G.R. No. 140496 ; August 17, 2004
DON PEPE HENSON ENTERPRISE, represented by its Managing-Partner, MR. ARISTIDES R. SUAREZ, petitioners, vs. MARIANO DAVID, JUAN PANGILINAN, MARCIAL DAYRIT, and MELQUIADES DE GUZMAN, respondents.

FACTS

Petitioner Don Pepe Henson Enterprise, a partnership, owns agricultural land in Angeles City. A 5.5-hectare portion is tenanted by respondents. This Court previously upheld the existence of a landlord-tenant relationship, affirming respondents’ security of tenure. During that prior case’s pendency, the Department of Agrarian Reform (DAR) placed the landholding under the Operation Land Transfer Program of P.D. No. 27, issuing Certificates of Land Transfer (CLTs) and eventually Emancipation Patents (EPs) and titles to respondents.
Subsequently, petitioner filed a complaint before the DARAB, seeking nullification of the land transfer. It argued the land was primarily sugarcane and thus exempt from P.D. No. 27, which covers rice and corn lands. It also claimed the land was owned by individual partners entitled to separate retention limits, and that the issuance of CLTs and EPs was void for lack of notice. Additionally, petitioner invoked P.D. No. 816, alleging respondents forfeited their rights by non-payment of lease rentals. The Provincial Adjudicator ruled for petitioner, declaring the coverage under P.D. No. 27 void and ordering respondents’ ejectment.

ISSUE

The core issues were: (1) whether the landholding was validly covered by P.D. No. 27; and (2) whether respondents violated P.D. No. 816, warranting forfeiture of their rights.

RULING

The Supreme Court affirmed the Court of Appeals with modification. On the first issue, the Court upheld the validity of the coverage under P.D. No. 27. It ruled that the prior final judgment in Don Pepe Henson Enterprises v. Pangilinan, which recognized respondents as tenants, established with conclusiveness that their specific farmholding was devoted to palay and vegetables. This factual finding barred re-litigation of the land’s primary crop. The claim of individual partner ownership was also rejected; a partnership has a separate juridical personality, and the land, registered in the partnership’s name, was subject to coverage as a single unit.
On the second issue, the Court found that respondents violated P.D. No. 816. This law mandates that tenants pay lease rentals when due. The Court rejected respondents’ defense of consignation after petitioner’s refusal to accept payment, noting they offered payment only after the filing of the ejectment complaint, which constituted deliberate non-payment for an appreciable period. However, since the CLTs and EPs were issued without prior notice to petitioner, the Court, affirming the appellate court, declared these documents void. Consequently, Section 3 of P.D. No. 816 applied, which states that a lessee who fails to pay rentals for two years shall lose the right to be issued a CLT. Therefore, while the annulment of the documents was upheld, the Court modified the decision to state it was with prejudice to respondents applying for new patents, and ordered them to vacate the landholding for violating P.D. No. 816.