EN BANC

[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).
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 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).
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).
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). :-cra law
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 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.
Fernan (C.J.), Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Gancayco, Padilla,
Bidin, Griño-Aquino, Medialdea and Regalado, JJ., concur.
Feliciano, J., is on leave.

Separate Opinions

SARMIENTO, J., concurring:

I agree that the petition be granted.
It is my opinion however that the main issue on the validity of the assailed provisions of R.A.
6657 (the Comprehensive Agrarian Reform Law of 1988) and its Implementing Rules and
Guidelines insofar as they include the raising of livestock, poultry, and swine in their coverage
cannot be simplistically reduced to a question of constitutional construction.
It is a well-settled rule that construction and interpretation come only after it has been
demonstrated that application is impossible or inadequate without them. A close reading
however of the constitutional text in point, specifically, Sec. 4, Art. XIII, particularly the
phrase, ". . . in case of other farmworkers, to receive a just share of the fruits thereof,"
provides a basis for the clear and possible coverage of livestock, poultry, and swine raising
within the ambit of the comprehensive agrarian reform program. This accords with the
principle that every presumption should be indulged in favor of the constitutionality of a
statute and the court in considering the validity of a statute should give it such reasonable
construction as can be reached to bring it within the fundamental law. 1
The presumption against unconstitutionality, I must say, assumes greater weight when a
ruling to the contrary would, in effect, defeat the laudable and noble purpose of the law, i.e.,
the welfare of the landless farmers and farmworkers in the promotion of social justice, by the
expedient conversion of agricultural lands into livestock, poultry, and swine raising by
scheming landowners, thus, rendering the comprehensive nature of the agrarian program
merely illusory.
The instant controversy, I submit, boils down to the question of whether or not the assailed
provisions violate the equal protection clause of the Constitution (Article II, section 1) which
teaches simply that all persons or things similarly situated should be treated alike, both as to
rights conferred and responsibilities imposed. 2
There is merit in the contention of the petitioner that substantial distinctions exist between
land directed purely to cultivation and harvesting of fruits or crops and land exclusively used
for livestock, poultry and swine raising, that make real differences, to wit:
x x x
No land is tilled and no crop is harvested in livestock and poultry farming. There are no tenants
nor landlords, only employers and employees.
Livestock and poultry do not sprout from land nor are they "fruits of the land."
Land is not even a primary resource in this industry. The land input is inconsequential that all
the commercial hog and poultry farms combined occupy less than one percent (1%) (0.4%
for piggery, 0.2% for poultry) of the 5.45 million hectares of land supposedly covered by the
CARP. And most farms utilize only 2 to 5 hectares of land. : nad

In every respect livestock and poultry production is an industrial activity. Its use of an
inconsequential portion of land is a mere incident of its operation, as in any other undertaking,
business or otherwise.
The fallacy of defining livestock and poultry production as an agricultural enterprise is nowhere
more evident when one considers that at least 95% of total investment in these farms is in
the form of fixed assets which are industrial in nature.
These include (1) animal housing structures and facilities complete with drainage, waterers,
blowers, misters and in some cases even piped-in music; (2) feedmills complete with grinders,
mixers, conveyors, exhausts, generators, etc.; (3) extensive warehousing facilities for feeds
and other supplies; (4) anti-pollution equipment such as bio-gas and digester plants
augmented by lagoons and concrete ponds; (5) deepwells, elevated water tanks, pumphouses
and accessory facilities; (6) modern equipment such as sprayers, pregnancy testers, etc.; (7)
laboratory facilities complete with expensive tools and equipment; and a myriad other such
technologically advanced appurtances.
How then can livestock and poultry farmlands be arable when such are almost totally occupied
by these structures?
The fallacy of equating the status of livestock and poultry farmworkers with that of agricultural
tenants surfaces when one considers contribution to output. Labor cost of livestock and
poultry farms is no more than 4% of total operating cost. The 98% balance represents inputs
not obtained from the land nor provided by the farmworkers — inputs such as feeds and
biochemicals (80% of the total cost), power cost, cost of money and several others.
Moreover, livestock and poultry farmworkers are covered by minimum wage law rather than
by tenancy law. They are entitled to social security benefits where tenant-farmers are not.
They are paid fixed wages rather than crop shares. And as in any other industry, they receive
additional benefits such as allowances, bonuses, and other incentives such as free housing
privileges, light and water.
Equating livestock and poultry farming with other agricultural activities is also fallacious in
the sense that like the manufacturing sector, it is a market for, rather than a source of
agricultural output. At least 60% of the entire domestic supply of corn is absorbed by livestock
and poultry farms. So are the by-products of rice (rice-bran), coconut (copra meal), banana
(banana pulp meal), and fish (fish meal). 3
x x x
In view of the foregoing, it is clear that both kinds of lands are not similarly situated and
hence, cannot be treated alike. Therefore, the assailed provisions which allow for the inclusion
of livestock and poultry industry within the coverage of the agrarian reform program
constitute invalid classification and must accordingly be struck down as repugnant to the equal
protection clause of the Constitution. chanrob les vi rtual law lib rary

Endnotes
SARMIENTO, J., concurring:

THIRD DIVISION

G.R. No. 156965 October 12, 2006

FROILAN DE GUZMAN, ANGEL MARCELO and NICASIO MAGBITANG, petitioners,

vs.
THE COURT OF APPEALS, OFFICE OF THE PRESIDENT, and the MUNICIPALITY OF
BALIUAG, BULACAN,respondents.

DECISION

Tinga, J.:

On appeal via a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure
are the Decision1 and Resolution2 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.

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. 03-02-5054'97, 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:

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.

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.

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

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 latter's acquisition of
the land. In support of this theory, petitioners cite minutes of meetings and resolutions passed by the
municipality's Sanggunian, purportedly indicating the municipality's 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 municipality's 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 sila dito ng mahinusay,
walang pasubali at maluwag sa kanilang kalooban, kung kaya't 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 na ng 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
latter's 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 family, the municipality's 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 municipality's 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 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 x16

The amendment is the Legislature's 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 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, Dasmariñas, 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.

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.

Quisumbing, J., Chairperson, Carpio, Carpio Morales, and Velasco, Jr., JJ., concur.

EN BANC

G.R. No. 78742 July 14, 1989

ASSOCIATION OF SMALL LANDOWNERS IN THE PHILIPPINES, INC., JUANITO D. GOMEZ,

GERARDO B. ALARCIO, FELIPE A. GUICO, JR., BERNARDO M. ALMONTE, CANUTO RAMIR
B. CABRITO, ISIDRO T. GUICO, FELISA I. LLAMIDO, FAUSTO J. SALVA, REYNALDO G.
ESTRADA, FELISA C. BAUTISTA, ESMENIA J. CABE, TEODORO B. MADRIAGA, AUREA J.
PRESTOSA, EMERENCIANA J. ISLA, FELICISIMA C. ARRESTO, CONSUELO M. MORALES,
BENJAMIN R. SEGISMUNDO, CIRILA A. JOSE & NAPOLEON S. FERRER, petitioners,
vs.
HONORABLE SECRETARY OF AGRARIAN REFORM, respondent.

G.R. No. 79310 July 14, 1989

ARSENIO AL. ACUNA, NEWTON JISON, VICTORINO FERRARIS, DENNIS JEREZA,

HERMINIGILDO GUSTILO, PAULINO D. TOLENTINO and PLANTERS' COMMITTEE, INC.,
Victorias Mill District, Victorias, Negros Occidental, petitioners,
vs.
JOKER ARROYO, PHILIP E. JUICO and PRESIDENTIAL AGRARIAN REFORM
COUNCIL, respondents.

G.R. No. 79744 July 14, 1989

INOCENTES PABICO, petitioner,

vs.
HON. PHILIP E. JUICO, SECRETARY OF THE DEPARTMENT OF AGRARIAN REFORM, HON.
JOKER ARROYO, EXECUTIVE SECRETARY OF THE OFFICE OF THE PRESIDENT, and
Messrs. SALVADOR TALENTO, JAIME ABOGADO, CONRADO AVANCENA and ROBERTO
TAAY, respondents.

G.R. No. 79777 July 14, 1989

NICOLAS S. MANAAY and AGUSTIN HERMANO, JR., petitioners,

vs.
HON. PHILIP ELLA JUICO, as Secretary of Agrarian Reform, and LAND BANK OF THE
PHILIPPINES, respondents.

CRUZ, J.:

In ancient mythology, Antaeus was a terrible giant who blocked and challenged Hercules for his life
on his way to Mycenae after performing his eleventh labor. The two wrestled mightily and Hercules
flung his adversary to the ground thinking him dead, but Antaeus rose even stronger to resume their
struggle. This happened several times to Hercules' increasing amazement. Finally, as they
continued grappling, it dawned on Hercules that Antaeus was the son of Gaea and could never die
as long as any part of his body was touching his Mother Earth. Thus forewarned, Hercules then held
Antaeus up in the air, beyond the reach of the sustaining soil, and crushed him to death.

Mother Earth. The sustaining soil. The giver of life, without whose invigorating touch even the
powerful Antaeus weakened and died.

The cases before us are not as fanciful as the foregoing tale. But they also tell of the elemental
forces of life and death, of men and women who, like Antaeus need the sustaining strength of the
precious earth to stay alive.

"Land for the Landless" is a slogan that underscores the acute imbalance in the distribution of this
precious resource among our people. But it is more than a slogan. Through the brooding centuries, it
has become a battle-cry dramatizing the increasingly urgent demand of the dispossessed among us
for a plot of earth as their place in the sun.

Recognizing this need, the Constitution in 1935 mandated the policy of social justice to "insure the
well-being and economic security of all the people," 1 especially the less privileged. In 1973, the new
Constitution affirmed this goal adding specifically that "the State shall regulate the acquisition,
ownership, use, enjoyment and disposition of private property and equitably diffuse property
ownership and profits." 2 Significantly, there was also the specific injunction to "formulate and
implement an agrarian reform program aimed at emancipating the tenant from the bondage of the
soil." 3

The Constitution of 1987 was not to be outdone. Besides echoing these sentiments, it also adopted
one whole and separate Article XIII on Social Justice and Human Rights, containing grandiose but
undoubtedly sincere provisions for the uplift of the common people. These include a call in the
following words for the adoption by the State of an agrarian reform program:

SEC. 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 right of
small landowners. The State shall further provide incentives for voluntary land-
sharing.

Earlier, in fact, R.A. No. 3844, otherwise known as the Agricultural Land Reform Code, had already
been enacted by the Congress of the Philippines on August 8, 1963, in line with the above-stated
principles. This was substantially superseded almost a decade later by P.D. No. 27, which was
promulgated on October 21, 1972, along with martial law, to provide for the compulsory acquisition
of private lands for distribution among tenant-farmers and to specify maximum retention limits for
landowners.

The people power revolution of 1986 did not change and indeed even energized the thrust for
agrarian reform. Thus, on July 17, 1987, President Corazon C. Aquino issued E.O. No. 228,
declaring full land ownership in favor of the beneficiaries of P.D. No. 27 and providing for the
valuation of still unvalued lands covered by the decree as well as the manner of their payment. This
was followed on July 22, 1987 by Presidential Proclamation No. 131, instituting a comprehensive
agrarian reform program (CARP), and E.O. No. 229, providing the mechanics for its implementation.

Subsequently, with its formal organization, the revived Congress of the Philippines took over
legislative power from the President and started its own deliberations, including extensive public
hearings, on the improvement of the interests of farmers. The result, after almost a year of spirited
debate, was the enactment of R.A. No. 6657, otherwise known as the Comprehensive Agrarian
Reform Law of 1988, which President Aquino signed on June 10, 1988. This law, while considerably
changing the earlier mentioned enactments, nevertheless gives them suppletory effect insofar as
they are not inconsistent with its provisions. 4

The above-captioned cases have been consolidated because they involve common legal questions,
including serious challenges to the constitutionality of the several measures mentioned above. They
will be the subject of one common discussion and resolution, The different antecedents of each case
will require separate treatment, however, and will first be explained hereunder.

G.R. No. 79777

Squarely raised in this petition is the constitutionality of P.D. No. 27, E.O. Nos. 228 and 229, and
R.A. No. 6657.

The subjects of this petition are a 9-hectare riceland worked by four tenants and owned by petitioner
Nicolas Manaay and his wife and a 5-hectare riceland worked by four tenants and owned by
petitioner Augustin Hermano, Jr. The tenants were declared full owners of these lands by E.O. No.
228 as qualified farmers under P.D. No. 27.

The petitioners are questioning P.D. No. 27 and E.O. Nos. 228 and 229 on 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.

They contend that President Aquino usurped legislative power when she promulgated E.O. No. 228.
The said measure is invalid also for violation of Article XIII, Section 4, of the Constitution, for failure
to provide for retention limits for small landowners. Moreover, it does not conform to Article VI,
Section 25(4) and the other requisites of a valid appropriation.

In connection with the determination of just compensation, the petitioners argue that the same may
be made only by a court of justice and not by the President of the Philippines. They invoke the
recent cases of EPZA v. Dulay 5 andManotok v. National Food Authority. 6 Moreover, the just
compensation contemplated by the Bill of Rights is payable in money or in cash and not in the form
of bonds or other things of value.

In considering the rentals as advance payment on the land, the executive order also deprives the
petitioners of their property rights as protected by due process. The equal protection clause is also
violated because the order places the burden of solving the agrarian problems on the owners only of
agricultural lands. No similar obligation is imposed on the owners of other properties.

The petitioners also maintain that in declaring the beneficiaries under P.D. No. 27 to be the owners
of the lands occupied by them, E.O. No. 228 ignored judicial prerogatives and so violated due
process. Worse, the measure would not solve the agrarian problem because even the small farmers
are deprived of their lands and the retention rights guaranteed by the Constitution.

In his Comment, the Solicitor General stresses that P.D. No. 27 has already been upheld in the
earlier cases ofChavez v. Zobel, 7 Gonzales v. Estrella, 8 and Association of Rice and Corn
Producers of the Philippines, Inc. v. The National Land Reform Council. 9 The determination of just
compensation by the executive authorities conformably to the formula prescribed under the
questioned order is at best initial or preliminary only. It does not foreclose judicial intervention
whenever sought or warranted. At any rate, the challenge to the order is premature because no
valuation of their property has as yet been made by the Department of Agrarian Reform. The
petitioners are also not proper parties because the lands owned by them do not exceed the
maximum retention limit of 7 hectares.

Replying, the petitioners insist they are proper parties because P.D. No. 27 does not provide for
retention limits on tenanted lands and that in any event their petition is a class suit brought in behalf
of landowners with landholdings below 24 hectares. They maintain that the determination of just
compensation by the administrative authorities is a final ascertainment. As for the cases invoked by
the public respondent, the constitutionality of P.D. No. 27 was merely assumed in Chavez, while
what was decided in Gonzales was the validity of the imposition of martial law.

In the amended petition dated November 22, 1588, it is contended that P.D. No. 27, E.O. Nos. 228
and 229 (except Sections 20 and 21) have been impliedly repealed by R.A. No. 6657. Nevertheless,
this statute should itself also be declared unconstitutional because it suffers from substantially the
same infirmities as the earlier measures.

A petition for intervention was filed with leave of court on June 1, 1988 by Vicente Cruz, owner of a
1. 83- hectare land, who complained that the DAR was insisting on the implementation of P.D. No.
27 and E.O. No. 228 despite a compromise agreement he had reached with his tenant on the
payment of rentals. In a subsequent motion dated April 10, 1989, he adopted the allegations in the
basic amended petition that the above- mentioned enactments have been impliedly repealed by R.A.
No. 6657.

G.R. No. 79310

The petitioners herein are landowners and sugar planters in the Victorias Mill District, Victorias,
Negros Occidental. Co-petitioner Planters' Committee, Inc. is an organization composed of 1,400
planter-members. This petition seeks to prohibit the implementation of Proc. No. 131 and E.O. No.
229.

The petitioners claim that the power to provide for a Comprehensive Agrarian Reform Program as
decreed by the Constitution belongs to Congress and not the President. Although they agree that the
President could exercise legislative power until the Congress was convened, she could do so only to
enact emergency measures during the transition period. At that, even assuming that the interim
legislative power of the President was properly exercised, Proc. No. 131 and E.O. No. 229 would still
have to be annulled for violating the constitutional provisions on just compensation, due process,
and equal protection.

They also argue that under Section 2 of Proc. No. 131 which provides:

Agrarian Reform Fund.-There is hereby created a special fund, to be known as the Agrarian Reform
Fund, an initial amount of FIFTY BILLION PESOS (P50,000,000,000.00) to cover the estimated cost
of the Comprehensive Agrarian Reform Program from 1987 to 1992 which shall be sourced from the
receipts of the sale of the assets of the Asset Privatization Trust and Receipts of sale of ill-gotten
wealth received through the Presidential Commission on Good Government and such other sources
as government may deem appropriate. The amounts collected and accruing to this special fund shall
be considered automatically appropriated for the purpose authorized in this Proclamation the amount
appropriated is in futuro, not in esse. The money needed to cover the cost of the contemplated
expropriation has yet to be raised and cannot be appropriated at this time.

Furthermore, they contend that taking must be simultaneous with payment of just compensation as it
is traditionally understood, i.e., with money and in full, but no such payment is contemplated in
Section 5 of the E.O. No. 229. On the contrary, Section 6, thereof provides that the Land Bank of the
Philippines "shall compensate the landowner in an amount to be established by the government,
which shall be based on the owner's declaration of current fair market value as provided in Section 4
hereof, but subject to certain controls to be defined and promulgated by the Presidential Agrarian
Reform Council." This compensation may not be paid fully in money but in any of several modes that
may consist of part cash and part bond, with interest, maturing periodically, or direct payment in
cash or bond as may be mutually agreed upon by the beneficiary and the landowner or as may be
prescribed or approved by the PARC.

The petitioners also argue that in the issuance of the two measures, no effort was made to make a
careful study of the sugar planters' situation. There is no tenancy problem in the sugar areas that
can justify the application of the CARP to them. To the extent that the sugar planters have been
lumped in the same legislation with other farmers, although they are a separate group with problems
exclusively their own, their right to equal protection has been violated.

A motion for intervention was filed on August 27,1987 by the National Federation of Sugarcane
Planters (NASP) which claims a membership of at least 20,000 individual sugar planters all over the
country. On September 10, 1987, another motion for intervention was filed, this time by Manuel
Barcelona, et al., representing coconut and riceland owners. Both motions were granted by the
Court.

NASP alleges that President Aquino had no authority to fund the Agrarian Reform Program and that,
in any event, the appropriation is invalid because of uncertainty in the amount appropriated. Section
2 of Proc. No. 131 and Sections 20 and 21 of E.O. No. 229 provide for an initial appropriation of fifty
billion pesos and thus specifies the minimum rather than the maximum authorized amount. This is
not allowed. Furthermore, the stated initial amount has not been certified to by the National
Treasurer as actually available.
Two additional arguments are made by Barcelona, to wit, the failure to establish by clear and
convincing evidence the necessity for the exercise of the powers of eminent domain, and the
violation of the fundamental right to own property.

The petitioners also decry the penalty for non-registration of the lands, which is the expropriation of
the said land for an amount equal to the government assessor's valuation of the land for tax
purposes. On the other hand, if the landowner declares his own valuation he is unjustly required to
immediately pay the corresponding taxes on the land, in violation of the uniformity rule.

In his consolidated Comment, the Solicitor General first invokes the presumption of constitutionality
in favor of Proc. No. 131 and E.O. No. 229. He also justifies the necessity for the expropriation as
explained in the "whereas" clauses of the Proclamation and submits that, contrary to the petitioner's
contention, a pilot project to determine the feasibility of CARP and a general survey on the people's
opinion thereon are not indispensable prerequisites to its promulgation.

On the alleged violation of the equal protection clause, the sugar planters have failed to show that
they belong to a different class and should be differently treated. The Comment also suggests the
possibility of Congress first distributing public agricultural lands and scheduling the expropriation of
private agricultural lands later. From this viewpoint, the petition for prohibition would be premature.

The public respondent also points out that the constitutional prohibition is against the payment of
public money without the corresponding appropriation. There is no rule that only money already in
existence can be the subject of an appropriation law. Finally, the earmarking of fifty billion pesos as
Agrarian Reform Fund, although denominated as an initial amount, is actually the maximum sum
appropriated. The word "initial" simply means that additional amounts may be appropriated later
when necessary.

On April 11, 1988, Prudencio Serrano, a coconut planter, filed a petition on his own behalf, assailing
the constitutionality of E.O. No. 229. In addition to the arguments already raised, Serrano contends
that the measure is unconstitutional because:

(1) Only public lands should be included in the CARP;

(2) E.O. No. 229 embraces more than one subject which is not expressed in the title;

(3) The power of the President to legislate was terminated on July 2, 1987; and

(4) The appropriation of a P50 billion special fund from the National Treasury did not
originate from the House of Representatives.

G.R. No. 79744

The petitioner alleges that the then Secretary of Department of Agrarian Reform, in violation of due
process and the requirement for just compensation, placed his landholding under the coverage of
Operation Land Transfer. Certificates of Land Transfer were subsequently issued to the private
respondents, who then refused payment of lease rentals to him.

On September 3, 1986, the petitioner protested the erroneous inclusion of his small landholding
under Operation Land transfer and asked for the recall and cancellation of the Certificates of Land
Transfer in the name of the private respondents. He claims that on December 24, 1986, his petition
was denied without hearing. On February 17, 1987, he filed a motion for reconsideration, which had
not been acted upon when E.O. Nos. 228 and 229 were issued. These orders rendered his motion
moot and academic because they directly effected the transfer of his land to the private respondents.

The petitioner now argues that:

(1) E.O. Nos. 228 and 229 were invalidly issued by the President of the Philippines.

(2) The said executive orders are violative of the constitutional provision that no
private property shall be taken without due process or just compensation.

(3) The petitioner is denied the right of maximum retention provided for under the
1987 Constitution.

The petitioner contends that the issuance of E.0. Nos. 228 and 229 shortly before Congress
convened is anomalous and arbitrary, besides violating the doctrine of separation of powers. The
legislative power granted to the President under the Transitory Provisions refers only to emergency
measures that may be promulgated in the proper exercise of the police power.

The petitioner also invokes his rights not to be deprived of his property without due process of law
and to the retention of his small parcels of riceholding as guaranteed under Article XIII, Section 4 of
the Constitution. He likewise argues that, besides denying him just compensation for his land, the
provisions of E.O. No. 228 declaring that:

Lease rentals paid to the landowner by the farmer-beneficiary after October 21, 1972
shall be considered as advance payment for the land.

is an unconstitutional taking of a vested property right. It is also his contention that the inclusion of
even small landowners in the program along with other landowners with lands consisting of seven
hectares or more is undemocratic.

In his Comment, the Solicitor General submits that the petition is premature because the motion for
reconsideration filed with the Minister of Agrarian Reform is still unresolved. As for the validity of the
issuance of E.O. Nos. 228 and 229, he argues that they were enacted pursuant to Section 6, Article
XVIII of the Transitory Provisions of the 1987 Constitution which reads:

The incumbent president shall continue to exercise legislative powers until the first Congress is
convened.

On the issue of just compensation, his position is that when P.D. No. 27 was promulgated on
October 21. 1972, the tenant-farmer of agricultural land was deemed the owner of the land he was
tilling. The leasehold rentals paid after that date should therefore be considered amortization
payments.

In his Reply to the public respondents, the petitioner maintains that the motion he filed was resolved
on December 14, 1987. An appeal to the Office of the President would be useless with the
promulgation of E.O. Nos. 228 and 229, which in effect sanctioned the validity of the public
respondent's acts.

G.R. No. 78742

The petitioners in this case invoke the right of retention granted by P.D. No. 27 to owners of rice and
corn lands not exceeding seven hectares as long as they are cultivating or intend to cultivate the
same. Their respective lands do not exceed the statutory limit but are occupied by tenants who are
actually cultivating such lands.

According to P.D. No. 316, which was promulgated in implementation of P.D. No. 27:

No tenant-farmer in agricultural lands primarily devoted to rice and corn shall be

ejected or removed from his farmholding until such time as the respective rights of
the tenant- farmers and the landowner shall have been determined in accordance
with the rules and regulations implementing P.D. No. 27.

The petitioners claim 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
required under the above-quoted decree. They therefore ask the Court for a writ of mandamus to
compel the respondent to issue the said rules.

In his Comment, the public respondent argues that P.D. No. 27 has been amended by LOI 474
removing any right of retention from persons who own other agricultural lands of more than 7
hectares in aggregate area or lands used for residential, commercial, industrial or other purposes
from which they derive adequate income for their family. And even assuming that the petitioners do
not fall under its terms, the regulations implementing P.D. No. 27 have already been issued, to wit,
the Memorandum dated July 10, 1975 (Interim Guidelines on Retention by Small Landowners, with
an accompanying Retention Guide Table), Memorandum Circular No. 11 dated April 21, 1978,
(Implementation Guidelines of LOI No. 474), Memorandum Circular No. 18-81 dated December
29,1981 (Clarificatory Guidelines on Coverage of P.D. No. 27 and Retention by Small Landowners),
and DAR Administrative Order No. 1, series of 1985 (Providing for a Cut-off Date for Landowners to
Apply for Retention and/or to Protest the Coverage of their Landholdings under Operation Land
Transfer pursuant to P.D. No. 27). For failure to file the corresponding applications for retention
under these measures, the petitioners are now barred from invoking this right.

The public respondent also stresses that the petitioners have prematurely initiated this case
notwithstanding the pendency of their appeal to the President of the Philippines. Moreover, the
issuance of the implementing rules, assuming this has not yet been done, involves the exercise of
discretion which cannot be controlled through the writ of mandamus. This is especially true if this
function is entrusted, as in this case, to a separate department of the government.

In their Reply, the petitioners insist that the above-cited measures are not applicable to them
because they do not own more than seven hectares of agricultural land. Moreover, assuming
arguendo that the rules were intended to cover them also, the said measures are nevertheless not in
force because they have not been published as required by law and the ruling of this Court
in Tanada v. Tuvera.10 As for LOI 474, the same is ineffective for the additional reason that a mere
letter of instruction could not have repealed the presidential decree.

Although holding neither purse nor sword and so regarded as the weakest of the three departments
of the government, the judiciary is nonetheless vested with the power to annul the acts of either the
legislative or the executive or of both when not conformable to the fundamental law. This is the
reason for what some quarters call the doctrine of judicial supremacy. Even so, this power is not
lightly assumed or readily exercised. The doctrine of separation of powers imposes upon the courts
a proper restraint, born of the nature of their functions and of their respect for the other departments,
in striking down the acts of the legislative and the executive as unconstitutional. The policy, indeed,
is a blend of courtesy and caution. To doubt is to sustain. The theory is that before the act was done
or the law was enacted, earnest studies were made by Congress or the President, or both, to insure
that the Constitution would not be breached.

In addition, the Constitution itself lays down stringent conditions for a declaration of
unconstitutionality, requiring therefor the concurrence of a majority of the members of the Supreme
Court who took part in the deliberations and voted on the issue during their session en banc.11 And
as established by judge made doctrine, the 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. 12

With particular regard to the requirement of proper party as applied in the cases before us, we hold
that the same is satisfied by the petitioners and intervenors because each of them has sustained or
is in danger of sustaining an immediate injury as a result of the acts or measures complained
of. 13 And even if, strictly speaking, they are not covered by the definition, it is still within the wide
discretion of the Court to waive the requirement and so remove the impediment to its addressing and
resolving the serious constitutional questions raised.

In the first Emergency Powers Cases, 14 ordinary citizens and taxpayers were allowed to question the
constitutionality of several executive orders issued by President Quirino although they were invoking
only an indirect and general interest shared in common with the public. The Court dismissed the
objection that they were not proper parties and ruled that "the transcendental importance to the
public of these cases demands that they be settled promptly and definitely, brushing aside, if we
must, technicalities of procedure." We have since then applied this exception in many other cases. 15

The other above-mentioned requisites have also been met in the present petitions.

In must be stressed that despite the inhibitions pressing upon the Court when confronted with
constitutional issues like the ones now before it, 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 as God and its conscience give it the light to probe its meaning and discover its
purpose. Personal motives and political considerations are irrelevancies that cannot influence its
decision. Blandishment is as ineffectual as intimidation.

For all the awesome power of the Congress and the Executive, the Court will not hesitate to "make
the hammer fall, and heavily," to use Justice Laurel's pithy language, where the acts of these
departments, or of any public official, betray the people's will as expressed in the Constitution.

It need only be added, to borrow again the words of Justice Laurel, that —

... when the judiciary mediates to allocate constitutional boundaries, it does not
assert any superiority over the other departments; it does not in reality nullify or
invalidate an act of the Legislature, but only asserts the solemn and sacred obligation
assigned to it by the Constitution to determine conflicting claims of authority under
the Constitution and to establish for the parties in an actual controversy the rights
which that instrument secures and guarantees to them. This is in truth all that is
involved in what is termed "judicial supremacy" which properly is the power of judicial
review under the Constitution. 16
The cases before us categorically raise constitutional questions that this Court must categorically
resolve. And so we shall.

II

We proceed first to the examination of the preliminary issues before resolving the more serious
challenges to the constitutionality of the several measures involved in these petitions.

The promulgation of P.D. No. 27 by President Marcos in the exercise of his powers under martial law
has already been sustained in Gonzales v. Estrella and we find no reason to modify or reverse it on
that issue. As for the power of President Aquino to promulgate Proc. No. 131 and E.O. Nos. 228 and
229, the same was authorized under Section 6 of the Transitory Provisions of the 1987 Constitution,
quoted above.

The said measures were issued by President Aquino before July 27, 1987, when the Congress of
the Philippines was formally convened and took over legislative power from her. They are not
"midnight" enactments intended to pre-empt the legislature because E.O. No. 228 was issued on
July 17, 1987, and the other measures, i.e., Proc. No. 131 and E.O. No. 229, were both issued on
July 22, 1987. Neither is it correct to say that these measures ceased to be valid when she lost her
legislative power for, like any statute, they continue to be in force unless modified or repealed by
subsequent law or declared invalid by the courts. A statute does not ipso facto become inoperative
simply because of the dissolution of the legislature that enacted it. By the same token, President
Aquino's loss of legislative power did not have the effect of invalidating all the measures enacted by
her when and as long as she possessed it.

Significantly, the Congress she is alleged to have undercut has not rejected but in fact substantially
affirmed the challenged measures and has specifically provided that they shall be suppletory to R.A.
No. 6657 whenever not inconsistent with its provisions. 17 Indeed, some portions of the said
measures, like the creation of the P50 billion fund in Section 2 of Proc. No. 131, and Sections 20 and
21 of E.O. No. 229, have been incorporated by reference in the CARP Law. 18

That fund, as earlier noted, is itself being questioned on the ground that it does not conform to the
requirements of a valid appropriation as specified in the Constitution. Clearly, however, Proc. No.
131 is not an appropriation measure even if it does provide for the creation of said fund, for that is
not its principal purpose. An appropriation law is one the primary and specific purpose of which is to
authorize the release of public funds from the treasury. 19 The creation of the fund is only incidental to
the main objective of the proclamation, which is agrarian reform.

It should follow that the specific constitutional provisions invoked, to wit, Section 24 and Section
25(4) of Article VI, are not applicable. With particular reference to Section 24, this obviously could
not have been complied with for the simple reason that the House of Representatives, which now
has the exclusive power to initiate appropriation measures, had not yet been convened when the
proclamation was issued. The legislative power was then solely vested in the President of the
Philippines, who embodied, as it were, both houses of Congress.

The argument of some of the petitioners that Proc. No. 131 and E.O. No. 229 should be invalidated
because they do not provide for retention limits as required by Article XIII, Section 4 of the
Constitution is no longer tenable. R.A. No. 6657 does provide for such limits now in Section 6 of the
law, which in fact is one of its most controversial provisions. This section declares:

Retention Limits. — Except as otherwise provided in this Act, no person may own or
retain, directly or indirectly, any public or private agricultural land, the size of which
 shall vary according to factors governing a viable family-sized farm, such as
commodity produced, terrain, infrastructure, and soil fertility as determined by the
Presidential Agrarian Reform Council (PARC) created hereunder, but in no case
shall retention by the landowner exceed five (5) hectares. Three (3) hectares may be
awarded to each child of the landowner, subject to the following qualifications: (1)
that he is at least fifteen (15) years of age; and (2) that he is actually tilling the land or
directly managing the farm; Provided, That landowners whose lands have been
covered by Presidential Decree No. 27 shall be allowed to keep the area originally
retained by them thereunder, further, That original homestead grantees or direct
compulsory heirs who still own the original homestead at the time of the approval of
this Act shall retain the same areas as long as they continue to cultivate said
homestead.

The argument that E.O. No. 229 violates the constitutional requirement that a bill shall have only one
subject, to be expressed in its title, deserves only short attention. It is settled that the title of the bill
does not have to be a catalogue of its contents and will suffice if the matters embodied in the text are
relevant to each other and may be inferred from the title. 20

The Court wryly observes that during the past dictatorship, every presidential issuance, by whatever
name it was called, had the force and effect of law because it came from President Marcos. Such
are the ways of despots. Hence, it is futile to argue, as the petitioners do in G.R. No. 79744, that LOI
474 could not have repealed P.D. No. 27 because the former was only a letter of instruction. The
important thing is that it was issued by President Marcos, whose word was law during that time.

But for all their peremptoriness, these issuances from the President Marcos still had to comply with
the requirement for publication as this Court held in Tanada v. Tuvera. 21 Hence, unless published in
the Official Gazette in accordance with Article 2 of the Civil Code, they could not have any force and
effect if they were among those enactments successfully challenged in that case. LOI 474 was
published, though, in the Official Gazette dated November 29,1976.)

Finally, there is the contention of the public respondent in G.R. No. 78742 that the writ of mandamus
cannot issue to compel the performance of a discretionary act, especially by a specific department of
the government. That is true as a general proposition but is subject to one important qualification.
Correctly and categorically stated, the rule is that mandamus will lie to compel the discharge of the
discretionary duty itself but not to control the discretion to be exercised. In other words, mandamus
can issue to require action only but not specific action.

Whenever a duty is imposed upon a public official and an unnecessary and

unreasonable delay in the exercise of such duty occurs, if it is a clear duty imposed
by law, the courts will intervene by the extraordinary legal remedy of mandamus to
compel action. If the duty is purely ministerial, the courts will require specific action. If
the duty is purely discretionary, the courts by mandamus will require action only. For
example, if an inferior court, public official, or board should, for an unreasonable
length of time, fail to decide a particular question to the great detriment of all parties
concerned, or a court should refuse to take jurisdiction of a cause when the law
clearly gave it jurisdiction mandamus will issue, in the first case to require a decision,
and in the second to require that jurisdiction be taken of the cause. 22

And while it is true that as a rule the writ will not be proper as long as there is still a plain, speedy
and adequate remedy available from the administrative authorities, resort to the courts may still be
permitted if the issue raised is a question of law. 23
III

There are traditional distinctions between the police power and the power of eminent domain that
logically preclude the application of both powers at the same time on the same subject. In the case
of City of Baguio v. NAWASA, 24for example, where a law required the transfer of all municipal
waterworks systems to the NAWASA in exchange for its assets of equivalent value, the Court held
that the power being exercised was eminent domain because the property involved was wholesome
and intended for a public use. Property condemned under the police power is noxious or intended for
a noxious purpose, such as a building on the verge of collapse, which should be demolished for the
public safety, or obscene materials, which should be destroyed in the interest of public morals. The
confiscation of such property is not compensable, unlike the taking of property under the power of
expropriation, which requires the payment of just compensation to the owner.

In the case of Pennsylvania Coal Co. v. Mahon, 25 Justice Holmes laid down the limits of the police
power in a famous aphorism: "The general rule at least is that while property may be regulated to a
certain extent, if regulation goes too far it will be recognized as a taking." The regulation that went
"too far" was a law prohibiting mining which might cause the subsidence of structures for human
habitation constructed on the land surface. This was resisted by a coal company which had earlier
granted a deed to the land over its mine but reserved all mining rights thereunder, with the grantee
assuming all risks and waiving any damage claim. The Court held the law could not be sustained
without compensating the grantor. Justice Brandeis filed a lone dissent in which he argued that there
was a valid exercise of the police power. He said:

Every restriction upon the use of property imposed in the exercise of the police
power deprives the owner of some right theretofore enjoyed, and is, in that sense, an
abridgment by the State of rights in property without making compensation. But
restriction imposed to protect the public health, safety or morals from dangers
threatened is not a taking. The restriction here in question is merely the prohibition of
a noxious use. The property so restricted remains in the possession of its owner. The
state does not appropriate it or make any use of it. The state merely prevents the
owner from making a use which interferes with paramount rights of the public.
Whenever the use prohibited ceases to be noxious — as it may because of further
changes in local or social conditions — the restriction will have to be removed and
the owner will again be free to enjoy his property as heretofore.

Recent trends, however, would indicate not a polarization but a mingling of the police power and the
power of eminent domain, with the latter being used as an implement of the former like the power of
taxation. The employment of the taxing power to achieve a police purpose has long been
accepted. 26 As for the power of expropriation, Prof. John J. Costonis of the University of Illinois
College of Law (referring to the earlier case of Euclid v. Ambler Realty Co., 272 US 365, which
sustained a zoning law under the police power) makes the following significant remarks:

Euclid, moreover, was decided in an era when judges located the Police and eminent
domain powers on different planets. Generally speaking, they viewed eminent
domain as encompassing public acquisition of private property for improvements that
would be available for public use," literally construed. To the police power, on the
other hand, they assigned the less intrusive task of preventing harmful externalities a
point reflected in the Euclid opinion's reliance on an analogy to nuisance law to
bolster its support of zoning. So long as suppression of a privately authored harm
bore a plausible relation to some legitimate "public purpose," the pertinent measure
need have afforded no compensation whatever. With the progressive growth of
government's involvement in land use, the distance between the two powers has
 contracted considerably. Today government often employs eminent domain
interchangeably with or as a useful complement to the police power-- a trend
expressly approved in the Supreme Court's 1954 decision in Berman v. Parker,
which broadened the reach of eminent domain's "public use" test to match that of the
police power's standard of "public purpose." 27

The Berman case sustained a redevelopment project and the improvement of blighted areas in the
District of Columbia as a proper exercise of the police power. On the role of eminent domain in the
attainment of this purpose, Justice Douglas declared:

If those who govern the District of Columbia decide that the Nation's Capital should
be beautiful as well as sanitary, there is nothing in the Fifth Amendment that stands
in the way.

Once the object is within the authority of Congress, the right to realize it through the
exercise of eminent domain is clear.

For the power of eminent domain is merely the means to the end. 28

In Penn Central Transportation Co. v. New York City, 29 decided by a 6-3 vote in 1978, the U.S
Supreme Court sustained the respondent's Landmarks Preservation Law under which the owners of
the Grand Central Terminal had not been allowed to construct a multi-story office building over the
Terminal, which had been designated a historic landmark. Preservation of the landmark was held to
be a valid objective of the police power. The problem, however, was that the owners of the Terminal
would be deprived of the right to use the airspace above it although other landowners in the area
could do so over their respective properties. While insisting that there was here no taking, the Court
nonetheless recognized certain compensatory rights accruing to Grand Central Terminal which it
said would "undoubtedly mitigate" the loss caused by the regulation. This "fair compensation," as he
called it, was explained by Prof. Costonis in this wise:

In return for retaining the Terminal site in its pristine landmark status, Penn Central was authorized
to transfer to neighboring properties the authorized but unused rights accruing to the site prior to the
Terminal's designation as a landmark — the rights which would have been exhausted by the 59-
story building that the city refused to countenance atop the Terminal. Prevailing bulk restrictions on
neighboring sites were proportionately relaxed, theoretically enabling Penn Central to recoup its
losses at the Terminal site by constructing or selling to others the right to construct larger, hence
more profitable buildings on the transferee sites. 30

The cases before us present no knotty complication insofar as the question of compensable taking is
concerned. To the extent that the measures under challenge merely prescribe retention limits for
landowners, there is an exercise of the police power for the regulation of private property in
accordance with the Constitution. But where, to carry out such regulation, it becomes necessary to
deprive such owners of whatever lands they may own in excess of the maximum area allowed, there
is definitely a taking under the power of eminent domain for which payment of just compensation is
imperative. 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 the physical possession of the said excess and all beneficial rights
accruing to the owner in favor of the farmer-beneficiary. This is definitely an exercise not of the
police power but of the power of eminent domain.

Whether as an exercise of the police power or of the power of eminent domain, the several
measures before us are challenged as violative of the due process and equal protection clauses.
The challenge to Proc. No. 131 and E.O. Nos. 228 and 299 on the ground that no retention limits are
prescribed has already been discussed and dismissed. It is noted that although they excited many
bitter exchanges during the deliberation of the CARP Law in Congress, the retention limits finally
agreed upon are, curiously enough, not being questioned in these petitions. We therefore do not
discuss them here. The Court will come to the other claimed violations of due process in connection
with our examination of the adequacy of just compensation as required under the power of
expropriation.

The argument of the small farmers that they have been denied equal protection because of the
absence of retention limits has also become academic under Section 6 of R.A. No. 6657.
Significantly, they too have not questioned the area of such limits. There is also the complaint that
they should not be made to share the burden of agrarian reform, an objection also made by the
sugar planters on the ground that they belong to a particular class with particular interests of their
own. However, no evidence has been submitted to the Court that the requisites of a valid
classification have been violated.

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. 31 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. 32 The Court finds that all these requisites have been met by
the measures here challenged as arbitrary and discriminatory.

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. 33 The petitioners 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.

It is worth remarking at this juncture that a statute may be sustained under the police power only if
there is a concurrence of the lawful subject and the lawful method. Put otherwise, the interests of the
public generally as distinguished from those of a particular class require the interference of the State
and, no less important, the means employed are reasonably necessary for the attainment of the
purpose sought to be achieved and not unduly oppressive upon individuals. 34 As the subject and
purpose of agrarian reform have been laid down by the Constitution itself, we may say that the first
requirement has been satisfied. What remains to be examined is the validity of the method employed
to achieve the constitutional goal.

One of the basic principles of the democratic system is that where the rights of the individual are
concerned, the end does not justify the means. It is not enough that there be a valid objective; it is
also necessary that the means employed to pursue it be in keeping with the Constitution. Mere
expediency will not excuse constitutional shortcuts. There is no question that not even the strongest
moral conviction or the most urgent public need, subject only to a few notable exceptions, will
excuse the bypassing of an individual's rights. It is no exaggeration to say that a, person invoking a
right guaranteed under Article III of the Constitution is a majority of one even as against the rest of
the nation who would deny him that right.
That right covers the person's life, his liberty and his property under Section 1 of Article III of the
Constitution. With regard to his property, the owner enjoys the added protection of Section 9, which
reaffirms the familiar rule that private property shall not be taken for public use without just
compensation.

This brings us now to the power of eminent domain.

IV

Eminent domain is an inherent power of the State that enables it to forcibly acquire
private lands intended for public use upon payment of just compensation to the
owner. Obviously, there is no need to expropriate where the owner is willing to sell
under terms also acceptable to the purchaser, in which case an ordinary deed of sale
may be agreed upon by the parties. 35 It is only where the owner is unwilling to sell, or
cannot accept the price or other conditions offered by the vendee, that the power of
eminent domain will come into play to assert the paramount authority of the State
over the interests of the property owner. Private rights must then yield to the
irresistible demands of the public interest on the time-honored justification, as in the
case of the police power, that the welfare of the people is the supreme law.

But for all its primacy and urgency, the power of expropriation is by no means absolute (as indeed
no power is absolute). The limitation is found in the constitutional injunction that "private property
shall not be taken for public use without just compensation" and in the abundant jurisprudence that
has evolved from the interpretation of this principle. Basically, the requirements for a proper exercise
of the power are: (1) public use and (2) just compensation.

Let us dispose first of the argument raised by the petitioners in G.R. No. 79310 that the State should
first distribute public agricultural lands in the pursuit of agrarian reform instead of immediately
disturbing property rights by forcibly acquiring private agricultural lands. Parenthetically, it is not
correct to say that only public agricultural lands may be covered by the CARP as the Constitution
calls for "the just distribution of all agricultural lands." In any event, the decision to redistribute private
agricultural lands in the manner prescribed by the CARP was made by the legislative and executive
departments in the exercise of their discretion. We are not justified in reviewing that discretion in the
absence of a clear showing that it has been abused.

A becoming courtesy admonishes us to respect the decisions of the political departments when they
decide what is known as the political question. As explained by Chief Justice Concepcion in the case
of Tañada v. Cuenco: 36

The term "political question" connotes what it means in ordinary parlance, namely, a
question of policy. It refers to "those questions which, under the Constitution, are to
be decided by the people in their sovereign capacity; or in regard to which full
discretionary authority has been delegated to the legislative or executive branch of
the government." It is concerned with issues dependent upon the wisdom, not
legality, of a particular measure.

It is true that the concept of the political question has been constricted with the enlargement of
judicial power, which now includes the authority of the courts "to determine whether or not there has
been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any
branch or instrumentality of the Government." 37 Even so, this should not be construed as a license
for us to reverse the other departments simply because their views may not coincide with ours.
The legislature and the executive have been seen fit, in their wisdom, to include in the CARP the
redistribution of private landholdings (even as the distribution of public agricultural lands is first
provided for, while also continuing apace under the Public Land Act and other cognate laws). The
Court sees no justification to interpose its authority, which we may assert only if we believe that the
political decision is not unwise, but illegal. We do not find it to be so.

In U.S. v. Chandler-Dunbar Water Power Company,38 it was held:

Congress having determined, as it did by the Act of March 3,1909 that the entire St.
Mary's river between the American bank and the international line, as well as all of
the upland north of the present ship canal, throughout its entire length, was
"necessary for the purpose of navigation of said waters, and the waters connected
therewith," that determination is conclusive in condemnation proceedings instituted
by the United States under that Act, and there is no room for judicial review of the
judgment of Congress ... .

As earlier observed, the requirement for public use has already been settled for us by the
Constitution itself No less than the 1987 Charter calls for agrarian reform, which is the reason why
private agricultural lands are to be taken from their owners, subject to the prescribed maximum
retention limits. The purposes specified in P.D. No. 27, Proc. No. 131 and R.A. No. 6657 are only an
elaboration of the constitutional injunction that the State adopt the necessary measures "to
encourage and undertake the just distribution of all agricultural lands to enable farmers who are
landless to own directly or collectively the lands they till." That public use, as pronounced by the
fundamental law itself, must be binding on us.

The second requirement, i.e., the payment of just compensation, needs a longer and more
thoughtful examination.

Just compensation is defined as the full and fair equivalent of the property taken from its owner by
the expropriator. 39 It has been repeatedly stressed by this Court that the measure is not the taker's
gain but the owner's loss. 40 The word "just" is used to intensify the meaning of the word
"compensation" to convey the idea that the equivalent to be rendered for the property to be taken
shall be real, substantial, full, ample. 41

It bears repeating that the measures challenged in these petitions contemplate more than a mere
regulation of the use of private lands under the police power. We deal here with an actual taking of
private agricultural lands that has dispossessed the owners of their property and deprived them of all
its beneficial use and enjoyment, to entitle them to the just compensation mandated by the
Constitution.

As held in Republic of the Philippines v. Castellvi, 42 there is compensable taking when the following
conditions concur: (1) the expropriator must enter a private property; (2) the entry must be for more
than a momentary period; (3) the entry must be under warrant or color of legal authority; (4) the
property must be devoted to public use or otherwise informally appropriated or injuriously affected;
and (5) the utilization of the property for public use must be in such a way as to oust the owner and
deprive him of beneficial enjoyment of the property. All these requisites are envisioned in the
measures before us.

Where the State itself is the expropriator, it is not necessary for it to make a deposit upon its taking
possession of the condemned property, as "the compensation is a public charge, the good faith of
the public is pledged for its payment, and all the resources of taxation may be employed in raising
the amount." 43 Nevertheless, Section 16(e) of the CARP Law provides that:
 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.

Objection is raised, however, to the manner of fixing the just compensation, which it is claimed is
entrusted to the administrative authorities in violation of judicial prerogatives. Specific reference is
made to Section 16(d), which provides that in case of the rejection or disregard by the owner of the
offer of the government to buy his land-

... the DAR shall conduct summary administrative proceedings to determine the
compensation for the land by 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 the 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.

To be sure, the determination of just compensation is a function addressed to the courts of justice
and may not be usurped by any other branch or official of the government. EPZA v. Dulay 44 resolved
a challenge to several decrees promulgated by President Marcos providing that the just
compensation for property under expropriation should be either the assessment of the property by
the government or the sworn valuation thereof by the owner, whichever was lower. In declaring
these decrees unconstitutional, the Court held through Mr. Justice Hugo E. Gutierrez, Jr.:

The method of ascertaining just compensation under the aforecited decrees

constitutes impermissible encroachment on judicial prerogatives. It tends to render
this Court inutile in a matter which under this Constitution is reserved to it for final
determination.

Thus, although in an expropriation proceeding the court technically would still have
the power to determine the just compensation for the property, following the
applicable decrees, its task would be relegated to simply stating the lower value of
the property as declared either by the owner or the assessor. As a necessary
consequence, it would be useless for the court to appoint commissioners under Rule
67 of the Rules of Court. Moreover, the need to satisfy the due process clause in the
taking of private property is seemingly fulfilled since it cannot be said that a judicial
proceeding was not had before the actual taking. However, the strict application of
the decrees during the proceedings would be nothing short of a mere formality or
charade as the court has only to choose between the valuation of the owner and that
of the assessor, and its choice is always limited to the lower of the two. The court
cannot exercise its discretion or independence in determining what is just or fair.
Even a grade school pupil could substitute for the judge insofar as the determination
of constitutional just compensation is concerned.

xxx

In the present petition, we are once again confronted with the same question of
whether the courts under P.D. No. 1533, which contains the same provision on just
compensation as its predecessor decrees, still have the power and authority to
 determine just compensation, independent of what is stated by the decree and to this
effect, to appoint commissioners for such purpose.

This time, we answer in the affirmative.

xxx

It is violative of due process to deny the owner the opportunity to prove that the
valuation in the tax documents is unfair or wrong. And it is repulsive to the basic
concepts of justice and fairness to allow the haphazard work of a minor bureaucrat or
clerk to absolutely prevail over the judgment of a court promulgated only after expert
commissioners have actually viewed the property, after evidence and arguments pro
and con have been presented, and after all factors and considerations essential to a
fair and just determination have been judiciously evaluated.

A reading of the aforecited Section 16(d) will readily show that it does not suffer from the
arbitrariness that rendered the challenged decrees constitutionally objectionable. Although the
proceedings are described as summary, the landowner and other interested parties are nevertheless
allowed an opportunity to submit evidence on the real value of the property. But more importantly,
the determination of the just compensation by the DAR is not by any means final and conclusive
upon the landowner or any other interested party, for Section 16(f) clearly provides:

Any party who disagrees with the decision may bring the matter to the court of proper
jurisdiction for final determination of just compensation.

The determination made by the DAR is only preliminary unless accepted by all parties concerned.
Otherwise, the courts of justice will still have the right to review with finality the said determination in
the exercise of what is admittedly a judicial function.

The second and more serious objection to the provisions on just compensation is not as easily
resolved.

This refers to Section 18 of the CARP Law providing in full as follows:

SEC. 18. Valuation and Mode of Compensation. — The LBP shall compensate the
landowner in such amount as may be agreed upon by the landowner and the DAR
and the LBP, in accordance with the criteria provided for in Sections 16 and 17, and
other pertinent provisions hereof, or as may be finally determined by the court, as the
just compensation for the land.

The compensation shall be paid in one of the following modes, at the option of the
landowner:

(1) Cash payment, under the following terms and conditions:

(a) For lands above fifty (50) hectares, insofar as the

excess hectarage is concerned — Twenty-five
percent (25%) cash, the balance to be paid in
government financial instruments negotiable at any
time.
 (b) For lands above twenty-four (24) hectares and up
to fifty (50) hectares — Thirty percent (30%) cash, the
balance to be paid in government financial
instruments negotiable at any time.

(c) For lands twenty-four (24) hectares and below —

Thirty-five percent (35%) cash, the balance to be paid
in government financial instruments negotiable at any
time.

(2) Shares of stock in government-owned or controlled corporations, LBP preferred

shares, physical assets or other qualified investments in accordance with guidelines
set by the PARC;

(3) Tax credits which can be used against any tax liability;

(4) LBP bonds, which shall have the following features:

(a) Market interest rates aligned with 91-day treasury

bill rates. Ten percent (10%) of the face value of the
bonds shall mature every year from the date of
issuance until the tenth (10th) year: Provided, That
should the landowner choose to forego the cash
portion, whether in full or in part, he shall be paid
correspondingly in LBP bonds;

(b) Transferability and negotiability. Such LBP bonds

may be used by the landowner, his successors-in-
interest or his assigns, up to the amount of their face
value, for any of the following:

(i) Acquisition of land or other real properties of the

government, including assets under the Asset
Privatization Program and other assets foreclosed by
government financial institutions in the same province
or region where the lands for which the bonds were
paid are situated;

(ii) Acquisition of shares of stock of government-

owned or controlled corporations or shares of stock
owned by the government in private corporations;

(iii) Substitution for surety or bail bonds for the

provisional release of accused persons, or for
performance bonds;

(iv) Security for loans with any government financial

institution, provided the proceeds of the loans shall be
invested in an economic enterprise, preferably in a
small and medium- scale industry, in the same
province or region as the land for which the bonds are
paid;
 (v) Payment for various taxes and fees to
government: Provided, That the use of these bonds
for these purposes will be limited to a certain
percentage of the outstanding balance of the financial
instruments; Provided, further, That the PARC shall
determine the percentages mentioned above;

(vi) Payment for tuition fees of the immediate family of

the original bondholder in government universities,
colleges, trade schools, and other institutions;

(vii) Payment for fees of the immediate family of the

original bondholder in government hospitals; and

(viii) Such other uses as the PARC may from time to

time allow.

The contention of the petitioners in G.R. No. 79777 is that the above provision is unconstitutional
insofar as it requires the owners of the expropriated properties to accept just compensation therefor
in less than money, which is the only medium of payment allowed. In support of this contention, they
cite jurisprudence holding that:

The fundamental rule in expropriation matters is that the owner of the property
expropriated is entitled to a just compensation, which should be neither more nor
less, whenever it is possible to make the assessment, than the money equivalent of
said property. Just compensation has always been understood to be the just and
complete equivalent of the loss which the owner of the thing expropriated has to
suffer by reason of the expropriation . 45 (Emphasis supplied.)

In J.M. Tuazon Co. v. Land Tenure Administration, 46 this Court held:

It is well-settled that just compensation means the equivalent for the value of the
property at the time of its taking. Anything beyond that is more, and anything short of
that is less, than just compensation. It means a fair and full equivalent for the loss
sustained, which is the measure of the indemnity, not whatever gain would accrue to
the expropriating entity. The market value of the land taken is the just compensation
to which the owner of condemned property is entitled, the market value being that
sum of money which a person desirous, but not compelled to buy, and an owner,
willing, but not compelled to sell, would agree on as a price to be given and received
for such property. (Emphasis supplied.)

In the United States, where much of our jurisprudence on the subject has been derived, the weight
of authority is also to the effect that just compensation for property expropriated is payable only in
money and not otherwise. Thus —

The medium of payment of compensation is ready money or cash. The condemnor

cannot compel the owner to accept anything but money, nor can the owner compel
or require the condemnor to pay him on any other basis than the value of the
property in money at the time and in the manner prescribed by the Constitution and
the statutes. When the power of eminent domain is resorted to, there must be a
standard medium of payment, binding upon both parties, and the law has fixed that
standard as money in cash. 47 (Emphasis supplied.)
 Part cash and deferred payments are not and cannot, in the nature of things, be
regarded as a reliable and constant standard of compensation. 48

"Just compensation" for property taken by condemnation means a fair equivalent in

money, which must be paid at least within a reasonable time after the taking, and it is
not within the power of the Legislature to substitute for such payment future
obligations, bonds, or other valuable advantage. 49(Emphasis supplied.)

It cannot be denied from these cases that the traditional medium for the payment of just
compensation is money and no other. And so, conformably, has just compensation been paid in the
past solely in that medium. However, we do not deal here with the traditional excercise of the power
of eminent domain. This is not an ordinary expropriation where only a specific property of relatively
limited area is sought to be taken by the State from its owner for a specific and perhaps local
purpose.

What we deal with here is a revolutionary kind of expropriation.

The expropriation before us affects all private agricultural lands whenever found and of whatever
kind as long as they are in excess of the maximum retention limits allowed their owners. This kind of
expropriation is intended for the benefit not only of a particular community or of a small segment of
the population but of the entire Filipino nation, from all levels of our society, from the impoverished
farmer to the land-glutted owner. Its purpose does not cover only the whole territory of this country
but goes beyond in time to the foreseeable future, which it hopes to secure and edify with the vision
and the sacrifice of the present generation of Filipinos. Generations yet to come are as involved in
this program as we are today, although hopefully only as beneficiaries of a richer and more fulfilling
life we will guarantee to them tomorrow through our thoughtfulness today. And, finally, let it not be
forgotten that it is no less than the Constitution itself that has ordained this revolution in the farms,
calling for "a just distribution" among the farmers of lands that have heretofore been the prison of
their dreams but can now become the key at least to their deliverance.

Such a program will involve not mere millions of pesos. The cost will be tremendous. Considering
the vast areas of land subject to expropriation under the laws before us, we estimate that hundreds
of billions of pesos will be needed, far more indeed than the amount of P50 billion initially
appropriated, which is already staggering as it is by our present standards. Such amount is in fact
not even fully available at this time.

We assume that the framers of the Constitution were aware of this difficulty when they called for
agrarian reform as a top priority project of the government. It is a part of this assumption that when
they envisioned the expropriation that would be needed, they also intended that the just
compensation would have to be paid not in the orthodox way but a less conventional if more
practical method. There can be no doubt that they were aware of the financial limitations of the
government and had no illusions that there would be enough money to pay in cash and in full for the
lands they wanted to be distributed among the farmers. We may therefore assume that their
intention was to allow such manner of payment as is now provided for by the CARP Law, particularly
the payment of the balance (if the owner cannot be paid fully with money), or indeed of the entire
amount of the just compensation, with other things of value. We may also suppose that what they
had in mind was a similar scheme of payment as that prescribed in P.D. No. 27, which was the law
in force at the time they deliberated on the new Charter and with which they presumably agreed in
principle.

The Court has not found in the records of the Constitutional Commission any categorical agreement
among the members regarding the meaning to be given the concept of just compensation as applied
to the comprehensive agrarian reform program being contemplated. There was the suggestion to
"fine tune" the requirement to suit the demands of the project even as it was also felt that they should
"leave it to Congress" to determine how payment should be made to the landowner and
reimbursement required from the farmer-beneficiaries. Such innovations as "progressive
compensation" and "State-subsidized compensation" were also proposed. In the end, however, no
special definition of the just compensation for the lands to be expropriated was reached by the
Commission. 50

On the other hand, there is nothing in the records either that militates against the assumptions we
are making of the general sentiments and intention of the members on the content and manner of
the payment to be made to the landowner in the light of the magnitude of the expenditure and the
limitations of the expropriator.

With these assumptions, the Court hereby declares that the content and manner of the just
compensation provided for in the afore- quoted Section 18 of the CARP Law is not violative of the
Constitution. We do not mind admitting that a certain degree of pragmatism has influenced our
decision on this issue, but after all this Court is not a cloistered institution removed from the realities
and demands of society or oblivious to the need for its enhancement. The Court is as acutely
anxious as the rest of our people to see the goal of agrarian reform achieved at last after the
frustrations and deprivations of our peasant masses during all these disappointing decades. We are
aware that invalidation of the said section will result in the nullification of the entire program, killing
the farmer's hopes even as they approach realization and resurrecting the spectre of discontent and
dissent in the restless countryside. That is not in our view the intention of the Constitution, and that is
not what we shall decree today.

Accepting the theory that payment of the just compensation is not always required to be made fully
in money, we find further that the proportion of cash payment to the other things of value constituting
the total payment, as determined on the basis of the areas of the lands expropriated, is not unduly
oppressive upon the landowner. It is noted that the smaller the land, the bigger the payment in
money, primarily because the small landowner will be needing it more than the big landowners, who
can afford a bigger balance in bonds and other things of value. No less importantly, the government
financial instruments making up the balance of the payment are "negotiable at any time." The other
modes, which are likewise available to the landowner at his option, are also not unreasonable
because payment is made in shares of stock, LBP bonds, other properties or assets, tax credits, and
other things of value equivalent to the amount of just compensation.

Admittedly, the compensation contemplated in the law will cause the landowners, big and small, not
a little inconvenience. As already remarked, this cannot be avoided. Nevertheless, it is devoutly
hoped that these countrymen of ours, conscious as we know they are of the need for their
forebearance and even sacrifice, will not begrudge us their indispensable share in the attainment of
the ideal of agrarian reform. Otherwise, our pursuit of this elusive goal will be like the quest for the
Holy Grail.

The complaint against the effects of non-registration of the land under E.O. No. 229 does not seem
to be viable any more as it appears that Section 4 of the said Order has been superseded by Section
14 of the CARP Law. This repeats the requisites of registration as embodied in the earlier measure
but does not provide, as the latter did, that in case of failure or refusal to register the land, the
valuation thereof shall be that given by the provincial or city assessor for tax purposes. On the
contrary, the CARP Law says that the just compensation shall be ascertained on the basis of the
factors mentioned in its Section 17 and in the manner provided for in Section 16.
The last major challenge to CARP is that the landowner is divested of his property even before
actual payment to him in full of just compensation, in contravention of a well- accepted principle of
eminent domain.

The recognized rule, indeed, is that title to the property expropriated shall pass from the owner to the
expropriator only upon full payment of the just compensation. Jurisprudence on this settled principle
is consistent both here and in other democratic jurisdictions. Thus:

Title to property which is the subject of condemnation proceedings does not vest the condemnor
until the judgment fixing just compensation is entered and paid, but the condemnor's title relates
back to the date on which the petition under the Eminent Domain Act, or the commissioner's report
under the Local Improvement Act, is filed. 51

... although the right to appropriate and use land taken for a canal is complete at the time of entry,
title to the property taken remains in the owner until payment is actually made. 52 (Emphasis
supplied.)

In Kennedy v. Indianapolis, 53 the US Supreme Court cited several cases holding that title to property
does not pass to the condemnor until just compensation had actually been made. In fact, the
decisions appear to be uniformly to this effect. As early as 1838, in Rubottom v. McLure, 54 it was
held that "actual payment to the owner of the condemned property was a condition precedent to the
investment of the title to the property in the State" albeit "not to the appropriation of it to public use."
In Rexford v. Knight, 55 the Court of Appeals of New York said that the construction upon the statutes
was that the fee did not vest in the State until the payment of the compensation although the
authority to enter upon and appropriate the land was complete prior to the payment. Kennedy further
said that "both on principle and authority the rule is ... that the right to enter on and use the property
is complete, as soon as the property is actually appropriated under the authority of law for a public
use, but that the title does not pass from the owner without his consent, until just compensation has
been made to him."

Our own Supreme Court has held in Visayan Refining Co. v. Camus and Paredes, 56 that:

If the laws which we have exhibited or cited in the preceding discussion are
attentively examined it will be apparent that the method of expropriation adopted in
this jurisdiction is such as to afford absolute reassurance that no piece of land can be
finally and irrevocably taken from an unwilling owner until compensation is paid ...
. (Emphasis supplied.)

It is true that P.D. No. 27 expressly ordered the emancipation of tenant-farmer as October 21, 1972
and declared that he shall "be deemed the owner" of a portion of land consisting of a family-sized
farm except that "no title to the land owned by him was to be actually issued to him unless and until
he had become a full-fledged member of a duly recognized farmers' cooperative." It was understood,
however, that full payment of the just compensation also had to be made first, conformably to the
constitutional requirement.

When E.O. No. 228, categorically stated in its Section 1 that:

All qualified farmer-beneficiaries are now deemed full owners as of October 21, 1972
of the land they acquired by virtue of Presidential Decree No. 27. (Emphasis
supplied.)
it was obviously referring to lands already validly acquired under the said decree, after proof of full-
fledged membership in the farmers' cooperatives and full payment of just compensation. Hence, it
was also perfectly proper for the Order to also provide in its Section 2 that the "lease rentals paid to
the landowner by the farmer- beneficiary after October 21, 1972 (pending transfer of ownership after
full payment of just compensation), shall be considered as advance payment for the land."

The CARP Law, for its part, conditions the transfer of possession and ownership of the land to the
government on receipt by 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. 57 No outright change of ownership is contemplated either.

Hence, the argument that the assailed measures violate due process by arbitrarily transferring title
before the land is fully paid for must also be rejected.

It is worth stressing at this point that all rights acquired by the tenant-farmer under P.D. No. 27, as
recognized under E.O. No. 228, are retained by him even now under R.A. No. 6657. This should
counter-balance the express provision in Section 6 of the said law that "the landowners whose lands
have been covered by Presidential Decree No. 27 shall be allowed to keep the area originally
retained by them thereunder, further, That original homestead grantees or direct compulsory heirs
who still own the original homestead at the time of the approval of this Act shall retain the same
areas as long as they continue to cultivate said homestead."

In connection with these retained rights, it does not appear in G.R. No. 78742 that the appeal filed by
the petitioners with the Office of the President has already been resolved. Although we have said
that the doctrine of exhaustion of administrative remedies need not preclude immediate resort to
judicial action, there are factual issues that have yet to be examined on the administrative level,
especially the claim that the petitioners are not covered by LOI 474 because they do not own other
agricultural lands than the subjects of their petition.

Obviously, the Court cannot resolve these issues. In any event, assuming that the petitioners have
not yet exercised their retention rights, if any, under P.D. No. 27, the Court holds that they are
entitled to the new retention rights provided for by R.A. No. 6657, which in fact are on the whole
more liberal than those granted by the decree.

The CARP Law and the other enactments also involved in these cases have been the subject of
bitter attack from those who point to the shortcomings of these measures and ask that they be
scrapped entirely. To be sure, these enactments are less than perfect; indeed, they should be
continuously re-examined and rehoned, that they may be sharper instruments for the better
protection of the farmer's rights. But we have to start somewhere. In the pursuit of agrarian reform,
we do not tread on familiar ground but grope on terrain fraught with pitfalls and expected difficulties.
This is inevitable. The CARP Law is not a tried and tested project. On the contrary, to use Justice
Holmes's words, "it is an experiment, as all life is an experiment," and so we learn as we venture
forward, and, if necessary, by our own mistakes. We cannot expect perfection although we should
strive for it by all means. Meantime, we struggle as best we can in freeing the farmer from the iron
shackles that have unconscionably, and for so long, fettered his soul to the soil.

By the decision we reach today, all major legal obstacles to the comprehensive agrarian reform
program are removed, to clear the way for the true freedom of the farmer. We may now glimpse the
day he will be released not only from want but also from the exploitation and disdain of the past and
from his own feelings of inadequacy and helplessness. At last his servitude will be ended forever. At
last the farm on which he toils will be his farm. It will be his portion of the Mother Earth that will give
him not only the staff of life but also the joy of living. And where once it bred for him only deep
despair, now can he see in it the fruition of his hopes for a more fulfilling future. Now at last can he
banish from his small plot of earth his insecurities and dark resentments and "rebuild in it the music
and the dream."

WHEREFORE, the Court holds as follows:

1. R.A. No. 6657, P.D. No. 27, Proc. No. 131, and E.O. Nos. 228 and 229 are
SUSTAINED against all the constitutional objections raised in the herein petitions.

2. Title to all expropriated properties shall be transferred to the State only upon full
payment of compensation to their respective owners.

3. All rights previously acquired by the tenant- farmers under P.D. No. 27 are
retained and recognized.

4. Landowners who were unable to exercise their rights of retention under P.D. No.
27 shall enjoy the retention rights granted by R.A. No. 6657 under the conditions
therein prescribed.

5. Subject to the above-mentioned rulings all the petitions are DISMISSED, without
pronouncement as to costs.

SO ORDERED.

Fernan, (C.J.), Narvasa, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Gancayco, Padilla, Bidin,
Sarmiento, Cortes, Griño-Aquino, Medialdea and Regalado, JJ., concur.

EN BANC

G.R. No. 171101 July 5, 2011

HACIENDA LUISITA, INCORPORATED, Petitioner,

LUISITA INDUSTRIAL PARK CORPORATION and RIZAL COMMERCIAL BANKING
CORPORATION,Petitioners-in-Intervention,
vs.
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 SUNIGA1 and his
SUPERVISORY GROUP OF THE HACIENDA LUISITA, INC. and WINDSOR
ANDAYA, Respondents.

DECISION

VELASCO, JR., J.:

"Land for the landless," a shibboleth the landed gentry doubtless has received with much misgiving,
if not resistance, even if only the number of agrarian suits filed serves to be the norm. Through the
years, this battle cry and root of discord continues to reflect the seemingly ceaseless discourse on,
and great disparity in, the distribution of land among the people, "dramatizing the increasingly urgent
demand of the dispossessed x x x for a plot of earth as their place in the sun."2 As administrations
and political alignments change, policies advanced, and agrarian reform laws enacted, the latest
being what is considered a comprehensive piece, the face of land reform varies and is masked in
myriads of ways. The stated goal, however, remains the same: clear the way for the true freedom of
the farmer.3

Land reform, or the broader term "agrarian reform," has been a government policy even before the
Commonwealth era. In fact, at the onset of the American regime, initial steps toward land reform
were already taken to address social unrest.4 Then, under the 1935 Constitution, specific provisions
on social justice and expropriation of landed estates for distribution to tenants as a solution to land
ownership and tenancy issues were incorporated.

In 1955, the Land Reform Act (Republic Act No. [RA] 1400) was passed, setting in motion the
expropriation of all tenanted estates.5

On August 8, 1963, the Agricultural Land Reform Code (RA 3844) was enacted,6 abolishing share
tenancy and converting all instances of share tenancy into leasehold tenancy.7 RA 3844 created the
Land Bank of the Philippines (LBP) to provide support in all phases of agrarian reform.

As its major thrust, RA 3844 aimed to create a system of owner-cultivatorship in rice and corn,
supposedly to be accomplished by expropriating lands in excess of 75 hectares for their eventual
resale to tenants. The law, however, had this restricting feature: its operations were confined mainly
to areas in Central Luzon, and its implementation at any level of intensity limited to the pilot project in
Nueva Ecija.8

Subsequently, Congress passed the Code of Agrarian Reform (RA 6389) declaring the entire
country a land reform area, and providing for the automatic conversion of tenancy to leasehold
tenancy in all areas. From 75 hectares, the retention limit was cut down to seven hectares.9

Barely a month after declaring martial law in September 1972, then President Ferdinand Marcos
issued Presidential Decree No. 27 (PD 27) for the "emancipation of the tiller from the bondage of the
soil."10 Based on this issuance, tenant-farmers, depending on the size of the landholding worked on,
can either purchase the land they tilled or shift from share to fixed-rent leasehold tenancy.11 While
touted as "revolutionary," the scope of the agrarian reform program PD 27 enunciated covered only
tenanted, privately-owned rice and corn lands.12

Then came the revolutionary government of then President Corazon C. Aquino and the drafting and
eventual ratification of the 1987 Constitution. Its provisions foreshadowed the establishment of a
legal framework for the formulation of an expansive approach to land reform, affecting all agricultural
lands and covering both tenant-farmers and regular farmworkers.13

So it was that Proclamation No. 131, Series of 1987, was issued instituting a comprehensive
agrarian reform program (CARP) to cover all agricultural lands, regardless of tenurial arrangement
and commodity produced, as provided in the Constitution.

On July 22, 1987, Executive Order No. 229 (EO 229) was issued providing, as its title14 indicates, the
mechanisms for CARP implementation. It created the Presidential Agrarian Reform Council (PARC)
as the highest policy-making body that formulates all policies, rules, and regulations necessary for
the implementation of CARP.

On June 15, 1988, RA 6657 or the Comprehensive Agrarian Reform Law of 1988, also known as
CARL or the CARP Law, took effect, ushering in a new process of land classification, acquisition,
and distribution. As to be expected, RA 6657 met stiff opposition, its validity or some of its provisions
challenged at every possible turn. Association of Small Landowners in the Philippines, Inc. v.
Secretary of Agrarian Reform 15 stated the observation that the assault was inevitable, the CARP
being an untried and untested project, "an experiment [even], as all life is an experiment," the Court
said, borrowing from Justice Holmes.

The Case

In this Petition for Certiorari and Prohibition under Rule 65 with prayer for preliminary injunctive
relief, petitioner Hacienda Luisita, Inc. (HLI) assails and seeks to set aside PARC Resolution No.
2005-32-0116 and Resolution No. 2006-34-0117 issued on December 22, 2005 and May 3, 2006,
respectively, as well as the implementing Notice of Coverage dated January 2, 2006 (Notice of
Coverage).18

The Facts

At the core of the case is Hacienda Luisita de Tarlac (Hacienda Luisita), once a 6,443-hectare mixed
agricultural-industrial-residential expanse straddling several municipalities of Tarlac and owned by
Compañia General de Tabacos de Filipinas (Tabacalera). In 1957, the Spanish owners of
Tabacalera offered to sell Hacienda Luisita as well as their controlling interest in the sugar mill within
the hacienda, the Central Azucarera de Tarlac (CAT), as an indivisible transaction. The Tarlac
Development Corporation (Tadeco), then owned and/or controlled by the Jose Cojuangco, Sr.
Group, was willing to buy. As agreed upon, Tadeco undertook to pay the purchase price for
Hacienda Luisita in pesos, while that for the controlling interest in CAT, in US dollars.19

To facilitate the adverted sale-and-purchase package, the Philippine government, through the then
Central Bank of the Philippines, assisted the buyer to obtain a dollar loan from a US bank.20 Also, the
Government Service Insurance System (GSIS) Board of Trustees extended on November 27, 1957
a PhP 5.911 million loan in favor of Tadeco to pay the peso price component of the sale. One of the
conditions contained in the approving GSIS Resolution No. 3203, as later amended by Resolution
No. 356, Series of 1958, reads as follows:

That the lots comprising the Hacienda Luisita shall be subdivided by the applicant-corporation and
sold at cost to the tenants, should there be any, and whenever conditions should exist warranting
such action under the provisions of the Land Tenure Act;21

As of March 31, 1958, Tadeco had fully paid the purchase price for the acquisition of Hacienda
Luisita and Tabacalera’s interest in CAT.22

The details of the events that happened next involving the hacienda and the political color some of
the parties embossed are of minimal significance to this narration and need no belaboring. Suffice it
to state that on May 7, 1980, the martial law administration filed a suit before the Manila Regional
Trial Court (RTC) against Tadeco, et al., for them to surrender Hacienda Luisita to the then Ministry
of Agrarian Reform (MAR, now the Department of Agrarian Reform [DAR]) so that the land can be
distributed to farmers at cost. Responding, Tadeco or its owners alleged that Hacienda Luisita does
not have tenants, besides which sugar lands––of which the hacienda consisted––are not covered by
existing agrarian reform legislations. As perceived then, the government commenced the case
against Tadeco as a political message to the family of the late Benigno Aquino, Jr.23

Eventually, the Manila RTC rendered judgment ordering Tadeco to surrender Hacienda Luisita to the
MAR. Therefrom, Tadeco appealed to the Court of Appeals (CA).
On March 17, 1988, the Office of the Solicitor General (OSG) moved to withdraw the government’s
case against Tadeco, et al. By Resolution of May 18, 1988, the CA dismissed the case the Marcos
government initially instituted and won against Tadeco, et al. The dismissal action was, however,
made subject to the obtention by Tadeco of the PARC’s approval of a stock distribution plan (SDP)
that must initially be implemented after such approval shall have been secured.24 The appellate court
wrote:

The defendants-appellants x x x filed a motion on April 13, 1988 joining the x x x governmental
agencies concerned in moving for the dismissal of the case subject, however, to the following
conditions embodied in the letter dated April 8, 1988 (Annex 2) of the Secretary of the [DAR] quoted,
as follows:

1. Should TADECO fail to obtain approval of the stock distribution plan for failure to comply
with all the requirements for corporate landowners set forth in the guidelines issued by the
[PARC]: or

2. If such stock distribution plan is approved by PARC, but TADECO fails to initially
implement it.

xxxx

WHEREFORE, the present case on appeal is hereby dismissed without prejudice, and should be
revived if any of the conditions as above set forth is not duly complied with by the TADECO.25

Markedly, Section 10 of EO 22926 allows corporate landowners, as an alternative to the actual land
transfer scheme of CARP, to give qualified beneficiaries the right to purchase shares of stocks of the
corporation under a stock ownership arrangement and/or land-to-share ratio.

Like EO 229, RA 6657, under the latter’s Sec. 31, also provides two (2) alternative modalities, i.e.,
land or stock transfer, pursuant to either of which the corporate landowner can comply with CARP,
but subject to well-defined conditions and timeline requirements. Sec. 31 of RA 6657 provides:

SEC. 31. Corporate Landowners.¾Corporate landowners may voluntarily transfer ownership over
their agricultural landholdings to the Republic of the Philippines pursuant to Section 20 hereof or to
qualified beneficiaries x x x.

Upon certification by the DAR, corporations owning agricultural lands may give their qualified
beneficiaries the right to purchase such proportion of the capital stock of the corporation that
the agricultural land, actually devoted to agricultural activities, bears in relation to the
company’s total assets, under such terms and conditions as may be agreed upon by them. In no
case shall the compensation received by the workers at the time the shares of stocks are distributed
be reduced. x x x

Corporations or associations which voluntarily divest a proportion of their capital stock, equity or
participation in favor of their workers or other qualified beneficiaries under this section shall be
deemed to have complied with the provisions of this Act: Provided, That the following conditions are
complied with:

(a) In order to safeguard the right of beneficiaries who own shares of stocks to dividends and
other financial benefits, the books of the corporation or association shall be subject to
periodic audit by certified public accountants chosen by the beneficiaries;
 (b) Irrespective of the value of their equity in the corporation or association, the beneficiaries
shall be assured of at least one (1) representative in the board of directors, or in a
management or executive committee, if one exists, of the corporation or association;

(c) Any shares acquired by such workers and beneficiaries shall have the same rights and
features as all other shares; and

(d) Any transfer of shares of stocks by the original beneficiaries shall be void ab initio unless
said transaction is in favor of a qualified and registered beneficiary within the same
corporation.

If within two (2) years from the approval of this Act, the [voluntary] 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 added.)

Vis-à-vis the stock distribution aspect of the aforequoted Sec. 31, DAR issued Administrative Order
No. 10, Series of 1988 (DAO 10),27 entitled Guidelines and Procedures for Corporate Landowners
Desiring to Avail Themselves of the Stock Distribution Plan under Section 31 of RA 6657.

From the start, the stock distribution scheme appeared to be Tadeco’s preferred option, for, on
August 23, 1988,28 it organized a spin-off corporation, HLI, as vehicle to facilitate stock acquisition by
the farmworkers. For this purpose, Tadeco assigned and conveyed to HLI the agricultural land
portion (4,915.75 hectares) and other farm-related properties of Hacienda Luisita in exchange for
HLI shares of stock.29

Pedro Cojuangco, Josephine C. Reyes, Teresita C. Lopa, Jose Cojuangco, Jr., and Paz C. Teopaco
were the incorporators of HLI.30

To accommodate the assets transfer from Tadeco to HLI, the latter, with the Securities and
Exchange Commission’s (SEC’s) approval, increased its capital stock on May 10, 1989 from PhP
1,500,000 divided into 1,500,000 shares with a par value of PhP 1/share to PhP 400,000,000 divided
into 400,000,000 shares also with par value of PhP 1/share, 150,000,000 of which were to be issued
only to qualified and registered beneficiaries of the CARP, and the remaining 250,000,000 to any
stockholder of the corporation.31

As appearing in its proposed SDP, the properties and assets of Tadeco contributed to the capital
stock of HLI, as appraised and approved by the SEC, have an aggregate value of PhP 590,554,220,
or after deducting the total liabilities of the farm amounting to PhP 235,422,758, a net value of PhP
355,531,462. This translated to 355,531,462 shares with a par value of PhP 1/share.32

On May 9, 1989, some 93% of the then farmworker-beneficiaries (FWBs) complement of Hacienda
Luisita signified in a referendum their acceptance of the proposed HLI’s Stock Distribution Option
Plan. On May 11, 1989, the Stock Distribution Option Agreement (SDOA), styled as a Memorandum
of Agreement (MOA),33 was entered into by Tadeco, HLI, and the 5,848 qualified FWBs34 and
attested to by then DAR Secretary Philip Juico. The SDOA embodied the basis and mechanics of
the SDP, which would eventually be submitted to the PARC for approval. In the SDOA, the parties
agreed to the following:

1. The percentage of the value of the agricultural land of Hacienda Luisita (P196,630,000.00)
in relation to the total assets (P590,554,220.00) transferred and conveyed to the SECOND
PARTY [HLI] is 33.296% that, under the law, is the proportion of the outstanding capital
 stock of the SECOND PARTY, which is P355,531,462.00 or 355,531,462 shares with a par
value of P1.00 per share, that has to be distributed to the THIRD PARTY [FWBs] under the
stock distribution plan, the said 33.296% thereof being P118,391,976.85 or 118,391,976.85
shares.

2. The qualified beneficiaries of the stock distribution plan shall be the farmworkers who
appear in the annual payroll, inclusive of the permanent and seasonal employees, who are
regularly or periodically employed by the SECOND PARTY.

3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY shall
arrange with the FIRST PARTY [Tadeco] the acquisition and distribution to the THIRD
PARTY 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.

4.The SECOND PARTY shall guarantee to the qualified beneficiaries of the [SDP] that every
year they will receive on top of their regular compensation, an amount that approximates the
equivalent of three (3%) of the total gross sales from the production of the agricultural land,
whether it be in the form of cash dividends or incentive bonuses or both.

5. Even if only a part or fraction of the shares earmarked for distribution will have been
acquired from the FIRST PARTY and distributed to the THIRD PARTY, FIRST PARTY shall
execute at the beginning of each fiscal year an irrevocable proxy, valid and effective for one
(1) year, in favor of the farmworkers appearing as shareholders of the SECOND PARTY at
the start of said year which will empower the THIRD PARTY or their representative to vote in
stockholders’ and board of directors’ meetings of the SECOND PARTY convened during the
year the entire 33.296% of the outstanding capital stock of the SECOND PARTY earmarked
for distribution and thus be able to gain such number of seats in the board of directors of the
SECOND PARTY that the whole 33.296% of the shares subject to distribution will be entitled
to.

6. In addition, the SECOND PARTY shall within a reasonable time subdivide and allocate for
free and without charge among the qualified family-beneficiaries residing in the place where
the agricultural land is situated, 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 barangay
where it actually resides on the date of the execution of this Agreement.

7. This Agreement is entered into by the parties in the spirit of the (C.A.R.P.) of the
government and with the supervision of the [DAR], with the end in view of improving the lot of
the qualified beneficiaries of the [SDP] and obtaining for them greater benefits. (Emphasis
added.)

As may be gleaned from the SDOA, included as part of the distribution plan are: (a) production-
sharing equivalent to three percent (3%) of gross sales from the production of the agricultural land
payable to the FWBs in cash dividends or incentive bonus; and (b) distribution of free homelots of
not more than 240 square meters each to family-beneficiaries. The production-sharing, as the SDP
indicated, is payable "irrespective of whether [HLI] makes money or not," implying that the benefits
do not partake the nature of dividends, as the term is ordinarily understood under corporation law.

While a little bit hard to follow, given that, during the period material, the assigned value of the
agricultural land in the hacienda was PhP 196.63 million, while the total assets of HLI was PhP
590.55 million with net assets of PhP 355.53 million, Tadeco/HLI would admit that the ratio of the
land-to-shares of stock corresponds to 33.3% of the outstanding capital stock of the HLI equivalent
to 118,391,976.85 shares of stock with a par value of PhP 1/share.

Subsequently, HLI submitted to DAR its SDP, designated as "Proposal for Stock Distribution under
C.A.R.P.,"35which was substantially based on the SDOA.

Notably, in a follow-up referendum the DAR conducted on October 14, 1989, 5,117 FWBs, out of
5,315 who participated, opted to receive shares in HLI.36 One hundred thirty-two (132) chose actual
land distribution.37

After a review of the SDP, then DAR Secretary Miriam Defensor-Santiago (Sec. Defensor-Santiago)
addressed a letter dated November 6, 198938 to Pedro S. Cojuangco (Cojuangco), then Tadeco
president, proposing that the SDP be revised, along the following lines:

1. That over the implementation period of the [SDP], [Tadeco]/HLI shall ensure that there will
be no dilution in the shares of stocks of individual [FWBs];

2. That a safeguard shall be provided by [Tadeco]/HLI against the dilution of the percentage
shareholdings of the [FWBs], i.e., that the 33% shareholdings of the [FWBs] will be
maintained at any given time;

3. That the mechanics for distributing the stocks be explicitly stated in the [MOA] signed
between the [Tadeco], HLI and its [FWBs] prior to the implementation of the stock plan;

4. That the stock distribution plan provide for clear and definite terms for determining the
actual number of seats to be allocated for the [FWBs] in the HLI Board;

5. That HLI provide guidelines and a timetable for the distribution of homelots to qualified
[FWBs]; and

6. That the 3% cash dividends mentioned in the [SDP] be expressly provided for [in] the
MOA.

In a letter-reply of November 14, 1989 to Sec. Defensor-Santiago, Tadeco/HLI explained that the
proposed revisions of the SDP are already embodied in both the SDP and MOA.39 Following that
exchange, the PARC, under then Sec. Defensor-Santiago, by Resolution No. 89-12-240 dated
November 21, 1989, approved the SDP of Tadeco/HLI.41

At the time of the SDP approval, HLI had a pool of farmworkers, numbering 6,296, more or less,
composed of permanent, seasonal and casual master list/payroll and non-master list members.

From 1989 to 2005, HLI claimed to have extended the following benefits to the FWBs:

(a) 3 billion pesos (P3,000,000,000) worth of salaries, wages and fringe benefits

(b) 59 million shares of stock distributed for free to the FWBs;

(c) 150 million pesos (P150,000,000) representing 3% of the gross produce;

 (d) 37.5 million pesos (P37,500,000) representing 3% from the sale of 500 hectares of
converted agricultural land of Hacienda Luisita;

(e) 240-square meter homelots distributed for free;

(f) 2.4 million pesos (P2,400,000) representing 3% from the sale of 80 hectares at 80 million
pesos (P80,000,000) for the SCTEX;

(g) Social service benefits, such as but not limited to free hospitalization/medical/maternity
services, old age/death benefits and no interest bearing salary/educational loans and rice
sugar accounts. 42

Two separate groups subsequently contested this claim of HLI.

On August 15, 1995, HLI applied for the conversion of 500 hectares of land of the hacienda from
agricultural to industrial use,43 pursuant to Sec. 65 of RA 6657, providing:

SEC. 65. Conversion of Lands.¾After 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, the DAR, upon application of the beneficiary or the landowner, with due notice to the
affected parties, and subject to existing laws, may authorize the reclassification, or conversion of the
land and its disposition: Provided, That the beneficiary shall have fully paid its obligation.

The application, according to HLI, had the backing of 5,000 or so FWBs, including respondent Rene
Galang, and Jose Julio Suniga, as evidenced by the Manifesto of Support they signed and which
was submitted to the DAR.44After the usual processing, the DAR, thru then Sec. Ernesto Garilao,
approved the application on August 14, 1996, per DAR Conversion Order No. 030601074-764-(95),
Series of 1996,45 subject to payment of three percent (3%) of the gross selling price to the FWBs and
to HLI’s continued compliance with its undertakings under the SDP, among other conditions.

On December 13, 1996, HLI, in exchange for subscription of 12,000,000 shares of stocks of
Centennary Holdings, Inc. (Centennary), ceded 300 hectares of the converted area to the
latter.46 Consequently, HLI’s Transfer Certificate of Title (TCT) No. 28791047 was canceled and TCT
No. 29209148 was issued in the name of Centennary. HLI transferred the remaining 200 hectares
covered by TCT No. 287909 to Luisita Realty Corporation (LRC)49 in two separate transactions in
1997 and 1998, both uniformly involving 100 hectares for PhP 250 million each.50

Centennary, a corporation with an authorized capital stock of PhP 12,100,000 divided into
12,100,000 shares and wholly-owned by HLI, had the following incorporators: Pedro Cojuangco,
Josephine C. Reyes, Teresita C. Lopa, Ernesto G. Teopaco, and Bernardo R. Lahoz.

Subsequently, Centennary sold51 the entire 300 hectares to Luisita Industrial Park Corporation
(LIPCO) for PhP 750 million. The latter acquired it for the purpose of developing an industrial
complex.52 As a result, Centennary’s TCT No. 292091 was canceled to be replaced by TCT No.
31098653 in the name of LIPCO.

From the area covered by TCT No. 310986 was carved out two (2) parcels, for which two (2)
separate titles were issued in the name of LIPCO, specifically: (a) TCT No. 36580054 and (b) TCT
No. 365801,55 covering 180 and four hectares, respectively. TCT No. 310986 was, accordingly,
partially canceled.
Later on, in a Deed of Absolute Assignment dated November 25, 2004, LIPCO transferred the
parcels covered by its TCT Nos. 365800 and 365801 to the Rizal Commercial Banking Corporation
(RCBC) by way of dacion en pago in payment of LIPCO’s PhP 431,695,732.10 loan obligations.
LIPCO’s titles were canceled and new ones, TCT Nos. 391051 and 391052, were issued to RCBC.

Apart from the 500 hectares alluded to, another 80.51 hectares were later detached from the area
coverage of Hacienda Luisita which had been acquired by the government as part of the Subic-
Clark-Tarlac Expressway (SCTEX) complex. In absolute terms, 4,335.75 hectares remained of the
original 4,915 hectares Tadeco ceded to HLI.56

Such, in short, was the state of things when two separate petitions, both undated, reached the DAR
in the latter part of 2003. In the first, denominated as Petition/Protest,57 respondents Jose Julio
Suniga and Windsor Andaya, identifying themselves as head of the Supervisory Group of HLI
(Supervisory Group), and 60 other supervisors sought to revoke the SDOA, alleging that HLI had
failed to give them their dividends and the one percent (1%) share in gross sales, as well as the
thirty-three percent (33%) share in the proceeds of the sale of the converted 500 hectares of land.
They further claimed that their lives have not improved contrary to the promise and rationale for the
adoption of the SDOA. They also cited violations by HLI of the SDOA’s terms.58 They prayed for a
renegotiation of the SDOA, or, in the alternative, its revocation.

Revocation and nullification of the SDOA and the distribution of the lands in the hacienda were the
call in the second petition, styled as Petisyon (Petition).59 The Petisyon was ostensibly filed on
December 4, 2003 by Alyansa ng mga Manggagawang Bukid ng Hacienda Luisita (AMBALA), where
the handwritten name of respondents Rene Galang as "Pangulo AMBALA" and Noel Mallari as "Sec-
Gen. AMBALA"60 appeared. As alleged, the petition was filed on behalf of AMBALA’s members
purportedly composing about 80% of the 5,339 FWBs of Hacienda Luisita.

HLI would eventually answer61 the petition/protest of the Supervisory Group. On the other hand,
HLI’s answer62 to the AMBALA petition was contained in its letter dated January 21, 2005 also filed
with DAR.

Meanwhile, the DAR constituted a Special Task Force to attend to issues relating to the SDP of HLI.
Among other duties, the Special Task Force was mandated to review the terms and conditions of the
SDOA and PARC Resolution No. 89-12-2 relative to HLI’s SDP; evaluate HLI’s compliance reports;
evaluate the merits of the petitions for the revocation of the SDP; conduct ocular inspections or field
investigations; and recommend appropriate remedial measures for approval of the Secretary.63

After investigation and evaluation, the Special Task Force submitted its "Terminal Report: Hacienda
Luisita, Incorporated (HLI) Stock Distribution Plan (SDP) Conflict"64 dated September 22, 2005
(Terminal Report), finding that HLI has not complied with its obligations under RA 6657 despite the
implementation of the SDP.65 The Terminal Report and the Special Task Force’s recommendations
were adopted by then DAR Sec. Nasser Pangandaman (Sec. Pangandaman).66

Subsequently, Sec. Pangandaman recommended to the PARC Executive Committee (Excom) (a)
the recall/revocation of PARC Resolution No. 89-12-2 dated November 21, 1989 approving HLI’s
SDP; and (b) the acquisition of Hacienda Luisita through the compulsory acquisition scheme.
Following review, the PARC Validation Committee favorably endorsed the DAR Secretary’s
recommendation afore-stated.67

On December 22, 2005, the PARC issued the assailed Resolution No. 2005-32-01, disposing as
follows:
NOW, THEREFORE, on motion duly seconded, RESOLVED, as it is HEREBY RESOLVED, to
approve and confirm the recommendation of the PARC Executive Committee adopting in toto the
report of the PARC ExCom Validation Committee affirming the recommendation of the DAR to
recall/revoke the SDO plan of Tarlac Development Corporation/Hacienda Luisita Incorporated.

RESOLVED, further, that the lands subject of the recalled/revoked TDC/HLI SDO plan be forthwith
placed under the compulsory coverage or mandated land acquisition scheme of the [CARP].

APPROVED.68

A copy of Resolution No. 2005-32-01 was served on HLI the following day, December 23, without
any copy of the documents adverted to in the resolution attached. A letter-request dated December
28, 200569 for certified copies of said documents was sent to, but was not acted upon by, the PARC
secretariat.

Therefrom, HLI, on January 2, 2006, sought reconsideration.70 On the same day, the DAR Tarlac
provincial office issued the Notice of Coverage71 which HLI received on January 4, 2006.

Its motion notwithstanding, HLI has filed the instant recourse in light of what it considers as the
DAR’s hasty placing of Hacienda Luisita under CARP even before PARC could rule or even read the
motion for reconsideration.72 As HLI later rued, it "can not know from the above-quoted resolution the
facts and the law upon which it is based."73

PARC would eventually deny HLI’s motion for reconsideration via Resolution No. 2006-34-01 dated
May 3, 2006.

By Resolution of June 14, 2006,74 the Court, acting on HLI’s motion, issued a temporary restraining
order,75enjoining the implementation of Resolution No. 2005-32-01 and the notice of coverage.

On July 13, 2006, the OSG, for public respondents PARC and the DAR, filed its Comment76 on the
petition.

On December 2, 2006, Noel Mallari, impleaded by HLI as respondent in his capacity as "Sec-Gen.
AMBALA," filed his Manifestation and Motion with Comment Attached dated December 4, 2006
(Manifestation and Motion).77 In it, Mallari stated that he has broken away from AMBALA with other
AMBALA ex-members and formed Farmworkers Agrarian Reform Movement, Inc. (FARM).78 Should
this shift in alliance deny him standing, Mallari also prayed that FARM be allowed to intervene.

As events would later develop, Mallari had a parting of ways with other FARM members, particularly
would-be intervenors Renato Lalic, et al. As things stand, Mallari returned to the AMBALA fold,
creating the AMBALA-Noel Mallari faction and leaving Renato Lalic, et al. as the remaining members
of FARM who sought to intervene.

On January 10, 2007, the Supervisory Group79 and the AMBALA-Rene Galang faction submitted
their Comment/Opposition dated December 17, 2006.80

On October 30, 2007, RCBC filed a Motion for Leave to Intervene and to File and Admit Attached
Petition-In-Intervention dated October 18, 2007.81 LIPCO later followed with a similar motion.82 In
both motions, RCBC and LIPCO contended that the assailed resolution effectively nullified the TCTs
under their respective names as the properties covered in the TCTs were veritably included in the
January 2, 2006 notice of coverage. In the main, they claimed that the revocation of the SDP cannot
legally affect their rights as innocent purchasers for value. Both motions for leave to intervene were
granted and the corresponding petitions-in-intervention admitted.

On August 18, 2010, the Court heard the main and intervening petitioners on oral arguments. On the
other hand, the Court, on August 24, 2010, heard public respondents as well as the respective
counsels of the AMBALA-Mallari-Supervisory Group, the AMBALA-Galang faction, and the FARM
and its 27 members83 argue their case.

Prior to the oral arguments, however, HLI; AMBALA, represented by Mallari; the Supervisory Group,
represented by Suniga and Andaya; and the United Luisita Workers Union, represented by Eldifonso
Pingol, filed with the Court a joint submission and motion for approval of a Compromise Agreement
(English and Tagalog versions) dated August 6, 2010.

On August 31, 2010, the Court, in a bid to resolve the dispute through an amicable settlement,
issued a Resolution84 creating a Mediation Panel composed of then Associate Justice Ma. Alicia
Austria-Martinez, as chairperson, and former CA Justices Hector Hofileña and Teresita Dy-Liacco
Flores, as members. Meetings on five (5) separate dates, i.e., September 8, 9, 14, 20, and 27, 2010,
were conducted. Despite persevering and painstaking efforts on the part of the panel, mediation had
to be discontinued when no acceptable agreement could be reached.

The Issues

HLI raises the following issues for our consideration:

I.

WHETHER OR NOT PUBLIC RESPONDENTS PARC AND SECRETARY PANGANDAMAN

HAVE JURISDICTION, POWER AND/OR AUTHORITY TO NULLIFY, RECALL, REVOKE
OR RESCIND THE SDOA.

II.

[IF SO], x x x CAN THEY STILL EXERCISE SUCH JURISDICTION, POWER AND/OR
AUTHORITY AT THIS TIME, I.E., AFTER SIXTEEN (16) YEARS FROM THE EXECUTION
OF THE SDOA AND ITS IMPLEMENTATION WITHOUT VIOLATING SECTIONS 1 AND 10
OF ARTICLE III (BILL OF RIGHTS) OF THE CONSTITUTION AGAINST DEPRIVATION OF
PROPERTY WITHOUT DUE PROCESS OF LAW AND THE IMPAIRMENT OF
CONTRACTUAL RIGHTS AND OBLIGATIONS? MOREOVER, ARE THERE LEGAL
GROUNDS UNDER THE CIVIL CODE, viz, ARTICLE 1191 x x x, ARTICLES 1380, 1381
AND 1382 x x x ARTICLE 1390 x x x AND ARTICLE 1409 x x x THAT CAN BE INVOKED
TO NULLIFY, RECALL, REVOKE, OR RESCIND THE SDOA?

III.

WHETHER THE PETITIONS TO NULLIFY, RECALL, REVOKE OR RESCIND THE SDOA

HAVE ANY LEGAL BASIS OR GROUNDS AND WHETHER THE PETITIONERS THEREIN
ARE THE REAL PARTIES-IN-INTEREST TO FILE SAID PETITIONS.

IV.
 WHETHER THE RIGHTS, OBLIGATIONS AND REMEDIES OF THE PARTIES TO THE
SDOA ARE NOW GOVERNED BY THE CORPORATION CODE (BATAS PAMBANSA
BLG. 68) AND NOT BY THE x x x [CARL] x x x.

On the other hand, RCBC submits the following issues:

I.

RESPONDENT PARC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO

LACK OR EXCESS OF JURISDICTION WHEN IT DID NOT EXCLUDE THE SUBJECT
PROPERTY FROM THE COVERAGE OF THE CARP DESPITE THE FACT THAT
PETITIONER-INTERVENOR RCBC HAS ACQUIRED VESTED RIGHTS AND
INDEFEASIBLE TITLE OVER THE SUBJECT PROPERTY AS AN INNOCENT
PURCHASER FOR VALUE.

A. THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE NOTICE OF

COVERAGE DATED 02 JANUARY 2006 HAVE THE EFFECT OF NULLIFYING TCT
NOS. 391051 AND 391052 IN THE NAME OF PETITIONER-INTERVENOR RCBC.

B. AS AN INNOCENT PURCHASER FOR VALUE, PETITIONER-INTERVENOR

RCBC CANNOT BE PREJUDICED BY A SUBSEQUENT REVOCATION OR
RESCISSION OF THE SDOA.

II.

THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE NOTICE OF COVERAGE

DATED 02 JANUARY 2006 WERE ISSUED WITHOUT AFFORDING PETITIONER-
INTERVENOR RCBC ITS RIGHT TO DUE PROCESS AS AN INNOCENT PURCHASER
FOR VALUE.

LIPCO, like RCBC, asserts having acquired vested and indefeasible rights over certain portions of
the converted property, and, hence, would ascribe on PARC the commission of grave abuse of
discretion when it included those portions in the notice of coverage. And apart from raising issues
identical with those of HLI, such as but not limited to the absence of valid grounds to warrant the
rescission and/or revocation of the SDP, LIPCO would allege that the assailed resolution and the
notice of coverage were issued without affording it the right to due process as an innocent purchaser
for value. The government, LIPCO also argues, is estopped from recovering properties which have
since passed to innocent parties.

Simply formulated, the principal determinative issues tendered in the main petition and to which all
other related questions must yield boil down to the following: (1) matters of standing; (2) the
constitutionality of Sec. 31 of RA 6657; (3) the jurisdiction of PARC to recall or revoke HLI’s SDP; (4)
the validity or propriety of such recall or revocatory action; and (5) corollary to (4), the validity of the
terms and conditions of the SDP, as embodied in the SDOA.

Our Ruling

I.

We first proceed to the examination of the preliminary issues before delving on the more serious
challenges bearing on the validity of PARC’s assailed issuance and the grounds for it.
Supervisory Group, AMBALA and their
respective leaders are real parties-in-interest

HLI would deny real party-in-interest status to the purported leaders of the Supervisory Group and
AMBALA, i.e., Julio Suniga, Windsor Andaya, and Rene Galang, who filed the revocatory petitions
before the DAR. As HLI would have it, Galang, the self-styled head of AMBALA, gained HLI
employment in June 1990 and, thus, could not have been a party to the SDOA executed a year
earlier.85 As regards the Supervisory Group, HLI alleges that supervisors are not regular
farmworkers, but the company nonetheless considered them FWBs under the SDOA as a mere
concession to enable them to enjoy the same benefits given qualified regular farmworkers. However,
if the SDOA would be canceled and land distribution effected, so HLI claims, citing Fortich v.
Corona,86 the supervisors would be excluded from receiving lands as farmworkers other than the
regular farmworkers who are merely entitled to the "fruits of the land."87

The SDOA no less identifies "the SDP qualified beneficiaries" as "the farmworkers who appear in the
annual payroll, inclusive of the permanent and seasonal employees, who are regularly or periodically
employed by [HLI]."88 Galang, per HLI’s own admission, is employed by HLI, and is, thus, a qualified
beneficiary of the SDP; he comes within the definition of a real party-in-interest under Sec. 2, Rule 3
of the Rules of Court, meaning, one who stands to be benefited or injured by the judgment in the suit
or is the party entitled to the avails of the suit.

The same holds true with respect to the Supervisory Group whose members were admittedly
employed by HLI and whose names and signatures even appeared in the annex of the SDOA. Being
qualified beneficiaries of the SDP, Suniga and the other 61 supervisors are certainly parties who
would benefit or be prejudiced by the judgment recalling the SDP or replacing it with some other
modality to comply with RA 6657.

Even assuming that members of the Supervisory Group are not regular farmworkers, but are in the
category of "other farmworkers" mentioned in Sec. 4, Article XIII of the Constitution,89 thus only
entitled to a share of the fruits of the land, as indeed Fortich teaches, this does not detract from the
fact that they are still identified as being among the "SDP qualified beneficiaries." As such, they are,
thus, entitled to bring an action upon the SDP.90 At any rate, the following admission made by Atty.
Gener Asuncion, counsel of HLI, during the oral arguments should put to rest any lingering doubt as
to the status of protesters Galang, Suniga, and Andaya:

Justice Bersamin: x x x I heard you a while ago that you were conceding the qualified farmer
beneficiaries of Hacienda Luisita were real parties in interest?

Atty. Asuncion: Yes, Your Honor please, real party in interest which that question refers to the
complaints of protest initiated before the DAR and the real party in interest there be considered as
possessed by the farmer beneficiaries who initiated the protest.91

Further, under Sec. 50, paragraph 4 of RA 6657, farmer-leaders are expressly allowed to represent
themselves, their fellow farmers or their organizations in any proceedings before the DAR.
Specifically:

SEC. 50. Quasi-Judicial Powers of the DAR.¾x x x

xxxx

Responsible farmer leaders shall be allowed to represent themselves, their fellow farmers or
their organizations in any proceedings before the DAR: Provided, however, that when there are
two or more representatives for any individual or group, the representatives should choose only one
among themselves to represent such party or group before any DAR proceedings. (Emphasis
supplied.)

Clearly, the respective leaders of the Supervisory Group and AMBALA are contextually real parties-
in-interest allowed by law to file a petition before the DAR or PARC.

This is not necessarily to say, however, that Galang represents AMBALA, for as records show and
as HLI aptly noted,92 his "petisyon" filed with DAR did not carry the usual authorization of the
individuals in whose behalf it was supposed to have been instituted. 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.

PARC’s Authority to Revoke a Stock Distribution Plan

On the postulate that the subject jurisdiction is conferred by law, HLI maintains that PARC is without
authority to revoke an SDP, for neither RA 6657 nor EO 229 expressly vests PARC with such
authority. While, as HLI argued, EO 229 empowers PARC to approve the plan for stock distribution
in appropriate cases, the empowerment only includes the power to disapprove, but not to recall its
previous approval of the SDP after it has been implemented by the parties.93 To HLI, it is the court
which has jurisdiction and authority to order the revocation or rescission of the PARC-approved
SDP.

We disagree.

Under Sec. 31 of RA 6657, as implemented by DAO 10, the authority to approve the plan for stock
distribution of the corporate landowner belongs to PARC. However, contrary to petitioner HLI’s
posture, PARC also has the power to revoke the SDP which it previously approved. It may be, as
urged, that RA 6657 or other executive issuances on agrarian reform do not explicitly vest the PARC
with the power to revoke/recall an approved SDP. Such power or authority, however, is deemed
possessed by PARC under the principle of necessary implication, a basic postulate that what is
implied in a statute is as much a part of it as that which is expressed.94

We have explained that "every statute is understood, by implication, to contain all such provisions as
may be necessary to effectuate its object and purpose, or to make effective rights, powers, privileges
or jurisdiction which it grants, including all such collateral and subsidiary consequences as may be
fairly and logically inferred from its terms."95 Further, "every statutory grant of power, right or privilege
is deemed to include all incidental power, right or privilege.96

Gordon v. Veridiano II is instructive:

The power to approve a license includes by implication, even if not expressly granted, the power to
revoke it. By extension, the power to revoke is limited by the authority to grant the license, from
which it is derived in the first place. Thus, if the FDA grants a license upon its finding that the
applicant drug store has complied with the requirements of the general laws and the implementing
administrative rules and regulations, it is only for their violation that the FDA may revoke the said
license. By the same token, having granted the permit upon his ascertainment that the conditions
thereof as applied x x x have been complied with, it is only for the violation of such conditions that
the mayor may revoke the said permit.97 (Emphasis supplied.)
Following the doctrine of necessary implication, it may be stated that the conferment of express
power to approve a plan for stock distribution of the agricultural land of corporate owners necessarily
includes the power to revoke or recall the approval of the plan.

As public respondents aptly observe, to deny PARC such revocatory power would reduce it into a
toothless agency of CARP, because the very same agency tasked to ensure compliance by the
corporate landowner with the approved SDP would be without authority to impose sanctions for non-
compliance with it.98 With the view We take of the case, only PARC can effect such revocation. The
DAR Secretary, by his own authority as such, cannot plausibly do so, as the acceptance and/or
approval of the SDP sought to be taken back or undone is the act of PARC whose official
composition includes, no less, the President as chair, the DAR Secretary as vice-chair, and at least
eleven (11) other department heads.99

On another but related issue, the HLI foists on the Court the argument that subjecting its
landholdings to compulsory distribution after its approved SDP has been implemented would impair
the contractual obligations created under the SDOA.

The broad sweep of HLI’s argument ignores certain established legal precepts and must, therefore,
be rejected.

A law authorizing interference, when appropriate, in the contractual relations between or among
parties is deemed read into the contract and its implementation cannot successfully be resisted by
force of the non-impairment guarantee. There is, in that instance, no impingement of the impairment
clause, the non-impairment protection being applicable only to laws that derogate prior acts or
contracts by enlarging, abridging or in any manner changing the intention of the parties. Impairment,
in fine, obtains if a subsequent law changes the terms of a contract between the parties, imposes
new conditions, dispenses with those agreed upon or withdraws existing remedies for the
enforcement of the rights of the parties.100 Necessarily, the constitutional proscription would not apply
to laws already in effect at the time of contract execution, as in the case of RA 6657, in relation to
DAO 10, vis-à-vis HLI’s SDOA. As held in Serrano v. Gallant Maritime Services, Inc.:

The prohibition [against impairment of the obligation of contracts] is aligned with the general principle
that laws newly enacted have only a prospective operation, and cannot affect acts or contracts
already perfected; however, as to laws already in existence, their provisions are read into contracts
and deemed a part thereof. Thus, the non-impairment clause under Section 10, Article II [of the
Constitution] is limited in application to laws about to be enacted that would in any way derogate
from existing acts or contracts by enlarging, abridging or in any manner changing the intention of the
parties thereto.101 (Emphasis supplied.)

Needless to stress, the assailed Resolution No. 2005-32-01 is not the kind of issuance within the
ambit of Sec. 10, Art. III of the Constitution providing that "[n]o law impairing the obligation of
contracts shall be passed."

Parenthetically, HLI tags the SDOA as an ordinary civil law contract and, as such, a breach of its
terms and conditions is not a PARC administrative matter, but one that gives rise to a cause of
action cognizable by regular courts.102 This contention has little to commend itself. The SDOA is a
special contract imbued with public interest, entered into and crafted pursuant to the provisions of
RA 6657. It embodies the SDP, which requires for its validity, or at least its enforceability, PARC’s
approval. And the fact that the certificate of compliance103––to be issued by agrarian authorities upon
completion of the distribution of stocks––is revocable by the same issuing authority supports the
idea that everything about the implementation of the SDP is, at the first instance, subject to
administrative adjudication.
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 of HLI.

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.104 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 prevail—generalia specialibus non
derogant.105 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 HLI’s
compliance with RA 6657. Evidently, RA 6657 should be the applicable law to the instant case.

HLI further contends that the inclusion of the agricultural land of Hacienda Luisita under the
coverage of CARP and the eventual distribution of the land to the FWBs would amount to a
disposition of all or practically all of the corporate assets of HLI. HLI would add that this contingency,
if ever it comes to pass, requires the applicability of the Corporation Code provisions on corporate
dissolution.

We are not persuaded.

Indeed, the provisions of the Corporation Code on corporate dissolution would apply insofar as the
winding up of HLI’s affairs or liquidation of the assets is concerned. However, the mere inclusion of
the agricultural land of Hacienda Luisita under the coverage of CARP and the land’s eventual
distribution to the FWBs will not, without more, automatically trigger the dissolution of HLI. As stated
in the SDOA itself, the percentage of the value of the agricultural land of Hacienda Luisita in relation
to the total assets transferred and conveyed by Tadeco to HLI comprises only 33.296%, following
this equation: value of the agricultural lands divided by total corporate assets. By no stretch of
imagination would said percentage amount to a disposition of all or practically all of HLI’s corporate
assets should compulsory land acquisition and distribution ensue.

This brings us to the validity of the revocation of the approval of the SDP sixteen (16) years after its
execution pursuant to Sec. 31 of RA 6657 for the reasons set forth in the Terminal Report of the
Special Task Force, as endorsed by PARC Excom. But first, the matter of the constitutionality of said
section.

Constitutional Issue

FARM asks for the invalidation of Sec. 31 of RA 6657, insofar as it affords the corporation, as a
mode of CARP compliance, to resort to stock distribution, an arrangement which, to FARM, impairs
the fundamental right of farmers and farmworkers under Sec. 4, Art. XIII of the Constitution.106
To a more specific, but direct point, FARM argues that Sec. 31 of RA 6657 permits stock transfer in
lieu of outright agricultural land transfer; in fine, there is stock certificate ownership of the farmers or
farmworkers instead of them owning the land, as envisaged in the Constitution. For FARM, this
modality of distribution is an anomaly to be annulled for being inconsistent with the basic concept of
agrarian reform ingrained in Sec. 4, Art. XIII of the Constitution.107

Reacting, HLI insists that agrarian reform is not only about transfer of land ownership to farmers and
other qualified beneficiaries. It draws attention in this regard to Sec. 3(a) of RA 6657 on the concept
and scope of the term "agrarian reform." The constitutionality of a law, HLI added, cannot, as here,
be attacked collaterally.

The instant challenge on the constitutionality of Sec. 31 of RA 6657 and necessarily its counterpart
provision in EO 229 must fail as explained below.

When the Court is called upon to exercise its power of judicial review over, and pass upon the
constitutionality of, acts of the executive or legislative departments, it does so only when the
following essential requirements are first met, to wit:

(1) there is an actual case or controversy;

(2) that the constitutional question is raised at the earliest possible opportunity by a proper
party or one with locus standi; and

(3) the issue of constitutionality must be the very lis mota of the case.108

Not all the foregoing requirements are satisfied in the case at bar.

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.109 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.110 If some other
grounds exist by which judgment can be made without touching the constitutionality of a law, such
recourse is favored.111 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.112 (Italics in the original.)

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 9700,113 amending Sec. 7 of RA 6657, has all
but superseded Sec. 31 of RA 6657 vis-à-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.

It is true that the Court, in some cases, has proceeded to resolve constitutional issues otherwise
already moot and academic114 provided the following requisites are present:

x x x first, there is a grave violation of the Constitution; second, the exceptional character of the
situation and the paramount public interest is involved; third, when the constitutional issue raised
requires formulation of controlling principles to guide the bench, the bar, and the public; fourth, the
case is capable of repetition yet evading review.

These requisites do not obtain in the case at bar.

For one, there appears to be no breach of the fundamental law. Sec. 4, Article XIII of the
Constitution reads:

The State shall, by law, undertake an agrarian reform program founded on the right of the 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 right of small landowners.
The State shall further provide incentives for voluntary land-sharing. (Emphasis supplied.)

The wording of the provision is unequivocal––the farmers and regular farmworkers have a right TO
OWN DIRECTLY OR COLLECTIVELY THE LANDS THEY TILL. The basic law allows two (2)
modes of land distribution—direct and indirect ownership. Direct transfer to individual farmers is the
most commonly used method by DAR and widely accepted. Indirect transfer through collective
ownership of the agricultural land is the alternative to direct ownership of agricultural land by
individual farmers. The aforequoted Sec. 4 EXPRESSLY authorizes collective ownership by farmers.
No language can be found in the 1987 Constitution that disqualifies or prohibits corporations or
cooperatives of farmers from being the legal entity through which collective ownership can be
exercised. The word "collective" is defined as "indicating a number of persons or things considered
as constituting one group or aggregate,"115 while "collectively" is defined as "in a collective sense or
manner; in a mass or body."116 By using the word "collectively," the Constitution allows for indirect
ownership of land and not just outright agricultural land transfer. This is in recognition of the fact that
land reform may become successful even if it is done through the medium of juridical entities
composed of farmers.

Collective ownership is permitted in two (2) provisions of RA 6657. Its Sec. 29 allows workers’
cooperatives or associations to collectively own the land, while the second paragraph of Sec. 31
allows corporations or associations to own agricultural land with the farmers becoming stockholders
or members. Said provisions read:

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 worker beneficiaries who shall form a workers’ cooperative or association which
will deal with the corporation or business association. x x x (Emphasis supplied.)

SEC. 31. Corporate Landowners.— x x x

xxxx

Upon certification by the DAR, corporations owning agricultural lands may give their qualified
beneficiaries the right to purchase such proportion of the capital stock of the corporation that the
agricultural land, actually devoted to agricultural activities, bears in relation to the company’s total
assets, under such terms and conditions as may be agreed upon by them. In no case shall the
compensation received by the workers at the time the shares of stocks are distributed be reduced.
The same principle shall be applied to associations, with respect to their equity or participation. x x x
(Emphasis supplied.)

Clearly, workers’ cooperatives or associations under Sec. 29 of RA 6657 and corporations or

associations under the succeeding Sec. 31, as differentiated from individual farmers, are authorized
vehicles for the collective ownership of agricultural land. Cooperatives can be registered with the
Cooperative Development Authority and acquire legal personality of their own, while corporations
are juridical persons under the Corporation Code. Thus, Sec. 31 is constitutional as it simply
implements Sec. 4 of Art. XIII of the Constitution that land can be owned COLLECTIVELY by
farmers. Even the framers of the l987 Constitution are in unison with respect to the two (2) modes of
ownership of agricultural lands tilled by farmers––DIRECT and COLLECTIVE, thus:

MR. NOLLEDO. And when we talk of the phrase "to own directly," we mean the principle of direct
ownership by the tiller?

MR. MONSOD. Yes.

MR. NOLLEDO. And when we talk of "collectively," we mean communal ownership, stewardship or
State ownership?

MS. NIEVA. In this section, we conceive of cooperatives; that is farmers’ cooperatives owning the
land, not the State.

MR. NOLLEDO. And when we talk of "collectively," referring to farmers’ cooperatives, do the farmers
own specific areas of land where they only unite in their efforts?

MS. NIEVA. That is one way.

MR. NOLLEDO. Because I understand that there are two basic systems involved: the "moshave"
type of agriculture and the "kibbutz." So are both contemplated in the report?

MR. TADEO. Ang dalawa kasing pamamaraan ng pagpapatupad ng tunay na reporma sa lupa ay
ang pagmamay-ari ng lupa na hahatiin sa individual na pagmamay-ari – directly – at ang tinatawag
na sama-samang gagawin ng mga magbubukid. Tulad sa Negros, ang gusto ng mga magbubukid
ay gawin nila itong "cooperative or collective farm." Ang ibig sabihin ay sama-sama nilang
sasakahin.

xxxx

MR. TINGSON. x x x When we speak here of "to own directly or collectively the lands they till," is this
land for the tillers rather than land for the landless? Before, we used to hear "land for the landless,"
but now the slogan is "land for the tillers." Is that right?

MR. TADEO. Ang prinsipyong umiiral dito ay iyong land for the tillers. Ang ibig sabihin ng "directly"
ay tulad sa implementasyon sa rice and corn lands kung saan inaari na ng mga magsasaka ang
lupang binubungkal nila. Ang ibig sabihin naman ng "collectively" ay sama-samang paggawa sa
isang lupain o isang bukid, katulad ng sitwasyon sa Negros.117 (Emphasis supplied.)

As Commissioner Tadeo explained, the farmers will work on the agricultural land "sama-sama" or
collectively. Thus, the main requisite for collective ownership of land is collective or group work by
farmers of the agricultural land. Irrespective of whether the landowner is a cooperative, association
or corporation composed of farmers, as long as concerted group work by the farmers on the land is
present, then it falls within the ambit of collective ownership scheme.

Likewise, Sec. 4, Art. XIII of the Constitution makes mention of a commitment on the part of the
State to pursue, by law, an agrarian reform program founded on the policy of land for the landless,
but subject to such priorities as Congress may prescribe, taking into account such abstract variable
as "equity considerations." The textual reference to a law and Congress necessarily implies that the
above constitutional provision is not self-executoryand that legislation is needed to implement the
urgently needed program of agrarian reform. And RA 6657 has been enacted precisely pursuant to
and as a mechanism to carry out the constitutional directives. This piece of legislation, in fact,
restates118 the agrarian reform policy established in the aforementioned provision of the Constitution
of promoting the welfare of landless farmers and farmworkers. RA 6657 thus defines "agrarian
reform" as "the redistribution of lands … to farmers and regular farmworkers who are landless … to
lift the economic status of the beneficiaries and all other arrangements alternative to the physical
redistribution of lands, such as production or profit sharing, labor administration and
the distribution of shares of stock which will allow beneficiaries to receive a just share of the fruits
of the lands they work."

With the view We take of this case, the stock distribution option devised under Sec. 31 of RA 6657
hews with the agrarian reform policy, as instrument of social justice under Sec. 4 of Article XIII of the
Constitution. Albeit land ownership for the landless appears to be the dominant theme of that policy,
We emphasize that Sec. 4, Article XIII of the Constitution, as couched, does not constrict Congress
to passing an agrarian reform law planted on direct land transfer to and ownership by farmers and
no other, or else the enactment suffers from the vice of unconstitutionality. If the intention were
otherwise, the framers of the Constitution would have worded said section in a manner mandatory in
character.

For this Court, Sec. 31 of RA 6657, with its direct and indirect transfer features, is not inconsistent
with the State’s commitment to farmers and farmworkers to advance their interests under the policy
of social justice. The legislature, thru Sec. 31 of RA 6657, has chosen a modality for collective
ownership by which the imperatives of social justice may, in its estimation, be approximated, if not
achieved. The Court should be bound by such policy choice.

FARM contends that the farmers in the stock distribution scheme under Sec. 31 do not own the
agricultural land but are merely given stock certificates. Thus, the farmers lose control over the land
to the board of directors and executive officials of the corporation who actually manage the land.
They conclude that such arrangement runs counter to the mandate of the Constitution that any
agrarian reform must preserve the control over the land in the hands of the tiller.

This contention has no merit.

While it is true that the farmer is issued stock certificates and does not directly own the land, still, the
Corporation Code is clear that the FWB becomes a stockholder who acquires an equitable interest in
the assets of the corporation, which include the agricultural lands. It was explained that the
"equitable interest of the shareholder in the property of the corporation is represented by the term
stock, and the extent of his interest is described by the term shares. The expression shares of stock
when qualified by words indicating number and ownership expresses the extent of the owner’s
interest in the corporate property."119 A share of stock typifies an aliquot part of the corporation’s
property, or the right to share in its proceeds to that extent when distributed according to law and
equity and that its holder is not the owner of any part of the capital of the corporation.120 However,
the FWBs will ultimately own the agricultural lands owned by the corporation when the corporation is
eventually dissolved and liquidated.

Anent the alleged loss of control of the farmers over the agricultural land operated and managed by
the corporation, a reading of the second paragraph of Sec. 31 shows otherwise. Said provision
provides that qualified beneficiaries have "the right to purchase such proportion of the capital stock
of the corporation that the agricultural land, actually devoted to agricultural activities, bears in
relation to the company’s total assets." The wording of the formula in the computation of the number
of shares that can be bought by the farmers does not mean loss of control on the part of the farmers.
It must be remembered that the determination of the percentage of the capital stock that can be
bought by the farmers depends on the value of the agricultural land and the value of the total assets
of the corporation.

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.

A view has been advanced that there can be no agrarian reform unless there is land distribution and
that actual land distribution is the essential characteristic of a constitutional agrarian reform program.
On the contrary, there have been so many instances where, despite actual land distribution, the
implementation of agrarian reform was still unsuccessful. As a matter of fact, this Court may take
judicial notice of cases where FWBs sold the awarded land even to non-qualified persons and in
violation of the prohibition period provided under the law. This only proves to show that the mere fact
that there is land distribution does not guarantee a successful implementation of agrarian reform.

As it were, the principle of "land to the tiller" and the old pastoral model of land ownership where
non-human juridical persons, such as corporations, were prohibited from owning agricultural lands
are no longer realistic under existing conditions. Practically, an individual farmer will often face
greater disadvantages and difficulties than those who exercise ownership in a collective manner
through a cooperative or corporation. The former is too often left to his own devices when faced with
failing crops and bad weather, or compelled to obtain usurious loans in order to purchase costly
fertilizers or farming equipment. The experiences learned from failed land reform activities in various
parts of the country are lack of financing, lack of farm equipment, lack of fertilizers, lack of
guaranteed buyers of produce, lack of farm-to-market roads, among others. Thus, at the end of the
day, there is still no successful implementation of agrarian reform to speak of in such a case.

Although success is not guaranteed, a cooperative or a corporation stands in a better position to

secure funding and competently maintain the agri-business than the individual farmer. While direct
singular ownership over farmland does offer advantages, such as the ability to make quick decisions
unhampered by interference from others, yet at best, these advantages only but offset the
disadvantages that are often associated with such ownership arrangement. Thus, government must
be flexible and creative in its mode of implementation to better its chances of success. One such
option is collective ownership through juridical persons composed of farmers.

Aside from the fact that there appears to be no violation of the Constitution, the requirement that the
instant case be capable of repetition yet evading review is also wanting. It would be speculative for
this Court to assume that the legislature will enact another law providing for a similar stock option.

As a matter of sound practice, the Court will not interfere inordinately with the exercise by Congress
of its official functions, the heavy presumption being that a law is the product of earnest studies by
Congress to ensure that no constitutional prescription or concept is infringed.121 Corollarily, courts
will not pass upon questions of wisdom, expediency and justice of legislation or its provisions.
Towards this end, all reasonable doubts should be resolved in favor of the constitutionality of a law
and the validity of the acts and processes taken pursuant thereof.122

Consequently, before a statute or its provisions duly challenged are voided, an unequivocal breach
of, or a clear conflict with the Constitution, not merely a doubtful or argumentative one, must be
demonstrated in such a manner as to leave no doubt in the mind of the Court. In other words, the
grounds for nullity must be beyond reasonable doubt.123 FARM has not presented compelling
arguments to overcome the presumption of constitutionality of Sec. 31 of RA 6657.

The wisdom of Congress in allowing an SDP through a corporation as an alternative mode of

implementing agrarian reform is not for judicial determination. Established jurisprudence tells us that
it is not within the province of the Court to inquire into the wisdom of the law, for, indeed, We are
bound by words of the statute.124

II.

The stage is now set for the determination of the propriety under the premises of the revocation or
recall of HLI’s SDP. Or to be more precise, the inquiry should be: whether or not PARC gravely
abused its discretion in revoking or recalling the subject SDP and placing the hacienda under
CARP’s compulsory acquisition and distribution scheme.

The findings, analysis and recommendation of the DAR’s Special Task Force contained and
summarized in its Terminal Report provided the bases for the assailed PARC revocatory/recalling
Resolution. The findings may be grouped into two: (1) the SDP is contrary to either the policy on
agrarian reform, Sec. 31 of RA 6657, or DAO 10; and (2) the alleged violation by HLI of the
conditions/terms of the SDP. In more particular terms, the following are essentially the reasons
underpinning PARC’s revocatory or recall action:

(1) Despite the lapse of 16 years from the approval of HLI’s SDP, the lives of the FWBs have
hardly improved and the promised increased income has not materialized;

(2) HLI has failed to keep Hacienda Luisita intact and unfragmented;

(3) The issuance of HLI shares of stock on the basis of number of hours worked––or the so-
called "man days"––is grossly onerous to the FWBs, as HLI, in the guise of rotation, can
unilaterally deny work to anyone. In elaboration of this ground, PARC’s Resolution No. 2006-
34-01, denying HLI’s motion for reconsideration of Resolution No. 2005-32-01, stated that
the man days criterion worked to dilute the entitlement of the original share beneficiaries;125

(4) The distribution/transfer of shares was not in accordance with the timelines fixed by law;

(5) HLI has failed to comply with its obligations to grant 3% of the gross sales every year as
production-sharing benefit on top of the workers’ salary; and

(6) Several homelot awardees have yet to receive their individual titles.

Petitioner HLI claims having complied with, at least substantially, all its obligations under the SDP,
as approved by PARC itself, and tags the reasons given for the revocation of the SDP as unfounded.
Public respondents, on the other hand, aver that the assailed resolution rests on solid grounds set
forth in the Terminal Report, a position shared by AMBALA, which, in some pleadings, is
represented by the same counsel as that appearing for the Supervisory Group.

FARM, for its part, posits the view that legal bases obtain for the revocation of the SDP, because it
does not conform to Sec. 31 of RA 6657 and DAO 10. And training its sight on the resulting dilution
of the equity of the FWBs appearing in HLI’s masterlist, FARM would state that the SDP, as couched
and implemented, spawned disparity when there should be none; parity when there should have
been differentiation.126

The petition is not impressed with merit.

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:

SECTION 2. Declaration of Principles and Policies.¾It 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 land-sharing. (Emphasis supplied.)

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.127 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 HLI’s
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 500-hectare 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.128 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.129

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."130 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.131 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 plan’s
revocation.

Neither does HLI’s SDP, whence the DAR-attested SDOA/MOA is based, infringe Sec. 31 of RA
6657, albeit public respondents erroneously submit otherwise.

The provisions of the first paragraph of the adverted Sec. 31 are without relevance to the issue on
the propriety of the assailed order revoking HLI’s SDP, for the paragraph deals with the transfer of
agricultural lands to the government, as a mode of CARP compliance, thus:

SEC. 31. Corporate Landowners.¾Corporate landowners may voluntarily transfer ownership over
their agricultural landholdings to the Republic of the Philippines pursuant to Section 20 hereof or to
qualified beneficiaries under such terms and conditions, consistent with this Act, as they may agree,
subject to confirmation by the DAR.

The second and third paragraphs, with their sub-paragraphs, of Sec. 31 provide as follows:
Upon certification by the DAR, corporations owning agricultural lands may give their qualified
beneficiaries the right to purchase such proportion of the capital stock of the corporation that
the agricultural land, actually devoted to agricultural activities, bears in relation to the
company’s total assets, under such terms and conditions as may be agreed upon by them. In no
case shall the compensation received by the workers at the time the shares of stocks are distributed
be reduced. x x x

Corporations or associations which voluntarily divest a proportion of their capital stock, equity or
participation in favor of their workers or other qualified beneficiaries under this section shall be
deemed to have complied with the provisions of this Act: Provided, That the following conditions are
complied with:

(a) In order to safeguard the right of beneficiaries who own shares of stocks to dividends and
other financial benefits, the books of the corporation or association shall be subject to
periodic audit by certified public accountants chosen by the beneficiaries;

(b) Irrespective of the value of their equity in the corporation or association, the beneficiaries
shall be assured of at least one (1) representative in the board of directors, or in a
management or executive committee, if one exists, of the corporation or association;

(c) Any shares acquired by such workers and beneficiaries shall have the same rights and
features as all other shares; and

(d) Any transfer of shares of stocks by the original beneficiaries shall be void ab initio unless
said transaction is in favor of a qualified and registered beneficiary within the same
corporation.

The mandatory minimum ratio of land-to-shares of stock supposed to be distributed or allocated to

qualified beneficiaries, adverting to what Sec. 31 of RA 6657 refers to as that "proportion of the
capital stock of the corporation that the agricultural land, actually devoted to agricultural activities,
bears in relation to the company’s total assets" had been observed.

Paragraph one (1) of the SDOA, which was based on the SDP, conforms to Sec. 31 of RA 6657.
The stipulation reads:

1. The percentage of the value of the agricultural land of Hacienda Luisita (P196,630,000.00) in
relation to the total assets (P590,554,220.00) transferred and conveyed to the SECOND PARTY
is 33.296% that, under the law, is the proportion of the outstanding capital stock of the SECOND
PARTY, which is P355,531,462.00 or 355,531,462 shares with a par value of P1.00 per share, that
has to be distributed to the THIRD PARTY under the stock distribution plan, the said 33.296%
thereof being P118,391,976.85 or 118,391,976.85 shares.

The appraised value of the agricultural land is PhP 196,630,000 and of HLI’s other assets is PhP
393,924,220. The total value of HLI’s assets is, therefore, PhP 590,554,220.132 The percentage of
the value of the agricultural lands (PhP 196,630,000) in relation to the total assets (PhP
590,554,220) is 33.296%, which represents the stockholdings of the 6,296 original qualified
farmworker-beneficiaries (FWBs) in HLI. The total number of shares to be distributed to said
qualified FWBs is 118,391,976.85 HLI shares. This was arrived at by getting 33.296% of the
355,531,462 shares which is the outstanding capital stock of HLI with a value of PhP 355,531,462.
Thus, if we divide the 118,391,976.85 HLI shares by 6,296 FWBs, then each FWB is entitled to
18,804.32 HLI shares. These shares under the SDP are to be given to FWBs for free.
The Court finds that the determination of the shares to be distributed to the 6,296 FWBs strictly
adheres to the formula prescribed by Sec. 31(b) of RA 6657.

Anent the requirement under Sec. 31(b) of the third paragraph, that the FWBs shall be assured of at
least one (1) representative in the board of directors or in a management or executive committee
irrespective of the value of the equity of the FWBs in HLI, the Court finds that the SDOA contained
provisions making certain the FWBs’ representation in HLI’s governing board, thus:

5. Even if only a part or fraction of the shares earmarked for distribution will have been acquired from
the FIRST PARTY and distributed to the THIRD PARTY, FIRST PARTY shall execute at the
beginning of each fiscal year an irrevocable proxy, valid and effective for one (1) year, in favor of the
farmworkers appearing as shareholders of the SECOND PARTY at the start of said year which will
empower the THIRD PARTY or their representative to vote in stockholders’ and board of directors’
meetings of the SECOND PARTY convened during the year the entire 33.296% of the outstanding
capital stock of the SECOND PARTY earmarked for distribution and thus be able to gain such
number of seats in the board of directors of the SECOND PARTY that the whole 33.296% of the
shares subject to distribution will be entitled to.

Also, no allegations have been made against HLI restricting the inspection of its books by
accountants chosen by the FWBs; hence, the assumption may be made that there has been no
violation of the statutory prescription under sub-paragraph (a) on the auditing of HLI’s accounts.

Public respondents, however, submit that the distribution of the mandatory minimum ratio of land-to-
shares of stock, referring to the 118,391,976.85 shares with par value of PhP 1 each, should have
been made in full within two (2) years from the approval of RA 6657, in line with the last paragraph of
Sec. 31 of said law.133

Public respondents’ submission is palpably erroneous. We have closely examined the last
paragraph alluded to, with particular focus on the two-year period mentioned, and nothing in it
remotely supports the public respondents’ posture. In its pertinent part, said Sec. 31 provides:

SEC. 31. Corporate Landowners x x x

If within two (2) years from the approval of this Act, the [voluntary] 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. (Word in bracket and emphasis added.)

Properly viewed, the words "two (2) years" clearly refer to the period within which the corporate
landowner, to avoid land transfer as a mode of CARP coverage under RA 6657, is to avail of the
stock distribution option or to have the SDP approved. The HLI secured approval of its SDP in
November 1989, well within the two-year period reckoned from June 1988 when RA 6657 took
effect.

Having hurdled the alleged breach of the agrarian reform policy under Sec. 2 of RA 6657 as well as
the statutory issues, We shall now delve into what PARC and respondents deem to be other
instances of violation of DAO 10 and the SDP.

On the Conversion of Lands

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 beneficiaries––is 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
HLI’s 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."134

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 Luisita’s 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.¾After 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

On the 3% Production Share

On the matter of the alleged failure of HLI to comply with sharing the 3% of the gross production
sales of the hacienda and pay dividends from profit, the entries in its financial books tend to indicate
compliance by HLI of the profit-sharing equivalent to 3% of the gross sales from the production of
the agricultural land on top of (a) the salaries and wages due FWBs as employees of the company
and (b) the 3% of the gross selling price of the converted land and that portion used for the SCTEX.
A plausible evidence of compliance or non-compliance, as the case may be, could be the books of
account of HLI. Evidently, the cry of some groups of not having received their share from the gross
production sales has not adequately been validated on the ground by the Special Task Force.

Indeed, factual findings of administrative agencies are conclusive when supported by substantial
evidence and are accorded due respect and weight, especially when they are affirmed by the
CA.135 However, such rule is not absolute. One such exception is when the findings of an
administrative agency are conclusions without citation of specific evidence on which they are
based,136 such as in this particular instance. As culled from its Terminal Report, it would appear that
the Special Task Force rejected HLI’s claim of compliance on the basis of this ratiocination:
  The Task Force position: Though, allegedly, the Supervisory Group receives the 3% gross
production share and that others alleged that they received 30 million pesos still others
maintain that they have not received anything yet. Item No. 4 of the MOA is clear and must
be followed. There is a distinction between the total gross sales from the production of the
land and the proceeds from the sale of the land. The former refers to the fruits/yield of the
agricultural land while the latter is the land itself. The phrase "the beneficiaries are entitled
every year to an amount approximately equivalent to 3% would only be feasible if the subject
is the produce since there is at least one harvest per year, while such is not the case in the
sale of the agricultural land. This negates then the claim of HLI that, all that the FWBs can be
entitled to, if any, is only 3% of the purchase price of the converted land.
 Besides, the Conversion Order dated 14 August 1996 provides that "the benefits, wages and
the like, presently received by the FWBs shall not in any way be reduced or adversely
affected. Three percent of the gross selling price of the sale of the converted land shall be
awarded to the beneficiaries of the SDO." The 3% gross production share then is different
from the 3% proceeds of the sale of the converted land and, with more reason, the 33%
share being claimed by the FWBs as part owners of the Hacienda, should have been given
the FWBs, as stockholders, and to which they could have been entitled if only the land were
acquired and redistributed to them under the CARP.

xxxx

 The FWBs do not receive any other benefits under the MOA except the aforementioned [(viz:
shares of stocks (partial), 3% gross production sale (not all) and homelots (not all)].

Judging from the above statements, the Special Task Force is at best silent on whether HLI has
failed to comply with the 3% production-sharing obligation or the 3% of the gross selling price of the
converted land and the SCTEX lot. In fact, it admits that the FWBs, though not all, have received
their share of the gross production sales and in the sale of the lot to SCTEX. At most, then, HLI had
complied substantially with this SDP undertaking and the conversion order. To be sure, this slight
breach would not justify the setting to naught by PARC of the approval action of the earlier PARC.
Even in contract law, rescission, predicated on violation of reciprocity, will not be permitted for a
slight or casual breach of contract; rescission may be had only for such breaches that are substantial
and fundamental as to defeat the object of the parties in making the agreement.137

Despite the foregoing findings, the revocation of the approval of the SDP is not without basis as
shown below.

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.¾The 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.¾In 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 worker-beneficiaries 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.138

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.¾The [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. (Emphasis supplied.)

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 company’s total assets."139 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.140

Before anything else, it should be stressed that, at the time PARC approved HLI’s SDP, HLI
recognized 6,296individuals 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 afore-quoted 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.141 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: That’s 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?

Atty. Dela Merced: It would be that way, Your Honor.

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.

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 shares who were not in the
original list of owners?

Atty. Dela Merced: Yes, 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?

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: None, Your Honor, I was referring, Your Honor, to the original… (interrupted)

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?142

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 year’s 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.¾The 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. (Emphasis supplied.)

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 60-day 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 three-month
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.

HLI’s 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.¾Lands 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.143 The PARC is,
therefore, correct in revoking the SDP. Consequently, the PARC Resolution No. 89-12-2 dated
November 21, l989 approving the HLI’s SDP is nullified and voided.

III.

We now resolve the petitions-in-intervention which, at bottom, uniformly pray for the exclusion from
the coverage of the assailed PARC resolution those portions of the converted land within Hacienda
Luisita which RCBC and LIPCO acquired by purchase.

Both contend that they are innocent purchasers for value of portions of the converted farm land.
Thus, their plea for the exclusion of that portion from PARC Resolution 2005-32-01, as implemented
by a DAR-issued Notice of Coverage dated January 2, 2006, which called for mandatory CARP
acquisition coverage of lands subject of the SDP.

To restate the antecedents, after the conversion of the 500 hectares of land in Hacienda Luisita, HLI
transferred the 300 hectares to Centennary, while ceding the remaining 200-hectare portion to LRC.
Subsequently, LIPCO purchased the entire three hundred (300) hectares of land from Centennary
for the purpose of developing the land into an industrial complex.144 Accordingly, the TCT in
Centennary’s name was canceled and a new one issued in LIPCO’s name. Thereafter, said land
was subdivided into two (2) more parcels of land. Later on, LIPCO transferred about 184 hectares to
RCBC by way of dacion en pago, by virtue of which TCTs in the name of RCBC were subsequently
issued.

Under Sec. 44 of PD 1529 or the Property Registration Decree, "every registered owner receiving a
certificate of title in pursuance of a decree of registration and every subsequent purchaser of
registered land taking a certificate of title for value and in good faith shall hold the same free from all
encumbrances except those noted on the certificate and enumerated therein."145

It is settled doctrine that one who deals with property registered under the Torrens system need not
go beyond the four corners of, but can rely on what appears on, the title. He is charged with notice
only of such burdens and claims as are annotated on the title. This principle admits of certain
exceptions, such as when the party has actual knowledge of facts and circumstances that would
impel a reasonably cautious man to make such inquiry, or when the purchaser has knowledge of a
defect or the lack of title in his vendor or of sufficient facts to induce a reasonably prudent man to
inquire into the status of the title of the property in litigation.146 A higher level of care and diligence is
of course expected from banks, their business being impressed with public interest.147

Millena v. Court of Appeals describes a purchaser in good faith in this wise:

x x x A purchaser in good faith is one who buys property of another, without notice that some other
person has a right to, or interest in, such property at the time of such purchase, or before he has
notice of the claim or interest of some other persons in the property. Good faith, or the lack of it, is in
the final analysis a question of intention; but in ascertaining the intention by which one is actuated on
a given occasion, we are necessarily controlled by the evidence as to the conduct and outward acts
by which alone the inward motive may, with safety, be determined. Truly, good faith is not a visible,
tangible fact that can be seen or touched, but rather a state or condition of mind which can only be
judged by actual or fancied tokens or signs. Otherwise stated, good faith x x x refers to the state of
mind which is manifested by the acts of the individual concerned.148 (Emphasis supplied.)

In fine, there are two (2) requirements before one may be considered a purchaser in good faith,
namely: (1) that the purchaser buys the property of another without notice that some other person
has a right to or interest in such property; and (2) that the purchaser pays a full and fair price for the
property at the time of such purchase or before he or she has notice of the claim of another.

It can rightfully be said that both LIPCO and RCBC are––based on the above requirements and with
respect to the adverted transactions of the converted land in question––purchasers in good faith for
value entitled to the benefits arising from such status.

First, at the time LIPCO purchased the entire three hundred (300) hectares of industrial land, there
was no notice of any supposed defect in the title of its transferor, Centennary, or that any other
person has a right to or interest in such property. In fact, at the time LIPCO acquired said parcels of
land, only the following annotations appeared on the TCT in the name of Centennary: the
Secretary’s Certificate in favor of Teresita Lopa, the Secretary’s Certificate in favor of Shintaro
Murai, and the conversion of the property from agricultural to industrial and residential use.149

The same is true with respect to RCBC. At the time it acquired portions of Hacienda Luisita, only the
following general annotations appeared on the TCTs of LIPCO: the Deed of Restrictions, limiting its
use solely as an industrial estate; the Secretary’s Certificate in favor of Koji Komai and Kyosuke
Hori; and the Real Estate Mortgage in favor of RCBC to guarantee the payment of PhP 300 million.

It cannot be claimed that RCBC and LIPCO acted in bad faith in acquiring the lots that were
previously covered by the SDP. Good faith "consists in the possessor’s 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."150 It is the opposite of fraud.

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 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.

And second, both LIPCO and RCBC purchased portions of Hacienda Luisita for value. Undeniably,
LIPCO acquired 300 hectares of land from Centennary for the amount of PhP 750 million pursuant to
a Deed of Sale dated July 30, 1998.151 On the other hand, in a Deed of Absolute Assignment dated
November 25, 2004, LIPCO conveyed portions of Hacienda Luisita in favor of RCBC by way
of dacion en pago to pay for a loan of PhP 431,695,732.10.

As bona fide purchasers for value, both LIPCO and RCBC have acquired rights which cannot just be
disregarded by DAR, PARC or even by this Court. As held in Spouses Chua v. Soriano:

With the property in question having already passed to the hands of purchasers in good faith, it is
now of no moment that some irregularity attended the issuance of the SPA, consistent with our
pronouncement in Heirs of Spouses Benito Gavino and Juana Euste v. Court of Appeals, to wit:

x x x the general rule that the direct result of a previous void contract cannot be valid, is inapplicable
in this case as it will directly contravene the Torrens system of registration. Where innocent third
persons, relying on the correctness of the certificate of title thus issued, acquire rights over
the property, the court cannot disregard such rights and order the cancellation of the
certificate. The effect of such outright cancellation will be to impair public confidence in the
certificate of title. The sanctity of the Torrens system must be preserved; otherwise, everyone
dealing with the property registered under the system will have to inquire in every instance as to
whether the title had been regularly or irregularly issued, contrary to the evident purpose of the law.

Being purchasers in good faith, the Chuas already acquired valid title to the property. A
purchaser in good faith holds an indefeasible title to the property and he is entitled to the
protection of the law.152 x x x (Emphasis supplied.)

To be sure, the practicalities of the situation have to a point influenced Our disposition on the fate of
RCBC and LIPCO. After all, the Court, to borrow from Association of Small Landowners in the
Philippines, Inc.,153 is not a "cloistered institution removed" from the realities on the ground. To note,
the approval and issuances of both the national and local governments showing that certain portions
of Hacienda Luisita have effectively ceased, legally and physically, to be agricultural and, therefore,
no longer CARPable are a matter of fact which cannot just be ignored by the Court and the DAR.
Among the approving/endorsing issuances:154

(a) Resolution No. 392 dated 11 December 1996 of the Sangguniang Bayan of Tarlac
favorably endorsing the 300-hectare industrial estate project of LIPCO;

(b) BOI Certificate of Registration No. 96-020 dated 20 December 1996 issued in
accordance with the Omnibus Investments Code of 1987;

(c) PEZA Certificate of Board Resolution No. 97-202 dated 27 June 1997, approving
LIPCO’s application for a mixed ecozone and proclaiming the three hundred (300) hectares
of the industrial land as a Special Economic Zone;

(d) Resolution No. 234 dated 08 August 1997 of the Sangguniang Bayan of Tarlac,
approving the Final Development Permit for the Luisita Industrial Park II Project;
 (e) Development Permit dated 13 August 1997 for the proposed Luisita Industrial Park II
Project issued by the Office of the Sangguniang Bayan of Tarlac;155

(f) DENR Environmental Compliance Certificate dated 01 October 1997 issued for the
proposed project of building an industrial complex on three hundred (300) hectares of
industrial land;156

(g) Certificate of Registration No. 00794 dated 26 December 1997 issued by the HLURB on
the project of Luisita Industrial Park II with an area of three million (3,000,000) square
meters;157

(h) License to Sell No. 0076 dated 26 December 1997 issued by the HLURB authorizing the
sale of lots in the Luisita Industrial Park II;

(i) Proclamation No. 1207 dated 22 April 1998 entitled "Declaring Certain Parcels of Private
Land in Barangay San Miguel, Municipality of Tarlac, Province of Tarlac, as a Special
Economic Zone pursuant to Republic Act No. 7916," designating the Luisita Industrial Park II
consisting of three hundred hectares (300 has.) of industrial land as a Special Economic
Zone; and

(j) Certificate of Registration No. EZ-98-05 dated 07 May 1998 issued by the PEZA, stating
that pursuant to Presidential Proclamation No. 1207 dated 22 April 1998 and Republic Act
No. 7916, LIPCO has been registered as an Ecozone Developer/Operator of Luisita
Industrial Park II located in San Miguel, Tarlac, Tarlac.

While a mere reclassification of a covered agricultural land or its inclusion in an economic zone does
not automatically allow the corporate or individual landowner to change its use,158 the reclassification
process is a prima facie indicium that the land has ceased to be economically feasible and sound for
agricultural uses. And if only to stress, DAR Conversion Order No. 030601074-764-(95) issued in
1996 by then DAR Secretary Garilao had effectively converted 500 hectares of hacienda land from
agricultural to industrial/commercial use and authorized their disposition.

In relying upon the above-mentioned approvals, proclamation and conversion order, both RCBC and
LIPCO cannot be considered at fault for believing that certain portions of Hacienda Luisita are
industrial/commercial lands and are, thus, outside the ambit of CARP. The PARC, and consequently
DAR, gravely abused its discretion when it placed LIPCO’s and RCBC’s property which once formed
part of Hacienda Luisita under the CARP compulsory acquisition scheme via the assailed Notice of
Coverage.

As regards the 80.51-hectare land transferred to the government for use as part of the SCTEX, this
should also be excluded from the compulsory agrarian reform coverage considering that the transfer
was consistent with the government’s exercise of the power of eminent domain159 and none of the
parties actually questioned the transfer.

While We affirm the revocation of the SDP on Hacienda Luisita subject of PARC Resolution Nos.
2005-32-01 and 2006-34-01, the Court cannot close its eyes to certain "operative facts" that had
occurred in the interim. Pertinently, the "operative fact" doctrine realizes that, in declaring
a law or executive action null and void, or, by extension, no longer without force and effect, undue
harshness and resulting unfairness must be avoided. This is as it should realistically be, since rights
might have accrued in favor of natural or juridical persons and obligations justly incurred in the
meantime.160 The actual existence of a statute or executive act is, prior to such a determination, an
operative fact and may have consequences which cannot justly be ignored; the past cannot always
be erased by a new judicial declaration.161

The oft-cited De Agbayani v. Philippine National Bank162 discussed the effect to be given to a
legislative or executive act subsequently declared invalid:

x x x It does not admit of doubt that prior to the declaration of nullity such challenged legislative or
executive act must have been in force and had to be complied with. This is so as until after the
judiciary, in an appropriate case, declares its invalidity, it is entitled to obedience and respect.
Parties may have acted under it and may have changed their positions. What could be more fitting
than that in a subsequent litigation regard be had to what has been done while such legislative or
executive act was in operation and presumed to be valid in all respects. It is now accepted as a
doctrine that prior to its being nullified, its existence as a fact must be reckoned with. This is merely
to reflect awareness that precisely because the judiciary is the government organ which has the final
say on whether or not a legislative or executive measure is valid, a period of time may have elapsed
before it can exercise the power of judicial review that may lead to a declaration of nullity. It would be
to deprive the law of its quality of fairness and justice then, if there be no recognition of what had
transpired prior to such adjudication.

In the language of an American Supreme Court decision: "The actual existence of a statute, prior to
such a determination of [unconstitutionality], 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 relations, individual and corporate, and particular conduct, private and official." x x x

Given the above perspective and considering that more than two decades had passed since the
PARC’s approval of the HLI’s SDP, in conjunction with numerous activities performed in good faith
by HLI, and the reliance by the FWBs on the legality and validity of the PARC-approved SDP,
perforce, certain rights of the parties, more particularly the FWBs, have to be respected pursuant to
the application in a general way of the operative fact doctrine.

A view, however, has been advanced that the operative fact doctrine is of minimal or altogether
without relevance to the instant case as it applies only in considering the effects of a declaration of
unconstitutionality of a statute, and not of a declaration of nullity of a contract. This is incorrect, for
this view failed to consider is that it is NOT the SDOA dated May 11, 1989 which was revoked in the
instant case. Rather, it is PARC’s approval of the HLI’s Proposal for Stock Distribution under CARP
which embodied the SDP that was nullified.

A recall of the antecedent events would show that on May 11, 1989, Tadeco, HLI, and the qualified
FWBs executed the SDOA. This agreement provided the basis and mechanics of the SDP that was
subsequently proposed and submitted to DAR for approval. It was only after its review that the
PARC, through then Sec. Defensor-Santiago, issued the assailed Resolution No. 89-12-2 approving
the SDP. Considerably, it is not the SDOA which gave legal force and effect to the stock distribution
scheme but instead, it is the approval of the SDP under the PARC Resolution No. 89-12-2 that gave
it its validity.

The above conclusion is bolstered by the fact that in Sec. Pangandaman’s recommendation to the
PARC Excom, what he proposed is the recall/revocation of PARC Resolution No. 89-12-2 approving
HLI’s SDP, and not the revocation of the SDOA. Sec. Pangandaman’s recommendation was
favorably endorsed by the PARC Validation Committee to the PARC Excom, and these
recommendations were referred to in the assailed Resolution No. 2005-32-01. Clearly, it is not the
SDOA which was made the basis for the implementation of the stock distribution scheme.
That the operative fact doctrine squarely applies to executive acts––in this case, the approval by
PARC of the HLI proposal for stock distribution––is well-settled in our jurisprudence. In Chavez v.
National Housing Authority,163 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. (Citations omitted; Emphasis supplied.)

The applicability of the operative fact doctrine to executive acts was further explicated by this Court
in Rieta v. People,164 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 Tañada 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 Tañada, 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 Tañada 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 Tañada and the arrest of petitioner — is an operative fact that can no longer be disturbed
or simply ignored. (Citations omitted; Emphasis supplied.)

To reiterate, although the assailed Resolution No. 2005-32-01 states that it revokes or recalls the
SDP, what it actually revoked or recalled was the PARC’s approval of the SDP embodied in
Resolution No. 89-12-2. Consequently, what was actually declared null and void was an executive
act, PARC Resolution No. 89-12-2,165and not a contract (SDOA). It is, therefore, wrong to say that it
was the SDOA which was annulled in the instant case. Evidently, the operative fact doctrine is
applicable.

IV.

While the assailed PARC resolutions effectively nullifying the Hacienda Luisita SDP are upheld, the
revocation must, by application of the operative fact principle, give way to the right of the original
6,296 qualified FWBs to choose whether they want to remain as HLI stockholders or not. The Court
cannot turn a blind eye to the fact that in 1989, 93% of the FWBs agreed to the SDOA (or the MOA),
which became the basis of the SDP approved by PARC per its Resolution No. 89-12-2 dated
November 21, 1989. From 1989 to 2005, the FWBs were said to have received from HLI salaries
and cash benefits, hospital and medical benefits, 240-square meter homelots, 3% of the gross
produce from agricultural lands, and 3% of the proceeds of the sale of the 500-hectare converted
land and the 80.51-hectare lot sold to SCTEX. HLI shares totaling 118,391,976.85 were distributed
as of April 22, 2005.166 On August 6, 20l0, HLI and private respondents submitted a Compromise
Agreement, in which HLI gave the FWBs the option of acquiring a piece of agricultural land or
remain as HLI stockholders, and as a matter of fact, most FWBs indicated their choice of remaining
as stockholders. These facts and circumstances tend to indicate that some, if not all, of the FWBs
may actually desire to continue as HLI shareholders. A matter best left to their own discretion.
With respect to the other FWBs who were not listed as qualified beneficiaries as of November 21,
1989 when the SDP was approved, they are not accorded the right to acquire land but shall,
however, continue as HLI stockholders. All the benefits and homelots167 received by the 10,502
FWBs (6,296 original FWBs and 4,206 non-qualified FWBs) listed as HLI stockholders as of August
2, 2010 shall be respected with no obligation to refund or return them since the benefits (except the
homelots) 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. If the number of HLI shares in the names of the original FWBs who opt to remain as HLI
stockholders falls below the guaranteed allocation of 18,804.32 HLI shares per FWB, the HLI shall
assign additional shares to said FWBs to complete said minimum number of shares at no cost to
said FWBs.

With regard to the homelots already awarded or earmarked, the FWBs are not obliged to return the
same to HLI or pay for its value since this is a benefit granted under the SDP. The homelots do not
form part of the 4,915.75 hectares covered by the SDP but were taken from the 120.9234 hectare
residential lot owned by Tadeco. Those who did not receive the homelots as of the revocation of the
SDP on December 22, 2005 when PARC Resolution No. 2005-32-01 was issued, will no longer be
entitled to homelots. Thus, in the determination of the ultimate agricultural land that will be subjected
to land distribution, the aggregate area of the homelots will no longer be deducted.

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 land’s 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 500-hectare
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 HLI’s 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.

A view has been advanced that HLI must pay the FWBs yearly rent for use of the land from 1989.
We disagree. It should not be forgotten that the FWBs are also stockholders of HLI, and the benefits
acquired by the corporation from its possession and use of the land ultimately redounded to the
FWBs’ benefit based on its business operations in the form of salaries, and other fringe benefits
under the CBA. To still require HLI to pay rent to the FWBs will result in double compensation.
For sure, HLI will still exist as a corporation even after the revocation of the SDP although it will no
longer be operating under the SDP, but pursuant to the Corporation Code as a private stock
corporation. The non-agricultural assets amounting to PhP 393,924,220 shall remain with HLI, while
the agricultural lands valued at PhP 196,630,000 with an original area of 4,915.75 hectares shall be
turned over to DAR for distribution to the FWBs. To be deducted from said area are the 500-hectare
lot subject of the August 14, 1996 Conversion Order, the 80.51-hectare SCTEX lot, and the total
area of 6,886.5 square meters of individual lots that should have been distributed to FWBs by DAR
had they not opted to stay in HLI.

HLI shall be paid just compensation for the remaining agricultural land that will be transferred to DAR
for land distribution to the FWBs. We find that the date of the "taking" is November 21, 1989, when
PARC approved HLI’s SDP per PARC Resolution No. 89-12-2. DAR shall coordinate with LBP for
the determination of just compensation. We cannot use May 11, 1989 when the SDOA was
executed, since it was the SDP, not the SDOA, that was approved by PARC.

The instant petition is treated pro hac vice in view of the peculiar facts and circumstances of the
case.

WHEREFORE, the instant petition is DENIED. 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 HLI’s SDP
under compulsory coverage on mandated land acquisition scheme of the CARP, are hereby
AFFIRMED with the MODIFICATION that the original 6,296 qualified FWBs shall have the option to
remain as stockholders of HLI. DAR shall 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 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.

Of the 6,296 FWBs, he or she who wishes to continue as an HLI stockholder is entitled to 18,804.32
HLI shares, and, in case the HLI shares already given to him or her is less than 18,804.32 shares,
the HLI is ordered to issue or distribute additional shares to complete said prescribed number of
shares at no cost to the FWB within thirty (30) days from finality of this Decision. Other FWBs who
do not belong to the original 6,296 qualified beneficiaries are not entitled to land distribution and
shall remain as HLI shareholders. All salaries, benefits, 3% production share and 3% share in the
proceeds of the sale of the 500-hectare converted land and the 80.51-hectare SCTEX lot and
homelots already received by the 10,502 FWBs, composed of 6,296 original FWBs and 4,206 non-
qualified FWBs, shall be respected with no obligation to refund or return them.

Within thirty (30) days after determining who from among the original FWBs will stay as
stockholders, DAR shall segregate from the HLI agricultural land with an area of 4,915.75 hectares
subject of PARC’s SDP-approving Resolution No. 89-12-2 the following: (a) the 500-hectare lot
subject of the August 14, l996 Conversion Order; (b) the 80.51-hectare lot sold to, or acquired by,
the government as part of the SCTEX complex; and (c) the aggregate area of 6,886.5 square meters
of individual lots that each FWB is entitled to under the CARP had he or she not opted to stay in HLI
as a stockholder. After the segregation process, as indicated, is done, the remaining area shall be
turned over to DAR for immediate land distribution to the original qualified FWBs who opted not to
remain as HLI stockholders.

The aforementioned area composed of 6,886.5-square meter lots allotted to the FWBs who stayed
with the corporation shall form part of the HLI assets.

HLI is directed to pay the 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 total gross sales from the production of the
agricultural land and 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 used or spent for legitimate corporate purposes. Any
unspent or unused balance 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 per 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 to be submitted within the first 15 days at the end of each quarter, until fully implemented.

The temporary restraining order is lifted.

SO ORDERED.

PRESBITERO J. VELASCO, JR.

Associate Justice

WE CONCUR:

RENATO C. CORONA
Chief Justice

ANTONIO T. CARPIO TERESITA J. LEONARDO-DE CASTRO

Associate Justice Associate Justice

(On official leave)

ARTURO D. BRION
DIOSDADO M. PERALTA*
Associate Justice
Associate Justice

LUCAS P. BERSAMIN MARIANO C. DEL CASTILLO

Associate Justice Associate Justice

ROBERTO A. ABAD MARTIN S. VILLARAMA, JR.

Associate Justice Associate Justice

JOSE PORTUGAL PEREZ JOSE CATRAL MENDOZA

Associate Justice Associate Justice
 MARIA LOURDES P. A. SERENO
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in
the above Decision had been reached in consultation before the case was assigned to the writer of
the opinion of the Court.

RENATO C. CORONA
Chief Justice

Footnotes

* On official leave.

1 "Jose Julio Zuniga" in some parts of the records.

2Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform,

G.R. No 78742, July 14, 1989, 175 SCRA 343, 352.

3 Id. at 392.

4Yujiro Hayami, et al., Toward an Alternative Land Reform Paradigm: A Philippine

Perspective 53 (1990).

5 Id.

6Bureau of Agrarian Reform Information and Education (BARIE) & Communications

Development Division (CDD), Agrarian Reform History 19 (2006).

7 Salmorin v. Zaldivar, G.R. No. 169691, July 23, 2008, 559 SCRA 564, 572.

8 Yujiro Hayami, et al., supra note 4, at 57.

9 Id.

10 Id.

11 Id. at 60; BARIE & CDD, supra note 6, at 21.

12 BARIE & CDD, supra note 6, at 22.

13 Yujiro Hayami, et al., supra note 4, at 71.

14Providing the Mechanism for the Implementation of the Comprehensive Agrarian Reform
Program.
15 Supra note 2.

16 Rollo, pp. 100-101.

17 Id. at 782-800.

18 Id. at 103-106.

19 Id. at 3644, Memorandum of HLI.

20 Id. at 3809, Memorandum of Farmworkers Agrarian Reform Movement, Inc. (FARM).

21 Id. at 3645-3646, Memorandum of HLI.

22 Id. at 3645.

23 Id. at 3810, Memorandum of FARM.

24 Id. at 3811.

25 Id. at 3651, Memorandum of HLI.

26SECTION 10. Corporate Landowners. Corporate landowners may give their workers and
other qualified beneficiaries the right to purchase such proportion of the capital stock of the
corporation that the land assets bear in relation to the corporation’s total assets, and grant
additional compensation which may be used for this purposes. The approval by the PARC of
a plan for such stock distribution, and its initial implementation, shall be deemed compliance
with the land distribution requirements of the CARP.

27 Section 1.

1a.) Qualified Corporate Landowner-Applicant¾All bona fide stock

corporations owning agricultural land utilized for agricultural production and
existing as such as of June 15, 1988, the date of effectivity of R.A. No. 6657,
may apply for and avail of the voluntary stock distribution plan [SDP]
provided in Section 31 thereof. New corporations incorporated after the
effectivity of R.A. No. 6657 may also apply, provided that they are
subsidiaries of or spin-offs from their mother corporation x x x.

1b.) Qualified Beneficiaries¾The qualified beneficiaries in the [SDP] are all

those identified beneficiaries of land transfer enumerated under Section 22 of
RA 6657.

The [SDP] shall be agreed upon by both the corporate landowner-applicant and the
qualified beneficiaries and subject to approval by PARC. x x x

Section 2. Applicant and Time of Filing¾The corporate landowner-applicant shall file

the [SDP] in a form to be prescribed by DAR and obtain approval within two (2) years
from the effectivity of RA 6657 but prior to DAR’s notice of compulsory acquisition of
said property under the same law.
Section 3. Proportion of Distribution¾The [SDP] of corporate landowner-applicant
must give the qualified beneficiaries the right to purchase at least such proportion of
the capital stock of the corporation that the agricultural land, actually devoted to
agricultural activities, bears in relation to the corporation’s total assets under such
terms and conditions as may be agreed upon by them.

Section 4. Stock Distribution Plan¾The [SDP] submitted by the corporate landowner-

applicant shall provide 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. This distribution plan in all cases, shall be at least
the minimum ratio for purposes of compliance with Section 31 of RA 6657.

On top of the minimum ratio provided under Section 3 of this Implementing

Guideline, 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.

Section 5. Criteria for Evaluation of Proposal¾The [SDP] submitted by the corporate

landowner-applicant shall meet the following minimum criteria:

a. that the continued operation of the corporation with its agricultural land
intact and unfragmented is viable with potential for growth and increased
profitability;

b. that the plan for stock distribution to qualified beneficiaries would result in
increased income and greater benefits to them, than if the lands were divided
and distributed to them individually;

c. that the stock distribution plan is acceptable to a majority, defined as 50%

plus 1, of all the qualified beneficiaries;

d. that the plan shall include a provision that the books of the corporation
shall be subject to periodic audit by certified public accountants chosen by
the beneficiaries;

e. that irrespective of the value of the beneficiaries equity in the corporation,

they shall be assured of at least one (1) representative in the Board of
Directors or in a management or executive committee, if one exists x x x;

f. that a beneficiary who avails of a stock option must first execute the
necessary waiver from being a beneficiary in another stock distribution plan x
x x;

g. other criteria that the DAR may prescribe x x x.

Section 6. Valuation and Compensation¾The valuation of corporate assets

submitted by the corporate landowner-applicant in this proposal shall be subject to
verification and audit examination by DAR. The determination of the value of the
agricultural land shall be based on the land valuation guidelines promulgated by
DAR.
 Section 7. Modes of Stock Distribution¾The [SDP] x x x may be effected through
divestment of the existing equity holdings by stockholders or other modes of stock
distribution acceptable to both parties and duly approved by DAR.

Section 8. Limited Transferability of Beneficiaries Stocks x x x.

Section 9. Payment of Shares – The payment of the purchase price of the shares
shall be under such terms and conditions agreed upon by the corporate landowner-
applicant and the beneficiaries, provided that in no case shall the compensation
received by the workers, at the time the shares of stock are distributed, be reduced.

Section 10. Disposition of Proposal¾After the evaluation of the [SDP] submitted by

the corporate landowner-applicant to the [DAR] Secretary, he shall forward the same
with all the supporting documents to the Presidential Agrarian Reform Council
(PARC), through its Executive Committee, with his recommendation for final action.

Section 11. Implementation / Monitoring of Plan¾The approved [SDP] 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 the stock and
transfer books and submitted to the Securities and Exchange Commission (SEC)
within sixty (60) days from the said implementation of the [SDP].

Upon completion, the corporate landowner-applicant shall be issued a Certificate of

Compliance. The [DAR] Secretary x x x shall strictly monitor the implementation to
determine whether or not there has been compliance with the approved [SDP] as
well as the requirements of the CARP. For this purpose, the corporate landowner-
applicant shall make available its premises for ocular inspection, its personnel for
interview, and its records for examination at normal business hours.

Section 12. Non-compliance with any of the requirements of Section 31 of RA 6675,

as implemented by this Implementing Guidelines shall be grounds for the revocation
of the Certificate of Compliance issued to the corporate landowner-applicant.

Section 13. Nothing herein shall be construed as precluding the PARC from making
its own independent evaluation and assessment of the stock distribution plan x x x
and in prescribing other requirements.

28 Rollo, p. 386.

29
Id. at 148.

30 Id. at 3767.

31 Id. at 1318-1319.

32 Id. at 3736-3740.

33 Id. at 147-150.
 Id. at 3746. The figure is lifted from "A Proposal for Stock Distribution under CARP";
34

Memorandum of HLI, Annex "A."

35 Id. at 3730-3748.

A PROPOSAL FOR STOCK DISTRIBUTION UNDER C.A.R.P.

Tarlac Development Corporation, [Tadeco] engaged principally in agricultural

pursuits, proposes to comply with the Comprehensive Agrarian Reform Program
(C.A.R.P.) x x x with [regard] to its farm x x x "Hacienda Luisita" by availing of
Section 31 of [RA] 6657 which allows a corporate landowner to choose between
physically dividing its agricultural land subject to agrarian reform among its
farmworkers and adopting a plan of distribution to the same beneficiaries of the
shares of the capital stock of the corporation owning the agricultural land.

In view of the fact that the portions of Hacienda Luisita devoted to agriculture,
consisting of approximately 4,915.75 hectares, if divided and distributed among more
or less 7,000 farmworkers as potential beneficiaries, would not be adequate to give
the said farmhands a decent means of livelihood, [Tadeco] has decided to resort to
the distribution of shares to the qualified beneficiaries as the better and more
equitable mode of compliance with the C.A.R.P.

One of the important businesses of [Tadeco] was to operate Hacienda Luisita which
is a sugarcane farm, the agricultural parts of which x x x have an aggregate area of
about 4,915.75 hectares.

Prior to 1981, [Tadeco] operated the said farm x x x manually. The only mechanized
portion of the operation then was the preparation of the land. Under this system of
cultivation, production was so exiguous that the yield per hectare was even below the
break-even point. To survive the crippling economic crisis begotten by the depressed
price of sugar [Tadeco] began introducing in Hacienda Luisita in 1981 new
technology in sugarcane farming by way of mechanization. The size and contiguous
nature of the land made the mechanized approach ideal. Its intention was not to cut
cost thru labor displacement but to take advantage of the better productivity level
accruing to this type of operation.

In no time at all, x x x the yield per hectare almost doubled and went up to 80 tons.
And what was before a marginal operation became a viable one.

FARMWORKER-BENEFICIARIES

Hacienda Luisita, as an agricultural enterprise, employs at the moment 6,296

farmworkers, excluding those whose names have been dropped from the list for not
having worked in the farm for the past two years. Its labor complement consists of
337 permanent farmworkers, 275 seasonal, 3,807 casuals who are master list
members and 1,877 casuals who are non-master list members, although it actually
needs only 4,047 of them to run the farm.

Since its acquisition of Hacienda Luisita in 1958, [Tadeco] has never resorted to
retrenchment in personnel even during extremely difficult times x x x, which saw the
sugar industry on the brink of collapse. It has promptly complied with increases in the
minimum wage law. There has been no collective bargaining negotiation that did not
produce an across-the-board increase in wages for labor, so that a Hacienda Luisita
worker received compensation much higher than the floor wage prescribed for the
sugar industry.

For Crop Year 1987-88, [Tadeco] paid a total of P48,040,000.00 in terms of salaries
and wages and fringe benefits of its employees and farmworkers in Hacienda Luisita.
Among the fringe benefits presently enjoyed by its personnel, under their existing
collective bargaining agreement [CBA] with management, are the following:

1.) 100% free hospitalization and medical plan for all employees and
workers, and their spouses, children and parents;

2.) Service and amelioration bonuses;

3.) Interest-free loans on education, rice and sugar, and salary and special
loans;

4.) Bus fare subsidy for students who are children of employees and workers
in the farm, and

5.) Retirement plan that is fully funded and non-contributory.

To be entitled to the above-mentioned benefits, a qualified worker has only to work

for 37 days in one crop year.

SPIN-OFF CORPORATION

To expedite compliance with the requirements of the [CARP] on stock distribution

and at the same time assure the farmworker-beneficiaries of the farm of receiving
greater benefits than if the agricultural land were to be divided among them instead,
[Tadeco] conceived of separating the agricultural portions of Hacienda Luisita from
the rest of its business and transferring and conveying the said agricultural land and
such properties, assets, equipment, rights, interests and accounts related to its
operation, including liabilities, obligations and encumbrances incurred thereby, to
another corporation separate and distinct, and for that purpose caused, thru its
controlling stockholders, the registration and incorporation of [HLI] on August 23,
1988, as the entity to serve as the spin-off vehicle in whose favor the said properties
and assets were later on to be transferred and conveyed.

Capital Structure. – To accommodate such transfer of assets, [HLI], with the approval
of the [SEC], increased its authorized capital stock on May 10, 1989, from
P1,500,000.00, divided into 1,500,000 shares with a par value of P1.00 per share, to
P400,000,000.00, divided into 400,000,000 shares also with a par value of P1.00 per
share, 150,000,000 of which issuable only to qualified and registered beneficiaries of
the (C.A.R.P.) and 250,000,000, to any stockholder or stockholders of the
corporation.

Valuation of Assets Transferred. – By virtue of a Deed of Assignment and

Conveyance executed on March 22, 1989, [Tadeco] subscribed to P355,131,462.00
worth of shares in the increase in authorized capital stock of the spin-off corporation,
[HLI], and in payment of its subscription transferred and conveyed to the latter the
agricultural portions of Hacienda Luisita x x x having a total area of 4,915.7466
hectares, which are covered x x x together with such other properties, assets,
equipment, rights, interests and accounts as are necessary in the operation of the
agricultural land.

Such properties and assets contributed by [Tadeco] to the capital stock of [HLI], as
appraised and approved by the [SEC], have an aggregate value of P590,554,220.00,
but inasmuch as the conveyance of assets also involved the transfer of liabilities to
the spin-off corporation, the net value left, after deducting the total liabilities of the
farm amounting to P235,422,758.99, is P355,131,462.00 which is precisely the
amount of [Tadeco’s] subscription to the increase in capital stock of [HLI].

The total value of the properties and assets transferred and conveyed by [Tadeco] to
[HLI] amounting to P590,554,220.00 may be broken down as follows:

1.) Agricultural land, x x x totaling 4,915.7466

hectares at their fair market value
of P40,000.00 per hectare ……………………… P196,630,000.00
2.) Machinery and Equipment, x x x consisting
of heavy equipment, [etc.] ……………………... 43,932,600.00
3.) Current Assets x x x …………………………… 162,638,993.00
4.) Land Improvements, in the nature of
roads, culverts, bridges, [etc.] ………………….. 31,886,300.00
5.) Unappraised Assets, such as railroad
system and equipment, x x x and construction
in progress……………………………………… 8,805,910.00
6.) Long Term Note Receivable …………………... 28,063,417.00
7.) Residential Land, with a total
area of 120.9234 hectares at their
appraisal value of P50.00 per sq. m. …………… 60,462,000.00
8.) Land, consisting of 187 lots used for
roads, railway, canals, lagoons, x x x
having an aggregate area
of 265.7495 hectares …………………………… 58,135,000.00

The break down of the liabilities and obligations contracted in operating the farm land
of Hacienda Luisita [totaling P235,422,758.00] and that have to be deducted from the
total value of the properties and assets transferred to arrive at their net value, is
hereinbelow indicated:

xxxx

The above valuations of both assets and liabilities have been given the imprimatur of
the [SEC] by reason of its approval of the increase in the authorized capital stock of
[HLI], the subscription to such increase of [Tadeco], and the payment by [Tadeco] of
its subscription thru transfer of assets and liabilities. Consequently, the net value of
the assets and properties transferred to [HLI] of P355,131,462.00, if added to the
subscription of the incorporators [HLI] to the original authorized capital stock of the
said corporation amounting to P400,000.00, would give us the total capital stock
subscribed and outstanding of [HLI] of P355,531,462.00 which, as will be seen later
on, plays an important role in determining what amount of shares of the capital stock
of [HLI] may be distributed among its farmworker-beneficiaries pursuant to Section
31 of Republic Act No. 6657.

MECHANICS OF STOCK DISTRIBUTION PLAN

Under Section 31 of [RA] 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 corporation’s total assets. Conformably with this legal provision,
[Tadeco] hereby submits for approval a stock distribution plan that envisions the
following:

1.) The percentage of the value of the agricultural portions of Hacienda

Luisita (P196,630,000.00) in relation to the total assets (P590,554,220.00)
transferred and conveyed to the spin-off corporation, x x x is 33.3%, or to be
exact, 33.296%, that in accordance with law, is the proportion of the
outstanding capital stock of the corporation owning the agricultural land,
which is P355,531,462.00 or 355,531,462 shares with a par value of P1.00
per share, that is proposed to be distributed to the qualified beneficiaries of
the plan.

2.) The said 33.3% of the outstanding capital stock of [HLI] is

P118,391,976.85 or 118,391,976.85 shares with a par value of P1.00 per
share.

3.) The qualified beneficiaries of the [SDP] shall be the farmworkers who
appear in the annual payroll, inclusive of the permanent and seasonal
employees, who are regularly or periodically employed by [HLI] x x x.

4.) [HLI] shall arrange with [Tadeco] at the end of each fiscal year, for a
period of 30 years, the acquisition and distribution to the farmworker-
beneficiaries, on the basis of number of days worked during the year and at
no cost to them, of one-thirtieth (1/30) of 118,391,976.85 shares of the capital
stock of [HLI], equivalent to P118,391,976.85, that are presently owned and
held by [Tadeco], until such time as the entire block of P118,391,976.85
shares shall have been completely acquired and distributed among the
farmworker-beneficiaries.

5.) [HLI] guarantees to the qualified beneficiaries of the stock distribution plan
that every year they will receive, on top of their regular compensation, an
amount that approximates three (3%) percent of the total gross sales from
the production of the agricultural land, whether it be in the form of cash
dividends or incentive bonuses or both.

6.) Even if only a part or fraction of the shares earmarked for distribution will
have been acquired from [Tadeco] and distributed among the farmworker-
beneficiaries, [Tadeco] shall execute at the beginning of each fiscal year an
irrevocable proxy, valid and effective for one (1) year, in favor of the
farmworkers appearing as shareholders of [HLI] at the start of the said year
 which will empower the said farmworkers or their representative to vote in
stockholders’ meetings of [HLI] convened during the year the entire 33.3% of
the outstanding capital stock of [HLI] earmarked for distribution and thus be
able from the very beginning to gain such number of seats in the board of
directors of [HLI] that the whole 33.3% of the shares subject to distribution
will be entitled to.

7.) In addition, [HLI] shall within a reasonable time subdivide and allocate for
free and without charge among the qualified family-beneficiaries residing in
the place where the agricultural land is situated, 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.

STOCK RIGHTS AND RESTRICTIONS

As previously explained, the amendment of the articles of incorporation of [HLI]

increasing its capital stock provided for the classification of its shares of stock into
two types: Class "A" and Class "B" shares. Shares of stock representing the
proportion of the outstanding capital stock of the said corporation to be distributed
among its farmworker-beneficiaries shall constitute the Class "A" shares, while the
rest of the capital stock shall become Class "B" shares or shares sans any
restrictions and can be issued to any stockholder.

Class "A" shares have the same rights as the x x x Class "B" shares. But their
issuance being limited to farmworker-beneficiaries only, Class "A" shares are subject
to the restriction that for a period of 10 years from and after their distribution, no sale,
transfer or conveyance of such shares x x x shall be valid unless it be by hereditary
succession or in favor of qualified and registered beneficiaries within the same
corporation. This limitation on the transferability appears x x x in the amended
articles of incorporation of [HLI] and in due time will be printed on the corresponding
certificates of stock of that type of shares.

Limiting the effectivity of the restriction to 10 years finds support in Section 27 of the
Republic Act No. 6657 which makes land distributed among beneficiaries under the
[CARP] non-transferable for only 10 years, and since stock distribution is a lawful
alternative to the fragmentation of land, the said legal provision should equally apply
to a case where stock option is the choice.

ADVANTAGES OF STOCK PLAN OVER LAND DISTRIBUTION

There are puissant reasons behind [Tadeco’s] preference for stock distribution to
land apportionment, and they are the following:

1.) The physical fragmentation and distribution of the agricultural segments of

Hacienda Luisita, among potential farmworker-beneficiaries who number
approximately 7,000 would result in each individual farmhand receiving less
than a hectare of land that in no way could produce enough to enable him to
lead a comfortable life;
 2.) As the recipient of a parcel of agricultural land, the farmworker has to take
care of injecting the necessary inputs needed by the land and shoulder the
cost of production, and

3.) The farmworker incurs the obligation of paying to the government for his
share of the agricultural land, although the law allows him 30 years within
which to do it.

On the other hand, the stock distribution plan envisaged by [Tadeco] contemplates
of:

A. Distributing the shares of stock over a number of years among the

qualified beneficiaries at no cost to them;

B. Allowing the farmworker to continue to work on the land as such and

receive the wages and other benefits provided for by his [CBA] with the
corporate landowner;

C. Entitling him to receive dividends, whether in cash or in stock, on the

shares already distributed to him and benefit from whatever appreciation in
value that the said shares may gain as the corporation becomes profitable;

D. Qualifying him to become the recipient of whatever income-augmenting

and benefit-improving schemes that the spin-off corporation may establish,
such as the payment of the guaranteed three (3%) percent of gross sales
every year and the free residential or homelots to be allotted to family
beneficiaries of the plan, and

E. Keeping the agricultural land intact and unfragmented, to maintain the

viability of the sugar operation involving the farm as a single unit and thus
warrant to the acknowledged farmworker-beneficiaries, hand-in-hand with
their acquisition of the shares of the capital stock of the corporation owning
the land, a continuing and stable source of income.

Indeed, the stock distribution plan of [Tadeco] x x x has many strong points and
adherence to the law is one of them.

For instance, in arranging for the acquisition by the farmworker-beneficiaries of

shares of the capital stock of the corporation owning the land gratis, the corporate
landowner upholds Section 9 of the Guidelines and Procedures promulgated to
implement Section 31 of [RA] 6657, which prohibits the use of government funds in
paying for the shares. Moreover, the plan for the free dispersal of shares will not in
any way diminish the regular compensation being received by the farmworker-
beneficiaries at the time of share distribution, which is proscribed by Section 31 of
[RA] 6657.

IMPORTANCE TO ECONOMIC DEVELOPMENT

Hacienda Luisita at present is the principal source of sugarcane needed by a sugar

mill owned and operated by [CAT] in the area. It supplies 50% of the sugarcane
requirement of the mill that has 1,850 employees and workers in its employ. Any
disruption in the present operation of Hacienda Luisita which would affect its present
productivity level would therefore automatically influence the operational viability of
the sugar factory x x x and which, in turn, would have repercussions on the livelihood
of the present employees and workers of the mill as well as the livelihood of the
thousands of sugarcane planters and their families within the Tarlac sugar district
being serviced by the sugar mill.

On the other hand, the well-being of the sugar mill has to be the prime concern also
of the corporate owner of Hacienda Luisita, simply because it is the entity that mills
and converts the sugarcane produce of the latter to a finished product. Not only that.
By milling with [CAT] which has the most efficient sugar mill in the region, the
corporate owner of Hacienda Luisita in effect guarantees to itself maximum recovery
from its farm’s sugarcane – something that is essential to its financial capability. In
other words, the relationship between farm and mill is one of absolute reciprocity and
interdependence. One cannot exist without the other.

The importance of the agricultural land of Hacienda Luisita staying undivided cannot
be gainsaid. For it to remain lucrative, it has to be operated as a unit x x x. And on its
successful operation rests the well-being of so many businesses and undertakings in
the province, or in a wider perspective, in the region, that are largely dependent upon
it for existence.

CONFORMITY OF FARMWORKER-BENEFICIARIES

On May 11, 1989, a historic event took place in Hacienda Luisita when the
representatives of [Tadeco] and [HLI] and 5,848 farmworker-beneficiaries inked their
accord, in the presence of officials of the [DAR], to a [MOA] that embodies the stock
distribution plan subject of this proposal. The said 5,848 farmworker-beneficiaries
who gave their conformity to the agreement represent 92.9% of their entire
complement which is much more than the majority (50% plus one) that the law
requires.

CONCLUSION

Here is a stock distribution plan that calls for the acquisition and distribution every
year, for the next 30 years, of 3,946,399.23 shares, worth P3,946,399.23, of the
capital stock of the corporation owning the agricultural land among its qualified
farmworker-beneficiaries at no costto them. It also guarantees to pay to them each
year the equivalent of three (3%) percent of the gross sales of the production of the
land, which is about P7,320,000.00 yearly, irrespective of whether the said
corporation makes money or not. It contemplates of allowing the farmworker-
beneficiaries from the very start to occupy such number of seats in the board of
directors of the corporate landowner as the whole number of shares of stock set
aside for distribution may entitle them, so that they could have a say in forging their
own destiny. And last but not least, it intends to help give the same farmworker-
beneficiaries, who are qualified, adequate shelter by providing residential or
homelots not exceeding 240 sq.m. each for free which they can call their own.

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 [CBA] with management. x
xx

36Under DAO 10, Sec. 1b.), par. 2, "the acceptance of the [SDP] by the majority of all the
qualified beneficiaries shall be binding upon all the said qualified beneficiaries within the
applicant corporation."

37 Rollo, p. 14.

38 Id. at 1308-1309.

39 Id. at 1310-1313.

40
Entitled "Resolution Approving the Stock Distribution Plan of [Tadeco]/HLI."

41 Rollo, p. 151.

42 Id. at 3667-3668.

43 Id. at 647-650.

44 Id. at 80, Petition of HLI; id. at 944, Consolidated Reply of HLI; id. at 1327-1328.

45 Id. at 651-664.

46 Id. at 1485-1487.

47 Id. at 1483-1484.

48 Id. at 1492-1493.

49 Id. at 1362.

50 Id. at 3669.

51 Id. at 1499-1509, via a Deed of Sale dated July 30, 1998.

52 Id. at 1362.

53 Id. at 1514-1518.

54 Id. at 1519-1520.

55 Id. at 1521-1522.

56 TSN, August 18, 2010, pp. 153-155.

57 Rollo, pp. 153-158, signed by 62 individuals.

58 Id. at 546.
59 Id. at 175-183.

Id. at 442, Mallari’s Comment to Petition. Mallari would, per his account, breakaway from
60

AMBALA to form, with ex-AMBALA members, Farmers Agrarian Reform Movement, Inc. or
FARM.

61 Id. at 159-174.

62 Id. at 184-192.

63 Id. at 679-680.

64Id. at 386-405. The following are the pertinent findings of the Special Task Force as stated
in its Terminal Report:

IV. IDENTIFICATION OF THE PROBLEMS/ISSUES/CONCERNS:

Matrix on the Comparative Views of the Farmer Groups vis-à-vis those of HLI
Management, Along With the Corresponding FGD/OCI. Results was prepared and
the compliance reports submitted, the petitions of the FWBs, particularly the
AMBALA and the Supervisory Group, together with the respective responses to said
petitions by HLI management and the FGD/OCI results were utilized to make a
comparative summary, exemplified hereunder.

1. INDIVIDUAL ISSUES RAISED BY THE SUPERVISORY GROUP OF HACIENDA

LUISITA INCORPORATED VIS-Á-VIS REJOINDER OF HLI AND OBSERVATION
OF TF.

1.1. Issue: Non-enjoyment of the rights and privileges that were supposed to
be given to the FWBs as stated in the [MOA] prompted the supervisory group
to claim for the "one percent (1%)" share from the HLI representing their
share as supervisors during the transition period.

 HLI management: Such claim is a total misapprehension of Section

32 of R.A. No. 6657, the last paragraph of which requires the
payment of 1% of the gross sale to managerial, supervisory and
technical workers at the time of the effectivity of R.A. No. 6657. There
were no such managerial employees and supervisors engaged in
temporarily managing and supervising the operation of the land until
its final turnover to the farmworkers since there was no land to
transfer in the first place.
 The Task Force position: That Section 32 of R.A. No. 6657 may not
directly apply to the instant case but the non-realization of the said
1% share of expectation in the gross sale is a cause of
disenchantment. The claim for the 1% share is not included in the
MOA. x x x

1.2. Issue: Non-receipt of the 10% dividend

 HLI contends that the distribution of said dividend does not apply to
corporate farms like HLI which opted for the SD Plan.
  Task force finding: The FWBs do not receive such financial return
despite the stipulation on the matter.

1.3. Issue: On the three percent (3%) out of the thirty three percent (33%)
representing the equity shares given from the proceeds of the sale of the 500
hectares (converted to non-agricultural use).

 The HLI management argues that the corporation, banking on the

legal fiction of separate corporate existence, is not obliged to give
33% of the gross selling price of the land since the legal owner is the
corporation itself and not the stockholders. And the 3% was given by
the HLI merely as a bonus for the FWBs.
 The Task Force position: Though, allegedly, the supervisory group
receives the 3% gross production share and that others alleged that
they received 30 million pesos still others maintain that they have not
received anything yet. Item No. 4 of the MOA is clear and must be
followed. There is a distinction between the total gross sales from the
production of the land and the proceeds from the sale of the land.
The former refers to the fruits/yield of the agricultural land while the
latter is the land itself. The phrase "the beneficiaries are entitled
every year to an amount approximately equivalent to 3% would only
be feasible if the subject is the produce since there is at least one
harvest per year, while such is not the case in the sale of the
agricultural land. This negates then the claim of HLI that, all that the
FWBs can be entitled to, if any, is only 3% of the purchase price of
the converted land.
 Besides, the Conversion Order dated 14 August 1996 provides that
"the benefits, wages and the like, presently received by the FWBs
shall not in any way be reduced or adversely affected. Three percent
of the gross selling price of the sale of the converted land shall be
awarded to the beneficiaries of the SDO." The 3% gross production
share then is different from the 3% proceeds of the sale of the
converted land and, with more reason, the 33% share being claimed
by the FWBs as part owners of the Hacienda, should have been
given the FWBs, as stockholders, and to which they could have been
entitled if only the land were acquired and redistributed to them under
the CARP.

1.4. Issue: Illegal conversion and financial incapability of HLI to proceed with
the proposed development, thereby leaving the areas unproductive.

 The HLI management contends that the Petition for Conversion was
duly approved by the DAR on 14 August 1996 and it had the
conformity of more than 5,000 FWBs who signed a manifesto of
support.
 In the Petitions and/during the OCI/FGD [Ocular Inspection/Focused
Group Discussion] the 500 hectares subject of conversion appear to
still remain undeveloped. A clear example is the Central Techno Park
which has a landscaped entrance and concrete roads but the only
things which can be seen inside the premises are cogon grasslands.
The FWBs further maintained that they were either not given any
 monetary benefit from the conversion of the 500 hectares or that they
were only partially given.

2. CONCERNS MANIFESTED IN THE PETITION FILED BY THE ALYANSA NG

MGA MANGGAGAWANG BUKID NG HACIENDA LUISITA (AMBALA) LED BY MR.
RENE GALANG

2.1. Issue: That DAR Administrative Order No. 10, series of 1988, guidelines
in the corporate availment of SDO, should observe Section 31 of R.A. No.
6657 qualified beneficiaries and provide that they (FWBs) be allowed to buy
the land from the company.

The HLI management posits the proposition that Section 31 is very clear and
unambiguous. It grants to the FWBs the right to purchase shares of stocks in
the corporation that owns the agricultural land itself and not the land. HLI is
correct in this unless the SDP is disregarded.

2.2. Issue: Cancellation of the SDO and immediate coverage of the area are
requested as the agreements in the implementation of the SDO were
allegedly not followed/complied with.

 The HLI management warranted that subject SD Plan is the most

feasible scheme/alternative vis-à-vis physical distribution of the
landholding under compulsory acquisition.
 During the FGD/OCI, it was represented that the terms, conditions
and benefits provided for in the MOA/commitment appear not to have
been substantially followed. Hereunder, is a more detailed discussion
of the issues:

2.2.1. On the issue of non compliance with the MOA

* FWBs are supposed to receive P700-800 dividends annually.

* P800-1000 production sharing per year. The Hacienda is operating

continuously which only proves that the Hacienda is earning.

 HLI, however, claims that it is not incurring profits, thus, there are no
dividends to be distributed. But the shares of stocks and 3%
production share have been given.
 FGD/OCI finding shows that the number of shares of stocks to be
received by the FWBs, depends on their designation (i.e., permanent,
casual or seasonal) and on the number of man days. Retired and
retrenched workers are not given shares of stocks and cease as
share holders. Undisputedly, the setup under the MOA is one-sided in
favor the HLI. The work schedule, upon which the extent of
entitlement to be granted shares of stock is wholly within the
prerogative and discretion of HLI management that a FWB can still be
denied thereof by the simple expediency of not giving him any
working hours/days. And this is made possible by the fact that [there]
are more farmers/farmworkers in its employ than what is, according
to HLI, necessary to make it operational.
2.2.2. On the issue of representation

 It was verified that the Board of Directors election is annually

conducted. However, majority of the FWBs are no longer interested
and, in fact, have boycotted the elections because of the minority
representation of the FWBs (4 as against 7). They claim that they are
always outnumbered and some claim that the representatives elected
are pro management. x x x [N]o fruitful and harmonious corporate
activities can be expected as any resistance will be counter-
productive, that to continue the operation under the SDP that is
challenged herein will only be an empty exercise. The farmers and
farmworkers will not, under the circumstances, be able to realize the
contemplated receipt of benefits under the Program.

2.2.3. On the issue of the 240-square meter homelot

 As to the 240 square meter homelots, not all of the FWBs were given
homelots. Of those given, they complain that they still do not have the
corresponding titles. And, those already given titles maintain that said
documents are useless as such, for they cannot even be used as
bank collaterals, despite even the lapse of the 5-year prescriptive
period, because banks and other financial institutions refuse to honor
the same without clearance from the HLI management. x x x

2.2.4. On the issue of coverage of the Hacienda

 The HLI contends that dividing the 4,915.75 hectares among 6,296
beneficiaries would result to a farm lot of 0.78 hectare per individual
FWB, which is not an economic size farm. Differences in the physical
conditions of the landholding must be considered such as soil fertility
and accessibility. The question of who would get the fertile or
accessible part of the land and who would receive less would
result/culminate in a "battle royale" among the FWBs.

DAR has established guidelines on the matter of such allocations and no

problem has been encountered in its implementation of the CARP. By and
large for a whole scale cultivation and production, formation of cooperatives
has proven to be an effective mechanism to address the problem. The law
even encourages the use of such combination [cf. Section 29, (3rd par.),
Rep. Act No. 6657]. lawphi 1

2.2.5. On the agreement that other benefits will be given other than those
provided for in the MOA

 It was stipulated that the SDO would provide the FWBs other benefits
x x x a less than a hectare-farm would not be able to provide, like the
3% of the gross production sales, to be shared with the FWBs, on top
of their regular compensation.
 The FWBs do not receive any other benefits under the MOA except
the aforementioned [(viz: shares of stocks (partial), 3% gross
production sale (not all) and homelots (not all)].
V. PRELIMINARY CONSIDERATIONS

1. The common issues raised by the petitioners are focused on the

revocation of the existing SDO that was proposed by HLI and approved by
the PARC on ground, among others that the provisions of Section 31 of R.A.
No. 6657, upon which the SDO/SDP was based is contrary to the basic
policy of the agrarian reform program on Land Acquisition and Redistribution,
as may be gleaned from the second paragraph of Section 2 of R.A. No. 6657,
which reads:

"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 farmworkers
with the opportunity to enhance their dignity and to improve the quality of
their lives through greater productivity of agricultural lands." (underscoring
supplied).

Envisioned in the foregoing provision is the physical land transfer to

prospective beneficiaries as reiterated in Section 5 thereof, as follows:

"Schedule of Implementation. The distribution of all lands covered by this Act

shall be implemented immediately and completed within ten (10) years from
the effectivity thereof".

2. While SDO/SDP is an alternative arrangement to the physical distribution

of lands pursuant to Section 31 of R.A. No. 6657, logic and reason dictate
that such agreement must materialize within a specific period during the
lifetime of CARP, stating clearly therein when such arrangement must end.
The aforementioned provision may be considered as the provision of the law
on "suspended coverage", parallel to the provisions of Section 11 on
Commercial Farming where coverage of CARP is deferred for ten (10) years
after the effectivity of Republic Act No. 6657. Stated simply, owners of
commercial farms are given a chance to recoup their investment for ten (10)
years before same is finally subjected to coverage under the CARP.

VI. FINDINGS, ANALYSIS AND RECOMMENDATION:

1. Providing for the quintessence and spirit of the agrarian reform program,
Republic Act No. 6657 explicitly provides:

"SECTION 2. Declaration of Principles and Policies.¾It is the policy of the

State to pursue a Comprehensive Agrarian Reform Program (CARP). The
welfare of the landless farmers and farmworkers will receive the highest
consideration to promote social justice and to move the nation toward sound
rural development and industrialization, and the establishment of owner
cultivatorship of economic-size 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 farmworkers
with the opportunity to enhance their dignity and improve the quality of their
lives through greater productivity of agricultural lands" (underscoring added). 1avv phil
Within the context of the foregoing policy/objective, the farmer/farmworker
beneficiaries (FWBs) in agricultural land owned and operated by corporations
may be granted option by the latter, with the intervention and prior
certification of DAR, "x x x the right to purchase such proportion of the capital
stock of the corporation that the agricultural land, actually devoted to
agricultural activities, bears in relation to the company’s total asset x x x"
(Section 31, Rep. Act NO. 6657). Toward this end, DAR issued
Administrative Order No. 10, series of 1988, copy of which is attached as
Annex "K" and made an integral part hereof, which requires that the stock
distribution option (SDO) shall meet the following criteria, reading, inter alia:

"a. that the continued operation of the corporation with its agricultural
land intact and unfragmented is viable, with potential for growth and
increased profitability;

"b. that the plan for stock distribution to qualified beneficiaries would
result in increased income and greater benefits to them, than if the
lands were divided and distributed to them individually;

xxxx

And to ensure, effective and fair implementation of the contemplated Stock

Distribution Plan (SDP), the said AO also provides:

"SECTION 12. Revocation of Certificate of Compliance¾Non-compliance

with any of the requirements of Section 31 of RA 6657, as implemented by
these Implementing Guidelines shall be grounds for the revocation of the
Certificate of Compliance issued to the corporate landowner-applicant.

SECTION 13. Reservation Clause¾Nothing herein shall be construed as

precluding the PARC from making its own independent evaluation and
assessment of the stock distribution plan of the corporate landowner-
applicant and from prescribing other requirements."

Herein, however, there is yet no Certificate of Compliance issued.

The reason is simple. Despite the lapse of sixteen (16) years, from the time
the SDP was approved in November 1989, by resolution of the x x x (PARC),
the objective and policy of CARP, i.e., acquisition and distribution (herein
under the [SDP], only shares of stocks) is yet to be fully completed; the
FWBs, instead of the promised/envisioned better life under the CARP
(therein, as corporate owner), do still live in want, in abject poverty,
highlighted by the resulting loss of lives in their vain/futile attempt to be
financially restored at least to where they were before the CARP (SDP) was
implemented. While they were then able to make both ends meet, with the
SDP, their lives became miserable.

2. For the foregoing considerations, as further dramatized by the following

violations/noncompliance with the guidelines prescribed, which are legally
presumed as integrated in the agreements/accords/stipulations arrived at
thereunder like the HLI SDP, namely:
 2.1. Noncompliance with Section 11 of Administrative Order No. 10, Series of
1988, which provides:

"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 the stock and transfer books
and submitted to the Securities and Exchange Commission (SEC) within
sixty (60) days from the said implementation plan."

The [SDP], however, submitted a 30-year implementation period in terms of

the transfer of shares of stocks to the farmworkers beneficiaries (FWBs). The
MOA provides:

"At the end of each fiscal year: for a period of 30 years, SECOND PARTY
shall arrange with the FIRST PARTY the acquisition and distribution to the
THIRD PARTY on the basis of the number of days worked and at no cost to
them of one-thirtieth (1/30) of …"

Plainly, pending the issuance of the corresponding shares of stocks, the

FWBs remain ordinary farmers and/or farmworker and the land remain under
the full ownership and control of the original owner, the HLI/TADECO.

To date the issuance and transfer of the shares of stocks, together with the
recording of the transfer, are yet to be complied with.

2.2. Noncompliance with the representations/warranties made under Section

5 (a) and (b) of said Administrative Order No. 10.

As claimed by HLI itself, the corporate activity has already stopped that the
contemplated profitability, increased income and greater benefits enumerated
in the SDP have remained mere illusions.

2.3. The agricultural land involved was not maintained "unfragmented". At

least, 500 hectares hereof have been carved out after its land use has been
converted to non-agricultural uses.

The recall of said SDP/SDO of HLI is recommended. More so, since:

1. It is contrary to Public Policy

Section 2 of [RA] 6657 provides that the welfare of landless farmworkers will receive
the highest consideration to promote social justice. As such, the State undertake a
more equitable distribution and ownership of land that shall provide farmworkers with
the opportunity to enhance their dignity and improve the quality of their lives through
greater productivity of agricultural lands.

In the case of Hacienda Luisita, the farmworkers alleged that the quality of their lives
has not improved. In fact it even deteriorated especially with the HLI Management
declaration that the company has not gained profits, in the last 15 years, that there
could be no declaration and distribution of dividends.
2. The matter of issuance/distribution shares of stocks in lieu of actual distribution of
the agricultural land involved, was made totally dependent on the discretion/caprice
of HLI. Under the setup, the agreement is grossly onerous to the FWBs as their man
days of work cannot depart from whatever management of HLI unilaterally directs.

They can be denied the opportunity to be granted a share of stock by just not
allowing them to work altogether under the guise of rotation. Meanwhile, within the
30-year period of bondage, they may already reach retirement or, worse, get
retrenched for any reason, then, they forever lose whatever benefit he could have
received as regular agrarian beneficiary under the CARP if only the SDP of HLI were
not authorized and approved.

Incidentally, the FWBs did not have participation in the valuation of the agricultural
land for the purpose of determining its proportionate equity in relation to the total
assets of the corporation. Apparently, the sugarlands were undervalued.

3. The FWBs were misled into believing by the HLI, through its carefully worded
Proposal that "x x x the stock distribution plan envisaged by [Tadeco], in effect,
assured of:

"A. Distributing the shares of stock over a numbers of years among the
qualified beneficiaries at no cost to them;

B. Allowing the farmworker to continue to work on the land as such and

receive the wages and other benefits provided for by his collective bargaining
agreement with the corporate landowner;

C. Entitling him to receive dividends, whether in cash or in stock, on the

shares already distributed to him and benefit from whatever appreciation in
value that the said shares may gain as the corporation becomes profitable;

D. Qualifying him to become the recipient of whatever income-augmenting

and benefit-improving schemes that the spin-off corporation may establish,
such as the payment of the guaranteed three (3%) percent of gross sales
every year and the free residential or homelots to be allotted to family
beneficiaries of the plan; and

E. Keeping the agricultural land intact and unfragmented, to maintain the

viability of the sugar operation involving the farm as a single unit and thus
warrant to the acknowledged farmworker-beneficiaries, hand-in-[hand] with
their acquisition of the shares of the capital stock of the corporation owing the
land, a continuing and stable source of income." (Annex "A", supra).

At the expense of being repetitive, the be sugar-coated assurances were, more than
enough to made them fall for the SDO as they made them feel rich as "stock holder"
of a rich and famous corporation despite the dirt in their hands and the tatters, they
use; given the feeling of security of tenure in their work when there is none;
expectation to receive dividends when the corporation has already suspended
operations allegedly due to loses; and a stable sugar production by maintaining the
agricultural lands when a substantial portion thereof of, almost 1/8 of the total area,
has already been converted to non-agricultural uses.
65 Id. at 694-699.

66 Id. at 339-342.

67 Id. at 100.

68 Id. at 101.

69 Id. at 146.

70 Id. at 107-140.

71 Id. at 103-106.

72 Id. at 19.

73 Id. at 52

74 Id. at 255-256.

75 Id. at 257-259.

76 Id. at 334-367.

77 Id. at 436-459.

Attys. Edgar Bernal and Florisa Almodiel signed the motion/manifestation as counsel of
78

Mallari and/or FARM.

79The Supervisory Group later teamed up with the AMBALA-Mallari faction. For brevity, they
are referred to herein as the "AMBALA-Mallari-Supervisory Group."

80 Rollo, pp. 530-641.

81 Id. at 1350-1359.

82 Id. at 1535-1544.

83 TSN, August 24, 2010, p. 229.

84 Rollo, pp. 3060-3062.

85 Id. at 81.

86 G.R. No. 131457, August 19, 1999, 312 SCRA 751.

87 Rollo, p. 82.

88 Id. at 149.
89Sec. 4. The State shall, by law, undertake an agrarian reform program 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 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 right of small landowners. The State shall further provide incentives forvoluntary
land-sharing.

90 Consumido v. Ros, G.R. No. 166875, July 31, 2007, 528 SCRA 696, 702.

91 TSN, August 18, 2010, p. 141.

92 Rollo, p. 871.

93
Id. at 38.

94Atienza v. Villarosa, G.R. No. 161081, May 10, 2005, 458 SCRA 385, 403; citing Chua v.
Civil Service Commission, G.R. No. 88979, February 7, 1992, 206 SCRA 65.

95 Id.

96 Id.

97 No. L-55230, November 8, 1988, 167 SCRA 51, 59-60.

98 Public respondents’ Memorandum, p. 24

99 EO 229, Sec. 18.

100 BANAT Party-list v. COMELEC, G.R. No. 177508, August 7, 2009, 595 SCRA 477, 498.

101 G.R. No. 167614, March 24, 2009, 582 SCRA 254, 275-276.

102 Rollo, p. 40; TSN August 18, 2010, p. 74.

DAO 10, Section 11. Implementation / Monitoring of Plan¾The approved [SDP] shall be
103

implemented within three (3) months x x x.

Upon completion [of the stock distribution], the corporate landowner-applicant shall
be issued a Certificate of Compliance. x x x

Section 12. Non-compliance with any of the requirements of Section 31 of RA 6675,

as implemented by this Implementing Guidelines shall be grounds for the revocation
of the Certificate of Compliance issued to the corporate landowner-applicant. x x x

104 TSN, August 24, 2010, p. 13.

105 Koruga v. Arcenas, G.R. Nos. 168332 and 169053, June 19, 2009, 590 SCRA 49, 68;
citing In Re: Petition for Assistance in the Liquidation of the Rural Bank of Bokod (Benguet),
Inc., PDIC v. Bureau of Internal Revenue, G.R. No. 158261, December 18, 2006, 511 SCRA
123, 141.

106 TSN, August 24, 2010, p. 205.

107 Id.

108Garcia v. Executive Secretary, G.R. No. 157584, April 2, 2009, 583 SCRA 119, 129; citing
Franciso, Jr. v. House of Representatives, G.R. No. 160261, November 10, 2003, 415 SCRA
44.

109
ABS-CBN Broadcasting Corporation v. Philippine Multi-Media System, Inc., G.R. Nos.
175769-70, January 19, 2009, 576 SCRA 262, 289 citing Philippine Veterans Bank v. Court
of Appeals, G.R. No. 132561, June 30, 2005, 462 SCRA 336; Apex Mining Co., Inc. v.
Southeast Mindanao Gold Mining Corp., G.R. Nos. 152613, 152628, 162619-20 and
152870-71.

110 Franciso, Jr. v. House of Representatives, supra note 108.

Alvarez v. PICOP Resources, Inc., G.R. Nos. 162243, etc., November 29, 2006, 508
111

SCRA 498, 552.

112 Supra note 108, at 138-139.

An Act Strengthening the CARP, Extending the Acquisition and Distribution of all
113

Agricultural Lands, Instituting Necessary Reforms, Amending for the Purpose Certain
Provisions of RA 6657, as Amended and Appropriating Funds therefor.

114 Quizon v. Comelec, 545 SCRA 635; Mattel, Inc. v. Francisco, 560 SCRA 506.

115 Webster’s Third New International Dictionary Unabridged 444-445 (1993).

116
Id. at 445.

117 Records of the Constitutional Commission, Vol. II, p. 678.

118Sec. 2, 3rd paragraph , of RA 6657 states: The agrarian reform program is founded on the
right of farmers and regular farmers who are landless, to own land directly or collectively the
lands they till or, in the case of other farmworkers to receive a share of the fruits thereof. To
this end, the State shall encourage and undertake the just distribution of all agricultural
lands, subject to priorities and retention limits set forth in this Act x x x.

119 11 Fletcher, Cyc. Corps. (1971 Rev. Vol.) Sec. 5083.

120 Mobilia Products, Inc. v. Umezawa, G.R. Nos. 149357 and 149403, March 4, 2005.

121 Cawaling v. COMELEC, G.R. No. 146319, October 26, 2001, 368 SCRA 453.
122 Basco v. PAGCOR, G.R. No. 138298, November 29, 2000, 346 SCRA 485

123 Angara v. Electoral Commission, 63 Phil. 139 (1936); Cawaling v. COMELEC, supra,
citing Alvarez v. Guingona, 252 SCRA 695 (1996).

124 National Food Authority v. Masda Security Agency, Inc., G.R. No. 163448, March 8, 2005.

125 Rollo, p. 794. The PARC resolution also states:

HLI’s implementation of the distribution of the mandatory minimum ratio of land-to-

shares of stock to the ARBs [Agrarian Reform Beneficiaries] was based on man
days, within its policy of no-work no-shares of stock, and not to equal number of
shares depending upon their rightful share, as required in the rules, and therefore
practically divested the ARBs, as to their qualification/entitlement, as ARBs at HLI’s
whims, to their disadvantage and prejudice in the form of diminution in the minimum
ration of shares. Having increased x x x the number of workers (contractual), the
equity share of each permanent employee, as of 1989, naturally had to be, as in fact,
reduced.

Further x x x, HLI took it upon itself, or usurped, the duty or mandate of DAR to
qualify the recipient ARBs and imposed its own criteria and discretion in the
allocation of the mandatory minimum ratio of land-to share by basing the distribution
on the number of days worked. Still worse, HLI made allocation to recipients who are
not in the ARBs original masterlist as admittedly, it distributed to about 11,955
stockholders of record 59,362,611 shares representing the second half of the
total number of shares earmarked for distribution when in fact there were only
6,296 farm workers or less, at the time when the land was placed under CARP
under the SDP/SDO scheme. (Emphasis added.)

126 Memorandum of Renato Lalic, et al., p. 14.

127 Little Oxford Dictionary 442 (7th ed.).

128 Rollo, p. 3676.

129The SGV & Co.’s Independent Auditors Report on HLI for years ended 2009, 2008 and
2007 contains the following entries: "[T]he Company has suffered recurring losses from
operations and has substantial negative working capital deficiency. The Company has
continued to have no operations and experienced financial difficulties as a result of a strike
staged by the labor union on November 6, 2004." Rollo, p. 3779, Annex "I" of HLI’s
Memorandum.

130 Sec. 5(2).

131 TSN, August 24, 2010, p. 125.

132 MOA, 4th Whereas clause.

133 Memorandum of public respondents, p. 41.

134 HLI Consolidated Reply and Opposition, p. 65.

 Herida v. F&C Pawnshop and Jewelry Store, G.R. No. 172601, April 16, 2009, 585 SCRA
135

395, 401.

136 Bascos, Jr. v. Taganahan, G.R. No. 180666, February 18, 2009, 579 SCRA 653, 674-675.

Cannu v. Galang, G.R. No. 139523, May 26, 2005, 459 SCRA 80, 93-94; Ang v. Court of
137

Appeals, G.R. No.80058, February 13, 1989, 170 SCRA 286.

138 TSN, August 18, 2010, p. 58.

139 RA 6657, Sec. 31.

140 DAO 10, s. 1988, Sec. 1.

141 TSN, August 18, 2010, p. 106.

142 Id. at 103-106.

See Abakada Guro Party List v. Purisima, G.R. No. 166715, August 14, 2008, 562 SCRA
143

251, 288-289.

144 Rollo, p. 1362.

145 Lu v. Manipon, G.R. No. 147072, May 7, 2002, 381 SCRA 788, 796.

146 Sandoval v. Court of Appeals, G.R. No. 106657, August 1, 1996, 260 SCRA 283, 295.

Cavite Development Bank v. Lim, G.R. No. 131679, February 1, 2000, 324 SCRA 346,
147

359..

148 G.R. No. 127797, January 31, 2000, 324 SCRA 126, 136-137.

149 Rollo, p. 1568.

Duran v. Intermediate Appellate Court, No. L-64159, September 10, 1985, 138 SCRA
150

489, 494.

151 Rollo, pp. 1499-1509.

152 G.R. No. 150066, April 13, 2007, 521 SCRA 68, 82-83.

153 Supra note 2.

154 Memorandum of RCBC, p. 52.

155 Id.

156 Id. at 52-53.

157 Id at 53.
 Roxas & Company, Inc. v. DAMBA-NFSW, G.R. Nos. 149548, etc., December 4, 2009,
158

607 SCRA 33, 56.

159 RA, 8974, Sec. 6.

See
<http://www.congress.gov.ph/committees/commnews/commnews_det.php?newsid=1231>
(last visited June 23, 2011).

160 Manila Motor Co., Inc. v. Flores, 99 Phil. 738, 739 (1956).

161 Fernandez v. P. Cuerva & Co., No. L-21114, November 28, 1967, 21 SCRA 1095, 1104;
citing Chicot County Drainage Dist. V. Baxter States Bank (1940) 308 US 371.

162 No. L-23127, April 29, 1971, 38 SCRA 429, 434-435.

163 G.R. No. 164527, August 15, 2007, 530 SCRA 235.

164 G.R. No. 147817, August 12, 2004, 436 SCRA 273.

See Province of North Cotabato v. GRP Peace Panel on Ancestral Domain, G.R. Nos.
165

183591, 183752, 183893, 183951 and 183962, October 14, 2008, 568 SCRA 402.

166 Rollo, p. 193.

167Id. at 3738. These homelots do not form part of the 4,915.75 hectares of agricultural land
in Hacienda Luisita. These are part of the residential land with a total area of 120.9234
hectares, as indicated in the SDP.

The Lawphil Project - Arellano Law Foundation

DISSENTING OPINION

CORONA, C.J.:

MR. OPLE. xxxx But when the Constitution directs Congress to the effect that the State shall
encourage and undertake distribution of all agricultural lands, subject to limitations put by law
especially on retention limits, does this contemplate — this question I address to the Committee and
particularly to Commissioner Tadeo — a blanket approach to all agricultural lands so that we do not
distinguish between, let us say, the owners of Hacienda Luisita, the biggest plantation in Luzon with
6,000 hectares[,] and this chap in Laguna or Quezon who has only 10 hectares of coconut
plantation? Sa inyo bang masid at wari ay masasagasaan ng land distribution ang dalawang ito: ang
may-ari ng pinakamalaking hasyenda dito sa Luzon at isang hindi naman mayaman, ni hindi
mariwasa, pangkaraniwang tao lamang na nagmamay-ari ng isang sukat ng lupang tinatamnan ng
niyog na hindi hihigit sa sampung ektarya?

MR. TADEO. Pareho.

 xxx xxx xxx

MR. OPLE. xxxx With respect to just a few enormous landed estates, I have already given
examples: Hacienda Luisita, the biggest in Luzon, with 6,000 hectares of rice and corn land and
sugar land and with 6,000 tenants and workers; the Canlubang Sugar Estate, just across the city in
Laguna; and in the West Visayas alone with about 30,000 sugar planters or hacenderos — the
aggregate for the nation escapes me for the moment. In the ultimate stage of the land reform
program as now envisioned, will all of these estates be redistributed to their tenants, and if they have
no tenants to whom will they be redistributed?

MR. TADEO. The principle is agrarian land for the tillers and land for the landless. x x x1

Agrarian reform is an essential element of social justice under the 1987 Constitution. It "mandates
that farmers and farmworkers have the right to own the lands they till, individually or collectively,
through cooperatives or similar organizations."2 It aims to liberate farmers and farmworkers from
bondage to the soil, to ensure that they do not remain slaves of the land but stewards thereof.

The decision of the Court in this case today should promote the constitutional intent of social justice
through genuine and meaningful agrarian reform. This is imperative because the framers of the 1987
Constitution themselves recognized the importance of Hacienda Luisita in the implementation of
agrarian reform in the Philippines. Thus, this case is of transcendental importance as it is a test of
the Court’s fidelity to agrarian reform, social justice and the Constitution.

History of Agrarian Reform

in the Philippines

Agrarian reform has been envisioned to be liberating for a major but marginalized sector of
Philippine society, the landless farmers and farmworkers. History, too, has been said to be liberating.
A quick review of the long and tortuous story "of the toiling masses to till the land as freemen and not
as slaves chained in bondage to a feudalistic system of land ownership"3 should enlighten us better
on the significance of the Court’s decision in this case.

By Royal Decree of November 7, 1751 the King of Spain acknowledged that the revolts which broke
out among peasants in the provinces of Cavite, Bulacan, Laguna and Morong (now, Rizal) stemmed
from "injuries which the [Filipinos] received from the managers of the estates which are owned by
the religious of St. Dominic and those of St. Augustine – usurping the lands of the [Filipinos], without
leaving them the freedom of the rivers for their fishing, or allowing them to cut woods for their
necessary use, or even collect the wild fruits xxx."4 The King approved the pacification measures
adopted by Don Pedro Calderon Enriquez of the Royal Audiencia who "demanded from the
aforesaid religious the titles of ownership of the lands which they possessed; and notwithstanding
the resistance that they made to him xxx distributed to the villages the lands which the [religious]
orders had usurped, and all which they held without legitimate cause [he] declared to be crown
lands."5

It has been two centuries and three scores since the first recorded attempt at compulsory land
redistribution in the Philippines.

It proved to be ineffectual though for by the end of the Spanish period and the beginning of the
American era the same religious orders still controlled vast tracts of land commonly known as "friar
lands."6 In his Special Reports to the U.S. President in 1908, Governor General William Howard Taft
placed friar landholdings at 171,991 hectares tilled by about 70,000 landless tenants.7 Noting that
such situation was "[a] most potential source of disorder in the islands," Taft negotiated with Rome
for the purchase of the friar lands for $7 Million with sinking funds.8 The "lands were to be disposed
of to the tenants as rapidly as the public interest will permit"9 even at a net pecuniary loss to the
colonial government.10

However, in a sudden shift of policy, the U.S. sold friar lands on terms most advantageous to it11 –
large tracts12were sold for close to $7 Million to corporate and individual investors.13 Most tenants in
possession were said to have been disinterested to purchase the lands.14 They were extended
assistance though in the form of better sharing and credit arrangements to ameliorate agrarian
relations.15

Soon after the Philippines was plunged into a series of peasant uprisings led by the Sakdalista in the
1930’s and the Hukbalahap in the 1950’s. Appeasement came in the form of RA 1199 (Agricultural
Tenancy Act of 1954) and RA 1400 (Land Reform Act of 1955). RA 1199 allowed tenants to become
leaseholders while RA 1400 mandated compulsory land redistribution. However, RA 1400 set
unreasonable retention limits at 300 hectares for private rice lands and 600 hectares for corporate
lands.16

As peasant unrest continued to fester, RA 3844 (Land Reform Code of 1963) was enacted instituting
the "operation land transfer" program but allowing a maximum retention area of 75 hectares.17 This
was followed in 1971 by RAs 6389 and 6390 (Code of Agrarian Reforms) which created the
Department of Agrarian Reform, reinforced the position of farmers18 and expanded the scope of
agrarian reform by reducing the retention limit to 24 hectares.19 In 1972, President Ferdinand E.
Marcos issued PD 2 proclaiming the entire Philippines as a land reform area. However, PD 27
subsequently restricted the scope of land reform to the compulsory redistribution of tenanted rice
and corn lands exceeding seven hectares.

Thus, more than two and a half centuries after compulsory land redistribution was first attempted in
the Philippines, there remained so much unfinished business. It is this which the social justice
provisions of the 1987 Constitution were intended to finish. Section 4, Article XIII thereof commands:

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 right of small
landowners. The State shall further provide incentives for voluntary land-sharing. (Emphasis
supplied)

By its plain language, it requires that the law implementing the agrarian reform program envisioned
by the Constitution should employ a land redistribution mechanism. Subject only to retention limits
as may be prescribed by Congress and to payment of just compensation, ownership of all
agricultural lands are to be distributed and transferred to the farmers and farmworkers who till the
land.

There is absolutely no doubt in my mind that the Constitution has ordained land redistribution as the
mechanism of agrarian reform. First, it recognizes the right of farmers and regular farmworkers who
are landless to own directly or collectively the lands they till. Second, it affirms the primacy20 of
this right which is enshrined as the centerpiece of agrarian reform, thereby guaranteeing its
enforcement. Third, in the same breath, it directs that, to such end, the State shall undertake the just
distribution of all agricultural lands,21 subject only to retention limits and just compensation.
Pursuant to the mandate of Section 4, Article XIII of the Constitution, Congress enacted RA 6657
(Comprehensive Agrarian Reform Law of 1988). It was supposed to be a revolutionary law,
introducing innovative approaches to agrarian reform. Among its novel provisions (and relevant to
this case) is Section 31 which provides:

SEC. 31. Corporate Landowners. - Corporate landowners may voluntarily transfer ownership over
their agricultural landholdings to the Republic of the Philippines pursuant to Section 20 hereof or to
qualified beneficiaries, under such terms and conditions consistent with this Act, as they may agree
upon, subject to confirmation by the DAR.

Upon certification by the DAR, corporations owning agricultural lands may give their qualified
beneficiaries the right to purchase such proportion of the capital stock of the corporation that the
agricultural land, actually devoted to agricultural activities, bears in relation to the company’s total
assets, under such terms and conditions as may be agreed upon by them. In no case shall the
compensation received by the workers at the time the shares of stocks are distributed be reduced.
The same principle shall be applied to associations, with respect to their equity or participation.

Corporations or associations which voluntarily divest a proportion of their capital stock, equity or
participation in favor of their workers or other qualified beneficiaries under this section shall be
deemed to have complied with the provisions of this Act: Provided, That the following conditions are
complied with:

a) In order to safeguard the right of beneficiaries who own shares of stocks to dividends and
other financial benefits, the books of the corporation or association shall be subject to
periodic audit by certified public accountants chosen by the beneficiaries;

b) Irrespective of the value of their equity in the corporation or association, the beneficiaries
shall be assured of at least one (1) representative in the board of directors, or in a
management or executive committee, if one exists, of the corporation or association;

c) Any shares acquired by such workers and beneficiaries shall have the same rights and
features as all other shares; and

d) Any transfer of shares of stocks by the original beneficiaries shall be void ab initio unless
said transaction is in favor of a qualified and registered beneficiary within the same
corporation.

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.

Section 31 of RA 6657 grants corporate landowners like petitioner Hacienda Luisita, Inc. (HLI) the
option to give qualified agrarian reform beneficiaries the right to purchase capital stock of the
corporation proportionate to how much the agricultural land actually devoted to agricultural activities
bears in relation to the company’s total assets, under such terms and conditions as may be agreed
upon by them. Such voluntary divestment of a portion of the corporate landowner’s capital stock to
qualified agrarian reform beneficiaries is considered compliance with the agrarian reform law (RA
6657), subject to certain conditions.

The Fundamental Issue

Section 31 of RA 6657 is at the center of this controversy as it is the basis of the assailed stock
distribution plan executed by petitioner HLI with farmworker-beneficiaries.

On the Constitutionality
Of Section 31 of RA 6657

The Constitution has vested this Court with the power and duty to determine and declare whether
the scales of constitutionality have been kept in balance or unduly tipped, whether an official action
is constitutional or not. As the fundamental and supreme law of the land, the Constitution also serves
as the counterweight against which the validity of all actions of the government is weighed. With it,
the Court ascertains whether the action of a department, agency or public officer preserves the
constitutional equilibrium or disturbs it.

In this case, respondents argue that Section 31 of RA 6657 has been weighed and found
wanting.22 In particular, its constitutionality is assailed insofar as it provides petitioner HLI the choice
to resort to stock distribution in order to comply with the agrarian reform program. Respondents
assert that the stock distribution arrangement is fundamentally infirm as it impairs the right of farmers
and farmworkers under Section 4, Article XIII of the Constitution to own the land they till.23

For its part, petitioner HLI points out that the constitutional issue has been raised collaterally and is
therefore proscribed.

The ponencia opines that the challenge on the constitutionality of Section 31 of RA 6657 and its
counterpart provision in EO 229 must fail because such issue is not the lis mota of the
case.24 Moreover, it has become moot and academic.25

I strongly disagree.

While the sword of judicial review must be unsheathed with restraint, the Court must not hesitate to
wield it to strike down laws that unduly impair basic rights and constitutional values.

Moreover, jurisprudence dictates:

It is a well-established rule that a court should not pass upon a constitutional question and decide a
law to be unconstitutional or invalid unless such question is raised by the parties and that when it is
raised, if the record also presents some other ground upon which the court may raise its judgment,
that course will be adopted and the constitutional question will be left for consideration until such
question will be unavoidable.26

In this case, the question of constitutionality has been raised by the parties-in-interest to the
case.27 In addition, any discussion of petitioner HLI’s stock distribution plan necessarily and
inescapably involves a discussion of its legal basis, Section 31 of RA 6657. More importantly, public
interest and a grave constitutional violation render the issue of the constitutionality of Section 31 of
RA 6657 unavoidable. Agrarian reform is historically imbued with public interest and, as the records
of the Constitutional Commission show, Hacienda Luisita has always been viewed as a litmus test of
genuine agrarian reform. Furthermore, the framers emphasized the primacy of the right of farmers
and farmworkers to directly or collectively own the lands they till. The dilution of this right not only
weakens the right but also debases the constitutional intent thereby presenting a serious assault on
the Constitution.
It is also noteworthy that while the ponencia evades the issue of constitutionality, it adverts to the
doctrine of operative facts in its attempt to come up with what it deems to be a just and equitable
resolution of this case. This is significant. The ponencia itself declares that the doctrine of operative
facts is applied in order to avoid undue harshness and resulting unfairness when a law or executive
action is declared null and void,28 therefore unconstitutional. As the Court explained the doctrine:

Under the operative fact doctrine, the law is recognized as unconstitutional but the effects of the
unconstitutional law, prior to its declaration of nullity, may be left undisturbed as a matter of equity
and fair play. In fact, the invocation of the operative fact doctrine is an admission that the law is
unconstitutional.29

Assuming for the sake of argument that the constitutionality of Section 31 of RA 6657 has been
superseded and rendered moot by Section 5 of RA 9700 vis-a-vis stock distribution as a form of
compliance with agrarian reform, the issue does not thereby become totally untouchable. Courts will
still decide cases, otherwise moot and academic, if:

xxx first, there is a grave violation of the Constitution; second, the exceptional character of the
situation and the paramount public interest is involved; third, when the constitutional issue raised
requires formulation of controlling principles to guide the bench, the bar, and the public; and fourth,
the case is capable of repetition yet evading review...30

In this case, all the above-mentioned requisites are present:

First, a grave violation of the Constitution exists. Section 31 of RA 6657 runs roughshod over the
language and spirit of Section 4, Article XIII of the Constitution.

The first sentence of Section 4 is plain and unmistakeable. It grounds the mandate for agrarian
reform on the right of farmers and regular farmworkers, who are landless, to own directly or
collectively the land they till. The express language of the provision is clear and unequivocal –
agrarian reform means that farmers and regular farmworkers who are landless should be given
direct or collective ownership of the land they till. That is their right.

Unless there is land distribution, there can be no agrarian reform. Any program that gives farmers or
farmworkers anything less than ownership of land fails to conform to the mandate of the
Constitution. In other words, a program that gives qualified beneficiaries stock certificates instead of
land is not agrarian reform.

Actual land distribution is the essential characteristic of a constitutional agrarian reform program.
The polar star, when we speak of land reform, is that the farmer has a right to the land he
tills.31 Indeed, a reading of the framers’ intent clearly shows that the philosophy behind agrarian
reform is the distribution of land to farmers, nothing less.

MR. NOLLEDO. And when we talk of the phrase "to own directly," we mean the principle of direct
ownership by the tiller?

MR. MONSOD. Yes.

MR. NOLLEDO. And when we talk of "collectively," we mean communal ownership, stewardship or
State ownership?
MS. NIEVA. In this section, we conceive of cooperatives; that is farmers’ cooperatives owning the
land, not the State.

MR. NOLLEDO. And when we talk of "collectively," referring to farmers’ cooperatives, do the farmers
own specific areas of land where they only unite in their efforts?

MS. NIEVA. That is one way.

MR. NOLLEDO. Because I understand that there are two basic systems involved: the "moshave"
type of agriculture and the "kibbutz." So are both contemplated in the report?

MR. TADEO. Ang dalawa kasing pamamaraan ng pagpapatupad ng tunay na reporma sa lupa ay
ang pagmamay-ari ng lupa na hahatiin sa individual na pagmamay-ari – directly – at ang tinatawag
na sama-samang gagawin ng mga magbubukid. Tulad sa Negros, ang gusto ng mga magbubukid
ay gawin nila itong "cooperative or collective farm." Ang ibig sabihin ay sama-sama nilang
sasakahin.

MR. BENNAGEN. Madam President, nais ko lang dagdagan iyong sagot ni Ginoong Tadeo. xxxx

Kasi, doon sa "collective ownership," kasali din iyong "communal ownership" ng mga minorya.
Halimbawa sa Tanay, noong gumawa kami ng isang pananaliksik doon, nagtaka sila kung bakit
kailangan pang magkaroon ng "land reform" na kung saan ay bibigyan sila ng tig-iisang titulo. At sila
nga ay nagpunta sa Ministry of Agrarian Reform at sinabi nila na hindi ito ang gusto nila; kasi sila
naman ay magkakamag-anak. Ang gusto nila ay lupa at hindi na kailangan ang tig-iisang titulo.
Maraming ganitong kaso mula sa Cordillera hanggang Zambales, Mindoro at Mindanao, kayat kasali
ito sa konsepto ng "collective ownership."

xxx xxx xxx

MR. VILLACORTA. xxx Section 532 gives the opportunity for tillers of the soil to own the land that
they till; xxx

xxx xxx xxx

MR. TADEO. xxx Ang dahilan ng kahirapan natin sa Pilipinas ngayon ay ang pagtitipon-tipon ng vast
tracts of land sa kamay ng iilan. Lupa ang nagbibigay ng buhay sa magbubukid at sa iba pang
manggagawa sa bukid. Kapag inalis sa kanila ang lupa, parang inalisan na rin sila ng buhay. Kaya
kinakailangan talagang magkaroon ng tinatawag na just distribution. xxx

xxx xxx xxx

MR. TADEO. Kasi ganito iyan. Dapat muna nating makita ang prinsipyo ng agrarian reform, iyong
maging may-ari siya ng lupa na kaniyang binubungkal. Iyon ang kauna-unahang prinsipyo nito. xxx

xxx xxx xxx

MR. TINGSON. xxx When we speak here of "to own directly or collectively the lands they till," is this
land for the tillers rather than land for the landless? Before, we used to hear

"land for the landless," but now the slogan is "land for the tillers." Is that right?
MR. TADEO. Ang prinsipyong umiiral dito ay iyong land for the tillers. Ang ibig sabihin ng "directly"
ay tulad sa implementasyon sa rice and corn lands kung saan inaari na ng mga magsasaka ang
lupang binubungkal nila. Ang ibig sabihin naman ng "collectively" ay sama-samang paggawa sa
isang lupain o isang bukid, katulad ng sitwasyon sa Negros.

xxx xxx xxx

MR. BENNAGEN. Maaari kayang magdagdag sa pagpapaliwanag ng "primacy"? Kasi may cultural
background ito. Dahil agrarian society pa ang lipunang Pilipino, maigting talaga ang ugnayan ng
mga magsasaka sa kanilang lupa. Halimbawa, sinasabi nila na ang lupa ay pinagbuhusan na ng
dugo, pawis at luha. So land acquires a symbolic content that is not simply negated by growth, by
productivity, etc. The primacy should be seen in relation to an agrarian program that leads to a later
stage of social development which at some point in time may already negate this kind of attachment.
The assumption is that there are already certain options available to the farmers. Marahil ang
primacy ay ang pagkilala sa pangangailangan ng magsasaka – ang pag-aari ng lupa. Ang
assumption ay ang pag-aari mismo ng lupa becomes the basis for the farmers to enjoy the benefits,
the fruits of labor. xxx (678)

xxx xxx xxx

MR. TADEO. xxx Kung sinasabi nating si Kristo ay liberating dahil ang api ay lalaya at ang mga
bihag ay mangaliligtas, sinabi rin ni Commissioner Felicitas Aquino na kung ang history ay liberating,
dapat ding maging liberating ang Saligang Batas. Ang magpapalaya sa atin ay ang agrarian and
natural resources reform.

The primary, foremost and paramount principles and objectives are contained [i]n lines 19 to 22:
"primacy of the rights and of farmers and farmworkers to own directly or collectively the lands they
till." Ito ang kauna-unahan at pinakamahalagang prinsipyo at layunin ng isang tunay na reporma sa
lupa – na ang nagbubungkal ng lupa ay maging may-ari nito. xxx (695-696)

The essential thrust of agrarian reform is land-to-the-tiller. Thus, to satisfy the mandate of the
constitution, any implementation of agrarian reform should always preserve the control over the land
in the hands of its tiller or tillers, whether individually or collectively.

Consequently, any law that goes against this constitutional mandate of the actual grant of land to
farmers and regular farmworkers must be nullified. If the Constitution, as it is now worded and as it
was intended by the framers envisaged an alternative to actual land distribution (e.g., stock
distribution) such option could have been easily and explicitly provided for in its text or even
conceptualized in the intent of the framers. Absolutely no such alternative was provided for. Section
4, Article XIII on agrarian reform, in no uncertain terms, speaks of land to be owned directly or
collectively by farmers and regular farm workers.

By allowing the distribution of capital stock, not land, as "compliance" with agrarian reform, Section
31 of RA 6657 directly and explicitly contravenes Section 4, Article XIII of the Constitution. The
corporate landowner remains to be the owner of the agricultural land. Qualified beneficiaries are
given ownership only of shares of stock, not the lands they till. Landless farmers and farmworkers
become landless stockholders but still tilling the land of the corporate owner, thereby perpetuating
their status as landless farmers and farmworkers.

Second, this case is of exceptional character and involves paramount public interest. In La Bugal-
B’Laan Tribal Association, Inc.,33 the Court reminded itself of the need to recognize the extraordinary
character of the situation and the overriding public interest involved in a case. Here, there is a
necessity for a categorical ruling to end the uncertainties plaguing agrarian reform caused by serious
constitutional doubts on Section 31 of RA 6657. While the ponencia would have the doubts linger,
strong reasons of fundamental public policy demand that the issue of constitutionality be resolved
now,34 before the stormy cloud of doubt can cause a social cataclysm.

At the risk of being repetitive, agrarian reform is fundamentally imbued with public interest and the
implementation of agrarian reform at Hacienda Luisita has always been of paramount interest.
Indeed, it was specifically and unequivocally targeted when agrarian reform was being discussed in
the Constitutional Commission. Moreover, the Court should take judicial cognizance of the violent
incidents that intermittently occur at Hacienda Luisita, solely because of the agrarian problem there.
Indeed, Hacienda Luisita proves that, for landless farmers and farmworkers, the land they till is their
life.

The Constitution does not only bestow the landless farmers and farmworkers the right to own the
land they till but also concedes that right to them and makes it a duty of the State to respect that
right through genuine and authentic agrarian reform. To subvert this right through a mechanism that
allows stock distribution in lieu of land distribution as mandated by the Constitution strikes at the very
heart of social justice. As a grave injustice, it must be struck down through the invalidation of the
statutory provision that permits it.

To leave this issue unresolved is to allow the further creation of laws, rules or orders that permit
policies creating, unintentionally or otherwise, means to avoid compliance with the foremost
objective of agrarian reform – to give the humble farmer and farmworker the right to own the land he
tills. To leave this matter unsettled is to encourage future subversion or frustration of agrarian
reform, social justice and the Constitution.

Third, the constitutional issue raised requires the formulation of controlling principles to guide the
bench, the bar and the public.35 Fundamental principles of agrarian reform must be established in
order that its aim may be truly attained.

One such principle that must be etched in stone is that no law, rule or policy can subvert the ultimate
goal of agrarian reform, the actual distribution of land to farmers and farmworkers who are landless.
Agrarian reform requires that such landless farmers and farmworkers be given direct or collective
ownership of the land they till, subject only to the retention limits and the payment of just
compensation. There is no valid substitute to actual distribution of land because the right of landless
farmers and farmworkers expressly and specifically refers to a right to own the land they till.

Fourth, this case is capable of repetition, yet evading review. As previously mentioned, if the subject
provision is not struck down today as unconstitutional, the possibility of passing future laws providing
for a similar option is ominously present. Indeed, what will stop our legislators from providing artificial
alternatives to actual land distribution if this Court, in the face of an opportunity to do so, does not
declare that such alternatives are completely against the Constitution?

We would be woefully remiss in our duty of safeguarding the Constitution and the constitutionally
guaranteed right of a historically marginalized sector if we allowed a substantial deviation from its
language and intent.

The following findings of the Special Task Force as stated in its Terminal Report36 are worth
reiterating:

... sugar-coated assurances were more than enough to make them fall for the SDO as they made
them feel rich as "stock holder" of a rich and famous corporation despite the dirt in their hands and
the tatters they use; given the feeling of security of tenure in their work when there is none;
expectation to receive dividends when the corporation has already suspended operations allegedly
due to losses; and a stable sugar production by maintaining the agricultural lands when a substantial
portion thereof, of almost 1/8 of the total areas, has already been converted to non-agricultural uses.

Truly, the pitiful consequences of a convoluted agrarian reform policy, such as those reported above,
can be avoided if laws were made to truly fulfill the aim of the constitutional provisions on agrarian
reform. As the Constitution sought to make the farmers and farmworkers masters of their own land,
the Court should not hesitate to state, without mincing word, that qualified agrarian reform
beneficiaries deserve no less than ownership of land.

The river cannot rise higher than its source. An unconstitutional provision cannot be the basis of a
constitutional act. As the stock distribution plan of petitioner HLI is based on Section 31 of RA 6657
which is unconstitutional, the stock distribution plan must perforce also be unconstitutional.

On Petitioner’s Long Due Obligation

to Distribute Hacienda Luisita to Farmers

Another compelling reason exists for ordering petitioner HLI to distribute the lands of Hacienda
Luisita to farmworker beneficiaries -- the National Government, in 1957, aided petitioner HLI’s
predecessor-in-interest in acquiring Hacienda Luisita with the condition that the acquisition of
Hacienda Luisita should be made "with a view to distributing this hacienda to small farmers in line
with the [government]37’s social justice program."38 The distribution of land to the farmers should
have been made within ten years. That was a sine qua non condition. It could have not been done
away with for mere expediency. Petitioner HLI is bound by that condition.39

Indeed, the National Government sought to enforce the condition when it filed a case on May 7,
1980 against Tarlac Development Corporation (TADECO), petitioner HLI’s predecessor-in-interest,
in the Regional Trial Court of Manila, Branch 43.40 The case, docketed as Civil Case No. 131654
entitled "Republic of the Philippines vs. TADECO," sought the surrender by TADECO of Hacienda
Luisita to the Ministry of Agrarian Reform for distribution to qualified farmworker-beneficiaries.41 In a
decision dated December 2, 1985, the trial court upheld the position of the National Government and
ordered TADECO to transfer control of Hacienda Luisita to the Ministry of Agrarian Reform, which
will distribute the land to small farmers after paying TADECO P3.988 Million.42

The trial court’s decision was appealed to the Court of Appeals where it was docketed as CA-G.R.
CV No. 08364. The appellate court, in a resolution dated May 18, 1988, dismissed the appeal
without prejudice:

WHEREFORE, the present case on appeal is hereby dismissed without prejudice, and should be
revived if any of the conditions as above set forth is not duly complied with by TADECO.

The conditions referred to are the following:

(a) should TADECO fail to obtain approval of the stock distribution plan for failure to comply
with all the requirements for corporate landowners set forth in the guidelines issued by the
PARC or

(b) if such stock distribution plan is approved by PARC, but TADECO fails to initially
implement it.43
In this case, the stock distribution plan of petitioner HLI, TADECO’s successor-in-interest, could not
have been validly approved by the PARC as it was null and void for being contrary to law. Its
essential terms, particularly the "man days" method for computing the number of shares to which a
farmworker-beneficiary is entitled and the extended period for the complete distribution of shares to
qualified farmworker-beneficiaries are against the letter and spirit of Section 31 of RA 6657,
assuming that provision is valid, and DAO No. 10-1988.

Even assuming that the approval could have been validly made by the PARC, the subsequent
revocation of such approval meant that there was no more approval to speak of, that the approval
has already been withdrawn. Thus, in any case, the decision of the trial court should be revived,
albeit on appeal. Such revival means that petitioner HLI cannot now evade its obligation which has
long be overdue, Hacienda Luisita should be distributed to qualified farmworker-beneficiaries.

On the Equities of the Case

And its Qualifications

Agrarian reform’s underlying principle is the recognition of the rights of farmers and farmworkers who
are landless to own, directly or collectively, the lands they till. Actual land distribution to qualified
agrarian reform beneficiaries is mandatory. Anything that promises something other than land must
be struck down for being unconstitutional.

Be that as it may and regardless of the constitutionality of Section 31 of RA 6657, the lifting of the
temporary restraining order in this case coupled with the affirmation of PARC Resolution No. 2005-
32-01 dated December 22, 2005 removes all barriers to the compulsory acquisition of Hacienda
Luisita for actual land distribution to qualified farmworker-beneficiaries. The said PARC resolution
directed that Hacienda Luisita "be forthwith placed under compulsory coverage or mandated land
acquisition scheme"44 and, pursuant thereto, a notice of coverage45 was issued. Hence, the overall
effect of the lifting of the temporary restraining order in this case should be the implementation of the
"compulsory coverage or mandatory acquisition scheme" on the lands of Hacienda Luisita.

This notwithstanding and despite the nullity of Section 31 of RA 6657 and its illegitimate offspring,
petitioner HLI’s stock distribution plan, I am willing to concede that the equities of the case might
possibly call for the application of the doctrine of operative facts. The Court cannot with a single
stroke of the pen undo everything that has transpired in Hacienda Luisita vis-à-vis the relations
between petitioner HLI and the farmworker-beneficiaries resulting from the execution of the stock
distribution plan more than two decades ago. A simplistic declaration that no legal effect whatsoever
may be given to any action taken pursuant to the stock distribution plan by virtue of its nullification
will only result in unreasonable and unfair consequences in view of previous benefits enjoyed and
obligations incurred by the parties under the said stock distribution plan.

Let me emphasize, however, that this tenuous concession is not without significant qualifications.

First, while operative facts and considerations of fairness and equity might be considered in
disposing of this case, the question of constitutionality of Section 31 of RA 6657 and, corollarily, of
petitioner HLI’s stock distribution plan, should be addressed squarely. As the said provision goes
against both the letter and spirit of the Constitution, the Court must categorically say in no uncertain
terms that it is null and void. The same principle applies to petitioner HLI’s stock distribution plan.

Second, pursuant to both the express mandate and the intent of the Constitution, the qualified
farmer-beneficiaries should be given ownership of the land they till. That is their right and
entitlement, which is subject only to the prescribed retention limits and the payment of just
compensation, as already explained.
Due to considerations of fairness and equity, however, those who wish to waive their right to actually
own land and instead decide to hold on to their shares of stock may opt to stay as stockholders of
petitioner HLI. Nonetheless, this scheme should apply in this case only.

Third, the proper action on the instant petition should be to dismiss it. For how can we grant it when
it invites us to rule against the constitutional right of landless farmworker-beneficiaries to actually
own the land they till? How can we sustain petitioner HLI’s claim that its stock distribution plan
should be upheld when we are in fact declaring that it is violative of the law and of the Constitution?
Indeed, to affirm the correctness of PARC Resolution No. 2005-32-01 dated December 22, 2005
revoking the stock distribution plan and directing the compulsory distribution of Hacienda Luisita
lands to the farmworker-beneficiaries and, at the same time, grant petitioner HLI’s prayer for the
nullification of the said PARC Resolution is an exercise in self-contradiction.

To say that we are partially granting the petition is to say that there is rightness in petitioner HLI’s
position that it can validly frustrate the actual distribution of Hacienda Luisita to the farmworker-
beneficiaries. That is fundamentally and morally wrong.

A Final Word

Our action here today is not simply about Hacienda Luisita or a particular stock distribution plan. Our
recognition of the right under the Constitution of those who till the land to steward it is the Court’s
marching order to dismantle the feudal tenurial relations that for centuries have shackled them to the
soil in exchange for a pitiful share in the fruits, and install them as the direct or collective masters of
the domain of their labor. It is not legal, nor moral, to replace their shackles with mere stock
certificates or any other superficial alternative.

We take action in these cases today to promote social justice, champion the cause of the poor and
distribute wealth more equitably. By applying the agrarian reform provision of the Constitution, we
seek to empower the farmers, enhance their dignity and improve their lives by freeing them from
their bondage to the land they till and making them owner-stewards thereof. We express iron-clad
fealty to Section 4, Article XIII of the Constitution to dismantle the concentration of land in the hands
of the privileged few. Thus, we direct the implementation of a genuine agrarian reform as envisioned
by the Constitution by ordering the just distribution of land for the democratization of productive
resources.

History will be the unforgiving judge of this Court. We cannot correct a historical anomaly and
prevent the eruption of a social volcano by fancy legal arguments and impressively crafted devices
for corporate control.

WHEREFORE, I vote that the petition be DISMISSED. Section 31 of RA 6657 should be declared
NULL and VOID for being unconstitutional. Consequently, the stock distribution plan of petitioner HLI
should likewise be declared NULL and VOID for being unconstitutional.

Accordingly, PARC Resolution Nos. 2005-32-01 dated December 22, 2005 and 2006-34-01 dated
May 3, 2006 should be AFFIRMED in so far as they direct the implementation of compulsory
coverage or mandated land acquisition scheme in Hacienda Luisita with the MODIFICATION that,
pro hac vice due to considerations of fairness and equity, qualified farmworker-beneficiaries may
waive their right to actually own the lands they till and stay as stockholders of petitioner HLI.

RENATO C. CORONA
Chief Justice
 THIRD DIVISION

G.R. No. 178895 January 10, 2011

REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF AGRARIAN REFORM,

through the HON. SECRETARY NASSER C. PANGANDAMAN, Petitioner,
vs.
SALVADOR N. LOPEZ AGRI-BUSINESS CORP., represented by SALVADOR N. LOPEZ, JR.,
President and General Manager, Respondent.

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

G.R. No. 179071

SALVADOR N. LOPEZ AGRI-BUSINESS CORP., represented by SALVADOR N. LOPEZ, JR.,

President and General Manager, Petitioner,
vs.
DEPARTMENT OF AGRARIAN REFORM, through the Honorable Secretary, Respondent.

DECISION

SERENO, J.:

Before us are two Rule 45 Petitions1 filed separately by the Department of Agrarian Reform (DAR),
through the Office of the Solicitor General, and by the Salvador N. Lopez Agri-Business Corp.
(SNLABC). Each Petition partially assails the Court of Appeals Decision dated 30 June 20062 with
respect to the application for exemption of four parcels of land - located in Mati, Davao Oriental and
owned by SNLABC - from Republic Act No. 6657, otherwise known as the Comprehensive Agrarian
Reform Law (CARL).

There is little dispute as to the facts of the case, as succinctly discussed by the Court of Appeals and
adopted herein by the Court, to wit:

Subject of this petition are four (4) parcels of land with an aggregate area of 160.1161 hectares
registered in the name of Salvador N. Lopez Agri-Business Corporation. Said parcels of land are
hereinafter described as follows:
1av vphi1

Title No. Area Location

TCT No. T-12635 (Lot 1454-A & 49.5706 Bo. Limot, Mati, Davao Oriental
1296) has.
TCT No. T-12637 (Lot 1298) 42.6822 Bo. Don Enrique Lopez, Mati, Dvo.
has. Or.
TCT No. T-12639 (Lot 1293-B) 67.8633 Bo. Don Enrique Lopez, Mati, Dvo.
has. Or.

On August 2, 1991, Municipal Agrarian Reform Officer (MARO) Socorro C. Salga issued a Notice of
Coverage to petitioner with regards (sic) to the aforementioned landholdings which were
subsequently placed under Compulsory Acquisition pursuant to R.A. 6657 (Comprehensive Agrarian
Reform Law).
On December 10, 1992, petitioner filed with the Provincial Agrarian Reform Office (PARO), Davao
Oriental, an Application for Exemption of the lots covered by TCT No. T-12637 and T-12639 from
CARP coverage. It alleged that pursuant to the case of Luz Farms v. DAR Secretary said parcels of
land are exempted from coverage as the said parcels of land with a total area of 110.5455 hectares
are used for grazing and habitat of petitioner’s 105 heads of cattle, 5 carabaos, 11 horses, 9 heads
of goats and 18 heads of swine, prior to the effectivity of the Comprehensive Agrarian Reform Law
(CARL).

On December 13, 1992 and March 1, 1993, the MARO conducted an onsite investigation on the two
parcels of land confirming the presence of the livestock as enumerated. The Investigation Report
dated March 9, 1993 stated:

That there are at least 2[5] to 30 heads of cows that farrow every year and if the trend of farrowing
persist (sic), then the cattle shall become overcrowded and will result to scarcity of grasses for the
cattle to graze;

That during the week cycle, the herds are being moved to the different adjacent lots owned by the
corporation. It even reached Lot 1454-A and Lot 1296. Thereafter, the herds are returned to their
respective night chute corrals which are constructed under Lot 1293-B and Lot 1298.

xxx

That the age of coconut trees planted in the area are already 40 to 50 years and have been affected
by the recent drought that hit the locality.

That the presence of livestocks (sic) have already existed in the area prior to the Supreme Court
decision on LUZ FARMS vs. Secretary of Agrarian Reform. We were surprised however, why the
management of the corporation did not apply for Commercial Farm Deferment (CFD) before, when
the two years reglamentary (sic) period which the landowner was given the chance to file their
application pursuant to R.A. 6657, implementing Administrative Order No. 16, Series of 1989;

However, with regards to what venture comes (sic) first, coconut or livestocks (sic), majority of the
farmworkers including the overseer affirmed that the coconut trees and livestocks (sic) were (sic)
simultaneously and all of these were inherited by his (applicant) parent. In addition, the financial
statement showed 80% of its annual income is derived from the livestocks (sic) and only 20% from
the coconut industry.

Cognitive thereto, we are favorably recommending for the exemption from the coverage of CARP
based on LUZ FARMS as enunciated by the Supreme Court the herein Lot No. 1293-B Psd-65835
under TCT No. T-12639 except Lot No. 1298, Cad. 286 of TCT No. T-12637 which is already
covered under the Compulsory Acquisition (CA) Scheme and had already been valued by the Land
Valuation Office, Land Bank of the Philippines.

On June 24, 1993, TCT No. T-12635 covering Lots 1454-A & 1296 was cancelled and a new one
issued in the name of the Republic of the Philippines under RP T-16356. On February 7, 1994,
petitioner through its President, Salvador N. Lopez, Jr., executed a letter-affidavit addressed to the
respondent-Secretary requesting for the exclusion from CARP coverage of Lots 1454-A and 1296 on
the ground that they needed the additional area for its livestock business. On March 28, 1995,
petitioner filed before the DAR Regional Director of Davao City an application for the exemption from
CARP coverage of Lots 1454-A and 1296 stating that it has been operating grazing lands even prior
to June 15, 1988 and that the said two (2) lots form an integral part of its grazing land.
The DAR Regional Director, after inspecting the properties, issued an Order dated March 5, 1997
denying the application for exemption of Lots 1454-A and 1296 on the ground that it was not clearly
shown that the same were actually, directly and exclusively used for livestock raising since in its
application, petitioner itself admitted that it needs the lots for additional grazing area. The application
for exemption, however of the other two (2) parcels of land was approved.

On its partial motion for reconsideration, petitioner argued that Lots 1454-A & 1296 were taken
beyond the operation of the CARP pursuant to its reclassification to a Pollutive Industrial District
(Heavy Industry) per Resolution No. 39 of the Sangguniang Bayan of Mati, Davao Oriental, enacted
on April 7, 1992. The DAR Regional Director denied the Motion through an Order dated September
4, 1997, ratiocinating that the reclassification does not affect agricultural lands already issued a
Notice of Coverage as provided in Memorandum Circular No. 54-93: Prescribing the Guidelines
Governing Section 20 of R.A. 7160.

Undaunted, petitioner appealed the Regional Director’s Orders to respondent DAR. On June 10,
1998, the latter issued its assailed Order affirming the Regional Director’s ruling on Lots 1454-A &
1296 and further declared Lots 1298 and 1293-B as covered by the CARP. Respondent ruled in this
wise considering the documentary evidence presented by petitioner such as the Business Permit to
engage in livestock, the certification of ownership of large cattle and the Corporate Income Tax
Returns, which were issued during the effectivity of the Agrarian Reform Law thereby debunking
petitioner’s claim that it has been engaged in livestock farming since the 1960s. Respondent further
ruled that the incorporation by the Lopez family on February 12, 1988 or four (4) months before the
effectivity of R.A. 6657 was an attempt to evade the noble purposes of the said law.

On October 17, 2002, petitioner’s Motion for Reconsideration was denied by respondent prompting
the former to file the instant petition.3

In the assailed Decision dated 30 June 2006,4 the Court of Appeals partially granted the SNLABC
Petition and excluded the two (2) parcels of land (Transfer Certificate of Title [TCT] Nos. T-12637
and T-12639) located in Barrio Don Enrique Lopez (the "Lopez lands") from coverage of the CARL.
However, it upheld the Decisions of the Regional Director5 and the DAR6 Secretary denying the
application for exemption with respect to Lots 1454-A and 1296 (previously under TCT No. T-12635)
in Barrio Limot (the "Limot lands"). These lots were already covered by a new title under the name of
the Republic of the Philippines (RP T-16356).

The DAR and SNLABC separately sought a partial reconsideration of the assailed Decision of the
Court of Appeals, but their motions for reconsideration were subsequently denied in the Court of
Appeals Resolution dated 08 June 2007.7

The DAR and SNLABC elevated the matter to this Court by filing separate Rule 45 Petitions
(docketed as G.R. No. 1788958 and 179071,9 respectively), which were subsequently ordered
consolidated by the Court.

The main issue for resolution by the Court is whether the Lopez and Limot lands of SNLABC can be
considered grazing lands for its livestock business and are thus exempted from the coverage of the
CARL under the Court’s ruling in Luz Farms v. DAR.10 The DAR questions the disposition of the
Court of Appeals, insofar as the latter allowed the exemption of the Lopez lands, while SNLABC
assails the inclusion of the Limot lands within the coverage of the CARL.

The Court finds no reversible error in the Decision of the Court of Appeals and dismisses the
Petitions of DAR and SNLABC.
Preliminarily, in a petition for review on certiorari filed under Rule 45, the issues that can be raised
are, as a general rule, limited to questions of law.11 However, as pointed out by both the DAR and
SNLABC, there are several recognized exceptions wherein the Court has found it appropriate to re-
examine the evidence presented.12 In this case, the factual findings of the DAR Regional Director,
the DAR Secretary and the CA are contrary to one another with respect to the following issue:
whether the Lopez lands were actually, directly and exclusively used for SNLABC’s livestock
business; and whether there was intent to evade coverage from the Comprehensive Agrarian
Reform Program (CARP) based on the documentary evidence. On the other hand, SNLABC argues
that these authorities misapprehended and overlooked certain relevant and undisputed facts as
regards the inclusion of the Limot lands under the CARL. These circumstances fall within the
recognized exceptions and, thus, the Court is persuaded to review the facts and evidence on record
in the disposition of these present Petitions.

The Lopez lands of SNLABC are actually and directly being used for livestock and are thus
exempted from the coverage of the CARL.

Briefly stated, the DAR questions the object or autoptic evidence relied upon by the DAR Regional
Director in concluding that the Lopez lands were actually, directly and exclusively being used for
SNLABC’s livestock business prior to the enactment of the CARL.

In Luz Farms v. Secretary of the Department of Agrarian Reform,13 the Court declared
unconstitutional the CARL provisions14 that included lands devoted to livestock under the coverage
of the CARP. The transcripts of the deliberations of the Constitutional Commission of 1986 on the
meaning of the word "agricultural" showed that it was never the intention of the framers of the
Constitution to include the livestock and poultry industry in the coverage of the constitutionally
mandated agrarian reform program of the government.15 Thus, lands devoted to the raising of
livestock, poultry and swine have been classified as industrial, not agricultural, and thus exempt from
agrarian reform.16

Under the rules then prevailing, it was the Municipal Agrarian Reform Officer (MARO) who was
primarily responsible for investigating the legal status, type and areas of the land sought to be
excluded;17 and for ascertaining whether the area subject of the application for exemption had been
devoted to livestock-raising as of 15 June 1988.18 The MARO’s authority to investigate has
subsequently been replicated in the current DAR guidelines regarding lands that are actually, directly
and exclusively used for livestock raising.19 As the primary official in charge of investigating the land
sought to be exempted as livestock land, the MARO’s findings on the use and nature of the land, if
supported by substantial evidence on record, are to be accorded greater weight, if not finality.

Verily, factual findings of administrative officials and agencies that have acquired expertise in the
performance of their official duties and the exercise of their primary jurisdiction are generally
accorded not only respect but, at times, even finality if such findings are supported by substantial
evidence.20 The Court generally accords great respect, if not finality, to factual findings of
administrative agencies because of their special knowledge and expertise over matters falling under
their jurisdiction.21

In the instant case, the MARO in its ocular inspection22 found on the Lopez lands several heads of
cattle, carabaos, horses, goats and pigs, some of which were covered by several certificates of
ownership. There were likewise structures on the Lopez lands used for its livestock business,
structures consisting of two chutes where the livestock were kept during nighttime. The existence of
the cattle prior to the enactment of the CARL was positively affirmed by the farm workers and the
overseer who were interviewed by the MARO. Considering these factual findings and the fact that
the lands were in fact being used for SNLABC’s livestock business even prior to 15 June 1988, the
DAR Regional Director ordered the exemption of the Lopez lands from CARP coverage. The Court
gives great probative value to the actual, on-site investigation made by the MARO as affirmed by the
DAR Regional Director. The Court finds that the Lopez lands were in fact actually, directly and
exclusively being used as industrial lands for livestock-raising.

Simply because the on-site investigation was belatedly conducted three or four years after the
effectivity of the CARL does not perforce make it unworthy of belief or unfit to be offered as
substantial evidence in this case. Contrary to DAR’s claims, the lack of information as regards the
initial breeders and the specific date when the cattle were first introduced in the MARO’s Report
does not conclusively demonstrate that there was no livestock-raising on the Lopez lands prior to the
CARL. Although information as to these facts are significant, their non-appearance in the reports
does not leave the MARO without any other means to ascertain the duration of livestock-raising on
the Lopez lands, such as interviews with farm workers, the presence of livestock infrastructure, and
evidence of sales of cattle – all of which should have formed part of the MARO’s Investigation
Report.

Hence, the Court looks with favor on the expertise of the MARO in determining whether livestock-
raising on the Lopez lands has only been recently conducted or has been a going concern for
several years already. Absent any clear showing of grave abuse of discretion or bias, the findings of
the MARO - as affirmed by the DAR Regional Director - are to be accorded great probative value,
owing to the presumption of regularity in the performance of his official duties.23

The DAR, however, insisted in its Petition24 on giving greater weight to the inconsistencies appearing
in the documentary evidence presented, and noted by the DAR Secretary, in order to defeat
SNLABC’s claim of exemption over the Lopez lands. The Court is not so persuaded.

In the Petition, the DAR argued that that the tax declarations covering the Lopez lands characterized
them as agricultural lands and, thus, detracted from the claim that they were used for livestock
purposes. The Court has since held that "there is no law or jurisprudence that holds that the land
classification embodied in the tax declarations is conclusive and final nor would proscribe any further
inquiry"; hence, "tax declarations are clearly not the sole basis of the classification of a
land."25 Applying the foregoing principles, the tax declarations of the Lopez lands as agricultural
lands are not conclusive or final, so as to prevent their exclusion from CARP coverage as lands
devoted to livestock-raising. Indeed, the MARO’s on-site inspection and actual investigation showing
that the Lopez lands were being used for livestock-grazing are more convincing in the determination
of the nature of those lands.lavv phil

Neither can the DAR in the instant case assail the timing of the incorporation of SNLABC and the
latter’s operation shortly before the enactment of the CARL. That persons employ tactics to
precipitously convert their lands from agricultural use to industrial livestock is not unheard of; they
even exploit the creation of a new corporate vehicle to operate the livestock business to substantiate
the deceitful conversion in the hopes of evading CARP coverage. Exemption from CARP, however,
is directly a function of the land’s usage, and not of the identity of the entity operating it. Otherwise
stated, lands actually, directly and exclusively used for livestock are exempt from CARP coverage,
regardless of the change of owner.26 In the instant case, whether SNLABC was incorporated prior to
the CARL is immaterial, since the Lopez lands were already being used for livestock-grazing
purposes prior to the enactment of the CARL, as found by the MARO. Although the managing entity
had been changed, the business interest of raising livestock on the Lopez lands still remained
without any indication that it was initiated after the effectivity of the CARL.

As stated by SNLABC, the Lopez lands were the legacy of Don Salvador Lopez, Sr. The ownership
of these lands was passed from Don Salvador Lopez, Sr., to Salvador N. Lopez, Jr., and
subsequently to the latter’s children before being registered under the name of SNLABC.
Significantly, SNLABC was incorporated by the same members of the Lopez family, which had
previously owned the lands and managed the livestock business.27 In all these past years, despite
the change in ownership, the Lopez lands have been used for purposes of grazing and pasturing
cattle, horses, carabaos and goats. Simply put, SNLABC was chosen as the entity to take over the
reins of the livestock business of the Lopez family. Absent any other compelling evidence, the
inopportune timing of the incorporation of the SNLABC prior to the enactment of the CARL was not
by itself a categorical manifestation of an intent to avoid CARP coverage.

Furthermore, the presence of coconut trees, although an indicia that the lands may be agricultural,
must be placed within the context of how they figure in the actual, direct and exclusive use of the
subject lands. The DAR failed to demonstrate that the Lopez lands were actually and primarily
agricultural lands planted with coconut trees. This is in fact contradicted by the findings of its own
official, the MARO. Indeed, the DAR did not adduce any proof to show that the coconut trees on the
Lopez lands were used for agricultural business, as required by the Court in DAR v. Uy,28 wherein
we ruled thus:

It is not uncommon for an enormous landholding to be intermittently planted with trees, and this
would not necessarily detract it from the purpose of livestock farming and be immediately considered
as an agricultural land. It would be surprising if there were no trees on the land. Also, petitioner did
not adduce any proof to show that the coconut trees were planted by respondent and used for
agricultural business or were already existing when the land was purchased in 1979. In the present
case, the area planted with coconut trees bears an insignificant value to the area used for the cattle
and other livestock-raising, including the infrastructure needed for the business. There can be no
presumption, other than that the "coconut area" is indeed used for shade and to augment the supply
of fodder during the warm months; any other use would be only be incidental to livestock farming.
The substantial quantity of livestock heads could only mean that respondent is engaged in farming
for this purpose. The single conclusion gathered here is that the land is entirely devoted to livestock
farming and exempted from the CARP.

On the assumption that five thousand five hundred forty-eight (5,548) coconut trees were existing on
the Lopez land (TCT No. T-12637), the DAR did not refute the findings of the MARO that these
coconut trees were merely incidental. Given the number of livestock heads of SNLABC, it is not
surprising that the areas planted with coconut trees on the Lopez lands where forage grass grew
were being used as grazing areas for the livestock. It was never sufficiently adduced that SNLABC
was primarily engaged in agricultural business on the Lopez lands, specifically, coconut-harvesting.
Indeed, the substantial quantity of SNLABC’s livestock amounting to a little over one hundred forty
(140) livestock heads, if measured against the combined 110.5455 hectares of land and applying the
DAR-formulated ratio, leads to no other conclusion than that the Lopez lands were exclusively
devoted to livestock farming.29

In any case, the inconsistencies appearing in the documentation presented (albeit sufficiently
explained) pale in comparison to the positive assertion made by the MARO in its on-site, actual
investigation - that the Lopez lands were being used actually, directly and exclusively for its
livestock-raising business. The Court affirms the findings of the DAR Regional Director and the Court
of Appeals that the Lopez lands were actually, directly and exclusively being used for SNLABC’s
livestock business and, thus, are exempt from CARP coverage.

The Limot lands of SNLABC are not actually and directly being used for livestock and should thus be
covered by the CARL.
In contrast, the Limot lands were found to be agricultural lands devoted to coconut trees and rubber
and are thus not subject to exemption from CARP coverage.

In the Report dated 06 April 1994, the team that conducted the inspection found that the entire Limot
lands were devoted to coconuts (41.5706 hectares) and rubber (8.000 hectares) and recommended
the denial of the application for exemption.30 Verily, the Limot lands were actually, directly and
exclusively used for agricultural activities, a fact that necessarily makes them subject to the CARP.
These findings of the inspection team were given credence by the DAR Regional Director who
denied the application, and were even subsequently affirmed by the DAR Secretary and the Court of
Appeals.

SNLABC argues that the Court of Appeals misapprehended the factual circumstances and
overlooked certain relevant facts, which deserve a second look. SNLABC’s arguments fail to
convince the Court to reverse the rulings of the Court of Appeals.

In the 07 February 1994 Letter-Affidavit addressed to the DAR Secretary, SNLABC requested the
exemption of the Limot lands on the ground that the corporation needed the additional area for its
livestock business. As pointed out by the DAR Regional Director, this Letter-Affidavit is a clear
indication that the Limot lands were not directly, actually and exclusively used for livestock raising.
SNLABC casually dismisses the clear import of their Letter-Affidavit as a "poor choice of words."
Unfortunately, the semantics of the declarations of SNLABC in its application for exemption are
corroborated by the other attendant factual circumstances and indicate its treatment of the subject
properties as non-livestock.

Verily, the MARO itself, in the Investigation Report cited by no less than SNLABC, found that the
livestock were only moved to the Limot lands sporadically and were not permanently designated
there. The DAR Secretary even described SNLABC’s use of the area as a "seasonal extension of
the applicant’s ‘grazing lands’ during the summer." Therefore, the Limot lands cannot be claimed to
have been actually, directly and exclusively used for SNLABC’s livestock business, especially since
these were only intermittently and secondarily used as grazing areas. The said lands are more
suitable -- and are in fact actually, directly and exclusively being used -- for agricultural purposes.

SNLABC’s treatment of the land for non-livestock purposes is highlighted by its undue delay in filing
the application for exemption of the Limot lands. SNLABC filed the application only on 07 February
1994, or three years after the Notice of Coverage was issued; two years after it filed the first
application for the Lopez lands; and a year after the titles to the Limot lands were transferred to the
Republic. The SNLABC slept on its rights and delayed asking for exemption of the Limot lands. The
lands were undoubtedly being used for agricultural purposes, not for its livestock business; thus,
these lands are subject to CARP coverage. Had SNLABC indeed utilized the Limot lands in
conjunction with the livestock business it was conducting on the adjacent Lopez lands, there was
nothing that would have prevented it from simultaneously applying for a total exemption of all the
lands necessary for its livestock.

The defense of SNLABC that it wanted to "save" first the Lopez lands where the corrals and chutes
were located, before acting to save the other properties does not help its cause. The piecemeal
application for exemption of SNLABC speaks of the value or importance of the Lopez lands,
compared with the Limot lands, with respect to its livestock business. If the Lopez and the Limot
lands were equally significant to its operations and were actually being used for its livestock
business, it would have been more reasonable for it to apply for exemption for the entire lands.
Indeed, the belated filing of the application for exemption was a mere afterthought on the part of
SNLABC, which wanted to increase the area of its landholdings to be exempted from CARP on the
ground that these were being used for its livestock business.
In any case, SNLABC admits that the title to the Limot lands has already been transferred to the
Republic and subsequently awarded to SNLABC’s farm workers.31 This fact only demonstrates that
the land is indeed being used for agricultural activities and not for livestock grazing.

The confluence of these factual circumstances leads to the logical conclusion that the Limot lands
were not being used for livestock grazing and, thus, do not qualify for exemption from CARP
coverage. SNLABC’s belated filing of the application for exemption of the Limot lands was a ruse to
increase its retention of its landholdings and an attempt to "save" these from compulsory acquisition.

WHEREFORE, the Petitions of the Department of Agrarian Reform and the Salvador N. Lopez Agri-
Business Corp. are DISMISSED, and the rulings of the Court of Appeals and the DAR Regional
Director are hereby AFFIRMED.

SO ORDERED.

MARIA LOURDES P. A. SERENO

EN BANC

G.R. No. 162070 October 19, 2005

DEPARTMENT OF AGRARIAN REFORM, represented by SECRETARY JOSE MARI B. PONCE

(OIC), Petitioner
vs.
DELIA T. SUTTON, ELLA T. SUTTON-SOLIMAN and HARRY T. SUTTON, Respondents.

DECISION

PUNO, J.:

This is a petition for review filed by the Department of Agrarian Reform (DAR) of the Decision and
Resolution of the Court of Appeals, dated September 19, 2003 and February 4, 2004, respectively,
which declared DAR Administrative Order (A.O.) No. 9, series of 1993, null and void for being
violative of the Constitution.

The case at bar involves a land in Aroroy, Masbate, inherited by respondents which has been
devoted exclusively to cow and calf breeding. On October 26, 1987, pursuant to the then existing
agrarian reform program of the government, respondents made a voluntary offer to sell (VOS)1 their
landholdings to petitioner DAR to avail of certain incentives under the law.

On June 10, 1988, a new agrarian law, Republic Act (R.A.) No. 6657, also known as the
Comprehensive Agrarian Reform Law (CARL) of 1988, took effect. It included in its coverage farms
used for raising livestock, poultry and swine.

On December 4, 1990, in an en banc decision in the case of Luz Farms v. Secretary of DAR,2 this
Court ruled that lands devoted to livestock and poultry-raising are not included in the definition of
agricultural land. Hence, we declared as unconstitutional certain provisions of the CARL insofar as
they included livestock farms in the coverage of agrarian reform.
In view of the Luz Farms ruling, respondents filed with petitioner DAR a formal request to withdraw
their VOS as their landholding was devoted exclusively to cattle-raising and thus exempted from the
coverage of the CARL.3

On December 21, 1992, the Municipal Agrarian Reform Officer of Aroroy, Masbate, inspected
respondents’ land and found that it was devoted solely to cattle-raising and breeding. He
recommended to the DAR Secretary that it be exempted from the coverage of the CARL.

On April 27, 1993, respondents reiterated to petitioner DAR the withdrawal of their VOS and
requested the return of the supporting papers they submitted in connection therewith.4 Petitioner
ignored their request.

On December 27, 1993, DAR issued A.O. No. 9, series of 1993,5 which provided that only portions
of private agricultural lands used for the raising of livestock, poultry and swine as of June 15, 1988
shall be excluded from the coverage of the CARL. In determining the area of land to be excluded,
the A.O. fixed the following retention limits, viz: 1:1 animal-land ratio (i.e., 1 hectare of land per 1
head of animal shall be retained by the landowner), and a ratio of 1.7815 hectares for livestock
infrastructure for every 21 heads of cattle shall likewise be excluded from the operations of the
CARL.

On February 4, 1994, respondents wrote the DAR Secretary and advised him to consider as final
and irrevocable the withdrawal of their VOS as, under the Luz Farms doctrine, their entire
landholding is exempted from the CARL.6

On September 14, 1995, then DAR Secretary Ernesto D. Garilao issued an Order7 partially granting
the application of respondents for exemption from the coverage of CARL. Applying the retention
limits outlined in the DAR A.O. No. 9, petitioner exempted 1,209 hectares of respondents’ land for
grazing purposes, and a maximum of 102.5635 hectares for infrastructure. Petitioner ordered the
rest of respondents’ landholding to be segregated and placed under Compulsory Acquisition.

Respondents moved for reconsideration. They contend that their entire landholding should be
exempted as it is devoted exclusively to cattle-raising. Their motion was denied.8 They filed a notice
of appeal9 with the Office of the President assailing: (1) the reasonableness and validity of DAR A.O.
No. 9, s. 1993, which provided for a ratio between land and livestock in determining the land area
qualified for exclusion from the CARL, and (2) the constitutionality of DAR A.O. No. 9, s. 1993, in
view of the Luz Farms case which declared cattle-raising lands excluded from the coverage of
agrarian reform.

On October 9, 2001, the Office of the President affirmed the impugned Order of petitioner DAR.10 It
ruled that DAR A.O. No. 9, s. 1993, does not run counter to the Luz Farms case as the A.O.
provided the guidelines to determine whether a certain parcel of land is being used for cattle-raising.
However, the issue on the constitutionality of the assailed A.O. was left for the determination
of the courts as the sole arbiters of such issue.

On appeal, the Court of Appeals ruled in favor of the respondents. It declared DAR A.O. No. 9, s.
1993, void for being contrary to the intent of the 1987 Constitutional Commission to exclude livestock
farms from the land reform program of the government. The dispositive portion reads:

WHEREFORE, premises considered, DAR Administrative Order No. 09, Series of 1993 is
hereby DECLARED null and void. The assailed order of the Office of the President dated 09
October 2001 in so far as it affirmed the Department of Agrarian Reform’s ruling that petitioners’
landholding is covered by the agrarian reform program of the government is REVERSED and SET
ASIDE.

SO ORDERED.11

Hence, this petition.

The main issue in the case at bar is the constitutionality of DAR A.O. No. 9, series of 1993, which
prescribes a maximum retention limit for owners of lands devoted to livestock raising.

Invoking its rule-making power under Section 49 of the CARL, petitioner submits that it issued DAR
A.O. No. 9 to limit the area of livestock farm that may be retained by a landowner pursuant to its
mandate to place all public and private agricultural lands under the coverage of agrarian reform.
Petitioner also contends that the A.O. seeks to remedy reports that some unscrupulous landowners
have converted their agricultural farms to livestock farms in order to evade their coverage in the
agrarian reform program.

Petitioner’s arguments fail to impress.

Administrative agencies are endowed with powers legislative in nature, i.e., the power to make rules
and regulations. They have been granted by Congress with the authority to issue rules to regulate
the implementation of a law entrusted to them. Delegated rule-making has become a practical
necessity in modern governance due to the increasing complexity and variety of public functions.
However, while administrative rules and regulations have the force and effect of law, they are not
immune from judicial review.12 They may be properly challenged before the courts to ensure that
they do not violate the Constitution and no grave abuse of administrative discretion is committed by
the administrative body concerned.

The fundamental rule in administrative law is that, to be valid, administrative rules and
regulations must be issued by authority of a law and must not contravene the provisions of the
Constitution.13 The rule-making power of an administrative agency may not be used to abridge the
authority given to it by Congress or by the Constitution. Nor can it be used to enlarge the power of
the administrative agency beyond the scope intended. Constitutional and statutory
provisions control with respect to what rules and regulations may be promulgated by
administrative agencies and the scope of their regulations.14

In the case at bar, we find that the impugned A.O. is invalid as it contravenes the Constitution. The
A.O. sought to regulate livestock farms by including them in the coverage of agrarian reform and
prescribing a maximum retention limit for their ownership. However, the deliberations of the 1987
Constitutional Commission show a clear intent to exclude, inter alia, all lands exclusively
devoted to livestock, swine and poultry- raising. The Court clarified in the Luz Farms case that
livestock, swine and poultry-raising are industrial activities and do not fall within the definition of
"agriculture" or "agricultural activity." The raising of livestock, swine and poultry is different from crop
or tree farming. It is an industrial, not an agricultural, activity. A great portion of the investment in this
enterprise is in the form of industrial fixed assets, such as: animal housing structures and facilities,
drainage, waterers and blowers, feedmill with grinders, mixers, conveyors, exhausts and generators,
extensive warehousing facilities for feeds and other supplies, anti-pollution equipment like bio-gas
and digester plants augmented by lagoons and concrete ponds, deepwells, elevated water tanks,
pumphouses, sprayers, and other technological appurtenances.15
Clearly, petitioner DAR has no power to regulate livestock farms which have been exempted by
the Constitution from the coverage of agrarian reform. It has exceeded its power in issuing the
assailed A.O.

The subsequent case of Natalia Realty, Inc. v. DAR16 reiterated our ruling in the Luz Farms case.
In Natalia Realty, the Court held that industrial, commercial and residential lands are not covered by
the CARL.17 We stressed anew that while Section 4 of R.A. No. 6657 provides that the CARL
shall cover all public and private agricultural lands, the term "agricultural land" does not
include lands classified as mineral, forest, residential, commercial or industrial. Thus,
in Natalia Realty, even portions of the Antipolo Hills Subdivision, which are arable yet still
undeveloped, could not be considered as agricultural lands subject to agrarian reform as these lots
were already classified as residential lands.

A similar logical deduction should be followed in the case at bar. Lands devoted to raising of
livestock, poultry and swine have been classified as industrial, not agricultural, lands and thus
exempt from agrarian reform. Petitioner DAR argues that, in issuing the impugned A.O., it was
seeking to address the reports it has received that some unscrupulous landowners have been
converting their agricultural lands to livestock farms to avoid their coverage by the agrarian reform.
Again, we find neither merit nor logic in this contention. The undesirable scenario which petitioner
seeks to prevent with the issuance of the A.O. clearly does not apply in this
case. Respondents’ family acquired their landholdings as early as 1948. They have long been in the
business of breeding cattle in Masbate which is popularly known as the cattle-breeding capital of the
Philippines.18 Petitioner DAR does not dispute this fact. Indeed, there is no evidence on record that
respondents have just recently engaged in or converted to the business of breeding cattle after the
enactment of the CARL that may lead one to suspect that respondents intended to evade its
coverage. It must be stressed that what the CARL prohibits is the conversion of agricultural
lands for non-agricultural purposes after the effectivity of the CARL. There has been no change
of business interest in the case of respondents.

Moreover, it is a fundamental rule of statutory construction that the reenactment of a statute by

Congress without substantial change is an implied legislative approval and adoption of the previous
law. On the other hand, by making a new law, Congress seeks to supersede an earlier one.19 In the
case at bar, after the passage of the 1988 CARL, Congress enacted R.A. No. 788120 which
amended certain provisions of the CARL. Specifically, the new law changed the definition of the
terms "agricultural activity" and "commercial farming" by dropping from its coverage lands
that are devoted to commercial livestock, poultry and swine-raising.21 With this significant
modification, Congress clearly sought to align the provisions of our agrarian laws with the
intent of the 1987 Constitutional Commission to exclude livestock farms from the coverage of
agrarian reform.

In sum, it is doctrinal that rules of administrative bodies must be in harmony with the provisions of
the Constitution. They cannot amend or extend the Constitution. To be valid, they must conform to
and be consistent with the Constitution. In case of conflict between an administrative order and the
provisions of the Constitution, the latter prevails.22 The assailed A.O. of petitioner DAR was properly
stricken down as unconstitutional as it enlarges the coverage of agrarian reform beyond the scope
intended by the 1987 Constitution.

IN VIEW WHEREOF, the petition is DISMISSED. The assailed Decision and Resolution of the Court
of Appeals, dated September 19, 2003 and February 4, 2004, respectively, are AFFIRMED. No
pronouncement as to costs.

SO ORDERED.
REYNATO S. PUNO

SECOND DIVISION

G.R. No. 133507 February 17, 2000

EUDOSIA DAEZ AND/OR HER HEIRS, REP. BY ADRIANO D. DAEZ, petitioners,

vs.
THE HON. COURT OF APPEALS MACARIO SORIENTES, APOLONIO MEDIANA, ROGELIO
MACATULAD and MANUEL UMALI, respondents.

DE LEON, JR., J.:

Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals2 dated January
28, 1998 which denied the application of petitioner heirs of Eudosia Daez for the retention of a
4.1685-hectare riceland pursuant to Republic Act (R.A.) No. 6657, otherwise known as the
Comprehensive Agrarian Reform Law3, thereby reversing the Decision4 of then Executive Secretary
Ruben D. Torres and the Order5 of then Deputy Executive Secretary Renato C. Corona, both of
which had earlier set aside the Resolution6 and Order7 of then Department of Agrarian Reform (DAR)
Secretary Ernesto D. Garilao denying exemption of the same riceland from coverage under
Presidential Decree (P.D.) No. 27.

The pertinent facts are:

Eudosia Daez, now deceased, was the owner of a 4.1685-hectare riceland in Barangay Lawa,
Meycauayan, Bulacan which was being cultivated by respondents Macario Soriente, Rogelio
Macatulad, Apolonio Mediana and Manuel Umali under a system of share-tenancy. The said land
was subjected to the Operation Land Transfer (OLT) Program under Presidential Decree (P.D.) No.
278 as amended by Letter of Instruction (LOI) No. 4749. Thus, the then Ministry of Agrarian Reform
acquired the subject land and issued Certificates of Land Transfer (CLT) on December 9, 1980 to
private respondents as beneficiaries.

However, on May 31, 1981, private respondents signed an affidavit, allegedly under duress, stating
that they are not share tenants but hired laborers10. Armed with such document, Eudosia Daez
applied for the exemption of said riceland from coverage of P.D. No. 27 due to non-tenancy as well
as for the cancellation of the CLTs issued to private respondents. 1âwphi1.nêt

In their Affidavit dated October 2, 1983, Eudosia Daez and her husband, Lope, declared ownership
over 41.8064 hectares of agricultural lands located in Meycauayan, Bulacan and fourteen (14)
hectares of riceland, sixteen (16) hectares of forestland, ten (10) hectares of "batuhan" and 1.8064
hectares of residential lands11 in Penaranda, Nueva Ecija. Included in their 41.8064-hectare
landholding in Bulacan, was the subject 4,1685-hectare riceland in Meycauayan.

On July 27, 1987, DAR Undersecretary Jose C. Medina issued an Order denying Eudosia Daez's
application for exemption upon finding that her subject land is covered under LOI No. 474, petitioner
being owner of the aforesaid agricultural lands exceeding seven (7) hectares12.

On June 29, 1989, Eudosia Daez wrote a letter to DAR Secretary Benjamin T. Leong requesting for
reconsideration of Undersecretary Medina's order. But on January 16, 199213 Secretary Leong
affirmed the assailed order upon finding private respondents to be bonafide tenants of the subject
land. Secretary Leong disregarded private respondents' May 31, 1981 affidavit for having been
executed under duress because he found that Eudosia's son, Adriano, who was then the incumbent
Vice-Mayor of Meycauayan, pressured private respondents into signing the same.

Undaunted, Eudosia Daez brought her case on February 20, 1992 to the Court of Appeals via a
petition for certiorari. The Court of Appeals, however, sustained the order of Secretary Leong in a
decision dated April 29, 1992. Eudosia pursued her petition before this court but we denied it in a
minute resolution dated September 18, 1992. We also denied her motion for reconsideration on
November 9, 1992.

Meantime, on August 6 and 12, 1992, the DAR issued Emancipation Patents (EPs) to private
respondents. Thereafter, the Register of Deeds of Bulacan issued the corresponding Transfer
Certificates of Title (TCTs).

Exemption of the 4.1685 riceland from coverage by P.D. No. 27 having been finally denied her,
Eudosia Daez next filed an application for retention of the same riceland, this time under R.A. No.
6657.

In an order dated March 22, 1994, DAR Region III OIC-Director Eugenio B. Bernardo allowed
Eudosia Daez to retain the subject riceland but he denied the application of her eight (8) children to
retain three (3) hectares each for their failure to prove actual tillage of the land or direct management
thereof as required by law14. Aggrieved, they appealed to the DAR.

On August 26, 1994, then DAR Secretary Ernesto D. Garilao, set aside the order of Regional
Director Bernardo in a Resolution,15 the decretal portion of which reads, viz.:

WHEREFORE, premises considered, this Resolution is hereby issued setting aside with
FINALITY the Order dated March 22, 1994 of the Regional Director of DAR Region III.

The records of this case is remanded to the Regional Office for immediate implementation of
the Order dated January 16, 1992 of this office as affirmed by the Court of Appeals and the
Supreme Court.

SO ORDERED.

Eudosia Daez filed a Motion for Reconsideration but it was denied on January 19, 199516.

She appealed Secretary Garilao's decision to the Office of the President which ruled in her favor.
The dispositive portion of the Decision17 of then Executive Secretary reads:

WHEREFORE, the resolution and order appealed from are hereby SET ASIDE and
judgment is rendered authorizing the retention by Eudosia Daez or her heirs of the 4.1685-
hectare landholding subject thereof.

SO ORDERED.18

Aggrieved, private respondents sought from the Court of Appeals, a review of the decision of the
Office of the President.

On January 28, 1999, the said Decision of the Office of the President was reversed. The Court of
Appeals ordered, thus:
 WHEREFORE, the assailed decision of July 5, 1996 and Order dated October 23, 1996 of
the public respondents are REVERSED AND SET ASIDE, and the Resolution and Order of
DAR Secretary Ernesto D. Garilao respectively dated August 26, 1994 and January 19, 1995
are REINSTATED.

SO ORDERED.

Hence, this petition which assigns the following errors:

I. THE HONORABLE COURT OF APPEALS ERRED WHEN IT RULED THAT DISTINCTION

BETWEEN EXEMPTION FROM AGRARIAN REFORM COVERAGE AND THE RIGHT OF
RETENTION OF LANDOWNERS IS ONLY A MATTER OF SEMANTICS THAT AN ADVERSE
DECISION IN THE FORMER WILL FORECLOSE FURTHER ACTION TO ENFORCE THE LATTER
CONSIDERING THAT THEY CONSTITUTE SEPARATE AND DISTINCT CAUSES OF ACTION
AND, THEREFORE, ENFORCEABLE SEPARATELY AND IN SEQUEL.

II. THE HONORABLE COURT OF APPEALS ERRED WHEN IT APPLIED THE PRINCIPLE
OF RES JUDICATA DESPITE THE FACT THAT THE PREVIOUS CASE CITED (EXEMPTION
FROM COVERAGE DUE TO NON-TENANCY) AND THE PRESENT CASE (RETENTION RIGHT)
ARE OF DIFFERENT CAUSES OF ACTION.

III. THE HONORABLE COURT OF APPEALS ERRED WHEN IT RULED/OPINED THAT THERE
WAS A CUT-OFF DATE (AUGUST 27, 1985) FOR LANDOWNERS TO APPLY FOR EXEMPTION
OR RETENTION UNDER PD 27 AND THOSE WHO FAILED TO FILE THEIR
APPLICATIONS/PETITIONS ARE DEEMED TO HAVE WAIVED THEIR RIGHTS.

IV. THE HONORABLE COURT OF APPEALS ERRED IN DECLARING THAT PETITIONERS

(RESPONDENTS THEREIN) ARE GUILTY OF ESTOPPEL.

V. THE HONORABLE COURT OF APPEALS ERRED WHEN IT RULED THAT THE LAND
SUBJECT OF THIS CASE IS NO LONGER OWNED BY PETITIONERS SINCE PRIVATE
RESPONDENTS HAVE ALREADY BEEN ISSUED NOT ONLY THEIR RESPECTIVE
CERTIFICATES OF LAND TRANSFER BUT ALSO THEIR INDIVIDUAL CERTIFICATES OF TITLE
OVER THE DISPUTED AREA.19

We grant the petition.

First. Exemption and retention in agrarian reform are two (2) distinct concepts.

P.D. No. 27, which implemented the Operation Land Transfer (OLT) Program, covers tenanted rice
or corn lands. The requisites for coverage under the OLT program are the following: (1) the land
must be devoted to rice or corn crops; and (2) there must be a system of share-crop or lease-
tenancy obtaining therein. If either requisite is absent, a landowner may apply for exemption. If either
of these requisites is absent, the land is not covered under OLT. Hence, a landowner need not apply
for retention where his ownership over the entire landholding is intact and undisturbed.

P.D. No. 27 grants each tenant of covered lands a five (5)-hectare lot, or in case the land is irrigated,
a three (3)-hectare lot constituting a family size farm. However, said law allows a covered landowner
to retain not more than seven (7) hectares of his land if his aggregate landholding does not exceed
twenty-four (24) hectares. Otherwise, his entire landholding is covered without him being entitled to
any retention right20.
Consequently, a landowner may keep his entire covered landholding if its aggregate size does not
exceed the retention limit of seven (7) hectares. In effect, his land will not be covered at all by the
OLT program although all requisites for coverage are present. LOI No. 474 clarified the effective
coverage of OLT to include tenanted rice or corn lands of seven (7) hectares or less, if the
landowner owns other agricultural lands of more than seven (7) hectares. The term "other
agricultural lands" refers to lands other than tenanted rice or corn lands from which the landowner
derives adequate income to support his family.

Thus, on one hand, exemption from coverage of OLT lies if: (1) the land is not devoted to rice or
corn crops even if it is tenanted; or (2) the land is untenanted even though it is devoted to rice or
corn crops.

On the other hand, the requisites for the exercise by the landowner of his right of retention are the
following: (1) the land must be devoted to rice or corn crops; (2) there must be a system of share-
crop or lease-tenancy obtaining therein; and (3) the size of the landholding must not exceed twenty-
four (24) hectares, or it could be more than twenty-four (24) hectares provided that at least seven (7)
hectares thereof are covered lands and more than seven (7) hectares of it consist of "other
agricultural lands".

Clearly, then, the requisites for the grant of an application for exemption from coverage of OLT and
those for the grant of an application for the exercise of a landowner's right of retention, are different.

Hence, it is incorrect to posit that an application for exemption and an application for retention are
one and the same thing. Being distinct remedies, finality of judgment in one does not preclude the
subsequent institution of the other. There was, thus, no procedural impediment to the application
filed by Eudosia Daez for the retention of the subject 4.1865-hectare riceland, even after her appeal
for exemption of the same land was denied in a decision that became final and executory.

Second. Petitioner heirs of Eudosia Daez may exercise their right of retention over the subject
4.1685 riceland.

The right of retention is a constitutionally guaranteed right, which is subject to qualification by the
legislature21. It serves to mitigate the effects of compulsory land acquisition by balancing the rights of
the landowner and the tenant and by implementing the doctrine that social justice was not meant to
perpetrate an injustice against the landowner22. A retained area, as its name denotes, is land which
is not supposed to anymore leave the landowner's dominion, thus sparing the government from the
inconvenience of taking land only to return it to the landowner afterwards, which would be a
pointless process.

In the landmark case of Association of Small Landowners in the Phil., Inc. v. Secretary of Agrarian
Reform23, we held that landowners who have not yet exercised their retention rights under P.D. No.
27 are entitled to the new retention rights under R.A. No. 665724. We disregarded the August 27,
1985 deadline imposed by DAR Administrative Order No. 1, series of 1985 on landowners covered
by OLT. However, if a landowner filed his application for retention after August 27, 1985 but he had
previously filed the sworn statements required by LOI Nos. 41, 45 and 52, he is still entitled to the
retention limit of seven (7) hectares under P.D. No. 2725. Otherwise, he is only entitled to retain five
(5) hectares under R.A. No. 6657.

Sec. 6 of R.A. No. 6657, which provides, viz.:

Sec. 6. Retention Limits — Except as otherwise provided in this Act, no person may own or
retain, directly or indirectly, any public or private agricultural land, the size of which shall vary
 according to factors governing a viable family-size, such as commodity produced, terrain,
infrastructure, and soil fertility as determined by the Presidential Agrarian Reform Council
(PARC) created hereunder, but in no case shall retention by the landowner exceed five (5)
hectares. Three (3) hectares may be awarded to each child of the landowner, subject to the
following qualifications: (1) that he is at least fifteen (15) years of age; and (2) that he is
actually tilling the land or directly managing the farm; Provided, That landowners whose land
have been covered by Presidential Decree No. 27 shall be allowed to keep the area
originally retained by them thereunder, further, That original homestead grantees or direct
compulsory heirs who still own the original homestead at the time of the approval of this Act
shall retain the same areas as long as they continue to cultivate said homestead.

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 lease-holder
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.

In all cases, the security of tenure of the farmers or farmworkers on the land prior to the
approval of this Act shall be respected.

Upon the effectivity of this Act, any sale, disposition, lease, management contract or transfer
of possession of private lands executed by the original landowner in violation of this Act shall
be null and void; Provided, however, That those executed prior to this Act shall be valid only
when registered with the Register of Deeds within a period of three (3) months after the
effectivity of this Act. Thereafter, all Register of Deeds shall inform the DAR within thirty (3)
days of any transaction involving agricultural lands in excess of five (5) hectares26.

defines the nature and incidents of a landowner's right of retention. For as long as the area to be
retained is compact or contiguous and it does not exceed the retention ceiling of five (5) hectares, a
landowner's choice of the area to be retained, must prevail. Moreover, Administrative Order No. 4,
series of 1991,27 which supplies the details for the exercise of a landowner's retention rights, likewise
recognizes no limit to the prerogative of the landowner, although he is persuaded to retain other
lands instead to avoid dislocation of farmers.

Without doubt, this right of retention may be exercised over tenanted land despite even the issuance
of Certificate of Land Transfer (CLT) to farmer-beneficiaries.28 What must be protected, however, is
the right of the tenants to opt to either stay on the land chosen to be retained by the landowner or be
a beneficiary in another agricultural land with similar or comparable features.29

Finally. Land awards made pursuant to the government's agrarian reform program are subject to the
exercise by a landowner, who is so qualified, of his right of retention.

Under P.D. No. 27, beneficiaries are issued CLTs to entitle them to possess lands. Thereafter, they
are issued Emancipation Patents (EPs) after compliance with all necessary conditions. Such EPs,
upon their presentation to the Register of Deeds, result in the issuance of the corresponding transfer
certificates of title (TCT) in favor of the beneficiaries mentioned therein30.
Under R.A. No. 6657, the procedure has been simplified31. Only Certificates of Land Ownership
Award (CLOAs) are issued, in lieu of EPs, after compliance with all prerequisites. Thereafter, upon
presentation of the CLOAs to the Register of Deeds, TCTs are issued to the designated
beneficiaries. CLTs are no longer issued.

The issuance of EPs or CLOAs to beneficiaries does not absolutely bar the landowner from retaining
the area covered thereby. Under Administrative Order No. 2, series of 199432, an EP or CLOA may
be cancelled if the land covered is later found to be part of the landowner's retained area.

A certificate of title accumulates in one document a comprehensive statement of the status of the fee
held by the owner of a parcel of land.33 As such, it is a mere evidence of ownership and it does not
constitute the title to the land itself. It cannot confer title where no title has been acquired by any of
the means provided by law34.

Thus, we had, in the past, sustained the nullification of a certificate of title issued pursuant to a
homestead patent because the land covered was not part of the public domain and as a result, the
government had no authority to issue such patent in the first place35. Fraud in the issuance of the
patent, is also a ground for impugning the validity of a certificate of title36. In other words, the
invalidity of the patent or title is sufficient basis for nullifying the certificate of title since the latter is
merely an evidence of the former.

In the instant case, the CLTs of private respondents over the subject 4.1685-hectare riceland were
issued without Eudosia Daez having been accorded her right of choice as to what to retain among
her landholdings. The transfer certificates of title thus issued on the basis of those CLTs cannot
operate to defeat the right of the heirs of deceased Eudosia Daez to retain the said 4.1685 hectares
of riceland.

WHEREFORE, the instant petition is hereby GRANTED. The Decision of the Court of Appeals,
dated January 28, 1998, is REVERSED and SET ASIDE and the Decision of the Office of the
President, dated July 5, 1996, is hereby REINSTATED. In the implementation of said decision,
however, the Department of Agrarian Reform is hereby ORDERED to fully accord to private
respondents their rights under Section 6 of R.A. No. 6657. 1âwphi1.nêt

No costs.

SO ORDERED.

FIRST DIVISION

G.R. No. 171972 June 8, 2011

LUCIA RODRIGUEZ AND PRUDENCIA RODRIGUEZ, Petitioners,

vs.
TERESITA V. SALVADOR, Respondent.

DECISION

DEL CASTILLO, J.:

Agricultural tenancy is not presumed but must be proven by the person alleging it.
This Petition for Certiorari1 under Rule 65 of the Rules of Court assails the August 24, 2005
Decision2 and the February 20, 2006 Resolution3 of the Court of Appeals (CA) in CA G.R. SP No.
86599. However, per Resolution4 of this Court dated August 30, 2006, the instant petition shall be
treated as a Petition for Review on Certiorari under Rule 45 of the same Rules.

Factual Antecedents

On May 22, 2003, respondent Teresita V. Salvador filed a Complaint for Unlawful
Detainer,5 docketed as Civil Case No. 330, against petitioners Lucia (Lucia) and Prudencia
Rodriguez, mother and daughter, respectively before the Municipal Trial Court (MTC) of Dalaguete,
Cebu.6 Respondent alleged that she is the absolute owner of a parcel of land covered by Original
Certificate of Title (OCT) No. P-271407 issued by virtue of Free Patent No. (VII-5) 2646 in the name
of the Heirs of Cristino Salvador represented by Teresita Salvador;8 that petitioners acquired
possession of the subject land by mere tolerance of her predecessors-in-interest;9 and that despite
several verbal and written demands made by her, petitioners refused to vacate the subject land.10

In their Answer,11 petitioners interposed the defense of agricultural tenancy. Lucia claimed that she
and her deceased husband, Serapio, entered the subject land with the consent and permission of
respondent’s predecessors-in-interest, siblings Cristino and Sana Salvador, under the agreement
that Lucia and Serapio would devote the property to agricultural production and share the produce
with the Salvador siblings.12 Since there is a tenancy relationship between the parties, petitioners
argued that it is the Department of Agrarian Reform Adjudication Board (DARAB) which has
jurisdiction over the case and not the MTC.13

On July 10, 2003, the preliminary conference was terminated and the parties were ordered to submit
their respective position papers together with the affidavits of their witnesses and other evidence to
support their respective claims.14

Ruling of the Municipal Trial Court

On September 10, 2003, the MTC promulgated a Decision15 finding the existence of an agricultural
tenancy relationship between the parties, and thereby, dismissing the complaint for lack of
jurisdiction. Pertinent portions of the Decision read:

Based on the facts presented, it is established that defendant Lucia Rodriguez and her husband
Serapio Rodriguez were instituted as agricultural tenants on the lot in question by the original owner
who was the predecessor-in-interest of herein plaintiff Teresita Salvador. The consent given by
[the]original owner to constitute [defendants] as agricultural tenants of subject landholdings binds
plaintiff who as successor-in-interest of the original owner Cristino Salvador steps into the latter’s
shoes acquiring not only his rights but also his obligations towards the herein defendants. In the
instant case, the consent to tenurial arrangement between the parties is inferred from the fact that
the plaintiff and her successors-in-interest had received their share of the harvests of the property in
dispute from the defendants.

Moreover, dispossession of agricultural tenants can only be ordered by the Court for causes
expressly provided under Sec. 36 of R.A. 3844. However, this Court has no jurisdiction over detainer
case involving agricultural tenants as ejectment and dispossession of said tenants is within the
primary and exclusive jurisdiction of the Department of Agrarian Reform and Agricultural Board
(DARAB). ([S]ee Sec. 1(1.4) DARAB 2003 Rules of Procedure[.])

WHEREFORE, in view of the foregoing, the instant complaint is hereby ordered DISMISSED for lack
of jurisdiction.
SO ORDERED.16

Aggrieved, respondent filed an appeal, docketed as Civil Case No. AV-1237, with the Regional Trial
Court (RTC) of Argao, Cebu, Branch 26.17

Ruling of the Regional Trial Court

On January 12, 2004, the RTC rendered a Decision18 remanding the case to

the MTC for preliminary hearing to determine whether tenancy relationship exists between the
parties.

Petitioners moved for reconsideration19 arguing that the purpose of a preliminary hearing was served
by the parties’ submission of their respective position papers and other supporting evidence.

On June 23, 2004, the RTC granted the reconsideration and affirmed the MTC Decision dated
September 10, 2003. The fallo of the new Decision20 reads:

WHEREFORE, the motion for reconsideration is GRANTED. The Decision dated September 10,
2003 of the Municipal Trial Court of Dalaguete, Cebu, is hereby AFFIRMED.

IT IS SO DECIDED.21

Respondent sought reconsideration22 but it was denied by the RTC in an Order23 dated August 18,
2004.

Thus, respondent filed a Petition for Review24 with the CA, docketed as CA G.R. SP No. 86599.

Ruling of the Court of Appeals

On August 24, 2005, the CA rendered judgment in favor of respondent. It ruled that no tenancy
relationship exists between the parties because petitioners failed to prove that respondent or her
predecessors-in-interest consented to the tenancy relationship.25 The CA likewise gave no probative
value to the affidavits

of petitioners’ witnesses as it found their statements insufficient to establish petitioners’ status as

agricultural tenants.26 If at all, the affidavits merely showed that petitioners occupied the subject land
with the consent of the original owners.27 And since petitioners are occupying the subject land by
mere tolerance, they are bound by an implied promise to vacate the same upon demand by the
respondent.28 Failing to do so, petitioners are liable to pay damages.29 Thus, the CA disposed of the
case in this manner:

WHEREFORE, in view of all the foregoing premises, judgment is hereby rendered by us SETTING
ASIDE, as we hereby set aside, the decision rendered by the RTC of Argao, Cebu on June 23, 2004
in Civil Case No. AV-1237 and ORDERING the remand of this case to the MTC of Dalaguete, Cebu
for the purpose of determining the amount of actual damages suffered by the [respondent] by reason
of the [petitioners’] refusal and failure to turn over to [respondent] the possession and enjoyment of
the land and, then, to make such award of damages to the [respondent].

SO ORDERED.30
 Issues

Hence, this petition raising the following issues:

I.

WHETHER X X X THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION IN RULING THAT PETITIONERS-
DEFENDANTS ARE NOT TENANTS OF THE SUBJECT LAND.

II.

WHETHER X X X SUCH RULING OF THE COURT OF APPEALS HAS FACTUAL AND LEGAL
BASIS AND IS SUPPORTED WITH SUBSTANTIAL EVIDENCE.31

Petitioners’ Arguments

Petitioners contend that under Section 532 of Republic Act No. 3844, otherwise known as the
Agricultural Land Reform Code, tenancy may be constituted by agreement of the parties either orally
or in writing, expressly or impliedly.33 In this case, there was an implied consent to constitute a
tenancy relationship as respondent and her predecessors-in-interest allowed petitioners to cultivate
the land and share the harvest with the landowners for more than 40 years.34

Petitioners further argue that the CA erred in disregarding the affidavits executed by their witnesses
as these are sufficient to prove the existence of a tenancy relationship.35 Petitioners claim that their
witnesses had personal knowledge of the cultivation and the sharing of harvest.36

Respondent’s Arguments

Respondent, on the other hand, maintains that petitioners are not agricultural tenants because mere
cultivation of an agricultural land does not make the tiller an agricultural tenant.37 Respondent insists
that her predecessors-in-interest merely tolerated petitioners’ occupation of the subject land.38

Our Ruling

The petition lacks merit.

Agricultural tenancy relationship does not exist in the instant case.

Agricultural tenancy exists when all the following requisites are present: 1) the parties are the
landowner and the tenant or agricultural lessee; 2) the subject matter of the relationship is an
agricultural land; 3) there is consent between the parties to the relationship; 4) the purpose of the
relationship is to bring about agricultural production; 5) there is personal cultivation on the part of the
tenant or agricultural lessee; and 6) the harvest is shared between landowner and tenant or
agricultural lessee.39

In this case, to prove that an agricultural tenancy relationship exists between the parties, petitioners
submitted as evidence the affidavits of petitioner Lucia and their neighbors. In her
affidavit,40 petitioner Lucia declared that she and her late husband occupied the subject land with the
consent and permission of the original owners and that their agreement was that she and her late
husband would cultivate the subject land, devote it to agricultural production, share the harvest with
the landowners on a 50-50 basis, and at the same time watch over the land. Witness Alejandro Arias
attested in his affidavit41 that petitioner Lucia and her husband, Serapio, have been cultivating the
subject land since 1960; that after the demise of Serapio, petitioner Lucia and her children continued
to cultivate the subject land; and that when respondent’s predecessors-in-interest were still alive, he
would often see them and respondent get some of the harvest. The affidavit42 of witness Conseso
Muñoz stated, in essence, that petitioner Lucia has been in peaceful possession and cultivation of
the subject property since 1960 and that the harvest was divided into two parts, ½ for the landowner
and ½ for petitioner Lucia.

The statements in the affidavits presented by the petitioners are not sufficient to prove the existence
of an agricultural tenancy.

As correctly found by the CA, the element of consent is lacking.43 Except for the self-serving affidavit
of Lucia, no other evidence was submitted to show that respondent’s predecessors-in-interest
consented to a tenancy relationship with petitioners. Self-serving statements, however, will not
suffice to prove consent of the landowner; independent evidence is necessary.44

Aside from consent, petitioners also failed to prove sharing of harvest. The affidavits of petitioners’
1avv phil

neighbors declaring that respondent and her predecessors-in-interest received their share in the
harvest are not sufficient. Petitioners should have presented receipts or any other evidence to show
that there was sharing of harvest45 and that there was an agreed system of sharing between them
and the landowners.46

As we have often said, mere occupation or cultivation of an agricultural land will not ipso facto make
the tiller an agricultural tenant.47 It is incumbent upon a person who claims to be an agricultural
tenant to prove by substantial evidence all the requisites of agricultural tenancy.48

In the instant case, petitioners failed to prove consent and sharing of harvest between the parties.
Consequently, their defense of agricultural tenancy must fail. The MTC has jurisdiction over the
instant case. No error can therefore be attributed to the CA in reversing and setting aside the
dismissal of respondent’s complaint for lack of jurisdiction. Accordingly, the remand of the case to
the MTC for the determination of the amount of damages due respondent is proper.

Respondent is entitled to the fair rental value or the reasonable compensation for the use and
occupation of the subject land.

We must, however, clarify that "the only damage that can be recovered [by respondent] is the fair
rental value or the reasonable compensation for the use and occupation of the leased property. The
reason for this is that [in forcible entry or unlawful detainer cases], the only issue raised in ejectment
cases is that of rightful possession; hence, the damages which could be recovered are those which
the [respondent] could have sustained as a mere possessor, or those caused by the loss of the use
and occupation of the property, and not the damages which [she] may have suffered but which have
no direct relation to [her] loss of material possession."49

WHEREFORE, the petition is DENIED. The assailed August 24, 2005 Decision and the February 20,
2006 Resolution of the Court of Appeals in CA G.R. SP No. 86599 are AFFIRMED. This case is
ordered REMANDED to the Municipal Trial Court of Dalaguete, Cebu, to determine the amount of
damages suffered by respondent by reason of the refusal and failure of petitioners to turn over the
possession of the subject land, with utmost dispatch consistent with the above disquisition.

SO ORDERED.
MARIANO C. DEL CASTILLO

THIRD DIVISION

G.R. No. 139592 October 5, 2000

REPUBLIC OF THE PHILIPPINES rep. by the DEPARTMENT OF AGRARIAN

REFORM, petitioner,
vs.
HON. COURT OF APPEALS and GREEN CITY ESTATE & DEVELOPMENT
CORPORATION, respondents.

DECISION

GONZAGA-REYES, J.:

This is a petition for review by certiorari of the Decision1 of the Court of Appeals dated December 9,
1998 that reversed the Order of petitioner, the Department of Agrarian Reform (petitioner DAR), by
exempting the parcels of land of private respondent Green City Estate and Development Corporation
(private respondent) from agrarian reform. Also assailed in this instant petition is the Resolution
dated May 11, 1998 issued by the same court that denied the Motion for Reconsideration of
petitioner DAR.

The five parcels of land in issue has a combined area of approximately 112.0577 hectares situated
at Barangay Punta, Municipality of Jala-Jala, Province of Rizal, covered by Transfer Certificates of
Title Nos. M-45856, M-45857, M-45858, M-45859 and M-45860 of the Register of Deeds of Rizal.
Private respondent acquired the land by purchase on May 26, 1994 from Marcela Borja vda. De
Torres. The tax declarations classified the properties as agricultural.

On June 16, 1994, petitioner DAR issued a Notice of Coverage of the subject parcels of land under
compulsory acquisition pursuant to Section 7, Chapter II of R.A. 6657 or the Comprehensive Land
Reform Law of 1998 (CARL).

On July 21, 1994, private respondent filed with the DAR Regional Office an application for exemption
of the land from agrarian reform, pursuant to DAR Administrative Order No. 6, series of 19942 and
DOJ Opinion No. 44, series of 1990. Administrative Order No. 6 provides the guidelines for
exemption from the Comprehensive Agrarian Reform Program (CARP) coverage while DOJ Opinion
No. 44, Series of 1990, authorizes the DAR to approve conversion of agricultural lands covered by
RA 6651 to non-agricultural uses effective June 15 1988.

In support of its application for exemption, private respondent submitted the following documents:

1. Certified photocopies of the titles and tax declarations.

2. Vicinity and location plans.

3. Certification of the Municipal Planning and Development Coordinator of the Office of the
Mayor of Jala-Jala.

4. Resolution No. R-36, series of 1981 of the HLURB.

 5. Certification from the National Irrigation Administration.

On October 12, 1994, the DAR Regional Director recommended a denial of the said petition, on the
ground that private respondent "failed to substantiate their (sic) allegation that the properties are
indeed in the municipality’s residential and forest conservation zone and that portions of the
properties are not irrigated nor irrigable".

On February 15, 1995, private respondent filed an Amended Petition for Exemption/Exclusion from
CARP coverage. This time, private respondent alleged that the property should be exempted since it
is within the residential and forest conservation zones of the town plan/zoning ordinance of Jala-
Jala. The amended petition for exemption showed that a portion of about 15 hectares of the land is
irrigated riceland which private respondent offered to sell to the farmer beneficiaries or to the DAR.
In support of its amended petition, private respondent submitted the following additional documents:

1. Certification letter from the HLURB that the specific properties are within the residential
and forest conservation zone.

2. Certification from the HLURB that the town plan/zoning ordinance of Jala-Jala was
approved on December 2, 1981 by the Human Settlements Commission.

3. Undertaking that the landowner is ready and willing to pay disturbance compensation to
the tenants for such amount as may be agreed upon or directed by the DAR.

4. Vicinity plan.

5. Amended survey plan which indicates the irrigated riceland that is now excluded from the
application.

6. Certification of the Jala-Jala Municipal Planning and Development Coordinator to the

effect that the properties covered are within the residential and forest conservation areas
pursuant to the zoning ordinance of Jala-Jala.

On October 19, 1995, the DAR Secretary issued an Order denying the application for exemption of
private respondent, on the grounds that the land use plan of Jala-Jala, which differs from its land use
map, intends to develop 73% of Barangay Punta into an agricultural zone; that the certification
issued by the Housing and Land Use Regulatory Board (HLURB) is not definite and specific; and
that the certification issued by the National Irrigation Authority (NIA) that the area is not irrigated nor
programmed for irrigation, is not conclusive on the DAR, since big areas in the municipality are
recipients of JICA-funded Integrated Jala-Jala Rural Development Projects. The motion for
reconsideration filed by private respondent was likewise denied by the DAR Secretary.

Private respondent then appealed to the Court of Appeals. During the course of the appeal, said
court created a commission composed of three (3) members tasked to conduct an ocular inspection
and survey of the subject parcels of land and to submit a report on the result of such inspection and
survey. To verify the report of the commission, the DAR constituted its own team to inspect and
report on the property in question. The verification report of the DAR, duly filed with the Court of
Appeals, objected to the report of the commission mainly due to the lack of specific boundaries
delineating the surveyed areas.

On December 9, 1998, the Court of Appeals issued its Decision that reversed the assailed DAR
orders, the dispositive portion of which reads:
"WHEREFORE, the Orders of the respondent Secretary dated October 19, 1995 and November 15,
1995 are hereby REVERSED, and judgement is hereby rendered declaring those portions of the
land of the petitioner which are mountainous and residential, as found by the Courts (sic)
commissioners, to be exempt from the Comprehensive Agrarian Reform Program, subject to their
delineation. The records of this case are hereby ordered remanded to the respondent Secretary for
further proceedings in the determination of the boundaries of the said areas."3

Hence this petition for review wherein petitioner DAR seeks the reversal of the foregoing decision on
the ground that the honorable Court of Appeals erred:

1. WHEN IT RULED THAT THERE WAS NO DEFINITE CLASSIFICATION OF THE

PROPERTIES INVOLVED WHEN, PER THE CORRESPONDING TAX DECLARATIONS,
THEY ARE GENERALLY CLASSIFIED AS AGRICULTURAL.

2. WHEN IT RULED THAT THE PHYSICAL FEATURES OF THE LAND AS OF 1980 OR

BEFORE AS APPEARING IN TABLE 3-3 OF THE ZONING ORDINANCE IS THE
PRESENT CLASSIFICATION OF THE LANDHOLDINGS INVOLVED; and

3. WHEN IT MADE A RULING ON HOW SUBJECT LANDHOLDING BE CLASSIFIED

(WHETHER COVERED BY AGRARIAN REFORM FOR BEING AGRICULTURAL LAND OR
NOT) AND DISPOSED OF SOLELY ON THE BASIS OF THE PHYSICAL CONDITION OF
THE LAND IRRESPECTIVE OF THE LEGAL ISSUE RAISED ON THEIR LEGAL
CLASSIFICATION, A FUNCTION THAT IS VESTED IN CONGRESS.4

The petition has no merit.

Republic Act No. 6657 otherwise known as the Comprehensive Agrarian Reform Law (CARL) of
1998 covers all public and private agricultural lands. The same law defines agricultural as "land
devoted to agricultural activity as defined in this Act and not classified as mineral, forest, residential,
commercial or industrial land".5

Private respondent sought exemption from the coverage of CARL on the ground that its five parcels
of land are not wholly agricultural. The land use map of the municipality, certified by the Office of the
Municipal Planning and Development Coordinator (MPDC) of Jala-Jala and the report of the
commission constituted by the Court of Appeals established that the properties lie mostly within the
residential and forest conservation zone.

Petitioner DAR maintains that the subject properties have already been classified as agricultural
based on the tax declarations.6 The Office of the Solicitor General (OSG) and petitioner DAR are one
in contending that the classification of lands once determined by law may not be varied or altered by
the results of a mere ocular or aerial inspection.7

We are unable to sustain petitioner’s contention. There is no law or jurisprudence that holds that the
land classification embodied in the tax declarations is conclusive and final nor would proscribe any
further inquiry. Furthermore, the tax declarations are clearly not the sole basis of the classification of
a land. In fact, DAR Administrative Order No. 6 lists other documents, aside from tax declarations,
that must be submitted when applying for exemption from CARP.8 In Halili vs. Court of Appeals9 , we
sustained the trial court when it ruled that the classification made by the Land Regulatory Board of
the land in question outweighed the classification stated in the tax declaration. The classification of
the Board in said case was more recent than that of the tax declaration and was based on the
present condition of the property and the community thereat.10
In this case, the Court of Appeals was constrained to resort to an ocular inspection of said properties
through the commission it created considering that the opinion of petitioner DAR conflicted with the
land use map submitted in evidence by private respondent. Respondent court also noted that even
from the beginning the properties of private respondent had no definite delineation and
classification.11 Hence, the survey of the properties through the court appointed commissioners was
the judicious and equitable solution to finally resolve the issue of land classification and delineation.

The OSG stresses that to be exempt from CARP under DOJ Opinion No. 44, the land must have
been classified as industrial/residential before June 15, 1988. 12 Based on this premise, the OSG
points out that no such classification was presented except the municipality’s alleged land use map
in 1980 showing that subject parcels of land fall within the municipality’s forest conservation
zone.13 The OSG further argues that assuming that a change in the use of the subject properties in
1980 may justify their exemption from CARP under DOJ Opinion No. 44, such land use of 1980 was,
nevertheless, repealed/amended when the HLURB approved the municipality’s Comprehensive
Development Plan for Barangay Punta for the years 1980 to 2000 in its Resolution No. 33, series of
1981.14 The plan for Barangay Punta, where the parcels of land in issue are located, allegedly
envision the development of the barangay into a progressive agricultural community with the limited
allocation of only 51 hectares for residential use and none for commercial and forest conservation
zone use.15

The foregoing arguments are untenable. We are in full agreement with respondent Court when it
rationalized that the land use map is the more appropriate document to consider, thus:

"The petitioner (herein private respondent) presented a development plan of the Municipality of Jala-
Jala, which was approved by the Housing and Land Use Regulatory Board (HLURB) on December
2, 1981. It also presented certifications from the HLURB and the Municipal Planning and
Development Coordinator of Jala-Jala that the subject properties fall within the Residential and
Forest Conservation zones of the municipality. Extant on the record is a color-coded land use map of
Jala-Jala, showing that the petitioner’s land falls mostly within the Residential and Forest
Conservation zones. This notwithstanding, the respondent Secretary of Agrarian Reform denied the
petitioner’s application on the ground that the town plan of the municipality, particularly Table 4-4
thereof, shows that Barangay Punta is intended to remain and to become a progressive agricultural
community in view of the abundance of fertile agricultural areas in the barangay, and that there is a
discrepancy between the land use mapwhich identifies a huge forest conservation zone and the land
use plan which has no area classified as forest conservation. 1âw phi 1

However, a closer look at the development plan for the municipality of Jala-Jala shows that Table 4-
4 does not represent the present classification of land in that municipality, but the proposed land use
to be achieved. The existing land use as of 1980 is shown by Table 3-3, wherein Barangay Punta is
shown to have a forest area of 35 hectares and open grassland (which was formerly forested area)
of 56 hectares. The land use map is consistent with this."16

Moreover, the commissioner’s report on the actual condition of the properties confirms the fact that
the properties are not wholly agricultural. In essence, the report of the commission showed that the
land of private respondent consists of a mountainous area with an average 28 degree slope
containing 66.5 hectares; a level, unirrigated area of 34 hectares of which 5 to 6 hectares are
planted to palay; and a residential area of 8 hectares.17 The finding that 66.5 hectares of the
112.0577 hectares of land of private respondent have an average slope of 28 degrees provides
another cogent reason to exempt these portions of the properties from the CARL. Section 10 of the
CARL is clear on this point when it provides that "all lands with eighteen percent (18%) slope and
over, except those already developed shall be exempt from the coverage of this Act".
Petitioner DAR and the OSG contest the finding of the Court of Appeals that the subject parcels of
land have a mountainous slope on the ground that this conclusion was allegedly arrived at in a
manner not in accord with established surveying procedures.18 They also bewail the consideration
given by the Court of Appeals to the "slope" issue since this matter was allegedly never raised
before the DAR and the Court of Appeals.19 Petitioner DAR and the OSG thus claim that laches had
already set in.20

As pointed out earlier, the crux of the controversy is whether the subject parcels of land in issue are
exempt from the coverage of the CARL. The determination of the classification and physical
condition of the lands is therefore material in the disposition of this case, for which purpose the Court
of Appeals constituted the commission to inspect and survey said properties. Petitioner DAR did not
object to the creation of a team of commissioners21 when it very well knew that the survey and ocular
inspection would eventually involve the determination of the slope of the subject parcels of land. It is
the protestation of petitioner that comes at a belated hour. The team of commissioners appointed by
respondent court was composed persons who were mutually acceptable to the parties.22 Thus, in the
absence of any irregularity in the survey and inspection of the subject properties, and none is
alleged, the report of the commissioners deserves full faith and credit and we find no reversible error
in the reliance by the appellate court upon said report.

WHEREFORE, the petition is hereby DENIED. The challenged Decision is AFFIRMED.

SO ORDERED.

Melo, (Chairman), Vitug, Panganiban, and Purisima, JJ., concur.

EN BANC

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 agencies1 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 Coverage3 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
permits7 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.

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
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 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.
 EN BANC

G.R. No. 100091 October 22, 1992

CENTRAL MINDANAO UNIVERSITY REPRESENTED ITS PRESIDENT DR. LEONARDO A. CHUA, petitioner,
vs.
THE DEPARTMENT OF AGRARIAN REFORM ADJUDICATION BOARD, THE COURT OF APPEALS and ALVIN OBRIQUE,
REPRESENTING BUKIDNON FREE FARMERS AGRICULTURAL LABORERS ORGANIZATION (BUFFALO), respondents.

CAMPOS, JR., J.:

This is a Petition for Review on Certiorari under Rule 65 of the Rules of Court to nullify the proceedings and decision of the Department of
Agrarian Reform Adjudication Board (DARAB for brevity) dated September 4, 1989 and to set aside the decision the decision * of the Court
of Appeals dated August 20, 1990, affirming the decision of the DARAB which ordered the segregation of 400 hectares of suitable, compact
and contiguous portions of the Central Mindanao University (CMU for brevity) land and their inclusion in the Comprehensive Agrarian Reform
Program (CARP for brevity) for distribution to qualified beneficiaries, on the ground of lack of jurisdiction.

This case originated in a complaint filed by complainants calling themselves as the Bukidnon Free Farmers and Agricultural Laborers
Organization (BUFFALO for brevity) under the leadership of Alvin Obrique and Luis Hermoso against the CMU, before the Department of
Agrarian Reform for Declaration of Status as Tenants, under the CARP.

From the records, the following facts are evident. The petitioner, the CMU, is an agricultural educational institution owned and run by the
state located in the town of Musuan, Bukidnon province. It started as a farm school at Marilang, Bukidnon in early 1910, in response to the
public demand for an agricultural school in Mindanao. It expanded into the Bukidnon National Agricultural High School and was transferred to
its new site in Managok near Malaybalay, the provincial capital of Bukidnon.

In the early 1960's, it was converted into a college with campus at Musuan, until it became what is now known as the CMU, but still primarily
an agricultural university. From its beginning, the school was the answer to the crying need for training people in order to develop the
agricultural potential of the island of Mindanao. Those who planned and established the school had a vision as to the future development of
that part of the Philippines. On January 16, 1958 the President of the Republic of the Philippines, the late Carlos P. Garcia, "upon the
recommendation of the Secretary of Agriculture and Natural Resources, and pursuant to the provisions of Section 53, of Commonwealth Act
No. 141, as amended", issued Proclamation No. 476, withdrawing from sale or settlement and reserving for the Mindanao Agricultural
College, a site which would be the future campus of what is now the CMU. A total land area comprising 3,080 hectares was surveyed and
registered and titled in the name of the petitioner under OCT Nos. 160, 161 and 162. 1

In the course of the cadastral hearing of the school's petition for registration of the aforementioned grant of agricultural land, several tribes
belonging to cultural communities, opposed the petition claiming ownership of certain ancestral lands forming part of the tribal reservations.
Some of the claims were granted so that what was titled to the present petitioner school was reduced from 3,401 hectares to 3,080 hectares.

In the early 1960's, the student population of the school was less than 3,000. By 1988, the student population had expanded to some 13,000
students, so that the school community has an academic population (student, faculty and non-academic staff) of almost 15,000. To cope with
the increase in its enrollment, it has expanded and improved its educational facilities partly from government appropriation and partly by self-
help measures.

True to the concept of a land grant college, the school embarked on self-help measures to carry out its educational objectives, train its
students, and maintain various activities which the government appropriation could not adequately support or sustain. In 1984, the CMU
approved Resolution No. 160, adopting a livelihood program called "Kilusang Sariling Sikap Program" under which the land resources of the
University were leased to its faculty and employees. This arrangement was covered by a written contract. Under this program the faculty and
staff combine themselves to groups of five members each, and the CMU provided technical know-how, practical training and all kinds of
assistance, to enable each group to cultivate 4 to 5 hectares of land for the lowland rice project. Each group pays the CMU a service fee and
also a land use participant's fee. The contract prohibits participants and their hired workers to establish houses or live in the project area and
to use the cultivated land as a collateral for any kind of loan. It was expressly stipulated that no landlord-tenant relationship existed between
the CMU and the faculty and/or employees. This particular program was conceived as a multi-disciplinary applied research extension and
productivity program to utilize available land, train people in modern agricultural technology and at the same time give the faculty and staff
opportunities within the confines of the CMU reservation to earn additional income to augment their salaries. The location of the CMU at
Musuan, Bukidnon, which is quite a distance from the nearest town, was the proper setting for the adoption of such a program. Among the
participants in this program were Alvin Obrique, Felix Guinanao, Joven Caballero, Nestor Pulao, Danilo Vasquez, Aronio Pelayo and other
complainants. Obrique was a Physics Instructor at the CMU while the others were employees in the lowland rice project. The other
complainants who were not members of the faculty or non-academic staff CMU, were hired workers or laborers of the participants in this
program. When petitioner Dr. Leonardo Chua became President of the CMU in July 1986, he discontinued the agri-business project for the
production of rice, corn and sugar cane known as Agri-Business Management and Training Project, due to losses incurred while carrying on
the said project. Some CMU personnel, among whom were the complainants, were laid-off when this project was discontinued. As Assistant
Director of this agri-business project, Obrique was found guilty of mishandling the CMU funds and was separated from service by virtue of
Executive Order No. 17, the re-organization law of the CMU.

Sometime in 1986, under Dr. Chua as President, the CMU launched a self-help project called CMU-Income Enhancement Program (CMU-
IEP) to develop unutilized land resources, mobilize and promote the spirit of self-reliance, provide socio-economic and technical training in
actual field project implementation and augment the income of the faculty and the staff.

Under the terms of a 3-party Memorandum of Agreement 2 among the CMU, the CMU-Integrated Development Foundation (CMU-IDF) and
groups or "seldas" of 5 CMU employees, the CMU would provide the use of 4 to 5 hectares of land to a selda for one (1) calendar year. The
CMU-IDF would provide researchers and specialists to assist in the preparation of project proposals and to monitor and analyze project
implementation. The selda in turn would pay to the CMU P100 as service fee and P1,000 per hectare as participant's land rental fee. In
addition, 400 kilograms of the produce per year would be turned over or donated to the CMU-IDF. The participants agreed not to allow their
hired laborers or member of their family to establish any house or live within vicinity of the project area and not to use the allocated lot as
collateral for a loan. It was expressly provided that no tenant-landlord relationship would exist as a result of the Agreement.

Initially, participation in the CMU-IEP was extended only to workers and staff members who were still employed with the CMU and was not
made available to former workers or employees. In the middle of 1987, to cushion the impact of the discontinuance of the rice, corn and
sugar cane project on the lives of its former workers, the CMU allowed them to participate in the CMU-IEP as special participants.

Under the terms of a contract called Addendum To Existing Memorandum of Agreement Concerning Participation To the CMU-Income
Enhancement Program, 3 a former employee would be grouped with an existing selda of his choice and provided one (1) hectare for a
lowland rice project for one (1) calendar year. He would pay the land rental participant's fee of P1,000.00 per hectare but on a charge-to-crop
basis. He would also be subject to the same prohibitions as those imposed on the CMU employees. It was also expressly provided that no
tenant-landlord relationship would exist as a result of the Agreement.

The one-year contracts expired on June 30, 1988. Some contracts were renewed. Those whose contracts were not renewed were served
with notices to vacate.

The non-renewal of the contracts, the discontinuance of the rice, corn and sugar cane project, the loss of jobs due to termination or
separation from the service and the alleged harassment by school authorities, all contributed to, and precipitated the filing of the complaint.

On the basis of the above facts, the DARAB found that the private respondents were not tenants and cannot therefore be beneficiaries under
the CARP. At the same time, the DARAB ordered the segregation of 400 hectares of suitable, compact and contiguous portions of the CMU
land and their inclusion in the CARP for distribution to qualified beneficiaries.

The petitioner CMU, in seeking a review of the decisions of the respondents DARAB and the Court of Appeals, raised the following issues:

1.) Whether or not the DARAB has jurisdiction to hear and decide Case No. 005 for Declaration of Status of Tenants and coverage of land
under the CARP.

2.) Whether or not respondent Court of Appeals committed serious errors and grave abuse of discretion amounting to lack of jurisdiction in
dismissing the Petition for Review on Certiorari and affirming the decision of DARAB.

In their complaint, docketed as DAR Case No. 5, filed with the DARAB, complainants Obrique, et al. claimed that they are tenants of the
CMU and/or landless peasants claiming/occupying a part or portion of the CMU situated at Sinalayan, Valencia, Bukidnon and Musuan,
Bukidnon, consisting of about 1,200 hectares. We agree with the DARAB's finding that Obrique, et. al. are not tenants. Under the terms of
the written agreement signed by Obrique, et. al., pursuant to the livelihood program called "Kilusang Sariling Sikap Program", it was
expressly stipulated that no landlord-tenant relationship existed between the CMU and the faculty and staff (participants in the project). The
CMU did not receive any share from the harvest/fruits of the land tilled by the participants. What the CMU collected was a nominal service
fee and land use participant's fee in consideration of all the kinds of assistance given to the participants by the CMU. Again, the agreement
signed by the participants under the CMU-IEP clearly stipulated that no landlord-tenant relationship existed, and that the participants are not
share croppers nor lessees, and the CMU did not share in the produce of the participants' labor.

In the same paragraph of their complaint, complainants claim that they are landless peasants. This allegation requires proof and should not
be accepted as factually true. Obrique is not a landless peasant. The facts showed he was Physics Instructor at CMU holding a very
responsible position was separated from the service on account of certain irregularities he committed while Assistant Director of the Agri-
Business Project of cultivating lowland rice. Others may, at the moment, own no land in Bukidnon but they may not necessarily be so
destitute in their places of origin. No proof whatsoever appears in the record to show that they are landless peasants.

The evidence on record establish without doubt that the complainants were originally authorized or given permission to occupy certain areas
of the CMU property for a definite purpose — to carry out certain university projects as part of the CMU's program of activities pursuant to its
avowed purpose of giving training and instruction in agricultural and other related technologies, using the land and other resources of the
institution as a laboratory for these projects. Their entry into the land of the CMU was with the permission and written consent of the owner,
the CMU, for a limited period and for a specific purpose. After the expiration of their privilege to occupy and cultivate the land of the CMU,
their continued stay was unauthorized and their settlement on the CMU's land was without legal authority. A person entering upon lands of
another, not claiming in good faith the right to do so by virtue of any title of his own, or by virtue of some agreement with the owner or with
one whom he believes holds title to the land, is a squatter. 4 Squatters cannot enter the land of another surreptitiously or by stealth, and
under the umbrella of the CARP, claim rights to said property as landless peasants. Under Section 73 of R.A. 6657, persons guilty of
committing prohibited acts of forcible entry or illegal detainer do not qualify as beneficiaries and may not avail themselves of the rights and
benefits of agrarian reform. Any such person who knowingly and wilfully violates the above provision of the Act shall be punished with
imprisonment or fine at the discretion of the Court.

In view of the above, the private respondents, not being tenants nor proven to be landless peasants, cannot qualify as beneficiaries under
the CARP.

The questioned decision of the Adjudication Board, affirmed in toto by the Court of Appeals, segregating 400 hectares from the CMU land is
primarily based on the alleged fact that the land subject hereof is "not directly, actually and exclusively used for school sites, because the
same was leased to Philippine Packing Corporation (now Del Monte Philippines)".

In support of this view, the Board held that the "respondent University failed to show that it is using actually, really, truly and in fact, the
questioned area to the exclusion of others, nor did it show that the same is directly used without any intervening agency or person", 5 and
"there is no definite and concrete showing that the use of said lands are essentially indispensable for educational purposes". 6 The reliance
by the respondents Board and Appellate Tribunal on the technical or literal definition from Moreno's Philippine Law Dictionary and Black's
Law Dictionary, may give the ordinary reader a classroom meaning of the phrase "is actually directly and exclusively", but in so doing they
missed the true meaning of Section 10, R.A. 6657, as to what lands are exempted or excluded from the coverage of the CARP.

The pertinent provisions of R.A. 6657, otherwise known as the Comprehensive Agrarian Reform Law of 1988, are as follows:

Sec. 4. SCOPE. — The Comprehensive Agrarian Reform Law of 1988 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 of 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 ad 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 agriculture regardless of the agricultural products raised or that can be
raised thereon.

Sec. 10 EXEMPTIONS AND EXCLUSIONS. — Lands actually, directly and exclusively used and found to be
necessary for parks, wildlife, forest reserves, reforestration, fish sanctuaries and breeding grounds, watersheds and
mangroves, national defense, school sites and campuses including experimental farm stations operated by public or
private schools for educational purposes, seeds and seedlings research and pilot production centers, church sites and
convents appurtenant thereto, mosque sites and Islamic centers appurtenant thereto, communal burial grounds and
cemeteries, penal colonies and penal farms actually worked by the inmates, government and private research and
quarantine centers and all lands with eighteen percent (18%) slope and over, except those already developed shall be
exempt from the coverage of this Act. (Emphasis supplied).

The construction given by the DARAB to Section 10 restricts the land area of the CMU to its present needs or to a land area presently,
actively exploited and utilized by the university in carrying out its present educational program with its present student population and
academic facility — overlooking the very significant factor of growth of the university in the years to come. By the nature of the CMU, which is
a school established to promote agriculture and industry, the need for a vast tract of agricultural land and for future programs of expansion is
obvious. At the outset, the CMU was conceived in the same manner as land grant colleges in America, a type of educational institution which
blazed the trail for the development of vast tracts of unexplored and undeveloped agricultural lands in the Mid-West. What we now know as
Michigan State University, Penn State University and Illinois State University, started as small land grant colleges, with meager funding to
support their ever increasing educational programs. They were given extensive tracts of agricultural and forest lands to be developed to
support their numerous expanding activities in the fields of agricultural technology and scientific research. Funds for the support of the
educational programs of land grant colleges came from government appropriation, tuition and other student fees, private endowments and
gifts, and earnings from miscellaneous sources. 7 It was in this same spirit that President Garcia issued Proclamation No. 476, withdrawing
from sale or settlement and reserving for the Mindanao Agricultural College (forerunner of the CMU) a land reservation of 3,080 hectares as
its future campus. It was set up in Bukidnon, in the hinterlands of Mindanao, in order that it can have enough resources and wide open
spaces to grow as an agricultural educational institution, to develop and train future farmers of Mindanao and help attract settlers to that part
of the country.

In line with its avowed purpose as an agricultural and technical school, the University adopted a land utilization program to develop and
exploit its 3080-hectare land reservation as follows: 8
 No. of Hectares Percentage

a. Livestock and Pasture 1,016.40 33

b. Upland Crops 616 20

c. Campus and Residential sites 462 15

d. Irrigated rice 400.40 13

e. Watershed and forest reservation 308 10

f. Fruit and Trees Crops 154 5

g. Agricultural
Experimental stations 123.20 4

3,080.00 100%

The first land use plan of the CARP was prepared in 1975 and since then it has undergone several revisions in line with changing economic
conditions, national economic policies and financial limitations and availability of resources. The CMU, through Resolution No. 160 S. 1984,
pursuant to its development plan, adopted a multi-disciplinary applied research extension and productivity program called the "Kilusang
Sariling Sikap Project" (CMU-KSSP). The objectives 9 of this program were:

1. Provide researches who shall assist in (a) preparation of proposal; (b) monitor project implementation; and (c) collect
and analyze all data and information relevant to the processes and results of project implementation;

2. Provide the use of land within the University reservation for the purpose of establishing a lowland rice project for the
party of the Second Part for a period of one calendar year subject to discretionary renewal by the Party of the First
Part;

3. Provide practical training to the Party of the Second Part on the management and operation of their lowland project
upon request of Party of the Second Part; and

4. Provide technical assistance in the form of relevant livelihood project specialists who shall extend expertise on
scientific methods of crop production upon request by Party of the Second Part.

In return for the technical assistance extended by the CMU, the participants in a project pay a nominal amount as service fee. The self-
reliance program was adjunct to the CMU's lowland rice project.

The portion of the CMU land leased to the Philippine Packing Corporation (now Del Monte Phils., Inc.) was leased long before the CARP was
passed. The agreement with the Philippine Packing Corporation was not a lease but a Management and Development Agreement, a joint
undertaking where use by the Philippine Packing Corporation of the land was part of the CMU research program, with the direct participation
of faculty and students. Said contracts with the Philippine Packing Corporation and others of a similar nature (like MM-Agraplex) were made
prior to the enactment of R.A. 6657 and were directly connected to the purpose and objectives of the CMU as an educational institution. As
soon as the objectives of the agreement for the joint use of the CMU land were achieved as of June 1988, the CMU adopted a blue print for
the exclusive use and utilization of said areas to carry out its own research and agricultural experiments.

As to the determination of when and what lands are found to be necessary for use by the CMU, the school is in the best position to resolve
and answer the question and pass upon the problem of its needs in relation to its avowed objectives for which the land was given to it by the
State. Neither the DARAB nor the Court of Appeals has the right to substitute its judgment or discretion on this matter, unless the evidentiary
facts are so manifest as to show that the CMU has no real for the land.

It is our opinion that the 400 hectares ordered segregated by the DARAB and affirmed by the Court of Appeals in its Decision dated August
20, 1990, is not covered by the CARP because:

(1) It is not alienable and disposable land of the public domain;

(2) The CMU land reservation is not in excess of specific limits as determined by Congress;

(3) It is private land registered and titled in the name of its lawful owner, the CMU;
 (4) It is exempt from coverage under Section 10 of R.A. 6657 because the lands are actually, directly and exclusively
used and found to be necessary for school site and campus, including experimental farm stations for educational
purposes, and for establishing seed and seedling research and pilot production centers. (Emphasis supplied).

Under Section 4 and Section 10 of R.A. 6657, it is crystal clear that the jurisdiction of the DARAB is limited only to matters involving the
implementation of the CARP. More specifically, it is restricted to agrarian cases and controversies involving lands falling within the coverage
of the aforementioned program. It does not include those which are actually, directly and exclusively used and found to be necessary for,
among such purposes, school sites and campuses for setting up experimental farm stations, research and pilot production centers, etc.

Consequently, the DARAB has no power to try, hear and adjudicate the case pending before it involving a portion of the CMU's titled school
site, as the portion of the CMU land reservation ordered segregated is actually, directly and exclusively used and found by the school to be
necessary for its purposes. The CMU has constantly raised the issue of the DARAB's lack of jurisdiction and has questioned the
respondent's authority to hear, try and adjudicate the case at bar. Despite the law and the evidence on record tending to establish that the
fact that the DARAB had no jurisdiction, it made the adjudication now subject of review.

Whether the DARAB has the authority to order the segregation of a portion of a private property titled in the name of its lawful owner, even if
the claimant is not entitled as a beneficiary, is an issue we feel we must resolve. The quasi-judicial powers of DARAB are provided in
Executive Order No. 129-A, quoted hereunder in so far as pertinent to the issue at bar:

Sec. 13. –– AGRARIAN REFORM ADJUDICATION BOARD — There is hereby created an Agrarian Reform
Adjudication Board under the office of the Secretary. . . . The Board shall assume the powers and functions with
respect to adjudication of agrarian reform cases under Executive Order 229 and this Executive Order . . .

Sec. 17. –– QUASI JUDICIAL POWERS OF THE DAR. — The DAR is hereby vested with quasi-judicial powers to
determine and adjudicate agrarian reform matters and shall have exclusive original jurisdiction over all matters
including implementation of Agrarian Reform.

Section 50 of R.A. 6658 confers on the DAR quasi-judicial powers as follows:

The DAR is hereby vested with primary jurisdiction to determine and adjudicate agrarian reform matters and shall have
original jurisdiction over all matters involving the implementation of agrarian reform. . . .

Section 17 of Executive Order No. 129-A is merely a repetition of Section 50, R.A. 6657. There is no doubt that the DARAB has
jurisdiction to try and decide any agrarian dispute in the implementation of the CARP. An agrarian dispute is defined by the same
law as any controversy relating to tenurial rights whether leasehold, tenancy stewardship or otherwise over lands devoted to
agriculture. 10

In the case at bar, the DARAB found that the complainants are not share tenants or lease holders of the CMU, yet it ordered the "segregation
of a suitable compact and contiguous area of Four Hundred hectares, more or less", from the CMU land reservation, and directed the DAR
Regional Director to implement its order of segregation. Having found that the complainants in this agrarian dispute for Declaration of
Tenancy Status are not entitled to claim as beneficiaries of the CARP because they are not share tenants or leaseholders, its order for the
segregation of 400 hectares of the CMU land was without legal authority. w do not believe that the quasi-judicial function of the DARAB
carries with it greater authority than ordinary courts to make an award beyond what was demanded by the complainants/petitioners, even in
an agrarian dispute. Where the quasi-judicial body finds that the complainants/petitioners are not entitled to the rights they are demanding, it
is an erroneous interpretation of authority for that quasi-judicial body to order private property to be awarded to future beneficiaries. The
order segregation 400 hectares of the CMU land was issued on a finding that the complainants are not entitled as beneficiaries, and on an
erroneous assumption that the CMU land which is excluded or exempted under the law is subject to the coverage of the CARP. Going
beyond what was asked by the complainants who were not entitled to the relief prayed the complainants who were not entitled to the relief
prayed for, constitutes a grave abuse of discretion because it implies such capricious and whimsical exercise of judgment as is equivalent to
lack of jurisdiction.

The education of the youth and agrarian reform are admittedly among the highest priorities in the government socio-economic programs. In
this case, neither need give way to the other. Certainly, there must still be vast tracts of agricultural land in Mindanao outside the CMU land
reservation which can be made available to landless peasants, assuming the claimants here, or some of them, can qualify as CARP
beneficiaries. To our mind, the taking of the CMU land which had been segregated for educational purposes for distribution to yet uncertain
beneficiaries is a gross misinterpretation of the authority and jurisdiction granted by law to the DARAB.

The decision in this case is of far-reaching significance as far as it concerns state colleges and universities whose resources and research
facilities may be gradually eroded by misconstruing the exemptions from the CARP. These state colleges and universities are the main
vehicles for our scientific and technological advancement in the field of agriculture, so vital to the existence, growth and development of this
country.

It is the opinion of this Court, in the light of the foregoing analysis and for the reasons indicated, that the evidence is sufficient to sustain a
finding of grave abuse of discretion by respondents Court of Appeals and DAR Adjudication Board. We hereby declare the decision of the
DARAB dated September 4, 1989 and the decision of the Court of Appeals dated August 20, 1990, affirming the decision of the quasi-judicial
body, as null and void and hereby order that they be set aside, with costs against the private respondents.
SO ORDERED

Gutierrez, Jr., Cruz, Feliciano, Padilla, Bidin, Griño-Aquino, Medialdea, Regalado, Davide, Jr., Romero, Nocon, and Melo, JJ., concur.

Bellosillo, J., took no part.

Narvasa, C.J., is on leave.

SECOND DIVISION

G.R. No. 182332 February 23, 2011

MILESTONE FARMS, INC., Petitioner,

vs.
OFFICE OF THE PRESIDENT, Respondent.

DECISION

NACHURA, J.:

Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Civil
Procedure, seeking the reversal of the Court of Appeals (CA) Amended Decision2 dated October 4,
2006 and its Resolution3 dated March 27, 2008.

The Facts

Petitioner Milestone Farms, Inc. (petitioner) was incorporated with the Securities and Exchange
Commission on January 8, 1960.4 Among its pertinent secondary purposes are: (1) to engage in the
raising of cattle, pigs, and other livestock; to acquire lands by purchase or lease, which may be
needed for this purpose; and to sell and otherwise dispose of said cattle, pigs, and other livestock
and their produce when advisable and beneficial to the corporation; (2) to breed, raise, and sell
poultry; to purchase or acquire and sell, or otherwise dispose of the supplies, stocks, equipment,
accessories, appurtenances, products, and by-products of said business; and (3) to import cattle,
pigs, and other livestock, and animal food necessary for the raising of said cattle, pigs, and other
livestock as may be authorized by law.5

On June 10, 1988, a new agrarian reform law, Republic Act (R.A.) No. 6657, otherwise known as the
Comprehensive Agrarian Reform Law (CARL), took effect, which included the raising of livestock,
poultry, and swine in its coverage. However, on December 4, 1990, this Court, sitting en banc, ruled
in Luz Farms v. Secretary of the Department of Agrarian Reform6 that agricultural lands devoted to
livestock, poultry, and/or swine raising are excluded from the Comprehensive Agrarian Reform
Program (CARP).

Thus, in May 1993, petitioner applied for the exemption/exclusion of its 316.0422-hectare property,
covered by Transfer Certificate of Title Nos. (T-410434) M-15750, (T-486101) M-7307, (T-486102)
M-7308, (T-274129) M-15751, (T-486103) M-7309, (T-486104) M-7310, (T-332694) M-15755, (T-
486105) M-7311, (T-486106) M-7312, M-8791, (T-486107) M-7313, (T-486108) M-7314, M-8796,
(T-486109) M-7315, (T-486110) M-9508, and M-6013, and located in Pinugay, Baras, Rizal, from the
coverage of the CARL, pursuant to the aforementioned ruling of this Court in Luz Farms.

Meanwhile, on December 27, 1993, the Department of Agrarian Reform (DAR) issued Administrative
Order No. 9, Series of 1993 (DAR A.O. No. 9), setting forth rules and regulations to govern the
exclusion of agricultural lands used for livestock, poultry, and swine raising from CARP coverage.
Thus, on January 10, 1994, petitioner re-documented its application pursuant to DAR A.O. No. 9.7

Acting on the said application, the DAR’s Land Use Conversion and Exemption Committee (LUCEC)
of Region IV conducted an ocular inspection on petitioner’s property and arrived at the following
findings:

[T]he actual land utilization for livestock, swine and poultry is 258.8422 hectares; the area which
served as infrastructure is 42.0000 hectares; ten (10) hectares are planted to corn and the remaining
five (5) hectares are devoted to fish culture; that the livestock population are 371 heads of cow, 20
heads of horses, 5,678 heads of swine and 788 heads of cocks; that the area being applied for
exclusion is far below the required or ideal area which is 563 hectares for the total livestock
population; that the approximate area not directly used for livestock purposes with an area of 15
hectares, more or less, is likewise far below the allowable 10% variance; and, though not directly
used for livestock purposes, the ten (10) hectares planted to sweet corn and the five (5) hectares
devoted to fishpond could be considered supportive to livestock production.

The LUCEC, thus, recommended the exemption of petitioner’s 316.0422-hectare property from the
coverage of CARP. Adopting the LUCEC’s findings and recommendation, DAR Regional Director
Percival Dalugdug (Director Dalugdug) issued an Order dated June 27, 1994, exempting petitioner’s
316.0422-hectare property from CARP.8

The Southern Pinugay Farmers Multi-Purpose Cooperative, Inc. (Pinugay Farmers), represented by
Timiano Balajadia, Sr. (Balajadia), moved for the reconsideration of the said Order, but the same
was denied by Director Dalugdug in his Order dated November 24, 1994.9 Subsequently, the
Pinugay Farmers filed a letter-appeal with the DAR Secretary.

Correlatively, on June 4, 1994, petitioner filed a complaint for Forcible Entry against Balajadia and
company before the Municipal Circuit Trial Court (MCTC) of Teresa-Baras, Rizal, docketed as Civil
Case No. 781-T.10 The MCTC ruled in favor of petitioner, but the decision was later reversed by the
Regional Trial Court, Branch 80, of Tanay, Rizal. Ultimately, the case reached the CA, which, in its
Decision11 dated October 8, 1999, reinstated the MCTC’s ruling, ordering Balajadia and all
defendants therein to vacate portions of the property covered by TCT Nos. M-6013, M-8796, and M-
8791. In its Resolution12 dated July 31, 2000, the CA held that the defendants therein failed to timely
file a motion for reconsideration, given the fact that their counsel of record received its October 8,
1999 Decision; hence, the same became final and executory.

In the meantime, R.A. No. 6657 was amended by R.A. No. 7881,13 which was approved on February
20, 1995. Private agricultural lands devoted to livestock, poultry, and swine raising were excluded
from the coverage of the CARL. On October 22, 1996, the fact-finding team formed by the DAR
Undersecretary for Field Operations and Support Services conducted an actual headcount of the
livestock population on the property. The headcount showed that there were 448 heads of cattle and
more than 5,000 heads of swine.

The DAR Secretary’s Ruling

On January 21, 1997, then DAR Secretary Ernesto D. Garilao (Secretary Garilao) issued an Order
exempting from CARP only 240.9776 hectares of the 316.0422 hectares previously exempted by
Director Dalugdug, and declaring 75.0646 hectares of the property to be covered by CARP.14

Secretary Garilao opined that, for private agricultural lands to be excluded from CARP, they must
already be devoted to livestock, poultry, and swine raising as of June 15, 1988, when the CARL took
effect. He found that the Certificates of Ownership of Large Cattle submitted by petitioner showed
that only 86 heads of cattle were registered in the name of petitioner’s president, Misael Vera, Jr.,
prior to June 15, 1988; 133 were subsequently bought in 1990, while 204 were registered from 1992
to 1995. Secretary Garilao gave more weight to the certificates rather than to the headcount
because "the same explicitly provide for the number of cattle owned by petitioner as of June 15,
1988."

Applying the animal-land ratio (1 hectare for grazing for every head of cattle/carabao/horse) and the
infrastructure-animal ratio (1.7815 hectares for 21 heads of cattle/carabao/horse, and 0.5126
hectare for 21 heads of hogs) under DAR A.O. No. 9, Secretary Garilao exempted 240.9776
hectares of the property, as follows:

1. 86 hectares for the 86 heads of cattle existing as of 15 June 1988;

2. 8 hectares for infrastructure following the ratio of 1.7815 hectares for every 21 heads of
cattle;

3. 8 hectares for the 8 horses;

4. 0.3809 square meters of infrastructure for the 8 horses; [and]

5. 138.5967 hectares for the 5,678 heads of swine.15

Petitioner filed a Motion for Reconsideration,16 submitting therewith copies of Certificates of Transfer
of Large Cattle and additional Certificates of Ownership of Large Cattle issued to petitioner prior to
June 15, 1988, as additional proof that it had met the required animal-land ratio. Petitioner also
submitted a copy of a Disbursement Voucher dated December 17, 1986, showing the purchase of
100 heads of cattle by the Bureau of Animal Industry from petitioner, as further proof that it had been
actively operating a livestock farm even before June 15, 1988. However, in his Order dated April 15,
1997, Secretary Garilao denied petitioner’s Motion for Reconsideration.17

Aggrieved, petitioner filed its Memorandum on Appeal18 before the Office of the President (OP).

The OP’s Ruling

On February 4, 2000, the OP rendered a decision19 reinstating Director Dalugdug’s Order dated
June 27, 1994 and declared the entire 316.0422-hectare property exempt from the coverage of
CARP.

However, on separate motions for reconsideration of the aforesaid decision filed by farmer-groups
Samahang Anak-Pawis ng Lagundi (SAPLAG) and Pinugay Farmers, and the Bureau of Agrarian
Legal Assistance of DAR, the OP issued a resolution20 dated September 16, 2002, setting aside its
previous decision. The dispositive portion of the OP resolution reads:

WHEREFORE, the Decision subject of the instant separate motions for reconsideration is hereby
SET ASIDE and a new one entered REINSTATING the Order dated 21 January 1997 of then DAR
Secretary Ernesto D. Garilao, as reiterated in another Order of 15 April 1997, without prejudice to
the outcome of the continuing review and verification proceedings that DAR, thru the appropriate
Municipal Agrarian Reform Officer, may undertake pursuant to Rule III (D) of DAR Administrative
Order No. 09, series of 1993.
SO ORDERED.21

The OP held that, when it comes to proof of ownership, the reference is the Certificate of Ownership
of Large Cattle. Certificates of cattle ownership, which are readily available – being issued by the
appropriate government office – ought to match the number of heads of cattle counted as existing
during the actual headcount. The presence of large cattle on the land, without sufficient proof of
ownership thereof, only proves such presence.

Taking note of Secretary Garilao’s observations, the OP also held that, before an ocular
investigation is conducted on the property, the landowners are notified in advance; hence, mere
reliance on the physical headcount is dangerous because there is a possibility that the landowners
would increase the number of their cattle for headcount purposes only. The OP observed that there
was a big variance between the actual headcount of 448 heads of cattle and only 86 certificates of
ownership of large cattle.

Consequently, petitioner sought recourse from the CA.22

The Proceedings Before the CA and Its Rulings

On April 29, 2005, the CA found that, based on the documentary evidence presented, the property
subject of the application for exclusion had more than satisfied the animal-land and infrastructure-
animal ratios under DAR A.O. No. 9. The CA also found that petitioner applied for exclusion long
before the effectivity of DAR A.O. No. 9, thus, negating the claim that petitioner merely converted the
property for livestock, poultry, and swine raising in order to exclude it from CARP coverage.
Petitioner was held to have actually engaged in the said business on the property even before June
15, 1988. The CA disposed of the case in this wise:

WHEREFORE, the instant petition is hereby GRANTED. The assailed Resolution of the Office of the
President dated September 16, 2002 is hereby SET ASIDE, and its Decision dated February 4, 2000
declaring the entire 316.0422 hectares exempt from the coverage of the Comprehensive Agrarian
Reform Program is hereby REINSTATED without prejudice to the outcome of the continuing review
and verification proceedings which the Department of Agrarian Reform, through the proper Municipal
Agrarian Reform Officer, may undertake pursuant to Policy Statement (D) of DAR Administrative
Order No. 9, Series of 1993.

SO ORDERED.23

Meanwhile, six months earlier, or on November 4, 2004, without the knowledge of the CA – as the
parties did not inform the appellate court – then DAR Secretary Rene C. Villa (Secretary Villa) issued
DAR Conversion Order No. CON-0410-001624 (Conversion Order), granting petitioner’s application
to convert portions of the 316.0422-hectare property from agricultural to residential and golf courses
use. The portions converted – with a total area of 153.3049 hectares – were covered by TCT Nos.
M-15755 (T-332694), M-15751 (T-274129), and M-15750 (T-410434). With this Conversion Order,
the area of the property subject of the controversy was effectively reduced to 162.7373 hectares.

On the CA’s decision of April 29, 2005, Motions for Reconsideration were filed by farmer-groups,
namely: the farmers represented by Miguel Espinas25 (Espinas group), the Pinugay Farmers,26 and
the SAPLAG.27 The farmer-groups all claimed that the CA should have accorded respect to the
factual findings of the OP. Moreover, the farmer-groups unanimously intimated that petitioner
already converted and developed a portion of the property into a leisure-residential-commercial
estate known as the Palo Alto Leisure and Sports Complex (Palo Alto).
Subsequently, in a Supplement to the Motion for Reconsideration on Newly Secured Evidence
pursuant to DAR Administrative Order No. 9, Series of 199328 (Supplement) dated June 15, 2005,
the Espinas group submitted the following as evidence:

1) Conversion Order29 dated November 4, 2004, issued by Secretary Villa, converting

portions of the property from agricultural to residential and golf courses use, with a total area
of 153.3049 hectares; thus, the Espinas group prayed that the remaining 162.7373 hectares
(subject property) be covered by the CARP;

2) Letter30 dated June 7, 2005 of both incoming Municipal Agrarian Reform Officer (MARO)
Bismark M. Elma (MARO Elma) and outgoing MARO Cesar C. Celi (MARO Celi) of Baras,
Rizal, addressed to Provincial Agrarian Reform Officer (PARO) II of Rizal, Felixberto Q.
Kagahastian, (MARO Report), informing the latter, among others, that Palo Alto was already
under development and the lots therein were being offered for sale; that there were actual
tillers on the subject property; that there were agricultural improvements thereon, including
an irrigation system and road projects funded by the Government; that there was no existing
livestock farm on the subject property; and that the same was not in the possession and/or
control of petitioner; and

3) Certification31 dated June 8, 2005, issued by both MARO Elma and MARO Celi,
manifesting that the subject property was in the possession and cultivation of actual
occupants and tillers, and that, upon inspection, petitioner maintained no livestock farm
thereon.

Four months later, the Espinas group and the DAR filed their respective Manifestations.32 In its
Manifestation dated November 29, 2005, the DAR confirmed that the subject property was no longer
devoted to cattle raising. Hence, in its Resolution33 dated December 21, 2005, the CA directed
petitioner to file its comment on the Supplement and the aforementioned Manifestations. Employing
the services of a new counsel, petitioner filed a Motion to Admit Rejoinder,34 and prayed that the
MARO Report be disregarded and expunged from the records for lack of factual and legal basis.

With the CA now made aware of these developments, particularly Secretary Villa’s Conversion
Order of November 4, 2004, the appellate court had to acknowledge that the property subject of the
controversy would now be limited to the remaining 162.7373 hectares. In the same token, the
Espinas group prayed that this remaining area be covered by the CARP.35

On October 4, 2006, the CA amended its earlier Decision. It held that its April 29, 2005 Decision was
theoretically not final because DAR A.O. No. 9 required the MARO to make a continuing review and
verification of the subject property. While the CA was cognizant of our ruling in Department of
Agrarian Reform v. Sutton,36 wherein we declared DAR A.O. No. 9 as unconstitutional, it still
resolved to lift the exemption of the subject property from the CARP, not on the basis of DAR A.O.
No. 9, but on the strength of evidence such as the MARO Report and Certification, and the
Katunayan37 issued by the Punong Barangay, Alfredo Ruba (Chairman Ruba), of Pinugay, Baras,
Rizal, showing that the subject property was no longer operated as a livestock farm. Moreover, the
CA held that the lease agreements,38 which petitioner submitted to prove that it was compelled to
lease a ranch as temporary shelter for its cattle, only reinforced the DAR’s finding that there was
indeed no existing livestock farm on the subject property. While petitioner claimed that it was merely
forced to do so to prevent further slaughtering of its cattle allegedly committed by the occupants, the
CA found the claim unsubstantiated. Furthermore, the CA opined that petitioner should have
asserted its rights when the irrigation and road projects were introduced by the Government within
its property. Finally, the CA accorded the findings of MARO Elma and MARO Celi the presumption of
regularity in the performance of official functions in the absence of evidence proving misconduct
and/or dishonesty when they inspected the subject property and rendered their report. Thus, the CA
disposed:

WHEREFORE, this Court’s Decision dated April 29, 2005 is hereby amended in that the exemption
of the subject landholding from the coverage of the Comprehensive Agrarian Reform Program is
hereby lifted, and the 162.7373 hectare-agricultural portion thereof is hereby declared covered by
the Comprehensive Agrarian Reform Program.

SO ORDERED.39

Unperturbed, petitioner filed a Motion for Reconsideration.40 On January 8, 2007, MARO Elma, in
compliance with the Memorandum of DAR Regional Director Dominador B. Andres, tendered
another Report41 reiterating that, upon inspection of the subject property, together with petitioner’s
counsel-turned witness, Atty. Grace Eloisa J. Que (Atty. Que), PARO Danilo M. Obarse, Chairman
Ruba, and several occupants thereof, he, among others, found no livestock farm within the subject
property. About 43 heads of cattle were shown, but MARO Elma observed that the same were inside
an area adjacent to Palo Alto. Subsequently, upon Atty. Que’s request for reinvestigation,
designated personnel of the DAR Provincial and Regional Offices (Investigating Team) conducted
another ocular inspection on the subject property on February 20, 2007. The Investigating Team, in
its Report42 dated February 21, 2007, found that, per testimony of petitioner’s caretaker, Rogelio
Ludivices (Roger),43 petitioner has 43 heads of cattle taken care of by the following individuals: i)
Josefino Custodio (Josefino) – 18 heads; ii) Andy Amahit – 15 heads; and iii) Bert Pangan – 2
heads; that these individuals pastured the herd of cattle outside the subject property, while Roger
took care of 8 heads of cattle inside the Palo Alto area; that 21 heads of cattle owned by petitioner
were seen in the area adjacent to Palo Alto; that Josefino confirmed to the Investigating Team that
he takes care of 18 heads of cattle owned by petitioner; that the said Investigating Team saw 9
heads of cattle in the Palo Alto area, 2 of which bore "MFI" marks; and that the 9 heads of cattle
appear to have matched the Certificates of Ownership of Large Cattle submitted by petitioner.

Because of the contentious factual issues and the conflicting averments of the parties, the CA set
the case for hearing and reception of evidence on April 24, 2007.44 Thereafter, as narrated by the
CA, the following events transpired:

On May 17, 2007, [petitioner] presented the Judicial Affidavits of its witnesses, namely, [petitioner’s]
counsel, [Atty. Que], and the alleged caretaker of [petitioner’s] farm, [Roger], who were both cross-
examined by counsel for farmers-movants and SAPLAG. [Petitioner] and SAPLAG then marked their
documentary exhibits.

On May 24, 2007, [petitioner’s] security guard and third witness, Rodolfo G. Febrada, submitted his
Judicial Affidavit and was cross-examined by counsel for fa[r]mers-movants and SAPLAG. Farmers-
movants also marked their documentary exhibits.

Thereafter, the parties submitted their respective Formal Offers of Evidence. Farmers-movants and
SAPLAG filed their objections to [petitioner’s] Formal Offer of Evidence. Later, [petitioner] and
farmers-movants filed their respective Memoranda.

In December 2007, this Court issued a Resolution on the parties’ offer of evidence and considered
[petitioner’s] Motion for Reconsideration submitted for resolution.45

Finally, petitioner’s motion for reconsideration was denied by the CA in its Resolution46 dated March
27, 2008. The CA discarded petitioner’s reliance on Sutton. It ratiocinated that the MARO Reports
and the DAR’s Manifestation could not be disregarded simply because DAR A.O. No. 9 was
declared unconstitutional. The Sutton ruling was premised on the fact that the Sutton property
continued to operate as a livestock farm. The CA also reasoned that, in Sutton, this Court did not
remove from the DAR the power to implement the CARP, pursuant to the latter’s authority to
oversee the implementation of agrarian reform laws under Section 5047 of the CARL. Moreover, the
CA found:

Petitioner-appellant claimed that they had 43 heads of cattle which are being cared for and pastured
by 4 individuals. To prove its ownership of the said cattle, petitioner-appellant offered in evidence 43
Certificates of Ownership of Large Cattle. Significantly, however, the said Certificates were all dated
and issued on November 24, 2006, nearly 2 months after this Court rendered its Amended Decision
lifting the exemption of the 162-hectare portion of the subject landholding. The acquisition of such
cattle after the lifting of the exemption clearly reveals that petitioner-appellant was no longer
operating a livestock farm, and suggests an effort to create a semblance of livestock-raising for the
purpose of its Motion for Reconsideration.48

On petitioner’s assertion that between MARO Elma’s Report dated January 8, 2007 and the
Investigating Team’s Report, the latter should be given credence, the CA held that there were no
material inconsistencies between the two reports because both showed that the 43 heads of cattle
were found outside the subject property.

Hence, this Petition assigning the following errors:

I.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT HELD THAT

LANDS DEVOTED TO LIVESTOCK FARMING WITHIN THE MEANING OF LUZ FARMS
AND SUTTON, AND WHICH ARE THEREBY EXEMPT FROM CARL COVERAGE, ARE
NEVERTHELESS SUBJECT TO DAR’S CONTINUING VERIFICATION AS TO USE, AND,
ON THE BASIS OF SUCH VERIFICATION, MAY BE ORDERED REVERTED TO
AGRICULTURAL CLASSIFICATION AND COMPULSORY ACQUISITION[;]

II.

GRANTING THAT THE EXEMPT LANDS AFORESAID MAY BE SO REVERTED TO

AGRICULTURAL CLASSIFICATION, STILL THE PROCEEDINGS FOR SUCH PURPOSE
BELONGS TO THE EXCLUSIVE ORIGINAL JURISDICTION OF THE DAR, BEFORE
WHICH THE CONTENDING PARTIES MAY VENTILATE FACTUAL ISSUES, AND AVAIL
THEMSELVES OF USUAL REVIEW PROCESSES, AND NOT TO THE COURT OF
APPEALS EXERCISING APPELLATE JURISDICTION OVER ISSUES COMPLETELY
UNRELATED TO REVERSION [; AND]

III.

IN ANY CASE, THE COURT OF APPEALS GRAVELY ERRED AND COMMITTED GRAVE
ABUSE OF DISCRETION WHEN IT HELD THAT THE PROPERTY IN DISPUTE IS NO
LONGER BEING USED FOR LIVESTOCK FARMING.49

Petitioner asseverates that lands devoted to livestock farming as of June 15, 1988 are classified as
industrial lands, hence, outside the ambit of the CARP; that Luz Farms, Sutton, and R.A. No. 7881
clearly excluded such lands on constitutional grounds; that petitioner’s lands were actually devoted
to livestock even before the enactment of the CARL; that livestock farms are exempt from the CARL,
not by reason of any act of the DAR, but because of their nature as industrial lands; that petitioner’s
property was admittedly devoted to livestock farming as of June 1988 and the only issue before was
whether or not petitioner’s pieces of evidence comply with the ratios provided under DAR A.O. No. 9;
and that DAR A.O. No. 9 having been declared as unconstitutional, DAR had no more legal basis to
conduct a continuing review and verification proceedings over livestock farms. Petitioner argues that,
in cases where reversion of properties to agricultural use is proper, only the DAR has the exclusive
original jurisdiction to hear and decide the same; hence, the CA, in this case, committed serious
errors when it ordered the reversion of the property and when it considered pieces of evidence not
existing as of June 15, 1988, despite its lack of jurisdiction; that the CA should have remanded the
case to the DAR due to conflicting factual claims; that the CA cannot ventilate allegations of fact that
were introduced for the first time on appeal as a supplement to a motion for reconsideration of its
first decision, use the same to deviate from the issues pending review, and, on the basis thereof,
declare exempt lands reverted to agricultural use and compulsorily covered by the CARP; that the
"newly discovered [pieces of] evidence" were not introduced in the proceedings before the DAR,
hence, it was erroneous for the CA to consider them; and that piecemeal presentation of evidence is
not in accord with orderly justice. Finally, petitioner submits that, in any case, the CA gravely erred
and committed grave abuse of discretion when it held that the subject property was no longer used
for livestock farming as shown by the Report of the Investigating Team. Petitioner relies on the 1997
LUCEC and DAR findings that the subject property was devoted to livestock farming, and on the
1999 CA Decision which held that the occupants of the property were squatters, bereft of any
authority to stay and possess the property.50

On one hand, the farmer-groups, represented by the Espinas group, contend that they have been
planting rice and fruit-bearing trees on the subject property, and helped the National Irrigation
Administration in setting up an irrigation system therein in 1997, with a produce of 1,500 to 1,600
sacks of palay each year; that petitioner came to court with unclean hands because, while it sought
the exemption and exclusion of the entire property, unknown to the CA, petitioner surreptitiously filed
for conversion of the property now known as Palo Alto, which was actually granted by the DAR
Secretary; that petitioner’s bad faith is more apparent since, despite the conversion of the 153.3049-
hectare portion of the property, it still seeks to exempt the entire property in this case; and that the
fact that petitioner applied for conversion is an admission that indeed the property is agricultural. The
farmer-groups also contend that petitioner’s reliance on Luz Farms and Sutton is unavailing because
in these cases there was actually no cessation of the business of raising cattle; that what is being
exempted is the activity of raising cattle and not the property itself; that exemptions due to cattle
raising are not permanent; that the declaration of DAR A.O. No. 9 as unconstitutional does not at all
diminish the mandated duty of the DAR, as the lead agency of the Government, to implement the
CARL; that the DAR, vested with the power to identify lands subject to CARP, logically also has the
power to identify lands which are excluded and/or exempted therefrom; that to disregard DAR’s
authority on the matter would open the floodgates to abuse and fraud by unscrupulous landowners;
that the factual finding of the CA that the subject property is no longer a livestock farm may not be
disturbed on appeal, as enunciated by this Court; that DAR conducted a review and monitoring of
the subject property by virtue of its powers under the CARL; and that the CA has sufficient discretion
to admit evidence in order that it could arrive at a fair, just, and equitable ruling in this case.51

On the other hand, respondent OP, through the Office of the Solicitor General (OSG), claims that the
CA correctly held that the subject property is not exempt from the coverage of the CARP, as
substantial pieces of evidence show that the said property is not exclusively devoted to livestock,
swine, and/or poultry raising; that the issues presented by petitioner are factual in nature and not
proper in this case; that under Rule 43 of the 1997 Rules of Civil Procedure, questions of fact may
be raised by the parties and resolved by the CA; that due to the divergence in the factual findings of
the DAR and the OP, the CA was duty bound to review and ascertain which of the said findings are
duly supported by substantial evidence; that the subject property was subject to continuing review
and verification proceedings due to the then prevailing DAR A.O. No. 9; that there is no question that
the power to determine if a property is subject to CARP coverage lies with the DAR Secretary; that
pursuant to such power, the MARO rendered the assailed reports and certification, and the DAR
itself manifested before the CA that the subject property is no longer devoted to livestock farming;
and that, while it is true that this Court’s ruling in Luz Farms declared that agricultural lands devoted
to livestock, poultry, and/or swine raising are excluded from the CARP, the said ruling is not without
any qualification.52

In its Reply53 to the farmer-groups’ and to the OSG’s comment, petitioner counters that the farmer-
groups have no legal basis to their claims as they admitted that they entered the subject property
without the consent of petitioner; that the rice plots actually found in the subject property, which were
subsequently taken over by squatters, were, in fact, planted by petitioner in compliance with the
directive of then President Ferdinand Marcos for the employer to provide rice to its employees; that
when a land is declared exempt from the CARP on the ground that it is not agricultural as of the time
the CARL took effect, the use and disposition of that land is entirely and forever beyond DAR’s
jurisdiction; and that, inasmuch as the subject property was not agricultural from the very beginning,
DAR has no power to regulate the same. Petitioner also asserts that the CA cannot
uncharacteristically assume the role of trier of facts and resolve factual questions not previously
adjudicated by the lower tribunals; that MARO Elma rendered the assailed MARO reports with bias
against petitioner, and the same were contradicted by the Investigating Team’s Report, which
confirmed that the subject property is still devoted to livestock farming; and that there has been no
change in petitioner’s business interest as an entity engaged in livestock farming since its inception
in 1960, though there was admittedly a decline in the scale of its operations due to the illegal acts of
the squatter-occupants.

Our Ruling

The Petition is bereft of merit.

Let it be stressed that when the CA provided in its first Decision that continuing review and
verification may be conducted by the DAR pursuant to DAR A.O. No. 9, the latter was not yet
declared unconstitutional by this Court. The first CA Decision was promulgated on April 29, 2005,
while this Court struck down as unconstitutional DAR A.O. No. 9, by way of Sutton, on October 19,
2005. Likewise, let it be emphasized that the Espinas group filed the Supplement and submitted the
assailed MARO reports and certification on June 15, 2005, which proved to be adverse to
petitioner’s case. Thus, it could not be said that the CA erred or gravely abused its discretion in
respecting the mandate of DAR A.O. No. 9, which was then subsisting and in full force and effect.

While it is true that an issue which was neither alleged in the complaint nor raised during the trial
cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play,
justice, and due process,54 the same is not without exception,55 such as this case. The CA, under
Section 3,56 Rule 43 of the Rules of Civil Procedure, can, in the interest of justice, entertain and
resolve factual issues. After all, technical and procedural rules are intended to help secure, and not
suppress, substantial justice. A deviation from a rigid enforcement of the rules may thus be allowed
to attain the prime objective of dispensing justice, for dispensation of justice is the core reason for
the existence of courts.57 Moreover, petitioner cannot validly claim that it was deprived of due
process because the CA afforded it all the opportunity to be heard.58 The CA even directed
petitioner to file its comment on the Supplement, and to prove and establish its claim that the subject
property was excluded from the coverage of the CARP. Petitioner actively participated in the
proceedings before the CA by submitting pleadings and pieces of documentary evidence, such as
the Investigating Team’s Report and judicial affidavits. The CA also went further by setting the case
for hearing. In all these proceedings, all the parties’ rights to due process were amply protected and
recognized.
With the procedural issue disposed of, we find that petitioner’s arguments fail to persuade. Its
invocation of Sutton is unavailing. In Sutton, we held:

In the case at bar, we find that the impugned A.O. is invalid as it contravenes the Constitution. The
A.O. sought to regulate livestock farms by including them in the coverage of agrarian reform and
prescribing a maximum retention limit for their ownership. However, the deliberations of the 1987
Constitutional Commission show a clear intent to exclude, inter alia, all lands exclusively devoted
to livestock, swine and poultry-raising. The Court clarified in the Luz Farms case that livestock,
swine and poultry-raising are industrial activities and do not fall within the definition of "agriculture" or
"agricultural activity." The raising of livestock, swine and poultry is different from crop or tree farming.
It is an industrial, not an agricultural, activity. A great portion of the investment in this enterprise is in
the form of industrial fixed assets, such as: animal housing structures and facilities, drainage,
waterers and blowers, feedmill with grinders, mixers, conveyors, exhausts and generators, extensive
warehousing facilities for feeds and other supplies, anti-pollution equipment like bio-gas and digester
plants augmented by lagoons and concrete ponds, deepwells, elevated water tanks, pumphouses,
sprayers, and other technological appurtenances.

Clearly, petitioner DAR has no power to regulate livestock farms which have been exempted by the
Constitution from the coverage of agrarian reform. It has exceeded its power in issuing the assailed
A.O.59

Indeed, as pointed out by the CA, the instant case does not rest on facts parallel to those of Sutton
because, in Sutton, the subject property remained a livestock farm. We even highlighted therein the
fact that "there has been no change of business interest in the case of respondents."60 Similarly, in
Department of Agrarian Reform v. Uy,61 we excluded a parcel of land from CARP coverage due to
the factual findings of the MARO, which were confirmed by the DAR, that the property was entirely
devoted to livestock farming. However, in A.Z. Arnaiz Realty, Inc., represented by Carmen Z. Arnaiz
v. Office of the President; Department of Agrarian Reform; Regional Director, DAR Region V,
Legaspi City; Provincial Agrarian Reform Officer, DAR Provincial Office, Masbate, Masbate; and
Municipal Agrarian Reform Officer, DAR Municipal Office, Masbate, Masbate,62 we denied a similar
petition for exemption and/or exclusion, by according respect to the CA’s factual findings and its
reliance on the findings of the DAR and the OP that

the subject parcels of land were not directly, actually, and exclusively used for pasture.63

Petitioner’s admission that, since 2001, it leased another ranch for its own livestock is fatal to its
cause.64 While petitioner advances a defense that it leased this ranch because the occupants of the
subject property harmed its cattle, like the CA, we find it surprising that not even a single police
and/or barangay report was filed by petitioner to amplify its indignation over these alleged illegal
acts. Moreover, we accord respect to the CA’s keen observation that the assailed MARO reports and
the Investigating Team’s Report do not actually contradict one another, finding that the 43 cows,
while owned by petitioner, were actually pastured outside the subject property.

Finally, it is established that issues of Exclusion and/or Exemption are characterized as Agrarian
Law Implementation (ALI) cases which are well within the DAR Secretary’s competence and
jurisdiction.65 Section 3, Rule II of the 2003 Department of Agrarian Reform Adjudication Board Rules
of Procedure provides:

Section 3. Agrarian Law Implementation Cases.

The Adjudicator or the Board shall have no jurisdiction over matters involving the administrative
implementation of RA No. 6657, otherwise known as the Comprehensive Agrarian Reform Law
(CARL) of 1988 and other agrarian laws as enunciated by pertinent rules and administrative orders,
which shall be under the exclusive prerogative of and cognizable by the Office of the Secretary of
the DAR in accordance with his issuances, to wit:

xxxx

3.8 Exclusion from CARP coverage of agricultural land used for livestock, swine, and poultry raising.

Thus, we cannot, without going against the law, arbitrarily strip the DAR Secretary of his legal
mandate to exercise jurisdiction and authority over all ALI cases. To succumb to petitioner’s
contention that "when a land is declared exempt from the CARP on the ground that it is not
agricultural as of the time the CARL took effect, the use and disposition of that land is entirely and
forever beyond DAR’s jurisdiction" is dangerous, suggestive of self-regulation. Precisely, it is the
DAR Secretary who is vested with such jurisdiction and authority to exempt and/or exclude a
property from CARP coverage based on the factual circumstances of each case and in accordance
with law and applicable jurisprudence. In addition, albeit parenthetically, Secretary Villa had already
granted the conversion into residential and golf courses use of nearly one-half of the entire area
originally claimed as exempt from CARP coverage because it was allegedly devoted to livestock
production.lawphil1

In sum, we find no reversible error in the assailed Amended Decision and Resolution of the CA
which would warrant the modification, much less the reversal, thereof.

WHEREFORE, the Petition is DENIED and the Court of Appeals Amended Decision dated October
4, 2006 and Resolution dated March 27, 2008 are AFFIRMED. No costs.

SO ORDERED.

SPECIAL FIRST DIVISION

G.R. No. 112526 March 16, 2005

STA. ROSA REALTY DEVELOPMENT CORPORATION, Petitioner,

vs.
JUAN B. AMANTE, FRANCISCO L. ANDAL, LUCIA ANDAL, ANDREA P. AYENDE, LETICIA P.
BALAT, FILOMENA B. BATINO, ANICETO A. BURGOS, JAIME A. BURGOS, FLORENCIA
CANUBAS, LORETO A. CANUBAS, MAXIMO A. CANUBAS, REYNALDO CARINGAL, QUIRINO
C. CASALME, BENIGNO A. CRUZAT, ELINO A. CRUZAT, GREGORIO F. CRUZAT, RUFINO C.
CRUZAT, SERGIO CRUZAT, SEVERINO F. CRUZAT, VICTORIA DE SAGUN, SEVERINO DE
SAGUN, FELICISIMO A. GONZALES, FRANCISCO A. GONZALES, GREGORIO A. GONZALES,
LEODEGARIO N. GONZALES, PASCUAL P. GONZALES, ROLANDO A. GONZALES,
FRANCISCO A. JUANGCO, GERVACIO A. JUANGCO, LOURDES U. LUNA, ANSELMO M.
MANDANAS, CRISANTO MANDANAS, EMILIO M. MANDANAS, GREGORIO A. MANDANAS,
MARIO G. MANDANAS, TEODORO MANDANAS, CONSTANCIO B. MARQUEZ, EUGENIO B.
MARQUEZ, ARMANDO P. MATIENZO, DANIEL D. MATIENZO, MAXIMINO MATIENZO,
PACENCIA P. MATIENZO, DOROTEA L. PANGANIBAN, JUANITO T. PEREZ, MARIANITO T.
PEREZ, SEVERO M. PEREZ, INOCENCIA S. PASQUIZA, BIENVENIDO F. PETATE, IGNACIO F.
PETATE, JUANITO PETATE, PABLO A. PLATON, PRECILLO V. PLATON, AQUILINO B.
SUBOL, CASIANO T. VILLA, DOMINGO VILLA, JUAN T. VILLA, MARIO C. VILLA, NATIVIDAD
B. VILLA, JACINTA S. ALVARADO, RODOLFO ANGELES, DOMINGO A. CANUBAS, EDGARDO
L. CASALME, QUIRINO DE LEON, LEONILO M. ENRIQUEZ, CLAUDIA P. GONZALES, FELISA
R. LANGUE, QUINTILLANO LANGUE, REYNALDO LANGUE, ROMEO S. LANGUE, MARIANITO
T. PEREZ, INOCENCIA S. PASQUIZA, AQUILINO B. SUBOL, BONIFACIO VILLA, ROGELIO
AYENDE, ANTONIO B. FERNANDEZ, ZACARIAS HERRERA, REYNARIO U. LAZO, AGAPITO
MATIENZO, DIONISIO F. PETATE, LITO G. REYES, JOSE M. SUBOL, CELESTINO G. TOPI NO,
ROSA C. AMANTE, SOTERA CASALME, REMIGIO M. SILVERIO, THE COURT OF APPEALS,
THE SECRETARY OF AGRARIAN REFORM, DEPARTMENT OF AGRARIAN REFORM
ADJUDICATION BOARD, LAND BANK OF THE PHILIPPINES, REGISTER OF DEEDS OF
LAGUNA, DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES REGIONAL
EXECUTIVE DIRECTOR FOR REGION IV and REGIONAL AGRARIAN REFORM OFFICER FOR
REGION IV., Respondents.

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

G.R. No. 118838 March 16, 2005

JUAN B. AMANTE, IGNACIO PETATE, DOMINGO CANUBAS, FLORENCIO CANUBAS,

CRESENCIO AMANTE, QUIRINO CASALME, LEODEGARIO GONZALES, DOMINGO VILLA,
JAIME BURGOS, NICOMEDES PETATE, MAXIMINO MATIENZO, MAXIMO CANUBAS, ELINO
CRUZAT, RUFINO CRUZAT, FELICISIMO GONZALES, QUINTILLANO LANGUE, TEODORO
MANDANAS, SERGIO CRUZAT, AGAPITO MATIENZO and SEVERINO DE SAGUM, Petitioner,
vs.
LUIS YULO, JESUS MIGUEL YULO, C-J YULO & SONS, INC., STA. ROSA REALTY
DEVELOPMENT CORPORATION, JOSE LAMBATIN, LAUREANO LAUREL, GALICANO
MAILOM, JR., REYNALDO OPENA, AGAPITO PRECILLA, DANILO SUMADSAD, ALFREDO
SUMADSAD, JUAN CANTAL, INIGO MENDOZA, ALEJANDRO SANCHEZ, SENADOR
RODRIGUEZ, VICTOR MOLINAR, DANILO CANLOBO, RESTING CARAAN, IGNACIO
VERGARA, HANDO MERCADO, FAUSTINO MAILOM, CONRADO BARRIENTOS, RENATO
VISAYA, DANTE BATHAN, SERAPIO NATIVIDAD, HONESTO TENORIO, NESTOR MERCADO,
BIENVENIDO OLFATO, RENE LIRAZAN, RUDY CANLOBO, BASIOLIO MULINGTAPANG, ITO
GONZALES, RENATO RINO, TINOY MABAGA, PACIO PADILLA, JOHNNY REAMILLO,
ROLANDO CARINGAL, IGNOY VILLAMAYOR, ROMEO TANTENGCO, LODRING CARAAN,
FREDO MERCADO, TOMMY MENDOZA, RAFAEL ONTE, REY MANAIG, DICK GASPAR,
ANTONIO MALLARI, ALFREDO ANIEL, BARIT, ALBERTO MANGUE, AGATON LUCIDO,
ONYONG CANTAL, BAYANI LACSON, ISKO CABILION, MANGUIAT, IGME OPINA, VILARETE,
PEDRO BENEDICTO, HECTOR BICO, RUFO SANCHEZ, LARRY DE LEON, BARIVAR SAMSON
and ROMEO NAVARRO, Respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

By virtue of the En Banc Resolution issued on January 13, 2004, the Court authorized the Special
First Division to suspend the Rules so as to allow it to consider and resolve the second Motion for
Reconsideration of respondents,1after the motion was heard on oral arguments on August 13, 2003.
On July 9, 2004,2 the Court resolved to submit for resolution the second Motion for Reconsideration
in G.R. No. 112526 together with G.R. No. 118338 in view of the Resolution of the Court dated
January 15, 2001 issued in G.R. No. 118838,3 consolidating the latter case with G.R. No. 112526,
the issues therein being interrelated.4 Hence, the herein Amended Decision.

The factual background of the two cases is as follows:

The Canlubang Estate in Laguna is a vast landholding previously titled in the name of the late
Speaker and Chief Justice Jose Yulo, Sr. Within this estate are two parcels of land (hereinafter
referred to as the "subject property") covered by TCT Nos. 81949 and 84891 measuring 254.766
hectares and part of Barangay Casile, subsequently titled in the name of Sta. Rosa Realty
Development Corporation (SRRDC), the majority stockholder of which is C.J. Yulo and Sons, Inc.

The subject property was involved in civil suits and administrative proceedings that led to the filing
of G.R. Nos. 112526 and 118838, thus:

Injunction Case Filed by Amante, et al.

On December 6, 1985, Amante, et al., who are the private respondents in G.R. No. 112526 and
petitioners in G.R. No. 118838, instituted an action for injunction with damages in the Regional Trial
Court of Laguna (Branch 24) against Luis Yulo, SRRDC, and several SRRDC security personnel,
docketed as Civil Case No. B-2333. Amante, et al. alleged that: they are residents of Barangay
Casile, Cabuyao, Laguna, which covers an area of around 300 hectares; in 1910, their ancestors
started occupying the area, built their houses and planted fruit-bearing trees thereon, and since then,
have been peacefully occupying the land; some time in June 3, 1985, SRRDC’s security people
illegally entered Bgy. Casile and fenced the area; SRRDC’s men also entered the barangay on
November 4, 1985, cut down the trees, burned their huts, and barred the lone jeepney from entering
the Canlubang Sugar Estate; as a result of these acts, Amante, et al. were deprived of possession
and cultivation of their lands. Thus, they claimed damages, sought the issuance of permanent
injunction and proposed that a right of way be declared.5

In their Answer, the defendants denied the allegations and disclaimed any control and supervision
over its security personnel. Defendant SRRDC also alleged that as the real owner of the property, it
was the one that suffered damages due to the encroachment on the property.6

A writ of preliminary injunction was issued by the trial court on August 17, 1987,7 but this was
subsequently dissolved by the Court of Appeals (CA) on April 22, 1988 in its decision in CA-G.R. SP
No. 13908.8

After trial on the merits, the trial court, on January 20, 1992, rendered a decision ordering Amante, et
al. to vacate the property, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the defendants

and against the plaintiffs hereby dismissing the complaint and amended complaint.

The plaintiffs are hereby ordered to vacate the parcels of land belonging to the defendants
Luis Yulo and Sta. Rosa Realty. They are likewise enjoined from entering the subject parcels
of land.

Although attorney’s fees and expenses of litigation are recoverable in case of a clearly
unfounded civil action against the plaintiff (Enervida vs. De la Torre, 55 SCRA 339), this
Court resolves not to award attorney’s fees etc. in favor of the defendants because the
plaintiffs appear to have acted in good faith in filing the present civil action (Salao vs. Salao,
70 SCRA 65) and that it would not be just and equitable to award the same in the case at
bar. (Liwanag vs. Court of Appeals, 121 SCRA 354) Accordingly, the other reliefs prayed for
by the defendants are hereby dismissed.

SO ORDERED.9

Amante, et al. appealed the aforesaid decision to the CA, docketed as CA-G.R. CV No. 38182.
On June 28, 1994, the CA affirmed with modification the decision of the trial court in the injunction
case. The dispositive portion of the appellate court’s decision10 reads as follows:

WHEREFORE, the judgment herein appealed from is hereby AFFIRMED, with the
modification that the defendants-appellees are hereby ordered, jointly and severally, to pay
the plaintiffs-appellants nominal damages in the amount of P5,000.00 per plaintiff. No
pronouncement as to costs.

SO ORDERED.11

Nominal damages were awarded by the CA because it found that SRRDC violated Amante, et al.’s
rights as possessors of the subject property.12

Amante, et al. filed a motion for reconsideration thereof, pointing out the DARAB’s decision placing
the property under compulsory acquisition, and the CA decision in CA-G.R. SP No. 27234, affirming
the same.13 The CA, however, denied the motion, with the modification that only SRRDC and the
defendants-security guards should be held jointly and severally liable for the nominal damages
awarded. It also made the clarification that the decision should not preempt any judgment or
prejudice the right of any party in the agrarian reform case pending before the Supreme Court (G.R.
No. 112526).14

Thus, Amante, et al. filed on March 2, 1995, herein petition, docketed as G.R. No. 118838 on the
following grounds:

4.1. The Court of Appeals decided the case contrary to law or applicable Supreme Court
decisions because:

4.1.1 First, petitioners may not be lawfully evicted from their landholdings considering that:

-- (a) Petitioners are already the registered owners under the torrens system of the
properties in question since February 26, 1992 by virtue of RA 6657 or the
Comprehensive Agrarian Reform Law;

-- (b) The Court of Appeals has affirmed the Regional Trial Court of Laguna’s
dismissal of the ejectment cases filed by respondent SRRDC against petitionerS;
and

-- (c) Assuming for the sake of argument only that petitioners are not yet the
registered owners of the properties in question, respondents may not raise the issue
of ownership in this case for injunction with damages, the same to be ventilated in a
separate action, not in this case brought to prevent respondents from committing
further acts of dispossession [Bacar v. del Rosario et al., 171 SCRA 451 (1989)].

4.1.2 Second, petitioners are entitled to moral, exemplary damages and attorney’s fees,
instead of mere nominal damages, considering that the Court of Appeals found respondents
to have unlawfully and illegally disturbed petitioners’ peaceful and continuous possession.15

Ejectment Cases Filed by SRRDC

Between October 1986 and August 1987, after the injunction case was filed by Amante, et al.,
SRRDC filed with the Municipal Trial Court (MTC) of Cabuyao, Laguna, several complaints for
forcible entry with preliminary injunction and damages against Amante, et al., docketed as Civil
Cases Nos. 250, 258, 260, 262 and 266. SRRDC alleged that some time in July 1987, they learned
that Amante, et al., without their authority and through stealth and strategy, were clearing, cultivating
and planting on the subject property; and that despite requests from SRRDC’s counsel, Amante, et
al. refused to vacate the property, prompting them to file the ejectment cases.16 Amante, et al.
denied that SRRDC are the absolute owners of the property, stating that they have been in peaceful
possession thereof, through their predecessors-in-interest, since 1910.17

On May 24, 1991, the MTC-Cabuyao rendered its decision in favor of SRRDC. Amante, et al. were
ordered to surrender possession and vacate the subject property. The decision was appealed to the
Regional Trial Court of Biñan, Laguna (Assisting Court).

On February 18, 1992, the RTC dismissed the ejectment cases on the ground that the subject
property is an agricultural land being tilled by Amante, et al., hence it is the Department of Agrarian
Reform (DAR), which has jurisdiction over the dispute.18 The RTC’s dismissal of the complaints was
brought to the CA via a petition for review, docketed as CA-G.R. SP No. 33382.19 In turn, the CA
dismissed the petition per its Decision dated January 17, 1995 on the ground that SRRDC failed to
show any prior physical possession of the subject property that would have justified the filing of the
ejectment cases.20 Also, the CA did not sustain the RTC’s finding that the subject properties are
agricultural lands and Amante, et al. are tenant/farmers thereof, as the evidence on record does not
support such finding. The parties did not file any motion for reconsideration from the Court of
Appeals’ dismissal, hence, it became final and executory.21

Administrative Proceedings

While the injunction and ejectment cases were still in process, it appears that in August, 1989, the
Municipal Agrarian Reform Office (MARO) issued a Notice of Coverage to SRRDC, informing
petitioners that the property covered by TCT Nos. T-81949, T-84891 and T-92014 is scheduled for
compulsory acquisition under the Comprehensive Agrarian Reform Program (CARP).22 SRRDC filed
its "Protest and Objection" with the MARO on the grounds that the area was not appropriate for
agricultural purposes, as it was rugged in terrain with slopes of 18% and above, and that the
occupants of the land were squatters, who were not entitled to any land as
beneficiaries.23 Thereafter, as narrated in the Decision of the Court dated October 12, 2001 in G.R.
No. 112526, the following proceedings ensued:

On August 29, 1989, the farmer beneficiaries together with the BARC chairman answered the
protest and objection stating that the slope of the land is not 18% but only 5-10% and that the land is
suitable and economically viable for agricultural purposes, as evidenced by the Certification of the
Department of Agriculture, municipality of Cabuyao, Laguna.

On September 8, 1989, MARO Belen dela Torre made a summary investigation report and
forwarded the Compulsory Acquisition Folder Indorsement (CAFI) to the Provincial Agrarian Reform
Officer (hereafter, PARO).

On September 21, 1989, PARO Durante Ubeda forwarded his endorsement of the
compulsory acquisition to the Secretary of Agrarian Reform.

On November 23, 1989, Acting Director Eduardo C. Visperas of the Bureau of Land
Acquisition and Development, DAR forwarded two (2) Compulsory Acquisition Claim Folders
covering the landholding of SRRDC, covered by TCT Nos. T-81949 and T-84891 to the
President, Land Bank of the Philippines for further review and evaluation.
On December 12, 1989, Secretary of Agrarian Reform Miriam Defensor Santiago sent
two (2) notices of acquisition to petitioner, stating that petitioner’s landholdings
covered by TCT Nos. T-81949 and T-84891, containing an area of 188.2858 and 58.5800
hectares, valued at P4,417,735.65 and P1,220,229.93, respectively, had been placed
under the Comprehensive Agrarian Reform Program.

On February 6, 1990, petitioner SRRDC in two letters separately addressed to Secretary

Florencio B. Abad and the Director, Bureau of Land Acquisition and Distribution, sent its
formal protest, protesting not only the amount of compensation offered by DAR for the
property but also the two (2) notices of acquisition.

On March 17, 1990, Secretary Abad referred the case to the DARAB for summary
proceedings to determine just compensation under R.A. No. 6657, Section 16.

On March 23, 1990, the LBP returned the two (2) claim folders previously referred for review
and evaluation to the Director of BLAD mentioning its inability to value the SRRDC
landholding due to some deficiencies.

On March 28, 1990, Executive Director Emmanuel S. Galvez wrote the Land Bank
President Deogracias Vistan to forward the two (2) claim folders involving the
property of SRRDC to the DARAB for it to conduct summary proceedings to determine
the just compensation for the land.

On April 6, 1990, petitioner sent a letter to the Land Bank of the Philippines stating that its
property under the aforesaid land titles were exempt from CARP coverage because they had
been classified as watershed area and were the subject of a pending petition for land
conversion.

On May 10, 1990, Director Narciso Villapando of BLAD turned over the two (2) claim folders
(CACF’s) to the Executive Director of the DAR Adjudication Board for proper administrative
valuation. Acting on the CACF’s, on September 10, 1990, the Board promulgated a
resolution asking the office of the Secretary of Agrarian Reform (DAR) to first resolve
two (2) issues before it proceeds with the summary land valuation proceedings.

The issues that need to be threshed out were as follows: (1) whether the subject parcels of
land fall within the coverage of the Compulsory Acquisition Program of the CARP; and (2)
whether the petition for land conversion of the parcels of land may be granted.

On December 7, 1990, the Office of the Secretary, DAR, through the Undersecretary
for Operations (Assistant Secretary for Luzon Operations) and the Regional Director
of Region IV, submitted a report answering the two issues raised. According to them,
firstly, by virtue of the issuance of the notice of coverage on August 11, 1989, and
notice of acquisition on December 12, 1989, the property is covered under compulsory
acquisition. Secondly, Administrative Order No. 1, Series of 1990, Section IV D also
supports the DAR position on the coverage of the said property. During the
consideration of the case by the Board, there was no pending petition for land
conversion specifically concerning the parcels of land in question.

On February 19, 1991, the Board sent a notice of hearing to all the parties interested, setting
the hearing for the administrative valuation of the subject parcels of land on March 6, 1991.
However, on February 22, 1991, Atty. Ma. Elena P. Hernandez-Cueva, counsel for SRRDC,
wrote the Board requesting for its assistance in the reconstruction of the records of the case
 because the records could not be found as her co-counsel, Atty. Ricardo Blancaflor, who
originally handled the case for SRRDC and had possession of all the records of the case
was on indefinite leave and could not be contacted. The Board granted counsel’s request
and moved the hearing on April 4, 1991.

On March 18, 1991, SRRDC submitted a petition to the Board for the latter to resolve
SRRDC’s petition for exemption from CARP coverage before any administrative
valuation of their landholding could be had by the Board.

On April 4, 1991, the initial DARAB hearing of the case was held and subsequently, different
dates of hearing were set without objection from counsel of SRRDC. During the April 15,
1991 hearing, the subdivision plan of subject property at Casile, Cabuyao, Laguna was
submitted and marked as Exhibit "5" for SRRDC. At the hearing on April 23, 1991, the Land
Bank asked for a period of one month to value the land in dispute.

At the hearing on April 23, 1991, certification from Deputy Zoning Administrator Generoso B.
Opina was presented. The certification issued on September 8, 1989, stated that the parcels
of land subject of the case were classified as "Industrial Park" per Sangguniang Bayan
Resolution No. 45-89 dated March 29, 1989.

To avert any opportunity that the DARAB might distribute the lands to the farmer
beneficiaries, on April 30, 1991, petitioner filed a petition with DARAB to disqualify private
respondents as beneficiaries. However, DARAB refused to address the issue of
beneficiaries.24

...

On December 19, 1991, the DARAB promulgated a decision, affirming the dismissal of the protest of
SRRDC against the compulsory coverage of the property covered by TCT Nos. 81949 and 84891.
The decretal portion of the decision reads:

WHEREFORE, based on the foregoing premises, the Board hereby orders:

1. The dismissal for lack of merit of the protest against the compulsory coverage of the
landholdings of Sta. Rosa Realty Development Corporation (Transfer Certificates of Title
Nos. 81949 and 84891 with an area of 254.766 hectares) in Barangay Casile, Municipality of
Cabuyao, Province of Laguna under the Comprehensive Agrarian Reform Program is hereby
affirmed;

2. The Land Bank of the Philippines (LBP) to pay Sta. Rosa Realty Development Corporation
the amount of Seven Million Eight Hundred Forty-One Thousand, Nine Hundred Ninety
Seven Pesos and Sixty-Four centavos (P7,841,997.64) for its landholdings covered by the
two (2) Transfer Certificates of Title mentioned above. Should there be a rejection of the
payment tendered, to open, if none has yet been made, a trust account for said amount in
the name of Sta. Rosa Realty Development Corporation;

3. The Register of Deeds of the Province of Laguna to cancel with dispatch Transfer
Certificate of Title Nos. 84891 and 81949 and new one be issued in the name of the
Republic of the Philippines, free from liens and encumbrances;
 4. The Department of Environment and Natural Resources either through its Provincial Office
in Laguna or the Regional Office, Region IV, to conduct a final segregation survey on the
lands covered by Transfer Certificate of Title Nos. 84891 and 81949 so the same can be
transferred by the Register of Deeds to the name of the Republic of the Philippines;

5. The Regional Office of the Department of Agrarian Reform through its Municipal and
Provincial Agrarian Reform Office to take immediate possession on the said landholding after
Title shall have been transferred to the name of the Republic of the Philippines, and
distribute the same to the immediate issuance of Emancipation Patents to the farmer-
beneficiaries as determined by the Municipal Agrarian Reform Office of Cabuyao, Laguna.25

On July 11, 1991, DAR Secretary Benjamin T. Leong issued a memorandum directing the Land
Bank of the Philippines (LBP) to open a trust account in favor of SRRDC, for P5,637,965.55, as
valuation for the SRRDC property.

The titles in the name of SRRDC were cancelled and corresponding TCTs were issued in the
name of the Republic of the Philippines on February 11, 1992,26 after which Certificates of
Land Ownership Award (CLOA) were issued in the name of the farmers-beneficiaries on
February 26, 1992.27

In the meantime, SRRDC had filed with the CA a petition for review of the DARAB’s decision,
docketed as CA-G.R. SP No. 27234.

On November 5, 1993, the CA affirmed the decision of DARAB, to wit:

WHEREFORE, premises considered, the DARAB decision dated December 19, 1991 is
AFFIRMED, without prejudice to petitioner Sta. Rosa Realty Development Corporation
ventilating its case with the Special Agrarian Court on the issue of just compensation.28

Hence, SRRDC filed on November 24, 1993, herein petition, docketed as G.R. No. 112526 on the
following grounds:

THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION

TANTAMOUNT TO LACK OR EXCESS OF ITS JURISDICTION IN RULING THAT THE
SRRDC PROPERTIES, DESPITE THE UNDISPUTED FACT OF THEIR NON-
AGRICULTURAL CLASSIFICATION PRIOR TO RA 6657, ARE COVERED BY THE CARP
CONTRARY TO THE NATALIA REALTY DECISION OF THIS HONORABLE COURT.

i. The SRRDC properties have been zoned and approved as ‘PARK’ since 1979.

ii. The SRRDC properties form part of a watershed area.

II

THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION

TANTAMOUNT TO LACK OR EXCESS OF ITS JURISDICTION IN DISREGARDING
ECOLOGICAL CONSIDERATIONS AS MANDATED BY LAW.

III
 THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION
TANTAMOUNT TO LACK OR EXCESS OF ITS JURISDICTION IN AFFIRMING THE
DISTRIBUTION OF THE SRRDC PROPERTIES TO PRIVATE RESPONDENTS WHO
HAVE BEEN JUDICIALLY DECLARED AS SQUATTERS AND THEREFORE ARE NOT
QUALIFIED BENEFICIARIES PURSUANT TO THE CENTRAL MINDANAO UNIVERSITY
DECISION OF THIS HONORABLE COURT.

i. The acquisition of the SRRDC properties cannot be valid for future beneficiaries.

ii. Section 22 of RA 6657 insofar as it expands the coverage of the CARP to ‘landless
residents’ is unconstitutional.

IV

THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION

TANTAMOUNT TO LACK OR EXCESS OF ITS JURISDICTION IN HOLDING THAT THE
DARAB HAS JURISDICTION TO PASS UPON THE ISSUE OF WHETHER THE SRRDC
PROPERTIES ARE SUBJECT TO CARP COVERAGE.29

On October 12, 2001, the Court rendered its Decision in G.R. No. 112526 only, setting aside the
decision of the CA in CA-G.R. SP No. 27234 and ordering the remand of the case to the DARAB for
re-evaluation and determination of the nature of the land. The dispositive portion of the Decision
reads as follows:

IN VIEW WHEREOF, the Court SETS ASIDE the decision of the Court of Appeals in CA-
G.R. SP No. 27234.

In lieu thereof, the Court REMANDS the case to the DARAB for re-evaluation and
determination of the nature of the parcels of land involved to resolve the issue of its coverage
by the Comprehensive Land Reform Program.

In the meantime, the effects of the CLOAs issued by the DAR to supposed farmer
beneficiaries shall continue to be stayed by the temporary restraining order issued on
December 15, 1993, which shall remain in effect until final decision on the case.

No costs.

SO ORDERED.30

It is the opinion of the Court in G.R. No. 112526, that the property is part of a watershed, and that
during the hearing at the DARAB, "there was proof that the land may be excluded from the coverage
of the CARP because of its high slopes."31 Thus, the Court concluded that a remand of the case to
the DARAB for re-evaluation of the issue of coverage is appropriate in order to resolve the true
nature of the subject property.32

In their Memorandum, Amante, et al. argues that there exist compelling reasons to grant the second
motion for reconsideration of the assailed decision of the Court, to wit:

2.1 Only QUESTIONS OF LAW are admittedly and undeniably at issue; yet the Honorable
Court reviewed the findings of facts of the Court of Appeals and the DARAB although the
case does not fall into any of the well-recognized exceptions to conduct a factual review.
 Worse, the 12 October 2001 Decision assumed facts not proven before any administrative,
quasi-judicial or judicial bodies;

2.2 The DARAB and the Court of Appeals already found the land to be CARPable; yet the
Honorable Court remanded the case to DARAB to re-evaluate if the land is CARPable;

2.3 The Decision did not express clearly and distinctly the facts and the law on which it is
based;

2.4 The Decision renewed the Temporary Restraining Order issued on 15 December 1993,
issuance of which is barred by Sec. 55 of R.A. 6657; and

2.5 This Honorable Court denied private respondents’ Motion for Reconsideration although
issues raised therein were never passed upon in the 12 October 2001 Decision or
elsewhere.33

The DAR and the DARAB, through the Office of the Solicitor General, did not interpose any objection
to the second motion for reconsideration. It also maintained that if SRRDC’s claim that the property
is watershed is true, then it is the DENR that should exercise control and supervision in the
disposition, utilization, management, renewal and conservation of the property.34

SRRDC meanwhile insists that there are no compelling reasons to give due course to the second
motion for reconsideration.35

At the outset, the Court notes that petitioner designated its petition in G.R. No. 112526 as one for
review on certiorari of the decision of the CA. In the same breath, it likewise averred that it was also
being filed as a special civil action for certiorari as public respondents committed grave abuse of
discretion.36 Petitioner should not have been allowed, in the first place, to pursue such remedies
simultaneously as these are mutually exclusive.37

It is SRRDC’s claim that the CA committed grave abuse of discretion in holding that the subject
property is agricultural in nature. In support of its contention, it argued, among others, that the
subject property had already been classified as "park" since 1979 under the Zoning Ordinance of
Cabuyao, as approved by the Housing and Land Use Regulatory Board (HLURB); that it forms part
of a watershed; and that the CA disregarded ecological considerations.38 SRRDC also claimed that
Amante, et al. are not qualified beneficiaries.39

Clearly, these issues are factual in nature, which the Court, as a rule, should not have considered in
this case. However, there are recognized exceptions, e.g., when the factual inferences of the
appellate court are manifestly mistaken; the judgment is based on a misapprehension of facts; or the
CA manifestly overlooked certain relevant and undisputed facts that, if properly considered, would
justify a different legal conclusion.40 The present cases fall under the above exceptions.

Thus, in order to finally set these cases to rest, the Court shall resolve the substantive matters
raised, which in effect comes down to the issue of the validity of the acquisition of the subject
property by the Government under Republic Act (R.A.) No. 6657, or the Comprehensive Agrarian
Reform Law of 1988 (CARL).

As noted earlier, the DARAB made its finding regarding the nature of the property in question, i.e.,
the parcels of land are agricultural and may be the subject of compulsory acquisition for distribution
to farmer-beneficiaries, thus:
 Ocular inspections conducted by the Board show that the subject landholdings have been
under the possession and tillage of the DAR identified potential beneficiaries which they
inherited from their forebears (workers of the Yulo Estate). They are bonafide residents and
registered voters (DARAB Exhibits "C" and "J") of Barangay Casile, Cabuyao, Laguna. There
is a barangay road leading toward the barangay school and sites and the settlement has a
barangay hall, church, elementary school buildings (DARAB Exhibit "Q"), Comelec precincts
(DARAB Exhibits "J-1" and J-2"), and other structures extant in progressive communities.
The barangay progressive development agencies, like the DECS, DA, COMELEC, DAR and
Support Services of Land Bank, DPWH, DTI and the Cooperative Development Authority
have extended support services to the community (DARAB Exhibits "I", "K" to "K-3", "L", "M",
"N", "O", "P" to "P-6"). More importantly, subject landholdings are suitable for
agriculture. Their topography is flat to undulating 3-15% slope. (Testimony of Rosalina
Jumaquio, Agricultural Engineer, DAR, TSN, June 21, 1991, DARAB Exhibits "F" and
"H"). Though some portions are over 18% slope, nevertheless, clearly visible thereat
are fruit-bearing trees, like coconut, coffee, and pineapple plantations, etc. (see
Petitioners Exhibits "A" to "YYY" and DARAB Exhibits "A" to "S", Records). In other
words, they are already productive and fully developed.

...

As the landholdings of SRRDC subject of the instant proceedings are already

developed not only as a community but also as an agricultural farm capable of
sustaining daily existence and growth, We find no infirmity in placing said parcels of
land under compulsory coverage. They do not belong to the exempt class of lands.
The claim that the landholding of SRRDC is a watershed; hence, belonging to the
exempt class of lands is literally "throwing punches at the moon" because the DENR
certified that "the only declared watershed in Laguna Province and San Pablo City is
the Caliraya-Lumot Rivers (Petitioner’s Exhibit "A"). A sensu contrario, the
landholdings subject herein are not.41 (Emphasis supplied)

The evidence on record supports these findings, to wit:

1. Certification dated January 16, 1989 by the OIC Provincial Environment and Natural
Resources Office of Laguna that the only declared watershed in the Laguna province and
San Pablo City is the Caliraya-Lumot Rivers No. 1570 dated September 1, 1976;42

2. Map prepared by Agricultural Engineer Rosalina H. Jumaquio showing that: a) the

topography of the property covered by TCT No. T-84891 topography is flat to undulating with
a 5 to 10% slope; (b) it is suitable to agricultural crops; and (c) the land is presently planted
with diversified crops;43

3. Certification dated August 28, 1989 by APT Felicito Buban of the Department of
Agriculture of Laguna that, per his ocular inspection, the subject property is an agricultural
area, and that the inhabitants’ main occupation is farming;44

4. Pictures taken by MARO Belen La Torre of Cabuyao, Laguna, showing that the property is
cultivated and inhabited by the farmer-beneficiaries;45

SRRDC however, insists that the property has already been classified as a "municipal park" and
beyond the scope of CARP. To prove this, SRRDC submitted the following:
 1. Certification dated March 1, 1991 by the Municipality of Cabuyao, Laguna that the entire
barangay of Casile is delineated as Municipal Park;46

2. Certification dated March 11, 1991 by the Housing and Land Use Regulatory Board that
the parcels of land located in Barangay Casile are within the Municipal Park, based on the
municipality’s approved General Land Use Plan ratified by the Housing and Land Use
Regulatory Board as per Resolution No. 38-2 dated June 25, 1980;47

3. Photocopies of pictures taken by Mr. Ernesto Garcia, Officer-in-Charge of the Special

Project Section of CJ Yulo and Sons, Inc., of portions of Barangay Casile;48

The Court recognizes the power of a local government to reclassify and convert lands through local
ordinance, especially if said ordinance is approved by the HLURB.49 Municipal Ordinance No. 110-54
dated November 3, 1979, enacted by the Municipality of Cabuyao, divided the municipality into
residential, commercial, industrial, agricultural and institutional districts, and districts and parks for
open spaces.50 It did not convert, however, existing agricultural lands into residential, commercial,
industrial, or institutional. While it classified Barangay Casile into a municipal park, as shown in its
permitted uses of land map, the ordinance did not provide for the retroactivity of its classification.
In Co vs. Intermediate Appellate Court,51 it was held that an ordinance converting agricultural lands
into residential or light industrial should be given prospective application only, and should not change
the nature of existing agricultural lands in the area or the legal relationships existing over such lands.
Thus, it was stated:

A reading of Metro Manila Zoning Ordinance No. 81-01, series of 1981, does not disclose
any provision converting existing agricultural lands in the covered area into residential or light
industrial. While it declared that after the passage of the measure, the subject area shall be
used only for residential or light industrial purposes, it is not provided therein that it shall
have retroactive effect so as to discontinue all rights previously acquired over lands located
within the zone which are neither residential nor light industrial in nature. This simply
means that, if we apply the general rule, as we must, the ordinance should be given
prospective operation only. The further implication is that it should not change the
nature of existing agricultural lands in the area or the legal relationships existing over
such lands …52 (Emphasis supplied)

Under Section 3 (c) of R.A. No. 6657, agricultural land is defined as land devoted to agricultural
activity and not classified as mineral, forest, residential, commercial or industrial land. Section 3 (b)
meanwhile defines agricultural activity as the cultivation of the soil, planting of crops, growing of fruit
trees, raising of livestock, poultry or fish, including the harvesting of such products, and other farm
activities, and practices performed by a farmer in conjunction with such farming operations done by
persons whether natural or juridical.

Before Barangay Casile was classified into a municipal park by the local government of Cabuyao,
Laguna in November 1979, it was part of a vast property popularly known as the Canlubang Sugar
Estate. SRRDC claimed that in May 1979, "the late Miguel Yulo … allowed the employees of the
Yulo group of companies to cultivate a maximum area of one hectare each subject to the condition
that they should not plant crops being grown by the Canlubang Sugar Estate, like coconuts and
coffee, to avoid confusion as to ownership of crops."53 The consolidation and subdivision plan
surveyed for SRRDC on March 10-15, 198454 also show that the subject property is sugar land.
Evidently, the subject property is already agricultural at the time the municipality of Cabuyao enacted
the zoning ordinance, and such ordinance should not affect the nature of the land. More so since
the municipality of Cabuyao did not even take any step to utilize the property as a park.
SRRDC cites the case of Natalia Realty, Inc. vs. DAR,55 wherein it was ruled that lands not devoted
to agricultural activity and not classified as mineral or forest by the DENR and its predecessor
agencies, and not classified in town plans and zoning ordinances as approved by the HLURB and its
preceding competent authorities prior to the enactment of R.A. No. 6657 on June 15, 1988, are
outside the coverage of the CARP. Said ruling, however, finds no application in the present case. As
previously stated, Municipal Ordinance No. 110-54 of the Municipality of Cabuyao did not provide for
any retroactive application nor did it convert existing agricultural lands into residential, commercial,
industrial, or institutional. Consequently, the subject property remains agricultural in nature and
therefore within the coverage of the CARP.

Only on March 9, 2004, SRRDC filed with the Court a Manifestation pointing out DAR Order No.
(E)4-03-507-309 dated February 17, 2004, exempting from CARP coverage two parcels of land
owned by SRRDC and covered by TCT Nos. T-85573 and T-92014.56 The DAR found that these
properties have been re-classified into Municipal Parks by the Municipal Ordinance of Cabuyao,
Laguna, and are part of the Kabangaan-Casile watershed, as certified by the DENR.57

The Court notes however that the said DAR Order has absolutely no bearing on these cases. The
herein subject property is covered by TCT Nos. 81949 and 34891, totally different, although
adjacent, from the property referred to in said DAR Order.

SRRDC also contends that the property has an 18% slope and over and therefore exempt from
acquisition and distribution under Section 10 of R.A. No. 6657. What SRRDC opted to ignore is that
Section 10, as implemented by DAR Administrative Order No. 13 dated August 30, 1990, also
provides that those with 18% slope and over but already developed for agricultural
purposes as of June 15, 1988, may be allocated to qualified occupants.58Hence, even assuming
that the property has an 18% slope and above, since it is already developed for agricultural
purposes, then it cannot be exempt from acquisition and distribution. Moreover, the topography
maps prepared by Agricultural Engineer Rosalina H. Jumaquio show that the property to be acquired
has a 5-10% flat to undulating scope;59 that it is suitable to agricultural crops;60 and it is in fact
already planted with diversified crops.61

Also, the Certification dated July 1, 1991 by Geodetic Engineer Conrado R. Rigor that the top portion
of Barangay Casile has a 0 to 18% slope while the side of the hill has a 19 to 75% slope,62 was
presented by SRRDC only during the proceedings before the CA which had no probative value in a
petition for review proceedings. The Court notes that SRRDC had been given ample time and
opportunity by the DARAB to prove the grounds for its protest and objection but miserably failed to
take advantage of such time and opportunity63 in the DARAB proceedings.

SRRDC also contends that the property is part of a watershed, citing as evidence, the Certification
dated June 26, 1991 by the Laguna Lake Development Authority that Barangay Casile is part of the
watershed area of the Laguna Lake Basin,64 and the Final Report for Watershed Area Assessment
Study for the Canlubang Estate dated July 1991 undertaken by the Engineering & Development
Corporation of the Philippines.65 It must be noted, however, that these pieces of evidence were
likewise brought to record only when petitioner filed its petition for review with the CA. The DARAB
never had the opportunity to assess these pieces of evidence.

The DARAB stated:

Noting the absence of evidence which, in the nature of things, should have been submitted
by landowner SRRDC and to avoid any claim of deprivation of its right to prove its claim to
just compensation (Uy v. Genato, 57 SCRA 123). We practically directed its counsel in not
only one instance, during the series of hearings conducted, to do so. We even granted
 continuances to give it enough time to prepare and be ready with the proof and documents.
To Our dismay, none was submitted and this constrained Us to take the failure/refusal of
SRRDC to present evidence as a waiver or, at least, an implied acceptance of the valuation
made by the DAR.66

The same goes with the CA, which did not have the discretion to consider evidence in a petition
for certiorari or petition for review on certiorari outside than that submitted before the DARAB. The
CA noted petitioner’s failure to present evidence in behalf of its arguments, thus:

. . . It must be recalled that petitioner Sta. Rosa Realty itself had asked the DARAB in a
petition dated March 18, 1991 to allow it ‘to adduce evidence in support of its position that
the subject parcels of land are not covered by the CARP beginning on the scheduled hearing
dated April 4, 1991.’ And DARAB obliged as in fact the petitioner commenced to introduce
evidence. If petitioner failed to complete the presentation of evidence to support its claim of
exemption from CARP coverage, it has only itself to blame for which DARAB cannot be
accused of not being impartial.67

Consequently, there is no need to order the remand of the case to the DARAB "for re-evaluation and
determination of the nature of the parcels of land involved." It runs contrary to orderly administration
of justice and would give petitioner undue opportunity to present evidence in support of its stance, an
opportunity it already had during the DARAB proceedings, and which opportunity it regrettably failed
to take advantage of.

More significantly however, it is the DAR Secretary that originally declared the subject
property as falling under the coverage of the CARP.

Moreover, DAR Administrative Order No. 13, Series of 1990 (Rules and Procedure Governing
Exemption of Lands from CARP Coverage under Section 10, R.A. No. 6657) provides:

I. LEGAL MANDATE

The general policy under CARP is to cover as much lands suitable for agriculture as
possible. However, Section 10, RA 6657 excludes and exempts certain types of lands from
the coverage of CARP, to wit:

A. Lands actually, directly and exclusively used and found to be necessary for parks, wildlife,
forest reserves, reforestation, fish sanctuaries and breeding grounds, watersheds and
mangroves, national defense, school sites and campuses including experimental farm
stations operated by public or private schools for educational purposes, seeds and seedlings
research and pilot production centers, church sites and convents appurtenant thereto,
mosque sites and Islamic centers appurtenant thereof, communal burial grounds and
cemeteries, penal colonies and penal farms actually worked by the inmates, government and
private research and quarantine centers; and

...

II. POLICIES

In the application of the aforecited provision of law, the following guidelines shall be
observed:
 A. For an area in I.A to be exempted from CARP coverage, it must be "actually, directly and
exclusively used and found to be necessary" for the purpose so stated.

...

C. Lands which have been classified or proclaimed, and/or actually directly and exclusively
used and found to be necessary for parks, wildlife, forest reserves, fish sanctuaries and
breeding grounds, and watersheds and mangroves shall be exempted from the coverage of
CARP until Congress, taking into account ecological, developmental and equity
considerations, shall have determined by law, the specific limits of public domain, as
provided for under Sec. 4(a) of RA 6657, and a reclassification of the said areas or portions
thereof as alienable and disposable has been approved. (Emphasis supplied)

In order to be exempt from coverage, the land must have been classified or proclaimed and actually,
directly and exclusively used and found to be necessary for watershed purposes.68 In this case, at
the time the DAR issued the Notices of Coverage up to the time the DARAB rendered its decision on
the dispute, the subject property is yet to be officially classified or proclaimed as a watershed and
has in fact long been used for agricultural purposes. SRRDC relies on the case of Central Mindanao
University (CMU) vs. DARAB,69 wherein the Court ruled that CMU is in the best position to determine
what property is found necessary for its use. SRRDC claims that it is in the best position to
determine whether its properties are "necessary" for development as park and watershed area.70

But SRRDC’s reliance on the CMU case is flawed. In the CMU case, the subject property from the
very beginning was not alienable and disposable because Proclamation No. 476 issued by the late
President Carlos P. Garcia already reserved the property for the use of the school. Besides, the
subject property in the CMU case was actually, directly and exclusively used and found to be
necessary for educational purposes.

In the present case, the property is agricultural and was not actually and exclusively used for
watershed purposes. As records show, the subject property was first utilized for the purposes of the
Canlubang Sugar Estate.71 Later, petitioner claimed that the occupants were allowed to cultivate the
area so long as they do not plant crops being grown by the Canlubang Sugar Estate in order to
avoid confusion as to ownership thereof.72 Thus, based on its own assertions, it appears that it had
benefited from the fruits of the land as agricultural land. Now, in a complete turnaround, it is claiming
that the property is part of a watershed.

Furthermore, in a belated attempt to prove that the subject property is part of a watershed that must
be environmentally protected, SRRDC submitted before the Court a Final Report dated February
1994 undertaken by the Ecosystems Research and Development Bureau (ERDB) of the DENR
entitled, "Environmental Assessment of the Casile and Kabanga-an River Watersheds."73 The study,
according to SRRDC, was made pursuant to a handwritten instruction issued by then President Fidel
V. Ramos. The study noted that, "the continuing threat of widespread deforestation and unwise land
use practices have resulted in the deteriorating condition of the watersheds."74 But the Court also
notes the Memorandum for the President dated September 1993 by then DENR Secretary Angel C.
Alcala that, after a field inspection conducted by the DENR’s Regional Executive Director and the
Provincial and Community Natural Resource Officers, it was found that:

...

2. Many bankal trees were found growing in the watershed/CARP areas, including some
which have been coppiced, and that water conduits for domestic and industrial uses were
found installed at the watershed area claimed by the Yulos. Records further show that in the
 1970s, a Private Land Timber Permit was issued to Canlubang Sugar Estate thru its
marketing arm, the Sta. Rosa Realty Devpt. Corp.

3. Resident farmers denied that they have been cutting bankal trees and volunteered the
information that one of the Estates’ security guards was dismissed for cutting and
transporting bankal trees. The trees cut by the dismissed security guard were found stacked
adjacent to the Canlubang Security Agency’s headquarters.75

Evidently, SRRDC had a hand in the degradation of the area, and now wants to put the entire blame
on the farmer-beneficiaries. It is reasonable to conclude that SRRDC is merely using "ecological
considerations" to avert any disposition of the property adverse to it.

SRRDC also objects to the identification of Amante, et al. as beneficiaries of the subject property.
Suffice it to say that under Section 15 of R.A. No. 6657, the identification of beneficiaries is a matter
involving strictly the administrative implementation of the CARP, a matter which is exclusively vested
in the Secretary of Agrarian Reform, through its authorized offices. Section 15 reads:

SECTION 15. Registration of Beneficiaries. — The DAR in coordination with the Barangay
Agrarian Reform Committee (BARC) as organized in this Act, shall register all agricultural
lessees, tenants and farmworkers who are qualified to be beneficiaries of the CARP. These
potential beneficiaries with the assistance of the BARC and the DAR shall provide the
following data:

(a) names and members of their immediate farm household;

(b) owners or administrators of the lands they work on and the length of tenurial
relationship;

(c) location and area of the land they work;

(d) crops planted; and

(e) their share in the harvest or amount of rental paid or wages received.

A copy of the registry or list of all potential CARP beneficiaries in the barangay shall be
posted in the barangay hall, school or other public buildings in the barangay where it shall be
open to inspection by the public at all reasonable hours.

Meanwhile, Administrative Order No. 10 (Rules and Procedures Governing the Registration of
Beneficiaries), Series of 1989, provides:

SUBJECT: I. PREFATORY STATEMENT

Pursuant to Section 15, Chapter IV, of the Comprehensive Agrarian Reform Law of 1988, the
DAR, in coordination with the Barangay Agrarian Reform Committee (BARC), as organized
pursuant to RA 6657, shall register all agricultural lessees, tenants and farmworkers who are
qualified beneficiaries of the CARP. This Administrative Order provides the Implementing
Rules and Procedures for the said registration.

...
 B. Specific

1. Identify the actual and potential farmer-beneficiaries of the CARP.

In Lercana vs. Jalandoni,76 the Court categorically stated that:

… the identification and selection of CARP beneficiaries are matters involving strictly the
administrative implementation of the CARP, a matter exclusively cognizable by the Secretary
of the Department of Agrarian Reform, and beyond the jurisdiction of the DARAB.77

The farmer-beneficiaries have already been identified in this case. Also, the DAR Secretary has
already issued Notices of Coverage and Notices of Acquisition pertaining to the subject property. It
behooves the courts to exercise great caution in substituting its own determination of the issue,
unless there is grave abuse of discretion committed by the administrative agency,78 which in these
cases the Court finds none.

SRRDC questions the constitutionality of Section 22 of R.A. No. 6657, which reads in part:

SECTION 22. Qualified Beneficiaries. The lands covered by the CARP shall be distributed as
much as possible to landless residents of the same barangay, or in the absence thereof,
landless residents of the same municipality in the following order of priority.

(a) agricultural lessees and share tenants;

(b) regular farmworkers;

(c) seasonal farmworkers;

(d) other farmworkers;

(e) actual tillers or occupants of public lands;

(f) collectives or cooperatives of the above beneficiaries; and

(g) others directly working on the land.

...

SRRDC argues that Section 22 "sweepingly declares landless residents as beneficiaries of the
CARP (to mean also squatters)," in violation of Article XIII, Section 4 of the Constitution, which aims
to benefit only the landless farmers and regular farmworkers.79

The Court cannot entertain such constitutional challenge. The requirements before a litigant can
challenge the constitutionality of a law are well-delineated, viz.:

(1) The existence of an actual and appropriate case;

(2) A personal and substantial interest of the party raising the constitutional question;

(3) The exercise of judicial review is pleaded at the earliest opportunity; and
 (4) The constitutional question is the lis mota of the case.80 (Emphasis supplied)

Earliest opportunity means that the question of unconstitutionality of the act in question should have
been immediately raised in the proceedings in the court below,81 in this case, the DAR Secretary. It
must be pointed out that all controversies on the implementation of the CARP fall under the
jurisdiction of the DAR, even though they raise questions that are also legal or constitutional in
nature.82 The earliest opportunity to raise a constitutional issue is to raise it in the pleadings before a
competent court that can resolve the same, such that, "if it is not raised in the pleadings, it cannot be
considered at the trial, and, if not considered at the trial, it cannot be considered on
appeal."83 Records show that SRRDC raised such constitutional challenge only before this Court
despite the fact that it had the opportunity to do so before the DAR Secretary. The DARAB correctly
refused to deal on this issue as it is the DAR Secretary who, under the law, has the authority to
determine the beneficiaries of the CARP. This Court will not entertain questions on the invalidity of a
statute where that issue was not specifically raised, insisted upon, and adequately argued84 in the
DAR.

Likewise, the constitutional question raised by SRRDC is not the very lis mota in the present case.
Basic is the rule that every law has in its favor the presumption of constitutionality, and to justify its
nullification, there must be a clear and unequivocal breach of the Constitution, and not one that is
doubtful, speculative or argumentative.85 The controversy at hand is principally anchored on the
coverage of the subject property under the CARP, an issue that can be determined without delving
into the constitutionality of Section 22 of R.A. No. 6657. While the identification of Amante, et al. as
farmer-beneficiaries is a corollary matter, yet, the same may be resolved by the DAR.

SRRDC questions the DARAB’s jurisdiction to entertain the question of whether the subject property
is subject to CARP coverage.

According to SRRDC, such authority is vested with the DAR Secretary who has the exclusive
prerogative to resolve matters involving the administrative implementation of the CARP and agrarian
laws and regulations.86

There is no question that the power to determine whether a property is subject to CARP coverage
lies with the DAR Secretary. Section 50 of R.A. No. 6657 provides that:

SEC. 50. Quasi-Judicial Powers of the DAR. - The DAR is hereby vested with primary
jurisdiction to determine and adjudicate agrarian reform matters and shall have exclusive
original jurisdiction over all matters involving the implementation of agrarian reform, except
those falling under the exclusive jurisdiction of the Department of Agriculture (DA) and the
Department of Environment and Natural Resources (DENR).

...

The DAR’s jurisdiction under Section 50 of R.A. No. 6657 is two-fold. The first is essentially
executive and pertains to the enforcement and administration of the laws, carrying them into
practical operation and enforcing their due observance, while the second is judicial and involves the
determination of rights and obligations of the parties.87

Pursuant to its judicial mandate of achieving a just, expeditious and inexpensive determination of
every action or proceeding before it,88 the DAR adopted the DARAB Revised Rules, Rule II
(Jurisdiction of the Adjudication Board) of which provides:
 SECTION 1. Primary, Original and Appellate Jurisdiction. – The Agrarian Reform
Adjudication Board shall have primary jurisdiction, both original and appellate, to determine
and adjudicate all agrarian disputes, cases, controversies, and matters or incidents involving
the implementation of the Comprehensive Agrarian Reform Program under Republic Act No.
6657, Executive Order Nos. 229, 228 and 129-A, Republic Act No. 3844 as amended by
Republic Act No. 6389, Presidential Decree No. 27 and other agrarian laws and their
implementing rules and regulations.

Specifically, such jurisdiction shall extend over but not be limited to the following:

a) Cases involving the rights and obligations of persons engaged in the cultivation and use of
agricultural land covered by the Comprehensive Agrarian Reform Program (CARP) and other
agrarian laws;

b) Cases involving the valuation of land, and determination and payment of just
compensation, fixing and collection of lease rentals, disturbance compensation, amortization
payments, and similar disputes concerning the functions of the Land Bank;

c) Cases involving the annulment or cancellation of orders or decisions of DAR officials other
than the Secretary, lease contracts or deeds of sale or their amendments under the
administration and disposition of the DAR and LBP;

d) Cases arising from, or connected with membership or representation in compact farms,

farmers’ cooperatives and other registered farmers’ associations or organizations, related to
land covered by the CARP and other agrarian laws;

e) Cases involving the sale, alienation, mortgage, foreclosure, pre-emption and redemption
of agricultural lands under the coverage of the CARP or other agrarian laws;

f) Cases involving the issuance of Certificate of Land Transfer (CLT), Certificate of Land
Ownership Award (CLOA) and Emancipation Patent (EP) and the administrative correction
thereof;

g) And such other agrarian cases, disputes, matters or concerns referred to it by the
Secretary of the DAR.

Provided, however, that matters involving strictly the administrative implementation of

the CARP and other agrarian laws and regulations, shall be the exclusive prerogative
of and cognizable by the Secretary of the DAR. (Emphasis supplied)

On the other hand, Administrative Order No. 06-00,89 which provides for the Rules of Procedure for
Agrarian Law Implementation (ALI) Cases, govern the administrative function of the DAR. Under
said Rules of Procedure, the DAR Secretary has exclusive jurisdiction over classification and
identification of landholdings for coverage under the CARP, including protests or oppositions thereto
and petitions for lifting of coverage. Section 2 of the said Rules specifically provides, inter alia, that:

SECTION 2. Cases Covered. - These Rules shall govern cases falling within the exclusive
jurisdiction of the DAR Secretary which shall include the following:
 (a) Classification and identification of landholdings for coverage under the
Comprehensive Agrarian Reform Program (CARP), including protests or oppositions
thereto and petitions for lifting of coverage;

(b) Identification, qualification or disqualification of potential farmer-beneficiaries;

(c) Subdivision surveys of lands under CARP;

(d) Issuance, recall or cancellation of Certificates of Land Transfer (CLTs) and CARP
Beneficiary Certificates (CBCs) in cases outside the purview of Presidential Decree (PD) No.
816, including the issuance, recall or cancellation of Emancipation Patents (EPs) or
Certificates of Land Ownership Awards (CLOAs) not yet registered with the Register of
Deeds;

(e) Exercise of the right of retention by landowner; . . . (Emphasis supplied)

Thus, the power to determine whether a property is agricultural and subject to CARP coverage
together with the identification, qualification or disqualification of farmer-beneficiaries lies with the
DAR Secretary.90

Significantly, the DAR had already determined that the properties are subject to expropriation
under the CARP and has distributed the same to the farmer-beneficiaries.

Initially, the LBP forwarded the two Compulsory Acquisition Claim Folders (CACF) covering the
subject properties to the DARAB for summary proceedings for the sole purpose of determining just
compensation. SRRDC then sent a letter to the LBP claiming that the subject properties were
exempt from CARP coverage and subject of a pending petition for land conversion. As a
consequence, the DARAB asked the DAR Secretary to first resolve the issues raised by SRRDC
before it can proceed with the land valuation proceedings. In response, the DAR, through the
Undersecretary for Operations and the Regional Director of Region IV, submitted its report stating
that: (1) the property is subject to compulsory acquisition by virtue of the Notice of Coverage issued
on August 11, 1989, and Notice of Acquisition issued on December 12, 1989, and that it was subject
to CARP coverage per Section IV D of DAR Administrative Order No. 1, Series of 1990; and (2)
there was no pending petition for land conversion involving the subject property. When SRRDC
petitioned the DARAB to resolve the issue of exemption from coverage, it was only then that the
DARAB took cognizance of said issue.91

As the DARAB succinctly pointed out, it was SRRDC that initiated and invoked the DARAB’s
jurisdiction to pass upon the question of CARP coverage. As stated by the DARAB:

4.5.2.2. The ISSUE ON CARP COVERAGE was initiated and incorporated in said
proceeding, at the instance of petitioner itself, by filing a petition dated March 18, 1991, …
Prayed therein were that DARAB:

1. Take cognizance and assume jurisdiction over the question of CARP coverage of the
subject parcels of land;

2. Defer or hold in abeyance the proceedings for administrative valuation of the subject
properties pending determination of the question of CARP coverage;
 3. Allow respondent SRRDC to adduce evidence in support of its position that the subject
parcels of land are not covered by the CARP beginning on the scheduled hearing date of
April 4, 1991" (p.3; emphasis and underscoring supplied).

Upon persistent request of petitioner SRRDC, it was accommodated by DARAB and a

counsel of SRRDC even took the witness stand. Its lawyers were always in attendance
during the scheduled hearings until it was time for SRRDC to present its own evidence.

4.5.2.3. But, as earlier stated, despite the open session proddings by DARAB for SRRDC to
submit evidence and the rescheduling for, allegedly, they are still collating the evidence, nay,
the request that it be allowed to adduce evidence, none was adduced and this constrained
public respondent to declare SRRDC as having waived its right to present evidence. And,
after the remaining parties were heard, the hearing was formally terminated.

...

4.5.3. Needless to state, the jurisdictional objection (CARP coverage), now being
raised herein was not one of the original matters in issue. Principally, DARAB was
called upon under Section 16 of Republic Act No. 6657 to resolve a land valuation
case. But SRRDC itself insisted that DARAB should take cognizance thereof in the
same land valuation proceeding. And, SRRDC, through its lawyers, actively
participated in the hearings conducted.

4.5.4. It was only when an adverse decision was rendered by DARAB that the
jurisdictional issue was raised in the petition for review it filed with the Honorable
Court of Appeals. It was also only then that petitioner presented proof/evidence.

...

4.5.6. Public respondents (DAR/DARAB) are not unmindful of the rule that matter of
jurisdiction may be raised at any stage of the proceeding. But for two serious considerations,
the applicability thereof in the case at bar should not be allowed.

4.5.6.1. The fact [part (municipal/industrial) and/or watershed] upon which the jurisdictional
issue interchangeably hinges were not established during the hearing of the case. No proof
was adduced. That the matter of CARP coverage is strictly administrative implementation of
CARP and, therefore, beyond the competence of DARAB, belonging, as it does, to the DAR
Secretary, was not even alleged, either before DARAB or the Honorable Court of Appeals,
the numerous petitions/incidents filed notwithstanding. Be it that as it may, the records of the
case show that initially DARAB refused to take cognizance thereof and, in fact, forwarded the
issue of CARP coverage to the office of the DAR Secretary. It was only when it was returned
to DARAB by said office that proceedings thereon commenced pursuant to Section 1(g) of
Rule II of the DARAB Revised Rules of Procedure.

4.5.6.2. Petitioner is now estopped from assailing the jurisdiction of DARAB. First, it
expressly acknowledged the same, in fact invoked it, when it filed its petition (Annex
"4"); and, second, during the scheduled hearings, SRRDC, through its counsel,
actively participated, one of its counsel (sic) even testifying. It may not now be
allowed to impugn the jurisdiction of public respondent …92(Emphasis supplied)

In CA-G.R. SP No. 27234, the CA likewise found that it was SRRDC that called upon the DARAB to
determine the issue and it, in fact, actively participated in the proceedings before it.93 It was
SRRDC’s own act of summoning the DARAB’s authority that cured whatever jurisdictional defect it
now raises. It is elementary that the active participation of a party in a case pending against him
before a court or a quasi-judicial body, is tantamount to a recognition of that court’s or body’s
jurisdiction and a willingness to abide by the resolution of the case and will bar said party from later
on impugning the court’s or body’s jurisdiction.94

Moreover, the issue of jurisdiction was raised by SRRDC only before the CA. It was never presented
or discussed before the DARAB for obvious reasons, i.e., it was SRRDC itself that invoked the
latter’s jurisdiction. As a rule, when a party adopts a certain theory, and the case is tried and decided
upon that theory in the court below, he will not be permitted to change his theory on appeal.95 Points
of law, theories, issues and arguments not brought to the attention of the lower court need not be,
and ordinarily will not be, considered by a reviewing court, as these cannot be raised for the first time
at such late stage.96 To permit SRRDC to change its theory on appeal would not only be unfair to
Amante, et al. but would also be offensive to the basic scales of fair play, justice and due process.97

Finally, the Court notes that then DAR Secretary Benjamin T. Leong issued a Memorandum on July
11, 1991, ordering the opening of a trust account in favor of SRRDC. In Land Bank of the Philippines
vs. Court of Appeals, this Court struck down as void DAR Administrative Circular No. 9, Series of
1990, providing for the opening of trust accounts in lieu of the deposit in cash or in bonds
contemplated in Section 16 (e) of R.A. No. 6657. As a result, the DAR issued Administrative Order
No. 2, Series of 1996, converting trust accounts in the name of landowners into deposit
accounts.98 Thus, the trust account opened by the LBP per instructions of DAR Secretary Benjamin
T. Leong should be converted to a deposit account, to be retroactive in application in order to rectify
the error committed by the DAR in opening a trust account and to grant the landowners the benefits
concomitant to payment in cash or LBP bonds prior to the ruling of the Court in Land Bank of the
Philippines vs. Court of Appeals. The account shall earn a 12% interest per annum from the time the
LBP opened a trust account up to the time said account was actually converted into cash and LBP
bonds deposit accounts.

Given the foregoing conclusions, the petition filed in G.R. No. 118838, which primarily rests on G.R.
No. 112526, should be granted.

The judgments of the trial court in the injunction case (Civil Case No. B-2333) and the CA in CA-
G.R. SP No. 38182were premised on SRRDC’s transfer certificates of title over the subject property.
The trial court and the CA cannot be faulted for denying the writ of injunction prayed for by Amante,
et al. since at the time the trial court rendered its decision in the injunction case on January 20,
1992, SRRDC was still the holder of the titles covering the subject property. The titles in its name
were cancelled and corresponding TCTs were issued in the name of the Republic of the Philippines
on February 11, 1992, and CLOAs were issued to the farmer-beneficiaries on February 26, 1992.
When Amante, et al., in their motion for reconsideration filed in CA-G.R. SP No. 38182, brought to
the CA’s attention the issuance of the CLOAs, the CA, per Resolution dated January 19, 1995,
reiterated its ruling that "whether or not the subject property is covered by the Comprehensive
Agrarian Reform Law (R.A. No. 6657) is the subject matter of a separate case, and we cannot
interfere with the same at the present time." The CA further stated that "(O)ur present decision is,
therefore, not intended to preempt any judgment or prejudice the right of any party in the said
case."99 It must be noted that at that juncture, the DARAB Decision and the CA decision in CA-G.R.
SP No. 27234, finding the subject property covered by the CARP Law, is yet to be finally resolved by
this Court in G.R. No. 112526and in fact, a temporary restraining order was issued by the Court on
December 15, 1993, enjoining the DARAB from enforcing the effects of the CLOAs. Amante, et al.
was likewise restrained from further clearing the subject property.100 Hence, the decision of the trial
court and the CA denying the writ of injunction was warranted.
Nevertheless, considering that the subject property is agricultural and may be acquired for
distribution to farmer-beneficiaries identified by the DAR under the CARP, the transfer certificates of
title issued in the name of the Republic of the Philippines and the CLOAs issued by the DAR in the
names of Amante, et al.,101 are valid titles and therefore must be upheld. By virtue thereof, Amante,
et al. who have been issued CLOAs are now the owners of the subject property. Consequently,
the decisions of the trial court in the injunction case and the CA in CA-G.R. SP No. 38182 must now
be set aside, insofar as it orders Amante, et al. to vacate and/or enjoins them from entering the
subject property.

The Court, however, agrees with the CA that Amante, et al. is not entitled to actual, moral and
exemplary damages, as well as attorney’s fees. SRRDC’s right of possession over the subject
property was predicated on its claim of ownership, and it cannot be sanctioned in exercising its rights
or protecting its interests thereon. As was ruled by the CA, Amante, et al. is merely entitled to
nominal damages as a result of SRRDC’s acts.102

All is not lost in this case. In its Memorandum dated September 29, 1993, to the DAR Secretary, the
DENR manifested that:

. . . the farmers themselves could be tapped to undertake watershed management and

protection. This community-based approach in natural resource management, is in fact,
being used in numerous watershed management projects nationwide. Adopting the same
approach in the area is deemed the best possible solution to the case since it will not
prejudice the CLOAs issued to the farmer-beneficiaries. They should, however, be required
to undertake the necessary reforestation and other watershed management/rehabilitation
measures in the area.

In view of the foregoing, we recommend that a watershed management plan for the area espousing
the community-based approach be drawn-up jointly by the DAR and DENR. . . .103

If SRRDC sincerely wants to preserve the property for ecological considerations, it can be done
regardless of who owns it. After all, we are all stewards of this earth, and it rests on all of us to tend
to it.

WHEREFORE, the Second Motion for Reconsideration is GRANTED. The Court’s Decision dated
October 12, 2001 in G.R. No. 112526 is SET ASIDE and the Decision of the Court of Appeals dated
November 5, 1993 in CA-G.R. SP No. 27234 is AFFIRMED with MODIFICATION, in that the Land
Bank of the Philippines is ordered to convert the trust account in the name of Sta. Rosa Realty
Development Corporation to a deposit account, subject to a 12% interest per annum from the time
the LBP opened a trust account up to the time said account was actually converted into cash and
LBP bonds deposit accounts. The temporary restraining order issued by the Court on December 15,
1993, is LIFTED.

The petition filed by Amante, et al. in G.R. No. 118838 is GRANTED in that Sta. Rosa Realty
Development Corporation is hereby ENJOINED from disturbing the peaceful possession of the
farmer-beneficiaries with CLOAs. The Decision of the Court of Appeals dated June 28, 1994 in CA-
G.R. CV No. 38182 is AFFIRMED insofar as the award of nominal damages is concerned.

The Department of Environment and Natural Resources and the Department of Agrarian Reform, in
coordination with the farmer-beneficiaries identified by the DAR, are URGED to formulate a
community-based watershed plan for the management and rehabilitation of Barangay Casile.

SO ORDERED.
 EN BANC

G.R. No. 127876 December 17, 1999

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.

PUNO, J.:

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, T-44664 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.

Hacienda Palico

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

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. The Notice was addressed as follows:

Roxas y Cia, Limited

Soriano Bldg., Plaza Cervantes

Manila, Metro Manila. 10

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

Hacienda Banilad

Nasugbu, Batangas 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

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

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. 22 After 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.

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, T-44663, 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. T-44663. 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 non-agricultural. 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-in-Charge, 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
NON-AGRICULTURAL 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.

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.

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 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.

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:

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

c) CARP CA Form 3 — Applicant's Information Sheet

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).

B. The PARO shall:

1. Ensure that the individual case folders are forwarded to him by his
MAROs.

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.

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.

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:

B. MARO

1. Receives the duly accomplished CARP Form Nos.

1 & 1.1 including supporting documents.

2. Gathers basic ownership documents listed under

1.a or 1.b above and prepares corresponding
VOCF/CACF by landowner/landholding.

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.

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.

b) Sends Notice of Coverage (CARP

Form No. 5) to landowner concerned
or his duly authorized representative
inviting him for a conference.

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:

Result of Field
Investigation

Inputs to valuation

Issues raised

Comments/recommen
dations by all parties
concerned.

d) Prepares Summary of Minutes of

the conference/public hearing to be
guided by CARP Form No. 7.

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

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:

Steps Responsible Activity Forms/

Agency/Unit Document

(requirements)

A. Identification and

Documentation

xxx xxx xxx

5 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 CARP

be posted for at least one Form No. 17

week on the bulletin board of

the municipal and barangay

halls where the property is

located. LGU office concerned

notifies DAR about compliance

with posting requirements thru

return indorsement on CARP

Form No. 17.

6 DARMO Send notice to the LBP, CARP

BARC, DENR representatives Form No. 3

and prospective ARBs of the schedule of the field investigation

to be conducted on the subject

property.

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, Map

Local Office conducts the investigation on

subject property to identify

the landholding, determines

its suitability and productivity;

and jointly prepares the Field

Investigation Report (FIR)

and Land Use Map. However,

the field investigation shall

proceed even if the LO, the

representatives of the DENR and

prospective ARBs are not available

provided, they were given due

notice of the time and date of

investigation 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,

after which the duly accomplished

Part I of CARP Form No. 4 shall

be forwarded to the LBP

representative for validation. If he agrees

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,

the conflict shall be resolved by

a composite team of DAR, LBP,

DENR and DA which shall jointly

conduct further investigation

thereon. The team shall submit its

report of findings which shall be

binding to both DAR and LBP,

pursuant to Joint Memorandum

Circular of the DAR, LBP, DENR

and DA dated 27 January 1992.

8 DARMO Screen prospective ARBs

BARC and causes the signing of CARP

the Application of Purchase Form No. 5

and Farmer's Undertaking

(APFU).

9 DARMO Furnishes a copy of the CARP

duly accomplished FIR to Form No. 4

the landowner by personal

delivery with proof of

service or registered mail

will return card and posts

a copy thereof for at least

one week on the bulletin

board of the municipal

and barangay halls where

the property is located.

LGU office concerned CARP

notifies DAR about Form No. 17

compliance with posting

requirement thru return

endorsement on CARP

Form No. 17.

B. Land Survey

10 DARMO Conducts perimeter or Perimeter

And/or segregation survey or

DENR delineating areas covered Segregation

 Local Office by OLT, "uncarpable Survey Plan

areas such as 18% slope

and above, unproductive/

unsuitable to agriculture,

retention, infrastructure.

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 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.

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. 65 Petitioner'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:

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.

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.

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 non-agricultural 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

MELO, J., concurring and dissenting opinion;

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 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.
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.

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

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

1. DAR Administrative Order No. 6, Series of 1994, subscribes to Department of Justice Opinion No.
44, Series of 1990 that lands classified as non-agricultural 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.

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

(b) Land where DAR has already issued a conversion order;

(c) Land determined as exempt under DOJ Opinions Nos. 44 and

181; or

(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 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 non-agricultural 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.

YNARES-SANTIAGO, J., concurring and dissenting opinion;

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

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

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.

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 T-44664 (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 lip-service, 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.

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.

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.

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

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.

RA 6657 explicitly limits its coverage thus:

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 non-covered 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 non-agricultural 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 non-agricultural 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 non-agricultural 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.

THIRD DIVISION

G.R. No. 170346 March 12, 2007

HEIRS OF NICOLAS JUGALBOT, Represented by LEONILA B. JUGALBOT, Petitioners,

vs.
COURT OF APPEALS and HEIRS OF VIRGINIA A. ROA, Represented by LOLITA R.
GOROSPE, Administratrix, Respondents.

DECISION

YNARES-SANTIAGO, J.:
Petitioners, Heirs of Nicolas Jugalbot, represented by their attorney-in-fact Leonila Jugalbot, assail
the Decision1 of the Court of Appeals dated October 19, 2005 in CA-G.R. SP No. 81823 where the
petitioners’ title to the disputed property, as evidenced by Transfer Certificate of Title (TCT) No. E-
103, was cancelled and the previous title, TCT No. T-11543, was reinstated in the name of Virginia
A. Roa. The appellate court reversed the Decision2 and Resolution3 of the Department of Agrarian
Reform Adjudication Board (DARAB) Central Office in DARAB Case No. 7966, affirming the
Decision4 of the Provincial Adjudicator and the Order5 denying the motion for reconsideration in
DARAB Case No. X (06-1358) filed in Misamis Oriental, for Cancellation of TCT No. E-103,
Recovery of Possession and Damages.

On September 28, 1997, an Emancipation Patent (EP) was issued to Nicolas Jugalbot based on the
latter’s claim that he was the tenant of Lot 2180-C of the Subdivision plan (LRC) TSD-10465, subject
property of the case at bar, with an area of 6,229 square meters, located at Barangay Lapasan,
Cagayan de Oro City. The subject property was registered in the name of Virginia A. Roa under
Transfer Certificate of Title (TCT) No. T-11543, the same being issued on April 1, 1970 in the name
of "Virginia A. Roa married to Pedro N. Roa." The property was originally registered in the name of
Marcelino Cabili from whom Virginia A. Roa purchased the same sometime in 1966.6

Nicolas Jugalbot alleged that he was a tenant of the property continuously since the 1950s. On a
Certification dated January 8, 1988 and issued by Department of Agrarian Reform (DAR) Team
Leader Eduardo Maandig, the subject property was declared to be tenanted as of October 21, 1972
and primarily devoted to rice and corn. On March 1, 1988, the Emancipation Patent was registered
with the Register of Deeds and Nicolas Jugalbot was issued TCT No. E-103.7

On August 10, 1998, the heirs of Virginia A. Roa, herein private respondents, filed before the
DARAB Provincial Office of Misamis Oriental a Complaint for Cancellation of Title (TCT No. E-103),
Recovery of Possession and Damages against Nicolas Jugalbot, docketed as DARAB Case No. X
(06-1358).8

On October 23, 1998, a Decision was rendered by the DARAB Provincial Adjudicator dismissing
private respondents’ complaint and upholding the validity of the Emancipation Patent. Private
respondents’ motion for reconsideration was denied.9

On appeal, the DARAB Central Office affirmed the Provincial Adjudicator’s decision on the sole
ground that private respondents’ right to contest the validity of Nicolas Jugalbot’s title was barred by
prescription. It held that an action to invalidate a certificate of title on the ground of fraud prescribes
after the expiration of one year from the decree of registration.10

On November 10, 2003, the DARAB denied private respondents’ motion for reconsideration,11 hence
they filed a petition for review before the Court of Appeals which was granted. The appellate court
reversed the Decision and Resolution of the DARAB Central Office on four grounds: (1) the absence
of a tenancy relationship; (2) lack of notice to Virginia Roa by the DAR; (3) the area of the property
which was less than one hectare and deemed swampy, rainfed and kangkong-producing; and (4) the
classification of the subject property as residential, which is outside the coverage of Presidential
Decree No. 27.

Hence, this petition for review on certiorari under Rule 45.

The sole issue for determination is whether a tenancy relationship exists between petitioners Heirs
of Nicolas Jugalbot, and private respondents, Heirs of Virginia A. Roa, under Presidential Decree
No. 27. Simply stated, are petitioners de jure tenants of private respondents?
As clearly laid down in Qua v. Court of Appeals12 and subsequently in Benavidez v. Court of
Appeals,13 the doctrine is well-settled that the allegation that an agricultural tenant tilled the land in
question does not automatically make the case an agrarian dispute. It is necessary to first establish
the existence of a tenancy relationship between the party litigants. The following essential requisites
must concur in order to establish a tenancy relationship: (a) the parties are the landowner and the
tenant; (b) the subject matter is agricultural land; (c) there is consent; (d) the purpose is agricultural
production; (e) there is personal cultivation by the tenant; and (f) there is a sharing of harvests
between the parties.14

Valencia v. Court of Appeals15 further affirms the doctrine that a tenancy relationship cannot be
presumed. Claims that one is a tenant do not automatically give rise to security of tenure. The
elements of tenancy must first be proved in order to entitle the claimant to security of tenure. There
must be evidence to prove the allegation that an agricultural tenant tilled the land in question. Hence,
a perusal of the records and documents is in order to determine whether there is substantial
evidence to prove the allegation that a tenancy relationship does exist between petitioner and private
respondents. The principal factor in determining whether a tenancy relationship exists is intent.16

Tenancy is not a purely factual relationship dependent on what the alleged tenant does upon the
land. It is also a legal relationship, as ruled in Isidro v. Court of Appeals.17 The intent of the parties,
the understanding when the farmer is installed, and their written agreements, provided these are
complied with and are not contrary to law, are even more important.18

Petitioners allege that they are bona fide tenants of private respondents under Presidential Decree
No. 27. Private respondents deny this, citing inter alia, that Virginia A. Roa was not given a notice of
coverage of the property subject matter of this case; that Virginia A. Roa and the private
respondents did not have any tenant on the same property; that the property allegedly covered by
Presidential Decree No. 27 was residential land; that the lot was paraphernal property of Virginia A.
Roa; and the landholding was less than seven (7) hectares.

The petition is devoid of merit.

The petitioners are not de jure tenants of private respondents under Presidential Decree No. 27 due
to the absence of the essential requisites that establish a tenancy relationship between them.

Firstly, the taking of subject property was done in violation of constitutional due process. The Court
of Appeals was correct in pointing out that Virginia A. Roa was denied due process because the
DAR failed to send notice of the impending land reform coverage to the proper party. The records
show that notices were erroneously addressed and sent in the name of Pedro N. Roa who was not
the owner, hence, not the proper party in the instant case. The ownership of the property, as can be
gleaned from the records, pertains to Virginia A. Roa. Notice should have been therefore served on
her, and not Pedro N. Roa.

Spouses Estonina v. Court of Appeals19 held that the presumption under civil law that all property of
the marriage belongs to the conjugal partnership applies only when there is proof that the property
was acquired during the marriage. Otherwise stated, proof of acquisition during the marriage is a
condition sine qua non for the operation of the presumption in favor of the conjugal
partnership.20 In Spouses Estonina, petitioners were unable to present any proof that the property in
question was acquired during the marriage of Santiago and Consuelo Garcia. The fact that when the
title over the land in question was issued, Santiago Garcia was already married to Consuelo as
evidenced by the registration in the name of "Santiago Garcia married to Consuelo Gaza," does not
suffice to establish the conjugal nature of the property.21
In the instant case, the Court of Appeals correctly held that the phrase "married to" appearing in
certificates of title is no proof that the properties were acquired during the spouses’ coverture and
are merely descriptive of the marital status of the person indicated therein. The clear import from the
certificate of title is that Virginia is the owner of the property, the same having been registered in her
name alone, and being "married to Pedro N. Roa" was merely descriptive of her civil status.22 Since
no proof was adduced that the property was acquired during the marriage of Pedro and Virginia Roa,
the fact that when the title over the land in question was issued, Virginia Roa was already married to
Pedro N. Roa as evidenced by the registration in the name of "Virginia A. Roa married to Pedro N.
Roa," does not suffice to establish the conjugal nature of the property.

In addition, the defective notice sent to Pedro N. Roa was followed by a DAR certification signed by
team leader Eduardo Maandig on January 8, 1988 stating that the subject property was tenanted as
of October 21, 1972 and primarily devoted to rice and corn despite the fact that there was no ocular
inspection or any on-site fact-finding investigation and report to verify the truth of the allegations of
Nicolas Jugalbot that he was a tenant of the property. The absence of such ocular inspection or on-
site fact-finding investigation and report likewise deprives Virginia A. Roa of her right to property
through the denial of due process.

By analogy, Roxas & Co., Inc. v. Court of Appeals23 applies to the case at bar since there was
likewise a violation of due process in the implementation of the Comprehensive Agrarian Reform
Law when the petitioner was not notified of any ocular inspection and investigation to be conducted
by the DAR before acquisition of the property was to be undertaken. Neither was there proof that
petitioner was given the opportunity to at least choose and identify its retention area in those
portions to be acquired.24 Both in the Comprehensive Agrarian Reform Law and Presidential Decree
No. 27, the right of retention and how this right is exercised, is guaranteed by law.

Since land acquisition under either Presidential Decree No. 27 and the Comprehensive Agrarian
Reform Law govern the extraordinary method of expropriating private property, the law must be
strictly construed. Faithful compliance with legal provisions, especially those which relate to the
procedure for acquisition of expropriated lands should therefore be observed. In the instant case, no
proper notice was given to Virginia A. Roa by the DAR. Neither did the DAR conduct an ocular
inspection and investigation. Hence, any act committed by the DAR or any of its agencies that
results from its failure to comply with the proper procedure for expropriation of land is a violation of
constitutional due process and should be deemed arbitrary, capricious, whimsical and tainted with
grave abuse of discretion.

Secondly, there is no concrete evidence on record sufficient to establish that Nicolas Jugalbot or the
petitioners personally cultivated the property under question or that there was sharing of harvests,
except for their self-serving statements. Clearly, there is no showing that Nicolas Jugalbot or any of
his farm household cultivated the land in question. No proof was presented except for their self-
serving statements that they were tenants of Virginia A. Roa. Independent evidence, aside from their
self-serving statements, is needed to prove personal cultivation, sharing of harvests, or consent of
the landowner, and establish a tenancy relationship.

Furthermore, in the findings of fact of the Court of Appeals, it was undisputed that Nicolas Jugalbot
was a soldier in the United States Army from June 15, 1946 to April 27, 194925 and upon retirement,
migrated to the United States and returned to the Philippines sometime in 1998.26 It was established
that Jugalbot’s wife Miguela and daughter Lilia P. Jugalbot are residents of 17623 Grayland Avenue,
Artesia, California, U.S.A., where Nicolas Jugalbot spent his retirement.27 Thus, the DAR, in
particular its team leader Eduardo Maandig, haphazardly issued a certification dated January 8,
1988 that the subject property was tenanted as of October 21, 1972 by Nicolas Jugalbot and
primarily devoted to rice and corn without the benefit of any on-site fact-finding investigation and
report. This certification became the basis of the emancipation patent and subsequently, TCT No. E-
103 issued on March 1, 1988, which was less than two months from the issuance of the
unsubstantiated DAR certification. Coincidentally, October 21, 1972 is the date Presidential Decree
No. 27 was signed into law.

Neither was there any evidence that the landowner, Virginia A. Roa, freely gave her consent,
whether expressly or impliedly, to establish a tenancy relationship over her paraphernal property.

As declared in Castillo v. Court of Appeals,28 absent the element of personal cultivation, one cannot
be a tenant even if he is so designated in the written agreement of the parties.29

In Berenguer, Jr. v. Court of Appeals,30 we ruled that the respondents’ self-serving statements
regarding their tenancy relations could not establish the claimed relationship. The fact alone of
working on another’s landholding does not raise a presumption of the existence of agricultural
tenancy. Substantial evidence does not only entail the presence of a mere scintilla of evidence in
order that the fact of sharing can be established; there must be concrete evidence on record
adequate enough to prove the element of sharing.31 We further observed in Berenguer, Jr.:

With respect to the assertion made by respondent Mamerto Venasquez that he is not only a tenant
of a portion of the petitioner’s landholding but also an overseer of the entire property subject of this
controversy, there is no evidence on record except his own claim in support thereof. The witnesses
who were presented in court in an effort to bolster Mamerto’s claim merely testified that they saw
him working on the petitioner’s landholding. More importantly, his own witnesses even categorically
stated that they did not know the relationship of Mamerto and the petitioner in relation to the said
landholding. x x x The fact alone of working on another’s landholding does not raise a
presumption of the existence of agricultural tenancy. Other factors must be taken into
consideration like compensation in the form of lease rentals or a share in the produce of the
landholding involved. (Underscoring supplied)

xxxx

In the absence of any substantial evidence from which it can be satisfactorily inferred that a sharing
arrangement is present between the contending parties, we, as a court of last resort, are duty-bound
to correct inferences made by the courts below which are manifestly mistaken or absurd. x x x

Without the essential elements of consent and sharing, no tenancy relationship can exist
between the petitioner and the private respondents. (Underscoring supplied)32

Bejasa v. Court of Appeals33 likewise held that to prove sharing of harvests, a receipt or any other
evidence must be presented as self-serving statements are deemed inadequate. Proof must always
be adduced.34 In addition –

The Bejasas admit that prior to 1984, they had no contact with Candelaria. They acknowledge that
Candelaria could argue that she did not know of Malabanan’s arrangement with them. True enough
Candelaria disavowed any knowledge that the Bejasas during Malabanan’s lease possessed the
land. However, the Bejasas claim that this defect was cured when Candelaria agreed to lease the
land to the Bejasas for ₱20,000.00 per annum, when Malabanan died in 1983. We do not agree. In a
tenancy agreement, consideration should be in the form of harvest sharing. Even assuming that
Candelaria agreed to lease it out to the Bejasas for ₱20,000 per year, such agreement did not create
a tenancy relationship, but a mere civil law lease.35
Thirdly, the fact of sharing alone is not sufficient to establish a tenancy relationship. In Caballes v.
Department of Agrarian Reform,36 we restated the well-settled rule that all the requisites must concur
in order to create a tenancy relationship between the parties and the absence of one or more
requisites does not make the alleged tenant a de facto tenant as contradistinguished from a de
jure tenant. This is so because unless a person has established his status as a de jure tenant he is
not entitled to security of tenure nor is he covered by the Land Reform Program of the Government
under existing tenancy laws.37 The security of tenure guaranteed by our tenancy laws may be
invoked only by tenants de jure, not by those who are not true and lawful tenants.38

As reiterated in Qua,39 the fact that the source of livelihood of the alleged tenants is not derived from
the lots they are allegedly tenanting is indicative of non-agricultural tenancy relationship.40

Finally, it is readily apparent in this case that the property under dispute is residential property and
not agricultural property. Zoning Certification No. 98-084 issued on September 3, 1998 clearly shows
that the subject property Lot 2180-C covered by TCT No. T-11543 with an area of 6,229 square
meters and owned by Virginia A. Roa is located within the Residential 2 District in accordance with
paragraph (b), Section 9, Article IV of Zoning Ordinance No. 880, Series of 1979 issued by the City
Planning and Development Office of Cagayan de Oro City.41 To bolster the residential nature of the
property, it must also be noted that no Barangay Agrarian Reform Council was organized or
appointed by the DAR existed in Barangay Lapasan, Cagayan de Oro City, as all lands have been
classified as residential or commercial, as certified by Barangay Captain of Lapasan.42

In Gonzales v. Court of Appeals,43 we held that an agricultural leasehold cannot be established on

land which has ceased to be devoted to cultivation or farming because of its conversion into a
residential subdivision. Petitioners were not agricultural lessees or tenants of the land before its
conversion into a residential subdivision in 1955. Not having been dispossessed by the conversion
of the land into a residential subdivision, they may not claim a right to reinstatement.44

This Court in Spouses Tiongson v. Court of Appeals45 succinctly ruled that the land surrounded by a
residential zone is always classified as residential. The areas surrounding the disputed six hectares
are now dotted with residences and, apparently, only this case has kept the property in question
from being developed together with the rest of the lot to which it belongs. The fact that a caretaker
plants rice or corn on a residential lot in the middle of a residential subdivision in the heart of a
metropolitan area cannot by any strained interpretation of law convert it into agricultural land and
subject it to the agrarian reform program.46

Despite the apparent lack of evidence establishing a tenancy relationship between petitioners and
private respondents, the DARAB improperly recognized the existence of such a relationship in
complete disregard of the essential requisites under Presidential Decree No. 27. DARAB committed
grave abuse of discretion amounting to lack of jurisdiction in issuing an Emancipation Patent to
Nicolas Jugalbot.

Once again, Benavidez v. Court of Appeals47 is illustrative in its pronouncement that an alleged
agricultural tenant tilling the land does not automatically make the case an agrarian dispute which
calls for the application of the Agricultural Tenancy Act and the assumption of jurisdiction by the
DARAB. It is absolutely necessary to first establish the existence of a tenancy relationship between
the party litigants. In Benavidez, there was no showing that there existed any tenancy relationship
between petitioner and private respondent. Thus, the case fell outside the coverage of the
Agricultural Tenancy Act; consequently, it was the Municipal Trial Court and not the DARAB which
had jurisdiction over the controversy between petitioner and private respondent.48
Verily, Morta, Sr. v. Occidental49 ruled that for DARAB to have jurisdiction over a case, there must
exist a tenancy relationship between the parties. In order for a tenancy agreement to take hold over
a dispute, it would be essential to establish all the indispensable elements of a landlord-tenant
relationship:

The regional trial court ruled that the issue involved is tenancy-related that falls within the exclusive
jurisdiction of the DARAB. It relied on the findings in DARAB Case No. 2413 that Josefina Opiana-
Baraclan appears to be the lawful owner of the land and Jaime Occidental was her recognized
tenant. However, petitioner Morta claimed that he is the owner of the land. Thus, there is even a
dispute as to who is the rightful owner of the land, Josefina Opiana-Baraclan or petitioner Morta. The
issue of ownership cannot be settled by the DARAB since it is definitely outside its jurisdiction.
Whatever findings made by the DARAB regarding the ownership of the land are not conclusive to
settle the matter. The issue of ownership shall be resolved in a separate proceeding before the
appropriate trial court between the claimants thereof.50

At any rate, whoever is declared to be the rightful owner of the land, the case cannot be considered
as tenancy-related for it still fails to comply with the other requirements. Assuming arguendo that
Josefina Opiana-Baraclan is the owner, then the case is not between the landowner and tenant. If,
however, Morta is the landowner, Occidental cannot claim that there is consent to a landowner-
tenant relationship between him and Morta. Thus, for failure to comply with the above requisites, we
conclude that the issue involved is not tenancy-related cognizable by the DARAB. 51

In Vda. de Tangub v. Court of Appeals,52 the jurisdiction of the Department of Agrarian Reform is
limited to the following: (a) adjudication of all matters involving implementation of agrarian reform; (b)
resolution of agrarian conflicts and land tenure related problems; and (c) approval and disapproval of
the conversion, restructuring or readjustment of agricultural lands into residential, commercial,
industrial and other non-agricultural uses.53

To recapitulate, petitioners are not de jure tenants of Virginia A. Roa, to which Presidential Decree
No. 27 is found to be inapplicable; hence, the DARAB has no jurisdiction over this case. The DARAB
not only committed a serious error in judgment, which the Court of Appeals properly corrected, but
the former likewise committed a palpable error in jurisdiction which is contrary to law and
jurisprudence. For all the foregoing reasons, we affirm the appellate court decision and likewise hold
that the DARAB gravely abused its discretion amounting to lack of jurisdiction on the grounds that
the subject matter of the present action is residential, and not agricultural, land, and that all the
essential requisites of a tenancy relationship were sorely lacking in the case at bar.

On one 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.54

As the court of last resort, our bounden duty to protect the less privileged should not be carried out
to such an extent as to deny justice to landowners whenever truth and justice happen to be on their
side. For in the eyes of the Constitution and the statutes, EQUAL JUSTICE UNDER THE LAW
remains the bedrock principle by which our Republic abides.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No.
81823 promulgated on October 19, 2005 is AFFIRMED. The Register of Deeds of Cagayan de Oro
City is ordered to CANCEL Transfer Certificate of Title No. E-103 for having been issued without
factual and legal basis, and REINSTATE Transfer Certificate of Title No. T-11543 in the name of
Virginia A. Roa. The city Assessor’s Office of Cagayan de Oro is likewise directed to CANCEL Tax
Declaration No. 80551 issued to Nicolas Jugalbot and RESTORE Tax Declaration No. 270922 in the
name of Virginia Angcod Roa. The heirs of Nicolas Jugalbot, represented by Leonila B. Jugalbot or
any other person claiming a right or interest to the disputed lot through the latter’s title are directed
to VACATEthe premises thereof and peaceably turn over its possession to petitioners Heirs of
Virginia A. Roa, represented by Lolita R. Gorospe. No pronouncement as to costs.

SO ORDERED.

CONSUELO YNARES-SANTIAGO