G.R. No.

182431 February 27, 2013

LAND BANK OF THE PHILIPPINES, Petitioner,

vs.
ESTHER ANSON RIVERA, ANTONIO G. ANSON AND CESAR G. ANSON, Respondents.

RESOLUTION

PEREZ, J.:

The Case

Before the Court is a Motion for Reconsideration1 filed by the Land Bank of the Philippines (LBP)
alleging error on the part of this Court in affirming the award of 12% interest on just compensation
due to the landowner.

The Facts

We reiterate the facts from the assailed 17 November 2010 Decision:

The respondents are the co-owners of a parcel of agricultural land embraced by Original Certificate
of Title No. P-082, and later transferred in their names under Transfer Certificate of Title No. T-95690
that was placed under the Operation Land Transfer pursuant to Presidential Decree No. 27 in 1972.
Only 18.8704 hectares of the total area of 20.5254 hectares were subject of the coverage.

After the Department of Agrarian Reform (DAR) directed payment, LBP approved the payment of
₱265,494.20, exclusive of the advance payments made in the form of lease rental amounting to
₱75,415.88 but inclusive of 6% increment of ₱191,876.99 pursuant to DAR Administrative Order No.
13, series of 1994.

On 1 December 1994, the respondents instituted Civil Case No. 94-03 for determination and
payment of just compensation before the Regional Trial Court (RTC), Branch 3 of Legaspi City,
claiming that the landholding involved was irrigated with two cropping seasons a year with an
average gross production per season of 100 cavans of 50 kilos/hectare, equivalent of
200 cavans/year/hectare; and that the fair market value of the property was not less than
₱130,000.00/hectare, or ₱2,668,302.00 for the entire landholding of 20.5254 hectares.

LBP filed its Answer, stating that rice and corn lands placed under the coverage of Presidential
Decree No. 27 [PD 27]2 were governed and valued in accordance with the provisions of Executive
Order No. 228 [EO 228]3 as implemented by DAR Administrative Order No. 2, Series of 1987 and
other statutes and administrative issuances; that the administrative valuation of lands covered by
[PD 27] and [EO 228] rested solely in DAR and LBP was the only financing arm; that the funds that
LBP would use to pay compensation were public funds to be disbursed only in accordance with
existing laws and regulations; that the supporting documents were not yet received by LBP; and that
the constitutionality of [PD 27] and [EO 228] was already settled. 4

The Trial Court’s Ruling

On 6 October 2004, the trial court rendered its decision which reads:
ACCORDINGLY, the just compensation of the land partly covered by TCT No. T-95690 is fixed
at Php1,297,710. 63. Land Bank of the Philippines is hereby ordered to pay Esther Anson, Cesar
Anson and Antonio Anson the aforesaid value of the land, plus interest of 12% per annum or
Php194.36 per day effective October 7, 2004, until the value is fully paid, in cash or in bond or in any
other mode of payment at the option of the landowners in accordance with Sec. 18, R.A. 6657. 5

Discontented, LBP filed an appeal before the Court of Appeals (CA). It argued that the trial court
erred in disregarding the lease rentals already paid by the farmer beneficiaries as part of the just
compensation as well as the imposition of 12% interest despite the increment of 6% interest allowed
under the EO 228 and DAR Administrative Order (A.O.) No. 13 Series of 1994 (A.O. 13-94).

The Court of Appeals’ Ruling

The appellate court partly granted the petition of the LBP, the fallo of the decision reading:

WHEREFORE, the DECISION DATED OCTOBER 6, 2004 is MODIFIED, ordering petitioner LAND
BANK OF THE PHILIPPINES to pay to the respondents just compensation (inclusive of interests as
of October 6, 2004) in the amount of ₱823, 957.23, plus interest of 12% per annum in the amount of
₱515, 777.57 or ₱61, 893.30 per annum, beginning October 7, 2004 until just compensation is fully
paid in accordance with this decision.

Costs of suit to be paid by the petitioner.6

In its petition7 before this Court, LBP alleged error in the imposition of 12% interest per annum
beginning from 7 October 2004 until full payment of just compensation for subject property and the
liability of the bank for costs of suit.

17 November 2010 Decision

In its argument, LBP cited the applicability of the DAR A.O. No. 2, Series of 2004 (A.O. 02-04) which
provides for the 6% interest imposition to the just compensation until actual payment. Further, it
added that the 12% interest finds application in cases of undue delay, which is not present in the
case. As to the payment of costs, the bank argued that it was performing a governmental function
when it disbursed the Agrarian Reform Fund (ARF) as the financial intermediary of the agrarian
program of the government.

In our 17 November 2010 Decision, this Court partly granted the prayers of LBP and deleted the
costs adjudged. We agreed that the bank was indeed performing a governmental function in
agrarian reform proceeding pursuant to Section 1, Rule 142 8 of the Rules of Court.9 However, we
upheld the imposition of 12% interest on the just compensation beginning 7 October 2004 until full
payment. We anchored our decision following the ruling in Republic of the Philippines v. Court of
Appeals.10

As a conclusion, the Court rendered the assailed decision which reads:

WHEREFORE, premises considered, the petition is GRANTED. The decision of the Court of
Appeals in C.A. G.R. SP No. 87463 dated 9 October 2007 is AFFIRMED with
the MODIFICATION that LBP is hereby held exempted from the payment of costs of suit. In all other
respects, the Decision of the Court of Appeals is AFFIRMED. No costs.11
Aggrieved, LBP filed this present Motion for Reconsideration and argued once again the erroneous
imposition of 12% interest. The bank reiterated its previous argument that the imposition is justifiable
only in case of undue delay in the payment of just compensation. 12 It argued13 against the application
of the A.O. No. 6, Series of 2008 (A.O. 06-08)14 to the instant case because it claims that the 6%
interest does not apply to agricultural lands valued under R.A. 6657, such as the subject properties,
following the Court’s ruling in Land Bank of the Philippines v. Chico.15

We deny the prayers of LBP.

In many cases16 decided by this Court, it has been repeated time and again that the award of 12%
interest is imposed in the nature of damages for delay in payment which in effect makes the
obligation on the part of the government one of forbearance. This is to ensure prompt payment of the
value of the land and limit the opportunity loss of the owner that can drag from days to decades.

In this case, LBP is adamant in contending that the landowners were promptly paid of their just
compensation. It argues that, "there is no factual finding whatsoever indicating undue delay on the
part of LBP."17

We disagree.

It is true that LBP approved the amount of ₱265,494.20 in favor of the landowners on 23 August
2004.18 However, that amount is way below the amount that should have been received by the
landowners based on the valuations adjudged by the agrarian court, CA and this Court. To be
considered as just compensation, it must be fair and equitable and the landowners must have
received it without any delay.19

The contention that there can be no delay when there is a deposit of the amount of the government
valuation in favor of the landowners was also the same argument raised in the second Motion for
Reconsideration addressing the 12 October 2010 and 23 November 2010 Resolutions in Apo
Fruits20 case. LBP contended then that landowners APO Fruits and Hijo Plantation did not suffer from
any delay in payment since the LBP made partial payments prior to the taking of the parcels of land.
The Court there ruled that twelve years passed after the Government took the properties, before full
payment was settled. The Court took into account that the partial payment made by LBP only
amounted to 5% of the actual value of property.21

Similar to Apo Fruits, the delay in this case is traceable to the undervaluation of the property of the
government. Had the landholdings been properly valued, the landowners would have accepted the
payment and there would have been no need for a judicial determination of just compensation. 22 The
landowners could not possibly accept ₱265,494.20 as full payment for their entire 18 hectare-
property. It must be noted that the landowners, since the deprivation of their property, have been
waiting for four decades to get the just compensation due to them.

As in several other just compensation cases, respondents faced the difficult problem whether to
accept a low valuation or file a case for determination of just compensation before the court. Before
the choice is made, and for a longer period if the judicial course is taken, the landowners already are
deprived of the income that could have been yielded by their lands.

The Imperial case23 is an applicable precedent.

Juan H. Imperial (Imperial) was the owner of five parcels of land with a total land area of 151.7168
hectares. Upon the effectivity of P.D. No. 27 and EO 228, the parcels of land were placed under the
Land Reform Program and distributed to the farmer-beneficiaries on 21 October 1972. On 20 July
1994, Imperial filed a complaint for determination and payment of just compensation before the
Agrarian Court of Legazpi City, Albay. As the amount fixed by the agrarian court was found to be
inacceptable by the parties, the case went up all the way to the Supreme Court. Before this Court,
LBP claimed that a 6% annual interest in the concept of damages should not be imposed because
(1) the delay in the payment of the just compensation was not its fault, and (2) DAR A.O. No. 13
already provides for the payment of a 6% annual interest, compounded annually, provided that the
just compensation is computed in accordance with its prescribed formula. 24 The Court partly granted
the claim of LBP and directed the trial court to re-compute the just compensation by using the
formula prescribed by DAR A.O. No. 13, as amended, which imposed a 6% interest compounded
annually from the date of the compensable taking on 21 October 1972 until 31 December 2006; and
thereafter, at the rate of 12% per annum, until full payment is made.25 This is to mean that from 1
January 2007 onwards, there shall be an imposition of 12% interest per annum until full payment in
the nature of damages for the delay. The reason given was that it would be inequitable to determine
the just compensation based solely on the formula provided by DAR A.O. No. 13, as amended. Just
compensation does not only pertain to the amount to be paid to the owners of the land, but also its
payment within a reasonable time from the taking of the land; hence the imposition of interest in the
nature of damages for the delay.26

In this case, LBP pointed out the error made by this Court in Imperial in determining the extent of the
period of applicability of the 6% compounded interest.27 It asserts that:

"Based on the foregoing, this Court deemed the day after the expiration of DAR A.O. No. 13,
meaning 1 January 2007, as the date of finality, constraining it to impose the 12% interest per
annum.

However, beyond the knowledge of the Supreme Court, a subsequent DAR A.O. extended the
applicability of the imposition of 6% interest compounded annually from 1 January 2007 until 31
December 2009.

Following the new DAR A.O., only 6% interest compounded annually would have been the correct
interest to be imposed. This was not imposed, however, simply because the day after 31 December
2006 or 01 January 2007 was deemed by the Supreme Court as the date of finality, leading to the
imposition of 12% interest."28

Contrary to the position of LBP, this Court did not commit a mistake in not applying the extension
thru A.O. 06-08 of the 6% interest until 31 December 2009. It must be understood that at the time of
the promulgation of the Imperial Decision on 12 February 2007, A.O. 06-08 was not yet effective, as
it was signed only on 30 July 2008.

Likewise, it is erroneous for LBP to anchor its motion on the contention that the 6% interest
compounded annually does not apply to agricultural lands valued under R.A. 6657 such as the
subject properties.29 The fact is that the valuation in the instant case was under P.D. 27 and E.O.
228, as adjudged by the trial court, because even if at the time of valuation R.A. 6657 was already
effective, the respondents failed to present any evidence on the valuation factors under Section 17
of R.A. 6657.

The Computation

The purpose of A.O. No. 13 is to compensate the landowners for unearned interests. Had they been
1âwphi1

paid in 1972 when the Government Support Price (GSP) for rice and corn was valued at ₱35.00 and
₱31.00, respectively, and such amounts were deposited in a bank, they would have earned a
compounded interest of 6% per annum. Thus, if the [Provincial Agrarian Reform Adjudicator]
[(]PARAD[)] used the 1972 GSP, then the product of (2.5 x Average Gross Production (AGP) x
₱35.00 or ₱31.00) could be multiplied by (1.06) to determine the value of the land plus the additional
6% compounded interest it would have earned from 1972. 30

Following A.O. 13-94, the 6% yearly interest compounded annually shall be reckoned from 21
October 1972 up to the effectivity date of this Order which was on 21 October 1994. However, A.O.
02-0431 extended the period of application of 6% interest from 21 October 1972 up to the time of
actual payment but not later than December 2006. Then, under A.O. 06-08, 32 the application of 6%
interest was further until 31 December 2009. It must be noted that the term "actual payment" in the
administrative orders is to be interpreted as "full payment" pursuant to the ruling in Land Bank of the
Philippines v. Obias33 and Land Bank of the Philippines v. Soriano.34

The amount of land value of ₱164,059.26 was already settled before the lower courts. 35 There is no
need for a new computation.

Applying the rules under A.O. 13-94, A.O. 02-04 and A.O. 06-08 the formula to determine the
increment of 6% interest per annum compounded annually beginning 21 October 1972 up to 31
December 2009 is:

CI = P (1+R) n

(CI as compounded interest; P as the Principal; R is the Rate of 6% and

n = number of years from date of tenancy starting from.)

Where:

P = ₱164,059. 26

R = 6%

n = 37 years

COMPUTATION:

CI = P (1+R) n
= ₱164,059.26 (1+ 6%) 37 years
= ₱164,059. 26 (1.06) 37 years
= ₱1,252,770.80

Then we add the compounded interest to the land value ₱164,059.26:

Compounded Amount = Land Value + Compounded Interest

= ₱164,059.26 + ₱1,252,770.80
= ₱1,416,830.06

To compute the compounded amount to be paid, we subtract the amount of lease rental of
₱75,415.88 as adjudged by the appellate court to the compounded amount: 36
Compounded Amount = ₱1,416,830.06 less ₱75,415.88
= ₱1,341,414.18

We add a simple interest of 12% to the compounded amount from 31 December 2009 until the
promulgation of this decision due to the delay incurred by LBP in not paying the full just
compensation to the Spouses:

I=PxRxT

(I = Interest, R = Rate, T = Time)

Where:

P = Compounded Amount

R = 12%

T = 31 December 2009 to 31 December 2012

1. COMPUTATION: 31 December 2009 to 31 December 2012

I=PxRxT

I = (Compounded Amount) (.12) (3 years)

I = ₱1,341,414.18 (.12) (3years)

I = ₱482,909.1048

2. COMPUTATION: 31 December 2012 to 20 February 2013

I = PxRxT
(Compounded Amount) (12% interest)
= x No. of Days
365 days
(Compounded Amount) (.12)
= x 50 days
365 days
(₱1,341,414.18) (.12)
= x 50 days
365 days
₱160,969.69
= x 50 days
365
= ₱441.01 x 50 days
 = ₱22,050.50

Final Just Compensation = Compounded Amount + Interest

= ₱1,341,414.18 + ₱482,909.1048+ ₱22,050.50
= ₱1,846,373.70

WHEREFORE, premises considered, we PARTIALLY GRANT the petitioner's Motion for

Reconsideration. The Decision dated 17 November 2010 of the Court's First Division is hereby
MODIFIED.

The petitioner Land Bank of the Philippines is hereby ORDERED to pay Esther Anson Rivera,
Antonio G. Anson and Cesar G. Anson ₱1,846,373.70 as final just compensation plus interest at the
rate of 12% per annum from the finality of this decision until full payment.

SO ORDERED.

JOSE PORTUGAL PEREZ

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO*
Associate Justice

TERESITA J. LEONARDO-DE CASTRO

PRESBITERO J. VELASCO, JR.
Associate Justice
Associate Justice
Acting Chairperson

DIOSDADO M. PERALTA
Associate Justice

ATT E STATI O N

I attest that the conclusions in the above Resolution had been reached in consultation before the
case was assigned to the writer of the opinion of the Court's Division.

TERESITA J. LEONARDO-DE CASTRO

Associate Justice
Acting Chairperson, Special First Division

C E RTI F I CATI O N

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I
certify that the conclusions in the above Resolution had been reached in consultation before the
case was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice
G.R. No. 133507 February 17, 2000

EUDOSIA DAEZ AND/OR HER HEIRS, REP. BY ADRIANO D. DAEZ, petitioners,

vs.
THE HON. COURT OF APPEALS MACARIO SORIENTES, APOLONIO MEDIANA, ROGELIO
MACATULAD and MANUEL UMALI, respondents.

DE LEON, JR., J.:

Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals2 dated January
28, 1998 which denied the application of petitioner heirs of Eudosia Daez for the retention of a
4.1685-hectare riceland pursuant to Republic Act (R.A.) No. 6657, otherwise known as the
Comprehensive Agrarian Reform Law3, thereby reversing the Decision4 of then Executive Secretary
Ruben D. Torres and the Order5 of then Deputy Executive Secretary Renato C. Corona, both of
which had earlier set aside the Resolution6 and Order7 of then Department of Agrarian Reform (DAR)
Secretary Ernesto D. Garilao denying exemption of the same riceland from coverage under
Presidential Decree (P.D.) No. 27.

The pertinent facts are:

Eudosia Daez, now deceased, was the owner of a 4.1685-hectare riceland in Barangay Lawa,
Meycauayan, Bulacan which was being cultivated by respondents Macario Soriente, Rogelio
Macatulad, Apolonio Mediana and Manuel Umali under a system of share-tenancy. The said land
was subjected to the Operation Land Transfer (OLT) Program under Presidential Decree (P.D.) No.
278 as amended by Letter of Instruction (LOI) No. 4749. Thus, the then Ministry of Agrarian Reform
acquired the subject land and issued Certificates of Land Transfer (CLT) on December 9, 1980 to
private respondents as beneficiaries.

However, on May 31, 1981, private respondents signed an affidavit, allegedly under duress, stating
that they are not share tenants but hired laborers10. Armed with such document, Eudosia Daez
applied for the exemption of said riceland from coverage of P.D. No. 27 due to non-tenancy as well
as for the cancellation of the CLTs issued to private respondents. 1âwphi1.nêt

In their Affidavit dated October 2, 1983, Eudosia Daez and her husband, Lope, declared ownership
over 41.8064 hectares of agricultural lands located in Meycauayan, Bulacan and fourteen (14)
hectares of riceland, sixteen (16) hectares of forestland, ten (10) hectares of "batuhan" and 1.8064
hectares of residential lands11 in Penaranda, Nueva Ecija. Included in their 41.8064-hectare
landholding in Bulacan, was the subject 4,1685-hectare riceland in Meycauayan.

On July 27, 1987, DAR Undersecretary Jose C. Medina issued an Order denying Eudosia Daez's
application for exemption upon finding that her subject land is covered under LOI No. 474, petitioner
being owner of the aforesaid agricultural lands exceeding seven (7) hectares 12.

On June 29, 1989, Eudosia Daez wrote a letter to DAR Secretary Benjamin T. Leong requesting for
reconsideration of Undersecretary Medina's order. But on January 16, 1992 13 Secretary Leong
affirmed the assailed order upon finding private respondents to be bonafide tenants of the subject
land. Secretary Leong disregarded private respondents' May 31, 1981 affidavit for having been
executed under duress because he found that Eudosia's son, Adriano, who was then the incumbent
Vice-Mayor of Meycauayan, pressured private respondents into signing the same.
Undaunted, Eudosia Daez brought her case on February 20, 1992 to the Court of Appeals via a
petition for certiorari. The Court of Appeals, however, sustained the order of Secretary Leong in a
decision dated April 29, 1992. Eudosia pursued her petition before this court but we denied it in a
minute resolution dated September 18, 1992. We also denied her motion for reconsideration on
November 9, 1992.

Meantime, on August 6 and 12, 1992, the DAR issued Emancipation Patents (EPs) to private
respondents. Thereafter, the Register of Deeds of Bulacan issued the corresponding Transfer
Certificates of Title (TCTs).

Exemption of the 4.1685 riceland from coverage by P.D. No. 27 having been finally denied her,
Eudosia Daez next filed an application for retention of the same riceland, this time under R.A. No.
6657.

In an order dated March 22, 1994, DAR Region III OIC-Director Eugenio B. Bernardo allowed
Eudosia Daez to retain the subject riceland but he denied the application of her eight (8) children to
retain three (3) hectares each for their failure to prove actual tillage of the land or direct management
thereof as required by law14. Aggrieved, they appealed to the DAR.

On August 26, 1994, then DAR Secretary Ernesto D. Garilao, set aside the order of Regional
Director Bernardo in a Resolution,15 the decretal portion of which reads, viz.:

WHEREFORE, premises considered, this Resolution is hereby issued setting aside with
FINALITY the Order dated March 22, 1994 of the Regional Director of DAR Region III.

The records of this case is remanded to the Regional Office for immediate implementation of
the Order dated January 16, 1992 of this office as affirmed by the Court of Appeals and the
Supreme Court.

SO ORDERED.

Eudosia Daez filed a Motion for Reconsideration but it was denied on January 19, 1995 16.

She appealed Secretary Garilao's decision to the Office of the President which ruled in her favor.
The dispositive portion of the Decision17 of then Executive Secretary reads:

WHEREFORE, the resolution and order appealed from are hereby SET ASIDE and judgment
is rendered authorizing the retention by Eudosia Daez or her heirs of the 4.1685-hectare
landholding subject thereof.

SO ORDERED.18

Aggrieved, private respondents sought from the Court of Appeals, a review of the decision of the
Office of the President.

On January 28, 1999, the said Decision of the Office of the President was reversed. The Court of
Appeals ordered, thus:

WHEREFORE, the assailed decision of July 5, 1996 and Order dated October 23, 1996 of
the public respondents are REVERSED AND SET ASIDE, and the Resolution and Order of
 DAR Secretary Ernesto D. Garilao respectively dated August 26, 1994 and January 19, 1995
are REINSTATED.

SO ORDERED.

Hence, this petition which assigns the following errors:

I. THE HONORABLE COURT OF APPEALS ERRED WHEN IT RULED THAT DISTINCTION

BETWEEN EXEMPTION FROM AGRARIAN REFORM COVERAGE AND THE RIGHT OF
RETENTION OF LANDOWNERS IS ONLY A MATTER OF SEMANTICS THAT AN ADVERSE
DECISION IN THE FORMER WILL FORECLOSE FURTHER ACTION TO ENFORCE THE LATTER
CONSIDERING THAT THEY CONSTITUTE SEPARATE AND DISTINCT CAUSES OF ACTION
AND, THEREFORE, ENFORCEABLE SEPARATELY AND IN SEQUEL.

II. THE HONORABLE COURT OF APPEALS ERRED WHEN IT APPLIED THE PRINCIPLE OF RES
JUDICATA DESPITE THE FACT THAT THE PREVIOUS CASE CITED (EXEMPTION FROM
COVERAGE DUE TO NON-TENANCY) AND THE PRESENT CASE (RETENTION RIGHT) ARE OF
DIFFERENT CAUSES OF ACTION.

III. THE HONORABLE COURT OF APPEALS ERRED WHEN IT RULED/OPINED THAT THERE
WAS A CUT-OFF DATE (AUGUST 27, 1985) FOR LANDOWNERS TO APPLY FOR EXEMPTION
OR RETENTION UNDER PD 27 AND THOSE WHO FAILED TO FILE THEIR
APPLICATIONS/PETITIONS ARE DEEMED TO HAVE WAIVED THEIR RIGHTS.

IV. THE HONORABLE COURT OF APPEALS ERRED IN DECLARING THAT PETITIONERS

(RESPONDENTS THEREIN) ARE GUILTY OF ESTOPPEL.

V. THE HONORABLE COURT OF APPEALS ERRED WHEN IT RULED THAT THE LAND
SUBJECT OF THIS CASE IS NO LONGER OWNED BY PETITIONERS SINCE PRIVATE
RESPONDENTS HAVE ALREADY BEEN ISSUED NOT ONLY THEIR RESPECTIVE
CERTIFICATES OF LAND TRANSFER BUT ALSO THEIR INDIVIDUAL CERTIFICATES OF TITLE
OVER THE DISPUTED AREA.19

We grant the petition.

First. Exemption and retention in agrarian reform are two (2) distinct concepts.

P.D. No. 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
of these requisites is absent, the land is not covered under OLT. Hence, a landowner need not apply
for retention where his ownership over the entire landholding is intact and undisturbed.

P.D. No. 27 grants each tenant of covered lands a five (5)-hectare lot, or in case the land is irrigated,
a three (3)-hectare lot constituting a family size farm. However, said law allows a covered landowner
to retain not more than seven (7) hectares of his land if his aggregate landholding does not exceed
twenty-four (24) hectares. Otherwise, his entire landholding is covered without him being entitled to
any retention right20.
Consequently, a landowner may keep his entire covered landholding if its aggregate size does not
exceed the retention limit of seven (7) hectares. In effect, his land will not be covered at all by the
OLT program although all requisites for coverage are present. LOI No. 474 clarified the effective
coverage of OLT to include tenanted rice or corn lands of seven (7) hectares or less, if the landowner
owns other agricultural lands of more than seven (7) hectares. The term "other agricultural lands"
refers to lands other than tenanted rice or corn lands from which the landowner derives adequate
income to support his family.

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.

On the other hand, the requisites for the exercise by the landowner of his right of retention are the
following: (1) the land must be devoted to rice or corn crops; (2) there must be a system of share-
crop or lease-tenancy obtaining therein; and (3) the size of the landholding must not exceed twenty-
four (24) hectares, or it could be more than twenty-four (24) hectares provided that at least seven (7)
hectares thereof are covered lands and more than seven (7) hectares of it consist of "other
agricultural lands".

Clearly, then, the requisites for the grant of an application for exemption from coverage of OLT and
those for the grant of an application for the exercise of a landowner's right of retention, are different.

Hence, it is incorrect to posit that an application for exemption and an application for retention are
one and the same thing. Being distinct remedies, finality of judgment in one does not preclude the
subsequent institution of the other. There was, thus, no procedural impediment to the application
filed by Eudosia Daez for the retention of the subject 4.1865-hectare riceland, even after her appeal
for exemption of the same land was denied in a decision that became final and executory.

Second. Petitioner heirs of Eudosia Daez may exercise their right of retention over the subject
4.1685 riceland.

The right of retention is a constitutionally guaranteed right, which is subject to qualification by the
legislature21. It serves to mitigate the effects of compulsory land acquisition by balancing the rights of
the landowner and the tenant and by implementing the doctrine that social justice was not meant to
perpetrate an injustice against the landowner 22. A retained area, as its name denotes, is land which is
not supposed to anymore leave the landowner's dominion, thus sparing the government from the
inconvenience of taking land only to return it to the landowner afterwards, which would be a
pointless process.

In the landmark case of Association of Small Landowners in the Phil., Inc. v. Secretary of Agrarian
Reform23, we held that landowners who have not yet exercised their retention rights under P.D. No.
27 are entitled to the new retention rights under R.A. No. 665724. We disregarded the August 27,
1985 deadline imposed by DAR Administrative Order No. 1, series of 1985 on landowners covered
by OLT. However, if a landowner filed his application for retention after August 27, 1985 but he had
previously filed the sworn statements required by LOI Nos. 41, 45 and 52, he is still entitled to the
retention limit of seven (7) hectares under P.D. No. 2725. Otherwise, he is only entitled to retain five
(5) hectares under R.A. No. 6657.

Sec. 6 of R.A. No. 6657, which provides, viz.:

Sec. 6. Retention Limits — Except as otherwise provided in this Act, no person may own or
retain, directly or indirectly, any public or private agricultural land, the size of which shall vary
 according to factors governing a viable family-size, such as commodity produced, terrain,
infrastructure, and soil fertility as determined by the Presidential Agrarian Reform Council
(PARC) created hereunder, but in no case shall retention by the landowner exceed five (5)
hectares. Three (3) hectares may be awarded to each child of the landowner, subject to the
following qualifications: (1) that he is at least fifteen (15) years of age; and (2) that he is
actually tilling the land or directly managing the farm; Provided, That landowners whose land
have been covered by Presidential Decree No. 27 shall be allowed to keep the area
originally retained by them thereunder, further, That original homestead grantees or direct
compulsory heirs who still own the original homestead at the time of the approval of this Act
shall retain the same areas as long as they continue to cultivate said homestead.

The right to choose the area to be retained, which shall be compact or contiguous, shall
pertain to the landowner. Provided, however, That in case the area selected for retention by
the landowner is tenanted, the tenant shall have the option to choose whether to remain
therein or be a beneficiary in the same or another agricultural land with similar or comparable
features. In case the tenant chooses to remain in the retained area, he shall be considered a
leaseholder and shall lose his right to be a beneficiary under this Act. In case the tenant
chooses to be a beneficiary in another agricultural land, he loses his right as a lease-holder
to the land retained by the landowner. The tenant must exercise this option within a period of
one (1) year from the time the landowner manifests his choice of the area for retention.

In all cases, the security of tenure of the farmers or farmworkers on the land prior to the
approval of this Act shall be respected.

Upon the effectivity of this Act, any sale, disposition, lease, management contract or transfer
of possession of private lands executed by the original landowner in violation of this Act shall
be null and void; Provided, however, That those executed prior to this Act shall be valid only
when registered with the Register of Deeds within a period of three (3) months after the
effectivity of this Act. Thereafter, all Register of Deeds shall inform the DAR within thirty (3)
days of any transaction involving agricultural lands in excess of five (5) hectares 26.

defines the nature and incidents of a landowner's right of retention. For as long as the area to be
retained is compact or contiguous and it does not exceed the retention ceiling of five (5) hectares, a
landowner's choice of the area to be retained, must prevail. Moreover, Administrative Order No. 4,
series of 1991,27 which supplies the details for the exercise of a landowner's retention rights, likewise
recognizes no limit to the prerogative of the landowner, although he is persuaded to retain other
lands instead to avoid dislocation of farmers.

Without doubt, this right of retention may be exercised over tenanted land despite even the issuance
of Certificate of Land Transfer (CLT) to farmer-beneficiaries.28 What must be protected, however, is
the right of the tenants to opt to either stay on the land chosen to be retained by the landowner or be
a beneficiary in another agricultural land with similar or comparable features. 29

Finally. Land awards made pursuant to the government's agrarian reform program are subject to the
exercise by a landowner, who is so qualified, of his right of retention.

Under P.D. No. 27, beneficiaries are issued CLTs to entitle them to possess lands. Thereafter, they
are issued Emancipation Patents (EPs) after compliance with all necessary conditions. Such EPs,
upon their presentation to the Register of Deeds, result in the issuance of the corresponding transfer
certificates of title (TCT) in favor of the beneficiaries mentioned therein30.
Under R.A. No. 6657, the procedure has been simplified 31. Only Certificates of Land Ownership
Award (CLOAs) are issued, in lieu of EPs, after compliance with all prerequisites. Thereafter, upon
presentation of the CLOAs to the Register of Deeds, TCTs are issued to the designated
beneficiaries. CLTs are no longer issued.

The issuance of EPs or CLOAs to beneficiaries does not absolutely bar the landowner from retaining
the area covered thereby. Under Administrative Order No. 2, series of 199432, an EP or CLOA may
be cancelled if the land covered is later found to be part of the landowner's retained area.

A certificate of title accumulates in one document a comprehensive statement of the status of the fee
held by the owner of a parcel of land.33 As such, it is a mere evidence of ownership and it does not
constitute the title to the land itself. It cannot confer title where no title has been acquired by any of
the means provided by law34.

Thus, we had, in the past, sustained the nullification of a certificate of title issued pursuant to a
homestead patent because the land covered was not part of the public domain and as a result, the
government had no authority to issue such patent in the first place35. Fraud in the issuance of the
patent, is also a ground for impugning the validity of a certificate of title36. In other words, the
invalidity of the patent or title is sufficient basis for nullifying the certificate of title since the latter is
merely an evidence of the former.

In the instant case, the CLTs of private respondents over the subject 4.1685-hectare riceland were
issued without Eudosia Daez having been accorded her right of choice as to what to retain among
her landholdings. The transfer certificates of title thus issued on the basis of those CLTs cannot
operate to defeat the right of the heirs of deceased Eudosia Daez to retain the said 4.1685 hectares
of riceland.

WHEREFORE, the instant petition is hereby GRANTED. The Decision of the Court of Appeals, dated
January 28, 1998, is REVERSED and SET ASIDE and the Decision of the Office of the President,
dated July 5, 1996, is hereby REINSTATED. In the implementation of said decision, however, the
Department of Agrarian Reform is hereby ORDERED to fully accord to private respondents their
rights under Section 6 of R.A. No. 6657. 1âwphi1.nêt