[O.P. Case No. 96-L-6682.  November 17, 2000.]

ANTONIO L. ARROYO, appellant, vs. NOLITO D. SOLMAYOR, ET AL., appellees.

D E C I S I O N

          This resolves the appeal of Antonio L. Arroyo (hereafter "Mr. Arroyo") from the Order dated July 19, 1994 of the Secretary of the Department of Agrarian Reform (DAR), which dismissed his petition to cancel the Certificates of Land Transfer (CLTs) issued in favor of the appellees, and the subsequent DAR order dated August 7, 1996, denying his motion for reconsideration.

          Records reveal the following relevant facts:

          The landholding subject of this case, with an aggregate area of 9.8038 hectares and situated at Matina, Davao City, covers portions embraced by Transfer Certificates of Title (TCT) Nos. T-2979 (now TCT Nos. T-131160 and T-131161), T-2980, T-2981 and T-2982 issued by the Register of Deeds for the City of Davao in the name of Mr. Arroyo. Appellees Nolito Solmayor, et al., occupy the land and claim to be de jure tenants of Mr. Arroyo.

          On November 23, 1978, Mr. Arroyo received a letter from Legal Officer Norberto N. Feria, Jr., of the then Ministry of Agrarian Reform (MAR, now DAR) informing him that his land was the subject of Operation Land Transfer (OLT) under Presidential Decree (PD) No. 27. He was likewise advised that he could apply for conversion of the land to residential or other urban purposes in accordance with the laws, rules and regulations then applicable. This was followed by a letter dated January 16, 1979 signed by Mr. Hilario Pulido, MAR Team Leader I, stating that based on the parcellary map sketching conducted by the Agrarian Reform and the Bureau of Lands, the subject property was covered by OLT program since the area thereof, which was tenanted at that time, was more than seven (7) hectares.

          On July 24, 1979, Mr. Arroyo applied for the conversion of the subject land to residential subdivision. Attached to the application were pertinent documents showing that the land has been classified as residential by different government agencies, such as the Human Settlements Regulatory Commission (precursor of the HLURB), the Bureau of Soils, and the City of Davao. Acting on the application, the DAR local officials conducted a series of conferences by and between Mr. Arroyo, through his representative, and the possessors and occupants of the land (herein appellees), purposely to reach a settlement for the latter's relocation, award of their respective homelots, and payment of disturbance compensation as a consequence of conversion. However, the parties reached no final agreement. This prompted the Agrarian Reform Technologist of Davao City, Elizabeth B. Caparo to recommend that the tenants on the land be accorded the benefits of PD 27 and/or that the matter (request/application for conversion) be referred to the Bureau of Agrarian Legal Assistance (BALA) for whatever action it may deem proper.

          In November 1984, the DAR, even without resolving Mr. Arroyo's request for conversion, issued the questioned CLTs in favor of the appellees. Upon discovery thereof, Mr. Arroyo filed on August 27, 1985, a petition for the cancellation of the CLTs on the ground that the subject property was, and still is, a residential property and therefore beyond the coverage of PD 27. There, he denied the existence of a tenancy relationship between him and the appellees.

          Some four (4) years hence, or on August 8, 1988 to be precise, Mr. Arroyo, through his Attorney-in-Fact, Mr. Eduardo E. Suatengco, Jr., made a voluntary offer to sell of his entire landholding, including the subject land, to the government pursuant to the provision of the Comprehensive Agrarian Reform Law (CARL) of 1988.

          In an order dated May 19, 1989, the DAR Regional Director of Region XI dismissed the petition for cancellation of CLTs, ratiocinating that with Mr. Arroyo's voluntary offer to sell, the issue of whether or not the subject land is within the OLT coverage becomes moot and academic.

          Meanwhile, the DAR, in 1990, issued Emancipation Patents (EPs) to the appellees as the identified tenant-beneficiaries on the land.

          In time, Mr. Arroyo filed an appeal with the Office of the Secretary of Agrarian Reform, praying that the May 19, 1989 order be set aside and the CLTs cancelled.

          In an order dated July 19, 1994, then DAR Secretary Ernesto Garilao dismissed the appeal and affirmed the validity of the EPs issued to the tenant-beneficiaries. In substance, Secretary Garilao held that notwithstanding the prior classification of the land, the actual use thereof remains agricultural and that appellees are Mr. Arroyo's de jure tenants.

          His motion for reconsideration having been denied in an order dated August 7, 1996, Mr. Arroyo has interposed this recourse.

          As below, Mr. Arroyo maintains that the subject land falls outside the coverage of PD 27 having been classified as residential prior to the effectivity of said decree on October 21, 1972 and that appellees are not his tenants. Appellees, as to be expected, maintain the opposite view.

          The crux of this case is whether or not grounds exist to warrant the cancellation of CLTs and EPs issued to appellees as the identified tenant-beneficiaries on the land. The determination of this issue in turn hinges on the question of whether or not the subject land is exempt under OLT coverage of PD 27.

          In the recent case of Eudosia Daez vs. Court of Appeals, G.R. No. 133507, February 17, 2000, the Supreme Court set forth the requirements for coverage under the OLT program in this wise:

          "PD 27, which implemented the Operation Land Transfer (OLT) Program, covers tenanted rice or corn lands. The requisites for coverage under the OLT program are the following: (1) the land must be devoted to rice or corn crops; and (2) there must be a system of share-crop or lease tenancy obtaining therein. If either requisite is absent, a landowner may apply for exemption. If either for those requisites is absent, the land is not covered under OLT.

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          Thus, on one hand, exemption from coverage of OLT lies if: (1) the land is not devoted to rice or corn crops even if it is tenanted; or (2) the land is untenanted even though it is devoted to rice or corn crops." (emphasis ours)

          Guided by the foregoing, it is essential to determine whether or not tenancy relationship exists between Mr. Arroyo and the appellees. In the absence of the all important element of tenancy, the subject land falls outside OLT coverage of PD 27 even if incidentally it is devoted to rice and/or corn. In the case of Prudential Bank vs. Gapultos, 181 SCRA 160, [1990], the Supreme Court lists the requisites essential for the establishment of tenancy relationship, thus:

          "The essential requisites of tenancy relationship are: (1) the parties are the landowner and the tenant; (2) the subject is agricultural land; (3) there is consent; (4) the purpose is agricultural production; (5) there is personal cultivation; and, (6) there is sharing of harvests. All these requisites must concur in order to create a tenancy relationship between the parties. The absence of one does not make an occupant of a parcel of land, or a cultivator thereof, or a planter thereon, a de jure tenant. Unless a person has established his status as a de jure tenant, he is not entitled to security of tenure nor is he covered by Land Reform Program of the government under existing tenancy laws." (emphasis ours)

          Moreover, the Supreme Court, in Tiongson vs. Court of Appeals, 130 SCRA 482 [1984], stated that "the key factor in ascertaining whether or not there is a landowner-tenant relationship in this case is the nature of the disputed property."

          Applying the above-stated requirements in the case at bar, we find the absence of tenancy relationship between the parties. Firstly, subject land is not an agricultural land, as the term is understood. Uncontroverted evidence shows that the subject land had been classified as residential/commercial even prior to the effectivity of PD 27. Per Official Zoning Map of the City of Davao adopted under Resolution No. 711, Ordinance No. 281, s. of 1972 (p. 243, Records), the land was classified as "Commercial Zone and Residential Zone Class B". This classification confirmed the residential character of the subject land as appearing in Mr. Arroyo's tax declarations filed way back in 1968 (pp. 187-190, Records). In Tiongson vs. Court of Appeals, [supra], the Supreme Court upheld the residential character of a 34-hectare lot on the basis of its residential classification as indicated on the covering tax declarations and on the annual receipts for real estate taxes paid over the land. Likewise, in Hilario vs. Intermediate Appellate Court, 148 SCRA 573 [1987], the Supreme Court, in holding that a piece of land is residential, accorded due weigh and consideration on the tax declaration classifying it as residential.

          The residential character of the subject property is likewise confirmed by the following government agencies or offices:

1.         The Housing and Land use Regulatory Board (HLURB), Davao City, which issued a Zoning Certification to the effect that the subject land is within the Residential/Commercial Zone under the Zoning Ordinance of Davao City adopted through a Sangguniang Bayan Resolution and ratified by the HLURB, through Board Resolution No. 39-4, s. of 1980 dated July 31, 1980 (p. 208, Records)

2.         The Office of the Zoning Administrator, City of Davao, certifying to the effect that the subject land is within a Residential Zone Class "B" in the Zonification Ordinance of Davao City (p. 126, Records).

3.         The Bureau of Soils of then Ministry of Agriculture, Davao City, which submitted a Certification to the effect that the subject land is suitable for urban use/housing projects (p. 127, Records).

4.         The Office of the City Planning and Development Coordinator, Office of the Zoning Administrator, certifying to the effect that the subject land was classified as Major Commercial Zone (C-2) and High Density Residential Zone (R-2) in the City Ordinance No. 363, s. of 1982 or better known as Expanded Zoning Ordinance of Davao City (p. 160, Records).

          To cap it all, even the DAR Provincial Task Force on Illegal Conversion, after conducting on April 10, 2000 an investigation on the reported illegal conversion of the subject land, admitted in its report of June 2, 2000 that it is no longer agricultural, it being classified as commercial and residential zones. Consequently, they ruled out any act of illegal conversion.

          Secondly, the records show that the land in dispute was never intended for agricultural production. For one, no agricultural improvements were introduced upon the land since its acquisition by Mr. Arroyo in 1951. In fact, for more than a decade since 1972, the disputed land was subject of numerous business proposals (attached to Appeal Memorandum) from various land developers for purposes of developing it into a residential and commercial area. For another, the subject property is situated in a commercial and residential area. As the records show, it is adjacent to the Government Service and Insurance System (GSIS) subdivision and other residential or commercial establishments, and surrounded by GSIS Heights, Villa Josefina Subdivision, Flores Village, Central Park Subdivision, Poly Subdivision, San Miguel Village, New Matina Golf Club, Davao Memorial Park, Shrine of the Infant Jesus, Matina Public Market and Venees Hotel.

          The fact that appellees may perhaps have planted rice or corn on the said land, situated in the middle of what appears to be a fast growing residential and business area in the heart of a metropolitan area, is of little moment. Such agricultural activity cannot, by any strained interpretation of law, amount to converting the land in question into agricultural land and subject it to the agrarian reform program of the government. The Supreme Court in Hilario vs. Intermediate Appellate Court [supra] held that:

          ". . .. But even if the claim of the private respondent that some corn was planted on the lots is true, this does not convert residential land into agricultural land.

          The presumption assumed by the appellate court, that a parcel of land which is located in a poblacion is not necessarily devoted to residential purposes, is wrong. It should be the other way around. A lot inside the poblacion should be presumed residential, or commercial or non-agricultural unless there is clearly preponderant evidence to show that it is agricultural." (Emphasis supplied)

          Clearly, therefore, two (2) requisites — that the land is agricultural and that the purpose thereof is agricultural production — necessary to establish the existence of tenancy relationship between Mr. Arroyo and the appellees are absent. On the other requirements for the creation of tenancy relationship, suffice it to reiterate the well-established rule that "(A)ll these requisites must concur in order to create a tenancy relationship between the parties. The absence of one does not make an occupant of a parcel of land, or a cultivator thereof, or a planter thereon, a de jure tenant. Unless a person has established his status as a de jure tenant, he is not entitled to security of tenure nor is he covered by Land Reform Program of the government under existing tenancy laws" (Prudential Bank vs. Gapultos, supra).

          As appellees are not de jure tenants of Mr. Arroyo, the ineluctable conclusion is that the subject land is outside OLT coverage under PD 27. The issuance, therefore, of CLTs and EPs in favor of the appellees was without legal basis. They must perforce be cancelled. It should be stressed that the recipients of CLT and EP issued pursuant to PD 27 do not necessarily acquire vested rights over the landholding subject thereof. The propriety of cancelling a CLT and EP, in case of a finding that the land is outside the coverage of PD 27, is recognized and is in fact provided for in DAR Administrative Order No. 02, s. of 1994 entitled Rules Governing the Correction and Cancellation of Registered/Unregistered Emancipation Patents (EPs), and Certificates of Land Ownership Award (CLOAs) Due to Unlawful Acts and Omissions or Breach of Obligations of Agrarian Reform Beneficiaries (ARBs) and for Other Causes, which provides that:

          "Under Presidential Decree No. 27, Executive Order No. 228, and Republic Act No. 6657, tenants, farmers, and regular farmworkers have the right to own directly the land they till. Ownership shall be evidenced by either an Emancipation Patent (EP) or Certificate of Landownership Award (CLOA)

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          EPs/CLOAs issued to ARBs may be corrected and cancelled for violations of agrarian laws, rules and regulations. This includes cases of lands which are found to be exempt/excluded from P.D. No. 27/E.O. No. 228 or CARP coverage, or part of the landowner's retained areas. All rights which accrue to the ARB upon cancellation may be forfeited and the amortization they have paid may be refunded." (emphasis ours)

          WHEREFORE, foregoing premises considered, the assailed DAR orders dated July 19, 1994 and August 7, 1996 are hereby REVERSED and SET ASIDE and a new one entered declaring the 9.8-hectare land in question outside the Operation Land Transfer coverage of Presidential Decree No. 27.

          SO ORDERED.

          Manila, Philippines.

By authority of the President:

(SGD.) RONALDO B. ZAMORA

Executive Secretary

Copy furnished:

Atty. Rizaldo P. Advincula

Atty. Rowena Garcia-Flores

Department of Agrarian Reform