G.R. No. 149422. April 10, 2003 DEPARTMENT OF AGRARIAN REFORM vs.

APEX INVESTMENT AND FINANCING CORPORATION (now SM Investment Corporation) Before us is a petition for review on certiorari[1] filed by the Department of Agrarian Reform (DAR) assailing the Decision[2] of the Court of Appeals dated April 26, 2001 in CA-G.R. SP No. 55052, Apex Investment and Financing Corporation vs.

Department of Agrarian Reform, et al.; and its Resolution dated August 2, 2001
denying petitioners motion for reconsideration. Respondent Apex Investment and Financing Corporation (now SM Investments Corporation), registered under the laws of the Philippines, owns several lots located at Barangay Paliparan, Dasmarias, Cavite, covered by Transfer Certificates of Title (TCT) Nos. T-72491, T-90474, T-90475, T-90476, and T-90477. On August 24, 1994, the Municipal Agrarian Reform Office (MARO) of Dasmarias initiated compulsory acquisition proceedings over those lots pursuant to Republic Act No. 6657, otherwise known as the Comprehensive Agrarian Reform Law of 1988. The MARO issued a Notice of Coverage informing respondent of the compulsory acquisition and inviting it to a meeting set on September 8, 1994; and Notice of Acquisition. Copies of these notices were sent to respondents office at 627 Echague Street, Manila. However, respondent denied having received the same because it was no longer holding office there. Respondent learned of the compulsory acquisition proceedings from the December 11, 1997 issue of the Balita stating, among others, thatTCT No. T-90476, covering respondents lot consisting of 23,614 square meters, has been placed under the compulsory acquisition program. Forthwith, petitioner sent respondent a copy of the Notice of Land Valuation and Acquisition dated July 24, 1997, offering to pay itP229,014.33 as compensation for the lot covered by TCT No. T-90476. On January 12, 1998, respondent filed with the PARO a Protest rejecting the offer of compensation and contending that its lands are not covered by R.A. No. 6657 because they were classified as residential even prior to the effectivity of the law. Attached to its protest are copies of its land titles, tax declarations, location map and other supporting documents.

On March 27, 1998, respondent filed with the PARO a Supplemental Protest with (a) the Certification issued by Engineer Baltazar M. Usis, Regional Irrigation Manager of the National Irrigation Administration, Region IV, stating that respondents lots are not covered by any irrigation project; and (b) the Certification issued by Engineer Gregorio Bermejo, Municipal Engineer and Deputized Zoning Administrator of Dasmarias, Cavite, attesting that the same lots are with in the residential zone based on the Land Use Plan of the Municipality of Dasmarias duly approved by the Housing and Land Use Regulatory Board (HLURB) in its Resolution No. R-42-A-3 dated February 11, 1981. It was only on February 15, 1999, or more than one year after respondent filed its protest, that the PARO forwarded to petitioner DAR the said protest together with the records of the compulsory acquisition proceedings. On June 21, 1999, respondent received a letter dated May 28, 1999 from petitioner requiring it to submit certified true copies of the TCTs covering its lots and a Certification from the HLURB attesting that they are within the residential zone of Dasmarias based on HLURB Resolution No. R-42-A-3 dated February 11, 1981. Thereafter, respondent learned that on June 24, 1999, the Registry of Deeds of Cavite cancelled one of its titles, TCT No. T-90476, and in lieu thereof, issued TCT No. T-868471 in the name of the Republic of the Philippines. On July 26, 1999, respondent came to know that TCT No. T-868471 was cancelled and in lieu thereof, TCT No. CLOA-2473 was issued in the name of Angel M. Umali, a farmer-beneficiary allegedly occupying the land. This prompted respondent to file with the Court of Appeals a petition for certiorari and prohibition praying that the compulsory acquisition proceedings over its landholdings be declared void and that TCT No. CLOA-2473 issued to Angel Umali be cancelled. In its comment, petitioner alleged that respondent failed to exhaust all administrative remedies before filing its petition. Hence, the same should be dismissed. On April 26, 2001, the Court of Appeals rendered its Decision, the dispositive portion of which reads: WHEREFORE, the petition for certiorari is hereby granted and judgment is hereby rendered as follows:

a) declaring the compulsory acquisition under Republic Act No. 6657 as null and void ab initio; b) prohibiting public respondents PARO and DAR from continuing with the compulsory acquisition proceedings over TCT No. T-72491; TCT No. T-90474; TCT No. T-90475; and TCT No. T-90477; compulsory acquisition proceedings over TCT No. T-72491; TCT No. T-90474; TCT No. T-90475; and TCT No. T-90477; c) prohibiting public respondent Register of Deeds of Cavite from cancelling the land titles of petitioner, i.e., TCT No. T-72491; TCT No. T-90474; TCT No. T-90475; and TCT No. T-90477 and the transferring, conveying and alienation thereof; and d) ordering the Register of Deeds of Cavite to restore TCT No. T-90476 (now CLOA 2473) in the name of petitioner. SO ORDERED. Petitioner filed a motion for reconsideration but was denied in the Resolution dated August 2, 2001. Hence, the instant petition for review on certiorari. Petitioner ascribes to the Court of Appeals the following errors: (a) in ruling that respondent corporation did not violate the principle of exhaustion of remedies; (b) in holding that respondent was deprived of its right to due process; and (c) in concluding that the subject parcels of land are residential, hence, not covered by R.A. No. 6657. On the first assigned error, this Court has consistently held that the doctrine of exhaustion of administrative remedies is a relative one and is flexible depending on the peculiarity and uniqueness of the factual and circumstantial settings of a case.[3] Among others, it is disregarded where, as in this case, (a) there are circumstances indicating the urgency of judicial intervention;[4] and (b) the administrative action is patently illegal and amounts to lack or excess of jurisdiction.[5] Records show that the PARO did not take immediate action on respondents Protest filed on January 12, 1998. It was only on February 15, 1999, or after more than one year, that it forwarded the same to petitioner DAR. Since then, what petitioner has done was to require respondent every now and then to submit copies of supporting documents which were already attached to its Protest. In the

meantime, respondent found that the PARO had caused the cancellation of its title and that a new one was issued to an alleged farmer-beneficiary. In Natalia Realty vs. Department of Agrarian Reform,[6] we held that the aggrieved landowners were not supposed to wait until the DAR acted on their letterprotests (after it had sat on them for almost a year) before resorting to judicial process. Given the official indifference which, under the circumstances could have continued forever, the landowners had to act to assert and protect their interests. Thus, their petition for certiorari was allowed even though the DAR had not yet resolved their protests. In the same vein, respondent here could not be expected to wait for petitioner DAR to resolve its protest before seeking judicial intervention. Obviously, petitioner might continue to alienate respondents lots during the pendency of its protest. Hence, the Court of Appeals did not err in concluding that on the basis of the circumstances of this case, respondent need not exhaust all administrative remedies before filing its petition for certiorari and prohibition. As to the second assigned error, we find that petitioner was deprived of its constitutional right to due process. Section 16 of R.A. No. 6657, provides: Section 16. Procedures for Acquisition of Private Lands. For purposes of acquisition of private lands, the following procedures shall be followed: (a) After having identified the land, the landowners and the beneficiaries, the DAR shall send its notice to acquire the land to the owners thereof, by personal delivery or registered mail, and post the same in a conspicuous place in the municipal building and barangay hall of the place where the property is located. Said notice shall contain the offer of the DAR to pay a corresponding value in accordance with the valuation set forth in Sections 17, 18, and other pertinent provisions hereof. x x x In Roxas & Co., Inc. vs. Court of Appeals,[7] we held: For a valid implementation of the CAR program, two notices are required: (1) the Notice of Coverage and letter of invitation to preliminary conference sent to the landowner, the representatives of the BARC, LBP, farmer beneficiaries and other interested parties pursuant to DAR A.O. No. 12, Series of 1989; and (2) theNotice of Acquisition sent to the landowner under Section 16 of R.A. No. 6657.

The importance of the first notice, i.e., the Notice of Coverage and the letter of invitation to the conference, and its actual conduct cannot be understated. They are steps designed to comply with the requirements of administrative due process. The implementation of the CARL is an exercise of the States police power and the power of eminent domain. To the extent that the CARL prescribes retention limits to the landowners, there is an exercise of police power for the regulation of private property in accordance with the Constitution (Association of Small Landowners in the

Philippines vs. Secretary of Agrarian Reform, 175 SCRA 343, 373-374 [1989]). But
where, to carry out such regulation, the owners are deprived of lands they own in excess of the maximum area allowed there is also a taking under the power of eminent domain. The taking contemplated is not a mere limitation of the use of the land. What is required is the surrender of the title to and physical possession of the said excess and all beneficial rights accruing to the owner in favor of the farmer beneficiary (id.). The Bill of Rights provides that [n]o person shall be deprived of life, liberty or property without de process of law (Section 1, Article III of the 1987 Constitution). The CARL was not intended to take away property without due process of law (Development Bank of the Philippines vs. Court of Appeals, 262 SCRA 245, 253 [1996]). The exercise of the power of eminent domain requires that due process be observed in the taking of private property. In the instant case, petitioner does not dispute that respondent did not receive the Notice of Acquisition and Notice of Coverage sent to the latters old address. Petitioner explained that its personnel could not effect personal service of those notices upon respondent because it changed its juridical name from Apex Investment and Financing Corporation to SM Investment Corporation. While it is true, that personal service could not be made, however, there is no showing that petitioner caused the service of the notices via registered mail as required by Section 16(a) of R.A. No. 6657. On this point, petitioner claimed that the notices were sent not only by registered mail but also by personal delivery and that there was actual receipt by respondent as shown by the signature appearing at the bottom left-hand corner of petitioners copies of the notices. But petitioner could not identify the name of respondents representative who allegedly received the notices. In fact, petitioner admitted that the signature thereon is illegible. It is thus safe to conclude that respondent was not notified of the compulsory acquisition proceedings. Clearly,

respondent was deprived of its right to procedural due process. It is elementary that before a person can be deprived of his property, he should be informed of the claim against him and the theory on which such claim is premised.[8] On the last assigned error, Section 4 of R.A. No. 6657 provides that the Comprehensive Agrarian Reform Law shall cover, regardless of tenurial arrangement and commodity produced, all public and private agricultural lands. Section 3(c) defines agricultural land, as land devoted to agricultural activit y as defined in this Act and not classified as mineral, forest, residential, commercial or industrial land. Respondent vehemently insists that its lots had been classified as residential prior to June 15, 1988, the date of effectivity of R.A. No. 6657. As earlier mentioned, Engineer Gregorio Bermejo, Municipal Engineer and Deputized Zoning Administrator of Dasmarias, Cavite, certified that respondents lands are within the residential zone of Dasmarias, based on the Land Use Plan of that municipality du ly approved by the HLURB in its Resolution No. R-42-A-3 dated February 11, 1981. We observe, however, that this factual issue was never determined below. Thus, we cannot conclude that respondents parcels of land are residential. WHEREFORE, the challenged Decision dated April 26, 2001 of the Court of Appeals in CA-G.R. SP No. 55052 is AFFIRMED withMODIFICATION in the sense that we allow the DAR to conduct appropriate proceedings to determine whether the subject parcels of land are indeed residential and are thus outside the coverage of R.A. No. 6657. G.R. No. 122363 vs. COURT OF APPEALS, HON. TEOFISTO T. GUINGONA, JR., as Executive Secretary, HON. ERNESTO GARILAO, Secretary of Agrarian Reform, CRISOSTOMO M. CORPIN, Regional Director, DAR Region VII, SANTOS GARGAYA, JULIANO MAGDAYAO, CRESCENCIANO FRIAS, FEDERICO JARE, ROSENDO LOBRESCO, ERNESTO LOBRESCO, FELICIANO LOBRESCO, CATALINO MANTAC, VICTORIANO MONTE-FALCON, FRANCISCO OBANG, April 29, 2003

VICTOR G. VALENCIA, petitioner,

AMBROSIO SEMILLANO, ROGELIO TAMAYO and EDILBERTO LOBRESCO,respondents. BELLOSILLO, J.: THE tenancy crisis in the Philippines is not just of recent vintage. History is replete with instances where tenant-farmers, relegated to a life of perpetual bondage, have rushed onto the battlefield with hopes of freedom from imminent thralldom, aptly described by Professor Harold J. Laski as the normal life of the poor - their perpetual fear of the morrow, their haunting sense of impending disaster, their fitful search for beauty that perpetually eludes them. Every administration that took over the reins of government saw the gravity of this problem. Thus, each offered to the tenant-tillers its own version of the appropriate legislation for their emancipation.

The Agricultural Tenancy Act of 1954 (R. A. No. 1199), the initial attempt of
President Magsaysay at agrarian reform, was conceived as a remedial legislation to uplift the social and economic status of tenants. It was insinuated in the legislative deliberations that several provisions therein operated to deprive the landowner of his right to contract and his right to property without due process of law. But, it was also argued, this involved societal values and the agricultural tenancy act was meant to remedy an existing social evil. Hence, all tenancy laws that followed thereafter were crafted along this line. This case is now being scrutinized and tested against the bedrock of legal and equitable safeguards to achieve a truly successful and balanced agrarian reform initiative. For more than a quarter of a century petitioner Victor G. Valencia, a government retiree, sought justice through administrative and judicial channels to regain possession of his two (2) parcels of land which he claims to have been unjustly withheld from him by persons claiming to be tenants with the ostensible complicity of government officials implementing the agrarian reform program. In the meantime his appeal for fairness and justice was denied him through procedural infirmities. We are now asked to probe into his lonely plight with a reminder that it is our solemn duty to dispense equal justice to the rich and the poor. We have repeatedly stressed that social justice - or any justice for that matter - is for the deserving, whether he be a millionaire in his mansion or a pauper in his hovel. It is true that, in case of reasonable doubt, we are to tilt the balance in favor of the poor

to whom the Constitution fittingly extends its sympathy and compassion. But never is it justified to give preference to the poor simply because they are poor, or reject the rich simply because they are rich, for justice must always be served for the poor and the rich alike according to the mandate of the law.1 The property in dispute involves two (2) parcels of land situated at Barangay Linothangan, Canlaon City, Negros Oriental, covered by TCT No. H-T-137 with an area of 23.7279 hectares, and by Homestead Application No. HA-231601 with Final Proof and Tax Declaration No. 0515 with an area of 6.4397 hectares. On 7 May 1957 Victor G. Valencia acquired the first parcel covered by TCT No. H-T137 from a certain Bonifacio Supnet. The only tenant of the property at that time was a certain Digoy Besario who was succeeded by his son Jesus Besario. On 2 July 1961 Valencia and Jesus Besario terminated their landlord-tenant relationship through a public instrument voluntarily executed by them, thus reverting the actual physical possession of the property to petitioner Valencia. On 22 October 1962 Valencia entered into a ten (10)-year civil law lease agreement over his two (2) parcels of land with a certain Glicerio Henson. Before the ten (10)year lease expired, apparently without objection from Henson, Valencia leased the property for five (5) years to Fr. Andres Flores under a civil law lease concept beginning 21 August 1970 or until 30 June 1975 after which the lease was cancelled and inscribed as Entry No. 1578 in TCT No. H-T-137. The lease agreement between Valencia and Fr. Flores was subject to a prohibition against subleasing or

encumbering the land without Valencia's written consent. This was admitted by the
parties as reflected in the DAR Investigation Report and Recommendations.2 The prohibition against subleasing or encumbering of the land apparently included the prohibition against installing a leasehold tenant thereon. Incidentally, it may be mentioned that in the prior lease agreement with Henson no such prohibition was stipulated. During the period of his lease, Henson instituted Crescenciano Frias and Marciano Frias to work on the property, although only Crescenciano Frias apparently remained in the land while Marciano Frias must have abandoned his cause if any, as he was not impleaded in this case; neither did he appear on record to have been issued a CLT in his name.

During the lease of Fr. Andres Flores, he designated Francisco Obang (as overseer), Rogelio Tamayo, Federico Jare, Feliciano Lobresco, Melchor Moncada, Rosendo Lobresco, Victoriano Montefalcon, Santos Gargaya, Catalino Mantac, Herodita Semillano, Ernesto Lobresco, Natividad Lobresco and Alfredo Demerin, along with Crescenciano and Marciano Frias, to cultivate the land. These farmhands shared their produce with Fr. Flores. Subsequently, Francisco Obang, Santos Gargaya, Crescenciano Frias, Federico Jare, Rosendo Lobresco, Juliano Magdayao, Ernesto Lobresco, Feliciano Lobresco, Catalino Mantac, Victoriano Montefalcon, Ambrosio Semillano, Rogelio Tamayo and Edilberto Lobresco, became recipients of CLTs and are collectively referred to herein as private respondents. When the lease agreement between Valencia and Fr. Flores expired on 30 June 1975, Valencia demanded that private respondents vacate the premises. Instead of complying with the demand, they refused and continued cultivating the land despite the demand for them to vacate. Valencia wanted to regain possession of his property so he could work it by administration, having in fact appointed Bernie Bautista as overseer until petitioner could retire from the government service. In his initial step in his long and agonizing journey, Valencia filed a letter of protest with the Minister of Agrarian Reform to take back the actual possession of his property that was subject of the civil law lease agreement. On 20 March 1976 his letter was referred to the DAR Regional Office in Cebu City. Meanwhile, without the knowledge much less consent of Valencia, private respondents applied for Certificates of Land Transfer (CLTs) under the Operation Land Transfer (OLT) Program pursuant to Presidential Decree No. 27 claiming they were bona fide tenants of the property. On 10 December 1985, while the investigation was being conducted by the DAR pursuant to petitioner's letter of protest of 20 March 1976, but before it could be terminated, the DAR issued the questioned CLTs to private respondents. The DAR Team Office in Canlaon City pursuant to the Operation Land Transfer Program under Pres. Decree No. 27 and Letter of Instruction No. 474 identified the following persons as farmer-beneficiaries:3 NAME A. TAX DEC. No. 0515 CLT NO. LOT NO. AREA (hectares)

1. Santos Gargaya 2. Juliano Magdayao

0-071160 a) 0-071161 b) 0-071163 c) 0-071166 d) 0-071175

0111 0122 0114 0117 0124

0.3300 ha. 0.3350 ha. 0.2550 ha. 0.4825 ha. 0.3140 ha.

B. TCT No. HT-137 3. Crescenciano Frias 0-071164 4. Federico Jare a) 0-71171 b) 0-71172 5. Rosendo Lobresco a) 0-071189 b) 0-071182 6. Ernesto Lobresco a) 0-071185 b) 0-71187 7. Feliciano Lobresco 8. Catalino Mantac 9. Victoriano Montefalcon 10. Francisco Obang 11. Ambrosio Semillano b) 0-071176 c) 0-071177 12. Rogelio Tamayo 0-071194 0125 0126 0139 0122 0.1135 ha. 0.0340 ha. 0.3400 ha 1.2040 has. 0-071168 a) 0-071165 0118 0116 1.200 has. 0.0340 ha. 0-071188 0-071162 0-071190 0115 0120 0121 0135 0129 0132 0133 0134 0113 0136 0.8890 ha. 0.4600 ha. 0.2500 ha. 0.2335 ha. 1.0325 ha. 0.8900 ha. 0.8400 ha. 0.3400 ha. 0.0425 ha. 0.1800 ha.

13. Edilberto Lobresco 0-071173

Total Area 10.1055 has In view of the issuance of CLTs to private respondents, petitioner Valencia filed a second letter of protest and requested an investigation and subsequent cancellation of the CLTs.

In February 1988 petitioner Valencia and Catalino Mantac, one of private respondents, entered into a leasehold contract undertaking to have a profit-sharing agreement. No other respondent entered into any agreement or tenancy contract, whether written or verbal, with Valencia, Henson or Fr. Flores. On 6 and 8 July 1988 an administrative investigation was conducted by the DAR Hearing Officer, Atty. Vilmo Ampong. This was done more than twelve (12) years

after the initial letter of protest was filed on 20 March 1976. After an on-site
investigation and inspection of the Valencia property, Atty. Ampong, in his Investigation Report and Recommendations dated 7 December 1988 found that: (a) Bernie Bautista, without any authority from protestant Valencia, obtained and/or received shares of the palay produced every harvest from private respondents starting 1975 to 1983 with his wife Hazel issuing the corresponding receipts; (b) Since the time Bautista and spouse obtained and/or received the owner's shares of the produce from private respondents not a single cavan nor its equivalent in cash was turned over or remitted to Valencia; (c) Private respondents stopped giving the landowner's shares to Bautista and his wife when they already refused to issue receipts, and so from then on private respondents appropriated to themselves all the landowner's shares; (d) While enjoying the possession, cultivation and utilization of the two (2) parcels of land, some of the private respondents sublet their farmholdings for financial considerations and turned them over to the sublessees for specified periods;4 (e) The DAR Team Office in Canlaon City had the landholding included in the Final Survey of 1983 notwithstanding Valencia's pending protest contesting the issuance of the CLTs;5 and, (f) Sometime in February 1988 Valencia and Catalino Mantac entered into a leasehold contract over a 0.0425 hectare of the 23.7279 hectares covered by TCT No. H-T-137.6 Atty. Vilmo Ampong also found that the right of private respondents to the land ceased upon the termination of the lease contracts, except as regards respondent Catalino Mantac with whom petitioner Valencia entered into a tenancy agreement. Atty. Ampong further confirmed that Valencia did not receive anything from private respondents as consideration for tilling his land. Consequently, Atty. Ampong recommended that the CLTs issued to private respondents be cancelled and the final survey conducted on the landholding of Valencia set aside.

On 24 August 1989 the DAR Regional Office in Cebu City, in DARRO Adm. Case No. VII-117-89, notwithstanding the Investigation Report and Recommendations of its DAR Team Office, dismissed Valencia's protest and held that private respondents had the right to continue on the land until otherwise ordered by the court.7 Valencia moved for reconsideration but on 12 July 1991 the motion was denied. This setback of Valencia prompted him to appeal to the Office of the President under authority of DAR Memo. Circ. No. 3, series of 1994, arguing that the Secretary of Agrarian Reform8 erred in considering private respondents as tenants and in not recognizing petitioner's right of retention under R. A. No. 6657 otherwise known as The Comprehensive Agrarian Reform Law. On 8 October 1993 Executive Secretary Teofisto Guingona, Jr., by authority of the President, affirmed the order of the DAR of 12 July 1991 subject to the modification that the area acquired by petitioner Valencia as homestead be excluded from the coverage of P. D. No. 27. Valencia then brought his case to the Court of Appeals contending that the Executive Secretary erred in recognizing private respondents as tenants and disallowing him and his seven (7) "compulsory heirs" from exercising their right of retention under R. A. No. 6657. However, in a decision promulgated on 27 July 1995 the Court of Appeals dismissed the case on a technical ground, i.e., that his appeal was filed out of time.9 The appellate court ruled that petitioner should have filed with it a petition for review within fifteen (15) days from receipt of the order of the DAR Secretary pursuant to Sec. 54 of R. A. No. 6657 and Supreme Court Adm. Circ. No. 1-95, instead of elevating the case to the Office of the President pursuant to DAR Memo. Circ. No. 3, series of 1994. Hence, according to the Court of Appeals, the petition of Valencia was filed out of time. On 22 September 1995 petitioner's motion for reconsideration was denied. In its Resolution the Court of Appeals, citing Shell Philippines, Inc. v. Central Bank,10 held that in case of discrepancy between the basic law and a rule or regulation issued to implement the law, the basic law prevails because the rule or regulation cannot go beyond the terms and provisions of the basic law.11 Thus, DAR Memo. Circ. No. 3, series of 1994, according to the Court of Appeals, cannot be considered valid and effective since it runs counter to Sec. 54 of R. A. No. 6657 which provides for an appeal from any decision, order, award or ruling by the DAR to the Court of

Appeals.12 Likewise, the appellate court held that the doctrine of exhaustion of administrative remedies does not apply in the present case where the respondent is a Department Secretary whose acts, as alter ego of the President, bear the implied approval of the latter.13 Valencia filed this Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to reverse and set aside the Decision of the Court of Appeals in CAG.R. SP No. 32669 dated 27 July 1995 as well as its Resolution denying his Motion for Reconsideration of 22 September 1995. Petitioner contends that DAR Memo. Circ. No. 3, series of 1994, is valid not being contrary to law and jurisprudence, and should be accorded respect being the Agrarian Reform Secretary's construction of the law that his Department administers and implements. Public respondents, on the other hand, aver that Secs. 15 and 20 of Book VII of E. O. No. 292 which are cited as the legal bases of DAR Memo. Circ. No. 3 refer to the procedure for administrative appeals from an agency to the Department Head which in this case is the DAR through its Secretary. They argue that there is no provision for appeal to the Office of the President since in the administrative structure the Secretary of Agrarian Reform is the alter ego of the President. They contend that Sec. 23 of Book VII cites the finality of the decision of the appellate agency without providing for a further appeal, and that Sec. 25 provides for judicial review from an agency decision, as they point to Sec. 54 of R. A. No. 6657 14 and SC Adm. Circ. No. 1-95.15 We agree with petitioner. Interpreting and harmonizing laws with laws is the best method of interpretation.Interpretare et concordare leges legibus est optimus

interpretandi modus.16 This manner of construction would provide a complete,

consistent and intelligible system to secure the rights of all persons affected by different legislative and quasi-legislative acts. Where two (2) rules on the same subject, or on related subjects, are apparently in conflict with each other, they are to be reconciled by construction, so far as may be, on any fair and reasonable hypothesis. Validity and legal effect should therefore be given to both, if this can be done without destroying the evident intent and meaning of the later act. Every statute should receive such a construction as will harmonize it with the pre-existing body of laws.

Harmonizing DAR Memo. Circ. No. 3, series of 1994, with SC Adm. Circ. No. 1-95 and Sec. 54 of R. A. No. 6657 would be consistent with promoting the ends of substantial justice for all parties seeking the protective mantle of the law. To reconcile and harmonize them, due consideration must be given to the purpose for which each was promulgated. The purpose of DAR Memo. Circ. No. 3, series of 1994, is to provide a mode of appeal for matters not falling within the jurisdictional ambit of the Department of Agrarian Reform Adjudication Board (DARAB) under R. A. No. 6657 and correct technical errors of the administrative agency. In such exceptional cases, the Department Secretary has established a mode of appeal from the Department of Agrarian Reform to the Office of the President as a plain, speedy, adequate and inexpensive remedy in the ordinary course of law. This would enable the Office of the President, through the Executive Secretary, to review technical matters within the expertise of the administrative machinery before judicial review can be resorted to by way of an appeal to the Court of Appeals under Rule 43 of the 1997 Rules on Civil Procedure. On the other hand, the purpose of SC Adm. Circ. No. 1-95, now embodied in Rule 43 of the 1997 Rules of Civil Procedure, is to invoke the constitutional power of judicial review over quasi-judicial agencies, such as the Department of Agrarian Reform under R. A. No. 6657 and the Office of the President in other cases by providing for an appeal to the Court of Appeals. Section 54 of R. A. No. 6657 is consistent with SC Adm. Circ. No. 1-95 and Rule 43 in that it establishes a mode of appeal from the DARAB to the Court of Appeals. In Angara v. Electoral Commission this Court upheld the promulgation of the rules of procedure of the Commission since they were necessary to the proper exercise of its express power to hear and decide election contests involving members of the legislature, although not specifically granted by the Constitution or statute.17 We ruled18x x x the creation of the Electoral Commission carried with it ex necesitate rei the power regulative in character to limit the time within which protests intrusted to its cognizance should be filed. It is a settled rule of construction

that where a general power is conferred or duty enjoined, every particular power necessary for the exercise of the one or the performance of the other is also conferred (Cooley, Constitutional Limitations, 8th ed., Vol. I, pp. 138,

139). In the absence of any further constitutional provision relating to the

procedure to be followed in filing protests before the Electoral Commission, therefore, the incidental power to promulgate such rules necessary for the proper exercise of its exclusive power x x x must be deemed by necessary implication to have been lodged also in the Electoral Commission (emphasis
supplied). Thus, the power of the Department Secretary to promulgate internal rules of administrative procedure is lodged in him by necessary implication as part of his express power to "promulgate rules and regulations necessary to carry out department objectives, policies, functions, plans, programs and projects."19 Is an appeal to the Office of the President from the Department Secretary pursuant to DAR Memo. Circ. No. 3, series of 1994, proper under the doctrine of exhaustion of administrative remedies? Petitioner contends that an appeal to the Office of the President from the Secretary of Agrarian Reform is proper under the doctrine of exhaustion of administrative remedies. On the other hand, it is the contention of public respondent, the Office of the Solicitor General, that an exception to this well-settled principle is the doctrine of qualified political agency. Where the respondent is a Department Secretary, whose acts as an alter ego of the President bear the implied or assumed approval of the latter, unless the President actually disapproves them, administrative remedies have already been exhausted. Recourse to the court may be made at that point, according to private respondents, a view that was sustained by the Court of Appeals. In this case, the appellate court ruled that the appeal before it was filed beyond the reglementary period as petitioner appealed to the Office of the President, and not to the Court of Appeals, where it should have been brought. In Tan v. Director of

Forestry this Court ruled that even if the respondent was a Department Secretary, an
appeal to the President was proper where the law expressly provided for

exhaustion.20
As a valid exercise of the Secretary's rule-making power to issue internal rules of procedure, DAR Memo. Circ. No. 3, series of 1994, expressly provides for an appeal to the Office of the President. Thus, petitioner Valencia filed on 24 November 1993 a timely appeal by way of a petition for review under Rule 43 to the Court of Appeals

from the decision of the Office of the President, which was received on 11 November 1993, well within the fifteen (15)-day reglementary period. An administrative decision must first be appealed to administrative superiors up to the highest level before it may be elevated to a court of justice for review. The power of judicial review may therefore be exercised only if an appeal is first made by the highest administrative body in the hierarchy of the executive branch of government. In Calo v. Fuertes this Court held that an administrative appeal to the President was the final step in the administrative process and thus a condition precedent to a judicial appeal.21 Hence, an appeal to the Office of the President from the decision of the Department Secretary in an administrative case is the last step that an aggrieved party should take in the administrative hierarchy, as it is a plain, speedy and adequate remedy available to the petitioner. Indeed, certain procedural technicalities have beclouded this case from the outset such that the substantive issue regarding the true nature of the relationship between petitioner and private respondents was not addressed by the Court of Appeals, hence, the raison d'tre of the case. It must necessarily be discussed if this Court were to resolve with finality the protracted conflict that has lasted over twenty-five (25) years. We are resolving the question at this point to bring this case once and for all to a just, fair and equitable conclusion. Where there are clear errors of law this Court must exercise its constitutional power of judicial review to correct such errors. The substantive issue to be resolved may be expressed in this manner: Can a contract of civil law lease prohibit a civil law lessee from employing a tenant on the land subject matter of the lease agreement? Otherwise stated, can petitioner's civil law lessee, Fr. Flores, install tenants on the subject premises without express authority to do so under Art. 1649 of the Civil Code, more so when the lessee is expressly prohibited from doing so, as in the instant case? Contrary to the impression of private respondents, Sec. 6 of R. A. No. 3844, as amended, does not automatically authorize a civil law lessee to employ a tenant without the consent of the landowner. The lessee must be so specifically authorized. For the right to hire a tenant is basically a personal right of a landowner, except as may be provided by law. But certainly nowhere in Sec. 6 does it say that a civil law

lessee of a landholding is automatically authorized to install a tenant thereon . A

different interpretation would create a perverse and absurd situation where a person

who wants to be a tenant, and taking advantage of this perceived ambiguity in the law, asks a third person to become a civil law lessee of the landowner. Incredibly, this tenant would technically have a better right over the property than the landowner himself. This tenant would then gain security of tenure, and eventually become owner of the land by operation of law. This is most unfair to the hapless and unsuspecting landowner who entered into a civil law lease agreement in good faith only to realize later on that he can no longer regain possession of his property due to the installation of a tenant by the civil law lessee. On the other hand, under the express provision of Art. 1649 of the Civil Code, the lessee cannot assign the lease without the consent of the lessor, unless there is a

stipulation to the contrary. In the case before us, not only is there no stipulation to
the contrary; the lessee is expressly prohibited from subleasing or encumbering the land, which includes installing a leasehold tenant thereon since the right to do so is an attribute of ownership. Plainly stated therefore, a contract of civil law lease can prohibit a civil law lessee from employing a tenant on the land subject matter of the lease agreement. An extensive and correct discussion of the statutory interpretation of Sec. 6 of R. A. No. 3844, as amended, is provided by the minority view in Bernas

v. Court of Appeals.22
When Sec. 6 provides that the agricultural leasehold relations shall be limited to the person who furnishes the landholding, either as owner, civil law lessee, usufructuary, or legal possessor, and the person who personally cultivates the same, it assumes

that there is already an existing agricultural leasehold relation, i.e., a tenant or agricultural lessee already works the land. The epigraph of Sec. 6 merely states who
are "Parties to Agricultural Leasehold Relations," which assumes that there is already a leasehold tenant on the land; not until then. This is precisely what we are still asked to determine in the instant proceedings. To better understand Sec. 6, let us refer to its precursor, Sec. 8 of R. A. No. 1199, as amended.23 Again, Sec. 8 of R. A. No. 1199 assumes the existence of a tenancy relation. As its epigraph suggests, it is a "Limitation of Relation," and the purpose is merely to limit the tenancy "to the person who furnishes the land, either as owner, lessee, usufructuary, or legal possessor, and to the person who actually works the land himself with the aid of labor available from within his immediate farm household." Once the tenancy relation is established, the parties to that relation are

limited to the persons therein stated. Obviously, inherent in the right of landholders to install a tenant is their authority to do so; otherwise, without such authority, civil law

lessees as landholders cannot install a tenant on the landholding. Neither Sec. 6 of R. A. No. 3844 nor Sec. 8 of R. A. No. 1199 automatically authorizes the persons named therein to employ a tenant on the landholding.
According to Mr. Justice Guillermo S. Santos and CAR Executive Judge Artemio C. Macalino, respected authorities on agrarian reform, the reason for Sec. 6 of R. A. No. 3844 and Sec. 8 of R. A. No. 1199 in limiting the relationship to the lessee and the lessor is to "discourage absenteeism on the part of the lessor and the custom of co-tenancy" under which "the tenant (lessee) employs another to do the farm work for him, although it is he with whom the landholder (lessor) deals directly. Thus, under this practice, the one who actually works the land gets the short end of the bargain, for the nominal or 'capitalist' lessee hugs for himself a major portion of the harvest."24 This breeds exploitation, discontent and confusion x x x x The kasugpong, kasapi, or katulong also works at the pleasure of the nominal tenant.25 When the new law, therefore, limited tenancy relation to the landholder and the person who actually works the land himself with the aid of labor available from within his immediate farm household, it eliminated the nominal tenant or middleman from the picture.26 Another noted authority on land reform, Dean Jeremias U. Montemayor,27 explains the rationale for Sec. 8 of R. A. No. 1199, the precursor of Sec. 6 of R. A. No. 3844: Since the law establishes a special relationship in tenancy with important consequences, it properly pinpoints the persons to whom said relationship shall apply. The spirit of the law is to prevent both landholder absenteeism and tenant absenteeism. Thus, it would seem that the discretionary powers and important duties of the landholder, like the choice of crop or seed, cannot be left to the will or capacity of an agent or overseer, just as the cultivation of the land cannot be entrusted by the tenant to some other people. Tenancy

relationship has been held to be of a personal character.28

Section 6 as already stated simply enumerates who are the parties to an existing contract of agricultural tenancy, which presupposes that a tenancy already exists. It does not state that those who furnish the landholding, i.e., either as owner, civil law lessee, usufructuary, or legal possessor, are automatically authorized to employ a

tenant on the landholding. The reason is obvious. The civil lease agreement may be restrictive. Even the owner himself may not be free to install a tenant, as when his ownership or possession is encumbered or is subject to a lien or condition that he should not employ a tenant thereon. This contemplates a situation where the property may be intended for some other specific purpose allowed by law, such as, its conversion into an industrial estate or a residential subdivision. Under Lastimoza v. Blanco,29 private respondents in that case could not be lawful tenants of the landowner for the reason that the civil law lessees, after failing to return the landholding to the landowner, already became deforciants. A deforciant cannot install a lawful tenant who is entitled to security of tenure. Attention may be invited to settled jurisprudence that the existence of an agricultural leasehold relationship is not terminated by changes of ownership in case of sale, or transfer of legal possession as in lease.30 This, again, assumes that tenancy already exists. In the case at bar, no such relationship was ever created between the civil law lessees and private respondents, and subsequently, between Valencia and private respondents except Catalino Mantac. With respect to the lease agreement between Valencia and Fr. Flores, the lessee did not have any authority to sublease Valencia's property due to the prohibition in their lease agreement. It is likewise in clear and unambiguous terms that the lease agreement was only for a limited duration with no extension.31 In Ponce v. Guevarra32 and Joya v. Pareja33 the agricultural leasehold relations were preserved because the "legal possessors therein were clearly clothed with legal authority or capacity to install tenants." But even assuming that they were not so authorized as in the Ponce case where the civil law lessee was expressly barred from installing a tenant under their contract of lease, the subsequent actions of the landowners in extending the lifetime of the lease, or in negotiating for better terms with the tenants, placed the landowners in estoppel to contest the agricultural leasehold relations. Consequently, the tenants in those cases may be categorized as tenants de jure enjoying tenurial security guaranteed by the Agricultural Tenancy Law, now by the Agricultural Land Reform Code, as amended. This is not the case before us. It must be noted that Valencia never extended the term of the civil law lease, nor did he negotiate with respondents for "better terms" upon the expiration of the lease. He

wanted precisely to recover possession of the property upon the expiration of the contract on 30 June 1975, except from Mantac with whom he already entered into a tenancy contract as herein before stated. Valencia appointed an overseer to prepare for his eventual takeover and to cultivate the property through labor administration after his long years in the government service. Verily, the intention of Valencia after the expiration of the lease contract was for him to cultivate the land by administration, or by himself, and not to surrender possession, much less ownership, to the private respondents. There may be apprehensions that should Sec. 6 of R. A. No. 3844 be construed as not to vest the civil law lessee or legal possessor with automatic authority to install tenants, it would in effect open the floodgates to their ejectment on the mere pretext that the civil law lessee or legal possessor was not so authorized by the landowner. This is more imagined than real. In the very recent case of Ganzon v. Court of

Appeals, decided 30 July 2002, this Court resolved the issue of whether the private
respondents should be considered agricultural tenants of the petitioner.34 The Court ruled that the respondents were not instituted as agricultural lessees but as civil law lessees of the land. This was evident from the contract of lease executed by the parties. The respondents were neither "impliedly" instituted as tenants nor designated as agricultural lessees by reason alone of the acquiescence by petitioner to the continued possession of the property. The Department of Agrarian Reform in Ganzon made the factual determination that the agreement entered into between Florisco Banhaw (one of the respondents) and Carolina L. Ganzon (petitioner) was a civil law lease. However, there was no evidence to prove that the other defendants in that case allegedly instituted as tenants were sharing or paying rentals to Florisco Banhaw or to the landowner. The DAR held that mere allegation without the corresponding receipts would not sufficiently establish a tenancy relationship especially since there was an express prohibition in the civil law lease contract from subleasing the subject land to any other person.35 From the foregoing discussion, it is reasonable to conclude that a civil law lessee cannot automatically institutetenants on the property under to Sec. 6 of R. A. No. 3844. The correct view that must necessarily be adopted is that the civil law lessee, although a legal possessor, may not install tenants on the property unless

expressly authorized by the lessor. And if a prohibition exists or is stipulated in the contract of lease the occupants of the property are merely civil law sublessees whose rights terminate upon the expiration of the civil law lease agreement. In the present case, the Decision of the Secretary of Agrarian Reform, as modified by the Office of the President through the Executive Secretary, held that private respondents were deemed leasehold tenants. They anchored their proposition on Sec. 6 of R. A. No. 3844, as amended, otherwise known as The Agricultural Land

Reform Code, which states that since the civil law lessees had a valid contract with
Valencia, the sublessees wereautomatically deemed his tenants by operation of law. This conclusion espoused by the Secretary of Agrarian Reform is arbitrary and unfounded. The following essential requisites must concur in order to establish a tenancy relationship:36 (a) the parties being landowner and tenant; (b) the subject matter is agricultural land; (c) there is consent by the landowner; (d) the purpose is agricultural production; (e) there is personal cultivation by the tenant; and, (f) there is sharing of harvests between the parties. An allegation that an agricultural tenant tilled the land in question does not make the case an agrarian dispute. 37Claims that one is a tenant do not automatically give rise to security of tenure. The elements of tenancy must first be proved in order to entitle the claimant to security of tenure. 38 A tenancy relationship cannot be presumed. There must be evidence to prove this allegation. Hence, a perusal of the records and documents is in order to determine whether there is substantial evidence to prove the allegation that a tenancy relationship does exist between petitioner and private respondents. The principal factor in determining whether a tenancy relationship exists is intent. Tenancy is not a purely factual relationship dependent on what the alleged tenant does upon the land. It is also a legal relationship. The intent of the parties, the understanding when the farmer is installed, and their written agreements, provided these are complied with and are not contrary to law, are even more important. 39 In Caballes v. DAR40 the Court held that all these requisites must concur in order to create a tenancy relationship. The absence of one does not make an occupant or a cultivator thereof or a planter thereon a de jure tenant. This is so because unless a person has established his status as a de jure tenant he is not entitled to security of tenure nor is he covered by the Land Reform Program of the Government under existing tenancy laws.41

The security of tenure guaranteed by our tenancy laws may be invoked only by tenants de jure, not by those who are not true and lawful tenants.42 In Berenguer, Jr. v. Court of Appeals this Court ruled that the respondents' selfserving statements regarding their tenancy relations could not establish the claimed relationship.43 The fact alone of working on another's landholding does not raise a presumption of the existence of agricultural tenancy.44 Substantial evidence does not only entail the presence of a mere scintilla of evidence in order that the fact of sharing can be established; there must be concrete evidence on record adequate enough to prove the element of sharing.45 Bejasa v. Court of Appeals similarly ruled that to prove sharing of harvests, a receipt or any other evidence must be presented as self-serving statements are deemed inadequate.46 In the present case, it is not disputed that the relationship between Valencia and Henson, and subsequently, Valencia and Fr. Flores, partook of a civil law lease. Henson and later Fr. Flores were not instituted as agricultural lessees but as civil law lessees. As a finding of fact, the Secretary of Agrarian Reform held that a written civil

law lease contract between Valencia and Fr. Flores was on file which contained in clear and precise terms the stipulation prohibiting the subleasing or encumbering of his parcels of land without the written consent of Valencia.47 The Secretary even went as far as stating for the record that such stipulation barring the subletting of the property was violated by Fr. Flores when he subleased the subject parcels of land to private respondents.48
The findings of fact by the DAR Hearing Officer, Atty. Ampong, in his Investigation

Report and Recommendationsdated 7 December 1988 concerning the admission by

private respondents that they never turned over the rentals or harvests to Valencia and, instead, to his overseer who was not authorized to receive any payments, must be deemed conclusive.49 As to the civil law lease between Valencia and Fr. Flores, the prohibition against subletting the property without the written consent of Valencia must be upheld. Thus, there is no tenurial security for private respondents designated by the civil law lessee, except for the oft-mentioned Catalino Mantac. Furthermore, it must be noted that private respondents Ernesto Lobresco and Francisco Obang sublet the land to third persons. Even assuming arguendo then that they were tenants, although installed without authority, the act of subletting to

third persons extinguished the agricultural leasehold relations of Ernesto Lobresco and Francisco Obang as it constituted an abandonment of the landholding due to absence of personal cultivation. Since private respondents with the exception of Catalino Mantac cannot be deemed tenants in contemplation of law, they are therefore not entitled to Certificates of Land Transfer (CLTs) under the Operation Land Transfer (OLT) Program pursuant to Pres. Decree No. 27 and L.O.I. No. 474. All other persons found in the land in question are considered unlawful occupants of the property unless otherwise authorized by the landowner to possess the same in a lawful capacity. Even as we uphold time and again the existence and validity of implied agricultural tenancy agreements, we encourage the forging of written documents to prevent ambiguity as to the terms set by both parties and for them to express their intent in clear language. This would minimize and even prevent the "shotgun approach" to tenancy relations imposed by some officials of the Government without complying with the essential requisites of tenancy as provided by law. Agreements must be entered freely and voluntarily by the parties concerned without the influence of third parties, much less the Government, making representations for either side. An express tenancy agreement would facilitate the aims of the agricultural tenancy laws and promote social justice for both landowner and tenant. With respect to the retention limits of land ownership by Valencia and his "direct descendants," the Comprehensive Agrarian Reform Law allows landowners whose lands have been covered by Pres. Decree No. 27 to keep the area originally retained by them provided the original homestead grantees who still own the original homestead at the time of the approval of Rep. Act No. 6657 shall retain the same areas as long as they continue to cultivate the homestead.50 The right to choose the area to be retained, which shall be compact or contiguous, shall pertain to the landowner, as a general rule.51 However, the factual determination of whether Valencia and his "direct descendants" have complied with Sec. 6 of Rep. Act No. 6657 should be addressed by the Department of Agrarian Reform. Ascertaining if petitioner and his "direct descendants" are within the seven (7)-hectare retention limit provided by Pres. Decree No. 27 requires the technical expertise of the administrative agency concerned.

It is appalling to note that it took over twelve (12) years for the Agrarian Reform Team 202 of the Canlaon City Office of the DAR to act on a simple matter calling for a preliminary determination of tenancy status, in spite of a telegram sent on 30 March 1976 by the Secretary of Agrarian Reform directing the Team Leader of A.R.T. 202 to investigate and submit a report on the landholding of petitioner Valencia.52 This is truly a travesty of great magnitude and a clear-cut case of undue delay and administrative injustice, for the rights of the landowner must equally be protected just as passionately as the rights of the tenant-tiller, especially so that in the meantime he has been deprived of the actual possession of his property which he envisioned to cultivate himself after retiring from the government service; worse, he was not paid his landholder's shares in the harvests, and there is no telling when, if ever, he will ever be paid by private respondents who claim to be his "tenants." Executive or administrative justice must always be dispensed with an even hand, regardless of a person's economic station in life. WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of Appeals in CA-G.R. SP No. 32669 dated 27 July 1995 and its Resolution dated 22 September 1995 denying the Motion for Reconsideration are REVERSED and SET ASIDE, and a new one is entered as follows: 1. The area acquired by petitioner Victor G. Valencia under his Homestead Application No. HA-231601 with Final Proof and Tax Declaration No. 0515 is EXCLUDED from the coverage of Pres. Decree No. 27, hence, must be retained by him; 2. The Certificates of Land Transfer (CLTs) issued to private respondents Santos Gargaya (CLT No. 0-071160), Juliano Magdayao (CLTs Nos. 0-071161, 0-071163, 0-071166 & 0-071175), Crescenciano Frias (CLT No. 0-071164), Federico Jare (CLTs Nos. 0-071171 & 0-071172), Rosendo Lobresco (CLTs Nos. 0-071189 & 0071182), Ernesto Lobresco (CLTs Nos. 0-071185 & 0-071187), Feliciano Lobresco (CLT No. 0-071188), Victoriano Montefalcon (CLT No. 0-071190), Francisco Obang (CLT No. 0-071168), Ambrosio Semillano (CLTs Nos. 0-071165, 0-071176 & 0071177), Rogelio Tamayo (CLT No. 0-071194) and Edilberto Lobresco (CLT No. 0071173) are CANCELLED and NULLIFIED for having been issued without factual and legal basis;

3. The agricultural leasehold of respondent Catalino Mantac (CLT No. 0-071162) covering an area of 0.0425 hectare subject of tenancy agreement with petitioner Victor G. Valencia is maintained and respected; 4. All unlawful occupants of the property under TCT No. H-T-137 and Homestead Application No. HA-231601 with Final Proof, and Tax Declaration No. 0515 including but not limited to the private respondents mentioned in par. 2 hereof are ORDERED to IMMEDIATELY VACATE and RETURN peacefully to the lawful owner, petitioner Victor G. Valencia, the parcels of land respectively possessed or occupied by them. No pronouncement as to costs. [G.R. No. 106615. January 15, 2004] SPOUSES ELIGIO P. MALLARI and MARCELINA I. MALLARI, petitioners,

vs. IGNACIO ARCEGA, PERCASIO CATACUTAN, BEN GARCIA, ALFREDO

DE GUZMAN, MARIETA JACINTO, CELESTINO MAGAT, VICENTE MALLARI, RAFAEL MANALO, LORENZO MANARANG, EMILIO DE MESA, JUAN PANGILINAN, TOROBIA SERRANO, CELESTINA TORNO, and JUANITO VITAL, respondents. [G.R. No. 108591. January 15, 2004] IGNACIO ARCEGA, PERCASIO CATACUTAN, BEN GARCIA, ALFREDO DE GUZMAN, MARIETA JACINTO, CELESTINO MAGAT, VICENTE MALLARI, RAFAEL MANALO, LORENZO MANARANG, EMILIO DE MESA, JUAN PANGILINAN, TOROBIA SERRANO, CELESTINA TORNO, and JUANITO VITAL, petitioners, vs. HONORABLE NORBERTO C. PONCE, Regional Trial Court Judge, Branch XLVI, San Fernando, Pampanga, and SPOUSES ELIGIO MALLARI and MARCELINA MALLARI, respondents. [G.R. No. 109452. January 15, 2004] SPOUSES ELIGIO P. MALLARI and MARCELINA I. MALLARI, petitioners, vs. IGNACIO ARCEGA, ALFREDO DE GUZMAN, PERCASIO CATACUTAN, RAFAEL MANALO, EMILIO DE MESA, JUANITO VITAL, TOROBIA SERRANO, CELESTINO MAGAT, VICENTE MALLARI, LORENZO MANARANG, MARIETA JACINTO, BEN GARCIA, CELESTINA TORNO, and JUAN PANGILINAN, respondents. [G.R. No. 109978. January 15, 2004]

SPOUSES ELIGIO P. MALLARI and MARCELINA I. MALLARI, petitioners, vs. IGNACIO ARCEGA, PERCASIO CATACUTAN, BEN GARCIA, ALFREDO DE GUZMAN, MARIETA JACINTO, CELESTINO MAGAT, VICENTE MALLARI, RAFAEL MANALO, LORENZO MANARANG, EMILIO DE MESA, JUAN PANGILINAN, TOROBIA SERRANO, CELESTINA TORNO, and JUANITO VITAL, respondents. [G.R. No. 139379. January 15, 2004] SPOUSES ELIGIO P. MALLARI and MARCELINA I. MALLARI, petitioners, vs. IGNACIO ARCEGA, PERCASIO CATACUTAN, BEN GARCIA, ALFREDO DE GUZMAN, MARIETA JACINTO, CELESTINO MAGAT, VICENTE MALLARI, RAFAEL MANALO, LORENZO MANARANG, EMILIO DE MESA, JUAN PANGILINAN, TOROBIA SERRANO, CELESTINA TORNO, and JUANITO VITAL, respondents. RESOLUTION SANDOVAL-GUTIERREZ, J.: At bar is a motion for reconsideration of our Decision [1] filed by spouses Eligio and Marcelina Mallari (petitioners in G.R. Nos. 106615, 109452, 109978 & 139379 and respondents in G.R. No. 108591). The instant consolidated petitions involve a parcel of agricultural land over which Ignacio Arcega, et al. (the 14 tenants who are petitioners in G.R. No. 108591 and respondents in G.R. Nos. 106615, 109452, 109978 & 139379) vigorously assert their right of redemption. The resolution of the issues raised in all these petitions hinges on the determination of the issue in G.R. No. 106615, i.e., whether Arcega, et

al. have validly tendered or consigned payment of the redemption price for the
purpose of exercising their right of redemption under Section 12, Republic Act No. 3844, as amended, through their presentation of a document entitled Certification To Finance Redemption of Estate Under R.A. No. 3844, As Amended , dated January 15, 1982 issued by Mr. Basilio Estanislao, then president of the Land Bank of the Philippines. A recapitulation of the essential facts relative to the instant motion for reconsideration shows that:

Arcega, et al. are agricultural lessees of landholdings planted to sugarcane, described as Lot 3364 of the San Fernando Cadastre, located at Maimpis, San Fernando, Pampanga. This lot is the subject of these cases. Lot 3364 was originally owned by spouses Roberto and Asuncion Wijangco under T.C.T. No. 27507-R of the Registry of Deeds of Pampanga. They mortgaged the lot and their other lots to the Philippine National Bank (PNB) to secure a loan. Eventually, for their failure to pay their loan, the PNB foreclosed the mortgage. In the auction sale that followed, the PNB, being the highest bidder, acquired the lots and was issued a Certificate of Sale. Upon failure of the Wijangcos to redeem the lots, ownership thereof was transferred to the PNB. Several land titles were then issued to it by the Register of Deeds. Among those titles is T.C.T. No. 154516-R covering Lot No. 3664. On July 10, 1980, spouses Eligio and Marcelina Mallari purchased two lots from the PNB, one of which is the subject Lot No. 3664, without any indication that the same is tenanted.[2] Pursuant to their agreement, the spouses paid PNB the sum of P473,000.00, or 20% of the purchase price of P2,365,000.00, as down-payment, and the balance to be paid in three equal annual installments. On July 22, 1981, Arcega, et al., who are occupying portions of the lot, filed with the Court of Agrarian Relations, San Fernando, Pampanga, a petition for redemption against the Wijangco spouses (as original owners), the PNB (as the mortgageetransferee and vendor) and the Mallari spouses (as the subsequent vendees), docketed as Agrarian Case No. 1908. Upon the abolition of the CAR, the case was automatically absorbed by the Regional Trial Court, Branch 46, also at San Fernando, Pampanga. Arcega, et al. alleged in their petition that in April, 1981, Eligio Mallari informed them that he purchased Lot No. 3664 from the PNB; that they tried to redeem their respective landholdings at P5,000.00 per hectare but spouses Mallari rejected the offer considering that the latter bought the lot from the PNB at P18,000.00 per hectare; and that they were compelled to institute the petition for redemption pursuant to Section 12 of Republic Act No. 3844,[3] as amended by R.A. 6389,[4] which provides: Sec. 12. Lessees right of redemption. In case the landholding is sold to a third person without the knowledge of the agricultural lessee, the latter shall have the right to redeem the same at a reasonable price and consideration: Provided, That where

there are two or more agricultural lessees, each shall be entitled to said right of redemption only to the extent of the area actually cultivated by him. The right of redemption under this Section may be exercised within one hundred eighty days from notice in writing which shall be served by the vendee on all lessees affected and the Department of Agrarian Reform upon the registration of the sale, and shall have priority over any other right of legal redemption. The redemption price shall be the reasonable price of the land at the time of the sale. Upon the filing of the corresponding petition or request with the Department or corresponding case in court by the agricultural lessee or lessees, the said period of one hundred and eighty days shall cease to run. xxx The Department of Agrarian Reform shall initiate, while the Land Bank shall finance, said redemption as in the case of pre-emption. On November 18, 1981, before the pre-trial of the case, Arcega, et al. filed with the trial court a motion praying that the Land Bank be ordered to issue a certification that it shall finance the redemption of their landholdings. The trial court, in its Order dated December 24, 1981, denied their motion and required them to show cause at the next hearing why their petition should not be dismissed for their failure to make a tender of payment and/or consignation of the redemption price. Arcega, et al. then moved for a reconsideration of the December 24, 1981 Order on the ground that the requirement of tender of payment and/or consignation is not necessary as a Land Bank certification to finance such redemption is sufficient. On January 20, 1982, during the hearing of their motion for reconsideration, Arcega, et al. presented a certification entitled Certification To Finance Redemption of Estate Under R.A. No. 3844, As Amended, dated January 15, 1982 issued by Mr. Basilio Estanislao, then president of the Land Bank of the Philippines. In its Order dated January 27, 1982, the trial court dismissed the petition for redemption because: (1) Arcega, et al. failed to exercise their right of redemption within the prescribed 180-day period; and (2) the Land Bank certification they presented does not constitute a tender of payment and/or consignation of the redemption price. Arcega, et al. interposed an appeal to the Court of Appeals, docketed as CAG.R. No. SP-13807-CAR. On May 31, 1982, the appellate court rendered a

Decision, reversing and setting aside the trial courts Order of January 27, 1982. It mainly ruled that: (a) Arcega, et al. have timely exercised their right of redemption under Section 12, R.A. No. 3844, as amended; and (b) a certification from the Land Bank that it will finance the redemption is sufficient tender of payment and consignation of the redemption price. Thus, the Court of Appeals remanded the case to the trial court for further proceedings. Aggrieved, the Mallari spouses filed a petition for review on certiorari with this Court, docketed as No. L-61093.[5] In a Decision dated May 25, 1988, we dismissed the spouses petition, holding that (1) the right of Arcega, et al. to redeem the property has not yet prescribed because no notice in writing of the sale was ever given by the vendee upon (them) as agricultural lessees of the land, as required by law;[6] and (2) it is not necessary for tenants-redemptioners to make a tender and/or consignation of the redemption price since a certification of the Land Bank to finance the redemption when presented will suffice.[7] The trial court then proceeded with the pre-trial of the case and, after a full-blown hearing, rendered a Decision[8] dated November 8, 1990, dismissing for the second time the petition for redemption, on the following grounds: 1. The action for redemption by Arcega, et al. has prescribed; 2. Arcega, et al. did not even present any witness from the Land Bank to identify this document (the questioned certification) and to attest to its due execution, genuineness and authenticity x x x, thereby losing entirely its probative value and bolstering the fact, as established, that indeed it was an accommodation certification only;[9] 3. The Land Bank did not join Arcega, et al. as a plaintiff or petitioner in the redemption case, neither was it impleaded as a co-defendant. Hence, no judgment is binding and enforceable against the bank since the court has not acquired jurisdiction over it; 4. The questioned Land Bank certification dated January 15, 1982 is void ab

initio since it is conditional and is not in accordance with the law and Land Bank
Circular Letter No. 3 dated February 25, 1980 and, therefore, the same cannot be considered as equivalent to tender of payment and consignation of the redemption price;

5. The Land Bank itself, in its letter dated October 16, 1989 (Exhibit 35), stated that it will not enforce the January 15, 1982 certification because it is not the certification required by law and Land Bank Circular No. 3 dated February 25, 1980. Also, the Land Bank, in another letter dated October 23, 1981 signed by Mr. Danilo R. Cueto, Manager, PIO (Exhibit 22), stated that the bank is not acquiring/financing sugar lands, thus: (1) The Land Bank of the Philippines is not acquiring sugar lands. Rather, it is the financing arm of the government in the implementation of the agrarian reform program in pursuance of PD 27. At present, Operation Land Transfer (OLT) covers only rice and corn lands; (2) As to its legal justification, the existing law on agrarian reform OLT does not cover sugar lands;[10] and 6. Arcega, et al. failed to establish by competent and satisfactory evidence the reasonable amount of the redemption price of their landholdings. Their witness, Rafael Manalo admitted in open court that he and his co-plaintiffs could afford to pay only P5,000.00 per hectare which is definitely way below the price per hectare at which PNB sold the lot to the defendants-spouses in 1980 at the price of P18,000.00 per hectare. On this score alone, plaintiffs petition must necessarily fail.[11] Arcega, et al. again appealed from the trial courts Decision to the Court of Appeals, docketed as CA-G.R. SP CAR 25209. In its Decision dated June 9, 1992, the appellate court reversed the trial courts Decision, holding that the issue of whether the Land Bank certification is equivalent to a valid tender of payment and/or consignation of the redemption price was already passed upon by this Court in No. L-61093; and that what the trial court should have done was to resolve the question on the reasonable amount of the redemption price, nothing more. Expectedly, spouses Mallari elevated the matter to this Court via the present petition for review on certiorari, docketed as G.R. No. 106615. Pending our resolution of this case, four other petitions were filed with this Court involving the trial courts various Orders issued in the same agrarian case and a DARABs Decision concerning the same disputed landholding: In G.R. No. 108591, Arcega, et al. assail the validity of the trial courts Orders dated November 3, 1992, November 12, 1992, December 2, 1992 and January 14, 1993 which recognize spouses Mallari's right to demand payment of back rentals

from Arcega, et al. for the agricultural crop year 1991-1992. In effect, the said Orders held that they failed to exercise their right of redemption. In G.R. No. 109452, spouses Mallari challenge the Cou rt of Appeals Decision dated March 10, 1993 affirming the Decision of the Department of Agrarian Reform Adjudication Board, Region III, suspending the proceedings in DARAB Case Nos. 144-P '89 to 160-P '89 (for dissolution of Arcega, et al.s tenancy relationship and their payment of annual rentals corresponding to six agricultural crop years 19831984 to 1988-1989) until such time that the petition for redemption shall have been finally resolved by this Court in G.R. No. 106615. In G.R. No. 109978, spouses Mallari impugn the April 30, 1993 Decision of the Court of Appeals reversing and setting aside the trial courts Order dated February 5, 1992 requiring Arcega, et al. to render an accounting on the sugarcane produced from their landholdings for the crop year 1991-1992; and the Order dated May 14, 1992 directing them to deliver to spouses Mallari their shares corresponding to the agricultural crop year 1991-1992. Both Orders are based on the trial courts finding that Arcega, et al. did not exercise their right of redemption. In G.R. No. 139379, spouses Mallari question the validity of the Court of Appeals Decision dated July 9, 1999 setting aside the trial courts Order of November 4, 1994 requiring Arcega, et al. to pay the spouses back rentals for the agricultural years 1982-1983 to 1989-1990. As we have stated at the outset, the resolution of these four other petitions hinges on the determination of the issue in G.R. No. 106615, i. e., whether Arcega, et al. have validly tendered or consigned the redemption price for the purpose of exercising their right of redemption under Section 12, Republic Act No. 3844, as amended, through their presentation of a Certification To Finance Redemption of Estate Under R.A. No. 3844, As Amende d, dated January 15, 1982 issued by Mr. Basilio Estanislao, then president of the Land Bank of the Philippines. Going back to the Mallari spouses petition in G.R. No. 106615, on March 20, 2002, we rendered a Decision affirming the June 9, 1992 Decision of the Court of Appeals. We reiterated our ruling in No. L-61093 that since the Land Bank has issued a certification that it will finance the redemption, it is not necessary for Arcega, et al. to tender payment and/or consign the redemption price. The dispositive portion of our Decision reads:

WHEREFORE: 1. The petitions of spouses Mallari in G.R. Nos. 106615, 109452, 109978 and 139379 are DENIED and the assailed Decisions of the Court of Appeals in CA-G.R. SP CAR No. 25209, CA-G.R. SP CAR No. 30085, CA-G.R. SP CAR No. 30887 and CA-G.R. SP CAR No. 36100 are AFFIRMED; 2. The petition of Arcega, et al. in G.R. No. 108591 is GRANTED and the appealed RTC Orders dated November 3, 1992, November 12, 1992, December 2, 1992 and January 14, 1993 are REVERSED and SET ASIDE; 3. 4. 5. The RTC is ORDERED to implead the LBP in Agrarian Case No. 1908; Agrarian Case No. 1908 is REMANDED to the RTC, Branch 46, San The RTC is further ORDERED to submit to this Court a progress report of the

Fernando, Pampanga for further proceedings with dispatch; and status of Agrarian Case No. 1908 every 3 months until this Courts Decision is fully implemented. SO ORDERED. Spouses Mallari now seek a reconsideration of our Decision. Basically, spouses Mallari contend that the questioned Land Bank certification, as held by the trial court in its November 8, 1990 Decision, is void ab initio for being merely conditional in character and not in accordance with the pertinent law and Land Bank Circular No. 3 dated February 25, 1980. Moreover, the Land Bank, in its letter dated October 16, 1989, signed by Augusto M. Aquino, addressed to Eligio Mallari, which the latter presented as Exhibit 35 during the trial of the agrarian case, states that the subject certification cannot be enforced against the bank, thus: x x x the certification (in question) cannot be enforced against Land Bank, whether or not it is a party to the pending case for redemption. The implementing rules and regulations outlined under LBP Circular Letter No. 3 speak of a certification from the Bank as to availability of funds, certifying that a certain amount in cash or/and bond had already been set aside for the purpose, whereas Annex A (the questioned certification presented by Arcega, et al.) of your letter is a mere conditional commitment on the part of the Bank to finance the redemption, which means that said financing must be in accordance with law and existing policies.[12]

Spouses Mallari maintain that the above-quoted letter effectively cancelled the questioned certification. Thus, Arcega, et al. have not properly tendered or consigned the redemption price and, therefore, cannot exercise their right of redemption. In their comment, Arcega, et al. countered by simply stating that the matter raised in the instant motion was already passed upon by this Court in No. L-61093 holding that the Land Bank certification will suffice. The essential questions raised in spouses Mallaris instant motion is (1) whether the subject Land Bank Certification to Finance Redemption of Estate Under R.A. No. 3844, As Amended, dated January 15, 1982, is void ab initio for being conditional and contrary to law and Land Bank Circular Letter No. 3, dated February 25, 1980, as held by the trial court; and (2) whether the said certification may still be enforced despite its cancellation by the Land Bank. The motion is impressed with merit. The first issue certainly involves a scrutiny of the intrinsic or inherent validity of the Land Bank certification. The resolution of this issue is crucial because if the certification is indeed void, then respondents Arcega, et al. can no longer exercise their right of redemption under Section 12 of R.A. 3844, as amended, quoted earlier. Contrary to the claim of Arcega, et al., this Court in its Decision in No. L-61093 (penned by the late Chief Justice Pedro L. Yap) did not pass upon the matter being raised by spouses Mallari in their instant motion for reconsideration, i.e., whether the Land Bank certification is void ab initio, or has become ineffective when it was cancelled by the Land Bank. It must be stressed that pursuant to that same Decision, the trial court conducted hearing in Agrarian Case No. 1908. After a fullblown hearing, the trial court rendered its Decision on November 8, 1990 dismissing the petition for redemption of Arcega, et al. on the grounds that, among others, the questioned Land Bank certification to finance redemption is void ab initio for being conditional in nature and not in accordance with Land Bank Circular No. 3 of February 25, 1980. We reiterate that the correctness of this particular ruling by the trial court was not passed upon by this Court in its Decision in No. L-61093. What it resolved is that A certification of the Land Bank to finance the redemption when presented will suffice,[13] not whether it is valid. Surely, these two phrases connote different meanings.

It is significant to stress further that after this Court rendered its May 25, 1988 Decision in No. L-61093, the Land Bank declared in its letter of October 16, 1989 to Eligio Mallari (Exhibit 35) that the questioned certification cannot be enforced due to its serious legal defects. We shall now make a definite ruling on the validity of the Land Bank certification in question. The law governing redemption cases by agricultural lessees is R.A. 3844, as amended, Section 12 (last paragraph) of which mandates: Sec. 12. Lessees right of redemption. x x x. The Department of Agrarian Reform shall initiate, while the Land Bank shall finance, said redemption as in the case of pre-emption. Pursuant to the above provision, Land Bank Circular Letter No. 3, dated February 25, 1980, entitled Rules and Regulations on the Financing by Land Bank of Acquisition of Land-holdings by Agricultural Lessees Through Pre-emption or Redemption under R.A. 3844, as amended, was issued. The pertinent provisions of the said Circular state: xxx 2. All proposals for Land Bank financing of land acquisition through pre-emption or redemption must carry the favorable endorsement of the Minister of Agrarian Reform. xxx 5. Upon direction of the Court of Agrarian Relations, or upon recommendation of the Minister of Agrarian Relations, the Land Bank may issue appropriate certification as to the availability of funds in lieu of cash and bond deposits to finance the acquisition of landholding subject of pre-emption or redemption. The certification shall be patterned after the attached form which is made an integral part of these rules and regulations: CERTIFICATION AS TO AVAILABILITY OF FUNDS Pursuant to Section 11/12 of RA No. 3844, as amended by RA No. 6389, I hereby certify that the Land Bank has today, ________, 19__, set aside the amount of P _________, of which 10% is in cash and 90% in Land Bank bonds as compensation for the landholding of ________________ situated at __________________ and covered by OCT/TCT No. ___________ of the Registry of

Deeds of ______________, which is the subject of pre-emption/redemption, to be made payable to said _____________________ in accordance with Section 80 regulations of the Land Bank on pre-emption/redemption cases. This certification is being issued pursuant to a letter-request dated ________, 19__, of the Minister of Agrarian Reform to the Land Bank of the Philippines. Issued at Manila, this _____ day of ________, 19__. LAND BANK OF THE PHILIPPINES By: ___________________________[14] (Underscoring supplied) However, the Land Bank certification dated January 15, 1982 which Arcega, et of RA No. 3844, as amended by Presidential Decree No. 251, subject to the rules and

al. presented is contrary to the document of financing guaranty prescribed in Land

Bank Circular Letter No. 3 quoted above. We reproduce in full the challenged certification: CERTIFICATION TO FINANCE REDEMPTION OF ESTATE UNDER R.A. NO. 3844, AS AMENDED This is to certify that the Land Bank of the Philippines shall finance the acquisit ion of the landholding situated in Barrio Maimpis, San Fernando, Pampanga, subject matter of a Redemption Case x x x docketed as CAR Case No. 1908-P 81, if found in consonance with the provisions of Section 12, Republic Act No. 3844, as amended, and with the relevant policies and procedures laid down by the Land Bank Board of Directors. Corresponding funds shall be set aside upon receipt of the order or directive from the honorable court and payment therefor shall be effected upon compliance with the banks guidelines and policies on the matter. Issued at Manila, this 15th day of January, 1982. LAND BANK OF THE PHILIPPINES By: (sgd.) BASILIO ESTANISLAO President[15] (Underscoring supplied)

First and foremost, paragraph 2 of Land Bank Circular Letter No. 3 has made it a mandatory requirement that all proposals for Land Bank financing of land acquisition through pre-emption or redemption must carry the favorable endorsement of the Minister (now Secretary) of Agrarian Reform. It is likewise required that the prescribed form must indicate that the certification has been issued pursuant to a letter-request from the (DAR Secretary) to the Land Bank of the Philippines. It bears emphasis that such favorable endorsement from the DAR Secretary is a vital part of the redemption process since, under Section 12 of R.A. 3844, as amended, it is the duty of the DAR to initiate pre -emption/redemption proceedings. It is the DAR which evaluates proposals/applications for Land Bank financing. Thus, it is within the discretion of the DAR Secretary whether or not to set aside certain amounts as compensation of the landholdings subject of pre-emption or redemption. It follows that without such favorable endorsement from the DAR Secretary, the Land Bank has no authority to finance pre-emption or redemption. This is so because under the same Section 12 of R.A. 3844, as amended, the Land Banks role is limited only to financing the redemption/acquisition of the landholding for the agricultural-lessee. Here, the Land Bank certification presented by Arcega, et al., the validity of which is vigorously questioned by spouses Mallari, is not supported by any favorable endorsement from the DAR Secretary. This plainly violates Section 12 of R.A. 3844, as amended, and Land Bank Circular Letter No. 3, dated February 25, 1980. As elucidated earlier, absent such DAR Secretarys favorable endorsement, the Land Bank has no authority to finance the redemption of the property for Arcega, et

al. Clearly, the disputed Land Bank certification is void. On this ground alone,
spouses Mallaris instant motion should be granted. Secondly, the questioned certification itself declares that the Land Banks undertaking to finance the redemption is conditional. The financing will push through if found in consonance with the provisions of Section 12, Republic Act No. 3844, as amended, and with the relevant policies and procedures laid down by the Land Bank Board of Directors. Certainly, this is contrary to the certification (reproduced above) prescribed by Land Bank Circular Letter No. 3, dated February 25, 1980. Moreover, the challenged certification does not set aside the specific compensation for the

redemption of the landholding. Hence, the Mallari spouses are not assured of the corresponding amount and its payment by Arcega, et al. Indeed, under the terms of the assailed certification, there is no assurance or undertaking at all from the Land Bank that it will finance the redemption. Equally compelling in our consideration of this case is the letter from the Land Bank dated October 16, 1989 (Exhibit 35) presented by spouses Mallari to the trial court which categorically states that the challenged certification cannot be enforced against the Land Bank for being in violation of LBP Circular Letter No. 3 on availability of funds and endorsement of the Minister (now Secretary) of Agrarian Reform. Considering that the disputed Land Bank certification is void, it follows that Ignacio Arcega, et al. have failed to tender payment of the redemption price or its due consignation in court. Such tender or consignation is an indispensable requirement to the proper exercise of the right of redemption by the agriculturallessees.[16] Absent the requisite tender and consignation of the redemption price, we hold that under R.A. No. 3844, as amended, Ignacio Arcega, et al.cannot redeem the subject landholdings. The right of redemption under R.A. No. 3844, as amended, is an essential mandate of the agrarian reform legislation to implement the States poli cy of ownercultivatorship and to achieve a dignified, self-reliant existence for small farmers.[17] Unfortunately, such laudable policy could not be effected in favor of Ignacio Arcega, et al. since they failed to tender or consign payment of the redemption price. Thus, spouses Mallari should be allowed to continue enjoying their right over the subject property as purchasers thereof, for the States commendable agrarian reform policy is never intended to unduly transgress the rights of innocent purchasers of land. WHEREFORE, the instant motion for reconsideration filed by spouses Mallari is GRANTED and our assailed Decision dated March 20, 2002 in these consolidated cases is RECONSIDERED and SET ASIDE. The Certification To Finance Redemption Of Estate Under R.A. No. 3844, As Amended, dated January 15, 1982 issued by the Land Bank of the Philippines is declared VOID, being in violation of Section 12, R.A. 3844, as amended, and Land Bank Circular Letter No. 3 dated

February 25, 1980. The Decision of the Regional Trial Court, Branch 46, San Fernando, Pampanga (acting as an Agrarian Court) in Agrarian Case No. 1908 dismissing the petition for redemption filed by Ignacio Arcega,et al. is AFFIRMED. SO ORDERED. G.R. No. 158228 March 23, 2004 DEPARTMENT OF AGRARIAN REFORM, as represented by its Secretary, ROBERTO M. PAGDANGANAN,petitioner, vs. DEPARTMENT OF EDUCATION, CULTURE AND SPORTS (DECS), respondent. DECISION YNARES-SANTIAGO, J.: This petition for review on certiorari seeks to set aside the decision1 of the Court of Appeals dated October 29, 2002 in CA-G.R. SP No. 64378, which reversed the August 30, 2000 decision of the Secretary of Agrarian Reform, as well as the Resolution dated May 7, 2003, which denied petitioners motion for reconsideration. In controversy are Lot No. 2509 and Lot No. 817-D consisting of an aggregate area of 189.2462 hectares located at Hacienda Fe, Escalante, Negros Occidental and Brgy. Gen. Luna, Sagay, Negros Occidental, respectively. On October 21, 1921, these lands were donated by the late Esteban Jalandoni to respondent DECS (formerly Bureau of Education).2 Consequently, titles thereto were transferred in the name of respondent DECS under Transfer Certificate of Title No. 167175.3 On July 15, 1985, respondent DECS leased the lands to Anglo Agricultural Corporation for 10 agricultural crop years, commencing from crop year 1984-1985 to crop year 1993-1994. The contract of lease was subsequently renewed for another 10 agricultural crop years, commencing from crop year 1995-1996 to crop year 2004-2005.4 On June 10, 1993, Eugenio Alpar and several others, claiming to be permanent and regular farm workers of the subject lands, filed a petition for Compulsory Agrarian Reform Program (CARP) coverage with the Municipal Agrarian Reform Office (MARO) of Escalante.5 After investigation, MARO Jacinto R. Piosa, sent a "Notice of Coverage" to respondent DECS, stating that the subject lands are now covered by CARP and inviting its representatives for a conference with the farmer beneficiaries.6 Then,

MARO Piosa submitted his report to OIC-PARO Stephen M. Leonidas, who recommended to the DAR Regional Director the approval of the coverage of the landholdings. On August 7, 1998, DAR Regional Director Dominador B. Andres approved the recommendation, the dispositive portion of which reads: WHEREFORE, all the foregoing premises considered, the petition is granted. Order is hereby issued: 1. Placing under CARP coverage Lot 2509 with an area of 111.4791 hectares situated at Had. Fe, Escalante, Negros Occidental and Lot 817-D with an area of 77.7671 hectares situated at Brgy. Gen. Luna, Sagay, Negros Occidental; 2. Affirming the notice of coverage sent by the DAR Provincial Office, Negros Occidental dated November 23, 1994; 3. Directing the Provincial Agrarian Reform Office of Negros Occidental and the Municipal Agrarian Reform Officers of Sagay and Escalante to facilitate the acquisition of the subject landholdings and the distribution of the same qualified beneficiaries. SO ORDERED.7 Respondent DECS appealed the case to the Secretary of Agrarian Reform which affirmed the Order of the Regional Director. 8 Aggrieved, respondent DECS filed a petition for certiorari with the Court of Appeals, which set aside the decision of the Secretary of Agrarian Reform.9 Hence, the instant petition for review. The pivotal issue to be resolved in this case is whether or not the subject properties are exempt from the coverage of Republic Act No. 6657, otherwise known as the Comprehensive Agrarian Reform Law of 1998 (CARL). The general policy under CARL is to cover as much lands suitable for agriculture as possible.10 Section 4 of R.A. No. 6657 sets out the coverage of CARP. It states that the program shall: " cover, regardless of tenurial arrangement and commodity produced, all public and private agricultural lands as provided in Proclamation No. 131 and Executive Order No. 229, including other lands of the public domain suitable for agriculture."

More specifically, the following lands are covered by the Comprehensive Agrarian Reform Program: (a) All alienable and disposable lands of the public domain devoted to or suitable for agriculture. No reclassification of forest or mineral lands to agricultural lands shall be undertaken after the approval of this Act until Congress, taking into account, ecological, developmental and equity considerations, shall have determined by law, the specific limits of the public domain; (b) All lands of the public domain in excess of the specific limits as determined by Congress in the preceding paragraph; (c) All other lands owned by the Government devoted to or suitable for agriculture; and (d) All private lands devoted to or suitable for agriculture regardless of the agricultural products raised or that can be raised thereon. Section 3(c) thereof defines "agricultural land," as "land devoted to agricultural activity as defined in this Act and not classified as mineral, forest, residential, commercial or industrial land." The term "agriculture" or "agricultural activity" is also defined by the same law as follows: Agriculture, Agricultural Enterprises or Agricultural Activity means the cultivation of the soil, planting of crops, growing of fruit trees, raising of livestock, poultry or fish, including the harvesting of such farm products, and other farm activities, and practices performed by a farmer in conjunction with such farming operations done by persons whether natural or juridical.11 The records of the case show that the subject properties were formerly private agricultural lands owned by the late Esteban Jalandoni, and were donated to respondent DECS. From that time until they were leased to Anglo Agricultural Corporation, the lands continued to be agricultural primarily planted to sugarcane, albeit part of the public domain being owned by an agency of the government.12 Moreover, there is no legislative or presidential act, before and after the enactment of R.A. No. 6657, classifying the said lands as mineral, forest, residential, commercial or industrial land. Indubitably, the subject lands fall under the classification of lands of the public domain devoted to or suitable for agriculture.

Respondent DECS sought exemption from CARP coverage on the ground that all the income derived from its contract of lease with Anglo Agricultural Corporation were actually, directly and exclusively used for educational purposes, such as for the repairs and renovations of schools in the nearby locality. Petitioner DAR, on the other hand, argued that the lands subject hereof are not exempt from the CARP coverage because the same are not actually, directly and exclusively used as school sites or campuses, as they are in fact leased to Anglo Agricultural Corporation. Further, to be exempt from the coverage, it is the land per

se, not the income derived therefrom, that must be actually, directly and exclusively
used for educational purposes. We agree with the petitioner. Section 10 of R.A. No. 6657 enumerates the types of lands which are exempted from the coverage of CARP as well as the purposes of their exemption, viz: xxxxxxxxx c) Lands actually, directly and exclusively used and found to be necessary for national defense, school sites and campuses, including experimental farm stations

operated by public or private schools for educational purposes, , shall be exempt

from the coverage of this Act.13 xxxxxxxxx Clearly, a reading of the paragraph shows that, in order to be exempt from the coverage: 1) the land must be "actually, directly, and exclusively used and found to

be necessary;" and 2) the purpose is "for school sites and campuses, including experimental farm stations operated by public or private schools for educational purposes."
The importance of the phrase "actually, directly, and exclusively used and found to

be necessary" cannot be understated, as what respondent DECS would want us to

do by not taking the words in their literal and technical definitions. The words of the law are clear and unambiguous. Thus, the "plain meaning rule" or verba legis in statutory construction is applicable in this case. Where the words of a statute are clear, plain and free from ambiguity, it must be given its literal meaning and applied without attempted interpretation.14 We are not unaware of our ruling in the case of Central Mindanao University v.

Department of Agrarian Reform Adjudication Board,15 wherein we declared the land

subject thereof exempt from CARP coverage. However, respondent DECS reliance thereon is misplaced because the factual circumstances are different in the case at bar.

Firstly, in the CMU case, the land involved was not alienable and disposable land of
the public domain because it was reserved by the late President Carlos P. Garcia under Proclamation No. 476 for the use of Mindanao Agricultural College (now CMU).16 In this case, however, the lands fall under the category of alienable and disposable lands of the public domain suitable for agriculture.

Secondly, in the CMU case, the land was actually, directly and exclusively used and
found to be necessary for school sites and campuses. Although a portion of it was being used by the Philippine Packing Corporation (now Del Monte Phils., Inc.) under a "Management and Development Agreement", the undertaking was that the land shall be used by the Philippine Packing Corporation as part of the CMU research program, with direct participation of faculty and students. Moreover, the land was part of the land utilization program developed by the CMU for its "Kilusang Sariling Sikap Project" (CMU-KSSP), a multi-disciplinary applied research extension and productivity program.17 Hence, the retention of the land was found to be necessary for the present and future educational needs of the CMU. On the other hand, the lands in this case were not actually and exclusively utilized as school sites and campuses, as they were leased to Anglo Agricultural Corporation, not for educational purposes but for the furtherance of its business. Also, as conceded by respondent DECS, it was the income from the contract of lease and not the subject lands that was directly used for the repairs and renovations of the schools in the locality. Anent the issue of whether the farmers are qualified beneficiaries of CARP, we disagree with the Court of Appeals finding that they were not. At the outset, it should be pointed out that the identification of actual and potential beneficiaries under CARP is vested in the Secretary of Agrarian Reform pursuant to Section 15, R.A. No. 6657, which states: SECTION 15. Registration of Beneficiaries. The DAR in coordination with the Barangay Agrarian Reform Committee (BARC) as organized in this Act, shall register all agricultural lessees, tenants and farmworkers who are qualified to be beneficiaries of the CARP. These potential beneficiaries with the assistance of the BARC and the DAR shall provide the following data:

(a) names and members of their immediate farm household; (b) owners or administrators of the lands they work on and the length of tenurial relationship; (c) location and area of the land they work; (d) crops planted; and (e) their share in the harvest or amount of rental paid or wages received. A copy of the registry or list of all potential CARP beneficiaries in the barangay shall be posted in the barangay hall, school or other public buildings in the barangay where it shall be open to inspection by the public at all reasonable hours. In the case at bar, the BARC certified that herein farmers were potential CARP beneficiaries of the subject properties.18 Further, on November 23, 1994, the Secretary of Agrarian Reform through the Municipal Agrarian Reform Office (MARO) issued a Notice of Coverage placing the subject properties under CARP. Since the identification and selection of CARP beneficiaries are matters involving strictly the administrative implementation of the CARP,19 it behooves the courts to exercise great caution in substituting its own determination of the issue, unless there is grave abuse of discretion committed by the administrative agency. In this case, there was none. The Comprehensive Agrarian Reform Program (CARP) is the bastion of social justice of poor landless farmers, the mechanism designed to redistribute to the underprivileged the natural right to toil the earth, and to liberate them from oppressive tenancy. To those who seek its benefit, it is the means towards a viable livelihood and, ultimately, a decent life. The objective of the State is no less certain: "landless farmers and farmworkers will receive the highest consideration to promote social justice and to move the nation toward sound rural development and industrialization."20 WHEREFORE, in view of the foregoing, the petition is GRANTED. The decision of the Court of Appeals dated October 29, 2002, in CA-G.R. SP No. 64378 is REVERSED and SET ASIDE. The decision dated August 30, 2000 of the Secretary of Agrarian Reform placing the subject lands under CARP coverage, is REINSTATED. SO ORDERED. [G.R. No. 158314. June 3, 2004]

SAMAHAN NG MAGSASAKA SA SAN JOSEP, represented by DOMINADOR MAGLALANG, petitioner, vs. MARIETTA VALISNO, ADELA, AQUILES, LEANDRO, HONORIO, LUMEN, NICOLAS, all surnamed VALISNO; RANDY V. WAGNER, MARIA MARTA B. VALISNO, NOELITO VALISNO, MARY ANN L. VALISNO, PHILIP V. BRANZUELA and BRENDON V. YUJUICO; MA. CRISTINA VALISNO, BENEDICTO V. YUJUICO, GREGORIO V. YUJUICO and LEONORA V. YUJUICO, respondents. DECISION YNARES-SANTIAGO, J.: The sole issue in this petition for review on certiorari is whether or not the grandchildren of the late Dr. Nicolas Valisno Sr. are entitled to retention rights as landowners under Republic Act No. 6657, or the Comprehensive Agrarian Reform Law (hereafter, CARL). The original 57-hectare property, situated in La Fuente, Sta. Rosa, Nueva Ecija, was formerly registered in the name of Dr. Nicolas Valisno, Sr. under Transfer Certificate of Title No. NT-38406. Before the effectivity of Presidential Decree No. 27,[1] the land was the subject of a judicial ejectment suit, whereby in 1971, the Valisnos tenants were ejected from the property.[2] Among these tenants was Dominador Maglalang, who represents the SMSJ in the instant proceedings. Meanwhile, on October 20 and 21, 1972, Dr. Valisno mortgaged 12 hectares of his property to Renato and Angelito Banting.[3] Thereafter, the property was subdivided into ten lots and on November 8, 1972, individual titles were issued in the name of the eight children of Nicolas, Angelito Banting, and Renato Banting. [4] After the mortgage on the 12 hectare portion was foreclosed and the property sold at public auction, four grandchildren of Dr. Nicolas Valisno, namely: Maria Cristina F. Valisno, daughter of Romulo D. Valisno; and Leonora Valisno Yujuico, Benedicto Valisno Yujuico and Gregorio Valisno Yujuico, children of Marietta Valisno redeemed the same from the mortgagees.[5] At the time of the redemption, Maria Cristina, Leonora and Gregorio were all minors; only Benedicto was of legal age, being then 26 years old.[6] The redemption was made on October 25, 1973, but the titles to the land were not transferred to the redemptioners until November 26, 1998.[7]

Subsequently,

the

entire

57-hectare

property

became

the

subject

of

expropriation proceedings before the Department of Agrarian Reform (DAR). In 1994, Dominador Maglalang, in behalf of the SMSP, filed a petition for coverage of the subject landholding under the CARL, which petition was dismissed for want of jurisdiction.[8] On June 14, 1995, Rogelio Chaves, DAR Provincial Agrarian Reform Officer (PARO), issued a Memorandum stating that the p roperty had been subdivided among the heirs of Dr. Nicolas Valisno Sr. before the issuance of PD 27 into tracts of approximately six hectares each.[9] Nevertheless, PARO Chaves added that the excess over the five-hectare retention limit could still be covered under RA 6657.[10] On appeal, the Office of the Regional Director issued an Order dated January 2, 1996, declaring the Valisno property exempt from the coverage of PD 27 and RA 6657.[11] This was reversed by then Secretary Garilao, who held that the property is covered by the Comprehensive Agrarian Reform Program, subject to the retention rights of the heirs of Nicolas, Sr. The Valisno heirs filed a motion for reconsideration of the said order, but the same was denied. On September 25, 1997, the Valisno heirs filed a Consolidated Application for Retention and Award under RA 6657. Specifically, the petition was filed by (1) Adela, Aquiles, Leandro, Honorio, Lumen, Nicolas and Marietta Valisno, seven children of Nicolas Valisno, Sr., who applied for retention rights as landowners; (2) Randy V. Wagner, Maria Marta B. Valisno, Noelito Valisno, Mary Ann L. Valisno, Philip V. Branzuela and Brendon V. Yujuico, grandchildren of Nicolas Sr. (hereafter collectively the Grandchildren-Awardees), who applied to be considered qualified child-awardees; and (3) Ma. Cristina Valisno, Benedicto V. Yujuico, Gregorio V. Yujuico and Leonora V. Yujuico, likewise grandchildren of Nicolas Sr. (hereafter collectively the Redemptioner-Grandchildren), who applied for retention rights as landowners over the 12-hectare portion of the property alleged to have been mortgaged by Nicolas Sr. in 1972 to Angelito and Renato Banting. The SMSJ, through Dominador Maglalang, opposed the Consolidated Application for Retention, specifically objecting to the award in favor of the Grandchildren-Awardees because they are not actually tilling nor directly managing the land in question as required by law.

On November 4, 1998, Regional Director Renato F. Herrera issued an Order which pertinently reads: WHEREFORE, premises considered, an ORDER is hereby issued as follows: 1. GRANTING the application for retention of the heirs of Dr. Nicolas Valisno, Sr., namely: Marietta Valisno; Honorio Valisno; Leandro Valisno; Adela Valisno; Nicolas Valisno, Jr.; Aquiles Valisno; and Lumen Valisno of not more than five (5) hectares each or a total of 35 hectares covered by Title Nos. 118446, 118443, 118442, 118440, 118445, 118441 and 118444, respectively, all located at La Fuente, Sta. Rosa, Nueva Ecija; 2. PLACING the excess of 19.0 hectares, more or less, under RA 6657 and acquiring the same thru Compulsory Acquisition for distribution to qualified farmerbeneficiaries taking into consideration the basic qualifications set forth by law; 3. 4. DENYING the request for the award to children of the applicants for utter lack DIRECTING the applicants-heirs to cause the segregation and survey of the of merit; and retained area at their own expense and to submit within thirty (30) days the final approved survey plan to this Office. SO ORDERED.[12] On appeal, the DAR Secretary affirmed the Order of the Regional Director with the following relevant ratiocination: In the second assignment of error, appellants faulted the Regional Director for not giving due consideration to the two (2) mortgages constituted by the original owner over a portion of his landholding in 1972 and redeemed by the latters grandchildren in 1973, when the 12-hectare land subject of the mortgages were ordered to be distributed to CARP beneficiaries. xxx xxx xxx The alleged redemption of the mortgaged property by the four (4) grandchildren of Nicolas Valisno, Sr., namely Ma. Cristina, Leonora, Gregorio and Benedicto, is not likewise worthy of any credence. The mortgaged property was allegedly redeemed on October 25, 1973. From the evidence on record, three (3) of the alleged redemptioners represented to be of legal age in the Discharge of Mortgage were still minors, hence, without any legal capacity at the time the redemption was made. [13]

On June 23, 2000, the motion for reconsideration filed by the heirs of Dr. Valisno was denied.[14] Respondent heirs filed a petition for review with the Court of Appeals, arguing that the Secretary of Agrarian Reform erred (1) in disallowing the award of one hectare to each of the seven Grandchildren-Awardees of Dr. Nicolas Valisno, as qualified children-awardees under the CARL; and (2) in not recognizing the redemption made by the four grandchildren of Dr. Nicolas Valisno over the 12hectare riceland mortgaged to Renato and Angelito Banting.[15] On March 26, 2002, the Court of Appeals reversed the Orders of the DAR Secretary, granted the award of one hectare each for the seven GrandchildrenAwardees, and affirmed the retention rights of the Redemptioner-Grandchildren over three hectares each, or a total of 12 hectares.[16] Petitioners filed a partial motion for reconsideration, assailing the right of retention of the four Redemptioner-Grandchildren over the 12-hectare property, and praying that an amended decision be rendered placing the 12 hectares under the coverage of the CARP.[17] This motion was denied on March 25, 2003. [18] Hence, this appeal, on the sole assignment of error: The Court of Appeals found the following facts relevant: First, that the mortgages were constituted over a 12-hectare portion of Dr. Valisnos estate in 1972. Second, that the titles to the property were transferred to the names of the mortgagees in 1972, viz., TCT No. NT-118447, covering a 6-hectare property in La Fuente, Sta. Rosa, Nueva Ecija, issued in the name of Angelito Banting; and TCT No. NT-118448, likewise covering a 6-hectare property in La Fuente, Sta. Rosa, Nueva Ecija, issued in the name of Renato Banting. Third, these properties were redeemed by the Redemptioner-Grandchildren on October 25, 1973, at the time of which redemption three of the four Redemptioner-Grandchildren were minors. Given these settled facts, the resolution of the sole issue in this case hinges on (1) the validity of the redemption in 1973, made when three of the RedemptionerGrandchildren were minors; and (2) if the redemption was valid, the determination of the retention rights of the Redemptioner-Grandchildren, if any, under RA 6557.

ISSUE: Whether or not the redemptioners, grandchildren of the deceased Nicolas Valisno, Sr. were entitled to retention rights as landowners under the Agrarian Reform Law despite the fact that the redemption was done by their parents (children of the deceased) only in their name and for their benefit. HELD: The appeal lacks merit. The relevant laws governing the minors redemption in 1973 are the general Civil Code provisions on legal capacity to enter into contractual relations. Article 1327 of the Civil Code provides that minors are incapable of giving consent to a contract. Article 1390 provides that a contract where one of the parties is incapable of giving consent is voidable or annullable. Thus, the redemption made by the minors in 1973 was merely voidable or annullable. Any action for the annulment of the contracts thus entered into by the minors would require that: (1) the plaintiff must have an interest in the contract; and (2) the action must be brought by the victim and not the party responsible for the defect. The action to annul the minors redemption in 1973, therefore, was one that could only have been initiated by the minors themselves, as the victims or the aggrieved parties in whom the law itself vests the right to file suit. This action was never initiated by the minors. We thus quote with approval the ratiocination of the Court of Appeals: Respondents contend that the redemption made by the petitioners was simulated, calculated to avoid the effects of agrarian reform considering that at the time of redemption the latter were still minors and could not have resources, in their own right, to pay the price thereof. We are not persuaded. While it is true that a transaction entered into by a party who is incapable of consent is voidable, however such transaction is valid until annulled. The redemption made by the four petitioners has never been annulled, thus, it is valid.[24] The transfer of the titles to the two 6-hectare properties in 1972 removed the parcels of land from the entire Valisno estate. The evidence clearly demonstrates that Renato Banting and Angelito Banting became the registered owners of the property in 1972. These two separate properties were then transferred to the Redemptioner-Grandchildren in 1973. Regardless of the source of their funds, and regardless of their minority, they became the legal owners of the property in 1973.

Moreover, although Maria Cristina, Leonora and Gregorio were all minors in 1973, they were undoubtedly of legal age in 1994, when SMSP initiated the petition for coverage of the subject landholding under the CARL, and of course were likewise of legal age in 1997, when all the Valisno heirs filed their Consolidated Application for Retention and Award under RA 6657. As owners in their own right of the questioned properties, RedemptionerGrandchildren enjoyed the right of retention granted to all landowners. This right of retention is a constitutionally guaranteed right, which is subject to qualification by the legislature.[25] It serves to mitigate the effects of compulsory land acquisition by balancing the rights of the landowner and the tenant and by implementing the doctrine that social justice was not meant to perpetrate an injustice against the landowner.[26] A retained area, as its name denotes, is land which is not supposed to leave the landowners dominion, thus sparing the government from the inconvenience of taking land only to return it to the landowner afterwards, which would be a pointless process. In the landmark case of Association of Small Landowners in the Philippines, Inc.

v. Secretary of Agrarian Reform,[27] we held that landowners who have not yet
exercised their retention rights under PD 27 are entitled to the new retention rights under RA 6657.[28] The retention rights of landowners are provided in Sec. 6 of RA 6657, which reads in relevant part: SECTION 6. Retention Limits. Except as otherwise provided in this Act, no person may own or retain, directly or indirectly, any public or private agricultural land, the size of which shall vary according to factors governing a viable family-size, such as commodity produced, terrain, infrastructure, and soil fertility as determined by the Presidential Agrarian Reform Council (PARC) created hereunder, but in no case shall retention by the landowner exceed five (5) hectares. Three (3) hectares may be awarded to each child of the landowner, subject to the following qualifications: (1) that he is at least fifteen (15) years of age; and (2) that he is actually tilling the land or directly managing the farm; Provided, That landowners whose land have been covered by Presidential Decree No. 27 shall be allowed to keep the area originally retained by them thereunder, Provided further, That original homestead grantees or direct compulsory heirs who still own the original homestead at the time of the

approval of this Act shall retain the same areas as long as they continue to cultivate said homestead. The right to choose the area to be retained, which shall be compact or contiguous, shall pertain to the landowner. Provided, however, That in case the area selected for retention by the landowner is tenanted, the tenant shall have the option to choose whether to remain therein or be a beneficiary in the same or another agricultural land with similar or comparable features. In case the tenant chooses to remain in the retained area, he shall be considered a leaseholder and shall lose his right to be a beneficiary under this Act. In case the tenant chooses to be a beneficiary in another agricultural land, he loses his right as a lease-holder to the land retained by the landowner. The tenant must exercise this option within a period of one (1) year from the time the landowner manifests his choice of the area for retention. This section defines the nature and incidents of a landowners right of retention. For as long as the area to be retained is compact or contiguous and it does not exceed the retention ceiling of five hectares, a landowners choice of the area to be retained must prevail. Each of the four Redemptioner-Grandchildren is thus entitled to retain a parcel of land with a ceiling of five hectares, for a total of 20 hectares. The parcels of land in question total only 12 hectares, or only three hectares each, which is well within the statutory retention limits. WHEREFORE, premises considered, the Decision of the Court of Appeals in CA-G.R. SP No. 59752 dated March 26, 2002, and Resolution of the Court of Appeals dated March 25, 2003, which upheld the retention rights of respondents Ma. Cristina Valisno, Benedicto V. Yujuico, Gregorio V. Yujuico and Leonora V. Yujuico, are AFFIRMED.
http://www.lis.dar.gov.ph/home/document_view/6746