G.R. No. 156965 ; October 12, 2006
FROILAN DE GUZMAN, ANGEL MARCELO and NICASIO MAGBITANG, petitioners, vs. THE COURT OF APPEALS, OFFICE OF THE PRESIDENT, and the MUNICIPALITY OF BALIUAG, BULACAN, respondents.

FACTS

Petitioners were tenants on a six-hectare land in Baliuag, Bulacan, formerly owned by the Vergel De Dios family. In 1979, the Municipality of Baliuag initiated expropriation proceedings to acquire the land. Petitioners entered into a compromise agreement, withdrawing their opposition in exchange for disturbance compensation and waiving all claims against the municipality. The Court of Agrarian Relations approved this agreement. The municipality acquired the land but allowed petitioners to continue cultivation, paying rentals, pending construction of a market complex. The market was never built. In 1996, petitioners filed a petition for the land to be placed under Operation Land Transfer (OLT) pursuant to P.D. No. 27.
The Regional Director of the DAR initially granted the petition, but the DAR Secretary reversed this order. The Office of the President affirmed the DAR Secretary’s reversal. The Court of Appeals subsequently dismissed petitioners’ appeal, upholding the land’s non-agricultural classification based on a municipal zoning ordinance passed around 1980 that reclassified the land as commercial for a market complex.

ISSUE

Whether the subject land can be reclassified as agricultural and placed under agrarian reform coverage after its conversion to non-agricultural use, despite the non-materialization of the intended commercial purpose and petitioners’ continuous cultivation.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals. The land cannot be placed under agrarian reform. The legal logic is anchored on the principle that the power to classify or reclassify lands lies primarily with the local government unit through zoning ordinances, as provided under Section 3 of Republic Act No. 2264 (Local Autonomy Act). The municipality’s zoning ordinance, enacted circa 1980, validly reclassified the land from agricultural to commercial. This reclassification removed the land from the scope of agrarian reform laws, specifically the Comprehensive Agrarian Reform Law ( R.A. No. 6657 ), which applies only to agricultural lands.
The Court ruled that subsequent events, such as the non-commencement of the market construction and petitioners’ continued farming, did not automatically revert the land to agricultural status. The commercial classification, once legally effected, remained. Petitioners’ reliance on Administrative Order No. 20, series of 1992, which restricts conversion of irrigated prime agricultural lands, was misplaced as the order cannot be applied retroactively to a land reclassified years before its issuance. The earlier compromise agreement and payment of disturbance compensation had also validly extinguished the original tenancy relationship.