CASE NO. 2011-0129: ESTATE OF PASTOR M. SAMSON, REPRESENTED BY HIS HEIR ROLANDO B. SAMSON VS. MERCEDES R. SUSANO AND NORBERTO R. SUSANO (G.R. NO. 179024) ; JULIAN C. CHAN VS. MERCEDES R. SUSANO AND NORBERTO R. SUSANO (G.R. NO. 179086, 30 MAY 2011, VILLARAMA, JR., J.) SUBJECTS: OPERATION LAND TRANSFER; P.D. 27; DEFINITION OF TENANT; TENANCY RELATIONSHIP A QUESTION OF FACT. (BRIEF TITLE: ESTATE OF SAMSON VS. SUSANO).

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SUBJECT: INSTANCES WHEN LAND CANNOT BE SUBJECT TO THE OLT PROGRAM OF P.D. NO. 27.

We find in favor of petitioners. Applying our pronouncement in Levardo v. Yatco, we rule that the subject land cannot be subject to the OLT program of P.D. No. 27 for two reasons: first, the subject land is less than seven hectares; and second, respondents failed to show that Pastor owned other agricultural lands in excess of seven hectares or urban land from which he derived adequate income, as required by Letter of Instruction (LOI) No. 474.

. . . . .

SUBJECT: DEFINITION OF TENANT.

R.A. No. 1199,  otherwise known as the Agricultural Tenancy Act of the Philippines, defines a tenant as a person who, himself and with the aid available from within his immediate farm household, cultivates the land belonging to, or possessed by, another, with the latter’s consent for purposes of production, sharing the produce with the landholder under the share tenancy system, or paying the landholder a price certain or ascertainable in produce or in money or both, under a leasehold tenancy system.

For a tenancy relationship to exist between the parties, the following essential elements must be shown: (1) the parties are the landowner and the tenant; (2) the subject matter is agricultural land; (3) there is consent between the parties; (4) the purpose is agricultural production; (5) there is personal cultivation by the tenant; and (6) there is sharing of the harvests between the parties. The presence of all of these elements must be proved by substantial evidence.

. . . . .

SUBJECT: TENANCY RELATIONSHIP IS QUESTION OF FACT.

The question of whether a tenancy relationship exists is basically a question of fact which, as a general rule, is beyond the scope of a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended.  The question of whether there was an implied tenancy and sharing are basically questions of fact and the findings of the Court of Appeals and the Boards a quo are, generally, entitled to respect and nondisturbance, as long as they are supported by substantial evidence.  Such findings of fact may be reviewed by the Court when the conclusion is a finding grounded entirely on speculation, surmises or conjectures, or if the findings of fact are conclusions without citation of specific evidence on which they are based.

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THIRD DIVISION

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DECISION

VILLARAMA, JR., J.:

Before us are two consolidated petitions for review on certiorari seeking to reverse the August 31, 2006 Decision^[1][1] and the July 27, 2007 Resolution^[2][2] of the Court of Appeals (CA) in CA-G.R. SP Nos. 89052 and 89443. The CA dismissed the separate appeals filed by herein petitioners Estate of Pastor M. Samson, represented by Rolando B. Samson, and Julian C. Chan from the November 7, 2003 Decision^[3][3] and December 29, 2004 Resolution^[4][4] of the Department of Agrarian Reform Adjudication Board (DARAB), Central Office.

The Facts

Pastor M. Samson (Pastor) owned a 1.0138-hectare parcel of land known as Lot 1108 of the Tala Estate Subdivision located in Bagumbong, Caloocan City and covered by Transfer Certificate of Title (TCT) No. 65174. In 1959, Pastor was approached by his friend Macario Susano (Macario) who asked for permission to occupy a portion of Lot1108 to build a house for his family. Since Pastor was godfather to one of Macario’s children, Pastor acceded to Macario’s request. Macario and his family occupied 620 square meters of Lot1108 and devoted the rest of the land to palay cultivation. Herein respondents, Macario’s wife Mercedes R. Susano and their son Norberto R. Susano, insist that while no agricultural leasehold contract was executed by Pastor and Macario, Macario religiously paid 15 cavans of palay per agricultural year to Pastor, which rent was reduced by Pastor in 1986 to 8 cavans of palay per agricultural year.^[5][5]

In 1973, Pastor subdivided Lot 1108 into three portions, to wit: Lot 1108-A having an area of 3,172 square meters and covered by TCT No. 52637; Lot 1108-B having an area of 270 square meters and covered by TCT No. 52635; and Lot 1108-C having an area of 6,696 square meters and covered by TCT No. 52638. The first and last parcels, namely Lots 1108-A and 1108-C, remained registered in Pastor’s name while Lot 1108-B was sold to Jimena Novera in 1973 without Macario’s knowledge.^[6][6]

In 1979, Pastor sold 2,552 square meters of Lot1108-A to spouses Felix Pacheco and Juanita Clamor, allegedly also without Macario’s knowledge and consent. As a result of the sale, Lot 1108-A was further subdivided into three portions: (1) Lot 1108-A-1 measuring 620 square meters and covered by TCT No. 137744 in Pastor’s name; (2) Lot 1108-A-2 measuring 2,361 square meters and covered by TCT No. 137745; and (3) Lot 1108-A-3 measuring 191 square meters and covered by TCT No. 137746. The last two parcels are registered in the name of spouses Felix Pacheco and Juanita Clamor.^[7][7]

Lots 1108-A-1 and 1108-C comprising a total area of 7,316 square meters remained occupied and cultivated by Macario and his family.

On February 28, 1989, Pastor sold Lot1108-C to petitioner Julian Chan.^[8][8] Consequently, TCT No. 52638 was cancelled and TCT No. 176758 was issued in Chan’s name.

According to respondents, no written notice was sent by Pastor to Macario prior to the sale to Chan of Lot 1108-C comprising an area of 6,696 square meters. They aver that Macario came to know of the transaction only after Chan visited the property sometime in October 1990 accompanied by an employee from the city government.^[9][9]

Chan, on the other hand, claims that prior to buying Lot1108-C from Pastor, he ascertained the location and condition of the property. He maintains that he knew the property to be a residential lot as indicated in Tax Declaration No. B-026-09768 issued over the said property by the Caloocan City Assessor’s Office.^[10][10]

On November 1990, Macario received a letter from Pastor’s lawyer demanding that he vacate the property within twenty (20) days.^[11][11] Aggrieved, Macario filed a complaint against Pastor before the Municipal Agrarian Reform Office (MARO) of Valenzuela.^[12][12]

Meanwhile, it appears that Chan and Macario tried to settle amicably the dispute as between them. On September 26, 1991, Macario and his wife Mercedes executed a notarized document entitled, “Kusang-Loob na Pagtatalaga” (Deed of Undertaking)^[13][13] wherein Macario, recognizing that Chan is a buyer in good faith, acknowledged the latter’s ownership over the said landholding. The said document provides, viz:

KUSANG-LOOB NA PAGTATALAGA (DEED OF UNDERTAKING)

ALAMIN NG LAHAT:

            Kami na sina MACARIO SUSANO at MERCEDES SUSANO, mag-asawa, Pilipino at naninirahan sa Bagumbong,KalookanCity, ay nagsaysay ng mga sumusunod:

1.      Na kami ang naghain ng reclamo sa Agrarian Reform Office sa Valenzuela, Metro Manila laban kay Ginoong Pastor Samson ngKaloocanCity;

2.      Na ang aming reclamo laban kay Ginoong Pastor Samson ay ng ipagbile niya ang isang lote na may laking 6696 metro cudrados (sic), humigit kumulang, na kami ang nagsasaka na hindi kami pinagsabihan labag sa batas ng Land Reform;

3.      Na ang nasabing lote ay ipinagbile kay Ginoong Jul[ia]n Chan na sa aming pagkakaalam [ay] binile ang nasabing lote in good faith at hindi alam na kami ang nagsasaka;

4.      Amin din [napag-alaman] na si Ginoong Jul[ia]n Chan [ay] binile ang nasabing lote sa kadahilanan na ang ipinakitang Tax Declaration ni Ginoong Pastor Samson ay hindi taniman ng palay kundi isang lugar na tirikan ng mga bahay lamang (residential area) at hindi labag sa Batas ng Land Reform;

5.      Sa kadahilanan na si Ginoong Julian Chan ay binile ang nasabing lote na walang alang-alang (in good faith) at umasa sa Tax Declaration na ipinakita sa kanya, kami at sampo ng aking (sic) mga anak [ay] kinikilala ang kanyang pagmamay[-]ari at aming iginagalang ang kanyang karapatan bilang may[-]ari at kami ay [nangangako] na hindi namin siya o ang kanyang familia gagambalain, tatakutin o bibigyan ng ano mang kaguluhan sa nasabing lote;

6.      Aming din [ipinangangako] na si Ginoong Julian Chan at ang kanyang familia ay may laya na dalawin sa anumang oras ng gabi or (sic) araw ang nasabing lote at ibig naming paabutin sa Agrarian Reform Office sa Valenzuela na huwag isangkot si Ginoong Julian Chan sa aming gusot ni Ginoong Pastor Samson.

            Sa katunayan ng lahat, kami lumagda ngayon ika-26 ng Septiembre, 1991 dito sa Manila.

(signed)                                                                        (thumbmarked)

MACARIO SUSANO                                     MERCEDES SUSANO

Assisted by:    (signed)

                        Atty. Valeriano T. Tolentino

Sa harap nila:

(signed)                                                                        (signed)

FABIAN SUSANO                                         REYNALDO M. JOSON

                        x x x x

Two other similar documents dated September 26, 1991 were executed by Macario and Mercedes in favor of Chan.^[14][14] In one of these documents, Macario and Mercedes acknowledged the receipt of P10,000.00 from Chan,^[15][15] as follows:

ALAMIN NG SINO MANG MAKABASA NITO:

            Kaming mag-asawang Macario at Mercedes Susano ay nagpapasalamat sa malaking tulong na ibinigay sa aming familia ni Ginoong Julian Chan na sa aming kagipitan ay binigyan kami ng halagang P10,000.00 peso (sic) bagaman wa[l]ang pag-kakautang o obligacion sa amin.

            Sa aming malaking pagpapasalamat at kagalakan ay masasabi naming wala siyang ligalig o pa[n]gamba na aming hahadla[n]gan ang kanyang pagkakabile ng isang parcelang lupa kay Ginoong Pastor Samson na aming iginagalang at kinikilala bagaman yoong (sic) nasabing lupa ay aming tinatrabaho nang pag-aari pa ni Ginoong Pastor Samson.

            Sa katunayan ng lahat na nasasaad sa itaas, kaming mag-asawa ay lumagda ngayon[g] ika-26 ng Septiembre, 1991 dito sa Kalookan City.

                (signed)                                                (thumbmarked)

            MACARIO SUSANO                         MERCEDES SUSANO

            SA HARAP NILA:

            (illegible)                                                           (illegible)

On April 9, 1992, Chan and Macario, assisted by their respective counsels, executed a Joint Motion and Manifestation^[16][16] wherein Macario promised to surrender possession of the property to Chan on or before November 30, 1992.

On February 9, 1993, Macario died and was succeeded by respondents in the possession and cultivation of the subject landholding.

Thereafter, on August 17, 1993 respondents filed an action for maintenance of peaceful possession^[17][17] with prayer for the issuance of a restraining order/preliminary injunction and for the redemption of the subject landholding against Pastor and Chan before the Department of Agrarian Reform Adjudication Board (DARAB) of Region IV. Specifically, the complaint prayed for the inclusion of the 7,316-square meter portion of said landholding, or Lots 1108-A-1 and 1108-C, within the Coverage of the Operation Land Transfer (OLT) Program under Presidential Decree (P.D.) No. 27^[18][18] or The Tenant Emancipation Decree. They also asked that an emancipation patent be issued in their favor.  They tendered P12,052.80 in cash representing the reasonable redemption price over the subject landholding based on the highest land valuation prescribed by the DAR on unirrigated rice land.^[19][19] Said amount was accepted by the DAR Regional Cashier per Order^[20][20] of DARAB Regional Adjudicator Fe Arche-Manalang.

In his Answer,^[21][21] Chan maintained that he is a buyer in good faith and that he relied on the tax declaration which stated that the subject property is residential in character. He also averred that agreements were made between him and Macario recognizing his ownership over the said land in exchange for P25,000 paid by him to Macario, P10,000 of which was duly acknowledged by Macario in writing.^[22][22] Chan insisted that Macario also promised to surrender possession of the property to him on or before November 30, 1992.

Pastor, on the other hand, filed a Motion to Dismiss citing the pendency of the complaint filed against him before the MARO of Valenzuela and alleging that the property is not agricultural land but a residential lot as indicated in Tax Declaration No. 10081, dated August 29, 1986, issued by the Caloocan City Assessor’s Office. Pastor also argued that the land involved, Lot1108-A-1 covered by TCT No. 137744, is only 620 square meters, too small to be considered a viable family-size farm or economic family-size farm under Republic Act (R.A.) No. 6657 or the Comprehensive Agrarian Reform Law (CARL) and P.D. No. 27.^[23][23] 

Respondents filed the Opposition^[24][24] to Pastor’s motion to dismiss, which Pastor countered through a Reply.^[25][25] On May 10, 1994, the Regional Agrarian Reform Adjudicator (RARAD) issued an Order^[26][26] denying Pastor’s motion and directing the parties to submit their respective position papers. Pastor filed a Motion for Reconsideration,^[27][27] reiterating his arguments in his motion to dismiss, and claiming that respondents are not entitled to the benefits of the agrarian reform program because they are not landless peasants. Said motion was, however, denied.^[28][28]  Thus, Pastor filed his Answer.^[29][29]

In his Answer, Pastor maintained that no tenancy relationship was established between him and herein respondents because Macario’s occupancy, as well as that of respondents, was only by mere tolerance. He also alleged that respondents’ cause of action, if there be any, is already barred by prescription, estoppel and/or laches.^[30][30]

Pastor likewise filed his Position Paper^[31][31] as directed.  He insisted that the land is not covered by R.A. No. 6657 or by P.D. No. 27 as the land is not agricultural land and no tenancy relationship existed between him and herein respondents, who occupied his land by mere tolerance.  He also reiterated that even assuming that the land is agricultural land, respondents are not entitled to the benefits of said land reform laws as they are not landless tenants to begin with and the subject land is too small to be a viable family-size farm.

Chan for his part argued in his Position Paper^[32][32] that the subject parcel of land cannot be considered as agricultural land due to the enactment in 1981 of Metro Manila Zoning Ordinance No. 81-01 classifying the lands within the Metropolitan Manila area as residential and/or commercial. Chan pointed that the said zoning ordinance preceded R.A. No. 6657, which became effective only on June 15, 1988.^[33][33]

Meanwhile, herein respondents maintained in their Position Paper^[34][34] that their predecessor-in-interest, Macario, was a bona fide agricultural tenant; hence, they are entitled to the rights of pre-emption and redemption.  And having validly exercised their right of redemption through the deposit of the redemption price with the DAR, they are allegedly now the owners of the subject land.  That they have such right of redemption is likewise due to the fact that the subject land is covered by the OLT Program, respondents added.

Up to now, the disputed portion of the subject landholding is still utilized as a rice field by the respondents.^[35][35]

The RARAD’s Ruling

On December 26, 1994, the RARAD issued a Decision^[36][36] declaring that the late Macario validly acquired the status of a bona fide and de jure tenant over the subject land due to Pastor’s implied acquiescence in allowing Macario to discharge the duties of a tenant for a considerable length of time until the latter’s death in 1993. This notwithstanding, respondents’ complaint was dismissed.  The RARAD ruled:

x x x Under the given factual milieu, there can be no question that the Plaintiffs’ predecessor-in-interest[,] the late Macario Susano[,] validly acquired the status of a bona fide and de jure tenant over the subject landholding by reason of Defendant Pastor Samson’s implied acquiescence over the years from the time he discharged the duties of such tenant until his demise in 1993. Estoppel by acquiescence has definitely set in and Petitioner can no longer impugn at this late stage the validity of the said decedent’s acquired tenancy status which is entitled to full judicial protection under the well-recognized principle of security of tenure guaranteed under existing agrarian laws which were established in the light of the social justice precept of the Constitution and in the exercise of the police power of the State to promote the common weal. The expiration of the period of the contract as fixed by the parties, or the sale, alienation or transfer of legal possession of the land does not[,] of itself[,] extinguish the relationship. In the latter case, the purchaser or transferee is simply subrogated to the rights and substituted to the obligations of the agricultural lessor. x x x

x x x x

However, herein lies the quandary.

As early as 1981 with the passage of Metro Manila Zoning Ordinance [No.] 81-01, the land in question has ceased to be agricultural. Judicial notice is taken of the fact that Caloocan City where the subject landholding is located is part of Metro Manila whose updated Comprehensive Development Plan and Accompanying Zoning Ordinance 81-01 was found to be in conformity with the requirements of Presidential Decree No. 922, Letter of Instructions (sic) No. 729 and Execut[i]ve Order No. 648 as specifically set out in the Memorandum of Agreement (MOA) executed on January 11, 1981 between the Metro Manila Commission (now Metro Manila Authority) and the HSRC (Human Settlements Regulatory Commission[,] now HLURB or the Housing and Land Use Regulatory Board). In a clarifying Memorandum dated February 14, 1990, Secretary of Justice Franklin M. Drilon opined that prior to June 15, 1988 which is the date of effectivity of RA 6657 or the Comprehensive Agrarian Reform Law of 1988, the powers of the HLURB and the Department of Finance to recategorize lands for land use and taxation purposes, respectively, were exclusive. The point in this entire discourse is that at the time of Macario Susano’s death in 1993, there was no longer any tenurial relationship to speak of[,] which could devolve upon the [p]laintiffs by right of succession[,] by virtue of the land’s automatic recategorization as non-agricultural [land] in 1981. This does not mean[,] however, that any existing legal rights created prior to the said reclassification may just be automatically shunted aside. On the contrary[,] while [p]laintiffs can no longer insist on physically holding on to the land in question[,] they may still rightfully claim payment of disturbance compensation for and in behalf of the late Macario Susano, their predecessor-in-interest in an amount equivalent to five times the average of the gross harvest on (sic) their landholding during the last five preceding calendar years x x x.

x x x x

WHEREFORE, premises considered, judgment is hereby rendered:

1.      Declaring the subject property more particularly described in paragraph 2 of the Complaint as no longer agricultural by virtue of its reclassification/conversion based on the duly approved Metro Manila Zoning Ordinance 81-01;

2.      Dismissing the Complaint against the [d]efendant Julian Chan for lack of cause of action;

3.      Directing the defendant Pastor Samson to pay to the [p]laintiffs 300 cavans or its money equivalent of P90,000.00 as and by way of disturbance compensation due to the late tenant Macario Susano;

4.      Pending the payment of such disturbance compensation, maintaining the [p]laintiffs in their peaceful possession of the remaining area consisting of 7,316 square meters presently utilized as combination farmlot/homelot (sic);

5.      Upon receipt of the said disturbance compensation, directing the [p]laintiffs to:

a)      surrender peaceful possession of the 6,696 square meter portion of the subject property to the present owner Julian Chan and the homelot (sic) of 620 square meters to [d]efendant Pastor Samson’

b)      remove their dwelling house erected on the said homelot (sic) after the lapse of 45 days following finality of judgment herein;

6.      Allowing the withdrawal by [p]laintiffs of the redemption price deposited with the Office of the DAR Regional Cashier in the amount of P12,052.80;

7.      Denying all other claims for lack of basis; and

8.      Without pronouncement as to costs.

SO ORDERED.^[37][37]

Unsatisfied, all of the parties filed their respective motions for reconsideration. Pastor assailed the Regional Adjudicator’s finding that Macario was a bona fide and de jure tenant in the said landholding, as well as the order directing him to pay respondents disturbance compensation. Chan, for his part, sought reconsideration with respect to the pronouncement allowing respondents to maintain their peaceful possession of the 7,316-square meter property until they have been paid the computed disturbance compensation.

Meanwhile, respondents argued that there is no law authorizing the conversion of agricultural lands by the mere passage of a zoning ordinance. To support their contention, respondents cited the Court’s pronouncement in Co v. Intermediate Appellate Court^[38][38] to the effect that the passage of Metro Manila Zoning Ordinance No. 81-01 does not serve to convert existing agricultural lands in the covered area into residential lands or light industrial use lands nor does it have any retroactive effect as to discontinue all previously acquired rights on said lands. They also posit that the said zoning ordinance did not ipso facto convert agricultural lands into non-agricultural lands but merely provided for a guideline for future land use of affected areas.

On May 18, 1995, the Regional Adjudicator issued an Order^[39][39] modifying her decision as follows:

WHEREFORE, premises considered, the dispositive portion of the questioned decision of December 26, 1994 is PARTIALLY MODIFIED to read as follows:

1.      Declaring the subject property more particularly described in paragraph 2 of the Complaint as no longer agricultural by virtue of its reclassification/conversion based on the duly approved Metro Manila Zoning Ordinance No. 81-01;

2.      Dismissing the Complaint against the Defendant Julian Chan for lack of cause of action;

3.      Directing the Plaintiffs and all persons claiming right[s] under them to immediately vacate the 6,696 sq. m. portion of the subject property and surrender peaceful possession thereof to the present owner Julian Chan;

4.      Directing the Defendant Pastor Samson to pay to the Plaintiffs 300 cavans of palay or its money equivalent of P90,000.00 as and by way of disturbance compensation to the late tenant Macario Susano;

5.      Upon receipt of such payment for disturbance compensation, directing the Plaintiffs and all persons claiming rights under them to vacate the area utilized as homelot (sic) consisting of 620 square meters and surrender peaceful possession thereof to the Defendant Pastor Samson;

6.      Allowing the withdrawal by Plaintiffs of the redemption price deposited with the Office of the DAR Regional Cashier in the amount of P12,052.80;

7.      Denying all other claims for lack of basis; and

8.      Without pronouncement as to costs.

SO ORDERED.^[40][40]

The DARAB’s Ruling

Upon appeal, the DARAB, on November 7, 2003, reversed the ruling of the RARAD.  Anchoring its decision on this Court’s pronouncement in Co v. Intermediate Appellate Court,^[41][41] the DARAB explained that the issuance of an ordinance classifying the subject property into non-agricultural land did not have the effect of automatically converting the said land as non-agricultural land and terminating the tenancy relationship between the parties. The dispositive portion of the DARAB decision reads:

WHEREFORE, premises considered, the assailed decision and order are hereby REVERSED and SET ASIDE. A new judgment is entered:

1)      Declaring the plaintiffs-appellants to be the lawful successors and tenants over the disputed landholding containing an area of 7,316 square meters;

2)   Ordering the defendants to respect and maintain the plaintiffs-appellants in the peaceful possession and cultivation of the subject landholding;

3)   Recognizing the redemption right of [p]laintiffs-[a]ppellants in the 6,696 square-meter (sic) landholding;

4)   Ordering [d]efendant Chan to reconvey the subject property to herein [p]laintiffs-[a]ppellants by executing a deed of reconveyance upon payment of the redemption price of P468,720.00 and allowing [d]efendant Chan to withdraw the amount of P12,052.80 from the DAR Regional Cashier, Region IV representing partial payment of the said price;

5)   In the event that this decision shall have become final and executory, but [d]efendant Chan still refuses to execute the necessary document of reconveyance of the land in issue, the Register of Deeds of Caloocan City is hereby directed to register this decision in connection with the subject land covered by TCT No. 176758; afterwhich (sic) the Register of Deeds is hereby authorized to cancel TCT No. 176758 and in lieu thereof, to issue another Transfer Certificate of Title to and in the name of plaintiffs-appellants;

6)   Directing the plaintiffs-appellants to coordinate with the Regional Director, Region IV or his duly authorized representative who shall initiate steps to obtain from the Land Bank financial assistance for redemption purposes of the subject property, pursuant to Section 12, R.A. 3844, as amended; [and]

7)   Denying all claims and counterclaims for lack of merit.

No pronouncement as to cost.

SO ORDERED.^[42][42]

Aggrieved, Pastor and Chan sought reconsideration of the said decision but their motions were denied for lack of merit.^[43][43]  Thus, they filed their respective petitions for review before the CA. The said appeals were later consolidated upon Pastor and Chan’s motion.

During the pendency of the appeal, Pastor died on July 28, 2006 and was substituted by his estate represented by Rolando B. Samson.

The CA’s Ruling

On August 31, 2006, the CA dismissed the appeal. The CA reasoned:

x x x As borne by the records, Macario’s cultivation of the property as well as [Pastor’s] receipt of a portion of the produce therein lasted for a considerable length of time or more than thirty (30) years with nary a protest on the latter’s part. To our mind, although petitioner [Pastor] did not expressly give his consent to a tenancy relation with Macario, we find that [Pastor’s] acts are indicative of his implied consent to such relationship. Otherwise stated, by allowing Macario Susano to cultivate the subject landholding for a considerable length of time and by receiving a portion of the harvest therein, petitioner is deemed to have impliedly consented to a tenancy relationship with Macario. After all, it is well-settled in law that a tenancy relationship may be established either verbally or in writing, expressly or impliedly.^[44][44]

The CA also held that Pastor and Macario’s tenancy relationship was not extinguished despite the reclassification of the subject land into non-agricultural land in 1981 citing our ruling in Alarcon v. Court of Appeals.^[45][45] The CA concluded that since the subject landholding was sold to Chan who, in turn, failed to notify Macario as required by law, the latter had the right to redeem the said property in accordance with Section 12^[46][46] of R.A. No. 3844, as amended, or the Code of Agrarian Reforms of the Philippines. 

On July 27, 2007, the CA denied petitioners’ motions for reconsideration.  Hence, these consolidated petitions.

The Issues

In G.R. No. 179024, the estate of Pastor Samson argues that

The Honorable Court of Appeals gravely erred in rendering its subject Decision affirming the findings of the RARAD a quo and DARAB that a tenancy relationship existed between the late Pastor M. Samson and the late Macario Susano.^[47][47]

          Petitioner Julian Chan, on the other hand, argues in G.R. No. 179086 that

[I.]       The Honorable Court of Appeals grievously erred in recognizing the residential status of the property in question and yet upholding the tenancy relation between Pastor Samson and Macario Susano and in binding herein petitioner thereto[;]

[II.]      The Honorable Court of Appeals grievously erred in misapplying the ruling of this Honorable Court in Alarcon v. Court of Appeals[; and]

[III.]     The Honorable Court of Appeals grievously erred in finding that respondents were entitled to the right of redemption and that the same may still be exercised by respondents.^[48][48]

In sum, at the core of this case is the issue of whether respondents are entitled to the benefits of the OLT Program under P.D. No. 27.

The Court’s Ruling

Respondents contend that the sale of Lot 1108-C to Chan is null and void for being contrary to the provisions of P.D. No. 27 and because at the time of the sale, ownership over the said property was already vested in Macario by virtue of the provisions of P.D. No. 27 on the OLT program.

Chan, for his part, maintained that Macario himself had recognized the validity of the sale of Lot 1108-C to him as shown in the Kusang Loob na Pagtatalaga (Deed of Undertaking), signed by Macario and witnessed by his family members in 1991, and the Joint Motion and Manifestation filed with the MARO of Valenzuela.^[49][49]  Chan also asserts that when he bought the land from Pastor, it was already classified as residential land following the passage of Metro Manila Zoning Ordinance No. 81-01 on March 18, 1981.

Meanwhile, the estate of Pastor Samson, by way of avoidance, insists that Macario was not Pastor’s tenant, reiterating the earlier claim that Macario’s occupancy on the said land was by mere tolerance. The estate also argues that if Macario was a tenant, he should have reacted and asserted his alleged rights under agrarian laws when the land he was cultivating was significantly reduced after portions thereof were sold in 1977 and 1984.^[50][50]

We find in favor of petitioners. Applying our pronouncement in Levardo v. Yatco,^[51][51] we rule that the subject land cannot be subject to the OLT program of P.D. No. 27 for two reasons: first, the subject land is less than seven hectares; and second, respondents failed to show that Pastor owned other agricultural lands in excess of seven hectares or urban land from which he derived adequate income, as required by Letter of Instruction (LOI) No. 474.^[52][52]

Moreover, the DAR Memorandum on the “Interim Guidelines on Retention by Small Landowners” dated July 10, 1975 is explicit:

5. Tenanted rice and/or corn lands seven (7) hectares or less shall not be covered by Operation Land Transfer. The relation of the land owner and tenant-farmers in these areas shall be leasehold x x x^[53][53]

However, while the disputed landholding which had an original aggregate area of only 1.0138 hectares is not covered by the OLT program, the same may still be covered by P.D. No. 27, albeit under its Operation Land Leasehold (OLL) program. The OLL program placed landowners and tenants of agricultural land devoted to rice and corn into a leasehold relationship as of October 21, 1972.^[54][54]  But the fact that Macario, respondents’ predecessor-in-interest, was a de jure tenant must be established.

Chan maintains that the tenancy relationship between Pastor and Macario, if there was any, ceased following the reclassification of the subject land as belonging to the low intensity residential zone (I-1) as of March 18, 1981. His contention, however, lacks merit in light of our ruling in Co v. Intermediate Appellate Court,^[55][55] wherein we said that Metro Manila Zoning Ordinance No. 81-01 did not have the effect of discontinuing rights previously acquired over lands located within the reclassified zone which are neither residential nor light industrial in nature.^[56][56] The zoning ordinance is given prospective operation only.^[57][57]

So was Macario a de jure tenant in the subject landholding entitled to security of tenure?

On this score, we answer in the negative.

R.A. No. 1199,^[58][58]  otherwise known as the Agricultural Tenancy Act of the Philippines, defines a tenant as a person who, himself and with the aid available from within his immediate farm household, cultivates the land belonging to, or possessed by, another, with the latter’s consent for purposes of production, sharing the produce with the landholder under the share tenancy system, or paying the landholder a price certain or ascertainable in produce or in money or both, under a leasehold tenancy system.^[59][59]

For a tenancy relationship to exist between the parties, the following essential elements must be shown: (1) the parties are the landowner and the tenant; (2) the subject matter is agricultural land; (3) there is consent between the parties; (4) the purpose is agricultural production; (5) there is personal cultivation by the tenant; and (6) there is sharing of the harvests between the parties.^[60][60] The presence of all of these elements must be proved by substantial evidence.^[61][61]

Petitioner estate of Pastor Samson contends that the elements of consent and sharing of harvest are lacking since Macario’s occupancy and possession of the subject land was only by mere tolerance.

Respondents, however, counter that there was implied tenancy because Pastor accepted his share of the production for a considerable length of time. To prove their contention, respondents presented the affidavits executed by three farmers from adjoining landholdings, namely Santiago Pacheco,^[62][62] Apolinario Francisco,^[63][63] and Damaso Matias,^[64][64] stating that they knew Macario to be a tenant of Pastor since 1959 and that Macario religiously paid his share of the produce to Pastor.

          The estate of Pastor Samson argues that the said affidavits are insufficient to establish the existence of a tenancy relationship since the affiants failed to provide details as to what the agreed rental was.  No concrete evidence was presented by the respondents to prove their claim.^[65][65]

          We agree with said petitioner.

The question of whether a tenancy relationship exists is basically a question of fact which, as a general rule, is beyond the scope of a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended.^[66][66]  The question of whether there was an implied tenancy and sharing are basically questions of fact and the findings of the Court of Appeals and the Boards a quo are, generally, entitled to respect and nondisturbance, as long as they are supported by substantial evidence.^[67][67]  Such findings of fact may be reviewed by the Court when the conclusion is a finding grounded entirely on speculation, surmises or conjectures,^[68][68] or if the findings of fact are conclusions without citation of specific evidence on which they are based.^[69][69]

In the case at bar, while the RARAD, DARAB and the CA are unanimous in their conclusion that an implied tenancy relationship existed between Pastor Samson and Macario Susano, no specific evidence was cited to support such conclusion other than their observation that Pastor failed to protest Macario’s possession and cultivation over the subject land for more than 30 years. Contrary to what is required by law, however, no independent and concrete evidence were adduced by respondents to prove that there was indeed consent and sharing of harvests between Pastor and Macario.

It has been repeatedly held that occupancy and cultivation of an agricultural land will not ipso facto make one a de jure tenant.^[70][70]  Independent and concrete evidence is necessary to prove personal cultivation, sharing of harvest, or consent of the landowner.^[71][71] Substantial evidence necessary to establish the fact of sharing cannot be satisfied by a mere scintilla of evidence; there must be concrete evidence on record adequate to prove the element of sharing. To prove sharing of harvests, a receipt or any other credible evidence must be presented, because self-serving statements are inadequate.^[72][72] Tenancy relationship cannot be presumed;^[73][73] the elements for its existence are explicit in law and cannot be done away with by conjectures.^[74][74] Leasehold relationship is not brought about by the mere congruence of facts but, being a legal relationship, the mutual will of the parties to that relationship should be primordial.^[75][75]  For implied tenancy to arise it is necessary that all the essential requisites of tenancy must be present.^[76][76]

The affidavits executed by three of respondents’ neighbors are insufficient to establish a finding of tenancy relationship between Pastor and Macario. As correctly observed by the estate of Pastor Samson, the affiants did not provide details based on their personal knowledge as to how the crop-sharing agreement was implemented, how much was given by Macario to Pastor, when and where the payments were made, or whether they have at any instance witnessed Pastor receive his share of the harvest from Macario. Such failure is fatal to respondents’ claim particularly since the respondents have the burden of proving their affirmative allegation of tenancy.^[77][77] In fine, the conclusions of the RARAD, DARAB and the CA respecting the existence of tenancy relationship between Pastor and Macario are not supported by substantial evidence on record.

The sale of the land to Chan likewise did not violate R.A. No. 3844 or the Agricultural Tenancy Act.  Considering that respondents have failed to establish their status as de jure tenants, they have no right of pre-emption or redemption under Sections 11 and 12 of the said law.^[78][78]

WHEREFORE, the petitions for review on certiorari are GRANTED. The assailed Decision dated August 31, 2006 and Resolution dated July 27, 2007 of the Court of Appeals in CA-G.R. SP Nos. 89052 and 89443 are REVERSED and SET ASIDE. Respondents Mercedes and Norberto R. Susano’s action for maintenance of peaceful possession, docketed as DARAB Case No. IV-MM-0063-93, is DISMISSED for lack of merit. They are ordered to SURRENDER peaceful possession and occupation of Lot 1108-A-1, covered by TCT No. 137744, to the Estate of Pastor M. Samson, represented by Rolando B. Samson andLot 1108-C, covered by TCT No. 176758, to petitioner Julian C. Chan.

No pronouncement as to costs.

          SO ORDERED.

A T T E S T A T I O N

          I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

C E R T I F I C A T I O N

          Pursuant to Section 13, Article VIII of the 1987 Constitution and the Division Chairperson’s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

CASE 2011-0128: DOLORES ADORA MACASLANG VS. RENATO AND MELBA ZAMORA (G.R. NO. 156375, 30 MAY 2011, BERSAMIN, J.) SUBJECTS: EJECTMENT, UNLAWFUL DETAINER, CAUSE OF ACTION, RTC AS APPELLATE COURT CAN TAKE ACCOUNT OTHER MATTERS NOT RAISED IN MTC. (BRIEF TITLE: MACASLANG VS. ZAMORA).

==========================

SUBJECT: RTC, IN EXERCISING APPELLATE JURISDICTION WAS NOT LIMITED TO THE ERRORS ASSIGNED IN THE PETITIONER’S APPEAL MEMORANDUM BUT COULD DECIDE ON THE BASIS OF THE ENTIRE RECORD AND MEMORANDA OF THE PARTIES.

Butthe petitioner’s appeal herein, being taken from the decision of the MTCC to the RTC, was governed by a different rule, specifically Section 18 of Rule 70 of the Rules of Court, to wit:

Section 18. xxx

xxx

The judgment or final order shall be appealable to the appropriate Regional Trial Court which shall decide the same on the basis of the entire record of the proceedings had in the court of origin and such memoranda and/or briefs as may be submitted by the parties or required by the Regional Trial Court. (7a)

As such,the RTC, in exercising appellate jurisdiction,was not limited to the errors assigned in the petitioner’s appeal memorandum, but could decide on the basis of the entire record of the proceedings had in the trial court and such memoranda and/or briefs as may be submitted by the parties or required by the RTC.

==========================

Republic of thePhilippines

Supreme Court

Manila

THIRD DIVISION

x—————————————————————————————–x

D  E C I S I O N

BERSAMIN, J.:

The Regional Trial Court (RTC) is not limited in its review of the decision of the Municipal Trial Court (MTC) to the issues assigned by the appellant, but can decide on the basis of the entire records of the proceedings of the trial court and such memoranda or briefs as may be submitted by the parties or required by the RTC.

The petitioner appeals the decision promulgated on July 3, 2002,^[1][1] whereby the Court of Appeals (CA) reversed“for having no basis in fact and in law” the decision rendered on May 18, 2000^[2][2] by the Regional Trial Court, Branch 25, in Danao City (RTC) that had dismissed the respondents’ action for ejectment against the petitioner, and reinstated the decision dated September 13, 1999 of the Municipal Trial Court in Cities (MTCC) of Danao City (ordering the petitioner as defendant to vacate the premises and to pay attorney’s fees of P10,000.00 and monthly rental of P5,000.00 starting December 1997 until they vacated the premises).^[3][3]

We grant the petition for review and rule that contrary to the CA’s conclusion, the RTCas an appellate court properly considered and resolved issues even if not raised in the appeal from the decision rendered in an ejectment case by the MTCC.

ANTECEDENTS

          On March 10, 1999, the respondents filed a complaint for unlawful detainer in the MTCC, alleging that “the [petitioner] sold to [respondents] a residential land located in Sabang,DanaoCity” and that “the [petitioner] requested to be allowed to live in the house” with a “promise to vacate as soon as she would be able to find a new residence.” They further alleged that despite their demand after a year, the petitioner failed or refused to vacate the premises.

Despite the due service of the summons and copy of the complaint, the petitioner did not file heranswer. The MTCC declared her in defaultupon the respondents’ motion to declare her in default, and proceeded to receivethe respondents’oral testimony and documentary evidence. Thereafter, onSeptember 13, 1999, the MTCC rendered judgment against her, disposing:

WHEREFORE, considering the foregoing, Judgment is hereby rendered in favor [of] plaintiffs (sic) spouses Renato Zamora and Melba Zamora and against defendant Dolores AdoraMacaslang, ordering defendant to vacate the properties in question, to pay to plaintiffs Attorney’s Fees in the sum of P10,000.00 and monthly rental of P5,000.00 starting December, 1997 until the time the defendant shall have vacated the properties in question.

SO ORDERED.^[4][4]

          The petitioner appealed to the RTC, averring the following as reversible errors, namely:

1.      Extrinsic Fraud was practiced upon defendant-appellant which ordinary prudence could not have guarded against and by reason of which she has been impaired of her rights.

2.      Defendant-Appellant has a meritorious defense in that there was no actual sale considering that the absolute deed of sale relied upon by the plaintiff-appell[ees] is a patent-nullity as her signature therein was procured through fraud and trickery.^[5][5]

and praying through her appeal memorandum as follows:

       Wherefore, in view of the foregoing, it is most respectfully prayed for that judgment be rendered in favor of defendant-appellant ordering that this case be remanded back to the Court of Origin, Municipal Trial Court of Danao City, for further proceedings to allow the defendant to present her evidence, and thereafter, to render a judgment anew.^[6][6]

          On May 18, 2000, the RTC resolved the appeal, to wit:^[7][7]

WHEREFORE,judgment is hereby rendered dismissing the complaint for failure to state a cause of action.

The same may, however, be refiled in the same Court, by alleging plaintiffs’ cause of action, if any.

Plaintiffs’ Motion for Execution of Judgment of the lower court is rendered moot by this judgment.

SO ORDERED.

          The respondents appealed to the CA, assailing the RTC’s decision for “disregarding the allegations in the complaint” in determining the existence or non-existence of a cause of action.

OnJuly 3, 2002, the CA reversed and set aside the RTC’s decision and reinstated the MTCC’s decision in favor of the respondents, disposing:

       WHEREFORE,foregoing premises considered, the Petition is hereby GIVEN DUE COURSE. Resultantly, the impugned decision of the Regional Trial Court is hereby REVERSED and SET ASIDE for having no basis in fact and in law, and the Decision of the Municipal Trial Court in Cities REINSTATED and AFFIRMED. No costs.

         SO ORDERED.^[8][8]

          The petitioner’smotion for reconsideration was denied onNovember 19, 2002.

ISSUES

          Hence, the petitioner appeals the CA’s adverse decision, submitting legal issues, as follows:

1.      Whether or not the Regional Trial Court in the exercise of its Appellate Jurisdiction is limited to the assigned errors in the Memorandum or brief filed before it or whether it can decide the case based on the entire records of the case, as provided for in Rule 40, Sec. 7. This is a novel issue which, we respectfully submit, deserves a definitive ruling by this Honorable Supreme Court since it involves the application of a new provision, specifically underlined now under the 1997 Revised Rules on Civil procedure.

2.      Whether or not in an action for unlawful detainer, where there was no prior demand to vacate and comply with the conditions of the lease made, a valid cause of action exists?

1. ^3.        Whether or not in reversing the Regional Trial Court Decision and reinstating and affirming the decision of the Municipal Circuit Trial Court, which was tried and decided by the MCTC in violation of the Rules on Summary Procedure, the Court of Appeals sanctioned a gross departure from the usual course of judicial proceedings?^[9][9]
2.  

          The issues that this Court has to resolve are stated thuswise:

1.     Whether or not the CA correctly found that the RTC committed reversible error in ruling on issues not raised by the petitioner in her appeal;

2.     Whether or not the CA correctly found that the complaint stated a valid cause of action;

3.     Whether or not the CA erred in finding that there was a valid demand to vacate made by the respondents on the petitioner; and

4.     Whether or not the petitioner’s defense of ownership was meritorious.

RULING

We grant the petition for review.

A.

As an appellate court, RTC may rule

upon an issue not raised on appeal

In its decision, the CA ruled that the RTC could not resolve issues that were not assigned by the petitioner in her appeal memorandum, explaining:

         Indeed(,) We are rather perplexed why the Regional Trial Court, in arriving at its decision, discussed and ruled on issues or grounds which were never raised, assigned, or argued on by the Defendant-appellee in her appeal to the former. A careful reading of the Defendant-appellee’s appeal memorandum clearly shows that it only raised two (2) grounds, namely (a) alleged extrinsic fraud, (b) meritorious defenses based on nullity of the Deed of Sale Instrument. And yet the Trial Court, in its decision, ruled on issues not raised such as lack of cause of action and no prior demand to vacate having been made.

         Only errors assigned and properly argued on the brief and those necessarily related thereto, may be considered by the appellate court in resolving an appeal in a civil case. Based on said clear jurisprudence, the court a quo committed grave abuse of discretion amounting to lack of jurisdiction when it resolved Defendant-appellee’s appeal based on grounds or issues not raised before it, much less assigned by Defendant-appellee as an error.

         Not only that. It is settled that an issue which was not raised during the Trial in the court below would not be raised for the first time on appeal as to do so would be offensive to the basic rules of fair play, justice and due process (Victorias Milling Co., Inc. vs. CA, 333 SCRA 663). We can therefore appreciate Plaintiffs-appellants’ dismay caused by the Regional Trial Court’s blatant disregard of a basic and fundamental right to due process.^[10][10]

The petitioner disagrees with the CA and contends that the RTC as an appellate court could rule on the failure of the complaint to state a cause of action and the lack of demand to vacate even if not assigned in the appeal.

We concur with the petitioner’s contention.

The CA might have been correct had the appeal been a first appeal from the RTC to the CA or another proper superior court, in which instance Section 8 of Rule 51, which applies to appeals from the RTC to the CA, imposes the express limitation of the review to only those specified in the assignment of errors or closely related to or dependent on an assigned error and properly argued in the appellant’s brief, viz:

Section 8. Questions that may be decided. – No error which does not affect the jurisdiction over the subject matter or the validity of the judgment appealed from or the proceeding therein will be considered unless stated in the assignment of errors, or closely related to or dependent on an assigned error and properly argued in the brief, save as the court may pass upon plain errors and clerical errors.

Butthe petitioner’s appeal herein, being taken from the decision of the MTCC to the RTC, was governed by a different rule, specifically Section 18 of Rule 70 of the Rules of Court, to wit:

Section 18. xxx

xxx

The judgment or final order shall be appealable to the appropriate Regional Trial Court which shall decide the same on the basis of the entire record of the proceedings had in the court of origin and such memoranda and/or briefs as may be submitted by the parties or required by the Regional Trial Court. (7a)

As such,the RTC, in exercising appellate jurisdiction,was not limited to the errors assigned in the petitioner’s appeal memorandum, but could decide on the basis of the entire record of the proceedings had in the trial court and such memoranda and/or briefs as may be submitted by the parties or required by the RTC.

The difference between the procedures for deciding on review is traceable to Section 22 of Batas PambansaBlg. 129,^[11][11]which provides:

Section 22. Appellate Jurisdiction. – Regional Trial Courts shall exercise appellate jurisdiction over all cases decided by Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts in their respective territorial jurisdictions.Such cases shall be decided on the basis of the entire record of the proceedings had in the court of origin [and] such memoranda and/or briefs as may be submitted by the parties or required by the Regional Trial Courts. The decision of the Regional Trial Courts in such cases shall be appealable by petition for review to the Court of Appeals which may give it due course only when the petition shows prima facie that the lower court has committed an error of fact or law that will warrant a reversal or modification of the decision or judgment sought to be reviewed.^[12][12]

As its compliance with the requirement of Section 36 of Batas PambansaBlg. 129to “adopt special rules or procedures applicable to such cases in order to achieve an expeditious and inexpensive determination thereof without regard to technical rules,” the Court promulgated the 1991 Revised Rules on Summary Procedure, whereby it institutionalized the summary procedure for all the first level courts. Section 21 of the 1991 Revised Rules on Summary Procedurespecifically stated:

Section 21. Appeal. – Thejudgment or final order shall be appealable to the appropriate Regional Trial Court which shall decide the same in accordance with Section 22 of Batas PambansaBlg. 129. The decision of the Regional Trial Court in civil cases governed by this Rule, including forcible entry and unlawful detainer shall be immediately executory, without prejudice to a further appeal that may be taken therefrom. Section 10 of Rule 70 shall be deemed repealed.

Later on, the Court promulgated the 1997 Rules of Civil Procedure, effective on July 1, 1997, and incorporated in Section 7 of Rule 40 thereof the directive to the RTC to decide appealed cases“on the basis of the entire record of the proceedings had in the court of origin and such memoranda as are filed,”viz:

Section 7. Procedure in the Regional Trial Court. –

(a) Upon receipt of the complete record or the record on appeal, the clerk of court of the Regional Trial Court shall notify the parties of such fact.

(b) Within fifteen (15) days from such notice, it shall be the duty of the appellant to submit a memorandum which shall briefly discuss the errors imputed to the lower court, a copy of which shall be furnished by him to the adverse party. Within fifteen (15) days from receipt of the appellant’s memorandum, the appellee may file his memorandum. Failure of the appellant to file a memorandum shall be a ground for dismissal of the appeal.

(c) Upon the filing of the memorandum of the appellee, or the expiration of the period to do so, the case shall be considered submitted for decision. The Regional Trial Court shall decide the case on the basis of the entire record of the proceedings had in the court of origin and such memoranda as are filed. (n)

As a result, the RTC presently decides all appeals from the MTC based on the entire record of the proceedings had in the court of origin and such memoranda or briefs as are filed in the RTC.

Yet, even without the differentiation in the procedures of deciding appeals, the limitation of the review to only the errors assigned and properly argued in the appeal brief or memorandum and the errors necessarily related to such assigned error sought not to have obstructed the CA from resolving the unassigned issues by virtue of their coming under one or several of the following recognized exceptions to the limitation, namely:

(a) When the question affects jurisdiction over the subject matter;

(b) Matters that are evidently plain or clerical errors within contemplation of law;

(c) Matters whose consideration is necessary in arriving at a just decision and complete resolution of the case or in serving the interests of justice or avoiding dispensing piecemeal justice;

(d) Matters raised in the trial court and are of record having some bearing on the issue submitted that the parties failed to raise or that the lower court ignored;

(e) Matters closely related to an error assigned; and

(f) Matters upon which the determination of a question properly assigned is dependent.^[13][13]

Consequently, the CA improperly disallowed the consideration and resolution of the two errors despite their being: (a)necessary in arriving at a just decision and acomplete resolution of the case; and (b) matters of record having some bearing on the issues submitted that the lower court ignored.

B.

CA correctly delved into and determined

whether or not complaint stated a cause of action

The RTC opined that the complaint failed to state a cause of action because the evidence showed that there was no demand to vacate made upon the petitioner.

The CA disagreed, observing in its appealed decision:

         But what is worse is that a careful reading of Plaintiffs-appellants’ Complaint would readily reveal that they have sufficiently established (sic) a cause of action against Defendant-appellee. It is undisputed that as alleged in the complaint and testified to by Plaintiffs-appellants, a demand to vacate was made before the action for unlawful detainer was instituted.

         A complaint for unlawful detainer is sufficient if it alleges that the withholding of possession or the refusal is unlawful without necessarily employing the terminology of the law (Jimenez vs. Patricia, Inc., 340 SCRA 525). In the case at bench, par. 4 of the Complaint alleges, thus:

      “4. After a period of one (1) year living in the aforementioned house, Plaintiff demanded upon defendant to vacate but she failed and refused;”

         From the foregoing allegation, it cannot be disputed that a demand to vacate has not only been made but that the same was alleged in the complaint. How the Regional Trial Court came to the questionable conclusion that Plaintiffs-appellants had no cause of action is beyond Us.^[14][14]

We concur with the CA.

A complaint sufficiently alleges a cause of action for unlawful detainer if it states the following:

(a)Initially, the possession of the property by the defendant was by contract with or by tolerance of the plaintiff;

(b)Eventually, such possession became illegal upon notice by the plaintiff to the defendant about the termination of the latter’s right of possession;

(c)Thereafter, the defendant remained in possession of the property and deprived the plaintiff of its enjoyment; and

(d)Within one year from the making of the last demand to vacate the propertyon the defendant, the plaintiff instituted the complaint for ejectment.^[15][15]

In resolving whether the complaint states a cause of action or not, only the facts alleged in the complaint are considered.  The test is whether the court can render a valid judgment on the complaint based on the facts alleged and the prayer asked for.^[16][16] Only ultimate facts, not legal conclusions or evidentiary facts, are considered for purposes of applying the test.^[17][17]

To resolve the issue, therefore, a look at the respondents’ complaint is helpful:

2. On September 10, 1997, defendant sold to plaintiffs a residential land located in Sabang, Danao City, covered by Tax Dec.0312417 RB with an area of 400 square meters, including a residential house where defendant was then living covered by Tax Dec. 0312417 RB, a copy of the deed of absolute [sale] of these properties is hereto attached as Annex “A”;

3. After the sale, defendant requested to be allowed to live in the house which plaintiff granted on reliance of defendant’s promise to vacate as soon as she would be able to find a new residence;

4. After a period of one (1) year living in the aforementioned house, plaintiffs demanded upon defendant to vacate but she failed or refused.

5. Plaintiffs sought the aid of the barangay Lupon of Sabang, Danao City for arbitration but no settlement was reached as shown by a certification to file action hereto attached as Annex “B”;

6. Plaintiffs were compelled to file this action and hire counsel for P10,000 by way of attorney’s fee;

7. Defendant agreed to pay plaintiffs a monthly rental of P5,000 for the period of time that the former continued to live in the said house in question.

WHEREFORE, it is respectfully prayed of this Honorable Court to render judgment ordering the defendant to vacate the properties in question, ordering the defendant to pay plaintiffs attorney’s fees in the sum of P10,000, ordering the defendant to pay the plaintiffs a monthly rental of P5,000 starting in October 1997, until the time that defendant vacates the properties in question. Plaintiffs pray for such other refiefs consistent with justice and equity.^[18][18]

Based on its allegations, the complaint sufficiently stated a cause of action for unlawful detainer. Firstly, it averred that the petitioner possessed the property by the mere tolerance of the respondents. Secondly, the respondents demanded that the petitioner vacate the property, thereby rendering her possession illegal. Thirdly,she remained in possession of the property despite the demand to vacate. And, fourthly, the respondents instituted the complaint onMarch 10, 1999,which was well within a year after the demand to vacate was made around September of 1998 or later.

Yet, even as we rule that the respondents’ complaint stated a cause of action, we must find and hold that both the RTC and the CA erroneously appreciated the real issue to be about the complaint’s failure to state a cause of action. It certainly was not so, but the respondents’ lack of cause of action. Their erroneous appreciation expectedly prevented the correct resolution of the action.

Failure to state a cause of action and lack of cause of action are really different from each other. On the one hand, failure to state a cause of action refers to the insufficiency of the pleading, and is a ground for dismissal under Rule 16 of the Rules of Court. On the other hand, lack of cause action refers to a situation where the evidence does not prove the cause of action alleged in the pleading. Justice Regalado, a recognized commentator on remedial law, has explained the distinction:^[19][19]

xxx What is contemplated, therefore, is a failure to state a cause of action which is provided in Sec. 1(g) of Rule 16. This is a matter of insufficiency of the pleading. Sec. 5 of Rule 10, which was also included as the last mode for raising the issue to the court, refers to the situation where the evidence does not prove a cause of action. This is, therefore, a matter of insufficiency of evidence. Failure to state a cause of action is different from failure to prove a cause of action. The remedy in the first is to move for dismissal of the pleading, while the remedy in the second is to demur to the evidence, hence reference to Sec. 5 of Rule 10 has been eliminated in this section. The procedure would consequently be to require the pleading to state a cause of action, by timely objection to its deficiency; or, at the trial, to file a demurrer to evidence, if such motion is warranted.

A complaint states a cause of action if it avers the existence of the three essential elements of a cause of action, namely:

(a) The legal right of the plaintiff;

(b) The correlative obligation of the defendant; and

(c) The act or omission of the defendant in violation of said legal right. 

If the allegations of the complaint do not aver the concurrence of these elements, the complaint becomes vulnerable to a motion to dismiss on the ground of failure to state a cause of action. Evidently, it is not the lack or absence of a cause of action that is a ground for the dismissal of the complaint but the fact that the complaint states no cause of action. Failure to state a cause of action may be raised at the earliest stages of an action through a motion to dismiss, but lack of cause of action may be raised at any time after the questions of fact have been resolved on the basis of the stipulations, admissions, or evidence presented.^[20][20]

Having found that neither Exhibit C nor Exhibit E was a proper demand to vacate,^[21][21] considering that Exhibit C (the respondents’ letter dated February 11, 1998)demanded the payment of P1,101,089.90, and Exhibit E (theirletter dated January 21, 1999) demandedthe payment of P1,600,000.00, the RTC concluded that the demand alleged in the complaint did not constitute a demand to pay rent and to vacate the premises necessary in an action for unlawful detainer. It was this conclusion that caused the RTC to confuse the defect as failure of the complaint to state a cause of action for unlawful detainer.

The RTC erred even in that regard.

To begin with, it was undeniable that Exhibit D (the respondents’ letter dated April 28, 1998) constituted the demand to vacate that validly supported their action for unlawful detainer, because of its unmistakable tenor as a demand to vacate, which the following portion indicates:^[22][22]

This is to give notice that since the mortgage to your property has long expired and that since the property is already in my name, I will be taking over the occupancy of said property two (2) months from date of this letter.

Exhibit D, despite not explicitly using the wordvacate, relayed to the petitioner the respondents’ desire to take over the possession of the property by giving her no alternative exceptto vacate.The word vacate, according to Golden Gate Realty Corporation v. Intermediate Appellate Court,^[23][23]is not a talismanic word that must be employed in all notices to vacate.The tenantsin Golden Gate Realty Corporationhad defaulted in the payment of rents, leading theirlessorto notify them to pay with a warning that a case of ejectment would be filed against themshould they not do so. The Court held that the lessor had thereby given strong notice that “you either pay your unpaid rentals or I will file a court case to have you thrown out of my property,”for therewas no other interpretation of the import of the notice due to the alternatives being clear cut, in that the tenants must pay rentals that had been fixed and had become payable in the past, failing in which they must move out.^[24][24]

Also, the demand not being to pay rent and to vacate did not render the cause of action deficient. Based on the complaint, the petitioner’s possession was allegedly based on the respondents’ tolerance, not on any contract between them. Hence, thedemand to vacate sufficed.

C.

Ejectment was not proper due

to defense of ownership being established

The respondents’ cause of action for unlawful detainer was based on their supposed right to possession resulting from their having acquired it through sale.

The RTCdismissed the complaint based on its following findings, to wit:

In the case at bench, there is conflict between the allegation of the complaint and the document attached thereto.

Simply stated, plaintiff alleged that she bought the house of the defendant for P100,000.00 onSeptember 10, 1997 as stated in an alleged Deed of Absolute Sale marked as Exhibit “A” to the complaint. Insofar as plaintiff is concerned, the best evidence is the said Deed of Absolute Sale.

The Court is surprised why in plaintiff’s letter dated February 11, 1998, marked as Exhibit “C” and attached to the same complaint, she demanded from the defendant the whooping sum of P1,101,089.90. It must be remembered that this letter was written five (5) months after the deed of absolute sale was executed.

The same letter (Exhibit “C”) is not a letter of demand as contemplated by law and jurisprudence. The plaintiff simply said that she will appreciate payment per notarized document. There is no explanation what this document is.

Plaintiff’s letter datedApril 28, 1998(Exhibit “D”) contradicts her allegation that she purchased the house and lot mentioned in the complaint. Exhibit “D”, which is part of the pleading and a judicial admission clearly shows that the house and lot of the defendant was not sold but mortgaged.

Again, for purposes of emphasis and clarity, a portion of the letter (Exhibit “D”) reads:

‘This is to give notice that since the mortgage to your property has long expired and that since the property is already in my name, I will be taking over the occupancy of said property two (2) months from date of this letter.’

x xxx

Exhibit “E”, which is a letter dated January 21, 1999, shows the real transaction between the parties in their case. To reiterate, the consideration in the deed of sale (Exhibit “A”) is P100,000.00 but in their letter (Exhibit “E”) she is already demanding the sum of P1,600,000.00 because somebody was going to buy it for P2,000,000.00.

There are indications that point out that the real transaction between the parties is one of equitable mortgage and not sale.^[25][25]

Despite holding herein that the respondents’ demand to vacate sufficed, we uphold the result of the RTC decision in favor of the petitioner. This we do,because therespondents’ Exhibit Cand Exhibit E, by demandingpayment from the petitioner, respectively,of P1,101,089.90 and P1,600,000.00, revealedthe true nature of the transaction involving the property in question as one of equitable mortgage, not a sale.

Our upholding of the result reached by the RTC rests on the following circumstancesthat tended to show that the petitioner had not really sold the property to the respondents, contrary to the latter’s averments, namely:

(a)The petitioner, as the vendor, was paid the amount of only P100,000.00,^[26][26] a price too inadequate in comparison with the sum of P1,600,000.00 demanded in Exhibit E;^[27][27]

(b) The petitioner retained possession of the property despite the supposed sale; and

(c) The deed of sale wasexecuted as a result or by reason of the loan the respondents extended to the petitioner,because they still allowed the petitioner to “redeem” the property by paying her obligation under the loan.^[28][28]

Submissions of the petitioner further supported the findings of the RTCon the equitable mortgage. Firstly, there was the earlier dated instrument (deed of pactode retro)involving the same property, albeit the consideration was only P480,000.00, executed between the petitioner as vendor a retro and the respondent Renato Zamora as vendee a retro.^[29][29] Secondly, there were two receipts for the payments the petitioner had made to the respondentstotaling P300,000.00.^[30][30] And, thirdly, the former secretary of respondent Melba Zamora executed an affidavit acknowledging that the petitioner had already paid a total of P500,000.00 to the respondents.^[31][31] All these confirmed the petitioner’s claim that she remained the owner of the property and was still entitled to its possession.

Article 1602 of the Civil Codeenumerates the instances when a contract, regardless of its nomenclature, may be presumed to be an equitable mortgage, namely:

(a) When the price of a sale with right to repurchase is unusually inadequate;

(b) When the vendor remains in possession as lessee or otherwise;

(c) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed;

(d)When the purchaser retains for himself a part of the purchase price;

(e)When the vendor binds himself to pay the taxes on the thing sold; and,

(f) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation.

The circumstances earlier mentioned were, indeed, badges of an equitable mortgage within the context ofArticle 1602 of the Civil Code.

Nonetheless, the findingsfavorable to the petitioner’s ownership are neitherfinally determinative of the title in the property, nor conclusive in any other proceeding where ownership of the property involved herein may be more fittingly adjudicated.Verily, where the cause of action in an ejectment suit is based on ownership of the property, the defense that the defendantretainedtitle or ownership is a proper subject for determination by the MTC but only for the purpose of adjudicating the rightful possessor of the property.^[32][32]This is based on Rule 70 of the Rules of Court, viz:

Section 16. Resolving defense of ownership. — When the defendant raises the defense of ownership in his pleadings and the question of possession cannot be resolved without deciding the issue of ownership, the issue of ownership shall be resolved only to determine the issue of possession.(4a)

D.

MTC committed procedural lapses

that must be noted and corrected

The Court seizes theopportunity to note and to correctseveralnoticeable procedural lapses on the part of the MTCC, to avoid the impression that the Court condones or tolerates the lapses.

The first lapse wasthe MTCC’s granting of the respondents’ motion to declare the petitioner in default following her failure to file an answer. The proper procedurewas not for the plaintiffs to move for the declaration in default of the defendant who failed to file the answer. Such a motion to declare in default has been expressly prohibited under Section 13, Rule 70 of  the Rules of Court.^[33][33]Instead, the trial court, either motuproprio or on motion of the plaintiff, should render judgment as the facts alleged in the complaint might warrant.^[34][34]In other words, the defendant’s failure to file an answer under Rule 70 of the Rules of Courtmight result to a judgment by default, not to a declaration of default.

The second lapse wasthe MTCC’sreception of the oral testimony of respondent Melba Zamora. Rule 70 of the Rules of Courthas envisioned the submission only of affidavits of the witnesses (not oral testimony) and other proofs on the factual issues defined in the order issued within five days from the termination of the preliminary conference;^[35][35]and has permittedthe trial court, should it find the need to clarify material facts, to thereafterissue an order during the 30-day period from submission of the affidavits and other proofs specifying the matters to be clarified, and requiring the parties to submit affidavits or other evidence upon such matters within ten days from receipt of the order.^[36][36]

The procedural lapses committed in this case are beyond comprehension.The MTCC judge could not have been unfamiliar with the prevailing procedure, considering that therevised version of Rule 70, although taking effect only on July 1, 1997,was derived from the 1991 Revised Rule on Summary Procedure, in effect since November 15, 1991. It was not likely, therefore, that the MTCC judge committed the lapses out of his unfamiliarity with the relevant rule. We discern thatthe cause of the lapses was his lack of enthusiasm in implementingcorrect procedures in this case. If that was the true reason, the Court can only be alarmed and concerned, for a judge should not lack enthusiasm in applying the rules of procedure lest the worthy objectives of their promulgation be unwarrantedly sacrificed and brushed aside. The MTCC judge should not forget that the rules of procedure were always meant to be implemented deliberately, not casually, and their non-compliance should only be excused in the higher interest of the administration of justice.

It is timely, therefore, to remind all MTC judges to display full and enthusiastic compliance with all the rules of procedure, especially those intended for expediting proceedings.

WHEREFORE,we grant the petition for review on certiorari; set aside the decision promulgated on July 3, 2002 by the Court of Appeals; and dismiss the complaint for unlawful detainer for lack of a cause of action.

The respondents shall pay the costs of suit.

          SO  ORDERED.

                                                                   LUCAS P. BERSAMIN

                                                                   Associate Justice

WE CONCUR:

CONCHITA CARPIO MORALES

Associate Justice

Chairperson

ARTURO D. BRION                MARTIN S. VILLARAMA, JR.

        Associate Justice                                        Associate Justice

MARIA LOURDES P. A. SERENO

Associate Justice

A T T E S T A T I O N

          I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                         CONCHITA CARPIO MORALES

                                                                   Associate Justice

                                                                   Chairperson

C E R T I F I C A T I O N

          Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                                          RENATO C. CORONA

                                                                    Chief Justice