G.R. No. L-30417 December 14, 1978
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. HON. MARIANO FORMOSO, Judge of the Court of Agrarian Relations, Br. II, Guimba, Nueva Ecija, ROSAURO GALUEGA, DOMINGO CORTEZ, BONIFACIO RAMOS, BENIGNO CASAPAO, and HERMOGENES VENTURA, respondents.

FACTS

The spouses Saturnino David and Josefa Reyes obtained a loan from the Rehabilitation Finance Corporation (RFC), predecessor of the Development Bank of the Philippines (DBP), secured by a mortgage on their land, Hacienda Parson. Upon the mortgagors’ default, the DBP initiated extra-judicial foreclosure. One day before the scheduled public auction on November 19, 1968, private respondents Rosauro Galuega, et al., claiming to be agricultural lessees of the land, filed a petition for prohibition with preliminary injunction in the Court of Agrarian Relations (CAR). They alleged a violation of their preferential right to purchase the land under agrarian laws. Respondent Judge Mariano Formoso issued a restraining order on November 18, 1968, halting the sale. The DBP moved to dismiss, arguing the CAR lacked jurisdiction as there was no landholder-tenant relationship between the Bank and the farmers. The CAR denied the motion and subsequent reconsideration, prompting DBP’s certiorari petition before the Supreme Court.

ISSUE

Whether the Court of Agrarian Relations had jurisdiction to restrain the extra-judicial foreclosure sale initiated by the DBP over the mortgaged tenanted land at the time it issued the orders in 1968 and 1969.

RULING

The Supreme Court ruled that the CAR lacked jurisdiction when it issued the assailed orders. The legal logic is anchored on the jurisdiction of the CAR as defined by statute at the time of the proceedings. Under Republic Act No. 1267 and Republic Act No. 3844 (the Agricultural Land Reform Code), the CAR’s jurisdiction was limited to cases involving the relationship of landholder and tenant. The DBP, as a mere mortgagee-creditor exercising its right to foreclose, was not a “landholder” as defined by law; no tenurial relationship existed between the Bank and the farmer-respondents. Therefore, the CAR acted without jurisdiction in taking cognizance of the case and issuing the restraining order against the foreclosure. However, the Court noted a significant supervening event: Presidential Decree No. 946, effective June 17, 1976, had expanded CAR jurisdiction to explicitly include “cases involving the sale, alienation, mortgage foreclosure, pre-emption and redemption of tenanted agricultural lands.” While this new law granted jurisdiction, it was not applied retroactively to validate the 1969 orders. Consequently, the Supreme Court set aside the CAR orders for lack of jurisdiction but, in the interest of expediency and to protect the tenants’ rights under the new decree and other agrarian reforms like Presidential Decree No. 27, ordered the case remanded to the CAR for further appropriate proceedings under its expanded jurisdiction.