Development Bank of the Philippines v. Formoso
REITERATIONFacts
The Antecedents: Spouses Saturnino David and Josefa Reyes obtained a loan of P45,000.00 from the Rehabilitation Finance Corporation (RFC), now the Development Bank of the Philippines (DBP), secured by a first mortgage on Hacienda Parson, a large parcel of land. Due to the spouses' failure to pay amortizations, the DBP initiated extra-judicial foreclosure proceedings under Act 3135, as amended, scheduling a public auction for November 19, 1968. Procedural History: On November 18, 1968, agricultural lessees of the land, namely Rosauro Galuega, Domingo Cortez, Bonifacio Ramos, Benigno Casapao, and Hermogenes Ventura, filed a petition for prohibition with preliminary injunction before the Court of Agrarian Relations (CAR), Branch II, Guimba, Nueva Ecija, presided over by Judge Mariano Formoso. They claimed a preferential right to buy the land under the Agricultural Land Reform Act. Judge Formoso issued a restraining order on the same date, prohibiting the foreclosure sale. The DBP filed a motion to dismiss, arguing lack of jurisdiction and cause of action, which was denied by Judge Formoso on February 13, 1969. A motion for reconsideration was also denied on March 17, 1969. The Petition: The Manager of the DBP and the Provincial Sheriff of Nueva Ecija filed the present petition for certiorari with a prayer for preliminary injunction before the Supreme Court. They sought to restrain the respondent judge from continuing with the CAR case and to set aside his orders, alleging that the judge acted without jurisdiction and/or with grave abuse of discretion.
Issue(s)
Whether the Court of Agrarian Relations (CAR) had jurisdiction to restrain the extra-judicial foreclosure sale of a tenanted landholding. Whether the orders issued by the respondent judge were valid given the alleged lack of jurisdiction.
Ruling
The Supreme Court set aside the orders of the respondent judge for lack of jurisdiction and returned the case to the Court of Agrarian Relations for further proceedings, aiming to protect the tenure and rights of the private respondents under applicable agrarian reform measures.
Ratio Decidendi
On Issue 1: The Court held that the Court of Agrarian Relations (CAR), as constituted under Republic Act No. 1267, possessed original and exclusive jurisdiction only over matters, controversies, disputes, or money claims arising from agrarian relations. In this case, there was no agrarian relationship between the petitioner DBP and the private respondents, the tenants. The power of attorney in the mortgage contract merely authorized DBP to sell the landholding in case of foreclosure to apply the proceeds to the loan, but it did not confer ownership or create an agrarian relationship. Therefore, the CAR judge acted without jurisdiction when he issued the restraining order and proceeded with the case, as the subject matter was a mortgage foreclosure, not an agrarian dispute. On Issue 2: The orders issued by the respondent judge on November 18, 1968, February 13, 1969, and March 17, 1969, were declared void for having been issued without jurisdiction. The Court acknowledged that subsequent developments, namely Presidential Decree No. 27 (Emancipation of Tenants) and Presidential Decree No. 946 (Reorganizing the CARs), expanded the jurisdiction of the CAR to include mortgage foreclosure of tenanted agricultural lands. However, PD 946, which became effective on June 17, 1976, was not made retroactive, and thus could not validate the orders issued in 1968 and 1969 when the CAR was still without such jurisdiction. The Court's decision to return the case to the CAR was based on the current expanded jurisdiction under PD 946, to ensure the protection of the tenants' rights.
Main Doctrine
The Court of Agrarian Relations (CAR), as a court of special and limited jurisdiction under Republic Act No. 1267, as amended, possessed original and exclusive jurisdiction solely over cases and controversies arising from agrarian relations. It lacked jurisdiction over mortgage foreclosure proceedings unless these disputes were intrinsically linked to agrarian relations. While subsequent legislation, specifically Presidential Decree No. 946, expanded the CAR's jurisdiction to encompass mortgage foreclosures of tenanted agricultural lands, this expansion was prospective and did not retroactively validate orders issued when the court was demonstrably without such authority.