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1. Association of Small Landowners vs.

Secretary of DAR
EN BANC
G.R. No. 78742
July 14, 1989
ASSOCIATION OF SMALL LANDOWNERS IN THE PHILIPPINES, INC., JUANITO D.
GOMEZ, GERARDO B. ALARCIO, FELIPE A. GUICO, JR., BERNARDO M. ALMONTE,
CANUTO RAMIR B. CABRITO, ISIDRO T. GUICO, FELISA I. LLAMIDO, FAUSTO J. SALVA,
REYNALDO G. ESTRADA, FELISA C. BAUTISTA, ESMENIA J. CABE, TEODORO B.
MADRIAGA, AUREA J. PRESTOSA, EMERENCIANA J. ISLA, FELICISIMA C. ARRESTO,
CONSUELO M. MORALES, BENJAMIN R. SEGISMUNDO, CIRILA A. JOSE & NAPOLEON S.
FERRER, petitioners,
vs.
HONORABLE SECRETARY OF AGRARIAN REFORM, respondent.
G.R. No. 79310
July 14, 1989
ARSENIO AL. ACUNA, NEWTON JISON, VICTORINO FERRARIS, DENNIS JEREZA,
HERMINIGILDO GUSTILO, PAULINO D. TOLENTINO and PLANTERS COMMITTEE, INC.,
Victorias Mill District, Victorias, Negros Occidental, petitioners,
vs.
JOKER ARROYO, PHILIP E. JUICO and PRESIDENTIAL AGRARIAN REFORM COUNCIL,
respondents.
G.R. No. 79744
July 14, 1989
INOCENTES PABICO, petitioner,
vs.
HON. PHILIP E. JUICO, SECRETARY OF THE DEPARTMENT OF AGRARIAN REFORM,
HON. JOKER ARROYO, EXECUTIVE SECRETARY OF THE OFFICE OF THE PRESIDENT,
and Messrs. SALVADOR TALENTO, JAIME ABOGADO, CONRADO AVANCENA and
ROBERTO TAAY, respondents.
G.R. No. 79777
July 14, 1989
NICOLAS S. MANAAY and AGUSTIN HERMANO, JR., petitioners,
vs.
HON. PHILIP ELLA JUICO, as Secretary of Agrarian Reform, and LAND BANK OF THE
PHILIPPINES, respondents.
DECISION
CRUZ, J.:
In ancient mythology, Antaeus was a terrible giant who blocked and challenged
Hercules for his life on his way to Mycenae after performing his eleventh labor. The
two wrestled mightily and Hercules flung his adversary to the ground thinking him
dead, but Antaeus rose even stronger to resume their struggle. This happened
several times to Hercules increasing amazement. Finally, as they continued
grappling, it dawned on Hercules that Antaeus was the son of Gaea and could never
die as long as any part of his body was touching his Mother Earth. Thus forewarned,
Hercules then held Antaeus up in the air, beyond the reach of the sustaining soil,
and crushed him to death.
Mother Earth. The sustaining soil. The giver of life, without whose invigorating touch
even the powerful Antaeus weakened and died.
The cases before us are not as fanciful as the foregoing tale. But they also tell of the
elemental forces of life and death, of men and women who, like Antaeus need the
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sustaining strength of the precious earth to stay alive.


Land for the Landless is a slogan that underscores the acute imbalance in the
distribution of this precious resource among our people. But it is more than a
slogan. Through the brooding centuries, it has become a battle-cry dramatizing the
increasingly urgent demand of the dispossessed among us for a plot of earth as
their place in the sun.
Recognizing this need, the Constitution in 1935 mandated the policy of social justice
to insure the well-being and economic security of all the people, 1 especially the
less privileged. In 1973, the new Constitution affirmed this goal adding specifically
that the State shall regulate the acquisition, ownership, use, enjoyment and
disposition of private property and equitably diffuse property ownership and
profits. 2 Significantly, there was also the specific injunction to formulate and
implement an agrarian reform program aimed at emancipating the tenant from the
bondage of the soil. 3
The Constitution of 1987 was not to be outdone. Besides echoing these sentiments,
it also adopted one whole and separate Article XIII on Social Justice and Human
Rights, containing grandiose but undoubtedly sincere provisions for the uplift of the
common people. These include a call in the following words for the adoption by the
State of an agrarian reform program:
SEC. 4. The State shall, by law, undertake an agrarian reform program founded on
the right of farmers and regular farmworkers, who are landless, to own directly or
collectively the lands they till or, in the case of other farmworkers, to receive a just
share of the fruits thereof. To this end, the State shall encourage and undertake the
just distribution of all agricultural lands, subject to such priorities and reasonable
retention limits as the Congress may prescribe, taking into account ecological,
developmental, or equity considerations and subject to the payment of just
compensation. In determining retention limits, the State shall respect the right of
small landowners. The State shall further provide incentives for voluntary landsharing.
Earlier, in fact, R.A. No. 3844, otherwise known as the Agricultural Land Reform
Code, had already been enacted by the Congress of the Philippines on August 8,
1963, in line with the above-stated principles. This was substantially superseded
almost a decade later by P.D. No. 27, which was promulgated on October 21, 1972,
along with martial law, to provide for the compulsory acquisition of private lands for
distribution among tenant-farmers and to specify maximum retention limits for
landowners.
The people power revolution of 1986 did not change and indeed even energized the
thrust for agrarian reform. Thus, on July 17, 1987, President Corazon C. Aquino
issued E.O. No. 228, declaring full land ownership in favor of the beneficiaries of P.D.
No. 27 and providing for the valuation of still unvalued lands covered by the decree
as well as the manner of their payment. This was followed on July 22, 1987 by
Presidential Proclamation No. 131, instituting a comprehensive agrarian reform
program (CARP), and E.O. No. 229, providing the mechanics for its implementation.
Subsequently, with its formal organization, the revived Congress of the Philippines
took over legislative power from the President and started its own deliberations,
including extensive public hearings, on the improvement of the interests of farmers.
The result, after almost a year of spirited debate, was the enactment of R.A. No.
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6657, otherwise known as the Comprehensive Agrarian Reform Law of 1988, which
President Aquino signed on June 10, 1988. This law, while considerably changing the
earlier mentioned enactments, nevertheless gives them suppletory effect insofar as
they are not inconsistent with its provisions. 4
The above-captioned cases have been consolidated because they involve common
legal questions, including serious challenges to the constitutionality of the several
measures mentioned above. They will be the subject of one common discussion and
resolution. The different antecedents of each case will require separate treatment,
however, and will first be explained hereunder.
G.R. No. 79777
Squarely raised in this petition is the constitutionality of P.D. No. 27, E.O. Nos. 228
and 229, and R.A. No. 6657.
The subjects of this
owned by petitioner
by four tenants and
declared full owners
No. 27.

petition are a 9-hectare riceland worked by four tenants and


Nicolas Manaay and his wife and a 5-hectare riceland worked
owned by petitioner Augustin Hermano, Jr. The tenants were
of these lands by E.O. No. 228 as qualified farmers under P.D.

The petitioners are questioning P.D. No. 27 and E.O. Nos. 228 and 229 on grounds
inter alia of separation of powers, due process, equal protection and the
constitutional limitation that no private property shall be taken for public use
without just compensation.
They contend that President Aquino usurped legislative power when she
promulgated E.O. No. 228. The said measure is invalid also for violation of Article
XIII, Section 4, of the Constitution, for failure to provide for retention limits for small
landowners. Moreover, it does not conform to Article VI, Section 25(4) and the other
requisites of a valid appropriation.
In connection with the determination of just compensation, the petitioners argue
that the same may be made only by a court of justice and not by the President of
the Philippines. They invoke the recent cases of EPZA v. Dulay 5 and Manotok v.
National Food Authority. 6 Moreover, the just compensation contemplated by the Bill
of Rights is payable in money or in cash and not in the form of bonds or other things
of value.
In considering the rentals as advance payment on the land, the executive order also
deprives the petitioners of their property rights as protected by due process. The
equal protection clause is also violated because the order places the burden of
solving the agrarian problems on the owners only of agricultural lands. No similar
obligation is imposed on the owners of other properties.
The petitioners also maintain that in declaring the beneficiaries under P.D. No. 27 to
be the owners of the lands occupied by them, E.O. No. 228 ignored judicial
prerogatives and so violated due process. Worse, the measure would not solve the
agrarian problem because even the small farmers are deprived of their lands and
the retention rights guaranteed by the Constitution.
In his Comment, the Solicitor General stresses that P.D. No. 27 has already been
upheld in the earlier cases of Chavez v. Zobel, 7 Gonzales v. Estrella, 8 and
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Association of Rice and Corn Producers of the Philippines, Inc. v. The National Land
Reform Council. 9 The determination of just compensation by the executive
authorities conformably to the formula prescribed under the questioned order is at
best initial or preliminary only. It does not foreclose judicial intervention whenever
sought or warranted. At any rate, the challenge to the order is premature because
no valuation of their property has as yet been made by the Department of Agrarian
Reform. The petitioners are also not proper parties because the lands owned by
them do not exceed the maximum retention limit of 7 hectares.
Replying, the petitioners insist they are proper parties because P.D. No. 27 does not
provide for retention limits on tenanted lands and that in any event their petition is
a class suit brought in behalf of landowners with landholdings below 24 hectares.
They maintain that the determination of just compensation by the administrative
authorities is a final ascertainment. As for the cases invoked by the public
respondent, the constitutionality of P.D. No. 27 was merely assumed in Chavez,
while what was decided in Gonzales was the validity of the imposition of martial law.
In the amended petition dated November 22, 1588, it is contended that P.D. No. 27,
E.O. Nos. 228 and 229 (except Sections 20 and 21) have been impliedly repealed by
R.A. No. 6657. Nevertheless, this statute should itself also be declared
unconstitutional because it suffers from substantially the same infirmities as the
earlier measures.
A petition for intervention was filed with leave of court on June 1, 1988 by Vicente
Cruz, owner of a 1. 83- hectare land, who complained that the DAR was insisting on
the implementation of P.D. No. 27 and E.O. No. 228 despite a compromise
agreement he had reached with his tenant on the payment of rentals. In a
subsequent motion dated April 10, 1989, he adopted the allegations in the basic
amended petition that the above- mentioned enactments have been impliedly
repealed by R.A. No. 6657.
G.R. No. 79310
The petitioners herein are landowners and sugar planters in the Victorias Mill
District, Victorias, Negros Occidental. Co-petitioner Planters Committee, Inc. is an
organization composed of 1,400 planter-members. This petition seeks to prohibit
the implementation of Proc. No. 131 and E.O. No. 229.
The petitioners claim that the power to provide for a Comprehensive Agrarian
Reform Program as decreed by the Constitution belongs to Congress and not the
President. Although they agree that the President could exercise legislative power
until the Congress was convened, she could do so only to enact emergency
measures during the transition period. At that, even assuming that the interim
legislative power of the President was properly exercised, Proc. No. 131 and E.O. No.
229 would still have to be annulled for violating the constitutional provisions on just
compensation, due process, and equal protection.
They also argue that under Section 2 of Proc. No. 131 which provides:
Agrarian Reform Fund.-There is hereby created a special fund, to be known as the
Agrarian Reform Fund, an initial amount of FIFTY BILLION PESOS
(P50,000,000,000.00) to cover the estimated cost of the Comprehensive Agrarian
Reform Program from 1987 to 1992 which shall be sourced from the receipts of the
sale of the assets of the Asset Privatization Trust and Receipts of sale of ill-gotten
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wealth received through the Presidential Commission on Good Government and


such other sources as government may deem appropriate. The amounts collected
and accruing to this special fund shall be considered automatically appropriated for
the purpose authorized in this Proclamation the amount appropriated is in futuro,
not in esse. The money needed to cover the cost of the contemplated expropriation
has yet to be raised and cannot be appropriated at this time.
Furthermore, they contend that taking must be simultaneous with payment of just
compensation as it is traditionally understood, i.e., with money and in full, but no
such payment is contemplated in Section 5 of the E.O. No. 229. On the contrary,
Section 6, thereof provides that the Land Bank of the Philippines shall compensate
the landowner in an amount to be established by the government, which shall be
based on the owners declaration of current fair market value as provided in Section
4 hereof, but subject to certain controls to be defined and promulgated by the
Presidential Agrarian Reform Council. This compensation may not be paid fully in
money but in any of several modes that may consist of part cash and part bond,
with interest, maturing periodically, or direct payment in cash or bond as may be
mutually agreed upon by the beneficiary and the landowner or as may be
prescribed or approved by the PARC.
The petitioners also argue that in the issuance of the two measures, no effort was
made to make a careful study of the sugar planters situation. There is no tenancy
problem in the sugar areas that can justify the application of the CARP to them. To
the extent that the sugar planters have been lumped in the same legislation with
other farmers, although they are a separate group with problems exclusively their
own, their right to equal protection has been violated.
A motion for intervention was filed on August 27,1987 by the National Federation of
Sugarcane Planters (NASP) which claims a membership of at least 20,000 individual
sugar planters all over the country. On September 10, 1987, another motion for
intervention was filed, this time by Manuel Barcelona, et al., representing coconut
and riceland owners. Both motions were granted by the Court.
NASP alleges that President Aquino had no authority to fund the Agrarian Reform
Program and that, in any event, the appropriation is invalid because of uncertainty
in the amount appropriated. Section 2 of Proc. No. 131 and Sections 20 and 21 of
E.O. No. 229 provide for an initial appropriation of fifty billion pesos and thus
specifies the minimum rather than the maximum authorized amount. This is not
allowed. Furthermore, the stated initial amount has not been certified to by the
National Treasurer as actually available.
Two additional arguments are made by Barcelona, to wit, the failure to establish by
clear and convincing evidence the necessity for the exercise of the powers of
eminent domain, and the violation of the fundamental right to own property.
The petitioners also decry the penalty for non-registration of the lands, which is the
expropriation of the said land for an amount equal to the government assessors
valuation of the land for tax purposes. On the other hand, if the landowner declares
his own valuation he is unjustly required to immediately pay the corresponding
taxes on the land, in violation of the uniformity rule.
In his consolidated Comment, the Solicitor General first invokes the presumption of
constitutionality in favor of Proc. No. 131 and E.O. No. 229. He also justifies the
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necessity for the expropriation as explained in the whereas clauses of the


Proclamation and submits that, contrary to the petitioners contention, a pilot
project to determine the feasibility of CARP and a general survey on the peoples
opinion thereon are not indispensable prerequisites to its promulgation.
On the alleged violation of the equal protection clause, the sugar planters have
failed to show that they belong to a different class and should be differently treated.
The Comment also suggests the possibility of Congress first distributing public
agricultural lands and scheduling the expropriation of private agricultural lands
later. From this viewpoint, the petition for prohibition would be premature.
The public respondent also points out that the constitutional prohibition is against
the payment of public money without the corresponding appropriation. There is no
rule that only money already in existence can be the subject of an appropriation
law. Finally, the earmarking of fifty billion pesos as Agrarian Reform Fund, although
denominated as an initial amount, is actually the maximum sum appropriated. The
word initial simply means that additional amounts may be appropriated later
when necessary.
On April 11, 1988, Prudencio Serrano, a coconut planter, filed a petition on his own
behalf, assailing the constitutionality of E.O. No. 229. In addition to the arguments
already raised, Serrano contends that the measure is unconstitutional because:
(1) Only public lands should be included in the CARP;
(2) E.O. No. 229 embraces more than one subject which is not expressed in the title;
(3) The power of the President to legislate was terminated on July 2, 1987; and
(4) The appropriation of a P50 billion special fund from the National Treasury did not
originate from the House of Representatives.
G.R. No. 79744
The petitioner alleges that the then Secretary of Department of Agrarian Reform, in
violation of due process and the requirement for just compensation, placed his
landholding under the coverage of Operation Land Transfer. Certificates of Land
Transfer were subsequently issued to the private respondents, who then refused
payment of lease rentals to him.
On September 3, 1986, the petitioner protested the erroneous inclusion of his small
landholding under Operation Land transfer and asked for the recall and cancellation
of the Certificates of Land Transfer in the name of the private respondents. He
claims that on December 24, 1986, his petition was denied without hearing. On
February 17, 1987, he filed a motion for reconsideration, which had not been acted
upon when E.O. Nos. 228 and 229 were issued. These orders rendered his motion
moot and academic because they directly effected the transfer of his land to the
private respondents.
The petitioner now argues that:
(1) E.O. Nos. 228 and 229 were invalidly issued by the President of the Philippines.

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(2) The said executive orders are violative of the constitutional provision that no
private property shall be taken without due process or just compensation.
(3) The petitioner is denied the right of maximum retention provided for under the
1987 Constitution.
The petitioner contends that the issuance of E.O. Nos. 228 and 229 shortly before
Congress convened is anomalous and arbitrary, besides violating the doctrine of
separation of powers. The legislative power granted to the President under the
Transitory Provisions refers only to emergency measures that may be promulgated
in the proper exercise of the police power.
The petitioner also invokes his rights not to be deprived of his property without due
process of law and to the retention of his small parcels of riceholding as guaranteed
under Article XIII, Section 4 of the Constitution. He likewise argues that, besides
denying him just compensation for his land, the provisions of E.O. No. 228 declaring
that:
Lease rentals paid to the landowner by the farmer-beneficiary after October 21,
1972 shall be considered as advance payment for the land.
is an unconstitutional taking of a vested property right. It is also his contention that
the inclusion of even small landowners in the program along with other landowners
with lands consisting of seven hectares or more is undemocratic.
In his Comment, the Solicitor General submits that the petition is premature
because the motion for reconsideration filed with the Minister of Agrarian Reform is
still unresolved. As for the validity of the issuance of E.O. Nos. 228 and 229, he
argues that they were enacted pursuant to Section 6, Article XVIII of the Transitory
Provisions of the 1987 Constitution which reads:
The incumbent president shall continue to exercise legislative powers until the first
Congress is convened.
On the issue of just compensation, his position is that when P.D. No. 27 was
promulgated on October 21. 1972, the tenant-farmer of agricultural land was
deemed the owner of the land he was tilling. The leasehold rentals paid after that
date should therefore be considered amortization payments.
In his Reply to the public respondents, the petitioner maintains that the motion he
filed was resolved on December 14, 1987. An appeal to the Office of the President
would be useless with the promulgation of E.O. Nos. 228 and 229, which in effect
sanctioned the validity of the public respondents acts.
G.R. No. 78742
The petitioners in this case invoke the right of retention granted by P.D. No. 27 to
owners of rice and corn lands not exceeding seven hectares as long as they are
cultivating or intend to cultivate the same. Their respective lands do not exceed the
statutory limit but are occupied by tenants who are actually cultivating such lands.
According to P.D. No. 316, which was promulgated in implementation of P.D. No. 27:

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No tenant-farmer in agricultural lands primarily devoted to rice and corn shall be


ejected or removed from his farmholding until such time as the respective rights of
the tenant- farmers and the landowner shall have been determined in accordance
with the rules and regulations implementing P.D. No. 27.
The petitioners claim they cannot eject their tenants and so are unable to enjoy
their right of retention because the Department of Agrarian Reform has so far not
issued the implementing rules required under the above-quoted decree. They
therefore ask the Court for a writ of mandamus to compel the respondent to issue
the said rules.
In his Comment, the public respondent argues that P.D. No. 27 has been amended
by LOI 474 removing any right of retention from persons who own other agricultural
lands of more than 7 hectares in aggregate area or lands used for residential,
commercial, industrial or other purposes from which they derive adequate income
for their family. And even assuming that the petitioners do not fall under its terms,
the regulations implementing P.D. No. 27 have already been issued, to wit, the
Memorandum dated July 10, 1975 (Interim Guidelines on Retention by Small
Landowners, with an accompanying Retention Guide Table), Memorandum Circular
No. 11 dated April 21, 1978, (Implementation Guidelines of LOI No. 474),
Memorandum Circular No. 18-81 dated December 29,1981 (Clarificatory Guidelines
on Coverage of P.D. No. 27 and Retention by Small Landowners), and DAR
Administrative Order No. 1, series of 1985 (Providing for a Cut-off Date for
Landowners to Apply for Retention and/or to Protest the Coverage of their
Landholdings under Operation Land Transfer pursuant to P.D. No. 27). For failure to
file the corresponding applications for retention under these measures, the
petitioners are now barred from invoking this right.
The public respondent also stresses that the petitioners have prematurely initiated
this case notwithstanding the pendency of their appeal to the President of the
Philippines. Moreover, the issuance of the implementing rules, assuming this has
not yet been done, involves the exercise of discretion which cannot be controlled
through the writ of mandamus. This is especially true if this function is entrusted, as
in this case, to a separate department of the government.
In their Reply, the petitioners insist that the above-cited measures are not
applicable to them because they do not own more than seven hectares of
agricultural land. Moreover, assuming arguendo that the rules were intended to
cover them also, the said measures are nevertheless not in force because they have
not been published as required by law and the ruling of this Court in Tanada v.
Tuvera. 10 As for LOI 474, the same is ineffective for the additional reason that a
mere letter of instruction could not have repealed the presidential decree.
I
Although holding neither purse nor sword and so regarded as the weakest of the
three departments of the government, the judiciary is nonetheless vested with the
power to annul the acts of either the legislative or the executive or of both when not
conformable to the fundamental law. This is the reason for what some quarters call
the doctrine of judicial supremacy. Even so, this power is not lightly assumed or
readily exercised. The doctrine of separation of powers imposes upon the courts a
proper restraint, born of the nature of their functions and of their respect for the
other departments, in striking down the acts of the legislative and the executive as
unconstitutional. The policy, indeed, is a blend of courtesy and caution. To doubt is
to sustain. The theory is that before the act was done or the law was enacted,
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earnest studies were made by Congress or the President, or both, to insure that the
Constitution would not be breached.
In addition, the Constitution itself lays down stringent conditions for a declaration of
unconstitutionality, requiring therefor the concurrence of a majority of the members
of the Supreme Court who took part in the deliberations and voted on the issue
during their session en banc. 11 And as established by judge made doctrine, the
Court will assume jurisdiction over a constitutional question only if it is shown that
the essential requisites of a judicial inquiry into such a question are first satisfied.
Thus, there must be an actual case or controversy involving a conflict of legal rights
susceptible of judicial determination, the constitutional question must have been
opportunely raised by the proper party, and the resolution of the question is
unavoidably necessary to the decision of the case itself. 12
With particular regard to the requirement of proper party as applied in the cases
before us, we hold that the same is satisfied by the petitioners and intervenors
because each of them has sustained or is in danger of sustaining an immediate
injury as a result of the acts or measures complained of. 13 And even if, strictly
speaking, they are not covered by the definition, it is still within the wide discretion
of the Court to waive the requirement and so remove the impediment to its
addressing and resolving the serious constitutional questions raised.
In the first Emergency Powers Cases, 14 ordinary citizens and taxpayers were
allowed to question the constitutionality of several executive orders issued by
President Quirino although they were invoking only an indirect and general interest
shared in common with the public. The Court dismissed the objection that they were
not proper parties and ruled that the transcendental importance to the public of
these cases demands that they be settled promptly and definitely, brushing aside, if
we must, technicalities of procedure. We have since then applied this exception in
many other cases. 15
The other above-mentioned requisites have also been met in the present petitions.
In must be stressed that despite the inhibitions pressing upon the Court when
confronted with constitutional issues like the ones now before it, it will not hesitate
to declare a law or act invalid when it is convinced that this must be done. In
arriving at this conclusion, its only criterion will be the Constitution as God and its
conscience give it the light to probe its meaning and discover its purpose. Personal
motives and political considerations are irrelevancies that cannot influence its
decision. Blandishment is as ineffectual as intimidation.
For all the awesome power of the Congress and the Executive, the Court will not
hesitate to make the hammer fall, and heavily, to use Justice Laurels pithy
language, where the acts of these departments, or of any public official, betray the
peoples will as expressed in the Constitution.
It need only be added, to borrow again the words of Justice Laurel, that
when the judiciary mediates to allocate constitutional boundaries, it does not
assert any superiority over the other departments; it does not in reality nullify or
invalidate an act of the Legislature, but only asserts the solemn and sacred
obligation assigned to it by the Constitution to determine conflicting claims of
authority under the Constitution and to establish for the parties in an actual
controversy the rights which that instrument secures and guarantees to them. This
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is in truth all that is involved in what is termed judicial supremacy which properly
is the power of judicial review under the Constitution. 16
The cases before us categorically raise constitutional questions that this Court must
categorically resolve. And so we shall.
II
We proceed first to the examination of the preliminary issues before resolving the
more serious challenges to the constitutionality of the several measures involved in
these petitions.
The promulgation of P.D. No. 27 by President Marcos in the exercise of his powers
under martial law has already been sustained in Gonzales v. Estrella and we find no
reason to modify or reverse it on that issue. As for the power of President Aquino to
promulgate Proc. No. 131 and E.O. Nos. 228 and 229, the same was authorized
under Section 6 of the Transitory Provisions of the 1987 Constitution, quoted above.
The said measures were issued by President Aquino before July 27, 1987, when the
Congress of the Philippines was formally convened and took over legislative power
from her. They are not midnight enactments intended to pre-empt the legislature
because E.O. No. 228 was issued on July 17, 1987, and the other measures, i.e.,
Proc. No. 131 and E.O. No. 229, were both issued on July 22, 1987. Neither is it
correct to say that these measures ceased to be valid when she lost her legislative
power for, like any statute, they continue to be in force unless modified or repealed
by subsequent law or declared invalid by the courts. A statute does not ipso facto
become inoperative simply because of the dissolution of the legislature that
enacted it. By the same token, President Aquinos loss of legislative power did not
have the effect of invalidating all the measures enacted by her when and as long as
she possessed it.
Significantly, the Congress she is alleged to have undercut has not rejected but in
fact substantially affirmed the challenged measures and has specifically provided
that they shall be suppletory to R.A. No. 6657 whenever not inconsistent with its
provisions. 17 Indeed, some portions of the said measures, like the creation of the
P50 billion fund in Section 2 of Proc. No. 131, and Sections 20 and 21 of E.O. No.
229, have been incorporated by reference in the CARP Law.18
That fund, as earlier noted, is itself being questioned on the ground that it does not
conform to the requirements of a valid appropriation as specified in the
Constitution. Clearly, however, Proc. No. 131 is not an appropriation measure even if
it does provide for the creation of said fund, for that is not its principal purpose. An
appropriation law is one the primary and specific purpose of which is to authorize
the release of public funds from the treasury.19 The creation of the fund is only
incidental to the main objective of the proclamation, which is agrarian reform.
It should follow that the specific constitutional provisions invoked, to wit, Section 24
and Section 25(4) of Article VI, are not applicable. With particular reference to
Section 24, this obviously could not have been complied with for the simple reason
that the House of Representatives, which now has the exclusive power to initiate
appropriation measures, had not yet been convened when the proclamation was
issued. The legislative power was then solely vested in the President of the
Philippines, who embodied, as it were, both houses of Congress.

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The argument of some of the petitioners that Proc. No. 131 and E.O. No. 229 should
be invalidated because they do not provide for retention limits as required by Article
XIII, Section 4 of the Constitution is no longer tenable. R.A. No. 6657 does provide
for such limits now in Section 6 of the law, which in fact is one of its most
controversial provisions. This section declares:
Retention Limits. Except as otherwise provided in this Act, no person may own or
retain, directly or indirectly, any public or private agricultural land, the size of which
shall vary according to factors governing a viable family-sized farm, such as
commodity produced, terrain, infrastructure, and soil fertility as determined by the
Presidential Agrarian Reform Council (PARC) created hereunder, but in no case shall
retention by the landowner exceed five (5) hectares. Three (3) hectares may be
awarded to each child of the landowner, subject to the following qualifications: (1)
that he is at least fifteen (15) years of age; and (2) that he is actually tilling the land
or directly managing the farm; Provided, That landowners whose lands have been
covered by Presidential Decree No. 27 shall be allowed to keep the area originally
retained by them thereunder, further, That original homestead grantees or direct
compulsory heirs who still own the original homestead at the time of the approval of
this Act shall retain the same areas as long as they continue to cultivate said
homestead.
The argument that E.O. No. 229 violates the constitutional requirement that a bill
shall have only one subject, to be expressed in its title, deserves only short
attention. It is settled that the title of the bill does not have to be a catalogue of its
contents and will suffice if the matters embodied in the text are relevant to each
other and may be inferred from the title. 20
The Court wryly observes that during the past dictatorship, every presidential
issuance, by whatever name it was called, had the force and effect of law because it
came from President Marcos. Such are the ways of despots. Hence, it is futile to
argue, as the petitioners do in G.R. No. 79744, that LOI 474 could not have repealed
P.D. No. 27 because the former was only a letter of instruction. The important thing
is that it was issued by President Marcos, whose word was law during that time.
But for all their peremptoriness, these issuances from the President Marcos still had
to comply with the requirement for publication as this Court held in Tanada v.
Tuvera. 21 Hence, unless published in the Official Gazette in accordance with Article
2 of the Civil Code, they could not have any force and effect if they were among
those enactments successfully challenged in that case. LOI 474 was published,
though, in the Official Gazette dated November 29,1976.)
Finally, there is the contention of the public respondent in G.R. No. 78742 that the
writ of mandamus cannot issue to compel the performance of a discretionary act,
especially by a specific department of the government. That is true as a general
proposition but is subject to one important qualification. Correctly and categorically
stated, the rule is that mandamus will lie to compel the discharge of the
discretionary duty itself but not to control the discretion to be exercised. In other
words, mandamus can issue to require action only but not specific action.
Whenever a duty is imposed upon a public official and an unnecessary and
unreasonable delay in the exercise of such duty occurs, if it is a clear duty imposed
by law, the courts will intervene by the extraordinary legal remedy of mandamus to
compel action. If the duty is purely ministerial, the courts will require specific action.
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If the duty is purely discretionary, the courts by mandamus will require action only.
For example, if an inferior court, public official, or board should, for an unreasonable
length of time, fail to decide a particular question to the great detriment of all
parties concerned, or a court should refuse to take jurisdiction of a cause when the
law clearly gave it jurisdiction mandamus will issue, in the first case to require a
decision, and in the second to require that jurisdiction be taken of the cause. 22
And while it is true that as a rule the writ will not be proper as long as there is still a
plain, speedy and adequate remedy available from the administrative authorities,
resort to the courts may still be permitted if the issue raised is a question of law. 23
III
There are traditional distinctions between the police power and the power of
eminent domain that logically preclude the application of both powers at the same
time on the same subject. In the case of City of Baguio v. NAWASA, 24 for example,
where a law required the transfer of all municipal waterworks systems to the
NAWASA in exchange for its assets of equivalent value, the Court held that the
power being exercised was eminent domain because the property involved was
wholesome and intended for a public use. Property condemned under the police
power is noxious or intended for a noxious purpose, such as a building on the verge
of collapse, which should be demolished for the public safety, or obscene materials,
which should be destroyed in the interest of public morals. The confiscation of such
property is not compensable, unlike the taking of property under the power of
expropriation, which requires the payment of just compensation to the owner.
In the case of Pennsylvania Coal Co. v. Mahon, 25 Justice Holmes laid down the
limits of the police power in a famous aphorism: The general rule at least is that
while property may be regulated to a certain extent, if regulation goes too far it will
be recognized as a taking. The regulation that went too far was a law prohibiting
mining which might cause the subsidence of structures for human habitation
constructed on the land surface. This was resisted by a coal company which had
earlier granted a deed to the land over its mine but reserved all mining rights
thereunder, with the grantee assuming all risks and waiving any damage claim. The
Court held the law could not be sustained without compensating the grantor. Justice
Brandeis filed a lone dissent in which he argued that there was a valid exercise of
the police power. He said:
Every restriction upon the use of property imposed in the exercise of the police
power deprives the owner of some right theretofore enjoyed, and is, in that sense,
an abridgment by the State of rights in property without making compensation. But
restriction imposed to protect the public health, safety or morals from dangers
threatened is not a taking. The restriction here in question is merely the prohibition
of a noxious use. The property so restricted remains in the possession of its owner.
The state does not appropriate it or make any use of it. The state merely prevents
the owner from making a use which interferes with paramount rights of the public.
Whenever the use prohibited ceases to be noxious as it may because of further
changes in local or social conditions the restriction will have to be removed and
the owner will again be free to enjoy his property as heretofore.
Recent trends, however, would indicate not a polarization but a mingling of the
police power and the power of eminent domain, with the latter being used as an
implement of the former like the power of taxation. The employment of the taxing
power to achieve a police purpose has long been accepted. 26 As for the power of
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expropriation, Prof. John J. Costonis of the University of Illinois College of Law


(referring to the earlier case of Euclid v. Ambler Realty Co., 272 US 365, which
sustained a zoning law under the police power) makes the following significant
remarks:
Euclid, moreover, was decided in an era when judges located the Police and
eminent domain powers on different planets. Generally speaking, they viewed
eminent domain as encompassing public acquisition of private property for
improvements that would be available for public use, literally construed. To the
police power, on the other hand, they assigned the less intrusive task of preventing
harmful externalities a point reflected in the Euclid opinions reliance on an analogy
to nuisance law to bolster its support of zoning. So long as suppression of a
privately authored harm bore a plausible relation to some legitimate public
purpose, the pertinent measure need have afforded no compensation whatever.
With the progressive growth of governments involvement in land use, the distance
between the two powers has contracted considerably. Today government often
employs eminent domain interchangeably with or as a useful complement to the
police power a trend expressly approved in the Supreme Courts 1954 decision in
Berman v. Parker, which broadened the reach of eminent domains public use test
to match that of the police powers standard of public purpose. 27
The Berman case sustained a redevelopment project and the improvement of
blighted areas in the District of Columbia as a proper exercise of the police power.
On the role of eminent domain in the attainment of this purpose, Justice Douglas
declared:
If those who govern the District of Columbia decide that the Nations Capital should
be beautiful as well as sanitary, there is nothing in the Fifth Amendment that stands
in the way.
Once the object is within the authority of Congress, the right to realize it through
the exercise of eminent domain is clear.
For the power of eminent domain is merely the means to the end. 28
In Penn Central Transportation Co. v. New York City, 29 decided by a 6-3 vote in
1978, the U.S Supreme Court sustained the respondents Landmarks Preservation
Law under which the owners of the Grand Central Terminal had not been allowed to
construct a multi-story office building over the Terminal, which had been designated
a historic landmark. Preservation of the landmark was held to be a valid objective of
the police power. The problem, however, was that the owners of the Terminal would
be deprived of the right to use the airspace above it although other landowners in
the area could do so over their respective properties. While insisting that there was
here no taking, the Court nonetheless recognized certain compensatory rights
accruing to Grand Central Terminal which it said would undoubtedly mitigate the
loss caused by the regulation. This fair compensation, as he called it, was
explained by Prof. Costonis in this wise:
In return for retaining the Terminal site in its pristine landmark status, Penn Central
was authorized to transfer to neighboring properties the authorized but unused
rights accruing to the site prior to the Terminals designation as a landmark the
rights which would have been exhausted by the 59-story building that the city
refused to countenance atop the Terminal. Prevailing bulk restrictions on
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neighboring sites were proportionately relaxed, theoretically enabling Penn Central


to recoup its losses at the Terminal site by constructing or selling to others the right
to construct larger, hence more profitable buildings on the transferee sites. 30
The cases before us present no knotty complication insofar as the question of
compensable taking is concerned. To the extent that the measures under challenge
merely prescribe retention limits for landowners, there is an exercise of the police
power for the regulation of private property in accordance with the Constitution. But
where, to carry out such regulation, it becomes necessary to deprive such owners of
whatever lands they may own in excess of the maximum area allowed, there is
definitely a taking under the power of eminent domain for which payment of just
compensation is imperative. The taking contemplated is not a mere limitation of the
use of the land. What is required is the surrender of the title to and the physical
possession of the said excess and all beneficial rights accruing to the owner in favor
of the farmer-beneficiary. This is definitely an exercise not of the police power but of
the power of eminent domain.
Whether as an exercise of the police power or of the power of eminent domain, the
several measures before us are challenged as violative of the due process and equal
protection clauses.
The challenge to Proc. No. 131 and E.O. Nos. 228 and 299 on the ground that no
retention limits are prescribed has already been discussed and dismissed. It is noted
that although they excited many bitter exchanges during the deliberation of the
CARP Law in Congress, the retention limits finally agreed upon are, curiously
enough, not being questioned in these petitions. We therefore do not discuss them
here. The Court will come to the other claimed violations of due process in
connection with our examination of the adequacy of just compensation as required
under the power of expropriation.
The argument of the small farmers that they have been denied equal protection
because of the absence of retention limits has also become academic under Section
6 of R.A. No. 6657. Significantly, they too have not questioned the area of such
limits. There is also the complaint that they should not be made to share the burden
of agrarian reform, an objection also made by the sugar planters on the ground that
they belong to a particular class with particular interests of their own. However, no
evidence has been submitted to the Court that the requisites of a valid classification
have been violated.
Classification has been defined as the grouping of persons or things similar to each
other in certain particulars and different from each other in these same particulars.
31 To be valid, it must conform to the following requirements: (1) it must be based
on substantial distinctions; (2) it must be germane to the purposes of the law; (3) it
must not be limited to existing conditions only; and (4) it must apply equally to all
the members of the class. 32 The Court finds that all these requisites have been
met by the measures here challenged as arbitrary and discriminatory.
Equal protection simply means that all persons or things similarly situated must be
treated alike both as to the rights conferred and the liabilities imposed. 33 The
petitioners have not shown that they belong to a different class and entitled to a
different treatment. The argument that not only landowners but also owners of
other properties must be made to share the burden of implementing land reform
must be rejected. There is a substantial distinction between these two classes of
owners that is clearly visible except to those who will not see. There is no need to
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elaborate on this matter. In any event, the Congress is allowed a wide leeway in
providing for a valid classification. Its decision is accorded recognition and respect
by the courts of justice except only where its discretion is abused to the detriment
of the Bill of Rights.
It is worth remarking at this juncture that a statute may be sustained under the
police power only if there is a concurrence of the lawful subject and the lawful
method. Put otherwise, the interests of the public generally as distinguished from
those of a particular class require the interference of the State and, no less
important, the means employed are reasonably necessary for the attainment of the
purpose sought to be achieved and not unduly oppressive upon individuals. 34 As
the subject and purpose of agrarian reform have been laid down by the Constitution
itself, we may say that the first requirement has been satisfied. What remains to be
examined is the validity of the method employed to achieve the constitutional goal.
One of the basic principles of the democratic system is that where the rights of the
individual are concerned, the end does not justify the means. It is not enough that
there be a valid objective; it is also necessary that the means employed to pursue it
be in keeping with the Constitution. Mere expediency will not excuse constitutional
shortcuts. There is no question that not even the strongest moral conviction or the
most urgent public need, subject only to a few notable exceptions, will excuse the
bypassing of an individuals rights. It is no exaggeration to say that a, person
invoking a right guaranteed under Article III of the Constitution is a majority of one
even as against the rest of the nation who would deny him that right.
That right covers the persons life, his liberty and his property under Section 1 of
Article III of the Constitution. With regard to his property, the owner enjoys the
added protection of Section 9, which reaffirms the familiar rule that private property
shall not be taken for public use without just compensation.
This brings us now to the power of eminent domain.
IV
Eminent domain is an inherent power of the State that enables it to forcibly acquire
private lands intended for public use upon payment of just compensation to the
owner. Obviously, there is no need to expropriate where the owner is willing to sell
under terms also acceptable to the purchaser, in which case an ordinary deed of
sale may be agreed upon by the parties. 35 It is only where the owner is unwilling to
sell, or cannot accept the price or other conditions offered by the vendee, that the
power of eminent domain will come into play to assert the paramount authority of
the State over the interests of the property owner. Private rights must then yield to
the irresistible demands of the public interest on the time-honored justification, as
in the case of the police power, that the welfare of the people is the supreme law.
But for all its primacy and urgency, the power of expropriation is by no means
absolute (as indeed no power is absolute). The limitation is found in the
constitutional injunction that private property shall not be taken for public use
without just compensation and in the abundant jurisprudence that has evolved
from the interpretation of this principle. Basically, the requirements for a proper
exercise of the power are: (1) public use and (2) just compensation.
Let us dispose first of the argument raised by the petitioners in G.R. No. 79310 that
the State should first distribute public agricultural lands in the pursuit of agrarian
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reform instead of immediately disturbing property rights by forcibly acquiring


private agricultural lands. Parenthetically, it is not correct to say that only public
agricultural lands may be covered by the CARP as the Constitution calls for the just
distribution of all agricultural lands. In any event, the decision to redistribute
private agricultural lands in the manner prescribed by the CARP was made by the
legislative and executive departments in the exercise of their discretion. We are not
justified in reviewing that discretion in the absence of a clear showing that it has
been abused.
A becoming courtesy admonishes us to respect the decisions of the political
departments when they decide what is known as the political question. As explained
by Chief Justice Concepcion in the case of Taada v. Cuenco: 36
The term political question connotes what it means in ordinary parlance, namely,
a question of policy. It refers to those questions which, under the Constitution, are
to be decided by the people in their sovereign capacity; or in regard to which full
discretionary authority has been delegated to the legislative or executive branch of
the government. It is concerned with issues dependent upon the wisdom, not
legality, of a particular measure.
It is true that the concept of the political question has been constricted with the
enlargement of judicial power, which now includes the authority of the courts to
determine whether or not there has been a grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of any branch or instrumentality of the
Government. 37 Even so, this should not be construed as a license for us to
reverse the other departments simply because their views may not coincide with
ours.
The legislature and the executive have been seen fit, in their wisdom, to include in
the CARP the redistribution of private landholdings (even as the distribution of
public agricultural lands is first provided for, while also continuing apace under the
Public Land Act and other cognate laws). The Court sees no justification to interpose
its authority, which we may assert only if we believe that the political decision is not
unwise, but illegal. We do not find it to be so.
In U.S. v. Chandler-Dunbar Water Power Company, 38 it was held:
Congress having determined, as it did by the Act of March 3,1909 that the entire St.
Marys river between the American bank and the international line, as well as all of
the upland north of the present ship canal, throughout its entire length, was
necessary for the purpose of navigation of said waters, and the waters connected
therewith, that determination is conclusive in condemnation proceedings instituted
by the United States under that Act, and there is no room for judicial review of the
judgment of Congress .
As earlier observed, the requirement for public use has already been settled for us
by the Constitution itself. No less than the 1987 Charter calls for agrarian reform,
which is the reason why private agricultural lands are to be taken from their owners,
subject to the prescribed maximum retention limits. The purposes specified in P.D.
No. 27, Proc. No. 131 and R.A. No. 6657 are only an elaboration of the constitutional
injunction that the State adopt the necessary measures to encourage and
undertake the just distribution of all agricultural lands to enable farmers who are
landless to own directly or collectively the lands they till. That public use, as
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pronounced by the fundamental law itself, must be binding on us.


The second requirement, i.e., the payment of just compensation, needs a longer
and more thoughtful examination.
Just compensation is defined as the full and fair equivalent of the property taken
from its owner by the expropriator. 39 It has been repeatedly stressed by this Court
that the measure is not the takers gain but the owners loss.40 The word just is
used to intensify the meaning of the word compensation to convey the idea that
the equivalent to be rendered for the property to be taken shall be real, substantial,
full, ample. 41
It bears repeating that the measures challenged in these petitions contemplate
more than a mere regulation of the use of private lands under the police power. We
deal here with an actual taking of private agricultural lands that has dispossessed
the owners of their property and deprived them of all its beneficial use and
enjoyment, to entitle them to the just compensation mandated by the Constitution.
As held in Republic of the Philippines v. Castellvi, 42 there is compensable taking
when the following conditions concur: (1) the expropriator must enter a private
property; (2) the entry must be for more than a momentary period; (3) the entry
must be under warrant or color of legal authority; (4) the property must be devoted
to public use or otherwise informally appropriated or injuriously affected; and (5)
the utilization of the property for public use must be in such a way as to oust the
owner and deprive him of beneficial enjoyment of the property. All these requisites
are envisioned in the measures before us.
Where the State itself is the expropriator, it is not necessary for it to make a deposit
upon its taking possession of the condemned property, as the compensation is a
public charge, the good faith of the public is pledged for its payment, and all the
resources of taxation may be employed in raising the amount. 43 Nevertheless,
Section 16(e) of the CARP Law provides that:
Upon receipt by the landowner of the corresponding payment or, in case of rejection
or no response from the landowner, upon the deposit with an accessible bank
designated by the DAR of the compensation in cash or in LBP bonds in accordance
with this Act, the DAR shall take immediate possession of the land and shall request
the proper Register of Deeds to issue a Transfer Certificate of Title (TCT) in the name
of the Republic of the Philippines. The DAR shall thereafter proceed with the
redistribution of the land to the qualified beneficiaries.
Objection is raised, however, to the manner of fixing the just compensation, which it
is claimed is entrusted to the administrative authorities in violation of judicial
prerogatives. Specific reference is made to Section 16(d), which provides that in
case of the rejection or disregard by the owner of the offer of the government to
buy his land the DAR shall conduct summary administrative proceedings to determine the
compensation for the land by requiring the landowner, the LBP and other interested
parties to submit evidence as to the just compensation for the land, within fifteen
(15) days from the receipt of the notice. After the expiration of the above period, the
matter is deemed submitted for decision. The DAR shall decide the case within
thirty (30) days after it is submitted for decision.
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To be sure, the determination of just compensation is a function addressed to the


courts of justice and may not be usurped by any other branch or official of the
government. EPZA v. Dulay 44 resolved a challenge to several decrees promulgated
by President Marcos providing that the just compensation for property under
expropriation should be either the assessment of the property by the government or
the sworn valuation thereof by the owner, whichever was lower. In declaring these
decrees unconstitutional, the Court held through Mr. Justice Hugo E. Gutierrez, Jr.:
The method of ascertaining just compensation under the aforecited decrees
constitutes impermissible encroachment on judicial prerogatives. It tends to render
this Court inutile in a matter which under this Constitution is reserved to it for final
determination.
Thus, although in an expropriation proceeding the court technically would still have
the power to determine the just compensation for the property, following the
applicable decrees, its task would be relegated to simply stating the lower value of
the property as declared either by the owner or the assessor. As a necessary
consequence, it would be useless for the court to appoint commissioners under Rule
67 of the Rules of Court. Moreover, the need to satisfy the due process clause in the
taking of private property is seemingly fulfilled since it cannot be said that a judicial
proceeding was not had before the actual taking. However, the strict application of
the decrees during the proceedings would be nothing short of a mere formality or
charade as the court has only to choose between the valuation of the owner and
that of the assessor, and its choice is always limited to the lower of the two. The
court cannot exercise its discretion or independence in determining what is just or
fair. Even a grade school pupil could substitute for the judge insofar as the
determination of constitutional just compensation is concerned.
xxx
In the present petition, we are once again confronted with the same question of
whether the courts under P.D. No. 1533, which contains the same provision on just
compensation as its predecessor decrees, still have the power and authority to
determine just compensation, independent of what is stated by the decree and to
this effect, to appoint commissioners for such purpose.
This time, we answer in the affirmative.
xxx
It is violative of due process to deny the owner the opportunity to prove that the
valuation in the tax documents is unfair or wrong. And it is repulsive to the basic
concepts of justice and fairness to allow the haphazard work of a minor bureaucrat
or clerk to absolutely prevail over the judgment of a court promulgated only after
expert commissioners have actually viewed the property, after evidence and
arguments pro and con have been presented, and after all factors and
considerations essential to a fair and just determination have been judiciously
evaluated.
A reading of the aforecited Section 16(d) will readily show that it does not suffer
from the arbitrariness that rendered the challenged decrees constitutionally
objectionable. Although the proceedings are described as summary, the landowner
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and other interested parties are nevertheless allowed an opportunity to submit


evidence on the real value of the property. But more importantly, the determination
of the just compensation by the DAR is not by any means final and conclusive upon
the landowner or any other interested party, for Section 16(f) clearly provides:
Any party who disagrees with the decision may bring the matter to the court of
proper jurisdiction for final determination of just compensation.
The determination made by the DAR is only preliminary unless accepted by all
parties concerned. Otherwise, the courts of justice will still have the right to review
with finality the said determination in the exercise of what is admittedly a judicial
function.
The second and more serious objection to the provisions on just compensation is not
as easily resolved.
This refers to Section 18 of the CARP Law providing in full as follows:
SEC. 18. Valuation and Mode of Compensation. The LBP shall compensate the
landowner in such amount as may be agreed upon by the landowner and the DAR
and the LBP, in accordance with the criteria provided for in Sections 16 and 17, and
other pertinent provisions hereof, or as may be finally determined by the court, as
the just compensation for the land.
The compensation shall be paid in one of the following modes, at the option of the
landowner:
(1) Cash payment, under the following terms and conditions:
(a) For lands above fifty (50) hectares, insofar as the excess hectarage is concerned
Twenty-five percent (25%) cash, the balance to be paid in government financial
instruments negotiable at any time.
(b) For lands above twenty-four (24) hectares and up to fifty (50) hectares Thirty
percent (30%) cash, the balance to be paid in government financial instruments
negotiable at any time.
(c) For lands twenty-four (24) hectares and below Thirty-five percent (35%) cash,
the balance to be paid in government financial instruments negotiable at any time.
(2) Shares of stock in government-owned or controlled corporations, LBP preferred
shares, physical assets or other qualified investments in accordance with guidelines
set by the PARC;
(3) Tax credits which can be used against any tax liability;
(4) LBP bonds, which shall have the following features:
(a) Market interest rates aligned with 91-day treasury bill rates. Ten percent (10%)
of the face value of the bonds shall mature every year from the date of issuance
until the tenth (10th) year: Provided, That should the landowner choose to forego
the cash portion, whether in full or in part, he shall be paid correspondingly in LBP
bonds;
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(b) Transferability and negotiability. Such LBP bonds may be used by the landowner,
his successors-in- interest or his assigns, up to the amount of their face value, for
any of the following:
(i) Acquisition of land or other real properties of the government, including assets
under the Asset Privatization Program and other assets foreclosed by government
financial institutions in the same province or region where the lands for which the
bonds were paid are situated;
(ii) Acquisition of shares of stock of government-owned or controlled corporations or
shares of stock owned by the government in private corporations;
(iii) Substitution for surety or bail bonds for the provisional release of accused
persons, or for performance bonds;
(iv) Security for loans with any government financial institution, provided the
proceeds of the loans shall be invested in an economic enterprise, preferably in a
small and medium- scale industry, in the same province or region as the land for
which the bonds are paid;
(v) Payment for various taxes and fees to government: Provided, That the use of
these bonds for these purposes will be limited to a certain percentage of the
outstanding balance of the financial instruments; Provided, further, That the PARC
shall determine the percentages mentioned above;
(vi) Payment for tuition fees of the immediate family of the original bondholder in
government universities, colleges, trade schools, and other institutions;
(vii) Payment for fees of the immediate family of the original bondholder in
government hospitals; and
(viii) Such other uses as the PARC may from time to time allow.
The contention of the petitioners in G.R. No. 79777 is that the above provision is
unconstitutional insofar as it requires the owners of the expropriated properties to
accept just compensation therefor in less than money, which is the only medium of
payment allowed. In support of this contention, they cite jurisprudence holding that:
The fundamental rule in expropriation matters is that the owner of the property
expropriated is entitled to a just compensation, which should be neither more nor
less, whenever it is possible to make the assessment, than the money equivalent of
said property. Just compensation has always been understood to be the just and
complete equivalent of the loss which the owner of the thing expropriated has to
suffer by reason of the expropriation . 45 (Emphasis supplied.)
In J.M. Tuazon Co. v. Land Tenure Administration, 46 this Court held:
It is well-settled that just compensation means the equivalent for the value of the
property at the time of its taking. Anything beyond that is more, and anything short
of that is less, than just compensation. It means a fair and full equivalent for the
loss sustained, which is the measure of the indemnity, not whatever gain would
accrue to the expropriating entity. The market value of the land taken is the just
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compensation to which the owner of condemned property is entitled, the market


value being that sum of money which a person desirous, but not compelled to buy,
and an owner, willing, but not compelled to sell, would agree on as a price to be
given and received for such property. (Emphasis supplied.)
In the United States, where much of our jurisprudence on the subject has been
derived, the weight of authority is also to the effect that just compensation for
property expropriated is payable only in money and not otherwise. Thus
The medium of payment of compensation is ready money or cash. The condemnor
cannot compel the owner to accept anything but money, nor can the owner compel
or require the condemnor to pay him on any other basis than the value of the
property in money at the time and in the manner prescribed by the Constitution and
the statutes. When the power of eminent domain is resorted to, there must be a
standard medium of payment, binding upon both parties, and the law has fixed that
standard as money in cash. 47 (Emphasis supplied.)
Part cash and deferred payments are not and cannot, in the nature of things, be
regarded as a reliable and constant standard of compensation. 48
Just compensation for property taken by condemnation means a fair equivalent in
money, which must be paid at least within a reasonable time after the taking, and it
is not within the power of the Legislature to substitute for such payment future
obligations, bonds, or other valuable advantage. 49 (Emphasis supplied.)
It cannot be denied from these cases that the traditional medium for the payment of
just compensation is money and no other. And so, conformably, has just
compensation been paid in the past solely in that medium. However, we do not deal
here with the traditional exercise of the power of eminent domain. This is not an
ordinary expropriation where only a specific property of relatively limited area is
sought to be taken by the State from its owner for a specific and perhaps local
purpose.
What we deal with here is a revolutionary kind of expropriation.
The expropriation before us affects all private agricultural lands whenever found
and of whatever kind as long as they are in excess of the maximum retention limits
allowed their owners. This kind of expropriation is intended for the benefit not only
of a particular community or of a small segment of the population but of the entire
Filipino nation, from all levels of our society, from the impoverished farmer to the
land-glutted owner. Its purpose does not cover only the whole territory of this
country but goes beyond in time to the foreseeable future, which it hopes to secure
and edify with the vision and the sacrifice of the present generation of Filipinos.
Generations yet to come are as involved in this program as we are today, although
hopefully only as beneficiaries of a richer and more fulfilling life we will guarantee to
them tomorrow through our thoughtfulness today. And, finally, let it not be forgotten
that it is no less than the Constitution itself that has ordained this revolution in the
farms, calling for a just distribution among the farmers of lands that have
heretofore been the prison of their dreams but can now become the key at least to
their deliverance.
Such a program will involve not mere millions of pesos. The cost will be tremendous.
Considering the vast areas of land subject to expropriation under the laws before us,
we estimate that hundreds of billions of pesos will be needed, far more indeed than
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the amount of P50 billion initially appropriated, which is already staggering as it is


by our present standards. Such amount is in fact not even fully available at this
time.
We assume that the framers of the Constitution were aware of this difficulty when
they called for agrarian reform as a top priority project of the government. It is a
part of this assumption that when they envisioned the expropriation that would be
needed, they also intended that the just compensation would have to be paid not in
the orthodox way but a less conventional if more practical method. There can be no
doubt that they were aware of the financial limitations of the government and had
no illusions that there would be enough money to pay in cash and in full for the
lands they wanted to be distributed among the farmers. We may therefore assume
that their intention was to allow such manner of payment as is now provided for by
the CARP Law, particularly the payment of the balance (if the owner cannot be paid
fully with money), or indeed of the entire amount of the just compensation, with
other things of value. We may also suppose that what they had in mind was a
similar scheme of payment as that prescribed in P.D. No. 27, which was the law in
force at the time they deliberated on the new Charter and with which they
presumably agreed in principle.
The Court has not found in the records of the Constitutional Commission any
categorical agreement among the members regarding the meaning to be given the
concept of just compensation as applied to the comprehensive agrarian reform
program being contemplated. There was the suggestion to fine tune the
requirement to suit the demands of the project even as it was also felt that they
should leave it to Congress to determine how payment should be made to the
landowner and reimbursement required from the farmer-beneficiaries. Such
innovations as progressive compensation and State-subsidized compensation
were also proposed. In the end, however, no special definition of the just
compensation for the lands to be expropriated was reached by the Commission. 50
On the other hand, there is nothing in the records either that militates against the
assumptions we are making of the general sentiments and intention of the
members on the content and manner of the payment to be made to the landowner
in the light of the magnitude of the expenditure and the limitations of the
expropriator.
With these assumptions, the Court hereby declares that the content and manner of
the just compensation provided for in the afore- quoted Section 18 of the CARP Law
is not violative of the Constitution. We do not mind admitting that a certain degree
of pragmatism has influenced our decision on this issue, but after all this Court is
not a cloistered institution removed from the realities and demands of society or
oblivious to the need for its enhancement. The Court is as acutely anxious as the
rest of our people to see the goal of agrarian reform achieved at last after the
frustrations and deprivations of our peasant masses during all these disappointing
decades. We are aware that invalidation of the said section will result in the
nullification of the entire program, killing the farmers hopes even as they approach
realization and resurrecting the spectre of discontent and dissent in the restless
countryside. That is not in our view the intention of the Constitution, and that is not
what we shall decree today.
Accepting the theory that payment of the just compensation is not always required
to be made fully in money, we find further that the proportion of cash payment to
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the other things of value constituting the total payment, as determined on the basis
of the areas of the lands expropriated, is not unduly oppressive upon the landowner.
It is noted that the smaller the land, the bigger the payment in money, primarily
because the small landowner will be needing it more than the big landowners, who
can afford a bigger balance in bonds and other things of value. No less importantly,
the government financial instruments making up the balance of the payment are
negotiable at any time. The other modes, which are likewise available to the
landowner at his option, are also not unreasonable because payment is made in
shares of stock, LBP bonds, other properties or assets, tax credits, and other things
of value equivalent to the amount of just compensation.
Admittedly, the compensation contemplated in the law will cause the landowners,
big and small, not a little inconvenience. As already remarked, this cannot be
avoided. Nevertheless, it is devoutly hoped that these countrymen of ours,
conscious as we know they are of the need for their forbearance and even sacrifice,
will not begrudge us their indispensable share in the attainment of the ideal of
agrarian reform. Otherwise, our pursuit of this elusive goal will be like the quest for
the Holy Grail.
The complaint against the effects of non-registration of the land under E.O. No. 229
does not seem to be viable any more as it appears that Section 4 of the said Order
has been superseded by Section 14 of the CARP Law. This repeats the requisites of
registration as embodied in the earlier measure but does not provide, as the latter
did, that in case of failure or refusal to register the land, the valuation thereof shall
be that given by the provincial or city assessor for tax purposes. On the contrary,
the CARP Law says that the just compensation shall be ascertained on the basis of
the factors mentioned in its Section 17 and in the manner provided for in Section
16.
The last major challenge to CARP is that the landowner is divested of his property
even before actual payment to him in full of just compensation, in contravention of
a well- accepted principle of eminent domain.
The recognized rule, indeed, is that title to the property expropriated shall pass from
the owner to the expropriator only upon full payment of the just compensation.
Jurisprudence on this settled principle is consistent both here and in other
democratic jurisdictions. Thus:
Title to property which is the subject of condemnation proceedings does not vest
the condemnor until the judgment fixing just compensation is entered and paid, but
the condemnors title relates back to the date on which the petition under the
Eminent Domain Act, or the commissioners report under the Local Improvement
Act, is filed. 51
although the right to appropriate and use land taken for a canal is complete at
the time of entry, title to the property taken remains in the owner until payment is
actually made. 52 (Emphasis supplied.)
In Kennedy v. Indianapolis, 53 the US Supreme Court cited several cases holding
that title to property does not pass to the condemnor until just compensation had
actually been made. In fact, the decisions appear to be uniformly to this effect. As
early as 1838, in Rubottom v. McLure, 54 it was held that actual payment to the
owner of the condemned property was a condition precedent to the investment of
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the title to the property in the State albeit not to the appropriation of it to public
use. In Rexford v. Knight, 55 the Court of Appeals of New York said that the
construction upon the statutes was that the fee did not vest in the State until the
payment of the compensation although the authority to enter upon and appropriate
the land was complete prior to the payment. Kennedy further said that both on
principle and authority the rule is that the right to enter on and use the property
is complete, as soon as the property is actually appropriated under the authority of
law for a public use, but that the title does not pass from the owner without his
consent, until just compensation has been made to him.
Our own Supreme Court has held in Visayan Refining Co. v. Camus and Paredes, 56
that:
If the laws which we have exhibited or cited in the preceding discussion are
attentively examined it will be apparent that the method of expropriation adopted in
this jurisdiction is such as to afford absolute reassurance that no piece of land can
be finally and irrevocably taken from an unwilling owner until compensation is paid
. (Emphasis supplied.)
It is true that P.D. No. 27 expressly ordered the emancipation of tenant-farmer as
October 21, 1972 and declared that he shall be deemed the owner of a portion of
land consisting of a family-sized farm except that no title to the land owned by him
was to be actually issued to him unless and until he had become a full-fledged
member of a duly recognized farmers cooperative. It was understood, however,
that full payment of the just compensation also had to be made first, conformably to
the constitutional requirement.
When E.O. No. 228, categorically stated in its Section 1 that:
All qualified farmer-beneficiaries are now deemed full owners as of October 21,
1972 of the land they acquired by virtue of Presidential Decree No. 27. (Emphasis
supplied.)
it was obviously referring to lands already validly acquired under the said decree,
after proof of full-fledged membership in the farmers cooperatives and full payment
of just compensation. Hence, it was also perfectly proper for the Order to also
provide in its Section 2 that the lease rentals paid to the landowner by the farmerbeneficiary after October 21, 1972 (pending transfer of ownership after full payment
of just compensation), shall be considered as advance payment for the land.
The CARP Law, for its part, conditions the transfer of possession and ownership of
the land to the government on receipt by the landowner of the corresponding
payment or the deposit by the DAR of the compensation in cash or LBP bonds with
an accessible bank. Until then, title also remains with the landowner. 57 No outright
change of ownership is contemplated either.
Hence, the argument that the assailed measures violate due process by arbitrarily
transferring title before the land is fully paid for must also be rejected.
It is worth stressing at this point that all rights acquired by the tenant-farmer under
P.D. No. 27, as recognized under E.O. No. 228, are retained by him even now under
R.A. No. 6657. This should counter-balance the express provision in Section 6 of the
said law that the landowners whose lands have been covered by Presidential
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Decree No. 27 shall be allowed to keep the area originally retained by them
thereunder, further, That original homestead grantees or direct compulsory heirs
who still own the original homestead at the time of the approval of this Act shall
retain the same areas as long as they continue to cultivate said homestead.
In connection with these retained rights, it does not appear in G.R. No. 78742 that
the appeal filed by the petitioners with the Office of the President has already been
resolved. Although we have said that the doctrine of exhaustion of administrative
remedies need not preclude immediate resort to judicial action, there are factual
issues that have yet to be examined on the administrative level, especially the
claim that the petitioners are not covered by LOI 474 because they do not own
other agricultural lands than the subjects of their petition.
Obviously, the Court cannot resolve these issues. In any event, assuming that the
petitioners have not yet exercised their retention rights, if any, under P.D. No. 27,
the Court holds that they are entitled to the new retention rights provided for by
R.A. No. 6657, which in fact are on the whole more liberal than those granted by the
decree.
V
The CARP Law and the other enactments also involved in these cases have been the
subject of bitter attack from those who point to the shortcomings of these measures
and ask that they be scrapped entirely. To be sure, these enactments are less than
perfect; indeed, they should be continuously re-examined and rehoned, that they
may be sharper instruments for the better protection of the farmers rights. But we
have to start somewhere. In the pursuit of agrarian reform, we do not tread on
familiar ground but grope on terrain fraught with pitfalls and expected difficulties.
This is inevitable. The CARP Law is not a tried and tested project. On the contrary, to
use Justice Holmess words, it is an experiment, as all life is an experiment, and so
we learn as we venture forward, and, if necessary, by our own mistakes. We cannot
expect perfection although we should strive for it by all means. Meantime, we
struggle as best we can in freeing the farmer from the iron shackles that have
unconscionably, and for so long, fettered his soul to the soil.
By the decision we reach today, all major legal obstacles to the comprehensive
agrarian reform program are removed, to clear the way for the true freedom of the
farmer. We may now glimpse the day he will be released not only from want but also
from the exploitation and disdain of the past and from his own feelings of
inadequacy and helplessness. At last his servitude will be ended forever. At last the
farm on which he toils will be his farm. It will be his portion of the Mother Earth that
will give him not only the staff of life but also the joy of living. And where once it
bred for him only deep despair, now can he see in it the fruition of his hopes for a
more fulfilling future. Now at last can he banish from his small plot of earth his
insecurities and dark resentments and rebuild in it the music and the dream.
WHEREFORE, the Court holds as follows:
1. R.A. No. 6657, P.D. No. 27, Proc. No. 131, and E.O. Nos. 228 and 229 are
SUSTAINED against all the constitutional objections raised in the herein petitions.
2. Title to all expropriated properties shall be transferred to the State only upon full
payment of compensation to their respective owners.
3. All rights previously acquired by the tenant- farmers under P.D. No. 27 are
retained and recognized.
4. Landowners who were unable to exercise their rights of retention under P.D. No.
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27 shall enjoy the retention rights granted by R.A. No. 6657 under the conditions
therein prescribed.
5. Subject to the above-mentioned rulings all the petitions are DISMISSED, without
pronouncement as to costs.
SO ORDERED.
Fernan, (C.J.), Narvasa, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Gancayco,
Padilla, Bidin, Sarmiento, Cortes, Grio-Aquino, Medialdea and Regalado, JJ., concur.

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2. Roxas v. CA GR#127876 12/17/99


EN BANC
[G.R. No. 127876. December 17, 1999]
ROXAS & CO., INC., petitioner, vs. THE HONORABLE COURT OF APPEALS,
DEPARTMENT OF AGRARIAN REFORM, SECRETARY OF AGRARIAN REFORM, DAR
REGIONAL DIRECTOR FOR REGION IV, MUNICIPAL AGRARIAN REFORM OFFICER OF
NASUGBU, BATANGAS and DEPARTMENT OF AGRARIAN REFORM ADJUDICATION
BOARD, respondents.
DECISION
PUNO, J.:
This case involves three (3) haciendas in Nasugbu, Batangas owned by petitioner
and the validity of the acquisition of these haciendas by the government under
Republic Act No. 6657, the Comprehensive Agrarian Reform Law of 1988.
Petitioner Roxas & Co. is a domestic corporation and is the registered owner of three
haciendas, namely, Haciendas Palico, Banilad and Caylaway, all located in the
Municipality of Nasugbu, Batangas. Hacienda Palico is 1,024 hectares in area and is
registered under Transfer Certificate of Title (TCT) No. 985. This land is covered by
Tax Declaration Nos. 0465, 0466, 0468, 0470, 0234 and 0354. Hacienda Banilad is
1,050 hectares in area, registered under TCT No. 924 and covered by Tax
Declaration Nos. 0236, 0237 and 0390. Hacienda Caylaway is 867.4571 hectares in
area and is registered under TCT Nos. T-44662, T-44663, T-44664 and T-44665.
The events of this case occurred during the incumbency of then President Corazon
C. Aquino. In February 1986, President Aquino issued Proclamation No. 3
promulgating a Provisional Constitution. As head of the provisional government, the
President exercised legislative power until a legislature is elected and convened
under a new Constitution.[1] In the exercise of this legislative power, the President
signed on July 22, 1987, Proclamation No. 131 instituting a Comprehensive Agrarian
Reform Program and Executive Order No. 229 providing the mechanisms necessary
to initially implement the program.
On July 27, 1987, the Congress of the Philippines formally convened and took over
legislative power from the President.[2] This Congress passed Republic Act No.
6657, the Comprehensive Agrarian Reform Law (CARL) of 1988. The Act was signed
by the President on June 10, 1988 and took effect on June 15, 1988.
Before the laws effectivity, on May 6, 1988, petitioner filed with respondent DAR a
voluntary offer to sell Hacienda Caylaway pursuant to the provisions of E.O. No. 229.
Haciendas Palico and Banilad were later placed under compulsory acquisition by
respondent DAR in accordance with the CARL.
Hacienda Palico
On September 29, 1989, respondent DAR, through respondent Municipal Agrarian
Reform Officer (MARO) of Nasugbu, Batangas, sent a notice entitled Invitation to
Parties to petitioner. The Invitation was addressed to Jaime Pimentel, Hda.
Administrator, Hda. Palico.[3] Therein, the MARO invited petitioner to a conference
on October 6, 1989 at the DAR office in Nasugbu to discuss the results of the DAR
investigation of Hacienda Palico, which was scheduled for compulsory acquisition
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this year under the Comprehensive Agrarian Reform Program.[4]


On October 25, 1989, the MARO completed three (3) Investigation Reports after
investigation and ocular inspection of the Hacienda. In the first Report, the MARO
found that 270 hectares under Tax Declaration Nos. 465, 466, 468 and 470 were flat
to undulating (0-8% slope) and actually occupied and cultivated by 34 tillers of
sugarcane.[5] In the second Report, the MARO identified as flat to undulating
approximately 339 hectares under Tax Declaration No. 0234 which also had several
actual occupants and tillers of sugarcane;[6] while in the third Report, the MARO
found approximately 75 hectares under Tax Declaration No. 0354 as flat to
undulating with 33 actual occupants and tillers also of sugarcane.[7]
On October 27, 1989, a Summary Investigation Report was submitted and signed
jointly by the MARO, representatives of the Barangay Agrarian Reform Committee
(BARC) and Land Bank of the Philippines (LBP), and by the Provincial Agrarian
Reform Officer (PARO). The Report recommended that 333.0800 hectares of
Hacienda Palico be subject to compulsory acquisition at a value of P6,807,622.20.[8]
The following day, October 28, 1989, two (2) more Summary Investigation Reports
were submitted by the same officers and representatives. They recommended that
270.0876 hectares and 75.3800 hectares be placed under compulsory acquisition at
a compensation of P8,109,739.00 and P2,188,195.47, respectively.[9]
On December 12, 1989, respondent DAR through then Department Secretary
Miriam D. Santiago sent a Notice of Acquisition to petitioner. The Notice was
addressed as follows:
Roxas y Cia, Limited
Soriano Bldg., Plaza Cervantes
Manila, Metro Manila.[10]
Petitioner was informed that 1,023.999 hectares of its land in Hacienda Palico were
subject to immediate acquisition and distribution by the government under the
CARL; that based on the DARs valuation criteria, the government was offering
compensation of P3.4 million for 333.0800 hectares; that whether this offer was to
be accepted or rejected, petitioner was to inform the Bureau of Land Acquisition and
Distribution (BLAD) of the DAR; that in case of petitioners rejection or failure to reply
within thirty days, respondent DAR shall conduct summary administrative
proceedings with notice to petitioner to determine just compensation for the land;
that if petitioner accepts respondent DARs offer, or upon deposit of the
compensation with an accessible bank if it rejects the same, the DAR shall take
immediate possession of the land.[11]
Almost two years later, on September 26, 1991, the DAR Regional Director sent to
the LBP Land Valuation Manager three (3) separate Memoranda entitled Request to
Open Trust Account. Each Memoranda requested that a trust account representing
the valuation of three portions of Hacienda Palico be opened in favor of the
petitioner in view of the latters rejection of its offered value.[12]
Meanwhile in a letter dated May 4, 1993, petitioner applied with the DAR for
conversion of Haciendas Palico and Banilad from agricultural to non-agricultural
lands under the provisions of the CARL.[13] On July 14, 1993, petitioner sent a letter
to the DAR Regional Director reiterating its request for conversion of the two
haciendas.[14]
Despite petitioners application for conversion, respondent DAR proceeded with the
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acquisition of the two Haciendas. The LBP trust accounts as compensation for
Hacienda Palico were replaced by respondent DAR with cash and LBP bonds.[15] On
October 22, 1993, from the mother title of TCT No. 985 of the Hacienda, respondent
DAR registered Certificate of Land Ownership Award (CLOA) No. 6654. On October
30, 1993, CLOAs were distributed to farmer beneficiaries.[16]
Hacienda Banilad
On August 23, 1989, respondent DAR, through respondent MARO of Nasugbu,
Batangas, sent a notice to petitioner addressed as follows:
Mr. Jaime Pimentel
Hacienda Administrator
Hacienda Banilad
Nasugbu, Batangas[17]
The MARO informed Pimentel that Hacienda Banilad was subject to compulsory
acquisition under the CARL; that should petitioner wish to avail of the other
schemes such as Voluntary Offer to Sell or Voluntary Land Transfer, respondent DAR
was willing to provide assistance thereto.[18]
On September 18, 1989, the MARO sent an Invitation to Parties again to Pimentel
inviting the latter to attend a conference on September 21, 1989 at the MARO Office
in Nasugbu to discuss the results of the MAROs investigation over Hacienda Banilad.
[19]
On September 21, 1989, the same day the conference was held, the MARO
submitted two (2) Reports. In his first Report, he found that approximately 709
hectares of land under Tax Declaration Nos. 0237 and 0236 were flat to undulating
(0-8% slope). On this area were discovered 162 actual occupants and tillers of
sugarcane.[20] In the second Report, it was found that approximately 235 hectares
under Tax Declaration No. 0390 were flat to undulating, on which were 92 actual
occupants and tillers of sugarcane.[21]
The results of these Reports were discussed at the conference. Present in the
conference were representatives of the prospective farmer beneficiaries, the BARC,
the LBP, and Jaime Pimentel on behalf of the landowner.[22] After the meeting, on
the same day, September 21, 1989, a Summary Investigation Report was submitted
jointly by the MARO, representatives of the BARC, LBP, and the PARO. They
recommended that after ocular inspection of the property, 234.6498 hectares under
Tax Declaration No. 0390 be subject to compulsory acquisition and distribution by
CLOA.[23] The following day, September 22, 1989, a second Summary Investigation
was submitted by the same officers. They recommended that 737.2590 hectares
under Tax Declaration Nos. 0236 and 0237 be likewise placed under compulsory
acquisition for distribution.[24]
On December 12, 1989, respondent DAR, through the Department Secretary, sent
to petitioner two (2) separate Notices of Acquisition over Hacienda Banilad. These
Notices were sent on the same day as the Notice of Acquisition over Hacienda
Palico. Unlike the Notice over Hacienda Palico, however, the Notices over Hacienda
Banilad were addressed to:
Roxas y Cia. Limited
7th Floor, Cacho-Gonzales Bldg. 101 Aguirre St., Leg.
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Makati, Metro Manila.[25]


Respondent DAR offered petitioner compensation of P15,108,995.52 for 729.4190
hectares and P4,428,496.00 for 234.6498 hectares.[26]
On September 26, 1991, the DAR Regional Director sent to the LBP Land Valuation
Manager a Request to Open Trust Account in petitioners name as compensation for
234.6493 hectares of Hacienda Banilad.[27] A second Request to Open Trust
Account was sent on November 18, 1991 over 723.4130 hectares of said Hacienda.
[28]
On December 18, 1991, the LBP certified that the amounts of P4,428,496.40 and
P21,234,468.78 in cash and LBP bonds had been earmarked as compensation for
petitioners land in Hacienda Banilad.[29]
On May 4, 1993, petitioner applied for conversion of both Haciendas Palico and
Banilad.
Hacienda Caylaway
Hacienda Caylaway was voluntarily offered for sale to the government on May 6,
1988 before the effectivity of the CARL. The Hacienda has a total area of 867.4571
hectares and is covered by four (4) titlesTCT Nos. T-44662, T-44663, T-44664 and T44665. On January 12, 1989, respondent DAR, through the Regional Director for
Region IV, sent to petitioner two (2) separate Resolutions accepting petitioners
voluntary offer to sell Hacienda Caylaway, particularly TCT Nos. T-44664 and T44663.[30] The Resolutions were addressed to:
Roxas & Company, Inc.
7th Flr. Cacho- Gonzales Bldg.
Aguirre, Legaspi Village
Makati, M. M.[31]
On September 4, 1990, the DAR Regional Director issued two separate Memoranda
to the LBP Regional Manager requesting for the valuation of the land under TCT Nos.
T-44664 and T-44663.[32] On the same day, respondent DAR, through the Regional
Director, sent to petitioner a Notice of Acquisition over 241.6777 hectares under
TCT No. T-44664 and 533.8180 hectares under TCT No. T-44663.[33] Like the
Resolutions of Acceptance, the Notice of Acquisition was addressed to petitioner at
its office in Makati, Metro Manila.
Nevertheless, on August 6, 1992, petitioner, through its President, Eduardo J. Roxas,
sent a letter to the Secretary of respondent DAR withdrawing its VOS of Hacienda
Caylaway. The Sangguniang Bayan of Nasugbu, Batangas allegedly authorized the
reclassification of Hacienda Caylaway from agricultural to non-agricultural. As a
result, petitioner informed respondent DAR that it was applying for conversion of
Hacienda Caylaway from agricultural to other uses.[34]
In a letter dated September 28, 1992, respondent DAR Secretary informed
petitioner that a reclassification of the land would not exempt it from agrarian
reform. Respondent Secretary also denied petitioners withdrawal of the VOS on the
ground that withdrawal could only be based on specific grounds such as
unsuitability of the soil for agriculture, or if the slope of the land is over 18 degrees
and that the land is undeveloped.[35]

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Despite the denial of the VOS withdrawal of Hacienda Caylaway, on May 11, 1993,
petitioner filed its application for conversion of both Haciendas Palico and Banilad.
[36] On July 14, 1993, petitioner, through its President, Eduardo Roxas, reiterated its
request to withdraw the VOS over Hacienda Caylaway in light of the following:
1) Certification issued by Conrado I. Gonzales, Officer-in-Charge, Department of
Agriculture, Region 4, 4th Floor, ATI (BA) Bldg., Diliman, Quezon City dated March 1,
1993 stating that the lands subject of referenced titles are not feasible and
economically sound for further agricultural development.
2) Resolution No. 19 of the Sangguniang Bayan of Nasugbu, Batangas approving the
Zoning Ordinance reclassifying areas covered by the referenced titles to nonagricultural which was enacted after extensive consultation with government
agencies, including [the Department of Agrarian Reform], and the requisite public
hearings.
3) Resolution No. 106 of the Sangguniang Panlalawigan of Batangas dated March 8,
1993 approving the Zoning Ordinance enacted by the Municipality of Nasugbu.
4) Letter dated December 15, 1992 issued by Reynaldo U. Garcia of the Municipal
Planning & Development, Coordinator and Deputized Zoning Administrator
addressed to Mrs. Alicia P. Logarta advising that the Municipality of Nasugbu,
Batangas has no objection to the conversion of the lands subject of referenced titles
to non-agricultural.[37]
On August 24, 1993, petitioner instituted Case No. N-0017-96-46 (BA) with
respondent DAR Adjudication Board (DARAB) praying for the cancellation of the
CLOAs issued by respondent DAR in the name of several persons. Petitioner alleged
that the Municipality of Nasugbu, where the haciendas are located, had been
declared a tourist zone, that the land is not suitable for agricultural production, and
that the Sangguniang Bayan of Nasugbu had reclassified the land to nonagricultural.
In a Resolution dated October 14, 1993, respondent DARAB held that the case
involved the prejudicial question of whether the property was subject to agrarian
reform, hence, this question should be submitted to the Office of the Secretary of
Agrarian Reform for determination.[38]
On October 29, 1993, petitioner filed with the Court of Appeals CA-G.R. SP No.
32484. It questioned the expropriation of its properties under the CARL and the
denial of due process in the acquisition of its landholdings.
Meanwhile, the petition for conversion of the three haciendas was denied by the
MARO on November 8, 1993.
Petitioners petition was dismissed by the Court of Appeals on April 28, 1994.[39]
Petitioner moved for reconsideration but the motion was denied on January 17,
1997 by respondent court.[40]
Hence, this recourse. Petitioner assigns the following errors:
A. RESPONDENT COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT
PETITIONERS CAUSE OF ACTION IS PREMATURE FOR FAILURE TO EXHAUST
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ADMINISTRATIVE REMEDIES IN VIEW OF THE PATENT ILLEGALITY OF THE


RESPONDENTS ACTS, THE IRREPARABLE DAMAGE CAUSED BY SAID ILLEGAL ACTS,
AND THE ABSENCE OF A PLAIN, SPEEDY AND ADEQUATE REMEDY IN THE ORDINARY
COURSE OF LAWALL OF WHICH ARE EXCEPTIONS TO THE SAID DOCTRINE.
B. RESPONDENT COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT
PETITIONERS LANDHOLDINGS ARE SUBJECT TO COVERAGE UNDER THE
COMPREHENSIVE AGRARIAN REFORM LAW, IN VIEW OF THE UNDISPUTED FACT THAT
PETITIONERS LANDHOLDINGS HAVE BEEN CONVERTED TO NON-AGRICULTURAL
USES BY PRESIDENTIAL PROCLAMATION NO. 1520 WHICH DECLARED THE
MUNICIPALITY OF NASUGBU, BATANGAS AS A TOURIST ZONE, AND THE ZONING
ORDINANCE OF THE MUNICIPALITY OF NASUGBU RE-CLASSIFYING CERTAIN
PORTIONS OF PETITIONERS LANDHOLDINGS AS NON-AGRICULTURAL, BOTH OF
WHICH PLACE SAID LANDHOLDINGS OUTSIDE THE SCOPE OF AGRARIAN REFORM,
OR AT THE VERY LEAST ENTITLE PETITIONER TO APPLY FOR CONVERSION AS
CONCEDED BY RESPONDENT DAR.
C. RESPONDENT COURT OF APPEALS GRAVELY ERRED WHEN IT FAILED TO DECLARE
THE PROCEEDINGS BEFORE RESPONDENT DAR VOID FOR FAILURE TO OBSERVE DUE
PROCESS, CONSIDERING THAT RESPONDENTS BLATANTLY DISREGARDED THE
PROCEDURE FOR THE ACQUISITION OF PRIVATE LANDS UNDER R.A. 6657, MORE
PARTICULARLY, IN FAILING TO GIVE DUE NOTICE TO THE PETITIONER AND TO
PROPERLY IDENTIFY THE SPECIFIC AREAS SOUGHT TO BE ACQUIRED.
D. RESPONDENT COURT OF APPEALS GRAVELY ERRED WHEN IT FAILED TO
RECOGNIZE THAT PETITIONER WAS BRAZENLY AND ILLEGALLY DEPRIVED OF ITS
PROPERTY WITHOUT JUST COMPENSATION, CONSIDERING THAT PETITIONER WAS
NOT PAID JUST COMPENSATION BEFORE IT WAS UNCEREMONIOUSLY STRIPPED OF
ITS LANDHOLDINGS THROUGH THE ISSUANCE OF CLOAS TO ALLEGED FARMER
BENEFICIARIES, IN VIOLATION OF R.A. 6657.[41]
The assigned errors involve three (3) principal issues: (1) whether this Court can
take cognizance of this petition despite petitioners failure to exhaust administrative
remedies; (2) whether the acquisition proceedings over the three haciendas were
valid and in accordance with law; and (3) assuming the haciendas may be
reclassified from agricultural to non-agricultural, whether this court has the power
to rule on this issue.
I. Exhaustion of Administrative Remedies.
In its first assigned error, petitioner claims that respondent Court of Appeals gravely
erred in finding that petitioner failed to exhaust administrative remedies. As a
general rule, before a party may be allowed to invoke the jurisdiction of the courts
of justice, he is expected to have exhausted all means of administrative redress.
This is not absolute, however. There are instances when judicial action may be
resorted to immediately. Among these exceptions are: (1) when the question raised
is purely legal; (2) when the administrative body is in estoppel; (3) when the act
complained of is patently illegal; (4) when there is urgent need for judicial
intervention; (5) when the respondent acted in disregard of due process; (6) when
the respondent is a department secretary whose acts, as an alter ego of the
President, bear the implied or assumed approval of the latter; (7) when irreparable
damage will be suffered; (8) when there is no other plain, speedy and adequate
remedy; (9) when strong public interest is involved; (10) when the subject of the
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controversy is private land; and (11) in quo warranto proceedings.[42]


Petitioner rightly sought immediate redress in the courts. There was a violation of its
rights and to require it to exhaust administrative remedies before the DAR itself was
not a plain, speedy and adequate remedy.
Respondent DAR issued Certificates of Land Ownership Award (CLOAs) to farmer
beneficiaries over portions of petitioners land without just compensation to
petitioner. A Certificate of Land Ownership Award (CLOA) is evidence of ownership of
land by a beneficiary under R.A. 6657, the Comprehensive Agrarian Reform Law of
1988.[43] Before this may be awarded to a farmer beneficiary, the land must first
be acquired by the State from the landowner and ownership transferred to the
former. The transfer of possession and ownership of the land to the government are
conditioned upon the receipt by the landowner of the corresponding payment or
deposit by the DAR of the compensation with an accessible bank. Until then, title
remains with the landowner.[44] There was no receipt by petitioner of any
compensation for any of the lands acquired by the government.
The kind of compensation to be paid the landowner is also specific. The law
provides that the deposit must be made only in cash or LBP bonds.[45] Respondent
DARs opening of trust account deposits in petitioners name with the Land Bank of
the Philippines does not constitute payment under the law. Trust account deposits
are not cash or LBP bonds. The replacement of the trust account with cash or LBP
bonds did not ipso facto cure the lack of compensation; for essentially, the
determination of this compensation was marred by lack of due process. In fact, in
the entire acquisition proceedings, respondent DAR disregarded the basic
requirements of administrative due process. Under these circumstances, the
issuance of the CLOAs to farmer beneficiaries necessitated immediate judicial action
on the part of the petitioner.
II. The Validity of the Acquisition Proceedings Over the Haciendas.
Petititioners allegation of lack of due process goes into the validity of the acquisition
proceedings themselves. Before we rule on this matter, however, there is need to
lay down the procedure in the acquisition of private lands under the provisions of
the law.
A. Modes of Acquisition of Land under R. A. 6657
Republic Act No. 6657, the Comprehensive Agrarian Reform Law of 1988 (CARL),
provides for two (2) modes of acquisition of private land: compulsory and voluntary.
The procedure for the compulsory acquisition of private lands is set forth in Section
16 of R.A. 6657, viz:
Sec. 16. Procedure for Acquisition of Private Lands. --. For purposes of acquisition of
private lands, the following procedures shall be followed:
a) After having identified the land, the landowners and the beneficiaries, the DAR
shall send its notice to acquire the land to the owners thereof, by personal delivery
or registered mail, and post the same in a conspicuous place in the municipal
building and barangay hall of the place where the property is located. Said notice
shall contain the offer of the DAR to pay a corresponding value in accordance with
the valuation set forth in Sections 17, 18, and other pertinent provisions hereof.
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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 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 muniments of title.
d) In case of rejection or failure to reply, the DAR shall conduct summary
administrative proceedings to determine the compensation for the land requiring
the landowner, the LBP and other interested parties to submit evidence as to the
just compensation for the land, within fifteen (15) days from receipt of the notice.
After the expiration of the above period, the matter is deemed submitted for
decision. The DAR shall decide the case within thirty (30) days after it is submitted
for decision.
e) Upon receipt by the landowner of the corresponding payment, or, in case of
rejection or no response from the landowner, upon the deposit with an accessible
bank designated by the DAR of the compensation in cash or in LBP bonds in
accordance with this Act, the DAR shall 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.
In the compulsory acquisition of private lands, the landholding, the landowners and
the farmer beneficiaries must first be identified. After identification, the DAR shall
send a Notice of Acquisition to the landowner, by personal delivery or registered
mail, and post it in a conspicuous place in the municipal building and barangay hall
of the place where the property is located. Within thirty days from receipt of the
Notice of Acquisition, the landowner, his administrator or representative shall inform
the DAR of his acceptance or rejection of the offer. If the landowner accepts, he
executes and delivers a deed of transfer in favor of the government and surrenders
the certificate of title. Within thirty days from the execution of the deed of transfer,
the Land Bank of the Philippines (LBP) pays the owner the purchase price. If the
landowner rejects the DARs offer or fails to make a reply, the DAR conducts
summary administrative proceedings to determine just compensation for the land.
The landowner, the LBP representative and other interested parties may submit
evidence on just compensation within fifteen days from notice. Within thirty days
from submission, the DAR shall decide the case and inform the owner of its decision
and the amount of just compensation. Upon receipt by the owner of the
corresponding payment, or, in case of rejection or lack of response from the latter,
the DAR shall deposit the compensation in cash or in LBP bonds with an accessible
bank. The DAR shall immediately take possession of the land and cause the
issuance of a transfer certificate of title in the name of the Republic of the
Philippines. The land shall then be redistributed to the farmer beneficiaries. Any
party may question the decision of the DAR in the regular courts for final
determination of just compensation.

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The DAR has made compulsory acquisition the priority mode of land acquisition to
hasten the implementation of the Comprehensive Agrarian Reform Program (CARP).
[46] Under Section 16 of the CARL, the first step in compulsory acquisition is the
identification of the land, the landowners and the beneficiaries. However, the law is
silent on how the identification process must be made. To fill in this gap, the DAR
issued on July 26, 1989 Administrative Order No. 12, Series of 1989, which set the
operating procedure in the identification of such lands. The procedure is as follows:
II. OPERATING PROCEDURE
A. The Municipal Agrarian Reform Officer, with the assistance of the pertinent
Barangay Agrarian Reform Committee (BARC), shall:
1. Update the masterlist of all agricultural lands covered under the CARP in his area
of responsibility. The masterlist shall include such information as required under the
attached CARP Masterlist Form which shall include the name of the landowner,
landholding area, TCT/OCT number, and tax declaration number.
2. Prepare a Compulsory Acquisition Case Folder (CACF) for each title (OCT/TCT) or
landholding covered under Phase I and II of the CARP except those for which the
landowners have already filed applications to avail of other modes of land
acquisition. A case folder shall contain the following duly accomplished forms:
a) CARP CA Form 1MARO Investigation Report
b) CARP CA Form 2-- Summary Investigation Report of Findings and Evaluation
c) CARP CA Form 3Applicants Information Sheet
d) CARP CA Form 4Beneficiaries Undertaking
e) CARP CA Form 5Transmittal Report to the PARO
The MARO/ BARC shall certify that all information contained in the above-mentioned
forms have been examined and verified by him and that the same are true and
correct.
3. Send a Notice of Coverage and a letter of invitation to a conference/ meeting to
the landowner covered by the Compulsory Case Acquisition Folder. Invitations to the
said conference/ meeting shall also be sent to the prospective farmer-beneficiaries,
the BARC representative(s), the Land Bank of the Philippines (LBP) representative,
and other interested parties to discuss the inputs to the valuation of the property.
He shall discuss the MARO/ BARC investigation report and solicit the views,
objection, agreements or suggestions of the participants thereon. The landowner
shall also be asked to indicate his retention area. The minutes of the meeting shall
be signed by all participants in the conference and shall form an integral part of the
CACF.
4. Submit all completed case folders to the Provincial Agrarian Reform Officer
(PARO).
B. The PARO shall:
1. Ensure that the individual case folders are forwarded to him by his MAROs.
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2. Immediately upon receipt of a case folder, compute the valuation of the land in
accordance with A.O. No. 6, Series of 1988.[47] The valuation worksheet and the
related CACF valuation forms shall be duly certified correct by the PARO and all the
personnel who participated in the accomplishment of these forms.
3. In all cases, the PARO may validate the report of the MARO through ocular
inspection and verification of the property. This ocular inspection and verification
shall be mandatory when the computed value exceeds 500,000 per estate.
4. Upon determination of the valuation, forward the case folder, together with the
duly accomplished valuation forms and his recommendations, to the Central Office.
The LBP representative and the MARO concerned shall be furnished a copy each of
his report.
C. DAR Central Office, specifically through the Bureau of Land Acquisition and
Distribution (BLAD), shall:
1. Within three days from receipt of the case folder from the PARO, review, evaluate
and determine the final land valuation of the property covered by the case folder. A
summary review and evaluation report shall be prepared and duly certified by the
BLAD Director and the personnel directly participating in the review and final
valuation.
2. Prepare, for the signature of the Secretary or her duly authorized representative,
a Notice of Acquisition (CARP CA Form 8) for the subject property. Serve the Notice
to the landowner personally or through registered mail within three days from its
approval. The Notice shall include, among others, the area subject of compulsory
acquisition, and the amount of just compensation offered by DAR.
3. Should the landowner accept the DARs offered value, the BLAD shall prepare and
submit to the Secretary for approval the Order of Acquisition. However, in case of
rejection or non-reply, the DAR Adjudication Board (DARAB) shall conduct a
summary administrative hearing to determine just compensation, in accordance
with the procedures provided under Administrative Order No. 13, Series of 1989.
Immediately upon receipt of the DARABs decision on just compensation, the BLAD
shall prepare and submit to the Secretary for approval the required Order of
Acquisition.
4. Upon the landowners receipt of payment, in case of acceptance, or upon deposit
of payment in the designated bank, in case of rejection or non-response, the
Secretary shall immediately direct the pertinent Register of Deeds to issue the
corresponding Transfer Certificate of Title (TCT) in the name of the Republic of the
Philippines. Once the property is transferred, the DAR, through the PARO, shall take
possession of the land for redistribution to qualified beneficiaries.
Administrative Order No. 12, Series of 1989 requires that the Municipal Agrarian
Reform Officer (MARO) keep an updated master list of all agricultural lands under
the CARP in his area of responsibility containing all the required information. The
MARO prepares a Compulsory Acquisition Case Folder (CACF) for each title covered
by CARP. The MARO then sends the landowner a Notice of Coverage and a letter of
invitation to a conference/ meeting over the land covered by the CACF. He also
sends invitations to the prospective farmer-beneficiaries, the representatives of the
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Barangay Agrarian Reform Committee (BARC), the Land Bank of the Philippines
(LBP) and other interested parties to discuss the inputs to the valuation of the
property and solicit views, suggestions, objections or agreements of the parties. At
the meeting, the landowner is asked to indicate his retention area.
The MARO shall make a report of the case to the Provincial Agrarian Reform Officer
(PARO) who shall complete the valuation of the land. Ocular inspection and
verification of the property by the PARO shall be mandatory when the computed
value of the estate exceeds P500,000.00. Upon determination of the valuation, the
PARO shall forward all papers together with his recommendation to the Central
Office of the DAR. The DAR Central Office, specifically, the Bureau of Land
Acquisition and Distribution (BLAD), shall review, evaluate and determine the final
land valuation of the property. The BLAD shall prepare, on the signature of the
Secretary or his duly authorized representative, a Notice of Acquisition for the
subject property.[48] From this point, the provisions of Section 16 of R.A. 6657 then
apply.[49]
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 States 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.[50] 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.[51] The Bill of Rights
provides that [n]o person shall be deprived of life, liberty or property without due
process of law.[52] The CARL was not intended to take away property without due
process of law.[53] The exercise of the power of eminent domain requires that due
process be observed in the taking of private property.
DAR A. O. No. 12, Series of 1989, from whence the Notice of Coverage first sprung,
was amended in 1990 by DAR A.O. No. 9, Series of 1990 and in 1993 by DAR A.O.
No. 1, Series of 1993. The Notice of Coverage and letter of invitation to the
conference meeting were expanded and amplified in said amendments.
DAR A. O. No. 9, Series of 1990 entitled Revised Rules Governing the Acquisition of
Agricultural Lands Subject of Voluntary Offer to Sell and Compulsory Acquisition
Pursuant to R. A. 6657, requires that:
B. MARO
1. Receives the duly accomplished CARP Form Nos. 1 & 1.1 including supporting
documents.
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2. Gathers basic ownership documents listed under 1.a or 1.b above and prepares
corresponding VOCF/ CACF by landowner/ landholding.
3. Notifies/ invites the landowner and representatives of the LBP, DENR, BARC and
prospective beneficiaries of the schedule of ocular inspection of the property at
least one week in advance.
4. MARO/ LAND BANK FIELD OFFICE/ BARC
a) Identify the land and landowner, and determine the suitability for agriculture and
productivity of the land and jointly prepare Field Investigation Report (CARP Form
No. 2), including the Land Use Map of the property.
b) Interview applicants and assist them in the preparation of the Application For
Potential CARP Beneficiary (CARP Form No. 3).
c) Screen prospective farmer-beneficiaries and for those found qualified, cause the
signing of the respective Application to Purchase and Farmers Undertaking (CARP
Form No. 4).
d) Complete the Field Investigation Report based on the result of the ocular
inspection/ investigation of the property and documents submitted. See to it that
Field Investigation Report is duly accomplished and signed by all concerned.
5. MARO
a) Assists the DENR Survey Party in the conduct of a boundary/ subdivision survey
delineating areas covered by OLT, retention, subject of VOS, CA (by phases, if
possible), infrastructures, etc., whichever is applicable.
b) Sends Notice of Coverage (CARP Form No. 5) to landowner concerned or his duly
authorized representative inviting him for a conference.
c) Sends Invitation Letter (CARP Form No. 6) for a conference/ public hearing to
prospective farmer-beneficiaries, landowner, representatives of BARC, LBP, DENR,
DA, NGOs, farmers organizations and other interested parties to discuss the
following matters:
Result of Field Investigation
Inputs to valuation
Issues raised
Comments/ recommendations by all parties concerned.
d) Prepares Summary of Minutes of the conference/ public hearing to be guided by
CARP Form No. 7.
e) Forwards the completed VOCF/CACF to the Provincial Agrarian Reform Office
(PARO) using CARP Form No. 8 (Transmittal Memo to PARO).

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x x x.
DAR A. O. No. 9, Series of 1990 lays down the rules on both Voluntary Offer to Sell
(VOS) and Compulsory Acquisition (CA) transactions involving lands enumerated
under Section 7 of the CARL.[54] In both VOS and CA transactions, the MARO
prepares the Voluntary Offer to Sell Case Folder (VOCF) and the Compulsory
Acquisition Case Folder (CACF), as the case may be, over a particular landholding.
The MARO notifies the landowner as well as representatives of the LBP, BARC and
prospective beneficiaries of the date of the ocular inspection of the property at least
one week before the scheduled date and invites them to attend the same. The
MARO, LBP or BARC conducts the ocular inspection and investigation by identifying
the land and landowner, determining the suitability of the land for agriculture and
productivity, interviewing and screening prospective farmer beneficiaries. Based on
its investigation, the MARO, LBP or BARC prepares the Field Investigation Report
which shall be signed by all parties concerned. In addition to the field investigation,
a boundary or subdivision survey of the land may also be conducted by a Survey
Party of the Department of Environment and Natural Resources (DENR) to be
assisted by the MARO.[55] This survey shall delineate the areas covered by
Operation Land Transfer (OLT), areas retained by the landowner, areas with
infrastructure, and the areas subject to VOS and CA. After the survey and field
investigation, the MARO sends a Notice of Coverage to the landowner or his duly
authorized representative inviting him to a conference or public hearing with the
farmer beneficiaries, representatives of the BARC, LBP, DENR, Department of
Agriculture (DA), non-government organizations, farmers organizations and other
interested parties. At the public hearing, the parties shall discuss the results of the
field investigation, issues that may be raised in relation thereto, inputs to the
valuation of the subject landholding, and other comments and recommendations by
all parties concerned. The Minutes of the conference/ public hearing shall form part
of the VOCF or CACF which files shall be forwarded by the MARO to the PARO. The
PARO reviews, evaluates and validates the Field Investigation Report and other
documents in the VOCF/ CACF. He then forwards the records to the RARO for another
review.
DAR A. O. No. 9, Series of 1990 was amended by DAR A. O. No. 1, Series of 1993.
DAR A. O. No. 1, Series of 1993 provided, among others, that:
IV. OPERATING PROCEDURES:
"Steps Responsible Activity Forms/
Agency/Unit Document
(Requirements)
A. Identification and
Documentation
xxx
5 DARMO Issues Notice of Coverage to LO CARP by personal delivery with proof of
Form No.2 service, or by registered mail with return card, informing him that his
property is now under CARP coverage and for LO to select his retention area, if he
desires to avail of his right of retention; and at the same time invites him to join the
field investigation to be conducted on his property which should be scheduled at
least two weeks in advance of said notice.
A copy of said Notice CARP shall be posted for at least Form No.17 one week on the
bulletin board of the municipal and barangay halls where the property is located.

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LGU office concerned notifies DAR about compliance with posting requirement thru
return indorsement on CARP Form No. 17.
6 DARMO Sends notice to the LBP, CARP BARC, DENR Form No.3 representatives
and prospective ARBs of the schedule of the field investigation to be conducted on
the subject property.
7 DARMO With the participation of CARP BARC the LO, representatives of Form No.4
LBP the LBP, BARC, DENR Land Use DENR and prospective ARBs, Map Local Office
conducts the investigation on subject property to identify the landholding,
determines its suitability and productivity; and jointly prepares the Field
Investigation Report (FIR) and Land Use Map. However, the field investigation shall
proceed even if the LO, the representatives of the DENR and prospective ARBs are
not available provided, they were given due notice of the time and date of the
investigation to be conducted. Similarly, if the LBP representative is not available or
could not come on the scheduled date, the field investigation shall also be
conducted, after which the duly accomplished Part I of CARP Form No. 4 shall be
forwarded to the LBP representative for validation. If he agrees to the ocular
inspection report
of DAR, he signs the FIR (Part I) and accomplishes Part II thereof.
In the event that there is a difference or variance between the findings of the DAR
and the LBP as to the propriety of covering the land under CARP, whether in whole
or in part, on the issue of suitability to agriculture, degree of development or slope,
and on issues affecting idle lands, the conflict shall be resolved by a composite
team of DAR, LBP, DENR and DA which shall jointly conduct further investigation
thereon. The team shall submit its report of findings which shall be binding to both
DAR and LBP, pursuant to Joint Memorandum Circular of the DAR, LBP, DENR and DA
dated 27 January 1992.
8 DARMO Screens prospective ARBS CARP BARC and causes the signing of Form No.
5 the Application of Purchase and Farmers' Undertaking (APFU).
9 DARMO Furnishes a copy of the CARP duly accomplished FIR to Form No. the
landowner by personal 4 delivery with proof of service or registered
mail with return card and posts a copy thereof for at least one week on the bulletin
board of the municipal and barangay halls where the property is located.
LGU office concerned CARP Notifies DAR about Form No. compliance with posting 17
requirement thru return endorsement on CARP Form No. 17.
B. Land Survey
10 DARMO Conducts perimeter or Perimeter And/or segregation survey or DENR
delineating areas covered Segregation Local Office by OLT, "uncarpable Survey Plan
areas such as 18% slope and above, unproductive/ unsuitable to agriculture,
retention, infrastructure. In case of segregation or subdivision survey, the plan shall
be approved by DENR-LMS.
C. Review and Completion of Documents.
11 DARMO Forwards VOCF/CACF CARP to DARPO. Form No. 6
x x x."
DAR A. O. No. 1, Series of 1993, modified the identification process and increased
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the number of government agencies involved in the identification and delineation of


the land subject to acquisition.[56] This time, the Notice of Coverage is sent to the
landowner before the conduct of the field investigation and the sending must
comply with specific requirements. Representatives of the DAR Municipal Office
(DARMO) must send the Notice of Coverage to the landowner by personal delivery
with proof of service, or by registered mail with return card, informing him that his
property is under CARP coverage and that if he desires to avail of his right of
retention, he may choose which area he shall retain. The Notice of Coverage shall
also invite the landowner to attend the field investigation to be scheduled at least
two weeks from notice. The field investigation is for the purpose of identifying the
landholding and determining its suitability for agriculture and its productivity. A copy
of the Notice of Coverage shall be posted for at least one week on the bulletin board
of the municipal and barangay halls where the property is located. The date of the
field investigation shall also be sent by the DAR Municipal Office to representatives
of the LBP, BARC, DENR and prospective farmer beneficiaries. The field investigation
shall be conducted on the date set with the participation of the landowner and the
various representatives. If the landowner and other representatives are absent, the
field investigation shall proceed, provided they were duly notified thereof. Should
there be a variance between the findings of the DAR and the LBP as to whether the
land be placed under agrarian reform, the lands suitability to agriculture, the degree
or development of the slope, etc., the conflict shall be resolved by a composite
team of the DAR, LBP, DENR and DA which shall jointly conduct further
investigation. The teams findings shall be binding on both DAR and LBP. After the
field investigation, the DAR Municipal Office shall prepare the Field Investigation
Report and Land Use Map, a copy of which shall be furnished the landowner by
personal delivery with proof of service or registered mail with return card. Another
copy of the Report and Map shall likewise be posted for at least one week in the
municipal or barangay halls where the property is located.
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.
B. The Compulsory Acquisition of Haciendas Palico and Banilad
In the case at bar, respondent DAR claims that it, through MARO Leopoldo C. Lejano,
sent a letter of invitation entitled Invitation to Parties dated September 29, 1989 to
petitioner corporation, through Jaime Pimentel, the administrator of Hacienda Palico.
[57] The invitation was received on the same day it was sent as indicated by a
signature and the date received at the bottom left corner of said invitation. With
regard to Hacienda Banilad, respondent DAR claims that Jaime Pimentel,
administrator also of Hacienda Banilad, was notified and sent an invitation to the
conference. Pimentel actually attended the conference on September 21, 1989 and
signed the Minutes of the meeting on behalf of petitioner corporation.[58] The
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Minutes was also signed by the representatives of the BARC, the LBP and farmer
beneficiaries.[59] No letter of invitation was sent or conference meeting held with
respect to Hacienda Caylaway because it was subject to a Voluntary Offer to Sell to
respondent DAR.[60]
When respondent DAR, through the Municipal Agrarian Reform Officer (MARO), sent
to the various parties the Notice of Coverage and invitation to the conference, DAR
A. O. No. 12, Series of 1989 was already in effect more than a month earlier. The
Operating Procedure in DAR Administrative Order No. 12 does not specify how
notices or letters of invitation shall be sent to the landowner, the representatives of
the BARC, the LBP, the farmer beneficiaries and other interested parties. The
procedure in the sending of these notices is important to comply with the requisites
of due process especially when the owner, as in this case, is a juridical entity.
Petitioner is a domestic corporation,[61] and therefore, has a personality separate
and distinct from its shareholders, officers and employees.
The Notice of Acquisition in Section 16 of the CARL is required to be sent to the
landowner by personal delivery or registered mail. Whether the landowner be a
natural or juridical person to whose address the Notice may be sent by personal
delivery or registered mail, the law does not distinguish. The DAR Administrative
Orders also do not distinguish. In the proceedings before the DAR, the distinction
between natural and juridical persons in the sending of notices may be found in the
Revised Rules of Procedure of the DAR Adjudication Board (DARAB). Service of
pleadings before the DARAB is governed by Section 6, Rule V of the DARAB Revised
Rules of Procedure. Notices and pleadings are served on private domestic
corporations or partnerships in the following manner:
Sec. 6. Service upon Private Domestic Corporation or Partnership.-- If the defendant
is a corporation organized under the laws of the Philippines or a partnership duly
registered, service may be made on the president, manager, secretary, cashier,
agent, or any of its directors or partners.
Similarly, the Revised Rules of Court of the Philippines, in Section 13, Rule 14
provides:
Sec. 13. Service upon private domestic corporation or partnership.If the defendant
is a corporation organized under the laws of the Philippines or a partnership duly
registered, service may be made on the president, manager, secretary, cashier,
agent, or any of its directors.
Summonses, pleadings and notices in cases against a private domestic corporation
before the DARAB and the regular courts are served on the president, manager,
secretary, cashier, agent or any of its directors. These persons are those through
whom the private domestic corporation or partnership is capable of action.[62]
Jaime Pimentel is not the president, manager, secretary, cashier or director of
petitioner corporation. Is he, as administrator of the two Haciendas, considered an
agent of the corporation?
The purpose of all rules for service of process on a corporation is to make it
reasonably certain that the corporation will receive prompt and proper notice in an
action against it.[63] Service must be made on a representative so integrated with
the corporation as to make it a priori supposable that he will realize his
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responsibilities and know what he should do with any legal papers served on him,
[64] and bring home to the corporation notice of the filing of the action.[65]
Petitioners evidence does not show the official duties of Jaime Pimentel as
administrator of petitioners haciendas. The evidence does not indicate whether
Pimentels duties is so integrated with the corporation that he would immediately
realize his responsibilities and know what he should do with any legal papers served
on him. At the time the notices were sent and the preliminary conference
conducted, petitioners principal place of business was listed in respondent DARs
records as Soriano Bldg., Plaza Cervantes, Manila,[66] and 7th Flr. Cacho-Gonzales
Bldg., 101 Aguirre St., Makati, Metro Manila.[67] Pimentel did not hold office at the
principal place of business of petitioner. Neither did he exercise his functions in
Plaza Cervantes, Manila nor in Cacho-Gonzales Bldg., Makati, Metro Manila. He
performed his official functions and actually resided in the haciendas in Nasugbu,
Batangas, a place over two hundred kilometers away from Metro Manila.
Curiously, respondent DAR had information of the address of petitioners principal
place of business. The Notices of Acquisition over Haciendas Palico and Banilad
were addressed to petitioner at its offices in Manila and Makati. These Notices were
sent barely three to four months after Pimentel was notified of the preliminary
conference. [68] Why respondent DAR chose to notify Pimentel instead of the
officers of the corporation was not explained by the said respondent.
Nevertheless, assuming that Pimentel was an agent of petitioner corporation, and
the notices and letters of invitation were validly served on petitioner through him,
there is no showing that Pimentel himself was duly authorized to attend the
conference meeting with the MARO, BARC and LBP representatives and farmer
beneficiaries for purposes of compulsory acquisition of petitioners landholdings.
Even respondent DARs evidence does not indicate this authority. On the contrary,
petitioner claims that it had no knowledge of the letter-invitation, hence, could not
have given Pimentel the authority to bind it to whatever matters were discussed or
agreed upon by the parties at the preliminary conference or public hearing. Notably,
one year after Pimentel was informed of the preliminary conference, DAR A.O. No. 9,
Series of 1990 was issued and this required that the Notice of Coverage must be
sent to the landowner concerned or his duly authorized representative.[69]
Assuming further that petitioner was duly notified of the CARP coverage of its
haciendas, the areas found actually subject to CARP were not properly identified
before they were taken over by respondent DAR. Respondents insist that the lands
were identified because they are all registered property and the technical
description in their respective titles specifies their metes and bounds. Respondents
admit at the same time, however, that not all areas in the haciendas were placed
under the comprehensive agrarian reform program invariably by reason of elevation
or character or use of the land.[70] The acquisition of the landholdings did not cover
the entire expanse of the two haciendas, but only portions thereof. Hacienda Palico
has an area of 1,024 hectares and only 688.7576 hectares were targetted for
acquisition. Hacienda Banilad has an area of 1,050 hectares but only 964.0688
hectares were subject to CARP. The haciendas are not entirely agricultural lands. In
fact, the various tax declarations over the haciendas describe the landholdings as
sugarland, and forest, sugarland, pasture land, horticulture and woodland.[71]
Under Section 16 of the CARL, the sending of the Notice of Acquisition specifically
requires that the land subject to land reform be first identified. The two haciendas in
the instant case cover vast tracts of land. Before Notices of Acquisition were sent to
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petitioner, however, the exact areas of the landholdings were not properly
segregated and delineated. Upon receipt of this notice, therefore, petitioner
corporation had no idea which portions of its estate were subject to compulsory
acquisition, which portions it could rightfully retain, whether these retained portions
were compact or contiguous, and which portions were excluded from CARP
coverage. Even respondent DARs evidence does not show that petitioner, through
its duly authorized representative, was notified of any ocular inspection and
investigation that was to be conducted by respondent DAR. Neither is there proof
that petitioner was given the opportunity to at least choose and identify its
retention area in those portions to be acquired compulsorily. The right of retention
and how this right is exercised, is guaranteed in Section 6 of the CARL, viz:
Section 6. Retention Limits.x x x.
The right to choose the area to be retained, which shall be compact or contiguous,
shall pertain to the landowner; Provided, however, That in case the area selected for
retention by the landowner is tenanted, the tenant shall have the option to choose
whether to remain therein or be a beneficiary in the same or another agricultural
land with similar or comparable features. In case the tenant chooses to remain in
the retained area, he shall be considered a leaseholder and shall lose his right to be
a beneficiary under this Act. In case the tenant chooses to be a beneficiary in
another agricultural land, he loses his right as a leaseholder to the land retained by
the landowner. The tenant must exercise this option within a period of one (1) year
from the time the landowner manifests his choice of the area for retention.
Under the law, a landowner may retain not more than five hectares out of the total
area of his agricultural land subject to CARP. The right to choose the area to be
retained, which shall be compact or contiguous, pertains to the landowner. If the
area chosen for retention is tenanted, the tenant shall have the option to choose
whether to remain on the portion or be a beneficiary in the same or another
agricultural land with similar or comparable features.
C. The Voluntary Acquisition of Hacienda Caylaway
Petitioner was also left in the dark with respect to Hacienda Caylaway, which was
the subject of a Voluntary Offer to Sell (VOS). The VOS in the instant case was made
on May 6, 1988,[72] before the effectivity of R.A. 6657 on June 15, 1988. VOS
transactions were first governed by DAR Administrative Order No. 19, series of
1989,[73] and under this order, all VOS filed before June 15, 1988 shall be heard
and processed in accordance with the procedure provided for in Executive Order No.
229, thus:
III. All VOS transactions which are now pending before the DAR and for which no
payment has been made shall be subject to the notice and hearing requirements
provided in Administrative Order No. 12, Series of 1989, dated 26 July 1989, Section
II, Subsection A, paragraph 3.
All VOS filed before 15 June 1988, the date of effectivity of the CARL, shall be heard
and processed in accordance with the procedure provided for in Executive Order No.
229.
"x x x."
Section 9 of E.O. 229 provides:
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Sec. 9. Voluntary Offer to Sell. The government shall purchase all agricultural lands
it deems productive and suitable to farmer cultivation voluntarily offered for sale to
it at a valuation determined in accordance with Section 6. Such transaction shall be
exempt from the payment of capital gains tax and other taxes and fees.
Executive Order 229 does not contain the procedure for the identification of private
land as set forth in DAR A. O. No. 12, Series of 1989. Section 5 of E.O. 229 merely
reiterates the procedure of acquisition in Section 16, R.A. 6657. In other words, the
E.O. is silent as to the procedure for the identification of the land, the notice of
coverage and the preliminary conference with the landowner, representatives of the
BARC, the LBP and farmer beneficiaries. Does this mean that these requirements
may be dispensed with regard to VOS filed before June 15, 1988? The answer is no.
First of all, the same E.O. 229, like Section 16 of the CARL, requires that the land,
landowner and beneficiaries of the land subject to agrarian reform be identified
before the notice of acquisition should be issued.[74] Hacienda Caylaway was
voluntarily offered for sale in 1989. The Hacienda has a total area of 867.4571
hectares and is covered by four (4) titles. In two separate Resolutions both dated
January 12, 1989, respondent DAR, through the Regional Director, formally accepted
the VOS over two of these four titles.[75] The land covered by the two titles has an
area of 855.5257 hectares, but only 648.8544 hectares thereof fell within the
coverage of R.A. 6657.[76] Petitioner claims it does not know where these portions
are located.
Respondent DAR, on the other hand, avers that surveys on the land covered by the
four titles were conducted in 1989, and that petitioner, as landowner, was not
denied participation therein. The results of the survey and the land valuation
summary report, however, do not indicate whether notices to attend the same were
actually sent to and received by petitioner or its duly authorized representative.[77]
To reiterate, Executive Order No. 229 does not lay down the operating procedure,
much less the notice requirements, before the VOS is accepted by respondent DAR.
Notice to the landowner, however, cannot be dispensed with. It is part of
administrative due process and is an essential requisite to enable the landowner
himself to exercise, at the very least, his right of retention guaranteed under the
CARL.
III. The Conversion of the three Haciendas.
It is petitioners claim that the three haciendas are not subject to agrarian reform
because they have been declared for tourism, not agricultural purposes.[78] In
1975, then President Marcos issued Proclamation No. 1520 declaring the
municipality of Nasugbu, Batangas a tourist zone. Lands in Nasugbu, including the
subject haciendas, were allegedly reclassified as non-agricultural 13 years before
the effectivity of R. A. No. 6657.[79] In 1993, the Regional Director for Region IV of
the Department of Agriculture certified that the haciendas are not feasible and
sound for agricultural development.[80] On March 20, 1992, pursuant to
Proclamation No. 1520, the Sangguniang Bayan of Nasugbu, Batangas adopted
Resolution No. 19 reclassifying certain areas of Nasugbu as non-agricultural.[81]
This Resolution approved Municipal Ordinance No. 19, Series of 1992, the Revised
Zoning Ordinance of Nasugbu[82] which zoning ordinance was based on a Land Use
Plan for Planning Areas for New Development allegedly prepared by the University
of the Philippines.[83] Resolution No. 19 of the Sangguniang Bayan was approved
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by the Sangguniang Panlalawigan of Batangas on March 8, 1993.[84]


Petitioner claims that Proclamation No. 1520 was also upheld by respondent DAR in
1991 when it approved conversion of 1,827 hectares in Nasugbu into a tourist area
known as the Batulao Resort Complex, and 13.52 hectares in Barangay Caylaway as
within the potential tourist belt. [85] Petitioner presents evidence before us that
these areas are adjacent to the haciendas subject of this petition, hence, the
haciendas should likewise be converted. Petitioner urges this Court to take
cognizance of the conversion proceedings and rule accordingly.[86]
We do not agree. Respondent DARs failure to observe due process in the acquisition
of petitioners landholdings does not ipso facto give this Court the power to
adjudicate over petitioners application for conversion of its haciendas from
agricultural to non-agricultural. The agency charged with the mandate of approving
or disapproving applications for conversion is the DAR.
At the time petitioner filed its application for conversion, the Rules of Procedure
governing the processing and approval of applications for land use conversion was
the DAR A. O. No. 2, Series of 1990. Under this A. O., the application for conversion
is filed with the MARO where the property is located. The MARO reviews the
application and its supporting documents and conducts field investigation and
ocular inspection of the property. The findings of the MARO are subject to review
and evaluation by the Provincial Agrarian Reform Officer (PARO). The PARO may
conduct further field investigation and submit a supplemental report together with
his recommendation to the Regional Agrarian Reform Officer (RARO) who shall
review the same. For lands less than five hectares, the RARO shall approve or
disapprove applications for conversion. For lands exceeding five hectares, the RARO
shall evaluate the PARO Report and forward the records and his report to the
Undersecretary for Legal Affairs. Applications over areas exceeding fifty hectares
are approved or disapproved by the Secretary of Agrarian Reform.
The DARs mandate over applications for conversion was first laid down in Section 4
(j) and Section 5 (1) of Executive Order No. 129-A, Series of 1987 and reiterated in
the CARL and Memorandum Circular No. 54, Series of 1993 of the Office of the
President. The DARs jurisdiction over applications for conversion is provided as
follows:
"A. The Department of Agrarian Reform (DAR) is mandated to approve or disapprove
applications for conversion, restructuring or readjustment of agricultural lands into
non-agricultural uses, pursuant to Section 4 (j) of Executive Order No. 129-A, Series
of 1987.
"B. Section 5 (1) of E.O. 129-A, Series of 1987, vests in the DAR, exclusive authority
to approve or disapprove applications for conversion of agricultural lands for
residential, commercial, industrial and other land uses.
"C Section 65 of R. A. No. 6657, otherwise known as the Comprehensive Agrarian
Reform Law of 1988, likewise empowers the DAR to authorize under certain
conditions, the conversion of agricultural lands.
"D. Section 4 of Memorandum Circular No. 54, Series of 1993 of the Office of the
President, provides that action on applications for land use conversion on individual
landholdings shall remain as the responsibility of the DAR, which shall utilize as its
primary reference, documents on the comprehensive land use plans and
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accompanying ordinances passed upon and approved by the local government units
concerned, together with the National Land Use Policy, pursuant to R. A. No. 6657
and E. O. No. 129-A.[87]
Applications for conversion were initially governed by DAR A. O. No. 1, Series of
1990 entitled Revised Rules and Regulations Governing Conversion of Private
Agricultural Lands and Non-Agricultural Uses, and DAR A. O. No. 2, Series of 1990
entitled Rules of Procedure Governing the Processing and Approval of Applications
for Land Use Conversion. These A.O.s and other implementing guidelines, including
Presidential issuances and national policies related to land use conversion have
been consolidated in DAR A. O. No. 07, Series of 1997. Under this recent issuance,
the guiding principle in land use conversion is:
to preserve prime agricultural lands for food production while, at the same time,
recognizing the need of the other sectors of society (housing, industry and
commerce) for land, when coinciding with the objectives of the Comprehensive
Agrarian Reform Law to promote social justice, industrialization and the optimum
use of land as a national resource for public welfare.[88]
Land Use refers to the manner of utilization of land, including its allocation,
development and management. Land Use Conversion refers to the act or process of
changing the current use of a piece of agricultural land into some other use as
approved by the DAR.[89] The conversion of agricultural land to uses other than
agricultural requires field investigation and conferences with the occupants of the
land. They involve factual findings and highly technical matters within the special
training and expertise of the DAR. DAR A. O. No. 7, Series of 1997 lays down with
specificity how the DAR must go about its task. This time, the field investigation is
not conducted by the MARO but by a special task force, known as the Center for
Land Use Policy Planning and Implementation (CLUPPI- DAR Central Office). The
procedure is that once an application for conversion is filed, the CLUPPI prepares the
Notice of Posting. The MARO only posts the notice and thereafter issues a certificate
to the fact of posting. The CLUPPI conducts the field investigation and dialogues
with the applicants and the farmer beneficiaries to ascertain the information
necessary for the processing of the application. The Chairman of the CLUPPI
deliberates on the merits of the investigation report and recommends the
appropriate action. This recommendation is transmitted to the Regional Director,
thru the Undersecretary, or Secretary of Agrarian Reform. Applications involving
more than fifty hectares are approved or disapproved by the Secretary. The
procedure does not end with the Secretary, however. The Order provides that the
decision of the Secretary may be appealed to the Office of the President or the
Court of Appeals, as the case may be, viz:
Appeal from the decision of the Undersecretary shall be made to the Secretary, and
from the Secretary to the Office of the President or the Court of Appeals as the case
may be. The mode of appeal/ motion for reconsideration, and the appeal fee, from
Undersecretary to the Office of the Secretary shall be the same as that of the
Regional Director to the Office of the Secretary.[90]
Indeed, the doctrine of primary jurisdiction does not warrant a court to arrogate
unto itself authority to resolve a controversy the jurisdiction over which is initially
lodged with an administrative body of special competence.[91] Respondent DAR is
in a better position to resolve petitioners application for conversion, being primarily
the agency possessing the necessary expertise on the matter. The power to
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determine whether Haciendas Palico, Banilad and Caylaway are non-agricultural,


hence, exempt from the coverage of the CARL lies with the DAR, not with this Court.
Finally, we stress that the failure of respondent DAR to comply with the requisites of
due process in the acquisition proceedings does not give this Court the power to
nullify the CLOAs already issued to the farmer beneficiaries. To assume the power is
to short-circuit the administrative process, which has yet to run its regular course.
Respondent DAR must be given the chance to correct its procedural lapses in the
acquisition proceedings. In Hacienda Palico alone, CLOA's were issued to 177 farmer
beneficiaries in 1993.[92] Since then until the present, these farmers have been
cultivating their lands.[93] It goes against the basic precepts of justice, fairness and
equity to deprive these people, through no fault of their own, of the land they till.
Anyhow, the farmer beneficiaries hold the property in trust for the rightful owner of
the land.
IN VIEW WHEREOF, the petition is granted in part and the acquisition proceedings
over the three haciendas are nullified for respondent DAR's failure to observe due
process therein. In accordance with the guidelines set forth in this decision and the
applicable administrative procedure, the case is hereby remanded to respondent
DAR for proper acquisition proceedings and determination of petitioner's application
for conversion.
SO ORDERED.
3. Hacienda Luisita GR 171101 7/15/2011
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
HACIENDA LUISITA, INCORPORATED,
Petitioner,
LUISITA INDUSTRIAL PARK CORPORATION and RIZAL COMMERCIAL BANKING
CORPORATION,
Petitioners-in-Intervention,
- versus PRESIDENTIAL AGRARIAN REFORM COUNCIL; SECRETARY NASSER PANGANDAMAN
OF THE DEPARTMENT OF AGRARIAN REFORM; ALYANSA NG MGA MANGGAGAWANG
BUKID NG HACIENDA LUISITA, RENE GALANG, NOEL MALLARI, and JULIO SUNIGA[1]
and his SUPERVISORY GROUP OF THE HACIENDA LUISITA, INC. and WINDSOR
ANDAYA,
Respondents.
G.R. No. 171101
Present:
CORONA, C.J.,
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CARPIO,
VELASCO, JR.,
LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,
ABAD,
VILLARAMA, JR.,
PEREZ,
MENDOZA, and
SERENO,
REYES,
PERLAS-BERNABE, JJ.

Promulgated:
November 22, 2011
x-----------------------------------------------------------------------------------------x
RESOLUTION
VELASCO, JR., J.:
For resolution are the (1) Motion for Clarification and Partial Reconsideration dated
July 21, 2011 filed by petitioner Hacienda Luisita, Inc. (HLI); (2) Motion for Partial
Reconsideration dated July 20, 2011 filed by public respondents Presidential
Agrarian Reform Council (PARC) and Department of Agrarian Reform (DAR); (3)
Motion for Reconsideration dated July 19, 2011 filed by private respondent Alyansa
ng mga Manggagawang Bukid sa Hacienda Luisita (AMBALA); (4) Motion for
Reconsideration dated July 21, 2011 filed by respondent-intervenor Farmworkers
Agrarian Reform Movement, Inc. (FARM); (5) Motion for Reconsideration dated July
21, 2011 filed by private respondents Noel Mallari, Julio Suniga, Supervisory Group
of Hacienda Luisita, Inc. (Supervisory Group) and Windsor Andaya (collectively
referred to as Mallari, et al.); and (6) Motion for Reconsideration dated July 22, 2011
filed by private respondents Rene Galang and AMBALA.[2]
On July 5, 2011, this Court promulgated a Decision[3] in the above-captioned case,
denying the petition filed by HLI and affirming Presidential Agrarian Reform Council
(PARC) Resolution No. 2005-32-01 dated December 22, 2005 and PARC Resolution
No. 2006-34-01 dated May 3, 2006 with the modification that the original 6,296
qualified farmworker-beneficiaries of Hacienda Luisita (FWBs) shall have the option
to remain as stockholders of HLI.
In its Motion for Clarification and Partial Reconsideration dated July 21, 2011, HLI
raises the following issues for Our consideration:
A
IT IS NOT PROPER, EITHER IN LAW OR IN EQUITY, TO DISTRIBUTE TO THE ORIGINAL
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FWBs OF 6,296 THE UNSPENT OR UNUSED BALANCE OF THE PROCEEDS OF THE


SALE OF THE 500 HECTARES AND 80.51 HECTARES OF THE HLI LAND, BECAUSE:
(1) THE PROCEEDS OF THE SALE BELONG TO THE CORPORATION, HLI, AS
CORPORATE CAPITAL AND ASSETS IN SUBSTITUTION FOR THE PORTIONS OF ITS
LAND ASSET WHICH WERE SOLD TO THIRD PARTY;
(2) TO DISTRIBUTE THE CASH SALES PROCEEDS OF THE PORTIONS OF THE LAND
ASSET TO THE FWBs, WHO ARE STOCKHOLDERS OF HLI, IS TO DISSOLVE THE
CORPORATION AND DISTRIBUTE THE PROCEEDS AS LIQUIDATING DIVIDENDS
WITHOUT EVEN PAYING THE CREDITORS OF THE CORPORATION;
(3) THE DOING OF SAID ACTS WOULD VIOLATE THE STRINGENT PROVISIONS OF THE
CORPORATION CODE AND CORPORATE PRACTICE.
B
IT IS NOT PROPER, EITHER IN LAW OR IN EQUITY, TO RECKON THE PAYMENT OF JUST
COMPENSATION FROM NOVEMBER 21, 1989 WHEN THE PARC, THEN UNDER THE
CHAIRMANSHIP OF DAR SECRETARY MIRIAM DEFENSOR-SANTIAGO, APPROVED THE
STOCK DISTRIBUTION PLAN (SDP) PROPOSED BY TADECO/HLI, BECAUSE:
(1) THAT PARC RESOLUTION NO. 89-12-2 DATED NOVEMBER 21, 1989 WAS NOT THE
ACTUAL TAKING OF THE TADECOs/HLIs AGRICULTURAL LAND;
(2) THE RECALL OR REVOCATION UNDER RESOLUTION NO. 2005-32-01 OF THAT SDP
BY THE NEW PARC UNDER THE CHAIRMANSHIP OF DAR SECRETARY NASSER
PANGANDAMAN ON DECEMBER 22, 2005 OR 16 YEARS EARLIER WHEN THE SDP
WAS APPROVED DID NOT RESULT IN ACTUAL TAKING ON NOVEMBER 21, 1989;
(3) TO PAY THE JUST COMPENSATION AS OF NOVEMBER 21, 1989 OR 22 YEARS
BACK WOULD BE ARBITRARY, UNJUST, AND OPPRESSIVE, CONSIDERING THE
IMPROVEMENTS, EXPENSES IN THE MAINTENANCE AND PRESERVATION OF THE
LAND, AND RISE IN LAND PRICES OR VALUE OF THE PROPERTY.
On the other hand, PARC and DAR, through the Office of the Solicitor General (OSG),
raise the following issues in their Motion for Partial Reconsideration dated July 20,
2011:
THE DOCTRINE OF OPERATIVE FACT DOES NOT APPLY TO THIS CASE FOR THE
FOLLOWING REASONS:
I
THERE IS NO LAW OR RULE WHICH HAS BEEN INVALIDATED ON THE GROUND OF
UNCONSTITUTIONALITY; AND
II
THIS DOCTRINE IS A RULE OF EQUITY WHICH MAY BE APPLIED ONLY IN THE
ABSENCE OF A LAW. IN THIS CASE, THERE IS A POSITIVE LAW WHICH MANDATES
THE DISTRIBUTION OF THE LAND AS A RESULT OF THE REVOCATION OF THE STOCK
DISTRIBUTION PLAN (SDP).
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For its part, AMBALA poses the following issues in its Motion for Reconsideration
dated July 19, 2011:
I
THE MAJORITY OF THE MEMBERS OF THE HONORABLE COURT, WITH DUE RESPECT,
ERRED IN HOLDING THAT SECTION 31 OF REPUBLIC ACT 6657 (RA 6657) IS
CONSTITUTIONAL.
II
THE MAJORITY OF THE MEMBERS OF THE HONORABLE COURT, WITH DUE RESPECT,
ERRED IN HOLDING THAT ONLY THE [PARCS] APPROVAL OF HLIs PROPOSAL FOR
STOCK DISTRIBUTION UNDER CARP AND THE [SDP] WERE REVOKED AND NOT THE
STOCK DISTRIBUTION OPTION AGREEMENT (SDOA).
III
THE MAJORITY OF THE MEMBERS OF THE HONORABLE COURT, WITH DUE RESPECT,
ERRED IN APPLYING THE DOCTRINE OF OPERATIVE FACTS AND IN MAKING THE
[FWBs] CHOOSE TO OPT FOR ACTUAL LAND DISTRIBUTION OR TO REMAIN AS
STOCKHOLDERS OF [HLI].
IV
THE MAJORITY OF THE MEMBERS OF THE HONORABLE COURT, WITH DUE RESPECT,
ERRED IN HOLDING THAT IMPROVING THE ECONOMIC STATUS OF FWBs IS NOT
AMONG THE LEGAL OBLIGATIONS OF HLI UNDER THE SDP AND AN IMPERATIVE
IMPOSITION BY [RA 6657] AND DEPARTMENT OF AGRARIAN REFORM
ADMINISTRATIVE ORDER NO. 10 (DAO 10).
V
THE HONORABLE COURT, WITH DUE RESPECT, ERRED IN HOLDING THAT THE
CONVERSION OF THE AGRICULTURAL LANDS DID NOT VIOLATE THE CONDITIONS OF
RA 6657 AND DAO 10.
VI
THE HONORABLE COURT, WITH DUE RESPECT, ERRED IN HOLDING THAT PETITIONER
IS ENTITLED TO PAYMENT OF JUST COMPENSATION. SHOULD THE HONORABLE
COURT AFFIRM THE ENTITLEMENT OF THE PETITIONER TO JUST COMPENSATION, THE
SAME SHOULD BE PEGGED TO FORTY THOUSAND PESOS (PhP 40,000.00) PER
HECTARE.
VII
THE HONORABLE COURT, WITH DUE RESPECT, ERRED IN HOLDING THAT LUISITA
INDUSTRIAL PARK CORP. (LIPCO) AND RIZAL COMMERCIAL BANKING CORPORATION
(RCBC) ARE INNOCENT PURCHASERS FOR VALUE.
In its Motion for Reconsideration dated July 21, 2011, FARM similarly puts forth the
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following issues:
I
THE HONORABLE SUPREME COURT SHOULD HAVE STRUCK DOWN SECTION 31 OF
[RA 6657] FOR BEING UNCONSTITUTIONAL. THE CONSTITUTIONALITY ISSUE THAT
WAS RAISED BY THE RESPONDENTS-INTERVENORS IS THE LIS MOTA OF THE CASE.
II
THE HONORABLE SUPREME COURT SHOULD NOT HAVE APPLIED THE DOCTRINE OF
OPERATIVE FACT TO THE CASE. THE OPTION GIVEN TO THE FARMERS TO REMAIN AS
STOCKHOLDERS OF HACIENDA LUISITA IS EQUIVALENT TO AN OPTION FOR
HACIENDA LUISITA TO RETAIN LAND IN DIRECT VIOLATION OF THE COMPREHENSIVE
AGRARIAN REFORM LAW. THE DECEPTIVE STOCK DISTRIBUTION OPTION / STOCK
DISTRIBUTION PLAN CANNOT JUSTIFY SUCH RESULT, ESPECIALLY AFTER THE
SUPREME COURT HAS AFFIRMED ITS REVOCATION.
III
THE HONORABLE SUPREME COURT SHOULD NOT HAVE CONSIDERED [LIPCO] AND
[RCBC] AS INNOCENT PURCHASERS FOR VALUE IN THE INSTANT CASE.
Mallari, et al., on the other hand, advance the following grounds in support of their
Motion for Reconsideration dated July 21, 2011:
(1) THE HOMELOTS REQUIRED TO BE DISTRIBUTED HAVE ALL BEEN DISTRIBUTED
PURSUANT TO THE MEMORANDUM OF AGREEMENT. WHAT REMAINS MERELY IS THE
RELEASE OF TITLE FROM THE REGISTER OF DEEDS.
(2) THERE HAS BEEN NO DILUTION OF SHARES. CORPORATE RECORDS WOULD
SHOW THAT IF EVER NOT ALL OF THE 18,804.32 SHARES WERE GIVEN TO THE
ACTUAL ORIGINAL FARMWORKER BENEFICIARY, THE RECIPIENT OF THE DIFFERENCE
IS THE NEXT OF KIN OR CHILDREN OF SAID ORIGINAL [FWBs]. HENCE, WE
RESPECTFULLY SUBMIT THAT SINCE THE SHARES WERE GIVEN TO THE SAME FAMILY
BENEFICIARY, THIS SHOULD BE DEEMED AS SUBSTANTIAL COMPLIANCE WITH THE
PROVISIONS OF SECTION 4 OF DAO 10.
(3) THERE HAS BEEN NO VIOLATION OF THE 3-MONTH PERIOD TO IMPLEMENT THE
[SDP] AS PROVIDED FOR BY SECTION 11 OF DAO 10 AS THIS PROVISION MUST BE
READ IN LIGHT OF SECTION 10 OF EXECUTIVE ORDER NO. 229, THE PERTINENT
PORTION OF WHICH READS, THE APPROVAL BY THE PARC OF A PLAN FOR SUCH
STOCK DISTRIBUTION, AND ITS INITIAL IMPLEMENTATION, SHALL BE DEEMED
COMPLIANCE WITH THE LAND DISTRIBUTION REQUIREMENT OF THE CARP.
(4) THE VALUATION OF THE LAND CANNOT BE BASED AS OF NOVEMBER 21, 1989,
THE DATE OF APPROVAL OF THE STOCK DISTRIBUTION OPTION. INSTEAD, WE
RESPECTFULLY SUBMIT THAT THE TIME OF TAKING FOR VALUATION PURPOSES IS A
FACTUAL ISSUE BEST LEFT FOR THE TRIAL COURTS TO DECIDE.
(5) TO THOSE WHO WILL CHOOSE LAND, THEY MUST RETURN WHAT WAS GIVEN TO
THEM UNDER THE SDP. IT WOULD BE UNFAIR IF THEY ARE ALLOWED TO GET THE
LAND AND AT THE SAME TIME HOLD ON TO THE BENEFITS THEY RECEIVED
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PURSUANT TO THE SDP IN THE SAME WAY AS THOSE WHO WILL CHOOSE TO STAY
WITH THE SDO.
Lastly, Rene Galang and AMBALA, through the Public Interest Law Center (PILC),
submit the following grounds in support of their Motion for Reconsideration dated
July 22, 2011:
I
THE HONORABLE COURT, WITH DUE RESPECT, GRAVELY ERRED IN ORDERING THE
HOLDING OF A VOTING OPTION INSTEAD OF TOTALLY REDISTRIBUTING THE SUBJECT
LANDS TO [FWBs] in [HLI].
A. THE HOLDING OF A VOTING OPTION HAS NO LEGAL BASIS. THE REVOCATION OF
THE [SDP] CARRIES WITH IT THE REVOCATION OF THE [SDOA].
B. GIVING THE [FWBs] THE OPTION TO REMAIN AS STOCKHOLDERS OF HLI WITHOUT
MAKING THE NECESSARY CHANGES IN THE CORPORATE STRUCTURE WOULD ONLY
SUBJECT THEM TO FURTHER MANIPULATION AND HARDSHIP.
C. OTHER VIOLATIONS COMMITTED BY HLI UNDER THE [SDOA] AND PERTINENT
LAWS JUSTIFY TOTAL LAND REDISTRIBUTION OF HACIENDA LUISITA.
II
THE HONORABLE COURT, WITH DUE RESPECT, GRAVELY ERRED IN HOLDING THAT
THE [RCBC] AND [LIPCO] ARE INNOCENT PURCHASERS FOR VALUE OF THE 300HECTARE PROPERTY IN HACIENDA LUISITA THAT WAS SOLD TO THEM PRIOR TO THE
INCEPTION OF THE PRESENT CONTROVERSY.
Ultimately, the issues for Our consideration are the following: (1) applicability of the
operative fact doctrine; (2) constitutionality of Sec. 31 of RA 6657 or the
Comprehensive Agrarian Reform Law of 1988; (3) coverage of compulsory
acquisition; (4) just compensation; (5) sale to third parties; (6) the violations of HLI;
and (7) control over agricultural lands.
We shall discuss these issues accordingly.
I. Applicability of the Operative Fact Doctrine
In their motion for partial reconsideration, DAR and PARC argue that the doctrine of
operative fact does not apply to the instant case since: (1) there is no law or rule
which has been invalidated on the ground of unconstitutionality;[4] (2) the doctrine
of operative fact is a rule of equity which may be applied only in the absence of a
law, and in this case, they maintain that there is a positive law which mandates the
distribution of the land as a result of the revocation of the stock distribution plan
(SDP).[5]
Echoing the stance of DAR and PARC, AMBALA submits that the operative fact
doctrine should only be made to apply in the extreme case in which equity demands
it, which allegedly is not in the instant case.[6] It further argues that there would be
no undue harshness or injury to HLI in case lands are actually distributed to the
farmworkers, and that the decision which orders the farmworkers to choose whether
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to remain as stockholders of HLI or to opt for land distribution would result in


inequity and prejudice to the farmworkers.[7] The foregoing views are also similarly
shared by Rene Galang and AMBALA, through the PILC.[8] In addition, FARM posits
that the option given to the FWBs is equivalent to an option for HLI to retain land in
direct violation of RA 6657.[9]
(a) Operative Fact Doctrine Not Limited to
Invalid or Unconstitutional Laws
Contrary to the stance of respondents, the operative fact doctrine does not only
apply to laws subsequently declared unconstitutional or unlawful, as it also applies
to executive acts subsequently declared as invalid. As We have discussed in Our July
5, 2011 Decision:
That the operative fact doctrine squarely applies to executive actsin this case, the
approval by PARC of the HLI proposal for stock distributionis well-settled in our
jurisprudence. In Chavez v. National Housing Authority, We held:
Petitioner postulates that the operative fact doctrine is inapplicable to the present
case because it is an equitable doctrine which could not be used to countenance an
inequitable result that is contrary to its proper office.
On the other hand, the petitioner Solicitor General argues that the existence of the
various agreements implementing the SMDRP is an operative fact that can no
longer be disturbed or simply ignored, citing Rieta v. People of the Philippines.
The argument of the Solicitor General is meritorious.
The operative fact doctrine is embodied in De Agbayani v. Court of Appeals, wherein
it is stated that a legislative or executive act, prior to its being declared as
unconstitutional by the courts, is valid and must be complied with, thus:
xxx xxx xxx
This doctrine was reiterated in the more recent case of City of Makati v. Civil Service
Commission, wherein we ruled that:
Moreover, we certainly cannot nullify the City Government's order of suspension, as
we have no reason to do so, much less retroactively apply such nullification to
deprive private respondent of a compelling and valid reason for not filing the leave
application. For as we have held, a void act though in law a mere scrap of paper
nonetheless confers legitimacy upon past acts or omissions done in reliance thereof.
Consequently, the existence of a statute or executive order prior to its being
adjudged void is an operative fact to which legal consequences are attached. It
would indeed be ghastly unfair to prevent private respondent from relying upon the
order of suspension in lieu of a formal leave application.
The applicability of the operative fact doctrine to executive acts was further
explicated by this Court in Rieta v. People, thus:
Petitioner contends that his arrest by virtue of Arrest Search and Seizure Order
(ASSO) No. 4754 was invalid, as the law upon which it was predicated General Order
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No. 60, issued by then President Ferdinand E. Marcos was subsequently declared by
the Court, in Taada v. Tuvera, 33 to have no force and effect. Thus, he asserts, any
evidence obtained pursuant thereto is inadmissible in evidence.
We do not agree. In Taada, the Court addressed the possible effects of its
declaration of the invalidity of various presidential issuances. Discussing therein
how such a declaration might affect acts done on a presumption of their validity, the
Court said:
. . .. In similar situations in the past this Court had taken the pragmatic and realistic
course set forth in Chicot County Drainage District vs. Baxter Bank to wit:
The courts below have proceeded on the theory that the Act of Congress, having
been found to be unconstitutional, was not a law; that it was inoperative, conferring
no rights and imposing no duties, and hence affording no basis for the challenged
decree. . . . It is quite clear, however, that such broad statements as to the effect of
a determination of unconstitutionality must be taken with qualifications. The actual
existence of a statute, prior to [the determination of its invalidity], is an operative
fact and may have consequences which cannot justly be ignored. The past cannot
always be erased by a new judicial declaration. The effect of the subsequent ruling
as to invalidity may have to be considered in various aspects with respect to
particular conduct, private and official. Questions of rights claimed to have become
vested, of status, of prior determinations deemed to have finality and acted upon
accordingly, of public policy in the light of the nature both of the statute and of its
previous application, demand examination. These questions are among the most
difficult of those which have engaged the attention of courts, state and federal, and
it is manifest from numerous decisions that an all-inclusive statement of a principle
of absolute retroactive invalidity cannot be justified.
xxx xxx xxx
Similarly, the implementation/ enforcement of presidential decrees prior to their
publication in the Official Gazette is an operative fact which may have
consequences which cannot be justly ignored. The past cannot always be erased by
a new judicial declaration . . . that an all-inclusive statement of a principle of
absolute retroactive invalidity cannot be justified.
The Chicot doctrine cited in Taada advocates that, prior to the nullification of a
statute, there is an imperative necessity of taking into account its actual existence
as an operative fact negating the acceptance of a principle of absolute retroactive
invalidity. Whatever was done while the legislative or the executive act was in
operation should be duly recognized and presumed to be valid in all respects. The
ASSO that was issued in 1979 under General Order No. 60 long before our Decision
in Taada and the arrest of petitioner is an operative fact that can no longer be
disturbed or simply ignored. (Citations omitted; emphasis in the original.)

Bearing in mind that PARC Resolution No. 89-12-2[10]an executive actwas declared
invalid in the instant case, the operative fact doctrine is clearly applicable.
Nonetheless, the minority is of the persistent view that the applicability of the
operative fact doctrine should be limited to statutes and rules and regulations
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issued by the executive department that are accorded the same status as that of a
statute or those which are quasi-legislative in nature. Thus, the minority concludes
that the phrase executive act used in the case of De Agbayani v. Philippine National
Bank[11] refers only to acts, orders, and rules and regulations that have the force
and effect of law. The minority also made mention of the Concurring Opinion of
Justice Enrique Fernando in Municipality of Malabang v. Benito,[12] where it was
supposedly made explicit that the operative fact doctrine applies to executive acts,
which are ultimately quasi-legislative in nature.
We disagree. For one, neither the De Agbayani case nor the Municipality of
Malabang case elaborates what executive act mean. Moreover, while orders, rules
and regulations issued by the President or the executive branch have fixed
definitions and meaning in the Administrative Code and jurisprudence, the phrase
executive act does not have such specific definition under existing laws. It should be
noted that in the cases cited by the minority, nowhere can it be found that the term
executive act is confined to the foregoing. Contrarily, the term executive act is
broad enough to encompass decisions of administrative bodies and agencies under
the executive department which are subsequently revoked by the agency in
question or nullified by the Court.
A case in point is the concurrent appointment of Magdangal B. Elma (Elma) as
Chairman of the Presidential Commission on Good Government (PCGG) and as Chief
Presidential Legal Counsel (CPLC) which was declared unconstitutional by this Court
in Public Interest Center, Inc. v. Elma.[13] In said case, this Court ruled that the
concurrent appointment of Elma to these offices is in violation of Section 7, par. 2,
Article IX-B of the 1987 Constitution, since these are incompatible offices. Notably,
the appointment of Elma as Chairman of the PCGG and as CPLC is, without a
question, an executive act. Prior to the declaration of unconstitutionality of the said
executive act, certain acts or transactions were made in good faith and in reliance
of the appointment of Elma which cannot just be set aside or invalidated by its
subsequent invalidation.
In Tan v. Barrios,[14] this Court, in applying the operative fact doctrine, held that
despite the invalidity of the jurisdiction of the military courts over civilians, certain
operative facts must be acknowledged to have existed so as not to trample upon
the rights of the accused therein. Relevant thereto, in Olaguer v. Military
Commission No. 34,[15] it was ruled that military tribunals pertain to the Executive
Department of the Government and are simply instrumentalities of the executive
power, provided by the legislature for the President as Commander-in-Chief to aid
him in properly commanding the army and navy and enforcing discipline therein,
and utilized under his orders or those of his authorized military representatives.[16]
Evidently, the operative fact doctrine is not confined to statutes and rules and
regulations issued by the executive department that are accorded the same status
as that of a statute or those which are quasi-legislative in nature.
Even assuming that De Agbayani initially applied the operative fact doctrine only to
executive issuances like orders and rules and regulations, said principle can
nonetheless be applied, by analogy, to decisions made by the President or the
agencies under the executive department. This doctrine, in the interest of justice
and equity, can be applied liberally and in a broad sense to encompass said
decisions of the executive branch. In keeping with the demands of equity, the Court
can apply the operative fact doctrine to acts and consequences that resulted from
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the reliance not only on a law or executive act which is quasi-legislative in nature
but also on decisions or orders of the executive branch which were later nullified.
This Court is not unmindful that such acts and consequences must be recognized in
the higher interest of justice, equity and fairness.
Significantly, a decision made by the President or the administrative agencies has to
be complied with because it has the force and effect of law, springing from the
powers of the President under the Constitution and existing laws. Prior to the
nullification or recall of said decision, it may have produced acts and consequences
in conformity to and in reliance of said decision, which must be respected. It is on
this score that the operative fact doctrine should be applied to acts and
consequences that resulted from the implementation of the PARC Resolution
approving the SDP of HLI.
More importantly, respondents, and even the minority, failed to clearly explain how
the option to remain in HLI granted to individual farmers would result in inequity
and prejudice. We can only surmise that respondents misinterpreted the option as a
referendum where all the FWBs will be bound by a majority vote favoring the
retention of all the 6,296 FWBs as HLI stockholders. Respondents are definitely
mistaken. The fallo of Our July 5, 2011 Decision is unequivocal that only those FWBs
who signified their desire to remain as HLI stockholders are entitled to 18,804.32
shares each, while those who opted not to remain as HLI stockholders will be given
land by DAR. Thus, referendum was not required but only individual options were
granted to each FWB whether or not they will remain in HLI.
The application of the operative fact doctrine to the FWBs is not iniquitous and
prejudicial to their interests but is actually beneficial and fair to them. First, they are
granted the right to remain in HLI as stockholders and they acquired said shares
without paying their value to the corporation. On the other hand, the qualified FWBs
are required to pay the value of the land to the Land Bank of the Philippines (LBP) if
land is awarded to them by DAR pursuant to RA 6657. If the qualified FWBs really
want agricultural land, then they can simply say no to the option. And second, if the
operative fact doctrine is not applied to them, then the FWBs will be required to
return to HLI the 3% production share, the 3% share in the proceeds of the sale of
the 500-hectare converted land, and the 80.51-hectare Subic-Clark-Tarlac
Expressway (SCTEX) lot, the homelots and other benefits received by the FWBs from
HLI. With the application of the operative fact doctrine, said benefits, homelots and
the 3% production share and 3% share from the sale of the 500-hectare and SCTEX
lots shall be respected with no obligation to refund or return them. The receipt of
these things is an operative fact that can no longer be disturbed or simply ignored.
(b) The Operative Fact Doctrine as Recourse in Equity
As mentioned above, respondents contend that the operative fact doctrine is a rule
of equity which may be applied only in the absence of a law, and that in the instant
case, there is a positive law which mandates the distribution of the land as a result
of the revocation of the SDP.
Undeniably, the operative fact doctrine is a rule of equity.[17] As a complement of
legal jurisdiction, equity seeks to reach and complete justice where courts of law,
through the inflexibility of their rules and want of power to adapt their judgments to
the special circumstances of cases, are incompetent to do so. Equity regards the
spirit and not the letter, the intent and not the form, the substance rather than the
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circumstance, as it is variously expressed by different courts.[18] Remarkably, it is


applied only in the absence of statutory law and never in contravention of said law.
[19]
In the instant case, respondents argue that the operative fact doctrine should not
be applied since there is a positive law, particularly, Sec. 31 of RA 6657, which
directs the distribution of the land as a result of the revocation of the SDP.
Pertinently, the last paragraph of Sec. 31 of RA 6657 states:
If within two (2) years from the approval of this Act, the land or stock transfer
envisioned above is not made or realized or the plan for such stock distribution
approved by the PARC within the same period, the agricultural land of the corporate
owners or corporation shall be subject to the compulsory coverage of this Act.
(Emphasis supplied.)
Markedly, the use of the word or under the last paragraph of Sec. 31 of RA 6657
connotes that the law gives the corporate landowner an option to avail of the stock
distribution option or to have the SDP approved within two (2) years from the
approval of RA 6657. This interpretation is consistent with the well-established
principle in statutory construction that [t]he word or is a disjunctive term signifying
disassociation and independence of one thing from the other things enumerated; it
should, as a rule, be construed in the sense in which it ordinarily implies, as a
disjunctive word.[20] In PCI Leasing and Finance, Inc. v. Giraffe-X Creative Imaging,
Inc.,[21] this Court held:
Evidently, the letter did not make a demand for the payment of the P8,248,657.47
AND the return of the equipment; only either one of the two was required. The
demand letter was prepared and signed by Atty. Florecita R. Gonzales, presumably
petitioners counsel. As such, the use of or instead of and in the letter could hardly
be treated as a simple typographical error, bearing in mind the nature of the
demand, the amount involved, and the fact that it was made by a lawyer. Certainly
Atty. Gonzales would have known that a world of difference exists between and and
or in the manner that the word was employed in the letter.
A rule in statutory construction is that the word or is a disjunctive term signifying
dissociation and independence of one thing from other things enumerated unless
the context requires a different interpretation.[22]
In its elementary sense, or, as used in a statute, is a disjunctive article indicating an
alternative. It often connects a series of words or propositions indicating a choice of
either. When or is used, the various members of the enumeration are to be taken
separately.[23]
The word or is a disjunctive term signifying disassociation and independence of one
thing from each of the other things enumerated.[24] (Emphasis in the original.)
Given that HLI secured approval of its SDP in November 1989, well within the twoyear period reckoned from June 1988 when RA 6657 took effect, then HLI did not
violate the last paragraph of Sec. 31 of RA 6657. Pertinently, said provision does not
bar Us from applying the operative fact doctrine.
Besides, it should be recognized that this Court, in its July 5, 2011 Decision, affirmed
the revocation of Resolution No. 89-12-2 and ruled for the compulsory coverage of
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the agricultural lands of Hacienda Luisita in view of HLIs violation of the SDP and
DAO 10. By applying the operative fact doctrine, this Court merely gave the
qualified FWBs the option to remain as stockholders of HLI and ruled that they will
retain the homelots and other benefits which they received from HLI by virtue of the
SDP.
It bears stressing that the application of the operative fact doctrine by the Court in
its July 5, 2011 Decision is favorable to the FWBs because not only were the FWBs
allowed to retain the benefits and homelots they received under the stock
distribution scheme, they were also given the option to choose for themselves
whether they want to remain as stockholders of HLI or not. This is in recognition of
the fact that despite the claims of certain farmer groups that they represent the
qualified FWBs in Hacienda Luisita, none of them can show that they are duly
authorized to speak on their behalf. As We have mentioned, To date, such
authorization document, which would logically include a list of the names of the
authorizing FWBs, has yet to be submitted to be part of the records.
II. Constitutionality of Sec. 31, RA 6657
FARM insists that the issue of constitutionality of Sec. 31 of RA 6657 is the lis mota
of the case, raised at the earliest opportunity, and not to be considered as moot and
academic.[25]
This contention is unmeritorious. As We have succinctly discussed in Our July 5,
2011 Decision:
While there is indeed an actual case or controversy, intervenor FARM, composed of
a small minority of 27 farmers, has yet to explain its failure to challenge the
constitutionality of Sec. 3l of RA 6657, since as early as November 21, l989 when
PARC approved the SDP of Hacienda Luisita or at least within a reasonable time
thereafter and why its members received benefits from the SDP without so much of
a protest. It was only on December 4, 2003 or 14 years after approval of the SDP via
PARC Resolution No. 89-12-2 dated November 21, 1989 that said plan and approving
resolution were sought to be revoked, but not, to stress, by FARM or any of its
members, but by petitioner AMBALA. Furthermore, the AMBALA petition did NOT
question the constitutionality of Sec. 31 of RA 6657, but concentrated on the
purported flaws and gaps in the subsequent implementation of the SDP. Even the
public respondents, as represented by the Solicitor General, did not question the
constitutionality of the provision. On the other hand, FARM, whose 27 members
formerly belonged to AMBALA, raised the constitutionality of Sec. 31 only on May 3,
2007 when it filed its Supplemental Comment with the Court. Thus, it took FARM
some eighteen (18) years from November 21, 1989 before it challenged the
constitutionality of Sec. 31 of RA 6657 which is quite too late in the day. The FARM
members slept on their rights and even accepted benefits from the SDP with nary a
complaint on the alleged unconstitutionality of Sec. 31 upon which the benefits
were derived. The Court cannot now be goaded into resolving a constitutional issue
that FARM failed to assail after the lapse of a long period of time and the occurrence
of numerous events and activities which resulted from the application of an alleged
unconstitutional legal provision.
It has been emphasized in a number of cases that the question of constitutionality
will not be passed upon by the Court unless it is properly raised and presented in an
appropriate case at the first opportunity. FARM is, therefore, remiss in belatedly
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questioning the constitutionality of Sec. 31 of RA 6657. The second requirement


that the constitutional question should be raised at the earliest possible opportunity
is clearly wanting.
The last but the most important requisite that the constitutional issue must be the
very lis mota of the case does not likewise obtain. The lis mota aspect is not
present, the constitutional issue tendered not being critical to the resolution of the
case. The unyielding rule has been to avoid, whenever plausible, an issue assailing
the constitutionality of a statute or governmental act. If some other grounds exist
by which judgment can be made without touching the constitutionality of a law,
such recourse is favored. Garcia v. Executive Secretary explains why:
Lis Mota the fourth requirement to satisfy before this Court will undertake judicial
review means that the Court will not pass upon a question of unconstitutionality,
although properly presented, if the case can be disposed of on some other ground,
such as the application of the statute or the general law. The petitioner must be
able to show that the case cannot be legally resolved unless the constitutional
question raised is determined. This requirement is based on the rule that every law
has in its favor the presumption of constitutionality; to justify its nullification, there
must be a clear and unequivocal breach of the Constitution, and not one that is
doubtful, speculative, or argumentative.
The lis mota in this case, proceeding from the basic positions originally taken by
AMBALA (to which the FARM members previously belonged) and the Supervisory
Group, is the alleged non-compliance by HLI with the conditions of the SDP to
support a plea for its revocation. And before the Court, the lis mota is whether or
not PARC acted in grave abuse of discretion when it ordered the recall of the SDP for
such non-compliance and the fact that the SDP, as couched and implemented,
offends certain constitutional and statutory provisions. To be sure, any of these key
issues may be resolved without plunging into the constitutionality of Sec. 31 of RA
6657. Moreover, looking deeply into the underlying petitions of AMBALA, et al., it is
not the said section per se that is invalid, but rather it is the alleged application of
the said provision in the SDP that is flawed.
It may be well to note at this juncture that Sec. 5 of RA 9700, amending Sec. 7 of RA
6657, has all but superseded Sec. 31 of RA 6657 vis--vis the stock distribution
component of said Sec. 31. In its pertinent part, Sec. 5 of RA 9700 provides: [T]hat
after June 30, 2009, the modes of acquisition shall be limited to voluntary offer to
sell and compulsory acquisition. Thus, for all intents and purposes, the stock
distribution scheme under Sec. 31 of RA 6657 is no longer an available option under
existing law. The question of whether or not it is unconstitutional should be a moot
issue. (Citations omitted; emphasis in the original.)
Based on the foregoing disquisitions, We maintain that this Court is NOT compelled
to rule on the constitutionality of Sec. 31 of RA 6657. In this regard, We clarify that
this Court, in its July 5, 2011 Decision, made no ruling in favor of the
constitutionality of Sec. 31 of RA 6657. There was, however, a determination of the
existence of an apparent grave violation of the Constitution that may justify the
resolution of the issue of constitutionality, to which this Court ruled in the negative.
Having clarified this matter, all other points raised by both FARM and AMBALA
concerning the constitutionality of RA 6657 deserve scant consideration.

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III. Coverage of Compulsory Acquisition


FARM argues that this Court ignored certain material facts when it limited the
maximum area to be covered to 4,915.75 hectares, whereas the area that should, at
the least, be covered is 6,443 hectares,[26] which is the agricultural land allegedly
covered by RA 6657 and previously held by Tarlac Development Corporation
(Tadeco).[27]
We cannot subscribe to this view. Since what is put in issue before the Court is the
propriety of the revocation of the SDP, which only involves 4,915.75 has. of
agricultural land and not 6,443 has., then We are constrained to rule only as regards
the 4,915.75 has. of agricultural land.
Moreover, as admitted by FARM itself, this issue was raised for the first time by
FARM in its Memorandum dated September 24, 2010 filed before this Court.[28] In
this regard, it should be noted that [a]s a legal recourse, the special civil action of
certiorari is a limited form of review.[29] The certiorari jurisdiction of this Court is
narrow in scope as it is restricted to resolving errors of jurisdiction and grave abuse
of discretion, and not errors of judgment.[30] To allow additional issues at this stage
of the proceedings is violative of fair play, justice and due process.[31]
Nonetheless, it should be taken into account that this should not prevent the DAR,
under its mandate under the agrarian reform law, from subsequently subjecting to
agrarian reform other agricultural lands originally held by Tadeco that were
allegedly not transferred to HLI but were supposedly covered by RA 6657.
DAR, however, contends that the declaration of the area[32] to be awarded to each
FWB is too restrictive. It stresses that in agricultural landholdings like Hacienda
Luisita, there are roads, irrigation canals, and other portions of the land that are
considered commonly-owned by farmworkers, and this may necessarily result in the
decrease of the area size that may be awarded per FWB.[33] DAR also argues that
the July 5, 2011 Decision of this Court does not give it any leeway in adjusting the
area that may be awarded per FWB in case the number of actual qualified FWBs
decreases.[34]
The argument is meritorious. In order to ensure the proper distribution of the
agricultural lands of Hacienda Luisita per qualified FWB, and considering that
matters involving strictly the administrative implementation and enforcement of
agrarian reform laws are within the jurisdiction of the DAR,[35] it is the latter which
shall determine the area with which each qualified FWB will be awarded.
(a)

Conversion of Agricultural Lands

AMBALA insists that the conversion of the agricultural lands violated the conditions
of RA 6657 and DAO 10, stating that keeping the land intact and unfragmented is
one of the essential conditions of [the] SD[P], RA 6657 and DAO 10.[36] It asserts
that this provision or conditionality is not mere decoration and is intended to ensure
that the farmers can continue with the tillage of the soil especially since it is the
only occupation that majority of them knows.[37]
We disagree. As We amply discussed in Our July 5, 2011 Decision:

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Contrary to the almost parallel stance of the respondents, keeping Hacienda Luisita
unfragmented is also not among the imperative impositions by the SDP, RA 6657,
and DAO 10.
The Terminal Report states that the proposed distribution plan submitted in 1989 to
the PARC effectively assured the intended stock beneficiaries that the physical
integrity of the farm shall remain inviolate. Accordingly, the Terminal Report and the
PARC-assailed resolution would take HLI to task for securing approval of the
conversion to non-agricultural uses of 500 hectares of the hacienda. In not too
many words, the Report and the resolution view the conversion as an infringement
of Sec. 5(a) of DAO 10 which reads: a. that the continued operation of the
corporation with its agricultural land intact and unfragmented is viable with
potential for growth and increased profitability.
The PARC is wrong.
In the first place, Sec. 5(a)just like the succeeding Sec. 5(b) of DAO 10 on increased
income and greater benefits to qualified beneficiariesis but one of the stated criteria
to guide PARC in deciding on whether or not to accept an SDP. Said Sec. 5(a) does
not exact from the corporate landowner-applicant the undertaking to keep the farm
intact and unfragmented ad infinitum. And there is logic to HLIs stated observation
that the key phrase in the provision of Sec. 5(a) is viability of corporate operations:
[w]hat is thus required is not the agricultural land remaining intact x x x but the
viability of the corporate operations with its agricultural land being intact and
unfragmented. Corporate operation may be viable even if the corporate agricultural
land does not remain intact or [un]fragmented.[38]
It is, of course, anti-climactic to mention that DAR viewed the conversion as not
violative of any issuance, let alone undermining the viability of Hacienda Luisitas
operation, as the DAR Secretary approved the land conversion applied for and its
disposition via his Conversion Order dated August 14, 1996 pursuant to Sec. 65 of
RA 6657 which reads:
Sec. 65. Conversion of Lands.After the lapse of five years from its award when the
land ceases to be economically feasible and sound for agricultural purposes, or the
locality has become urbanized and the land will have a greater economic value for
residential, commercial or industrial purposes, the DAR upon application of the
beneficiary or landowner with due notice to the affected parties, and subject to
existing laws, may authorize the x x x conversion of the land and its dispositions. x
xx
Moreover, it is worth noting that the application for conversion had the backing of
5,000 or so FWBs, including respondents Rene Galang, and Jose Julio Suniga, then
leaders of the AMBALA and the Supervisory Group, respectively, as evidenced by
the Manifesto of Support they signed and which was submitted to the DAR.[39] If at
all, this means that AMBALA should be estopped from questioning the conversion of
a portion of Hacienda Luisita, which its leader has fully supported.
(b)

LIPCO and RCBC as Innocent Purchasers for Value

The AMBALA, Rene Galang and the FARM are in accord that Rizal Commercial
Banking Corporation (RCBC) and Luisita Industrial Park Corporation (LIPCO) are not
innocent purchasers for value. The AMBALA, in particular, argues that LIPCO, being
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a wholly-owned subsidiary of HLI, is conclusively presumed to have knowledge of


the agrarian dispute on the subject land and could not feign ignorance of this fact,
especially since they have the same directors and stockholders.[40] This is
seconded by Rene Galang and AMBALA, through the PILC, which intimate that a look
at the General Information Sheets of the companies involved in the transfers of the
300-hectare portion of Hacienda Luisita, specifically, Centennary Holdings, Inc.
(Centennary), LIPCO and RCBC, would readily reveal that their directors are
interlocked and connected to Tadeco and HLI.[41] Rene Galang and AMBALA,
through the PILC, also allege that with the clear-cut involvement of the leadership of
all the corporations concerned, LIPCO and RCBC cannot feign ignorance that the
parcels of land they bought are under the coverage of the comprehensive agrarian
reform program [CARP] and that the conditions of the respective sales are imbued
with public interest where normal property relations in the Civil Law sense do not
apply.[42]
Avowing that the land subject of conversion still remains undeveloped, Rene Galang
and AMBALA, through the PILC, further insist that the condition that [t]he
development of the land should be completed within the period of five [5] years
from the issuance of this Order was not complied with. AMBALA also argues that
since RCBC and LIPCO merely stepped into the shoes of HLI, then they must comply
with the conditions imposed in the conversion order.[43]
In addition, FARM avers that among the conditions attached to the conversion order,
which RCBC and LIPCO necessarily have knowledge of, are (a) that its approval shall
in no way amend, diminish, or alter the undertaking and obligations of HLI as
contained in the [SDP] approved on November 21, 1989; and (b) that the benefits,
wages and the like, received by the FWBs shall not in any way be reduced or
adversely affected, among others.[44]
The contentions of respondents are wanting. In the first place, there is no denying
that RCBC and LIPCO knew that the converted lands they bought were under the
coverage of CARP. Nevertheless, as We have mentioned in Our July 5, 2011
Decision, this does not necessarily mean that both LIPCO and RCBC already acted in
bad faith in purchasing the converted lands. As this Court explained:
It cannot be claimed that RCBC and LIPCO acted in bad faith in acquiring the lots
that were previously covered by the SDP. Good faith consists in the possessors
belief that the person from whom he received it was the owner of the same and
could convey his title. Good faith requires a well-founded belief that the person from
whom title was received was himself the owner of the land, with the right to convey
it. There is good faith where there is an honest intention to abstain from taking any
unconscientious advantage from another. It is the opposite of fraud.
To be sure, intervenor RCBC and LIPCO knew that the lots they bought were
subjected to CARP coverage by means of a stock distribution plan, as the DAR
conversion order was annotated at the back of the titles of the lots they acquired.
However, they are of the honest belief that the subject lots were validly converted
to commercial or industrial purposes and for which said lots were taken out of the
CARP coverage subject of PARC Resolution No. 89-12-2 and, hence, can be legally
and validly acquired by them. After all, Sec. 65 of RA 6657 explicitly allows
conversion and disposition of agricultural lands previously covered by CARP land
acquisition after the lapse of five (5) years from its award when the land ceases to
be economically feasible and sound for agricultural purposes or the locality has
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become urbanized and the land will have a greater economic value for residential,
commercial or industrial purposes. Moreover, DAR notified all the affected parties,
more particularly the FWBs, and gave them the opportunity to comment or oppose
the proposed conversion. DAR, after going through the necessary processes,
granted the conversion of 500 hectares of Hacienda Luisita pursuant to its primary
jurisdiction under Sec. 50 of RA 6657 to determine and adjudicate agrarian reform
matters and its original exclusive jurisdiction over all matters involving the
implementation of agrarian reform. The DAR conversion order became final and
executory after none of the FWBs interposed an appeal to the CA. In this factual
setting, RCBC and LIPCO purchased the lots in question on their honest and wellfounded belief that the previous registered owners could legally sell and convey the
lots though these were previously subject of CARP coverage. Ergo, RCBC and LIPCO
acted in good faith in acquiring the subject lots. (Emphasis supplied.)
In the second place, the allegation that the converted lands remain undeveloped is
contradicted by the evidence on record, particularly, Annex X of LIPCOs
Memorandum dated September 23, 2010,[45] which has photographs showing that
the land has been partly developed.[46] Certainly, it is a general rule that the
factual findings of administrative agencies are conclusive and binding on the Court
when supported by substantial evidence.[47] However, this rule admits of certain
exceptions, one of which is when the findings of fact are premised on the supposed
absence of evidence and contradicted by the evidence on record.[48]
In the third place, by arguing that the companies involved in the transfers of the
300-hectare portion of Hacienda Luisita have interlocking directors and, thus,
knowledge of one may already be imputed upon all the other companies, AMBALA
and Rene Galang, in effect, want this Court to pierce the veil of corporate fiction.
However, piercing the veil of corporate fiction is warranted only in cases when the
separate legal entity is used to defeat public convenience, justify wrong, protect
fraud, or defend crime, such that in the case of two corporations, the law will regard
the corporations as merged into one.[49] As succinctly discussed by the Court in
Velarde v. Lopez, Inc.:[50]
Petitioner argues nevertheless that jurisdiction over the subsidiary is justified by
piercing the veil of corporate fiction. Piercing the veil of corporate fiction is
warranted, however, only in cases when the separate legal entity is used to defeat
public convenience, justify wrong, protect fraud, or defend crime, such that in the
case of two corporations, the law will regard the corporations as merged into one.
The rationale behind piercing a corporations identity is to remove the barrier
between the corporation from the persons comprising it to thwart the fraudulent
and illegal schemes of those who use the corporate personality as a shield for
undertaking certain proscribed activities.
In applying the doctrine of piercing the veil of corporate fiction, the following
requisites must be established: (1) control, not merely majority or complete stock
control; (2) such control must have been used by the defendant to commit fraud or
wrong, to perpetuate the violation of a statutory or other positive legal duty, or
dishonest acts in contravention of plaintiffs legal rights; and (3) the aforesaid
control and breach of duty must proximately cause the injury or unjust loss
complained of. (Citations omitted.)
Nowhere, however, in the pleadings and other records of the case can it be
gathered that respondent has complete control over Sky Vision, not only of finances
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but of policy and business practice in respect to the transaction attacked, so that
Sky Vision had at the time of the transaction no separate mind, will or existence of
its own. The existence of interlocking directors, corporate officers and shareholders
is not enough justification to pierce the veil of corporate fiction in the absence of
fraud or other public policy considerations.
Absent any allegation or proof of fraud or other public policy considerations, the
existence of interlocking directors, officers and stockholders is not enough
justification to pierce the veil of corporate fiction as in the instant case.
And in the fourth place, the fact that this Court, in its July 5, 2011 Decision, ordered
the payment of the proceeds of the sale of the converted land, and even of the
80.51-hectare land sold to the government, through the Bases Conversion
Development Authority, to the qualified FWBs, effectively fulfils the conditions in the
conversion order, to wit: (1) that its approval shall in no way amend, diminish, or
alter the undertaking and obligations of HLI as contained in the SDP approved on
November 21, 1989; and (2) that the benefits, wages and the like, received by the
FWBs shall not in any way be reduced or adversely affected, among others.
A view has also been advanced that the 200-hectare lot transferred to Luisita Realty
Corporation (LRC) should be included in the compulsory coverage because the
corporation did not intervene.
We disagree. Since the 200-hectare lot formed part of the SDP that was nullified by
PARC Resolution 2005-32-01, this Court is constrained to make a ruling on the rights
of LRC over the said lot. Moreover, the 500-hectare portion of Hacienda Luisita, of
which the 200-hectare portion sold to LRC and the 300-hectare portion subsequently
acquired by LIPCO and RCBC were part of, was already the subject of the August 14,
1996 DAR Conversion Order. By virtue of the said conversion order, the land was
already reclassified as industrial/commercial land not subject to compulsory
coverage. Thus, if We place the 200-hectare lot sold to LRC under compulsory
coverage, this Court would, in effect, be disregarding the DAR Conversion Order,
which has long attained its finality. And as this Court held in Berboso v. CA,[51]
Once final and executory, the Conversion Order can no longer be questioned.
Besides, to disregard the Conversion Order through the revocation of the approval
of the SDP would create undue prejudice to LRC, which is not even a party to the
proceedings below, and would be tantamount to deprivation of property without due
process of law.
Nonethess, the minority is of the adamant view that since LRC failed to intervene in
the instant case and was, therefore, unable to present evidence supporting its good
faith purchase of the 200-hectare converted land, then LRC should be given full
opportunity to present its case before the DAR. This minority view is a contradiction
in itself. Given that LRC did not intervene and is, therefore, not a party to the instant
case, then it would be incongruous to order them to present evidence before the
DAR. Such an order, if issued by this Court, would not be binding upon the LRC.
Moreover, LRC may be considered to have waived its right to participate in the
instant petition since it did not intervene in the DAR proceedings for the nullification
of the PARC Resolution No. 89-12-2 which approved the SDP.
(c) Proceeds of the sale of the 500-hectare converted land
and of the 80.51-hectare land used for the SCTEX
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As previously mentioned, We ruled in Our July 5, 2011 Decision that since the Court
excluded the 500-hectare lot subject of the August 14, 1996 Conversion Order and
the 80.51-hectare SCTEX lot acquired by the government from compulsory
coverage, then HLI and its subsidiary, Centennary, should be liable to the FWBs for
the price received for said lots. Thus:
There is a claim that, since the sale and transfer of the 500 hectares of land subject
of the August 14, 1996 Conversion Order and the 80.51-hectare SCTEX lot came
after compulsory coverage has taken place, the FWBs should have their
corresponding share of the lands value. There is merit in the claim. Since the SDP
approved by PARC Resolution No. 89-12-2 has been nullified, then all the lands
subject of the SDP will automatically be subject of compulsory coverage under Sec.
31 of RA 6657. Since the Court excluded the 500-hectare lot subject of the August
14, 1996 Conversion Order and the 80.51-hectare SCTEX lot acquired by the
government from the area covered by SDP, then HLI and its subsidiary, Centennary,
shall be liable to the FWBs for the price received for said lots. HLI shall be liable for
the value received for the sale of the 200-hectare land to LRC in the amount of PhP
500,000,000 and the equivalent value of the 12,000,000 shares of its subsidiary,
Centennary, for the 300-hectare lot sold to LIPCO for the consideration of PhP
750,000,000. Likewise, HLI shall be liable for PhP 80,511,500 as consideration for
the sale of the 80.51-hectare SCTEX lot.
We, however, note that HLI has allegedly paid 3% of the proceeds of the sale of the
500-hectare land and 80.51-hectare SCTEX lot to the FWBs. We also take into
account the payment of taxes and expenses relating to the transfer of the land and
HLIs statement that most, if not all, of the proceeds were used for legitimate
corporate purposes. In order to determine once and for all whether or not all the
proceeds were properly utilized by HLI and its subsidiary, Centennary, DAR will
engage the services of a reputable accounting firm to be approved by the parties to
audit the books of HLI to determine if the proceeds of the sale of the 500-hectare
land and the 80.51-hectare SCTEX lot were actually used for legitimate corporate
purposes, titling expenses and in compliance with the August 14, 1996 Conversion
Order. The cost of the audit will be shouldered by HLI. If after such audit, it is
determined that there remains a balance from the proceeds of the sale, then the
balance shall be distributed to the qualified FWBs.
HLI, however, takes exception to the above-mentioned ruling and contends that it is
not proper to distribute the unspent or unused balance of the proceeds of the sale
of the 500-hectare converted land and 80.51-hectare SCTEX lot to the qualified
FWBs for the following reasons: (1) the proceeds of the sale belong to the
corporation, HLI, as corporate capital and assets in substitution for the portions of
its land asset which were sold to third parties; (2) to distribute the cash sales
proceeds of the portions of the land asset to the FWBs, who are stockholders of HLI,
is to dissolve the corporation and distribute the proceeds as liquidating dividends
without even paying the creditors of the corporation; and (3) the doing of said acts
would violate the stringent provisions of the Corporation Code and corporate
practice.[52]
Apparently, HLI seeks recourse to the Corporation Code in order to avoid its liability
to the FWBs for the price received for the 500-hectare converted lot and the 80.51hectare SCTEX lot. However, as We have established in Our July 5, 2011 Decision,
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the rights, obligations and remedies of the parties in the instant case are primarily
governed by RA 6657 and HLI cannot shield itself from the CARP coverage merely
under the convenience of being a corporate entity. In this regard, it should be
underscored that the agricultural lands held by HLI by virtue of the SDP are no
ordinary assets. These are special assets, because, originally, these should have
been distributed to the FWBs were it not for the approval of the SDP by PARC. Thus,
the government cannot renege on its responsibility over these assets. Likewise, HLI
is no ordinary corporation as it was formed and organized precisely to make use of
these agricultural lands actually intended for distribution to the FWBs. Thus, it
cannot shield itself from the coverage of CARP by invoking the Corporation Code. As
explained by the Court:
HLI also parlays the notion that the parties to the SDOA should now look to the
Corporation Code, instead of to RA 6657, in determining their rights, obligations and
remedies. The Code, it adds, should be the applicable law on the disposition of the
agricultural land of HLI.
Contrary to the view of HLI, the rights, obligations and remedies of the parties to the
SDOA embodying the SDP are primarily governed by RA 6657. It should abundantly
be made clear that HLI was precisely created in order to comply with RA 6657,
which the OSG aptly described as the mother law of the SDOA and the SDP.[53] It is,
thus, paradoxical for HLI to shield itself from the coverage of CARP by invoking
exclusive applicability of the Corporation Code under the guise of being a corporate
entity.
Without in any way minimizing the relevance of the Corporation Code since the
FWBs of HLI are also stockholders, its applicability is limited as the rights of the
parties arising from the SDP should not be made to supplant or circumvent the
agrarian reform program.
Without doubt, the Corporation Code is the general law providing for the formation,
organization and regulation of private corporations. On the other hand, RA 6657 is
the special law on agrarian reform. As between a general and special law, the latter
shall prevailgeneralia specialibus non derogant.[54] Besides, the present impasse
between HLI and the private respondents is not an intra-corporate dispute which
necessitates the application of the Corporation Code. What private respondents
questioned before the DAR is the proper implementation of the SDP and HLIs
compliance with RA 6657. Evidently, RA 6657 should be the applicable law to the
instant case. (Emphasis supplied.)
Considering that the 500-hectare converted land, as well as the 80.51-hectare
SCTEX lot, should have been included in the compulsory coverage were it not for
their conversion and valid transfers, then it is only but proper that the price
received for the sale of these lots should be given to the qualified FWBs. In effect,
the proceeds from the sale shall take the place of the lots.
The Court, in its July 5, 2011 Decision, however, takes into account, inter alia, the
payment of taxes and expenses relating to the transfer of the land, as well as HLIs
statement that most, if not all, of the proceeds were used for legitimate corporate
purposes. Accordingly, We ordered the deduction of the taxes and expenses relating
to the transfer of titles to the transferees, and the expenditures incurred by HLI and
Centennary for legitimate corporate purposes, among others.

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On this note, DAR claims that the [l]egitimate corporate expenses should not be
deducted as there is no basis for it, especially since only the auditing to be
conducted on the financial records of HLI will reveal the amounts to be offset
between HLI and the FWBs.[55]
The contention is unmeritorious. The possibility of an offsetting should not prevent
Us from deducting the legitimate corporate expenses incurred by HLI and
Centennary. After all, the Court has ordered for a proper auditing [i]n order to
determine once and for all whether or not all the proceeds were properly utilized by
HLI and its subsidiary, Centennary. In this regard, DAR is tasked to engage the
services of a reputable accounting firm to be approved by the parties to audit the
books of HLI to determine if the proceeds of the sale of the 500-hectare land and
the 80.51-hectare SCTEX lot were actually used for legitimate corporate purposes,
titling expenses and in compliance with the August 14, 1996 Conversion Order. Also,
it should be noted that it is HLI which shall shoulder the cost of audit to reduce the
burden on the part of the FWBs. Concomitantly, the legitimate corporate expenses
incurred by HLI and Centennary, as will be determined by a reputable accounting
firm to be engaged by DAR, shall be among the allowable deductions from the
proceeds of the sale of the 500-hectare land and the 80.51-hectare SCTEX lot.
We, however, find that the 3% production share should not be deducted from the
proceeds of the sale of the 500-hectare converted land and the 80.51-hectare
SCTEX lot. The 3% production share, like the homelots, was among the benefits
received by the FWBs as farmhands in the agricultural enterprise of HLI and, thus,
should not be taken away from the FWBs.
Contrarily, the minority is of the view that as a consequence of the revocation of the
SDP, the parties should be restored to their respective conditions prior to its
execution and approval, subject to the application of the principle of set-off or
compensation. Such view is patently misplaced.
The law on contracts, i.e. mutual restitution, does not apply to the case at bar. To
reiterate, what was actually revoked by this Court, in its July 5, 2011 Decision, is
PARC Resolution No. 89-12-2 approving the SDP. To elucidate, it was the SDP, not the
SDOA, which was presented for approval by Tadeco to DAR.[56] The SDP explained
the mechanics of the stock distribution but did not make any reference nor
correlation to the SDOA. The pertinent portions of the proposal read:
MECHANICS OF STOCK DISTRIBUTION PLAN
Under Section 31 of Republic Act No. 6657, a corporation owning agricultural land
may distribute among the qualified beneficiaries such proportion or percentage of
its capital stock that the value of the agricultural land actually devoted to
agricultural activities, bears in relation to the corporations total assets. Conformably
with this legal provision, Tarlac Development Corporation hereby submits for
approval a stock distribution plan that envisions the following:[57] (Terms and
conditions omitted; emphasis supplied)
xxxx
The above stock distribution plan is hereby submitted on the basis of all these
benefits that the farmworker-beneficiaries of Hacienda Luisita will receive under its
provisions in addition to their regular compensation as farmhands in the agricultural
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enterprise and the fringe benefits granted to them by their collective bargaining
agreement with management.[58]
Also, PARC Resolution No. 89-12-2 reads as follows:
RESOLUTION APPROVING THE STOCK DISTRIBUTION PLAN OF
DEVELOPMENT COMPANY/HACIENDA LUISITA INCORPORATED (TDC/HLI)

TARLAC

NOW THEREFORE, on motion duly seconded,


RESOLVED, as it is hereby resolved, to approve the stock distribution plan of
TDC/HLI.
UNANIMOUSLY APPROVED.[59] (Emphasis supplied)
Clearly, what was approved by PARC is the SDP and not the SDOA. There is,
therefore, no basis for this Court to apply the law on contracts to the revocation of
the said PARC Resolution.
IV. Just Compensation
In Our July 5, 2011 Decision, We stated that HLI shall be paid just compensation for
the remaining agricultural land that will be transferred to DAR for land distribution
to the FWBs. We also ruled that the date of the taking is November 21, 1989, when
PARC approved HLIs SDP per PARC Resolution No. 89-12-2.
In its Motion for Clarification and Partial Reconsideration, HLI disagrees with the
foregoing ruling and contends that the taking should be reckoned from finality of
the Decision of this Court, or at the very least, the reckoning period may be tacked
to January 2, 2006, the date when the Notice of Coverage was issued by the DAR
pursuant to PARC Resolution No. 2006-34-01 recalling/revoking the approval of the
SDP.[60]
For their part, Mallari, et al. argue that the valuation of the land cannot be based on
November 21, 1989, the date of approval of the SDP. Instead, they aver that the
date of taking for valuation purposes is a factual issue best left to the determination
of the trial courts.[61]
At the other end of the spectrum, AMBALA alleges that HLI should no longer be paid
just compensation for the agricultural land that will be distributed to the FWBs,
since the Manila Regional Trial Court (RTC) already rendered a decision ordering the
Cojuangcos to transfer the control of Hacienda Luisita to the Ministry of Agrarian
Reform, which will distribute the land to small farmers after compensating the
landowners P3.988 million.[62] In the event, however, that this Court will rule that
HLI is indeed entitled to compensation, AMBALA contends that it should be pegged
at forty thousand pesos (PhP 40,000) per hectare, since this was the same value
that Tadeco declared in 1989 to make sure that the farmers will not own the
majority of its stocks.[63]
Despite the above propositions, We maintain that the date of taking is November
21, 1989, the date when PARC approved HLIs SDP per PARC Resolution No. 89-12-2,
in view of the fact that this is the time that the FWBs were considered to own and
possess the agricultural lands in Hacienda Luisita. To be precise, these lands
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became subject of the agrarian reform coverage through the stock distribution
scheme only upon the approval of the SDP, that is, November 21, 1989. Thus, such
approval is akin to a notice of coverage ordinarily issued under compulsory
acquisition. Further, any doubt should be resolved in favor of the FWBs. As this
Court held in Perez-Rosario v. CA:[64]
It is an established social and economic fact that the escalation of poverty is the
driving force behind the political disturbances that have in the past compromised
the peace and security of the people as well as the continuity of the national order.
To subdue these acute disturbances, the legislature over the course of the history of
the nation passed a series of laws calculated to accelerate agrarian reform,
ultimately to raise the material standards of living and eliminate discontent.
Agrarian reform is a perceived solution to social instability. The edicts of social
justice found in the Constitution and the public policies that underwrite them, the
extraordinary national experience, and the prevailing national consciousness, all
command the great departments of government to tilt the balance in favor of the
poor and underprivileged whenever reasonable doubt arises in the interpretation of
the law. But annexed to the great and sacred charge of protecting the weak is the
diametric function to put every effort to arrive at an equitable solution for all parties
concerned: the jural postulates of social justice cannot shield illegal acts, nor do
they sanction false sympathy towards a certain class, nor yet should they deny
justice to the landowner whenever truth and justice happen to be on her side. In the
occupation of the legal questions in all agrarian disputes whose outcomes can
significantly affect societal harmony, the considerations of social advantage must
be weighed, an inquiry into the prevailing social interests is necessary in the
adjustment of conflicting demands and expectations of the people, and the social
interdependence of these interests, recognized. (Emphasis supplied.)
The minority contends that it is the date of the notice of coverage, that is, January
2, 2006, which is determinative of the just compensation HLI is entitled to for its
expropriated lands. To support its contention, it cited numerous cases where the
time of the taking was reckoned on the date of the issuance of the notice of
coverage.
However, a perusal of the cases cited by the minority would reveal that none of
them involved the stock distribution scheme. Thus, said cases do not squarely apply
to the instant case. Moreover, it should be noted that it is precisely because the
stock distribution option is a distinctive mechanism under RA 6657 that it cannot be
treated similarly with that of compulsory land acquisition as these are two (2)
different modalities under the agrarian reform program. As We have stated in Our
July 5, 2011 Decision, RA 6657 provides two (2) alternative modalities, i.e., land or
stock transfer, pursuant to either of which the corporate landowner can comply with
CARP.
In this regard, it should be noted that when HLI submitted the SDP to DAR for
approval, it cannot be gainsaid that the stock distribution scheme is clearly HLIs
preferred modality in order to comply with CARP. And when the SDP was approved,
stocks were given to the FWBs in lieu of land distribution. As aptly observed by the
minority itself, [i]nstead of expropriating lands, what the government took and
distributed to the FWBs were shares of stock of petitioner HLI in proportion to the
value of the agricultural lands that should have been expropriated and turned over
to the FWBs. It cannot, therefore, be denied that upon the approval of the SDP
submitted by HLI, the agricultural lands of Hacienda Luisita became subject of CARP
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coverage. Evidently, the approval of the SDP took the place of a notice of coverage
issued under compulsory acquisition.
Also, it is surprising that while the minority opines that under the stock distribution
option, title to the property remains with the corporate landowner, which should
presumably be dominated by farmers with majority stockholdings in the
corporation, it still insists that the just compensation that should be given to HLI is
to be reckoned on January 2, 2006, the date of the issuance of the notice of
coverage, even after it found that the FWBs did not have the majority stockholdings
in HLI contrary to the supposed avowed policy of the law. In effect, what the
minority wants is to prejudice the FWBs twice. Given that the FWBs should have had
majority stockholdings in HLI but did not, the minority still wants the government to
pay higher just compensation to HLI. Even if it is the government which will pay the
just compensation to HLI, this will also affect the FWBs as they will be paying higher
amortizations to the government if the taking will be considered to have taken place
only on January 2, 2006.
The foregoing notwithstanding, it bears stressing that the DAR's land valuation is
only preliminary and is not, by any means, final and conclusive upon the landowner.
The landowner can file an original action with the RTC acting as a special agrarian
court to determine just compensation. The court has the right to review with finality
the determination in the exercise of what is admittedly a judicial function.[65]
A view has also been advanced that HLI should pay the qualified FWBs rental for the
use and possession of the land up to the time it surrenders possession and control
over these lands. What this view fails to consider is the fact that the FWBs are also
stockholders of HLI prior to the revocation of PARC Resolution No. 89-12-2. Also, the
income earned by the corporation from its possession and use of the land ultimately
redounded to the benefit of the FWBs based on its business operations in the form
of salaries, benefits voluntarily granted by HLI and other fringe benefits under their
Collective Bargaining Agreement. That being so, there would be unjust enrichment
on the part of the FWBs if HLI will still be required to pay rent for the use of the land
in question.
V. Sale to Third Parties
There is a view that since the agricultural lands in Hacienda Luisita were placed
under CARP coverage through the SDOA scheme on May 11, 1989, then the 10-year
period prohibition on the transfer of awarded lands under RA 6657 lapsed on May
10, 1999, and, consequently, the qualified FWBs should already be allowed to sell
these lands with respect to their land interests to third parties, including HLI,
regardless of whether they have fully paid for the lands or not.
The proposition is erroneous. Sec. 27 of RA 6657 states:
SEC. 27. Transferability of Awarded Lands. - Lands acquired by beneficiaries under
this Act may not be sold, transferred or conveyed except through hereditary
succession, or to the government, or to the LBP, or to other qualified beneficiaries
for a period of ten (10) years: Provided, however, That the children or the spouse of
the transferor shall have a right to repurchase the land from the government or LBP
within a period of two (2) years. Due notice of the availability of the land shall be
given by the LBP to the Barangay Agrarian Reform Committee (BARC) of the
barangay where the land is situated. The Provincial Agrarian Coordinating
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Committee (PARCCOM), as herein provided, shall, in turn, be given due notice


thereof by the BARC.
If the land has not yet been fully paid by the beneficiary, the right to the land may
be transferred or conveyed, with prior approval of the DAR, to any heir of the
beneficiary or to any other beneficiary who, as a condition for such transfer or
conveyance, shall cultivate the land himself. Failing compliance herewith, the land
shall be transferred to the LBP which shall give due notice of the availability of the
land in the manner specified in the immediately preceding paragraph.
In the event of such transfer to the LBP, the latter shall compensate the beneficiary
in one lump sum for the amounts the latter has already paid, together with the
value of improvements he has made on the land. (Emphasis supplied.)
To implement the above-quoted provision, inter alia, DAR issued Administrative
Order No. 1, Series of 1989 (DAO 1) entitled Rules and Procedures Governing Land
Transactions. Said Rules set forth the rules on validity of land transactions, to wit:
II. RULES ON VALIDITY OF LAND TRANSACTIONS
A. The following transactions are valid:
1.
Those executed by the original landowner in favor of the qualified beneficiary
from among those certified by DAR.
2.

Those in favor of the government, DAR or the Land Bank of the Philippines.

3.
Those covering lands retained by the landowner under Section 6 of R.A. 6657
duly certified by the designated DAR Provincial Agrarian Reform Officer (PARO) as a
retention area, executed in favor of transferees whose total landholdings inclusive
of the land to be acquired do not exceed five (5) hectares; subject, however, to the
right of pre-emption and/or redemption of tenant/lessee under Section 11 and 12 of
R.A. 3844, as amended.
xxxx
4.
Those executed by beneficiaries covering lands acquired under any agrarian
reform law in favor of the government, DAR, LBP or other qualified beneficiaries
certified by DAR.
5.
Those executed after ten (10) years from the issuance and registration of the
Emancipation Patent or Certificate of Land Ownership Award.
B. The following transactions are not valid:
1.
Sale, disposition, lease management contract or transfer of possession of
private lands executed by the original landowner prior to June 15, 1988, which are
registered on or before September 13, 1988, or those executed after June 15, 1988,
covering an area in excess of the five-hectare retention limit in violation of R.A.
6657.
2.
Those covering lands acquired by the beneficiary under R.A. 6657 and
executed within ten (10) years from the issuance and registration of an
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Emancipation Patent or Certificate of Land Ownership Award.


3.
Those executed in favor of a person or persons not qualified to acquire land
under R.A. 6657.
4.
Sale, transfer, conveyance or change of nature of the land outside of urban
centers and city limits either in whole or in part as of June 15, 1988, when R.A. 6657
took effect, except as provided for under DAR Administrative Order No. 15, series of
1988.
5.
Sale, transfer or conveyance by beneficiary of the right to use or any other
usufructuary right over the land he acquired by virtue of being a beneficiary, in
order to circumvent the law.
x x x x (Emphasis supplied.)
Without a doubt, under RA 6657 and DAO 1, the awarded lands may only be
transferred or conveyed after ten (10) years from the issuance and registration of
the emancipation patent (EP) or certificate of land ownership award (CLOA).
Considering that the EPs or CLOAs have not yet been issued to the qualified FWBs in
the instant case, the 10-year prohibitive period has not even started. Significantly,
the reckoning point is the issuance of the EP or CLOA, and not the placing of the
agricultural lands under CARP coverage.
Moreover, if We maintain the position that the qualified FWBs should be
immediately allowed the option to sell or convey the agricultural lands in Hacienda
Luisita, then all efforts at agrarian reform would be rendered nugatory by this Court,
since, at the end of the day, these lands will just be transferred to persons not
entitled to land distribution under CARP. As aptly noted by the late Senator Neptali
Gonzales during the Joint Congressional Conference Committee on the
Comprehensive Agrarian Reform Program Bills:
SEN. GONZALES. My point is, as much as possible let the said lands be distributed
under CARP remain with the beneficiaries and their heirs because that is the lesson
that we have to learn from PD No. 27. If you will talk with the Congressmen
representing Nueva Ecija, Pampanga and Central Luzon provinces, law or no law,
you will find out that more than one-third of the original, of the lands distributed
under PD 27 are no longer owned, possessed or being worked by the grantees or
the awardees of the same, something which we ought to avoid under the CARP bill
that we are going to enact.[66] (Emphasis supplied.)
Worse, by raising that the qualified beneficiaries may sell their interest back to HLI,
this smacks of outright indifference to the provision on retention limits[67] under RA
6657, as this Court, in effect, would be allowing HLI, the previous landowner, to own
more than five (5) hectares of agricultural land, which We cannot countenance.
There is a big difference between the ownership of agricultural lands by HLI under
the stock distribution scheme and its eventual acquisition of the agricultural lands
from the qualified FWBs under the proposed buy-back scheme. The rule on retention
limits does not apply to the former but only to the latter in view of the fact that the
stock distribution scheme is sanctioned by Sec. 31 of RA 6657, which specifically
allows corporations to divest a proportion of their capital stock that the agricultural
land, actually devoted to agricultural activities, bears in relation to the companys
total assets. On the other hand, no special rules exist under RA 6657 concerning the
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proposed buy-back scheme; hence, the general rules on retention limits should
apply.
Further, the position that the qualified FWBs are now free to transact with third
parties concerning their land interests, regardless of whether they have fully paid
for the lands or not, also transgresses the second paragraph of Sec. 27 of RA 6657,
which plainly states that [i]f the land has not yet been fully paid by the beneficiary,
the right to the land may be transferred or conveyed, with prior approval of the
DAR, to any heir of the beneficiary or to any other beneficiary who, as a condition
for such transfer or conveyance, shall cultivate the land himself. Failing compliance
herewith, the land shall be transferred to the LBP x x x. When the words and
phrases in the statute are clear and unequivocal, the law is applied according to its
express terms.[68] Verba legis non est recedendum, or from the words of a statute
there should be no departure.[69]
The minority, however, posits that [t]o insist that the FWBs rights sleep for a period
of ten years is unrealistic, and may seriously deprive them of real opportunities to
capitalize and maximize the victory of direct land distribution. By insisting that We
disregard the ten-year restriction under the law in the case at bar, the minority, in
effect, wants this Court to engage in judicial legislation, which is violative of the
principle of separation of powers.[70] The discourse by Ruben E. Agpalo, in his book
on statutory construction, is enlightening:
Where the law is clear and unambiguous, it must be taken to mean exactly what it
says and the court has no choice but to see to it that its mandate is obeyed. Where
the law is clear and free from doubt or ambiguity, there is no room for construction
or interpretation. Thus, where what is not clearly provided in the law is read into the
law by construction because it is more logical and wise, it would be to encroach
upon legislative prerogative to define the wisdom of the law, which is judicial
legislation. For whether a statute is wise or expedient is not for the courts to
determine. Courts must administer the law, not as they think it ought to be but as
they find it and without regard to consequences.[71] (Emphasis supplied.)
And as aptly stated by Chief Justice Renato Corona in his Dissenting Opinion in Ang
Ladlad LGBT Party v. COMELEC:[72]
Regardless of the personal beliefs and biases of its individual members, this Court
can only apply and interpret the Constitution and the laws. Its power is not to create
policy but to recognize, review or reverse the policy crafted by the political
departments if and when a proper case is brought before it. Otherwise, it will tread
on the dangerous grounds of judicial legislation.
Considerably, this Court is left with no other recourse but to respect and apply the
law.
VI. Grounds for Revocation of the SDP
AMBALA and FARM reiterate that improving the economic status of the FWBs is
among the legal obligations of HLI under the SDP and is an imperative imposition by
RA 6657 and DAO 10.[73] FARM further asserts that [i]f that minimum threshold is
not met, why allow [stock distribution option] at all, unless the purpose is not social
justice but a political accommodation to the powerful.[74]

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Contrary to the assertions of AMBALA and FARM, nowhere in the SDP, RA 6657 and
DAO 10 can it be inferred that improving the economic status of the FWBs is among
the legal obligations of HLI under the SDP or is an imperative imposition by RA 6657
and DAO 10, a violation of which would justify discarding the stock distribution
option. As We have painstakingly explained in Our July 5, 2011 Decision:
In the Terminal Report adopted by PARC, it is stated that the SDP violates the
agrarian reform policy under Sec. 2 of RA 6657, as the said plan failed to enhance
the dignity and improve the quality of lives of the FWBs through greater productivity
of agricultural lands. We disagree.
Sec. 2 of RA 6657 states:
SECTION 2. Declaration of Principles and Policies.It is the policy of the State to
pursue a Comprehensive Agrarian Reform Program (CARP). The welfare of the
landless farmers and farm workers will receive the highest consideration to promote
social justice and to move the nation towards sound rural development and
industrialization, and the establishment of owner cultivatorship of economic-sized
farms as the basis of Philippine agriculture.

To this end, a more equitable distribution and ownership of land, with due regard to
the rights of landowners to just compensation and to the ecological needs of the
nation, shall be undertaken to provide farmers and farm workers with the
opportunity to enhance their dignity and improve the quality of their lives through
greater productivity of agricultural lands.
The agrarian reform program is founded on the right of farmers and regular farm
workers, who are landless, to own directly or collectively the lands they till or, in the
case of other farm workers, to receive a share of the fruits thereof. To this end, the
State shall encourage the just distribution of all agricultural lands, subject to the
priorities and retention limits set forth in this Act, having taken into account
ecological, developmental, and equity considerations, and subject to the payment
of just compensation. The State shall respect the right of small landowners and shall
provide incentives for voluntary land-sharing.
Paragraph 2 of the above-quoted provision specifically mentions that a more
equitable distribution and ownership of land x x x shall be undertaken to provide
farmers and farm workers with the opportunity to enhance their dignity and improve
the quality of their lives through greater productivity of agricultural lands. Of note is
the term opportunity which is defined as a favorable chance or opening offered by
circumstances. Considering this, by no stretch of imagination can said provision be
construed as a guarantee in improving the lives of the FWBs. At best, it merely
provides for a possibility or favorable chance of uplifting the economic status of the
FWBs, which may or may not be attained.
Pertinently, improving the economic status of the FWBs is neither among the legal
obligations of HLI under the SDP nor an imperative imposition by RA 6657 and DAO
10, a violation of which would justify discarding the stock distribution option.
Nothing in that option agreement, law or department order indicates otherwise.
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Significantly, HLI draws particular attention to its having paid its FWBs, during the
regime of the SDP (1989-2005), some PhP 3 billion by way of salaries/wages and
higher benefits exclusive of free hospital and medical benefits to their immediate
family. And attached as Annex G to HLIs Memorandum is the certified true report of
the finance manager of Jose Cojuangco & Sons Organizations-Tarlac Operations,
captioned as HACIENDA LUISITA, INC. Salaries, Benefits and Credit Privileges (in
Thousand Pesos) Since the Stock Option was Approved by PARC/CARP, detailing
what HLI gave their workers from 1989 to 2005. The sum total, as added up by the
Court, yields the following numbers: Total Direct Cash Out (Salaries/Wages & Cash
Benefits) = PhP 2,927,848; Total Non-Direct Cash Out (Hospital/Medical Benefits) =
PhP 303,040. The cash out figures, as stated in the report, include the cost of
homelots; the PhP 150 million or so representing 3% of the gross produce of the
hacienda; and the PhP 37.5 million representing 3% from the proceeds of the sale of
the 500-hectare converted lands. While not included in the report, HLI manifests
having given the FWBs 3% of the PhP 80 million paid for the 80 hectares of land
traversed by the SCTEX. On top of these, it is worth remembering that the shares of
stocks were given by HLI to the FWBs for free. Verily, the FWBs have benefited from
the SDP.
To address urgings that the FWBs be allowed to disengage from the SDP as HLI has
not anyway earned profits through the years, it cannot be over-emphasized that, as
a matter of common business sense, no corporation could guarantee a profitable
run all the time. As has been suggested, one of the key features of an SDP of a
corporate landowner is the likelihood of the corporate vehicle not earning, or, worse
still, losing money.
The Court is fully aware that one of the criteria under DAO 10 for the PARC to
consider the advisability of approving a stock distribution plan is the likelihood that
the plan would result in increased income and greater benefits to [qualified
beneficiaries] than if the lands were divided and distributed to them individually. But
as aptly noted during the oral arguments, DAO 10 ought to have not, as it cannot,
actually exact assurance of success on something that is subject to the will of man,
the forces of nature or the inherent risky nature of business.[75] Just like in actual
land distribution, an SDP cannot guarantee, as indeed the SDOA does not
guarantee, a comfortable life for the FWBs. The Court can take judicial notice of the
fact that there were many instances wherein after a farmworker beneficiary has
been awarded with an agricultural land, he just subsequently sells it and is
eventually left with nothing in the end.
In all then, the onerous condition of the FWBs economic status, their life of hardship,
if that really be the case, can hardly be attributed to HLI and its SDP and provide a
valid ground for the plans revocation. (Citations omitted; emphasis in the original.)
This Court, despite the above holding, still affirmed the revocation by PARC of its
approval of the SDP based on the following grounds: (1) failure of HLI to fully comply
with its undertaking to distribute homelots to the FWBs under the SDP; (2)
distribution of shares of stock to the FWBs based on the number of man days or
number of days worked by the FWB in a years time; and (3) 30-year timeframe for
the implementation or distribution of the shares of stock to the FWBs.
Just the same, Mallari, et al. posit that the homelots required to be distributed have
all been distributed pursuant to the SDOA, and that what merely remains to be done
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is the release of title from the Register of Deeds.[76] They further assert that there
has been no dilution of shares as the corporate records would show that if ever not
all of the 18,804.32 shares were given to the actual original FWB, the recipient of
the difference is the next of kin or children of said original FWB.[77] Thus, they
submit that since the shares were given to the same family beneficiary, this should
be deemed as substantial compliance with the provisions of Sec. 4 of DAO 10.[78]
Also, they argue that there has been no violation of the three-month period to
implement the SDP as mandated by Sec. 11 of DAO, since this provision must be
read in light of Sec. 10 of Executive Order No. 229, the pertinent portion of which
reads, The approval by the PARC of a plan for such stock distribution, and its initial
implementation, shall be deemed compliance with the land distribution requirement
of the CARP.[79]
Again, the matters raised by Mallari, et al. have been extensively discussed by the
Court in its July 5, 2011 Decision. As stated:
On Titles to Homelots
Under RA 6657, the distribution of homelots is required only for corporations or
business associations owning or operating farms which opted for land distribution.
Sec. 30 of RA 6657 states:
SEC. 30. Homelots and Farmlots for Members of Cooperatives.The individual
members of the cooperatives or corporations mentioned in the preceding section
shall be provided with homelots and small farmlots for their family use, to be taken
from the land owned by the cooperative or corporation.
The preceding section referred to in the above-quoted provision is as follows:
SEC. 29. Farms Owned or Operated by Corporations or Other Business
Associations.In the case of farms owned or operated by corporations or other
business associations, the following rules shall be observed by the PARC.
In general, lands shall be distributed directly to the individual worker-beneficiaries.
In case it is not economically feasible and sound to divide the land, then it shall be
owned collectively by the worker-beneficiaries who shall form a workers cooperative
or association which will deal with the corporation or business association. Until a
new agreement is entered into by and between the workers cooperative or
association and the corporation or business association, any agreement existing at
the time this Act takes effect between the former and the previous landowner shall
be respected by both the workers cooperative or association and the corporation or
business association.
Noticeably, the foregoing provisions do not make reference to corporations which
opted for stock distribution under Sec. 31 of RA 6657. Concomitantly, said
corporations are not obliged to provide for it except by stipulation, as in this case.
Under the SDP, HLI undertook to subdivide and allocate for free and without charge
among the qualified family-beneficiaries x x x residential or homelots of not more
than 240 sq. m. each, with each family beneficiary being assured of receiving and
owning a homelot in the barrio or barangay where it actually resides, within a
reasonable time.
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More than sixteen (16) years have elapsed from the time the SDP was approved by
PARC, and yet, it is still the contention of the FWBs that not all was given the 240square meter homelots and, of those who were already given, some still do not
have the corresponding titles.
During the oral arguments, HLI was afforded the chance to refute the foregoing
allegation by submitting proof that the FWBs were already given the said homelots:
Justice Velasco: x x x There is also an allegation that the farmer beneficiaries, the
qualified family beneficiaries were not given the 240 square meters each. So, can
you also [prove] that the qualified family beneficiaries were already provided the
240 square meter homelots.
Atty. Asuncion: We will, your Honor please.
Other than the financial report, however, no other substantial proof showing that all
the qualified beneficiaries have received homelots was submitted by HLI. Hence,
this Court is constrained to rule that HLI has not yet fully complied with its
undertaking to distribute homelots to the FWBs under the SDP.
On Man Days and the Mechanics of Stock Distribution
In our review and analysis of par. 3 of the SDOA on the mechanics and timelines of
stock distribution, We find that it violates two (2) provisions of DAO 10. Par. 3 of the
SDOA states:
3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY [HLI]
shall arrange with the FIRST PARTY [TDC] the acquisition and distribution to the
THIRD PARTY [FWBs] on the basis of number of days worked and at no cost to them
of one-thirtieth (1/30) of 118,391,976.85 shares of the capital stock of the SECOND
PARTY that are presently owned and held by the FIRST PARTY, until such time as the
entire block of 118,391,976.85 shares shall have been completely acquired and
distributed to the THIRD PARTY.
Based on the above-quoted provision, the distribution of the shares of stock to the
FWBs, albeit not entailing a cash out from them, is contingent on the number of
man days, that is, the number of days that the FWBs have worked during the year.
This formula deviates from Sec. 1 of DAO 10, which decrees the distribution of equal
number of shares to the FWBs as the minimum ratio of shares of stock for purposes
of compliance with Sec. 31 of RA 6657. As stated in Sec. 4 of DAO 10:
Section 4. Stock Distribution Plan.The [SDP] submitted by the corporate landownerapplicant shall provide for the distribution of an equal number of shares of the same
class and value, with the same rights and features as all other shares, to each of the
qualified beneficiaries. This distribution plan in all cases, shall be at least the
minimum ratio for purposes of compliance with Section 31 of R.A. No. 6657.
On top of the minimum ratio provided under Section 3 of this Implementing
Guideline, the corporate landowner-applicant may adopt additional stock
distribution schemes taking into account factors such as rank, seniority, salary,
position and other circumstances which may be deemed desirable as a matter of
sound company policy.
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The above proviso gives two (2) sets or categories of shares of stock which a
qualified beneficiary can acquire from the corporation under the SDP. The first
pertains, as earlier explained, to the mandatory minimum ratio of shares of stock to
be distributed to the FWBs in compliance with Sec. 31 of RA 6657. This minimum
ratio contemplates of that proportion of the capital stock of the corporation that the
agricultural land, actually devoted to agricultural activities, bears in relation to the
companys total assets. It is this set of shares of stock which, in line with Sec. 4 of
DAO 10, is supposed to be allocated for the distribution of an equal number of
shares of stock of the same class and value, with the same rights and features as all
other shares, to each of the qualified beneficiaries.
On the other hand, the second set or category of shares partakes of a gratuitous
extra grant, meaning that this set or category constitutes an augmentation share/s
that the corporate landowner may give under an additional stock distribution
scheme, taking into account such variables as rank, seniority, salary, position and
like factors which the management, in the exercise of its sound discretion, may
deem desirable.
Before anything else, it should be stressed that, at the time PARC approved HLIs
SDP, HLI recognized 6,296 individuals as qualified FWBs. And under the 30-year
stock distribution program envisaged under the plan, FWBs who came in after 1989,
new FWBs in fine, may be accommodated, as they appear to have in fact been
accommodated as evidenced by their receipt of HLI shares.
Now then, by providing that the number of shares of the original 1989 FWBs shall
depend on the number of man days, HLI violated the afore-quoted rule on stock
distribution and effectively deprived the FWBs of equal shares of stock in the
corporation, for, in net effect, these 6,296 qualified FWBs, who theoretically had
given up their rights to the land that could have been distributed to them, suffered
a dilution of their due share entitlement. As has been observed during the oral
arguments, HLI has chosen to use the shares earmarked for farmworkers as reward
system chips to water down the shares of the original 6,296 FWBs. Particularly:
Justice Abad: If the SDOA did not take place, the other thing that would have
happened is that there would be CARP?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: Thats the only point I want to know x x x. Now, but they chose to enter
SDOA instead of placing the land under CARP. And for that reason those who would
have gotten their shares of the land actually gave up their rights to this land in
place of the shares of the stock, is that correct?
Atty. Dela Merced: It would be that way, Your Honor.
Justice Abad: Right now, also the government, in a way, gave up its right to own the
land because that way the government takes own [sic] the land and distribute it to
the farmers and pay for the land, is that correct?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: And then you gave thirty-three percent (33%) of the shares of HLI to
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the farmers at that time that numbered x x x those who signed five thousand four
hundred ninety eight (5,498) beneficiaries, is that correct?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: But later on, after assigning them their shares, some workers came in
from 1989, 1990, 1991, 1992 and the rest of the years that you gave additional
shares who were not in the original list of owners?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: Did those new workers give up any right that would have belong to
them in 1989 when the land was supposed to have been placed under CARP?
Atty. Dela Merced: If you are talking or referring (interrupted)
Justice Abad: None! You tell me. None. They gave up no rights to land?
Atty. Dela Merced: They did not do the same thing as we did in 1989, Your Honor.
Justice Abad: No, if they were not workers in 1989 what land did they give up? None,
if they become workers later on.
Atty. Dela Merced: None, Your Honor, I was referring, Your Honor, to the original
(interrupted)
Justice Abad: So why is it that the rights of those who gave up their lands would be
diluted, because the company has chosen to use the shares as reward system for
new workers who come in? It is not that the new workers, in effect, become just
workers of the corporation whose stockholders were already fixed. The TADECO who
has shares there about sixty six percent (66%) and the five thousand four hundred
ninety eight (5,498) farmers at the time of the SDOA? Explain to me. Why, why will
you x x x what right or where did you get that right to use this shares, to water
down the shares of those who should have been benefited, and to use it as a reward
system decided by the company?
From the above discourse, it is clear as day that the original 6,296 FWBs, who were
qualified beneficiaries at the time of the approval of the SDP, suffered from watering
down of shares. As determined earlier, each original FWB is entitled to 18,804.32
HLI shares. The original FWBs got less than the guaranteed 18,804.32 HLI shares
per beneficiary, because the acquisition and distribution of the HLI shares were
based on man days or number of days worked by the FWB in a years time. As
explained by HLI, a beneficiary needs to work for at least 37 days in a fiscal year
before he or she becomes entitled to HLI shares. If it falls below 37 days, the FWB,
unfortunately, does not get any share at year end. The number of HLI shares
distributed varies depending on the number of days the FWBs were allowed to work
in one year. Worse, HLI hired farmworkers in addition to the original 6,296 FWBs,
such that, as indicated in the Compliance dated August 2, 2010 submitted by HLI to
the Court, the total number of farmworkers of HLI as of said date stood at 10,502.
All these farmworkers, which include the original 6,296 FWBs, were given shares out
of the 118,931,976.85 HLI shares representing the 33.296% of the total outstanding
capital stock of HLI. Clearly, the minimum individual allocation of each original FWB
of 18,804.32 shares was diluted as a result of the use of man days and the hiring of
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additional farmworkers.
Going into another but related matter, par. 3 of the SDOA expressly providing for a
30-year timeframe for HLI-to-FWBs stock transfer is an arrangement contrary to
what Sec. 11 of DAO 10 prescribes. Said Sec. 11 provides for the implementation of
the approved stock distribution plan within three (3) months from receipt by the
corporate landowner of the approval of the plan by PARC. In fact, based on the said
provision, the transfer of the shares of stock in the names of the qualified FWBs
should be recorded in the stock and transfer books and must be submitted to the
SEC within sixty (60) days from implementation. As stated:
Section 11. Implementation/Monitoring of Plan.The approved stock distribution plan
shall be implemented within three (3) months from receipt by the corporate
landowner-applicant of the approval thereof by the PARC, and the transfer of the
shares of stocks in the names of the qualified beneficiaries shall be recorded in
stock and transfer books and submitted to the Securities and Exchange Commission
(SEC) within sixty (60) days from the said implementation of the stock distribution
plan.
It is evident from the foregoing provision that the implementation, that is, the
distribution of the shares of stock to the FWBs, must be made within three (3)
months from receipt by HLI of the approval of the stock distribution plan by PARC.
While neither of the clashing parties has made a compelling case of the thrust of
this provision, the Court is of the view and so holds that the intent is to compel the
corporate landowner to complete, not merely initiate, the transfer process of shares
within that three-month timeframe. Reinforcing this conclusion is the 60-day stock
transfer recording (with the SEC) requirement reckoned from the implementation of
the SDP.
To the Court, there is a purpose, which is at once discernible as it is practical, for the
three-month threshold. Remove this timeline and the corporate landowner can
veritably evade compliance with agrarian reform by simply deferring to absurd
limits the implementation of the stock distribution scheme.
The argument is urged that the thirty (30)-year distribution program is justified by
the fact that, under Sec. 26 of RA 6657, payment by beneficiaries of land
distribution under CARP shall be made in thirty (30) annual amortizations. To HLI,
said section provides a justifying dimension to its 30-year stock distribution
program.
HLIs reliance on Sec. 26 of RA 6657, quoted in part below, is obviously misplaced as
the said provision clearly deals with land distribution.
SEC. 26. Payment by Beneficiaries.Lands awarded pursuant to this Act shall be paid
for by the beneficiaries to the LBP in thirty (30) annual amortizations x x x.
Then, too, the ones obliged to pay the LBP under the said provision are the
beneficiaries. On the other hand, in the instant case, aside from the fact that what is
involved is stock distribution, it is the corporate landowner who has the obligation to
distribute the shares of stock among the FWBs.
Evidently, the land transfer beneficiaries are given thirty (30) years within which to
pay the cost of the land thus awarded them to make it less cumbersome for them to
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pay the government. To be sure, the reason underpinning the 30-year


accommodation does not apply to corporate landowners in distributing shares of
stock to the qualified beneficiaries, as the shares may be issued in a much shorter
period of time.
Taking into account the above discussion, the revocation of the SDP by PARC should
be upheld for violating DAO 10. It bears stressing that under Sec. 49 of RA 6657, the
PARC and the DAR have the power to issue rules and regulations, substantive or
procedural. Being a product of such rule-making power, DAO 10 has the force and
effect of law and must be duly complied with. The PARC is, therefore, correct in
revoking the SDP. Consequently, the PARC Resolution No. 89-12-2 dated November
21, l989 approving the HLIs SDP is nullified and voided. (Citations omitted;
emphasis in the original.)
Based on the foregoing ruling, the contentions of Mallari, et al. are either not
supported by the evidence on record or are utterly misplaced. There is, therefore,
no basis for the Court to reverse its ruling affirming PARC Resolution No. 2005-32-01
and PARC Resolution No. 2006-34-01, revoking the previous approval of the SDP by
PARC.
VII. Control over Agricultural Lands
After having discussed and considered the different contentions raised by the
parties in their respective motions, We are now left to contend with one crucial issue
in the case at bar, that is, control over the agricultural lands by the qualified FWBs.
Upon a review of the facts and circumstances, We realize that the FWBs will never
have control over these agricultural lands for as long as they remain as stockholders
of HLI. In Our July 5, 2011 Decision, this Court made the following observations:
There is, thus, nothing unconstitutional in the formula prescribed by RA 6657. The
policy on agrarian reform is that control over the agricultural land must always be in
the hands of the farmers. Then it falls on the shoulders of DAR and PARC to see to it
the farmers should always own majority of the common shares entitled to elect the
members of the board of directors to ensure that the farmers will have a clear
majority in the board. Before the SDP is approved, strict scrutiny of the proposed
SDP must always be undertaken by the DAR and PARC, such that the value of the
agricultural land contributed to the corporation must always be more than 50% of
the total assets of the corporation to ensure that the majority of the members of the
board of directors are composed of the farmers. The PARC composed of the
President of the Philippines and cabinet secretaries must see to it that control over
the board of directors rests with the farmers by rejecting the inclusion of nonagricultural assets which will yield the majority in the board of directors to nonfarmers. Any deviation, however, by PARC or DAR from the correct application of the
formula prescribed by the second paragraph of Sec. 31 of RA 6675 does not make
said provision constitutionally infirm. Rather, it is the application of said provision
that can be challenged. Ergo, Sec. 31 of RA 6657 does not trench on the
constitutional policy of ensuring control by the farmers. (Emphasis supplied.)

In line with Our finding that control over agricultural lands must always be in the
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hands of the farmers, We reconsider our ruling that the qualified FWBs should be
given an option to remain as stockholders of HLI, inasmuch as these qualified FWBs
will never gain control given the present proportion of shareholdings in HLI.
A revisit of HLIs Proposal for Stock Distribution under CARP and the Stock
Distribution Option Agreement (SDOA) upon which the proposal was based reveals
that the total assets of HLI is PhP 590,554,220, while the value of the 4,915.7466
hectares is PhP 196,630,000. Consequently, the share of the farmer-beneficiaries in
the HLI capital stock is 33.296% (196,630,000 divided by 590,554.220);
118,391,976.85 HLI shares represent 33.296%. Thus, even if all the holders of the
118,391,976.85 HLI shares unanimously vote to remain as HLI stockholders, which
is unlikely, control will never be placed in the hands of the farmer-beneficiaries.
Control, of course, means the majority of 50% plus at least one share of the
common shares and other voting shares. Applying the formula to the HLI
stockholdings, the number of shares that will constitute the majority is 295,112,101
shares (590,554,220 divided by 2 plus one [1] HLI share). The 118,391,976.85
shares subject to the SDP approved by PARC substantially fall short of the
295,112,101 shares needed by the FWBs to acquire control over HLI. Hence, control
can NEVER be attained by the FWBs. There is even no assurance that 100% of the
118,391,976.85 shares issued to the FWBs will all be voted in favor of staying in HLI,
taking into account the previous referendum among the farmers where said shares
were not voted unanimously in favor of retaining the SDP. In light of the foregoing
consideration, the option to remain in HLI granted to the individual FWBs will have
to be recalled and revoked.

Moreover, bearing in mind that with the revocation of the approval of the SDP, HLI
will no longer be operating under SDP and will only be treated as an ordinary private
corporation; the FWBs who remain as stockholders of HLI will be treated as ordinary
stockholders and will no longer be under the protective mantle of RA 6657.
In addition to the foregoing, in view of the operative fact doctrine, all the benefits
and homelots[80] received by all the FWBs shall be respected with no obligation to
refund or return them, since, as We have mentioned in our July 5, 2011 Decision,
the benefits x x x were received by the FWBs as farmhands in the agricultural
enterprise of HLI and other fringe benefits were granted to them pursuant to the
existing collective bargaining agreement with Tadeco.
One last point, the HLI land shall be distributed only to the 6,296 original FWBs. The
remaining 4,206 FWBs are not entitled to any portion of the HLI land, because the
rights to said land were vested only in the 6,296 original FWBs pursuant to Sec. 22
of RA 6657.
In this regard, DAR shall verify the identities of the 6,296 original FWBs, consistent
with its administrative prerogative to identify and select the agrarian reform
beneficiaries under RA 6657.[81]

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WHEREFORE, the Motion for Partial Reconsideration dated July 20, 2011 filed by
public respondents Presidential Agrarian Reform Council and Department of
Agrarian Reform, the Motion for Reconsideration dated July 19, 2011 filed by private
respondent Alyansa ng mga Manggagawang Bukid sa Hacienda Luisita, the Motion
for Reconsideration dated July 21, 2011 filed by respondent-intervenor Farmworkers
Agrarian Reform Movement, Inc., and the Motion for Reconsideration dated July 22,
2011 filed by private respondents Rene Galang and AMBALA are PARTIALLY
GRANTED with respect to the option granted to the original farmworker-beneficiaries
of Hacienda Luisita to remain with Hacienda Luisita, Inc., which is hereby RECALLED
and SET ASIDE. The Motion for Clarification and Partial Reconsideration dated July
21, 2011 filed by petitioner HLI and the Motion for Reconsideration dated July 21,
2011 filed by private respondents Noel Mallari, Julio Suniga, Supervisory Group of
Hacienda Luisita, Inc. and Windsor Andaya are DENIED.
The fallo of the Courts July 5, 2011 Decision is hereby amended and shall read:
PARC Resolution No. 2005-32-01 dated December 22, 2005 and Resolution No.
2006-34-01 dated May 3, 2006, placing the lands subject of HLIs SDP under
compulsory coverage on mandated land acquisition scheme of the CARP, are hereby
AFFIRMED with the following modifications:
All salaries, benefits, the 3% of the gross sales of the production of the agricultural
lands, the 3% share in the proceeds of the sale of the 500-hectare converted land
and the 80.51-hectare SCTEX lot and the homelots already received by the 10,502
FWBs composed of 6,296 original FWBs and the 4,206 non-qualified FWBs shall be
respected with no obligation to refund or return them. The 6,296 original FWBs shall
forfeit and relinquish their rights over the HLI shares of stock issued to them in favor
of HLI. The HLI Corporate Secretary shall cancel the shares issued to the said FWBs
and transfer them to HLI in the stocks and transfer book, which transfers shall be
exempt from taxes, fees and charges. The 4,206 non-qualified FWBs shall remain as
stockholders of HLI.
DAR shall segregate from the HLI agricultural land with an area of 4,915.75 hectares
subject of PARCs SDP-approving Resolution No. 89-12-2 the 500-hectare lot subject
of the August 14, l996 Conversion Order and the 80.51-hectare lot sold to, or
acquired by, the government as part of the SCTEX complex. After the segregation
process, as indicated, is done, the remaining area shall be turned over to DAR for
immediate land distribution to the original 6,296 FWBs or their successors-ininterest which will be identified by the DAR. The 4,206 non-qualified FWBs are not
entitled to any share in the land to be distributed by DAR.
HLI is directed to pay the original 6,296 FWBs the consideration of PhP 500,000,000
received by it from Luisita Realty, Inc. for the sale to the latter of 200 hectares out
of the 500 hectares covered by the August 14, 1996 Conversion Order, the
consideration of PhP 750,000,000 received by its owned subsidiary, Centennary
Holdings, Inc., for the sale of the remaining 300 hectares of the aforementioned
500-hectare lot to Luisita Industrial Park Corporation, and the price of PhP
80,511,500 paid by the government through the Bases Conversion Development
Authority for the sale of the 80.51-hectare lot used for the construction of the
SCTEX road network. From the total amount of PhP 1,330,511,500 (PhP 500,000,000
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+ PhP 750,000,000 + PhP 80,511,500 = PhP 1,330,511,500) shall be deducted the


3% of the proceeds of said transfers that were paid to the FWBs, the taxes and
expenses relating to the transfer of titles to the transferees, and the expenditures
incurred by HLI and Centennary Holdings, Inc. for legitimate corporate purposes. For
this purpose, DAR is ordered to engage the services of a reputable accounting firm
approved by the parties to audit the books of HLI and Centennary Holdings, Inc. to
determine if the PhP 1,330,511,500 proceeds of the sale of the three (3)
aforementioned lots were actually used or spent for legitimate corporate purposes.
Any unspent or unused balance and any disallowed expenditures as determined by
the audit shall be distributed to the 6,296 original FWBs.
HLI is entitled to just compensation for the agricultural land that will be transferred
to DAR to be reckoned from November 21, 1989 which is the date of issuance of
PARC Resolution No. 89-12-2. DAR and LBP are ordered to determine the
compensation due to HLI.
DAR shall submit a compliance report after six (6) months from finality of this
judgment. It shall also submit, after submission of the compliance report, quarterly
reports on the execution of this judgment within the first 15 days after the end of
each quarter, until fully implemented.
The temporary restraining order is lifted.
SO ORDERED.
4. Alita vs. CA 170 Scra 706
G.R. No. 78517
February 27, 1989
GABINO ALITA, JESUS JULIAN, JR., JESUS JULIAN, SR., PEDRO RICALDE, VICENTE
RICALDE and ROLANDO SALAMAR, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, ENRIQUE M. REYES, PAZ M. REYES and FE M.
REYES, respondents.
Bureau of Agrarian Legal Assistance for petitioners.
Leonardo N. Zulueta for Enrique Reyes, et al. Adolfo S. Azcuna for private
respondents.
PARAS, J.:
Before us is a petition seeking the reversal of the decision rendered by the
respondent Court of Appeals**on March 3, 1987 affirming the judgment of the court
a quo dated April 29, 1986, the dispositive portion of the trial court's decision
reading as follows;
WHEREFORE, the decision rendered by this Court on November 5, 1982 is hereby
reconsidered and a new judgment is hereby rendered:
1.
Declaring that Presidential Decree No. 27 is inapplicable to lands obtained
thru the homestead law,
2. Declaring that the four registered co-owners will cultivate and operate the
farmholding themselves as owners thereof; and
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3. Ejecting from the land the so-called tenants, namely; Gabino Alita, Jesus Julian,
Sr., Jesus Julian, Jr., Pedro Ricalde, Vicente Ricalde and Rolando Salamar, as the
owners would want to cultivate the farmholding themselves.
No pronouncement as to costs.
SO ORDERED. (p. 31, Rollo)
The facts are undisputed. The subject matter of the case consists of two (2) parcels
of land, acquired by private respondents' predecessors-in-interest through
homestead patent under the provisions of Commonwealth Act No. 141. Said lands
are situated at Guilinan, Tungawan, Zamboanga del Sur.
Private respondents herein are desirous of personally cultivating these lands, but
petitioners refuse to vacate, relying on the provisions of P.D. 27 and P.D. 316 and
appurtenant regulations issued by the then Ministry of Agrarian Reform (DAR for
short), now Department of Agrarian Reform (MAR for short).
On June 18, 1981, private respondents (then plaintiffs), instituted a complaint
against Hon. Conrado Estrella as then Minister of Agrarian Reform, P.D. Macarambon
as Regional Director of MAR Region IX, and herein petitioners (then defendants) for
the declaration of P.D. 27 and all other Decrees, Letters of Instructions and General
Orders issued in connection therewith as inapplicable to homestead lands.
Defendants filed their answer with special and affirmative defenses of July 8, 1981.
Subsequently, on July 19, 1982, plaintiffs filed an urgent motion to enjoin the
defendants from declaring the lands in litigation under Operation Land Transfer and
from being issued land transfer certificates to which the defendants filed their
opposition dated August 4, 1982.
On November 5, 1982, the then Court of Agrarian Relations 16th Regional District,
Branch IV, Pagadian City (now Regional Trial Court, 9th Judicial Region, Branch XVIII)
rendered its decision dismissing the said complaint and the motion to enjoin the
defendants was denied.
On January 4, 1983, plaintiffs moved to reconsider the Order of dismissal, to which
defendants filed their opposition on January 10, 1983.
Thus, on April 29, 1986, the Regional Trial Court issued the aforequoted decision
prompting defendants to move for a reconsideration but the same was denied in its
Order dated June 6, 1986.
On appeal to the respondent Court of Appeals, the same was sustained in its
judgment rendered on March 3, 1987, thus:
WHEREFORE, finding no reversible error thereof, the decision appealed from is
hereby AFFIRMED.
SO ORDERED. (p. 34, Rollo)
Hence, the present petition for review on certiorari.
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The pivotal issue is whether or not lands obtained through homestead patent are
covered by the Agrarian Reform under P.D. 27.
The question certainly calls for a negative answer.
We agree with the petitioners in saying that P.D. 27 decreeing the emancipation of
tenants from the bondage of the soil and transferring to them ownership of the land
they till is a sweeping social legislation, a remedial measure promulgated pursuant
to the social justice precepts of the Constitution. However, such contention cannot
be invoked to defeat the very purpose of the enactment of the Public Land Act or
Commonwealth Act No. 141. Thus,
The Homestead Act has been enacted for the welfare and protection of the poor.
The law gives a needy citizen a piece of land where he may build a modest house
for himself and family and plant what is necessary for subsistence and for the
satisfaction of life's other needs. The right of the citizens to their homes and to the
things necessary for their subsistence is as vital as the right to life itself. They have
a right to live with a certain degree of comfort as become human beings, and the
State which looks after the welfare of the people's happiness is under a duty to
safeguard the satisfaction of this vital right. (Patricio v. Bayog, 112 SCRA 45)
In this regard, the Philippine Constitution likewise respects the superiority of the
homesteaders' rights over the rights of the tenants guaranteed by the Agrarian
Reform statute. In point is Section 6 of Article XIII of the 1987 Philippine Constitution
which provides:
Section 6. The State shall apply the principles of agrarian reform or stewardship,
whenever applicable in accordance with law, in the disposition or utilization of other
natural resources, including lands of public domain under lease or concession
suitable to agriculture, subject to prior rights, homestead rights of small settlers,
and the rights of indigenous communities to their ancestral lands.
Additionally, it is worthy of note that the newly promulgated Comprehensive
Agrarian Reform Law of 1988 or Republic Act No. 6657 likewise contains a proviso
supporting the inapplicability of P.D. 27 to lands covered by homestead patents like
those of the property in question, reading,
Section 6. Retention Limits. ...
... Provided further, That original homestead grantees or their direct compulsory
heirs who still own the original homestead at the time of the approval of this Act
shall retain the same areas as long as they continue to cultivate said homestead.'
WHEREFORE, premises considered, the decision of the respondent Court of Appeals
sustaining the decision of the Regional Trial Court is hereby AFFIRMED.
SO ORDERED.
Melencio-Herrera, (Chairperson), Padilla, Sarmiento and Regalado, JJ., concur.
5. Natalia Realty GR103302 8/12/93
EN BANC
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[G.R. No. 103302. August 12, 1993.]


NATALIA REALTY, INC., and ESTATE DEVELOPERS AND INVESTORS CORP., petitioners,
vs. DEPARTMENT OF AGRARIAN REFORM, SEC. BENJAMIN T. LEONG and DIR.
WILFREDO LEANO, DAR-REGION IV, respondents.
Loni M. Patajo for petitioners.
The Solicitor General for respondents.
SYLLABUS
1.
POLITICAL LAW; STATUTORY CONSTRUCTION; A SPECIAL LAW PREVAILS
OVER A GENERAL LAW. The implementing Standards, Rules and Regulations of
P.D. 957 applied to all subdivisions and condominiums in general. On the other
hand, Presidential Proclamation No. 1637 referred only to the Lungsod Silangan
Reservation, which makes it a special law. It is a basic tenet in statutory
construction that between a general law and a special law, the latter prevails
(National Power Corporation v. Presiding Judge, RTC, Br. XXV, G.R. No. 72477, 16
October 1990, 190 SCRA 477).
2.
ID.; ADMINISTRATIVE LAW; NON-EXHAUSTION OF ADMINISTRATIVE
REMEDIES, JUSTIFIED IN THE CASE AT BAR. Anent the argument that there was
failure to exhaust administrative remedies in the instant petition, suffice it to say
that the issues raised in the case filed by SAMBA members differ from those of
petitioners. The former involve possession; the latter, the propriety of including
under the operation of CARL lands already converted for residential use prior to its
effectivity. Besides, petitioners were not supposed to wait until public respondents
acted on their letter-protests, this after sitting it out for almost a year. Given the
official indifference, which under the circumstances could have continued forever,
petitioners had to act to assert and protect their interests. (Rocamora v. RTC-Cebu,
Br. VIII, G.R. No. 65037, 23 November 1988, 167 SCRA 615).
3.
CIVIL LAW; LAND REGISTRATION; AGRICULTURAL LAND, DEFINED; LANDS
NOT DEVOTED TO AGRICULTURAL ACTIVITY, OUTSIDE THE COVERAGE OF CARL.
Section 4 of R.A. 6657 provides that the CARL shall "cover, regardless of tenurial
arrangement and commodity produced, all public and private agricultural lands." As
to what constitutes "agricultural land," it is referred to as "land devoted to
agricultural activity as defined in this Act and not classified as mineral, forest,
residential, commercial or industrial land." (Sec. 3 (c), R.A. 6657) The deliberations
of the Constitutional Commission confirm this limitation. "Agricultural lands" are
only those lands which are "arable and suitable agricultural lands" and "do not
include commercial, industrial and residential lands." (Luz Farms v. Secretary of the
Department of Agrarian Reform, G.R. No. 86889, 4 December 1990, 192 SCRA 51,
citing Record, CONCOM, 7 August 1986, Vol. III, p. 30) Indeed, lands not devoted to
agricultural activity are outside the coverage of CARL. These include lands
previously converted to non-agricultural uses prior to the effectivity of CARL by
government agencies other than respondent DAR. In its Revised Rules and
Regulations Governing Conversion of Private Agricultural Lands to Non-Agricultural
Uses, (DAR Administrative Order No. 1, Series of 1990), DAR itself defined
"agricultural land" thus ". . . Agricultural land refers to those devoted to
agricultural activity as defined in R.A. 6657 and not classified as mineral or forest by
the Department of Environment and Natural Resources (DENR) and its predecessor
agencies, and not classified in town plans and zoning ordinances as approved by the
Housing and Land Use Regulatory Board (HLURB) and its preceding competent
authorities prior to 15 June 1988 for residential, commercial or industrial use." The
Secretary of Justice, responding to a query by the Secretary of Agrarian Reform,
noted in an Opinion that lands covered by Presidential Proclamation No. 1637, inter
alia, of which the NATALIA lands are part, having been reserved for townsite
purposes "to be developed as human settlements by the proper land and housing
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agency," are "not deemed 'agricultural lands' within the meaning and intent of
Section 3 (c) of R.A. No. 6657." Not being deemed "agricultural lands," they are
outside the coverage of CARL.
DECISION
BELLOSILLO, J p:
Are lands already classified for residential, commercial or industrial use, as
approved by the Housing and Land Use Regulatory Board and its precursor agencies
1 prior to 15 June 1988, 2 covered by R.A. 6657, otherwise known as the
Comprehensive Agrarian Reform Law of 1988? This is the pivotal issue in this
petition for certiorari assailing the Notice of Coverage 3 of the Department of
Agrarian Reform over parcels of land already reserved as townsite areas before the
enactment of the law.
Petitioner Natalia Realty, Inc. (NATALIA, for brevity) is the owner of three (3)
contiguous parcels of land located in Banaba, Antipolo, Rizal, with areas of 120.9793
hectares, 1.3205 hectares and 2.7080 hectares, or a total of 125.0078 hectares, and
embraced in Transfer Certificate of Title No. 31527 of the Register of Deeds of the
Province of Rizal.
On 18 April 1979, Presidential Proclamation No. 1637 set aside 20,312 hectares
of land located in the Municipalities of Antipolo, San Mateo and Montalban as
townsite areas to absorb the population overspill in the metropolis which were
designated as the Lungsod Silangan Townsite. The NATALIA properties are situated
within the areas proclaimed as townsite reservation.
Since private landowners were allowed to develop their properties into low-cost
housing subdivisions within the reservation, petitioner Estate Developers and
Investors Corporation (EDIC, for brevity), as developer of NATALIA properties,
applied for and was granted preliminary approval and locational clearances by the
Human Settlements Regulatory Commission. The necessary permit for Phase I of the
subdivision project, which consisted of 13.2371 hectares, was issued sometime in
1982; 4 for Phase II, with an area of 80.0000 hectares, on 13 October 1983; 5 and
for Phase III, which consisted of the remaining 31.7707 hectares, on 25 April 1986. 6
Petitioners were likewise issued development permits 7 after complying with the
requirements. Thus the NATALIA properties later became the Antipolo Hills
Subdivision.
On 15 June 1988, R.A. 6657, otherwise known as the "Comprehensive Agrarian
Reform Law of 1988" (CARL, for brevity), went into effect. Conformably therewith,
respondent Department of Agrarian Reform (DAR, for brevity), through its Municipal
Agrarian Reform Officer, issued on 22 November 1990 a Notice of Coverage on the
undeveloped portions of the Antipolo Hills Subdivision which consisted of roughly
90.3307 hectares. NATALIA immediately registered its objection to the Notice of
Coverage.
EDIC also protested to respondent Director Wilfredo Leano of the DAR Region
IV Office and twice wrote him requesting the cancellation of the Notice of Coverage.
On 17 January 1991, members of the Samahan ng Magsasaka sa Bundok Antipolo,
Inc. (SAMBA, for brevity), filed a complaint against NATALIA and EDIC before the
DAR Regional Adjudicator to restrain petitioners from developing areas under
cultivation by SAMBA members. 8 The Regional Adjudicator temporarily restrained
petitioners from proceeding with the development of the subdivision. Petitioners
then moved to dismiss the complaint; it was denied. Instead, the Regional
Adjudicator issued on 5 March 1991 a Writ of Preliminary Injunction.
Petitioners NATALIA and EDIC elevated their cause to the DAR Adjudication
Board (DARAB); however, on 16 December 1991 the DARAB merely remanded the
case to the Regional Adjudicator for further proceedings. 9
In the interim, NATALIA wrote respondent Secretary of Agrarian Reform
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reiterating its request to set aside the Notice of Coverage. Neither respondent
Secretary nor respondent Director took action on the protest-letters, thus
compelling petitioners to institute this proceeding more than a year thereafter.
NATALIA and EDIC both impute grave abuse of discretion to respondent DAR for
including undeveloped portions of the Antipolo Hills Subdivision within the coverage
of the CARL. They argue that NATALIA properties already ceased to be agricultural
lands when they were included in the areas reserved by presidential fiat for townsite
reservation.
Public respondents through the Office of the Solicitor General dispute this
contention. They maintain that the permits granted petitioners were not valid and
binding because they did not comply with the implementing Standards, Rules and
Regulations of P.D. 957, otherwise known as "The Subdivision and Condominium
Buyers' Protective Decree," in that no application for conversion of the NATALIA
lands from agricultural to residential was ever filed with the DAR. In other words,
there was no valid conversion. Moreover, public respondents allege that the instant
petition was prematurely filed because the case instituted by SAMBA against
petitioners before the DAR Regional Adjudicator has not yet terminated.
Respondents conclude, as a consequence, that petitioners failed to fully exhaust
administrative remedies available to them before coming to court.
The petition is impressed with merit. A cursory reading of the Preliminary
Approval and Locational Clearances as well as the Development Permits granted
petitioners for Phases I, II and III of the Antipolo Hills Subdivision reveals that
contrary to the claim of public respondents, petitioners NATALIA and EDIC did in fact
comply with all the requirements of law.
Petitioners first secured favorable recommendations from the Lungsod
Silangan Development Corporation, the agency tasked to oversee the
implementation of the development of the townsite reservation, before applying for
the necessary permits from the Human Settlements Regulatory Commission. 10
And, in all permits granted to petitioners, the Commission stated invariably therein
that the applications were in "conformance" 11 or "conformity" 12 or "conforming"
13 with the implementing Standards, Rules and Regulations of P.D. 957. Hence, the
argument of public respondents that not all of the requirements were complied with
cannot be sustained. llcd
As a matter of fact, there was even no need for petitioners to secure a
clearance or prior approval from DAR. The NATALIA properties were within the areas
set aside for the Lungsod Silangan Reservation. Since Presidential Proclamation No.
1637 created the townsite reservation for the purpose of providing additional
housing to the burgeoning population of Metro Manila, it in effect converted for
residential use what were erstwhile agricultural lands provided all requisites were
met. And, in the case at bar, there was compliance with all relevant rules and
requirements. Even in their applications for the development of the Antipolo Hills
Subdivision, the predecessor agency of HLURB noted that petitioners NATALIA and
EDIC complied with all the requirements prescribed by P.D. 957
The implementing Standards, Rules and Regulations of P.D. 957 applied to all
subdivisions and condominiums in general. On the other hand, Presidential
Proclamation No. 1637 referred only to the Lungsod Silangan Reservation, which
makes it a special law. It is a basic tenet in statutory construction that between a
general law and a special law, the latter prevails. 14
Interestingly, the Office of the Solicitor General does not contest the
conversion of portions of the Antipolo Hills Subdivision which have already been
developed. 15 Of course, this is contrary to its earlier position that there was no
valid conversion. The applications for the developed and undeveloped portions of
subject subdivision were similarly situated. Consequently, both did not need prior
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DAR approval.
We now determine whether such lands are covered by the CARL. Section 4 of
R.A. 6657 provides that the CARL shall "cover, regardless of tenurial arrangement
and commodity produced, all public and private agricultural lands." As to what
constitutes "agricultural land," it is referred to as "land devoted to agricultural
activity as defined in this Act and not classified as mineral, forest, residential,
commercial or industrial land. 16 The deliberations of the Constitutional Commission
confirm this limitation. "Agricultural lands" are only those lands which are "arable
and suitable agricultural lands" and "do not include commercial, industrial and
residential lands." 17
Based on the foregoing, it is clear that the undeveloped portions of the
Antipolo Hills Subdivision cannot in any language be considered as "agricultural
lands." These lots were intended for residential use. They ceased to be agricultural
lands upon approval of their inclusion in the Lungsod Silangan Reservation. Even
today, the areas in question continue to be developed as a low-cost housing
subdivision, albeit at a snail's pace. This can readily be gleaned from the fact that
SAMBA members even instituted an action to restrain petitioners from continuing
with such development. The enormity of the resources needed for developing a
subdivision may have delayed its completion but this does not detract from the fact
that these lands are still residential lands and outside the ambit of the CARL.
Indeed, lands not devoted to agricultural activity are outside the coverage of
CARL. These include lands previously converted to non-agricultural uses prior to the
effectivity of CARL by government agencies other than respondent DAR. In its
Revised Rules and Regulations Governing Conversion of Private Agricultural Lands to
Non-Agricultural Uses, 18 DAR itself defined "agricultural land" thus
". . . Agricultural land refers to those devoted to agricultural activity as defined in
R.A. 6657 and not classified as mineral or forest by the Department of Environment
and Natural Resources (DENR) and its predecessor agencies, and not classified in
town plans and zoning ordinances as approved by the Housing and Land Use
Regulatory Board (HLURB) and its preceding competent authorities prior to 15 June
1988 for residential, commercial or industrial use."
Since the NATALIA lands were converted prior to 15 June 1988, respondent
DAR is bound by such conversion. It was therefore error to include the undeveloped
portions of the Antipolo Hills Subdivision within the coverage of CARL.
Be that as it may, the Secretary of Justice, responding to a query by the
Secretary of Agrarian Reform, noted in an Opinion 19 that lands covered by
Presidential Proclamation No. 1637, inter alia, of which the NATALIA lands are part,
having been reserved for townsite purposes "to be developed as human settlements
by the proper land and housing agency," are "not deemed 'agricultural lands' within
the meaning and intent of Section 3 (c) of R.A. No. 6657." Not being deemed
"agricultural lands," they are outside the coverage of CARL.
Anent the argument that there was failure to exhaust administrative remedies
in the instant petition, suffice it to say that the issues raised in the case filed by
SAMBA members differ from those of petitioners. The former involve possession; the
latter, the propriety of including under the operation of CARL lands already
converted for residential use prior to its effectivity.
Besides, petitioners were not supposed to wait until public respondents acted
on their letter-protests, this after sitting it out for almost a year. Given the official
indifference, which under the circumstances could have continued forever,
petitioners had to act to assert and protect their interests. 20
In fine, we rule for petitioners and hold that public respondents gravely abused
their discretion in issuing the assailed Notice of Coverage dated 22 November 1990
of lands over which they no longer have jurisdiction.
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WHEREFORE, the Petition for Certiorari is GRANTED. The Notice of Coverage of


22 November 1990 by virtue of which undeveloped portions of the Antipolo Hills
Subdivision were placed under CARL coverage is hereby SET ASIDE.
SO ORDERED.
6. Luz Farms GR86889 12/04/90
EN BANC

[G.R. No. 86889. December 4, 1990.]

LUZ FARMS, petitioner, vs. THE HONORABLE SECRETARY OF THE DEPARTMENT OF


AGRARIAN REFORM, respondent.

Enrique M. Belo for petitioner.

DECISION

PARAS, J p:
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
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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).
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. 131168).
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
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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.
The constitutional provision under consideration reads as follows:
ARTICLE XIII
xxx
xxx
xxx
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 landsharing.
xxx
xxx
xxx"
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 "contractgrowing 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).
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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]).
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:
xxx
xxx
xxx
"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.
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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).
xxx
xxx
xxx
The questions were answered and explained in the statement of then
Commissioner Tadeo, quoted as follows:
xxx
xxx
xxx
"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).
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).

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Thus, where the legislature or the executive acts beyond the scope of its
constitutional powers, it becomes the duty of the judiciary to declare what the other
branches of the government had assumed to do, as void. This is the essence of
judicial power conferred by the Constitution "(I)n one Supreme Court and in such
lower courts as may be established by law" (Art. VIII, Section 1 of the 1935
Constitution; Article X, Section I of the 1973 Constitution and which was adopted as
part of the Freedom Constitution, and Article VIII, Section 1 of the 1987 Constitution)
and which power this Court has exercised in many instances (Demetria v. Alba, 148
SCRA 208 [1987]).
PREMISES CONSIDERED, the instant petition is hereby GRANTED. Sections 3(b),
11, 13 and 32 of R.A. No. 6657 insofar as the inclusion of the raising of livestock,
poultry and swine in its coverage as well as the Implementing Rules and Guidelines
promulgated in accordance therewith, are hereby DECLARED null and void for being
unconstitutional and the writ of preliminary injunction issued is hereby MADE
permanent.
SO ORDERED.
Fernan (C.J.), Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Gancayco, Padilla,
Bidin, Grio-Aquino, Medialdea and Regalado, JJ., concur.
Feliciano, J., is on leave.

Separate Opinions

SARMIENTO, J., concurring:


I agree that the petition be granted.
It is my opinion however that the main issue on the validity of the assailed
provisions of R.A. 6657 (the Comprehensive Agrarian Reform Law of 1988) and its
Implementing Rules and Guidelines insofar as they include the raising of livestock,
poultry, and swine in their coverage can not be simplistically reduced to a question
of constitutional construction.
It is a well-settled rule that construction and interpretation come only after it
has been demonstrated that application is impossible or inadequate without them.
A close reading however of the constitutional text in point, specifically, Sec. 4, Art.
XIII, particularly the phrase, ". . . in case of other farmworkers, to receive a just
share of the fruits thereof," provides a basis for the clear and possible coverage of
livestock, poultry, and swine raising within the ambit of the comprehensive agrarian
reform program. This accords with the principle that every presumption should be
indulged in favor of the constitutionality of a statute and the court in considering
the validity of a statute should give it such reasonable construction as can be
reached to bring it within the fundamental law. 1
The presumption against unconstitutionality, I must say, assumes greater
weight when a ruling to the contrary would, in effect, defeat the laudable and noble
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purpose of the law, i.e., the welfare of the landless farmers and farmworkers in the
promotion of social justice, by the expedient conversion of agricultural lands into
livestock, poultry, and swine raising by scheming landowners, thus, rendering the
comprehensive nature of the agrarian program merely illusory.
The instant controversy, I submit, boils down to the question of whether or not
the assailed provisions violate the equal protection clause of the Constitution
(Article II, section 1) which teaches simply that all persons or things similarly
situated should be treated alike, both as to rights conferred and responsibilities
imposed. 2
There is merit in the contention of the petitioner that substantial distinctions
exist between land directed purely to cultivation and harvesting of fruits or crops
and land exclusively used for livestock, poultry and swine raising, that make real
differences, to wit:
xxx
xxx
xxx
No land is tilled and no crop is harvested in livestock and poultry farming. There are
no tenants nor landlords, only employers and employees.
Livestock and poultry do not sprout from land nor are they "fruits of the land."
Land is not even a primary resource in this industry. The land input is
inconsequential that all the commercial hog and poultry farms combined occupy
less than one percent (1%) (0.4% for piggery, 0.2% for poultry) of the 5.45 million
hectares of land supposedly covered by the CARP. And most farms utilize only 2 to 5
hectares of land.
In every respect livestock and poultry production is an industrial activity. Its use of
an inconsequential portion of land is a mere incident of its operation, as in any other
undertaking, business or otherwise.
The fallacy of defining livestock and poultry production as an agricultural enterprise
is nowhere more evident when one considers that at least 95% of total investment
in these farms is in the form of fixed assets which are industrial in nature.
These include (1) animal housing structures and facilities complete with drainage,
waterers, blowers, misters and in some cases even piped-in music; (2) feedmills
complete with grinders, mixers, conveyors, exhausts, generators, etc.; (3) extensive
warehousing facilities for feeds and other supplies; (4) anti-pollution equipment
such as bio-gas and digester plants augmented by lagoons and concrete ponds; (5)
deepwells, elevated water tanks, pumphouses and accessory facilities; (6) modern
equipment such as sprayers, pregnancy testers, etc.; (7) laboratory facilities
complete with expensive tools and equipment; and a myriad other such
technologically advanced appurtances.
How then can livestock and poultry farmlands be arable when such are almost
totally occupied by these structures?
The fallacy of equating the status of livestock and poultry farmworkers with that of
agricultural tenants surfaces when one considers contribution to output. Labor cost
of livestock and poultry farms is no more than 4% of total operating cost. The 98%
balance represents inputs not obtained from the land nor provided by the
farmworkers inputs such as feeds and biochemicals (80% of the total cost), power
cost, cost of money and several others.
Moreover, livestock and poultry farmworkers are covered by minimum wage law
rather than by tenancy law. They are entitled to social security benefits where
tenant-farmers are not. They are paid fixed wages rather than crop shares. And as
in any other industry, they receive additional benefits such as allowances, bonuses,
and other incentives such as free housing privileges, light and water.
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Equating livestock and poultry farming with other agricultural activities is also
fallacious in the sense that like the manufacturing sector, it is a market for, rather
than a source of agricultural output. At least 60% of the entire domestic supply of
corn is absorbed by livestock and poultry farms. So are the by-products of rice (ricebran), coconut (copra meal), banana (banana pulp meal), and fish (fish meal). 3
xxx
xxx
xxx
In view of the foregoing, it is clear that both kinds of lands are not similarly
situated and hence, can not be treated alike. Therefore, the assailed provisions
which allow for the inclusion of livestock and poultry industry within the coverage of
the agrarian reform program constitute invalid classification and must accordingly
be struck down as repugnant to the equal protection clause of the Constitution.
7. DAR vs. Sutton GR 162070 10/19/05
EN BANC
DEPARTMENT OF AGRARIAN G.R. No. 162070
REFORM, represented by SECRETARY
JOSE MARI B. PONCE (OIC), Present:
Petitioner, Davide, C.J.,
Puno,
Panganiban,
Quisumbing,
Ynares-Santiago,
Sandoval-Gutierrez,
Carpio,
- versus - Austria-Martinez,
Corona,
Carpio Morales,
Callejo, Sr.,
Azcuna,
Tinga,
Chico-Nazario and
Garcia, JJ.
DELIA T. SUTTON, ELLA T.
SUTTON-SOLIMAN and Promulgated:
HARRY T. SUTTON,
Respondents. October 19, 2005
x-----------------------------------x
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
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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 Order[7]
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 appeal[9] 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
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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 Reforms
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.
Petitioners 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
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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.[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. DAR[16] reiterated our ruling in the
Luz Farms case. In Natalia Realty, the Court held that 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. 7881[20] 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.
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[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.
SO ORDERED.
8. Milestone Farms GR 182332 2/23/2011
SECOND DIVISION
MILESTONE FARMS, INC.,
Petitioner,
- versus OFFICE OF THE PRESIDENT,
Respondent.
G.R. No. 182332
Present:
CARPIO, J.,
Chairperson,
NACHURA,
PERALTA,
ABAD, and
VILLARAMA, JR.,* JJ.
Promulgated:
February 23, 2011
x-----------------------------------------------------------------------------x
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
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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 316.0422hectare 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, (T486110) 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 DARs Land Use Conversion and Exemption
Committee (LUCEC) of Region IV conducted an ocular inspection on petitioners
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 petitioners 316.0422-hectare
property from the coverage of CARP. Adopting the LUCECs findings and
recommendation, DAR Regional Director Percival Dalugdug (Director Dalugdug)
issued an Order dated June 27, 1994, exempting petitioners 316.0422-hectare
property from CARP.[8]

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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 TeresaBaras, 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 MCTCs 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 Secretarys 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 petitioners 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;
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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 petitioners
Motion for Reconsideration.[17]
Aggrieved, petitioner filed its Memorandum on Appeal[18] before the Office of the
President (OP).
The OPs Ruling
On February 4, 2000, the OP rendered a decision[19] reinstating Director Dalugdugs
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.
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 Garilaos 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
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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 petitioners 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 CAs 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-residentialcommercial 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:
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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 Villas
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 DARs 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
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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 Courts 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 petitioners 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. Ques
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 petitioners 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, [petitioners] counsel, [Atty. Que], and the alleged caretaker of [petitioners]
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, [petitioners] security guard and third witness, Rodolfo G. Febrada,
submitted his Judicial Affidavit and was cross-examined by counsel for fa[r]mersmovants 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 [petitioners] Formal Offer of
Evidence. Later, [petitioner] and farmers-movants filed their respective Memoranda.
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In December 2007, this Court issued a Resolution on the parties offer of evidence
and considered [petitioners] Motion for Reconsideration submitted for resolution.
[45]
Finally, petitioners motion for reconsideration was denied by the CA in its
Resolution[46] dated March 27, 2008. The CA discarded petitioners reliance on
Sutton. It ratiocinated that the MARO Reports and the DARs 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 latters
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 petitioners assertion that between MARO Elmas Report dated January 8, 2007
and the Investigating Teams 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 DARS 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]

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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 petitioners 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
petitioners property was admittedly devoted to livestock farming as of June 1988
and the only issue before was whether or not petitioners 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 petitioners 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 farmergroups also contend that petitioners 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
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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 DARs 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 Courts 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 OSGs 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 DARs 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 Teams Report, which confirmed that the subject property is still
devoted to livestock farming; and that there has been no change in petitioners
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.
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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
petitioners 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 Teams 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 petitioners 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]

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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 CAs 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]
Petitioners 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 CAs keen observation that the assailed MARO reports and the
Investigating Teams 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
Secretarys 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 petitioners 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 DARs 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
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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.

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