G.R. No. 194818 June 9, 2014
12
CHARLES BUMAGAT, JULIAN BACUDIO, ROSARIO PADRE, SPOUSES ROGELIO and
ZOSIMA PADRE, and FELIPE DOMINCIL, Petitioners,
vs.
REGALADO ARRIBAY, Respondent.
DECISION
DEL CASTILLO, J.:
A case involving agricultural land does not immediately qualify it as an agrarian dispute.
The mere fact that the land is agricultural does not ipso facto make the possessor an
agricultural lessee or tenant; there are conditions or requisites before he can qualify as an
agricultural lessee or tenant, and the subject matter being agricultural land constitutes
simply one condition. In order to qualify as an agrarian dispute, there must likewise exist a
tenancy relation between the parties.
This Petition for Review on Certiorari1 seeks to set aside the February 19, 2010 Decision2 of
the Court of Appeals (CA) in CA-G.R. SP No. 101423, entitled "Regalado Arribay, Petitioner,
versus Charles Bumagat, Julian Bacudio, Rosario Padre, Spouses Rogelio and Zosima Padre,
and Felipe Domincil," as well as its November 9, 2010 Resolution3 denying reconsideration
of the assailed judgment.
Factual Antecedents
Petitioners are the registered owners, successors-in-interest, or possessors of agricultural
land, consisting of about eight hectares, located in Bubog, Sto. Tomas, Isabela Province, to
wit:
1. Charles Bumagat (Bumagat) – 14,585 square meters covered by Transfer
Certificate of Title No. (TCT) 014557;4
2. Julian Bacudio (Bacudio) – 14,797 square meters covered by TCT 014556;5
3. Rosario Padre – 14,974 square meters covered by TCT 0145546 in the name of
Dionicio Padre;7
4. Spouses Rogelio and Zosima Padre – 6,578 square meters covered by TCT
0145618 in the name of Ireneo Padre;9
5. Spouses Rogelio and Zosima Padre – 6,832 square meters covered by TCT
014560 in the name of their predecessor-in-interest Felix Pacis;10
6. Felipe Domincil – 14,667 square meters covered by TCT 014558;11 and
7. Felipe Domincil – 7,319 square meters.
The certificates of title to the above titled properties were issued in 1986 pursuant to
emancipation patents.13
On July 19, 2005, petitioners filed a Complaint14 for forcible entry against respondent
before the 2nd Municipal Circuit Trial Court (MCTC) of Cabagan-Delfin Albano, Isabela. The
case was docketed as Special Civil Action No. 475 (SCA 475). In an Amended
Complaint,15 petitioners alleged that on May 9, 2005, respondent – with the aid of armed
goons, and through the use of intimidation and threats of physical harm – entered the
above-described parcels of land and ousted them from their lawful possession; that
respondent then took over the physical possession and cultivation of these parcels of land;
and that petitioners incurred losses and injuries by way of lost harvests and other damages.
Petitioners thus prayed for injunctive relief, actual damages in the amount of not less than
₱40,000.00 for each cropping season lost, ₱30,000.00attorney’s fees, and costs.
Respondent filed a Motion to Dismiss,16 claiming that the subject properties are agricultural
lands – which thus renders the dispute an agrarian matter and subject to the exclusive
jurisdiction of the Department of Agrarian Reform Adjudication Board (DARAB). However,
in a January 30, 2006 Order,17 the MCTC denied the motion, finding that the pleadings failed
to show the existence of a tenancy or agrarian relationship between the parties that would
bring their dispute within the jurisdiction of the DARAB. Respondent’s motion for
reconsideration was similarly rebuffed.18
Respondent filed his Amended Answer with Counterclaim,19 alleging among others that
petitioners’ titles have been ordered cancelled in a December 1, 2001 Resolution 20 issued
by the Department of Agrarian Reform, Region 2 in Administrative Case No. A0200 0028
94; that he is the absolute owner of approximately 3.5 hectares of the subject parcels of
land, and is the administrator and overseer of the remaining portion thereof, which belongs
to his principals Leonardo and Evangeline Taggueg (the Tagguegs); that petitioners
abandoned the subject properties in 1993, and he planted the same with corn; that in 2004,
he planted the land to rice; that he sued petitioners before the Municipal Agrarian Reform
Office (MARO) for non-payment of rentals since 1995; and that the court has no jurisdiction
over the ejectment case, which is an agrarian controversy.
The parties submitted their respective Position Papers and other evidence.21
During the proceedings before the MCTC, respondent presented certificates of title,
supposedly issued in his name and in the name of the Tagguegs in 2001, which came as a
result of the supposed directive in Administrative Case No. A0200 0028 94 to cancel
petitioners’ titles. As claimed by respondent, the subject parcels of land formed part of a
23.663-hectare property owned by one Romulo Taggueg, Sr. (Romulo Sr.) and covered by
Original Certificate of Title No. (OCT) P-4835, which was placed under the Operation Land
Transfer Program pursuant to Presidential Decree No. 2722 (PD 27). Petitioners supposedly
became farmer-beneficiaries under the program, and the parcels of land were awarded to
them.
Meanwhile, Romulo Sr. died and his heirs instituted Administrative Case No. A0200 0028
94 to cancel petitioners’ titles. The heirs won the case, and later on new titles over the
property were issued in their favor. In turn, one of the heirs transferred his title in favor of
respondent.
Ruling of the Municipal Circuit Trial Court
On April 12, 2007, a Decision23 was rendered by the MCTC in SCA 475, the dispositive
portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the
defendant as follows:
1. Ordering the defendant or any person or persons acting in his behalf to vacate
the entire SEVENTY NINE THOUSAND SEVEN HUNDRED FIFTY TWO (79,752)[-
]SQUARE METERS, property described under paragraph 2 of the amended
complaint and to peacefully surrender the physical possession thereof in favor of
each of the plaintiffs;
2. Ordering the defendant to pay each of the plaintiffs representing actual
damages as follows:
o Charles Bumagat …………………... ₱109,390.00
o Julian Bacudio …………………….... ₱110,980.00
o Rosario Padre ……………………… ₱112,305.00
o Sps. Rogelio and ZosimaPadre ..... ₱100,575.00
o Felipe Domincil …………………..… ₱165,429.00
3. Ordering the defendant to pay plaintiffs representing the Attorney’s fees in the
amount of ₱10,000.00.
4. Ordering the defendant to pay costs of the suit.
SO ORDERED.24
Essentially, the MCTC held that based on the evidence, petitioners were in actual possession
of the subject parcels of land, since respondent himself admitted that he brought an action
against petitioners before the MARO to collect rentals which have remained unpaid since
1995 – thus implying that petitioners, and not respondent, were in actual possession of the
land, and belying respondent’s claim that he took possession of the property in 1993 when
petitioners supposedly abandoned the same. The court added that petitioners’ claims were
corroborated by the statements of other witnesses – farmers of the adjoining lands –
declaring that petitioners have been in unmolested and peaceful possession of the subject
property until May 9, 2005,when they were dispossessed by respondent.
The MCTC added that it had jurisdiction over the case since there is no tenancy relationship
between the parties, and the pleadings do not allege such fact; that respondent’s own
witnesses declared that the subject property was never tenanted nor under lease to tenants.
Finally, the MCTC held that while respondent and his principals, the Tagguegs, have been
issued titles covering the subject property, this cannot give respondent "license to take the
law into his own hands and unilaterally eject the plaintiffs from the land they have been
tilling."25
Ruling of the Regional Trial Court
Respondent appealed26 the MCTC Decision before the Regional Trial Court (RTC), insisting
that the DARAB has jurisdiction over the case; that he has been in actual possession of the
subject land since 2003; that while petitioners hold certificates of title to the property, they
never acquired ownership over the same for failure to pay just compensation therefor; that
petitioners’ titles have been ordered cancelled, and they reverted to the status of mere
tenants; and that the MCTC erred in granting pecuniary awards to petitioners.
On October 15, 2007, the RTC issued its Order27 denying the appeal for lack of merit and
affirming in toto the appealed MCTC judgment. In sum, the RTC pronouncement echoed the
MCTC findings that no tenancy or any other agrarian relationship existed between the
parties, nor do the pleadings bear out such fact; that the evidence preponderantly shows
that petitioners were in actual possession of the subject land; and that petitioners were
entitled to compensation as awarded by the court a quo.
Ruling of the Court of Appeals
Respondent went up to the CA by Petition for Review,28 assailing the Decision of the RTC
and claiming that since petitioners acquired title by virtue of PD 27, this should by itself
qualify the controversy as an agrarian dispute covered by the DARAB; that there is no need
to allege in the pleadings that he and the heirs of Romulo Sr. acquired title to the property,
in order for the dispute to qualify as an agrarian dispute; that petitioners’ titles were
ordered cancelled in Administrative Case No. A0200 0028 94; that he has been in
possession of the property since 2003; and that the trial court erred in granting pecuniary
awards to petitioners.
On February 19, 2010, the CA issued the assailed Decision, which held thus:
IN VIEW WHEREOF, the petition is GRANTED. The assailed Order of the Regional Trial
Court of Cabagan, Isabela, Branch 22, dated October 15, 2007, affirming in toto the previous
Decision of the MCTC of Cabagan-Sto. Tomas, Isabela is hereby REVERSED and SET ASIDE.
Civil Case No. 475, entitled "Charles Bumagat, Julian Bacudio, Rosario Padre, Sps. Rogelio
and Zosima Padre and Felipe Domincil versus Regalado Arribay" is DISMISSED.
SO ORDERED.29
In reversing the trial court, the CA agreed that the parties’ dispute fell under the jurisdiction
of the DARAB since petitioners’ titles were obtained pursuant to PD 27, and under the 1994
DARAB rules of procedure, cases involving the issuance, correction and cancellation of
Certificates of Land Ownership Award (CLOAs) and Emancipation Patents (EPs) which are
registered with the Land Registration Authority fall under DARAB jurisdiction.30 The
appellate court added that the Complaint for ejectment attacked the certificates of title
issued in favor of respondent and the Tagguegs because the complaint prayed for –
x x x the annulment of the coverage of the disputed property within the Land Reform Law
which is but an incident involving the implementation of the CARP. These are matters
relating to terms and conditions of transfer of ownership from landlord to agrarian reform
beneficiaries over which DARAB has primary and exclusive original jurisdiction, pursuant
to Section 1(f), Rule II, DARAB New Rules of Procedure.31
Petitioners moved for reconsideration, but in a November 9, 2010 Resolution, the CA stood
its ground. Hence, the present recourse.
Issue
Petitioners raise the following issue in this Petition:
WITH ALL DUE RESPECT, THE COURT OF APPEALS ERRED WHEN IT RULED THAT THE
MCTC HAD NO JURISDICTION OVER THE COMPLAINT OF THE (PETITIONERS), INSTEAD IT
IS THE DARAB THAT HAS JURISDICTION, SINCE THE COMPLAINT ESSENTIALLY PRAYS
FOR THE ANNULMENT OFTHE COVERAGE OF THE DISPUTED PROPERTY WITH THE LAND
REFORM LAW WHICH IS BUT AN INCIDENT INVOLVING THE IMPLEMENTATION OF THE
CARP.32
Petitioners’ Arguments
In their Petition and Reply,33 petitioners seek a reversal of the assailed CA dispositions and
the reinstatement of the MCTC’s April 12, 2007 Decision, arguing that their Complaint for
ejectment simply prays for the recovery of de facto possession from respondent, who
through force, threat and intimidation evicted them from the property; that there is no
agrarian reform issue presented therein; that the fact that the controversy involved
agricultural land does not ipso facto make it an agrarian dispute; that the parties’ dispute
does not relate to any tenurial arrangement over agricultural land; and that quite the
contrary, the parties are strangers to each other and are not bound by any tenurial
relationship, whether by tenancy, leasehold, stewardship, or otherwise.34
Petitioners add that when certificates of title were issued in their favor, they ceased to be
tenant-tillers of the land but became owners thereof; that full ownership over the property
was acquired when emancipation patents were issued in their favor;35 that when their
certificates of title were issued, the application of the agrarian laws was consummated; and
that as owners of the subject property, they were thus in peaceful and adverse physical
possession thereof when respondent ousted them by force, threat and intimidation.
Petitioners argue further that respondent is not the former landowner, nor the
representative thereof; he is merely an absolute stranger who came into the picture only
later.
Finally, petitioners argue that it was erroneous for the CA to rule that in seeking to evict
respondent, they were in effect mounting an attack on the latter’s title and thus their
Complaint in effect sought the "the annulment of the coverage of the disputed property
within the Land Reform Law which is but an incident involving the implementation of the
CARP,"36 which thus relates to "terms and conditions of transfer of ownership from
landlord to agrarian reform beneficiaries over which DARAB has primary and exclusive
original jurisdiction x x x."37
Respondent’s Arguments
Seeking the denial of the Petition, respondent in his Comment38 insists that the ejectment
case is intertwined with the CARP Law,39 since petitioners’ titles were obtained by virtue of
the agrarian laws, which thus places the controversy within the jurisdiction of the DARAB;
that under the 2003 DARAB Rules of Procedure, specifically Rule II, Section 1, paragraph
1.440 thereof, cases involving the ejectment and dispossession of tenants and/or
leaseholders fall within the jurisdiction of the DARAB; that under such rule, the one who
ejects or dispossesses the tenant need not be the landowner or lessor, and could thus be
anybody, including one who has no tenurial arrangement with the evicted/dispossessed
tenant.
Respondent adds that with the cancellation of petitioners’ titles, they were directed to enter
into a leasehold relationship with the owners of the subject parcels of land, or the heirs of
Romulo Sr. – whose petition for exemption and application for retention were granted and
approved by the Department of Agrarian Reform, Region 2 in Administrative Case No.
A0200 0028 94 – and later, with him as transferor and purchaser of a 3.5-hectare portion
thereof.
Our Ruling
The Court grants the Petition.
In declaring that the parties’ dispute fell under the jurisdiction of the DARAB, the CA held
that respondents’ titles were obtained pursuant to PD 27, and pursuant to the 1994 DARAB
rules of procedure then applicable, cases involving the issuance, correction and cancellation
of CLOAs and EPs which are registered with the Land Registration Authority fall under
DARAB jurisdiction. It added that since the Complaint prayed for the annulment of the
coverage of the disputed property under the land reform law, which thus relates to terms
and conditions of transfer of ownership from landlord to agrarian reform beneficiaries, the
DARAB exercises jurisdiction.
What the appellate court failed to realize, however, is the fact that as between petitioners
and the respondent, there is no tenurial arrangement, not even an implied one. As correctly
argued by petitioners, a case involving agricultural land does not immediately qualify it as
an agrarian dispute. The mere fact that the land is agricultural does not ipso facto make the
possessor an agricultural lessee or tenant. There are conditions or requisites before he can
qualify as an agricultural lessee or tenant, and the subject being agricultural land
constitutes just one condition.41 For the DARAB to acquire jurisdiction over the case, there
must exist a tenancy relation between the parties. "[I]n order for a tenancy agreement to
take hold over a dispute, it is essential to establish all its indispensable elements, to wit: 1)
that the parties are the landowner and the tenant or agricultural lessee; 2) that the subject
matter of the relationship is an agricultural land; 3) that there is consent between the
parties to the relationship; 4) that the purpose of the relationship is to bring about
agricultural production; 5) that there is personal cultivation on the part of the tenant or
agricultural lessee; and 6) that the harvest is shared between the landowner and the tenant
or agricultural lessee."42In the present case, it is quite evident that not all of these
conditions are present. For one, there is no tenant, as both parties claim ownership over the
property.
Besides, when petitioners obtained their emancipation patents and subsequently their
certificates of title, they acquired vested rights of absolute ownership over their respective
landholdings. "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, and that the landowner has been fully compensated for his property. 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. His right of ownership, once vested, becomes fixed and
established and is no longer open to doubt or controversy."43 Petitioners "became the
owner[s] of the subject property upon the issuance of the emancipation patents and, as
such, [enjoy] the right to possess the same—a right that is an attribute of absolute
ownership."44
On the other hand, it appears that respondent obtained title through Romulo Sr.’s heirs,
whose claim to the property is by virtue of an unregistered deed of donation in their favor
supposedly executed prior to September 21, 1972. On this basis, the heirs filed in 1993 a
petition with the Department of Agrarian Reform, Region 2 to exempt the property from
coverage under PD 27, which was granted in a December 29, 1994 Order.45 By then, or way
back in 1986 petitioners had been issued certificates of title thus, respondent’s acquisition
of the property appears questionable, considering the Court’s pronouncement in Gonzales
v. Court of Appeals,46 thus:
The sole issue to be resolved is whether the property subject of the deed of donation which
was not registered when P.D. No. 27 took effect, should be excluded from x x x Operation
Land Transfer.
Petitioners insist that the deed of donation executed by Ignacio Gonzales validly transferred
the ownership and possession of Lot 551-C which comprises an area of 46.97 hectares to
his 14 grandchildren. They further assert that inasmuch as Lot 551-C had already been
donated, the same can no longer fall within the purview of P.D.No. 27, since each donee
shall have a share of about three hectares only which is within the exemption limit of seven
hectares for each landowner provided under P.D. No. 27.
Article 749 of the Civil Code provides inter alia that "in order that the donation of an
immovable may be valid, it must be made in a public document, specifying therein the
property donated and the value of the charges which the donee must satisfy." Corollarily,
Article 709 of the same Code explicitly states that "the titles of ownership, or other rights
over immovable property, which are not duly inscribed or annotated in the Registry of
property shall not prejudice third persons." From the foregoing provisions, it may be
inferred that as between the parties to a donation of an immovable property, all that is
required is for said donation to be contained in a public document. Registration is not
necessary for it to be considered valid and effective. However, in order to bind third
persons, the donation must be registered in the Registry of Property (now Registry of Land
Titles and Deeds). Although the non-registration of a deed of donation shall not affect its
validity, the necessity of registration comes into play when the rights of third persons are
affected, as in the case at bar.
It is actually the act of registration that operates to convey registered land or affect title
thereto. Thus, Section 50 of Act No. 496 (Land Registration Act), as amended by Section 51
of P.D. No. 1529 (Property Registration Decree), provides:
SEC. 51. Conveyance and other dealings by registered owner - . . . But 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, but shall operate only as a contract
between the parties and as evidence of authority to the Register of Deeds to make
registration.
The act of registration shall be the operative act to convey or affect the land insofar as third
persons are concerned, . . .
Further, it is an entrenched doctrine in our jurisdiction that registration in a public registry
creates constructive notice to the whole world (Olizon vs. Court of Appeals, 236 SCRA 148
[1994]). Thus, Section 51 of Act No. 496, as amended by Section 52 of P.D. No. 1529,
provides:
SEC. 52. Constructive notice upon registration - Every conveyance, mortgage, lease, lien,
attachment, order, judgment, instrument or entry affecting registered land shall, if
registered, filed or entered in the Office of the Register of Deeds for the province or city
where the land to which it relates lies, be constructive notice to all persons from the time of
such registering, filing or entering.
It is undisputed in this case that the donation executed by Ignacio Gonzales in favor of his
grandchildren, although in writing and duly notarized, has not been registered in
accordance with law. For this reason, it shall not be binding upon private respondents who
did not participate in said deed or had no actual knowledge thereof. Hence, while the deed
of donation is valid between the donor and the donees, such deed, however, did not bind
the tenants-farmers who were not parties to the donation. As previously enunciated by this
Court, non-registration of a deed of donation does not bind other parties ignorant of a
previous transaction (Sales vs. Court of Appeals, 211 SCRA 858 [1992]). So it is of no
moment that the right of the [tenant]-farmers in this case was created by virtue of a decree
or law. They are still considered "third persons" contemplated in our laws on registration,
for the fact remains that these [tenant]-farmers had no actual knowledge of the deed of
donation.
 xxxx
As a final note, our laws on agrarian reform were enacted primarily because of the
realization that there is an urgent need to alleviate the lives of the vast number of poor
farmers in our country. Yet, despite such laws, the majority of these farmers still live on a
hand-to-mouth existence. This can be attributed to the fact that these agrarian laws have
never really been effectively implemented. Certain individuals have continued to prey on
the disadvantaged, and as a result, the farmers who are intended to be protected and
uplifted by the said laws find themselves back in their previous plight or even in a more
distressing situation. This Court ought to be an instrument in achieving a dignified existence
for these farmers free from pernicious restraints and practices, and there’s no better time to
do it than now.47
When petitioners’ titles were issued in 1986, these became indefeasible and
incontrovertible. Certificates of title issued pursuant to emancipation patents acquire the
same protection accorded to other titles, and become indefeasible and incontrovertible
upon the expiration of one year from the date of the issuance of the order for the issuance of
the patent. Lands so titled may no longer be the subject matter of a cadastral proceeding;
nor can they be decreed to other individuals.48 "The rule in this jurisdiction, regarding
public land patents and the character of the certificate of title that may be issued by virtue
thereof, is that where land is granted by the government to a private individual, the
corresponding patent therefor is recorded, and the certificate of title is issued to the
grantee; thereafter, the land is automatically brought within the operation of the Land
Registration Act, the title issued to the grantee becoming entitled to all the safeguards
provided in Section 38 of the said Act. In other words, upon expiration of one year from its
issuance, the certificate of title shall become irrevocable and indefeasible like a certificate
issued in a registration proceeding."49
preferential right to the same either; the Court adheres to the identical findings of fact of the
MCTC and RTC.
Finally, respondent’s submissions are unreliable for being contradictory. In some of his
pleadings, he claims to have acquired possession over the property as early as in 1993; in
others, he declares that he entered the land in 2003. Notably, while he claimed in his
Answer in the MCTC that he entered the land in 1993, he declared in his appeal with the
RTC and Petition for Review in the CA that he took possession of the property only in
2003.50 Irreconcilable and unexplained contradictions on vital points in respondent’s
account necessarily disclose a weakness in his case.51
Regarding the award of actual damages, which respondent prominently questioned all
throughout the proceedings, this Court finds that there is sufficient basis for the MCTC to
award petitioners the total amount of ₱598,679.00 by way of actual damages. The trial
court’s findings on this score are based on the evidence presented by the petitioners and
the respective statements of their witnesses, who themselves are farmers cultivating lands
adjacent to the subject property.52
WHEREFORE, the Petition is GRANTED. The assailed February 19, 2010 Decision and
November 9, 2010 Resolution of the Court of Appeals in CAG.R. SP No. 101423 are
REVERSED and SET ASIDE. The April 12, 2007 Decision of the 2nd Municipal Circuit Trial
Court of Cabagan-Delfin Albano, Isabela in Special Civil Action No. 475 is REINSTATED and
AFFIRMED.
SO ORDERED.

For the above reasons, the Court is not inclined to believe respondent’s contention that with
the issuance of the December 29, 1994 Order of the Department of Agrarian Reform, Region
2 in Administrative Case No. A0200 0028 94 ordering the cancellation of petitioners’ titles,
the latter were relegated to the status of mere tenants. Nor can the Court agree with the
appellate court’s observation that through the forcible entry case, petitioners impliedly
seek to exclude the property from land reform coverage; there is no factual or legal basis for
such conclusion, and no such inference could be logically generated.1âwphi1 To begin with,
petitioners acknowledge nothing less than ownership over the property.

Likewise, for the foregoing reasons, it may be concluded that petitioners exercised prior
peaceful and uninterrupted possession of the property until the same was interrupted by
respondent’s forcible intrusion in 2005; being farmer beneficiaries under PD 27 and finally
having acquired title to the property in 1986, the Court is inclined to believe that
petitioners continued to till their landholdings without fail. Indeed, the evidence on record
indicates such peaceful and undisturbed possession, while respondent’s claim that he
entered the property as early as in 1993 remains doubtful, in light of his own admission
that he sued petitioners for the collection of supposed rentals which they owed him since
1995. Petitioners’ witnesses further corroborate their claim of prior peaceful possession.
With regard to the portion of the property which is not titled to petitioners but over which
they exercise possessory rights, respondent has not sufficiently shown that he has any
G.R. No. 180134 March 5, 2014
RAFAEL VALES, CECILIA VALES-VASQUEZ, and YASMIN VALES-JACINTO, Petitioners,
vs.
MA. LUZ CHORESCA GALINATO, ERNESTO CHORESCA, TEOFILO AMADO, LORNA
PARIAN MEDIANERO, REBECCA PORCAL, and VIVENCIO ORDOYO, Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the Decision2 dated July 25, 2007 and
the Resolution3 dated September 27, 2007 of the Court of Appeals (CA) in CA-G.R. SP No.
01130 which affirmed the Order dated September 5, 2005 4 issued by the Office of the
President (OP) in O.P. Case No. 03-J-607, and declared that petitioners Rafael Vales, Cecilia
Vales-Vasquez, and Yasmin Vales-Jacinto (petitioners) have no right of retention over the
landholding subject of this case.
The Facts
On March 3, 1972, Spouses Perfecto5 and Marietta Vales (Sps. Vales) executed a Deed of
Sale6 conveying five (5) parcels of registered agricultural land, identified as Lot Nos. 2116,
2045, 2213, 2157, and 2119 with an aggregate area of 20.3168 hectares (has.) all situated
in Barrio Manguna, Cabatuan, Iloilo (subject lands), to their three (3) children, herein
petitioners (subject sale). However, the subject sale was not registered, hence, title to the
subject lands remained in the names of Sps. Vales. At the time of the sale, the subject lands
were tenanted.7
Several months later, or on October 21, 1972, Presidential Decree No. (PD) 278 was passed
decreeing the emancipation of tenants. As required under Letter of Instruction No. (LOI) 41
issued on November 21, 1972, petitioner Rafael Vales executed a sworn
declaration,9 asserting that he and his sisters are co-owners of the subject lands. This
notwithstanding, the subject lands were placed under the coverage of the government’s
Operation Land Transfer (OLT) Program as properties belonging to Sps. Vales, not to
petitioners.10
Invoking the landowner’s retention rights provided under PD 27,11 petitioners filed, on
December 23, 1975, a letter-request12 for the retention of the subject lands with the Office
of the Agrarian Reform Team No. 06-24-185, which, however, was not acted upon.13 On
March 31, 1980, they filed a petition14 before the then Ministry of Agrarian Reform-Region
VI, praying that they be certified as owners of the subject lands which they have declared in
their names for tax purposes as early as November 29, 1972.15 They further prayed that
they be allowed to partition the subject lands with the end in view of obtaining titles for
their respective shares. The petition, however, remained unresolved16 for nearly two (2)
decades.
Meanwhile, during the period July to August 1987, petitioners entered into several
Agricultural Leasehold Contracts17 with the following tenants: Milagros Allaga, Wenceslao
Perez, Dalmacio Parian, Francisco Choresca, Teofilo Amado, Vivencio Ordoyo, Melchor
Choresca, Ricardo Paniza, and Rodolfo Porcal. These contracts were duly registered with
the Office of the Municipal Treasurer of Cabatuan.18 The following year, 1988, Emancipation
Patents19 (EPs) were issued to certain tenants of the subject lands. Petitioners claimed,
however, that such issuances were made "without [their] knowledge and despite their
vehement protest and opposition."20
On January 12, 1998, petitioners filed a petition21 before the Regional Office of the
Department of Agrarian Reform (DAR), docketed as Administrative Case No. A-0604-0014-
98, asking for: (a) the resolution of the earlier petition dated March 31, 1980; (b) the
exemption of the subject lands from the coverage of the OLT Program; and (c) the
affirmation of petitioners’ right to retain seven (7) has. as provided under PD 27, which
they requested way back in December 1975, but to no avail. Significantly, petitioners
admitted in their petition that the subject sale was not registered and thus, the titles to the
subject lands were not transferred to their names. This was supposedly due to the fact that
the lands were tenanted, and that the Minister of Agrarian Reform refused to issue the
required certification for purposes of registration.
The DAR Regional Director Ruling
In an Order22 dated August 16, 1999, the DAR Regional Director declared that ownership
over the subject lands remained with Sps. Vales due to petitioners’ failure to effect the
registration or even the annotation of the subject sale before October 21, 1972 as required
under DAR Memorandum23 dated May 7, 1982 (May 7, 1982 DAR Memorandum). Hence,
the sale did not bind the tenants concerned, and no retention rights were transferred to
petitioners. Accordingly, the DAR Regional Director denied the petitions for exemption and
retention, and affirmed the placing of the subject lands under the OLT Program of the
government pursuant to PD 27, as well as the issuance of EPs in favor of the tenants.
Petitioners moved for reconsideration which was, however, denied in an Order24 dated
December 6, 1999, prompting their appeal before the DAR Secretary, docketed as Adm.
Case No. A-9999-06-E-247-00.
The DAR Secretary Ruling
In an Order25 dated December 11, 2002 (December 11, 2002 Order), the DAR Secretary
reversed and set aside the orders of the DAR Regional Director, and thereby granted the
petitions for exemption and retention, subject, however, to the provisions of LOI 474 dated
October 21, 1976.26 The DAR Secretary ruled that petitioners were able to prove by
substantial evidence that the tenants had knowledge of the subject sale in their favor and
had even recognized petitioners as the new owners of the subject lands as they paid rentals
to them.27 Hence, the sale was valid and binding on the tenants pursuant to the May 7, 1982
DAR Memorandum,28 thus removing the subject lands from the OLT Program coverage.
However, in line with LOI 474, the DAR Secretary directed the Municipal Agrarian Reform
Officer to determine if petitioners own other agricultural lands of more than seven (7) has.
or lands used for residential, commercial, industrial or other urban purposes from which
they derive adequate income to support themselves and their families.
Some of the tenants and/or their relatives – namely, herein respondents Ma. Luz Choresca
Galinato, Ernesto Choresca, Teofilo Amado, Lorna Parian Medianero, Rebecca Porcal and
Vivencio Ordoyo (respondents) – filed a motion for reconsideration29 which was initially
denied30 but subsequently granted by the DAR Secretary in an Order31 dated September 25,
2003 (September 25, 2003 Order).
In granting the motion and reversing his earlier decision, the DAR Secretary held that the
tenants must be shown to have acquired actual knowledge of the subject sale prior to
October 21, 1972 in order to grant validity thereto. However, it appears from the date of the
earliest receipts evidencing the rental payments to petitioners that the tenants knew of the
said sale only in 1977. As such, petitioners never became valid owners of the subject
lands,32thus warranting the denial of their petitions for exemption and retention.
Dissatisfied, petitioners elevated the matter to the OP.
The Proceedings Before the OP
In a Decision33 dated December 30, 2003 (December 30, 2003 Decision), the OP affirmed
the findings and conclusions of the DAR Secretary which thereby prompted petitioners to
file a motion for reconsideration,34 wherein they proffered a new argument, particularly,
that when their father, Perfecto Vales (Perfecto), died on September 8, 1985, they acquired
ownership of the subject lands by intestate succession, including the right of retention as
owners.35
Finding merit in the argument, the OP, in a Resolution36 dated April 6, 2004 (April 6, 2004
Resolution), reversed its earlier ruling, holding that upon the demise of Perfecto, his heirs,
including herein petitioners, became co-owners of the subject lands by intestate succession
with the inherent right to apply for exemption/retention. Considering, however, that the
subject lands were conjugal in nature, Perfecto’s half of the entire 20.3168 hectare area was
transferred by intestacy to petitioners and their mother, giving each heir about 2.5 has.,
which was within the seven-hectare (7-hectare) retention limit under PD
27.37 Consequently, the OP exempted the pro-indiviso shares of petitioners in the subject
lands and ordered the cancellation of the EPs covering the same.
On respondents’ motion for reconsideration,38 the OP modified its April 6, 2004 Resolution
in an Order39 dated August 19, 2004 (August 19, 2004 Order), declaring that petitioners
should be considered as only one landowner with respect to their undivided portions and
not as separate landowners pursuant to Article 340 of DAR Memorandum dated January 9,
1973 (January 9, 1973 DAR Memorandum). Consequently, it excluded from the coverage of
the OLT Program only a 7-hectare portion of the subject lands as petitioners’ collective
retention area and maintained the OLT Program coverage of the remaining portion.
Both petitioners and respondents filed their respective motions for reconsideration which
were denied in an Order41dated September 5, 2005. The OP reinstated its initial December
30, 2003 Decision, holding that the non-registration of the subject sale and the tenants’ lack
of actual knowledge thereof prior to October 21, 1972 rendered the transfer as invalid and
non-binding on third persons. The subject lands, thus, remained under the ownership of
Sps. Vales for purposes of determining OLT Program coverage. Considering, however, that
Sps. Vales’ aggregate landholding consists of 58.606 has., which exceeded the 24-hectare
landholding limit under PD 27, they were therefore disqualified to avail of any retention
rights under the said law, without prejudice to the availment of the retention rights granted
under the new law, Republic Act No. (RA) 6657,42 otherwise known as the "Comprehensive
Agrarian Reform Law of 1988."
Feeling aggrieved, petitioners filed an appeal before the CA.
The CA Ruling
In a Decision43 dated July 25, 2007, the CA denied petitioners’ appeal, holding that since
their predecessors-in-interest (i.e., Sps. Vales) were not entitled to exemption and retention
under PD 27 given that their aggregate landholdings consist of 58.606 has., neither could
petitioners avail of said rights under RA 6657. In this relation, the CA noted that while PD
27 allows a covered landowner to retain not more than seven (7) has. of his land, if his
aggregate landholdings do not exceed 24 has., on the other hand, under LOI 474, where his
aggregate landholdings exceed 24 has., the entire landholding inclusive of the seven (7) has.
or less of tenanted rice or corn lands will be covered without any right of
retention.44 Accordingly, the CA pronounced that the new retention rights under RA 6657
are likewise unavailing to petitioners as the same is premised on the existence of such right
under PD 27.45
Unperturbed, petitioners moved for reconsideration which was, however, denied in a
Resolution46 dated September 27, 2007, hence, this petition.
The Issues Before the Court
The essential issues in this case are whether or not: (a) the subject lands are exempt from
OLT Program coverage; and (b) petitioners are entitled to avail of any retention right under
existing agrarian laws.
The Court’s Ruling
The petition lacks merit.
A. Legal Parameters of Exemption and
Retention in Agrarian Reform
PD 27, which implemented the OLT Program of the government, covers tenanted rice or
corn lands. The requisites for coverage under the OLT Program are the following: (a) the
land must be devoted to rice or corn crops; and (b) there must be a system of share-crop or
lease-tenancy obtaining therein. If either requisite is absent, a landowner may apply for
exemption since the land would not be considered as covered under the OLT Program.
Accordingly, a landowner need not apply for retention where his ownership over the entire
landholding is intact and undisturbed.47
If the land is covered by the OLT Program, which, hence, renders the right of retention
operable, the landowner who cultivates or intends to cultivate an area of his tenanted rice
or corn land has the right to retain an area of not more than seven (7) has. thereof,48 on the
condition that his aggregate landholdings do not exceed 24 has. as of October 21, 1972.
Otherwise, his entire landholdings are covered by the OLT Program without him being
entitled to any retention right.49 Similarly, by virtue of LOI 474, if the landowner, as of
October 21 1976, owned less than 24 has. of tenanted rice or corn lands, but additionally
owned (a) other agricultural lands of more than 7 has., whether tenanted or not, whether
cultivated or not, and regardless of the income derived therefrom, or (b) lands used for
residential, commercial, industrial or other urban purposes, from which he derives
adequate income to support himself and his family, his entire landholdings shall be
similarly placed under OLT Program coverage, without any right of retention.50 As stated in
DAR Administrative Order No. 4, series of 1991, or the "Supplemental Guidelines Governing
the Exercise of Retention Rights by Landowners Under Presidential Decree No. 27," issued
on April 26, 1991:
xxxx
B. Policy Statements
1. Landowners covered by PD 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;
b. 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. (Emphasis and underscoring
supplied)
Subsequently, or on June 10, 1998, Congress passed RA 6657 which modified the retention
limits under PD 27. In particular, Section 651 of RA 6657 states that covered landowners are
allowed to retain a portion of their tenanted agricultural land not exceeding an area of five
(5) has. and, further thereto, provides that an additional three (3) has. may be awarded to
each child of the landowner subject to certain qualifications. While landowners who have
not yet exercised their rights of retention under PD 27 are entitled to the new retention
rights provided by RA 6657, a landowner who filed an application under RA 6657 shall be
subject to the limitations stated under LOI 474 as above stated.
B. Propriety of the Denial of
the Petition for Exemption
Petitioners sought exemption of the subject lands from the OLT Program of the government
by claiming ownership thereof on the basis of a sale thereof by the registered owners, i.e.,
Sps. Vales, executed on March 3, 1972. However, said transaction, in order to be valid and
equally deemed as binding against the tenants concerned, should be examined in line with
the provisions of the May 7, 1982 DAR Memorandum, to wit:
Transfers of ownership of lands covered by a Torrens Certificate of Title duly executed
prior to October 21, 1972 but not registered with the Register of Deeds concerned before
said date in accordance with the Land Registration Act (Act No. 496) shall not be considered
a valid transfer of ownership insofar as the tenant-farmers are concerned and therefore the
land shall be placed under [the OLT Program].
Transfer of ownership of unregistered lands (ownership may be evidenced by tax
declaration, deeds of conveyance) executed prior to October 21, 1972, whether registered
or not with the Register of Deeds concerned pursuant to Act No. 3344 may be considered a
valid transfer/conveyance as between the parties subject to verification of the due
execution of the conveyance/transfer in accordance with the formalities prescribed by law.
In order that the foregoing transfers of ownership mentioned in the preceding two
paragraphs may be binding upon the tenants, such tenants should have knowledge of such
transfers/conveyance prior to October 21, 1972, have recognized the persons of the new
owners, and have been paying rentals/amortization to such new owners. (Emphases and
underscoring supplied)
Tersely put, the May 7, 1982 DAR Memorandum provides that tenants should (a) have
actual knowledge of unregistered transfers of ownership of lands covered by Torrens
Certificate of Titles prior to October 21, 1972, (b) have recognized the persons of the new
owners, and (c) have been paying rentals/amortization to such new owners in order to
validate the transfer and bind the tenants to the same.
In the case at bar, it is undisputed that the subject sale was not registered or even annotated
on the certificates of title covering the subject lands. More importantly, the CA, which
upheld the final rulings of the DAR Secretary and the OP, found that the tenants
categorically belied having actual knowledge of the said sale, and that the tenants still
recognized Sps. Vales as the landowners.52 In this regard, petitioners failed to show any
justifiable reason to warrant a contrary finding.53 Thus, keeping in mind that the factual
findings of the CA are generally accorded with finality absent any sufficient countervailing
reason therefor,54 it may be concluded that petitioners failed to comply with the
requirements stated under the May 7, 1982 DAR Memorandum. As a result, the subject sale
could not be considered as valid, especially as against the tenants and/or their relatives –
particularly, herein respondents. The subject lands were therefore correctly placed under
the OLT Program of the government, which thereby warranted the denial of the petition for
exemption.

C. Propriety of the Denial of

the Petition for Retention

Anent the issue on retention, suffice it to state that Sps. Vales had no right to retain the
subject lands considering that their aggregate landholdings, consisting of 58.6060
has.,55 exceeded the 24-hectare landholding limit as above-explained. Consequently, the
subject lands would fall under the complete coverage of the OLT Program, without any right
of retention on petitioners’ part, either under PD 27 or RA 6657, being mere successors-in-
interest of Sps. Vales by virtue of intestate succession.1âwphi1 In this respect, the denial of
the petition for retention was likewise proper.

D. Propriety of the Reconsideration of the

DAR Secretary’s December 11, 2002 Order

Finally, the Court finds no merit in petitioners’ claim that the December 11, 2002 Order of
the DAR Secretary granting the petitions for exemption and retention had already attained
finality and can no longer be reconsidered, reversed or modified, especially on a second
motion for reconsideration which is a prohibited pleading.56 In his September 25, 2003
Order, the DAR Secretary explained that a "palpable mistake"57 and "patent error"58 had
been committed in determining the date of the filing of respondents’ motion for
reconsideration, which upon review, was shown to have been timely filed, warranting
reconsideration of his earlier order. Settled is the rule that issues of retention and non-
coverage of a land under agrarian reform are within the domain of the DAR Secretary. 59 By
virtue of such special competence, he should be given an opportunity, even on a second
motion for reconsideration, to rectify the errors he may have committed. The time-honored
rule is that if a remedy within the administrative machinery can still be had by giving the
administrative officer concerned every opportunity to decide on the matter that comes
within his jurisdiction, then such remedy should be priorly exhausted.60 Besides, rules of
procedure are construed liberally in administrative proceedings as administrative bodies
are not bound by the technicalities applicable to courts of law, hence, should not be used to
override substantial justice,61 as in this case.

All told, the Court finds no cogent reason to reverse the denial of the tribunals a quo of the
petitions for exemption and retention herein considered.

WHEREFORE, the petition is DENIED. The Decision dated July 25, 2007 and the Resolution
dated September 27, 2007 of the Court of Appeals in CA-G.R. SP No. 01130 are hereby
AFFIRMED.

SO ORDERED.
G.R. No. 175055 June 27, 2012
LAND BANK OF THE PHILIPPINES, Petitioner,
vs.
Heirs of MAXIMO PUYAT and GLORIA PUYAT, represented by Attorney-in-Fact
Marissa Puyat, Respondents.
DECISION
DEL CASTILLO, J.:
In agrarian reform cases, when the acquisition process under Presidential Decree (PD) No.
27 remains incomplete upon the effectivity of Republic Act (RA) No. 6657, the process
should be completed under the new law.1
Before the Court is a Petition for Review2 assailing the June 28, 2006 Decision3 of the Court
of Appeals (CA) in CA-G.R. SP No. 86582. The dispositive portion of the assailed Decision
reads:
WHEREFORE, the decision dated May 11, 2004 as amended by the order dated September
3, 2004 is AFFIRMED subject to the modification that the reckoning of the 6% interest per
annum shall be from March 21, 1990.
Costs of suit shall be paid by the petitioner.
SO ORDERED.4
Factual Antecedents
Gloria and Maximo Puyat,5 both deceased, are the registered owners of a parcel of riceland
consisting of 46.8731 hectares located in Barangay Bakod Bayan, Cabanatuan City, Province
of Nueva Ecija (subject property). Respondents are the heirs of Gloria and Maximo Puyat,
and the pro-indiviso co-owners of the subject property.
The records do not disclose when the Department of Agrarian Reform (DAR) placed
44.3090 hectares of Puyats’ land under Operation Land Transfer pursuant to PD 27. It is,
however, clear that the DAR issued several emancipation patents in favor of various farmer-
beneficiaries in December 1989.6 All of the said patents were annotated on Puyats’ Transfer
Certificate of Title (TCT) No. 1773 on March 20, 1990, and thereby caused the concomitant
partial cancellation of Puyats’ title.
The Puyats did not receive any compensation for the cancellation of their title over the
awarded portions of the subject property.
It was only on September 18, 1992 (more than two years after the DAR awarded the
property to farmer-beneficiaries) that the Land Bank of the Philippines (Land Bank)
received DAR’s instruction to pay just compensation to the Puyats.7 Accordingly, Land Bank
made its initial valuation of ₱2,012.50 per hectare or a total of ₱92,752.10. Deducting the
farmers’ lease rentals amounting to ₱5,241.20, the Land Bank recommended the payment
to the landowners of the net value of ₱87,510.90.8 Respondents received Land Bank’s initial
valuation together with the Notice of Acquisition and Valuation Form, and rejected the
valuation for being "ridiculously low."
The heirs of Puyat filed a complaint for determination and payment of just
compensation9 with the Regional Trial Court (RTC) of Cabanatuan City, Nueva Ecija on
November 24, 1998. The complaint, docketed as Agr. Case No. 124-AF, was raffled to Branch
23 of the said court.
Respondents presented the supervising agriculturalist from the City Agro-Industrial Office,
who testified that the average palay production for Barangay Bakod Bayan ranges from 70
to 80 cavans per hectare.10 Another officer from the same office testified that the average
annual palay production is around 65 cavans per hectare.11 The zoning officer of the City
Planning and Development Office testified that the subject property is located in the agro-
industrial district, which is near the central business district of Cabanatuan City.12 The zonal
value determined by the Bureau of Internal Revenue (BIR) for this area is ₱10.00 per
square meter.13 Respondents prayed that their 468,731 square meter-property be valued at
₱100,000.00 per hectare.14
The Land Bank and the DAR answered that the valuation was made in strict compliance
with the formula provided for lands acquired under PD 27 and Executive Order (EO) No.
228. DAR presented a memorandum dated 1976,15which shows that the average gross
production for three years prior to 1976 was 23 cavans16 per hectare only. It maintained
that the valuation of respondents’ property should be made using the prevailing rates on
October 21, 1972, or the date when PD 27 took effect. Land Bank, on the other hand,
presented its Claims Processing Form,17which showed that it set the valuation at ₱2,012.50.
per hectare.18
Ruling of the Regional Trial Court
The trial court first determined what law should be applied in determining the just
compensation due to respondents. According to the trial court, while the property was
appropriated pursuant to PD 27, its valuation should be made in accordance with Section
17 of RA 6657.
The trial court found that respondents’ property could yield an average of 65 cavans per
hectare, per harvest season. It could be planted with rice and corn. It is located in an agro-
industrial area, accessible by concrete roads, and properly serviced by telecommunication
and other utilities. The BIR pegged the zonal value for this area at ₱10 per square meter, or
₱100,000.00 per hectare.
Taking the above factors in consideration, the court declared that the reasonable
compensation for respondents’ property should be ₱100,000.00 per hectare.
Since the government took the respondents’ property on March 20, 1990 (the date when
the emancipation patents were annotated on respondents’ TCT No. 1773) without giving
the respondents just compensation for such taking, there was delay in payment which
justifies the imposition of legal interest. Thus, the trial court ordered the DAR, through the
Land Bank, to pay 6% legal interest per annum from the date of taking until the amount is
fully paid.
The trial court disposed of the case thus:
WHEREFORE, all premises considered, judgment is hereby rendered ordering defendant
Department of Agrarian Reform through the defendant Land Bank of the Philippines to pay
plaintiffs Gloria Puyat and all the Heirs of Maximo Puyat, thru their Attorney-in-Fact
Marissa Puyat the total amount of Four Million Six Hundred Eighty Seven Thousand Three
Hundred Ten (₱4,687,310.00) Philippine Currency, representing the just compensation of
the property with a total area of 46.8731 hectares, situated in Barangay Bakod Bayan,
Cabanatuan City, Nueva Ecija, covered by T.C.T No. 1773 with 6% legal interest per annum
from date of taking (which the Court determines to be in 1990) until fully paid.
SO ORDERED.19
Upon Land Bank’s motion, the trial court modified its decision by reducing the compensable
area to the actual area acquired by the DAR. The court explained:
Considering that only 44.3090 hectares [were] distributed to farmer-beneficiaries this
should only be the area to be compensated at the rate of ₱100,000.00 per hectare for a total
amount of Four Million Four Hundred Thirty Thousand Nine Hundred (₱4,430,900.00)
Pesos.20
xxxx
Wherefore, the Motion for Reconsideration is partially Granted.
The Decision dated May 11, 2004 is hereby amended and defendant Department of
Agrarian Reform through the Land Bank of the Philippines [is] hereby directed to pay
plaintiffs Gloria Puyat and the Heirs of Maximo Puyat, thru their Attorney-in-Fact Marissa
Puyat, the amount of Four Million Four Hundred Thirty Thousand Nine Hundred
(₱4,430,900.00) Pesos representing the just compensation of the covered 44.3090 hectares
of their property (covered by TCT No. 1773) situated at Barangay Bakod Bayan, Cabanatuan
City, which [were] actually distributed to farmer-beneficiaries with 6% legal interest per
annum from the date of taking (in 1990) until fully paid.
SO ORDERED.21
Land Bank appealed the modified decision to the CA. It raised two main issues. First, it
argued that the trial court erred in computing the just compensation using the factors
provided in Section 17 of RA 6657. Since respondents’ land was acquired in accordance
with PD 27, its valuation should likewise be limited to the formula mandated under PD 27
and EO 228. Second, if the court followed the formula provided for lands acquired under PD
27 and EO 228, a 6% yearly compounded interest is already provided therein, hence the
additional 6% legal interest imposed by the trial court would be redundant. The prayer
reads:
WHEREFORE, premises considered, it is respectfully prayed of this Honorable Court that
after due consideration, a DECISION be rendered ANNULLING AND SETTING ASIDE the
Decision dated 11 May 2004 x x x and the Order dated 03 September 2004 x x x for
being CONTRARY TO P.D. NO. 27 AND E.O. NO. 228, and RELEVANT/MATERIAL
EVIDENCE PRESENTED, and TO ISSUE another Decision UPHOLDING the LAND
VALUATION based on the foregoing laws and evidence amounting to EIGHTY NINE
THOUSAND ONE HUNDRED SEVENTY ONE PESOS & 86/100 (PHP 89,171.86) as the just
compensation for the subject landholding.
x x x x22
Ruling of the Court of Appeals
The appellate court noted that the question presented is what law should be used in the
determination of just compensation of lands acquired pursuant to PD 27.23 Corollarily, once
a court determines which law governs just compensation, can its decision be limited to the
formula provided in the administrative orders of the DAR?
The CA held that the determination of just compensation is a judicial function, which cannot
be unduly restricted by requiring the courts to strictly adhere to formulae appearing in
legislative or executive acts. Being a judicial function, courts can choose to rely on the
factors enumerated in Section 17 of RA 6657, even if these factors do not appear in PD 27 or
EO 228. Such reliance cannot be assailed as irregular or illegal considering that the courts
would still rely on reasonable factors for ascertaining just compensation.24
The CA also explained that the imposition of legal interest on the just compensation is not
an error. The legal interest was properly imposed considering that the Puyats were
deprived of their property since March 20, 1990 without receiving just compensation
therefor. However, in order to be precise, the CA modified the RTC Decision by imposing the
legal interest not from "1990", but from March 20, 1990, which is the date when the
emancipation patents were inscribed on TCT No. 1773.
Land Bank moved for a reconsideration25 of the adverse decision, which motion was denied
by the appellate court in its October 16, 2006 Resolution.26
Issues
1. Can lands acquired pursuant to PD 27 be valued using the factors appearing in
Section 17 of RA 6657?
2. Is it proper to impose the 6% legal interest per annum on the unpaid just
compensation?
 3. Should the case be remanded to the trial court for the recomputation of just
compensation using Section 17 of RA 6657, as amended by RA 9700?
Land Bank argues that the just compensation must be valued at the time of taking of the
property. Since respondents’ lands were acquired pursuant to PD 27, it is deemed taken
under the law operative since October 21, 1972 (the effectivity date of PD 27). Thus, Land
Bank posits that the CA erred in computing the just compensation based on Section 17 of
RA 6657, a law that came into effect after the time of taking.
Further, according to Land Bank, if PD 27 and EO 228 are to be applied, the interest rate is
already provided for under DAR AO No. 13, series of 1994, as amended by DAR AO No. 2,
series of 2004. Thus, the 6% interest on the just compensation imposed by the trial and
appellate courts is erroneous for being a double interest and should be deleted.
Our Ruling
Which law determines the just compensation for lands acquired under Presidential Decree
No. 27?
The Court has already resolved the first question posed by Land Bank in several
decisions.27 It has been held that, when the government takes property pursuant to PD 27,
but does not pay the landowner his just compensation until after RA 6657 has taken effect
in 1988, it becomes more equitable to determine the just compensation using RA 6657.
Land Bank of the Philippines v. Natividad28 explained it thus:
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, Malacañang, 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 [upon] 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 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.29
In the case at bar, respondents’ title to the property was cancelled and awarded to farmer-
beneficiaries on March 20, 1990. In 1992, Land Bank approved the initial valuation for the
just compensation that will be given to respondents. Both the taking of respondents’
property and the valuation occurred during the effectivity of RA 6657. When the acquisition
process under PD 27 remains incomplete and is overtaken by RA 6657, the process should
be completed under RA 6657, with PD 27 and EO 228 having suppletory effect only. 30 This
means that PD 27 applies only insofar as there are gaps in RA 6657; where RA 6657 is
sufficient, PD 27 is superseded. Among the matters where RA 6657 is sufficient is the
determination of just compensation. In Section 17 thereof, the legislature has provided for
the factors that are determinative of just compensation. Petitioner cannot insist on applying
PD 27 which would render Section 17 of RA 6657 inutile.
Interest rate awarded for the delay
The trial and appellate courts imposed an interest of 6% per annum on the
just compensation to be given to the respondents based on the finding that Land Bank was
guilty of delay.
Land Bank maintains that the formula contained in DAR AO No. 13, series of 1994, already
provides for 6% compounded interest. Thus, the additional imposition of 6% interest by the
trial and appellate courts is unwarranted.31
There is a fallacy in Land Bank’s position. The 6% interest rate imposed by the trial and
appellate courts would be a double imposition of interest had the courts below also applied
DAR AO No. 13, series of 1994. But the fact remains that the courts below did not apply DAR
AO No. 13. In fact, that is precisely the reason why Land Bank appealed the trial court’s
decision to the CA, and the latter’s decision to this Court. Therefore, Land Bank is cognizant
that the lower courts’ imposition of the 6% interest cannot constitute a double imposition
of a legal interest.
The Court is not unaware that current jurisprudence sets the interest rate for delay in
payments in agrarian cases at 12% per annum.32 In the case at bar, however, the
respondents did not contest the interest awarded by the lower courts and instead asked for
the affirmance in toto of the appellate court’s decision.33 In keeping with the demands of
due process, therefore, the Court deems it fit not to disturb the interest rate imposed by the
courts below.
No need to remand
After the parties filed their respective memorandum in 2007 and submitted the case for
resolution,34 Congress passed a new agrarian reform law, RA 9700, which further amended
RA 6657, as amended. RA 9700, entitled An Act Strengthening the Comprehensive Agrarian
Reform Program (CARP), Extending the Acquisition and Distribution of all Agricultural
Lands, Instituting Necessary Reforms, Amending for the Purpose Certain Provisions of
Republic Act No. 6657, otherwise known as the Comprehensive Agrarian Reform Law of
1988, as amended, and Appropriating Funds Therefor, took effect on July 1, 2009.35 It
provides in Section 5 thereof that all valuations that are "subject to challenge by the
landowners" shall be "completed and finally resolved pursuant to Section 17 of Republic
Act No. 6657, as amended." Section 5 of RA 9700 is reproduced below:
SECTION 5. Section 7 of Republic Act No. 6657, as amended, is hereby further amended to
read as follows:
SEC. 7. Priorities. – The DAR, in coordination with the Presidential Agrarian Reform Council
(PARC) shall plan and program the final acquisition and distribution of all remaining
unacquired and undistributed agricultural landsfrom the effectivity of this Act until
June 30, 2014. Lands shall be acquired and distributed as follows:
Phase One: During the five (5)-year extension period hereafter all remaining lands above
fifty (50) hectares shall be covered for purposes of agrarian reform upon the effectivity of
this Act. xxx rice and corn lands under Presidential Decree No. 27; xxx: Provided,
furthermore, That all previously acquired lands wherein valuation is subject to challenge by
landowners shall be completed and finally resolved pursuant to Section 17 of
Republic Act No. 6657, as amended; x x x36
Relatedly, RA 9700 amended Section 17 of RA 6657 by adding factors for the determination
of just compensation, i.e., the value of standing crop and seventy percent (70%) of the zonal
valuation of the BIR, translated into a basic formula by the DAR. The amended provision
reads as follows:
SECTION 7. Section 17 of Republic Act No. 6657, as amended, is hereby further amended
to read as follows:
SEC. 17. Determination of Just Compensation. – In determining just compensation, the cost
of acquisition of the land, the value of the standing crop, the current value of like properties,
its nature, actual use and income, the sworn valuation by the owner, the tax declarations,
the assessment made by government assessors, and seventy percent (70%) of the zonal
valuation of the Bureau of Internal Revenue (BIR), translated into a basic formula by the
DAR shall be considered, subject to the final decision of the proper court. 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.37
Thus, in a Manifestation and Motion dated January 21, 2010,38 Land Bank submits that RA
9700 has rendered its Petition moot and that the case should now be remanded to the trial
courts so that the valuation for respondents’ property may be made in accordance with
Section 17 of RA 6657, as amended by RA 9700.
Respondents opposed. They maintained that there is no more need to remand the case to
the trial court because their property has already been valued using Section 17 of RA 6657,
as amended.39
There is no merit in Land Bank’s motion to remand the case.1âwphi1 RA 9700 took effect at
a time when this case was already submitted for resolution. All the issues had been joined
and the parties had argued exhaustively on their various contentions. The issue regarding
the applicability of RA 9700 to the instant case was not among those discussed in the
parties’ memoranda. For us to rule that RA 9700 decrees a remand of the case would be
abhorrent to the rules of fair play.
Moreover, Land Bank’s position — that RA 9700 decrees a wholesale remand of all cases
involving the determination of just compensation so that they may all be resolved using
Section 17 of RA 6657, as amended by RA 9700, no matter in what stage of proceedings
they are found — is a contentious issue that should be ventilated in a proper case. It
appears that the DAR itself, in implementing RA 9700, does not share Land Bank’s position
that all pending valuations shall be processed in accordance with Section 17 of RA 6657, as
amended by RA 9700. Administrative Order No. 02, series of 2009 (DAR AO No. 02-09),
which is the Implementing Rules of RA 9700 and which DAR formulated pursuant to
Section 3140 of RA 9700, provides:
VI. Transitory Provision
xxxx
[W]ith respect to land valuation, all Claim Folders received by LBP prior to July 1,
2009 shall be valued in accordance with Section 17 of R.A. No. 6657 prior to its
amendment by R.A. No. 9700.
The Implementing Rules of RA 9700 thus authorize the valuation of lands in accordance
with the old Section 17 of RA 6657, as amended (prior to further amendment by RA 9700),
so long as the claim folders for such lands have been received by Land Bank prior to its
amendment by RA 9700 in 2009. In the instant case, Land Bank received the claim folder for
the respondents’ property in 1992,41 which was long before the effectivity of RA 9700 in
2009. Following DAR’s own understanding of RA 9700, it appears that there is no reason to
remand the case since the valuation can be determined in accordance with the old Section
17 of RA 6657, as amended (prior to further amendment by RA 9700).
Further, DAR AO No. 02-09 makes clear distinctions with respect to the laws that should
govern the valuation of lands, to wit:
IV. Statement of Policies
xxxx
D. Land Valuation and Landowner Compensation
1. The compensation for lands covered under RA 9700 shall be:
a) the amount determined in accordance with the criteria provided for
in Section 7 of the said lawand existing guidelines on land valuation; x
xx
 2. All previously acquired lands wherein valuation is subject to challenge by
landowners shall be completed and finally resolved pursuant to Section 17 of
R.A. No. 6657, as amended.
In like manner, claims over tenanted rice and corn lands under P.D. No. 27 and
Executive Order (E.O.) No. 228 whether submitted or not to the Land Bank of the
Philippines (LBP) and not yet approved for payment shall be valued under R.A.
No. 6657, as amended.
Landholdings covered by P.D. No. 27 and falling under Phase I of R.A. No. 9700 shall
be valued under R.A. No. 9700.
The above shows DAR’s opinion that valuations shall be made either under RA
9700 or under "Section 17 of R.A. No. 6657, as amended." It appears that lands yet to be
acquired and distributed by the DAR when RA 9700 took effect shall be valued using RA
9700, while lands already acquired but unpaid when RA 9700 took effect shall be valued
using "Section 17 of R.A. No. 6657, as amended" (i.e., as amended by earlier amendatory
laws, prior to further amendment by RA 9700). The administrative order, therefore, negates
Land Bank’s contention that all pending valuations should make use of Section 17 of RA
6657, as amended by RA 9700. Land Bank’s contention must await resolution in a proper
case where the issue is timely raised and properly argued by the parties. The instant case is
not the suitable venue.
Lastly, in arriving at the valuations for respondents’ property, the Court also considers that
the courts below had already followed Section 17 of RA 6657, as amended. That RA 9700
added two new factors to the said provision, is not sufficient ground for remanding the case
under the factual milieu of this case. To remand the case now for another valuation, so that
the two new factors may also be considered, appears impractical and inequitable. The
respondents have been deprived of their property for 22 years. It is time that they receive
what has long been due them.
No wanton disregard of the factors provided under Republic Act No. 6657
Land Bank maintains that, assuming arguendo that RA 6657 is the applicable law, the trial
and appellate courts wantonly disregarded the basic valuation formula in DAR AO No. 5,
series of 1998, which implements Section 17 of RA 6657. It insists that courts are not at
liberty to dispense of these formulations at will. Land Bank thus asks that the case be
remanded to the trial court for a proper determination of the just compensation in
accordance with DAR AO No. 5, series of 1998.
We disagree. The trial and appellate courts arrived at the just compensation with due
consideration for the factors provided in Section 17 of RA 6657 (prior to its amendment by
RA 9700). They took into account the nature of the property, its actual use or the crops
planted thereon, the volume of its produce, and its value according to government
assessors. As the CA correctly held, the determination of just compensation is a judicial
function; hence, courts cannot be unduly restricted in their determination thereof. To do so
would deprive the courts of their judicial prerogatives and reduce them to the bureaucratic
function of inputting data and arriving at the valuation. While the courts should be mindful
of the different formulae created by the DAR in arriving at just compensation, they are not
strictly bound to adhere thereto if the situations before them do not warrant it.42 Apo Fruits
Corporation v. Court of Appeals43 thoroughly discusses this issue, to wit:
x x x [T]he 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[.] x x x44
As a final note, it has not escaped the Court’s notice that the DAR and the Land Bank appear
nonchalant in depriving landowners of their properties. They seem to ignore the
requirements of law such as notice, valuation, and deposit of initial valuation before taking
these properties, and yet they ask for a strict compliance with the law when it comes to
compensating the landowners. This inequitable situation appears in innumerable cases and
this Court feels duty-bound to remind the DAR and the Land Bank to give as much regard
for the law when taking property as they do when they are ordered to pay for them. The
rights of landowners cannot be lightly set aside and disregarded for the attainment of the
lofty ideals of agrarian reform.
WHEREFORE, premises considered, the Petition is DENIED for lack of merit. The assailed
June 28, 2006 Decision of the Court of Appeals in CA-G.R. SP No. 86582 is AFFIRMED.
SO ORDERED.