Fil-Estate Properties, Inc. vs. Reyes

The Secretary of Agrarian Reform possesses primary jurisdiction over all matters involving the implementation of the Comprehensive Agrarian Reform Law, including the authority to investigate acts directed toward the circumvention of the law's objectives and to review the validity of administrative proceedings canceling Certificates of Land Ownership Award, and general proclamations declaring tourism zones do not automatically exclude lands from CARP coverage absent specific identification by the Philippine Tourism Authority and actual reclassification.

Hacienda Looc is an 8,650.7778-hectare property in Nasugbu, Batangas, registered under Transfer Certificate of Title No. T-28719 in the name of the Development Bank of the Philippines (DBP). Following the transfer of DBP's assets to the government via Executive Order No. 14 (1987), the Asset Privatization Trust (APT) was appointed trustee. In 1990, APT entered into a Memorandum of Agreement with the Department of Agrarian Reform (DAR) to sell portions of the hacienda under the Voluntary Offer to Sell (VOS) scheme of Republic Act No. 6657 (CARL). From 1991 to 1993, the DAR distributed 25 Certificates of Land Ownership Award (CLOAs) covering approximately 3,981 hectares to farmer-beneficiaries.

In December 1993, APT sold its rights to Hacienda Looc to Manila Southcoast Development Corporation (Manila Southcoast). Manila Southcoast subsequently filed a petition before the DAR Adjudication Board (DARAB) seeking the cancellation of the 25 CLOAs, alleging the lands were exempt from CARP coverage. Between 1996 and 1998, several CLOAs were canceled by Regional Agrarian Reform Adjudicators based on waivers allegedly executed by the beneficiaries. Farmer-beneficiaries contested these cancellations, claiming the waivers were falsified and that they were denied due process.

In 1995, Manila Southcoast entered into a joint venture with Fil-Estate Properties, Inc. (Fil-Estate) for the development of 10 lots (totaling 1,219.0133 hectares) covered by the canceled CLOAs. Fil-Estate filed a petition for exclusion from CARP coverage, asserting the lands had slopes exceeding 18% and were within a tourism zone under Proclamation No. 1520. The DAR Regional Director initially granted the exclusion, but Agrarian Reform Secretary Ernesto D. Garilao reversed this in a March 25, 1998 Order, declaring 70 hectares of the 1,219 hectares as covered land and nullifying the alleged transfers of rights over the CLOAs.

The Property and Initial CARP Coverage: Hacienda Looc, an 8,650.7778-hectare property in Nasugbu, Batangas, was transferred from the Development Bank of the Philippines to the government in 1987 and placed under the trusteeship of the Asset Privatization Trust (APT). In 1990, APT offered portions of the land to the Department of Agrarian Reform (DAR) under the Voluntary Offer to Sell scheme. Between 1991 and 1993, the DAR distributed 25 Certificates of Land Ownership Award (CLOAs) covering 3,981.2806 hectares to farmer-beneficiaries.

The Sale to Manila Southcoast and Cancellation Proceedings: In December 1993, APT sold its rights to Hacienda Looc to Manila Southcoast Development Corporation. In April 1995, Manila Southcoast filed a petition before the DAR Adjudication Board (DARAB) seeking the cancellation of the 25 CLOAs and reconveyance of excluded areas. Between January and June 1996, the Regional Agrarian Reform Adjudicator issued Partial Summary Judgments canceling 15 CLOAs based on waivers allegedly executed by the beneficiaries. In October 1997, Undersecretary Artemio Adasa issued an order canceling 9 additional CLOAs. Farmer-beneficiaries contested these cancellations, alleging the waivers were falsified and that some signatories were already deceased at the time of execution.

Fil-Estate's Exemption Petition: In October 1995, Manila Southcoast entered into a joint venture with Fil-Estate Properties, Inc. for the development of 10 lots (1,219.0133 hectares) covered by 10 of the CLOAs. In October 1996, Fil-Estate filed a petition to exclude these lots from CARP coverage, claiming they had slopes exceeding 18% and were located within a tourism zone under Proclamation No. 1520. In December 1996, the DAR Regional Director granted the exclusion.

The Secretary's March 25, 1998 Order: Following investigations by task forces revealing irregularities in the cancellation proceedings and findings that portions of the land were agriculturally developed, Agrarian Reform Secretary Ernesto Garilao issued an Order on March 25, 1998. The Order declared 70 hectares of the 1,219-hectare parcel as covered land under CARP, directed the re-documentation and award of these areas to qualified beneficiaries, nullified alleged sales or transfers of rights over the CLOAs, and ordered the reconveyance of exempt parcels to the APT or its successors-in-interest.

The Compromise Agreement: During the pendency of the consolidated cases before the Supreme Court, the parties in G.R. Nos. 152797 and 189315 entered into a Compromise Agreement seeking to exclude from litigation Lots 780-12 and 780-13 (212 hectares) covered by CLOA Nos. 4158 and 4159. The claimants of these lots agreed to waive their rights in favor of Fil-Estate in exchange for valuable consideration. The agreement was initially signed only by counsel, but later ratified through Sworn Declarations with Instructions to Counsel and Special Powers of Attorney executed by the individual claimants.

Proper Remedy (G.R. Nos. 152797 and 189315): Fil-Estate argued that the proper remedy to assail the decisions, resolutions, and orders of the Agrarian Reform Secretary is a petition for review under Rule 43 of the Rules of Court, not an appeal to the Office of the President, citing Section 54 of Republic Act No. 6657.

Forum Shopping: Fil-Estate maintained that Reyes, et al. committed willful and deliberate forum shopping by filing: (1) an appeal before the Office of the President; (2) a Comment before the Court of Appeals in CA-G.R. SP No. 47497; and (3) a Petition to Re-Open Case before the DAR, all raising the same allegations and praying for the same reliefs while the appeal before the Office of the President was pending.

Scope of Review: Fil-Estate asserted that Agrarian Reform Secretary Garilao exceeded the scope of his review by looking into the validity of the cancellation proceedings for the 25 CLOAs when the only issue before him was the propriety of the Regional Director's Order excluding the 10 lots from CARP coverage.

CARP Exemption: Fil-Estate argued that the 10 lots are excluded from CARP coverage because Nasugbu, Batangas was classified as a tourism zone under Proclamation No. 1520 (1975) and Proclamation No. 1801 (1978), placing the areas under the control of the Philippine Tourism Authority. It contended that this classification automatically excluded the lands from CARP regardless of slope or development. Alternatively, it claimed the lands had slopes of 18% or over and were agriculturally undeveloped, falling under Section 10 of Republic Act No. 6657.

Validity of Compromise (G.R. Nos. 152797 and 189315): Reyes, et al. argued that the Compromise Agreement was valid and should be approved, noting that the claimants of Lots 780-12 and 780-13 had executed the necessary Special Powers of Attorney and that the 10-year prohibition on transfer under Section 27 of Republic Act No. 6657 had already lapsed.

Procedural Remedy: Reyes, et al. countered that under the doctrine of exhaustion of administrative remedies, an appeal before the Office of the President was proper pursuant to DAR Memorandum Circular No. 3, series of 1994.

Forum Shopping: They argued that a comment to a petition is not an initiatory pleading and thus does not require a certification against forum shopping, and that the Petition to Re-Open Case was filed while the appeal before the Office of the President was still pending, precluding the possibility of conflicting decisions.

CARP Coverage: Reyes, et al. maintained that the 10 lots are agriculturally developed and covered by CARP, citing expert findings from the Institute of Environmental Science and Management. They argued that Proclamation No. 1520 had been repealed by Executive Order Nos. 448 and 506, which mandate that lands reserved for specific purposes but suitable for agriculture be transferred to the DAR for distribution. They further argued that agrarian reform as an aspect of social justice outweighs tourism interests.

Scope of Review: They contended that the Secretary did not err in looking into the cancellation proceedings, as Section 50 of Republic Act No. 6657 authorizes the Secretary to correct errors defeating the substantive rights of farmer-beneficiaries.

Due Process and CLOA Validity: They claimed the cancellation proceedings were void for lack of jurisdiction and due process, alleging they were deceived into signing blank waivers and were not notified of the proceedings.

Community of Interest: They argued that the community of interest principle warrants a review of the application of CARL over the entire Hacienda Looc, not just the 10 lots, as Fil-Estate's development plans would impact agricultural activities in other areas.

Bias and Partiality (G.R. No. 200684): Del Mundo, et al. asserted that Court of Appeals Associate Justice Marlene Gonzales-Sison should have inhibited herself from CA-G.R. SP No. 111965 because she had penned two previous decisions involving the same subject matter, casting doubt on her objectivity.

Finality of Orders and Community of Interest: They claimed that Undersecretary Adasa's October 27, 1997 Order and Regional Adjudicator Minas' March 10, 1998 Order canceling their CLOAs did not attain finality as to them because they were denied due process. They invoked the community of interest principle, arguing that although they did not appeal, they should benefit from the appeal filed by other farmer-beneficiaries.

Validity of Cancellation: They assailed the issuance of a new certificate of title to Manila Southcoast while the cancellation petition was pending, and argued that the waivers were not voluntarily executed.

Proper Remedy (G.R. Nos. 152797 and 189315): Reyes, et al. argued that DAR Memorandum Circular No. 3, series of 1994, provided for an appeal to the Office of the President from decisions of the Agrarian Reform Secretary, and that this remedy was proper for matters involving administrative implementation of CARL, as distinguished from agrarian disputes under the jurisdiction of DARAB.

Forum Shopping: They contended that filing a comment to a petition and a motion to reopen did not constitute forum shopping because these were not initiatory pleadings asserting claims for relief, and no possibility of conflicting decisions existed at the time the motions were filed.

CARP Coverage: They argued that Proclamation No. 1520 merely identified potential tourism areas but did not automatically reclassify the lands as non-agricultural, and that the DAR Secretary's factual findings on slope and agricultural development were supported by substantial evidence.

Scope of Review: They maintained that the Secretary had broad powers under Section 50 of Republic Act No. 6657 to investigate acts circumventing CARL objectives, including fraudulent cancellations of CLOAs.

Compromise Validity (G.R. Nos. 152797 and 189315): Fil-Estate argued that the Compromise Agreement should be given effect, noting that the claimants had ratified the agreement through subsequent executions of Special Powers of Attorney and that the 10-year prohibition on transfer had lapsed.

Bias and Partiality (G.R. No. 200684): Manila Southcoast countered that mere imputation of bias without extrinsic evidence is insufficient, and that the non-inhibition of Associate Justice Gonzales-Sison did not render the decision void.

Community of Interest: It argued that the community of interest principle does not apply because Del Mundo, et al. failed to show that their rights were interwoven with those of the appealing parties, and the principle cannot be invoked to recover a lost right to appeal.

Due Process: It claimed that Del Mundo, et al. were not denied due process as they were given opportunity to explain their side, and that the issuance of a new certificate of title was based on the Deed of Sale with the government, not the pending cancellation petition.

Validity of Cancellation: It asserted that the cancellation of CLOAs had become final and executory as to Del Mundo, et al. for their failure to appeal.

Compromise Agreement: Whether Lots 780-12 and 780-13 should be excluded from litigation in G.R. Nos. 152797 and 189315 based on the Compromise Agreement between the parties.

Procedural Remedy: Whether Reyes, et al. erred in filing an appeal before the Office of the President instead of a petition for review before the Court of Appeals to challenge Agrarian Reform Secretary Garilao's March 25, 1998 Order.

Forum Shopping: Whether Reyes, et al. committed willful and deliberate forum shopping by filing their Comment to the Petition in CA-G.R. SP No. 47497 and by filing a Petition to Re-Open Case before the Department of Agrarian Reform during the pendency of their appeal before the Office of the President.

Scope of Review: Whether Agrarian Reform Secretary Garilao exceeded the scope of his review by looking into the validity of the cancellation proceedings for the Certificates of Land Ownership Award.

CARP Exemption: Whether the lots subject of G.R. Nos. 152797 and 189315 are excluded from the coverage of the Comprehensive Agrarian Reform Program by virtue of Proclamation No. 1520 or Section 10 of Republic Act No. 6657.

Judicial Inhibition: Whether the non-inhibition of Court of Appeals Associate Justice Gonzales-Sison rendered the judgments in CA-G.R. SP No. 111965 void.

Community of Interest: Whether, under the principle of community of interest, the Orders rendered by Undersecretary Adasa and Regional Adjudicator Minas did not attain finality as to Del Mundo, et al.

Validity of Cancellation: Whether the cancellation of Del Mundo, et al.'s Certificates of Land Ownership Award was valid.

Compromise Agreement: The Compromise Agreement is valid and enforceable with respect to Lots 780-12 and 780-13. The claimants executed the necessary Special Powers of Attorney ratifying the agreement, and the 10-year prohibition on transfer under Section 27 of Republic Act No. 6657 had lapsed, rendering the waiver of rights effective. The omission of other parties from the compromise does not affect its validity as to the claimants of the specific lots, as non-parties cannot be bound by the agreement.

Procedural Remedy: The appeal to the Office of the President was the proper remedy. Section 54 of Republic Act No. 6657 must be read in relation to the two-fold jurisdiction of the DAR. For matters involving the administrative implementation of CARL (Agrarian Law Implementation Cases), which fall under the exclusive jurisdiction of the Secretary of Agrarian Reform, the remedy is an appeal to the Office of the President pursuant to DAR Memorandum Circular No. 3, series of 1994. Rule 43 applies only to decisions of the DAR Adjudication Board (DARAB) in agrarian disputes.

Forum Shopping: Reyes, et al. did not commit forum shopping. A comment to a petition is not an initiatory pleading asserting a claim for relief and does not require a certification against forum shopping. The Petition to Re-Open Case was filed while the appeal before the Office of the President was pending and before the records were elevated, thus no possibility of conflicting decisions existed.

Scope of Review: Agrarian Reform Secretary Garilao did not exceed his jurisdiction. Under Section 50 of Republic Act No. 6657, the DAR has primary jurisdiction over all matters involving the implementation of agrarian reform, including the authority to investigate acts directed toward the circumvention of the law's objectives. Given serious allegations that the CLOA cancellations were based on falsified waivers and executed without due process, the Secretary had the authority to probe into the validity of the cancellation proceedings to protect the substantive rights of farmer-beneficiaries.

CARP Exemption: The lots are not excluded from CARP coverage. Proclamation No. 1520 merely declared the municipalities of Maragondon, Ternate, and Nasugbu as tourist zones and directed the Philippine Tourism Authority to identify specific geographic areas with potential tourism value; it did not automatically reclassify all lands within these municipalities as non-agricultural or exclude them from CARP. The power to determine whether land is non-agricultural and exempt from CARP lies with the DAR, not the courts. The factual findings of the DAR Secretary, supported by substantial evidence from multiple task forces and inter-agency committees regarding the lands' slope and agricultural development, are accorded great weight and finality.

Judicial Inhibition: The non-inhibition of Associate Justice Gonzales-Sison did not render the judgments void. Mere suspicion or bare allegations of bias are insufficient grounds for voluntary inhibition under Rule 137, Section 1 of the Rules of Court; there must be clear and convincing evidence of acts or conduct indicative of arbitrariness or prejudice, which Del Mundo, et al. failed to present.

Community of Interest: The community of interest principle does not apply to Del Mundo, et al. The principle applies to the effect of a reversal of judgment on parties who did not appeal, not to revive a lost right to appeal. Del Mundo, et al. failed to show that their rights and interests were inseparable or so interwoven with those of the parties who filed an appeal as to preclude separate consideration.

Validity of Cancellation: The cancellation of Del Mundo, et al.'s Certificates of Land Ownership Award was valid. They failed to appeal the orders canceling their CLOAs within the reglementary period, and the DARAB's findings that the lands were mostly idle, forested, and with slopes above 18% were supported by substantial evidence.

Primary Jurisdiction of the Department of Agrarian Reform — The DAR is vested with primary jurisdiction to determine and adjudicate agrarian reform matters and has exclusive original jurisdiction over all matters involving the implementation of the Comprehensive Agrarian Reform Law. This jurisdiction is two-fold: (1) the Secretary of Agrarian Reform has jurisdiction over administrative implementation (Agrarian Law Implementation Cases), including applications for exemption from coverage; and (2) the DAR Adjudication Board has jurisdiction over agrarian disputes. The Secretary's factual findings, when supported by substantial evidence, are accorded great weight and respect.

Interpretation of Tourism Zone Proclamations — General proclamations declaring entire municipalities or provinces as tourist zones, which merely recognize potential tourism value and direct the Philippine Tourism Authority to identify specific geographic areas for development, do not automatically reclassify all lands within the zone as non-agricultural or exempt them from CARP coverage. Actual identification and development plans by the Philippine Tourism Authority are required for specific areas to be considered excluded.

Community of Interest Principle — The principle applies only to determine the effect of a reversal of a judgment on parties who did not appeal, operating as a reversal as to all if their rights are inseparable or interwoven. It cannot be invoked to recover a right to appeal that has already been lost through failure to file a timely appeal.

Forum Shopping — The evil sought to be avoided is the possibility of conflicting decisions being rendered by different forums. A comment to a petition is not an initiatory pleading asserting a claim for relief and does not require a certification against forum shopping. The rule applies only to incipient applications or complaints.

Judicial Inhibition — Under Rule 137, Section 1 of the Rules of Court, voluntary inhibition requires just and valid reasons other than those grounds for compulsory disqualification. Mere suspicion or bare allegations of bias or partiality are insufficient; there must be clear and convincing evidence of acts or conduct clearly indicative of arbitrariness or prejudice.

Compromise Agreements Involving CARP Lands — A compromise agreement involving lands acquired under CARP is valid provided the 10-year prohibitory period on transfer under Section 27 of Republic Act No. 6657 has lapsed. The agreement must comply with the requisites of a valid contract under the Civil Code, including consent of the parties (either personally or through a valid special power of attorney), and must not be contrary to law, morals, good customs, public order, or public policy.

• "The Department of Agrarian Reform is vested with primary jurisdiction to determine and adjudicate agrarian reform matters and has exclusive original jurisdiction over all matters involving the implementation of the Comprehensive Agrarian Reform Law. In carrying out its mandate, the Department of Agrarian Reform, through its Secretary, may investigate acts that are directed toward the circumvention of the law's objectives. Its findings are accorded great weight and respect, especially when supported by substantial evidence."

• "Interpretare et concordare leges legibus est optimus interpretandi modus. This manner of construction would provide a complete, consistent and intelligible system to secure the rights of all persons affected by different legislative and quasi-legislative acts."

• "A reading of the Comprehensive Agrarian Reform Law, as a social welfare legislation, should be 'more than just an inquiry into the literal meaning of the law.' In interpreting tenancy and labor legislations, the broad consideration is the ultimate resolution of doubts in favor of the tenant or worker."

• "The rule on communality of interest does not apply here. The rule refers to the effect of a reversal of a judgment on parties who did not appeal. [Petitioners] cannot rely upon this rule to recover an appeal which they had already lost."

• "Proclamation No. 1520 merely recognized the 'potential tourism value' of certain areas within the general area declared as tourism zones. It did not reclassify the areas to non-agricultural use."

Roxas & Company, Inc. v. DAMBA-NSFW, 622 Phil. 37 (2009) — Controlling precedent interpreting Proclamation No. 1520; held that the proclamation merely identified areas with potential tourism value but did not automatically reclassify all lands in the declared zones as non-agricultural or exempt them from CARP coverage.

Valencia v. Court of Appeals, 449 Phil. 711 (2003) — Distinguished the modes of appeal from DAR decisions; held that for matters under the Secretary's jurisdiction (administrative implementation), appeal to the Office of the President is proper, while decisions of the DARAB are appealed via Rule 43 to the Court of Appeals.

Sebastian v. Morales, 445 Phil. 595 (2003) — Followed for the rule that the proper mode of appeal from decisions of the Secretary of Agrarian Reform is a petition for review under Rule 43, but distinguished by Valencia to allow appeal to the Office of the President for non-DARAB matters.

Dadizon v. Bernadas, 606 Phil. 687 (2009) — Cited for the community of interest principle; explained that the rule applies to the effect of reversal on non-appealing parties, not to revive lost appeals.

Lebrudo v. Loyola, 660 Phil. 456 (2011) — Applied for the rule that waivers or transfers of rights over CARP lands during the 10-year prohibitory period are void under Section 27 of Republic Act No. 6657.

Samahang Magbubukid ng Kapdula, Inc. v. Court of Appeals, 364 Phil. 622 (1999) — Cited for the distinction between the jurisdiction of the Secretary of Agrarian Reform and the DAR Adjudication Board.

Section 50, Republic Act No. 6657 (Comprehensive Agrarian Reform Law) — Vests the DAR with primary jurisdiction to determine and adjudicate agrarian reform matters and exclusive original jurisdiction over all matters involving the implementation of agrarian reform, except those under the exclusive jurisdiction of the Department of Agriculture and the DENR.

Section 54, Republic Act No. 6657 — Provides that decisions of the DAR may be brought to the Court of Appeals by certiorari within 15 days; read in relation to Section 60 and Rule 43 regarding appeals from quasi-judicial agencies.

Section 10, Republic Act No. 6657 — Exempts from CARP coverage lands with 18% slope and over, except those already developed.

Section 27, Republic Act No. 6657, as amended by Republic Act No. 9700 — Prohibits the sale, transfer, or conveyance of awarded lands for a period of 10 years, except through hereditary succession, to the government, to the Land Bank of the Philippines, or to other qualified beneficiaries through the DAR.

Article XIII, Sections 4-8, 1987 Constitution — Social justice and human rights provisions on agrarian and natural resources reform, mandating the just distribution of agricultural lands and protection of farmers' rights.

Rule 137, Section 1, Rules of Court — Governs the disqualification of judges, distinguishing between compulsory disqualification (pecuniary interest, relationship) and voluntary inhibition (just and valid reasons).

Rule 7, Section 5, Rules of Court — Certification against forum shopping; applies only to initiatory pleadings asserting a claim for relief.

Articles 1318, 1409, 1878, 2028, 2035, and 2036, Civil Code — Provisions on the requisites and validity of contracts and compromise agreements, including the necessity of special powers of attorney for compromise and the limitation that compromises cannot include objects contrary to law or public policy.

Peralta (Chairperson), A. Reyes, Jr., and Inting, JJ.