G.R. No. L-7667 - Palileo vs. Cosio

Since 1955, spouses Florentino Francisco and Estelita Mata Francisco (spouses Francisco) have been in possession of about 23,032 square meters of land located at Barangay Malayantoc, Sto. Domingo, Nueva Ecija.
In 1976, pursuant to Presidential Decree No. 27, respondent Florentino Francisco was issued Certificate of Land Transfer No. 03019169, which established his title over the property.

In 1989, due to extreme poverty, spouses Francisco borrowed P50,000 from petitioner's Eugenia Castellano.
The agreement stipulated that in exchange for the loan, Eugenia would cultivate and possess the property until the debt was fully paid; the payment was promised within three years or by 1992.
The arrangement was not reduced into writing, and it later emerged that when spouses Francisco attempted to settle the debt in the latter part of 1992, Eugenia refused to accept the payment.

Subsequent to the attempted settlement, Eugenia managed to secure Emancipation Patent No. 489877 and Transfer Certificate of Title No. EP-71729 in the name of her son, Erlaine Castellano.
On December 17, 1997, spouses Francisco filed a petition for cancellation of Erlaine’s emancipation patent before the Department of Agrarian Reform Adjudication Board (DARAB), asserting that the transfer of ownership occurred without their knowledge and consent and claiming that the supporting documents were fabricated.
The Castellanos countered by stating that spouses Francisco had later informed them that they would no longer redeem the land.

The Regional Adjudicator, in his decision on August 30, 1999, ruled in favor of the Castellanos by:

Finding and declaring that spouses Francisco had sold and abandoned their tenancy/possessory rights over the property;
Ordering the cancellation of Florentino Francisco’s Certificate of Land Transfer;
Forfeiting all amortization payments made and disqualifying Florentino as an Agrarian Reform Beneficiary; and
Dismissing other claims for want of evidence.

The DARAB, on January 12, 2001, affirmed the Regional Adjudicator’s decision by holding that:

Spouses Francisco surrendered their possessory right in exchange for the P50,000 loan and physically abandoned the land when they went abroad; and
The issuance of Erlaine’s emancipation patent vested her with absolute ownership as this document enjoyed the presumption of regularity and validity.

On June 11, 2002, the Court of Appeals reversed the DARAB decision by ruling that:

Erlaine’s emancipation patent must be canceled because it was issued in violation of PD No. 27, which permits valid transfer only to the government or by hereditary succession;
The transfer from spouses Francisco to the Castellanos was void since it amounted to an improper alienation of their possessory rights; and
Spouses Francisco did not actually abandon the property but temporarily surrendered possession under a condition that it revert back upon full payment of the loan.

The petitioners raised two main issues regarding whether spouses Francisco abandoned their rights over the land and whether the issuance of Erlaine’s emancipation patent was valid.
The factual history later revealed evidence of Florentino Francisco’s voluntary surrender of the land to the Samahang Nayon, a mechanism whereby the land is transferred to the government, thereby qualifying the issuance of the patent as valid under the agrarian reform laws.
Relevant supporting documents included executed waivers of rights, resolutions by the Samahang Nayon, and corroborative salaysay evidencing Florentino’s intention to return the property to the government.

Whether spouses Francisco abandoned their rights over the land by virtue of their temporary surrender of possession during the loan period.
Whether Erlaine Castellano’s emancipation patent is valid, given that its issuance was based on the alleged transfer of possessory rights against the provisions of PD No. 27.