FIRST DIVISION

[G.R. No. 112526. October 12, 2001.]

STA. ROSA REALTY DEVELOPMENT CORPORATION , petitioner, vs .

COURT OF APPEALS, JUAN B. AMANTE, FRANCISCO L. ANDAL,
LUCIA ANDAL, ANDREA P. AYENDE, LETICIA P. BALAT, FILOMENA B.
BATINO, ANICETO A. BURGOS, JAIME A. BURGOS, FLORENCIA
CANUBAS, LORETO A. CANUBAS, MAXIMO A. CANUBAS, REYNALDO
CARINGAL, QUIRINO C. CASALME, BENIGNO A. CRUZAT, ELINO A.
CRUZAT, GREGORIO F. CRUZAT, RUFINO C. CRUZAT, SERGIO
CRUZAT, SEVERINO F. CRUZAT, VICTORIA DE SAGUN, SEVERINO DE
SAGUN, FELICISIMO A. GONZALES, FRANCISCO A. GONZALES,
GREGORIO GONZALES, LEODEGARIO N. GONZALES, PASCUAL P.
GONZALES, ROLANDO A. GONZALES, FRANCISCO A. JUANGCO,
GERVACIO A. JUANGCO, LOURDES U. LUNA, ANSELMO M.
MANDANAS, CRISANTO MANDANAS, EMILIO M. MANDANAS,
GREGORIO A. MANDANAS, MARIO G. MANDANAS, TEODORO
MANDANAS, CONSTANCIO B. MARQUEZ, EUGENIO B. MARQUEZ,
ARMANDO P. MATIENZO, DANIEL D. MATIENZO, MAXIMINO
MATIENZO, PACENCIA P. MATIENZO, DOROTEA L. PANGANIBAN,
JUANITO T. PEREZ, MARIANITO T. PEREZ, SEVERO M. PEREZ,
INOCENCIA S. PASQUIZA, BIENVENIDO F. PETATE, IGNACIO F.
PETATE, JUANITO PETATE, PABLO A. PLATON, PRECILLO V.
PLATON, AQUILINO B. SUBOL, CASIANO T. VILLA, DOMINGO VILLA,
JUAN T. VILLA, MARIO C. VILLA, NATIVIDAD A. VILLA, JACINTA S.
ALVARADO, RODOLFO ANGELES, DOMINGO A. CANUBAS, EDGARDO
L. CASALME, QUIRINO DE LEON, LEONILO M. ENRIQUEZ, CLAUDIA
P. GONZALES, FELISA R. LANGUE, QUINTILLANO LANGUE,
REYNALDO LANGUE, ROMEO S. LANGUE, BONIFACIO VILLA,
ROGELIO AYENDE, ANTONIO B. FERNANDEZ, ZACARIAS HERRERA,
REYNARIO U. LAZO, AGAPITO MATIENZO, DIONISIO F. PETATE,
LITO G. REYES, JOSE M. SUBOL, CELESTINO G. TOPI NO, ROSA C.
AMANTE, SOTERA CASALME, REMIGIO M. SILVERIO, THE
SECRETARY OF AGRARIAN REFORM, DEPARTMENT OF AGRARIAN
REFORM ADJUDICATION BOARD, LAND BANK OF THE PHILIPPINES,
REGISTER OF DEEDS OF LAGUNA, DEPARTMENT OF ENVIRONMENT
AND NATURAL RESOURCES REGIONAL EXECUTIVE DIRECTOR FOR
REGION IV, and REGIONAL AGRARIAN REFORM OFFICER FOR
REGION IV , respondents.

Romulo Mabanta Buenaventura Sayoc & Delos Angeles Law Offices for petitioner.
Miguel M. Gonzales, Norberto L. Martinez and Rosemarie M. Osoteo for private
respondents.

SYNOPSIS

Two parcels of land, titled under TCT Nos. 81949 and 84891 registered in the
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 name of petitioner, later declared as watershed area by the Department of Environment
and Natural Resources (DENR), comprising 254.6 hectares were placed by the
Department of Agrarian Reform (DAR) under compulsory acquisition after service of the
requisite notice of coverage and letter of invitation and notice of acquisition. The same
was objected to by petitioner claiming that the area was not appropriate for agricultural
purposes and that the area was rugged in terrain with slopes of 18%. It presented proof
to that effect. Petitioner protested both the amount of compensation offered and the
notices of acquisition to the Department of Agrarian Reform Adjudication Board
(DARAB). Thereafter, the DAR Secretary issued a memorandum directing the Land Bank
to open a trust account in favor of petitioner for P5,637,965.55, the valuation of the
properties, as the former rejected the offer of the DAR. The DARAB then rendered
judgment dismissing the protest of petitioner and ordered Land Bank to pay petitioner
P7,841,997.64 and that should there be a rejection of the payment tendered, to open, if
none has yet been made, a trust account for said amount in the name of petitioner.
Petitioner elevated the issues to the Court of Appeals which a rmed the assailed
decision. Hence, this recourse.
There are 2 modes of acquisition of private land under R.A. No. 6657. One is
compulsory and the other is voluntary. The present case falls under the compulsory
process. Under Sec. 16 of the law, in case the offer of the DAR to pay the just
compensation was rejected, the DAR shall deposit the amount in cash or in Landbank
Bonds with an accessible bank. In the case at bar, the payment of just compensation
was not in accordance with the procedural requirement as the same was made by
virtue of a trust account. However, in view of the necessity to resolve the issue as to the
true nature of the parcels involved, the Court directed the DARAB to conduct a re-
evaluation of the issue.

SYLLABUS

1. LABOR AND SOCIAL LEGISLATION; COMPREHENSIVE AGRARIAN REFORM

LAW (P.D. 6657); MODES OF ACQUISITION. — Under Republic Act No. 6657, there are two
modes of acquisition of private land: compulsory and voluntary. In the case at bar, the
Department of Agrarian Reform sought the compulsory acquisition of subject property
under R.A. No. 6657, Section 16.
2. ID.; ID.; NOTICES REQUIRED. — For a valid implementation of the CARP
Program, two notices are required: (1) the notice of coverage and letter of invitation to a
preliminary conference sent to the landowner, the representative of the BARC, LBP, farmer
bene ciaries and other interested parties pursuant to DAR A.O. No. 12, series of 1989; and
(2) the notice of acquisition sent to the landowner under Section 16 of the CARL.
3. ID.; ID.; ID.; NOTICE OF COVERAGE AND LETTER OF INVITATION TO A
PRELIMINARY CONFERENCE, PURPOSE. — The importance of the rst notice, that is, the
notice of coverage and the letter of invitation to a conference, and its actual conduct
cannot be understated. They are steps designed to comply with the requirements of
administrative due process.
4. ID.; ID.; IMPLEMENTATION OF COMPREHENSIVE AGRARIAN REFORM LAW,
EXERCISE OF POLICE POWER AND EMINENT DOMAIN. — The implementation of the CARL
is an exercise of the State's police power and the power of eminent domain. To the extent
that the CARL prescribes retention limits to the landowners, there is an exercise of police
power for the regulation of private property in accordance with the Constitution. But
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 where, to carry out such regulation, the owners are deprived of lands they own in excess of
the maximum area allowed, there is also a taking under the power of eminent domain. The
taking contemplated is not mere limitation of the use of the land. What is required is the
surrender of the title to and physical possession of the excess and all bene cial rights
accruing to the owner in favor of the farmer beneficiary.
5. ID.; ID.; JUST COMPENSATION, HOW MADE. — In Association of Small
Landowners in the Philippines v. Secretary of Agrarian Reform , we held that "The CARP
Law, for its part, conditions the transfer of possession and ownership of the land to the
government on receipt of the landowner of the corresponding payment or the deposit by
the DAR of the compensation in cash or LBP bonds with an accessible bank. Until then, title
also remains with the landowner. No outright change of ownership is contemplated either."
6. POLITICAL LAW; STATE; POLICE POWER; POWER OF MUNICIPALITY TO
ISSUE ZONING CLASSIFICATION. — The authority of the municipality of Cabuyao, Laguna
to issue zoning classi cation is an exercise of its police power, not the power of eminent
domain. "A zoning ordinance is de ned as a local city or municipal legislation which
logically arranges, prescribes, de nes and apportions a given political subdivision into
specific land uses as present and future projection of needs." AacSTE

7. LABOR AND SOCIAL LEGISLATION; COMPREHENSIVE AGRARIAN REFORM

LAW (P.D. 6657); PROPERTY WITH SLOPES OF 18% OR MORE, EXEMPTED FROM ITS
COVERAGE. — Another factor that needs to be mentioned is the fact that during the
DARAB hearing, petitioner presented proof that the Casile property has slopes of 18% and
over, which exempted the land from the coverage of CARL. R.A. No. 6657, Section 10,
provides that ". . . watersheds . . . and all lands with eighteen percent (18%) slope and over,
except those already developed shall be exempt from coverage of this Act."

DECISION

PARDO , J : p

The case before the Court is a petition for review on certiorari of the decision of the
Court of Appeals 1 a rming the decision of the Department of Agrarian Reform
Adjudication Board 2 (hereafter DARAB) ordering the compulsory acquisition of
petitioner's property under the Comprehensive Agrarian Reform Program (CARP).
Petitioner Sta. Rosa Realty Development Corporation (hereafter SRRDC) was the
registered owner of two parcels of land, situated at Barangay Casile, Cabuyao, Laguna
covered by TCT Nos. 81949 and 84891, with a total area of 254.6 hectares. According to
petitioner, the parcels of land are watersheds, which provide clean potable water to the
Canlubang community, and that ninety (90) light industries are now located in the area. 3
Petitioner alleged that respondents usurped its rights over the property, thereby
destroying the ecosystem. Sometime in December 1985, respondents led a civil case 4
with the Regional Trial Court, Laguna, seeking an easement of a right of way to and from
Barangay Casile. By way of counterclaim, however, petitioner sought the ejectment of
private respondents.
In October 1986 to August 1987, petitioner led with the Municipal Trial Court,
Cabuyao, Laguna separate complaints for forcible entry against respondents. 5
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 After the ling of the ejectment cases, respondents petitioned the Department of
Agrarian Reform (DAR) for the compulsory acquisition of the SRRDC property under the
CARP.
On August 11, 1989, the Municipal Agrarian Reform O cer (MARO) of Cabuyao,
Laguna issued a notice of coverage to petitioner and invited its o cials or representatives
to a conference on August 18, 1989. 6 During the meeting, the following were present:
representatives of petitioner, the Land Bank of the Philippines, PARCCOM, PARO of
Laguna, MARO of Laguna, the BARC Chairman of Barangay Casile and some potential
farmer bene ciaries, who are residents of Barangay Casile, Cabuyao, Laguna. It was the
consensus and recommendation of the assembly that the landholding of SRRDC be placed
under compulsory acquisition.
On August 17, 1989, petitioner led with the Municipal Agrarian Reform O ce
(MARO), Cabuyao, Laguna a "Protest and Objection" to the compulsory acquisition of the
property on the ground that the area was not appropriate for agricultural purposes. The
area was rugged in terrain with slopes of 18% and above and that the occupants of the
land were squatters, who were not entitled to any land as beneficiaries. 7
On August 29, 1989, the farmer bene ciaries together with the BARC chairman
answered the protest and objection stating that the slope of the land is not 18% but only 5-
10% and that the land is suitable and economically viable for agricultural purposes, as
evidenced by the Certi cation of the Department of Agriculture, municipality of Cabuyao,
Laguna. 8
On September 8, 1989, MARO Belen dela Torre made a summary investigation
report and forwarded the Compulsory Acquisition Folder Indorsement (CAFI) to the
Provincial Agrarian Reform Officer (hereafter PARO). 9
On September 21, 1989, PARO Durante Ubeda forwarded his endorsement of the
compulsory acquisition to the Secretary of Agrarian Reform.
On November 23, 1989, Acting Director Eduardo C. Visperas of the Bureau of Land
Acquisition and Development, DAR forwarded two (2) Compulsory Acquisition Claim
Folders covering the landholding of SRRDC, covered by TCT Nos. T-81949 and T-84891 to
the President, Land Bank of the Philippines for further review and evaluation. 1 0
On December 12, 1989, Secretary of Agrarian Reform Miriam Defensor Santiago
sent two (2) notices of acquisition 1 1 to petitioner, stating that petitioner's landholdings
covered by TCT Nos. 81949 and 84891, containing an area of 188.2858 and 58.5800
hectares, valued at P4,417,735.65 and P1,220,229.93, respectively, had been placed under
the Comprehensive Agrarian Reform Program.
On February 6, 1990, petitioner SRRDC in two letters 1 2 separately addressed to
Secretary Florencio B. Abad and the Director, Bureau of Land Acquisition and Distribution,
sent its formal protest, protesting not only the amount of compensation offered by DAR
for the property but also the two (2) notices of acquisition.
On March 17, 1990, Secretary Abad referred the case to the DARAB for summary
proceedings to determine just compensation under R. A. No. 6657, Section 16.
On March 23, 1990, the LBP returned the two (2) claim folders previously referred
for review and evaluation to the Director of BLAD mentioning its inability to value the
SRRDC landholding due to some deficiencies.
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 On March 28, 1990, Executive Director Emmanuel S. Galvez wrote Land Bank
President Deogracias Vistan to forward the two (2) claim folders involving the property of
SRRDC to the DARAB for it to conduct summary proceedings to determine the just
compensation for the land.
On April 6, 1990, petitioner sent a letter to the Land Bank of the Philippines stating
that its property under the aforesaid land titles were exempt from CARP coverage because
they had been classi ed as watershed area and were the subject of a pending petition for
land conversion.
On May 10, 1990, Director Narciso Villapando of BLAD turned over the two (2) claim
folders (CACF's) to the Executive Director of the DAR Adjudication Board for proper
administrative valuation. Acting on the CACF's, on September 10, 1990, the Board
promulgated a resolution asking the o ce of the Secretary of Agrarian Reform (DAR) to
rst resolve two (2) issues before it proceeds with the summary land valuation
proceedings. 1 3
The issues that need to be threshed out were as follows: (1) whether the subject
parcels of land fall within the coverage of the Compulsory Acquisition Program of the
CARP; and (2) whether the petition for land conversion of the parcels of land may be
granted.
On December 7, 1990, the O ce of the Secretary, DAR, through the Undersecretary
for Operations (Assistant Secretary for Luzon Operations) and the Regional Director of
Region IV, submitted a report answering the two issues raised. According to them, rstly,
by virtue of the issuance of the notice of coverage on August 11, 1989, and notice of
acquisition on December 12, 1989, the property is covered under compulsory acquisition.
Secondly, Administrative Order No. 1, Series of 1990, Section IV D also supports the DAR
position on the coverage of the said property. During the consideration of the case by the
Board, there was no pending petition for land conversion speci cally concerning the
parcels of land in question.
On February 19, 1991, the Board sent a notice of hearing to all the parties interested,
setting the hearing for the administrative valuation of the subject parcels of land on March
6, 1991. However, on February 22, 1991, Atty. Ma. Elena P. Hernandez-Cueva, counsel for
SRRDC, wrote the Board requesting for its assistance in the reconstruction of the records
of the case because the records could not be found as her co-counsel, Atty. Ricardo
Blanca or, who originally handled the case for SRRDC and had possession of all the
records of the case was on inde nite leave and could not be contacted. The Board granted
counsel's request and moved the hearing to April 4, 1991.
On March 18, 1991, SRRDC, submitted a petition to the Board for the latter to
resolve SRRDC's petition for exemption from CARP coverage before any administrative
valuation of their landholding could be had by the Board.
On April 4, 1991, the initial DARAB hearing of the case was held and subsequently,
different dates of hearing were set without objection from counsel of SRRDC. During the
April 15, 1991 hearing, the subdivision plan of subject property at Casile, Cabuyao, Laguna
was submitted and marked as Exhibit "5" for SRRDC. At the hearing on April 23, 1991, the
Land Bank asked for a period of one month to value the land in dispute.
At the hearing on April 23, 1991, certi cation from Deputy Zoning Administrator
Generoso B. Opina was presented. The certi cation issued on September 8, 1989, stated
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 that the parcels of land subject of the case were classi ed as "industrial Park" per
Sanguniang Bayan Resolution No. 45-89 dated March 29, 1989. 1 4
To avert any opportunity that the DARAB might distribute the lands to the farmer
bene ciaries, on April 30, 1991, petitioner led a petition 1 5 with DARAB to disqualify
private respondents as bene ciaries. However, DARAB refused to address the issue of
beneficiaries.
In the meantime, on January 20, 1992, the Regional Trial Court, Laguna, Branch 24,
rendered a decision, 1 6 nding that private respondents illegally entered the SRRDC
property, and ordered them evicted.
On July 11, 1991, DAR Secretary Benjamin T. Leong issued a memorandum directing
the Land Bank of the Philippines to open a trust account in favor of SRRDC, for
P5,637,965.55, as valuation for the SRRDC property.
On December 19, 1991, DARAB promulgated a decision, the decretal portion of
which reads:
"WHEREFORE, based on the foregoing premises, the Board hereby orders:
"1. The dismissal for lack of merit of the protest against the
compulsory coverage of the landholdings of Sta. Rosa Realty Development
Corporation (Transfer Certi cates of Title Nos. 81949 and 84891 with an area of
254.766 hectares) in Barangay Casile, Municipality of Cabuyao, Province of
Laguna under the Comprehensive Agrarian Reform Program is hereby affirmed;
"2. The Land Bank of the Philippines (LBP) to pay Sta. Rosa Realty
Development Corporation the amount of Seven Million Eight Hundred Forty-One
Thousand, Nine Hundred Ninety-Seven Pesos and Sixty-Four centavos
(P7,841,997.64) for its landholdings covered by the two (2) Transfer Certi cates
of Title mentioned above. Should there be a rejection of the payment tendered, to
open, if none has yet been made, a trust account for said amount in the name of
Sta. Rosa Realty Development Corporation;
"3. The Register of Deeds of the Province of Laguna to cancel with
dispatch Transfer certi cate of Title Nos. 84891 and 81949 and new one be
issued in the name of the Republic of the Philippines, free from liens and
encumbrances;
"4. The Department of Environment and Natural Resources either
through its Provincial O ce in Laguna or the Regional O ce, Region IV, to
conduct a nal segregation survey on the lands covered by Transfer certi cate of
Title Nos. 84891 and 81949 so the same can be transferred by the Register of
Deeds to the name of the Republic of the Philippines;
"5. The Regional O ce of the Department of Agrarian Reform through
its Municipal and Provincial Agrarian Reform O ce to take immediate
possession on the said landholding after Title shall have been transferred to the
name of the Republic of the Philippines, and distribute the same to the immediate
issuance of Emancipation Patents to the farmer-bene ciaries as determined by
the Municipal Agrarian Reform Office of Cabuyao, Laguna." 1 7

On January 20, 1992, the Regional Trial Court, Laguna, Branch 24, rendered a
decision in Civil Case No. B-2333 1 8 ruling that respondents were builders in bad faith.

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 On February 6, 1992, petitioner led with the Court of Appeals a petition for review
of the DARAB decision. 1 9 On November 5, 1993, the Court of Appeals promulgated a
decision a rming the decision of DARAB. The decretal portion of the Court of Appeals
decision reads:
"WHEREFORE, premises considered, the DARAB decision dated September
19, 1991 is AFFIRMED, without prejudice to petitioner Sta. Rosa Realty
Development Corporation ventilating its case with the Special Agrarian Court on
the issue of just compensation." 2 0

Hence, this petition. 2 1

On December 15, 1993, the Court issued a Resolution which reads:
"G.R. Nos. 112526 (Sta. Rosa Realty Development Corporation vs. Court of
Appeals, et. al.) — Considering the compliance, dated December 13, 1993, led by
counsel for petitioner, with the resolution of December 8, 1993 which required
petitioner to post a cash bond or surety bond in the amount of P1,500,000.00
Pesos before issuing a temporary restraining order prayed for, manifesting that it
has posted a CASH BOND in the same amount with the Cashier of the Court as
evidenced by the attached o cial receipt no. 315519, the Court resolved to ISSUE
the Temporary Retraining Order prayed for.
"The Court therefore, resolved to restrain: (a) the Department of Agrarian
Reform Adjudication Board from enforcing its decision dated December 19, 1991
in DARAB Case No. JC-R-IV-LAG-0001, which was a rmed by the Court of
Appeals in a Decision dated November 5, 1993, and which ordered, among others,
the Regional O ce of the Department of Agrarian Reform through its Municipal
and Provincial Reform O ce to take immediate possession of the landholding in
dispute after title shall have been transferred to the name of the Republic of the
Philippines and to distribute the same through the immediate issuance of
Emancipation Patents to the farmer-bene ciaries as determined by the Municipal
Agrarian O cer of Cabuyao, Laguna, (b) The Department of Agrarian Reform
and/or the Department of Agrarian Reform Adjudication Board, and all persons
acting for and in their behalf and under their authority from entering the properties
involved in this case and from introducing permanent infrastructures thereon; and
(c) the private respondents from further clearing the said properties of their green
cover by the cutting or burning of trees and other vegetation, effective today until
further orders from this Court." 2 2

The main issue raised is whether the property in question is covered by CARP
despite the fact that the entire property was formed part of a watershed area prior to the
enactment of R.A. No. 6657.
Under Republic Act No. 6657, there are two modes of acquisition of private land:
compulsory and voluntary. In the case at bar, the Department of Agrarian Reform sought
the compulsory acquisition of subject property under R. A. No. 6657, Section 16, to wit:
"Sec. 16. Procedure for Acquisition of Private Lands. — For purposes of
acquisition of private lands, the following procedures shall be followed:

a.) After having identi ed the land, the landowners and the
bene ciaries, 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
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 shall contain the offer of the DAR to pay corresponding value in
accordance with the valuation set forth in Sections 17, 18, and other
pertinent provisions hereof.
b.) Within thirty (30) days from the date of the receipt of written notice
by personal delivery or registered mail, the landowner, his
administrator or representative shall inform the DAR of his
acceptance or rejection of the offer.
c.) If the landowner accepts the offer of the DAR, the LBP shall pay the
landowner the purchase price of the land within thirty (30) days
after he executes and delivers a deed of transfer in favor of the
government and other muniments of title.

d.) In case of rejection or failure to reply, the DAR shall conduct

summary administrative proceedings to determine the
compensation for the land requiring the landowner, the LBP and
other interested parties to submit fteen (15) days from receipt of
the notice. After the expiration of the above period, the matter is
deemed submitted for decision. The DAR shall decide the case
within thirty (30) days after it is submitted for decision.
e.) Upon receipt by the landowner of the corresponding payment, or, in
case of rejection or no response from the landowner, upon the
deposit with an accessible bank designated by the DAR of the
compensation in cash or in LBP bonds in accordance with this act,
the DAR shall make immediate possession of the land and shall
request the proper Register of Deeds to issue Transfer Certi cate of
Titles (TCT) in the name of the Republic of the Philippines. The DAR
shall thereafter proceed with the redistribution of the land to the
qualified beneficiaries.
f.) Any party who disagrees with the decision may bring the matter to
the court 2 3 of proper jurisdiction for nal determination of just
compensation.

In compulsory acquisition of private lands, the landholding, the landowners and

farmer bene ciaries must rst be identi ed. After identi cation, the DAR shall send a
notice of acquisition to the landowner, by personal delivery or registered mail, and post it
in a conspicuous place in the municipal building and barangay hall of the place where the
property is located.
Within thirty (30) days from receipt of the notice of acquisition, the landowner, his
administrator or representative shall inform the DAR of his acceptance or rejection of the
offer.
If the landowner accepts, he executes and delivers a deed of transfer in favor of the
government and surrenders the certi cate of title. Within thirty (30) days from the
execution of the deed of transfer, the Land Bank of the Philippines (LBP) pays the owner
the purchase price. If the landowner accepts, he executes and delivers a deed of transfer in
favor of the government and surrenders the certi cate of title. Within thirty days from the
execution of the deed of transfer, the Land Bank of the Philippines (LBP) pays the owner
the purchase price. If the landowner rejects the DAR's offer or fails to make a reply, the
DAR conducts summary administrative proceedings to determine just compensation for
the land. The landowner, the LBP representative and other interested parties may submit
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 evidence on just compensation within fteen days from notice. Within thirty days from
submission, the DAR shall decide the case and inform the owner of its decision and the
amount of just compensation.
Upon receipt by the owner of the corresponding payment, or, in case of rejection or
lack of response from the latter, the DAR shall deposit the compensation in cash or in LBP
bonds with an accessible bank. The DAR shall immediately take possession of the land
and cause the issuance of a transfer certi cate of title in the name of the Republic of the
Philippines. The land shall then be redistributed to the farmer bene ciaries. Any party may
question the decision of the DAR in the special agrarian courts (provisionally the Supreme
Court designated branches of the regional trial court as special agrarian courts) for nal
determination of just compensation.
The DAR has made compulsory acquisition the priority mode of land acquisition to
hasten the implementation of the Comprehensive Agrarian Reform Program (CARP). Under
Sec. 16 of the CARL, the rst step in compulsory acquisition is the identi cation of the
land, the landowners and the farmer bene ciaries. However, the law is silent on how the
identi cation process shall be made. To ll this gap, on July 26, 1989, the DAR issued
Administrative Order No. 12, series of 1989, which set the operating procedure in the
identification of such lands. The procedure is as follows:
A. The Municipal Agrarian Reform Officer (MARO), with the assistance of the
pertinent Barangay Agrarian Reform Committee (BARC), shall:
1. Update the masterlist of all agricultural lands covered under the
CARP in his area of responsibility; the masterlist should include
such information as required under the attached CARP masterlist
form which shall include the name of the landowner, landholding
area, TCT/OCT number, and tax declaration number.
2. Prepare the Compulsory Acquisition Case Folder (CACF) for each
title (OCT/TCT) or landholding covered under Phase I and II of the
CARP except those for which the landowners have already led
applications to avail of other modes of land acquisition. A case
folder shall contain the following duly accomplished forms:
a) CARP CA Form 1 — MARO investigation report
b) CARP CA Form No. 2 — Summary investigation report
findings and evaluation
c) CARP CA Form 3 — Applicant's Information sheet

d) CARP CA Form 4 — Beneficiaries undertaking

e) CARP CA Form 5 — Transmittal report to the PARO
The MARO/BARC shall certify that all information contained in the above-mentioned
forms have been examined and verified by him and that the same are true and correct.
3. Send notice of coverage and a letter of invitation to a
conference/meeting to the landowner covered by the Compulsory
Case Acquisition Folder. Invitations to the said conference meeting
shall also be sent to the prospective farmer-bene ciaries, the BARC
representatives, the Land Bank of the Philippines (LBP)
representative, and the other interested parties to discuss the inputs
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 to the valuation of the property.
He shall discuss the MARO/BARC investigation report and solicit the views,
objection, agreements or suggestions of the participants thereon. The
landowner shall also ask to indicate his retention area. The minutes of the
meeting shall be signed by all participants in the conference and shall
form an integral part of the CACF.
4. Submit all completed case folders to the Provincial Agrarian Reform
Officer (PARO).
B. The PARO shall:
1. Ensure the individual case folders are forwarded to him by his
MAROs.
2. Immediately upon receipt of a case folder, compute the valuation of
the land in accordance with A.O. No. 6, series of 1988. The valuation
worksheet and the related CACF valuation forms shall be duly
certi ed correct by the PARO and all the personnel who participated
in the accomplishment of these forms.
3. In all cases, the PARO may validate the report of the MARO through
ocular inspection and veri cation of the property. This ocular
inspection and veri cation shall be mandatory when the computed
value exceeds P500,000 per estate.

4. Upon determination of the valuation, forward the case folder,

together with the duly accomplished valuation forms and his
recommendations, to the Central Office.
The LBP representative and the MARO concerned shall be furnished a copy each of his
report.
C. DAR Central Office, specifically through the Bureau of Land Acquisition
and Distribution (BLAD), shall:
1. Within three days from receipt of the case folder from the PARO,
review, evaluate and determine the nal land valuation of the
property covered by the case folder. A summary review and
evaluation report shall be prepared and duly certi ed by the BLAD
Director and the personnel directly participating in the review and
final valuation.
2. Prepare, for the signature of the Secretary or her duly authorized
representative, a notice of acquisition (CARP Form 8) for the subject
property. Serve the notice to the landowner personally or through
registered mail within three days from its approval. The notice shall
include among others, the area subject of compulsory acquisition,
and the amount of just compensation offered by DAR.
3. Should the landowner accept the DAR's offered value, the BLAD
shall prepare and submit to the Secretary for approval the order of
acquisition. However, in case of rejection or non-reply, the DAR
Adjudication Board (DARAB) shall conduct a summary
administrative hearing to determine just compensation, in
accordance with the procedures provided under Administrative
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 Order No. 13, series of 1989. Immediately upon receipt of the
DARAB's decision on just compensation, the BLAD shall prepare
and submit to the Secretary for approval the required order of
acquisition.
4. Upon the landowner's receipt of payment, in case of acceptance, or
upon deposit of payment in the designated bank, in case of
rejection or non-response, the Secretary shall immediately direct the
pertinent Register of Deeds to issue the corresponding Transfer
Certi cate of Title (TCT) in the name of the Republic of the
Philippines. Once the property is transferred, the DAR, through the
PARO, shall take possession of the land for redistribution to
qualified beneficiaries."

Administrative Order No. 12, Series of 1989 requires that the Municipal Agrarian
Reform O cer (MARO) keep an updated master list of all agricultural lands under the
CARP in his area of responsibility containing all the required information. The MARO
prepares a Compulsory Acquisition Case Folder (CACF) for each title covered by CARP.
The MARO then sends the landowner a "Notice of Coverage" and a "letter of invitation" to a
"conference/meeting" over the land covered by the CACF. He also sends invitations to the
prospective farmer-bene ciaries, the representatives of the Barangay Agrarian Reform
Committee (BARC), the Land Bank of the Philippines (LBP) and other interested parties to
discuss the inputs to the valuation of the property and solicit views, suggestions,
objections or agreements of the parties. At the meeting, the landowner is asked to indicate
his retention area.
The MARO shall make a report of the case to the Provincial Agrarian Reform O cer
(PARO) who shall complete the valuation of the land. Ocular inspection and veri cation of
the property by the PARO shall be mandatory when the computed value of the estate
exceeds P500,000.00. Upon determination of the valuation, the PARO shall forward all
papers together with his recommendation to the Central O ce of the DAR. The DAR
Central O ce, speci cally, the Bureau of Land Acquisition and Distribution (BLAD) shall
prepare, on the signature of the Secretary or his duly authorized representative, a notice of
acquisition of the subject property. From this point, the provisions of R. A. No. 6657,
Section 16 shall apply.
For a valid implementation of the CARP Program, two notices are required: (1) the
notice of coverage and letter of invitation to a preliminary conference sent to the
landowner, the representative of the BARC, LBP, farmer bene ciaries and other interested
parties pursuant to DAR A.O. No. 12, series of 1989; and (2) the notice of acquisition sent
to the landowner under Section 16 of the CARL.
The importance of the rst notice, that is, the notice of coverage and the letter of
invitation to a conference, and its actual conduct cannot be understated. They are steps
designed to comply with the requirements of administrative due process. The
implementation of the CARL is an exercise of the State's police power and the power of
eminent domain. To the extent that the CARL prescribes retention limits to the landowners,
there is an exercise of police power for the regulation of private property in accordance
with the Constitution. But where, to carry out such regulation, the owners are deprived of
lands they own in excess of the maximum area allowed, there is also a taking under the
power of eminent domain. The taking contemplated is not mere limitation on the use of
the land. What is required is the surrender of the title to and physical possession of the
excess and all beneficial rights accruing to the owner in favor of the farmer beneficiary.
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 In the case at bar, DAR has executed the taking of the property in question. However,
payment of just compensation was not in accordance with the procedural requirement.
The law required payment in cash or LBP bonds, not by trust account as was done by DAR.
I n Association of Small Landowners in the Philippines v. Secretary of Agrarian
Reform, we held that "The CARP Law, for its part, conditions the transfer of possession and
ownership of the land to the government on receipt of the landowner of the corresponding
payment or the deposit by the DAR of the compensation in cash or LBP bonds with an
accessible bank. Until then, title also remains with the landowner. No outright change of
ownership is contemplated either." 2 4
Consequently, petitioner questioned before the Court of Appeals DARAB's decision
ordering the compulsory acquisition of petitioner's property. 2 5 Here, petitioner pressed
the question of whether the property was a watershed, not covered by CARP.
Article 67 of the Water Code of the Philippines (P. D. No. 1067) provides:
"Art. 67. Any watershed or any area of land adjacent to any surface
water or overlying any ground water may be declared by the Department of
Natural resources as a protected area. Rules and Regulations may be
promulgated by such Department to prohibit or control such activities by the
owners or occupants thereof within the protected area which may damage or
cause the deterioration of the surface water or ground water or interfere with the
investigation, use, control, protection, management or administration of such
waters."

Watersheds may be de ned as "an area drained by a river and its tributaries and
enclosed by a boundary or divide which separates it from adjacent watersheds."
Watersheds generally are outside the commerce of man, so why was the Casile property
titled in the name of SRRDC? The answer is simple. At the time of the titling, the
Department of Agriculture and Natural Resources had not the declared the property as
watershed area. The parcels of land in Barangay Casile were declared as "PARK" by a
Zoning Ordinance adopted by the municipality of Cabuyao in 1979, as certi ed by the
Housing and Land Use Regulatory Board. On January 5, 1994, the Sangguniang Bayan of
Cabuyao, Laguna issued a Resolution 2 6 voiding the zoning classi cation of the land at
Barangay Casile as Park and declaring that the land was now classi ed as agricultural
land.
The authority of the municipality of Cabuyao, Laguna to issue zoning classi cation is
an exercise of its police power, not the power of eminent domain. "A zoning ordinance is
de ned as a local city or municipal legislation which logically arranges, prescribes, de nes
and apportions a given political subdivision into speci c land uses as present and future
projection of needs." 2 7
I n Natalia Realty, Inc. v. Department of Agrarian Reform 2 8 we held that lands
classi ed as non-agricultural prior to the effectivity of the CARL may not be compulsorily
acquired for distribution to farmer beneficiaries.
However, more than the classi cation of the subject land as PARK is the fact that
subsequent studies and survey showed that the parcels of land in question form a vital
part of a watershed area. 2 9
Now, petitioner has offered to prove that the land in dispute is a "watershed or part
of the protected area for watershed purposes." Ecological balances and environmental
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 disasters in our day and age seem to be interconnected. Property developers and tillers of
the land must be aware of this deadly combination. In the case at bar, DAR included the
disputed parcels of land for compulsory acquisition simply because the land was allegedly
devoted to agriculture and was titled to SRRDC, hence, private and alienable land that may
be subject to CARP.
However, the scenario has changed, after an in-depth study, survey and
reassessment. We cannot ignore the fact that the disputed parcels of land form a vital part
of an area that need to be protected for watershed purposes. In a report of the
Ecosystems Research and Development Bureau (ERDB), a research arm of the DENR,
regarding the environmental assessment of the Casile and Kabanga-an river watersheds,
they concluded that:
"The Casile barangay covered by CLOA in question is situated in the
heartland of both watersheds. Considering the barangays proximity to the
Matangtubig waterworks, the activities of the farmers which are in con ict with
proper soil and water conservation practices jeopardize and endanger the vital
waterworks. Degradation of the land would have double edge detrimental effects.
On the Casile side this would mean direct siltation of the Mangumit river which
drains to the water impounding reservoir below. On the Kabanga-an side, this
would mean destruction of forest covers which acts as recharged areas of the
Matang Tubig springs. Considering that the people have little if no direct interest
in the protection of the Matang Tubig structures they couldn't care less even if it
would be destroyed.
The Casile and Kabanga-an watersheds can be considered a most vital life
support system to thousands of inhabitants directly and indirectly affected by it.
From these watersheds come the natural God-given precious resource — water. . .
...

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

7.2 The Casile farmers should be relocated and given nancial

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

7.4 A comprehensive and detailed watershed management plan and

program be formulated and implemented by the Canlubang Estate in coordination
with pertinent government agencies." 3 0

The ERDB report was prepared by a composite team headed by Dr. Emilio Rosario,
the ERDB Director, who holds a doctorate degree in water resources from U.P. Los Banos
in 1987; Dr. Medel Limsuan, who obtained his doctorate degree in watershed management
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 from Colorado University (US) in 1989; and Dr. Antonio M. Dano, who obtained his
doctorate degree in Soil and Water Management Conservation from U.P. Los Banos in
1993.
Also, DENR Secretary Angel Alcala submitted a Memorandum for the President
dated September 7, 1993 (Subject: PFVR HWI Ref.: 933103 Presidential Instructions on
the Protection of Watersheds of the Canlubang Estates at Barrio Casile, Cabuyao, Laguna)
which reads:
"It is the opinion of this o ce that the area in question must be maintained
for watershed purposes for ecological and environmental considerations, among
others. Although the 88 families who are the proposed CARP bene ciaries will be
affected, it is important that a larger view of the situation be taken as one should
also consider the adverse effect on thousands of residents downstream if the
watershed will not be protected and maintained for watershed purposes.

"The foregoing considered, it is recommended that if possible, an alternate

area be allocated for the affected farmers, and that the Canlubang Estates be
mandated to protect and maintain the area in question as a permanent watershed
reserved." 3 1

The de nition does not exactly depict the complexities of a watershed. The most
important product of a watershed is water which is one of the most important human
necessity. The protection of watersheds ensures an adequate supply of water for future
generations and the control of ash oods that not only damage property but cause loss
of lives. Protection of watersheds is an "intergenerational responsibility" that needs to be
answered now.
Another factor that needs to be mentioned is the fact that during the DARAB hearing,
petitioner presented proof that the Casile property has slopes of 18% and over, which
exempted the land from the coverage of CARL. R. A. No. 6657, Section 10, provides:
"Section 10. Exemptions and Exclusions. — Lands actually, directly
and exclusively used and found to be necessary for parks, wildlife, forest reserves,
reforestation, sh sanctuaries and breeding grounds, watersheds and mangroves,
national defense, school sites and campuses including experimental farm
stations operated by public or private schools for educational purposes, seeds
and seedlings research and pilot production centers, church sites and convents
appurtenent thereto, communal burial grounds and cemeteries, penal colonies
and penal farms actually worked by the inmates, government and private
research and quarantine centers, and all lands with eighteen percent (18%) slope
and over, except those already developed shall be exempt from coverage of this
Act."

Hence, during the hearing at DARAB, there was proof showing that the disputed
parcels of land may be excluded from the compulsory acquisition coverage of CARP
because of its very high slopes.
To resolve the issue as to the nature of the parcels of land involved in the case at
bar, the Court directs the DARAB to conduct a re-evaluation of the issue.
IN VIEW WHEREOF, the Court SETS ASIDE the decision of the Court of Appeals in
CA-G.R. SP No. 27234.
In lieu thereof, the Court REMANDS the case to the DARAB for re-evaluation and
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 determination of the nature of the parcels of land involved to resolve the issue of its
coverage by the Comprehensive Land Reform Program.
In the meantime, the effects of the CLOAs issued by the DAR to supposed farmer-
bene ciaries shall continue to be stayed by the temporary restraining order issued on
December 15, 1993, which shall remain in effect until final decision on the case.
No costs.
SO ORDERED.
Davide, Jr., C.J. and Ynares-Santiago, J., concur.
Puno, J., took no part due to relationship.
Kapunan, J., is on official leave.

Footnotes

1. In CA-G.R. SP No. 27234, promulgated on November 05, 1993, Martin, Jr., J., ponente,
Chua and Guerrero, JJ., concurring, Rollo, Vol. I, pp. 228-258.
2. DARAB (Case No. JC-IV-LAG-0001) entitled Juan Amante, et. al. vs. Sta. Rosa Realty
Development Corporation, promulgated on December 19, 1991, Rollo, Vol. I, pp. 133-136.
3. Petition, Rollo, Vol. I, p. 10.

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

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

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

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

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

August 29, 1989.
9. Ibid., Summary Investigation Report.
10. Original Record, Folder II.

11. Folder I, Notice of Acquisition.

12. Ibid., Letters.
13. Folder, JC-R-IV-LAG-0001-GO, Decision DARAB, pp. 23-25.
14. Original Records, Folder of Exhibits III, Certification from the Office of the Deputy
Zoning Administrator.

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

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

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

concurred in by Renato B. Padilla, Lorenzo R. Reyes, Leopoldo M. Serrano, Jr. and
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 Josefina M. Sidiangco, members.
18. Petition, Annex "F", Vol. I, SC Rollo, pp. 70-83.

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

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

21. Petition filed on November 24, 1993. G.R. No. 112526, Rollo, Vol. I, pp. 2-52. On
September 28, 1994, the Court gave due course to the petition. G.R. No. 112526, Rollo,
Vol. II, pp. 780-781.
22. Resolution, Rollo, pp. 296-300.

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

24. 175 SCRA 343, 391 (1989).

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

26. Comment of private respondents, Annex "1", Rollo, Vol. I, pp. 331-332.
27. P. D. No. 449, Sec. 4 (b).

28. 225 SCRA 278, 283 [1993].

29. Petition, Annex "K" (Annex "B" of), G.R. No. 112526, Rollo, Vol. I, p. 225; Reply, Annex "G",
G. R. No. 112526, Rollo, Vol. I, pp. 455-521.
30. Reply, Annex "A", Rollo, Vol. II, pp. 583-584.

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

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