LUZ FARMS, Petitioner, vs.

  THE HONORABLE SECRETARY OF THE

DEPARTMENT OF AGRARIAN REFORM, Respondent.
G.R. No. 86889:  December 4, 1990
192 SCRA 51

This case involves the issue questioning the constitutionality of some

sections of the Comprehensive Agrarian Reform Law also known as the RA No.
6657 which was approved on June 10, 1988, as follows:

SECTION 3(B) – the definition of “AGRICULTURE, AGRICULTURAL

ENTERPRISE OR AGRICULTURAL ACTIVITY” which means the cultivation of
the soil, planting of crops, growing of fruit trees, raising of livestock, poultry or
fish, including the harvesting of such farm products, and other farm activities
and practices performed by a farmer in conjunction with such farming
operations done by persons whether natural or juridical;

SECTION 11 – COMMERCIAL FARMING. – Commercial farms, which

are private agricultural lands devoted to commercial livestock, poultry and
swine raising and aquaculture including saltbeds, fishponds and prawn ponds,
fruit farms, orchards, vegetable and cut-flower farms, and cacao, coffee and
rubber plantations, shall be subject to immediate compulsory acquisition and
distribution after 10 years from the effectivity of this Act. In the new farms, the
ten-year period shall begin from the first year of commercial production and
operation, as determined by the DAR. During the ten-year period, the
government shall initiate the steps necessary to acquire these lands, upon
payment of just compensation for the land and the improvements thereon,
preferably in favor of organized cooperatives or associations, which shall
thereafter manage the said lands for the worker-beneficiaries.

If the DAR determines that the purposes for which this deferment is
granted no longer exist, such areas shall automatically be subject to
redistribution.

The provisions of Section 32 of this Act, with regard to production- and

income-sharing, shall apply to commercial farms;

SECTION 13- PRODUCTION-SHARING PLAN. - Any enterprise

adopting the scheme provided for in Section 32 or operating under a
production venture, lease, management contract or other similar arrangement
and any farm covered by Sections 8 and 11 hereof is hereby mandated to
execute within ninety (90) days from the effectivity of this Act, a production-
sharing plan, under guidelines prescribed by the appropriate government
agency.

Nothing herein shall be construed to sanction the diminution of any

benefits such as salaries, bonuses, leaves and working conditions granted to
the employee-beneficiaries under existing laws, agreements, and voluntary
practice by the enterprise, nor shall the enterprise and its employee-
beneficiaries be prevented from entering into any agreement with terms more
favorable to the latter;

SECTION 16. PROCEDURE FOR ACQUISITION OF PRIVATE LANDS. –

For purposes of acquisition of private lands, the following procedures shall be
followed:

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

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

(c) If the landowner accepts the offer of the DAR, the Land Bank of the
Philippines (LBP) shall pay the landowner the purchase price of the land
within thirty (30) days after he executes and delivers a deed of transfer in
favor of the Government and surrenders the Certificate of Title and other
monuments 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 the notice. After the expiration of the above
period, the matter is deemed submitted for decision. The DAR shall
decide the case within thirty (30) days after it is submitted for decision.

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

(f) Any party who disagrees with the decision may bring the matter to the
court of proper jurisdiction for final determination of just compensation.
 SECTION 17. DETERMINATION OF JUST COMPENSATION. – In
determining just compensation, the cost of acquisition of the land, the current
value of like properties, its nature, actual use and income, the sworn valuation
by the owner, the tax declarations, and the assessment made by government
assessors shall be considered. The social and economic benefits contributed by
the farmers and the farmworkers and by the Government to the property as
well as the non-payment of taxes or loans secured from any government
financing institution on the said land shall be considered as additional factors
to determine its valuation.

(a For lands above – Twenty-five percent

)
fifty (50) hectares, insofar (25%) cash, the balance to
as the excess hectarage is be paid in government
concerned. financial instruments
negotiable at any time.
(b For lands above – Thirty percent (30%) cash,
)
twenty-four (24) hectares the balance to be paid in
and up to fifty (50) government financial
hectares.
instruments negotiable
at any time.
(c) For lands twenty-four – Thirty-five percent (35%)
(24) hectares and below. cash, the balance to be
paid
in government financial
instruments negotiable at
any time.

SECTION 32.- PRODUCTION-SHARING. – Pending final land transfer,

individuals or entities owning, or operating under lease or management
contract, agricultural lands are hereby mandated to execute a production-
sharing plan with their farmworkers or farmworkers’ organization, if any,
whereby 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, determines a lower ceiling.

In the event that the individual or entity realizes a profit, an additional

ten percent (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.

To forestall any disruption in the normal operation of lands to be turned

over to the farmworker-beneficiaries mentioned above, a transitory period, the
length of which shall be determined by the DAR, shall be established.
 During this transitory period, at least one percent (1%) of the gross sales
of the entity shall be distributed to the managerial, supervisory and technical
group in place at the time of the effectivity of this Act, as compensation for
such transitory managerial and technical functions as it will perform, pursuant
to an agreement that the farmworker-beneficiaries and the managerial,
supervisory and technical group may conclude, subject to the approval of the
DAR
.
The Secretary of DAR promulgated its Rules and Regulations
implementing Section 11 of R.A. 6657 on January 2, 1989 under DAR
Administrative Order No. 16, series of 1988 which was entitled as the “Rules
and Regulations for Implementing Section 11 of R.A. 6657 on Commercial
Farming”. And, the latter also promulgated the Guidelines and Procedures
implementing Production and Profit Sharing as embodied in Sections 13 and
32 of R.A. 6657 on January 9, 1989 under DAR Administrative Order No. 8,
series of 1988 which was entitled as the “Guidelines and Procedures
implementing Production and Profit Sharing under RA 6657”.

FACTS:

Petitioner Luz Farms, a corporation engaged in the livestock and poultry

business who undesirably affected by the enforcement of the abovementioned
sections of RA No. 6657 which was promulgated by the DAR on January 9,
1989.

It argued that livestock or poultry raising is not similar with crop or tree
farming. That the land is not the primary resource in this undertaking and
represents no more than 5% of the total investments of commercial livestock
and poultry raisers. And, that the land is incidental but not the principal factor
or consideration in their industry. Hence, it contended that it should not be
included in the coverage of RA 6657 which covers “agricultural lands”.

On the other hand, the public respondent claimed that the term
“agriculture” and the inclusion of such enterprise under Section 3(b) of R.A.
6657 is proper as he cited the definitions of the following terms under the
Webster’s International Dictionary, Second Edition year 1954, to wit:

Agriculture which means the art or science of cultivating the ground and
raising and harvesting crops, often, including also, feeding, breeding and
management of livestock, tillage, husbandary, farming. Livestock as domestic
animal used or raised on a farm, especially for profit. And, Farm as a plot or
tract of land devoted to the raising of domestic or other animals.

ISSUES:

1) Whether or not the said sections of RA No. 6657 are constitutional in

so far 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?
 2) Whether or not the court has jurisdiction over the case due to the fact
that it is a constitutional question?

RULING:

On the first issue, the constitutional provision under consideration reads

as follows:

ARTICLE XIII
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"

The reason for the grant of retention rights are stated in the
abovementioned section of Article XIII. The right of retention is a
constitutionally guaranteed right, which is subject to qualification by the
legislature. It serves to alleviate the effects of compulsory land acquisition by
balancing the rights of the landowner and the tenant and by implementing the
doctrine that social justice was not meant to commit an injustice against the
landowner.

The Supreme Court states 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 the true that the intention 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.”

The transcript 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. Hence, they adopted the definition of “agricultural
land” 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.

Also, Commissioner Tadeo stated “Sa pangalawang katanungan ng Ginoo

ay medyo hindi kami nag kaunawaan. Ipinaaalam ko kay Commissioner
Regalado na hindi naming inilagay ang agricultural worker saka dahilanang
kasama rito ang piggery, poultry at livestock workers. Ang 1inilagay naming
dito ay farm worker kaya hindi kasama ang piggery, poultry at livestock
workers.”

It is evident that Chapter II of the RA 6657 which includes “private

agricultural lands devoted to commercial livestock, poultry and swine raising”
in the definition of “commercial farms” in Section 11 is invalid, to the extent
that the aforecited agro-indutrial activities are made to be covered by the
agrarian reform program of the State. There is simply no include livestock and
poultry lands in the coverage of agrarian reform.

Hence, the requirements under Sections 13 and 32 of R.A. 6657 directing

“corporate farms” which include livestock and poultry raisers to execute and
implement “production-sharing plans” whereby the petitioner is called upon to
distribute from 3 percent of their gross sales and 10 percent of their net profits
to their workers as additional compensation is unreasonable for being
confiscatory, and therefore violative of due process.

On the second issue, the SC averred that it will assume the jurisdiction
over a constitutional question only if it is shown that the essential requisites of
a judicial review or inquiry are first satisfied, First, there must be an actual
case or controversy (a conflict of legal rights, an assertion of opposite legal
claims which can be resolved on the basis of existing law and jurisprudence) –
in this case the actual controversy is the constitutionality of some portions of
RA 6657. Second, the constitutional question must be raised by the proper
party (a proper party is one with “legal standing” or “locus standi”, who has
sustained or is imminent danger of sustaining an injury as a result of the act
complained of). Third, the constitutional question must be raised at the earliest
possible opportunity. And, lastly, the decision on the constitutional question
must be determinative of the case itself (due to the doctrine of separation of
powers which demands that proper respect be accorded the other department,
courts are loathe or can't stand to decide constitutional questions as long as
there are some other basis that can be used for a decision. The constitutional
issue must be the “lis mota” or the the cause of the suit or action.)

Moreover, the SC in arriving on the 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 or “sweet talk” 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.”
 The SC declared null and void sections 3(b), 11, 13 and 32 of R.A. 6657
in so far as the inclusion of the raising of livestock, poultry and swine in its
coverage as well as the Implementing Rules and Guidelines promulgated by the
DAR.

WHAT IS DAR ADMINISTRATIVE ORDER NO. 01 SERIES OF 2004?

Because of the nullification of Sections 3(b), 11, 13, and 32 of R.A. 6657
in the case of “Luz Farms vs. The Honorable Secretary of the DAR”, G.R. No.
86889, December 4, 1990, they enacted R.A. No. 7881 which amends Section
11 of R.A. 6657 by excluding, among others, commercial livestock, poultry and
swine raising from the classification of commercial farms due for CARP or RA
6389 coverage after the 10-year deferment period, the DAR issued this
Administrative Order governing the exclusion of agricultural lands used for
cattle raising from the coverage of the Comprehensive Agrarian Reform
Program.

It covers all application for exclusion from Comprehensive Agrarian

Reform Program (CARP), under R.A. 9700, coverage of private agricultural
lands or portions thereof actually, exclusively, and directly used for cattle
raising as of 15 June 1988 so as to prevent the circumvention or avoidance of
coverage under CARP and to protect the rights of the agrarian reform
beneficiaries specifically against their possible unlawful ejectment due to
unauthorized change or conversion or fraudulent declaration thereof.