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Constitution Statutes Executive Issuances Judicial Issuances Other Issuances Jurisprudence International Legal Resources AUSL Exclusive
Constitution Statutes Executive Issuances Judicial Issuances Other Issuances Jurisprudence International Legal Resources AUSL Exclusive

FIRST DIVISION

G.R. No. 112526 October 12, 2001

STA. ROSA REALTY DEVELOPMENT CORPORATION, petitioner,

vs.
COURT OF APPEALS, 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 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 A. 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, BONIFACIO
VILLA, ROGELIO AYENDE, ANTONIO B. FERNANDEZ, ZACARIAS HERRERA, 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 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.

PARDO, J.:

The case before the Court is a petition for review on certiorari of the decision of the Court of Appeals1 affirming the
decision of the Department of Agrarian Reform Adjudication Board2 (hereafter DARAB) ordering the compulsory
acquisition of petitioner's property under the Comprehensive Agrarian Reform Program (CARP).

Petitioner Sta. Rosa Realty Development Corporation (hereafter, SRRDC) was the registered owner of two parcels
of land, situated at Barangay Casile, Cabuyao, Laguna covered by TCT Nos. 81949 and 84891, with a total area of
254.6 hectares. According to petitioner, the parcels of land are watersheds, which provide clean potable water to the
Canlubang community, and that ninety (90) light industries are now located in the area.3

Petitioner alleged that respondents usurped its rights over the property, thereby destroying the ecosystem.
Sometime in December 1985, respondents filed a civil case4 with the Regional Trial Court, Laguna, seeking an
easement of a right of way to and from Barangay Casile. By way of counterclaim, however, petitioner sought the
ejectment of private respondents.

In October 1986 to August 1987, petitioner filed with the Municipal Trial Court, Cabuyao, Laguna separate
complaints for forcible entry against respondents.5

After the filing of the ejectment cases, respondents petitioned the Department of Agrarian Reform (DAR) for the
compulsory acquisition of the SRRDC property under the CARP.

On August 11, 1989, the Municipal Agrarian Reform Officer (MARO) of Cabuyao, Laguna issued a notice of
coverage to petitioner and invited its officials or representatives to a conference on August 18, 1989.6 During the
meeting, the following were present: representatives of petitioner, the Land Bank of the Philippines, PARCCOM,
PARO of Laguna, MARO of Laguna, the BARC Chairman of Barangay Casile and some potential farmer
beneficiaries, who are residents of Barangay Casile, Cabuyao, Laguna. It was the consensus and recommendation
of the assembly that the landholding of SRRDC be placed under compulsory acquisition.

On August 17, 1989, petitioner filed with the Municipal Agrarian Reform Office (MARO), Cabuyao, Laguna a "Protest
and Objection" to the compulsory acquisition of the property on the ground that the area was not appropriate for
agricultural purposes. The area 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.7

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.8

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).9

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.10

On December 12, 1989, Secretary of Agrarian Reform Miriam Defensor Santiago sent two (2) notices of
acquisition11 to petitioner, stating that petitioner's landholdings covered by TCT Nos. 81949 and 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 letters12 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 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.13

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 to 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 Sanguniang Bayan Resolution No. 45-89 dated March 29, 1989.14

To avert any opportunity that the DARAB might distribute the lands to the farmer beneficiaries, on April 30, 1991,
petitioner filed a petition15 with DARAB to disqualify private respondents as beneficiaries. However, DARAB refused
to address the issue of beneficiaries.

In the meantime, on January 20, 1992, the Regional Trial Court, Laguna, Branch 24, rendered a decision,16 finding
that private respondents illegally entered the SRRDC property, and ordered them evicted.

On July 11, 1991, DAR Secretary Benjamin T. Leong issued a memorandum directing the Land Bank of the
Philippines to open a trust account in favor of SRRDC, for P5,637,965.55, as valuation for the SRRDC property.

On December 19, 1991, DARAB promulgated a decision, the decretal portion of which 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."17

On January 20, 1992, the Regional Trial Court, Laguna, Branch 24, rendered a decision in Civil Case No. B-233318
ruling that respondents were builders in bad faith.

On February 6, 1992, petitioner filed with the Court of Appeals a petition for review of the DARAB decision.19 On
November 5, 1993, the Court of Appeals promulgated a decision affirming the decision of DARAB. The decretal
portion of the Court of Appeals decision reads:

"WHEREFORE, premises considered, the DARAB decision dated September 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."20Hence, this petition.21

On December 15, 1993, the Court issued a Resolution which reads:

"G. R. Nos. 112526 (Sta. Rosa Realty Development Corporation vs. Court of Appeals, et. al.) – Considering
the compliance, dated December 13, 1993, filed by counsel for petitioner, with the resolution of December 8,
1993 which required petitioner to post a cash bond or surety bond in the amount of P1,500,000.00 Pesos
before issuing a temporary restraining order prayed for, manifesting that it has posted a CASH BOND in the
same amount with the Cashier of the Court as evidenced by the attached official receipt no. 315519, the
Court resolved to ISSUE the Temporary Retraining Order prayed for.

"The Court therefore, resolved to restrain: (a) the Department of Agrarian Reform Adjudication Board from
enforcing its decision dated December 19, 1991 in DARAB Case No. JC-R-IV-LAG-0001, which was affirmed
by the Court of Appeals in a Decision dated November 5, 1993, and which ordered, among others, the
Regional Office of the Department of Agrarian Reform through its Municipal and Provincial Reform Office to
take immediate possession of the landholding in dispute after title shall have been transferred to the name of
the Republic of the Philippines and to distribute the same through the immediate issuance of Emancipation
Patents to the farmer-beneficiaries as determined by the Municipal Agrarian Officer of Cabuyao, Laguna, (b)
The Department of Agrarian Reform and/or the Department of Agrarian Reform Adjudication Board, and all
persons acting for and in their behalf and under their authority from entering the properties involved in this
case and from introducing permanent infrastructures thereon; and (c) the private respondents from further
clearing the said properties of their green cover by the cutting or burning of trees and other vegetation,
effective today until further orders from this Court."22

The main issue raised is whether the property in question is covered by CARP despite the fact that the entire
property formed part of a watershed area prior to the enactment of R. A. No. 6657.

Under Republic Act No. 6657, there are two modes of acquisition of private land: compulsory and voluntary. In the
case at bar, the Department of Agrarian Reform sought the compulsory acquisition of subject property under R. A.
No. 6657, Section 16, to wit:

"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 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 the 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 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 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 make immediate
possession of the land and shall request the proper Register of Deeds to issue Transfer Certificate of
Titles (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 court23 of proper jurisdiction
for final determination of just compensation.

In compulsory acquisition of private lands, the landholding, the landowners and 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 (30) 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 (30) 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 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 special agrarian courts (provisionally the Supreme Court designated branches of the
regional trial court as special agrarian courts) for final determination of just compensation.

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

A. The Municipal Agrarian Reform Officer (MARO), 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 should 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 the 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 No 2 – Summary investigation report 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 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 representatives, the Land Bank of the Philippines (LBP)
representative, and the 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 ask 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 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. 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
P500,000 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 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 prepare, on the signature of the Secretary or his duly
authorized representative, a notice of acquisition of the subject property. From this point, the provisions of R. A. No.
6657, Section 16 shall apply.

For a valid implementation of the CARP Program, two notices are required: (1) the notice of coverage and letter of
invitation to a preliminary conference sent to the landowner, the representative 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, that is, the notice of coverage and the letter of invitation to a 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. 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 mere limitation of the use of the land. What is
required is the surrender of the title to and physical possession of the excess and all beneficial rights accruing to the
owner in favor of the farmer beneficiary.

In the case at bar, DAR has executed the taking of the property in question. However, payment of just compensation
was not in accordance with the procedural requirement. The law required payment in cash or LBP bonds, not by
trust account as was done by DAR.

In Association of Small Landowners in the Philippines v. Secretary of Agrarian Reform, we held that "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."24

Consequently, petitioner questioned before the Court of Appeals DARAB's decision ordering the compulsory
acquisition of petitioner's property.25 Here, petitioner pressed the question of whether the property was a watershed,
not covered by CARP.

Article 67 of the Water Code of the Philippines (P. D. No. 1067) provides:

"Art. 67. Any watershed or any area of land adjacent to any surface water or overlying any ground water may
be declared by the Department of Natural resources as a protected area. Rules and Regulations may be
promulgated by such Department to prohibit or control such activities by the owners or occupants thereof
within the protected area which may damage or cause the deterioration of the surface water or ground water
or interfere with the investigation, use, control, protection, management or administration of such waters."

Watersheds may be defined as "an area drained by a river and its tributaries and enclosed by a boundary or divide
which separates it from adjacent watersheds." Watersheds generally are outside the commerce of man, so why was
the Casile property titled in the name of SRRDC? The answer is simple. At the time of the titling, the Department of
Agriculture and Natural Resources had not declared the property as watershed area. The parcels of land in
Barangay Casile were declared as "PARK" by a Zoning Ordinance adopted by the municipality of Cabuyao in 1979,
as certified by the Housing and Land Use Regulatory Board. On January 5, 1994, the Sangguniang Bayan of
Cabuyao, Laguna issued a Resolution26 voiding the zoning classification of the land at Barangay Casile as Park
and declaring that the land is now classified as agricultural land.

The authority of the municipality of Cabuyao, Laguna to issue zoning classification is an exercise of its police power,
not the power of eminent domain. "A zoning ordinance is defined as a local city or municipal legislation which
logically arranges, prescribes, defines and apportions a given political subdivision into specific land uses as present
and future projection of needs."27

In Natalia Realty, Inc. v. Department of Agrarian Reform28 we held that lands classified as non-agricultural prior to
the effectivity of the CARL may not be compulsorily acquired for distribution to farmer beneficiaries.
However, more than the classification of the subject land as PARK is the fact that subsequent studies and survey
showed that the parcels of land in question form a vital part of a watershed area.29

Now, petitioner has offered to prove that the land in dispute is a "watershed or part of the protected area for
watershed purposes." Ecological balances and environmental disasters in our day and age seem to be
interconnected. Property developers and tillers of the land must be aware of this deadly combination. In the case at
bar, DAR included the disputed parcels of land for compulsory acquisition simply because the land was allegedly
devoted to agriculture and was titled to SRRDC, hence, private and alienable land that may be subject to CARP.

However, the scenario has changed, after an in-depth study, survey and reassessment. We cannot ignore the fact
that the disputed parcels of land form a vital part of an area that need to be protected for watershed purposes. In a
report of the Ecosystems Research and Development Bureau (ERDB), a research arm of the DENR, regarding the
environmental assessment of the Casile and Kabanga-an river watersheds, they concluded that:

"The Casile barangay covered by CLOA in question is situated in the heartland of both watersheds.
Considering the barangays proximity to the Matangtubig waterworks, the activities of the farmers which are in
conflict with proper soil and water conservation practices jeopardize and endanger the vital waterworks.
Degradation of the land would have double edge detrimental effects. On the Casile side this would mean
direct siltation of the Mangumit river which drains to the water impounding reservoir below. On the Kabanga-
an side, this would mean destruction of forest covers which acts as recharged areas of the Matang Tubig
springs. Considering that the people have little if no direct interest in the protection of the Matang Tubig
structures they couldn't care less even if it would be destroyed.

The Casile and Kabanga-an watersheds can be considered a most vital life support system to thousands of
inhabitants directly and indirectly affected by it. From these watersheds come the natural God-given precious
resource – water. x x x x x

Clearing and tilling of the lands are totally inconsistent with sound watershed management. More so, the
introduction of earth disturbing activities like road building and erection of permanent infrastructures. Unless
the pernicious agricultural activities of the Casile farmers are immediately stopped, it would not be long before
these watersheds would cease to be of value. The impact of watershed degredation threatens the livelihood
of thousands of people dependent upon it. Toward this, we hope that an acceptable comprehensive
watershed development policy and program be immediately formulated and implemented before the
irreversible damage finally happens.

Hence, the following are recommended:

7.2 The Casile farmers should be relocated and given financial assistance.

7.3 Declaration of the two watersheds as critical and in need of immediate rehabilitation.

7.4 A comprehensive and detailed watershed management plan and program be formulated and
implemented by the Canlubang Estate in coordination with pertinent government agencies."30

The ERDB report was prepared by a composite team headed by Dr. Emilio Rosario, the ERDB Director, who holds a
doctorate degree in water resources from U.P. Los Banos in 1987; Dr. Medel Limsuan, who obtained his doctorate
degree in watershed management from Colorado University (US) in 1989; and Dr. Antonio M. Dano, who obtained
his doctorate degree in Soil and Water management Conservation from U.P. Los Banos in 1993.

Also, DENR Secretary Angel Alcala submitted a Memorandum for the President dated September 7, 1993 (Subject:
PFVR HWI Ref.: 933103 Presidential Instructions on the Protection of Watersheds of the Canlubang Estates at
Barrio Casile, Cabuyao, Laguna) which reads:

"It is the opinion of this office that the area in question must be maintained for watershed purposes for
ecological and environmental considerations, among others. Although the 88 families who are the proposed
CARP beneficiaries will be affected, it is important that a larger view of the situation be taken as one should
also consider the adverse effect on thousands of residents downstream if the watershed will not be protected
and maintained for watershed purposes.

"The foregoing considered, it is recommended that if possible, an alternate area be allocated for the affected
farmers, and that the Canlubang Estates be mandated to protect and maintain the area in question as a
permanent watershed reserved."31

The definition does not exactly depict the complexities of a watershed. The most important product of a watershed is
water which is one of the most important human necessity. The protection of watersheds ensures an adequate
supply of water for future generations and the control of flashfloods that not only damage property but cause loss of
lives. Protection of watersheds is an "intergenerational responsibility" that needs to be answered now.

Another factor that needs to be mentioned is the fact that during the DARAB hearing, petitioner presented proof that
the Casile property has slopes of 18% and over, which exempted the land from the coverage of CARL. R. A. No.
6657, Section 10, provides:

"Section 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 appurtenent 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 coverage of this Act."

Hence, during the hearing at DARAB, there was proof showing that the disputed parcels of land may be excluded
from the compulsory acquisition coverage of CARP because of its very high slopes.

To resolve the issue as to the true nature of the parcels of land involved in the case at bar, the Court directs the
DARAB to conduct a re-evaluation of the issue.

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.

Davide, Jr., C.J., (Chairman), and Ynares-Santiago, JJ., concur.

Puno, J., no part due to relationship.
Kapunan, J., on official leave.

Footnotes

1 In CA-G. R. SP No. 27234, promulgated on November 05, 1993, Martin, Jr., J., ponente, Chua and
Guerrero, JJ., concurring, Rollo, Vol. I, pp. 228-258.

2 DARAB (Case No. JC-IV-LAG-0001) entitled Juan Amante, et. al. vs. Sta. Rosa Realty Development
Corporation, promulgated on December 19, 1991, Rollo, Vol. I, pp. 133-136.

3 Petition, Rollo, Vol. I, p.10.

4 Petition, Regional Trial Court, Laguna, docketed as Civil Case No. B-2333, Rollo, Vol. I, p. 11.

5 Civil Cases Nos. 250, 258, 260, 262 and 266, p. 11.

6 Petition, Annex "A", Rollo, Vol. I, p. 55.

7 Petition, Annex "B", Rollo, Vol. I, p. 56-57.

8 Original Record, Folder I, Letter of Felicito B. Buban, Department of Agriculture, dated August 29, 1989.

9 Ibid., Summary Investigation Report.

 10 Original Record, Folder II.

11 Folder I, Notice of Acquisition.

12 Ibid., Letters.

13 Folder, JC-R-IV-LAG-0001-GO, Decision DARAB, pp. 23-25.

14 Original Records, Folder of Exhibits III, Certification from the Office of the Deputy Zoning Administrator.

15 Vol. I, DARAB Folder, Manifestation and Motion.

16 Petition, Annex "B", Judgment, Judge Rodrigo V. Cosico, presiding, CA Rollo, pp. 98-111. In Civil Case
Nos. 250, 260, 258, 262, and 266.

17 Folder JC-R-IV-LAG-0001-C.O., Decision, penned by Benjamin T. Leong Chairman, concurred in by

Renato B. Padilla, Lorenzo R. Reyes, Leopoldo M. Serrano, Jr. and Josefina M. Sidiangco, members.

18 Petition, Annex "F", Vol. I, SC Rollo, pp. 70-83.

19 Docketed as CA-G. R. SP No. 27234.

20 CA Rollo, Decision, Martin, Jr., J., ponente, Chua and Guerrero, JJ., concurring, pp. 499-529.

21 Petition filed on November 24, 1993. G.R. No. 112526, Rollo, Vol. I, pp. 2-52. On September 28, 1994, the
Court gave due course to the petition. G.R. No. 112526, Rollo, Vol. II, pp. 780-781.

22 Resolution, Rollo, pp. 296-300.

23 R. A. No. 6657, Sec. 57.

24 175 SCRA 343, 391 (1989).

25 In CA-G. R. SP No. 27234.

26 Comment of private respondents, Annex "1", Rollo, Vol. I, p. 331-332.

27 P. D. No. 449, Sec. 4 (b).

28 225 SCRA 278, 283 [1993].

29 Petition, Annex "K" (Annex "B" of), G.R. No. 112526, Rollo, Vol. I , p. 225; Reply, Annex "G", G.R. No.
112526, Rollo, Vol. I, pp. 455-521.

30 Reply, Annex "A", Rollo, Vol. II, pp. 583-584.

31 Rollo, Vol. I, Memorandum, Secretary Alcala to FVR, p. 225.

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