Holy Trinity Realty & Development Corporation vs. Dela Cruz

Land on which no agricultural activity is being conducted is not subject to the coverage of either Presidential Decree No. 27 or Republic Act No. 6657, regardless of its formal classification, and emancipation patents issued without compliance with mandatory due process requirements are void ab initio.

Holy Trinity Realty & Development Corporation is a corporate entity that purchased a parcel of land in Brgy. Dakila, Malolos, Bulacan from Freddie Santiago, who had earlier acquired the property from tenants who voluntarily relinquished their tenancy rights. The controversy arose when certain individuals claiming to be heirs of former tenants sought to place the property under the coverage of the government's Operation Land Transfer program under Presidential Decree No. 27 and Republic Act No. 6657 (Comprehensive Agrarian Reform Law). The dispute implicates the interplay between local government reclassification powers under Republic Act No. 7160 (Local Government Code) and the coverage authority of the Department of Agrarian Reform.

The Dakila property, a 212,500-square-meter parcel in Brgy. Dakila, Malolos, Bulacan, was registered in the name of Freddie Santiago under TCT No. T-103698. It was formerly tenanted by several individuals, but in August 1991, these tenants freely and voluntarily relinquished their tenancy rights in favor of Santiago through their respective sinumpaang pahayag, in exchange for financial assistance and individual homelots titled and distributed in their names. On September 17, 1992, Holy Trinity Realty & Development Corporation purchased the remaining 208,050 square meters from Santiago, caused the transfer of title to its name, and subdivided the property into six lots. The petitioner then developed the property by dumping filling materials on the topsoil, erecting a perimeter fence and steel gate, and establishing its field office thereon.

On March 4, 1998, the Sangguniang Bayan ng Malolos passed Municipal Resolution No. 16-98, reclassifying four of the six subdivided lots as residential, citing that the properties were untenanted, not fit for agricultural use due to lack of sufficient irrigation, already improved with subdivision roads, and more suitable for residential use. The Municipal Planning and Development Office issued a Certificate of Eligibility for Conversion and a Preliminary Approval and Locational Clearance in favor of the petitioner. On August 23, 1999, the petitioner purchased from Santiago another parcel of 25,611 square meters in Barangay Sumapang Matanda, Malolos, Bulacan.

In April 2006, a certain Silvino Manalad and the alleged heirs of Felix Surio wrote to the Provincial Agrarian Reform Officer requesting investigation of the sale of the Dakila property. BARC Chairman Numeriano L. Enriquez followed with a letter request to place the Dakila property under Operation Land Transfer pursuant to Presidential Decree No. 27. Days later, the DAR Provincial Office filed a petition to annul the sale before the Provincial Agrarian Reform Adjudicator. On August 18, 2006, the OIC-Regional Director granted the letter request, directing the placement of the property under PD 27/RA 6657 coverage and ordering distribution to qualified farmer beneficiaries. Pending the petitioner's motion to withdraw, the Register of Deeds canceled the petitioner's titles and issued emancipation patents to the respondents. The petitioner's motion for reconsideration was denied almost two months after the EPs were issued.

The petitioner appealed to the DAR Secretary, who denied the appeal on November 22, 2007, holding that the Dakila property was not exempt from agrarian reform coverage because Municipal Resolution No. 16-98 merely re-zoned rather than reclassified the property. The Office of the President reversed the DAR Secretary on March 1, 2010, finding the property had ceased to be agricultural and was reclassified as residential. The Court of Appeals, however, reversed the OP on July 27, 2011, declaring the property agricultural and subject to RA 6657 coverage, holding that no valid reclassification occurred because an ordinance, not a resolution, was required under Section 20 of the Local Government Code. The CA limited its ruling to the issue of whether the property was agricultural land under RA 6657, declining to resolve the validity of the EPs or the propriety of the DAR's procedures.

• Premature Issuance of EPs: Petitioner argued that the DAR should have withheld issuance of the EPs in view of the pending DARAB petition, and that even granting a final DARAB decision existed, the EPs remained premature because no court proceedings for cancellation of the petitioner's title had been commenced, leaving the petitioner's title indefeasible and not subject to collateral attack by the OIC-Regional Director and DAR Secretary.
• Denial of Due Process: Petitioner maintained that it was deprived of due process because the requirements of notice, public hearing, and field investigation under RA 6657 and DAR Administrative Order No. 12, Series of 1998 were not strictly complied with by the DAR.
• Erroneous Application of RA 6657: Petitioner argued that the CA erred in placing the Dakila property under RA 6657 coverage when the OIC-Regional Director's order applied PD 27, the two laws being distinct — PD 27 requiring the beneficiary to be a tenant-farmer of agricultural land devoted to rice or corn, while RA 6657 was broader, covering all public and private agricultural lands regardless of tenurial arrangement and commodity produced.
• Defective Verification: Petitioner assailed the respondents' petition for review before the CA for defective certification, pointing out that the verification was executed by the respondents despite the letter request having been signed by BARC Chairman Enriquez, and that the verification stated the allegations were based on "knowledge and belief" rather than "personal knowledge and authentic records" as required by the Rules of Court.

• Scope of CA Ruling: Respondents countered that the CA correctly set aside the issue of whether they were qualified beneficiaries, because that was not the issue raised in the letter request.
• Pending DARAB Action: Respondents argued that the CA could not have ruled on the validity of the sale of the Dakila property in light of the pending action in the DARAB.
• DAR Jurisdiction: Respondents maintained that it was within the jurisdiction of the DAR to determine whether or not the respondents were qualified beneficiaries.
• Invalidity of Waivers: Respondents asserted that the waivers by the tenants were illegal.
• Issuance of EPs as Consequence: Respondents argued that the issuance of the EPs was a necessary consequence of placing the Dakila property under the coverage of PD 27.

• Verification Defect: Whether the respondents' petition for review before the CA should have been dismissed outright for defective verification under Section 4, Rule 7 of the 1997 Revised Rules of Civil Procedure.
• Scope of Appellate Review: Whether the CA gravely erred in limiting its decision to the issue of whether the Dakila property was subject to RA 6657 coverage, omitting ruling on interrelated issues including the validity of EPs, the nullification of the sale, the surrender of tenancy rights, and the property's actual residential use.
• Coverage Under Agrarian Reform Laws: Whether the Dakila property was agricultural land within the coverage of RA 6657 or PD 27.
• Validity of EPs: Whether the issuance of the EPs pursuant to the August 18, 2006 order of the DAR Regional Office was proper.

• Verification Defect: No. The defect in the verification was formal, not jurisdictional, and was cured by the respondents' voluntary submission of a corrected verification; the respondents, as identified beneficiaries and real parties in interest, had legal standing to sign the verification.
• Scope of Appellate Review: No. The CA erred in limiting its ruling. Appellate courts possess inherent authority to review unassigned errors closely related to properly assigned errors or necessary for a just and complete resolution; the validity of the EPs was closely intertwined with the issue of agrarian reform coverage.
• Coverage Under Agrarian Reform Laws: No. The Dakila property was not agricultural land subject to coverage under either RA 6657 or PD 27, because no agricultural activity was being conducted on the property and no tenancy relationship was established between the respondents and the landowner.
• Validity of EPs: No. The issuance of the EPs was null and void for patent denial of due process, the DAR having failed to comply with mandatory notice, hearing, field investigation, prior payment, and procedural requirements under RA 6657, PD 27, and relevant DAR administrative orders.

• Verification Defect: Verification is a formal, not jurisdictional, requisite intended to secure assurance that allegations are made in good faith, true and correct, and not merely speculative. Non-compliance does not render a pleading defective; courts may order correction or even act on an unverified pleading to serve the ends of justice. The respondents, as identified beneficiaries to whom EPs were issued, became real parties in interest with legal standing to sign the verification. Section 50-A of RA 6657, as added by Section 19 of RA 9700, expressly grants agrarian reform beneficiaries legal standing and interest to intervene concerning their rights under CARP. The defect was further cured by the respondents' voluntary submission of a corrected verification.

• Scope of Appellate Review: Under Section 8, Rule 51 of the Rules of Court, appellate courts may pass upon errors closely related to or dependent on an assigned error and properly argued, as well as plain errors. The CA possessed inherent authority to review unassigned errors necessary for a just and complete resolution. The validity of the EPs was closely intertwined with the issue of agrarian reform coverage: the letter request sought coverage under PD 27, but the CA declared coverage under RA 6657, two laws that are distinct in scope and tenurial instruments. PD 27 covers rice and corn lands and issues EPs, while RA 6657 covers all agricultural lands and issues CLOAs. By declaring coverage under RA 6657 while leaving the validity of PD 27-issued EPs unresolved, the CA left more questions unanswered than it resolved.

• Coverage Under Agrarian Reform Laws: The CA correctly held that Municipal Resolution No. 16-98 did not validly reclassify the Dakila property from agricultural to residential, because Section 20 of RA 7160 requires an ordinance passed after public hearings, not a mere resolution, which is a temporary declaration of sentiment. The petitioner also failed to show that the requisite public hearings were conducted. Thus, the property remained formally classified as agricultural. However, formal classification alone does not subject land to agrarian reform coverage. Two requisites must be met under RA 6657: (1) the land must be devoted to agricultural activity, and (2) the land must not be classified as mineral, forest, residential, commercial, or industrial. No evidence showed any agricultural activity — cultivation, planting, livestock raising, harvesting — being performed on the Dakila property. The former tenants themselves declared they surrendered their rights because the land was not conducive to farming by reason of its elevation. Municipal Resolution No. 16-98's Whereas Clauses confirmed the property was not fit for agricultural use due to lack of irrigation. For PD 27 coverage, the land must be devoted to rice or corn cultivation with a system of share-crop or lease-tenancy obtaining as of October 21, 1972; neither requisite was established. The report of the Legal Services Division referenced only the Sumapang Matanda property under TCT No. 103697 as covered by PD 27, not the Dakila property. No tenancy relationship was proven: consent of the landowner was absent, no sharing of harvests was shown, and Barangay Captain Teodoro's affidavit stated the respondents were never actual farmers on the property. Tenancy cannot be presumed but must be established by evidence.

• Validity of EPs: The procedural requirements for issuing EPs under PD 27, as enumerated in Reyes vs. Barrios, include six sequential steps — identification of tenants, land survey, issuance of CLT, land valuation, amortization payments, and finally EP issuance — plus submission of numerous supporting documents. The majority of these were lacking. Under RA 6657, Section 16 mandates a detailed acquisition procedure including notice of coverage, notice of acquisition, landowner's acceptance or rejection, valuation, payment by Land Bank, and only thereafter transfer of title. Two notices are required: the notice of coverage under DAR A.O. No. 12, Series of 1989, and the notice of acquisition under Section 16 of RA 6657. The OIC-Regional Director's proceedings did not constitute substantial compliance. No evidence of prior payment to the landowner was submitted, contrary to the mandate of Section 16(e) that the DAR take possession only after full payment. Under PD 27, full payment by the beneficiary was a condition precedent to EP issuance. The petitioner's constitutionally guaranteed right of retention was disregarded. The allocation of lots exceeding three hectares to each respondent violated Section 23 of RA 6657. A decision rendered without due process is void ab initio and may be attacked directly or collaterally; all resulting acts, including the EPs, were likewise null and void.

• Agricultural Activity Requirement for CARP Coverage — For land to be placed under RA 6657 coverage, two requisites must be met: (1) the land must be devoted to agricultural activity, defined as cultivation of the soil, planting of crops, growing of fruit trees, raising livestock, poultry or fish, including harvesting and other farm activities; and (2) the land must not be classified as mineral, forest, residential, commercial, or industrial. Land on which no agricultural activity is conducted is outside CARP coverage regardless of formal classification.

• PD 27 Coverage Requisites — For land to be covered under PD 27, it must be devoted to rice or corn cultivation, and there must be a system of share-crop or lease-tenancy obtaining as of October 21, 1972. If either requisite is absent, the land must be excluded. Exemption follows when the land is not devoted to rice or corn even if tenanted, or is untenanted even if devoted to rice or corn.

• Elements of Tenancy Relationship — Six requisites must concur: (1) the parties are the landholder and the tenant; (2) the subject is agricultural land; (3) there is consent; (4) the purpose is agricultural production; (5) there is consideration; and (6) there is sharing of harvests. The absence of one or more requisites prevents the creation of a tenancy relationship. Tenancy cannot be presumed but must be established by evidence.

• Ordinance vs. Resolution for Reclassification — Under Section 20 of RA 7160, reclassification of agricultural lands requires an ordinance passed by the sanggunian after conducting public hearings. A resolution is a mere declaration of sentiment temporary in nature and differs from an ordinance, which is a law possessing general and permanent character. A resolution is ineffectual for reclassification.

• Due Process in CARP Implementation — The implementation of CARP is an exercise of both police power and eminent domain. Two notices are required: the notice of coverage under DAR A.O. No. 12, Series of 1989, and the notice of acquisition under Section 16 of RA 6657. Prior payment to the landowner is mandatory before the DAR may take possession and transfer title. Non-compliance with these mandatory procedures deprives the landowner of due process and renders the proceedings void ab initio.

• Verification as Formal Requirement — Verification is a formal, not jurisdictional, requisite. Non-compliance does not render a pleading defective; courts may order correction or act on an unverified pleading to serve the ends of justice. A party's representative, lawyer, or any person who personally knows the truth of the facts alleged may sign the verification.

• "Land on which no agricultural activity is being conducted is not subject to the coverage of either Presidential Decree No. 27 or Republic Act No. 6657 (Comprehensive Agrarian Reform Law)." — This is the opening pronouncement of the decision, stating the core ratio decidendi that defines the controlling rule for agrarian reform coverage.

• "The spirit of agrarian reform laws is not to distribute lands per se, but to enable the landless to own land for cultivation. This is why the basic qualification laid down for the intended beneficiary is to show the willingness, aptitude and ability to cultivate and make the land as productive as possible." — This passage articulates the policy rationale underlying the agricultural activity requirement, tying it to the constitutional direction that agrarian reform shall be founded on the right of landless farmers to own the lands they till.

• "Tenancy could not be presumed, but must be established by evidence; its mere allegation is neither evidence nor equivalent to proof of its existence." — This formulation states the evidentiary standard for proving tenancy, a frequently cited proposition in agrarian law jurisprudence.

• "A decision rendered without due process is void ah initio and may be attacked directly or collaterally. All the resulting acts were also null and void." — This passage states the consequence of procedural non-compliance in CARP implementation, establishing that void proceedings taint all derivative acts including the issuance of emancipation patents.

• Sigre vs. Court of Appeals, G.R. No. 109568, August 8, 2002 — Followed for the proposition that RA 6657 operates distinctly from PD 27, the former covering all agricultural lands while the latter covers rice and corn lands; RA 6657 did not repeal or supersede PD 27, and provisions of PD 27 not inconsistent with RA 6657 are suppletory.
• Roxas & Co., Inc. vs. Court of Appeals, G.R. No. 127876, December 17, 1999 — Followed extensively for the dual notice requirement in CARP implementation (notice of coverage and notice of acquisition) and the principle that CARP involves both police power and eminent domain, requiring due process including prior payment before taking.
• Reyes vs. Barrios, G.R. No. 172841, December 15, 2010 — Followed for the enumeration of the six sequential procedural steps and supporting documents required before an emancipation patent may be validly issued under PD 27.
• Luz Farms vs. Secretary of the Department of Agrarian Reform, G.R. No. 86889, December 4, 1990 — Followed for the constitutional limitation of agricultural lands to "arable and suitable agricultural lands."
• Solmayor vs. Arroyo, G.R. No. 153817, March 31, 2006 — Followed for the principle that land must be devoted to rice or corn cultivation at the time PD 27 took effect on October 21, 1972, and that certifications by government agencies closer in time to that period are more probative than later ocular inspection reports.
• Paris vs. Alfeche, G.R. No. 139083, August 30, 2001 — Followed for the requirement under PD 27 that tenant-farmers must fully pay the cost of the land, including interest, within fifteen years before title is transferred.
• Philippine National Bank vs. Rabat, G.R. No. 134406, November 15, 2000 — Followed for the procedural rule that appellate courts may review unassigned errors closely related to properly assigned errors or necessary for a just decision.

• Section 20, Chapter II, Title I, Republic Act No. 7160 (Local Government Code) — Provides that a city or municipality may, through an ordinance passed by the sanggunian after conducting public hearings, authorize the reclassification of agricultural lands. Applied to hold that Municipal Resolution No. 16-98 was ineffectual for reclassification because it was a resolution, not an ordinance, and there was no showing that public hearings were conducted.
• Section 3(b) and (c), Republic Act No. 6657 (CARL) — Defines "agricultural activity" as cultivation of the soil, planting of crops, growing of fruit trees, raising of livestock, poultry or fish, including harvesting and other farm activities; and "agricultural land" as land devoted to agricultural activity and not classified as mineral, forest, residential, commercial, or industrial land. Applied to determine that the Dakila property did not qualify as agricultural land because no agricultural activity was being conducted thereon.
• Section 4(d), Republic Act No. 6657 — Defines the scope of CARP coverage. Applied to establish that land must be primarily devoted to or suitable for agriculture to be covered.
• Section 16, Republic Act No. 6657 — Outlines the procedure for acquisition of private lands, including notice of acquisition, landowner's acceptance or rejection, valuation, payment by Land Bank, and transfer of title only after payment. Applied to hold that the DAR's non-compliance with these mandatory procedures denied the petitioner due process.
• Section 23, Republic Act No. 6657 — Provides that no qualified beneficiary may own more than three hectares of agricultural land. Applied to note that all respondents were awarded lots exceeding three hectares, violating this provision.
• Section 6, Republic Act No. 6657 — Provides retention limits and prohibits certain transactions. Applied in connection with the petitioner's right of retention, which the OIC-Regional Director disregarded.
• Section 50-A, Republic Act No. 6657, as added by Section 19 of Republic Act No. 9700 — Grants agrarian reform beneficiaries or identified beneficiaries legal standing and interest to intervene concerning their rights under CARP. Applied to uphold the respondents' standing to sign the verification.
• Section 8, Rule 51, Rules of Court — Provides that appellate courts may consider errors closely related to or dependent on assigned errors, as well as plain errors. Applied to hold that the CA erred in limiting its ruling and should have resolved the validity of the EPs.
• Presidential Decree No. 27 — Decrees the tenant-tiller's emancipation from the bondage of the soil, covering rice and corn lands with a system of share-crop or lease-tenancy. Applied to hold that the Dakila property was not covered because it was not shown to be devoted to rice or corn cultivation, nor was any tenancy relationship established as of October 21, 1972.
• DAR Administrative Order No. 12, Series of 1989 — Prescribes the notice of coverage requirement in CARP implementation. Applied to hold that the OIC-Regional Director failed to comply with mandatory notice requirements.

Maria Lourdes P. A. Sereno (Chief Justice), Teresita J. Leonardo-De Castro (Associate Justice), Jose Portugal Perez (Associate Justice), Estela M. Perlas-Bernabe (Associate Justice). No separate concurring opinions were written.