G. R. No.

133250 - November 11, 2003

FRANCISCO I. CHAVEZ, Petitioner, v. PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY
DEVELOPMENT CORPORATION, respondents.

RESOLUTION

CARPIO, J.:

This Court is asked to legitimize a government contract that conveyed to a private entity 157.84 hectares
of reclaimed public lands along Roxas Boulevard in Metro Manila at the negotiated price of P1,200 per
square meter. However, published reports place the market price of land near that area at that time at a
high of P90,000 per square meter.1 The difference in price is a staggering P140.16 billion, equivalent to
the budget of the entire Judiciary for seventeen years and more than three times the Marcos Swiss
deposits that this Court forfeited in favor of the government.

Many worry to death that the private investors will lose their investments, at most not more than one-
half billion pesos in legitimate expenses,2 if this Court voids the contract. No one seems to worry about
the more than tens of billion pesos that the hapless Filipino people will lose if the contract is allowed to
stand. There are those who question these figures, but the questions arise only because the private
entity somehow managed to inveigle the government to sell the reclaimed lands without public bidding
in patent violation of the Government Auditing Code.

Fortunately for the Filipino people, two Senate Committees, the Senate Blue Ribbon Committee and the
Committee on Accountability of Public Officers, conducted extensive public hearings to determine the
actual market value of the public lands sold to the private entity. The Senate Committees established
the clear, indisputable and unalterable fact that the sale of the public lands is grossly and
unconscionably undervalued based on official documents submitted by the proper government agencies
during the Senate investigation. We quote the joint report of these two Senate Committees, Senate
Committee Report No. 560, as approved by the Senate in plenary session on 27 September 1997:3
The Consideration for the Property

PEA, under the JVA, obligated itself to convey title and possession over the Property, consisting of
approximately One Million Five Hundred Seventy Eight Thousand Four Hundred Forty One (1,578,441)
Square Meters for a total consideration of One Billion Eight Hundred Ninety Four Million One Hundred
Twenty Nine Thousand Two Hundred (P1,894,129,200.00) Pesos, or a price of One Thousand Two
Hundred (P1,200.00) Pesos per square meter.

According to the zonal valuation of the Bureau of Internal Revenue, the value of the Property is Seven
Thousand Eight Hundred Pesos (P7,800.00) per square meter. The Municipal Assessor of Parañaque,
Metro Manila, where the Property is located, pegs the market value of the Property at Six Thousand
Pesos (P6,000.00) per square meter. Based on these alone, the price at which PEA agreed to convey the
property is a pittance. And PEA cannot claim ignorance of these valuations, at least not those of the
Municipal Assessors office, since it has been trying to convince the Office of the Municipal Assessor of
Parañaque to reduce the valuation of various reclaimed properties thereat in order for PEA to save on
accrued real property taxes.

PEAs justification for the purchase price are various appraisal reports, particularly the following:

(1) An appraisal by Vic T. Salinas Realty and Consultancy Services concluding that the Property is worth
P500.00 per square meter for the smallest island and P750.00 per square meter for the two other
islands, or a total of P1,170,000.00 as of 22 February 1995;

(2) An appraisal by Valencia Appraisal Corporation concluding that the Property is worth P850 per
square meter for Island I, P800 per square meter for Island II and P600 per square meter for the smallest
island, or a total of P1,289,732,000, also as of 22 February 1995; and

(3) An Appraisal by Asian Appraisal Company, Inc. (AACI), stating that the Property is worth
approximately P1,000 per square meter for Island I, P950 per square meter for Island II and P600 per
square meter for Island III, or a total of P1,518,805,000 as of 27 February 1995.
The credibility of the foregoing appraisals, however, are [sic] greatly impaired by a subsequent appraisal
report of AACI stating that the property is worth P4,500.00 per square meter as of 26 March 1996. Such
discrepancies in the appraised value as appearing in two different reports by the same appraisal
company submitted within a span of one year render all such appraisal reports unworthy of even the
slightest consideration. Furthermore, the appraisal report submitted by the Commission on Audit
estimates the value of the Property to be approximately P33,673,000,000.00, or P21,333.07 per square
meter.

There were also other offers made for the property from other parties which indicate that the Property
has been undervalued by PEA. For instance, on 06 March 1995, Mr. Young D. See, President of Saeil
Heavy Industries Co., Ltd., (South Korea), offered to buy the property at P1,400.00 and expressed its
willingness to issue a stand-by letter of credit worth $10 million. PEA did not consider this offer and
instead finalized the JVA with AMARI. Other offers were made on various dates by Aspac Management
and Development Group Inc. (for P1,600 per square meter), Universal Dragon Corporation (for P1,600
per square meter), Cleene Far East Manila Incorporated and Hyosan Prime Construction Co. Ltd. which
had prepared an Irrevocable Clean Letter of Credit for P100,000,000.

In addition, AMARI agreed to pay huge commissions and bonuses to various persons, amounting to
P1,596,863,050.00 (P1,754,707,150.00 if the bonus is included), as will be discussed fully below, which
indicate that AMARI itself believed the market value to be much higher than the agreed purchase price.
If such commissions are added to the purchase price, AMARIs acquisition cost for the Property will add-
up to P3,490,992,250.00 (excluding the bonus). If AMARI was willing to pay such amount for the
Property, why was PEA willing to sell for only P1,894,129,200.00, making the Government stand to lose
approximately P1,596,863,050.00?

x x x

Even if we simply assume that the market value of the Property is half of the market value fixed by the
Municipal Assessors Office of Parañaque for lands along Roxas Boulevard, or P3,000.00 per square
meter, the Government now stands to lose approximately P2,841,193,800.00. But an even better
assumption would be that the value of the Property is P4,500.00 per square meter, as per the AACI
appraisal report dated 26 March 1996, since this is the valuation used to justify the issuance of P4 billion
worth of shares of stock of Centennial City Inc. (CCI) in exchange for 4,800,000 AMARI shares with a
total par value of only P480,000,000.00. With such valuation, the Governments loss will amount to
P5,208,855,300.00.
Clearly, the purchase price agreed to by PEA is way below the actual value of the Property, thereby
subjecting the Government to grave injury and enabling AMARI to enjoy tremendous benefit and
advantage. (Emphasis supplied)

The Senate Committee Report No. 560 attached the following official documents from the Bureau of
Internal Revenue, the Municipal Assessor of Parañaque, Metro Manila, and the Commission on Audit:

1. Annex "M," Certified True Copy of BIR Zonal Valuations as certified by Antonio F. Montemayor,
Revenue District Officer. This official document fixed the market value of the 157.84 hectares at P7,800
per square meter.

2. Annex "N," Certification of Soledad S. Medina-Cue, Municipal Assessor, Parañaque, dated 10

December 1996. This official document fixed the market value at P6,000 per square meter.

3. Exhibit "1-Engr. Santiago," the Appraisal Report of the Commission on Audit. This official document
fixed the market value at P21,333.07 per square meter.

Whether based on the official appraisal of the BIR, the Municipal Assessor or the Commission on Audit,
the P1,200 per square meter purchase price, or a total of P1.894 billion for the 157.84 hectares of
government lands, is grossly and unconscionably undervalued. The authoritative appraisal, of course, is
that of the Commission on Audit which valued the 157.84 hectares at P21,333.07 per square meter or a
total of P33.673 billion. Thus, based on the official appraisal of the Commission on Audit, the
independent constitutional body that safeguards government assets, the actual loss to the Filipino
people is a shocking P31.779 billion.

This gargantuan monetary anomaly, aptly earning the epithet "Grandmother of All Scams,"4 is not the
major defect of this government contract. The major flaw is not even the P1.754 billion in commissions
the Senate Committees discovered the private entity paid to various persons to secure the contract,5
described in Senate Report No. 560 as follows:

A Letter-Agreement dated 09 June 1995 signed by Messrs. Premchai Karnasuta and Emmanuel Sy for
and in behalf of AMARI, on the one hand, and stockholders of AMARI namely, Mr. Chin San Cordova
(a.k.a. Benito Co) and Mr. Chua Hun Siong (a.k.a. Frank Chua), on the other, sets forth various payments
AMARI paid or agreed to pay the aforesaid stockholders by way of fees for "professional efforts and
services in successfully negotiating and securing for AMARI the Joint Venture Agreement", as follows:

Form of Payment

Paid/Payable On

Amount

Managers Checks

28 April 1995

P 400,000,000.00

Managers Checks

Upon signing of letter

262,500,000.00
10 Post Dated Checks (PDCs)

60 days from date of letter

127,000,000.00

24 PDCs

31 Aug. 95 to 31 Jan. 98

150,000,000.00

48 PDCs

Monthly, over a 12-month pd. from date of letter

357,363,050.00

Cash bonus

When sale of land begins

not exceeding
157,844,100.00

Developed land from Project

Upon completion of each phase

Costing

300,000,000.00

TOTAL

P1,754,707,150.00

==============

Mr. Luis Benitez of SGV, the external auditors of AMARI, testified that said Letter-Agreement was
approved by the AMARI Board.6 (Emphasis supplied)

The private entity that purchased the reclaimed lands for P1.894 billion expressly admitted before the
Senate Committees that it spent P1.754 billion in commissions to pay various individuals for
"professional efforts and services in successfully negotiating and securing" the contract. By any legal or
moral yardstick, the P1.754 billion in commissions obviously constitutes bribe money. Nonetheless,
there are those who insist that the billions in investments of the private entity deserve protection by this
Court. Should this Court establish a new doctrine by elevating grease money to the status of legitimate
investments deserving of protection by the law? Should this Court reward the patently illegal and grossly
unethical business practice of the private entity in securing the contract? Should we allow those with
hands dripping with dirty money equitable relief from this Court?

Despite these revolting anomalies unearthed by the Senate Committees, the fatal flaw of this contract is
that it glaringly violates provisions of the Constitution expressly prohibiting the alienation of lands of the
public domain.

Thus, we now come to the resolution of the second Motions for Reconsideration7 filed by public
respondent Public Estates Authority ("PEA") and private respondent Amari Coastal Bay Development
Corporation ("Amari"). As correctly pointed out by petitioner Francisco I. Chavez in his Consolidated
Comment,8 the second Motions for Reconsideration raise no new issues.

However, the Supplement to "Separate Opinion, Concurring and Dissenting" of Justice Josue N. Bellosillo
brings to the Courts attention the Resolutions of this Court on 3 February 1965 and 24 June 1966 in L-
21870 entitled "Manuel O. Ponce, et al. v. Hon. Amador Gomez, et al." and No. L-22669 entitled
"Manuel O. Ponce, et al. v. The City of Cebu, et al." ("Ponce Cases"). In effect, the Supplement to the
Dissenting Opinion claims that these two Resolutions serve as authority that a single private corporation
like Amari may acquire hundreds of hectares of submerged lands, as well as reclaimed submerged lands,
within Manila Bay under the Amended Joint Venture Agreement ("Amended JVA").

We find the cited Ponce Cases inapplicable to the instant case.

First, as Justice Bellosillo himself states in his supplement to his dissent, the Ponce Cases admit that
"submerged lands still belong to the National Government."9 The correct formulation, however, is that
submerged lands are owned by the State and are inalienable. Section 2, Article XII of the 1987
Constitution provides:

All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of
potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are
owned by the State. With the exception of agricultural lands, all other natural resources shall not be
alienated. x x x. (Emphasis supplied)

Submerged lands, like the waters (sea or bay) above them, are part of the States inalienable natural
resources. Submerged lands are property of public dominion, absolutely inalienable and outside the
commerce of man.10 This is also true with respect to foreshore lands. Any sale of submerged or
foreshore lands is void being contrary to the Constitution.11

This is why the Cebu City ordinance merely granted Essel, Inc. an "irrevocable option" to purchase the
foreshore lands after the reclamation and did not actually sell to Essel, Inc. the still to be reclaimed
foreshore lands. Clearly, in the Ponce Cases the option to purchase referred to reclaimed lands, and not
to foreshore lands which are inalienable. Reclaimed lands are no longer foreshore or submerged lands,
and thus may qualify as alienable agricultural lands of the public domain provided the requirements of
public land laws are met.

In the instant case, the bulk of the lands subject of the Amended JVA are still submerged lands even to
this very day, and therefore inalienable and outside the commerce of man. Of the 750 hectares subject
of the Amended JVA, 592.15 hectares or 78% of the total area are still submerged, permanently under
the waters of Manila Bay. Under the Amended JVA, the PEA conveyed to Amari the submerged lands
even before their actual reclamation, although the documentation of the deed of transfer and issuance
of the certificates of title would be made only after actual reclamation.

The Amended JVA states that the PEA "hereby contributes to the Joint Venture its rights and privileges
to perform Rawland Reclamation and Horizontal Development as well as own the Reclamation Area."12
The Amended JVA further states that "the sharing of the Joint Venture Proceeds shall be based on the
ratio of thirty percent (30%) for PEA and seventy percent (70%) for AMARI."13 The Amended JVA also
provides that the PEA "hereby designates AMARI to perform PEAs rights and privileges to reclaim, own
and develop the Reclamation Area."14 In short, under the Amended JVA the PEA contributed its rights,
privileges and ownership over the Reclamation Area to the Joint Venture which is 70% owned by Amari.
Moreover, the PEA delegated to Amari the right and privilege to reclaim the submerged lands.
The Amended JVA mandates that the PEA had "the duty to execute without delay the necessary deed of
transfer or conveyance of the title pertaining to AMARIs Land share based on the Land Allocation
Plan."15 The Amended JVA also provides that "PEA, when requested in writing by AMARI, shall then
cause the issuance and delivery of the proper certificates of title covering AMARIs Land Share in the
name of AMARI, x x x."16

In the Ponce Cases, the City of Cebu retained ownership of the reclaimed foreshore lands and Essel, Inc.
only had an "irrevocable option" to purchase portions of the foreshore lands once actually reclaimed. In
sharp contrast, in the instant case ownership of the reclamation area, including the submerged lands,
was immediately transferred to the joint venture. Amari immediately acquired the absolute right to own
70% percent of the reclamation area, with the deeds of transfer to be documented and the certificates
of title to be issued upon actual reclamation. Amaris right to own the submerged lands is immediately
effective upon the approval of the Amended JVA and not merely an option to be exercised in the future
if and when the reclamation is actually realized. The submerged lands, being inalienable and outside the
commerce of man, could not be the subject of the commercial transactions specified in the Amended
JVA.

Second, in the Ponce Cases the Cebu City ordinance granted Essel, Inc. an "irrevocable option" to
purchase from Cebu City not more than 70% of the reclaimed lands. The ownership of the reclaimed
lands remained with Cebu City until Essel, Inc. exercised its option to purchase. With the subsequent
enactment of the Government Auditing Code (Presidential Decree No. 1445) on 11 June 1978, any sale
of government land must be made only through public bidding. Thus, such an "irrevocable option" to
purchase government land would now be void being contrary to the requirement of public bidding
expressly required in Section 7917 of PD No. 1445. This requirement of public bidding is reiterated in
Section 37918 of the 1991 Local Government Code.19 Obviously, the ingenious reclamation scheme
adopted in the Cebu City ordinance can no longer be followed in view of the requirement of public
bidding in the sale of government lands. In the instant case, the Amended JVA is a negotiated contract
which clearly contravenes Section 79 of PD No. 1445.

Third, Republic Act No. 1899 authorized municipalities and chartered cities to reclaim foreshore lands.
The two Resolutions in the Ponce Cases upheld the Cebu City ordinance only with respect to foreshore
areas, and nullified the same with respect to submerged areas. Thus, the 27 June 1965 Resolution made
the injunction of the trial court against the City of Cebu "permanent insofar x x x as the area outside or
beyond the foreshore land proper is concerned."
As we held in the 1998 case of Republic Real Estate Corporation v. Court of Appeals,20 citing the Ponce
Cases, RA No. 1899 applies only to foreshore lands, not to submerged lands. In his concurring opinion in
Republic Real Estate Corporation, Justice Reynato S. Puno stated that under Commonwealth Act No.
141, "foreshore and lands under water were not to be alienated and sold to private parties," and that
such lands "remained property of the State." Justice Puno emphasized that "Commonwealth Act No. 141
has remained in effect at present." The instant case involves principally submerged lands within Manila
Bay. On this score, the Ponce Cases, which were decided based on RA No. 1899, are not applicable to
the instant case.

Fourth, the Ponce Cases involve the authority of the City of Cebu to reclaim foreshore areas pursuant to
a general law, RA No. 1899. The City of Cebu is a public corporation and is qualified, under the 1935,
1973, and 1987 Constitutions, to hold alienable or even inalienable lands of the public domain. There is
no dispute that a public corporation is not covered by the constitutional ban on acquisition of alienable
public lands. Both the 9 July 2002 Decision and the 6 May 2003 Resolution of this Court in the instant
case expressly recognize this.

Cebu City is an end user government agency, just like the Bases Conversion and Development Authority
or the Department of Foreign Affairs.21 Thus, Congress may by law transfer public lands to the City of
Cebu to be used for municipal purposes, which may be public or patrimonial. Lands thus acquired by the
City of Cebu for a public purpose may not be sold to private parties. However, lands so acquired by the
City of Cebu for a patrimonial purpose may be sold to private parties, including private corporations.

However, in the instant case the PEA is not an end user agency with respect to the reclaimed lands
under the Amended JVA. As we explained in the 6 May 2003 Resolution:

PEA is the central implementing agency tasked to undertake reclamation projects nationwide. PEA took
the place of the Department of Environment and Natural Resources ("DENR" for brevity) as the
government agency charged with leasing or selling all reclaimed lands of the public domain. In the hands
of PEA, which took over the leasing and selling functions of DENR, reclaimed foreshore (or submerged
lands) lands are public lands in the same manner that these same lands would have been public lands in
the hands of DENR. (Emphasis supplied)

Our 9 July 2002 Decision explained the rationale for treating the PEA in the same manner as the DENR
with respect to reclaimed foreshore or submerged lands in this wise:

To allow vast areas of reclaimed lands of the public domain to be transferred to PEA as private lands will
sanction a gross violation of the constitutional ban on private corporations from acquiring any kind of
alienable land of the public domain. PEA will simply turn around, as PEA has now done under the
Amended JVA, and transfer several hundreds of hectares of these reclaimed and still to be reclaimed
lands to a single private corporation in only one transaction. This scheme will effectively nullify the
constitutional ban in Section 3, Article XII of the 1987 Constitution which was intended to diffuse
equitably the ownership of alienable lands of the public domain among Filipinos, now numbering over
80 million strong. (Emphasis supplied)

Finally, the Ponce Cases were decided under the 1935 Constitution which allowed private corporations
to acquire alienable lands of the public domain. However, the 1973 Constitution prohibited private
corporations from acquiring alienable lands of the public domain, and the 1987 Constitution reiterated
this prohibition. Obviously, the Ponce Cases cannot serve as authority for a private corporation to
acquire alienable public lands, much less submerged lands, since under the present Constitution a
private corporation like Amari is barred from acquiring alienable lands of the public domain.

Clearly, the facts in the Ponce Cases are different from the facts in the instant case. Moreover, the
governing constitutional and statutory provisions have changed since the Ponce Cases were disposed of
in 1965 and 1966 through minute Resolutions of a divided (6 to 5) Court.

This Resolution does not prejudice any innocent third party purchaser of the reclaimed lands covered by
the Amended JVA. Neither the PEA nor Amari has sold any portion of the reclaimed lands to third
parties. Title to the reclaimed lands remains with the PEA. As we stated in our 9 July 2002 Decision:

In the instant case, the only patent and certificates of title issued are those in the name of PEA, a wholly
government owned corporation performing public as well as proprietary functions. No patent or
certificate of title has been issued to any private party. No one is asking the Director of Lands to cancel
PEAs patent or certificates of title. In fact, the thrust of the instant petition is that PEAs certificates of
title should remain with PEA, and the land covered by these certificates, being alienable lands of the
public domain, should not be sold to a private corporation.

As we held in our 9 July 2002 Decision, the Amended JVA "violates glaringly Sections 2 and 3, Article XII
of the 1987 Constitution." In our 6 May 2003 Resolution, we DENIED with FINALITY respondents Motions
for Reconsideration. Litigations must end some time. It is now time to write finis to this "Grandmother
of All Scams."

WHEREFORE, the second Motions for Reconsideration filed by Public Estates Authority and Amari
Coastal Bay Development Corporation are DENIED for being prohibited pleadings. In any event, these
Motions for Reconsideration have no merit. No further pleadings shall be allowed from any of the
parties.

SO ORDERED
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.

[G.R. NO. 162070 October 19, 2005]

DEPARTMENT OF AGRARIAN REFORM, represented by SECRETARY JOSE MARI B. PONCE (OIC),
Petitioner, v. DELIA T. SUTTON, ELLA T. SUTTON-SOLIMAN and HARRY T. SUTTON, Respondents.

DECISION

PUNO, J.:

This is a Petition for Review filed by the Department of Agrarian Reform (DAR) of the Decision and
Resolution of the Court of Appeals, dated September 19, 2003 and February 4, 2004, respectively, which
declared DAR Administrative Order (A.O.) No. 9, series of 1993, null and void for being violative of the
Constitution.

The case at bar involves a land in Aroroy, Masbate, inherited by respondents which has been devoted
exclusively to cow and calf breeding. On October 26, 1987, pursuant to the then existing agrarian reform
program of the government, respondents made a voluntary offer to sell (VOS)1 their landholdings to
petitioner DAR to avail of certain incentives under the law.

On June 10, 1988, a new agrarian law, Republic Act (R.A.) No. 6657, also known as the Comprehensive
Agrarian Reform Law (CARL) of 1988, took effect. It included in its coverage farms used for raising
livestock, poultry and swine.

On December 4, 1990, in an en banc decision in the case of Luz Farms v. Secretary of DAR,2 this Court
ruled that lands devoted to livestock and poultry-raising are not included in the definition of agricultural
land. Hence, we declared as unconstitutional certain provisions of the CARL insofar as they included
livestock farms in the coverage of agrarian reform.

In view of the Luz Farms ruling, respondents filed with petitioner DAR a formal request to withdraw their
VOS as their landholding was devoted exclusively to cattle-raising and thus exempted from the coverage
of the CARL.3
On December 21, 1992, the Municipal Agrarian Reform Officer of Aroroy, Masbate, inspected
respondents' land and found that it was devoted solely to cattle-raising and breeding. He recommended
to the DAR Secretary that it be exempted from the coverage of the CARL.

On April 27, 1993, respondents reiterated to petitioner DAR the withdrawal of their VOS and requested
the return of the supporting papers they submitted in connection therewith.4 Petitioner ignored their
request.

On December 27, 1993, DAR issued A.O. No. 9, series of 1993,5 which provided that only portions of
private agricultural lands used for the raising of livestock, poultry and swine as of June 15, 1988 shall be
excluded from the coverage of the CARL. In determining the area of land to be excluded, the A.O. fixed
the following retention limits, viz: 1:1 animal-land ratio (i.e., 1 hectare of land per 1 head of animal shall
be retained by the landowner), and a ratio of 1.7815 hectares for livestock infrastructure for every 21
heads of cattle shall likewise be excluded from the operations of the CARL.

On February 4, 1994, respondents wrote the DAR Secretary and advised him to consider as final and
irrevocable the withdrawal of their VOS as, under the Luz Farms doctrine, their entire landholding is
exempted from the CARL.6

On September 14, 1995, then DAR Secretary Ernesto D. Garilao issued an Order7 partially granting the
application of respondents for exemption from the coverage of CARL. Applying the retention limits
outlined in the DAR A.O. No. 9, petitioner exempted 1,209 hectares of respondents' land for grazing
purposes, and a maximum of 102.5635 hectares for infrastructure. Petitioner ordered the rest of
respondents' landholding to be segregated and placed under Compulsory Acquisition.

Respondents moved for reconsideration. They contend that their entire landholding should be
exempted as it is devoted exclusively to cattle-raising. Their motion was denied.8 They filed a notice of
appeal9 with the Office of the President assailing: (1) the reasonableness and validity of DAR A.O. No. 9,
s. 1993, which provided for a ratio between land and livestock in determining the land area qualified for
exclusion from the CARL, and (2) the constitutionality of DAR A.O. No. 9, s. 1993, in view of the Luz
Farms case which declared cattle-raising lands excluded from the coverage of agrarian reform.

On October 9, 2001, the Office of the President affirmed the impugned Order of petitioner DAR.10 It
ruled that DAR A.O. No. 9, s. 1993, does not run counter to the Luz Farms case as the A.O. provided the
guidelines to determine whether a certain parcel of land is being used for cattle-raising. However, the
issue on the constitutionality of the assailed A.O. was left for the determination of the courts as the sole
arbiters of such issue.

On appeal, the Court of Appeals ruled in favor of the respondents. It declared DAR A.O. No. 9, s. 1993,
void for being contrary to the intent of the 1987 Constitutional Commission to exclude livestock farms
from the land reform program of the government. The dispositive portion reads:

WHEREFORE, premises considered, DAR Administrative Order No. 09, Series of 1993 is hereby
DECLARED null and void. The assailed order of the Office of the President dated 09 October 2001 in so
far as it affirmed the Department of Agrarian Reform's ruling that petitioners' landholding is covered by
the agrarian reform program of the government is REVERSED and SET ASIDE.

SO ORDERED.11

Hence, this petition.

The main issue in the case at bar is the constitutionality of DAR A.O. No. 9, series of 1993, which
prescribes a maximum retention limit for owners of lands devoted to livestock raising.

Invoking its rule-making power under Section 49 of the CARL, petitioner submits that it issued DAR A.O.
No. 9 to limit the area of livestock farm that may be retained by a landowner pursuant to its mandate to
place all public and private agricultural lands under the coverage of agrarian reform. Petitioner also
contends that the A.O. seeks to remedy reports that some unscrupulous landowners have converted
their agricultural farms to livestock farms in order to evade their coverage in the agrarian reform
program.

Petitioner's arguments fail to impress.

Administrative agencies are endowed with powers legislative in nature, i.e., the power to make rules
and regulations. They have been granted by Congress with the authority to issue rules to regulate the
implementation of a law entrusted to them. Delegated rule-making has become a practical necessity in
modern governance due to the increasing complexity and variety of public functions. However, while
administrative rules and regulations have the force and effect of law, they are not immune from judicial
review.12 They may be properly challenged before the courts to ensure that they do not violate the
Constitution and no grave abuse of administrative discretion is committed by the administrative body
concerned.

The fundamental rule in administrative law is that, to be valid, administrative rules and regulations must
be issued by authority of a law and must not contravene the provisions of the Constitution.13 The rule-
making power of an administrative agency may not be used to abridge the authority given to it by
Congress or by the Constitution. Nor can it be used to enlarge the power of the administrative agency
beyond the scope intended. Constitutional and statutory provisions control with respect to what rules
and regulations may be promulgated by administrative agencies and the scope of their regulations.14

In the case at bar, we find that the impugned A.O. is invalid as it contravenes the Constitution. The A.O.
sought to regulate livestock farms by including them in the coverage of agrarian reform and prescribing
a maximum retention limit for their ownership. However, the deliberations of the 1987 Constitutional
Commission show a clear intent to exclude, inter alia, all lands exclusively devoted to livestock, swine
and poultry - raising. The Court clarified in the Luz Farms casethat livestock, swine and poultry-raising
are industrial activities and do not fall within the definition of "agriculture" or "agricultural activity." The
raising of livestock, swine and poultry is different from crop or tree farming. It is an industrial, not an
agricultural, activity. A great portion of the investment in this enterprise is in the form of industrial fixed
assets, such as: animal housing structures and facilities, drainage, waterers and blowers, feedmill with
grinders, mixers, conveyors, exhausts and generators, extensive warehousing facilities for feeds and
other supplies, anti-pollution equipment like bio-gas and digester plants augmented by lagoons and
concrete ponds, deepwells, elevated water tanks, pumphouses, sprayers, and other technological
appurtenances.15

Clearly, petitioner DAR has no power to regulate livestock farms which have been exempted by the
Constitution from the coverage of agrarian reform. It has exceeded its power in issuing the assailed A.O.

The subsequent case of Natalia Realty, Inc. v. DAR16 reiterated our ruling in the Luz Farms case. In
Natalia Realty, the Court heldthat industrial, commercial and residential lands are not covered by the
CARL.17 We stressed anew that while Section 4 of R.A. No. 6657 provides that the CARL shall cover all
public and private agricultural lands, the term "agricultural land" does not include lands classified as
mineral, forest, residential, commercial or industrial. Thus, in Natalia Realty, even portions of the
Antipolo Hills Subdivision, which are arable yet still undeveloped, could not be considered as agricultural
lands subject to agrarian reform as these lots were already classified as residential lands.

A similar logical deduction should be followed in the case at bar. Lands devoted to raising of livestock,
poultry and swine have been classified as industrial, not agricultural, lands and thus exempt from
agrarian reform. Petitioner DAR argues that, in issuing the impugned A.O., it was seeking to address the
reports it has received that some unscrupulous landowners have been converting their agricultural lands
to livestock farms to avoid their coverage by the agrarian reform. Again, we find neither merit nor logic
in this contention. The undesirable scenario which petitioner seeks to prevent with the issuance of the
A.O. clearly does not apply in this case. Respondents' family acquired their landholdings as early as 1948.
They have long been in the business of breeding cattle in Masbate which is popularly known as the
cattle-breeding capital of the Philippines.18 Petitioner DAR does not dispute this fact. Indeed, there is no
evidence on record that respondents have just recently engaged in or converted to the business of
breeding cattle after the enactment of the CARL that may lead one to suspect that respondents intended
to evade its coverage. It must be stressed that what the CARL prohibits is the conversion of agricultural
lands for non-agricultural purposes after the effectivity of the CARL. There has been no change of
business interest in the case of respondents.

Moreover, it is a fundamental rule of statutory construction that the reenactment of a statute by

Congress without substantial change is an implied legislative approval and adoption of the previous law.
On the other hand, by making a new law, Congress seeks to supersede an earlier one.19 In the case at
bar, after the passage of the 1988 CARL, Congress enacted R.A. No. 788120 which amended certain
provisions of the CARL. Specifically, the new law changed the definition of the terms "agricultural
activity" and "commercial farming" by dropping from its coverage lands that are devoted to commercial
livestock, poultry and swine-raising.21 With this significant modification, Congress clearly sought to align
the provisions of our agrarian laws with the intent of the 1987 Constitutional Commission to exclude
livestock farms from the coverage of agrarian reform.

In sum, it is doctrinal that rules of administrative bodies must be in harmony with the provisions of the
Constitution. They cannot amend or extend the Constitution. To be valid, they must conform to and be
consistent with the Constitution. In case of conflict between an administrative order and the provisions
of the Constitution, the latter prevails.22 The assailed A.O. of petitioner DAR was properly stricken down
as unconstitutional as it enlarges the coverage of agrarian reform beyond the scope intended by the
1987 Constitution.
IN VIEW WHEREOF, the petition is DISMISSED. The assailed Decision and Resolution of the Court of
Appeals, dated September 19, 2003 and February 4, 2004, respectively, are AFFIRMED. No
pronouncement as to costs.

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. 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 Certiorari[1] under Rule 45 of the Rules of
Civil Procedure, seeking the reversal of the Court of Appeals (CA) Amended
Decision[2] dated October 4, 2006 and its Resolution [3] 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 Reform[6] 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 Decision [11] 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
Resolution[12] 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 Appeal[18] before the Office of the

President (OP).

The OP's Ruling

On February 4, 2000, the OP rendered a decision[19] 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 resolution [20] 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.
br>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-0410-0016 [24] (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 Espinas [25] (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 1993 [28] (Supplement)
dated June 15, 2005, the Espinas group submitted the following as evidence:

1) Conversion Order[29] 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)  Letter[30] 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)  Certification[31] 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 Resolution [33] 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 Katunayan[37] 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 Report[41] 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 Report[42] 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

Resolution[46] 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 50 [47] 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 Reply[53] 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.
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.

G.R. No. 200454, October 22, 2014

HOLY TRINITY REALTY & DEVELOPMENT

CORPORATION, Petitioner, v. VICTORIO DELA CRUZ, LORENZO MANALAYSAY,
RICARDO MARCELO, JR. AND LEONCIO DE GUZMAN, Respondents.

DECISION

BERSAMIN, J.:

Land on which no agricultural activity is being conducted is not subject to the coverage
of either Presidential Decree No. 27 or Republic Act No. 6657 (Comprehensive Agrarian
Reform Law).

The Case

The petitioner appeals the decision promulgated on July 27, 2011, 1 whereby the Court
of Appeals (CA) reversed the decision issued by the Office of the President (OP) on
March 1, 2010,2 and reinstated the order of the OIC-Regional Director of the
Department of Agrarian Reform in Regional Office III rendered on August 18, 2006. 3

Antecedents

Subject of the controversy is a parcel of land located in Brgy. Dakila, Malolos, Bulacan
(Dakila property) registered in the name of Freddie Santiago under Transfer Certificate
of Title (TCT) No. T-103698 of the Registry of Deeds of Bulacan with an area of 212,500
square meters. The Dakila property used to be tenanted by Susana Surio, Cipriano
Surio, Alfonso Espiritu, Agustin Surio, Aurelio Surio, Pacifico Eugenio, Godofredo
Alcoriza, Lorenza Angeles, Ramon Manalad, Toribio Hernandez, Emerciana Montealegre,
Pedro Manalad, Celerino Ramos and Cecilia L. Martin, 4 but in August 1991, these
tenants freely and voluntarily relinquished their tenancy rights in favor of Santiago
through their respective sinumpaang pahayag5 in exchange for some financial
assistance and individual homelots titled and distributed in their names, as follows:6

TCT No. Name of Tenant/Successor Area (sq. m.)

T-73006 Susana Surio 186
T-73007 Cipriano Surio 150
T-73008 Alfonso Espiritu 300
 T-73009 Agustin Surio 300
T-73010 Aurelio Surio 264
T-73011 Pacifico Eugenio 300
T-73012 Godofredo Alcoriza 300
T-73013 Lorenza Angeles 300
Ramon Manalad 300
T-73014 Toribio M. Hernandez 300
Emerciana Montealegre 300
Pedro Manalad 300
T-73015 Celerino Ramos 300
T-73016 Cecilia L. Martin 300
T-73017 Pablo dela Cruz 300
T-73018 Aurelio dela Cruz 300
T-73019 Julita Leoncio 300
Anicia L. de Guzman
T-73020 Ramon Centeno 300
T-73021 Miguel Centeno 300
TOTAL 4,500

On September 17, 1992, the petitioner purchased the remaining 208,050 square
meters of the Dakila property from Santiago,7 and later caused the transfer of the title
to its name as well as subdivided the Dakila property into six lots, 8 to wit:
chanRoblesvirtualLawlibrary

TCT No. Area (sq. m.)

81618 50,000
81619 50,000
81620 50,000
81621 54,810
73022 2,401
73023 839
TOTAL 208,050

The petitioner then developed the property by dumping filling materials on the topsoil,
and by erecting a perimeter fence and steel gate. It established its field office on the
property.9

On March 4, 1998, the Sanggunian Bayan ng Malolos passed Municipal Resolution No.
16-98 reclassifying four of the six subdivided lots belonging to the petitioner, to wit: chanRoblesvirtualLawlibrary

MUNICIPAL RESOLUTION NO. 16-98

A RESOLUTION RE-CLASSIFYING AS RESIDENTIAL LOTS THE FOUR (4) PARCELS OF

LAND SEPARATELY COVERED BY TCT NO. 81618, TCT NO. 81619, TCT NO.81620 AND
TCT NO. 81621 CONTAINING AN AREA OF 50,000 SQ MTS, 50,000 SQ. MTS, 50,000 SQ
M (sic) AND 54,810 SQ M (sic) RESPECTIVELY ALL LOCATED AT DAKILA, MALOLOS,
BULACAN REGISTERED IN THE NAME OF THE HOLY TRINITY REALTY AND
DEVELOPMENT CORPORATION

WHEREAS, Ms. Jennifer M. Romero, Auditor Representative of Holy Trinity Realty and
Development Corporation in [her] letter to the Sangguniang Bayan made a request for
re-classification of four parcel(s) of land registered in the name of Holy Trinity and
Development Corporation under TCT NO. 81618, TCT NO. 81619, TCT NO.81620 AND
TCT NO. 81621 with an area of 50,000 sq. m., 50,000 sq. m., 50,000 sq. m. AND
54,810 sq. m. respectively all located at Dakila, Malolos, Bulacan.

WHEREAS, after an ocular inspection of the subject lots and matured deliberation, the
Sangguniang Bayan found merit in the request for the following reasons, thus:
1.  The Properties are untenanted; cralawlawlibrary

2.  That they are not fitted (sic) for agricultural use for lack of sufficient irrigation; cralawlawlibrary

3.  There are improvements already introduce[d] on the property by its owner like
construction of subdivision roads; cralawlawlibrary

4.  Lack of oppositor to the intend[ed] subdivision project on the properties by its
owner; cralawlawlibrary

5.  That they are more suitable for residential use considering their location vi[s]-à-
vi[s] with (sic) the residential lots in the area.

NOW THEREFORE, on motion of Hon. Romeo L. Maclang as seconded by all

Sangguniang Bayan members present,

RESOLVED, as is hereby resolved to re-classify into residential properties four (4)

parcels of land separately covered by TCT NO. 81618, TCT NO. 81619, TCT NO.81620
AND TCT NO. 81621 of the Registry of Deeds of Bulacan, containing an area of 50,000
sq. m. respectively, registered in ownership of Holy Trinity and Development
Corporation located and adjacent to one another in Barangay Dakila of this Municipality
pursuant to the power vested to this Sangguniang [sic] by the Local Government Code
of the Philippines.

RESOLVED further that the owner and/or developer of the said property shall provide
adequate [illegible] to protect the adjacent lots and its owners from any inconvenience
and prejudice caused by the development of the above mentioned property.

APPROVED.10

Consequently, the Municipal Planning and Development Office (MPDO) of Malolos,

Bulacan issued a Certificate of Eligibility for Conversion (Certificate of Zoning
Conformance),11 as well as a Preliminary Approval and Locational Clearance in favor of
the petitioner for its residential subdivision project on the Dakila property. 12

On August 23, 1999, the petitioner purchased from Santiago another parcel of land with
an area of 25,611 located in Barangay Sumapang Matanda, Malolos, Bulacan
(Sumapang Matanda property) and covered by TCT No. T-103697 of the Registry of
Deeds of Bulacan.13

In April 2006, a certain Silvino Manalad and the alleged heirs of Felix Surio wrote to the
Provincial Agrarian Reform Officer (PARO) of Bulacan to request an investigation of the
sale of the Dakila property.14 This was followed by the letter request of Sumapang
Matanda Barangay Agrarian Reform Council (BARC) Chairman  Numeriano L. Enriquez
to place the Dakila property within the coverage of Operation Land Transfer (OLT)
pursuant to Presidential Decree No. 27, which was docketed as A-0302-0608-06, A.R.
Case No. LSD-0324’06.15

Several days later, the DAR Provincial Office of Bulacan filed a petition to annul the sale
of the Dakila property with the Provincial Agrarian Reform Adjudicator (PARAD) of
Bulacan, docketed as DARAB Case No. R-03-02-2873’06.

Ruling of the DAR Regional Office

On August 18, 2006,  the OIC-Regional Director in San Fernando, Pampanga issued an
order granting the letter request of BARC Chairman Enriquez in A-0302-0608-06, A.R.
Case No. LSD-0324’06,16viz: chanRoblesvirtualLawlibrary

WHEREFORE, in the light of the foregoing premises and for the reason indicated
therein, this Office resolves to give due course to this instant request. Accordingly, the
MARO and PARO concerned are hereby DIRECTED to place within the ambit of PD
27/RA 6657 the following titles TCT Nos. T-81618, T-81619, T-81620, T-81621, T-
81622 and T-73023, all situated at Sumapang Matanda, Malolos City, Bulacan,
registered in the name of Holy Trinity Realty and Development Corporation for
distribution to qualified farmer beneficiary (sic).

Finally, the DAR reserves the right to cancel or withdraw this Order in case of
misrepresentation of facts material to its issuance and for violation of pertinent agrarian
laws including applicable implementing guidelines or rules and regulations.

SO ORDERED.17

The OIC-Regional Director opined that the sale of the Dakila property was a prohibited
transaction under Presidential Decree No. 27, Section 6 of Republic Act No. 6657 18 and
DAR Administrative Order No. 1, Series of 1989; and that the petitioner was disqualified
from acquiring land under Republic Act No. 6657 because it was a corporation.19

Aggrieved, the petitioner assailed the order through its Motion to Withdraw/Quash/Set
Aside,20 citing lack of jurisdiction and denial of due process. It argued that the letter
request was in the nature of a collateral attack on its title.

Pending resolution of the Motion to Withdraw/Quash/Set Aside, the Register of Deeds

issued emancipation patents (EPs) pursuant to the order of the OIC-Regional Director.
The petitioner’s titles were canceled and EPs were issued to the respondents as
follows:21

Emancipation
TCT No. Beneficiary/ies Area (sqm)
  Patent No.
 T-2007-EP22 00783329 Victorio dela Cruz 50,000
T-2008-EP23 00783330 Lorenzo Manalaysay 50,000
T-2009-EP24 00783331 Ricardo Marcelo, Jr. 50,000
T-2010-EP25 cralawred 00783332 Leoncio de Guzman 54,810
T-2011-EP26 00783334 Gonzalo Caspe 2,401
T-2012-EP27 00783333 839

Almost two months after the EPs were issued, the OIC-Regional Director denied the
petitioner’s motion for reconsideration. 28

Ruling of the DAR Secretary

The petitioner appealed to the DAR Secretary, submitting that: (1) the letter request
for coverage under Presidential Decree No. 27 and the subsequent filing of the petition
for annulment of sale in the DARAB constituted forum shopping; and (2) the EPs were
prematurely issued.

On November 22, 2007, DAR Secretary Nasser C. Pangandaman issued an order

denying the appeal,29 and holding that forum shopping was not committed because the
causes of action in the letter request and the action for cancellation of the deed of sale
before the DARAB were distinct and separate; that the EPs were regularly issued; and
that the resolution of the DARAB would not in any manner affect the validity of the EPs.

Ruling on the petitioner’s motion for reconsideration, the DAR Secretary said that the
Dakila property was not exempt from the coverage of Presidential Decree No. 27 and
Republic Act No. 6657 because Municipal Resolution No. 16-98 did not change or
reclassify but merely re-zoned the Dakila property. 30

Ruling of the Office of the President

On March 1, 2010, the Office of the President (OP) reversed the ruling of DAR Secretary
Pangandaman upon its finding that the Dakila property had ceased to be suitable for
agriculture, and had been reclassified as residential land pursuant to Municipal
Resolution No. 16-98, thus:31

We find merit in the appeal.

Under Section 3 (c) of RA 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.

In this case, the subject landholdings are not agricultural lands but rather residential
lands. The lands are located in a residential area. Likewise, there are agricultural
activities within or near the area. Even today, the areas in question continued (sic) to
be developed as a residential community, albeit at a snail’s pace. This can be readily
gleaned from the fact that both the City Assessor of Malolos and the Provincial Assessor
of Bulacan have considered these lands as residential for taxation purposes.
Based on the foregoing, it is clear that appellant’s landholding 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 Municipal Resolution No. 16-98. The
authority of the municipality (now City) of Malolos to issue zoning classification is an
exercise of its police power, not the power of eminent domain. Section 20, Chapter 2,
Title I of RA 7160 specifically empowers municipal and/or city councils to adopt zoning
and subdivision ordinances or regulations within its territorial jurisdiction. A zoning
ordinance/resolution 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 agricultural lands to non-agricultural lands is not
subject to the approval of the Department of Agrarian Reform.

It bears stressing that in his Decision dated April 30, 2002, as affirmed by the
Department of Agrarian Reform Adjudication Board (DARAB) in its Resolution dated
March 17, 2006, Bulacan Provincial Adjudicator Toribio Ilao, Jr., declared that the
properties were not tenanted and/or agricultural and that the alleged farmers-
occupants are mere squatters thereto. These decision and resolution were not appealed
by the farmers-occupants and, as such, it became final and executory. By declaring, in
its assailed Order of November 22, 2007, that the properties subject of the suit, were
agricultural lands, the DAR Secretary thereby reversed the said DARAB rulings, issued
more than a year before, and nullified Resolution No. 16-98 of the Municipal Council of
Malolos, approved nine (9) years earlier, on March 4, 1998. Thus, the DAR Secretary
acted with grave abuse of discretion amounting to excess or lack of jurisdiction.

IN VIEW OF THE FOREGOING, the appeal is hereby GRANTED. Accordingly, the

November 22, 2007 Order and February 22, 2008 Resolution of the Department of
Agrarian Reform are hereby REVERSED and SET ASIDE.

SO ORDERED.32

The respondents moved to reconsider, but the OP denied their motion for
reconsideration. Hence, they appealed to the CA by petition for review. 33

Ruling of the CA

In the now assailed decision promulgated on July 27, 2011, 34 the CA reversed and set
aside the decision of the OP. It declared that prior to the effectivity of Republic Act No.
6657 on June 15, 1988 and even after the passage of Municipal Resolution No. 16-98
on March 4, 1998, the Dakila property was an agricultural land; that there was no valid
reclassification because Section 20 of Republic Act No. 7160 (The Local Government
Code) and Memorandum Circular No. 54 required an ordinance, not a resolution; and
that findings of the DAR on the Dakila property being an agricultural land should be
respected,35 subject to the clarification to the effect that its determination was only
limited to the issue of whether the Dakila property was an agricultural land covered by
Republic Act No. 6657.

The petitioner sought reconsideration but its motion for that purpose was denied. 36

Hence, this appeal by petition for review on certiorari.

 Issues

The petitioner presents the following issues for our consideration: chanRoblesvirtualLawlibrary

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRONEOUSLY OMITTED TO

RULE UPON, ALBEIT WITHOUT CITING ANY VALID REASONS, THE VARIOUS
INTERRELATED ISSUES PROFFERED IN PETITIONER’S COMMENT RELATIVE TO DAR’S
INCLUSION OF THE SUBJECT DAKILA PROPERTY UNDER THE COVERAGE OF THE
AGRARIAN REFORM LAW, TO WIT: A.) RESPONDENT-GRANTEES OF EMANCIPATION
PATENTS FROM DAR ARE NOT LEGITIMATE TENANTS OF THE DAKILA PROPERTY; B.)
THE SALE AND TRANSFER OF TITLES IN THE NAME OF PETITIONER HAVE NOT
HERETOFORE BEEN NULLIFIED EITHER BY THE DARAB CENTRAL OFFICE OR THE
REGULAR COURTS; C.) THE BONAFIDE TENANTS OF THE DAKILA PROPERTY HAVE
VALIDLY SURRENDERED THEIR TENANCY RIGHTS IN FAVOR OF PETITIONER’S
PREDECESSOR-IN-INTEREST; D.) THE DAKILA PROPERTY WAS NO LONGER TENANTED
AND, FURTHER, WAS NO LONGER SUITABLE TO AGRICULTURE, AT THE TIME OF ITS
COVERAGE UNDER AGRARIAN REFORM, ITS ACTUAL USE BEING ALREADY
RESIDENTIAL

II

WHETHER OR NOT THE HONORABLE COURT OF APPEALS LIKEWISE ERRED IN FAILING

TO RULE ON THE ILLEGALITY OF THE MANNER BY WHICH THE DAR CAUSED THE
SUMMARY COVERAGE OF THE DAKILA PROPERTY UNDER THE CARP, ITS EXTRA-
JUDICIAL CANCELLATION OF PETITIONER’S TITLES WITHOUT DUE PROCESS OF LAW,
AND ITS PREMATURE ISSUANCE OF EMANCIPATION PATENTS IN FAVOR OF
RESPONDENTS

III

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRONEOUSLY APPLIED THE

PROVISIONS OF RA 6657 IN RESOLVING THE SUBJECT PETITION, EVEN THOUGH THE
DAR PLACED THE SUBJECT DAKILA PROPERTY UNDER THE COVERAGE OF
PRESIDENTIAL DECREE NO. 27

IV.

WHETHER OR NOT HEREIN RESPONDENT’S PETITION FOR REVIEW A QUO OUGHT TO

HAVE BEEN DISMISSED OUTRIGHT BY THE HONORABLE COURT OF APPEALS FOR
FAILURE TO COMPLY WITH SECTION 4, RULE 7 OF THE 1997 REVISED RULES OF CIVIL
PROCEDURE.37

The petitioner argues that the CA ignored issues vital to the complete determination of
the parties’ respective rights over the Dakila property.

Firstly, the CA should have ruled on the propriety of issuing the EPs. In view of the
pending petition before the DARAB, the DAR should have withheld the issuance of the
EPs. Even granting that a final decision had already been rendered by the DARAB, the
issuance of the EPs remained premature inasmuch as the DAR had not yet commenced
any court proceedings for the cancellation of the petitioner’s title. Accordingly, the
petitioner’s title remained indefeasible and could not be disturbed by the collateral
orders by the OIC-Regional Director and the DAR Secretary.

Secondly, the petitioner was deprived of due process because the requirements of
notice and the conduct of a public hearing and a field investigation were not strictly
complied with by the DAR pursuant to Republic Act No. 6657 and DAR Administrative
Order No. 12, Series of 1998.

Thirdly, the CA erred in placing the Dakila property under the coverage of Republic Act
No. 6657 when the order of the OIC-Regional Director applied the provisions of
Presidential Decree No. 27. The two laws should be differentiated from each other; on
one hand, Presidential Decree No. 27 required the beneficiary to be a tenant-farmer of
an agricultural land devoted to rice or corn, while on the other Republic Act No. 6657
was relatively broader and covered all public and private agricultural lands regardless of
the tenurial arrangement and the commodity produced.

Lastly, the CA should have dismissed the respondents’ petition for review due to its
defective certification, pointing to the verification having been executed by the
respondents despite the letter request having been signed by BARC Chairman Enriquez;
and assailing the verification for containing the statement that the allegations therein
were based on their “knowledge and belief” instead of their “personal knowledge and
authentic records” as required by the Rules of Court.

The respondents countered that: (1) the CA correctly set aside the issue of whether or
not they were qualified beneficiaries, because that was not the issue raised in the letter
request; (2) the CA could not have ruled on the validity of the sale of the Dakila
property in light of the pending action in the DARAB; (3) it was within the jurisdiction of
the DAR to determine whether or not the respondents were qualified beneficiaries; (4)
the waivers by the tenants were illegal; and (5) the issuance of the EPs was a
necessary consequence of placing the Dakila property under the coverage of
Presidential Decree No. 27.

In view of the foregoing, the Court needs to consider and resolve the following: chanRoblesvirtualLawlibrary

1. Did the CA gravely err in limiting its decision to the issue of whether or not the
Dakila property was subject to the coverage of Republic Act No. 6657?

2. Was the Dakila property agricultural land within the coverage of Republic Act No.
6657 or Presidential Decree No. 27?

3. Was the issuance of the EPs pursuant to the August 16, 2006 order of the DAR
Regional Office proper?

Ruling

We reverse the CA, and reinstate the decision of the OP.

 I.
Procedural Issue

We first resolve the issue of the supposedly defective verification.

The verification of a petition is intended to secure an assurance that the allegations

contained in the petition have been made in good faith, are true and correct and not
merely speculative.38 This requirement affects the form of the pleading, and its non-
compliance will not render the pleading defective. It is a formal, not a jurisdictional
requisite.39 The courts may order the correction of the pleading if the verification is
lacking, and may even act on an unverified pleading if doing so will serve the ends of
justice.40

Under the foregoing, the CA rightly allowed the petition for review of the respondents
despite the statement that the allegations therein were based on their “knowledge and
belief.” We underscore that the defect was even lifted upon the voluntary submission by
the respondents themselves of their corrected verification in order to comply with
the Rules of Court.

We cannot also subscribe to the argument that the respondents were not appropriate
parties to sign the verification. They were, considering that when the DAR issued the
EPs, they became the real parties in interest in the proceedings, giving them the
requisite personality to sign the verification. Moreover, there is no question that the
party himself need not sign the verification, for it was enough that the party’s
representative, lawyer, or any person who personally  knew the truth of the facts
alleged in the pleadings could sign the verification. 41 In any event, the respondents, as
the identified beneficiaries, had legal standing and interest to intervene to protect their
rights or interests under Republic Act No. 6657. This is clear from Section 19 of
Republic Act No. 9700,42 which amended Republic Act No. 6657 by adding Section 50-A,
to wit:
chanRoblesvirtualLawlibrary

Section 19. Section 50 of Republic Act No. 6657, as amended, is hereby further
amended by adding Section 50-A to read as follows:
Section 50-A. Exclusive Jurisdiction on Agrarian Dispute. – x x x

In cases where regular courts or quasi-judicial bodies have competent jurisdiction,

agrarian reform beneficiaries or identified beneficiaries and/or their associations shall
have legal standing and interest to intervene concerning their individual or collective
rights and/or interests under the CARP.

xxxx

II.
Courts can pass upon matters
related to the issues raised by the parties

As a general rule, appellate courts are precluded from discussing and delving into
issues that are not raised by the parties. The pertinent rule is Section 8, Rule 51 of
the Rules of Court, to wit: chanRoblesvirtualLawlibrary
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.

In Philippine National Bank v. Rabat,43 the Court explained how this rule operates,
thus:chanRoblesvirtualLawlibrary

In his book, Mr. Justice Florenz D. Regalado commented on this section, thus: chanRoblesvirtualLawlibrary

1. Sec. 8, which is an amendment of the former Sec. 7 of this Rule, now includes some
substantial changes in the rules on assignment of errors. The basic procedural rule is
that only errors claimed and assigned by a party will be considered by the court, except
errors affecting its jurisdiction over the subject matter. To this exception has now
been added errors affecting the validity of the judgment appealed from or the
proceedings therein.

Also, even if the error complained of by a party is not expressly stated in his
assignment of errors but the same is closely related to or dependent on an
assigned error and properly argued in his brief, such error may now be
considered by the court. These changes are of jurisprudential origin.

2. The procedure in the Supreme Court being generally the same as that in the Court of
Appeals, unless otherwise indicated (see Secs. 2 and 4, Rule 56), it has been held that
the latter is clothed with ample authority to review matters, even if they are not
assigned as errors on appeal, if it finds that their consideration is necessary in arriving
at a just decision of the case. Also, an unassigned error closely related to an error
properly assigned (PCIB vs. CA, et al., L-34931, Mar. 18, 1988), or upon which the
determination of the question raised by error properly assigned is dependent, will be
considered by the appellate court notwithstanding the failure to assign it as error
(Ortigas, Jr. vs. Lufthansa German Airlines, L-28773, June 30, 1975; Soco vs. Militante,
et al., G.R. No. 58961, June 28, 1983).

It may also be observed that under Sec. 8 of this Rule, the appellate court is authorized
to consider a plain error, although it was not specifically assigned by the appellant
(Dilag vs. Heirs of Resurreccion, 76 Phil. 649), otherwise it would be sacrificing
substance for technicalities.44 (Emphasis supplied)

Conformably with the foregoing, the CA is vested with sufficient authority and discretion
to review matters, not assigned as errors on appeal, if it finds that consideration
thereof is necessary in arriving at a complete and just resolution of the case or to serve
the interests of justice or to avoid dispensing piecemeal justice. 45 In fact, the CA is
possessed with inherent authority to review unassigned errors that are closely related
to an error properly raised, or upon which the determination of the error properly
assigned is dependent, or where it finds that consideration thereof is necessary in
arriving at a just decision of the case. 46

It cannot be gainsaid that the validity of the EPs was closely intertwined with the issue
of whether the Dakila property was covered by the agrarian reform laws. When the CA
declared that the Dakila property came  within the coverage of Republic Act No. 6657,
the CA barely scraped the surface and left more questions unresolved rather than
writing finis on the matter. To recall, this case originated from the letter of BARC
Chairman Enriquez requesting that the Dakila property be placed under the OLT
pursuant to Presidential Decree No. 27. But, as the petitioner correctly argues, the two
laws, although similarly seeking to alleviate the plight of landless farmers or
farmworkers from the bondage of tilling the soil, are distinct from each other. Republic
Act No. 6657 is broader in scope than Presidential Decree No. 27, for the former applies
to all agricultural lands in which agricultural activities are conducted, while the latter
requires that the covered agricultural land be tenanted and primarily devoted to rice or
corn cultivation.

In Sigre v. Court of Appeals,47 the Court also stated: chanRoblesvirtualLawlibrary

[T]he Court need not belabor the fact that R.A. 6657 or the CARP Law operates
distinctly from P.D. 27.  R.A. 6657 covers all public and private agricultural land
including other lands of the public domain suitable for agriculture as provided for in
Proclamation No. 131 and Executive Order No. 229; while, P.D. 27 covers rice and corn
lands.  On this score, E.O. 229, which provides for the mechanism of the
Comprehensive Agrarian Reform Program, specifically states: “(P)residential Decree No.
27, as amended, shall continue to operate with respect to rice and corn lands, covered
thereunder. x x x” It cannot be gainsaid, therefore, that R.A. 6657 did not repeal or
supersede, in any way, P.D. 27.  And whatever provisions of P.D. 27 that are not
inconsistent with R.A. 6657 shall be suppletory to the latter, and all rights acquired by
the tenant-farmer under P.D. 27 are retained even with the passage of R.A. 6657. 48

In addition, the tenurial instruments issued to agrarian reform beneficiaries differ under
these laws. Ownership of the beneficiary under Presidential Decree No. 27 is evidenced
by an EP while a certificate of land ownership award (CLOA) is issued under Republic
Act No. 6657. For this reason, the CA could not have simply set aside the issue of
whether the EPs issued to the respondents were validly made by the DAR considering
its declaration that the Dakila property was subject to Republic Act No. 6657.

III.
The Dakila property was not an agricultural land
within the coverage of R.A. No. 6657 or P.D. No. 27

The CA declared that the Dakila property as an agricultural land; and that there was no
valid reclassification under Municipal Resolution No. 16-98 because the law required an
ordinance, not a resolution.

We agree in part with the CA.

Under Republic Act No. 7160, local government units, such as the Municipality of
Malolos, Bulacan, are vested with the power to reclassify lands. However, Section 20,
Chapter II, Title I of Republic Act No. 7160 ordains:chanRoblesvirtualLawlibrary

Section 20. Reclassification of Lands. – (a) A city or municipality may, through an

ordinance passed by the sanggunian after conducting public hearings for the
purpose, authorize the reclassification of agricultural lands and provide for the manner
of their utilization or disposition in the following cases: (1) when the land ceases to be
economically feasible and sound for agricultural purposes as determined by the
Department of Agriculture or (2) where the land shall have substantially greater
economic value for residential, commercial, or industrial purposes, as determined by
the sanggunian concerned: x x x. (Emphasis supplied)

Clearly, an ordinance is required in order to reclassify agricultural lands, and such may
only be passed after the conduct of public hearings.

The petitioner claims the reclassification on the basis of Municipal Resolution No. 16-98.
Given the foregoing clarifications, however, the  resolution was ineffectual for that
purpose. A resolution was a mere declaration of the sentiment or opinion of the
lawmaking body on a specific matter that was temporary in nature, and differed from
an ordinance in that the latter was a law by itself and possessed a general and
permanent character.49 We also note that the petitioner did not show if the requisite
public hearings were conducted at all. In the absence of any valid and complete
reclassification, therefore, the Dakila property remained under the category of an
agricultural land.

Nonetheless, the Dakila property was not an agricultural land subject to the coverage of
Republic Act No. 6657 or Presidential Decree No. 27.

Verily, the basic condition for land to be placed under the coverage of Republic Act No.
6657 is that it must either be primarily devoted to or be suitable for
agriculture.50 Perforce, land that is not devoted to agricultural activity is outside the
coverage of Republic Act No. 6657.51 An agricultural land, according to Republic Act No.
6657, is one that is devoted to agricultural activity and not classified as mineral, forest,
residential, commercial or industrial land. 52Agricultural activity includes the “cultivation
of the soil, planting of crops, growing of fruit trees, raising 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.”53

Consequently, before land may be placed under the coverage of Republic Act No. 6657,
two requisites must be met, namely: (1) that the land must be devoted to agricultural
activity; and (2) that the land must not be classified as mineral, forest, residential,
commercial or industrial land. Considering that the Dakila property has not been
classified as mineral, forest, residential, commercial or industrial, the second requisite
is satisfied. For the first requisite to be met, however, there must be a showing that
agricultural activity is undertaken on the property.

It is not difficult to see why Republic Act No. 6657 requires agricultural activity in order
to classify land as agricultural. The spirit of agrarian reform laws is not to distribute
lands per se, but to enable the landless to own land for cultivation. This is why the
basic qualification laid down for the intended beneficiary is to show the willingness,
aptitude and ability to cultivate and make the land as productive as possible. 54 This
requirement conforms with the policy direction set in the 1987 Constitution to the effect
that agrarian reform laws shall be founded on the right of the landless farmers and
farmworkers to own, directly or collectively, the lands they till. 55 In Luz Farms v.
Secretary of the Department of Agrarian Reform,56 we even said that the framers of the
Constitution limited agricultural lands to the “arable and suitable agricultural lands.”
Here, no evidence was submitted to show that any agricultural activity – like cultivation
of the land, planting of crops, growing of fruit trees, raising of livestock, or poultry or
fish, including the harvesting of such farm products, and other farm activities and
practices – were being performed on the Dakila property in order to subject it to the
coverage of Republic Act No. 6657. We take particular note that the previous tenants
had themselves declared that they were voluntarily surrendering their tenancy rights
because the land was not conducive to farming by reason of its elevation, among
others.57 Also notable is the second Whereas Clause of Municipal Resolution No. 16-98,
which mentioned that the Dakila property was not fit for agricultural use due to lack of
sufficient irrigation and that it was more suitable for residential use, thus:
chanRoblesvirtualLawlibrary

WHEREAS, after an ocular inspection of the subject lots and matured deliberation, the
Sangguniang Bayan found merit in the request for the following reasons, thus:
1. The properties are untenanted; cralawlawlibrary

2. That they are not fitted [sic] for agricultural use for lack of sufficient
irrigation;

3. There are improvements already introduce[d] on the property by its owner like
construction of subdivision roads;cralawlawlibrary

4. Lack of oppositor to the intend[ed] subdivision project on the properties by its

owner; cralawlawlibrary

5. That they are more suitable for residential use considering their location viz-a-viz
(sic) with (sic) the residential lots in the area. 58 (Emphasis supplied)

The terse statement by the OIC-Regional Director that the Dakila property would still be
subject to Republic Act No. 6657 should Presidential Decree No. 27 be inapplicable 59 did
not meet the requirements under Republic Act No. 6657. Section 7 of Republic Act No.
6657 identified rice and corn lands subject to Presidential Decree No. 27 for priority
distribution in the first phase and implementation of the CARP. Insofar as the interplay
of these two laws was concerned, the Court has said that during the effectivity of the
Republic Act No. 6657  and in the event of incomplete acquisition under Presidential
Decree No. 27, the former should apply, with the provisions of the latter and Executive
Order No. 22860 having only suppletory effect.61

Even if we supplemented the provisions of Presidential Decree No. 27, the outcome is
still the same, because the Dakila property was still not within the scope of the law. For
land to be covered under Presidential Decree No. 27, it must be devoted to rice or corn
crops, and there must be a system of share-crop or lease-tenancy obtaining therein. If
either requisite is absent, the land must be excluded. Hence, exemption from coverage
followed when the land was not devoted to rice or corn even if it was tenanted; or the
land was untenanted even though it was devoted to rice or corn. 62 Based on these
conditions, the DAR Regional Office erred in subjecting the Dakila property under the
OLT.

The first requirement, that the land be devoted to rice or corn cultivation, was not
sufficiently established. In this regard, the OIC-Regional Director inaccurately based his
holding on the report submitted by the Legal Services Division that—

[P]ortion of the property embraced under TCT No. 103697 with an area of 2.5611

hectares more or less, was placed under PD [No.] 27 and subsequently an approved
survey plan (Psd-03-020270) has been prepared which was then the basis of the
issuance of titles in favor of Felix Surio and Silvino Manalad under EP Nos. 345262
and 342561. On the other hand, the land subject of this controversy was, likewise,
subdivided and now covered by an approved plan ASP No. Psd-031410-066532. 63

What can be gathered from the report of the Legal Services Division was that the land
owned by the petitioner and covered by Presidential Decree No. 27 was the Sumapang
Matanda property under TCT No. 103697. As to the Dakila property, we can only infer
from the report that it was merely subdivided. The report did not mention whatsoever
the agricultural activities performed in the Dakila property. Nor was there a finding that
the Dakila property was devoted to either rice or corn cultivation as to justify its
coverage under Presidential Decree No. 27. Such a finding was necessary, for the Court
has observed in Solmayor v. Arroyo:64

Although this Court will not disregard the evidence presented by petitioners that the
land is devoted to rice and corn crops in 1993, when the ocular inspection by the DAR
personnel was conducted, it must be noted that around the time of the passage of
Presidential Decree No. 27 up to 1978, when the subject property was placed under the
coverage of Operation Land Transfer, the available evidence issued and certified by the
different government agencies, closer in time to the mentioned time frame will show
that respondent’s property has, indeed, been classified as within the residential and
commercial zones of Davao City.  It cannot escape the notice of this Court that more
than a decade before the issuance of the said ocular investigation report stating that
the land is devoted to agricultural production, government agencies equipped with the
technical expertise to determine the proper classification of the subject land have
already determined that the land is part of the residential and commercial zones of
Davao City making it suitable for other urban use.  Therefore, it is only reasonable to
conclude, based on the certification of various executive agencies issued when this
controversy arose, that at the time of the passage of Presidential Decree No. 27,
respondent’s property was not agricultural.65

For land to come within the coverage of the OLT, indeed, there must be a showing that
it is devoted to the cultivation of rice or corn, and there must be a system of share-crop
or lease tenancy obtaining on October 21, 1972, the time when Presidential Decree No.
27 took effect.66 Unfortunately, no such evidence was presented, nor was there any
field investigation conducted to verify whether or not the landholding was primarily
devoted to the cultivation of rice or corn.  Accordingly, the Dakila property should be
excluded from the OLT.

The DAR Secretary affirmed the validity of the EPs in favor of the respondents
only  “pursuant to the Order of the Regional Director.”67 We note, however, that the
evidence to establish in the proceedings below that they or their predecessors had been
tenants of the petitioner’s predecessor-in-interest to make them the rightful
beneficiaries of the Dakila property was severely wanting. For tenancy to exist, there
must be proof that: (1) the parties are the landholder and the tenant; (2) the subject is
agricultural land; (3) there is consent; (4) the purpose is agricultural production; (5)
there is consideration;68 and (6) there is a sharing of the harvests. All these requisites
are necessary to create a tenancy relationship, and the absence of one or more of them
will not make the alleged tenant a de facto tenant.69 Unless a person has established his
status as a de jure tenant, he is not entitled to security of tenure; nor is he covered by
the land reform program of the Government under the existing tenancy laws. 70 Here,
the consent to establish a tenant-landlord relationship was manifestly absent. In view
of the petitioner’s repeated denial of the tenancy, the respondents ought then to
establish the tenancy relationship, but did not do so. Tenancy could not be presumed,
but must be established by evidence; its mere allegation is neither evidence nor
equivalent to proof of its existence.71

There was also no showing that the respondents were engaged in any agricultural
activities, or agreed with Santiago or the petitioner on the sharing of harvests. The
OIC-Regional Director obviously disregarded the affidavit of Barangay Captain Felino M.
Teodoro of Dakila, Malolos, Bulacan stating that the respondents were never the actual
farmers on the Dakila property.72

IV.
The petitioner was deprived of due process

The petitioner posits that it was denied due process by the failure of the OIC-Regional
Director to see to the compliance with the procedures outlined by Republic Act No. 6657
and Presidential Decree No. 27. It claims that the OIC-Regional Director resorted to
“procedural shortcuts” and irregularities73 in issuing the EPs to the respondents.

We agree with the petitioner’s position.

In Reyes v. Barrios,74 we identified the procedural requirements that must be followed

prior to the issuance of an EP, viz:
chanRoblesvirtualLawlibrary

The Primer on Agrarian Reform enumerates the steps in transferring the land to the
tenant-tiller, thus:
a. First step: the identification of tenants, landowners, and the land covered by OLT.

b. Second step: land survey and sketching of the actual cultivation of the tenant to
determine parcel size, boundaries, and possible land use; cralawlawlibrary

c. Third step: the issuance of the Certificate of Land Transfer (CLT). To ensure accuracy
and safeguard against falsification, these certificates are processed at the National
Computer Center (NCC) at Camp Aguinaldo; cralawlawlibrary

d. Fourth step: valuation of the land covered for amortization computation; cralawlawlibrary

e. Fifth step: amortization payments of tenant-tillers over fifteen (15) year period; and

f. Sixth step: the issuance of the Emancipation Patent.

Thus, there are several steps to be undertaken before an Emancipation Patent can be
issued. x x x.
xxxx

Furthermore, there are several supporting documents which a tenant-farmer must

submit before he can receive the Emancipation Patent, such as:
a. Application for issuance of Emancipation Patent; cralawlawlibrary

b. Applicant's (owner's) copy of Certificate of Land Transfer.

c. Certification of the landowner and the Land Bank of the Philippines that the applicant
has tendered full payment of the parcel of land as described in the application and as
actually tilled by him; cralawlawlibrary

d. Certification by the President of the Samahang Nayon or by the head of farmers'

cooperative duly confirmed by the municipal district officer (MDO) of the Ministry of
Local Government and Community Development (MLGCD) that the applicant is a full-
fledged member of a duly registered farmers' cooperative or a certification to these
effect;
cralawlawlibrary

e. Copy of the technical (graphical) description of the land parcel applied for prepared
by the Bureau of Land Sketching Team (BLST) and approved by the regional director of
the Bureau of Lands; cralawlawlibrary

f. Clearance from the MAR field team (MARFT) or the MAR District Office (MARDO) legal
officer or trial attorney; or in their absence, a clearance by the MARFT leader to the
effect that the land parcel applied for is not subject of adverse claim, duly confirmed by
the legal officer or trial attorney of the MAR Regional Office or, in their absence, by the
regional director; cralawlawlibrary

g. Xerox copy of Official Receipts or certification by the municipal treasurer showing

that the applicant has fully paid or has effected up-to-date payment of the realty taxes
due on the land parcel applied for; and

h. Certification by the MARFT leader whether applicant has acquired farm machineries
from the MAR and/or from other government agencies.
Majority of these supporting documents are lacking in this case. Hence, it was improper
for the DARAB to order the issuance of the Emancipation Patent in favor of respondent
without the required supporting documents and without following the requisite
procedure before an Emancipation Patent may be validly issued. 75

Furthermore, Section 16 of Republic Act No. 6657 outlines the procedure in acquiring
private lands subject to its coverage, viz: chanRoblesvirtualLawlibrary

Section 16. Procedure for Acquisition of Private Lands. - For purposes of acquisition of

private lands, the following procedures shall be followed: chanRoblesvirtualLawlibrary

(a) After having identified the land, the landowners and the beneficiaries, the DAR shall
send its notice to acquire the land to the owners thereof, by personal delivery or
registered mail, and post the same in a conspicuous place in the municipal building and
barangay hall of the place where the property is located. Said notice shall contain the
offer of the DAR to pay a corresponding value in accordance with the valuation set forth
in Sections 17, 18 and other pertinent provisions hereof.

(b) Within thirty (30) days from the date of receipt of written notice by personal
delivery or registered mail, the landowners, his administrator or representative shall
inform the DAR of his acceptance or rejection of the former.

(c) If the landowner accepts the offer of the DAR, the Land Bank of the Philippines shall
pay the landowner the purchase price of the land within thirty (30) days after he
executes and delivers a deed of transfer in favor of the Government and surrenders the
Certificate of Title and other muniments of title.

(d) In case of rejection or failure to reply, the DAR shall conduct summary
administrative proceedings to determine the compensation for the land 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 notice. After the
expiration of the above period, the matter is deemed submitted for decision. The DAR
shall decide the case within thirty (30) days after it is submitted for decision.

(e) Upon receipt by the landowner of the corresponding payment or in case of rejection
or no response from the landowner, upon the deposit with an accessible bank
designated by the DAR of the compensation in cash or in LBP bonds in accordance with
this Act, the DAR shall take immediate possession of the land and shall request the
proper Register of Deeds to issue a Transfer Certificate of Title (TCT) in the name of the
Republic of the Philippines. The DAR shall thereafter proceed with the redistribution of
the land to the qualified beneficiaries.

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

Under Republic Act No. No. 6657 and DAR A.O. No. 12, Series of 1989, two notices
should be sent to the landowner — the first, the notice of coverage; and the other, the
notice of acquisition.

The Court cannot consider and declare the proceedings conducted by the OIC-Regional
Director as a substantial compliance with the notice requirements. Compliance with
such requirements, being necessary to render the implementation of the CARP valid,
was mandatory. As the Court observed in Roxas & Co., Inc. v. Court of Appeals:76

For a valid implementation of the CAR Program, two notices are required:
(1) the Notice of Coverage and letter of invitation to a preliminary conference
sent to the landowner, the representatives of the BARC, LBP, farmer
beneficiaries and other interested parties pursuant to DAR A.O. No. 12, Series
of 1989; and (2) the Notice of Acquisition sent to the landowner under Section
16 of the CARL.

The importance of the first notice, i.e., the Notice of Coverage and the letter of
invitation to the conference, and its actual conduct cannot be understated.
They are steps designed to comply with the requirements of administrative
due process. The implementation of the CARL is an exercise of the State’s
police power and the power of eminent domain. To the extent that the CARL
prescribes retention limits to the landowners, there is an exercise of police
power for the regulation of private property in accordance with the
Constitution. But where, to carry out such regulation, the owners are deprived
of lands they own in excess of the maximum area allowed, there is also a
taking under the power of eminent domain. The taking contemplated is not a
mere limitation of the use of the land. What is required is the surrender of the
title to and physical possession of the said excess and all beneficial rights
accruing to the owner in favor of the farmer beneficiary. The Bill of Rights
provides that "[n]o person shall be deprived of life, liberty or property without
due process of law." The CARL was not intended to take away property
without due process of law. The exercise of the power of eminent domain
requires that due process be observed in the taking of private property.

xxxx

Clearly then, the notice requirements under the CARL are not confined to the Notice of
Acquisition set forth in Section 16 of the law. They also include the Notice of Coverage
first laid down in DAR A. O. No. 12, Series of 1989 and subsequently amended in DAR
A. O. No. 9, Series of 1990 and DAR A. O. No. 1, Series of 1993. This Notice of
Coverage does not merely notify the landowner that his property shall be placed under
CARP and that he is entitled to exercise his retention right; it also notifies him,
pursuant to DAR A. O. No. 9, Series of 1990, that a public hearing shall be conducted
where he and representatives of the concerned sectors of society may attend to discuss
the results of the field investigation, the land valuation and other pertinent matters.
Under DAR A. O. No. 1, Series of 1993, the Notice of Coverage also informs the
landowner that a field investigation of his landholding shall be conducted where he and
the other representatives may be present.77 (Emphasis supplied)

The procedures provided by Section 16 of Republic Act No. 6657 and its relevant DAR
administrative issuances are to ensure the compliance with the due process
requirements of the law. The result of their non-compliance is to deprive the landowner
of its constitutional right to due process.

The Court has carefully explained in Roxas & Co., Inc. v. Court of Appeals that the
taking under the CARL is an exercise of police power as well as of eminent domain. The
taking of the landholding by the State effectively results in the surrender by the
landowner of its title and physical possession to the beneficiaries. Hence, compensation
should be given to the landowner prior to the taking. This is the clear-cut directive of
Section 16(e) of Republic Act No. 6657 which mandates the DAR to take immediate
possession of the land only after full payment and to thereafter request the Register of
Deeds to transfer title in the name of the Republic of the Philippines, and later on to the
intended beneficiaries.

However, there was no evidence of payment prior to the cancellation of the petitioner’s
TCTs submitted here. The requirement of prior payment was found in Republic Act No.
6657 and Presidential Decree No. 27, under which full payment by the intended
beneficiary was a condition prior to the award of an EP.  We have explicitly pronounced
in Coruña v. Cinamin78 that the emancipation of tenants does not come free. The
transfer of lands under Presidential Decree No. 27 remained subject to the terms and
conditions provided in said law. In Paris v. Alfeche,79 we said:
chanRoblesvirtualLawlibrary
x x x. Section 2 of PD 266 states:
“After the tenant-farmer shall have fully complied with the requirements for a grant of
title under Presidential Decree No. 27, an Emancipation Patent and/or Grant shall be
issued by the Department of Agrarian Reform on the basis of a duly approved survey
plan.”

On the other hand, paragraphs 8 and 9 of PD 27 reads as follows: chanRoblesvirtualLawlibrary

“For the purpose of determining the cost of the land to be transferred to the tenant-
farmer pursuant to this Decree, the value of the land shall be equivalent to two and
one-half (2 ½) times the average harvest of three normal crop years immediately
preceding the promulgation of this Decree; cralawlawlibrary

“The total cost of the land, including interest at the rate of six (6) per centum per
annum, shall be paid by the tenant in fifteen (15) years of fifteen (15) equal annual
amortizations[.]”

Although, under the law, tenant farmers are already deemed owners of the
land they till, they are still required to pay the cost of the land, including
interest, within fifteen years before the title is transferred to them.80 (Emphasis
supplied)

The unquestioned non-compliance with the procedures set by Republic Act No. 6657
and its relevant rules and regulations further denied to the petitioner the exercise of its
right of retention.81 In doing so, the OIC-Regional Director disregarded this
constitutionally guaranteed right. We cannot understate the value of the right of
retention as the means 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 is not meant to perpetrate an injustice against the landowner. 82

We also consider the manner by which the Dakila property was apportioned to the
respondents highly suspect. It appears from the face of the EPs that the individual lots
were allocated based on how the landholding was subdivided by the petitioner.
Moreover, all the respondents were awarded lots exceeding three hectares in violation
of Section 23 of Republic Act No. 6657, which provides that “[n]o qualified beneficiary
may own more than three (3) hectares of agricultural land.”

In fine, the order of the OIC-Regional Director was patently null and void. The denial of
due process to the petitioner sufficed to cast the impress of nullity on the official act
thereby taken. A decision rendered without due process is void ab initio and may be
attacked directly or collaterally.83 All the resulting acts were also null and void.
Consequently, the EPs awarded to the respondents should be nullified.

WHEREFORE, the Court GRANTS the petition for review

on certiorari; REVERSES and SETS ASIDE the decision promulgated on July 27, 2011
by the Court of Appeals; REINSTATES the assailed decision of the Office of the
President issued on March 1, 2010; DIRECTS the cancellation of Emancipation Patents
No. 00783329, No. 00783330, No. 0078331, No. 0078332, No. 0078333, and No.
0078334 issued to the respondents for being NULL and VOID; and ORDERS the
 respondents to pay the costs of suit.

G.R. No. 228503, July 25, 2018

HEIRS OF RAMON ARCE, SR., Petitioners, v. DEPARTMENT OF AGRARIAN

REFORM, REPRESENTED BY SECRETARY VIRGILIO DELOS REYES, Respondent.

DECISION

TIJAM, J.:

We resolve this petition for Review on Certiorari1 under Rule 45 of the Rules of Court,
assailing the Decision2 dated August 5, 2016 and the Resolution3 dated November 28,
2016 of the Court of Appeals (CA) in CA-G.R. SP No. 140755.

The Antecedent Facts

As early as the 1950s, even before the advent of Republic Act (RA) No.
6657,4 otherwise known as the Comprehensive Agrarian Reform Law (CARL) of 1988,
through which the State implements its policy for a Comprehensive Agrarian Reform
Program (CARP), the Heirs of Ramon Arce, Sr., namely, Eulalio Arce, Lorenza Arce,
Ramon Arce, Jr., Mauro Arce and Esperanza Arce, (petitioners) were registered owners
of a parcel of land located in Brgy. Macabud, Montalban, Rizal with an area of 76.39
hectares (ha.), covered by Transfer Certificates of Title Nos. T-442673, 442674,
442675, and 442676 (referred to as subject lands). The subject lands were utilized as
pasture lands for the petitioners' cattle, i.e., buffaloes, carabaos and goats (hereinafter
referred to as livestock), for milk and dairy production in the manufacture of Selecta
Carabao's Milk and Ice Cream (now Arce Dairy Ice Cream). 5 The farming method
adopted by the petitioners was known as "feedlot operation" where the animals were
confined and fed on a cut-and-carry basis or zero grazing. 6

Sometime in 1998, the Philippine Carabao Center-Department of Agriculture (PCC-DA)

recommended that petitioners' livestock be transferred to avoid the liver fluke
infestation in the area. In compliance with PCC-DA's recommendation, petitioners
transferred the older and milking livestock, which are susceptible to infection, to their
feedlot facility located in Novaliches, Quezon City (Novaliches property). The younger
cattle, which are not susceptible to the fluke infection, remained in the subject lands. 7

Notwithstanding the transfer of some of their livestock, petitioners continued to plant

and grow napier grass in the subject lands. The napier grass were then cut, carried and
used as fodder for their livestock which were maintained both in the subject lands and
in the Novaliches property.8

On August 6, 2008, the Provincial Agrarian Reform Officer (PARO) of Teresa, Rizal
issued a Notice of Coverage (NOC)9 over the subject lands under the CARP. In
response, petitioners sent a letter10 dated October 17, 2008 to the PARO of DAR Region
IV-A, seeking to exclude and exempt the subject lands from the NOC considering that it
has been utilized for livestock raising even before the enactment of the CARP. To prove
this, the petitioners enclosed documents, 11 among them were: Certificates of Ownership
of Large Cattle registered under the name of Mauro Arce; Photocopy of Livestock
Inventory as of December 1987 stating that they have 102 registered cattle, 125
unregistered cattle and 212 heads of goats; Current photos taken on September 17,
2008 of the Arce livestock farm, feeding, and milking techniques, the milk processing
and ice cream making machinery at the Arcefoods Plant on Selecta Drive in Balintawak,
Quezon City; Current (2008) Certificates of Ownership of 104 heads of cattle under the
name of Mauro Arce/Selarce Farms, Inc; and, Photocopy of Livestock Inventory in the
Year 2008 showing 150 heads of large cattle. The PARO of DAR Region IV-A considered
the letter as a Petition for Exclusion from CARP Coverage. 12

On December 2, 2008, Municipal Agrarian Reform Officer (MARO) of DAR Region IV-A,
issued a Report and Recommendation and recommended the grant of the Petition for
Exclusion from CARP Coverage. The Report stated, among others, that:

xxx the method of farming practiced by the Arce Farm is by feed rearing. This means
that the animals are not freely grazing in the open field but instead are confined
separately in a feedlot where they are fed and milked; xxx pasture grass of 76 hectares
subject landholdings serve as food production area to provide the feed requirements of
the animals reared in a separate area; xxx the existence of large cattle is evidently
proven by Certificates of Ownership of Large Cattle presented by the landowners, the
existence of such cover the years 1981 to present; xxx inspection conducted at the
feedlot facility xxx at Novaliches xxx there exists 7 buildings where different livestock
are fed/housed. xxx. 13

xxx the clear scenario xxx is that (the subject property) has been a livestock farm and
it continues to exist until now under the exclusive operation and management of its
owner, regardless of the method (traditional or modern) of farming xxx.14

On March 4, 2009, the Legal Division of the DAR Provincial Office (DARPO) issued an
Evaluation Report and Recommendation and likewise recommended the grant of the
Petition for Exclusion from CARP Coverage. The Evaluation Report stated, among
others, that:

xxx the subject properties, which are undulating in topography and predominantly more
than 18% slope are registered in the names of Heirs of Ramon Arce, Sr., and is not
devoted to any agricultural activity by any person, but actually and directly devoted to
the production of napier grass for feeding purposes by Selarce Farms, owned by the
applicant Heirs;15 xxx there were employees of the applicant who were actually
gathering napier grasses on the subject properties to meet the daily needs of the
cattles, buffaloes and goats in the Feed and Fattening Facility which they declared that
they used to cut and gather napier grass at the volume of 6 tons of napier grasses
daily;16 xxx the aggregate area of the property of 76.3964 hectares has been actually,
directly, exclusively devoted to livestock (cattle, buffaloes/carabaos, and goats) for milk
and dairy production since the 1960s, or long before the advent of the CARP Law in
1988;17 xxx the applicant has fully complied with all the requirements under DAR A.O.
No. 7, Series of 2008 and AO. No. 9, Series of 1993; 18 and xxx the confinement of
cattles, buffalos/carabaos and goats in a separate place other than the herein subject
properties are but necessary for health and sanitary reasons, there is the chain of
connection of the utilization of the livestocks exclusively and directly from farm to
livestock facility; xxx19
On September 30, 2009, the petitioners filed a Manifestation to Lift Notice of Coverage
with the PARO, which was treated as a petition and docketed as Case No. A-0400-0250-
09 of DAR Regional Office IV-A with the PARO. 20 This was anchored on the ground that
petitioners were in the business of livestock raising, and were using the subject lands
as pasture lands for their buffaloes which produce the carabao milk for their ice cream
products. The petitioners claimed that the NOC is contrary to the 1987 Philippine
Constitution which provides that livestock farms are not among those described as
agricultural lands subject to land reform.

On November 20, 2009, Rommel Bote, Attorney II of DARPO, submitted a

Memorandum addressed to DARPO's Chief of Legal Divsion, indicating therein that the
petition is meritorious and thus, recommending the lifting of the NOC upon the subject
lands.21

Based on these findings, DAR Regional Director Antonio G. Evangelista (RD Evangelista)
issued an Order22 dated December 22, 2009, granting the Petition to Lift Notice of
Coverage, the dispositive portion of which reads, thus:

WHEREFORE, premises considered, the Petition for Lifting of Notice of Coverage filed by
the Heirs of Ramon S. Arce, Sr. represented by Rodolfo S. Arce, namely: 1. Eulalio
Arce, 2. Lorenza Arce, 3. Ramon Arce, Jr., 4. Mauro Arce, and 5. Esperanza Arce
involving four (4) parcels of land covered by TCT Nos. 442673 (17.3645 hectares),
442674 (40.5424 hectares), 442675 (15.6485 hectares), and 442676 (2.8410
hectares), with an aggregate area of 76.3964 located at Brgy. Macabuid, Rodriguez,
Rizal is hereby GRANTED.23

On April 29, 2011, RD Evangelista issued a Certification, 24 stating that the Order dated
December 22, 2009 had become final and executory, considering that no motion for
reconsideration and/or appeal was filed.

Meanwhile, Joevin M. Ucag (Ucag) of DAR Region IV-A submitted an Ocular Inspection
Report dated May 12, 2011 to the MARO, stating that "there was no livestock/cattle
found in the area of Macabud, Rodriguez, Rizal".25

Subsequently, the Samahan ng mga Magsasakang Nagkakaisa sa Sitio Calumpit

(SAMANACA), through their leaders, sent letters dated March 2, 2011 and June 14,
2011, to DAR Secretary Virgilio R. De Los Reyes (Secretary De Los Reyes), seeking to
annul RD Evangelista's Order dated December 22, 2009. The letters were treated as a
Petition to Annul an Invalid Resolution by the Regional Director.26

On November 8, 2011, petitioners filed their Comment and countered that RD

Evangelista's Order dated December 22, 2009 had become final and executory and that
the subject lands were within the retention limit. Thus, they prayed for the dismissal of
SAMANACA's Letters-Petition.27

On December 7, 2012, DAR Secretary De Los Reyes issued an Order, 28 denying

petitioners' Petition for Exclusion from CARP Coverage. The DAR ruled, among others,
that while it is true that the subject lands had been a livestock farm prior to the CARP's
enactment, the petitioners failed to prove that the said lands are actually, directly,
exclusively and continuously used for livestock activity up to the present. According to
the DAR, there were no longer cattle and livestock facilities within the subject lands.

Petitioners filed a Motion for Reconsideration (with Motion for Ocular Inspection) 29 dated
January 15, 2013; a Supplemental Motion for Reconsideration30 dated January 28,
2013; and, a Second Supplemental Motion for Reconsideration 31 dated March 18, 2013
of the DAR's Order. In these motions, the petitioners, alleged, among others that their
right to due process were violated when the alleged ocular inspection on the subject
lands was conducted by Ucag without prior notice to them, thereby depriving them the
right to refute such findings. They averred that Ucag never entered the gated premises
of the subject lands and that, had there been an inspection, he must have conducted
the same only from outside the premises. Petitioners likewise averred that it is unlikely
that Ucag could have spotted the livestock therein considering that the same were lying
on a sloping plain, combined with the tall napier grasses.

Thereafter, petitioners filed an Appeal Memorandum 32 with the Office of the President
(OP) and averred, among others, as follows: (1) DAR Secretary De Los Reyes erred in
reversing RD Evangelista's Order dated December 22, 2009 after it already attained
finality; (2) the subject lands were presently and exclusively utilized for livestock
raising; (3) only a number of livestock (older and milking) were transferred from the
subject lands to the Novaliches facility at the instance of the PCC-DA, while the younger
livestock remained in the subject lands; and, (4) SAMANACA has no legal standing to
assail RD Evangelista's Order dated December 22, 2009 since they were never in
possession of the subject lands and they were not tenants, farmers and tillers thereon.

On April 29, 2015, the OP rendered its Decision, 33 and ruled that petitioners' subject
lands were exempted from the coverage of CARP. The dispositive portion of its decision
reads, thus:

WHEREFORE, premises considered, the Order dated 7 December 2012 of the Secretary
of the Department of Agrarian Reform is hereby REVERSED AND SET ASIDE. The
petition for exclusion from CARP coverage with respect to the 76.3964 hectares of
lands, located in Brgy. Macabud, Montalban, Rizal, owned by the Heirs of Ramon Arce,
is hereby GRANTED.

SO ORDERED.34

The DAR filed a Petition for Review35 with the CA and prayed for the reversal of the OP's
April 29, 2015 Decision. The CA granted the same in its assailed Decision 36 dated
August 5, 2016. The CA held, among others, that petitioners failed to refute or deny
that since 1998, there were no longer cattle in the subject lands and that the same
were no longer used as grazing lands.

Their Motion for Reconsideration,37 having been denied in the CA's November 28, 2016
Resolution,38 petitioners filed this instant petition, anchored on the following grounds:

A.
THE ASSAILED DECISION AND RESOLUTION WERE NOT IN ACCORD WITH LAW
AND APPLICABLE DECISIONS OF THE SUPREME COURT CONSIDERING THAT
THE COURT OF APPEALS ERRONEOUSLY UPHELD THE FINDINGS OF FACTS OF
THE DAR SECRETARY WHICH WERE BASED ON PROCEEDINGS UNDERTAKEN IN
BLATANT VIOLATION OF PETITIONERS' BASIC RIGHTS TO ADMINISTRATIVE
DUE PROCESS AND DESPITE PETITIONERS' PRESENTATION OF SUBSTANTIAL
EVIDENCE SHOWING PRESENCE OF LIVESTOCK IN THE SUBJECT PROPERTIES.

B.

THE ASSAILED DECISION AND RESOLUTION WERE NOT IN ACCORD WITH LAW
AND APPLICABLE DECISIONS OF THE SUPREME COURT CONSIDERING THAT
THE COURT OF APPEALS ERRONEOUSLY RULED THAT THE SUBJECT
PROPERTIES ARE NO LONGER ACTUALLY, DIRECTLY, AND EXCLUSIVELY USED
FOR LIVESTOCK RAISING PURPOSES DESPITE THE FACT THAT THE SUBJECT
PROPERTIES ARE UTILIZED TO SUSTAIN THE FEEDLOT
OPERATIONS/INTENSIVE SYSTEM OF FARMING OF PETITIONERS.

C.

THE ASSAILED DECISION AND RESOLUTION WERE NOT MADE IN ACCORD

WITH LAW AND APPLICABLE DECISIONS OF THE SUPREME COURT
CONSIDERING THAT THE COURT OF APPEALS HAD ERRONEOUSLY GIVEN DUE
COURSE TO RESPONDENT'S PETITION FOR REVIEW DESPITE THE NON-
OBSERVANCE OF THE RULE ON EXHAUSTION OF ADMINISTRATIVE
REMEDIES.39

Meanwhile, on March 20, 2018, SAMANACA filed an Ex-parte Motion for Leave (for
Intervention and for Admission of Comment), 40 arguing that its members have already
been identified as qualified beneficiaries of the subject lands and hence, has the right to
participate and air its side of the controversy.

This Court's Ruling

The petition is granted.

This case falls under the recognized exceptions

to the rule that this Court is not a trier of
facts –

As a general rule, factual issues are not within the province of this Court. However, if
the factual findings of the government agency and the CA are conflicting, 41 or the
evidence that was misapprehended was of such nature as to compel a contrary
conclusion if properly appreciated,42 the reviewing court may delve into the records and
examine for itself the questioned findings.

Here, considering the disparity between the findings of fact of the OP, on the one hand,
and that of the DAR Secretary and the CA on the other hand, with respect to the
following issues on whether the petitioners' subject lands were used for livestock raising
on or before June 15, 1988; and, whether there were still livestock grazing in the
subject lands up to the present, We are constrained to re-examine the facts of this case
based on the evidence presented by both parties.

The subject lands are devoted to livestock

raising; thus, they remain to be exempted from
the coverage of the CARP –

Contrary to the rulings of the DAR and the CA, the subject lands are exempted from the
coverage of the CARP.

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.43 Section 3(c) thereof defines "agricultural land" as land devoted
to agricultural activity and not classified as mineral, forest, residential, commercial or
industrial land.44

In Luz Farms v. The Honorable Secretary of the Department of Agrarian Reform,45 the

Court declared unconstitutional the CARL provisions46 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.47 (Emphasis ours)

Reiterating Our ruling in the Luz Farms case, We held in Natalia Realty and Estate
Developers and Investors Corp. Inc. v. Department of Agrarian Reform Sec. Benjamin
T. Leong and Dir. Wilfredo Leano, DAR REGION IV,48 that industrial, commercial and
residential lands are not covered by the CARL. In the same case, We stressed that while
Section 4 of R.A. No. 6657 provides that the CARL shall cover all public and private
agricultural lands, the term "agricultural land" does not include lands classified as
mineral, forest, residential, commercial or industrial.

Guided by the foregoing, lands devoted to the raising of livestock, poultry and swine
have been classified as industrial, not agricultural, and thus, exempted from agrarian
reform.49

A thorough review of the records reveals that there is substantial evidence to show that
the entirety of the petitioners' subject lands were devoted to livestock production since
the 1950s, i.e., even before the enactment of the CARL on June 15, 1988. No less than
the DAR, who has the competence to determine the status of the land, 50 acknowledged
this when it held that:

It cannot be denied that the Arce properties [subject lands] had been a livestock farm.
The documentary evidence presented by the Applicants [petitioners] established the
existence of livestock activity in the landholding prior (sic) the enactment of the CARL
on 15 June 1988, such as Certificates of Ownership of Large Cattle issued from 1981 to
1988, Certification from the Philippine Carabao Center attesting that the Selarce Farm
is a cooperator of the Center as early as 1982, and the Technical Paper published by
the Philippine Council for Agriculture and Resources Research featuring the Arce Farm
in the "Philippines Recommends for Carabao Production 1978." These documents were
positively affirmed by DARPO personnel in their investigation report and recommending
for the exclusion of the said landholdings. 51

Indeed, the subject lands are utilized for livestock raising, and as such, classified as
industrial, and not agricultural lands. Thus, they are exempted from agrarian reform.

This notwithstanding, the DAR denied petitioners' Petition for Exclusion from CARP
Coverage. The DAR ruled that the subject lands were no longer being utilized for
livestock purposes since there were no longer livestock grazing in the area of Brgy.
Macabud, Rizal, based on an Ocular Inspection Report conducted by Ucag of DAR
Region IV-A. The CA, relying on the DAR's pronouncement and in the case
of Department of Agrarian Reform v. Vicente K. Uy,52 pointed out that the status of the
subject lands as an industrial land was not maintained because these were no longer
exclusively, directly and actually devoted to livestock activity up to the present.

We differ.

First, the records disclosed that sometime in 1998, the PCC-DA recommended that the
livestock in the subject lands be transferred to petitioners' Novaliches property due to a
fluke infection in Macabud, Montalban, RizaL While the petitioners followed the
recommendation and transferred the older and milking livestock to the Novaliches
property, the younger cattle, which were not susceptible to the fluke infection,
remained in the subject lands.53 Petitioners proved this by the submission, among
others, of photographs of livestock freely grazing in the subject lands. Contrary to the
DAR's and CA's findings, the transfer of some of petitioners' livestock to the Novaliches
property, did not detract from the usage of the subject lands which was for the
breeding of livestock. As correctly observed by the OP:

xxx. The confinement of the cattles, buffalos, carabaos and goats in a separate facility
other than the subject landholdings is of no moment since the transfer, as
established, was necessary for health and sanitary considerations having been
recommended by the Executive Director of the Philippine Carabao Center of the
Department of Agriculture (PCC-DA). Such transfer is temporary in nature and did
not divert the use thereof from the purpose of livestock farming. Thus, the DAR
Secretay committed an error in immediately considering the subject properties as
agricultural. xxx54 (Emphasis ours)

Second, upon petitioners' filing of the Petition for Exclusion from CARP Coverage, both
the MARO and the DARPO issued their respective reports on the inspection over the
subject lands and recommended that the the petition be granted for being meritorious.

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. 55

In its ocular inspection, the MARO found, among others, that the subject lands were
devoted for livestock farm up to the present and that there were large cattle thereon as
proven by Certificates of Ownership of Large Cattle presented by the petitioners, the
existence of such, cover the years 1981 to the present. The DARPO's report was more
explicit in that it stated that the subject lands have been actually, directly and
exclusively utilized for livestock raising long before the advent of the CARL.

Unfortunately, the DAR and the CA gave little weight to these reports. Instead, they
relied on the ocular inspection conducted by Ucag, to the effect that there were no
longer livestock grazing in the area of Macabud, Rodriguez, Rizal.

The reliance is erroneous.

For one thing, Ucag's ocular inspection was done without the knowledge and prior
notice to the petitioners. Aside from the fact that the Ocular Inspection Report did not
specify the area over which the alleged inspection was made, there was dearth of
evidence that Ucag was permitted to enter the gated premises of the subject lands. Had
there been indeed an inspection, the same must have been conducted only from
outside the premises. As such, it is likely that Ucag failed to spot the livestock therein.
As pointed out by the petitioners, there could have no vantage point from where Ucag
could fully inspect the subject lands considering that the same were lying on a sloping
plain, combined with the tall napier grasses, which could have easily hidden the
livestock. For another thing, the records did not show that petitioners were given the
opportunity to submit their respective sets of evidence against Ucag's Ocular Inspection
Report so as to be duly considered and taken into account by the DAR in arriving at its
ruling.

Third, the subject lands remained to be non-agricultural, despite the fact that they were
being used, not only as a grazing pasture, but as a production area where napier grass
were grown to supply food for the livestock maintained in the subject lands and in the
Novaliches property.

"Feedlot operation", the method adopted by the petitioners in rearing their livestock,
was recognized by the DAR, in Administrative Order No. 01, Series of 2004 (AO No. 01-
04).56 As explained by the MARO, this means that the animals were not freely grazing in
the open field but instead were confined separately in a feedlot where they were fed
and milked.

Indeed, the subject lands have been utilized as an exclusive source for the food
requirements of all the petitioners' livestock, i.e., those occupying the subject lands and
those that were transferred to the Novaliches facility. Without the subject lands where
napier grass were grown, petitioners could not have raised the livestock which were
necessary in breeding their livestock.

Contrary to the DAR's avermen,57 the mere fact that petitioners were sowing napier
grass in the subject lands did not automatically make the same an agricultural land so
as to be covered under the CARP. It would be surprising if there were no napier grass
on the subject lands considering that the same has been used as a grazing pasture for
petitioners' livestock. Also, the DAR did not adduce any proof to show that the napier
grass were planted and used for agricultural business. There can be no other
presumption, other than that the napier grass was used to augment the supply of
fodder for the petitioners' livestock which was in line with petitioners' method of
farming. As aptly observed by the OP:
xxx the records are bereft of any evidence showing that there are agricultural activities
in the subject area. To be covered, private lands should be devoted to or suitable for
agriculture and/or presently occupied and tilled by farmers. What is evident, however,
is that the landholdings are covered and planted with napier grass which is gathered by
employees of appellants to meet the daily needs of the cattle, buffalos and goats that
were transferred to Novaliches, instead of just allowing the said livestock to graze in
the area at the risk of getting diseases like liver fluke infections as warned by the
Executive Director of PCC-DA. Evidently, the subject properties have always been
maintained as a pasture land only with napier grass.

xxx the records are likewise bereft of any evidence showing that the land is suitable for
agriculture. What is clear in the ocular inspection of the MARO and the DARPO Legal is
that the subject landholdings are undulating in topography and predominantly with a
slope of more than 18 percent. As provided in the CARP Law, all lands with 18% slope
and over shall be exempt from the coverage of the said law. xxx the Certification dated
23 June 2014 issued by the Bureau of Soils and Water Management of the Department
of Agriculture and the finding in the Highlight of Accomplishment by Bureau of Soils and
Water Management of the Department of Agriculture dated 18 June 2014, revealed that
the subject land is idled, underutilized, and not suitable for agriculture. 58

Fourth, the CA misread Our pronouncement in the Uy case. On page 8 of its decision,
the CA cited the following passages from the Uy case, thus:

xxx the law only requires that for exemption of CARP to apply, the subject landholding
should be devoted to cattle-raising as of June 15, 1988 is not entirely correct, for the
law requires that it be exclusively, directly and actually used for livestock as of June 15,
1988. Under A.O. No. 9, Series of 1993, two conditions must be established: 1) it must
be shown that the subject landholding was EXCLUSIVELY, DIRECTLY AND ACTUALLY
used for livestock, poultry or swine on or before June 15, 1988; and, 2) the farm must
satisfy the ratios of land to livestock.59

The aforecited paragraph, however, was merely a part of the "facts", and not indicated
in the "decision" portion of the Uy case. We did not declare in the Uy case that the two
conditions set forth in A.O. No. 09, Series of 1993 (quoted above), should first be
established in order that a land be excluded from the coverage of the CARP.
Contrariwise, in the Uy case, We held that we have already strucked down A.O. No. 09-
93 in the Department of Agrarian Reform v. Sutton. 60 for being unconstitutional. Thus,
We explained:

xxx the threshold substantive issue is the validity and implementation of DAR
Administrative Order No. 9, Series of 1993 on the respondent's landholding of more or
less 472 ha. in light of the ruling of this Court in Department of Agrarian Reform v.
Sutton, where DAR Administrative Order No. 9, Series of 1993 was declared
unconstitutional.61

xxx to be valid, administrative rules and regulations must be issued by authority of law

and must not contravene the provisions of the Constitution. The rule-making power of
an administrative agency may not be used to abridge the authority given to it by
Congress or by the Constitution. Nor can it be used to enlarge the power of the
administrative agency beyond the scope intended. xxx.62
xxx 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. xxx. 63

In the Sutton case, We discussed that what A.O. No. 09-93 sought to address were the
reports that some unscrupulous landowners have been converting their agricultural
lands to livestock farms to avoid their coverage from the agrarian reform. In that case,
as well as in the present one, the odious scenario which A.O. No. 09-93 seeks to
prevent is clearly non-existent. Recall that petitioners acquired their landholdings as
early as the 1950s. Since then, they have long been utilizing the subject lands covered
by napier grass for the raising of their livestock. Evidently, there was no evidence on
record that petitioners have just recently engaged in or converted to the raising of
livestock after the enactment of the CARL that may lead to the suspicion that
petitioners had the intention of evading its coverage. Stated differently, the usage of
the subject lands for livestock raising, has been a going concern by the petitioners even
before the passage of the CARL.

Lastly, We stress that what the CARL prohibits is the conversion of agricultural lands for
non-agricultural purposes after the effectivity of the CARL. 64 Here, there was no
showing that the subject lands which were devoted for livestock raising prior to the
CARL, had been converted to an agricultural land, after its passage. Thus, the
petitioners' subject lands remained to be non-agricultural, i.e., devoted to livestock
raising, and thus, excluded from the coverage of the CARP.

SAMANACA's Motion for Leave (for

Intervention and for Admission of Comment)
cannot be given due course –

Intervention under Rule 19 of the Rules of Court is a remedy by which a third party, not
originally impleaded in the proceedings, becomes a litigant therein for a certain
purpose: to enable the third party to protect or preserve a right or interest that may be
affected by those proceedings.65

In Hon. Executive Secretary, Commissioner of Custom and the District Collector of

Customs of the Port of Subic v. Northeast Freight Forwarders, Inc.,66 We explained the
rationale of this remedy, in this wise:

Intervention is not a matter of absolute right but may be permitted by the court when
the applicant shows facts which satisfy the requirements of the statute authorizing
intervention. Under our Rules of Court, what qualifies a person to intervene is his
possession of a legal interest in the matter in litigation or in the success of either of the
parties, or an interest against both; or when he is so situated as to be adversely
affected by a distribution or other disposition of property in the custody of the court or
an officer thereof As regards the legal interest as qualifying factor, this Court has ruled
that such interest must be of a direct and immediate character so that the intervenor
will either gain or lose by the direct legal operation of the judgment. The interest must
be actual and material, a concern which is more than mere curiosity, or academic or
sentimental desire; it must not be indirect and contingent, indirect and remote,
conjectural, consequential or collateral. However, notwithstanding the presence of a
legal interest, permission to intervene is subject to the sound discretion of the court,
the exercise of which is limited by considering "whether or not the intervention will
unduly delay or prejudice the adjudication of the rights of the original parties and
whether or not the intervenor's rights may be fully protected in a separate
proceeding."67

Keeping these factors in mind, SAMANACA may not be allowed to intervene.

SAMANACA's allegation that its members have a substantial interest in the outcome of
the present case, since they have been identified to be the qualified beneficiaries of the
subject lands is not sufficient The records show that the members of SAMANACA were
never in possession of the subject lands nor were they, at one time or another, tenants,
farmers, or tillers thereon. Likewise, SAMANACA failed to substantiate their claim that
they have been identified as qualified beneficiaries of the subject lands under the CARP.
No shred of evidence was ever submitted to prove this claim.

Clearly, SAMANACA's assertions do not amount to a direct and immediate legal interest,
so much so that they will either gain or lose by the direct legal operation of the court's
judgment. At most, their interest, if any, is characterized as inchoate, contingent and
expectant – which could not have justified intervention.

After an assiduous review of the records of this case, this Court concludes that
petitioners' subject lands are beyond the coverage of the agrarian reform program.

WHEREFORE, premises considered, the August 5, 2016 Decision and the November
28, 2016 Resolution of the Court of Appeals in CA-G.R. SP No. 140755, are
REVERSED and SET ASIDE, and a new one entered upholding the exemption of the
subject lands from the coverage of Republic Act No. 6657, otherwise known as the
Comprehensive Agrarian Reform Law of 1988.

SO ORDERED.