SIXTH DIVISION

[CA-G.R. SP No. 39006.  January 14, 1999.]

DEPARTMENT OF AGRARIAN REFORM, as represented by DIR. PERCIVAL C. DALUGDUG, petitioner, vs. HONORABLE PRESIDING JUDGE, Branch 41, Fifth Judicial Region, Daet, Camarines Norte, MUNICIPALITY OF DAET, as represented by Mayor Elmer Panotes, REGISTER OF DEEDS, as represented by FRANCISCO OBUSAN III, MUNICIPAL ASSESSOR'S OFFICE, LI SENG GIAP AND CO. INC., as represented by JOHN T. LEE, respondents.

D E C I S I O N

GARCIA, J p:

            In this original action for annulment of judgment, petitioner Department of Agrarian Reform (DAR), seeks the nullification and annulment of the decision dated August 30, 1994 of the Regional Trial Court at Daet, Camarines, Norte, Branch 41, approving the compromise agreement submitted by the parties in Civil Case No. 6371, a proceeding for eminent domain thereat filed by the Municipality of Daet against Li Seng Giap and Co. Inc.

            The facts:

            On June 4, 1992, Municipal Agrarian Reform Officer Jinny P. Glorioso of the Department of Agrarian Reform at Daet, Camarines Norte, sent a notice of coverage to respondent Li Seng Giap and Co. Inc. (LI SENG GIAP, for short), informing the latter that the DAR has placed under its compulsory acquisition scheme pursuant to Section 7 of the Comprehensive Agrarian Reform Law (Rep. Act. No. 6657), the corporation's two (2) parcels of land situated at Alawihao, Daet, Camarines Norte and respectively covered by TCT No. 117 and Assessment of Real Property (ARP) No. 009-0155, with a combined area of 26.0965 hectares (Annex "E", Petition).

            At about that time, however, the Municipality of Daet was already seriously eyeing the aforementioned parcels of land for the purpose of converting the same into a resettlement project to alleviate its serious housing problem. So it is that on August 4, 1993, in pursuit of the Municipality's resolve to curb this growing social malaise, the Sangguniang Bayan of Daet, in session assembled, passed Resolution No. 198 approving Municipal Ordinance No. 09 entitled "AN ORDINANCE AUTHORIZING THE MUNICIPAL MAYOR OF DAET, CAMARINES NORTE, TO INITIATE THE EXPROPRIATION OF THE LANDS OWNED BY LI SENG GIAP CO., INC., LOCATED AT BARANGAY ALAWIHAO, DAET, CAMARINES NORTE . . . TO BE USED AS RESETTLEMENT AREA FOR LANDLESS RESIDENTS OF DAET (URBAN POOR)" (Annex "B" to Answer With Motion To Dismiss And Counterclaim, Rollo, pp. 55-58).

            Thereafter, or on August 16, 1993, the Municipality's Planning and Development Coordinator addressed a communication to then Secretary Rafael Alunan III of the Department of Interior and Local Government (DILG), informing the latter that pursuant to DILG Circular No. 93-03, entitled "Identification of Lands and Sites for Socialized Housing", the Municipality has already identified the aforesaid LI SENG GIAP properties as suitable for socialized housing (Annex "A", Answer with Motion to Dismiss and Counterclaim, Rollo, p. 54).

            On August 31, 1993 the Municipal Mayor wrote LI SENG GIAP advising tine latter of the Municipality's intention to utilize the subject landholding as a "resettlement area" for its "landless residents" and offering to buy the same in an amount equivalent to its current and fair market value (Annex "C", Answer with Motion to Dismiss and Counterclaim, Rollo, p. 58). Obviously disinterested with the offer, the corporation did not even bother to make any reply.

            Hence, on October 27, 1993, in the Regional Trial Court at Daet, Camarines Norte, a complaint for eminent domain was filed by the Municipality, represented by its mayor, against respondent LI SENG GIAP. Docketed as Civil Case No. 6371, the complaint was eventually raffled to Branch 41 of the court (Annex ''D", Answer with Motion to Dismiss and Counterclaim, Rollo, pp. 59-62).

            On August 30, 1994, the parties to Civil Case No. 6371 entered into a COMPROMISE AGREEMENT whereunder LI SENG GIAP agreed to cede ownership of the subject landholdings to the Municipality for a total consideration of P260,965.00 (Annex "A", Petition). Under the same agreement, the Municipality "undertakes to reclassify the subject properties into residential lands pursuant to Section 20 of Republic Act No. 7160" (Local Government Code of 1991), about which the parties made it clear that the circumstance that the same properties had been made subject of agrarian reform "should not stand in the way of progress and the human settlement needs of the many applicants/beneficiaries of the over 26 hectares resettlement area".

            On the same date — August 30, 1994 — the parties submitted the compromise agreement to the respondent court which, in a decision of even date, approved the agreement and accordingly rendered judgment on the basis thereof, thus:

            "Finding the said compromise agreement to be voluntarily executed and without any semblance of deceit or misrepresentation, the same being not contrary to law, public policy or morals, the aforesaid compromise agreement is hereby approved and the parties are enjoined to religiously comply with the aforecited compromise agreement which, for all intent and purposes, shall have the full force and effect between the herein parties and be deemed the decision in this case.

            SO ORDERED" (Annex "B", Petition).

            Conformably with the terms of the aforesaid compromise agreement, a Deed of Absolute Sale was subsequently executed by and between the Municipality, as the Vendee, represented by Mayor Elmer Panotes, and respondent LI SENG GIAP, as the Vendor-Owner, represented by its Vice-President and General Manager John T. Lee (Annex "C", Petition).

            On November 22, 1994, the Sanggunian Bayan of Daet enacted Resolution No. 330 authorizing the Municipal Mayor to apply with the Housing and Land Use Regulatory Board (HLURB) for an authority to subdivide the lands in question and to offer the same for sale to the intended beneficiaries (Annex "T", Answer with Motion to Dismiss with Counterclaim). On the same date, the Sangguniang Bayan likewise passed Resolution No. 331 authorizing Mayor Elmer Panotes to enter into contracts with two (2) tenants in the said landholdings, namely, Blas Magana and Ernesto Moron, with the end in view that the two would relinquish and surrender to the Municipality the areas respectively tenanted by them (Annex "F", Answer with Motion to Dismiss with Counterclaim).

            On December 2, 1994, Magana and Moron executed their respective affidavits entitled "Kusang-Loob na Pagsusuko ng Karapatan sa Lupang Sinasaka" whereunder they surrendered and relinquished in favor of the Municipality all their rights and interests over the subject landholdings in exchange for small portions thereof which were ceded to them by the latter.

            Thereafter, the entire remaining lands were assessed in the name of the Municipality in whose name was issued the corresponding Assessments of Real Property (ARPs). With the land now in its name, the Municipality then proceeded to re-classify the same into residential lands.

            Pursuing the project, the Sanggunian Bayan of Daet subsequently requested for subsidy contribution from the Office of the President — National Housing Authority (NHA) for the development of the area into the so-called "Daet Resettlement Project". Responding thereto, the NHA allotted the amount of P16,428,000.00 as its subsidy contribution to the Municipality, in connection with which a Memorandum of Agreement was entered into by and between NHA and the Municipality expressly for purposes of establishing "a resettlement project in the Municipality of Daet to accommodate families affected by the infrastructure projects of the national/local government, and those residing in danger areas as well as other squatter families willing to be relocated permanently" (Annex "U", Answer with Motion to Dismiss with Counterclaim).

            It was against the foregoing backdrop of events when, on November 6, 1995, herein petitioner Department of Agrarian Reform filed with this Court the present action for annulment of judgment, therein praying that the decision dated August 30, 1994 of the respondent court approving the compromise agreement submitted by the parties in Civil Case No. 6371 and rendering judgment on the basis thereof be declared null and void. It is further prayed that the respondents Municipality and LI SENG GIAP be directed to surrender the subject lands to the DAR for "Comprehensive Agrarian Reform Program coverage", it being alleged therein —

"7.     That respondents are fully aware of the coverage under CARP of the subject property . . .:

8.      That respondents, despite knowledge of coverage under CARP of the subject property, capriciously and in open disregard of agrarian laws, acquired said parcels of agricultural land and converted the same into residential land;

9.      That the subject agricultural land, upon Notice of Coverage to the landowner can no longer be the object of any other transaction".

            Easily, the question that immediately comes to mind, but which, surprisingly, was not raised by any of the private respondents herein, is whether or not DAR, which is admittedly not a party to Civil Case No. 6371, has the legal standing in this Court to ask for the annulment of the judgment rendered in that case, a remedy permissible only on two (2) stated grounds, to wit: lack of jurisdiction and extrinsic or collateral fraud (Rule 47, Sec. 2, 1997 Rules of Civil Procedure; Lapulapu Development & Housing Corporation vs. Risos, 261 SCRA 517, 524 [1996]; Santos vs. Court of Appeals, 224 SCRA 673, 681 [1993]).

            Going by the quoted allegations, supra, of the petition filed in this case, it is evident that DAR anchors its present recourse on ground of extrinsic fraud. As understood in law, however, extrinsic fraud refers to "any fraudulent act of the prevailing party in the litigation which is committed outside of the trial of the case, whereby the defeated party has been prevented from exhibiting fully his side of the case, by fraud or deception practiced on him by his opponent" (Gerardo vs. De la Peña, 192 SCRA 691, 697 [1990), and cases cited; Santos vs. Court of Appeals, supra, p. 681; Emphasis supplied).

            Given the circumstance that, as aforesaid, petitioner is not even a party to Civil Case No. 6371, much less a "defeated party" therein, and, therefore, none of the herein private respondents may be said to be petitioner's "opponent" in the same case, We seriously doubt if petitioner has the requisite personality to assail and ask for the annulment of the judgment by compromise rendered by the respondent court in the main action below. This, on top of the failure of the petition to allege with particularity the circumstances constituting what could have been the collateral or extrinsic fraud committed by any or both of the herein private respondents.

            In any event, even if We were to brush aside the foregoing procedural issue and proceed to "hold the bull by its horn", so to speak, by addressing what, in Our view, is the forefront question herein, namely, whether or not the Municipality of Daet has the power to expropriate and reclassify agricultural lands already given a notice of coverage for compulsory acquisition by the Department of Agrarian Reform, still the petitioner's cause must fall.

            In essence, it is the DAR's posture that an agricultural land, upon the landowner's receipt of the notice of coverage from the DAR informing him that his landholding has been placed under the coverage of Republic Act No. 6657, otherwise known as the Comprehensive Agrarian Reform Law, "can no longer be the object of any other transaction" (Petition, p. 3).

            On the other hand, the respondent Municipality argues that: (1) it was merely performing its duties and functions as specifically provided for in Republic Act No. 7160, otherwise known as the Local Government Code, when it pursued the expropriation proceedings against the subject landholdings; (2) the power of expropriation lodged in local governments is superior to that of the DAR; and (3) the petition is already moot and academic since the resettlement project is almost an accomplished work at the time it was filed.

            Section 19 of the Local Government Code of 1991 expressly vests on local governments the power of eminent domain, thus:

            "SEC. 19.      Eminent Domain. — A local government unit may through its chief executive and acting pursuant to an ordinance, exercise the power of eminent domain for public use, or purpose, or welfare for the benefit of the poor and the landless, upon payment of just compensation, pursuant to the provisions of the Constitution and pertinent laws: Provided, however, That the power of eminent domain may not be exercised unless a valid and definite offer has been previously made to the owner, and such offer was not accepted; Provided further, That the local government may immediately take possession of the property upon the filing of the expropriation proceedings and upon making a deposit with the proper court of at least fifteen percent (15%) of the fair market value of the property based on the current tax declaration of the property to be expropriated: Provided, finally, That the amount to be paid for the expropriated property shall be determined by the proper court, based on the fair market value at the time of the taking of the property".

            As is always the case with the statutory grant of the power of eminent domain, the aforequoted provision only requires compliance with two (2) essential requisites for a valid exercise thereof, namely: (1) the public use or purpose of expropriation; and (2) the payment of just compensation.

            There can be no question at all that the respondent Municipality has more than adequately complied with the aforementioned requisites when it initiated expropriation proceedings against the property of respondent LI SENG GIAP. For one, it cannot be denied that the establishment of a resettlement project for the Municipality's landless residents is a legitimate public purpose. For another, respondent LI SENG GIAP itself admits receipt from the Municipality of the "just compensation" for its properties.

            In short, nothing could have stand on the way against the Municipality's smooth acquisition of the subject realties were it not for the fact that DAR had earlier expressed its intention to place the same realties under compulsory acquisition pursuant to the Comprehensive Agrarian Reform Law (Rep. Act No. 6657). The question that arises then is which of these two (2) government instrumentalities has the superior right over the property in question.

            Noticeably, Section 19, supra, of the Local Government Code (Rep. Act No. 7160), makes no mention of the DAR's role when local government units seek to expropriate or exercise their power of eminent domain over agricultural lands. We view this omission as an unqualified recognition by the legislature of the plenary power of local governments in expropriation proceedings even as regards agricultural land. True, municipal governments have no inherent power of eminent domain, as in fact they can exercise the power only when so expressly authorized by statute. It is equally true, however, that when much power is so granted, the power thus delegated is "complete within its limits". This, the High Court says so in Province of Camarines Sur vs. Court of Appeals, 222 SCRA 173, 179 [1993], where the same Court also made it unquestionably clear the superior nature of the local government's power to expropriate as against the power to distribute lands under the land reform program. We quote:

            "The Court of Appeals, following the recommendation of the Solicitor General, held that the Province of Camarines Sur must comply with the provision of Section 65 of the Comprehensive Agrarian Reform Law and must first secure the approval of the Department of Agrarian Reform of the plan to expropriate the lands of the San Joaquins.

            In Heirs of Juancho Ardana v. Reyes, 125 SCRA 220, petitioners raised the issue of whether the Philippine Tourism Authority can expropriate lands covered by the 'Operation Land Transfer' for use of a tourist resort complex. There was a finding that of the 282 hectares sought to be expropriated, only an area of 8,970 square meters or less than one hectare was affected by the land reform program and covered by emancipation patents issued by the Ministry of Agrarian Reform. While the Court said that there was 'no need under the facts of this petition to rule on whether the public purpose is superior or inferior to another purpose or engage in a balancing of competing public interest', it upheld the expropriation after noting that petitioners had failed to overcome the showing that the taking of 8,970 square meters formed part of the resort complex. A fair and reasonable reading of the decision is that this Court viewed the power of expropriation an superior to the power to distribute lands under the land reform program" (Emphasis supplied).

            For sure, in the very same case, the High Court even recognized the power of local government to reclassify agricultural lands for whatever purpose they find suitable without prior clearance from the DAR. Again, We quote from the Court's decision therein:

            "The rules on conversion of agricultural lands found in Section 4 (k) and 5(1) of Executive Order No. 129-A, Series of 1987, cannot be source of the authority of the Department of Agrarian Reform to determine the suitability of a parcel of agricultural land for the purpose to which it would be devoted by the expropriating authority. While those rules vest on the Department of Agrarian Reform the exclusive authority to approve or disapprove conversions of agricultural lands for residential, commercial or industrial uses, such authority is limited to the applications submitted by the land owners or tenant beneficiaries.

xxx                    xxx                    xxx

            To sustain the Court of Appeals would mean that the local government  units can no longer expropriate agricultural lands needed for construction of roads bridges schools, hospitals, etc., without first applying for conversion of the use of the lands with the Department of Agrarian Reform, because all of these projects would naturally involve a change in the land use. In effect, it would then be the Department to scrutinize whether the expropriation is for a public purpose or public use" (At pages 180-181; Emphasis supplied).

            Independent of the above is the hard reality that, as claimed by the respondent Municipality which was never traversed by the petitioner, the Daet Resettlement Project, as the area in question is now called, is almost complete at the moment. If anything else, this renders the present recourse moot and academic.

            WHEREFORE, the instant petition is hereby DISMISSED.

            No costs.

            SO ORDERED.

            Vasquez, Jr. and Regino, JJ., concur.