G.R. Nos.

181912 & 183347

RAMON M. ALFONSO, Petitioner
vs.
LAND BANK OF THE PHILIPPINES and DEPARTMENT OF AGRARIAN REFORM,
Respondents

DECISION

JARDELEZA, J.:

The main issue presented in this case concerns the legal duty of the courts, in the determination
of just compensation under Republic Act No. 6657,1 (RA 6657), in relation to Section 17 of RA
6657 and the implementing formulas of the Department of Agrarian Reform (DAR).

The Court En Banc reaffirms the established jurisprudential rule, that is: until and unless
declared invalid in a proper case, courts have the positive legal duty to consider the use and
application of Section 17 and the DAR basic formulas in determining just compensation for
properties covered by RA 6657. When courts, in the exercise of its discretion, find that deviation
from the law and implementing formulas is warranted, it must clearly provide its reasons
therefor.

The Case

This is a petition for review on certiorari of the Decision2 and Resolution,3 dated July 19, 2007
and March 4, 2008, respectively, of the Court of Appeals in CA-G.R. SP No. 90615 and CA-
G.R. SP No. 90643. The Court of Appeals granted the individual petitions filed by the DAR and
the Land Bank of the Philippines (LBP) and set aside the Decision4 dated May 13, 2005 of the
Regional Trial Court fixing the total amount of ₱6,090,000.00 as just compensation.5

The Facts

Cynthia Palomar (Palomar) was the registered owner of two (2) parcels of land. One is located
in San Juan, Sorsogon City, with an area of 1.6530 hectares covered by Transfer Certificate of
Title (TCT) No. T-21136,6 and the other in Bibincahan, Sorsogon City, with an area of 26.2284
hectares covered by TCT No. T-23180.7

Upon the effectivity of RA 6657, the DAR sought to acquire Palomar's San Juan and Bibincahan
properties at a valuation of ₱36,066.27 and ₱792,869.06,8 respectively. Palomar, however,
rejected the valuations.

Land Valuation Case Nos. 68-01 and 70-01 were consequently filed before the DAR Provincial
Adjudication Board (Board) for summary determination of just compensation. In the meantime,
or on April 16, 2001, Palomar sold her rights over the two properties to petitioner Ramon M.
Alfonso (Alfonso ).9

Upon orders from the Board, the parties submitted their position papers and evidence to support
their respective proposed valuations. On June 20, 2002, Provincial Adjudicator Manuel M.
Capellan issued Decisions10 in Land Valuation Case Nos. 68-01 and 70-01.
Applying DAR Administrative Order No. 5, Series of 1998, (DAR AO No. 5 [1998]), Provincial
Adjudicator Capellan valued the properties as follows:

San Juan Property:

Land Value = CNI x 0.9 + MV x 0.1

Thus:
666.67 kls AGP / FIR
16.70 ASP / PCA data
CNI = 666.67 x 16.70 x .70 - .12 x 0.9
= 58,450.29
MV = 30,600 x 1.2 x .90 + 70 x 150.00
x 1.2 x .90 x 0.1
= 4,438.80
Land Value = 58,450.29 + 4,438.80
= 62,889.09 x 1.6530hectares
= 103,955.6611

Bibincahan Property:

Land Value = CNI x 0.9 + MV x 0.1

Thus:
= 3>952 kls AGP /FIR
16.70 ASP /PCA data
CNI = 952 x 16.70 x .70 - .12 x 0.9
= 83,466.59
MV = 30,600 x 1.2 x .90 + 90 x 150.00
x 1.2 x .90 x 0.1
= 4,762.80
Land Value = 83,466.59 + 4,762.80
= 88,229.39 x 26.2284 hectares
= 2,314,115.7312

Respondent LBP, as the CARP financial intermediary pursuant to Section 64 of RA 6657,13 filed

a motion seeking for a reconsideration of the Provincial Adjudicator's valuations. This was
denied in an Order14 dated September 13, 2002.
Both the LBP15 and Alfonso16 filed separate actions for the judicial determination of just
compensation of the subject properties before Branch 52 of the Regional Trial Court, sitting as
Special Agrarian Court (SAC), of Sorsogon City. These actions were docketed as Civil Case No.
2002-7073 and Civil Case No. 2002-7090, respectively. Upon Alfonso's motion, the cases were
consolidated on December 10, 200217 and Amado Chua (Chua) of Cuervo Appraisers, Inc. was
appointed Commissioner who was ordered to submit his report (Cuervo Report) within thirty (30)
days.18

Trial on the merits ensued, with each party presenting witnesses and documentary evidence to
support their respective case. Aside from presenting witnesses, the LBP submitted as evidence
the following documents: Field Investigation Report, Land Use Map and Market Value per
Ocular Inspection for each of the affected properties.19 Alfonso, for his part, submitted as
evidence the Cuervo Report and the testimony of Commissioner Chua.20

In his appraisal of the properties, Commissioner Chua utilized two approaches in valuing the
subject properties, the Market Data Approach (MDA) and the Capitalized Income Approach
(CIA), due to their "different actual land use."21 He opined that "the average of the two
indications reasonably represented the just compensation (fair market value) of the land with
productive coconut trees":22

Site Unit Land Value (Php/Sq.M.)23

  Market Data Capitalized Income Average
Approach (MDA) Approach (CIA) (rounded to the
nearest tens)
1 Php 25 Php 18.1125 22
2 Php 22 Php 17.1275 20

He thereafter computed the final land value as follows:24

  Area Unit Land Value Just Compensation

(Sq.m.) (Php) (Fair Market Value)
Site 1      
Coconut Land 15,765 22 Php 346,830
Residential Land 600 160 96,000
Irrigation Canal 165 * *
Total for Site 1 - 16,530 sq.m   Php 442,830
       
Site 2      
Coconut Land 258,534 20 Php 5,170,680
Residential Land 3,000 160 480,000
Irrigation Canal 750 * *
 Total for Site 2 - 262,284 sq.m   Php 5,650,680
Grand Total      
(Sites 1 & 2) - 278,814 sq.m.   Php 6,093,510
    Say - Php 6,094,000

Ruling of the SAC

On May 13, 2005, the SAC rendered its Decision. Finding the valuations of both the LBP and
the Provincial Adjudicator to be "unrealistically low,"25 the SAC adopted Commissioner Chua's
valuation as set out in the Cuervo Report. It also held that the 'provisions of Section 2,
Executive Order No. 228 (EO 228) were mere "guiding principles" which cannot substitute the
court's judgment "as to what amount [of just compensation] should be awarded and how to
arrive at such amount."26 The dispositive portion of the SAC's Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered:

1) Fixing the amount of FOUR HUNDRED FORTY-TWO THOUSAND EIGHT HUNDRED

THIRTY PESOS ([₱]442,830.00)[ ], Philippine currency for Site 1 with an area of 16,530 sq. m.
covered by TCT No. T-21136 situated at San Juan, Sorsogon City and the amount of FIVE
MILLION SIX HUNDRED FIFTY THOUSAND SIX HUNDRED EIGHTY [PESOS]
([₱]5,650,680.00) Philippine currency for Site 2 with an area of 262,284 sq. m. covered by TCT
No. T-23180 situated at Bibincahan, Sorsogon City or a total amount of SIX MILLION NINETY
THOUSAND PESOS ([₱]6,090,000.00) for the total area of 278,814 sq.m. in the name of
Cynthia Palomar/Ramon M. Alfonso which property was taken by the government pursuant to
the Agrarian Reform Program of the government as provided by R.A. 6657.

2) Ordering the Petitioner Land Bank of the Philippines to pay the Plaintiff/Private Respondent
the amount of FOUR HUNDRED FORTY-TWO THOUSAND EIGHT HUNDRED THIRTY
PESOS ([₱]442,830.00) and the amount of FIVE MILLION SIX HUNDRED FIFTY THOUSAND
AND SIX HUNDRED EIGHTY PESOS ([₱]5,650,680.00) or the total amount of SIX MILLION
NINETY THOUSAND PESOS ([₱]6,090,000.00) Philippine currency for Lots 1604 and 2161
respectively, in the manner provided by R.A. 6657 by way of full payment of the said just
compensation after deducting whatever amount previously received by the private respondents
from the Petitioner Land Bank of the Philippines as part of the just compensation.

3) Without pronouncement as to costs.

SO ORDERED.27

In an Order28 dated July 5, 2005, the SAC denied the motions filed by the LBP and the DAR
seeking reconsideration of the Decision. These government agencies filed separate petitions for
review before the Court of Appeals.

In its petition, docketed as CA-G.R. SP No. 90615, the LBP faulted the SAC for giving
considerable weight to the Cuervo Report and argued that the latter's valuation was arrived at in
clear violation of the provisions of RA 6657, DAR AO No. 5 (1998), and the applicable
jurisprudence.29
According to the LBP, there is nothing in Section 17 of RA 6657 which provides that capitalized
income of a property can be used as a basis in determining just compensation. Thus, when the
SAC used the capitalized income of the properties as basis for valuation, "it actually modified
the valuation factors set forth by RA 6657."30

The DAR, for its part, imputed error on the part of the SAC for adopting "the average between
the Market Data Approach and Capitalized Income Approach as the just compensation of
subject landholdings."31

Ruling of the Court of Appeals

In its challenged Decision dated July 19, 2007, the Court of Appeals found that the SAC failed to
observe the procedure and guidelines provided under DAR AO No. 5 (1998). It consequently
granted the petitions filed by the LBP and the DAR and ordered the remand of the case to the
SAC for the determination of just compensation in accordance with the DAR basic formula.32

Alfonso filed a motion seeking reconsideration of the Court of Appeals' Decision.33 Finding no

cogent reason to reverse its earlier Decision, the Court of Appeals denied Alfonso's motion.34

Hence, this petition.

Issue

As stated in the outset, the issue sought to be resolved in this case involves the legal duty of the
courts in relation to Section 17 and the implementing DAR formulas. Otherwise stated, are
courts obliged to apply the DAR formula in cases where they are asked to determine just
compensation for property covered by RA 6657?

The resolution of the issue presented is fairly straightforward given the established
jurisprudence on the binding character of the DAR formulas. During the course of the
deliberations of this case, however, concerns were strongly raised (by way of dissents and
separate concurring opinion) on the propriety of maintaining the present rule.

This case presents an opportunity for the Court en banc not only to reaffirm the prevailing
doctrine, but also expound, more explicitly and unequivocally, on our understanding of the
exercise of our "judicial function" in relation to legislatively-defined factors and standards and
legislatively-provided regulatory schemes.

Ruling of the Court

We GRANT the petition in part.

The ruling of the Court will thus be divided into four (4) component parts.

To provide context for proper understanding, Part I will discuss the history of Philippine land
reform, with emphasis on the development, over the years, of the manner of fixing just
compensation, as well as the development of jurisprudence on the same.
In Part II, the Court will evaluate the challenged CA ruling based on the law and prevailing
jurisprudence.

Part III will address all issues raised by way of dissents and separate concurring opinion against
the mandatory application of the DAR formulas. It will also discuss (1) primary jurisdiction and
the judicial function to determine just compensation; (2) how the entire regulatory scheme
provided under RA 6657 represents reasonable policy choices on the part of Congress and the
concerned administrative agency, given the historical and legal context of the government's land
reform program; and (3) how matters raised in the dissents are better raised in a case directly
challenging Section 17 and the resulting DAR formulas. We shall also show how the current
valuation scheme adopted by the DAR is at par with internationally-accepted valuation
standards.

Part IV will conclude by affirming the law, the DAR regulations and prevailing jurisprudence
which, save for a successful direct challenge, must be applied to secure certainty and stability of
judicial decisions.

I. Contextual Background

A. History of Philippine land reform laws

Section 4, Article XIII of the Constitution provides:

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.

Congress first attempted to provide for land reform in 1955, when it enacted Republic Act No.
1400, or the Land Reform Act of 1955 (RA 1400). Its scope was limited to the expropriation of
private agricultural lands in excess of 300 hectares of contiguous area, if held by a natural
person, and those in excess of 600 hectares if owned by corporations.35 With respect to
determining just compensation, it provided that the courts take into consideration the following:

(a) Prevailing prices of similar lands in the immediate area;

(b) Condition of the soil, topography, and climate hazards;

(c) Actual production;

(d) Accessibility; and

(e) Improvements.36
Afterwards, Congress enacted Republic Act No. 3844, otherwise known as the Agricultural Land
Reform Code of 1963 (RA 3844). Its scope, though expanded, was limited by an order of priority
based on utilization and area.37 Just compensation under this law was based on the annual
lease rental income, without prejudice to the other factors that may be considered.38

On October 21, 1972, then President Ferdinand Marcos issued Presidential Decree No.
2739 (PD 27). It provided for a national land reform program covering all rice and com
lands.40 This was a radical shift in that, for the first time in the history of land reform, its coverage
was national, compulsorily covering all rice and com lands. Even more radical, however, is its
system of land valuation. Instead of providing factors to be considered in the determination of
just compensation, similar to the system under RA 1400 and RA 3844, PD 27 introduced a
valuation process whereby just compensation is determined using a fzxed mathematical
formula provided within the law itself. The formula was also exclusively production based, that
is, based only on the income of the land.

Under PD 27, landowner's compensation was capped to 2.5 times the annual yield, as follows:

Land Value = Average harvest of 3 normal crop years x (2.5)

Notably, this valuation scheme under PD 27 closely resembled those applied in agrarian reform
programs earlier implemented in other Asian countries. In Taiwan, for example, compensation
was capped at 2.5 times the annual yield of the main crop, when the land values at the time
averaged four to six times the annual yield.41 South Korea, which commenced its land reform
program sometime in the 1940s, on the , other hand, capped compensation at 1.25 times the
value of the annual yield, when the land values at the time averaged five times the annual
yield.42 In Japan, the price for the acquisition of agricultural land under its land reform program,
at one point, "could not be greater than forty times the 'official rental value' (chintai-kakaku) of
rice fields or forty-eight times the 'official rental value' of dry fields x x x."43

While the constitutionality of PD 27 was upheld in the cases of De Chavez v.

Zobel44 and Gonzales v. Estrella,45 these cases did not rule on the validity of the mathematical
valuation formula employed.

Under President Corazon C. Aquino's Executive Order No. 228 (EO 228) issued on July 17,
1987, the system under PD 27 was more or less retained for purposes of valuing the
remaining unvalued rice and com lands. Land value under EO 228 was computed based on the
average gross production (AGP) multiplied by 2.5, the product of which shall be multiplied by
either ₱35.00 or ₱31.00, the Government Support Price (GSP) for one cavan of palay or corn,
respectively. Thus:

Land Value= (AGP x 2.5) x GSP46

On June 10, 1988, RA 6657 was enacted implementing a comprehensive agrarian reform
program (CARP). Unlike PD 27 which covered only rice and com lands, CARP sought to
cover all public and private agricultural lands. It was (and remains to be) an ambitious
endeavor, targeting an estimated 7 .8 million hectares of land for acquisition and redistribution
to landless farmer and farmworker beneficiaries.47

B. Regulatory scheme to determine just compensation under RA 665 7

With an undertaking of such magnitude, the Congress set up a regulatory scheme for the
determination of just compensation founded on four major features.

First, under Section 17 of RA 6657, Congress identified factors to be considered in the

determination of just compensation in the expropriation of agricultural lands. This Section reads:

Sec. 17. Determination of Just Compensation. – In determining just compensation, the cost of

acquisition of the land, the current value of like properties, its nature, actual use and income, the
sworn valuation by the owner, the tax declarations, and the assessment made by government
assessors shall be considered. The social and economic benefits contributed by the farmers
and the farmworkers and by the Government to the property as well as the non-payment of
taxes or loans secured from any government financing institution on the said land shall be
considered as additional factors to determine its valuation.

Second, under Section 49, Congress vested the DAR and the Presidential Agrarian Reform
Council (PARC)48 with the power to issue rules and regulations, both substantive and
procedural, to carry out the objects and purposes of the law:

Sec. 49. Rules and Regulations. -The PARC and the DAR shall have the power to issue rules
and regulations, whether substantive or procedural, to carry out the objects and purposes of this
Act. Said rules shall take effect ten (10) days after publication in two (2) national newspapers of
general circulation.

It is on the basis of this section that the DAR would issue its basic formulas.

Third, under Section 16(d) and (f), Congress gave the DAR primary jurisdiction to conduct
summary administrative proceedings to determine and decide the compensation for the land, in
case of disagreement between the DAR/LBP and the landowners:

Sec. 16. Procedure for Acquisition of Private Lands. - For purposes of acquisition of private
lands, the following procedures shall be followed:

xxx

(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 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.

xxx

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

Fourth, to implement Section 16(f), Congress provided for the judicial review of the DAR
preliminary determination of just compensation. Under Sections 56 and 57, it vested upon
designated Special Agrarian Courts the special original and exclusive jurisdiction over all
petitions for the determination of just compensation to landowners:

Sec. 56. Special Agrarian Court. - The Supreme Court shall designate at least one (1) branch of
the Regional Trial Court (RTC) within each province to act as a Special Agrarian Court. The
Supreme Court may designate more branches to constitute such additional . Special Agrarian
Courts as may be necessary to cope with the number of agrarian cases in each province. In the
designation, the Supreme Court shall give preference to the Regional Trial Courts which have
been assigned to handle agrarian cases or whose presiding judges were former judges of the
defunct Court of Agrarian Relations. The Regional Trial Court (RTC) judges assigned to said
courts shall exercise said special jurisdiction in addition to the regular jurisdiction of their
respective courts. The Special Agrarian Courts shall have the powers and prerogatives inherent
in or belonging to the Regional Trial Courts.

Sec. 57. Special Jurisdiction. - The Special Agrarian Courts shall have original and exclusive
jurisdiction over all petitions for the determination of just compensation to landowners, and the
prosecution of all 1 criminal offenses under this Act. The Rules of Court shall apply to all
proceedings before the Special Agrarian Courts, unless modified by this Act. The Special
Agrarian Courts shall decide all appropriate cases under their special jurisdiction within thirty
(30) days from submission of the case for decision.

We shall later on show how this regulatory scheme provided by Congress (and implemented by
the DAR) is a reasonable policy choice given the grand scale of the government's agrarian
reform program.

C. Development of the DAR basic formula

On March 8, 1989, the DAR issued Administrative Order No. 649 (DAR AO No. 6 [1989]), its first
attempt to translate the factors laid down by Congress in Section 17 into a formula.

Making use of "the multi-variable approach which subsumes the ten factors mentioned under
Section 17," the DAR set out a formula to estimate "a composite value based on land market
price, assessor's market value and landowner's declared value."50 Reduced to equation form,
the formulation is as follows:

Total Land Value = MV + AMV + DV

where:

Market Value (MV) = Refers to the latest and comparable transactions

within the municipality/province/region,
depending on availability of data. Mortgages
which take into account bank exposures shall
also be considered in computing for this value.

Assessor’s Market Value = Refers to the assessment made by government

(AMV) assessors.
 Declared Value (DV) = Refers to the landowner’s declaration under EO
229 or RA 6657.51

Between June 1988 to December 1989, the University of the Philippines Institute of Agrarian
Studies (UP-IAS) conducted an agrarian reform study, which analyzed, among others, the land
valuation scheme of the government under DAR AO No. 6 (1989).52

The UP-IAS study, which Justice Leonen cites in his dissenting opinion, criticized DAR AO No.
6 (1989) for averaging the values based on the land market price, assessor's market value and
landowner's declared value. The UP-IAS study said:

If agricultural lands are to be distributed to landless farmers and farmworkers for agricultural
purposes, then landowners should be compensated for their lands based on its agricultural
potential. The appropriate formula, therefore, is to value land based only on
production/productivity. The land valuation on PD 27, which stipulates that the value is
equivalent to 2.5 x average production of tl:1ree preceding normal croppings is a classic
illustration of simplicity and productivity-based land valuation.53 (Emphasis supplied.)

According to the study, the AMV component had no cut-off date, while the MV factor had no
guidelines for determining comparable sales, which makes the DAR formula prone to
manipulation.54 It thus suggested control measures to prevent manipulation of the existing
formula, including the setting of cut-off dates for AMV and guidelines for comparable sales.55 It
went on to suggest that "x x x major components could be assigned weights with more
emphasis attached to the production-based value. Should the declared value be unavailable,
then the value should be based only on the components that are available, rather than employ
the maximum limit, that is, assuming DV to be equivalent to the sum of the other components. x
x x"56

It was also around this time that the infamous Garchitorena estate deal was exposed. Under this
deal, land acquired privately for only ₱3.1 Million in 1988 was proposed to be purchased by the
DAR a year later at "an extremely inflated price" of ₱62.5 Million.57 In his book A Captive Land:
The Politics of Agrarian Reform in the Philippines, Dr. James Putzel wrote:

Under the compensation formula finally included in the law and the early [guidelines] of DAR,
landowners could secure even more than [market value] compensation for their lands. x x x
With the passage of [RA 6657] in June 1988, DAR decided that the value of land would be
determined by averaging three estimates of market value: the 'assessed market value' (AMV)
reported in a landowner's most recent tax declaration, the 'market value' (MV) as an average of
three sales of comparable land in the vicinity of a landholding inflated by the consumer price
index, and the owner's own 'declaration of fair market value' (DMV) made during the
government's land registration programme, Listasaka I and 11, between 1987 and 1988. While
the compensation formula included a safeguard against extreme [overvaluation] in the owner's
own declaration, it still permitted compensation at up to 33 per cent more than the market value
x x x.

Such a compensation formula might have guaranteed against excessive compensation, in terms
of the [market value] criteria enunciated in the law, if state institutions like DAR or the tax
bureau[ ] were immune to landowner influence. However, DAR officials were urged to
demonstrate results by closing as many deals as possible with landowners. There were several
ways in which the formula was abused. First, DAR officials often chose to establish market
value (MV) as an average of three sales of highly-valued land, labelling the sales as
'comparable.' The arbitrary character of their choice along with the tendency for land speculation
demonstrated the unsoundness of using 'comparable sales' as an element in the compensation
formula. Secondly, landowners were able to pay just one tax instalment on the basis of an
inflated land value and thus raise the level of 'assessed market value' (AMV). The nearer that
assessed value was to the market value, the higher could be their own declared value and the
resulting compensation. There was no obligation for landowners to pay unpaid tax arrears at the
inflated level, but beneficiaries who received the land would be required to pay taxes at this
level. Thirdly, because DAR officials discussed with landowners the level of comparable sales
being chosen, landowners could both influence that choice and plan the most advantageous
level for their 'declared market value' (DMV). The formula was therefore extremely susceptible
to abuse by the landowners and opened the door to corrupt practices by DAR officials.58

Within the same year, DAR Administrative Order No. 1759 (DAR AO No. 17 [1989]) was issued
revising the land valuation formula under DAR AO No. 6 (1989). This revision appears to be a
reaction to the recent developments, with the new formula reflecting lessons learned from the
Garchitorena estate scandal and the UP-IAS study's comments and suggested improvements.

Under DAR AO No. 17 (1989), the DAR laid down guidelines for the determination of the
Comparable Sales (CS) component,60 provided a cut-off date for Market Value per Tax
Declaration (MV),61 and placed greater weight to productivity through the Capitalized Net
Income (CNI) factor, among others. Thus:

Land Value= (CS x 0.3) + (CNI x 0.4) + (MV x 0.3)

Where:

CS = Comparable Sales
CNI = Capitalized Net Income
MV = Market Value per Tax Declaration62

In case of unavailability of figures for the three main factors, the DAR, in keeping with the UP-
IAS study, also came up with alternate formulas using the available components, always with
more weight given to CNI, the production-based value.

On April 25, 1991, the capitalization rate (relevant for the CNI factor) was lowered from 20% to
16%.63 This decrease was presumably made for the benefit of the landowners, considering a
lower capitalization rate results to a higher CNI valuation.

The next major change in the basic formula came with the issuance of DAR Administrative
Order No. 664 (DAR AO No. 6 [1992]) on October 30, 1992, which, among others, gave even
more weight to the CNI factor, and further lowering the capitalization rate to 12%.65

This basic formula66 was retained under DAR AO No. 5 (1998), issued on April 15, 1998.
Parenthetically, DAR AO No. 5 (1998) gave landowners the opportunity to take part in the
valuation process, including participation in the DAR's field investigations67 and submission of
statements as to the income claimed to , be derived from the property (whether from the crop
harvest/lease of the property).68 It is only when the landowner fails to submit the statement, or
the claimed value cannot be validated from the actual inspection of the property, that the DAR
and the LBP are allowed to "adopt any applicable industry data or, in the absence thereof,
conduct an industry study on the specific crop which will be used in determining the production,
cost and net income of the subject landholding."69

Recognizing that not all agricultural properties are always similarly circumstanced, the DAR also
introduced alternative CNI formulas which can be applied depending on a property’s peculiar
situation. There were CNI formulas for when a land is devoted to intercropping, or the practice
of planting seasonal or other permanent crop/s between or under existing permanent or
seasonal crops70 and to account for lease contracts.71 There are existing valuation guidelines
which also take into account the types of crops found in the property sought to be covered, i.e.,
Cavendish bananas,72 sugarcane,73 rubber,74 and standing commercial trees,75 among others.

D. First extension of life of CARP

Ten (10) years after RA 6657, the CARP’s Land Acquisition and Distribution component was still
far from finished. Thus, in 1998, Congress enacted Republic Act No. 853276 (RA 8532),
extending the CARP implementation for another ten (10) years and providing funds
augmentation of ₱50 billion.77 This additional allocation of funds expired in June 2008. In Joint
Resolution No. 1 approved by both Houses of Congress in January 2009, Congress temporarily
extended CARP to until June 2009.78

E. Republic Act No. 9700 and the amendment

of Section 17 of RA 6657

By the end of June 2009, there was still a substantial balance (about 1.6 million hectares for
distribution) from the projected target.79 So, on August 7, 2009, Congress passed Republic Act
No. 970080 (RA 9700), extending the program to June 30, 2014. It also amended Section 17 to
read:

Sec. 17. Determination of Just Compensation. – In determining just compensation, the cost of

acquisition of the land, the value of the standing crop, the current value of like properties, its
nature, actual use and income, the sworn valuation by the owner, the tax declarations, the
assessment made by government assessors, and seventy percent (70%) of the zonal valuation
of the Bureau of Internal Revenue (BIR),  translated into a basic formula by the DAR shall be
considered, subject to the final decision of the proper court. The social and economic
benefits contributed by the farmers and the farmworkers and by the Government to the property
as well as the non-payment of taxes or loans secured from any government financing institution
on the said land shall be considered as additional factors to determine its valuation. (Italics,
emphasis and underscoring supplied.)

To implement the amendments to Section 17, the DAR issued, among others, DAR
Administrative Order No. 181 (DAR AO No. 1 [2010]) and Administrative Order No. 782 (DAR AO
No. 7 [2011]). Despite retaining the basic formula for valuation, these administrative orders
introduced a change in the reckoning date of average gross product (AGP) and selling price
(SP), both of which are relevant to the CNI factor, to June 30, 2009.83 The MV factor was also
amended and adjusted to the fair market value equivalent to seventy percent (70%) of the
Bureau of Internal Revenue (BIR) zonal valuation.84 The basic formula under DAR AO No. 7
(2011) appears to be the prevailing land formula to date.
F. Constitutional challenge to RA 665 7

Shortly after the enactment of RA 6657, its constitutionality was challenged in a series of cases
filed with the Court. Among other objections, landowners argued that entrusting to the DAR the
manner of fixing just compensation violated judicial prerogatives. This claim was unanimously
rejected in our landmark holding in Association of Small Landowners in the Philippines, Inc. v.
Secretary of Agrarian Reform (Association):85

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 –

x x x [T]he 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] 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.86 (Emphasis and underscoring supplied. Citations omitted.)

G.Controlling doctrines after Association

Since this landmark ruling in Association, the Court has, over the years, set forth a finely
wrought body of jurisprudence governing the determination of just compensation under RA
6657. This body of precedents is built upon three strands of related doctrines.

First, in determining just compensation, courts are obligated to apply both the compensation
valuation factors enumerated by the Congress under Section 17 of RA 6657,87 and the basic
formula laid down by the DAR.88 This was the holding of the Court on July 20, 2004 when it
decided the case of Landbank of the Philippines v. Banal89 (Banal) which involved the
application of the DAR-issued formulas. There, we declared:

While the determination of just compensation involves the exercise of judicial discretion,
however, such discretion must be discharged within the bounds of the law. Here, the RTC
wantonly disregarded R.A. 6657, as amended, and its implementing rules and regulations (DAR
Administrative Order No. 6, as amended by DAR Administrative Order No. 11).

x x x In determining the valuation of the subject property, the trial court shall consider the
factors provided under Section 17 of R.A. 6657, as amended, mentioned earlier. The
formula prescribed by the DAR in Administrative Order No. 6, Series of 1992, as amended
by DAR Administrative Order No. 11, Series of 1994, shall be used in the valuation of the
land. Furthermore, upon its own initiative, or at the instance of any of the parties, the trial court
may, appoint one or more commissioners to examine, investigate and ascertain facts relevant to
the dispute.90 (Emphasis and underscoring supplied.)

Banal would thereafter be considered the landmark case on binding character of the DAR
formulas. It would be cited in the greatest number of subsequent cases involving the issue of
application of the DAR-issued formulas in the determination of just compensation.91

Second,the formula, being an administrative regulation issued by the DAR pursuant to its rule-
making and subordinate legislation power under RA 6657, has the force and effect of law.
Unless declared invalid in a case where its validity is directly put in issue, courts must consider
their use and application.92 In Land Bank of the Philippines v. Celada93 (Celada), we held:

As can be gleaned from above ruling, the SAC based its valuation solely on the observation that
there was a "patent disparity" between the price given to respondent and the other landowners.
We note that it did not apply the DAR valuation formula since according to the SAC, it is Section
17 of RA No. 6657 that "should be the principal basis of computation as it is the law governing
the matter." The SAC further held that said Section 17 "cannot be superseded by any
administrative order of a government agency," thereby implying that the valuation formula under
DAR Administrative Order No. 5, Series of 1998 (DAR AO No. 5,s. of 1998), is invalid and of no
effect.

While SAC is required to consider the acquisition cost of the land, the current value of like
properties, its nature, actual use and income, the sworn valuation by the owner, the tax
declaration and the assessments made by the government assessors to determine just
compensation, it is equally true that these factors have been translated into a basic formula by
the DAR pursuant to its rule-making power under Section 49 of RA No. 6657. As the
government agency principally tasked to implement the agrarian reform program, it is the DAR’s
duty to issue rules and regulations to carry out the object of the law. DAR AO No. 5, s. of 1998
precisely "filled in the details" of Section 17, RA No. 6657 by providing a basic formula by which
the factors mentioned therein may be taken into account. The SAC was at no liberty to
disregard the formula which was devised to implement the said provision.

It is elementary that rules and regulations issued by administrative bodies to interpret the law
which they are entrusted to enforce, have the force of law, and are entitled to great respect.
Administrative issuances partake of the nature of a statute and have in their favor a presumption
of legality. As such, court cannot ignore administrative issuances especially when, as in
this case, its validity was not put in issue. Unless an administrative order is declared
invalid, court have no option but to apply the same.94 (Emphasis and underscoring
supplied.)

Third, courts, in the exercise of their judicial discretion, may relax the application of the formula
to fit the peculiar circumstances of a case. They must, however, clearly explain the reason for
any deviation; otherwise, they will be considered in grave abuse of discretion.95 This rule, set
forth in Land Bank of the Philippines v. Yatco Agricultural Enterprises96 (Yatco), was a
qualification of the application of Celada, to wit:

That the RTC-SAC must consider the factors mentioned by the law (and consequently the
DAR's implementing formula) is not a novel concept. In Land Bank of the Philippines v.
Sps. Banal, we said that the RTC-SAC must consider the factors enumerated under Section
17 of R.A. No. 6657, as translated into a basic formula by the DAR, in determining just
compensation.

We stressed the RTC-SAC's duty to apply the DAR formula in determining just compensation
in Landbank of the Philippines v. Celada and reiterated this same ruling in Land Bank of the
Philippines v. Lim, Land Bank of the Philippines v. Luciano, and Land Bank of the Philippines v.
Colarina, to name a few.

In the recent case of Land Bank of the Philippines v. Honeycomb Farms Corporation, we again
affirmed the need to apply Section 17 of R.A. No. 6657 and DAR AO 5-98 in just compensation
cases. There, we considered the CA and the R TC in grave error when they opted to come up
with their own basis for valuation and completely disregarded the DAR formula. The need to
apply the parameters required by the law cannot be doubted; the DAR's administrative
issuances, on the other hand, partake of the nature of statutes and have in their favor a
presumption of legality. Unless administrative orders are declared invalid or unless the cases
before them involve situations these administrative issuances do not cover, the courts must
apply them.

In other words, in the exercise of the Court's essentially judicial function of determining
just compensation, the RTC-SACs are not granted unlimited discretion and must
consider and apply the R.A. No. 6657 - enumerated factors and the DAR formula that
reflect these factors. These factors and formula provide the uniform framework or structure for
the computation of the just compensation for a property subject to agrarian reform. This uniform
system will ensure that they do not arbitrarily fix an amount that is absurd, baseless and even
contradictory to the objectives of our agrarian reform laws as just compensation. This system
will likewise ensure that the just compensation fixed represents, at the very least, a close
approximation of the full and real value of the property taken that is fair and equitable for both
the farmer-beneficiaries and the landowner.

When acting within the parameters set by the law itself, the RTC-SACs, however, are not
strictly bound to apply the DAR formula to its minute detail, particularly when faced with
situations that do not warrant the formula's strict application; they may, in the exercise of
their discretion, relax the formula's application to fit the factual situations before them.
They must, however, clearly explain the reason for any deviation from the factors and
formula that the law and the rules have provided.

The situation where a deviation is made in the exercise of judicial discretion should at all times
be distinguished from a situation where there is utter and blatant disregard of the factors spelled
out by law and by the implementing rules. For in such a case, the RTC-SAC's action already
amounts to grave abuse of discretion for having been taken outside of the contemplation of the
law.97 (Emphasis and underscoring supplied.)

Prescinding from Association, the cases of Banal, Celada and Yatco combined provide the

three strands of controlling and unifying doctrines governing the determination of just
compensation in agrarian reform expropriation.

For clarity, we restate the body of rules as follows: The factors listed under Section 17 of RA
6657 and its resulting formulas provide a uniform framework or structure for the
computation of just compensation which ensures that the amounts to be paid to affected
landowners are not arbitrary, absurd or even contradictory to the objectives of agrarian
reform. Until and unless declared invalid in a proper case, the DAR formulas partake of
the nature of statutes, which under the 2009 amendment became law itself, and thus
have in their favor the presumption of legality, such that courts shall consider, and not
disregard, these formulas in the determination of just compensation for properties
covered by the CARP. When faced with situations which do not warrant the formula's
strict application, courts may, in the exercise of their judicial discretion, relax the
formula's application to fit the factual situations before them, subject only to the
condition that they clearly explain in their Decision their reasons (as borne by the
evidence on record) for the deviation undertaken. It is thus entirely allowable for a court
to allow a landowner's claim for an amount higher than what would otherwise have been
offered (based on an application of the formula) for as long as there is evidence on
record sufficient to support the award.

In Part II, we shall evaluate the challenged rulings of the Court of Appeals based on the
foregoing guidelines.

II. The SAC deviated, without reason or explanation, from Sect. 17 and

the DAR-issued formula when it adopted the Cuervo Report

Petitioner Alfonso challenges the Decision of the Court of Appeals which reversed the SAC's
findings for failing to observe the procedure and guidelines provided under the relevant DAR
rule.98

Applying DAR AO No. 5 (1998), the LBP and the DAR considered the following in its valuation
of Alfonso’s properties: (1) data from the Field Investigation Reports conducted on the
properties;99 (2) data from the Philippine Coconut Authority (PCA) as to municipal selling price
for coconut in the Sorsogon Province;100 and (3) the Schedule of Unit Market Value (SUMV).101

Due to the absence of relevant comparable sales transactions in the area,102 the DAR and the
LBP used the following formula:

LV = (CNI x 0.9) + (MV x 0.1)

It valued the San Juan and Bibincahan properties at ₱39,974.22103 and

₱792,869.06,104 respectively.

The SAC, in its Decision dated May 13, 2005, rejected this valuation for being "unrealistically
low"105 and instead adopted Commissioner Chua's Cuervo Report, which valued the San Juan
and Bibincahan properties at the "more realistic" amounts of ₱442,830.00 and ₱5,650,680.00,
respectively.106

That the SAC's adoption of the Cuervo Report valuation constitutes deviation from Section 17
and the prescribed formula is fairly evident.

Commissioner Chua employed a different formula, other than that set forth in DAR AO No. 5
(1998), to compute the valuation. While the DAR-issued formula generally uses the three (3)
traditional approaches to value, each with assigned weights, Commissioner Chua chose to
apply only two approaches, namely, the Market Data Approach (MDA) and the Capitalized
Income Approach (CIA)107 and averaged the indications resulting from the two approaches. He
thereafter concluded that the result "reasonably represented the just compensation (fair market
value) of the land with productive coconut trees."108

In addition, in his computation of the CNI factor, Commissioner Chua used, without any
explanation, a capitalization rate of eight percent (8% ),109 instead of the twelve percent (12%)
rate provided under DAR AO No. 5 (1998).

As earlier explained, deviation from the strict application of the DAR formula is not absolutely
proscribed. For this reason, we find that the Court of Appeals erred in setting aside the SAC's
Decision on the mere fact of deviation from the prescribed legislative standards and basic
formula. Yatco teaches us that courts may, in the exercise of its judicial discretion, relax the
application of the DAR formula, subject only to the condition that the reasons for said deviation
be clearly explained.

In this case, the SAC, in adopting the Cuervo Report valuation, merely said:

Considering all these factors, the valuation made by the Commissioner and the potentials of the
property, the Court considers that the valuation of the Commissioner as the more realistic
appraisal which could be the basis for the full and fair equivalent of the property taken
from the owner while the Court finds that the valuation of the [LBP] as well as the
Provincial Adjudicator of Sorsogon in this (sic) particular parcels of land for acquisition
are unrealistically low.110 (Emphasis and underscoring supplied.)

The statement that the government's valuation is "unrealistically low," without more, is

insufficient to justify its deviation from Section 17 and the implementing DAR
formula.111 There is nothing in the SAC's Decision to show why it found Commissioner Chua's
method more appropriate for purposes of appraising the subject properties, apart from the fact
that his method yields a much higher (thus, in its view, "more realistic") result.

The Cuervo Report itself does not serve to enlighten this Court as to the reasons behind the
non-application of the legislative factors and the DAR-prescribed formula.

For example, the Cuervo Report cited a number of "comparable sales" for purposes of its
market data analysis.112 Aside from lack of proof of fact of said sales, the Report likewise failed
to explain how these purported "comparable" sales met the guidelines provided under DAR AO
No. 5 (1998). The relevant portion of DAR AO No. 5 (1998) reads:

II. C.2 The criteria in the selection of the comparable sales transaction (ST) shall be as follows:

a. When the required number of STs is not available at the barangay level, additional STs may
be secured from the municipality where the land being offered/covered is situated to complete
the required three comparable STs. In case there are more STs available than what is required
at the municipal level, the most recent transactions shall be considered. The same rule shall
apply at the provincial level when no STs are available at the municipal level. In all cases, the
combination of STs sourced from the barangay, municipality and province shall not exceed
three transactions.

b. The land subject of acquisition as well as those subject of comparable sales transactions
should be similar in topography, land use, i.e., planted to the same crop. Furthermore, in case of
permanent crops, the subject properties should be more or less comparable in terms of their
stages of productivity and plant density.

c. The comparable sales transactions should have been executed within the
period January 1, 1985 to June 15, 1988, and registered within the period January l, 1985,
to September 13, 1988.

d. STs shall be grossed up from the date of registration up to the date of receipt of CF by LBP
from DAR for processing, in accordance with Item II.A.9. (Emphasis and underscoring supplied.)

To this Court's mind, a reasoned explanation from the SAC to justify its deviation from the
foregoing guidelines is especially important considering that both the DAR and the LBP were
unable to find sales of comparable nature.

Worse, further examination of the cited sales would show that the same far from complies with
the guidelines as to the cut-off dates provided under the DAR AO No. 5 (1998). The purported
sales were dated between November 28, 1989 (at the earliest) to March 12, 2002 (at the
latest),113 whereas DAR AO No. 5 (1998) had already and previously set the cut-off between
June to September of 1988. We also note that these purported sales involve much smaller
parcels of land (the smallest involving only 100 square meters). We can hardly see how these
sales can be considered "comparable" for purposes of determining just compensation for the
subject land.

Neither was there any explanation as to the glaring discrepancies between the government and
Commissioner Chua's factual findings. Where, for example, the DAR and the LBP claim an
average yield of 666.67kg/ha.114 and 952kgs./ha.,115 the Cuervo Report asserts 1,656 kgs./ha.
and 1,566 kgs./ha.,116 for the San Juan and Bibincahan properties, respectively. Where the
government alleges an average selling price of ₱5.58 for coconuts,117 the Cuervo Report claims
₱l2.50.118 The Cuervo Report, however, is completely bereft of evidentiary support by which the
SAC could have confirmed or validated the statements made therein. In contrast, the valuations
submitted by the DAR and the LBP were amply supported by the relevant PCA data, SFMV and
Field Investigation Reports.

Considering the foregoing, we cannot but conclude that the SAC committed the very thing
cautioned about in Yatco, that is, "utter and blatant disregard of the factors spelled out by the
law and by the implementing rules."119 In this sense, we AFFIRM the Court of Appeals' finding of
grave abuse of discretion and order the REMAND of the case to the SAC for computation of just
compensation in accordance with this Court's ruling in Yatco.

Part III shall now address the concerns raised in the dissents.

III. The Dissents/Separate Concurring Opinion

A. Summary of issues raised Dissents/Separate Concurring Opinion

Justice Leonen proposes that this Court abandon the doctrines in Banal and Celada, arguing
that Section 17 of RA 6657 and DAR AO No. 5 (1998) are unconstitutional to the extent they
suggest that the basic formula is mandatory on courts.120 His principal argument is grounded on
the premise that determination of just compensation is a judicial function. Along the same lines,
Justice Carpio cites Apo Fruits Corporation v. Court of Appeals (Apo Fruits)121 to support his
view that the basic formula "does not and cannot strictly bind the courts."122 Justice Velasco, for
his part, calls for a revisit of the decided cases because a rule mandating strict application of the
DAR formula could only straitjacket the judicial function. Justice Carpio also raises an issue of
statutory construction.123 He argues that Section 17 and DAR AO No. 5 (1998) apply only when
the landowner and the tenant agree on the proffered value, but not otherwise.

B. Dissents as indirect constitutional attacks

At this juncture, we emphasize that petitioner Alfonso never himself questioned the
constitutionality of Section 17 of RA No. 6657 and the DAR Administrative Order implementing
the same. The main thrust of Alfonso's petition concerns itself only with the non-binding nature
of Section 17 of RA 6657 and the resulting DAR formula in relation to the judicial determination
of the just compensation for his properties.

Petitioner is a direct-injury party who could have initiated a direct attack on Section 17 and DAR
AO No. 5 (1998). His failure to do so prevents this case from meeting the "case and
controversy" requirement of Angara.124 It also deprives the Court of the benefit of the "concrete
adverseness which sharpens the presentation of issues upon which the court depends for
illumination of difficult constitutional questions."125

The dissents are, at their core, indirect attacks on the constitutionality of a provision of law and
of an administrative rule or regulation. This is not allowed under our regime of judicial review. As
we held in Angara v. Electoral Commission,126 our power of judicial review is limited:

x x x [T]o actual cases and controversies to be exercised after full opportunity of

argument by the parties, and limited further to the constitutional question raised or the
very lis mota presented. Any attempt at abstraction could only lead to dialectics and barren
legal questions and to sterile conclusions unrelated to actualities. Narrowed as its function is in
this manner, the judiciary does not pass upon questions of wisdom, justice or expediency of
legislation. More than that, courts accord the presumption of constitutionality to legislative
enactments, not only because the legislature is presumed to abide by the Constitution but also
because the judiciary in the determination of actual cases and controversies must reflect the
wisdom and justice of the people as expressed through their representatives in the executive
and legislative departments of the government.127 (Emphasis supplied.)

Our views as individual justices cannot make up for the deficiency created by the petitioner's
failure to question the validity and constitutionality of Section 17 and the DAR formulas. To insist
otherwise will be to deprive the government (through respondents DAR and LBP) of their due
process right to a judicial review made only "after full opportunity of argument by the parties."128

Most important, since petitioner did not initiate a direct attack on constitutionality, there is no
factual foundation of record to prove the invalidity or unreasonableness of Sectionl 7 and DAR
AO No. 5 (1998). This complete paucity of evidence cannot be cured by the arguments raised
by, and debated among, members of the Court. As we held in Ermita-Malate Hotel and Motel
Operators Association, Inc. v. City Mayor of Manila:129

It admits of no doubt therefore that there being a presumption of validity, the necessity for
evidence to rebut it is unavoidable, unless the statute or ordinance is void on its face,
which is not the case here. The principle has been nowhere better expressed than in the
leading case of O'Gorman& Young v. Hartford Fire Insurance Co., where the American
Supreme Court through Justice Brandeis tersely and succinctly summed up the matter thus:
"[t]he statute here questioned deals with a subject clearly within the scope of the police
power. We are asked to declare it void on the ground that the specific method of regulation
prescribed is unreasonable and hence deprives the plaintiff of due process of law. As
underlying questions of fact may condition the constitutionality of legislation of this
character, the presumption of constitutionality must prevail in the absence of some
factual foundation of record for overthrowing the statute." No such factual foundation being
laid in the present case, the lower court deciding the matter on the pleadings and the stipulation
of facts, the presumption of validity must prevail and the judgment against the ordinance set
aside.130 (Emphasis and underscoring supplied.)

Issues on the constitutionality or validity of Section 17 of RA 6657 and DAR AO No. 5 (1998) not
having been raised by the petitioner, much less properly pleaded and ventilated, it behooves the
Court to apply, not abandon, Banal, Celada and Yatco, and postpone consideration of the
dissents' arguments in a case directly attacking Section 17 of RA 6657 and DAR AO No. 5
(1998).

If, however, left unanswered, the objections now casting Section 17 and the DAR formulas in
negative light might be used as bases for the abandonment of the rule established in Banal and
clarified in Yatco. The net practical effect, whether intended or not, of such a course of action
would be to strip the implementing DAR regulations of all presumption of validity. We would then
place upon the government the burden of proving the formula's appropriateness in every case,
as against the valuation method chosen by the landowner, whatever it may be. It would allow
the landowner to cherry-pick, so to speak, a factor or set of factors to support a proposed
valuation method. As the case below has shown, such a process has allowed the SAC to
conclude, without explanation, that Commissioner Chua's higher valuation was "more realistic"
than the government's "ridiculously low" valuation and, therefore, in its opinion, more just.

Allowing the SAC to arrive at a determination of just compensation based on open-ended

standards like "more realistic" and "ridiculously low" bodes ill for the future of land reform
implementation. One can only imagine the havoc such a ruling, made in the name of ensuring
absolute freedom of judicial discretion, would have on the government's agrarian reform
program and the social justice ends it seeks to further. It could open the floodgates to the
mischief of the Garchitorena estate scandal where, to borrow terms used by the SAC in this
case, a property acquired at a "ridiculously low" cost of ₱3.1 million was proposed to be
purchased by the DAR for the "more realistic" amount of ₱6.09 million.

We thus feel compelled to address these issues, if only to assure those directly affected, that
the law and the implementing DAR regulations are reasonable policy choices made by the
Legislative and Executive departments on how best to implement the law, hence, the heavy
premium given their application.

C. Primary jurisdiction and the judicial power/function to determine just compensation

Section 1, Article VIII of the 1987 Constitution131 provides that "judicial power includes the duty
of the courts of justice to settle actual controversies involving rights which are legally
demandable and enforceable."

The right of a landowner to just compensation for the taking of his or her private property is a
legally demandable and enforceable right guaranteed by no less than the Bill of Rights, under
Section 9, Article III of the Constitution.132 The determination of just compensation in cases of
eminent domain is thus an actual controversy that calls for the exercise of judicial power by the
courts. This is what the Court means when it said that "[t]he determination of 'just compensation'
in eminent domain cases is a judicial function."133

Before RA 6657, the courts exercised the power to determine just compensation under the
Rules of Court. This was true under RAs 1400 and 3844 and during the time when President
Marcos in Presidential Decree No. 1533 attempted to impermissibly restrict the discretion of the
courts, as would be declared void in EPZA v. Dulay (E-PZA). RA 6657 changed this process by
providing for preliminary determination by the DAR of just compensation.

Does this grant to the DAR of primary jurisdiction to determine just compensation limit, or worse,
deprive, courts of their judicial power? We hold that it does not. There is no constitutional
provision, policy, principle, value or jurisprudence that places the determination of a justiciable
controversy beyond the reach of Congress' constitutional power to require, through a grant of
primary jurisdiction, that a particular controversy be first referred to an expert administrative
agency for adjudication, subject to subsequent judicial review.

In fact, the authority of Congress to create administrative agencies and grant them preliminary
jurisdiction flows not only from the exercise of its plenary legislative power,134 but also from its
constitutional power to apportion and diminish the jurisdiction of courts inferior to the Supreme
Court.135

Tropical Homes, Inc. v. National Housing Authority,136 has settled that "[t]here is no question that
a statute may vest exclusive original jurisdiction in an administrative agency over certain
disputes and controversies falling within the agency's special expertise."137

In San Miguel Properties, Inc. v. Perez,138 we explained the reasons why Congress, in its
judgment, may choose to grant primary jurisdiction over matters within the erstwhile jurisdiction
of the courts, to an agency:

The doctrine of primary jurisdiction  bas been increasingly called into play on matters
demanding the special competence of administrative agencies even if such matters are
at the same time within the jurisdiction of the courts. A case that requires for its
determination the expertise, specialized skills, and knowledge of some administrative
board or commission because it involves technical matters or intricate questions of fact,
relief must first be obtained in an appropriate administrative proceeding before a remedy will be
supplied by the courts although the matter comes within the jurisdiction of the courts. The
application of the doctrine does not call for the dismissal of the case in the court but only for its
suspension until after the matters within the competence of the administrative body are threshed
out and determined.

To accord with the doctrine of primary jurisdiction, the courts cannot and will not determine a
controversy involving a question within the competence of an administrative tribunal, the
controversy having been so placed within the special competence of the administrative tribunal
under a regulatory scheme. In that instance, the judicial process is suspended pending referral
to the administrative body for its view on the matter in dispute. Consequently, if the courts
cannot resolve a question that is within the legal competence of an administrative body prior to
the resolution of that question by the latter, especially where the question demands the
exercise of sound administrative discretion requiring the special knowledge, experience,
and services of the administrative agency to ascertain technical and intricate matters of
fact, and a uniformity of ruling is essential to comply with the purposes of the regulatory
statute administered, suspension or dismissal of the action is proper. 139 (Emphasis and
underscoring supplied.)

Rule 43 of the Revised Rules of Court, which provides for a uniform procedure for appeals from
a long list of quasi-judicial agencies to the Court of Appeals, is a loud testament to the power of
Congress to vest myriad agencies with the preliminary jurisdiction to resolve controversies
within their particular areas of expertise and experience.

In fact, our landmark ruling in Association has already validated the grant by Congress to the
DAR of the primary jurisdiction to determine just compensation. There, it was held that RA 6657
does not suffer from the vice of the decree voided in EPZA,140 where the valuation scheme was
voided by the Court for being an "impermissible encroachment on judicial
prerogatives."141 In EPZA, we held:

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 the Constitution is reserved to it for final determination.

x x x [T]he 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.142

Unlike EPZA, and in answer to the question raised in one of the dissents,143 the scheme

provided by Congress under RA 6657 does not take discretion away from the courts in
determining just compensation in agrarian cases. Far from it. In fact, the DAR valuation
formula is set up in such a way that its application is dependent on the existence of a
certain set of facts, the ascertainment of which falls within the discretion of the court.

Applied to the facts of this case, and confronted with the LBP/DAR valuation and the court-
appointed commissioner's valuation, it was entirely within the SAC's discretion to ascertain the
factual bases for the differing amounts and decide, for itself, which valuation would provide just
compensation. If, in its study of the case, the SAC, for example, found that the circumstances
warranted the application of a method of valuation different from that of the DAR's, it was free to
adopt any other method it deemed appropriate (including the Cuervo method), subject only to
the Yatco requirement that it provide a reasoned explanation therefor.

As pointed out earlier in this Opinion, however, the SAC in this case simply adopted the Cuervo
valuation as the "more realistic" amount and rejected the DAR/LBP valuation for being
"unrealistically low." In fact, there is nothing in its Decision to indicate that the SAC actually
looked into the evidentiary bases for the opposing valuations to satisfy itself of the factual bases
of each. This, in tum, explains the utter dearth of explanation for the stark inconsistencies
between Commissioner Chua and the DAR/LBP's factual findings. Thus, and with all due
respect, it is quite incorrect to say that the present rule requiring strict application of the DAR
formula completely strips courts of any discretion in determining what compensation is just for
properties covered by the CARP.
More importantly, in amending Section 1 7 of RA 665 7, Congress provided that the
factors and the resulting basic formula shall be "subject to the final decision of the proper court."
Congress thus clearly conceded that courts have the power to look into the "justness" of the use
of a formula to determine just compensation, and the "justness" of the factors and their weights
chosen to flow into it.

In fact, the regulatory scheme provided by Congress in fact sets the stage for
a heightened judicial review of the DAR's preliminary determination of just compensation
pursuant to Section 17 of RA 6657. In case of a proper challenge, SACs are actually
empowered to conduct a de nova review of the DAR's decision. Under RA 6657, a full trial is
held where SA Cs are authorized to (1) appoint one or more commissioners,144 (2) receive, hear,
and retake the testimony and evidence of the parties, and (3) make findings of fact anew.145 In
other words, in exercising its exclusive and original jurisdiction to determine just
compensation under RA 6657, the SAC is possessed with exactly the same powers and
prerogatives of a Regional Trial Court (RTC) under Rule 67 of the Revised Rules of Court.

In such manner, the SAC thus conducts a more exacting type of review, compared to the
procedure provided either under Rule 43 of the Revised Rules of Court, which governs appeals
from decisions of administrative agencies to the Court of Appeals, or under Book VII, Chapter 4,
Section 25146 of the Administrative Code of 1987,147 which provides for a default administrative
review process. In both cases, the reviewing court decides based on the record, and the
agency's findings of fact are held to be binding when supported by substantial evidence.148 The
SAC, in contrast, retries the whole case, receives new evidence, and holds a full evidentiary
hearing.

Having established that the regulatory scheme under RA 6657 does not, in principle, detract
from (but rather effectuates) the exercise of the judicial function, we shall now show how the
DAR valuation process is at par with internationally-accepted valuation practices and standards.

H. DAR Valuation process is at par with international standards

Valuation is not an exact science.149 In clear recognition of the inherent difficulty such a task
entails, the DAR declared:

Just compensation in regard to land cannot be an absolute amount disregarding particularities

of productivity, distance to the marketplace and so on.1âwphi1 Hence, land valuation is not an
exact science but an exercise fraught with inexact estimates requiring integrity,
conscientiousness and prudence on the part of those responsible for it. What is important
ultimately is that the land value approximates, as closely as possible, what is broadly
considered to be just.150

Nevertheless, there are existing standards which are observed to ensure the competence and
integrity of valuation practice. At present, we have the Philippine Valuation Standards (PVS), or
the reference standards for local government assessors and other agencies undertaking
property valuations.151 The PVS are, in turn, based on the International Valuation Standards
(IVS), also known as the Generally Accepted Valuation Principles (GAVP). The IVS represents
the internationally accepted best practices in the valuation profession and were formulated by
the International Valuations Standards Committee (IVSC).152
Of note is the IVSC's stature in the valuation profession. Composed of professional valuation
associations from around the world, the IVSC is a non-governmental organization (NGO)
member of the United Nations which provides advice and counsel relating to valuation and
seeks to coordinate its Standards and work programs with related professional discipline in the
public interest, and cooperates with international agencies in determining and promulgating new
standards. It was granted Roster status with the United Nations Economic and Social Council in
May 1985.153

There also exists a process which allows for a systematic procedure154 to be followed in
answering questions about real property value:

Part One: Definition of the Problem

Identification Intended Purpose of Date of Identification Extra- Hypo-
of use of appraisal opinion of ordinary thetical
client/intende appraisal (including of value characteristics assumptions conditions
d users definition of of property
value) (including
location and
property
rights to be
valued)
Part Two: Scope of Work
Part Three: Data Collection and Property Description
Market Area Data Subject Property Data Comparable Property Data
General characteristics of Specific characteristics of Sales, listings, offerings,
region, city and neighborhood land and improvements, vacancies, cost and
personal property, business depreciation, income and
assets, etc. expenses, capitalization
rates, etc.
Part IV. Data Analysis
Market Analysis Highest and Best Use Analysis
Demand studies Site as though vacant
Supply studies Ideal improvement
Marketability studies Property as improved
Part V. Land Value Opinion
Part VI. Application of the Approaches to Value
Cost Sales Comparison Income
Part VII. Reconciliation of Value Indications and Final Opinion of Value
Part VIII. Report of Defined Value

Based on the foregoing, the process involves, among others, utilizing one or more valuation
approaches, with each individual approach producing a particular value indication,155 and
thereafter, reconciling the different value indications to arrive at "a supported opinion of defined
value."156

The valuation process is applied to develop a well-supported opinion of a defined value based
on an analysis of pertinent general and specific data. Appraisers develop an opinion of property
value with specific appraisal procedures that reflect the different approaches to data analysis.157

The PVS and the IVS, discussed earlier, list three market-based valuation approaches: the
sales comparison approach, the income capitalization approach and the cost approach.158

The sales comparison approach considers the sales of similar or substitute properties and
related market data, and establishes a value estimate by processes involving comparison. In
general, a property being valued is compared with sales of similar properties that have been
transacted in the market.159

In the income capitalization approach, income and expense data relating to the property being
valued are considered and value is estimated through a capitalization
process.1âwphi1 Capitalization relates income (usually a net income figure) and a defined value
type by converting an income amount into a value estimate. This process may
consider direct relationships (known as capitalization rates), yield or discount rates (reflecting
measures of return on investment), or both.160

The cost approach considers the possibility that, as an alternative to the purchase of a given
property, one could acquire a modem equivalent asset that would provide equal utility. In a real
estate context, this would involve the cost of acquiring equivalent land and constructing an
equivalent new structure. Unless undue time, inconvenience and risk are involved, the price that
a buyer would pay for the asset being valued would not be more than the cost of the modem
equivalent. Often the asset being valued will be less attractive than the cost of the modem
equivalent because of age or obsolescence.161

These approaches are used in all estimations of value.162 Depending on the circumstances

attendant to each particular case, one or more of these approaches may be used.

The final analytical step in the valuation process is the reconciliation of the value indications
derived into a single peso figure or a range into which the value will most likely fall:

In the valuation process, more than one approach to value is usually applied, and each
approach typically results in a different indication of value. If two or more approaches are used,
the appraiser must reconcile at least two value indications. Moreover, several value indications
may be derived in a single approach. x xx

x x x Resolving the differences among various value indications is called reconciliation. x x

x163 (Emphasis supplied.)

Reconciliation requires appraisal judgment and a careful, logical analysis of the procedures that
lead to each value indication. Appropriateness, accuracy and quantity of evidence are the
criteria with which an appraiser forms a meaningful, defensible and credible final opinion of
value.164
The valuation process concludes with a final report/opinion of value. This reported value is the
appraiser's opinion165 and reflects the experience and judgment that has been applied to the
study of the assembled data.166

For a well-supported opinion of a defined value, however, there must be an analysis of pertinent
general and specific data167 using an accepted and systematic valuation process. Following the
generally accepted valuation process, there is an application of the appropriate approaches to
value and, where multiple approaches have been employed, the reconciliation of the different
value indications to arrive at a final opinion of value. Reconciliation, in large part, relies on the
proper application of appraisal techniques and the appraiser 's judgment and experience.168

The Philippines has kept abreast with the internationally-recognized and accepted standards for
valuation practice.

As previously discussed, we already have the PVS used by local government assessors and
other agencies in conducting property valuations.169 There is also Republic Act No. 9646 (RA
9646), otherwise known as the Real Estate Service Act of the Philippines, which mandates the
conduct of licensure examinations to ensure the technical competence, responsibility and
professionalism of real estate practitioners in general (including appraisers, in particular).170

Actual valuation reforms to overcome the "multiplicity of fragmented policies and regulations
which have previously characterized both the public and private sectors"171 have also been
undertaken. In April 2010, the Department of Finance (DOF) issued a Mass Appraisal
Guidebook for the "operationalization and practical application of the Philippine Valuation
Standards."172 The PVS also appear in the Manual on Real Property Appraisal and Assessment
Operations published by the DOF as guidelines to aid local assessors in discharging their
functions.173

A Valuation Reform Act174 is currently being proposed to harmonize valuation in both public and
private sectors by providing uniform valuation standards which "shall conform with generally
accepted international valuation standards and principles."175

The existence of these standards and measures highlights the emerging importance of
valuation, not only in the context of land reform implementation, but as a profession, with high
standards of competence, a distinct body of knowledge continually augmented by contributions
of practitioners, and a code of ethics and standards of practice with members willing to be
subject to peer review.176

An examination of the terms of the DAR issuances would show that the implementing agency
has indeed taken pains to ensure that its valuation system is at par with local and international
valuation standards. The pertinent portion of DAR AO No. 7 (2011) reads:

Section 85. Formula for Valuation.1âwphi1 The basic formula for the valuation of lands
covered by VOS or CA shall be:

LV = (CNI x 0.60) +(CS x 0.30) + (MV x 0.10)

Where:
LV = Land Value
CNI = Capitalized Net Income (based on land use and productivity)
CS = Comparable Sales (based on fair market value equivalent to 70% of BIR
Zonal Value)
MV = Market Value per Tax declaration (based on Government assessment)

The CS factor refers to the Market Data Approach under the standard appraisal

approaches which is based primarily on the principle of substitution where a prudent individual
will pay no more for a property than it would cost to purchase a comparable substitute property.
This factor is determined by the use of 70% of the BIR zonal valuation.

The CNI factor, on the other hand, refers to the Income Capitalization Approach under the
standard appraisal approaches which is considered the most applicable valuation technique
for income-producing properties such as agricultural landholdings. Under this approach, the
value of the land is determined by taking the sum of the net present value of the streams of
income, in perpetuity, that will be forgone by the LO due to the coverage of his landholding
under CARP.

The MV factor is equivalent to the Market Data Approach, except that this is intended for
taxation purposes only. (Emphasis and underscoring supplied.)

The administrative order's express reference to "standard appraisal approaches," namely the
Market Data Approach and the Income Capitalization Approach, as discussed earlier, is in line
with the PVS and the IVS/GAVP.

1. The whole regulatory scheme provided under RA 6657 (and operationalized through the DAR
formulas) are reasonable policy choices to best implement the purposes of the law

The whole regulatory scheme provided under RA 6657 (and implemented through the DAR
formulas) are reasonable policy choices made by the Congress and the DAR on how best to
implement the purposes of the CARL. These policy choices, in the absence of contrary
evidence, deserve a high degree of deference from the Court.

On the Section 17 enumeration. Congress, in adopting Section 17, opted for the enumeration of
multiple factors provided under RAs 1400 and 3844, to replace the exclusively production based
formula provided in PD 27. The Court cannot now fault Congress for not
enumerating all possible valuation factors, a task even this Court cannot conceivably achieve,
and use the Congress’ limitation as a reason to void the enumeration.

On the use of a formula. In the absence of evidence of record to the contrary, it is reasonable to
assume that DAR decided that a formula is a practical method to arrive at a determination of
just compensation due the landowner. This became necessary considering the multiple factors
laid down by the Congress in Section 17. For one, the formulas provide a concrete, uniform and
consistent equation, applicable to all agricultural land nationwide, regardless of their location. It
thus assures prompt, consistent and even-handed implementation by limiting the exercise of
discretion by DAR officials. We have also earlier noted how formulas worked in the agrarian
reform programs of other Asian countries. Finally, we have also noted how the absence of a
formula resulted in the Garchitorena estate scandal. The Garchitorena estate scandal
underscores the wisdom of deferring to the DAR’s choice to use a formula in its judgment,
"uniformity of ruling is essential to comply with the purposes of [RA 6657]."177

On the choice of the formula's components and their weights. DAR reformulated its formulas
every so often as it gained experience in its implementation. We can see from AO No. 5 (1998)
that the DAR finally settled on two approaches to value: the income capitalization approach and
the sales comparison approach, represented under the CNI and CS factors, respectively. While
the cost approach was excluded, market value of the land as per tax declaration of the owner
(MV) is nevertheless considered. DAR also decided on the relative weights to allocate to each
component.

The inclusion of the CNI as a component factor was id apparent reaction to the suggestion of
the UP-IAS study, which roundly[ criticized DAR AO No. 6 (1989) for not having considered the
production income of the land. While the same study recommended that the appropriate formula
should "value land based only on production/productivity,"178 the DAR, however, chose to also
consider comparable sales and market value as per tax declaration. This is in keeping with the
mandate of Section 17 which provided that "current value of like properties" and "the sworn
valuation by the owner, the tax declarations," and the "assessment made by government
assessors" shall also be considered.

We note that while "cost of acquisition of the land" was also included as a factor to be
considered in determining just compensation, it was not included as a component in the basic
formula. Again, in the absence of contrary evidence of record, it is reasonable to assume that
the DAR acted, on the knowledge that most agricultural lands are inherited. This makes their
acquisition cost nil. To include the same as a component of the formula would only serve to
reduce the resulting value, much to the prejudice of the landowner.179

On the formula as DAR 's expert opinion. The general function of an appraisal or valuation
exercise is to develop an opinion of a certain type of value.180 This process, though subjective,
is amenable to a rigorous process that should result in a considered opinion of value. As earlier
discussed, there is an application of the generally accepted approaches to value and, where
multiple approaches have been employed, the reconciliation of the different value indications to
arrive at a final opinion of value.181 In this case, the DAR, applying the law and using the
accepted valuation process and approaches to value, acted no different from a valuation
appraiser and gave an opinion as to what components make up the right formula.

Similar to the valuation profession which recognizes that the integrity and credibility of a
valuation opinion rests in large part on the appraiser's judgment and experience,182 the DAR's
choices on the formula's component parts and their corresponding weights was based on its
expertise, judgment and actual experience in the field of agrarian reform. We have taken pains
to show how the DAR formula, and valuation process, is consistent and at par with recognized,
international relation processes. There is no contrary evidence of record.

We shall now discuss the detailed arguments of the dissents as they relate to the DAR
formulas.

J. Responses to specific arguments in the Dissents and Separate Concurring Opinion

Justice Leonen asserts that the Congress and the DAR failed to capture all the factors183 (if not
the "important,"184 "highly influential,"185 and "critical"186 ones) to fully determine market value.
Since the listing of factors in Section 17 is incomplete, any formula derived therefrom would also
(and necessarily) be incomplete for purposes of arriving at just compensation.

We note that Justice Leonen cites the UP-IAS study in his dissent. This study analyzed the DAR
formula under DAR AO No. 06 (1989). Our case now involves the DAR formula under DAR AO
No. 5 (1998). Not only is the latter formula completely different from that under DAR AO No. 6
(1989), it has, as earlier discussed, already "improved" on the formula by incorporating the
suggestions and recommendations of the UP-IAS study cited.

Furthermore, Justice Leonen did not point to a complete or exhaustive listing of factors upon
which he based his assertion of the law's incompleteness. Neither did he show how courts are
to actually approach valuation (in the absence of Section 17 and the implementing DAR
formula) as to avoid "underrating the effect of each property's peculiarities."187

Even granting, for the sake of argument, that there is an infinite number of factors that can be
considered in the valuation of property, we see no conceptual inconsistency between
applying a formula to determine just compensation and giving all attendant factors due
consideration.

This is evident when one considers the indispensability of the approaches to value in any
estimation of value.188 Following the generally-accepted valuation process, after all relevant
market area data, subject property data and comparable property data have been gathered and
analyzed,189 the approaches to value will be applied190 and the resulting value indications
reconciled191 to arrive at a final opinion of value. Thus, while there can arguably be an infinite
number of factors that can be considered for purposes of determining a property's value, they
would all ultimately be distilled into any one of the three valuation approaches. In fact, and as
part of their discipline, appraisers are expected to "apply all the approaches that are applicable
and for which there is data."192

Justice Leonen also seems to favor the use of the discounted cash flow (DCF)/discounted future
income method (a variant of the yield capitalization technique) where the present DAR basic
formula makes use of the direct capitalization technique.193 He thereafter equates this to a lack
of consideration for future income and ventures that, in turn, might be the reason why
landowners always feel that the DAR/LBP assessment is severely undervalued.194

We disagree. Direct capitalization and yield capitalization are both methods used in the income
capitalization approach to value.

Direct capitalization is distinct from yield capitalization x x x in that the former does not directly
consider the individual cash flows beyond the first year. Although yield capitalization explicitly
calculates year-by-year effects of potentially changing income patterns, changes in the original
investment's value, and other considerations, direct capitalization processes a single year's
income into an indication of value. x x x195

In fact, and applied to the same set of facts, use of either method can be expected to produce
similar results:

x x x Either direct capitalization or yield capitalization may correctly produce a supportable

indication of value when based on relevant market information derived from comparable
properties, which should have similar income-expense ratios, land value-to-building value ratios,
risk characteristics, and future expectations of income and value changes over a typical holding
period. A choice of capitalization method does not produce a different indication of value
under this circumstance.196 (Emphasis supplied.)

Selection of the appropriate income capitalization method to use depends on the attendant
circumstances. While direct capitalization is used when properties are already operating on a
stabilized basis, it is not useful where the property sought to be valued is going through an initial
lease-up or when income and/or expenses are expected to change in an irregular pattern over
time. In the latter case, yield capitalization techniques are considered to be more appropriate.197

In fact, the DAR uses yield capitalization methods where, based on its experience, such method
is appropriate. In Joint Memorandum Circular No. 07, Series of 1999, for example, the DAR and
the LBP revised their initial valuation guidelines for rubber plantations, to wit:

I. PREFATORY STATEMENT

The rubber plantation income models presented under the old rubber Land Valuation Guideline
(LVG No. 6, Series of 1990) recognized the income of rubber plantations based on processed
crumb rubber. However, recent consultations with rubber authorities (industry, research,
etc.) disclosed that the standard income approach to valuation should measure the net
income or productivity of the land based on the farm produce (in their raw forms) and not
on the entire agri-business income enhanced by the added value of farm products due to
processing. Hence, it is more appropriate to determine the Capitalized Net Income (CNI)
of rubber plantations based on the actual yield and farm gate prices of raw products
(field latex and cuplump) and the corresponding cost of production.

There is also a growing market for old rubber trees which are estimated to generate net
incomes ranging between ₱20,000 and ₱30,000 per hectare or an average of about ₱100 per
tree, depending on the remaining stand of old trees at the end of its economic life. This market
condition for old rubber trees was not present at the time LVG No. 6, Series of 1990, was being
prepared. (The terminal or salvage value of old rubber trees was at that time pegged at only
₱6,000 per hectare, representing the amount then being paid by big landowners to contractors
for clearing and uprooting old trees.)

LVG No. 6, Series of 1990, was therefore revised to address the foregoing considerations and
in accordance with DAR Administrative Order (AO) No. 05, Series of 1998. (Emphasis and
underscoring supplied.)

What can be fairly inferred from the DAR's adoption of the direct capitalization method in its
formula is the operational assumption198 that the agricultural properties to be valued are, in
general, operating on a stabilized basis, or are expected to produce on a steady basis. This
choice of capitalization method is a policy decision made by the DAR drawn, we can presume,
from its expertise and actual experience as the expert administrative agency.

Justice Velasco, for his part, calls for a revisit of the established rule on the ground that the
same "have veritably rendered hollow and ineffective the maxim that the determination of just
compensation is a judicial function."199 According to him, the view that application of the DAR
formulas cannot be made mandatory on courts is buttressed by: (1) Section 50 of RA 6657
which expressly provides that petitions for determination of just compensation fall within the
original and exclusive jurisdiction of the SACs;200 (2) Land Bank of the Philippines v.
Belista201 which already settled that petitions for the determination of just compensation are
excepted from the cases falling under the DAR's special original and exclusive jurisdiction under
Section 57 of RA 6657; and (3) Heirs of Lorenzo and Carmen Vidad v. Land Bank of the
Philippines, (Heirs of Vidad)202 which held that the DAR's process of valuation under Section 16
of RA 6657 is only preliminary, the conclusion of which is not a precondition for purposes of
invoking the SAC's original and exclusive jurisdiction to determine just compensation.

Justice Velasco correctly pointed out this Court's statement in Belista excepting petitions for
determination of just compensation from the list of cases falling within the DAR's original and
exclusive jurisdiction.203 Justice Velasco is also correct when he stated that the Court, in Heirs
of Vidad, summarized and affirmed rulings which "invariably upheld the [SAC's] original and
exclusive jurisdiction x x x notwithstanding the seeming failure to exhaust administrative
remedies before the DAR."204 Later on, he would point out, again correctly, the seemingly
conflicting rulings issued by this Court regarding the imposition upon the courts of a formula to
determine just compensation.

We acknowledge the existence of statements contained in our rulings over the years which may
have directly led to the inconsistencies in terms of the proper interpretation of the CARL. As
adverted to earlier in this Opinion, this Court thus takes this case as a good opportunity to
affirm, for the guidance of all concerned, what it perceives to be the better jurisprudential rule.

Justice Velasco reads both Belista and Heirs of Vidad as bases to show that SACs possess
original and exclusive jurisdiction to determine just compensation, regardless of prior exercise
by the DAR of its primary jurisdiction.

We do not disagree with the rulings in Belista and Heirs of Vidad, both of which acknowledge

the grant of primary jurisdiction to the DAR, subject to judicial review. We are, however, of the
view that the better rule would be to read these seemingly conflicting cases without having to
disturb established doctrine.

Belista, for example, should be read in conjunction with Association, the landmark case directly
resolving the constitutionality of RA 6657. In Association, this Court unanimously upheld the
grant of jurisdiction accorded to the DAR under Section 16 to preliminarily determine just
compensation. This grant of primary jurisdiction is specific, compared to the general grant of
quasi-judicial power to the DAR under Section 50. Belista, which speaks of exceptions to
the general grant of quasi-judicial power under Section 50, cannot be read to extend to
the specific grant of primary jurisdiction under Section 16.

Heirs of Vidad should also be read in light of our ruling in Land Bank of the Philippines v.
Martinez,205 another landmark case directly and affirmatively resolving the issue of whether the
DAR' s preliminary determination (of just compensation) can attain finality. While the
determination of just compensation is an essentially judicial function, Martinez teaches us that
the administrative agency’s otherwise preliminary determination may become conclusive not
because judicial power was supplanted by the agency's exercise of primary jurisdiction
but because a party failed to timely invoke the same. The Court said as much in Heirs of
Vidad:

It must be emphasized that the taking of property under RA 6657 is an exercise of the State’s
power of eminent domain. The valuation of property or determination of just compensation in
eminent domain proceedings is essentially a judicial function which is vested with the courts and
not with administrative agencies. When the parties cannot agree on the amount of just
compensation, only the exercise of judicial power can settle the dispute with binding effect on
the winning and losing parties. On the other hand, the determination of just compensation
in the RARAD/DARAB requires the voluntary agreement of the parties. Unless the parties
agree, there is no settlement of the dispute before the RARAD/DARAB, except if the
aggrieved party fails to file a petition for just compensation on time before the
RTC.206 (Emphasis and underscoring supplied.)

Considering the validity of the grant of primary jurisdiction, our ruling in Heirs of Vidal should
also be reconciled with the rationale behind the doctrine of primary jurisdiction. In this sense,
neither landowner nor agency can disregard the administrative process provided under the law
without offending the already established doctrine of primary jurisdiction:

x x x [I]n cases raising issues of fact not within the conventional experience of judges or cases
requiring the exercise of administrative discretion, agencies created by Congress for regulating
the subject matter should not be passed over. This is so even though the facts after they have
been appraised by specialized competence serve as a premise for legal consequences to be
judicially defined. Uniformity and consistency in the regulation of business entrusted to a
particular agency are secured, and the limited functions of review by the judiciary are
more rationally exercised, by preliminary resort for ascertaining and interpreting the
circumstances underlying legal issues to agencies that are better equipped than courts
by specialization, by insight gained through experience, and by more flexible
procedure.207 (Emphasis supplied.)

Arguing against the binding nature of the DAR formula, Justice Carpio, in his Separate
Concurring Opinion, cites Apo Fruits208 which held, to wit:

What is clearly implicit, thus, is that the basic formula and its alternatives-administratively
determined (as it is not found in Republic Act No. 6657, but merely set forth in DAR AO No. 5,
Series of 1998)-although referred to and even applied by the courts in certain instances, does
not and cannot strictly bind the courts. x x x209

The argument of Apo Fruits that the DAR formula is a mere administrative order has, however,
been completely swept aside by the amendment to Section 17 under RA 9700. To recall,
Congress amended Section 17 of RA 6657 by expressly providing that the valuation factors
enumerated be "translated into a basic formula by the DAR x x x." This amendment converted
the DAR basic formula into a requirement of the law itself. In other words, the formula ceased to
be merely an administrative rule, presumptively valid as subordinate legislation under the DAR's
rule-making power. The formula, now part of the law itself, is entitled to the presumptive
constitutional validity of a statute.210More important, Apo Fruits merely states that the formula
cannot "strictly" bind the courts. The more reasonable reading of Apo Fruits is that the formula
does not strictly apply in certain circumstances. Apo Fruits should, in other words, be read
together with Yatco.

Justice Carpio also raises an issue of statutory construction of Section 18 of RA 6657 in relation
to Section 17. Section 18 reads:

Sec. 18. Valuation and Mode of Compensation. –The LBP shall compensate the landowner in
such amounts 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 1 7, and other pertinent provisions
hereof, or as may be finally determined by the court, as the just compensation for the land.

The Justice reads Section 18 to mean that Section 17 and the implementing DAR formula
operate only to qualify the offer to be made by the DAR and the LBP to the landowner. Section
17 is not a qualifying imposition on the court in its determination of just compensation. Stated
differently, where there is disagreement on the issue of just compensation, Section 17 and the
basic formula do not apply.

We disagree. Sections 16, 17 and 18 should all be read together in context211 as to give effect to
the law.212 This is the essence of the doctrines we laid down in Banal, Celada and Yatco.

Section 16 governs the procedure for the acquisition of private lands. The relevant provision
reads:

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 setforth in Sections 17, 18, and
other pertinent provisions hereof.x x x (Emphasis supplied.)

It is clear from the foregoing provision that the procedure for acquisition of private land is
commenced by the DAR's notice of acquisition and offer of compensation to the landowner. At
such point, the DAR does not know whether the landowner will accept its offer. Section 16(a),
however, states without qualification that the DAR shall make the offer in accordance with
Sections 17 and 18. In case the landowner does not reply or rejects the offer, then the DAR
initiates summary administrative proceedings to determine just compensation, subject to the
final determination of the court. In the summary proceedings, the DAR offer remains founded on
the criteria set forth in Section 17. Section 16(a) did not distinguish between the situation where
the landowner accepts the DAR's offer and where he/she does not. Section 17, as amended,
itself also did not distinguish between a valuation arrived at by agreement or one adjudicated by
litigation. Where the law does not distinguish, we should not distinguish.213

Section 18, on the other hand, merely recognizes the possibility that the landowner will disagree
with the DAR/LBP's offer. In such case, and where the landowner elevates the issue to the
court, the court needs to rule on the offer of the DAR and the LBP. Since the government's offer
is required by law to be founded on Section 1 7, the court, in exercising judicial review, will
necessarily rule on the DAR determination based on the factors enumerated in Section 17.

Now, whether the court accepts the determination of the DAR will depend on its exercise of
discretion. This is the essence of judicial review. That the court can reverse, affirm or modify the
DARJLBP's determination cannot, however, be used to argue that Section 18 excuses
observance from Section 17 in cases of disagreement.

Finally, there is no cogent policy or common sense reason to distinguish. Worse, this reading
flies in the face of the contemporaneous interpretation and implementation given by the DAR
and the LBP to Sections 16, 17 (as amended) and 18. DAR AO No. 5 (1998) expressly provides
that the basic formula applies to both voluntary offers to sell and to compulsory acquisition.214

K. The matters raised by the dissents are better resolved in a proper case
directly challenging Section 17 of RA 6657 and the resulting DAR
formulas

The following central issues of fact underlying many of the arguments raised by the dissents are
better raised in a case directly impugning the validity of Section 17 and the DAR formulas:

(1) Whether, under the facts of a proper case, the use of a basic formula (based on factors
enumerated by Congress) to determine just compensation is just and reasonable.

Evidence must be taken to determine whether, given the scale of the government's agrarian
reform program, the DAR and the LBP (and later, Congress) acted justly and within reason in
choosing to implement the law with the enumeration of factors in Section 17 and the use of a
basic formula, or, whether, under the facts, it is more just and reasonable to employ a case to
case method of valuation.

A core and triable question of fact is whether the DAR and the LBP can effectively and fairly
implement a large scale land reform program without some guide to canalize the discretion of its
employees tasked to undertake valuation. Otherwise stated, how can the DAR and the LBP
commence CARP implementation if the different DAR and LBP employees tasked with making
the offer, and spread nationwide, are each given complete discretion to determine value from
their individual reading of Section 17? This will resolve the factual underpinnings of the
argument advanced that the valuation factors enumerated in Section 17 apply only where there
is agreement on value as between the DAR/LBP and the landowner. But not when there is
disagreement.

(2) Whether, under the facts of a proper case, the enumeration of the factors in Section 17 and
the resulting formula, are themselves just and reasonable.

To resolve this, there must be a hearing to determine: (a) whether, following generally-accepted
valuation principles, the enumeration under Section 17 is sufficient or under-inclusive; (2) how
the DAR arrived at selecting the components of the formula and their assigned weights; (3)
whether there are fairer or more just and reasonable alternatives, or combinations of
alternatives, respecting valuation components and their weights; and (4) whether the DAR
properly computes or recognizes net present value under the CNI factor, and whether DAR
employs a fair capitalization rate in computing CNI.

All things considered, it is important that the DAR and the LBP be heard so that they can
present evidence on the cost and other implications of doing away with the use of a basic
formula, or using a different mix of valuation components and weights.

IV Conclusion

The detennination of just compensation is a judicial function. The "justness" of the enumeration
of valuation factors in Section 17, the "justness" of using a basic formula, and the "justness" of
the components (and their weights) that flow into the basic formula, are all matters for the courts
to decide. As stressed by Celada, however, until Section 17 or the basic formulas are declared
invalid in a proper case, they enjoy the presumption of constitutionality. This is more so now,
with Congress, through RA 9700, expressly providing for the mandatory consideration of the
DAR basic formula. In the meantime, Yatco, akin to a legal safety net, has tempered the
application of the basic formula by providing for deviation, where supported by the facts and
reasoned elaboration.

While concededly far from perfect, the enumeration under Section 17 and the use of a basic
formula have been the principal mechanisms to implement the just compensation provisions of
the Constitution and the CARP for many years. Until a direct challenge is successfully mounted
against Section 17 and the basic formulas, they and the collective doctrines in Banal,
Celada and Yatco should be applied to all pending litigation involving just compensation in
agrarian reform. This rule, as expressed by the doctrine of stare decisis, necessary for securing
certainty and stability of judicial decisions, thus:

Time and again, the Court has held that it is a very desirable and necessary judicial practice that
when a court has laid down a principle of law as applicable to a certain state of facts, it will
adhere to that principle and apply it to all future cases in which the facts are substantially the
same. Stare decisis et non quieta movere. Stand by the decisions and disturb not what is
settled. Stare decisis simply means that for the sake of certainty, a conclusion reached in one
case should be applied to those that follow if the facts are substantially the same, even though
the parties may be different. It proceeds from the first principle of justice that, absent any
powerful countervailing considerations, like cases ought to be decided alike. Thus, where the
same questions relating to the same event have been put forward by the parties similarly
situated as in a previous case litigated and decided by a competent court, the rule of stare
decisis is a bar to any attempt to relitigate the same issue.215

This Court thus for now gives full constitutional presumptive weight and credit to Section 17 of
RA 6657, DAR AO No. 5 (1998) and the resulting DAR basic formulas. To quote the lyrical
words of Justice Isagani Cruz in Association:

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.216

For the guidance of the bench, the bar, and the public, we reiterate the rule: Out of regard for
the DAR's expertise as the concerned implementing agency, courts should henceforth consider
the factors stated in Section 17 of RA 6657, as amended, as translated into the applicable DAR
formulas in their determination of just compensation for the properties covered by the said law.
If, in the exercise of their judicial discretion, courts find that a strict application of said formulas is
not warranted under the specific circumstances of the case before them, they may deviate or
depart therefrom, provided that this departure or deviation is supported by a reasoned
explanation grounded on the evidence on record. In other words, courts of law possess the
power to make a final determination of just compensation.217

A final note

We must be reminded that the government (through the administrative agencies) and the courts
are not adversaries working towards different ends; our roles are, rather, complementary. As the
United States Supreme Court said in Far East Coeference v. United States:218

x x x [C]ourt and agency are not to be regarded as wholly independent and unrelated
instrumentalities of justice, each acting in the performance of its prescribed statutory duty
without regard to the appropriate function of the other in securing the plainly indicated objects of
the statute. Court and agency are the means adopted to attain the prescribed end, and, so
far as their duties are defined by the words of the statute, those words should be
construed so as to attain that end through coordinated action. Neither body should repeat
in this day the mistake made by the courts of law when equity was struggling for recognition as
an ameliorating system of justice; neither can rightly be regarded by the other as an alien
intruder, to be tolerated if must be, but never to be encouraged or aided by the other in the
attainment of the common aim.219 (Emphasis supplied.)

The Congress (which wrote Section 1 7 and funds the land reform land acquisition), the DAR
(author of DAR AO No. 5 [1998] and implementer of land reform), and the LBP (tasked under
EO 405 with the valuation of lands) are partners to the courts. All are united in a common
responsibility as instruments of justice and by a common aim to enable the farmer to "banish
from his small plot of earth his insecurities and dark resentments and "rebuild in it the music and
the dream."220 Courts and government agencies must work together if we are to achieve this
shared objective.

WHEREFORE, the petition is PARTIALLY GRANTED. Civil Case Nos. 2002-7073 and 2002-
7090 are REMANDED to the Special Agrarian Court for the determination of just compensation
in accordance with this ruling.

SO ORDERED.
G.R. No. 188299               January 23, 2013

HEIRS OF LUIS A. LUNA and REMEGIO A. LUNA, and LUZ LUNA-SANTOS, as

represented by their Attorney-in-fact, AUREA B. LUBIS, Petitioners,
vs.
RUBEN S. AFABLE, TOMAS M. AFABLE, FLORANTE A. EVANGELISTA, LEOVY S.
EVANGELISTA, JAIME M. ILAGAN ET, AL., Respondents.

DECISION

PEREZ, J.:

The power of local government units to convert or reclassify lands from agricultural to non-
agricultural prior to the passage of Republic Act (RA) No. 6657 – the Comprehensive Agrarian
Reform Law (CARL) – is not subject to the approv3l of the Department of Agrarian Reform
(DAR).1 In this sense, the authority of local government units to reclassify land before 15 June
1988 – the date of effectivity of the CARL – may be said to be absolute.

Before the Court is a Petition for Review on Certiorari seeking to reverse and set aside the 13
March 2009 Decision2 of the Court of Appeals (CA) in CA-G.R. SP No. 101114 and its 10 June
2009 Resolution3 denying petitioners’ motion for reconsideration.

The Facts

Petitioners are co-owners of a parcel of land covered by Transfer Certificate of Title (TCT) No.
J-7205 (T-54199), with an area of 158.77 hectares, located in Barangay Guinobatan, Calapan
City, Oriental Mindoro.4 100.2856 hectares of the landholding was subjected to compulsory
acquisition under the Comprehensive Agrarian Reform Program (CARP) through a Notice of
Land Valuation and Acquisition dated 20 August 1998 issued by the Provincial Agrarian Reform
Officer (PARO) and published in a newspaper of general circulation on 29, 30 and 31 August
1998.5

Respondents were identified by the DAR as qualified farmer-beneficiaries; hence, the

corresponding Certificates of Land Ownership Award (CLOAs) were generated, issued to
respondents and duly registered in their names on 12 October 1998.6

On 21 October 1998, petitioners filed before the DAR Adjudication Board (DARAB) Oriental
Mindoro a Petition for "Cancellation of CLOAs, Revocation of Notice of Valuation and
Acquisition and Upholding and Affirming the Classification of Subject Property and Declaring the
same outside the purview of RA No. 6657."7 The petition was anchored mainly on the
reclassification of the land in question into a light intensity industrial zone pursuant to Municipal
Ordinance No. 21, series of 1981, enacted by the Sangguniang Bayan of Calapan, thereby
excluding the same from the coverage of the agrarian law.

The Ruling of the DARAB Calapan City

In a Decision dated 26 August 1999, the DARAB disposed of the petition in the following
manner:
IN THE LIGHT OF the foregoing, judgment is hereby rendered:

1. Ordering the Cancellation of Certificates of Land Ownership Award x x x issued by the

Department of Agrarian Reform in favor of private respondents pursuant to RA No. 6657
covering the subject parcel of land under TCT No. 5-7205 [sic] (T-54199) of the Registry
of Deeds for the Province of Oriental Mindoro, in the name of Luis Luna, et. al.,

2. Upholding and affirming the classification of the subject parcel of land into residential,
commercial and institutional uses pursuant to RA No. 2264 (Autonomy Act of 1959) and
the Local Government Code of 1991;

3. Declaring the farmholding in question outside the purview of Republic Act No. 6657;

x x x x8

The DARAB found that petitioners’ property is exempt from the CARP as it has been
reclassified as non-agricultural prior to the effectivity of Republic Act (RA) No. 6657. According
to the DARAB, the records of the case indicate that subject parcel of land was classified as
within the residential, commercial and industrial zone by the Sangguniang Bayan of Calapan,
Oriental Mindoro through Resolution No. 139, Series of 1981, enacted on 14 April 1981 as
Municipal Ordinance No. 21. Moreover, the Office of the City Assessor has also classified the
property as residential, commercial and industrial in use under the tax declaration covering the
same. Finally, the Office of the Deputized Zoning Administrator, Urban Planning and
Development Office, Calapan City, issued a Certification on 25 September 1998 stating that
"under Article III, Section 3, No. 7 of Resolution No. 139, Municipal Ordinance No. 21, Series of
1981, areas covered by this [sic] provisions has [sic] been declared as Light Intensity Industrial
Zone prior to the approval of RA 6657 x x x."9

The DARAB cited Department of Justice (DOJ) Opinion No. 44, Series of 1990, which provides
that a parcel of land is considered non-agricultural and, therefore, beyond the coverage of the
CARP, if it had been classified as residential, commercial, or industrial in the city or municipality
where the Land Use Plan or zoning ordinance has been approved by the Housing and Land
Use Regulatory Board (HLURB) before 15 June 1988, the date of effectivity of RA No. 6657.
The aforementioned Opinion of the DOJ further states that all lands falling under this category,
that is, lands already classified as commercial, industrial or residential, before 15 June 1988 no
longer need any conversion clearance from the DAR.10

Aggrieved, respondents appealed to the DARAB Central Office.

The Ruling of the DARAB Central Office

The Central Office of the DARAB found that its local office in Calapan City erred in declaring
petitioners’ property outside the coverage of the CARP by relying solely on the assertion of the
landowners that the land had already been reclassified from agricultural to non-agricultural prior
to 15 June 1988.11

The DARAB held that the local Adjudicator misconstrued DOJ Opinion No. 44, Series of 1990
and, in the process, overlooked DAR Administrative Order (AO) No. 2, Series of 1994 which
provides the grounds upon which CLOAs may be cancelled, among which is that the land is
found to be exempt or excluded from CARP coverage or is to be part of the landowner’s
retained area as determined by the Secretary of Agrarian Reform or his authorized
representative. Thus, the DARAB concluded, the issue of whether or not petitioners’ land is
indeed exempt from CARP coverage is still an administrative matter to be determined
exclusively by the DAR Secretary or his authorized representative. In short, an exemption
clearance from the DAR is still required. In this connection, DAR AO No. 6 was issued on 27
May 1994 setting down the guidelines in the issuance of exemption clearance based on Section
3(c) of RA No. 6657 and DOJ Opinion No. 44, Series of 1990. Pursuant thereto, "any landowner
or his duly authorized representative whose lands are covered by DOJ Opinion No. 44-S-1990,
and desires to have an exemption clearance from the DAR, should file the application with the
Regional Office of the DAR where the land is located."12 (Underlining omitted)

Accordingly, the DARAB set aside the Decision dated 26 August 1999 of the DARAB Calapan
City for lack of jurisdiction and referred13 the case to the Regional Office of DAR Region IV for
final determination as to whether the land covered by TCT No. J-7205 (T-54199) in the names
of Luis Luna, et al. is exempt from CARP coverage.14

In an apparent response to the above ruling of the DARAB holding that petitioners still need an
exemption clearance from the DAR, petitioners filed an application for exemption from CARP
coverage of subject land.

The Ruling of the DAR

(On Petitioners’ Application for Exemption from CARP coverage)

In an Order dated 16 December 2003, then DAR Secretary Roberto M. Pagdanganan

(Pagdanganan) granted petitioners’ application for exemption based on the following findings:

In a joint ocular inspection and investigation conducted by the representatives of the Municipal
Agrarian Reform Office MARO, PARO and Regional Center for Land Use Policy, Planning and
ImplementationRCLUPPI on September 18 2003, disclosed the following findings:

1. The documents (HLURB and Deputized Zoning AdministratorDZA Certifications) show

that the whole 158 hectares is exempted from the coverage of RA 6657;

2. It is not irrigated;

3. The area where subject property is located can be considered as already urbanizing;
and

4. The topography is generally flat and the property is traversed by a concrete highway
hence accessible to all means of land transportation.

xxxx

DOJ Opinion No. 44, Series of 1990 and the case of Natalia Realty vs. Department of Agrarian
Reform (12 August 1993/225 SCRA 278) opines (sic) that with respect to the conversion of
agricultural lands covered by RA No. 6657 to non-agricultural uses, the authority of the
Department of Agrarian Reform to approve such conversion maybe [sic] exercised from the date
of its effectivity on 15 June 1988. Thus, all lands that are already classified as commercial,
industrial or residential before 15 June 1988 no longer need any conversion clearance.
Moreover, Republic Act No. 6657 or the Comprehensive Agrarian Reform Law (CARL), Section
3, Paragraph (c) defines "agricultural land" as referring to "land devoted to agricultural activity as
defined in this Act and not classified as mineral, forest, residential, commercial or industrial
land." The case before this Office clearly reveals that the subject property is not within the
agricultural zone prior to 15 June 1988.

The subject property has been zoned as light-industrial prior to the enactment of the
Comprehensive Agrarian Reform Program as shown by the various certifications issued by the
HLURB15 and CPDC of Calapan City, Mindoro stating that the subject properties were
reclassified to light-industrial zone by the City of Calapan, Mindoro and approved by the Human
Settlements Regulatory Commission (now HLURB) per Resolution No. R-39-04 on 31 July
1980.

In view of the foregoing, this Office finds the application to have fully complied with all the
documentary requirements for exemption set forth under DAR A.O. 6 Series of 1994 guidelines.
x x x.16

The application for exemption was, therefore, granted subject to the condition, among others,
that disturbance compensation shall be paid to affected tenants, farm workers, or bona fide
occupants of the land.17

Predictably, respondents filed a motion for reconsideration of the Order of exemption.

The Ruling of the DAR

(On Respondents’ Motion for Reconsideration)

In a Resolution dated 15 June 2004, former DAR Officer-in-Charge (OIC)-Secretary Jose Mari
B. Ponce (Ponce) granted respondents’ motion for reconsideration based on the following
considerations:

Resolution No. R-39-4 Series of 1980 of the then Municipality of Calapan as conditionally
approved by Human Settlement Regulatory Commission (now HLURB) did not categorically
place the entire landholding for light-industrial. Section 1(f), Art. III of said resolution provided
that:

"(f) I-1 Zone – Light Industrial are the following:

All lots 100 meters deep east and 200 meters deep west of Sto. Niño-Lumangbayan-Sapul
Road from the Teachers’ Village down to Barangay Guinobatan."

Resolution No. 151, City Ordinance No. 6 which declared the whole area of Barangay
Guinobatan into residential, commercial and institutional uses was approved by the Calapan
City Council only on 23 June 1998. Furthermore, the Comprehensive Land Use Plan and
Zoning for Calapan City was approved by the Sangguniang Panlalawigan only in 2001 through
Resolution No. 218, Series of 2001.

xxxx
x x x. Hence, in the case at hand, subject property is still within the ambit of the Comprehensive
Agrarian Reform Program since the same were [sic] reclassified only in 1998 through
Resolution No. 151, City Ordinance No. 6, and was approved by the Sangguniang Panlalawigan
only in 2001 through Resolution No. 218, Series of 2001 long after the effectivity of RA 6657.18

Thus, the Order dated 16 December 2003 issued by DAR Secretary Pagdanganan was set
aside, revoked and cancelled.19

Petitioners filed a motion for reconsideration of this Resolution.

The Ruling of the DAR

(On Petitioners’ Motion for Reconsideration)

On 21 June 2006, the DAR, through then OIC Secretary Nasser C. Pangandaman
(Pangandaman), issued an Order denying petitioners’ motion for reconsideration on the
following grounds:

On 13 October 2005, the CLUPPI Inspection Team, accompanied by the Municipal Agrarian
Reform Officer (MARO), Provincial Agrarian Reform Officer (PARO) and other DAR Field
Personnel, conducted an ocular inspection of the subject landholding and noted the following:

• The landholding is composed of four (4) parcels embraced under TCT No. J-7205, with
an area of 153.7713 hectares and located in Brgy. Guinobatan, Calapan City, Oriental
Mindoro;

• The topography varies: Lot No. 612-D is flat, while Lot Nos. 612-A, 612-B and 612-C
are flat to hilly;

• There were no billboards visible in the premises;

• There were grasses, some fruit trees and vegetable, but generally, planted with rice;

• Tenants/farmworkers/protestants were present during the inspection;

• A spring was seen in the area, which serves as a source of water for the riceland and
irrigation canal;

• The provincial highway traverses the property;

• Surrounding areas are still agricultural in nature; and

• A newly constructed city hall was built in the riceland area covering a portion of five (5)
hectares out of the eighty (80)-hectare riceland area.

xxxx

A careful perusal of the facts and circumstances show that the petitioners failed to offer
substantial evidence that would warrant reversal of the Order.
Resolution No. R-39-4, Series of 1980 of the then Municipality of Calapan, conditionally
approved by Human Settlement Regulatory Commission, did not categorically place the entire
landholding under Light Industrial Zone. x x x.

xxxx

The Certification issued on 8 October 1998 by the Housing and Land Use Regulatory Board
(HLURB)20 proved that the property is still agricultural. The same provides that the landholding
is within the Light Industrial Zone (100 meters deep west and 200 meters deep east) of the
Provincial Road and the rest is Agricultural Zone based on the Zoning Ordinance approved by
HLURB Resolution No. R-9-34 dated 31 July 1980. It was re-classified into residential,
commercial and institutional uses pursuant to Sangguniang Panlungsod Resolution No. 151,
Ordinance No. 6 only on 23 June 1998. The 1981 Ordinance, albeit approved by the HLURB,
did not automatically reclassify the land. Physical aspects of the landholding are actually
agricultural as there are some fruit trees and generally, planted with rice. Also, the surrounding
areas are apparently agricultural in usage.

On 11 January 2006, the Municipal Agrarian Reform Officer (MARO) submitted a report stating
that the Light Industrial Zone which covers the fraction covering 100 meters deep west and 200
meters deep east along the provincial road traversing the property areas which were declared in
the HLURB Certification dated 08 October 1998, were already covered by Presidential Decree
No. 27. Thus, there was already a vested right over the property and can no longer be covered
by an Application for Exemption Clearance.21

The Order dated 15 June 2004 granting the motion for reconsideration filed by the farmer-
beneficiaries was, therefore, affirmed in toto.

Petitioners, consequently, filed an appeal before the Office of the President.

The Ruling of the Office of the President

In its Decision dated 15 December 2006, the Office of the President found petitioners’ appeal
impressed with merit. It quoted with approval the findings and conclusions of former DAR
Secretary Pagdanganan in his Order of 16 December 2003.22

According to the Office of the President, contrary to the findings and conclusions of the DAR in
its Resolution dated 15 June 2004, the area where subject property is situated was really
intended to be classified, not as agricultural, as in fact it was declared as residential, commercial
and institutional in 1998.23

Moreover, supervening events have transpired such that subjecting the property to CARP
coverage would already be inappropriate under the circumstances. The Sangguniang
Panlungsod approved City Ordinance No. 6, Resolution No. 151, declaring the whole area of
Barangay Guinobatan into a residential, commercial and industrial zone on 23 June 1998. The

Notice of Acquisition and Land Valuation covering 100.2856 hectares out of the 158.77 hectares
total land area of the property was issued by the DAR only on 20 August 1998. On 25
September 1998, a Certification was issued by the City Planning and Development
Officer/Deputized Zoning
Administrator, classifying subject property as within the Light Intensity Industrial Zone based on
Sangguniang Bayan Resolution No. 139, Municipal Ordinance No. 21, Series of 1981, Section 3
of RA 6657, DOJ Opinion No. 44, Series of 1990 and Sangguniang Panlungsod Ordinance No.
6, Series of 1998. The application for exemption from CARP coverage filed by petitioners was
initially granted by the DAR in 2003. The Certificate of Zoning Classification dated 18 December
2003 issued by the Zoning and Land Use Division of the Urban Planning and Development
Department classifies the subject property as an urban Development Zone, based on City
Resolution No. 231, Ordinance No. 4, Series of 1999 and Sangguniang Panlalawigan
Resolution No. 218, Series of 2001.24

The Office of the President further held that from the time portions of subject property were
declared to be within the Light Intensity Industrial Zone in 2003, it was never established that it
had been devoted to agricultural purposes. Besides, the confirmation of its falling within the
residential, commercial and industrial zone was ahead of the Notice of Acquisition. It would not
be proper to subject a residential, commercial and industrial property to CARP anymore.25

In conclusion, the Office of the President declared that the 16 December 2003 Order of the DAR
is more in accord with the facts and law relevant to the case. Hence, it set aside, revoked and
cancelled the Resolution and Order, dated 15 June 2004 and 21 June 2006, respectively, of
former DAR OIC-Secretaries Ponce and Pangandaman and reinstated the Order dated 16
December 2003 of Secretary Pagdanganan.26

The motion for reconsideration and second motion for reconsideration of respondents were
respectively denied by the Office of the President in a Resolution27 dated 12 June 2007 and an
Order28 dated 13 September 2007.

Respondents then appealed to the CA.

The Ruling of the Court of Appeals

In a Decision dated 13 March 2009, the CA granted the appeal based on a finding that the ruling
of the Office of the President is not supported by substantial evidence.29

According to the CA, it is clear from the 1981 Ordinance of the Sangguniang Bayan of Calapan
that only those lots 100 meters deep west and 200 meters deep east of the Sto. Niño-
Lumangbayan-Sapul Road from the Teachers’ Village Subdivision to Barangay Guinobatan, and
not the entire Barangay Guinobatan, was classified into light intensity industrial zone. If the
intention were to classify the entire Barangay Guinobatan into a light intensity industrial zone,
then the 1981 Ordinance should have provided so, instead of limiting the areas so classified
based on the reference points of the lots that would be affected thereby.30

Citing the case of Natalia Realty, Inc. v. Department of Agrarian Reform,31 wherein it was held
that lands not devoted to agricultural activity, including lands previously converted to non-
agricultural uses by government agencies other than the DAR prior to the effectivity of the
CARL, are outside the coverage of the CARL, the Court of Appeals ruled that in this case, there
is no showing that subject property was in fact included in the classification of light intensity
industrial zone prior to 15 June 1988, the date of effectivity of the CARL.32

The CA further held that the fact that the Sangguniang Panlungsod of the City of Calapan later
on enacted Resolution No. 151 as City Ordinance No. 6 on 23 June 1998, declaring the whole
area of Barangay Guinobatan as residential, commercial and institutional areas and site of the
new City Government Center for the City of Calapan does not automatically convert the property
into a non-agricultural land exempt from the coverage of the agrarian law. It bears stressing that
the 1998 Ordinance was enacted after the effectivity of the CARL and, in order to be exempt
from CARP coverage, the land must have been classified as industrial/residential before 15
June 1988.33

The CA likewise cited with approval the findings and conclusions of then DAR OIC-Secretaries
Ponce and Pangandaman in their respective decisions and concluded that the Office of the
President gravely erred when it ignored the findings in the 15 June 2004 Resolution and 21
June 2006 Order of the DAR. Said the CA:

x x x The Office of the President cannot simply brush aside the DAR’s pronouncements
regarding the status of the subject property as not exempt from CARP coverage considering
that the DAR has unquestionable technical expertise on these matters. Factual findings of
administrative agencies are generally accorded respect and even finality by this Court, if such
findings are supported by substantial evidence, a situation that obtains in this case. The factual
findings of the Secretary of Agrarian Reform who, by reason of his official position, has acquired
expertise in specific matters within his jurisdiction, deserve full respect and, without justifiable
reason, ought not to be altered, modified or reversed.34

Thus, the Decision dated 15 December 2006, Resolution dated 12 June 2007, and Order dated
13 September 2007 of the Office of the President were reversed and set aside. The Resolution
dated 15 June 2004 of former DAR OIC-Secretary Ponce and the Order dated 21 June 2006 of
then DAR OIC-Secretary Pangandaman were reinstated.

Hence, this petition for review wherein petitioners seek the reversal of the aforementioned
decision on the ground, among others, that the Honorable Court of Appeals gravely erred in
holding that the Decision dated 15 December 2006 of the Office of the President is not
supported by substantial evidence.35

The Issue

The core issue for resolution is whether the land subject of this case had been reclassified as
non-agricultural as early as 1981, that is, prior to the effectivity of the CARL and, therefore,
exempt from its coverage.

Our Ruling

At the outset, it must be pointed out that the determination of the issue presented in this case
requires a review of the factual findings of the DAR, of the Office of the President and of the CA.

It is well settled that in a petition for review on certiorari under Rule 45 of the Rules of Court,
only questions of law may be raised.36 This Court, in numerous instances, has had occasion to
explain that it is not its function to analyze or weigh evidence all over again.37 As a rule, the
Court respects the factual findings of the CA and of quasi-judicial agencies like the DAR, giving
them a certain measure of finality.38 There are, however, recognized exceptions to this rule, one
of which is when the findings of fact are conflicting.
The records of this case show that each of the agencies which rendered a ruling in this case –
from the DARAB local office to the CA – arrived at different findings and conclusions, with each
body overturning the decision of the one before it. Thus, due to the divergence of the findings of
the DARAB local office on the one hand, and the DARAB Central Office on the other, and
considering the conflicting findings of former DAR Secretaries and the disparity between the
findings of fact of the Office of the President and of the CA, we are constrained to re-examine
the facts of this case based on the evidence presented by both parties.

After an assiduous review of the records of this case, this Court concludes that petitioners’ land
is outside the coverage of the agrarian reform program.

At the core of the present controversy is Resolution No. 139, later on enacted as Ordinance No.
21, series of 1981 by the Sangguniang Bayan of Calapan, Oriental Mindoro at its regular
session on 14 April 1981 and subsequently amended at its special session of 20 October
1981.39 Ordinance No. 21 revised the comprehensive zoning regulations of the then Municipality
of Calapan. Article III, Section 3, No. 7 of the ordinance provides:

I-1 Zone

Light intensity industrial zone are the following:

All lots 100 meters deep west and 200 meters deep east of Sto. Niño-Lumangbayan-Sapul
Road from the Teachers’ Village Subdivision to Barangay Guinobatan.40

Petitioners maintain that their landholding falls within the area classified as light intensity
industrial zone, as specified in the afore-quoted provision of the ordinance. Respondents, on the
other hand, insist otherwise. The settlement of this issue is crucial in determining whether the
subject landholding is within or outside the coverage of the CARL.

Section 4 of RA No. 6657 states that the coverage of the CARL is as follows:

SEC. 4. Scope. – The Comprehensive Agrarian Reform Law of 1989 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. x x x;

(b) All lands of the public domain in excess of the specific limits as determined by
Congress in the preceding paragraph;

(c) All private lands devoted to or suitable for agriculture regardless of the agricultural
products raised or that can be raised thereon. (Emphasis supplied)
"Agricultural land" is defined under Section 3(c) of the CARL as that which is "devoted to
agricultural activity x x x and not classified as mineral, forest, residential, commercial or
industrial land."

The meaning of "agricultural lands" covered by the CARL was explained further by the DAR in
its AO No. 1, Series of 1990, dated 22 March 1990, entitled "Revised Rules and Regulations
Governing Conversion of Private Agricultural Land to Non-Agricultural Uses," issued pursuant to
Section 4941 of the CARL.42 Thus:

Agricultural land refers to those devoted to agricultural activity as defined in RA 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.
(Emphasis supplied)43

It is clear from the last clause of the afore-quoted provision that a land is not agricultural, and
therefore, outside the ambit of the CARP if the following conditions concur:

1. the land has been classified in town plans and zoning ordinances as residential, commercial
or industrial; and

2. the town plan and zoning ordinance embodying the land classification has been approved by
the HLURB or its predecessor agency prior to 15 June 1988.

It is undeniable that local governments have the power to reclassify agricultural into non-
agricultural lands.44 Section 345 of RA No. 2264 (The Local Autonomy Act of 1959) specifically
empowers municipal and/or city councils to adopt zoning and subdivision ordinances or
regulations in consultation with the National Planning Commission.46 By virtue of a zoning
ordinance, the local legislature may arrange, prescribe, define, and apportion the land within its
political jurisdiction into specific uses based not only on the present, but also on the future
projection of needs.47 It may, therefore, be reasonably presumed that when city and municipal
boards and councils approved an ordinance delineating an area or district in their cities or
municipalities as residential, commercial, or industrial zone pursuant to the power granted to
them under Section 3 of the Local Autonomy Act of 1959, they were, at the same time,
reclassifying any agricultural lands within the zone for non-agricultural use; hence, ensuring the
implementation of and compliance with their zoning ordinances.48

The regulation by local legislatures of land use in their respective territorial jurisdiction through
zoning and reclassification is an exercise of police power.49 The power to establish zones for
industrial, commercial and residential uses is derived from the police power itself and is
exercised for the protection and benefit of the residents of a locality.50 Ordinance No. 21 of the
Sangguniang Bayan of Calapan was issued pursuant to Section 3 of the Local Autonomy Act of
1959 and is, consequently, a valid exercise of police power by the local government of Calapan.

The second requirement – that a zoning ordinance, in order to validly reclassify land, must have
been approved by the HLURB prior to 15 June 1988 – is the result of Letter of Instructions No.
729, dated 9 August 1978. According to this issuance, local governments are required to submit
their existing land use plans, zoning ordinances, enforcement systems and procedures to the
Ministry of Human Settlements – one of the precursor agencies of the HLURB – for review and
ratification.51

Ordinance No. 21 was based on the Development Plan for the then Municipality of Calapan and
on the Zone District Plan prepared by its Municipal Development Staff. The Plans were adopted
by the Sangguniang Bayan of Calapan through a Resolution on 14 April 1980.52 The same were
granted approval by the HLURB through Resolution No. R-39-4, series of 1980, dated 31 July
1980.53

Based on the foregoing, there is no doubt that Ordinance No. 21 validly reclassified the area
identified therein as "100 meters deep west and 200 meters deep east of Sto. Niño-
Lumangbayan-Sapul Road from the Teachers’ Village Subdivision to Barangay Guinobatan" into
a light intensity industrial zone, making the same exempt from CARL coverage.

The next – and more crucial – question to be settled now is whether or not petitioners’
landholding falls within the reclassified zone, thereby taking it out of the coverage of the CARL.

In resolving the issue in the affirmative, former DAR Secretary Pagdanganan relied primarily on
the respective Certifications issued by the Office of the Deputized Zoning Administrator, Urban
Planning and Development Department of Calapan City54 and by the Housing and Urban
Development Coordinating Council (HUDCC),55 and considered subject property as having
"been zoned as light-industrial prior to the enactment of the Comprehensive Agrarian Reform
Program." Secretary Pagdanganan consequently granted petitioners’ application for exemption
pursuant to DAR AO No. 6, Series of 1994.56 This issuance was released by the DAR following
DOJ Opinion No. 44, Series of 1990,57 wherein the Secretary of the DOJ opined that "with
respect to conversions of agricultural lands covered by RA 6657 to non-agricultural uses, the
authority of the DAR to approve such conversions may be exercised from the date of the law’s
effectivity on June 15, 1998." Thus, AO No. 6 states that "all lands that were already classified
as commercial, industrial or residential before 15 June 1988 no longer need any conversion
clearance." Designed "to streamline the issuance of exemption clearances, based on DOJ
Opinion No. 44," the AO laid down the procedure and guidelines for the issuance of exemption
clearances58 for landowners whose lands are covered by DOJ Opinion No. 44, Series of 1990
and desire to obtain an exemption clearance from the DAR. Such exemption clearance does not
mean that the DAR Secretary is exempting the land from CARL coverage, with the implication
that the land was previously covered; it simply means that the CARL itself has, from the start,
excluded the land from CARL coverage, and the DAR Secretary is only affirming such fact.

The exemption order of Secretary Pagdanganan found petitioners’ application to have fully
complied with the documentary requirements for exemption set forth under AO No. 6, the more
important of which are the Certifications from the Deputized Zoning Administrator and the
HUDCC stating that petitioners’ property falls within the Light Intensity Industrial Zone of
Calapan City.

Incidentally, what AO No. 6 requires is a certification from the HLURB. Although what petitioners
submitted was a certification from the HUDCC, Secretary Pagdanganan apparently considered
the same as sufficient compliance with the requirements of AO No. 6 and in fact never referred
to the certification as coming from the HUDCC but was consistently identified as "certification
from the HLURB" throughout his order. We see nothing irregular in this considering that the
HLURB is an agency under the HUDCC59 and especially since the Certification of the HUDCC is
itself "based on the Zoning Ordinance approval by HLURB Resolution No. R-39-4 dated 31 July
1980."

In contrast to the exemption order issued by Secretary Pagdanganan, the resolution and order,
respectively, of OIC Secretaries Ponce and Pangandaman – which the CA cited with approval –
relied mainly on certifications declaring that the property is irrigated or has a slope of below 18%
and on an ocular inspection report stating that the property is generally covered with rice and
that the surrounding areas are still agricultural, as bases for their conclusion that subject land is
agricultural and, therefore, covered by the CARL. These matters, however, no longer bear any
significance in the light of the certifications of the Deputized Zoning Administrator and the
HUDCC testifying to the non-agricultural nature of the landholding in question.

The CARL, as amended, is unequivocal that only lands devoted to agricultural activity and not
classified as mineral, forest, residential, commercial or industrial land are within its scope. Thus,
the slope of the land or the fact of its being irrigated or non-irrigated becomes material only if the
land is agricultural, for purposes of exempting the same from the coverage of the agrarian law.
However, if the land is non-agricultural – as is the case of the property here under consideration
– the character and topography of the land lose significance.

It must likewise be emphasized that, since zoning ordinances are based not only on the present,
but also on the future projection of needs of a local government unit, when a zoning ordinance is
passed, the local legislative council obviously takes into consideration the prevailing conditions
in the area where the land subject of reclassification is situated. Accordingly, when the then
Sangguniang Bayan of Calapan enacted Ordinance No. 21, there is reasonable ground to
believe that the district subject of the reclassification, including its environs, was already
developing. Thus, as found by the Office of the President: "we find that the area where subject
property is situated was really intended to be classified not as agricultural, as in fact it was
declared as a residential, commercial and institutional in 1998."60

The CA, agreeing with the finding of OIC Secretary Pangandaman, and quoting from the OIC
Secretary’s order, held that the Certification of the HUDCC "proved that the property is still
agricultural."

A careful scrutiny of the aforementioned certification reveals, however, that contrary to the
findings of OIC Secretary Pangandaman and the CA, the certification, in fact, proves that
petitioners’ land falls within the area classified as light intensity industrial zone. Quoted
hereunder are the pertinent portions of the certification:

This is to certify that a parcel of land with a total area of 1,587,713 square meters and situated
at Brgy. Guinobatan, Calapan City, Oriental Mindoro, a portion of which is approximately
1,537,713 square meters is applied for Zoning Certification as shown in the vicinity map
submitted by the applicant appears to be within the LIGHT INDUSTRIAL ZONE (100 meters
deep west and 200 meters deep east) of the Provincial Road and the rest is AGRICULTURAL
ZONE based on the Zoning Ordinance approval by HLURB Resolution No. R-39-4 dated 31
July 1980. (Emphasis supplied)

Submitted Transfer Certificate of Title described as:

TCT NO. LOT NO. AREA (sq.m.) REGISTERED OWNER

 J-7205 612 1,531,713 (sic) Luis A. Luna, et al.

x x x x61

Based on the foregoing, 1,537,713 square meters (sq. ms.) out of the 1,587,713 sq. ms. total
area of petitioners’ property have been zoned as light industrial and only 50,000 sq. ms.
apparently remain agricultural. Considering, however, the certification of the Deputized Zoning

Administrator of the Urban Planning and Development Department of Calapan City, this Court
finds and so holds that the entire landholding has been classified as light intensity industrial
zone pursuant to Ordinance No. 21.

The court is inclined to give more evidentiary weight to the certification of the zoning
administrator being the officer having jurisdiction over the area where the land in question is
situated and is, therefore, more familiar with the property in issue. Besides, this certification
carried the presumption of regularity in its issuance62 and respondents have the burden of
overcoming this presumption. Respondents, however, failed to present any evidence to rebut
that presumption.

Accordingly, since specialized agencies, such as the HUDCC and the Office of the Deputized
Zoning Administrator tasked to determine the classification of parcels of land have already
certified that the subject land is industrial, the Court must accord such pronouncements great
respect, if not finality, in the absence of evidence to the contrary.63

Respondents insist that petitioners’ landholding is not included in the light intensity industrial
zone under Ordinance No. 21, yet, they never submitted any evidence to support their
contention. No maps, such as a zoning map or a land use map, clearly showing that petitioners’
property lies outside the reclassified area were presented by respondents. Instead, what they
presented were: (1) a certification from the Provincial Irrigation Manager stating that several of
the respondents were listed as beneficiaries of the Calapan Dam Irrigators’ Association; (2) a
certification from the Municipal Agriculturist of Calapan declaring that the property is irrigated;
(3) photographs of the irrigation system covering the subject landholding; (4) a letter from the
Chief of the Land Management Service of the DENR Region IV stating that the entire 158.77
hectares of the land in question falls under 18% slope;64 (5) photographs showing that the
property is generally planted with rice;65 and other documents which, however, do not prove nor
support their claim that the property has not been reclassified into non-agricultural use.

Respondents, however, did submit in the proceedings before then DAR OIC Secretary Ponce
an "approved survey plan" commissioned by the DAR allegedly "showing that only about 20
hectares or so would be covered by" Ordinance No. 21. A copy of this plan was nevertheless
not attached to the records of this case thereby making it impossible for this Court to examine
the same and draw its own conclusions therefrom.

At any rate, as already adverted to above, the certification of the deputized zoning administrator
carries more weight by reason of his special knowledge and expertise and the matter under
consideration being under his jurisdiction and competence. He is, therefore, in a better position
to attest to the classification of the property in question.
The best evidence respondents could have presented was a map showing the metes and
bounds and definite delineations of the subject land. Since respondents failed to do so, this
Court is bound to rely on the certifications of the appropriate government agencies with
recognized expertise on the matter of land classification. Thus, through the certifications issued
by the deputized zoning administrator of Calapan City and by the HUDCC, petitioners were able
to positively establish that their property is no longer agricultural at the time the CARL took
effect and, therefore, cannot be subjected to agrarian reform.

A final note: In his Order dated 21 June 2006, then OIC Secretary Pangandaman made mention
of a "report" issued by the MARO of Calapan City claiming that the area covering 100 meters
deep west and 200 meters deep east along the provincial road traversing the property which
was declared in the HUDCC certification dated 8 October 1998 as light industrial has already
been covered by Presidential Decree No. 27.66 Thus, Secretary Pangandaman concluded, there
were already vested rights over the property and can no longer be covered by an application for
exemption.

The records of this case, however, do not contain a copy of the aforementioned
report.1âwphi1 Thus, the Court is unable to scrutinize the same and make a definite ruling
thereon.

In any case, an examination of the records of this case show that the earliest document
evidencing coverage under the CARP of the land subject of this dispute is the published Notice
of Land Valuation and Acquisition dated 20 August 1998. Prior thereto, all documents in
connection with the compulsory acquisition of land for agrarian reform pertain to land covered
by TCT No. T-18192 with an area of 161 hectares, purportedly in the name of Mariquita A.
Luna.67 Clearly, this land is different from the land subject of this case which is covered by TCT
No. J-7205 (T-54199). It may, therefore, be reasonably presumed that the report adverted to
refers to the land covered by TCT No. T-18192 and not to the property under consideration
herein.

The Office of the President was, consequently, correct when it revoked the resolution and order,
respectively, of former OIC Secretaries Ponce and Pangandaman and declared that the Order
of then Secretary Pagdanganan was more in accord with the facts and the law applicable to the
case at bar. Thus, the CA clearly erred when it held that the findings and conclusion of the
Office of the President are not supported by substantial evidence.

WHEREFORE, the Court GRANTS the petition and REVERSES and SETS ASIDE the Decision
dated 13 March 2009 and the Resolution dated 10 June 2009 of the Court of Appeals in CA-
G.R. SP. No. 101114. The Decision of the Office of the President dated 15 December 2006 is
hereby REINSTATED.

SO ORDERED.
G.R. No. 191545

HEIRS OF AUGUSTO SALAS, JR., represented by TERESITA D. SALAS, Petitioners

vs
MARCIANO CABUNGCAL, SERAFIN CASTILLO, DOMINGO M. MANTUANO, MANOLITO
D. BINAY, MARIA M. CABUNGCAL, REMON C. RAMOS, NENITA R. BINAY, DOMINGO L.
MANTUANO, NENITA L. GUERRA, ROSALINA B. MANTUANO, DOMINADOR C.
CASTILLO, LEALINE M. CABUNGCAL, ALBERTO CAPULOY, ALFREDO VALENCIA,
MARIA L. VALENCIA, GERARDO GUERRA, GREGORIO M. LATAYAN, REMEDIOS M.
GUEVARRA, JOSE C. BASCONCILLO, APLONAR TENORIO, JULIANA V. SUMAYA,
ANTONIO C. HERNANDEZ, VERONICA MILLENA, TERSITA D.C. CASTILLO, DANTE M.
LUSTRE, EFIPANIO M. CABUNGCAL, NESTOR V. LATINA, NENITA LLORCA, ROMEL L.
LOMIDA, MARILOU CASTILLO, RUBEN CASTILLO, ARNOLD MANALO, RICARDO
CAPULOY, AMELITA CALIMBAS, ROSALITA C. ELFANTE, LANIE CAMPIT, RODILLO
RENTON, RUSTICO AMAZON A, LUZVIMINDA DE OCAMPO, DANILO DE OCAMPO, JOSE
DARWIN LISTANCO, NEMESIO CABUNGCAL, RENATO ALZATE, BERNARDO AQUINO,
RODRIGO CABUNGCAL, CHON A G. AGUILA, ROSA M. MANTUANO, ALLAN M. LUSTRE,
FELIPE LOQUEZ, DOMINGO MANALO, DOMINADOR M. MANALO, JENNIFER H.
MALIBIRAN, FELIXBERTO RITAN, LEONILA FERRER, TOMAS M. LORENO, CELSO
VALENCIA, CONSTANTINO LUSTRE, REYNALDO C. MALIBIRAN, ORLANDO C.
MALIBIRAN, RICARDO LLAMOSO AND SANTA DIMAYUGA, represented by JOSE C.
BASCONILLO, Respondents

DECISION

LEONEN, J.:

Republic Act No. 6657 or the Comprehensive Agrarian Reform Law generally covers all public
and private agricultural lands.

This resolves a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil
Procedure. The Petition1 is an offshoot of the Court of Appeals Second Division's
Decision2 dated October 26, 2009 and Resolution3 dated March 1, 2010 in the case docketed as
CA-G.R. SP No. 103703.

Augusto Salas, Jr. (Salas) was the registered owner of a vast tract of agricultural
land4 traversing five barangays-Pusil, Bulacnin, Balintawak, Marawoy, and Inosluban-in Lipa
City, Batangas.5 Respondents Marciano Cabungcal, Serafin Castillo, Domingo M. Mantuano,
Manolito D. Binay, Maria M. Cabungcal, Remon C. Ramos, Nenita R. Binay, Domingo L.
Mantuano, Nenita L. Guerra, Rosalina B. Mantuano, Dominador C. Castillo, Lealine M.
Cabungcal, Alberto Capuloy, Alfredo Valencia, Maria L. Valencia, Gerardo Guerra, Gregorio M.
Latayan, Remedios M. Guevarra, Jose C. Basconcillo, Aplonar Tenorio, Juliana V. Sumaya,
Antonio C. Hernandez, Veronica Millena, Tersita D.C. Castillo, Dante M. Lustre, Efipanio M.
Cabungcal, Nestor V. Latina, Nenita llorca, Romel L. Lomida, Marilou Castillo, Ruben Castillo,
Arnold Manalo, Ricardo Capuloy, Amelita Calimbas, Rosalita C. Elfante, Lanie Campit, Rodillo
Renton, Rustico Amazona, Luzviminda De Ocampo, Danilo De Ocampo, Jose Darwin Listanco,
Nemesio Cabungcal, Renato Alzate, Bernardo Aquino, Rodrigo Cabungcal, Chona G. Aguila,
Rosa m. Mantuano, Allan M. Lustre, Felipe Loquez, Domingo Manalo, Dominador M. Manalo,
Jennifer H. Malibiran, Felixberto Ritan, Leonila Ferrer, Tomas M. Lorena, Celso Valencia,
Constantino Lustre, Reynaldo C. Malibiran, Orlando c. Malibiran, Ricardo Llamoso and Santa
Dimayuga, represented by Jose C. Basconillo were tenant farmers in his agricultural land6 and
are agrarian reform beneficiaries under the Comprehensive Agrarian Reform Program.

According to Transfer Certificate of Title (TCT) No. T-2807,7 the agricultural land of Salas had
an aggregate area of 148.4354 hectares (roughly 1.5 million square meters),8 covering Lots 1
and 2.9 Lot 1 spanned 56.1361 hectares,10 while Lot 2 spanned 92.2993 hectares.11

Under Section 312 of Republic Act No. 2264,13 the applicable law at that time, municipal and city
councils were empowered to adopt zoning and subdivision ordinances or regulations, in
consultation with the National Planning Commission.

On February 19, 1977, then President Ferdinand Marcos created the National Coordinating
Council for Town Planning, Housing and Zoning (National Coordinating Council) to prepare and
oversee all government town p1ans, housing, and zoning measures.14

After a year, the National Coordinating Council was dissolved and replaced by the Human
Settlements Regulatory Commission.15 Under Letter of Instruction No. 729, the power of the
local government to convert or reclassify agricultural lands became subject to the approval of
the Human Settlements Regulatory Commission.16

The Human Settlements Regulatory Commission was tasked to "[r]eview, evaluate and approve
or disapprove comprehensive land use development plans and zoning ordinances of local
government[ s]."17

On December 2, 1981, the Human Settlements Regulatory Commission issued Resolution No.
35,18 approving the Town Plan/Zoning Ordinance of Lipa City, Batangas.19 Pursuant to the
approved town plan of Lipa City, Salas' agricultural land was reclassified as a farmlot
subdivision20 for cultivation, livestock production, or agro-forestry.21

Sometime in May 1987, Salas entered into an Owner-Contractor Agreement with Laperal Realty
Corporation (Laperal Realty) for the development, subdivision, and sale of his land.22

On November 17, 1987, the Human Settlements Regulatory Commission, now Housing and
Land Use Regularoty Board (HLURB),23 issued Development Permit No. 7-0370, granting
Laperal Realty a permit for a Nature Farmlots subdivision.24

Salas subdivided Lot 1 into Lots A to C under Psd-04-0262541,25 and Lot 2 into Lots A to K
under Psd-04-0262542.26 A total of 14 subdivided lots were titled in his name, as follows:27

Former Lot 1 Description Area in square meters New Titles Issued

Lot A (Bgy. Inosluban) 234,967 (23.4967 ha.) TCT No. 67660
Lot B (Bgy. Inosluban) 9,366 (.9366 ha.) TCT No. 67661
Lot C (Bgy. Marawoy) 317,028 (31.7028 ha.) TCT No. 67662
Total 561,361 (56.1361 ha.)  
 
Former Lot 2 Description Area in square meters New Titles Issued
 Lot A (Bgy. Balintawak)
Lot B (Bgy. Balintawak)
Lot C (Bgy. Bulacnin)
Lot D (Bgy. Bulacnin)
Lot E (Bgy. Bulacnin)
Lot F (Bgy. Pusil)
Lot G (Bgy. Pusil)
Lot H (Bgy. Pusil)
Lot I (Bgy. Pusil)
Lot J (Bgy. Pusil)
Lot K (Bgy. Pusil)
Total
3,058 (.3058 ha.) TCT No. 67663
90,587 (9.0587 ha.) TCT No. 67664
2,925 (.2925 ha.) TCT No. 67665
75,934 (7.5934 ha.) TCT No. 67666
13,909 (1.3909 ha.) TCT No. 67667
106,509 (10.6509 ha.) TCT No. 67668
60,121 (6.0121 ha.) TCT No. 67669
89,202 (8.9202 ha.) TCT No. 67670
9,086 (.9086 ha.) TCT No. 67671
460,633 (46.0633 ha.) TCT No. 67672
11,029 (1.1029 ha.) TCT No. 67673
922,993 (92.2993 ha.)  

Under Psd-04-027665, Salas further subdivided Lot J into 23 smaller lots, with areas ranging
from .1025 to 2.1663 hectares each.28 Then, he consolidated Lots F, G, and H and subdivided
them into 1 7 smaller lots under Psd-04-003573, with areas ranging from .1546 to 2.0101
hectares each.29

The transfer certificates of title for these subdivided lots were all issued in Salas' name.30

Meanwhile, respondents continued to farm on his landholdings.31

On June 10, 1988, Republic Act No. 665732 was signed into law and became effective on June
15, 1988.33 The law sought to expand the coverage of the government's agrarian reform
program.34 Salas' landholdings were among those contemplated for acquisition and distribution
to qualified farmer beneficiaries.35

Before HLURB, Salas applied for a permission to sell his subdivided lots.36 On July 12, 1988,
HLURB issued a License to Sel137 Phase 1 of the farmlot subdivision, consisting of 31 lots.38

From July 12, 1988 to October 1989, Laperal Realty sold unspecified portions of the subdivided
lots.39

Salas also executed in favor of Laperal Realty a Special Power of Attorney "to exercise general
control, supervision and management of the sale of his land[holdings ]".40

On June 10, 1989, Salas went on a business trip to Nueva Ecija and never came back.41

Pursuant to the Special Power of Attomey,42 Laperal Realty subdivided Salas' property and sold
unspecified portions of these to Rockway Real Estate Corporation and to South Ridge Village,
Inc. on February 22, 1990, as well as to spouses Thelma and Gregorio Abrajano, to Oscar
Dacillo, and to spouses Virginia and Rodel Lava on June 27, 1991.43
The sale of these lots resulted in only 82.5569 hectares of the original 148.4354 hectares
unsold and remaining under Salas' name,44 namely, Lots A to C (from the former Lot 1) and Lots
B and J-7 to J-18 (from the former Lot 2), totaling 16 lots. Thus:45

Salas' remaining lots Area (in hectares) TCT No.

Lot A 23.4967 67660
Lot B 0.9366 67661
Lot C 31.7028 67662
Lot B 9.0587 67664
Lot J-7 1.2159 68223
Lot J-8 1.0757 68224
Lot J-9 1.2158 68225
Lot J-10 1.3356 68226
Lot J-11 1.0000 68227
Lot J-12 1.0000 68228
Lot J-13 1.4802 68229
Lot J-14 2.0443 68230
Lot J-15 1.8060 68231
Lot J-16 2.1663 68232
Lot J-17 1.5454 68233
Lot J-18 1.4769 68234
Total 82.5569 hectares  

Petitioners Heirs of Salas assailed the inclusion of their landholdings, i.e. the 16 lots, under the
Comprehensive Agrarian Reform Program.46 They filed protest letters before the Department of
Agrarian Reform on January 8, 1991, and before the Department of Agrarian Reform
Adjudication Board on April 12, 1991.47

On May 31, 1993, before the protests were resolved, the Municipal Agrarian Reform Officer of
Lipa City sent a Notice of Coverage48 for the landholdings that would be subject to acquisition
and distribution to qualified farmer beneficiaries.

Subsequently, the Department of Agrarian Reform denied petitioners' protest for lack of merit,
while the Department of Agrarian Reform Adjudication Board dismissed it for lack of
jurisdiction.49

The Notice of Land Valuation and Acquisition was sent on December 28, 1993.50
Between 1995 and 1996, agrarian reform beneficiaries were given Certificates of Land
Ownership Award over portions of Salas' landholdings, covering a total area of about 40.8588
hectares.51

Thirteen (13) lots consisting of Lot A (from the former Lot 1) and Lots J-7 to J-18 (from the
former Lot 2) were distributed to agrarian reform beneficiaries.52 The lots were registered in their
names, as follows:53

Lot Former Agrarian Reform Beneficiaries Area (has.) CLOANo.

TCT No.
Lot A 67660 Romeo Mantuano 0.0252 00189533
    Respondent Rustico G. Amazona 0.0277
    Jaime Latayan 0.0308
    Rogelio Q. Valencia 0.0252 00189534
    Jose B. Guerra 0.0359 00189535
    Respondent Gerardo Guerra 0.0327 00189536
    Alberto B. Guerra 0.0384 00189537
    Respondent Nenita M. Llorca 0.0457 00189538
    Respondent Maria L. Valencia 0.0383 00189539
    (Church/basketball court) 0.0843
    Respondent Marciano V. Cabungcal 0.0686 00189542
    Ernesto Latayan 0.0509
    Feliciano Cuenca 0.0578
    Respondent Gregorio M. Latayan 0.0509 00189541
    Francisco Cabungcal 0.0696 00189540
    Antonina Mantuano 0.0729
    Lorenzo Ritan 0.0934
    Bernardo P. Loza 0.0678 00189543
    Respondent Domingo M. Manalo 0.5979 00189544
    Eduardo Castillo 0.5979 00189545
    Respondent Nestor V. Latina 1.1958 00189546
    Romeo Mantuano 1.1958
    Respondent Alfredo L. Valencia 1.1958 00189547
    Sergio I. Valencia 1.1959 00189548
    Manuel L. Castillo 1.1958 00189550
    Respondent Nenita M. Llorca 1.1959 00189551
    Jose V. Malibiran 1.1959 00189552
    Alberto B. Guerra 1.1958 00189553
    Jose B. Guerra 1.1958 00189554
    Respondent Gregorio M. Latayan 1.1957 00189555
    Rustico O. Roxas 1.1959 00189556
    Dominador C. Castillo 0.5979 00189557
    Nemesio V. Cabungcal 0.5957 00189558
    Francisco V. Cabungcal 1.1951 00189559
    Marciano V. Cabungcal 1.1958 00189560
    Mario Castillo 1.1985 00189561
    Mario Castillo 1.1958 00189562
    Rosemarie C. De Guzman 0.5976 00189563
    Rosemarie C. De Guzman 0.5976 00189563
    Ronnie D. Binay 0.5976 00189564
Lot J-7 68223 Jaime and Clemente Latayan 1.2159 00305426
Lot J-8 68224 Amado Conrado Latayan and 1.0757 00305427
Clemente Latayan
Lot J-9 68225 Amado Conrado Latayan and 1.2158 00305428
Clemente Latayan
Lot J- 68226 Candido L. Amazon, et al. 1.3356 00305429
10
Lot J- 68227 Ernesto M. and Diomedes H. 1 00305430
11 Latayan
LotJ-12 68228 Ernesto M. Latayan 1 00305431
LotJ-13 68229   1.4802  
LotJ-14 68230 Conchita M. Latayan 2.0443 00305417
Lot J- 68231 Eugenia v. Latina and Conchita M. 1.8060 00305433
15 Latayan
LotJ-16 68232 Eugenia v. Latina and Gabino 2.1663 00305418
Latayan
    Gabino Latayan 1.5454 00305419
    Gabino Latayan 1.4769 00305434
    Total 40.8588  
 Hectares
 

The 14th lot, Lot C from the former Lot 1, consisting of 31.7028 hectares, was also distributed to
the beneficiaries.54

Thus, of the 16 lots unsold and remaining under Salas' name,55 14 lots were awarded to
agrarian reform beneficiaries.56 Only two lots remained with Salas: 9.0587 hectares (Lot B from
the former Lot 2) and 9.3864 (Lot B from the former Lot 1).57

Meanwhile, the 17th lot, Lot C from the former Lot 2, 0.2925 hectares, was designated as a
school site;58 thus, it was not included in the scope of the agrarian reform program.59

On December 8, 1995, before the Department of Agrarian Reform Adjudication Board, an action
was filed for the cancellation of the Certificates of Land Ownership Award, with a prayer for the
issuance of a temporary restraining order to enjoin the distribution of their landholdings to
qualified farmer beneficiaries.60

By 1996, Salas, Jr. had already been missing for more than seven (7) years.61 On August 6,
1996, Salas' wife, Teresita Diaz Salas (Teresita), petitioned the court to declare him
presumptively dead.62 The court granted the petition on December 12, 1996,63 and Teresita was
appointed as administrator of his estate.64

In 1997, the Department of Agrarian Reform Adjudication Board denied petitioners' action for
the cancellation of respondents' Certificates of Land Ownership Award.65

On July 29, 1997, the Estate of Salas, with Teresita as the administrator, filed an Application for
Exemption/Exclusion from the Comprehensive Agrarian Reform Program for the 17 lots before
the Department of Agrarian Reform.66 This was allegedly not acted upon.67

Meanwhile, the Center for Land Use, Policy, Planning, and Implementation II sought for a
clarification with the HLURB regarding the definition of a farmlot subdivision.68 On July 16, 1998,
then HLURB Commissioner Francisco L. Dagnalan stated that a farmlot subdivision is a
"planned community intended primarily for intensive agricultural activities secondarily for
housing."69 Such farmlot must be "located in the fringes of the urban core of cities and
municipalities."70

On April 29, 2001,71 the Estate of Salas again filed an application for exemption from the
coverage of the Comprehensive Agrarian Reform Program for the 17 parcels of land before the
Department of Agrarian

Reform Center for Land Use, Policy, Planning, and Implementation II.72

Petitioners prayed that an aggregate area of 82.8494 hectares be exempted from the
Comprehensive Agrarian Reform Program.73 Located in Barangays

Bulacnin and Inosluban-Maraouy, Lipa City,74 these lots were as follows:75

   Lots Area (has.) TCT No.
From the former Lot 1 (subdivided under 1. Lot A 23.4967 67660
Psd-04-0262541)
2. Lot B 0.9366 67661
3. Lot C 31.7028 67662
From the former Lot 2 (subdivided under 4. Lot B 9.0587 67664
Psd-04-0262542)
5. Lot C 0.2925 67665
6. LotJ-7 1.2159 68223
7. LotJ-8 1.0757 68224
8. Lot J-9 1.2158 68225
9. LotJ-10 1.3356 68226
10. Lot J-11 1.0000 68227
11. Lot J-12 1.0000 68228
12. Lot J-13 1.4802 68229
13. Lot J-14 2.0443 68230
14. Lot J-15 1.8060 68231
15. Lot J-16 2.1663 68232
16. Lot J-17 1.5454 68233
17. Lot J-18 1.4769 68234
 

The Estate of Salas claimed that the property had been reclassified as non-agricultural prior to
the effectivity of Republic Act No. 6657.76 It anchored the alleged exclusion of the 17 lots on
Department of Justice Opinion No. 44, series of 1990.77

Department of Justice Opinion No. 44 states that the Department of Agrarian Reform's authority
to approve reclassifications of agricultural lands to non-agricultural uses could be exercised only
from the date of the effectivity of Republic Act No. 6657 on June 15, 1988.78 Thus:

Based on the foregoing premises, we reiterate the view that with respect to conversions of
agricultural lands covered by [Republic Act] No. 6657 to non-agricultural uses, the authority of
[Department of Agrarian Reform] to approve such conversions may be exercised from the date
of the law's effectivity on June 15, 1988. This conclusion is based on a liberal interpretation of
[Republic Act] No. 6657 in the light of [Department of Agrarian Reform's] mandate and
extensive coverage of the agrarian reform program.79

On November 21, 2002, the farmer-beneficiaries opposed the estate's petition for
exemption,80 arguing that they had already received Certificates of Land Ownership Award over
the properties.81
To resolve the matter, the Department of Agrarian Reform Center for Land Use, Policy,
Planning, and Implementation II prepared an Investigation Report, which revealed that 14 of the
17 lots were already subjected to agrarian reform and were being paid for by the farmer-
beneficiaries as owners.82 Only Lots B and C of the former Lot 1 were not covered under the
Comprehensive Agrarian Reform Program, while Lot B of the former Lot 2 was pending
inclusion.83

The Department of Agrarian Reform Center for Land Use, Policy, Planning, and Implementation
II also confirmed the presence of agricultural activities in these 17 lots.84 Thus:

2. The southern points, specifically Lot Nos. A [Psd-04-262541 of the former Lot l], B [Psd-04-
0262542 of the former Lot 2], A and J-18 [of the former Lot 2] are planted to corn. Most of the
rest of the area have been cleared in preparation for planting. Patches of grass and shrubs
were also noted;

3. Topography is flat;

4. Land uses of adjacent areas are agricultural and idle agricultural;

5. A dialogue with the farmer-beneficiaries was also conducted. The result of which, among
others[,] are:

a. they have been tilling the properties for several years;

b. they are recipients of [Certificates of Land Ownership Award]; and

c. payments of land amortization are continuously being made to the Land Bank
of the Philippines.

6. Per information given by the DAR Municipal Office, with the exception of Lots B [Psd-04-
0262541] and C [Psd-04-02625241] [,] which were never covered [i.e. not distributed to agrarian
reform beneficiaries,] and Lot B [Psd-04-0262542) [,] the Claim Folder (CF) of which is still at
the DAR Provincial Office, the rest have been distributed to beneficiaries.85 (Emphasis supplied)

On October 15, 2003, the HLURB issued Board Resolution No. 750, stating that "[f]or Farmlot
Subdivision ... there is no change in principal use."86

In an Order87 dated January 7, 2004, then Secretary of Agrarian Reform Roberto Pagdanganan

granted petitioners' application for exemption of the 1 7 lots from the Comprehensive Agrarian
Reform Program.88 The dispositive portion read:

WHEREFORE, premises considered, the application for exemption clearance involving the

herein described parcels of land with an aggregate area of 82.8294 hectares, located at
Barangays Bulacnin and Insoluban-Maraouy, Lipa City[,] Batangas[,] is
hereby GRANTED pursuant to [Department of Agrarian Reform] Administrative Order No. 6,
Series of 1994. Further, petitioner is directed to maintain in peaceful possession the farmer-
beneficiaries therein pending the payment of disturbance compensation due them.

SO ORDERED.89
According to respondents, they were neither informed nor furnished copies of the petitioners'
application for exemption and the Regional Trial Court's January 7, 2004 Order.90 They learned
about the application for exemption91 and the ruling on it only from concerned neighbors92 and
from Marawoy, Lipa City Municipal Agrarian Reform Office personnel,93 who showed them a
copy of the January 7, 2004 Order.94

Respondents moved for reconsideration on February 18, 2004.95 They asserted that the lots
were agricultural and teeming with agricultural activity, as defined under Republic Act No.
6657.96

On September 23, 2005, the Department of Agrarian Reform Center for Land Use, Policy,
Planning, and Implementation Secretariat wrote a letter to HLURB, seeking clarification or
opinion on the classification of a farmlot subdivision.97

On December 19, 2005, HLURB Director Atty. Cesar A. Manuel (Atty. Manuel) replied in writing
to the Department of Agrarian Reform Center for Land Use, Policy, Planning, and
Implementation,98 stating that under HLURB Rules, a farmlot subdivision is considered within an
agricultural zone.99 Moreover, notwithstanding the reclassification, a farmlot subdivision's
principal use for farming has remained.100

In an Order dated September 19, 2006, then Officer-In-Charge Secretary of Agrarian Reform
Nasser Pangandaman granted101 respondents' motion for reconsideration and set aside the
January 7, 2004 Order. The dispositive portion read:

WHEREFORE, premises considered the MOTION FOR RECONSIDERATION (MR) filed by the

movant-oppositors, Mariano Cabungacal, et al, is hereby GRANTED SETTING ASIDE THE
ORDER dated 07 January 2004 issued by then Secretary Roberto M. Pagdanganan to Mr.
Augusto Salas, Jr. The CLOA holders on the area of 40.8588 hectares shall continue the
maintenance of the land while the [Provincial Agrarian Reform Office] and the [Municipal
Agrarian Reform Office] is directed to look into the possibility of covering the remaining portion
of the subject property.

SO ORDERED.102

Petitioners appealed the September 19, 2006 Order before the Office of the President.103

In a Decision104 dated June 29, 2007, the Office of the President set aside the September 19,
2006 Order and reinstated the January 7, 2004 Order of the Department of Agrarian Reform.

Respondents moved for reconsideration, but this was denied on April 23, 2008.105

Respondents appealed before the Court of Appeals.106 In a Decision107 dated October 26, 2009,
the Court of Appeals granted respondents' petition, reversed the June 29, 2007 Office of the
President Decision, and reinstated the September 19, 2006 Department of Agrarian Reform
Order.

Petitioners moved for reconsideration, which the Court of Appeals denied on March 1, 2010.108
Thus, on March 25, 2010, petitioners filed a Petition for Review on Certiorari109 with this Court.
The petition was granted due course.110

On November 9, 2010, petitioners moved for the issuance of a temporary restraining

order. 111 They attached an affidavit of Gloria Linang Mantuano (Gloria) in support of their
motion.112 Based on her affidavit, Gloria was told by unnamed tenants that respondents and
agrarian reform beneficiaries Ricardo Capuloy, Rodrigo Cabungcal, Celso Valencia, Danilo de
Ocampo, and Gerardo Guerra were able to sell their lands.113

In a Resolution dated November 22, 2010, petitioners' prayer for a temporary restraining order
was granted.114 It stated that "[t]he consummation of acts leading to the disposition of the
litigated property can make it difficult to implement this Court's decision[.]"115

On January 31, 2011, this Court resolved to approve the bond amounting to ₱2,000,000.00 and
issue the temporary restraining order in favor of petitioners.116

On November 12, 2013, Jose C. Basconillo (Basconillo), one of the respondents, sent a letter to
this Court, questioning the propriety of issuing a temporary restraining order based merely on
Gloria's affidavit.117 Casting doubt on Gloria's credibility, Basconillo said that she was not even
part of the land reform beneficiaries.118 Further, she lived in Barangay Balintawak, as stated in
her Salaysay,119 and not in Barangay Inosluban-Marawoy or in Barangay Buclanin, where the
lots allegedly disposed of were located.

The principal issue in this case is whether the reclassification of petitioners' agricultural land as
a farmlot subdivision exempts the Estate of Salas from the coverage of the Comprehensive
Agrarian Reform Program under Republic Act No. 6657. Subsumed in this matter are the
following ISsues:

(a) Whether Republic Act No. 6657 covers lands classified into nonagricultural uses prior to its
effectivity;

(b) Whether Salas' farmlot subdivision falls under an "agricultural land" as defined by applicable
laws; and

(c) Whether the 17 lots are covered under the Comprehensive Agrarian Reform Program.

The 1987 Constitution mandates the just distribution of all agricultural lands, subject to the limits
prescribed by Congress. Under Article II, Section 21 of the Constitution, "[t]he State shall
promote comprehensive rural development and agrarian reform." Article XIII, Section 4 provides
that an agrarian reform program shall be carried out in the country:

Section 4. The State shall, by law, undertake an agrarian reform program founded on the rights
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.

On June 10, 1988, Republic Act No. 6657 or the Comprehensive Agrarian Reform Law was
enacted to fulfill this constitutional mandate.

The Comprehensive Agrarian Reform Law covers all public and private agricultural lands, as
provided in Proclamation No. 131120 and Executive Order No. 229,121 including other lands of the
public domain suitable for agriculture, regardless of tenurial arrangement and commodity
produced.122 However, a maximum of five (5) hectares of the landowner's compact or
contiguous landholdings may not be distributed to qualified beneficiaries, as it is within the
landowner's rights to retain this area.123

The Comprehensive Agrarian Reform Program covers the following lands: (1) all alienable and
disposable lands of the public domain devoted to or suitable for agriculture; (2) all lands of the
public domain exceeding the total area of five hectares and below to be retained by the
landowner; (3) all government-owned lands that are devoted to or suitable for agriculture; and
(4) all private lands devoted to or suitable for agriculture, regardless of the agricultural products
raised or can be raised on these lands.124

Meanwhile, Section 10 of the Comprehensive Agrarian Reform125 provides the types of lands

that are excluded therefrom:

1. Lands that are actually, directly and exclusively used for parks, wildlife, forest reserves,
reforestation, fish sanctuaries and breeding grounds, and watersheds and mangoes;

2. Private lands that are actually, directly and exclusively used for prawn farms and fishponds;126

3. Lands that are actually, directly and exclusively used and found to be necessary for:

a. National defense;

b. School sites and campuses including experimental farm stations operated by

public or private schools for educational purposes;

c. Seeds and seedling research and pilot production center;

d. Church sites and convents appurtenant thereto;

e. Mosque sites and Islamic centers appurtenant thereto;

f. Communal burial grounds and cemeteries;

g. Penal colonies and penal farms actually worked by the inmates; and

h. Government and private research and quarantine centers.

4. All lands where the topography is hilly, i.e. with at least eighteen percent (18%) slope and
over, and are not developed for agriculture.
The Comprehensive Agrarian Reform Law covers all agricultural lands, save for those not used
or suitable for agricultural activities.1âwphi1

The law defines agricultural land as "land devoted to agricultural activity ... and not classified as
mineral, forest, residential, commercial or industrial land."127 For agricultural land to be
considered devoted to an agricultural activity, there must be "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."128

Aside from being devoted to an agricultural activity, the land must, likewise, not have been
classified as mineral, forest, residential, commercial, or industrial land. Administrative Order No.
01-90 states:

III. Coverage

Agricultural land refers to those devoted to agricultural activity as defined in [Republic Act 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 and Land Use Regulatory Board (HLURB) and its
preceding authorities prior to 15 June 1988 for residential, commercial, or industrial use.

Section 65 of Republic Act No. 6657,129 as reiterated by Administrative Order No. 01-90, states
that reclassification or conversion of agricultural lands into non-agricultural lands is subject to
the approval of the Department of Agrarian Reform. The law has given the Department of
Agrarian Reform the power to "approve or disapprove applications for conversion ... of
agricultural lands into non-agricultural uses[,]"130 such as "residential, commercial, industrial, and
other land uses ... "131

Before the effectivity of Republic Act No. 6657 on June 15, 1988, the Department of Agrarian
Reform had no authority to approve the conversion or reclassification of agricultural lands by
local governments. Under Section 3 of Republic Act No. 2264, local governments had the power
to approve reclassification of agricultural lands. Municipal and city councils could adopt zoning
and subdivision ordinances or regulations reclassifying agricultural lands in consultation with the
National Planning Commission.132

The question of whether the reclassification by local governments prior to the enactment of
Republic Act No. 6657 still needed the approval of the Department of Agrarian Reform was
raised by then Secretary of Agrarian Reform Florencio Abad to the Department of Justice.133 In
response, then Secretary of Justice Franklin M. Drilon issued Department of Justice Opinion No.
44 on March 16, 1990, stating that the conversion of agricultural lands covered by Republic Act
No. 6657 did not need the authority of the Department of Agrarian Reform before the date of
effectivity of Republic Act No. 6657 on June 15, 1988.134 The Department of Agrarian Reform's
authority to approve conversions only began on June 15, 1988.135

In light of Department of Justice Opinion No. 44, the Department of Agrarian Reform issued
Administrative Order No. 06-94136 to streamline the issuance of exemption clearances by the
Department of Agrarian Reform. It affirms the rule that a local government reclassification
before June 15, 1988 does not need the approval of the Department of Agrarian Reform.137
In Natalia Realty Inc. v. Department of Agrarian Reform,138 lands not devoted to agricultural
activity, including lands previously converted to nonagricultural use prior to the effectivity of
Republic Act No. 6657 by government agencies other than the Department of Agrarian Reform,
were declared outside the coverage of the Comprehensive Agrarian Reform Law. Thus:

Indeed, lands not devoted to agricultural activity are outside the coverage of [Comprehensive
Agrarian Reform Law]. These include lands previously converted to non-agricultural uses prior
to the effectivity of [Comprehensive Agrarian Reform Law] by government agencies other than
respondent [Department of Agrarian Reform] ...

….

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 [Comprehensive Agrarian Reform Law].139

II

As a general rule, agricultural lands that were reclassified as commercial, residential, or

industrial by the local government, as approved by the HLURB,140 before June 15, 1988 are
excluded from the Comprehensive Agrarian Reform Program.

A farmlot is not included in any of these categories.

Respondents correctly argue that the 17 lots are still classified and devoted to agricultural
uses.141 The definition of a "farmlot subdivision" under the HLURB Rules and Regulations
Implementing Farmlot Subdivision Plan (HLURB Regulations) leaves no doubt that it is an
"agricultural land" as defined under Republic Act No. 3844.

Rule V, Section 18 (d) of the BLURB Regulations provides:

….

d. A Farmlot Subdivision - is a planned community intended primarily for intensive agricultural

activities and secondarily for housing. A planned community consists of the provision for basic
utilities judicious allocation of areas, good layout based on sound planning principles.
(Emphasis supplied)

Under the HLURB Regulations, a farmlot for varied farm activities, such as milking cow and
raising poultry,142 is allowed only on a "backyard scale"143 or a small-scale operation, and not for
mass production. In a farmlot for agro-industrial purposes, the maximum buildable area for food
processing or preservation is limited144 to only twenty-five percent (25%) of the total lot
area.145 Likewise, a rice mill must be less than 300 square meters in size, and must be more
than one hectare away from another mill.146

In contrast, under Rule 2, Section 9 (G) of the BLURB Regulations, a farmlot subdivision plan
for planting tree crops, mixed orchard, or diversified crops has none of these restrictions in
scale, size, or use, thus recognizing a farmlot subdivision's principal use for farming.
The BLURB Regulations also provide for the minimum site criteria for a farmlot subdivision plan.
First, it must be near a marketplace where the farm produce can be utilized and marketed.
Second, it must meet the needs of farming activities. Third, the topography, soil, and climate
must be suited for planting crops.147 These highlight a farmlot subdivision's primarily agricultural
nature.148 Thus:

SECTION 7. SITE CRITERIA. Farmlots subdivision shall conform to the following criteria:

A. Accessibility.

The site must be accessible to transportation lines. Road, railroad facilities should add to the
site's proximity to market center and industries where farm produce maybe utilized.

B. Availability of Community Services and Facilities

Basic utilities like roads and water sources must be found and readily available to adequately
serve the needs of the intended/prospective farm activities. Where available, subdivision
development must include the provision of power lines to the farm lots.

C. Distance from the Urban Centers

Farmlot subdivisions must be away from the center of Metro Manila and/or in the fringes of the
urban core of the metropolis and of cities and municipalities. However, they shall be accessible
from employment centers and population centers where the products of the farmlots can be
readily marketed.

D. Physical suitability of the site varies with respect to the intended farm activities within the
subdivisions. Natural features considered for varied activities are slope, climate/temperature
and types of soil.

Even succeeding HLURB issuances affirm the agricultural use of a farmlot subdivision.

In 2003, the HLURB declared that devoting an agricultural land into a farmlot subdivision does
not change its principal use for agricultural activities.149 HLURB Director Atty. Manuel's letter
dated December 19, 2005 also confirmed that a farmlot subdivision is considered to be within
an agricultural zone.150

Moreover, HLURB Board Resolution Nos. 922-14,151 926-15,152 and 921-14153 all state that a

farmlot subdivision is "primarily intended for agricultural production, with a minimum lot area of
1,000 sq.m. and with a twenty-five percent (25%) maximum allowable buildable area." HLURB
Memorandum Circular No. 001-15154 reiterates the same definition.

The records show that the 17 lots are agricultural in nature. In its Investigation Report, the
Department of Agrarian Reform Center for Land Use, Policy, Planning, and Implementation II
found that the lots, being flat, were suitable for cultivating crops, and had been cleared for
planting, or were planted with corn.155 The areas covered by the original TCT No. T- 2807 had
been tilled for several years156 and had been found to be irrigable.157 Even the "[l]and uses of
adjacent areas are agricultural and idle agricultural" in nature.158
The reclassification of Salas' landholding into a farmlot subdivision, although effected before
Republic Act No. 6657, has not changed the nature of these agricultural lands, the legal
relationships existing over such lands, or the agricultural usability of the lands. Thus, these lots
were properly subjected to compulsory coverage under the Comprehensive Agrarian Reform
Law.

Invoking Natalia Realty v. Department of Agrarian Reform,159 petitioners argue for the exclusion

of the 17 lots.160 They claim that, as in Natalia, a zoning ordinance prior to the effectivity of
Republic Act No. 6657 prescribed the uses for the landholdings as non-agricultural; therefore,
these lots are exempted from the Comprehensive Agrarian Reform Program.161

Petitioners cite other cases where, with the approval of BLURB, the local government converted
agricultural lands into residential162 or commercial163 lands, or reclassified an agricultural zone
into an urban zone164 prior to June 15, 1988. Unfortunately, none of these cases applies.

For instance, Natalia165 involves a land that was converted into a town site or residential land,
intended for residential use. De Guzman v. Court of Appeals166 involves a land that was
converted into a wholesale market complex, intended for commercial use. Agrarian Reform
Beneficiaries Association v. Nicolas167 involves the reclassification of a farming area into an
urban zone.

Meanwhile, this case involves a land that was reclassified as a "farmlot subdivision," intended
for "intensive agricultural activities."168 Likewise, located away from the city center,169 the farmlot
subdivision has not been developed into an urban zone.

When Salas' agricultural land was reclassified as a farmlot subdivision, the applicable law was
Republic Act No. 3844, as amended.170

Republic Act No. 3844, sought "to make the small farmers more independent, self-reliant and
responsible citizens, and a source of genuine strength in our democratic society."171 Thus,
Republic Act No. 3844 established the Land Authority172 to initiate proceedings for the
acquisition of private agricultural lands,173 and the subdivision of these lands into economic
family-size farm units for resale to bona fide tenants, occupants, and qualified farmers.174

Section 166 (1) of Republic Act No. 3844 defined an agricultural land as "land devoted to any
growth, including but not limited to crop lands[.]"175 The law neither made reference to a "farmlot
subdivision," nor did it exclude a farmlot from the definition of an agricultural land.

Not being excluded, Salas' landholdings were thus contemplated in the definition of an
agricultural land under Republic Act No. 3844.

Likewise, Republic Act No. 6657 does not exclude a farmlot subdivision from the definition of an
agricultural land. Section 3(c) of Republic Act No. 6657 states that agricultural lands refer to
"land devoted to agricultural activity . . . and not classified as mineral, forest, residential,
commercial, or industrial land." Section 76 expressly provides that any other definition
inconsistent with Republic Act No. 6657 has been repealed by this law.176

III
Insisting on the exclusion of the 17 lots from the Comprehensive Agrarian Reform Program,
petitioners rely on the definition of an agricultural land under the HLURB Regulations. Rule V,
Section 18 (e) states that agricultural lands are "parcels of land ranging from 0.2 to 50 or more
hectares ... exclusively or predominantly used for cultivation, livestock production and agro-
forestry without the intended qualities of the farmlot subdivision."

A farmlot subdivision has the following intended qualities under the HLURB Regulations: it is a
planned community primarily for intensive agricultural activities, and secondarily for housing.177

Petitioners argue that, to be considered an agricultural land, the property must be used
exclusively for agricultural purposes and cannot be used secondarily for housing.178 Since the
reclassification as a farmlot subdivision rendered the lots no longer exclusively for agricultural
purposes, then these lots ceased to be agricultural land.179

Petitioners are mistaken.

First, an executive regulation cannot go beyond the law.180 Republic Act No. 3844 (1963)
broadly defined an agricultural land as "land devoted to any growth, including but not limited to
crop lands."181 Republic Act No. 6657, as amended, also broadly defines agricultural land as
land devoted to agricultural activity.182 In contrast, the HLURB Regulations restrict the definition
of agricultural lands to those lands "exclusively or predominantly used for cultivation," not being
a farmlot subdivision.183

In limiting the definition of an agricultural land to one "without the intended qualities of a farmlot
subdivision," the HLURB Regulations are overriding, supplanting, and modifying a statutory
definition. This is prohibited. A mere executive issuance cannot alter, expand, or restrict the
provisions of the law it seeks to enforce.184

It bears stressing that neither Republic Act No. 3844 nor Republic Act No. 6657 excludes a
farmlot subdivision, which is primarily agricultural in nature, from the definition of an agricultural
land.

Second, in case of doubt, any other definition of an agricultural land inconsistent with the law,
such as that found under the HLURB Regulations, has been expressly185 repealed by Section 76
of Republic Act No. 6657.

Republic Act No. 6657 never required that a landholding must be exclusively used for
agricultural purposes to be covered by the Comprehensive Agrarian Reform Program. What
determines a tract of land's inclusion in the program is its suitability for any agricultural activity.

The Department of Agrarian Reform Administrative Order No. 01-90 (Revised Rules and
Regulations Governing Conversion of Private Agricultural Lands to Non-Agricultural Uses)
defines agricultural land as follows:

III. Coverage

Agricultural land refers to those devoted to agricultural activity as definedin [Republic Act 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 and Land Use Regulatory Board (HLURB) and its
preceding authorities prior to 15 June 1988 for residential, commercial, or industrial use.

We parse this definition into its three elements. Agricultural lands consist of lands:

(1) Devoted to agricultural activity, as defined in Republic Act No. 6657;

(2) Not classified as mineral or forest by the Department of Environment and Natural
Resources; and

(3) Prior to June 15, 1988, not classified for residential, commercial, or industrial use under a
local government town plan and zoning ordinance, as approved by the BLURB (or its
predecessors, the National Coordinating Council and the Human Settlements Regulatory
Commission).

Salas' farmlot subdivision fulfills these elements.

For the first element, the lots are devoted to agricultural activity.

Agricultural activity refers to 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."186

Petitioners never denied the continued existence of agricultural activity within these lots.187

Moreover, the Department of Agrarian Reform Center for Land Use, Policy, Planning, and
Implementation II, as affirmed by the Court of Appeals, found that the estate's landholdings
have been used for agricultural purposes.188

In issuing a Notice of Coverage and Notice of Valuation to the Estate of Salas,189 the Municipal
Agrarian Reform Office also found that the lots are for agricultural use, and therefore, covered
under the Comprehensive Agrarian Reform Program.190 The awarding of the lands191 to the
agrarian reform beneficiaries bolsters the agricultural activity present in them.

For the second element, it is undisputed that the lots have not been declared as mineral or
forest lands by the Department of Environment and Natural Resources.1avvphi1 No application
has been filed to declare the landholdings as mineral or forest lands, and neither has the
Department of Environment and Natural Resources ever declared the properties as such.

As to the third element, the lands were not classified by the Lipa City Town Plan/Zoning
Ordinance as commercial, residential, or industrial lands prior to June 15, 1988. Rather, the
reclassification, which was approved by HLURB's predecessor agency, was that of a "farmlot
subdivision."192

Section 4 (d) of Republic Act No. 6657 covers "[a]ll private lands devoted to or suitable for
agriculture[,] regardless of the agricultural products raised or that can be raised thereon." As the
estate's private lands are (a) devoted to or suitable for agriculture; and (b) not classified as
mineral, forest, residential, commercial, or industrial, then these may be included in the
Comprehensive Agrarian Reform Program.

Finally, whenever there is reasonable uncertainty in the interpretation of the law, the balance
must be tilted in favor of the poor and underprivileged.193

Republic Act No. 6657 was enacted as social legislation, pursuant to the policy of the State to
pursue a Comprehensive Agrarian Reform Program.194 Agrarian reform is the means towards a
viable livelihood and, ultimately, a decent life for the landless farmers.

In Perez-Rosario v. Court of Appeals:195

Agrarian reform is a perceived solution to social instability. The edicts of social justice found in
the Constitution and the public policies that underwrite them, the extraordinary national
experience, and the prevailing national consciousness, all command the great departments of
government to tilt the balance in favor of the poor and underprivileged whenever reasonable
doubt arises in the interpretation of the law. But annexed to the great and sacred charge of
protecting the weak is the diametric function to put every effort to arrive at an equitable solution
for all parties concerned: the jural postulates of social justice cannot shield illegal acts, nor do
they sanction false sympathy towards a certain class, nor yet should they deny justice to the
landowner whenever truth and justice happen to be on her side. In the occupation of the legal
questions in all agrarian disputes whose outcomes can significantly affect societal harmony, the
considerations of social advantage must be weighed, an inquiry into the prevailing social
interests is necessary in the adjustment of conflicting demands and expectations of the people,
and the social interdependence of these interests, recognized.196 (Emphasis supplied, citations
omitted)

The general policy of Republic Act No. 6657 is to cover as many lands suitable for agricultural
activities as may be allowed.197

Where there is doubt as to the intention of the local government in the area where the property
is located, the interpretation should be towards the declared intention of the law.

WHEREFORE, the petition filed by Heirs of Augusto Salas is DENIED, and the Decision of the
Court of Appeals Second Division, Manila, promulgated on October 20, 2009 in CA-G.R. SP No.
103703, is AFFIRMED.

The temporary restraining order dated November 22, 2010 is PERMANENTLY LIFTED.

SO ORDERED.
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 and Manotok 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 of Chavez 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, 24 for 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.
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.,"35 which 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.44 After 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,75 enjoining 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-executory and 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 6,296 individuals as qualified FWBs. And under the 30-year stock distribution
program envisaged under the plan, FWBs who came in after 1989, new FWBs in fine, may be
accommodated, as they appear to have in fact been accommodated as evidenced by their
receipt of HLI shares.

Now then, by providing that the number of shares of the original 1989 FWBs shall depend on
the number of "man days," HLI violated the 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:

x x x           x x x          x x x

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.’

x x x           x x x          x x x

"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. 89-12-2,165 and 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.
G.R. No. 209384

URBANO F. ESTRELLA, Petitioner vs. PRISCILLA P. FRANCISCO, Respondent.

DECISION

BRION, J.:

This petition for review on certiorari seeks to reverse and set aside the November 28, 2012
resolution 1 of the Court of Appeals (CA) in CA-G.R. SP No. 121519. 2 The CA dismissed
petitioner Urbano F. Estrella's (Estrella) appeal from the Department of Agrarian Reform
Adjudication Board's (DARAB) February 23, 2009 decision 3 in DARAB Case No.
13185 which denied Estrella's right of redemption over an agricultural landholding.

ANTECEDENTS

Lope Cristobal (Cristobal) was the owner of a twenty-three thousand nine hundred and thirty-
three square meter (23,933 sqm.) parcel of agricultural riceland (subject
landholding) in Cacarong Matanda, Pandi,

Bulacan, covered by Transfer Certificate of Title (TCT) No. T-248106 of the Register of Deeds

of Bulacan. Estrella was the registered agricultural tenant-lessee of the subject landholding.

On September 22, 1997, Cristobal sold the subject landholding to respondent Priscilla Francisco
(Francisco) for five hundred thousand pesos (₱500,000.00),4 without notifying Estrella.

Upon discovering the sale, Estrella sent Cristobal a demand letter dated March 31, 1998, for the
return of the subject landholding.5 He also sent Francisco a similar demand letter dated July 31,
1998. Neither Cristobal nor Francisco responded to Estrella’s demands.6

On February 12, 2001, Estrella filed a complaint7 against Cristobal and Francisco for legal
redemption, recovery, and maintenance of peaceful possession before the Office of the
Provincial Agrarian Reform Adjudicator (PARAD). His complaint was docketed as DCN. R-03-
02-2930’01.

Estrella alleged that the sale between Cristobal and Francisco was made secretly and in bad
faith, in violation of Republic Act No. (R.A.) 3844, the Agricultural Land Reform Code (the
Code).8He insisted that he never waived his rights as a registered tenant over the property and
that he was willing to match the sale price. Estrella concluded that as the registered tenant, he
is entitled to legally redeem the property from Francisco. He also manifested his ability and
willingness to deposit the amount of ₱500,000.00 with the PARAD as the redemption price.9

Cristobal did not file an answer while Francisco denied all the allegations in the complaint
except for the fact of the sale.10 Francisco claimed that she was an innocent purchaser in good
faith because she only bought the property after: (1) Cristobal assured her that there would be
no problems regarding the transfer of the property; and (2) Cristobal personally undertook to
compensate Estrella. Therefore, Estrella had no cause of action against her.
On June 23, 2002, the PARAD rendered its decision recognizing Estrella’s right of
redemption.11 The PARAD found that neither Cristobal nor Francisco notified Estrella in writing
of the sale. In the absence of such notice, an agricultural lessee has a right to redeem the
landholding from the buyer pursuant to Section 12 of the Code.12

Francisco appealed the PARAD’s decision to the DARAB where it was docketed as DARAB
Case No. 13185.

On February 23, 2009, the DARAB reversed the PARAD’s decision and denied Estrella the right
of redemption.13 Citing Section 12 of the Code as amended, the DARAB held that the right of
redemption may be exercised within 180 days from written notice of the sale. Considering that
more than three years had lapsed between Estrella’s discovery of the sale and his filing of the
case for redemption, the DARAB concluded that Estrella slept on his rights and lost the right to
redeem the landholding.

Estrella moved for reconsideration but the DARAB denied the motion.

On September 30, 2011, Estrella filed a motion before the CA to declare himself as a pauper
litigant and manifested his intention to file a petition for review of the DARAB’s decision.14 He
alleged that he was living below the poverty line and did not have sufficient money or property
for food, shelter, and other basic necessities.

On October 17, 2011, Estrella filed a petition for review15 of the DARAB’s decision before the
CA. The petition was docketed as CA-G.R. SP No. 121519.

Estrella emphasized that the purpose of the State in enacting the agrarian reform laws is to
protect the welfare of landless farmers and to promote social justice towards establishing
ownership over the agricultural land by the tenant-lessees.16 He insisted that the DARAB erred
in denying him the right of redemption based on a technicality and that the redemption period in
Sec. 12 of the Code does not apply in his case because neither the lessor nor the vendee
notified him in writing of the sale.17

On November 28, 2012, the CA dismissed Estrella’s petition for review for failure to show any
reversible error in the DARAB’s decision.18 Estrella received a copy of the CA’s resolution on
April 10, 2013.19

On April 11, 2013, Estrella filed a motion for a twenty-day extension of time (or until April 31,
2013) to file his motion for reconsideration of the November 28, 2012 resolution.20

On April 30, 2013, Estrella requested another ten-day extension of time (or until May 9, 2013) to
file his motion for reconsideration.21

On May 9, 2013, Estrella filed his Motion for Reconsideration arguing that his right of
redemption had not yet prescribed because he was not given written notice of the sale to
Francisco.22

On May 30, 2013, the CA denied Estrella’s motions for extension of time, citing the rule that the
reglementary period to file a motion for reconsideration is non-extendible. 23 The CA likewise
denied Estrella’s Motion for Reconsideration.
Hence, the present recourse to this Court.

On August 23, 2013, Estrella filed a motion for extension of time to file his petition for review
and a motion to be declared as a pauper litigant.24 We granted both motions on October 13,
2013.

THE PARTIES’ ARGUMENTS

Estrella argues that an agricultural tenant’s right of redemption over the landholding cannot
prescribe when neither the lessor-seller nor the buyer has given him written notice of the sale.

On the other hand, Francisco counters that Estrella failed to make a formal tender of or to
consign with the PARAD the redemption price as required in Quiño v. Court of Appeals.  25 She
also questioned the genuineness of Estrella’s claim to be a pauper litigant. Francisco points out
that a person who claims to be willing to pay the redemption price of ₱500,000.00 is not, by any
stretch of the imagination, a pauper.26

OUR RULING

We find no merit in the petition.

The use and ownership of property bears a social function, and all economic agents are
expected to contribute to the common good.27 To this end, property ownership and economic
activity are always subject to the duty of the State to promote distributive justice and intervene
when the common good requires.28

As early as 1973, the Philippines has already declared our goal of emancipating agricultural
tenants from the bondage of the soil.29 The State adopts a policy of promoting social justice,
establishing owner cultivatorship of economic-size farms as the basis of Philippine agriculture,
and providing a vigorous and systematic land resettlement and redistribution program.30

In pursuit of land reform, the State enacted the Agricultural Land Reform Code in 1963. The
Code established an agricultural leasehold system that replaced all existing agricultural share
tenancy systems at that point.

The existence of an agricultural tenancy relationship between the lessor and the lessee gives
the latter rights that attach to the landholding, regardless of whoever may subsequently become
its owner.31 This strengthens the security of tenure of the tenants and protects them from being
dispossessed of the landholding or ejected from their leasehold by the death of either the lessor
or of the tenant, the expiration of a term/period in the leasehold contract, or the alienation of the
landholding by the lessor.32 If either party dies, the leasehold continues to bind the lessor (or his
heirs) in favor of the tenant (or his surviving spouse/descendants). In case the lessor alienates
the land, the transferee is subrogated to the rights and substituted to the obligations of the
lessor-transferor. The agricultural leasehold subsists, notwithstanding the resulting change in
ownership of the landholding, and the lessee’s rights are made enforceable against the
transferee or other successor-in-interest of the original lessor.

To protect the lessee’s security of tenure, the Code grants him the right of pre-emption – the
preferential right to buy the landholding under reasonable terms and conditions if ever the
agricultural lessor decides to sell it.33 As an added layer of protection, the Code also grants him
the right to redeem the landholding from the vendee in the event that the lessor sells it without
the lessee’s knowledge.34

Originally, the lessee had a redemption period of two years from registration of the sale:

Sec. 12. Lessee’s Right of Redemption – In case the landholding is sold to a third person
without the knowledge of the agricultural lessee, the latter shall have the right to redeem the
same at a reasonable price and consideration: Provided, That the entire landholding sold must
be redeemed: Provided, further, That where there are two or more agricultural lessees, each
shall be entitled to said right of redemption only to the extent of the area actually cultivated by
him. The right of redemption under this Section may be exercised within two years from the
registration of the sale, and shall have priority over any other right of legal redemption.35

In Padasas v. Court of Appeals,36 we held that a lessee’s actual knowledge of the sale of the
landholding is immaterial because the Code specifically and definitively provides that the
redemption period must be counted from the registration of the sale. This ruling was
subsequently affirmed in Manuel v. Court of Appeals.37

In 1971, R.A. 6389 amended Section 12 of the Code and shortened the redemption period:

Sec. 12. Lessee’s right of Redemption. – In case the landholding is sold to a third person
without the knowledge of the agricultural lessee, the latter shall have the right to redeem the
same at a reasonable price and consideration: Provided, That where there are two or more
agricultural lessees, each shall be entitled to said right of redemption only to the extent of the
area actually cultivated by him. The right of redemption under this Section may be
exercised within one hundred eighty days from notice in writing which shall be served by
the vendee on all lessees affected and the Department of Agrarian Reform upon the
registration of the sale, and shall have priority over any other right of legal redemption. The
redemption price shall be the reasonable price of the land at the time of the sale.

Upon the filing of the corresponding petition or request with the department or corresponding
case in court by the agricultural lessee or lessees, the period of one hundred and eighty days
shall cease to run.

Any petition or request for redemption shall be resolved within sixty days from the filing thereof;
otherwise, the said period shall start to run again.1âwphi1

The Department of Agrarian Reform shall initiate, while the Land Bank shall finance, said
redemption as in the case of pre-emption. 38 [emphases and underscoring supplied]

In Mallari v. Court of Appeals,39 we held that the lessee’s right of redemption will not prescribe if
he is not served written notice of the sale. We affirmed this ruling in Springsun Management
Systems v. Camerino40 and Planters Development Bank v. Garcia.  41

More recently in Po v. Dampal,42 we held that the failure of the vendee to serve written notice of
the sale to the lessee and the DAR prevents the running of the 180-day redemption period; the
lessee’s constructive knowledge of the sale does not dispense with the vendee’s duty to give
written notice.
Simply put, Section 12 expressly states that the 180-day period must be reckoned from written
notice of sale. If the agricultural lessee was never notified in writing of the sale of the
landholding, there is yet no prescription period to speak of.43

As the vendee, respondent Francisco had the express duty to serve written notice on Estrella,
the agricultural lessee, and on the DAR. Her failure to discharge this legal duty prevented the
commencement of the 180-day redemption period. Francisco only gave written notice of the
sale in her answer44 before the PARAD wherein she admitted the fact of the sale.45 Thus,
Estrella timely exercised his right of redemption. To hold otherwise would allow Francisco to
profit from her own neglect to perform a legally mandated duty.

However, despite the timely filing of the redemption suit, Estrella did not validly exercise his right
to redeem the property. As early as 1969 in Basbas v. Entena,46 this Court had already held that
the valid exercise of the right of redemption requires either tender of the purchase price or valid
consignation thereof in Court:

x x x the right of legal redemption must be exercised within specified time limits: and the
statutory periods would be rendered meaningless and of easy evasion unless the redemptioner
is required to make an actual tender in good faith of what he believed to be the reasonable price
of the land sought to be redeemed. The existence of the right of redemption operates to depress
the market value of the land until the period expires, and to render that period indefinite by
permitting the tenant to file a suit for redemption, with either party unable to foresee when final
judgment will terminate the action, would render nugatory the period of two years [now 180
days] fixed by the statute for making the redemption and virtually paralyze any efforts of the
landowner to realize the value of his land. No buyer can be expected to acquire it without any
certainty as to the amount for which it may be redeemed, so that he can recover at least his
investment in case of redemption. In the meantime, the landowner’s needs and obligations
cannot be met. It is doubtful if any such result was intended by the statute, absent clear wording
to that effect.

The situation becomes worse when, as shown by the evidence in this case, the redemptioner
has no funds and must apply for them to the Land Authority, which, in turn, must depend on the
availability of funds from the Land Bank. It then becomes practically certain that the landowner
will not be able to realize the value of his property for an indefinite time beyond the two years
redemption period.47

After the amendment of Section 12 of the Code, a certification from the Land Bank that it will
finance the redemption will also suffice in lieu of tender of payment or consignation.48

In the present case, Estrella manifested his willingness to pay the redemption price but failed to
tender payment or consign it with the PARAD when he filed his complaint. To be sure, a
tenant’s failure to tender payment or consign it in court upon filing the redemption suit is not
necessarily fatal; he can still cure the defect and complete his act of redemption by consigning
his payment with the court within the remaining prescriptive period.49

Ordinarily, the 180-day redemption period begins to run from the date that the vendee furnishes
written notice of the sale to the lessee. The filing of a petition or request for redemption with the
DAR (through the PARAD) suspends the running of the redemption period.
However, as the cases of Basbas and Almeda v. Court of Appeals50 – as well the amendment to
Section 12 of the Code – evidently show, Congress did not intend the redemption period to be
indefinite. This 180-day period resumes running if the petition is not resolved within sixty days.51

Because Francisco failed to serve Estrella written notice of the sale, Estrella’s 180-day
redemption period was intact when he filed the complaint before the PARAD. The filing of the
complaint prevented the running of the prescription period and gave Estrella time to cure the
defect of his redemption through consignment of the redemption price.

After the lapse of sixty days, Estrella’s 180-day redemption period began running pursuant to
Section 12 of the Code. Nevertheless, Estrella could still have consigned payment within this
180-day period.

The exercise of the right of redemption must be made in accordance with the law. Tender of the
redemption price or its valid consignation must be made within the prescribed redemption
period.52 The reason for this rule is simple:

x x x Only by such means can the buyer become certain that the offer to redeem is one
made seriously and in good faith. A buyer cannot be expected to entertain an offer of
redemption without attendant evidence that the redemptioner can, and is willing to
accomplish the repurchase immediately. A different rule would leave the buyer open to
harassment by speculators or crackpots as well as to unnecessary prolongation of the
redemption period, contrary to the policy of the law. While consignation of the tendered
price is not always necessary because legal redemption is not made to discharge a pre-existing
debt, a valid tender is indispensable, for the reasons already stated. Of course, consignation of
the price would remove all controversy as to the redemptioner's ability to pay at the proper
time. 53 [emphasis supplied]

Unfortunately, even after the lapse of the 240 days (the 60-day freeze period and the 180-day
redemption period), there was neither tender nor judicial consignation of the redemption price.
Even though Estrella repeatedly manifested his willingness to consign the redemption price, he
never actually did.

While Estrella exercised his right of redemption in a timely manner, the redemption was
ineffective because he failed to exercise this right in accordance with the law. Notably, he had
also repeatedly manifested his inability to even pay judicial costs and docket fees. He has been
declared (twice) as a pauper litigant who was "living· below the poverty threshold level because
of limited income." 54 This casts considerable doubt on Estrella's ability to pay the full price of the
property. In sum, we have no choice but to deny the petition.

The Agricultural Land Reform Code is a social legislation designed to promote economic and
social stability. It must be interpreted liberally to give full force and effect to its clear intent, which
is "to achieve a dignified existence for the small farmers" and to make them "more independent,
self-reliant and responsible citizens, and a source of genuine strength in our democratic
society."55 Nevertheless, while we endeavor to protect the rights of agricultural lessees, we must
be mindful not to do so at the expense of trampling upon the landowners' rights which are
likewise protected by law.

WHEREFORE, we hereby DENY the petition for lack of merit; accordingly, we AFFIRM the

November 28, 2012 resolution of the Court of Appeals in CA-G.R. SP No. 121519. No costs.
SO ORDERED.

G.R. No, 170018               September 23, 2013

DEPARTMENT OF AGRARIAN REFORM, REPRESENTED BY OIC-SECRETARY NASSER

C. PANGANDAMAN, Petitioner,
vs.
THE COURT OF APPEALS AND BASILAN AGRICULTURAL TRADING CORPORATION
(BATCO), Respondents.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for certiorari1 is the Decision2 dated September 6, 2005 of the Court of
Appeals (CA) in CA-G.R. SP No. 55377 which: (a) reversed and set aside the Order3 dated
February 25, 1999 of the Secretary of the Department of Agrarian Reform (DAR); (b) cancelled
Transfer Certificates of Title (TCT) Nos. T-1012,4 T-1013,5 and T-10146 in the name of Malo-ong
Canal Farmers Agrarian Reform Multi-Purpose Cooperative (MCFARMCO); and (c) directed the
Registry of Deeds of the Province of Basilan (Basilan RD) to issue a new set of titles in favor of
private respondent Basilan Agriculture Trading Corporation (BATCO).

The Facts

BATCO was the owner of several parcels of agricultural land, with an aggregate area of
206.5694 hectares (has.), situated in Malo-ong7 Canal, Lamitan, Province of Basilan (Basilan)
and covered by TCT Nos. T-7454,8 T-7455,9 and T-745610 (subject lands).11 On September 20,
1989, theaforesaid lands were voluntarily offered for sale (VOS) to the government pursuant to
Section 1912 of Republic Act No. (RA) 6657,13 otherwise known as the "Comprehensive Agrarian
Reform Law of 1988," for a consideration of ₱12,360,000.00.14 In 1992, BATCO was
notified15 that the 153.8801hectare portion of the subject lands (subject portion), consisting of
Lot Nos.3, 4, and 5, was being placed under the compulsory acquisition scheme by the DAR.16

On January 6, 1993, BATCO reiterated its offer to sell the entire206.5694 has. of the subject
lands, but this time to include the improvements thereon, and for a higher consideration of
₱32,000,000.00.17 On May 6,1997, BATCO received a Notice of Land Valuation and
Acquisition18 dated April 15, 1997 from the DAR Provincial Agrarian Reform Officer
(PARO),offering it the amount of ₱7,501,228.39 for the subject portion.19 BATCO rejected20 the
valuation and opposed the same before the DAR Adjudication Board (DARAB).21 In view of
BATCO’s rejection, the DAR – following the procedure under Section 16(e)22 of RA 6657 –
directed the Land Bank of the Philippines (LBP) to deposit the compensation in cash and in
agrarian reform bonds23 and thereafter requested24 the Basilan RD to issue TCTs in the name of
the Republic of the Philippines (Republic). In the meantime, the subject portion was surveyed
and the beneficiaries were accordingly identified. After which, DAR Regional Director Rogelio E.
Tamin (Director Tamin) directed the PARO to generate and issue the corresponding Certificates
of Land Ownership (CLOAs) in favor of the identified beneficiaries even over BATCO's protest.25
On February 9, 1998, then DAR Secretary Ernesto Garilao directed Director Tamin and the
PARO to proceed with the registration and distribution of the CLOAs to the said identified
beneficiaries.26

In a letter dated March 2, 1998 to Director Tamin,27 BATCO requested for the exemption of the
subject portion, citing the case of Luz Farms v. DAR Secretary28 (Luz Farms) and DAR
Administrative Order No. (AO) 09, Series of 199329 (DAR AO 09-93).30 On May 6, 1998, BATCO
filed before the DAR Regional Office a petition31 for the exemption of the subject portion from
the coverage of the government's Comprehensive Agrarian Reform Program (CARP). It alleged
that almost all of the entire subject lands have been devoted to cattle and livestock production
since their acquisition in1987,32 warranting their exemption from CARP coverage in accordance
with the ruling in Luz Farms and the provisions of DAR AO 09-93. It claimed that as of March
15, 1998, there were 150 heads of cattle, 50 heads of swine, and 50 heads of goats in the
subject portion.33 Meanwhile, BATCO's certificates of title over the foregoing were cancelled and
new titles were issued in the name of the Republic on July 17, 1998.34

The DAR Regional Director’s Ruling

On August 12, 1998, Director Tamin issued an Order35 (August 12,1998 Order) dismissing
BATCO's petition, holding that based on the DAR's ocular inspection/investigation, the subject
portion was "not exclusively, directly and actually used for livestock, poultry, and swine raising
as of June15, 1988, the date of effectivity of RA 6657, and contrary to the spirit and intent of
DAR AO 09-93."36 Hence, the subject portion is not exempt from CARP coverage. Moreover,
under DAR AO 09, Series of 1990, VOS of lands to the government, with the exception of lands
within the retention limits, may no longer be withdrawn.37

BATCO appealed38 to the Office of the DAR Secretary, reiterating39 its claim that the subject
portion was devoted to cattle production prior to June 15, 1988 as evidenced by the appended
certificates of ownership of large cattle (certificates of livestock ownership) which, according to
it," should have been the major basis in the determination of whether or not a particular
landholding is devoted to such production, as claimed."40

In the interim, the Republic's certificates of title were cancelled on October 6, 1998 with the
registration of the CLOAs in the name of MCFARMCO for the benefit of its 54 members.
Accordingly, new certificates of title,41 i.e. , TCT Nos. T-1012, T-1013, and T-1014, were issued
in favor of MCFARMCO.

The DAR Secretary’s Ruling

On February 25, 1999, then DAR Secretary Horacio R. Morales, Jr. (Secretary Morales) issued
an Order42 (February 25, 1999 Order), denying the appeal on the ground that BATCO failed: 1)
to present substantial evidence to show that the subject portion was exclusively, directly and
actually used for livestock, poultry, and swine raising prior to June 15, 1988;and 2) to comply
with the livestock and infrastructure requirements under DAR AO 09-93.43 Secretary Morales
observed that: (a) none of the certificates of livestock ownership appended to the records
predates the effectivity of RA 6657;44 (b) more than half45 of the cattle "was registered and
presumably brought into the property only on March 13, 1998 onwards, barely three months
before BATCO filed its application for exemption with the DAR Provincial Office on May 6,
1998";46 and (c) BATCO's act of submitting the subject lands (including the subject portion)
under the VOS scheme is an admission that they were subject to CARP coverage.47 Finding
that the act of changing or converting the lands to livestock, poultry and swine raising after June
15, 1988 was without an approved conversion, Secretary Morales directed the Municipal
Agrarian Reform Officer concerned to conduct an investigation48 for possible violations of
Section73(c) and (e) of RA 6657.49 BATCO filed a motion for reconsideration50 and a
supplemental motion,51 averring that prior to its acquisition of the subject lands from the Marcelo
Mendoza Development Corporation (Mendoza Plantation) on February 4, 1987, the latter was
already engaged in livestock raising and had facilities such as shade/barn, feed storage, corals
and gates, which BATCO subsequently improved and developed.52

BATCO further admitted that only a portion (about 100 has.) of the subject lands was devoted to
livestock raising, for which the corresponding exemption was prayed.53 It explained that the
necessary documents were in the possession of the previous owner, hence, it was unable to
produce the same before the DAR Regional Director.54 In support of the foregoing motions,
BATCO submitted,55 among others, Certificates of Ownership of Large Cattle Nos. B-3144051
to B-314415056 dated between July 10, 1987 to August 15, 1987,57 and the Joint Affidavit58 of
barangay officials of Barangays Tumakid, Maloong San Jose, Maloong Canal, and Buahan, all
in Lamitan, Basilan declaring that BATCO is engaged in large cattle raising. Nonetheless,
BATCO affirmed that it is still offering 100 has. of the subject lands for the CARP.59

On August 31, 1999, Secretary Morales issued an Order60 denying BATCO's motion for
reconsideration. He gave no credence to the certificates of livestock ownership belatedly
submitted by BATCO, observing that the absence of a sufficient justification for its failure to
present such certificates earlier casts doubt to their veracity and genuineness.61 Further, he held
that laches had set in, especially considering that the petition was filed only in 1998, or long
after the orders for coverage were issued in 1992.62 Finally, he pointed out that BATCO failed to
present proof that it has met the infrastructure requirements under DAR AO 09-93.63

The Proceedings Before the CA

BATCO's appeal was initially dismissed64 but subsequently reinstated by the CA.65

On September 6, 2005, the CA issued a Decision66 reversing and setting aside Secretary

Morales’ February 25, 1999 Order. It ruled that estoppel does not lie against BATCO
considering that the pertinent law and regulations did not provide for a prescriptive period for the
filing of exemption from CARP coverage.67 Moreover, in the light of Luz Farms, a petition for
exemption is not even necessary so long as the landholdings are devoted to livestock, poultry,
and swine raising, thus, rendering DAR AO09-93 ineffective and inconsequential.68

The CA gave credence to BATCO's documentary evidence to support its claim of the existence
and presence of livestock in the lands in question starting the year 1987 consisting of: (a) the
Certification69 dated March 26,1998 of the Municipal Agriculturist of Lamitan, Basilan (Municipal
Agriculturist Certification) as to the number of cattle found in the area; (b) the photographs70 of
the livestock therein allegedly taken on May 31, 2001and July 5, 2005; and (c) the affidavits71 of
former municipal mayors72 of Lamitan, Basilan – namely, Wilfrido C. Furigay and Ramon Garcia,
Jr. – attesting to the existence and presence of livestock in the subject lands starting the year
1987. The CA likewise condemned the cancellation of BATCO's certificates of title prior to full
payment of the compensation and prior to the decision on the petition for exemption as violative
of BATCO's right to procedural and substantive due process.73 Corollarily, the CA cancelled
TCT Nos. T-1012, T-1013 and T-1014 in the name of MCFARMCO and directed the Basilan RD
to issue a new set of titles in BATCO's favor.74
 The Issue Before the Court

The essential issue in this case is whether or not the CA gravely abused its discretion in
excluding/exempting the subject lands from CARP coverage despite BATCO's admission that
only a portion thereof was devoted to livestock raising and considering its previous voluntary
offer of the lands to the government under the VOS scheme.

The Court's Ruling

The petition is meritorious.

Under RA 6657, the CARP shall cover all public and private agricultural lands, including other
lands of the public domain suitable for agriculture, regardless of tenurial arrangement and
commodity produced.75 Section 3(c) thereof defines "agricultural land" as land devoted to
agricultural activity and not classified as mineral, forest, residential, commercial or industrial
land. Lands devoted to livestock, poultry, and swine raising are classified as industrial, not
agricultural lands and, thus, exempt from agrarian reform. As such, the DAR has no power to
regulate livestock farms.76

Nevertheless, the determination of the land’s classification as either an agricultural or industrial

land – and, in turn, whether or not the land falls under agrarian reform exemption – must be
preliminarily threshed out before the DAR, particularly, before the DAR Secretary. Verily, issues
of exclusion or exemption partake the nature of Agrarian Law Implementation (ALI)cases which
are well within the competence and jurisdiction of the DAR Secretary.77 Towards this end, the
latter is ordained to exercise his legal mandate of excluding or exempting a property from CARP
coverage based on the factual circumstances of each case and in accordance with the law and
applicable jurisprudence.78 Thus, considering too his technical expertise on the matter, courts
cannot simply brush aside his pronouncements regarding the status of the land in dispute, i.e.,
as to whether or not it falls under CARP coverage. As held in DAR v. Oroville Development
Corp.:79

We cannot simply brush aside the DAR’s pronouncements regarding the status of the subject
property as not exempt from CARP coverage considering that the DAR has unquestionable
technical expertise on these matters. Factual findings of administrative agencies are generally
accorded respect and even finality by this Court, if such findings are supported by substantial
evidence, a situation that obtains in this case. The factual findings of the Secretary of Agrarian
Reform who, by reason of his official position, has acquired expertise in specific matters within
his jurisdiction, deserve full respect and, without justifiable reason, ought not to be altered,
modified or reversed. (Emphases supplied)

It is settled that in order to be entitled to exclusion/exemption, it must be shown that the land is
exclusively devoted to livestock, swine or poultry raising.80 The land must be shown to have
been used for such purposes as of the effectivity of RA 6657, or on June 15, 1988,81 in order to
prevent any fraudulent declaration of areas supposedly used for these purposes as well as to
protect the rights of agrarian beneficiaries therein. This is in consonance with Section 73(c) of
RA 6657 which prohibits the conversion by any landowner of his agricultural land into any non-
agricultural use with intent to avoid the application of RA 6657 to his landholdings and to
dispossess his tenant farmers of the land tilled by them.
A thorough review of the records reveals no substantial evidence to show that the entirety of the
subject lands were exclusively devoted to livestock production since June 15, 1988 so as to
warrant their exclusion/exemption from CARP coverage and the consequent cancellation of
MCFARMCO's certificates of title. In fact, contrary to its original submission that almost all of the
entire 206.5694 has. landholding has been devoted to cattle and livestock production since their
acquisition in 1987,82 BATCO subsequently admitted in its Supplemental Motion for
Reconsideration of the Order dated 25 February 199983 (supplemental motion for
reconsideration) that only a portion of the subject lands was actually devoted to livestock
raising, for which the exemption of not less than 100 has. was sought.84 On this score alone, the
CA gravely abused its discretion in declaring the subject lands as exempt from CARP coverage
and ordering the cancellation of MCFARMCO's certificates of title and the issuance of new titles
in BATCO's favor.

It must be further pointed out that the subject lands were offered by BATCO to the government
under the VOS scheme on September 20, 1989,85 which offer was reiterated on January 6,
199386 without any claim of exemption, notwithstanding the existence of the Luz Farms ruling
(which was promulgated on December 4, 1990). In fact, the subject portion was acquired by the
government in 1992 and still BATCO never sought exemption under Luz Farms. While it
protested the valuation of the DAR87 during its VOS, it did not, at that time, seek any exemption
from CARP coverage. BATCO only raised the claimed exemption when it filed the petition for
exemption before the DAR Regional Director on May 6, 1998.However, the petition was filed on
the basis of DAR AO 09-93,88 and accordingly denied by the DAR Regional Director 89 and the
DAR Secretary90 for failing to meet the requirements set forth therein. While the Court struck
down DAR AO 09-93 as unconstitutional in the case of DAR v. Sutton91

(Sutton) on October 19, 2005, the DAR Decisions and even the CA Decision dated September
6, 2005 in CA-G.R. SP No. 55377 were all rendered at the time that the said AO was still
subsisting and in full force and effect. Consequently, in view of the prospectivity principle of
judicial decisions92 and the operative fact doctrine,93 the petition for exemption must be resolved
under the provisions of the said AO.

Under DAR AO 09-93, in order to be entitled to exemption, the applicant must prove that: (a) the
land sought to be excluded from CARP coverage is exclusively, directly and actually used for
livestock, poultry and swine raising as of June 15, 1988; (b) there should be one head of cattle
per hectare of land and seven heads of goat per hectare of land; and (c) there should be 21
heads of cattle for every 1.7815 has. of infrastructure, 147heads of goat or sheep for every
0.7205 hectare of infrastructure, and 21heads of swine for every 0.5126 hectare of
infrastructure. Consistent with the prohibition under Section 73(c) of RA 6657, DAR AO 09-93
likewise provided that "any act of a landowner to change or convert his agricultural and to
livestock, poultry and swine raising after June 15, 1988, with the intent to avoid the application
of [RA 6657] to his landholdings, shall be considered invalid and illegal and shall not affect the
coverage of his land holding under CARP."

It bears noting that the denial of the petition for exemption by the DAR Regional Director was
based on an ocular inspection/investigation conducted by the DAR provincial personnel in
Basilan.94 The rationale for the denial of the petition was also clearly outlined in the February 25,
1999 Order95 of the DAR Secretary who observed that: (a) none of the 156certificates of
livestock ownership submitted by BATCO predates the effectivity of RA 6657;96 (b) more than
half (80 out of 156)97 of the cattle was brought into the property only a few months before the
petition was filed; (c) the municipal agriculturist certified the presence of only 120 heads of
cattle,98 which is short of the minimum requirement under DAR AO 09-93;99 and (d) no evidence
was presented to prove the presence of hogs and goats as well as of BATCO having met the
infrastructure requirements under DAR AO 09-93.100 There being no cogent reason to deviate
from the foregoing, the Court is impelled to sustain the DAR Secretary’s findings.

To note, in denying BATCO's motion for reconsideration, the DAR Secretary also observed that,
contrary to BATCO's claim that the additional certificates of livestock ownership it undertook to
produce further were in the name of the Mendoza Plantation from which it purchased the
subject lands in 1987, the certificates eventually submitted with its supplemental motion for
reconsideration were actually under its name. Accordingly, the DAR Secretary cannot be faulted
for not giving credence to the same.

In fact, even if the Court were to apply Sutton retroactively and disregard DAR AO 09-93, the
pieces of evidence relied upon by the CA actually failed to establish the theory that the entirety
of the subject lands or specific portions thereof are exclusively devoted to the raising of cattle,
swine and goat as of June 15, 1988. The Court notes that the Municipal Agriculturist
Certification101 dated March 26, 1998, which the CA appreciated in favor of BATCO, merely
stated that the subject lands are "suitable for cattle production since before it was acquired and
transferred to BATCO PLANTATION."102 On the other hand, the Affidavits103 of former municipal
mayors confirming their issuance of several certificates of livestock ownership during their
respective terms were only presented before the CA and were not backed up by copies of the
certificates themselves. Moreover, while the former municipal mayors attested to the existence
and presence of livestock in the subject lands starting the year 1987, they commonly described
the subject lands as a vast tract of land principally devoted to coconut production, which was
extensively inter-cropped with coffee, rubber, black pepper, and cacao trees after BATCO's
acquisition.104 These descriptions are insufficient to establish BATCO’s claimed exemption as
what is required is exclusive devotion of the lands to the raising of cattle, swine and goat as of
June 15, 1988.

More pertinently, the Court further notes that contrary to BATCO's representations in its petition
for exemption, the primary land use of the subject lands105 as declared by BATCO itself in its
landowner's reply to notice of land valuation and acquisition106 (landowners reply) dated May
6,1997, negates its own claim that the said lands were exclusively devoted for the raising of
cattle, swine and goat, viz.:

Area
Lot Land Use
Acq'd
3 Cocoland 8.9917
Cocoland/Coffee 10.0000

Sub-total 18.9917

4 Cocoland 44.4733
Coco/Coffee 8.0000
Coco/Rubber 1.5000
Coco/Black Pepper 1.5000
Coco/Black Pepper/
Rubber 1.5000
 Sub-total 56.9733

5 Cocoland 10.0000
Cocoland/Coffee 67.9151

Sub-total 77.9151

107
GRAND TOTAL 153.8801
=========

In this accord, the Court finds that BATCO's claim of a different land use in its petition for
exemption was only a mere afterthought which, therefore, cannot be countenanced.

Finally, the Court cannot give credence to BATCO's claim of denial of due process when its
certificates of title were cancelled and new ones were issued in favor of the Republic prior to the
issuance of the DAR Regional Director's August 12, 1998 Order. While the final resolution of
petitions for exemption, as a rule, should precede the placing of the property under the CARP
and the issuance of the CLOA to the beneficiaries,108 it bears stressing that the subject lands
had already been placed under the CARP coverage in1992, or long before the petition for
exemption was filed by BATCO on May6, 1998. In the meantime, the actions undertaken by
BATCO such as the VOS on January 6, 1993,109 the counter-offer of valuation for the subject
lands according to their declared land uses as contained in the afore-mentioned landowner’s
reply110 dated May 6, 1997, the letter-protest dated May 23, 1997 (which challenged the survey
of the lands), and the identification of the beneficiaries grounded on its alleged failure to choose
the retention area,111 all affirmed the coverage of the subject lands under the CARP.
Considering further that the claim of denial of due process was never raised in the proceedings
before the DAR but belatedly brought up only in its Memorandum112 dated July 28, 2005 filed
before the CA113 and in the absence of showing that the same prevented it from presenting its
case before the DAR officials, it cannot be said that BATCO was denied due process. Neither
was it deprived of its properties without just compensation given that after it rejected the DAR's
valuation on May 6, 1997, the DAR immediately caused the deposit of the compensation in cash
and in agrarian reform bonds on June 11, 1997.114 All told, the denial of BATCO’s petition for
exemption was proper. In view of its contrary ruling, and the absence of any substantial bases
therefor, the Court finds that the CA gravely abused its discretion in reversing the DAR
Secretary’s February 25, 1999 Order.

WHEREFORE, the petition is GRANTED. The Decision dated September 6, 2005 of the Court
of Appeals in CA-G.R. SP No. 55377 is hereby REVERSED AND SET ASIDE and a new
judgment is rendered REINSTATING the Order dated February 25, 1999 of the Department of
Agrarian Reform Secretary dismissing private respondent Basilan Agricultural Trading
Corporation’s petition for exemption.

SO ORDERED.
 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).:-cralaw
It has been established that this Court will assume jurisdiction over a constitutional question
only if it is shown that the essential requisites of a judicial inquiry into such a question are first
satisfied. Thus, there must be an actual case or controversy involving a conflict of legal rights
susceptible of judicial determination, the constitutional question must have been opportunely
raised by the proper party, and the resolution of the question is unavoidably necessary to the
decision of the case itself (Association of 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.
G.R. No.176549

DEPARTMENT OF AGRARIAN REFORM, QUEZON CITY & PABLO MENDOZA, Petitioners,

vs.
ROMEO C. CARRIEDO, Respondent.

DECISION

JARDELEZA, J.:

This is a Petition for Review on Certiorari1 assailing the Court of Appeals Decision dated
October 5, 20062 and Resolution dated January 10, 20073 in CA-G.R. SP No. 88935. The
Decision and Resolution reversed the Order dated February 22, 20054 issued by the
Department of Agrarian Reform-Central Office (DAR-CO) in Administrative Case No. A-9999-
03-CV-008-03 which directed that a 5.0001 hectare piece of agricultural land (land) be placed
under the Comprehensive Agrarian Reform Program pursuant to Republic Act (RA) No. 6657 or
the Comprehensive Agrarian Reform Law.

The Facts

The land originally formed part of the agricultural land covered by Transfer Certificate of Title
(TCT) No. 17680,5 which in turn, formed part of the total of 73.3157 hectares of agricultural land
owned by Roman De Jesus (Roman).6

On May 23, 1972, petitioner Pablo Mendoza (Mendoza) became the tenant of the land by virtue
of a Contrato King Pamamuisan7 executed between him and Roman. Pursuant to the Contrato,
Mendoza has been paying twenty-five (25) piculs of sugar every crop year as lease rental to
Roman. It was later changed to Two Thousand Pesos (P2, 000.00) per crop year, the land
being no longer devoted to sugarcane.8

On November 7, 1979, Roman died leaving the entire 73.3157 hectares to his surviving wife
Alberta Constales (Alberta), and their two sons Mario De Jesus (Mario) and Antonio De Jesus
(Antonio).9 On August 23, 1984, Antonio executed a Deed of Extrajudicial Succession with
Waiver of Right10 which made Alberta and Mario co-owners in equal proportion of the
agricultural land left by Roman.11

On June 26, 1986, Mario sold12 approximately 70.4788 hectares to respondent Romeo C.

Carriedo (Carriedo), covered by the following titles and tax declarations, to wit:

1. TCT No. 35055

2. (Tax Declaration) TD No. 48354

3. TCT No. 17681

4. TCT No. 56897

 5. TCT No. 17680

The area sold to Carriedo included the land tenanted by Mendoza (forming part of the area
covered by TCT No. 17680). Mendoza alleged that the sale took place without his knowledge
and consent.

In June of 1990, Carriedo sold all of these landholdings to the Peoples’ Livelihood Foundation,
Inc. (PLFI) represented by its president, Bernabe Buscayno.13 All the lands, except that covered
by TCT No. 17680, were subjected to Voluntary Land Transfer/Direct Payment Scheme and
were awarded to agrarian reform beneficiaries in 1997.14

The parties to this case were involved in three cases concerning the land, to wit:

The Ejectment Case (DARAB Case No. 163-T-90 | CAG.R. SP No. 44521 | G.R. No. 143416)

On October 1, 1990, Carriedo filed a Complaint for Ejectment and Collection of Unpaid Rentals
against Mendoza before the Provincial Agrarian Reform Adjudication Board (PARAD) of Tarlac
docketed as DARAB Case No. 163-T-90. He subsequently filed an Amended Complaint on
October 30, 1990.15

In a Decision dated June 4, 1992,16 the PARAD ruled that Mendoza had knowledge of the sale,
hence, he could not deny the fact nor assail the validity of the conveyance. Mendoza violated
Section 2 of Presidential Decree (PD) No. 816,17 Section 50 of RA No. 119918 and Section 36 of
RA No. 3844,19 and thus, the PARAD declared the leasehold contract terminated, and ordered
Mendoza to vacate the premises.20

Mendoza filed an appeal with the Department of Agrarian Reform Adjudication Board
(DARAB).1âwphi1 In a Decision dated February 8, 1996,21 the DARAB affirmed the PARAD
Decision in toto. The DARAB ruled that ownership of the land belongs to Carriedo. That the
deed of sale was unregistered did not affect Carriedo’s title to the land. By virtue of his
ownership, Carriedo was subrogated to the rights and obligation of the former landowner,
Roman.22

Mendoza then filed a Petition for Review with the Court of Appeals (CA). The case was
docketed as CA-G.R. SP No. 44521. In a Decision dated September 7, 1998,23 the CA affirmed
the DARAB decision in toto. The CA ruled that Mendoza’s reliance on Section 6 of RA No. 6657
as ground to nullify the sale between De Jesus and Carriedo was misplaced, the section being
limited to retention limits. It reiterated that registration was not a condition for the validity of the
contract of sale between the parties.24 Mendoza’s Motions for Reconsideration and New Trial
were subsequently denied.25

Mendoza thus filed a Petition for Review on Certiorari with this Court, docketed as G.R. No.
143416. In a Resolution dated August 9, 2000,26 this Court denied the petition for failure to
comply with the requirements under Rule 45 of the Rules of Court. An Entry of Judgment was
issued on October 25, 2000.27 In effect, the Decision of the CA was affirmed, and the following
issues were settled with finality:

1) Carriedo is the absolute owner of the five (5) hectare land;

 2) Mendoza had knowledge of the sale between Carriedo and Mario De Jesus, hence he
is bound by the sale; and

3) Due to his failure and refusal to pay the lease rentals, the tenancy relationship
between Carriedo and Mendoza had been terminated.

Meanwhile, on October 5, 1999, the landholding covered by TCT No. 17680 with an area of
12.1065 hectares was divided into sub-lots. 7.1065 hectares was transferred to Bernabe
Buscayno et al. through a Deed of Transfer28 under PD No. 27.29 Eventually, TCT No. 17680
was partially cancelled, and in lieu thereof, emancipation patents (EPs) were issued to Bernabe,
Rod and Juanito, all surnamed Buscayno. These lots were identified as Lots C, D and E
covered by TCT Nos. 44384 to 44386 issued on September 10, 1999.30 Lots A and B, consisting
of approximately 5.0001 hectares and which is the land being occupied by Mendoza, were
registered in the name of Carriedo and covered by TCT No. 34428131 and TCT No. 344282.32

The Redemption Case (DARAB III-T-1476-97 | CA-G.R. SP No. 88936)

On July 21, 1997, Mendoza filed a Petition for Redemption33 with the PARAD. In an Order dated
January 15, 2001,34 the PARAD dismissed his petition on the grounds of litis pendentia and lack
of the required certification against forum-shopping. It dismissed the petition so that the pending
appeal of DARAB Case No. 163-T-90 (the ejectment case discussed above) with the CA can
run its full course, since its outcome partakes of a prejudicial question determinative of the
tenability of Mendoza’s right to redeem the land under tenancy.35

Mendoza appealed to the DARAB which reversed the PARAD Order in a Decision dated
November 12, 2003.36 The DARAB granted Mendoza redemption rights over the land. It ruled
that at the time Carriedo filed his complaint for ejectment on October 1, 1990, he was no longer
the owner of the land, having sold the land to PLFI in June of 1990. Hence, the cause of action
pertains to PLFI and not to him.37 It also ruled that Mendoza was not notified of the sale of the
land to Carriedo and of the latter’s subsequent sale of it to PLFI. The absence of the mandatory
requirement of notice did not stop the running of the 180 day-period within which Mendoza
could exercise his right of redemption.38 Carriedo’s Motion for Reconsideration was
subsequently denied.39

Carriedo filed a Petition for Review with the CA. In a Decision dated December 29, 2006,40 the
CA reversed the DARAB Decision. It ruled that Carriedo’s ownership of the land had been
conclusively established and even affirmed by this Court. Mendoza was not able to substantiate
his claim that Carriedo was no longer the owner of the land at the time the latter filed his
complaint for ejectment. It held that the DARAB erred when it ruled that Mendoza was not guilty
of forum-shopping.41 Mendoza did not appeal the decision of the CA.

The Coverage Case (ADM Case No. A-9999-03-CV-008-03 | CA-G.R. SP No. 88935)

On February 26, 2002, Mendoza, his daughter Corazon Mendoza (Corazon) and Orlando
Gomez (Orlando) filed a Petition for Coverage42 of the land under RA No. 6657. They claimed
that they had been in physical and material possession of the land as tenants since 1956, and
made the land productive.43 They prayed (1) that an order be issued placing the land under
Comprehensive Agrarian Reform Program (CARP); and (2) that the DAR, the Provincial
Agrarian Reform Officer (PARO) and the Municipal Agrarian Reform Officer (MARO) of Tarlac
City be ordered to proceed with the acquisition and distribution of the land in their favor.44 The
petition was granted by the Regional Director (RD) in an Order dated October 2, 2002,45 the
dispositive portion of which reads:

WHEREFORE, foregoing premises considered, the petition for coverage under CARP filed by
Pablo Mendoza, et al[.], is given due course. Accordingly, the MARO and PARO are hereby
directed to place within the ambit of RA 6657 the landholding registered in the name of Romeo
Carriedo covered and embraced by TCT Nos. 334281 and 334282, with an aggregate area of
45,000 and 5,001 square meters, respectively, and to distribute the same to qualified farmer-
beneficiaries.

SO ORDERED.46

On October 23, 2002, Carriedo filed a Protest with Motion to Reconsider the Order dated
October 2, 2002 and to Lift Coverage47 on the ground that he was denied his constitutional right
to due process. He alleged that he was not notified of the filing of the Petition for Coverage, and
became aware of the same only upon receipt of the challenged Order.

On October 24, 2002, Carriedo received a copy of a Notice of Coverage dated October 21,
200248 from MARO Maximo E. Santiago informing him that the land had been placed under the
coverage of the CARP.49 On December 16, 2002, the RD denied Carriedo’s protest in an Order
dated December 5, 2002.50 Carriedo filed an appeal to the DAR-CO.

In an Order dated February 22, 2005,51 the DAR-CO, through Secretary Rene C. Villa, affirmed
the Order of the RD granting coverage. The DAR-CO ruled that Carriedo was no longer allowed
to retain the land due to his violation of the provisions of RA No. 6657. His act of disposing his
agricultural landholdings was tantamount to the exercise of his retention right, or an act
amounting to a valid waiver of such right in accordance with applicable laws and
jurisprudence.52 However, it did not rule whether Mendoza was qualified to be a farmer-
beneficiary of the land. The dispositive portion of the Order reads:

WHEREFORE, premises considered, the instant appeal is hereby DISMISSED for lack of merit.

Consequently, the Order dated 2 October 2002 of the Regional Director of DAR III, is
hereby AFFIRMED.

SO ORDERED.53

Carriedo filed a Petition for Review54 with the CA assailing the DAR-CO Order. The appeal was
docketed as CA-G.R. SP No. 88935. In a Decision dated October 5, 2006, the CA reversed the
DAR-CO, and declared the land as Carriedo’s retained area. The CA ruled that the right of
retention is a constitutionally-guaranteed right, subject to certain qualifications specified by the
legislature.55 It serves to mitigate the effects of compulsory land acquisition by balancing the
rights of the landowner and the tenant by implementing the doctrine that social justice was not
meant to perpetrate an injustice against the landowner.56 It held that Carriedo did not commit
any of the acts which would constitute waiver of his retention rights found under Section 6 of
DAR Administrative Order No. 02, S.2003.57 The dispositive portion of the Decision reads:

WHEREFORE, premises considered and pursuant to applicable law and jurisprudence on the
matter, the present Petition is hereby GRANTED. Accordingly, the assailed Order of the
Department of Agrarian Reform-Central Office, Elliptical Road, Diliman, Quezon City (dated
February 22, 2005) is hereby REVERSED and SET ASIDE and a new one entered—
DECLARING the subject landholding as the Petitioner’s retained area. No pronouncements as
to costs.

SO ORDERED.58

Hence, this petition.

Petitioners maintain that the CA committed a reversible error in declaring the land as Carriedo’s
retained area.59

They claim that Paragraph 4, Section 6 of RA No. 6657 prohibits any sale, disposition, lease,
management contract or transfer of possession of private lands upon effectivity of the
law.60 Thus, Regional Director Renato Herrera correctly observed that Carriedo’s act of
disposing his agricultural property would be tantamount to his exercise of retention under the
law. By violating the law, Carriedo could no longer retain what was left of his property. "To rule
otherwise would be a roundabout way of rewarding a landowner who has violated the explicit
provisions of the Comprehensive Agrarian Reform Law."61

They also assert that Carriedo waived his right to retain for failure or neglect for an
unreasonable length of time to do that which he may have done earlier by exercising due
diligence, warranting a presumption that he abandoned his right or declined to assert
it.62 Petitioners claim that Carriedo has not filed an Application for Retention over the subject
land over a considerable passage of time since the same was acquired for distribution to
qualified farmer beneficiaries.63

Lastly, they argue that Certificates of Land Ownership Awards (CLOAs) already generated in
favor of his co-petitioners Corazon Mendoza and Rolando Gomez cannot be set aside. CLOAs
under RA No. 6657 are enrolled in the Torrens system of registration which makes them
indefeasible as certificates of title issued in registration proceedings.64

The Issue

The sole issue for our consideration is whether Carriedo has the right to retain the land.

Our Ruling

We rule in the affirmative. Carriedo did not waive his right of retention over the land.1âwphi1

The 1987 Constitution expressly recognizes landowner retention rights under Article XIII,
Section 4, to wit:

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.)

RA No. 6657 implements this directive, thus:

Section 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 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.

xxx

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. 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. xxx (Emphasis supplied.)

In Danan v. Court of Appeals,65 we explained the rationale for the grant of the right of retention
under agrarian reform laws such as RA No. 6657 and its predecessor PD No. 27, to wit:

The right of retention is a constitutionally guaranteed right, which is subject to qualification by

the legislature. 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 landowner. 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. For as long as the area to be retained is
compact or contiguous and does not exceed the retention ceiling of five (5) hectares, a
landowner's choice of the area to be retained must prevail. xxx66

To interpret Section 6 of RA No. 6657, DAR issued Administrative Order No. 02, Series of 2003
(DAR AO 02-03). Section 6 of DAR AO 02-03 provides for the instances when a landowner is
deemed to have waived his right of retention, to wit:

Section 6. Waiver of the Right of Retention. – The landowner waives his right to retain by
committing any of the following act or omission:

6.1 Failure to manifest an intention to exercise his right to retain within sixty (60)
calendar days from receipt of notice of CARP coverage.
 6.2 Failure to state such intention upon offer to sell or application under the [Voluntary
Land Transfer (VLT)]/[Direct Payment Scheme (DPS)] scheme.

6.3 Execution of any document stating that he expressly waives his right to retain. The
MARO and/or PARO and/or Regional Director shall attest to the due execution of such
document.

6.4 Execution of a Landowner Tenant Production Agreement and Farmer’s

Undertaking (LTPA-FU) or Application to Purchase and Farmer’s Undertaking (APFU)
covering subject property.

6.5 Entering into a VLT/DPS or [Voluntary Offer to Sell (VOS)] but failing to manifest an
intention to exercise his right to retain upon filing of the application for VLT/DPS or VOS.

6.6 Execution and submission of any document indicating that he is consenting to the
CARP coverage of his entire landholding.

6.7 Performing any act constituting estoppel by laches which is the failure or neglect for
an unreasonable length of time to do that which he may have done earlier by exercising
due diligence, warranting a presumption that he abandoned his right or declined to
assert it.

Petitioners cannot rely on the RD’s Order dated October 2, 2002 which granted Mendoza’s
petition for coverage on the ground that Carriedo violated paragraph 4 Section 667 of RA No.
6657 for disposing of his agricultural land, consequently losing his right of retention. At the time
when the Order was rendered, up to the time when it was affirmed by the DAR-CO in its Order
dated February 22, 2005, the applicable law is Section 6 of DAR 02-03. Section 6 clearly shows
that the disposition of agricultural land is not an act constituting waiver of the right of retention.

Thus, as correctly held by the CA, Carriedo "[n]ever committed any of the acts or omissions
above-stated (DAR AO 02-03). Not even the sale made by the herein petitioner in favor of PLFI
can be considered as a waiver of his right of retention. Likewise, the Records of the present
case is bereft of any showing that the herein petitioner expressly waived (in writing) his right of
retention as required under sub-section 6.3, section 6, DAR Administrative Order No. 02-
S.2003."68

Petitioners claim that Carriedo’s alleged failure to exercise his right of retention after a long
period of time constituted a waiver of his retention rights, as envisioned in Item 6.7 of DAR AO
02-03.

We disagree.

Laches is defined as the failure or neglect for an unreasonable and unexplained length of time,
to do that which by exercising due diligence could or should have been done earlier; it is
negligence or omission to assert a right within a reasonable time, warranting a presumption that
the party entitled to assert it either has abandoned it or declined to assert it.69 Where a party
sleeps on his rights and allows laches to set in, the same is fatal to his case.70

Section 4 of DAR AO 02-03 provides:

Section 4. Period to Exercise Right of Retention under RA 6657

4.1 The landowner may exercise his right of retention at any time before receipt of notice
of coverage.

4.2 Under the Compulsory Acquisition (CA) scheme, the landowner shall exercise his
right of retention within sixty (60) days from receipt of notice of coverage.

4.3 Under the Voluntary Offer to Sell (VOS) and the Voluntary Land Transfer
(VLT)/Direct Payment Scheme (DPS), the landowner shall exercise his right of retention
simultaneously at the time of offer for sale or transfer.

The foregoing rules give Carriedo any time before receipt of the notice of coverage to exercise
his right of retention, or if under compulsory acquisition (as in this case), within sixty (60) days
from receipt of the notice of coverage. The validity of the notice of coverage is the very subject
of the controversy before this court. Thus, the period within which Carriedo should exercise his
right of retention cannot commence until final resolution of this case.

Even assuming that the period within which Carriedo could exercise his right of retention has
commenced, Carriedo cannot be said to have neglected to assert his right of retention over the
land. The records show that per Legal Report dated December 13, 199971 prepared by Legal
Officer Ariel Reyes, Carriedo filed an application for retention which was even contested by
Pablo Mendoza’s son, Fernando.72 Though Carriedo subsequently withdrew his application, his
act of filing an application for retention belies the allegation that he abandoned his right of
retention or declined to assert it.

In their Memorandum73 however, petitioners, for the first time, invoke estoppel, citing DAR

Administrative Order No. 05 Series of 200674 (DAR AO 05-06) to support their argument that
Carriedo waived his right of retention.75 DAR AO 05-06 provides for the rules and regulations
governing the acquisition and distribution of agricultural lands subject of conveyances under
Sections 6, 7076 and 73 (a)77 of RA No. 6657. Petitioners particularly cite Item no. 4 of the
Statement of Policies of DAR AO 05-06, to wit:

II. Statement of Policies

4. Where the transfer/sale involves more than the five (5) hectares retention area, the transfer is
considered violative of Sec. 6 of R.A. No. 6657.

In case of multiple or series of transfers/sales, the first five (5) hectares sold/conveyed without
DAR clearance and the corresponding titles issued by the Register of Deeds (ROD) in the name
of the transferee shall, under the principle of estoppel, be considered valid and shall be
treated as the transferor/s’ retained area but in no case shall the transferee exceed the five-
hectare landholding ceiling pursuant to Sections 6, 70 and 73(a) of R.A. No. 6657. Insofar as
the excess area is concerned, the same shall likewise be covered considering that the
transferor has no right of disposition since CARP coverage has been vested as of 15 June
1988. Any landholding still registered in the name of the landowner after earlier dispositions
totaling an aggregate of five (5) hectares can no longer be part of his retention area and
therefore shall be covered under CARP. (Emphasis supplied.)
Citing this provision, petitioners argue that Carriedo lost his right of retention over the land
because he had already sold or disposed, after the effectivity of RA No. 6657, more than fifty
(50) hectares of land in favor of another.78

In his Memorandum,79 Carriedo maintains that petitioners cannot invoke any administrative

regulation to defeat his right of retention. He argues that "administrative regulation must be in
harmony with the provisions of law otherwise the latter prevails."80

We cannot sustain petitioners' argument. Their reliance on DAR AO 05-06 is misplaced. As will
be seen below, nowhere in the relevant provisions of RA No. 6657 does it indicate that a
multiple or series of transfers/sales of land would result in the loss of retention rights. Neither do
they provide that the multiple or series of transfers or sales amounts to the waiver of such right.

The relevant portion of Section 6 of RA No. 6657 referred to in Item no. 4 of DAR AO 05-06
provides:

Section 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 farm, such as the 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. xxx

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
the 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 Registers of Deeds shall inform the Department of
Agrarian Reform (DAR) within thirty (30) days of any transaction involving agricultural lands in
excess of five (5) hectares. (Emphasis supplied.)

Section 70 of RA No. 6657, also referred to in Item no. 4 of DAR AO 05-06 partly provides:

The sale or disposition of agricultural lands retained by a landowner as a consequence of

Section 6 hereof shall be valid as long as the total landholdings that shall be owned by the
transferee thereof inclusive of the land to be acquired shall not exceed the landholding ceilings
provided for in this Act. Any sale or disposition of agricultural lands after the effectivity of
this Act found to be contrary to the provisions hereof shall be null and void. xxx
(Emphasis supplied.)

Finally, Section 73 (a) of RA No. 6657 as referred to in Item No. 4 of DAR AO 05-06 provides,

Section 73. Prohibited Acts and Omissions. – The following are prohibited:

(a) The ownership or possession, for the purpose of circumventing the provisions of this Act, of
agricultural lands in excess of the total retention limits or award ceilings by any person, natural
or juridical, except those under collective ownership by farmer-beneficiaries; xxx

Sections 6 and 70 are clear in stating that any sale and disposition of agricultural lands in
violation of the RA No. 6657 shall be null and void. Under the facts of this case, the reasonable
reading of these three provisions in relation to the constitutional right of retention should be that
the consequence of nullity pertains to the area/s which were sold, or owned by the transferee, in
excess of the 5-hectare land ceiling. Thus, the CA was correct in declaring that the land is
Carriedo’s retained area.81

Item no. 4 of DAR AO 05-06 attempts to defeat the above reading by providing that, under the
principle of estoppel, the sale of the first five hectares is valid. But, it hastens to add that the first
five hectares sold corresponds to the transferor/s’ retained area. Thus, since the sale of the first
five hectares is valid, therefore, the landowner loses the five hectares because it happens to be,
at the same time, the retained area limit. In reality, Item No. 4 of DAR AO 05-06 operates as a
forfeiture provision in the guise of estoppel. It punishes the landowner who sells in excess of
five hectares. Forfeitures, however, partake of a criminal penalty.82

In Perez v. LPG Refillers Association of the Philippines, Inc.,83 this Court said that for an
administrative regulation to have the force of a penal law, (1) the violation of the administrative
regulation must be made a crime by the delegating statute itself; and (2) the penalty for such
violation must be provided by the statute itself.84

Sections 6, 70 and 73 (a) of RA No. 6657 clearly do not provide that a sale or disposition of land
in excess of 5 hectares results in a forfeiture of the five hectare retention area. Item no. 4 of
DAR AO 05-06 imposes a penalty where none was provided by law.

As this Court also held in People v. Maceren,85 to wit:

The reason is that the Fisheries law does not expressly prohibit electro fishing. As electro
fishing is not banned under the law, the Secretary of Agriculture and Natural Resources and the
Natural Resources and the Commissioner of Fisheries are powerless to penalize it. In other
words, Administrative Order Nos. 84 and 84-1, in penalizing electro fishing, are devoid of any
legal basis.

Had the lawmaking body intended to punish electro fishing, a penal provision to that effect could
have been easily embodied in the old Fisheries Law.86

The repugnancy between the law and Item no. 4 of DAR AO 05-06 is apparent by a simple
comparison of their texts. The conflict undermines the statutorily-guaranteed right of the
landowner to choose the land he shall retain, and DAR AO 05-06, in effect, amends RA No.
6657.

In Romulo, Mabanta, Buenaventura, Sayoc & De Los Angeles (RMBSA) v. Home Development

Mutual Fund (HDMF),87 this Court was confronted with the issue of the validity of the
amendments to the rules and regulations implementing PD No. 1752.88 In that case, PD No.
1752 (as amended by RA No. 7742) exempted RMBSA from the Pag-Ibig Fund coverage for the
period January 1 to December 31, 1995. In September 1995, however, the HDMF Board of
Trustees issued a board resolution amending and modifying the rules and regulations
implementing RA No. 7742. As amended, the rules now required that for a company to be
entitled to a waiver or suspension of fund coverage, it must have a plan providing for both
provident/retirement and housing benefits superior to those provided in the Pag-Ibig Fund. In
ruling against the amendment and modification of the rules, this Court held that—
In the present case, when the Board of Trustees of the HDMF required in Section 1, Rule VII of
the 1995 Amendments to the Rules and Regulations Implementing R.A. No. 7742 that
employers should have both provident/retirement and housing benefits for all its employees in
order to qualify for exemption from the Fund, it effectively amended Section 19 of P.D. No.
1752. And when the Board subsequently abolished that exemption through the 1996
Amendments, it repealed Section 19 of P.D. No. 1752. Such amendment and subsequent
repeal of Section 19 are both invalid, as they are not within the delegated power of the
Board. The HDMF cannot, in the exercise of its rule-making power, issue a regulation not
consistent with the law it seeks to apply. Indeed, administrative issuances must not override,
supplant or modify the law, but must remain consistent with the law they intend to carry out.
Only Congress can repeal or amend the law.89 (Citations omitted; underscoring supplied.)

Laws, as well as the issuances promulgated to implement them, enjoy the presumption of
validity.90 However, administrative regulations that alter or amend the statute or enlarge or
impair its scope are void, and courts not only may, but it is their obligation to strike down such
regulations.91 Thus, in this case, because Item no. 4 of DAR AO 05-06 is patently null and void,
the presumption of validity cannot be accorded to it. The invalidity of this provision constrains us
to strike it down for being ultra vires.

In Conte v. Commission on Audit,92 the sole issue of whether the Commission on Audit (COA)
acted in grave abuse of discretion when it disallowed in audit therein petitioners' claim of
financial assistance under Social Security System (SSS) Resolution No. 56 was presented
before this Court. The COA disallowed the claims because the financial assistance under the
challenged resolution is similar to a separate retirement plan which results in the increase of
benefits beyond what is allowed under existing laws. This Court, sitting en banc, upheld the
findings of the COA, and invalidated SSS Resolution No. 56 for being ultra vires, to wit:

xxx Said Sec. 28 (b) as amended by RA 4968 in no uncertain terms bars the creation of any
insurance or retirement plan — other than the GSIS — for government officers and employees,
in order to prevent the undue and [iniquitous] proliferation of such plans. It is beyond cavil that
Res. 56 contravenes the said provision of law and is therefore invalid, void and of no effect. xxx

We are not unmindful of the laudable purposes for promulgating Res. 56, and the positive
results it must have had xxx. But it is simply beyond dispute that the SSS had no authority to
maintain and implement such retirement plan, particularly in the face of the statutory
prohibition. The SSS cannot, in the guise of rule-making, legislate or amend laws or worse,
render them nugatory.

It is doctrinal that in case of conflict between a statute and an administrative order, the former
must prevail. A rule or regulation must conform to and be consistent with the provisions of the
enabling statute in order for such rule or regulation to be valid. The rule-making power of a
public administrative body is a delegated legislative power, which it may not use either to
abridge the authority given it by the Congress or the Constitution or to enlarge its power beyond
the scope intended. xxx Though well-settled is the rule that retirement laws are liberally
interpreted in favor of the retiree, nevertheless, there is really nothing to interpret in either RA
4968 or Res. 56, and correspondingly, the absence of any doubt as to the ultra-vires nature
and illegality of the disputed resolution constrains us to rule against
petitioners.93 (Citations omitted; emphasis and underscoring supplied.)
Administrative regulations must be in harmony with the provisions of the law for administrative
regulations cannot extend the law or amend a legislative enactment.94 Administrative issuances
must not override, but must remain consistent with the law they seek to apply and implement.
They are intended to carry out, not to supplant or modify the law.95 Administrative or executive
acts, orders and regulations shall be valid only when they are not contrary to the laws or the
Constitution.96 Administrative regulations issued by a Department Head in conformity with law
have the force of law.97 As he exercises the rule-making power by delegation of the lawmaking
body, it is a requisite that he should not transcend the bounds demarcated by the statute for the
exercise of that power; otherwise, he would be improperly exercising legislative power in his
own right and not as a surrogate of the lawmaking body.98

If the implementing rules and regulations are issued in excess of the rule-making authority of the
administrative agency, they are without binding effect upon the courts. At best, the same may
be treated as administrative interpretations of the law and as such, they may be set aside by the
Supreme Court in the final determination of what the law means.99

While this Court is mindful of the DAR’s commitment to the implementation of agrarian reform, it
must be conceded that departmental zeal may not be permitted to outrun the authority conferred
by statute.100 Neither the high dignity of the office nor the righteousness of the motive then is an
acceptable substitute; otherwise the rule of law becomes a myth.101

As a necessary consequence of the invalidity of Item no. 4 of DAR AO 05-06 for being ultra
vires, we hold that Carriedo did not waive his right to retain the land, nor can he be considered
to be in estoppel.

Finally, petitioners cannot argue that the CLOAs allegedly granted in favor of his co-petitioners
Corazon and Orlando cannot be set aside. They claim that CLOAs under RA No. 6657 are
enrolled in the Torrens system of registration which makes them indefeasible as certificates of
title issued in registration proceedings.102 Even as these allegedly issued CLOAs are not in the
records, we hold that CLOAs are not equivalent to a Torrens certificate of title, and thus are not
indefeasible.

CLOAs and EPs are similar in nature to a Certificate of Land Transfer (CLT) in ordinary land
registration proceedings. CLTs, and in turn the CLOAs and EPs, are issued merely as
preparatory steps for the eventual issuance of a certificate of title. They do not possess the
indefeasibility of certificates of title. Justice Oswald D. Agcaoili, in Property Registration Decree
and Related Laws (Land Titles and Deeds),103 notes, to wit:

Under PD No. 27, beneficiaries arc issued certificates of land transfers (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, shall be the
basis for the issuance of the corresponding transfer certificates of title (TCTs) in favor of the
corresponding beneficiaries.

Under RA No. 6657, the procedure has been simplified. Only certificates of land ownership
award (CLOAs) are issued, in lieu of EPs, after compliance with all prerequisites. 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 AO No. 2, series of 1994, an EP or CLOA may be
cancelled if the land covered is later found to be part of the landowner's retained area. (Citations
omitted; underscoring supplied.)

The issue, however, involving the issuance, recall or cancellation of EPs or CLOAs, is lodged
with the DAR,104 which has the primary jurisdiction over the matter.105

WHEREFORE, premises considered, the Petition is hereby DENIED for lack of merit. The

assailed Decision of the Court of Appeals dated October 5, 2006 is AFFIRMED. Item no. 4 of
DAR Administrative Order No. 05, Series of 2006 is hereby declared INVALID, VOID and OF
NO EFFECT for being ultra vires.

SO ORDERED.
G.R. No. 132759 October 25, 2005

ALEJANDRO DANAN, TIRSO LINGAD, JR., AMADO BELLEZA, CARLITO SANTOS,

LADISLAO DANAN, RUBEN SAMBAT, RODRIGO DANAN, ABEDNIDO DANAN, FELIX
ESCUETA, ROMEO TALA, ADELOMO BALUYOT, PEDRO TALA, RUBEN MANGANTI,
PAQUITO CRUZ, RICARDO DIMA-RUCUT, RUFINO DEL ROSARIO, MARCOS PANGAN,
LAURA MANIAGO, LAMBERTO DANAN, FLORNARDO MANANSALA, DOMINADOR
ARTOLA, ROBERTO ZUÑIGA, JR., JOSE MENDOZA, ROMAN BERNAL, BENEDICTO
DANAN, JOEL DANAN, RODRIGO PAULE, JIMMY MANALAC, FELICIANO MACASPAC,
MARIANO MANANSALA, SILVESTRE MANUEL, FAUSTINO PANGAN, FLORENCIO
PANGAN, CONRADO CARLOS DANAN, PESCASIO DIMARUCUT, DANIEL DANAN,
LUCIANO MANLAPAZ, ARMANDO DANAN, FELICIANO MALLARI, REYNALDO MUSNI,
RODEL ZUNIGA DANAN, ALFREDO MORALES, JESUS NUNAG, ABRAHAM MANUYAG,
PEDRO MERCADO, OSCAR MANALILI, FORTUNATO MANUEL, ROSITA BERNAL, RUBEN
MIRANDA, NICOLAS MANANSALA, JOSE MANLAPAZ, JR., DIOSDADO LINGAD, MONICA
TALA, JULIE CORTES, ANDRES PAULE, RONNIE PAULE, CARLITO AGUILUS, ROMEO
BALINGIT, BENIGNO PORTALES, ARNEL SAMBAT, ALFREDO ALFARO, ROMEO
ALFARO, FELICIANO BUCAD, SR., ONADAB ISIP, CARLITO DIMACALI, JAIME
BAUTISTA, ELIAS BALINGIT, REMY CARLOS, MARIANO SANTOS, FEDERICO
MANLAPAZ, REYNALDO SANTOS, ADELAIDA CALMA, GREGORIO CALMA, PEPITO
ALFARO, FERNANDO MANANSALA, JOE RAMMIE EMILIA, ROGELIO CORTES,
DOMINADOR MALIT, ELPIDIO TALA, RODRIGO TALA, SALVADOR TALA, ROMEO TALA,
REMEO DANAN, EDUARDO DANAN, CWZAR DANAN, BENJAMIN PANGAN, DOMINGO
SUMANDAL, MOISES SUSI, RODOLFO GERVACIO, SR., RODOLFO GERVASIO, JR.,
JESUS BERNAL, ALFREDO SANTOS, FORTUNATO DANAN, FRANCISCO MACASPAC,
EDWIN MACASPAC, FELICISIMO MACASPAC, DIOSDADO MACASPAC, REYNALDO
TIMBANG, EULOGIO MACASPAC, RICARDO CHAVEZ, RUBEN MANUYAG, DELFIN TALA,
TOMAS PAULE, CLARO SUBA, DIOSDADO FLORES, FRANCISCO NORALES, VENANCIO
FLORES, DANTE FLORES, AGUSTIN ARIOLA, RICARDO ARIOLA, ARTEMIO FLORES,
FELICIANO BUCOD, JR., ROLANDO SERRANO, JUANITO LINTAG, TOMAS TALA,
LEONARDO RONQUILLO, LAMBERTO TALA, RICARDO LINGAD, ANOTNIO SANTOS,
IGNACIO TRESVALLES, ERNESTO PITUC, TEOFILO MUNOZ, BIENVENIDO BELLEZA,
MANUEL MAGUIAT, OFELIA MIGUEL, PEDRO TALA, ALEJANDRO TALA, RODRIGO
SERRANO, FRANCISCO BERNARTE, OSCAR SERRANO, CONSOLACION SERRANO,
CEZAR SERRANO, JOSE BERNARTE, JESUS BERNARTE, CALIXTO SERRANO,
ROBERTO MALLARI, ARNOLD PATRICIA, REYNALDO OSBUAL, WILFREDO TAPALLA,
ELIZALDE FAPREQUILAN, REYNALDO CASTRO, LUISITO MALLARI, ANTONIO CASTRO,
MARCELO MANANSALA, MARFELA AQUINO, HERMOGENES LACAP, VIRGILIO
MANANSALA, NESTOR DATU, ROMEO DATU, ALEGRIA BELLEZA, PURITA MIRANDO,
MARIA PEREZ, ALBERTO DELA CRUZ, ARTURO DELA CRUZ, GENERITO TALA,
CELESTINO TAPALLA, JIMMY TAPALLA, MIKE TAPALLA, REMIGIO OSBUAL, MYRNA
MIGUEL, EDUARDO ESCUETA, CONRADO MALLARI, AVELINO MIGUEL, VICTORINO
TALA, IGNACIO DELA CRUZ, ROLANDO OSBUAL and ROLANDO
MASANQUE, Petitioners,
vs.
THE HONORABLE COURT OF APPEALS and ESTRELLA ARRASTIA, Respondents.

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

G.R. No. 132866

THE COURT OF APPEALS and THE DEPARTMENT OF AGRARIAN REFORM

ADJUDICATION BOARD, Petitioners,
vs.
ESTRELLA ARRASTIA, Respondent.

DECISION

Tinga, J.:

This deals with two separate Rule 45 petitions, later consolidated, filed by the Department of
Agrarian Reform Adjudication Board ("DARAB") and Alfredo Danan, et al. Both petitions seek
the reversal of the Court of Appeals’ Decision in CA-G.R. SP No. 33796, which reversed and set
aside the DARAB Decision in DARAB Case No. 1551 and its Resolution denying petitioners’
motion for reconsideration.

Petitioners ("private petitioners") in G.R. No. 132759 are all residents of Lubao, Pampanga,
claiming to be cultivating a vast landholding owned by the heirs of Teodorica Reinares Arrastia,
Leticia Arrastia Montenegro and Juanita Arrastia ("Arrastia heirs"). Said property has an
aggregate area of approximately three hundred (300) hectares and is situated at
the Barangays of Lourdes, Baruya, and San Isidro, all within the Municipality of Lubao,
Pampanga. The records of the case show that the landholding had been subdivided and
distributed among the Arrastia heirs and the corresponding certificates of titles issued
accordingly.

Petitioner in G.R. No. 132866 is the DARAB, the adjudication arm of the Department of Agrarian
Reform ("DAR") that is tasked to implement the government’s comprehensive agrarian reform
program ("CARP").

The common respondent in both petitions is Estrella Arrastia, one of the Arrastia heirs and a co-
owner of the disputed property. Respondent Arrastia own 4.4630 hectares of the disputed
property.

The factual antecedents are as follows:

Sometime in 1976, a certain Rustico Coronel leased the subject property for a period of twelve
(12) years or until the crop year 1987 to 1988.1 On September 27, 1986, persons claiming to be
farmers and residents of Barangay Lourdes and Barangay San Rafael signed a joint resolution
as members of the Aniban ng mga Manggagawa sa Agrikultura ("AMA") to enter and lease the
subject property from the Arrastia heirs. Then Pampanga Governor Brien Guiao favorably
endorsed the resolution to then Minister of Environment and Natural Resources Heherson
Alvarez. On the basis of said resolution but without the consent of the landowners, the AMA
members, who are herein petitioners, entered the disputed land, cleared portions thereof and
planted various crops thereon. This culminated in a violent confrontation on May 21, 1988 that
led to the filing of criminal charges against AMA members.2

On June 2, 1988, the AMA filed a complaint with petitioner DARAB, docketed as DARAB Case
No. 0001, praying that respondent Arrastia be prevented from destroying standing crops on the
disputed property and from fencing said property and that petitioners be allowed to continue
with their farming thereon. On August 15, 1988, the DARAB ordered the DAR Regional Director
to conduct an ocular inspection on the disputed property.3 The inspection team submitted an
Ocular/Investigation Report with the observation that there were no substantially significant
plantings on the disputed property. The Municipal Agrarian Reform Officer ("MARO") of Lubao,
Pampanga also submitted a report dated September 21, 1989, recommending the
disqualification of private petitioners from availing of the benefits under the CARP.4

On October 5, 1988, the DARAB issued an order denying AMA’s motion for authority to
cultivate. The order became final and executory on July 29, 1989, after the DARAB denied
AMA’s motion for reconsideration.5

On behalf of her co-heirs and co-owners, Arrastia instituted an action against private petitioners
for violation of Section 73(b) of Republic Act (R.A.) No. 6657 on October 9, 1989. Arrastia’s
complaint, docketed as Agrarian Case No. 2000, was raffled to Branch 48 of the Regional Trial
Court of San Fernando, Pampanga on October 9, 1989. The trial court, sitting as a special
agrarian court ("SAC"), issued a temporary restraining order, and subsequently a preliminary
injunction, both enjoining private petitioners from entering and cultivating the disputed property.

On November 29, 1989, private petitioners filed a complaint for injunction and damages before
the Provincial Agrarian Reform Adjudication Board ("PARAD") against Arrastia, alleging that
they were actual tillers of the disputed property who were forcibly evicted by Arrastia from their
tenanted lots through the use of armed men. In their complaint, docketed as DARAB Regional
Case No. 161-P’ 89, they prayed that Arrastia be restrained from preventing them from
reoccupying the property in question. Upon referral of the matter to the respective Barangay
Agrarian Reform Committees ("BARC") of the Barangays of Lourdes, San Isidro, and San
Rafael, BARC officials reported that the dispute could no longer be settled amicably. In
particular, the BARC of Barangay San Rafael (Baruya), Lubao informed the hearing officer that
private petitioners were tenants or actual tillers of the disputed property. The Lubao MARO also
submitted the reports of other BARC officials.6

On the basis of the reports submitted by BARC officials and private petitioners’ affidavits, the
hearing officer issued on December 9, 1990 an order granting a preliminary injunction to restrain
Arrastia from disturbing private petitioners in the tilling of the disputed property. The PARAD
hearing officer also directed the MARO to act on the petition for the coverage of the disputed
property under the CARP.7

Meanwhile, on January 30, 1991, Arrastia filed an omnibus motion in DARAB Case No. 0001,
questioning the jurisdiction of the hearing officer to issue an order of injunction. The DARAB
denied said motion and subsequently issued the writ of injunction on September 22, 1992.

Arrastia filed an answer in DARAB Regional Case No. 161-P’ 89, interposing the defense that
the disputed land was not devoted to agriculture and that private petitioners were not tenants
thereof.
After due hearing, the PARAD rendered a decision in DARAB Regional Case No. 161-P’ 89 on
May 13, 1993, declaring that the subject property is covered by the CARP and that private
petitioners are qualified beneficiaries of the program. The adjudicator also issued an injunction
prohibiting Arrastia from disturbing private petitioners’ occupation of the property. The
dispositive portion of the decision reads:

WHEREFORE, PREMISES CONSIDERED, this Board hereby renders judgment:

(1) Confirming and declaring that the subject landholding with an area of 300 hectares, more or
less, situated at Barangays Lourdes, San Isidro and San Rafael (Baruya), Lubao, Pampanga,
owned by the defendant and her co-owners are agricultural land subject to the coverage of RA
No. 6657, and that plaintiffs are qualified beneficiaries who enjoy the benefits of agrarian laws
including the right to an award of the lands they actually till in accordance with the procedure
therein;

(2) Making the preliminary injunction hereto forthwith issued, prohibiting the defendant and her
co-owners and all other persons claiming any right or title under them, from continuing to
exclude plaintiffs and from re-entry and re-occupation of the subject landholding as agricultural
tenants and their restoration thereat, final and permanent; and

(3) Ordering the defendant and her co-owners to pay plaintiffs the amount of ₱10,000.00 as
attorney’s fees, plus costs.8

Arrastia appealed the aforementioned decision to petitioner DARAB. The appeal was docketed
as DARAB Case No. 1551. On March 28, 1994, the DARAB rendered its decision modifying the
appealed judgment, the dispositive portion of which reads:

WHEREFORE, premises considered, the appeal is DISMISSED. The judgment of the Provincial
Adjudicator is hereby modified as follows:

1. Declaring Dominador Flores, Rodrigo Serrano, Oscar Salazar, Alejandro Danan, Tirso
Lingad, Francisco Santos, Dante Danan, Jesus Castro, Amado Escueta, Marcos Susi,
Francisco Bernate, Felix Escueta, Ladislao Danan, Lamberto Danan, Carlito Santos, Orlando
Santos, Jose Manansala, Eulalio Danan, Eddie Escueta, Conrado Castro, Pedro Tala and
Victorino Tala to be agricultural lessees on their respective tillages, and ordering their
reinstatement on the land;

2. Ordering the rest of the Plaintiffs-Appellees to be reinstated on the land and to possess and
occupy their respective areas of cultivation;

3. Ordering the Regional Director of the Department of Agrarian Reform, Region III, San
Fernando, Pampanga, the Provincial Agrarian Reform Officer for the Province of Pampanga and
the Municipal Reform Officer for the Municipality of Lubao, Province of Pampanga to
immediately undertake administrative processes for the coverage of the land under Republic Act
No. 6657 and other applicable agrarian laws, DAR Administrative Order No. 1, Series of 1993,
DAR Department Memorandum Circular No. 04, Series of 1993 and other DAR rules and
regulations taking into consideration the qualifications of Appellees to be beneficiaries of the
program as well as the right of retention of the owners of the subject landholding and the last
paragraph of Section 6, Republic Act No. 6657 which provides:
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 the period of three (3) months after the effectivity of
this Act. Thereafter, all Register of Deeds shall inform the DAR within thirty (30) days of any
transaction involving agricultural lands in excess of five (5) hectares.

4. Ordering Defendant-Appellant, or any person or persons acting for and in behalf, to refrain
from committing any act or acts which will disturb or in any way adversely interfere with the
peaceful possession, occupation and farming activities of Appellees on the land itself;

5. Ordering Defendant-Appellant to pay Plaintiff-Appellees the reasonable amount of Twenty

Thousand Pesos (₱20,000.00) as attorney’s fees plus costs of the suit; and

6. Ordering the Regional Sheriff of the DAR Regional Adjudication Board, Region III, to
implement this Order and submit a return to this Board within seven (7) days from receipt of this
Order.

This decision is immediately executory pursuant to Section 50 of Republic Act No. 6657.9

Aggrieved, Arrastia elevated the controversy to the Court of Appeals, which reversed and set
aside the decision of the DARAB.

On the issue of whether private petitioners are qualified beneficiaries under the CARP, the
appellate court ruled in the negative mainly on the basis of the report of MARO Josefina Vidal
which was quoted at length in its Decision. In the said report, the MARO recommended the
disqualification of private petitioners from the coverage of the CARP in view of their continued
violation of Sections 22 and 23 of Executive Order No. 229, under which persons, associations,
or entities which prematurely enter lands covered by agrarian reform shall be permanently
disqualified from CARP coverage and cited for contempt, respectively. The Court of Appeals
also found private petitioners guilty of violating the temporary restraining order and preliminary
injunction issued by the SAC in Agrarian Case No. 2000 and also the temporary restraining
issued by the Court of Appeals itself on April 13, 1994. The appeals court denied the motions for
reconsideration separately filed by private petitioners. Hence, the petitions before this Court.

In its petition, DARAB raised the following issues:

1.1. THE HONORABLE COURT OF APPEALS ERRED WHEN IT SET ASIDE THE ENTIRETY
OF THE DECISION APPEALED FROM, TO INCLUDE THE ORDER TO PLACE THE
DISPUTED LANDHOLDINGS UNDER CARP COVERAGE, ON THE SOLE BASIS OF THE
FINDING THAT PRIVATE RESPONDENTS (FARMERS) THEREIN WERE DISQUALIFIED AS
FARMER BENEFICIARIES;

1.2. THE HONORABLE COURT OF APPEALS ERRED WHEN IT RULED ON THE

DISQUALIFICATION OF ALL THE FARMERS (PRIVATE RESPONDENTS THEREIN),
IRRESPECTIVE OF WHETHER THEY (OR SOME) ARE AGRICULTURAL TENANTS OR
NOT, ON THE SOLE BASIS OF A FIELD REPORT THAT WAS PREPARED AND SUBMITTED
WITHOUT THE FARMERS AT LEAST GIVEN OPPORTUNITY TO BE HEARD, THUS,
VIOLATIVE OF DUE PROCESS.10
In turn, private petitioners in their petition impute the following errors to the Court of Appeals:

1. RESPONDENT COURT GRAVELY ERRED IN NOT GIVING FIRST DUE COURSE TO THE
PETITION IN CA-G.R. NO. 33796 AND REQUIRED THE DARAB TO ELEVATE TO IT THE
RECORDS OF DARAB CASE NO. 1551 INCLUDING ALL THE EVIDENCE PRESENTED SO
IT COULD HAVE FULLY APPRECIATED ALL THE FACTS INSTEAD OF MERELY RELYING
ON THE PLEADINGS FILED BEFORE IT.

2. THE RESPONDENT COURT GRAVELY ERRED IN IGNORING FUNDAMENTAL RULES

OF ADMINISTRATIVE DUE PROCESS BY ITS FAILURE AND REFUSAL TO CONSIDER
SUBSTANTIVE EVIDENCE INTRODUCED BY PETITIONERS IN THE PROCEEDINGS IN
DARAB CASE NO. 161-P’89 AND DARAB CASE NO. 1551 RESULTING IN FINDINGS WHICH
ARE NOT ONLY CONTRARY TO LAW AND THE EVIDENCE ON RECORD BUT ARE
FURTHER PATENTLY PARTIAL TO PRIVATE RESPONDENTS.

3. THE RESPONDENT COURT GRAVELY ERRED IN MAKING CONCLUSIONS FROM ITS

REVIEW OF THE DARAB DECISION IN DARAB CASE NO. 1551 WITHOUT ANY BASIS ON
THE DECISION ITSELF THUS CITING ERRORS IN THE SAID DECISION WHICH WERE
NOT ACTUALLY MADE BY THE DARAB.

4. THE RESPONDENT COURT GRAVELY ERRED IN REVERSING THE FINDINGS OF

FACTS OF THE DARAB WITHOUT DUE REGARD TO EVIDENCE PRESENTED BEFORE
THE LATTER.11

The two petitions advance two main arguments: first, the Court of Appeals’ finding that private
petitioners are ineligible to become CARP beneficiaries is without factual or evidentiary basis;
second, the Court of Appeals’ reversal of the DARAB’s order to undertake administrative
proceedings for the acquisition of the subject property for agrarian reform purposes is
premature.

Private petitioners contend that the Court of Appeals’ declaration that they are not qualified
beneficiaries of the CARP has no evidentiary basis because it failed to order the transmittal of
the DARAB records, particularly the reports of the different BARC officials establishing tenancy
relationship between private petitioners and the owners of the disputed property. For its part,
DARAB denies having categorically declared in its decision in DARAB Case No. 1551 that
private petitioners are qualified beneficiaries because the administrative proceeding to
determine the beneficiaries entitled under R.A. No. 6657 was yet to be undertaken not by
DARAB but by the administrative officials of DAR. DARAB also describes as arbitrary and
unilateral the MARO report quoted by the appellate court in support of its ruling that private
petitioners prematurely entered the disputed property.

The resolution of the issue on private petitioners’ eligibility under the CARP calls for a review of
the evidence on record to determine whether or not the conclusion of the Court of Appeals has
factual basis. At the outset, it should be noted that the jurisdiction of this Court in a petition for
review on certiorari under Rule 45 of the Rules of Court is limited to reviewing only errors of law,
as it is not a trier of facts. It is a settled doctrine that findings of fact of the Court of Appeals are
binding and conclusive upon this Court, not to be disturbed unless: (1) the conclusion is a
finding grounded entirely on speculation, surmise and conjecture; (2) the inference made is
manifestly mistaken; (3) there is grave abuse of discretion; (4) the judgment is based on a
misapprehension of facts; (5) the findings of fact are conflicting; (6) the Court of Appeals went
beyond the issues of the case and its findings are contrary to the admissions of both appellant
and appellees; (7) the findings of fact of the Court of Appeals are contrary to those of the trial
court; (8) said findings of fact are conclusions without citation of specific evidence on which they
are based; (9) the facts set forth in the petition as well as in the petitioner's main and reply briefs
are not disputed by the respondents; and (10) the findings of fact of the Court of Appeals are
premised on the supposed absence of evidence and contradicted by the evidence on record.12

The DARAB and the Court of Appeals’ findings in respect to the status of private petitioners are
conflicting. The DARAB found that private petitioners are either agricultural lessees paying
rentals to the landowners or actual tillers in possession of distinct portions of the subject
property. The Court of Appeals, however, found private petitioners as not qualified to become
CARP beneficiaries on account of certain violations they committed and considered it
unnecessary to ascertain their status as agricultural lessees or tillers. In view of the divergent
opinions, the Court must review the evidence relied upon by the DARAB and the Court of
Appeals in arriving at their respective conclusions.

The Court affirms factual findings and conclusions of the Court of Appeals.

The appellate court’s conclusion that private petitioners committed particular violations
warranting their disqualification from the CARP is based on the MARO report which has not
been disputed by all the private petitioners. The MARO who prepared the report enjoys the
presumption of regularity in the performance of her functions. Absent any showing that the
Court of Appeals committed grave abuse of discretion in giving evidentiary weight to said report,
said factual findings are generally deemed conclusive on this Court, which is not a trier of
facts.13

Anent DARAB’s contention that the MARO report was made unilaterally and without giving
private petitioners the opportunity to be heard, the circumstances not nullify said report for lack
of due process. The essence of due process is simply an opportunity to be heard or, as applied
to administrative proceedings, an opportunity to explain one's side or an opportunity to seek
reconsideration of the action or ruling complained of.14 Private petitioners cannot claim denial of
due process simply because they had ample opportunity to rebut the MARO’s findings and
present contrary evidence in the proceedings before the PARAD, the DARAB, or the Court of
Appeals.

Private petitioners insist that they are bona fide agricultural tenants of the disputed property. It is
unnecessary to pass upon this issue in the light of the categorical finding of the appellate court
that private petitioners are no longer entitled to avail of the benefits under the CARP. In any
event, however, the claim is not well-founded.

A perusal of the decision in DARAB Case No. 1551 reveals that DARAB classified two (2) sets
of farmworkers, i.e., those who cultivated the land and paid corresponding rentals, and those
who occupied and cultivated portions of the disputed property since 1986 as certified by BARC
officials.

Mere occupation or cultivation of an agricultural land does not automatically convert a tiller or
farmworker into an agricultural tenant recognized under agrarian laws. The essential requisites
of a tenancy relationship are: (1) the parties are the landowner and the tenant; (2) the subject is
agricultural land; (3) there is consent among the parties; (4) the purpose is agricultural
production; (5) there is personal cultivation; and (6) there is sharing of harvests. All these
requisites must concur in order to create a tenancy relationship between the parties.15 In the
case at bar, it has not been sufficiently established that private petitioners’ occupation and
cultivation of the disputed property was with the consent of the landowners.

DARAB assails the Court of Appeals in reversing the DARAB decision in its entirety. It contends
that the determination of private petitioners’ eligibility under R.A. No. 6657 has no bearing on its
order to commence administrative procedure for the acquisition of the disputed property.

As borne by the case records,16 respondent Arrastia owns only 4.4630 hectares of the subject
property, which is below the retention limit under Section 617 of R.A. No. 6657 granting a right of
retention of up to a maximum of five (5) hectares of agricultural land in favor of a landowner
whose property may be acquired for distribution to agrarian reform beneficiaries. Consequently,
a landowner may keep his entire covered landholding if its aggregate size does not exceed the
retention limit of five (5) hectares. His land will not be covered at all by the operation land
transfer program although all requisites for coverage are present.

The right of retention is a constitutionally guaranteed right, which is subject to qualification by

the legislature. 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 landowner. 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.18 For as long as the area to be retained is
compact or contiguous and 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, 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.19 Therefore, there is no legal and
practical basis to order the commencement of the administrative proceedings for the placement
of respondent Arrastia’s land under the CARP since her property’s land area falls below the
retention limit of five (5) hectares.

WHEREFORE, both petitions in G.R No. 132759 and G.R. No. 132866 are DENIED.
The Decision of the Court of Appeals in CA-G.R. SP No. 33796 is AFFIRMED. Costs against
private petitioners.

SO ORDERED.
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.

G.R. No.176549

DEPARTMENT OF AGRARIAN REFORM, QUEZON CITY & PABLO MENDOZA, Petitioners,

vs.
ROMEO C. CARRIEDO, Respondent.

DECISION

JARDELEZA, J.:

This is a Petition for Review on Certiorari1 assailing the Court of Appeals Decision dated
October 5, 20062 and Resolution dated January 10, 20073 in CA-G.R. SP No. 88935. The
Decision and Resolution reversed the Order dated February 22, 20054 issued by the
Department of Agrarian Reform-Central Office (DAR-CO) in Administrative Case No. A-9999-
03-CV-008-03 which directed that a 5.0001 hectare piece of agricultural land (land) be placed
under the Comprehensive Agrarian Reform Program pursuant to Republic Act (RA) No. 6657 or
the Comprehensive Agrarian Reform Law.

The Facts

The land originally formed part of the agricultural land covered by Transfer Certificate of Title
(TCT) No. 17680,5 which in turn, formed part of the total of 73.3157 hectares of agricultural land
owned by Roman De Jesus (Roman).6

On May 23, 1972, petitioner Pablo Mendoza (Mendoza) became the tenant of the land by virtue
of a Contrato King Pamamuisan7 executed between him and Roman. Pursuant to the Contrato,
Mendoza has been paying twenty-five (25) piculs of sugar every crop year as lease rental to
Roman. It was later changed to Two Thousand Pesos (P2, 000.00) per crop year, the land
being no longer devoted to sugarcane.8

On November 7, 1979, Roman died leaving the entire 73.3157 hectares to his surviving wife
Alberta Constales (Alberta), and their two sons Mario De Jesus (Mario) and Antonio De Jesus
(Antonio).9 On August 23, 1984, Antonio executed a Deed of Extrajudicial Succession with
Waiver of Right10 which made Alberta and Mario co-owners in equal proportion of the
agricultural land left by Roman.11
On June 26, 1986, Mario sold12 approximately 70.4788 hectares to respondent Romeo C.
Carriedo (Carriedo), covered by the following titles and tax declarations, to wit:

1. TCT No. 35055

2. (Tax Declaration) TD No. 48354

3. TCT No. 17681

4. TCT No. 56897

5. TCT No. 17680

The area sold to Carriedo included the land tenanted by Mendoza (forming part of the area
covered by TCT No. 17680). Mendoza alleged that the sale took place without his knowledge
and consent.

In June of 1990, Carriedo sold all of these landholdings to the Peoples’ Livelihood Foundation,
Inc. (PLFI) represented by its president, Bernabe Buscayno.13 All the lands, except that covered
by TCT No. 17680, were subjected to Voluntary Land Transfer/Direct Payment Scheme and
were awarded to agrarian reform beneficiaries in 1997.14

The parties to this case were involved in three cases concerning the land, to wit:

The Ejectment Case (DARAB Case No. 163-T-90 | CAG.R. SP No. 44521 | G.R. No. 143416)

On October 1, 1990, Carriedo filed a Complaint for Ejectment and Collection of Unpaid Rentals
against Mendoza before the Provincial Agrarian Reform Adjudication Board (PARAD) of Tarlac
docketed as DARAB Case No. 163-T-90. He subsequently filed an Amended Complaint on
October 30, 1990.15

In a Decision dated June 4, 1992,16 the PARAD ruled that Mendoza had knowledge of the sale,
hence, he could not deny the fact nor assail the validity of the conveyance. Mendoza violated
Section 2 of Presidential Decree (PD) No. 816,17 Section 50 of RA No. 119918 and Section 36 of
RA No. 3844,19 and thus, the PARAD declared the leasehold contract terminated, and ordered
Mendoza to vacate the premises.20

Mendoza filed an appeal with the Department of Agrarian Reform Adjudication Board
(DARAB).1âwphi1 In a Decision dated February 8, 1996,21 the DARAB affirmed the PARAD
Decision in toto. The DARAB ruled that ownership of the land belongs to Carriedo. That the
deed of sale was unregistered did not affect Carriedo’s title to the land. By virtue of his
ownership, Carriedo was subrogated to the rights and obligation of the former landowner,
Roman.22

Mendoza then filed a Petition for Review with the Court of Appeals (CA). The case was
docketed as CA-G.R. SP No. 44521. In a Decision dated September 7, 1998,23 the CA affirmed
the DARAB decision in toto. The CA ruled that Mendoza’s reliance on Section 6 of RA No. 6657
as ground to nullify the sale between De Jesus and Carriedo was misplaced, the section being
limited to retention limits. It reiterated that registration was not a condition for the validity of the
contract of sale between the parties.24 Mendoza’s Motions for Reconsideration and New Trial
were subsequently denied.25

Mendoza thus filed a Petition for Review on Certiorari with this Court, docketed as G.R. No.
143416. In a Resolution dated August 9, 2000,26 this Court denied the petition for failure to
comply with the requirements under Rule 45 of the Rules of Court. An Entry of Judgment was
issued on October 25, 2000.27 In effect, the Decision of the CA was affirmed, and the following
issues were settled with finality:

1) Carriedo is the absolute owner of the five (5) hectare land;

2) Mendoza had knowledge of the sale between Carriedo and Mario De Jesus, hence he
is bound by the sale; and

3) Due to his failure and refusal to pay the lease rentals, the tenancy relationship
between Carriedo and Mendoza had been terminated.

Meanwhile, on October 5, 1999, the landholding covered by TCT No. 17680 with an area of
12.1065 hectares was divided into sub-lots. 7.1065 hectares was transferred to Bernabe
Buscayno et al. through a Deed of Transfer28 under PD No. 27.29 Eventually, TCT No. 17680
was partially cancelled, and in lieu thereof, emancipation patents (EPs) were issued to Bernabe,
Rod and Juanito, all surnamed Buscayno. These lots were identified as Lots C, D and E
covered by TCT Nos. 44384 to 44386 issued on September 10, 1999.30 Lots A and B, consisting
of approximately 5.0001 hectares and which is the land being occupied by Mendoza, were
registered in the name of Carriedo and covered by TCT No. 34428131 and TCT No. 344282.32

The Redemption Case (DARAB III-T-1476-97 | CA-G.R. SP No. 88936)

On July 21, 1997, Mendoza filed a Petition for Redemption33 with the PARAD. In an Order dated
January 15, 2001,34 the PARAD dismissed his petition on the grounds of litis pendentia and lack
of the required certification against forum-shopping. It dismissed the petition so that the pending
appeal of DARAB Case No. 163-T-90 (the ejectment case discussed above) with the CA can
run its full course, since its outcome partakes of a prejudicial question determinative of the
tenability of Mendoza’s right to redeem the land under tenancy.35

Mendoza appealed to the DARAB which reversed the PARAD Order in a Decision dated
November 12, 2003.36 The DARAB granted Mendoza redemption rights over the land. It ruled
that at the time Carriedo filed his complaint for ejectment on October 1, 1990, he was no longer
the owner of the land, having sold the land to PLFI in June of 1990. Hence, the cause of action
pertains to PLFI and not to him.37 It also ruled that Mendoza was not notified of the sale of the
land to Carriedo and of the latter’s subsequent sale of it to PLFI. The absence of the mandatory
requirement of notice did not stop the running of the 180 day-period within which Mendoza
could exercise his right of redemption.38 Carriedo’s Motion for Reconsideration was
subsequently denied.39

Carriedo filed a Petition for Review with the CA. In a Decision dated December 29, 2006,40 the
CA reversed the DARAB Decision. It ruled that Carriedo’s ownership of the land had been
conclusively established and even affirmed by this Court. Mendoza was not able to substantiate
his claim that Carriedo was no longer the owner of the land at the time the latter filed his
complaint for ejectment. It held that the DARAB erred when it ruled that Mendoza was not guilty
of forum-shopping.41 Mendoza did not appeal the decision of the CA.

The Coverage Case (ADM Case No. A-9999-03-CV-008-03 | CA-G.R. SP No. 88935)

On February 26, 2002, Mendoza, his daughter Corazon Mendoza (Corazon) and Orlando
Gomez (Orlando) filed a Petition for Coverage42 of the land under RA No. 6657. They claimed
that they had been in physical and material possession of the land as tenants since 1956, and
made the land productive.43 They prayed (1) that an order be issued placing the land under
Comprehensive Agrarian Reform Program (CARP); and (2) that the DAR, the Provincial
Agrarian Reform Officer (PARO) and the Municipal Agrarian Reform Officer (MARO) of Tarlac
City be ordered to proceed with the acquisition and distribution of the land in their favor.44 The
petition was granted by the Regional Director (RD) in an Order dated October 2, 2002,45 the
dispositive portion of which reads:

WHEREFORE, foregoing premises considered, the petition for coverage under CARP filed by
Pablo Mendoza, et al[.], is given due course. Accordingly, the MARO and PARO are hereby
directed to place within the ambit of RA 6657 the landholding registered in the name of Romeo
Carriedo covered and embraced by TCT Nos. 334281 and 334282, with an aggregate area of
45,000 and 5,001 square meters, respectively, and to distribute the same to qualified farmer-
beneficiaries.

SO ORDERED.46

On October 23, 2002, Carriedo filed a Protest with Motion to Reconsider the Order dated
October 2, 2002 and to Lift Coverage47 on the ground that he was denied his constitutional right
to due process. He alleged that he was not notified of the filing of the Petition for Coverage, and
became aware of the same only upon receipt of the challenged Order.

On October 24, 2002, Carriedo received a copy of a Notice of Coverage dated October 21,
200248 from MARO Maximo E. Santiago informing him that the land had been placed under the
coverage of the CARP.49 On December 16, 2002, the RD denied Carriedo’s protest in an Order
dated December 5, 2002.50 Carriedo filed an appeal to the DAR-CO.

In an Order dated February 22, 2005,51 the DAR-CO, through Secretary Rene C. Villa, affirmed
the Order of the RD granting coverage. The DAR-CO ruled that Carriedo was no longer allowed
to retain the land due to his violation of the provisions of RA No. 6657. His act of disposing his
agricultural landholdings was tantamount to the exercise of his retention right, or an act
amounting to a valid waiver of such right in accordance with applicable laws and
jurisprudence.52 However, it did not rule whether Mendoza was qualified to be a farmer-
beneficiary of the land. The dispositive portion of the Order reads:

WHEREFORE, premises considered, the instant appeal is hereby DISMISSED for lack of merit.

Consequently, the Order dated 2 October 2002 of the Regional Director of DAR III, is
hereby AFFIRMED.

SO ORDERED.53

Carriedo filed a Petition for Review54 with the CA assailing the DAR-CO Order. The appeal was
docketed as CA-G.R. SP No. 88935. In a Decision dated October 5, 2006, the CA reversed the
DAR-CO, and declared the land as Carriedo’s retained area. The CA ruled that the right of
retention is a constitutionally-guaranteed right, subject to certain qualifications specified by the
legislature.55 It serves to mitigate the effects of compulsory land acquisition by balancing the
rights of the landowner and the tenant by implementing the doctrine that social justice was not
meant to perpetrate an injustice against the landowner.56 It held that Carriedo did not commit
any of the acts which would constitute waiver of his retention rights found under Section 6 of
DAR Administrative Order No. 02, S.2003.57 The dispositive portion of the Decision reads:

WHEREFORE, premises considered and pursuant to applicable law and jurisprudence on the
matter, the present Petition is hereby GRANTED. Accordingly, the assailed Order of the
Department of Agrarian Reform-Central Office, Elliptical Road, Diliman, Quezon City (dated
February 22, 2005) is hereby REVERSED and SET ASIDE and a new one entered—
DECLARING the subject landholding as the Petitioner’s retained area. No pronouncements as
to costs.

SO ORDERED.58

Hence, this petition.

Petitioners maintain that the CA committed a reversible error in declaring the land as Carriedo’s
retained area.59

They claim that Paragraph 4, Section 6 of RA No. 6657 prohibits any sale, disposition, lease,
management contract or transfer of possession of private lands upon effectivity of the
law.60 Thus, Regional Director Renato Herrera correctly observed that Carriedo’s act of
disposing his agricultural property would be tantamount to his exercise of retention under the
law. By violating the law, Carriedo could no longer retain what was left of his property. "To rule
otherwise would be a roundabout way of rewarding a landowner who has violated the explicit
provisions of the Comprehensive Agrarian Reform Law."61

They also assert that Carriedo waived his right to retain for failure or neglect for an
unreasonable length of time to do that which he may have done earlier by exercising due
diligence, warranting a presumption that he abandoned his right or declined to assert
it.62 Petitioners claim that Carriedo has not filed an Application for Retention over the subject
land over a considerable passage of time since the same was acquired for distribution to
qualified farmer beneficiaries.63

Lastly, they argue that Certificates of Land Ownership Awards (CLOAs) already generated in
favor of his co-petitioners Corazon Mendoza and Rolando Gomez cannot be set aside. CLOAs
under RA No. 6657 are enrolled in the Torrens system of registration which makes them
indefeasible as certificates of title issued in registration proceedings.64

The Issue

The sole issue for our consideration is whether Carriedo has the right to retain the land.

Our Ruling

We rule in the affirmative. Carriedo did not waive his right of retention over the land.1âwphi1
The 1987 Constitution expressly recognizes landowner retention rights under Article XIII,
Section 4, to wit:

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.)

RA No. 6657 implements this directive, thus:

Section 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 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.

xxx

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. 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. xxx (Emphasis supplied.)

In Danan v. Court of Appeals,65 we explained the rationale for the grant of the right of retention
under agrarian reform laws such as RA No. 6657 and its predecessor PD No. 27, to wit:

The right of retention is a constitutionally guaranteed right, which is subject to qualification by

the legislature. 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 landowner. 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. For as long as the area to be retained is
compact or contiguous and does not exceed the retention ceiling of five (5) hectares, a
landowner's choice of the area to be retained must prevail. xxx66
To interpret Section 6 of RA No. 6657, DAR issued Administrative Order No. 02, Series of 2003
(DAR AO 02-03). Section 6 of DAR AO 02-03 provides for the instances when a landowner is
deemed to have waived his right of retention, to wit:

Section 6. Waiver of the Right of Retention. – The landowner waives his right to retain by
committing any of the following act or omission:

6.1 Failure to manifest an intention to exercise his right to retain within sixty (60)
calendar days from receipt of notice of CARP coverage.

6.2 Failure to state such intention upon offer to sell or application under the [Voluntary
Land Transfer (VLT)]/[Direct Payment Scheme (DPS)] scheme.

6.3 Execution of any document stating that he expressly waives his right to retain. The
MARO and/or PARO and/or Regional Director shall attest to the due execution of such
document.

6.4 Execution of a Landowner Tenant Production Agreement and Farmer’s

Undertaking (LTPA-FU) or Application to Purchase and Farmer’s Undertaking (APFU)
covering subject property.

6.5 Entering into a VLT/DPS or [Voluntary Offer to Sell (VOS)] but failing to manifest an
intention to exercise his right to retain upon filing of the application for VLT/DPS or VOS.

6.6 Execution and submission of any document indicating that he is consenting to the
CARP coverage of his entire landholding.

6.7 Performing any act constituting estoppel by laches which is the failure or neglect for
an unreasonable length of time to do that which he may have done earlier by exercising
due diligence, warranting a presumption that he abandoned his right or declined to
assert it.

Petitioners cannot rely on the RD’s Order dated October 2, 2002 which granted Mendoza’s
petition for coverage on the ground that Carriedo violated paragraph 4 Section 667 of RA No.
6657 for disposing of his agricultural land, consequently losing his right of retention. At the time
when the Order was rendered, up to the time when it was affirmed by the DAR-CO in its Order
dated February 22, 2005, the applicable law is Section 6 of DAR 02-03. Section 6 clearly shows
that the disposition of agricultural land is not an act constituting waiver of the right of retention.

Thus, as correctly held by the CA, Carriedo "[n]ever committed any of the acts or omissions
above-stated (DAR AO 02-03). Not even the sale made by the herein petitioner in favor of PLFI
can be considered as a waiver of his right of retention. Likewise, the Records of the present
case is bereft of any showing that the herein petitioner expressly waived (in writing) his right of
retention as required under sub-section 6.3, section 6, DAR Administrative Order No. 02-
S.2003."68

Petitioners claim that Carriedo’s alleged failure to exercise his right of retention after a long
period of time constituted a waiver of his retention rights, as envisioned in Item 6.7 of DAR AO
02-03.
We disagree.

Laches is defined as the failure or neglect for an unreasonable and unexplained length of time,
to do that which by exercising due diligence could or should have been done earlier; it is
negligence or omission to assert a right within a reasonable time, warranting a presumption that
the party entitled to assert it either has abandoned it or declined to assert it.69 Where a party
sleeps on his rights and allows laches to set in, the same is fatal to his case.70

Section 4 of DAR AO 02-03 provides:

Section 4. Period to Exercise Right of Retention under RA 6657

4.1 The landowner may exercise his right of retention at any time before receipt of notice
of coverage.

4.2 Under the Compulsory Acquisition (CA) scheme, the landowner shall exercise his
right of retention within sixty (60) days from receipt of notice of coverage.

4.3 Under the Voluntary Offer to Sell (VOS) and the Voluntary Land Transfer
(VLT)/Direct Payment Scheme (DPS), the landowner shall exercise his right of retention
simultaneously at the time of offer for sale or transfer.

The foregoing rules give Carriedo any time before receipt of the notice of coverage to exercise
his right of retention, or if under compulsory acquisition (as in this case), within sixty (60) days
from receipt of the notice of coverage. The validity of the notice of coverage is the very subject
of the controversy before this court. Thus, the period within which Carriedo should exercise his
right of retention cannot commence until final resolution of this case.

Even assuming that the period within which Carriedo could exercise his right of retention has
commenced, Carriedo cannot be said to have neglected to assert his right of retention over the
land. The records show that per Legal Report dated December 13, 199971 prepared by Legal
Officer Ariel Reyes, Carriedo filed an application for retention which was even contested by
Pablo Mendoza’s son, Fernando.72 Though Carriedo subsequently withdrew his application, his
act of filing an application for retention belies the allegation that he abandoned his right of
retention or declined to assert it.

In their Memorandum73 however, petitioners, for the first time, invoke estoppel, citing DAR

Administrative Order No. 05 Series of 200674 (DAR AO 05-06) to support their argument that
Carriedo waived his right of retention.75 DAR AO 05-06 provides for the rules and regulations
governing the acquisition and distribution of agricultural lands subject of conveyances under
Sections 6, 7076 and 73 (a)77 of RA No. 6657. Petitioners particularly cite Item no. 4 of the
Statement of Policies of DAR AO 05-06, to wit:

II. Statement of Policies

4. Where the transfer/sale involves more than the five (5) hectares retention area, the transfer is
considered violative of Sec. 6 of R.A. No. 6657.
In case of multiple or series of transfers/sales, the first five (5) hectares sold/conveyed without
DAR clearance and the corresponding titles issued by the Register of Deeds (ROD) in the name
of the transferee shall, under the principle of estoppel, be considered valid and shall be
treated as the transferor/s’ retained area but in no case shall the transferee exceed the five-
hectare landholding ceiling pursuant to Sections 6, 70 and 73(a) of R.A. No. 6657. Insofar as
the excess area is concerned, the same shall likewise be covered considering that the
transferor has no right of disposition since CARP coverage has been vested as of 15 June
1988. Any landholding still registered in the name of the landowner after earlier dispositions
totaling an aggregate of five (5) hectares can no longer be part of his retention area and
therefore shall be covered under CARP. (Emphasis supplied.)

Citing this provision, petitioners argue that Carriedo lost his right of retention over the land
because he had already sold or disposed, after the effectivity of RA No. 6657, more than fifty
(50) hectares of land in favor of another.78

In his Memorandum,79 Carriedo maintains that petitioners cannot invoke any administrative

regulation to defeat his right of retention. He argues that "administrative regulation must be in
harmony with the provisions of law otherwise the latter prevails."80

We cannot sustain petitioners' argument. Their reliance on DAR AO 05-06 is misplaced. As will
be seen below, nowhere in the relevant provisions of RA No. 6657 does it indicate that a
multiple or series of transfers/sales of land would result in the loss of retention rights. Neither do
they provide that the multiple or series of transfers or sales amounts to the waiver of such right.

The relevant portion of Section 6 of RA No. 6657 referred to in Item no. 4 of DAR AO 05-06
provides:

Section 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 farm, such as the 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. xxx

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
the 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 Registers of Deeds shall inform the Department of
Agrarian Reform (DAR) within thirty (30) days of any transaction involving agricultural lands in
excess of five (5) hectares. (Emphasis supplied.)

Section 70 of RA No. 6657, also referred to in Item no. 4 of DAR AO 05-06 partly provides:

The sale or disposition of agricultural lands retained by a landowner as a consequence of

Section 6 hereof shall be valid as long as the total landholdings that shall be owned by the
transferee thereof inclusive of the land to be acquired shall not exceed the landholding ceilings
provided for in this Act. Any sale or disposition of agricultural lands after the effectivity of
this Act found to be contrary to the provisions hereof shall be null and void. xxx
(Emphasis supplied.)
Finally, Section 73 (a) of RA No. 6657 as referred to in Item No. 4 of DAR AO 05-06 provides,

Section 73. Prohibited Acts and Omissions. – The following are prohibited:

(a) The ownership or possession, for the purpose of circumventing the provisions of this Act, of
agricultural lands in excess of the total retention limits or award ceilings by any person, natural
or juridical, except those under collective ownership by farmer-beneficiaries; xxx

Sections 6 and 70 are clear in stating that any sale and disposition of agricultural lands in
violation of the RA No. 6657 shall be null and void. Under the facts of this case, the reasonable
reading of these three provisions in relation to the constitutional right of retention should be that
the consequence of nullity pertains to the area/s which were sold, or owned by the transferee, in
excess of the 5-hectare land ceiling. Thus, the CA was correct in declaring that the land is
Carriedo’s retained area.81

Item no. 4 of DAR AO 05-06 attempts to defeat the above reading by providing that, under the
principle of estoppel, the sale of the first five hectares is valid. But, it hastens to add that the first
five hectares sold corresponds to the transferor/s’ retained area. Thus, since the sale of the first
five hectares is valid, therefore, the landowner loses the five hectares because it happens to be,
at the same time, the retained area limit. In reality, Item No. 4 of DAR AO 05-06 operates as a
forfeiture provision in the guise of estoppel. It punishes the landowner who sells in excess of
five hectares. Forfeitures, however, partake of a criminal penalty.82

In Perez v. LPG Refillers Association of the Philippines, Inc.,83 this Court said that for an
administrative regulation to have the force of a penal law, (1) the violation of the administrative
regulation must be made a crime by the delegating statute itself; and (2) the penalty for such
violation must be provided by the statute itself.84

Sections 6, 70 and 73 (a) of RA No. 6657 clearly do not provide that a sale or disposition of land
in excess of 5 hectares results in a forfeiture of the five hectare retention area. Item no. 4 of
DAR AO 05-06 imposes a penalty where none was provided by law.

As this Court also held in People v. Maceren,85 to wit:

The reason is that the Fisheries law does not expressly prohibit electro fishing. As electro
fishing is not banned under the law, the Secretary of Agriculture and Natural Resources and the
Natural Resources and the Commissioner of Fisheries are powerless to penalize it. In other
words, Administrative Order Nos. 84 and 84-1, in penalizing electro fishing, are devoid of any
legal basis.

Had the lawmaking body intended to punish electro fishing, a penal provision to that effect could
have been easily embodied in the old Fisheries Law.86

The repugnancy between the law and Item no. 4 of DAR AO 05-06 is apparent by a simple
comparison of their texts. The conflict undermines the statutorily-guaranteed right of the
landowner to choose the land he shall retain, and DAR AO 05-06, in effect, amends RA No.
6657.

In Romulo, Mabanta, Buenaventura, Sayoc & De Los Angeles (RMBSA) v. Home Development

Mutual Fund (HDMF),87 this Court was confronted with the issue of the validity of the
amendments to the rules and regulations implementing PD No. 1752.88 In that case, PD No.
1752 (as amended by RA No. 7742) exempted RMBSA from the Pag-Ibig Fund coverage for the
period January 1 to December 31, 1995. In September 1995, however, the HDMF Board of
Trustees issued a board resolution amending and modifying the rules and regulations
implementing RA No. 7742. As amended, the rules now required that for a company to be
entitled to a waiver or suspension of fund coverage, it must have a plan providing for both
provident/retirement and housing benefits superior to those provided in the Pag-Ibig Fund. In
ruling against the amendment and modification of the rules, this Court held that—

In the present case, when the Board of Trustees of the HDMF required in Section 1, Rule VII of
the 1995 Amendments to the Rules and Regulations Implementing R.A. No. 7742 that
employers should have both provident/retirement and housing benefits for all its employees in
order to qualify for exemption from the Fund, it effectively amended Section 19 of P.D. No.
1752. And when the Board subsequently abolished that exemption through the 1996
Amendments, it repealed Section 19 of P.D. No. 1752. Such amendment and subsequent
repeal of Section 19 are both invalid, as they are not within the delegated power of the
Board. The HDMF cannot, in the exercise of its rule-making power, issue a regulation not
consistent with the law it seeks to apply. Indeed, administrative issuances must not override,
supplant or modify the law, but must remain consistent with the law they intend to carry out.
Only Congress can repeal or amend the law.89 (Citations omitted; underscoring supplied.)

Laws, as well as the issuances promulgated to implement them, enjoy the presumption of
validity.90 However, administrative regulations that alter or amend the statute or enlarge or
impair its scope are void, and courts not only may, but it is their obligation to strike down such
regulations.91 Thus, in this case, because Item no. 4 of DAR AO 05-06 is patently null and void,
the presumption of validity cannot be accorded to it. The invalidity of this provision constrains us
to strike it down for being ultra vires.

In Conte v. Commission on Audit,92 the sole issue of whether the Commission on Audit (COA)
acted in grave abuse of discretion when it disallowed in audit therein petitioners' claim of
financial assistance under Social Security System (SSS) Resolution No. 56 was presented
before this Court. The COA disallowed the claims because the financial assistance under the
challenged resolution is similar to a separate retirement plan which results in the increase of
benefits beyond what is allowed under existing laws. This Court, sitting en banc, upheld the
findings of the COA, and invalidated SSS Resolution No. 56 for being ultra vires, to wit:

xxx Said Sec. 28 (b) as amended by RA 4968 in no uncertain terms bars the creation of any
insurance or retirement plan — other than the GSIS — for government officers and employees,
in order to prevent the undue and [iniquitous] proliferation of such plans. It is beyond cavil that
Res. 56 contravenes the said provision of law and is therefore invalid, void and of no effect. xxx

We are not unmindful of the laudable purposes for promulgating Res. 56, and the positive
results it must have had xxx. But it is simply beyond dispute that the SSS had no authority to
maintain and implement such retirement plan, particularly in the face of the statutory
prohibition. The SSS cannot, in the guise of rule-making, legislate or amend laws or worse,
render them nugatory.

It is doctrinal that in case of conflict between a statute and an administrative order, the former
must prevail. A rule or regulation must conform to and be consistent with the provisions of the
enabling statute in order for such rule or regulation to be valid. The rule-making power of a
public administrative body is a delegated legislative power, which it may not use either to
abridge the authority given it by the Congress or the Constitution or to enlarge its power beyond
the scope intended. xxx Though well-settled is the rule that retirement laws are liberally
interpreted in favor of the retiree, nevertheless, there is really nothing to interpret in either RA
4968 or Res. 56, and correspondingly, the absence of any doubt as to the ultra-vires nature
and illegality of the disputed resolution constrains us to rule against
petitioners.93 (Citations omitted; emphasis and underscoring supplied.)

Administrative regulations must be in harmony with the provisions of the law for administrative
regulations cannot extend the law or amend a legislative enactment.94 Administrative issuances
must not override, but must remain consistent with the law they seek to apply and implement.
They are intended to carry out, not to supplant or modify the law.95 Administrative or executive
acts, orders and regulations shall be valid only when they are not contrary to the laws or the
Constitution.96 Administrative regulations issued by a Department Head in conformity with law
have the force of law.97 As he exercises the rule-making power by delegation of the lawmaking
body, it is a requisite that he should not transcend the bounds demarcated by the statute for the
exercise of that power; otherwise, he would be improperly exercising legislative power in his
own right and not as a surrogate of the lawmaking body.98

If the implementing rules and regulations are issued in excess of the rule-making authority of the
administrative agency, they are without binding effect upon the courts. At best, the same may
be treated as administrative interpretations of the law and as such, they may be set aside by the
Supreme Court in the final determination of what the law means.99

While this Court is mindful of the DAR’s commitment to the implementation of agrarian reform, it
must be conceded that departmental zeal may not be permitted to outrun the authority conferred
by statute.100 Neither the high dignity of the office nor the righteousness of the motive then is an
acceptable substitute; otherwise the rule of law becomes a myth.101

As a necessary consequence of the invalidity of Item no. 4 of DAR AO 05-06 for being ultra
vires, we hold that Carriedo did not waive his right to retain the land, nor can he be considered
to be in estoppel.

Finally, petitioners cannot argue that the CLOAs allegedly granted in favor of his co-petitioners
Corazon and Orlando cannot be set aside. They claim that CLOAs under RA No. 6657 are
enrolled in the Torrens system of registration which makes them indefeasible as certificates of
title issued in registration proceedings.102 Even as these allegedly issued CLOAs are not in the
records, we hold that CLOAs are not equivalent to a Torrens certificate of title, and thus are not
indefeasible.

CLOAs and EPs are similar in nature to a Certificate of Land Transfer (CLT) in ordinary land
registration proceedings. CLTs, and in turn the CLOAs and EPs, are issued merely as
preparatory steps for the eventual issuance of a certificate of title. They do not possess the
indefeasibility of certificates of title. Justice Oswald D. Agcaoili, in Property Registration Decree
and Related Laws (Land Titles and Deeds),103 notes, to wit:

Under PD No. 27, beneficiaries arc issued certificates of land transfers (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, shall be the
basis for the issuance of the corresponding transfer certificates of title (TCTs) in favor of the
corresponding beneficiaries.

Under RA No. 6657, the procedure has been simplified. Only certificates of land ownership
award (CLOAs) are issued, in lieu of EPs, after compliance with all prerequisites. 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 AO No. 2, series of 1994, an EP or CLOA may be
cancelled if the land covered is later found to be part of the landowner's retained area. (Citations
omitted; underscoring supplied.)

The issue, however, involving the issuance, recall or cancellation of EPs or CLOAs, is lodged
with the DAR,104 which has the primary jurisdiction over the matter.105

WHEREFORE, premises considered, the Petition is hereby DENIED for lack of merit. The

assailed Decision of the Court of Appeals dated October 5, 2006 is AFFIRMED. Item no. 4 of
DAR Administrative Order No. 05, Series of 2006 is hereby declared INVALID, VOID and OF
NO EFFECT for being ultra vires.

SO ORDERED.
 G.R. No. 194417, November 23, 2016

HEIRS OF TEODORO CADELIÑA, REPRESENTED BY SOLEDAD CADIZ VDA. DE

CADELIÑA, Petitioners, v. FRANCISCO CADIZ, CELESTINO DELA CRUZ, ANTONIO
VICTORIA, HEIRS OF TELESFORO VILLAR REPRESENTED BY SAMUEL VILLAR,
FRANCISCO VICTORIA AND MAGNO GANTE, Respondents;ChanRoblesVirtualawlibrary

HON. JOSE C. REYES, JR., IN HIS CAPACITY AS PRESIDING JUSTICE, HON.

NORMANDIE PIZARRO, IN HIS CAPACITY AS MEMBER, AND HON. RICARDO R.
ROSARIO, IN HIS CAPACITY AS MEMBER OF THE COURT OF APPEALS SPECIAL
FORMER THIRD DIVISION, Public Respondents.

DECISION

JARDELEZA, J.:

This is a petition for certiorari1 under Rule 65 of the Revised Rules of Court seeking to nullify the
Court of Appeals' (CA) May 25, 2009 Resolution2 and September 22, 2010 Resolution3 in CA-
G.R. SP No. 108414 (collectively, Assailed Resolutions). The Assailed Resolutions dismissed
the petition for review under Rule 43 of the Revised Rules of Court filed by the Heirs of Teodoro
Cadeliña represented by Soledad Cadiz Vda. De Cadeliña (petitioners), against the July 5, 2006
Decision4 and the March 11, 2009 Resolution5 of the Department of Agrarian Reform
Adjudication Board (DARAB) in DARAB Cases Nos. 10543 and 10554.6 The DARAB granted
the complaint7 filed by Francisco Cadiz, Celestino Dela Cruz, Antonio Victoria and heirs of
Telesforo Villar, represented by Samuel Villar, (respondents) for reinstatement of possession as
farmer tenants.chanroblesvirtuallawlibrary

The Facts

Respondents filed complaints for reinstatement of possession as farmer tenants against

petitioners with the DARAB-Region 2, San Fermin, Cauayan, Isabela docketed as DARAB
Cases Nos. II-2063-ISA 2000 and II-2064-ISA 2000.8 Respondents alleged that they were the
farmers/tillers of portions9 of Lot No. 7050, Cad. 211, Santiago Cadastre (properties),
"ownership then claimed by Nicanor Ibuna, Sr. [who is] their landowner," since 1962 until
around the end of 1998 when they were deprived of their respective possessions, occupations
and tillage of the properties.10 This was allegedly brought about by the execution of the decision
of the CA in a previous case (CA-G.R. CV No. 42237)11 ordering the transfer of the properties to
Teodoro Cadeliña (Teodoro) and his heirs, petitioners herein.

Petitioners moved to dismiss the complaint on the ground that respondents cannot be
considered as tenants under land reform law because they were instituted by Nicanor Ibuna, Sr.
(Ibuna) whose rights were declared by the court illegal and unlawful in CA-G.R. CV No. 42237
and that the DARAB has no jurisdiction to entertain the case for lack of tenancy relationship
between the parties.12

In its Decision13 dated October 24, 2000, the DARAB, Region 2, San Fermin, Cauayan, Isabela
ruled in favor of respondents. The DARAB declared Ibuna as legal possessor of the properties
who had the right to institute respondents as tenants of the properties. The DARAB said,
"[w]hile the title of the late Nicanor Ibuna was subsequently declared null and void by the [CA in
CA-G.R. CV No. 42237], he is deemed considered as legal possessor of the subject land" and
"[a]s legal possessor, the late Ibuna has the right to grant to the herein plaintiffs the cultivation
of the land pursuant to Section 6 of [Republic Act (RA) No.] 3844, as amended, otherwise
known as the Agricultural Land Reform Code."14 As a result, respondents are entitled to security
of tenure in working on the properties. Thus, the DARAB: (1) declared respondents the tenants
of the properties; (2) ordered petitioners, their heirs, agent, or any person(s) acting on their
behalf to vacate the land in issue and to deliver the possession and cultivation of said lands to
respondents; (3) ordered respondents to pay lease rentals to petitioners in accordance with
Section 34 of RA No. 3844; and (4) ordered petitioners to pay respondents attorney's fees and
honoraria in the amount of P20,000.00.15

This was appealed before the DARAB Quezon City (DARAB Cases Nos. 10543-10544) which
denied the appeal in its Decision dated July 5, 2006. A motion for reconsideration was also
denied in the March 11, 2009 Resolution. Thereafter, petitioners filed the petition for review
under Rule 43 before the CA.

On May 25, 2009, the CA dismissed the petition for not being sufficient in form and in
substance.16 In their Motion for Reconsideration,17 petitioners attached the missing special
power of attorney in favor of Enor C. Cadeliña and the certified original copies of the pertinent
DARAB decisions and resolution, and cited inadvertence and excusable negligence for the
other procedural lapses. The CA, however, denied the motion in the September 22, 2010
Resolution which petitioners received on September 29, 2010.18

Hence, this petition filed on November 26, 2010,19 where petitioners argue that the CA
committed grave abuse of discretion in dismissing the petition based on procedural grounds,
and for ignoring the merits of the petition. According to them, there is a conflict between the
decision in CA G.R. CV No. 42237 annulling the titles of respondents and declaring the
homestead patents of Teodoro lawful, and the DARAB Decision dated October 24, 2000
declaring respondents as tenants.20

The Issue

Whether the CA committed grave abuse of discretion in dismissing the petition for review based
on procedural grounds.chanroblesvirtuallawlibrary
 Our Ruling

We grant the petition.

Technical rules of procedure may be set aside in order to achieve substantial justice.

It does not escape us that the right recourse against the dismissal of petitioners' appeal with the
CA is an appeal by certiorari under Rule 45, and not certiorari under Rule 65, of the Revised
Rules of Court.21 The Assailed Decisions were final and appealable judgments, which disposed
of petitioners' appeal in a manner left nothing more to be done by the CA.22 As a rule, the
existence and availability of this right to appeal precludes the resort to certiorari since a petition
for certiorari under Rule 65 of the Revised Rules of Court may only be resorted to in the
absence of appeal or any plain, speedy and adequate remedy in the ordinary course of
law.23 Corollarily, we have repeatedly ruled that certiorari is not and cannot be made a substitute
for a lost appeal. As such, this case would have been dismissed outright for failure of petitioners
to avail of the proper remedy.

Nevertheless, when we are convinced that substantial justice will be defeated by the strict
application of procedural rules that are, ironically, intended for the just, speedy and inexpensive
disposition of cases on the merits, we will not hesitate to overlook the procedural technicalities.
While ordinarily, certiorari is unavailing where the appeal period has lapsed, there are
exceptions, as when: (a) the public welfare and the advancement of public policy dictates;
(b) the broader interest of justice so requires; (c) the writs issued are null and void; or (d) the
questioned order amounts to an oppressive exercise of judicial authority.24 Thus, we said
in Pahila-Garrido v. Tortogo:25chanroblesvirtuallawlibrary
We also observe that the rule that a petition should have been brought under Rule 65 instead of
under Rule 45 of the Rules of Court (or vice versa) is not inflexible or rigid. The inflexibility or
rigidity of application of the rules of procedure is eschewed in order to serve the higher ends of
justice. Thus, substance is given primacy over form, for it is paramount that the rules of
procedure are not applied in a very rigid technical sense, but used only to help secure, not
override, substantial justice. If a technical and rigid enforcement of the rules is made, their
aim is defeated. Verily, the strict application of procedural technicalities should not
hinder the speedy disposition of the case on the merits. To institute a guideline, therefore,
the Rules of Court expressly mandates that the rules of procedure "shall be liberally construed
in order to promote their objective of securing a just, speedy and inexpensive disposition of
every action and proceeding."26 (Emphasis supplied.)
The record shows that the facts of this case are undisputed and we are only presented with
questions of law which we are readily able to decide. The issues only involve the determination
of whether respondents are de jure tenants entitled to security of tenure under our land reform
laws, and consequently, of the jurisdiction of the DARAB to order the restoration of possession
of petitioners' properties to respondents. After review, we hold that since the merits of the
petition far outweigh the rigid application of the rules, there is a need to suspend the rules in this
case to achieve substantial justice.

This is all the more true when the strict application of technical rules of procedure will result in a
decision that will disturb already settled cases. We are mindful of the impact that the dismissal
of this petition may have on the final and executory decisions not only in CA-G.R. CV No. 42237
(declaring Ibuna's title as void, and upholding petitioners' homestead over the properties), but
also in a much earlier case involving the denial of the free patent application of Ibuna over the
properties (which also declared his title void) in Department of Agriculture and Natural
Resources (DANR) Case No. 2411.27 We take notice that we affirmed this order of the Secretary
of DANR in DANR Case No. 2411 in our Resolution in G.R. No. L-30916 dated April 25, 1988.28

Respondents are not agricultural leasehold lessees entitled to security of tenure.

We first address petitioners' claim that there is inconsistency between respondents' position of
claiming ownership in CA-G.R. CV No. 42237, and their claim of tenancy relationship in this
case. While we have previously held that "[t]enancy relationship is inconsistent with the
assertion of ownership,"29 this is not applicable in the case of respondents. Records show that
respondents were previously issued title (albeit nullified in CA-G.R. CV No. 42237) under
Section 330 of Presidential Decree No. 152,31 which gives a share tenant actually tilling the land
the preferential right to acquire the portion actually tilled by him.32 Respondents' assertions of
ownership over the properties in CA-G.R. CV No. 42237 were only but a consequence of their
previous status as alleged tenants of Ibuna; their claims of tenancy status and ownership were
successive, and not simultaneous. Thus, particular to the circumstances of their case, there was
no conflict between their assertion of ownership in CA-G.R. CV No. 42237 and of tenancy in this
case.

Nevertheless, respondents' claim of tenancy relationship fails.

Under RA No. 3844,33 otherwise known as the Agriculture Land Reform Code, which
superseded RA No. 1199,34 the determination of the existence of an agricultural leasehold
relation is not only a factual issue, but is also an issue determined by the terms of the law. RA
No. 3844 provides that agricultural leasehold relation is established: (1) by operation of law in
accordance with Section 4 of the said act as a result of the abolition of the agricultural share
tenancy system under RA No. 1199, and the conversion of share tenancy relations into
leasehold relations; or (2) by oral or written agreement, either express or implied.35 While
petitioners Cadiz and Victoria claim to be instituted as tenants in 1962 or during the effectivity of
RA No. 1199, and petitioners Villar and Dela Cruz claim to be instituted in 1972 or during the
effectivity of RA No. 3844, the principles in establishing such relationship in cases before us
have been the same for both laws.

For agricultural tenancy or agricultural leasehold to exist, the following requisites must be
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.36 The absence of any of the
requisites does not make an occupant, cultivator, or a planter, a de jure tenant which entitles
him to security of tenure or to coverage by the Land Reform Program of the government under
existing tenancy laws.37

In Cunanan v. Aguilar,38 we held that a tenancy relationship can only be created with the true
and lawful landowner who is the owner, lessee, usufructuary or legal possessor of the land, to
wit:cralawlawlibrary

Under the foregoing factual milieu, private respondent's claims-(1) that petitioner was not
agricultural tenant, and (2) that the recognition by the Court of Agrarian Relations of his alleged
tenancy status has been secured thru misrepresentation and suppression of facts-must prevail.
(1) By petitioner's own claim filed with the CAR in 1970 he was constituted as tenant on the land
by Pragmacio Paule. Paule was, however, ordered to vacate the holding and surrender the
same to private respondents herein, the heirs of Ciriaco Rivera, as early as December 8, 1964
by the final and executory judgment in Civil Case No. 1477. Therefore, Paule's institution of
petitioner as tenant in the holding did not give rise to a tenure relationship. Tenancy
relationship can only be created with the consent of the true and lawful landowner who is
the owner, lessee, usufructuary or legal possessor of the land. It cannot be created by
the act of a supposed landowner, who has no right to the land subject of the tenancy,
much less by one who has been dispossessed of the same by final
judgement.39 (Emphasis supplied; citations omitted.)
In this case, Ibuna's institution of respondents as tenants did not give rise to a tenure
relationship because Ibuna is not the lawful landowner, either in the concept of an owner or a
legal possessor, of the properties. It is undisputed that prior to the filing of the complaint with the
DARAB, the transfers of the properties to Ibuna and his predecessor, Andres Castillo, were
declared void in separate and previous proceedings.40 Since the transfers were void, it vested
no rights whatsoever in favor of Ibuna, either of ownership and possession. It is also for this
reason that the DARAB erred in declaring Ibuna as a legal possessor who may furnish a
landholding to respondents. That which is inexistent cannot give life to anything at
all.41cralawred

Notably, upholding Ibuna as the legal possessor of the properties is inconsistent with petitioners'
homestead since a homestead applicant is required to occupy and cultivate the land for his own
and his family's benefit, and not for the benefit of someone else.42 Also, it must be recalled that
the CA, in CA-G.R. CV No. 42237, ordered respondents to reconvey the properties to
petitioners herein.43 Upholding respondents' claim for tenancy, and consequently their
possession of the properties, would frustrate this final and executory decision of the CA.

There being no agricultural tenancy relationship between petitioners and respondents, the
DARAB acted beyond its jurisdiction when it ordered petitioners, among other things, to restore
possession of the lands to respondents.

WHEREFORE, the petition is GRANTED. The DARAB Quezon City Decision dated July 5, 2006
and the Resolution dated March 11, 2009 in DARAB Cases Nos. 10543 and 10544, as well as
the affirmed Decision of the DARAB-Region 2 dated October 14, 2000, are hereby SET ASIDE.
The complaints in DARAB Case Nos. 11-2063-ISA 2000 and 11-2064-ISA 2000
are DISMISSED.

No costs.

SO ORDERED.
G.R. No. 78517 February 27, 1989

GABINO ALITA, JESUS JULIAN, JR., JESUS JULIAN, SR., PEDRO RICALDE, VICENTE
RICALDE and ROLANDO SALAMAR, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, ENRIQUE M. REYES, PAZ M. REYES and FE M.
REYES, respondents.

Bureau of Agrarian Legal Assistance for petitioners.

Leonardo N. Zulueta for Enrique Reyes, et al. Adolfo S. Azcuna for private respondents.

PARAS, J.:

Before us is a petition seeking the reversal of the decision rendered by the respondent Court of
Appeals**on March 3, 1987 affirming the judgment of the court a quo dated April 29, 1986, the
dispositive portion of the trial court's decision reading as follows;

WHEREFORE, the decision rendered by this Court on November 5, 1982 is

hereby reconsidered and a new judgment is hereby rendered:

1. Declaring that Presidential Decree No. 27 is inapplicable to lands obtained thru

the homestead law,

2. Declaring that the four registered co-owners will cultivate and operate the
farmholding themselves as owners thereof; and

3. Ejecting from the land the so-called tenants, namely; Gabino Alita, Jesus
Julian, Sr., Jesus Julian, Jr., Pedro Ricalde, Vicente Ricalde and Rolando
Salamar, as the owners would want to cultivate the farmholding themselves.
 No pronouncement as to costs.

SO ORDERED. (p. 31, Rollo)

The facts are undisputed. The subject matter of the case consists of two (2) parcels of land,
acquired by private respondents' predecessors-in-interest through homestead patent under the
provisions of Commonwealth Act No. 141. Said lands are situated at Guilinan, Tungawan,
Zamboanga del Sur.

Private respondents herein are desirous of personally cultivating these lands, but petitioners
refuse to vacate, relying on the provisions of P.D. 27 and P.D. 316 and appurtenant regulations
issued by the then Ministry of Agrarian Reform (DAR for short), now Department of Agrarian
Reform (MAR for short).

On June 18, 1981, private respondents (then plaintiffs), instituted a complaint against Hon.
Conrado Estrella as then Minister of Agrarian Reform, P.D. Macarambon as Regional Director
of MAR Region IX, and herein petitioners (then defendants) for the declaration of P.D. 27 and all
other Decrees, Letters of Instructions and General Orders issued in connection therewith as
inapplicable to homestead lands.

Defendants filed their answer with special and affirmative defenses of July 8, 1981.

Subsequently, on July 19, 1982, plaintiffs filed an urgent motion to enjoin the defendants from
declaring the lands in litigation under Operation Land Transfer and from being issued land
transfer certificates to which the defendants filed their opposition dated August 4, 1982.

On November 5, 1982, the then Court of Agrarian Relations 16th Regional District, Branch IV,
Pagadian City (now Regional Trial Court, 9th Judicial Region, Branch XVIII) rendered its
decision dismissing the said complaint and the motion to enjoin the defendants was denied.

On January 4, 1983, plaintiffs moved to reconsider the Order of dismissal, to which defendants
filed their opposition on January 10, 1983.

Thus, on April 29, 1986, the Regional Trial Court issued the aforequoted decision prompting
defendants to move for a reconsideration but the same was denied in its Order dated June 6,
1986.

On appeal to the respondent Court of Appeals, the same was sustained in its judgment
rendered on March 3, 1987, thus:

WHEREFORE, finding no reversible error thereof, the decision appealed from is

hereby AFFIRMED.

SO ORDERED. (p. 34, Rollo)

Hence, the present petition for review on certiorari.

The pivotal issue is whether or not lands obtained through homestead patent are covered by the
Agrarian Reform under P.D. 27.
The question certainly calls for a negative answer.

We agree with the petitioners in saying that P.D. 27 decreeing the emancipation of tenants from
the bondage of the soil and transferring to them ownership of the land they till is a sweeping
social legislation, a remedial measure promulgated pursuant to the social justice precepts of the
Constitution. However, such contention cannot be invoked to defeat the very purpose of the
enactment of the Public Land Act or Commonwealth Act No. 141. Thus,

The Homestead Act has been enacted for the welfare and protection of the poor.
The law gives a needy citizen a piece of land where he may build a modest
house for himself and family and plant what is necessary for subsistence and for
the satisfaction of life's other needs. The right of the citizens to their homes and
to the things necessary for their subsistence is as vital as the right to life itself.
They have a right to live with a certain degree of comfort as become human
beings, and the State which looks after the welfare of the people's happiness is
under a duty to safeguard the satisfaction of this vital right. (Patricio v. Bayog,
112 SCRA 45)

In this regard, the Philippine Constitution likewise respects the superiority of the homesteaders'
rights over the rights of the tenants guaranteed by the Agrarian Reform statute. In point is
Section 6 of Article XIII of the 1987 Philippine Constitution which provides:

Section 6. The State shall apply the principles of agrarian reform or stewardship,
whenever applicable in accordance with law, in the disposition or utilization of
other natural resources, including lands of public domain under lease or
concession suitable to agriculture, subject to prior rights, homestead rights of
small settlers, and the rights of indigenous communities to their ancestral lands.

Additionally, it is worthy of note that the newly promulgated Comprehensive Agrarian Reform
Law of 1988 or Republic Act No. 6657 likewise contains a proviso supporting the inapplicability
of P.D. 27 to lands covered by homestead patents like those of the property in question,
reading,

Section 6. Retention Limits. ...

... Provided further, That original homestead grantees or their 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.'

WHEREFORE, premises considered, the decision of the respondent Court of Appeals

sustaining the decision of the Regional Trial Court is hereby AFFIRMED.

SO ORDERED.
G.R. No. 199008               November 19, 2014

DANILO ALMERO, TERESITA ALAGON, CELIA BULASO, LUDY RAMADA, REGINA

GEGREMOSA, ISIDRO LAZARTE, THELMA EMBARQUE, FELIPE LAZARTE, GUILERMA
LAZARTE, DULCESIMA BENIMELE, Petitioners,
vs.
HEIRS OF MIGUEL PACQUING, as represented by LINDA PACQUING
FADRILAN, Respondents.

DECISION

BRION, J.:

Before this Court is a petition for review on certiorari 1 filed under Rule 45 of the Rules of Court
directly assailing the February 16, 2011 Decision2 and July 19, 2011 resolution3 of the Office of
the President (OP) in OP Case No. 10-C-152. The OP recalled and cancelled the Certificate of
Land Ownership Awards ( CLOAs) issued to the petitioners covering certain homestead lots that
formed part of the Pacquing Estate, a 23.6272-hectare property located in Cuambogan, Tagum
City.

Factual Antecedents

Miguel Pacquing acquired agricultural lands (the property) with a total area of 23.6272 hectares
in Cuambogan, Tagum City through Homestead Patent No. V-33775. These lands were
registered on January 6, 1955 with the Register of Deeds under Original Certificate of Title No.
(P-2590) P-653.

The records show that, on August 5, 1991, the Municipal Agrarian Reform Officer (MARO) sent
Miguel’s representative a Notice of Coverage placing the Pacquing Estate under the
Comprehensive Agrarian Reform Program (CARP). Miguel failed to reply to the notice and,
instead filed a Voluntary Offer to Sell (VOS) with the Department of Agrarian Reform (DAR) on
August 31, 1991. Miguel, however, died during the pendency of the VOS proceedings. Miguel’s
wife, Salome, had died five years earlier.
In January 1992, respondent Linda Pacquing-Fadrilan, sole heir of the spouses Pacquing,
executed an affidavit adjudicating to herself ownership of the property. In August of the
sameyear, she filed an application for retention with the DAR Regional Directorwho denied
Linda’s application in an order dated December 14, 1993. The order denying Linda’s application
for retention later became final and executory.

On June 25, 1994, certain individuals, including the present petitioners who were earlier
identified as farmer-beneficiaries of the subject land, were issued CLOAs over their respective
cultivated portions of the property.

On October 20, 1999, Linda, through her attorney-in-fact, Samuel Osias, filed with the Office of
the Provincial Adjudicator in Tagum City a petition to cancel the petitioners’ CLOAs. The
Provincial Adjudicator later dismissed the petition due to Linda’s failure to file her position paper.
She appealed the dismissal with the Department of Agrarian Reform Adjudication Board
(DARAB).

It appears that, in the meantime, Transfer Certificates of Title (TCTs) covering portions of the
property were issued to Napoleon Villa Sr., et al. who had been contracted by Linda, under an
agricultural leasehold agreement, to cultivate the lands.

In a resolution dated June 29, 2001, the DARAB nullified the TCTs issued to Napoleon Villa Sr.
et. al. and reinstated Linda’s title to the property. At the same time, the DARAB ordered the
generation and issuance of titles to the petitioners and other farmer-beneficiaries of the subject
land. In a subsequent resolution dated September 28, 2001, the DARAB validated the TCTs
issued to the following individuals: Danilo Almero, Celia Bulaso, Ludy Ramada, Isidro Lazarte,
Cepriano Lazarte, Thelma Emorque, Domingo Juanico, Candido Labeste and Renato Benimate.

Root of the present petition: Petition to Recall and Cancel the petitioners’ CLOAs

Linda again sought to recall and cancel the petitioners’ CLOAs by filing a petition with the DAR,
which the latter endorsed to the DAR Regional Office. Linda argued that the DARAB erred in
distributing portions of the land to the petitioners because the entire property was supposed to
be exempt from CARP coverage. The petitioners opposed Linda’s petition.

In an order dated December 18,2008, the DAR Regional Director ruled that the Pacquing Estate
was subject to CARP and that the CLOAs issued to the petitioners were valid. Linda filed an
appeal to the DAR Secretary.

In an order dated August 18, 2009, former DAR Secretary Nasser C. Pangandaman denied
Linda’s appeal under the following terms:

"xxx, under Section 6 of R.A. No. 6657, there are two requisites to exempt homestead lands
from CARP coverage. First, the homestead grantee or his direct compulsory heir(s) still own the
original homestead at the time of the effectivity of R.A. No. 6657 on 15 June 1988; and second,
the original homestead grantee or his direct compulsory heir(s) was cultivating the homestead
as of 15 June 1988 and continues to cultivate the same.

In this case, it is undisputed that the subject landholdings were still owned by the original
homestead grantees at the time of the effectivity of R.A. No. 6657. However,the said homestead
grantees no longer cultivate the same. Therefore, on this score, the subject landholdings cannot
be exempted from CARP coverage." (Emphasis ours)

Linda appealed the DAR Secretary’s August 18, 2009 order to the OP.

In a decision dated February 16,2011, the OP, through Executive Secretary Paquito N. Ochoa
Jr., reversed the DAR Secretary’s August 18, 2009 Order and recalled and cancelled the
petitioners’ CLOAs. The OP held that:

"xxx, the fact that petitioners-appellants (referring to the respondent Linda), since the beginning,
have always protested the issuance of the CLOAs to the respondents-appellees (referring to the
petitioners) is a clear demonstration of their willingness to continue with the cultivation of the
subject landholdings, or tostart anew with the cultivation or even to direct the management of
the farm.

Given the foregoing, petitioners-appellants should be given the chance to exercise their rights
as heirs of the homestead grantee to continue to cultivate the homestead lots either personally
or directly managing the farm pursuant to the pronouncement in the Paris case. They still own
the original homestead issuedto their predecessor-in-interest and have manifested their
intention to continue with the cultivation of the homestead lots."4 (Emphasis supplied)

The petitioners moved to reconsider the decision, but the OP denied their motion in a
resolution5 dated July 19, 2011.

With no appeal or petition for review filed with the Court of Appeals within the fifteen (15) - day
appeal period, the DAR Bureau of Agrarian Legal Assistance issued on August 22, 2011 a
Certificate of Finality6 declaring as final and executory the OP’s February 16, 2011 decision and
July 19, 2011 resolution.The petitioners, however, contest the finality of the OP’s decision and
allege that their counsel only received a certified copy of the OP’s resolution denying their
motion for reconsideration on September 29, 2011.

On November 14, 2011, the petitioners directly filed with this Court a petition for review on
certiorari under Rule 45 assailing the subject OP’s decision and resolution.

The Petition

The petitioners raise the following issues:

I- WHO WILL ISSUE A CERTIFICATE OF FINALITY OF THE DECISION WHEN THE

DECISION OF THE ADMINISTRATIVE AGENCY IS REVERSE (sic) ON APPEAL BY
THE OFFICE OF THE PRESIDENT?

II- ARE LANDS UNDER THE HOMESTEAD GRANT, EXEMPT FROM AGRARIAN
REFORM COVERAGE UNDER SECTION 6 OF R.A. 6657, EVEN IF THE HEIR OF
THE PATENTEE IS NOT CULTIVATING THE LAND, BUT AND HAD EVEN OFFERED
THE SAME UNDER THE VOLUNTARY OFFER TO SELL SCHEME?
 III- IN CARP COVERAGE, IS DEPOSIT OF LAND OWNER’S COMPENSATION WITH
LAND BANK OF THE PHILIPPINES ENOUGH TO TRANSFER TITLE TO THE STATE,
EVEN IF THE OWNER DOES NOT ACCEPT THE SAME?7 (Emphasis supplied)

Pleadings Subsequent to the Petition

In her comment dated March 16, 2012,8 Linda counter-argues that the present petition should
be denied outright for being an improper mode of appeal: the appeal from the OP’s assailed
decision and resolution should have been filed with the CA via a petition for review under Rule
43 and not directly with this Court viaa petition for review on certiorari under Rule 45.

The petitioners filed their counter-comment/reply9 asking this Court to decide the present case
not on technicalities but based on its merits, and that the Court, instead, treat their petition as a
special civil action for certiorari under Rule 65.

OUR RULING

We see MERIT in the present petition.

First, we address the proceduralissue raised by the respondent.

Under Rule 43 of the Rules of Court, an appeal from the awards, judgments, final orders or
resolutions of or authorized by any quasi-judicial agency such as the Office of the President, in
the exercise of its quasijudicial functions shall be filed to the CA10 within a period of fifteen (15)
days from notice of, publication or denial of a motion for new trial or reconsideration.11 The
appeal may involve questions of fact, of law, or mixed questions of fact and law.12

A direct resort to this Court, however, may be allowed in cases where only questions of law are
raised.13 A question of law exists when the doubt or controversy concerns the correct application
of law or jurisprudence to a certain set of facts; or when the issue does not call for an
examination of the probative value of the evidence presented, the truth or falsehood of facts
being admitted.14

In the present petition, the petitioners raised valid questions of law that warranted the direct
recourse to this Court. Basically, they question the OP’s application of the law and jurisprudence
on the issue of whether the Pacquing Estate should be exempt from CARP coverage. In this
case, no further examination of the truth or falsity of the facts is required. Our review of the case
is limited to the determination of whether the OP has correctly applied the law and jurisprudence
based on the facts on record.

We now proceed to the merits of the case.

R.A. No. 6657 or the Comprehensive Agrarian Reform Law (CARL) of 1988 covers all public
and private agricultural lands as provided in Proclamation No. 13115 and E.O. No.
229,16 including other lands of the public domain suitable for agriculture. Section 4 of R.A. 6657,
as amended,17 specifically lists the lands covered by the CARP, which include:

(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 to 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 agriculture regardless of the agricultural
products raised or that can be raised thereon.

And Section 10 of R.A. 6657, as amended,18 expressly provides for the lands exempted or
excluded from the CARP, namely:

(a) Lands actually, directly and exclusively used for parks, wildlife, forest reserves,
reforestation, fish sanctuaries and breeding grounds, watersheds and mangroves shall
be exempt from the coverage of this Act

(b) Private lands actually, directly and exclusively used for prawn farms and fishponds
shall be exempt from the coverage of this Act: Provided, that said prawn farms and
fishponds have not been distributed and Certificate of Land Ownership (CLOA) issued
under the Agrarian Reform Program; and

xxxx

(c) Lands actually, directly and exclusively used and found to be necessary for national
defense, school sites and campuses, including experimental farms stations operated by
public or private schools for educational purposes, seeds and seedlings research and
pilot production centers, church sites and covenants 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.

The subject land, being agricultural in nature, is clearly not exempt from CARP coverage.

But Linda argues that the subject land is exempt from CARP primarily because it was acquired
by her father viaa homestead patent. She claims that the rights of homestead grantees have
been held superior to those of agrarian reform tenants and, thus, her right to the subject land
must be upheld. The OP, agreeing with the respondent, stated that:

"There can be no question that, weighed against each other, the rights of a homesteader prevail
over the rights of the tenants guaranteed by agrarian reform laws.

As early as the case of Patricio v. Bayug, it has been held that the more paramount and
superior policy consideration is to uphold the right of the homesteader and his heirs to own and
cultivate personally the land acquired from the State without being encumbered by tenancy
relations.
Just right after the promulgation of Republic Act No. 6657, otherwise known as the
Comprehensive Agrarian Reform Law (CARL), the doctrine enunciated in Patricio was applied
in Alita v. Court of Appeals where it was held thatPresidential DecreeNo. 27 cannot be invoked
to defeat the very purpose of the enactment of the Public Land Act or Commonwealth Act No.
141. It was further pointedout that even the Philippine Constitution respects the superiority of
the homesteaders’ rights over the rights of the tenants guaranteed by the Agrarian Reform
statute."19 (Citations omitted.)

The right of homestead grantees to retain or keep their homestead is, however, not absolutely
guaranteed by law.1âwphi1 Section 6 of R.A 6657 provides that:

"Section 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 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 areas originally retained by
them thereunder: provided, further, that original homestead grantees or their 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. (Emphasis ours)

Thus, in order for the homestead grantees or their direct compulsory heirs to retain or keep their
homestead, the following conditions must first be satisfied: (a) they must still be the owners of
the original homestead at the time of the CARL's effectivity, and (b) they must continue to
cultivate the homestead land.

In this case, Linda, as the direct compulsory heir of the original homestead grantee, is no longer
cultivating the subject homestead land. The OP misinterpreted our ruling in Paris v.
Alfeche20 when it held that Linda's mere expression of her desire to continue or to start anew
with the cultivation of the land would suffice to exempt the subject homestead land from the
CARL. On the contrary, we specifically held in Paris v. Alfeche that:

"Indisputably, homestead grantees or their direct compulsory heirs can own and retain the
original homestead, only for "as long as they continue to cultivate" them. That parcels of land
are covered by homestead patents will not automatically exempt them from the operation of
land reform. It is the fact of continued cultivation by the original grantees or their direct
compulsory heirs that shall exempt their lands from land reform coverage."21 (Emphasis
supplied) WHEREFORE, in view of the foregoing, we hereby:

(a) REVERSE and SET ASIDE the February 16, 2011 Decision and July 19, 2011
Resolution of the Office of the President in OP Case No. 1 O-C-152;

(b) RECALL and REVOKE the August 22, 2011 Certificate of Finality issued by the
Department of Agrarian Reform Bureau of Agrarian Legal Assistance; and

(c) AFFIRM the August 18, 2009 Order of the Department of Agrarian Reform Secretary
in DARCO Order No. MS-0908-295 Series of 2009 A-999-10-CLT-028-09.
SO ORDERED.

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:

1avvphi1
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.lavvphil

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.

G.R. No. 197127

NOEL L. ONG, OMAR ANTHONY L. ONG, and NORMAN L. ONG, Petitioners,

vs.
NICOLASA O. IMPERIAL, DARIO R. ECHALUCE, ROEL I. RO BELO, SERAFIN R.
ROBELO, EFREN R. ROBELO, RONILO S. AGNO, LORENA ROBELO, ROMEO O.
IMPERIAL, NANILON IMPERIAL CORTEZ, JOVEN IMPERIAL CORTEZ, and RODELIO O.
IMPERIAL, Respondents.

DECISION

LEONARDO-DE CASTRO, J.:

Before the Court is a petition for review on certiorari under Rule 45 seeking to reverse, nullify,
and set aside the November 30, 2010 Decision1and the May 11, 2011 Resolution2 of the Court
of Appeals in CA-G.R. SP No. 93941.

The facts are as follows:

Petitioners Noel L. Ong, Omar Anthony L. Ong, and Norman L. Ong (petitioners) are registered
owners of a parcel of land with an area of Four Hundred Five Thousand Six Hundred Forty-Five
(405,645) square meters described under Transfer Certificate of Title (TCT) No. T-1 7045
located in Barangay Dogongan, Daet, Camarines Norte (subject property).

The Municipal Agrarian Reform Officer (MARO) of Daet issued a Notice of Coverage to
petitioners on August 14, 1994.

Petitioners wrote a letter3 dated April 26, 1995 "vehemently protesting/objecting" to the

coverage of the subject property under compulsory acquisition under Comprehensive Agrarian
Reform Law (CARL), for the following reasons:
 1) The entire area of 40.5645 [hectares] had been used as grazing area for cattle and
carabao long before the passage of R.A. 6657, and is therefore, excluded from the
coverage of CARL;

2) After deducting the retention area of the individual landowners, the excess area of
each is only 8.5215 has.;

3) Considering that there are several bills pending in Congress to increase the retention
area of landowners, to cover lands below 20 hectares will result only in confusion and
needless paperwork should the retention area be increased in answer to the clamor of
majority of landowners.

MARO Jinny Glorioso sent a letter-reply4 on May 31, 1995, stating that the petitioners had
confirmed that the entire 40.5645 hectares was actually being used for coconut production, so
petitioners had failed to comply with the requirement that the property must be actually, directly
and exclusively used for livestock, poultry, and swine-raising purposes. MARO Glorioso also
wrote that the subject property was covered by CARL because the retention area for
landowners is five hectares, and the excess area in this case is 8.5214 hectares; thus, it is
covered.

On September 23, 1996, MARO Glorioso issued a Notice of Acquisition over the subject
property.5

Petitioners then filed an application for exemption clearance with the Department of Agrarian
Reform (DAR) Regional Office V on October 16, 1996, claiming that subject property had
already been reclassified as residential built-up area pursuant to the Town Plan and Zoning
Ordinance of Daet dated September 21, 1978 and Zoning Ordinance No. 04, series of 1980.
Petitioners submitted the following supporting documents:

1. Certified True Copy of TCT No. 17045;

2. Location Map;

3. Certification dated 9 October 1996 issued by [Deputized Zoning Administrator (DZA)]

Jesus L. Hernandez, Jr. stating that the subject landholding is within the residential built-
up area per Zoning Ordinance No. 4, series of 1980;

4. Certification dated 9 December 1996 issued by Jesus A. Obligacion, Regional

Director of Housing and Land Use Regulatory Board (HLURB), Region V, stating that the
Town Plan and Zoning Ordinance of Daet, Camarines Norte was approved by then
Human Settlements Regulatory Commission now HLURB on 21 September 1978;

5. Certification dated 14 October 1996 issued by Antonio A. Avila, Jr. of the National
Irrigation Administration (NIA) of Daet, Camarines Norte stating that the subject land is
not covered by an existing irrigation system [or] by [an] irrigation project with firm funding
commitment; and

6. Certification dated 5 March 1997 issued by [MARO] Jinny P. Glorioso stating that the
land covered by TCT No. 17045 [was] tenanted and a Notice of Coverage/Acquisition
[had] been issued on 17 August 1996.6
DAR Region V Director Percival C. Dalugdug sent a letter7 dated June 5, 1997 to Deputized
Zoning Administrator Fernandez, which reads in part:

Please be informed that subject property has already been covered by the CARP under the
[Compulsory] Acquisition scheme, because we believe that the land is agricultural and not
otherwise. x x x.

xxxx

In order to rectify these conflicting claims may we request from your good office for a
revalidation and verification of the exact location of the above-mentioned landholding as far as
its zoning location is concerned according to the Official Land Use Plan of Daet, for the proper
guidance of this office in the issuance of requested DAR Exemption Clearance. x x x.
(Emphasis ours.)

Deputized Zoning Administrator Fernandez replied to the DAR Director’s request for revalidation
and verification of the exact location of the subject property in the following manner:

Please be informed that there is no conflict between the official land use map of 1978 and
the certification issued by our Office. Please note that what is reflected in the aforesaid
town plan is the actual use of properties in Daet as of 1978, while our Certification states
that the property under TCT T-17045 is within the RESIDENTIAL BUILTUP AREA. x x x.

xxxx

The projected increase of 278.465 hectares is the Built-Up Area for residential purposes, to
which the property in question is classified.1âwphi1 Please be informed further that in
classifying Built-Up areas, we give priority to properties in the center or poblacion of barangays
connected to provincial or national roads, more so if the adjacent properties are already being
used and classified as residential as of 1978. Please note that in the land use map of 1978,
the area directly in front of the property in question, as well as the property in the eastern
portion are already classified as residential areas. We took into consideration also the fact
that the Barangay Hall Day Care and Health Center of the Barangay are located in this area.

We hope that all the above explanation clears the issue on the supposed conflicting
claims, and we see no reason to rectify our Certification dated October 9, 1996 regarding
the property under TCT No. T-17045-C.N.8 (Emphases added.)

The DAR Regional Center for Land Use Policy, Planning and Implementation (RCLUPPI) V
conducted an investigation and in its report, wrote the following as established facts:

a) Subject landholdings are planted with coconuts and predominantly agricultural in

nature;

b) Said lands are tenanted by Nicolasa Vda. De Imperial, Efren Rodelo and Julio Jamite;

c) The landowner executed a Deed of Undertaking to pay disturbance compensation to

affected tenants;
 d) The area has been reclassified as residential prior to 15 June 1988;

e) The area applied for conversion has not been placed under the coverage of P.D. 27
but a Notice of Coverage under R.A. 6657 had been issued on 17 August 1994 by
MARO Jinny P. Glorioso; and

f) The area is not irrigated nor scheduled for irrigation rehabilitation nor irrigable (sic)
with firm funding commitment.9 (Emphasis ours.)

Based on their findings, the DAR RCLUPPI V investigating team recommended the denial of
petitioners’ application for exemption. DAR Region V Director Dalugdug in his 2nd Indorsement
to the DAR Secretary dated September 30, 1997, wrote:

This Office, after a careful evaluation of the records of the application, concurs with the
findings and recommendations of the RCLUPPI V [Investigation] team for the denial of
the application on the ground that the subject property has been [placed] under
compulsory coverage and a Notice of Acquisition was already issued by the MARO of
Daet, Camarines Norte. Moreover, the contention/justification of the Deputized Zoning
Administrator when he was requested to explain why the properties are in the green
[colorcoded] in the land use map as stated in his July 7, 1997 letter cannot be given credence
by this Office. This is due to the fact that we believe that the built-up area for residential
areas provided in the right hand portion of the map (from 258 to 556 has.) or another 258
has. between 1978 and 1982) has long been exhausted. If one will take note, the present
residential area of Daet is well beyond the 556 has. limit set for 1982. The Ong property,
[therefore], can no longer find any room in the built-up area under the 1978 land use
plan.10 (Emphases ours.)

Upholding the findings of the Regional Office, then DAR Secretary Horacio R. Morales, Jr.
issued an Order11 dated February 2, 2000 denying petitioners’ Application for Exemption under
DOJ Opinion No. 44, series of 1990, and directing the Director of DAR Region V "to proceed
with the acquisition of the subject landholding in accordance with existing agrarian laws."
Secretary Morales’s Order contained the following discussion, which we quote:

First, the justification made by Jesus L. Fernandez, Jr., Deputized Zoning Administrator
of Daet, Camarines Norte, in his letter dated 7 July 1997, is not sufficient to prove that the
subject land is classified as built-up area for residential purposes. It is true that the said
agency is the proper forum to certify as to the classification of a parcel of land within
their jurisdiction. However, the same must be supported by substantial evidence. The
findings of the Regional Director reveal that the built-up area for residential purposes
provided in the right hand portion of the Official Land Use Plan of 1978 of the
Municipality of Daet has long been exhausted. Thus, the present residential area of Daet is
well beyond the 556-hectare limit set for 1982. Therefore, the subject landholding cannot be
considered as part of the built-up area reserved for residential purposes. The subject
landholding remains agricultural based on the original land use plan in 1978. Being an
agricultural land, the subject landholding is within the ambit of RA 6657.

Second, Administrative Order No. 6, Series of 1994, requires that any application for exemption
should be accompanied by a Certification from the Housing and Land Use Regulatory Board
(HLURB) that the pertinent zoning ordinance has been approved by the Board prior to 15 June
1988. In the case at hand, the original land use plan in 1978 shows that the subject landholding
was agricultural in nature. The Deputy Zoning Administrator claims that the subject landholdings
became part of the residential built-up area by virtue of an authority indicated in the right hand
portion of the land use plan to extend the residential area from 258 hectares in 1980 to 556
hectares in 1982. However, it is not shown that the 1982 land use plan had been similarly
approved by the HLURB. No proof has ever been presented that the 1982 land use plan
had been approved by the HLURB. Since coverage is the general rule, applicant has the
burden of proof that subject property is exempt.

Acting on petitioners’ Motion for Reconsideration,12 then DAR Secretary Hernani A. Braganza

issued an Order13 on June 20, 2002 stating that the opinion of the Deputized Zoning
Administrator had insufficient basis and could not prevail over the clear findings of the DAR
Regional Director.

Meanwhile, TCT No. T-4202-A (Certificate of Land Ownership Award No. 00538736)14 was
issued to "Nicolasa Imperial, et al." Covering 253,263 square meters in Barangay Dogongan,
Municipality of Daet, Province of Camarines Norte on October 27, 2000. Petitioners appealed
the DAR Orders dated February 2, 2000 and June 20, 2002 (the questioned DAR Orders) to the
Office of the President for review.

The records from the Office of the President contained a copy of a document entitled
Memorandum for the Executive Secretary from DESLA Manuel G. Gaite, Subject: Appeal of
Noel Ong in O.P. Case No. 04-L-500 dated July 29, 2005 and we note the following portion of
said memorandum:

The DZA has positively declared that the subject property is within the reclassified built-up
residential areas of the municipality. As far as the coverage of the Municipal Ordinance is
concerned, the DZA should have the last say, since it is within its mandate to determine the
coverage of the zoning ordinance and therefore has exclusive jurisdiction as far as the issue is
concerned. Verification likewise of the records show (Rec. p. 12) that the application is
accompanied by a corresponding certification of HLURB Region No. 5, Regional Director, Jesse
A. Obligacion that the pertinent Municipal Ordinance No. 4 of Daet, Camarines Norte, has been
approved by the HLURB on September 21, 1978, prior to June 15, 1988, the effectivity of the
CARP law.15

The Office of the President rendered its Decision16 on September 5, 2005 signed by Executive
Secretary Eduardo Ermita. The Office of the President declared that the main issue was
whether or not the subject property had been reclassified as residential so as to exempt it from
Comprehensive Agrarian Report Program (CARP) coverage. The Office of the President found
that "[a] closer scrutiny of the facts will reveal that the DAR Secretary concurred with the
findings of the DAR Regional Director, who in turn relied on his own belief that the land is
agricultural and not otherwise." The Office of the President reversed and set aside the
questioned DAR Orders and approved petitioners’ application for clearance, "exempting from
CARP coverage the 40.5 hectares property with TCT No. T-17045, situated in Barangay
Dogongan, Daet, Camarines Norte."

We quote below relevant portions of the September 5, 2005 Decision of the Office of the
President:

A careful reading of the map would show that what the DAR Secretaries referred to as having
been fully exhausted/allocated, are those actual and original residential areas of the municipality
totaling 278.465 hectares, as indicated in colored map. It does not refer to those additional built-
up residential areas of the Municipality covered by the Ordinance in the total area of 556.93
hectares pointed out by DZA, which includes the property in question.

Thus, as between the findings of the DAR Regional Director and the DZA, we must favor
the expertise of the latter. The determination and classification of land areas within their
jurisdiction is rightfully vested in the local government unit concerned, in this case, the
Deputy Zoning Administrator of Daet, as approved through municipal ordinance.

Under the foregoing circumstances, the denial of the exemption on the ground that the MARO
has already issued a NOTICE OF ACQUISITION in 1994 is flawed. The area having already
been reclassified as residential prior to June 1988 (as established by the DAR RCLUPPI V), it
cannot be the subject of a Notice of Acquisition which covers only agricultural lands. Perforce,
the Notice of Acquisition over the subject property is void ab initio.

Finally, the ruling of the DAR Secretary that the application for exemption was belatedly filed in
order to defeat CARP coverage of the property is untenable.1âwphi1 What invalidated CARP
coverage over the subject property is not the application for exemption, but the fact the land in
question not being anymore agricultural, is beyond the coverage of CARP, pursuant to Section
4 of R.A. 6657 (Natalia Realty vs. Department of Agrarian Reform, supra).17

In a subsequent Order18 dated March 3, 2006, the Office of the President resolved the Verified
Motion for Intervention with Motion for Reconsideration (of the September 5, 2005 Decision of
the Office of the President) filed by Nicolasa O. Imperial, Dario R. Echaluce, Roel I. Robelo,
Serafin R. Robelo, Efren R. Robelo, Ronilo S. Agno, Lorena Robelo, Romeo O. Imperial,
Nanilon I. Cortez, Joven I. Cortez, and Rodelio O. Imperial (respondents), who raised the
following as grounds for reconsideration:

1. The Decision violates their constitutional rights to due process;

2. The opinion of the Municipal Deputy Zoning Administrator (DZA) of Daet cannot
prevail over the expert opinion of the Department of Land Reform on the matter;

3. The application for exemption by the applicants-appellants was a mere afterthought

intended merely to defeat the CARP coverage; and

4. There is no proof that prior to the alleged reclassification of the subject land, a public
hearing was conducted and the required percentage of the total agricultural land area at
the time of the passage of the ordinance was considered.

The Office of the President denied the Motion for Intervention and Reconsideration and
reaffirmed its earlier Decision, reasoning as follows:

While it is true that movants were not made parties to the case, this was so because applicants
Ong, et al. filed their application for exemption from CARP coverage pursuant to DOJ
Opinion No. 44, Series of 1990, as implemented by DAR Administrative Order No. 06,
Series of 1994. The application for exemption was premised on the doctrine (as affirmed
by DOJ Opinion No. 44) that a land already converted to residential prior to June 15, 1988
cannot be the subject of a Notice of Acquisition since the subject land, being residential
and not agricultural, is already beyond the coverage of CARP. (Natalia Realty vs. DAR, 225
SCRA 278) Hence, the application was not adversarial against any other parties, but
personal to the landowner-petitioner.

Nevertheless, the implementation of DAR A.O. No. 6, series of 1994, puts in place a process of
application and notice so that all parties concerned are fully aware of the pending application for
exemption clearance.

Upon receipt of an application for exemption pursuant to DOJ Opinion No. 44, the DAR
Regional Center for Land Use, Policy, Planning and Implementation (RCLUPPI) field unit
conducts an ocular inspection. In that inspection, the field unit interviews and informs the
tenants/farmers if any, that such an application is pending.

Further, the RCLUPPI unit files a detailed report, indicating therein the number of farmer-
beneficiaries affected and whether or not a Deed of Undertaking was executed by the
landowner to pay disturbance compensation to affected tenants. In this case, appellants Ong et
al. executed a Deed of Undertaking dated January 11, 1997, in favor of tenants Nicolasa vda.
De Imperial, Efren Robelo and Julio Jamito. The RCLUPPI Region V also reported that there
were only three tenants at the time of the inspection. Hence, the rest of the intervenors-movants
herein are either children or relatives of the above-named three tenants of the Ong family.

It is therefore incorrect to say that movants-intervenors were totally unaware of the

proceedings until they received the questioned Decision on September 26, 2005. Thus,
we hold that there was reasonable opportunity to intervene since the application was
filed in 1996. During this period, the proceedings were elevated from the Regional to
Department level, and finally on appeal to this Office.19 (Emphases added, citation omitted.)

Unsatisfied, respondents filed a petition for review with the Court of Appeals under Rule 43
seeking to nullify and set aside the Decision dated September 5, 2005 and the Order dated
March 3, 2006, both of the Office of the President. This was docketed as CA-G.R. SP. No.
93941.

RULING OF THE COURT OF APPEALS

In its November 30, 2010 Decision, the Court of Appeals ruled "that the Office of the President
committed reversible error in reversing the Orders of the DAR Secretaries and in approving
[petitioners’] Application for Exemption of their property from the CARP." The Court of Appeals
ratiocinated as follows:

While WE agree with the Office of the President that lands which have been reclassified as
residential prior to June 15, 1988 [cannot] be the subject of compulsory acquisition by the DAR
for its agrarian reform program, WE are not inclined to sustain its ruling approving the
application for clearance of respondents exempting from CARP coverage the subject
landholding because of respondents’ failure to comply with the requirements for such
exemption.

A careful scrutiny of the record of this case reveals that the Office of the President failed to
judiciously examine the supporting documents submitted by respondents in their application for
exemption.

xxxx
As can be gleaned from [DAR Administrative Order No. 6, series of 1994, or the "Guidelines for
the Issuance of Exemption Clearances based on Sec. 3(c) of RA 6657 and the Department of
Justice (DOJ) Opinion No. 44, Series of 1990"], an application for exemption from the coverage
of the CARP must be accompanied by a certification from the HLURB that the pertinent zoning
ordinance has been approved by the Board prior to June 15, 1988 (the date of effectivity of the
CARL). In the instant case, respondents did file an accompanying Certification from the
HLURB. However, a meticulous perusal of the Certification issued by the HLURB as
compared with the one issued by the Deputized Zoning Ordinance shows glaring
inconsistencies which cast doubt as to the land use classification of respondents’
landholding. x x x.

xxxx

The glaring inconsistency and discrepancy in the foregoing certifications are readily apparent.
According to the Deputized Zoning Administrator of Daet, Camarines Norte, the Zoning
Ordinance reclassifying the landholding of respondents into residential land was passed in
1980, however, in the Certification of the HLURB the said "Town Plan and Zoning Ordinance of
Daet, Camarines Norte was approved by the Housing and Land Regulatory Board, then Human
Settlements Regulatory Commission on September 21, 1978." Obviously, the approved Zoning
Ordinance being referred to in the Certification of the HLURB was not Zoning Ordinance No. 4,
Series of 1980 mentioned by the Deputized Zoning Administrator in his Certification. For how
could the HLURB [approve] on September 21, 1978 a town plan and zoning ordinance still to be
passed in 1980. Certainly, the HLURB could not approve a zoning ordinance which was not yet
existing at the time of the passage of the approval. The HLURB must have been referring to
another town plan and zoning ordinance of Daet, Camarines Norte which was passed in 1978
and not in 1980. This can be inferred from the letter of Deputized Zoning Administrator Jesus L.
Fernandez, Jr. x x x.

xxxx

If what was approved by the HLURB on September 21, 1978 was the 1978 original land use
plan of Daet, Camarines Norte [t]hen the inescapable conclusion would be that subject
landholding of respondents is not exempt from CARP coverage since the same was classified
as agricultural in nature as found by the then DAR Secretary Horacio R. Morales, Jr. x x x.

xxxx

Even assuming for the sake of argument, that a zoning ordinance was enacted after 1978,
particularly in 1980 or 1982, reclassifying respondents’ landholding from agricultural to non-
agricultural or residential, still OUR conclusion would be the same since no proof was ever
presented that the later zoning ordinance was approved by the HLURB. We are, therefore, in
accord with the x x x disquisition of the DAR Secretary x x x.20

The Court of Appeals denied petitioners’ Motion for Reconsideration. Hence, this appeal.

The parties submitted their respective Memoranda on July 1, 2013 (petitioners) and July 12,
2013 (respondents).21

THEORY OF PETITIONERS
Petitioners are now before us to raise the following issues which they allege to be purely
questions of law:

1. Whether or not the subject landholding of the petitioners is exempted from the
coverage of the government’s Comprehensive Agrarian Reform Program;

2. Whether or not the petition filed by respondents before the Court of Appeals is
exempted from the rule that errors not assigned on appeal cannot be passed upon.22

Petitioners claim that the Court of Appeals failed to take into consideration that with respect to
the alleged discrepancy involving the approval of Zoning Ordinance No. 4, series of 1980, and
the ratification of Daet’s Town Plan by the National Coordinating Council for Town Planning,
Housing and Zoning (NCCTPHZ) in 1978, the NCCTPHZ was created as a first attempt to
formulate and approve the Comprehensive Development Town Plans in selected municipalities
throughout the country as mandated by Letter of Instructions No. 729; that almost all the town
plans then approved by the NCCTPHZ included a Land Use Plan, but not a Zoning Plan or an
adopted Zoning Ordinance; that after one year, the NCCTPHZ was dissolved, and the Human
Settlements Regulatory Commission (now HLURB) subsequently formed was the one that
required a Zoning Ordinance as part of the Comprehensive Development Plan to be submitted
by each municipality for approval. Petitioners contend that Daet, Camarines Norte was among
the first municipalities which formulated its Comprehensive Development Plan approved by
NCCTHPZ without a zoning ordinance and that "it was only in 1980 that the Sangguniang
Bayan of Daet adopted their zoning ordinance based on their previously approved Land Use
Plan."23

Petitioners contend that they are deemed to have substantially complied with the requirements
of Administrative Order No. 6, series of 1994, particularly with respect to the HLURB certification
that the pertinent zoning ordinance must have been approved by the board prior to June 15,
1988. Petitioners point out that "there was no HLURB yet at the time that Daet’s Town Plan was
prepared and the Zoning Ordinance was passed" and that the "HLURB came about when the
former Human Settlements Regulatory Commission was renamed"24 per Executive Order No. 90
dated December 17, 1986. Petitioners allege that it is absurd to require approval by the HLURB
of the subject 1980 Zoning Ordinance. Petitioners further allege that the approval of Daet’s
Town Plan or Land Use Plan on September 21, 1978 by NCCTPHZ or HSRC must be favorably
considered to have carried with it the corresponding approval of the Zoning Ordinance
subsequently passed in 1980 which, in the first place, was based on the HSRC-approved 1978
Town Plan or Land Use Plan.

Petitioners cite Junio v. Garilao25:

The Certification issued by the Board expressly mentioned that the "property x x x, Lot 835-B
located at Brgy. Tangub, Bacolod City, covered by TCT T-79622, x x x was identified for
residential use under the 1976 Framework Plan of the City of Bacolod prepared pursuant to the
Program of the then Ministry of Local Government and approved by the City Council in its
Resolution No. 5153-A, Series of 1976." It also certified that the "area where the aforecited
property is located was likewise identified for residential use under the Town Planning, Housing
Zoning Program of the National Coordinating Council of the then Ministry of Human Settlements
as approved under the City Council Resolution No. 5792, Series of 1977. x x x." (Citations
omitted.) Petitioners, alternatively, submit that the HLURB approval of the 1980 Zoning
Ordinance is not necessary following the provision of Section 4 in relation to Section 3(c) of
Republic Act No. 6657, which reads:

SECTION 3. Definitions. — For the purpose of this Act, unless the context indicates otherwise:

xxxx

(c) Agricultural land refers to land devoted to agricultural activity and not classified as mineral,
forest, residential, commercial or industrial land.

SECTION 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 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 agriculture regardless of the agricultural
products raised or that can be raised thereon.

Petitioners submit that there is nothing in the above provisions of law that requires the exercise
of the power to reclassify an agricultural land to be approved by the HLURB. Petitioners claim
that such power to reclassify is exclusively within the authority of the local government unit
concerned. Petitioners allege that given the reclassification of the subject property to residential
pursuant to Ordinance No. 04, series of 1980, based on the 1978 approved Town Plan, the
same can no longer be reverted to agricultural. Petitioners conclude that since the subject
property was reclassified from agricultural to residential long before June 15, 1988, it is
therefore exempt from the coverage of the CARL.26

Petitioners likewise argue that the Court of Appeals "committed palpable and patent error and/or
grave abuse of discretion in holding that the present case is exempted from the rule that errors
not assigned on appeal cannot be passed upon."27

According to petitioners, the Court of Appeals expressly admitted that the issue regarding the
alleged lack of proof of approval by the HLURB of the 1980 Zoning Ordinance was not raised as
an error in the appealed case, but the Court of Appeals was able to justify its action by
enumerating the instances when an appellate court is clothed with ample authority to review
rulings even if they are not assigned as errors in the appeal, and claiming that the present case
fell squarely under the enumerated exceptions. Petitioners submit that the instant case does not
fall under any of the mentioned exceptions.28

Petitioners claim injustice because the Court of Appeals allegedly allowed respondents to
intervene in the instant case even beyond the period prescribed by the Rules of Court.

THEORY OF RESPONDENTS

Respondents allege that a careful reading of the Certification issued by the HLURB as
compared with the one issued by the Deputized Zoning Administrator would show "glaring
inconsistencies which cast doubt as to the land use classification of petitioners’ landholding."29

Respondents contend that if "what was approved by the HLURB on September 21, 1978 was
the original land use plan of Daet, Camarines Norte, then the inescapable conclusion would be
that the subject landholding of respondents is not exempt from CARP coverage since the same
was classified as agricultural in nature."30

Respondents claim that HLURB approval is required for reclassification of land through local
ordinance, contrary to petitioners’ contention.

As regards petitioners’ allegation that the Court of Appeals committed grave abuse of discretion
when it passed upon an issue not assigned as error, respondents argue that this maxim is
subject to exceptions as provided in Section 8 of Rule 51.

Claiming that they are indispensable parties, respondents finally argue that the allowance of
their motion to intervene by the Court of Appeals even beyond the period prescribed by the
Rules of Court was proper.

THIS COURT’S RULING

The petition has merit. We sustain the September 5, 2005 Decision of the Office of the
President and its Order dated March 3, 2006 and thus reverse the questioned Decision and
Resolution of the Court of Appeals, which upheld the decision of the DAR to deny petitioner’s
request for exemption from CARP for the subject property.

The power to reclassify land is granted by law to the local government, which was validly
exercised in this case. The subject property having already been validly reclassified to
residential land by the municipality of Daet prior to June 15, 1988, when the CARL took effect,
then it is exempt from the coverage of CARP.

DISCUSSION

At the outset, we would like to address petitioners’ contention that the Court of Appeals
allegedly allowed respondents to intervene in the instant case even beyond the period
prescribed by the Rules of Court. The Court of Appeals found, however, that being the farmer-
beneficiaries, respondents "have substantial rights or interests in the outcome of the case;" that
"[i]ndisputably, they stand to be directly injured by the assailed Decision of the Office of the
President;" and that "their rights or interests cannot be adequately pursued and protected in
another proceeding." Furthermore, the Court of Appeals, in giving due course to respondents’
intervention, reasoned that this Court has in the past allowed a party to intervene even beyond
the period prescribed by the Rules, as "the allowance or disallowance of a motion for
intervention rests on the sound discretion of the court after consideration of the appropriate
circumstances." We see no reason to question the Court of Appeals’ discretion on this matter.31

Nevertheless, we disagree with the Court of Appeals’ disposition of the substantive issue of
whether subject property is exempt from the coverage of the CARP.

We have unequivocally held that "to be exempt from CARP, all that is needed is one valid
reclassification of the land from agricultural to non- agricultural by a duly authorized government
agency before June 15, 1988, when the CARL took effect."32

As to what is a "duly authorized government agency," the DAR Handbook for CARP
Implementors33 recognizes and discusses the LGU’s authority to reclassify lands under Republic
Act No. 7160 or the Local Government Code.34

Moreover, in Heirs of Dr. Jose Deleste v. Land Bank of the Philippines,35 the Court held that "[it]
is undeniable that the local government has the power to reclassify agricultural into non-
agricultural lands." Citing Pasong Bayabas Farmers Association, Inc. v. Court of Appeals,36 the
Court further held that this power is not subject to DAR approval, and we quote:

[P]ursuant to Sec. 3 of Republic Act No. (RA) 2264, amending the Local Government Code,
municipal and/or city councils are empowered to "adopt zoning and subdivision ordinances or
regulations in consultation with the National Planning Commission." It was also emphasized
therein that "[t]he power of the local government to convert or reclassify lands [from
agricultural to non-agricultural lands prior to the passage of RA 6657] is not subject to
the approval of the [DAR]."37 (Emphasis ours, citation omitted.)

In the case now before us, the Court of Appeals reversed the Office of the President’s ruling
approving petitioners’ application for exemption clearance "because of [petitioners’] failure to
comply with the requirements for such exemption." Even though not specifically assigned as an
error, the Court of Appeals focused on the discrepancy it had allegedly found between the
certification issued by the Deputized Zoning Administrator and the one from the HLURB
regarding the year that the subject property was reclassified by the local government from
agricultural to residential. The Court of Appeals even went on to state that "[a] careful scrutiny of
the record of this case reveals that the Office of the President failed to judiciously examine the
supporting documents submitted by respondents in their application for exemption."38

The Court of Appeals found it material that the HLURB certified that the "Town Plan and Zoning
Ordinance of Daet, Camarines Norte was approved by the Housing and Land Use Regulatory
Board, then Human Settlements Regulatory Commission on September 21, 1978"39 while the
Deputized Zoning Administrator authorized that as per Zoning Ordinance No. 4, series of 1980,
subject property was within the residential built-up area. The Court of Appeals insisted that
petitioners should have submitted the HLURB certification for Zoning Ordinance No. 4.

The Certification40 from Deputized Zoning Administrator Engr. Jesus Fernandez, Jr. dated
October 9, 1996, reads in part:
This is to certify that the parcel of land owned [in] common by NOEL L. ONG, OMAR
ANTHONY L. ONG and NORMAN L. ONG situated at Barangay Dogongan, Daet, Camarines
Norte, described under Transfer Certificate of Title No. T-17045 and Sketch Plan of Lot 1, Psu-
19545, surveyed by JOSE A. GOC, JR. Geodetic Engineer, with an area of FOUR HUNDRED
FIVE THOUSAND SIX HUNDRED FORTYFIVE (405,645) square meters is within
the RESIDENTIAL BUILT-UP area as per Zoning Ordinance No. 4, series of 1980, outside
the ten meters right of way and the municipality has no proposed road expansion and
improvement on the area as per record of existing Town Plan.

The body of the Certification41 dated December 9, 1996 from the HLURB Regional Director
Jesse A. Obligacion reads as follows:

This is to certify that as per records on file, the Town Plan and Zoning Ordinance of Daet,
Camarines Norte was approved by the Housing and Land Use Regulatory Board,
then Human Settlements Regulatory Commission on September 21, 1978 in accordance
with official practices and procedures carried out pursuant to Letter of Instruction No. 511 which
established a National Coordinating Council for Town Planning, Housing and Zoning
(NCCTPHZ), and pursuant to HLRB Memorandum Circular No. 15, Series of 1995.

Factual as this may seem, this brings to us the crucial question of whether, based on these two
certifications, petitioners had effectively complied with the requirements for exemption.

Looking at such requirements, DAR Administrative Order No. 06-9442 or the "Guidelines for the
Issuance of Exemption Clearances Based on Sec. 3(c) of Republic Act No. 6657 and the
Department of Justice (DOJ) Opinion No. 44, Series Of 1990" was the prevailing rule when
petitioners filed their petition for exemption. Under A.O. No. 06-94’s chapter entitled "Legal
Basis," it is stated that:

Department of Justice Opinion No. 44 series of 1990 has ruled that with respect to the
conversion of agricultural lands covered by R.A. No. 6657 to non-agricultural uses, the authority
of DAR to approve such conversion may be exercised from the date of its effectivity, on June
15, 1988. Thus, all lands that already classified as commercial, industrial or residential
before 15 June 1988 no longer need any conversion clearance.

DAR A.O. No. 06-94 also provided a list of required documents to be attached to the application
for exemption clearance, as follows:

The application should be duly signed by the landowner or his representative, and should be
accompanied by the following documents:

1. Duly notarized Special Power of Attorney, if the applicant is not the landowner himself;

2. Certified true copies of the titles which is the subject of the application;

3. Current tax declaration (s) covering the property;

4. Location Map or Vicinity Map;

 5. Certification from the Deputized Zoning Administrator that the land has been
reclassified to residential industrial or commercial use prior to June 15, 1988;

6. Certification from the HLURB that the pertinent zoning ordinances has been
approved by the Board prior to June 15, 1988;

7. Certification from the National Irrigation Administration that the land is not covered by
Administrative Order No. 20, s. 1992, i.e., that the area is not irrigated, nor scheduled for
irrigation rehabilitation nor irrigable with firm funding commitment.

8. Proof of payment of disturbance compensation, if the area is presently being occupied

by farmers, or waiver/undertaking by the occupants that they will vacate the area
whenever required.

The Court of Appeals focused on petitioners’ alleged "failure to comply with the requirements for
such exemption," a matter not even assigned by respondents (petitioners therein) as an error,
which fact the Court of Appeals itself admits in its questioned decision, and which it further
admits it may not rule upon, but which it claims falls under one of the exceptions to the general
rule.

The respondents’ Verified Petition for Review with Prayer for Preliminary Injunction and
TRO43 filed before the Court of Appeals contains a "Concise Statement of the issues &
Assignment of Errors Found in the Questioned O.P. Decision & O.P. Order committed by the
Honorable Office of the President," which reads:

I - THE HONORABLE OFFICE OF THE PRESIDENT GRAVELY ERRED IN HOLDING

THAT RESPONDENTS’ PARCEL OF LAND COVERED BY TCT NO. T-17045 WITH AN
AREA OF 405,605 SQUARE METERS HAS BEEN RECLASSIFIED AS RESIDENTIAL
LAND, HENCE, EXEMPT FROM CARP COVERAGE.

II – THE HONORABLE OFFICE OF THE PRESIDENT GRAVELY ERRED IN

APPLYING THE CASE OF NATALIA REALTY VS. DAR, 225 SCRA 278 IN THE
INSTANT CASE NOTWITHSTANDING THE GREAT VARIANCE IN THE PECULIAR
FACTUAL MILIEU OR ENVIRONMENT OF EACH CASE.

III – THE HONORABLE OFFICE OF THE PRESIDENT GRAVELY ERRED IN

ADMITTING HOOK, LINE & SINKER THE [BIASED], SELF-SERVING, VAGUE, AND
AMBIGUOUS CERTIFICATION OF THE DEPUTY ZONING ADMINISTRATOR & THE
INADEQUATE & INSUFFICIENT HLURB CERTIFICATION, AS AGAINST THE
THOROUGH & EXPERT INVESTIGATION & CONSISTENT FINDINGS THAT THE
SUBJECT LAND IS AGRICULTURAL OF THE DAR RCLUPPI INVESTIGATING TEAM,
THE HONORABLE DAR REGIONAL DIRECTOR, & THE HONORABLE DAR
SECRETARIES.44

The Court of Appeals wrote:

After a judicious review of the record of this case, WE rule to grant the Petition but on another
ground.

xxxx
While the foregoing issue has not been raised as an error, and therefore, WE may not
pass upon it, as this would contravene the basic rules of fair play and justice, however, it
is jurisprudentially recognized that it is well within the authority of this Court to raise, if it
deems proper under the circumstances obtaining, error/s not assigned on an appealed
case. Thus, in several cases, the Supreme Court declared that an appellate court is clothed
with ample authority to review rulings even if they are not assigned as errors in the appeal in
these instances: (a) grounds not assigned as errors but affecting jurisdiction over the subject
matter; (b) matters not assigned as errors on appeal but are evidently plain or clerical errors
within contemplation of law; (c) matters not assigned as errors on appeal but consideration of
which is necessary in arriving at a just decision and complete resolution of the case or to serve
the interests of justice or to avoid dispensing piecemeal justice; (d) matters not specifically
assigned as errors on appeal but raised in the trial court and are matters of record having some
bearing on the issue submitted which the parties failed to raise or which the lower court ignored;
(e) matters not assigned as errors on appeal but closely related to an error assigned; and (f)
matters not assigned as errors on appeal but upon which the determination of a question
properly assigned, is dependent. The present case undoubtedly falls squarely under the
above-enumerated exceptions.45 (Emphasis ours.)

To our mind, the Court of Appeals committed a reversible error when it decided the case based
on a ground neither found in the aforequoted assignment of errors submitted by respondents
nor in the arguments propounded in the appellants’ brief. The applicable rule is Section 8, Rule
51 of the 1997 Rules of Civil Procedure, which reads:

Section 8. Questions that may be decided. - No error which does not affect the jurisdiction over
the subject matter or the validity of the judgment appealed from or the proceedings therein will
be considered unless stated in the assignment of errors, or closely related to or dependent on
an assigned error and properly argued in the brief, save as the court may pass upon plain errors
and clerical errors.

Although the Court has declared many exceptions to the above rule, and the Court of Appeals
painstakingly enumerated some of these exceptions, the Court of Appeals omitted to discuss to
which exception this alleged error belongs, and exactly how this error falls under such
exception. To our mind, flexibility in applying the rules must be balanced with sufficient reason
and justification, clearly arrived at and explained by the Court of Appeals, so as not to
"contravene the basic rules of fair play and justice."46

We find that the decision of the Office of the President is more consistent with law and
jurisprudence. The Office of the President found that the subject property had been properly
reclassified by the appropriate local government authority as residential, a fact even noted by
the DAR.

To reiterate, we have held that "lands previously converted by government agencies to non-
agricultural uses prior to the effectivity of the CARL are outside its coverage."47

As to the appropriateness of an HSRC approval, the Court in Heirs of Deleste ruled on the

validity of a local government’s reclassification of land that was subsequently approved not by
the HLURB, but by its predecessor, the HSRC. The Court held that the HSRC approval is
enough, and it is a valid reclassification, as explained in the following quoted portion of the
decision:
Likewise, it is not controverted that City Ordinance No. 1313, which was enacted by the City of
Iligan in 1975, reclassified the subject property into a commercial/residential area. DARAB,
however, believes that the approval of HLURB is necessary in order for the
reclassification to be valid.

We differ. As previously mentioned, City Ordinance No. 1313 was enacted by the City of Iligan
in 1975. Significantly, there was still no HLURB to speak of during that time. It was the
Task Force on Human Settlements, the earliest predecessor of HLURB, which was already in
existence at that time, having been created on September 19, 1973 pursuant to Executive Order
No. 419. It should be noted, however, that the Task Force was not empowered to review and
approve zoning ordinances and regulations. As a matter of fact, it was only on August 9,
1978, with the issuance of Letter of Instructions No. 729, that local governments were
required to submit their existing land use plans, zoning ordinances, enforcement
systems and procedures to the Ministry of Human Settlements for review and ratification.
The Human Settlements Regulatory Commission (HSRC) was the regulatory arm of the
Ministry of Human Settlements.

Significantly, accompanying the Certification dated October 8, 1999 issued by Gil R. Balondo,
Deputy Zoning Administrator of the City Planning and Development Office, Iligan City, and the
letter dated October 8, 1999 issued by Ayunan B. Rajah, Regional Officer of the HLURB, is the
Certificate of Approval issued by Imelda Romualdez Marcos, then Minister of Human
Settlements and Chairperson of the HSRC, showing that the local zoning ordinance was,
indeed, approved on September 21, 1978. This leads to no other conclusion than that City
Ordinance No. 1313 enacted by the City of Iligan was approved by the HSRC, the
predecessor of HLURB. The validity of said local zoning ordinance is, therefore, beyond
question.

Since the subject property had been reclassified as residential/commercial land with the
enactment of City Ordinance No. 1313 in 1975, it can no longer be considered as an
"agricultural land" within the ambit of RA 6657. x x x.48 (Emphases supplied, citations omitted.)

The Court then cited a similar case, Remman Enterprises, Inc. v. Court of Appeals,49 wherein it
was held:

In the main, REMMAN hinges its application for exemption on the ground that the subject lands
had ceased to be agricultural lands by virtue of the zoning classification by the Sangguniang
Bayan of Dasmariñas, Cavite, and approved by the HSRC, specifying them as residential.

In Natalia Realty, Inc. v. Department of Agriculture, this Court resolved the issue of whether
lands already classified for residential, commercial or industrial use, as approved by the
Housing and Land Use Regulatory Board (HLURB) and its precursor agencies, i.e., National
Housing Authority and Human Settlements Regulatory Commission, prior to 15 June 1988, are
covered by Republic Act No. 6657, otherwise known as the Comprehensive Agrarian Reform
Law of 1988. We answered in the negative x x x. (Citation omitted.)

We discussed the history of the HSRC in Buklod nang Magbubukid sa Lupaing Ramos, Inc. v.
E. M. Ramos and Sons, Inc.50 wherein we said:

The Court again agrees with the Court of Appeals that Resolution No. 29-A need not be
subjected to review and approval by the HSRC/HLURB. Resolution No. 29-A was approved by
the Municipality of Dasmariñas on July 9, 1972, at which time, there was even no
HSRC/HLURB to speak of.

The earliest predecessor of the HSRC, the Task Force on Human Settlements, was created
through Executive Order No. 419 more than a year later on September 19, 1973. And even
then, the Task Force had no power to review and approve zoning and subdivision ordinances
and regulations.

It was only on August 9, 1978, with the issuance of Letter of Instructions No. 729, that local
governments were required to submit their existing land use plans, zoning ordinances,
enforcement systems, and procedures to the Ministry of Human Settlements for review and
ratification.

The HSRC was eventually established on February 7, 1981. Section 5(b) of the HSRC Charter
contained the explicit mandate for the HSRC to:

b. Review, evaluate and approve or disapprove comprehensive land use development

plans and zoning ordinances of local government; and the zoning component of civil works
and infrastructure projects of national, regional and local governments; subdivisions,
condominiums or estate development projects including industrial estates, of both the public and
private sectors and urban renewal plans, programs and projects: Provided, that the land use
Development Plans and Zoning Ordinances of Local Governments herein subject to review,
evaluation and approval of the commission shall respect the classification of public lands for
forest purposes as certified by the Ministry of Natural Resources: Provided, further, that the
classification of specific alienable and disposable lands by the Bureau of Lands shall be in
accordance with the relevant zoning ordinance of Local government where it exists; and
provided, finally, that in cities and municipalities where there are as yet no zoning ordinances,
the Bureau of Lands may dispose of specific alienable and disposable lands in accordance with
its own classification scheme subject to the condition that the classification of these lands may
be subsequently change by the local governments in accordance with their particular zoning
ordinances which may be promulgated later. x x x. ASEIDH

Neither the Ministry of Human Settlements nor the HSRC, however, could have exercised its
power of review retroactively absent an express provision to that effect in Letter of Instructions
No. 729 or the HSRC Charter, respectively. A sound cannon of statutory construction is that a
statute operates prospectively only and never retroactively, unless the legislative intent to the
contrary is made manifest either by the express terms of the statute or by necessary implication.
Article 4 of the Civil Code provides that: "Laws shall have no retroactive effect, unless the
contrary is provided." Hence, in order that a law may have retroactive effect, it is necessary that
an express provision to this effect be made in the law, otherwise nothing should be understood
which is not embodied in the law. Furthermore, it must be borne in mind that a law is a rule
established to guide our actions without no binding effect until it is enacted, wherefore, it has no
application to past times but only to future time, and that is why it is said that the law looks to the
future only and has no retroactive effect unless the legislator may have formally given that effect
to some legal provisions.

xxxx

Since the subject property had been reclassified as residential land by virtue of
Resolution No. 29-A dated July 9, 1972, it is no longer agricultural land by the time the
CARL took effect on June 15, 1988 and is, therefore, exempt from the CARP. (Emphases
supplied, citations omitted.)

In Buklod, the Court cited previous decisions with the same conclusion, and we quote the
relevant points of discussion below:

This is not the first time that the Court made such a ruling.

xxxx

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, DAR
itself defined "agricultural land" thus —

"x x x Agricultural land 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 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. x x x.

That the land in the Natalia Realty case was reclassified as residential by a presidential

proclamation, while the subject property herein was reclassified as residential by a local
ordinance, will not preclude the application of the ruling of this Court in the former to the
latter. The operative fact that places a parcel of land beyond the ambit of the CARL is its
valid reclassification from agricultural to nonagricultural prior to the effectivity of the
CARL on June 15, 1988, not by how or whose authority it was reclassified.

In Pasong Bayabas Farmers Association, Inc. v. Court of Appeals (Pasong Bayabas case), the
Court made the following findings:

Under Section 3(c) of Rep. Act No. 6657, agricultural lands refer to lands devoted to agriculture
as conferred in the said law and not classified as industrial land. Agricultural lands are only
those lands which are arable or suitable lands that do not include commercial, industrial and
residential lands. Section 4(e) of the law provides that it covers all private lands devoted to or
suitable for agriculture regardless of the agricultural products raised or that can be raised
thereon. Rep. Act No. 6657 took effect only on June 15, 1988. But long before the law tools
effect, the property subject of the suit had already been reclassified and converted from
agricultural to non-agricultural or residential land by the following administrative
agencies: (a) the Bureau of Lands, when it approved the subdivision plan of the property
consisting of 728 subdivision lots; (b) the National Planning Commission which approved the
subdivision plan subdivided by the LDC/CAI for the development of the property into a low-cost
housing project; (c) the Municipal Council of Carmona, Cavite, when it approved
Kapasiyahang Blg. 30 on May 30, 1976; (d) Agrarian Reform Minister Conrado F. Estrella, on
July 3, 1979, when he granted the application of the respondent for the development of the
Hakone Housing Project with an area of 35.80 hectares upon the recommendation of the
Agrarian Reform Team, Regional Director of Region IV, which found, after verification and
investigation, that the property was not covered by P.D. No. 27, it being untenanted and not
devoted to the production of palay/or corn and that the property was suitable for conversion to
residential subdivision; (e) by the Ministry of Local Government and Community Development;
(f) the Human Settlements Regulatory Commission which issued a location clearance,
development permit, Certificate of Inspection and License to Sell to the LDC/private respondent;
and, (g) the Housing and Land Use Regulatory Board which also issued to the respondent
CAI/LDC a license to sell the subdivision lots.x x x.

Noticeably, there were several government agencies which reclassified and converted the
property from agricultural to nonagricultural in the Pasong Bayabas case. The CARL though
does not specify which specific government agency should have done the reclassification. To be
exempt from CARP, all that is needed is one valid reclassification of the land from agricultural to
non-agricultural by a duly authorized government agency before June 15, 1988, when the CARL
took effect. All similar actions as regards the land subsequently rendered by other government
agencies shall merely serve as confirmation of the reclassification. The Court actually
recognized in the Pasong Bayabas case the power of the local government to convert or
reclassify lands through a zoning ordinance:

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 the 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. x x x.

At the very beginning of Junio v. Garilao, the Court already declared that:

Lands already classified and identified as commercial, industrial or residential before June 15,
1988 - the date of effectivity of the Comprehensive Agrarian Reform Law (CARL) - are outside
the coverage of this law. Therefore, they no longer need any conversion clearance from the
Department of Agrarian Reform (DAR).

The Court then proceeded to uphold the authority of the City Council of Bacolod to reclassify as
residential a parcel of land through Resolution No. 5153-A, series of 1976. The reclassification
was later affirmed by the HSRC. Resultantly, the Court sustained the DAR Order dated
September 13, 1994, exempting the same parcel of land from CARP Coverage.51

Therefore, the Office of the President was correct when it ruled that the DAR's "denial of the
exemption on the ground that the MARO [had] already issued a NOTICE OF ACQUISITION in
1994 is flawed" and that "[the] area having already been reclassified as residential prior to June
1988 (as established by the DAR RCLUPPI V), it cannot be the subject of a Notice of
Acquisition which covers only agricultural lands." The Office of the President likewise correctly
held that "the Notice of Acquisition over the subject property is void ab initio. "52

WHEREFORE, in view of the foregoing, we GRANT the petition. We hereby SET ASIDE the

November 30, 2010 Decision and the May 11, 2011 Resolution of the Court of Appeals in CA-
G.R. SP No. 93941 and REINSTATE the September 5, 2005 Decision and the March 3, 2006
Order of the Office of the President.

SO ORDERED.

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.

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
G.R. No. 158228             March 23, 2004

DEPARTMENT OF AGRARIAN REFORM, as represented by its Secretary, ROBERTO M.

PAGDANGANAN, petitioner,
vs.
DEPARTMENT OF EDUCATION, CULTURE AND SPORTS (DECS), respondent.

DECISION

YNARES-SANTIAGO, J.:

This petition for review on certiorari seeks to set aside the decision1 of the Court of Appeals
dated October 29, 2002 in CA-G.R. SP No. 64378, which reversed the August 30, 2000
decision of the Secretary of Agrarian Reform, as well as the Resolution dated May 7, 2003,
which denied petitioner’s motion for reconsideration.

In controversy are Lot No. 2509 and Lot No. 817-D consisting of an aggregate area of 189.2462
hectares located at Hacienda Fe, Escalante, Negros Occidental and Brgy. Gen. Luna, Sagay,
Negros Occidental, respectively. On October 21, 1921, these lands were donated by the late
Esteban Jalandoni to respondent DECS (formerly Bureau of Education).2 Consequently, titles
thereto were transferred in the name of respondent DECS under Transfer Certificate of Title No.
167175.3

On July 15, 1985, respondent DECS leased the lands to Anglo Agricultural Corporation for 10
agricultural crop years, commencing from crop year 1984-1985 to crop year 1993-1994. The
contract of lease was subsequently renewed for another 10 agricultural crop years, commencing
from crop year 1995-1996 to crop year 2004-2005.4

On June 10, 1993, Eugenio Alpar and several others, claiming to be permanent and regular
farm workers of the subject lands, filed a petition for Compulsory Agrarian Reform Program
(CARP) coverage with the Municipal Agrarian Reform Office (MARO) of Escalante.5

After investigation, MARO Jacinto R. Piñosa, sent a "Notice of Coverage" to respondent DECS,
stating that the subject lands are now covered by CARP and inviting its representatives for a
conference with the farmer beneficiaries.6 Then, MARO Piñosa submitted his report to OIC-
PARO Stephen M. Leonidas, who recommended to the DAR Regional Director the approval of
the coverage of the landholdings.

On August 7, 1998, DAR Regional Director Dominador B. Andres approved the

recommendation, the dispositive portion of which reads:

WHEREFORE, all the foregoing premises considered, the petition is granted. Order is hereby
issued:

1. Placing under CARP coverage Lot 2509 with an area of 111.4791 hectares situated at
Had. Fe, Escalante, Negros Occidental and Lot 817-D with an area of 77.7671 hectares
situated at Brgy. Gen. Luna, Sagay, Negros Occidental;

2. Affirming the notice of coverage sent by the DAR Provincial Office, Negros Occidental
dated November 23, 1994;

3. Directing the Provincial Agrarian Reform Office of Negros Occidental and the
Municipal Agrarian Reform Officers of Sagay and Escalante to facilitate the acquisition of
the subject landholdings and the distribution of the same qualified beneficiaries.

SO ORDERED.7

Respondent DECS appealed the case to the Secretary of Agrarian Reform which affirmed the
Order of the Regional Director. 8

Aggrieved, respondent DECS filed a petition for certiorari with the Court of Appeals, which set
aside the decision of the Secretary of Agrarian Reform.9

Hence, the instant petition for review.

The pivotal issue to be resolved in this case is whether or not the subject properties are exempt
from the coverage of Republic Act No. 6657, otherwise known as the Comprehensive Agrarian
Reform Law of 1998 (CARL).

The general policy under CARL is to cover as much lands suitable for agriculture as
possible.10 Section 4 of R.A. No. 6657 sets out the coverage of CARP. It states that the program
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 agriculture regardless of the agricultural
products raised or that can be raised thereon.

Section 3(c) thereof defines "agricultural land," as "land devoted to agricultural activity as
defined in this Act and not classified as mineral, forest, residential, commercial or industrial
land." The term "agriculture" or "agricultural activity" is also defined by the same law 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.11

The records of the case show that the subject properties were formerly private agricultural lands
owned by the late Esteban Jalandoni, and were donated to respondent DECS. From that time
until they were leased to Anglo Agricultural Corporation, the lands continued to be agricultural
primarily planted to sugarcane, albeit part of the public domain being owned by an agency of the
government.12 Moreover, there is no legislative or presidential act, before and after the
enactment of R.A. No. 6657, classifying the said lands as mineral, forest, residential,
commercial or industrial land. Indubitably, the subject lands fall under the classification of lands
of the public domain devoted to or suitable for agriculture.

Respondent DECS sought exemption from CARP coverage on the ground that all the income
derived from its contract of lease with Anglo Agricultural Corporation were actually, directly and
exclusively used for educational purposes, such as for the repairs and renovations of schools in
the nearby locality.

Petitioner DAR, on the other hand, argued that the lands subject hereof are not exempt from the
CARP coverage because the same are not actually, directly and exclusively used as school
sites or campuses, as they are in fact leased to Anglo Agricultural Corporation. Further, to be
exempt from the coverage, it is the land per se, not the income derived therefrom, that must be
actually, directly and exclusively used for educational purposes.

We agree with the petitioner.

Section 10 of R.A. No. 6657 enumerates the types of lands which are exempted from the
coverage of CARP as well as the purposes of their exemption, viz:

xxxxxxxxx
c) Lands actually, directly and exclusively used and found to be necessary for national
defense, school sites and campuses, including experimental farm stations operated by public or
private schools for educational purposes, … , shall be exempt from the coverage of this Act.13

xxxxxxxxx

Clearly, a reading of the paragraph shows that, in order to be exempt from the coverage: 1) the
land must be "actually, directly, and exclusively used and found to be necessary;" and 2) the
purpose is "for school sites and campuses, including experimental farm stations operated by
public or private schools for educational purposes."

The importance of the phrase "actually, directly, and exclusively used and found to be
necessary" cannot be understated, as what respondent DECS would want us to do by not
taking the words in their literal and technical definitions. The words of the law are clear and
unambiguous. Thus, the "plain meaning rule" or verba legis in statutory construction is
applicable in this case. Where the words of a statute are clear, plain and free from ambiguity, it
must be given its literal meaning and applied without attempted interpretation.14

We are not unaware of our ruling in the case of Central Mindanao University v. Department of
Agrarian Reform Adjudication Board,15 wherein we declared the land subject thereof exempt
from CARP coverage. However, respondent DECS’ reliance thereon is misplaced because the
factual circumstances are different in the case at bar.

Firstly, in the CMU case, the land involved was not alienable and disposable land of the public
domain because it was reserved by the late President Carlos P. Garcia under Proclamation No.
476 for the use of Mindanao Agricultural College (now CMU).16 In this case, however, the lands
fall under the category of alienable and disposable lands of the public domain suitable for
agriculture.

Secondly, in the CMU case, the land was actually, directly and exclusively used and found to be
necessary for school sites and campuses. Although a portion of it was being used by the
Philippine Packing Corporation (now Del Monte Phils., Inc.) under a "Management and
Development Agreement", the undertaking was that the land shall be used by the Philippine
Packing Corporation as part of the CMU research program, with direct participation of faculty
and students. Moreover, the land was part of the land utilization program developed by the CMU
for its "Kilusang Sariling Sikap Project" (CMU-KSSP), a multi-disciplinary applied research
extension and productivity program.17 Hence, the retention of the land was found to be
necessary for the present and future educational needs of the CMU. On the other hand, the
lands in this case were not actually and exclusively utilized as school sites and campuses, as
they were leased to Anglo Agricultural Corporation, not for educational purposes but for the
furtherance of its business. Also, as conceded by respondent DECS, it was the income from the
contract of lease and not the subject lands that was directly used for the repairs and renovations
of the schools in the locality.

Anent the issue of whether the farmers are qualified beneficiaries of CARP, we disagree with
the Court of Appeals’ finding that they were not.

At the outset, it should be pointed out that the identification of actual and potential beneficiaries
under CARP is vested in the Secretary of Agrarian Reform pursuant to Section 15, R.A. No.
6657, which states:
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.

In the case at bar, the BARC certified that herein farmers were potential CARP beneficiaries of
the subject properties.18 Further, on November 23, 1994, the Secretary of Agrarian Reform
through the Municipal Agrarian Reform Office (MARO) issued a Notice of Coverage placing the
subject properties under CARP. Since the identification and selection of CARP beneficiaries are
matters involving strictly the administrative implementation of the CARP,19 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. In this case, there was none.

The Comprehensive Agrarian Reform Program (CARP) is the bastion of social justice of poor
landless farmers, the mechanism designed to redistribute to the underprivileged the natural right
to toil the earth, and to liberate them from oppressive tenancy. To those who seek its benefit, it
is the means towards a viable livelihood and, ultimately, a decent life. The objective of the State
is no less certain: "landless farmers and farmworkers will receive the highest consideration to
promote social justice and to move the nation toward sound rural development and
industrialization."20

WHEREFORE, in view of the foregoing, the petition is GRANTED. The decision of the Court of
Appeals dated October 29, 2002, in CA-G.R. SP No. 64378 is REVERSED and SET ASIDE.
The decision dated August 30, 2000 of the Secretary of Agrarian Reform placing the subject
lands under CARP coverage, is REINSTATED.

SO ORDERED.
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.