[ G.R. NO. 153817. March 31, 2006 ]

[ G.R. NO. 153817. March 31, 2006 ]

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FIRST DIVISION

[ G.R. NO. 153817. March 31, 2006 ]

NOLITO D. SOLMAYOR, VICENTE LASTIMA, JUANITO B. SUAREZ, GERVACIO BATAUSA (DEC.) REPRESENTED BY ANTONIO BATAUSA, VICTORIANO CANDIA, PRIMITIVO BORRES (DEC.) REPRESENTED BY ROGELIO BORRES, TIBURCIO MANULAT (DEC.) REPRESENTED BY TERESITA MANULAT PALACA, PATRICIO ASTACAAN, JUANITO AMIGABLE, OZITA MENDOZA, LUIS CANDOG (DEC.) REPRESENTED BY JOVENCIA CANDOG AND SABINO CELADES (DEC.) REPRESENTED BY SERGIA ESTANTE, PETITIONERS, VS. ANTONIO L. ARROYO, RESPONDENT

D E C I S I O N

CHICO-NAZARIO, J.:

Before Us is a Petition for Review on Certiorari under Rule 45 of the Rules of Civil Procedure assailing the Decision[1] of the Court of Appeals which affirmed the Decision[2] of the Office of the President reversing the Order[3] of the Department of Agrarian Reform (DAR) which dismissed herein respondent's appeal from the order dated 19 May 1989 of the Regional Director of DAR Region XI dismissing the petition filed by Antonio Arroyo for the cancellation of Certificates of Land Transfer (CLTs) issued to herein petitioners.

On 23 November 1978, respondent Arroyo received a letter from the legal officer of the then Ministry of Agrarian Reform (now DAR) informing him that his land with an aggregate area of 9.8038 hectares situated at Matina, Davao City, was the subject of Operation Land Transfer (OLT) under Presidential Decree No. 27, which took effect on 21 October 1972. Likewise, he was advised that he could apply for the conversion of the land to residential or other urban purposes in accordance with applicable laws. In a letter dated 16 January 1979, then Team Leader I of the Ministry of Agrarian Reform notified respondent that based on the parcellary map sketching conducted by the Agrarian Reform and the Bureau of Lands, the subject property was covered by the OLT program since the area thereof, which was tenanted at that time, was more than seven hectares.

Based on an Indorsement issued by the City Zoning and Development Officer on 5 July 1979 certifying that the property is "partly zonified as Residential Class "A" and "B," Commercial and Open Space x x x as per existing Zoning Ordinance of Davao City," respondent applied for the conversion of the land to residential subdivision on 24 July 1979. Attached to the said application were documents issued by different government agencies such as the Human Settlements Regulatory Commission (precursor of the Housing and Land Use Regulatory Board [HLURB]), Bureau of Soils and the City of Davao, showing that said land has been classified as residential.

Acting on said application, DAR local officials conducted a series of conferences between respondent, through his representative, and herein petitioners as occupants of the property, purposely to reach a settlement for the latter's relocation, award of respective homelots, and the payment of disturbance compensation as a consequence of the conversion. However, no final agreement was reached between the parties. This prompted the Agrarian Reform Technologist of Davao City to propose that the tenants on the land be accorded the benefits of Presidential Decree No. 27 or that the matter be referred to the Bureau of Agrarian Legal Assistance for proper action.

Without first resolving respondent's application for conversion, the then Ministry of Agrarian Reform issued in November 1984 the questioned CLTs in favor of petitioners. Upon knowledge of said issuance, respondent filed a petition for the cancellation of said CLTs on 27 August 1985 on the ground that the subject land was, and still is, residential property and thus, beyond the coverage of Presidential Decree No. 27. Furthermore, respondent denies the existence of a tenancy relationship between him and petitioners.

On 8 August 1988, respondent, through his attorney-in-fact, made a Voluntary Offer to Sell his entire landholding, including the subject property, to the government in accordance with the provisions of Republic Act 6657 or the Comprehensive Agrarian Reform Law of 1988. As a consequence thereof, the Regional Director of DAR Region XI issued an Order dated 19 May 1989 dismissing respondent's petition for cancellation of CLTs. According to said Order, "with the offer made by petitioner, the issue in this petition, whether or not the subject properties are within the land transfer coverage, becomes moot and academic."[4] Respondent appealed said Order to the Office of the Secretary of Agrarian Reform praying that it be set aside and that the CLTs be cancelled. Meanwhile, in 1990, the DAR issued Emancipation Patents to petitioners as the identified farmer-beneficiaries on the land.

In an Order dated 19 July 1994, then DAR Secretary Ernesto Garilao dismissed respondent's appeal and upheld the validity of the Emancipation Patents awarded to petitioners. According to the Secretary:

Going to the first issue, this Office so holds that the landholding in question are agricultural as of October 21, 1972 despite the fact that the same have been declared for tax purposes as residential. The Memorandum dated May 17, 1993 which contains the investigation report of the DAR personnel who conducted the ocular inspection and investigation explicitly shows that when Presidential Decree No. 27 took effect the actual use of the land is agricultural. This fact is further buttressed when petitioner, in his letter dated August 8, 1988 manifested his desire to voluntarily offer to sell the properties in question to the Department of Agrarian Reform, declaring that the subject landholdings are productive and suitable to agricultural production.

The fact that there is a certification from the HLURB that the property has been rezoned to residential use is of no moment. It must be observed that the notion that real property which is already classified as residential or commercial, is no longer agricultural land, is found in Section 3 of R.A. 6657. In other words, the property was still agricultural at the time of the promulgation of P.D. 27, and the rights of the tenant farmers shall have vested by then, and future reclassification could not derogate such vested rights.

Anent the second issue, records show that sharing was established as per receipts submitted during the investigation by Primitivo J. Borres, overseer of the subject landholding. Records further disclosed that the agricultural produce were received by Melencio A. Gumtang and Bonifacio P. Bernardino, administrators of Antonio Arroyo's properties in Matina, Davao City. The contention of the petitioner that there was no consent extended by him to the respondents is not well-taken. As borne out by the records, overseer Primitivo J. Borres permitted the tilling of the land by the respondents hence, the landowner-petitioner in the present case is chargeable with knowledge through his overseer of such cultivation. Under Section 7 of Republic Act No. 1199, as amended, tenancy relationship may be established either verbally or in writing, expressly or impliedly.

x x x x

WHEREFORE, premises considered, Order is hereby issued dismissing the instant petition for utter lack of merit. The validity of the issuance of the Emancipation Patents (EPs) to the tenants is hereby affirmed.[5]

Respondent's Motion for Reconsideration was subsequently denied in an Order dated 7 August 1996, prompting respondent to file an appeal before the Office of the President. In a Decision dated 17 November 2000, the Office of the President reversed the order of the DAR Secretary and declared the 9.8 hectares outside the coverage of Presidential Decree No. 27, to wit:

The crux of this case is whether or not grounds exist to warrant the cancellation of CLTs and EPs issued to appellees as the identified tenant-beneficiaries on the land. The determination of this issue in turn hinges on the question of whether or not the subject land is exempt under OLT coverage of PD 27.

In the recent case of Eudosia Daez vs. Court of Appeals, G.R. No. 133507, February 17, 2000, the Supreme Court set forth the requirements for coverage under the OLT program in this wise:

"PD 27, which implemented the Operation Land Transfer (OLT) Program, covers tenanted rice or corn lands. The requisites for coverage under the OLT Program are the following: (1) the land must be devoted to rice or corn crops; and (2) there must be a system of share-crop or lease tenancy obtaining therein. If either requisite is absent, a landowner may apply for exemption. If either for [sic] those requisites is absent, the land is not covered under OLT.

x x x x

Thus, on one hand, exemption from coverage of OLT lies if: (1) the land is not devoted to rice or corn crops even if it is tenanted; or (2) the land is untenanted even though it is devoted to rice or corn crops."

Guided by the foregoing, it is essential to determine whether or not tenancy relationship exists between Mr. Arroyo and the appellees. In the absence of the all important element of tenancy, the subject land falls outside OLT coverage of PD 27 even if incidentally it is devoted to rice and/or corn. In the case of Prudential Bank vs. Gapultos, 181 SCRA 160 [1990], the Supreme Court lists the requisites essential for the establishment of tenancy relationship, thus:

"The essential requisites of tenancy relationship are: (1) the parties are the landowner and the tenant; (2) the subject is agricultural land; (3) there is consent; (4) the purpose is agricultural production; (5) there is personal cultivation; and (6) there is sharing of harvests. All these requisites must concur in order to create a tenancy relationship between the parties. The absence of one does not make an occupant of a parcel of land, or a cultivator thereof, or a planter thereon, a de jure tenant. 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 Land Reform Program of the government under existing tenancy laws."

x x x x

Applying the above-stated requirements in the case at bar, we find the absence of tenancy relationship between the parties. Firstly, subject land is not an agricultural land, as the term is understood. Uncontroverted evidence shows that the subject land had been classified as residential/commercial even prior to the effectivity of PD 27. Per Official Zoning Map of the City of Davao adopted under Resolution No. 711, Ordinance No. 281, s. of 1972 (p. 243, Records), the land was classified as "Commercial Zone and Residential Zone Class B". This classification confirmed the residential character of the subject land as appearing in Mr. Arroyo's tax declarations filed way back in 1968 (pp. 187-190, Records). x x x

The residential character of the subject property is likewise confirmed by the following government agencies or offices:

1. The Housing and Land Use Regulatory Board (HLURB), Davao City, which issued a Zoning Certification to the effect that the subject land is within the Residential/Commercial Zone under the Zoning Ordinance of Davao City adopted through a Sangguniang Bayan Resolution and ratified by the HLURB, through Board Resolution No. 39-4, s. of 1980 dated July 31, 1980 (p. 208, Records).

2. The Office of the Zoning Administrator, City of Davao, certifying to the effect that the subject land is within a Residential Zone Class "B" in the Zonification Ordinance of Davao City (p. 126, Records).

3. The Bureau of Soils of then Ministry of Agriculture, Davao City, which submitted a Certification to the effect that the subject land is suitable for urban use/housing projects (p. 127, Records).

4. The Office of the City Planning and Development Coordinator, Office of the Zoning Administrator, certifying to the effect that the subject land was classified as Major Commercial Zone (C-2) and High Density Residential Zone (R-2) in the City Ordinance No. 363, s. of 1982 or better known as Expanded Zoning Ordinance of Davao City (p. 160, Records).To cap it all, even the DAR Provincial Task Force on Illegal Conversion, after conducting on April 10, 2000 an investigation on the reported illegal conversion of the subject land, admitted on its report of June 2, 2000 that it is no longer agricultural, it being classified as commercial and residential zones. Consequently, they ruled out any act of illegal conversion. Secondly, the records show that the land in dispute was never intended for agricultural production. For one, no agricultural improvements were introduced upon the land since its acquisition by Mr. Arroyo in 1951. In fact, for more than a decade since 1972, the disputed land was subject of numerous business proposals (attached to Appeal/Memorandum) from various land developers for purposes of developing it into a residential and commercial area. For another, the subject property is situated in a commercial and residential area. As the records show, it is adjacent to the Government Service and Insurance System (GSIS) subdivision and other residential or commercial establishments, and surrounded by GSIS Heights, Villa Josefina Subdivision, Flores Village, Central Park Subdivision, Poly Subdivision, San Miguel Village, New Matina Golf Club, Davao Memorial Park, Shrine of the Infant Jesus, Matina Public Market and Venees hotel.

The fact that appellees may perhaps have planted rice or corn on the said land, situated in the middle of what appears to be a fast growing residential and business area in the heart of a metropolitan area, is of little moment. Such agricultural activity cannot, by any strained interpretation of law, amount to converting the land in question into agricultural land and subject it to the agrarian reform program of the government. The Supreme Court in Hilario vs. Intermediate Appellate Court (supra) held that:

"x x x. But even if the claim of the private respondent that some corn was planted on the lots is true, this does not convert residential land into agricultural land.

The presumption assumed by the appellate court, that a parcel of land which is located in a poblacion is not necessarily devoted to residential purposes, is wrong. It should be the other way around. A lot inside the poblacion should be presumed residential, or commercial or non-agricultural unless there is clearly preponderant evidence to show that it is agricultural." (underlining supplied)

Clearly, therefore, two (2) requisites — that the land is agricultural and that the purpose thereof is agricultural production — necessary to establish the existence of tenancy relationship between Mr. Arroyo and the appellees are absent. On the other requirements for the creation of tenancy relationship, suffice it to reiterate the well-established rule that "[A]ll these requisites must concur in order to create a tenancy relationship between the parties. The absence of one does not make an occupant of a parcel of land, or a cultivator thereof, or a planter thereon, a de jure tenant. 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 Land Reform Program of the government under existing tenancy laws" (Prudential Bank v. Gapultos, supra).

As appellees are not de jure tenants of Mr. Arroyo, the ineluctable conclusion is that the subject land is outside OLT coverage under PD 27. The issuance, therefore, of CLTs and EPs in favor of the appellees was without legal basis. They must perforce be cancelled. It should be stressed that the recipients of CLT and EP issued pursuant to PD 27 do not necessarily acquire vested rights over the landholding subject thereof. The propriety of canceling a CLT and EP, in case of a finding that the land is outside the coverage of PD 27, is recognized and is in fact provided for in DAR Administrative Order No. 02, s. of 1994 entitled Rules Governing the Correction and Cancellation of Registered/Unregistered Emancipation Patents (EPs), and Certificates of Land Ownership Award (CLOAs) Due to Unlawful Acts and Omissions or Breach of Obligations of Agrarian Reform Beneficiaries (ARBs) and for Other Causes, which provides that:

"Under Presidential Decree No. 27, Executive Order No. 228, and Republic Act No. 6657, tenants, farmers, and regular farmworkers have the right to own directly the land they till. Ownership shall be evidenced by either an Emancipation Patent (EP) or Certificate of Landownership Award (CLOA)

x x x x

EPs/CLOAs issued to ARBs may be corrected and cancelled for violations of agrarian laws, rules and regulations. This includes cases of lands which are found to be exempt/excluded from P.D. No. 27/E.O. No. 228 or CARP coverage, or part of the landowner's retained areas. All rights which accrue to the ARB upon cancellation may be forfeited and the amortization they have paid may be refunded."

WHEREFORE, foregoing premises considered, the assailed DAR orders dated July 19, 1994 and August 7, 1996 are hereby REVERSED and SET ASIDE and a new one entered declaring the 9.8-hectare land in question outside the Operation Land Transfer coverage of Presidential Decree No. 27.[6]

Aggrieved by the decision of the Office of the President, petitioners filed a Petition for Review before the Court of Appeals, maintaining that the Office of the President erred in finding that the subject landholding has been classified as non-agricultural prior to the effectivity of Presidential Decree No. 27 and not primarily devoted to rice or corn crops, and that the farmer-beneficiaries are not tenants of respondent.

In a decision dated 11 January 2002, the appellate court denied petitioners' appeal and affirmed the decision of the Office of the President. The Court of Appeals disposed of the issues in this wise:

The petition is bereft of merit.

x x x x

For Us to determine whether the subject property is within the coverage of Presidential Decree No. 27, We are lifting the pertinent provision of paragraph 5 of P.D. 27 which states in no uncertain terms that:

x x x x

This (P.D. 27) shall apply to tenant farmers of private agricultural lands primarily devoted to rice and corn under a system of share-crop or lease tenancy, whether classified as landed or not."

Thus, from the provision of the above-cited decree, as amended by R.A. 6657, land coverage thereof only applies when two (2) conditions concur, a) the agricultural land is planted with rice and corn; and b) the existence of a tenancy relationship between the landowner and the tenant-farmer.

As correctly argued by the respondent herein, and so ruled by the Office of the President, the subject property is not a private agricultural land as specifically required under the aforequoted provision of P.D. 27, as amended. Uncontroverted evidence shows that the subject property had already been classified as residential/commercial even prior to the effectivity of P.D. 27. Per Official Zoning Map of the City of Davao adopted under Resolution No. 711, Ordinance No. 281, s. of 1972 (p. 243, Records), the land was classified as "Commercial Zone and Residential Zone Class B". This classification confirmed the residential character of the subject land as appearing in Mr. Arroyo's tax declarations filed way back in 1968 (pp. 187-190, Records). Furthermore, in support of its factual findings, the Office of the President rightfully considered several certifications issued by various government agencies, both local and national, which confirmed the residential character of the property in question, to wit:

The Housing and Land Use Regulatory Board (HLURB), Davao City, which issued a Zoning Certification to the effect that the subject land is within the Residential/Commercial Zone under the Zoning Ordinance of Davao City adopted through a Sangguniang Bayan Resolution and ratified by the HLURB, through Board Resolution No. 39-4, s. of 1980 dated July 31, 1980 (p. 208, Records).

The Office of the Zoning Administrator, City of Davao, certifying to the effect that the subject land is within a Residential Zone Class "B" in the Zonification Ordinance of Davao City (p. 126, Records).

The Bureau of Soils of then Ministry of Agriculture, Davao City, which submitted a Certification to the effect that the subject land is suitable for urban use/housing projects (p. 127, Records).

The Office of the City Planning and Development Coordinator, Office of the Zoning Administrator, certifying to the effect that the subject land was classified as Major Commercial Zone (C-2) and High Density Residential Zone (R-2) in the City Ordinance No. 363, s. of 1982 or better known as Expanded Zoning Ordinance of Davao City (p. 160, Records).

DAR Provincial Task Force on Illegal Conversion Report dated 02 June 2000, which unequivocably stated that the subject land is no longer agricultural, it being classified as commercial and residential zones. Consequently, said Task Force ruled out any act of illegal conversion.

[1] CA-G.R. SP No. 63180, dated 11 January 2002, penned by Associate Justice Bienvenido L. Reyes with Associate Justices Cancio C. Garcia (now a member of this Court) and Roberto A. Barrios, concurring.

[2] OP Case No. 96-L-6682, dated 17 November 2000.

[3] Dated 19 July 1994, penned by then Secretary of the Department of Agrarian Reform Ernesto D. Garilao.

[4] See DAR Order dated 19 July 1994, Annex "C" of Petition, rollo, p. 48.

[5] Id., pp. 50-52.

[6] CA Rollo, pp. 33-36.

[7] Rollo, pp. 37-45. [8] HLC Construction and Development Corporation v. Emily Homes Subdivision Homeowners Association, G.R. No. 139360, 23 September 2003, 411 SCRA 504, 508, citing Bank of the Philippine Islands v. Court of Appeals, 450 Phil. 532, 540 (2003); Cavile v. Heirs of Cavile, 448 Phil. 302, 311 (2003); Twin Towers Condominium Corporation v. Court of Appeals, 446 Phil. 208, 298 (2003).

[9] Cavile v. Heirs of Cavile, 448 Phil. 302, 311 (2003).

[10] Id.

[11] Id.

[12] Id.

[13] Morales v. The Board of Regents of the University of the Philippines, G.R. No. 161172, 13 December 2004, 446 SCRA 227, 238-239, citing A-One Feeds, Inc. v. Court of Appeals, G.R. No. L-35560, 30 October 1980, 100 SCRA 590, 594.

[14] Morales v. the Board of Regents of the University of the Philippines, G.R. No. 161172, 13 December 2004, 446 SCRA 227, 239; citing Tamayo v. Court of Appeals, G.R. No. 147070, 17 February 2004, 423 SCRA 175, 178.

[15] Orcino v. Civil Service Commission, G.R. No. 92869, 18 October 1990, 190 SCRA 815, 819.

[16] Id., citing Insular Life Assurance Co. Lyd. Employees Association-Natu v. Insular Life Assurance Co. Ltd., G.R. No. L-25291, 10 March 1977, 76 SCRA 50, 53.

[17] Almendrala v. Ngo, G.R. No. 142408, 30 September 2005, 471 SCRA 311, 322.

[18] Records, pp. 183-190.

[19] Id., p. 127.

[20] Id., p. 128.

[21] Id., p. 126.

[22] Id., p. 208.

[23] Id., p. 160.

[24] Id., p. 243.

[25] Bulilan v. Commission on Audit, 360 Phil. 626, 634 (1998), citing Villaflor v. Court of Appeals, 345 Phil. 524, 562 (1997).

[26] G.R. No. L-78214, 5 December 1988, 168 SCRA 247, 254.

[27] Id.

[28] Spouses Cayetano and Patricia Tiongson v. Court of Appeals, 215 Phil. 430, 437 (1984).

[29] Id.