ARBA vs. Nicolas

Lands reclassified by local government units as non-agricultural prior to the effectivity of RA 6657, with approval from the HLURB or its predecessor, are outside the coverage of the Comprehensive Agrarian Reform Program.

Philippine Banking Corporation (PhilBanking) owned two parcels of land in Barangay Mintal, Davao City. On September 7, 1989, the Department of Agrarian Reform (DAR) issued a notice of coverage placing the properties under compulsory acquisition pursuant to RA 6657. Despite PhilBanking's protests, DAR cancelled the titles, transferred ownership to the Republic, and distributed the land to farmer-beneficiaries belonging to the Agrarian Reform Beneficiaries Association (ARBA) under a Certificate of Land Ownership Award (CLOA). On March 24, 1994, PhilBanking executed a deed of assignment in favor of respondents Loreto G. Nicolas and Olimpio R. Cruz, who, as successors-in-interest, continued the protest over the DAR's takeover.

• Ownership and Coverage: PhilBanking was the registered owner of two parcels of land in Davao City. On September 7, 1989, DAR issued a notice of coverage under RA 6657. PhilBanking protested the inclusion.
• Acquisition and Distribution: Despite PhilBanking's objections, DAR cancelled the titles, transferred ownership to the Republic, and distributed the land to ARBA members via CLOA No. CL-143.
• Assignment: On March 24, 1994, PhilBanking assigned the properties to respondents Nicolas and Cruz. As assignees, respondents continued the protest by filing a complaint before the DARAB for cancellation of the CLOA and reinstatement of titles.
• Reclassification: The subject lands had been reclassified as Urban/Urbanizing Zone under City Ordinance No. 363, Series of 1982, prior to the effectivity of RA 6657. The reclassification was approved by the Davao City Zoning Administrator and the HLURB Regional Office, and reflected in the Official Comprehensive Zoning Map of Davao City.

• Lack of Cause of Action: Petitioner argued that respondents lacked a valid cause of action because there was no valid and lawful transfer of the subject realty to them, depriving respondents of the requisite personality to sue.
• Inapplicability of Natalia Realty: Petitioner maintained that the Natalia Realty ruling should not apply because the facts are dissimilar, claiming the ruling was confined solely to agricultural lands located within townsite reservations.
• Finality of DARAB Findings: Petitioner argued that the CA erred in disregarding the DARAB Central Office's findings of fact, which are mandated by Section 54 of RA 6657 to be "final and conclusive" if supported by substantial evidence.

• Exemption from CARP Coverage: Respondents countered that the subject lands were reclassified as urban prior to the effectivity of RA 6657 and are thus exempt from compulsory acquisition.
• Denial of Due Process: Respondents argued that the DAR hastily acquired the properties without affording the landowner proper due process, an issue they raised as lawful assignees and successors-in-interest of PhilBanking.

• Cause of Action: Whether respondents possess a valid cause of action to sue given their status as assignees.
• Applicability of Natalia Realty: Whether the Natalia Realty doctrine applies to lands reclassified by local government units as non-agricultural prior to the effectivity of RA 6657.
• Finality of DARAB Findings: Whether the DARAB Central Office's findings of fact are final and conclusive despite lacking substantial evidence.

• Cause of Action: A valid cause of action exists. As lawful assignees and successors-in-interest, respondents stand to be directly benefited or injured from the resolution of the case and rightfully pursued the actions initiated by their assignor. Furthermore, the issue of lack of cause of action was raised for the first time on appeal, rendering it procedurally improper.
• Applicability of Natalia Realty: The Natalia Realty doctrine applies. Lands previously converted by government agencies to non-agricultural uses prior to the effectivity of RA 6657 are outside CARP coverage. This principle extends beyond townsite reservations to any agricultural land converted to non-agricultural uses with the approval of government agencies like the HLURB. Because the subject lands were reclassified as urban/urbanizing in 1982, they are exempt from CARL.
• Finality of DARAB Findings: DARAB findings of fact are not final and conclusive if unsupported by substantial evidence. The CA correctly found that the DARAB erred in concluding that PhilBanking did not oppose the acquisition; records demonstrate that PhilBanking vigorously protested, albeit by filing a complaint directly with the RTC rather than exhausting administrative remedies.

• Exemption of Reclassified Lands from CARP — Lands previously converted by government agencies to non-agricultural uses prior to the effectivity of RA 6657 are outside the coverage of CARP. This applies provided the conversion was made with the approval of government agencies like the HLURB. Local government units possess the authority to reclassify agricultural lands to non-agricultural uses (e.g., residential, commercial, industrial) prior to CARL effectivity, exempting such lands from compulsory acquisition.
• Finality of DARAB Findings of Fact — Under Section 54 of RA 6657, DAR findings of fact are final and conclusive only if based on substantial evidence. Absent such evidentiary support, courts may review and reverse these findings.

• "x x x social justice - or any justice for that matter - is for the deserving whether he be a millionaire in his mansion or a pauper in his hovel. It is true that, in case of reasonable doubt, we are called upon to tilt the balance in favor of the poor simply because they are poor, to whom the Constitution fittingly extends its sympathy and compassion. But never is it justified to prefer the poor simply because they are poor, or to eject the rich simply because they are rich, for justice must always be served, for poor and rich alike, according to the mandate of the law."

• Natalia Realty, Inc. v. Department of Agrarian Reform, G.R. No. 103302, August 12, 1993 — Followed. Established the doctrine that lands previously converted by government agencies to non-agricultural uses prior to the effectivity of RA 6657 are outside CARP coverage.
• Pasong Bayabas Farmers Association, Inc. v. Court of Appeals, G.R. Nos. 142359 & 142980, May 25, 2004 — Followed. Affirmed the authority of municipal councils to reclassify agricultural land to residential prior to CARL, exempting it from CARP.
• Junio v. Garilao, G.R. No. 147146, July 29, 2005 — Followed. Recognized the authority of the City Council of Bacolod to reclassify land as residential prior to CARL effectivity, exempting it from compulsory acquisition.
• De Guzman v. Court of Appeals, G.R. No. 156965, October 12, 2006 — Followed. Reiterated the Natalia ruling on CARP exemption.
• Land Bank of the Philippines v. Court of Appeals, G.R. Nos. 118712 & 118745, October 6, 1995 — Cited for the principle that social justice must be served to both rich and poor alike according to the mandate of the law.

• Section 54, RA 6657 — Provides that DAR decisions may be brought to the CA by certiorari and that DAR findings of fact are final and conclusive if based on substantial evidence. Applied to determine that the DARAB findings were reviewable due to lack of substantial evidence.
• Section 3(c), RA 6657 — Defines agricultural land as land devoted to agricultural activity and not classified as mineral, residential, commercial, or industrial. Applied to support the exclusion of lands reclassified as urban prior to CARL effectivity.
• Section 3, RA 2264 (Local Autonomy Act of 1959) — Empowers municipal boards or city councils to adopt zoning and subdivision ordinances or regulations. Applied to validate the reclassification made by the Davao City Council.
• Rule 45, Rules of Court — Governs ordinary appeals via petition for review on certiorari, limited to questions of law.
• Rule 65, Rules of Court — Governs original actions for certiorari to correct errors of jurisdiction or grave abuse of discretion.

Consuelo Ynares-Santiago (Chairperson), Ma. Alicia Austria-Martinez, Minita V. Chico-Nazario, Antonio Eduardo B. Nachura.