G.R. No. 178110      -    AYALA LAND, INC. and CAPITOL CITY FARMS, INC., petitioners,  versus SIMEONA CASTILLO, LORENZO PERLAS, JESSIELYN CASTILLO, LUIS MAESA, ROLANDO BATIQUIN and BUKLURAN MAGSASAKA NG TIBIG, as represented by their attorney-in-fact, SIMEONA CASTILLO, respondents.

 

                                                                             Promulgated:

 

                                                                             June 15, 2011

 

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DISSENTING OPINION

 

VILLARAMA, JR., J.:

 

I dissent from the majority ruling for the following reasons:

 

1.     The grant of the appeal was mainly premised on petitioners’ unfounded assertion that the issuance of the notice of coverage and notice of acquisition was raised for the first time on appeal.

 

2.     The prohibition on the filing of a petition for conversion of agricultural lands already placed under CARP coverage is not a “mere guiding principle” but a preventive measure against any act of the landowner to evade the application of Republic Act (R.A.) No. 6657 to his landholding.

 

3.     The rules on land conversion expressly provide for the remedy of cancellation or revocation of conversion order within a five-year period if the petition is based on any violation of relevant rules and regulations of the Department of Agrarian Reform (DAR).

 

4.     Petitioners have not complied with the requirements for a valid reclassification of agricultural lands.

 

5.     The “policy pronouncement” of the Office of the President (OP) on the supposed balancing of the rights of agricultural tenants and farm workers with substantial financial losses to be incurred by the Bangko Sentral ng Pilipinas (BSP), the biggest creditor of the landowner’s mortgagee bank, ignores the declared policy of the State that “[T]he welfare of the landless farmers and farmworkers will receive the highest consideration to promote social justice and to move the nation toward sound rural development and industrialization,  and the establishment of owner cultivatorship of economic size farms as the basis of Philippine agriculture.”

The buy-out arrangement clearly favored the landowner CCFI who was able to evade CARP coverage and at the same pay off its huge mortgage debt—which otherwise it could not fully settle from the proceeds of  a foreclosure sale—to a private bank then under liquidation, at the expense of impoverished farmers and in violation of existing DAR regulations.  In these situations, the landowner-mortgagor alone should bear the loss in case of deficiency because the foreclosure buyer is merely substituted to the landowner entitled only to just compensation pursuant to R.A. No. 6657 and DAR rules.

The factual antecedents are undisputed:

Capitol City Farms, Inc. (CCFI) is the registered owner of a parcel of land with an area of 221.3048 hectares located at Barangay Munting Ilog  (now Tibig), Silang, Cavite under Transfer Certificate of Title (TCT) No. 128672,[1] one of its two properties mortgaged to Manila Banking Corporation (MBC).  The mortgage lien in favor of MBC was duly annotated on the said title.  In 1987, MBC was placed under receivership pursuant to the order of the BSP.    

On September 29, 1989, the DAR issued a Notice of Coverage, placing the subject property under compulsory acquisition pursuant to Section 7 of R.A. No. 6657, otherwise known as the Comprehensive Agrarian Reform Law of 1988 (CARL).  On December 22, 1989, DAR issued a Notice of Acquisition in which the government offered the amount of P1,263,015.87 as purchase price.

Subsequently, MBC foreclosed its mortgage lien over CCFI’s properties and as a result of the foreclosure sale, MBC acquired the same, as evidenced by a Certificate of Sale[2] issued in its favor.  Said certificate of sale was registered on January 4, 1991.[3]  However, MBC was unable to transfer to its name title over several acquired assets as it was still under receivership and also because DAR had placed these lands under compulsory acquisition.

In a special civil action filed before this Court (G.R. No. 85960), MBC sought to enjoin the Monetary Board, the Central Bank of the Philippines and two of its officials from proceeding with MBC’s liquidation.  On January 11, 1989, this Court issued a Resolution enjoining the liquidation of MBC’s assets, but MBC later moved for the partial liquidation of some of its assets, including the subject property, so that it could settle its obligations with BSP and its other creditors and finance its re-opening.[4]  Apparently, MBC did not mention the fact that the subject landholdings have been placed under the CARL.

On August 29, 1995, this Court issued a Resolution[5] authorizing the partial liquidation. MBC then executed a Deed of Partial Redemption[6] on December 29, 1995, allowing CCFI to redeem partially the subject property and to sell the subject property to a third party pending full payment of the redemption price.  It was stipulated that the down payment (30% of the total price) shall be payable to MBC upon “approval of the exemption of the two (2) parcels of land x x x from the coverage of the Agrarian Reform Law x x x or the conversion of the aforesaid parcels of land to non-agricultural use.”  MBC likewise shall continue to have custody and possession of the corresponding titles for as long as any obligation remains due to it, unless CCFI or its successor-in-interest pays the full value of either parcel of land at the rate of P500.00 per square meter excluding interest.[7]

On the same date, CCFI executed a Deed of Absolute Sale[8] in favor of Ayala Land, Inc. (ALI) over its properties covered by TCT Nos. 128672 and 144245.  The payment of purchase price to CCFI was subject to certain terms and conditions, among which is the “issuance of DAR Approval for the Parcels of Land”, meaning the exemption from coverage of the CARL or conversion of the land to non-agricultural use, “signed in either case by the Secretary of the Department of Agrarian Reform.”[9]  However, this sale was registered only on September 27, 1999 under Entry No. 2311 on TCT No. 128672.[10]

Sometime in August 1995, BSP through then Deputy Governor Alberto V. Reyes, requested the DAR Secretary to issue an order exempting MBC’s landholdings from the coverage of CARL and declaring a moratorium on compulsory acquisition proceedings against the same.  This request was denied by the DAR Secretary in his letter-decision dated February 14, 1995 stating that MBC’s landholdings are subject to the immediate coverage of CARL and directing the distribution of lands to qualified beneficiaries. While MBC through BSP sought reconsideration of the said letter-decision, the DAR Secretary denied it in his letter-resolution dated June 13, 1995.  Records showed that MBC appealed the DAR Secretary’s denial of its request for exemption to the OP (OP Case No. 6231).  Upon motion of MBC and pursuant to Section 6 of Administrative Order (AO) No. 18 dated February 12, 1987, the OP issued an Order dated August 30, 1995 staying the execution of the appealed DAR orders.[11]      

In the meantime, CCFI’s counsel sent a letter dated May 7, 1996 to the Regional Director of DAR Region IV requesting that the Notice of Acquisition be lifted. CCFI  claimed that: (1) the subject property has been reclassified by the Municipal Council of Silang, Cavite, from agricultural to residential by virtue of a Municipal Resolution; (2) the subject property is not serviced by the National Irrigation Administration; (3) the subject property is not planted with coconut trees as certified by the Philippine Coconut Authority; (4) the subject property is certified to be eligible for land conversion as certified by the DAR based on the foregoing certifications; and (5) the subject property is not tenanted although there are occupants who have, however, already been paid their disturbance compensation and have already executed a Waiver of Rights and endorsement  for the lifting of the Notice of Acquisition.[12]  While this letter-request was endorsed to the Legal Division of DAR Region IV and set for hearing,[13] there is no showing in the records of any further action or resolution made by the DAR. 

On October 11, 1996, then Executive Secretary Ruben D. Torres issued his Decision[14] in OP Case No. 6231.  MBC had earlier filed a motion for the issuance of an order granting MBC a period of five years within which to seek conversion of its landholdings to non-agricultural use.  The OP declared that the threshold issue is whether or not the land being sought to be covered are agricultural lands within the compulsory coverage of the CARL.  It opined that the ends of justice will be better served if BSP is given the fullest opportunity to monetize the assets of the bank which are outside the coverage of CARL or may be converted into non-agricultural uses.  Hence, the respondent DAR officials should respect the temporary custody of the landholdings by BSP by deferring coverage under the CARL until the BSP has been given the amplest opportunity to evaluate those assets and submit proof of exemption or convertibility, even after the termination of such receivership.  The OP thus decreed:

WHEREFORE, premises considered, the instant case is hereby remanded to the Department of Agrarian Reform for the purpose of receiving evidence on the question of which among the parcels of land, subject matter of this case, are exempt from the coverage of the Comprehensive Agrarian Reform Law, which lands may be converted into non-agricultural uses, and which may be subjected to compulsory coverage.  In the meantime, and while these issues have not been resolved, Respondents are hereby directed to cease and desist from subjecting the Petitioner’s properties to the CARL, or otherwise distributing those parcels of land already covered to farmer-beneficiaries.

The parties are further enjoined to assist each other in formulating a mutually beneficial solution to this dispute, bearing in mind that the rehabilitation of the Petitioner will be beneficial to the Bangko Sentral ng Pilipinas and the general public, without losing sight of the objectives of the Comprehensive Agrarian Reform Program.

SO ORDERED.[15]

DAR’s motion for reconsideration of the above decision was denied by the OP which reiterated the “need to balance the interests of MBC, its creditors [including the BSP to which MBC was indebted in the total amount of P8,771,893,000 or 85% of MBC’s total indebtedness] and the general public, and the faithful implementation of the agrarian reform, with the view of harmonizing them and ensuring that the objectives of CARP are met and satisfied.”[16]

Meanwhile, in his Resolution[17] dated October 3, 1997, DAR Secretary Ernesto D. Garilao granted MBC’s request for clearance to sell its landholdings which included the subject property (TCT No. 128672), citing Section 73-A of R.A. No. 6657, as amended by R.A. No. 7881, and further clarified in Memorandum Circular No. 05, Series of 1996,  which permits the sale and/or transfer of agricultural land in cases where such sale, transfer or conveyance is made necessary as a result of bank’s foreclosure of the mortgaged land.  However, it was declared that the properties sold shall remain under CARL coverage unless MBC is able to comply with the requirements of the DAR on exemption or conversion. Furthermore, MBC or the rightful owners of the properties, should a transfer, sale or conveyance materialize, were granted a period of ninety (90) days to submit completed applications for exemptions or conversions.   Note that the subject property had earlier been sold to ALI by virtue of the authority granted to CCFI by MBC under the Deed of Partial Redemption while CCFI’s 1996 request for the DAR to lift the Notice of Acquisition was made in pursuance of its contractual undertaking with MBC and ALI to seek exemption from CARL or conversion of the land to non-agricultural use.      

Subsequently, CCFI filed an application for land conversion which was approved by then DAR Secretary Ernesto D. Garilao.  DAR Conversion Order No. 4-97-1029-051[18] issued on October 31, 1997 thus decreed:

WHEREFORE, premises considered, the conversion/exemption application filed by the Capitol Citifarms[,] Incorporated over a parcel of land covered by TCT No. 128672 with an area of 221.3048 hectares, located at Brgy. Munting Ilog [now Tibig], Silang, Cavite is hereby APPROVED subject to the following conditions:

1)   Submission of the abovementioned lacking documentary requirements as required by the Committee within thirty days from receipt of this Order;

2)   The development of the land should be completed within five years from the issuance of this Order;

3)   Notice of Conversion should be posted at the most conspicuous place within the project area using appropriate materials with a minimum size of one (1) by two (2) meters, indicating the name of the project and area, name of the developer/landowner, date when conversion was approved, and the date when the development permit was granted; and,

4)   The DAR reserves the right to cancel or withdraw this order for misrepresentation of facts integral to its issuance and for violation of the rules and regulation on land use conversion.[19]

 

Among the documents submitted by CCFI is the Department of Agriculture Soil Investigation Report stating that “the said property is considered moderately to marginally suitable to agricultural crops due to very shallow to shallow soil depth, moderate erosion hazard, moderate to low soil fertility, undulating topography, strongly rolling to steep hilly physiology and is not economically suitable to agricultural development due to serious soil/land limitation existing in the area.”[20]  The conversion order likewise cited the findings of the Center for Land Use Policy, Planning and Implementation (CLUPPI-1 & 2) which together with the Municipal Agrarian Reform Officer (MARO) of Silang conducted a joint ocular inspection on October 17, 1997.  The CLUPPI-1 Executive Committee thus recommended the approval of CCFI’s application, on the basis of the finding that the land is eligible for exemption from CARL coverage, considering the following:

a.     The subject property is about 10 kilometers from the Provincial Road.

b.    The topography of the landholding is hilly and has an average slope of more than 18%, undeveloped and is mostly covered with wild growth of thick vines and bushes and secondary growth of forest trees except for the portion where few pineapple and cassava are planted which is approximately 2,000 square meters.

c.     The dominant use of the surrounding area is industrial/forest growth as the landholding is sitting on a mountainous slope overlooking the Sta. Rosa Technopark.

d.    The area is not irrigated and no irrigation system was noted in the area.[21]

 

On May 19, 2000, Ricardo Sim, Mario Perlas, Simeona Castillo, and Marilou Buklatin, on their behalf and as representatives of fifty-two (52) fellow tenant-farmers (herein respondents), filed with the DAR a Petition for Revocation of Conversion Order No. 4-97-1029-051 against CCFI and ALI.[22] They claimed that CCFI grossly violated the conversion order because instead of developing the land within five years from the issuance of the order as required in No. 2 above, it sold the land to ALI. They also pointed out that when CCFI sold the land to ALI in 1995, it was still agricultural land. Thus, CCFI violated Section 6[23] of the CARL and DAR Administrative Order No. 1, Series of 1989.[24]  They further alleged that the application for conversion was a mere ploy to cover up the illegal transaction and to evade the coverage of the property under the CARL, and in violation of the tenant-farmers’ right to buy the land pursuant to the right of pre-emption granted to them under R.A. No. 3844.

CCFI also committed gross misrepresentation when it made it appear that the land had been duly reclassified from agricultural to other uses when in truth, as certified by the Housing and Land Use Regulatory Board (HLURB),[25] the Municipality of Silang does not have an approved town plan/zoning ordinance as of October 24, 1997 and only passed Sangguniang Bayan Resolution No. ML-008, Series of 1996,[26] which is not an ordinance but mere resolution approving CCFI’s request for reclassification of the subject property. Lastly, respondents claimed that CCFI failed to comply with the undertaking to effect the complete payment of the disturbance compensation of tenant-farmers.

On December 18, 2000, then DAR Secretary Horacio R. Morales, Jr. issued an Order[27] (Morales Order) revoking DAR Conversion Order No. 4-97-1029-051.  It was noted that the power of the cities or municipalities to reclassify agricultural lands to other uses is exercised through its local legislature and no less than an ordinance has to be passed after conducting public hearings for the said reclassification to be valid.  Secretary Morales thus ruled:

            x x x we find that respondents have violated the provisions of paragraph 4, Section 6 of RA 6657 and DAR Administrative Order No. 1, Series of 1989, when Capitol Citifarms, Inc. sold the subject property to respondent Ayala Land, Inc. and did not register the same within a reasonable time. This is in order to avoid the full effects of the said law and rules and regulations. The conversion is resorted to evade the coverage of the land under CARP, with accompanying misrepresentation as to the ownership of the subject landholding to avoid detection of their unauthorized transaction. These are violations of the law and DAR rules and regulations and are grounds sufficient to warrant the revocation/withdrawal of the conversion order in respondents’ favor.[28] (Emphasis supplied.)

          ALI moved to reconsider the Morales Order. On September 3, 2002, while the motion for reconsideration was pending, respondent Simeona S. Castillo submitted to DAR a comment on the Withdrawal of Appearance of Atty. Annalyn S. Dolor, who was acting as counsel for the tenant-farmers. Castillo requested for the resolution of ALI’s motion for reconsideration and also mentioned therein the existence of a Notice of Coverage issued on the subject property. A copy of the Notice of Coverage was attached to her comment.[29]

          On September 26, 2002, then DAR Secretary Hernani A. Braganza issued an Order[30] (Braganza Order) reversing the Morales Order.   It was held that since the Deed of Partial Redemption and  Deed of Absolute Sale were subject to several conditions,  MBC’s obligation to transfer ownership to CCFI did not arise unless the happening of said conditions.  On the other hand, ALI’s obligation to make full payment of the purchase price to CCFI was also subject to specified conditions, foremost of which is the issuance by the DAR of an order of exemption or conversion.  Hence, there was no transfer of ownership when the Deed of Absolute Sale was executed on December 29, 1995.

The motion for reconsideration filed by Atty. Henry So in behalf of the respondents was denied by DAR Secretary Roberto M. Pagdanganan on August 13, 2003.[31]  It was held that Atty. So had no more locus standi to represent the tenant-farmers as he only represents the interest of Mr. Lamberto Javier who had entered into a compromise agreement with ALI.

          Aggrieved, respondents elevated the case to the OP. In their Appeal Memorandum, they stressed that a Notice of Coverage and Notice of Acquisition have already been issued over the subject property as early as 1989.  It was reiterated that there was misrepresentation and concealment on the part of CCFI and ALI when they did not register the sale to escape the coverage of the subject land under the CARL pertaining to ownership of lands exceeding the limits therein imposed. Attached to the appeal memorandum is a copy of the Certification dated July 23, 2003 issued by Charito B. Lansang, Board Secretary of the HLURB stating that as per their records on file, the Municipality of Silang has no approved town plan/zoning ordinance/comprehensive land use plan.[32]

          On January 28, 2004, the OP rendered a Decision[33] dismissing the appeal.  It noted that the alleged lack of approved land classification in Silang was not among those issues raised before the DAR Secretary, as the same was not included in the recitation of issues in the August 13, 2003 Order denying the motion for reconsideration of the Braganza Order.  On the issue of concealment, the OP adopted the finding of Secretary Braganza that there was no transfer of ownership at the time the Deed of Absolute Sale was executed on December 29, 1995.  It likewise found that no evidence was submitted to controvert the DAR’s factual finding that the subject property had long been converted to non-agricultural uses since October 1997, upon approval of the application for conversion.

Finding the subject property to have been legally and validly converted into non-agricultural land, the OP declared:

Moreover, in the absence of controverting evidence filed by the appellants to support otherwise, there is no reason to doubt the veracity of the findings of the Central Land Use Planning Policy & Implementation-1 (CLUPPI-1 and 2) and the Municipal Agrarian Reform Officer of Silang, Cavite in a joint ocular inspection conducted on the subject property finding the same as beyond 18% in slope and undeveloped, not irrigated and no irrigation … was noted in the area, which, in turn, were used as basis by the CLUPPI-1 Executive Committee to recommend that the subject property was not proper for Comprehensive Agrarian Reform Program (CARP) coverage.

Under DAR Memo Circular No. 11-79, land use conversion is allowed when the conversion to non-agricultural purposes is by reason of the change in the predominant land use brought about by urban development or zoning regulations which render the landholdings more economically suitable to non-agricultural uses.  Moreso, in the instant case, where the physical condition of the subject land and its surroundings qualify the same to be exempted from the coverage of the CARP.

It is a known fact that the close proximity of the province of Cavite to Metro Manila is the cause of the present economic boom it is presently enjoying.  Foreign investors had been attracted to invest in the province as evidenced by the many factories and plants situated in the area.  All of these businesses generate employment within the area, and consequently, more and more residents.  Further, the congestion in Metro Manila, plus the cities’ exorbitant real estate prices compel the many entities to relocate residences or offices in the suburbs. In the light of all these modernization, industrialization, and urbanization happening in the environs of respondents, it becomes all the more justified to not limit lands for agricultural purposes only when the same can be more productive if put to other usage.  As it is, we would only succeed in hindering progress if respondents’ properties would be covered by CARP.

 

It must be stressed, however, that regardless of the urbanization and industrialization taking place in Cavite, the same is only incidental and does not constitute sufficient legal basis for exempting the subject property from CARP coverage and approving its conversion to non-agricultural one.[34]  (Emphasis supplied.)

 

Respondents appealed to the CA which by Decision[35] dated January 31, 2007 reversed the OP and ruled that said office committed a reversible error in upholding a conversion order that permits the circumvention of agrarian laws.  After discussing the conflicting rulings of Secretaries Morales and Braganza, the appellate court made the following observations:

The only point argued at length in the Pagdanganan order was soundly rejected by the OP. Emphasis was made in the order on the lack of locus standi of the lawyer of the petitioners to file the motion for reconsideration against the Braganza order.  But the OP said that in administrative cases, technicality must give way to the bigger purpose of providing relief to parties.  The OP upheld the grounds in the Braganza order for maintaining the conversion order, but added one more, something original and novel.

At the concluding part of its discussion, it alluded to another memorandum circular of the DAR that land use conversion may be allowed when it is by reason of the changes in the predominant land use brought about by urban development. It then pointed to the fact that the close proximity of the province of Cavite to Metro Manila has opened it to the effects of modernization and urbanization.  It warned that we would only succeed in hindering progress if under these conditions we would still insist on CARP coverage.

The argument is valid if the agricultural land is still not subjected to compulsory acquisition under CARP.  But as we saw, there has already been a notice of coverage and notice of acquisition issued for the property. The OP was right in tempering its enthusiasm for modernization by recognizing that urbanization and industrialization may not be sufficient legal grounds for converting areas under land reform to other uses.  Verily, no less than the cited DAR Administrative Order No. 12 enjoins conversions of lands already under a notice of acquisition.  The objectives and ends of economic progress must always be sought after [sic] within the framework of the law, not against it, or in spite of it.  This is what the rule of law is all about.[36] (Emphasis supplied.)

Petitioners anchored their petition on the following grounds:

A.  RESPONDENTS ARE GUILTY OF FRAUD AND COME TO COURT WITH UNCLEAN HANDS. RESPONDENTS JESSIELYN CASTILLO, LUIS MAESA, ROLANDO BATIQUIN AND BUKLURAN MAGSASAKA NG TIBIG ARE NOT AMONG THOSE WHO FILED THE PETITION FOR THE REVOCATION OF THE SUBJECT CONVERSION ORDER.

B. WITH ALL DUE RESPECT, THE COURT OF APPEALS DECIDED A LEGAL QUESTION NOT IN ACCORDANCE WITH JURISPRUDENCE AND SANCTIONED A DEPARTURE FROM THE USUAL AND ACCEPTED COURSE OF JUDICIAL PROCEEDINGS WHEN IT ISSUED THE SUBJECT DECISION AND RESOLUTION CONSIDERING THAT:

1)   THE HONORABLE COURT OF APPEALS RESOLVED AN ISSUE RAISED FOR THE FIRST TIME ON APPEAL.  THIS IS OFFENSIVE TO JUSTICE, DUE PROCESS, AND FAIR PLAY.

2)   THIS HONORABLE COURT OF APPEALS INVOKED A DAR RULE THAT HAD BEEN SUPERSEDED EARLY ON.

3)   THE FINDING OF THE HONORABLE COURT OF APPEALS THAT THE BRAGANZA ORDER “FAILED TO YIELD ANY DIRECT CHALLENGE” TO THE MORALES ORDER HAS NO FACTUAL BASIS.

4)   THE DAR ITSELF FOUND THAT THE SUBJECT PROPERTY IS NOT PROPER TO BE ACQUIRED AND DISTRIBUTED UNDER THE COMPREHENSIVE AGRARIAN REFORM PROGRAM AND HAS LONG BEEN CONVERTED TO NON-AGRICULTURAL USES.

5)   THE RULING OF THE OFFICE OF THE PRESIDENT THAT DAR MEMO CIRCULAR NO. 11-79 AUTHORIZED THE CONVERSION OF THE PROPERTY IS ENTITLED TO GREAT RESPECT.

6)   THE PAGDANGANAN ORDER DIRECTED THE ISSUANCE OF A CERTIFICATE OF FINALITY OF THE BRAGANZA ORDER.  HENCE, THE LATTER CAN NO LONGER BE REVIEWED OR MODIFIED.

7)   THE EQUITIES MILITATE AGAINST PETITIONERS BECAUSE THEY ARE BARRED BY LACHES WHILE ALI HAS ALREADY DEVELOPED THE SUBJECT PROPERTIES IN KEEPING WITH ITS URBANIZED SETTING.[37]

The core issue to be addressed is whether there exists legal ground to cancel or revoke the conversion order previously issued on the subject land.

But first, the issue of prescription, which was raised by the petitioner in opposition to the petition for revocation filed by the respondents before the DAR Secretary on May 19, 2000, must be resolved.

 

 

 

The Petition for Cancellation/

Revocation of Conversion

Order is not time-barred

 

Petitioners contended that respondents’ action had prescribed, citing Section 34 of DAR AO No. 1, Series of 1999 which states:

 

Article VII

 

Cancellation or Withdrawal of Conversion Orders

 

SEC. 34. Filing of Petition. - A petition for cancellation or withdrawal of the conversion order may be filed at the instance of DAR or any aggrieved party before the approving authority within ninety (90) days from discovery of facts which would warrant such cancellation but not more than one (1) year from issuance of the order: Provided, That where the ground refers to any of those enumerated in Sec. 35 (b), (e), and (f), the petition may be filed within ninety (90) days from discovery of such facts but not beyond the period for development stipulated in the order of conversion:  Provided further, That where the ground is lack of jurisdiction, the petition shall be filed with the Secretary and the period prescribed herein shall not apply.

Resolving the issue, Secretary Morales found the above inapplicable as AO No. 1 applies only to those applications filed subsequent to its effectivity, as can be gleaned from Article II, Section 3 thereof.  Instead, the provisions of DAR AO No. 12, Series of 1994 were applied, which administrative order did not provide for any prescriptive period for the filing of such petition.  Petitioners however, assail this interpretation as leading to absurd consequences because then conversion orders filed after the effectivity of DAR AO No. 1 would have to reckon with the one-year prescriptive period for filing a petition for revocation/cancellation whereas those petitions for revocation of conversion orders rendered before the effectivity of DAR AO No. 1 would be imprescriptible.[38] 

Further, petitioners pointed out that Section 3(d), Article II of DAR AO No. 1 provides that the rules shall apply to those agricultural lands “reclassified to residential, commercial, industrial, or other non-agricultural uses on or after the effectivity of RA 6657 on June 15, 1988 pursuant to Section 20 of RA 7160 and other pertinent laws and regulations, and are to be converted to such uses.” Since the property had already been reclassified for residential, commercial and industrial use as early as February 9, 1996 by virtue of Sangguniang Bayan Resolution No. ML-008 of the Municipality of Silang, it follows that respondents’ petition for revocation is barred by Section 34 of DAR AO No. 1.  Petitioners likewise stressed that respondents failed to seasonably avail of remedies under existing rules such as filing of motion for reconsideration and appeal to the OP or the CA. 

The majority ruled that the petitioners may no longer question the conversion order which had attained finality considering that the action for its cancellation was filed almost three years after the said order had been in force and effect.

          I disagree on the ground that this is a clear misapplication of the rules on conversion.

As provided in Section 34, Article VII of DAR AO No. 1, a petition for cancellation/withdrawal of conversion order may be filed within the period of development provided in the order of conversion if the ground refers to any of those mentioned in Section 35 (b), (e) and (f):

x x x x

(b) Noncompliance with the conditions of the conversion order;

x x x x

(e) Conversion to a use other than that authorized in the conversion order; and/or

(f)  Any other violation of relevant rules and regulations of DAR.   (Emphasis supplied.)

Moreover, the October 31, 1997 conversion order explicitly stated that–

The DAR reserves the right to cancel or withdraw this order for misrepresentation of facts integral to its issuance and for violation of the rules and regulation on land use conversion.

Petitioners are bound by the above express condition in the conversion order issued to it such that even if DAR AO No. 1 is applicable, the respondents raised as among the grounds for the revocation or cancellation of the conversion order the non-compliance with the condition of developing the area within five years, the illegal sale transaction made by CCFI to evade coverage under CARL, and CCFI’s gross misrepresentation before the DAR that the land subject of conversion had already been reclassified to non-agricultural uses when in fact the Municipality of Silang does not have an approved town plan/zoning ordinance as of October 24, 1997 and what was passed was a mere resolution and not an ordinance, and pressure exerted on the tenant-farmers left them with no alternative but to accept partial payments and sign waivers.  Such alleged misrepresentation of facts and violation of the rules and regulations on land conversion were legally sufficient for the filing of a petition to revoke or cancel the October 31, 1997 order, and to exempt the same from the one-year prescriptive period laid down in DAR AO No. 1.  The situation clearly falls under the first exception under Section 34 in relation to Section 35 (f) of AO No. 1 such that the petition may be filed within five years – the period of development stated in the order of conversion.  Since the order of conversion was issued on October 31, 1997, respondents have until October 31, 2002 within which to seek its revocation.  Respondents’ act of filing the petition for revocation on May 19, 2000 was therefore well within the prescriptive period set by DAR AO No. 1.

 

The majority also cited this Court’s ruling in Villorente v. Aplaya Laiya Corp.[39]  However, the facts in said case are not on all fours with the present case. In that case, the petitioners farmer-beneficiaries who did not appeal the conversion order, proceeded to negotiate with the respondent regarding disturbance compensation, but after one year of protracted negotiations decided to file a motion for reconsideration of the conversion order, praying that it be set aside and should not be enforced due to non-observance of due process as they allegedly were belatedly notified.  When their motion for reconsideration was denied by the DAR, petitioners filed a petition for review before the CA which dismissed the same.  We sustained the CA and ruled that estoppel had set in considering that the petition for review filed by the petitioners with the CA was merely an afterthought, when negotiations with the respondent for their claims for disturbance compensation failed.  Having agreed to negotiate with the respondent for the disturbance compensation which they claimed was due them, conformably with the Conversion Order, we held that petitioners can no longer assail the conversion order which had become final and executory.

In the case at bar, the Court is confronted with a different factual milieu which involves not an appeal from a conversion order but a petition to cancel or revoke the same. A petition for cancellation or withdrawal of the conversion order is  a remedy provided under DAR AO No. 01, Series of 1999 (Revised Rules and Regulations on the Conversion of  Agricultural Lands to Non-Agricultural Uses), already in force when respondents filed their petition before the DAR. 

The finality of the 1997 Conversion Order issued to CCFI notwithstanding, Sec. 34 of AO No. 01 provides a one-year period from the issuance of the order within which to file the petition.  By way of an exception, a petition for cancellation may still be filed even beyond said period if the grounds for cancellation are those enumerated in Sec. 35 (b), (e) and (f), but not beyond the period for development stipulated in the order of conversion. Since the respondents raised as grounds for cancellation of the conversion order the 1995 non-compliance with the conditions of the conversion order, the 1995 sale between CCFI and ALI of the subject agricultural lands, and gross misrepresentation on the requisite reclassification pursuant to local sanggunian ordinance – grounds which fall under Sec. 35 (b) and (f) -- the period for filing the petition was five years.  Hence, the petition was timely filed in May 2000.

 

 

Revocation of Conversion

Order made by Secretary

Morales was proper as the

lands were already

placed under CARP

coverage

 

The timeliness of respondents’ petition for revocation having been established, the principal issue for resolution is to determine whether the October 31, 1997 order of conversion was validly revoked by Secretary Morales.

Executive Order No. 129-A, Series of 1987 vests on the DAR “exclusive authority to approve or disapprove [applications for] conversion of agricultural lands for residential, commercial, industrial, and other land uses as may be provided for by law.”  Pursuant to its mandate, DAR promulgated AO No. 12 on October 24, 1994, which was in force at the time CCFI filed the application for conversion and its approval by the DAR.  Paragraph VI, subparagraph E of AO No. 12, Series of 1994 provides:

E.  No application for conversion shall be given due course if 1) the DAR has issued a Notice of Acquisition under the Compulsory Acquisition (CA) process; 2) Voluntary Offer to Sell (VOS), or an application for stock distribution covering the subject property has been received by DAR; or 3) there is already a perfected agreement between the landowner and the beneficiaries under Voluntary Land Transfer (VLT). (Emphasis and underscoring supplied.)

            Since a Notice of Acquisition was already issued over the subject property, DAR clearly erred in giving due course to and granting CCFI’s application for conversion. 

The majority decision, however, holds that respondents are barred from asserting that Notice of Acquisition had been issued over the subject landholding because such cannot be raised for the first time on appeal.  Besides, the respondents were unable to substantiate their claim as no such document is found in the records of the DAR, OP and the CA.

The decision thus emphasized in bold print: “In fact, the records show that this issue was not raised in the original Petition for Certiorari in the second Motion for Reconsideration filed by the farmers before the DAR, and that no Notice of Acquisition was attached to their Appeal Memorandum to the OP” and adding that “[A]s a consequence, the OP, Secretary Pagdanganan, Secretary Braganza, and Secretary Morales did not have any opportunity to dwell on this issue in their Orders and Decision.”  Obviously, the majority deemed it of central importance so that the non-production of this document resulted in grave violation of petitioners’ right to due process, which cannot be countenanced.

With due respect to the ponente and my esteemed colleagues,  I cannot agree with this approach as it conveniently overlooks substantive rights on a mere invocation of a procedural norm.

 

 

The existence of Notice

of Acquisition is an

admitted fact; no

proof necessary

 

Records of the DAR would show that the fact of issuance of notices of coverage and acquisition over the subject property was never in issue, notwithstanding the absence of reference to such issuances in the Morales Order.   MBC and CCFI simply resorted to all legal maneuvers to delay their implementation.

That the lands have already been placed under CARL coverage even before MBC acquired the subject property is further evidently confirmed by the following documentary evidence: (1) the stipulation/condition in the Deed of Partial Redemption and Deed of Absolute Sale, both dated August 25, 1995, in which CCFI undertook to obtain DAR approval for CARP exemption or conversion to non-agricultural use; (2) CCFI’s letter-request dated May 7, 1996 addressed to the DAR Regional Director for the lifting of the Notice of Acquisition; (3) BSP’s request in 1995 made in behalf of MBC for exemption of the subject property from CARL coverage, and the letter-denial of DAR Secretary who directed the distribution of the land to qualified farmer beneficiaries; (4) the Decision dated October 11, 1996 of Executive Secretary Ruben D. Torres on the appeal of BSP from the DAR Secretary’s denial of its request for exemption, in which the DAR was directed to defer proceeding with the distribution of  lands already covered by CARL and petitioner was  granted the opportunity to present proof  that the lands are qualified for exemption or conversion;  and (5) MBC’s request for DAR clearance in October 1997 to sell its landholdings placed under CARL coverage, which includes the subject property. 

Indeed, records bear out that on May 7, 1996, counsel for CCFI wrote the DAR Regional Director to request the lifting of the Notice of Acquisition,[40] citing as reasons the alleged reclassification of the lands from  agricultural to commercial/industrial by the Municipal Council of Silang, DA certification that the property is eligible for conversion, non-irrigated character of the land, and absence of tenants except for some occupants who had executed waiver of right and endorsed the lifting of the notice of acquisition.  It is to be noted that such request was made in compliance with the terms and conditions of the Deed of Partial Redemption dated December 29, 1995 executed between CCFI and MBC, as well as the Deed of Absolute Sale on even date in favor of ALI. Under par. II, (b)(3) of the Deed of Absolute Sale, CFI undertook to secure exemption or conversion from the DAR for the two parcels of land it sold to ALI, by February 15 and March 15, 1996.

Moreover, the request for the lifting of the Notice of Acquisition was made following the denial by Secretary Ernesto Garilao of MBC’s request for a DAR order exempting the subject lands from the coverage of CARL, under letters dated February 14, 1995 and June 13, 1995.[41]  While MBC appealed the said denial to the OP, CCFI, under the Deed of Absolute Sale with ALI, remained duty-bound to fulfill the condition precedent to the direct payment of down payment to MBC (equivalent to payment of down payment due to CCFI under the contract of sale), that is, to obtain an order of exemption or land conversion from DAR.

Notwithstanding the favorable ruling issued by Executive Secretary Ruben Torres who ordered the remand of the case to the DAR for further proceedings to determine whether the subject lands can qualify for exemption or conversion, and issued a cease and desist order against proceedings for compulsory acquisition being undertaken by the DAR, MBC still sought DAR clearance to sell all its foreclosed assets which have been placed under CARP coverage.  This confirms that the subject lands have already been subjected to compulsory acquisition under R.A. No. 6657.  Notably, Secretary Garilao in his Order dated 03 October 1997[42] clarified that despite the sale to be effected by MBC, which is allowed under Sec. 73-A of R.A. No. 6657, as amended by R.A. No. 7881, the subject lands remain subject to compulsory transfer pursuant to Sec. 71 of said law, and also directed that only those parcels not yet covered by CLOAs or EPs may be sold or conveyed by MBC.  However, MBC and CCFI failed to disclose that the subject lands have already been sold by CCFI to ALI as early as December 1995.  Secretary Garilao acknowledged the fact that a cease and desist order was issued by the OP but nevertheless maintained that the landholdings remained subject to the provisions on acquisition under CARL although the acquisition of petitioners’ properties is thereby suspended.  The clearance to sell requested by MBC was thus granted simply because the sale and/or transfer of agricultural land in case such sale, transfer or conveyance is made necessary as a result of a bank’s foreclosure of the mortgaged land, is permitted under Sec. 73-A, R.A. No. 6657, as amended by R.A. No. 7881.  Such clearance was granted to enable MBC, the foreclosing mortgagee bank, to sell the subject lands as a consequence of foreclosure under the law, but not for the purpose of its disposition by CCFI.  Conveyance or sale by the original landowner is subject to restrictions or limitations under the CARL.

Considering the attendant circumstances, CCFI’s May 1996 request for the lifting of Notice of Acquisition constitutes an admission against interest of the fact that such notice have been issued following the earlier issuance of Notice of Coverage over its landholdings.  Admissions against interest are those made by a party to a litigation or by one in privity with or identified in legal interest with such party, and are admissible whether or not the declarant is available as a witness.[43]  An admission against interest is the best evidence that affords the greatest certainty of the facts in dispute, based on the presumption that no man would declare anything against himself unless such declaration is true.[44]

          As the successor-in-interest of CCFI, ALI is bound by the admission under the aforesaid request to lift Notice of Acquisition made by CCFI and may not be allowed in this case to dispute its existence and issuance.  Besides, the fact that the DAR was already in the process of distributing the lands under the Compulsory Acquisition at the time of the sale and application for conversion, was never disputed by the petitioners until the respondents mentioned it in their appeal memorandum filed with the OP.

While it is true that an issue which was neither alleged in the complaint nor raised during the trial cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play, justice, and due process, the same is not without exception.[45]   The CA under Section 3, Rule 43 of the 1997 Rules of Civil Procedure, as amended, can, in the interest of justice, entertain and resolve factual issues.[46]  In concluding that the conversion order was improperly granted because there have been issued a notice of coverage and notice of acquisition covering the subject landholdings, the CA is deemed to have duly considered all relevant evidence on record inasmuch as it painstakingly analyzed the orders, not only of the OP but also those rendered by the three DAR Secretaries.

It is of course well-settled that points of law, theories, issues and arguments not brought to the attention of the lower court need not be -- and ordinarily will not be -- considered by a reviewing court, as they cannot be raised for the first time at that late stage.  There are, however, exceptions to the general rule. Though not raised below, the following issues may be considered by the reviewing court:  lack of jurisdiction over the subject matter, as this issue may be raised at any stage; plain error; jurisprudential developments affecting the issues; or the raising of a matter of public policy.[47]  

In this case, the CA found as crucial the previous issuance of a notice of coverage and notice of acquisition to the resolution of the issue of whether or not the OP erred in sustaining the Braganza and Pagdanganan orders which reversed the Morales Order revoking the conversion order granted to CCFI.  Ruling in the affirmative, the appellate court declared that such reversal was grave error considering that under the provisions of DAR AO No. 12, Series of 1994, such application for conversion should not have been entertained in the first place.  Assuming arguendo this was raised only before the OP, the CA’s finding and conclusions cannot be assailed as reversible error or grave abuse.

 

Petitioners committed

serious violations of

DAR rules and

regulations

 

          Even assuming that respondents were unable to produce a copy of the Notice of Acquisition, such did not negate or cure petitioners’ serious violations of DAR rules and regulations warranting the cancellation of the conversion order, pursuant to DAR AO No. 01, Series of 1999.

The ground cited in the Morales Order was the failure of CCFI to register the sale to ALI, which was made only four years later (1999) after its application for conversion was approved.  This was deliberately done in view of the retention limits set by law on ownership of agricultural lands after the effectivity of CARL.  Secretary Morales exhaustively discussed this finding which justified the revocation of the conversion order, thus:

 

The registration of the absolute deed of sale between respondents involving the subject property was made on September 29, 1999, almost two (2) years after the conversion of the land from agricultural to residential, commercial and industrial uses was approved on October 31, 1997.

 

The sale or transaction between Capitol and ALI involving the subject parcel, which at that time of sale is still agricultural, is subject to the prohibition on any sale, disposition, lease, management contract or transfer of possession of private lands executed by the original landowner in violation of the act, and the requirement imposed upon the Registers of Deeds to inform the DAR within thirty days of any transaction involving agricultural lands in excess of five hectares, as provided for under paragraph 4, Section 6 of RA 6657.  These same prohibitions and requirements are contained under DAR AO 1, Series of 1989, the Rules and Procedures Governing Land Transactions, then in force at the time of the sale.

 

... No reporting of this sale of agricultural land which is beyond five (5) hectares to the DAR can be made by the Register of Deeds, and the transferee ALI, can not be required to furnish the Register of Deeds of an affidavit attesting that their total landholding as a result of the said acquisition do not exceed five (5) hectares, since the sale was not brought to the attention of the Register of Deeds until lately.  The Register of Deeds who is tasked to perform such requirements cannot do so until the sale was brought to the attention of the Register of Deeds, and to the public at large, only from the day of the registration of the deed.

 

At the time of the registration of the deed on September 29, 1999, the subject land had ceased to be an agricultural land since it has already been converted to other uses by virtue of an approved conversion application.  As such, the requirement of reporting by the Register of Deed[s] of any transaction involving agricultural lands beyond five (5) hectares, was not made as it is no longer necessary.

 

The conclusion that can be drawn from the chronological events answers the issue at hand in the affirmative.  There was clear intention on the part of respondents to evade the coverage of the land under CARP.  Not only that, they have violated and failed to comply with the requirements on transactions on agricultural lands under RA 6657 and pertinent DAR administrative order.  These will warrant the revocation/withdrawal of the order as provided under item XV(c) of DAR AO 12, Series of 1994.

 

At the time of the sale, there was a requirement that once a transaction involving an agricultural land in excess of five (5) hectares is known to the Register of Deeds, he is to report the same to the Department within thirty (30) days.  The transferee of the said land is likewise required to submit an affidavit to the Register of Deeds … and the BARC Chairman, attesting that he does not own more than five (5) hectares of agricultural land as a result of the said transactions.  These requirements find justification in Section 6 of RA 6657 on 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-sized farm…but in no case shall retention by landowner exceed five (5) hectares.”

 

The sale made in 1995 was not registered within a reasonable time but nearly four (4) years after the sale in 1999, at the time the land is no longer agricultural.  This is in order to avoid compliance with the abovementioned requirements on sale of agricultural land.  Had they registered the sale at the time the land was still agricultural in nature and not yet reclassified, the transaction, when reported can be struck down as null and void.  Besides, at that time, the transferee, ALI, can not attest that its landholding does not exceed the retention limit, as a result of the transaction because they hold more.[48]  (Emphasis and italics supplied.)

The above findings and ruling of Secretary Morales were upheld by the CA which noted that what renders the conversion order revocable was the deliberate attempt of both CCFI and ALI to conceal their sale transaction in order to circumvent the agrarian laws.  The Braganza ruling that the conveyance to ALI did not transfer ownership since it was a conditional sale and hence not proscribed, overlooks the fact that a Notice of Acquisition had already been issued.  Allowing the landowner to use this convenient ploy to evade CARP coverage ultimately defeats the purpose of the agrarian reform program of achieving social justice through equitable distribution of large landholdings to tenants or farmers tilling the same.

As mentioned earlier, DAR clearance was given authorizing MBC to sell the foreclosed mortgaged land.  The clearance to sell does not cover a sale by landowner CCFI.  Any sale by CCFI at the time the land was still agricultural would be an illegal transfer under Sec. 73 of R.A. No. 6657 for which DAR clearance could not have been issued.  Section 6 of the same Act allows only the retention limit of the landowner up to five (5) hectares.  This means that the landowner is only allowed to dispose of his property within his retention limit and the excess of five (5) hectares shall be covered by CARP for distribution to qualified farmers and beneficiaries.[49]  CCFI then could not have obtained the requisite DAR clearance for it to sell more than 200 hectares of land to ALI.  Under DAR rules then already in force, in all transactions involving the transfer or sale of agricultural land to another, the issuance of a DAR clearance is an essential requisite in order that it may be considered a valid transfer. This is in view of DAR’s policy to protect the rights of tenants and other farmworkers who may be displaced therein.[50]

 

Petitioners failed to comply

with the requirements for

a valid reclassification

Petitioners submitted Resolution No. ML-008, Series of 1996 adopted by the Sangguniang Bayan of Silang in support of their application for conversion. But as found by Secretary Morales, said resolution merely approved CCFI’s request for reclassification. 

Section 20 of R.A. No. 7160 states that:

          SECTION 20.  Reclassification of Lands. – (a) A city or municipality may, through an ordinance passed by the sanggunian after conducting public hearings for the purpose, authorize the reclassification of agricultural lands and provide for the manner of their utilization or disposition in the following cases: (1) when the land ceases to be economically feasible and sound for agricultural purposes as determined by the Department of Agriculture or (2) where the land shall have substantially greater economic value for residential, commercial, or industrial purposes, as determined by the sanggunian concerned: Provided, That such reclassification shall be limited to the following percentage of the total agricultural land area at the time of the passage of the ordinance:

            x x x x            

            (e) Nothing in this Section shall be construed as repealing, amending, or modifying in any manner the provisions of R.A. No. 6657.

The document submitted by petitioners being a mere resolution and not an ordinance, it cannot support their application for conversion.  Even assuming arguendo that the Sangguniang Bayan of Silang passed an ordinance to the effect, still such reclassification would be legally infirm. Memorandum Circular No. 54 “Prescribing the Guidelines Governing Section 20 of RA 7160 Otherwise Known as the Local Government Code of 1991 Authorizing Cities and Municipalities to Reclassify Agricultural Lands Into Non-Agricultural Uses” issued by President Fidel V. Ramos on June 8, 1993 specified the scope and limitations on the power of the cities and municipalities to reclassify agricultural lands into other uses. 

SECTION 1. Scope and Limitations. – (a) Cities and municipalities with comprehensive land use plans reviewed and approved in accordance with EO 72 (1993), may authorize the reclassification of agricultural lands into non-agricultural uses and provide for the manner of their utilization or disposition, subject to the limitations and other conditions prescribed in this Order.

x x x x

(d) In addition, the following types of agricultural lands shall not be covered by the said reclassification:

(1)        Agricultural lands distributed to agrarian reform beneficiaries subject to Section 65 of RA 6657;

(2)   Agricultural lands already issued a notice of coverage or voluntarily offered for coverage under CARP.

(3)        Agricultural lands identified under AO 20, s. of 1992, as non-negotiable for conversion as follows:

x x x x (Emphasis supplied.)

The power of the LGUs to reclassify agricultural lands is not absolute and the reclassification of agricultural lands by LGUs shall be subject to the requirements of land use conversion procedure.[51]  The exclusion of agricultural lands already covered by CARP from the operation of Section 20 of R.A. No. 7160 was reiterated in the statement of policies and governing principles of DAR AO No. 12, Series of 1994 which expressly directs the DAR not to give due course to applications for conversion of lands already issued a Notice of Acquisition.  Clearly, the cancellation by Secretary Morales of the 1997 Order of conversion issued by Secretary Garilao, for violation of existing DAR rules and regulations, was proper and justified.

It is also to be noted that in the 1997 Order, Secretary Garilao approved the conversion and exemption from CARP coverage sought by CCFI despite the lack of documentary requirements enumerated by the CLUPPI-1.  While the CLUPPI-1 recommended the issuance of an order stating that the land is exempt, it nonetheless explicitly declared that such approval for exemption is subject to the submission of said documents.  These documents are:

1.      Provincial Land Use Plan showing that the area is part of those reclassified into residential/commercial/industrial use;

2.      Statement of justification of Economic/Social benefits of the proposed subdivision project;

3.      Development Plan including the Work and Financial Plan;

4.      Proof of Financial and Organizational capability of the proponent, and

5.      Proof of disturbance compensation for the remaining unpaid farmer beneficiaries.[52]  

Petitioners nonetheless contend that the recommendation of CLUPPI-1 Executive Committee to exempt the subject property from CARP coverage in the light of the finding of the joint ocular inspection with the MARO of Silang that “[t]he topography of the landholding is hilly and has an average slope of more than 18%, undeveloped x x x” and the “dominant use of the surrounding area is industrial/forest growth”, was never disputed.  They point out that even the Morales Order noted that the property had long been converted into non-agricultural uses when the conversion order was issued on October 31, 1997.  

At the time of CCFI’s filing of application for conversion, the property was agricultural land as defined under DAR rules and regulations. In its Revised Rules and Regulations for Conversion of Agricultural Lands to Non-Agricultural Uses (DAR AO No. 1, Series of 1990, issued on March 22, 1990), DAR itself defined “agricultural land” thus –

x x x Agricultural land refers to those devoted to agricultural activity as defined in RA 6657 and not classified as mineral or forest by the Department of Environment and Natural Resources (DENR) and its predecessor agencies, and not classified in town plans and zoning ordinances as approved by the Housing and Land Use Regulatory Board (HLURB) and its preceding competent authorities prior to 15 June 1988 for residential, commercial or industrial use. (Italics supplied.)

Respondents attached to their petition for revocation a certification issued by Board Secretary Charito B. Lansang that per HLURB records, the Municipality of Silang, Cavite does not have a town plan/zoning ordinance/comprehensive land use plan approved by the Board as of July 23, 2003. The OP clearly erred in stating that it was an issue raised for the first time on appeal.  In any case, DAR AO No. 12 itself provides that:

4.      If the city/municipality does not have a comprehensive development plan and zoning ordinance duly approved by HLURB/SP but the dominant use of the area surrounding the land subject of the application for conversion is no longer agricultural, or if the proposed use is similar to, or compatible with the dominant use of the surrounding area as determined by the DAR, conversion may be possible.[53] (Emphasis supplied.)

          The above exception notwithstanding, DAR AO No. 12 is categorical in declaring the policy that no application for conversion shall be given due course if the DAR has issued a Notice of Acquisition under the Compulsory Acquisition process.[54]  

The OP’s “policy pronouncement”

is not an imprimatur to disregard

existing DAR rules and defeat

the rights of agricultural

tenants and farm workers

 

 

The majority decision stresses that the conversion and/or reclassification of the subject lands has become an operative fact, citing the findings of NIA, PCA, DENR and CLUPPI. It was also noted that respondent farmers themselves “do not deny that at the time of the filing of the Petition for Revocation, the lands in question were no longer agricultural.”

I maintain my disagreement that the grant of conversion order was legally infirm.

The CLUPPI indeed recommended the approval of the application for land conversion, its stated basis being the finding of the ocular inspection team that the property is “beyond 18º in slope, idle and undeveloped” and is “also considered eligible for exemption subject to the submission of the required documents.  However, exemption alone even if granted will not suffice if the intention of the landowner is to modify the actual use of the land. Compliance with the rules on land conversion is therefore still necessary to obtain a DAR conversion order.[55] 

The majority further held that the policy declaration in DAR AO No. 12, Series of 1994 was a mere guiding principle, which should not be interpreted as an absolute proscription on conversion, citing the same administrative order which likewise allowed conversion if the use has changed due to urbanization or the land has ceased to be economically feasible. It specifically cites par. B(3), Part VI of DAR AO 12-94 which allows conversion when the land will have greater economic value for residential, commercial or industrial purposes “as certified by the Local Government Unit.”  According to the majority, this signifies that the thrust of the community and the local government is the conversion of lands, and hence the two resolutions issued by the Sangguniang Bayan of Silang and the Sangguniang Panlalawigan of Cavite, are sufficient compliance with the requirement of the conversion order.

I disagree with this proposition because it overlooks the injustice wrought upon the agricultural tenants and farm workers who have been deprived of the benefits of the CARP designed to uplift their condition.

The OP remanded the case to the DAR for further proceedings in order to give the petitioners opportunity to prove that their landholdings are qualified for exemption and/or conversion, as a matter of due process highlighted by the public interest involved (i.e., rehabilitation of financially distressed MBC). While the said office indeed underscored the need to “balance the interest between the petitioner bank (under receivership by the BSP), its creditors [including the BSP to which MBC was indebted in the total amount of P8,771,893,000 representing 85% of its total indebtedness] and the general public on one hand, and the faithful implementation of agrarian reform program on the other, with the view of harmonizing them and ensuring that the objectives of the CARP are met and satisfied,”  this should not signal disregard of existing DAR rules and regulations nor overlook patent violations thereof committed by the petitioners.  As far as the DAR is concerned, the correct perspective has been expressed in its declaration that “[S]ince RA. No. 6657 is a social welfare legislation, the rules on exemptions, exclusions and/or conversions must be interpreted restrictively and any doubt as to the applicability of the law should be resolved in favor of inclusion.”[56]

In reality, the buy-out arrangement did not involve such “public interests” balancing, but one which clearly favored the landowner CCFI.  The sale by CCFI, in contravention of DAR rules and regulations, enabled it to evade CARP coverage while paying off its huge debts to the already financially distressed MBC, at the expense of its tenants and farm workers who would have rightfully benefitted from the distribution of the vast agricultural landholding had the compulsory acquisition process not been scuttled by the combined efforts of MBC, CCFI and ALI since the lands were placed under CARP coverage in 1989.

In these situations where the mortgaged agricultural lands are foreclosed, the defaulting landowner alone should bear the loss in case of deficiency because the foreclosure buyer is merely substituted to the landowner entitled only to just compensation pursuant to R.A. No. 6657 and its implementing rules.[57]  While Sec. 73-A of the law was amended by R.A. No. 7881 to permit the sale of mortgaged agricultural lands made necessary as a result of a bank’s foreclosure, it did not exempt the land sold from the operation of CARP.

DAR Opinion No. 09, Series of 2008[58] states this unchanged policy with respect to mortgaged agricultural lands foreclosed by a bank, even if the latter is under receivership/liquidation:

 

FORECLOSURE BY PRIVATE BANK PLACED UNDER RECEIVERSHIP/LIQUIDATION STILL UNDER ACQUISITION AND DISTRIBUTION TO QUALIFIED BENEFICIARIES

 

          Private bank’s foreclosed assets, regardless of the area, are subject to existing laws on their compulsory transfer under the General Banking Act as a consequence of foreclosure and acquisition under Section 16 of R.A. No. 6657.  As long as the subject property is agricultural, the same shall still be subjected to acquisition and distribution to qualified beneficiaries pursuant to the provisions of the CARL. Private bank may sell to third parties their foreclosed asset, as a consequence of foreclosure, but still subject to acquisition under CARP.

 

          Even if the subject foreclosed property was placed under receivership or liquidation by the BSP, the same shall still be subjected to acquisition under CARL. In case said foreclosed property was sold or will be sold as a consequence of liquidation or receivership by the BSP, the same will still be subjected to acquisition and eventual distribution to agrarian reform beneficiaries pursuant to CARL.

 

 

            In this case, MBC sought authority from this Court to sell its acquired assets in G.R. No. 85960 in view of the injunction issued  enjoining the BSP from liquidating MBC pending the outcome of Civil Case No. 87-40659 pending in the RTC of Manila, Branch 23.  The Court authorized the intended sale “under the best terms and conditions” to enable the MBC to settle its obligations to BSP.  Records fail to show that MBC disclosed to this Court that among those assets requested to be sold are agricultural lands already covered by CARP.  

Section 2 of R.A. No. 6657 declares in no uncertain terms that the welfare of the landless farmers and farmworkers will receive the highest consideration to promote social justice and to move the nation toward sound rural development and industrialization, and the establishment of owner cultivatorship of economic-sized farms as the basis of Philippine agriculture.  It is this fundamental goal that breathes spirit into the strict regulation of conversions and exemptions at the instance of landowners.  Landowners such as CCFI may not stall the acquisition proceedings started as early as 1989, dragging it for  several years – in this case ten years – and later claim that the land had already ceased to be economically feasible for agricultural purposes.  Precisely, the CARL had envisioned the advent of urbanization that would affect lands awarded to the farmers.  However, it is altogether a different matter when the CARP was never even given the chance to be implemented as a result of the landowner’s legal maneuvers until conditions of the land had so changed with the lapse of time.  Of late, the unabated land-use conversion from agricultural to industrial, commercial, residential or tourist purposes has been described as “systematically reversing land reform in a way that was never foreseen by the framers of CARL.”[59]

That CARL must first be implemented as a social justice measure prior to these perceived developments in the locality is evident from a reading of Section 65, thus:

SEC. 65. Conversion of lands.After the lapse of five (5) years from its award,  when the land ceases to be economically feasible and sound for agricultural purposes, or the locality has become urbanized and the land will have a greater economic value for residential, commercial or industrial purposes, the DAR upon application of the beneficiary or the landowner, with due notice to the affected parties and subject to existing laws, may authorize the reclassification or conversion of the land and its disposition: Provided, That the beneficiary shall have fully paid his obligation. (Emphasis supplied.)

It is my humble view that in resolving this controversy, the interest of the landless farmers is paramount.  

Referral to the Court En Banc

 

Given the facts and issues set forth, I reiterate my position that this case is proper for resolution by the Court En Banc pursuant to Section 3 (k), Rule 2 of the Internal Rules of the Supreme Court which states:

SEC. 3.  Court en banc matters and cases. --  The Court en banc shall act on the following matters and cases:

x x x x

(k)  Division cases where the subject matter has a huge financial impact on businesses or affects the welfare of a community;

x x x x

            The huge financial impact of the Court’s ruling in this case is clearly apparent in the figures involved in current transactions within the Nuvali estate, reportedly at P11,000 per square meter, or more than P24 Billion plus for the entire 221.3048 hectares.  Moreover, there is also no dispute that with the billion-peso loan owed and apparently not yet fully settled by MBC with the BSP, the substantial amounts already spent for the initial payment of disturbance compensation to tenants-beneficiaries, improvements began on the land and mounting litigation costs incurred by the parties for more than ten years already, the final disposition of this case would have tremendous effect on the banking and real estate sectors, as well as significant bearing on the economic well-being of the affected tenants-beneficiaries.

          I also submit to the discretion of my colleagues the possible transfer of this case to the Court en banc, in accordance with sub-section (l) of the same Rule which reads:

(l)   subject to Section 11(b) of this rule, other division cases that, in the opinion of at least three Members of this Division who are voting and present, are appropriate for transfer to the Court en banc;

I therefore vote to DENY the present petition for review on certiorari for lack of merit and AFFIRM the Decision dated January 31, 2007 and Resolution dated May 25, 2007 of the Court of Appeals in CA-G.R. SP No. 86321.

Should there be further proceedings in this case, I also vote that the same be referred to the Banc for appropriate action.

                                                                   

           

                                                          MARTIN S. VILLARAMA, JR.

                                                                        Associate Justice

 



[1]       CA rollo, pp. 152-157.

[2]       DAR records, folder #3 of 3, pp. 1455-1457.

[3]       CA rollo, p. 157.

[4]       DAR records, folder #3 of 3, p. 1443.

[5]       Id. at 1443-1444.

[6]       Id. at 1445-1454.

[7]       Id. at 1448, 1452-1453.

[8]       Id. at 1465-1477.

[9]       Id. at 1466 and 1469.

[10]     CA rollo, p. 157.

[11]     DAR records, folder #3 of 3, p. 1482; CA rollo, pp. 60-65.

[12]     DAR records, folder #1 of 3, p. 526.

[13]     Id. at 519-523.

[14]     DAR records, folder #3 of 3, pp. 1481-1490.

[15]     Id. at 1489-1490.

[16]     Id. at 1491-1493.

[17]     Id. at 1494-1497.

[18]     CA rollo, pp. 38-40.

[19]     Id. at 39-40.

[20]     Id. at 38.

[21]     Id. at 39.

[22]     DAR records, folder #1 of 3, pp. 577-582; CA rollo, pp. 101-106.

[23]     SEC. 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-sized farm, 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 lands 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 their 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.

                x x x x

                Upon the effectivity of this Act, any sale, disposition, lease, management contract or transfer of possession of private lands executed by the original landowner in violation of this Act shall be null and void: Provided, however, That those executed prior to this Act shall be valid only when registered with the Register of Deeds within a period of three (3) months after the effectivity of this Act. Thereafter, all Registers of Deeds shall inform the [Department of Agrarian Reform] within thirty (30) days of any transaction involving agricultural lands in excess of five (5) hectares. (Emphasis supplied.)

[24]     Rules and Procedures Governing Land Transactions.

[25]     DAR records, folder #1 of 3, p. 566; CA rollo, p. 120.

[26]     Id. at 527-528. The Sangguniang Bayan Resolution was issued on February 9, 1996.

[27]     CA rollo, pp. 66-83.

[28]     Id. at 81.

[29]     See DAR records, folder #2 of 3, pp. 1357-1359.

[30]     CA rollo, pp. 84-94.

[31]     Rollo, pp. 158-164.

[32]     CA rollo, pp. 41-48, 57 and 96.

[33]     Supra note 3.

[34]     Id. at 207-208.

[35]     Supra note 1.

[36]     Id. at 64-65.

[37]     Id. at 20-21.

[38]     Id. at 29-30.

[39]     G.R. No. 145013, March 31, 2005, 454 SCRA 493.

[40]    DAR records (Vol. I), pp. 7-8.

[41]     Rollo, pp. 326-331.

[42]     DAR records (Vol. 3).

[43]     Lazaro v. Agustin, G.R. No. 152364, April 15, 2010, 618 SCRA 298, 308, citing Unchuan v. Lozada, G.R. No. 172671. April 16, 2009, 585 SCRA 421, 435.

[44]     Taghoy v. Tigol, Jr., G.R. No. 159665, August 3, 2010, 626 SCRA 341, 350, citing Heirs of Miguel Franco v. Court of Appeals, 463 Phil. 417, 425 (2003); Yuliongsiu v. PNB, 130 Phil. 575, 580 (1968); Republic v. Bautista, G.R. No. 169801, September 11, 2007, 532 SCRA 598, 609; and Bon v. People, 464 Phil. 125, 138 (2004).

[45]     Milestone Farm, Inc. v. Office of the President, G.R. No. 182332,  February 23, 2011, citing Dosch v. NLRC, et al., 208 Phil. 259, 272 (1983) and DOH v. C.V. Canchela & Associates, Architects (CVCAA), 511 Phil. 654, 670 (2005).

[46]     Section 3 of Rule 43 of the 1997 Rules of Civil Procedure, as amended, provides:

                SEC. 3. Where to appeal. – An appeal under this Rule may be taken to the Court of Appeals within the period and in the manner herein provided, whether the appeal involves questions of fact, of law, or mixed questions of fact and law.

[47]     Villaranda v. Villaranda, G.R. No. 153447, February 23, 2004, 423 SCRA 571, 589-580.

[48]     Rollo, pp. 114-116.

[49]     DAR Opinion No. 25, S. 2006, August 29, 2006.

[50]     DAR Opinion, No. 15, s. 2006, March 21, 2006.  DAR AO No. 01, Series of 1989 provides for transactions exempted from prior clearance requirement.

[51]     See Chamber of Real Estate and Builders Associations, Inc. (CREBA) v. Secretary of Agrarian Reform, G.R. No. 183409, June 18, 2010, 621 SCRA 295, 323-324.

[52]     CA rollo, p. 39.

[53]     DAR AO No. 12, Series of 1994, VI [B](4).

[54]     Id., VI[E].

[55]     See DAR Opinion No. 16, s. 2001, September 10, 2001.

[56]     See DAR Opinion No. 18, s. 2003, September 17, 2003.

[57]     See DAR Administrative Order No. 1, Series of 2000 entitled “Revised Rules and Regulations on the Acquisition of Agricultural Lands Subject of Mortgage or Foreclosure.”

[58]     Dated April 14, 2008.

[59]     Antonio Ma. Nieva, “Agrarian ‘Reform,’ Ramos Style” based on a series of articles published by the Philippine Daily Inquirer, source: http://www.multinationalmonitor.org/hyper/issues/1994/01/nieva.html.