NELITA M. BACALING, REPRESENTED BY HER ATTORNEY-IN-FACT JOSE JUAN TONG, AND JOSE JUAN TONG, IN HIS PERSONAL CAPACITY, PETITIONERS, VS. FELOMINO MUYA, CRISPIN AMOR, WILFREDO JERE…

Bacaling versus Muya

The Case

This is a petition for review on certiorari brought before the Supreme Court by Nelita Bacaling, represented by her attorney-in-fact Jose Juan Tong, and by Jose Juan Tong in his personal capacity, against Felomino Muya, Crispin Amor, Wilfredo Jereza, Rodolfo Lazarte and Nemesio Tonocante. The petitioners ask the Court to reverse the Court of Appeals, which had validated the certificates of land transfer issued to the respondents over one hundred ten sub-lots in Iloilo City. The case matters because it gathers in one decision three questions a bar candidate must master: who is a real party in interest, when an agency is one coupled with interest and therefore irrevocable, and when land is outside the coverage of agrarian reform because it is residential rather than agricultural.

Procedural History

Bacaling and Tong first filed with the Department of Agrarian Reform a petition to cancel the certificates of land transfer issued to the respondents. The Regional Director dismissed the petition, and the Department of Agrarian Reform Central Office affirmed the dismissal. Bacaling and Tong then appealed to the Office of the President, which reversed the agrarian authorities in a decision dated May 22, 1998. The Office of the President declared the landholdings exempt from the coverage of the Comprehensive Agrarian Reform Law, cancelled the certificates of land transfer, and directed the Department of Agrarian Reform to implement the voluntary offer of disturbance compensation and relocation. The motions for reconsideration were denied on July 22, 1999.

The respondents elevated the matter to the Court of Appeals on a petition for review under Rule 43. The Court of Appeals reversed the Office of the President and reinstated the order of the Regional Director, refusing to recognize the 1955 classification of the lots as residential. Reconsideration was denied on June 5, 2001. Hence this petition for review on certiorari before the Supreme Court.

Facts

Nelita Bacaling and her husband Ramon owned three parcels of land in Jaro, Iloilo City, with a total area of 9.9631 hectares. In 1955 the landholding was subdivided into one hundred ten sub-lots, each covered by its own transfer certificate of title. That same year the National Urban Planning Commission approved the landholding as residential or subdivision, and the Bureau of Lands approved the subdivision plan for a low-cost residential community called the Bacaling-Moreno Subdivision.

In 1957 the spouses obtained a real estate loan from the Government Service Insurance System to develop the subdivision, secured by a mortgage over the lots. Only part of the loan was released, the spouses failed to pay their amortizations, and the mortgage was foreclosed. After litigation that reached the Supreme Court, Bacaling, by then a widow, restored ownership of the one hundred ten sub-lots to herself in 1989. Meanwhile, in 1977 the City Council of Iloilo enacted a zoning ordinance declaring the sub-lots residential and non-agricultural, and in 1978 Bacaling registered the subdivision with the National Housing Authority and obtained a license to sell.

The respondents claim they were instituted as tenant-tillers in 1964, that their relationship became leasehold in 1974, and that in 1980 they secured certificates of land transfer. The Office of the President found instead that in 1972 and thereafter the respondents clandestinely entered and occupied the entire landholding, taking advantage of the troubled peace and order situation at the onset of martial law and of the foreclosure. In 1990 Bacaling sold the sub-lots to Jose Juan Tong and two others, and in 1992 she executed in his favor an irrevocable special power of attorney to clear the titles and cause the transfer of the lots to the buyers. Ten years after the sale Bacaling sued to nullify it, but the complaint was dismissed with prejudice and the dismissal became final.

Issues

• Whether or not petitioner Jose Juan Tong has the requisite material interest to litigate this petition for review, despite Bacaling's attempt to revoke the power of attorney and withdraw the petition.
• Whether or not the respondents are agricultural lessees entitled to security of tenure under the agrarian laws.
• Whether or not the one hundred ten sub-lots, classified for residential use before October 21, 1972, are covered by Operation Land Transfer under Presidential Decree Number 27.

Applicable Provisions

Presidential Decree Number 27, as quoted in the decision, defines its own coverage:

tenant-farmers of private agricultural lands primarily devoted to rice and corn under a system of shared-crop or lease tenancy, whether classified as landed estate or not.

This is the key text, because the decree reaches only private agricultural lands, so land already converted to residential use falls outside it.

Ruling

On the first issue, the Court held that Tong possesses adequate and legitimate interest. Interest means material interest, an interest in issue to be affected by the judgment, and a real party in interest is the party who would be benefited or injured by the judgment. As buyer of the sub-lots and as attorney-in-fact under an irrevocable special power of attorney, Tong stands to be benefited or injured by the judgment. The Court treated Bacaling's motion to withdraw skeptically, applying the rule that a party who adopts a theory below cannot change it on appeal. More importantly, the agency is one coupled with interest: it was executed to complete the performance of the contract of sale, and the fiduciary relationship of ordinary agency is replaced by a material consideration that bars removal of the agent on the ground of loss of trust and confidence. Bacaling cannot revoke it at her whim and pleasure, and since no judgment has set the agency aside, Tong retains material interest with or without her cooperation.

On the second issue, the Court ruled that the respondents are not agricultural lessees. Of the requisites of a valid leasehold relationship, the first, third and sixth are lacking: the parties must be landowner and tenant, there must be consent, and the harvest must be shared. The Court held that the Government Service Insurance System, not Bacaling, owned the properties from 1961 up to 1989, because the confirmation of the foreclosure sale retroacts to the date of the sale itself. The respondents' agreement to till the land was not with the true owner, and there is no showing that the System consented to a tenancy or received a share of the harvest. The pendency of the earlier case concerned only the right of redemption, not the validity of the foreclosure, so it did not preserve Bacaling's ownership in the interim.

On the third issue, the Court held that the sub-lots are residential and outside agrarian reform. The key factor in ascertaining a landowner-tenant relationship is the nature of the disputed property, and lands converted to non-agricultural or residential use by agencies other than the Department of Agrarian Reform before the 1988 agrarian reform law are excluded from coverage. The lots were officially classified as residential since 1955, confirmed by the zoning ordinance of 1977, the registration with the National Housing Authority and the license to sell in 1978, and the sale to Tong in 1990 for residential development.

Doctrine

First, a real party in interest is the party who would be benefited or injured by the judgment, and an agent under an agency coupled with interest has sufficient material interest to prosecute the case in his own name. Second, an agency coupled with interest, created for the mutual interest of agent and principal as when executed to complete a contract of sale, cannot be revoked at the pleasure of the principal; revocation requires judicial process. Third, the requisites of an agricultural leasehold relationship are the landowner and tenant, agricultural land as subject matter, consent, the purpose of agricultural production, personal cultivation, and sharing of the harvest. Fourth, the key factor in ascertaining a landowner-tenant relationship is the nature of the property, and land classified as residential before the agrarian reform law is outside the coverage of Presidential Decree Number 27 and the Comprehensive Agrarian Reform Law.

Disposition

The Court granted the petition, reversed the Court of Appeals, and upheld the decision of the Office of the President cancelling the certificates of land transfer and declaring the landholdings exempt from agrarian reform coverage.

Remember This

Memorize the line that the key factor in ascertaining a landowner-tenant relationship is the nature of the disputed property, so residential land never enters agrarian reform. Examiners use this case for the requisites of an agricultural leasehold, for agencies coupled with interest, and for the retroactive effect of the confirmation of a foreclosure sale on ownership.