LAND BANK OF THE PHILIPPINES, G.R. No.

175055
Petitioner,

Present:

VELASCO, JR.,
- versus - LEONARDO-DE CASTRO
Acting Chairperson,

BRION,
DEL CASTILLO, and

Heirs of MAXIMO PUYAT and PERLAS-BERNABE, JJ.

GLORIA PUYAT, represented by

Attorney-in-Fact Marissa Puyat, Promulgated:

Respondents. June 27, 2022

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

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 Review[2] assailing the June 28, 2006 Decision[3] 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 DARs instruction to pay just compensation to the Puyats.[7] Accordingly, Land Bank made its initial valuation of P2,012.50 per hectare or a total
of P92,752.10. Deducting the farmers lease rentals amounting to P5,241.20, the Land Bank recommended the payment to the landowners of the net value
of P87,510.90.[8] Respondents received Land Banks 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 compensation[9] 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 P10.00
per square meter.[13] Respondents prayed that their 468,731 square meter-property be valued at P100,000.00 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,[15] which shows that the average gross production for three years prior to 1976 was 23 cavans[16] 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,[17] which showed that it set the valuation at P2,012.50. 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 P10 per square meter, or P100,000.00 per hectare.

Taking the above factors in consideration, the court declared that the reasonable compensation for respondents property should be P100,000.00 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 (P4,687,310.00) 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 Banks 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 P100,000.00 per hectare for a total amount of Four Million Four Hundred Thirty Thousand Nine Hundred (P4,430,900.00) 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 (P4,430,900.00) 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 x[22]

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 reconsideration[25] 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. Natividad[28] explained it 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 [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
DARs 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 Banks 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 courts decision to the CA, and the latters 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 courts 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
lands from the effectivity of this Act until June 30, 2014. Lands shall be acquired and distributed as follows:

Phase One: During the five (5)-year extension period hereafter all remaining lands above fifty (50) hectares shall be
covered for purposes of agrarian reform upon the effectivity of this Act. 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 x[36]

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 Banks motion to remand the case. 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 Banks 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 Banks 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 31[40] 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 DARs 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 law and existing guidelines
on land valuation; x x x

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 DARs 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 Banks contention that all pending valuations should make use of Section 17 of RA 6657, as amended by RA 9700. Land
Banks 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 Appeals[43] 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 x[44]

As a final note, it has not escaped the Courts 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.

G.R. No. 194818 June 9, 2014

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.12
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 Resolution20 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 1.4 40 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
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 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.
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, 20054 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) 27 8 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 Contracts 17 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 Order 41dated 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 Resolution 46 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.