G.R. No.

103302 August 12, 1993

NATALIA REALTY, INC., AND ESTATE DEVELOPERS AND INVESTORS CORP., petitioners,
vs.
DEPARTMENT OF AGRARIAN REFORM, SEC. BENJAMIN T. LEONG and DIR. WILFREDO
LEANO, DAR REGION IV, respondents.

Lino M. Patajo for petitioners.

The Solicitor General for respondents.

BELLOSILLO, J.:

Are lands already classified for residential, commercial or industrial use, as approved by the Housing
and Land Use Regulatory Board and its precursor agencies 1 prior to 15 June 1988, 2 covered by R.A.
6657, otherwise known as the Comprehensive Agrarian Reform Law of 1988? This is the pivotal issue in
this petition for certiorari assailing the Notice of Coverage 3 of the Department of Agrarian Reform over
parcels of land already reserved as townsite areas before the enactment of the law.

Petitioner Natalia Realty, Inc. (NATALIA, for brevity) is the owner of three (3) contiguous parcels of
land located in Banaba, Antipolo, Rizal, with areas of 120.9793 hectares, 1.3205 hectares and
2.7080 hectares, or a total of 125.0078 hectares, and embraced in Transfer Certificate of Title No.
31527 of the Register of Deeds of the Province of Rizal.

On 18 April 1979, Presidential Proclamation No. 1637 set aside 20,312 hectares of land located in
the Municipalities of Antipolo, San Mateo and Montalban as townsite areas to absorb the population
overspill in the metropolis which were designated as the Lungsod Silangan Townsite. The NATALIA
properties are situated within the areas proclaimed as townsite reservation.

Since private landowners were allowed to develop their properties into low-cost housing subdivisions
within the reservation, petitioner Estate Developers and Investors Corporation (EDIC, for brevity), as
developer of NATALIA properties, applied for and was granted preliminary approval and locational
clearances by the Human Settlements Regulatory Commission. The necessary permit for Phase I of
the subdivision project, which consisted of 13.2371 hectares, was issued sometime in 1982; 4 for
Phase II, with an area of 80,000 hectares, on 13 October 1983; 5 and for Phase III, which consisted of the
remaining 31.7707 hectares, on 25 April 1986. 6 Petitioner were likewise issued development
permits 7 after complying with the requirements. Thus the NATALIA properties later became the Antipolo
Hills Subdivision.

On 15 June 1988, R.A. 6657, otherwise known as the "Comprehensive Agrarian Reform Law of
1988" (CARL, for brevity), went into effect. Conformably therewith, respondent Department of
Agrarian Reform (DAR, for brevity), through its Municipal Agrarian Reform Officer, issued on 22
November 1990 a Notice of Coverage on the undeveloped portions of the Antipolo Hills Subdivision
which consisted of roughly 90.3307 hectares. NATALIA immediately registered its objection to the
notice of Coverage.

EDIC also protested to respondent Director Wilfredo Leano of the DAR Region IV Office and twice
wrote him requesting the cancellation of the Notice of Coverage.

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On 17 January 1991, members of the Samahan ng Magsasaka sa Bundok Antipolo, Inc. (SAMBA,
for the brevity), filed a complaint against NATALIA and EDIC before the DAR Regional Adjudicator to
restrain petitioners from developing areas under cultivation by SAMBA members. 8 The Regional
Adjudicator temporarily restrained petitioners from proceeding with the development of the subdivision.
Petitioners then moved to dismiss the complaint; it was denied. Instead, the Regional Adjudicator issued
on 5 March 1991 a Writ of Preliminary Injunction.

Petitioners NATALIA and EDIC elevated their cause to the DAR Adjudication Board (DARAB);
however, on 16 December 1991 the DARAB merely remanded the case to the Regional Adjudicator
for further proceedings. 9

In the interim, NATALIA wrote respondent Secretary of Agrarian Reform reiterating its request to set
aside the Notice of Coverage. Neither respondent Secretary nor respondent Director took action on
the protest-letters, thus compelling petitioners to institute this proceeding more than a year
thereafter.

NATALIA and EDIC both impute grave abuse of discretion to respondent DAR for including
undedeveloped portions of the Antipolo Hills Subdivision within the coverage of the CARL. They
argue that NATALIA properties already ceased to be agricultural lands when they were included in
the areas reserved by presidential fiat for the townsite reservation.

Public respondents through the Office of the Solicitor General dispute this contention. They maintain
that the permits granted petitioners were not valid and binding because they did not comply with the
implementing Standards, Rules and Regulations of P.D. 957, otherwise known as "The Subdivision
and Condominium Buyers Protective Decree," in that no application for conversion of the NATALIA
lands from agricultural residential was ever filed with the DAR. In other words, there was no valid
conversion. Moreover, public respondents allege that the instant petition was prematurely filed
because the case instituted by SAMBA against petitioners before the DAR Regional Adjudicator has
not yet terminated. Respondents conclude, as a consequence, that petitioners failed to fully exhaust
administrative remedies available to them before coming to court.

The petition is impressed with merit. A cursory reading of the Preliminary Approval and Locational
Clearances as well as the Development Permits granted petitioners for Phases I, II and III of the
Antipolo Hills Subdivision reveals that contrary to the claim of public respondents, petitioners
NATALIA and EDIC did in fact comply with all the requirements of law.

Petitioners first secured favorable recommendations from the Lungsod Silangan Development
Corporation, the agency tasked to oversee the implementation of the development of the townsite
reservation, before applying for the necessary permits from the Human Settlements Regulatory
Commission. 10 And, in all permits granted to petitioners, the Commission
stated invariably therein that the applications were in "conformance" 11 or "conformity" 12 or
"conforming" 13 with the implementing Standards, Rules and Regulations of P.D. 957. Hence, the
argument of public respondents that not all of the requirements were complied with cannot be sustained.

As a matter of fact, there was even no need for petitioners to secure a clearance or prior approval
from DAR. The NATALIA properties were within the areas set aside for the Lungsod Silangan
Reservation. Since Presidential Proclamation No. 1637 created the townsite reservation for the
purpose of providing additional housing to the burgeoning population of Metro Manila, it in effect
converted for residential use what were erstwhile agricultural lands provided all requisites were met.
And, in the case at bar, there was compliance with all relevant rules and requirements. Even in their
applications for the development of the Antipolo Hills Subdivision, the predecessor agency of

2
HLURB noted that petitioners NATALIA and EDIC complied with all the requirements prescribed by
P.D. 957.

The implementing Standards, Rules and Regulations of P.D. 957 applied to all subdivisions and
condominiums in general. On the other hand, Presidential Proclamation No. 1637 referred only to
the Lungsod Silangan Reservation, which makes it a special law. It is a basic tenet in statutory
construction that between a general law and a special law, the latter prevails. 14

Interestingly, the Office of the Solicitor General does not contest the conversion of portions of the
Antipolo Hills Subdivision which have already been developed. 15 Of course, this is contrary to its
earlier position that there was no valid conversion. The applications for the developed and undeveloped
portions of subject subdivision were similarly situated. Consequently, both did not need prior DAR
approval.

We now determine whether such lands are covered by the CARL. Section 4 of R.A. 6657 provides
that the CARL shall "cover, regardless of tenurial arrangement and commodity produced, all public
and private agricultural lands." As to what constitutes "agricultural land," it is referred to as "land
devoted to agricultural activity as defined in this Act and not classified as mineral, forest, residential,
commercial or industrial land." 16 The deliberations of the Constitutional Commission confirm this
limitation. "Agricultural lands" are only those lands which are "arable and suitable agricultural lands" and
"do not include commercial, industrial and residential lands." 17

Based on the foregoing, it is clear that the undeveloped portions of the Antipolo Hills Subdivision
cannot in any language be considered as "agricultural lands." These lots were intended for
residential use. They ceased to be agricultural lands upon approval of their inclusion in the Lungsod
Silangan Reservation. Even today, the areas in question continued to be developed as a low-cost
housing subdivision, albeit at a snail's pace. This can readily be gleaned from the fact that SAMBA
members even instituted an action to restrain petitioners from continuing with such development.
The enormity of the resources needed for developing a subdivision may have delayed its completion
but this does not detract from the fact that these lands are still residential lands and outside the
ambit of the CARL.

Indeed, lands not devoted to agricultural activity are outside the coverage of CARL. These include
lands previously converted to non-agricultural uses prior to the effectivity of CARL by government
agencies other than respondent DAR. In its Revised Rules and Regulations Governing Conversion
of Private Agricultural Lands to Non-Agricultural Uses, 18 DAR itself defined "agricultural land" thus

. . . Agricultural lands refers to those devoted to agricultural activity as defined in R.A.

6657 and not classified as mineral or forest by the Department of Environment and
Natural Resources (DENR) and its predecessor agencies, and not classified in town
plans and zoning ordinances as approved by the Housing and Land Use Regulatory
Board (HLURB) and its preceding competent authorities prior to 15 June 1988 for
residential, commercial or industrial use.

Since the NATALIA lands were converted prior to 15 June 1988, respondent DAR is bound by such
conversion. It was therefore error to include the undeveloped portions of the Antipolo Hills
Subdivision within the coverage of CARL.

Be that as it may, the Secretary of Justice, responding to a query by the Secretary of Agrarian
Reform, noted in an Opinion 19 that lands covered by Presidential Proclamation No. 1637, inter alia, of
which the NATALIA lands are part, having been reserved for townsite purposes "to be developed as
human settlements by the proper land and housing agency," are "not deemed 'agricultural lands' within

3
the meaning and intent of Section 3 (c) of R.A. No. 6657. " Not being deemed "agricultural lands," they
are outside the coverage of CARL.

Anent the argument that there was failure to exhaust administrative remedies in the instant petition,
suffice it to say that the issues raised in the case filed by SAMBA members differ from those of
petitioners. The former involve possession; the latter, the propriety of including under the operation
of CARL lands already converted for residential use prior to its effectivity.

Besides, petitioners were not supposed to wait until public respondents acted on their letter-protests,
this after sitting it out for almost a year. Given the official indifference, which under the
circumstances could have continued forever, petitioners had to act to assert and protect their
interests. 20

In fine, we rule for petitioners and hold that public respondents gravely abused their discretion in
issuing the assailed Notice of Coverage of 22 November 1990 by of lands over which they no longer
have jurisdiction.

WHEREFORE, the petition for Certiorari is GRANTED. The Notice of Coverage of 22 November
1990 by virtue of which undeveloped portions of the Antipolo Hills Subdivision were placed under
CARL coverage is hereby SET ASIDE.

SO ORDERED.

Natalia Realty, Inc. and Estate Developer and Investors Corp vs DAR
GR No 103302 August 12, 1993

Facts:
Natalia is the owner of 3 contiguous parcels of land with an area of 120.9793 hectares, 1.3205 hectares
and 2.7080 hectares or a total of 125.0078 hectares, which are covered by TCT No. 31527. Presidential
Proclamation No. 1637 set aside 20,312 hectares of land as townsite areas to absorb the population
overspill in the metropolis which were designated as the Lungsod Silangan Townsite. The Natalia
properties are situated within the areas proclaimed as townsite reservation. Since private landowners
were allowed to develop their properties into low-cost housing subdivisions with the reservation,
petitioner EDIC as developer of Natalia applied for and was granted preliminary approval and location
clearances by the Human Settlements Regulatory Commission, which Natalia thereafter became
Antipolo Hills Subdivision. On June 15 1988, Ra 6657 went to effect. Respondent issed a Notice of
Coverage on the undeveloped portions of Antipolo Hills Subdivision. Natalia and EDIC immediately
registered its objection to the notice of coverage and requested the cancellation of the Notice of
Coverage.

Natalia and EDIC both argued that the properties ceased to be agricultural lands when they were
included in the areas reserved by Presidential Proclamation for the townsite reservation. DAR then
contended that the permits granted were not valid and binding since they did not comply with t he
implementing Standards, Rules and Regulations of PD 957 (The Subdivision and Condominium Buyers
Protective Decree), and that there was no valid conversion of the properties.

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Issue:
Whether or not lands not classified for agricultural use, as approved by the Housing and Land Use
Regulatory Board and its agencies prior to June 15, 1988 covered by RA 6657.

Ruling:
No, Sec. 4 of RA 6657 provides that CARL shall cover, regardless of tenurial arrangement and commodity
produced, all public and private agricultural lands. And agricultural lands is referred to as land devoted
to agricultural activity and not classified as mineral, forst, residential, commercial or industrial land.
Thus, the underdeveloped portions of the Antipolo Hills Subdivision cannot be considered as agricultural
lands for this land was intended for residential use. They ceased to be agricultural land by virtue of the
Presidential Proclamation No. 1637.

[G.R. No. 86889 : December 4, 1990.]

192 SCRA 51

LUZ FARMS, Petitioner, vs. THE HONORABLE SECRETARY OF THE DEPARTMENT OF AGRARIAN REFORM,
Respondent.

DECISION

PARAS, J.:

This is a petition for prohibition with prayer for restraining order and/or preliminary and permanent
injunction against the Honorable Secretary of the Department of Agrarian Reform for acting without
jurisdiction in enforcing the assailed provisions of R.A. No. 6657, otherwise known as the
Comprehensive Agrarian Reform Law of 1988 and in promulgating the Guidelines and Procedure
Implementing Production and Profit Sharing under R.A. No. 6657, insofar as the same apply to herein
petitioner, and further from performing an act in violation of the constitutional rights of the petitioner.

As gathered from the records, the factual background of this case, is as follows:

On June 10, 1988, the President of the Philippines approved R.A. No. 6657, which includes the raising of
livestock, poultry and swine in its coverage (Rollo, p. 80).

On January 2, 1989, the Secretary of Agrarian Reform promulgated the Guidelines and Procedures
Implementing Production and Profit Sharing as embodied in Sections 13 and 32 of R.A. No. 6657 (Rollo,
p. 80).

5
On January 9, 1989, the Secretary of Agrarian Reform promulgated its Rules and Regulations
implementing Section 11 of R.A. No. 6657 (Commercial Farms). (Rollo, p. 81).

Luz Farms, petitioner in this case, is a corporation engaged in the livestock and poultry business and
together with others in the same business allegedly stands to be adversely affected by the enforcement
of Section 3(b), Section 11, Section 13, Section 16(d) and 17 and Section 32 of R.A. No. 6657 otherwise
known as Comprehensive Agrarian Reform Law and of the Guidelines and Procedures Implementing
Production and Profit Sharing under R.A. No. 6657 promulgated on January 2, 1989 and the Rules and
Regulations Implementing Section 11 thereof as promulgated by the DAR on January 9, 1989 (Rollo, pp.
2-36).: rd

Hence, this petition praying that aforesaid laws, guidelines and rules be declared unconstitutional.
Meanwhile, it is also prayed that a writ of preliminary injunction or restraining order be issued enjoining
public respondents from enforcing the same, insofar as they are made to apply to Luz Farms and other
livestock and poultry raisers.

This Court in its Resolution dated July 4, 1939 resolved to deny, among others, Luz Farms' prayer for the
issuance of a preliminary injunction in its Manifestation dated May 26, and 31, 1989. (Rollo, p. 98).

Later, however, this Court in its Resolution dated August 24, 1989 resolved to grant said Motion for
Reconsideration regarding the injunctive relief, after the filing and approval by this Court of an
injunction bond in the amount of P100,000.00. This Court also gave due course to the petition and
required the parties to file their respective memoranda (Rollo, p. 119).

The petitioner filed its Memorandum on September 6, 1989 (Rollo, pp. 131-168).

On December 22, 1989, the Solicitor General adopted his Comment to the petition as his Memorandum
(Rollo, pp. 186-187).

Luz Farms questions the following provisions of R.A. 6657, insofar as they are made to apply to it:

(a) Section 3(b) which includes the "raising of livestock (and poultry)" in the definition of "Agricultural,
Agricultural Enterprise or Agricultural Activity."

(b) Section 11 which defines "commercial farms" as "private agricultural lands devoted to commercial,
livestock, poultry and swine raising . . ."

(c) Section 13 which calls upon petitioner to execute a production-sharing plan.

(d) Section 16(d) and 17 which vest on the Department of Agrarian Reform the authority to summarily
determine the just compensation to be paid for lands covered by the Comprehensive Agrarian Reform
Law.

(e) Section 32 which spells out the production-sharing plan mentioned in Section 13

". . . (W)hereby three percent (3%) of the gross sales from the production of such lands are distributed
within sixty (60) days of the end of the fiscal year as compensation to regular and other farmworkers in

6
such lands over and above the compensation they currently receive: Provided, That these individuals or
entities realize gross sales in excess of five million pesos per annum unless the DAR, upon proper
application, determine a lower ceiling.

In the event that the individual or entity realizes a profit, an additional ten (10%) of the net profit after
tax shall be distributed to said regular and other farmworkers within ninety (90) days of the end of the
fiscal year . . ."

The main issue in this petition is the constitutionality of Sections 3(b), 11, 13 and 32 of R.A. No. 6657
(the Comprehensive Agrarian Reform Law of 1988), insofar as the said law includes the raising of
livestock, poultry and swine in its coverage as well as the Implementing Rules and Guidelines
promulgated in accordance therewith.:-cralaw

The constitutional provision under consideration reads as follows:

ARTICLE XIII

x x x

AGRARIAN AND NATURAL RESOURCES REFORM

Section 4. The State shall, by law, undertake an agrarian reform program founded on the right of
farmers and regular farmworkers, who are landless, to own directly or collectively the lands they till or,
in the case of other farmworkers, to receive a just share of the fruits thereof. To this end, the State shall
encourage and undertake the just distribution of all agricultural lands, subject to such priorities and
reasonable retention limits as the Congress may prescribe, taking into account ecological,
developmental, or equity considerations, and subject to the payment of just compensation. In
determining retention limits, the State shall respect the rights of small landowners. The State shall
further provide incentives for voluntary land-sharing.

x x x"

Luz Farms contended that it does not seek the nullification of R.A. 6657 in its entirety. In fact, it
acknowledges the correctness of the decision of this Court in the case of the Association of Small
Landowners in the Philippines, Inc. vs. Secretary of Agrarian Reform (G.R. 78742, 14 July 1989) affirming
the constitutionality of the Comprehensive Agrarian Reform Law. It, however, argued that Congress in
enacting the said law has transcended the mandate of the Constitution, in including land devoted to the
raising of livestock, poultry and swine in its coverage (Rollo, p. 131). Livestock or poultry raising is not
similar to crop or tree farming. Land is not the primary resource in this undertaking and represents no
more than five percent (5%) of the total investment of commercial livestock and poultry raisers. Indeed,
there are many owners of residential lands all over the country who use available space in their
residence for commercial livestock and raising purposes, under "contract-growing arrangements,"
whereby processing corporations and other commercial livestock and poultry raisers (Rollo, p. 10). Lands
support the buildings and other amenities attendant to the raising of animals and birds. The use of land
is incidental to but not the principal factor or consideration in productivity in this industry. Including
backyard raisers, about 80% of those in commercial livestock and poultry production occupy five
hectares or less. The remaining 20% are mostly corporate farms (Rollo, p. 11).

7
On the other hand, the public respondent argued that livestock and poultry raising is embraced in the
term "agriculture" and the inclusion of such enterprise under Section 3(b) of R.A. 6657 is proper. He
cited that Webster's International Dictionary, Second Edition (1954), defines the following words:

"Agriculture the art or science of cultivating the ground and raising and harvesting crops, often,
including also, feeding, breeding and management of livestock, tillage, husbandry, farming.

It includes farming, horticulture, forestry, dairying, sugarmaking . . .

Livestock domestic animals used or raised on a farm, especially for profit.

Farm a plot or tract of land devoted to the raising of domestic or other animals." (Rollo, pp. 82-83).

The petition is impressed with merit.

The question raised is one of constitutional construction. The primary task in constitutional construction
is to ascertain and thereafter assure the realization of the purpose of the framers in the adoption of the
Constitution (J.M. Tuazon & Co. vs. Land Tenure Administration, 31 SCRA 413 [1970]).: rd

Ascertainment of the meaning of the provision of Constitution begins with the language of the
document itself. The words used in the Constitution are to be given their ordinary meaning except
where technical terms are employed in which case the significance thus attached to them prevails (J.M.
Tuazon & Co. vs. Land Tenure Administration, 31 SCRA 413 [1970]).

It is generally held that, in construing constitutional provisions which are ambiguous or of doubtful
meaning, the courts may consider the debates in the constitutional convention as throwing light on the
intent of the framers of the Constitution. It is true that the intent of the convention is not controlling by
itself, but as its proceeding was preliminary to the adoption by the people of the Constitution the
understanding of the convention as to what was meant by the terms of the constitutional provision
which was the subject of the deliberation, goes a long way toward explaining the understanding of the
people when they ratified it (Aquino, Jr. v. Enrile, 59 SCRA 183 [1974]).

The transcripts of the deliberations of the Constitutional Commission of 1986 on the meaning of the
word "agricultural," clearly show that it was never the intention of the framers of the Constitution to
include livestock and poultry industry in the coverage of the constitutionally-mandated agrarian reform
program of the Government.

The Committee adopted the definition of "agricultural land" as defined under Section 166 of R.A. 3844,
as laud devoted to any growth, including but not limited to crop lands, saltbeds, fishponds, idle and
abandoned land (Record, CONCOM, August 7, 1986, Vol. III, p. 11).

The intention of the Committee is to limit the application of the word "agriculture." Commissioner Jamir
proposed to insert the word "ARABLE" to distinguish this kind of agricultural land from such lands as
commercial and industrial lands and residential properties because all of them fall under the general
classification of the word "agricultural". This proposal, however, was not considered because the
Committee contemplated that agricultural lands are limited to arable and suitable agricultural lands and
therefore, do not include commercial, industrial and residential lands (Record, CONCOM, August 7,
1986, Vol. III, p. 30).

8
In the interpellation, then Commissioner Regalado (now a Supreme Court Justice), posed several
questions, among others, quoted as follows:

x x x

"Line 19 refers to genuine reform program founded on the primary right of farmers and farmworkers. I
wonder if it means that leasehold tenancy is thereby proscribed under this provision because it speaks
of the primary right of farmers and farmworkers to own directly or collectively the lands they till. As also
mentioned by Commissioner Tadeo, farmworkers include those who work in piggeries and poultry
projects.

I was wondering whether I am wrong in my appreciation that if somebody puts up a piggery or a poultry
project and for that purpose hires farmworkers therein, these farmworkers will automatically have the
right to own eventually, directly or ultimately or collectively, the land on which the piggeries and poultry
projects were constructed. (Record, CONCOM, August 2, 1986, p. 618).

x x x

The questions were answered and explained in the statement of then Commissioner Tadeo, quoted as
follows:

x x x

"Sa pangalawang katanungan ng Ginoo ay medyo hindi kami nagkaunawaan. Ipinaaalam ko kay
Commissioner Regalado na hindi namin inilagay ang agricultural worker sa kadahilanang kasama rito ang
piggery, poultry at livestock workers. Ang inilagay namin dito ay farm worker kaya hindi kasama ang
piggery, poultry at livestock workers (Record, CONCOM, August 2, 1986, Vol. II, p. 621).

It is evident from the foregoing discussion that Section II of R.A. 6657 which includes "private
agricultural lands devoted to commercial livestock, poultry and swine raising" in the definition of
"commercial farms" is invalid, to the extent that the aforecited agro-industrial activities are made to be
covered by the agrarian reform program of the State. There is simply no reason to include livestock and
poultry lands in the coverage of agrarian reform. (Rollo, p. 21).

Hence, there is merit in Luz Farms' argument that the requirement in Sections 13 and 32 of R.A. 6657
directing "corporate farms" which include livestock and poultry raisers to execute and implement
"production-sharing plans" (pending final redistribution of their landholdings) whereby they are called
upon to distribute from three percent (3%) of their gross sales and ten percent (10%) of their net profits
to their workers as additional compensation is unreasonable for being confiscatory, and therefore
violative of due process (Rollo, p. 21).:-cralaw

It has been established that this Court will assume jurisdiction over a constitutional question only if it is
shown that the essential requisites of a judicial inquiry into such a question are first satisfied. Thus,
there must be an actual case or controversy involving a conflict of legal rights susceptible of judicial
determination, the constitutional question must have been opportunely raised by the proper party, and
the resolution of the question is unavoidably necessary to the decision of the case itself (Association of

9
Small Landowners of the Philippines, Inc. v. Secretary of Agrarian Reform, G.R. 78742; Acuna v. Arroyo,
G.R. 79310; Pabico v. Juico, G.R. 79744; Manaay v. Juico, G.R. 79777, 14 July 1989, 175 SCRA 343).

However, despite the inhibitions pressing upon the Court when confronted with constitutional issues, it
will not hesitate to declare a law or act invalid when it is convinced that this must be done. In arriving at
this conclusion, its only criterion will be the Constitution and God as its conscience gives it in the light to
probe its meaning and discover its purpose. Personal motives and political considerations are
irrelevancies that cannot influence its decisions. Blandishment is as ineffectual as intimidation, for all the
awesome power of the Congress and Executive, the Court will not hesitate "to make the hammer fall
heavily," where the acts of these departments, or of any official, betray the people's will as expressed in
the Constitution (Association of Small Landowners of the Philippines, Inc. v. Secretary of Agrarian
Reform, G.R. 78742; Acuna v. Arroyo, G.R. 79310; Pabico v. Juico, G.R. 79744; Manaay v. Juico, G.R.
79777, 14 July 1989).

Thus, where the legislature or the executive acts beyond the scope of its constitutional powers, it
becomes the duty of the judiciary to declare what the other branches of the government had assumed
to do, as void. This is the essence of judicial power conferred by the Constitution "(I)n one Supreme
Court and in such lower courts as may be established by law" (Art. VIII, Section 1 of the 1935
Constitution; Article X, Section I of the 1973 Constitution and which was adopted as part of the Freedom
Constitution, and Article VIII, Section 1 of the 1987 Constitution) and which power this Court has
exercised in many instances (Demetria v. Alba, 148 SCRA 208 [1987]).

PREMISES CONSIDERED, the instant petition is hereby GRANTED. Sections 3(b), 11, 13 and 32 of R.A. No.
6657 insofar as the inclusion of the raising of livestock, poultry and swine in its coverage as well as the
Implementing Rules and Guidelines promulgated in accordance therewith, are hereby DECLARED null
and void for being unconstitutional and the writ of preliminary injunction issued is hereby MADE
permanent.

SO ORDERED.

Luz Farms v. Secretary of DAR

G.R. No. 86889 December 4, 1990

Facts:

On 10 June 1988, RA 6657 was approved by the President of the Philippines, which includes, among
others, the raising of livestock, poultry and swine in its coverage.

Petitioner Luz Farms, a corporation engaged in the livestock and poultry business, avers that it would be
adversely affected by the enforcement of sections 3(b), 11, 13, 16 (d), 17 and 32 of the said law. Hence,
it prayed that the said law be declared unconstitutional. The mentioned sections of the law provies,
among others, the product-sharing plan, including those engaged in livestock and poultry business.

Luz Farms further argued that livestock or poultry raising is not similar with crop or tree farming. That
the land is not the primary resource in this undertaking and represents no more than 5% of the total
investments of commercial livestock and poultry raisers. That the land is incidental but not the principal

10
factor or consideration in their industry. Hence, it argued that it should not be included in the coverage
of RA 6657 which covers agricultural lands.

Issue: Whether or not certain provisions of RA 6657 is unconstitutional for including in its definition of
Agriculture the livestock and poultyr industry?

Ruling:

The Court held YES.

Looking into the transcript of the Constitutional Commission on the meaning of the word agriculture,
it showed that the framers never intended to include livestock and poultry industry in the coverage of
the constitutionally mandated agrarian reform program of the government.

Further, Commissioner Tadeo pointed out that the reasin why they used the term farmworkers rather
than agricultural workers in the said law is because agricultural workers includes the livestock and
poultry industry, hence, since they do not intend to include the latter, they used farmworkers to have
distinction.

Hence, there is merit on the petitioners argument that the product-sharing plan applied to corporate
farms in the contested provisions is unreasonable for being consficatory and violative of the due
process of aw.

ASLO vs sec of agrarian reform

FACTS:

These are consolidated cases involving common legal questions including serious challenges to the
constitutionality of R.A. No. 6657 also known as the "Comprehensive Agrarian Reform Law of 1988"

In G.R. No. 79777, the petitioners are questioning the P.D No. 27 and E.O Nos. 228 and 229 on the
grounds inter alia of separation of powers, due process, equal protection and the constitutional
limitation that no private property shall be taken for public use without just compensation.

In G.R. No. 79310, the petitioners in this case claim that the power to provide for a Comprehensive
Agrarian Reform Program as decreed by the Constitution belongs to the Congress and not to the
President, the also allege that Proclamation No. 131 and E.O No. 229 should be annulled for violation of
the constitutional provisions on just compensation, due process and equal protection. They contended
that the taking must be simultaneous with payment of just compensation which such payment is not
contemplated in Section 5 of the E.O No. 229.

In G.R. No. 79744, the petitioner argues that E.O Nos. 228 and 229 were invalidly issued by the President
and that the said executive orders violate the constitutional provision that no private property shall be
taken without due process or just compensation which was denied to the petitioners.

11
In G.R. No 78742 the petitioners claim that they cannot eject their tenants and so are unable to enjoy
their right of retention because the Department of Agrarian Reform has so far not issued the
implementing rules of the decree. They therefore ask the Honorable Court for a writ of mandamus to
compel the respondents to issue the said rules.

ISSUE:

Whether or not the laws being challenged is a valid exercise of Police power or Power of Eminent
Domain.

RULING:

Police Power through the Power of Eminent Domain, though there are traditional distinction between
the police power and the power of eminent domain, property condemned under police power is noxious
or intended for noxious purpose, the compensation for the taking of such property is not subject to
compensation, unlike the taking of the property in Eminent Domain or the power of expropriation which
requires the payment of just compensation to the owner of the property expropriated.

175 SCRA 343 Political Law Constitutional Law Bill of Rights Equal Protection Valid Classification

Eminent Domain Just Compensation

These are four consolidated cases questioning the constitutionality of the Comprehensive Agrarian
Reform Act (R.A. No. 6657 and related laws i.e., Agrarian Land Reform Code or R.A. No. 3844).

Brief background: Article XIII of the Constitution on Social Justice and Human Rights includes a call for
the adoption by the State of an agrarian reform program. The State shall, by law, undertake an agrarian
reform program founded on the right of farmers and regular farmworkers, who are landless, to own
directly or collectively the lands they till or, in the case of other farmworkers, to receive a just share of
the fruits thereof. RA 3844 was enacted in 1963. P.D. No. 27 was promulgated in 1972 to provide for the
compulsory acquisition of private lands for distribution among tenant-farmers and to specify maximum
retention limits for landowners. In 1987, President Corazon Aquino issued E.O. No. 228, declaring full
land ownership in favor of the beneficiaries of PD 27 and providing for the valuation of still unvalued
lands covered by the decree as well as the manner of their payment. In 1987, P.P. No. 131, instituting a
comprehensive agrarian reform program (CARP) was enacted; later, E.O. No. 229, providing the
mechanics for its (PP131s) implementation, was also enacted. Afterwhich is the enactment of R.A. No.
6657, Comprehensive Agrarian Reform Law in 1988. This law, while considerably changing the earlier
mentioned enactments, nevertheless gives them suppletory effect insofar as they are not inconsistent
with its provisions.

[Two of the consolidated cases are discussed below]

G.R. No. 78742: (Association of Small Landowners vs Secretary)

The Association of Small Landowners in the Philippines, Inc. sought exception from the land distribution
scheme provided for in R.A. 6657. The Association is comprised of landowners of ricelands and

12
cornlands whose landholdings do not exceed 7 hectares. They invoke that since their landholdings are
less than 7 hectares, they should not be forced to distribute their land to their tenants under R.A. 6657
for they themselves have shown willingness to till their own land. In short, they want to be exempted
from agrarian reform program because they claim to belong to a different class.

G.R. No. 79777: (Manaay vs Juico)

Nicolas Manaay questioned the validity of the agrarian reform laws (PD 27, EO 228, and 229) on the
ground that these laws already valuated their lands for the agrarian reform program and that the
specific amount must be determined by the Department of Agrarian Reform (DAR). Manaay averred that
this violated the principle in eminent domain which provides that only courts can determine just
compensation. This, for Manaay, also violated due process for under the constitution, no property shall
be taken for public use without just compensation.

Manaay also questioned the provision which states that landowners may be paid for their land in bonds
and not necessarily in cash. Manaay averred that just compensation has always been in the form of
money and not in bonds.

ISSUE:

1. Whether or not there was a violation of the equal protection clause.

2. Whether or not there is a violation of due process.

3. Whether or not just compensation, under the agrarian reform program, must be in terms of cash.

HELD:

1. No. The Association had not shown any proof that they belong to a different class exempt from the
agrarian reform program. Under the law, classification has been defined as the grouping of persons or
things similar to each other in certain particulars and different from each other in these same
particulars. To be valid, it must conform to the following requirements:

(1) it must be based on substantial distinctions;

(2) it must be germane to the purposes of the law;

(3) it must not be limited to existing conditions only; and

(4) it must apply equally to all the members of the class.

Equal protection simply means that all persons or things similarly situated must be treated alike both as
to the rights conferred and the liabilities imposed. The Association have not shown that they belong to a
different class and entitled to a different treatment. The argument that not only landowners but also
owners of other properties must be made to share the burden of implementing land reform must be
rejected. There is a substantial distinction between these two classes of owners that is clearly visible
except to those who will not see. There is no need to elaborate on this matter. In any event, the
Congress is allowed a wide leeway in providing for a valid classification. Its decision is accorded

13
recognition and respect by the courts of justice except only where its discretion is abused to the
detriment of the Bill of Rights. In the contrary, it appears that Congress is right in classifying small
landowners as part of the agrarian reform program.

2. No. It is true that the determination of just compensation is a power lodged in the courts. However,
there is no law which prohibits administrative bodies like the DAR from determining just compensation.
In fact, just compensation can be that amount agreed upon by the landowner and the government
even without judicial intervention so long as both parties agree. The DAR can determine just
compensation through appraisers and if the landowner agrees, then judicial intervention is not needed.
What is contemplated by law however is that, the just compensation determined by an administrative
body is merely preliminary. If the landowner does not agree with the finding of just compensation by an
administrative body, then it can go to court and the determination of the latter shall be the final
determination. This is even so provided by RA 6657:

Section 16 (f): Any party who disagrees with the decision may bring the matter to the court of proper
jurisdiction for final determination of just compensation.

3. No. Money as [sole] payment for just compensation is merely a concept in traditional exercise of
eminent domain. The agrarian reform program is a revolutionary exercise of eminent domain. The
program will require billions of pesos in funds if all compensation have to be made in cash if
everything is in cash, then the government will not have sufficient money hence, bonds, and other
securities, i.e., shares of stocks, may be used for just compensation.

Hacienda Luisita Inc. (HLI) v. Presidential Agrarian Reform Council (PARC), et al., G.R. No. 171101,
November 22, 2011

RESOLUTION

VELASCO, JR., J.:

I. THE FACTS

On July 5, 2011, the Supreme Court en banc voted unanimously (11-0) to DISMISS/DENY the petition
filed by HLI and AFFIRM with MODIFICATIONS the resolutions of the PARC revoking HLIs Stock
Distribution Plan (SDP) and placing the subject lands in Hacienda Luisita under compulsory coverage of
the Comprehensive Agrarian Reform Program (CARP) of the government.

The Court however did not order outright land distribution. Voting 6-5, the Court noted that there are
operative facts that occurred in the interim and which the Court cannot validly ignore. Thus, the Court
declared that the revocation of the SDP must, by application of the operative fact principle, give way to
the right of the original 6,296 qualified farmworkers-beneficiaries (FWBs) to choose whether they want
to remain as HLI stockholders or [choose actual land distribution]. It thus ordered the Department of
Agrarian Reform (DAR) to immediately schedule meetings with the said 6,296 FWBs and explain to
them the effects, consequences and legal or practical implications of their choice, after which the FWBs

14
will be asked to manifest, in secret voting, their choices in the ballot, signing their signatures or placing
their thumbmarks, as the case may be, over their printed names.

The parties thereafter filed their respective motions for reconsideration of the Court decision.

II. THE ISSUES

(1) Is the operative fact doctrine available in this case?

(2) Is Sec. 31 of RA 6657 unconstitutional?
(3) Cant the Court order that DARs compulsory acquisition of Hacienda Lusita cover the full 6,443
hectares allegedly covered by RA 6657 and previously held by Tarlac Development Corporation
(Tadeco), and not just the 4,915.75 hectares covered by HLIs SDP?
(4) Is the date of the taking (for purposes of determining the just compensation payable to HLI)
November 21, 1989, when PARC approved HLIs SDP?
(5) Has the 10-year period prohibition on the transfer of awarded lands under RA 6657 lapsed on May
10, 1999 (since Hacienda Luisita were placed under CARP coverage through the SDOA scheme on May
11, 1989), and thus the qualified FWBs should now be allowed to sell their land interests in Hacienda
Luisita to third parties, whether they have fully paid for the lands or not?
(6) THE CRUCIAL ISSUE: Should the ruling in the July 5, 2011 Decision that the qualified FWBs be given
an option to remain as stockholders of HLI be reconsidered?

III. THE RULING

[The Court PARTIALLY GRANTED the motions for reconsideration of respondents PARC, et al. with
respect to the option granted to the original farmworkers-beneficiaries (FWBs) of Hacienda Luisita to
remain with petitioner HLI, which option the Court thereby RECALLED and SET ASIDE. It reconsidered its
earlier decision that the qualified FWBs should be given an option to remain as stockholders of HLI, and
UNANIMOUSLY directed immediate land distribution to the qualified FWBs.]

1. YES, the operative fact doctrine is applicable in this case.

[The Court maintained its stance that the operative fact doctrine is applicable in this case since, contrary
to the suggestion of the minority, the doctrine is not limited only to invalid or unconstitutional laws but
also applies to decisions made by the President or the administrative agencies that have the force and
effect of laws. Prior to the nullification or recall of said decisions, they may have produced acts and
consequences that 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. The majority stressed that the application of the operative fact doctrine by the
Court in its July 5, 2011 decision was in fact favorable to the FWBs because not only were they 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.]

2. NO, Sec. 31 of RA 6657 NOT unconstitutional.

[The Court maintained that the Court is NOT compelled to rule on the constitutionality of Sec. 31 of RA
6657, reiterating that it was not raised at the earliest opportunity and that the resolution thereof is not
the lis mota of the case. Moreover, the issue has been rendered moot and academic since SDO is no
longer one of the modes of acquisition under RA 9700. The majority clarified that in its July 5, 2011

15
decision, it made no ruling in favor of the constitutionality of Sec. 31 of RA 6657, but found nonetheless
that there was no apparent grave violation of the Constitution that may justify the resolution of the
issue of constitutionality.]

3. NO, the Court CANNOT order that DARs compulsory acquisition of Hacienda Lusita cover the full
6,443 hectares and not just the 4,915.75 hectares covered by HLIs SDP.

[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 the Court is constrained to rule only
as regards the 4,915.75 has. of agricultural land. Nonetheless, 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.

However since the area to be awarded to each FWB in the July 5, 2011 Decision appears too restrictive
considering that there are roads, irrigation canals, and other portions of the land that are considered
commonly-owned by farmworkers, and these may necessarily result in the decrease of the area size that
may be awarded per FWB the Court reconsiders its Decision and resolves to give the DAR leeway in
adjusting the area that may be awarded per FWB in case the number of actual qualified FWBs
decreases. 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, it is the latter which shall
determine the area with which each qualified FWB will be awarded.

On the other hand, the majority likewise reiterated its holding that the 500-hectare portion of Hacienda
Luisita that have been validly converted to industrial use and have been acquired by intervenors Rizal
Commercial Banking Corporation (RCBC) and Luisita Industrial Park Corporation (LIPCO), as well as the
separate 80.51-hectare SCTEX lot acquired by the government, should be excluded from the coverage of
the assailed PARC resolution. The Court however ordered that the unused balance of the proceeds of
the sale of the 500-hectare converted land and of the 80.51-hectare land used for the SCTEX be
distributed to the FWBs.]

4. YES, the date of taking is November 21, 1989, when PARC approved HLIs SDP.

[For the purpose of determining just compensation, the date of taking is November 21, 1989 (the date
when PARC approved HLIs SDP) since 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, on November 21, 1989. Such approval is akin to a notice of coverage ordinarily issued under
compulsory acquisition. On the contention of the minority (Justice Sereno) that the date of the notice of
coverage [after PARCs revocation of the SDP], that is, January 2, 2006, is determinative of the just
compensation that HLI is entitled to receive, the Court majority noted that none of the cases cited to
justify this position involved the stock distribution scheme. Thus, said cases do not squarely apply to the
instant case. 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.]

16
5. NO, the 10-year period prohibition on the transfer of awarded lands under RA 6657 has NOT lapsed
on May 10, 1999; thus, the qualified FWBs should NOT yet be allowed to sell their land interests in
Hacienda Luisita to third parties.

[Under RA 6657 and DAO 1, the awarded lands may only be transferred or conveyed after 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, should the FWBs be immediately allowed the option to sell or convey their interest in the
subject lands, then all efforts at agrarian reform would be rendered nugatory, since, at the end of the
day, these lands will just be transferred to persons not entitled to land distribution under CARP.]

6. YES, the ruling in the July 5, 2011 Decision that the qualified FWBs be given an option to remain as
stockholders of HLI should be reconsidered.

[The Court reconsidered its earlier decision that the qualified FWBs should be given an option to remain
as stockholders of HLI, inasmuch as these qualified FWBs will never gain control [over the subject lands]
given the present proportion of shareholdings in HLI. The Court noted that the share of the FWBs in the
HLI capital stock is [just] 33.296%. Thus, even if all the holders of this 33.296% unanimously vote to
remain as HLI stockholders, which is unlikely, control will never be in the hands of the FWBs. Control
means the majority of [sic] 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 total HLI capital shares 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.]

17
 THIRD DIVISION

FROILAN DE GUZMAN, G.R. No. 156965

ANGEL MARCELO and
NICASIO MAGBITANG, Present:
Petitioners,

QUISUMBING, J.,
Chairperson,
- versus - CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.
THE COURT OF APPEALS,
OFFICE OF THE PRESIDENT,
and the MUNICIPALITY OF Promulgated:
BALIUAG, BULACAN,
Respondents. October 12, 2006

x -------------------------------------------------------------------------------x

DECISION

TINGA, J.:

On appeal via a petition for review on certiorari under Rule 45 of the 1997 Rules of
Civil Procedure are the Decision[1] and Resolution[2] of the Court of Appeals in CA-
G.R. SP No. 55710. The Decision affirmed the Resolution dated 4 October 1999 of
the Office of the President dismissing petitioners appeal from the Order of the
Secretary of Agrarian Reform declaring that the disputed property cannot be placed
under the coverage of the agrarian reform program or the Operation Land Transfer.

The following factual antecedents are matters of record.

18
Petitioners Froilan De Guzman, Angel Marcelo and Nicasio Magbitang were among
the tenants of a parcel of land situated at Barangay Pagala, Baliuag, Bulacan. The
land, measuring six (6) hectares, was formerly owned by the Vergel De Dios family.
Sometime in 1979, respondent Municipality of Baliuag, Bulacan (municipality)
sought the expropriation of the land before the now defunct Court of Agrarian
Relations. During the pendency of the expropriation proceedings, the municipality
and petitioners entered into a compromise agreement, whereby petitioners
irrevocably withdrew their opposition to the expropriation of the land in
consideration of the payment of a disturbance compensation of P25,000.00 per
hectare or P2.50 per square meter. Petitioners also waived all claims and demands
against the municipality. The Court of Agrarian Relations approved said
compromise agreement in its decisions dated 16 April 1979 and 9 August 1979.[3]

From the records, it can be gathered that the municipality eventually acquired
ownership of the land through expropriation but allowed petitioners to continue
cultivating their lots pending the construction of the Baliuag Wholesale Complex
Market. For this arrangement, petitioners remitted rentals to the municipal treasurer.
Despite the lapse of several years, construction of the market did not push through.
This prompted petitioners, who had continually occupied and cultivated the land, to
file in 1996 a petition with the Municipal Agrarian Reform Office (MARO) of
Baliuag, praying that the land be placed under the Operation Land Transfer (OLT)
in accordance with Presidential Decree (P.D.) No. 27.[4]

Following the filing of their petition for CARP coverage before the MARO,
petitioners filed a complaint on 13 May 1997 with the Department of Agrarian
Reform Adjudication Board (DARAB) against the municipality. In their complaint
docketed as DARAB Case No. 03-02-505497, petitioners prayed for the issuance of
a preliminary injunction or temporary restraining order to secure their peaceful
possession over the land. The Provincial Adjudicator rendered judgment in favor of
petitioners on 17 July 1997. The dispositive portion of the decision reads:

WHEREFORE, premises considered, the Board finds the plaintiffs a [sic] bona-
fide farmer[-]beneficiaries of agrarian reform[.] [A]ccordingly, judgment is hereby
rendered as follows:

19
 1. Directing the the [sic] respondent, Municipality of Baliuag, Bulacan[,]
represented by Honorable Mayor Edilberto Tengco and all other persons acting in
their behalf to permanently cease and desist from dumping garbage in the premises
in question;

2. Directing the respondent to maintain petitioners in peaceful possession over the

disputed property.

SO ORDERED.[5]

On 6 January 1997, the Regional Director of the Department of Agrarian Reform

(DAR) issued an order granting the petition and declaring the land as covered by
OLT.[6] The municipality moved for its reconsideration in vain. Following the denial
of its motion for reconsideration, the municipality elevated the matter to the DAR
Secretary who, in his Order dated 8 August 1997, reversed the Order of 6 January
1997 of the Regional Director.[7] Petitioners, aggrieved this time, filed an appeal
with the Office of the President. On 1 July 1999, Executive Secretary Ronaldo B.
Zamora, by authority of the President, dismissed petitioners appeal and affirmed the
order of the DAR Secretary.[8]

Undaunted, petitioners filed a petition for review with the Court of Appeals, which
prayed for the reversal of the Order of 1 July 1999 issued by the Office of the
President on the grounds that the land remained agricultural and that the Office of
the President erred in relying upon the certification issued by the Housing and Land
Use Regulatory Board (HLURB) classifying the land as commercial. They also
argued that under the provisions of Administrative Order (A.O.) No. 20, series of
1992, the conversion of the land for non-agricultural purposes was disallowed.

20
On 30 January, 2002, the Court of Appeals rendered the assailed Decision,
dismissing petitioners appeal. Upholding the non-agricultural classification of the
land, the Court of Appeals ruled that the land could no longer be subject of the
comprehensive agrarian reform law (CARL). The Court of Appeals also denied
petitioners motion for reconsideration in the assailed Resolution dated January 20,
2003.

Hence, the instant petition, imputing the following errors to the Court of Appeals:

I.

WITH ALL DUE RESPECT, THE COURT OF APPEALS COMMITTED

GRAVE AND MANIFEST ERROR IN LAW WHEN IT FAILED TO CONSIDER
THAT THE SUBJECT LANDHOLDING SHOULD HAVE BEEN COVERED
BY OPERATION LAND TRANSFER PURSUANT TO P.D. NO. 27 DUE TO
THE FAILURE OF THE LANDOWNER TO CARRY OUT ITS CONVERSION
FROM AGRICULTURAL LAND FOR A LONG PERIOD OF TIME.

II.

THE COURT OF APPEALS COMMITTED SERIOUS ERROR WHEN IT

UPHOLD (sic) THE RECLASSIFICATION OF THE SUBJECT
LANDHOLDING.

III.

THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION

WHEN IT DISREGARDED THE PROVISIONS OF THE O.P.
ADMINISTRATIVE ORDER NO. 20 SERIES OF 1992 WHICH CLEARLY
PROVIDES THE NON NEGOTIABILITY OF IRRIGATED PRIME
AGRICULTURAL LANDS TO NON-AGRICULTURAL PURPOSES.[9]

Essentially, the main issue to be resolved is whether the subject land can be
reclassified to agricultural after the purpose of its conversion to a non-agricultural
land had not materialized.

21
Petitioners contend that despite the conversion of the land for a commercial purpose,
they have remained tenants of the land devoting it for agricultural production.
Though the earlier tenancy relationship had been terminated upon the payment of
disturbance compensation pursuant to the 1979 compromise agreement, petitioners
posit that a tenancy relationship was created anew between them and the
municipality when the latter allowed petitioners to cultivate the land after the
expropriation proceeding.

The petition has no merit.

Under Section 3(c) of Republic Act (R.A.) No. 6657, otherwise known as the
Comprehensive Agrarian Reform Law (CARL), an agricultural land refers to land
devoted to agricultural activity as defined therein and not classified as mineral,
forest, residential, commercial or industrial land. The deliberations of the
Constitutional Commission confirm this limitation. Agricultural lands are only those
lands which are arable and suitable agricultural lands and do not include
commercial, industrial and residential lands.[10]

In Natalia Realty, Inc. vs. Department of Agrarian Reform,[11] it was held that
lands not devoted to agricultural activity are outside the coverage of
CARL including lands previously converted to non-agricultural uses prior to the
effectivity of CARL by government agencies other than the DAR. This rule has been
reiterated in a number of subsequent cases. Despite claims that the areas have been
devoted for agricultural production, the Court has upheld the non-agricultural
classification made by the NHA over housing and resettlements projects,[12] zoning
ordinances passed by local government units classifying residential areas,[13] and
certifications over watershed areas issued by the Department of Environment and
Natural Resources (DENR).[14]

22
 The DAR itself has recognized the prospective application of R.A. No. 6657,
insofar as it provides under Section 3(c) thereof that lands classified as non-
agricultural prior to the effectivity of the CARL are not covered by the CARL. Thus,
DAR Administrative Order No. 1, series of 1990 provides:

Agricultural land refers to those devoted to agricultural activity as defined

in R.A. [No.] 6657 and not classified as mineral or forest by the Department of
Environment and Natural Resources (DENR) and its predecessor agencies, and not
classified in town plans and zoning ordinances as approved by the Housing Land
Use Regulatory Board (HLURB) and its preceding competent authorities prior to
15 June 1988 for residential, commercial or industrial use. (Emphasis supplied.}

That the subject land had been reclassified from agricultural to non-
agricultural is not disputed. The records reveal that as early as 1980, the municipality
had passed a zoning ordinance which identified the subject land as the site of the
wholesale market complex. As per certification issued by the HLURB, the land is
within the zoning plan approved by the National Coordinating Council for Town
Planning, Housing and Zoning.

Petitioners also theorize that they earned a vested right over the land when a
tenancy relationship was established anew between them and the municipality
subsequent to the latters acquisition of the land. In support of this theory, petitioners
cite minutes of meetings and resolutions passed by the municipalitys Sanggunian,
purportedly indicating the municipalitys recognition of their status as tenants of the
subject landholding.

Petitioners theory does not persuade the Court.

A segment of the minutes of the meeting of the

municipalitys Sanggunian dated 27 May 1988, which petitioners cite to bolster their
theory, is quoted below:

Tumindig din at namahayag ang ating Punong Bayan Kgg. Reynaldo S. del
Rosario at sinabing sa kasulukuyan ay hindi pa naman
kailangan ng Pamahalaang Bayan
ang nasabing lupa ngunit kung ito ay kakailangan na ay kinakailangang umalis sil
adito ng mahinusay, walang pasubali at maluwag sa kanilang kalooban,

23
 kung kayat iminungkahi niya na gumawa ng isang nakasulat na kasunduan na ang
nakasaad ay kusang-
loob silang aalis sa nasabing lupa pagdating ng panahon na ito ay kailanganin nan
g Pamahalaang Bayan.[15]

The aforequoted minutes clearly show that petitioners use and possession of
the land was by mere tolerance of the municipality and subject to the condition that
petitioners would voluntarily vacate the land when the need would arise. In the same
minutes, the Sanggunian resolved to authorize then Mayor Reynaldo S. del Rosario
to enter into an agreement in writing with petitioners concerning the
latters temporary cultivation of the land as hired labor.

As discussed earlier, the land had ceased to be classified as agricultural when

the municipality extended petitioners occupation of the land. After the municipality
acquired ownership over the land through expropriation and passed the ordinance
converting said land into a commercial area, any transaction entered into by the
municipality involving the land was governed by the applicable civil law in relation
to laws on local government. At this point, agrarian laws no longer governed the
relationship between petitioners and the municipality. While it was not established
whether the relationship between petitioners and the municipality was that of a lessor
and lessee or that of an employer and laborer, as the supposed written agreement
was not offered in evidence, the fact remains that the subject land had already been
identified as commercial in the zoning ordinance.

Certainly, petitioners occupation of the land, made possible as it was by the

tolerance of the municipality, was subject to its peremptory right to terminate. As
absolute owner of the land, the municipality is entitled to devote the land for
purposes it deems appropriate.

It is noteworthy that even prior to its expropriation and reclassification, the

land was never placed under the coverage of the agrarian reform program. Although
it appears that petitioners had been tilling the land as tenants of the Vergel De Dios

24
family, the municipalitys predecessor-in-interest, the records do not show that
petitioners had applied for coverage of the land under the agrarian reform program.
Before a claimant becomes a qualified beneficiary of agrarian reform, the
administrative process for coverage under the CARP must be initiated. The mere
fact of cultivating an agricultural land does not ipso jure vest ownership right in
favor of the tiller. Since petitioners had not applied for CARP coverage prior to the
reclassification of the land to commercial, their occupation by mere tolerance cannot
ripen into absolute ownership.

Petitioners further argue that the municipalitys failure to realize the

commercial project operates to reinstate the original status of the land as agricultural.
In support of this theory, petitioners cite Section 36 (1) of R.A. No. 3844, or the
Agriculture Land Reform Code, unaware that the provision had been amended by
R.A. 6389, entitled, An Act Amending Republic Act Numbered Thirty Eight
Hundred and Forty Four, As Amended, Otherwise Known As the Agricultural Land
Reform Code and For Other Purposes.

Before its amendment, Section 36 (1), R.A. No. 3844 provided:

SEC. 36. Possession of Landholding; Exceptions.Notwithstanding any
agreement as to the period or future surrender, of the land, an agricultural lessee
shall continue in the enjoyment and possession of his landholding except when his
dispossession has been authorized by the Court in a judgment that is final and
executory if after due hearing it is shown that:

(1) The agricultural lessor-owner or a member of his immediate family will

personally cultivate the landholding or will convert the landholding, if suitably
located, into residential, factory, hospital or school site or other useful non-
agricultural purposes: Provided, That the agricultural lessee shall be entitled to
disturbance compensation equivalent to five years rental on his landholding in
addition to his rights under Sections twenty-five and thirty-four, except when the
land owned and leased by the agricultural lessor, is not more than five hectares, in
which case instead of disturbance compensation the lessee may be entitled to an
advanced notice of at least one agricultural year before ejectment proceedings are
filed against him: Provided, further, That should the landholder not cultivate the
land himself for three years or fail to substantially carry out such conversion within
one year after the dispossession of the tenant, it shall be presumed that he acted in

25
 bad faith and the tenant shall have the right to demand possession of the land and
recover damages for any loss incurred by him because of said dispossessions.

With the enactment of the amendatory law, the condition imposed on the
landowner to implement the conversion of the agricultural land to a non-agricultural
purpose within a certain period was deleted. Section 36 (1), R.A. No. 3844, as
amended, now reads:

SEC. 36. Possession of Landholding; Exceptions. Notwithstanding any

agreement as to the period or future surrender, of the land, an agricultural lessee
shall continue in the enjoyment and possession of his landholding except when his
dispossession has been authorized by the Court in a judgment that is final and
executory if after due hearing it is shown that:

(1) The landholding is declared by the department head upon

recommendation of the National Planning Commission to be suited for residential,
commercial, industrial or some other urban purposes: Provided, That the
agricultural lessee shall be entitled to disturbance compensation equivalent to five
times the average of gross harvests on his landholding during the last five preceding
calendar years;

x x x x[16]

The amendment is the Legislatures recognition that the optimal use of some
lands may not necessarily be for agriculture. Thus, discretion is vested on the
appropriate government agencies to determine the suitability of a land for residential,
commercial, industrial or other purposes. With the passage of the CARL, the
conversion of agricultural lands to non-agricultural uses was retained and the
imposition on the landowner to implement within a time frame the proposed non-
agricultural use of the land was done away with.

Moreover, in Pasong Bayabas Farmers Association, Inc. v. Court of

Appeals,[17] the Court declared categorically that the failure of the landowner therein
to complete the housing project did not have the effect of reverting the property to
its classification as agricultural land, although the order of conversion issued by the
then Minister of Agrarian Reform obliged the landowner to commence the physical
development of the housing project within one year from receipt of the order of
conversion.[18] In said case, a vast tract of land claimed to be cultivated by its tenants
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formed part of the subdivision plan of a housing project approved by the National
Planning Commission and Municipal Council of Carmona and subsequently
declared by the Provincial Board of Cavite as composite of the industrial areas of
Carmona, Dasmarias, Silang and Trece Martirez. Because the reclassification of the
property by the Municipal Council of Carmona to non-agricultural land took place
before the effectivity of the CARL, the Court held that Section 65 of R.A. No. 6657
cannot be applied retroactively.[19]

More importantly, the Court in Pasong Bayabas recognized the power of

local government units to adopt zoning ordinances, citing Section 3 of R.A. No.
2264,[20] to wit:
Section 3 of Rep. Act No. 2264, amending the Local Government Code,
specifically empowers municipal and/or city councils to adopt zoning and
subdivision ordinances or regulations in consultation with the National Planning
Commission. A zoning ordinance prescribes, defines, and apportions a given
political subdivision into specific land uses as present and future projection of
needs. The power of the local government to convert or reclassify lands to
residential lands to non-agricultural lands reclassified is not subject to the approval
of the Department of Agrarian Reform. Section 65 of Rep. Act No. 6657 relied
upon by the petitioner applies only to applications by the landlord or the beneficiary
for the conversion of lands previously placed under agrarian reform law after the
lapse of five years from its award. It does not apply to agricultural lands already
converted as residential lands prior to the passage of Rep. Act No. 6657.[21]

Thus, the zoning ordinance passed by the municipality sometime in 1980

reclassifying the subject land as commercial and future site of a market complex
operated to take away the agricultural status of the subject property. Subsequent
events cited by petitioners such as their continuous tillage of the land and the non-
commencement of the construction of the market complex did not strip the land of
its classification as commercial.

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 Petitioners reliance on the provisions of A.O. No. 20, series of 1992, issued
by then President Fidel Ramos is misplaced. A.O. No. 20, which sets forth the
guidelines to be observed by local government units and government agencies on
agricultural land use conversion, cannot be applied to the subject land for the reason
that the land had already been classified as commercial long before its issuance.
Indeed, A.O. No. 20 cannot be applied retroactively.

WHEREFORE, the instant petition for review on certiorari is DENIED. The

Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 55710
are AFFIRMED. Costs against petitioners.

SO ORDERED.

DANTE O. TINGA
Associate Justice

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 175 SCRA 343 Political Law Constitutional Law Bill of Rights Equal Protection
Valid Classification
Eminent Domain Just Compensation
These are four consolidated cases questioning the constitutionality of the Comprehensive
Agrarian Reform Act (R.A. No. 6657 and related laws i.e., Agrarian Land Reform Code or
R.A. No. 3844).
Brief background: Article XIII of the Constitution on Social Justice and Human Rights includes
a call for the adoption by the State of an agrarian reform program. The State shall, by law,
undertake an agrarian reform program founded on the right of farmers and regular
farmworkers, who are landless, to own directly or collectively the lands they till or, in the case
of other farmworkers, to receive a just share of the fruits thereof. RA 3844 was enacted
in 1963. P.D. No. 27 was promulgated in 1972 to provide for the compulsory acquisition of
private lands for distribution among tenant-farmers and to specify maximum retention limits
for landowners. In 1987, President Corazon Aquino issued E.O. No. 228, declaring full land
ownership in favor of the beneficiaries of PD 27 and providing for the valuation of still unvalued
lands covered by the decree as well as the manner of their payment. In 1987, P.P. No. 131,
instituting a comprehensive agrarian reform program (CARP) was enacted; later, E.O. No.
229, providing the mechanics for its (PP131s) implementation, was also enacted. Afterwhich
is the enactment of R.A. No. 6657, Comprehensive Agrarian Reform Law in 1988. This law,
while considerably changing the earlier mentioned enactments, nevertheless gives them
suppletory effect insofar as they are not inconsistent with its provisions.
[Two of the consolidated cases are discussed below]
G.R. No. 78742: (Association of Small Landowners vs Secretary)
The Association of Small Landowners in the Philippines, Inc. sought exception from the land
distribution scheme provided for in R.A. 6657. The Association is comprised of landowners
of ricelands and cornlands whose landholdings do not exceed 7 hectares. They invoke that
since their landholdings are less than 7 hectares, they should not be forced to distribute their
land to their tenants under R.A. 6657 for they themselves have shown willingness to till their
own land. In short, they want to be exempted from agrarian reform program because they
claim to belong to a different class.
G.R. No. 79777: (Manaay vs Juico)
Nicolas Manaay questioned the validity of the agrarian reform laws (PD 27, EO 228, and 229)
on the ground that these laws already valuated their lands for the agrarian reform program
and that the specific amount must be determined by the Department of Agrarian Reform
(DAR). Manaay averred that this violated the principle in eminent domain which provides that
only courts can determine just compensation. This, for Manaay, also violated due process for
under the constitution, no property shall be taken for public use without just compensation.
Manaay also questioned the provision which states that landowners may be paid for their
land in bonds and not necessarily in cash. Manaay averred that just compensation has always
been in the form of money and not in bonds.
ISSUE:
1. Whether or not there was a violation of the equal protection clause.
2. Whether or not there is a violation of due process.

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3. Whether or not just compensation, under the agrarian reform program, must be in terms of
cash.
HELD:
1. No. The Association had not shown any proof that they belong to a different class exempt
from the agrarian reform program. Under the law, classification has been defined as the
grouping of persons or things similar to each other in certain particulars and different from
each other in these same particulars. To be valid, it must conform to the following
requirements:
(1) it must be based on substantial distinctions;
(2) it must be germane to the purposes of the law;
(3) it must not be limited to existing conditions only; and
(4) it must apply equally to all the members of the class.
Equal protection simply means that all persons or things similarly situated must be treated
alike both as to the rights conferred and the liabilities imposed. The Association have not
shown that they belong to a different class and entitled to a different treatment. The argument
that not only landowners but also owners of other properties must be made to share the
burden of implementing land reform must be rejected. There is a substantial distinction
between these two classes of owners that is clearly visible except to those who will not see.
There is no need to elaborate on this matter. In any event, the Congress is allowed a wide
leeway in providing for a valid classification. Its decision is accorded recognition and respect
by the courts of justice except only where its discretion is abused to the detriment of the Bill
of Rights. In the contrary, it appears that Congress is right in classifying small landowners as
part of the agrarian reform program.
2. No. It is true that the determination of just compensation is a power lodged in the courts.
However, there is no law which prohibits administrative bodies like the DAR from determining
just compensation. In fact, just compensation can be that amount agreed upon by the
landowner and the government even without judicial intervention so long as both parties
agree. The DAR can determine just compensation through appraisers and if the landowner
agrees, then judicial intervention is not needed. What is contemplated by law however is that,
the just compensation determined by an administrative body is merely preliminary. If the
landowner does not agree with the finding of just compensation by an administrative body,
then it can go to court and the determination of the latter shall be the final determination. This
is even so provided by RA 6657:
Section 16 (f): Any party who disagrees with the decision may bring the matter to the court of
proper jurisdiction for final determination of just compensation.
3. No. Money as [sole] payment for just compensation is merely a concept in traditional
exercise of eminent domain. The agrarian reform program is a revolutionary exercise of
eminent domain. The program will require billions of pesos in funds if all compensation have
to be made in cash if everything is in cash, then the government will not have sufficient
money hence, bonds, and other securities, i.e., shares of stocks, may be used for just
compensation.

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