Tenant's Right to Redeem Land Under LBP Financing and Agrarian Justice

The Supreme Court recently settled an important question for agricultural tenants: must a tenant pay the full redemption price upfront to exercise the right to redeem the land they till? In Marcelo v. Gucilatar (G.R. No. 224040, October 6, 2021), the Court ruled that the Land Bank of the Philippines (LBP) is mandated by law to finance the redemption, so a tenant's failure to tender or consign the price does not automatically defeat the right to redeem.

The ruling breathes life into the State's policy of agrarian justice, ensuring that tenant-farmers are not barred from owning the land they cultivate simply because they lack ready cash.

The Facts of the Case

Three agricultural tenants — Josefina Marcelo, Eligio Capule, and Carlito Nicodemus — cultivated parcels of land in Malolos City, Bulacan. Their families had tilled these lands for decades, some since the 1940s and 1950s, under tenancy arrangements with successive owners.

In 2002, the then-owner mortgaged the properties to a private individual for P300,000.00. When the owner failed to pay, the mortgage was foreclosed, and the creditor emerged as the highest bidder at the auction sale for P625,000.00. The titles were later consolidated in the creditor's name.

The tenants were never notified in writing of the sale. They continued paying rentals to the former owner, unaware that ownership had changed hands. When the new owner sought to eject them, the tenants filed a petition for redemption under Section 12 of Republic Act No. 3844, as amended.

The Legal Issue

The central question was whether the tenants validly exercised their right of redemption despite not having tendered or consigned the redemption price when they filed their petition.

The Department of Agrarian Reform Adjudication Board (DARAB) and the Court of Appeals both ruled against the tenants, holding that tender or consignation of the redemption price is an indispensable requirement. The tenants appealed to the Supreme Court.

The Supreme Court's Ruling

The Supreme Court reversed, upholding the tenants' right to redeem.

The Court began with the policy behind the law. Under Section 2 of R.A. No. 3844, the State adopted a policy of promoting social justice, establishing owner-cultivatorship, and achieving a dignified existence for small farmers. The existence of an agricultural tenancy relationship gives the tenant rights that attach to the landholding, regardless of who subsequently becomes its owner.

Section 12 of R.A. No. 3844, as amended by R.A. No. 6389, grants the agricultural lessee the right to redeem the landholding when it is sold to a third person without the lessee's knowledge. The redemption price is the reasonable price of the land at the time of the sale.

The Court acknowledged the general rule that tender or consignation is indispensable. However, it pointed to the last part of Section 12, which states that "the Department of Agrarian Reform shall initiate, while the Land Bank shall finance said redemption."

The Court reasoned that agricultural tenants may not always have ready cash to tender or consign. To give farmers the chance to own the land they cultivate, the law directs the DAR to initiate redemption proceedings and the LBP to finance the redemption. If courts dismissed redemption cases simply because of the tenant's failure to tender or consign the price, that portion of the law would be rendered nugatory.

The Court held that when an agricultural tenant files a redemption case without consigning or tendering the redemption price, a Certification from the LBP that it will finance the redemption will suffice.

The Court also noted that since the tenants were never notified in writing of the sale, the 180-day prescriptive period for exercising the right of redemption never began to run.

The case was remanded to the DARAB to determine the reasonable price of the land at the time of the sale, and the LBP was directed to finance the redemption.

Practical Takeaways

• Written notice is crucial. Under Section 12, R.A. No. 3844, the 180-day period to redeem starts only upon written notice from the vendee to all affected lessees and the DAR. Without such notice, the period does not run.

• LBP financing is available. Tenant-farmers who cannot afford to pay the redemption price upfront may seek financing from the Land Bank. A certification from LBP that it will finance the redemption can substitute for actual tender or consignation.

• Tenancy must be established. The right of redemption attaches only to genuine agricultural tenants. Tenancy cannot be presumed and must be proved by substantial evidence.

• Agrarian justice is the guiding principle. The law aims to liberate farmers from a system that perpetuated their bondage to debt and poverty. Courts will interpret redemption provisions in light of this policy.

• Act promptly but correctly. While the Court was lenient here, tenants should still file their redemption petitions within the prescriptive period and coordinate with the DAR and LBP to secure financing.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.