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G.R. No. L-105586 December 15, 1993 REMIGIO ISIDRO, petitioner, vs. THE HON.

COURT OF APPEALS (SEVENTH DIVISION) AND NATIVIDAD GUTIERREZ, respondents. Joventino A. Cornista for petitioner. Yolanda Quisumbing-Javellana & Associates for private respondent. PADILLA, J.: This is a petition for review on certiorari of the decision * of the respondent Court of Appeals dated 27 February 1992 in CA-G.R. SP No. 26671 ordering petitioner to vacate the land in question and surrender possession thereof to the private respondent; and its 21 May 1992 resolution denying petitioner's motion for reconsideration for lack of merit. The facts which gave rise to this petition are as follows: Private respondent Natividad Gutierrez is the owner of a parcel of land with an area of 4.5 hectares located in Barrio Sta. Cruz, Gapan, Nueva Ecija. In 1985, Aniceta Garcia, sister of private respondent and also the overseer of the latter, allowed petitioner Remigio Isidro to occupy the swampy portion of the abovementioned land, consisting of one (1) hectare, in order to augment his (petitioner's) income to meet his family's needs. The occupancy of a portion of said land was subject top the condition that petitioner would vacate the land upon demand. Petitioner occupied the land without paying any rental and converted the same into a fishpond. In 1990, private respondent through the overseer demanded from petitioner the return of the land, but the latter refused to vacate and return possession of said land, claiming that he had spent effort and invested capital in converting the same into a fishpond. A complaint for unlawful detainer was filed by private respondent against petitioner before the Municipal Trial Court (MTC) of Gapan, Nueva Ecija which was docketed as Civil Case No. 4120. Petitioner set up the following defenses: (a) that the complaint was triggered by his refusal to increase his lease rental; (b) the subject land is a fishpond and therefore is agricultural land; and (c) that lack of formal demand to vacate exposes the complaint to dismissal for insufficiency of cause of action. 1 Based on an ocular inspection of the subject land, the trial court found that the land in question is a fishpond 2and, thus, in a decision dated 30 May 1991, the said trial court dismissed the complaint, ruling that the land is agricultural and therefore the dispute over it is agrarian which is under the original and exclusive jurisdiction of the courts of agrarian relations as provided in Sec. 12(a) of Republic Act No. 946 (now embodied in the Revised Rules of Procedure of the Department of Agrarian Reform Adjudication Board). 3 An appeal was filed by private respondent before the Regional Trial Court (RTC) of Gapan, Nueva Ecija, docketed as Civil Case No. 889. In due course, the RTC rendered a decision on 5 November 1991 concurring with the findings of the MTC and affirming in toto the trial court's decision. The RTC decision held that: Even conceding for the sake of argument that the defendant-appellee was allowed by the plaintiffappellant, through her sister Aniceta Garcia (her administratrix over the land in question) to occupy and use the landholding in question on condition that the defendant would vacate the same upon demand of the owner or plaintiff herein, without paying any rental either in cash or produce, under these facts there was a tenurial arrangement, within the meaning of Sec. 3(d) of RA 6657, thereby placing the dispute involved in this case within the jurisdiction of the DARAB. Perhaps, it would be different if the defendant was merely a trespasser, without any right whatsoever, when he entered and occupied the subject landholding. The defendant, as a matter of fact, was a legal possessor of the land in question and therefore to determine his rights and obligations over the said property, the DARAB is the proper forum for such issue. 4 Not satisfied with the decision of the RTC, private respondent appealed to the respondent Court of Appeals and the appeal was docketed as CA-G.R. SP No. 26671. On 27 February 1992, as earlier stated, the respondent Court of Appeals reversed and set aside the decision of the RTC, ordering petitioner to vacate the parcel of land in question and surrender possession thereof to private respondent, and to pay private respondent the sum of P5,000.00 as and for attorney's fees and expenses of litigation. 5 The respondent Court of Appeals ruled that:

The agrarian dispute over which the DAR may have jurisdiction by virtue of its quasi-judicial power is that which involves tenurial arrangements, whether leasehold, tenancy, stewardship or otherwise, over lands devoted to agriculture. Tenurial arrangement is concerned with the act or manner of putting into proper order the rights of holding a piece of agricultural land between the landowner and the farmer or farmworker. In the case at bar, there can be no dispute that between the parties herein there is no tenurial arrangement, whether leasehold, tenancy, stewardship or otherwise, over the land in dispute. Other than his bare allegation in the Answer with Counterclaim, and his affidavit, private respondent has not shown prima facie that he is a tenant of the petitioner. The affidavits of his witnesses Antonio Samin and Daniel Villareal attest to the fact that they acted as mediators in the dispute between the parties herein sometime in October 1990, but no settlement was arrived at, and that the subject land is a fishpond. To the same effect is the affidavit of Feliciano Garcia. Absent any prima facie proof that private respondent has a tenancy relationship with petitioner, the established fact is that private respondent is possessing the property in dispute by mere tolerance, and when such possession ceased as such upon demand to vacate by the petitioner, private respondent became a squatter in said land. We hold that the Municipal Trial Court of Gapan, Nueva Ecija has jurisdiction over the unlawful detainer case. 6 Petitioner moved for reconsideration of the foregoing decision, but, also as earlier stated, it was denied in a resolution dated 21 May 1992 7 for lack of merit. Hence, this petition for review under Rule 45 of the Rules of Court. Petitioner raises the following issue: WHETHER OR NOT THE MUNICIPAL COURT HAS THE JURISDICTION IN THIS CASE AND WHETHER THE PUBLIC RESPONDENT COULD LEGALLY EJECT THE PETITIONER CONSIDERING THE FOLLOWING: 1. THAT THE SUBJECT IS A FISHPOND AND UNDER THE LAW AND JURISPRUDENCE FISHPONDS ARE CLASSIFIED AS AGRICULTURAL LANDS; 2. THAT BEING AN AGRICULTURAL LAND THE SAME IS GOVERNED BY OUR TENANCY LAWS WHERE RULE 70 OF THE RULES OF COURT CANNOT BE SIMPLY APPLIED; AND 3. THAT UNDER THE RULES OF THE DEPARTMENT OF AGRARIAN REFORM ADJUDICATION BOARD, THE DETERMINATION OF WHETHER A PERSON WORKING ON A FISHPOND IS A TENANT OR NOT IS CLEARLY WITHIN THE EXCLUSIVE JURISDICTION OF THE DARAB. 8 The petition is devoid of merit. We hold for the private respondent. It is basic whether or not a court has jurisdiction over the subject matter of an action is determined from the allegations of the complaint. As held in Multinational Village Homeowners' Association, Inc., vs. Court of Appeals, et al.: 9 Jurisdiction over the subject-matter is determined upon the allegations made in the complaint, irrespective of whether the plaintiff is entitled to recover upon the claim asserted therein a matter resolved only after and as a result of the trial. Neither can the jurisdiction of the court be made to depend upon the defenses made by the defendant in his answer or motion to dismiss. If such were the rule, the question of jurisdiction would depend almost entirely upon the defendant. In her complaint before the court a quo, private respondent stated that she is the owner of a parcel of land situated in Barrio Sta. Cruz, Gapan, Nueva Ecija, which petitioner is illegally occupying; that petitioner has taken advantage of the tolerance of her (private respondent's) sister in allowing him to occupy the land on the condition that he (petitioner) would vacate the land upon demand. Because of petitioner's refusal to vacate the land, private respondent's remedy, as owner of said land, was to file an action for unlawful detainer with the Municipal Trial Court. In his answer to the complainant, petitioner alleged that the land involved in the dispute is an agricultural land and hence, the case must be filed with the Court of Agrarian Relations (not the MTC). Moreover, petitioner contended that it was his refusal to increase his lease rental (implying tenancy) that prompted the private respondent to sue him in court. 10 It is well settled jurisprudence that a court does not lose its jurisdiction over an unlawful detainer case by the simple expedient of a party raising as a defense therein the alleged existence of a tenancy relationship between the parties. 11 The court continues to have the authority to hear the evidence for the purpose precisely of determining whether or not it has jurisdiction. And upon such hearing, if tenancy is shown to be the real issue, the court should dismiss the case for lack of jurisdiction. 12

The MTC dismissed the unlawful detainer complaint primarily on the ground that the subject land is agricultural and therefore the question at issue is agrarian. In this connection, it is well to recall that Section 1, Rule II of the Revised Rules of Procedure, 13 provides that the Agrarian Reform Adjudication Board shall have primary jurisdiction, both original and appellate, to determine and adjudicate all agrarian disputes, cases, controversies, and matters or incidents involving the implementation of the Comprehensive Agrarian Reform Program under Republic Act No. 6657, Executive Order Nos. 229, 228 and 129-A, Republic Act No. 3844 as amended by Republic Act No. 6389, Presidential Decree No. 27 and other agrarian laws and their implementing rules and regulations. An agrarian dispute refers to any controversy relating to tenurial arrangements, whether leasehold, tenancy, stewardship or otherwise, over lands devoted to agriculture, including disputes concerning farmworkers associations or representation of persons in negotiating, fixing, maintaining, changing or seeking to arrange terms and conditions of such tenurial arrangements. It includes any controversy relating to compensation of lands acquired under Republic Act No. 6657 and other terms and conditions of transfer of ownership from landowners to farmworkers, tenants and other agrarian reform beneficiaries, whether the disputants stand in the proximate relation of farm operator and beneficiary, landowner and tenant, or lessor or lessee. 14 It is irrefutable in the case at bar that the subject land which used to be an idle, swampy land was converted by the petitioner into a fishpond. And it is settled that a fishpond is an agricultural land. An agricultural land refers to the land devoted to agricultural activity as defined in Republic Act No. 6657 15 and not classified as mineral, forest, residential, commercial or industrial land. 16 Republic Act No. 6657 defines agricultural activity as the cultivation of the soil, planting of crops, growing of fruit trees, raising of 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 done by persons whether natural or judicial. 17 But a case involving an agricultural land does not automatically make such case an agrarian dispute upon which the DARAB has jurisdiction. The mere fact that the land is agricultural does not ipso facto make the possessor an agricultural lessee of tenant. The law provides for conditions or requisites before he can qualify as one and the land being agricultural is only one of them. 18 The law states that an agrarian dispute must be a controversy relating to a tenurial arrangement over lands devoted to agriculture. And as previously mentioned, such arrangement may be leasehold, tenancy or stewardship. Tenancy is not a purely factual relationship dependent on what the alleged tenant does upon the land. It is also a legal relationship. The intent of the parties, the understanding when the farmer is installed, and their written agreements, provided these are complied with and are not contrary to law, are even more important. 19 The essential requisites of a tenancy relationship are: (1) the parties are the landowner and the tenant; (2) the subject matter is agricultural land; (3) there is consent; (4) the purpose is agricultural production; (5) there is personal cultivation by the tenant; and (6) there is a sharing of harvests between the parties. All these requisites must concur in order to create a tenancy relationship between the parties. The absence of one does not make an occupant of a parcel of land, or a cultivator thereof, or a planter thereon, a de jure tenant. Unless a person establishes his status as a de jure tenant, he is not entitled to security of tenure nor is he covered by the Land Reform Program of the government under existing tenancy laws (Caballes v. DAR, et al., G.R. No. 78214, December 5, 1988). 20 Furthermore, an agricultural lessee as defined in Sec. 116(2) of Republic Act No. 3844, is a person who, by himself and with the aid available from within his immediate farm household, cultivates the land belonging to, or possessed by, another with the latter's consent for purposes of production, for a price certain in money or in produce or both. An agricultural lessor, on the other hand, is a natural or judicial person who, either as owner, civil law lessee, usufructuary, or legal possessor lets or grants to another the cultivation and use of his land for a price certain. 21 Based on the statutory definitions of a tenant or a lessee, it is clear that there is no tenancy or agricultural/leasehold relationship existing between the petitioner and the private respondent. There was no contract or agreement entered into by the petitioner with the private respondent nor with the overseer of the private respondent, for petitioner to cultivate the land for a price certain or to share his harvests. Petitioner has failed to substantiate his claim that he was paying rent for the use of the land. Whether or not private respondent knew of the conversion by petitioner of the idle, swampy land into a fishpond is immaterial in this case. The fact remains that the existence of all the requisites of a tenancy relationship was not proven by the petitioner. And in the absence of a tenancy relationship, the complaint for unlawful detainer is properly within the jurisdiction of the Municipal Trial Court, as provided in Sec. 33 of Batas Pambansa Blg. 129. Having established that the occupancy and possession by petitioner of the land in question is by mere tolerance, private respondent had the legal right to demand upon petitioner to vacate the land. And as correctly ruled by the respondent appellate court: . . . . His (petitioner's) lawful possession became illegal when the petitioner (now private respondent) through her sister made a demand on him to vacate and he refused to comply with such demand. Such is the ruling in Pangilinan vs. Aguilar, 43 SCRA 136, 144, wherein it was held:

While in possession by tolerance is lawful, such possession becomes illegal upon demand to vacate is made by the owner and the possessor by tolerance refuses to comply with such demand (Prieto vs. Reyes, 14 SCRA 432; Yu vs. De Lara, 6 SCRA 786, 788; Amis vs. Aragon, L-4684, April 28, 1957). A person who occupies the land of another at the latter's tolerance or permission, without any contract between them, is necessarily bound by an implied promise that he will vacate upon demand, failing which a summary action for ejectment is the proper remedy against him (Yu vs. De Lara, supra)." 22 The present case should be distinguished from the recent case of Bernas vs. The Honorable Court of Appeals. 23In the Bernas case, the land occupant (Bernas) had a production-sharing agreement with the legal possessor (Benigno Bitoon) while the records in this case fail to show that herein petitioner (Isidro) was sharing the harvest or paying rent for his use of the land. Moreover, the agreement between the overseer (Garcia) and herein petitioner was for petitioner to occupy and use the land by mere tolerance of the owner. Petitioner Isidro failed to refute that Garcia allowed him to use the land subject to the condition that petitioner would vacate it upon demand. In the Bernas case, the petitioner (Bernas) was able to establish the existence of an agricultural tenancy or leasehold relationship between him and the legal possessor. The evidence in this case, on the other hand, fails to prove that petitioner Isidro, was an agricultural tenant or lessee. WHEREFORE, the petition is DENIED. The questioned decision and resolution of the Court of Appeals are hereby AFFIRMED. Costs against the petitioner. SO ORDERED.

G.R. No. 104269 November 11, 1993 DEPARTMENT OF AGRICULTURE, petitioner, vs. THE NATIONAL LABOR RELATIONS COMMISSION, et al., respondents. Roy Lago Salcedo for private respondents.

VITUG, J.: For consideration are the incidents that flow from the familiar doctrine of non-suability of the state. In this petition for certiorari, the Department of Agriculture seeks to nullify the Resolution, 1 dated 27 November 1991, of the National Labor Relations Commission (NLRC), Fifth Division, Cagayan de Oro City, denying the petition for injunction, prohibition and mandamus that prays to enjoin permanently the NLRC's Regional Arbitration Branch X and Cagayan de Oro City Sheriff from enforcing the decision 2 of 31 May 1991 of the Executive Labor Arbiter and from attaching and executing on petitioner's property. The Department of Agriculture (herein petitioner) and Sultan Security Agency entered into a contract 3 on 01 April 1989 for security services to be provided by the latter to the said governmental entity. Save for the increase in the monthly rate of the guards, the same terms and conditions were also made to apply to another contract, dated 01 May 1990, between the same parties. Pursuant to their arrangements, guards were deployed by Sultan Agency in the various premises of the petitioner. On 13 September 1990, several guards of the Sultan Security Agency filed a complaint for underpayment of wages, nonpayment of 13th month pay, uniform allowances, night shift differential pay, holiday pay and overtime pay, as well as for damages, 4 before the Regional Arbitration Branch X of Cagayan de Oro City, docketed as NLRC Case No. 10-09-0045590 (or 10-10-00519-90, its original docket number), against the Department of Agriculture and Sultan Security Agency. The Executive Labor Arbiter rendered a decision on 31 May finding herein petitioner and jointly and severallyliable with Sultan Security Agency for the payment of money claims, aggregating P266,483.91, of the complainant security guards. The petitioner and Sultan Security Agency did not appeal the decision of the Labor Arbiter. Thus, the decision became final and executory. On 18 July 1991, the Labor Arbiter issued a writ of execution. 5 commanding the City Sheriff to enforce and execute the judgment against the property of the two respondents. Forthwith, or on 19 July 1991, the City Sheriff levied on execution the motor vehicles of the petitioner, i.e. one (1) unit Toyota Hi-Ace, one (1) unit Toyota Mini Cruiser, and one (1) unit Toyota Crown. 6 These units were put under the custody of Zacharias Roa, the property custodian of the petitioner, pending their sale at public auction or the final settlement of the case, whichever would come first.

A petition for injunction, prohibition and mandamus, with prayer for preliminary writ of injunction was filed by the petitioner with the National Labor Relations Commission (NLRC), Cagayan de Oro, alleging, inter alia, that the writ issued was effected without the Labor Arbiter having duly acquired jurisdiction over the petitioner, and that, therefore, the decision of the Labor Arbiter was null and void and all actions pursuant thereto should be deemed equally invalid and of no legal, effect. The petitioner also pointed out that the attachment or seizure of its property would hamper and jeopardize petitioner's governmental functions to the prejudice of the public good. On 27 November 1991, the NLRC promulgated its assailed resolution; viz: WHEREFORE, premises considered, the following orders are issued: 1. The enforcement and execution of the judgments against petitioner in NLRC RABX Cases Nos. 10-1000455-90; 10-10-0481-90 and 10-10-00519-90 are temporarily suspended for a period of two (2) months, more or less, but not extending beyond the last quarter of calendar year 1991 to enable petitioner to source and raise funds to satisfy the judgment awards against it; 2. Meantime, petitioner is ordered and directed to source for funds within the period above-stated and to deposit the sums of money equivalent to the aggregate amount. it has been adjudged to pay jointly and severally with respondent Sultan Security Agency with the Regional Arbitration Branch X, Cagayan de Oro City within the same period for proper dispositions; 3. In order to ensure compliance with this order, petitioner is likewise directed to put up and post sufficient surety and supersedeas bond equivalent to at least to fifty (50%) percent of the total monetary award issued by a reputable bonding company duly accredited by the Supreme Court or by the Regional Trial Court of Misamis Oriental to answer for the satisfaction of the money claims in case of failure or default on the part of petitioner to satisfy the money claims; 4. The City Sheriff is ordered to immediately release the properties of petitioner levied on execution within ten (10) days from notice of the posting of sufficient surety or supersedeas bond as specified above. In the meanwhile, petitioner is assessed to pay the costs and/or expenses incurred by the City Sheriff, if any, in connection with the execution of the judgments in the above-stated cases upon presentation of the appropriate claims or vouchers and receipts by the city Sheriff, subject to the conditions specified in the NLRC Sheriff, subject to the conditions specified in the NLRC Manual of Instructions for Sheriffs; 5. The right of any of the judgment debtors to claim reimbursement against each other for any payments made in connection with the satisfaction of the judgments herein is hereby recognized pursuant to the ruling in the Eagle Security case, (supra). In case of dispute between the judgment debtors, the Executive Labor Arbiter of the Branch of origin may upon proper petition by any of the parties conduct arbitration proceedings for the purpose and thereby render his decision after due notice and hearings; 7. Finally, the petition for injunction is Dismissed for lack of basis. The writ of preliminary injunction previously issued is Lifted and Set Aside and in lieu thereof, a Temporary Stay of Execution is issued for a period of two (2) months but not extending beyond the last quarter of calendar year 1991, conditioned upon the posting of a surety or supersedeas bond by petitioner within ten (10) days from notice pursuant to paragraph 3 of this disposition. The motion to admit the complaint in intervention isDenied for lack of merit while the motion to dismiss the petition filed by Duty Sheriff is Noted SO ORDERED. In this petition for certiorari, the petitioner charges the NLRC with grave abuse of discretion for refusing to quash the writ of execution. The petitioner faults the NLRC for assuming jurisdiction over a money claim against the Department, which, it claims, falls under the exclusive jurisdiction of the Commission on Audit. More importantly, the petitioner asserts, the NLRC has disregarded the cardinal rule on the non-suability of the State. The private respondents, on the other hand, argue that the petitioner has impliedly waived its immunity from suit by concluding a service contract with Sultan Security Agency. The basic postulate enshrined in the constitution that "(t)he State may not be sued without its consent," 7 reflects nothing less than a recognition of the sovereign character of the State and an express affirmation of the unwritten rule effectively insulating it from the jurisdiction of courts. 8 It is based on the very essence of sovereignty. As has been aptly observed, by Justice Holmes, a sovereign is exempt from suit, not because of any formal conception or obsolete theory, but on the logical and practical ground that there can be no legal right as against the authority that makes the law on which the right depends. 9 True, the doctrine, not too infrequently, is derisively called "the royal prerogative of dishonesty" because it grants the state the prerogative to defeat any legitimate claim against it by simply invoking its non-suability. 10 We have had occasion, to explain in its defense, however, that a continued adherence to the doctrine of non-suability cannot be deplored, for the loss of governmental efficiency and the obstacle to the performance of its multifarious functions would be

far greater in severity than the inconvenience that may be caused private parties, if such fundamental principle is to be abandoned and the availability of judicial remedy is not to be accordingly restricted. 11 The rule, in any case, is not really absolute for it does not say that the state may not be sued under any circumstances. On the contrary, as correctly phrased, the doctrine only conveys, "the state may not be sued without its consent;" its clear import then is that the State may at times be sued. 12 The States' consent may be given expressly or impliedly. Express consent may be made through a general law 13 or a special law. 14 In this jurisdiction, the general law waiving the immunity of the state from suit is found in Act No. 3083, where the Philippine government "consents and submits to be sued upon any money claims involving liability arising from contract, express or implied, which could serve as a basis of civil action between private parties." 15 Implied consent, on the other hand, is conceded when the State itself commences litigation, thus opening itself to a counterclaim 16 or when it enters into a contract. 17 In this situation, the government is deemed to have descended to the level of the other contracting party and to have divested itself of its sovereign immunity. This rule, relied upon by the NLRC and the private respondents, is not, however, without qualification. Not all contracts entered into by the government operate as a waiver of its non-suability; distinction must still be made between one which is executed in the exercise of its sovereign function and another which is done in its proprietary capacity. 18 In the Unites States of America vs. Ruiz, 19 where the questioned transaction dealt with improvements on the wharves in the naval installation at Subic Bay, we held: The traditional rule of immunity exempts a State from being sued in the courts of another State without its consent or waiver. This rule is a necessary consequence of the principles of independence and equality of States. However, the rules of International Law are not petrified; they are constantly developing and evolving. And because the activities of states have multiplied, it has been necessary to distinguish them between sovereign and governmental acts ( jure imperii) and private, commercial and proprietary act ( jure gestionisis). The result is that State immunity now extends only to acts jure imperii. The restrictive application of State immunity is now the rule in the United States, the United Kingdom and other states in Western Europe. xxx xxx xxx The restrictive application of State immunity is proper only when the proceedings arise out of commercial transactions of the foreign sovereign, its commercial activities or economic affairs. Stated differently, a state may be said to have descended to the level of an individual and can this be deemed to have actually given its consent to be sued only when it enters into business contracts. It does not apply where the contracts relates to the exercise of its sovereign functions. In this case the projects are an integral part of the naval base which is devoted to the defense of both the United States and the Philippines, indisputably a function of the government of the highest order; they are not utilized for not dedicated to commercial or business purposes. In the instant case, the Department of Agriculture has not pretended to have assumed a capacity apart from its being a governmental entity when it entered into the questioned contract; nor that it could have, in fact, performed any act proprietary in character. But, be that as it may, the claims of private respondents, i.e. for underpayment of wages, holiday pay, overtime pay and similar other items, arising from the Contract for Service, clearly constitute money claims. Act No. 3083, aforecited, gives the consent of the State to be "sued upon any moneyed claim involving liability arising from contract, express or implied, . . . Pursuant, however, to Commonwealth Act ("C.A.") No. 327, as amended by Presidential Decree ("P.D.") No. 1145, the money claim first be brought to the Commission on Audit. Thus, inCarabao, Inc., vs. Agricultural Productivity Commission, 20 we ruled: (C)laimants have to prosecute their money claims against the Government under Commonwealth Act 327, stating that Act 3083 stands now merely as the general law waiving the State's immunity from suit, subject to the general limitation expressed in Section 7 thereof that "no execution shall issue upon any judgment rendered by any Court against the Government of the (Philippines), and that the conditions provided in Commonwealth Act 327 for filing money claims against the Government must be strictly observed." We fail to see any substantial conflict or inconsistency between the provisions of C.A. No. 327 and the Labor Code with respect to money claims against the State. The Labor code, in relation to Act No. 3083, provides the legal basis for the State liability but the prosecution, enforcement or satisfaction thereof must still be pursued in accordance with the rules and procedures laid down in C.A. No. 327, as amended by P.D. 1445. When the state gives its consent to be sued, it does thereby necessarily consent to unrestrained execution against it. tersely put, when the State waives its immunity, all it does, in effect, is to give the other party an opportunity to prove, if it can, that the State has a liability. 21 In Republic vs. Villasor 22 this Court, in nullifying the issuance of an alias writ of execution directed against the funds of the Armed Forces of the Philippines to satisfy a final and executory judgment, has explained, thus

The universal rule that where the State gives its consent to be sued by private parties either by general or special law, it may limit the claimant's action "only up to the completion of proceedings anterior to the stage of execution" and that the power of the Courts ends when the judgment is rendered, since government funds and properties may not be seized under writs or execution or garnishment to satisfy such judgments, is based on obvious considerations of public policy. Disbursements of public funds must be covered by the correspondent appropriation as required by law. The functions and public services rendered by the State cannot be allowed to be paralyzed or disrupted by the diversion of public funds from their legitimate and specific objects, as appropriated by law. 23 WHEREFORE, the petition is GRANTED. The resolution, dated 27 November 1991, is hereby REVERSED and SET ASIDE. The writ of execution directed against the property of the Department of Agriculture is nullified, and the public respondents are hereby enjoined permanently from doing, issuing and implementing any and all writs of execution issued pursuant to the decision rendered by the Labor Arbiter against said petitioner. SO ORDERED.

[G.R. No. 89545, December 03, 1990] SPOUSES ROLANDO DOLORFINO AND MONINA FULE, PETITIONERS, VS. THE HON. COURT OF APPEALS, SEVERO ALCOS AND EFIGENIA DE LUNA-ALCOS, RESPONDENT. DECISION GRINO-AQUINO, J.:

This petition for review assails the decision dated July 20, 1989 of the Court of Appeals in CA-G.R. CAR No. 17054 entitled, "Severo Alcos and Efigenia de Luna-Alcosvs. Rolando Dolorfino and Monina Fule," affirming in toto the decision of the Regional Trial Court, Branch 31, City of San Pablo, in Agrarian Case No. SP-011, which declared that a tenancy relationship exists between the parties and ordered payment of the tenant's share in the produce of the land plus damages. In 1933, the spouses Severo Alcos and Efigenia de Luna-Alcos were instituted tenants of a 26,077-square-meter landholding in Barangay San Rafael, San Pablo City, covered by OCT No. F-819 (Free Patent No. [IV-5]) in the name of Prudencia Fule. The Alcoses took possession of the land which was already planted with coconuts. They cleared it and also planted coffee, lanzones, rambutan, gabi and bananas. They had agreed with the landowner that the latter could at anytime freely partake of the fruits and that the tenants would have a share of one-half (1/2) of the harvested fruits plus one-seventh (1/7) of the coconut produce, or an estimated 2,542 nuts a year at P1.00 per nut. After Prudencia Fule's death, the property was inherited by her son, Jose Fule, upon whose death the property was inherited by his son, Artemio Fule. After Artemio Fule'sdeath, the land was inherited by Monina Fule Dolorfino, married to Rolando Dolorfino. The Alcoses continued to work on the landholding. However, in 1980, they were informed by the Dolorfinos that the property would be sold. In consideration of their consenting as tenants, to the sale, they were offered a P5 per square meter commission if they could find a buyer for the land plus either of the following options: (1) 180 square meters of the Dolorfinos' property in Patria Village, San Pablo City, with reimbursement for the value of the plants which they cultivated on the landholding; or (2) 2,000 square meters of the San Rafael landholding. The Alcoses chose the second option. The agreement was not reduced to writing. Unfortunately, the intended sale did not materialize anyway. In February, 1980, the Dolorfinos refused to give the Alcoses their share of the harvest, prompting the latter to seek advice from the Ministry of Agrarian Reform,whose Attorney Reyes inspected the landholding, and informed the Alcoses that as tenants, they were entitled to a one-third share of the produce. In July 1982, the Dolorfinos fenced the landholding, using barbed wire and bamboo posts taken from a bamboo grove on the property. The house of the Alcoses was fenced out and they were prohibited from entering, or gathering the fruits of the plants, inside the fenced property. The Alcoses filed a letter-complaint (Exh. B) in the Ministry of Agrarian Reform, Region IV. The Agrarian Reform Team of San Pablo City, headed by Atty. Minas, arranged a meeting between the parties on August 25, 1982 but the Dolorfinos did not show up.

On May 8, 1985, the Alcoses filed Agrarian Case No. SP-011 in the Regional Trial Court (Branch 31) of San Pablo City for illegal ejectment with damages and confirmation of the tenancy. The Dolorfinos denied that the Alcoses were bona fidetenants. Furthermore, their cause of action, if any, had prescribed under Section 38 of R.A. 3844, because their complaint was filed more than three (3) years after the cause of action had accrued. The Regional Trial Court rendered a decision on September 12, 1988, ruling that a "tenancy relationship" existed between the parties and that the "tenants" were entitled to payment of P18,563 as their share of the produce of the land from 1980 to 1987 and P5,000 as moral damages, attorney's fees and costs. The Dolorfinos were directed to reinstate the Alcoses on the landholding. The Dolorfinos appealed the decision to the Court of Appeals where the case was docketed as CA-G.R. CAR No. 17054. In a decision promulgated on July 20, 1989, the Court of Appeals affirmed the trial court's decision in toto. Hence, this petition for review. The petitioners allege that the respondent court erred in not declaring that theAlcoses' cause of action is barred by the Statute of Limitations, because Section 38 of R.A. 3844, as amended, requires an action or complaint to be filed in court by or on behalf of the tenant and no such action was filed from 1982 to 1985. The argument has no merit. The plaintiffs' evidence that they were instituted by Prudencio Fule as agricultural lessees of the land in question was not controverted by the petitioners. The finding to that effect of the trial court and the appellate court, being supported by substantial evidence, is entitled to great weight, respect and finality (People vs. Laureta, 159 SCRA 256; Hernandez vs. Court of Appeals, 149 SCRA 67). Once a leasehold relation has been established, the agricultural lessee is entitled to security of tenure. He has a right to continue working on the land and he may not be ejected therefrom except for cause as provided by law (De Jesus vs. IAC, 175 SCRA 559). "Section 7. Tenure of agricultural leasehold relation. - the agricultural leasehold relation once established shall confer upon the agricultural lessee the right to continue working on the landholding until such leasehold relation is extinguished. The agricultural lessee shall be entitled to security of tenure on his landholding and cannot be ejectedtherefrom unless authorized by the Court for causes herein provided." (Agricultural Land Reform Code, R.A. 3844). The agricultural relationship is not extinguished by the sale, alienation or transfer of the legal possession of the landholding. The purchaser or transferee is simply subrogated to the rights and substituted to the obligations of the agricultural lessor. (Sec. 10, R.A. 3844. There is no merit in the petitioners contention, that the private respondents' cause of action for illegal dispossession of their leasehold had already prescribed when the latter filed their complaint for reinstatement in May, 1985. Section 38 of Republic Act No. 3844 provides that "an action to enforce any cause of action under this Code shall be barred if not commenced within three (3) years after such cause of action accrued." The law does not specifically require a judicial action,hence, it can be an administrative action. Ubi lex non distinguit nec nos distingueredebemos (Where the law does not distinguish, we should not distinguish). The records show that as early as 1980, the Alcoses had sought assistance from the Ministry of Agrarian Reform, through its Attorney Reyes, when they were not given a share of the fruits of the land. They were refused entry on the land in July, 1982 after it was fenced by Dolorfino. In August, 1982, they filed a letter-complaint in the Ministry of Agrarian Reform which, under the law, was the appropriate agency tasked with the function of assisting landless farmers to acquire economic family-size farms, and the duty of implementing and enforcing the provisions of the Code of Agrarian Reform. The appropriate government machinery, therefore, was set in motion upon the filing of their letter-complaint seeking to enforce their rights as agricultural lessees under the Code. The filing of such administrative complaint stopped the running of the prescriptive period against their causes of action for deprivation of their share ofthe harvests and for illegal dispossession of their leasehold. Even the filing of their judicial action on May 9, 1985, was done within the three year limitation period after their ouster from the land in July, 1982 when the petitioners constructed a barbed wire enclosure around it. Clearly, the lessees right of action had not yet then prescribed. WHEREFORE, the petition for review is denied. The decision of the Court of Appeals is AFFIRMED, but with modification with regard to the payment by the petitioners to the private respondents of the latter's share of the harvests from the land which should be computed from 1980 up to and until the possession of the landholding is actually restored to them. In other respects the decision is maintained. SO ORDERED.

G.R. No. 76415 August 30, 1990 JULIO BARANDA and ROBERTO BARANDA, petitioners, vs. HON. ALFONSO BAGUIO, THE PROVINCIAL SHERIFF OF BACOLOD, RURAL BANK OF HINIGARAN, INC.,respondents. Eduardo S. Baranda for petitioners. Ireneo G. Aredonia, Jr. for respondent Rural Bank of Hinigaran, Inc. PARAS, J.: This is a petition for certiorari and prohibition with preliminary injunction seeking the annulment of the September 16, 1976 Order of the Regional Trial Court, Branch XLIV Bacolod City * granting the petition for issuance of a writ of possession in T.C.T. Nos. T-47199 L.R.C. No. 105 entitled In Re: "Petition for Issuance of Writ of Possession Rural Bank of Hinigaran Inc.Petitioner". Herein petitioners are the children of the late Lumen Baranda who, in 1975, acquired a loan of P37,000.00 from herein private respondent Rural Bank of Hinigaran, Inc. (BANK for short). To secure the loan, she mortgaged two parcels of land covered by Transfer Certificates of Title Nos. T-55533 and T-47199. She also executed an affidavit that the said parcels of land are not tenanted and have no tenancy obligation whatsoever (Rollo, p. 80). In 1976, the loan was increased to P42,000.00. Lumen Baranda failed to pay the loan on its maturity date. The said parcels of land were foreclosed and then sold at public auction to respondent BANK, being the highest bidder. The right of redemption was not exercised and respondent BANK consolidated ownership over said parcels of land in June 1979, and the Registry of Deeds of Negros Occidental issued in its favor TCT No. T-1129989 and TCT No. T-112995. Upon representations made by Lumen Baranda with respondent BANK the latter agreed to resell the foreclosed properties to the former. Meanwhile, Lumen Baranda continued in possession and occupation of the said properties but failed to raise the necessary amount to repurchase the said properties. Accordingly, respondent BANK filed with the then Court of First Instance of Negros Occidental a Petition for the Issuance of a Writ of Possession dated January 11, 1982 (Ibid., pp. 35-39). This case was assigned to Branch V of the said court, presided over by herein respondent judge, and docketed as L.R.C. No. 105-TCT No. T-55533 and TCT No. T-47199. Respondent BANK prayed for the issuance of a writ of possession in its favor in order to eject or oust the mortgagor, her heirs, assigns, or successors-in-interest, and all other adverse occupants, or persons claiming any title thereon, from the premises of the aforesaid properties; to which, Lumen Baranda filed an opposition (Ibid. pp. 76-79). Lumen Baranda, thereafter, now joined by her two (2) sons, herein petitioners, filed a Complaint dated September 23, 1982 (Ibid., pp. 22-23) with the Court of Agrarian Relations, Branch II, *** docketed therein as CAR Case No. 811-135, for violations of P.D. Nos. 316, 383 and 1038 and damages, with a prayer for temporary restraining order and/or injunction and prohibition. Judge Britanico, in an Order dated September 30, 1982, directed the Deputy Sheriff to investigate and find out whether petitioners are actual tillers of the land and to ascertain the length of their occupation or cultivation thereof, including the fishpond. On October 4, 1982, the Deputy Sheriff submitted his report, wherein he stated a) That it is, in fact, the plaintiff Julio Baranda and Roberto Baranda who are actually tilling the land subject of the present litigation by occupying the same since 1972 (when they were instituted therein by their mother Lumen Baranda) up to the present; and b) That such occupancy consists of: cultivating the low and elevated portions of the land covering an area of four (4) hectares, more or less, and planting the same to palay under rainfed condition; raising bangus in a two hectares fishpond; and taking care of the other plants such as coconuts, bamboos and nipas growing at random over the east portion of the land, including the planting of ipil-ipil trees for the purpose of selling firewoods; (p. 60, Rollo) Accordingly, Judge Britanico, in an Order dated October 4, 1982 (Ibid., pp. 20-21), granted the issuance of a restraining order WHEREFORE, in the light of the foregoing, the prayer of the plaintiffs for the issuance of a restraining order is tenable and meritorious. Consequently, the same is granted. The defendant Rural Bank of Hinigaran Inc., its officers and employees, agents, representatives, or persons acting for and in its behalf, are hereby ordered to stop, cease, desist and refrain from disturbing, harassing,

threatening, ousting, removing or ejecting, in any manner, the plaintiffs in the peaceful possession and cultivation of the landholdings in question pending final determination of this case on the merits. After the judiciary reorganization 1983, CAR Case No. 811135 was re-assigned from Judge Britanico of the CAR Court to the Regional Trial Court of Bacolod City, Br. II. *** In an order dated July 7, 1983, the case was referred to the Ministry of Agrarian Reform Region IV for certification that the case is proper for the court to hear in accordance with the provision of Sec. 2 of P.D. No. 316 and Sec. 2 of P.D. No. 1038 (Ibid., pp. 33-34). A certification that the case is proper for trial was issued by the Regional Director of Region IV, Ministry of Agrarian Reform. Meanwhile, on October 14, 1982, petitioners filed with the Court of Appeals a Petition for Certiorari, Mandamus, Prohibition and Injunction. In the same, petitioners claim that they are the tenants and cultivators-owners of the disputed landholding, and as such, they are entitled to security of tenure, and that it is only the Court of Agrarian Relations that has original and exclusive jurisdiction to decide and settle questions involving tenancy relationship. On this premise, they prayed that (1) respondents be ordered to desist from disturbing the petitioners' peaceful possession of the land in question until the Case No. 811-135 of the Court of Agrarian Relations is terminated; (2) to deny the Writ of Possession applied for by respondent bank; (3) order respondents to desist from filing false, malicious and fictitious suits; (4) order respondents to recognize the tenancy of petitioners to the land; and (5) order respondent bank to sell subject property to petitioners at a price within the purview and contemplation of Presidential Decree No. 27. The Court of Appeals, however, in a Decision promulgated on April 29, 1982, holding that respondent judge has jurisdiction over the case, dismissed the petition (Ibid., pp. 82-87). The Barandas filed a Petition and/or Motion to Dismiss or Opposition to Second Motion to Resolve Petition for Issuance of Writ of Possession dated October 28, 1985 at the Regional Trial Court of Negros Occ. Branch XLIV-Bacolod City where the petition for issuance of Writ of Possession was pending and where it was alleged, among others, that respondent judge has lost jurisdiction and/or has no more jurisdiction to issue a writ of possession (Ibid., pp. 40-46). Respondent Judge Baguio of aforementioned court an Order dated September 2, 1985 (Ibid., pp. 47-50), denied the aforestated petition and/or motion as follows: WHEREFORE, the Court finds the manifestation and motion to dismiss not well-taken and the same is hereby denied. Thereafter, the questioned Order of September 16, 1986 was issued (Ibid., pp. 51-53), granting the petition for the issuance of a writ of possession, to wit: In view thereof, the petition for issuance of a writ possession on being well-taken, the same is hereby granted and the Clerk of Court is hereby directed to issue said writ and to place the petitioner in the possession of the two parcels of land, namely, Lot. No. 3032-3-2 covered by Transfer Certificate of Title No. T-55533 of the Municipality of Hinigaran, Neg. Occ., as well as Lot No. 3032-K, covered by Transfer Certificate of Title No. T-47199 of the Hinigaran Cadastre, upon payment of required fees. Meanwhile, in June, 1986, Lumen Baranda died. On October 16, 1986, petitioners filed a Notice of Appeal. In the same, they gave notice that they are appealing the Order of September 2, 1986, copy of which was allegedly received on September 25, 1986. Nevertheless, no appeal was made, but instead, on November 13, 1986, the instant petition was filed. The Second Division of this Court, in a Resolution dated September 16, 1987 (Ibid., p. 119), after the parties had submitted the required pleadings, resolved to give due course to the petition and to require the parties to submit their respective memoranda. Petitioners submitted their Memoranda on November 6, 1987 (Ibid., pp. 129-143); while respondent BANK filed its Memorandum on January 27, 1988 (Ibid., pp. 161-165). The instant petition is devoid of merit. The main issue in this case is whether or not respondent judge acted with abuse of discretion and/or exceeded his jurisdiction in ordering the issuance of a writ of possession. The answer is in the negative. At the outset, it should be stated that for certiorari to lie, there must be a capricious, arbitrary and whimsical exercise of power, the very antithesis of the judicial prerogative in accordance with centuries of both civil and common law traditions (Francisco vs. Mandi, 152 SCRA 711 (1987); and that the grave abuse of discretion must be shown (Palm Avenue Realty Development Corporation vs. Presidential Commission on Good Government, 153 SCRA 579 (1987). In the instant case, considering that: (1) Lumen Baranda executed an affidavit that the parcels of land in question are not tenanted and have no tenancy obligation whatsoever; (2) the ownership to the parcels of land in question were already consolidated in the respondent Bank; (3) the petition for issuance of a writ of possession was filed in January, 1982,

whereas CAR Case No. 811-135 was filed in September, 1982, or eight (8) months later; and (4) it is already a well settled rule that the purchaser in a foreclosure sale of mortgage property is entitled to a writ of possession and that upon an exparte petition of the purchaser, it is ministerial upon the court to issue such writ of possession in favor of the purchaser (Barican vs. Intermediate Appellate Court, 162 SCRA 358), it is evident that respondent judge did not err much less abused his discretion, in holding that the claim of tenancy appears only as an after thought on the part of Lumen Baranda to give reason to oppose the issuance of a writ of possession. Moreover, from the facts of this case, it is crystal clear that no tenancy relation exists between petitioners and respondent BANK, and as such, petitioners are not entitled to security of tenure. The essential requisites of tenancy relationship are: (1) the parties are the landowner and the tenant; (2) the subject is agricultural land; (3) there is consent; (4) the purpose is agricultural production; (5) there is personal cultivation; and (6) there is sharing of harvests. All these requisites must concur in order to create a tenancy relationship between the parties. The absence of one does not make an occupant of a parcel of land, or a cultivator thereof, or planter thereon, ade jure tenant. Unless a person has established his status as a de jure tenant, he is not entitled to security of tenure nor is he covered by the Land Reform Program of the government under existing tenancy law. (Prudential Bank vs. Hon. Filomeno Capultos, et al., G.R. No. L-41835 and G.R. No. L-49293, January 19, 1990; citing the case of Caballes vs. DAR, et al., G.R. No. 78214, Dec. 5, 1988). In the instant case, the relationship between the petitioners and respondent BANK is mortgagor and mortgagee, not landowner and tenant. Granting that petitioners are the actual tillers since 1972, they are tillers as owners and not as tenants. In fact, their mother, Lumen Baranda, executed an affidavit that the said properties are not tenanted and have no tenancy obligation whatsoever. Besides, it will be recalled that petitioner filed a notice on appeal. In the same, they alleged that they received the Order of September 2, 1986 on September 25, 1986. No appeal was filed, and after the reglementary period, petitioners filed the instant petition on November 13, 1986. As ruled by this Court, the extraordinary remedy ofcertiorari cannot be resorted to as a substitute for the lapsed remedy of appeal (Distileria Limtuaco & Co., Inc. vs. IAC, 157 SCRA 706 (1988). PREMISES CONSIDERED, the instant petition is hereby DISMISSED. SO ORDERED.

G.R. No. 86044 July 2, 1990 VICTORINO TORRES, petitioner, vs. LEON VENTURA, respondent. Public Attorney's Office for petitioner. Melosino Respicio for private respondent.

GANCAYCO, J.: This nation has a wealth of laws on agrarian reform. Such laws were enacted not only because of the constitutional mandate regarding the protection to labor and the promotion of social justice but also because of the realization that there is an urgent need to do something in order to improve the lives of the vast number of poor farmers in our land. Yet, despite such laws, it is a fact that the agrarian problems which beset our nation have remained unsolved. Majority of our farmers still live a hand-to-mouth existence. The clamor for change has not died down. One need not go far in order to search for the reason behind this. We all know that our beautifully-worded agrarian laws have never really been effectively implemented. Unscrupulous individuals have found various ways in order to get around the laws. Loopholes in the law and the ignorance of the poor farmers have been taken advantage of by them. Consequently, the farmers who are intended to be protected and uplifted by the said laws find themselves back to where they started or even in a worse position. We must put a stop to this vicious cycle and the time to do it is now. This case serves to remind those who are involved in the execution of agrarian laws that it is the farmer-beneficiary's interest that must be primarily served. This also holds that agrarian laws are to be liberally construed in favor of the farmerbeneficiary. Anyone who wishes to contest the rights of the farmer to land given to him by the government in accordance with our agrarian laws has the burden of proving that the farmer does not deserve the government grant. Posed before Us for resolution in this petition for review on certiorari is the question of to whom ownership and possession of a certain landholding rightfully belongs: to petitioner who was the tiller of the land when Presidential Decree

No. 27 was promulgated, or to private respondent in whose favor petitioner transferred his rights over the land in consideration of P5,000.00. The following facts can be gathered from the records of this case: Petitioner was the leasehold tenant of a 4,000 square-meter parcel of land included in the Florencio Firme Estate and located at Caloocan, Cabatuan, Isabela. In 1972, when Presidential Decree No. 27 was signed into law, petitioner was the tiller of the aforementioned piece of land and was automatically deemed owner of the property. Under Presidential Decree No. 27, any form of transfer of those lands within the coverage of the law is prohibited except as otherwise provided therein. In 1978, urgently in need of money, petitioner was forced to enter into what is called a "selda" agreement, with private respondent, wherein he transferred his rights of possession and enjoyment over the landholding in question to the latter in consideration of a loan in the amount of P5,000.00 to be paid not earlier than 1980. As part of the agreement, petitioner signed an "Affidavit of Waiver" whereby he waived all his rights over the property in favor of private respondent. According to petitioner, it was also agreed upon by them that upon the payment of the loaned amount, private respondent will deliver possession and enjoyment of the property back to petitioner. Two years later or in 1980, petitioner offered to pay the loaned amount but private respondent asked for an extension of one more year to continue cultivating the land and enjoying its fruits. Because of this, the money being offered by petitioner to pay for the loan was utilized for other purposes. In 1981, though petitioner really wanted to get the property back, he could not do so because he lacked the necessary funds. It was only in 1985 when petitioner was able to save enough money to make another offer but this time private respondent categorically denied said offer and refused to vacate the land. Hence, petitioner filed a complaint with the barangay captain of Magsaysay, Cabatuan, Isabela stating therein that he mortgaged his land to private respondent and that he already wanted to redeem it. On the scheduled date of hearing, private respondent failed to appear. Upon the issuance by the barangay captain of a certificate to file action, petitioner filed a complaint with the Regional Trial Court of Cauayan, Isabela for the recovery of possession of the parcel of land in question. After due trial, the said court rendered a decision in favor of petitioner with the following dispositive portion: WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered: (1) DECLARING the affidavit of waiver (Exh. 1) executed by the plaintiff waiving his right as a leasehold tenant to the defendant null and void; (2) ORDERING the defendant, his agents, tenants or any person or persons acting on his behalf to deliver immediately the possession of the land in question to the plaintiff; (3) DECLARING the loan of P5,000.00 received by the plaintiff from the defendant in 1979 including interest thereon considered paid as of December 1, 1983; (4) ORDERING the defendant to pay the plaintiff total damages and in the amount of P5,200.00 up to December 1, 1986; and (5) ORDERING the defendant to pay the plaintiff 6 cavans of palay at 50 kilos per planting season from December 1, 1986, or their equivalent at the NFA price of P3.50 per kilo, until the possession of the land in question is delivered to the plaintiff. 1 On appeal to the Court of Appeals, the decision of the trial court was reversed. Hence, this petition for review on certiorari. 2 Taking into consideration the circumstances surrounding this case and bearing in mind the constitutional mandate on the promotion of agrarian reform, We rule in favor of petitioner. It is not disputed by private respondent that petitioner was in fact the tiller of the subject land when Presidential Decree No. 27 was promulgated in 1972. As a consequence of the law, petitioner was granted the right to possess and enjoy the property for himself. The conflict arose when petitioner, by force of circumstances, transferred possession of his land to private respondent in consideration of a sum certain. As to what was actually the contract that was entered upon is being contested by the two parties herein. Petitioner has insisted from the very beginning that the agreement entered into between him and private respondent was one of mortgage and that private respondent promised to give back to him his landholding upon payment

of the loaned amount. The stand of private respondent, on the other hand, is that petitioner relinquished all his rights over the property in his favor, as expressly written in the Affidavit of Waiver that petitioner signed. In its decision, the trial court ruled in favor of petitioner having found his version more convincing than that of private respondent whose evasive attitude did not go unnoticed therein. The trial court further ruled that the transfer of property from petitioner to private respondent is null and void for being violative of Presidential Decree No. 27. The Court of Appeals, on the other hand, believed that petitioner completely waived his rights over the land as evidenced by the Affidavit of Waiver he executed. According to the Court of Appeals, the said Affidavit of Waiver is valid because at the time of its execution, petitioner was not yet the owner of the land there having been no title issued to him yet. As such, continued the Court of Appeals, the Affidavit of Waiver did not violate Presidential Decree No. 27. The Court of Appeals further added that petitioner abandoned his landholding and received benefits under the agreement, hence, should not be rewarded at the expense of private respondent. After a careful scrutiny of the two conflicting decisions and an exhaustive study of the laws and jurisprudence applicable to this case, We affirm the judgment of the trial court. First, of all, We have given much weight to the finding of the trial court that what was entered upon by the parties herein was a contract of mortgage. It need not be stressed that in the matter of credibility of witnesses, We rely heavily on the findings of the trial court because it had the opportunity to meet them face to face. As the trial court observed, petitioner's version is more convincing because of the apparent evasive attitude of private respondent as compared to the candid testimony of the petitioner. 3 Indeed, We find it hard to believe that petitioner, who has been tilling the land in question for a long, long time would suddenly lose interest in it and decide to leave it for good at a time when he knew that full ownership over the same was soon going to be in his hands. Furthermore, if the situation were otherwise, petitioner would not have made repeated offers to pay for the amount he borrowed from private respondent and demand from the latter the possession of the land. He would not have even thought of bringing an action for the recovery of the same if he honestly believed that he had already given it up in favor of private respondent. Petitioner, or anyone in his right mind for that matter, would not waste his time, effort and money, especially if he is poor, to prosecute an unworthy action. If at all, petitioner is an example of a poor tenant farmer who, due to sheer poverty, was constrained to mortgage his only land 4 to somebody else 5 situation which Presidential Decree No. 27 sought to prevent by providing an explicit prohibition on transfers. The above finding notwithstanding, and assuming that petitioner really waived his tenancy rights in favor of private respondent, this case should still be resolved against private respondent. The transfer would still be void for being made in violation of Presidential Decree No. 27. We shall now take a closer look at the law. Presidential Decree No. 27 was signed into law in view of the fact that the old concept of land ownership by a few has spawned valid and legitimate grievances that gave rise to violent conflict and social tension. 6 The law points out that reformation must start with the emancipation of the tiller from the bondage of the soil. 7 The fundamental policy of the law is reflected in its title, to wit: PRESIDENTIAL DECREE NO. 27 DECREEING THE EMANCIPATION OF TENANT FROM THE BONDAGE OF THE SOIL, TRANSFERRING TO THEM THE OWNERSHIP OF THE LAND THEY TILL AND PROVIDING THE INSTRUMENTS AND MECHANISM THEREFOR. This policy is intended to be given effect by the following provisions: xxx xxx xxx The tenant farmer, whether in land classified as landed estate or not, shall be DEEMED OWNER of a portion constituting a family size farm of five (5) hectares if not irrigated and three (3) hectares if irrigated; (Emphasis supplied). xxx xxx xxx 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; (Emphasis supplied). xxx xxx xxx 8 The law is clear and leaves no room for doubt. Upon the promulgation of Presidential Decree No. 27 on October 21, 1972, petitioner was DEEMED OWNER of the land in question. As of that date, he was declared emancipated from the bondage of the soil. As such, he gained the rights to possess, cultivate, and enjoy the landholding for himself. Those rights over that particular property were granted by the government to him and to no other. To insure his continued possession and enjoyment of the property, he could not, under the law, make any valid form of transfer except to the government or by hereditary succession, to his successors.

Yet, it is a fact that despite the prohibition, many farmer-beneficiaries like petitioner herein were tempted to make use of their land to acquire much needed money. Hence, the then Ministry of Agrarian Reform issued the following Memorandum Circular: Despite the above prohibition, however, there are reports that many farmer-beneficiaries of PD 27 havetransferred the 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 PD 27 and therefore, null and void. 9 (Emphasis supplied.) We do not agree with the Court of Appeals when it ruled that petitioner's land is not included in the legal prohibition since petitioner has not yet acquired absolute title to the land having failed to comply with all the conditions set forth by the law. With regard to the legal prohibition, We hold that title refers not only to that issued upon compliance by the tenant-farmer of the said conditions but also includes those rights and interests that the tenant-farmer immediately acquired upon the promulgation of the law. To rule otherwise would make a tenant farmer falling in the category of those who have not yet been issued a formal title to the land they till easy prey to those who would like to tempt them with cash in exchange for inchoate title over the same. Following this, absolute title over lands covered by Presidential Decree No. 27 would end up in the name of persons who were not the actual tillers when the law was promulgated. Furthermore, the evidence on hand shows that Certificate of Land Transfer No. 096267 covering the land in question is in the name of petitioner Victorino Torres. 10 This is admitted by private respondent. 11 In Gloria de Oliver vs. Sisenando Cruz, et al., 12 the Court of Appeals correctly ruled that: The rights and interests covered by the Certificate of Land Transfer are beyond the commerce of man. They are not negotiable except when it is used by the beneficiary as a collateral for a loan with the rural bank for an agricultural production. Having settled that the contract of transfer entered into between petitioner and private respondent is void ab initio, We now go to the issue of whether or not the principle of pari delicto 13 applies to this case. We rule in the negative. Public policy and the policy of the law must prevail. To hold otherwise will defeat the spirit and intent of Presidential Decree No. 27 and the tillers will never be emancipated from the bondage of the soil. In Catalina de los Santos vs. Roman Catholic Church, 14 this Court ruled that the pari delicto doctrine is not applicable to a homestead which has been illegally sold in violation of the homestead law. One of the reasons given by this Court for the ruling is that the policy of the law is to give land to a family for home and cultivation. In Acierto, et al. vs. De los Santos, et al., 15 where the principle was reiterated, this Court, through Justice Alex Reyes, made the following pronouncement: Appellants, however, contend that the voiding provision of the Act may not be invoked in favor of plaintiffs as their predecessor in interest was in pari delicto, and that, since the same provision says the illegal sale shall have the effect of annulling the grant and cause the reversion of the property and its improvements to the State, plaintiffs may no longer claim the homestead. Similar contentions were made in the case of Catalina de los Santos vs. Roman Catholic Church of Midsayap et al., G.R. No. L-6088, decided February 25, 1954, but they were there overruled, this Court holding that the pari delictodoctrine may not be invoked in a case of this kind since it would run counter to an avowed fundamental policy of the State, that the forfeiture of the homestead is a matter between the State and the grantee or his heirs, and that until the State had taken steps to annul the grant and asserts title to the homestead the purchaser is, as against the vendor or his heirs "no more entitled to keep the land than any intruder. 16 The pronouncements in the two above-mentioned cases were adopted by this Court in Angeles, et al. vs. Court of Appeals, et al., 17 wherein We ruled that the sale of the homestead by the homesteader is null and void and his heirs have the right to recover the homestead illegally disposed of. In view of all the foregoing, We hold that the contract, being void ab initio, must be given no effect at all. The parties in this case are to be placed in status quo which was the condition prevailing prior to the execution of the void contract. WHEREFORE, the Decision of the Court of Appeals in CA-G.R. CV No. 15482 is REVERSED AND SET ASIDE. The Decision of the Regional Trial Court of Cauayan, Isabela in Civil Case No. Br. XIX-167 is hereby ordered REINSTATED. Costs against private respondent. SO ORDERED.

G.R. No. L-48518 November 8, 1989

GREGORIO SANTIAGO, petitioner, vs. HONORABLE COURT OF APPEALS, HONORABLE COURT OF AGRARIAN RELATIONS, DIONESIA GARCIA and PONCIANO PADERES, respondents. Judicial Cases Division for petitioner. Jose R. Cabatuando for private respondents.

PARAS, J.: Before Us is a Petition for certiorari to review the decision 1 of the respondent Court of Appeals promulgated June 6, 1978 in CA-G.R. No. 07885, affirming the decision 2 of the respondent Court of Agrarian Relations dated February 22, 1978 in CAR Case No. 1389 of the Fourth Regional District, Branch III-A, Gapan, Nueva Ecija, which was an action for the increase of agricultural leasehold rentals, the dispositive portion of which reads as follows: FOR ALL THE FOREGOING CONSIDERATIONS, judgment is hereby rendered in favor of plaintiffspouses 3Ponciano PADERES and DIONESIA Garcia and against defendant 4 Gregorio Santiago, in the tenor and disposition hereinbelow provided: 1. Authorizing herein plaintiffs to increase the leasehold rentals over the landholding in question with an approximate area of 2.5. hectares, situated at Lumanas, Tabuating, San Leonardo, Nueva Ecija, for the regular crop from 17 cavans and 29 kilos to 42 cavans of clean dried palay at 46 kilos a cavan effective the current agricultural year; 2. Ordering the parties to change their tenancy system from share to leasehold tenancy on the dayatan crop at a fixed rental of 42 cavans of clean dried palay at 50 kilos per cavan effective the current agricultural year; 3. Ordering the defendant to notify plaintiffs three (3) days before reaping and threshing; and 4. Dismissing plaintiff's claim for moral damages and attorney's fees for insufficiency of evidence. SO ORDERED. (pp. 34-35, Rollo) The undisputed facts are summarized by the appellate court as follows: Plaintiff spouses Ponciano Paderes and Dionesia Garcia (PADERESES, for short), are the owners of a piece of agricultural land planted to rice located at Lumanas, Tabuating, San Leonardo, Nueva Ecija, containing an area of 2.5. hectares, more or less (hereinafter to be referred to simply as the "LANDHOLDING"). Before 1974, the LANDHOLDING received water for irrigation from the Bongabon Irrigation System and could be planted to two cropping seasons a year known as the regular and the dayatan crops. The tenant on the LANDHOLDING is defendant Gregorio Santiago. In a previous CAR Case initiated by SANTIAGO, the rentals for the LANDHOLDING were fixed by the trial court at 17 cavans and 29 kilos at 46 kilos per cavan for the regular crop, and because of the irregularity of irrigation water supply from the Bongabon Irrigation System, the rental for the dayatan crop was temporarily fixed at 25% of the net harvest after deducting the seeds and costs of reaping and threshing. The decision was affirmed by the Court of Appeals on September 24, 1975. When the Pantabangan Dam went into operation sometime in 1974, it complemented the supply of water from the Bongabon Irrigation System so that the harvests of crops from ricelands thus serviced, including the LANDHOLDING. increased. On January 27, 1977, the PADERESES filed the present action for an increase in rentals alleging that, with the operation of the Pantabangan Dam, the sufficient and continuous supply of irrigation water from the Bongabon Irrigation System resulted not only in an increased yield but also insured the harvest of dayatan crop in the LANDHOLDING. In his Answer, SANTIAGO alleged that the PADERESES had no justification for the increase in rentals and claimed that the action was merely to harass him for which he claimed damages. (pp. 35-36, Rollo) After the issues were joined the trial court rendered a decision in favor of the plaintiffs (herein private respondents) thus prompting defendant (herein petitioner) to appeal to respondent appellate court on questions of law and of fact. The appellate court, in affirming the decision of the trial court, found that the findings of fact in the decision of the lower court are supported by the evidence and the conclusions stated therein are not against the law and jurisprudence. Hence the present petition with three issues to be resolved:

I THE RENTALS OF THE LANDHOLDING IN QUESTION HAD BEEN PREVIOUSLY FIXED AT 17 CAVANS AND 29 KILOS IN CAR CASE NO. 563 ON FEBRUARY 28, 1974, CAN THE SAME COURT INCREASE THE RENTALS TO 42 CAVANS IN CAR CASE NO 1389 ON THE SAME LANDHOLDING BASED ONLY ON MISINTERPRETATION OF LAW AND APPLICABLE JURISPRUDENCE ON AGRARIAN LAWS? II WHEN THE RENTALS OF THE LANDHOLDING HAS (SIC) BEEN PREVIOUSLY FIXED, IS IT JUSTIFIED TO INCREASE THE RENTALS BASED ON IMPROVEMENT INTRODUCED WITHOUT INQUIRING INTO THE ACTUAL INCREASE OF HARVEST'? III WHEN AN AGRARIAN CASE IS APPEALED TO THE COURT OF APPEALS, IS IT PROPER FOR THE APPELLATE COURT TO RENDER A DECISION EVEN WITHOUT NOTICE TO THE PARTIES INVOLVED TO REQUIRE THEM TO FILE THEIR RESPECTIVE MEMORANDA? (Page 2, Brief of Petitioner) Simply stated, petitioner alleges that the appellate court committed error and abuse of discretion in affirming the trial court's decision increasing the rentals on the landholding since said affirmance was based only on misappreciation/misrepresentation of the applicable agrarian law and jurisprudence. Petitioner also alleges denial of due process since the respondent Court of Appeals rendered its decision without giving due notice to the parties in order to require them to file their respective memoranda. The applicable law in this case is the last paragraph of Sec. 34 of R.A. 3844 as amended by R.A. 6389, to wit: If capital improvements are introduced on the farm not by the lessee to increase its productivity, the rental shall be increased proportionately to the consequent increase in production due to said improvements. In case of disagreement, the Court shall determine the reasonable increase in rental. The findings of fact both of the agrarian court and the appellate court established that the operation of the Pantabangan Dam in 1974, supplementing irrigation water service from the Bongabon Irrigation System, resulted in increased production of ricelands, including the LANDHOLDING which certainly was introduced not by the lessee, which warrants an increase in rental as provided for by R.A. 3844. From the record, We gather the following: that prior to 1974, this landholding was already an irrigated riceland with the water supplied by the Pampanga-Bongabon River Irrigation System. When defendant started his farm work in the agricultural year (1969-1970), this landholding was only planted to one cropping season known as the regular crop because the water supply from the said irrigation system was inadequate and not continuous. On the basis of the gross harvests for the three (3) agricultural years, namely: 1969 1970 100 cavans 1970 1971 72 cavans 1971 1972 84 cavans Total 256 cavans the Court only fixed the rentals for the regular crop at 17 cavans and 29 kilos at 46 kilos per cavan while the dayatan crop, if any, is temporarily fixed at 25% of the net harvest after deducting the seeds and costs of reaping and threshing. It is, therefore, clear that there were no harvests for the dayatan crop, otherwise, the Court would not have provided for a temporary rental of 25% of the net produce. With the operation of the Pantabangan Dam in 1974, linking it with the Pampanga-Bongabon Irrigation System, the irrigation canals were repaired and widened to insure an abundant and continuous supply of irrigation water (Exhibits "D", "H" and "I"). As a consequence, the tenants in the surrounding areas including defendant started to plant the dayatan crop with the improved methods of farming, Perfecto Domingo and Lamberto Lajum in their affidavits (Exhibits "H", and "I") and on cross-examination declared that their harvest beginning said agricultural year had increased to 100 cavans per hectare. The increase in the harvest was confirmed by the "Certification" of Graciano M. Bartolome, Farm Management Technologist, Bureau of Agricultural Extension, San Leonardo, Nueva Ecija, dated May 9, 1977, that the average production per hectare within the vicinity of Tabuating, San Leonardo, Nueva Ecija was between 80 and 85 cavans (Exhibit "J"). Furthermore, even if we have to consider the "Certification" issued by Emilio M. Gonzales, Team Leader, Region III, Department of Agrarian Reform, Sta. Rosa, Nueva Ecija, dated January 25, 1977, it appears that the average rate of rental per hectare of irrigated areas at San Leonardo, Nueva Ecija is 12 cavans (Exhibit "B"). With all these certifications of the aforesaid government agencies, undoubtedly, the increase in the harvests in both the regular and

dayatan crops could be attributed to no other than the operation of the Pantabangan Dam which certainly is a capital improvement. There can also be no question that said capital improvements have resulted not only in the capability of the farmers in the area to produce two crops a year, but also in the vast increase of their production per hectare. It is to be noted that with defendant's total gross harvest of 256 cavans for the agricultural years 1969-1970, 1970-1971 and 1971-1972, the average harvest over this landholding of 2.5 hectares is 85.33 cavans or 34.15 per hectare. Without considering the claims of plaintiff's two (2) witnesses who harvested 100 cavans per hectare but only the minimum of 80 cavans per hectare as certified to by the Farm Management Technologist, Bureau of Agricultural Extension (Exhibit "J"), the gross produce for the 2.5 hectares would be 200 cavans or an increase of approximately a little less than 2-1/2 times for every hectare. Deducting from the gross produce of 200 cavans, the 2 cavans seeds, 10% of 20 cavans, as reaping expenses and 5% or 10 cavans as threshing expenses or a total of 32 cavans (See p. 17, Decision dated February 28, 1974 in CAR Case No. 563, as aforestated), the net produce is 168 cavans. Computing the equivalent of 25% out of the net harvest of 168 cavans, we have 41 cavans as the legal rental for the 2.5. hectares for both the regular and dayatan crops 46 kilos and 50 kilos for every cavan, respectively. Such findings of facts especially when well substantiated by the evidence on the record are accorded the highest respect. (Vda. de Donato v. CA, 154 SCRA 119) Petitioner argues that the improvements while such were not introduced by him, were nevertheless not also introduced by the lessor or the owner of the landholding but by the government. Such contention merits no consideration. The law is very particular only in mentioning improvements not introduced by the lessee and is silent on improvements introduced by the lessor or anyone not the lessee as long as the improvements will increase the productivity of the landholding. Where the law does not distinguish, We must not distinguish. Moreover, R.A. 3844 and R.A. 6389, being social legislations, are designed to promote economic and social stability and must be interpreted liberally to give full force and effect to their clear intent, not only in favor of the tenant-farmers but also of landowners especially when proof has been established that the operations of the Pantabangan Dam, supplementing irrigation water serviced from Bongabon Irrigation System, resulted in increased production of the ricelands, including the landholding in question which improvement certainly was introduced not by the lessee a condition which warrants the increase in rental as provided for by R.A. 3844. Petitioner also assails the appellate court in rendering a decision without even informing him to file his Memorandum. Again, such contention holds no water. Petitioner in his brief admits that the procedure in the Court of Appeals on cases appealed to it from the Court of Agrarian Reform is provided for in Sec. 18 of P.D. No. 946, quoted as follows: The Court of Appeals shall affirm the decision or order or the portions thereof appealed from if the findings of fact in the said decision or order are supported by substantial evidence as basis thereof, and the conclusions stated therein are not clearly against the law and jurisprudence. The Court of Appeals shall not be precluded from taking into consideration any issue, question or incident, even if not raised, if resolution thereof is necessary for a complete and just disposition of the case. xxx xxx xxx Upon receipt of the records of the case from the Court of Agrarian Relations, the Court of Appeals may, if it deems necessary, require the parties to file simultaneous memoranda within a non-extendible period of fifteen (15) days from notice; the appellate court shall decide the case within thirty (30) days from receipt of said records or memoranda. (Emphasis supplied) The law therefore grants the Court of Appeals the discretion to require, or not to require, the parties to submit simultaneous memoranda, depending on whether it deems such submission to be necessary, or not. In case of non-requirement, neither party can rightfully claim that he has been deprived of his day in court, considering that the filing of a memorandum is not an indispensable part and considering further that no injustice is done, inasmuch as both parties stand on the same footing where no one enjoys any advantage over the other. Furthermore, when respondent Court of Appeals decided this case without requiting the parties to file simultaneous memoranda, it was under the greater compulsion of seeing to it that the lower court's decision was not only supported by substantial evidence, but also that the conclusions stated therein are not clearly against the law and jurisprudence, otherwise it would not have affirmed the same. PREMISES CONSIDERED, the petition is hereby DISMISSED for lack of merit. SO ORDERED.

G.R. No. 79416 September 5, 1989 ROSALINA BONIFACIO, surviving wife; and children GABRIEL, PONCIANO, TIBURCIO, BEATRIZ, GENEROSA, SILVERIA, LEONARDO, FELOMENA, ENCARNACION and LEONILA, all surnamed

BONIFACIO,petitioners, vs. HON. NATIVIDAD G. DIZON, Presiding Judge of the Regional Trial Court of Malolos, Branch XIII, Malolos, Bulacan and PASTORA SAN MIGUEL, respondents.

FERNAN, C.J.: The issue raised in the instant petition for certiorari certified to us by the Court of Appeals in its resolution 1 dated November 28, 1986 in CA-G.R. SP No. 10033 as involving a pure question of law is phrased by petitioners, thus: WHETHER OR NOT, THE FAVORABLE JUDGMENT OBTAINED BY THE DECEDENT IS INHERITED BY THE COMPULSORY HEIRS, THEREBY VESTING TO THE LATTER, ALL THE RIGHTS CONFERRED BY THE JUDGMENT TO (sic) THE DECEDENT. 2 The favorable judgment adverted to by petitioners traces its origin to the complaint filed on July 1, 1968 by Olimpio Bonifacio before the then Court of Agrarian Relations, Fifth Regional District, Branch I-A of Baliwag, Bulacan, seeking the ejectment of private respondent Pastora San Miguel from Bonifacio's two-hectare agricultural land situated at Patubig, Marilao, Bulacan and covered by Transfer Certificate of Title No. T-27298. The ground relied upon therefor was personal cultivation under Section 36 (1) of R.A. 3844, otherwise known as the Agricultural Land Reform Code (CAR Case No. 2160-B'68). After trial on the merits, judgment was rendered therein on September 18, 1970 by Judge Manuel Jn. Serapio: 1. Granting authority to plaintiff OLIMPIO BONIFACIO to eject defendant PASTORA SAN MIGUEL from the landholding in question situated at Patubig, Marilao, Bulacan with an area of two (2) hectares, more or less, and consequently, ordering said defendant to vacate the same landholding and deliver possession thereof to said plaintiff for the latter's personal cultivation, subject to the provisions of Section 25 of R.A. 3844; and 2. Dismissing all other claims and counterclaims of the parties. 3 On appeal by private respondent Pastora San Miguel, the Court of Appeals 4 modified said judgment with respect to her counterclaim by ordering Olimpio Bonifacio to pay her the amount of P 1,376.00. The judgment was affirmed in all other respects. 5 Still dissatisfied, private respondent Pastora San Miguel sought relief from this Court. During the pendency of her petition, on August 7, 1983, Olimpio Bonifacio died. As no notice of such death was given to the Court, no order for the substitution of his heirs was made. On July 31, 1985, the Court En Banc resolved to deny private respondent's petition for lack of merit and to affirm the decision of the Court of Appeals. 6 Subsequently, petitioners Rosalina Bonifacio, as surviving wife, and Gabriel, Ponciano, Tiburcio, Beatriz, Generosa, Silveria, Leonardo, Felomena, Encarnacion and Leonila all surnamed Bonifacio, as children and heirs of Olimpio Bonifacio, moved for the execution of the decision in CAR Case No. 2160-B'68 before the respondent Regional Trial Court of Bulacan. A writ of execution was issued on February 20, 1986 and on March 6, 1986, the Deputy Sheriff submitted his Report (Partial Delivery of Possession), stating in part that except for a portion thereof occupied by the house of Pastora San Miguel which the latter refused to vacate, he had delivered the land subject matter of the action to Rosalina Bonifacio as surviving wife of Olimpio Bonifacio. Thereafter, private respondent Pastora San Miguel moved to quash the writ of execution. This was opposed by petitioners who in turn sought the issuance of a writ of demolition and an order declaring Pastora San Miguel in contempt of court for allegedly re-entering the subject land. After hearing, respondent Judge Natividad G. Dizon issued a resolution on July 15, 1986, the dispositive portion of which reads: WHEREFORE, the implementation of the writ of execution of the Decision dated September 18, 1970 made by the Sheriff of this Court, per directive contained in our Order of February 18, 1986, is hereby declared null and void; the "Motion for Demolition" filed by plaintiff is hereby denied; and, the "Petition for Contempt" likewise denied. SO ORDERED. 7

Petitioners assail this resolution in the petition for certiorari filed before the Court of Appeals, which as stated earlier, was certified to us pursuant to Section 9 (3) of Batas Pambansa Blg. 129 in relation to Section 5 (2) [e], Art. X of the 1973 Constitution and Rule 50, Sec. 3 of the Revised Rules of Court. Petitioners contend that respondent judge committed grave abuse of discretion tantamount to lack of jurisdiction in ruling that the decision in CAR Case No. 2160-B'68 can no longer be executed as said action is purely personal in character and therefore cannot, upon Olimpio Bonifacio's death, be inherited by his heirs. They assert that CAR Case No. 2160-B'68, being an ejectment case and not one of those specifically provided by law to be purely personal, survives the death of a party. Furthermore, as under Rule 39, Section 49 (b) of the Rules of Court, a judgment is binding not only upon the parties but also on their successors-in-interest, petitioners are entitled to enforce the decision in CAR Case No. 2160-B'68. Private respondent, on the other hand, places stress on the fact that the action under consideration is not an ordinary ejectment case but an agrarian case for the ejectment of an agricultural lessee. She theorizes that the right being asserted in the action is personal to Olimpio Bonifacio, which necessarily died with him. She further contends that the non-substitution of Olimpio Bonifacio by his heirs rendered the proceedings taken after his death null and void. She also points to certain supervening events which allegedly prohibit execution of the judgment in CAR Case No. 2160-B'68, to wit: the amendment of Section 36 (1), R.A. 3844 by R.A. No. 6389 and 2) the promulgation of P.D. No. 27. Private respondent is correct in characterizing CAR Case No. 2160-B'68 as more than an ordinary ejectment case. It is, indeed, an agrarian case for the ejectment of an agricultural lessee, which in the light of the public policy involved, is more closely and strictly regulated by the State. This factor, however, does not operate to bar the application to the instant case of the general rule that an ejectment case survives the death of a party. 8 Much of the problem lies in the term "personal cultivation" by which the ground for ejectment under Section 36 (1) of R.A. 3844 was loosely referred. As it is, the term gave the impression that the ejectment of an agricultural lessee was allowed only if and when the landowner-lessor and no other opted to cultivate the landholding; thereby giving use to a bigger misconception that the right of cultivation pertained exclusively to the landowner-lessor, and therefore his personal right alone. A reading of Section 36 (1), R.A. 3844 however readily demonstrates the fallacy of this interpretation. Said section provides: Sec. 36. Possession of Landholding; Exceptions. Notwithstanding any agreement as to the period or future surrender of the land, an agricultural lessee shall continue in the enjoyment and possession of his landholding except when his dispossession has been authorized by the Court in a judgment that is final and executory if after due hearing it is shown that: (1) The agricultural lessor-owner or a member of the immediate family will personally cultivate the landholding or will convert the landholding, if suitably located, into residential, factory, hospital or school site or other useful non-agricultural purposes . . . . Under this provision, ejectment of an agricultural lessee was authorized not only when the landowner-lessor desired to cultivate the landholding, but also when a member of his immediate family so desired. In so providing, the law clearly did not intend to limit the right of cultivation strictly and personally to the landowner but to extend the exercise of such right to the members of his immediate family. Clearly then, the right of cultivation as a ground for ejectment was not a right exclusive and personal to the landowner-lessor. To say otherwise would be to put to naught the right of cultivation likewise conferred upon the landowner's immediate family members. The right of cultivation was extended to the landowner's immediate family members evidently to place the landownerlessor in parity with the agricultural lessee who was (and still is) allowed to cultivate the land with the aid of his farm household. In this regard, it must be observed that an agricultural lessee who cultivates the landholding with the aid of his immediate farm household is within the contemplation of the law engaged in "personal cultivation." Thus, whether used in reference to the agricultural lessor or lessee, the term "personal cultivation" cannot be given a restricted connotation to mean a right personal and exclusive to either lessor or lessee. In either case, the right extends to the members of the lessor's or lessee's immediate family members. Petitioners are not only the heirs and successors-in-interest, but the immediate family members of the deceased landownerlessor as well. The right to cultivate the landholding asserted in CAR Case No. 2160-B'68 not being a purely personal right of the deceased landowner-lessor, the same was transmitted to petitioners as heirs and successors-in-interest. Petitioners are entitled to the enforcement of the judgment in CAR Case No. 2160-B'68. Rules of procedure make it the duty of the attorney to inform the court promptly of his client's death, incapacity or incompetency during the pendency of the action and to give the name and residence of his executor, administrator, guardian or other legal representative. 9 In case of a party's death, the court, if the action survives, shall then order upon proper notice the legal representatives of the deceased to appear and to be substituted for the deceased within a period of 30 days or within such time as may be granted. 10

In the case at bar, Olimpio Bonifacio's death during the pendency of private respondent's petition was not communicated to the Court. As ruled by this Court in the case of Florendo, Jr. vs. Coloma, supra, involving substantially the same facts and issue: . . . The petitioners challenge the proceeding in the Court of Appeals after the death of the plaintiffappellant Adela Salindon. They are of the opinion that since there was no legal representative substituted for Salindon after her death, the appellate court lost its jurisdiction over the case and consequently, the proceedings in the said court are null and void. This argument is without merit. There is no dispute that an ejectment case survives the death of a party. The supervening death of plaintiffappellant Salindon did not extinguish her civil personality (Republic v. Bagtas 6 SCRA 242; Vda. de Haberes v. Court of Appeals, 104 SCRA 534). . . . xxx xxx xxx In the case at bar, Salindon's counsel after her death on December 11, 1976 failed to inform the court of Salindon's death. The appellate court could not be expected to know or take judicial notice of the death of Salindon without the proper manifestation from Salindon's counsel. In such a case and considering that the supervening death of appellant did not extinguish her civil personality, the appellate court was well within its jurisdiction to proceed as it did with the case. There is no showing that the appellate court's proceedings in the case were tainted with irregularities. Private respondent's challenge against the proceedings held after Olimpio Bonifacio's death cannot therefore be heeded. Neither can private respondent derive comfort from the amendment of Section 36 (1) of R.A. 3844 by Section 7 of R.A. No. 6389 11 and the promulgation of P.D. No. 27. 12 In Nilo v. Court of Appeals, G.R. No. L-34586, April 2, 1984,128 SCRA 519, we categorically ruled that both R.A. No. 6389 and P.D. No. 27 cannot be applied retroactively under the general rule that statutes have no retroactive effect unless otherwise provided therein. There being no cogent reason to nullify the implementation of the writ of execution in CAR Case No. 2160-B'68, respondent judge acted with grave abuse of discretion in having done so. The writ prayed for should issue. WHEREFORE, the petition is GRANTED. The assailed resolution dated July 15, 1986 is hereby SET ASIDE. The immediate execution of the decision in CAR Case No. 2160-B'68 is ordered. This decision is immediately executory. No pronouncement as to costs. SO ORDERED.

G.R. No. 72282 July 24, 1989 ANACLETO DE JESUS, petitioner, vs. HON. INTERMEDIATE APPELLATE COURT, SOCORRO CALIMBAS-MIACO, GUILLERMO CALIMBASRODRIGUEZ and TIRSO CALIMBAS, respondents. FERNAN, C.J.: This is a petition for review on certiorari of the resolution of the Court of Appeals promulgated on February 28, 1985 which reconsidered its previous decision dated July 29, 1984 in A.C. G.R. No. 70261-R entitled "Socorro Calimbas-Miaco v. de Jesus" and reversed the decision of the Court of First Instance of Bataan (Branch II) dismissing an action for "Recovery of Possession with Damages" for lack of jurisdiction. The pivotal issue posed by petitioner is whether or not he is an agricultural lessee or a civil law lessee. It is of paramount importance in this case to appreciate the contradistinction between an agricultural lessee whose security of tenure is guaranteed by the Tenancy Law (Sec. 5(b) R.A. 1199) and a civil law lessee whose right to work on the land expires in accordance with the terms of the Lease Agreement. The antecedent facts are as follows: Private respondents are owners of some 7.162 hectares of land in Pilar, Bataan known as Lot No. 513 of Pilar cadastre and covered by TCT No. T-3975. About four (4) hectares of the above lot is a fishpond possession of which has been in petitioner since 1962 as a lessee. On April 22, 1972, private respondents, as heirs of Spouses Eustacio Calimbas and Modesta Paguio who in their lifetime were the registered owners of the land, entered into a civil law contract of lease, with

petitioner de Jesus and one Felicisima Rodriguez. This contract was to be effective for 2-1/2 years starting January 1, 1972 to July 1, 1974. Petitioner de Jesus and Felicisima Rodriguez formed a partnership over the fishpond with de Jesus as the industrial partner and Rodriguez as the capitalist. Upon the expiration of the civil law lease contract on July 1, 1974, Felicisima Rodriguez gave up the lease but petitioner de Jesus refused to vacate the leased premises despite repeated demands. On December 5, 1975, private respondents filed a complaint for "Recovery of Possession with Damages" against the petitioner before the Court of First Instance, now Regional Trial Court of Bataan Branch II, docketed as Civil Case No. 4016, On July 20, 1979, the Court of First Instance of Bataan ruled in favor of petitioner and dismissed the complaint for lack of jurisdiction. The dispositive portion of the decision reads: WHEREFORE, premises above considered, this case is hereby dismissed for lack of jurisdiction without prejudice to the filing of the same with the proper court with respect to the other incident which is for adjustment and fixing of the rentals. 1 According to the lower court, the fishpond is an agricultural land as held in the case of Tawatao & del Rosario v. Garcia, et al., G.R. No. L-17649, July 31, 1963 . 2 It further held that petitioner is an agricultural lessee and not a civil law lessee, therefore jurisdiction over the dispute belongs to the Court of Agrarian Relations and not to the Court of First Instance. The bases for holding that petitioner de Jesus is an agricultural lessee are the following: [1] the land is agricultural; [2] Felicisima Rodriguez testified that she left the lease after the expiration in 1974 and it was petitioner who managed the fishpond alone, thereby qualifying as an agricultural lessee; and [3] the CFI Judge, motu propio, visited the fishpond and saw no one but the petitioner working on the fishpond, thereby further strengthening the contention that the land is subject to a one man cultivation. Private respondents filed a Motion for Reconsideration but it was denied. They appealed to the Intermediate Appellate Court, now Court of Appeals, and on June 29, 1984, the latter rendered a decision affirming the Court of First Instance of Bataan; to wit: WHEREFORE, the Order dated July 20, 1979 dismissing the case for lack of jurisdiction of the lower court, is hereby AFFIRMED. 3 On Motion for Reconsideration the Intermediate Appellate Court, after a thorough review and assessment of the records for any oversight, realized its error which was to some extent influenced by the lower court's findings as above discussed and reversed itself in the resolution of February 23, 1985, holding that petitioner is not an agricultural lessee but a civil law lessee and further ordered the latter to vacate the land. On the basis of stronger evidence, where petitioner himself admitted that he hired the services of many people other than the members of his family to cultivate the land, respondent appellate Court ruled that petitioner failed to qualify as an agricultural lessee under the doctrine laid down in Gabriel v. Pangilinan, 58 SCRA 590 (1974) and as defined in Paragraph 2, Section 166, Chapter XI of the Agricultural Land Reform Code . 4 Moreover, he admitted that he cultivated an adjacent fishpond of 11-1/2 hectares by employing other laborers, whereby he was more correctly categorized as a business enterpreneur engaged in the fishpond industry. Hence, the Court of Appeals ruled as follows: WHEREFORE, finding the Motion for Reconsideration meritorious, the decision sought to be reconsidered is hereby REVERSED and set aside, except the statement of facts thereof which is hereby incorporated by reference, and a judgment is hereby entered: 1. Declaring the Lease Contract (annex B) between the parties as having been lawfully terminated as of July 1, 1974; 2. Ordering the defendant-appellee and/or any person acting under him, to immediately vacate the land in question including the fishpond, and restore and deliver the possession thereof to the plaintiffs-appellants in good condition as before; 3. Ordering the defendant-appellee to pay to the plaintiffs-appellants reasonable rentals over the premises at the rate of P 4,000.00 per annum from July 1, 1974 until said appellee shall have completely restored possession thereof to the plaintiffs-appellants; and 4. Ordering the defendant-appellee to pay plaintiffs-appellants attorney's fees of P 5,000.00 and litigation expenses of P 5,000.00, plus costs. SO ORDERED. 5 On September 25, 1985, petitioner filed a Motion for Reconsideration which was denied. Hence this Petition for Review on certiorari assailing the Resolution of the Intermediate Appellate Court as not supported by evidence, inconclusive and contrary or violative of applicable laws, Rules of Court, B.P. 129 and established jurisprudence.

We rule against petitioner. The Agricultural Land Reform Code was enacted by Congress to institute land reforms in the Philippines. It was passed to establish owner-cultivatorship and the family size farm as the basis of Philippine agriculture; to achieve a dignified existence for the small farmers free from pernicious industrial restraints and practices; to make the small farmers more independent, self-reliant and responsible citizens and a source of a genuine strength in our democratic society. 6 In other words, the Agricultural Land Reform Code was enacted to help the small farmers and to uplift their economic status by providing them a modest standard of living sufficient to meet a farm family's needs for food, clothing, shelter, education and other basic necessities. The law further protects the small farmer by conferring upon him security of tenure over the landholding he is working on. The leasehold relation cannot be extinguished by the mere expiration of the term or period in a leasehold contract or by the sale, alienation or transfer of the legal possession of the landholding. He can only be ejected by the Court for cause. 7 But with this benevolence is his obligation to work on the land by himself or with the aid of his immediate farm household. By "immediate farm household", the law means the members of the family of the lessee or lessor and other persons who are dependent upon him for support and who usually help him in his activities. 8 Petitioner de Jesus contends that he is an agricultural lessee because a fishpond is an agricultural land as held in the case of Tawatao v. Garcia, supra. While this is true, the mere fact that the land is agricultural does not ipso facto make him an agricultural lessee. The law provides conditions or requisites before he can qualify as one and the land being agricultural is only one of them. Among others, the law is explicit in requiring the tenant and his immediate family to work the land. 9 Thus, petitioner also contends that he is the sole cultivator of the fishpond as supported by the testimony of his former partner, Felicisima Rodriguez and as found by the trial judge. But on review by the Court of Appeals these allegations gave way to a much stronger evidence-the judicial admissions of petitioner himself, that he hired many persons to help him cultivate the fishpond. The pertinent portion of his testimony reads: Q When you first took possession of the property, how large was this fishpond in question? A There is only one and a half hectares that could be used sir and this area is the only one that has water. Q But according to the complainant, the area is now four hectares, can you explain why it has grown to four hectares? A I had it constructed, this is ricefield and grassland before. Q Do you mean to tell us that you spent effort and money in improving this fishpond to four hectares? Atty. Origuera: Leading Court: Sustained Q You said you improved the fishpond from one and one-half hectares to four hectares, is that correct? A Yes, sir. Q Did you do this by yourself A With my sons and my father-in-law. Q You did not employ any other person except your immediate relatives? A I did sir, I hired many. 10 A disclosure made before the court is a judicial admission and under the rules this cannot be contradicted unless previously shown to have been made by palpable mistake. 11 In the case at bar, there is nothing in the records to show that petitioner committed a palpable mistake in making the above disclosures. Hence, absent the requisite of personal cultivation, petitioner de Jesus cannot be considered an agricultural lessee. In the case of Evangelista v. Court of Appeals, 12 this Court held that one cannot be said to be an agricultural lessee if he has not personally or by his farm household cultivated the land in question. Moreover, it is an undisputed fact that petitioner is cultivating an adjacent fishpond with a size of 11-1/2 hectares which further proves that he is not a small farmer but a businessman. He testified thus: Q: Do you have any other source of income between 1963 and 1969? A: There is sir. Q: What? A: Fishpond also. Q: Up to the present? A: Yes, sir. Q: What is the area of the fishpond in question which are you operating at present excluding this one? A: Eleven hectares and a half. Q: Who owns this eleven and a half hectares? A: Maximo Reyes, sir. Q: Where is this located? A: Adjacent, sir. Q: Do you employ help in operating this eleven and a half hectares? A: Yes sir.

Q: How many? A: Sometimes plenty, sometimes few. Q: You employ help because you cannot work in that eleven and a half hectares yourself? A: No, sir. 13 Petitioner asserts that the cultivation of another fishpond is irrelevant as the law does not require or prohibit the total absence of other sources of income. In ruling on this matter, it is of much significance to look into the spirit of the Agricultural Land Reform Code. First and foremost, the law is meant to assist and help the small farmers as enunciated in its Declaration of Policy. In the case at bar, petitioner de Jesus is not a small farmer but a businessman. To consider him an agricultural lessee despite the fact that he is cultivating another fishpond with an area of 11-1/2 hectares, and furthermore despite the fact that he does not cultivate the fishpond personally and/ or with the help of his immediate farm household as defined by law, would render nugatory the letter and intent of the Agricultural Reform Code. Petitioner further contends that the civil law lease contract he signed in 1972 is unenforceable because his consent was vitiated. We have to disagree. Under the law on contracts, 14 vitiated consent does not make a contract unenforceable but merely voidable. If indeed petitioner's consent was vitiated, his remedy would have been to annul the contract for voidable contracts produce legal effects until they are annulled. The jurisdiction of the Court of First Instance has also been put in issue on the assumption that if petitioner is an agricultural lessee, then the case should have been filed in the Court of Agrarian Relations. We hold that this issue has now become moot and academic in view of the passage of B.P. 129. Section 19 of said law provides that the Court of First Instance, now Regional Trial Court, shall have jurisdiction over cases cognizable by the Court of Agrarian Relations. WHEREFORE, in view of the foregoing, the questioned Resolution of the Intermediate Appellate Court, now Court of Appeals, is hereby affirmed. SO ORDERED. Gutierrez, Jr., Feliciano, Bidin and Cortes, JJ., concur.

G.R. No. 36213 June 29, 1989 FELIX GONZALES & CARMEN GONZALES, petitioners, vs. HON. COURT OF APPEALS, DECEASED SPOUSES ANDRES AGCAOILE & LEONORA AGCAOILE, substituted by LUCIA A. SISON, respondents. Tomas A. Leonardo for private respondent. GRINO-AQUINO, J.: The issue in this case is whether an agricultural tenancy relationship can be created over land embraced in an approved residential subdivision. The petitioners leased a lot in the subdivision on which they built their house, and, by tolerance of the subdivision owner, they cultivated some vacant adjoining lots. The Court of Agrarian Relations, as well as the Court of Appeals, ruled that "the plaintiffs are not de jure agricultural tenants." (p. 66, Rollo.) That ruling is assailed in this appeal by certiorari. On October 26, 1988, Lucia A. Sison filed a motion to be substituted in lieu of the private respondents Andres Agcaoile (who died on May 20, 1976) and Leonora Agcaoile (who died on March 22, 1979) as she inherited, and is now the registered owner of, nine (9) unsold lots in the subdivision covered by TCT Nos. 20397 and 20398 of the Agcaoile spouses, now registered in her name under TCT Nos. T-98.096 up to T-98.104 (pp. 117-130, Rollo). On February 22, 1989, this Court granted her motion. The facts of this case are not disputed and are recited in the appealed decision dated December 6, 1972 of the Court of Appeals in CA-G.R. No. 00253-R, as follows: Defendants spouses are the owners of two parcels of land registered in their names under T.C.T. Nos. 20397 and 20398, with an area of 43,383 square meters, located in Barrio Bagbaguin, Sta. Maria, Bulacan. At the time defendants purchased the land in 1937, Maximo Cruz was the tenant who was planting palay thereon. Maximo continued as tenant until he was succeeded upon his death by his son, Fidel Cruz. After tenanting the land for four years, Fidel was succeeded by Pascual Gonzales, father of plaintiff Felix Gonzales. In 1954, Pascual ceased to be a tenant because the land was proposed to be converted into a residential subdivision. The following year, or on May 3, 1955, the land became an approved subdivision. It was subdivided into twenty-six (26) residential lots.

Sometime in 1956, the plaintiffs spouses offered to pay a rental for Lot No. 1285-M of the subdivision on which they were to build a house. Defendant Leonora Agcaoile agreed to a rental of P 20.00 a month. Plaintiffs also offered to act as agents for the subdivision. Leonora agreed. Plaintiffs were able to sell a lot to one Clements Bernabe, and they received the corresponding commission of P 300.00. A number of other lots were sold by defendants to different buyers. While plaintiffs were renting a portion of the subdivision, they requested to be allowed to plant palay on the lots that have not yet been sold. Leonora acquiesced because she pitied the plaintiff who have many children. No specific agreement was concluded with regard to the sharing of harvests, but plaintiffs delivered part of the yield to Federico Mateo, defendants' overseer. When plaintiffs defaulted renting Lot 1285-M, defendants sent the letter dated September 12, 1968 asking them to pay the accrued rentals or to vacate the premises (Exh. 1). Plaintiffs countered with an action to elect the leasedhold system of tenancy, docketed as CAR Case No. 2169 Bulacan '68. Said case was dismissed on August 7, 1969. On November 18, 1969, plaintiff filed the present action seeking to elect the leasehold system and praying for a reliquidation of past harvests embracing the agricultural years 1961-1962 to 1967-1968, inclusive. Before summons could be served on defendants, they initiated an action against the plaintiffs for recovery of possession, in the Court of First Instance of Bulacan, where said action was docketed as Civil Case No. SM-329. Then defendants answered the complaint in the present case, alleging that the property subject of the action is residential land. On October 29, 1970, the Bulacan CFI rendered a decision in Civil Case SM329 favorably to the plaintiffs therein. On May 14, 1971, the judgment subject of the present appeal was rendered. (pp. 15-16, Rollo). Upon the evidence, the Court of Appeals upheld the decision of the Agrarian Court. It ruled: ... Upon the evidence, it appears that in 1955 the property subject of the action ceased to be agricultural or farmland, it having been converted as of that year into a homesite or residential subdivision. When plaintiffs, therefore, gained possession of a portion of the land in 1956, upon acquiescence of defendants, they were not installed as agricultural tenants on a piece of agricultural land. Agricultural tenancy cannot be created on a homesite or residential subdivision. Republic Act No. 1199, invoked by the appellants, does not apply to such property. And neither are the rights to elect leasehold and to reliquidate the harvests assertible in respect to a residential subdivision or homesite. (p. 16, Rollo). After deliberating on the petition and arguments in the briefs of the parties, We resolved to deny the petition for review. There is no merit in the petitioners' argument that inasmuch as residential and commercial lots may be considered "agricultural" (Krivenko vs. Register of Deeds, 79 Phil. 461) an agricultural tenancy can be established on land in a residential subdivision. The Krivenko decision interpreting the constitutional prohibition against transferring private agricultural land to individuals, corporations, or associations not qualified to acquire or hold lands of the public domain, save in the case of hereditary succession (Art. XIII Sec. 5, 1935 Constitution; later Art. XIV, Sec. 14, 1973 Constitution; Art. XII, Sec. 7, 1987 Constitution) has nothing to do with agricultural tenancy. An agricultural leasehold cannot be established on land which has ceased to be devoted to cultivation or farming because of its conversion into a residential subdivision. Petitioners may not invoke Section 36(l) of Republic Act No. 3844 which provides that "when the lessor-owner fails to substantially carry out the conversion of his agricultural land into a subdivision within one year after the dispossession of the lessee, the lessee shall be entitled to reinstatement and damages," for the petitioners were not agricultural lessees or tenants of the land before its conversion into a residential subdivision in 1955. Not having been dispossessed by the conversion of the land into a residential subdivision, they may not claim a right to reinstatement. Furthermore, their admission that: (1) they leased from the respondents a lot (No. 1285-M) in the subdivision on which they built their house; (2) that as commission agents for the respondents, they were able to sell a subdivision lot to Clemente Bernabe, and received a P 300-commission on the sale; and (3) that "a number of other lots were sold by respondents to different buyers," (p. 51, Rollo) refutes the petitioners' contention that the development of the subdivision was a mere "scheme" to dispossess the previous tenant. On the other hand, the petitioners' tactic of entering the subdivision as lessee of a homelot and thereafter cultivating some unsold lots ostensibly for temporary use as a home garden, but covertly for the purpose of later claiming the land as "tenanted" farm lots, recalls the fable of the camel that sought shelter inside its master's tent during a storm, and once inside, kicked its master out of the tent. Here, the private respondents' tolerance of the petitioners' supposedly temporary use of some vacant lots in the subdivision was seized by the latter as a weapon to deprive the respondents of their land. WHEREFORE, finding no reversible error in the decision of the Court of Appeals, We deny the petition for review for lack of merit. SO ORDERED.

G.R. No. 78517 February 27, 1989 GABINO ALITA, JESUS JULIAN, JR., JESUS JULIAN, SR., PEDRO RICALDE, VICENTE RICALDE and ROLANDO SALAMAR, petitioners, vs. THE HONORABLE COURT OF APPEALS, ENRIQUE M. REYES, PAZ M. REYES and FE M. REYES,respondents. Bureau of Agrarian Legal Assistance for petitioners. Leonardo N. Zulueta for Enrique Reyes, et al. Adolfo S. Azcuna for private respondents.

PARAS, J.: Before us is a petition seeking the reversal of the decision rendered by the respondent Court of Appeals**on March 3, 1987 affirming the judgment of the court a quo dated April 29, 1986, the dispositive portion of the trial court's decision reading as follows; WHEREFORE, the decision rendered by this Court on November 5, 1982 is hereby reconsidered and a new judgment is hereby rendered: 1. Declaring that Presidential Decree No. 27 is inapplicable to lands obtained thru the homestead law, 2. Declaring that the four registered co-owners will cultivate and operate the farmholding themselves as owners thereof; and 3. Ejecting from the land the so-called tenants, namely; Gabino Alita, Jesus Julian, Sr., Jesus Julian, Jr., Pedro Ricalde, Vicente Ricalde and Rolando Salamar, as the owners would want to cultivate the farmholding themselves. No pronouncement as to costs. SO ORDERED. (p. 31, Rollo) The facts are undisputed. The subject matter of the case consists of two (2) parcels of land, acquired by private respondents' predecessors-in-interest through homestead patent under the provisions of Commonwealth Act No. 141. Said lands are situated at Guilinan, Tungawan, Zamboanga del Sur. Private respondents herein are desirous of personally cultivating these lands, but petitioners refuse to vacate, relying on the provisions of P.D. 27 and P.D. 316 and appurtenant regulations issued by the then Ministry of Agrarian Reform (DAR for short), now Department of Agrarian Reform (MAR for short). On June 18, 1981, private respondents (then plaintiffs), instituted a complaint against Hon. Conrado Estrella as then Minister of Agrarian Reform, P.D. Macarambon as Regional Director of MAR Region IX, and herein petitioners (then defendants) for the declaration of P.D. 27 and all other Decrees, Letters of Instructions and General Orders issued in connection therewith as inapplicable to homestead lands. Defendants filed their answer with special and affirmative defenses of July 8, 1981. Subsequently, on July 19, 1982, plaintiffs filed an urgent motion to enjoin the defendants from declaring the lands in litigation under Operation Land Transfer and from being issued land transfer certificates to which the defendants filed their opposition dated August 4, 1982. On November 5, 1982, the then Court of Agrarian Relations 16th Regional District, Branch IV, Pagadian City (now Regional Trial Court, 9th Judicial Region, Branch XVIII) rendered its decision dismissing the said complaint and the motion to enjoin the defendants was denied. On January 4, 1983, plaintiffs moved to reconsider the Order of dismissal, to which defendants filed their opposition on January 10, 1983. Thus, on April 29, 1986, the Regional Trial Court issued the aforequoted decision prompting defendants to move for a reconsideration but the same was denied in its Order dated June 6, 1986.

On appeal to the respondent Court of Appeals, the same was sustained in its judgment rendered on March 3, 1987, thus: WHEREFORE, finding no reversible error thereof, the decision appealed from is hereby AFFIRMED. SO ORDERED. (p. 34, Rollo) Hence, the present petition for review on certiorari. The pivotal issue is whether or not lands obtained through homestead patent are covered by the Agrarian Reform under P.D. 27. The question certainly calls for a negative answer. We agree with the petitioners in saying that P.D. 27 decreeing the emancipation of tenants from the bondage of the soil and transferring to them ownership of the land they till is a sweeping social legislation, a remedial measure promulgated pursuant to the social justice precepts of the Constitution. However, such contention cannot be invoked to defeat the very purpose of the enactment of the Public Land Act or Commonwealth Act No. 141. Thus, The Homestead Act has been enacted for the welfare and protection of the poor. The law gives a needy citizen a piece of land where he may build a modest house for himself and family and plant what is necessary for subsistence and for the satisfaction of life's other needs. The right of the citizens to their homes and to the things necessary for their subsistence is as vital as the right to life itself. They have a right to live with a certain degree of comfort as become human beings, and the State which looks after the welfare of the people's happiness is under a duty to safeguard the satisfaction of this vital right. (Patricio v. Bayog, 112 SCRA 45) In this regard, the Philippine Constitution likewise respects the superiority of the homesteaders' rights over the rights of the tenants guaranteed by the Agrarian Reform statute. In point is Section 6 of Article XIII of the 1987 Philippine Constitution which provides: Section 6. The State shall apply the principles of agrarian reform or stewardship, whenever applicable in accordance with law, in the disposition or utilization of other natural resources, including lands of public domain under lease or concession suitable to agriculture, subject to prior rights, homestead rights of small settlers, and the rights of indigenous communities to their ancestral lands. Additionally, it is worthy of note that the newly promulgated Comprehensive Agrarian Reform Law of 1988 or Republic Act No. 6657 likewise contains a proviso supporting the inapplicability of P.D. 27 to lands covered by homestead patents like those of the property in question, reading, Section 6. Retention Limits. ... ... Provided further, That original homestead grantees or their direct compulsory heirs who still own the original homestead at the time of the approval of this Act shall retain the same areas as long as they continue to cultivate said homestead.' WHEREFORE, premises considered, the decision of the respondent Court of Appeals sustaining the decision of the Regional Trial Court is hereby AFFIRMED. SO ORDERED.

G.R. No. L-34613 January 26, 1989 ANTONIO J. CASTRO, petitioner, vs. THE COURT OF APPEALS and GAVINO DE LA CRUZ, respondents. Puno Law Office for petitioner. GUTIERREZ, JR., J.: The petitioner presents for review the decision of the Court of Appeals which reversed the findings made by the Court of Agrarian Relations, Fifth Regional District, Branch I of Malolos, Bulacan that there is no tenancy relationship between the petitioner and the private respondent with respect to the disputed piece of agricultural landholding. The dispositive portion of the appellate court's decision reads:

WHEREFORE, the appealed judgment is hereby reversed and a new one entered ordering the defendantappellee to maintain the plaintiff-appellant in peaceful possession of the landholding in controversy which consists of a perimeter of 50 meters by 100 meters of the northern portion of the former's sugar crusher area in Banga, Plaridel, Bulacan where the ten mango trees in question are existing; to pay to the appellant the sum of Thirty Pesos (P30.00) per year from 1964 as the value of the appellant's share in the fruits of the ten mango trees tenanted by the appellant until the possession of said trees is delivered to the latter; to pay the appellant the sum of P500.00 as attorney's fees; and to pay the costs of this court suit. (Rollo, pp. 67-68) The subject matter of this case is a piece of landholding with a perimeter of roughly 50 meters by 100 meters situated at the northern portion of the petitioner's land devoted to sugar crusher operations in Banga Plaridel, Bulacan with a total area of 7,114 square meters, more or less. On November 10, 1967, the private respondent initiated an action for accounting and damages against the petitioner with the Court of Agrarian Relations, Fifth Regional District in Malolos, Bulacan. The case was docketed as CAR Case No. 1963. The complaint alleged, among others, that the private respondent is the present lessee of the petitioner over a certain parcel of riceland formerly owned by the late Gregorio Santos in Banga, Plaridel, Bulacan with a total area of about 5 hectares; that as rentals, the petitioner is paid 45 cavans of palay for the regular crop and 28 cavans of palay for the "binato" or "palagad" crop; that since 1935, the private respondent has been the tenant of the petitioner's agricultural landholding situated in the northern side of the latter's sugar crusher area planted with mango trees; that on April 25, 1964, the petitioner and the private respondents entered into a tenancy contract captioned "Kasunduan ng Pamumuwisan ng Lupang Sakahan" containing a stipulation under paragraph 9 thereof that the fruit trees planted by the former on the subject landholding shall be divided on a 50-50 basis is smudged by the former and if harvested on season, 30% shall go to the farmer; that sometime in June 1967, the petitioner caused the harvesting of the mango fruits from the northern side of his sugar crusher area gathering eight baskets of mangoes without the private respondent's consent and demanding from the latter an accounting of the said fruits; that on November 6, 1967, the petitioner, aided by his household helpers cut down and destroyed 155 banana plants, 24 of which had green fruits to the private respondent's damage at an estimated amount of P215.00 for the payment of which he made a demand from the petitioner; that on November 7, 1967, the petitioner sent a tractor to plow the remnants of the aforestated banana plants but the tractor's operator failed to proceed with the plowing upon the request of the private respondent's children; and that the petitioner admitted before the investigator in the Office of the Agrarian Counsel in Malolos, Bulacan that he was responsible for the destruction of the banana plants and the plowing of the area with his tractor. In his answer with court-claim, the petitioner, by way of special and affirmative defenses, averred, among others, that the leasehold relationship between him and the private respondent is limited to the five hectare landholding at Barrio Banga, Plaridel, Bulacan which is described in their tenancy agreement embodied in a document known as "Kasunduan ng Pamumuwisan ng Lupang Sakahan" entered into on April 25, 1964; that his sugar crusher area is a piece of land which is entirely separate and distinct from the five-hectare land which is the object of his leasehold relationship with the private respondent; and that the private respondent has never been a tenant in any portion of the petitioner's sugar crusher area. On November 13, 1968, the contending parties submitted to the agrarian court their partial stipulation of facts, as follows: PARTIAL STIPULATION OF FACT'S PARTIES, through their undersigned counsels, respectfully state: 1. That plaintiff is of legal age, married, and a resident of Banga, Plaridel, Bulacan. 2. That defendant is also of legal age, single, and a resident of Poblacion, Plaridel, Bulacan. 3. That plaintiff is the agricultural lessee of defendant over one of his landholdings located at Banga, Plaridel, Bulacan with an area of five (5) hectares, the palay rental thereon being fixed at 45 cavans of palay for the regular crop harvest and 28 cavans of palay for the binato crop harvest. Their tenancy relationship in governed by a document denominated as "Kasunduan ng Pamumuwisan ng Lupang Sakahan", a true copy of which is attached hereto as Annex "A" and made as an integral part hereof. 4. That parties herein were also the parties in CAR Case No. 1086 (Bulacan, 1964), but herein plaintiff and defendant were the defendant and plaintiff, respectively in the said case. The sugar crusher are which is the subject matter of the instant litigation was touched upon in CAR Case No. 1086 with its identity, description, and boundaries being marked out in a diagram which was submitted as Exhibit "A" for Antonio Castro in connection with his Urgent Motion to Cite Gavino de la Cruz for Contempt, dated August 31, 1965. The said exhibit is being hereto adopted and marked as Annex "B" and made as an integral part hereof. WHEREFORE, IT IS MOST RESPECTFULLY PRAYED that the foregoing Partial Stipulation of Facts be approved and that the parties be allowed to adduce additional evidence on controverted matters.

Manila for Malolos, Bulacan, November 13, 1968.' Rollo, pp. 50-51) On December 14, 1970, after trial on the merits, the agrarian court dismissed CAR Case No. 1963. It ruled that the private respondent is not a tenant of the petitioner on the portion of landholding in question and has no right to share in the mango trees planted thereon and to ask for damages for the petitioner's act of cutting the banana plants thereon. On appeal, the respondent court on January 5, 1972, reversed the agrarian court's judgment and ruled that: (1) the positive allegation of the private respondent that he is a tenant over the portion of landholding in question prevails over a mere general and sweeping denial made by the petitioner that the private respondent was never his tenant over the subject portion; (2) the private respondent has been in physical possession of the portion in dispute as tenant since 1934 when its owner was yet a certain Gregorio Santos so that in 1938 when the petitioner became the owner of the sugar crusher land, the tenancy status of the private respondent over the said land was retained pursuant to Sections 7 and 9 of the Agricultural Tenancy Act; and (3) the private respondent has not been judicially ejected nor his tenancy status extinguished by voluntary surrender or abandonment as provided under Sec. 6 of the said Act. In assailing the appellate court's decision, the petitioner presents the following arguments to bolster his case, to wit: I Inspite of established jurisprudence, the respondent Court gravely abused its discretion in reversing the findings of fact of the Court of Agrarian Relations which are supported by substantial evidence. II The respondent Court gravely abused its discretion in not ruling that the leasehold contract between the petitioner and the private respondent, dated April 25, 1965, excluded the sugar crusher area from their tenancy relationship. III Even assuming the findings of fact of respondent court, the inescapable conclusion is still lack of tenancy relationship between the petitioner and respondent dela Cruz. IV The respondent court gravely abused its discretion in ordering petitioner to pay to private respondent dela Cruz P30.00 per year from 1964 until possession of the mango trees is restored the the former. V The respondent court gravely abused its discretion in awarding P 500.00 as attorney's fees in favor of respondent de la Cruz. (Rollo, pp. 11, 17, 19, 22 and 24) The main issue in this petition is whether or not the private respondent is a bona fide tenant of the particular piece of landholding disputed in this case. The agrarian (court found that on tenancy relationship existed between the petitioner and the private respondent with respect to the specific area. On the other hand, the appellate court found otherwise. It declared the private respondent a tenant over the petitioner's sugar crusher land. In view of the disparity in the rulings of the courts below, we have to determine whether or not the respondent court committed grave abuse of discretion amounting to lack of jurisdiction when it disturbed the findings of facts of the Court of Agrarian Relations. In the case of Bagsican v. Court of Appeals (141 SCRA 226, 229-23, January 30, 1986), we held in no uncertain terms that: . . . , in agrarian cases, all that is required is mere substantial evidence'. That has been the consistent ruling of this Court in a long line of cases (Ulpiendo v. CAR, L-13891, Oct. 31, 1960; Villaviza v. Panganiban, 10 SCRA 824; Gagola v. CAR, 18 SCRA 992; Beltran v. Cruz, 25 SCRA 607). This substantial evidence rule was later incorporated in P.D. 946 which took effect on June 17, 1976 and has been expressly made applicable to agrarian cases. Section 18 of the said decree provides: The Court of Appeals shall affirm the decision or order or the portions thereof appealed from if the finding of fact in the said decision or order are supported by substantial evidence as basis thereof, and the conclusions therein are not clearly against the law and jurisprudence. . . Under this rule, all that the appellate court has to do, insofar as the evidence is concerned, is to find out if the decision is supported by substantial evidence (Picardal v. Lladas, 21 SCRA 1483, 1488). So much so that the findings of fact of the Court of Agrarian Relations, if supported by substantial evidence, are conclusive on the appellate tribunal. (De Chavez v. Zobel, et al., 55 SCRA 32 [1974])

Substantial evidence does not necessarily import preponderant evidence, as is required in an ordinary civil case. It has been defined to be such relevant evidence as a reasonable mind might accept as adequate to support a conclusion and its absence is not shown by stressing that there is contrary evidence on record, direct or circumstantial, for the appellate court cannot substitute its own judgment or criteria for that of the trial court in determining wherein lies the weight of evidence or what evidence is entitled to belief. (Picardal v. Lladas, supra). In the instant case, we find that the respondent court made erroneous inferences from the facts which were proved. Firstly, it ruled that the private respondent has been a tenant of the disputed area since 1938 when the records do not clearly establish that there was a tenancy relationship between the private respondent and the late Gregorio Santos, the former owner over the particular portion of the landholding dedicated to the crushing of sugar cane. The sugar crusher area must be distinguished from the five-hectare riceland. Under the then applicable law which was section 6 of the Agricultural Tenancy Act, it was provided that: Sec. 6. Tenancy Relationship; Its Definition Tenancy relationship is a juridical tie which arises between a landholder and a tenant once they agree, expressly or impliedly, to undertake jointly the cultivation of land belonging to the former, either under the share tenancy or leasehold tenancy system, as a result of which relationship the tenant acquires the right to continue working on the cultivating the land until and unless he is dispossessed of his holdings for any of the just causes enumerated in section 50 or the relationship is terminated in accordance with section 9. The essential requisites of a tenancy relationship are: (1) the parties are the landholder and the tenant; (2) the subject is the agricultural landholding; (3) there is consent between the parties; (4) the purpose is agricultural production; (5) there is personal cultivation by the tenant; and (6) there is a sharing of harvests between landlord and tenant (see Adamos v. Hon. Bagasao, G.R. No. 63671, promulgated June 28, 1988 citing Carag v. Court of Appeals, 151 SCRA 44). The claim of the private respondent that he was a tenant of the late Gregorio Santos was established purely by the selfserving testimony of the private respondent alone. Moreover, with respect to the sugar crusher area in question where banana plants were planted, there was no evidence of any sharing arrangement between the late Santos and the private respondent regarding the banana fruits. The act of giving the late Santos the cream of the crop of the banana harvests as presents or gift is definitely not the element of sharing contemplated by law to establish a tenancy relationship. Hence, the private respondent's right to security of tenure as a tenant over the sugar crusher land does not find any evidentiary support. Secondly, the leasehold contract between the petitioner and the private respondent designated as "Kasunduan ng Pamumuwisan ng Lupang Sakahan" defines the landholding subject matter of the leasehold contract as: l. . . . isang lupang sakahan sa Banga, Plaridel, Bulacan, na may sukat na limang (5) ektarya, humigit kumulang, at may binhing apat (4) kaban na palay.' (Rollo, p. 35) There is no doubt that the northern portion of the petitioner's landholding is excluded from the leasehold agreement between the petitioner and the private respondent. Moreover, the private respondents own testimony admitted that the fivehectare landholding is adjacent to the petitioner's sugar crusher area thereby supporting the latter's claim that the said five hectare land is entirely separate and distinct from the portion under consideration. (tsn, pp. 28-29, hearing of June 29, 1965 in CAR Case No. 1086 cited in tsn, pp. 18-19, hearing of September 16, 1970 in CAR Case No. 1963; CAR Decision p. 9) The leasehold agreement covers land primarily planted to rice. The disputed property is a piece of sugar crusher land. Rule 130, section 7 of the Rules of Court categorically provides that: SEC. 7. Evidence of written agreements when the terms of an agreement have been reduced to writing, it is to be considered as containing all such terms, and, therefore, there can be, between the parties and their successors-in-interest, no evidence of the terms of the agreement other than the contents of the writing, except in the following cases: (a) Where a mistake or imperfection of the writing or its failure to express the true intent and agreement of the parties, or the validity of the agreement is put in issue by the pleadings; (b) When there is an intrinsic ambiguity in the writing. xxx xxx xxx If the parties in the aforementioned leasehold agreement intended to include the sugar crusher area in question then they could have embodies the same, with its bananas and mangoes, in their written agreement. In the case ofRebuldela v. Intermediate Appellate Court (155 SCRA 520, 529, [November 11, 1987]), we stated that: ... As ruled by the Court in Del Rosario v. Santos (108 SCRA 43 [1981]) the parol evidence rule forbids any addition to or contradiction of the terms of a written instrument. Oral testimony cannot prevail over a

written agreement of the parties, the purpose of the parol evidence rule being to give stability to written agreements and to remove the temptation and possibility of perjury, which would be afforded if parol evidence were admissible (Conde v. Court of Appeals, 119 SCRA 245 [1981]). The private respondent, in all of his pleadings; never raised as an issue the presence of a mistake or imperfection in the leasehold agreement with the petitioner. Neither was there a claim that the said agreement failed to express the full and true intent and agreement of the parties nor did the private respondent question the validity of the agreement or assert that the agreement suffers from an intrinsic ambiguity. Lastly, we find reversible error in the appellate court's ruling that: That the northern portion of appellee's sugar crusher area is not covered by the leasehold contract Exhibit "A" executed between him and the appellant on April 25, 1964, is evident from the face of that agreement. Nevertheless, it is not evident, even remotely, from the context of the said document, nor elsewhere in the evidence, that when the parties executed the same, the appellant agreed to surrender and relinquish voluntarily his tenancy over the disputed landholding and in lieu thereof to take the 5 hectare land subject matter of Exhibit "A". (Rollo, p. 63) The ruling assumes something which is not there. When the respondent agreed to be tenant over five hectares of riceland, he was not a tenant over the sugar crusher land. There was nothing to relinquish. What the respondent is trying to do is to include sugar crusher land in the riceland. It is apparent from the records of this petition that after the execution of the leasehold agreement between the petitioner and the private respondent in 1964, the private respondent was prohibited from entering the northern portion of the petitioner's sugar crusher area. From the very start, the terms of the agreement are clear. The petitioner even fenced the said area and placed "no trespassing" signs around it, thus, preventing the private respondent from smudging the 10 mango trees planted thereon. As regards the banana plants thereon, the fruits thereof had been gathered by the petitioner since 1964 (tsn, pp. 31, 36-37 and 77-78, hearing of June 24, 1970; CAR Decision. p. 7). It is evident that the petitioner's act of enclosing the area in controversy disallowed the private respondent from exercising personal acts of cultivation as regards the said area. It did not form part of their agreement. Absent the elements of consent and personal cultivation by the alleged tenant, no tenancy relationship can be deemed created, not to mention the fact that no sharing arrangement is borne by the circumstances of the present case. Thus, the appellate court erred in applying sections 6 and 9 of the Agricultural Tenancy Act in favor of the private respondent when the aforecited provisions presuppose the existence of a tenancy status. Considering the foregoing, we sustain the factual findings of the agrarian court. To rule otherwise will utterly run against the grain of the well-established doctrine that findings of facts of the Court of Agrarian Relations will not be disturbed on appeal where there is substantial evidence to support them and that our main and only task with respect to the evidence in agrarian cases is to find out if the conclusion reached by the lower court is supported by "substantial evidence." (Vda. de Donato v. Court of Appeals, 154 SCRA 119 (1987); Bagsican v. Court of Appeals, supra) WHEREFORE, premises considered, the PETITION is GRANTED. The judgment appealed from is hereby REVERSED and SET ASIDE. The decision of the Court of Agrarian Relations dated December 14,1970 is REINSTATED.

G.R. No. L-57719-21 May 6, 1988 WILFREDO DAVID, petitioner, vs. COURT OF APPEALS, JULIO MANALILI, ARCADIO BALAGTAS, MARTIN PASCUAL, RICARTE SUPAN, FIDEL LIWANAG, MATIAS DIZON, NARCISO LUMBA, DANIEL SUPAN and CIRIACO REYES, respondents. Hermenegildo D. Ocampo for petitioner. Jose V. Reyes for respondents. FERNAN, J.: Submitted for determination in this petition for review on certiorari is the issue of whether or not tenants in plantations exclusively devoted to sugarcane production may automatically convert their relationship with the landowner from sharing to leasehold system in the absence of a presidential proclamation sanctioning such change of relationship. The nine [9] private respondents herein were share tenants of Patricio David in his 36-hectare land in barangays San Pablo and San Agustin in Magalang, Pampanga. Each tenant had a landholding ranging in area from four to five hectares devoted entirely to the production of sugarcane which were ultimately milled and processed into sugar by the Pampanga Sugar Development Company [PASUDECO] in San Fernando, Pampanga.

As dictated by the practice in Central Luzon, the landowner advanced the expenses of production including the subsistance of the tenants. The landowner transacted with the PASUDECO during the milling season. He took charge of transporting the sugarcane from the fields to the millers, recruiting cane cutters to whom he extended cash advances, and procuring farm machineries. He exercised general supervision and control of the farm and had to attend to the needs of the tenants including extending loans to them and providing for the fertilizers used in the plantation. On their part, the tenants provided labor during the milling season from November to March each year. They were allowed to undertake additional jobs to augment their earnings even if they were also tenants in the landowner's riceland. Liquidation and accounting usually ensued a few days after the sugarcane had been milled and the landowner and the tenants shared 50%-50% the net proceeds of the sale of the sugarcane. Also shared similarly were the molasses, additional sugar seasonally given by PASUDECO, the bag rebates, incentive bonuses and other benefits granted by the millers. Effective in the 1979-80 agricultural year, Patricio David leased his sugarland to his son, Wilfredo David. For said year, Wilfredo shared with the tenants the net proceeds of the sugarcane produced on the 50%-50% arrangement. As early as August 15, 1979, herein private respondents notified Wilfredo David of their intention to elect the leasehold tenancy system starting from agricultural year 1980-81. 1 Wilfredo David objected not only because he had prepared for said agricultural year by applying for a crop loan from the Philippine National Bank but also because he believed that his tenants were financially incapable to undertake the venture. Hence, he allegedly halted the cutting of the canes which had started sometime in November, 1979. Through the help of the Bureau of Agrarian Legal Assistance of the then Ministry of Agrarian Reform, private respondents individually filed complaints in the Court of Agrarian Relations in Angeles City. Said complaints, in effect, sought to compel David to shift to the leasehold tenancy system. They prayed for an interlocutory order authorizing the Deputy Sheriff to supervise the harvesting, milling and hauling of the standing crops which would thereafter be shared on a 50%50% basis. They also proposed a temporary arrangement on the sharing should the case continue before the harvest of the 1980-81 crop. 2 In his answer to the complaints, David contended that private respondents were not entitled to an automatic conversion to leasehold tenancy because Section 4 of Republic Act No. 3844, as amended, was not applicable to sugarlands inasmuch as the production of sugar was covered by marketing allotments and subject to international commitments. He averred that under a presidential proclamation on September 21, 1979, sugarlands should be managed and cultivated under the corporate farming scheme. He denied having stopped the harvest of the crops but alleged that the Philippine National Bank refused to release portions of the crop loans he had obtained. The Philippine National Bank, in whose favor Wilfredo David executed a chattel mortgage on September 14, 1979 covering 1,805.76 piculs of "A" and "B" sugar of the 1980-81 crop to secure a loan of P124,000, sought intervention in the case. In its answer in intervention, said bank contended that private respondents were not entitled to elect the leasehold system as a matter of right in view of Section 4 of Republic Act No. 3844. The court disallowed the intervention. On December 18, 1980, the Court of Agrarian Relations rendered a decision ordering the change of relationship between private respondents and petitioner from share tenancy to the leasehold system starting with agricultural year 1980-81. It also fixed the rentals of each tenant. Wilfredo David appealed to the Court of Appeals which, in its decision * of July 13, 1981, affirmed the decision of the Court of Agrarian Relations. 3 Hence, the instant petition for review on certiorari stressing the necessity for a ruling on the aforestated issue in view of the diverse rulings thereon of the Court of Appeals. Petitioner does not question the correctness of the rentals imposed by the Court of Agrarian Relations. It is not surprising, therefore, that after this case was submitted for decision in this Court, private respondents filed a motion for execution pending appeal based on the provisions of Section 5 of Republic Act No. 5434 and Section 18 of Presidential Decree No. 946. Said Section 18 states that an appeal shall not stay the decision or order of the Court of Agrarian Relations "except where the ejectment of a tenant-farmer, agricultural lessee or tiller, settler, or amortizing owner-cultivator is directed." Accordingly, notwithstanding petitioner's opposition thereto, We granted the motion for execution pending appeal in the resolution of May 31, 1983. 4 Hence, the instant petition zeroes in solely on the legal issue set forth at the beginning of this decision. Private respondents anchor their arguments on the provisions of Republic Act No. 1199, 5 as amended, which states: SEC. 14. Change of System. The tenant shall have the right to change the tenancy, contract from one of share tenancy to leasehold tenancy and vice-versa and from one crop sharing arrangement to another of the share tenancy. If the share tenancy contract is in writing and duly registered, the right to change from one crop sharing arrangement to another or from one tenancy system to another may be exercised at least one month before the beginning of the next agricultural year after the expiration of the period of the contract. In the absence of any registered written contract, the right may be exercised at least one month before the agricultural year where the change shall be effected.

and on the following provisions of Republic Act No: 3844 6 which, as originally enacted on August 8, 1963, stated: SEC. 4. Abolition of Agricultural Share Tenancy. Agricultural share tenancy, as herein defined, is hereby declared to be contrary to public policy and shall be abolished: Provided, That existing share tenancy contracts may continue in force and effect in any region or locality, to be governed in the meantime by the pertinent provisions of Republic Act Numbered Eleven hundred and ninety- nine, as amended, until the end of the agricultural year when the National Land Reform Council proclaims that all the government machineries and agencies in that region or locality relating to leasehold envisioned in this Code are operating, unless such contracts provide for a shorter period or the tenant sooner exercises his option to elect the leasehold system: Provided, further, That in order not to jeopardize international commitments, lands devoted to crops covered by marketing allotments shall be made the subject of a separate proclamation that adequate provisions, such as the organization of cooperatives, marketing agreements, or other similar workable arrangements, have been made to insure efficient management on all matters requiring synchronization of the agricultural with the processing phases of such crops; Provided, furthermore, That where the agricultural share tenancy contract has ceased to be operative by virtue of this Code, or where such a tenancy contract has been entered into in violation of the provisions of this Code and is, therefore, null and void, and the tenant continues in possession of the land for cultivation, there shall be presumed to exists a leasehold relationship under the provisions of this Code, without prejudice to the right of the landowner and the former tenant to enter into any other lawful contract in relation to the land formerly under tenancy contract, as long as in the interim the security of tenure of the former tenant under Republic Act Numbered Eleven hundred ninety-nine, as amended, and as provided in this Code, is not impaired: Provided, finally, That if a lawful leasehold tenancy contract was entered into prior to the effectivity of this Code, the rights and obligations arising therefrom shall continue to subsist until modified by the parties in accordance with the provisions of this Code. Republic Act No. 6389 7 later amended Section 4 thereby providing for an "automatic conversion" to agricultural leasehold from agricultural share tenancy which is declared as contrary to public policy. The amendment retains the proviso on crops covered by marketing allotments. Sugarlands are not mentioned as among the areas covered by the Agricultural Land Reform Code. Neither are they included in the exempted lands which, as enumerated in Section 35 of said Code, include fishponds, saltbeds and those principally planted to citrus, coconuts. cacao, coffee, durian and other similar permanent trees. While it is true that there have been no presidential proclamations to the effect that measures have been adopted to insure efficient management of the agricultural and processing phases of crops covered by marketing allotments, it would be nothing short of regressive to deny sugarland share tenants of their right to elect the leasehold system. Considering the policy of the government as enunciated in Section 4 of the Code as amended, which mandates the automatic conversion of share tenants to leaseholders, individual sugarland tenants should not be discriminated against. Hence, any share tenant in sugarlands may, in accordance with law, exercise his option to change his relationship with the landowner into the leasehold system. However, all sugarland tenants who do not avail of said option may still be subject to existing lawful arrangements with the landowner in the absence of the presidential proclamation adverted to in Section 4. In this connection, We quote with approval the Court of Appeals decision which states: The policy and the law are clear. Share tenancy is contrary to public policy and must be abolished. Any interpretation of the law which tends to prolong any share tenancy relationship can be indulged in only when such an interpretation is inescapable and may not be avoided. But where it is possible to construe an abolition of share tenancy, then such a construction must perforce be adopted. A careful consideration of the decision appealed to us in these cases shows that the lower court did not err. There is no showing that the defendant-appellant's view is clearly and unmistakably supported by the statute and, therefore, that the policy to abolish share tenancy for the plaintiffs may be judicially halted and stayed. The only basis for the appellant's appeal is the second proviso in Section 4 of Republic Act 3844 that "... lands devoted to crops covered by marketing allotments shall be made the subject of a separate proclamation by the President ...." There are various reasons why we adopt a strict construction against exemptions to leasehold tenancy. Where the language of a statute is fairly susceptible to two or more constructions, that should be adopted which will most tend to give effect to the manifest intent of the lawmaker and promote the object for which the statute was enacted and a construction should be rejected which would tend to render abortive other provisions of the statute and to defeat the object which the legislator sought to attain by its enactment (Ty Sue vs. Hord, 12 Phil. 485). xxx xxx xxx

There is absolutely no showing from the fact of this case that the crops harvested from the appellant's landholding are covered by marketing allotments or that to convert the tenancy relationships in this case from an out-moded and more oppressive system to one of leasehold would jeopardize any international commitments. The Philippines no longer depends on the marketing allotment or quota which our sugar industry was committed to fill for the American market. Sugar is now sold in the world open market, about half under long term contracts which protect against the violent fluctuations of prices characteristic of the sugar trade and the other half in shorter term arrangements to get the best possible prices at any given time. In both cases, however, sugar is traded not in terms of quotas or marketing allotments but in free and open competition with the rest of the world's sugar. 8 Another development worth mentioning is the fact that to give more teeth to the policy of automatic conversion of share tenancy to the leasehold system, Presidential Decree No. 1425 was issued to strengthen the prohibition against agricultural share tenancy by providing penalties for violation thereof. We may add that more recent developments portend the transformation of tenants to owner-farmers. Under the 1987 Constitution, a comprehensive rural development and agrarian reform shall be promoted. Accordingly, President Corazon C. Aquino issued on July 22, 1987 Proclamation No. 131 instituting a comprehensive agrarian reform program, and Executive Order No. 229 providing the mechanisms for the implementation of the said program. Both issuances state that all public and private agricultural lands shall be covered by an agrarian reform program. In the instant case, We can do no less than to apply a liberal interpretation of the Agricultural Land Reform Code to give full force and effect to its clear intent which, under Section 2[2] and [6] of said Code, is "to achieve a dignified existence for the small farmers" and to make them "more dependent, self-reliant and responsible citizens, and a source of genuine strength in our democratic society." 9 WHEREFORE, the instant petition for review on certiorari is hereby denied. No costs. SO ORDERED.

G.R. No. L-48008 January 20, 1989 BARTOLOME MACARAEG, CORAZON MACARAEG, BENITA MACARAEG and EUFRACIA BALUYOT,petitioners, vs. COURT OF APPEALS, SEGUNDO RAPADA and MAURICIA DE GUZMAN, respondents. Ricardo S. Licu for petitioners. Judicial Cases Division for private respondents.

GUTIERREZ, JR., J.: This petition for review on certiorari prays for a reversal of the decision of the Court of Appeals which affirmed the judgment of the Court of Agrarian Relations, 4th Regional District, Branch VI, in Paniqui, Tarlac declaring as tenants the private respondents over the parcel of land in controversy. On November 20, 1973, a case for the fixing of rentals was filed by the private respondents against the petitioners alleging, among others, that spouses Rapada have been the duly constituted tenants of the petitioners for more than twenty (20) years over a landholding situated at Barrio Guiteb, Ramos, Tarlac with an area of 1.5 hectares and seeded to two (2) cavans of palay; that despite the insistent demands of the spouses Rapada since 1970 for a system of tenancy to govern their relationship with the petitioners, the latter has refused to do so inspite of the fact that the subject property has been declared a land reform area; that as tenants, the spouses Rapada shouldered all the expenses of production while the petitioners liquidated the harvests of the landholding in question on a 50-50 sharing ratio without first deducting the expenses for production incurred by the spouses Rapada when the liquidation should have been on a 75-25 basis of the net harvest in favor of the latter; and that the spouses Rapada were short-shared as a result of the unlawful sharing made between them and the petitioners. The petitioners, in their answer, stated that the spouses Rapada are not their tenants on the landholding in question; that the spouses Rapada, relying on the provisions of General Order No. 34 dated July 26, 1973 entered said landholding without the knowledge and consent of the petitioners; and that the spouses Rapada are tilling more than 10 hectares of agricultural land deriving a net income of at least P6,000.00 annually.

The petitioners further set up as affirmative defenses that the spouses Rapada, invoking the provisions of General Order No. 34, entered the dried portions of the land planted to sugar crops and utilized the said portions for root crops without the petitioner's knowledge and consent; that after discovering the said spouses' illegal acts, the petitioners complained to the Philippine Constabulary and were assured that the spouses Rapada will restore possession of the aforementioned portions to them after harvesting the rice crops planted thereon; and that the rice crops harvested shall be shared between the petitioners and the spouses Rapada on a 90-10 basis in favor of the latter pursuant to General Order No. 34. On January 10, 1974, the private respondent's motion for the issuance of an interlocutory order enjoining the petitioners from molesting their peaceful possession and cultivation of the landholding in question was granted. At the pre-trial of CAR Case No. 2628T-'73 conducted by the Clerk of Court of the court a quo, an order was issued delimiting the facts and issues of the present case as agreed upon by the contending parties. The pre-trial order reads: During the pre-trial scheduled this morning, parties, assisted by their respective counsels have agreed on the following : ISSUES 1) Fixing of rentals; 2) Reliquidation from the agricultural year 1970 up to 1972-1973 considering that the harvest in the agricultural year 19731974 has been liquidated by the issuance of an interlocutory order issued by the Court on March 22, 1974; 3) Damages on both sides. FACTS l) Parties agreed that the boundaries of the landholding in question are as follows: On the North: bounded by Taloy River; West: also bounded by Taloy River; East: bounded by Cojuangco Estate; South: bounded by properties of Macaraeg; 2) Parties agreed that at present the plaintiffs are in possession and cultivation of the said landholding in question; 3) Parties agreed that in the cultivation of the landholding, the plaintiffs shouldered all the expenses for production with the qualification on the part of the defendants that during the agricultural year 1972-1973 and 1973-1974, the first plowing of the landholding in question was made by the defendants; 4) Parties agreed that the landholding in question is only a small portion at the tip of a 12 hectare sugar cane plantation with the qualification on the part of the plaintiffs that this landholding in question from the time plaintiffs were instituted had always been devoted to the planting of palay.' (pp. 4-5, Rollo) After trial, the agrarian court rendered judgment in favor of the private respondents as follows: WHEREFORE, premises considered, judgment is hereby issued: 1) Declaring the plaintiffs as tenants over one-half (1/2) hectare portion of the lands owned by the defendants which is situated at Bo. Guiteb, Ramos, Tarlac, and bounded as follows: On the North, bounded by Taloy River; On the West, also bounded by Taloy River; On the East, bounded by Cojuangco Estate; on the South, bounded by the properties of the Macaraegs. 2) Fixing the lease rental in the quantity of 4 cavans and 37 kilos at 50 kilos per cavan and 37 kilos at 50 kilos per cavan (sic) for every crop year and of the same variety planted thereon; 3) Ordering the defendants to reimburse the plaintiffs the quantity of 5 cavans and 19 kilos at 50 kilos per cavan which is the excess rental paid by the plaintiffs for the crop year 1972-1973; and, 4) Dismissing all other claims for damages for lack of sufficient evidence to support the same." (pp. 38-39, Rollo; pp. 1-2, CA decision) On appeal, the respondent court affirmed in toto the agrarian court's judgment basing its decision on the following grounds: 1) that the issue on the alleged procedural defect at the pretrial stage was not seasonably raised by the petitioners, hence,

deemed waived; and 2) that the tenancy relations between the contending parties is an established fact at least from crop year 1972-1973 onward by virtue of an implied admission by the petitioners under paragraph 3 of the pre-trial order dated July 1, 1975. The petitioners now assert that the Court of Appeals committed the following grave errors: (1) THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW WHEN IT APPLIED THE DOCTRINE LAID DOWN IN THE CASE OF CCC INSURANCE CORPORATION V. COURT OF APPEALS, ET AL. (L-25920, Jan. 20,1970) WHEN THE PROPER RULING APPLICABLE IN THE CASE AT BAR IS THAT ENUNCIATED IN THE CASE OF CABALLERO V. DEIPARINE (L-39059, Sept. 30, 1974). (2) THE COURT OF APPEALS AGAIN COMMITTED ANOTHER ERROR OF LAW WHEN IT MADE AN AFFIRMANCE OF THE ALLEGED EXISTENCE OF THE TENANCY RELATIONSHIP BETWEEN THE PARTIES CONSIDERING THAT THE LOWER COURT MADE NO FINDINGS TO THAT EFFECT BASED ON THE EVIDENCE ADDUCED. (3) THE COURT OF APPEALS FURTHERMORE COMMITTED ANOTHER ERROR OF LAW IN NOT APPLYING THE PRINCIPLE OF RES JUDICATA AND IN NOT DECLARING THIS CASE BARRED BY THE SAID LEGAL PRINCIPLE. (pp. 128-129; 132 & 133, Rollo) On the first assigned error, the petitioners, in order to present a meritorious case, abandon their claim in the appellate court that the proceedings at the pre-trial of the case were null and void for lack of authority on the part of the Clerk of Court to conduct it. They now contend that what they question is not the validity of the said proceedings but the stipulations contained in the pre-trial order. They state that the alleged agreement at the pre-trial should be declared null and void for there is no showing that the parties gave their consent and approval to it. In support of their contention, the petitioners cite the case of Caballero v. Deiparine (60 SCRA 136 [1974]). The aforecited case is inapplicable to this case. The stipulation of facts in the Caballero case contained serious unauthorized admissions against the interests of the plaintiffs-appellants therein who had no hand in its preparation and formulation since it was only their counsel who, without special authority, entered into a stipulation of facts prejudicial to their interests. The plaintiffs' lawyer without any special authority to do so made admissions on matters regarding which only the clients could make binding commitments. On the other hand, the decision of the agrarian court in this case was reached only after trial on the merits of the case unlike in the Caballero case where the decision of the trial court was based on the pre-trial agreement. Moreover, the petitioners in the instant case did not raise their objections to the pre-trial proceedings before they continued with and actively participated in the trial proper of the case or before the agrarian court promulgated its decision. We find no error committed by the appellate court in applying the case of CCC Insurance Corporation v. Court of Appeals (31 SCRA 264 [1970]) to the present case considering that if there were irregularities in the conduct of the pretrial proceedings they merely pertained to procedural matters. There is no proof of the alleged irregularities related to stipulations contained in the pre-trial order. Any question involving procedural matters must be seasonably raised. On the second assigned error, we find the petitioners bound by the stipulations at the pre-trial which they now try to disown. In the case of Lucio Lucenta v. Court of First Instance of Bukidnon, Branch VI, et al., (G.R. No. L-39789, June 20, 1988), we stated that: ...The petitioner is bound by what was to be bound upon in the pre-trial. As we have ruled inMunasque v. Court of Appeals, (139 SCRA 533, 541): The petitioner, therefore should be bound by the delimitation of the issues during the pre-trial because he himself agreed to the same. In Permanent Concrete Products, Inc. v. Teodoro (26 SCRA 330), we ruled: xxx xxx xxx The appellant is bound by the delimitation of the issues contained in the trial court's order issued on the very day the pretrial conference was held. Such an order controls the subsequent course of the action, unless modified before the trial to prevent manifest injustice. In the case at bar, modification of the pre-trial order was never sought at the instance of any party. At the pre-trial of the instant case, the issue of whether or not there exists a tenancy relationship between the contending parties was not included by the petitioners as among the specific issues to be resolved. Moreover, their counter-allegation that the private respondents are mere cultivators as defined by the provisions of General Order No. 34 and not tenants on the landholding in question is not sufficient to overcome the positive evidence presented at the trial by the private respondents showing the existence of tenancy relations between them and the petitioners. Proof that the claimants were never tenants on the disputed landholding should have been clearly established in order to override the evidence supporting otherwise. (See Barias vs. Alcantara, 117 SCRA 651 [1982]). The testimony given by respondent Mauricia as corroborated by Tranquilino Natividad (barrio councilman of Guiteb, Ramos, Tarlac) and Jacinto M. Rapal (farm management

technician assigned in the area where the subject landholding is situated) is both convincing and unrebutted. We affirm the ruling made by the court that: At any rate, there is ample evidence to support the trial court's finding and conclusion of the existence of tenancy relationship between the parties. Indeed, such finding and conclusion are supported not only by substantial evidence which is all that is required by law and jurisprudence (PD 946, sec. 18; Picardal v. Lladas, L-21309, Dec. 29, 1967, 21 SCRA 1483) to sustain an appeal the decision of the agrarian court but by preponderance of evidence ordinarily required under the Rules of Court in civil cases. Such relationship was established by the testimony of appellee Mauricia G. Rapada as corroborated by DAR Farm Management Technician Jovito Rapal and Barrio Councilman Tranquilino Natividad. Thus, Mauricia G. Rapada declared: Q Madam witness, will you please state before this Honorable Court the area of your landholding in question? A More or less one-half (1/2) hectares, sir. Q Since when have you been cultivating this landholding? A Since the land was owned by the Bartolome Macaraeg, sir. Q Particularly what Bartolome are you referring to? A Bartolome Macaraeg, sir. Q In what capacity were you given this landholding? A As a tenant, sir. COURT: Q Share or lease tenant? A As share tenant, sir. Q Under what basis? A Formerly we divide the share on the 50-50 but the last two (2) years we divided the share at the ratio of 75-25. Q In whose favor? A In my favor, sir. (TSN, July 29, 1975, pp. 4-6) After informing the Court that they received the landholding in question from the late Raymundo Macaraeg, appellants' father, some 20 years before and that since then have been in possession thereof, Mrs. Rapada continued her testimony, as follows: Q In the agricultural year 1970, who was your landholder then? A After the death of Raymundo Macaraeg, Bartolome Macaraeg succeeded as the landowner, sir. xxx xxx xxx A It was Bartolome Macaraeg who got the share of the landowner for that particular year, sir. xxx xxx xxx A What I know it was Bartolome Macaraeg who owns this land inasmuch as he was the one who came to liquidate my harvest and to whom I dealt with in the cultivation of the land. A In that agricultural year 1970 who shouldered all the expenses for production? We shouldered the expenses, sir. Q What about the reaping fee, who shouldered the reaping fee? A We, sir. COURT: Q What do you mean by 'we'? A We shouldered the expenses, meaning the landowner do not share any expenses. Q In other words, the only contribution made by the landowner is the landholding, is that what you mean? A Yes, sir. (TSN, Ibid., pp. 10-14). Witness Tranquilino Natividad, barrio councilman of Guiteb, Ramos, Tarlac, corroborated Mrs. Rapada on her and her husband's tenancy relationship when he testified that he knows the Rapadas and the landholding in question; that plaintiffs Rapadas were dividing the harvest of said land with Raymundo Macaraeg when he was still alive (TSN, Dec. 19, 1975, p. 8); that defendant Bartolome Macaraeg is the son of the late Raymundo Macaraeg; that the areas of the landholding in question is 1/2 hectare (ibid., p. 9); and that the Rapadas are cultivating this 1/2 hectare of land as tenants and it was Raymundo Macaraeg who gave them the land (ibid., p. 11).' (pp. 2831, Rollo) In the case of Latag v. Banog (16 SCRA 88 [1966]) citing the case of Marcelo v. De Leon (105 Phil. 1175 [1959]), we held that: xxx xxx xxx ... It has been declared that 'an agricultural tenancy classified as share tenancy exists where a person has physical possession of another's land for the purpose of cultivating it and giving the owner a share in the crop. (at p. 93) There is no dispute that the private respondents are in physical possession of the landholding under consideration for purposes of cultivation and agricultural production initially evidenced by the stipulation of facts in the pre-trial order. During the trial of the case, evidence on personal cultivation and sharing was further presented by the private respondents. Hence, tenancy relationship between the petitioners and the private respondents was established by the evidence on record. The appellate court correctly observed that petitioner Bartolome with whom the private respondents dealt as regards the

disputed landholding was never presented in court to rebut the evidence in support of the existence of tenancy relations between the contending parties. We apply our ruling regarding findings of lower courts: ... [T]he determination that a person is a tenant-farmer is a factual conclusion made by the trial court on the basis of evidence directly available to it and will not be reversed on appeal except for the most compelling reasons. As we do not see any such reason in the instant case, we are not justified in rejecting such findings, more so since they have been affirmed in toto by the respondent court in the exercise of its own powers of review. (Anderson Co, et al. v. Hon. Intermediate Appellate Court, et al., G.R. No. 65928, June 21, 1988). On the third assigned error, the appellate court found that there is no Identity of the parties and the subject matter as between the present case and a former case docketed as CAR Case No. 2582-T '73. Such identity is an indispensable requisite of the doctrine of res judicata. We uphold the appellate court's findings with respect to the non-applicability of the said doctrine in the absence of substantial evidence to the contrary. We reiterate our pronouncement in the case of Malaysian Airline System Bernad v. Court of Appeals (156 SCRA 321-323 [1987]) that: We affirm the factual findings of the respondent court and the lower court, there being no sufficient showing that the said courts committed reversible error in reaching such conclusions. As we are not a trier of facts, we generally rely upon, and are bound by, the conclusions on this matter of the lower courts, which are better equipped and have better opportunity to assess the evidence firsthand, including the testimony of the witnesses. We have repeatedly held that the findings of fact of the court of Appeals are final and conclusive and cannot be reviewed on appeal to the Supreme Court provided they are based on substantial evidence (Alsua-Betts v. Court of Appeals, et al., 92 SCRA 332 [1979]). Among the exceptions to this rule are: (a) when the conclusion is a finding grounded entirely on speculations, surmises or conjectures; (b) when the inference made is manifestly mistaken, absurd or impossible; (c) where there is grave abuse of discretion; (d) when the judgment is based on a misapprehension of facts; (e) when the findings of facts are conflicting; (f) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both the appellant and appellee (Ramos, et al. v. Pepsi-Cola Bottling Co., 19 SCRA 289 [1967]). None of these exceptions is present in this case. WHEREFORE, IN VIEW OF THE FOREGOING, the petition is hereby DISMISSED. The questioned decision of the Court of Appeals is AFFIRMED. SO ORDERED.

G.R. Nos. L-46281-83 August 19, 1988 COCONUT COOPERATIVE MARKETING ASSOCIATION, INC. (COCOMA), petitioner, vs. COURT OF APPEALS, PEDRO COSICO, HERMOGENES COSICO and LUCAS COSICO, respondents. F.M. Poonin & Associates, for petitioner. Manuel A. Cordero for respondents.

PADILLA, J.: Petition to review on certiorari the decision * of the Court of Appeals, promulgated 19 May 1977, in CA G.R. No. SP05096R entitled "Pedro Cosico, Hermogenes Cosico, and Lucas Cosico, plaintiffs-appellees versus Rosario Vda. de Fule, et al., defendants, and Coconut Cooperative Marketing Association, Inc. defendants-appellants," which affirmed the defendant-appellee. ** of the Court of Agrarian Relations, dated 26 January 1976, in CAR Case Nos. 2236, 2237 and 2238, finding private respondents Pedro Cosico and Hermogenes Cosico to be share tenants of the coconut landholdings of the petitioner. The facts of the case: The owners of the coconut land in question located in Bo. Imok Calauan, Laguna, consisting of fifteen (15) hectares, more or less, are the spouses Pedro Rulloda and Salud Sanchez. Prior to, and including the years 1964 up to 1971, Rosario Paraiso Vda. de Fule (Fule, hereafter) obtained legal possession of the land c,irrency virtue of a yearly contract of sale (pakyaw) of all the coconut produce and other fruits from said land. In 1972, Fule did not renew the contract but spouses (Pedro Rulloda and Salud Sanchez) executed a similar contract with Eddie A. Escudero, which was renewed every year until 1975. 1

During the period prior to 1964, Fule had utilized the services of Pedro, Hermogenes and Lucas Cosico as caretakers over four (4) hectares each of the land in question, paying them for their services in cash, which was equivalent to 1/7 of the proceeds of the sale of coconuts harvested from the land they each caretook. As caretakers, the Cosico's would check or visit said plantation to see whether there was stealing in the plantation, and they would report to her (Fule). They lived in a place about 2 and 1/2 kms. away from the land in question. They had no work animals to cultivate the land with; they used bolos to clean and clear the land by cutting grass and burning them. Private respondents (Cosicos) alleged that they also planted coconut trees and other permanent trees in the land, for which they have not allegedly been paid. The tasks of harvesting, gathering, picking and hauling coconuts were performed by laborers hired and paid by Fule or her coconut buyer. And when respondent Pedro Cosico was hired to gather coconuts in the land, he was paid for his labor. The payment for his labor was separate from his 1/7 share received as caretaker. 2 Defendant Fule became a member of the petitioner COCOMA from 1964 to 1972, while Eddie A. Escudero became a member of the same cooperative-corporation from 1972 to 1975. During the time that the land was under contract with these persons, petitioner COCOMA claims to have acted as their agent in providing management and marketing services. 3 Consequently, from 1964 up to 1975, petitioner COCOMA hired allegedly for and on behalf of Fule and Eddie A. Escudero, the necessary laborers to harvest and transport the coconut produce from the land. Among these workers were respondents Pedro and Hermogenes Cosico who were recommendees of Fule, and who were hired to clean the land of grass, shrubs, dried coconut leaves and husks. The work done in the land and the expenses incurred therefor were approved and paid by Fule and Eddie A. Escudero, through petitioner COCOMA. And all the cleaning and planting expenses were covered with receipts duly signed by the laborers. 4 During all the time that petitioner COCOMA was rendering management and marketing services in the land in question, all the proceeds from the sale of the coconut produce thereof, less the necessary expenses mentioned above, were paid and delivered, after every harvest season, to said Fule and Eddie A. Escudero, respectively, in compliance with the terms of their marketing agreements with petitioner COCOMA. 5 On 9 October 1971, or after seven (7) years from 1964 that all the workers had been receiving their wages as hired workers in said land from Fule and later from Eddie A. Escudero, through the petitioner COCOMA, the respondents Pedro, Hermogenes and Lucas, all surnamed Cosico, started to claim to be the tenants in three (3) separate portions of said landholding, consisting of about four (4) hectares each, more or less. They instituted individually CAR Cases Nos. 2236, 2237 and 2238 against defendants Rosario Paraiso Vda. de Fule and Villa Escudero Corporation (VESCO). Respondents later amended their complaint in said cases by including, petitioner COCOMA as defendant. 6 On 26 January 1976 the Court of Agrarian Relations (CAR) rendered a joint decision:' in the three (3) cases, the dispositive part of which is as follows: WHEREFORE, Judgment is hereby rendered: 1. Declaring plaintiffs Pedro Cosico (CAR CASE No. 2236) and Hermogenes Cosico (CAR CASE No. 2237), as true and lawful tenants of the Coconut Marketing Association (COCOMA), its duly authorized representatives, successors in interest and/or assigns, over four (4) hectares each of coconut land described in their respective complaints; 2. Declaring, furthermore, plaintiff Hermogenes Cosico as the true and lawful tenant of defendant COCOMA, its duly authorized representatives, successors in interest and/or assigns, over that four (4) hectares of coconut land described in CAR CASE No. 2238, which is contiguous to that referred to in CAR CASE No. 2237; 3. Declaring that no tenancy relations exists between defendant COCOMA and Lucas Cosico, plaintiff in CAR CASE No. 2238; 4. Ordering defendant COCOMA, its representatives, successors in interest and/or assigns, to immediately reinstate plaintiffs Pedro Cosico and Hermogenes Cosico to the landholdings mentioned in the next preceding paragraphs and to maintain them in peaceful possession and tenancy thereof, on a sharing arrangement of 70-30 in favor of the defendant COCOMA on the proceeds of the net harvest until such time as said parties shall have mutually agreed on fixed rentals; 5. Ordering defendant COCOMA, its representatives, successors in interest and/or assigns to deliver to plaintiffs Pedro Cosico and Hermogenes Cosico the amount of P28,994.00 representing the 30% share of the said plaintiffs from the coconuts harvested from the land in question for the period covering November 12, 1971 up to June 4, 1975 6. Ordering defendant COCOMA, its representatives, successors in interest and/or assigns to render an accounting of the harvests of the land for the period starting June 5, 1975, up to the present and to deposit to the Court, the equivalent of the 30% share of the aforementioned plaintiffs, for delivery to said plaintiffs; 7. Ordering defendant COCOMA, its representatives, successors in interest and/or assigns, to

pay plaintiffs Pedro Cosico and Hermogenes Cosico the amount of Four Thousand Pesos ( P4,000.00) or Two Thousand Pesos (P2,000.00) each, as expenses of litigation and other incidental expenses; and 8. Denying the claim for decision-' of all three defendants; All other claim and counterclaims are denied for lack of merit. 7 On 19 February 1976, petitioner COCOMA appealed the CAR decision:' to the Court of Appeals. On 19 May 1977, the Court of Appeals, as earlier stated, rendered a decision, the dispositive part of which is as follows: WHEREFORE, finding the decision appealed from to be in accordance with law and supported by substantial evidence, the same is hereby affirmed in toto without pronouncement as to costs in this instance. 8 Hence, the instant petition of COCOMA. The four (4) issues raised by the petitioner are: (1) whether or not the private respondents are share tenants in the coconut land in question; (2) whether or not private respondent Hermogenes Cosico can be adjudged a share tenant and the COCOMA ordered the reinstate him in the land involved in CAR Case No. 2238 when Hermogenes Cosico is not even a plaintiff in said Case No. 2238, but one Lucas Cosico; (3) whether or not COCOMA, contending to be a mere marketing agent which provides management and marketing services to the members of the cooperative, can be held directly liable to the private respondents-tenants for their share in the coconuts harvested; and (4) whether or not the computation of the alleged shares due the respondents Pedro Cosico and Hermogenes Cosico, made by the trial court is patently erroneous because the same was based on a wrong number of coconuts harvested and on conjectured prices. As to the first issue, petitioner contends that private respondents were merely caretakers, of Fule and, later, Eddie Escudero, whose task included clearing the land by cutting grass and burning them to smudge the coconut trees to make them bear fruits, 9 planting of coconuts, and other fruit bearing trees, 10 and harvesting, gathering, picking and hauling coconuts, 11 and that, as caretakers, private respondents were paid separately in cash. 12Hence, the petitioner would like this Court to believe that since private respondents were mere caretakers who were paid in cash for their services, they were therefore, hired laborers, not share tenants. Petitioner's contention is without merit. In determining the nature of the relationship of the parties in the instant case, it would be well to review the concept of a share tenant as against that of an agricultural worker. Share tenancy or agricultural tenancy is defined as: ... the physical possession by a person of land devoted to agriculture, belonging to or legally possessed by another for the purpose of production through the labor of the former and of the members of his immediate farm household in consideration of which the former agrees to share the harvest with the latter or to pay a price certain or ascertainable, either in produce or in money or in both (Section 3, Republic Act 1199, the Agricultural Tenancy Act, as amended). ... share tenancy exists whenever two persons agree on a joint undertaking for agricultural production wherein one party furnishes the land and the other his labor, with either or both contributing any one or several of the items of production, the tenant cultivating the land with the aid of labor available from members of his immediate farm household, and the produce thereof to be divided between the landholder and the tenant in proportion to their respective contributions (Sec. 4, RA 1199; Sec. 166 (25), RA 3844, Agricultural Land Reform Code). 13 On the other hand, the Court has defined an agricultural worker as follows: ... . A "farm worker" is any "agricultural wage, salary or piece worker but is not limited to a farm worker of a particular farm employer unless this Code (Agricultural Land Reform Code, supplied) explicitly states otherwise, and any individual whose work has ceased as a consequence of, or in connection with, a current agrarian dispute or an unfair labor practice and who has not obtained a substantially equivalent and regular employment." The term includes "farm laborer and/or farm employer." An agricultural worker' is not a whit different from a farm worker. From the definition of a "farm worker" thus fashioned, it is quite apparent that there should be an employer-employee relationship between the farm employer and the farm worker. In determining; the existence of an employer-employee relationship, the elements that are generally considered are the following: (1) selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the employer's power to control the employee's conduct. It is this last element that constitutes the most important index of the existence of relationship. 14 The above-mentioned characteristics of an agricultural worker or farm worker do not exist in share tenancy.

Further, in one case, the Court compared an agricultural worker with a share tenant, and set out the following distinctions, among others, between the two: ... . The agricultural laborer works for the farm employer, and for his labor he receives a salary or wage, regardless of whether the employer makes a profit. On the other hand, the share tenant participates in the agricultural produce. His share is necessarily dependent on the amount of the harvest. Since the relationship between farm employer and agricultural laborer is that of employer and employee, the decisive factor is the control exercised by the former over the latter. On the other hand, the landholder has the 'right to require the tenant to follow those proven farm practices which have been found to contribute towards increased agricultural production and to use fertilizer of the kind or kinds shown by proven farm practices adapted to the requirements of the land." This is but the right of a partner to protect his interest, not the control exercised by an employer. ... 15 The record of this case is bare of evidence to support the conclusion that the private respondents are mere agricultural workers. Unlike ordinary laborers, respondents did not observe regular hours of work. They did not work in shifts. Petitioner COCOMA could not even remember the number of days that private respondents worked on the land for each agricultural year. While petitioner kept a record of the full amount paid to respondents for each agricultural season, it did not keep an accurate record of the actual number of days respondents reported for work. 16 The petitioner did not lay down regulations under which respondents were supposed to do their work. Neither did petitioner prescribe the manner by which the private respondents were to perform their duties as farmworkers. We do not find that degree of control and supervision essential to the presence of an employer-employee relationship between petitioner and respondents and before that, between Fule or Escudero, on the one hand and respondents, on the other. Petitioner, in an attempt attempt to support its pretense that private respondents are only hired laborers, not share tenants, claims that private respondents are mere caretakers who paid for their services as such, and whose work consists of clearing and cleaning the land, planting the coconut and other fruit-bearing trees, and harvesting, gathering, picking and hauling coconuts. We do not sustain the petitioner's pretense. Now well-settled is the rule that cultivation is an important factor in determining; the existence of a share tenancy relationship. 17 As to the meaning of cultivation, this Court has already held that: ... . The definition of cultivation is not limited merely to the tilling, plowing or harrowing of the land. It includes the promotion to growth and the care of the plants, or husbanding the ground to forward the products of the earth by general industry . The raising of coconuts is a unique agricultural enterprise. Unlike rice, the planting of coconut seedlings does not need harrowing and plowing. Holes are merely dug on the ground of sufficient depth and distance, the seedlings placed in the holes and the surface thereof covered by soil. Some coconut trees are planted only every thirty to a hundred years. The major work in raising coconuts begins when the coconut trees are already fruit-bearing. Then it is cultivated by smudging or smoking the plantation, taking care of the coconut trees, applying fertilizer, weeding and watering, thereby increasing the produce. The fact that respondent Benitez, together with his family, handles all phases of farmwork from clearing the landholding to the processing of copra, although at times with the aid of hired laborers, thereby cultivating the land, shows that he is a tenant, not a mere farm laborer. 18 It may thus be said that the caretaker of an agricultural land can also be considered the cultivator of the land. 19 In Marcelo v. De Leon, plaintiff therein argued that the defendant was not a tenant inasmuch as the latter did not till or cultivate the land in order to grow the fruit-bearing trees because they were already full-grown; that he did not do the actual gathering of the fruits but merely supervised the gathering; that after deducting the expenses, he gave one-half of the fruits to the plaintiff all in consideration of the land. Ruling in the above-mentioned case, this Court held: Anyone who has had fruit trees in his yard, will disagree with the above description of the relationship. He knows the caretaker must water the trees, even fertilize them for better production, uproot weeds and turn the soil, sometimes fumigate to eliminate plant pests, etc. Those chores obviously mean 'working or cultivating' the land. Besides, it seems that defendant planted other crops, (i.e. cultivated the lot) giving the landowner his corresponding share. 20 Applying the foregoing precedents to the case at bar, and given the kind of work performed by respondents on the landholding in question, the Court holds that respondents are share tenants, not hired workers, of the petitioner. Further supportive of the existence of a share tenancy relationship between petitioner and respondents is their agreement to share the produce or harvest on a 1/7 to 6/7 basis in favor of the petitioner COCOMA. Though not a decisive indication per se of the existence of tenancy relationship, such sharing of the harvests, taken together with the other factors characteristic of tenancy shown to be present in the case at bar, strengthens the claim of respondents that, indeed, they are tenants.

To prove petitioner's claim that the private respondents are hired workers and not its tenants, petitioner would rely mainly on the receipts signed by respondents and other persons tending to show that they were paid by petitioner for services rendered especially for cutting grass. 21 This Court cannot re-examine the facts as found by the Court of Appeals, except for unusual and urgent reasons which however do not exist in this case. Whether a person is a tenant or not is basically a question of fact and the findings of the respondent court and the trial court are, generally, entitled to respect and non-disturbance. 22 The conclusion then, anent the first issue, as borne out by the evidence on record, is that private respondents Pedro and Hermogenes, both surnamed Cosico, are share tenants of the land in dispute. On the second issue, petitioner questions the recognition by the trial court and the Court of Appeals of respondent Hermogenes Cosico as tenant in the landholding where his co-respondent Lucas Cosico claims to be the tenant, when the former is not even a party to the separate case filed by the latter and he (Hermogenes Cosico) did not allege such tenancy in his own amended complaint. In other words, it is petitioner's submission that even if respondent Hermogenes Cosico were to be considered a tenant in the landholding described in his amended complaint, the court had no legal basis, however, in declaring him also a tenant of a landholding described and claimed by another person in another case in which he (Hermogenes) is not a party and which he did not claim to be a tenant of, in his own complaint. 23 Petitioner's contention. is without merit. It should be noted that the three (3) cases filed by the three (3) private respondents were jointly tried and their common evidence showed that, although Hermogenes and Lucas Cosico were supposed to have separate holdings, from 1956, of four (4) hectares each, both of them worked the two (2) holdings jointly in their entirety, but it was only Hermogenes Cosico who received the tenant's share from the whole. In other words, it was Hermogenes Cosico who acted as sole tenant of the two (2) holdings. Hence, the latter's recognition by the Court of Agrarian Relations and the Court of Appeals; as the tenant in the holding also claimed by Lucas Cosico. The facts, therefore, warranted Hermogenes Cosico's recognition as the tenant in both landholding. 24 In Teodoro vs. Macaraeg, this Court ruled: Significantly, the Court of Agrarian Relations is not 'restricted to the specific relief claimed or demands made by the parties to the dispute, but may include in the order or decision any matter or determination which may be deemed necessary and expedient for the purpose of settling the dispute or preventing further disputes, provided said matter for determination has been established by competent evidence during the hearing. 25 Further, R.A. 3844, Section 155, provides: SEC. 155. Powers of the Court; Rules of Procedure. ... The Courts of Agrarian Relations shall be governed by the Rules of Court: Provided, That in the hearing, investigation and determination of any question or controversy pending before them the Courts without impairing substantial rights, shall not be bound strictly by the technical rules of evidence and procedure, except in expropriation cases. We now move to the third issue. It is contended by the petitioner COCOMA that it has never been a landholder of the land in question, since it was, at no time, owner, lessee or sub-lessee of the land, or buyer of the coconut produce thereof, or usufructuary or legal possessor of the same, or even an assignee of any right affecting it. Thus, assuming, without conceding, that respondents Pedro and Hermogenes Cosico are considered tenants of the land, petitioner COCOMA submits that, being only an agent of defendants Fule and Escudero, it can not be held liable for the acts of its principals. Petitioner's cooperative-corporation is not in accordance with applicable laws, because A landholder shall mean a person, natural or juridical, who, either as owner, lessee, usufructuary or legal possessor lets or grants to another the use or cultivation of his land for a consideration either in shares under the share tenancy system, or a price certain or ascertainable under the leasehold system. 26 In accordance with the above provision, petitioner COCOMA is the landholder of the subject landholdings for (a) it is juridical person" being a domestic corporation established under the laws of the Philippines; (b) it is the "legal possessor" of the land for it has the sole management and administration thereof, 27 (c) it has authorized or retained the private respondents to cultivate the land; and (d) it has shared the harvest with the latter, albeit unlawfully, making it appear that they are laborers instead of tenants. 28 Petitioner, being a landholder, as defined by law, is therefore subject to the rights, obligations, and limitations provided for under the agrarian laws.

There is also no question that, in this case, there was a transfer of the legal possession of the land from one landholder to another (Fule to petitioner COCOMA). In connection therewith, Republic Act 3844, Sec. 10 states: SEC. 10. Agricultural Leasehold Relation Not Extinguished by Expiration of Period, etc.The agricultural leasehold relation under this Code shall not be extinguished by mere expiration of the term or period in a leasehold contract nor by the sale, alienation or transfer of the legal possession of the landholding. In case the agricultural lessor sells, alienates or transfers the legal possession of the landholdings, the purchaser or transferee thereof shall be subrogated to the rights and substituted to the obligations of the agricultural lessor. Further, in several cases, this Court sustained the preservation of the landholder-tenant relationship, in cases of transfer of legal possession: ... in case of transfer or in case of lease, as in the instant case, the tenancy relationship between the landowner and his tenant should be preserved in order to insure the well-being of the tenant or protect him from being unjustly dispossessed by the transferee or purchaser of the land; in other words, the purpose of the law in question is to maintain the tenants in the peaceful possession and cultivation of the land or afford them protection against unjustified dismissal from their holdings. (Primero v. CAR, 101 Phil. 675); It is our considered judgment, since the return by the lessee of the leased property to the lessor upon the expiration of the contract involves also a transfer of legal possession, and taking into account the manifest intent of the lawmaking body in amending the law, i.e., to provide the tenant with security of tenure in all cases of transfer of legal possession, that the instant case falls within and is governed by the provisions of Section 9 of Republic Act 1199, as amended by Republic Act 2263. (Joya v. Pareja, 106 Phil. 645) ... that the tenant may proceed against the transferee of the land to enforce obligation incurred by the former landholder in relation to said land, for the reason that 'such obligation. . . falls upon the assignee or transferee of the land' pursuant to Sec. 9 abovementioned. Since respondents are in turn free to proceed against the former landholder for reimbursement, it is not iniquitous to hold them responsible to the tenant for said obligations. Moreover, it is the purposes of Republic Act 1199, particularly Sec. 9 thereof, to insure that the right of the tenant to receive his lawful share of the produce of the land is unhampered by the transfer of said land from one landholder to another. (Almarinez v. Potenciano, 120 Phil. 1154.) Therefore, petitioner, being a landholder, can be held liable to private respondents for their shares in the coconuts harvested from the landholding in question. As to the fourth issue, i.e., that the computation of the private respondents thirty percent (30%) share in the harvest from 1971 to 1975, made by the Court of Agrarian Relations and affirmed by the Court of Appeals, is erroneous, this Court finds no compelling reason to depart from such computation, as it is a part of the findings of fact and conclusions drawn therefrom by the respondent appellate court. Such findings and conclusions should not be disturbed on appeal, in the absence of proof that they are unfounded or were arbitrarily arrived at or that the Court of Appeals had failed to consider important evidence to the contrary. In Bagsican v. Court of appeals, it was held that: ... in agrarian cases, all that is required is mere substantial evidence. xxx xxx xxx Under this rule, all that the appellate court has to do, insofar as the evidence is concerned, is to find out if the decision:' is supported by substantial evidence. So much so that the findings of fact of the Court of Agrarian Relations, if supported by such evidence, are conclusive on the appellate tribunal. 29 The respondent appellate court, in the case at bar, acted correctly when it ruled: On the whole, we are not at liberty to reverse the foregoing findings of fact of the Agrarian Court in the absence of any proof that are unfounded or where arbitrarily arrived at or that the court had failed to consider important evidence to the contrary. It is well-established that so long as the findings of fact of the Agrarian Court attain the minimum, evidentiary support demanded by law, that is, supported by substantial evidence, such findings cannot be reversed by the appellate tribunals. In the present case, We do not find any cogent reason to adopt a conclusion different from that reached by the court a quo. 30 WHEREFORE, the petition is DENIED. The decision:' appealed from is AFFIRMED. Costs against the petitioner. SO ORDERED.

G.R. No. L-44570 May 30, 1986 MANUEL GUERRERO and MARIA GUERRERO, petitioners, vs. HON. COURT OF APPEALS, and APOLINARIO BENITEZ, respondents. A.D. Guerrero for petitioners. Bureau of Legal Assistance for private respondents. GUTIERREZ, JR., J.: Whether or not a tenancy relationship exists between the parties Manuel Guerrero, et al and Apolinario Benitez, et al. as to determine their respective rights and obligations to one another is the issue in this petition to review the decision of the then Court of Appeals, now the Intermediate Appellate Court, which affirmed in toto the decision of the Court of Agrarian Relations in CAR Case No. 6793-NE (SA-Q) '73, the dispositive portion of which reads: In view of all the foregoing, judgment is hereby rendered: (1) ordering defendants-spouses Manuel and Maria Guerrero to reinstate plaintiff Apolinario Benitez to the 10-hectare portion of the 16-hectare coconut holding in question, located at Bo. San Joaquin, Maria Aurora Sub-province Quezon and to maintain said plaintiff in the peaceful possession and cultivation thereof, with all the rights accorded and obligations imposed upon him by law; (2) ordering defendants Paulino and Rogelio both surnamed Latigay to vacate the said ten-hectare portion and deliver possession thereof to plaintiff Apolinario Benitez; (3) ordering defendants-spouses Manuel and Maria Guerrero to pay damages to plaintiffs in the amount of P14,911.20 beginning from July, 1973 and to pay the same amount every year thereafter until plaintiff is effectively reinstated to the ten-hectare portion; (4) denying plaintiff-tenants' prayer for reconstruction of the copra cottage: and (5) ordering defendants-spouses Manuel and Maria Guerrero to pay plaintiff the amount of P200.00 by way of litigation expenses. All other claims of the parties are denied. With costs against defendants-spouses. The petitioners adopt the respondent court's findings of fact excepting, however, to its conclusion that tenancy relations exist between the petitioners and the respondents, thus: In 1969, plaintiff Apolinario Benitez was taken by defendants- spouses Manuel and Maria Guerrero to take care of their 60 heads of cows which were grazing within their 21-hectare coconut plantation situated at Bo. San Joaquin, Maria Aurora, Subprovince of Aurora, Quezon. Plaintiff was allowed for that purpose to put up a hut within the plantation where he and his family stayed. In addition to attending to the cows, he was made to clean the already fruitbearing coconut trees, burn dried leaves and grass and to do such other similar chores. During harvest time which usually comes every three months, he was also made to pick coconuts and gather the fallen ones from a 16-hectare portion of the 21-hectare plantation. He had to husk and split the nuts and then process its meat into copra in defendants' copra kiln. For his work related to the coconuts, he shared 1/3 of the proceeds from the copra he processed and sold in the market. For attending to the cows he was paid P500 a year. Sometime in the early part of 1973, plaintiff was refrained from gathering nuts from the 10-hectare portion of the 16-hectare part of the plantation from where he used to gather nuts. He felt aggrieved by the acts of defendants and he brought the matter to the attention of the Office of Special Unit in the Office of the President in Malacanang, Manila. This led to an execution of an agreement, now marked as Exh. D, whereby defendants agreed, among others, to let plaintiff work on the 16-hectare portion of the plantation as tenant thereon and that their relationship will be guided by the provisions of republic Act No. 1199. The Agricultural Tenancy Act of the Philippines. Then in July, 1973, he was again refrained from gathering nuts from the 10-hectare portion of the plantation with threats of bodily harm if he persists to gather fruits therefrom. Defendant spouses, the Guerreros, then assigned defendants Rogelio and Paulino Latigay to do the gathering of the nuts and the processing thereof into copra. Defendants Guerreros also caused to be demolished a part of the cottage

where plaintiff and his family lived, thus, making plaintiffs feel that they (defendants) meant business. Hence, this case for reinstatement with damages. The lower court formulated four (4) issues by which it was guided in the resolution of the questions raised by the pleadings and evidence and we pertinently quote as follows: (1) whether or not plaintiff is the tenant on the coconut landholding in question consisting of sixteen (16) hectares; (2) In The affirmative, whether or not he was unlawfully dispossessed of ten (10) hectare thereof; (3) Whether or not the parties are entitled to actual and moral damages, attorney's fees and litigation expenses. This petition for review poses the following questions of law: I Whether or not with the passage of Presidential Decree 1038 only last October 21, 1976, Republic Act 6389 otherwise known as the Code of Agrarian Reforms has repealed in their entirety the Agricultural Tenancy Act (Republic Act 1199) and the Agricultural Reform Code (Republic Act 3844) abrogating or nullifying therefore all agricultural share tenancy agreements over all kinds of lands, as the one involved in the case at bar-over coconut plantation-and hence, the complaint below as well as the challenged decision by the courts below, based as they are on such share tenancy agreements, have lost their validity cessante ratio legis, cessat ipsa lex. II Assuming arguendo that said laws have not thus been repealed, is respondent Benitez hereunder the undisputed fact of the case as found by the courts below a share tenant within the purview of the said laws, i.e., Republic Acts 1199 and 3844, or a mere farmhand or farm worker as such relationship were extensively discussed in Delos Reyes vs. Espinelli, 30 SCRA 574. (Copied verbatim from Petition, p. 31rollo) Petitioner insists in this petition that Benitez was a mere farmhand or laborer who was dismissed as an employee from the landholding in question and not ousted therefrom as tenant. Whether a person is a tenant or not is basically a question of fact and the findings of the respondent court and the trial court are, generally, entitled to respect and non-disturbance. The law defines "agricultural tenancy" as the physical possession by a person of land devoted to agriculture, belonging to or legally possessed by another for the purpose of production through the labor of the former and of the members of his immediate farm household in consideration of which the former agrees to share the harvest with the latter or to pay a price certain or ascertainable, either in produce or in money, or in both (Section 3, Republic Act 1199, The Agricultural tenancy Act, as amended.) With petitioner reference to this case, "share tenancy" exists whenever two persons agree on a joint undertaking for agricultural production wherein one party furnishes the land and the other his labor, with either or both contributing any one or several of the items of production, the tenant cultivating the land with the aid of labor available from members of his immediate farm household, and the produce thereof to be divided between the landholder and the tenant in proportion to their respective contributions (Sec. 4, RA 1199; Sec. 166(25) RA 3844, Agricultural Land Reform Code). In contrast, a farmhand or agricultural laborer is "any agricultural salary or piece worker but is not limited to a farmworker of a particular farm employer unless this Code expressly provides otherwise, and any individual whose work has ceased as a consequence of, or in connection with, a current agrarian dispute or an unfair labor practice and who has not obtained a substantially equivalent and regular employment" (Sec. 166(15) RA 3844, Agricultural Land Reform Code). The petitioners contend that the two courts below applied erroneous definitions of "tenancy" found in repealed laws. They assert that the Agricultural Tenancy Act and the Agricultural Land Reform Code have been superseded by the Code of Agrarian Reforms, Rep. Act 6389, which the trial court and the Court of Appeals failed to cite and apply. There is no question that the latest law on land and tenancy reforms seeks to abolish agricultural share tenancy as the basic relationship governing farmers and landowners in the country. On August 8, 1963, Republic Act 3844 abolished and outlawed share tenancy and put in its stead the agricultural leasehold system. On September 10, 1971, Republic Act 6389 amending Republic Act 3844 declared share tenancy relationships as contrary to public policy. On the basis of this national policy, the petitioner asserts that no cause of action exists in the case

at bar and the lower court's committed grave error in upholding the respondent's status as share tenant in the petitioners' landholding. The petitioners' arguments are regressive and, if followed, would turn back the advances in agrarian reform law. The repeal of the Agricultural Tenancy Act and the Agricultural Land Reform Code mark the movement not only towards the leasehold system but towards eventual ownership of land by its tillers. The phasing out of share tenancy was never intended to mean a reversion of tenants into mere farmhands or hired laborers with no tenurial rights whatsoever. It is important to note that the Agricultural Tenancy Act (RA 1199) and the Agricultural Land Reform Code (RA 3844) have not been entirely repealed by the Code of Agrarian Reform (RA 6389) even if the same have been substantially modified by the latter. However, even assuming such an abrogation of the law, the rule that the repeal of a statute defeats all actions pending under the repealed statute is a mere general principle. Among the established exceptions are when vested rights are affected and obligations of contract are impaired. (Aisporna vs. Court of Appeals, 108 SCRA 481). The records establish the private respondents' status as agricultural tenants under the legal definitions. Respondent Benitez has physically possessed the landholding continuously from 1969 until he was ejected from it. Such possession of longstanding is an essential distinction between a mere agricultural laborer and a real tenant within the meaning of the tenancy law (Moreno, Philippine Law Dictionary, 1972 Edition), a tenant being one who, has the temporary use and occupation of land or tenements belonging to another (Bouvier's Law Dictionary, Vol. II, p. 3254) for the purpose of production (Sec. 3, Republic Act 1199; delos Reyes vs. Espinelli, 30 SCRA 574). Respondent Benitez lives on the landholding. He built his house as an annex to the petitioner's copra kiln. A hired laborer would not build his own house at his expense at the risk of losing the same upon his dismissal or termination any time. Such conduct is more consistent with that of an agricultural tenant who enjoys security of tenure under the law. Cultivation is another important factor in determining the existence of tenancy relationships. It is admitted that it had been one Conrado Caruruan, with others, who had originally cleared the land in question and planted the coconut trees, with the respondent coming to work in the landholding only after the same were already fruit bearing. The mere fact that it was not respondent Benitez who had actually seeded the land does not mean that he is not a tenant of the land. The definition of cultivation is not limited merely to the tilling, plowing or harrowing of the land. It includes the promotion of growth and the care of the plants, or husbanding the ground to forward the products of the earth by general industry. The raising of coconuts is a unique agricultural enterprise. Unlike rice, the planting of coconut seedlings does not need harrowing and plowing. Holes are merely dug on the ground of sufficient depth and distance, the seedlings placed in the holes and the surface thereof covered by soil. Some coconut trees are planted only every thirty to a hundred years. The major work in raising coconuts begins when the coconut trees are already fruitbearing. Then it is cultivated by smudging or smoking the plantation, taking care of the coconut trees, applying fertilizer, weeding and watering, thereby increasing the produce. The fact that respondent Benitez, together with his family, handles all phases of farmwork from clearing the landholding to the processing of copra, although at times with the aid of hired laborers, thereby cultivating the land, shows that he is a tenant, not a mere farm laborer. (delos Reyes vs. Espinelli, supra Marcelo vs. de Leon, 105 Phil. 1175). Further indicating the existence of a tenancy relationship between petitioners and respondent is their agreement to share the produce or harvest on a "tercio basis" that is, a 1/3 to 2/3 sharing in favor of the petitioner-landowners. Though not a positive indication of the existence of tenancy relations perse the sharing of harvest taken together with other factors characteristic of tenancy shown to be present in the case at bar, strengthens the claim of respondent that indeed, he is a tenant. The case of delos Reyes vs. Espinelli (supra) clearly explains the matter thus: The agricultural laborer works for the employer, and for his labor he receives a salary or wage, regardless of whether the employer makes a profit. On the other hand, the share tenant par ticipates in the agricultural produce. His share is necessarily dependent on the amount of harvest. Hence, the lower court's computation of damages in favor of respondent based on the number of normal harvests. In most cases, we have considered the system of sharing produce as convincing evidence of tenancy relations. The petitioners entered into an agreement on May 2, 1973 which in clear and categorical terms establishes respondent as a tenant, to wit: AGREEMENT This agreement entered into by and between Manuel Guerrero hereinafter referred to as the landowner and Apolinario Benitez hereinafter referred to as tenant. xxx xxx xxx The petitioners, however, contend that the word "tenant" in the aforequoted agreement was used to mean a hired laborer farm employee as understood agreed upon by the parties. The fact that their relationship would be guided by the provisions

of Republic Act 1199 or the Agricultural Tenancy Act of the Philippines militates against such an assertion. It would be an absurdity for Republic Act 1199 to govern an employer-employee relationship. If as the petitioners insist a meaning other than its general acceptation had been given the word "tenant", the instrument should have so stated '. Aided by a lawyer, the petitioners, nor the respondent could not be said to have misconstrued the same. In clear and categorical terms, the private respondent appears to be nothing else but a tenant: Finally, comes the admission by the petitioners' counsel of the respondent's status as tenant: ATTY. ESTEBAN: Q You said you are living at San Joaquin, who cause the sowing of the lumber you made as annex in the house? ATTY. NALUNDASAN Please remember that under the law, tenant is given the right to live in the holding in question. We admit him as tenant. xxxxxxxxx (Apolinario Benitez on Redirect, TSN, June 25, 1974, pp. 4950). The respondent's status as agricultural tenant should be without question. Once a tenancy relationship is established, the tenant has the right to continue working until such relationship is extinguished according to law. The Agricultural Tenancy Act of 1954 (Republic Act 1199), the Agricultural Land Reform Code of 1963 (Republic Act 3844), the Code of Agrarian Reforms (Republic Act 6389) and Presidential Decree 1038 (Strengthening the Security of Tenure of Tenant Tillers in Non-Rice/Corn Producing Agricultural Lands) all provide for the security of tenure of agricultural tenants. Ejectment may be effected only for causes provided by law, to wit: l) Violation or failure of the tenant to comply with any of the terms and conditions of the tenancy contract or any of the provisions of the Agricultural Tenancy Act; 2) The tenant's failure to pay the agreed rental or to deliver the landholder's share unless the tenant's failure is caused by a fortuitous event or force majeure; 3) Use by the tenant of the land for purposes other than that specified by the agreement of the parties; 4) Failure of the tenant to follow proven farm practices: 5) Serious injury to the land caused by the negligence of the tenant; 6) Conviction by a competent court of a tenant or any member of his immediate family or farm household of a crime against the landholder or a member of his immediate family. (Section 50, Rep. Act 1199). None of the above causes exists in the case at bar. The respondent has been unlawfully deprived of his right to security of tenure and the Court of Agrarian Reforms did not err in ordering the reinstatement of respondent as tenant and granting him damages therefor. Before we close this case, it is pertinent to reiterate that the respondent's right as share tenant do not end with the abolition of share tenancy. As the law seeks to "uplift the farmers from poverty, ignorance and stagnation to make them dignified, self-reliant, strong and responsible citizens ... active participants in nation-building", agricultural share tenants are given the right to leasehold tenancy as a first step towards the ultimate status of owner-cultivator, a goal sought to be achieved by the government program of land reform. It is true that leasehold tenancy for coconut lands and sugar lands has not yet been implemented. The policy makers of government are still studying the feasibility of its application and the consequences of its implementation. Legislation still has to be enacted. Nonetheless, wherever it may be implemented, the eventual goal of having strong and independent farmers working on lands which they own remains. The petitioners' arguments which would use the enactment of the Agrarian Reform Code as the basis for setting back or eliminating the tenurial rights of the tenant have no merit. WHEREFORE, the petition is DISMISSED for lack of merit. The decision of the appellate court is AFFIRMED. No costs. SO ORDERED.

[G.R. No. 86889, December 04, 1990] LUZ FARMS, PETITIONER, VS. THE HONORABLE SECRETARY OF THE DEPARTMENT OF AGRARIAN REFORM, RESPONDENT. DECISION PARAS, J.: This is a petition for prohibition with prayer for restraining order and/or preliminary and permanent injunction against the Honorable Secretary of the Department of Agrarian Reform for acting without jurisdiction in enforcing the assailed provisions of R.A. No. 6657, otherwise known as the Comprehensive Agrarian Reform Law of 1988 and in promulgating the Guidelines and Procedure Implementing Production and Profit Sharing under R.A. No. 6657, insofar as the same apply to herein petitioner, and further from performing an act in violation of the constitutional rights of the petitioner. As gathered from the records, the factual background of this case, is as follows: On June 10, 1988, the President of the Philippines approved R.A. No. 6657, which includes the raising of livestock, poultry and swine in its coverage (Rollo, p. 80). On January 2, 1989, the Secretary of Agrarian Reform promulgated the Guidelines and Procedures Implementing Production and Profit Sharing as embodied in Sections 13 and 32 of R.A. No. 6657 (Rollo, p. 80). On January 9, 1989, the Secretary of Agrarian Reform promulgated its Rules and Regulations implementing Section 11 of R.A. No. 6657 (Commercial Farms). (Rollo, p. 81). Luz Farms, petitioner in this case, is a corporation engaged in the livestock and poultry business and together with others in the same business allegedly stands to be adversely affected by the enforcement of Section 3(b), Section 11, Section 13, Section 16(d) and 17 and Section 32 of R.A. No. 6657 otherwise known as Comprehensive Agrarian Reform Law and of the Guidelines and Procedures Implementing Production and Profit Sharing under R.A. No. 6657 promulgated on January 2, 1989 and the Rules and Regulations Implementing Section 11 thereof as promulgated by the DAR on January 9, 1989 (Rollo, pp. 2-36). Hence, this petition praying that aforesaid laws, guidelines and rules be declared unconstitutional. Meanwhile, it is also prayed that a writ of preliminary injunction or restraining order be issued enjoining public respondents from enforcing the same, insofar as they are made to apply to Luz Farms and other livestock and poultry raisers. This Court in its Resolution dated July 4, 1989 resolved to deny, among others, Luz Farms prayer the issuance of a preliminary injunction in its Manifestation dated May 26 and 31, 1989. (Rollo, p. 98). Later, however, this Court in its Resolution dated August 24, 1989resolved to grant said Motion for Reconsideration regarding the injunctive relief, after the filing and approval by this Court of an injunction bond in the amount of P100,000.00. This Court also gave due course to the petition and required the parties to file their respective memoranda (Rollo, p. 119). The petitioner filed its Memorandum on September 6, 1989 (Rollo, pp. 131-168). On December 22, 1989, the Solicitor General adopted his Comment to the petition as his Memorandum (Rollo, pp. 186-187). Luz Farms questions the following provisions of R.A. 6657, insofar as they are made to apply to it: (a) Section 3(b) which includes the raising of livestock (and poultry) in the definition of Agricultural, Agricultural Enterprise or Agricultural Activity. (b) Section 11 which defines commercial farms as private agricultural lands devoted to commercial, livestock, poultry and swine raising x x x. (c) Section 13 which calls upon petitioner to execute a production-sharing plan. (d) Section 16(d) and 17 which vest on the Department of Agrarian Reform the authority to summarily determine the just compensation to be paid for lands covered by the Comprehensive Agrarian Reform Law. (e) Section 32 which spells out the production-snaring plan mentioned in Section 13 -? "x x x (W)hereby three percent (3%) of the gross sales from the production of such lands are distributed within sixty (60) days of the end of the fiscal year as compensation to regular and other farmworkers in such lands over and above the compensation they currently receive: Provided, That these individuals or entities realize gross sales in excess of five million pesos per annum unless the DAR, upon proper application, determine a lower ceiling. In the event that the individual or entity realizes a profit, an additional ten (10%) of the net profit after tax shall be distributed to said regular and other farmworkerswithin ninety (90) days of the end of the fiscal year. x x x."

The main issue in this petition is the constitutionality of Sections 3(b), 11, 13 and 32 of R.A. No. 6657 (the Comprehensive Agrarian Reform Law of 1988), insofar as the said law includes the raising of livestock, poultry and swine in its coverage as well as the Implementing Rules and Guidelines promulgated in accordance therewith. The Constitutional provision under consideration reads as follows: ARTICLE XIII xxx xxx xxx AGRARIAN AND NATURAL RESOURCES REFORM Section 4. 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 rights of small landowners. The State shall further provide incentives for voluntary land-sharing. xxx xxx xxx."

Luz Farms contended that it does not seek the nullification of R.A. 6657 in its entirety. In fact, it acknowledges the correctness of the decision of this Court in the case of the Association of Small Landowners in the Philippines, Inc. vs. Secretary of Agrarian Reform (G.R. 78742, 14 July 1989) affirming the constitutionality of the Comprehensive Agrarian Reform Law. It, however, argued that Congress in enacting the said law has transcended the mandate of the Constitution, in including land devoted to the raising of livestock, poultry and swine in its coverage (Rollo, p. 131). Livestock or poultry raising is not similar to crop or tree farming. Land is not the primary resource in this undertaking and represents no more than five percent (5%) of the total investment of commercial livestock and poultry raisers. Indeed, there are many owners of residential lands all over the country who use available space in their residences for commercial livestock and raising purposes, under "contract-growing arrangements," whereby they supplement the requirements of meat processing corporations and other commercial livestock and poultry raisers (Rollo, p. 10). Lands support the buildings and other amenities attendant to the raising ofanimals and birds. The use of land is incidental to but not the principalfactor or consideration in productivity in this industry. Excluding backyard raisers, about 80% of those in commercial livestock and poultry production occupy five hectares or less. The remaining 20% are mostly corporate farms (Rollo, p. 11). On the other hand, the public respondent argued that livestock and poultry raising is embraced in the term "agriculture" and the inclusion of such enterprise under Section 3(b) of R.A. 6657 is proper. He cited that Webster's International Dictionary, Second Edition (1954), defines the following words: "Agriculture - the art or science of cultivating the ground and raising and harvesting crops, often, including also, feeding, breeding and management of livestock, tillage, husbandry, farming. It includes farming, horticulture, forestry, dairying, sugarmaking x x x. Livestock - domestic animals used or raised on a farm, especially for profit. Farm - a plot or tract of land devoted to the raising of domestic or other animals." (Rollo, pp. 82-83). The petition is impressed with merit. The question raised is one of constitutional construction. The primary task in constitutional construction is to ascertain and thereafter assure the realization of the purpose of the framers in the adoption of the Constitution (J.M. Tuazon & Co. vs. Land Tenure Administration, 31 SCRA 413 [1970]). Ascertainment of the meaning of the provision of Constitution begins with the language of the document itself. The words used in the Constitution are to be given their ordinary meaning except where technical terms are employed in which case the significance thus attached to them prevails (J.M. Tuazon & Co. vs. Land Tenure Administration, 31 SCRA 413 [1970]). It is generally held that, in construing constitutional provisions which are ambiguous or of doubtful meaning, the courts may consider the debates in the constitutional convention as throwing light on the intent of the framers of the Constitution. It is true that the intent of the convention is not controlling by itself, but as its proceeding was preliminary to the adoption by the people of the Constitution the understanding of the convention as to what was meant by the terms of the constitutional provision which was the subject of the deliberation, goes a long way toward explaining the understanding of the people when they ratified it (Aquino, Jr. v. Enrile, 59 SCRA 183 [1974]). The transcripts of the deliberations of the Constitutional Commission of 1986 on the meaning of the word "agricultural," clearly show that it was never the intention of the framers of the Constitution to include livestock and poultry industry in the coverage of the constitutionally-mandated agrarian reform program of the Government. The Committee adopted the definition of "agricultural land" as defined under Section 186 of R.A. 3844, as land devoted to any growth. Including but not limited to crop lands, saltbeds, fishponds, idle and abandoned land (Record, CONCOM, August 7, 1986, Vol. III, p. 11). The intention of the Committee is to limit the application of the word "agriculture." Commissioner Jamir proposed to insert the word "ARABLE" to distinguish this kind of agricultural land from such lands ascommercial and industrial lands

and residential properties because all of them fall under the general classification of the word "agricultural". This proposal, however, was not considered because the Committee contemplated that agricultural lands are limited to arable and suitable agricultural lands and therefore, do not include commercial, industrial and residential lands (Record, CONCOM, August 7, 1986, Vol. III, p. 30). In the interpellation, then Commissioner Regalado (now a Supreme Court Justice), posed several questions, among others, quoted as follows: xxx xxx xxx

"Line 19 refers to genuine reform program founded on the primary right of farmers and farmworkers. I wonder if it means that leaseholdtenancy is thereby proscribed under this provision because it speaks of the primary right of farmers and farmworkers to own directly or collectively the lands they till. As also mentioned by CommissionerTadeo, farmworkers include those who work in piggeries and poultry projects. I was wondering whether I am wrong in my appreciation that if somebody puts up a piggery or a poultry project and for that purpose hires farmworkers therein, these farmworkers will automatically have the right to own eventually, directly or ultimately or collectively, the land on which the piggeries and poultry projects were constructed. (Record, CONCOM, August 2, 1986, p. 618). xxx xxx xxx." The questions were answered and explained in the statement of then Commissioner Tadeo, quoted as follows: xxx xxx xxx

"Sa pangalawang katanungan ng Ginoo ay medyo hindi kaminagkaunawaan. Ipinaaalam ko kay Commissioner Regalado n a hindinamin inilagay ang agricultural worker sa kadahilanang kasama rito angpiggery, poultry at livestock workers. Ang inilagay namin dito ay farm worker kaya hindi kasama ang piggery, poultry at livestock workers (Record, CONCOM, August 2, 1986, Vol. II, p. 621). It is evident from the foregoing discussion that Section II of R.A. 6657 which includes private agricultural lands devoted to commercial livestock, poultry and swine raising in the definition of "commercial farms" is invalid, to the extent that the aforecited agro-industrial activities are made to be covered by the agrarian reform program of the State. There is simply no reason to include livestock and poultry lands in the coverage of agrarian reform (Rollo, p. 21). Hence, there is merit in Luz Farms argument that the requirement in Sections 13 and 32 of R.A. 6657 directing corporate farms which include livestock and poultry raisers to execute and implement production-sharing plans (pending final redistribution of their landholdings) whereby they are called upon to distribute from three percent (3%) of their gross sales and ten percent (10%) of their net profits to their workers as additional compensation is unreasonable for being confiscatory, and therefore violative of due process (Rollo, p. 21). It has been established that this Court will assume jurisdiction over aconstitutional question only if it is shown that the essential requisites of a judicial inquiry into such a question are first satisfied. Thus, there must be an actual case or controversy involving a conflict of legal rights susceptible judicial determination, the constitutional question must have been opportunely raised by the proper party, and the resolution of the question is unavoidably necessary to the decision of the case itself (Association of Small Landowners of the Philippines, Inc. v. Secretary of Agrarian Reform, G.R. 78742; Acuna v. Arroyo, G.R. 79310; Pabico v.Juico, G.R. 79744; Manaay v. Juico, G.R. 79777, 14 July 1989, 175 SCRA 343). However, despite the inhibitions pressing upon the Court when confronted with constitutional issues, it will not hesitate to declare a law or act invalid when it is convinced that this must be done. In arriving at this conclusion, its only criterion will be the Constitution and God as its conscience gives it in the light to probe its meaning and discover its purpose. Personal motives and political considerations are irrelevancies that cannot influence its decisions. Blandishment is as ineffectual as intimidation, for all the awesome power of the Congress and Executive, the Court will not hesitate "to make the hammer fall heavily," where the acts of these departments, or of any official, betray the peoples will as expressed in the Constitution (Association of Small Landowners of Philippines, Inc. v. Secretary of Agrarian Reform, G.R. 78742; Acuna v. Arroyo, G.R. 79310; Pabico v. Juico, G.R. 79744;Manaay v. Juico, G.R. 79777, 14 July 1989). Thus, where the legislature or the executive acts beyond the scope of its constitutional powers, it becomes the duty of the judiciary to declare what the other branches of the government had assumed to do as void. This is the essence of judicial power conferred by the Constitution "(I)n one Supreme Court and in such lower courts as may be established by law" (Art. VIII, Section 1 of the 1935 Constitution; Article X, Section I of the 1973 Constitution and which was adopted as part of the Freedom Constitution, and Article VIII, Section 1 of the 1987 Constitution) and which power this Court has exercised in many instances (Demetria v. Alba, 148 SCRA 208 [1987]). PREMISES CONSIDERED, the instant petition is hereby GRANTED. Sections 3(b), 11, 13 and 32 of R.A. No. 6657 insofar as the inclusion of the raising of livestock, poultry and swine in its coverage as well as the Implementing Rules and Guidelines promulgated in accordance therewith, are hereby DECLARED null and void for being unconstitutional and the writ of preliminary injunction issued is hereby MADE permanent. SO ORDERED.

SECOND DIVISION STANFILCO EMPLOYEES AGRARIAN REFORM BENEFICIARIES MULTI-PURPOSE COOPERATIVE, Petitioner, G.R. No. 154048 Present: CARPIO, J., Chairperson, LEONARDO-DE CASTRO, BRION, DEL CASTILLO, and ABAD, JJ.

versus

DOLE PHILIPPINES, INC. Promulgated: (STANFILCO DIVISION), ORIBANEX SERVICES, INC. and SPOUSES ELLY AND MYRNA ABUJOS, Respondents. November 27, 2009 x ------------------------------------------------------------------------------------------x

DECISION

BRION, J.: Before this Court is the petition for review on certiorari[1] filed by petitioner Stanfilco Employees Agrarian Reform Beneficiaries Multi-Purpose Cooperative (SEARBEMCO). It assails: (a) the decision[2] of the Court of Appeals (CA) in CA-G.R. SP No. 66148 dated November 27, 2001; and (b) the CAs resolution[3] of June 13, 2002 in the same case, denying SEARBEMCOs motion for reconsideration. THE FACTUAL ANTECEDENTS On January 29, 1998, SEARBEMCO, as seller, and respondent DOLE Philippines, Inc. (Stanfilco Division) (DOLE), as buyer, entered into a Banana Production and Purchase Agreement [4] (BPPA). The BPPA provided that SEARBEMCO shall sell exclusively to DOLE, and the latter shall buy from the former, all Cavendish bananas of required specifications to be planted on the land owned by SEARBEMCO. The BPPA states: The SELLER agrees to sell exclusively to the BUYER, and the BUYER agrees to buy all Cavendish Banana of the Specifications and Quality described in EXHIBIT A hereof produced on the SELLERS plantation covering an area of 351.6367 hectares, more or less, and which is planted and authorized under letter of instruction no. 790 as amended on November 6, 1999 under the terms and conditions herein stipulated. The SELLER shall not increase or decrease the area(s) stated above without the prior written approval of the BUYER. However, the SELLER may reduce said area(s) provided that if the SELLER replaces the reduction by planting bananas on an equivalent area(s) elsewhere, it is agreed that such replacement area(s) shall be deemed covered by the Agreement. If the SELLER plants an area(s) in excess of said 351.6367 hectares, the parties may enter into a separate agreement regarding the production of said additional acreage. SELLER will produce banana to the maximum capacity of the plantation, as much as practicable, consistent with good agricultural practices designed to produce banana of quality having the standards hereinafter set forth for the duration of this Banana Production and Purchase Agreement.

SEARBEMCO bound and obliged itself, inter alia, to do the following: V. SPECIFIC OBLIGATIONS OF THE SELLER xxx

p.) Sell exclusively to the BUYER all bananas produced from the subject plantation, except those rejected by the BUYER for failure to meet the specifications and conditions contained in Exhibit A hereof. In the case of any such rejected bananas, the SELLER shall have the right to sell such rejected bananas to third parties, for domestic non-export consumption. The SELLER shall only sell bananas produced from the plantation and not from any other source. [Emphasis supplied.]

Any dispute arising from or in connection with the BPPA between the parties shall be finally settled through arbitration. To quote the BPPA: IX. ARBITRATION OF DISPUTE All disputes arising in connection with this Agreement shall be finally settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by three (3) Arbitrators appointed in accordance with said Rules. The Arbitration shall be held in a venue to be agreed by the parties. Judgment upon the award rendered may be entered in any Philippine Court having jurisdiction or application may be made to such court for judicial acceptance of the award and as order of enforcement, as the case may be.

On December 11, 2000, DOLE filed a complaint with the Regional Trial Court [5] (RTC) against SEARBEMCO, the spouses Elly and Myrna Abujos (spouses Abujos), and Oribanex Services, Inc. (Oribanex) for specific performance and damages, with a prayer for the issuance of a writ of preliminary injunction and of a temporary restraining order. DOLE alleged that SEARBEMCO sold and delivered to Oribanex, through the spouses Abujos, the bananas rejected by DOLE, in violation of paragraph 5(p), Article V of the BPPA which limited the sale of rejected bananas for domestic non-export consumption. DOLE further alleged that Oribanex is likewise an exporter of bananas and is its direct competitor. DOLE narrated in its complaint how SEARBEMCO sold and delivered the rejected bananas to Oribanex through the spouses Abujos: 9.) That, however, on April 12, 2000 at about 5:00 oclock in the afternoon, [DOLE] through its authorized security personnel discovered that defendant SEARBEMCO, in violation of Section 5(p) Article V of the Banana Production and Purchase Agreement, packed the bananas rejected by [DOLE] in boxes marked CONSUL in Packing Plant 32 in DAPCO Panabo and sold and delivered them to defendant Abujos; 10.) That about 373 CONSUL marked boxes were packed and knowingly sold by defendant SEARBEMCO to ORIBANEX SERVICES, INC. through defendants Abujos who carried and loaded the same on board a blue Isuzu Canter bearing plate no. LDM 976 and delivered to defendant ORIBANEX for export at the TEFASCO Wharf covered by Abujos Delivery Receipt, a copy of which is hereto attached as Annex B; 11.) That the following day, April 13, 2000, again the same security found that defendant SEARBEMCO continued to pack the bananas rejected by plaintiff in boxes marked as CONSUL and, in violation of paragraph 5(p) Article V of the Banana Production and Purchase Agreement, sold and delivered them to defendant ORIBANEX SERVICES, INC., for export, through defendants Abujos; 12.) That about 648 CONSUL marked boxes were packed and knowingly sold by defendant SEARBEMCO to ORIBANEX SERVICES, INC., through defendants Abujos who carried and loaded the same on board a red Isuzu Forwarder, bearing plate no. LCV 918, and delivered to defendant ORIBANEX for export at the TEFASCO Wharf covered by Abujos Delivery Receipt, a copy of which is hereto attached and marked as Annex C; 13.) That the sale of a total of 712 boxes of rejected bananas covering April 12 and 13, 2000, or any other dates prior thereto or made thereafter by defendant SEARBEMCO to defendant ORIBANEX SERVICES, INC. through defendant Abujos is in utter violation of the Agreement between plaintiff [DOLE] and defendant SEARBEMCO that SEARBEMCO may sell bananas rejected by plaintiff to parties for domestic non-export consumption only. SEARBEMCO responded with a motion to dismiss on the grounds of lack of jurisdiction over the subject matter of the claim, lack of cause of action, failure to submit to arbitration which is a condition precedent to the filing of a complaint, and the complaints defective verification and certification of non-forum shopping.[6] SEARBEMCO argued that:

1)

the Department of Agrarian Reform Adjudication Board (DARAB) has exclusive jurisdiction over the action filed by DOLE, pursuant to Sections 1 and 3(e) of Administrative Order No. 09, Series of 1998[7] (AO No. 9-98) and Section 5(a) and (c) of Administrative Order No. 02, Series of 1999 [8] (AO No. 2-99) of the Department of Agrarian Reform (DAR), since the dispute between the parties is an agrarian dispute within the exclusive competence of the DARAB to resolve;

2)

the filing of the complaint is premature, as the dispute between DOLE and SEARBEMCO has not been referred to and resolved by arbitration, contrary to Article IX of the BPPA and Article V, Sec. 30(g) [9] of

AO No. 9-98 of the DAR; 3) it did not violate Section 5(p), Article V of the BPPA, since the rejected bananas were sold to the spouses Abujos who were third-party buyers and not exporters of bananas; and 4) the complaint is fatally defective as the Board of Directors of DOLE did not approve any resolution authorizing Atty. Reynaldo Echavez to execute the requisite Verification and Certification Against Forum Shopping and, therefore, the same is fatally defective. DOLE opposed SEARBEMCOs motion to dismiss alleging, among others, that: 1) 2) the dispute between the parties is not an agrarian dispute within the exclusive jurisdiction of the DARAB under Republic Act No. 6657[10] (RA No. 6657); and the Arbitration Clause of the BPPA is not applicable as, aside from SEARBEMCO, DOLE impleaded other parties (i.e., the spouses Abujos and Oribanex who are not parties to the BPPA) as defendants.[11]

Subsequently, DOLE filed on February 2, 2001 an amended complaint,[12] the amendment consisting of the Verification and Certification against forum shopping for DOLE executed by Danilo C. Quinto, DOLEs Zone Manager. THE RTC RULING The RTC denied SEARBEMCOs motion to dismiss in an Order dated May 16, 2001.[13] The trial court stated that the case does not involve an agrarian conflict and is a judicial matter that it can resolve. SEARBEMCO moved for the reconsideration of the RTC Order.[14] The RTC denied the motion for lack of merit in its Order of July 12, 2001.[15] THE CA RULING On July 26, 2001, SEARBEMCO filed a special civil action for certiorari[16] with the CA alleging grave abuse of discretion on the part of the RTC for denying its motion to dismiss and the subsequent motion for reconsideration. SEARBEMCO argued that the BPPA the parties executed is an agri-business venture agreement contemplated by DARs AO No. 9-98. Thus, any dispute arising from the interpretation and implementation of the BPPA is an agrarian dispute within the exclusive jurisdiction of the DARAB. In a decision dated November 27, 2001,[17] the CA found that the RTC did not gravely abuse its discretion in denying SEARBEMCOs motion to dismiss and motion for reconsideration. The CA ruled that the [DAR] has no jurisdiction, under said [AO No. 9-98], over actions between [SEARBEMCO] and [DOLE] for enforcement of the said Agreement when one commits a breach thereof and for redress by way of specific performance and damages inclusive of injunctive relief. [18] It held that the case is not an agrarian dispute within the purview of Section 3(d) of RA No. 6657,[19] but is an action to compel SEARBEMCO to comply with its obligations under the BPPA; it called for the application of the provisions of the Civil Code, not RA No. 6657. The CA likewise disregarded SEARBEMCOs emphatic argument that DOLEs complaint was prematurely filed because of its failure to first resort to arbitration. The arbitration clause under the BPPA, said the CA, applies only when the parties involved are parties to the agreement; in its complaint, DOLE included the spouses Abujos and Oribanex as defendants. According to the CA, if [DOLE] referred its dispute with [SEARBEMCO] to a Panel of Arbitrators, any

judgment rendered by the latter, whether for or against [DOLE] will not be binding on the [spouses Abujos] and [Oribanex], as case law has it that only the parties to a suit, as well as their successors-in-interest, are bound by the judgment of the Court or quasi-judicial bodies.[20] On SEARBEMCOs argument that the Verification and Certification Against Forum Shopping under DOLEs amended complaint is defective for failure to state that this was based on personal knowledge, the CA ruled that the omission of the word personal did not render the Verification and Certification defective. SEARBEMCO moved for reconsideration of the decision, but the CA denied the motion for lack of merit in its resolution of June 13, 2002.[21] ASSIGNMENT OF ERRORS In the present petition, SEARBEMCO submits that the CA erred in ruling that: 1.) the RTC has jurisdiction over the subject matter of the complaint of DOLE, considering that the case involves an agrarian dispute within the exclusive jurisdiction of the DARAB; 2.) the complaint of DOLE states a cause of action, despite the fact that SEARBEMCO has not violated any provision of the BPPA; and 3.) the filing of the complaint is not premature, despite DOLEs failure to submit its claim to arbitration a condition precedent to any juridical recourse. THE COURTS RULING We do not find the petition meritorious. DOLEs complaint falls within the jurisdiction of the regular courts, not the DARAB.

SEARBEMCO mainly relies on Section 50[22] of RA No. 6657 and the characterization of the controversy as an agrarian dispute or as an agrarian reform matter in contending that the present controversy falls within the competence of the DARAB and not of the regular courts. The BPPA, SEARBEMCO claims, is a joint venture and a production, processing and marketing agreement, as defined under Section 5 (c) (i) and (ii) of DAR AO No. 2-99;[23] hence, any dispute arising from the BPPA is within the exclusive jurisdiction of the DARAB. SEARBEMCO also asserts that the parties relationship in the present case is not only that of buyer and seller, but also that of supplier of land covered by the CARP and of manpower on the part of SEARBEMCO, and supplier of agricultural inputs, financing and technological expertise on the part of DOLE. Therefore, SEARBEMCO concludes that the BPPA is not an ordinary contract, but one that involves an agrarian element and, as such, is imbued with public interest. We clarify at the outset that what we are reviewing in this petition is the legal question of whether the CA correctly ruled that the RTC committed no grave abuse discretion in denying SEARBEMCOs motion to dismiss. In ruling for legal correctness, we have to view the CA decision in the same context that the petition forcertiorari it ruled upon was presented to the appellate court; we have to examine the CA decision from the prism of whether it correctly determined the presence or absence of grave abuse of discretion in the RTC ruling before it, not on the basis of whether the RTC ruling on the merits of the case was correct. In other words, we have to be keenly aware that the CA undertook a Rule 65 review, not a review on appeal, of the challenged RTC ruling. A court acts with grave abuse of discretion amounting to lack or excess of jurisdiction when its action was performed in a capricious and whimsical exercise of judgment equivalent to lack of discretion. The abuse of discretion must be so patent and gross as to amount to an evasion of a positive duty or to a virtual refusal to perform a duty enjoined by law, or to act at all in contemplation of the law, as where the power is exercised in an arbitrary and despotic manner by reason or passion or personal hostility.[24]

As the CA found, the RTCs action was not attended by any grave abuse of discretion and the RTC correctly ruled in denying SEARBEMCOs motion to dismiss. We fully agree with the CA. Section 3(d) of RA No. 6657 is clear in defining an agrarian dispute: any controversy relating to tenurial arrangements, whether leasehold, tenancy, stewardship or otherwise, over lands devoted to agriculture, including dispute concerning farm-workers associations or representations of persons in negotiating, fixing, maintaining, changing or seeking to arrange terms or conditions of such tenurial arrangements. It includes any controversy relating to compensation of lands acquired under this Act and other terms and conditions of transfer of ownership from landowners to farmworkers, tenants and other agrarian reform beneficiaries, whether the disputants stand in the proximate relation of farm operator and beneficiary, landowner and tenant, or lessor and lessee.[25] RA No. 6657 is procedurally implemented through the 2003 DARAB Rules of Procedure where Section 1, Rule enumerates the instances where the DARAB shall have primary and exclusive jurisdiction. A notable feature of RA

II

[26]

No. 6657 and its implementing rules is the focus on agricultural lands and the relationship over this land that serves as the basis in the determination of whether a matter falls under DARAB jurisdiction. In Heirs of the Late Hernan Rey Santos v. Court of Appeals,[27] we held that: For DARAB to have jurisdiction over a case, there must exist a tenancy relationship between the parties. x x x. In Vda. De Tangub v. Court of Appeals (191 SCRA 885), we held that the jurisdiction of the Department of Agrarian Reform is limited to the following: a.) adjudication of all matters involving implementation of agrarian reform; b.) resolution of agrarian conflicts and land tenure related problems; and c.) approval and disapproval of the conversion, restructuring or readjustment of agricultural lands into residential, commercial, industrial, and other non-agricultural uses. [Emphasis supplied].

The case of Pasong Bayabas Farmers Association, Inc. v. Court of Appeals[28] lists down the indispensable elements for a tenancy relationship to exist: (1) the parties are the landowner and the tenant or agricultural lessee; (2) the subject matter of the relationship is an agricultural land; (3) there is consent between the parties to the relationship; (4) the purpose of the relationship is to bring about agricultural production; (5) there is personal cultivation on the part of the tenant or agricultural lessee; and (6) the harvest is shared between the landowner and the tenant or the agricultural lessee. The parties in the present case have no tenurial, leasehold, or any other agrarian relationship that could bring their controversy within the ambit of agrarian reform laws and within the jurisdiction of the DARAB. In fact, SEARBEMCO has no allegation whatsoever in its motion to dismiss regarding any tenancy relationship between it and DOLE that gave the present dispute the character of an agrarian dispute. We have always held that tenancy relations cannot be presumed. The elements of tenancy must first be proved by substantial evidence which can be shown through records, documents, and written agreements between the parties. A principal factor, too, to consider in determining whether a tenancy relationship exists is the intent of the parties. [29] SEARBEMCO has not shown that the above-mentioned indispensable elements of tenancy relations are present between it and DOLE. It also cannot be gleaned from the intention of the parties that they intended to form a tenancy relationship between them. In the absence of any such intent and resulting relationship, the DARAB cannot have jurisdiction. Instead, the present petition is properly cognizable by the regular courts, as the CA and the RTC correctly ruled. Notably, the requirement of the existence of tenurial relationship has been relaxed in the cases of Islanders CARPFarmers Beneficiaries Muti-Purpose Cooperative, Inc. v. Lapanday Agricultural and Devt. Corporation[30] and Cubero v. Laguna West Multi-Purpose Cooperative, Inc.[31] The Court, speaking through former Chief Justice Panganiban, declared in Islanders that: [The definition of agrarian dispute in RA No. 6657 is] broad enough to include disputes arising from any tenurial arrangement beyond the traditional landowner-tenant or lessor-lessee relationship. xxx [A]grarian reform extends beyond the mere acquisition and redistribution of land, the law acknowledges other modes of tenurial arrangements to effect the implementation of CARP.[32]

While Islanders and Cubero may seem to serve as precedents to the present case, a close analysis of these cases, however, leads us to conclude that significant differences exist in the factual circumstances between those cases and the present case, thus rendering the rulings in these cited cases inapplicable. Islanders questioned (through a petition for declaration of nullity filed before the RTC of Tagum City) the lack of authority of the farmer-beneficiaries alleged representative to enter into a Joint Production Agreement with Lapanday. The farmers-beneficiaries assailed the validity of the agreement by additionally claiming that its terms contravened RA No. 6657. Cubero likewise involved a petition to declare the nullity of a Joint Venture Agreement between the farmerbeneficiaries and Laguna West Multi-Purpose Cooporative, Inc. The successors of the farmer-beneficiaries assailed the agreement before the RTC of Tanauan, Batangas for having been executed within the 10-year prohibitory period under Section 27 of RA No. 6657. In both cases, the Court ruled that the RTC lacked jurisdiction to hear the complaint and declared the DARAB as the competent body to resolve the dispute. The Court declared that when the question 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. Carefully analyzed, the principal issue raised in Islanders and Cubero referred to the management, cultivation, and use of the CARP-covered agriculturalland; the issue of the nullity of the joint economic enterprise agreements in Islanders and Cubero would directly affect the agricultural land covered by CARP. Those cases significantly did not pertain to post-harvest transactions involving the produce from CARP-covered agricultural lands, as the case before us does now. Moreover, the resolution of the issue raised in Islanders and Cubero required the interpretation and application of the provisions of RA No. 6657, considering that the farmer-beneficiaries claimed that the agreements contravened specific provisions of that law. In the present case, DOLEs complaint for specific performance and damages before the RTC did not question the validity of the BPPA that would require the application of the provisions of RA No. 6657; neither did SEARBEMCOs motion to dismiss nor its other pleadings assail the validity of the BPPA on the ground that its provisions violate RA No. 6657. The resolution of the present case would therefore involve, more than anything else, the application of civil law provisions on breaches of contract, rather than agrarian reform principles. Indeed, in support of their arguments, the parties have capitalized and focused on their relationship as buyer and seller. DOLE, the buyer, filed a complaint against SEARBEMCO, the seller, to enforce the BPPA between them and to compel the latter to comply with its obligations. The CA is thus legally correct in its declaration that the action before the RTC does not involve an agrarian dispute, nor does it call for the application of Agrarian Reform laws. x x x. The action of [DOLE] involves and calls for the application of the New Civil Code, in tandem with the terms and conditions of the [BPPA] of [SEARBEMCO] and [DOLE].[33] We find SEARBEMCOs reliance on DAR AO No. 9-98 and AO No. 2-99 as bases for DARABs alleged expanded jurisdiction over all disputes arising from the interpretation of agribusiness ventures to be misplaced. DARABs jurisdiction under Section 50 of RA No. 6657 should be read in conjunction with the coverage of agrarian reform laws; administrative issuances like DAR AO Nos. 9-98 and 2-99 cannot validly extend the scope of the jurisdiction set by law. In so ruling, however, we do not pass upon the validity of these administrative issuances. We do recognize the possibility that disputes may exist between parties to joint economic enterprises that directly pertain to the management, cultivation, and use of CARP-covered agricultural land. Based on our above discussion, these disputes will fall within DARABs jurisdiction. Even assuming that the present case can be classified as an agrarian dispute involving the interpretation or implementation of agribusiness venture agreements, DARAB still cannot validly acquire jurisdiction, at least insofar as

DOLEs cause of action against the third parties the spouses Abujos and Oribanex is concerned. To prevent multiple actions, we hold that the present case is best resolved by the trial court. DOLEs complaint validly states a cause of action

SEARBEMCO asserts that the pleading containing DOLEs claim against it states no cause of action. It contends that it did not violate any of the provisions of the BPPA, since the bananas rejected by DOLE were sold to the spouses Abujos who are third-party buyers and are not exporters of bananas transactions that the BPPA allows. Since the sole basis of DOLEs complaint was SEARBEMCOs alleged violation of the BPPA, which SEARBEMCO insists did not take place, the complaint therefore did not state a cause of action. Due consideration of the basic rules on lack of cause of action as a ground for a motion to dismiss weighs against SEARBEMCOs argument. In the case of Jimenez, Jr. v. Jordana,[34] this Court had the opportunity to discuss the sufficiency of the allegations of the complaint to uphold a valid cause of action, as follows: In a motion to dismiss, a defendant hypothetically admits the truth of the material allegations of the plaintiffs complaint. This hypothetical admission extends to the relevant and material facts pleaded in, and the inferences fairly deductible from, the complaint. Hence, to determine whether the sufficiency of the facts alleged in the complaint constitutes a cause of action, the test is as follows: admitting the truth of the facts alleged, can the court render a valid judgment in accordance with the prayer? To sustain a motion to dismiss, the movant needs to show that the plaintiffs claim for relief does not exist at all. On the contrary, the complaint is sufficient if it contains sufficient notice of the cause of action even though the allegations may be vague or indefinite, in which event, the proper recourse would be, not a motion to dismiss, but a motion for a bill of particulars.[35]

In applying this authoritative test, we must hypothetically assume the truth of DOLEs allegations, and determine whether the RTC can render a valid judgment in accordance with its prayer. We find the allegations in DOLEs complaint to be sufficient basis for the judgment prayed for. Hypothetically admitting the allegations in DOLEs complaint that SEARBEMCO sold the rejected bananas to Oribanex, a competitor of DOLE and also an exporter of bananas, through the spouses Abujos, a valid judgment may be rendered by the RTC holding SEARBEMCO liable for breach of contract. That the sale had been to the spouses Abujos who are not exporters is essentially a denial of DOLEs allegations and is not therefore a material consideration in weighing the merits of the alleged lack of cause of action. What SEARBEMCO stated is a counter-statement of fact and conclusion, and is a defense that it will have to prove at the trial. At this point, the material consideration is merely what the complaint expressly alleged. Hypothetically assuming DOLEs allegations of ultimate sale to Oribanex, through the spouses Abujos, to be true, we hold following the test of sufficiency in Jordana that DOLEs prayer for specific performance and damages may be validly granted; hence, a cause of action exists. The filing of the complaint is not premature since arbitration proceedings are not necessary in the present case

SEARBEMCO argues that DOLE failed to comply with a condition precedent before the filing of its complaint with the RTC, i.e., DOLE did not attempt to settle their controversy through arbitration proceedings. SEARBEMCO relies on Article V, Section 30(g) of DAR AO No. 9-98[36] and Section 10 of DAR AO No. 2-99[37] which provide that as a rule, voluntary methods such as mediation or conciliation, shall be preferred in resolving disputes involving joint economic enterprises. SEARBEMCO also cites Section IX of the BPPA which provides that all disputes arising out of or in connection with their agreement shall be finally settled through arbitration.

Following our conclusion that agrarian laws find no application in the present case, we find as the CA did that SEARBEMCOs arguments anchored on these laws are completely baseless. Furthermore, the cited DAR AO No. 2-99, on its face, only mentions a preference, not a strict requirement of referral to arbitration. The BPPA-based argument deserves more and closer consideration. We agree with the CA ruling that the BPPA arbitration clause does not apply to the present case since third parties are involved. Any judgment or ruling to be rendered by the panel of arbitrators will be useless if third parties are included in the case, since the arbitral ruling will not bind them; they are not parties to the arbitration agreement. In the present case, DOLE included as parties the spouses Abujos and Oribanex since they are necessary parties, i.e., they were directly involved in the BPPA violation DOLE alleged, and their participation are indispensable for a complete resolution of the dispute. To require the spouses Abujos and Oribanex to submit themselves to arbitration and to abide by whatever judgment or ruling the panel of arbitrators shall make is legally untenable; no law and no agreement made with their participation can compel them to submit to arbitration. In support of its position, SEARBEMCO cites the case of Toyota Motor Philippines Corp. v. Court of Appeals[38] which holds that, the contention that the arbitration clause has become dysfunctional because of the presence of third parties is untenable. Contracts are respected as the law between the contracting parties. As such, the parties are thereby expected to abide with good faith in their contractual commitments. SEARBEMCO argues that the presence of third parties in the complaint does not affect the validity of the provisions on arbitration. Unfortunately, the ruling in the Toyota case has been superseded by the more recent cases of Heirs of Augusto L. Salas, Jr. v. Laperal Realty Corporation[39]and Del Monte Corporation-USA v. Court of Appeals.[40] Heirs of Salas involved the same issue now before us: whether or not the complaint of petitioners-heirs in that case should be dismissed for their failure to submit the matter to arbitration before filing their complaint. The petitioners-heirs included as respondents third persons who were not parties to the original agreement between the petitioners-heirs and respondent Laperal Realty. In ruling that prior resort to arbitration is not necessary, this Court held: Respondent Laperal Realty, as a contracting party to the Agreement, has the right to compel petitioners to first arbitrate before seeking judicial relief. However, to split the proceedings into arbitration for respondent Laperal Realty and trial for the respondent lot buyers, or to hold trial in abeyance pending arbitration between petitioners and respondent Laperal Realty, would in effect result in multiplicity of suits, duplicitous procedure and unnecessary delay. On the other hand, it would be in the interest of justice if the trial court hears the complaint against all herein respondents and adjudicates petitioners rights as against theirs in a single and complete proceeding.[41] The case of Del Monte is more direct in stating that the doctrine held in the Toyota case has already been abandoned: The Agreement between petitioner DMC-USA and private respondent MMI is a contract. The provision to submit to arbitration any dispute arising therefrom and the relationship of the parties is part of that contract and is itself a contract. As a rule, contracts are respected as the law between the contracting parties and produce effect as between them, their assigns and heirs. Clearly, only parties to the Agreement, i.e., petitioners DMC-USA and its Managing Director for Export Sales Paul E. Derby, and private respondents MMI and its Managing Director Lily Sy are bound by the Agreement and its arbitration clause as they are the only signatories thereto. Petitioners Daniel Collins and Luis Hidalgo, and private respondent SFI, not parties to the Agreement and cannot even be considered assigns or heirs of the parties, are not bound by the Agreement and the arbitration clause therein. Consequently, referral to arbitration in the State of California pursuant to the arbitration clause and the suspension of the proceedings in Civil Case No. 2637-MN pending the return of the arbitral award could be called for but only as to petitioners DMC-USA and Paul E. Derby, Jr., and private respondents MMI and Lily Sy, and not as to other parties in this case, in accordance with the recent case of Heirs of Augusto L. Salas, Jr. v. Laperal Realty Corporation, which superseded that of [sic] Toyota Motor Philippines Corp. v. Court of Appeals. xxxx The object of arbitration is to allow the expeditious determination of a dispute. Clearly, the issue before us could not be speedily and efficiently resolved in its entirety if we allow simultaneous arbitration proceedings and trial, or suspension of trial pending arbitration. Accordingly, the interest of

justice would only be served if the trial court hears and adjudicates the case in a single and complete proceeding.[42]

Following these precedents, the CA was therefore correct in its conclusion that the parties agreement to refer their dispute to arbitration applies only where the parties to the BPPA are solely the disputing parties. Additionally, the inclusion of third parties in the complaint supports our declaration that the present case does not fall under DARABs jurisdiction. DARABs quasi-judicial powers under Section 50 of RA No. 6657 may be invoked only when there is prior certification from the Barangay Agrarian Reform Committee (or BARC) that the dispute has been submitted to it for mediation and conciliation, without any success of settlement. [43] Since the present dispute need not be referred to arbitration (including mediation or conciliation) because of the inclusion of third parties, neither SEARBEMCO nor DOLE will be able to present the requisite BARC certification that is necessary to invoke DARABs jurisdiction; hence, there will be no compliance with Section 53 of RA No. 6657. WHEREFORE, premises considered, we hereby DENY the petition for certiorari for lack of merit. The Regional Trial Court, Branch 34, Panabo City, is hereby directed to proceed with the case in accordance with this Decision. Costs against petitioner SEARBEMCO. SO ORDERED.

G.R. No. 100091 October 22, 1992 CENTRAL MINDANAO UNIVERSITY REPRESENTED ITS PRESIDENT DR. LEONARDO A. CHUA, petitioner, vs. THE DEPARTMENT OF AGRARIAN REFORM ADJUDICATION BOARD, THE COURT OF APPEALS and ALVIN OBRIQUE, REPRESENTING BUKIDNON FREE FARMERS AGRICULTURAL LABORERS ORGANIZATION (BUFFALO),respondents.

CAMPOS, JR., J.: This is a Petition for Review on Certiorari under Rule 65 of the Rules of Court to nullify the proceedings and decision of the Department of Agrarian Reform Adjudication Board (DARAB for brevity) dated September 4, 1989 and to set aside the decision the decision * of the Court of Appeals dated August 20, 1990, affirming the decision of the DARAB which ordered the segregation of 400 hectares of suitable, compact and contiguous portions of the Central Mindanao University (CMU for brevity) land and their inclusion in the Comprehensive Agrarian Reform Program (CARP for brevity) for distribution to qualified beneficiaries, on the ground of lack of jurisdiction. This case originated in a complaint filed by complainants calling themselves as the Bukidnon Free Farmers and Agricultural Laborers Organization (BUFFALO for brevity) under the leadership of Alvin Obrique and Luis Hermoso against the CMU, before the Department of Agrarian Reform for Declaration of Status as Tenants, under the CARP. From the records, the following facts are evident. The petitioner, the CMU, is an agricultural educational institution owned and run by the state located in the town of Musuan, Bukidnon province. It started as a farm school at Marilang, Bukidnon in early 1910, in response to the public demand for an agricultural school in Mindanao. It expanded into the Bukidnon National Agricultural High School and was transferred to its new site in Managok near Malaybalay, the provincial capital of Bukidnon. In the early 1960's, it was converted into a college with campus at Musuan, until it became what is now known as the CMU, but still primarily an agricultural university. From its beginning, the school was the answer to the crying need for training people in order to develop the agricultural potential of the island of Mindanao. Those who planned and established the school had a vision as to the future development of that part of the Philippines. On January 16, 1958 the President of the Republic of the Philippines, the late Carlos P. Garcia, "upon the recommendation of the Secretary of Agriculture and Natural Resources, and pursuant to the provisions of Section 53, of Commonwealth Act No. 141, as amended", issued Proclamation No. 476, withdrawing from sale or settlement and reserving for the Mindanao Agricultural College, a site which would be the future campus of what is now the CMU. A total land area comprising 3,080 hectares was surveyed and registered and titled in the name of the petitioner under OCT Nos. 160, 161 and 162. 1

In the course of the cadastral hearing of the school's petition for registration of the aforementioned grant of agricultural land, several tribes belonging to cultural communities, opposed the petition claiming ownership of certain ancestral lands forming part of the tribal reservations. Some of the claims were granted so that what was titled to the present petitioner school was reduced from 3,401 hectares to 3,080 hectares. In the early 1960's, the student population of the school was less than 3,000. By 1988, the student population had expanded to some 13,000 students, so that the school community has an academic population (student, faculty and non-academic staff) of almost 15,000. To cope with the increase in its enrollment, it has expanded and improved its educational facilities partly from government appropriation and partly by self-help measures. True to the concept of a land grant college, the school embarked on self-help measures to carry out its educational objectives, train its students, and maintain various activities which the government appropriation could not adequately support or sustain. In 1984, the CMU approved Resolution No. 160, adopting a livelihood program called "Kilusang Sariling Sikap Program" under which the land resources of the University were leased to its faculty and employees. This arrangement was covered by a written contract. Under this program the faculty and staff combine themselves to groups of five members each, and the CMU provided technical know-how, practical training and all kinds of assistance, to enable each group to cultivate 4 to 5 hectares of land for the lowland rice project. Each group pays the CMU a service fee and also a land use participant's fee. The contract prohibits participants and their hired workers to establish houses or live in the project area and to use the cultivated land as a collateral for any kind of loan. It was expressly stipulated that no landlordtenant relationship existed between the CMU and the faculty and/or employees. This particular program was conceived as a multi-disciplinary applied research extension and productivity program to utilize available land, train people in modern agricultural technology and at the same time give the faculty and staff opportunities within the confines of the CMU reservation to earn additional income to augment their salaries. The location of the CMU at Musuan, Bukidnon, which is quite a distance from the nearest town, was the proper setting for the adoption of such a program. Among the participants in this program were Alvin Obrique, Felix Guinanao, Joven Caballero, Nestor Pulao, Danilo Vasquez, Aronio Pelayo and other complainants. Obrique was a Physics Instructor at the CMU while the others were employees in the lowland rice project. The other complainants who were not members of the faculty or non-academic staff CMU, were hired workers or laborers of the participants in this program. When petitioner Dr. Leonardo Chua became President of the CMU in July 1986, he discontinued the agri-business project for the production of rice, corn and sugar cane known as Agri-Business Management and Training Project, due to losses incurred while carrying on the said project. Some CMU personnel, among whom were the complainants, were laid-off when this project was discontinued. As Assistant Director of this agri-business project, Obrique was found guilty of mishandling the CMU funds and was separated from service by virtue of Executive Order No. 17, the re-organization law of the CMU. Sometime in 1986, under Dr. Chua as President, the CMU launched a self-help project called CMU-Income Enhancement Program (CMU-IEP) to develop unutilized land resources, mobilize and promote the spirit of self-reliance, provide socioeconomic and technical training in actual field project implementation and augment the income of the faculty and the staff. Under the terms of a 3-party Memorandum of Agreement 2 among the CMU, the CMU-Integrated Development Foundation (CMU-IDF) and groups or "seldas" of 5 CMU employees, the CMU would provide the use of 4 to 5 hectares of land to a selda for one (1) calendar year. The CMU-IDF would provide researchers and specialists to assist in the preparation of project proposals and to monitor and analyze project implementation. The selda in turn would pay to the CMU P100 as service fee and P1,000 per hectare as participant's land rental fee. In addition, 400 kilograms of the produce per year would be turned over or donated to the CMU-IDF. The participants agreed not to allow their hired laborers or member of their family to establish any house or live within vicinity of the project area and not to use the allocated lot as collateral for a loan. It was expressly provided that no tenant-landlord relationship would exist as a result of the Agreement. Initially, participation in the CMU-IEP was extended only to workers and staff members who were still employed with the CMU and was not made available to former workers or employees. In the middle of 1987, to cushion the impact of the discontinuance of the rice, corn and sugar cane project on the lives of its former workers, the CMU allowed them to participate in the CMU-IEP as special participants. Under the terms of a contract called Addendum To Existing Memorandum of Agreement Concerning Participation To the CMU-Income Enhancement Program, 3 a former employee would be grouped with an existing selda of his choice and provided one (1) hectare for a lowland rice project for one (1) calendar year. He would pay the land rental participant's fee of P1,000.00 per hectare but on a charge-to-crop basis. He would also be subject to the same prohibitions as those imposed on the CMU employees. It was also expressly provided that no tenant-landlord relationship would exist as a result of the Agreement. The one-year contracts expired on June 30, 1988. Some contracts were renewed. Those whose contracts were not renewed were served with notices to vacate. The non-renewal of the contracts, the discontinuance of the rice, corn and sugar cane project, the loss of jobs due to termination or separation from the service and the alleged harassment by school authorities, all contributed to, and precipitated the filing of the complaint.

On the basis of the above facts, the DARAB found that the private respondents were not tenants and cannot therefore be beneficiaries under the CARP. At the same time, the DARAB ordered the segregation of 400 hectares of suitable, compact and contiguous portions of the CMU land and their inclusion in the CARP for distribution to qualified beneficiaries. The petitioner CMU, in seeking a review of the decisions of the respondents DARAB and the Court of Appeals, raised the following issues: 1.) Whether or not the DARAB has jurisdiction to hear and decide Case No. 005 for Declaration of Status of Tenants and coverage of land under the CARP. 2.) Whether or not respondent Court of Appeals committed serious errors and grave abuse of discretion amounting to lack of jurisdiction in dismissing the Petition for Review on Certiorari and affirming the decision of DARAB. In their complaint, docketed as DAR Case No. 5, filed with the DARAB, complainants Obrique, et al. claimed that they are tenants of the CMU and/or landless peasants claiming/occupying a part or portion of the CMU situated at Sinalayan, Valencia, Bukidnon and Musuan, Bukidnon, consisting of about 1,200 hectares. We agree with the DARAB's finding that Obrique, et. al. are not tenants. Under the terms of the written agreement signed by Obrique, et. al., pursuant to the livelihood program called "Kilusang Sariling Sikap Program", it was expressly stipulated that no landlord-tenant relationship existed between the CMU and the faculty and staff (participants in the project). The CMU did not receive any share from the harvest/fruits of the land tilled by the participants. What the CMU collected was a nominal service fee and land use participant's fee in consideration of all the kinds of assistance given to the participants by the CMU. Again, the agreement signed by the participants under the CMU-IEP clearly stipulated that no landlord-tenant relationship existed, and that the participants are not share croppers nor lessees, and the CMU did not share in the produce of the participants' labor. In the same paragraph of their complaint, complainants claim that they are landless peasants. This allegation requires proof and should not be accepted as factually true. Obrique is not a landless peasant. The facts showed he was Physics Instructor at CMU holding a very responsible position was separated from the service on account of certain irregularities he committed while Assistant Director of the Agri-Business Project of cultivating lowland rice. Others may, at the moment, own no land in Bukidnon but they may not necessarily be so destitute in their places of origin. No proof whatsoever appears in the record to show that they are landless peasants. The evidence on record establish without doubt that the complainants were originally authorized or given permission to occupy certain areas of the CMU property for a definite purpose to carry out certain university projects as part of the CMU's program of activities pursuant to its avowed purpose of giving training and instruction in agricultural and other related technologies, using the land and other resources of the institution as a laboratory for these projects. Their entry into the land of the CMU was with the permission and written consent of the owner, the CMU, for a limited period and for a specific purpose. After the expiration of their privilege to occupy and cultivate the land of the CMU, their continued stay was unauthorized and their settlement on the CMU's land was without legal authority. A person entering upon lands of another, not claiming in good faith the right to do so by virtue of any title of his own, or by virtue of some agreement with the owner or with one whom he believes holds title to the land, is a squatter. 4 Squatters cannot enter the land of another surreptitiously or by stealth, and under the umbrella of the CARP, claim rights to said property as landless peasants. Under Section 73 of R.A. 6657, persons guilty of committing prohibited acts of forcible entry or illegal detainer do not qualify as beneficiaries and may not avail themselves of the rights and benefits of agrarian reform. Any such person who knowingly and wilfully violates the above provision of the Act shall be punished with imprisonment or fine at the discretion of the Court. In view of the above, the private respondents, not being tenants nor proven to be landless peasants, cannot qualify as beneficiaries under the CARP. The questioned decision of the Adjudication Board, affirmed in toto by the Court of Appeals, segregating 400 hectares from the CMU land is primarily based on the alleged fact that the land subject hereof is "not directly, actually and exclusively used for school sites, because the same was leased to Philippine Packing Corporation (now Del Monte Philippines)". In support of this view, the Board held that the "respondent University failed to show that it is using actually, really, truly and in fact, the questioned area to the exclusion of others, nor did it show that the same is directly used without any intervening agency or person", 5 and "there is no definite and concrete showing that the use of said lands are essentially indispensable for educational purposes". 6 The reliance by the respondents Board and Appellate Tribunal on the technical or literal definition from Moreno's Philippine Law Dictionary and Black's Law Dictionary, may give the ordinary reader a classroom meaning of the phrase "is actually directly and exclusively", but in so doing they missed the true meaning of Section 10, R.A. 6657, as to what lands are exempted or excluded from the coverage of the CARP. The pertinent provisions of R.A. 6657, otherwise known as the Comprehensive Agrarian Reform Law of 1988, are as follows:

Sec. 4. SCOPE. The Comprehensive Agrarian Reform Law of 1988 shall cover, regardless of tenurial arrangement and commodity produced, all public and private agricultural lands as provided in Proclamation No. 131 and Executive Order No. 229 including other lands of the public domain suitable for agriculture. More specifically, the following lands are covered by the Comprehensive Agrarian Reform Program: (a) All alienable and disposable lands of the public domain devoted to or suitable for agriculture. No reclassification of forest of mineral lands to agricultural lands shall be undertaken after the approval of this Act until Congress, taking into account ecological, developmental and equity considerations, shall have determined by law, the specific limits of the public domain; (b) All lands of the public domain in excess of the specific limits ad determined by Congress in the preceding paragraph; (c) All other lands owned by the Government devoted to or suitable for agriculture; and (d) All private lands devoted to or suitable for agriculture regardless of the agricultural products raised or that can be raised thereon. Sec. 10 EXEMPTIONS AND EXCLUSIONS. Lands actually, directly and exclusively used and found to be necessary for parks, wildlife, forest reserves, reforestration, fish sanctuaries and breeding grounds, watersheds and mangroves, national defense, school sites and campuses including experimental farm stations operated by public or private schools for educational purposes, seeds and seedlings research and pilot production centers, church sites and convents appurtenant thereto, mosque sites and Islamic centers appurtenant thereto, communal burial grounds and cemeteries, penal colonies and penal farms actually worked by the inmates, government and private research and quarantine centers and all lands with eighteen percent (18%) slope and over, except those already developed shall be exempt from the coverage of this Act. (Emphasis supplied). The construction given by the DARAB to Section 10 restricts the land area of the CMU to its present needs or to a land area presently, actively exploited and utilized by the university in carrying out its present educational program with its present student population and academic facility overlooking the very significant factor of growth of the university in the years to come. By the nature of the CMU, which is a school established to promote agriculture and industry, the need for a vast tract of agricultural land and for future programs of expansion is obvious. At the outset, the CMU was conceived in the same manner as land grant colleges in America, a type of educational institution which blazed the trail for the development of vast tracts of unexplored and undeveloped agricultural lands in the Mid-West. What we now know as Michigan State University, Penn State University and Illinois State University, started as small land grant colleges, with meager funding to support their ever increasing educational programs. They were given extensive tracts of agricultural and forest lands to be developed to support their numerous expanding activities in the fields of agricultural technology and scientific research. Funds for the support of the educational programs of land grant colleges came from government appropriation, tuition and other student fees, private endowments and gifts, and earnings from miscellaneous sources. 7 It was in this same spirit that President Garcia issued Proclamation No. 476, withdrawing from sale or settlement and reserving for the Mindanao Agricultural College (forerunner of the CMU) a land reservation of 3,080 hectares as its future campus. It was set up in Bukidnon, in the hinterlands of Mindanao, in order that it can have enough resources and wide open spaces to grow as an agricultural educational institution, to develop and train future farmers of Mindanao and help attract settlers to that part of the country. In line with its avowed purpose as an agricultural and technical school, the University adopted a land utilization program to develop and exploit its 3080-hectare land reservation as follows: 8 No. of Hectares Percentage a. Livestock and Pasture 1,016.40 33 b. Upland Crops 616 20 c. Campus and Residential sites 462 15 d. Irrigated rice 400.40 13 e. Watershed and forest reservation 308 10 f. Fruit and Trees Crops 154 5

g. Agricultural Experimental stations 123.20 4 3,080.00 100% The first land use plan of the CARP was prepared in 1975 and since then it has undergone several revisions in line with changing economic conditions, national economic policies and financial limitations and availability of resources. The CMU, through Resolution No. 160 S. 1984, pursuant to its development plan, adopted a multi-disciplinary applied research extension and productivity program called the "Kilusang Sariling Sikap Project" (CMU-KSSP). The objectives 9 of this program were: 1. Provide researches who shall assist in (a) preparation of proposal; (b) monitor project implementation; and (c) collect and analyze all data and information relevant to the processes and results of project implementation; 2. Provide the use of land within the University reservation for the purpose of establishing a lowland rice project for the party of the Second Part for a period of one calendar year subject to discretionary renewal by the Party of the First Part; 3. Provide practical training to the Party of the Second Part on the management and operation of their lowland project upon request of Party of the Second Part; and 4. Provide technical assistance in the form of relevant livelihood project specialists who shall extend expertise on scientific methods of crop production upon request by Party of the Second Part. In return for the technical assistance extended by the CMU, the participants in a project pay a nominal amount as service fee. The self-reliance program was adjunct to the CMU's lowland rice project. The portion of the CMU land leased to the Philippine Packing Corporation (now Del Monte Phils., Inc.) was leased long before the CARP was passed. The agreement with the Philippine Packing Corporation was not a lease but a Management and Development Agreement, a joint undertaking where use by the Philippine Packing Corporation of the land was part of the CMU research program, with the direct participation of faculty and students. Said contracts with the Philippine Packing Corporation and others of a similar nature (like MM-Agraplex) were made prior to the enactment of R.A. 6657 and were directly connected to the purpose and objectives of the CMU as an educational institution. As soon as the objectives of the agreement for the joint use of the CMU land were achieved as of June 1988, the CMU adopted a blue print for the exclusive use and utilization of said areas to carry out its own research and agricultural experiments. As to the determination of when and what lands are found to be necessary for use by the CMU, the school is in the best position to resolve and answer the question and pass upon the problem of its needs in relation to its avowed objectives for which the land was given to it by the State. Neither the DARAB nor the Court of Appeals has the right to substitute its judgment or discretion on this matter, unless the evidentiary facts are so manifest as to show that the CMU has no real for the land. It is our opinion that the 400 hectares ordered segregated by the DARAB and affirmed by the Court of Appeals in its Decision dated August 20, 1990, is not covered by the CARP because: (1) It is not alienable and disposable land of the public domain; (2) The CMU land reservation is not in excess of specific limits as determined by Congress; (3) It is private land registered and titled in the name of its lawful owner, the CMU; (4) It is exempt from coverage under Section 10 of R.A. 6657 because the lands are actually, directly and exclusively used and found to be necessary for school site and campus, including experimental farm stations for educational purposes, and for establishing seed and seedling research and pilot production centers. (Emphasis supplied). Under Section 4 and Section 10 of R.A. 6657, it is crystal clear that the jurisdiction of the DARAB is limited only to matters involving the implementation of the CARP. More specifically, it is restricted to agrarian cases and controversies involving lands falling within the coverage of the aforementioned program. It does not include those which are actually, directly and exclusively used and found to be necessary for, among such purposes, school sites and campuses for setting up experimental farm stations, research and pilot production centers, etc. Consequently, the DARAB has no power to try, hear and adjudicate the case pending before it involving a portion of the CMU's titled school site, as the portion of the CMU land reservation ordered segregated is actually, directly and exclusively used and found by the school to be necessary for its purposes. The CMU has constantly raised the issue of the

DARAB's lack of jurisdiction and has questioned the respondent's authority to hear, try and adjudicate the case at bar. Despite the law and the evidence on record tending to establish that the fact that the DARAB had no jurisdiction, it made the adjudication now subject of review. Whether the DARAB has the authority to order the segregation of a portion of a private property titled in the name of its lawful owner, even if the claimant is not entitled as a beneficiary, is an issue we feel we must resolve. The quasi-judicial powers of DARAB are provided in Executive Order No. 129-A, quoted hereunder in so far as pertinent to the issue at bar: Sec. 13. AGRARIAN REFORM ADJUDICATION BOARD There is hereby created an Agrarian Reform Adjudication Board under the office of the Secretary. . . . The Board shall assume the powers and functions with respect to adjudication of agrarian reform cases under Executive Order 229 and this Executive Order . . . Sec. 17. QUASI JUDICIAL POWERS OF THE DAR. The DAR is hereby vested with quasijudicial powers to determine and adjudicate agrarian reform matters and shall have exclusive original jurisdiction over all matters including implementation of Agrarian Reform. Section 50 of R.A. 6658 confers on the DAR quasi-judicial powers as follows: The DAR is hereby vested with primary jurisdiction to determine and adjudicate agrarian reform matters and shall have original jurisdiction over all matters involving the implementation of agrarian reform. . . . Section 17 of Executive Order No. 129-A is merely a repetition of Section 50, R.A. 6657. There is no doubt that the DARAB has jurisdiction to try and decide any agrarian dispute in the implementation of the CARP. An agrarian dispute is defined by the same law as any controversy relating to tenurial rights whether leasehold, tenancy stewardship or otherwise over lands devoted to agriculture. 10 In the case at bar, the DARAB found that the complainants are not share tenants or lease holders of the CMU, yet it ordered the "segregation of a suitable compact and contiguous area of Four Hundred hectares, more or less", from the CMU land reservation, and directed the DAR Regional Director to implement its order of segregation. Having found that the complainants in this agrarian dispute for Declaration of Tenancy Status are not entitled to claim as beneficiaries of the CARP because they are not share tenants or leaseholders, its order for the segregation of 400 hectares of the CMU land was without legal authority. w do not believe that the quasi-judicial function of the DARAB carries with it greater authority than ordinary courts to make an award beyond what was demanded by the complainants/petitioners, even in an agrarian dispute. Where the quasi-judicial body finds that the complainants/petitioners are not entitled to the rights they are demanding, it is an erroneous interpretation of authority for that quasi-judicial body to order private property to be awarded to future beneficiaries. The order segregation 400 hectares of the CMU land was issued on a finding that the complainants are not entitled as beneficiaries, and on an erroneous assumption that the CMU land which is excluded or exempted under the law is subject to the coverage of the CARP. Going beyond what was asked by the complainants who were not entitled to the relief prayed the complainants who were not entitled to the relief prayed for, constitutes a grave abuse of discretion because it implies such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction. The education of the youth and agrarian reform are admittedly among the highest priorities in the government socioeconomic programs. In this case, neither need give way to the other. Certainly, there must still be vast tracts of agricultural land in Mindanao outside the CMU land reservation which can be made available to landless peasants, assuming the claimants here, or some of them, can qualify as CARP beneficiaries. To our mind, the taking of the CMU land which had been segregated for educational purposes for distribution to yet uncertain beneficiaries is a gross misinterpretation of the authority and jurisdiction granted by law to the DARAB. The decision in this case is of far-reaching significance as far as it concerns state colleges and universities whose resources and research facilities may be gradually eroded by misconstruing the exemptions from the CARP. These state colleges and universities are the main vehicles for our scientific and technological advancement in the field of agriculture, so vital to the existence, growth and development of this country. It is the opinion of this Court, in the light of the foregoing analysis and for the reasons indicated, that the evidence is sufficient to sustain a finding of grave abuse of discretion by respondents Court of Appeals and DAR Adjudication Board. We hereby declare the decision of the DARAB dated September 4, 1989 and the decision of the Court of Appeals dated August 20, 1990, affirming the decision of the quasi-judicial body, as null and void and hereby order that they be set aside, with costs against the private respondents. SO ORDERED

CELESTINO SANTIAGO substituted by LAURO SANTIAGO and ISIDRO G.R. Nos. 186184 & 186988[1]

GUTIERREZ substituted by ROGELIO GUTIERREZ, Present: Petitioners, CARPIO MORALES, Chairperson, J., PERALTA,* BERSAMIN, VILLARAMA, JR., and SERENO, JJ.

versus

AMADA R. ORTIZ-LUIS substituted by Promulgated: JUAN ORTIZ-LUIS, JR. September 20, 2010 Respondent. x - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - -- - - - - - - - -- - - - - - - - x DECISION

CARPIO MORALES, J. Petitioners Lauro Santiago and Rogelio Gutierrez, in substitution of their now deceased respective fathers Celestino Santiago and Isidro Gutierrez, challenge the August 22, 2008 Decision of the Court of Appeals [2] respecting the retention rights under Republic Act No. 6657[3] (R.A. 6657) of Amada R. Ortiz-Luis (Amada), substituted by her son-herein respondent Juan, Jr. Juan and Amada Ortiz Luis (Spouses Ortiz Luis)were the owners of 7.1359 hectares of tenanted riceland situated in Barangay San Fernando Sur, Cabiao, Nueva Ecija and covered by TCT No. NT-10798 (the property). Pursuant to Presidential Decree No. 27 (P.D. No. 27), Decreeing the Emancipation of Tenants from the Bondage of the Soil, Transferring to them the Ownership of the Land they Till and Providing the Instruments and Mechanism Therefor, which took effect on October 21, 1972, the property was placed under Operation Land Transfer (OLT). Despite the inclusion of the property under the OLT, the Spouses Ortiz-Luis, by Deed of Absolute Sale dated June 16, 1979, transferred it to their children Rosario, Teresita, Simplicio and Antonio, all surnamed Ortiz-Luis. The children were able to have the property transferred under their names on June 25, 1992. The children later filed an Application for Retention under P.D. No. 27 before the Department of Agrarian Reform Regional Office (DARRO) which was denied by Order dated February 28, 1997 in this wise: It bears stressing that the Transfer Certificate of Title evidencing the conveyance in favor of herein petitioners-appellants was registered only on 25 June 1992, hence the subject land is still considered under the ownership of Spouses Ortiz Luis (pursuant to Memorandum dated January 9, 1973 and Department Memorandum Circular No. 8, Series of 1974) insofar as coverage under OLT is concerned. xxxx Upon conducting a careful investigation of the records presented, this Office concludes beyond any iota of doubt that the landholding in issue was indeed conveyed to petitioners-appellants after October 21, 1972 which is a clear violation of agrarian laws, rules and regulations.[4] (underscoring supplied) In light of the denial of her childrens application for retention, Amada filed on July 14, 1999 an Application for Retention over the property under R.A. 6657 before the DARRO. By Decision of November 24, 1999, the Provincial Agrarian Reform Adjudicator (PARAD), to which the application was referred for determination of the validity of TCT No. NT-189843 issued to the children, ordered the cancellation of said title and reinstated the spouses Ortiz-Luis title. Amadas application for retention was thus given due course by DARRO. Provincial Agrarian Reform Officer (PARO) Rogelio M. Chavez recommended the denial of Amadas application upon the ground that an owner of tenanted rice and corn lands may not retain those lands if he, as of October 21, 1972, owned more than 24 hectares of tenanted rice or corn lands.[5] It appears that Spouses Ortiz Luis owned 178.8092 hectares, only 88.4513 of which were placed under OLT.

The PAROs recommendation notwithstanding, DARRO, by Order of May 23, 2000,[6] granted Amadas application for retention, it holding that her failure to exercise her retention rights under P.D. No. 27 entitled her to the benefit of retention under R.A. 6657. Farmer-beneficiaries Celestino (petitioner Lauros father) and Isidro (petitioner Rogelios father), having been granted on May 20, 1994 emancipation patents covering 2.9424 hectares and 2.0238 hectares of the property, respectively, moved for reconsideration of the DARRO May 23, 2000 Order. DARRO denied the motion by Order of October 4, 2000. On the assumption that no appeal was filed, DARRO issued a Memorandum dated October 24, 2000 to implement its Orders. Amada subsequently filed on March 2, 2001 a petition for cancellation of Celestino and Isidros emancipation patents before the PARAD. The farmer-beneficiaries did not file their Answer, despite notice, and failed to appear during the hearings of the petition. After the ex-parte presentation of Amadas evidence, Adjudicator Napoleon Baguilat, by Decision of April 11, 2001,[7] ordered the cancellation of Celestino and Isidros Emancipation Patents: WHEREFORE, premises considered, judgment is hereby rendered as follows: 1. 2. 3. Declaring the private respondents[-herein petitioners] as lessees over the retained area of the petitioner; Declaring [herein petitioners] TCT Nos. EP 74278 and 74276 to have lost its force and effect upon the rendition of this decision; Declaring the Municipal Agrarian Reform Office of Cabiao, Nueva Ecija to cause the execution of leasehold contract between the petitioner and the private respondents[-herein petitioners]; Directing the Register of Deeds for the Province of Nueva Ecija to cancel the TCT Nos. EP 74278 and 74276 registered in the names of Celestino Santiago and Isidro Gutierrez.[8]

4.

Two (2) days after the issuance of the PARAD April 11, 2001 Decision or on April 14, 2001, Celestino and Isidro filed their Answer/Motion for Reconsideration which was denied by Order of June 21, 2001. On appeal, the Department of Agrarian Reform Adjudication Board (DARAB), by Decision of April 5, 2005, ruled in favor of petitioners: Under Administrative Order No. 4, Series of 1991, the authority to issue a certificate of retention on landholdings covered under R.A. 6657 lies exclusively with the Regional Director. It likewise provides that the Order of the Regional Director approving or denying the application for retention shall become final fifteen (15) days from receipt of the same, unless appeal is made to the DAR Secretary. In the case at bar, Private Respondents (petitioners) were able to appeal the Order of Retention issued by Regional Director Atty. Acosta to the DAR Secretary. The appeal is still pending before the Office of the Director of the Bureau of Agrarian Legal Assistance (BALA), Department of Agrarian Reform, Diliman, Quezon City, as per certification dated February 21, 2005. In view thereof, the cancellation of subject EPs is not warranted on the ground that the Order of Retention has not attained finality.[9] (emphasis and underscoring supplied)

Juan Ortiz-Luis, Jr. (respondent), who substituted for Amada after she passed away on December 8, 2001, filed a petition for review before the Court of Appeals following the denial by the DARAB of his motion for reconsideration of its April 5, 2005 Decision. The petition was docketed as CA-G.R. SP No. 97071. In time, Celestino and Isidros appeal to the DAR Secretary respecting the DARRO Orders which granted retention rights to Amada was denied by DAR Secretary Roberto Pagdanganan by Order of October 24, 2003 (Pagdanganan Order).[10] Celestino and Isidro filed a motion for reconsideration. Pending resolution of the motion, Celestino died[11] and was thereupon substituted by petitioner Lauro. Secretary Pagdanganans successor-in-interest, Secretary Nasser Pangandaman, granted Celestino and Isidros Motion for Reconsideration and accordingly reversed the Pagdanganan Order by Order of October 24, 2005 (Pangandaman Order) in this wise:[12] It must be stressed that when spouses Juan and Amada Ortiz-Luis filed an Application for Retention on 14 July 1999, PARO Rogelio M. Chavez of South Nueva Ecija recommended for the denial of the said Application for Retention pursuant to M.C. No. 18-81 and A.O. No. 4, Series of 1991, considering the fact also that the spouses owned an aggregate landholding of 178.8092 hectares where the 7.1358 hectare subject landholdings from the aggregate 88. 5413 hectares of which are rice and corn land were already covered under OLT pursuant to P.D. No. 27 and E.O. No. 228.

L.O.I. No. 474 clearly finds application to the present case, and, having established that applicantsappellees own other agricultural lands seven (7) hectares or more, there can be no question that they are not entitled to retention under P.D. No. 27.[13]

His motion for reconsideration having been denied, respondent appealed to the Office of the President (OP) which, by Decision of May 9, 2007, reversed and set aside the Pangandaman Order and reinstated the Pagdanganan Order upholding the grant to Amada of her retention rights. Petitioners thereupon elevated the matter to the Court of Appeals via petition for review, docketed as CA-G.R. SP No. 100439. This petition was consolidated with respondents above-mentioned petition in CA-G.R. SP No. 97071 (assailing the DARAB Resolution setting aside the cancellation of petitioners E[mancipation] P[atents]. By the assailed Decision of August 22, 2008, the Court of Appeals, in CA-G.R. SP No. 100439, upheld the Decision of the OP, clarifying, however, that: x x x in the implementation of this Decision, the Department of Agrarian Reform through the Municipal Agrarian Reform Office (MARO) is hereby ORDERED to fully accord ARBs Celestino Santiago and Isidro Gutierrez as substituted by Lauro Santiago and Rogelio Gutierrez, respectively, their rights under Section 6 of Republic Act No. 6657 and DAR Administrative Order No. 05-00 as already discussed. [14] (underscoring supplied)

The appellate court dismissed CA-G.R. No. 97071 which respondent did not challenge. In the present petition, petitioners assail the appellate courts upholding of Amadas right of retention in CA-G.R. SP No. 100439 and citing DAR Administrative Order (AO) No. 05, Series of 2000.[15] The petition is impressed with merit. The relevant provision of AO No. 05, Series of 2000 reads: SEC. 9. Retention Area The area allowed to be retained by the landowner shall be as follows: (a) Landowners covered by PD 27 are entitled to retain seven (7) hectares, except those whose entire tenanted rice and corn lands are subject of acquisition and distribution under OLT. An owner of tenanted rice and corn lands may not retain those lands under the following cases:

1. 2.

If he, as of 21 October 1972, owned more than twenty-four (24) hectares of tenanted rice and corn lands; or By virtue of Letter of Instruction (LOI) No. 474, if he, as of 21 October 1972, owned less than twenty-four (24) hectares of tenanted rice and corn lands but additionally owned the following: i. ii. other agricultural lands of more than seven (7) hectares, whether tenanted or not, whether cultivated or not, and regardless of the income derived therefrom; or lands used for residential, commercial, industrial or other urban purposes from which he derives adequate income to support himself and his family. xxxx

(d)

Landowners who filed their applications after the 27 August 1985 deadline and did not comply with LOI No. 41, 45 and 52 shall only be entitled to a maximum of five (5) hectares as retention area. Landowners who failed to qualify to retain under paragraph (a) of this Section shall also be allowed to retain a maximum of five (5) hectares in accordance with RA 6657. (underscoring supplied)

The right of retention, as protected and enshrined in the Constitution, balances the effect of compulsory land acquisition by granting the landowner the right to choose the area to be retained subject to legislative standards. [16]

The legislative standards are set forth in Section 6 of R.A. 6657, thus: Section 6. Retention Limits. Except as otherwise provided in this Act, no person may own, or retain, directly or indirectly, any public or private agricultural land, the size of which shall vary according to factors governing a viable family-size, such as commodity produced, terrain, infrastructure, and soil

fertility as determined by the Presidential Agrarian Reform Council (PARC) created hereunder, but in no case shall retention by the landowner exceed five (5) hectares. Three (3) hectares may be awarded to each child of the landowner, subject to the following qualifications: (1) that he is at least fifteen (15) years of age; and (2) that he is actually tilling the land or directly managing the farm; Provided, That landowners whose land have been covered by Presidential Decree No. 27 shall be allowed to keep the area originally retained by them thereunder, Provided further, That the original homestead grantees or direct compulsory heirs who still own the original homestead at the time of the approval of this Act shall retain the same areas as long as they continue to cultivate said homestead. The right to choose the area to be retained, which shall be compact or contiguous, shall pertain to the landowner. Provided, however, That in case the area selected for retention by the landowner is tenanted, the tenant shall have the option to choose whether to remain therein or be a beneficiary in the same or another agricultural land with similar or comparable features. In case the tenant chooses to remain in the retained area, he shall be considered a leaseholder and shall lose his right to be a beneficiary under this Act. In case the tenant chooses to be a beneficiary in another agricultural land, he loses his right as a lease-holder to the land retained by the landowner. The tenant must exercise this option within a period of one (1) year from the time the landowner manifests his choice of the area for retention. (underscoring supplied)

Section 6 implies that the sole requirement in the exercise of retention rights is that the area chosen by the landowner must be compact or contiguous. In the recent case of Heirs of Aurelio Reyes v. Garilao,[17] however, the Court held that a landowners retention rights under R.A. 6657 are restricted by the conditions set forth in Letter of Instruction (LOI) No. 474 issued on October 21, 1976 which reads: To: The Secretary of Agrarian Reform. WHEREAS, last year I ordered that small landowners of tenanted rice/corn lands with areas of less than twenty-four hectares but above seven hectares shall retain not more than seven hectares of such lands except when they own other agricultural lands containing more than seven hectares or land used for residential, commercial, industrial or other urban purposes from which they derive adequate income to support themselves and their families; WHEREAS, the Department of Agrarian Reform found that in the course of implementing my directive there are many landowners of tenanted rice/corn lands with areas of seven hectares or less who also own other agricultural lands containing more than seven hectares or lands used for residential, commercial, industrial or other urban purposes where they derive adequate income to support themselves and their families; WHEREAS, it is therefore necessary to cover said lands under the Land Transfer Program of the government to emancipate the tenant-farmers therein. NOW, THEREFORE, I, PRESIDENT FERDINAND E. MARCOS, President of the Philippines, do hereby order the following: "1. You shall undertake to place under the Land Transfer Program of the government pursuant to Presidential Decree No. 27, all tenanted rice/corn lands with areas of seven hectares or less belonging to landowners who own other agricultural lands of more than seven hectares in aggregate areas or lands used for residential, commercial, industrial or other urban purposes from which they derive adequate income to support themselves and their families. (underscoring supplied)

DAR Memorandum Circular No. 11, Series of 1978[18] provided for the implementing guidelines of LOI No. 474: Tenanted rice/corn lands with areas of seven hectares or less shall be covered by Operation Land Transfer if those lands belong to the following landowners: a.) Landowners who own other agricultural lands of more than seven hectares in aggregate areas, whether tenanted or not, cultivated or not, and regardless of the income derived therefrom; b.) Landowners who own lands used for residential, commercial, industrial or other urban purposes from which they derive an annual gross income of at least five thousand (P5,000.00) pesos. (underscoring supplied) In Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform,[19] the Court held that landowners who have not yet exercised their retention rights under P.D. No. 27 are entitled to new retention rights

provided for by R.A. No. 6657 . . .[20] In Heirs of Aurelio Reyes v. Garilao, however, the Court held that the limitations under LOI No. 474 still apply to a landowner who filed an application under R.A. 6657. Amada is thus not entitled to retention rights. As noted by the PARO in recommending denial of her application which was eventually heeded in the Pangandaman Order, while Spouses Ortiz Luis owned aggregate landholdings equivalent to 178.8092 hectares, only a portion thereof 88.5413 hectares were placed under OLT. A Certification dated May 7, 2001[21] issued by the Municipal Agrarian Reform Office (MARO) affirms that as of even date, Spouses Ortiz Luis still owned 162.1584 hectares of land in Cabiao, Nueva Ecija. Letter of Instruction (LOI) No. 474 amended P.D. No. 27 by removing any right of retention from persons who own other agricultural lands of more than 7 hectares, or lands used for residential, commercial, industrial or other purpose from which they derive adequate income to support themselves and their families.[22] Section 9 (d) of DAR Administrative Order No. 05, on which the Court of Appeals in part anchored its ruling, is inconsistent with P.D. No. 27, as amended by LOI No. 474, insofar as it removed the limitations to a landowners retention rights. It is well-settled that administrative officials are empowered to promulgate rules and regulations in order to implement a statute. The power, however, is restricted such that an administrative regulation cannot go beyond what is provided in the legislative enactment. It must always be in harmony with the provisions of the law, hence, any resulting discrepancy between the two will always be resolved in favor of the statute.[23] WHEREFORE, the challenged Court of Appeals Decision dated August 22, 2008 in C.A.-G.R. S.P. No. 100439 is REVERSED and SET ASIDE. The Order dated October 24, 2005 of Agrarian Reform Secretary Nasser Pangandaman is REINSTATED. SO ORDERED.

G.R. No. 136466

November 25, 2009

THE HEIRS OF AURELIO REYES, Petitioners, vs. HON. ERNESTO D. GARILAO, as the Secretary of the Department of Agrarian Reform, and EXEQUIEL ROMAN, BASILIO NUEZ, ONOFRE LAVARIAS, GAVINO BUENSUCESO, CENON MANUEL, ALFONSO RODRIGO, TEOFILO ICO, ALFREDO LAVARIAS, MIGUEL RIVERA, ROMULO ALFONSO, LYDIA TOLENTINO, EDILBERTO EUGENIO, BEATA VDA. DE DUNGCA, WILFREDO MILANIO, ANDRES RAMOS, RUDY POLICARPIO, PELAGIA PULMONEZ, ALBERTO DE LEON, LAURO REYES, FELICIO GUEVARRA, EMILIO GARCIA, JR., TERESITA GUEVARRA, GUILLERMO GUEVARRA, JOSE ESTRILLA, FEDERICO ALFONSO, JOSE MEDINA, BENITO OCAMPO, ERNESTO TOLENTINO, FERNANDO TOLENTINO, RUPERTO BRILLANTE, MARGARITO BUENSUCESO, PRIMITIVO MAYUYO, GENARO ROMAN, DEOGRACIAS ROMAN, LUIS TOLENTINO, ELIGIO VERGARA, CARLOS RAMOS, PABLO ALFONSO, SERAFIN MEDINA, CARMEN VDA. DE YUSI, ALEJANDRO BALAN, and EMETERIO DUNCA, Respondents. DECISION PERALTA, J.: Before this Court is a Petition for Review on Certiorari,1 under Rule 45 of the Rules of Court, assailing the April 16, 1997 Decision2 and December 2, 1998 Resolution3 of the Court of Appeals (CA) in CA-G.R. SP 42847. The facts of the case: Petitioners are the registered co-owners of a parcel of land known as Lot No. 166 of the Cadastral survey of Orani, Bataan, consisting of an area of 99.1085 hectares and covered under Transfer Certificate of Title No. T-91171 of the Registry of Deeds of Bataan.4 Particularly, the individual shares of petitioners are hereunder enumerated, thus: 1. Antonia Reyes (widow) 55.0602 has. 2. Cesar H. Reyes 5.5060 has. 3. Aurelio H. Reyes 5.5060 has. 4. Lourdes R. Mateo 5.5060 has. 5. Teresita H. Reyes 5.5060 has.

6. Gregorio H. Reyes 5.5060 has. 7. Carlos H. Reyes 5.5060 has. 8. Manuel H. Reyes 5.5060 has. 9. Maria Rosario R. Bartolome 5.5060 has. -------------99.1082 has.5 Said property was originally owned by the spouses Antonia Reyes and the late Aurelio Reyes (Aurelio), who died in January 21, 1972 (before the effectivity of Presidential Decree No 27).6 Upon the death of Aurelio, said property passed by succession to petitioners, who divided the same as shown above. On September 21, 1988, emancipation patents were issued to respondents as farmer-beneficiaries over the entire landholding in question.7 On August 2, 1993, petitioners lodged a petition for the cancellation of the emancipation patents issued to the respondents before the Department of Agrarian Reform Adjudication Board San Fernando, Pampanga, which is now pending and docketed as DARAB Case No. 118-BAT-93.8 Earlier, however, on July 15, 1993, petitioners filed with the Department of Agrarian Reform (DAR), Region III, San Fernando, Pampanga, their respective applications for retention9 over Lot No. 166, at five (5) hectares each, pursuant to Section 610 of Republic Act No. 6657, or the Comprehensive Agrarian Reform Law of 1988 (RA No. 6657).11 On October 25, 1994, the OIC-Regional Director issued an Order12 granting petitioners applications for retention, the dispositive portion of which reads: WHEREFORE, premises considered, an Order is hereby issued: 1. GRANTING the Application for individual retention of the heirs of Aurelio P. Reyes with each heir to retain not more than five (5) hectares of their landholding at Barangay Mulawin, Orani, Bataan, which must be compact and contiguous; 2. DIRECTING the said heirs to make the segregation of their retainable area at their own expense and to submit the result thereof to this Office; 3. DIRECTING the parties concerned to initiate the cancellation of emancipation patent(s), if any has (have) been issued over the retained landholding before the proper forum; and 4. DIRECTING the DAR personnel concerned to make provisions for the welfare of the affected farmer-beneficiaries, if any. SO ORDERED.13 On July 31, 1995, respondents appealed the October 25, 1994 Order of the OIC-Regional Director to the DAR Secretary. On November 30, 1996, the DAR Secretary issued an Order14 setting aside the Order of the Regional Director, the dispositive portion of which reads: WHEREFORE, premises considered, Order is hereby issued setting aside the Order dated October 25, 1994. Consequently, the granting of applicants-appellees individual retention rights is hereby revoked. SO ORDERED.15 The DAR Secretary found that each compulsory heir owns, aside from the 5.5060 has. representing their 1/9 share of the property in dispute, other landholdings presumably used either as residential, commercial, industrial or for other urban purposes located in Makati and Manila.16 The DAR Secretary further held that landowners who own lands devoted to nonagricultural purposes are presumed to derive adequate income therefrom to support themselves and their families.17 Accordingly, the DAR Secretary denied the applications for exemption of petitioners pursuant to DAR Administrative Order No. 4, series of 1991.18 Aggrieved by the Order of the DAR Secretary, petitioners sought to assail the same via a petition for review before the CA. On April 16, 1997, the CA rendered a Decision19 ruling in favor of respondents, the dispositive portion of which reads: WHEREFORE, the petition for review is DISMISSED for lack of merit.

SO ORDERED.20 The CA ruled that Administrative Order No. 4, series of 1991, and Letter of Instruction (LOI) No. 474 restricts the right of retention of landowners, in the wise: Petitioners land has been subjected to land reform under P.D. No. 27. On September 21, 1988, emancipation patents were issued over the subject land in favor of farmer-beneficiaries. Petitioners filed their individual applications for retention of their share in the subject land only on July 15, 1993, after the effectivity of R.A. No. 6657. Thus, the provisions of R.A. No. 6657 shall govern petitioners exercise of their right of retention. Section 6 of R.A. No. 6657 provides that "landowners whose lands have been covered by P.D. No. 27 shall be allowed to keep the area originally retained by them thereunder." Since petitioners did not exercise their right of retention under P.D. No. 27, the provisions of R.A. No. 6657 on retention limit shall govern. However, since LOI No. 474 and Administrative Order No. 4, series of 1991, restricts the right of retention of landowners, in the sense that those who own other non-agricultural lands and derive adequate income therefrom have no right of retention, the said restriction should be applied to herein petitioner.21 Moreover, the CA upheld the finding of the DAR Secretary, that in addition to the share of petitioners in the land subject of herein petition, petitioners have other landholdings presumably used either as residential, commercial, industrial, or for other urban purposes located in Makati and Manila.22 Hence, the CA concluded that petitioners were not entitled to exercise their retention rights as a result of the restrictions contained in Administrative Order No. 4, series of 1991, as well as LOI No. 474. Petitioners then filed a Motion for Reconsideration, which was, however, denied by the CA in a Resolution23 dated December 2, 1998. Hence, herein petition, with petitioners raising the following grounds in support of the petition, to wit: A. PETITIONERS RIGHT TO RETENTION OF PORTIONS OF THEIR LANDHOLDINGS IS NOT FORECLOSED BY ANY VESTED RIGHT THAT PRIVATE RESPONDENTS MAY CLAIM. B. LOI NO. 474 DATED OCTOBER 21, 1976 HAS BEEN REPEALED BY REP. ACT NO. 6657, HENCE, THE RESTRICTIVE CONDITIONS IN THE EARLIER LAW SHOULD NOT BE APPLIED TO PETITIONERS EXERCISE OF THEIR RETENTION RIGHTS UNDER THE LATTER LAW. C. DEPARTMENT OF AGRARIAN REFORM ADMINISTRATIVE ORDER NO. 04, SERIES OF 1991, HAS THEREFORE NO STATUTORY BASIS INSOFAR AS RETENTION RIGHTS UNDER REPUBLIC ACT NO. 6657 ARE CONCERNED. SAID ISSUANCE APPLIES ONLY TO RETENTION RIGHTS OF (7) HECTARES UNDER PRESIDENTIAL DECREE NO. 27.24 The petition is not meritorious. At the crux of the controversy is the determination of the applicability of the restrictive conditions found in LOI No. 474 to RA No. 6657. In order to understand the case at bar, this Court shall hereunder discuss the various laws and administrative order pertinent to herein petition and their relation to one another. Presidential Decree No. 27 (PD No. 27),25 issued on October 21, 1972 by then President Ferdinand E. Marcos, proclaimed the entire country as a "land reform area" and decreed the emancipation of tenants from the bondage of the soil, transferring to them the ownership of the land they till. To achieve its purpose, the decree laid down a system for the purchase by tenant-farmers, long recognized as the backbone of the economy, of the lands they were tilling. Owners of rice and corn lands that exceeded the minimum retention area were bound to sell their lands to qualified farmers at liberal terms and subject to conditions.26 More importantly, PD No. 27 also provides that, "in all cases, the landowner may retain an area not more than seven (7) hectares if such landowner is cultivating such area or will now cultivate it." Meanwhile, on October 21, 1976, then President Marcos, issued LOI No. 474, addressed to the Secretary of Agrarian Reform, the pertinent portions of which read: To: The Secretary of Agrarian Reform.

WHEREAS, last year I ordered that small landowners of tenanted rice/corn lands with areas of less than twenty-four hectares but above seven hectares shall retain not more than seven hectares of such lands except when they own other agricultural lands containing more than seven hectares or land used for residential, commercial, industrial or other urban purposes from which they derive adequate income to support themselves and their families; WHEREAS, the Department of Agrarian Reform found that in the course of implementing my directive there are many landowners of tenanted rice/corn lands with areas of seven hectares or less who also own other agricultural lands containing more than seven hectares or lands used for residential, commercial, industrial or other urban purposes where they derive adequate income to support themselves and their families; WHEREAS, it is therefore necessary to cover said lands under the Land Transfer Program of the government to emancipate the tenant-farmers therein. NOW, THEREFORE, I, PRESIDENT FERDINAND E. MARCOS, President of the Philippines, do hereby order the following: "1. You shall undertake to place under the Land Transfer Program of the government pursuant to Presidential Decree No. 27, all tenanted rice/corn lands with areas of seven hectares or less belonging to landowners who own other agricultural lands of more than seven hectares in aggregate areas or lands used for residential, commercial, industrial or other urban purposes from which they derive adequate income to support themselves and their families." 27 LOI No. 474, thus, amended PD No. 27 by removing "any right of retention from persons who own other agricultural lands of more than 7 hectares, or lands used for residential, commercial, industrial or other purposes from which they derive adequate income to support themselves and their families."28 After Martial Law, on June 10, 1988, Congress, under the leadership of then President Corazon Aquino passed RA No. 665729 or the Comprehensive Agrarian Reform Law. Of importance is Section 6 which provides for the right of retention of landowners, to wit: SEC. 6. Retention Limits. - Except as otherwise provided in this Act, no person may own or retain, directly, any public or private agricultural land, the size of which shall vary according to factors governing a viable family-sized farm, such as commodity produced, terrain, infrastructure, and soil fertility as determined by the Presidential Agrarian Reform Council (PARC) created hereunder, but in no case shall the retention by the landowner exceed five (5) hectares. Three (3) hectares may be awarded to each child of the landowner, subject to the following qualifications: (1) that he is at least fifteen (15) years of age; and (2) that he is actually tilling the land or directly managing the farm: Provided, That landowners whose lands have been covered by Presidential Decree No. 27 shall be allowed to keep the area originally retained by them thereunder; Provided, further, That original homestead grantees or direct compulsory heirs who still own the original homestead at the time of the approval of this Act shall retain the same areas as long as they continue to cultivate said homestead. The right to choose the area to be retained, which shall be compact or contiguous, shall pertain, to the landowner:Provided, however, That in case the area selected for retention by the landowner is tenanted, the tenant shall have the option to choose whether to remain therein or be a beneficiary in the same or another agricultural land with similar or comparable features. In case the tenant chooses to remain in the retained area, he shall be considered a leaseholder and shall lose his right to be a beneficiary under this Act. In case the tenant chooses to be a beneficiary in another agricultural land, he loses his right as a leaseholder to the land retained by the landowner. The tenant must exercise this option within a period of one (1) year from the time the landowner manifests his choice of the area for retention. In all cases, the security of tenure of the farmers or farm workers on the land prior to the approval of this Act shall be respected. Upon the effectivity of this Act, any sale, disposition, lease, management contract or transfer of possession of private lands executed by the original landowner in violation of this Act shall be null and void: Provided, however,That those executed prior to this Act shall be valid only when registered with the Register of Deeds within a period of three (3) months after the effectivity of this Act . Thereafter, all Registers of Deeds shall inform the DAR within thirty (30) days of any transaction involving agricultural lands in excess of five (5) hectares.30 As can be observed, Section 6 of RA No. 6657, while providing for a right of retention of five hectares, does not prescribe the limitation or conditions provided for in LOI No. 474. Soon after, Administrative Order No. 4, series of 1991, was issued by the Secretary of the Department of Agrarian Reform, the pertinent portions of which read: B. Policy Statements.

1. Landowners covered by P.D. 27 are entitled to retain seven hectares, except those whose entire tenanted rice and corn lands are subject of acquisition and distribution under Operation Land Transfer (OLT). An owner of tenanted rice and corn lands may not retain these lands under the following cases: a. If he, as of 21 October 1972, owned more than 24 hectares of tenanted rice and corn lands; or by virtue of LOI 474, if he, as of 21 October 1976, owned less than 24 hectares of tenanted rice or corn lands, but additionally owned the following: - Other agricultural lands of more than seven hectares, whether tenanted or not, whether cultivated or not, and regardless of the income derived therefrom; or - Lands used for residential, commercial, industrial, or other urban purposes, from which he derives adequate income to support himself and his family.31 Based on the foregoing, petitioners anchor herein petition on their observation that Section 6 of RA No. 6657 does not provide for the limitation or exception to the exercise of retention rights previously found in LOI No. 474. Petitioners, thus, posit that those parts of the section amended, which are omitted in the amendments, are deemed repealed.32 Likewise, petitioners contend that LOI No. 474 is inconsistent with the provisions of RA No. 6657 and was therefore repealed by the latter.33 After a judicious examination of the laws and relevant jurisprudence to the case at bar, this Court holds that petitioners positions are without merit. LOI No. 474 provides for a restrictive condition on the exercise of the right of retention, specifically disqualifying landowners who "own other agricultural lands of more than seven hectares in aggregate areas, or lands used for residential, commercial, industrial or other urban purposes from which they derive adequate income to support themselves and their families." Said condition is essentially the same one contained in Administrative Order No. 4, series of 1991. In Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform,34 this Court upheld the validity of LOI No. 474, in the wise: The Court wryly observes that during the past dictatorship, every presidential issuance, by whatever name it was called, had the force and effect of law because it came from President Marcos. Such are the ways of despots. Hence, it is futile to argue, as petitioners do in G.R. No. 79744, that LOI 474 could not have repealed P.D. No. 27 because the former was only a letter of instruction. The important thing is that it was issued by President Marcos, whose word was law during the time. Petitioners, however, argue that RA No. 6657 has impliedly repealed LOI No. 474 on the theory that the latter is inconsistent with the former. Consequently, petitioners contend that Administrative Order No. 4, series of 1991 has no statutory basis. This Court cannot subscribe to petitioners view. This Court is guided by Social Justice Society v. Atienza Jr.,35wherein the operation of implied repeals was extensively discussed, to wit: Repeal by implication proceeds on the premise that where a statute of later date clearly reveals the intention of the legislature to abrogate a prior act on the subject, that intention must be given effect. There are two kinds of implied repeal. The first is: where the provisions in the two acts on the same subject matter are irreconcilably contradictory, the latter act, to the extent of the conflict, constitutes an implied repeal of the earlier one. The second is: if the later act covers the whole subject of the earlier one and is clearly intended as a substitute, it will operate to repeal the earlier law. The oil companies argue that the situation here falls under the first category. Implied repeals are not favored and will not be so declared unless the intent of the legislators is manifest. As statutes and ordinances are presumed to be passed only after careful deliberation and with knowledge of all existing ones on the subject, it follows that, in passing a law, the legislature did not intend to interfere with or abrogate a former law relating to the same subject matter. If the intent to repeal is not clear, the later act should be construed as a continuation of, and not a substitute for, the earlier act.36 Based on the foregoing, this Court disagrees with the theory advanced by petitioners that RA No. 6657 has impliedly repealed LOI No. 474. The congressional deliberations37 cited by petitioners are insufficient to indicate an intent to repeal LOI No. 474. A perusal thereof shows that said deliberations were confined only to the matter of retention limits (i.e., 3, 5 or 7 hectares), and no mention was made of the restrictive conditions found in LOI No. 474. As a matter of fact, what is clear from said deliberations is that the framers of RA No. 6657 had intended to distribute more lands.38 While both laws may have the same subject matter, i.e. agrarian reform and its mechanism, if there is no intent to repeal the earlier enactment, every effort at a reasonable construction must be made to reconcile the statutes, so that both can be given effect.39

To stress, RA No. 6657 is a social justice and poverty alleviation program which seeks to empower the lives of agrarian reform beneficiaries through equitable distribution and ownership of the land based on the principle of land to the tiller. RA No.6657, however, allows landowners to retain five hectares of their landholding. LOI No. 474, on the other hand, imposes restrictive conditions on the exercise of the right of retention by mandating that landowners who possess other lands used for residential, commercial, industrial, or other urban purposes, from which they derive adequate income to support themselves and their families are disqualified from exercising their right of retention. Respondents, in their Comment,40 argue that LOI No. 474 partakes of a special law, while RA No. 6657 is a general law, to wit: It will be noted that LOI No. 474, as implemented by Administrative Order No. 04, Series of 1991, partakes of a special law specifically governing the acquisition of "all tenanted rice/corn lands with [an] area of seven hectares or less belonging to landowners who own other agricultural lands of more than seven hectares in aggregate areas or lands used for residential, commercial, industrial or other urban purposes from which they derive adequate income to support themselves and their families" under the Land Transfer Program of the government pursuant to Presidential Decree No. 27. x x x On the other hand, Section 6 of R.A. No. 6657, otherwise known as the Comprehensive Agrarian Reform Law of 1988, merely provides, in relations to lands retained by the landowners under P.D. No. 27, that "landowners whose lands have been covered by Presidential Decree No. 27 shall be allowed to keep the area originally retained by them thereunder." R.A. No. 6657 does not govern nor provide for the manner and conditions by which the right of retention of landowners of rice/corn lands may be exercised. It is, therefore, a general law covering "all public and private agricultural lands as provided in Proclamation No. 131 and Executive Order No. 229, including other lands of the public domain suitable for agriculture. x x x41 Respondents also contend that both laws are complementary to each other such that while RA No. 6657 does not provide for the mechanism for the exercise of the right of retention of landowners under PD No. 27, LOI No. 474, as implemented by DAR Administrative Order No. 4, series of 1991, supplies that mechanism.42 Lastly, respondents argue that as between a general law (R.A. No. 6657) and a special law (LOI No. 474), there is no dispute that the latter shall prevail. 43 The position of respondents is well-taken. It is a well-settled rule in statutory construction that a subsequent general law does not repeal a prior special law on the same subject matter unless it clearly appears that the legislature has intended by the latter general act to modify or repeal the earlier special law.44 Generalia specialibus non derogant (a general law does not nullify a specific or special law).45 This is so even if the provisions of the general law are sufficiently comprehensive to include what was set forth in the special act.46Moreover, the special act and the general law must stand together, one as the law of the particular subject and the other as the law of general application.47 There is no conflict between RA No. 6675 and LOI No. 474 as both can be given a reasonable construction so as to give them effect. The suppletory application of laws is sanctioned under Section 75 of RA No. 6675, to wit: SEC. 75. Suppletory Application of Existing Legislation. - The provisions of Republic Act Number 3844, as amended, Presidential Decree Numbers 27 and 266 as amended, Executive Order Numbers 228 and 229, both Series of 1987, and other laws not inconsistent with this Act shall have suppletory effect. Withal, this Court concludes that while RA No. 6675 is the law of general application, LOI No. 474 may still be applied to the latter. Hence, landowners under RA No. 6675 are entitled to retain five hectares of their landholding; however, if they too own other "lands used for residential, commercial, industrial or other urban purposes from which they derive adequate income to support themselves and their families," they are disqualified from exercising their right of retention. For the same reasons previously discussed, this Court cannot subscribe to petitioners view that Section 76, 48 or the Repealing Clause of RA No. 6675, has repealed LOI No. 474.1avvphil Anent petitioners claim that Administrative Order No. 4, series of 1991, has no statutory basis, the same is without merit. It is a general rule that the power of administrative officials to promulgate rules and regulations in the implementation of a statute is necessarily limited only to carrying into effect what is provided in the legislative enactment.49 Furthermore, it is an elementary rule in administrative law that administrative regulations and policies enacted by administrative bodies to interpret the law which they are entrusted to enforce, have the force of law, and are entitled to great weight and respect.50 Since the validity of LOI No. 474 and its suppletory application to RA No. 6675 has been settled, it is clear that Administrative Order No. 4, series of 1991, is valid as it is merely a reiteration of LOI No. 474. Lastly, petitioners contend that even on the assumption that Administrative Order No. 4 or even LOI No. 474, may be applied to the retention rights under RA No. 6657, still there is no substantial evidence to support the finding of respondent Secretary that petitioners own other lands devoted to non-agricultural uses from which they derived adequate income to support their family.51 On this point, the DAR Secretary made the following findings, to wit:

Be that as it may, records however disclosed that Antonia Reyes, the surviving spouse, owned 55.0602 has. tenanted riceland as of October 21, 1972 representing her and 1/9 shares of the landholding in question. Records further show that each compulsory heir owns, aside from the 5.5060 has. representing their 1/9 share of the said property, other landholdings presumably used either as residential, commercial, industrial, or for other urban purposes located at Makati and Manila (See: Petition for Approval of Amended Project of Partition dated July 9, 1975).52 Said findings were also made by the CA as its basis in affirming the decision of the DAR Secretary. The same is a question of fact which cannot be the subject of herein petition.53 More importantly, the findings of the DAR are accorded not only respect but even finality by this Court, because it has acquired the necessary expertise on the matter.54 Said findings appear to be supported by substantial evidence which is all that is required in agrarian cases.55 Hence, this Court finds no reason to disturb said findings of the Secretary. Given the foregoing, it would be unnecessary to discuss the first issue raised by petitioners as the same is immaterial, considering this Courts ruling that LOI No. 474 applies suppletorily to RA No. 6675. WHEREFORE, premises considered, the petition is denied. The April 16, 1997 Decision and December 2, 1998 Resolution of the Court of Appeals in CA-G.R. SP No. 42847 are hereby AFFIRMED. SO ORDERED.

[G.R. No. 174971, October 15, 2008] LAND BANK OF THE PHILIPPINES, PETITIONER, VS. AMS FARMING CORPORATION, RESPONDENT. DECISION CHICO-NAZARIO, J.: Before this Court is a Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court filed by petitioner Land Bank of the Philippines (LBP) seeking the reversal and setting aside of (1) the Decision[2] dated 28 March 2006 of the Court of Appeals which dismissed the Petition for Review of LBP in CA-G.R. SP No. 77520; and (2) the Resolution[3] dated 26 September 2006 of the appellate court which denied the Motion for Reconsideration of LBP. In its assailed Decision, the Court of Appeals effectively affirmed the Decision[4] dated 11 March 2003 of the Regional Trial Court (RTC), Tagum City, Davao del Norte, Branch 2, acting as a Special Agrarian Court in Special Agrarian Case No. 612000, ordering the Department of Agrarian Reform (DAR), through the LBP, to pay respondent AMS Farming Corporation (AMS) just compensation for the standing crops and various improvements it introduced on the land owned by Totco Credit Corporation (TOTCO), all fees and expenses of the Court-appointed Commissioners, and attorney's fees. I The Antecedent Facts There is no controversy as to the antecedent facts that gave rise to the Petition at bar. The Lease Agreements The National Abaca and Other Fibers Corporation (NAFCO) was the owner of a piece of agricultural land with an area of 73.7 hectares, more or less, located in Barrio Sampao, Municipality of Kapalong, Province of Davao. On 21 September 1970, NAFCO leased a 51-hectare portion of said land to AMS for a period of 15 years.[5] When Apeco Motors Corporation (APECO) acquired ownership of the land, the said lease agreement was registered and annotated on its certificate of title. Upon the expiration of the first lease agreement, APECO and AMS executed on 21 February 1986 a new Lease Agreement[6] over 51.15 hectares of the same agricultural land, for a period of 10 years, beginning on 1 November 1985 and ending on 31 October 1995. Again, the Lease Agreement was registered and annotated on the certificate of title of APECO. Sometime during the effectivity of the lease, ownership of the afore-mentioned agricultural land was transferred to TOTCO. Also, on 15 June 1988, just a little over two years from the execution of the Lease Agreement between APECO and AMS, Republic Act No. 6657, otherwise known as the Comprehensive Agrarian Reform Law (CARL), took effect. The CARL espoused the policy of the State to pursue a Comprehensive Agrarian Reform Program (CARP), whereby the State undertook the just distribution of all agricultural lands, subject to the priorities and retention limits set forth in the CARL and to the payment of just compensation.[7]

On 8 August 1991, four years before the expiration of the existing Lease Agreement, TOTCO and AMS executed a Memorandum of Agreement (MOA) wherein they agreed to increase the area leased to 61.65 hectares, and renew the lease for another 25 years, commencing on 1 November 1991 and expiring on 31 October 2016. Unlike the previous lease agreements, however, the MOA was never registered. As the lessee of a significant portion of the agricultural land, AMS developed a banana plantation thereon, cultivating and planting on the leased property Cavendish banana for export, and introducing the necessary improvements and infrastructures. DAR Case No. 52-99 On 9 September 1996, TOTCO submitted to the DAR a voluntary offer to sell (VOS) of its agricultural land, including the area leased to AMS. Adopting the valuation made by the LBP, the DAR issued a notice of valuation and acquisition offering the amount of P1,806,754.83 as just compensation for the property. When TOTCO rejected the proffered amount, the matter was endorsed to the DAR Adjudication Board (DARAB), where it was docketed as DARAB Case No. LV-XI1713-DN-97. The DARAB, in a Decision dated 3 November 1998, upheld the valuation of just compensation made by the LBP. Still unsatisfied with the amount of just compensation being offered for its agricultural land, TOTCO filed on 23 April 1999 with the RTC, acting as a Special Agrarian Court, a Complaint against the DAR and LBP for the determination of just compensation. The Complaint was docketed as DAR Case No. 52-99. The DAR failed to file its Answer and upon motion of TOTCO, it was declared by the RTC to be in default on 20 July 1999. The RTC appointed a panel of Commissioners to conduct a fair valuation of the property, and submit its findings and Report, including its Recommendation on the just compensation. The panel of Commissioners submitted its Appraisal Report for approval of the RTC on 21 January 2000. In its Report, the panel found acceptable the valuation presented by TOTCO of P328,026.85 per hectare of the agricultural land planted with Cavendish banana. Pertinent portions of the Report are reproduced below: This Commission is aware of an existing Order promulgated by the Honorable Judge Bernardo V. Saludares of the Special Agrarian Court, Tagum City, in a certain DAR Case, a property engaged in banana production for export also located in Kapalong wherein the Provincial Agrarian Reform Adjudicator appraised said land at P205,774.80 per hectare for the entire 20.1362 hectares as the new fair and just reasonable compensation for the subject landholdings or for a total valuation of P4,143,325 (Provincial Agrarian Reform Adjudicator Atty. Danica L. Aminin on March 12, 1998, in DARAB Case No. LV-XI-0690-96 regarding a 20.1362 hectare banana land of landowner, BALMAR FARMS, INC.) Exh. "E", page 27, par. 2 (marginally-lined of a decision of Hon. Bernardo V. Saludares.) In that same decision the same Honorable Judge allowed P140,000 per hectare as appraised value for developments/improvements that is, Road Networks, Bridges, Drainage Canals, Cableways and Aerial Proppings (Exh. "F", page 31, decision promulgated by Hon. Bernardo V. Saludares.) So we have the following as the total value per hectare for a land with the same industry and undertaking, within the same Municipality: Land with standing banana plants For developments and improvements TOTALP205,774.90 140,000.00 P345,774.90 vvvvvvvvvv

This can be favorably compared to the P328,026.85 claimed by [AMS]. The actual area acquired by the DAR and valued LBP is............................................. 70.8118 has. Area planted to native variety and others............................ 8.0000 has. Thus: 62.8118 has. x P328,026.85 = P20,603,903 8.0000 has. x 100,000.00 = 800,000.00 70.8118 has. for a total of = P21,403,903[8] [9] On 8 March 2000, the RTC rendered its Decision in DAR Case No. 52-99, adopting the amount of just compensation recommended by the panel of Commissioners. The dispositive portion of the said Decision reads: WHEREFORE, consistent with all the foregoing premises, judgment is hereby rendered providing for the fair, just and reasonable compensation of plaintiff-[TOTCO's] titled banana lands and improvements as follows: First: -- For defendants-DAR as Expropriator and Land Bank of the Philippines, jointly and severally, to pay the plaintiffTOTCO CREDIT CORPORATION (FORMERLY APECO MOTORS CORP.) the determined, as herein the fixed valuation as the fair, just and reasonable compensation of its titled banana lands at Sampao, Kapalong, Davao del Norte, including its improvements thereon, the total amount of P21,403,903.00 or Twenty-one Million Four Hundred Three

Thousand Nine Hundred Three Pesos, Philippine Currency, with interest which shall be based on the rate of interest of the 90-Day Treasury Bills as provided for under Sec. 18, par. 4(a) of RA 6657, and as expressly prayed for in [TOTCO's] complaint; Second: -- For defendants-DAR as Expropriator and Land Bank of the Philippines, jointly and severally, to pay all fees due to the Commissioners to be taxed as part of the costs pursuant to Section 12, Rule 67, of the 1997 RCP, as amended, which shall be claimed in a Bill of Costs to be submitted to the Court for its evaluation and proper action thereto; Third: -- For the defendants-DAR, as Expropriator, and Land Bank of the Philippines, jointly and severally, to pay plaintiff-[TOTCO] the reasonable attorney's fees, also to be taxed as part of the costs which should be claimed in a Bill of Costs to be submitted to the Court for its evaluation and proper action; and Fourth: -- For the Defendant-DAR, as Expropriator, and Land Bank of the Philippines, jointly and severally, to pay the entire costs of the suit.[10] (Emphasis supplied.) Since the valuation of the just compensation awarded by the RTC to TOTCO in its Decision dated 8 March 2000 included the standing crops and improvements introduced by AMS on the leased property, AMS President Alberto M. Soriano (Soriano) filed an Affidavit in (sic) Third Party Claim dated 19 May 2000 before the RTC in DAR Case No. 52-99. In his Affidavit, Soriano asserted that AMS was the owner of the standing crops and all the improvements inherent in the operation of a banana plantation on the land owned by TOTCO; that the RTC Decision of 8 March 2000 in DAR Case No. 52-99 was null and void in so far as the standing crops and improvements were concerned since these were owned by AMS, although the land was owned and titled in the name of TOTCO; that the said Decision did not bind AMS for it was never a party in the case; that AMS was denied due process; and that the total valuation of the standing crops and improvements amounted to P54,453,576.54. In the end, Soriano requested the Deputy Sheriff and LBP not to deposit or pay in the name of TOTCO the portion of the just compensation awarded in DAR Case No. 52-99 which corresponded to the value of the standing crops and improvements. On 6 June 2000, the RTC issued in DAR Case No. 52-99 an Order[11] granting the Motion filed by TOTCO for the immediate execution of its judgment, even before the expiration of the period to appeal, considering that the property of TOTCO was already acquired, distributed, and awarded by the DAR; subject, however, to Soriano's Affidavit of Third Party Claim. Since the period to appeal the 8 March 2000 Decision of the RTC in DAR Case No. 52-99 lapsed without any appeal being taken therefrom, the said Decision eventually became final. On 4 September 2000, the counsel for AMS wrote LBP a letter[12] calling its attention to the Third Party Claim of AMS on the award of just compensation to TOTCO in DAR Case No. 52-99. AMS requested that TOTCO be paid just compensation for the land only, and that the balance of the award be remitted by check to AMS. LBP, however, did not act on the request of AMS. TOTCO subsequently filed a Motion to expunge Soriano's Affidavit from the records of DAR Case No. 52-99, but the RTC, after hearing, denied the said Motion in an Order[13] dated 26 September 2000, ruling therein that: This Court painstakingly considers the arguments adduced in the Motion to expunge the Third Party Claim and the opposition thereto. There is no cogent reason to deprive the Third Party Claimant of his right to file an Affidavit of Third Party Claim. The Third Party Claimant should be given an opportunity to prove his claim in a trial where all issues are properly ventilated. WHEREFORE, in view thereof, the motion to expunge the Affidavit in (sic) Third Party Claim of Alberto M. Soriano is hereby denied.[14] Special Agrarian Case No. 61-2000 On 23 April 1999, TOTCO filed with the RTC its Complaint for just compensation, docketed as DAR Case No. 52-99. Learning that the agricultural land it was leasing was already the subject of a pending VOS made by TOTCO, but apparently still unaware of the pendency of DAR Case No. 52-99, AMS wrote LBP a letter dated 22 November 1999 submitting its own VOS of the banana crops planted on the 61.65 hectares of land owned by TOTCO. On 8 March 2000, the RTC promulgated its Decision in DAR Case No. 52-99 awarding just compensation to TOTCO for its land, as well as the standing crops and improvements found thereon. AMS did not receive a copy of the said Decision since it was not a party in DAR Case No. 52-99. AMS was merely furnished a copy thereof by the LBP Land Valuation Office in Davao City, when one of its employees followed up on the status of its VOS on 3 May 2000. This prompted AMS President Soriano to file with the RTC, in DAR Case No. 52-99, an Affidavit in (sic) Third Party Claim dated 19 May 2000. With the issuance of a writ of execution in DAR Case No. 52-99, AMS filed with the RTC, acting as a Special Agrarian Court, its own Petition[15] for determination of just compensation with application for a writ of preliminary injunction and temporary restraining order, naming the DAR and/or LBP and TOTCO as respondents. The Petition was docketed as Special Agrarian Case No. 61-2000. In its Petition before the RTC, AMS essentially made the same allegations in Soriano's

"Affidavit in (sic) Third Party Claim" filed in DAR Case No. 52-99; but added the contention that the implementation of the RTC Decision dated 8 March 2000 in said case would cause great and irreparable injury, would work injustice to AMS, and complicate, aggravate, and multiply the issues of the present case. AMS then sought from the RTC the following: PRAYER WHEREFORE, it is most respectfully prayed of this Honorable Court that an order BE ISSUED for fixing the true and real value of [AMS's] property consisting of standing crops and improvements based on the reasons aforecited, and to appoint Commissioners forthwith to accomplish said purpose; and to order defendants Land Bank of the Philippines and Department of Agrarian Reform jointly and severally to pay [AMS] aside from just compensation as heretofore claimed, attorney[']s fees equivalent to 25% of the total claims and such other fees as may be required by law. Pending final determination of this case, payments of court fees, docket fees and other fees relative to the filing of the instant petition be given first and prior lien on the amounts to be awarded as just compensation in this case; thus, [AMS] further pray[s] that the instant petition be received and admitted by the Court. Immediately enjoining the defendants Land Bank of the Philippines fromMAKING DEPOSIT/PAYMENT in favor of Totco Credit Corporation the amount corresponding to the valuation of standing crops and improvements as described in DAR Case No. 52-99; and for this purpose, petition prays for a temporary restraining order to restrain defendant Land Bank from making any deposit/payment in favor of Totco Credit Corporation; and for this purpose [AMS] offers a bond subject to the approval of this Honorable Court the sum of P309,224.17 representing the value of the standing crops and improvements; After trial, making the injunction above-mentioned permanent and ordering defendants Land Bank of the Philippines and the Department of Agrarian Reform NOT TO DEPOSIT/PAY Totco Credit Corporation the amount intended for the standing crops and improvements to be determined during trial as above-mentioned and with such further orders that are just and equitable in the premises.[16] In its Answer,[17] TOTCO denied that AMS was still the owner of the standing crops and improvements on its land. The 21 February 1986 Lease Agreement and the 8 August 1991 MOA were invalid for failure of AMS to comply with Section 6 of the CARL requiring all contracts of lease executed prior to the CARL be registered with the Register of Deeds within three months from the date of effectivity of the said law on 15 June 1988. Even assuming that the said contracts were valid, they were terminated by operation of law on 15 June 1988 when the property of TOTCO was placed under the coverage of the CARL. Still assuming that the contracts were valid, according to the very terms thereof, AMS, as the lessee, only had "the right but not the obligation" to remove the buildings, improvements, facilities, equipment, and machineries from the leased property upon the termination of the lease. Given that AMS did not exercise such right to remove and left the standing crops and improvements on the property of TOTCO, these were now owned by TOTCO. Hence, TOTCO prayed that the Petition of AMS be dismissed. LBP also filed its Answer and an Amended Answer with Affirmative Defenses and Motion to Dismiss. LBP pointed out that the standing crops and improvements subject of Special Agrarian Case No. 61-2000 were the same as those in DAR Case No. 52-99. The just compensation for the standing crops and improvements was previously determined in the Decision dated 8 March 2000 of the RTC in DAR Case No. 52-99, and the said decision was already executed pursuant to the writ of execution issued by the same court. AMS should have asserted and proven its Third Party Claim in DAR Case No. 52-99. It could not bring another case for just compensation without first nullifying the proceedings in DAR Case No. 52-99 for the second case shall be barred by prior judgment. AMS also could not claim that it was totally unaware that the agricultural land it was leasing from TOTCO was being placed under the CARP, because being in possession thereof, it presumably knew of the activities undertaken by DAR officials on the said property pursuant to the CARP, such as identification of the land and its beneficiaries. Moreover, the panel of Commissioners appointed by the RTC in DAR Case No. 52-99 also conducted several ocular inspections of the property. Even assuming that AMS had no knowledge of the proceedings in DAR Case No. 52-99, the said case was a real action and the decision rendered therein bound the property and the whole world. Finally, since the MOA dated 8 August 1991 renewing the lease was not registered, it was null and void under Section 6 of the CARL. Same as TOTCO, LBP prayed for the dismissal of the Petition of AMS in Special Agrarian Case No. 61-2000. The DAR filed a Manifestation adopting the Amended Answer with Affirmative Defenses and Motion to Dismiss of LBP. In its Reply, AMS argued that there was nothing in Section 6 of the CARL which rendered null and void a lease which had been in existence prior to the effectivity of said law. AMS began leasing the agricultural land as early as 21 September 1970 and had only been renewing its lease. TOTCO was regularly billing AMS for the rentals on the leased property even after the effectivity of the CARL, and AMS religiously paid the same until 1998 or 1999. TOTCO knew who was the real owner of the standing crops and improvements on its land, but it only wanted to unjustly enrich itself by accepting the compensation for something it did not work for, produce, or introduce on its property. On 10 January 2001, the RTC appointed a panel of Commissioners to determine the value of just compensation for the standing crops and improvements claimed by AMS. Incidentally, the composition of the panel was exactly the same as that in DAR Case No. 52-99. The panel of Commissioners submitted its Appraisal Report to the RTC on 21 August 2001. In its Report, the panel determined the total actual market value of all existing improvements introduced by AMS on the land owned by TOTCO to be P48,952,473.28, computed as follows:

This Commission hereby arrived at a total of P48,952,473.28 for all the existing improvements introduced by Petitioner under DAR Case No. 61-2000, illustrated below: 1. Standing Crops...................... P41,844,919.44 (P862,504.42 X 48.5156 hectares)

11. Machineries.......................... P7,107,553.84 a. Cableways, roads and Canals................... P4,342,164.64 (P89,500.38 X 48.5156 has.) b. Aerial Propping........ P2,765,389.20 (P57,000.00 X 48.5156 has.)[18] After the conduct of hearings and the formal offer of evidence by the parties, Special Agrarian Case No. 61-2000 was submitted for decision. The RTC promulgated its Decision on 11 March 2003, ruling in favor of AMS. In essence, the RTC found that the standing crops and improvements were indeed owned by AMS. There was no basis for LBP to pay TOTCO just compensation for the said standing crops and improvements, and the recovery of the value thereof already paid to TOTCO shall be the responsibility of the DAR and LBP. AMS had the right to just compensation, equivalent to the market value of its standing crops and improvements, as determined by the panel of Commissioners. The RTC, thus, adjudged: WHEREFORE, premises considered, judgment is hereby rendered in favor of the petitioner AMS Farming Corporation, as follows: First. - The fair, just and reasonable compensation of various improvements consisting of standing banana crops, cableways, road networks and canals and aerial proppings, introduced and owned by petitioner - AMS Farming Corporation, on the 48.5156 hectares of land owned by Respondent-Totco Credit Corporation is hereby determined and fixed at FORTY EIGHT MILLION NINE HUNDRED FIFTY TWO THOUSAND FOUR HUNDRED SEVENTY THREE & 28/100 (P48,952,473.28) PESOS, Philippine Currency, and in order to make such fixed and computed amount of just compensation truly just as the same should have been paid to [AMS] at the time of the acquisition of the land, on which they exist, by the Respondents-DAR and LBP on November 24, 1997 which is the date the title of the land had been transferred in the name of the Republic of the Philippines, a properly-computed adjustment to make such valuation of just compensation at par with the current true value of the Philippine Peso vis--vis the U.S. Dollar be added to said determined and fixed amount supra; plus legal interest thereon pegged at 12% per annum computed from the date of acquisition of the land as hereinabove indicated until full payment to [AMS] is made or deposited in the Court, the totality of which the Respondent-Department of Agrarian Reform, thru the Respondent-Land Bank of the Philippines, are hereby ordered to pay, jointly and severally to [AMS] hereof; Second. - Hereby ordering the Respondent-Department of Agrarian Reform, through the Respondent-Land bank (sic) of the Philippines, to pay jointly and severally, all fees and expenses payable to the Court-appointed Commissioners which shall be taxed as part of the costs as expressly mandated under Section 12, of Rule 67, of the 1997 Rules of Civil Procedure, as amended, to be claimed by [AMS] in a Bill of Costs to be submitted for consideration and action by the Court; Third. - Hereby ordering the Respondent-Department of Agrarian Reform, through the Respondent-Land Bank of the Philippines, to pay jointly and severally, to [AMS] the attorney's fees equivalent to Ten (10%) percent of the total amount herein fixed as just compensation and interests, including the re-computed readjustment amount added thereto, likewise to be claimed in a Bill of Costs which [AMS] shall submit for the proper consideration and action by this Court; Fourth. - Except for the above, no further pronouncement as to costs.[19] The RTC denied the Motion for Reconsideration of LBP in an Order dated 25 April 2003. LBP subsequently appealed the judgment of the RTC in Special Agrarian Case No. 61-2000 to the Court of Appeals, where it was docketed as CA-G.R. SP No. 77520. It turned out that the DAR also appealed the same judgment to the Court of Appeals, which was assigned the docket number CA-G.R. SP No. 76724. In the meantime, during the pendency of CA-G.R. SP No. 77520 before the Court of Appeals, AMS filed with the RTC, in Special Agrarian Case No. 61-2000, a Motion for Execution Pending Appeal and its Bill of Costs. In its Order dated 26 June 2003, the RTC granted execution of its Decision dated 11 March 2003 even pending appeal thereof. The writ of execution was issued in Special Agrarian Case No. 61-2000 on 18 July 2003 and served on LBP on 24 July 2003. AMS then moved for the issuance of a writ of levy and attachment, which was again granted by the RTC in an Order dated 11 August 2003. Several real properties of LBP were levied upon and sold at a public auction held on 29 September 2003 in favor of AMS, for its bid of P100,922,861.43. After the parties submitted the necessary pleadings, the Court of Appeals rendered its Decision in CA-G.R. SP No. 77520 on 28 March 2006, dismissing the appeal of LBP.

The Court of Appeals upheld the validity of the MOA dated 8 August 1991 and by virtue thereof, declared AMS as the owner of the standing crops and improvements it introduced on the leased property. The MOA was not rendered inoperative by the last paragraph of Section 6 of the CARL. Section 6 speaks of retention limits, and the last paragraph thereof cannot be construed separately from the preceding paragraphs. The lease or transfer of possession of private agricultural lands should be deemed null and void only if they violate the provisions of the CARL on retention limits. The last paragraph of Section 6 itself recognizes the validity of a lease agreement already in existence prior to the CARL, provided that it had been registered within three months from the effectivity of the said law. Section 72(a) of the CARL likewise acknowledges the validity and continuity of a lease agreement after the effectivity of the said law, and even after the agricultural land had already been distributed to qualified beneficiaries. Considering that the proceedings in DAR Case No. 52-99 were more quasi in rem thanin rem, and AMS was excluded therefrom, the Court of Appeals ruled that the judgment of the RTC in said case should not bind AMS. Also taking into account that the same judgment already attained finality, the appellate court pronounced that it would only be a formality for AMS to still pursue its VOS before the DAR. The Court of Appeals further found that the appeal of LBP was dismissible on technical grounds. According to the appellate court, LBP violated the rule on non-forum shopping for failing to inform it of the pendency of CA-G.R. SP No. 76724. In addition, LBP was not the real party-in-interest, being only the depositary of the Agrarian Reform Fund and the financial intermediary for purposes of the CARL. For the same reason, LBP could not institute CA-G.R. SP No. 77520 without the concurrence of the Republic of the Philippines, through the Office of the Solicitor General (OSG). The Agrarian Reform Fund belonged to the Republic and it is the one which stood to be injured by execution against the said fund. The Court of Appeals finally decreed: FOR THESE REASONS, the petition is DISMISSED for lack of merit. Costs against [LBP].[20] Acting on the Motion for Reconsideration of the LBP, the Court of Appeals issued a Resolution dated 26 September 2006. In said Resolution, the appellate court did not give much credence to the argument of LBP that AMS used the wrong mode in seeking payment for its standing crops and improvements on the leased property. It took note that LBP did not bother to appeal the RTC Decision dated 8 March 2000 in DAR Case No. 52-99, awarding just compensation to TOTCO for the land, as well as the standing crops and improvements thereon. The bad faith of LBP was displayed when it resisted and totally ignored the valid claim of AMS over the standing crops and improvements. It took LBP to task for proceeding to fully pay TOTCO the award of just compensation in DAR Case No. 52-99 despite the Third Party Claim of AMS. As a result, the Court of Appeals refused to reconsider its earlier Decision. LBP is presently before this Court via this Petition for Review on Certiorari, raising the following issues: A WHETHER OR NOT THE APPELLATE COURT GRAVELY ERRED IN SUSTAINING THE [RTC'S] DECISION AWARDING JUST COMPENSATION IN FAVOR OF AMS FARMS ([SPECIAL AGRARIAN] CASE NO. 61-2000) FOR THE IMPROVEMENTS INTRODUCED ON THE LANDHOLDINGS AFTER IT EARLIER AWARDED JUST COMPENSATION TO TOTCO (DAR CASE NO. 52-99) FOR THE SAME IMPROVEMENTS. B WHETHER OR NOT THE APPELLATE COURT GRAVELY ERRED IN RULING THAT [AMS'S] INTEREST OVER THE IMPROVEMENTS (CAVENDISH BANANA) INTRODUCED ON THE LANDHOLDING OF TOTCO CANNOT BE PREJUDICED BY THE DECISION RENDERED BY THE [RTC] IN THE CASE ENTITLED TOTCO VS. DAR/LBP, DAR CASE NO. 52-99 FOR JUST COMPENSATION. C WHETHER OR NOT THE APPELLATE COURT GRAVELY ERRED IN THE INTERPRETATION AND APPLICATION OF SEC. 6 IN RELATION TO SEC. 73, RA 6657 BY SUSTAINING THE VALIDITY OF THE MEMORANDUM OF AGREEMENT EXECUTED ON 8 AUGUST 1991 AFTER THE EFFECTIVITY OF THE ACT. D WHETHER OR NOT THE APPELLATE COURT GRAVELY ERRED WHEN IT RULED THAT THE VOLUNTARY OFFER TO SELL (VOS) IS NOT REQUIRED SINCE IT WOULD BE AN EXERCISE IN FUTILITY. E WHETHER OR NOT THE APPELLATE COURT GRAVELY ERRED (A) IN DECLARING THAT LBP IS NOT THE REAL PARTY-IN-INTEREST AND, (B) IT VIOLATED THE RULE ON FORUM SHIPPING (sic) BECAUSE OF THE

PENDENCY OF THE CASE ENTITLED DAR VS. AMS FARMING, (sic) CORPORATION, CA-G.R. SP NO. 76724, COURT OF APPEALS. F WHETHER OR NOT THE APPEALLATE COURT GRAVELY ERRED IN NOT RESOLVING THE ISSUE ON THE [RTC] GRANTING THE FOLLOWING AWARDS, TO WIT: 1. PESO-DOLLAR RATE ADJUSTMENT; 2. INTEREST RATE OF TWELVE (12%) PER ANNUM RECKONED FROM NOVEMBER 24, 1997 (DATE OF ISSUANCE OF TITLE IN THE NAME OF THE REPUBLIC CANCELING TITLE OF TOTCO CREDIT CORP.); 3. ATTORNEY'S FEE EQUIVALENT TO 10% OF THE JUDGMENT, INTEREST PLUS PESO-DOLLAR RATE READJUSTMENT. II The Ruling of this Court The Court shall first address the procedural and/or technical issues before proceeding to the substantive issues raised by LBP. A. Procedural/technical issues The LBP is a real party-in-interest which could file its own appeal, represented by its Legal Department as the collaborating counsel of the Government Corporate Counsel. The Court of Appeals was indeed in error for denying LBP its right to file an appeal on the ground that it was not a real party-in-interest, since it did not stand to lose or gain anything from the RTC Decision dated 11 March 2003 in Special Agrarian Case No. 61-2000. It is worthy to note that in making its pronouncement that LBP was a mere depositary of the Agrarian Reform Fund and the financial intermediary for purposes of the CARL, the appellate court was unable to cite any statutory or jurisprudential basis therefor. To the contrary, the Court had already recognized in Sharp International Marketing v. Court of Appeals[21] thatthe LBP plays a significant role under the CARL and in the implementation of the CARP, thus: As may be gleaned very clearly from EO 229, the LBP is an essential part of the government sector with regard to the payment of compensation to the landowner. It is, after all, the instrumentality that is charged with the disbursement of public funds for purposes of agrarian reform. It is therefore part, an indispensable cog, in the governmental machinery that fixes and determines the amount compensable to the landowner. Were LBP to be excluded from that intricate, if not sensitive, function of establishing the compensable amount, there would be no amount "to be established by the government" as required in Sec. 6, EO 229. This is precisely why the law requires the [Deed of Absolute Sale (DAS)], even if already approved and signed by the DAR Secretary, to be transmitted still to the LBP for its review, evaluation and approval. It needs no exceptional intelligence to understand the implications of this transmittal. It simply means that if LBP agrees on the amount stated in the DAS, after its review and evaluation, it becomes its duty to sign the deed. But not until then. For, it is only in that event that the amount to be compensated shall have been "established" according to law. Inversely, if the LBP, after review and evaluation, refuses to sign, it is because as a party to the contract it does not give its consent thereto. This necessarily implies the exercise of judgment on the part of LBP, which is not supposed to be a mere rubber stamp in the exercise. Obviously, were it not so, LBP could not have been made a distinct member of [Presidential Agrarian Reform Council (PARC)], the super body responsible for the successful implementation of the CARP. Neither would it have been given the power to review and evaluate the DAS already signed by the DAR Secretary. If the function of the LBP in this regard is merely to sign the DAS without the concomitant power of review and evaluation, its duty to "review/evaluate" mandated in Adm. Order No. 5 would have been a mere surplus age, meaningless, and a useless ceremony. xxxx Even more explicit is R.A. 6657 with respect to the indispensable role of LBP in the determination of the amount to be compensated to the landowner. Under Sec. 18 thereof, "the LBP shall compensate the landowner in such amount as may be agreed upon by the landowner and the DAR and LBP, in accordance with the criteria provided in Secs. 16 and 17, and other pertinent provisions hereof, or as may be finally determined by the court, as the just compensation for the land." Without the signature of the LBP President, there was simply no contract between Sharp and the Government. The Deed of Absolute Sale dated January 9, 1989, was incomplete and therefore had no binding effect at all. Consequently, Sharp cannot claim any legal right thereunder that it can validly assert in a petition for mandamus. (Emphasis supplied.)

The issue of whether LBP can file an appeal on its own, separately and independently of the DAR, in land valuation and just compensation cases, had been squarely addressed by the Court in Gabatin v. Land Bank of the Philippines,[22] where it ruled: It must be observed that once an expropriation proceeding for the acquisition of private agricultural lands is commenced by the DAR, theindispensable role of Land Bank begins. Even in the preliminary stage of the valuation and the determination of just compensation, the respondent's task is inseparably interwoven with that of the DAR, thus: . . . under the law, the Land Bank of the Philippines is charged with the initial responsibility of determining the value of lands placed under agrarian reform and compensation to be paid for their taking (Section 1, E.O. 405). Through the notice sent to the landowner pursuant to 16(a) of R.A. No. 6657, the DAR makes an offer. In case the landowner rejects the offer, a summary administrative proceeding is held and afterward, the provincial (PARAD), the regional (RARAD) or the central (DARAB) adjudicator as the case maybe, depending on the value of the land, fixes the price to be paid for the land. If the landowner does not agree to the price fixed, he may bring the matter to the RTC acting as Special Agrarian Court. E.O. No. 405 provides that the DAR is required to make use of the determination of the land valuation and compensation by the Land Bank as the latter is primarily responsible for the determination of the land valuation and compensation for all private lands under Rep. Act No. 6657. In Sharp International Marketing v. Court of Appeals, this Court even went on to say that without the Land Bank, there would be no amount to be established by the government for the payment of just compensation, thus: xxxx More telling is the fact that Land Bank can disagree with the decision of the DAR in the determination of just compensation, and bring the matter to the RTC designated as a [Special Agrarian Court] for final determination of just compensation. The foregoing clearly shows that there would never be a judicial determination of just compensation absent respondent Land Bank's participation. Logically, it follows that respondent is an indispensable party in an action for the determination of just compensation in cases arising from agrarian reform program. Assuming arguendo that respondent is not an indispensable party but only a necessary party as is being imposed upon us by the petitioners, we find the argument of the petitioners that only indispensable parties can appeal to be incorrect. There is nothing in the Rules of Court that prohibits a party in an action before the lower court to make an appeal merely on the ground that he is not an indispensable party. The Rules of Court does not distinguish whether the appellant is an indispensable party or not. To avail of the remedy, the only requirement is that the person appealing must have a present interest in the subject matter of the litigation and must be aggrieved or prejudiced by the judgment. A party, in turn, is deemed aggrieved or prejudiced when his interest, recognized by law in the subject matter of the lawsuit, is injuriously affected by the judgment, order or decree. The fact that a person is made a party to a case before the lower court, and eventually be made liable if the judgment be against him, necessarily entitles him to exercise his right to appeal. To prohibit such party to appeal is nothing less than an outright violation of the rules on fair play. (Emphasis supplied.) It is evident from the afore-quoted jurisprudence that the role of LBP in the CARP is more than just the ministerial duty of keeping and disbursing the Agrarian Reform Funds. As the Court had previously declared, the LBP is primarily responsible for the valuation and determination of compensation for all private lands. It has the discretion to approve or reject the land valuation and just compensation for a private agricultural land placed under the CARP. In case the LBP disagrees with the valuation of land and determination of just compensation by a party, the DAR, or even the courts, the LBP not only has the right, but the duty, to challenge the same, by appeal to the Court of Appeals or to this Court, if appropriate. Moreover, the fact that the LBP was impleaded as a party in Special Agrarian Case No. 61-2000 before the RTC, and made liable under the Decision dated 11 March 2003 in said case, necessarily entitled it to exercise its right to appeal therefrom, and to prohibit the same "is nothing less than an outright violation of the rules on fair play." The Court likewise cannot sustain the ruling of the Court of Appeals that LBP needed to secure first the concurrence of the Republic and to be represented only by the OSG in its appeal. The Court has already settled in the preceding paragraphs that the LBP could file the appeal in CA-G.R. SP No. 77520 on its own behalf and in the protection of its own interest. Furthermore, LBP is a government-owned and controlled corporation (GOCC).[23]Book IV, Title III, Chapter 3, Section 10 of Executive Order No. 292, otherwise known as the Administrative Code of 1987, provides that the Office of the Government Corporate Counsel (OGCC) shall act as the principal law office of all GOCCs, their subsidiaries, other corporate off-springs, and government acquired asset corporations. Administrative Order No. 130, issued by the Office of the President on 19 May 1994, delineating the functions and responsibilities of the OSG and the OGCC, clarifies that all legal matters pertaining to GOCCs, their subsidiaries, other corporate offsprings, and government acquired asset corporations shall beexclusively referred to and handled by the OGCC, unless their respective charters expressly name the OSG as their legal counsel. Nonetheless, the GOCC may hire the services of a private counsel in exceptional cases with the written conformity and acquiescence of the Government Corporate Counsel, and with the concurrence of the

Commission on Audit (COA).[24] The Government Corporate Counsel, in its letter of authority,[25] had given its conformity and acquiescence for the LBP Legal Department to appear as its collaborating counsel in all LBP cases, including the present case. And there was no need for the concurrence of the COA since the LBP was being represented by its own Legal Department and was not incurring additional cost for the said legal services. The authority of the LBP Legal Department herein to represent the bank in its appeal before the Court of Appeals and this Court is, thus, indisputable. The LBP did not commit forum shopping. It cannot also be said that the LBP violated the proscription on forum shopping for failing to inform the Court of Appeals in CA-G.R. SP No. 77520 of the pendency of the appeal of DAR in CA-G.R. SP No. 76724 before the same court. Forum shopping is manifest whenever a party "repetitively avail[s] of several judicial remedies in different courts, simultaneously or successively, all substantially founded on the same transactions and the same essential facts and circumstances, and all raising substantially the same issues either pending in, or already resolved adversely by, some other court." It has also been defined as "an act of a party against whom an adverse judgment has been rendered in one forum of seeking and possibly getting a favorable opinion in another forum, other than by appeal or the special civil action of certiorari, or the institution of two or more actions or proceedings grounded on the same cause on the supposition that one or the other court would make a favorable disposition." Considered a pernicious evil, it adversely affects the efficient administration of justice since it clogs the court dockets, unduly burdens the financial and human resources of the judiciary, and trifles with and mocks judicial processes.[26] There is forum shopping when, in the two or more cases pending, there is identity of parties, rights or causes of action and relief sought. Forum shopping exists where the elements of litis pendentia are present or when a final judgment in one case will amount to res judicata in the other. For litis pendentia to exist, the following requisites must be present: 1. Identity of parties, or at least such parties as those representing the same interests in both actions; 2. Identity of rights asserted and reliefs prayed for, the reliefs being founded on the same facts; 3. Identity with respect to the two preceding particulars in the two cases, such that any judgment that may be rendered in the pending case, regardless of which party is successful, would amount to res judicata in the other case.[27] While it may be true that CA-G.R. SP No. 77520 and CA-G.R. SP No. 76724 were both appeals of the 11 March 2003 Decision of the RTC in Special Agrarian Case No. 61-2000, the former was interposed by the LBP while the latter was filed by the DAR. Obviously, the DAR and the LBP are not the same parties. Neither can it be easily presumed that they represent the same interests in their appeals. It should be remembered that the LBP, in land valuation and just compensation cases, exercises authority and discretion separate and independent of the DAR, and may even disagree with and take a position contrary to that of the DAR. That the LBP and the DAR, in this instance, both assert in their respective appeal that AMS has no right to just compensation, can be said to be merely coincidental and may not be true at all times; hence, it does not merge their personalities and their interests, as to compel them to appeal together. Was the LBP under the obligation to inform the Court of Appeals in CA-G.R. SP No. 77520 that the DAR filed its own appeal in CA-G.R. SP No. 76724? Given the circumstances obtaining in this case, the Court answers in the negative. Again, it must be emphasized that although both the DAR and the LBP are government agencies/instrumentalities responsible for the implementation of the CARP, each is a distinct and independent entity, acting in accordance with its own mandate and functions. It has not been sufficiently shown that the LBP was privy to the choice of the DAR to also file an appeal of the RTC Decision dated 11 March 2003 in Special Agrarian Case No. 61-2000. The LBP was not impleaded in CA-G.R. SP No. 76724 and was not receiving notices in said case. The LBP and the DAR were not sharing the same counsel given that the LBP was being represented in CA-G.R. SP No. 77520 by its own Legal Department. The burden of proving that LBP actually knew of CA-G.R. SP No. 76724, yet still failed to properly notify the Court of Appeals, fall on AMS, and the same cannot be assumed just because DAR and LBP are both government agencies/instrumentalities. The situation of the DAR and LBP should not be treated differently from other cases wherein multiple parties from the proceedings in the court a quo each filed their own appeals. If brought in time to the attention of the appellate court, the multiple appeals may be consolidated; but non-consolidation should not result in the dismissal of the appeals on the ground of forum shopping unless it has been substantially established that they were intentionally resorted to by the appealing parties in order to "shop around" for a favorable decision. The rule prohibiting forum-shopping was designed to promote and facilitate the orderly administration of justice. It should not be interpreted with such absolute literalness as to defeat its ultimate objective which is to achieve substantial justice as expeditiously as possible.[28] B. Substantive issues The CARL does not absolutely prohibit lease agreements involving private agricultural lands. The contentious provision of the CARL is Section 6 thereof which reads in full: SEC. 6. Retention Limits. - Except as otherwise provided in this Act, no person may own or retain, directly or indirectly, any public or private agricultural land, the size of which shall vary according to factors governing a viable family-sized farm, such as commodity produced, terrain, infrastructure, and soil fertility as determined by the Presidential Agrarian

Reform Council (PARC) created hereunder, but in no case shall retention by the landowner exceed five (5) hectares. Three (3) hectares may be awarded to each child of the landowner, subject to the following qualifications: (1) that he is at least fifteen (15) years of age; and (2) that he is actually tilling the land or directly managing the farm: Provided, That the landowners whose lands have been covered by Presidential Decree No. 27 shall be allowed to keep the area originally retained by them thereunder; Provided, further, That original homestead grantees or their direct compulsory heirs who still own the original homestead at the time of the approval of this Act shall retain the same areas as long as they continue to cultivate said homestead. The right to choose the area to be retained, which shall be compact or contiguous, shall pertain to the landowner; Provided however, That in case the area selected for retention by the landowner is tenanted, the tenant shall have the option to choose whether to remain therein or be a beneficiary in the same or another agricultural land with similar or comparable features. In case the tenant chooses to remain in the retained area, he shall be considered a leaseholder and shall lose his right to be a beneficiary under this Act. In case the tenant chooses to be a beneficiary in another agricultural land, he loses his right as a leaseholder to the land retained by the landowner. The tenant must exercise this option within a period of one (1) year from the time the landowner manifests his choice of the area for retention. In all cases, the security of tenure of the farmers or farmworkers on the land prior to the approval of this Act shall be respected. Upon the effectivity of this Act, any sale, disposition, lease, management contract or transfer of possession of private lands executed by the original landowner in violation of this Act shall be null and void: Provided, however, That those executed prior to this Act shall be valid only when registered with the Register of Deeds within a period of three (3) months after the effectivity of this Act. Thereafter, all Register of Deeds shall inform the DAR within thirty (30) days of any transaction involving agricultural lands in excess of five (5) hectares. (Emphasis ours.) There is nothing in the last paragraph of the afore-quoted provision which would relay the intention of the Legislature to absolutely prohibit lease agreements after the effectivity of the CARL. It is a rule in statutory construction that every part of the statute must be interpreted with reference to the context, i.e., that every part of the statute must be considered together with the other parts, and kept subservient to the general intent of the whole enactment.[29] Section 6 of the CARL specifically governs retention limits, and the last paragraph thereof must be interpreted or construed in accordance with the context of said section. Simply, what the last paragraph of Section 6 of the CARL considers null and void are lease agreements or any other contract involving private lands executed with the intention of circumventing and violating the retention limits set by the CARL. Consistent therewith, Section 73(a) of the same law expressly prohibits the ownership or possession 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-beneificiaries. The Court is not persuaded that the MOA dated 8 August 1991 between TOTCO and AMS was null and void because it was executed with the intention of violating the provisions of the CARL, particularly, on retention limits. The MOA renewed a lease arrangement over the piece of agricultural land that had been existence since 1970, nearly two decades before the CARL. It is more reasonable to assume that the parties decided to maintain the lease because it proved to be a convenient and profitable arrangement for them, rather than that they intended to deceive the government as to the true size of landholding of the lessee TOTCO. The Memorandum of Agreement dated 8 August 1991, not being registered, is valid and binding only upon the parties thereto, but not on third persons such as LBP. To recall, the Lease Agreement between APECO (the predecessor-in-interest of TOTCO) and AMS was executed on 21 February 1986, prior to the effectivity of the CARL. The lease shall be for a period of 10 years, commencing on 1 November 1985 and expiring on 31 October 1995. The Lease Agreement was registered with the Registry of Deeds and accordingly annotated on the certificate of title of APECO. The CARL took effect on 15 June 1988. The last paragraph of Section 6 thereof states that all contracts of sale, disposition, lease, management contract, or transfer of possession of private lands executed prior to the CARL shall be valid only when registered with the Register of Deeds within a period of three months from the effectivity of the said Act. Since the 21 February 1986 Lease Agreement was already registered prior to the CARL, there was no more need for it to be registered again within three months from the effectivity of the said law, as required by the last paragraph of Section 6 thereof, for such would only be redundant. Having complied with the registration requirement, the Lease Agreement remained valid even after the effectivity of the CARL. On 8 August 1991, TOTCO and AMS executed the MOA increasing the area leased and extending the lease for 25 years, beginning 1 November 1991 and ending on 31 October 2016. The MOA was not registered. The non-registration of the 8 August 1991 MOA did not render the same null and void. There is no provision in the CARL to such effect. While the last paragraph of Section 6 of the said law does require as a condition for validity the registration of any contract involving private land, it applies only to contracts "executed prior to this Act." The consequence of the non-registration of the 8 August 1991 MOA is clearly set forth in Article 1648 of the Civil Code, which states that, "Every lease of real estate may be recorded in the Registry of Property. Unless a lease is recorded, it shall

not be binding on third persons." The same principle is adopted by Section 51 of Presidential Decree No. 1529, otherwise known as the Land Registration Decree, which provides that no deed, mortgage, lease or other voluntary instrument except a will - purporting to convey or affect registered land shall take effect as a conveyance or bind the land until its registration. Thus, if the lease of a piece of land covered by a certificate of title is not registered, it is binding only between the lessor and the lessee but it does not affect innocent third persons.[30] In the present case, TOTCO submitted the VOS of its agricultural property to the DAR on 9 September 1996. When LBP began its valuation of said property pursuant to the CARP, the certificate of title covering the same in the name of TOTCO only bore the annotation of the Lease Agreement dated 21 February 1986, which had already expired on 31 October 1995. AMS argues that DAR and LBP should have known of the extension of the lease contract between AMS and TOTCO considering that AMS remained in possession of the land being placed under the CARP. The DAR officials who conducted ocular visits of the property could not have missed this fact. The Court is not convinced. Such an argument hardly constitutes solid basis for ruling against LBP, especially in view of its counter-charge that AMS should have been alerted to the CARP proceedings involving the leased property given the numerous visits and activities conducted by DAR officials thereon, as well as by the panel of Commissioners appointed by the RTC in DAR Case No. 52-99. It is hardly believable that AMS remained in total ignorance of the CARP proceedings involving the leased property until it received on 3 May 2000 a copy of the RTC Decision in DAR Case No. 52-99 dated 8 March 2000. It would seem that the ocular visits conducted by DAR officials on the property of TOTCO are double-edged, working to the disadvantage of all the parties and highlighting a lack of diligence on all sides - with DAR and LBP, on one hand, and AMS, on the other - failing to take notice of each other's presence on the leased property and acting promptly and accordingly therefrom. The Court also notes that even the panel of Commissioners appointed by the RTC in DAR Case No. 52-99, which also inspected the property of TOTCO, had likewise overlooked the possession thereof by AMS and, resultantly, failed to discover as early as then that the lease agreement between TOTCO and AMS was extended. Perhaps the problem lies with paragraph 6 of the Lease Agreement of 21 February 1986, which provided that: 6. he LESSEE shall devote the leased property to production of bananas and other crops, other than rice and corn or other crops that will place under or subject the land under land reform, and shall have the right to build and construct thereon such buildings, dwelling and farm houses, roadways and waterways, improvements and facilities of whatever nature, and place thereon such equipment and machineries as it may deem necessary or expedient in its agricultural operations, and the right but not the obligation to remove during the leased period or any extension thereof, or after the expiration of the lease, any such buildings, improvements, facilities, equipment and machineries upon the termination of this lease. No liability of any nature shall accrue to the LESSEE by reason of its construction use or removal of these buildings, roadways, waterways, improvements, facilities, equipment and machineries, provided such constructions or structures, use or removal shall not cause substantial damage to the leased property. However, subject to an agreement, the LESSOR may purchase the physical movable improvements such as buildings, shade, staff houses, laborers' quarters, and other similar permanent improvements upon the expiration of the contract.[31] Based on the foregoing paragraph, the standing crops and improvements made by AMS on the property of TOTCO shall remain thereon, even after the expiration of the lease, should AMS not exercise its right to remove the same. It would, therefore, not be odd for third persons to still find the standing crops and improvements of a banana plantation on the property of TOTCO, even when the latter's lease agreement with AMS should have already expired. There were no sufficient circumstances to put third persons on guard or lead them to presume that the lease between TOTCO and AMS was extended beyond the expiration of the 21 February 1986 Lease Agreement. The Court of Appeals belittles the effect of non-registration of the MOA dated 8 August 1991 by reasoning that it merely extended the original Lease Agreement dated 21 February 1986. Since the principal agreement (the Lease Agreement) was registered, there was no more need to register the accessory contract (the MOA). The ratiocination of the appellate court on this matter, adopted by AMS, is appallingly specious. The 8 August 1991 MOA was not a mere accessory of the 25 February 1986 Lease Agreement; it was a brand new contract. It substantially digressed from the terms of the Lease Agreement, leasing an expanded area and providing for a lease period of 25 years beginning 1 November 1991 and ending 31 October 2016. That the MOA made the Lease Agreement an integral part thereof did not make the former an accessory of the latter. It only did away, as a matter of convenience, of having to reiterate in the MOA the provisions in the Lease Agreement which the parties still intended to observe. Since it was the MOA dated 8 August 1991 which, in effect, adopted or absorbed the Lease Agreement dated 21 February 1986, it was the registration of the former rather than the latter which became essential. The registration and annotation of the MOA on the certificate of title of TOTCO would constitute sufficient notice to third parties of the existence of the two

lease contracts, because the MOA explicitly referred to the Lease Agreement as an integral part thereof. In contrast, it could not be reasonably expected that third parties were alerted to the existence of the MOA by the registration and annotation of the Lease Agreement alone on the certificate of title of TOTCO, for the latter contract makes no mention at all of the MOA or, more importantly, of the expanded area leased and the longer period of lease thereunder. The Court, therefore, finds that the MOA dated 8 August 1991, not being registered, binds only the parties thereto, namely, TOTCO and AMS. But as far as LBP, a third party, was concerned, the registered Lease Agreement of 21 February 1986 had expired on 31 October 1995, and the private agricultural land and all the standing crops and improvements thereon were owned by TOTCO. Absent the registration of the MOA, AMS cannot compel LBP to recognize the same and be bound by its terms. The recourse of AMS is not to seek just compensation from LBP under the CARL, but to recover from TOTCO under the Civil Code. From the very beginning, the RTC and the Court of Appeals erred in resolving the claim of AMS under the CARL, rather than the Civil Code. The said courts proceeded from the mistaken presumption that AMS had a right to just compensation under the CARL for the standing crops and improvements it introduced as a lessee on the agricultural land of TOTCO. The RTC should have dismissed the Petition of AMS in Special Agrarian Case No. 61-2000 for lack of cause of action; it was clearly not an agrarian matter. There is no question that the landowner is entitled to just compensation for its private agricultural land taken pursuant to the CARP for distribution to qualified beneficiaries. However, even after an exhaustive scrutiny of the CARL, the Court could not find a provision therein on the right of a lessee of a private agricultural land to just compensation for the crops it planted and improvements it built thereon, which could be recognized separately and distinctly from the right of the landowner to just compensation for his land. The standing crops and improvements are valued simply because they are appurtenant to the land, and must necessarily be included in the final determination of the just compensation for the land to be paid to the landowner. Standing crops and improvements, if they do not come with the land, are totally inconsequential for CARP purposes. The only express provision in the CARL directly concerning the right of a lessee of a private agricultural land placed under the CARP is Section 72(a) thereof, which states: Section 72. Leases, Management, Grower or Service Contracts, Mortgages and Other Claims. - Lands covered by this Act under lease, management, grower or service contracts, and the like shall be disposed of as follows: a) Lease, management, grower or service contracts covering private lands may continue under their original terms and conditions until the expiration of the same even if such land has, in the meantime, been transferred to qualified beneficiaries. But this Court must still qualify that the lessee can only avail itself of the afore-mentioned right to continue the lease contract under its original terms and conditions until the expiration of the same, and even after the distribution of the land to the qualified beneficiaries, if the said lease contract was duly registered; because only when it is registered, will the lease contract be binding on third parties, such as the CARP beneficiaries. Other than Section 72(a) thereof, the CARL does not specially govern lease contracts of private agricultural lands. So that for the determination of the rights of AMS as a lessee in a lease contract terminated by the sale of the leased property to a third person (regardless of the fact that the third person was the Republic and the sale was made pursuant to the CARP), the Court resorts to the general provisions of the Civil Code on lease contracts; and not the CARL. Relevant articles of the Civil Code reads: ART. 1654. The lessor is obliged: (1) To deliver the thing which is the object of the contract in such a condition as to render it fit for the use intended; (2) To make on the same during the lease all the necessary repairs in order to keep it suitable for the use to which it has been devoted, unless there is a stipulation to the contrary; (3) To maintain the lessee in the peaceful and adequate enjoyment of the lease for the entire duration of the contract. ART. 1659. If the lessor or the lessee should not comply with the obligations set forth in articles 1654 and 1657, the aggrieved party may ask for the rescission of the contract and indemnification for damages, or only the latter, allowing the contract to remain in force. ART. 1676. The purchaser of a piece of land which is under a lease that is not recorded in the Registry of Property may terminate the lease, save when there is a stipulation to the contrary in the contract of sale, or when the purchaser knows of the existence of the lease. If the buyer makes use of the right, the lessee may demand that he be allowed to gather the fruits of the harvest which corresponds to the current agricultural year and that the vendor indemnify him for damages suffered.

If the sale is fictitious, for the purpose of extinguishing the lease, the supposed vendee cannot make use of the right granted in the first paragraph of this article. The sale is presumed to be fictitious if at the time the supposed vendee demands the termination of the lease, the sale is not recorded in the Registry of Property. (Emphasis ours.) It is clear that under the Civil Code, the recourse of AMS as a lessee is against its lessor, TOTCO. Since TOTCO was unable to comply with its obligation to keep AMS in peaceful and adequate enjoyment of the leased property for the entire duration of the lease agreed upon in the MOA dated 8 August 1991, then AMS could rescind the MOA (which, as the Court declared herein, is still binding between TOTCO and AMS, but already incapable of execution considering the acquisition of the property by the Republic under the CARP) and seek indemnification for damages. In addition, AMS, as the lessee under an unregistered contract of lease, also had the right to demand that it be allowed to gather the fruits of the harvest corresponding to the agricultural year the leased property was actually acquired by the Republic under the CARP and that it again be indemnified by TOTCO as the vendor of the property for the damages suffered. A lessee who made improvements on the leased property is further granted the following rights by the Civil Code upon the termination of the lease for any reason: ART. 1678. If the lessee makes, in good faith, useful improvements which are suitable to the use for which the lease is intended, without altering the form or substance of the property leased, the lessor upon the termination of the lease shall pay the lessee one-half of the value of the improvements at that time. Should the lessor refuse to reimburse said amount, the lessee may remove the improvements, even though the principal thing may suffer damage thereby. He shall not, however, cause any more impairment upon the property leased than is necessary. With regard to the ornamental expenses, the lessee shall not be entitled to any reimbursement, but he may remove the ornamental objects, provided no damage is caused to the principal thing, and the lessor does not choose to retain them by paying their value at the time the lease is extinguished. (Emphasis ours.) A lessee is not treated the same way as a builder in good faith who believed himself to be the owner of the land, and as such built thereon and incurred expenses in doing so; and who, under Articles 448[32] and 546[33] of the New Civil Code, is vested the rights of retention and reimbursement for necessary and useful expenses made on the land. A lessee, being conclusively presumed to know that he is not the owner of the land that he is leasing, and constructs a house or building or any other improvement or structure on the leased land, only has the right granted to him by Article 1678 of the Civil Code to remove the same in case the lessor elects not to appropriate the building and pay 50% of its value. [34] Knowing that his occupation of the premises continued only during the life of the lease contract and that he must vacate the premises upon termination of the lease, or even earlier, if he violated the terms thereof, the lessee is deemed to have introduced the improvements at his own risk. He cannot recover their value, much less retain the premises until reimbursement is made.[35] Even more severe was paragraph 6 of the Lease Agreement dated 21 February 1986, made an integral part of the MOA dated 8 August 1991 between TOTCO and AMS, which granted AMS, upon the expiration of the lease, the right, but not the obligation, to remove the improvements it introduced on the leased land. The said paragraph did not at all require TOTCO to pay or compensate AMS for the value of the improvements in the event that AMS would choose not to remove the same.[36] In light of the foregoing, when AMS entered into a lease agreement of the agricultural land with TOTCO, it had no right to expect that, upon the termination of the lease, it would be compensated for the crops it planted and improvements it built on the leased land; or that, if at all, it can recover more than half the value thereof from TOTCO. Hence, the Court cannot allow AMS to seek full compensation for the same crops and improvements from the LBP just because its lease was terminated by the sale of the leased property to the Republic under the CARP. That the leased land was placed under the CARP did not change the status of AMS as a lessee and gave it the right to more compensation upon the termination of the lease, as compared to the lessee of any other kind of property. It was never the intention of the CARL to create a privileged class of lessees. AMS has no interest in the just compensation paid by LBP to TOTCO pursuant to the judgment in DAR Case No. 5299. The Decision dated 8 March 2000 of the RTC in DAR Case No. 52-99 is actually irrelevant to AMS. Since AMS was not a landowner, but a mere lessee of the agricultural land owned by TOTCO, it had no right under the CARL to demand from LBP just compensation for its standing crops and improvements. Thus, it cannot lay claim to the portion of the just compensation, pertaining to the improvements on the leased property, awarded by the RTC to TOTCO in DAR Case No. 52-99. And consequently, the Affidavit of Third Party Claim filed by AMS President Soriano in DAR Case No. 52-99 over the just compensation awarded to TOTCO is without merit. As a lessee, the rights of AMS over its standing crops and improvements on the leased property are defined, conferred, as well as limited by the provisions of the MOA it executed with TOTCO on 8 August 1991, in relation to those of the Civil Code. Such rights are totally independent of and unaffected by the judgment of the RTC in DAR Case No. 52-99. That the leased property was placed under the CARP and that TOTCO received just compensation therefor are not relevant to the rights of AMS as a lessee. Rather, what is significant to AMS is only the fact that it was deprived of the peaceful and adequate enjoyment of the property for the duration of the period of lease agreed upon in the MOA. WHEREFORE, premises considered, the instant Petition for Review is herebyGRANTED. The Decision dated 28 March 2006 and Resolution dated 26 September 2006 of Court of Appeals in CA-G.R. SP No. 77520 is ANNULED and SET ASIDE. The Petition for the determination of just compensation with prayer for the issuance of a writ of preliminary

injunction and temporary restraining order filed by respondent AMS Farming Corporation before Regional Trial Court, Tagum City, Davao del Norte, Branch 2, and docketed as Special Agrarian Case No. 61-2000, is orderedDISMISSED, without prejudice to the filing by respondent AMS Farming Corporation of the appropriate case against its lessor, Totco Credit Corporation, pursuant to the provisions of the Civil Code on lease contracts. SO ORDERED. [G.R. No. 89620, July 13, 1990] PRUDENCIO S. PENTICOSTES, SR. AND PRUDENCIO S. PENTICOSTES, JR., PETITIONERS, VS. DEVELOPMENT BANK OF THE PHILIPPINES, SPOUSES ALEXANDER DE GUZMAN AND NATIVIDAD MABALOT AND REGISTER OF DEEDS OF TARLAC, RESPONDENTS. DECISION GANCAYCO, J.:

In this case the singular issue is whether or not a bank mortgagor may be compelled to surrender the duplicate title of the property mortgaged for registration pursuant to the Comprehensive Agrarian Reform Program (CARP) of the government when the mortgage obligation has not been paid for. The facts are undisputed. Respondents spouses Alexander de Guzman and NatividadMabalot obtained a mortgage loan from the Development Bank of the Philippines (DBP for short), whereby Transfer Certificates of Title Nos. 77533 and 76343 were offered as collateral. Thereafter, the land described under Transfer Certificate of Title No. 76343 was leased by said respondents-spouses to petitioner Prudencio S. Penticostes onFebruary 4, 1982. The other lot covered by Transfer Certificate of Title No. 77533 was sold to the other petitioner Prudencio Penticostes, Jr. on February 26, 1987. Meanwhile, R.A. No. 6657, otherwise known as the CARP Law was passed. Considering Section 6 thereof relative to the registration of deeds or any transactions involving agricultural lands, petitioners, in compliance therewith, went to the Register of Deeds of Tarlac to register their deeds of sale and lease contract. The Register of Deeds, however, refused to annotate the two (2) deeds in the original file kept in his Office without the owner's duplicate copies of said titles. With this requirement,petitioners went to the DBP to borrow the titles but the latter contended that the registered owners-spouses thereof still have an unpaid balance on their mortgage contract. Petitioners expressed their willingness to assume the same but did not actually assume nor pay the unpaid obligation so the DBP stood firm in its refusal. Thus, petitioners filed a complaint in the Regional Trial Court of Tarlac seeking to compel the surrender of the said titles for purposes of registration, its registration and damages. A motion to dismiss the complaint dated September 16, 1988 was filed by the respondent Register of Deeds for lack of cause of action and for failure to exhaust administrative remedies. The De Guzman spouses filed a motion for issuance of a complete set of a copy of the complaint with motion for extension of time to file the answer on September 19, 1988, having been served on September 9, 1989 a copy of the complaint attached to the summons which is supposed to consist of six pages, but it actually consisted of five pages only with page 4 missing so that said respondents cannot possibly file their answer until after a complete set of the complaint is served to them. The DBP, which was served a copy of the summons on September 9, 1988, filed a motion to dismiss on September 22, 1988 on the ground that the claim is unenforceable under the statute of frauds and that the complaint states no cause of action. On October 4, 1988 Prudencio Penticostes filed a motion to declare respondents in default for failure to file the responsive pleadings under the rules. On October 6, 1988 the De Guzman spouses filed their answer with compulsory counter-claim. On October 11, 1988, the trial court directed the petitioners to comment on the preliminary issues raised by the respondents in their special affirmative defenses within five (5) days from notice. On October 11, 1988 petitioners filed their memorandum with a prayer that the presiding judge inhibit himself inasmuch as the counsel of petitioners filed an administrative case against him. An opposition to the motion to dismiss filed by the DBP was filed by petitioners on October 26, 1988. On November 8, 1988 the trial court denied the motion for inhibition for lack of legal ground and considering that there are issues of facts rendering the ground for dismissal not indubitable, action on the motion to dismiss was deferred until after the evidence warrants the same. On November 16, 1988, plaintiffs filed a motion to declare respondents-spouses in default.

On November 24, 1988, the trial court issued an order denying plaintiffs' motion todeclare respondents-spouses in default, considering the provision of Section 4, Rule 18 of the Rules of Court and considering further that respondents-spouses' counterclaim is compulsory in nature. A motion for reconsideration thereof was filed by the petitioners and the De Guzman spouses were given five (5) days to file their comment. In the meanwhile, on December 8, 1988, petitioners also filed a motion to declare the DBP in default. The respondentsspouses filed their comment on December 14, 1988 stating that they filed a motion to require the petitioner to furnish a complete copy of the complaint to be able to file an answer and that they filed the same before theirmotion was resolved by the trial court and even as petitioner failed to furnish them a complete copy of the complaint. On December 14, 1988, the DBP filed an answer withcompulsory counterclaim and alternative compulsory counterclaim. On December 22, 1988, the DBP also filed an opposition to declare the adverse parties in default. In its order dated February 14, 1989, the trial court denied petitioners motion to declare the DBP in default inasmuch as the latter filed a motion to dismiss onSeptember 22, 1988 before the expiry date to file the answer so that the motion to dismiss is considered an answer.[1] It ruled that as the case states a common allegation against the respondents, the court shall try the case against all upon the considered answer thus seasonably filed. It also held that the filing of the DBP'sanswer after the deferment of the motion to dismiss did not prejudice the petitioners as the answer is a reiteration of the issues raised in the motion to dismiss which was treated as an answer. The pre-trial was thus set on March 14, 1989. On said date, a pre-trial conference was held after which the trial court rendered a pre-trial order as follows: "During the pre-trial conference of this case, parties stipulated and agreed on the following facts: 1. 2. The existence of the deed of sale and lease of the property; That at the time of the execution of the deed of sale, this land was mortgaged to the Development Bank of the Philippines, Tarlac Branch,Tarlac, Tarlac; and That at the time the plaintiffs demanded from the Development Bank of the Philippines the surrender of the title, they were duly informed that the loan of defendants-spouses Alexander de Guzman and NatividadMabalot was still outstanding and only partially paid, to which Atty.Prudencio Penticostes expressed his willingness to assume the same.

3.

The only factual matters to be resolved pertain to damages, the admission of its proof being dependent on the resolution of the legal issues raised in the pleadings of the parties. Parties, through counsel, are hereby directed to submit their respective memoranda to resolve the legal issues in their pleadings not later thanApril 14, 1989. Without prejudice to the resolution of the legal issues, set the hearing onMay 10, 11 and 12, 1989, at 8:30 in the morning (sic)."[2] The parties filed their memoranda. On April 28, 1989, a decision was rendered by the trial court dismissing the complaint for lack of merit. Hence, this petition. Petitioners assailed the trial court for rendering a decision when there was allegedly no answer filed by the respondents and that they should have been declared indefault. This allegation is without cogent basis. The court has taken pains to relate the antecedent incidents in the court in order to determine the merit of this representation. In the case of respondent Register of Deeds, he filed a timely motion to dismiss within the reglementary period to answer. Similarly, the respondent DBP filed a timely motion to dismiss. And before its motion to dismiss was resolved by the court the DBP filed its answer and compulsory counterclaim on December 14, 1988. Upon the filing of the motion to dismiss by the DBP the period to file an answer isdeemed interrupted until said motion to dismiss is resolved. By the same token, the De Guzman spouses filed, within the reglementary period to answer, a motion to require the petitioners to furnish them a complete set of the complaint and for an extension of time to file the answer. Nevertheless, even before the resolution of their motion, they filed on October 6, 1988 their answer with counter-claim. No doubt their motion for the issuance of the complete set of a copy of the complaint with motion for extension of time to file answer interrupted the running of the period within which to file the answer. None of the respondents, therefore, was in default as their answers were timely filed. Moreover, assuming that any of the respondents failed to file the answer on time, under Section 4, Rule 18 of the Rules of Court, "when a complaint states a common cause of action against several defendants, some of whom answer, and the

others fail to do so, the court shall try the case against all upon the answers thus filed and render judgment upon the evidence presented." As to the merit of the case, it appears that at the pre-trial, the parties agreed and entered into a stipulation of facts on the basis of which the trial court required the parties to file their memoranda. Because of the stipulation of facts of the parties at the pre-trial, as indeed the facts appear to be undisputed, the Court can very well resolve the case without need of a trial on the merits. In resolving the issue as to whether or not the respondents may be compelled to surrender the title of the properties in the possession of the DBP for registration by the petitioners pursuant to the CARP Law, the trial court made the following disquisition: "Considering the admission of the parties that the loan of defendants-spouses de Guzman is still outstanding and only partially paid, defendants-spouses' obligation therefore to deliver said titles is thus unavailing as the titles were in the possession of the DBP as security of the loan obtained by said spouses. The provision of the mortgage contract executed by the mortgagor-spouses states that they could not convey or in any manner encumber the mortgage property without the written consent of the mortgagor-bank (p. 11, Answer). It is therefore legally and physically impossible for defendants-spouses to surrender something which is not in their possession. With respect to defendant DBP, plaintiffs failed to show any legal basis upon which this Court will use its coercive power. On the other hand, defendant DBP stands firm on its contractual right pursuant to the mortgage contract with the other defendants-spouses. Plaintiffs, not being privies to the aforementioned contract, can not invoke their obligation under the CARP Law to obtain the copies of Transfer Certificates of Title Nos. 77533 and 76343 for the registration of their right without disturbing defendant DBP's secured rights. Plaintiffs' right cannot rise higher than its source, i.e., defendant de Guzman spouses. Nowhere in plaintiffs' complaint and other pleadings could be found a legal basis for the surrender of the aforementioned copies of Transfer Certificates of Title Nos. 77533 and 76343 which it holds as collateral for the mortgage loan to defendants-spouses de Guzman. Even the compulsory registration of rights under par. 4, Sec. 6, of the CARP Law will not justify disturbance of DBP's prior and superior right. What plaintiffs cannot do by way of voluntary registration could be obtained by some other means, as what plaintiff Prudencio S.Penticostes did when he served a notice of lis pendens to the office of defendant Register of Deeds (p. 10, Record). The CARP Law or any other law, does not require from any party compliance under impossible conditions. There being no legal ground for the plaintiffs to compel the defendants-spouses de Guzman and the DBP to surrender the titles, refusal of the Register of Deeds to annotate plaintiffs' Deed of Sale and Lease Contract without presentation of the owners' duplicate copies of said titles is in order (Sec. 53, P.D. 1529)."[3] We agree. Under Section 6 of R.A. No. 6657 popularly known as the CARP Law it is provided as follows: "x x x. "Upon the effectivity of this Act, any sale, disposition, lease, management contract or transfer of possession of private lands executed by the original landowner in violation of this Act shall be null and void: Provided, however, That those executed prior to this Act shall be valid only when registered with the Register of Deeds within a period of three (3) months after the effectivity of this Act. Thereafter, all Registers of Deeds shall inform the Department of Agrarian Reform (DAR) within thirty (30) days of any transaction involving agriculturallands in excess of five (5) hectares." The foregoing provision simply means that any sale, disposition, lease management contract or transfer of possession of private lands executed by the original land owners in violation of the act shall be null and void unless it is registered with the Register of Deeds within a period of three (3) months after the effectivity of said act. The documents of sale and lease in favor of petitioners may be registered only by the Register of Deeds upon their compliance with the requirement of the law with respect to the submission of the duplicate copy of the owners certificate of title.[4] Since in this case the said duplicate titles are in the possession of the DBP as mortgagor thereof and since it appears that the mortgage loan covering the properties have not been fully paid for, the DBP had the right to refuse to release the duplicate titles to the petitioners for purposes of registration. The petitioners, therefore, may not compel the DBP through court action to surrender the owners duplicate title of the property in question for purposes of registration of the documents of petitioners under the CARP Law. WHEREFORE, the petition is DISMISSED for lack of merit, with costs against petitioners. SO ORDERED.

[G.R. No. 74323, September 21, 1990] WENCESLAO HERNANDEZ, PETITIONER, VS. HON. INTERMEDIATE APPELLATE COURT, SALVADOR P. DE GUZMAN, JR., QUINTIN FLORES, JUAN GARCIA, ARSENIO FLORES, FRANCISCO FLORES, AURELIO LEVISTE AND SIMON LEVISTE, RESPONDENTS. DECISION MEDIALDEA, J.:

This is a petition for review on certiorari of the decision of the Intermediate Appellate Court (now Court of Appeals) affirming the decision of the Regional Trial Court, Fourth Judicial Region, Branch XXIX, San Pablo City in an agrarian case, docketed as CAR Case No. 8258, filed by private respondents against petitioner for sums of money representing their unpaid shares of the harvest as tenants of the latter. The antecedent facts, as found by the trial court, and later affirmed by the appellate court, are as follows: "The property subject matter of this case is landed estate consisting of 53 hectares of coconut land, more or less, located in Barangay Perez,Calauan, Laguna, formerly owned by the spouses Salvador andEscolastica Tolentino, now both deceased, who had during their lifetime ten (10) children, and as of 1969 owned by SALESC, Inc., possession was relinquished to Wenceslao Hernandez in 1957 under a civil-law lease. The houses of the plaintiff are built in the cluster inside the property where they and their respective family reside, at least as of 1973 according to defendant Wenceslao Hernandez. They built their houses clumped together within one area because of the dange(r) and threat posed by the Hukbalahap movement. "The court finds the plaintiffs as bonafide agricultural tenants over the plantation since world war II when the property was personally cultivated by late Salvador Tolentino and, upon his demise, by the lateEscolastica M. Tolentino. The several letters written by Mrs. Tolentino, by herself and thru her daughter Benita, addressed to Quintin Flores, are eloquent testimonies of a tenancy relationship inasmuch as the plaintiffs are identified as bantay' over the property and who are entitled to a share in the harvest. The letter dated March 14, 1951 (Exh. 'D') addressed to Quintin Flores by the late Escolastica M. Vda. deTolentino herself reads as follows: Hindi itong kondisyon na itong ikaapat na bahagi ang ibibigay ko sa inyo; angkondisyon na ibibigay ko sa inyo ay para sa isang taong ito, hanggang sa katapusanng taong ito, ay kalahati, at sa mga susunod na taon, ay tercio parte na lamang. Ito ay sa mga halaman lamang bukod sa niyog. 'Bilangin ang mga puno ng halaman sa kani kanilang lugar, bawa't bantay kung ilanglanzones. Kung ilan ang abocado, star apple, at iba pang halaman ng itinanim ngMang Badong. Nakikita nila na malalaki na ang mga halaman kaya nagprisinta segurod ine sa akin. "Coconut land is considered under our laws as agricultural (See RA 1199 and 3844) and a share tenant is one whose renumeration (sic) for cultivating land owned or possessed by another is determined by a proportional percentage of the harvest. The act of cultivation includes cleaning or clearing of the under brush within the plantation (Delos Reyes v. Espineli, 30 SCRA 574). Plaintiffs have shown through their evidence that they have been in possession of their respective areas inthe plantation which they clean and clear for the purpose of improving the harvest and they are paid at the rate of 1/6 of the harvest under the late Mrs. Escolastica M. Tolentino and reduced to only 1/7 under the tenure of defendant Wenceslao Hernandez. "The Court cannot accept the version of the defendants that the plaintiffs were evicted from the premises in the year 1952 or 1953, or even in 1954. The receipt evidencing the sale of the coconuts toPotenciano Gallevo for the years 1953 to 1957 inclusive (see Exhs. 'R' to 'U' inclusive) which were produced by the plaintiffs prove that plaintiffs not only were in the premises all along but had a hand or participation in the harvest and its sale to Potenciano Gallevo; the Tolentinos are educated people as may be gleaned from their family picture marked asExh. 'P' and it is a surprise to the court why their documentation of their relationship with the plaintiffs is haphazard. In fact, the practically illiterate plaintiffs have shown some system in keeping track of the meager records made available to them by the defendants. They were even able to produce the safe conduct passes issued by Mr. Arturo M.Tolentino (See Exhs. 'C' and 'F'); although said passes are only for a few days validity, the court considers the said limitation as an act of prudence on the part of the Tolentinos who apparently wanted to avoid the theft of their coconuts which could otherwise be hauled even before and after the harvest time. And even if the court takes into consideration the protestations made by the defendant, the most it could do is create a doubt, in which case the same shall be resolved in favor of the plaintiffs (see Sec. 56, RA 1199; Sec. 16, PD 946). The court notes that Wenceslao Hernandez admitted that when he occupied the premises for the first time when the same was leased to him, the plaintiffs were already inside the property planting crops, and this belies the testimony of SALESC, Inc. that the plaintiffs had already been driven out from the premises in the year 1952 or thereabout. "At any rate, it is immaterial if the plaintiffs had been ejected as tenants in 1952 or 1953. They are anchoring this suit on the fact that they remained as agricultural tenants on the plantation even during the tenure of Wenceslao Hernandez beginning the year 1957. The plaintiffs have been in continuous, uninterrupted possession of the plantation asevidenced by

their houses built thereon which Hernandez himself admitted on the witness stand as having been constructed by the plaintiffs who, according to him, insisted on constructing the sameinspite of his refusal to give them permission; if indeed he had refused them permission to build their houses on the property, why did Hernandez not call the authorities or report the same to the landowner? "The civil law lease executed by SALESC Incorporated in favor ofWenceslao Hernandez was reduced to writing only in 1970 (See Exhs. 2, 2-A to '2-J'). Wenceslao Hernandez was not prohibited from taking in agricultural tenants. In the absence of such prohibition, it follows that whomever the civil lessee takes in a(s) agricultural tenant shall bind the landowner. "The court hereby finds that the landholding of the plaintiff are twelve hectares for Quintin Flores, fourteen hectares for Juan Garcia, eight hectares for Arsenio Flores, seven hectares for Francisco Flores, five hectares for Aurelio Leviste and seven hectares for Simon Leviste (seeExhs. 'A-1' and 'A-1-A' - and that aside from the coconut trees planted thereon, the plaintiffs planted citrus, lanzones, coffee, pineapples and bananas. Plaintiffs used to have their houses in their respective landholdings but with the advent of the Hukbalahap movement in the area, they were constrained to build their houses in a cluster in the landholding of Juan Garcia. Also, the evidence submitted by the parties shows that the plaintiffs received as their share from the coconut harvest starting the year 1980 only 1/7 of the same. Attached to the records of this case is an 'Urgent Manifestation and Motion dated October 24, 1983 filed by the plaintiffs, giving the Court a breakdown of the coconut harvest of the property and shares received by the plaintiffs as a whole and the court therefore holds that for the period February to December, 1980, 440,103 coconuts were harvested and the 1/7 share of the plaintiffs stood at P13,454.50; for the period February to December, 1981, 484,811 coconuts were harvested and plaintiffs' 1/7 share stood at P13, 105.00; for the period February to December, 1982 408,464 were harvested and plaintiffs' share stood at P13,280.20, and from February to October, 1983, 421,181 coconuts were harvested andplaintiffs' share stood at P18,844.10. Inasmuch as the plaintiffs' aforesaid shares is computed to only 1/7 which is equal to only 14.28% the defendants should add thereto the sum of P64,601.49 to make it equal to 30%." (pp. 36-39, Rollo) On February 28, 1985, the trial court rendered judgment, the dispositive portion of which reads: "WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants as follows: "1. Declaring the plaintiffs as the true and lawful tenants of SALESC,Inc. and of Wenceslao Hernandez, in and over the property owned by SALESC, Inc. and under lease to the latter, more particularly twelve hectares for Quintin Flores, fourteen hectares for Juan Garcia, eight hectares for Arsenio Flores, seven hectares for Francisco Flores, five hectares for Aurelio Leviste and seven hectares for Simon Leviste, and which landholdings are found and depicted in the sketches marked as Exhibits 'A-1' and 'A-1-A'; "2. Ordering defendant Wenceslao Hernandez to pay to the plaintiffs the sum of P64,601.49 representing the unpaid balance of the shares they are entitled to receive from January 22, 1980 when this complaint was filed to October 31, 1983; "3. Upon the finality of this decision to submit to the court an accounting of the harvest upwards indicating therein the 30% share of the plaintiffs, the amounts already received by the plaintiffs and the balance, and the latter to pay to the plaintiffs, the said balance; "4. The payments to the plaintiffs under the above paragraphs 2 and 3shall be with interest at the legal rate from the time the delivery of saidshares to the plaintiffs accrued to the time full payment is made, and said interest shall stop running either upon payment of the amounts to the plaintiffs or upon deposit of the same with the Clerk of Court; "5. Declaring the sharing between the plaintiffs as tenants on the one hand and the defendants as the landowner on the other hand to be 70% of the net harvest in favor of the landowner and 30% of the net coconut harvest in favor of the plaintiffs for their respective landholdings as of January 22, 1980; and with respect to the other crops, 20% for the landowner and 80% for the tenant for the bananas; 20% for the landowner and 80% for the tenant for the pineapples; 70% for the landowner and 30% for the tenant for lanzones; and 70% for the landowner and 30% for the tenant for coffee, also retroactive to the date of the filing of this action; "6. Ordering defendant Wenceslao Hernandez to pay to the plaintiffs the sum of P15,000.00 by way of reimbursement of plaintiffs' attorney's fees; "The counterclaim interposed by the defendants are dismissed for lack of merit. The cross-claim filed by SALESC, Inc. against WenceslaoHernandez is likewise denied considering that the latter was not specifically prohibited from appointing tenants and the tenants appointedby said defendant are the very tenants left by SALESC, Inc. on the premises. "SO ORDERED. (pp. 31-32, Rollo) Not satisfied with the decision, petitioner Hernandez appealed to the Intermediate Appellate Court (now Court of Appeals). On April 14, 1986, the respondent appellate court rendered a decision affirming the trial court's judgment with the modification that the attorney's fees shall be reduced from P15,000.00 to P5,000.00. Hence, the instant petition is filed, with the petitioner assigning the following errors: "1. The respondent appellate court committed a grave error and misapprehension of facts when it upheld the conclusion of the trial court that the private respondents are agricultural tenants of the petitioner in the land in question, and in not declaring that they are not tenants;

"2. The respondent appellate court committed a grave error and mistaken application of law when it finds that an agricultural leasehold system exists between the private respondents and the petitioner." (p. 69, Rollo) Anent the first assigned error, petitioner argues that private respondents are not tenants but "bantays" or watchers as stated in the letter of Mrs. Tolentino to respondent Quintin Flores; that even as "bantays," the private respondents had already been dismissed in 1952 or 1953; that when petitioner started to lease the property in 1957, there were no persons or houses in the landholding; that it was in 1973 that private respondents were hired as wage laborers to do the picking, gathering and hauling of coconuts. Petitioner's contentions are untenable. In resolving the issue on the nature of the relationship of the parties in the instant case, it would be well to cite the distinction between a share tenant and an agricultural worker. Share tenancy is defined as the physical possession by a person of land devoted to agriculture, belonging to or legally possessed by another for the purpose of production through the labor of the former and of the members of his immediate farm householdin consideration of which the former agrees to share the harvest with the latter or to pay a price certain or ascertainable, either in produce or in money or in both (Section 3, R.A. 1199, Agricultural Tenancy Act, as amended). Share tenancy exists whenever two persons agree on a joint undertaking for agricultural production wherein one party furnishes the land and the other, his labor, with either or both contributing any one or several items of production, the tenant cultivating the land with the aid of labor available from members of his immediate farm household, and the produce thereof to be divided between the landholder and the tenant in proportion to their respective contributions (Section 4, R.A. 1199; Section 166(25), R.A. 3844, Agricultural Land Reform Code). In contrast, a farmhand or agricultural worker is any agricultural wage, salary or piece worker but is not limited to a farm worker of a particular farm employer unlessthis Code explicitly states otherwise, and any individual whose work has ceased as a consequence of, or in connection with, a current agrarian dispute or an unfair labor practice and who has not obtained a substantially equivalent and regular employment. An important criteria in determining whether the relationship is one of share tenancy is cultivation. The meaning of cultivation concerning coconut lands has already been spelled out by this Court as follows: x x x. The definition of cultivation is not limited merely to the tilling, plowing or harrowing of the land. It includes the promotion of growth and the care of the plants, or husbanding the ground to forward the products of the earth by general industry. The raising of coconuts is a unique agricultural enterprise. Unlike rice, the planting of coconut seedlings does not need harrowing and plowing. Holes are merely dug on the ground of sufficient depth and distance, the seedlings placed in the holes and the surface thereof covered by soil. Some coconut trees are planted only every thirty to a hundred years. The major work in raising coconuts begins when the coconut trees are already fruit-bearing. Then it is cultivated by smudging or smoking the plantation, taking care of the coconut trees, applying fertilizer, weeding and watering, thereby increasing the produce. The fact that respondent Benitez, together with his family, handles all phases of farmwork from clearing the landholding to the processing of copra, although at times with the aid of hired laborers, thereby cultivating the land, shows that he is a tenant, not a mere farm laborer. (Guerrero v. Court of Appeals, G.R. No. L-44570, May 30, 1986, 142 SCRA 136; Coconut Cooperative Marketing Association, Inc. (COCOMA) v. Court of Appeals, Nos. L-4628183, August 19, 1988, 164 SCRA 568) It may thus be said that the caretaker of an agricultural land can also be considered the cultivator of the land (Latag v. Banog, G.R. No. 20098, January 31, 1966, 16 SCRA 88). The trial court and respondent appellate court arrived at the same findings and conclusions that private respondents have been in continuous, uninterrupted physical possession of their respective areas in the landholding, which they have cleaned and cleared for the purpose of improving the harvests; that they have lived in the landholding and constructed their houses thereon; that respondents were paid in an amount equivalent to a share of one-sixth (1/6) of the harvest during the ownership of Mrs. Tolentino and then later, one seventh (1/7) during the period of petitioner's lease. The status of respondents as tenants based on the foregoing cannot be gainsaid. Where private respondents cultivated the land and did not receive salaries but a share in the produce or the cash equivalent of his share in lump, the relationship is one of tenancy and not employment. The fact that respondents have huts erected on the landholding shows they are tenants (Cruz v. Court of Appeals, G.R. No. 50350, May 15, 1984, 129 SCRA 222). Further, this Court has consistently ruled that in agrarian cases, all that is required is mere substantial evidence. Hence, the agrarian court's findings of fact which attained the minimum evidentiary support demanded by law, that is, supported by substantial evidence, are final and conclusive and cannot be reversed by the appellate tribunals (Bagsican v. Court of Appeals, G.R. No. 62255, January 30, 1986, 141 SCRA 226).

With regard to the second assigned error, it may be true that the statement of respondent appellate court that agricultural leasehold exists between the parties herein is somehow misplaced. Nevertheless, this cannot justify the reversal of the merits of the case. There is no question that on August 8, 1963, R.A. 3844, the Agricultural Land Reform Code abolished and outlawed share tenancy and put in its stead the agricultural leasehold system. On September 10, 1971, R.A. 6389, the Code of Agrarian Reforms, amending R.A. 3844, declared share tenancy as contrary to public policy. Although share tenancy was statutorily abolished, leasehold tenancy for coconut and sugar lands has not yet been implemented. The policy makers of government are still studying the feasibility of its application and the consequences of its implementation. Nonetheless, this did not end the rights of share tenants in these types of lands. The eventual goal of legislation of having strong and independent farmers working on lands which they own remains (Guerrero v. Court of Appeals, No. L-44570, May 30, 1986, 142 SCRA 136). ACCORDINGLY, the petition is DENIED and the assailed judgment of the Intermediate Appellate Court (now Court of Appeals) dated April 14, 1986 is AFFIRMED. SO ORDERED.

[G.R. No. 79434, February 26, 1990] DEOCRECIO DAVID, PETITIONER, VS. HONORABLE COURT OF APPEALS AND THE PEOPLE OF THE PHILIPPINES, RESPONDENTS. DECISION FELICIANO, J.: In this Petition for Review, petitioner Deocrecio David assails the Decision of the Court of Appeals dated 31 July 1987 in C.A. - G.R. CR No. 03804 which convicted him of consummated rape committed upon the person of private respondent Luzviminda Ganiban. On 24 September 1960, Purificacion Ganiban, mother and natural guardian of Luzviminda, filed a sworn complaint with the then Justice of Peace Court of Malinao, Aklan, charging petitioner with having raped Luzviminda. Because the warrant for the arrest of petitioner was returned unserved, the Justice of the Peace archived the case. Sixteen (16) years later, petitioner was finally arrested but later ordered released on bail. On 28 July 1978, an information for rape was filed against him with the then Court of First Instance of Aklan. Petitioner moved to quash the case on the ground that the information was fatally defective having been based from the mother's sworn complaint rather than that of the offended party. The motion was granted by the trial court and the case was dismissed by an order dated 10 March 1980. On 20 June 1980. Assistant Provincial Fiscal Sheila Cortez filed another information for rape this time based upon a sworn complaint of Luzviminda Ganiban. The information read: "That on or about the 2nd day of September 1960, at 4:00 o'clock in the afternoon, in Barangay Bangcalan, Municipality of Malinao, Province of Aklan, Republic of the Philippines, and within the jurisdiction of this Honorable Court, the abovenamed accused, with lewd designs and by means of violence and intimidation, did then and there wilfully, unlawfully and feloniously, have carnal knowledge of said LUZVIMINDA GANIBAN, then a child six (6) years of age, against her will and without her consent, thereby causing upon the latter physical injuries, as follows: 1. Lacerated wound with hematoma, hymen at 6 o'clock; 2. Lacerated wound, fourchette. as per Medico-Legal of Dr. Daniel M. Villanueva, Junior Resident Physician, Aklan Provincial Hospital, hereto attached as Annex 'B' and forming an integral part hereof." Petitioner waived the reading of the information and entered a plea of not guilty. Trial on the merits followed. On 6 March 1986, the trial court rendered a decision finding petitioner guilty of attempted rape and decreeing: "WHEREFORE, this Court believes that the accused unlawfully, intentionally and forcibly inserted his pointer finger into the vagina of Luzviminda Ganiban, and following the doctrine laid down by the Court of Appeals in the case of PP. vs. Lagmay (Supra), the accused is GUILTY of the lesser offense of Attempted Rape, defined and penalized under Act 335 of the Revised Penal Code. The accused Deocrecio David being a minor (about fifteen (15) years old) at the time of the commission of the crime, is hereby sentenced to suffer an indeterminate penalty of FOUR (4) YEARS and TWO (2)

MONTHS of prision correccional as minimum, to EIGHT (8) YEARS and ONE (1) DAY of prision mayor as maximum, and to pay the offended party Luzviminda Ganiban the following amounts: (1) Two Thousand Five Hundred Pesos (P2,500.00) for compensatory damages; and (2) Twenty Thousand Pesos (P20,000.00) for moral damages. without subsidiary imprisonment in case of insolvency, and to pay the costs. SO ORDERED." Petitioner moved for reconsideration, without success. On appeal, the Court of Appeals, on 31 July 1987, rendered a Decision convicting petitioner of consummated rape. The dispositive portion of the Court of Appeals Decision reads: "WHEREFORE, premises considered, the appealed judgment is MODIFIED so as to read as follows: Accused-appellant Deocrecio David is hereby convicted of Rape, defined and penalized under Art. 335 of the Revised Penal Code, as amended, and sentenced to suffer an indeterminate penalty of from six (6) years and one (1) day of Prision Mayor, as minimum, to fourteen (14) years, eight (8) months and one (1) day of Reclusion Temporal as maximum, and to pay the offended party, Luzviminda Ganiban, Two Thousand Five Hundred Pesos (P2,500.00) for compensatory damages and Twenty Thousand Pesos (P20,000.00) as moral damages, without subsidiary imprisonment in case of insolvency, and to pay the costs. SO ORDERED." In the instant Petition, petitioner raises two (2) issues: "I. Whether or not the petitioner is guilty of rape as defined and penalized under Article 335 of the Revised Penal Code; II. Whether or not the Honorable Court of Appeals has correctly appreciated the entire evidence on record." [1] The facts as presented by the prosecution may be summarized in the following manner: On 2 September 1960, Luzviminda, then six (6) years of age, along with three (3) other children, were playing games inside the house of petitioner at Dangcalan, Malinao, Aklan. They were playing "anwang-anwang" (carabao, carabao) by crawling inside a rolled mat placed on the floor of what was essentially a one-room house. The children, with hands and knees on the floor and pretending to be carabaos, chased each other into one opening of the rolled mat and out on the other end. Petitioner then sixteen (16) years old, had been watching the children playing. He eventually joined the children and was tagged as the "It" or the "Bantay". As the "Bantay", he was supposed to chase the children crawling on their hands and knees and to catch them while inside the mat and to tap the buttocks of those whom he caught.[2] When Luzviminda was crawling towards the rolled mat, petitioner followed her into the rolled mat, and there grabbed her, covered her mouth with his hand, got on top of the rear end of the child, took out his male member and thrust it into her private part, causing the child excruciating pain. Petitioner released Luzviminda upon hearing her mother calling for her. Luzviminda got out of the rolled mat crying, ran out of the house and reported the incident to her mother. The mother, Purificacion Ganiban, noticed blood trickling down her daughter's legs and demanded to know what had happened. Luzviminda replied that petitioner had put his male organ into her private part. The outraged mother went up the house of petitioner which was about 15 meters away; petitioner avoided her by jumping out of the house through the window and ran away. The bleeding Luzviminda was rushed by her mother to the hospital in Kalibo, Aklan. Upon medical examination, Dr. Daniel Villanueva found that Luzviminda's hymen had been lacerated at six o'clock position, resulting in a hematoma. There was also a lacerated wound on the fourchette. No laboratory examination was, however, carried out to determine the presence of spermatozoa on Luzviminda's vagina. Luzviminda stayed in the hospital for about a week; her parents spent about P2,000.00 for her medical expenses. The version of the facts presented by the defense was summarized by the Court of Appeals in the following manner: "x x x The children and the accused, then 16 years old, were playing 'anwang-anwang' or 'carabao-carabao' in the sala of the house, by crawling on the floor with two hands and knees chasing each other inside a rolled mat whose opening was big enough for a child to enter (about 30 inches in diameter and about 1-1/2 arms-stretch in length), going inside one and coming out of the other end of the rolled mat. The 'It' or 'Bantay' tried to catch them by touching their buttocks with his finger.

Shortly, Luzviminda (then 6 years old) and her younger sister arrived and was allowed by the accused to join the game. After Luzviminda crawled inside the rolled mat, the accused followed her. Since she had no panty and her buttocks exposed to him, he 'pricked' her buttocks and 'accidentally hit her private part'. She came out of the rolled mat crying. When asked by Jenny Icabandi as to what had happened she replied that her private part was pricked. Accused did not notice she was bleeding or that blood was oozing down her legs. She went home but later her mother arrived and asked what happened. He admitted to her that he had accidentally pricked her daughter's buttocks but the mother got angry and went home. xxx xxx xxx."[3] Thus, the central issue is whether the accused had forced his male organ into the private part of the six (6) year old Luzviminda or whether the accused had merely "pricked" or "accidentally hit her private part" with his finger. The trial court held that the accused had inserted his pointer finger into Luzviminda's vagina, in the process causing her physical injuries. In contrast, the Court of Appeals found as a fact that the accused had indeed raped Luzviminda. We have examined the record of this case with particular care and we find that the findings of fact by the Court of Appeals are amply supported by the evidence of record. In the first place, we are quite unable to conceive how the accused could haveaccidentally inserted his pointer finger in Luzvimincia's private part. Secondly, Luzviminda testified explicitly that the accused had gotten on top of her while inside the rolled mat and had inserted his male organ into her private part: "xxx xxx xxx Q: A: What particular game were you then playing? We were playing game in which there was a rolled mat and we got inside the mat and we took turns in getting in and out of the rolled mat. While it was your turn inside that mat during your game, was there unusual incident that happened? Yes, Madam. What was that unusual incident that happened? Deocrecio David went inside also and then covered my mouth. xxx xxx xxx Q: That Deocrecio David is the same Deocrecio David who is the accused in this case and the one you have pointed at the back? Yes, Madam. And what did the said Deocrecio David use in covering your mouth? His hand. And with how many hands did he cover your mouth? . One only And after he covered your mouth, what did he do, if he did anything else? He forced me. He inserted his private organ inside my private organ. By the way, how old were you when the incident took place? I was about five to six years old. Was he able to insert his private organ inside your private organ?

Q: A: Q: A:

A: Q: A: Q: A: Q: A: Q: A: Q:

A: Q: A: Q:

Yes, Madam. And how did you feel? It was painful. Did you shout?

A:

I could not shout because his hand was covering my mouth.

xxx xxx xxx Q:

About how long, if you could recall did ... I reform. When the accused Deocrecio David was able to insert his private organ inside your private organ, what happened next?

A:

I heard the shout of my mother because she was calling for me because I could not be found in our house.

Q:

And what did Deocrecio David do when you heard your mother calling for you?

A:

He released me.

Q:

And when he released you, what did you do?

A:

I cried and went out of the house.

Q:

What did you notice . . . I reform. Did you notice anything unusual on your body before going down the house?

A:

Yes, Madam. Plenty of blood was running down my legs.

Q:

And when Deocrecio David put his hand on your mouth, did you hear any playmates inside the house?

xxx xxx xxx Q:

While Deocrecio David covered your mouth and inserted his private part inside your private part, did you notice where your other playmates (sic) were?

A:

I did not see anybody else. I did not hear them also.

Q:

When you were released by Deocrecio David and you started crying going towards your home, did you notice where were your other playmates then?

A:

I did not notice them anymore. xxx xxx xxx[4]

Q:

You said that when the accused went top of you and covered your mouth, that was the time when you felt pain. You are referring to the pain on your private part?

A:

Yes, sir. And that was the precise moment that you were feeling the pain that you heard the shout of your mother calling on you, is that correct? After he has done the act I heard the shout of my mother.

Q:

A:

Q:

He was still on top of you when you heard your mother calling for you?

A:

Yes, sir.

Q:

And after your mother called you, that was the time the accused allegedly released you?

A:

Yes, sir.

Q:

And after you were released, you went out of the rolled mat?

A:

Yes, sir.

Q:

And you went out of the house of the accused?

A:

Yes, sir.

Q:

But your playmates were no longer there?

A:

They were not there anymore.

Q:

You did not know where they went? I do not know. (TSN, p. 25, November 11, 1983)."[5] (Italics supplied)

A:

The testimony of Luzviminda was corroborated by the medical finding that she had sustained a lacerated wound with hematoma in the hymen at 6:00 o'clock position, and another lacerated wound in the fourchette. The Court of Appeals said on this point: "x x x Granting that due to the victim's tender age (six years old at the time) the laceration of the hymen at 6 o'clock even with hematoma could have been caused by the finger of a 16 year old inserted into her vagina, yet there was also the laceration at the fourchette, found in between the vaginal walls and the anus, with massive bleeding, requiring the victim's hospitalization for six days. Certainly, the nature and extent of the injuries disclosed by the medical examination preclude the possibility of 'accidental' pricking caused by a single thrust of his pointer finger, thereby rendering more credible the thesis that appellant caused his sexual organ to be inserted forcibly into the victim's tender private part." [6] True, the testimony of a rape victim must not be received with precipitate credulity. In the case at bar, the testimony of Luzviminda, far from imposing upon one's credulity, was straightforward, explicit and convincing and she did not change her story or otherwise breakdown under cross-examination. There is, secondly, the testimony of Luzviminda's mother. Purificacion Ganiban, that when she saw Luzviminda crying and with blood oozing down her legs, she asked her what had happened and that Luzviminda had said that the accused

Deocrecio David had put his male organ into her private part.[7] What Luzviminda reported to her mother immediately after the rape incident, may be treated as part of the res gestae and hence admissible to show that it was petitioner's male member, and not his pointer finger, that he had thrust into Luzviminda's private part. Thirdly, as the Court of Appeals pointed out, there is no inherent impossibility or improbability of the accused raping a five (5) or six (6) year old little girl inside the rolled mat. It may be noted firstly that the diameter of the rolled mat (30 inches) was wide enough not merely to let such a child crawl through it on her hands and knees but also wide enough to enable the sixteen (16) year old boy to get on the back of the child. It should be stressed, secondly, that the rolled mat was not a rigid structure, but rather a smooth and flexible one being woven out of buri or some similar material. The net effect is that the accused could well have gotten on top of the complainant, pinned her down, openned his pants and let out his male member, inside the rolled mat. Luzviminda being only five (5) or six (6) years old then could not have put up a vigorous struggle, with accused's hand on her mouth and his weight on her back. It is quite settled doctrine that even the slightest penetration of the labia of the pudendum is sufficient to consummate the crime of rape.[8] In the case at bar, the laceration of Luzviminda's hymen and the lacerated wound on her fourchette very clearly showed that there had been some penetration and that accordingly the offense must be qualified as consummate rape. The trial court found the accused guilty only of attempted rape upon the strength of People v. Lagmay,[9] but in doing so, obviously misapplied that case to the one at bar. In Lagmay, the appellant had used force and violence in trying to have carnal knowledge of the complainant, but did not succeed in introjecting his male organ into the offended girl because of her continuous and vigorous resistance. Because Lagmay had ejaculated without penetration, he used his finger on the offended party and was thereupon found guilty of attempted rape. In the case at bar, Luzviminda's testimony was that the accused had used his penis; it was the accused who, in seeking to exculpate himself, alleged that his finger had, inexplicably, found its way into Luzviminda's vagina. We are aware that the Solicitor General took the position before the Court of Appeals that the accused should be convicted merely of having inserted his finger into the victim's vagina, i.e., of acts of lasciviousness. We are also aware that in rape, the only witnesses available are commonly the accused and the victim and everything therefore depends upon the credibility of the testimony given by the victim and the accused. Here, a consideration of the surrounding circumstances of this case leads us to agree with the Court of Appeals that the testimony of Luzviminda is well worthy of credence and is quite sufficient to sustain conviction of the accused. The Court of Appeals said: "But there is yet one more significant circumstance the lower court failed to appreciate. It is said that the rape victim who brings her case to the court undergoes the indignity of being 'raped again', what with the forced recollection of the harrowing experience, the numerous inquisitions, exposure to public humiliation and the irreparable loss of self-respect and self-worth, along with her family and loved ones so much so that many a rape victim and/or their families would rather keep the crime to themselves. In the case at bar, the incident happened way back in 1960. The case was only revived in 1978 and the victim already married by then. Had this been a simple case of 'finger pricking', why did the victim and her family choose to pursue the case and subject themselves anew to the humiliation of a public trial when they could have chosen to keep mum and forget the whole incident after having been 'numbered' by 16 long intervening years? The fact that the victim already married, and her mother, doggedly pursued the case in spite of the time and money and energy in coming to the hearings from Manila where they have already settled and inspite of being subjected anew to the rigors of the trial, will serve to prove the sincerity of Luzviminda's motivation the search for justice and the plea for redress for a crime of such a nature that is otherwise better left forgotten. It must be noted that there is no iota of evidence on record to show that the victim or her family were prompted by ill-will or any untoward motive to place the accused in jeopardy or to have him prosecuted for vindictive purposes. We are morally convinced that the crime of consummated rape was committed and that the offended girl even at this last stage deserves vindication. xxx xxx xxx."[10] We conclude that the accused has failed to show reversible error on the part of the Court of Appeals in convicting him of consummated rape. Under Article 335 of the Revised Penal Code, the penalty for consummated rape isreclusion perpetua. Crediting the accused with the mitigating circumstance of minority[11] since he was sixteen (16) years old at the time of the commission of the rape, and there being no aggravating nor any other mitigating circumstance present, the penalty next lower in degree reclusion temporal, in its medium period is properly imposable. Applying the indeterminate sentence law and the penalty next lower in degree to reclusion temporal medium being prision mayor medium, the accused should suffer imprisonment for an indeterminate period of from eight (8) years and one (1) day (not six [6] years and one (1) day, as the Court of Appeals decreed) of prision mayor as minimum to fourteen (14) years, eight (8) months and one (1) day of reclusion temporal as maximum. WHEREFORE, the Petition for Review is DENIED for lack of merit and the Decision of the Court of Appeals is hereby MODIFIED so as to impose upon petitioner Deocrecio David an indeterminate sentence of imprisonment ranging from eight (8) years and one (1) day of prision mayor as minimum to fourteen (14) years, eight (8) months and one (1) day

of reclusion temporal as maximum. The petitioner shall pay Thirty Thousand Pesos (P30,000.00) as moral damages. In all other respects, the Decision of the Court of Appeals is AFFIRMED. Costs against petitioner. SO ORDERED.

G.R. No. L-41835 January 19, 1990 PRUDENTIAL BANK, petitioner, vs. HONORABLE FILOMENO GAPULTOS Presiding Judge, Branch I, Court of Agrarian Relations, Davao City and RAMON E. SAURA, respondents. G.R. No. L-49293 January 19, 1990 PRUDENTIAL BANK, petitioner, vs. LEOPOLDO M. SERRANO and PAQUITO F. FUENTES, in their capacity as Regional Director and Regional Trial Attorney, Region XI (Davao) of the Ministry of Agrarian Reform; and RAMON E. SAURA, respondents. Ferrer & Magno for petitioner. Ambrosio Padilla, Mempin & Reyes Law Offices for private respondent.

PARAS, J.: These are petitions for certiorari and prohibition with preliminary injunction which seek to set aside and annul in: (1) G.R. No. L-41835, the orders of the respondent judge dated September 16, 1975, denying petitioner's motion to dismiss and October 15, 1975, denying the motion for reconsideration, in CAR Case No. 2023 entitled "Ramon E. Saura v. Prudential Bank;" and (2) G.R. No. L-49293, the orders of the hearing officer dated October 11, 1978, denying petitioner's motion to dismiss and November 9, 1978, denying the motion for reconsideration, in Re: Petition of Ramon E. Saura for an OLT on the five (5) hectares unirrigated portion of TCT No. T-37179 entitled "Atty. Ramon E. Saura v. Prudential Bank." As gathered from the records, the facts of these cases are as follows: In G.R. No. L-41835-Petitioner is a general banking corporation, duly organized and existing under the laws of the Philippines with principal office at Prudential Bank Bldg., Ayala Avenue, Makati while respondent Ramon E. Saura is a member of the bar and a resident of 966 Gov. Forbes, Manila (Rollo, G.R. No. L-41835, Petition, p. 1). Lot with TCT No. 5049 was registered in the name of Saura Import & Export Co., Inc. of the Register of Deeds of Davao City (Ibid.) The aforesaid property was the site of a jutemill factory erected by Saura Import & Export Co., Inc. (Ibid., Petition, p. 2). In 1954 Lot with TCT No. 5049 was the subject of an unregistered Real Estate Mortgage between petitioner Prudential Bank and private respondent Ramon E. Saura, authorized president of Saura Import & Export Co., Inc. (Ibid., pp. 35-40). Mortgagor Saura Import & Export Co., Inc. applied for a letter of credit and mortgagee Prudential Bank issued a Letter of Credit No. 2261 and caused the shipment of eighty five (85) cases of jutemill machinery from Hongkong to Davao for which the mortgagor on August 6, 1953, executed a trust receipt in favor of the mortgagee (Ibid., p. 35). On account of the said trust receipt, an unpaid balance of Two Hundred Fifty Three Thousand Five Hundred Twenty Eight and Sixty Nine Centavos (P253,528.69) remains in favor of the mortgagee and against the mortgagor as of August 2, 1954. (Ibid.) For and in consideration of the premises and as a security for the payment of said balance including the interest and other obligations arising therefrom, the mortgagor thereby transfers and conveys, by way of mortgage unto the mortgagee, its successors and assigns, the real property (TCT No. 5049) together with all the buildings and improvements now existing or which may thereafter be constructed on the said property of which the mortgagor is the absolute owner, with the exception of the jutemill machineries, equipment, accessories and movable properties which are installed or placed therein (Ibid., pp. 35-36). It was stipulated in the mortgage among others that:

This Mortgage and the sale of the property mortgaged in the event of foreclosure shall not be impaired or affected by contracts of lease now in force or hereto after entered into by the Mortgagor even if the lease contracts be registered in the office of the Register of Deeds unless they are executed with the consent of the Mortgagee expressly set forth therein. On December 8, 1964, a suit for foreclosure of mortgage was instituted in Civil Case No. 59246 in the Court of First Instance of Manila entitled "Prudential Bank v. Saura Import & Export Co., Inc." (Ibid., Petition, p. 2). On February 27, 1970 after judgment was rendered therein, the property was the subject of an execution sale foreclosing the mortgage pending appeal on October 15, 1970 after the Court of Appeals in CA-G.R. No. 45832-R denied the private respondent's petition for certiorari with preliminary injunction (Ibid.). The main appeal of Saura Import & Export Co., Inc. from the decision in Civil Case No. 59246 was dismissed by the Court of Appeals on October 25, 1971 in CA-G.R. No. 47138-R and Saura Import & Export Co., Inc. elevated the matter to the Supreme Court on petition for review on certiorari in Case No. L-34770 entitled "Saura Import & Export Co., Inc. v. Court of Appeals" (Ibid.). The petitioner became the owner of the said parcel of land by virtue of foreclosure proceedings and TCT No. T-37179 of the Land Records of Davao City was issued in its favor on January 2, 1973 (Ibid., Petition, p. 2). Meanwhile, on January 3, 1963 and January 2, 1968, private respondent Ramon E. Saura and his company Saura Import & Export entered into a lease contract over subject property covered by TCT No. 5049 (Ibid., pp. 12-13) with the Saura Company as lessor and private respondent Saura as agricultural lessee of subject parcels of land, the ownership of which, as aforestated, was later transferred to the petitioner bank. (Ibid., p. 15). Private respondent Ramon E. Saura claims that by operation of law, petitioner was subrogated to the rights and substituted to the obligations of Saura Import & Export Co., Inc. as agricultural lessor of the said parcel of land in relation to him (Ibid., p. 9) but petitioner has, however, allegedly refused to recognize private respondent as agricultural lessee of the parcel of land, as shown in the letter dated May 8, 1973 (Ibid., p. 14) and unreasonably refused to accept the rentals tendered by private respondent, as shown in letters dated May 8, 1973, May 10, 1974 and March 12, 1975 (Ibid., pp. 2022). For this reason, private respondent notified the petitioner that in view of his refusal to accept private respondent's tender of payments, private respondent will make a consignation of the said rentals in court (Ibid,, p. 23). Accordingly, in view of petitioner's refusal to recognize private respondent as agricultural lessee and to accept the latter's tender of payments, private respondent (Ibid., p. 10), on May 21, 1975, filed a complaint against petitioner bank with the Court of Agrarian Relations docketed as CAR Case No. 2023 seeking to compel petitioner bank to accept supposed agricultural leasehold rentals and to recognize him as agricultural lessee of aforesaid two parcels of land covered by petitioner's TCT No. 37179 of the Davao City Register of Deeds (Rollo, G.R. No. L-41835, Annex "A", pp. 8-11). On July 17, 1975, petitioner bank simultaneously filed in CAR Case No. 2023 its answer to the complaint and a Motion to Dismiss (Ibid., Annexes "B" and "C", pp. 24-30; 31-34). In the meantime on July 23, 1975, petitioner filed in Case No. 59246 of the Court of First Instance of Manila a Motion for a Writ of Possession against Saura Import & Export Co., Inc. and/or Ramon E. Saura addressed to the Sheriff of Davao City to put petitioner in actual physical possession of the premises now titled in the bank's name under TCT No. 37179 of the Register of Deeds of Davao City (Ibid., Petition, p. 3). On July 28, 1975 private respondent filed his reply and answer to counterclaim and his opposition to the motion to dismiss in CAR Case No. 2023 (Ibid., Annexes "D" and "E", pp. 43-45; 46-53). On August 21, 1975, respondent Saura filed in CAR Case No. 2023 a Motion for Preliminary Injunction to stop the petitioner bank or any person acting in its behalf from dispossessing respondent Saura from the land subject matter of the case by virtue of any writ of possession that the petitioner bank may obtain from the Court of First Instance of Manila in Case No. 59246 (Ibid., Annexes "F" and "G", pp. 54-56; 58-63). On September 16, 1975, the respondent-judge issued an order denying the Motion to Dismiss for lack of merit (Ibid., Annex "H", pp. 64-65). On September 26,1975, petitioner bank filed a Motion for Reconsideration of the order of September 16, 1975 (Ibid., Annex "I", pp. 66-72). On the same date petitioner bank obtained an order from the Court of First Instance of Manila in Case No. 59246 ordering the issuance of a writ of possession of the property covered by TCT No. 37179 which is the same landholding involved in CAR Case No. 2023 subject of the motion for preliminary injunction (Ibid, Annexes "J" and "K", pp. 73-75; 76). The respondent judge of the Agrarian Court on October 15, 1975 issued an order denying petitioner's Motion for Reconsideration and on October 18, 1975 respondent judge issued another order granting respondent Saura's Motion for Preliminary Injunction and then issued the writ of injunction itself (Ibid., Annexes "L", "M" and "N", pp. 77-79; 80-84; 8586).

In G.R. No. L-49293, the petition for certiorari and prohibition with preliminary injunction was brought about by the filing of a petition on April 11, 1978 for Operation Land Transfer (OLT) by Atty. Ramon E. Saura on the landholding covered by TCT T-37179 registered in the name of petitioner bank notwithstanding the pendency of CAR Case No. 2023 and G.R. No. L-41835 in the Supreme Court. Respondent officials set the case for hearing for August 25, 1978 but petitioner's counsel was unable to attend because the Philippine Air Lines plane he took early that morning for Davao to attend the hearing was delayed in departing from 5:40 to 8:40 a.m. and petitioner's counsel did not make it to Davao City (Rollo, G.R. No. L-49293, Petition, p. 5). In said hearing, Atty. Saura was allowed to present his evidence which consisted of documentary evidence, mainly affidavits and certifications of third parties attesting to his de facto tillage of the soil (Rollo, G.R. No. L-49293, Petition, pp. 5-6). Petitioner Prudential Bank filed a Motion to Reset Hearing and to Set Aside Atty. Saura's Formal Offer of Evidence bringing to the attention of the hearing officer, respondent Regional Trial Attorney Fuentes, the unfortunate circumstances that prevented petitioner bank's counsel from attending the healing of August 25, 1978. Simultaneously Prudential Bank filed a formal Motion to Dismiss on the ground that: (1) Atty. Saura is not a bona fide tenant-farmer and (2) that the pendency of CAR Case No. 2023 and G.R. No. L-41835 preempts the jurisdiction of the Ministry of Agrarian Reform (Ibid., Annex "B", pp. 17-25). In an order dated October 11, 1978 respondent Hearing Officer ruled that: (a) Atty. Ramon Saura's offer of evidence was admitted subject to the cross-examination and presentation of counter-evidence of Prudential Bank; (b) The administrative functions of the Dept. of Agrarian Reform provided for in Sec. 12 (b) (1-12) of Presidential Decree No. 946 would not divest the civil court of its acquired jurisdiction. The DAR's jurisdiction is administrative and is appealable to the President of the Phil.; while the other is judicial which is appealable to the Court of Appeals or the Supreme Court. Each of these is independent from each other and could co-exist. Wherefore, the Motion to Dismiss is denied for lack of merit. (Rollo, Annex "C", pp. 28-29) A Motion for Reconsideration was filed by petitioner Prudential Bank on the order issued by the respondent hearing officer dated October 11, 1978 denying petitioner's Motion to Dismiss (Rollo, Annex "D", pp. 30-33). Reconsideration was denied in an order dated November 9, 1978 by respondent hearing officer Atty. Fuentes stating that in the Ministry's Guidelines on Operation Land Transfer Coverage: Landholdings which are the subject of court litigation are not exempted unless there is an injunction issued by the Court against the Department of Agrarian Reform, the same shall be covered by Operation Land Transfer. (Rollo, Annex "E", pp. 34-35). Hence, these petitions which involve the same property and the same parties. Consequently, in the resolution of the Second Division of this Court dated February 28, 1979, L-49293 was consolidated with L-41835. A temporary restraining order was issued by this Court in L-49293, enjoining respondents Regional Director and Regional Trial Attorney and their representatives from further entertaining the petition of Atty. Ramon E. Saura (Rollo, L-49293, pp. 52-53) and in L-41835, respondent Judge, his agents and assigns from further proceeding with CAR Case No. 2023 (Rollo, L-41835, pp. 104-105). The pivotal issue in both cases is the applicability of P.D. 27 and P.D. 946 to the land in question. Respondents commonly contend that the present petition is premature for non-exhaustion of administrative remedies. In other words, respondents would have the petitioner appeal first to the Office of the President before resort to the filing of the instant petition for certiorari and prohibition in the Supreme Court. Aside from the fact that the courts have already acquired jurisdiction over the issue of whether or not Atty. Saura is an agricultural lessee, long before the institution of the present administrative proceedings in May, 1978 as Atty. Saura himself sought judicial remedies on July 17, 1975 in Davao CAR Case No. 2023 and Prudential Bank filed a petition for certiorari and prohibition on November 12, 1975 in G.R. No. 41835 before this Court, it is a settled rule that on purely legal question the aggrieved party need not exhaust administrative remedies (Malabanan v. Ramento, 129 SCRA 359 [1984]; Linorco v. Board of Administrators, Philippine Veterans Affairs Office, 133 SCRA 43 [1984]; National Housing Authority v. C.A., 121 SCRA 777 [1983]). This is because "nothing of an administrative nature is to be done or can be done" (Dauan v. Secretary of Agriculture and Natural Resources, 18 SCRA 223 [1967]) in the administrative forum. Although, administrative determination of questions of law is persuasive on courts and carries with it a strong presumption of correctness (42 Am. Jur., p. 626), nonetheless, the interpretation and application of laws is the court's prerogative (Cadwallader et al. vs. Abedela, 98 SCRA 123 [1980]; Philex Mining Corp. v. Zaldivia 43 SCRA 479 [1972]). In fact, a judicial review even on findings of facts of an administrative agency may be made when there is fraud, imposition or

mistake other than errors of judgment in estimating the value or effect of evidence (Ortua v. Singson Encarnacion, 59 Phil. 440) or there is error in the appreciation of pleadings and in the interpretation of the documentary evidence presented by the parties (Tan Tiang Teek v. Commission, 40 O.G. 6th Supp. 125). As to the merits of these cases, it will be recalled that the property in question is the subject of an unregistered mortgage executed on August 6, 1954 between the Prudential Bank and Trust Co. as mortgagee and Saura Import and Export Co., Inc. as mortgagor, signed for the latter by Ramon E. Saura, a Board Chairman, president and controlling stockholder, as representative of said mortgagor (Rollo, L-41835, pp. 35-39). As such, respondent Saura is not only charged with notice of the terms of the mortgage contract which provides among others that the mortgage and the sale of the property mortgaged in the event of foreclosure shall not be affected by contracts of lease executed without the consent of the Mortgagee, but is also estopped from questioning said terms or disregarding them. Thus, it was held that an estoppel may arise from the making of a promise even though without consideration, if it was intended that the promise should be relied upon and in fact it was relied upon and if a refusal to enforce it would be virtually to sanction the perpetration of fraud or would result in other injustice (Roxas v. Court of Appeals, 154 SCRA 277-278 [1987]; Gonzalo Sy Trading v. Central Bank, 70 SCRA 570 [1976]). But Atty. Saura did not deny the existence of such commitments in the mortgage contract nor question the validity thereof under laws existing at the time of the mortgage. Instead, after petitioner became the owner of the said parcel of land by virtue of judicial foreclosure proceedings and the issuance of TCT No. T-37179, Atty. Saura sought refuge under the Land Reform Law as amended by P.D. No. 27 otherwise known as the Emancipation Decree promulgated on October 21, 1972. Supposedly, as a tenant-lessee of Saura Import and Export Co., the former owner of the subject land which is now owned by Prudential Bank, he claims that the latter is subrogated to the obligations of the former, by virtue of contracts of lease entered into between him and his company. However, as aforestated, said lease is without the consent of the mortgagee. Later, despite the pendency of CAR Case No. 2023 wherein Atty. Saura sought to be declared as agricultural lessee, he then filed with the Minister of Agrarian Reform a letter-petition for OLT (Operation Land Transfer) and be deemed the owner of five (5) hectares of the same land. The essential requisites of a tenancy relationship are: (1) the parties are the landowner and the tenant; (2) the subject is agricultural land; (3) there is consent; (4) the purpose is agricultural production; (5) there is personal cultivation; and (6) there is sharing of harvests. All these requisites must concur in order to create a tenancy relationship between the parties. The absence of one does not make an occupant of a parcel of land, or a cultivator thereof, or a planter thereon, a dejure tenant. Unless a person has established his status as a dejure tenant, he is not entitled to security of tenure nor is he covered by the Land Reform, Program of the government under existing tenancy laws (Caballes v. DAR et al., G.R. No. 78214, Dec. 5,1988). A careful study of the records shows that: The property was not originally agricultural land but rather one devoted to industrial pursuits. As indicated in the mortgage deed, the land was the site of the jute mill factory set up by Saura Import & Export Co., in 1953. The mortgage covers the real property described together with all the buildings and improvements existing thereon or shall thereafter be constructed with the exception of the machineries and other movable properties. The purpose is evidently not agricultural but as above indicated industrial. Even assuming that it was later reverted to agricultural purposes, it is apparent that there is no consent. On the contrary, the consequent executions of lease contracts were without the knowledge much less the consent of the mortgagee, now the present owner; and therefore clear violations of the terms of the mortgage which was binding on all the parties herein. Thereafter, petitioner has consistently refused to recognize private respondent as agricultural lessee and to accept the rentals tendered by private respondent. Undoubtedly, without a valid lease contract, private respondent Saura cannot be a tenant-lessee in the contemplation of P.D. 27 and P.D. 946 entitled to the benefits thereunder. In fact one cannot discount the existence of a clever maneuver to defeat the turnover of the lands in question after the ownership of the same had been transferred to the petitionermortgagee as a result of judicial foreclosure proceedings, and a writ of possession issued to put petitioner in actual possession of the premises. Verily, the land Reform Laws cannot be used as a shield or a ploy to defraud creditors. Finally, there appears to be no personal cultivation. The property in question is situated in Dalian, Davao City while Atty. Saura is a resident of 966 Governor Forbes, Manila. He is a practicing lawyer and is the senior partner of the law firm Saura, Miguel & Associates. Aside from being the concurrent board chairman, president and controlling stockholder of Saura Import & Export Co. he holds one or more positions with respect to Dalian Agro Industrial Dev. Co., Inc., the Rural Bank of Davao City as well as the Southern Philippine Timber and Plywood Co. Inc. With such varied business interests, it is highly improbable that he can still personally cultivate the land. Verily, it is more reasonable to believe that he hires people to work for him and the palay he allegedly produces is actually for commercial purposes (Rollo, G.R. No. L-41835, p. 26). There is no leasehold tenancy where alleged lessee never intended to cultivate the land personally (Novesteras v. Court of Appeals, 149 SCRA 47 [1987]). Under the circumstances, private respondent cannot avail of the benefits afforded by the Tenancy Law.

As to whether or not the Court of Agrarian Relations may issue a writ of preliminary injunction to enjoin the execution of the writ of possession issued by the Court of First Instance of Manila, the answer is in the negative. The doctrine is undisputed that no court has the power to interfere by injunction with the judgment or orders of another court of concurrent or coordinate jurisdiction having the power to grant the relief sought by injunction (Investors' Finance Corp. v. Ebarle, 163 SCRA 61 [1988]). In fact, the doctrine is applied by analogy even to a body statutorily at par with the Regional Trial Court (Municipality of Malolos vs. Libangang Malolos, Inc., 164 SCRA 290 [1988]). More importantly, as the purchaser of the property in the foreclosure sale and to which the respective title has already been issued, petitioner's right over the property has become absolute, vesting upon it the right of possession over and enjoyment of the property which the Court must aid in effecting its delivery. Indeed, it has been held that it would be a gross error for the judge to suspend the implementation of the writ of possession. Once the writ has been issued, the Court has no alternative but to enforce it without delay (PNB v. Adel, 118 SCRA 116 [1982]). In fact in a later case, even the Court of Appeals was not allowed to restrain the implementation of a writ of possession (GSIS v. Court of Appeals, 145 SCRA 344145 [1986]). Private respondent further averred that he was never a party to Civil Case No. 59246 of the Court of First Instance of Manila nor was he mentioned in the writ of possession issued by the same court as one of those to be dispossessed. In the same breath, however, counsel for private respondent contradicted himself when he stated that the writ of possession is directed only against the defendant corporation or any other persons privy to or claiming any right or interest under it (L-41835, p. 113; emphasis supplied). From the foregoing discussion, there appears to be no question that Atty. Saura is a privy to Saura Import & Export Co. and is claiming right or interest under it. As to whether or not he can be dispossessed of said property under the circumstances, has been squarely answered by this Court in the affirmative, to the effect, that a mortgagee who has foreclosed upon the mortgaged real property of a delinquent debtor and has purchased the same at the foreclosure sale, can be granted a writ of possession over the property despite the fact that the premises are in the possession of a lessee thereof and whose lease has not yet been terminated, unless the lease has been previously registered in the Registry of Property or with prior knowledge of the mortgagee (Ibasco v. Caguioa, 143 SCRA 539 [1986]). There is no dispute that subject leases executed in the case at bar were not registered and that the mortgagee had no knowledge thereof. Under the circumstances, neither the respondent Judge of the Court of Agrarian Relations in L-41835 nor respondents Regional Director and Regional Trial Attorney of the Ministry of Agrarian Reform in L-49293 had jurisdiction over the instant cases. PREMISES CONSIDERED, the assailed orders of respondent Judge dated September 16 and October 15, 1975 in G.R. No. L-41835 and of the respondent officials dated October 11, 1978 and November 9, 1978 in G.R. No. L-49293, are hereby ANNULLED and SET ASIDE and the temporary restraining orders issued by this Court in these cases are considered PERMANENT. SO ORDERED.

G.R. No. L-61093 May 25, 1988 ELIGIO P. MALLARI and MARCELINA I. MALLARI, petitioners, vs. HONORABLE COURT OF APPEALS, IGNACIO ARCEGA, SIMEON BACANI, NUMERIANO BACANI, PERCASIO CATACUTAN, NICOLAS GALANG, BEN GARCIA, QUIRINO JACINTO, MARIETA JACINTO, MELENCIO MADLANGBAYAN, CELESTINO MAGAT, VICENTE MALLARI, EXEQUIEL MANALO, GONZALO MANALO, LORENZO MANARANG, SEGUNDO MARZAN, EMILIO DE MESA, JUAN PANGILINAN, VEDASTO PANGILINAN, TELESFORO QUIAMBAO, EMILIANO SERRANO, RICARDO SERRANO, TORIBIA SERRANO, CELESTINA TORNO, JUANITO VITAL and TOMAS VITAL, respondents. E.P. Mallari & Associates for petitioners. Bureau of Agrarian Legal Assistance and Erlich V. Barraquias for respondents.

YAP, C.J.: This is an appeal by way of a petition for review on certiorari of the decision of the Court of Appeals, promulgated on May 31, 1982, in CA-G.R. No. SP-13807-CAR, reversing the order of the Court of Agrarian Relations, Branch I, San Fernando, Pampanga, which dismissed the petition for redemption, and remanding to the said court for further proceedings the case entitled "Ignacio Arcega et al. versus Roberto Wijangco, et al." The antecedent facts are: Private respondents are agricultural tenants of a landholding the property in question planted to sugarcane described as Lot 3364 of the cadastral survey of San Fernando, Pampanga, situated at Bo. Manimpis thereof, containing an area of 1,327,999 square meters, and originally owned by the spouses Roberto Wijangco and Asuncion Robles under T.C.T. No. 27507-R. The said land was mortgaged to the Philippine National Bank (PNB) on March 16, 1962. For failure of the spouses Wijangcos to pay their mortgage indebtedness, the PNB foreclosed the mortgage, with the notice for the extrajudicial sale being published in the "VOICE," a newspaper of general circulation in the province of Pampanga on February 26, March 5 and 12,1978. The PNB, being the highest bidder in the extra-judicial sale, was awarded [as the purchaser of] the said property and accordingly [by virtue of which it] was issued a certificate of sale on March 17, 1978. Subsequently, T.C.T. No. 154516-R was issued to PNB upon failure of the spouses Wijangcos to exercise their right of redemption within the one-year period as required by law. On July 10, 1980, the PNB executed a deed of conditional sale over the said land in favor of the herein petitioners, the spouses Mallari, without any indication that the same is tenanted. The condition of the sale was for the Mallaris to pay by installment, with a down-payment of 20% of the purchase price of P2,365,000.00 upon the execution of the document, and to pay the balance in three (3) equal annual installments. On July 22,1981, the private respondents filed a petition for redemption before the Court of Agrarian Relations (CAR) at San Fernando, Pampanga, claiming that it was only in April, 1981, that they were informed by petitioner Atty. Eligio Mallari that he had purchased the said land, whereupon private respondents signified their intention to redeem the land at P5,000.00 per hectare but by reason of Atty. Mallaris refusal to agree to the redemption price, they were compelled to file the petition for redemption against the spouses Wijangcos as former owners, the PNB as the present registered owner and the spouses Mallari's as the subsequent purchasers under the deed of conditional sale executed by the PNB. The records of the case show that on June 29, 1981, private respondents wrote the Ministry of Agrarian Reform requesting that the redemption be initiated by the Ministry and financed by the Land Bank. A similar request was also sent to the District Officer, Pampanga, Agrarian District Office on June 22, 1981. On November 18, 1981, the private respondents filed a motion praying that the CAR ordered the Land Bank to issue a certification of availability of funds to finance the redemption of the subject landholding. On December 24, 1981, the said court issued an order denying the motion and requiring the private respondents to show cause at the next scheduled hearing of the case why the case should not be dismissed for their failure to make a tender of payment and/or consignation relative to the redemption price. Private respondents moved for a reconsideration of the said order on the ground that the requirement of tender of payment and/or consignation is not necessary as a certification of availability of funds from the Land Bank is sufficient. At the start of the scheduled hearing, counsel for private respondents presented a certification from the Land Bank dated January 15, 1982 entitled "Certification to Finance Redemption of Estate Under R.A. 3844, As Amended." On January 27,1982, the CAR issued an order dismissing the petition for redemption on the ground that the certification to finance redemption issued by the Land Bank of the Philippines did not constitute a valid consignation of the redemption price and therefore there was allegedly a failure on the part of private respondents to comply with the jurisdictional requirements of Section 12 of R.A. No. 3844 on the exercise of the right of redemption. On appeal to respondent Court of Appeals, the order of the dismissing the petition for redemption was lower court reversed and the case was remanded to the CAR for further proceedings. The appellate court ruled that private respondents had properly exercised their right of redemption against the petitioners within the 180-day period as required by Section 12, R.A. No. 3844, as amended; that the right of redemption is exercised by merely petitioning the court or requesting the Ministry of Agrarian Reforms to initiate and finance the redemption; and that it is not necessary for the lessee to make a tender of payment and/or consignation of the amount of the redemption price. Hence, this appeal. Petitioners raise the following issues: 1. Private respondents have no cause of action, since a) redemption being a right exercised against a vendee upon registration of the sale, the unregistered Deed of Conditional Sale in favor of petitioners executed by the PNB can not be the basis for the lessee's right of redemption; and the period of the right of redemption has already lapsed; and 2. Private respondents did not make any valid tender of payment or consignation of the redemption price. Section 12 of R.A. No. 3844, otherwise known as the Agricultural Land Reform Code, provides:

Lessee's Right of Redemption. In case the landholding is sold to a third person without the knowledge of the agricultural lessee, the latter shall have the right to redeem the same at a reasonable price and consideration: ... The right of redemption under this Section may be exercised within two years from the registration of the sale and shall have priority over any other right of legal redemption. Subsequently, this provision was amended by R.A. No. 6389, otherwise known as the Code of Agrarian Reforms of the Philippines, and reads, thus: Lessee's Right of Redemption: In case the land-holding is sold to a third person without the knowledge of the agricultural lessee, the latter shall have the right to redeem the same at a reasonable price and consideration: ... The right of redemption under this Section may be exercisedwithin one hundred eighty days from notice in writing which shall be served by the vendee on all lessees affected and the Department Ashville olAgrarian Reform upon the registration of the sale. ...(Emphasis supplied) Presidential Decree No. 27 which emancipated the tenant from the bondage of the soil has greatly qualified the provisions of the Code of Agrarian Reform; however, no changes have been effected on the above-mentioned section providing for the lessee's right of redemption. It is the contention of petitioners that insofar as they are concerned, since the deed of conditional sale in their favor has not yet been registered, no redemption proceedings can yet be instituted against them under Republic Act No. 3844, as amended; hence, private respondents have no cause of action against them. On the other hand, if the right of redemption by the tenants under the said law is to be reckoned from the registration of the sale of the land, such right of redemption has already lapsed, since the PNB, as vendee of the land in a foreclosure sale, had been issued a certificate of sale on March 17, 1978 and subsequently was issued T.C.T. No. 154516-R upon failure of the mortgagors to redeem the property within the one-year period as required by law. Petitioners' contention is without merit. If the tenants (the herein private respondents) had the right to redeem the property under the law upon the sale of the property to the PNB in 1978, such right of redemption has not yet prescribed because no notice in writing of the sale was ever given by the vendee upon the tenant as agricultural lessees of the land, as required by law. The PNB was made a party defendant in the petition for redemption filed by the private respondents with the Court of Agrarian Relations, and the PNB has not appealed the decision of the Intermediate Appellate Court holding that the private respondents had the right to redeem the property as the agricultural lessees thereof Insofar as the petitioners are concerned, being the transferee of the land in question by virtue of the unregistered deed of conditional sale, they can not claim that the tenants, as agricultural lessees of the land, have no cause of action against them simply because the deed of conditional sale executed in their favor by the PNB has not yet been registered. Republic Act No. 3844, as amended, prescribes the period within which the right of redemption must be exercised by the agricultural lessees, which is one hundred eighty days from written notice from the vendee of the property upon registration of the sale. But certainly there is nothing in the law which provides that without such written notice, the agricultural lessees can not exercise their right of redemption. Regarding the second assignment of error alleged by petitioners, namely, that the private respondents did not validly exercise their right of redemption since there was no valid consignation or tender of payment, we find contention devoid of merit. The appellate court correctly ruled that it is not necessary for the lessee to make a tender of payment and/or consignation of the amount of the redemption price, that a certification issued by the Land Bank that it will finance the redemption of the property in question is sufficient. Petitioners contend that Section 12 of R.A. No. 3844, as amended by R.A. No. 6389, will show that, unlike Section 11 thereof, there is no provision which deems the presentation of a certification of the Land Bank that it shall make payment of the property sought to be redeemed to be sufficient tender or consignation of the redemption price. Section 11 of R.A. No. 3844, as amended, is a provision on the lessee's right of pre-emption and provides that: "... If the agricultural lessee agrees with the terms and condition of the sale ... [he] must either tender payment of, or present a certificate from the Land Bank that it shall make payment ... on the price of the landholding to the agricultural lessor. If the latter refuses to accept such tender or presentment, he may consign it with the court ... " (Emphasis supplied). True, said provision does not appear in Section 12 thereof, which refers to the lessee's right of redemption. However, there is no doubt that within the context of the Code and in line with this Court's exhortation that a liberal interpretation of the Code's provisions is imperative, to give it full force and effect to its clear intent, the lessee-preemptioner and the lesseeredemptioner have the same rights and are in the same footing and category insofar as the availment of the facilities of the Land Bank and the Ministry of Agrarian Reform are concerned. Moreover, it is explicitly provided in Section 12 that "the Department of Agrarian Reform shall initiate while the Land Bank shall finance, said redemption as in the case of preemption." Hence, it is not necessary for tenants- redemptioners to make a tender and/or consignation of the redemption price. A certification of the Land Bank to finance the redemption when presented will suffice. As observed by the appellate court:

... Unlike the agricultural lessee whose financial capacity to pay the redemption price may be doubtful so that in case of direct payment of the redemption price by him to the owner of the land, he is obligated to make an actual tender of the reasonable price of the land, the Land Bank is a solvent government agency which is mandated to finance acquisition of farm lots. Its obligations are unconditional guaranteed by the government (Sec. 76, R.A. 3844). Accordingly, finding the petition without merit, the same is hereby DISMISSED, with costs against petitioner. SO ORDERED.

G.R. No. L-28853 July 22, 1975 BICOL FEDERATION OF LABOR, petitioner-appellant, vs. DR. G. S. CUYUGAN, MARIO, CERES, FIDES, BUL, all surnamed CUYUGAN, ERNESTO OBSUNA, ERNESTO DACER, and NARCISO MALATE, respondents-appellees. Quirico Fabul for petitioner-appellant. Ozaeta, Gibbs and Ozaeta for respondents-appellees.

CASTRO, J.: This is an appeal from a resolution of the Court of Agrarian Relations of Camarines Sur, Branch I, dismissing the complaint (CAR case 874), filed by the Bicol Federation of Labor in behalf of fifteen of its members* (hereinafter referred to as the claimants) against Dr. G. S. Cuyugan, his children Mario, Ceres, Fides and Bul, and their overseers Ernesto Obsuna, Ernesto Dacer and Narciso Malate (hereinafter referred to as the appellees), for lack of jurisdiction over the subject-matter thereof. We set aside the resolution, and remand the case for further proceedings. The material portions of the complaint in question recite: 1. Petitioner is a registered labor organization representing its bona fide members who are tenants of a portion of the 276 hectares of agricultural land devoted to coconuts owned by respondents Cuyugan ...; 2. That in 1947, Dona Jacinta de S. Cuyugan deceased wife of Dr. G.S. Cuyugan, and mother of the 4 respondents Cuyugan children, thru their general overseer Gregorio Musa, took in the tenants on a verbal and implied understanding that each would clear the bushes and trees on their respective assigned areas and plant thereon coconuts; that while they waited and watched their plantings, they may plant other semipermanent and non-permanent crops in their respective clearings for their livelihood, with the promise that when the time comes for their coconut plantings to bear fruits, they shall share in the produce according to the customs and practice of sharing in the locality, unless compensation is paid them also in conformity with the customs of the place, when landowner shall have the full and exclusive benefits of the nuts produced; 3. That the customs and practice adopted in his locality in alike situation is to pay the planter-tenant fifty centavos per tree of three years old and one peso twenty-five centavos when five years or more, provided it is alive; however if no compensation had been made, the planter-tenant shall receive a share on a fifty-fifty basis, the latter undertaking the cleaning, harvesting gathering, husking and making the copra; 4. That in conformity with the understanding, the petitioning tenants ... cared and successfully planted coconuts which are now continuously bearing fruits and numbering 8000 trees ...; 5. That tenants have not been compensated of their respective plantings, despite their demands, and, as early as 1957, when a portion of the plantings were already bearing fruits, the tenants were given a share of one-third instead of one-half, while the landowner gets two-thirds of the produce, the tenants doing the cleaning, harvesting, stocking, husking and making copra all at the expense and without reimbursement from landowner contrary to the agreed practice, and despite their protests, landowners overseer promised

and continue to promise them of settling the matter, while all the past years, and up to the present the 1/ 3 2 3 / sharing in favor of the landowner is being enforced; ... 6. That harvesting of coconuts is now taking place and there are about 20,000 nuts which had been felled to the ground upon orders of the agent, Ernesto Obsuna, employing for this purpose an outsider, the respondents Ernesto Dacer and Narciso Malate, with the right to process the nuts into copra to the exclusion of the original planters-tenants, and for them (Dacer and Malate) to receive the 1/ 3 share; 7. That the tenants were further made to understand by agent Obsuna that all their respective landholding shall be withdrawn from their care ...; 13. That petitioning tenants register its desire to a change from the sharing to a lease-hold system in their landholdings whereby they shall have a wider area and initiative to increase the productivity of the land with the least intervention by the agents of the landholder and for this purpose manifest their willingness to negotiate on the terms of the contract; .... On January 16, 1964 the agrarian court, acting on a motion to dismiss filed by the appellees, issued a resolution dismissing the complaint for lack of jurisdiction, as follows: To our mind, it is clear from the above facts, that, at least, as of this date, there is no tenancy relationship between the herein parties. It has been alleged clearly that the tenancy relationship will arise only upon failure of the respondents to compensate or indemnify the members of the petitioner-union for planting the coconuts in amounts fixed by the customs of the locality. In the absence of an adjudication by a competent court that no compensation has been made in amounts fixed by the customs of the place, the members of the petitioner-union has no right to claim tenancy relationship and, much less, invoke before this Court the customs of the place as to the sharing ratio that would govern the tenancy relationship that will be created upon failure to recover compensation from respondents. As of now, the binding and operative agreement between the parties is a civil contract over which the ordinary courts of justice have jurisdiction..... From the foregoing resolution the Bicol Federation of Labor appealed to the Court of Appeals which thereafter certified the appeal (CA-G.R. 34543-R) to this Court upon the sole question of law whether on the basis of the facts alleged the agrarian court has jurisdiction over the subject-matter of the complaint. 1. The essential averments of the complaint are the following: (a) the claimants were hired by the deceased wife of Dr. G.S. Cuyugan to clear her land and plant coconut seedlings thereon; (b) the claimants were allowed to plant non-permanent crops in their respective clearings; (c) when the coconut trees are already fruit-bearing the claimants are by their agreement entitled to share in the produce thereof on the customary 50-50 basis, unless the landowner shall compensate them in cash at the rate of P0.50 or P1.25 per tree, depending on its age; (d) the claimants have not been compensated in cash despite demands upon the landowner who has instead opted to give them a share in the produce on a 1/ 3 - 2/ 3 basis in favor of the landlord instead of the customary 50-50 sharing basis; and (e) the respondents are employing other people in their coconut plantation, thereby in effect ousting the claimants and preventing them from pursuing their claim for compensation. Section 154 of R.A. 3844, as amended, otherwise known as the Code of Agrarian Reforms, pertinently defines the jurisdiction of courts of agrarian relations as follows: The Court shall have original and exclusive jurisdiction over: (1) All cases or actions involving matters, controversies, disputes, or money claims arising from agrarian relations; ... Although the Code nowhere expressly defines the metes and bounds of the term "agrarian relations," there can be no doubt, considering the policy, objectives, spirit and purposes of that far-reaching legislation, that as used therein, the term embraces every situation where an individual provides his personal labor over a parcel of agricultural land belonging to another for the purpose principally of agricultural production, and where the former, for his labor input and other sundry contributions, is compensated either in wages or a share in the produce, or is obligated to pay lease rentals to the landowner. In the case at bar, the complaint alleges that the claimants were taken in by the landowner to provide their labor consisting of clearing the latter's land of shrubs and bushes, preparing it for the planting of coconut seedlings, and taking care of the coconut plants. For that labor, the claimants were given the right to plant non-permanent food crops for their subsistence and guaranteed a share in the harvest once the coconut trees they planted bore fruit. Although the landowner reserved to herself the option to pay the claimants instead the cash value of their labor input according to the customs of the place, this

alternative, as clearly averred in the complaint, was never exercised by the landowner who continued to share with the appellants the produce of the coconut trees. On the basis of the hypothetically admitted statement of ultimate facts, therefore, the actual on-going relationship between the principal adverse parties at the time of the filing of the complaint was one of share tenancy and the cause of action is the vindication of the appellants' rights in that relationship, a matter definitely within the periphery of the jurisdictional competence of the agrarian court. The fundamental error of the court below was its precipitate assumption that the absence of a judicial declaration of non-payment by the landowner of the cash value of the labor input of the claimants removes the case from its jurisdiction a posture which, to say the least, ignores the realities described in the questioned complaint. Moreover, even if the complaint may be regarded as primarily posing a money claim, the jurisdiction of the court below would still attach because what gave rise to the complaint was the hiring and retention of the claimants' services for the purpose of agricultural production, a situation well within the contemplation of section 154 of the Code of Agrarian Reforms. 2. During the pendency of this suit, the respondents raised the technical question of whether the Bicol Federation of Labor is competent to act as a party to the case at bar in view of the declaration by its counsel, made after the Federation terminated his authority to represent it in the courts of law, that his legal retainership, including that in the case at bar, is in behalf of the individual claimants concerned and not of the Federation. The respondents also submitted to this Court the affidavits of two of the principal claimants in this case, Zacarias Naron and Jaime Paz, wherein it is stated that they have not given their consent to the Federation to represent them in the action below. Zacarias Naron, however, later disclaimed any knowledge of the contents of the sworn declaration signed by him. Going over the record, we note that ten of the claimants represented by the Federation signed or thumbmarked the petition to appeal as pauper filed with the Court of Appeals by Atty. Quirico A. Fabul, erstwhile counsel of the Federation, namely, Ariston Cuatrona, Gregorio Bardon, Pio Diaz, Elpidio Alanis, Crispin Fabillar, Alfredo Bagayawa, Modesto Egregorio, Jose Alveza, Celestino Bardon, and Gabriel Omegan. To prevent failure or miscarriage of justice and pursuant to the provisions of Section 3 of Rule 3 of the Rules of Court, the names of the fifteen principal claimants in the case at bar should be added to the complaint below under the legal representation of Atty. Quirico A. Fabul until and unless each individual claimant should otherwise manifest before the court below. ACCORDINGLY, the resolution of the Court of Agrarian Relations of Camarines Sur dismissing the questioned complaint is set aside, and this case is hereby remanded to the said court, with the instruction that it proceed forthwith to try the case with deliberate speed. No pronouncement as to costs. Makalintal, C.J., Makasiar, Muoz Palma and Martin, JJ., concur.

LAND BANK OF THE PHILIPPINES, Petitioner, - versus HON. ERNESTO P. PAGAYATAN, in his capacity as Presiding Judge of the Regional Trial Court, Branch 46, San Jose, Occidental Mindoro; and JOSEFINA S. LUBRICA, in her capacity as Assignee of Federico Suntay, Respondents.

G.R. No. 177190 Present: CORONA, C.J., Chairperson, VELASCO, JR., NACHURA,* DEL CASTILLO, and PEREZ, JJ.

Promulgated: February 23, 2011

x-----------------------------------------------------------------------------------------x

DECISION VELASCO, JR., J.:

The Case This Petition for Review on Certiorari under Rule 45 seeks to annul the August 17, 2006 Decision[1] and March 27, 2007 Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP No. 93206, which affirmed the Order dated March 4, 2005[3] of the Regional Trial Court (RTC), Branch 46 in San Jose, Occidental Mindoro, in Agrarian Case No. 1390 for the fixing of just compensation, entitled Land Bank of the Philippines v. Josefina S. Lubrica, in her capacity as assignee of Federico Suntay, and Hon. Teodoro A. Cidro, as Provincial Agrarian Reform Adjudicator of San Jose, Occidental Mindoro. The RTC Order affirmed the Decision dated March 21, 2003[4] of the Provincial Agrarian Reform Adjudicator (PARAD) of San Jose, Occidental Mindoro in Case No. DCN-0405-0022-02, entitled Josefina S. Lubrica, in her capacity as Assignee of Federico Suntay v. Hon. Hernani A. Braganza, in his capacity as Secretary of the Department of Agrarian Reform, and Land Bank of the Philippines. The Facts On October 21, 1972, the 3,682.0286-hectare Suntay Estate, consisting of irrigated/unirrigated rice and corn lands covered by Transfer Certificate of Title No. T-31(1326) located in the Barangays of Gen. Emilio Aguinaldo, Sta. Lucia, and San Nicolas in Sablayan, Occidental Mindoro, was subjected to the operation of Presidential Decree No. 27, under its Operation Land Transfer (OLT), with the farmer-beneficiaries declared as owners of the property. However, a 300-hectare portion of the land was subjected to the Comprehensive Agrarian Reform Program (CARP) instead of the OLT. Thus, Certificates of Landownership Award were issued to the farmer-beneficiaries in possession of the land.[5] Such application of the CARP to the 300-hectare land was later the subject of a case before the Department of Agrarian Reform Adjudicatory Board (DARAB), which ruled that the subject land should have been the subject of OLT instead of CARP. The landowner admitted before the PARAD that said case was pending with this Court and docketed as G.R. No. 108920, entitled Federico Suntay v. Court of Appeals. Meanwhile, the owner of the land remained unpaid for the property. Thus, Josefina S. Lubrica, in her capacity as assignee of the owner of the property, Federico Suntay, filed a Petition for Summary Determination of Just Compensation with the PARAD, docketed as Case No. DCN-0405-0022-2002. Thereafter, the PARAD issued its Decision dated March 21, 2003, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered: 1. Fixing the preliminary just compensation for 431.1407 hectare property at P166,150.00 per hectare or a total of P71,634,027.30. Directing the Land Bank of the Philippines to immediately pay the aforestated amount to the Petitioner; Directing the DAR to immediately comply with all applicable requirements so that the subject property may be formally distributed and turned over to the farmer beneficiaries thereof, in accordance with the Decision of the DARAB Central in DARAB Case No. 2846.

2.

3.

No cost. SO ORDERED.[6]

Petitioner Land Bank of the Philippines (LBP) filed a Motion for Reconsideration dated April 10, 2003 of the above decision, but the PARAD denied the motion in an Order dated December 15, 2003.[7] The LBP then filed a Petition dated March 4, 2004 with the RTC docketed as Agrarian Case No. 1390, appealing the PARAD Decision. In the Petition, the LBP argued that because G.R. No. 108920 was pending with this Court in relation to the 300-hectare land subject of the instant case, the Petition for Summary Determination of Just Compensation filed before the PARAD was premature. The LBP argued further that the PARAD could only make an award of up to PhP 5 million only. The PARAD, therefore, could not award an amount of PhP 71,634,027.30. The LBP also contended that it could not satisfy the demand for payment of Lubrica, considering that the documents necessary for it to undertake a preliminary valuation of the property were still with the Department of Agrarian Reform (DAR). By way of answer, Lubrica filed a Motion to Deposit the Preliminary Valuation under Section 16(e) of Republic Act No. (RA) 6657 and Ad Cautelam Answer dated June 18, 2004.[8] In the said motion, Lubrica claimed that since the DAR already took possession of the disputed property, the LBP is duty-bound to deposit the compensation determined by the PARAD in a bank accessible to the landowner. In an Order dated March 4, 2005, the RTC resolved Lubricas motion, as follows: The foregoing considered and as prayed for by the respondent-movant The Land Compensation Department, Land Bank of the Philipines, is hereby directed to deposit the preliminary compensation as

determined by the PARAD, in case and bonds in the total amount of Php 71,634,027.30, with the Land Bank of the Philippines, Manila, within seven (7) days from receipt of this order, and to notify this Court of compliance within such period.[9]

Thus, the LBP filed an Omnibus Motion dated March 17, 2005 praying for the reconsideration of the above order, the admission of an amended petition impleading the DAR, and the issuance of summons to the new defendants. In the Omnibus Motion, the LBP contended: In this AMENDED PETITION, Land Bank impleaded the DAR as respondent because DAR is the lead agency of the government in the implementation of the agrarian reform. It is the one which is responsible in identifying the lands to be covered by agrarian reform program, placing/identifying the farmer beneficiaries, parcellary mapping of the land, and determining the land value covered by PD 27/EO 228. The documents DAR prepares is placed in a folder called claim folder which it forwards to Land Bank for processing and payment. 21. At present there is no claim folder prepared and submitted by DAR to Land Bank, and therefore Land Bank has no claim folder to process and no basis to pay the landowner.[10] In an Order dated December 8, 2005,[11] the RTC denied the Omnibus Motion finding no reversible error in its Order dated March 4, 2005 and denying the motion to amend the petition for being unnecessary towards land valuation. Thus, the LBP appealed the RTC Orders dated March 4, 2005 and December 8, 2005 to the CA through a Petition for Certiorari dated February 13, 2006. The LBP argued that without the claim folder from the DAR, it could not preliminarily determine the valuation of the covered lands and process the compensation claims. Moreover, it said that the amount to be deposited under Sec. 16 of RA 6657, or the Agrarian Reform Law of 1988, is the offered purchase price of DAR for the land contained in the notice of acquisition and not the price determined in an administrative proceeding before the PARAD. Afterwards, on August 17, 2006, the CA issued the assailed decision, the dispositive portion of which reads: WHEREFORE, premises considered, the petition is hereby DENIED DUE COURSE, and subsequently DISMISSED for lack of merit. SO ORDERED.[12] The LBP moved for reconsideration of the CA Decision, but the CA did not reconsider it, as stated in its Resolution dated March 27, 2007. Hence, the LBP filed this petition. The Issue What is the proper amount to be deposited under Section 16 of Republic Act No. 6657? Is it the PARAD/DARAB determined valuation or the preliminary valuation as determined by the DAR/LBP?[13] The Ruling of the Court The petition is meritorious. Private respondent Lubrica argues that, under the doctrines of res judicata and stare decisis, the instant case must be dismissed in light of the decision of this Court in Lubrica v. Land Bank of the Philippines,[14] the dispositive portion of which reads: WHEREFORE, premises considered, the petition is GRANTED. The assailed Amended Decision dated October 27, 2005 of the Court of Appeals in CA-G.R. SP No. 77530 is REVERSED and SET ASIDE. The Decision dated May 26, 2004 of the Court of Appeals affirming (a) the March 31, 2003 Order of the Special Agrarian Court ordering the respondent Land Bank of the Philippines to deposit the just compensation provisionally determined by the PARAD; (b) the May 26, 2003 Resolution denying respondents Motion for Reconsideration; and (c) the May 27, 2003 Order directing Teresita V. Tengco, respondents Land Compensation Department Manager to comply with the March 31, 2003 Order, is REINSTATED. The Regional Trial Court of San Jose, Occidental Mindoro, Branch 46, acting as Special Agrarian Court is ORDERED to proceed with dispatch in the trial of Agrarian Case Nos. R-1339 and R-1340, and to compute the final valuation of the subject properties based on the aforementioned formula. SO ORDERED. (Emphasis supplied.)

The principles of res judicata and stare decisis do not apply to the case at bar. In Lanuza v. Court of Appeals,[15] the Court discussed the principle of res judicata, to wit: Res judicata means a matter adjudged, a thing judicially acted upon or decided; a thing or matter settled by judgment. The doctrine of res judicata provides that a final judgment, on the merits rendered by a court of competent jurisdiction is conclusive as to the rights of the parties and their privies and constitutes an absolute bar to subsequent actions involving the same claim, demand, or cause of action. The elements of res judicata are (a) identity of parties or at least such as representing the same interest in both actions; (b) identity of rights asserted and relief prayed for, the relief being founded on the same facts; and (c) the identity in the two (2) particulars is such that any judgment which may be rendered in the other action will, regardless of which party is successful, amount to res judicata in the action under consideration. (Emphasis supplied.) In Lubrica, the issue was as follows: Petitioners insist that the determination of just compensation should be based on the value of the expropriated properties at the time of payment. Respondent LBP, on the other hand, claims that the value of the realties should be computed as of October 21, 1972 when P.D. No. 27 took effect.[16]

While the Court directed that the valuation made by the PARAD be the amount to be deposited in favor of the landowner, it was done only because the PARADs valuation was based on the time the payment was made. The issue before Us is whether the RTC acted properly in ordering the deposit or payment to the landowner of the preliminary valuation of the land made by the PARAD. This is considering that Sec. 16(e) of RA 6657 clearly requires the initial valuation made by the DAR and LBP be deposited or paid to the landowner before taking possession of the latters property, not the preliminary valuation made by the PARAD. Evidently, the second element of res judicata is not present. The relief prayed for in Lubrica is that the amount for deposit in favor of the landowner be determined on the basis of the time of payment and not of the time of taking. But here, the prayer of the LBP is for the deposit of the valuation of the LBP and DAR and not that of the PARAD. These are two distinct and separate issues. Res judicata, therefore, cannot apply. We cannot apply the principle of stare decisis to the instant case, too. The Court explained the principle in Ting v. Velez-Ting:[17] The principle of stare decisis enjoins adherence by lower courts to doctrinal rules established by this Court in its final decisions. It is based on the principle that once a question of law has been examined and decided, it should be deemed settled and closed to further argument. Basically, it is a bar to any attempt to relitigate the same issues, necessary for two simple reasons: economy and stability. In our jurisdiction, the principle is entrenched in Article 8 of the Civil Code. (Emphasis supplied.)

To reiterate, Lubrica and the instant case have different issues. Hence, stare decisis is also inapplicable here. The LBP posits that under Sec. 16(e) of RA 6657, and as espoused in Land Bank of the Philippines v. Court of Appeals,[18] it is the purchase price offered by the DAR in its notice of acquisition of the land that must be deposited in an accessible bank in the name of the landowner before taking possession of the land, not the valuation of the PARAD. The Court agrees with the LBP. The RTC erred when it ruled: Under Section 16 (e) the payment of the provisional compensation determined by the PARAD in the summary administrative proceedings under Section 16 (d) should precede the taking of the land. In the present case, the taking of the property even preceded the mere determination of a provisional compensation by more than 30 years.[19]

Sec. 16 of RA 6657 contains the procedure for the acquisition of private lands, viz: SEC. 16. lands, the following procedures shall be followed: For purposes of acquisition of private

(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 or registered 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 in accordance 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 landowner, his administrator or representative shall inform the DAR of his acceptance or rejection of the offer. (c) If the landowner accepts the offer of the DAR, the LBP 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 of 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 the notice. After the expiration of the above period, the matter is deemed submitted for decision. The DAR shall decide the case within thirty (30) days after 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 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 to the 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. (Emphasis supplied.) Conspicuously, there is no mention of the PARAD in the foregoing Sec. 16(e) when it speaks of the deposit with an accessible bank designated by the DAR of the compensation in cash or LBP bonds in accordance with this Act. Moreover, it is only after the DAR has made its final determination of the initial valuation of the land that the landowner may resort to the judicial determination of the just compensation for the land. Clearly, therefore, it is the initial valuation made by the DAR and LBP that is contained in the letter-offer to the landowner under Sec. 16(a), said valuation of which must be deposited and released to the landowner prior to taking possession of the property. This too was the Courts interpretation of the above provision in Land Bank of the Philippines v. Heir of Trinidad S. Vda. De Arieta:[20] It was thus erroneous for the CA to conclude that the provisional compensation required to be deposited as provided in Section 16 (e) is the sum determined by the DARAB/PARAD/RARAD in a summary administrative proceeding merely because the word deposit appeared for the first time in the sub-paragraph immediately succeeding that sub-paragraph where the administrative proceeding is mentioned (sub-paragraph d). On the contrary, sub-paragraph (e) should be related to sub-paragraphs (a), (b) and (c) considering that the taking of possession by the State of the private agricultural land placed under the CARP is the next step after the DAR/LBP has complied with notice requirements which include the offer of just compensation based on the initial valuation by LBP. To construe sub-paragraph (e) as the appellate court did would hamper the land redistribution process because the government still has to wait for the termination of the summary administrative proceeding before it can take possession of the lands. Contrary to the CAs view, the deposit of provisional compensation is made even before the summary administrative proceeding commences, or at least simultaneously with it, once the landowner rejects the initial valuation (offer) by the LBP. Such deposit results from his rejection of the DAR offer (based on the LBPs initial valuation). Both the conduct of summary administrative proceeding and deposit of provisional compensation follow as a consequence of the landowners rejection under both the compulsory acquisition and VOS. This explains why the words rejection or failure to reply and rejection or no response from the landowner are found in sub-paragraphs (d) and (e). Such rejection/no response from the landowner could not possibly refer to the award of just compensation in the summary administrative proceeding considering that the succeeding sub-paragraph (f) states that the landowner who disagrees with the same is granted the right to petition in court for final determination of just compensation. As it is, the CAs interpretation would have loosely interchanged the terms rejected the offer and disagrees with the decision, which is far from what the entire provision plainly conveys. xxxx Under the law, the LBP is charged with the initial responsibility of determining the value of lands placed under land reform and the compensation to be paid for their taking. Once an expropriation proceeding or the acquisition of private agricultural lands is commenced by the DAR, the indispensable role of LBP begins. EO No. 405, issued on June 14, 1990, provides that the DAR is required to make use of the determination of the land valuation and compensation by the LBP as the latter is primarily responsible for the determination of the land valuation and compensation. In fact, the LBP can disagree

with the decision of the DAR in the determination of just compensation, and bring the matter to the RTC designated as [Special Agrarian Court] for final determination of just compensation. The amount of offer which the DAR gives to the landowner as compensation for his land, as mentioned in Section 16 (b) and (c), is based on the initial valuation by the LBP. This then is the amount which may be accepted or rejected by the landowner under the procedure established in Section 16. Perforce, such initial valuation by the LBP also becomes the basis of the deposit of provisional compensation pending final determination of just compensation, in accordance with subparagraph (e). (Emphasis supplied.)

It is clear from Sec. 16 of RA 6657 that it is the initial valuation made by the DAR and the LBP that must be released to the landowner in order for DAR to take possession of the property. Otherwise stated, Sec. 16 of RA 6657 does not authorize the release of the PARADs determination of just compensation for the land which has not yet become final and executory. Moreover, it bears pointing out that, pursuant to DAR Administrative Order No. 02, Series of 1996, entitled Revised Rules and Procedures Governing the Acquisition of Agricultural Lands subject of Voluntary Offer to Sell and Compulsory Acquisition pursuant to Republic Act No. 6657, the DAR Municipal Office (DARMO) first prepares a claim folder (CF) containing the necessary documents for the valuation of the land. The DARMO then forwards this claim folder to the DAR Provincial Office (DARPO) which, in turn, has the following duties: Receives claim folder and forwards to the DAR-LBP Pre-Processing Unit (PPU) for review/evaluation of documents. Gathers lacking documents, if any.[21] The DAR-LBP PPU then forwards the CF to the LBP-Land Valuation and Landowners Compensation Office (LVLCO) which receives and evaluates the CF for completeness, consistency and document sufficiency. Gathers additional valuation documents.[22] Thereafter, the LBP-LVLCO determines land valuation based on valuation inputs and prepares and sends Memo of Valuation, Claim Folder Profile and Valuation Summary (MOV-CFPVS) to the DARPO.[23] The DARPO then sends Notice of Valuation and Acquisition to LO [landowner] by personal delivery with proof of service or by registered mail with return card, attaching copy of MOV-CFPVS and inviting LOs attention to the submission of documents required for payment of claim.[24] Notably, DAR failed to prepare the claim folder which is necessary for the LBP to make a valuation of the land to be expropriated. The proper remedy would have been to ask the DAR and LBP to determine such initial valuation and to have the amount deposited to his account, in accordance with Sec. 16 of RA 6657. Nevertheless, it was erroneous for private respondent to have filed a Petition for Determination of Just Compensation with PARAD when the remedy that she was seeking was for the deposit of the initial valuation that the DAR and LBP should have made. Contrary to the CAs ruling, the RTCs failure to distinguish between the initial valuation that is contemplated in Sec. 16 of RA 6657 and the just compensation subject of judicial determination is a gross and patent error that can be considered as grave abuse of discretion. Gross abuse of discretion is defined, as follows: A special civil action for certiorari, under Rule 65, is an independent action based on the specific grounds therein provided and will lie only if there is no appeal or any other plain, speedy, and adequate remedy in the ordinary course of law. A petition for certiorari will prosper only if grave abuse of discretion is alleged and proved to exist. Grave abuse of discretion, under Rule 65, has a specific meaning. It is the arbitrary or despotic exercise of power due to passion, prejudice or personal hostility; or the whimsical, arbitrary, or capricious exercise of power that amounts to an evasion or refusal to perform a positive duty enjoined by law or to act at all in contemplation of law. For an act to be struck down as having been done with grave abuse of discretion, the abuse of discretion must be patent and gross.[25] x x x (Emphasis supplied.) It should also be pointed out that in the related Land Bank of the Philippines v. Pagayatan,[26] the Court had found the presiding judge of the RTC, Branch 16 in San Jose, Occidental Mindoro, herein respondent Judge Ernesto P. Pagayatan, guilty of Gross Ignorance of the Law or Procedure and Gross Misconduct for holding Teresita V. Tengco, Acting Chief of the Land Compensation Department of the LBP, and Leticia Lourdes A. Camara, Chief of the Land Compensation Department of the LBP, guilty of indirect contempt for allegedly disobeying the very same Order dated March 4, 2005 of the RTC. In that case, Court ruled: The partiality of respondent was highlighted when, out of his selective invocation of judicial courtesy, he refused to resolve Leticia and Teresitas February 14, 2007 Urgent Manifestation of Compliance and Motion and other pending incidents in view of the pendency before the appellate court of the LBPs Omnibus Motion praying for, among other things, the quashal of the warrant of arrest, whereas he had earlier found Leticia and Teresita guilty of contempt despite the pendency before the appellate court of LBPs motion for reconsideration of the dismissal of the petition in CA-G.R. SP No. 93206.

Evidently, the RTC had already acted with partiality in deciding the case and with grave abuse of discretion.

Moreover, in order to give life and breath to Sec. 16 of RA 6657, as well as DAR Administrative Order No. 02, Series of 1996, the Court is constrained to direct the DAR and the LBP to make the initial valuation of the subject land as of the time of its taking and to deposit the valuation in the name of the landowner or his estate, in accordance with RA 6657 and the pertinent decisions of this Court on the matter. The length of time that has elapsed that the landowner has not received any compensation for the land cannot justify the release of the PARAD valuation to the landowner. Sec. 16 of RA 6657 only allows the release of the initial valuation of the DAR and the LBP to the landowner prior to the determination by the courts of the final just compensation due. Besides, it must be stressed that it was only sometime in 2003 that the assignee of the landowner filed a petition for determination of just compensation with the PARAD. Clearly, the landowner slept on his right to demand payment of the initial valuation of the land. Nevertheless, such lapse of time demands that the DAR and the LBP act with dispatch in determining such initial valuation and to deposit it in favor of the landowner at the soonest possible time. WHEREFORE, the petition is GRANTED. The CAs August 17, 2006 Decision and March 27, 2007 Resolution in CA-G.R. SP No. 93206 are herebyREVERSED and SET ASIDE. The DAR and the LBP are hereby given three (3) months from receipt of notice that this Decision has become final and executory, within which to determine the initial valuation of the subject lot and to deposit its initial value to the account of private respondent Lubrica. The PARAD Decision dated March 21, 2003 in Case No. DCN-0405-0022-02 is hereby ANNULLED and SET ASIDE. The RTC Order dated March 4, 2005 in Agrarian Case No. 1390 is also ANNULLED and SET ASIDE. No costs. SO ORDERED.

[G.R. No. 180557, September 26, 2008] HEIRS OF ROQUE F. TABUENA, REPRESENTED BY AURORA P. TABUENA, ESTER P. TABUENA AND ERLINDA T. MARCELLANA, HEIRS OF JOSE TABUENA, REPRESENTED BY MA. LUZ T. MACASINAG, HEIRS OF ROMULO TABUENA, REPRESENTED BY MILAGROS ARROYO, HEIRS OF BENJAMIN TABUENA, REPRESENTED BY MA. VICTORIA TABUENA, AND RAFAELA ROSARIO ESGUERRA, PETITIONERS, VS. LAND BANK OF THE PHILIPPINES, RESPONDENT. DECISION YNARES-SATIAGO, J.: This petition assails the July 11, 2007 Decision[1] of the Court of Appeals in CA-G.R. SP No. 88469 which reversed and set aside the October 1, 2004 Decision[2] of the Regional Trial Court of Sorsogon City, Branch 52 in Agrarian Case No. 20006767. Also assailed is the October 15, 2007 Resolution[3] which denied the motion for reconsideration. The facts of the case as found by the Court of Appeals are as follows: On September 28, 2000, respondents filed a complaint for determination and payment of just compensation against the Department of Agrarian Reform (DAR) and Land Bank of the Philippines (LBP), which was amended on October 3, 2000, alleging that they were the owners of Lot No. 6183, an irrigated riceland with an area of 29.9557 hectares located at Bibincahan, Sorsogon, Sorsogon; that 26.2585 hectares of said lot were brought by DAR under the coverage of P.D. No. 27 (The Comprehensive Agrarian Reform Law) and set the total value thereof at P105,572.48, excluding increments, in contravention of their right to a just compensation; and that the determination of what constitutes just compensation is inherently a judicial function which cannot and should not be left to administrative officials. An amended answer was filed by DAR alleging that the determination of just compensation by the court is not necessary because respondents and the farmer-beneficiaries had already executed a Landowner-Tenant Production Agreement and Farmers Undertaking (LTPA-FU) To Pay to the LBP, whereby the parties agreed on the valuation of the riceland; and that in compliance with said agreement, the farmer-beneficiaries have already paid their land amortizations with LBP, as evidenced by a Certification dated July 18, 1980 issued by Mr. Ely Pongpong, Bank Executive Officer I. A motion to dismiss was filed by LBP alleging that the case did not pass the Department of Agrarian Reform and Adjudication Board (DARAB), which has primary and exclusive original and appellate jurisdiction over the valuation of land, as well as the preliminary determination and payment of just compensation and disputes concerning the functions of LBP; that for failure to exhaust administrative remedies, the case is premature; and that respondents have no cause of action against it. In an Order dated March 26, 2001, the court a quo found LBP's argument on non-exhaustion of administrative remedies to be meritorious and referred the case to the DARAB/PARAD for it to conduct a summary hearing for initial valuation process. However, the Provincial Adjudicator of Sorsogon informed the court a quo that the Preliminary Valuation and

other pertinent papers have not yet been forwarded to the Board. LBP then filed an answer alleging that the complaint states no cause of action because respondents already received the payment for their property in the form of cash and bonds and they executed documents evidencing payment of the property to their full satisfaction, such as the Assignment of Rights, Landowner's Affidavit of Warranty and Undertaking, Extrajudicial Settlement of Estate and Waiver of Rights, Payment Release Forms, Special Power of Attorney and Delegation of Special Power of Attorney, copies of which, together with photocopies of the Case Registry Book and Bond Registry Book, were attached thereto as Annexes "A" to "G." In their position paper, respondents admitted that they have already received the amount of P64,690.19 from the valuation of P105,572.48. However, they claimed that the valuation of P4,398.00 per hectare is unreasonable and shocking to the conscience and since they have not yet been fully paid for their property, they are still the owners thereof and can ask for an increase of the purchase price. A position paper was filed by DAR alleging that respondents accepted the valuation of P15,572.48 and executed a Deed of Assignment of Rights and Landowner's Affidavit of Warranty and Undertaking, so that they are already estopped from asking for an increase in the purchase price. LBP filed a position paper alleging that respondents are estopped from claiming an increase in the valuation on the grounds of payment and prescription, as more than twenty (20) years have lapsed from the time said valuation was made. On October 1, 2004, the court a quo rendered judgment, the dispositive portion of which reads: "WHEREFORE, premises considered, judgment is hereby rendered: 1) Fixing the amount of FOUR MILLION EIGHT HUNDRED FIFTY-FIVE THOUSAND PESOS (PHP4,855,000.00) for the area of 26.0012 hectares, covered by TCT No. T-28473 in the name of the Heirs of Roque Tabuena of that Riceland situated at Baribag, Bibincahan, Sorsogon City which property was taken by the government pursuant to P.D. No. 27. Ordering the defendant Land Bank of the Philippines to pay the Plaintiffs the total amount of Four Million Eight Hundred Fifty-Five Thousand Pesos (P4,855,000.00) Philippine currency in the manner provided by law by way of the full payment of the said just compensation after deducting whatever amount previously received by the plaintiffs if any from the defendant Land Bank of the Philippines as part of the just compensation. Ordering the plaintiffs to pay whatever deficiency in the docket fees to the Clerk of Court based on the valuation fixed by the Court. Without pronouncement as to costs.

2)

3) 4)

SO ORDERED."[4] DAR and LBP filed separate motions for reconsideration[5] but were denied; thus, both filed petitions for review[6] before the Court of Appeals. However, DAR's petition was dismissed by the Court of Appeals in a Resolution dated August 26, 2005. An Entry of Judgment[7] was issued on September 23, 2005. Only LBP's Petition for Review[8] was considered by the appellate court. LBP alleged that the subject land transfer claim had been settled and extinguished by virtue of the Deed of Assignment of Rights executed by petitioners in favor of LBP; that the said deed is the best evidence that the land transfer claim had been consummated; that since there has been no action on the part of petitioners to annul the same, they were estopped from assailing its validity; that the just compensation fixed by the trial court in the amount of P4,855,000.00 was improper since the valuation should be computed at the time of the taking of the property; that petitioners should have first availed of the administrative proceedings before the DAR which has primary jurisdiction over the case; and that it is only after the landowner had disagreed with the valuation of the DAR that he can file a case before the courts for final determination of just compensation. Petitioners claimed that their acceptance of the offered price does not estop them from questioning the valuation since the Deed of Assignment of Rights is not conclusive proof that their claim was extinguished; that the trial court did not err in fixing just compensation in the amount of P4,855,000.00 since the actual taking of the land would take effect only upon the payment of just compensation. On July 11, 2007, the appellate court rendered the assailed Decision reversing and setting aside the decision of the trial court and dismissing the complaint for determination and payment of just compensation. The Court of Appeals ruled that although the Deed of Assignment of Rights was not formally offered by the respondent, the same was incorporated in the records of the case; moreover, petitioners failed to deny it under oath hence, its genuineness and due execution are deemed admitted; that since petitioners executed a Deed of Assignment of Rights and acknowledged receipt of the full compensation for the property, there is no need to bring the matter to the trial court for the determination and payment of just compensation; that petitioners' cause of action has prescribed since the action for determination and payment of just compensation was filed only after 20 years from the time its valuation has been fixed by DAR; that in computing the just compensation for expropriation proceedings, it is the value of the land at the time of the taking, not at the time of the rendition of the judgment, that should be taken into consideration. Petitioners' motion for reconsideration[9] was denied; hence, the instant petition for review on certiorari.

Petitioners contend that the appellate court erred when it admitted the Deed of Assignment of Rights considering that the said document was not offered in evidence by respondent; that petitioners were not given the opportunity to examine the same or to object to its admissibility; that assuming that the said deed may be admitted in evidence, it could not be considered as a binding contract because they executed the same under duress. The petition lacks merit. Generally, courts cannot consider evidence which has not been formally offered. Parties are required to inform the courts of the purpose of introducing their respective exhibits to assist the latter in ruling on their admissibility in case an objection thereto is made. Without a formal offer of evidence, courts are constrained to take no notice of the evidence even if it has been marked and identified.[10] However, this Court has relaxed the foregoing rule and allowed evidence not formally offered to be admitted and considered by the trial court provided the same must have been identified by testimony duly recorded and incorporated in the records of the case.[11] In the instant case, the Deed of Assignment of Rights[12] was set up by LBP as an affirmative defense in its Answer and was incorporated in the records of the case as an annex.[13] Petitioners however failed to question its existence or due execution. On the contrary, they acknowledged receipt of a portion of the compensation for the property[14] and admitted that the Deed of Assignment of Rights appeared as an encumbrance in their certificate of title.[15] Petitioners' failure to specifically deny under oath the existence, authenticity and due execution of the said document is tantamount to a judicial admission of its genuineness and due execution.[16] Sections 7 and 8, Rule 8 of the Rules of Court provide: SEC. 7. Action or defense based on document. - Whenever an action or defense is based upon a written instrument or document, the substance of such instrument or document shall be set forth in the pleading, and the original or a copy thereof shall be attached to the pleading as an exhibit, which shall be deemed to be a part of the pleading, or said copy may with like effect be set forth in the pleading. SEC. 8. How to contest such documents. - When an action or defense is founded upon a written instrument, copied in or attached to the corresponding pleading as provided in the preceding section, the genuineness and due execution of the instrument shall be deemed admitted unless the adverse party, under oath, specifically denies them, and sets forth what he claims to be the facts; but the requirement of an oath does not apply when the adverse party does not appear be a party to the instrument or when compliance with an order for an inspection of the original instrument is refused. There is likewise no merit in petitioners' allegation that LBP lacks locus standi since DAR's petition for review was dismissed by the Court of Appeals and said dismissal has become final and executory; that being a necessary party and not an indispensable party, LBP has no right to appeal unless the DAR appeals. LBP is an agency created primarily to provide financial support in all phases of agrarian reform pursuant to Section 74 of Republic Act (RA) No. 3844[17] and Section 64 of RA No. 6657.[18] It is vested with the primary responsibility and authority in the valuation and compensation of covered landholdings to carry out the full implementation of the Agrarian Reform Program.[19] It may agree with the DAR and the land owner as to the amount of just compensation to be paid to the latter and may also disagree with them and bring the matter to court for judicial determination.[20] Once an expropriation proceeding for the acquisition of private agricultural lands is commenced by the DAR, the indispensable role of LBP begins,[21] which clearly shows that there would never be a judicial determination of just compensation absent respondent LBP's participation. Logically, it follows that respondent is an indispensable party in an action for the determination of just compensation in cases arising from agrarian reform program; [22] as such, it can file an appeal independently of DAR. Moreover, by virtue of the Deed of Assignment of Rights executed by petitioners whereby they acknowledged receipt of the full compensation for their property and have assigned, transferred and conveyed their rights over the subject property to LBP, their claim for an increase in the valuation of such property has no basis. LBP's obligation had long been extinguished and settled. Except for their bare and general allegations of compulsion and duress in view of the fact that the Deed of Assignment of Rights was executed during the effectivity of Martial Law, petitioners have not presented any evidence to dispute the same. Hence, petitioners were estopped from assailing the validity of the said deed. Moreover, laches has set in due to petitioners' inaction for more than 20 years to assail the due execution of the Deed of Assignment of Rights. Laches is defined as the failure or neglect for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier; it is negligence or omission to assert a right within a reasonable length of time, warranting a presumption that the party entitled to assert it either has abandoned it or declines to assert it.[23] All the elements of laches are present in the instant case. The subject property was acquired by the government by virtue of Presidential Decree No. 27 which took effect on October 21, 1972; the parties executed the Deed of Assignment of Rights on October 10, 1979; but it was only on September 28, 2000 that petitioners filed the action for determination and payment of just compensation. Moreover, Section 16 of Republic Act No. 6657 gives the landowner, in case he/she disagrees with valuation of the DAR, the following remedy, to wit: 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 land-owners and the beneficiaries, the DAR shall send its notice to acquire the land to the owners thereof, by personal delivery or registered 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 in accordance with the valuation set forth in Section 17, 18, and other pertinent provisions hereof. (b) Within thirty (30) days from the date of receipt of written notice by personal delivery of registered mail, the landowner, his administrator or representative shall inform the DAR of his acceptance or rejection of the offer. (c) If the landowner accepts the offer of the DAR, the LBP 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 of 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 the notice. After the expiration of the above period, the matter is deemed submitted for decision. The DAR shall decide the case within thirty (30) days after 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 to the 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. (Underscoring ours) In Apo Fruits Corporation v. Court of Appeals,[24] this Court ruled that: AFC and HPI now blame LBP for allegedly incurring delay in the determination and payment of just compensation. However, the same is without basis as AFC and HPI's proper recourse after rejecting the initial valuations of respondent LBP was to bring the matter to the RTC acting as a SAC, and not to file two complaints for determination of just compensation with the DAR, which was just circuitous as it had already determined the just compensation of the subject properties taken with the aid of LBP. (Underscoring ours) Besides, Rule XIII, Section 11 of the New Rules of Procedure of the DARAB provides thus: Section 11. Land Valuation and Preliminary 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. (Underlining for emphasis)[25] Finally, there is no basis to petitioners' allegation that they were not yet fully paid of the valuation. The Deed of Assignment of Rights[26] executed by petitioners and respondent clearly provided that: WHEREAS, the Land Bank has by these presents satisfactorily paid and settled in my/our favor the net cost or value of the above-described landholdings in the mode provided under Presidential Decree No. 251 as follows: CASH: BONDS: TWELVE THOUSAND SEVENTEEN PESOS & 53/100 (P12,017.53) NINETY SEVEN THOUSAND PESOS ONLY (P97,000.00)

which settlement/payment is in full compensation of the cost of said landholding (s) and which I/we hereby acknowledge to have received from the Land Bank to my/our full satisfaction. WHEREAS, pursuant to the said Presidential Decree No. 251, whenever the Land Bank pays the whole or a portion of the total cost of farm lots, the Bank shall be subrogated by reason thereof to the rights of the landowner to collect and receive the yearly amortization/s on the farm lot/s or the amount paid including the interest thereon, from the above-named tenantfarmer beneficiary/ies in whose favor said farm lot/s has/have been transferred pursuant to Presidential Decree No. 27; NOW, THEREFORE, for and in consideration of the foregoing premises, covenants and stipulations, I/We hereby ASSIGN, TRANSFER and CONVEY, absolutely and irrevocably to the LAND BANK OF THE PHILIPPINES, x x x all claims, rights, interests and participations of whatever nature or kind pertaining to the area/s covered by the Certificate/s of Land Transfer mentioned herein and transferred to the tenant-farmer/s x x x all existing improvements thereon x x x. (Underscoring ours) WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 88469 dated July 11, 2007 reversing and setting aside the October 1, 2004 Decision of the Regional Trial Court of Sorsogon, Branch 52 in Agrarian Case No. 2000-6767 and dismissing petitioners' complaint for determination and payment of just compensation, as well as the October 15, 2007 Resolution denying the Motion for Reconsideration, are AFFIRMED. SO ORDERED.

PETRONILA MAYLEM, Petitioner,

G.R. No. 162721 Present: YNARES-SANTIAGO, J., Chairperson, CHICO-NAZARIO, VELASCO, JR., NACHURA, and PERALTA, JJ. Promulgated:

- versus -

CARMELITA ELLANO and ANTONIA MORCIENTO, Respondents.

July 13, 2009 x-----------------------------------------------------------------------------------------x

DECISION PERALTA, J.: This is a petition for review under Rule 45 of the Rules of Court, seeking the reversal of the Decision [1] of the Court of Appeals in CA-G.R. SP No. 70431, dated September 11, 2003, as well as the Resolution[2] dated February 23, 2004, which denied reconsideration. The assailed Decision affirmed the Decision[3] of the Department of Agrarian Reform Adjudication BoardIsabela in DARAB Case No. 7725 which, in turn, affirmed the judgment [4] of the Provincial Adjudicator in DARAB Case No. II-1239-ISA97 -- 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, Isabela[5] under a leasehold agreement he had entered into with petitioners husband, Segundino Maylem, and the latters parents. On January 8, 1988, or eight months before Segundinos demise,[6] the property was awarded to Abad by operation of Presidential Decree (P.D.) No. 27[7] 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. 028668[9] 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 Abads knowledge that the same was mortgaged to a third person,[16] Abad filed on December 5, 1997 a Complaint[17] 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 petitioners 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 Abads 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 formers proprietary rights. The Provincial Adjudicator also noted that petitioners

petition for retention would not affect Abads 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 appeal[21] 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 petitioners contention that Abads 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 Abads 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 P57,000.00. Raising once again the issue of prescription, she laments that it is patent from Abads complaint that the action had already prescribed when the complaint was filed in 1997 and, hence, was dismissible on that ground. For their part, respondents[27] 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 petitioners 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 samea 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, petitioners act of dispossessing Abad of the land awarded to him was merely calculated to impair the latters 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 inTorres v. Ventura,[42] the Court declared that the object of agrarian reform is to vest in the farmerbeneficiary, 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 Abads 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.[45] There is likewise no merit in petitioners averment that the November 30, 1998 Order [46] 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 2.9194hectare landholding covered by TCT No.T-42515[47]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 Abads EP No. A-216347.[48] Hence, we fail to be swayed even by petitioners 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 petitioners last-ditch attempt to defeat Abads 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. Casuno[50] 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 Courtnoting 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 landownerheld 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 courts conclusion that the registration of Abads 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 petitioners 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.

G.R. No. L-54106 February 16, 1982 LUCRECIO PATRICIO, SEGUNDO DALIGDIG, FRANCISCO DALIGDIG, FLORENCIO ARELLANO and EPIFANIO DALIGDIG, petitioners, vs. ISABELO BAYOG, CONRADA, PEDRO, EMILIO, ALFONSO, DIONISIO and ARSENIO, all surnamed MENDEZ, and COURT OF APPEALS, respondents.

AQUINO, J.: The legal issue in this case is whether the tenants hired by the purchaser of a homestead planted to coconuts and bananas may be ejected by the homesteader's heirs who were allowed by the Court of Appeals to repurchase the homestead and who desire to personally possess and till the land. As factual background, it should be stated that in 1934 Policarpio Mendez obtained a patent and Torrens title for a homestead with an area of about twenty-three hectares located at Sitio Badiangon, Barrio Dalipuga, Iligan City. He and his wife, Petra Macaliag and their nine children lived on the land, cleared it and planted coconuts thereon. In 1956, Mendez sold the homestead to the spouses Eugenio Lamberang and Ester Fuentes. In 1958, Mendez and his children filed an action to annul the sale. Lamberang countered with an ejectment suit. On March 20, 1961, Mendez and his children filed an action against the Lamberang spouses for the reconveyance of the homestead. The three cases reached the Court of Appeals which in a decision dated January 3, 1977 ordered Lamberang to reconvey the homestead to the Mendezes "free of all liens and encumbrances " upon their payment to Lamberang of P19,411.28 as redemption price. That judgment became final and executory. The Court of Appeals also held that upon the execution of the deed of reconveyance and the delivery of the redemption price to the Lamberang spouses, the Mendezes Would be "entitled to the possession and occupancy" of the homestead. (Mendez vs. Lamberang, Lamberang vs. Bayug, and Mendez vs. Fuentes-Lamberang CA-G.R. Nos. 50819-81-R.) The Mendezes paid the redemption price and the Lamberang spouses reconveyed the homestead. Pursuant to a writ of possession, a deputy sheriff placed Isabelo Bayog, the representative of the Mendez family in possession of the homestead

after ejecting the tenants of the Lamberang spouses named Lucrecio Patricio, Florencio Arellano, Epifanio Daligdig, Francisco Daligdig and Segundo Daligdig, now the petitioners herein. However, the tenants reentered the homestead allegedly upon instruction of Bernardino O. Nuez, a trial attorney of the Bureau of Agrarian Legal Assistant. Hence, the Mendezes filed a motion to declare them and Nuez in contempt of court. Before that contempt incident could be resolved, or on April 10, 1979, the tenants, represented by Nuez, filed in the Court of Agrarian Relations at Iligan City a complaint for damages against the heirs of Policarpio Mendez named Isabelo Bayog and Conrada, Pedro, Emilio, Alfonso, Dionisio and Arsenio, all surnamed Mendez (CAR Case No. 92), now private respondents. By reason of an agreement between the parties at the hearing on October 22, 1979, the said tenants vacated the land. They are now not in possession of the land (p. 5, Rollo). The Agrarian Court in its decision of December 12, 1979 held that the plaintiffs were "tenants of the landholding in question" and ordered their reinstatement therein. The lower court directed the Mendezes to pay them their "unrealized shares" in the coconuts. The Agrarian Court concluded that the plaintiffs became the tenants of the Mendezes because the Lamberangs, with whom they established a tenancy relationship, were not illegal possessors of the land, having acquired it through a sale. The court said that under Section 10 of the Code of Agrarian Reform tenants are entitled to security of tenure and that under section 36 of that Code, personal cultivation by the landowner is no longer a ground for terminating tenancy. The Agrarian Court noted that Presidential Decree No. 152 dated March 13, 1973, which prohibits the employment or use of share tenants in complying with the requirements regarding entry, occupation and cultivation of public lands, is not applicable to the case. The Mendezes appealed to the Court of Appeals which on May 8, 1980 reversed the decision of the Agrarian Court and declared that the Mendezes are "entitled to the homestead without the gravamen of plaintiffs' tenancies"because the purpose of granting homesteads is "to distribute disposable agricultural lots of the State to land destitute citizens for their home and cultivation" (Pascua vs. Talens, 80 Phil. 792, 793). That policy would be defeated " if the buter can install permanents tenants in the homestead who would even have the right of preemption" (Patricio vs. Bayog, CA-G. R. No. 10611-CAR ). The tenants appealed to this Court. They contend (a) that under section 118 of the Public Land Law, share tenancy may be constituted in homestead after five years from the grant of the patent because section 119 of the same law does not prohibit any encumbrance on the homestead after that period and (b) that they cannot be ejected because they were not parties in any of the cases involving the Mendezes and Lamberang. This is a case where two competing interests have to be weighed against each other: the tenant's right to security of tenure as against the right of the homesteader or his heirs to own a piece of land for their residence and livelihood. We hold that the more paramount and superior policy consideration is to uphold the right of the homesteader and his heirs to own and cultivate personally the land acquired from the State without being encumbered by tenancy relations. * This holding is consistent with the intention of the Code of Agrarian Reform to abolish agricultural share tenancy, "to establish owner-cultivatorship and the economic family-size farm as the basis of Philippine agriculture and "to achieve a dignified existence for the small farmers free from pernicious institutional restraints and practices" (Sec. 2). WHEREFORE, the judgment of the Court of Appeals is affirmed. No costs. SO ORDERED.

DEPARTMENT OF AGRARIAN REFORM, as represented by its Secretary, RENE C. VILLA, Petitioner,

G.R. No. 165547 Present: PUNO, C.J., Chairperson, SANDOVAL-GUTIERREZ, CORONA, AZCUNA, and GARCIA, JJ. Promulgated: January 24, 2007

- versus -

SARANGANI AGRICULTURAL CO., INC., ACIL CORPORATION, NICASIO ALCANTARA and TOMAS ALCANTARA, Respondents.

x ----------------------------------------------------------------------------------------- x

DECISION

AZCUNA, J.: This is a petition for review[1] by the Department of Agrarian Reform (DAR) seeking the reversal of the Decision and Resolution, dated July 19, 2004 and September 24, 2004, respectively, of the Court of Appeals in CA-G.R. SP No. 79899, entitled Sarangani Agricultural Co, Inc., et al. v. Hon. Manuel Domingo, et al. Respondents are the owners of the lands in question which have been reclassified from agricultural into nonagricultural uses by virtue of a municipal zoning ordinance, and are included in the comprehensive land use plan of the Municipality of Alabel. The antecedents are as follows: The Province of Sarangani was created pursuant to Republic Act No. 7228 on March 16, 1992, composed of seven (7) municipalities, namely, Alabel, Glan, Maasin, Maitum, Malapatan, Malungon and Kiamba which were segregated from the Province of South Cotabato. Under said Act, the Municipality of Alabel was made the capital of the new province where the capitol building and all other national and provincial offices shall be established.[2] On February 14, 1997, the Sangguniang Bayan of Alabel passed Resolution No. 97-08 or Resolution Adopting and Endorsing the Ten-Year Municipal Comprehensive Development Plan (MCDP 1995-2005) of the Municipality of Alabel and Its Land Use Development Plan and Zoning Ordinance for Adoption and Approval of the Provincial Governor, Honorable Priscilla L. Chiongbian, Thru The Honorable Sangguniang Panlalawigan of Sarangani Province. On January 30, 1998, pursuant to Municipal Zoning Ordinance No. 08, Series of 1997, and to accelerate the development and urbanization of Alabel, the Sangguniang Bayan of Alabel passed Resolution No. 98-03 reclassifying lots that were located within the built-up areas, based on the 1995-2005 Land Use Plan of the municipality, from agricultural to non-agricultural uses.[3] On March 2, 1998, the Sangguniang Panlalawigan of Sarangani approved Resolution No. 98-018 or the Resolution Adopting the Ten-Year Municipal Comprehensive Development Plan (MCDP 1995-2205) and the Land Use Development Plan and Zoning Ordinance of the Municipality of Alabel, Sarangani Per Resolution No. 97-08 and Municipal Ordinance No. 97-08, S. of 1997 of the Sangguniang Bayan of Alabel. A portion of the area involving 376.5424 hectares, however, was covered by the Comprehensive Agrarian Reform Law (R.A. No. 6657) commercial farms deferment scheme.[4] The Zoning Certification issued by the office of the Municipal Planning and Development Council (MPDC) showed that respondents properties located at Barangay Maribulan, Alabel were among those reclassified from agricultural and pasture land to residential, commercial institutional, light industrial and open space in the 1995-2005 land use plan of Alabel. [5] On July 2, 1998, respondent Sarangani Agricultural Company, Inc. (SACI) filed an application for land use conversion of the following parcels of land with an aggregate area of 1,005 hectares: Registered Owner SACI SACI SAC I SACI SAC I SACI SACI Nicasio Alcantara SACI TCT No. T-7207 T -48807 (T-4807) T -48808 (T-4808) T -48809 (T-4809) T-48810 (T-4810) T -48811 (T-4811) T-48812 (T-4812) T-(10885) T-44538 T-9210 Lot No. 1-C 2 3 4 5 6 7 10 2 Area (Ha.) 52.4365 181.3353 281.0874 241.7880 40.6738 137.0340 12.3265 20.9149 12.1425 Area Applied (Ha.) 52.4365 181.3353 281.0874 241.7880 40.6738 137.0340 12.3265 20.9149 12.1425

Tomas Alcantara Nicasio Alcantara ACIL Corporation SACI

T-14359 (T-1185) Untitled T-(41758) (T-4150) Untitled

39 53 806 807

10.9390 5.0672 3.3115 6.7871

10.9390 5.0672 3.3115 6.7871

Accompanying SACIs application for conversion were the documents required under the Department of Agrarian Reform (DAR) Administrative Order No. 7, Series of 1997.[6] Subsequently, a Site Inspection Report was prepared by the Housing and Land Use Regulatory Board (HLURB) Regional Office (Region XI) and was indorsed to DAR Secretary Horacio R. Morales, Jr. On March 16, 1999, the Provincial Agrarian Reform Council (PARC) and the Provincial Land Use Technical Committee (PLUTC)[7] conducted an inspection of the subject properties. In a Memorandum dated July 9, 1999, the PLUTC recommended that SACIs application be made subject to the following conditions: 1) presentation by SACI of its development plan; 2) submission of the lacking documents; 3) re-survey and segregation of the property according to use or project in coordination with the DAR Regional Office; and, 4) submission of the resulting map indicating the technical description of the area per actual use/project attested by the Regional Director. Meanwhile, on March 22, 1999, members of the Sarangani Agrarian Reform Beneficiaries Association, Inc. (SARBAI) sent a letter-petition to the DAR Secretary oppposing the application for land use conversion filed by SACI. SARBAI alleged that its members were merely forced to sign the waiver of rights, considering that the commercial farm deferment period ended on June 15, 1998. Later, an Urgent Petition for the Denial of Land Use Conversion Application of Banana Commercial Farm of SACI was filed by SARBAI and was received by the PARC Secretariat on July 14, 1999. In the March 30, 2000 deliberation of the PLUTC, the committee agreed to recommend the disapproval of 158.0672 hectares that had been planted with bananas and coconuts. The committee noted that said portion of the property was still viable for agriculture, irrigated, with Notice of Coverage, and under protest or with opposition from SARBAI. It likewise recommended that the decision as to the rest of the area applied for conversion shall be deferred subject to the submission of the following within a period of thirty (30) days: 1) a five-year comprehensive development plan; 2) a survey plan signed by the Regional Technical Director of Land Management Service and noted by the DAR Regional Director (Region XI); 3) SACIs proof of undertaking, which will contain the package of benefits it intends to give to the affected farm workers except those working in the banana plantation; 4) the concurrence of all the workers who would be affected by the proposed conversion, which concurrence should be noted by the Municipal Agrarian Reform Office (MARO) and acknowledged by a notary public. On its part, SACI contended that 1) its projects were aligned to address the current and anticipated commercial and residential needs of Sarangani province, and the removal of any portion of its property included in its comprehensive development plan will affect the viability of the plan; 2) the banana plantations will be transformed into a socialized housing subdivision which will be made available to the displaced workers and the other low income earners of Alabel; 3) the company will construct and install power generation facilities in the entire area; 4) at the time the application for land use conversion was filed, no Notice of Coverage was ever issued by DAR, and the subsequent issuance of such notice was highly irregular because the same may be issued only after the final resolution of the application for land use conversion; and 5) the previous Order of Deferment cannot be a legal barrier to the filing of an application for land use conversion. On November 9, 2000, DAR Secretary Horacio R. Morales, Jr. denied SACIs application for land use conversion. The pertinent portion of the Order reads: The proponent also submitted another DA certification stating that 12 parcels of land (Lot Nos. 2, 3, 4, 5, 6, 7, 12, 807, 53, 10, 39 and 806) with an area of 816.7401 hectares, located at Maribulan, Alabel, Sarangani are part of expansion for urbanizing areas. Though discussed on several meetings, no decision was made on the application since the applicant was not able to comply with the documentary requirements and clarify the issues raised by the Committee. [I]n [the] 30 March 2000 Meeting of the PLUTC, the Committee deliberated again [on] the subject application and agreed to recommend the disapproval of 158.0672 hectares area planted to banana[s] and coconuts. The Committee noted that said portion of the property is still viable for agriculture, irrigated, with Notice of Coverage and with protest or opposition from SARBAI. The Committee also agreed to request the DAR to determine the metes and bounds of the area planted to banana[s] and coconuts vis--vis areas devoted to other enterprises. Relative to the rest of the area applied for conversion, the committee deferred its decision subject to the submission of a 5-year comprehensive development plan, showing among others, the schedule of development by phase, the specific lots involved and the corresponding proposed use.

The Committee acceded to the request of SACI and deferred its recommendation to deny conversion of that portion of the property planted to banana[s] and coconut[s] pending submission of a manifesto or SACIs proof of undertaking that it will compensate farm workers affected by showing, among others, the schedule of development by phase, the specific lots involved and the corresponding proposed use [of] the conversion, concurred by the workers/oppositors, noted by the MARO and duly notarized. The Committee also requested SACI to submit details of the pomelo farm in Malandag being offered as a replacement farm for the relocation of the farm workers. SACI was given a 30-day period to submit these documents. SACI, however, failed to submit the oath of undertaking to pay disturbance compensation to affected workers being required by the Committee and as provided under DAR Administrative Order No. 01, Series of 1999. Instead, SACI submitted an undertaking executed by the affected workers stating that they are amenable to the package of benefits offered by the company. Nevertheless, those who executed the deed of undertaking did not represent the majority of the farm workers. Out of the 95 regular banana workers only 45 and eight (8) supervisors including four (4) workers who were not included in the workers master list of SACI executed a deed of undertaking. As regards the 105-hectare pomelo farm, SACI failed to affirm whether they are going to pursue their offer. Likewise, DAR Region XI reported that coverage of the same area is on-going, and a different group of potential beneficiaries have already been identified. Therefore, it could no longer be offered as a relocation site. Foregoing considered, the Committee, during its 18 August 2000 Meeting, sustained its earlier recommendation to deny the conversion of that portion of the property planted to bananas and coconuts. With regard to the rest. of the area, the Committee deferred its decision subject to the delineation by the SACI of the total area that they can develop within the allowed five-year period. Likewise, the PLUTC is requesting the SACI to submit a revised five-year development plan that will show the schedule of development by phase, by year, and the proposed use for each parcel of land.

WHEREFORE, premises considered, it is hereby ordered that: 1. The application filed by the Sarangani Agricultural Company, Inc. (SACI), represented by Cynthia Adao-Prat, involving parcels of land planted to banana[s] and coconut[s] and with Notice of Coverage identified as TCT Nos. T-10885 (20.9149 ha.), T-14359 (10.9390 ha.), T-41718 (3.3115 ha.), OCT No. V-19574 or T-9210 (12.1425 ha.), Lot 807 (6.7871 ha.) and portion of P-V-125 (95.00 ha.) and [an] area covered by Lot 53 (5.0672 ha.) with an aggregate area of 154.622 [actually it is 154.1622] hectares is hereby DENIED. The Dar Regional Office of Region XI is hereby instructed to determine the metes and bounds of the area subject for distribution to the qualified FWBs. 2. The resolution of the application involving the rest of the area applied for conversion is DEFERRED pending submission by the applicant of a revised five-year development plan indicating the specific use of each parcel of land. SO ORDERED.[8]

Petitioner filed a Motion for Reconsideration of the above decision but the same was denied by the Court of Appeals in a Resolution, dated September 24, 2004. Their Motion for Reconsideration of the above Order having been denied, respondents appealed to the Office of the President (O.P. Case No. 02-1-47.4, alleging that the Secretary of Agrarian Reform committed serious errors in 1) finding that a notice of coverage had been issued for the banana area of the landholdings; 2) giving undue significance to the protest or opposition by SARBAI; 3) requiring a deed of undertaking even after applicant-appellants written commitment to pay whatever lawful obligation SACI may incur as a consequence of the conversion; 4) holding that farms with commercial farm deferment cannot be applied for conversion; 5) ruling that irrigated lands suitable for agriculture were disqualified for conversion; and 6) ruling that applicant-appellant had not submitted a five-year development plan.[9] In a Decision dated June 30, 2003, the Office of the President through Presidential Assistant Manuel C. Domingo dismissed the appeal and affirmed in toto the challenged DAR Orders. Respondents motion for reconsideration was denied,[10] so they filed with the Court of Appeals a petition for review raising substantially the same issues. On July 19, 2004, the Court of Appeals rendered a Decision granting the petition, the dispositive portion of which reads: WHEREFORE, premises considered, the present petition is hereby GIVEN DUE COURSE. Consequently, the assailed Decision and Order dated June 30, 2003 and September 12, 2003, respectively, of the Office of the President, as well as the Orders dated November 9, 2000 and August 28, 2002 of the DAR Secretary are hereby REVERSED and SET ASIDE insofar as the DAR directs the MARO of Alabel, Sarangani to proceed with the distribution of the banana and coconut areas subject of the June 16,

1998 Notice of Coverage. The Secretary of the Department of Agrarian Reform is hereby directed to issue a conversion order covering the aforesaid area under the terms and conditions as provided in pertinent guidelines of the department. As to the rest of the area applied for conversion, action on which has been deferred, the DAR Regional Office (DAR Region No. XI) is hereby DIRECTED to expedite the processing and evaluation of petitioners land use conversion application in accordance with the provisions of DAR AO No.7, Series of 1997, and DAR AO No. 01-99 whenever the provisions of the latter issuance are made applicable to those applications filed before its effectivity. The DAR Secretary and all officers and employees acting on his behalf are hereby enjoined from proceeding with the distribution of petitioners lands under compulsory acquisition provided in Sec. 16 of R.A. No. 6657. Whatever actions already taken in pursuance of the June 16, 1998 Notice of Coverage under CARP are hereby nullified for DARs failure to observe due process therein. No pronouncement as to costs. SO ORDERED.[11] Hence, this petition alleging that the Court of Appeals erred: I WHEN IT RULED THAT THE JUNE 16, 1998 NOTICE OF COVERAGE WAS ILLEGAL AS DAR ALLEGEDLY FAILED TO OBSERVE DUE PROCESS. II WHEN IT RULED THAT DAR SHOULD USE THE COMPREHENSIVE LAND USE PLANS AND ACCOMPANYING ORDINANCE OF THE LOCAL SANGGUNIAN AS PRIMARY REFERENCE SO AS NOT TO DEFEAT THE VERY PURPOSE OF THE LOCAL GOVERNMENT UNIT (LGU) CONCERNED IN RECLASSIFYING CERTAIN AREAS TO ACHIEVE SOCIAL AND ECONOMIC BENEFITS IN PURSUANCE TO ITS MANDATE TOWARDS THE GENERAL WELFARE. III WHEN IT FAILED TO TAKE INTO CONSIDERATION THE BASIC PROVISIONS AND PRINCIPLES OF LAW WITH SPECIAL ATTENTION TO THE REQUIREMENTS OR PRECONDITIONS FOR LAND CLASSIFICATION/CONVERSION AND THE BASIC MANDATE OF THE CARP.

With regard to the first issue on due process, this Court holds that, under the circumstances, a notice of coverage is not an indispensable requirement before DAR can acquire the subject lots or commercial farms, which are covered by a deferment period[12] under the Comprehensive Agrarian Reform Law (CARL) or R.A. No 6657 upon its effectivity on June 15, 1998. The pertinent provision of the law states: Sec. 11. Commercial Farming. Commercial farms, which are private agricultural lands devoted to saltbeds, fruit farms, orchards, vegetables and cut-flower farms, cacao, coffee and rubber plantations, shall be subject to immediate compulsory acquisition and distribution after ten (10) years from the effectivity of this Act.[13] In the case of new farms, the ten-year period shall begin from the first year of commercial production and operation, as determined by the DAR. During the ten-year period, the Government shall initiate steps necessary to acquire these lands, upon payment of just compensation for the land and the improvements thereon, preferably in favor of organized cooperatives or associations, which shall thereafter manage the said lands for the workers-beneficiaries. (AS amended by R.A. 7881; Rules and regulations on the acquisition, valuation compensation and distribution of deferred commercial farms DAR AO No. 09, s. 1998) DAR Administrative Order No.9, Series of 1998,[14] on the Rules and Regulations on the Acquisition, Valuation, Compensation and Distribution of Deferred Commercial Farms applies to all commercial farms as defined under Section 11 of R.A. No. 6657:[15] SEC. 2. Statement of Policies. The acquisition, valuation, compensation, distribution, operation and management of deferred commercial farms shall be governed by the following policies: (a) All commercial farms whose deferment expired as of June 15, 1998 shall be subject to immediate acquisition and distribution under the Comprehensive Agrarian Reform Program (CARP). Those whose deferments have yet to expire will be acquired and distributed only upon expiration of their respective deferment period as originally determined by the Department of Agrarian reform (DAR), or earlier if the DAR determines that the purpose for which it was deferred no longer exists and revokes its deferment; The process of acquisition of these commercial farms by DAR is specifically provided under Article III, Section 9 of the above administrative order, to wit: SEC. 9. Procedure for Acquisition.The acquisition of deferred commercial farms shall be governed by the following procedures: (a) Voluntary Offer to Sell/Compulsory Acquisition

1) The Order of Deferment previously issued over the landholding shall serve, upon expiration of the deferment period of the subject commercial farm, as the Notice of Coverage,[16] supported by the Compliance Work Program and Summary of Exceptions (Form A) originally submitted with the approved deferment application. However, for record purposes, the landowner shall be served a Notice of Expiration of Deferment (Annex 2) which shall contain a reminder of his right of retention, should he wish to exercise the same; 2) In general, the procedure for acquisition shall follow DAR Administrative Order No. 01, Series of 1998, as amended by DAR Administrative Order No. 02, Series of 1996, entitled Revised Rules and Procedures governing the Acquisition of Agricultural Lands subject of Voluntary offer to Sell and Compulsory Acquisition Pursuant to Republic Act No. 6657, subject to certain modifications intended to expedite the process as provided herein. Clearly, it was unnecessary for petitioner to issue a notice of coverage to respondents in order to place the properties in question under CARP coverage. Hence, the contention by respondents that due process was not duly observed by petitioner must fail. Accordingly, the denial of the application for conversion must be upheld. As regards the second issue, DAR Administrative Order No. 7, Series of 1997, or the Omnibus Rules and Procedures Governing Conversion of Agricultural Lands to Non-agricultural Uses prescribes the guidelines for land use conversion: VI. A. B. POLICIES AND GUIDELINES General Guidelines b) Conversion may be allowed if at the time of the application, the lands are reclassified as commercial, industrial, residential or other non-agricultural in the new or revised town plans promulgated by the local government unit (LGU) and approved by the Housing and Land Use Regulatory Board (HLURB) or by the Sangguniang Panlalawigan (SP) after June 15, 1988, in

accordance with Section 20 of R.A. No. 7160, as implemented by MC No. 54, and Executive Order No. 72, Series of 1993[17] of the Office of the President.

In connection with the afore-stated administrative order, Section 20 of Republic Act No. 7160, otherwise known as the Local Government Code of 1991, empowers the local government units to reclassify agricultural lands: Sec. 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: Provided, That such reclassification shall be limited to the following percentage of the total agricultural land area at the time of the passage of the ordinance: (1) (2) (3) For highly urbanized and independent component cities, FIFTEEN PERCENT (15%); For component cities and first to third class municipalities, ten percent (10%), and For fourth to sixth class municipalities, five percent (5%); Provided further, That agricultural lands distributed to agrarian reform beneficiaries pursuant to Republic Act No. 6657, otherwise known as The Comprehensive Agrarian Reform Law, shall not be affected by the said reclassification and the conversion of such lands into other purposes shall be governed by Section 65 of said Act. (c) The local government units shall in conformity with existing laws, continue to prepare their respective comprehensive land use plans enacted though zoning ordinances which shall be the primary and dominant bases for the future use of land resources: Provided, That the requirements for food production, human settlements, and industrial expansion shall be taken into consideration in the preparation of such plans. (e) Nothing in this section shall be construed as repealing, amending or modifying in any manner the provisions of R.A. No. 6657.[18] Memorandum Circular No. 54 Prescribing the Guidelines Governing Section 20 of R.A. No. 7160 Otherwise Known as the Local Government Code of 1991 Authorizing Cities and Municipalities to Reclassify Agricultural Lands Into Non-Agricultural Uses issued by President Fidel V. Ramos on June 8, 1993 specified the scope and limitations on the power of the cities and municipalities to reclassify agricultural lands into other uses. It provided that all ordinances authorizing reclassification of agricultural lands shall be subject to the review and approval of the province in the case of component cities or municipalities, or by the HLURB for highly urbanized or independent component cities in accordance with Executive Order No. 72, Series of 1993, thus: SECTION 4. Use of the comprehensive land use plans[19] and ordinances as primary reference documents in land use conversions. - Pursuant to RA 6657 and EO 129-A, actions on applications for land use conversions on individual landholdings shall remain as the responsibility of DAR, which shall utilize as its primary reference documents the comprehensive land use plans and accompanying ordinance passed upon and approved by the LGUs concerned, together with the National Land Use Policy. Hence, with regard to agricultural lands that have been reclassified for non-agricultural uses by the local government unit concerned, the CA is correct in declaring that DAR should refer to the comprehensive land use plans and the ordinances of the Sanggunian in assessing land use conversion applications, thus: Construing Sec. 20 of the Local Government Code and the subsequent administrative issuances implementing the same, we are of the opinion that while the DAR retains the responsibility for approving or disapproving applications for land use conversion filed by individual landowners on their landholdings, the exercise of such authority should be confined to compliance with the requirements and limitations under existing laws and regulations, such as the allowable percentage of agricultural [area] to be reclassified, ensuring sufficient food production, areas non-negotiable for conversion and those falling under environmentally critical areas or highly restricted for conversion under the NIPAS law. Definitely, the DARs power in such cases may not be exercised in such a manner as to defeat the very purpose of the LGU concerned in reclassifying certain areas to achieve social and economic benefits in pursuit of its mandate towards the general welfare. Precisely, therefore, the DAR is required to use the comprehensive land use plans and accompanying ordinances of the local Sanggunian as primary references in evaluating applications for land use conversion filed by individual landowners. In this case, petitioners have already complied with the standard requirements laid down under the applicable rules and regulations of the DAR....[20]

The conversion of agricultural lands into non-agricultural uses shall be strictly regulated and may be allowed only when the conditions prescribed under R.A. No. 6657 are present.[21] In this regard, the Court agrees with the ratiocination of the CA that DARs scope of authority in assessing land use conversion applications is limited to examining whether the requirements prescribed by law and existing rules and regulations have been complied with. This holds true in the present case where, because of the creation of the Province of Sarangani and in view of its thrust to urbanize, particularly its provincial capital which is the Municipality of Alabel, the local government has reclassified certain portions of its land area from agricultural to non-agricultural. Thus, to reiterate, in accordance with E.O. No. 72, Series of 1993, and subject to the limitations prescribed by law, DAR should utilize the comprehensive land use plans in evaluating the land use conversion application of respondents whose lands have already been reclassified by the local government for non-agricultural uses. This is not to say, however, that every property of respondents which is included in the comprehensive land use plan of the Municipality of Alabel shall be automatically granted non-coverage. As mentioned earlier, said application is subject to the limitations and conditions prescribed by law. One such limitation that is present here is that a portion of respondents property of 376.5424 hectares, a portion totaling 154.622 [or 154.1622] hectares which are planted to bananas and coconuts, are covered by CARLs ten-year deferment scheme, which has expired on June 15, 1998. By law, these lands are subject to redistribution to CARP beneficiaries upon the lapse of the ten-year period, counted from the date of the effectivity of the CARL or R.A. No. 6657 on June 15, 1988, which was way before the creation of the Province of Sarangani and the eventual reclassification of the agricultural lands into non-agricultural in the Municipality of Alabel where respondents properties are located. In short, the creation of the new Province of Sarangani, and the reclassification that was effected by the Municipality of Alabel did not operate to supersede the applicable provisions of R.A. No. 6657. Moreover, Section 20 of the LGC of 1991 on the reclassification of lands explicitly states that [n]othing in this section shall be construed as repealing, amending or modifying in any manner the provisions of R.A. No. 6657. Thus, where the law speaks in clear and categorical language, there is no room for interpretation. There is only room for application.[22] In view of the foregoing, the Court deems it unnecessary to discuss the third issue presented in the petition. WHEREFORE, the petition is PARTLY GRANTED insofar as the issue on due process is concerned. In connection with this, the denial by the Department of Agrarian Reform (DAR) of respondents application for conversion with regard to the 154.622 [or 154.1622] hectares, the deferment period of which has already expired, is AFFIRMED; and the Orders of the DAR dated November 9, 2000 and August 28, 2002, directing the MARO of Alabel, Sarangani to proceed with the distribution of the banana and coconut areas subject of the June 16, 1998 Notice of Coverage, are REINSTATED. The Decision and Resolution, dated July 19, 2004and September 24, 2004, respectively, of the Court of Appeals in CA-G.R. SP No. 79899, are hereby MODIFIED accordingly. No costs. SO ORDERED. LAND BANK OF THEPHILIPPINES, Petitioner, G.R. No. 171840 Present: CARPIO MORALES, J., Chairperson, BRION, BERSAMIN, VILLARAMA, JR., and SERENO, JJ.

- versus -

Promulgated: DEPARTMENT OF AGRARIAN REFORM and METRACO TELEApril 4, 2011 HYGIENIC SERVICES CORPORATION, Respondent. x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x DECISION VILLARAMA, JR., J.:

This is a petition for review on certiorari under Rule 45 assailing the Decision[1] dated June 27, 2005 and Resolution[2] dated March 9, 2006 of the Court of Appeals (CA) in CA-G.R. SP No. 80441 which affirmed the Decision[3] dated June 23, 2003 of the Regional Trial Court (Special Agrarian Court) of Santiago City, Isabela, Branch 21 in CAR Case No. 21-0636. The facts are as follows: Private respondent Metraco Tele-Hygienic Services Corporation (METRACO) is the registered owner of three parcels of agricultural land with an aggregate area of 33.5917 hectares located at San Antonio, Ramon, Isabela and covered by Transfer Certificate of Title (TCT) Nos. T-291208, T-291209 and T-291210. The lands are fully irrigated by the National Irrigation Administration (NIA) and planted with rice. In July and December 2000, METRACO voluntarily offered to sell the aforesaid lands under the provisions of Republic Act (R.A.) No. 6657 or theComprehensive Agrarian Reform Law (CARL) of 1988. Private respondents assessment was P300,000.00 per hectare. On February 8, 2001, the landowners offer was referred to petitioner Land Bank of the Philippines (LBP) for valuation.[4] On June 6, 2001, petitioner fixed the just compensation for the subject landholdings,[5]as follows: TCT No. T-291208 T-291209 T-291210 TOTAL Area Acquired 15.8036 has. 1.5995 has. 14.3923 has. 31.7954 has. Average Amount Per Hectare P146,935.87 145,294.84 146,935.87 Total P2,322,115.71 232,399.09 2,114,745.12 P4,669,259.92

Since private respondent rejected the valuation made by petitioner, the latter deposited the amount of compensation, which the former accepted without prejudice to reevaluation and eventual payment of just compensation due for its property. Private respondent then went to the Department of Agrarian Reform Adjudication Board (DARAB)-Region 02 at San Fermin, Cauayan City, Isabela which held summary proceedings for determination of just compensation (JC No. R-II539-Isa 2001). On December 3, 2001, DAR Provincial Adjudicator Pepito P. Planta issued the following Order[6]: WHEREFORE, for the reasons above-stated, it is Ordered that the value of the land in issue fixed by respondent LBP be set aside and be fixed at P180,000.00 per hectare or the aggregate sum of P5,580,000.00 deducting thereof the partial payment already received by the petitioner, and directing the respondent LBP to pay the same to the petitioner after submission of all documentary requirements. SO ORDERED.[7] The DAR found untenable petitioners position that the basis of valuation should be the guidelines issued under DAR Administrative Order (AO) No. 5, series of 1998 and findings of the ocular inspection. It said that to do so would contravene the Supreme Courts declaration in Land Bank of the Philippines v. Court of Appeals[8] that any formula or guidelines promulgated by the bank is a violation of due process of the Constitution.[9] When the DAR denied its motion for reconsideration, petitioner instituted before the Special Agrarian Court (SAC) CAR Case No. 21-0636 for determination of just compensation. During the trial, the parties presented their witnesses and documentary evidence. Faustino Onza, property appraiser of LBP, testified that the Municipal Agrarian Reform Office (MARO) scheduled an ocular inspection of the subject lands onJanuary 24, 2001. During the ocular inspection attended by the representative of the landowner, as well as representatives of MARO, farmer beneficiaries and the Barangay Agrarian Reform Committee (BARC), they gathered data on production and suitability of the lands. These include the number of cavans of palay being harvested per hectare, the location of the property and water supply. The lands were situated 7.5 kilometers, more or less, from the poblacion, with a NIA water system and planted to palay by the farmer beneficiaries. The LBP actually prepared a field investigation report and a land use map for each parcel of land. The production figure obtained was 120 cavans per cropping. The selling price of palay (P6.75 per kg.) was based on the records of the Department of Agriculture (DA) office. As to location, the all-weather road (municipal road) traversing the property was also taken into consideration.[10] Another witness for LBP, Amante Siazon, Chief of the Claims, Processing and Payment Division of LBPs Agrarian Reform Center, testified that after the landowners representative, Ceferina Jocson, offered to sell their property, it was placed under the coverage of the CARP (VOS) on December 7, 2000. Upon receipt of the claim for compensation, they prepared the valuation and processing form. In making the initial valuation, they used the formula: Land Valuation (LV) = Capitalized Net Income (CNI) x 90% + Market Value (MV) per Tax Declaration x 10%, which is provided for in DAR AO No. 5. The Annual Gross Production (AGP) is multiplied to the Selling Price (SP) and then further multiplied to

.2/.12. The .2 or 20% represents the cost of operation while the .12 refers to the net income of the properties. AGP is gathered from the field investigation, which is 240 cavans per hectare which was sourced from the landowners, the farmers tilling the lands, and the industry data provided by the DA. Information from these sources was also validated with those coming from farmers tilling the adjoining properties. The SP is based on the average price within 12 months as provided by the DA prior to the coverage of the properties. In this case, the CNI was determined at P135,000.00 per hectare. As to the MV, this was provided by the Provincial Assessors Office which indicates the classification of agricultural land such as Riceland irrigated, Riceland un-irrigated, under the schedule of base unit market values for agricultural lands. The subject properties were classified as irrigated Riceland, first class, with corresponding unit market value of P264,000.00 per hectare. Another factor considered in the valuation was location adjustment as indicated in the tax declaration, in which there is a corresponding deduction made regarding the distance of the property to the all-weather road and to the poblacion; the guidelines issued by the Provincial Assessors Office were followed. As shown by the valuation forms, the location adjustments for each parcel were as follows: 93% (TCT Nos. T-291208 and T-291210) because of 3% and 4% deduction made, as the land traverses a municipal road and it is 8 kilometers from the poblacion; and 87% (TCT No. T-291209). Said figures were arrived at based on the findings in the field investigation report on the actual distance of the lot to the municipal road. The points to be deducted depending on distance (kilometer) to all-weather road and to the poblacion were based on schedule issued by the Provincial Assessors Office. The Regional Consumers Price Index (RCPI) came from the National Statistics Office (NSO) which updates the peso value of the property. Based on their computation, the value of the lands are: P145,294.84 per hectare for the land covered by TCT No. T-291209, and P146,935.87 per hectare for the land covered by TCT Nos. T-291208 and T-291210.[11] On cross-examination, Siazon admitted that other factors such as current value of properties within the vicinity and potential use were not considered, and that it was the LBP appraiser who actually conducted the ocular inspection and data gathering. He likewise admitted that the initial valuation of the subject lands do not represent the fair market value[12] insofar as the price of the adjoining properties, which is naturally higher. As to the exclusion of the 1.1173 hectares, this pertains to a drainage canal and road based on the subdivision plan.[13] Private respondent presented as its witness, Ramon A. Galindez, a member of its board of directors. Galindez testified that they rejected the valuation by LBP because it is too low and the lands are classified first class irrigated riceland assessed at P264,000.00 per hectare, based on the certification dated September 10, 2001 issued by the Municipal Assessors Office, and as per the tax declarations. He also presented figures of the propertys appraised fair market value given by the different banks in Santiago City, showing higher amount of P300,000.00 per hectare. The DARAB likewise set the value of the lands in its decision at P180,000.00 per hectare. With respect to the selling price of palay, Galindez said that he himself has been farming for more than ten years and also planted palay in his lands situated in other barangays and Santiago City. In the year 2001, the price of palay is between P9.00 and P10.00 per kg., as evidenced by receipts dated March 8, 2001 issued by the Republic Cereal Corporation at Santiago City, Isabela showing the prices of dry palay he sold at P9.50 and P9.80 per kg. He further recalled that the government support price for palay in 2001 was also between P9.00 and P10.00 per kg.[14] In its decision,[15] the SAC recomputed the compensation fixed by LBP by using P9.00 as selling price of palay per kg. based on the September 25, 2001Certification by the National Food Authority (NFA) that the government support price for palay is P10.00 per kg. (March-August) and P9.00 per kg. (September-February). Private respondents witness had testified that he actually sold his palay for that price to a private buyer as shown by receipts he presented in court. The SAC also added to the computation the 1.1173 hectares excluded by petitioner -- a portion consisting of a drainage canal and a road -- stating that these are indispensable part of the entire landholding which the farmer/tiller will necessarily use. The SAC thus decreed: WHEREFORE, in the light of the foregoing considerations judgment is hereby rendered DECLARING that the just compensation of the lands to be paid by the Land Bank of thePhilippines to the respondent Metraco Tele-Hygenic Services, Corp. is as follows: For T.C.T. No. T-291208 - P3,089,416.13 For T.C.T. No. T-291209 - P 297,177.50 For T.C.T. No. T-291210 - P2,907,041.87 SO ORDERED.[16] Petitioner moved for reconsideration arguing that the basis of selling price of palay used by the court and acquisition of the road and canal were in violation of DAR AO No. 05, series of 1998. The SAC, however, denied the motion.[17] On appeal, the CA sustained the SACs computation holding that the NFA certification which stated the government support price for palay as P9.00 andP10.00 per kg., as well as the receipts issued by the Republic Cereal Corporation showing that the buying price of palay at the time was between P9.50 and P9.80 per kg., are recognized by DAR AO No. 5 under Item II.B.1 thereof. The CA noted that the data from the DA thru the certification issued by the Municipal Agrarian Reform Officer (MARO) of Ramon, Isabela, relied upon by petitioner, is unreliable and inaccurate considering that: (1) it did not have figures for the months of July, August and December 2000, as well as for January and May 2001; and (2) it contained abnormal prices for the months of October and November 2000 as shown by the notation therein that Selling

price below normal due to continuous rain and typhoons experienced during these months. As for the inclusion of the irrigation canal and road portions, the CA ruled that while the landowner should not be compensated for the improvements introduced by the government pursuant to Item II.F of DAR AO No. 5, in this case however, what is being compensated is not the cost or value of such improvements but that of the whole land taken under the CARP law.[18] Its motion for reconsideration having been denied, petitioner filed the present petition contending that the appellate court committed serious errors of law I. IN AFFIRMING THE TRIAL COURTS DECISION USING P9.00 AS THE SELLING PRICE OF PALAY PER KILO WHICH RESULTED IN THE TRIAL COURTS COMPUTATION OF P185,435.00 PER HECTARE FOR TCT NO. T-291208 AND TCT T-291210 AND AT P185[,]794.00 PER HECTARE FOR TCT NO. T-291209; IN AFFIRMING THE TRIAL COURTS DECISION IN WHICH A COMPUTATION AND SEPARATE COMPENSATION WAS MADE FOR CERTAIN PORTIONS OF THE SUBJECT LANDHOLDINGS NOT SEPARATELY COMPENSABLE UNDER PERTINENT DAR POLICY REGULATIONS IMPLEMENTING SECTION 17, IN RELATION TO SECTION 49, OF THE CARP LAW (R.A. 6657).[19]

II.

The petition is partly meritorious. Under Section 1 of Executive Order No. 405, series of 1990, petitioner LBP is charged with the initial responsibility of determining the value of lands placed under land reform and the just compensation to be paid for their taking. Through a notice of voluntary offer to sell (VOS) submitted by the landowner, accompanied by the required documents, the DAR evaluates the application and determines the lands suitability for agriculture. The LBP likewise reviews the application and the supporting documents and determines the valuation of the land. Thereafter, the DAR issues the Notice of Land Valuation to the landowner. 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.[20] The LBPs 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.[21] Section 17 of R.A. No. 6657 provides: SEC. 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, and the assessment made by government assessors shall be considered. The social and economic benefits contributed by the farmers and the farmworkers and by the Government to the property as well as the nonpayment 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. Celada[22] we held that the above provision is implemented by DAR AO No. 5, series of 1998,[23] thus: While SAC is required to consider the acquisition cost of the land, the current value of like properties, its nature, actual use and income, the sworn valuation by the owner, the tax declaration and the assessments made by the government assessors to determine just compensation, it is equally true that these factors have been translated into a basic formula by the DAR pursuant to its rule-making powers under Section 49 of RA No. 6657. As the government agency principally tasked to implement the agrarian reform program, it is the DARs duty to issue rules and regulations to carry out the object of the law. DAR AO No. 5, s. of 1998 precisely filled in the details of Section 17, RA No. 6657 by providing a basic formula by which the factors mentioned therein may be taken into account. The SAC was at no liberty to disregard the formula which was devised to implement the said provision. [24] (Emphasis supplied.) In the case at bar, while the SAC found the formula provided in DAR AO No. 5 applicable in determining the amount of just compensation, it disagreed with petitioner on the correct amount of Selling Price (SP) of palay and valuation of the irrigation canal and road. Petitioner contends that as a result of the erroneous application of DAR AO No. 5 by the SAC and CA, the amount of compensation had tremendously and unduly increased from P4,669,259.92 to P6,293,635.50. The difference of P1,624,375.58 would definitely be hurtful to the States Agrarian Reform Fund, of which petitioner is a mere custodian or trustee.

Private respondent maintains that the CA correctly applied the provisions of DAR AO No. 5 when it read Item II.B with II.B.1 which allows the use of data on selling price coming from other government and private entities knowledgeable in the concerned industry. Consequently, the government support price of palay as certified by the NFA and actual buying price reflected in the two receipts issued by a private buyer, may be used as basis for selling price in computing the CNI, without violating DAR AO No. 5. The SAC, using P9.00 as SP, computed the CNI per hectare as follows: CNI = AGP x SP) x 20% CNI = (240 x 50 x 9.00) x 20% .12 180,000[25]

CNI =

On the other hand, petitioners computation used P6.75, the average selling price within the 12-months prior to its receipt of private respondents claim folder (CF), as SP and came up with CNI of P135,000.00 per hectare. Petitioner indicated the date of receipt of the CF as June 1, 2001. As to the P6.75 per kg. SP, petitioner based it on the following data provided by MARO Rodolfo B. Cabuyadao of Ramon, Isabela: May 2001 N/A April 2001...P7.30 March 2001. 7.60 February 2001. 8.30 January 2001 N/A December 2000 N/A November 2000.4.50 October 2000 5.00 September 2000.7.80 August 2000...N/A July 2000N/A[26] The certification issued by the MARO, however, contained a notation that the SP for October and November 2000 was below normal due to continuous rains and typhoons experienced during these months. For that reason, the SAC and CA were of the view that petitioner should not have relied on the data provided by the MARO, and instead used the P9.00 government support price reflected in the NFA Certification[27] dated September 25, 2001 and receipts[28] issued by a private entity (Republic Cereal Corporation). The CA was emphatic that DAR AO No. 5 itself recognizes the data coming from other government regulatory agencies and private entities. We disagree. Item II of DAR AO No. 5 provides the following guidelines: A. There shall be one basic formula for the valuation of lands covered by VOS or CA: LV = (CNI x 0.6) + (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 shall be used if all the three factors are present, relevant, and applicable. A.1 When the CS factor is not present and CNI and MV are applicable, LV = (CNI x 0.9) + (MV x 0.1) xxxx A.7 In all of the above, the computed value using the applicable formula shall in no case exceed the LOs offer in case of VOS. The LOs offer shall be grossed up from the date of offer up to the date of receipt of CF by LBP from DAR. the formula shall be:

A.8 For purposes of this Administrative Order, the date of receipt of CF by LBP from DAR shall mean the date when the CF is determined by the LBP-LVLCO to be complete with all the required documents and valuation inputs duly verified and validated, and ready for final computation/processing. xxxx B. Capitalized Net Income (CNI) -- This shall refer to the difference between the gross sales (AGP x SP) and total cost of operations (CO) capitalized at 12% Expressed in equation form: CNI = Where: CNI = (AGP x SP) CO 0.12 Capitalized Net Income

AGP = Annual Gross Production corresponding to the latest available 12months gross production immediately preceding the date of FI. SP = The average of the latest available 12-months selling prices prior to the date of receipt of the CF by LBP for processing, such prices to be secured from the Department of Agriculture (DA) and other appropriate regulatory bodies or, in their absence, from the Bureau of Agricultural Statistics. If possible, SP data shall be gathered for the barangay or municipality where the property is located. In the absence thereof, SP may be secured within the province or region.

xxxx B.1 Industry data on production, cost of operations and selling price shall be obtained from government/private entities. Such entities shall include, but not [be] limited to, the Department of Agriculture (DA), the Sugar Regulatory Authority (SRA), the Philippine Coconut Authority (PCA) and other private persons/entities knowledgeable in the concerned industry. B.2 The landowner shall submit a statement of net income derived from the land subject of acquisition. This shall include, among others, total production and cost of operations on a per crop basis, selling price/s (farm gate) and such other data as may be required. These data shall be validated/verified by the Department of Agrarian Reform and Land Bank of the Philippinesfield personnel. The actual tenants/farmworkers of the subject property will be primary source of information for purposes of verification or, if not available, the tenants/farmworkers of adjoining property. In case of failure by the landowner to submit the statement within fifteen (15) days from the date of receipt of letter-request as certified by the Municipal Agrarian Reform Office (MARO) or the data stated therein cannot be verified/validated, DAR and LBP may adopt any applicable industry data or, in the absence thereof, conduct an industry study on the specific crop which will be used in determining the production, cost and net income of the subject landholding. xxxx D. In the Computation of Market Value per Tax Declaration (MV), the most recent tax Declaration (TD) and Schedule of Unit Market Values (SUMV) issued prior to receipt of CF by LBP shall be considered. The Unit Market Value (UMV) shall be grossed up from the date of its effectivity up to the date of receipt of CF by LBP from DAR for processing, in accordance with item II.A.9. xxxx E. F. Valuation of Improvements (non-crop) shall be undertaken by LBP. The landowner shall not be compensated or paid for improvements introduced by third parties such as the government, farmer-beneficiaries or others. x x x x (Emphasis supplied.)

There being no available information on Comparable Sales (CS), the applicable formula is LV = (CNI x 0.90) + (MV per TD x 0.10). To determine the CNI in this case, the LBP gathered the necessary data on annual gross production (AGP), selling price (SP) of palay, net income rate and land use. As clearly stated in DAR AO No. 5, the SP for purposes of computing the CNI, must be the average of the latest available 12-months selling prices prior to the date of receipt of the claim folder by LBP, to be secured from the DA, Bureau of Agricultural Statistics or other appropriate regulatory bodies.[29] Thus, the selling price of P9.00 submitted by private respondent sourced from the NFA (March-August and September-February without indicating the year) and private buyer (March and October 2001) cannot be used as it was not the average obtained within the period referred to in DAR AO No. 5 (July 2000 to May 2001). Besides, such selling price was gathered from Santiago City and not the Municipality of Ramon where the properties are located, contrary to DAR AO No. 5. Said provision also states that the data from the province or region may be used only in the absence of selling prices from the municipality or barangay. We declared in Land Bank of the Philippines v. Celada[30] that the DAR was tasked to issue the rules and regulations to carry out the details of Section 17 of R.A. No. 6657. It can be safely presumed that the fluctuations in the selling price of palay were already taken into consideration since only the average of theseavailable prices within the 12 months prior to the receipt of the CF, will be used in computing the CNI. Hence, the SAC and CA clearly erred in completely disregarding the data provided by the MARO simply because it contained a notation that the figures indicated for two months (October and November 2000) were not normal due to typhoons. On the exclusion of the NIA irrigation canal and road, we find untenable petitioners argument that said portions do not form part of the compensable area. It is true that Item II F of DAR AO No. 5 provides that those improvements introduced by the government, farmer-beneficiaries and other third parties, shall not be paid. However, as correctly ruled by the CA, what is being compensated is not the cost or value of the improvements introduced by the government but the value of the whole land taken under the CARP law. This does not mean that those portions are being separately valued as claimed by petitioner. Moreover, compensating the land upon which those improvements were built is consistent with the principle that the equitable distribution and ownership of land sought to be achieved through CARP is undertaken with due regard to the rights of landowners to just compensation. Petitioners interpretation of Item II.F of DAR AO No. 5 would only lead to absurd and unjust consequences for the landowner whose landholding a substantial portion thereof -- is not being covered by the CARP and yet, the landowner is deprived of its use while the farmer-beneficiaries benefit from the present improvements (irrigation canal and road) on the property taken. Hence, we fully agree with the private respondent in arguing that: Verily, Petitioners suggestion that Metraco should not be compensated for the canal and road that are being used by the farmer-tillers notwithstanding that the same are already registered in the name of the Republic of the Philippines is dangerous as it would be tantamount to taking private property without due process of law and without payment of just compensation in violation of the constitution.[31] We must stress, at this juncture, that the taking of private lands under the agrarian reform program partakes of the nature of an expropriation proceeding. In a number of cases, we have stated that just compensation in expropriation proceedings represents the full and fair equivalent of the property taken from its owner by the expropriator. The measure is not the takers gain, but the owners loss. To compensate is to render something which is equal in value to that taken or received.[32] In sum, we find petitioners valuation sufficiently substantiated and in accordance with Section 17 of R.A. No. 6657 and DAR AO No. 5, series of 1998,[33]except that the portions of the landholdings occupied by the NIA water system and road should also be included in the total compensable area. WHEREFORE, the petition for review on certiorari is PARTLY GRANTED. The Decision dated June 27, 2005 and Resolution dated March 9, 2006 of the Court of Appeals in CA-G.R SP No. 80441 are hereby SET ASIDE. The Court hereby DECLARES the valuation made by Land Bank of the Philippines in the total amount of P4,669,259.92 as just compensation for the properties of Metraco Tele-Hygienic Services Corporation covered by TCT Nos. T-291208, T291209 and T-291210 of the Registry of the Province of Isabela, and ORDERING it to pay additional compensation for the excluded 1.1173 hectares based on the same formula and computation. No pronouncement as to costs. SO ORDERED. LAND BANK OF THE PHILIPPINES, Petitioner, G.R. No. 172230

- versus -

MAGIN FERRER, ANTONIO V. FERRER, and RAMON V. FERRER, represented by their Attorney-in-fact, ATTY. RAFAEL VILLAROSA, Respondents. x---------------------------------------------x DEPARTMENT OF AGRARIAN REFORM, represented by Secretary NASSER C. PANGANDAMAN, Petitioner,

G.R. No. 179421 Present:

- versus -

CARPIO, J.,Chairperson, NACHURA, PERALTA, ABAD, and MENDOZA,JJ.

ANTONIO V. FERRER and RAMON V. FERRER, Respondents. Promulgated: February 2, 2011 X -------------------------------------------------------------------------------------- X

DECISION MENDOZA, J.: Challenged in these consolidated petitions for review are the August 30, 2005[1] and the January 24, 2007 Decisions of the Court of Appeals (CA) in C.A. G.R. SP No. 88012 and C.A. G.R. SP No. 88008, respectively. The separate CA decisions affirmed the decision of the Regional Trial Court, Branch 33, Guimba, Nueva Ecija (RTC). The CA ruled that Republic Act (R.A.) No. 6657, and not Presidential Decree (P.D.) No. 27, should govern in the determination of just compensation after the effectivity of said act.
[2]

The Facts The consolidated records show that on October 11, 2000, Magin V. Ferrer, Antonio V. Ferrer and Ramon V. Ferrer (the Ferrers), represented by their attorney-in-fact, Rafael Villarosa, filed their Petition for Determination and Payment of Just Compensation against the Land Bank of the Philippines (LBP) before the RTC, docketed as Agrarian Case No. 1142-G. Later, the Ferrers filed an amended petition impleading the Department of Agrarian Reform (DAR) as well. In their petition, the Ferrers alleged that they were the absolute owners pro-indiviso of a parcel of agricultural land with an area of 11.7297 hectares located in Bagong Bayan, San Jose, Nueva Ecija. It was one of the parcels of land they inherited from their deceased mother, Liberata Villarosa, who died ab intestato onJanuary 23, 1968. It was also among the properties covered in the Deed of Extra-Judicial Partition executed by and between them; their deceased grandfather, Gonzalo F. Villarosa; their deceased aunt, Matilde Villarosa, and Rafael Villarosa. The Ferrers further alleged that they found out that an Emancipation Patent covering 3.5773 hectares of the subject agricultural land was secretly issued in the name of Alfredo Carbonel, one of its occupants, without payment of just compensation. The LBP then fixed the just compensation at a very low price of P132,685.67 or approximately P12,050.00 per hectare in violation of the guidelines in R.A. No. 6657, otherwise known as The Comprehensive Agrarian Reform Law. They asserted that the just compensation of the subject agricultural land should at least be computed at P250,000.00 per hectare, or the total sum of P2,930,000.00 for the entire 11.7297 hectares considering that it was irrigated and strategically located. On the other hand, the LBP and the DAR were of the position that the subject agricultural property had been placed under the coverage of the Operation Land Transfer (OLT) Program and, therefore, the provisions of P.D. No. 27 (Emancipation Decree of Tenants) and/or Executive Order (E.O.) No. 228 (Declaring Full Land Ownership to Qualified Farmer-Beneficiaries covered by PD 27; Determining the Value of Remaining Unvalued Rice and Corn Lands subject of

PD 27; and Providing for the Manner of Payment By the Farmer Beneficiary and Mode of Compensation to the Landowner) should apply. Thus, they insisted that the value of the subject agricultural land be in accordance with P.D. No. 27. In the proceedings below, the RTC appointed three (3) commissioners who were tasked to determine the amount of just compensation to be paid to the Ferrers. On September 27, 2004, after the written reports of the commissioners were submitted, the RTC rendered a decision, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered: 1. Fixing the just compensation for plaintiffs 4.6203 hectares of land at P208,000.00 per hectare or a total of P961, 022.50; 2. Ordering the defendants DAR and LBP to pay the above amount of money to the plaintiffs in the manner provided by law and existing legislations. SO ORDERED.

Unsatisfied with the decision, the LBP and the DAR filed separate motions for reconsideration which were both denied by the RTC in its Order dated December 1, 2004. Thereafter, the LBP and the DAR filed their respective petitions for review before the CA. The LBP petition was docketed as CA-G.R. SP No. 88012 and raffled to the Eighth Division while the DAR petition was docketed as CA-G.R. SP No. 88008 and raffled to the Eleventh Division. On August 30, 2005, the CA-Eighth Division, in CA-G.R. SP No. 88012, rendered a decision affirming the RTC decision. On January 24, 2007, the CA-Eleventh Division, in CA-G.R. SP No. 88008, likewise affirmed the decision. As earlier stated, the two divisions of the CA similarly ruled that R.A. No. 6657, and not P.D. No. 27, should govern in the determination of just compensation in this case. They reasoned out that although the subject property was tenanted and devoted to rice production in 1972 when P.D. No. 27 was issued, the just compensation cannot be based on the value of the property in 1972 because there was then no taking of the subject land as there was no payment yet to the private respondents. The CA explained that the land shall be considered taken only upon payment of just compensation because it would complete the agrarian reform process. The CA further stated that R.A. No. 6657 was the law of primary jurisdiction while P.D. No. 27 and other agrarian laws not inconsistent with R.A. No. 6657 shall only apply suppletorily. The LBP and the DAR filed their respective motions for reconsideration but these were denied by the CA in its resolutions dated April 7, 2006[3] and August 22, 2007,[4] respectively. Dissatisfied with the CA decisions, the LBP and the DAR filed their separate petitions before this Court. The LBP petition was docketed as G.R. No. 172230 and the DAR petition as G.R. No. 179421. On December 3, 2007, the Court issued a resolution[5] consolidating the two petitions because both cases involved the same subject matter and questions of law and fact. Both petitions basically raise this ISSUE Whether or not the Court of Appeals erred in ruling that RA 6657, rather than P.D. No. 27/E.O. No. 228, is the law that should apply in the determination of just compensation for the subject agricultural land.

Positions of the Parties The LBP and the DAR basically argue that P.D. No. 27, as reaffirmed by E.O. No. 228, should be applied in determining the just compensation for the subject property. They contend that P.D. No. 27 and E.O. No. 228 prescribe the formula in determining the just compensation of rice and corn lands tenanted as of October 21, 1972. As the subject property was tenanted and devoted to rice production in 1972, the just value should be fixed at the prevailing rate at that time, when the emancipation of the tenant-farmers from the bondage of the soil was declared in P.D. No. 27. As to R.A. No. 6657, both the LBP and the DAR insist that it applies only to ricelands and cornlands not tenanted as of October 21, 1972. R.A. No. 6657 does not cover ricelands and cornlands acquired under P.D. No. 27 and E.O. No. 228. The governments OLT program on tenanted privately-owned rice and corn lands pursuant to P.D. No. 27 continues separately and distinctly from the Comprehensive Agrarian Reform Program (CARP) acquisition and distribution program under R.A. No. 6657 because 1) R.A. No. 6657 operates prospectively; and 2) Congress intended that lands subject to or governed by existing government programs such as the OLT and homestead under P.D. No. 27 are to be treated distinctly.

With respect to the appointment of commissioners, the LBP and the DAR argue that there was no legal basis therefor because 1) there were no long accounts or difficult questions of fact that required the expertise and know-how of the commissioners; and 2) the formula for just compensation was already provided under P.D. No. 27 and E.O. No. 228. On the other hand, the Ferrers adopted the common ruling of the CA stating that it did not err in applying the provisions of R.A. No. 6657 in fixing the just compensation for the subject property. The Courts Ruling

The issue as to which agrarian law between P. D. No. 27/E.O. No. 228 and R.A. No. 6657 should apply in the determination of just compensation has been laid to rest in a number of cases. In the case of Land Bank of the Philippines v. Hon. Eli G. C. Natividad,[6] it was ruled that: Under the factual circumstances of this case, the agrarian reform process is still incomplete as the just compensation to be paid private respondents has yet to be settled. Considering the passage of Republic Act No. 6657 (RA 6657) before the completion of this process, the just compensation should be determined and the process concluded under the said law. Indeed, RA 6657 is the applicable law, with PD 27 and EO 228 having only suppletory effect, conformably with our ruling in Paris v. Alfeche.[7] Section 17 of RA 6657 which is particularly relevant, providing as it does the guideposts for the determination of just compensation, reads as follows: Sec. 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, and the assessment made by government assessors shall be considered. The social and economic benefits contributed by the farmers and the farm-workers 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. It would certainly be inequitable to determine just compensation based on the guideline provided by PD 27 and EO 228 considering the DARs failure to determine the just compensation for a considerable length of time. That just compensation should be determined in accordance with RA 6657, and not PD 27 or EO 228, is especially imperative considering that just compensation should be the full and fair equivalent of the property taken from its owner by the expropriator, the equivalent being real, substantial, full and ample. [Emphases supplied] In Land Bank of the Philippines v. Manuel O Gallego, Jr.,[8] the Court handed down the same ruling. Thus: 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 (R.A.) No. 6657, in prior cases concerning just compensation. In Paris v. Alfeche,[9] 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,[10] the Court inParis 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 corn 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 Corn 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 for agriculture, 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 (emphasis supplied). 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 corn 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.[11] 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.[12] The retroactive application of R.A. No. 6657 is not only statutory but is also founded on equitable considerations. In Lubrica v. Land Bank of the Philippines,[13] 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 farmer-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] The above rulings were reiterated in the recent cases of Land Bank of the Philippines v. Rizalina Gustilo Barrido and Heirs of Romeo Barrido[14] and Land Bank of the Philippines v. Enrique Livioco.[15] The CA was, therefore, correct in ruling that the agrarian reform process in this particular case was still incomplete because the just compensation due to the Ferrers had yet to be settled. Since R.A. No. 6657 was already in effectivity before the completion of the process, the just compensation should be determined and the process concluded under this law. With respect to the appointment of the commissioners, it is an issue not properly brought and ventilated in the trial courts below and only raised for the first time on appeal. At any rate, the appointment was proper because the applicable law is R.A. No. 6657. WHEREFORE, the petitions for review on certiorari are DENIED. SO ORDERED. LAND BANK OF THEPHILIPPINES, Petitioner, G.R. No. 171685 Present: CARPIO MORALES, J., Chairperson, BRION, BERSAMIN, VILLARAMA, JR., and SERENO, JJ.

- versus -

Promulgated: GLENN Y. ESCANDOR, GEROME Y. ESCANDOR, EMILIO D. ESCANDOR and October 11, 2010 VIOLETA YAP, Respondents. x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x DECISION VILLARAMA, JR., J.: Challenged in this petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, are the Decision[1] dated September 23, 2004 and Resolution[2] dated February 10, 2006 of the Court of Appeals (CA) in CA-G.R. SP No. 79027. The CA had directed the Regional Trial Court (RTC) ofDavao City, Branch 15, acting as Special Agrarian Court (SAC), to recompute the amount of just compensation due to respondents. The facts are as follows: Respondents Glenn and Gerome Y. Escandor are the registered owners of four parcels of agricultural land located in Tuban and Saliducon, Sta. Cruz, Davao del Sur while respondents Emilio Escandor and Violeta Yap are the registered owners of two parcels of agricultural land situated in Dalagbong and Bulacan in Malalag, Davao del Sur.[3] In 1995, the Department of Agrarian Reform (DAR) placed the aforesaid lands under compulsory acquisition of the Comprehensive Agrarian Reform Program (CARP) pursuant to Republic Act (R.A.) No. 6657. Petitioner Land Bank of the Philippines (LBP) through its Land Valuation Office conducted a field investigation and came up with its valuations in

the aggregate amount of P927,895.97 for the properties of Glenn and Gerome Y. Escandor, and P849,611.01 for the properties of Emilio Escandor and Violeta Yap.[4] Since respondents rejected the LBPs valuation, the DAR instituted summary administrative proceedings for the determination of just compensation while petitioner deposited in the name of respondents the amount of compensation in cash and bonds.[5] In the meantime, respondents titles were cancelled and emancipation patents were issued to farmerbeneficiaries. After due proceedings, the DAR sustained the valuation made by petitioner. On October 8, 1998, respondents filed their respective complaints for determination and payment of just compensation against petitioner and the DAR before the RTC of Davao City, Branch 15, acting as SAC. [6] With the agreement of the parties, the cases were jointly tried. The trial court also ordered the parties to submit the names of their respective commissioners who submitted their reports. On March 3, 2003, the RTC rendered its Decision,[7] the fallo of which reads: WHEREFORE, judgment is hereby rendered as follows: The Defendants shall pay: Glenn and Gerome Escandor in Civil Case No. 26,832 the following sums: 1. TCT No. 19216 2.7918 hectares Two Hundred Fifty Thousand Pesos TCT No. 19217 0.5887 hectares Forty Thousand Pesos TCT No. 19218 3.7417 hectares Four Hundred Thousand Pesos TCT No. 19219 14.178 hectares One Hundred Thousand Pesos 2. Violeta Yap and Emilio Escandor in Civil Case N[o]. 26,833 TCT No. Hundred TCT No. Hundred 3. Costs of Suits. 18903 4093 hectares One Thousand Pesos 8.8992 hectares One Thousand Pesos 13.7413 Million Million One Four

Million

Four

SO ORDERED.[8]

The SAC addressed the issue of whether just compensation should be based on the market value formula which respondents endorsed or the income value formula which the DAR used. All things being equal, according to the trial court, if the price is based mainly on the average yearly fruit/income product for five years immediately before the taking of the owner-farmers yearly income then it depends principally on unpredictable weather and on widely volatile fluctuating prices of the farm products both of which are beyond the owners capability to control and to foresee. Thus, the market value approach gives the owner a better chance to survivebecause the money might be enough to tide him over until he regains his composure after losing his cherished farm and to start hopefully all over again even though he is already in [his] 50s or 60s and is already over the hill physically. The SAC thus justified the award of the higher amount of just compensation, stating that fair and full equivalent of the losses sustained, all the facts of the property and its surroundings, its improvements and capabilities should be considered.[9] A motion for reconsideration was filed by petitioner but the same was denied by the trial court in its Order dated August 1, 2003.[10] Petitioner filed a petition for review before the CA arguing that the SAC gravely erred in fixing the just compensation for the properties of respondents in the aggregate amount of P4,590,000.00, in clear violation of the provisions of R.A. No. 6657 and its implementing regulations, particularly DAR Administrative Order (AO) No. 06, series of 1992, as amended by DAR AO No. 11, series of 1994. On September 23, 2004, the CA rendered the assailed Decision, the dispositive portion of which reads: WHEREFORE, in view of the foregoing, it is premature at this point to rule on the correctness of the special agrarian courts computation of just compensation. The special court is therefore DIRECTED to recompute the just compensation to reflect: 1) the value of the properties at the time of their taking; 2) the basis, formula and/or mathematical computation in arriving at the just compensation; and 3) the interest computed from the time the property is taken to the time when compensation is actually paid.

Forthwith, let the records of this case be remanded to the special agrarian court for further proceedings. SO ORDERED.[11] The CA held that Section 17 of R.A. No. 6657 does not limit the sole basis in computing just compensation to the income method nor does it foreclose the use of market value approach. The factors enumerated therein merely serve as a guideline for the court which is not precluded from considering all, some or only one of those factors in computing just compensation. While the LBP and the DAR may determine just compensation, such determination is merely preliminary and administrative, not binding or conclusive upon the agrarian court. The CA also declared that adopting the mathematical computation fixed by the Administrative Order would violate the landowners right to due process. The landowner must be given the opportunity to prove the real value of his property and to disprove the valuation of the expropriating agency. [12] The CA further ruled that the computation of just compensation should be made at the time of the taking, which in this case should be in 1997 when the DAR took the lands and cancelled respondents titles thereto. Hence, there is a need to recompute the amount of just compensation using as basis the value of the lands in 1997 and reflecting the formula in arriving at the valuation. Lastly, though not mentioned in the SAC decision nor raised in the petition, the CA stated that the final compensation must include interest to temper the prejudice caused to the landowner on account of the delay in his payment.[13] Petitioner filed a motion for reconsideration[14] of the aforesaid Decision. In a Resolution dated February 10, 2006, the CA denied the motion. Hence, this petition anchored on the following grounds: A. THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN ORDERING THE REMAND OF THE CASE TO THE SPECIAL AGRARIAN COURT WITHOUT THE CORRESPONDING INSTRUCTION TO COMPUTE THE JUST COMPENSATION IN ACCORDANCE WITH THE VALUATION FACTORS UNDER SECTION 17 OF R.A. 6657 AS TRANSLATED INTO A BASIC FORMULA IN DAR ADMINISTRATIVE ORDER NO. 6, SERIES OF 1992, AND AS HELD IN THE CASE OF SPS. BANAL, G.R. NO. 143276 (JULY 20, 2004). THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN ORDERING THE PAYMENT OF INTEREST CONSIDERING THAT THE MODE OF COMPENSATION IN AGRARIAN REFORM IS CLEARLY PRESCRIBED UNDER SECTION 18 OF R.A. 6657.[15]

B.

Petitioner contends that the basis of valuation for the determination of just compensation is provided in Section 17 of R.A. No. 6657 and DAR AO No. 06, series of 1992. Unless they are declared unconstitutional or invalid, petitioner submits that the SAC has no other option but to apply the said laws. On the other hand, respondents maintain that in eminent domain cases, the power to determine the amount of just compensation is a judicial function. They stress that a reading of Section 17 of R.A. No. 6657 will show that the current market value of the properties expropriated are among the factors to be considered in determining the amount of just compensation. Thus, respondents maintain that the CA did not commit error in remanding the case to the SAC and directing the computation of the market value of respondents properties at the time they were expropriated in 1997. We grant the petition. It is settled that the determination of just compensation is a judicial function.[16] The DARs land valuation is only preliminary and is not, by any means, final and conclusive upon the landowner or any other interested party. In the exercise of their functions, the courts still have the final say on what the amount of just compensation will be. [17] Although the DAR is vested with primary jurisdiction under the Comprehensive Agrarian Reform Law (CARL) of 1988 to determine in a preliminary manner the reasonable compensation for lands taken under the CARP, such determination is subject to challenge in the courts.[18] The CARL vests in the RTCs, sitting as SACs, original and exclusive jurisdiction over all petitions for the determination of just compensation. [19] This means that the RTCs do not exercise mere appellate jurisdiction over just compensation disputes.[20] We have held that the jurisdiction of the RTCs is not any less original and exclusive because the question is first passed upon by the DAR. The proceedings before the RTC are not a continuation of the administrative determination. Indeed, although the law may provide that the decision of the DAR is final and unappealable, still a resort to the courts cannot be foreclosed on the theory that courts are the guarantors of the legality of administrative action. [21]

Since the subject lands were placed under land reform after the effectivity of R.A. No. 6657, it is said law which governs the valuation of lands for the purpose of awarding just compensation. Section 17 of R.A. No. 6657 provides the guideposts for the determination of just compensation: Sec. 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, and the assessment made by government assessors shall be considered. The social and economic benefits contributed by the farmers 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 recognition of the DARs rule-making power to carry out the object of R.A. No. 6657, the Court ruled in Land Bank of the Philippines v. Sps. Banal[22]that the applicable formula in fixing just compensation was DAR AO No. 06, series of 1992, as amended by DAR AO No. 11, series of 1994, which was then the governing regulation applicable to compulsory acquisition of lands. In the said case, the trial court based its valuation upon a different formula and did not conduct any hearing for the reception of evidence. Thus, the Court remanded the case to the SAC for trial on the merits. Subsequently, in Land Bank of the Philippines v. Celada,[23] we held that the factors enumerated under Section 17 of R.A. No. 6657 had already been translated into a basic formula by the DAR pursuant to its rule-making power under Section 49 of R.A. No. 6657. Thus, the formula outlined in DAR AO No. 05, series of 1998[24] should be applied in computing just compensation, to wit: LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1) Where: LV CNI CS MV = Land Value = Capitalized Net Income = Comparable Sales = Market Value per Tax Declaration

Likewise, in Land Bank of the Philippines v. Lim[25] and Land Bank of the Philippines v. Heirs of Eleuterio Cruz, the Court, reiterating the mandatory application of the aforementioned guidelines in determining just compensation, also ordered the remand of the cases to the SAC for the determination of just compensation strictly in accordance with the applicable DAR regulation.[27]
[26]

In view of the foregoing rulings, we hold that both the SAC and the CA erred in not strictly observing the guidelines provided in Section 17 of RA No. 6657 and adopting DAR administrative orders implementing the same, specifically AO No. 5, series of 1998 which took effect on May 11, 1998 and thus already in force at the time of the filing of the complaints. And contrary to the stance of the CA, we held in Land Bank of the Philippines v. Lim[28] that Section 17 of R.A. No. 6657 and DAR AO No. 6, series of 1992, are mandatory and not mere guides that the RTC may disregard.[29] We have stressed that the special agrarian court cannot ignore, without violating the agrarian law, the formula provided by the DAR for the determination of just compensation. This Court thus rejected the valuation fixed by the RTC because it failed to follow the DAR formula.[30] This Court recently reiterated in Land Bank of the Philippines v. Barrido[31]: While the determination of just compensation is essentially a judicial function vested in the RTC acting as a Special Agrarian Court, the judge cannot abuse his discretion by not taking into full consideration the factors specifically identified by law and implementing rules. Special Agrarian Courts are not at liberty to disregard the formula laid down in DAR A.O. No. 5, series of 1998, because unless an administrative order is declared invalid, courts have no option but to apply it. The courts cannot ignore, without violating the agrarian law, the formula provided by the DAR for the determination of just compensation. Conformably with the aforecited rulings, the instant case must be remanded to the SAC for the determination of just compensation in accordance with DAR AO No. 5, series of 1998, the latest DAR issuance on fixing just compensation.[32] On the matter of interest on the final compensation, we are unable to agree with the CAs position that it is automatically awarded in agrarian cases involving lands placed under CARP. As we held in Land Bank of the Philippines v. Celada[33]: Finally, there is no basis for the SACs award of 12% interest per annum in favor of respondent. Although in some expropriation cases, the Court allowed the imposition of said interest, the same was in the nature of damages for delay in payment which in effect makes the obligation on the part of the government one of forbearance. In this case, there is no delay that would justify the payment of interest since the just compensation due to respondent has been promptly and validly deposited in her name

in cash and LBP bonds. Neither is there factual or legal justification for the award of attorneys fees and costs of litigation in favor of respondent. (Emphasis supplied.) Respondents are not entitled to interest on the final compensation considering that petitioner promptly deposited the compensation for their lands after they rejected petitioners initial valuation. Such deposit of cash and bonds in the name of the landowners was made in accordance with Sections 16 (e) and 18 of R.A. No. 6657.[34] WHEREFORE, the petition is GRANTED. The Decision dated September 23, 2004 and Resolution dated February 10, 2006 of the Court of Appeals in CA-G.R. SP No. 79027 are hereby AFFIRMED with MODIFICATION in that the Regional Trial Court, Branch 15, Davao City is specifically DIRECTED to determine just compensation in SP. Civil Case Nos. 26,832-98 and 26,833-98 strictly in accordance with Section 17 of R.A. No. 6657 and DAR Administrative Order No. 05, series of 1998. No costs. SO ORDERED. LAND BANK OF THEPHILIPPINES, Petitioner, G.R. No. 161834 Present: CARPIO MORALES, J., Chairperson, BRION, BERSAMIN, ABAD,* and VILLARAMA, JR., JJ.,

- versus -

HEIR OF TRINIDAD S. VDA. DE Promulgated: ARIETA, represented by the sole and only heir, ALICIA ARIETA TAN, Respondent. August 11, 2010 x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x DECISION VILLARAMA, JR., J.:

Before us is a petition for review on certiorari filed by petitioner under Rule 45 of the 1997 Rules of Civil Procedure, as amended, to reverse and set aside the Decision[1] dated August 8, 2003 of the Court of Appeals (CA) in CAG.R. SP No. 76572 denying its petition for certiorari and sustaining the Orders dated December 12, 2002 and February 17, 2003 of the Regional Trial Court (RTC) (Special Agrarian Court [SAC]) of Tagum City, Davao del Norte, Branch 2 in DAR Case No. 79-2002. The antecedents are set forth in the CA Decision: Private respondent is the registered owner of a parcel of agricultural land situated in Sampao, Kapalong, Davao del Norte with an approximate area of 37.1010 hectares covered by Transfer Certificate of Title No. T-49200, 14.999 hectares of which was covered by RA No. 6657 through the Voluntary Offer to Sell (VOS) scheme of the Comprehensive Agrarian Reform Program (CARP). Private respondent offered to the Department of Agrarian Reform (DAR) the price of P2,000,000.00 per hectare for said portion of the land covered by CARP. Petitioner Land Bank of the Philippines (LBP) valued and offered as just compensation for said 14.999 hectares the amount of P1,145,806.06 or P76,387.57 per hectare. The offer was rejected by private respondent. In accordance with Section 16 of RA No. 6657, petitioner LBP deposited for the account of private respondent P1,145,806.06 in cash and in bonds as provisional compensation for the acquisition of the property.

Thereafter, the DAR Adjudication Board (DARAB), through the Regional Adjudicator (RARAD) for Region XI conducted summary administrative proceedings under DARAB Case No. LV-XI-0330-DN2002 to fix the just compensation. On June 26, 2002, the DARAB rendered a decision fixing the compensation of the property at P10,294,721.00 or P686,319.36 per hectare. Petitioner LBP filed a motion for reconsideration of the above decision but the same was denied on September 4, 2002. Petitioner LBP filed a petition against private respondent for judicial determination of just compensation before the Special Agrarian Court, Regional Trial Court, Branch 2, Tagum City, docketed as DAR Case No. 78-2002, which is the subject of this petition. Private respondent, on the other hand, filed a similar petition against DAR before the same Special Agrarian Court docketed as DAR Case No. 79-2002, to which petitioner LBP filed its answer and moved for the dismissal of the petition for being filed out of time. Private respondent filed a Motion for Delivery of the Initial Valuation praying that petitioner LBP be ordered to deposit the DARAB determined amount of P10,294,721.00 in accordance with the Supreme Court ruling in Land Bank of the Philippines vs. Court of Appeals, Pedro L. Yap, Et Al., G.R. No. 118712, October 6, 1995. Petitioner LBP filed a Manifestation praying that the amount of the deposit should only be the initial valuation of the DAR/LBP in the amount of P1,145,806.06 and not P10,294,721.00 as determined by the DARAB. On December 12, 2002, public respondent rendered the assailed resolution ordering petitioner LBP to deposit for release to the private respondent the DARAB determined just compensation of P10,294,721.00. On December 13, 2002, petitioner LBP filed a motion for reconsideration of the said order to deposit. On December 17, 2002, private respondent filed a motion to cite Romeo Fernando Y. Cabanal and Atty. Isagani Cembrano, manager of petitioner LBPs Agrarian Operations Office in Region XI and its handling lawyer, respectively, for contempt for failure to comply with the order to deposit. After the filing of private respondents comment to the motion for reconsideration and petitioner LBPs explanation and memorandum to the motion for reconsideration, public respondent rendered the assailed resolution dated February 17, 2003, denying petitioner LBPs motion for reconsideration. Petitioner LBP filed a motion to admit a second motion for reconsideration which still remains unacted upon by public respondent. Hence, this petition based on the following grounds: I. THE SAC ORDER TO DEPOSIT HAD NO LEGAL BASIS, CONSIDERING THAT THE REQUIREMENT FOR THE PROMPT PAYMENT OF JUST COMPENSATION TO THE PRIVATE RESPONDENT WAS SATISFIED BY THE DEPOSIT OF THE PROVISIONAL COMPENSATION OF P1,145,806.06 REQUIRED UNDER SECTION 16 (E) OF RA 6657 AND THE RULING IN THE CASE OF LAND BANK OF THE PHILIPPINES V. COURT OF APPEALS, PEDRO L. YAP, ET AL., G.R. NO. 118712, OCTOBER 6, 1995 AND JULY 5, 1996. THE SPECIAL AGRARIAN COURT IS NOT AN APPELLATE COURT FOR DARAB DECISIONS ON COMPENSATION AND HAS NO JURISDICTION TO REVIEW, ADOPT, OR ORDER THE EXECUTION OF DARAB DECISIONS ON COMPENSATION PENDING FINAL DETERMINATION OF JUST COMPENSATION OR TO PREJUDGE THE CASE IN VIOLATION OF PETITIONERS RIGHT TO DUE PROCESS OF LAW.[2]

II.

On August 8, 2003, the CA dismissed the petition holding that the assailed orders of the SAC are correct and within the parameters of Republic Act (R.A.) No. 6657, thus: Section 16 (a) refers to an offer of the DAR to pay a corresponding value of the land. Facts of the case show that P1,145,806.06 was the offered price which was rejected by the private respondent.

In cases of rejection of the offer, Section 16(d) states that there shall be a summary administrative proceedings to determine the compensation for the land. Hence, the proceedings before the DARAB, through the RARAD for Region XI as in this case. Note that in Sections 16(a) to (d), or, during the offer until its rejection, there was no reference to a deposit of the compensation. The reference to a deposit of the compensation appears only in Section 16(e) or after the DAR, in a summary administrative proceedings, had determined or decided the case relative to the compensation of the land. If it had been the intention of the law to require the deposit of the compensation based on the offer or in the amount of P1,145,806.06, the law should have stated such. The reference to the deposit right after [the] decision of the DARAB shall have been rendered, obviously means that the amount of the deposit should be based on the DARAB decision. Otherwise, there would be no need to institute an administrative proceeding before the DARAB, before a deposit shall be required. In the case of Association of Small Landowners in the Philippines, Inc. vs. Secretary of Agrarian Reform, the Supreme Court held that the determination made by the DAR is onlypreliminary unless accepted by all parties concerned. Apropos, it was held in the case of Land Bank of the Philippines vs. Court of Appeals and Jose Pascual that it is the DARAB which has the authority to determine the initial valuation of lands involving agrarian reform although such valuation may only be considered preliminary as the final determination of just compensation is vested in the courts. Therefore, the deposit of the initial valuation referred to in Section 16 of RA No. 6657 is the DARdetermined amount or in this case, the amount of P10,294,721.00. The assailed orders of the SAC are correct and within the parameters of RA No. 6657. [3] [ITALICS SUPPLIED.]

Petitioner LBP filed a motion for reconsideration but the same was denied by the CA on January 21, 2004.[4] In this recourse from the appellate courts ruling, petitioner alleges that: THE COURT OF APPEALS GRAVELY ERRED ON A QUESTION OF LAW IN DENYING AND/OR DISMISSING THE PETITION FOR CERTIORARI FILED BY LBP, THEREBY AFFIRMING THE ORDER OF THE SAC A QUO THAT THE DEPOSIT OF THE INITIAL VALUATION REFERRED TO IN SECTION 16 OF RA 6657 IS THE NON-FINAL DAR ADJUDICATION BOARD (DARAB)-DETERMINED AMOUNT OR IN THIS CASE, THE AMOUNT OF P10,294,721.00.[5] Petitioner argues that a reading of Section 16 shows that the rejection by the landowner refers to the offer of the DAR as compensation for the land as initially valued by LBP pursuant to Executive Order (EO) No. 405, and not the compensation award contained in the decision of the DARAB/RARAD. It contends that the CAs interpretation would only inject obscurity and vagueness in the law, which is otherwise clear and unambiguous. The over-stretching of the connotation and meaning of rejection as relating to the decision of the DARAB/RARAD, as the CA would have it, is utterly wrong and not within the intendment of Section 16. Obviously, sub-paragraph (e) does not make any reference at all to the decisions of quasi-judicial bodies. If the law so intended to attach connotation to the word rejection in subparagraph (e) in relation to the decisions of the DARAB/RARAD, or the word deposit in relation to the compensation award of the DARAB/RARAD, sub-paragraph (e) should have stated it plain and clear.[6] Petitioner points out that the amount it deposited as provisional compensation is the starting point for the cancellation of the title of the landowner in favor of the Government, while the administrative proceeding for the determination of just compensation is ongoing with the DARAB. Thus, if the amount to be deposited is the amount as determined by the PARAD, RARAD or DARAB, then the implementation of the CARP will be adversely affected since the cancellation of the landowners title will now depend on how fast the decision would be rendered by said quasi-judicial bodies. Logic, therefore, dictates that the amount that should be deposited is the amount initially offered by the DAR and not the amount as determined by a quasi-judicial body like the PARAD, RARAD or DARAB.[7]

Citing DAR Administrative Order (AO) No. 02, series of 1996, which converted all existing trust deposits and instituted a new procedure on the direct deposit in cash and bonds, petitioner asserts that the provisional compensation consists of the original DAR/LBP valuation offered to the landowner, following the correct interpretation of Section 16 (e) of R.A. No. 6657. This deposit is done only once, that is, after the landowner rejects the original valuation offered by DAR/LBP. It must also be noted from the procedure provided in DAR AO No. 02, the request by the DAR to the DARAB/RARAD/PARAD to conduct administrative proceedings is done only after a request to deposit the initial/original compensation proceeds had been made by the DAR to LBP; the amount to be deposited is that offered initially by the DAR based on the valuation made by LBP pursuant to EO No. 405.[8] Petitioner further points out that with thousands of cases involving compensation of lands, if LBP were to implement the SAC order that the PARAD/RARAD valuation is the one (1) to be deposited but thereafter the valuation by LBP is finally upheld by the Court as the just compensation due to the landowner, petitioner will be faced with an enormous responsibility of filing recovery suits against thousands of landowners. It stressed that once deposited, the inordinately high valuation would be under the complete disposal of the landowner, the withdrawal thereof, pending final determination by the Court of just compensation, is only made subject to compliance with payment release requirements of petitioner. Indeed, the SAC misinterpreted the law and if its erroneous order is implemented, it will create financial havoc to the already scarce Agrarian Reform Fund (ARF) because every victorious party before the RARAD/PARAD/DARAB will surely move for a similar order to deposit their compensation award even if the cases for judicial determination of just compensation are still pending before the SAC.[9] On the other hand, respondent points out that petitioner did not appeal the decision of the RARAD to the Board, and hence, the administrative proceeding for determination of just compensation is over. The proceeding before the SAC is not an appeal from the decision of the RARAD. Consequently, what is to be deposited is not the initial valuation by petitioner but that of the RARAD. Moreover, if petitioners interpretation of Section 16 is upheld, it will render the proceedings before the DARAB useless, for after all it is the LBPs valuation which will be followed.[10] The lone issue in this controversy is the correct amount of provisional compensation which the LBP is required to deposit in the name of the landowner if the latter rejects the DAR/LBPs offer. Petitioner maintains it should be its initial valuation of the land subject of Voluntary Offer to Sell (VOS) while respondent claims it pertains to the sum awarded by the PARAD/RARAD/DARAB in a summary administrative proceeding pending final determination by the courts. The petition is meritorious. Section 16 of R.A. No. 6657 reads: SEC. 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 or registered 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 in accordance 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 offer. (c) If the landowner accepts the offer of the DAR, the LBP 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 the notice. After the expiration of the above period, the matter is deemed submitted for decision. The DAR shall decide the case within thirty (30) days after 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 to the 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. [EMPHASIS SUPPLIED.]

According to the CA, the deposit of provisional compensation mentioned in sub-paragraph (e) pertains to that amount awarded by the DAR in the summary administrative proceeding under the preceding sub-paragraph (d). It noted that the word deposit was not mentioned until after sub-paragraph (d), when the DAR is tasked to conduct a summary administrative proceeding. Otherwise, said the appellate court, there would be no need to institute an administrative proceeding before the DARAB, before a deposit is required. We find the foregoing as a strained interpretation of a simple and clear enough provision on the procedure governing acquisition of lands under CARP, whether under the compulsory acquisition or VOS scheme. Indeed, it would make no sense to mention anything about the provisional deposit in sub-paragraphs (a) and (b) the landowner is sent a notice of valuation to which he should reply within a specified time, and in sub-paragraph (c) when the landowner accepts the offer of the DAR/LBP as compensation for his land. Sub-paragraph (d) provides for the consequence of the landowners rejection of the initial valuation of his land, that is, the conduct of a summary administrative proceeding for a preliminary determination by the DARAB through the PARAD or RARAD, during which the LBP, landowner and other interested parties are required to submit evidence to aid the DARAB/RARAD/PARAD in the valuation of the subject land. Sub-paragraph (e), on the other hand, states the precondition for the States taking of possession of the landowners property and the cancellation of the landowners title, thus paving the way for the eventual redistribution of the land to qualified beneficiaries: payment of the compensation (if the landowner already accepts the offer of the DAR/LBP) or deposit of the provisional compensation (if the landowner rejects or fails to respond to the offer of the DAR/LBP). Indeed, the CARP Law conditions the transfer of possession and ownership of the land to the government on receipt by the landowner of the corresponding payment or the deposit of the compensation in cash or LBP bonds with an accessible bank.[11] It was thus erroneous for the CA to conclude that the provisional compensation required to be deposited as provided in Section 16 (e) is the sum determined by the DARAB/PARAD/RARAD in a summary administrative proceeding merely because the word deposit appeared for the first time in the sub-paragraph immediately succeeding that sub-paragraph where the administrative proceeding is mentioned (sub-paragraph d). On the contrary, sub-paragraph (e) should be related to sub-paragraphs (a), (b) and (c) considering that the taking of possession by the State of the private agricultural land placed under the CARP is the next step after the DAR/LBP has complied with notice requirements which include the offer of just compensation based on the initial valuation by LBP. To construe sub-paragraph (e) as the appellate court did would hamper the land redistribution process because the government still has to wait for the termination of the summary administrative proceeding before it can take possession of the lands. Contrary to the CAs view, the deposit of provisional compensation is made even before the summary administrative proceeding commences, or at least simultaneously with it, once the landowner rejects the initial valuation (offer) by the LBP. Such deposit results from his rejection of the DAR offer (based on the LBPs initial valuation). Both the conduct of summary administrative proceeding and deposit of provisional compensation follow as a consequence of the landowners rejection under both the compulsory acquisition and VOS. This explains why the words rejection or failure to reply and rejection or no response from the landowner are found in sub-paragraphs (d) and (e). Such rejection/no response from the landowner could not possibly refer to the award of just compensation in the summary administrative proceeding considering that the succeeding sub-paragraph (f) states that the landowner who disagreeswith the same is granted the right to petition in court for final determination of just compensation. As it is, the CAs interpretation would have loosely interchanged the terms rejected the offer and disagrees with the decision, which is far from what the entire provision plainly conveys.

We also find the CAs conclusion that petitioners interpretation of Section 16 (e) would render unnecessary the filing of an administrative proceeding before the deposit is made, as untenable. Said court raised a perceived inconsistency or contradiction not found in the law. Precisely, the deposit of provisional compensation is required to be made because the landowner has rejected the initial valuation or amount offered by the DAR, which is then mandated to conduct a summary administrative proceeding for preliminary determination of just compensation. It may be that the confusion in reading the provision stems from the words offer of the DAR/rejection or acceptance of the offer used in Section 16 (b) and (c), which seemingly leaves out the active role of the LBP at the early stage of the land acquisition procedure, whether under compulsory acquisition or VOS. Section 18 of R.A. No. 6657 provides: SECTION 18. Valuation and Mode of Compensation. -- The LBP shall compensate the landowner in such amount as may be agreed upon by the landowner and the DAR and the LBP, in accordance with the criteria provided for in Sections 16 and 17, and other pertinent provisions hereof, or as may be finally determined by the court, as the just compensation for the land. xxxx

Under the law, the LBP is charged with the initial responsibility of determining the value of lands placed under land reform and the compensation to be paid for their taking.[12] Once an expropriation proceeding or the acquisition of private agricultural lands is commenced by the DAR, the indispensable role of LBP begins. EO No. 405, issued on June 14, 1990, provides that the DAR is required to make use of the determination of the land valuation and compensation by the LBP as the latter is primarily responsible for the determination of the land valuation and compensation. In fact, the LBP can disagree with the decision of the DAR in the determination of just compensation, and bring the matter to the RTC designated as SAC for final determination of just compensation.[13] The amount of offer which the DAR gives to the landowner as compensation for his land, as mentioned in Section 16 (b) and (c), is based on the initial valuation by the LBP.[14] This then is the amount which may be accepted or rejected by the landowner under the procedure established in Section 16. Perforce, such initial valuation by the LBP also becomes the basis of the deposit of provisional compensation pending final determination of just compensation, in accordance with sub-paragraph (e). The procedure for the determination of compensation cases under Republic Act No. 6657, as devised by this Court, commences with the valuation by the LBP of the lands taken by the State from private owners under the land reform program. Based on the valuation of the land by the LBP, the DAR makes an offer to the landowner through a written notice. In case the landowner rejects the offer, a summary administrative proceeding is held and, afterwards, depending on the value of the land, the Provincial Agrarian Reform Adjudicator (PARAD), the Regional Agrarian Reform Adjudicator (RARAD), or the DARAB, fixes the price to be paid for the said land. If the landowner still does not agree with the price so fixed, he may bring the matter to the RTC, acting as Special Agrarian Court.[15] [EMPHASIS SUPPLIED.]

DAR AO No. 02, series of 1996, Revised Rules and Procedures Governing the Acquisition of Agricultural Lands Subject of Voluntary Offer to Sell and Compulsory Acquisition Pursuant to Republic Act No. 6657 reinforces the view that it is the initial valuation of the LBP which becomes the basis of the provisional compensation deposit. The following procedural steps on Valuation and Compensation under DAR AO No. 02 clearly show that such deposit of provisional compensation is to be made by LBP either before or simultaneously with the conduct of the summary administrative proceedings, without awaiting the termination of the proceedings or rendition of judgment/decision by the DARAB/RARAD/PARAD. Consequently, the amount of just compensation determined by the DARAB/RARAD/PARAD cannot be the deposit contemplated in Section 16 (e). Steps Responsible Agency/Unit Activity Forms/Documents (Requirements)

D. Land Valuation and Compensation

13

LBP-LVLCO

Receives and evaluates the CF for completeness, consistency and document sufficiency. Gathers additional valuation documents. Determine land valuation based on valuation inputs Note: CFs where the land valuation amounts to more than P3 million shall be forwarded to LBP-HO. Claims Valuation and Processing Form (CVPF)

14

LBP-LVLCO

15

LBP-LVLCO

Prepares and sends Memo of Valuation, Claim Folder Profile and Valuation Summary (MOV-CFPVS) to PARO

CARP Form No. 9(Memorandum of Valuation and Claim Folder Profile and Valuation Summary)

16

DARPO

Receives LBPs MOV-CFPVS and ascertains the completeness of the data and information therein. Sends Notice of Land Valuation and Acquisition to LO by personal delivery with proof of service or by registered mail with return card, attaching copy of MOV-CFPVS and inviting LOs attention to the submission of documents required for payment of claim. CARP Form No. 10(Notice of Land Valuation and Acquisition)

17

DARPO

18

DARPO

Posts a copy of the Notice of Land Valuation (NLVA) for at least seven (7) working days on the bulletin board of the provincial capitol, municipal and barangay halls where the property is located and issues a Certification of Posting Compliance. Replies to Notice of Land Valuation and Acquisition and submits documents required for payment of compensation claim. If LO accepts, proceed to D.1. If LO rejects or fails to reply, proceed to D.2.

CARP Form No. 11(Certification of Posting Compliance)

19

LO

xxxx D.2. Where LO rejects the Land Valuation 20 DARPO If the LO rejects the offered price or fails to reply within thirty (30) days from receipt of the Notice of Land Valuation and CARP Form No. 10.a (LOs Reply to NLVA)

Acquisition, forwards to LBP the Request to Deposit the compensation proceeds in cash and in bonds in the name of the LO 21 DARPO Requests the DARAB/RARAD/ PARAD to conduct administrative proceedings pursuant to DARAB guidelines, as the case maybe, furnishing therein a copy each of the LOs Letter of Rejection, Notice of Land Valuation and Acquisition and LBPs Memorandum of Valuation. Deposits the compensation proceeds in the name of the LOand issues Certification of Deposit to DAR through the PARO, copy furnished the LO. The entire deposit may be withdrawn by the LO; however, actual release of same shall be subject to LOs submission of all requirements for payment and execution of Confirmation of Coverage and Transfer.

CARP Form No. 15(Request for Deposit)

CARP Form No. 14 Advice to DARAB/ RARAD/PARAD

22

LBP-LVO LBP-HO

CARP Form No. 17 (Certification of Deposit)

CARP Form No. 17.a (Confirmation of Coverage and Transfer For Claims of Individual LOs Still Pending with DARAB) CARP Form No. 17.b (Confirmation of Coverage and Transfer For Claimsof Corporate LOs Still Pending with DARAB)

23

DARPO

Upon receipt of the Certification of Deposit from LBP, transmits the same to the Register of Deeds concerned, including the approved segregation/subdivision plan of subject property, if partially covered and simultaneously requests the ROD to issue TCT in the name of RP. Issues new TCT in the name of RP and forwards owners duplicate certificate of title in the name of RP to LBP-LVO which furnishes the PARO a certified xerox copy of the same. Simultaneously with Activity Nos. 22-24 above, the DARAB/ RARAD/PARAD conducts summary administrative proceedings, renders decision and informs parties concerned of the same. Upon receipt of the Certificate of Finality of the DARAB Order, requests LBP to pay the LO in accordance with the DARAB decision; requests LBP to prepare Confirmation of Coverage and

CARP Form No. 18 (Request to Issue TCT in the name of RP)

24

ROD

New TCT in the name of RP and owners duplicate copy of title in the name of RP.

25

DARAB/ RARAD/ PARAD

26

DARPO

CARP Form No. 17.c (Confirmation of Coverage and Transfer For Claims of Individual LOs

Transfer for LO to accomplish. Thereafter, LBP follows Activity Nos. 25-26 under D.1. In case the LO still rejects DARAB decision, he may go to the Special Agrarian Reform Court (SAC) for the final determination of just compensation.

Already decided by DARAB) CARP Form No. 17.d (Confirmation of Coverage and Transfer) For Claims of Corporate LOs Already decided by DARAB)

It must also be noted that under the DARAB 2003 Rules of Procedure, there is no requirement of delivery or deposit of provisional compensation based on the judgment or award by the PARAD/RARAD or DARAB. Section 10, Rule XIX of the DARAB 2003 Rules only allows execution of judgments for compensation which have become final and executory.[16] This only underscores the primary responsibility of the LBP to submit an initial valuation at which DAR would offer to purchase the land, and to deposit said amount after the landowner has rejected the offer. There is still another reason why we cannot agree with the appellate courts interpretation of Section 16, R.A. No. 6657. Petitioner had assumed a more significant role as financial intermediary for the CARP after 1989, primarily due to scandals and anomalies, which stalled its implementation during the Aquino administration, involving overvalued private haciendas voluntarily offered by big landowners in collusion with DAR officers and employees. The most notorious of these land scams even became the subject of a joint inquiry conducted by the Senate and House of Representatives committees on agrarian reform. With government acquisition of large landholdings at inflated prices, the farmers are at a losing end, as they can hardly afford the overpriced land.[17] Against this backdrop of exposed irregularities and to ensure the success of the CARP, former President Corazon C. Aquino issued EO No. 405 which transferred the primary responsibility of determining land valuation and compensation for all lands covered under CARP from the DAR to the LBP, a specialized government bank. The intent is to accelerate program implementation by tapping the LBPs professional expertise, as expressed in the EOs whereas clause: WHEREAS, the Land Bank of the Philippines employs commercial banking personnel whose professional expertise includes appraisal of agricultural properties for purposes of granting loans; WHEREAS, the implementation of the Comprehensive Agrarian Reform Program, particularly on the matter of acquisition and distribution of private agricultural lands, may be accelerated by streamlining certain administrative procedures in land valuation and compensation; NOW, THEREFORE, I, CORAZON C. AQUINO, President of the Philippines, by virtue of the powers vested in me by law, do hereby order: SECTION 1. The Land Bank of the Philippines shall be primarily responsible for the determination of the land valuation and compensation for all private lands suitable for agriculture under either the Voluntary Offer to Sell (VOS) or Compulsory Acquisition (CA) arrangements as governed by Republic Act No. 6657. The Department of Agrarian Reform shall make use of the determination of the land valuation and compensation by the Land Bank of the Philippines, in the performance of [its] functions. The objective of the procedures on land valuation provided by the Comprehensive Agrarian Reform Law (CARL) as amplified by the issuances of the DAR/DARAB is to enforce the constitutional guarantee of just compensation for the taking of private agricultural lands placed under the CARP. It must be stressed that the DARs authority to determine just compensation is merely preliminary. On the other hand, under Section 1 of EO No. 405, series of 1990, the LBP is charged with the initial responsibility of determining the value of lands placed under land reform and the just compensation to be paid for their taking. 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, LBPs 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.[18] It is now settled that the valuation of property in eminent domain is essentially a judicial function which is vested with the RTC acting as Special Agrarian Court. The same cannot be lodged with administrative agencies and may not be usurped by any other branch or official of the government.[19] Although under the CARL of 1988, the landowners are entitled to withdraw the amount deposited in their behalf pending the final resolution of the case involving the final valuation of his property, [20] the SAC may not, as in this case, order the petitioner to deposit or deliver the much higher amount adjudged by the RARAD considering that it already complied with the deposit of provisional compensation by depositing the amount of its initial valuation which was rejected by the respondent. And while the DARAB Rules of Procedure provides for execution pending appeal upon meritorious grounds,[21] respondent has not established such meritorious reasons for allowing execution of the RARAD decision pending final determination of just compensation by the court. As the Court had previously declared, the LBP is primarily responsible for the valuation and determination of compensation for all private lands. It has the discretion to approve or reject the land valuation and just compensation for a private agricultural land placed under the CARP. In case the LBP disagrees with the valuation of land and determination of just compensation by a party, the DAR, or even the courts, the LBP not only has the right, but the duty, to challenge the same, by appeal to the CA or to this Court, if appropriate.[22] Both LBP and respondent filed petitions before the SAC disputing the RARAD judgment awarding compensation in the amount of P10,294,721.00. In view of the substantial difference in the valuations -- the initial valuation by the LBP being only P1,145,806.06 -- the more prudent course is to await the final resolution of the issue of just compensation already filed with said court. Lastly, the Court finds no merit in the contention of respondent that the RARADs decision had already become final due to failure of the petitioner to appeal the same to the Board, in accordance with Section 5, Rule XIX of the 2003 DARAB Rules of Procedure. It must be noted that said Rules was adopted only on January 17, 2003. Section 1, Rule XXIV of the 2003 DARAB Rules explicitly states that: SECTION 1. Transitory Provisions. These rules shall govern all cases filed on or after its effectivity. All cases pending with the Board and the Adjudicators, prior to the date of effectivity of these Rules, shall be governed by the DARAB Rules prevailing at the time of their filing. The applicable rule is Section 2, Rule XIV (Judicial Review) of the Revised Rules of the Department of Agrarian Reform Adjudication Board which provides: Section 2. Just Compensation Cases to the Special Agrarian Courts. -- The decision, resolution or order of the Adjudicator or the Board on land valuation or determination of just compensation, may be brought to the proper Special Agrarian Court for final judicial determination.

WHEREFORE, the petition is GRANTED. The assailed Decision dated August 8, 2003 of the Court of Appeals in CA-G.R. SP No. 76572 is herebyREVERSED and SET ASIDE. The Land Bank of the Philippines is hereby declared to have duly complied with the requirement of deposit of provisional compensation under Section 16 (e) of R.A. No. 6657 and DAR AO No. 02, series of 1996. No costs. SO ORDERED. LAND BANK OF THE PHILIPPINES, G.R. No. 177511 Petitioner, Present:

- versus -

CARPIO, J., Chairperson, NACHURA, PERALTA, ABAD, and MENDOZA, JJ. Promulgated:

FORTUNE SAVINGS AND LOAN ASSOCIATION, INC., represented by PHILIPPINE DEPOSIT INSURANCE CORPORATION, Respondent.

June 29, 2010

x --------------------------------------------------------------------------------------- x DECISION ABAD, J.:

This case is about the just compensation to which an owner of land taken under the Comprehensive Agrarian Reform Law is entitled, given such owners failure to adduce evidence at the trial of the case. The Facts and the Case Respondent Fortune Savings and Loan Association, Inc. (Fortune Savings) owned a 4,230-square meter agricultural land in San Gregorio, Malvar, Batangas,[1]that it acquired for P80,000.00 after foreclosing on the mortgage constituted on the land by one of its borrowers who defaulted on a P71,500.00 loan. Fortune Savings offered to sell the property for P100,000.00 to the Department of Agrarian Reform (DAR) for inclusion in the Comprehensive Agrarian Reform Program (CARP). But petitioner Land Bank of the Philippines (Land Bank), the financial intermediary for the CARP,[2] fixed the lands value at only P6,796.00. Rejecting this amount, Fortune Savings filed a summary administrative proceeding for the determination of just compensation with the DAR Adjudication Board (DARAB). On March 3, 1999 DARAB rendered judgment, finding unreasonable Land Banks valuation of the land and fixing its value at P93,060.00. Since the Land Bank received a copy of the decision on March 17, 1999, it had 15 days from that date or until April 1, 1999 within which to file an action with the appropriate Regional Trial Court (RTC) for judicial determination of just compensation.[3] But, because April 1 fell on Maundy Thursday, a public holiday, Land Bank was able to file a petition for the determination of just compensation before the RTC of Lipa City in Agrarian Case 99-0214 only on Monday, April 5, 1999. For Land Banks failure to cause the service of summons, however, the RTC dismissed the case on December 14, 1999 without prejudice. Meanwhile, Fortune Savings ceased operations and was taken over by the Philippine Deposit Insurance Corporation as its liquidator. On April 7, 2000 or four months after the RTC dismissed Agrarian Case 99-0214, Land Bank filed another petition for the determination of just compensation for the subject land in Agrarian Case 2000-0155. Because Fortune Savings failed to file a responsive pleading, the RTC declared it in default. Land Bank presented its evidence ex parte and on May 30, 2002 the RTC rendered a decision, upholding Land Banks valuation of the property at P6,796.00 based on a technical formula adopted by the DAR. Fortune Savings appealed to the Court of Appeals (CA),[4] arguing that the DARAB decision had already become final and executory and that the Land Bank valuation of P6,796.00, adopted by the RTC was erroneous. On August 29, 2006, the CA rendered judgment, reinstating the March 3, 1999 DARAB decision and itsP93,060.00 valuation.[5] The CA ruled that Land Bank incurred delay in filing only on April 5, 1999 its petition for the determination of just compensation in Agrarian Case 99-0214 and that, consequently, the DARAB decision became final and executory on April 1, 1999. After the CA denied Land Banks motion for reconsideration, the latter came to this Court through a petition for review on certiorari. The Issues Presented The issues presented in this case are: 1. Whether or not the CA erred in holding that, since Land Bank filed its original judicial action in Agrarian Case 99-0214 beyond the 15-day period set under Rule XIII, Section 11 of the DARAB Rules, the DARAB determination of just compensation became final and executory; and

2. Whether or not the CA erred in adopting the valuation fixed by DARAB for the property at P93,060.00 instead of the P6,796.00 established by Land Bank. The Ruling of the Court One. Land Bank points out that, in ruling that the bank filed Agrarian Case 99-0214 out of time, the CA disregarded the fact that April 1, 1999, the last day for it to file the petition, was a holiday, it being Maundy Thursday. Fortune Savings, on the other hand, claims in its Comment that, even if Land Bank filed the case on time, the fact remains that the RTC dismissed the same for Land Banks failure to serve summons. Fortune Savings filing of another caseAgrarian Case 2000-0155cannot operate as a continuance of Agrarian Case 99-0214 because it was an entirely different case altogether. Agrarian Case 2000-0155 did not operate to revive Agrarian Case 99-0214 nor did it give to Land Bank the benefit of having filed on time the action that the DARAB Rules contemplated. Although the DAR is vested with primary jurisdiction under the Comprehensive Agrarian Reform Law of 1988 or CARL to determine in a preliminary manner the reasonable compensation for lands taken under the CARP, such determination is subject to challenge in the courts.[6] The CARL vests in the RTCs, sitting as Special Agrarian Courts, original and exclusive jurisdiction over all petitions for the determination of just compensation.[7] This means that the RTCs do not exercise mereappellate jurisdiction over just compensation disputes.[8] The RTCs jurisdiction is not any less original and exclusive because the question is first passed upon by the DAR. The proceedings before the RTC are not a continuation of the administrative determination. Indeed, although the law may provide that the decision of the DAR is final and unappealable, still a resort to the courts cannot be foreclosed on the theory that courts are the guarantors of the legality of administrative action.[9] The taking of property under the CARL is a government exercise of the power of eminent domain. Since the determination of just compensation in eminent domain proceedings is a judicial function, such determination cannot be made to depend on the existence of administrative proceedings of a similar nature. Thus, even while the DARAB summary administrative hearing for determination of just compensation is pending, the interested party may file a petition for judicial determination of the same.[10] In another case, the Court allowed the filing with the trial court of a petition to fix just compensation despite failure of the landowner to seek reconsideration of the DARs valuation.[11] Consequently, Land Banks filing of Agrarian Case 2000-0155 after the dismissal without prejudice of Agrarian Case 99-0214 cannot be regarded as barred by the filing of the latter case beyond the 15-day period prescribed under Rule XIII, Section 11 of the DARAB Rules. The procedural soundness of Agrarian Case 2000-0155 could not be made dependent on the DARAB case, for these two proceedings are separate and independent. Two. In the matter of the amount of just compensation to which Fortune Savings is entitled, the Court notes that the latter forfeited by default its right to present evidence of just compensation before the RTC. Thus, the latter court simply accepted the computation and supporting documents that Land Bank adduced at the trial, which computation was at P6,796.00 based on the formula provided by Section 17 of the CARL. But, although the formula found in Section 17 of the CARL may be justly adopted in certain cases, it is by no means the only formula that the court may adopt in determining just compensation. The Court finds too iniquitous the amount of P6,796.00 for the land. As Fortune Savings pointed out, P6,796.00 is just the price of a 14-inch television set, yet what is at stake in this case is a 4,230-square meter land with 43 coconut-bearing trees and 6 jackfruit trees, certainly with potential for greater productivity than a television set. That Fortune Savings was willing to pay P80,000.00 for the property is proof that the property was valued far more than theP6,796.00 fixed by the RTC. The CA adopted the DARAB valuation of P93,060.00 for the subject land for a technical reason. But, since DARAB fixed the amount based on its expertise and since that amount is not quite far from the price for which Fortune Savings bought the same at a public auction, the Court is inclined to accept such valuation. Considering the relatively small amount involved, this would be a far better alternative than remanding the case and incurring further delay in its resolution. WHEREFORE, the Court PARTIALLY GRANTS the petition. The August 29, 2006 decision and April 18, 2007 resolution of the Court of Appeals in CA-G.R. CV 76816 are REVERSED and SET ASIDE, except that the valuation of the subject property at P93,060.00 as originally contained in the March 3, 1999 decision of the DARAB, and which was adopted by the Court of Appeals, is AFFIRMED. For the reasons stated above, petitioner Land Bank of the Philippines is directed to pay the respondent Fortune Savings and Loan Association, Inc. the sum of P93,060.00 as just compensation for the taking of its land with legal interest from the time of the finality of this decision until it is paid in full. SO ORDERED. AND BANK OF THE No. 183279 G.R. No. 183279 G.R.

PHILIPPINES, Petitioner,

Present: CORONA, J., Chairperson, VELASCO, JR., NACHURA, PERALTA, and MENDOZA, JJ.

- versus -

DEPARTMENT OF AGRARIAN REFORM ADJUDICATION BOARD and HEIRS OF VICENTE ADAZA, HEIRS OF ROMEO ADAZA, and HEIRS OF CESAR ADAZA, represented by RUSSEL ADAZA, Respondents.

Promulgated: January 25, 2010

x-----------------------------------------------------------------------------------------x

DECISION VELASCO, JR., J.: The Case Appealed under Rule 45 are the Decision[1] and Resolution[2] of the Court of Appeals (CA) dated December 14, 2007 and June 3, 2008, respectively, in CA-G.R. SP No. 00984, affirming the orders of the Department of Agrarian Reform Adjudication Board (DARAB) that granted private respondents motion to withdraw amended valuation.

The Facts Private respondents, namely, the heirs of Vicente, Romeo, and Cesar, all surnamed Adaza, represented by Russel Adaza (Adazas, collectively), were owners of a tract of land with an area of 359 hectares, more or less, situated in Patagan, Manukan, Zamboanga del Norte and covered by Transfer Certificate of Title No. T-42963. Of the total, the Department of Agrarian Reform (DAR) identified a 278.4092-hectare portion as suitable for compulsory acquisition under the comprehensive agrarian reform program (CARP) pursuant to the Comprehensive Agrarian Reform Law of 1988 or Republic Act No. (RA) 6657, otherwise known as the CARP Law. In August 1991, the DAR sent out a notice of coverage. The claim folder profile was then endorsed to petitioner Land Bank of the Philippines (LBP) to determine the value of the land. The LBP assigned the covered 278.4092-hectare area an aggregate value of PhP 786,654.46. The DAR, in turn, offered the same amount to the Adazas as just compensation for their landholding, but the latter considered the valuation for their developed property unreasonably low and rejected the offer. This prompted DAR to order the LBP to deposit the amount aforestated to the account of the Adazas, who then secured the release of that amount without prejudice to their right to a final determination of just compensation. The DAR then subdivided the property into smaller lots and, in December 1992, distributed them to identified beneficiaries. Pursuant to the pertinent provision of the then governing 2003 DARAB Rules of Procedure in relation to Section 16(d) of RA 6657 in case of contested valuation, the Provincial Agrarian Reform Adjudicator (PARAD) of Zamboanga del Norte conducted a summary administrative hearing to determine just compensation. In the course of the hearing and on its preliminary estimation that the computation was unconscionably low, the PARAD, by Order of December 22, 2003,[3] asked the LBP to undertake another landsite inspection and recomputation of the value of the subject landholding in accordance with the latest formulae on land valuation. The LBP later submitted its compliance report, [4] in which it came out with a new revalued figure and prayed that the PARAD adopt the recomputed value in the amount of PhP 3,426,153.80 as just compensation for the Adazas CARP-covered property. On May 23, 2005, the PARAD issued another Order[5] disposing as follows: WHEREFORE, x x x order is hereby issued affirming the recomputed valuation of the covered landholding in the sum of P3,426,153.80 to be in accordance with the latest applicable administrative order and guidelines, without prejudice to the right of the [Adazas] to appeal, or go to the Special Agrarian Court whenever proper.[6] The Adazas found the reevaluated amount level still too low, prompting them to appeal to the DARAB, docketed as DARAB Case No. 13719LV. Pending resolution of their appeal, the Adazas interposed a Motion to Withdraw Amended Valuation[7] on August 9, 2005, seeking the release to them of the amount representing the difference between the initial valuation and the second valuation. The Adazas alleged having long been dispossessed of the subject property, while the farmer-beneficiaries installed on it are enjoying full possession of it.

In its Comment[8] dated October 6, 2005, the LBP disputed the Adazas right to lay claim on the recomputed valuation, and, at the same time, questioned the legality of their right before the DARAB. Thus, pending finality of the resolution setting just compensation, the LBP added, no execution shall lie insofar as the incremental value is concerned. By Order[9] dated January 2, 2006, the DARAB granted the motion to withdraw amended valuation, with a directive to its Secretariat to issue the necessary writ of execution, on the strength of the ensuing ratiocination: Execution pending appeal is allowed when superior circumstances demanding urgency outweigh the damages that may result from the issuance of the writ. [The Adazas] were already deprived of the beneficial ownership of the subject landholding effective December 1992. x x x To the mind of this Board, the long years of waiting by the [Adazas] for the final determination of just compensation of the subject landholding outweighs the damages that may result from the issuance of the writ of execution pending appeal. Staying the execution of the 23 May 2005 Decision of the Adjudicator a quo who affirmed the valuation made by the LBP, would bring more injustice to [the Adazas]. x x x Besides, Section [1]6 of RA 6657 does not make a distinction as to initial valuation or amended valuation made by the LBP. Any valuation made by the LBP on CARP-covered land is made pursuant to Executive Order No. 405, Series of 1990. LBP then moved for reconsideration, but the DARAB, per its Order [10] of March 14, 2006, denied the motion and reiterated its earlier directive on the issuance of a writ of execution. Therefrom, the LBP went to the CA on certiorari under Rule 65. Ruling of the Appellate Court By Decision dated December 14, 2007, as effectively reiterated in a Resolution of June 3, 2008, the CA found the allegations on grave abuse of discretion on the part of the DARAB to be baseless and accordingly denied the LBPs petition for certiorari, disposing: WHEREFORE, the petition is DENIED. The assailed Orders of the DARAB dated January 2, 2006 and March 14, 2006 are hereby AFFIRMED in toto. Hence, this petition for review, on the following legal issue: WHETHER OR NOT THE [DARAB] CAN ORDER THE RELEASE TO THE LANDOWNERS, BY WAY OF EXECUTION PENDING APPEAL, OF THE INCREMENTAL DIFFERENCE OF A LANDBANK RECOMPUTATION UPHELD IN A DECISION OF THE DAR ADJUDICATOR A QUO WITHIN THE PURVIEW OF SECTION 16, ET SEQ. OF THE CARP LAW (R.A. 6657) AND ITS IMPLEMENTING RULES. In the main, it is the LBPs posture that the DARAB cannot validly order the release of the incremental difference (amended valuation amount of PhP 3,426,153.80 original valuation amount of PhP 786,564.46 = incremental amount or difference) by way of execution pending appeal inasmuch as the amended valuation has yet to be approved by DAR. Without such approval, so LBPs argument goes, there is really no amended valuation within the ambit of Sec. 16 of the CARP Law, which contemplates of a DAR-LBP valuation. In the absence, thus, of a duly DAR-approved valuation, there is no subject for execution.[11] And at any event, LBP also argues that it has no statutory duty to release any amount resulting from any subsequent reevaluation based on an order which is not yet final and executory.[12] Our Ruling The petition is without merit. Three points need to be emphasized at the outset. First, the amount of PhP 3,426,153.80 the Adazas want to be released pending appeal, or pending final determination of just compensation, to be precise, was arrived at by LBP, its reevaluation efforts taken pursuant to Executive Order No. 405,[13] Series of 1990, Sec. 1 of which reads: SECTION 1. The [LBP] shall be primarily responsible for the determination of the land valuation and compensation for all private lands suitable for agriculture under the Voluntary Offer to Sell (VOS) or Compulsory Acquisition (CA) arrangement as governed by [RA] 6657. The [DAR] shall make use of the determination of the land valuation and compensation by the [LBP] in the performance of functions. After effecting the transfer of titles from the landowner to the Republic of the Philippines, the [LBP] shall inform the DAR of such fact in order that the latter may proceed with the distribution of the lands to the qualified agrarian reform beneficiaries x x x.

Second, the LBP, no less, had asked the PARAD to adopt LBPs recomputed value of PhP 3,426,153.80 as just compensation for the subject property. And third, the Adazas landholding had already been distributed before full payment of just compensation could be effected. In fact, the Adazas have been deprived of the beneficial use and ownership of their landholding since 1992 and have received only PhP 786,564.46 for their 278.40-hectare CARP-covered lands.[14] In light of the foregoing considerations, it is but just and proper to allow, with becoming dispatch, withdrawal of the revised compensation amount, albeit protested. The concept of just compensation contemplates of just and timely payment; it embraces not only the correct determination of the amount to be paid to the landowner, but also the payment of the land within a reasonable time from its taking.[15] Without prompt payment, compensation cannot, as Land Bank of the Philippines v. Court of Appeals[16] instructs, be considered just, for the owner is made to suffer the consequence of being immediately deprived of his land while being made to wait for years before actually receiving the amount necessary to cope with his loss. The LBPs argument that by allowing withdrawal of the incremental amount, the government may be placed at a losing end, citing the possibility that the recomputed amount may be more than the just compensable value of the 278.40 hectares taken, is specious. For one, as an exercise of police power to complement eminent domain, the forced taking of private property under the CARP puts the landowners, and not the government, in a situation where the odds are already stacked against them. One thing going for the landowners, though, is that they cannot, as a matter of law, be compelled to accept the LBPs valuation of their expropriated land and/or accept DARs offer by way of compensation. And for another, the stated risk which the DAR or the government will allegedly be exposed to if immediate withdrawal of the rejected compensation is allowed is at the moment pure speculation. The DARAB, with its presumptive expertise in agrarian land valuation, even dismissed as very remote the possibility of the LBP-amended valuation exceeding the value of the subject landholding using the valuation criteria and formulae prescribed under the law. It may be well to explicate at this juncture the nature of the right of landowners to the amount set aside for their land placed under CARP. Under the CARP Law, the landowners are entitled to withdraw the amount deposited in their behalf pending the final resolution of the case involving the final valuation of his property. This entitlement remains regardless of whether the amount is provisional, as contemplated in Sec. 16(d) and (e) of RA 6657 or the final compensation as provided under Sec. 18 of the same law. The provisions referred to respectively provide: Sec. 16. Procedure for Acquisition of Private Lands. For purposes of acquisition of private lands, the following procedures shall be followed: xxxx (d) In case of rejection [of the offer of DAR to pay a corresponding value in accordance with the valuation set forth in Section 17 and 18] or failure to reply, the DAR shall conduct summary administrative proceedings to determine the compensation for the land 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 the notice. x x x (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 to the qualified beneficiaries. (Emphasis supplied.) Sec. 18. Valuation and Mode of Payment. The LBP shall compensate the landowner the amount as may be agreed upon by the landowner and the DAR and the LBP in accordance with the criteria provided for in Sections 16 and 17,[17] and other provisions hereof or as may be finally determined by the court as the just compensation for the land.

In Land Bank of the Philippines v. Court of Appeals, the Court stressed the need to allow the landowners to withdraw immediately the amount deposited in their behalf, pending final determination of what is just compensation for their land, thus: The attempt to make a distinction between the deposit of compensation under Section 16(e) of RA 6657 and determination of just compensation under Section 18 is unacceptable. To withhold the right of the landowners to appropriate the amounts already deposited in their behalf as compensation for their properties simply because they rejected the DARs valuation, and notwithstanding that they have

already been deprived of the possession of such properties is an oppressive exercise of eminent domain. The irresistible expropriation of private respondents properties was painful enough. But DAR rubbed it in all the more by withholding that which rightfully belongs to private respondents in exchange for the taking x x x. This is misery twice bestowed on private respondents, which the Court must rectify. Hence, we find it unnecessary to distinguish between provisional compensation under Section 16(e) and final compensation under Section 18 for purposes of exercising the landowners right to appropriate the same. The immediate effect in both situations is the same, the landowner is deprived of the use and possession of his property for which he should be fairly and immediately compensated.[18] (Emphasis ours.) The LBP, in a bid to stall further the Adazas claim to the difference of the new and original valuation amounts, would foist the argument that the sum which the CARP Law requires it to set aside and which the landowner may withdraw is the amount corresponding to the LBP-DAR valuation. LBP adds, however, that in the instant case, the DAR has yet to approve the new valuation. The Court may accord cogency to LBPs argument, but for the fact that the Provincial Adjudicator a quo and eventually the DARAB affirmed the new property valuation made by the LBP. By virtue of such affirmatory action, the DAR has, in effect, approved the PhP 3,426,153.80-LBP valuation, DARAB being the adjudicating arm of DAR.[19] Lest it be overlooked, the DARAB has primary jurisdiction to adjudicate all agrarian disputes, inclusive of controversies relating to compensation of lands under the CARP Law,[20] as the determination of just compensation is essentially a judicial function.[21] As aptly observed by the DARAB, there is no way that such amended valuation would go down as it is the landowners who have exhibited opposition to the valuation. The LBPs lament about the impropriety of what amounts to the DARAB allowing execution pending appeal without requiring the Adazas to post a bond does not persuade. Under Rule XX, Section 2 of the 2003 DARAB Rules of Procedure,[22] the DARAB may grant a motion to execute an order or decision pending appeal upon meritorious grounds. To the DARAB, there is no more ground more meritorious than the [Adazas] agony of waiting for a long period of time to have their properties properly valued.[23] We cannot agree more. The length of time that the Adazas have been deprived of their property without receiving their just due on a rather simple issue of just compensation will suffice to justify the exercise by DARAB of its discretion to allow execution pending appeal. To paraphrase what we said in Apo Fruits Corporation v. Court of Appeals,[24] allowing the taking of the landowners property and leaving them empty-handed while government withholds compensation are undoubtedly oppressive. On the matter of allowing execution pending appeal without requiring the Adazas to put up a bond, we cite with approval what the DARAB sensibly wrote on that regard: As [regards] the posting of bond, the office of bond is for the payment of damages which the aggrieved party may suffer in the event the final order or decision is reversed on appeal. As stated in the preceding paragraph the possibility of having the LBP amended valuation be reversed is very remote. Thus, this Board is of the opinion that posting of bond is not necessary for the execution pending appeal of the 23 May 2005 decision. Besides the amount to be released is the amount computed by LBP itself. WHEREFORE, this petition is hereby DENIED. SO ORDERED. LAND BANK OF THE PHILIPPINES, Petitioner, G.R. No. 165428

Present: - versus CORONA, J., Chairperson, CHICO-NAZARIO, VELASCO, JR., NACHURA, and PERALTA, JJ.

TERESITA PANLILIO LUCIANO, Respondent.

Promulgated: November 25, 2009 x-----------------------------------------------------------------------------------------x

DECISION PERALTA, J.: For our resolution in the instant petition for review on certiorari filed by petitioner Land Bank of the Philippines are the Decision[1] dated August 3, 2004 and the Resolution[2] dated September 28, 2004 of the Court of Appeals in CA-G.R. CV No. 60263.[3] The factual antecedents are as follows: Respondent Teresita Panlilio Luciano is the registered owner of two parcels of agricultural lands covered by Transfer Certificate of Title (TCT) Nos. 223893 and 223894, with an area of 10.4995 hectares and 12.7526 hectares, respectively (subject lands), both situated in Barangay Amucao, Tarlac, Tarlac. On August 29, 1989, respondent voluntarily offered to sell the subject lands to the government under the Comprehensive Agrarian Reform Law, (CARL) or Republic Act (RA) No. 6657, as amended.[4] On August 13, 1991, the Department of Agrarian Reform (DAR) sent Notices of Acquisition[5] to respondent as well as endorsed respondent's claim folders[6]to petitioner Land Bank for the determination of the value of the subject lands, pursuant to Land Bank's mandate under Executive Order (EO) No. 405. Petitioner Land Bank made a total valuation of P425,626.67 for the subject lands applying DAR Administrative Order (AO) No. 17, series of 1989, as amended, and the applicable provisions of RA No. 6657.[7] Respondent rejected the valuation; thus, in accordance with Section 16 (d) of RA No. 6657, the Department of Agrarian Reform Adjudication Board (DARAB) undertook a summary administrative proceeding. During the pendency of the case, DAR AO No. 6, series of 1992, was promulgated. Consequently, the DARAB issued an Order directing petitioner Land Bank to revalue the subject lands applying the pertinent provisions of DAR AO No. 6, series of 1992. Petitioner Land Bank came up with P643,662.54 as the total value for the subject lands.[8] Dissatisfied with the valuation, respondent, on January 23, 1995, filed with the Special Agrarian Court (SAC) of Tarlac, Tarlac, a petition[9] for eminent domain with prayer for a writ of preliminary mandatory injunction. She alleged that petitioner Land Bank erred in applying AO No. 6, series of 1992, in computing the just compensation for the subject lands, since such AO had been illegally issued by the Secretary of Agrarian Reforms because the AO repealed Section 56 of RA No. 3844 (The Agricultural Land Reform Code), in relation to Sections 17 and 75 of RA No. 6657. Respondent likewise prayed for the issuance of a writ of preliminary mandatory injunction, which would order petitioner Land Bank to deposit the preliminary compensation required under Section 16 (e) of RA No. 6657, as the possession and titles of the subject lands were already transferred to the DAR; and that she be authorized to withdraw the amount ordered deposited, pending determination of the just compensation; and she asked for damages. DAR filed its Answer with Special and Affirmative Defenses[10] and argued that Land Bank's valuation of the subject lands bore the presumption of regularity, and that DAR could not be made to answer for damages in the performance of its public duties and responsibilities. DAR agreed to deposit the amount ofP643,662.54, but objected to the withdrawal of the said amount until after the final determination of the just compensation. In her Pre-Trial Brief[11] dated May 26, 1997, respondent admitted the areas acquired, as well as the average gross production per hectare, used by petitioner Land Bank in computing the just compensation, thus, limiting the issue to: What capitalization rate should be used in determining just compensation? Will it be 6% as provided in RA No. 3844 before its amendment, or 20%, 16% or 12%, as successively provided in the different DAR administrative orders? On September 30, 1997, petitioner filed a Motion for Summary Judgment,[12] which was granted. On January 6, 1998, the RTC rendered a Decision,[13] the dispositive portion of which reads: WHEREFORE, the Court finds that the just compensation for the land covered by TCT No. 223893, with an area of 10.4995 hectares, is P825,050.71; and the land covered by TCT No. 223894, with an area of 12.7526 hectares, is P1,002,099.30 to be paid in accordance with the mode of payment under Section 18 of R.A. 6657.[14] In arriving at its decision, the RTC made the following disquisitions, thus: R.A. 6657 merely sets the criteria which [may be] used as bases in determining just compensation, such as the cost of acquisition, income, sworn statement of owners, assessments by government assessors. (Sec. 17, RA 6657). The petitioner (herein respondent) should have submitted evidence on these aspects, but also did not. The petitioner filed a motion for summary judgment which is appropriate, considering that the answer filed by the DAR did not tender any genuine issue. Petitioner adopted, as exhibit, the Land

Valuation Worksheet. The Court, based on this limited data appearing on the said valuation sheet, had to fix the just compensation. The average gross production is 78.58 canvas of palay per hectare. The computed net income is fixed at 20%. The DAR, using the computed or capitalized net income divided by 16% [came] up with a value of P20,921.94 per hectare, pegging the selling price of palay at P4.26 per kilo. Thus, the total compensation, as per DAR's computation, is P192,191.98, using its formula. By any stretch of the imagination, the Court cannot accept as just compensation the amount or value of the land per hectare at P20,921.94 fixed by respondents. Even raw lands or hilly lands which are offered for sale will command a higher price. That price is not even equivalent to the price of a square meter of a parcel of land in the center of Manila. Again, petitioner rely on the provision of RA 3844, requiring the payment of five (5) times the gross average harvest as disturbance compensation to be paid to tenants ejected by a Court's decision. (Sec. 36 (1), RA 3844, as amended by RA 6389). This could not be applicable in the reverse, i.e., if the land will be sold by the landowner. The only reason the landowner is required to pay five (5) times the gross average harvest as disturbance compensation is to discourage the ejectment of tenants. This Court is of the opinion that P.D. No. 27 may still be applied in this case, even in a suppletory character. (Sections 75 and 76, RA 6657). The formula specified therein is simple and just as it is based on the average gross production for the three cropping seasons/years prior thereto. It is also in consonance with justice that the selling price of palay should be the current price of P8.00 per kilo rather than the P35.00 per cavan. The offer of the petitioner for the price of the land is P50,000.00 when the offer was made in 1991. Thus, computed under P.D. No. 27, the value should be 1. 2. 78.58 x 400 x 2.5 x 10.4995 for the 10.4995 hectares; 78.58 x 400 x 2.5 x 12.7526 for the 12.7526 hectares.[15]

Petitioner Land Bank filed a motion for reconsideration. The RTC then issued an Order which deferred the resolution on the motion for reconsideration and directed petitioner to submit the evidence it intended to present should the case be re-opened. Petitioner Land Bank complied and submitted the evidence required in the aforesaid Order.[16] On March 4, 1998, the RTC issued a Resolution[17] denying petitioner Land Bank's motion for reconsideration. Petitioner Land Bank filed an appeal with the CA. On August 3, 2004, the CA issued its assailed Decision, the dispositive portion of which reads: WHEREFORE, the Decision dated January 6, 1998 of the Special Agrarian Court of Tarlac, Tarlac, must be, as it hereby is, VACATED and SET ASIDE. Agrarian Case No. 152 is REMANDED to the Regional Trial Court of Tarlac, Tarlac, Branch 63, which is hereby directed to allow the parties to present evidence for the determination of just compensation.[18] In so ruling, the CA averred (1) that the RTC, sitting as SAC, may suppletorily apply the formula embodied in PD No. 27 in computing the just compensation for lands pursuant to the voluntary scheme under RA No. 6657; (2) that the RTC had the discretion to choose which formula to apply in determining just compensation, having in view Section 17 of RA No. 6657; (3) that Land Bank determined only the initial valuation of lands covered by CARP, but it was the SAC that must ultimately decide; (4) that DAR Administrative Order No. 6, series of 1992 may only serve as a guide for the SAC in determining just compensation, but may not supplant or supersede the SAC's own judgment. The CA found that the RTC erred in fixing at P8.00 a kilo, or P400.00 per cavan, the selling price of palay for the following reasons: (1) the selling price of palay should not be the current price, but the selling price at the time of the taking, which was on August 28, 1989; and (2) there was no evidence to show that indeed the amount used by the RTC was the current selling price of palay. Petitioner Land Bank filed a Motion for Partial Reconsideration alleging that the remand of the case to the RTC for the determination of just compensation should not only be limited to the determination of the selling price of palay or the application of formula under PD No. 27, but it must be allowed to present evidence in accordance with the factors enumerated in Section 17 of RA No. 6657. On September 28, 2004, the CA denied petitioner Land Bank's partial motion for reconsideration. Hence, this petition wherein petitioner raises the lone assigned error.

THE HONORABLE COURT OF APPEALS ERRED IN LAW IN RULING THAT THE COURT A QUO MAY EMPLOY SUPPLETORILY THE FORMULA EMBODIED IN P.D. 27, BUT NOT THE PRESCRIBED PRICE OF PALAY UNDER E.O. 228, THUS LIMITING THE COMPUTATION OF THE JUST COMPENSATION TO THE APPLICABLE SELLING PRICE OF PALAY ONLY IN THE WOULD-BE PROCEEDINGS IN THE COURT A QUO.[19] Petitioner contends that the subject lands were undisputedly acquired by the government through the DAR pursuant to RA No. 6657; thus, the determination of the just compensation must be based on several factors enumerated in Section 17 of RA No. 6657 and not PD No. 27 as found by the RTC and affirmed by the CA. We agree. In Land Bank of the Philippines v. Banal,[20] the subject property was compulsorily acquired by the DAR pursuant to RA No. 6657. As the registered owners rejected Land Bank's valuation which applied the formula in DAR AO No. 6, series of 1992, as amended by DAR AO No. 11, series of 1994, a summary administrative proceeding was conducted before the Provincial Agrarian Reform Adjudicator (PARAD) to determine the valuation of the land. The PARAD affirmed the Land Bank's valuation. Dissatisfied, the registered owners filed a petition for the determination of just compensation with the RTC. On the same day after the pre-trial, the RTC issued an Order which dispensed with the hearing and directed the parties to submit their respective memoranda. The RTC rendered judgment, fixing the just compensation based on the facts established in another case pending before it using the formula prescribed under EO No. 228 and RA No. 3844. Land Bank filed an appeal with the CA, which affirmed the RTC decision. On Land Bank's petition for review filed with us, we found that the CA and the RTC erred in applying the formula prescribed under EO No. 228 and RA No. 3844 in determining the valuation of the subject land and ordered the remand of the case to the RTC for trial on the merits. The RTC was ordered to consider the factors provided under Section 17 of RA No. 6657 in determining the proper valuation of the subject property and the formula in DAR AO No. 6, series of 1992, as amended by DAR AO No. 11, series of 1994. In so ruling, we made the following disquisitions, to wit: x x x In determining just compensation, the RTC is required to consider several factors enumerated in Section 17 of R.A. 6657, as amended, thus: Sec. 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, and the assessment made by government assessors shall be considered. The social and economic benefits contributed by the farmers 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. These factors have been translated into a basic formula in DAR Administrative Order No. 6, Series of 1992, as amended by DAR Administrative Order No. 11, Series of 1994, issued pursuant to the DARs rule-making power to carry out the object and purposes of R.A. 6657, as amended. The formula stated in DAR Administrative Order No. 6, as amended, is as follows: LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1) LV = Land Value CNI = Capitalized Net Income CS = Comparable Sales MV = Market Value per Tax Declaration The above formula shall be used if all the three factors are present, relevant and applicable. A.1 When the CS factor is not present and CNI and MV are applicable, the formula shall be: LV = (CNI x 0.9) + (MV x 0.1) When the CNI factor is not present, and CS and MV are applicable, the formula shall be: LV = (CS x 0.9) + (MV x 0.1) When both the CS and CNI are not present and only MV is applicable, the formula shall be: LV = MV x 2

A.2

A.3

Here, the RTC failed to observe the basic rules of procedure and the fundamental requirements in determining just compensation for the property. Firstly, it dispensed with the hearing and merely ordered the parties to submit their respective memoranda. Such action is grossly erroneous since the

determination of just compensation involves the examination of the following factors specified in Section 17 of R.A. 6657, as amended: 1. the cost of the acquisition of the land; 2. the current value of like properties; 3. its nature, actual use and income; 4. the sworn valuation by the owner; the tax declarations; 5. the assessment made by government assessors; 6. the social and economic benefits contributed by the farmers and the farmworkers and by the government to the property; and 7. the non-payment of taxes or loans secured from any government financing institution on the said land, if any. Obviously, these factors involve factual matters which can be established only during a hearing wherein the contending parties present their respective evidence. In fact, to underscore the intricate nature of determining the valuation of the land, Section 58 of the same law even authorizes the Special Agrarian Courts to appoint commissioners for such purpose.[21] The mandatory application of the above-mentioned guidelines in determining just compensation was reiterated in Land Bank of the Philippines v. Lim,[22] wherein we ordered the remand of the case to the RTC for the determination of just compensation strictly in accordance with DAR AO 6-92, as amended.[23] In this case, respondent voluntarily offered to sell the subject lands to the DAR pursuant to RA No. 6657; thus, we find that the CA erred in ruling that the RTC correctly took recourse under PD No. 27 in determining the just compensation of the subject lands. The valuation factors under Section 17 of RA No. 6657 and the formula under DAR AO No. 6, series of 1992, as amended by DAR AO No. 11, series of 1994, should be applied since the subject lands were acquired under RA No. 6657[24] and not under PD No. 27. In fact, we have repeatedly held that if the agrarian reform process under PD No. 27 is still incomplete, as the just compensation to be paid to the owners has yet to be settled; and considering the passage of RA No. 6657 before the completion of the process, the just compensation should be determined and the process concluded under the latter law.[25] Section 75 of RA No. 6657 provides that PD No. 27 and E.O. No. 228 have only suppletory effect.[26] In Land Bank v. Natividad,[27] we held that it would certainly be inequitable to determine just compensation based on the guidelines provided by PD No. 27 and EO No. 228, considering the DAR's failure to determine the just compensation for a considerable length of time; and that it is especially imperative that just compensation should be determined in accordance with RA No. 6657, and not PD No. 27 and EO 228, considering that just compensation should be the full and fair equivalent of the property taken from its owner by the expropriator, the equivalent being real, substantial, full and ample. Consequently, if the determination of just compensation of lands brought under the Operation Land Transfer of PD No. 27 was made under RA No. 6657, the RTC should have applied the provisions of RA No. 6657 to determine the just compensation of the subject lands, as they were voluntarily offered for sale under the said law. Section 17 of RA No. 6657, which is specifically pertinent, enumerates the factors to be considered in the determination of just compensation, thus: Sec. 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, and the assessment made by government assessors shall be considered. The social and economic benefits contributed by the farmers 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. and these factors have been translated into a basic formula by the DAR pursuant to its rule-making power under Section 49 of R.A. No. 6657. In this case, the basic formula applicable is DAR AO No. 6, series of 1992, the then governing regulation applicable to the lands that respondent voluntarily offered to sell under RA No. 6657. And the factors enumerated under Section 17 of RA No. 6657 as implemented through DAR AO No. 6, series of 1992, as amended, involve factual matters that can be established only during a hearing wherein the contending parties should present their respective evidence.[28] Petitioner Land Bank claims that while the determination of just compensation involves judicial discretion, the RTC should take into serious consideration the facts and data gathered by the Land Bank as the administrative agency mandated by law to determine the valuation of the agricultural lands covered by land reform; and that it has the expertise to do the land valuation. Under Section 1 of E.O. No. 405, series of 1990, the Land Bank of the Philippines is charged with the initial responsibility of determining the value of lands placed under land reform and the just compensation to be paid for their

taking. Through a notice of voluntary offer to sell (VOS) submitted by the landowner, accompanied by the required documents, the DAR evaluates the application and determines the lands suitability for agriculture. The LBP likewise reviews the application and the supporting documents and determines the valuation of the land. Thereafter, the DAR issues the Notice of Land Valuation to the landowner. 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. This, in essence, is the procedure for the determination of just compensation. [29] 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 Special Agrarian Court, that should make the final determination of just compensation, taking into consideration the factors enumerated in Section 17 of RA No. 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. 6, series of 1992, as amended by DAR AO No. 11, series of 1994. Thus, the remand of the case to the appropriate court below is necessary for the parties to present their evidence, as we are not a trier of facts. Considering, however, that respondent was already 96 years old when she filed her Comment in 2006 on the instant petition for review, and that the subject lands were acquired in 1991, we find these special circumstances justifying the acceleration of the final disposition of this case, and deem it best to pro hac vice commission the Court of Appeals as its agent to receive and evaluate the evidence of the parties. [30] Its mandate is to ascertain the just compensation due in accordance with this Decision, applying Section 17 of R.A. No. 6657 and DAR AO No. 6, series of 1992, as amended. In Land Bank of the Philippines v. Gallego,[31] we held that the remand of cases before us to the Court of Appeals for the reception of further evidence is not a novel procedure. It is sanctioned by the Rules of Court, as we have availed ourselves of the procedure in quite a few cases. WHEREFORE, the Decision of the Court of Appeals dated August 3, 2004 in CA-G.R. CV No. 60263 is REVERSED and SET ASIDE. Agrarian Case No. 152 is REMANDED to the Court of Appeals, which is directed to receive evidence and determine with dispatch the just compensation due respondent in accordance with Section 17 of RA No. 6657 and DAR AO No. 6, series of 1992, as amended by DAR AO No. 11, series of 1994. SO ORDERED.

G.R. No. 171674 Present: DEPARTMENT OF AGRARIAN REFORM (DAR), represented by HON. NASSER C. PANGANDAMAN, in his capacity as DAR OICSecretary, Petitioner, YNARES-SANTIAGO, J., Chairperson, CHICO-NAZARIO, VELASCO, JR., NACHURA, and PERALTA, JJ.

- versus -

Promulgated: August 4, 2009

CARMEN S. TONGSON, Respondent. x-----------------------------------------------------x

DECISION

PERALTA, J.: Before this Court is a Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court seeking to set aside the August 30, 2005 Decision[2] and February 10, 2006 Resolution[3] of the Court of Appeals (CA) in CA-G.R. CV No. 64176.

The facts of the case: Respondent Carmen S. Tongson is the owner of four parcels of agricultural land located in Davao City. Three of these properties are located in Bayabas, Toril and the other located at Wangan, Calinan. Since the properties were primarily devoted to rice and corn under a system of lease-tenancy agreement, the same were brought under the coverage of Presidential Decree No. 27[4] (PD 27), otherwise known as Tenants Emancipation Decree.[5] Sometime in 1988, the petitioner Department of Agrarian Reform offered to pay respondent P9,000.00 per hectare for her properties in Bayabas, Toril. Respondent, however, did not act on the offer as she was then leaving for the United States for her husbands medical treatment.[6] In 1989, upon her return to Davao, respondent was surprised to learn that, except for the portions devoted to orchards and planted with coconuts, all her properties in Wangan, Calinan and in Bayabas, Toril were taken over by petitioner.[7] Respondent alleged that petitioner summarily took her properties without any notice and had fixed the acquisition cost for the same at P1,500.00 per hectare for those located at Bayabas, Toril and P800.00 per hectare for the one located at Wangan, Calinan. Lastly, respondent alleged that petitioner subsequently issued Emancipation Patents to the farmerbeneficiaries.[8] Petitioner denied the allegations and averred that the properties were placed under the coverage of the agrarian reform program; hence, not summarily taken. Likewise, petitioner claimed that respondent was notified of the proceedings when they made the initial offer to her. Lastly, petitioner claimed that the acquisition cost was arrived at based on PD 27 in relation to Executive Order No. 228[9] (EO 228), and that the subsequent issuance of Emancipation Patents was part of the implementation of the program.[10] On October 25, 1993, respondent filed a Petition[11] for the determination of just compensation before the Special Agrarian Court (SAC), Branch 15, of the Regional Trial Court of Davao City. The same was docketed as Civil Case No. 22,408-93. During the trial, the SAC formed a Board of Commissioners to appraise the value of the properties. Thereafter, the commissioners using the market-date approach submitted their Report.[12] Taking into consideration the value of the neighboring properties based on sale offerings and sale transactions, the Commissioners fixed the Bayabas properties at P75,000.00 per hectare and the Wangan property at P90,000.00 per hectare.[13] On March 17, 1999, after due deliberation and on the basis of the Commissioners Report, the SAC rendered a Decision[14] the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered ordering the respondent [herein petitioner] to pay the petitioner [herein respondent] the following sums: 1. Twenty-five thousand pesos per hectare for the thirty hectares in Bayabas, Toril the respondent got and distributed to beneficiaries, plus legal interest to compute from June 1, 1989 until fully paid. Forty thousand pesos per hectare for the twenty hectares in Wangan, Calinan that the respondent got and distributed to beneficiaries, plus legal interest to compute from June 1, 1989 until fully paid. SO ORDERED.[15]

2.

Petitioner then appealed to the CA via Rule 41 of the Rules of Court arguing in the main that the SAC erred in not applying the provisions of PD 27 and EO 228 in determining the value of the properties in dispute.[16] On August 30, 2005, the CA rendered a Decision, the dispositive portion of which reads: WHEREFORE, in view of the foregoing, the appeal is hereby DISMISSED subject to modification regarding the commissioners fees, the assailed decision is hereby AFFIRMED. SO ORDERED.[17] The CA ruled that Republic Act No. 6657[18] (RA 6657), or the Comprehensive Agrarian Reform Law of 1988, was applicable in the determination of just compensation. It ruled that RA 6657 made all laws pertaining to the agrarian reform program to have suppletory application only.[19] Furthermore, the CA held that RA 6657 brought under its coverage all agricultural lands, including those where the process of agrarian reform coverage was started under PD 27 but was not completed under the decree.[20]

Petitioner filed a Motion for Reconsideration,[21] which was denied by the CA in the Resolution[22] dated February 10, 2006. Hence, herein appeal, with petitioner raising a lone assignment of error, to wit: THE TRIAL COURT ERRED WHEN IT CONSIDERED FACTORS NOT THEN EXISTING AT THE TIME OF ITS TAKING, THUS, UNDULY AND TREMENDOUSLY INCREASED THE VALUATION AND, RESULTANTLY, THE AMOUNT, AS FIXED BELOW, WAS EXORBITANT, AN OVERPRICE, WHEN CONSIDERED IN THE LIGHT OF THE FACTS AND CIRCUMSTANCES THEN OCCURING ON OCTOBER 21, 1972.[23]

The petition is bereft of merit.

Petitioner is adamant that for purposes of computation of just compensation the same should have been based on PD 27 in relation to EO 228. The pertinent portions of PD 27 read: xxxx 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 (2-1/2) 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. (Emphasis supplied)

Implementing the formula under PD 27, EO 228 states: xxxx SECTION 2. Henceforth, the valuation of rice and corn lands covered by P.D. No. 27 shall be based on the average gross production determined by the Barangay Committee on Land Production in accordance with Department Memorandum Circular No. 26, series of 1973 and related issuances and regulation of the Department of Agrarian Reform. The average gross production per hectare shall be multiplied by two and a half (2.5), the product of which shall be multiplied by Thirty-Five Pesos (P35.00), the government support price for one cavan of 50 kilos of palay on October 21, 1972, or Thirty-One Pesos (P31.00), the government support price for one cavan of 50 kilos of corn on October 21, 1972, and the amount arrived at shall be the value of the rice and corn land, as the case may be, for the purpose of determining its cost to the farmer and compensation to the landowner.

On the other hand, respondent contends that RA 6657 should be the basis for the computation of just compensation. Section 17 of which reads: Sec. 17. Determination of Just Compensation. In determining just compensation, the cost of acquisition of the land, the current value of the like properties, its nature, actual use and income, the sworn valuation by the owner, the tax declarations, and the assessment made by government assessors shall be considered. The social and economic benefits contributed by the farmers and the farm workers 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.[24]

Clearly, PD 27 and RA 6657 provide different factors for the computation of just compensation. The former uses average crop harvest as a consideration, whereas, the latter uses the current value of like properties, its nature, actual use and income, the sworn valuation by the owner, the tax declarations, and the assessment made by government assessors as factors for consideration in determining just compensation. In the case at bar, it is undisputed by the parties that the lands were acquired under PD 27. Moreover, it is also undisputed that just compensation has not yet been settled prior to the passage of RA 6657. Thus, the issue to be determined is what law shall govern in the determination of just compensation. The issue, once the subject of a number of cases, has finally been settled by this Court in recent years. It has been ruled that, if just compensation was not settled prior to the passage of RA 6657, it should be computed in accordance with the said law, although the property was acquired under PD 27.[25]

In Landbank of the Philippines v. Carolina B. Vda. de Abello, et al.,[26] this Court ruled: Under the factual circumstances of the case, the agrarian reform process is still incomplete as the just compensation to be paid respondents has yet to be settled. Considering the passage RA 6657 before the completion of this process, the just compensation should be determined and the process concluded under the said law. Indeed, this Court has time and again upheld the applicability of RA 6657, with PD 27 and EO 228 having only suppletory effect, conformably with our ruling in Paris v. Alfeche. Likewise, in Land Bank of the Philippines vs. Heirs of Angel T. Domingo,[27] this Court ruled: In Land Bank v. Natividad, the Court held that the determination of just compensation in accordance with RA 6657, and not PD 27 and EO 228, is especially imperative considering that just compensation should be the full and fair equivalent of the property taken from its owner by the expropriator, the equivalent being real, substantial, full and ample. In this same case, this Court also had the occasion to discuss the just compensation for PD 27 lands, thus: Land Banks contention that the property was acquired for purposes of agrarian reform on October 21, 1972, the time of the effectivity of PD 27, ergo just compensation should be based on the value of the property as of that time and not at the time of possession in 1993, is likewise erroneous. In Office of the President, Malacaang, Manila v. Court of Appeals, we ruled that the seizure of the landholding did not take place on the date of effectivity of PD 27 but would take effect on the payment of just compensation.

To be sure, the foregoing doctrine can also be found in Landbank of the Philippines v. Josefina Dumlao et al[28] and Meneses v. Secretary of Agrarian Reform.[29] In sum, since the lands in dispute were taken under PD 27 and just compensation has not yet been settled prior to the passage of RA 6657, the latter law should be made applicable in conformity with this Courts ruling in the abovementioned cases. The last issue to be resolved then is when was their actual taking? The same has already been settled in Domingo where this Court ruled: LBPs contention that the property was taken on 21 October 1972, the date of effectivity of PD 27, thus just compensation should be computed based on the GSP in 1972, is erroneous. The date of taking of the subject land for purposes of computing just compensation should be reckoned from the issuance dates of the emancipation patents. An emancipation patent constitutes the conclusive authority for the issuance of a Transfer Certificate of Title in the name of the grantee. It is from the issuance of an emancipation patent that the grantee can acquire the vested right of ownership in the landholding, subject to the payment of just compensation to the landowner.[30]

Hence, it is the date of the issuance of emancipation patents that should serve as the reckoning point for purposes of computation of just compensation. Copies of the emancipation patents issued to the farmer-beneficiaries, however, have not been attached to the records of the case. Except in certain portions[31] of the RTC decision where one can infer that the emancipation patents were issued in 1989, this Court is not certain of the exact date thereof. Hence, this Court is constrained to remand the case back to the SAC for receipt of evidence as to the date of the grant of the emancipation patents, which date shall serve as the reckoning point for the computation of just compensation due respondent. WHEREFORE, premises considered, the August 30, 2005 Decision and February 10, 2006 Resolution of the Court of Appeals in CA-G.R. CV No. 64176 are hereby AFFIRMED. The records of the case is ordered REMANDED to the Special Agrarian Court, Branch 15, of the Regional Trial Court of Davao City, for further reception of evidence as to the date of the grant of the emancipation patents which shall serve as the basis for the computation of just compensation in accordance with the market-data approach pursuant to Republic Act No. 6657. SO ORDERED.

G.R. No. 164631 LAND BANK OF THE PHILIPPINES, Petitioner, Present: YNARES-SANTIAGO, J., Chairperson, CHICO-NAZARIO, VELASCO, JR., NACHURA, and PERALTA, JJ. Promulgated: RENE RALLA BELISTA, June 26, 2009 Respondent. x--------------------------------------------------x

- versus -

DECISION

PERALTA, J.: Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court filed by Land Bank of the Philippines (petitioner), seeking to annul and set aside the May 26, 2004 Decision[1] and the July 28, 2004 Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP No. 81096. The antecedent facts and proceedings, as narrated by the CA, are as follows: It appears that spouses Pablo Ralla and Carmen Munoz Ralla had donated their eight (8) parcels of lot located in Ligao, Albay to their daughter, Rene Ralla Belista, the herein private respondent. The eight (8) parcels of lot were placed by the Department of Agrarian Reform (DAR, for brevity) under the coverage of the Comprehensive Agrarian Reform Program (Presidential Decree No. 27 and Executive Order No. 228). Consequently, private respondent claimed payment of just compensation over said agricultural lands. It further appears that the DAR's evaluation of the subject farms was only P227,582.58, while petitioner Land Bank of the Philippines (LBP, for brevity) assessed the same atP317,259.31. Believing that her lots were grossly underestimated, private respondent, on 11 November 2002, filed a Petition for Valuation and Payment of Just Compensation against petitioning bank before the DARABRegional Adjudicator for Region V (RARAD-V) docketed as DCN D-05-02-VC-005. On 07 July 2003, the RARAD-V issued a Decision, in favor of herein private respondent, the fallo of which reads: Wherefore, just compensation for the subject areas is hereby preliminarily fixed at TWO MILLION EIGHT HUNDRED NINETY-SIX THOUSAND and FOUR HUNDRED EIGHT & 91/100 (P2,896,408.91) PESOS. Land Bank of the Philippines, Legaspi City, is hereby ordered to pay herein petitioner said amount pursuant to existing rules and guidelines, minus the sum already remitted per Order dated January 2, 2003. SO ORDERED. As both parties interposed their respective motions for reconsideration, the RARAD-V eventually issued an Order dated 8 October 2003, the decretal portion of which reads: Wherefore, the Decision dated July 7, 2003 is MODIFIED, fixing the valuation claim of petitioner herein with respect to her due share in the above lots to the tune of Two Million Five Hundred Forty Thousand, Two Hundred Eleven and 58/100 (P2,540,211.58) Pesos. Land Bank Legaspi City is hereby ordered to pay herein petitioner said amount pursuant to existing rules and guidelines, minus the sum already paid per Order dated January 2, 2003. SO ORDERED.

Aggrieved, petitioner Bank, on 28 October 2003, filed an original Petition for Determination of Just Compensation at the same sala of the RTC, docketed as Agrarian Case No. 03-06. The court a quo motu propio dismissed the case when it issued the herein first assailed Order dated 12 November 2003 for failure to exhaust administrative remedies and/or comply with Sections 5, 6, and 7, Rule XIX, 2003 DARAB Rules of Procedure. Petitioner LBP lodged a Motion for Reconsideration arguing, inter alia, that the DARAB 2003 Rules of Procedure does not apply to SAC nor its precursor DARAB Case and that the ground for dismissal of the case is not among the instances when a court may dismiss a case on its motion. As the court a quo denied its Motion for Reconsideration in an Order dated 28 November 2003, petitioner LBP elevated the case before the Tribunal through the present Petition for Review, theorizing: I. WHETHER OR NOT THE SAC A QUO ERRED IN DISMISSING THE CASE MOTU PROPIO ON THE GROUND OF PLAINTIFF'S FAILURE TO EXHAUST ADMINISTRATIVE REMEDIES. WHETHER OR NOT SECTIONS 5, 6, AND 7, RULE XIX OF THE DARAB 2003 RULES OF PROCEDURE APPLY TO CASES FILED AND PENDING BEFORE THE DARAB OR ITS ADJUDICATORS PRIOR TO ITS EFFECTIVITY AND TO CASES FILED AND PENDING WITH THE SPECIAL AGRARIAN COURTS.[3]

II.

On May 26, 2004, the CA rendered its assailed Decision dismissing the petition. The CA ruled that under Section 5, Rule XIX of the 2003 DARAB Rules of Procedure, an appeal from the adjudicator's resolution shall be filed before the DARAB and not before the RTC; that petitioner's filing of the case before the RTC without first seeking the intervention of the DARAB is violative of the doctrine of non-exhaustion of administrative remedies. The CA found that petitioner's petition for determination of just compensation was filed in the RTC on October 28, 2003 when the 2003 DARAB Rules of Procedure was already in effect, i.e., on February 8, 2003, and under its transitory provision, it is provided that the 2003 Rules shall govern all cases filed on or after its effectivity; and, since an appeal from the adjudicator's resolution should first be filed with the DARAB, the RTC, sitting as a Special Agrarian Court (SAC), did not err in dismissing petitioner's petition. Petitioner filed a motion for reconsideration, which was denied in a Resolution dated July 28, 2004. Petitioner is now before the Court raising the following arguments: 1. THE COURT OF APPEALS ERRED IN LAW IN DISMISSING THE PETITION FOR REVIEW CONSIDERING THAT THE LBP DID NOT VIOLATE THE DOCTRINE OF NONEXHAUSTION OF ADMINISTRATIVE REMEDIES WHEN IT FILED THE ORIGINAL PETITION FOR DETERMINATION OF JUST COMPENSATION BEFORE THE COURT A QUO WITHOUT FIRST SEEKING THE INTERVENTION OF THE DARAB. THE COURT OF APPEALS ERRED IN DECLARING THAT THE APPLICABLE RULE IS THE 2003 DARAB RULES OF PROCEDURE, DESPITE THE FACT THAT THE PETITION (FOR VALUATION AND PAYMENT OF JUST COMPENSATION) WAS FILED BEFORE THE RARAD ON NOVEMBER 11, 2002.[4]

2.

Petitioner contends that the petition for valuation and payment of just compensation was filed with the DARABRegional Adjudicator for Region V (RARAD) on November 11, 2002, long before the effectivity of the 2003 Rules of Procedure; that under the transitory provision of the 2003 DARAB Rules, all cases pending with the Board and the adjudicators prior to the date of the Rules' effectivity shall be governed by the DARAB Rules prevailing at the time of their filing; that clear from the transitory provision that it is the proceeding of the DARAB which is governed by the 2003 DARAB Rules of Procedure, thus, it is the date of filing of the petition with the DARAB or any of its adjudicators which is the reckoning date of the applicability of the 2003 DARAB Rules and not the date of filing with the SAC; that under the 1994 DARAB Rules prevailing at the time of the filing of the respondent's claim for just compensation, the Rules provided that the decision of the adjudicator on land valuation and preliminary determination of just compensation shall not be appealable to the Board, but shall be brought directly to the RTC; that it was in the observance of the 1994 DARAB Rules that petitioner brought the adjudicator's decision to the RTC sitting as SAC.

In his Comment, respondent claims that petitioner's petition with the RTC is an original action and, since the case was filed at a time when appeal to the DARAB Central Office was already provided in the 2003 DARAB Rules before resorting to judicial action, the RTC correctly dismissed the petition, which was correctly affirmed by the CA. Petitioner filed a Reply reiterating its arguments in the petition. The issue for resolution is whether it is necessary that in cases involving claims for just compensation under Republic Act (RA) No. 6657 that the decision of the Adjudicator must first be appealed to the DARAB before a party can resort to the RTC sitting as SAC. The court rules in the negative. Sections 50 and 57 of RA No. 6657 provide: Section 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) x x x Section 57. Special Jurisdiction. The Special Agrarian Court 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. x x x The Special Agrarian Courts shall decide all appropriate cases under their special jurisdiction within thirty (30) days from submission of the case for decision.

Clearly, under Section 50, DAR has primary jurisdiction to determine and adjudicate agrarian reform matters and exclusive original jurisdiction over all matters involving the implementation of agrarian reform, except those falling under the exclusive jurisdiction of the DA and the DENR. Further exception to the DAR's original and exclusive jurisdiction are all petitions for the determination of just compensation to landowners and the prosecution of all criminal offenses under RA No. 6657, which are within the jurisdiction of the RTC sitting as a Special Agrarian Court. Thus, jurisdiction on just compensation cases for the taking of lands under RA No. 6657 is vested in the courts. In Republic v. CA,[5] the Court explained: Thus, Special Agrarian Courts, which are Regional Trial Courts, are given original and exclusive jurisdiction over two categories of cases, to wit: (1) all petitions for the determination of just compensation to landowners and (2) the prosecution of all criminal offenses under [R.A. No. 6657]. The provisions of 50 must be construed in harmony with this provision by considering cases involving the determination of just compensation and criminal cases for violations of R.A. No. 6657 as excepted from the plenitude of power conferred on the DAR. Indeed, there is a reason for this distinction. The DAR is an administrative agency which cannot be granted jurisdiction over cases of eminent domain (for such are takings under R.A. No. 6657) and over criminal cases. Thus, in EPZA v. Dulay and Sumulong v. Guerrero - we held that the valuation of property in eminent domain is essentially a judicial function which cannot be vested in administrative agencies, while in Scotys Department Store v. Micaller, we struck down a law granting the then Court of Industrial Relations jurisdiction to try criminal cases for violations of the Industrial Peace Act.[6] In a number of cases, the Court has upheld the original and exclusive jurisdiction of the RTC, sitting as SAC, over all petitions for determination of just compensation to landowners in accordance with Section 57 of RA No. 6657. In Land Bank of the Philippines v. Wycoco,[7] the Court upheld the RTC's jurisdiction over Wycoco's petition for determination of just compensation even where no summary administrative proceedings was held before the DARAB which has primary jurisdiction over the determination of land valuation. The Court held: In Land Bank of the Philippines v. Court of Appeals, the landowner filed an action for determination of just compensation without waiting for the completion of DARABs re-evaluation of the land. This, notwithstanding, the Court held that the trial court properly acquired jurisdiction because of its exclusive and original jurisdiction over determination of just compensation, thus 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 an appellate jurisdiction would be contrary to Sec. 57 and, therefore, would be void. Thus, direct resort to the SAC [Special Agrarian Court] by private respondent is valid. In the case at bar, therefore, the trial court properly acquired jurisdiction over Wycocos complaint for determination of just compensation. It must be stressed that although no summary administrative proceeding was held before the DARAB, LBP was able to perform its legal mandate of initially determining the value of Wycoco's land pursuant to Executive Order No. 405, Series of 1990.[8] x x x

In Land Bank of the Philippines v. Natividad,[9] wherein Land Bank questioned the alleged failure of private respondents to seek reconsideration of the DAR's valuation, but instead filed a petition to fix just compensation with the RTC, the Court said: At any rate, in Philippine Veterans Bank v. CA, we held that there is nothing contradictory between the DARs 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 original and exclusive jurisdiction of regional trial courts over all petitions for the determination of just compensation. The first refers to administrative proceedings, while the second refers to judicial proceedings. In accordance with settled principles of administrative law, primary jurisdiction is vested in the DAR to determine in a preliminary manner the just compensation for the lands taken under the agrarian reform program, but such determination is subject to challenge before the courts. The resolution of just compensation cases for the taking of lands under agrarian reform is, after all, essentially a judicial function. Thus, the trial court did not err in taking cognizance of the case as the determination of just compensation is a function addressed to the courts of justice.[10] In Land Bank of the Philippines v. Celada,[11] where the issue was whether the SAC erred in assuming jurisdiction over respondent's petition for determination of just compensation despite the pendency of the administrative proceedings before the DARAB, the Court stated that: It would be well to emphasize that the taking of property under RA No. 6657 is an exercise of the power of eminent domain by the State. 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.[12]

The RTC dismissed petitioner's petition for determination of just compensation relying on Sections 5, 6 and 7 of Article XIX of the 2003 DARAB Rules of Procedure, to wit: Section 5. Appeal. A party who disagrees with the resolution of the Adjudicator may bring the matter to the Board by filing with the Adjudicator concerned a Notice of Appeal within fifteen (15) days from receipt of the resolution. The filing of a Motion for Reconsideration of said resolution shall interrupt the period herein fixed. If the motion is denied, the aggrieved party may file the appeal within the remaining period, but in no case shall it be less than five (5) days. Section 6. When Resolution Deemed Final. Failure on the part of the aggrieved party to contest the resolution of the Adjudicator within the aforecited reglementary period provided shall be deemed a concurrence by such party with the land valuation, hence said valuation shall become final and executory. Section 7. Filing of Original Action with the Special Agrarian Court for Final Determination. The party who disagrees with the decision of the Board may contest the same by filing an original action with the Special Agrarian Court (SAC) having jurisdiction over the subject property within fifteen (15) days from his receipt of the Board's decision.

Notably, the above-mentioned provisions deviated from Section 11, Rule XIII of the 1994 DARAB Rules of Procedure which provides:

Section 11. Land Valuation and Preliminary 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.

where DARAB acknowledges that the decision of just compensation cases for the taking of lands under RA 6657 is a power vested in the courts.[13] 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.[14] 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.[15]Only a statute can confer jurisdiction on courts and administrative agencies while rules of procedure cannot.[16] WHEREFORE, the petition for review on certiorari is GRANTED. The Decision dated May 26, 2004 and the Resolution dated July 28, 2004, of the Court of Appeals in CA-G.R. SP No. 81096, are REVERSED and SET ASIDE. The Regional Trial Court, Branch 3, Legaspi City, sitting as Special Agrarian Court, isDIRECTED to hear without delay petitioner's petition for the determination of just compensation. SO ORDERED.

G.R. No. 177404

June 25, 2009

LAND BANK OF THE PHILIPPINES, Petitioner, vs. KUMASSIE PLANTATION COMPANY INCORPORATED, Respondent. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 178097 June 25, 2009

KUMASSIE PLANTATION COMPANY INCORPORATED, Petitioner, vs. LAND BANK OF THE PHILIPPINES and THE SECRETARY OF THE DEPARTMENT OF AGRARIAN REFORM,Respondents. DECISION CHICO-NAZARIO, J.: Before Us are two consolidated Petitions for Review on Certiorari under Rule 45 of the Rules of Court,1 docketed as G.R. No. 177404 and G.R. No. 178097, assailing the Decision,2 dated 24 November 2005, and Resolution,3dated 30 March 2007, of the Court of Appeals in CA-G.R. CV No. 65923. The undisputed facts are as follows: Kumassie Plantation Company Incorporated (KPCI) is the registered owner of 802.2906 hectares of agricultural land situated in Basiawan, Santa Maria, Davao del Sur, and covered by Transfer Certificate of Title (TCT) No. 646.4 In 1982, KPCI and Philippine Cocoa Corporation (PCC) entered into a contract of lease whereby the former agreed to lease the said land together with the improvements thereon to the latter for a period of 25 years beginning 15 May 1982.5 Subsequently, PCC executed a deed of assignment transferring all its rights as lessee under the said contract of lease to Philippine Cocoa Estates Corporation (PCEC) effective 31 December 1983.6 On 18 February 1992, a portion of the aforementioned land, measuring 457.9952 hectares, planted with coconuts and cocoa (subject land), was compulsorily acquired by the Department of Agrarian Reform (DAR), Region XI, Davao City, for distribution to farmer-beneficiaries pursuant to Republic Act No. 6657, otherwise known as the Comprehensive Agrarian Reform Law of 1988.7 The DAR then requested the Land Bank of the Philippines (LBP) to determine the value of the subject land.8 LBP pegged the value of the subject land at P19,140,965.00 or equivalent to P41,792.94 per hectare.9 DAR offered to KPCI said amount as compensation for the subject land,10but it was rejected by KPCI for being "unreasonably low."11 Despite the rejection by KPCI of the valuation of the subject land by LBP, the amount of P19,140,965.00 was

deposited by LBP, upon the instructions of DAR, in the name and for the account of KPCI.12 KPCI withdrew from LBP the entire amount in cash and bonds.13 DAR then advised the Department of Agrarian Reform Adjudication Board (DARAB), on 27 July 1994, to conduct a summary administrative proceeding for the determination of the just compensation due KPCI for the subject land.14 The proceeding was docketed as DARAB Case No. JC-R-XI-DAV-OR-0017-CO. LBP and KPCI later submitted their respective position papers with the DARAB.15 DAR next directed the Register of Deeds of Digos, Davao del Sur, on 26 September 1994, to cancel TCT No. 646 covering the subject land in the name of KPCI and to issue a new TCT in the name of the Republic of the Philippines.16 After the issuance of a new TCT in the name of the Republic of the Philippines, and again upon the request of the DAR, the Register of Deeds of Digos, Davao del Sur, issued Certificates of Land Ownership Award (CLOAs) to qualified farmerbeneficiaries.17 On 20 January 1997, KPCI filed with the Davao City Regional Trial Court (RTC), Branch 15 (acting as a Special Agrarian Court), a Complaint against LBP and the DAR for determination and payment of just compensation, docketed as Civil Case No. 25,045-97.18 KPCI implored the RTC to render judgment fixing the just compensation for the subject land at P160,000.00 per hectare, or equivalent to a total amount of P73,279,232.00, less the amount of P19,140,965.00 which KPCI had previously withdrawn from LBP.19 Subsequently, LBP and the DAR filed with the RTC their respective Answers contending that the Complaint was prematurely filed as KPCI failed to exhaust administrative remedies; that KPCI was already paid just compensation for the subject land, determined to be P41,792.94 per hectare, for a total amount of P19,140,965.91; and that KPCI admitted in the Complaint having received such amount from LBP. LBP asserted that it correctly calculated the value of the subject land to be P19,140,965.91, applying the formula prescribed in DAR Administrative Order (DAO) No. 6, Series of 1992, as amended by DAO No. 11, Series of 1994. At the end of their respective Answers, both LBP and DAR sought the dismissal of the Complaint of KPCI.20 The RTC thereafter directed the parties to submit the names of their respective nominees for commissioners in Civil Case No. 25,045-97.21 KPCI nominated Oliver A. Morales (Morales), President of Cuervo Appraisers Incorporated,22 while LBP submitted the name of a certain Engineer Romeo Cabanial.23 For its part, the DAR endorsed Tomasa L. Miranda (Miranda), a DAR employee.24 The RTC appointed Morales and Miranda as commissioners. The two subsequently took their oaths of office as court-appointed commissioners.25 Meanwhile, the DARAB issued, on 19 May 1997, a Resolution in JC-R-XI-DAV-OR-0017-CO, affirming the valuation of the subject land by the LBP.26 The DARAB found the LBP valuation of the subject land to be "accurate and just," as it was in harmony with the pertinent provisions of Republic Act No. 6657 and DAO No. 6, Series of 1992, as amended.27 After trial in Civil Case No. 25,045-97, the RTC rendered its Decision on 18 February 1999, fixing the fair and reasonable value of the subject land at P100,000.00 per hectare. In arriving at said valuation, the RTC considered the location of the subject land, the nature of the trees planted thereon, and the reasons stated in Morales appraisal report. The RTC then ordered LBP and DAR to pay KPCI an amount equivalent to P100,000.00 per hectare as just compensation for the subject land, plus legal interest computed from 23 March 1994 until fully paid.28 LBP filed with the RTC a Motion for Reconsideration of the foregoing Decision;29 while DAR filed a Notice of Appeal, manifesting that it would appeal said RTC Decision to the Court of Appeals.30 On 23 July 1999, the RTC issued an Order denying the Motion for Reconsideration of LBP.31 Aggrieved, LBP filed its appeal with the Court of Appeals, docketed as CA-G.R CV No. 65923.32 LBP filed, on 27 September 2000, its Appellants Brief in CA-G.R CV No. 65923.33 DAR joined the appeal of LBP by filing, on 18 January 2001, in CA-G.R CV No. 65923, a Manifestation adopting in toto the Appellants Brief of LBP.34 On 24 November 2005, the Court of Appeals promulgated its Decision in CA-G.R CV No. 65923, affirming with modification the appealed RTC Decision. The appellate court sustained the finding of the RTC that the fair and reasonable value of the subject land was P100,000.00 per hectare. Nevertheless, it ruled that the imposition of legal interest should be deleted, as there was no delay on the part of LBP in depositing the amount ofP19,140,965.91 in the account of KPCI, which amount was admittedly withdrawn by KPCI. The fallo of the Decision of the Court of Appeals reads: WHEREFORE, premises considered, the Decision of the Regional Trial Court (RTC), 11th Judicial Region, Br. 15, Davao City is AFFIRMED with MODIFICATION. As modified, as none should be awarded, the award of interest is deleted. No costs.35 LBP and KPCI each filed its own Motion for Reconsideration of the 24 November 2005 Decision of the Court of Appeals,36 but both Motions were denied by the appellate court in its Resolution dated 30 March 2007.

Hence, LBP and KPCI separately sought recourse from this Court by virtue of the Petitions for Review presently before us, docketed as G.R. No. 177404 and G.R. No. 178097, respectively. The two Petitions were consolidated since they arose from the same set of facts.37 The procedure for the determination of compensation cases under Republic Act No. 6657, as devised by this Court,38 commences with the valuation by the LBP of the lands taken by the State from private owners under the land reform program. Based on the valuation of the land by the LBP, the DAR makes an offer to the landowner through a written notice. In case the landowner rejects the offer, a summary administrative proceeding is held and, afterwards, depending on the value of the land, the Provincial Agrarian Reform Adjudicator (PARAD), the Regional Agrarian Reform Adjudicator (RARAD), or the DARAB, fixes the price to be paid for the said land. If the landowner still does not agree with the price so fixed, he may bring the matter to the RTC, acting as Special Agrarian Court. In the process of determining the just compensation due to landowners, it is a necessity that the RTC takes into account several factors enumerated in Section 17 of Republic Act No. 6657, as amended, to wit: Sec. 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, and the assessment made by government assessors shall be considered. The social and economic benefits contributed by the farmers 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. Being the government agency primarily charged with the implementation of the agrarian reform program, DAR issued DAO No. 6, Series of 1992, as amended, filling out the details necessary for the implementation of Section 17 of Republic Act No. 6657. DAR translated the factors specified in Section 17 of Republic Act No. 6657, into a basic formula, presented as follows in DAO No. 6, Series of 1992, as amended: LV = (CNI x 0.6) + ( 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 shall be used if all the three factors are present, relevant, and applicable. A.1 When the CS factor is not present and CNI and MV are applicable, the formula shall be: LV = (CNI x 0.9) + (MV x 0.1) A.2 When the CNI factor is not present, and CS and MV are applicable, the formula shall be: LV = (CS x 0.9) + (MV x 0.1) A.3 When both the CS and CNI are not present and only MV is applicable, the formula shall be: LV = MV x 2 In its Petition docketed as G.R. No. 177404, LBP maintains that the RTC and the Court of Appeals erred in their valuation of the subject land at P100,000.00 per hectare because both courts did not consider the factors enumerated in Section 17 of Republic Act No. 6657 and the formula for valuation of lands under DAO No. 6, Series of 1992, as amended.39 While the determination of just compensation is essentially a judicial function which is vested in the RTC acting as Special Agrarian Court, we, nonetheless, disregarded the determination of just compensation made by the RTC in Land Bank of the Philippines v. Banal,40 Land Bank of the Philippines v. Celada,41 and in Land Bank of the Philippines v. Lim,42 when, as in this case, the judge gravely abused his discretion by not taking into full consideration the factors specifically identified by law and implementing rules. In several cases, we have reminded the special agrarian courts to resolve just determination cases judiciously and with utmost observance of Section 17 of Republic Act No. 6657 and the administrative orders issued by the DAR to implement said statutory provision.

In Land Bank of the Philippines v. Banal,43 we emphasized that the factors laid down in Section 17 of Republic Act No. 6657 and the formula stated in DAO No. 6, Series of 1992, as amended, must be adhered to by the RTC in fixing the valuation of lands subjected to agrarian reform, thus: In determining just compensation, the RTC is required to consider several factors enumerated in Section 17 of R.A. 6657, as amended, thus: xxxx These factors have been translated into a basic formula in [DAO 6-92], as amended by [DAO 11-94], issued pursuant to the DARs rule-making power to carry out the object and purposes of R.A. 6657, as amended. xxxx While the determination of just compensation involves the exercise of judicial discretion, however, such discretion must be discharged within the bounds of the law. Here, the RTC wantonly disregarded R.A. 6657, as amended, and its implementing rules and regulations. ([DAO 6-92], as amended by [DAO 11-94]). xxxx WHEREFORE, x x x. The trial judge is directed to observe strictly the procedures specified above in determining the proper valuation of the subject property. (Emphasis ours.) Again, in Land Bank of the Philippines v. Celada,44 we stressed that the special agrarian court cannot ignore, without violating Republic Act No. 6657, the formula provided by the DAR for the determination of just compensation. We rejected the valuation fixed by the RTC because it failed to follow the DAR formula: While [Special Agrarian Court] is required to consider the acquisition cost of the land, the current value of like properties, its nature, actual use and income, the sworn valuation by the owner, the tax declaration and the assessments made by the government assessors to determine just compensation, it is equally true that these factors have been translated into a basic formula by the DAR pursuant to its rule-making power under Section 49 of R.A. No. 6657. As the government agency principally tasked to implement the agrarian reform program, it is the DARs duty to issue rules and regulations to carry out the object of the law. [DAO] No. 5, s. of 1998 precisely "filled in the details" of Section 17, RA No. 6657 by providing a basic formula by which the factors mentioned therein may be taken into account. The [Special Agrarian Court] was at no liberty to disregard the formula which was devised to implement the said provision. It is elementary that rules and regulations issued by administrative bodies to interpret the law which they are entrusted to enforce, have the force of law, and are entitled to great respect. Administrative issuances partake of the nature of a statute and have in their favor a presumption of legality. As such, courts cannot ignore administrative issuances especially when, as in this case, its validity was not put in issue. Unless an administrative order is declared invalid, courts have no option but to apply the same. (Emphasis ours.) Instead, we sustained the valuation made by the LBP, which was patterned after the applicable administrative order issued by the DAR, viz: [LBP] arrived at its valuation by using available factors culled from the Department of Agriculture and Philippine Coconut Authority, and by computing the same in accordance with the formula provided, thus COMPUTATION (Applicable Formula): LV = 0.90 CNI + 0.10 MV Comparable Land Transactions (P x x x x ____ ) = P x-x-x Capitalized Net Income: Cassava 16,666.67 x 0.90 = 15,000.00 Corn/Coco 26,571.70 = 23,914.53 Market Value Cassava 8,963.78 x 0.10 = 896.38 per Tax Declaration: Corn/Coco 10,053.93 = 1,005.39 Computed Value per Hectare: Cassava 15,896.38; Corn/Coco 24,919.92 xxxx Value per hectare used: Cassava 15,896.38 x 6.0000 has. = 95,378.28 Corn/Coco 24,919.92 x 8.1939 has. = 204,191.33 Payment due to LO : P299, 569.61 The above computation was explained by Antero M. Gablines, Chief of the Claims, Processing, Valuation and Payment Division of the Agrarian Operations Center of the Land Bank, to wit:

ATTY. CABANGBANG: (On direct): xxxx q. What are the items needed for the Land Bank to compute? a. In accordance with Administrative Order No. 5, series of 1998, the value of the land should be computed using the capitalized net income plus the market value. We need the gross production of the land and its output and the net income of the property. q. You said "gross production." How would you fix the gross production of the property? a. In that Administrative Order No. 5, if the owner of the land is cooperative, he is required to submit the net income. Without submitting all his sworn statements, we will get the data from the DA (Agriculture) or from the coconut authorities. xxxx q. In this recommended amount which you approved, how did you arrive at this figure? a. We used the data from the Philippine (Coconut) Authority and the Agriculture and the data stated that Cassava production was only 10,000 kilos per hectare; corn, 2,000 kilos; and coconuts, 15.38 kilos per hectare. The data stated that in the first cropping of 1986, the price of cassava was P1.00 per kilo; corn was sold at P7.75 per kilo; and the Philippine Coconut Authority stated that during that time, the selling price of coconuts was P8.23 per kilo. q. After these Production data and selling price, there is here a "cost of operation," what is this? a. It is the expenses of the land owner or farmer. From day one of the cultivation until production. Without the land owners submission of the sworn statement of the income, production and the cost, x x x Administrative Order No. 5 states that x x x we will use 20% as the net income, meaning 80% of the production in peso. This is the cost of valuation. q. 80 % for what crops? a. All crops except for coconuts where the cost of expenses is only 20%. q. Summing all these data, what is the value per hectare of the cassava? a. The cassava is P15,896.38. q. How about the corn x x x intercropped with coconuts? a. P24,919.92. Under the circumstances, we find the explanation and computation of [LBP] to be sufficient and in accordance with applicable laws. [LBPs] valuation must thus be upheld.45 (Emphases ours.) In Apo Fruits Corporation v. Court of Appeals,46 we once more gave paramount importance to the criteria inscribed in Section 17 of Republic Act No. 6657 and the pertinent DAOs. In sustaining therein the valuation of the special agrarian court, we ratiocinated: [T]he Court affirmed the due consideration given by the RTC of the factors specified in Section 17, Republic Act No. 6657. Again, the proper valuation of the subject premises was reached with clear regard for the acquisition cost of the land, current market value of the properties, its nature, actual use and income, inter alia factors that are material and relevant in determining just compensation. These are the very same factors laid down in a formula by DAR A.O. No. 5. Due regard was thus given by the RTC to Republic Act No. 6657, DAR A.O. No. 5 and prevailing jurisprudence when it arrived at the value of just compensation due to AFC and HPI in this case. The Court En Banc in Land Bank of the Philippines v. Lim47 was confronted with the question of whether the RTC can resort to any other means of determining just compensation aside from Section 17 of Republic Act No. 6657 and DAO No. 6, Series of 1992, as amended. The Court resolved the issue in the negative and pronounced that Section 17 of Republic Act No. 6657 and DAO No. 6, Series of 1992, as amended, are mandatory and are not mere guides that the RTC may disregard. Citing Banal and Celada, we held in Lim that: In Land Bank of the Philippines v. Spouses Banal [434 SCRA 543], this Court underscored the mandatory nature of Section 17 of RA 6657 and DAR AO 6-92, as amended by DAR AO 11-94, x x x.

xxxx And in LBP v. Celada [479 SCRA 495], this Court set aside the valuation fixed by the RTC of Tagbilaran, which was based solely on the valuation of neighboring properties, because it did not apply the DAR valuation formula. x x x. xxxx Consequently, as the amount of P2,232,868 adopted by the RTC in its December 21, 2001 Order was not based on any of the mandatory formulas prescribed in DAR AO 6-92, as amended by DAR AO 11-94, the Court of Appeals erred when it affirmed the valuation adopted by the RTC. (Emphases ours.) In the instant case, the RTC did not pay particular attention to Section 17 of Republic Act No. 6657 and DAO No. 6, Series of 1992, as amended. It merely cited the location of the subject land, nature of the trees planted thereon, and Morales appraisal report, as bases for fixing the value of the subject land at P100,000.00 per hectare; which are not among the factors mentioned in Section 17 of Republic Act No. 6657. Also, the RTC did not apply the formula stated under DAO No. 6, Series of 1992, as amended, in fixing the value of the subject land. This undoubtedly constitutes an obvious departure from the settled doctrine previously discussed herein regarding the mandatory nature of Section 17 of Republic Act No. 6657 and DAO No. 6, Series of 1992, as amended. Further, Morales, in his appraisal report, used the market data approach (a method which based the value of the subject land on sales and listings of similar properties situated within the area), and the income approach (a procedure which based the value of the subject land on the potential net benefit that may be derived from its ownership) in determining the value of the subject land.48 Morales did not explicitly state or even impliedly use Section 17 of Republic Act No. 6657 and DAO No. 6, Series of 1992, as amended, in his appraisal report for the subject land. Neither was there any foundation for concluding that the market data approach and income approach conformed to statutory and regulatory requirements. More importantly, Morales himself admitted during the trial that he did not consider Republic Act No. 6657 and DAO No. 6, Series of 1992, as amended, in his appraisal report for the subject land, despite being aware of the said law and rules for a long time.49 This being the case, the valuation of the subject land, as contained in the appraisal report adopted by the RTC, cannot be deemed to be in compliance with the requirements under Section 17 of Republic Act No. 6657 and DAO No. 6, Series of 1992, as amended. In contrast, LBP arrived at its valuation of the subject land by considering the factors identified under Section 17 of Republic Act No. 6657, and by computing the same in accordance with the formula in DAO No. 6, Series of 1992, as amended. The meticulous calculations of LBP are reproduced below: FORMULA USED IN THE VALUATION OF THE SUBJECT PROPERTY The records show that Acquisition Cost (CA), Market Value based on Mortgage (MVM) and Comparable Sales (CS) are not applicable. Hence, pursuant to paragraph A.2 of DAR Adm. Order No. 6, Series of 1992, the applicable formula in arriving at the land Value is: LV = (CNI x 0.9) + (MV [x] 0.1). Considering that the subject property is covered by an existing lease contract, the Lease Rental Income was also considered in the computation of the Capitalized Net Income (CNI) by following the formula prescribed under paragraph B.7 of Dar Adm. Order No. 6, Series of 1992, thus: LRI CNI = .12 DISCUSSION OF THE FORMULAE The pertinent provisions of DAR Adm. Order No. 6, Series of 1992, reads: B. Capitalized Net Income (CNI) This shall refer to the difference between the gross sales (AGP x SP) and total cost of operations (CO) capitalized at 12%. Expressed in equation form: (AGP x SP) CO CNI = .12 Where: CNI = Capitalized Net Income

AGP = One years Average Gross Production immediately preceding the date of offer in case of VOS or date of notice of coverage in case of CA. SP = Selling price shall refer to average prices for the immediately preceding calendar year from the date of receipt of the claimfolder by LBP from DAR for processing secured from the Department of Agriculture (DA) other appropriate regulatory bodies or in their absence, from Bureau of Agricultural Statistics. If possible, SP data shall be gathered from the barangay or municipality where the property is located. In the absence thereof, SP may be secured within the province or region. CO = Cost of Operations Whenever the cost of operations could not be obtained or not be obtained or verified, and assumed net income rate (NIR) of 20% shall be used. Landholdings planted to coconut which are productive at the time of offer/coverage shall continue to use the 70% NIR x x x 12 = Capitalized Rate B.1 Industry data on production, cost of operation, and selling price shall be obtained from government/private entities. Such entities shall include, but not limited to the Department of Agriculture (DA), the Sugar Regulatory Authority (SRA), the Philippine Coconut Authority (PCA) and other private persons/entities knowledgeable to the concerned industry. B.2 The landowner shall submit a statement of net income derived from the land subject of acquisition. This shall include among others, total production and cost of operations on a per crop basis, selling price/s (farm gate) and such other data as may be required. xxxx In case of failure by the landowner to submit the statement x x x or the data stated therein cannot be verified/validated from the farmers, LBP may adopt any available industry data or in the absence thereof may conduct an industry study on the specific crop which will be used in determining the production, cost and net income of the subject landholding. xxxx B.7 For landholdings planted to permanent crops which are covered by existing lease contract, the following formula shall be used in the computation of the CNI: LRI CNI/Ha. = .12 Where: LRI = Lease Rental Income per Hectare/Year as stipulated under the contract. xxxx c. In case the lease rental is a variable amount (e.g., progressively increasing during the term of the lease), LRI is computed as follows: Sum of Annual lease Rental per Hectare over the remaining Term of the Lease Contract Remaining Term of Lease, Years xxxx D. Market Value per Tax Declaration (MV) shall refer to the market value per Tax Declaration (TD) issued before August 29, 1987 (effectivity of EO 229). The most recent set of values indicated in the latest schedule of unit value (SMV) grossed-up for inflation rate from the date of effectivity up to the date of receipt of claimfolder by LBP from DAR for processing. CAPITALIZED NET INCOME Re: AGP LANDBANK adopted as AGP the average production indicated in the Contract of Lease which is 44 metric tons of copra per month (net) or 528 metric tons a year. Converted into kilos, the AGP per hectare is 658.12 kilos.

LRI =

Re: Selling Price As Selling Price, LANDBANK used the 1992 Philippine Coconut Authority Data which is P6.87 per kilo as the same is the average price for the immediately preceding calendar year from the date of receipt by LANDBANK of the claimfolder from DAR for processing in 1993 pursuant to paragraph 5, Item B of DAR Adm. Order No. 6, Series of 1992, above quoted. Re: Capitalization Rate A 12% capitalization rate was used in accordance with paragraph 8, Item B of DAR Adm. Order No. 6, Series of 1992. Using the foregoing as input, the CNI for copra is P37,677.37 per hectare (658.12 kilos x P6.87 per kilo / .12). Cocoa was not included in the computation of the CNI because there is no production data available. Further, the same was introduced by the lessee. Re: LRI Pursuant to Item B, paragraph B.7, sub-paragraph c of DAR Adm. Order No. 6, Series of 1992, LANDBANK computed the total lease rentals for the remaining period of the lease contract (1994 to 2007 or 14 years). Thus, LRI = (690 x 4) + (P680 x 5) + (P1,120 x 5) divided by 14 or P904.29 per hectare. Following the formula: 12% over LRI (P904.29), the CNI per hectare (Lease Contract) is P7,535.75. MARKET VALUE PER TAX DECLARATION In the computation of the market Value per Tax Declaration (MV), the unit market values of both the land and the coconut trees were determined based on the 1991 Schedule of Market Values for agricultural properties in Sta. Maria, Davao del Sur. Per the said Schedule of Market Values, the subject property is classified as third class cocoland and has a unit market value of P6,240.00 per hectare while the cocotrees have a unit market value ofP62.40 per tree. The unit market values of both the land and the cocotrees were multiplied with the location adjustment factor of 98% and the results were in turn multiplied with the Consumer Price Index (1.1254). Thus, the total market value as adjusted for the land is P6,882.05 per hectare and P4,129.23 for the cocotrees or a total of P11,011.28 per hectare. In summation: CNI (copra) - P37,677.37 per ha.

CNI (Lease contract) - P 7,535.75 per ha. Total CNI MV (Land) MV (cocotree) Total MV - P45,213.12 per ha. - P 6,882.05 per ha. - P 4,129.23 per ha. - P11,011.28 per ha.

Following the formula: LV = CNI x 0.9 (P45,213.12 x 0.9) P40,691.81 + MV 0.1 (11,011.28 x 0.1) P1,101.13 x 457.9952 hectares, the total value of the area subject to acquisition is P19,140,965.91.50 (Emphases supplied). We find the foregoing exhaustive explanation and thorough computations of LBP to be sufficient and in accordance with Section 17 of Republic Act No. 6657 and DAO No. 6, Series of 1992, as amended. Hence, the Court affirms the valuation by LBP of P41,792.94 per hectare, or a total of P19,140,965.91, for the subject land. Since we have already resolved the issue in G.R No. 177404, we shall now discuss and determine the matters brought up in G.R. No. 178097. In its Petition docketed as G.R. No. 178097, KPCI argues that the imposition of legal interest as damages is warranted because LBP has delayed in paying just compensation for the subject land. KPCI alleges that the act of LBP in appealing the decisions of the RTC and the Court of Appeals reveals the intent of the LBP to delay the payment of just compensation to KPCI.511awphi1.net

Given our finding that it is the valuation of the subject land by the LBP that is correct and in compliance with the requirements of the law and administrative rules and regulations, then the issue of interest, raised by KPCI in its Petition, has actually become irrelevant. The amount of P19,140,965.91, representing the valuation of LBP for the entire subject land, was deposited for the account of and in the name of KPCI, which the latter had admittedly already withdrawn. The just compensation for the subject land is, thus, already fully paid. Even if we were still to address the issue of interest, we shall decide against KPCI. In expropriation cases, interest is due the landowner if there was delay in payment. The imposition of interest was in the nature of damages for the delay in payment, which in effect makes the obligation on the part of the government one of forbearance. It follows that the interest in the form of damages cannot be applied where there was prompt and valid payment of just compensation.52 In Apo Fruits Corporation v. Court of Appeals,53 we stressed that interest on just compensation is imposed only in case of delay in the payment thereof, which must be sufficiently established.1awphi1 There is nothing in the records to show that LBP was delayed in the payment of just compensation to KPCI. In fact, contrary to the claim of KPCI, it was paid just compensation by LBP with dispatch. The mere fact that LBP appealed the decisions of the RTC and the Court of Appeals does not mean that it deliberately delayed the payment of just compensation to KPCI. LBP is an agency created primarily to provide financial support in all phases of agrarian reform pursuant to Section 74 of Republic Act No. 3844 and Section 64 of Republic Act No. 6657. It is vested with the primary responsibility and authority in the valuation and compensation of covered landholdings to carry out the full implementation of the Agrarian Reform Program. It may agree with the DAR and the landowner as to the amount of just compensation to be paid to the latter and may also disagree with them and bring the matter to court for judicial determination.54 This makes the LBP an indispensable party in cases involving just compensation for lands taken under the Agrarian Reform Program, with a right to appeal decisions in such cases that are unfavorable to it. Having only exercised its right to appeal in this case, LBP cannot be penalized by making it pay for interest. WHEREFORE, in view of the foregoing: 1) The Petition of Land Bank of the Philippines in G.R. No. 177404 is GRANTED. The Decision, dated 24 November 2005, and Resolution, dated 30 March 2007, of the Court of Appeals in CA-G.R. CV No. 65923, are REVERSED and SET ASIDE. The valuation of the subject land at P41,792.94 per hectare, for a total ofP19,140,965.91, by the Land Bank of the Philippines is APPROVED, and such amount is DECLARED PAID IN FULL; and 2) The Petition of Kumassie Plantation Company Incorporated is DENIED. No costs. SO ORDERED.

LAND BANK OF THE PHILIPPINES, Petitioner,

G.R. No. 164025 Present: CARPIO MORALES, J.*, Acting Chairperson, TINGA, VELASCO, JR., LEONARDO-DE CASTRO,** and BRION, JJ. Promulgated: May 8, 2009

- versus -

HEIRS OF HONORATO DE LEON, represented by AMBROCIO DE LEON, Respondent.

x---------------------------------------------------------------------------------------x DECISION TINGA, J.: This is a petition for review[1] on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, assailing the decision[2] and resolution[3]

of the Court of Appeals in CA-G.R. SP No. 77619. The assailed decision dismissed for lack of merit petitioners appeal from the decision[4] of the Regional Trial Court (RTC), Branch 26, Cabanatuan City ordering the payment of just compensation to respondents while the resolution denied petitioners motion for reconsideration.[5] The following factual antecedents are undisputed. Petitioner Land Bank of the Philippines (LBP) is a government banking institution designated under Section 64 of Republic Act (R.A.) No. 6654 as the financial intermediary of the agrarian reform program of the government. Respondents are the heirs of the late Honorato De Leon, the registered owner of an agricultural land situated at Barangay Carmen, Zaragoza, Nueva Ecija and covered by Transfer Certificate of Title (TCT) No. 10918-R. The whole area measuring 36.1238 hectares was acquired by the Department of Agrarian Reform (DAR) and placed under the coverage of Presidential Decree (P.D.) No. 27. Respondents received the notice of coverage sometime in 1988. Finding the land valuation offered by the DAR to be very low, respondents filed a complaint for the fixing of just compensation before the RTC of Cabanatuan City, sitting as a Special Agrarian

Court (SAC). The complaint dated 20 February 1995 was docketed as Agrarian Case No. 98-AF and entitled, Heirs of Honorato De Leon, represented by Ponciano R. De Leon v. Department of Agrarian Reform, as representative of the Republic of the Philippines, and Land Bank of the Philippines. Respondents prayed that just compensation be computed based on the following values: (a) an average gross production (AGP) of 195 cavans per hectare per year or 17,610.35 cavans for the entire 36.1238 hectares; (b) plus simple interest of 6% per annum for 20 years on the 17,610.35 cavans or 21,132.41 cavans; and (c) government support price of P500.00. Using the aforementioned values, respondents claimed that the total just compensation due them should be in the amount ofP19,371,385.00.[6] DAR adopted petitioners exhibits, among them a DAR order for petitioner to pay respondents the amount of P195,971.60 exclusive of the benefits under DAR A.O. No. 13, series of 1994. Also submitted in evidence were a Certification dated 07 June 1991 showing that the total compensation in the amount of P195,971.60 due respondents had been deposited on 31 January 1991 in cash and bonds and a letter dated 29 March 2000, informing respondents that the balance of their claim remained at P706,754.00, inclusive of interest provided under DAR A.O. No. 13, series of 1994.[7]

Acting under a written authority issued by Atty. Federico Poblete, DAR Undersecretary for Legal Affairs, a certain Atty. Benjamin Baui, the Legal Officer ofDAR-Cabanatuan City, entered into a compromise agreement with herein respondents. The agreement, which was approved by the SAC on 29 June 2001 after petitioner failed to file a comment thereto, provided the payment of just compensation in the amount of P19,371,385.00.[8] However, on 9 November 2001, the SAC denied the motion for execution of the compromise judgment on the ground of oversight on the part of Atty. Baui regarding his authority to enter into a settlement. On 14 January 2003, the SAC rendered a decision, the dispositive portion of which states: WHEREFORE, judgment is hereby rendered ordering the Department of Agrarian Reform through the Land Bank of the Philippines to pay petitioners the total amount of ONE MILLION EIGHT HUNDRED NINETY-SIX THOUSAND FOUR HUNDRED NINTEY-NINE PESOS and FIFTY CENTAVOS (P1,896,499.50), Philippine Currency without interests, representing the just compensation of the property with the total area of 36.1238 hectares located in Barangay Carmen, Zaragoza, Nueva Ecija, covered by TCT No. 10218. SO ORDERED.[9]

In arriving at the amount of just compensation, the SAC used a value of P175.00 as the government support price for palay based on the certification by the provincial manager of the National Food Authority (NFA) in Cabanatuan City. The SAC no longer imposed interest on account of a higher value of government support price. With regard to the compromise judgment, the SAC declared in its decision that the same had been set aside and considered without effect on the ground that Atty. Poblete cannot authorize Atty. Baui to enter into a stipulation of facts binding upon the DAR. Petitioner filed an appeal docketed as CA-G.R. SP No. 77619, arguing that just compensation should be fixed based on the formula in P.D. No. 27 in relation to Executive Order No. 228, providing a government support price of P35.00. Using the said formula and the provision on interest under DAR A.O. No. 13, series of 1994, petitioner prayed that just compensation be fixed at P706,754.90. Respondents questioned the authority of the Court of Appeals to give due course to the appeal, considering that the compromise judgment had not been set aside under Rule 38 of the Rules of Court. In a Resolution dated 8 October 2004, the Court of Appeals affirmed its jurisdiction to take cognizance of petitioners appeal. [10]

On 19 March 2, 2004, the Court of Appeals rendered the assailed decision, dismissing the appeal for lack of merit. On 9 June 2004, the appellate court denied petitioners motion for reconsideration. Hence, the instant petition, raising a lone issue for the Courts consideration: THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW WHEN IT USED DIFFERENT FACTORS/DATA IN THE DETERMINATION OF JUST COMPENSATION OF SUBJECT RICELAND, IN UTTER DISREGARD OF THE EVIDENCE ON RECORD AND THE PERTINENT PROVISIONS OF PRESIDENTIAL DECREE NO. 27 AND EXECUTIVE ORDER NO. 228. For their part, respondents elevated to this Court a petition for certiorari and prohibition, docketed as G.R. No. 166972. The petitioner prayed for the nullification of the assumption of jurisdiction by the Court of Appeals in CA-G.R. SP No. 77619 and the declaration that the compromise judgment is final and executory. In a Resolution dated 22 June 2005, the Court resolved to dismiss G.R. No. 166972 for the failure to submit a verified statement of the material dates of the receipt of the decision and filing of the motion for reconsideration and failure to verify the petition and submit a valid certification of nonforum shopping. [11] The resolution became final and executory on 22 August 2005.[12]

The only question that remains for resolution is the value of just compensation to be paid to respondents. Petitioner maintains that the formula should be based under the provisions of P.D. No. 27 and E.O. No. 228, which fix the Land Value to be equal to (2.5 x AGP x P35) x A, where AGP is the average gross production per hectare; P35.00 is the government support price for palay in 1972; and A is the total land area. Petitioner argues that P35.00 was used in the foregoing formula as the support price of palay per cavan because it was the selling price of palay per cavan on October 21, 1972, when the government took over the ownership of the subject land. The petition lacks merit. On 15 June 1988, the Comprehensive Agrarian Reform Law (CARL) or R.A. No. 6657 was enacted to promote special justice to the landless farmers and provide a more equitable distribution and ownership of land with due regard to the rights of landowners to just compensation and to the ecological needs of the nation.[13] Section 4 of R.A. No. 6657 provides that the CARL shall cover all public and private agricultural lands including other lands of the public domain suitable for agriculture. Section 7 provides that rice and corn lands under P.D. No. 27, among other lands, will comprise phase one of the acquisition plan and distribution program. Section 75 states that the provisions of P.D. No. 27 and E.O. Nos. 228 and 229, and other laws not inconsistent with R.A. No. 6657 shall have suppletory effect.[14] Furthermore, in Land Bank of the Philippines v. Heirs of Domingo,[15] the Court stressed the duty of the Court to balance the interests of both the landowner and the farmer-beneficiaries, to wit: Section 9, Article III of the 1987 Constitution provides that no private property shall be taken for public use without just compensation. As a concept in the Bill of Rights, just compensation is defined as the fair market value of the property as between one who receives, and one who desires to sell. Section 4, Article XIII of the 1987 Constitution mandates that the redistribution of agricultural lands shall be subject to the payment of just compensation. The deliberations of the 1986 Constitutional Commission on this subject reveal that just compensation should not also make an insurmountable obstacle to a successful agrarian reform. Hence, the landowners right to just compensation should be balanced with agrarian reform. In Land Bank v. Court of Appeals, we declared that it is the duty of the court to protect the weak and the underprivileged, but this duty should not be carried out to such an extent as to deny justice to the landowner whenever truth and justice happen to be on his side.[16] In the instant case, respondents were furnished with the notice of coverage sometime in 1988 only. Even if respondents property were acquired pursuant to P.D. No. 27, the fixing of just compensation based on the values under P.D. No. 27/E.O. No. 228 would render meaningless respondents right to a just compensation.

Thus, the Court ruled in Paris v. Alfeche[17] that when the passage of R.A. No. 6657 supervened before the payment of just compensation, the provisions of R.A. No. 6657 on just compensation would be applicable. The same pronouncement has been reiterated in Land Bank of the Philippines v. Natividad,[18] Land Bank of the Philippines v. Estanislao,[19] Land Bank of the Philippines v. Heirs of Domingo[20] and LBP v. Heirs of Cruz.[21]

Pertinently, Section 17 of R.A. No. 6657 provides:

Sec. 17. Determination of Just Compensation.In determining just compensation, the cost of acquisition of the land, the current value of the like properties, its nature, actual use and income, the sworn valuation by the owner, the tax declarations, and the assessments made by government assessors shall be considered. The social and economic benefits contributed by the farmers 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. Celada, the Court ruled that the factors enumerated under Section 17, R.A. No. 6657 had already been translated into a basic formula by the Department of Agrarian Reform (DAR) pursuant to its rulemaking power under Section 49 of R.A. No. 6657. Thus, the Court held in Celada that the formula outlined in DAR A.O. No. 5, series of 1998 should be applied in computing just compensation.[22] Likewise, in Land Bank of the Philippines v. Sps. Banal,[23] the Court ruled that the applicable formula in fixing just compensation is DAR A.O. No. 6, series of 1992, as amended by DAR A.O. No. 11, series of 1994, then the governing regulation applicable to compulsory acquisition of lands, in recognition of the DARs rule-making power to carry out the objectives of R.A. No. 6657. Because the trial court therein based its valuation upon a different formula and did not conduct any hearing for the reception of evidence, the Court ordered a remand of the case to the SAC for trial on the merits.[24]

The mandatory application of the aforementioned guidelines in determining just compensation has been reiterated recently in Land Bank of the Philippines v. Lim[25] and Land Bank of the Philippines v. Heirs of Cruz,[26] where the Court also ordered the remand of the cases to the SAC for the determination of just compensation strictly in accordance with the applicable DAR regulation. Conformably with the aforequoted rulings, the instant case must be remanded to the SAC for the determination of just compensation in accordance with DAR A.O. No. 5, series of 1998, the latest DAR issuance on fixing just compensation. WHEREFORE, the instant petition for review on certiorari is DENIED and the decision and resolution of the court of Appeals in CA-G.R. SP No. 77619 areREVERSED and SET ASIDE. Agrarian Case No. 98-AF is REMANDED to the Regional Trial Court, Branch 26, Cabanatuan City, which is directed to determine with dispatch the just compensation due respondents strictly in accordance with DAR A.O. No. 5, series of 1998. SO ORDERED.

LAND BANK OF THE PHILLIPINES, Petitioner,

G.R. No. 168631 Present: YNARES-SANTIAGO, J., Chairperson, CARPIO MORALES,* CHICO-NAZARIO, NACHURA, and PERALTA, JJ.

versus -

CAROLINA B. VDA. DE ABELLO and HEIRS OF ELISEO ABELLO, NAMELY: Promulgated: NENITA, SULITA, ROLANDO, IMELDA and ELISEO, JR., all surnamed ABELLO, Respondents. April 7, 2009 x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x DECISION PERALTA, J.:

This is a petition for review on certiorari, under Rule 45 of the Rules of Court, seeking to annul and set aside the Decision[1] dated February 28, 2005, and Resolution[2] dated June 27, 2005, of the Court of Appeals (CA) in CA-G.R. SP No. 85091.

The antecedents are as follows: Respondent Carolina Vda. de Abello (Carolina) is the widow of the late Eliseo Abello, while the rest of the respondents are their children. Respondents are the owners of a parcel of land covered by Transfer Certificate of Title (TCT) No. NT55863, containing an area of 12.1924 hectares, situated at Brgy. Sto. Nio 3rd, San Jose City.[3] In a letter[4] dated March 6, 2000 addressed to a certain Dalmacio Regino, thru Eliseo Abello, the Land Valuation and Landowners Compensation Office III of the Land Bank of the Philippines (LBP) informed the respondents that 10.3476 hectares of the their property have been placed under the governments Operation Land Transfer[5] and that the assessed compensation for the lands expropriation was P146,938.54. Using the guidelines for just compensation embodied in Presidential Decree No. 27[6] (PD 27) and implemented in Executive Order No. 228[7] (EO 228), and taking into consideration the Government Support Price (GSP) for one cavan of 50 kilos palay in October 21, 1972 which was P35.00,[8] the Department of Agrarian Reform (DAR) and the LBP computed the value of the 10.3476 hectare land at P40,743.66.[9] Based on DAR Administrative Order No. 13 (DAR AO 13),[10] series of 1994, a 6% increment in the amount of P106,194.88 was added to the original valuation.[11] Thus, the formula they used to compute the value of the property was: Land value = Average Gross Production (AGP) x 2.5 x Government Support Price (GSP) Or = = 45 x 2.5 x 35

P3,937.5 x 10.3476 hectare = P40,743.66 + P106,198.88 Increment per CAR AO 13, S. 1994

P 146,938.54

Claim No. 03-EO-94-0573 reflects that the proceeds of the claim amounts as follows: Original Cash P Bond 4,074.37 36,669.29 Increment per DAR AO 13, S. 1994 10,619.48 95,575.40 Total 14,693.85 132,244.69

Total

40,743.66

106,194.88

146,938.54[12]

In a letter[13] dated June 6, 2000, Carolina informed LBP that she is the owner of the said parcel of land and not Dalmacio Regino. Further, she stated that the prevailing market value of an agricultural land at Sto. Nio 3rd, San Jose City at that time was P300,000.00 to P400,000.00 per hectare. She pegged the value of the subject property at P350,000.00 per hectare or a total of P4,267,340.00, which should be paid to her and the other heirs of Eliseo Abello.[14] Subsequently, respondents filed a Petition for Just Compensation[15] before the Special Agrarian Court (SAC), Regional Trial Court, Branch 33, Guimba, Nueva Ecija, which petition was later docketed as Special Agrarian Case No. 1193-G. Respondents alleged that they are the owners of an agricultural land covered by TCT No. NT-55863 consisting of 12.1924 hectares situated at Barangay Sto. Nio 3rd, San Jose City, their ownership being evidenced by a deed of absolute sale executed in favor of the spouses Eliseo Abello and Carolina Abello by the registered owner, Eleuteria Vda. de Ignacio; that 10.3476 hectares of the aforesaid land was placed under Operation Land Transfer by the government; that the defendant LBP fixed the value of their land at P145,938.54; that their land yields an average harvest of 120 cavans of palay per hectare per cropping; that the prevailing purchase price per hectare in the area ranges from P300,000.00 to P400,000.00 per hectare; and that the petitioners are willing to sell aforesaid landholding forP350,000.00 per hectare.[16] Ultimately, they prayed, among other things, that the just compensation for the subject property be fixed in the amount of not less thanP4,267,340.00. On July 26, 2002, LBP filed its Answer.[17] Among other things, LBP alleged that the said landholding was under Operation Land Transfer by the DAR, and was valued in accordance with PD 27 and EO 228; that it was endorsed to the LBP for payment in November 1994; that LBP reviewed the claim and found the same in order; that the subject landholding was valued at P40,743.66 for the 10.3426 hectares covered; that the average gross production (AGP) was determined to be 45cavans per hectare; that the government support price in 1972 per cavan of palay was P35.00, the price obtaining at that time; that in addition to the amount ofP40,743.66, DAR AO 13 provides for an incremental increase of 6% compounded annually, hence, the total compensation due the landowner is P146,938.54.[18] LBP prayed that the said valuation be adopted by the SAC or that it be judicially determined in accordance with law and jurisprudence.

Thereafter, the SAC appointed commissioners to assist it in examining, investigating, and ascertaining the facts relevant to the dispute, including the valuation of the subject landholding. The team was headed by Officer-in-Charge, Branch Clerk of Court, Mr. Arsenio S. Esguerra, Jr. (Esguerra), with Mr. Gil Alvarez and Mr. Willy Wong as members. On January 30, 2003, Commissioner Esguerra submitted a Consolidated Commissioners Report[19] detailing their findings. Based on their ocular inspection, the land is situated four kilometers from the town proper and accessible by a feeder road. The topography is generally flat and there are water pumps installed. He recommended that the compensation for the subject land should be pegged at P200,000.00 per hectare. It reads: xxxx The landholdings of the plaintiff has an aggregate area of 10.3476 hectares situated at Barangay Sto. Nio 3rd, San Jose City. The landholding is classified as riceland. It is four (4) kilometers away from the city proper of San Jose City and traversed by a feeder road. It is accessible to all kinds of transportation. It is along the San Jose City-Lupao, Nueva Ecija provincial highway. The topography is generally flat and there is a creek (Linamuyak Creek) near the landholdings where farmer-beneficiaries can derive water. There are also water pumps installed, hence, the landholding is artificially irrigated. There is electricity in the site. The average gross harvest ranges from 100 to 110 cavans per hectare. Based from the foregoing considerations, the undersigned believes that the compensation of plaintiff's landholdings with an aggregate area of 10.3476 hectares is P200,000.00 per hectare. On April 12, 2004, the SAC rendered a Decision[20] adopting the recommendation of its appointed commissioners which fixed the just compensation for the subject property at P200,000.00 per hectare. The decretal portion of which reads: WHEREFORE, judgment is hereby rendered: 1. Fixing the just compensation for plaintiffs 10.342 hectare land at P200,000 per hectare or a total of P2,068,520.00 2. Ordering the defendant Land Bank of the Philippines to pay the above amount to the plaintiffs. SO ORDERED.[21] Both the LBP and the DAR filed separate motions for reconsideration which was denied in the Order [22] dated July 5, 2004. Pursuant to Section 60 of RA 6657, LBP sought recourse before the CA in CA-G.R. SP No. 85091, arguing that: A. THE COURT A QUO ERRED IN FIXING THE JUST COMPENSATION OF THE COVERED AREA OF 10.3476 HECTARES AT P200,000.00 PER HECTARE BY NOTFOLLOWING THE APPROPRIATE LAND VALUATION FORMULA PRESCRIBED UNDER PD 27 AND EO NO. 288. B. THE COURT A QUO ERRED IN APPLYING THE VALUATION FACTORS UNDER R.A. 6657 TO SUBJECT LANDHOLDING ACQUIRED UNDER P.D. 27.[23] On February 28, 2005, the CA rendered a Decision[24] denying the petition, the dispositive portion of which reads: WHEREFORE, finding no reversible error from the order abovementioned, the petition is hereby DENIED and the decision of the Regional Trial Court[,] Branch No. 33 of Guimba, Nueva Ecija in Agrarian Case No. 1193-G is AFFIRMED in all respect. SO ORDERED.[25] The CA opined that the SAC made no mistake when it ruled that the provisions of RA 6657 is controlling and that the provisions of PD 27 and EO 228 shall apply only in suppletory character to RA 6657.[26] LBC filed a motion for reconsideration, but it was denied in the Resolution[27] dated June 27, 2005. Hence, this present petition. The core issue submitted by LBP to be resolved in the present case is: WHETHER OR NOT THE SPECIAL AGRARIAN COURT CAN DISREGARD THE FORMULA PRESCRIBED UNDER

P.D. NO. 27 AND E.O. 228 IN FIXING THE JUST COMPENSATION OF P.D. 27-COVERED LAND.[28]

LBP maintains that the formula under PD 27 and EO 228, coupled with the grant of compounded interest pursuant to DAR AO 13, is sufficient to arrive at a just compensation for the subject property. Moreover, LBP insists that it is the value of the property at the time of taking -- not at the time of payment -- that is controlling.[29] To buttress its claim, LBP argues that the property was legally taken by the government upon the effectivity of PD 27 or on October 21, 1972, and it is such date that ownership over the subject land was deemed transferred from the landowner to the farmer-beneficiaries. When EO 228 fixed the basis in determining the value of the land using the government support price (GSP) for one cavan of 50 kilos of palay on October 21, 1972 at P35.00, it was in cognizance of the rule that just compensation is the value of the property at the time of the taking. As such, PD 27 and EO 228 should be the basis in computing the value of the land because respondents were effectively deprived not only of possession, but also of dominion over the subject property on October 21, 1972.[30] The petition is bereft of merit. As the opening paragraph of PD 27 explains, the statute was issued in order to address the then prevailing violent conflict and social tension brought about by the iniquitous landownership by a few. It is within this context that former President Ferdinand Marcos deemed it proper to declare the emancipation of all tenant-farmers effective October 21, 1972.[31] Thereafter, EO 228 declared full land ownership to all qualified farmer- beneficiaries as of October 21, 1972 and gave the formula for land valuation. On June 15, 1988, the Comprehensive Agrarian Reform Law (CARL), or RA 6657, was enacted to promote social justice to the landless farmers and provide a more equitable distribution and ownership of land with due regard to the rights of landowners to just compensation and to the ecological needs of the nation. [32]

Section 4 of RA 6657 provides that the CARL shall cover all public and private agricultural lands, including other lands of the public domain suitable for agriculture. Section 7[33] provides that rice and corn lands under PD 27, among other lands, will comprise phase one of the acquisition plan and distribution program. Section 75[34] of RA 6657 expressly states that the provisions of PD 27 and EO 228 and 229, and other laws not inconsistent with RA 6657, shall have suppletory effect. In Office of the President, Malacaang, Manila v. Court of Appeals,[35] this Court ruled that the seizure of the landholding did not take place on the date of effectivity of PD 27 but would take effect on the payment of just compensation. LBPs contention that the subject property was acquired for purposes of agrarian reform on October 21, 1972, the time of the effectivity of PD 27, ergo just compensation should be based on the value of the property as of that time, is consequently flawed. In Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform,[36] the Court held that it is a recognized rule that title to the property expropriated shall pass from the owner to the expropriator only upon full payment of just compensation. The Court further held that: It is true that P.D. No. 27 expressly ordered the emancipation of tenant-farmer as [of] October 21, 1972 and declared that he shall be deemed the owner of a portion of land consisting of a family-sized farm except that no title to the land owned by him was to be actually issued to him unless and until he had become a full-fledged member of a duly recognized farmers cooperative. It was understood, however, that full payment of just compensation also had to be made first, conformably to the constitutional requirement. In Land Bank of the Philippines v. Natividad,[37] the Court held that the determination of just compensation should be in accordance with RA 6657, and not PD 27 and EO 228, thus:

It would certainly be inequitable to determine just compensation based on the guideline provided by PD 27 and EO 228 considering the DARs failure to determine the just compensation for a considerable length of time. That just compensation should be determined in accordance with RA 6657, and not PD 27 or EO 228, is especially imperative considering that just compensation should be the full and fair equivalent of the property taken from its owner by the expropriator, the equivalent being real, substantial, full and ample.

Under the factual circumstances of the case, the agrarian reform process is still incomplete as the just compensation to be paid respondents has yet to be settled. Considering the passage RA 6657 before the completion of this process, the just compensation should be determined and the process concluded under the said law. [38] Indeed, this Court has time and

again upheld the applicability of RA 6657, with PD 27 and EO 228 having only suppletory effect, conformably with our ruling in Paris v. Alfeche.[39] Section 17 of RA 6657, which is particularly relevant, providing as it does the guideposts for the determination of just compensation, reads as follows: Sec. 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, and the assessment made by government assessors shall be considered. The social and economic benefits contributed by the farmers 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. To be sure, just compensation should be determined in accordance with RA 6657, and not PD 27 or EO 228. This is especially imperative considering that just compensation should be the full and fair equivalent of the property taken from its owner by the expropriator, the equivalent being real, substantial, full and ample. [40] The determination of the proper valuation of the land upon any other basis would not only be unjust, it is bordering on absurdity. For years, respondents have been deprived of the use and enjoyment of their landholding, yet to date, they have not received just compensation therefor. Although the purpose of PD 27 was the emancipation of tenants from the bondage of the soil and transferring to them the ownership of the land they till, such noble purpose should not trample on the landowners right to be fairly and justly compensated for the value of their property. In sum, the SAC and the CA committed no reversible error when it ruled that it is the provisions of RA 6657 that is applicable to the present case. The SAC arrived at the just compensation for respondents property after taking into consideration the commissioners report on the nature of the subject landholding, its proximity from the city proper, its use, average gross production, and the prevailing value of the lands in the vicinity. This Court is convinced that the SAC correctly determined the amount of just compensation due to respondents in accordance with, and guided by, RA 6657 and existing jurisprudence. WHEREFORE, the petition is DENIED. The Decision dated February 28, 2005 and Resolution dated June 27, 2005 of the Court of Appeals, in CA-G.R. SP No. 85091, are AFFIRMED. Costs against petitioner. SO ORDERED.

ALLIED BANKING CORPORATION, Petitioner,

G.R. No. 175422 Present:

- versus -

THE LAND BANK OF THEPHILIPPINES and THE SECRETARY OF THE DEPARTMENT OF AGRARIAN REFORM, Respondents.

YNARES-SANTIAGO, J., Chairperson, AUSTRIA-MARTINEZ, CHICO-NAZARIO, NACHURA, and PERALTA, JJ. Promulgated:

March 13, 2009 x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION CHICO-NAZARIO, J.:

This Petition for Review under Rule 45 of the Rules of Court seeks to reverse and set aside the 29 June 2006 Decision[1] and the 07 November 2006Resolution[2] of the Court of Appeals in CA-G.R. CV No. 74738 which annulled the Decision of the Regional Trial Court (RTC) of Balanga City, Bataan, Branch 1. The Court of Appeals likewise remanded the case to the RTC, ordering the latter to determine the just compensation of the subject parcels of land acquired by the Department of Agrarian Reform (DAR) from Allied Banking Corporation (Allied) pursuant to Republic Act No. 6657, as amended, otherwise known as the Comprehensive Agrarian Reform Law of 1988. Allied owned two abutting parcels of land located at Mabiga, Hermosa, Bataan, which were covered by Transfer Certificates of Title (TCT) No. 97975 and No. 97976, with respective land areas of 20.4840 hectares (204,840 square

meters) and 21.3835 hectares (214,860 square meters). The two parcels of land were compulsorily acquired by the DAR pursuant to Republic Act No. 6657. In its Notices of Valuation dated 30 July 1997 and 23 October 1997, and by using the formula under DAR Administrative Order (DAO) No. 17, Series of 1989, as amended by DAO No. 06, Series of 1992, and further amended by DAO No. 11, Series of 1994, the Land Bank of the Philippines (Landbank) pegged the value of the 20.4840-hectare land covered by TCT No. 97975 at P1,170,683.70 or P57,151.123 per hectare, while the second land with the area of 21.3835[3] hectares covered under TCT No. 97976 was valued at P1,427,030.73 or at P66,735.13 per hectare. On 30 October 1997, Landbank informed Allied that it had increased the valuation of the 20.4840[4] hectares under TCT No. 97975 to P1,171,714.29 or P57,201.44 per hectare. After allegedly having conducted a survey on the prevailing market value of the lots within the vicinity, Allied rejected the valuation and insisted that the two parcels of land in question be valued at P180,000.00 per hectare, hence, the 20.4840 hectares should be valued at P3,687,120, and the 21.3835 hectares at P3,867,489. Allied presented its arguments before the Provincial Agrarian Reform Adjudicator. The Provincial Agrarian Reform Adjudicator upheld the valuation of the Landbank. On 19 January 1999, Allied filed a Petition for Just Compensation with the RTC of Dinalupihan, Bataan, Branch 5. Later the case was re-raffled to the RTC of Balanga City, Bataan, Branch 1, acting as Special Agrarian Court (SAC) pursuant to Administrative Circular No. 80 dated 18 July 1989. On 23 March 2000, upon the agreement of the parties, commissioners were appointed, namely: 1) Gilbert S. Argonza, the chairman and commissioner of the RTC; 2) Hilario M. Paria, nominated by Allied; 3) Engr. Moises L. Petero, nominated by Landbank; and 4) Crispin O. Dominguez, nominated by the DAR. On 2 March 2001, the commissioners were ordered by the RTC to submit their report on their respective recommendations as to the just compensation for the subject lands. For unknown reasons, only Hilario M. Paria, the commissioner nominated by Allied, submitted his report. The report, which adopted the findings of the Asian Appraisal Company that was earlier commissioned by Allied, made use of the Market Data Approach, which is explained and illustrated in the said report: The value of the land was arrived at by the Market Data Approach. In this approach the value of the land is based on sales and listings of comparable property registered within the vicinity. The technique of this approach requires the establishing of comparable property by reducing reasonable comparative sales and listings to a common denominator. This is done by adjusting the differences between the subject property and those actual sales and listings regarded as comparable. The property used as basis of comparison was premised on the factors of location, size and shape of the lot, and time element. In valuing the land, records of recent sales and offerings of similar land are analyzed and comparison made for such factors as size, characteristics of the lot, location, quality, and prospective use. Although no sales of truly comparable land have occurred, the following are believed to provide reasonable bases for comparison: Listings: 1. Currently, an 18-hectare (180,000 sq. m.) property located along Barangay Road, within Barangay Mabiga, Hermosa, Bataan is being offered for sale thru a certain Mr. Paolo Hermoso, a local resident, at an asking price of P80 per sq.m. Currently, a 4-hectare (40,000 sq. m.) property located along Barangay Road, beside Mabiga Elementary School, within Mabiga, Hermosa, Bataan is being offered for sale thru a certain Ms. Liway, Grumal, Barangay Chairman and resident of Mabiga, at an asking price of P40 per sq. m.

2.

The abovementioned listings are located along Barangay Road and within a more desirable neighborhood, and are free of tenants/squatters. They are, therefore, considered superior to the subject property. Due to the scarcity of market data that may be used for direct comparison purposes, we have sought the opinion of some local residents, the municipal assessor, bank appraisers and other knowledgeable individuals who, in our opinion, may be considered as generally conversant with land values in the area and gathered that fairly large tracts of land along Barangay Road command a selling price of P30 to as much as P80 per sq. m., while interior parcels of agricultural land in the vicinity of the

subject property are ranging from P10 to P20 per sq. m., depending on size, shape, terrain, proximity to roadways and other physical attributes of the land.[5]

Based on the Market Data Approach, the report valued the subject properties at P15.00 per square meter (P150,000.00 per hectare), thus: After an analysis of the market data, considering such factors as location, desirability, neighborhood, utility, size and time element, the market value of the land, x x x is estimated as atP15 per sq.m. or a total value of P6,296,000 for a total land area of 419,700 sq.m.[6]

In a Decision dated 14 January 2002, the RTC adopted the valuation submitted by Commissioner Hilario M. Paria, who fixed the value of the lands in question at P15.00 per square meter or at P150,000.00 per hectare. The decretal portion reads: WHEREFORE, in view of the foregoing, the two (2) lots belonging to the petitioner located at Mabiga, Hermosa, Bataan, containing a total area of 419,700 square meters be valued at Six Million Two Hundred Ninety Six Thousand Pesos (P6,296,000.00), Philippine Currency.[7]

Landbank and DAR appealed the RTC decision. In a Decision dated 29 June 2006, the Court of Appeals nullified the RTC Decision and remanded the case to the RTC for determination of just compensation. In setting aside the RTC Decision, the Court of Appeals stated that the RTC failed to observe the basic rules of procedure and the fundamental requirements in determining just compensation, namely: (1) that the RTC relied solely upon the report of Allieds nominated commissioner when there were four commissioners; (2) that there was no showing that Landbank and DAR were notified of the filing of the report of Allieds commissioner, thereby depriving the other parties of the opportunity to object to the said report; (3) that the report of Allieds commissioner was not substantiated by competent evidence; and (4) that the RTC erred in adopting the Market Data Approach, which method was not sanctioned by the pertinent administrative orders of DAR in relation to the determination of just compensation. The dispositive portion of the Court of Appeals Decision provides: WHEREFORE, in view of the foregoing, the Decision dated January 14, 2002 of the RTC of Balanga City, Branch 1, is hereby ANNULLED and SET ASIDE. Civil Case No. 6885 is REMANDED to the RTC for determination of just compensation for the subject parcels of land in strict compliance with the provisions of R.A. 6657, as amended, the DAR Administrative Orders, and the Rules of Court.[8]

Allied filed a motion for reconsideration, which was denied by the Court of Appeals in its Order dated 7 November 2006. Hence, the instant case. Allied maintains that Landbank and DAR are barred from questioning the determination made by its commissioner since they agreed to such appointment and conceded to be bound by the findings of such commissioners. Although only the findings of Allieds commissioner was considered, owing to the fact that the other commissioners failed to submit their reports, said findings are binding on the parties. Allied likewise insists that Landbank and DAR need not be separately notified of the submission of the report of the formers commissioner as the latter are given ample opportunity to meet with said commissioner during the several hearings set by the RTC and to question his report. According to Allied, this opportunity to meet and to question its commissioner, which Landbank and DAR squandered, is considered sufficient notice. Allied takes exception to the Court of Appeals statement that the RTC findings were uncorroborated by evidence. Allied argues that the RTCs decision is supported by evidence through the report of Allieds commissioner.[9] Allied also contends that the Court of Appeals erred in ruling that the basic formula in DAO No. 6, Series of 1992, as amended by DAO No. 11, Series of 1994, should have been invoked instead of the Market Data Approach. It stresses that when an agrarian case for the determination of just compensation is elevated to the RTC, the court, acting as a special agrarian court, is not bound by Sections 17[10] of the Comprehensive Agrarian Law and its implementing rules, DAO No. 6, Series of 1992. As the RTC made its own evaluation in arriving at the just compensation of the subject lands, said evaluation should be followed, even if it disregarded Section 17 of the Comprehensive Agrarian Law and the pertinent rules and regulations of DAR. Allieds arguments fail to persuade.

The procedure for the determination of compensation cases under Republic Act No. 6657, as synthesized by this Court,[11] commences with the Landbank determining the value of the lands under the land reform program. Making use of the Landbank valuation, the DAR makes an offer to the landowner by way of a notice sent to the latter, pursuant to Section 16(a) of Republic Act No. 6657. In case the landowner rejects the offer, a summary administrative proceeding is held and afterward the Provincial Agrarian Reform Adjudicator (PARAD), the Regional Agrarian Reform Adjudicator (RARAD) or the Department of Agrarian Reform Adjudication Board (DARAB) adjudicator as the case may be, depending on the value of the land, fixes the price to be paid for the land. If the landowner does not agree to the price fixed, he may bring the matter to the RTC acting as Special Agrarian Court. In the process of determining the just compensation due to landowners, it is a necessity that the RTC must take into account several factors enumerated in Section 17 of Republic Act No. 6657, as amended, thus: Sec. 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, and the assessment made by government assessors shall be considered. The social and economic benefits contributed by the farmers 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.

Being the government agency primarily charged with the implementation of the agrarian reform program, DAR issued DAO No. 6 to fill out the details necessary for the implementation of Section 17 of Republic Act No. 6657. DAR converted these factors specified in Section 17 into a basic formula in DAO No. 6, as amended, in this wise: LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1) LV = Land Value CNI = Capitalized Net Income CS = Comparable Sales MV = Market Value per Tax Declaration The above formula shall be used if all the three factors are present, relevant and applicable. A.1 When the CS factor is not present and CNI and MV are applicable, the formula shall be: LV = (CNI x 0.9) + (MV x 0.1) When the CNI factor is not present, and CS and MV are applicable, the formula shall be: LV = (CS x 0.9) + (MV x 0.1)

A.2

be:

A.3 When both the CS and CNI are not present and only MV is applicable, the formula shall LV = MV x 2

The pivotal issue at hand is whether the RTC, acting as a special agrarian court, can disregard the factors mentioned under Section 17 of the agrarian law, detailed by DAO No. 6, and adopt the market data approach submitted by a court-appointed commissioner. While the determination of just compensation is essentially a judicial function which is vested in the RTC acting as Special Agrarian Court,[12] nevertheless, this Court disregarded the determination of just compensation made by the RTC in Land Bank of the Philippines v. Spouses Banal,[13] Land Bank of the Philippines v. Celada,[14] and in Land Bank of the Philippines v. Lim,[15] when, as in this case, the judge gravely abused his discretion by not taking into full consideration the factors enumerated in the agrarian law and further detailed by the DAR administrative order implementing the same. Jurisprudence has not been wanting in reminding special agrarian courts to resolve just determination cases judiciously and with utmost observance of Section 17 of the agrarian law and the administrative orders issued by the DAR implementing the said provision. In Land Bank of the Philippines v. Spouses Banal[16] this Court pointed out that factors spelled out in Section 17 of Republic Act No. 6657 and the formula stated in DAO No. 6 must be adhered to by the RTC in fixing the valuation of lands subjected to agrarian reform, thus: In determining just compensation, the RTC is required to consider several factors enumerated in Section 17 of R.A. 6657, as amended, thus: "Sec. 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, and the assessment made by government assessors shall be considered. The social and economic benefits contributed by the farmers 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." These factors have been translated into a basic formula in [DAR AO 6-92], as amended by [DAR AO 11-94], issued pursuant to the DAR's rule-making power to carry out the object and purposes of R.A. 6657, as amended. The formula stated in [DAR AO 6-92], as amended, is as follows: LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1) LV = Land Value CNI = Capitalized Net Income CS = Comparable Sales MV = Market Value per Tax Declaration The above formula shall be used if all the three factors are present, relevant and applicable. A.1 When the CS factor is not present and CNI and MV are applicable, the formula shall be: LV = (CNI x 0.9) + (MV x 0.1) xxxx While the determination of just compensation involves the exercise of judicial discretion, however, such discretion must be discharged within the bounds of the law. Here, the RTC wantonly disregarded R.A. 6657, as amended, and its implementing rules and regulations. ([DAR AO 6-92], as amended by [DAR AO 11-94]). xxxx WHEREFORE, x x x. The trial judge is directed to observe strictly the procedures specified above in determining the proper valuation of the subject property. (Emphasis supplied.) Again, in Land Bank of the Philippines v. Celada,[17] this Court stressed that the special agrarian court cannot ignore, without violating the agrarian law, the formula provided by the DAR for the determination of just compensation. This Court rejected the valuation fixed by the RTC because it failed to follow the DAR formula: While SAC is required to consider the acquisition cost of the land, the current value of like properties, its nature, actual use and income, the sworn valuation by the owner, the tax declaration and the assessments made by the government assessors to determine just compensation, it is equally true that these factors have been translated into a basic formula by the DAR pursuant to its rule-making power under Section 49 of RA No. 6657. As the government agency principally tasked to implement the agrarian reform program, it is the DARs duty to issue rules and regulations to carry out the object of the law. DAR AO No. 5, s. of 1998 precisely filled in the details of Section 17, RA No. 6657 by providing a basic formula by which the factors mentioned therein may be taken into account. The SAC was at no liberty to disregard the formula which was devised to implement the said provision. It is elementary that rules and regulations issued by administrative bodies to interpret the law which they are entrusted to enforce, have the force of law, and are entitled to great respect. Administrative issuances partake of the nature of a statute and have in their favor a presumption of legality. As such, courts cannot ignore administrative issuances especially when, as in this case, its validity was not put in issue. Unless an administrative order is declared invalid, courts have no option but to apply the same. Instead, it upheld the valuation made by Landbank which was patterned after the applicable administrative order issued by the DAR, viz: [Landbank] arrived at its valuation by using available factors culled from the Department of Agriculture and Philippine Coconut Authority, and by computing the same in accordance with the formula provided, thus COMPUTATION (Applicable Formula): LV = 0.90 CNI + 0.10 MV Comparable Land Transactions (P x x x Capitalized Net Income: Cassava x ____ ) = P x-x-x

16,666.67 x 0.90 = 15,000.00 = 23,914.53

Corn/Coco 26,571.70 Market Value per Tax Declaration: Cassava

8,963.78 x 0.10 = 896.38 = 1,005.39

Corn/Coco 10,053.93

Computed Value per Hectare: Cassava 15,896.38; Corn/Coco 24,919.92 xxxx Value per hectare used: Cassava 15,896.38 x 6.0000 has. = 95,378.28 Corn/Coco 24,919.92 x 8.1939 has.= 204,191.33 Payment due to LO : P299, 569.61

The above computation was explained by Antero M. Gablines, Chief of the Claims, Processing, Valuation and Payment Division of the Agrarian Operations Center of the Land Bank, to wit: ATTY. CABANGBANG: (On direct): xxxx q. a. What are the items needed for the Land Bank to compute? In accordance with Administrative Order No. 5, series of 1998, the value of the land should be computed using the capitalized net income plus the market value. We need the gross production of the land and its output and the net income of the property. You said gross production. How would you fix the gross production of the property? In that Administrative Order No. 5, if the owner of the land is cooperative, he is required to submit the net income. Without submitting all his sworn statements, we will get the data from the DA (Agriculture) or from the coconut authorities.

q. a.

xxxx q. a. In this recommended amount which you approved, how did you arrive at this figure? We used the data from the Philippine (Coconut) Authority and the Agriculture and the data stated that Cassava production was only 10,000 kilos per hectare; corn, 2,000 kilos; and coconuts, 15.38 kilos per hectare. The data stated that in the first cropping of 1986, the price of cassava was P1.00 per kilo; corn was sold at P7.75 per kilo; and the Philippine Coconut Authority stated that during that time, the selling price of coconuts was P8.23 per kilo. After these Production data and selling price, there is here a cost of operation, what is this? It is the expenses of the land owner or farmer. From day one of the cultivation until production. Without the land owners submission of the sworn statement of the income, production and the cost, x x x Administrative Order No. 5 states that x x x we will use 20% as the net income, meaning 80% of the production in peso. This is the cost of valuation. 80 % for what crops? All crops except for coconuts where the cost of expenses is only 20%. Summing all these data, what is the value per hectare of the cassava? The cassava is P15,896.38. How about the corn x x x intercropped with coconuts? P24,919.92.

q. a.

q. a. q. a. q. a.

Under the circumstances, we find the explanation and computation of [Landbank] to be sufficient and in accordance with applicable laws. [Landbanks] valuation must thus be upheld.[18] Apo Fruits Corporation v. Court of Appeals[19] yet again accentuated the necessity of giving paramount importance to the criteria found in Section 17 of the agrarian law and the pertinent DAR administrative order. In affirming therein the special agrarian courts valuation, it reasoned in this fashion: [T]he Court affirmed the due consideration given by the RTC of the factors specified in Section 17, Republic Act No. 6657. Again, the proper valuation of the subject premises was reached with clear regard for the acquisition cost of the land, current market value of the properties, its nature, actual use and income, inter alia factors that are material and relevant in determining just compensation. These are the very same factors laid down in a formula by DAR A.O. No. 5. Due regard was thus given by the RTC to Republic Act No. 6657, DAR A.O. No. 5 and prevailing jurisprudence when it arrived at the value of just compensation due to AFC and HPI in this case.

The Court En Banc in Land Bank of the Philippines v. Lim[20] was confronted with the question whether the RTC can resort to any other means of determining just compensation apart from Section 17 of Republic Act No. 6657 and DAO No. 6. The Court resolved the issue in the negative and pronounced therein that Section 17 of Republic Act No. 6657 and DAO No. 6 are mandatory and are not mere guides that the RTC may disregard. Basing its ruling on the pronouncements of Land Bank of the Philippines v. Spouses Banal and Land Bank of the Philippines v. Celada, the Court enunciated: In Land Bank of the Philippines v. Spouses Banal, this Court underscored the mandatory nature of Section 17 of RA 6657 and DAR AO 6-92, as amended by DAR AO 11-94, viz: In determining just compensation, the RTC is required to consider several factors enumerated in Section 17 of R.A. 6657, as amended, thus: "Sec. 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, and the assessment made by government assessors shall be considered. The social and economic benefits contributed by the farmers 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." These factors have been translated into a basic formula in [DAR AO 6-92], as amended by [DAR AO 11-94], issued pursuant to the DAR's rule-making power to carry out the object and purposes of R.A. 6657, as amended. xxxx While the determination of just compensation involves the exercise of judicial discretion, however, such discretion must be discharged within the bounds of the law. Here, the RTC wantonly disregarded R.A. 6657, as amended, and its implementing rules and regulations. ([DAR AO 6-92], as amended by [DAR AO 11-94]). xxxx WHEREFORE, x x x Civil Case No. 6806 is REMANDED to the RTC x x x. The trial judge is directed to observe strictly the procedures specified above in determining the proper valuation of the subject property. x x x. And in LBP v. Celada, this Court set aside the valuation fixed by the RTC of Tagbilaran, which was based solely on the valuation of neighboring properties, because it did not apply the DAR valuation formula. The Court explained: While [the RTC] is required to consider the acquisition cost of the land, the current value of like properties, its nature, actual use and income, the sworn valuation by the owner, the tax declaration and the assessments made by the government assessors to determine just compensation, it is equally true that these factors have been translated into a basic formula by the DAR pursuant to its rule-making power under Section 49 of R.A. No. 6657. As the government agency principally tasked to implement the agrarian reform program, it is the DAR's duty to issue rules and regulations to carry out the object of the law. The DAR [Administrative Order] precisely "filled in the details" of Section 17, R.A. No. 6657 by providing a basic formula by which the factors mentioned therein may be taken into account. The [RTC] was at no liberty to disregard the formula which was devised to implement the said provision. xxxx Consequently, as the amount of P2,232,868 adopted by the RTC in its December 21, 2001 Order was not based on any of the mandatory formulas prescribed in DAR AO 6-92, as amended by DAR AO 11-94, the Court of Appeals erred when it affirmed the valuation adopted by the RTC. (Emphases supplied.) In the instant case, the RTC did not consider Section 17 of Republic Act No. 6657 as well as DAO No. 6 and instead adopted, hook line and sinker, the market data approach introduced by the commissioner nominated by Allied. This undoubtedly constitutes a glaring departure from the established tenet discussed above on the mandatory nature of Section 17 of Republic Act No. 6657 and DAO No. 6, as amended. It is worthy to note that Allied did not provide any evidence that the market data approach, which based the value of the land in question on sales and listings of similar properties situated within the area, conformed to the subject administrative order, and it is not also clear if same approach took into consideration the said administrative order. Such being the case, the market data approach espoused by Allied cannot be a valuation that complies with the requirements under the agrarian law. Besides, this Court has once refused to accept the market data approach as a method of valuation compliant with the agrarian law and enforced by the DAR:

We find that the factors required by the law and enforced by the DAR Administrative Order were not observed by the SAC when it adopted wholeheartedly the valuation arrived at in the appraisal report. According to the appraisal company, it "personally inspected the property, investigated local market conditions, and have given consideration to the extent, character and utility of the property; sales and holding prices of similar land; and highest and best use of the property." The value of the land was arrived at using the market data approach, which bases the value of the land on sales and listings of comparable property registered within the vicinity. In fact, as noted by the Court of Appeals, a representative of the company admitted that it did not consider the CARP valuation to be applicable.[21] (Emphases supplied.) In fine, this Court defers to the findings of the Court of Appeals, there being no cogent reason to veer away from such findings. Lastly, since Landbank and the DAR failed to submit their respective reports and have them substantiated during the hearings, and since the valuation of Landbank remains unsubstantiated, the Court is left with no recourse but to remand the case to the RTC. WHEREFORE, premises considered, the instant petition is hereby DENIED. The Decision of the Court of Appeals dated 29 June 2006 and its Resolution dated 7 November 2006 annulling the 14 January 2002 Decision of the Regional Trial Court of Balanga City, Bataan, Branch 1, and remanding the case to the same trial court are hereby AFFIRMED. Costs against petitioner. SO ORDERED. AND BANK OF THE PHILIPPINES, Petitioner, G.R. No. 168453 Present: YNARES-SANTIAGO, J., Chairperson, AUSTRIA-MARTINEZ, CORONA,* NACHURA, and PERALTA, JJ. Promulgated:

- versus -

HERNANDO T. CHICO and LORNA CHICO, in her capacity as Attorney-In-Fact, Respondents.

March 13, 2009 x------------------------------------------------------------------------------------x

DECISION NACHURA, J.: Before this Court is a Petition[1] for Review on Certiorari under Rule 45 of the Rules of Civil Procedure, seeking the reversal of the Court of Appeals (CA) Decision[2] dated March 17, 2005, which affirmed with modification the Decision[3] of the Regional Trial Court (RTC) of Cabanatuan City sitting as a Special Agrarian Court (SAC), dated May 17, 2004. The Facts The property subject of this controversy is the 8.3027[4]-hectare portion (subject property) of three (3) parcels of irrigated rice land particularly denominated as Lot Nos. 1, 2 and 3, located at Sitio Sta. Cruz, Sto. Tomas Feria, Quezon, Nueva Ecija, containing a total area of 12.2209 hectares and covered by Transfer Certificate of Title (TCT) No. N18893[5] (entire property) in the name of respondent Hernando T. Chico (respondent). In his Amended Petition[6] for Fixing Just Compensation dated June 2, 2002, filed before the SAC, respondent, as represented by his Attorney-in-Fact, herein respondent Lorna Chico (Lorna), asseverated that the subject property was taken by the Department of Agrarian Reform (DAR) and the title thereto transferred to farmer-beneficiaries (FBs) Amador Gamboa, Regino Ambrocio and Romualdo Francisco,[7] with the issuance of Emancipation Patents (EPs) in their favor on December 27, 1994, without prior notice to respondent and without payment of just compensation. Traversing the petition, the DAR claimed that respondent was duly notified of the subject property's coverage under the Operation Land Transfer (OLT) program of the government and the compensation therefor was already agreed upon at P10,000.00 per hectare, pursuant to the Landowner-Tenant Production Agreement[8] (LTPA) executed between respondent and the FBs. DAR submitted that the petition for just compensation was baseless and ought to be dismissed.[9]

On the other hand, petitioner Land Bank of the Philippines (LBP) opined that it did not have any legal obligation to finance the said transfer because the folder claim of respondent was not duly endorsed for processing and payment and forwarded to the LBP by the DAR. LBP supposed that the transfer may have been made through the Voluntary Land Transfer (VLT) scheme wherein the landowner and the FBs agreed on the amount of just compensation and on the manner of payment, or the FBs may have already completed paying their amortizations in accordance with DAR's valuation. In any of these instances, DAR was no longer obligated to endorse the claim folder to LBP and, in turn, LBP was under no obligation to finance said transfer. Thus, respondent had no cause of action against LBP.[10] Trial on the merits ensued. Witnesses testified and both parties submitted their respective sets of evidence. The SAC's Ruling On May 17, 2004, the SAC ruled that the price of P10,000.00 per hectare as just compensation for the subject property, as contained in the LTPA, could not be sustained in the absence of concrete proof that respondent and the FBs voluntarily agreed thereto; otherwise, respondent would not have filed the petition for just compensation before the SAC. Moreover, the SAC noted that it would have been unrealistic and illogical for respondent to agree that the subject property, which was a prime lot, should be priced at only P10,000.00 per hectare. Thus, the SAC held: WHEREFORE, judgment is hereby rendered ordering the Department of Agrarian Reform through the Land Bank of the Philippines to pay petitioner Hernando T. Chico the total amount of ONE MILLION EIGHT HUNDRED SIXTY THOUSAND FIVE HUNDRED FORTY THOUSAND (sic) PESOS (P1,860,540.00), Philippine Currency, representing the just compensation for his property with a total area of 9.3027 hectares, situated at Sto. Tomas Feria, Quezon, Nueva Ecija, covered by TCT No. N-18893, with 12% legal interest annually, from date of acquisition, until fully paid. No costs. SO ORDERED.[11] Upon an Ex-Parte Motion to Correct Clerical Errors[12] filed by respondent on May 24, 2004, the SAC amended the aforementioned Decision in its Order[13]dated May 26, 2004, thus: WHEREFORE, judgment is hereby rendered ordering the Department of Agrarian Reform through the Land Bank of the Philippines to pay petitioner Hernando T. Chico the total amount of ONE MILLION SIX HUNDRED SIXTY THOUSAND FIVE HUNDRED FORTY THOUSAND (sic) PESOS (P1,660,540.00), Philippine Currency, representing the just compensation of his property with a total area of 8.3027 hectares, situated at Sto. Tomas Feria, Quezon, Nueva Ecija, covered by TCT No. N-18893, with 12% legal interest annually, from date of acquisition, until fully paid. No costs. SO ORDERED. LBP filed a Motion for Reconsideration, arguing that the SAC should have considered October 21, 1972 as the date of taking, inasmuch as the subject property was acquired under Presidential Decree (P.D.) No. 27 [14] and Executive Order (E.O.) No. 228;[15] thus, it erred when it applied instead Republic Act (R.A.) No. 6657[16] as the legal basis for just compensation. In the meantime, respondent filed an Urgent Motion for Partial Release, [17] a Motion for Issuance of Writ of Execution of the Judgment[18] and a Motion to Deposit in Court Money Judgment and Interests.[19] On July 29, 2004, the SAC denied LBP's Motion for Reconsideration and correlatively granted respondent's motion for execution, directing LBP to partially pay respondent the amount of P800,000.00 as just compensation.[20] Aggrieved, LBP appealed to the CA with an application for the issuance of a Temporary Restraining Order (TRO) and/or Preliminary Injunction.[21] On September 29, 2004, the CA issued a TRO, enjoining the SAC from enforcing the Writ of Partial Execution.[22] The CA's Ruling On March 17, 2005, the CA affirmed the ruling of the SAC giving no probative value to the LTPA because of the absence of concrete proof that the parties voluntarily agreed thereto. The CA concurred with the SAC's logic that respondent's act of filing the petition for fixing of just compensation was clear proof to the contrary. Moreover, the CA held that the ruling of the SAC was in accord with Sec. 21[23] of R.A. No. 6657. Citing our decision in Land Bank v. Court of Appeals,[24] the CA declared that the provisions of R.A. No. 6657 should now govern all cases of just compensation for the acquisition of lands while the provisions of P.D. No. 27 should only be suppletory in character. However, the CA ruled that the lease rentals collected from the FBs in 1991-1993, in the total amount ofP178,200.00, should be treated as advance payments for the subject property and must be deducted from the just compensation due respondent. The CA also opined that the twelve (12%) percent interest imposed by the SAC had no legal basis. Pursuant to Sec. 26 [25] of R.A. No. 6657 and

P.D. No. 27, the CA imposed an interest of six percent (6%) per annum from the time of taking until full payment is made. Thus, the CA disposed of the case in this wise: WHEREFORE, premises considered, the DECISION dated May 17, 2004 and the ORDER dated July 29, 2004 of the Regional Trial Court Branch 23 of Cabanatuan City sitting asSpecial Agrarian Court in AGR. Case No. 154 are hereby AFFIRMED with modification that the amount of just compensation is reduced to ONE MILLION FOUR HUNDRED EIGHTY TWO THOUSAND THREE HUNDRED FORTY PESOS (P1,482,340.00) with interest at the legal rate of six percent (6%) per annum from the time of taking until fully paid. SO ORDERED.[26] On April 13, 2005, LBP filed a Motion for Reconsideration[27] which the CA denied in its Resolution[28] dated June 9, 2005. Hence this Petition based on the following grounds: A. THE COURT OF APPEALS GRAVELY ERRED IN SUSTAINING THE SAC WHICH ORDERED THE PETITIONER TO PAY THE RESPONDENTS THE AMOUNT OFP1,482,340.00 AS JUST COMPENSATION FOR SUBJECT PROPERTY IN THE ABSENCE OF A LAND TRANSFER CLAIM COMING FROM DAR WHICH IS NECESSARY FOR THE PETITIONER TO PROCESS AND PAY THE JUST COMPENSATION CLAIM. B. ASSUMING ARGUENDO THAT THE PETITIONER IS LIABLE TO PAY JUST COMPENSATION SANS ANY LAND TRANSFER CLAIM, THE COURT OF APPEALS, IN USING FACTORS PRESCRIBED IN SEC. 17 OF R.A. NO. 6657, GRAVELY ERRED IN SUSTAINING THE JUST COMPENSATION IN THE AMOUNT OF P1,482,340.00 WHICH TOTALLY DISREGARDED THE VALUATION FORMULA PROVIDED FOR UNDER P.D. 27, E.O. 228 AND THE LANDOWNERTENANT PRODUCTION AGREEMENT (LTPA) DATED APRIL 19, 1987. C. THE COURT OF APPEALS GRAVELY ERRED IN AWARDING SIX PERCENT (6%) INTEREST PER ANNUM FROM THE TIME OF TAKING UNTIL FULL PAYMENT [OF] JUST COMPENSATION FOR THE SUBJECT PROPERTY.[29]

LBP claims that before it could make any payment to the landowner, as part of the legal process, it is necessary that the records or the Land Transfer Claim (LTC) should be endorsed by DAR to LBP, because without such records, LBP has nothing to evaluate, value, process, and pay; that the evidence showed that there were no records of DAR's acquisition of the subject property as no LTC was forwarded by DAR to the LBP because respondent actually entered into a VLT which pegged the amount of P10,000.00 per hectare as just compensation; that this amount was reasonable, considering that the agreement was entered into in 1987; that the LTPA, being a consensual contract bearing all the requisite formalities, was valid and binding upon the parties and must, therefore, be complied with in good faith; that LBP is duty-bound to protect the Agrarian Reform Fund (ARF) from being illegally disbursed, hence, any disbursement from the ARF, being a public fund, must comply with the usual and accepted accounting and auditing rules and procedure such as the existence of the LTC; and that the CA did not resolve the issue whether or not LBP was legally obliged to compensate respondent in the absence of any LTC. Moreover, LBP argues that assuming arguendo that it is legally obliged to finance the transfer herein, the CA erred in making the award based on R.A. No. 6657 and not on P.D. No. 27 and/or E.O. No. 228 and the LTPA; that the CA seriously erred when it upheld the SAC's use of the zonal valuation of the subject property in the amount of P200,000.00 per hectare since that valuation is intended only for taxation purposes and not for the determination of just compensation under P.D. No. 27 and/or E.O. No. 228; that the determination by the SAC of the amount of just compensation was highly speculative, conjectural and lacked legal basis; and that the CA improperly imposed an annual six percent (6%) compounded interest on the amount of just compensation because R.A. No. 6657 does not provide for payment of interest. LBP submits that the amount of P10,000.00 per hectare, as agreed upon by the parties under the LTPA, should be sustained as just compensation in this case.[30] Respondent counters that since December 27, 1994, he has been deprived of the subject property and yet, has never been paid by the LBP; that where there is delay in tendering a valid payment of just compensation, the imposition of interest is in order, citing Land Bank of the Philippines v. Wycoco;[31] that the determination of just compensation is not an administrative matter but a judicial function;[32] that all the issues raised by LBP were squarely discussed and resolved by the CA in its assailed Decision; that LBP repeatedly raises questions of fact in its petition, which is improper, because the factual findings of the SAC and the CA are binding and conclusive, and only questions of law may be reviewed by this

Court under Rule 45 of the Rules of Civil Procedure. Respondent submits that the assailed CA Decision should be affirmed.[33] Our Ruling Significant is the absence of claim folders, or LTC, which would ordinarily impel us to remand this case to the SAC. However, even if the obvious recourse is to remand the case, considering the lapse of time, the efforts and resources exerted, and the age and physical condition of respondent, this Court deems it proper to resolve the case on the merits here and now, if only to write finis to this controversy. In Land Bank of the Philippines v. Spouses Placido Orilla and Clara Dy Orilla,[34] we had the occasion to explain the matter of just compensation: Constitutionally, "just compensation" is the sum equivalent to the market value of the property, broadly described as 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 the one who receives and the one who desires to sell, it being fixed at the time of the actual taking by the government. Just compensation is defined as the full and fair equivalent of the property taken from its owner by the expropriator. It has been repeatedly stressed by this Court that the true measure is not the taker's gain but the owner's loss. The word "just" is used to modify the meaning of the word "compensation" to convey the idea that the equivalent to be given for the property to be taken shall be real, substantial, full, and ample. Just compensation, under the premises, presupposes the expropriation or taking of agricultural lands for eventual distribution to agrarian reform beneficiaries. Section 17 of R.A. No. 6657 which provides for the parameters in the determination of just compensation, reads as follows: Sec. 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, and the assessment made by government assessors shall be considered. The social and economic benefits contributed by the farmers and the farm-workers 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. There is no question that, in this case, the subject property was expropriated. In fact, EPs have already been issued to the FBs, and respondent has been deprived of the use and the fruits of the subject property. [35] Yet, respondent remains unpaid. LBP disavows any liability to respondent, relying on the LTPA which, according to LBP, proves that respondent entered into a VLT scheme with the FBs. In the same breath, LBP insists that on the basis of the LTPA, the amount of just compensation must be pegged at P10,000.00 per hectare. Lastly, the LBP surmises that the LTPA is the reason why no claim folder or LTC was forwarded by the DAR to LBP. By and large, LBP invites us to look closely into the LTPA. It is hornbook doctrine that under Rule 45 of the Rules of Court, only questions of law, not of fact, may be raised before the Supreme Court. This Court is not a trier of facts and it is not its function to re-examine and weigh anew the respective sets of evidence of the parties. Factual findings of the RTC, herein sitting as a SAC, especially those affirmed by the CA, are conclusive on this Court when supported by the evidence on record.[36] The Court shall analyze or weigh the evidence again only in the exercise of discretion and for compelling reasons, because it is not our duty to review, evaluate, and weigh the probative value of the evidence adduced before the lower courts. [37] Here, we find that none of these exceptional circumstances obtains. Outright, respondent denied having signed the LTPA. [38] Both the SAC and CA gave no probative weight to the LTPA. No proof was adduced that respondent and the FBs ever entered into a VLT scheme; neither is there evidence that the rentals given to respondent by the FBs constituted payment for the subject property. As correctly pointed out by the SAC and the CA, it would indeed be highly contrary to ordinary logic that respondent would voluntarily enter into the LTPA and, subsequently, deny the same, deprive himself of the fruits of his own land, file a case before the court and as a result, painfully undertake the rigorous, expensive and tedious process of litigation. Based on the foregoing, we find no cogent reason to deviate from the common finding of both the SAC and the CA giving no probative value to the LTPA. Necessarily, the amount of P10,000.00 per hectare as just compensation for the subject property must be discarded. As to the absence of claim folders, while we understand that the LBP must give a valuation of the subject property through claim folders or LTCs forwarded by the DAR, we cannot close our eyes to the obvious reality that respondent was dispossessed of his property and has received no payment therefor. LBP invokes our ruling in Crisologo-Jose v. Land Bank of the Philippines,[39] where claim folders were not forwarded to LBP, and we dismissed the petition of the landowner. However, we note that Crisologo-Jose and this case do not share the same factual milieu. In Crisologo-Jose, the properties were not actually acquired by the government, as the landowner failed to prove the fact of actual or symbolic compulsory taking by competent evidence, through such proof as the required Notice of Valuation which usually follows the Notice of Coverage, the letter of invitation to a preliminary conference and the Notice of Acquisition that DAR sends, pursuant to DAR administrative issuances, to the landowner affected. In this case, EPs were already issued in favor of the FBs. Moreover, it cannot be denied that respondent was actually deprived of rentals due him since 1994 as the FBs said that the subject property would be acquired by LBP.

In the exercise of our mandate as a court of justice and equity,[40] we rule in favor of respondent despite the absence of claim folders pro hac vice. If respondent is deprived of the just compensation due him mainly because of the absence of claim folders which were not prepared by the DAR even after it had already taken the subject property and issued the EPs in favor of the FBs, we would be abetting the perpetration of a grave injustice on the respondent. As to the legal basis of just compensation, we hold that the applicable law is R.A. No. 6657. Our recent ruling in Land Bank of the Philippines v. Pacita Agricultural Multi-Purpose Cooperative, Inc., etc., et al.[41] is enlightening. Therein, the Court made a comparative analysis of cases that confronted the issue of whether properties covered by P.D. No. 27 and E.O. No. 228, for which the landowners had yet to be paid, would be compensated under P.D. No. 27 and E.O. No. 228 or under the pertinent provisions of R.A. No. 6657. We observed that in Gabatin v. Land Bank of the Philippines[42] a case which LBP invokes in this controversy the Court declared that the reckoning period for the determination of just compensation should be the time when the land was taken, i.e., in 1972, applying P.D. No. 27 and E.O. No. 228. However, the Court also noted that after Gabatin, the Court had decided several cases in which it found it more equitable to determine just compensation based on the value of the property at the time of payment. These cases are Land Bank of the Philippines v. Natividad,[43] Meneses v. Secretary of Agrarian Reform[44] and Lubrica v. Land Bank of the Philippines,[45] including the earlier cases of Office of the President v. Court of Appeals[46] andParis v. Alfeche.[47] Thus, based on foregoing jurisprudence, we reiterate our ruling in Natividad, to wit: Land Bank's contention that the property was acquired for purposes of agrarian reform on October 21, 1972, the time of the effectivity of PD 27, ergo just compensation should be based on the value of the property as of that time and not at the time of possession in 1993, is likewise erroneous. In Office of the President, Malacaang, Manila v. Court of Appeals, we ruled that the seizure of the landholding did not take place on the date of effectivity of PD 27 but would take effect on the payment of just compensation. Under the factual circumstances of this case, the agrarian reform process is still incomplete as the just compensation to be paid private respondents has yet to be settled. Considering the passage of Republic Act No. 6657 (RA 6657) before the completion of this process, the just compensation should be determined and the process concluded under the said law. Indeed, RA 6657 is the applicable law, with PD 27 and EO 228 having only suppletory effect, conformably with our ruling in Paris v. Alfeche. xxxx It would certainly be inequitable to determine just compensation based on the guideline provided by PD 27 and EO 228 considering the DAR's failure to determine the just compensation for a considerable length of time. That just compensation should be determined in accordance with RA 6657, and not PD 27 or EO 228, is especially imperative considering that just compensation should be the full and fair equivalent of the property taken from its owner by the expropriator, the equivalent being real, substantial, full and ample.[48]

Inasmuch as the determination of just compensation in eminent domain cases is a judicial function, the SAC did not capriciously or arbitrarily act in setting the price at P200,000.00 per hectare an award merely modified by the CA. We see no reason to disturb the factual findings on the valuation of the subject property. The amount fixed by the SAC and CA does not appear to be grossly exorbitant or otherwise unjustified. In this case, the SAC properly arrived at the amount of just compensation for the subject property, taking into account its nature as irrigated land, market value, assessed value at the time of the taking, and the volume and value of its produce, as it made the following findings: (a) [t]he prevailing market value of agricultural lands in Quezon, Nueva Ecija, and adjacent areas, where it is of public knowledge is sold at P80,000.00 to P300,000.00 per hectare; (b) [t]he presence [and] availability of an irrigation system to augment and increase agricultural production; (c) and (d) [t]he average harvests per hectare which [is] 100.05 cavans.[49] [t]he available comparable sales in the area, i.e. P80,000.00, P300,000.00 and P200,000.00;

Thus, it cannot be said that the SAC had no basis for its valuation of the subject property. It took into consideration the important factors enumerated in Section 17 of Republic Act No. 6657 which, in turn, are the very same criteria that make up the DAR formula. In Apo Fruits Corporation v. Court of Appeals,[50] we held: What is clearly implicit, thus, is that the basic formula and its alternatives administratively determined (as it is not found in Republic Act No. 6657, but merely set forth in DAR AO No. 5, Series of 1998) although referred to and even applied by the courts in certain instances, does not and cannot strictly bind the courts. To insist that the formula must be applied with utmost rigidity whereby the

valuation is drawn following a strict mathematical computation goes beyond the intent and spirit of the law. The suggested interpretation is strained and would render the law inutile. Statutory construction should not kill but give life to the law. As we have established in earlier jurisprudence, the valuation of property in eminent domain is essentially a judicial function which is vested in the regional trial court acting as a SAC, and not in administrative agencies. The SAC, therefore, must still be able to reasonably exercise its judicial discretion in the evaluation of the factors for just compensation, which cannot be arbitrarily restricted by a formula dictated by the DAR, an administrative agency. Surely, DAR AO No. 5 did not intend to straightjacket the hands of the court in the computation of the land valuation. While it provides a formula, it could not have been its intention to shackle the courts into applying the formula in every instance. The court shall apply the formula after an evaluation of the three factors, or it may proceed to make its own computation based on the extended list in Section 17 of Republic Act No. 6657, which includes other factors, like the cost of acquisition of the land; the current valuation of like properties; its nature, actual use and income; the sworn valuation by the owner; the tax declarations; and the assessment made by the government assessors.[51]

However, when just compensation is determined under R.A. No. 6657, no incremental, compounded interest of six percent (6%) per annum shall be assessed. In this regard, LBP's point is well taken. The CA erred in imputing interest, because the same applies only to lands taken under P.D. No. 27 and E.O. No. 228, pursuant to Administrative Order No. 13, Series of 1994[52] (A.O. No. 13), and not Sec. 26 of R.A. No. 6657 as cited by the CA. Pertinent is our ruling in Land Bank of the Philippines v. Court of Appeals,[53] to wit: The purpose of AO No. 13 is to compensate the landowners for unearned interests. Had they been paid in 1972 when the GSP for rice and corn was valued at P35.00 and P31.00, respectively, and such amounts were deposited in a bank, they would have earned a compounded interest of 6% per annum. Thus, if the PARAD used the 1972 GSP, then the product of (2.5 x AGP x P35 or P31) could be multiplied by (1.06)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 P35.00 to P300.00/cavan of palay and from P31.00 to P250.00/cavan of corn, there is no more need to add any interest thereon, muchless compound it. To the extent that it granted 6% compounded interest to private respondent Jose Pascual, the Court of Appeals erred.[54]

Likewise, the twelve percent (12%) interest imposed by the SAC has no legal basis. In Land Bank of the Philippines v. Wycoco,[55] this Court held that the interest of 12% per annum on the just compensation is due the landowner in case of delay in payment, which will, in effect, make the obligation on the part of the government one of forbearance. On the other hand, interest in the form of damages cannot be imposed where there is prompt and valid payment of just compensation. Interest on just compensation is assessed only in case of delay in the payment thereof, a fact which must be adequately proved. In this case, it is noteworthy that the LBP, all the while, believed in good faith in the validity of the LTPA, assumed that the acquisition of the subject property was by way of a VLT scheme, and, thus, was not obligated to finance the transfer. Given the foregoing, we find that the imposition of interest on the award of just compensation is not justified and should therefore be deleted. A final note.

The Comprehensive Agrarian Reform Program was undertaken primarily for the benefit of our landless farmers. However, the undertaking should not result in the oppression of landowners by pegging the cheapest value for their lands. Indeed, the taking of properties for agrarian reform purposes is a revolutionary kind of expropriation,[56] but not at the undue expense of landowners who are also entitled to protection under the Constitution and agrarian reform laws.[57] Verily, to pay respondent only P10,000.00 per hectare for his land today, after he was deprived of it since 1994, would be unjust and inequitable. WHEREFORE, the instant Petition is partially GRANTED. The assailed Court of Appeals Decision in CA-G.R. SP No. 85806 dated March 17, 2005 isREVERSED and SET ASIDE. The Decision of the Regional Trial Court (RTC) of Cabanatuan City, sitting as a Special Agrarian Court, dated March May 17, 2004, is REINSTATED with the MODIFICATION that the interest imposed is DELETED. No costs. SO ORDERED.

G.R. No. 173226

January 20, 2009

LAND BANK OF THE PHILIPPINES, Petitioner, vs. MANUEL O. GALLEGO, JR., VELASCO, JR., and JOSEPH L. GALLEGO and CHRISTOPHER GALLEGO,Respondents.

DECISION Tinga, J.: This instant petition for review on certiorari1 under Rule 45 of the 1997 Rules of Civil Procedure seeks the reversal of the Decision2 and Resolution3 of the Court of Appeals in CA-G.R. SP No. 77676. The Court of Appeals Decision modified the amount of just compensation awarded by the Regional Trial Court (RTC) sitting as a Special Agrarian Court, Branch 29, Cabanatuan City to respondents for the expropriation of their property for the comprehensive agrarian reform program of the Department of Agrarian Reform (DAR), while the Resolution denied petitioners motion for reconsideration of the Decision. The following factual antecedents are undisputed and are matters of record: Respondents Manuel O. Gallego, Jr., Joseph L. Gallego and Christopher L. Gallego are the co-owners of several parcels of agricultural lands located in Barangay Sta. Rita and Barangay Concepcion in Cabiao, Nueva Ecija. The lands have an aggregate area of 142.3263 hectares and are covered by Transfer Certificate of Title Nos. T-139629, T-139631 and T139633.4 Sometime in 1972, the DAR placed a portion of the property under the coverage of Presidential Decree No. 27 (P.D. No. 27). However, the DAR and respondents failed to agree on the amount of just compensation, prompting respondents to file on 10 December 1998 a petition before the RTC of Cabanatuan City.5 The petition, docketed as Agrarian Case No. 127AF, named the DAR and herein petitioner Land Bank of the Philippines (LBP) as respondents and prayed that just compensation be fixed in accordance with the valuation formula under P.D. No. 27 based on an Average Gross Production of 109.535 cavans per hectare including interest at 6% compounded annually as provided under PARC Resolution No. 9224-1.6 Petitioner LBP filed an answer, averring that only 76.8324 hectares and not 89.5259 hectares as was alleged in the petition were placed under the coverage of P.D. No. 27 and that just compensation should be determined based on an Average Gross Production of 65 cavans and/or 56.6 cavans per hectare which were the values at the time of taking of the property. Although the DAR did not file an answer, it was represented at the hearings by a certain Atty. Benjamin T. Bagui.7 During the course of the hearing of the petition, the coverage of respondents lands had expanded to a bigger area. In order to conform to the increase in the area placed under agrarian reform, respondents filed on 14 October 2002 an amended petition, stating that as certified by the Municipal Agrarian Reform Office (MARO) of Cabiao, Nueva Ecija, 122.8464 hectares of the property had already been placed under the operation of P.D. No. 27. In the answer filed by the DAR as well as during the pre-trial, the counsels for DAR and petitioner LBP stipulated that the property subject of the petition was irrigated and had a total area of 120 hectares, more or less.8 After the pre-trial conference, the trial court issued an Order dated 08 November 2002,9 embodying the agreed stipulation that the property placed under agrarian reform had an area of 120 hectares, more or less, and directing the MARO of Cabiao, Nueva Ecija to submit the records pertaining to the exact landholdings already processed and acquired by petitioner LBP. In a Supplemental Pre-Trial Order dated 25 November 2002,10 the trial court stated that in view of the parties agreement that the property was irrigated and had an area of 120 hectares, the only factual issue to be resolved would be the correct Average Gross Production, based on which just compensation would be fixed.11 On 14 March 2003, the trial court rendered a Decision,12 adopting respondents formula which was based on an Average Gross Production of 121.6 cavans per hectare. The dispositive portion of the RTC Decision reads: WHEREFORE, judgment is hereby rendered in favor of the petitioners, and the Land Bank of the Philippines is ordered to pay the petitioners Manuel O. Gallego, Joseph L. Gallego and Christopher L. Gallego in a manner set forth in Sections 17 and 18 of R.A. No. 6657 (Comprehensive Land Reform Code) the total amount ofP52,209,720.00 as the just compensation for 122.8464 hectares of ricelands distributed and awarded to tenants-beneficiaries surveyed, described and subdivided into lots with corresponding lot numbers, and areas as indicated in the Summary of Farmer-Beneficiaries and Lot Distribution in Gallego Estate, consisting of six (6) pages, which is annexed hereto and made part of this Decision, including all improvements of roads and irrigation canals therein existing. The amount of P1,179,027.00 or whatever amount the Land Bank of the Philippines has paid to the Gallegos as initial or provisional valuation shall be deducted from the amount of P52,209,720.00. SO ORDERED.13 In arriving at the amount of just compensation, the trial court adopted the formula prescribed in P.D. No. 27, which fixed the land value as equivalent to 2.5 multiplied by the Government Support Price of palay multiplied by the Average Gross Production per hectare of the three preceding agricultural years. The trial court used the values ofP500.00 as Government Support Price for palay and 121.6 cavans per hectare as Average Gross Production of respondents property. Applying Article 195814 of the Civil Code, the trial court also imposed "interest in kind" payable from 1972 to 2002 by multiplying by 1.8 the Average Gross Production of palay of 121.6 cavans per hectare multiplied by 2.5.

Both petitioner LBP and the DAR separately moved for the reconsideration of the trial courts Decision. In its Order dated 28 April 2003, the trial court denied both motions.15 Only petitioner LBP appealed from the trial courts Decision. According to petitioner LBP, the trial court erred in applying values that had no basis in law instead of adopting the Average Gross Production established by the Barangay Committee on Land Production under DAR Circular No. 26, series of 1973, and the mandated Government Support Price of P35 per cavan of palay under Section 2 of Executive Order (E.O.) No. 228. Upon motion by respondents, the Court of Appeals issued a Resolution on 5 November 2004, ordering the release of P2,000,000.00 in favor of respondents as partial execution of the Decision of the trial court. The appellate court allowed the partial execution on the grounds that respondent Manuel Gallego was in need of an urgent medical operation and that there was no longer any question that respondents were entitled to just compensation.16 The Court of Appeals rendered the assailed Decision on 29 September 2005.17 The appellate court agreed that the values applied by the trial court in fixing just compensation had no legal basis because the formula under P.D. No. 27 and E.O. No. 228 mandated a Government Support Price of P35.00 per cavan of palay. It also held that the imposition of interest based on Article 1958 of the Civil Code was improper because said article does not apply to the expropriation of land but contemplates cases of simple loan or mutuum. According to the Court of Appeals, the peculiar circumstances of the case persuaded the appellate court to fix just compensation based on the current market value of the subject property on the premise that the provisions of P.D. No. 27 and E.O. No. 228 serve only as guiding principles and are not conclusive on the courts. The appellate court fixed the propertys value at the current market rate of P25.00 per square meter similar to that of other properties located in Barangay Sta. Rita and Barangay Concepcion. The dispositive portion of the Decision reads: WHEREFORE, the foregoing considered, the assailed Decision is hereby MODIFIED in that the award in the amount of P52,209,720.00 as just compensation for 122.8464 hectares of ricelands is hereby REDUCED to THIRTY MILLION SEVEN HUNDRED ELEVEN THOUSAND SIX HUNDRED PESOS (P30,711,600.00) computed based on the current fair market value of the expropriated parcels of land at the rate of P25.00 per square meter. The amount of One Million One Hundred Seventy Nine Thousand and Twenty Seven Pesos (P1,179,027.00) or whatever amount the petitioner has paid to the Gallegos as initial or provisional valuation, as well as the Two Million Pesos (P2,000,000.00) already released pursuant to this Courts Resolution dated 5 November 2004 as partial execution of the court a quos decision shall be deducted from the foregoing award.18 Petitioner LBP sought reconsideration but was denied in a Resolution dated 23 June 2006. Hence, the instant petition, raising the following issues: 1. IS IT LAWFUL OR VALID FOR THE COURT A QUO AND THE APPELLATE COURT TO USE THE ALLEGED CURRENT MARKET VALUE IN DETERMINING SUBJECT PROPERTYS JUST COMPENSATION, IN EFFECT RETROACTIVELY APPLYING R.A. NO. 6657 IN OBVIOUS CONTRAVENTION OF P.D. NO. 27/E.O. NO. 228. 2. IS IT LAWFUL OR VALID FOR THE COURT A QUO AND THE APPELLATE COURT TO USE AN INEXISTENT GOVERNMENT SUPPORT PRICE ALLEGEDLY IN THE AMOUNT OF FIVE HUNDRED PESOS (P500.00) IN APPARENT VIOLATION OF THE LEGISLATED GOVERNMENT SUPPORT PRICE (GSP) AMOUNTING TO THIRTY FIVE PESOS (P35.00) FOR EVERY CAVAN OF 50 KILOS OF PALAY? 3. IS IT LAWFUL OR VALID FOR THE APPELLATE COURT TO REQUIRE THE RELEASE OF TWO MILLION PESOS (PhP 2,000,000.00), WHICH DOES NOT CONSTITUTE AS THE INITIAL AMOUNT OF VALUATION FOR SUBJECT PROPERTY, IN FAVOR OF RESPONDENTS?19 On 26 July 2006, the Court issued a Resolution requiring the LBP Legal Department, the counsel for petitioner LBP, to submit proof of written conformity of the Office of the Government Corporate Counsel (OGCC) to represent petitioner LBP in the instant petition to conform to the Courts directive in Land Bank of the Philippines v. Teresita PanlilioLuciano.20 Pursuant to said Resolution, the LBP Legal Department submitted through a Compliance/Manifestation21 a copy of