Heirs of Spouses Adriano Salise and Natividad Pagudar, et al. vs. Ricardo A. Gacula

A final and executory order from the DAR Secretary exempting a parcel of land from CARP coverage does not automatically cancel the Certificates of Land Ownership Award (CLOAs) previously issued to agrarian reform beneficiaries. The cancellation of CLOAs requires a separate proceeding before the DAR where the beneficiaries are impleaded as indispensable parties, and the issuance of the exemption clearance is subject to the payment of disturbance compensation.

Respondent Ricardo A. Gacula owned a 30-hectare land in Cagayan de Oro City. After the land was placed under CARP and CLOAs were issued to the petitioner-heirs, Gacula filed a Petition for Annulment/Cancellation of the CLOAs and a separate Application for Exemption from CARP coverage. The DAR Secretary granted the exemption application in 1999, an order that became final and executory in 2001 after the petitioners failed to file a motion for reconsideration or an appeal to the Office of the President. Despite the finality of the exemption order, the DARAB later reversed an adjudicator's order implementing it, leading to the present dispute over the proper procedure to effect the exemption and cancel the CLOAs.

• Nature of the Action: The case involves a dispute over the cancellation of Certificates of Land Ownership Award (CLOAs) issued to petitioners-heirs over a 30-hectare land in Cagayan de Oro City, following the respondent-landowner's successful application for exemption of the land from CARP coverage.
• The Exemption Proceedings: On January 14, 1998, the DAR Secretary granted respondent Gacula's Application for Exemption. After a series of reversals, Acting DAR Secretary Navarro, on December 1, 1999, upheld the exemption. This order became final and executory on October 15, 2001, with the issuance of an Order of Finality.
• The Execution and Challenge: On November 27, 2003, a DAR Adjudicator issued an order cancelling the petitioners' CLOAs and placing Gacula in possession, implementing the final exemption order. The petitioners challenged this via an "Urgent Motion" before the DARAB Central Office.
• Dismissal and Appeals: The DARAB dismissed the Urgent Motion for lack of jurisdiction, treating it as a petition for certiorari. The petitioners appealed to the CA. After procedural setbacks and a prior Supreme Court intervention (G.R. No. 202830), the CA eventually granted the appeal and remanded the case to the DARAB.
• DARAB and CA Rulings: The DARAB reversed the 2003 adjudicator's order, declaring the CLOAs valid. The CA reversed the DARAB, finding the exemption order final due to the petitioners' failure to exhaust administrative remedies (i.e., appeal to the Office of the President). The CA remanded the case to the DAR Secretary for proper disposition.

• Finality of the Exemption Order: Petitioners argued that the DAR Secretary's exemption order is not immutable and should not be the basis for cancelling their CLOAs without a separate, direct proceeding.
• Jurisdiction of the DARAB: Petitioners contended that the DARAB erred in dismissing their Urgent Motion for lack of jurisdiction, as the adjudicator's execution order was issued without authority and in violation of their right to due process.
• Validity of CLOAs: Petitioners maintained that their CLOAs are valid and subsisting, as the original Petition for Cancellation filed by Gacula had been dismissed.

• Failure to Exhaust Administrative Remedies: Respondent countered that the DAR Secretary's 1999 exemption order became final and executory because the petitioners failed to file a motion for reconsideration or an appeal to the Office of the President, as required by administrative rules.
• Finality of the Exemption Order: Respondent argued that the final exemption order necessitates the cancellation of the CLOAs, and the DARAB erred in reversing the adjudicator's execution of that order.
• Proper Remedy: Respondent asserted that the proper course is to implement the final exemption order, which may require a separate proceeding for CLOA cancellation, but the underlying land exemption itself is already settled.

• Exhaustion of Administrative Remedies: Whether the petitioners' failure to appeal the DAR Secretary's 1999 exemption order to the Office of the President rendered the order final and executory.
• Propriety of CLOA Cancellation: Whether the final exemption order automatically warrants the cancellation of the petitioners' CLOAs, or whether a separate cancellation proceeding is required.
• Jurisdiction over the Urgent Motion: Whether the DARAB correctly dismissed the petitioners' Urgent Motion challenging the adjudicator's execution order for lack of jurisdiction.

• Exhaustion of Administrative Remedies: The petitioners' failure to exhaust available administrative remedies (motion for reconsideration and appeal to the Office of the President) rendered the DAR Secretary's 1999 exemption order final and executory. The doctrine of exhaustion of administrative remedies is a cornerstone of the judicial system, and none of the recognized exceptions applied to this case.
• Propriety of CLOA Cancellation: The final exemption order does not automatically cancel the CLOAs. A separate petition for cancellation must be filed before the DAR, in which the agrarian reform beneficiaries are indispensable parties, to directly challenge the CLOAs. The issuance of the exemption clearance is subject to the payment of disturbance compensation to the affected beneficiaries.
• Jurisdiction over the Urgent Motion: The DARAB's dismissal of the Urgent Motion was not the central issue before the Court. The core issue was the finality of the exemption order and the proper procedure thereafter. The Court affirmed the CA's remand to the DAR Secretary for proper disposition, which encompasses the necessary proceedings.

• Doctrine of Exhaustion of Administrative Remedies — This doctrine requires parties to exhaust all administrative remedies available to them before seeking judicial intervention. It is based on comity and convenience, allowing administrative agencies to exercise their specialized competence. The Court applied this doctrine to bar the petitioners' challenge to the exemption order, as they failed to appeal it to the Office of the President, the next administrative level.
• Indispensable Party in CLOA Cancellation — In petitions for the cancellation of Emancipation Patents (EPs) or Certificates of Land Ownership Award (CLOAs), the agrarian reform beneficiaries or their heirs are indispensable parties. The Court relied on this principle to hold that a separate cancellation proceeding before the DAR is necessary, where the petitioners-beneficiaries must be impleaded.
• Disturbance Compensation — An agricultural lessee or beneficiary whose landholding is reclassified and removed from CARP coverage is entitled to disturbance compensation. The Court modified the CA decision to explicitly subject the exemption clearance to the payment of disturbance compensation as determined by the DAR Secretary.

• "The thrust of the rule is that courts must allow administrative agencies to carry out their functions and discharge their responsibilities within the specialized areas of their respective competence." — This passage underscores the rationale for the exhaustion doctrine, emphasizing judicial deference to administrative expertise.
• "CLOAs issued in contravention of agrarian reform laws do not enjoy the protection of indefeasibility of title..." — This clarifies that CLOAs are not indefeasible and can be cancelled if found to be invalidly issued, which is foundational to the requirement of a separate cancellation proceeding.
• "[A] separate case should nonetheless still be filed by respondents (also before the DAR) for the purpose of cancelling the EP and CLOA titles of the affected tenants." — This excerpt from a cited precedent directly supports the Court's ruling on the necessity of a separate cancellation proceeding.

• Spouses Salise v. Department of Agrarian Reform Adjudication Board Region X Adjudicator Abeto Salcedo, Jr., 787 Phil. 586 (2016) — This is the prior Supreme Court decision (G.R. No. 202830) in the same case, which ordered the CA to reinstate the petitioners' appeal. It was cited to provide the procedural background.
• Farmer-Beneficiaries Belonging to the Samahang Magbubukid ng Bagumbong, Jalajala, Rizal v. Heirs of Maronilla, 858 Phil. 308 (2019) — This case was cited as instructive on the point that a separate cancellation proceeding must be filed before the DAR to cancel CLOAs, even after an exemption order is secured, because the beneficiaries are indispensable parties.
• Republic v. Lacap, 546 Phil. 87 (2007) — Cited to highlight the importance of the doctrines of exhaustion of administrative remedies and primary jurisdiction.
• Department of Agrarian Reform v. Oroville Development Corp., 548 Phil. 51 (2007) — Cited for the principle that factual findings of administrative agencies like the DAR, due to their technical expertise, are accorded great respect.

• Section 32, DAR Administrative Order No. 06, Series of 2000 and Section 32, DAR Administrative Order No. 03, Series of 2017 — These provisions were cited to establish the administrative procedure: a motion for reconsideration of a DAR Secretary's order must first be filed, and if denied, an appeal may be taken to the Office of the President within 15 days.
• Section 4, Republic Act No. 6657 (Comprehensive Agrarian Reform Law) — This provision states that the agrarian reform program covers all public and private agricultural lands. The DAR Secretary's authority to determine exemptions from this coverage derives from this law.
• Rule 13, Section 16 of the Rules of Court — This provision on proof of filing by registered mail was cited to show that the petitioners' Motion for Reconsideration before the CA was timely filed, as proven by the registry receipt and affidavit of mailing.

• Justice Alfredo Benjamin S. Caguioa (Chairperson, Ponente)
• Justice Henri Jean Paul B. Inting (on official business)
• Justice Maria Filomena D. Singh
• Justice Ramon Paul L. Hernando
• Justice Rodil V. Zalameda