G.R. No. 248650 , March 15, 2023
ELIZABETH ONG LIM, PETITIONER, VS. LAZARO N. CRUZ, REPRESENTED BY VICENTE T. CRUZ, RESPONDENTS.

FACTS

On July 21, 1994, respondent Lazaro N. Cruz was awarded two parcels of agricultural land in Calumpit, Bulacan, by the Department of Agrarian Reform (DAR) under the Comprehensive Agrarian Reform Program (CARP). The titles contained a restriction prohibiting sale, transfer, or conveyance for ten years, except by hereditary succession or to the government or qualified beneficiaries. On April 26, 2000, within the prohibition period, Lazaro obtained a loan of ₱1,500,000.00 from petitioner Elizabeth Ong Lim and executed a Real Estate Mortgage over the first parcel as security. On May 9, 2002, also within the prohibition period, Lazaro executed a Deed of Absolute Sale over the second parcel in favor of the petitioner for ₱1,500,000.00. Lazaro delivered the original titles to the petitioner. On May 12, 2011, Lazaro, represented by his son Vicente T. Cruz, filed a complaint before the Regional Trial Court (RTC) seeking the annulment of the mortgage and sale for violating the prohibition under Section 27 of Republic Act No. 6657 (CARP Law). The RTC denied the complaint, ruling the respondent had no cause of action and was estopped, but reduced the mortgage interest to 12% per annum. The Court of Appeals (CA) affirmed the RTC’s jurisdiction and the validity of the mortgage but declared the Deed of Sale null and void for violating RA 6657. The CA ordered the petitioner to surrender possession of the sold land and the respondent to return the sale proceeds. Petitioner sought review before the Supreme Court.

ISSUE

Whether the Deed of Absolute Sale dated May 9, 2002, is null and void for violating the prohibition against transfer within ten years under Section 27 of Republic Act No. 6657 .

RULING

Yes, the Supreme Court denied the petition and affirmed the Court of Appeals’ ruling. The Deed of Absolute Sale is void ab initio for violating the explicit prohibition in Section 27 of RA 6657, which forbids the transfer of awarded lands within ten years from issuance, except by hereditary succession or to the government or other qualified beneficiaries. The law aims to preserve the ownership of the land in the hands of the agrarian reform beneficiary. The Court distinguished the sale from the mortgage; the mortgage, being merely an accessory contract for security and not a transfer of ownership, was not covered by the prohibition. However, the sale constituted a direct and absolute conveyance of ownership within the prohibited period and was therefore invalid. The principle of in pari delicto (both parties equally at fault) does not apply to such contracts as they are contrary to public policy and the social justice objectives of agrarian reform. The parties were restored to their original positions: the petitioner must surrender possession of the land, and the respondent must return the purchase price received. The Court upheld the RTC’s jurisdiction, as the case involved no tenurial agrarian relation between the parties to constitute an agrarian dispute falling under the DAR Adjudication Board’s jurisdiction.