G.R. No.

127876 December 17, 1999

Hacienda Palico

ROXAS & CO., INC., petitioner,

vs.
THE HONORABLE COURT OF APPEALS, DEPARTMENT OF
AGRARIAN REFORM, SECRETARY OF AGRARIAN REFORM, DAR
REGIONAL DIRECTOR FOR REGION IV, MUNICIPAL AGRARIAN
REFORM OFFICER OF NASUGBU, BATANGAS and DEPARTMENT OF
AGRARIAN REFORM ADJUDICATION BOARD,respondents.

On September 29, 1989, respondent DAR, through respondent Municipal

Agrarian Reform Officer (MARO) of Nasugbu, Batangas, sent a notice entitled
"Invitation to Parties" to petitioner. The Invitation was addressed to "Jaime
Pimentel, Hda. Administrator, Hda. Palico." 3 Therein, the MARO invited
petitioner to a conference on October 6, 1989 at the DAR office in Nasugbu to
discuss the results of the DAR investigation of Hacienda Palico, which was
"scheduled for compulsory acquisition this year under the Comprehensive Agrarian
Reform Program." 4

This case involves three (3) haciendas in Nasugbu, Batangas owned by petitioner
and the validity of the acquisition of these haciendas by the government under
Republic Act No. 6657, the Comprehensive Agrarian Reform Law of 1988.
Petitioner Roxas & Co. is a domestic corporation and is the registered owner of
three haciendas, namely, Haciendas Palico, Banilad and Caylaway, all located in
the Municipality of Nasugbu, Batangas. Hacienda Palico is 1,024 hectares in
area and is registered under Transfer Certificate of Title (TCT) No. 985. This
land is covered by Tax Declaration Nos. 0465, 0466, 0468, 0470, 0234 and 0354.
Hacienda Banilad is 1,050 hectares in area, registered under TCT No. 924 and
covered by Tax Declaration Nos. 0236, 0237 and 0390. Hacienda Caylaway is
867.4571 hectares in area and is registered under TCT Nos. T-44662, T-44663, T44664 and T-44665.
The events of this case occurred during the incumbency of then President
Corazon C. Aquino. In February 1986, President Aquino issued Proclamation
No. 3 promulgating a Provisional Constitution. As head of the provisional
government, the President exercised legislative power "until a legislature is
elected and convened under a new Constitution." 1 In the exercise of this
legislative power, the President signed on July 22, 1987, Proclamation No. 131
instituting a Comprehensive Agrarian Reform Program and Executive Order No. 229
providing the mechanisms necessary to initially implement the program.
On July 27, 1987, the Congress of the Philippines formally convened and took
over legislative power from the President. 2 This Congress passed Republic Act
No. 6657, the Comprehensive Agrarian Reform Law (CARL) of 1988. The Act was
signed by the President on June 10, 1988 and took effect on June 15, 1988.
Before the law's effectivity, on May 6, 1988, petitioner filed with respondent
DAR a voluntary offer to sell Hacienda Caylaway pursuant to the provisions of
E.O. No. 229. Haciendas Palico and Banilad were later placed under compulsory
acquisition by respondent DAR in accordance with the CARL.

On October 25, 1989, the MARO completed three (3) Investigation Reports after
investigation and ocular inspection of the Hacienda. In the first Report, the
MARO found that 270 hectares under Tax Declaration Nos. 465, 466, 468 and
470 were "flat to undulating (0-8% slope)" and actually occupied and cultivated
by 34 tillers of sugarcane. 5 In the second Report, the MARO identified as "flat to
undulating" approximately 339 hectares under Tax Declaration No. 0234 which also
had several actual occupants and tillers of sugarcane; 6 while in the third Report, the
MARO found approximately 75 hectare under Tax Declaration No. 0354 as "flat to
undulating" with 33 actual occupants and tillers also of sugarcane. 7
On October 27, 1989, a "Summary Investigation Report" was submitted and
signed jointly by the MARO, representatives of the Barangay Agrarian Reform
Committee (BARC) and Land Bank of the Philippines (LBP), and by the
Provincial Agrarian Reform Officer (PARO). The Report recommended that
333.0800 hectares of Hacienda Palico be subject to compulsory acquisition at a
value of P6,807,622.20. 8 The following day, October 28, 1989, two (2) more
Summary Investigation Reports were submitted by the same officers and
representatives. They recommended that 270.0876 hectares and 75.3800 hectares be
placed under compulsory acquisition at a compensation of P8,109,739.00 and
P2,188,195.47, respectively. 9
On December 12, 1989, respondent DAR through then Department Secretary
Miriam D. Santiago sent a "Notice of Acquisition" to petitioner.
Petitioner was informed that 1,023.999 hectares of its land in Hacienda Palico
were subject to immediate acquisition and distribution by the government under
the CARL; that based on the DAR's valuation criteria, the government was
offering compensation of P3.4 million for 333.0800 hectares; that whether this
offer was to be accepted or rejected, petitioner was to inform the Bureau of Land
Acquisition and Distribution (BLAD) of the DAR; that in case of petitioner's
rejection or failure to reply within thirty days, respondent DAR shall conduct
summary administrative proceedings with notice to petitioner to determine just

compensation for the land; that if petitioner accepts respondent DAR's offer, or
upon deposit of the compensation with an accessible bank if it rejects the same,
the DAR shall take immediate possession of the land. 11
Almost two years later, on September 26, 1991, the DAR Regional Director sent
to the LBP Land Valuation Manager three (3) separate Memoranda entitled
"Request to Open Trust Account." Each Memoranda requested that a trust
account representing the valuation of three portions of Hacienda Palico be
opened in favor of the petitioner in view of the latter's rejection of its offered
value. 12
Meanwhile in a letter dated May 4, 1993, petitioner applied with the DAR for
conversion of Haciendas Palico and Banilad from agricultural to non-agricultural
lands under the provisions of the CARL. 13 On July 14, 1993, petitioner sent a letter
to the DAR Regional Director reiterating its request for conversion of the two
haciendas. 14
Despite petitioner's application for conversion, respondent DAR proceeded with
the acquisition of the two Haciendas. The LBP trust accounts as compensation
for Hacienda Palico were replaced by respondent DAR with cash and LBP
bonds. 15 On October 22, 1993, from the mother title of TCT No. 985 of the
Hacienda, respondent DAR registered Certificate of Land Ownership Award (CLOA)
No. 6654. On October 30, 1993, CLOA's were distributed to farmer beneficiaries. 16
Hacienda Banilad
On August 23, 1989, respondent DAR, through respondent MARO of Nasugbu,
Batangas, sent a notice to petitioner addressed as follows:
Mr. Jaime Pimentel
Hacienda Administrator

On September 21, 1989, the same day the conference was held, the MARO
submitted two (2) Reports. In his first Report, he found that approximately 709
hectares of land under Tax Declaration Nos. 0237 and 0236 were "flat to
undulating (0-8% slope)." On this area were discovered 162 actual occupants and
tillers of sugarcane. 20 In the second Report, it was found that approximately 235
hectares under Tax Declaration No. 0390 were "flat to undulating," on which were 92
actual occupants and tillers of sugarcane. 21
The results of these Reports were discussed at the conference. Present in the
conference were representatives of the prospective farmer beneficiaries, the
BARC, the LBP, and Jaime Pimentel on behalf of the landowner. 22After the
meeting, on the same day, September 21, 1989, a Summary Investigation Report was
submitted jointly by the MARO, representatives of the BARC, LBP, and the PARO.
They recommended that after ocular inspection of the property, 234.6498 hectares
under Tax Declaration No. 0390 be subject to compulsory acquisition and
distribution by CLOA. 23 The following day, September 22, 1989, a second Summary
Investigation was submitted by the same officers. They recommended that 737.2590
hectares under Tax Declaration Nos. 0236 and 0237 be likewise placed under
compulsory acquisition for distribution. 24
On December 12, 1989, respondent DAR, through the Department Secretary,
sent to petitioner two (2) separate "Notices of Acquisition" over Hacienda
Banilad. These Notices were sent on the same day as the Notice of Acquisition
over Hacienda Palico. Unlike the Notice over Hacienda Palico, however, the
Notices over Hacienda Banilad were addressed to:
Roxas y Cia. Limited
7th Floor, Cacho-Gonzales Bldg. 101 Aguirre St., Leg.

Hacienda Banilad
Nasugbu, Batangas

On September 18, 1989, the MARO sent an "Invitation to Parties" again to

Pimentel inviting the latter to attend a conference on September 21, 1989 at the
MARO Office in Nasugbu to discuss the results of the MARO's investigation
over Hacienda Banilad. 19

17

The MARO informed Pimentel that Hacienda Banilad was subject to

compulsory acquisition under the CARL; that should petitioner wish to
avail of the other schemes such as Voluntary Offer to Sell or Voluntary
Land Transfer, respondent DAR was willing to provide assistance
thereto. 18

Makati, Metro Manila. 25

Respondent DAR offered petitioner compensation of P15,108,995.52 for
729.4190 hectares and P4,428,496.00 for 234.6498 hectares. 26
On September 26, 1991, the DAR Regional Director sent to the LBP Land
Valuation Manager a "Request to Open Trust Account" in petitioner's name as
compensation for 234.6493 hectares of Hacienda Banilad. 27 A second "Request to

Open Trust Account" was sent on November 18, 1991 over 723.4130 hectares of said
Hacienda. 28

On December 18, 1991, the LBP certified that the amounts of P4,428,496.40 and
P21,234,468.78 in cash and LBP bonds had been earmarked as compensation for
petitioner's land in Hacienda Banilad. 29
On May 4, 1993, petitioner applied for conversion of both Haciendas Palico and
Banilad.
Hacienda Caylaway
Hacienda Caylaway was voluntarily offered for sale to the government on May
6, 1988 before the effectivity of the CARL. The Hacienda has a total area of
867.4571 hectares and is covered by four (4) titles TCT Nos. T-44662, T44663, T-44664 and T-44665. On January 12, 1989, respondent DAR, through
the Regional Director for Region IV, sent to petitioner two (2) separate
Resolutions accepting petitioner's voluntary offer to sell Hacienda Caylaway,
particularly TCT Nos. T-44664 and T-44663. 30 The Resolutions were addressed to:
Roxas & Company, Inc.
7th Flr. Cacho-Gonzales Bldg.
Aguirre, Legaspi Village
Makati, M. M 31
On September 4, 1990, the DAR Regional Director issued two separate
Memoranda to the LBP Regional Manager requesting for the valuation of the
land under TCT Nos. T-44664 and T-44663. 32 On the same day, respondent DAR,
through the Regional Director, sent to petitioner a "Notice of Acquisition" over
241.6777 hectares under TCT No. T-44664 and 533.8180 hectares under TCT No. T44663. 33 Like the Resolutions of Acceptance, the Notice of Acquisition was
addressed to petitioner at its office in Makati, Metro Manila.
Nevertheless, on August 6, 1992, petitioner, through its President, Eduardo J.
Roxas, sent a letter to the Secretary of respondent DAR withdrawing its VOS of
Hacienda Caylaway. The Sangguniang Bayan of Nasugbu, Batangas allegedly
authorized the reclassification of Hacienda Caylaway from agricultural to nonagricultural. As a result, petitioner informed respondent DAR that it was
applying for conversion of Hacienda Caylaway from agricultural to other
uses. 34

In a letter dated September 28, 1992, respondent DAR Secretary informed

petitioner that a reclassification of the land would not exempt it from agrarian
reform. Respondent Secretary also denied petitioner's withdrawal of the VOS on
the ground that withdrawal could only be based on specific grounds such as
unsuitability of the soil for agriculture, or if the slope of the land is over 18
degrees and that the land is undeveloped. 35
Despite the denial of the VOS withdrawal of Hacienda Caylaway, on May 11,
1993, petitioner filed its application for conversion of both Haciendas Palico and
Banilad. 36 On July 14, 1993, petitioner, through its President, Eduardo Roxas,
reiterated its request to withdraw the VOS over Hacienda Caylaway in light of the
following:
1) Certification issued by Conrado I. Gonzales, Officer-inCharge, Department of Agriculture, Region 4, 4th Floor, ATI
(BA) Bldg., Diliman, Quezon City dated March 1, 1993 stating
that the lands subject of referenced titles "are not feasible and
economically sound for further agricultural development.
2) Resolution No. 19 of the Sangguniang Bayan of Nasugbu,
Batangas approving the Zoning Ordinance reclassifying areas
covered by the referenced titles to non-agricultural which was
enacted after extensive consultation with government agencies,
including [the Department of Agrarian Reform], and the
requisite public hearings.
3) Resolution No. 106 of the Sangguniang Panlalawigan of
Batangas dated March 8, 1993 approving the Zoning Ordinance
enacted by the Municipality of Nasugbu.
4) Letter dated December 15, 1992 issued by Reynaldo U.
Garcia of the Municipal Planning & Development, Coordinator
and Deputized Zoning Administrator addressed to Mrs. Alicia P.
Logarta advising that the Municipality of Nasugbu, Batangas
has no objection to the conversion of the lands subject of
referenced titles to non-agricultural. 37
On August 24, 1993 petitioner instituted Case No. N-0017-96-46 (BA) with
respondent DAR Adjudication Board (DARAB) praying for the cancellation of
the CLOA's issued by respondent DAR in the name of several persons. Petitioner
alleged that the Municipality of Nasugbu, where the haciendas are located, had
been declared a tourist zone, that the land is not suitable for agricultural

production, and that the Sangguniang Bayan of Nasugbu had reclassified the
land to non-agricultural.
In a Resolution dated October 14, 1993, respondent DARAB held that the case
involved the prejudicial question of whether the property was subject to agrarian
reform, hence, this question should be submitted to the Office of the Secretary of
Agrarian Reform for determination. 38
On October 29, 1993, petitioner filed with the Court of Appeals CA-G.R. SP No.
32484. It questioned the expropriation of its properties under the CARL and the
denial of due process in the acquisition of its landholdings.
Meanwhile, the petition for conversion of the three haciendas was denied by the
MARO on November 8, 1993.
Petitioner's petition was dismissed by the Court of Appeals on April 28,
1994. 39 Petitioner moved for reconsideration but the motion was denied on January
17, 1997 by respondent court. 40
Hence, this recourse. Petitioner assigns the following errors:
A. RESPONDENT COURT OF APPEALS GRAVELY ERRED
IN HOLDING THAT PETITIONER'S CAUSE OF ACTION IS
PREMATURE FOR FAILURE TO EXHAUST
ADMINISTRATIVE REMEDIES IN VIEW OF THE PATENT
ILLEGALITY OF THE RESPONDENTS' ACTS, THE
IRREPARABLE DAMAGE CAUSED BY SAID ILLEGAL
ACTS, AND THE ABSENCE OF A PLAIN, SPEEDY AND
ADEQUATE REMEDY IN THE ORDINARY COURSE OF
LAW ALL OF WHICH ARE EXCEPTIONS TO THE SAID
DOCTRINE.
B. RESPONDENT COURT OF APPEALS GRAVELY ERRED
IN HOLDING THAT PETITIONER'S LANDHOLDINGS
ARE SUBJECT TO COVERAGE UNDER THE
COMPREHENSIVE AGRARIAN REFORM LAW, IN VIEW
OF THE UNDISPUTED FACT THAT PETITIONER'S
LANDHOLDINGS HAVE BEEN CONVERTED TO NONAGRICULTURAL USES BY PRESIDENTIAL
PROCLAMATION NO. 1520 WHICH DECLARED THE
MUNICIPALITY NASUGBU, BATANGAS AS A TOURIST
ZONE, AND THE ZONING ORDINANCE OF THE
MUNICIPALITY OF NASUGBU RE-CLASSIFYING

CERTAIN PORTIONS OF PETITIONER'S LANDHOLDINGS

AS NON-AGRICULTURAL, BOTH OF WHICH PLACE
SAID LANDHOLDINGS OUTSIDE THE SCOPE OF
AGRARIAN REFORM, OR AT THE VERY LEAST ENTITLE
PETITIONER TO APPLY FOR CONVERSION AS
CONCEDED BY RESPONDENT DAR.
C. RESPONDENT COURT OF APPEALS GRAVELY ERRED
WHEN IT FAILED TO DECLARE THE PROCEEDINGS
BEFORE RESPONDENT DAR VOID FOR FAILURE TO
OBSERVE DUE PROCESS, CONSIDERING THAT
RESPONDENTS BLATANTLY DISREGARDED THE
PROCEDURE FOR THE ACQUISITION OF PRIVATE
LANDS UNDER R.A. 6657, MORE PARTICULARLY, IN
FAILING TO GIVE DUE NOTICE TO THE PETITIONER
AND TO PROPERLY IDENTIFY THE SPECIFIC AREAS
SOUGHT TO BE ACQUIRED.
D. RESPONDENT COURT OF APPEALS GRAVELY ERRED
WHEN IT FAILED TO RECOGNIZE THAT PETITIONER
WAS BRAZENLY AND ILLEGALLY DEPRIVED OF ITS
PROPERTY WITHOUT JUST COMPENSATION,
CONSIDERING THAT PETITIONER WAS NOT PAID JUST
COMPENSATION BEFORE IT WAS UNCEREMONIOUSLY
STRIPPED OF ITS LANDHOLDINGS THROUGH THE
ISSUANCE OF CLOA'S TO ALLEGED FARMER
BENEFICIARIES, IN VIOLATION OF R.A. 6657. 41
The assigned errors involve three (3) principal issues: (1) whether this Court can
take cognizance of this petition despite petitioner's failure to exhaust
administrative remedies; (2) whether the acquisition proceedings over the three
haciendas were valid and in accordance with law; and (3) assuming the
haciendas may be reclassified from agricultural to non-agricultural, whether this
court has the power to rule on this issue.
I. Exhaustion of Administrative Remedies.
In its first assigned error, petitioner claims that respondent Court of Appeals
gravely erred in finding that petitioner failed to exhaust administrative remedies.
As a general rule, before a party may be allowed to invoke the jurisdiction of the
courts of justice, he is expected to have exhausted all means of administrative
redress. This is not absolute, however. There are instances when judicial action
may be resorted to immediately. Among these exceptions are: (1) when the

question raised is purely legal; (2) when the administrative body is in estoppel;
(3) when the act complained of is patently illegal; (4) when there is urgent need
for judicial intervention; (5) when the respondent acted in disregard of due
process; (6) when the respondent is a department secretary whose acts, as an
alter ego of the President, bear the implied or assumed approval of the latter; (7)
when irreparable damage will be suffered; (8) when there is no other plain,
speedy and adequate remedy; (9) when strong public interest is involved; (10)
when the subject of the controversy is private land; and (11) in quo
warranto proceedings. 42
Petitioner rightly sought immediate redress in the courts. There was a violation
of its rights and to require it to exhaust administrative remedies before the DAR
itself was not a plain, speedy and adequate remedy.
Respondent DAR issued Certificates of Land Ownership Award (CLOA's) to
farmer beneficiaries over portions of petitioner's land without just compensation
to petitioner. A Certificate of Land Ownership Award (CLOA) is evidence of
ownership of land by a beneficiary under R.A. 6657, the Comprehensive
Agrarian Reform Law of 1988. 43 Before this may be awarded to a farmer
beneficiary, the land must first be acquired by the State from the landowner and
ownership transferred to the former. The transfer of possession and ownership of the
land to the government are conditioned upon the receipt by the landowner of the
corresponding payment or deposit by the DAR of the compensation with an
accessible bank. Until then, title remains with the landowner. 44 There was no receipt
by petitioner of any compensation for any of the lands acquired by the government.
The kind of compensation to be paid the landowner is also specific. The law
provides that the deposit must be made only in "cash" or "LBP
bonds." 45 Respondent DAR's opening of trust account deposits in petitioner' s name
with the Land Bank of the Philippines does not constitute payment under the law.
Trust account deposits are not cash or LBP bonds. The replacement of the trust
account with cash or LBP bonds did not ipso facto cure the lack of compensation; for
essentially, the determination of this compensation was marred by lack of due
process. In fact, in the entire acquisition proceedings, respondent DAR disregarded
the basic requirements of administrative due process. Under these circumstances, the
issuance of the CLOA's to farmer beneficiaries necessitated immediate judicial
action on the part of the petitioner.
II. The Validity of the Acquisition Proceedings Over the Haciendas.
Petitioner's allegation of lack of due process goes into the validity of the
acquisition proceedings themselves. Before we rule on this matter, however,
there is need to lay down the procedure in the acquisition of private lands under
the provisions of the law.

A. Modes of Acquisition of Land under R. A. 6657

Republic Act No. 6657, the Comprehensive Agrarian Reform Law of 1988
(CARL), provides for two (2) modes of acquisition of private land: compulsory
and voluntary. The procedure for the compulsory acquisition of private lands is
set forth in Section 16 of R.A. 6657, viz:
Sec. 16. Procedure for Acquisition of Private Lands. For
purposes of acquisition of private lands, the following
procedures shall be followed:
a). After having identified the land, the
landowners and the beneficiaries, the DAR
shall send its notice to acquire the land to the
owners thereof, by personal delivery or
registered mail, and post the same in a
conspicuous place in the municipal building
and barangay hall of the place where the
property is located. Said notice shall contain
the offer of the DAR to pay a corresponding
value in accordance with the valuation set
forth in Sections 17, 18, and other pertinent
provisions hereof.
b) Within thirty (30) days from the date of
receipt of written notice by personal delivery
or registered mail, the landowner, his
administrator or representative shall inform the
DAR of his acceptance or rejection of the
offer.
c) If the landowner accepts the offer of the
DAR, the LBP shall pay the landowner the
purchase price of the land within thirty (30)
days after he executes and delivers a deed of
transfer in favor of the Government and
surrenders the Certificate of Title and other
muniments of title.
d) In case of rejection or failure to reply, the
DAR shall conduct summary administrative
proceedings to determine the compensation for
the land requiring the landowner, the LBP and

other interested parties to submit evidence as

to the just compensation for the land, within
fifteen (15) days from receipt of the notice.
After the expiration of the above period, the
matter is deemed submitted for decision. The
DAR shall decide the case within thirty (30)
days after it is submitted for decision.

case of rejection or lack of response from the latter, the DAR shall deposit the
compensation in cash or in LBP bonds with an accessible bank. The DAR shall
immediately take possession of the land and cause the issuance of a transfer
certificate of title in the name of the Republic of the Philippines. The land shall
then be redistributed to the farmer beneficiaries. Any party may question the
decision of the DAR in the regular courts for final determination of just
compensation.

e) Upon receipt by the landowner of the

corresponding payment, or, in case of rejection
or no response from the landowner, upon the
deposit with an accessible bank designated by
the DAR of the compensation in cash or in
LBP bonds in accordance with this Act, the
DAR shall take immediate possession of the
land and shall request the proper Register of
Deeds to issue a Transfer Certificate of Title
(TCT) in the name of the Republic of the
Philippines. The DAR shall thereafter proceed
with the redistribution of the land to the
qualified beneficiaries.

The DAR has made compulsory acquisition the priority mode of the land
acquisition to hasten the implementation of the Comprehensive Agrarian Reform
Program (CARP). 46 Under Section 16 of the CARL, the first step in compulsory
acquisition is the identification of the land, the landowners and the
beneficiaries. However, the law is silent on how the identification process must be
made. To fill in this gap, the DAR issued on July 26, 1989 Administrative Order
No.12, Series or 1989, which set the operating procedure in the identification of such
lands. The procedure is as follows:

f) Any party who disagrees with the decision

may bring the matter to the court of proper
jurisdiction for final determination of just
compensation.
In the compulsory acquisition of private lands, the landholding, the landowners
and the farmer beneficiaries must first be identified. After identification, the
DAR shall send a Notice of Acquisition to the landowner, by personal delivery or
registered mail, and post it in a conspicuous place in the municipal building and
barangay hall of the place where the property is located. Within thirty days from
receipt of the Notice of Acquisition, the landowner, his administrator or
representative shall inform the DAR of his acceptance or rejection of the offer. If
the landowner accepts, he executes and delivers a deed of transfer in favor of the
government and surrenders the certificate of title. Within thirty days from the
execution of the deed of transfer, the Land Bank of the Philippines (LBP) pays
the owner the purchase price. If the landowner rejects the DAR's offer or fails to
make a reply, the DAR conducts summary administrative proceedings to
determine just compensation for the land. The landowner, the LBP representative
and other interested parties may submit evidence on just compensation within
fifteen days from notice. Within thirty days from submission, the DAR shall
decide the case and inform the owner of its decision and the amount of just
compensation. Upon receipt by the owner of the corresponding payment, or, in

II. OPERATING PROCEDURE

A. The Municipal Agrarian Reform Officer, with the assistance
of the pertinent Barangay Agrarian Reform Committee
(BARC), shall:
1. Update the masterlist of all agricultural
lands covered under the CARP in his area of
responsibility. The masterlist shall include
such information as required under the
attached CARP Masterlist Form which shall
include the name of the landowner,
landholding area, TCT/OCT number, and tax
declaration number.
2. Prepare a Compulsory Acquisition Case
Folder (CACF) for each title (OCT/TCT) or
landholding covered under Phase I and II of
the CARP except those for which the
landowners have already filed applications to
avail of other modes of land acquisition. A
case folder shall contain the following duly
accomplished forms:
a) CARP CA Form 1
MARO Investigation Report

b) CARP CA Form 2
Summary Investigation
Report of Findings and
Evaluation

B. The PARO shall:

c) CARP CA Form 3
Applicant's Information
Sheet

2. Immediately upon receipt of a case folder,

compute the valuation of the land in
accordance with A.O. No. 6, Series of
1988. 47 The valuation worksheet and the related
CACF valuation forms shall be duly certified
correct by the PARO and all the personnel who
participated in the accomplishment of these
forms.

d) CARP CA Form 4
Beneficiaries Undertaking
e) CARP CA Form 5
Transmittal Report to the
PARO
The MARO/BARC shall certify that all
information contained in the above-mentioned
forms have been examined and verified by him
and that the same are true and correct.
3. Send a Notice of Coverage and a letter of
invitation to a conference/meeting to the
landowner covered by the Compulsory Case
Acquisition Folder. Invitations to the said
conference/meeting shall also be sent to the
prospective farmer-beneficiaries, the BARC
representative(s), the Land Bank of the
Philippines (LBP) representative, and other
interested parties to discuss the inputs to the
valuation of the property. He shall discuss the
MARO/BARC investigation report and solicit
the views, objection, agreements or
suggestions of the participants thereon. The
landowner shall also be asked to indicate his
retention area. The minutes of the meeting
shall be signed by all participants in the
conference and shall form an integral part of
the CACF.
4. Submit all completed case folders to the
Provincial Agrarian Reform Officer (PARO).

1. Ensure that the individual case folders are

forwarded to him by his MAROs.

3. In all cases, the PARO may validate the

report of the MARO through ocular inspection
and verification of the property. This ocular
inspection and verification shall be mandatory
when the computed value exceeds = 500,000
per estate.
4. Upon determination of the valuation,
forward the case folder, together with the duly
accomplished valuation forms and his
recommendations, to the Central Office. The
LBP representative and the MARO concerned
shall be furnished a copy each of his report.
C. DAR Central Office, specifically through
the Bureau of Land Acquisition and
Distribution (BLAD), shall:
1. Within three days from receipt of the case
folder from the PARO, review, evaluate and
determine the final land valuation of the
property covered by the case folder. A
summary review and evaluation report shall be
prepared and duly certified by the BLAD
Director and the personnel directly
participating in the review and final valuation.
2. Prepare, for the signature of the Secretary or
her duly authorized representative, a Notice of

Acquisition (CARP CA Form 8) for the

subject property. Serve the Notice to the
landowner personally or through registered
mail within three days from its approval. The
Notice shall include, among others, the area
subject of compulsory acquisition, and the
amount of just compensation offered by DAR.
3. Should the landowner accept the DAR's
offered value, the BLAD shall prepare and
submit to the Secretary for approval the Order
of Acquisition. However, in case of rejection
or non-reply, the DAR Adjudication Board
(DARAB) shall conduct a summary
administrative hearing to determine just
compensation, in accordance with the
procedures provided under Administrative
Order No. 13, Series of 1989. Immediately
upon receipt of the DARAB's decision on just
compensation, the BLAD shall prepare and
submit to the Secretary for approval the
required Order of Acquisition.
4. Upon the landowner's receipt of payment, in
case of acceptance, or upon deposit of
payment in the designated bank, in case of
rejection or non-response, the Secretary shall
immediately direct the pertinent Register of
Deeds to issue the corresponding Transfer
Certificate of Title (TCT) in the name of the
Republic of the Philippines. Once the property
is transferred, the DAR, through the PARO,
shall take possession of the land for
redistribution to qualified beneficiaries.
Administrative Order No. 12, Series of 1989 requires that the Municipal
Agrarian Reform Officer (MARO) keep an updated master list of all agricultural
lands under the CARP in his area of responsibility containing all the required
information. The MARO prepares a Compulsory Acquisition Case Folder
(CACF) for each title covered by CARP. The MARO then sends the landowner a
"Notice of Coverage" and a "letter of invitation" to a "conference/meeting" over
the land covered by the CACF. He also sends invitations to the prospective
farmer-beneficiaries the representatives of the Barangay Agrarian Reform
Committee (BARC), the Land Bank of the Philippines (LBP) and other

interested parties to discuss the inputs to the valuation of the property and solicit
views, suggestions, objections or agreements of the parties. At the meeting, the
landowner is asked to indicate his retention area.
The MARO shall make a report of the case to the Provincial Agrarian Reform
Officer (PARO) who shall complete the valuation of the land. Ocular inspection
and verification of the property by the PARO shall be mandatory when the
computed value of the estate exceeds P500,000.00. Upon determination of the
valuation, the PARO shall forward all papers together with his recommendation
to the Central Office of the DAR. The DAR Central Office, specifically, the
Bureau of Land Acquisition and Distribution (BLAD), shall review, evaluate and
determine the final land valuation of the property. The BLAD shall prepare, on
the signature of the Secretary or his duly authorized representative, a Notice of
Acquisition for the subject property. 48 From this point, the provisions of Section 16
of R.A. 6657 then apply. 49
For a valid implementation of the CAR program, two notices are required:
(1) the Notice of Coverage and letter of invitation to a preliminary conference
sent to the landowner, the representatives of the BARC, LBP, farmer
beneficiaries and other interested parties pursuant to DAR A.O. No. 12, Series of
1989; and (2) the Notice of Acquisition sent to the landowner under Section 16 of
the CARL.
The importance of the first notice, i.e., the Notice of Coverage and the letter of
invitation to the conference, and its actual conduct cannot be understated. They
are steps designed to comply with the requirements of administrative due
process. The implementation of the CARL is an exercise of the State's police
power and the power of eminent domain. To the extent that the CARL prescribes
retention limits to the landowners, there is an exercise of police power for the
regulation of private property in accordance with the Constitution. 50 But where,
to carry out such regulation, the owners are deprived of lands they own in excess of
the maximum area allowed, there is also a taking under the power of eminent
domain. The taking contemplated is not a mere limitation of the use of the land.
What is required is the surrender of the title to and physical possession of the said
excess and all beneficial rights accruing to the owner in favor of the farmer
beneficiary. 51 The Bill of Rights provides that "[n]o person shall be deprived of life,
liberty or property without due process of law." 52 The CARL was not intended to
take away property without due process of law. 53 The exercise of the power of
eminent domain requires that due process be observed in the taking of private
property.
DAR A.O. No. 12, Series of 1989, from whence the Notice of Coverage first
sprung, was amended in 1990 by DAR A.O. No. 9, Series of 1990 and in 1993
by DAR A.O. No. 1, Series of 1993. The Notice of Coverage and letter of

invitation to the conference meeting were expanded and amplified in said

amendments.

b) Sends Notice of Coverage (CARP Form No. 5) to landowner concerned or his

duly authorized representative inviting him for a conference.

DAR A.O. No. 9, Series of 1990 entitled "Revised Rules Governing the
Acquisition of Agricultural Lands Subject of Voluntary Offer to Sell and
Compulsory Acquisition Pursuant to R.A. 6657," requires that:

c) Sends Invitation Letter (CARP Form No. 6) for a conference/public hearing to

prospective farmer-beneficiaries, landowner, representatives of BARC, LBP,
DENR, DA, NGO's, farmers' organizations and other interested parties to discuss
the following matters:

B. MARO
Result of Field Investigation
1. Receives the duly accomplished CARP Form Nos. 1 & 1.1 including
supporting documents.

Inputs to valuation parties concerned.

2. Gathers basic ownership documents listed under 1.a or 1.b above and prepares
corresponding VOCF/CACF by landowner/landholding.

d) Prepares Summary of Minutes of the conference/public hearing to be guided

by CARP Form No. 7.

3. Notifies/invites the landowner and representatives of the LBP, DENR, BARC

and prospective beneficiaries of the schedule of ocular inspection of the property
at least one week in advance.

e) Forwards the completed VOCF/CACF to the Provincial Agrarian Reform

Office (PARO) using CARP Form No. 8 (Transmittal Memo to PARO).
xxx xxx xxx

4. MARO/LAND BANK FIELD OFFICE/BARC

a) Identify the land and landowner, and determine the suitability for agriculture
and productivity of the land and jointly prepare Field Investigation Report
(CARP Form No. 2), including the Land Use Map of the property.
b) Interview applicants and assist them in the preparation of the Application For
Potential CARP Beneficiary (CARP Form No. 3).
c) Screen prospective farmer-beneficiaries and for those found qualified, cause
the signing of the respective Application to Purchase and Farmer's Undertaking
(CARP Form No. 4).
d) Complete the Field Investigation Report based on the result of the ocular
inspection/investigation of the property and documents submitted. See to it that
Field Investigation Report is duly accomplished and signed by all concerned.
5. MARO
a) Assists the DENR Survey Party in the conduct of a boundary/ subdivision
survey delineating areas covered by OLT, retention, subject of VOS, CA (by
phases, if possible), infrastructures, etc., whichever is applicable.

DAR A.O. No. 9, Series of 1990 lays down the rules on both Voluntary Offer to
Sell (VOS) and Compulsory Acquisition (CA) transactions involving lands
enumerated under Section 7 of the CARL. 54 In both VOS and CA. transactions,
the MARO prepares the Voluntary Offer to Sell Case Folder (VOCF) and the
Compulsory Acquisition Case Folder (CACF), as the case may be, over a particular
landholding. The MARO notifies the landowner as well as representatives of the
LBP, BARC and prospective beneficiaries of the date of the ocular inspection of the
property at least one week before the scheduled date and invites them to attend the
same. The MARO, LBP or BARC conducts the ocular inspection and investigation
by identifying the land and landowner, determining the suitability of the land for
agriculture and productivity, interviewing and screening prospective farmer
beneficiaries. Based on its investigation, the MARO, LBP or BARC prepares the
Field Investigation Report which shall be signed by all parties concerned. In addition
to the field investigation, a boundary or subdivision survey of the land may also be
conducted by a Survey Party of the Department of Environment and Natural
Resources (DENR) to be assisted by the MARO. 55 This survey shall delineate the
areas covered by Operation Land Transfer (OLT), areas retained by the landowner,
areas with infrastructure, and the areas subject to VOS and CA. After the survey and
field investigation, the MARO sends a "Notice of Coverage" to the landowner or his
duly authorized representative inviting him to a conference or public hearing with
the farmer beneficiaries, representatives of the BARC, LBP, DENR, Department of
Agriculture (DA), non-government organizations, farmer's organizations and other
interested parties. At the public hearing, the parties shall discuss the results of the
field investigation, issues that may be raised in relation thereto, inputs to the

valuation of the subject landholding, and other comments and recommendations by

all parties concerned. The Minutes of the conference/public hearing shall form part
of the VOCF or CACF which files shall be forwarded by the MARO to the PARO.
The PARO reviews, evaluates and validates the Field Investigation Report and other
documents in the VOCF/CACF. He then forwards the records to the RARO for
another review.

DAR A.O. No. 9, Series of 1990 was amended by DAR A.O. No. 1, Series of
1993. DAR A.O. No. 1, Series of 1993 provided, among others, that:
IV. OPERATING PROCEDURES:

field investigation shallproceed even if the LO, therepresentatives of the DENR

andprospective ARBs are not availableprovided, they were given duenotice of
the time and date ofinvestigation to be conducted.
Similarly, if the LBP representative
is not available or could not come
on the scheduled date, the field
investigation shall also be conducted,

Steps Responsible Activity Forms/

after which the duly accomplished

Agency/Unit Document

Part I of CARP Form No. 4 shall

(requirements)

be forwarded to the LBP

A. Identification and Documentation

representative for validation. If he agrees

xxx xxx xxx

DARMO Issue Notice of Coverage CARP to LO by personal delivery Form No.

2 with proof of service, or registered mail with return card, informing him that
his property is now under CARP coverage and for LO to select his retention area,
if he desires to avail of his right of retention; and at the same time invites him to
join the field investigation to be conducted on his property which should be
scheduled at least two weeks in advance of said notice.
A copy of said Notice shall CARPbe posted for at least one Form No. 17week on
the bulletin board ofthe municipal and barangayhalls where the property
islocated. LGU office concernednotifies DAR about compliancewith posting
requirements thrureturn indorsement on CARP Form No. 17.
6 DARMO Send notice to the LBP, CARP BARC, DENR representatives Form
No. 3and prospective ARBs of the schedule of the field investigationto be
conducted on the subjectproperty.
7 DARMO With the participation of CARP BARC the LO, representatives of
Form No. 4 LBP the LBP, BARC, DENR Land Use DENR and prospective
ARBs, MapLocal Office conducts the investigation onsubject property to
identifythe landholding, determinesits suitability and productivity;and jointly
prepares the FieldInvestigation Report (FIR)and Land Use Map. However,the

to the ocular inspection report of DAR,

he signs the FIR (Part I) and
accomplishes Part II thereof.
In the event that there is a
difference or variance between
the findings of the DAR and the
LBP as to the propriety of
covering the land under CARP,
whether in whole or in part, on
the issue of suitability to agriculture,
degree of development or slope,

and on issues affecting idle lands,

will return card and posts

the conflict shall be resolved by

a copy thereof for at least

a composite team of DAR, LBP,

one week on the bulletin

DENR and DA which shall jointly

board of the municipal

conduct further investigation

and barangay halls where

thereon. The team shall submit its

the property is located.

report of findings which shall be

LGU office concerned CARP

binding to both DAR and LBP,

notifies DAR about Form No. 17

pursuant to Joint Memorandum

compliance with posting

Circular of the DAR, LBP, DENR

requirement thru return

and DA dated 27 January 1992.

endorsement on CARP

8 DARMO Screen prospective ARBs

Form No. 17.

BARC and causes the signing of CARP

B. Land Survey

the Application of Purchase Form No. 5

10 DARMO Conducts perimeter or Perimeter

and Farmer's Undertaking

And/or segregation survey or

(APFU).

DENR delineating areas covered Segregation

9 DARMO Furnishes a copy of the CARP

Local Office by OLT, "uncarpable Survey Plan

duly accomplished FIR to Form No. 4

areas such as 18% slope

the landowner by personal

and above, unproductive/

delivery with proof of

unsuitable to agriculture,

service or registered mail

retention, infrastructure.

landowner "by personal delivery with proof of service or registered mail with return
card." Another copy of the Report and Map shall likewise be posted for at least one
week in the municipal or barangay halls where the property is located.

In case of segregation or
subdivision survey, the
plan shall be approved
by DENR-LMS.
C. Review and Completion
of Documents
11. DARMO Forward VOCF/CACF CARP
to DARPO. Form No. 6
xxx xxx xxx.
DAR A.O. No. 1, Series of 1993, modified the identification process and
increased the number of government agencies involved in the identification and
delineation of the land subject to acquisition. 56 This time, the Notice of Coverage
is sent to the landowner before the conduct of the field investigation and the sending
must comply with specific requirements. Representatives of the DAR Municipal
Office (DARMO) must send the Notice of Coverage to the landowner by "personal
delivery with proof of service, or by registered mail with return card," informing him
that his property is under CARP coverage and that if he desires to avail of his right of
retention, he may choose which area he shall retain. The Notice of Coverage shall
also invite the landowner to attend the field investigation to be scheduled at least two
weeks from notice. The field investigation is for the purpose of identifying the
landholding and determining its suitability for agriculture and its productivity. A
copy of the Notice of Coverage shall be posted for at least one week on the bulletin
board of the municipal and barangay halls where the property is located. The date of
the field investigation shall also be sent by the DAR Municipal Office to
representatives of the LBP, BARC, DENR and prospective farmer beneficiaries. The
field investigation shall be conducted on the date set with the participation of the
landowner and the various representatives. If the landowner and other representatives
are absent, the field investigation shall proceed, provided they were duly notified
thereof. Should there be a variance between the findings of the DAR and the LBP as
to whether the land be placed under agrarian reform, the land's suitability to
agriculture, the degree or development of the slope, etc., the conflict shall be
resolved by a composite team of the DAR, LBP, DENR and DA which shall jointly
conduct further investigation. The team's findings shall be binding on both DAR and
LBP. After the field investigation, the DAR Municipal Office shall prepare the Field
Investigation Report and Land Use Map, a copy of which shall be furnished the

Clearly then, the notice requirements under the CARL are not confined to the
Notice of Acquisition set forth in Section 16 of the law. They also include the
Notice of Coverage first laid down in DAR A.O. No. 12, Series of 1989 and
subsequently amended in DAR A.O. No. 9, Series of 1990 and DAR A.O. No. 1,
Series of 1993. This Notice of Coverage does not merely notify the landowner
that his property shall be placed under CARP and that he is entitled to exercise
his retention right; it also notifies him, pursuant to DAR A.O. No. 9, Series of
1990, that a public hearing, shall be conducted where he and representatives of
the concerned sectors of society may attend to discuss the results of the field
investigation, the land valuation and other pertinent matters. Under DAR A.O.
No. 1, Series of 1993, the Notice of Coverage also informs the landowner that a
field investigation of his landholding shall be conducted where he and the other
representatives may be present.
B. The Compulsory Acquisition of Haciendas Palico and Banilad
In the case at bar, respondent DAR claims that it, through MARO Leopoldo C.
Lejano, sent a letter of invitation entitled "Invitation to Parties" dated September
29, 1989 to petitioner corporation, through Jaime Pimentel, the administrator of
Hacienda Palico. 57 The invitation was received on the same day it was sent as
indicated by a signature and the date received at the bottom left corner of said
invitation. With regard to Hacienda Banilad, respondent DAR claims that Jaime
Pimentel, administrator also of Hacienda Banilad, was notified and sent an invitation
to the conference. Pimentel actually attended the conference on September 21, 1989
and signed the Minutes of the meeting on behalf of petitioner corporation. 58 The
Minutes was also signed by the representatives of the BARC, the LBP and farmer
beneficiaries. 59 No letter of invitation was sent or conference meeting held with
respect to Hacienda Caylaway because it was subject to a Voluntary Offer to Sell to
respondent DAR. 60
When respondent DAR, through the Municipal Agrarian Reform Officer
(MARO), sent to the various parties the Notice of Coverage and invitation to the
conference, DAR A.O. No. 12, Series of 1989 was already in effect more than a
month earlier. The Operating Procedure in DAR Administrative Order No. 12
does not specify how notices or letters of invitation shall be sent to the
landowner, the representatives of the BARC, the LBP, the farmer beneficiaries
and other interested parties. The procedure in the sending of these notices is
important to comply with the requisites of due process especially when the
owner, as in this case, is a juridical entity. Petitioner is a domestic

corporation, 61 and therefore, has a personality separate and distinct from its
shareholders, officers and employees.
The Notice of Acquisition in Section 16 of the CARL is required to be sent to the
landowner by "personal delivery or registered mail." Whether the landowner be
a natural or juridical person to whose address the Notice may be sent by
personal delivery or registered mail, the law does not distinguish. The DAR
Administrative Orders also do not distinguish. In the proceedings before the
DAR, the distinction between natural and juridical persons in the sending of
notices may be found in the Revised Rules of Procedure of the DAR
Adjudication Board (DARAB). Service of pleadings before the DARAB is
governed by Section 6, Rule V of the DARAB Revised Rules of Procedure.
Notices and pleadings are served on private domestic corporations or
partnerships in the following manner:
Sec. 6. Service upon Private Domestic Corporation or
Partnership. If the defendant is a corporation organized
under the laws of the Philippines or a partnership duly
registered, service may be made on the president, manager,
secretary, cashier, agent, or any of its directors or partners.
Similarly, the Revised Rules of Court of the Philippines, in Section 13, Rule 14
provides:
Sec. 13. Service upon private domestic corporation or
partnership. If the defendant is a corporation organized
under the laws of the Philippines or a partnership duly
registered, service may be made on the president, manager,
secretary, cashier, agent, or any of its directors.
Summonses, pleadings and notices in cases against a private domestic
corporation before the DARAB and the regular courts are served on the
president, manager, secretary, cashier, agent or any of its directors. These persons
are those through whom the private domestic corporation or partnership is
capable of action. 62
Jaime Pimentel is not the president, manager, secretary, cashier or director of
petitioner corporation. Is he, as administrator of the two Haciendas, considered
an agent of the corporation?
The purpose of all rules for service of process on a corporation is to make it
reasonably certain that the corporation will receive prompt and proper notice in
an action against it. 63 Service must be made on a representative so integrated with

the corporation as to make it a priori supposable that he will realize his

responsibilities and know what he should do with any legal papers served on
him, 64 and bring home to the corporation notice of the filing of the
action. 65Petitioner's evidence does not show the official duties of Jaime Pimentel as
administrator of petitioner's haciendas. The evidence does not indicate whether
Pimentel's duties is so integrated with the corporation that he would immediately
realize his responsibilities and know what he should do with any legal papers served
on him. At the time the notices were sent and the preliminary conference conducted,
petitioner's principal place of business was listed in respondent DAR's records as
"Soriano Bldg., Plaza Cervantes, Manila," 66 and "7th Flr. Cacho-Gonzales Bldg., 101
Aguirre St., Makati, Metro Manila."67 Pimentel did not hold office at the principal
place of business of petitioner. Neither did he exercise his functions in Plaza
Cervantes, Manila nor in Cacho-Gonzales Bldg., Makati, Metro Manila. He
performed his official functions and actually resided in the haciendas in Nasugbu,
Batangas, a place over two hundred kilometers away from Metro Manila.

Curiously, respondent DAR had information of the address of petitioner's

principal place of business. The Notices of Acquisition over Haciendas Palico
and Banilad were addressed to petitioner at its offices in Manila and Makati.
These Notices were sent barely three to four months after Pimentel was notified
of the preliminary conference. 68Why respondent DAR chose to notify Pimentel
instead of the officers of the corporation was not explained by the said respondent.
Nevertheless, assuming that Pimentel was an agent of petitioner corporation, and
the notices and letters of invitation were validly served on petitioner through
him, there is no showing that Pimentel himself was duly authorized to attend the
conference meeting with the MARO, BARC and LBP representatives and farmer
beneficiaries for purposes of compulsory acquisition of petitioner's landholdings.
Even respondent DAR's evidence does not indicate this authority. On the
contrary, petitioner claims that it had no knowledge of the letter-invitation,
hence, could not have given Pimentel the authority to bind it to whatever matters
were discussed or agreed upon by the parties at the preliminary conference or
public hearing. Notably, one year after Pimentel was informed of the preliminary
conference, DAR A.O. No. 9, Series of 1990 was issued and this required that
the Notice of Coverage must be sent "to the landowner concerned or his duly
authorized representative." 69
Assuming further that petitioner was duly notified of the CARP coverage of its
haciendas, the areas found actually subject to CARP were not properly identified
before they were taken over by respondent DAR. Respondents insist that the
lands were identified because they are all registered property and the technical
description in their respective titles specifies their metes and bounds.
Respondents admit at the same time, however, that not all areas in the haciendas

were placed under the comprehensive agrarian reform program invariably by

reason of elevation or character or use of the land. 70
The acquisition of the landholdings did not cover the entire expanse of the two
haciendas, but only portions thereof. Hacienda Palico has an area of 1,024
hectares and only 688.7576 hectares were targetted for acquisition. Hacienda
Banilad has an area of 1,050 hectares but only 964.0688 hectares were subject to
CARP. The haciendas are not entirely agricultural lands. In fact, the various tax
declarations over the haciendas describe the landholdings as "sugarland," and
"forest, sugarland, pasture land, horticulture and woodland." 71
Under Section 16 of the CARL, the sending of the Notice of Acquisition
specifically requires that the land subject to land reform be first identified. The
two haciendas in the instant case cover vast tracts of land. Before Notices of
Acquisition were sent to petitioner, however, the exact areas of the landholdings
were not properly segregated and delineated. Upon receipt of this
notice, therefore, petitioner corporation had no idea which portions of its estate
were subject to compulsory acquisition, which portions it could rightfully
retain, whether these retained portions were compact or contiguous, and which
portions were excluded from CARP coverage. Even respondent DAR's evidence
does not show that petitioner, through its duly authorized representative, was
notified of any ocular inspection and investigation that was to be conducted by
respondent DAR. Neither is there proof that petitioner was given the opportunity
to at least choose and identify its retention area in those portions to be acquired
compulsorily. The right of retention and how this right is exercised, is guaranteed
in Section 6 of the CARL, viz:

Under the law, a landowner may retain not more than five hectares out of the
total area of his agricultural land subject to CARP. The right to choose the area to
be retained, which shall be compact or contiguous, pertains to the landowner. If
the area chosen for retention is tenanted, the tenant shall have the option to
choose whether to remain on the portion or be a beneficiary in the same or
another agricultural land with similar or comparable features.
C. The Voluntary Acquisition of Hacienda Caylaway
Petitioner was also left in the dark with respect to Hacienda Caylaway, which
was the subject of a Voluntary Offer to Sell (VOS). The VOS in the instant case
was made on May 6, 1988, 72 before the effectivity of R.A. 6657 on June 15, 1988.
VOS transactions were first governed by DAR Administrative Order No. 19, series
of 1989, 73 and under this order, all VOS filed before June 15, 1988 shall be heard
and processed in accordance with the procedure provided for in Executive Order No.
229, thus:
III. All VOS transactions which are now pending before the
DAR and for which no payment has been made shall be subject
to the notice and hearing requirements provided in
Administrative Order No. 12, Series of 1989, dated 26 July
1989, Section II, Subsection A, paragraph 3.
All VOS filed before 15 June 1988, the date of effectivity of the
CARL, shall be heard and processed in accordance with the
procedure provided for in Executive Order No. 229.

Sec. 6. Retention Limits. . . . .

The right to choose the area to be retained, which shall be
compact or contiguous, shall pertain to the
landowner; Provided, however, That in case the area selected
for retention by the landowner is tenanted, the tenant shall have
the option to choose whether to remain therein or be a
beneficiary in the same or another agricultural land with similar
or comparable features. In case the tenant chooses to remain in
the retained area, he shall be considered a leaseholder and shall
lose his right to be a beneficiary under this Act. In case the
tenant chooses to be a beneficiary in another agricultural land,
he loses his right as a leaseholder to the land retained by the
landowner. The tenant must exercise this option within a period
of one (1) year from the time the landowner manifests his
choice of the area for retention.

xxx xxx xxx.

Sec. 9 of E.O. 229 provides:
Sec. 9. Voluntary Offer to Sell. The government shall
purchase all agricultural lands it deems productive and suitable
to farmer cultivation voluntarily offered for sale to it at a
valuation determined in accordance with Section 6. Such
transaction shall be exempt from the payment of capital gains
tax and other taxes and fees.
Executive Order 229 does not contain the procedure for the identification of
private land as set forth in DAR A.O. No. 12, Series of 1989. Section 5 of E.O.
229 merely reiterates the procedure of acquisition in Section 16, R.A. 6657. In
other words, the E.O. is silent as to the procedure for the identification of the
land, the notice of coverage and the preliminary conference with the landowner,

representatives of the BARC, the LBP and farmer beneficiaries. Does this mean
that these requirements may be dispensed with regard to VOS filed before June
15, 1988? The answer is no.
First of all, the same E.O. 229, like Section 16 of the CARL, requires that the
land, landowner and beneficiaries of the land subject to agrarian reform
be identified before the notice of acquisition should be issued. 74 Hacienda
Caylaway was voluntarily offered for sale in 1989. The Hacienda has a total area of
867.4571 hectares and is covered by four (4) titles. In two separate Resolutions both
dated January 12, 1989, respondent DAR, through the Regional Director, formally
accepted the VOS over the two of these four
titles. 75 The land covered by two titles has an area of 855.5257 hectares, but only
648.8544 hectares thereof fell within the coverage of R.A. 6657. 76 Petitioner claims
it does not know where these portions are located.
Respondent DAR, on the other hand, avers that surveys on the land covered by
the four titles were conducted in 1989, and that petitioner, as landowner, was not
denied participation therein, The results of the survey and the land valuation
summary report, however, do not indicate whether notices to attend the same
were actually sent to and received by petitioner or its duly authorized
representative. 77 To reiterate, Executive Order No. 229 does not lay down the
operating procedure, much less the notice requirements, before the VOS is accepted
by respondent DAR. Notice to the landowner, however, cannot be dispensed with. It
is part of administrative due process and is an essential requisite to enable the
landowner himself to exercise, at the very least, his right of retention guaranteed
under the CARL.
III. The Conversion of the three Haciendas.
It is petitioner's claim that the three haciendas are not subject to agrarian reform
because they have been declared for tourism, not agricultural
purposes. 78 In 1975, then President Marcos issued Proclamation No. 1520 declaring
the municipality of Nasugbu, Batangas a tourist zone. Lands in Nasugbu, including
the subject haciendas, were allegedly reclassified as non-agricultural 13 years before
the effectivity of R. A. No. 6657. 79 In 1993, the Regional Director for Region IV of
the Department of Agriculture certified that the haciendas are not feasible and sound
for agricultural development. 80 On March 20, 1992, pursuant to Proclamation No.
1520, the Sangguniang Bayan of Nasugbu, Batangas adopted Resolution No. 19
reclassifying certain areas of Nasugbu as non-agricultural. 81 This Resolution
approved Municipal Ordinance No. 19, Series of 1992, the Revised Zoning
Ordinance of Nasugbu 82 which zoning ordinance was based on a Land Use Plan for
Planning Areas for New Development allegedly prepared by the University of the
Philippines. 83 Resolution No. 19 of the Sangguniang Bayan was approved by the
Sangguniang Panlalawigan of Batangas on March 8, 1993. 84

Petitioner claims that proclamation No. 1520 was also upheld by respondent
DAR in 1991 when it approved conversion of 1,827 hectares in Nasugbu into a
tourist area known as the Batulao Resort Complex, and 13.52 hectares in
Barangay Caylaway as within the potential tourist belt. 85 Petitioner present
evidence before us that these areas are adjacent to the haciendas subject of this
petition, hence, the haciendas should likewise be converted. Petitioner urges this
Court to take cognizance of the conversion proceedings and rule accordingly. 6
We do not agree. Respondent DAR's failure to observe due process in the
acquisition of petitioner's landholdings does not ipso facto give this Court the
power to adjudicate over petitioner's application for conversion of its haciendas
from agricultural to non-agricultural. The agency charged with the mandate of
approving or disapproving applications for conversion is the DAR.
At the time petitioner filed its application for conversion, the Rules of Procedure
governing the processing and approval of applications for land use conversion
was the DAR A.O. No. 2, Series of 1990. Under this A.O., the application for
conversion is filed with the MARO where the property is located. The MARO
reviews the application and its supporting documents and conducts field
investigation and ocular inspection of the property. The findings of the MARO
are subject to review and evaluation by the Provincial Agrarian Reform Officer
(PARO). The PARO may conduct further field investigation and submit a
supplemental report together with his recommendation to the Regional Agrarian
Reform Officer (RARO) who shall review the same. For lands less than five
hectares, the RARO shall approve or disapprove applications for conversion. For
lands exceeding five hectares, the RARO shall evaluate the PARO Report and
forward the records and his report to the Undersecretary for Legal Affairs.
Applications over areas exceeding fifty hectares are approved or disapproved by
the Secretary of Agrarian Reform.
The DAR's mandate over applications for conversion was first laid down in
Section 4 (j) and Section 5 (l) of Executive Order No. 129-A, Series of 1987 and
reiterated in the CARL and Memorandum Circular No. 54, Series of 1993 of the
Office of the President. The DAR's jurisdiction over applications for conversion
is provided as follows:
A. The Department of Agrarian Reform
(DAR) is mandated to "approve or disapprove
applications for conversion, restructuring or
readjustment of agricultural lands into nonagricultural uses," pursuant to Section 4 (j) of
Executive Order No. 129-A, Series of 1987.

B. Sec. 5 (l) of E.O. 129-A, Series of 1987,

vests in the DAR, exclusive authority to
approve or disapprove applications for
conversion of agricultural lands for residential,
commercial, industrial and other land uses.
C. Sec. 65 of R.A. No. 6657, otherwise known
as the Comprehensive Agrarian Reform Law
of 1988, likewise empowers the DAR to
authorize under certain conditions, the
conversion of agricultural lands.
D. Sec. 4 of Memorandum Circular No. 54,
Series of 1993 of the Office of the President,
provides that "action on applications for land
use conversion on individual landholdings
shall remain as the responsibility of the DAR,
which shall utilize as its primary reference,
documents on the comprehensive land use
plans and accompanying ordinances passed
upon and approved by the local government
units concerned, together with the National
Land Use Policy, pursuant to R.A. No. 6657
and E.O. No. 129-A. 87
Applications for conversion were initially governed by DAR A.O. No. 1, Series
of 1990 entitled "Revised Rules and Regulations Governing Conversion of
Private Agricultural Lands and Non-Agricultural Uses," and DAR A.O. No. 2,
Series of 1990 entitled "Rules of Procedure Governing the Processing and
Approval of Applications for Land Use Conversion." These A.O.'s and other
implementing guidelines, including Presidential issuances and national policies
related to land use conversion have been consolidated in DAR A.O. No. 07,
Series of 1997. Under this recent issuance, the guiding principle in land use
conversion is:
to preserve prime agricultural lands for food production while,
at the same time, recognizing the need of the other sectors of
society (housing, industry and commerce) for land, when
coinciding with the objectives of the Comprehensive Agrarian
Reform Law to promote social justice, industrialization and the
optimum use of land as a national resource for public welfare. 88

"Land Use" refers to the manner of utilization of land, including its allocation,
development and management. "Land Use Conversion" refers to the act or
process of changing the current use of a piece of agricultural land into some
other use as approved by the DAR. 89 The conversion of agricultural land to uses
other than agricultural requires field investigation and conferences with the
occupants of the land. They involve factual findings and highly technical matters
within the special training and expertise of the DAR. DAR A.O. No. 7, Series of
1997 lays down with specificity how the DAR must go about its task. This time, the
field investigation is not conducted by the MARO but by a special task force, known
as the Center for Land Use Policy Planning and Implementation (CLUPPI-DAR
Central Office). The procedure is that once an application for conversion is filed, the
CLUPPI prepares the Notice of Posting. The MARO only posts the notice and
thereafter issues a certificate to the fact of posting. The CLUPPI conducts the field
investigation and dialogues with the applicants and the farmer beneficiaries to
ascertain the information necessary for the processing of the application. The
Chairman of the CLUPPI deliberates on the merits of the investigation report and
recommends the appropriate action. This recommendation is transmitted to the
Regional Director, thru the Undersecretary, or Secretary of Agrarian Reform.
Applications involving more than fifty hectares are approved or disapproved by the
Secretary. The procedure does not end with the Secretary, however. The Order
provides that the decision of the Secretary may be appealed to the Office of the
President or the Court of Appeals, as the case may be, viz:
Appeal from the decision of the Undersecretary shall be made
to the Secretary, and from the Secretary to the Office of the
President or the Court of Appeals as the case may be. The mode
of appeal/motion for reconsideration, and the appeal fee, from
Undersecretary to the Office of the Secretary shall be the same
as that of the Regional Director to the Office of the Secretary. 90
Indeed, the doctrine of primary jurisdiction does not warrant a court to arrogate
unto itself authority to resolve a controversy the jurisdiction over which is
initially lodged with an administrative body of special competence. 91Respondent
DAR is in a better position to resolve petitioner's application for conversion, being
primarily the agency possessing the necessary expertise on the matter. The power to
determine whether Haciendas Palico, Banilad and Caylaway are non-agricultural,
hence, exempt from the coverage of the CARL lies with the DAR, not with this
Court.
Finally, we stress that the failure of respondent DAR to comply with the
requisites of due process in the acquisition proceedings does not give this Court
the power to nullify the CLOA's already issued to the farmer beneficiaries. To
assume the power is to short-circuit the administrative process, which has yet to
run its regular course. Respondent DAR must be given the chance to correct its
procedural lapses in the acquisition proceedings. In Hacienda Palico alone,

CLOA's were issued to 177 farmer beneficiaries in 1993. 92 Since then until the
present, these farmers have been cultivating their lands. 93 It goes against the basic
precepts of justice, fairness and equity to deprive these people, through no fault of
their own, of the land they till. Anyhow, the farmer beneficiaries hold the property in
trust for the rightful owner of the land.
IN VIEW WHEREOF, the petition is granted in part and the acquisition
proceedings over the three haciendas are nullified for respondent DAR's failure
to observe due process therein. In accordance with the guidelines set forth in this
decision and the applicable administrative procedure, the case is hereby
remanded to respondent DAR for proper acquisition proceedings and
determination of petitioner's application for conversion.
SO ORDERED.
Davide, Jr., C.J., Bellosillo, Vitug, Mendoza, Panganiban, Purisima, Buena,
Gonzaga-Reyes and De Leon, Jr., JJ., concur.
Melo, J., please see concurring and dissenting opinion.
Ynares-Santiago, J., concurring and dissenting opinion.
Kapunan, J., I join in the concurring and dissenting opinion of Justice C. Y.
Santiago.
Quisumbing, J., I join the in the concurring and dissenting opinion of J.
Santiago.
Pardo, J., I join the concurring and dissenting opinion of J. Santiago.
Separate Opinions

Presidential Proclamation No. 1520 has the force and effect of law unless
repealed. This law declared Nasugbu, Batangas as a tourist zone.
Considering the new and pioneering stage of the tourist industry in 1975, it can
safely be assumed that Proclamation 1520 was the result of empirical study and
careful determination, not political or extraneous pressures. It cannot be
disregarded by DAR or any other department of Government.
In Province of Camarines Sur, et al. vs. Court of Appeals, et al. (222 SCRA 173,
182 [1993]), we ruled that local governments need not obtain the approval of
DAR to reclassify lands from agricultural to non-agricultural use. In the present
case, more than the exercise of that power, the local governments were merely
putting into effect a law when they enacted the zoning ordinances in question.
Any doubts as to the factual correctness of the zoning reclassifications are
answered by the February 2, 1993 certification of the Department of Agriculture
that the subject landed estates are not feasible and economically viable for
agriculture, based on the examination of their slope, terrain, depth, irrigability,
fertility, acidity, and erosion considerations.
I agree with the ponencia's rejection of respondent's argument that agriculture is
not incompatible and may be enforced in an area declared by law as a tourist
zone. Agriculture may contribute to the scenic views and variety of countryside
profiles but the issue in this case is not the beauty of ricefields, cornfields, or
coconut groves. May land found to be non-agricultural and declared as a tourist
zone by law, be withheld from the owner's efforts to develop it as such? There
are also plots of land within Clark Field and other commercial-industrial zones
capable of cultivation but this does not subject them to compulsory land reform.
It is the best use of the land for tourist purposes, free trade zones, export
processing or the function to which it is dedicated that is the determining factor.
Any cultivation is temporary and voluntary.

MELO, J., concurring and dissenting opinion;

The other point I wish to emphasize is DAR's failure to follow its own
administrative orders and regulations in this case.

I concur in the ponencia of Justice Ynares-Santiago, broad and exhaustive as it is

in its treatment of the issues. However, I would like to call attention to two or
three points which I believe are deserving of special emphasis.

The contradictions between DAR administrative orders and its actions in the
present case may be summarized:

The apparent incongruity or shortcoming in the petition is DAR's disregard of a

law which settled the non-agricultural nature of the property as early as 1975.
Related to this are the inexplicable contradictions between DAR's own official
issuances and its challenged actuations in this particular case.

1. DAR Administrative Order No. 6, Series of 1994, subscribes to Department of

Justice Opinion No. 44, Series of 1990 that lands classified as nonagricultural prior to June 15, 1988 when the CARP Law was passed are exempt
from its coverage. By what right can DAR now ignore its own Guidelines in this
case of land declared as forming a tourism zone since 1975?

2. DAR Order dated January 22, 1991 granted the conversion of the adjacent and
contiguous property of Group Developers and Financiers, Inc. (GDFI) into the
Batulao Tourist Resort. Why should DAR have a contradictory stance in the
adjoining property of Roxas and Co., Inc. found to be similar in nature and
declared as such?
3. DAR Exemption Order, Case No. H-9999-050-97 dated May 17, 1999 only
recently exempted 13.5 hectares of petitioner's property also found in Caylaway
together, and similarly situated, with the bigger parcel (Hacienda Caylaway)
subject of this petition from CARL coverage. To that extent, it admits that its
earlier blanket objections are unfounded.

Southcoast Development Corporation also found in Nasugbu, Batangas, have

been cancelled on similar grounds as those in the case at bar.
The CLOAs in the instant case were issued over land declared as nonagricultural by a presidential proclamation and confirmed as such by actions of
the Department of Agriculture and the local government units concerned. The
CLOAs were issued over adjoining lands similarly situated and of like nature as
those declared by DAR as exempt from CARP coverage. The CLOAs were
surprisingly issued over property which were the subject of pending cases still
undecided by DAR. There should be no question over the CLOAs having been
improperly issued, for which reason, their cancellation is warranted.

4. DAR Administrative Order No. 3, Series of 1996 identifies the land outside of
CARP coverage as:
YNARES-SANTIAGO, J., concurring and dissenting opinion;
(a) Land found by DAR as no longer suitable
for agriculture and which cannot be given
appropriate valuation by the Land Bank;

I concur in the basic premises of the majority opinion. However, I dissent in its
final conclusions and the dispositive portion.

(b) Land where DAR has already issued a

conversion order;

With all due respect, the majority opinion centers on procedure but unfortunately
ignores the substantive merits which this procedure should unavoidably sustain.

(c) Land determined as exempt under DOJ

Opinions Nos. 44 and 181; or

The assailed decision of the Court of Appeals had only one basic reason for its
denial of the petition, i.e., the application of the doctrine of non-exhaustion of
administrative remedies. This Court's majority ponencia correctly reverses the
Court of Appeals on this issue. The ponencia now states that the issuance of
CLOA's to farmer beneficiaries deprived petitioner Roxas & Co. of its property
without just compensation. It rules that the acts of the Department of Agrarian
Reform are patently illegal. It concludes that petitioner's rights were violated,
and thus to require it to exhaust administrative remedies before DAR was not a
plain, speedy, and adequate remedy. Correctly, petitioner sought immediate
redress from the Court of Appeals to this Court.

(d) Land declared for non-agricultural use by

Presidential Proclamation.
It is readily apparent that the land in this case falls under all the above categories
except the second one. DAR is acting contrary to its own rules and regulations.
I should add that DAR has affirmed in a Rejoinder (August 20, 1999) the
issuance and effectivity of the above administrative orders.
DAR Administrative Order No. 3, Series of 1996, Paragraph 2 of Part II, Part III
and Part IV outlines the procedure for reconveyance of land where CLOAs have
been improperly issued. The procedure is administrative, detailed, simple, and
speedy. Reconveyance is implemented by DAR which treats the procedure as
"enshrined . . . in Section 50 of Republic Act No. 6657" (Respondent's
Rejoinder). Administrative Order No. 3, Series of 1996 shows there are no
impediments to administrative or judicial cancellations of CLOA's improperly
issued over exempt property. Petitioner further submits, and this respondent does
not refute, that 25 CLOAs covering 3,338 hectares of land owned by the Manila

However, I respectfully dissent from the judgment which remands the case to the
DAR. If the acts of DAR are patently illegal and the rights of Roxas & Co.
violated, the wrong decisions of DAR should be reversed and set aside. It
follows that the fruits of the wrongful acts, in this case the illegally issued
CLOAs, must be declared null and void.
Petitioner Roxas & Co. Inc. is the registered owner of three (3) haciendas located
in Nasugbu, Batangas, namely: Hacienda Palico comprising of an area of 1,024
hectares more or less, covered by Transfer Certificate of Title No. 985 (Petition,
Annex "G"; Rollo, p. 203); Hacienda Banilad comprising an area of 1,050

hectares and covered by TCT No. 924 (Petition, Annex "I"; Rollo, p. 205); and
Hacienda Caylaway comprising an area of 867.4571 hectares and covered by
TCT Nos. T-44655 (Petition, Annex "O"; Rollo, p. 216), T-44662 (Petition,
Annex "P";Rollo, p. 217), T-44663 (Petition, Annex "Q"; Rollo, p. 210) and T44664 (Petition, Annex "R"; Rollo, p. 221).
Sometime in 1992 and 1993, petitioner filed applications for conversion with
DAR. Instead of either denying or approving the applications, DAR ignored and
sat on them for seven (7) years. In the meantime and in acts of deceptive lipservice, DAR excluded some small and scattered lots in Palico and Caylaway
from CARP coverage. The majority of the properties were parceled out to
alleged farmer-beneficiaries, one at a time, even as petitioner's applications were
pending and unacted upon.
The majority ponencia cites Section 16 of Republic Act No. 6657 on the
procedure for acquisition of private lands.
The ponencia cites the detailed procedures found in DAR Administrative Order
No. 12, Series of 1989 for the identification of the land to be acquired. DAR did
not follow its own prescribed procedures. There was no valid issuance of a
Notice of Coverage and a Notice of Acquisition.
The procedure on the evaluation and determination of land valuation, the duties
of the Municipal Agrarian Reform Officer (MARO), the Barangay Agrarian
Reform Committee (BARC), Provincial Agrarian Reform Officer (PARO) and
the Bureau of Land Acquisition and Distribution (BLAD), the documentation
and reports on the step-by-step process, the screening of prospective Agrarian
Reform Beneficiaries (ARBs), the land survey and segregation survey plan, and
other mandatory procedures were not followed. The landowner was not properly
informed of anything going on.
Equally important, there was no payment of just compensation. I agree with
the ponencia that due process was not observed in the taking of petitioner's
properties. Since the DAR did not validly acquire ownership over the lands,
there was no acquired property to validly convey to any beneficiary. The CLOAs
were null and void from the start.
Petitioner states that the notices of acquisition were sent by respondents by
ordinary mail only, thereby disregarding the procedural requirement that notices
be served personally or by registered mail. This is not disputed by respondents,
but they allege that petitioner changed its address without notifying the DAR.
Notably, the procedure prescribed speaks of only two modes of service of notices
of acquisition personal service and service by registered mail. The non-

inclusion of other modes of service can only mean that the legislature
intentionally omitted them. In other words, service of a notice of acquisition
other than personally or by registered mail is not valid. Casus omissus pro
omisso habendus est. The reason is obvious. Personal service and service by
registered mail are methods that ensure the receipt by the addressee, whereas
service by ordinary mail affords no reliable proof of receipt.
Since it governs the extraordinary method of expropriating private property, the
CARL should be strictly construed. Consequently, faithful compliance with its
provisions, especially those which relate to the procedure for acquisition of
expropriated lands, should be observed. Therefore, the service by respondent
DAR of the notices of acquisition to petitioner by ordinary mail, not being in
conformity with the mandate of R.A. 6657, is invalid and ineffective.
With more reason, the compulsory acquisition of portions of Hacienda Palico,
for which no notices of acquisition were issued by the DAR, should be declared
invalid.
The entire ponencia, save for the last six (6) pages, deals with the mandatory
procedures promulgated by law and DAR and how they have not been complied
with. There can be no debate over the procedures and their violation. However, I
respectfully dissent in the conclusions reached in the last six pages. Inspite of all
the violations, the deprivation of petitioner's rights, the non-payment of just
compensation, and the consequent nullity of the CLOAs, the Court is remanding
the case to the DAR for it to act on the petitioner's pending applications for
conversion which have been unacted upon for seven (7) years.
Petitioner had applications for conversion pending with DAR. Instead of
deciding them one way or the other, DAR sat on the applications for seven (7)
years. At that same time it rendered the applications inutile by distributing
CLOAs to alleged tenants. This action is even worse than a denial of the
applications because DAR had effectively denied the application against the
applicant without rendering a formal decision. This kind of action preempted any
other kind of decision except denial. Formal denial was even unnecessary. In the
case of Hacienda Palico, the application was in fact denied on November 8,
1993.
There are indisputable and established factors which call for a more definite and
clearer judgment.
The basic issue in this case is whether or not the disputed property is agricultural
in nature and covered by CARP. That petitioner's lands are non-agricultural in
character is clearly shown by the evidence presented by petitioner, all of which

were not disputed by respondents. The disputed property is definitely not subject
to CARP.

petitioner's acts of voluntarily offering Hacienda Caylaway for sale and applying
for conversion its lands from agricultural to non-agricultural.

The nature of the land as non-agricultural has been resolved by the agencies with
primary jurisdiction and competence to decide the issue, namely (1) a
Presidential Proclamation in 1975; (2) Certifications from the Department of
Agriculture; (3) a Zoning Ordinance of the Municipality of Nasugbu, approved
by the Province of Batangas; and (4) by clear inference and admissions,
Administrative Orders and Guidelines promulgated by DAR itself.

Respondents, on the other hand, did not only ignore the administrative and
executive decisions. It also contended that the subject land should be deemed
agricultural because it is neither residential, commercial, industrial or timber.
The character of a parcel of land, however, is not determined merely by a process
of elimination. The actual use which the land is capable of should be the
primordial factor.

The records show that on November 20, 1975 even before the enactment of the
CARP law, the Municipality of Nasugbu, Batangas was declared a "tourist zone"
in the exercise of lawmaking power by then President Ferdinand E. Marcos
under Proclamation No. 1520 (Rollo, pp. 122-123). This Presidential
Proclamation is indubitably part of the law of the land.

RA 6657 explicitly limits its coverage thus:

On 20 March 1992 the Sangguniang Bayan of Nasugbu promulgated its

Resolution No. 19, a zonification ordinance (Rollo, pp. 124-200), pursuant to its
powers under Republic Act No. 7160, i.e., the Local Government Code of 1991.
The municipal ordinance was approved by the Sangguniang Panlalawigan of
Batangas (Rollo, p. 201). Under this enactment, portions of the petitioner's
properties within the municipality were re-zonified as intended and appropriate
for non-agricultural uses. These two issuances, together with Proclamation 1520,
should be sufficient to determine the nature of the land as non-agricultural. But
there is more.
The records also contain a certification dated March 1, 1993 from the Director of
Region IV of the Department of Agriculture that the disputed lands are no longer
economically feasible and sound for agricultural purposes (Rollo, p. 213).
DAR itself impliedly accepted and determined that the municipality of Nasugbu
is non-agricultural when it affirmed the force and effect of Presidential
Proclamation 1520. In an Order dated January 22, 1991, DAR granted the
conversion of the adjoining and contiguous landholdings owned by Group
Developer and Financiers, Inc. in Nasugbu pursuant to the Presidential
Proclamation. The property alongside the disputed properties is now known as
"Batulao Resort Complex". As will be shown later, the conversion of various
other properties in Nasugbu has been ordered by DAR, including a property
disputed in this petition, Hacienda Caylaway.
Inspite of all the above, the Court of Appeals concluded that the lands
comprising petitioner's haciendas are agricultural, citing, among other things,

The Comprehensive Agrarian Reform Law of 1998 shall cover,

regardless of tenurial arrangement and commodity produced, all
public and private agricultural lands as provided in
Proclamation No. 131 and Executive Order No. 229, including
other lands of the public domain suitable for agriculture.
More specifically, the following lands are covered by the
Comprehensive Agrarian Reform Program:
(a) All alienable and disposable lands of the public domain
devoted to or suitable for agriculture. No reclassification of
forest or mineral lands to agricultural lands shall be undertaken
after the approval of this Act until Congress, taking into
account, ecological, developmental and equity considerations,
shall have determined by law, the specific limits of the public
domain;
(b) All lands of the public domain in excess of the specific
limits as determined by Congress in the preceding paragraph;
(c) All other lands owned by the Government devoted to or
suitable for agriculture; and
(d) All private lands devoted to or suitable for a
agriculture regardless of the agricultural products raised or that
can be raised thereon." (RA 6657, Sec. 4; emphasis provided)
In Luz Farms v. Secretary of the Department of Agrarian Reform and Natalia
Realty, Inc. v. Department of Agrarian Reform, this Court had occasion to rule
that agricultural lands are only those which are arable and suitable.

It is at once noticeable that the common factor that classifies land use as
agricultural, whether it be public or private land, is its suitability for agriculture.
In this connection, RA 6657 defines "agriculture" as follows:
Agriculture, Agricultural Enterprises or Agricultural Activity
means the cultivation of the soil, planting of crops, growing of
fruit trees, raising of livestock, poultry or fish, including the
harvesting of such farm products, and other farm activities, and
practices performed by a farmer in conjunction with such
farming operations done by persons whether natural or
juridical. (RA 6657, sec. 3[b])
In the case at bar, petitioner has presented certifications issued by the
Department of Agriculture to the effect that Haciendas Palico, Banilad and
Caylaway are not feasible and economically viable for agricultural development
due to marginal productivity of the soil, based on an examination of their slope,
terrain, depth, irrigability, fertility, acidity, and erosion factors (Petition, Annex
"L", Rollo, p. 213; Annex "U", Rollo, p. 228). This finding should be accorded
respect considering that it came from competent authority, said Department
being the agency possessed with the necessary expertise to determine suitability
of lands to agriculture. The DAR Order dated January 22, 1991 issued by
respondent itself stated that the adjacent land now known as the Batulao Resort
Complex is hilly, mountainous, and with long and narrow ridges and deep
gorges. No permanent sites are planted. Cultivation is by kaingin method. This
confirms the findings of the Department of Agriculture.
Parenthetically, the foregoing finding of the Department of Agriculture also
explains the validity of the reclassification of petitioner's lands by the
Sangguniang Bayan of Nasugbu, Batangas, pursuant to Section 20 of the Local
Government Code of 1991. It shows that the condition imposed by respondent
Secretary of Agrarian Reform on petitioner for withdrawing its voluntary offer to
sell Hacienda Caylaway, i.e., that the soil be unsuitable for agriculture, has been
adequately met. In fact, the DAR in its Order in Case No. A-9999-050-97,
involving a piece of land also owned by petitioner and likewise located in
Caylaway, exempted it from the coverage of CARL (Order dated May 17, 1999;
Annex "D" of Petitioner's Manifestation), on these grounds.
Furthermore, and perhaps more importantly, the subject lands are within an area
declared in 1975 by Presidential Proclamation No. 1520 to be part of a tourist
zone. This determination was made when the tourism prospects of the area were
still for the future. The studies which led to the land classification were relatively
freer from pressures and, therefore, more objective and open-minded.
Respondent, however, contends that agriculture is not incompatible with the
lands' being part of a tourist zone since "agricultural production, by itself, is a

natural asset and, if properly set, can command tremendous aesthetic value in the
form of scenic views and variety of countryside profiles." (Comment, Rollo,
579).
The contention is untenable. Tourist attractions are not limited to scenic
landscapes and lush greeneries. Verily, tourism is enhanced by structures and
facilities such as hotels, resorts, rest houses, sports clubs and golf courses, all of
which bind the land and render it unavailable for cultivation. As aptly described
by petitioner:
The development of resorts, golf courses, and commercial
centers is inconsistent with agricultural development. True,
there can be limited agricultural production within the context
of tourism development. However, such small scale farming
activities will be dictated by, and subordinate to the needs or
tourism development. In fact, agricultural use of land within
Nasugbu may cease entirely if deemed necessary by the
Department of Tourism (Reply, Rollo, p. 400).
The lands subject hereof, therefore, are non-agricultural. Hence, the voluntary
offer to sell Hacienda Caylaway should not be deemed an admission that the land
is agricultural. Rather, the offer was made by petitioner in good faith, believing
at the time that the land could still be developed for agricultural production.
Notably, the offer to sell was made as early as May 6, 1988, before the soil
thereon was found by the Department of Agriculture to be unsuitable for
agricultural development (the Certifications were issued on 2 February 1993 and
1 March 1993). Petitioner's withdrawal of its voluntary offer to sell, therefore,
was not borne out of a whimsical or capricious change of heart. Quite simply, the
land turned out to be outside of the coverage of the CARL, which by express
provision of RA 6657, Section 4, affects only public and private agricultural
lands. As earlier stated, only on May 17, 1999, DAR Secretary Horacio Morales,
Jr. approved the application for a lot in Caylaway, also owned by petitioner, and
confirmed the seven (7) documentary evidences proving the Caylaway area to be
non-agricultural (DAR Order dated 17 May 1999, in Case No. A-9999-050-97,
Annex "D" Manifestation).
The DAR itself has issued administrative circulars governing lands which are
outside of CARP and may not be subjected to land reform. Administrative Order
No. 3, Series of 1996 declares in its policy statement what landholdings are
outside the coverage of CARP. The AO is explicit in providing that such noncovered properties shall be reconveyed to the original transferors or owners.
These non-covered lands are:

a. Land, or portions thereof, found to be no

longer suitable for agriculture and, therefore,
could not be given appropriate valuation by
the Land Bank of the Philippines (LBP);
b. Those were a Conversion Order has already
been issued by the DAR allowing the use of
the landholding other than for agricultural
purposes in accordance with Section 65 of
R.A. No. 6657 and Administrative Order No.
12, Series of 1994;
c. Property determined to be exempted from
CARP coverage pursuant to Department of
Justice Opinion Nos. 44 and 181; or
d. Where a Presidential Proclamation has been
issued declaring the subject property for
certain uses other than agricultural. (Annex
"F", Manifestation dated July 23, 1999)
The properties subject of this Petition are covered by the first, third, and fourth
categories of the Administrative Order. The DAR has disregarded its own
issuances which implement the law.
To make the picture clearer, I would like to summarize the law, regulations,
ordinances, and official acts which show beyond question that the disputed
property is non-agricultural, namely:
(a) The Law. Proclamation 1520 dated November 20, 1975 is
part of the law of the land. It declares the area in and around
Nasugbu, Batangas, as a Tourist Zone. It has not been repealed,
and has in fact been used by DAR to justify conversion of other
contiguous and nearby properties of other parties.
(b) Ordinances of Local Governments. Zoning ordinance of the
Sangguniang Bayan of Nasugbu, affirmed by the Sangguniang
Panlalawigan of Batangas, expressly defines the property as
tourist, not agricultural. The power to classify its territory is
given by law to the local governments.
(c) Certification of the Department of Agriculture that the
property is not suitable and viable for agriculture. The factual

nature of the land, its marginal productivity and non-economic

feasibility for cultivation, are described in detail.
(d) Acts of DAR itself which approved conversion of contiguous
or adjacent land into the Batulao Resorts Complex. DAR
described at length the non-agricultural nature of Batulao and of
portion of the disputed property, particularly Hacienda
Caylaway.
(e) DAR Circulars and Regulations. DAR Administrative Order
No. 6, Series of 1994 subscribes to the Department of Justice
opinion that the lands classified as non-agricultural before the
CARP Law, June 15, 1988, are exempt from CARP. DAR Order
dated January 22, 1991 led to the Batulao Tourist Area. DAR
Order in Case No. H-9999-050-97, May 17, 1999, exempted
13.5 hectares of Caylaway, similarly situated and of the same
nature as Batulao, from coverage. DAR Administrative Order
No. 3, Series of 1996, if followed, would clearly exclude
subject property from coverage.
As earlier shown, DAR has, in this case, violated its own circulars, rules and
regulations.
In addition to the DAR circulars and orders which DAR itself has not observed,
the petitioner has submitted a municipal map of Nasugbu, Batangas (Annex "E",
Manifestation dated July 23, 1999). The geographical location of Palico,
Banilad, and Caylaway in relation to the GDFI property, now Batulao Tourist
Resort, shows that the properties subject of this case are equally, if not more so,
appropriate for conversion as the GDFI resort.
Petitioner's application for the conversion of its lands from agricultural to nonagricultural was meant to stop the DAR from proceeding with the compulsory
acquisition of the lands and to seek a clear and authoritative declaration that said
lands are outside of the coverage of the CARL and can not be subjected to
agrarian reform.
Petitioner assails respondent's refusal to convert its lands to non-agricultural use
and to recognize Presidential Proclamation No. 1520, stating that respondent
DAR has not been consistent in its treatment of applications of this nature. It
points out that in the other case involving adjoining lands in Nasugbu, Batangas,
respondent DAR ordered the conversion of the lands upon application of Group
Developers and Financiers, Inc. Respondent DAR, in that case, issued an Order

dated January 22, 1991 denying the motion for reconsideration filed by the
farmers thereon and finding that:
In fine, on November 27, 1975, or before the movants filed
their instant motion for reconsideration, then President
Ferdinand E. Marcos issued Proclamation No. 1520, declaring
the municipalities of Maragondon and Ternate in the province
of Cavite and the municipality of Nasugbu in the province of
Batangas as tourist zone. Precisely, the landholdings in question
are included in such proclamation. Up to now, this office is not
aware that said issuance has been repealed or amended
(Petition, Annex "W"; Rollo, p. 238).
The DAR Orders submitted by petitioner, and admitted by DAR in its Rejoinder
(Rejoinder of DAR dated August 20, 1999), show that DAR has been
inconsistent to the extent of being arbitrary.
Apart from the DAR Orders approving the conversion of the adjoining property
now called Batulao Resort Complex and the DAR Order declaring parcels of the
Caylaway property as not covered by CARL, a major Administrative Order of
DAR may also be mentioned.
The Department of Justice in DOJ Opinion No. 44 dated March 16, 1990 (Annex
"A" of Petitioner's Manifestation) stated that DAR was given authority to
approve land conversions only after June 15, 1988 when RA 6657, the CARP
Law, became effective. Following the DOJ Opinion, DAR issued its AO No. 06,
Series of 1994 providing for the Guidelines on Exemption Orders (Annex
"B", Id.). The DAR Guidelines state that lands already classified as nonagricultural before the enactment of CARL are exempt from its coverage.
Significantly, the disputed properties in this case were classified as tourist zone
by no less than a Presidential Proclamation as early as 1975, long before 1988.
The above, petitioner maintains, constitute unequal protection of the laws.
Indeed, the Constitution guarantees that "(n)o person shall be deprived of life,
liberty or property without due process of law, nor shall any person be denied the
equal protection of the laws" (Constitution, Art. III, Sec. 1). Respondent DAR,
therefore, has no alternative but to abide by the declaration in Presidential
Proclamation 1520, just as it did in the case of Group Developers and Financiers,
Inc., and to treat petitioners' properties in the same way it did the lands of Group
Developers, i.e., as part of a tourist zone not suitable for agriculture.
On the issue of non-payment of just compensation which results in a taking of
property in violation of the Constitution, petitioner argues that the opening of a

trust account in its favor did not operate as payment of the compensation within
the meaning of Section 16 (e) of RA 6657. In Land Bank of the Philippines
v. Court of Appeals (249 SCRA 149, at 157 [1995]), this Court struck down as
null and void DAR Administrative Circular No. 9, Series of 1990, which
provides for the opening of trust accounts in lieu of the deposit in cash or in
bonds contemplated in Section 16 (e) of RA 6657.
It is very explicit therefrom (Section 16 [e]) that the deposit
must be made only in "cash" or in "LBP bonds." Nowhere does
it appear nor can it be inferred that the deposit can be made in
any other form. If it were the intention to include a "trust
account" among the valid modes of deposit, that should have
been made express, or at least, qualifying words ought to have
appeared from which it can be fairly deduced that a "trust
account" is allowed. In sum, there is no ambiguity in Section
16(e) of RA 6657 to warrant an expanded construction of the
term "deposit."
xxx xxx xxx
In the present suit, the DAR clearly overstepped the limits of its
powers to enact rules and regulations when it issued
Administrative Circular No. 9. There is no basis in allowing the
opening of a trust account in behalf of the landowner as
compensation for his property because, as heretofore discussed,
section 16(e) of RA 6657 is very specific that the deposit must
be made only in "cash" or in "LBP bonds." In the same vein,
petitioners cannot invoke LRA Circular Nos. 29, 29-A and 54
because these implementing regulations cannot outweigh the
clear provision of the law. Respondent court therefore did not
commit any error in striking down Administrative Circular No.
9 for being null and void.
There being no valid payment of just compensation, title to petitioner's
landholdings cannot be validly transferred to the Government. A close scrutiny
of the procedure laid down in Section 16 of RA 6657 shows the clear legislative
intent that there must first be payment of the fair value of the land subject to
agrarian reform, either directly to the affected landowner or by deposit of cash or
LBP bonds in the DAR-designated bank, before the DAR can take possession of
the land and request the register of deeds to issue a transfer certificate of title in
the name of the Republic of the Philippines. This is only proper inasmuch as title
to private property can only be acquired by the government after payment of just
compensation In Association of Small Landowners in the Philippines
v. Secretary of Agrarian Reform (175 SCRA 343, 391 [1989]), this Court held:

The CARP Law, for its part, conditions the transfer of

possession and ownership of the land to the government on
receipt of the landowner of the corresponding payment or the
deposit by the DAR of the compensation in cash or LBP bonds
with an accessible bank. Until then, title also remains with the
landowner. No outright change of ownership is contemplated
either.
Necessarily, the issuance of the CLOAs by respondent DAR on October 30,
1993 and their distribution to farmer-beneficiaries were illegal inasmuch as no
valid payment of compensation for the lands was as yet effected. By law,
Certificates of Land Ownership Award are issued only to the beneficiaries after
the DAR takes actual possession of the land (RA 6657, Sec. 24), which in turn
should only be after the receipt by the landowner of payment or, in case of
rejection or no response from the landowner, after the deposit of the
compensation for the land in cash or in LBP bonds (RA 6657, Sec. 16[e]).
Respondents argue that the Land Bank ruling should not be made to apply to the
compulsory acquisition of petitioner's landholdings in 1993, because it occurred
prior to the promulgation of the said decision (October 6, 1995). This is
untenable. Laws may be given retroactive effect on constitutional considerations,
where the prospective application would result in a violation of a constitutional
right. In the case at bar, the expropriation of petitioner's lands was effected
without a valid payment of just compensation, thus violating the Constitutional
mandate that "(p)rivate property shall not be taken for public use without just
compensation" (Constitution, Art. III, Sec. 9). Hence, to deprive petitioner of the
benefit of the Land Bank ruling on the mere expedient that it came later than the
actual expropriation would be repugnant to petitioner's fundamental rights.
The controlling last two (2) pages of the ponencia state:
Finally, we stress that the failure of respondent DAR to comply
with the requisites of due process in the acquisition proceedings
does not give this Court the power to nullify the CLOA's
already issued to the farmer beneficiaries. To assume the power
is to short-circuit the administrative process, which has yet to
run its regular course. Respondent DAR must be given the
chance to correct its procedural lapses in the acquisition
proceedings. In Hacienda Palico alone, CLOA's were issued to
177 farmer beneficiaries in 1993. Since then until the present,
these farmers have been cultivating their lands. It goes against
the basic precepts of justice, fairness and equity to deprive these
people, through no fault of their own, of the land they till.

Anyhow, the farmer beneficiaries hold the property in trust for

the rightful owner of the land.
I disagree with the view that this Court cannot nullify illegally issued CLOA's
but must ask the DAR to first reverse and correct itself.
Given the established facts, there was no valid transfer of petitioner's title to the
Government. This being so, there was also no valid title to transfer to third
persons; no basis for the issuance of CLOAs.
Equally important, CLOAs do not have the nature of Torrens Title.
Administrative cancellation of title is sufficient to invalidate them.
The Court of Appeals said so in its Resolution in this case. It stated:
Contrary to the petitioner's argument that issuance of CLOAs to
the beneficiaries prior to the deposit of the offered price
constitutes violation of due process, it must be stressed that the
mere issuance of the CLOAs does not vest in the farmer/grantee
ownership of the land described therein.
At most the certificate merely evidences the government's
recognition of the grantee as the party qualified to avail of the
statutory mechanisms for the acquisition of ownership of the
land. Thus failure on the part of the farmer/grantee to comply
with his obligations is a ground for forfeiture of his certificate
of transfer. Moreover, where there is a finding that the property
is indeed not covered by CARP, then reversion to the landowner
shall consequently be made, despite issuance of CLOAs to the
beneficiaries. (Resolution dated January 17, 1997, p. 6)
DAR Administrative Order 03, Series of 1996 (issued on August 8, 1996; Annex
"F" of Petitioner's Manifestation) outlines the procedure for the reconveyance to
landowners of properties found to be outside the coverage of CARP. DAR itself
acknowledges that they can administratively cancel CLOAs if found to be
erroneous. From the detailed provisions of the Administrative Order, it is
apparent that there are no impediments to the administrative cancellation of
CLOAs improperly issued over exempt properties. The procedure is followed all
over the country. The DAR Order spells out that CLOAs are not Torrens Titles.
More so if they affect land which is not covered by the law under which they
were issued. In its Rejoinder, respondent DAR states:

3.2. And, finally, on the authority of DAR/DARAB to cancel

erroneously issued Emancipation Patents (EPs) or Certificate of
Landownership Awards (CLOAs), same is enshrined, it is
respectfully submitted, in Section 50 of Republic Act No. 6657.
In its Supplemental Manifestation, petitioner points out, and this has not been
disputed by respondents, that DAR has also administratively cancelled twenty
five (25) CLOAs covering Nasugbu properties owned by the Manila Southcoast
Development Corporation near subject Roxas landholdings. These lands were
found not suitable for agricultural purposes because of soil and topographical
characteristics similar to those of the disputed properties in this case.
The former DAR Secretary, Benjamin T. Leong, issued DAR Order dated
January 22, 1991 approving the development of property adjacent and
contiguous to the subject properties of this case into the Batulao Tourist Resort.
Petitioner points out that Secretary Leong, in this Order, has decided that the
land
1. Is, as contended by the petitioner GDFI "hilly, mountainous,
and characterized by poor soil condition and nomadic method
of cultivation, hence not suitable to agriculture."
2. Has as contiguous properties two haciendas of Roxas y
Cia and found by Agrarian Reform Team Leader Benito Viray
to be "generally rolling, hilly and mountainous and strudded
(sic) with long and narrow ridges and deep gorges. Ravines are
steep grade ending in low dry creeks."
3. Is found in an. area where "it is quite difficult to provide
statistics on rice and corn yields because there are no permanent
sites planted. Cultivation is by Kaingin Method."
4. Is contiguous to Roxas Properties in the same area where
"the people entered the property surreptitiously and were
difficult to stop because of the wide area of the two haciendas
and that the principal crop of the area is sugar . . .." (emphasis
supplied).
I agree with petitioner that under DAR AO No. 03, Series of 1996, and unlike
lands covered by Torrens Titles, the properties falling under improperly issued
CLOAs are cancelled by mere administrative procedure which the Supreme
Court can declare in cases properly and adversarially submitted for its decision.
If CLOAs can under the DAR's own order be cancelled administratively, with

more reason can the courts, especially the Supreme Court, do so when the matter
is clearly in issue.
With due respect, there is no factual basis for the allegation in the motion for
intervention that farmers have been cultivating the disputed property.
The property has been officially certified as not fit for agriculture based on slope,
terrain, depth, irrigability, fertility, acidity, and erosion. DAR, in its Order dated
January 22, 1991, stated that "it is quite difficult to provide statistics on rice and
corn yields (in the adjacent property) because there are no permanent sites
planted. Cultivation is by kaingin method." Any allegations of cultivation,
feasible and viable, are therefore falsehoods.
The DAR Order on the adjacent and contiguous GDFI property states that "(T)he
people entered the property surreptitiously and were difficult to stop . . .."
The observations of Court of Appeals Justices Verzola and Magtolis in this
regard, found in their dissenting opinion (Rollo, p. 116), are relevant:
2.9 The enhanced value of land in Nasugbu, Batangas, has
attracted unscrupulous individuals who distort the spirit of the
Agrarian Reform Program in order to turn out quick profits.
Petitioner has submitted copies of CLOAs that have been issued
to persons other than those who were identified in the
Emancipation Patent Survey Profile as legitimate Agrarian
Reform beneficiaries for particular portions of petitioner's
lands. These persons to whom the CLOAs were awarded,
according to petitioner, are not and have never been workers in
petitioner's lands. Petitioners say they are not even from
Batangas but come all the way from Tarlac. DAR itself is not
unaware of the mischief in the implementation of the CARL in
some areas of the country, including Nasugbu. In fact, DAR
published a "WARNING TO THE PUBLIC" which appeared in
the Philippine Daily Inquirer of April 15, 1994 regarding this
malpractice.
2.10 Agrarian Reform does not mean taking the agricultural
property of one and giving it to another and for the latter to
unduly benefit therefrom by subsequently "converting" the
same property into non-agricultural purposes.
2.11 The law should not be interpreted to grant power to the
State, thru the DAR, to choose who should benefit from multi-

million peso deals involving lands awarded to supposed

agrarian reform beneficiaries who then apply for conversion,
and thereafter sell the lands as non-agricultural land.
Respondents, in trying to make light of this problem, merely emphasize that
CLOAs are not titles. They state that "rampant selling of rights", should this
occur, could be remedied by the cancellation or recall by DAR.
In the recent case of "Hon. Carlos O. Fortich, et. al. vs. Hon. Renato C. Corona,
et. al." (G.R. No. 131457, April 24, 1998), this Court found the CLOAs given to
the respondent farmers to be improperly issued and declared them invalid.
Herein petitioner Roxas and Co., Inc. has presented a stronger case than
petitioners in the aforementioned case. The procedural problems especially the
need for referral to the Court of Appeals are not present. The instant petition
questions the Court of Appeals decision which acted on the administrative
decisions. The disputed properties in the present case have been declared nonagricultural not so much because of local government action but by Presidential
Proclamation. They were found to be non-agricultural by the Department of
Agriculture, and through unmistakable implication, by DAR itself. The
zonification by the municipal government, approved by the provincial
government, is not the only basis.
On a final note, it may not be amiss to stress that laws which have for their
object the preservation and maintenance of social justice are not only meant to
favor the poor and underprivileged. They apply with equal force to those who,
notwithstanding their more comfortable position in life, are equally deserving of
protection from the courts. Social justice is not a license to trample on the rights
of the rich in the guise of defending the poor, where no act of injustice or abuse
is being committed against them. As we held in Land Bank (supra.):
It has been declared that the duty of the court to protect the
weak and the underprivileged should not be carried out to such
an extent as to deny justice to the landowner whenever truth
and justice happen to be on his side. As eloquently stated by
Justice Isagani Cruz:
. . . social justice or any justice for that
matter is for the deserving, whether he be a
millionaire in his mansion or a pauper in his
hovel. It is true that, in case of reasonable
doubt, we are called upon to tilt the balance in
favor of the poor simply because they are
poor, to whom the Constitution fittingly

extends its sympathy and compassion. But

never is it justified to prefer the poor simply
because they are poor, or to eject the rich
simply because they are rich, for justice must
always be served, for poor and rich alike,
according to the mandate of the law.
IN THE LIGHT OF THE FOREGOING, I vote to grant the petition
for certiorari; and to declare Haciendas Palico, Banilad and Caylaway, all
situated in Nasugbu, Batangas, to be non-agricultural and outside the scope of
Republic Act No. 6657. I further vote to declare the Certificates of Land
Ownership Award issued by respondent Department of Agrarian Reform null and
void and to enjoin respondents from proceeding with the compulsory acquisition
of the lands within the subject properties. I finally vote to DENY the motion for
intervention.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

HACIENDA LUISITA,
INCORPORATED,
Petitioner,
LUISITA INDUSTRIAL PARK
CORPORATION and RIZAL
COMMERCIAL BANKING
CORPORATION,
Petitioners-in-Intervention,
- versus PRESIDENTIAL AGRARIAN
REFORM COUNCIL; SECRETARY
NASSER PANGANDAMAN OF THE
DEPARTMENT OF AGRARIAN
REFORM; ALYANSA NG MGA
MANGGAGAWANG BUKID NG
HACIENDA LUISITA, RENE
GALANG, NOEL MALLARI, and
JULIO SUNIGA[1] and his
SUPERVISORY GROUP OF THE
HACIENDA LUISITA, INC. and
WINDSOR ANDAYA,
Respondents.

G.R. No. 171101

For resolution are the (1) Motion for Clarification and
Present:
Partial Reconsideration dated July 21, 2011 filed by
petitioner Hacienda Luisita, Inc. (HLI); (2) Motion for
CORONA, C.J.,
Partial Reconsideration dated July 20, 2011 filed by public
CARPIO,
respondents Presidential Agrarian Reform Council (PARC)
VELASCO, JR.,
and Department of Agrarian Reform (DAR); (3) Motion for
LEONARDO-DE CASTRO,
Reconsideration dated July 19, 2011 filed by private
BRION,
respondent Alyansa ng mga Manggagawang Bukid sa
PERALTA,
BERSAMIN,
Hacienda
Luisita
(AMBALA);
(4)Motion
for
DEL CASTILLO,
Reconsideration dated July 21, 2011 filed by respondentABAD,
intervenor Farmworkers Agrarian Reform Movement, Inc.
VILLARAMA, JR., (FARM); (5) Motion for Reconsideration dated July 21,
PEREZ,
2011 filed by private respondents Noel Mallari, Julio
MENDOZA, and
Suniga, Supervisory Group of Hacienda Luisita, Inc.
SERENO,
(Supervisory Group) and Windsor Andaya (collectively
REYES,
PERLAS-BERNABE, referred to as Mallari, et al.); and (6) Motion for
Reconsideration dated July 22, 2011 filed by private
respondents Rene Galang and AMBALA.[2]
Promulgated:
November 22, 2011

x----------------------------------------------------------------------------------------x
R E S O LUTIO N
VELASCO, JR., J.:

On July 5, 2011, this Court promulgated a

Decision[3] in the above-captioned case, denying the petition
filed by HLI and affirming Presidential Agrarian Reform
Council (PARC) Resolution No. 2005-32-01 dated
December 22, 2005 and PARC Resolution No. 2006-34-01
dated May 3, 2006 with the modification that the original
6,296 qualified farmworker-beneficiaries of Hacienda
Luisita (FWBs) shall have the option to remain as
stockholders of HLI.

In its Motion for Clarification and Partial

Reconsideration dated July 21, 2011, HLI raises the
following issues for Our consideration:
A
IT IS NOT PROPER, EITHER IN LAW OR IN
EQUITY, TO DISTRIBUTE TO THE
ORIGINAL FWBs OF 6,296 THE UNSPENT
OR UNUSED BALANCE OF THE PROCEEDS
OF THE SALE OF THE 500 HECTARES AND
80.51 HECTARES OF THE HLI LAND,
BECAUSE:
(1) THE PROCEEDS OF THE SALE BELONG
TO
THE
CORPORATION,
HLI,
AS
CORPORATE CAPITAL AND ASSETS IN
SUBSTITUTION FOR THE PORTIONS OF ITS
LAND ASSET WHICH WERE SOLD TO
THIRD PARTY;
(2) TO DISTRIBUTE THE CASH SALES
PROCEEDS OF THE PORTIONS OF THE
LAND ASSET TO THE FWBs, WHO ARE
STOCKHOLDERS OF HLI, IS TO DISSOLVE
THE CORPORATION AND DISTRIBUTE THE
PROCEEDS AS LIQUIDATING DIVIDENDS
WITHOUT EVEN PAYING THE CREDITORS
OF THE CORPORATION;
(3) THE DOING OF SAID ACTS WOULD
VIOLATE THE STRINGENT PROVISIONS OF
THE
CORPORATION
CODE
AND
CORPORATE PRACTICE.

B
IT IS NOT PROPER, EITHER IN LAW OR IN
EQUITY, TO RECKON THE PAYMENT OF
JUST COMPENSATION FROM NOVEMBER
21, 1989 WHEN THE PARC, THEN UNDER
THE CHAIRMANSHIP OF DAR SECRETARY
MIRIAM
DEFENSOR-SANTIAGO,
APPROVED THE STOCK DISTRIBUTION
PLAN (SDP) PROPOSED BY TADECO/HLI,
BECAUSE:
(1) THAT PARC RESOLUTION NO. 89-12-2
DATED NOVEMBER 21, 1989 WAS NOT THE
ACTUAL TAKING OF THE TADECOs/HLIs
AGRICULTURAL LAND;
(2) THE RECALL OR REVOCATION UNDER
RESOLUTION NO. 2005-32-01 OF THAT SDP
BY THE NEW PARC UNDER THE
CHAIRMANSHIP OF DAR SECRETARY
NASSER PANGANDAMAN ON DECEMBER
22, 2005 OR 16 YEARS EARLIER WHEN THE
SDP WAS APPROVED DID NOT RESULT IN
ACTUAL TAKING ON NOVEMBER 21, 1989;
(3) TO PAY THE JUST COMPENSATION AS
OF NOVEMBER 21, 1989 OR 22 YEARS
BACK WOULD BE ARBITRARY, UNJUST,
AND OPPRESSIVE, CONSIDERING THE
IMPROVEMENTS, EXPENSES IN THE
MAINTENANCE AND PRESERVATION OF
THE LAND, AND RISE IN LAND PRICES OR
VALUE OF THE PROPERTY.

On the other hand, PARC and DAR, through the

Office of the Solicitor General (OSG), raise the following
issues in their Motion for Partial Reconsideration dated July
20, 2011:
THE DOCTRINE OF OPERATIVE FACT
DOES NOT APPLY TO THIS CASE FOR THE
FOLLOWING REASONS:
I
THERE IS NO LAW OR RULE WHICH HAS
BEEN INVALIDATED ON THE GROUND OF
UNCONSTITUTIONALITY; AND
II
THIS DOCTRINE IS A RULE OF EQUITY
WHICH MAY BE APPLIED ONLY IN THE
ABSENCE OF A LAW. IN THIS CASE, THERE
IS A POSITIVE LAW WHICH MANDATES
THE DISTRIBUTION OF THE LAND AS A
RESULT OF THE REVOCATION OF THE
STOCK DISTRIBUTION PLAN (SDP).

For its part, AMBALA poses the following issues in

its Motion for Reconsideration dated July 19, 2011:
I
THE MAJORITY OF THE MEMBERS OF THE
HONORABLE COURT, WITH DUE RESPECT,
ERRED IN HOLDING THAT SECTION 31 OF

REPUBLIC ACT 6657

CONSTITUTIONAL.

(RA

6657)

IS

II
THE MAJORITY OF THE MEMBERS OF THE
HONORABLE COURT, WITH DUE RESPECT,
ERRED IN HOLDING THAT ONLY THE
[PARCS] APPROVAL OF HLIs PROPOSAL
FOR STOCK DISTRIBUTION UNDER CARP
AND THE [SDP] WERE REVOKED AND NOT
THE STOCK DISTRIBUTION OPTION
AGREEMENT (SDOA).
III
THE MAJORITY OF THE MEMBERS OF THE
HONORABLE COURT, WITH DUE RESPECT,
ERRED IN APPLYING THE DOCTRINE OF
OPERATIVE FACTS AND IN MAKING THE
[FWBs] CHOOSE TO OPT FOR ACTUAL
LAND DISTRIBUTION OR TO REMAIN AS
STOCKHOLDERS OF [HLI].
IV
THE MAJORITY OF THE MEMBERS OF THE
HONORABLE COURT, WITH DUE RESPECT,
ERRED IN HOLDING THAT IMPROVING
THE ECONOMIC STATUS OF FWBs IS NOT
AMONG THE LEGAL OBLIGATIONS OF HLI
UNDER THE SDP AND AN IMPERATIVE
IMPOSITION
BY
[RA
6657]
AND
DEPARTMENT OF AGRARIAN REFORM
ADMINISTRATIVE ORDER NO. 10 (DAO 10).

V
THE HONORABLE COURT, WITH DUE
RESPECT, ERRED IN HOLDING THAT THE
CONVERSION OF THE AGRICULTURAL
LANDS
DID
NOT
VIOLATE
THE
CONDITIONS OF RA 6657 AND DAO 10.
VI
THE HONORABLE COURT, WITH DUE
RESPECT, ERRED IN HOLDING THAT
PETITIONER IS ENTITLED TO PAYMENT OF
JUST COMPENSATION. SHOULD THE
HONORABLE
COURT
AFFIRM
THE
ENTITLEMENT OF THE PETITIONER TO
JUST COMPENSATION, THE SAME SHOULD
BE PEGGED TO FORTY THOUSAND PESOS
(PhP 40,000.00) PER HECTARE.
VII
THE HONORABLE COURT, WITH DUE
RESPECT, ERRED IN HOLDING THAT
LUISITA INDUSTRIAL PARK CORP. (LIPCO)
AND RIZAL COMMERCIAL BANKING
CORPORATION (RCBC) ARE INNOCENT
PURCHASERS FOR VALUE.

In its Motion for Reconsideration dated July 21, 2011,

FARM similarly puts forth the following issues:
I

THE HONORABLE SUPREME COURT

SHOULD HAVE STRUCK DOWN SECTION
31
OF
[RA
6657]
FOR
BEING
UNCONSTITUTIONAL.
THE
CONSTITUTIONALITY ISSUE THAT WAS
RAISED
BY
THE
RESPONDENTSINTERVENORS IS THE LIS MOTAOF THE
CASE.
II
THE HONORABLE SUPREME COURT
SHOULD NOT HAVE APPLIED THE
DOCTRINE OF OPERATIVE FACT TO THE
CASE. THE OPTION GIVEN TO THE
FARMERS TO REMAIN AS STOCKHOLDERS
OF HACIENDA LUISITA IS EQUIVALENT TO
AN OPTION FOR HACIENDA LUISITA TO
RETAIN LAND IN DIRECT VIOLATION OF
THE
COMPREHENSIVE
AGRARIAN
REFORM LAW. THE DECEPTIVE STOCK
DISTRIBUTION
OPTION
/
STOCK
DISTRIBUTION PLAN CANNOT JUSTIFY
SUCH RESULT, ESPECIALLY AFTER THE
SUPREME COURT HAS AFFIRMED ITS
REVOCATION.
III
THE HONORABLE SUPREME COURT
SHOULD NOT HAVE CONSIDERED [LIPCO]
AND [RCBC] AS INNOCENT PURCHASERS
FOR VALUE IN THE INSTANT CASE.

Mallari, et al., on the other hand, advance the

following grounds in support of their Motion for
Reconsideration dated July 21, 2011:
(1) THE HOMELOTS REQUIRED TO BE
DISTRIBUTED
HAVE
ALL
BEEN
DISTRIBUTED
PURSUANT
TO
THE
MEMORANDUM OF AGREEMENT. WHAT
REMAINS MERELY IS THE RELEASE OF
TITLE FROM THE REGISTER OF DEEDS.
(2) THERE HAS BEEN NO DILUTION OF
SHARES. CORPORATE RECORDS WOULD
SHOW THAT IF EVER NOT ALL OF THE
18,804.32 SHARES WERE GIVEN TO THE
ACTUAL
ORIGINAL
FARMWORKER
BENEFICIARY, THE RECIPIENT OF THE
DIFFERENCE IS THE NEXT OF KIN OR
CHILDREN OF SAID ORIGINAL [FWBs].
HENCE, WE RESPECTFULLY SUBMIT THAT
SINCE THE SHARES WERE GIVEN TO THE
SAME
FAMILY
BENEFICIARY,
THIS
SHOULD BE DEEMED AS SUBSTANTIAL
COMPLIANCE WITH THE PROVISIONS OF
SECTION 4 OF DAO 10.
(3) THERE HAS BEEN NO VIOLATION OF
THE 3-MONTH PERIOD TO IMPLEMENT
THE [SDP] AS PROVIDED FOR BY SECTION
11 OF DAO 10 AS THIS PROVISION MUST BE
READ IN LIGHT OF SECTION 10 OF
EXECUTIVE ORDER NO. 229, THE
PERTINENT PORTION OF WHICH READS,
THE APPROVAL BY THE PARC OF A PLAN

FOR SUCH STOCK DISTRIBUTION, AND ITS

INITIAL IMPLEMENTATION, SHALL BE
DEEMED COMPLIANCE WITH THE LAND
DISTRIBUTION REQUIREMENT OF THE
CARP.
(4) THE VALUATION OF THE LAND
CANNOT BE BASED AS OF NOVEMBER 21,
1989, THE DATE OF APPROVAL OF THE
STOCK DISTRIBUTION OPTION. INSTEAD,
WE RESPECTFULLY SUBMIT THAT THE
TIME OF TAKING FOR VALUATION
PURPOSES IS A FACTUAL ISSUE BEST LEFT
FOR THE TRIAL COURTS TO DECIDE.
(5) TO THOSE WHO WILL CHOOSE LAND,
THEY MUST RETURN WHAT WAS GIVEN TO
THEM UNDER THE SDP. IT WOULD BE
UNFAIR IF THEY ARE ALLOWED TO GET
THE LAND AND AT THE SAME TIME HOLD
ON TO THE BENEFITS THEY RECEIVED
PURSUANT TO THE SDP IN THE SAME WAY
AS THOSE WHO WILL CHOOSE TO STAY
WITH THE SDO.

Lastly, Rene Galang and AMBALA, through the

Public Interest Law Center (PILC), submit the following
grounds
in
support
of
their Motion
for
Reconsideration dated July 22, 2011:
I

THE HONORABLE COURT, WITH DUE

RESPECT, GRAVELY ERRED IN ORDERING
THE HOLDING OF A VOTING OPTION
INSTEAD OF TOTALLY REDISTRIBUTING
THE SUBJECT LANDS TO [FWBs] in [HLI].
A. THE HOLDING OF A VOTING OPTION
HAS NO LEGAL BASIS. THE REVOCATION
OF THE [SDP] CARRIES WITH IT THE
REVOCATION OF THE [SDOA].
B. GIVING THE [FWBs] THE OPTION TO
REMAIN AS STOCKHOLDERS OF HLI
WITHOUT MAKING THE NECESSARY
CHANGES
IN
THE
CORPORATE
STRUCTURE WOULD ONLY SUBJECT
THEM TO FURTHER MANIPULATION AND
HARDSHIP.
C. OTHER VIOLATIONS COMMITTED BY
HLI UNDER THE [SDOA] AND PERTINENT
LAWS
JUSTIFY
TOTAL
LAND
REDISTRIBUTION OF HACIENDA LUISITA.
II
THE HONORABLE COURT, WITH DUE
RESPECT, GRAVELY ERRED IN HOLDING
THAT THE [RCBC] AND [LIPCO] ARE
INNOCENT PURCHASERS FOR VALUE OF
THE
300-HECTARE
PROPERTY
IN
HACIENDA LUISITA THAT WAS SOLD TO
THEM PRIOR TO THE INCEPTION OF THE
PRESENT CONTROVERSY.

Ultimately, the issues for Our consideration are the

following: (1) applicability of the operative fact doctrine; (2)
constitutionality
of
Sec.
31
of RA 6657
or
the Comprehensive Agrarian Reform Law of 1988; (3)
coverage of compulsory acquisition; (4) just compensation;
(5) sale to third parties; (6) the violations of HLI; and (7)
control over agricultural lands.
We shall discuss these issues accordingly.
I. Applicability of the Operative Fact Doctrine
In their motion for partial reconsideration, DAR and
PARC argue that the doctrine of operative fact does not
apply to the instant case since: (1) there is no law or rule
which has been invalidated on the ground of
unconstitutionality;[4] (2) the doctrine of operative fact is a
rule of equity which may be applied only in the absence of a
law, and in this case, they maintain that there is a positive
law which mandates the distribution of the land as a result of
the revocation of the stock distribution plan (SDP).[5]
Echoing the stance of DAR and PARC, AMBALA
submits that the operative fact doctrine should only be made
to apply in the extreme case in which equity demands it,
which allegedly is not in the instant case. [6] It further argues
that there would be no undue harshness or injury to HLI in
case lands are actually distributed to the farmworkers, and

that the decision which orders the farmworkers to choose

whether to remain as stockholders of HLI or to opt for land
distribution would result in inequity and prejudice to the
farmworkers.[7] The foregoing views are also similarly
shared by Rene Galang and AMBALA, through the PILC.
[8]
In addition, FARM posits that the option given to the
FWBs is equivalent to an option for HLI to retain land in
direct violation of RA 6657.[9]
(a) Operative Fact Doctrine Not Limited to
Invalid or Unconstitutional Laws
Contrary to the stance of respondents, the operative
fact doctrine does not only apply to laws subsequently
declared unconstitutional or unlawful, as it also applies to
executive acts subsequently declared as invalid. As We have
discussed in Our July 5, 2011 Decision:
That the operative fact doctrine squarely
applies to executive actsin this case, the approval
by PARC of the HLI proposal for stock
distributionis
well-settled
in
our
jurisprudence. In Chavez v. National Housing
Authority, We held:
Petitioner postulates that the
operative
fact
doctrine
is
inapplicable to the present case
because it is an equitable doctrine
which could not be used to

countenance an inequitable result

that is contrary to its proper office.
On the other hand, the
petitioner Solicitor General argues
that the existence of the various
agreements
implementing
the
SMDRP is an operative fact that can
no longer be disturbed or simply
ignored, citing Rieta v. People of
the Philippines.
The argument of the Solicitor
General is meritorious.
The operative fact doctrine is
embodied in De Agbayani v. Court
of Appeals, wherein it is stated that
a legislative or executive act, prior
to
its
being
declared
as
unconstitutional by the courts, is
valid and must be complied with,
thus:
xxx xxx xxx
This doctrine was reiterated
in the more recent case of City of
Makati v. Civil Service Commission,
wherein we ruled that:
Moreover,
we
certainly
cannot
nullify
the
City
Government's order of suspension,

as we have no reason to do so, much

less retroactively apply such
nullification to deprive private
respondent of a compelling and
valid reason for not filing the leave
application. For as we have held, a
void act though in law a mere
scrap of paper nonetheless confers
legitimacy upon past acts or
omissions done in reliance
thereof. Consequently, the existence
of a statute or executive order prior
to its being adjudged void is an
operative fact to which legal
consequences are attached. It would
indeed be ghastly unfair to prevent
private respondent from relying
upon the order of suspension in lieu
of a formal leave application.
The applicability of the operative fact
doctrine to executive acts was further explicated
by this Court in Rieta v. People, thus:
Petitioner contends that his
arrest by virtue of Arrest Search and
Seizure Order (ASSO) No. 4754
was invalid, as the law upon which
it was predicated General Order No.
60, issued by then President
Ferdinand
E.
Marcos
was
subsequently declared by the Court,
in Taada v. Tuvera, 33 to have no
force and effect. Thus, he asserts,

any evidence obtained pursuant

thereto is inadmissible in evidence.
We do not agree. In Taada,
the Court addressed the possible
effects of its declaration of the
invalidity of various presidential
issuances. Discussing therein how
such a declaration might affect acts
done on a presumption of their
validity, the Court said:
. . .. In similar
situations in the past
this Court had taken
the pragmatic and
realistic course set
forth in Chicot County
Drainage District vs.
Baxter Bank to wit:
The
courts
below have proceeded
on the theory that the
Act
of
Congress,
having been found to
be
unconstitutional,
was not a law; that it
was
inoperative,
conferring no rights
and
imposing
no
duties, and hence
affording no basis for
the
challenged

decree. . . . It is quite
clear, however, that
such broad statements
as to the effect of a
determination
of
unconstitutionality
must be taken with
qualifications.
The
actual existence of a
statute, prior to [the
determination of its
invalidity],
is
an
operative fact and may
have
consequences
which cannot justly be
ignored. The past
cannot always be
erased by a new
judicial
declaration.
The effect of the
subsequent ruling as to
invalidity may have to
be
considered
in
various aspects with
respect to particular
conduct, private and
official. Questions of
rights claimed to have
become vested, of
status,
of
prior
determinations deemed
to have finality and
acted
upon
accordingly, of public

policy in the light of

the nature both of the
statute and of its
previous application,
demand examination.
These questions are
among
the
most
difficult
of
those
which have engaged
the attention of courts,
state and federal, and it
is
manifest
from
numerous
decisions
that an all-inclusive
statement
of
a
principle of absolute
retroactive invalidity
cannot be justified.
xxx xxx xxx
Similarly,
the
implementation/
enforcement
of
presidential
decrees
prior
to
their
publication in the
Official Gazette is an
operative fact which
may
have
consequences which
cannot
be
justly
ignored. The past
cannot always be

erased by a new
judicial declaration . . .
that an all-inclusive
statement
of
a
principle of absolute
retroactive invalidity
cannot be justified.
The Chicot doctrine cited
in Taada advocates that, prior to the
nullification of a statute, there is an
imperative necessity of taking into
account its actual existence as an
operative
fact
negating
the
acceptance of a principle of absolute
retroactive invalidity. Whatever was
done while the legislative or
the executive act was in operation
should be duly recognized and
presumed to be valid in all
respects. The ASSO that was
issued in 1979 under General
Order No. 60 long before our
Decision in Taada and the arrest
of petitioner is an operative fact
that can no longer be disturbed or
simply ignored. (Citations omitted;
emphasis in the original.)

Bearing in mind that PARC Resolution No. 89-122[10]an executive actwas declared invalid in the instant case,
the operative fact doctrine is clearly applicable.

Nonetheless, the minority is of the persistent view that

the applicability of the operative fact doctrine should be
limited to statutes and rules and regulations issued by the
executive department that are accorded the same status as
that of a statute or those which are quasi-legislative in
nature. Thus, the minority concludes that the phrase
executive act used in the case of De Agbayani v. Philippine
National Bank[11] refers only to acts, orders, and rules and
regulations that have the force and effect of law. The
minority also made mention of the Concurring Opinion of
Justice Enrique Fernando in Municipality of Malabang v.
Benito,[12] where it was supposedly made explicit that the
operative fact doctrine applies to executive acts, which are
ultimately quasi-legislative in nature.
We disagree. For one, neither the De Agbayani case
nor the Municipality of Malabang case elaborates what
executive act mean. Moreover, while orders, rules and
regulations issued by the President or the executive branch
have fixed definitions and meaning in the Administrative
Code and jurisprudence, the phrase executive act does not
have such specific definition under existing laws. It should
be noted that in the cases cited by the minority, nowhere can
it be found that the term executive act is confined to the
foregoing. Contrarily, the term executive act is broad enough
to encompass decisions of administrative bodies and
agencies under the executive department which are

subsequently revoked by the agency in question or nullified

by the Court.
A case in point is the concurrent appointment of
Magdangal B. Elma (Elma) as Chairman of the Presidential
Commission on Good Government (PCGG) and as Chief
Presidential Legal Counsel (CPLC) which was declared
unconstitutional by this Court in Public Interest Center, Inc.
v. Elma.[13] In said case, this Court ruled that the concurrent
appointment of Elma to these offices is in violation of
Section 7, par. 2, Article IX-B of the 1987 Constitution,
since these are incompatible offices. Notably, the
appointment of Elma as Chairman of the PCGG and as
CPLC is, without a question, an executive act. Prior to the
declaration of unconstitutionality of the said executive act,
certain acts or transactions were made in good faith and in
reliance of the appointment of Elma which cannot just be set
aside or invalidated by its subsequent invalidation.
In Tan v. Barrios,[14] this Court, in applying the
operative fact doctrine, held that despite the invalidity of the
jurisdiction of the military courts over civilians, certain
operative facts must be acknowledged to have existed so as
not to trample upon the rights of the accused therein.
Relevant thereto, in Olaguer v. Military Commission No. 34,
[15]
it was ruled that military tribunals pertain to the
Executive Department of the Government and are simply
instrumentalities of the executive power, provided by the
legislature for the President as Commander-in-Chief to aid

him in properly commanding the army and navy and

enforcing discipline therein, and utilized under his orders or
those of his authorized military representatives.[16]
Evidently, the operative fact doctrine is not confined
to statutes and rules and regulations issued by the executive
department that are accorded the same status as that of a
statute or those which are quasi-legislative in nature.
Even assuming that De Agbayani initially applied the
operative fact doctrine only to executive issuances like
orders and rules and regulations, said principle can
nonetheless be applied, by analogy, to decisions made by the
President or the agencies under the executive department.
This doctrine, in the interest of justice and equity, can be
applied liberally and in a broad sense to encompass said
decisions of the executive branch. In keeping with the
demands of equity, the Court can apply the operative fact
doctrine to acts and consequences that resulted from the
reliance not only on a law or executive act which is quasilegislative in nature but also on decisions or orders of the
executive branch which were later nullified. This Court is
not unmindful that such acts and consequences must be
recognized in the higher interest of justice, equity and
fairness.
Significantly, a decision made by the President or the
administrative agencies has to be complied with because it
has the force and effect of law, springing from the powers of

the President under the Constitution and existing laws. Prior

to the nullification or recall of said decision, it may have
produced acts and consequences in conformity to and in
reliance of said decision, which must be respected. It is on
this score that the operative fact doctrine should be applied
to acts and consequences that resulted from the
implementation of the PARC Resolution approving the SDP
of HLI.
More importantly, respondents, and even the minority,
failed to clearly explain how the option to remain in HLI
granted to individual farmers would result in inequity and
prejudice. We can only surmise that respondents
misinterpreted the option as a referendum where all the
FWBs will be bound by a majority vote favoring the
retention of
all
the 6,296 FWBs
as HLI
stockholders. Respondents
are
definitely
mistaken.
The fallo of Our July 5, 2011 Decision is unequivocal that
only those FWBs who signified their desire to remain as
HLI stockholders are entitled to 18,804.32 shares each,
while those who opted not to remain as HLI stockholders
will be given land by DAR. Thus, referendum was not
required but only individual options were granted to each
FWB whether or not they will remain in HLI.
The application of the operative fact doctrine to the
FWBs is not iniquitous and prejudicial to their interests but
is actually beneficial and fair to them. First, they are granted
the right to remain in HLI as stockholders and they acquired

said shares without paying their value to the corporation. On

the other hand, the qualified FWBs are required to pay the
value of the land to the Land Bank of the Philippines (LBP)
if land is awarded to them by DAR pursuant to RA 6657. If
the qualified FWBs really want agricultural land, then they
can simply say no to the option. And second, if the operative
fact doctrine is not applied to them, then the FWBs will be
required to return to HLI the 3% production share, the 3%
share in the proceeds of the sale of the 500-hectare
converted land, and the 80.51-hectare Subic-Clark-Tarlac
Expressway (SCTEX) lot, the homelots and other benefits
received by the FWBs from HLI. With the application of the
operative fact doctrine, said benefits, homelots and the 3%
production share and 3% share from the sale of the 500hectare and SCTEX lots shall be respected with no
obligation to refund or return them. The receipt of these
things is an operative fact that can no longer be disturbed or
simply ignored.
(b) The Operative Fact Doctrine as Recourse in
Equity
As mentioned above, respondents contend that the
operative fact doctrine is a rule of equity which may be
applied only in the absence of a law, and that in the instant
case, there is a positive law which mandates the distribution
of the land as a result of the revocation of the SDP.

Undeniably, the operative fact doctrine is a rule of

equity.[17] As a complement of legal jurisdiction, equity seeks
to reach and complete justice where courts of law, through
the inflexibility of their rules and want of power to adapt
their judgments to the special circumstances of cases, are
incompetent to do so. Equity regards the spirit and not the
letter, the intent and not the form, the substance rather than
the circumstance, as it is variously expressed by different
courts.[18] Remarkably, it is applied only in the absence of
statutory law and never in contravention of said law.[19]
In the instant case, respondents argue that the
operative fact doctrine should not be applied since there is a
positive law, particularly, Sec. 31 of RA 6657, which directs
the distribution of the land as a result of the revocation of
the SDP. Pertinently, the last paragraph of Sec. 31 of RA
6657 states:
If within two (2) years from the approval
of this Act, the land or stock transfer envisioned
above is not made or realized or the plan for such
stock distribution approved by the PARC within
the same period, the agricultural land of the
corporate owners or corporation shall be subject
to the compulsory coverage of this Act.
(Emphasis supplied.)

Markedly, the use of the word or under the last

paragraph of Sec. 31 of RA 6657 connotes that the law gives
the corporate landowner an option to avail of the stock

distribution option or to have the SDP approved within two

(2) years from the approval of RA 6657. This interpretation
is consistent with the well-established principle in statutory
construction that [t]he word or is a disjunctive term
signifying disassociation and independence of one thing
from the other things enumerated; it should, as a rule, be
construed in the sense in which it ordinarily implies, as a
disjunctive word.[20] In PCI Leasing and Finance, Inc. v.
Giraffe-X Creative Imaging, Inc.,[21] this Court held:
Evidently, the letter did not make a
demand
for
the
payment
of
the
P8,248,657.47 AND the return of the equipment;
only either one of the two was required. The
demand letter was prepared and signed by Atty.
Florecita R. Gonzales, presumably petitioners
counsel. As such, the use of or instead of and in
the letter could hardly be treated as a simple
typographical error, bearing in mind the nature of
the demand, the amount involved, and the fact
that it was made by a lawyer. Certainly Atty.
Gonzales would have known that a world of
difference exists between and and or in the
manner that the word was employed in the letter.
A
rule
in
statutory
construction is that the word or is a
disjunctive
term
signifying
dissociation and independence of
one thing from other things
enumerated unless the context
requires a different interpretation.[22]

In its elementary sense, or,

as used in a statute, is a
disjunctive article indicating an
alternative. It often connects a
series of words or propositions
indicating a choice of either.
When or is used, the various
members of the enumeration are
to be taken separately.[23]
The word or is a disjunctive
term signifying disassociation and
independence of one thing from
each of the other things enumerated.
[24]
(Emphasis in the original.)

Given that HLI secured approval of its SDP in

November 1989, well within the two-year period reckoned
from June 1988 when RA 6657 took effect, then HLI did not
violate the last paragraph of Sec. 31 of RA 6657. Pertinently,
said provision does not bar Us from applying the operative
fact doctrine.

Besides, it should be recognized that this Court, in its

July 5, 2011 Decision, affirmed the revocation of Resolution
No. 89-12-2 and ruled for the compulsory coverage of the
agricultural lands of Hacienda Luisita in view of HLIs
violation of the SDP and DAO 10. By applying the operative
fact doctrine, this Court merely gave the qualified FWBs the
option to remain as stockholders of HLI and ruled that they
will retain the homelots and other benefits which they
received from HLI by virtue of the SDP.
It bears stressing that the application of the operative
fact doctrine by the Court in its July 5, 2011 Decision is
favorable to the FWBs because not only were the FWBs
allowed to retain the benefits and homelots they received
under the stock distribution scheme, they were also given
the option to choose for themselves whether they want to
remain as stockholders of HLI or not. This is in recognition
of the fact that despite the claims of certain farmer groups
that they represent the qualified FWBs in Hacienda Luisita,
none of them can show that they are duly authorized to
speak on their behalf. As We have mentioned, To date, such
authorization document, which would logically include a list
of the names of the authorizing FWBs, has yet to be
submitted to be part of the records.
II. Constitutionality of Sec. 31, RA 6657
FARM insists that the issue of constitutionality of Sec.
31 of RA 6657 is the lis mota of the case, raised at the

earliest opportunity, and not to be considered as moot and

academic.[25]
This contention is unmeritorious. As We have
succinctly discussed in Our July 5, 2011 Decision:
While there is indeed an actual case or
controversy, intervenor FARM, composed of a
small minority of 27 farmers, has yet to explain
its failure to challenge the constitutionality of
Sec. 3l of RA 6657, since as early as November
21, l989 when PARC approved the SDP of
Hacienda Luisita or at least within a reasonable
time thereafter and why its members received
benefits from the SDP without so much of a
protest. It was only on December 4, 2003 or 14
years after approval of the SDP via PARC
Resolution No. 89-12-2 dated November 21,
1989 that said plan and approving resolution
were sought to be revoked, but not, to stress, by
FARM or any of its members, but by petitioner
AMBALA. Furthermore, the AMBALA petition
did NOT question the constitutionality of Sec. 31
of RA 6657, but concentrated on the purported
flaws and gaps in the subsequent implementation
of the SDP. Even the public respondents, as
represented by the Solicitor General, did not
question the constitutionality of the provision. On
the other hand, FARM, whose 27 members
formerly belonged to AMBALA, raised the
constitutionality of Sec. 31 only on May 3, 2007
when it filed its Supplemental Comment with the
Court. Thus, it took FARM some eighteen (18)

years from November 21, 1989 before it

challenged the constitutionality of Sec. 31 of RA
6657 which is quite too late in the day. The
FARM members slept on their rights and even
accepted benefits from the SDP with nary a
complaint on the alleged unconstitutionality of
Sec. 31 upon which the benefits were
derived. The Court cannot now be goaded into
resolving a constitutional issue that FARM failed
to assail after the lapse of a long period of time
and the occurrence of numerous events and
activities which resulted from the application of
an alleged unconstitutional legal provision.
It has been emphasized in a number of
cases that the question of constitutionality will
not be passed upon by the Court unless it is
properly raised and presented in an appropriate
case at the first opportunity. FARM is, therefore,
remiss
in
belatedly
questioning
the
constitutionality of Sec. 31 of RA 6657. The
second requirement that the constitutional
question should be raised at the earliest possible
opportunity is clearly wanting.
The last but the most important requisite
that the constitutional issue must be the very lis
mota of the case does not likewise obtain. The lis
mota aspect is not present, the constitutional issue
tendered not being critical to the resolution of the
case. The unyielding rule has been to avoid,
whenever plausible, an issue assailing the
constitutionality of a statute or governmental act.
If some other grounds exist by which judgment
can
be
made
without
touching
the

constitutionality of a law, such recourse is

favored. Garcia v. Executive Secretary explains
why:
Lis
Mota the
fourth
requirement to satisfy before this
Court will undertake judicial review
means that the Court will not pass
upon
a
question
of
unconstitutionality,
although
properly presented, if the case can
be disposed of on some other
ground, such as the application of
the statute or the general law. The
petitioner must be able to show that
the case cannot be legally resolved
unless the constitutional question
raised
is
determined.
This
requirement is based on the rule that
every law has in its favor the
presumption of constitutionality; to
justify its nullification, there must
be a clear and unequivocal breach of
the Constitution, and not one that is
doubtful,
speculative,
or
argumentative.
The lis mota in this case, proceeding from
the basic positions originally taken by AMBALA
(to which the FARM members previously
belonged) and the Supervisory Group, is the
alleged non-compliance by HLI with the
conditions of the SDP to support a plea for its
revocation. And before the Court, the lis mota is
whether or not PARC acted in grave abuse of

discretion when it ordered the recall of the SDP

for such non-compliance and the fact that the
SDP, as couched and implemented, offends
certain constitutional and statutory provisions. To
be sure, any of these key issues may be resolved
without plunging into the constitutionality of Sec.
31 of RA 6657. Moreover, looking deeply into
the underlying petitions of AMBALA, et al., it is
not the said section per se that is invalid, but
rather it is the alleged application of the said
provision in the SDP that is flawed.
It may be well to note at this juncture that
Sec. 5 of RA 9700, amending Sec. 7 of RA 6657,
has all but superseded Sec. 31 of RA 6657 vis-vis the stock distribution component of said Sec.
31. In its pertinent part, Sec. 5 of RA 9700
provides: [T]hat after June 30, 2009, the modes
of acquisition shall be limited to voluntary
offer to sell and compulsory acquisition. Thus,
for all intents and purposes, the stock distribution
scheme under Sec. 31 of RA 6657 is no longer an
available option under existing law. The question
of whether or not it is unconstitutional should be
a moot issue. (Citations omitted; emphasis in the
original.)

Based on the foregoing disquisitions, We maintain

that this Court is NOT compelled to rule on the
constitutionality of Sec. 31 of RA 6657. In this regard, We
clarify that this Court, in its July 5, 2011 Decision, made no
ruling in favor of the constitutionality of Sec. 31 of RA
6657. There was, however, a determination of the existence

of an apparent grave violation of the Constitution that may

justify the resolution of the issue of constitutionality, to
which this Court ruled in the negative. Having clarified this
matter, all other points raised by both FARM and AMBALA
concerning the constitutionality of RA 6657 deserve scant
consideration.

action of certiorari is a limited form of review.[29] The

certiorari jurisdiction of this Court is narrow in scope as it is
restricted to resolving errors of jurisdiction and grave abuse
of discretion, and not errors of judgment.[30] To allow
additional issues at this stage of the proceedings is violative
of fair play, justice and due process.[31]

III. Coverage of Compulsory Acquisition

Nonetheless, it should be taken into account that this

should not prevent the DAR, under its mandate under the
agrarian reform law, from subsequently subjecting to
agrarian reform other agricultural lands originally held by
Tadeco that were allegedly not transferred to HLI but were
supposedly covered by RA 6657.

FARM argues that this Court ignored certain material

facts when it limited the maximum area to be covered to
4,915.75 hectares, whereas the area that should, at the least,
be covered is 6,443 hectares,[26] which is the agricultural
land allegedly covered by RA 6657 and previously held by
Tarlac Development Corporation (Tadeco).[27]
We cannot subscribe to this view. Since what is put in
issue before the Court is the propriety of the revocation of
the SDP, which only involves 4,915.75 has. of agricultural
land and not 6,443 has., then We are constrained to rule only
as regards the 4,915.75 has. of agricultural land.
Moreover, as admitted by FARM itself, this issue was
raised for the first time by FARM in its Memorandum dated
September 24, 2010 filed before this Court.[28] In this regard,
it should be noted that [a]s a legal recourse, the special civil

DAR, however, contends that the declaration of the

area to be awarded to each FWB is too restrictive. It
stresses that in agricultural landholdings like Hacienda
Luisita, there are roads, irrigation canals, and other portions
of the land that are considered commonly-owned by
farmworkers, and this may necessarily result in the decrease
of the area size that may be awarded per FWB. [33] DAR also
argues that the July 5, 2011 Decision of this Court does not
give it any leeway in adjusting the area that may be awarded
per FWB in case the number of actual qualified FWBs
decreases.[34]
[32]

The argument is meritorious. In order to ensure the

proper distribution of the agricultural lands of Hacienda
Luisita per qualified FWB, and considering that matters

involving strictly the administrative implementation and

enforcement of agrarian reform laws are within the
jurisdiction of the DAR,[35] it is the latter which shall
determine the area with which each qualified FWB will be
awarded.
(a)

Conversion of Agricultural Lands

AMBALA insists that the conversion of the

agricultural lands violated the conditions of RA 6657 and
DAO 10, stating that keeping the land intact and
unfragmented is one of the essential conditions of [the]
SD[P], RA 6657 and DAO 10.[36] It asserts that this provision
or conditionality is not mere decoration and is intended to
ensure that the farmers can continue with the tillage of the
soil especially since it is the only occupation that majority of
them knows.[37]
We disagree. As We amply discussed in Our July 5,
2011 Decision:
Contrary to the almost parallel stance of
the respondents, keeping Hacienda Luisita
unfragmented is also not among the imperative
impositions by the SDP, RA 6657, and DAO 10.
The Terminal Report states that the
proposed distribution plan submitted in 1989 to
the PARC effectively assured the intended stock
beneficiaries that the physical integrity of the

farm shall remain inviolate. Accordingly, the

Terminal Report and the PARC-assailed
resolution would take HLI to task for securing
approval of the conversion to non-agricultural
uses of 500 hectares of the hacienda. In not too
many words, the Report and the resolution view
the conversion as an infringement of Sec. 5(a) of
DAO 10 which reads: a. that the continued
operation of the corporation with its agricultural
land intact and unfragmented is viable with
potential for growth and increased profitability.
The PARC is wrong.
In the first place, Sec. 5(a)just like the
succeeding Sec. 5(b) of DAO 10 on increased
income and greater benefits to qualified
beneficiariesis but one of the stated criteria to
guide PARC in deciding on whether or not to
accept an SDP. Said Sec. 5(a) does not exact from
the
corporate
landowner-applicant
the
undertaking to keep the farm intact and
unfragmented ad infinitum. And there is logic to
HLIs stated observation that the key phrase in the
provision of Sec. 5(a) is viability of corporate
operations: [w]hat is thus required is not the
agricultural land remaining intact x x x but the
viability of the corporate operations with its
agricultural land being intact and unfragmented.
Corporate operation may be viable even if the
corporate agricultural land does not remain intact
or [un]fragmented.[38]
It is, of course, anti-climactic to mention
that DAR viewed the conversion as not violative

of any issuance, let alone undermining the

viability of Hacienda Luisitas operation, as the
DAR Secretary approved the land conversion
applied for and its disposition via his Conversion
Order dated August 14, 1996 pursuant to Sec. 65
of RA 6657 which reads:
Sec.
65. Conversion
of
Lands.After the lapse of five years
from its award when the land ceases
to be economically feasible and
sound for agricultural purposes, or
the locality has become urbanized
and the land will have a greater
economic value for residential,
commercial or industrial purposes,
the DAR upon application of the
beneficiary or landowner with due
notice to the affected parties, and
subject to existing laws, may
authorize the x x x conversion of the
land and its dispositions. x x x

Moreover, it is worth noting that the application for

conversion had the backing of 5,000 or so FWBs, including
respondents Rene Galang, and Jose Julio Suniga, then
leaders of the AMBALA and the Supervisory Group,
respectively, as evidenced by the Manifesto of Support they
signed and which was submitted to the DAR. [39] If at all, this
means that AMBALA should be estopped from questioning
the conversion of a portion of Hacienda Luisita, which its
leader has fully supported.

(b)

LIPCO and RCBC as Innocent Purchasers

for Value

The AMBALA, Rene Galang and the FARM are in

accord that Rizal Commercial Banking Corporation (RCBC)
and Luisita Industrial Park Corporation (LIPCO) are not
innocent purchasers for value. The AMBALA, in particular,
argues that LIPCO, being a wholly-owned subsidiary of
HLI, is conclusively presumed to have knowledge of the
agrarian dispute on the subject land and could not feign
ignorance of this fact, especially since they have the same
directors and stockholders.[40]This is seconded by Rene
Galang and AMBALA, through the PILC, which intimate
that a look at the General Information Sheets of the
companies involved in the transfers of the 300-hectare
portion of Hacienda Luisita, specifically, Centennary
Holdings, Inc. (Centennary), LIPCO and RCBC, would
readily reveal that their directors are interlocked and
connected to Tadeco and HLI.[41] Rene Galang and
AMBALA, through the PILC, also allege that with the clearcut involvement of the leadership of all the corporations
concerned, LIPCO and RCBC cannot feign ignorance that
the parcels of land they bought are under the coverage of the
comprehensive agrarian reform program [CARP] and that
the conditions of the respective sales are imbued with public
interest where normal property relations in the Civil Law
sense do not apply.[42]

Avowing that the land subject of conversion still

remains undeveloped, Rene Galang and AMBALA, through
the PILC, further insist that the condition that [t]he
development of the land should be completed within the
period of five [5] years from the issuance of this Order was
not complied with. AMBALA also argues that since RCBC
and LIPCO merely stepped into the shoes of HLI, then they
must comply with the conditions imposed in the conversion
order.[43]

that were previously covered by the SDP. Good

faith consists in the possessors belief that the
person from whom he received it was the owner
of the same and could convey his title. Good faith
requires a well-founded belief that the person
from whom title was received was himself the
owner of the land, with the right to convey
it. There is good faith where there is an honest
intention to abstain from taking any
unconscientious advantage from another. It is the
opposite of fraud.

In addition, FARM avers that among the conditions

attached to the conversion order, which RCBC and LIPCO
necessarily have knowledge of, are (a) that its approval shall
in no way amend, diminish, or alter the undertaking and
obligations of HLI as contained in the [SDP] approved on
November 21, 1989; and (b) that the benefits, wages and the
like, received by the FWBs shall not in any way be reduced
or adversely affected, among others.[44]

To be sure, intervenor RCBC and

LIPCO knew that the lots they bought were
subjected to CARP coverage by means of a
stock distribution plan, as the DAR conversion
order was annotated at the back of the titles of
the lots they acquired. However, they are of
the honest belief that the subject lots were
validly converted to commercial or industrial
purposes and for which said lots were taken
out of the CARP coverage subject of PARC
Resolution No. 89-12-2 and, hence, can be
legally and validly acquired by them.After all,
Sec. 65 of RA 6657 explicitly allows conversion
and disposition of agricultural lands previously
covered by CARP land acquisition after the lapse
of five (5) years from its award when the land
ceases to be economically feasible and sound for
agricultural purposes or the locality has become
urbanized and the land will have a greater
economic value for residential, commercial or
industrial purposes. Moreover, DAR notified all
the affected parties, more particularly the FWBs,
and gave them the opportunity to comment or

The contentions of respondents are wanting. In the

first place, there is no denying that RCBC and LIPCO knew
that the converted lands they bought were under the
coverage of CARP. Nevertheless, as We have mentioned in
Our July 5, 2011 Decision, this does not necessarily mean
that both LIPCO and RCBC already acted in bad faith in
purchasing the converted lands. As this Court explained:
It cannot be claimed that RCBC and
LIPCO acted in bad faith in acquiring the lots

oppose the proposed conversion. DAR, after

going through the necessary processes, granted
the conversion of 500 hectares of Hacienda
Luisita pursuant to its primary jurisdiction under
Sec. 50 of RA 6657 to determine and adjudicate
agrarian reform matters and its original exclusive
jurisdiction over all matters involving the
implementation of agrarian reform. The DAR
conversion order became final and executory
after none of the FWBs interposed an appeal to
the CA. In this factual setting, RCBC and LIPCO
purchased the lots in question on their honest and
well-founded belief that the previous registered
owners could legally sell and convey the lots
though these were previously subject of CARP
coverage. Ergo, RCBC and LIPCO acted in good
faith in acquiring the subject lots. (Emphasis
supplied.)

In the second place, the allegation that the converted

lands remain undeveloped is contradicted by the evidence on
record, particularly, Annex X of LIPCOs Memorandum
dated September 23, 2010,[45] which has photographs
showing that the land has been partly developed.
[46]
Certainly, it is a general rule that the factual findings of
administrative agencies are conclusive and binding on the
Court when supported by substantial evidence.[47] However,
this rule admits of certain exceptions, one of which is when
the findings of fact are premised on the supposed absence of
evidence and contradicted by the evidence on record.[48]

In the third place, by arguing that the companies

involved in the transfers of the 300-hectare portion of
Hacienda Luisita have interlocking directors and, thus,
knowledge of one may already be imputed upon all the other
companies, AMBALA and Rene Galang, in effect, want this
Court to pierce the veil of corporate fiction. However,
piercing the veil of corporate fiction is warranted only in
cases when the separate legal entity is used to defeat public
convenience, justify wrong, protect fraud, or defend crime,
such that in the case of two corporations, the law will regard
the corporations as merged into one.[49] As succinctly
discussed by the Court in Velarde v. Lopez, Inc.:[50]
Petitioner argues nevertheless that
jurisdiction over the subsidiary is justified by
piercing the veil of corporate fiction. Piercing the
veil of corporate fiction is warranted, however,
only in cases when the separate legal entity is
used to defeat public convenience, justify wrong,
protect fraud, or defend crime, such that in the
case of two corporations, the law will regard the
corporations as merged into one. The rationale
behind piercing a corporations identity is to
remove the barrier between the corporation from
the persons comprising it to thwart the fraudulent
and illegal schemes of those who use the
corporate personality as a shield for undertaking
certain proscribed activities.
In applying the doctrine of piercing the
veil of corporate fiction, the following requisites
must be established: (1) control, not merely

majority or complete stock control; (2) such

control must have been used by the defendant to
commit fraud or wrong, to perpetuate the
violation of a statutory or other positive legal
duty, or dishonest acts in contravention of
plaintiffs legal rights; and (3) the aforesaid
control and breach of duty must proximately
cause the injury or unjust loss complained
of. (Citations omitted.)

Conversion Development Authority, to the qualified FWBs,

effectively fulfils the conditions in the conversion order, to
wit: (1) that its approval shall in no way amend, diminish, or
alter the undertaking and obligations of HLI as contained in
the SDP approved on November 21, 1989; and (2) that the
benefits, wages and the like, received by the FWBs shall not
in any way be reduced or adversely affected, among others.

Nowhere, however, in the pleadings and

other records of the case can it be gathered that
respondent has complete control over Sky Vision,
not only of finances but of policy and business
practice in respect to the transaction attacked, so
that Sky Vision had at the time of the transaction
no separate mind, will or existence of its own.
The existence of interlocking directors, corporate
officers and shareholders is not enough
justification to pierce the veil of corporate fiction
in the absence of fraud or other public policy
considerations.

A view has also been advanced that the 200-hectare

lot transferred to Luisita Realty Corporation (LRC) should
be included in the compulsory coverage because the
corporation did not intervene.

Absent any allegation or proof of fraud or other public

policy considerations, the existence of interlocking directors,
officers and stockholders is not enough justification to pierce
the veil of corporate fiction as in the instant case.
And in the fourth place, the fact that this Court, in its
July 5, 2011 Decision, ordered the payment of the proceeds
of the sale of the converted land, and even of the 80.51hectare land sold to the government, through the Bases

We disagree. Since the 200-hectare lot formed part of

the SDP that was nullified by PARC Resolution 2005-32-01,
this Court is constrained to make a ruling on the rights of
LRC over the said lot. Moreover, the 500-hectare portion of
Hacienda Luisita, of which the 200-hectare portion sold to
LRC and the 300-hectare portion subsequently acquired by
LIPCO and RCBC were part of, was already the subject of
the August 14, 1996 DAR Conversion Order. By virtue of
the said conversion order, the land was already reclassified
as industrial/commercial land not subject to compulsory
coverage. Thus, if We place the 200-hectare lot sold to LRC
under compulsory coverage, this Court would, in effect, be
disregarding the DAR Conversion Order, which has long
attained its finality. And as this Court held in Berboso v. CA,
[51]
Once final and executory, the Conversion Order can no
longer be questioned. Besides, to disregard the Conversion

Order through the revocation of the approval of the SDP

would create undue prejudice to LRC, which is not even a
party to the proceedings below, and would be tantamount to
deprivation of property without due process of law.
Nonethess, the minority is of the adamant view that
since LRC failed to intervene in the instant case and was,
therefore, unable to present evidence supporting its good
faith purchase of the 200-hectare converted land, then LRC
should be given full opportunity to present its case before
the DAR. This minority view is a contradiction in itself.
Given that LRC did not intervene and is, therefore, not a
party to the instant case, then it would be incongruous to
order them to present evidence before the DAR. Such an
order, if issued by this Court, would not be binding upon the
LRC.
Moreover, LRC may be considered to have waived its
right to participate in the instant petition since it did not
intervene in the DAR proceedings for the nullification of the
PARC Resolution No. 89-12-2 which approved the SDP.
(c) Proceeds of the sale of the 500-hectare
converted land
and of the 80.51-hectare land used for the
SCTEX

As previously mentioned, We ruled in Our July 5,

2011 Decision that since the Court excluded the 500-hectare
lot subject of the August 14, 1996 Conversion Order and the
80.51-hectare SCTEX lot acquired by the government from
compulsory coverage, then HLI and its subsidiary,
Centennary, should be liable to the FWBs for the price
received for said lots. Thus:
There is a claim that, since the sale and
transfer of the 500 hectares of land subject of the
August 14, 1996 Conversion Order and the
80.51-hectare SCTEX lot came after compulsory
coverage has taken place, the FWBs should have
their corresponding share of the lands
value. There is merit in the claim. Since the SDP
approved by PARC Resolution No. 89-12-2 has
been nullified, then all the lands subject of the
SDP will automatically be subject of compulsory
coverage under Sec. 31 of RA 6657. Since the
Court excluded the 500-hectare lot subject of the
August 14, 1996 Conversion Order and the
80.51-hectare SCTEX lot acquired by the
government from the area covered by SDP, then
HLI and its subsidiary, Centennary, shall be liable
to the FWBs for the price received for said
lots. HLI shall be liable for the value received for
the sale of the 200-hectare land to LRC in the
amount of PhP 500,000,000 and the equivalent
value of the 12,000,000 shares of its subsidiary,
Centennary, for the 300-hectare lot sold to
LIPCO for the consideration of PhP
750,000,000. Likewise, HLI shall be liable for

PhP 80,511,500 as consideration for the sale of

the 80.51-hectare SCTEX lot.
We, however, note that HLI has allegedly
paid 3% of the proceeds of the sale of the 500hectare land and 80.51-hectare SCTEX lot to the
FWBs. We also take into account the payment of
taxes and expenses relating to the transfer of the
land and HLIs statement that most, if not all, of
the proceeds were used for legitimate corporate
purposes. In order to determine once and for all
whether or not all the proceeds were properly
utilized by HLI and its subsidiary, Centennary,
DAR will engage the services of a reputable
accounting firm to be approved by the parties to
audit the books of HLI to determine if the
proceeds of the sale of the 500-hectare land and
the 80.51-hectare SCTEX lot were actually used
for legitimate corporate purposes, titling expenses
and in compliance with the August 14, 1996
Conversion Order. The cost of the audit will be
shouldered by HLI. If after such audit, it is
determined that there remains a balance from the
proceeds of the sale, then the balance shall be
distributed to the qualified FWBs.

HLI, however, takes exception to the abovementioned ruling and contends that it is not proper to
distribute the unspent or unused balance of the proceeds of
the sale of the 500-hectare converted land and 80.51-hectare
SCTEX lot to the qualified FWBs for the following reasons:
(1) the proceeds of the sale belong to the corporation, HLI,
as corporate capital and assets in substitution for the portions

of its land asset which were sold to third parties; (2) to

distribute the cash sales proceeds of the portions of the land
asset to the FWBs, who are stockholders of HLI, is to
dissolve the corporation and distribute the proceeds as
liquidating dividends without even paying the creditors of
the corporation; and (3) the doing of said acts would violate
the stringent provisions of the Corporation Code and
corporate practice.[52]
Apparently, HLI seeks recourse to the Corporation
Code in order to avoid its liability to the FWBs for the price
received for the 500-hectare converted lot and the 80.51hectare SCTEX lot. However, as We have established in Our
July 5, 2011 Decision, the rights, obligations and remedies
of the parties in the instant case are primarily governed by
RA 6657 and HLI cannot shield itself from the CARP
coverage merely under the convenience of being a corporate
entity. In this regard, it should be underscored that the
agricultural lands held by HLI by virtue of the SDP are no
ordinary assets. These are special assets, because, originally,
these should have been distributed to the FWBs were it not
for the approval of the SDP by PARC. Thus, the government
cannot renege on its responsibility over these assets.
Likewise, HLI is no ordinary corporation as it was formed
and organized precisely to make use of these agricultural
lands actually intended for distribution to the FWBs. Thus, it
cannot shield itself from the coverage of CARP by invoking
the Corporation Code. As explained by the Court:

HLI also parlays the notion that the parties

to the SDOA should now look to the Corporation
Code, instead of to RA 6657, in determining their
rights, obligations and remedies. The Code, it
adds, should be the applicable law on the
disposition of the agricultural land ofHLI.
Contrary to the view of HLI, the rights,
obligations and remedies of the parties to the
SDOA embodying the SDP are primarily
governed by RA 6657. It should abundantly be
made clear that HLI was precisely created in
order to comply with RA 6657, which the OSG
aptly described as the mother law of the SDOA
and the SDP.[53] It is, thus, paradoxical for HLI
to shield itself from the coverage of CARP by
invoking exclusive applicability of the
Corporation Code under the guise of being a
corporate entity.
Without in any way minimizing the
relevance of the Corporation Code since the
FWBs of HLI are also stockholders, its
applicability is limited as the rights of the
parties arising from the SDP should not be
made to supplant or circumvent the agrarian
reform program.
Without doubt, the Corporation Code is the
general law providing for the formation,
organization and regulation of private
corporations. On the other hand, RA 6657 is the
special law on agrarian reform. As between a
general and special law, the latter shall
prevailgeneralia specialibus non derogant.

Besides, the present impasse between HLI and

the private respondents is not an intra-corporate
dispute which necessitates the application of the
Corporation Code. What private respondents
questioned before the DAR is the proper
implementation of the SDP and HLIs compliance
with RA 6657. Evidently, RA 6657 should be the
applicable law to the instant case. (Emphasis
supplied.)
[54]

Considering that the 500-hectare converted land, as

well as the 80.51-hectare SCTEX lot, should have been
included in the compulsory coverage were it not for their
conversion and valid transfers, then it is only but proper that
the price received for the sale of these lots should be given
to the qualified FWBs. In effect, the proceeds from the sale
shall take the place of the lots.
The Court, in its July 5, 2011 Decision, however,
takes into account, inter alia, the payment of taxes and
expenses relating to the transfer of the land, as well as HLIs
statement that most, if not all, of the proceeds were used for
legitimate corporate purposes. Accordingly, We ordered the
deduction of the taxes and expenses relating to the transfer
of titles to the transferees, and the expenditures incurred by
HLI and Centennary for legitimate corporate purposes,
among others.
On this note, DAR claims that the [l]egitimate
corporate expenses should not be deducted as there is no

basis for it, especially since only the auditing to be

conducted on the financial records of HLI will reveal the
amounts to be offset between HLI and the FWBs.[55]
The contention is unmeritorious. The possibility of an
offsetting should not prevent Us from deducting the
legitimate corporate expenses incurred by HLI and
Centennary. After all, the Court has ordered for a proper
auditing [i]n order to determine once and for all whether or
not all the proceeds were properly utilized by HLI and its
subsidiary, Centennary. In this regard, DAR is tasked to
engage the services of a reputable accounting firm to be
approved by the parties to audit the books of HLI to
determine if the proceeds of the sale of the 500-hectare land
and the 80.51-hectare SCTEX lot were actually used for
legitimate corporate purposes, titling expenses and in
compliance with the August 14, 1996 Conversion Order.
Also, it should be noted that it is HLI which shall shoulder
the cost of audit to reduce the burden on the part of the
FWBs. Concomitantly, the legitimate corporate expenses
incurred by HLI and Centennary, as will be determined by a
reputable accounting firm to be engaged by DAR, shall be
among the allowable deductions from the proceeds of the
sale of the 500-hectare land and the 80.51-hectare SCTEX
lot.
We, however, find that the 3% production share
should not be deducted from the proceeds of the sale of the
500-hectare converted land and the 80.51-hectare SCTEX

lot. The 3% production share, like the homelots, was among

the benefits received by the FWBs as farmhands in the
agricultural enterprise of HLI and, thus, should not be taken
away from the FWBs.
Contrarily, the minority is of the view that as a
consequence of the revocation of the SDP, the parties should
be restored to their respective conditions prior to its
execution and approval, subject to the application of the
principle of set-off or compensation. Such view is patently
misplaced.
The law on contracts, i.e. mutual restitution, does not
apply to the case at bar. To reiterate, what was actually
revoked by this Court, in its July 5, 2011 Decision, is PARC
Resolution No. 89-12-2 approving the SDP. To elucidate, it
was the SDP, not the SDOA, which was presented for
approval by Tadeco to DAR.[56] The SDP explained the
mechanics of the stock distribution but did not make any
reference nor correlation to the SDOA. The pertinent
portions of the proposal read:
MECHANICS
DISTRIBUTION PLAN

OF

STOCK

Under Section 31 of Republic Act No.

6657, a corporation owning agricultural land may
distribute among the qualified beneficiaries such
proportion or percentage of its capital stock that
the value of the agricultural land actually devoted

to agricultural activities, bears in relation to the

corporations total assets. Conformably with this
legal
provision,
Tarlac
Development
Corporation hereby submits for approval a
stock distribution plan that envisions the
following:[57] (Terms and conditions omitted;
emphasis supplied)
xxxx
The above stock distribution plan is
hereby submitted on the basis of all these
benefits that the farmworker-beneficiaries of
Hacienda Luisita will receive under its provisions
in addition to their regular compensation as
farmhands in the agricultural enterprise and the
fringe benefits granted to them by their collective
bargaining agreement with management.[58]

Also, PARC Resolution No. 89-12-2 reads as follows:

RESOLUTION
APPROVING
THE
STOCK DISTRIBUTION PLAN OF TARLAC
DEVELOPMENT
COMPANY/HACIENDA
LUISITA INCORPORATED (TDC/HLI)
NOW THEREFORE, on motion duly
seconded,
RESOLVED, as it is hereby resolved, to
approve the stock distribution plan of
TDC/HLI.

[59]

UNANIMOUSLY
(Emphasis supplied)

APPROVED.

Clearly, what was approved by PARC is the SDP and

not the SDOA. There is, therefore, no basis for this Court to
apply the law on contracts to the revocation of the said
PARC Resolution.
IV. Just Compensation
In Our July 5, 2011 Decision, We stated that HLI shall
be paid just compensation for the remaining agricultural
land that will be transferred to DAR for land distribution to
the FWBs. We also ruled that the date of the taking is
November 21, 1989, when PARC approved HLIs SDP per
PARC Resolution No. 89-12-2.
In its Motion for Clarification and Partial
Reconsideration, HLI disagrees with the foregoing ruling
and contends that the taking should be reckoned from
finality of the Decision of this Court, or at the very least, the
reckoning period may be tacked to January 2, 2006, the date
when the Notice of Coverage was issued by the DAR
pursuant to PARC Resolution No. 2006-34-01
recalling/revoking the approval of the SDP.[60]
For their part, Mallari, et al. argue that the valuation
of the land cannot be based on November 21, 1989, the date

of approval of the SDP. Instead, they aver that the date of

taking for valuation purposes is a factual issue best left to
the determination of the trial courts.[61]
At the other end of the spectrum, AMBALA alleges
that HLI should no longer be paid just compensation for the
agricultural land that will be distributed to the FWBs, since
the Manila Regional Trial Court (RTC) already rendered a
decision ordering the Cojuangcos to transfer the control of
Hacienda Luisita to the Ministry of Agrarian Reform, which
will distribute the land to small farmers after compensating
the landowners P3.988 million.[62] In the event, however, that
this Court will rule that HLI is indeed entitled to
compensation, AMBALA contends that it should be pegged
at forty thousand pesos (PhP 40,000) per hectare, since this
was the same value that Tadeco declared in 1989 to make
sure that the farmers will not own the majority of its stocks.
[63]

Despite the above propositions, We maintain that the

date of taking is November 21, 1989, the date when PARC
approved HLIs SDP per PARC Resolution No. 89-12-2, in
view of the fact that this is the time that the FWBs were
considered to own and possess the agricultural lands in
Hacienda Luisita. To be precise, these lands became subject
of the agrarian reform coverage through the stock
distribution scheme only upon the approval of the SDP, that
is, November 21, 1989. Thus, such approval is akin to a
notice of coverage ordinarily issued under compulsory

acquisition. Further, any doubt should be resolved in favor

of the FWBs. As this Court held in Perez-Rosario v. CA:[64]
It is an established social and economic
fact that the escalation of poverty is the driving
force behind the political disturbances that have
in the past compromised the peace and security of
the people as well as the continuity of the
national order. To subdue these acute
disturbances, the legislature over the course of
the history of the nation passed a series of laws
calculated to accelerate agrarian reform,
ultimately to raise the material standards of living
and eliminate discontent. Agrarian reform is a
perceived solution to social instability. The
edicts of social justice found in the
Constitution and the public policies that
underwrite them, the extraordinary national
experience, and the prevailing national
consciousness, all command the great
departments of government to tilt the balance
in favor of the poor and underprivileged
whenever reasonable doubt arises in the
interpretation of the law. But annexed to the
great and sacred charge of protecting the weak is
the diametric function to put every effort to arrive
at an equitable solution for all parties concerned:
the jural postulates of social justice cannot shield
illegal acts, nor do they sanction false sympathy
towards a certain class, nor yet should they deny
justice to the landowner whenever truth and
justice happen to be on her side. In the
occupation of the legal questions in all agrarian

disputes whose outcomes can significantly affect

societal harmony, the considerations of social
advantage must be weighed, an inquiry into the
prevailing social interests is necessary in the
adjustment of conflicting demands and
expectations of the people, and the social
interdependence of these interests, recognized.
(Emphasis supplied.)

The minority contends that it is the date of the notice

of coverage, that is, January 2, 2006, which is determinative
of the just compensation HLI is entitled to for its
expropriated lands. To support its contention, it cited
numerous cases where the time of the taking was reckoned
on the date of the issuance of the notice of coverage.
However, a perusal of the cases cited by the minority
would reveal that none of them involved the stock
distribution scheme. Thus, said cases do not squarely apply
to the instant case. Moreover, it should be noted that it is
precisely because the stock distribution option is a
distinctive mechanism under RA 6657 that it cannot be
treated similarly with that of compulsory land acquisition as
these are two (2) different modalities under the agrarian
reform program. As We have stated in Our July 5, 2011
Decision, RA 6657 provides two (2) alternative modalities,
i.e., land or stock transfer, pursuant to either of which the
corporate landowner can comply with CARP.

In this regard, it should be noted that when HLI

submitted the SDP to DAR for approval, it cannot be
gainsaid that the stock distribution scheme is clearly HLIs
preferred modality in order to comply with CARP. And
when the SDP was approved, stocks were given to the
FWBs in lieu of land distribution. As aptly observed by the
minority itself, [i]nstead of expropriating lands, what the
government took and distributed to the FWBs were shares of
stock of petitioner HLI in proportion to the value of the
agricultural lands that should have been expropriated and
turned over to the FWBs. It cannot, therefore, be denied that
upon the approval of the SDP submitted by HLI, the
agricultural lands of Hacienda Luisita became subject of
CARP coverage. Evidently, the approval of the SDP took the
place of a notice of coverage issued under compulsory
acquisition.
Also, it is surprising that while the minority opines
that under the stock distribution option, title to the property
remains with the corporate landowner, which should
presumably be dominated by farmers with majority
stockholdings in the corporation, it still insists that the just
compensation that should be given to HLI is to be reckoned
on January 2, 2006, the date of the issuance of the notice of
coverage, even after it found that the FWBs did not have the
majority stockholdings in HLI contrary to the supposed
avowed policy of the law. In effect, what the minority wants
is to prejudice the FWBs twice. Given that the FWBs should
have had majority stockholdings in HLI but did not, the

minority still wants the government to pay higher just

compensation to HLI. Even if it is the government which
will pay the just compensation to HLI, this will also affect
the FWBs as they will be paying higher amortizations to the
government if the taking will be considered to have taken
place only on January 2, 2006.
The foregoing notwithstanding, it bears stressing that
the DAR's land valuation is only preliminary and is not, by
any means, final and conclusive upon the landowner. The
landowner can file an original action with the RTC acting as
a special agrarian court to determine just compensation. The
court has the right to review with finality the determination
in the exercise of what is admittedly a judicial function.[65]
A view has also been advanced that HLI should pay
the qualified FWBs rental for the use and possession of the
land up to the time it surrenders possession and control over
these lands. What this view fails to consider is the fact that
the FWBs are also stockholders of HLI prior to the
revocation of PARC Resolution No. 89-12-2. Also, the
income earned by the corporation from its possession and
use of the land ultimately redounded to the benefit of the
FWBs based on its business operations in the form of
salaries, benefits voluntarily granted by HLI and other fringe
benefits under their Collective Bargaining Agreement. That
being so, there would be unjust enrichment on the part of the
FWBs if HLI will still be required to pay rent for the use of
the land in question.

V. Sale to Third Parties

There is a view that since the agricultural lands in
Hacienda Luisita were placed under CARP coverage
through the SDOA scheme on May 11, 1989, then the 10year period prohibition on the transfer of awarded lands
under RA 6657 lapsed on May 10, 1999, and, consequently,
the qualified FWBs should already be allowed to sell these
lands with respect to their land interests to third parties,
including HLI, regardless of whether they have fully paid
for the lands or not.
The proposition is erroneous. Sec. 27 of RA 6657
states:
SEC. 27. Transferability of Awarded
Lands. - Lands acquired by beneficiaries under
this Act may not be sold, transferred or
conveyed
except
through
hereditary
succession, or to the government, or to the
LBP, or to other qualified beneficiaries for a
period of ten (10) years: Provided, however,
That the children or the spouse of the transferor
shall have a right to repurchase the land from the
government or LBP within a period of two (2)
years. Due notice of the availability of the land
shall be given by the LBP to the Barangay
Agrarian Reform Committee (BARC) of the
barangay where the land is situated. The
Provincial Agrarian Coordinating Committee

(PARCCOM), as herein provided, shall, in turn,

be given due notice thereof by the BARC.
If the land has not yet been fully paid by
the beneficiary, the right to the land may be
transferred or conveyed, with prior approval of
the DAR, to any heir of the beneficiary or to
any other beneficiary who, as a condition for
such transfer or conveyance, shall cultivate the
land himself. Failing compliance herewith, the
land shall be transferred to the LBP which shall
give due notice of the availability of the land in
the manner specified in the immediately
preceding paragraph.
In the event of such transfer to the LBP,
the latter shall compensate the beneficiary in one
lump sum for the amounts the latter has already
paid, together with the value of improvements he
has made on the land. (Emphasis supplied.)

To implement the above-quoted provision, inter alia,

DAR issued Administrative Order No. 1, Series of 1989
(DAO 1) entitled Rules and Procedures Governing Land
Transactions. Said Rules set forth the rules on validity of
land transactions, to wit:
II. RULES ON
TRANSACTIONS

VALIDITY

OF

A. The following transactions are valid:

LAND

1. Those executed by the original landowner

in favor of the qualified beneficiary from
among those certified by DAR.
2. Those in favor of the government, DAR or
the Land Bank of the Philippines.
3. Those covering lands retained by the
landowner under Section 6 of R.A. 6657
duly certified by the designated DAR
Provincial Agrarian Reform Officer
(PARO) as a retention area, executed in
favor of transferees whose total
landholdings inclusive of the land to be
acquired do not exceed five (5) hectares;
subject, however, to the right of preemption and/or redemption of tenant/lessee
under Section 11 and 12 of R.A. 3844, as
amended.
xxxx
4. Those executed by beneficiaries covering
lands acquired under any agrarian reform
law in favor of the government, DAR,
LBP or other qualified beneficiaries
certified by DAR.
5. Those executed after ten (10) years from
the issuance and registration of the
Emancipation Patent or Certificate of
Land Ownership Award.
B. The following transactions are not valid:

1. Sale, disposition, lease management

contract or transfer of possession of private
lands executed by the original landowner
prior to June 15, 1988, which are
registered on or before September 13,
1988, or those executed after June 15,
1988, covering an area in excess of the
five-hectare retention limit in violation of
R.A. 6657.
2. Those covering lands acquired by the
beneficiary under R.A. 6657 and executed
within ten (10) years from the issuance and
registration of an Emancipation Patent or
Certificate of Land Ownership Award.
3. Those executed in favor of a person or
persons not qualified to acquire land under
R.A. 6657.
4. Sale, transfer, conveyance or change of
nature of the land outside of urban centers
and city limits either in whole or in part as
of June 15, 1988, when R.A. 6657 took
effect, except as provided for under DAR
Administrative Order No. 15, series of
1988.
5. Sale, transfer or conveyance by
beneficiary of the right to use or any other
usufructuary right over the land he
acquired by virtue of being a beneficiary,
in order to circumvent the law.
x x x x (Emphasis supplied.)

Without a doubt, under RA 6657 and DAO 1, the

awarded lands may only be transferred or conveyed after ten
(10) years from the issuance and registration of the
emancipation patent (EP) or certificate of land ownership
award (CLOA). Considering that the EPs or CLOAs have
not yet been issued to the qualified FWBs in the instant case,
the 10-year prohibitive period has not even started.
Significantly, the reckoning point is the issuance of the EP
or CLOA, and not the placing of the agricultural lands
under CARP coverage.
Moreover, if We maintain the position that the
qualified FWBs should be immediately allowed the option
to sell or convey the agricultural lands in Hacienda Luisita,
then all efforts at agrarian reform would be rendered
nugatory by this Court, since, at the end of the day, these
lands will just be transferred to persons not entitled to land
distribution under CARP. As aptly noted by the late Senator
Neptali Gonzales during the Joint Congressional Conference
Committee on the Comprehensive Agrarian Reform
Program Bills:
SEN. GONZALES. My point is, as much
as possible let the said lands be distributed
under CARP remain with the beneficiaries
and their heirs because that is the lesson that we
have to learn from PD No. 27. If you will talk
with the Congressmen representing Nueva Ecija,
Pampanga and Central Luzon provinces, law or
no law, you will find out that more than one-

third of the original, of the lands distributed

under PD 27 are no longer owned, possessed
or being worked by the grantees or the
awardees of the same, something which we
ought to avoid under the CARP bill that we
are going to enact.[66] (Emphasis supplied.)

Worse, by raising that the qualified beneficiaries may

sell their interest back to HLI, this smacks of outright
indifference to the provision on retention limits[67] under RA
6657, as this Court, in effect, would be allowing HLI, the
previous landowner, to own more than five (5) hectares of
agricultural land, which We cannot countenance. There is a
big difference between the ownership of agricultural lands
by HLI under the stock distribution scheme and its eventual
acquisition of the agricultural lands from the qualified
FWBs under the proposed buy-back scheme. The rule on
retention limits does not apply to the former but only to the
latter in view of the fact that the stock distribution scheme is
sanctioned by Sec. 31 of RA 6657, which specifically allows
corporations to divest a proportion of their capital stock that
the agricultural land, actually devoted to agricultural
activities, bears in relation to the companys total assets. On
the other hand, no special rules exist under RA 6657
concerning the proposed buy-back scheme; hence, the
general rules on retention limits should apply.
Further, the position that the qualified FWBs are now
free to transact with third parties concerning their land
interests, regardless of whether they have fully paid for the

lands or not, also transgresses the second paragraph of Sec.

27 of RA 6657, which plainly states that [i]f the land has not
yet been fully paid by the beneficiary, the right to the land
may be transferred or conveyed, with prior approval of the
DAR, to any heir of the beneficiary or to any other
beneficiary who, as a condition for such transfer or
conveyance, shall cultivate the land himself. Failing
compliance herewith, the land shall be transferred to the
LBP x x x. When the words and phrases in the statute are
clear and unequivocal, the law is applied according to its
express terms.[68] Verba legis non est recedendum, or from
the words of a statute there should be no departure.[69]
The minority, however, posits that [t]o insist that the
FWBs rights sleep for a period of ten years is unrealistic,
and may seriously deprive them of real opportunities to
capitalize and maximize the victory of direct land
distribution. By insisting that We disregard the ten-year
restriction under the law in the case at bar, the minority, in
effect, wants this Court to engage in judicial legislation,
which is violative of the principle of separation of powers.
[70]
The discourse by Ruben E. Agpalo, in his book on
statutory construction, is enlightening:
Where the law is clear and unambiguous, it
must be taken to mean exactly what it says and
the court has no choice but to see to it that its
mandate is obeyed. Where the law is clear and
free from doubt or ambiguity, there is no room
for construction or interpretation. Thus, where

what is not clearly provided in the law is read

into the law by construction because it is more
logical and wise, it would be to encroach upon
legislative prerogative to define the wisdom of
the law, which is judicial legislation. For
whether a statute is wise or expedient is not for
the courts to determine. Courts must
administer the law, not as they think it ought
to be but as they find it and without regard to
consequences.[71] (Emphasis supplied.)

And as aptly stated by Chief Justice Renato Corona in

his Dissenting Opinion in Ang Ladlad LGBT Party v.
COMELEC:[72]
Regardless of the personal beliefs and
biases of its individual members, this Court can
only apply and interpret the Constitution and the
laws. Its power is not to create policy but to
recognize, review or reverse the policy crafted by
the political departments if and when a proper
case is brought before it. Otherwise, it will tread
on the dangerous grounds of judicial legislation.

Considerably, this Court is left with no other recourse

but to respect and apply the law.

AMBALA and FARM reiterate that improving the

economic status of the FWBs is among the legal obligations
of HLI under the SDP and is an imperative imposition by
RA 6657 and DAO 10.[73] FARM further asserts that [i]f that
minimum threshold is not met, why allow [stock distribution
option] at all, unless the purpose is not social justice but a
political accommodation to the powerful.[74]
Contrary to the assertions of AMBALA and FARM,
nowhere in the SDP, RA 6657 and DAO 10 can it be inferred
that improving the economic status of the FWBs is among
the legal obligations of HLI under the SDP or is an
imperative imposition by RA 6657 and DAO 10, a violation
of which would justify discarding the stock distribution
option. As We have painstakingly explained in Our July 5,
2011 Decision:
In the Terminal Report adopted by PARC,
it is stated that the SDP violates the agrarian
reform policy under Sec. 2 of RA 6657, as the
said plan failed to enhance the dignity and
improve the quality of lives of the FWBs through
greater productivity of agricultural lands. We
disagree.
Sec. 2 of RA 6657 states:

VI. Grounds for Revocation of the SDP

SECTION 2. Declaration of
Principles and Policies.It is the
policy of the State to pursue a

Comprehensive Agrarian Reform

Program (CARP). The welfare of
the landless farmers and farm
workers will receive the highest
consideration to promote social
justice and to move the nation
towards sound rural development
and industrialization, and the
establishment
of
owner
cultivatorship of economic-sized
farms as the basis of Philippine
agriculture.

To this end, a more equitable

distribution and ownership of land,
with due regard to the rights of
landowners to just compensation
and to the ecological needs of the
nation, shall be undertaken to
provide
farmers
and
farm
workers with the opportunity to
enhance
their dignity
and
improve the quality of their lives
through greater productivity of
agricultural lands.
The agrarian reform program
is founded on the right of farmers
and regular farm workers, who are
landless, to own directly or
collectively the lands they till or, in
the case of other farm workers, to

receive a share of the fruits thereof.

To this end, the State shall
encourage the just distribution of all
agricultural lands, subject to the
priorities and retention limits set
forth in this Act, having taken into
account ecological, developmental,
and equity considerations, and
subject to the payment of just
compensation. The State shall
respect the right of small
landowners and shall provide
incentives for voluntary landsharing.
Paragraph 2 of the above-quoted provision
specifically mentions that a more equitable
distribution and ownership of land x x x shall be
undertaken to provide farmers and farm workers
with the opportunity to enhance their dignity
and improve the quality of their lives through
greater productivity of agricultural lands. Of note
is the term opportunity which is defined as a
favorable chance or opening offered by
circumstances. Considering this, by no stretch of
imagination can said provision be construed as a
guarantee in improving the lives of the FWBs. At
best, it merely provides for a possibility or
favorable chance of uplifting the economic status
of the FWBs, which may or may not be attained.
Pertinently, improving the economic status
of the FWBs is neither among the legal
obligations of HLI under the SDP nor an
imperative imposition by RA 6657 and DAO 10,

a violation of which would justify discarding the

stock distribution option. Nothing in that option
agreement, law or department order indicates
otherwise.
Significantly, HLI draws particular
attention to its having paid its FWBs, during the
regime of the SDP (1989-2005), some PhP 3
billion by way of salaries/wages and higher
benefits exclusive of free hospital and medical
benefits to their immediate family. And attached
as Annex G to HLIs Memorandum is the certified
true report of the finance manager of Jose
Cojuangco
&
Sons
Organizations-Tarlac
Operations, captioned as HACIENDA LUISITA,
INC. Salaries, Benefits and Credit Privileges (in
Thousand Pesos) Since the Stock Option was
Approved by PARC/CARP, detailing what
HLI gave their workers from 1989 to 2005. The
sum total, as added up by the Court, yields the
following numbers: Total Direct Cash Out
(Salaries/Wages & Cash Benefits) = PhP
2,927,848; Total Non-Direct Cash Out
(Hospital/Medical Benefits) = PhP 303,040. The
cash out figures, as stated in the report, include
the cost of homelots; the PhP 150 million or so
representing 3% of the gross produce of the
hacienda; and the PhP 37.5 million representing
3% from the proceeds of the sale of the 500hectare converted lands. While not included in
the report, HLI manifests having given the FWBs
3% of the PhP 80 million paid for the 80 hectares
of land traversed by the SCTEX. On top of these,
it is worth remembering that the shares of stocks

were given by HLI to the FWBs for free. Verily,

the FWBs have benefited from the SDP.
To address urgings that the FWBs be
allowed to disengage from the SDP as HLI has
not anyway earned profits through the years, it
cannot be over-emphasized that, as a matter of
common business sense, no corporation could
guarantee a profitable run all the time. As has
been suggested, one of the key features of an
SDP of a corporate landowner is the likelihood of
the corporate vehicle not earning, or, worse still,
losing money.
The Court is fully aware that one of the
criteria under DAO 10 for the PARC to consider
the advisability of approving a stock distribution
plan is the likelihood that the plan would result
in increased income and greater benefits to
[qualified beneficiaries] than if the lands were
divided and distributed to them individually.
But as aptly noted during the oral arguments,
DAO 10 ought to have not, as it cannot, actually
exact assurance of success on something that is
subject to the will of man, the forces of nature or
the inherent risky nature of business. [75] Just like
in actual land distribution, an SDP cannot
guarantee, as indeed the SDOA does not
guarantee, a comfortable life for the FWBs. The
Court can take judicial notice of the fact that
there were many instances wherein after a
farmworker beneficiary has been awarded with
an agricultural land, he just subsequently sells it
and is eventually left with nothing in the end.

In all then, the onerous condition of the

FWBs economic status, their life of hardship, if
that really be the case, can hardly be attributed to
HLI and its SDP and provide a valid ground for
the plans revocation. (Citations omitted;
emphasis in the original.)

This Court, despite the above holding, still affirmed

the revocation by PARC of its approval of the SDP based on
the following grounds: (1) failure of HLI to fully comply
with its undertaking to distribute homelots to the FWBs
under the SDP; (2) distribution of shares of stock to the
FWBs based on the number of man days or number of days
worked by the FWB in a years time; and (3) 30-year
timeframe for the implementation or distribution of the
shares of stock to the FWBs.
Just the same, Mallari, et al. posit that the homelots
required to be distributed have all been distributed pursuant
to the SDOA, and that what merely remains to be done is the
release of title from the Register of Deeds. [76] They further
assert that there has been no dilution of shares as the
corporate records would show that if ever not all of the
18,804.32 shares were given to the actual original FWB, the
recipient of the difference is the next of kin or children of
said original FWB.[77] Thus, they submit that since the shares
were given to the same family beneficiary, this should be
deemed as substantial compliance with the provisions of
Sec. 4 of DAO 10.[78] Also, they argue that there has been no
violation of the three-month period to implement the SDP as

mandated by Sec. 11 of DAO, since this provision must be

read in light of Sec. 10 of Executive Order No. 229, the
pertinent portion of which reads, The approval by the PARC
of a plan for such stock distribution, and its initial
implementation, shall be deemed compliance with the land
distribution requirement of the CARP.[79]
Again, the matters raised by Mallari, et al. have been
extensively discussed by the Court in its July 5, 2011
Decision. As stated:
On Titles to Homelots
Under RA 6657, the distribution of
homelots is required only for corporations or
business associations owning or operating farms
which opted for land distribution. Sec. 30 of RA
6657 states:
SEC. 30. Homelots and
Farmlots
for
Members
of
Cooperatives.The
individual
members of the cooperatives or
corporations mentioned in the
preceding section shall be provided
with homelots and small farmlots
for their family use, to be taken
from the land owned by the
cooperative or corporation.
The preceding section referred to in the
above-quoted provision is as follows:

SEC. 29. Farms Owned or

Operated by Corporations or Other
Business Associations.In the case of
farms owned or operated by
corporations or other business
associations, the following rules
shall be observed by the PARC.
In general, lands shall be
distributed directly to the individual
worker-beneficiaries.
In case it is not economically
feasible and sound to divide the
land, then it shall be owned
collectively
by
the
workerbeneficiaries who shall form a
workers cooperative or association
which will deal with the corporation
or business association. Until a new
agreement is entered into by and
between the workers cooperative or
association and the corporation or
business association, any agreement
existing at the time this Act takes
effect between the former and the
previous landowner shall be
respected by both the workers
cooperative or association and the
corporation or business association.
Noticeably, the foregoing provisions do
not make reference to corporations which opted
for stock distribution under Sec. 31 of RA 6657.
Concomitantly, said corporations are not obliged

to provide for it except by stipulation, as in this

case.
Under the SDP, HLI undertook to
subdivide and allocate for free and without
charge among the qualified family-beneficiaries x
x x residential or homelots of not more than 240
sq. m. each, with each family beneficiary being
assured of receiving and owning a homelot in the
barrio or barangay where it actually resides,
within a reasonable time.
More than sixteen (16) years have elapsed
from the time the SDP was approved by PARC,
and yet, it is still the contention of the FWBs that
not all was given the 240-square meter homelots
and, of those who were already given, some still
do not have the corresponding titles.
During the oral arguments, HLI was
afforded the chance to refute the foregoing
allegation by submitting proof that the FWBs
were already given the said homelots:
Justice Velasco: x x x There
is also an allegation that the farmer
beneficiaries, the qualified family
beneficiaries were not given the 240
square meters each. So, can you also
[prove] that the qualified family
beneficiaries were already provided
the 240 square meter homelots.
Atty. Asuncion: We will, your
Honor please.

Other than the financial report, however,

no other substantial proof showing that all the
qualified beneficiaries have received homelots
was submitted by HLI. Hence, this Court is
constrained to rule that HLI has not yet fully
complied with its undertaking to distribute
homelots to the FWBs under the SDP.
On Man Days and the Mechanics of
Stock Distribution
In our review and analysis of par. 3 of the
SDOA on the mechanics and timelines of stock
distribution, We find that it violates two (2)
provisions of DAO 10. Par. 3 of the SDOA states:
3. At the end of each fiscal
year, for a period of 30 years, the
SECOND PARTY [HLI] shall
arrange with the FIRST PARTY
[TDC]
the
acquisition
and
distribution to the THIRD PARTY
[FWBs] on the basis of number of
days worked and at no cost to them
of
one-thirtieth
(1/30)
of
118,391,976.85 shares of the capital
stock of the SECOND PARTY that
are presently owned and held by the
FIRST PARTY, until such time as
the entire block of 118,391,976.85
shares shall have been completely
acquired and distributed to the
THIRD PARTY.

Based on the above-quoted provision, the

distribution of the shares of stock to the FWBs,
albeit not entailing a cash out from them, is
contingent on the number of man days, that is,
the number of days that the FWBs have worked
during the year. This formula deviates from Sec.
1 of DAO 10, which decrees the distribution of
equal number of shares to the FWBs as the
minimum ratio of shares of stock for purposes of
compliance with Sec. 31 of RA 6657. As stated in
Sec. 4 of DAO 10:
Section 4. Stock Distribution
Plan.The [SDP] submitted by the
corporate landowner-applicant shall
provide for the distribution of
an equal number of shares of the
same class and value, with the
same rights and features as all
other shares, to each of the
qualified
beneficiaries.
This
distribution plan in all cases, shall
be at least the minimum ratio for
purposes of compliance with
Section 31 of R.A. No. 6657.
On top of the minimum
ratio provided under Section 3 of
this Implementing Guideline, the
corporate landowner-applicant may
adopt additional stock distribution
schemes taking into account
factors such as rank, seniority,
salary, position
and
other
circumstances which may be

deemed desirable as a matter of

sound company policy.
The above proviso gives two (2) sets or
categories of shares of stock which a qualified
beneficiary can acquire from the corporation
under the SDP. The first pertains, as earlier
explained, to the mandatory minimum ratio of
shares of stock to be distributed to the FWBs in
compliance with Sec. 31 of RA 6657. This
minimum ratio contemplates of that proportion
of the capital stock of the corporation that the
agricultural land, actually devoted to
agricultural activities, bears in relation to the
companys total assets. It is this set of shares of
stock which, in line with Sec. 4 of DAO 10, is
supposed to be allocated for the distribution of an
equal number of shares of stock of the same class
and value, with the same rights and features as all
other shares, to each of the qualified
beneficiaries.
On the other hand, the second set or
category of shares partakes of a gratuitous extra
grant, meaning that this set or category
constitutes an augmentation share/s that the
corporate landowner may give under an
additional stock distribution scheme, taking into
account such variables as rank, seniority, salary,
position and like factors which the management,
in the exercise of its sound discretion, may deem
desirable.
Before anything else, it should be stressed
that, at the time PARC approved HLIs SDP, HLI

recognized 6,296 individuals as qualified FWBs.

And under the 30-year stock distribution program
envisaged under the plan, FWBs who came in
after 1989, new FWBs in fine, may be
accommodated, as they appear to have in fact
been accommodated as evidenced by their receipt
of HLI shares.
Now then, by providing that the number of
shares of the original 1989 FWBs shall depend on
the number of man days, HLI violated the aforequoted rule on stock distribution and effectively
deprived the FWBs of equal shares of stock in the
corporation, for, in net effect, these 6,296
qualified FWBs, who theoretically had given up
their rights to the land that could have been
distributed to them, suffered a dilution of their
due share entitlement. As has been observed
during the oral arguments, HLI has chosen to use
the shares earmarked for farmworkers as reward
system chips to water down the shares of the
original 6,296 FWBs. Particularly:
Justice Abad: If the SDOA
did not take place, the other thing
that would have happened is that
there would be CARP?
Atty. Dela Merced: Yes, Your
Honor.
Justice Abad: Thats the only
point I want to know x x x. Now,
but they chose to enter SDOA
instead of placing the land under

CARP. And for that reason those

who would have gotten their shares
of the land actually gave up their
rights to this land in place of the
shares of the stock, is that correct?

shares who were not in the original

list of owners?

Atty. Dela Merced: It would

be that way, Your Honor.

Justice Abad: Did those new

workers give up any right that
would have belong to them in 1989
when the land was supposed to have
been placed under CARP?

Justice Abad: Right now, also

the government, in a way, gave up
its right to own the land because
that way the government takes own
[sic] the land and distribute it to the
farmers and pay for the land, is that
correct?
Atty. Dela Merced: Yes, Your
Honor.
Justice Abad: And then you
gave thirty-three percent (33%) of
the shares of HLI to the farmers at
that time that numbered x x x those
who signed five thousand four
hundred ninety eight (5,498)
beneficiaries, is that correct?

Atty. Dela Merced: Yes, Your

Honor.

Atty. Dela Merced: If you are

talking or referring (interrupted)
Justice Abad: None! You tell
me. None. They gave up no rights to
land?
Atty. Dela Merced: They did
not do the same thing as we did in
1989, Your Honor.
Justice Abad: No, if they
were not workers in 1989 what land
did they give up? None, if they
become workers later on.

Atty. Dela Merced: Yes, Your

Honor.

Atty. Dela Merced: None,

Your Honor, I was referring, Your
Honor, to the original (interrupted)

Justice Abad: But later on,

after assigning them their shares,
some workers came in from 1989,
1990, 1991, 1992 and the rest of the
years that you gave additional

Justice Abad: So why is it

that the rights of those who gave up
their lands would be diluted,
because the company has chosen to

use the shares as reward system for

new workers who come in? It is not
that the new workers, in effect,
become just workers of the
corporation whose stockholders
were already fixed. The TADECO
who has shares there about sixty six
percent (66%) and the five thousand
four hundred ninety eight (5,498)
farmers at the time of the SDOA?
Explain to me. Why, why will you x
x x what right or where did you get
that right to use this shares, to water
down the shares of those who
should have been benefited, and to
use it as a reward system decided by
the company?
From the above discourse, it is clear as day
that the original 6,296 FWBs, who were qualified
beneficiaries at the time of the approval of the
SDP, suffered from watering down of shares. As
determined earlier, each original FWB is entitled
to 18,804.32 HLI shares. The original FWBs got
less than the guaranteed 18,804.32 HLI shares
per beneficiary, because the acquisition and
distribution of the HLI shares were based on man
days or number of days worked by the FWB in a
years time. As explained by HLI, a beneficiary
needs to work for at least 37 days in a fiscal year
before he or she becomes entitled to HLI
shares. If it falls below 37 days, the FWB,
unfortunately, does not get any share at year
end. The number of HLI shares distributed varies
depending on the number of days the FWBs were

allowed to work in one year. Worse, HLI hired

farmworkers in addition to the original 6,296
FWBs, such that, as indicated in the Compliance
dated August 2, 2010 submitted by HLI to the
Court, the total number of farmworkers of HLI as
of said date stood at 10,502. All these
farmworkers, which include the original 6,296
FWBs, were given shares out of the
118,931,976.85 HLI shares representing the
33.296% of the total outstanding capital stock of
HLI. Clearly, the minimum individual allocation
of each original FWB of 18,804.32 shares was
diluted as a result of the use of man days and the
hiring of additional farmworkers.
Going into another but related matter, par.
3 of the SDOA expressly providing for a 30-year
timeframe for HLI-to-FWBs stock transfer is an
arrangement contrary to what Sec. 11 of DAO 10
prescribes. Said Sec. 11 provides for the
implementation of the approved stock
distribution plan within three (3) months from
receipt by the corporate landowner of the
approval of the plan by PARC. In fact, based on
the said provision, the transfer of the shares of
stock in the names of the qualified FWBs should
be recorded in the stock and transfer books and
must be submitted to the SEC within sixty (60)
days from implementation. As stated:
Section
11. Implementation/Monitoring of
Plan.The
approved
stock
distribution
plan
shall
be implemented within three (3)

months from receipt by the

corporate landowner-applicant of
the approval thereof by the
PARC, and the transfer of the
shares of stocks in the names of the
qualified beneficiaries shall be
recorded in stock and transfer books
and submitted to the Securities
and
Exchange
Commission
(SEC) within sixty (60) days from
the said implementation of the
stock distribution plan.
It is evident from the foregoing provision
that the implementation, that is, the distribution
of the shares of stock to the FWBs, must be made
within three (3) months from receipt by HLI of
the approval of the stock distribution plan by
PARC. While neither of the clashing parties has
made a compelling case of the thrust of this
provision, the Court is of the view and so holds
that the intent is to compel the corporate
landowner to complete, not merely initiate, the
transfer process of shares within that three-month
timeframe. Reinforcing this conclusion is the 60day stock transfer recording (with the SEC)
requirement reckoned from the implementation
of the SDP.

To the Court, there is a purpose, which is

at once discernible as it is practical, for the threemonth threshold. Remove this timeline and the
corporate landowner can veritably evade
compliance with agrarian reform by simply
deferring to absurd limits the implementation of
the stock distribution scheme.
The argument is urged that the thirty (30)year distribution program is justified by the fact
that, under Sec. 26 of RA 6657, payment by
beneficiaries of land distribution under CARP
shall be made in thirty (30) annual amortizations.
To HLI, said section provides a justifying
dimension to its 30-year stock distribution
program.
HLIs reliance on Sec. 26 of RA 6657,
quoted in part below, is obviously misplaced as
the said provision clearly deals with land
distribution.
SEC.
26. Payment
by
Beneficiaries.Lands
awarded
pursuant to this Act shall be paid for
by the beneficiaries to the LBP in
thirty (30) annual amortizations x x
x.
Then, too, the ones obliged to pay the LBP
under the said provision are the beneficiaries. On
the other hand, in the instant case, aside from the
fact that what is involved is stock distribution, it
is the corporate landowner who has the obligation
to distribute the shares of stock among the FWBs.

Evidently, the land transfer beneficiaries

are given thirty (30) years within which to pay
the cost of the land thus awarded them to make it
less cumbersome for them to pay the government.
To be sure, the reason underpinning the 30-year
accommodation does not apply to corporate
landowners in distributing shares of stock to the
qualified beneficiaries, as the shares may be
issued in a much shorter period of time.
Taking into account the above discussion,
the revocation of the SDP by PARC should be
upheld for violating DAO 10. It bears stressing
that under Sec. 49 of RA 6657, the PARC and the
DAR have the power to issue rules and
regulations, substantive or procedural. Being a
product of such rule-making power, DAO 10 has
the force and effect of law and must be duly
complied with. The PARC is, therefore, correct in
revoking the SDP. Consequently, the PARC
Resolution No. 89-12-2 dated November 21, l989
approving the HLIs SDP is nullified and voided.
(Citations omitted; emphasis in the original.)

Based on the foregoing ruling, the contentions of

Mallari, et al. are either not supported by the evidence on
record or are utterly misplaced. There is, therefore, no basis
for the Court to reverse its ruling affirming PARC
Resolution No. 2005-32-01 and PARC Resolution No. 200634-01, revoking the previous approval of the SDP by PARC.

VII. Control
over
Agricultural
Lands
After having discussed and considered the different
contentions raised by the parties in their respective motions,
We are now left to contend with one crucial issue in the case
at bar, that is, control over the agricultural lands by the
qualified FWBs.
Upon a review of the facts and circumstances, We
realize that the FWBs will never have control over these
agricultural lands for as long as they remain as stockholders
of HLI. In Our July 5, 2011 Decision, this Court made the
following observations:
There is, thus, nothing unconstitutional in
the formula prescribed by RA 6657. The policy
on agrarian reform is that control over the
agricultural land must always be in the hands
of the farmers. Then it falls on the shoulders of
DAR and PARC to see to it the farmers should
always own majority of the common shares
entitled to elect the members of the board of
directors to ensure that the farmers will have a
clear majority in the board. Before the SDP is
approved, strict scrutiny of the proposed SDP
must always be undertaken by the DAR and
PARC, such that the value of the agricultural land
contributed to the corporation must always be
more than 50% of the total assets of the

corporation to ensure that the majority of the

members of the board of directors are composed
of the farmers. The PARC composed of the
President
of
the Philippines and
cabinet
secretaries must see to it that control over the
board of directors rests with the farmers by
rejecting the inclusion of non-agricultural assets
which will yield the majority in the board of
directors to non-farmers. Any deviation, however,
by PARC or DAR from the correct application of
the formula prescribed by the second paragraph
of Sec. 31 of RA 6675 does not make said
provision constitutionally infirm. Rather, it is the
application of said provision that can be
challenged. Ergo, Sec. 31 of RA 6657 does not
trench on the constitutional policy of ensuring
control by the farmers. (Emphasis supplied.)

In line with Our finding that control over agricultural

lands must always be in the hands of the farmers, We
reconsider our ruling that the qualified FWBs should be
given an option to remain as stockholders of HLI, inasmuch
as these qualified FWBs will never gain control given the
present proportion of shareholdings in HLI.
A revisit of HLIs Proposal for Stock Distribution
under CARP and the Stock Distribution Option Agreement
(SDOA) upon which the proposal was based reveals that the

total assets of HLI is PhP 590,554,220, while the value of

the 4,915.7466 hectares is PhP 196,630,000. Consequently,
the share of the farmer-beneficiaries in the HLI capital stock
is 33.296% (196,630,000 divided by 590,554.220);
118,391,976.85 HLI shares represent 33.296%. Thus, even if
all the holders of the 118,391,976.85 HLI shares
unanimously vote to remain as HLI stockholders, which is
unlikely, control will never be placed in the hands of the
farmer-beneficiaries. Control, of course, means the majority
of 50% plus at least one share of the common shares and
other voting shares. Applying the formula to the HLI
stockholdings, the number of shares that will constitute the
majority is 295,112,101 shares (590,554,220 divided by 2
plus one [1] HLI share). The 118,391,976.85 shares subject
to the SDP approved by PARC substantially fall short of the
295,112,101 shares needed by the FWBs to acquire control
over HLI. Hence, control can NEVER be attained by the
FWBs. There is even no assurance that 100% of the
118,391,976.85 shares issued to the FWBs will all be voted
in favor of staying in HLI, taking into account the previous
referendum among the farmers where said shares were not
voted unanimously in favor of retaining the SDP. In light of
the foregoing consideration, the option to remain in HLI
granted to the individual FWBs will have to be recalled and
revoked.

Moreover, bearing in mind that with the revocation of

the approval of the SDP, HLI will no longer be operating
under SDP and will only be treated as an ordinary private
corporation; the FWBs who remain as stockholders of HLI
will be treated as ordinary stockholders and will no longer
be under the protective mantle of RA 6657.
In addition to the foregoing, in view of the operative
fact doctrine, all the benefits and homelots [80] received by all
the FWBs shall be respected with no obligation to refund or
return them, since, as We have mentioned in our July 5, 2011
Decision, the benefits x x x were received by the FWBs as
farmhands in the agricultural enterprise of HLI and other
fringe benefits were granted to them pursuant to the existing
collective bargaining agreement with Tadeco.
One last point, the HLI land shall be distributed only
to the 6,296 original FWBs. The remaining 4,206 FWBs are
not entitled to any portion of the HLI land, because the
rights to said land were vested only in the 6,296 original
FWBs pursuant to Sec. 22 of RA 6657.
In this regard, DAR shall verify the identities of the
6,296 original FWBs, consistent with its administrative
prerogative to identify and select the agrarian reform
beneficiaries under RA 6657.[81]

WHEREFORE,
the Motion
for
Partial
Reconsideration dated July 20, 2011 filed by public
respondents Presidential Agrarian Reform Council and
Department of Agrarian Reform, the Motion for
Reconsideration dated July 19, 2011 filed by private
respondent Alyansa ng mga Manggagawang Bukid sa
Hacienda Luisita, the Motion for Reconsideration dated July
21, 2011 filed by respondent-intervenor Farmworkers
Agrarian Reform Movement, Inc., and the Motion for
Reconsiderationdated July 22, 2011 filed by private
respondents Rene Galang and AMBALA are PARTIALLY
GRANTED with respect to the option granted to the
original farmworker-beneficiaries of Hacienda Luisita to
remain with Hacienda Luisita, Inc., which is
hereby RECALLED and SET ASIDE. The Motion for
Clarification and Partial Reconsideration dated July 21,
2011 filed by petitioner HLI and the Motion for
Reconsideration dated July 21, 2011 filed by private
respondents Noel Mallari, Julio Suniga, Supervisory Group
of Hacienda Luisita, Inc. and Windsor Andaya are DENIED.
The fallo of the Courts July 5, 2011 Decision is
hereby amended and shall read:

PARC Resolution No. 2005-32-01 dated December

22, 2005 and Resolution No. 2006-34-01 dated May 3, 2006,
placing the lands subject of HLIs SDP under compulsory
coverage on mandated land acquisition scheme of the CARP,
are herebyAFFIRMED with the following modifications:
All salaries, benefits, the 3% of the gross sales of the
production of the agricultural lands, the 3% share in the
proceeds of the sale of the 500-hectare converted land and
the 80.51-hectare SCTEX lot and the homelots already
received by the 10,502 FWBs composed of 6,296 original
FWBs and the 4,206 non-qualified FWBs shall be respected
with no obligation to refund or return them. The 6,296
original FWBs shall forfeit and relinquish their rights over
the HLI shares of stock issued to them in favor of HLI. The
HLI Corporate Secretary shall cancel the shares issued to the
said FWBs and transfer them to HLI in the stocks and
transfer book, which transfers shall be exempt from taxes,
fees and charges. The 4,206 non-qualified FWBs shall
remain as stockholders of HLI.
DAR shall segregate from the HLI agricultural land
with an area of 4,915.75 hectares subject of PARCs SDPapproving Resolution No. 89-12-2 the 500-hectare lot
subject of the August 14, l996 Conversion Order and the
80.51-hectare lot sold to, or acquired by, the government as
part of the SCTEX complex. After the segregation process,
as indicated, is done, the remaining area shall be turned over
to DAR for immediate land distribution to the original 6,296

FWBs or their successors-in-interest which will be identified

by the DAR. The 4,206 non-qualified FWBs are not entitled
to any share in the land to be distributed by DAR.
HLI is directed to pay the original 6,296 FWBs the
consideration of PhP 500,000,000 received by it from
Luisita Realty, Inc. for the sale to the latter of 200 hectares
out of the 500 hectares covered by the August 14, 1996
Conversion Order, the consideration of PhP 750,000,000
received by its owned subsidiary, Centennary Holdings, Inc.,
for the sale of the remaining 300 hectares of the
aforementioned 500-hectare lot to Luisita Industrial Park
Corporation, and the price of PhP 80,511,500 paid by the
government through the Bases Conversion Development
Authority for the sale of the 80.51-hectare lot used for the
construction of the SCTEX road network. From the total
amount of PhP 1,330,511,500 (PhP 500,000,000 + PhP
750,000,000 + PhP 80,511,500 = PhP 1,330,511,500) shall
be deducted the 3% of the proceeds of said transfers that
were paid to the FWBs, the taxes and expenses relating to
the transfer of titles to the transferees, and the expenditures
incurred by HLI and Centennary Holdings, Inc. for
legitimate corporate purposes. For this purpose, DAR is
ordered to engage the services of a reputable accounting
firm approved by the parties to audit the books of HLI and
Centennary Holdings, Inc. to determine if the PhP
1,330,511,500 proceeds of the sale of the three (3)
aforementioned lots were actually used or spent for
legitimate corporate purposes. Any unspent or unused

balance and any disallowed expenditures as determined by

the audit shall be distributed to the 6,296 original FWBs.
HLI is entitled to just compensation for the agricultural land
that will be transferred to DAR to be reckoned from
November 21, 1989 which is the date of issuance of PARC
Resolution No. 89-12-2. DAR and LBP are ordered to
determine the compensation due to HLI.

DAR shall submit a compliance report after six (6) months

from finality of this judgment. It shall also submit, after
submission of the compliance report, quarterly reports on the
execution of this judgment within the first 15 days after the
end of each quarter, until fully implemented.
The temporary restraining order is lifted.
SO ORDERED.