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Doctrine:

Operative fact. The reclassification/conversion of the land has long been a foregone fact. While respondents insist that
the process by which the land was reclassified was invalid, their claim is immaterial, because, as stated, the two
procedures are distinct. Independently of the Sangguniang Bayans own initiative, the DAR issued a Certificate of
Eligibility. These issuances only bolster the fact that, at the time it was converted, the land was no longer agricultural,
and that it would generate more revenue if reclassified as a residential area. Resolution No. ML-08-S-96, adopted by
the Sangguniang Bayan of Silang, recommended conversion based on the favorable findings of the Committee on
Housing and Land Use.
1.

CCFI owned two parcels of land (the subject land) with a total area of 221.3048 hectares located at Barangay
Tibig in Silang,Cavite. The subject land was mortgaged in favor of one of CCFIs creditors, MBC. Pursuant to
Resolution No. 505 of the Monetary Board of the Bangko Sentral ng Pilipinas (BSP), MBC was placed under
receivership on22 May 1987, in accordance with Section 29 of the Central Bank Act. Pursuant to this law, the
assets of MBC were placed in the hands of its receiver under custodia legis. On 29 September 1989, the DAR
issued a Notice of Coverage placing the property under compulsory acquisition under the Comprehensive
Agrarian Reform Law of 1988.
2. CCFI was unable to comply with its mortgage obligations to MBC. The latter foreclosed on the lien, and the land
was awarded to it in an auction sale held on 4 January 1991. The sale was duly annotated on the titles as Entry
No. 5324-44. In a Deed of Partial Redemption, CCFI was authorized to partially redeem the two parcels of land
and sell them to a third party, pending full payment of the redemption price.Under the Deed, the down
payment, which was 30% of the purchase price, would be payable to the bank only upon approval of the
exemption of the two parcels of land from the coverage of CARL or upon their conversion to non-agricultural
use.
3. On the same date, the property was sold to petitioner ALI in a Deed of Sale over the properties covered by TCT
Nos. 128672 and 144245. The sale was not absolute but conditional stating that MBC was to continue to have
custody of the corresponding titles for as long as any obligation remained due it.
4. Prompted by the numerous proceedings for compulsory acquisition initiated by the DAR against MBC, Governor
Reyes requested then DAR Secretary Ernesto Garilao to issue an order exempting the landholdings of MBC
from CARL and to declare a moratorium on the compulsory acquisition of MBCs landholdings. But Secretary
Garilao denied the request. On1 August 1995, MBC and Governor Reyes filed with the OP a Petition for Review
of Secretary Garilaos Decision. The OP issued a Stay Orderof the appealed Decision. Thereafter, MBC filed with
the OP a motion for the issuance of an order granting the former a period of five years within which to seek the
conversion of its landholdings to non-agricultural use.
5. Instead of ruling on the motion alone, however, the OP, through Executive Secretary Ruben D. Torres remanded
the case to the DAR and ordered the agency to determine which parcels of land were exempt from the
coverage of the CARL. Secretary Torres denied the Motion for Reconsideration filed by the DAR.
6. Secretary Garilao issued a Resolution dated3 October 1997, granting MBCs Request for Clearance to Sell, with
the sale to be undertaken by CCFI. He applied Section 73-A of Republic Act No. (R.A.) 6657, as amended by
R.A. 7881, that allows the sale of agricultural land where such sale or transfer is necessitated by a banks
foreclosure of a mortgage. DAR Memorandum Circular No. 05, Series of 1996 further clarified the above
provision, stating that foreclosed assets are subject to existing laws on their compulsory transfer under Section
16 of the General Banking Act. CCFI thereafter filed an application for conversion and/or exemption pursuant to
its prerogative as a landowner under Part IV of DAR A.O. 12-94 and the procedure outlined therein.
7. On 31 October 1997, Secretary Garilao issued Conversion Order No. 4-97-1029-051, approving the conversion
and/or exemption of the 221-hectare property in Silang, exempting the properties from agrarian reform
coverage, as it was beyond eighteen (18) degrees in slope.
8. On 19 May 2000, he farmers tilling the subject land filed a Petition for Revocation of Conversion Order No. 497-1029-051 alleging: (1) that the sale in 1995 by CCFI to ALI was invalid; and (2) that CCFI and ALI were guilty
of misrepresentation in claiming that the property had been reclassified through a mere Resolution, when the
law required an ordinance of the Sanggunian. The issue of the alleged Notice of Acquisition was never raised.
Neither was there any mention of the issuance of a Notice of Coverage.
9. On18 December 2000, DAR Secretary Horacio Morales, Jr.declared that the action to revoke the conversion had
not yet prescribed. According to him, Section 34 of A.O. 1-99 imposing the one-year prescription period did not
apply, because administrative rules should be applied prospectively. Thus, the rule to be followed was that
prevailing at the time of the issuance of the Conversion Order DAR A.O. 12-94 not A.O. 1-99, which was the
rule prevailing when the Petition for Revocation was filed. But he never passed upon or even mentioned any
matter related to the Notice of Acquisition.
10. On 26 September 2002, acting on the Motion for Reconsideration filed by ALI, DAR Secretary Hernani Braganza
reversed the Revocation of Conversion Order 4-97-1029-051. Again, Secretary Braganza was not afforded an
opportunity to discuss any evidence related to the existence or effect of any Notice of Acquisition, as the
joinder of issues was limited.
11. Secretary Braganza found that the Deed of Partial Redemption was conditional, and that there was no transfer
of ownership to CCFI or its successor-in-interest, ALI. Hence, there could be no violation of the CARL arising
from an unauthorized transfer of the land to ALI. In fact, the obligation of ALI to pay the purchase price did not
arise until the DARs issuance of an order of exemption or conversion. On14 January 2003, Secretary Braganza
granted ALIs Motion for Extension to develop the land for another five (5) years.

12. The farmers questioned the jurisdiction of the DAR to determine the ownership of the lands and to determine
whether or not the sale was conditional, as these issues are within the ambit of the civil courts.
13. On appeal, the upheld Conversion Order No. 4-97-1029-051 issued by then Secretary of the Department of
Agrarian Reform (DAR) Ernesto Garilao, as well as the Orders issued by Secretary Hernani Braganza and
Secretary Roberto Pagdanganan both affirming the conversion.
Issue:
1.
2.

Whether or not the subject property has long been converted into non-agricultural uses?
Whether or not the CA is barred from resolving the issue of the alleged Notice of Acquisition thaw only raised
for the first time on appeal?