Mallari vs. Arcega

A Land Bank certification to finance redemption under Section 12 of R.A. No. 3844, as amended, must strictly comply with Land Bank Circular Letter No. 3 dated February 25, 1980, which requires: (1) a favorable endorsement from the Department of Agrarian Reform Secretary; and (2) an unconditional certification that specific funds (10% cash and 90% bonds) have already been set aside for the purpose. A conditional certification stating that the Bank "shall finance" the acquisition only "if found in consonance" with law and policies, and which lacks the required DAR endorsement, is void ab initio and cannot substitute for the indispensable requirement of tender or consignation of the redemption price.

The dispute concerns Lot 3364 located in Maimpis, San Fernando, Pampanga, an agricultural land planted to sugarcane. The lot was originally owned by spouses Roberto and Asuncion Wijangco, who mortgaged it to the Philippine National Bank (PNB). After foreclosure and the Wijangcos' failure to redeem, PNB acquired ownership. On July 10, 1980, spouses Eligio and Marcelina Mallari purchased the lot from PNB without any indication that it was tenanted. Ignacio Arcega and 13 other agricultural lessees were occupying portions of the land and sought to exercise their statutory right of redemption under the Agricultural Land Reform Code after learning of the sale to the Mallari spouses.

• On July 10, 1980, spouses Eligio and Marcelina Mallari purchased Lot 3364 from the Philippine National Bank (PNB), which had acquired the property through foreclosure from the original owners, spouses Roberto and Asuncion Wijangco.
• Ignacio Arcega and 13 other agricultural lessees were occupying portions of the subject land, which was planted to sugarcane.
• On July 22, 1981, Arcega, et al. filed a petition for redemption with the Court of Agrarian Relations (CAR) against the Wijangcos, PNB, and the Mallari spouses, invoking Section 12 of R.A. No. 3844, as amended.
• On January 15, 1982, Arcega, et al. presented a "Certification To Finance Redemption of Estate Under R.A. No. 3844, As Amended" issued by Basilio Estanislao, then President of the Land Bank of the Philippines.
• The certification stated that the Bank "shall finance the acquisition... if found in consonance with the provisions of Section 12... and with the relevant policies and procedures laid down by the Land Bank Board of Directors," and that "corresponding funds shall be set aside upon receipt of the order or directive from the honorable court."
• The certification did not contain any favorable endorsement from the Department of Agrarian Reform Secretary, nor did it specify the amount of funds already set aside for the redemption.
• In a letter dated October 16, 1989, the Land Bank informed Eligio Mallari that the subject certification could not be enforced against the Bank because it was merely a conditional commitment and not the certification required under Land Bank Circular Letter No. 3, which requires a certification that funds have already been set aside pursuant to a DAR request.

• The Land Bank certification dated January 15, 1982 is void ab initio for being conditional in character and not in accordance with Section 12 of R.A. No. 3844 and Land Bank Circular Letter No. 3 dated February 25, 1980.
• The certification was effectively cancelled by the Land Bank in its October 16, 1989 letter, which categorically stated that the document cannot be enforced against the Bank for being in violation of Circular Letter No. 3.
• The certification lacks the mandatory favorable endorsement from the DAR Secretary required under Paragraph 2 of Circular Letter No. 3, which is essential because the DAR must initiate redemption proceedings and evaluate proposals for financing.
• Absent a valid Land Bank certification, Arcega, et al. failed to make a valid tender of payment or consignation of the redemption price, which is an indispensable requirement for exercising the right of redemption.

• The issue regarding the validity of the Land Bank certification was already passed upon by the Supreme Court in No. L-61093, which held that a certification of the Land Bank to finance the redemption "will suffice" as sufficient compliance with the requirement of tender or consignation.
• The Court is bound by its previous ruling that the certification is sufficient to constitute tender or consignation of the redemption price, and the matter should not be re-litigated.

• Procedural:
  • Whether the Supreme Court may grant the motion for reconsideration and reverse its Decision dated March 20, 2002, which affirmed the sufficiency of the Land Bank certification as tender of payment.
• Substantive Issues:
  • Whether the Land Bank certification dated January 15, 1982 constitutes valid tender or consignation of the redemption price under Section 12 of R.A. No. 3844, as amended.
  • Whether the certification is void ab initio for failing to comply with the requirements of Land Bank Circular Letter No. 3, particularly the lack of favorable endorsement from the DAR Secretary and its conditional nature.

• Procedural:
  • The Court granted the motion for reconsideration, ruling that the previous decision in No. L-61093 did not pass upon the intrinsic validity of the certification, but merely stated that a certification "will suffice" to constitute tender/consignation if valid. The issue of voidness was raised only after the remand to the trial court, which conducted a full-blown hearing and found the certification void for non-compliance with mandatory requirements.
• Substantive:
  • The Land Bank certification dated January 15, 1982 is declared VOID ab initio for the following reasons: (1) It lacks the mandatory favorable endorsement from the DAR Secretary required under Paragraph 2 of Land Bank Circular Letter No. 3, which is essential because the DAR must initiate redemption proceedings and evaluate proposals for financing; (2) The certification is conditional, stating that financing will proceed only "if found in consonance" with law and bank policies, and that funds will be set aside only upon receipt of court order, contrary to the required certification that funds have already been set aside; (3) The Land Bank itself, in its October 16, 1989 letter, declared the certification unenforceable for not complying with Circular Letter No. 3.
  • Absent a valid Land Bank certification, Arcega, et al. failed to tender or consign the redemption price, which is an indispensable requirement for exercising the right of redemption under R.A. No. 3844, as amended.
  • Consequently, the petition for redemption filed by Arcega, et al. is dismissed, and the Mallari spouses are allowed to continue enjoying their rights as purchasers.

• Right of Redemption under Section 12 of R.A. No. 3844 — Agricultural lessees have the right to redeem landholdings sold to third persons within 180 days from written notice of sale, at a reasonable price. The Department of Agrarian Reform initiates the proceedings while the Land Bank finances the redemption.
• Indispensable Requirement of Tender or Consignation — To validly exercise the right of redemption, agricultural lessees must either tender payment or consign the redemption price in court. A Land Bank certification may substitute for this requirement only if it strictly complies with statutory and regulatory requirements; a void certification cannot substitute for tender/consignation.
• Strict Compliance with Land Bank Circular Letter No. 3 — A valid certification must: (a) carry the favorable endorsement of the DAR Secretary; (b) certify that specific funds (10% cash, 90% bonds) have already been set aside; and (c) be unconditional. A conditional certification lacking DAR endorsement is void ab initio.

• "The right of redemption under R.A. No. 3844, as amended, is an essential mandate of the agrarian reform legislation to implement the State's policy of owner-cultivatorship and to achieve a dignified, self-reliant existence for small farmers."
• "Absent the requisite tender and consignation of the redemption price, we hold that under R.A. No. 3844, as amended, Ignacio Arcega, et al. cannot redeem the subject landholdings."
• "The Department of Agrarian Reform shall initiate, while the Land Bank shall finance, said redemption as in the case of pre-emption."

• Mallari vs. Court of Appeals, No. L-61093, May 25, 1988, 161 SCRA 503 — Cited as the previous ruling that a Land Bank certification "will suffice" as tender/consignation, but distinguished because it did not rule on the intrinsic validity of the specific certification in question.
• Quiño vs. Court of Appeals, 353 Phil. 449 (1998) — Cited for the principle that tender or consignation of the redemption price is an indispensable requirement to the proper exercise of the right of redemption.
• Hidalgo vs. Hidalgo, G.R. No. L-25326, May 29, 1970, 144 Phil. 312 — Cited for the policy behind agrarian reform legislation regarding owner-cultivatorship.

• Section 12, Republic Act No. 3844 (The Agricultural Land Reform Code of 1963), as amended by Republic Act No. 6389 (The Code of Agrarian Reforms of 1971) — Governs the lessee's right of redemption, requiring the DAR to initiate and the Land Bank to finance redemption.
• Land Bank Circular Letter No. 3, dated February 25, 1980 — Prescribes the rules for Land Bank financing of land acquisition through pre-emption or redemption, requiring DAR Secretary endorsement and specifying the form of certification (setting aside of specific funds).