencies, closer in time to the
mentioned time frame will show that respondent’s property has, indeed, been classified as within
the residential and commercial zones of Davao City. It cannot escape the notice of this Court that
more than a decade before the issuance of the said ocular investigation reportstating that the land
is devoted to agricultural production, government agencies equipped with the technical expertise to
determine the proper classification of the subject land have already determined that the land is part
of the residential and commercial zones of Davao City making it suitable for other urban use.
Therefore, it is only reasonable to conclude, based on the certification of various executive agencies
issued when this controversy arose, that at the time of the passage of Presidential Decree No. 27,
respondent’s property was not agricultural.65

For land to come within the coverage of the OLT, indeed, there must be a showing that it is devoted
to the cultivation of rice or corn, and there must be a system of share-crop or lease tenancy
obtaining on October 21, 1972, the time when Presidential Decree No. 27 took effect.66
Unfortunately, no such evidence was presented, nor was there any field investigation conducted to
verify whether or not the landholding was primarily devoted to the cultivation of rice or corn.
Accordingly, the Dakila property should be excluded from the OLT.

The DAR Secretary affirmed the validity of the EPs in favor of the respondents only "pursuant to the
Order of the Regional Director."67 We note, however, that the evidence to establish in the
proceedings below that they or their predecessors had been tenants of the petitioner’s
predecessorin-interest to make them the rightful beneficiaries of the Dakila property was severely
wanting. For tenancy to exist, there must be proof that: (1) the parties are the landholder and the
tenant; (2) the subject is agricultural land; (3) there is consent; (4) the purpose isagricultural
production; (5) there is consideration;68 and (6) there is a sharing of the harvests. All these
requisites are necessary to create a tenancy relationship, and the absence of one or more of them
will not make the alleged tenant a de facto tenant.69 Unless a person has established his status as a
de juretenant, he is not entitled to security of tenure; nor is he covered by the land reform program
of the Government under the existing tenancy laws.70 Here, the consent to establish a tenant-
landlord relationship was manifestly absent. In view of the petitioner’s repeated denial of the
tenancy, the respondents ought then to establish the tenancy relationship, but did not do so.
Tenancy could not be presumed, but must be established by evidence; its mere allegation is neither
evidence nor equivalent to proof of its existence.71

There was also no showing that the respondents were engaged in any agricultural activities, or
agreed with Santiago or the petitioner on the sharing of harvests. The OIC-Regional Director
obviously disregarded the affidavit of Barangay Captain Felino M. Teodoro of Dakila, Malolos,
Bulacan stating that the respondents were never the actual farmers on the Dakila property.72

IV. The petitioner was deprived of due process

The petitioner posits that it was denied due process by the failure of the OIC-Regional Director to
see to the compliance withthe procedures outlined by Republic Act No. 6657 and Presidential
Decree No. 27. It claims that the OIC-Regional Director resorted to "procedural shortcuts" and
irregularities73 in issuing the EPs to the respondents.

We agree with the petitioner’s position.

In Reyes v. Barrios,74 we identified the procedural requirements that must be followed prior to the
issuance of an EP, viz:

The Primer on Agrarian Reform enumerates the steps in transferring the land to the tenant-tiller,
thus:

a. First step: the identification of tenants, landowners, and the land covered by OLT.

b. Second step: land survey and sketching of the actual cultivation of the tenantto determine parcel
size, boundaries, and possible land use;

c. Third step: the issuance of the Certificate of Land Transfer (CLT). To ensure accuracy and
safeguard against falsification, these certificatesare processed at the National Computer Center
(NCC) at Camp Aguinaldo;
d. Fourth step: valuation of the land covered for amortization computation;

e. Fifth step: amortization payments of tenant-tillers over fifteen (15) year period; and

f. Sixth step: the issuance of the Emancipation Patent.

Thus, there are several steps to be undertaken before an Emancipation Patent can be issued. x x x.

xxxx

Furthermore, there are several supporting documents which a tenant-farmer must submit before
he can receive the Emancipation Patent, such as:

a. Application for issuance of Emancipation Patent;

b. Applicant's (owner's) copy of Certificate of Land Transfer.

c. Certification of the landowner and the Land Bank of the Philippines that the applicant has
tendered full payment of the parcel of land as described in the application and as actually tilled by
him;

d. Certification by the President of the Samahang Nayon or by the head of farmers' cooperative duly
confirmed by the municipal district officer (MDO) of the Ministry of Local Government and
Community Development (MLGCD) that the applicant is a full-fledged member of a duly registered
farmers' cooperative or a certification to these effect;

e. Copy of the technical (graphical) description of the land parcel applied for prepared by the
Bureau of Land Sketching Team (BLST) and approved by the regional director of the Bureau of
Lands;

f. Clearance from the MAR field team (MARFT) or the MAR District Office (MARDO) legal officer or
trial attorney; or in their absence, a clearance by the MARFT leader to the effect that the land parcel
applied for is not subject of adverse claim, duly confirmed by the legal officer or trial attorney of the
MAR Regional Office or, in their absence, by the regional director;

g. Xerox copy of Official Receipts or certification by the municipal treasurer showing that the
applicant has fully paid or has effected up-to-date payment of the realty taxes due on the land
parcel applied for; and

h. Certification by the MARFT leader whether applicant has acquired farm machineries from the
MAR and/or from other government agencies.

Majority of these supporting documents are lacking in this case. Hence, it was improper for the
DARAB to order the issuance of the Emancipation Patent in favor of respondent without the
required supporting documents and without following the requisite procedure before an
Emancipation Patent may be validly issued.75

Furthermore, Section 16 of Republic Act No. 6657 outlines the procedure in acquiring private lands
subject to its coverage, viz:
Section 16. Procedure for Acquisition of Private Lands. - For purposes of acquisition of private
lands, the following procedures shall be followed:

(a) After having identified the land, the landowners and the beneficiaries, the DAR shall send its
notice to acquire the land to the owners thereof, by personal delivery orregistered mail, and post
the same in a conspicuous place in the municipal building and barangay hall of the place where the
property is located. Said notice shall contain the offer of the DAR to pay a corresponding value
inaccordance with the valuation set forth in Sections 17, 18 and other pertinent provisions hereof.

(b) Within thirty (30) days from the date of receipt of written notice by personal delivery or
registered mail, the landowners, his administrator or representative shall inform the DAR of his
acceptance or rejection of the former.

(c) If the landowner accepts the offer of the DAR, the Land Bank of the Philippines shall pay the
landowner the purchase price of the land within thirty (30) days after he executes and delivers a
deed of transfer in favor of the Government and surrenders the Certificate of Title and other
muniments of title.

(d) In case of rejection or failure to reply, the DAR shall conduct summary administrative
proceedings to determine the compensation for the land by requiring the landowner, the LBP and
other interested parties to submit evidence as to the just compensation for the land, within fifteen
(15) days from the receipt of notice. After the expiration of the above period, the matter is deemed
submitted for decision. The DAR shall decide the case within thirty (30) daysafter it is submitted for
decision.

(e) Upon receipt by the landowner of the corresponding payment or in case of rejection or no
response from the landowner, upon the deposit with an accessible bank designated by the DAR of
the compensation in cash or in LBP bonds in accordance with this Act, the DAR shall take
immediate possession of the land and shall request the proper Register of Deeds to issue a Transfer
Certificate of Title (TCT) in the name of the Republic of the Philippines. The DAR shall thereafter
proceed with the redistribution of the land tothe qualified beneficiaries.

(f) Any party who disagrees with the decision may bring the matter to the court of proper
jurisdiction for final determination of just compensation.

Under Republic Act No. No. 6657 and DAR A.O. No. 12, Series of 1989, two notices should be sent to
the landowner — the first, the notice of coverage; and the other, the notice of acquisition. The Court
cannot consider and declare the proceedings conducted by the OIC-Regional Director as a
substantial compliance with the notice requirements. Compliance with such requirements, being
necessary to render the implementation of the CARP valid, was mandatory. As the Court observed
in Roxas & Co., Inc. v. Court of Appeals:76

For a valid implementation of the CAR Program, two notices are required: (1) the Notice of
Coverage and letter of invitation to a preliminary conference sent to the landowner, the
representatives of the BARC, LBP, farmer beneficiaries and other interested parties pursuant to
DAR A.O. No. 12, Series of 1989; and (2) the Notice of Acquisition sent to the landowner under
Section 16 of the CARL.

The importance of the first notice, i.e., the Notice of Coverage and the letter of invitation to the
conference, and its actual conduct cannot be understated. They are steps designed to comply with
the requirements of administrative due process. The implementation of the CARL is an exercise of
the State’s police power and the power of eminent domain. To the extent that the CARL prescribes
retention limits to the landowners, there is an exercise of police power for the regulation of private
property in accordance with the Constitution. But where, to carry out such regulation, the owners
are deprived of lands they own in excess of the maximum area allowed, there is also a taking under
the power of eminent domain. The taking contemplated is not a mere limitation of the use of the
land. What is required is the surrender of the title to and physical possession of the said excess and
all beneficial rights accruing to the owner in favor of the farmer beneficiary. The Bill of Rights
provides that "[n]o person shall be deprived of life, libertyor property without due process of law."
The CARL was not intended to take away property without due process of law. The exercise of the
power of eminent domain requires that due process be observed in the taking of private property.

xxxx

Clearly then, the notice requirements under the CARL are not confined to the Notice of Acquisition
set forth in Section 16 of the law. They also include the Notice of Coverage first laid down in DAR A.
O. No. 12, Series of 1989 and subsequently amended in DAR A. O. No. 9, Series of 1990 and DAR A.
O. No. 1, Series of 1993. This Notice of Coverage does not merely notify the landowner that his
property shall be placed under CARP and that he is entitled to exercise his retention right; it also
notifies him, pursuant to DAR A. O. No. 9, Series of 1990, that a public hearing shall be conducted
where he and representatives of the concerned sectors of society may attend to discuss the results
of the field investigation, the land valuation and other pertinent matters. Under DAR A. O. No. 1,
Series of 1993, the Notice of Coverage also informs the landowner that a field investigation of his
landholding shall be conducted where he and the other representatives may be present.77
(Emphasis supplied)

The procedures provided by Section 16 of Republic Act No. 6657 and its relevant DAR
administrative issuances are to ensure the compliance with the due process requirements of the
law. The result of their non-compliance is to deprive the landowner of its constitutional right to due
process.

The Court has carefully explained in Roxas & Co., Inc. v. Court of Appeals that the taking under the
CARL isan exercise of police power as well as of eminent domain. The taking of the landholding by
the State effectively results in the surrender by the landowner of its title and physical possession to
the beneficiaries. Hence, compensation should be given to the landowner prior to the taking. This is
the clear-cut directive of Section 16(e) of Republic Act No. 6657 which mandates the DAR to take
immediate possession of the land only after full payment and to thereafter request the Register of
Deeds to transfer title inthe name of the Republic of the Philippines, and later on to the intended
beneficiaries.

However, there was no evidence of payment prior to the cancellation of the petitioner’s TCTs
submitted here.1â wphi1 The requirement of prior payment was found in Republic Act No. 6657
and Presidential Decree No. 27, under which full payment by the intended beneficiary was a
condition prior to the award of an EP. We haveexplicitly pronounced in Coruñ a v. Cinamin78 that
the emancipation of tenants does not come free. The transfer of lands under Presidential Decree No.
27 remained subject to the terms and conditions provided in said law. In Paris v. Alfeche,79 we
said:

x x x. Section 2 of PD 266 states:

"After the tenant-farmer shall have fully complied with the requirements for a grant of title under
Presidential Decree No. 27, an Emancipation Patent and/or Grant shall be issued by the Department
of Agrarian Reform on the basis of a duly approved survey plan."

On the other hand, paragraphs 8 and 9 of PD 27 reads as follows:

"For the purpose of determining the cost of the land to be transferred to the tenant-farmer
pursuant to this Decree, the value of the land shall be equivalent to two and one-half (2 ½) times
the average harvest of three normal crop years immediately preceding the promulgation of this
Decree;

"The total cost of the land, including interest at the rate of six (6) per centum per annum, shall be
paid by the tenant in fifteen (15) years of fifteen (15) equal annual amortizations[.]"

Although, under the law, tenant farmers are already deemed owners of the land they till, they are
still required to pay the cost of the land, including interest, within fifteen years before the title is
transferred to them.80 (Emphasis supplied)

The unquestioned non-compliance with the procedures set by Republic Act No. 6657 and its
relevant rules and regulations further denied to the petitioner the exercise of its right of
retention.81 In doing so, the OICRegional Director disregarded this constitutionally guaranteed
right. We cannot understate the value of the right of retention as the means to mitigate the effects of
compulsory land acquisition by balancing the rights of the landowner and the tenant and by
implementing the doctrine that social justice is not meant to perpetrate an injustice against the
landowner.82

We also consider the manner by which the Dakila property was apportioned to the respondents
highly suspect. It appears from the face of the EPs that the individual lots were allocated based on
how the landholding was subdivided by the petitioner. Moreover, all the respondents were
awarded lots exceeding three hectares in violation of Section 23 of Republic Act No. 6657, which
provides that "[n]o qualified beneficiary may own more than three (3) hectares of agricultural
land."

In fine, the order of the OIC-Regional Director was patently null and void. The denial of due process
to the petitioner sufficed to cast the impress of nullity on the official act thereby taken. A decision
rendered without due process is void ah initio and may be attacked directly or collaterally.83 All
the resulting acts were also null and void. Consequently, the EPs awarded to the respondents
should be nullified.

WHEREFORE, the Court GRANTS the petition for review on certiorari; REVERSES and SETS ASIDE
the decision promulgated on July 27, 2011 by the Court of Appeals; REINSTATES the assailed
decision of the Office of the President issued on March 1, 2010; DIRECTS the cancellaticm of
Emancipation Patents No. 00783329, No. 00783330, No. 0078331, No. 0078332, No. 0078333, and
No. 0078334 issued to the respondents for being NULL and VOID; and ORDERS the respondents to
pay the costs of suit.

SO ORDERED.

August 8, 2017
G.R. No. 190004

LAND BANK OF THE PIDLIPPINES, Petitioner,

vs.
EUGENIO DALAUTA, Respondent

DECISION

MENDOZA, J.:

This petition for review on certiorari under Rule 45 seeks to review, reverse and set aside the
September 18, 2009 Decision1 of the Court of Appeals-Cagayan de Oro (CA) in CA-G.R. SP No.
01222-MIN, modifying the May 30, 2006 Decision2 of the Regional Trial Court, Branch 5, Butuan
City (RTC), sitting as Special Agrarian Court (SAC), in Civil Case No. 4972 - an action for
determination of just compensation.

The Facts

Respondent Eugenio Dalauta (Dalauta) was the registered owner of an agricultural land in Florida,
Butuan City, with an area of 25.2160 hectares and covered by Transfer Certificate of Title (TCT) No.
T-1624. The land was placed by the Department of Agrarian Reform (DAR) under compulsory
acquisition of the Comprehensive Agrarian Reform Program (CARP) as reflected in the Notice of
Coverage,3 dated January 17, 1994, which Dalauta received on February 7, 1994. Petitioner Land
Bank of the Philippines (LBP) offered ₱192,782.59 as compensation for the land, but Dalauta
rejected such valuation for being too low.4

The case was referred to the DAR Adjudication Board (DARAB) through the Provincial Agrarian
Reform Adjudicator (PARAD) of Butuan City. A summary administrative proceeding was conducted
to determine the appropriate just compensation for the subject property. In its Resolution,5 dated
December 4, 1995, the PARAD affirmed the valuation made by LBP in the amount of ₱192,782.59.

On February 28, 2000, Dalauta filed a petition for determination of just compensation with the RTC,
sitting as SAC. He alleged that LBP's valuation of the land was inconsistent with the rules and
regulations prescribed in DAR Administrative Order (A.O.) No. 06, series of 1992, for determining
the just compensation of lands covered by CARP's compulsory acquisition scheme.

During the trial, the SAC constituted the Board of Commissioners (Commissioners) tasked to
inspect the land and to make a report thereon. The Report of the Commissioners,6 dated July 10,
2002, recommended that the value of the land be pegged at ₱100,000.00 per hectare. With both
Dalauta and the DAR objecting to the recommended valuation, the SAC allowed the parties to
adduce evidence to support their respective claims.

Dalauta's Computation

Dalauta argued that the valuation of his land should be determined using the formula in DAR A.O.
No. 6, series of 1992, which was Land Value (LV) = Capitalized Net Income (CNI) x 0.9 + Market
Value (MV) per tax declaration x 0.1, as he had a net income of ₱350,000.00 in 1993 from the sale of
the trees that were grown on the said land. Norberto C. Fonacier (Fonacier), the purchaser of the
trees, testified that he and Dalauta executed their Agreement7 before Atty. Estanislao G. Ebarle, Jr.,
which showed that he undertook to bear all expenses in harvesting the trees and to give Dalauta the
amount of ₱350,000.00 as net purchase payment, for which he issued a check. He said that it was
his first and only transaction with Dalauta. Fonacier also claimed that a portion of Dalauta's land
was planted with corn and other trees such as ipil-ipil, lingalong, and other wild trees.

During his cross-examination, Dalauta clarified that about 2,500 trees per hectare were planted on
about twenty-one (21) hectares of his land, while the remaining four (4) hectares were reserved by
his brother for planting com. He also claimed to have replanted the land with gemelina trees, as
advised by his lawyer, after Fonacier harvested the trees in January 1994. Such plants were the
improvements found by the Commissioners during their inspection. Dalauta added that he had no
tenants on the land. He prayed that the compensation for his land be pegged at ₱2,639,566.90.

LBP's Computation

LBP argued that the valuation of Dalauta's land should be determined using the formula LV= MVx 2,
which yielded a total value of ₱192,782.59 for the 25.2160 hectares of Dalauta's land.

LBP claimed that during the ocular inspection/investigation, only 36 coconut trees existed on the
subject land; that three (3) hectares of it were planted with corn; and the rest was idle with few
second-growth trees. To support its claim, LBP presented, as witnesses, Ruben P. Penaso (Penaso),
LBP Property Appraiser of CDO Branch, whose basic function was to value the land covered by
CARP based on the valuation guidelines provided by DAR; and Alex G. Carido (Carido), LBP Agrarian
Operation Specialist of CDO Branch, whose function was to compute the value of land offered by a
landowner to the DAR, using the latter's guidelines.

Based on Penaso's testimony, 3.0734 hectares of the subject land were planted with com for family
consumption while the 22.1426 hectares were idle, although there were second-growth trees
thereon. He reported that the trees had no value and could be considered as weeds. Likewise,
Penaso indicated "none" under the column of Infrastructures in the report, although there was a
small house made of wood and cut logs in the center of the corn land. He posited that an
infrastructure should be made of concrete and hollow blocks. Penaso stated that the sources of
their data were the guide, the BARC representative, and the farmers from the neighboring lots. On
cross-examination, he admitted that there were coconut trees scattered throughout the land; that
he did not ask the guide about the first-growth trees or inquire from the landowner about the land's
income; and that he used the land's market value as reflected in its 1984 tax declaration.8

Per testimony of Carido, the valuation of Dalauta's land was computed in September 1994 pursuant
to the Memorandum Request to Value the Land9 addressed to the LBP president. He alleged that
the entries in the Claims Valuation and Processing Forms were the findings of their credit
investigator. Carido explained that they used the formula L V = MV x 2 in determining the value of
Dalauta's land because the land had no income. The land's com production during the ocular
inspection in 1994 was only for family consumption. Hence, pursuant to DAR A.O. No. 6, series of
1992, the total value of Dalauta's land should be computed as LV = MV x 2, where MV was the
Market Value per Tax Declaration based on the Tax Declaration issued in 1994.10 Carido explained
that:

xxx using the formula MV x 2, this is now the computation. Land Value= Market Value (6,730.07) x 2
= 13,460.14 - this is the price of the land per hectare, x the area of corn land which is 3.0734, we
gave the total Land Value for corn ₱41,368.39. For Idle Land, the Market Value which is computed
in the second page of this paper is P3,419.07 by using the formula MV x 2 = ₱3,419.07 x 2, we come
up with the Land Value per hectare = 6,838.14 multiplied by the area of the idle land which is
22.1426 hectares. The total Land Value for idle is ₱151,414.20. Adding the total Land Value for corn
and idle, we get the grand total of ₱192,782.59, representing the value of the 25.2160 hectares.11

On cross and re-cross-examinations, Carido admitted that there were different ways of computing
the land value under DAR A.O. No. 6. He claimed that no CNI and/or Comparable Sales (CS) were
given to him because the land production was only for family consumption, hence, CNI would not
apply. Further, he explained that the net income and/or production of the land within twelve (12)
months prior to the ocular inspection was considered in determining the land value.12

The Ruling of the SAC

On May 30, 2006, the SAC rendered its decision as follows:

WHEREFORE, AND IN VIEW OF ALL OF THE FOREGOING, DAR and LBP are directed to pay to:

1.) Land Owner Mr. Eugenio Dalauta the following:

a. Two Million Six Hundred Thirty Nine Thousand Five Hundred Fifty Seven (₱2,639,557.oo) Pesos,
Philippine Currency, as value of the Land;

b. One Hundred Thousand (₱100,ooo.oo) Pesos, Philippine Currency for the farmhouse;

c. One Hundred Fifty Thousand (₱150,000.00) Pesos, Philippine Currency, as reasonable attorney's
fees;

d. Fifty Thousand (₱50,000.00) Pesos, Philippine Currency as litigation expenses;

2.) The Members of the Board of Commissioners:

a. Ten Thousand (P10,ooo.oo) Pesos, Philippine Currency for the Chairman of the Board;

b. Seven Thousand Five Hundred (₱7,500.00) Pesos, Philippine Currency for each of the two (2)
members of the Board;

SO ORDERED.13

The SAC explained its decision in this wise:

Going over the records of this case, taking into consideration the Commissioners Report which is
replete with pictures of the improvements introduced which pictures are admitted into evidence
not as illustrated testimony of a human witness but as probative evidence in itself of what it shows
(Basic Evidence, Bautista, 2004 Edition), this Court is of the considered view that the Report
(Commissioners) must be given weight.

While LBP's witness Ruben P. Penaso may have gone to the area, but he did not, at least, list down
the improvements. The members of the Board of Commissioners on the other hand, went into the
area, surveyed its metes and bounds and listed the improvements they found including the
farmhouse made of wood with galvanized iron roofing (Annex "C", Commissioner's Report, p. 132,
Record)
All told, the basic formula for the valuation of lands covered by Voluntary Offer to Sell and
Compulsory Acquisition is:

LV = (CNI x o.6) + (CS x 0.3) + (MV x 0.1)

Where: LV =Land Value

CNI =Capitalized Net Income

CS = Comparable Sales

MV =Market Value per Tax Declaration

The above formula is used if all the three (3) factors are present, relevant and applicable. In any
case, the resulting figure in the equation is always multiplied to the number of area or hectarage of
land valued for just compensation.

Whenever one of the factors in the general formula is not available, the computation of land value
will be any of the three (3) computations or formulae:

LV = (CNI x 0.9) + (MV x 0.1)

(If the comparable sales factor is missing)

LV = (CS x 0.9) + (MV x 0.1)

(If the capitalize net income is unavailable)

LV = MV x 2 (If only the market value factor is available)

(Agrarian Law and Jurisprudence as compiled by DAR and UNDP pp. 94-95)

Since the Capitalized Net Income in this case is available, the formula to be used is:

LV = (CNI x 0.9) + (MVx 0.1)

Whence:

LV = (₱350,000.00/.12 x 0.9) + (₱145,570 x 0.1)

= (₱2,916,666.67 x 0.9) + (₱145,557.oo) [sic]

= ₱2,625,000.00 + ₱14,557.00

= ₱2,639,557.00 plus ₱100,000.00 for the Farmhouse.14

Unsatisfied, LBP filed a motion for reconsideration, but it was denied by the SAC on July 18, 2006.

Hence, LBP filed a petition for review under Rule 42 of the Rules of Court before the CA, arguing: 1]
that the SAC erred in taking cognizance of the case when the DARAB decision sustaining the LBP
valuation had long attained finality; 2] that the SAC erred in taking judicial notice of the
Commissioners' Report without conducting a hearing; and 3] that the SAC violated Republic Act
(R.A.) No. 665715 and DAR A.O. No. 6, series of 1992, in fixing the just compensation.

The CA Ruling

In its September 18, 2009 Decision, the CA ruled that the SAC correctly took cognizance of the case,
citing LBP v. Wycoco16 and LBP v. Suntay.17 It reiterated that the SAC had original and exclusive
jurisdiction over all petitions for the determination of just compensation. The appellate court stated
that the original and exclusive jurisdiction of the SAC would be undermined if the DAR would vest
in administrative officials the original jurisdiction in compensation cases and make the SAC an
appellate court for the review of administrative decisions.18

With regard to just compensation, the CA sustained the valuation by the SAC for being well within
R.A. No. 6657, its implementing rules and regulations, and in accordance with settled jurisprudence.
The factors laid down under Section 17 of R.A. No. 6657, which were translated into a basic formula
in DAR A.O. No. 6, series of 1992, were used in determining the value of Dalauta's property. It stated
that the courts were not at liberty to disregard the formula which was devised to implement
Section 1 7 of R.A. No. 6657. The CA, however, disagreed with the SAC's valuation of the farmhouse,
which was made of wood and galvanized iron, for it was inexistent during the taking of the subject
land.19

The appellate court also disallowed the awards of attorney's fees and litigation expenses for failure
of the SAC to state its factual and legal basis. As to the award of commissioner's fees, the CA
sustained it with modification to conform with Section 15, Rule 14120 of the Rules of Court.
Considering that the Commissioners worked for a total of fifteen (15) days, the CA ruled that they
were only entitled to a fee of ₱3,000.00 each or a total of ₱9,000.00.21 The dispositive portion
reads:

WHEREFORE, in view of all the foregoing, the instant petition is PARTIALLY GRANTED, and the
assailed Decision dated May 30, 2006 of the RTC, Branch 5, Butuan City, in Civil Case No. 4972, is
hereby MODIFIED as follows: (1) the compensation for the farmhouse (₱100,000.00), as well as the
awards for attorney's fees (₱150,000.00) and litigation expenses (₱50,000.00), are hereby
DELETED; and (2) the members of the Board of Commissioners shall each be paid a commissioner's
fee of Three Thousand Pesos (₱3,000.00) by petitioner Land Bank of the Philippines. The assailed
Decision is AFFIRMED in all other respect.

SO ORDERED.22

Not in conformity, LBP filed this petition raising the following:

ISSUES

1. Whether or not the trial court had properly taken jurisdiction over the case despite the finality of
the PARAD Resolution.

2. Whether or not the trial court correctly computed the just compensation of the subject property.

The Court's Ruling

Primary Jurisdiction of the DARAB
and Original Jurisdiction of the SAC

Jurisdiction is defined as the power and authority of a court to hear, try and decide a case.23
Jurisdiction over the subject matter is conferred only by the Constitution or the law.24 The courts,
as well as administrative bodies exercising quasi-judicial functions, have their respective
jurisdiction as may be granted by law. In connection with the courts' jurisdiction vis-a-vis
jurisdiction of administrative bodies, the doctrine of primary jurisdiction takes into play.

The doctrine of primary jurisdiction tells us that courts cannot, and will not, resolve a controversy
involving a question which is within the jurisdiction of an administrative tribunal, especially where
the question demands the exercise of sound administrative discretion requiring the special
knowledge, experience and services of the administrative tribunal to determine technical and
intricate matters of fact.25

In agrarian reform cases, primary jurisdiction is vested in the DAR, more specifically, in the DARAB
as provided for in Section 50 of R.A. No. 6657 which reads:

SEC. 50. Quasi-Judicial Powers of the DAR. - The DAR is hereby vested with primary jurisdiction to
determine and adjudicate agrarian reform matters and shall have exclusive original jurisdiction
over all matters involving the implementation of agrarian reform, except those falling under the
exclusive jurisdiction of the Department of Agriculture (DA) and the Department of Environment
and Natural Resources (DENR). [Emphasis supplied]

Meanwhile, Executive Order (E.O.) No. 229 also vested the DAR with (1) quasi-judicial powers to
determine and adjudicate agrarian reform matters; and (2) jurisdiction over all matters involving
the implementation of agrarian reform, except those falling under the exclusive original jurisdiction
of the Department of Agriculture and the Department of Environment and Natural Resources.26

On the other hand, the SACs are the Regional Trial Courts expressly granted by law with original
and exclusive jurisdiction over all petitions for the determination of just compensation to
landowners. Section 57 of R.A. No. 6657 provides:

SEC. 57. Special Jurisdiction. - The Special Agrarian Courts shall have original and exclusive
jurisdiction over all petitions for the determination of just compensation to landowners, and the
prosecution of all criminal offenses under this Act. The Rules of Court shall apply to all proceedings
before the Special Agrarian Courts, unless modified by this Act.

The Special Agrarian Courts shall decide all appropriate cases under their special jurisdiction
within thirty (30) days from submission of the case for decision. [Emphases supplied]

Adhering thereto, in Land Bank of the Philippines v. Heir of Trinidad S. V da. De Arieta,27 it was
written:

In both voluntary and compulsory acquisitions, wherein the landowner rejects the offer, the DAR
opens an account in the name of the landowner and conducts a summary administrative
proceeding. If the landowner disagrees with the valuation, the matter may be brought to the RTC,
acting as a special agrarian court. But as with the DAR-awarded compensation, LBP's valuation of
lands covered by CARL is considered only as an initial determination, which is not conclusive, as it
is the RTC, sitting as a Special Agrarian Court, that should make the final determination of just
compensation, taking into consideration the factors enumerated in Section 17 of R.A. No. 6657 and
the applicable DAR regulations. xxx.28 [Emphases and underscoring supplied]

The DARAB Rules and

Subsequent Rulings

Recognizing the separate jurisdictions of the two bodies, the DARAB came out with its own rules to
avert any confusion. Section 11, Rule XIII of the 1994 DARAB Rules of Procedure reads:

Land Valuation Determination and Payment of Just Compensation. - The decision of the Adjudicator
on land valuation and preliminary determination and payment of just compensation shall not be
appealable to the Board but shall be brought directly to the Regional Trial Courts designated as
Special Agrarian Courts within fifteen (15) days from receipt of the notice thereof. Any party shall
be entitled to only one motion for reconsideration. [Emphasis supplied]

The Court stamped its imprimatur on the rule in Philippine Veterans Bank v. CA (Veterans Bank);29
LBP v. Martinez (Martinez); 30 and Soriano v. Republic (Soriano). 31 In all these cases, it was
uniformly decided that the petition for determination of just compensation before the SAC should
be filed within the period prescribed under the DARAB Rules, that is, "within fifteen (15) days from
receipt of the notice thereof." In Philippine Veterans Bank, it was written:

There is nothing contradictory between the provision of §so granting the DAR primary jurisdiction
to determine and adjudicate "agrarian reform matters" and exclusive original jurisdiction over "all
matters involving the implementation of agrarian reform," which includes the determination of
questions of just compensation, and the provision of §57 granting Regional Trial Courts "original
and exclusive jurisdiction" over (1) all petitions for the determination of just compensation to
landowner, and (2) prosecutions of criminal offenses under R.A. No. 6657. The first refers to
administrative proceedings, while the second refers to judicial proceedings. Under R.A. No. 6657,
the Land Bank of the Philippines is charged with the preliminary determination of the value of
lands placed under land reform program and the compensation to be paid for their taking. It
initiates the acquisition of agricultural lands by notifying the landowner of the government's
intention to acquire his land and the valuation of the same as determined by the Land Bank. Within
30 days from receipt of notice, the landowner shall inform the DAR of his acceptance or rejection of
the offer. In the event the landowner rejects the offer, a summary administrative proceeding is held
by the provincial (PARAD), the regional (RARAD) or the central (DARAB) adjudicator, as the case
may be, depending on the value of the land, for the purpose of determining the compensation for
the land. The landowner, the Land Bank, and other interested parties are then required to submit
evidence as to the just compensation for the land. The DAR adjudicator decides the case within 30
days after it is submitted for decision. If the landowner finds the price unsatisfactory, he may bring
the matter directly to the appropriate Regional Trial Court.

To implement the provisions of R.A. No. 6657, particularly §50 thereof, Rule XIII, §u of the DARAB
Rules of Procedure provides:

Land Valuation Determination and Payment of Just Compensation. - The decision of the Adjudicator
on land valuation and preliminary determination and payment of just compensation shall not be
appealable to the Board but shall be brought directly to the Regional Trial Courts designated as
Special Agrarian Courts within fifteen (15) days from receipt of the notice thereof. Any party shall
be entitled to only one motion for reconsideration.
As we held in Republic v. Court of Appeals,32 this rule is an acknowledgment by the DARAB that the
power to decide just compensation cases for the taking of lands under R.A. No. 6657 is vested in the
courts. It is error to think that, because of Rule XIII, §n, the original and exclusive jurisdiction given
to the courts to decide petitions for determination of just compensation has thereby been
transformed into an appellate jurisdiction. It only means that, in accordance with settled principles
of administrative law, primary jurisdiction is vested in the DAR as an administrative agency to
determine in a preliminary manner the reasonable compensation to be paid for the lands taken
under the Comprehensive Agrarian Reform Program, but such determination is subject to challenge
in the courts.

The jurisdiction of the Regional Trial Courts is not any less "original and exclusive" because the
question is first passed upon by the DAR, as the judicial proceedings are not a continuation of the
administrative determination. For that matter, the law may provide that the decision of the DAR is
final and unappealable.

Nevertheless, resort to the courts cannot be foreclosed on the theory that courts are the guarantors
of the legality of administrative action.

Accordingly, as the petition in the Regional Trial Court was filed beyond the 15-day period provided
in Rule XIII, §u of the Rules of Procedure of the DARAB, the trial court correctly dismissed the case
and the Court of Appeals correctly affirmed the order of dismissal. xxx33 [Emphases and
underscoring supplied; Citations omitted]

Any uncertainty with the foregoing ruling was cleared when the Court adhered to the Veterans
Bank ruling in its July 31, 2008 Resolution in Land Bank v. Martinez:34

On the supposedly conflicting pronouncements in the cited decisions, the Court reiterates its ruling
in this case that the agrarian reform adjudicator's decision on land valuation attains finality after
the lapse of the 15-day period stated in the DARAB Rules. The petition for the fixing of just
compensation should therefore, following the law and settled jurisprudence, be filed with the SAC
within the said period. This conclusion, as already explained in the assailed decision, is based on the
doctrines laid down in Philippine Veterans Bank v. Court of Appeals and Department of Agrarian
Reform Adjudication Board v. Lubrica. [Emphases and underscoring supplied]

Jurisdiction of the SAC

is Original and Exclusive;
The Courts Ruling in Veterans
Bank and Martinez should be
Abandoned

Citing the rulings in Veterans and Martinez, the LBP argues that the PARAD resolution already
attained finality when Dalauta filed the petition for determination of just compensation before the
RTC sitting as SAC. The petition was filed beyond the 15-day prescriptive period or, specifically,
more than five (5) years after the issuance of the PARAD Resolution.

This issue on jurisdiction and prescription was timely raised by LBP as an affirmative defense, but
the SAC just glossed over it and never really delved on it. When the issue was raised again before
the CA, the appellate court, citing LBP v. Wycoco35 and LBP v. Suntay,36 stressed that the RTC,
acting as SAC, had original and exclusive jurisdiction over all petitions for the determination of just
compensation. It explained that the original and exclusive jurisdiction of the SAC would be
undermined if the DAR would vest in administrative officials the original jurisdiction in
compensation cases and make the SAC an appellate court for the review of administrative
decisions.37

The Court agrees with the CA in this regard. Section 9, Article III of the 1987 Constitution provides
that "[p]rivate property shall not be taken for public use without just compensation." In Export
Processing Zone Authority v. Dulay,38 the Court ruled that the valuation of property in eminent
domain is essentially a judicial function which cannot be vested in administrative agencies. "The
executive department or the legislature may make the initial determination, but when a party
claims a violation of the guarantee in the Bill of Rights that private property may not be taken for
public use without just compensation, no statute, decree, or executive order can mandate that its
own determination shall prevail over the court's findings. Much less can the courts be precluded
from looking into the 'justness' of the decreed compensation. "39 Any law or rule in derogation of
this proposition is contrary to the letter and spirit of the Constitution, and is to be struck down as
void or invalid. These were reiterated in Land Bank of the Philippines v. Montalvan,40 when the
Court explained:

It is clear from Sec. 57 that the RTC, sitting as a Special Agrarian Court, has "original and exclusive
jurisdiction over all petitions for the determination of just compensation to landowners." This
"original and exclusive" jurisdiction of the RTC would be undermined if the DAR would vest in
administrative officials original jurisdiction in compensation cases and make the RTC an appellate
court for the review of administrative decisions. Thus, although the new rules speak of directly
appealing the decision of adjudicators to the RTCs sitting as Special Agrarian Courts, it is clear from
Sec. 57 that the original and exclusive jurisdiction to determine such cases is in the RTCs. Any effort
to transfer such jurisdiction to the adjudicators and to convert the original jurisdiction of the RTCs
into appellate jurisdiction would be contrary to Sec. 57 and therefore would be void. Thus, direct
resort to the SAC by private respondent is valid.

It would be well to emphasize that the taking of property under R.A. No. 6657 is an exercise of the
power of eminent domain by the State.1â wphi1 The valuation of property or determination of just
compensation in eminent domain proceedings is essentially a judicial function which is vested with
the courts and not with administrative agencies. Consequently, the SAC properly took cognizance of
respondent's petition for determination of just compensation. [Emphases and underscoring
supplied]

Since the determination of just compensation is a judicial function, the Court must abandon its
ruling in Veterans Bank, Martinez and Soriano that a petition for determination of just
compensation before the SAC shall be proscribed and adjudged dismissible if not filed within the
15-day period prescribed under the DARAB Rules.

To maintain the rulings would be incompatible and inconsistent with the legislative intent to vest
the original and exclusive jurisdiction in the determination of just compensation with the SAC.
Indeed, such rulings judicially reduced the SAC to merely an appellate court to review the
administrative decisions of the DAR. This was never the intention of the Congress.

As earlier cited, in Section 57 of R.A. No. 6657, Congress expressly granted the RTC, acting as SAC,
the original and exclusive jurisdiction over all petitions for the determination of just compensation
to landowners. Only the legislature can recall that power. The DAR has no authority to qualify or
undo that. The Court's pronouncement in Veterans Bank, Martinez, Soriano, and Limkaichong,
reconciling the power of the DAR and the SAC essentially barring any petition to the SAC for having
been filed beyond the 15-day period provided in Section 11, Rule XIII of the DARAB Rules of
Procedure, cannot be sustained. The DAR regulation simply has no statutory basis.

On Prescription

While R.A. No. 6657 itself does not provide for a period within which a landowner can file a petition
for the determination of just compensation before the SAC, it cannot be imprescriptible because the
parties cannot be placed in limbo indefinitely. The Civil Code settles such conundrum. Considering
that the payment of just compensation is an obligation created by law, it should only be ten (10)
years from the time the landowner received the notice of coverage. The Constitution itself provides
for the payment of just compensation in eminent domain cases.41 Under Article 1144, such actions
must be brought within ten (10) years from the time the right of action accrues. Article 1144 reads:

Art. 1144. The following actions must be brought within ten years from the time the right of action
accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment. (n)

Nevertheless, any interruption or delay caused by the government like proceedings in the DAR
should toll the running of the prescriptive period. The statute of limitations has been devised to
operate against those who slept on their rights, but not against those desirous to act but cannot do
so for causes beyond their control.42

In this case, Dalauta received the Notice of Coverage on February 7, 1994.43 He then filed a petition
for determination of just compensation on February 28, 2000. Clearly, the filing date was well
within the ten year prescriptive period under Article 1141.

Concurrent Exercise of
Jurisdiction

There may be situations where a landowner, who has a pending administrative case before the DAR
for determination of just compensation, still files a petition before the SAC for the same objective.
Such recourse is not strictly a case of forum shopping, the administrative determination being not
resjudicata binding on the SAC.44 This was allowed by the Court in LBP v. Celada45 and other
several cases. Some of these cases were enumerated in Land Bank of the Philippines v. Umandap46
as follows:

1. In the 1999 case of Land Bank of the Philippines v. Court of Appeals,47 we held that the SAC
properly acquired jurisdiction over the petition to determine just compensation filed by the
landowner without waiting for the completion of DARAB's re-evaluation of the land.

2. In the 2004 case of Land Bank of the Philippines v. Wycoco, 48 we allowed a direct resort to the
SAC even where no summary administrative proceedings have been held before the DARAB.

3. In the 2006 case of Land Bank of the Philippines v. Celada,49 this Court upheld the jurisdiction of
the SAC despite the pendency of administrative proceedings before the DARAB. x x x. xxxx
4. In the 2009 case of Land Bank of the Philippines v. Belista,50 this Court permitted a direct
recourse to the SAC without an intermediate appeal to the DARAB as mandated under the new
provision in the 2003 DARAB Rules of Procedure. We ruled:

Although Section 5, Rule XIX of the 2003 DARAB Rules of Procedure provides that the land
valuation cases decided by the adjudicator are now appealable to the Board, such rule could not
change the clear import of Section 57 of RA No. 6657 that the original and exclusive jurisdiction to
determine just compensation is in the RTC. Thus, Section 57 authorizes direct resort to the SAC in
cases involving petitions for the determination of just compensation. In accordance with the said
Section 57, petitioner properly filed the petition before the RTC and, hence, the RTC erred in
dismissing the case. Jurisdiction over the subject matter is conferred by law. Only a statute can
confer jurisdiction on courts and administrative agencies while rules of procedure cannot.51

Nevertheless, the practice should be discouraged. Everyone can only agree that simultaneous
hearings are a waste of time, energy and resources. To prevent such a messy situation, a landowner
should withdraw his case with the DAR before filing his petition before the SAC and manifest the
fact of withdrawal by alleging it in the petition itself. Failure to do so, should be a ground for a
motion to suspend judicial proceedings until the administrative proceedings would be terminated.
It is simply ludicruous to allow two procedures to continue at the same time.

On Just Compensation

Upon an assiduous assessment of the different valuations arrived at by the DAR, the SAC and the
CA, the Court agrees with the position of Justice Francis Jardeleza that just compensation for
respondent Dalauta's land should be computed based on the formula provided under DAR-LBP
Joint Memorandum Circular No. 11, series of 2003 (JMC No. 11 (2003)). This Memorandum
Circular, which provides for the specific guidelines for properties with standing commercial trees,
explains:

The Capitalized Net Income (CNI) approach to land valuation assumes that there would be uniform
streams of future income that would be realized in perpetuity from the seasonal/permanent crops
planted to the land. In the case of commercial trees (hardwood and soft wood species), however,
only a one-time income is realized when the trees are due for harvest. The regular CNI approach in
the valuation of lands planted to commercial trees would therefore not apply.52 (Emphasis and
underscoring supplied.)

During the proceedings before the SAC, Dalauta testified that he derived a net income of
₱350,000.00 in 1993 from the sale to Fonacier of falcata trees grown in the property. He presented
the following evidence to bolster his claim of income: (1) Agreement between Dalauta and Fonacier
over the sale of falcata trees;53 (2) copy of deposit slip of amount of ₱350,000.00;54 and (3)
Certification from Allied Bank as to fact of deposit of the amount of ₱350,000.00 on November 15,
1993.55

Dalauta's sale of falcata trees indeed appears to be a one-time transaction. He did not claim to have
derived any other income from the property prior to receiving the Notice of Coverage from the DAR
in February 1994. For this reason, his property would be more appropriately covered by the
formula provided under JMC No. 11 (2003).
JMC No. 11 (2003) provides for several valuation procedures and formulas, depending on whether
the commercial trees found in the land in question are harvestable or not, naturally grown, planted
by the farmer-beneficiary or lessee or at random. It also provides for the valuation procedure
depending on when the commercial trees are cut (i.e., while the land transfer claim is pending or
when the landholding is already awarded to the farmer-beneficiaries).

Dalauta alleges to have sold all the falcata trees in the property to Fonacier in 1993.56 After
Fonacier finished harvesting in January 1994, he claims that, per advice of his lawyer, he
immediately caused the date of effectivity of this Joint Memorandum Circular x x x." It is submitted,
however, that applying the above formula to compute just compensation for respondent's land
would be the most equitable course of action under the circumstances. Without JMC No. 11 (2003),
Dalauta's property would have to be valued using the formula for idle lands, the CNI and CS factors
not being applicable. Following this formula, just compensation for Dalauta's property would only
amount to ₱225,300.00, computed as follows:

LV = MVx2

Where:

LV = Land Value

MV = Market Value per Tax Declaration*

• For the area planted to corn,

₱7,740.00/hectare

• For idle/pasture land, ₱3,890/hectare

Thus:

For the 4 hectares planted to corn:

LV = (P7, 7 40/hectare x 4 hectares) x 2

= ₱61,920.00

For the 21 hectares of idle/pasture land:

LV = (₱3,890/hectare x 21) x 2

= ₱163,380.00

Total Land Value = P61,920.00 + Pl63,380.00

= P225,300.00

As above stated, the amount would be more equitable if it would be computed pursuant to JMC No.
11 (2003). Moreover, the award shall earn legal interest. Pursuant to Nacar v. Gallery Frames,57 the
interest shall be computed from the time of taking at the rate of twelve percent (12%) per annum
until June 30, 2013. Thereafter, the rate shall be six percent (6%) per annum until fully paid.

WHEREFORE, the Court hereby DECLARES that the final determination of just compensation is a
judicial function; that the jurisdiction of the Regional Trial Court, sitting as Special Agrarian Court,
is original and exclusive, not appellate; that the action to file judicial determination of just
compensation shall be ten (10) years from the time of the taking; and that at the time of the filing of
judicial determination, there should be no pending administrative action for the determination of
just compensation.

As to the just compensation, the September 18, 2009 Decision of the Court of Appeals decreeing
payment of ₱2,639,557 .00 as the value of the subject property is SET ASIDE. Let the case be
remanded to the Regional Trial Court, Branch 5, Butuan City, sitting as Special Agrarian Court, for
purposes of computing just compensation in accordance with JMC No. 11 (2003) and this
disposition.

The amount shall earn legal interest from the time of taking at the rate of twelve percent (12%) per
annum until June 30, 2013. Thereafter, the rate shall be six percent (6%) per annum until fully paid.

SO ORDERED.

G.R. No. 181370 March 9, 2011

JULIAN S. LEBRUDO and REYNALDO L. LEBRUDO, Petitioners,

vs.
REMEDIOS LOYOLA, Respondent.

DECISION

CARPIO, J.:

The Case

Before the Court is a petition1 for review on certiorari assailing the Resolution2 dated 4 January
2008 and Decision3 dated 17 August 2007 of the Court of Appeals (CA) in CA-G.R. SP No. 90048.

The Facts

Respondent Remedios Loyola (Loyola) owns a 240-square meter parcel of land located in Barangay
Milagrosa, Carmona, Cavite, known as Lot No. 723-6, Block 1, Psd-73149 (lot), awarded by the
Department of Agrarian Reform (DAR) under Republic Act No. 66574 (RA 6657) or the
Comprehensive Agrarian Reform Law of 1988. This lot is covered by Certificate of Land
Ownership5 (CLOA) No. 20210 issued in favor of Loyola on 27 December 1990 and duly registered
on 14 March 1991 under Transfer of Certificate of Title (TCT)/CLOA No. 998.

On 27 June 1995, petitioner Julian S. Lebrudo (Lebrudo), now deceased and represented by his son,
petitioner Reynaldo L. Lebrudo, filed with the Office of the Provincial Agrarian Reform Adjudicator
(PARAD) of Trece Martires City, Cavite, an action6 for the cancellation of the TCT/CLOA in the name
of Loyola and the issuance of another for the one-half portion of the lot in Lebrudo’s favor.
In a Decision7 dated 18 December 1995, the PARAD dismissed the case without prejudice on the
ground that the case was filed prematurely. On 11 March 1996, Lebrudo re-filed the same action.8

Lebrudo alleged that he was approached by Loyola sometime in 1989 to redeem the lot, which was
mortgaged by Loyola’s mother, Cristina Hugo, to Trinidad Barreto. After Lebrudo redeemed the lot
for ₱250.00 and a cavan of palay, Loyola again sought Lebrudo’s help in obtaining title to the lot in
her name by shouldering all the expenses for the transfer of the title of the lot from her mother,
Cristina Hugo. In exchange, Loyola promised to give Lebrudo the one-half portion of the lot.
Thereafter, TCT/CLOA No. 998 was issued in favor of Loyola. Loyola then allegedly executed a
Sinumpaang Salaysay9 dated 28 December 1989, waiving and transferring her rights over the one-
half portion of the lot in favor of Lebrudo. To reiterate her commitment, Loyola allegedly executed
two more Sinumpaang Salaysay10 dated 1 December 1992 and 3 December 1992, committing
herself to remove her house constructed on the corresponding one-half portion to be allotted to
Lebrudo.

Thereafter, Lebrudo asked Loyola to comply with her promise. However, Loyola refused. Lebrudo
sought the assistance of the Sangguniang Barangay of Milagrosa, Carmona, Cavite; the Philippine
National Police (PNP) of Carmona, Cavite; and the Department of Agrarian Reform to mediate.
However, despite steps taken to amicably settle the issue, as evidenced by certifications from the
PNP and the barangay, there was no amicable settlement. Thus, Lebrudo filed an action against
Loyola.

In her Answer, Loyola maintained that Lebrudo was the one who approached her and offered to
redeem the lot and the release of the CLOA. Loyola denied promising one-half portion of the lot as
payment for the transfer, titling and registration of the lot. Loyola explained that the lot was her
only property and it was already being occupied by her children and their families. Loyola also
denied the genuineness and due execution of the two Sinumpaang Salaysay dated 28 December
1989 and 3 December 1992. The records do not show whether Loyola renounced the Sinumpaang
Salaysay dated 1 December 1992.

In a Decision11 dated 13 February 2002, the PARAD of Trece Martires City, Cavite decided the case
in Lebrudo’s favor. The dispositive portion of the decision states:

WHEREFORE, in view of the foregoing, JUDGMENT is hereby rendered:

a) Declaring Respondent Remedios Loyola disqualified as farmer beneficiary of the subject land
identified as Lot 723-6, Block 1, under TCT/CLOA No. 998;

b) Declaring the Deed of sales over the subject lot illegal and ordered the same set aside;

c) Declaring Plaintiff JULIAN LEBRUDO entitled to one half (½) of the subject property under
TCT/CLOA No. 998 in the name of Remedios Loyola;

d) Ordering the other one half (½) of the subject lot ready for allocation to qualified beneficiary;

e) Ordering the DAR PARO Office thru the Operations Division to cancel TCT/CLOA No. 998 and in
lieu thereof, to generate and issue another title over the 120 square meters in the name of JULIAN
LEBRUDO;
f) Ordering the survey of the subject lot at the expense of the petitioner so that title be issued to
plaintiff herein;

g) Ordering the Register of Deeds, Trece Martires City to cancel TCT/CLOA No. 998 in the name of
Remedios Loyola;

h) Ordering the Register of Deeds, Trece Martires City to register the title in the name [of] Julian
Lebrudo as presented by the DAR or its representative over the lot in question;

No pronouncement as to costs and damages.

SO ORDERED.12

Loyola appealed to the Department of Agrarian Reform Adjudication Board (DARAB).13 In a

Decision14 dated 24 August 2004, the DARAB reversed the decision of the PARAD and ruled in
Loyola’s favor. The dispositive portion states:

WHEREFORE, premises considered, the appealed decision is hereby REVERSED and SET ASIDE and
a new judgment rendered as follows:

1. Upholding and maintaining the validity and effectivity of TCT/CLOA No. 998 in the name of the
respondent;

2. Declaring the Sinumpaang Salaysay dated December 28, 1989 and December 3, 1992 attached to
the petition as Annex C and F, null and void without legal force and effect;

3. Directing the Register of Deeds of Trece Martires City, Cavite to reinstate TCT/CLOA No. 998 in
the name of the respondent.

The status quo ante order issued by this Board on November 3, 2003 is hereby LIFTED.

SO ORDERED.15

Lebrudo filed a motion for reconsideration which the DARAB denied in a Resolution16 dated 12
April 2005. Lebrudo then filed a petition17 for review with the CA.

In a Decision18 dated 17 August 2007, the CA affirmed the decision of the DARAB. Lebrudo filed a
motion for reconsideration which the CA denied in a Resolution19 dated 4 January 2008.

Hence, this petition.

The Issue

The main issue is whether Lebrudo is entitled to the one-half portion of the lot covered by RA 6657
on the basis of the waiver and transfer of rights embodied in the two Sinumpaang Salaysay dated
28 December 1989 and 3 December 1992 allegedly executed by Loyola in his favor.

The Court’s Ruling

The petition lacks merit.

A Certificate of Land Ownership or CLOA is a document evidencing ownership of the land granted
or awarded to the beneficiary by DAR, and contains the restrictions and conditions provided for in
RA 6657 and other applicable laws. Section 27 of RA 6657, as amended by RA 9700,20 which
provides for the transferability of awarded lands, states:

SEC. 27. Transferability of Awarded Lands. – Lands acquired by beneficiaries under this ACT may
not be sold, transferred or conveyed except through hereditary succession, or to the government, or
to the LBP, or to other qualified beneficiaries for a period of ten (10) years: Provided, however,
That the children or the spouse of the transferor shall have a right to repurchase the land from the
government or LBP within a period of two (2) years. Due notice of the availability of the land shall
be given by the LBP to the Barangay Agrarian Reform Committee (BARC) of the barangay where the
land is situated. The Provincial Agrarian Coordinating Committee (PARCCOM), as herein provided,
shall, in turn, be given due notice thereof by the BARC.

The title of the land awarded under the agrarian reform must indicate that it is an emancipation
patent or a certificate of land ownership award and the subsequent transfer title must also indicate
that it is an emancipation patent or a certificate of land ownership award.

If the land has not yet been fully paid by the beneficiary, the rights to the land may be transferred or
conveyed, with prior approval of the DAR, to any heir of the beneficiary or to any other beneficiary
who, as a condition for such transfer or conveyance, shall cultivate the land himself. Failing
compliance herewith, the land shall be transferred to the LBP which shall give due notice of the
availability of the land in the manner specified in the immediately preceding paragraph. x x x
(Emphasis supplied)

It is clear from the provision that lands awarded to beneficiaries under the Comprehensive
Agrarian Reform Program (CARP) may not be sold, transferred or conveyed for a period of 10
years. The law enumerated four exceptions: (1) through hereditary succession; (2) to the
government; (3) to the Land Bank of the Philippines (LBP); or (4) to other qualified beneficiaries. In
short, during the prohibitory 10-year period, any sale, transfer or conveyance of land reform rights
is void, except as allowed by law, in order to prevent a circumvention of agrarian reform laws.

In the present case, Lebrudo insists that he is entitled to one-half portion of the lot awarded to
Loyola under the CARP as payment for shouldering all the expenses for the transfer of the title of
the lot from Loyola’s mother, Cristina Hugo, to Loyola’s name. Lebrudo used the two Sinumpaang
Salaysay executed by Loyola alloting to him the one-half portion of the lot as basis for his claim.

Lebrudo’s assertion must fail. The law expressly prohibits any sale, transfer or conveyance by
farmer-beneficiaries of their land reform rights within 10 years from the grant by the DAR. The law
provides for four exceptions and Lebrudo does not fall under any of the exceptions. In Maylem v.
Ellano,21 we held that the waiver of rights and interests over landholdings awarded by the
government is invalid for being violative of agrarian reform laws. Clearly, the waiver and transfer of
rights to the lot as embodied in the Sinumpaang Salaysay executed by Loyola is void for falling
under the 10-year prohibitory period specified in RA 6657.

Lebrudo asserts that he is a qualified farmer beneficiary who is entitled to the lot under the CARP.
DAR Administrative Order No. 3,22 series of 1990, enumerated the qualifications of a beneficiary:

1. Landless;
2. Filipino citizen;

3. Actual occupant/tiller who is at least 15 years of age or head of the family at the time of filing
application; and

4. Has the willingness, ability and aptitude to cultivate and make the land productive.

Lebrudo does not qualify as a beneficiary because of (1) and (3). First, Lebrudo is not landless.
According to the records,23 Municipal Agrarian Reform Officer Amelia Sangalang issued a
certification dated 28 February 1996 attesting that Lebrudo was awarded by the DAR with a
homelot consisting of an area of 236 square meters situated at Japtinchay Estate, Bo. Milagrosa,
Carmona, Cavite. Next, Lebrudo is not the actual occupant or tiller of the lot at the time of the filing
of the application. Loyola and her family were the actual occupants of the lot at the time Loyola
applied to be a beneficiary under the CARP.

Further, the CA, in its Decision dated 17 August 2007, correctly observed that a certificate of title
serves as evidence of an indefeasible title and after the expiration of the one-year period from the
issuance of the registration decree upon which it is based, the title becomes incontrovertible. The
CA also declared that the basis of Lebrudo’s claim, the two Sinumpaang Salaysay dated 28
December 1989 and 3 December 1992, were illegal and void ab initio for being patently intended to
circumvent and violate the conditions imposed by the agrarian law. The relevant portions of the
decision provide:

x x x It is undisputed that CLOA 20210 was issued to the respondent on December 27, 1990 and
was registered by the Register of Deeds of Cavite on March 14, 1991, resulting in the issuance of
TCT/CLOA No. 998 in her name.

Under Sec. 43, P.D. 1529, the certificate of title that may be issued by the Register of Deeds pursuant
to any voluntary or involuntary instrument relating to the land shall be the transfer certificate of
title, which shall show the number of the next previous certificate covering the same land and also
the fact that it was previously registered, giving the record number of the original certificate of title
and the volume and page of the registration book in which the original certificate of title is found.

The certificate of title serves as evidence of an indefeasible title to the property in favor of the
person whose name appears therein. After the expiration of the one-year period from the issuance
of the decree of registration upon which it is based, the title becomes incontrovertible.

Accordingly, by the time when original petitioner Julian Lebrudo filed on June 27, 1995 the first
case (seeking the cancellation of the respondent’s CLOA), the respondent’s certificate of title had
already become incontrovertible. That consequence was inevitable, for as the DARAB correctly
observed, an original certificate of title issued by the Register of Deeds under an administrative
proceeding was as indefeasible as a certificate of title issued under a judicial registration
proceeding. Clearly, the respondent, as registered property owner, was entitled to the protection
given to every holder of a Torrens title.1avvphi1

The issue of whether or not the respondent was bound by her waiver and transfer in favor of Julian
Lebrudo, as contained in the several sinumpaang salaysay, was irrelevant. Worse for the petitioner,
the DARAB properly held that the undertaking of the respondent to Julian Lebrudo under the
sinumpaang salaysay dated December 28, 1989 and December 3, 1992 – whereby she promised to
give him ½ portion of the homelot in consideration of his helping her work on the release of the
CLOA to her and shouldering all the expenses for the purpose – was "clearly illegal and void ab
initio" for being patently intended to circumvent and violate the conditions imposed by the agrarian
laws and their implementing rules. He could not, therefore, have his supposed right enforced. x x
x24

We see no reason to disturb the findings of the CA. The main purpose of the agrarian reform law is
to ensure the farmer-beneficiary’s continued possession, cultivation and enjoyment of the land he
tills.25 To do otherwise is to revert back to the old feudal system whereby the landowners
reacquired vast tracts of land and thus circumvent the government’s program of freeing the tenant-
farmers from the bondage of the soil.26

WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 17 August 2007 and
Resolution dated 4 January 2008 of the Court of Appeals in CA-G.R. SP No. 90048.

SO ORDERED.

G.R. No. 188174 June 29, 2015

DEPARTMENT OF AGRARIAN REFORM, through its PROVINCIAL AGRARIAN REFORM OFFICER OF

DAVAO CITY, and THE MUNICIPAL AGRARIAN REFORM OFFICER OF CALINAN, DAVAO CITY,
Petitioners,
vs.
WOODLAND AGRO-DEVELOPMENT, INC., Respondent.

DECISION

SERENO, CJ:

This Petition for Review under Rule 45 seeks the nullification of the Decision1 dated 2 February
2009 issued by the Regional Trial Court of Davao City Branch 14 (RTC) and its Order2 dated 8 May
2009 in Special Civil Case No. 30855-2005. The RTC nullified the Notice of Coverage (NOC) dated 11
December 2003 and Notice of Acquisition (NOA) dated 5 October 2004 issued by petitioner
Department of Agrarian Reform (DAR) over a portion of a parcel of land owned by respondent
Woodland Agro Development. Inc. (Woodland). The court also denied DAR's Motion for
Reconsideration.3

The issue before this Court is whether Republic Act No. 8532 (R.A. 8532) authorized the DAR to
issue Notices of Coverage and Acquisition after 15 June 1998, or beyond the 10-year
implementation period provided or in Section 5 of Republic Act No. 6657 (R.A. 6657) or the

Comprehensive Agrarian Reform Law (CARL), which states:

SECTION 5. Schedule of Implementation. - The distribution of all lands, covered by this Act shall be
implemented immediately and completed within ten (10) years from the effectivity thereof.

The Court rules that R.A. 8532 extended the term of the implementation of the Comprehensive
Agrarian Reform Program (CARP) under the CARL. Consequently, the NOC dated 11 December
2003 and NOA dated 5 October 2004 issued over the portion of respondent's land are valid.
ANTECEDENT FACTS

Woodland is the registered owner of a parcel of agricultural land covered by Transfer Certificate of
Title (TCT) No. T-113207 with an area of 10.0680 hectares located at Subasta, Calinan, Davao City.4
On 11 December 2003, the DAR issued an NOC5 placing 5.0680 hectares under the coverage of the
CARL for having exceeded the retention limit6 provided by law. TCT No. T-113207 was canceled,
and a new title covering 5.0680 hectares was issued in the name of the Republic of the Philippines.7
Thereafter, on 14 February 2005, Certificates of Land Ownership Award (CLOAs) were issued in
favor of five farmer beneficiaries.8

On 3 March 2005, Woodland filed with the RTC a Complaint9 for "Declaratory Relief, Annulment of
the Notice of Coverage under R.A. 6657, with Prayer for the Issuance of a Temporary Restraining
Order and/or Writ of Preliminary Injunction." Woodland contended that the issuance of the NOC
was illegal, because R.A. 6657 had already expired on 15 June 1998.10 It argued that pursuant to
Section 5 of the law, the agency had a period of ten (10) years to implement the CARP from the time
of its effectivity on 15 June 1988. It further argued that the CARL's amendatory law, R.A. 8532, did
not extend the DAR's authority to acquire agrarian lands for distribution. It theorized that the
budget augmentations legislated in R.A. 8532 pertained only to the funding requirements of the
other facets of the CARP implementation and excluded the acquisition of private agricultural
lands.11

The DAR hinged its Answer12 on Department of Justice (DOJ) Opinion No. 009, Series of 1997
issued by then DOJ Secretary Teofisto Guingona, Jr. He opined that Section 5 was merely directory
in character; that the 10-year period of implementation was only a time frame given to the DAR for
the acquisition and distribution of public and private agricultural lands covered by R.A. 6657.13
The schedule was meant to guide the DAR in setting its priorities, but it was not by any means a
limitation of authority in the absence of more categorical language to that effect.14

THE RULING OF THE RTC

The RTC ruled that the DAR's act of sending Woodland an NOC was already a breach of R.A. 6657,
since the NOC was issued beyond the 10-year period prescribed by law.15 The trial court further
ruled that R.A. 8532 only amended the CARL' s provision on the sourcing of funds for the
implementation of the CARP, and not the provision on the period within which the DAR may
acquire lands for distribution. The court held that R.A. 8532 did not extend the 10-year period of
land acquisition.16 Neither did it overstep the DAR's jurisdiction to try agrarian matters, but only
determined Woodland's rights under the CARL.17

The dispositive portion18 of the RTC Decision reads:

Premises considered, this Court rules in favor of the plaintiff and judgment is rendered as follows:

1. Declaring that Republic Act No. [8532] did not extend the acquisition of private lands beyond
June 15, 1998 and;

2. Nullifying the [Notice] of Coverage dated December 11, 2003 and the Notice of Acquisition dated
October 5, 2004.

After its Motion for Reconsideration was denied, petitioner elevated the case to this Court via a
Petition for Review under Rule 45.
THE ISSUE

The sole issue raised by petitioner is whether it can still issue Notices of Coverage after 15 June
1998.

THE COURT'S RULING

Article XIII, Section 4 of the 1987 Constitution encapsulates the people's yearning for genuine
agrarian reform. The provision states:

The State shall, by law, undertake an agrarian reform program founded on the right of farmers and
regular farmworkers, who are landless, to own directly or collectively the lands they till or, in the
case of other farmworkers, to receive a just share of the fruits thereof. To this end, the State shall
encourage and undertake the just distribution of all agricultural lands, subject to such priorities and
reasonable retention limits as the Congress may prescribe, taking into account ecological,
developmental, or equity considerations, and subject to the payment of just compensation. In
determining retention limits, the State shall respect the right of small landowners. The State shall
further provide incentives for voluntary land-sharing.

Sixteen months after the ratification of the Constitution, Congress enacted the CARL.19 The policy
of the law is to pursue a Comprehensive Agrarian Reform Program that shall give highest
consideration to the welfare of landless farmers and farmworkers to promote social justice; move
the nation toward sound rural development and industrialization; and establish owner
cultivatorship of economic-size farms as the basis of Philippine agriculture. To this end, a more
equitable distribution and ownership of land shall be undertaken with due regard for the rights of
landowners to just compensation and to the ecological needs of the nation to provide farmers and
farmworkers with the opportunity to enhance their dignity and improve the quality of their lives
through greater productivity of agricultural lands.20

In Secretary of Agrarian Reform v. Tropical Homes, lnc.,21 we recognized the CARL as a "bastion of
social justice of poor landless farmers, the mechanism designed to redistribute to the
underprivileged the natural right to toil the earth, and to liberate them from oppressive tenancy."
To those who seek the law's benefit, it is the means towards a viable livelihood and ultimately, a
decent life.22

The Court is guided by these principles in the resolution of the present Petition for Review on
Certiorari.

The agrarian reform program, being one of the immutable hallmarks of the 1987 Constitution, must
be faithfully implemented to meet the ends of social justice.1â wphi1 The Court cannot subscribe to
Woodland's stance that the DAR's authority to issue notices of coverage and acquisition ceased
after the 10-year implementation period mentioned in Section 5 of the CARL. Such a view runs afoul
of the constitutional mandate firmly lodged in Article XIII, Section 4, which seeks the just
distribution of all agricultural lands to qualified farmers and farm workers to free them from
oppressive tenancy agreements.

The success of the CARP depends heavily on the adept implementation by the DAR. The agency's
primordial procedural tool for realizing the law's objectives is the issuance of Notices of Coverage
and Acquisition. For us to sustain Woodland's theory that the DAR can no longer issue those notices
after 15 June 1998 despite the enactment of R.A. 8532 would thwart the CARP's purpose. As the
Court ruled in Gonzales v. Court of Appeals:23

[O]ur laws on agrarian reform were enacted primarily because of the realization that there is an
urgent need to alleviate the lives of the vast number of poor farmers in our country. Yet, despite
such laws, the majority of these farmers still live on a hand-to-mouth existence. This can be
attributed to the fact that these agrarian laws have never really been effectively implemented.
Woodland asserts that R.A. 8532 only amended R.A. 6657 insofar as the funding requirements for
the CARP are concerned. It disputes the extension of the DAR's authority to acquire and distribute
private agricultural lands.

The first paragraph of Section 63, as originally worded and as amended, used the phrase "this Act"
to refer to CARL as a whole.

Originally, the first paragraph of Section 63 reads:

SECTION 63. Funding Source. - The initial amount needed to implement this Act for the period of
ten (10) years upon approval hereof shall be funded from the Agrarian Reform Fund created under
Sections 20 and 21 of Executive Order No. 229. (Emphasis supplied)

As amended by R.A. 8532, the first paragraph of Section 63 stated:

SECTION 63. Funding Source. - The amount needed to implement this Act until the year 2008 shall
be funded from the Agrarian Reform Fund. (Emphasis supplied)

In 2009, Congress again amended certain provisions of the CARL, including Section 63.24 The latest
revision of the first paragraph recites:

SECTION 63. Funding Source. - The amount needed to further implement the CARP as provided in
this Act, until June 30, 2014, upon expiration of funding under Republic Act No. 8532 and other
pertinent laws, shall be funded from the Agrarian Reform Fund and other funding sources in the
amount of at least One hundred fifty billion pesos (₱150,000,000,000.00). (Emphasis supplied)

Clearly, Section 63 refers to the implementation of the CARL in its entirety, not just the funding
source. Indeed, R.A. 8532 specifically amended Section 63 of R.A. 6657, but it does not follow that
only Section 63 had been affected by the amendment. The fact that Section 63 falls under the
chapter on "Financing" only emphasizes its general applicability. Hence, the phrase "until the year
2008" used in R.A. 8532 unmistakably extends the DAR's authority to issue NOCs for purposes of
acquiring and distributing private agricultural lands.

Finally, R.A. 9700 extended the acquisition and distribution of all agricultural lands until 30 June
2014.25 The title alone of R.A. 9700 - An Act Strengthening the Comprehensive Agrarian Reform
Program (CARP), Extending the Acquisition and Distribution of All Agricultural Lands, Instituting
Necessary Reforms, Amending for the Purpose Certain Provisions of Republic Act No. 6657,
Otherwise Known as the Comprehensive Agrarian Reform Law of 1988, As Amended, and
Appropriating Funds Therefor - reveals that the CARP was indeed extended from 1998 to 2008 via
R.A. 8532. Had there been no prior extension from 1998 to 2008, how else could the CARP have
been extended by R.A. 9700 until 30 June 2014? There could have been an extension only if the
program sought to be extended had not expired.
WHEREFORE, the foregoing Petition is GRANTED. The Decision dated 2 February 2009 and Order
dated 8 May 2009 of the Regional Trial Court of Davao City Branch 14 in Special Civil Case No.
30855-2005 are REVERSED and SET ASIDE. The DAR's Notice of Coverage dated 11 December 2003
and Notice of Acquisition dated 5 October 2004 are UPHELD with full effect. SO ORDERED.

G.R. No. 181370 March 9, 2011

JULIAN S. LEBRUDO and REYNALDO L. LEBRUDO, Petitioners,

vs.
REMEDIOS LOYOLA, Respondent.

DECISION

CARPIO, J.:

The Case

Before the Court is a petition1 for review on certiorari assailing the Resolution2 dated 4 January
2008 and Decision3 dated 17 August 2007 of the Court of Appeals (CA) in CA-G.R. SP No. 90048.

The Facts

Respondent Remedios Loyola (Loyola) owns a 240-square meter parcel of land located in Barangay
Milagrosa, Carmona, Cavite, known as Lot No. 723-6, Block 1, Psd-73149 (lot), awarded by the
Department of Agrarian Reform (DAR) under Republic Act No. 66574 (RA 6657) or the
Comprehensive Agrarian Reform Law of 1988. This lot is covered by Certificate of Land
Ownership5 (CLOA) No. 20210 issued in favor of Loyola on 27 December 1990 and duly registered
on 14 March 1991 under Transfer of Certificate of Title (TCT)/CLOA No. 998.

On 27 June 1995, petitioner Julian S. Lebrudo (Lebrudo), now deceased and represented by his son,
petitioner Reynaldo L. Lebrudo, filed with the Office of the Provincial Agrarian Reform Adjudicator
(PARAD) of Trece Martires City, Cavite, an action6 for the cancellation of the TCT/CLOA in the name
of Loyola and the issuance of another for the one-half portion of the lot in Lebrudo’s favor.

In a Decision7 dated 18 December 1995, the PARAD dismissed the case without prejudice on the
ground that the case was filed prematurely. On 11 March 1996, Lebrudo re-filed the same action.8

Lebrudo alleged that he was approached by Loyola sometime in 1989 to redeem the lot, which was
mortgaged by Loyola’s mother, Cristina Hugo, to Trinidad Barreto. After Lebrudo redeemed the lot
for ₱250.00 and a cavan of palay, Loyola again sought Lebrudo’s help in obtaining title to the lot in
her name by shouldering all the expenses for the transfer of the title of the lot from her mother,
Cristina Hugo. In exchange, Loyola promised to give Lebrudo the one-half portion of the lot.
Thereafter, TCT/CLOA No. 998 was issued in favor of Loyola. Loyola then allegedly executed a
Sinumpaang Salaysay9 dated 28 December 1989, waiving and transferring her rights over the one-
half portion of the lot in favor of Lebrudo. To reiterate her commitment, Loyola allegedly executed
two more Sinumpaang Salaysay10 dated 1 December 1992 and 3 December 1992, committing
herself to remove her house constructed on the corresponding one-half portion to be allotted to
Lebrudo.
Thereafter, Lebrudo asked Loyola to comply with her promise. However, Loyola refused. Lebrudo
sought the assistance of the Sangguniang Barangay of Milagrosa, Carmona, Cavite; the Philippine
National Police (PNP) of Carmona, Cavite; and the Department of Agrarian Reform to mediate.
However, despite steps taken to amicably settle the issue, as evidenced by certifications from the
PNP and the barangay, there was no amicable settlement. Thus, Lebrudo filed an action against
Loyola.

In her Answer, Loyola maintained that Lebrudo was the one who approached her and offered to
redeem the lot and the release of the CLOA. Loyola denied promising one-half portion of the lot as
payment for the transfer, titling and registration of the lot. Loyola explained that the lot was her
only property and it was already being occupied by her children and their families. Loyola also
denied the genuineness and due execution of the two Sinumpaang Salaysay dated 28 December
1989 and 3 December 1992. The records do not show whether Loyola renounced the Sinumpaang
Salaysay dated 1 December 1992.

In a Decision11 dated 13 February 2002, the PARAD of Trece Martires City, Cavite decided the case
in Lebrudo’s favor. The dispositive portion of the decision states:

WHEREFORE, in view of the foregoing, JUDGMENT is hereby rendered:

a) Declaring Respondent Remedios Loyola disqualified as farmer beneficiary of the subject land
identified as Lot 723-6, Block 1, under TCT/CLOA No. 998;

b) Declaring the Deed of sales over the subject lot illegal and ordered the same set aside;

c) Declaring Plaintiff JULIAN LEBRUDO entitled to one half (½) of the subject property under
TCT/CLOA No. 998 in the name of Remedios Loyola;

d) Ordering the other one half (½) of the subject lot ready for allocation to qualified beneficiary;

e) Ordering the DAR PARO Office thru the Operations Division to cancel TCT/CLOA No. 998 and in
lieu thereof, to generate and issue another title over the 120 square meters in the name of JULIAN
LEBRUDO;

f) Ordering the survey of the subject lot at the expense of the petitioner so that title be issued to
plaintiff herein;

g) Ordering the Register of Deeds, Trece Martires City to cancel TCT/CLOA No. 998 in the name of
Remedios Loyola;

h) Ordering the Register of Deeds, Trece Martires City to register the title in the name [of] Julian
Lebrudo as presented by the DAR or its representative over the lot in question;

No pronouncement as to costs and damages.

SO ORDERED.12

Loyola appealed to the Department of Agrarian Reform Adjudication Board (DARAB).13 In a

Decision14 dated 24 August 2004, the DARAB reversed the decision of the PARAD and ruled in
Loyola’s favor. The dispositive portion states:
WHEREFORE, premises considered, the appealed decision is hereby REVERSED and SET ASIDE and
a new judgment rendered as follows:

1. Upholding and maintaining the validity and effectivity of TCT/CLOA No. 998 in the name of the
respondent;

2. Declaring the Sinumpaang Salaysay dated December 28, 1989 and December 3, 1992 attached to
the petition as Annex C and F, null and void without legal force and effect;

3. Directing the Register of Deeds of Trece Martires City, Cavite to reinstate TCT/CLOA No. 998 in
the name of the respondent.

The status quo ante order issued by this Board on November 3, 2003 is hereby LIFTED.

SO ORDERED.15

Lebrudo filed a motion for reconsideration which the DARAB denied in a Resolution16 dated 12
April 2005. Lebrudo then filed a petition17 for review with the CA.

In a Decision18 dated 17 August 2007, the CA affirmed the decision of the DARAB. Lebrudo filed a
motion for reconsideration which the CA denied in a Resolution19 dated 4 January 2008.

Hence, this petition.

The Issue

The main issue is whether Lebrudo is entitled to the one-half portion of the lot covered by RA 6657
on the basis of the waiver and transfer of rights embodied in the two Sinumpaang Salaysay dated
28 December 1989 and 3 December 1992 allegedly executed by Loyola in his favor.

The Court’s Ruling

The petition lacks merit.

A Certificate of Land Ownership or CLOA is a document evidencing ownership of the land granted
or awarded to the beneficiary by DAR, and contains the restrictions and conditions provided for in
RA 6657 and other applicable laws. Section 27 of RA 6657, as amended by RA 9700,20 which
provides for the transferability of awarded lands, states:

SEC. 27. Transferability of Awarded Lands. – Lands acquired by beneficiaries under this ACT may
not be sold, transferred or conveyed except through hereditary succession, or to the government, or
to the LBP, or to other qualified beneficiaries for a period of ten (10) years: Provided, however,
That the children or the spouse of the transferor shall have a right to repurchase the land from the
government or LBP within a period of two (2) years. Due notice of the availability of the land shall
be given by the LBP to the Barangay Agrarian Reform Committee (BARC) of the barangay where the
land is situated. The Provincial Agrarian Coordinating Committee (PARCCOM), as herein provided,
shall, in turn, be given due notice thereof by the BARC.
The title of the land awarded under the agrarian reform must indicate that it is an emancipation
patent or a certificate of land ownership award and the subsequent transfer title must also indicate
that it is an emancipation patent or a certificate of land ownership award.

If the land has not yet been fully paid by the beneficiary, the rights to the land may be transferred or
conveyed, with prior approval of the DAR, to any heir of the beneficiary or to any other beneficiary
who, as a condition for such transfer or conveyance, shall cultivate the land himself. Failing
compliance herewith, the land shall be transferred to the LBP which shall give due notice of the
availability of the land in the manner specified in the immediately preceding paragraph. x x x
(Emphasis supplied)

It is clear from the provision that lands awarded to beneficiaries under the Comprehensive
Agrarian Reform Program (CARP) may not be sold, transferred or conveyed for a period of 10
years. The law enumerated four exceptions: (1) through hereditary succession; (2) to the
government; (3) to the Land Bank of the Philippines (LBP); or (4) to other qualified beneficiaries. In
short, during the prohibitory 10-year period, any sale, transfer or conveyance of land reform rights
is void, except as allowed by law, in order to prevent a circumvention of agrarian reform laws.

In the present case, Lebrudo insists that he is entitled to one-half portion of the lot awarded to
Loyola under the CARP as payment for shouldering all the expenses for the transfer of the title of
the lot from Loyola’s mother, Cristina Hugo, to Loyola’s name. Lebrudo used the two Sinumpaang
Salaysay executed by Loyola alloting to him the one-half portion of the lot as basis for his claim.

Lebrudo’s assertion must fail. The law expressly prohibits any sale, transfer or conveyance by
farmer-beneficiaries of their land reform rights within 10 years from the grant by the DAR. The law
provides for four exceptions and Lebrudo does not fall under any of the exceptions. In Maylem v.
Ellano,21 we held that the waiver of rights and interests over landholdings awarded by the
government is invalid for being violative of agrarian reform laws. Clearly, the waiver and transfer of
rights to the lot as embodied in the Sinumpaang Salaysay executed by Loyola is void for falling
under the 10-year prohibitory period specified in RA 6657.

Lebrudo asserts that he is a qualified farmer beneficiary who is entitled to the lot under the CARP.
DAR Administrative Order No. 3,22 series of 1990, enumerated the qualifications of a beneficiary:

1. Landless;

2. Filipino citizen;

3. Actual occupant/tiller who is at least 15 years of age or head of the family at the time of filing
application; and

4. Has the willingness, ability and aptitude to cultivate and make the land productive.

Lebrudo does not qualify as a beneficiary because of (1) and (3). First, Lebrudo is not landless.
According to the records,23 Municipal Agrarian Reform Officer Amelia Sangalang issued a
certification dated 28 February 1996 attesting that Lebrudo was awarded by the DAR with a
homelot consisting of an area of 236 square meters situated at Japtinchay Estate, Bo. Milagrosa,
Carmona, Cavite. Next, Lebrudo is not the actual occupant or tiller of the lot at the time of the filing
of the application. Loyola and her family were the actual occupants of the lot at the time Loyola
applied to be a beneficiary under the CARP.
Further, the CA, in its Decision dated 17 August 2007, correctly observed that a certificate of title
serves as evidence of an indefeasible title and after the expiration of the one-year period from the
issuance of the registration decree upon which it is based, the title becomes incontrovertible. The
CA also declared that the basis of Lebrudo’s claim, the two Sinumpaang Salaysay dated 28
December 1989 and 3 December 1992, were illegal and void ab initio for being patently intended to
circumvent and violate the conditions imposed by the agrarian law. The relevant portions of the
decision provide:

x x x It is undisputed that CLOA 20210 was issued to the respondent on December 27, 1990 and
was registered by the Register of Deeds of Cavite on March 14, 1991, resulting in the issuance of
TCT/CLOA No. 998 in her name.

Under Sec. 43, P.D. 1529, the certificate of title that may be issued by the Register of Deeds pursuant
to any voluntary or involuntary instrument relating to the land shall be the transfer certificate of
title, which shall show the number of the next previous certificate covering the same land and also
the fact that it was previously registered, giving the record number of the original certificate of title
and the volume and page of the registration book in which the original certificate of title is found.

The certificate of title serves as evidence of an indefeasible title to the property in favor of the
person whose name appears therein. After the expiration of the one-year period from the issuance
of the decree of registration upon which it is based, the title becomes incontrovertible.

Accordingly, by the time when original petitioner Julian Lebrudo filed on June 27, 1995 the first
case (seeking the cancellation of the respondent’s CLOA), the respondent’s certificate of title had
already become incontrovertible. That consequence was inevitable, for as the DARAB correctly
observed, an original certificate of title issued by the Register of Deeds under an administrative
proceeding was as indefeasible as a certificate of title issued under a judicial registration
proceeding. Clearly, the respondent, as registered property owner, was entitled to the protection
given to every holder of a Torrens title.1avvphi1

The issue of whether or not the respondent was bound by her waiver and transfer in favor of Julian
Lebrudo, as contained in the several sinumpaang salaysay, was irrelevant. Worse for the petitioner,
the DARAB properly held that the undertaking of the respondent to Julian Lebrudo under the
sinumpaang salaysay dated December 28, 1989 and December 3, 1992 – whereby she promised to
give him ½ portion of the homelot in consideration of his helping her work on the release of the
CLOA to her and shouldering all the expenses for the purpose – was "clearly illegal and void ab
initio" for being patently intended to circumvent and violate the conditions imposed by the agrarian
laws and their implementing rules. He could not, therefore, have his supposed right enforced. x x
x24

We see no reason to disturb the findings of the CA. The main purpose of the agrarian reform law is
to ensure the farmer-beneficiary’s continued possession, cultivation and enjoyment of the land he
tills.25 To do otherwise is to revert back to the old feudal system whereby the landowners
reacquired vast tracts of land and thus circumvent the government’s program of freeing the tenant-
farmers from the bondage of the soil.26

WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 17 August 2007 and
Resolution dated 4 January 2008 of the Court of Appeals in CA-G.R. SP No. 90048.
SO ORDERED.