G.R. No. 192999 - Diamond Farms, Inc. vs. Diamond Farm Workers Multi-Purpose Cooperative

Case Summary (G.R. No. 192999)

Factual Background

Diamond Farms, Inc. was a commercial banana producer owning 1,023.8574 hectares in Carmen, Davao, a large portion of which was the subject of agrarian reform deferment that was later lifted. After the deferment was lifted, the government placed 958.8574 hectares under CARP, and ultimately 698.8897 hectares were awarded to members of a cooperative while petitioner retained management and control over 277.44 hectares, including a 109.625-hectare parcel from which six TCTs were later cancelled and replaced by TCTs in the name of the Republic of the Philippines. The Department of Agrarian Reform (DAR) identified 278 CARP beneficiaries for the 109.625 hectares and issued CLOAs in their favor on October 26, 2000.

Complaint and Counterclaims

On July 2, 2002 petitioner filed a complaint for unlawful occupation, damages and attorneys fees, alleging that respondents and other farm workers forcibly entered and occupied 74.3393 hectares of the 109.625-hectare parcel and prevented harvesting, thereby causing alleged lost income of P1.46 million per week and demanding exemplary damages and attorneys fees. Respondents admitted petitioner’s prior title holdings and the productivity of the land, but counterclaimed that they were identified CARP beneficiaries who continued to work as petitioner’s farm workers, that petitioner failed to pay production and profit shares, and that petitioner conspired to install third parties on portions of the land.

Proceedings Before the Regional Adjudicator

During the proceedings before the Office of the Regional Adjudicator petitioner deposited P2.51 million as computed production and profit share for years 1995 to 1999, and the Regional Adjudicator ordered the parties to submit position papers and a project of distribution. The Adjudicator found that petitioner lost ownership when the government acquired the land and when CLOAs were issued to the 278 beneficiaries, held that respondents were lawful possessors as beneficiaries, and concluded that petitioner had no contract with the beneficiaries and therefore was unlawfully occupying the land.

Decision of the DARAB

Petitioner appealed to the DARAB, which denied the appeal and modified the Regional Adjudicator’s order by denying petitioner’s complaint for unlawful occupation, ordering petitioner to turn over possession and to respect the beneficiaries’ peaceful possession, and awarding in favor of respondents production and profit shares, accrued interest on unpaid amounts, and lease rentals subject to set-offs, with a total computation that included P27,553,703.25 less the deposited P2,511,786.00 plus interest figures as set out in the DARAB decision of December 11, 2006.

Court of Appeals Ruling

The Court of Appeals affirmed the DARAB in toto except that it deleted the award of lease rentals and interest thereon. The CA rejected petitioner’s contention that just compensation had not been paid and characterized a claim of nonpayment as a collateral attack on the Republic’s TCTs, noting the DAR’s procedures, the existence of deposits that implied compensation, petitioner’s failure to seek nullification of the Republic’s TCTs, and petitioner’s own deposit of P2.51 million as recognition of the beneficiaries’ entitlement to production share.

Issues Presented on Appeal to the Supreme Court

The Supreme Court identified the principal issues as whether respondents committed unlawful occupation and are liable for damages and attorneys fees; whether petitioner should be ordered to turn over possession of the subject land to respondents and respect their possession; and whether the DARAB’s award of production share and interest was proper.

Petitioner’s Contentions Before the Supreme Court

Petitioner argued that respondents could not be lawful possessors until petitioner had actually received just compensation or until the DAR deposited compensation in cash or LBP bonds, invoking Sec. 16(e) of the CARL and asserting a constitutional right to just compensation. Petitioner maintained that the CA erred by treating the compensation issue as collateral to the issuance of the Republic’s TCTs and by refusing to address the claimed nonpayment of just compensation.

Respondents’ Contentions and Documentary Proof

Respondents countered that deposit and compensation occurred, submitting Certificates of Deposit (CARP Form No. 17) showing LBP deposits of P9.92 million in cash and agrarian reform bonds covering the 109.625 hectares and a DAR memorandum requesting issuance of TCTs in the name of the Republic. Respondents also produced certified copies of the cancellation of petitioner’s TCTs and issuance of subsequent TCTs in favor of the Republic and of CLOAs and later titles in favor of agrarian beneficiaries or cooperatives, thereby asserting completed steps under CARP.

The Court’s Findings on Possession and Ownership

The Supreme Court found that petitioner had lost ownership of the 109.625-hectare parcel when the DAR took the steps contemplated by Sec. 16(e) and when CLOAs were issued to the identified beneficiaries, and that the issuance of CLOAs is evidence of ownership by beneficiaries under Sec. 24 of the CARL. The Court further found that both parties had shared possession, with petitioner remaining as farm operator and manager and respondents continuing as farm workers, and that respondents’ acts of guarding the land to prevent installation of third parties were reasonable and lawful to protect their possession under Article 429 of the Civil Code.

The Court’s Ruling on Unlawful Occupation and Possession

The Court held that respondents were not guilty of unlawful occupation, and that there was no basis to award petitioner damages or attorneys fees, because respondents were agrarian reform beneficiaries whose CLOAs had vested rights of ownership and possession. The Court nonetheless directed that possession of the 109.625 hectares be turned over to qualified CARP beneficiaries, and tasked the DAR and the Provincial Agrarian Reform Officer to assist the DARAB in effecting distribution and installation of beneficiaries.

Legal Reasoning on the Issue of Just Compensation and Jurisdiction

The Supreme Court rejected petitioner’s contention that the CA erred by not resolving the question of just compensation, explaining that petitions for determination of just compensation fall within the original and exclusive jurisdiction of the Regional Trial Court acting as a Special Agrarian Court under Sec. 56 and Sec. 57 of the CARL, and that this case was a complaint for unlawful occupat

Case Syllabus (G.R. No. 192999)

Parties and Procedural Posture

Diamond Farms, Inc. filed a complaint on July 2, 2002 for unlawful occupation, damages, and attorneys fees against respondents.
Diamond Farm Workers Multi-Purpose Cooperative and named individuals answered with a compulsory counterclaim asserting CARP beneficiary rights and entitlement to production and profit share.
The Regional Agrarian Reform Adjudicator issued a decision finding that petitioner lost ownership and denying petitioner's complaint while granting respondents counterclaims.
The Department of Agrarian Reform Adjudication Board (DARAB) denied petitioner's appeal in a Decision dated December 11, 2006 and awarded production and profit share and interest while ordering turnover of possession.
The Court of Appeals affirmed the DARAB Decision in CA-G.R. SP No. 101384 by Decision dated December 17, 2009 and modified the award by deleting lease rentals and interest thereon by Resolution dated July 15, 2010.
Petitioner elevated the case to the Supreme Court by petition for review on certiorari contesting the CA rulings on just compensation and collateral attack on Republic titles.

Key Factual Allegations

Diamond Farms, Inc. owned 1,023.8574 hectares in Carmen, Davao, of which 958.8574 hectares were initially deferred for CARP coverage.
The deferment was lifted on February 14, 1995 and 698.8897 hectares were awarded to members of DARBMUPCO while petitioner maintained management and control over 277.44 hectares, including a 109.625-hectare parcel.
Petitioner's TCTs over portions of the 109.625-hectare land were cancelled on November 23, 1999 and Transfer Certificates of Title in the name of the Republic were issued thereafter.
The DAR identified 278 CARP beneficiaries of the 109-hectare land on August 5, 2000 and issued six CLOAs on October 26, 2000.
Petitioner alleged possession of two parcels totaling 74.3393 hectares producing on average 11,000 boxes of export-quality bananas per week valued at P1.46 million and claimed respondents forcibly entered and occupied the land beginning June 10, 2002.
Respondents admitted petitioner's prior possession of the 74-hectare land but asserted that they guarded the land to protect their rights as farm workers and CARP beneficiaries and claimed entitlement to production and profit share.
Petitioner deposited P2.51 million as a computation of respondents' production and profit share during administrative proceedings.

Statutory Framework

The case principally involved Republic Act No. 6657 (the Comprehensive Agrarian Reform Law or CARL) including Sec. 16(e) on acquisition procedure, Sec. 24 on award to beneficiaries, Sec. 32 on production-sharing, Sec. 17 on determination of just compensation, and Secs. 56 and 57 on Special Agrarian Courts and jurisdiction.
The Court applied the 1987 Constitution provision on agrarian reform in Section 4, Article XIII, 1987 Constitution as interpreted in precedent.
The DAR rules on deferred commercial farms were applied, specifically DAR Administrative Order No. 9, Series of 1998, Sec. 20 on registration of CLOAs and installation of beneficiaries.

Issues Presented

Whether respondents were guilty of unlawful occupation and whether petitioner was entitled to damages and attorneys fees.
Whether petitioner should be ordered to turn over possession of the 109-hectare land to respondents and respect their possession.
Whether the award of production and profit share and accrued interest to respondents was proper.

Petitioner's Contentions

Petitioner argued that respondents could not be lawful possessors until petitioner received corresponding payment or until compensation was deposited in cash or in Land Bank of the Philippines bonds as required by Sec. 16(e), CARL.
Petitioner maintained that the issue of nonpayment of just compensation was an unavoidable issue in its complaint and that the CA erred in treating its contention as a collateral attack on Republic TCTs.
Petitioner sought a declaration that it remained lawful owner and possessor of the subject land until actual receipt of just compensation