Baltazar vs. Court of Appeals

Presidential Decrees Nos. 27 and 316 cannot be applied retroactively to agrarian cases pending before their promulgation, and an agricultural lessee who was not given written notice of the sale of the landholding may validly exercise the right of redemption under Section 12 of Republic Act No. 3844 by tendering or consigning the purchase price within two years from registration of the sale.

Petitioner Angel Baltazar had been a share tenant since 1912 over two parcels of riceland (Lots Nos. 1242 and 6) in Barrio Salacot, San Miguel, Bulacan, originally owned by Emiliano Tecson and later transferred to Salud B. Calderon before the Japanese Occupation. He became an agricultural lessee during the agricultural year 1968-69. Private respondent Flora L. Esguerra purchased the two parcels from Calderon on 6 March 1969 for ₱4,608.32. The Agricultural Land Reform Code (Republic Act No. 3844) took effect on 22 August 1963 and governed the rights and obligations of agricultural lessors and lessees, including the lessee's rights of pre-emption and redemption. The front portion of Lot No. 1242 fronting the National Highway had become residential since the Japanese Occupation, but Baltazar continued to possess and cultivate the rear and greater portion.

Petitioner Angel Baltazar had been a share tenant since 1912 over two parcels of riceland — Lots Nos. 1242 and 6 — covered by Transfer Certificates of Title Nos. 74177 and 74161, with areas of 19,841 and 14,984 square meters, respectively, located at Barrio Salacot, San Miguel, Bulacan. The front portion of Lot No. 1242, stretching along the National Highway, had become a residential area since the Japanese Occupation, but Baltazar continued to possess and cultivate the rear and greater portion of this lot and all of Lot No. 6. He became an agricultural lessee during the agricultural year 1968-69. The two lots were originally owned by Emiliano Tecson, who transferred ownership to Salud B. Calderon before the Japanese Occupation.

On 6 March 1969, Salud Calderon sold the two parcels of land to private respondent Flora L. Esguerra for ₱4,608.32. As the new owner, Esguerra caused the cancellation of the former titles and the issuance of new ones in her name: TCT No. 108665 replacing TCT No. 74161, and TCT No. 108666 replacing TCT No. 74177. Six months later, on 26 September 1969, Esguerra caused the subdivision of Lot No. 1242 into ten lots (Nos. 1242-A to 1242-J), with Lots 1242-A to 1242-I comprising approximately 300 square meters each fronting the national road, and Lot No. 1242-J covering 17,121 square meters corresponding to the rear portion over which Baltazar continued his tenancy. The sale was made without compliance with the written notice requirement of Section 11 of Republic Act No. 3844, nor was the affidavit required under Section 13 of the same Code executed prior to registration.

To pursue her plan to convert the entire landholding into residential lots, Esguerra instituted on 24 December 1969 a Complaint for Ejectment against Baltazar before the Court of Agrarian Relations, alleging that the tenanted portions — Lot 1242-J (17,121 sq m) and the lot under TCT No. 108665 (14,984 sq m), totaling approximately 3.2 hectares — were suited for subdivision into residential lots. The residential lots (1242-A to 1242-I) were already excluded from the complaint. In his Answer, Baltazar interposed the defenses that the sale violated the notice requirements of Sections 11 and 13 of RA 3844, that Esguerra failed to give the notice required under Section 36 before filing ejectment, that the landholdings were not suitable for homesite, and that the attempt to dispossess him was in bad faith. By way of counterclaim, Baltazar tendered and deposited ₱5,000.00 with the court to cover the purchase price of ₱4,608.32, exercising his right of redemption under Section 12 of the Code.

Pending final determination, Baltazar filed a motion for an interlocutory order, testifying that on 27 February 1970 Esguerra had begun bulldozing the land, destroying dikes and rice paddies, constructing roads, and planting monuments. He also presented a Resolution of the Municipal Council of San Miguel, Bulacan, dated 20 February 1970, denying Esguerra's application for conversion on the ground that the land was under tenant possession and there was a pending suit. The trial court issued the interlocutory order on 5 March 1970 enjoining Esguerra from disturbing Baltazar's possession. After trial on the merits, the Court of Agrarian Relations rendered its decision on 20 August 1970, upholding Baltazar's right to redeem and ordering Esguerra to convey the properties for ₱4,608.32. The trial court found that Esguerra had not proven suitability for conversion, had no approved subdivision plan, lacked approval from the Municipal Council, had not readied construction, and had acted with some measure of bad faith in seeking dispossession of the tenant.

Upon elevation to the Court of Appeals, the appellate court observed that the issues could no longer be resolved under the law then in force due to the supervening status quo provisions of PD Nos. 27 and 316. On 22 October 1974, the Court of Appeals dismissed the ejectment suit but denied Baltazar the right of redemption, ordering instead the maintenance of the leasehold relationship with continued payment of rentals. Baltazar's motions for reconsideration were denied, prompting the instant petition.

• Retroactive Application of PD Nos. 27 and 316: Petitioner argued that the Court of Appeals erred in giving retroactive effect to Presidential Decrees Nos. 27 and 316, thereby avoiding the principal issues raised before it, when the ejectment case had been filed and the trial court had rendered its decision long before said decrees took effect.
• Right of Redemption Under RA 3844: Petitioner maintained that the Court of Appeals should have affirmed the lower court's finding that he had properly exercised his right of redemption under the Agricultural Land Reform Code, Republic Act No. 3844, having consigned the full purchase price in court within the prescriptive period.
• Opposition to Omnibus Motion for Rentals: Petitioner opposed Esguerra's Omnibus Motion seeking delivery of lease rentals from 1969 to 1977, contending that it would place an undue burden on him at 88 years of age, overlook problems of recovery should he prevail, and set aside the government's social justice program.

• Denial of Intervention: Respondent argued that the lower court erred in denying the Motion to Intervene filed by her husband, Alejandro Esguerra.
• Improper Order of Conveyance: Respondent contended that the lower court erred in ordering her to convey the lands to petitioner, contrary to Section 14 of Republic Act No. 3844, which exempts land to be converted into residential purposes from the rights of pre-emption and redemption.
• Grave Abuse of Discretion: Respondent asserted that the lower court committed grave abuse of discretion in issuing the Order of 5 March 1970 restraining her from carrying out her conversion plans.
• Claim for Lease Rentals: Respondent filed an Omnibus Motion, reiterated three times, praying that the share or rentals allegedly due her from 1969 to 1977 — corresponding to a total yearly harvest of 510 cavans or ₱30,600.00 — be delivered to her or deposited in a bonded warehouse.

• Retroactive Application of PD Nos. 27 and 316: Whether the Court of Appeals erred in according retroactive application to Presidential Decrees Nos. 27 and 316 and their implementing circulars to a case pending before it long before these decrees took effect.
• Validity of Right of Redemption: Whether petitioner had properly exercised his right of redemption under Republic Act No. 3844, such that the lower court's ruling ordering conveyance of the landholdings should be affirmed.
• Claim for Lease Rentals: Whether private respondent's Omnibus Motion for delivery of lease rentals from 1969 to 1977 should be granted.

• Retroactive Application of PD Nos. 27 and 316: No. Presidential Decrees Nos. 27 and 316 cannot be applied retroactively to a case pending before their promulgation, there being no express or clearly implied legislative intent authorizing retrospective application.
• Validity of Right of Redemption: Yes. Petitioner validly exercised his right of redemption under Section 12 of Republic Act No. 3844, having consigned the full purchase price in court within two years from registration of the sale, and the conditions for exemption under Section 14 not having been fulfilled by private respondent.
• Claim for Lease Rentals: No. Petitioner cannot be compelled to pay rentals for landholdings of which he is deemed the owner-cultivator from the time he fully paid the redemption price by consignation in court.

• Retroactive Application of PD Nos. 27 and 316: It is a fundamental postulate in statutory construction, embodied in Article 4 of the New Civil Code, that laws shall have no retroactive effect unless the contrary is provided. This rule has been consistently applied: statutes are not to be construed as intended to have retroactive effect so as to affect pending proceedings unless such intent is expressly declared or clearly and necessarily implied from the language of the enactment. There being no express nor clearly implied authorization in PD Nos. 27 and 316 allowing retrospective application, prospective construction is called for. The ejectment suit was filed on 24 December 1969 and the trial court rendered its decision on 20 August 1970, both prior to the effectivity of PD 27 (21 October 1972) and PD 316 (22 October 1973). The case had been pending before the Court of Appeals since 1970, again prior to the promulgation of said decrees. Moreover, even if applied retroactively, PD Nos. 27 and 316 would find no application because the ejectment proceedings were not filed to harass the tenant but to convert the land into a subdivision, a reason perfectly valid under the laws then in force. Maintaining the status quo would prove more prejudicial to petitioner, since by allowing him the right of redemption he becomes an independent owner, whereas maintaining the leasehold would make him a perpetual agricultural lessee bound to pay rentals. The fundamental policy objectives of agrarian laws are achieved by according petitioner the right to redeem, a vested right acquired under the Code of Agrarian Reforms that cannot be deprived by subsequent legislation. This ruling is supported by Castro vs. Court of Appeals, Cabatan vs. Court of Appeals, Jacinto vs. Court of Appeals, Espiritu vs. Cipriano, and Padasas vs. Court of Appeals.

• Validity of Right of Redemption: Republic Act No. 3844, which took effect on 22 August 1963, governs the relationship between the parties. Section 11 grants the agricultural lessee the preferential right to buy the landholding upon sale by the lessor, exercisable within ninety days from written notice. Section 12 grants the right of redemption where the landholding is sold to a third person without the knowledge of the agricultural lessee, exercisable within two years from registration of the sale. The subject landholdings were sold by Calderon to Esguerra without complying with the notice requirement of Section 11, nor was the affidavit required under Section 13 executed prior to registration. Absent any written notice of sale served on petitioner, his right to redeem ripened upon registration of the sale on 10 March 1969. When petitioner filed his Answer with counterclaim on 29 January 1970, he simultaneously deposited ₱5,000.00 covering the full purchase price of ₱4,608.32, thus seasonably exercising his redemption right within the two-year period. Private respondent invoked Section 14, which exempts land to be converted into residential purposes from the rights of pre-emption and redemption, but this exemption is conditioned upon concurrence of three requisites: (1) the property is suitably located; (2) the conversion is in good faith; and (3) the conversion is substantially carried out within one year from the date of sale. The trial court found that none of these requisites were fulfilled — Esguerra had not proven suitability, had no approved subdivision plan, lacked approval from the Municipal Council, had not readied construction, and had acted with some measure of bad faith. These findings are supported by substantial evidence and are well-nigh conclusive on an appellate tribunal. The rights of pre-emption and redemption were the means prescribed by the Code of Agrarian Reforms to implement the declared State policy of establishing ownership-cultivatorship and promoting the upliftment of small farmers.

• Claim for Lease Rentals: Since petitioner had validly and promptly exercised his right of redemption as far back as 1970 by consigning the full purchase price in court, private respondent's claim for rentals must fail. Petitioner cannot be compelled to pay rentals for the use of landholdings of which he is deemed the owner-cultivator from the time he fully paid the reasonable price by consignation. There being no opposition from private respondent as to the redemption price, the consignated amount is held to be the reasonable price of the landholdings redeemed.

• Prospective Application of Laws — Under Article 4 of the New Civil Code, laws shall have no retroactive effect unless the contrary is provided. Statutes are not to be construed as intended to have retroactive effect so as to affect pending proceedings unless such intent is expressly declared or clearly and necessarily implied from the language of the enactment. The Court applied this doctrine to hold that PD Nos. 27 and 316, promulgated in 1972 and 1973, could not be applied retroactively to an ejectment case filed in 1969 and decided by the trial court in 1970.

• Lessee's Right of Redemption (Section 12, RA 3844) — Where the landholding is sold to a third person without the knowledge of the agricultural lessee, the latter has the right to redeem the same at a reasonable price and consideration, provided the entire landholding sold must be redeemed. The right may be exercised within two years from registration of the sale and has priority over any other right of legal redemption. The Court found that petitioner's right ripened upon registration on 10 March 1969 and was validly exercised by consignation of the full purchase price on 29 January 1970, well within the prescriptive period.

• Lessee's Right of Pre-emption (Section 11, RA 3844) — In case the agricultural lessor decides to sell the landholding, the agricultural lessee shall have the preferential right to buy the same under reasonable terms and conditions, exercisable within ninety days from written notice served by the owner on all lessees affected. The Court found that this right could not be exercised because no written notice was served on petitioner, making the right of redemption under Section 12 the proper remedy.

• Exception to Redemption for Land Conversion (Section 14, RA 3844) — The rights of pre-emption and redemption cannot be exercised over landholdings suitably located which the owner bought or holds for conversion into residential, commercial, industrial, or other similar non-agricultural purposes, provided three requisites concur: (1) the property is suitably located; (2) the conversion be in good faith; and (3) the conversion is substantially carried out within one year from the date of sale. The Court held that these conditions must concur; otherwise, the land is subject to redemption by the tenant. None of the requisites were found to have been fulfilled by private respondent.

• Limitation on Land Rights (Section 62, RA 3844) — Landholdings acquired under the Code may not be resold, mortgaged, encumbered, or transferred until after the lapse of ten years from the date of full payment and acquisition, and after such period, any transfer may be made only in favor of persons qualified to acquire economic family-size farm units. The Court reminded petitioner of this limitation on his redeemed landholdings.

• "It is a fundamental postulate in statutory construction that 'laws shall have no retroactive effect, unless the contrary is provided.'" — This passage articulates the controlling rule of prospective application that barred the Court of Appeals from applying PD Nos. 27 and 316 retroactively to a pending case, and is the ratio decidendi for the first issue.

• "statutes are not to be construed as intended to have a retroactive effect so as to affect pending proceedings, unless such intent is expressly declared or clearly and necessarily implied from the language of the enactment" — Quoted from Espiritu vs. Cipriano, this formulation establishes the standard for determining when retroactive application of a statute to pending proceedings is permissible, and is frequently cited in subsequent jurisprudence on statutory construction.

• "Absent any written notice of sale served on petitioner, upon the registration of the sale of the landholdings in question on 10 March 1969, petitioner's right to redeem ripened on said date." — This passage defines the point at which the statutory period for redemption begins to run under Section 12 of RA 3844, establishing that registration of the sale — not notice — triggers the ripening of the redemption right when no notice was given.

• "the fundamental policy objectives of our agrarian laws, inclusive of PD 27 and 316, are achieved and upheld by according to petitioner the right to redeem, a vested right which he had acquired under the Code of Agrarian Reforms and of which he cannot be deprived by subsequent legislation." — This passage articulates the principle that vested rights acquired under existing agrarian legislation cannot be impaired by subsequent decrees, and that the social justice objectives of agrarian reform are better served by ownership-cultivatorship through redemption than by perpetuating a leasehold arrangement.

• Espiritu vs. Cipriano, 55 SCRA 533 (1974) — Cited as controlling authority for the principle that statutes are not to be construed as having retroactive effect on pending proceedings unless such intent is expressly declared or clearly and necessarily implied. Followed by the Court in barring retroactive application of PD Nos. 27 and 316.
• Castro, et al. vs. Court of Appeals, et al., G.R. No. L-44727, September 11, 1980 — Cited as a recent ruling that PD Nos. 27, 316, and 946 cannot be applied retroactively and apply only to bona fide tenants. Followed.
• Cabatan vs. Court of Appeals, et al., 95 SCRA 323 (1980) — Cited for the proposition that once a court has taken jurisdiction over a case, its authority cannot be adversely affected by a subsequent statute prescribing a precondition. Followed.
• Jacinto vs. Court of Appeals, et al., 87 SCRA 263 (1978) — Cited for the ruling that PD 27 applies only to bona fide tenants and cannot operate retroactively in favor of a petitioner whose tenancy relationship had already been extinguished. Followed.
• Padasas vs. Court of Appeals, et al., 82 SCRA 250 (1978) — Cited for the principle that the Agricultural Land Reform Code must be enforced prospectively and not retroactively, and that rights such as the right of redemption accrue upon enactment and may be exercised thereafter in appropriate cases. Followed.
• Almeda vs. CA, 78 SCRA 194 (1977) — Cited for the rule that timely exercise of the legal redemption right requires either tender of the price or valid consignation within the prescribed period. Followed.
• Davao Steel Corp. vs. Cabatuando, et al., 10 SCRA 704 — Cited in relation to the requirement of approval from proper authorities for land conversion. Followed.
• De Chavez vs. Zobel, 105 SCRA 26 (1974) — Cited for the principle that factual findings of the trial court supported by substantial evidence are well-nigh conclusive on an appellate tribunal. Followed.
• Hidalgo vs. Hidalgo, 33 SCRA 106 (1970) — Cited in support of the policy objective of agrarian laws to inculcate in every tenant-farmer an independent and self-reliant existence. Followed.

• Article 4, New Civil Code — Provides that laws shall have no retroactive effect unless the contrary is provided. Applied as the foundational rule of statutory construction to bar retroactive application of PD Nos. 27 and 316 to the pending ejectment case.
• Section 11, Republic Act No. 3844 (Agricultural Land Reform Code) — Grants the agricultural lessee the right of pre-emption upon the lessor's decision to sell the landholding, exercisable within ninety days from written notice. Applied to determine that petitioner could not exercise pre-emption because no written notice was served, making redemption under Section 12 the proper remedy.
• Section 12, Republic Act No. 3844 — Grants the agricultural lessee the right of redemption where the landholding is sold to a third person without the lessee's knowledge, exercisable within two years from registration of the sale. Applied to hold that petitioner's right ripened upon registration on 10 March 1969 and was validly exercised by consignation of the full purchase price on 29 January 1970.
• Section 13, Republic Act No. 3844 — Requires that no deed of sale of agricultural land under cultivation by an agricultural lessee shall be recorded unless accompanied by an affidavit of the vendor that written notice was given or that the land is not worked by a lessee. Applied to find that registration was effected in violation of this provision.
• Section 14, Republic Act No. 3844 — Exempts land to be converted into residential, commercial, industrial, or similar purposes from the rights of pre-emption and redemption, subject to three conditions: suitability of location, good faith, and substantial conversion within one year from sale. Applied to hold that none of the three requisites were fulfilled by private respondent, thus the exemption did not apply. This section was repealed by Section 3 of Republic Act No. 6389.
• Section 36(1), Republic Act No. 3844 — Provides that an agricultural lessee shall continue in possession of his landholding except when dispossession is authorized by the court after due hearing, as when the lessor will personally cultivate or convert the landholding if suitably located into residential, factory, hospital, or school site, upon payment of disturbance compensation. Applied to show that private respondent failed to comply with the notice requirement before filing ejectment and that conversion was not properly authorized.
• Section 62, Republic Act No. 3844 — Limits disposition of landholdings acquired under the Code: they may not be resold, mortgaged, encumbered, or transferred until after ten years from full payment, and thereafter only in favor of persons qualified to acquire economic family-size farm units. Cited as a reminder to petitioner of the limitations on his redeemed landholdings.
• Presidential Decree No. 27 — Promulgated 21 October 1972, decreeing the emancipation of tenants and transferring ownership of the land they till. Held not applicable retroactively to the pending case.
• Presidential Decree No. 316 — Promulgated 22 October 1973, prohibiting ejectment of tenant-tillers from rice and corn farmholdings and requiring maintenance of the status quo. Held not applicable retroactively to the pending case.
• Republic Act No. 6389 — Approved 10 September 1971, amending the Code of Agrarian Reforms, including the repeal of Section 14 and amendments to Section 36(1). Noted as not applicable since the governing law was the original text of RA 3844 in force at the time of the sale and ejectment filing.

• Makasiar, J. — Concur.
• Fernandez, J. — Concur.
• Guerrero, J. — Concur.
• De Castro, J. — Concur.
• Teehankee, J. — Concurred qualifiedly in the result. He agreed that redemption should be upheld but contended that respondent should be given the opportunity to show that the land was in fact suitable for residential purposes and had been converted within the period allowed by law, in which case redemption should not be allowed and petitioner should instead receive disturbance compensation equivalent to five years' rental under Section 36 of Republic Act No. 6389. He noted that petitioner was 88 years of age with no shown direct descendants or immediate relatives to succeed him in cultivation, and that Section 62 of the Code of Agrarian Reform does not permit redemption for speculation or profit by reselling subdivided residential lots, allowing disposition only after ten years and only in favor of persons qualified to acquire economic family-size farm units.