G.R. No. 173923 ; October 12, 2009
PEDRO MAGO, et al., Petitioners, vs. JUANA Z. BARBIN, Respondent.

FACTS

Respondent Juana Barbin filed an action for Cancellation of Emancipation Patents (EPs) against petitioners, the Mago family, before the Provincial Agrarian Reform Adjudicator (PARAD). She alleged she was the owner of a riceland and that the petitioners, as her tenants, violated their leasehold contracts by failing to pay rentals for over two years, a ground for dispossession. The PARAD denied her petition, finding the landholding was lawfully placed under the Operation Land Transfer (OLT) program under P.D. No. 27, as respondent owned other agricultural lands exceeding seven hectares. The PARAD ruled her proper recourse was to claim just compensation.
The Department of Agrarian Reform Adjudication Board (DARAB) reversed the PARAD. It found that after the land was placed under OLT and EPs were issued in 1987, the tenancy relationship ceased. However, the parties later executed Deeds of Transfer in 1991 for a direct payment scheme where petitioners would pay amortizations directly to respondent. The DARAB found petitioners, except one, defaulted on these amortizations for more than three consecutive years. Applying DAR Administrative Order No. 02, series of 1994, which allows cancellation of EPs for such default in direct payment schemes, the DARAB ordered the EPs cancelled. The Court of Appeals affirmed this decision.

ISSUE

Whether the Court of Appeals erred in affirming the cancellation of the petitioners’ Emancipation Patents based on default in amortization payments under a direct payment scheme.

RULING

The Supreme Court DENIED the petition and AFFIRMED the assailed Court of Appeals Decision. The legal logic is anchored on the conditional nature of an Emancipation Patent and the validity of direct payment schemes under agrarian laws. While the issuance of an EP under P.D. No. 27 confers a vested right of ownership to the farmer-beneficiary, this right is not absolute. It remains subject to the condition that the beneficiary faithfully complies with his obligations, including the payment of amortizations. Executive Order No. 228 explicitly sanctions direct payment schemes between the landowner and the beneficiary as a legitimate mode of compensation. The Deeds of Transfer executed by the parties created a binding obligation for petitioners to pay amortizations directly to respondent. Their failure to pay for an aggregate of three consecutive years constituted a clear violation of DAR Administrative Order No. 02, s. 1994, which expressly lists such default as a ground for cancellation. The Court rejected the argument that the EPs had become indefeasible after one year, ruling that the one-year period for challenging a certificate of title under the Property Registration Decree does not apply when the challenge is based on grounds specifically provided under agrarian laws, such as violation of the conditions for retaining the EP. The cancellation was a valid enforcement of the conditional nature of the grant, not an attack on the title’s indefeasibility.