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THIRDDIVISION

[G.R.No.156965.October12,2006.]
FROILANDEGUZMAN,ANGELMARCELOandNICASIO
MAGBITANG,petitioners,vs.THECOURTOFAPPEALS,
OFFICEOFTHEPRESIDENT,andtheMUNICIPALITYOF
BALIUAG,BULACAN,respondents.

DECISION

TINGA,J :
p

OnappealviaapetitionforreviewoncertiorariunderRule45ofthe1997Rulesof
CivilProcedurearetheDecision1andResolution2oftheCourtofAppealsinCA
G.R.SPNo.55710.TheDecisionaffirmedtheResolutiondated4October1999
oftheOfficeofthePresidentdismissingpetitioners'appealfromtheOrderofthe
SecretaryofAgrarianReformdeclaringthatthedisputedpropertycannotbe
placedunderthecoverageoftheagrarianreformprogramortheOperationLand
Transfer.
Thefollowingfactualantecedentsaremattersofrecord.
PetitionersFroilanDeGuzman,AngelMarceloandNicasioMagbitangwere
amongthetenantsofaparceloflandsituatedatBarangayPagala,Baliuag,
Bulacan.Theland,measuringsix(6)hectares,wasformerlyownedbytheVergel
DeDiosfamily.Sometimein1979,respondentMunicipalityofBaliuag,Bulacan
(municipality)soughttheexpropriationofthelandbeforethenowdefunctCourtof
AgrarianRelations.Duringthependencyoftheexpropriationproceedings,the
municipalityandpetitionersenteredintoacompromiseagreement,whereby
petitionersirrevocablywithdrewtheiroppositiontotheexpropriationofthelandin
considerationofthepaymentofadisturbancecompensationofP25,000.00per
hectareorP2.50persquaremeter.Petitionersalsowaived"allclaimsand
demands"againstthemunicipality.TheCourtofAgrarianRelationsapprovedsaid
compromiseagreementinitsdecisionsdated16April1979and9August1979.3
Fromtherecords,itcanbegatheredthatthemunicipalityeventuallyacquired
ownershipofthelandthroughexpropriationbutallowedpetitionerstocontinue
cultivatingtheirlotspendingtheconstructionoftheBaliuagWholesaleComplex
Market.Forthisarrangement,petitionersremittedrentalstothemunicipal
treasurer.Despitethelapseofseveralyears,constructionofthemarketdidnot

pushthrough.Thispromptedpetitioners,whohadcontinuallyoccupiedand
cultivatedtheland,tofilein1996apetitionwiththeMunicipalAgrarianReform
Office(MARO)ofBaliuag,prayingthatthelandbeplacedundertheOperation
LandTransfer(OLT)inaccordancewithPresidentialDecree(P.D.)No.27.4
FollowingthefilingoftheirpetitionforCARPcoveragebeforetheMARO,
petitionersfiledacomplainton13May1997withtheDepartmentofAgrarian
ReformAdjudicationBoard(DARAB)againstthemunicipality.Intheircomplaint
docketedasDARABCaseNo.03025054'97,petitionersprayedfortheissuance
ofapreliminaryinjunctionortemporaryrestrainingordertosecuretheirpeaceful
possessionovertheland.TheProvincialAdjudicatorrenderedjudgmentinfavor
ofpetitionerson17July1997.Thedispositiveportionofthedecisionreads:
WHEREFORE,premisesconsidered,theBoardfindstheplaintiffs
a[sic]bonafidefarmer[]beneficiariesofagrarianreform[.]
[A]ccordingly,judgmentisherebyrenderedasfollows:
1.

Directingthethe[sic]respondent,MunicipalityofBaliuag,

Bulacan[,]representedbyHonorableMayorEdilbertoTengcoand
allotherpersonsactingintheirbehalftopermanentlyceaseand
desistfromdumpinggarbageinthepremisesinquestion
2.
Directingtherespondenttomaintainpetitionersinpeaceful
possessionoverthedisputedproperty.
IEAa ST

SOORDERED.5

On6January1997,theRegionalDirectoroftheDepartmentofAgrarianReform
(DAR)issuedanordergrantingthepetitionanddeclaringthelandascoveredby
OLT.6Themunicipalitymovedforitsreconsiderationinvain.Followingthedenial
ofitsmotionforreconsideration,themunicipalityelevatedthemattertotheDAR
Secretarywho,inhisOrderdated8August1997,reversedtheOrderof6
January1997oftheRegionalDirector.7Petitioners,aggrievedthistime,filedan
appealwiththeOfficeofthePresident.On1July1999,ExecutiveSecretary
RonaldoB.Zamora,byauthorityofthePresident,dismissedpetitioners'appeal
andaffirmedtheorderoftheDARSecretary.8
Undaunted,petitionersfiledapetitionforreviewwiththeCourtofAppeals,which
prayedforthereversaloftheOrderof1July1999issuedbytheOfficeofthe
PresidentonthegroundsthatthelandremainedagriculturalandthattheOfficeof
thePresidenterredinrelyinguponthecertificationissuedbytheHousingand
LandUseRegulatoryBoard(HLURB)classifyingthelandascommercial.They
alsoarguedthatundertheprovisionsofAdministrativeOrder(A.O.)No.20,series
of1992,theconversionofthelandfornonagriculturalpurposeswasdisallowed.
On30January,2002,theCourtofAppealsrenderedtheassailedDecision,
dismissingpetitioners'appeal.Upholdingthenonagriculturalclassificationofthe
land,theCourtofAppealsruledthatthelandcouldnolongerbesubjectofthe

comprehensiveagrarianreformlaw(CARL).TheCourtofAppealsalsodenied
petitioners'motionforreconsiderationintheassailedResolutiondatedJanuary20,
2003.
Hence,theinstantpetition,imputingthefollowingerrorstotheCourtofAppeals:
I.
WITHALLDUERESPECT,THECOURTOFAPPEALS
COMMITTEDGRAVEANDMANIFESTERRORINLAWWHENIT
FAILEDTOCONSIDERTHATTHESUBJECTLANDHOLDING
SHOULDHAVEBEENCOVEREDBYOPERATIONLAND
TRANSFERPURSUANTTOP.D.NO.27DUETOTHEFAILURE
OFTHELANDOWNERTOCARRYOUTITSCONVERSIONFROM
AGRICULTURALLANDFORALONGPERIODOFTIME.
II.
THECOURTOFAPPEALSCOMMITTEDSERIOUSERROR
WHENITUPHOLD(sic)THERECLASSIFICATIONOFTHE
SUBJECTLANDHOLDING.
III.
THECOURTOFAPPEALSCOMMITTEDGRAVEABUSEOF
DISCRETIONWHENITDISREGARDEDTHEPROVISIONSOF
THEO.P.ADMINISTRATIVEORDERNO.20SERIESOF1992
WHICHCLEARLYPROVIDESTHENONNEGOTIABILITYOF
IRRIGATEDPRIMEAGRICULTURALLANDSTONON
AGRICULTURALPURPOSES.9

Essentially,themainissuetoberesolvediswhetherthesubjectlandcanbe
reclassifiedtoagriculturalafterthepurposeofitsconversiontoanonagricultural
landhadnotmaterialized.
STc AIa

Petitionerscontendthatdespitetheconversionofthelandforacommercial
purpose,theyhaveremainedtenantsofthelanddevotingitforagricultural
production.Thoughtheearliertenancyrelationshiphadbeenterminateduponthe
paymentofdisturbancecompensationpursuanttothe1979compromise
agreement,petitionerspositthatatenancyrelationshipwascreatedanew
betweenthemandthemunicipalitywhenthelatterallowedpetitionerstocultivate
thelandaftertheexpropriationproceeding.
Thepetitionhasnomerit.
UnderSection3(c)ofRepublicAct(R.A.)No.6657,otherwiseknownasthe
ComprehensiveAgrarianReformLaw(CARL),anagriculturallandreferstoland
devotedtoagriculturalactivityasdefinedthereinandnotclassifiedasmineral,
forest,residential,commercialorindustrialland.Thedeliberationsofthe
ConstitutionalCommissionconfirmthislimitation."Agriculturallands"areonly
thoselandswhichare"arableandsuitableagriculturallands"and"donotinclude
commercial,industrialandresidentiallands."10

InNataliaRealty,Inc.vs.DepartmentofAgrarianReform,11itwasheldthatlands
notdevotedtoagriculturalactivityareoutsidethecoverageofCARLincluding
landspreviouslyconvertedtononagriculturalusespriortotheeffectivityofCARL
bygovernmentagenciesotherthantheDAR.Thisrulehasbeenreiteratedina
numberofsubsequentcases.Despiteclaimsthattheareashavebeendevoted
foragriculturalproduction,theCourthasupheldthe"nonagricultural"classification
madebytheNHAoverhousingandresettlementsprojects,12zoningordinances
passedbylocalgovernmentunitsclassifyingresidentialareas,13and
certificationsoverwatershedareasissuedbytheDepartmentofEnvironmentand
NaturalResources(DENR).14
TheDARitselfhasrecognizedtheprospectiveapplicationofR.A.No.6657,
insofarasitprovidesunderSection3(c)thereofthatlandsclassifiedasnon
agriculturalpriortotheeffectivityoftheCARLarenotcoveredbytheCARL.Thus,
DARAdministrativeOrderNo.1,seriesof1990provides:
Agriculturallandreferstothosedevotedtoagriculturalactivityas
definedinR.A.[No.]6657andnotclassifiedasmineralorforestby
theDepartmentofEnvironmentandNaturalResources(DENR)
anditspredecessoragencies,andnotclassifiedintownplansand
zoningordinancesasapprovedbytheHousingLandUse
RegulatoryBoard(HLURB)anditsprecedingcompetent
authoritiespriorto15June1988forresidential,commercialor
industrialuse.(Emphasissupplied.)

Thatthesubjectlandhadbeenreclassifiedfromagriculturaltononagriculturalis
notdisputed.Therecordsrevealthatasearlyas1980,themunicipalityhad
passedazoningordinancewhichidentifiedthesubjectlandasthesiteofthe
wholesalemarketcomplex.AspercertificationissuedbytheHLURB,thelandis
withinthezoningplanapprovedbytheNationalCoordinatingCouncilforTown
Planning,HousingandZoning.
Petitionersalsotheorizethattheyearnedavestedrightoverthelandwhena
tenancyrelationshipwasestablishedanewbetweenthemandthemunicipality
subsequenttothelatter'sacquisitionoftheland.Insupportofthistheory,
petitionersciteminutesofmeetingsandresolutionspassedbythemunicipality's
Sanggunian,purportedlyindicatingthemunicipality'srecognitionoftheirstatusas
tenantsofthesubjectlandholding.
Petitioners'theorydoesnotpersuadetheCourt.
Asegmentoftheminutesofthemeetingofthemunicipality'sSangguniandated27
May1988,whichpetitionerscitetobolstertheirtheory,isquotedbelow:

TumindigdinatnamahayagangatingPunongBayanKgg.
ReynaldoS.delRosarioatsinabingsakasulukuyanayhindipa
namankailanganngPamahalaangBayanangnasabinglupa

ngunitkungitoaykakailangannaaykinakailangangumalissila
ditongmahinusay,walangpasubaliatmaluwagsakanilang
kalooban,kungkaya'timinungkahiniyanagumawangisang
nakasulatnakasunduannaangnakasaadaykusangloobsilang
aalissanasabinglupapagdatingngpanahonnaitoaykailanganin
nangPamahalaangBayan.15

Theaforequotedminutesclearlyshowthatpetitioners'useandpossessionofthe
landwasbymeretoleranceofthemunicipalityandsubjecttotheconditionthat
petitionerswouldvoluntarilyvacatethelandwhentheneedwouldarise.Inthe
sameminutes,theSanggunianresolvedtoauthorizethenMayorReynaldoS.del
Rosariotoenterintoanagreementinwritingwithpetitionersconcerningthelatter's
temporarycultivationofthelandashiredlabor.
Asdiscussedearlier,thelandhadceasedtobeclassifiedasagriculturalwhenthe
municipalityextendedpetitioners'occupationoftheland.Afterthemunicipality
acquiredownershipoverthelandthroughexpropriationandpassedtheordinance
convertingsaidlandintoacommercialarea,anytransactionenteredintobythe
municipalityinvolvingthelandwasgovernedbytheapplicablecivillawinrelation
tolawsonlocalgovernment.Atthispoint,agrarianlawsnolongergovernedthe
relationshipbetweenpetitionersandthemunicipality.Whileitwasnotestablished
whethertherelationshipbetweenpetitionersandthemunicipalitywasthatofa
lessorandlesseeorthatofanemployerandlaborer,asthesupposedwritten
agreementwasnotofferedinevidence,thefactremainsthatthesubjectlandhad
alreadybeenidentifiedascommercialinthezoningordinance.
ADSIa T

Certainly,petitioners'occupationoftheland,madepossibleasitwasbythe
toleranceofthemunicipality,wassubjecttoitsperemptoryrighttoterminate.As
absoluteowneroftheland,themunicipalityisentitledtodevotethelandfor
purposesitdeemsappropriate.
Itisnoteworthythatevenpriortoitsexpropriationandreclassification,theland
wasneverplacedunderthecoverageoftheagrarianreformprogram.Althoughit
appearsthatpetitionershadbeentillingthelandastenantsoftheVergelDeDios
family,themunicipality'spredecessorininterest,therecordsdonotshowthat
petitionershadappliedforcoverageofthelandundertheagrarianreformprogram.
Beforeaclaimantbecomesaqualifiedbeneficiaryofagrarianreform,the
administrativeprocessforcoverageundertheCARPmustbeinitiated.Themere
factofcultivatinganagriculturallanddoesnotipsojurevestownershiprightin
favorofthetiller.SincepetitionershadnotappliedforCARPcoveragepriortothe
reclassificationofthelandtocommercial,theiroccupationbymeretolerance
cannotripenintoabsoluteownership.
Petitionersfurtherarguethatthemunicipality'sfailuretorealizethecommercial
projectoperatestoreinstatetheoriginalstatusofthelandasagricultural.In
supportofthistheory,petitionersciteSection36(1)ofR.A.No.3844,orthe
AgricultureLandReformCode,unawarethattheprovisionhadbeenamendedby

R.A.6389,entitled,"AnActAmendingRepublicActNumberedThirtyEight
HundredandFortyFour,AsAmended,OtherwiseKnownAstheAgriculturalLand
ReformCodeandForOtherPurposes."
Beforeitsamendment,Section36(1),R.A.No.3844provided:
Sec.36.
PossessionofLandholdingExceptions.
Notwithstandinganyagreementastotheperiodorfuture
surrender,oftheland,anagriculturallesseeshallcontinueinthe
enjoymentandpossessionofhislandholdingexceptwhenhis
dispossessionhasbeenauthorizedbytheCourtinajudgmentthat
isfinalandexecutoryifafterduehearingitisshownthat:
(1)

Theagriculturallessorowneroramemberofhis

immediatefamilywillpersonallycultivatethelandholdingorwill
convertthelandholding,ifsuitablylocated,intoresidential,factory,
hospitalorschoolsiteorotherusefulnonagriculturalpurposes:
Provided,Thattheagriculturallesseeshallbeentitledto
disturbancecompensationequivalenttofiveyearsrentalonhis
landholdinginadditiontohisrightsunderSectionstwentyfiveand
thirtyfour,exceptwhenthelandownedandleasedbythe
agriculturallessor,isnotmorethanfivehectares,inwhichcase
insteadofdisturbancecompensationthelesseemaybeentitledto
anadvancednoticeofatleastoneagriculturalyearbefore
ejectmentproceedingsarefiledagainsthim:Provided,further,
Thatshouldthelandholdernotcultivatethelandhimselfforthree
yearsorfailtosubstantiallycarryoutsuchconversionwithinone
yearafterthedispossessionofthetenant,itshallbepresumed
thatheactedinbadfaithandthetenantshallhavetherightto
demandpossessionofthelandandrecoverdamagesforanyloss
incurredbyhimbecauseofsaiddispossessions.

Withtheenactmentoftheamendatorylaw,theconditionimposedonthe
landownertoimplementtheconversionoftheagriculturallandtoanonagricultural
purposewithinacertainperiodwasdeleted.Section36(1),R.A.No.3844,as
amended,nowreads:
Sec.36.

PossessionofLandholdingExceptions.

Notwithstandinganyagreementastotheperiodorfuture
surrender,oftheland,anagriculturallesseeshallcontinueinthe
enjoymentandpossessionofhislandholdingexceptwhenhis
dispossessionhasbeenauthorizedbytheCourtinajudgmentthat
isfinalandexecutoryifafterduehearingitisshownthat:
(1)
Thelandholdingisdeclaredbythedepartmentheadupon
recommendationoftheNationalPlanningCommissiontobesuited
forresidential,commercial,industrialorsomeotherurban
purposes:Provided,Thattheagriculturallesseeshallbeentitledto

disturbancecompensationequivalenttofivetimestheaverageof
grossharvestsonhislandholdingduringthelastfivepreceding
calendaryears
xxxxxxxxx16

TheamendmentistheLegislature'srecognitionthattheoptimaluseofsomelands
maynotnecessarilybeforagriculture.Thus,discretionisvestedonthe
appropriategovernmentagenciestodeterminethesuitabilityofalandfor
residential,commercial,industrialorotherpurposes.Withthepassageofthe
CARL,theconversionofagriculturallandstononagriculturaluseswasretained
andtheimpositiononthelandownertoimplementwithinatimeframetheproposed
nonagriculturaluseofthelandwasdoneawaywith.
Moreover,inPasongBayabasFarmersAssociation,Inc.v.CourtofAppeals,17
theCourtdeclaredcategoricallythatthefailureofthelandownerthereinto
completethehousingprojectdidnothavetheeffectofrevertingthepropertytoits
classificationasagriculturalland,althoughtheorderofconversionissuedbythe
thenMinisterofAgrarianReformobligedthelandownertocommencethephysical
developmentofthehousingprojectwithinoneyearfromreceiptoftheorderof
conversion.18Insaidcase,avasttractoflandclaimedtobecultivatedbyits
tenantsformedpartofthesubdivisionplanofahousingprojectapprovedbythe
NationalPlanningCommissionandMunicipalCouncilofCarmonaand
subsequentlydeclaredbytheProvincialBoardofCaviteascompositeofthe
industrialareasofCarmona,Dasmarias,SilangandTreceMartirez.Becausethe
reclassificationofthepropertybytheMunicipalCouncilofCarmonatonon
agriculturallandtookplacebeforetheeffectivityoftheCARL,theCourtheldthat
Section65ofR.A.No.6657cannotbeappliedretroactively.19
Moreimportantly,theCourtinPasongBayabasrecognizedthepoweroflocal
governmentunitstoadoptzoningordinances,citingSection3ofR.A.No.2264,20
towit:
Section3ofRep.ActNo.2264,amendingtheLocalGovernment
Code,specificallyempowersmunicipaland/orcitycouncilstoadopt
zoningandsubdivisionordinancesorregulationsinconsultation
withtheNationalPlanningCommission.Azoningordinance
prescribes,defines,andapportionsagivenpoliticalsubdivisioninto
specificlandusesaspresentandfutureprojectionofneeds.The
powerofthelocalgovernmenttoconvertorreclassifylandsto
residentiallandstononagriculturallandsreclassifiedisnotsubject
totheapprovaloftheDepartmentofAgrarianReform.Section65
ofRep.ActNo.6657relieduponbythepetitionerappliesonlyto
applicationsbythelandlordorthebeneficiaryfortheconversionof
landspreviouslyplacedunderagrarianreformlawafterthelapse
offiveyearsfromitsaward.Itdoesnotapplytoagriculturallands
alreadyconvertedasresidentiallandspriortothepassageofRep.
ActNo.6657.21

Thus,thezoningordinancepassedbythemunicipalitysometimein1980
reclassifyingthesubjectlandascommercialandfuturesiteofamarketcomplex
operatedtotakeawaythe"agricultural"statusofthesubjectproperty.Subsequent
eventscitedbypetitionerssuchastheircontinuoustillageofthelandandthenon
commencementoftheconstructionofthemarketcomplexdidnotstripthelandof
itsclassificationascommercial.
HCa IDS

Petitioners'relianceontheprovisionsofA.O.No.20,seriesof1992,issuedby
thenPresidentFidelRamosismisplaced.A.O.No.20,whichsetsforththe
guidelinestobeobservedbylocalgovernmentunitsandgovernmentagencieson
agriculturallanduseconversion,cannotbeappliedtothesubjectlandforthe
reasonthatthelandhadalreadybeenclassifiedascommerciallongbeforeits
issuance.Indeed,A.O.No.20cannotbeappliedretroactively.
WHEREFORE,theinstantpetitionforreviewoncertiorariisDENIED.The
DecisionandResolutionoftheCourtofAppealsinCAG.R.SPNo.55710are
AFFIRMED.Costsagainstpetitioners.

SOORDERED.
Quisumbing,Carpio,CarpioMoralesandVelasco,Jr.,JJ.,concur.
Footnotes
1.

Rollo,pp.2839.PennedbyJusticeAmelitaG.Tolentinoand
concurredinbyJJ.ConradoM.Vasquez,Jr.,Chairman,TenthDivision,
andAndresB.Reyes,Jr.

2.

Id.at4149.

3.

Id.at2930.

4.

Id.at30.

5.

Id.at48.

6.

CArollo,pp.3233.

7.

Id.at4247.

8.

Id.at1721.

9.

Rollo,p.9.

10.

NataliaRealty,Inc.v.DepartmentofAgrarianReform,G.R.No.
103302,12August1993,225SCRA278,283.

11.

G.R.No.103302,12August1993,225SCRA278.

12.

NationalHousingAuthorityv.Hon.Allarde,376Phil.147(1999).

13.

PasongBayabasFarmersAssociation,Inc.v.CourtofAppeals,G.R.
No.142359,25May2004,429SCRA109Juniov.Garilao,G.R.No.
147146,29July2005,465SCRA173.

14.

Sta.RosaRealtyDevelopmentCorporationv.CourtofAppeals,419
Phil.457(2001.

15.

CArollo,p.48.

16.

R.A.No.3844,Section36(1),asamendedbyR.A.No.6389.

17.

Supranote13.

18.

Supranoteat136.

19.

Supranote13at135.

20.

Powertoadoptzoningandplanningordinances.Anyprovisionof
lawtothecontrarynotwithstanding,MunicipalBoardsorCityCouncilsin
cities,andMunicipalCouncilsinmunicipalitiesareherebyauthorizedto
adoptzoningandsubdivisionordinancesorregulationsfortheirrespective
citiesandmunicipalitiessubjecttotheapprovaloftheCityMayoror
MunicipalMayor,asthecasemaybe.Citiesandmunicipalitiesmay,
however,consulttheNationalPlanningCommissiononmatterspertaining
toplanningandzoning.

21.

PasongBayabasFarmersAssociation,Inc.v.CourtofAppeals,supra
note13at13435.