G.R. No. 125063, September 24, 2002
THE HEIRS OF GUILLERMO A. BATONGBACAL, PETITIONERS, VS. THE COURT OF APPEALS, THE DEPARTMENT OF AGRARIAN REFORM ADJUDICATION BOARD, AND CATALINO SANTOS, RESPONDENTS.

FACTS

Juana Luciano was the registered owner of an agricultural land in Bocaue, Bulacan. She mortgaged it to Philippine Banking Corporation (Philbanking) in 1962. After she defaulted, the bank foreclosed the mortgage and became the absolute owner on February 5, 1970. A tenancy relationship between Luciano and respondent Catalino Santos had commenced in the 1930s and continued to subsist. On January 11, 1985, Philbanking sold the property to petitioner Guillermo Batongbacal. When Batongbacal tried to register the sale, he discovered that a Certificate of Land Transfer (CLT) No. 0-025760, issued on January 22, 1981, had been registered in the name of Catalino Santos pursuant to Presidential Decree No. 27. Santos had been declaring the land for taxation and paying taxes since 1983. After going blind in 1987, Santos waived his rights as an agrarian reform beneficiary in favor of his son Severino Santos, who continued cultivating the land and delivering rentals to Luciano’s representatives until they refused acceptance, after which the rentals were deposited with a rice mill owner through the Barangay Captain. Batongbacal filed a complaint with the DAR, alleging Santos excavated the property. The Regional Agrarian Reform Adjudication Board and, on appeal, the Department of Agrarian Reform Adjudication Board (DARAB) ruled in favor of Santos, declaring him (and later his son) as tenant-lessee and now owner, and validating the substitution. The Court of Appeals affirmed the DARAB decision. Batongbacal died and was substituted by his heirs, who filed this petition.

ISSUE

Whether the Court of Appeals erred in: 1) refusing to recognize Guillermo Batongbacal as the true and lawful owner; 2) declaring the sale between Philbanking and Batongbacal null and void; 3) upholding the position that Batongbacal is not entitled to damages; and 4) declaring the Certificate of Land Transfer valid despite the purported transferor no longer owning the land at the time of its generation.

RULING

The Supreme Court DENIED the petition and AFFIRMED the decision of the Court of Appeals.
1. The tenancy relationship between Luciano and Santos, governed first by R.A. 1199 and then R.A. 3844, conferred security of tenure upon Santos. The sale or alienation of the land does not extinguish the tenancy; the purchaser merely assumes the rights and obligations of the former landholder. When P.D. 27 took effect in 1972, the land was owned by Philbanking, but the tenancy remained. Santos, as a tenant-farmer, was “deemed owner” under P.D. 27, and the subsequent issuance of a CLT to him in 1981 was valid. Philbanking, as agricultural lessor, was subrogated to Luciano’s rights and obligations upon acquiring the land in 1970. Its sale of the land to Batongbacal in 1985 without notifying Santos and giving him the opportunity to exercise his right of preemption under Section 11 of R.A. 3844 constituted a breach of obligation. Therefore, Batongbacal could not be recognized as the lawful owner free of the tenancy rights.
2. The Court did not declare the sale between Philbanking and Batongbacal null and void per se. It held that Batongbacal validly acquired whatever title Philbanking had, but such title remained subject to the existing agrarian leasehold and the rights of the tenant-beneficiary under P.D. 27.
3. The claim for damages arising from Santos’s excavation of the property was untenable. As a tenant “deemed owner,” Santos had discretion in cultivating the land. The DARAB found the excavation was done to level the land for irrigation, which was in line with cultivation and calculated to increase production. The factual findings of administrative agencies like the DARAB are binding if supported by substantial evidence.
4. The Certificate of Land Transfer issued to Santos in 1981 was valid. At the time P.D. 27 took effect in 1972, Philbanking was already the owner and was subrogated to the agricultural lessor’s obligations. The issuance of the CLT was pursuant to the mandate of P.D. 27, which aimed to transfer ownership to the tenant-farmer. The fact that the original landholder (Luciano) no longer owned the land at the time of the CLT’s issuance did not invalidate it, as the law operated directly on the relationship between the actual landowner (Philbanking) and the tenant (Santos).