ELMINA C. DAVID-FERNANDEZ, WIVENIA C. DAVID-ESMUNDO, JUAN PABLO C. DAVID AND SERAFIN C. DAVID, JR., PETITIONERS, VS. OMEGA BREEDERS, INC. REPRESENTED BY BONIFACIO ONG, GREGORIO …

David-Fernandez versus Omega Breeders

The Case

This is a petition filed by the heirs of the registered owner of a large agricultural landholding in Victoria, Tarlac, against the farmer beneficiaries who were awarded the land under the government's land reform program and against Omega Breeders, Incorporated, the company that later bought portions of it. The petitioners ask that the emancipation patents, the deeds of sale, and the transfer certificates of title issued to the company be annulled and cancelled, on the ground that they were deprived of just compensation and that the sales violated the agrarian reform laws. The case matters because it fixes where jurisdiction lies over emancipation patents already registered with the land registration authority, and because it states, as a rule, that a sale by a beneficiary within the prohibitory period is void and produces no civil effect.

Procedural History

The petitioners filed their action for annulment and cancellation of emancipation patents, annulment of deeds of sale and mortgage, and damages before the Office of the Provincial Agrarian Reform Adjudicator of Tarlac. The company moved to dismiss on the ground of lack of jurisdiction, but the Provincial Adjudicator denied the motion, and denied the company's motion for reconsideration as well. After trial, the Provincial Adjudicator rendered a decision nullifying the sales to the company for violating the agrarian laws, ordering the cancellation of the emancipation patents of the four farmer beneficiaries who sold, ordering the Register of Deeds to cancel the company's titles, and directing that the land be reallocated to other qualified farmer beneficiaries. The company appealed to the Department of Agrarian Reform Adjudication Board. The Board reversed the Provincial Adjudicator, holding that the petitioners' cause of action had been mooted by an earlier decision of the Board and that it had no jurisdiction, the matter being one of administrative implementation of agrarian laws. The petitioners' motion for reconsideration was denied. The petitioners then came to the Supreme Court by petition for review under Rule 43.

Facts

The petitioners were the registered owners of a parcel of agricultural land in Barangay Baculong, Victoria, Tarlac, with an area of 149,749 square meters, covered by a transfer certificate of title. The land was placed under the coverage of Presidential Decree 27 through Operation Land Transfer, and it was then being cultivated by ten tenant farmers. On June 14, 1989, the Department of Agrarian Reform issued emancipation patents in favor of these tenants for their individual holdings, and the patents were registered with the Registry of Deeds of Tarlac in June 1993. The petitioners' title was cancelled and the land was divided into parcellary lots, with separate titles issued to the beneficiaries.

Shortly after receiving their titles, four of the beneficiaries, namely Rogelio Tañedo, Cipriano Castillo, Celia Vda. de Francisco, and Oscar Tañedo, sold the lands awarded to them to Omega Breeders, Incorporated. Their titles were cancelled and new titles were issued in the company's name. The company then used these titles as collateral for a loan.

In March 1998, the petitioners filed their action. They alleged that before the land was placed under the decree, it had been mortgaged with a bank, and that without their knowledge the mortgage was paid by the company, after which the four beneficiaries were made to execute deeds of sale in its favor. They claimed that the distribution of the patents was premature and irregular because they had not yet received just compensation, and that the sales were void because the sellers were not yet the legitimate owners. The Department of Agrarian Reform answered that there was no premature distribution, the registration of the patents having been based on a certificate of compensation, and that the petitioners had been notified of the coverage. The Land Bank of the Philippines asserted that it had performed its duty and had informed the petitioners of the availability of the full compensation, and that their non-receipt of it was due to their own failure to submit the required documents.

Issues

• Whether or not the Department of Agrarian Reform Adjudication Board has jurisdiction over an action seeking the cancellation of emancipation patents already registered with the land registration authority and the annulment of deeds of sale of lands covered by the agrarian reform program.
• Whether or not the emancipation patents distributed to the farmer beneficiaries should be cancelled on the ground of non-payment of just compensation to the landowners.
• Whether or not the sale of the awarded lands by four farmer beneficiaries to Omega Breeders, Incorporated is void for falling within the prohibitory period, and whether the titles issued to the company pursuant to that sale should be cancelled.

Applicable Provisions

Section 13 of Executive Order 129-A provides:

Section 13. Agrarian Reform Adjudication Board - There is hereby created an Agrarian Reform Adjudication Board under the Office of the Secretary. The Board shall be composed of the Secretary as Chairman, two (2) Undersecretaries as may be designated by the Secretary, the Assistant Secretary for Legal Affairs and (3) others to be appointed by the President, upon the recommendation of the Secretary, as members. A Secretariat shall be constituted to support the Board. The Board shall assume the powers and functions with respect to the adjudication of agrarian reform cases under Executive Order No. 229 and this Executive Order. These powers and functions may be delegated to the regional offices of the Department in accordance with rules and regulations to be promulgated by the Board.

This provision is the source of the Board's adjudicatory power, which the Court holds was erroneously disclaimed in this case.

Section 1, Rule II of the 1994 Rules of Procedure of the Board provides, in pertinent part:

Section 1. Primary and Exclusive Original and Appellate Jurisdiction - The Board shall have primary and exclusive jurisdiction, both original and appellate, to determine and adjudicate all agrarian disputes involving the implementation of the Comprehensive Agrarian Reform Program (CARP) under Republic Act No. 6657, Executive Order Nos. 228 and 129-A, Republic Act No. 3844 as amended by Republic Act No. 6389, Presidential Decree No. 27 and other agrarian laws and their implementing rules and regulations. Specifically, such jurisdiction shall include but not be limited to cases involving the following: x x x e) Those involving the sale, alienation, mortgage, foreclosure, pre-emption and redemption of agricultural lands under the coverage of the CARP or other agrarian laws; f) Those involving the issuance, correction and cancellation of Certificates of Land Ownership Award (CLOAs) and Emancipation Patents (EPs) which are registered with the Land Registration Authority.

This rule expressly covers the cancellation of registered emancipation patents and the sale of covered agricultural lands, which are precisely the reliefs the petitioners prayed for.

Section 27 of Republic Act 6657 provides:

Section 27. Transferability of Awarded Lands. Lands acquired by beneficiaries under this Act may not be sold, transferred or conveyed except through hereditary succession, or to the government, or to the Land Bank of the Philippines, or to other qualified beneficiaries for a period of ten (10) years: Provided, however, That the children or the spouse of the transferor shall have a right to repurchase the land from the government or the Land Bank of the Philippines within a period of two (2) years. x x x If the land has not yet been fully paid by the beneficiary, the rights to the land may be transferred or conveyed, with prior approval of the Department of Agrarian Reform, to any heir of the beneficiary or to any other beneficiary who, as a condition for such transfer or conveyance, shall cultivate the land himself. Failing compliance herewith, the land shall be transferred to the Land Bank of the Philippines which shall give due notice of the availability of the land in the manner specified in the immediately preceding paragraph.

This provision supplies the ten-year prohibitory period and the only four permitted modes of transfer, and the sale to the company falls under none of them.

Ruling

On the first issue, the Court ruled that the Board does have jurisdiction. Jurisdiction over the subject matter is conferred by law and is determined by the material allegations of the complaint and the character of the relief prayed for. The petitioners sought the cancellation of emancipation patents already registered with the land registration authority, on the grounds of non-payment of just compensation and illegal transfer to the company. These are matters expressly placed within the Board's jurisdiction by its own rules, and the Board therefore erred in dismissing the petition for lack of jurisdiction.

On the second issue, the Court ruled that the patents should not be cancelled on the ground of non-payment of just compensation. The Court stressed that ownership of lands acquired under Presidential Decree 27 may be transferred only after the beneficiary has fully paid the amortizations, so that without full payment there can be no transfer of title from the landowner to the grantee. Here, however, the registration of the patents and the issuance of the titles were made only after the Land Bank certified that it had deposited and earmarked the compensation in cash and in bonds, and this certification was annotated on the title. The petitioners did not dispute that despite notice of the availability of the funds, they failed to submit the documentary and administrative requirements for release. Their inaction, if not refusal to accept the compensation, should not prejudice the rights of the beneficiaries who complied with their duties under the law.

On the third issue, the Court ruled that the sale to the company is void. Presidential Decree 27 prohibits the sale or transfer of any landholding acquired under it except by hereditary succession or in favor of the government, and Republic Act 6657 allows transfer within ten years only through hereditary succession, to the government, to the Land Bank, or to other qualified beneficiaries. The four beneficiaries sold their holdings in November 1996, barely eight years from the issuance of their patents in June 1989, and the company falls under none of the exceptions. The Court held that a void contract is equivalent to nothing, produces no civil effect, and does not create, modify, or extinguish a juridical relation, so the titles issued to the company pursuant to the void sale are necessarily invalid. The Court added that the mere issuance of an emancipation patent does not place ownership beyond attack, and that patents may be cancelled for violations of agrarian laws. The beneficiaries who sold proved themselves unworthy of the grace of the government, and their patents were cancelled. Ownership does not revert to them, nor to the petitioners, because the land was acquired under the decree and must be reallocated by the government to other qualified beneficiaries.

Doctrine

First, jurisdiction over the cancellation of emancipation patents registered with the land registration authority, and over the sale and alienation of lands covered by the agrarian reform program, belongs to the Department of Agrarian Reform Adjudication Board, and is determined by the allegations of the complaint and the relief prayed for, not by the agency's own characterization of the case as mere administrative implementation.

Second, under Presidential Decree 27 and Section 27 of Republic Act 6657, lands awarded to beneficiaries may not be sold, transferred, or conveyed within ten years except through hereditary succession, to the government, to the Land Bank of the Philippines, or to other qualified beneficiaries. Any sale outside these exceptions is void, and a void contract produces no civil effect, so titles derived from it are likewise invalid and cannot be shielded by the indefeasibility of a registered title.

Third, the transfer of ownership to the beneficiary presupposes full payment of the amortizations, but a landowner who, despite notice and the earmarking of compensation, fails to claim it cannot invoke non-payment to defeat the rights of beneficiaries who complied with the law.

Disposition

The petition was granted. The decision and resolution of the Board dismissing the petition for lack of jurisdiction were reversed and set aside, the decision of the Provincial Adjudicator cancelling the emancipation patents of the four selling beneficiaries and the titles of Omega Breeders, Incorporated was reinstated, and the land was ordered reallocated to other qualified farmer beneficiaries.

Remember This

Memorize this line: a sale by an agrarian reform beneficiary within the ten-year prohibitory period is void, and a void contract is equivalent to nothing, so the titles built upon it fall with it. Examiners use this case to test jurisdiction over registered emancipation patents and the exceptions to the ten-year prohibition on transfer of awarded lands.