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G.R. NO. 185838, February 10, 2014 - RICARDO V. QUINTOS, Petitioner, v. DEPARTMENT OF AGRARIAN REFORM ADJUDICATION BOARD AND KANLURANG MINDORO FARMER’S COOPERATIVE, INC., Respondents.

G.R. NO. 185838, February 10, 2014 - RICARDO V. QUINTOS, Petitioner, v. DEPARTMENT OF AGRARIAN REFORM ADJUDICATION BOARD AND KANLURANG MINDORO FARMER’S COOPERATIVE, INC., Respondents.

PHILIPPINE SUPREME COURT DECISIONS

SECOND DIVISION

G.R. NO. 185838, February 10, 2014

RICARDO V. QUINTOS, Petitioner, v. DEPARTMENT OF AGRARIAN REFORM ADJUDICATION BOARD AND KANLURANG MINDORO FARMER’S COOPERATIVE, INC., Respondents.

R E S O L U T I O N

PERLAS–BERNABE, J.:

Assailed in this petition for review on certiorari1 is the Decision2 dated July 31, 2006 and Resolution3 dated December 17, 2008 of the Court of Appeals (CA) in CA–G.R. SP No. 44430 which affirmed with modification the Decision4 dated March 20, 1997 of the Department of Agrarian Reform Adjudication Board (DARAB) in DARAB Case No. 1883.

The Facts

Subject of the instant case is a 604.3258 hectare (ha.) land situated in Tayamaan, Mamburao, Occidental Mindoro (subject property), covered by Transfer Certificate of Title (TCT) No. T–116395 in the name of Golden Country Farms, Incorporated (GCFI), which consists of: (a) a 249 ha. mango orchard (mango orchard); and (b) a 355 ha. riceland (riceland).6

GCFI is a domestic corporation organized for the purpose of engaging in poultry and livestock production, processing, and trading.7 Petitioner Ricardo V. Quintos (Quintos) is the majority stockholder8 of GCFI who managed its properties until 1975 when management was taken over by Armando Romualdez (Romualdez).

Under Romualdez’s management, GCFI contracted substantial loans with the Philippine National Bank (PNB) and the Development Bank of the Philippines (DBP),9 which were secured by several real estate mortgages over GCFI properties,10 including the subject property.11 In 1981, Romualdez abandoned the management of the GCFI properties,12 afterwhich DBP took over.13 Sometime during the same year, certain people started to plant palay on the subject property, eventually covering the riceland.14

After the EDSA revolution, the possession and management of the GCFI properties were returned to GCFI. However, in July 1987, the properties were sequestered by the Presidential Commission on Good Government,15 albeit, eventually cleared. In the meantime, PNB and DBP transferred their financial claims against GCFI to the Asset Privatization Trust (APT).16

For GCFI’s continuous failure to pay its loans, PNB and DBP initiated extra–judicial foreclosure proceedings against the GCFI properties, which were, however, enjoined by the Regional Trial Court of Makati, Branch 134 (RTC) at Quintos’s instance.17

In 1989, APT Officer–in–Charge Cesar Lacuesta (Lacuesta) entered into a verbal agreement with 53 members of private respondent Kanlurang Mindoro Farmers’ Cooperative, Inc. (KAMIFCI), allowing the latter to tend the standing mango trees, induce their flowering, and gather the fruits at P300.00 per tree, the payment of which was to be remitted to Quintos.18

Subsequently, Quintos reacquired the possession and management of the GCFI properties, including the subject property, through a Memorandum of Agreement dated February 26, 1992 between him and APT, which was further approved by the RTC.19

Thereafter, Quintos was informed by APT of the notice from the Department of Agrarian Reform20 (DAR) placing the riceland under compulsory acquisition pursuant to the Comprehensive Agrarian Reform Program (CARP) of the government.21 This prompted Quintos to file a petition for exemption before the Office of the DAR Secretary (exemption case). In the main, Quintos cited the Court’s ruling in Luz Farms v. Secretary of the Department of Agrarian Reform22 (Luz Farms) wherein it declared as unconstitutional the inclusion of lands devoted to commercial raising of livestock, poultry, and swine under the CARP. To this end, Quintos claimed that GCFI was organized for the primary purpose of buying, selling, importing, exporting, improving, preparing, processing, producing, dealing, and trading–in cattle, swine, poultry, stock, meat, dairy products, etc., warranting the exemption of its properties, including the subject property, from CARP coverage.23

In an Order24 dated October 5, 1993 (October 5, 1993 DAR Order), then DAR Secretary Ernesto D. Garilao (DAR Secretary) ruled that the exemption enumerated in Luz Farms applies only to poultry, livestock, or swine farms existing as of June 15, 1988, the effectivity date of Republic Act No. (RA) 6657,25 otherwise known as the “Comprehensive Agrarian Reform Law of 1988.” Thus, considering that GCFI had ceased operations as such before the said date, or in May 1988, and that the subject property continued to be devoted to agricultural uses, including rice production and operation of groves of mango trees, the DAR Secretary denied Quintos’s petition for exemption, and ordered the Regional Director to place under CARP coverage26 the area actually cultivated to the extent of 558.9657 has.27

The Proceedings Before the PARAD

Meanwhile, on October 12, 1992, KAMIFCI filed an action for the peaceful possession and enjoyment of the subject property (tenancy case) against Quintos before the Office of the Provincial Adjudicator (PARAD) of San Jose, Occidental Mindoro, asserting its rights under an agricultural leasehold tenancy agreement it purportedly entered into with Lacuesta. In his answer, Quintos denied the personality of KAMIFCI as a registered cooperative as well as the existence of any tenancy agreement covering the subject property.28

On November 3, 1993, the PARAD rendered a Decision29 (November 3, 1993 PARAD Decision), holding that there was a verbal lease tenancy agreement entered into by Lacuesta with the 53 KAMIFCI members with respect to the mango orchard, and such was binding upon APT and GCFI30 notwithstanding the Certification31 dated August 25, 1993 issued by APT denying Lacuesta’s authority to enter into any tenurial relation and to issue GCFI official receipts. As such, the PARAD directed the reinstatement of the 53 KAMIFCI members previously tending the mango trees during the 1990 to 1991 and 1991 to 1992 seasons, and ordered them to pay the corresponding consideration of P300.00 per mango tree per season. The PARAD likewise held that the riceland had already been placed under CARP coverage and acquired for disposition by the DAR.32 Accordingly, it enjoined Quintos or any person acting in his behalf from disturbing the peaceful occupation of the farmer occupants in the subject property. Aggrieved, Quintos appealed to the DARAB.

Meanwhile, the Office of the President (OP) rendered a Decision33 dated February 21, 1995 (February 21, 1995 OP Decision) in the exemption case, ruling that the cessation of poultry and livestock activities on the GCFI properties, including the subject property, a month prior to the effectivity of RA 6657, does not a priori convert the properties to agricultural lands. In this relation, the OP concluded that the act of the DAR in declaring the said properties as covered by the CARP without affording GCFI the opportunity to contest the supposed conversion was arbitrary and confiscatory.34 Hence, it set aside the October 5, 1993 DAR Order, and granted the petition for exemption, except with respect to the mango orchard, the coverage and compulsory acquisition of which was deferred pursuant to Section 1135 of RA 6657.

The DAR filed a motion for reconsideration which was, however, denied with finality in a Resolution36 dated December 20, 1995 for being filed out of time. Because of this, the February 21, 1995 OP Decision became final and executory.

The DARAB Ruling

On March 20, 1997, the DARAB rendered a Decision37 in the tenancy case, respecting the findings and conclusions made in the February 21, 1995 OP Decision. It also (a) declared that the farmers in the “palayan area” covering 355 has. (i.e., the Riceland) may qualify as farmer–beneficiaries in the mango orchard as may be determined by the Municipal Agrarian Reform Officer; (b) held that Certificates of Land Ownership Award (CLOAs) should be generated immediately and distributed to qualified farmer–beneficiaries; and (c) affirmed the directive for Quintos not to disturb the peaceful possession and cultivation of the farmers in the mango orchard.

Dissatisfied, Quintos appealed to the CA, claiming that GCFI never consented to any tenancy relationship with the KAMIFCI members. It also argued that Lacuesta could not have established a valid tenancy relation with the KAMIFCI members covering the mango orchard on account of APT’s: (a) admission and acknowledgment that GCFI remains the owner of the subject property, which means that, APT cannot exercise any of the attributes of ownership until foreclosure thereof is effected; and (b) denial of Lacuesta’s authority to enter into any tenurial agreement with any individual or farmers’ cooperative for the use/lease of the subject property.38

Quintos further contended that the immediate generation of CLOAs is improper without payment of just compensation and affording GCFI the opportunity to exercise its right of retention.39

The CA Ruling

On July 31, 2006, the CA rendered a Decision,40 holding that the tenancy agreement entered by APT with the 53 KAMIFCI members on the mango orchard was binding upon GCFI since all its business concerns and transactions were coursed through APT at that time. It, however, declared as premature the generation of CLOAs in favor of the farmer–beneficiaries pending exercise of the landowner’s right of retention and absent payment of just compensation. Considering that the February 21, 1995 OP Decision had already attained finality, the CA no longer tackled the issues posed with respect to the riceland.

Unperturbed, Quintos filed a motion for partial reconsideration41 which was denied in a Resolution42 dated December 17, 2008. In addition, the CA directed the DAR to conduct the appropriate survey to ascertain the actual surface area of the mango orchard. Hence, the instant petition.

The Issue Before the Court

The essential issue for the Court’s resolution is whether or not the CA correctly sustained the validity of the tenancy agreement purported in this case.

The Court’s Ruling

The petition is meritorious.

Tenancy is a legal relationship established by the existence of particular facts as required by law.43 For a tenancy relationship to exist between the parties, the following essential elements must be shown: (a) the parties are the landowner and the tenant; (b) the subject matter is agricultural land; (c) there is consent between the parties; (d) the purpose is agricultural production; (e) there is personal cultivation by the tenant; and (f) there is sharing of the harvests between the parties.44All the above elements must concur in order to create a tenancy relationship. Thus, the absence of one does not make an occupant of a parcel of land, a cultivator or a planter thereon, a de jure tenant entitled to security of tenure under existing tenancy laws.45

The burden of proof rests on the one claiming to be a tenant to prove his affirmative allegation by substantial evidence. His failure to show in a satisfactory manner the facts upon which he bases his claim would put the opposite party under no obligation to prove his exception or defense. The rule applies to civil and administrative cases.46

In this relation, it bears stressing that the right to hire a tenant is basically a personal right of a landowner, except as may be provided by law.47 Hence, the consent of the landowner should be secured prior to the installation of tenants.48

In the present case, the PARAD, the DARAB and the CA all held that a tenancy relationship exists between GCFI and the 53 KAMIFCI members who were allegedly installed as tenants by APT, the “legal possessor” of the mango orchard at that time. Records are, however, bereft of any showing that APT was authorized by the property’s landowner, GCFI, to install tenants thereon. To be sure, APT only assumed the rights of the original mortgagees in this case, i.e., PNB and DBP, which, however, have yet to exercise their right to foreclose the mortgaged properties due to the RTC’s order enjoining the same. It is settled that a mortgagee does not become the owner of the mortgaged property until he has foreclosed the mortgage and, thereafter, purchased the property at the foreclosure sale.49 With the foreclosure proceedings having been enjoined, APT could not have been regarded as the “landowner” of the subject property. Thus, since the consent of the standing landowner, GCFI, had not been secured by APT in this case, it had no authority to enter into any tenancy agreement with the KAMIFCI members.

It is well to note that a reliance on Section 650 of RA 3844,51 as amended, does not dilute the propriety of this conclusion. In Valencia v. CA (Valencia),52 the Court illumined that the said section – contrary to the milieu of the present case – already “assumes that there is already an existing agricultural leasehold relation,” consistent with the “personal character” of the tenancy relationship, viz.:53

When Sec. 6 provides that the agricultural leasehold relations shall be limited to the person who furnishes the landholding, either as owner, civil law lessee, usufructuary, or legal possessor, and the person who personally cultivates the same, it assumes that there is already an existing agricultural leasehold relation, i.e., a tenant or agricultural lessee already works the land. The epigraph of Sec. 6 merely states who are “Parties to Agricultural Leasehold Relations,” which assumes that there is already a leasehold tenant on the land; x x x.

To better understand Sec. 6, let us refer to its precursor, Sec. 8 of R.A. No. 1199, as amended. Again, Sec. 8 of R.A. No. 1199 assumes the existence of a tenancy relation. As its epigraph suggests, it is a “Limitation of Relation,” and the purpose is merely to limit the tenancy “to the person who furnishes the land, either as owner, lessee, usufructuary, or legal possessor, and to the person who actually works the land himself with the aid of labor available from within his immediate farm household.” Once the tenancy relation is established, the parties to that relation are limited to the persons therein stated. Obviously, inherent in the right of landholders to install a tenant is their authority to do so; otherwise, without such authority, x x x landholders cannot install a tenant on the landholding. Neither Sec. 6 of R.A. No. 3844 nor Sec. 8 of R.A. No. 1199 automatically authorizes the persons named therein to employ a tenant on the landholding.

xxxx

[N]oted authority on land reform, Dean Jeremias U. Montemayor, explains the rationale for Sec. 8 of R.A. No. 1199, the precursor of Sec. 6 of R.A. No. 3844:

Since the law establishes a special relationship in tenancy with important consequences, it properly pinpoints the persons to whom said relationship shall apply. The spirit of the law is to prevent both landholder absenteeism and tenant absenteeism. Thus, it would seem that the discretionary powers and important duties of the landholder, like the choice of crop or seed, cannot be left to the will or capacity of an agent or overseer, just as the cultivation of the land cannot be entrusted by the tenant to some other people. Tenancy relationship has been held to be of a personal character. (Emphases and underscoring supplied; citations omitted)

WHEREFORE, the petition is GRANTED. The Decision dated July 31, 2006 and Resolution dated December 17, 2008 of the Court of Appeals in CA–G.R. SP No. 44430 are REVERSED and SET ASIDE since no valid tenancy agreement exists over the mango orchard subject of this case.

SO ORDERED.

Carpio, J., (Chairperson), Velasco, Jr.,* Brion, and Perez, JJ., concur.

Endnotes:


* Designated Additional Member per Raffle dated February 5, 2014.

1Rollo, pp. 9–23.

2 Id. at 25–42. Penned by Presiding Justice Ruben T. Reyes (retired member of the Court), with Associate Justices Rebecca De Guia–Salvador and Monina Arevalo–Zenarosa, concurring.

3 Id. at 43–46. Penned by Associate Justice Rebecca De Guia–Salvador, with Associate Justices Ramon R. Garcia and Japar B. Dimaampao, concurring.

4 CA rollo, pp. 27–33. Penned by Assistant Secretary Lorenzo R. Reyes, with Undersecretary Hector D. Soliman, and Assistant Secretaries Augusto P. Quijano and Sergio B. Serrano, concurring.

5 Id. at 153–155.

6Rollo, p. 26.chanrobleslaw

7 Id. at 11.

8 Id. at 26. Quintos claims that he owns about 74% of all GCFI issued shares (id. at 11).

9 Id. at 27.

10 CA rollo, p. 29.

11 Id. at 48.

12Rollo, pp. 26–27.

13 CA rollo, p. 37.

14Rollo, pp. 26–27.

15 CA rollo, p. 53.

16Rollo, p. 12

17 CA rollo, p. 53.

18Rollo, p. 27.

19 CA rollo, pp. 29 and 53.

20 Id. at 53.

21 Id. at 41 and 53.

22 Id. at 48; G.R. No. 86889, December 4, 1990, 192 SCRA 51.

23 CA rollo, p. 49.

24 Id. at 48–51.

25 “AN ACT INSTITUTING A COMPREHENSIVE AGRARIAN REFORM PROGRAM TO PROMOTE SOCIAL JUSTICE AND INDUSTRIALIZATION, PROVIDING THE MECHANISM FOR ITS IMPLEMENTATION, AND FOR OTHER PURPOSES.”

26 CA rollo, pp. 50–51.

27 Id. at 53.

28 Id. at 28.

29 Id. at 37–47. Penned by Provincial Adjudicator Claro M. Almobela.

30 Id. at 40.

31 Id. at 66.

32 Id. at 41.

33 Id. at 52–60. Penned by then Executive Secretary Teofisto T. Guingona, Jr., by authority of the President.

34 Id. at 59.

35 SEC. 11. Commercial Farming. – Commercial farms which are private agricultural lands devoted to salt beds, fruit farms, orchards, vegetable and cut–flower farms, and cacao, coffee and rubber plantations, shall be subject to immediate compulsory acquisition and distribution after ten (10) years from the effectivity of this Act. In the case of new farms, the ten–year period shall begin from the first year of commercial production and operation, as determined by the DAR. During the ten–year period, the Government shall initiate steps necessary to acquire these lands, upon payment of just compensation for the land and the improvements thereon, preferably in favor of organized cooperatives or associations, which shall thereafter manage the said lands for the workers–beneficiaries.

36 CA rollo, pp. 61–64. Penned by Senior Deputy Executive Secretary Leonardo A. Quisumbing, by authority of the President.

37 Id. at 27–33.

38 Id. at 10–11.

39 Id. at 15–16.

40Rollo, pp. 25–42.

41 CA rollo, pp. 240–254.

42Rollo, pp. 43–46.

43Salmorin v. Dr. Zaldivar, 581 Phil. 531, 538 (2008).

44 Estate of Pastor M. Samson v. Susano, G.R. Nos. 179024 and 179086, May 30, 2011, 649 SCRA 345, 365.

45Reyes v. Spouses Joson, 551 Phil. 345, 352 (2007).

46 See Soliman v. Pampanga Sugar Development Company (PASUDECO), Inc., G.R. No. 169589, June 16, 2009, 589 SCRA 236, 249–250.

47Valencia v. CA, 449 Phil. 711, 730 (2003); VHJ Construction and Development Corp. v. CA, 480 Phil. 28, 38 (2004); Sumawang v. Engr. De Guzman, 481 Phil. 239, 247 (2004); Pag–asa Fishpond Corp. v. Jimenez, 578 Phil. 106, 130 (2008).

48 See Pag–asa Fishpond Corporation v. Jimenez, id. at 134.

49Ramirez v. CA, 456 Phil. 345, 353.

50 Section 6. Parties to Agricultural Leasehold Relation – The agricultural leasehold relation shall be limited to the person who furnishes the landholding, either as owner, civil law lessee, usufructuary, or legal possessor, and the person who personally cultivates the same.

51 Entitled “AN ACT TO ORDAIN THE AGRICULTURAL LAND REFORM CODE AND TO INSTITUTE LAND REFORMS IN THE PHILIPPINES, INCLUDING THE ABOLITION OF TENANCY AND THE CHANNELING OF CAPITAL INTO INDUSTRY, PROVIDE FOR THE NECESSARY IMPLEMENTING AGENCIES, APPROPRIATE FUNDS THEREFOR AND FOR OTHER PURPOSES.”

52 Supra note 47.

53 Id. at 730–732.

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