Agra Week 2 Cases

Page 1 of 52 | Agrarian Law & Social Legislation Week 2 | amgisidro
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.
air, beyond the reach of the sustaining soil, and crushed him to
death.
Mother Earth. The sustaining soil. The giver of life, without
whose invigorating touch even the powerful Antaeus weakened
and died.
The cases before us are not as fanciful as the foregoing tale.
But they also tell of the elemental forces of life and death, of
men and women who, like Antaeus need the sustaining
strength of the precious earth to stay alive.
"Land for the Landless" is a slogan that underscores the acute
imbalance in the distribution of this precious resource among
our people. But it is more than a slogan. Through the brooding
centuries, it has become a battle-cry dramatizing the
increasingly urgent demand of the dispossessed among us for
a plot of earth as their place in the sun.
Recognizing this need, the Constitution in 1935 mandated the
policy of social justice to "insure the well-being and economic
security of all the people," 1 especially the less privileged. In
1973, the new Constitution affirmed this goal adding
specifically that "the State shall regulate the acquisition,
ownership, use, enjoyment and disposition of private property
and equitably diffuse property ownership and profits." 2
Significantly, there was also the specific injunction to "formulate
and implement an agrarian reform program aimed at
emancipating the tenant from the bondage of the soil." 3
The Constitution of 1987 was not to be outdone. Besides
echoing these sentiments, it also adopted one whole and
separate Article XIII on Social Justice and Human Rights,
containing grandiose but undoubtedly sincere provisions for
the uplift of the common people. These include a call in the
following words for the adoption by the State of an agrarian
reform program:
SEC. 4. The State shall, by law, undertake an agrarian reform
program founded on the right of farmers and regular
farmworkers, who are landless, to own directly or collectively
the lands they till or, in the case of other farmworkers, to
receive a just share of the fruits thereof. To this end, the State
shall encourage and undertake the just distribution of all
agricultural lands, subject to such priorities and reasonable
retention limits as the Congress may prescribe, taking into
account ecological, developmental, or equity considerations
and subject to the payment of just compensation. In
determining retention limits, the State shall respect the right of
small landowners. The State shall further provide incentives for
voluntary land-sharing.
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
Earlier, in fact, R.A. No. 3844, otherwise known as the

Agricultural Land Reform Code, had already been enacted by
the Congress of the Philippines on August 8, 1963, in line with
the above-stated principles. This was substantially superseded
almost a decade later by P.D. No. 27, which was promulgated
on October 21, 1972, along with martial law, to provide for the
compulsory acquisition of private lands for distribution among
tenant-farmers and to specify maximum retention limits for
landowners.

The people power revolution of 1986 did not change and
indeed even energized the thrust for agrarian reform. Thus, on
July 17, 1987, President Corazon C. Aquino issued E.O. No.
228, declaring full land ownership in favor of the beneficiaries
of P.D. No. 27 and providing for the valuation of still unvalued
lands covered by the decree as well as the manner of their
payment. This was followed on July 22, 1987 by Presidential
Proclamation No. 131, instituting a comprehensive agrarian
reform program (CARP), and E.O. No. 229, providing the
mechanics for its implementation.
Subsequently, with its formal organization, the revived
Congress of the Philippines took over legislative power from
the President and started its own deliberations, including
extensive public hearings, on the improvement of the interests
of farmers. The result, after almost a year of spirited debate,
was the enactment of R.A. No. 6657, otherwise known as the
Comprehensive Agrarian Reform Law of 1988, which President
Aquino signed on June 10, 1988. This law, while considerably
changing the earlier mentioned enactments, nevertheless
gives them suppletory effect insofar as they are not
inconsistent with its provisions. 4
The above-captioned cases have been consolidated because
they involve common legal questions, including serious
challenges to the constitutionality of the several measures
mentioned above. They will be the subject of one common
discussion and resolution, The different antecedents of each
case will require separate treatment, however, and will first be
explained hereunder.
G.R. No. 79777
Squarely raised in this petition is the constitutionality of P.D.
No. 27, E.O. Nos. 228 and 229, and R.A. No. 6657.
The subjects of this petition are a 9-hectare riceland worked by
four tenants and owned by petitioner Nicolas Manaay and his
wife and a 5-hectare riceland worked by four tenants and
owned by petitioner Augustin Hermano, Jr. The tenants were
declared full owners of these lands by E.O. No. 228 as
qualified farmers under P.D. No. 27.
The petitioners are questioning P.D. No. 27 and E.O. Nos.
and 229 on grounds inter alia of separation of powers,
process, equal protection and the constitutional limitation
no private property shall be taken for public use without
compensation.
228
due
that
just
They contend that President Aquino usurped legislative power

when she promulgated E.O. No. 228. The said measure is
invalid also for violation of Article XIII, Section 4, of the
Constitution, for failure to provide for retention limits for small
landowners. Moreover, it does not conform to Article VI,
Section 25(4) and the other requisites of a valid appropriation.
In connection with the determination of just compensation, the
petitioners argue that the same may be made only by a court
of justice and not by the President of the Philippines. They
invoke the recent cases of EPZA v. Dulay 5 and Manotok v.
National Food Authority. 6 Moreover, the just compensation
contemplated by the Bill of Rights is payable in money or in
cash and not in the form of bonds or other things of value.
In considering the rentals as advance payment on the land, the

executive order also deprives the petitioners of their property
rights as protected by due process. The equal protection
clause is also violated because the order places the burden of
solving the agrarian problems on the owners only of
agricultural lands. No similar obligation is imposed on the
owners of other properties.
The petitioners also maintain that in declaring the beneficiaries
under P.D. No. 27 to be the owners of the lands occupied by
them, E.O. No. 228 ignored judicial prerogatives and so
violated due process. Worse, the measure would not solve the
agrarian problem because even the small farmers are deprived
of their lands and the retention rights guaranteed by the
Constitution.
In his Comment, the Solicitor General stresses that P.D. No. 27
has already been upheld in the earlier cases of Chavez v.
Zobel, 7 Gonzales v. Estrella, 8 and Association of Rice and
Corn Producers of the Philippines, Inc. v. The National Land
Reform Council. 9 The determination of just compensation by
the executive authorities conformably to the formula prescribed
under the questioned order is at best initial or preliminary only.
It does not foreclose judicial intervention whenever sought or
warranted. At any rate, the challenge to the order is premature
because no valuation of their property has as yet been made
by the Department of Agrarian Reform. The petitioners are also
not proper parties because the lands owned by them do not
exceed the maximum retention limit of 7 hectares.
Replying, the petitioners insist they are proper parties because
P.D. No. 27 does not provide for retention limits on tenanted
lands and that in any event their petition is a class suit brought
in behalf of landowners with landholdings below 24 hectares.
They maintain that the determination of just compensation by
the administrative authorities is a final ascertainment. As for
the cases invoked by the public respondent, the
constitutionality of P.D. No. 27 was merely assumed in Chavez,
while what was decided in Gonzales was the validity of the
imposition of martial law.
In the amended petition dated November 22, 1588, it is
contended that P.D. No. 27, E.O. Nos. 228 and 229 (except
Sections 20 and 21) have been impliedly repealed by R.A. No.
6657. Nevertheless, this statute should itself also be declared
unconstitutional because it suffers from substantially the same
infirmities as the earlier measures.
A petition for intervention was filed with leave of court on June
1, 1988 by Vicente Cruz, owner of a 1. 83- hectare land, who
complained that the DAR was insisting on the implementation
of P.D. No. 27 and E.O. No. 228 despite a compromise
agreement he had reached with his tenant on the payment of
rentals. In a subsequent motion dated April 10, 1989, he
adopted the allegations in the basic amended petition that the
above- mentioned enactments have been impliedly repealed
by R.A. No. 6657.
G.R. No. 79310
The petitioners herein are landowners and sugar planters in
the Victorias Mill District, Victorias, Negros Occidental. Copetitioner 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.
motion for intervention was filed, this time by Manuel

Barcelona, et al., representing coconut and riceland owners.
Both motions were granted by the Court.
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.
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.
They also argue that under Section 2 of Proc. No. 131 which
provides:
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.
Agrarian Reform Fund.-There is hereby created a special fund,

to be known as the Agrarian Reform Fund, an initial amount of
FIFTY BILLION PESOS (P50,000,000,000.00) to cover the
estimated cost of the Comprehensive Agrarian Reform
Program from 1987 to 1992 which shall be sourced from the
receipts of the sale of the assets of the Asset Privatization
Trust and Receipts of sale of ill-gotten wealth received through
the Presidential Commission on Good Government and such
other sources as government may deem appropriate. The
amounts collected and accruing to this special fund shall be
considered automatically appropriated for the purpose
authorized in this Proclamation the amount appropriated is in
futuro, not in esse. The money needed to cover the cost of the
contemplated expropriation has yet to be raised and cannot be
appropriated at this time.
Furthermore, they contend that taking must be simultaneous
with payment of just compensation as it is traditionally
understood, i.e., with money and in full, but no such payment is
contemplated in Section 5 of the E.O. No. 229. On the
contrary, Section 6, thereof provides that the Land Bank of the
Philippines "shall compensate the landowner in an amount to
be established by the government, which shall be based on the
owner's declaration of current fair market value as provided in
Section 4 hereof, but subject to certain controls to be defined
and promulgated by the Presidential Agrarian Reform Council."
This compensation may not be paid fully in money but in any of
several modes that may consist of part cash and part bond,
with interest, maturing periodically, or direct payment in cash or
bond as may be mutually agreed upon by the beneficiary and
the landowner or as may be prescribed or approved by the
PARC.
The petitioners also argue that in the issuance of the two
measures, no effort was made to make a careful study of the
sugar planters' situation. There is no tenancy problem in the
sugar areas that can justify the application of the CARP to
them. To the extent that the sugar planters have been lumped
in the same legislation with other farmers, although they are a
separate group with problems exclusively their own, their right
to equal protection has been violated.
A motion for intervention was filed on August 27,1987 by the
National Federation of Sugarcane Planters (NASP) which
claims a membership of at least 20,000 individual sugar
planters all over the country. On September 10, 1987, another
The petitioners also decry the penalty for non-registration of

the lands, which is the expropriation of the said land for an
amount equal to the government assessor's valuation of the
land for tax purposes. On the other hand, if the landowner
declares his own valuation he is unjustly required to
immediately pay the corresponding taxes on the land, in
violation of the uniformity rule.
In his consolidated Comment, the Solicitor General first
invokes the presumption of constitutionality in favor of Proc.
No. 131 and E.O. No. 229. He also justifies the necessity for
the expropriation as explained in the "whereas" clauses of the
Proclamation and submits that, contrary to the petitioner's
contention, a pilot project to determine the feasibility of CARP
and a general survey on the people's opinion thereon are not
indispensable prerequisites to its promulgation.
On the alleged violation of the equal protection clause, the
sugar planters have failed to show that they belong to a
different class and should be differently treated. The Comment
also suggests the possibility of Congress first distributing public
agricultural lands and scheduling the expropriation of private
agricultural lands later. From this viewpoint, the petition for
prohibition would be premature.
The public respondent also points out that the constitutional
prohibition is against the payment of public money without the
corresponding appropriation. There is no rule that only money
already in existence can be the subject of an appropriation law.
Finally, the earmarking of fifty billion pesos as Agrarian Reform
Fund, although denominated as an initial amount, is actually
the maximum sum appropriated. The word "initial" simply
means that additional amounts may be appropriated later when
necessary.
On April 11, 1988, Prudencio Serrano, a coconut planter, filed a
petition on his own behalf, assailing the constitutionality of E.O.
No. 229. In addition to the arguments already raised, Serrano
contends that the measure is unconstitutional because:
(1) Only public lands should be included in the CARP;
(2) E.O. No. 229 embraces more than one subject which is not
expressed in the title;

(3) The power of the President to legislate was terminated on
July 2, 1987; and
(4) The appropriation of a P50 billion special fund from the
National Treasury did not originate from the House of
Representatives.
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:
G.R. No. 79744
The incumbent president shall continue to exercise legislative

powers until the first Congress is convened.
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 the issue of just compensation, his position is that when

P.D. No. 27 was promulgated on October 21. 1972, the tenantfarmer 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.
On September 3, 1986, the petitioner protested the erroneous

inclusion of his small landholding under Operation Land
transfer and asked for the recall and cancellation of the
Certificates of Land Transfer in the name of the private
respondents. He claims that on December 24, 1986, his
petition was denied without hearing. On February 17, 1987, he
filed a motion for reconsideration, which had not been acted
upon when E.O. Nos. 228 and 229 were issued. These orders
rendered his motion moot and academic because they directly
effected the transfer of his land to the private respondents.
The petitioner now argues that:
(1) E.O. Nos. 228 and 229 were invalidly issued by the
President of the Philippines.
(2) The said executive orders are violative of the constitutional
provision that no private property shall be taken without due
process or just compensation.
(3) The petitioner is denied the right of maximum retention
provided for under the 1987 Constitution.
The petitioner contends that the issuance of E.0. Nos. 228 and
229 shortly before Congress convened is anomalous and
arbitrary, besides violating the doctrine of separation of
powers. The legislative power granted to the President under
the Transitory Provisions refers only to emergency measures
that may be promulgated in the proper exercise of the police
power.
The petitioner also invokes his rights not to be deprived of his
property without due process of law and to the retention of his
small parcels of riceholding as guaranteed under Article XIII,
Section 4 of the Constitution. He likewise argues that, besides
denying him just compensation for his land, the provisions of
E.O. No. 228 declaring that:
Lease rentals paid to the landowner by the farmer-beneficiary
after October 21, 1972 shall be considered as advance
payment for the land.
is an unconstitutional taking of a vested property right. It is also
his contention that the inclusion of even small landowners in
the program along with other landowners with lands consisting
of seven hectares or more is undemocratic.
In his Reply to the public respondents, the petitioner maintains

that the motion he filed was resolved on December 14, 1987.
An appeal to the Office of the President would be useless with
the promulgation of E.O. Nos. 228 and 229, which in effect
sanctioned the validity of the public respondent's acts.
G.R. No. 78742
The petitioners in this case invoke the right of retention granted
by P.D. No. 27 to owners of rice and corn lands not exceeding
seven hectares as long as they are cultivating or intend to
cultivate the same. Their respective lands do not exceed the
statutory limit but are occupied by tenants who are actually
cultivating such lands.
According to P.D. No. 316, which was promulgated in
implementation of P.D. No. 27:
No tenant-farmer in agricultural lands primarily devoted to rice
and corn shall be ejected or removed from his farmholding until
such time as the respective rights of the tenant- farmers and
the landowner shall have been determined in accordance with
the rules and regulations implementing P.D. No. 27.
The petitioners claim they cannot eject their tenants and so are
unable to enjoy their right of retention because the Department
of Agrarian Reform has so far not issued the implementing
rules required under the above-quoted decree. They therefore
ask the Court for a writ of mandamus to compel the respondent
to issue the said rules.
In his Comment, the public respondent argues that P.D. No. 27
has been amended by LOI 474 removing any right of retention
from persons who own other agricultural lands of more than 7
hectares in aggregate area or lands used for residential,
commercial, industrial or other purposes from which they
derive adequate income for their family. And even assuming
that the petitioners do not fall under its terms, the regulations
implementing P.D. No. 27 have already been issued, to wit, the
Memorandum dated July 10, 1975 (Interim Guidelines on
Retention by Small Landowners, with an accompanying
Retention Guide Table), Memorandum Circular No. 11 dated
April 21, 1978, (Implementation Guidelines of LOI No. 474),
Memorandum Circular No. 18-81 dated December 29,1981
(Clarificatory Guidelines on Coverage of P.D. No. 27 and
Retention by Small Landowners), and DAR Administrative
Order No. 1, series of 1985 (Providing for a Cut-off Date for

Landowners to Apply for Retention and/or to Protest the
Coverage of their Landholdings under Operation Land Transfer
pursuant to P.D. No. 27). For failure to file the corresponding
applications for retention under these measures, the petitioners
are now barred from invoking this right.
The public respondent also stresses that the petitioners have
prematurely initiated this case notwithstanding the pendency of
their appeal to the President of the Philippines. Moreover, the
issuance of the implementing rules, assuming this has not yet
been done, involves the exercise of discretion which cannot be
controlled through the writ of mandamus. This is especially true
if this function is entrusted, as in this case, to a separate
department of the government.
In their Reply, the petitioners insist that the above-cited
measures are not applicable to them because they do not own
more than seven hectares of agricultural land. Moreover,
assuming arguendo that the rules were intended to cover them
also, the said measures are nevertheless not in force because
they have not been published as required by law and the ruling
of this Court in Tanada v. Tuvera. 10 As for LOI 474, the same is
ineffective for the additional reason that a mere letter of
instruction could not have repealed the presidential decree.
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, earnest studies were made by Congress or
the President, or both, to insure that the Constitution would not
be breached.
In addition, the Constitution itself lays down stringent
conditions for a declaration of unconstitutionality, requiring
therefor the concurrence of a majority of the members of the
Supreme Court who took part in the deliberations and voted on
the issue during their session en banc. 11 And as established by
judge made doctrine, the Court will assume jurisdiction over a
constitutional question only if it is shown that the essential
requisites of a judicial inquiry into such a question are first
satisfied. Thus, there must be an actual case or controversy
involving a conflict of legal rights susceptible of judicial
determination, the constitutional question must have been
opportunely raised by the proper party, and the resolution of
the question is unavoidably necessary to the decision of the
case itself. 12
With particular regard to the requirement of proper party as
applied in the cases before us, we hold that the same is
satisfied by the petitioners and intervenors because each of
them has sustained or is in danger of sustaining an immediate
injury as a result of the acts or measures complained of. 13 And
even if, strictly speaking, they are not covered by the definition,
it is still within the wide discretion of the Court to waive the
requirement and so remove the impediment to its addressing
and resolving the serious constitutional questions raised.
In the first Emergency Powers Cases, 14 ordinary citizens and
taxpayers were allowed to question the constitutionality of
several executive orders issued by President Quirino although
they were invoking only an indirect and general interest shared
in common with the public. The Court dismissed the objection
that they were not proper parties and ruled that "the
transcendental importance to the public of these cases
demands that they be settled promptly and definitely, brushing
aside, if we must, technicalities of procedure." We have since
then applied this exception in many other cases. 15
The other above-mentioned requisites have also been met in
the present petitions.
In must be stressed that despite the inhibitions pressing upon
the Court when confronted with constitutional issues like the
ones now before it, it will not hesitate to declare a law or act
invalid when it is convinced that this must be done. In arriving
at this conclusion, its only criterion will be the Constitution as
God and its conscience give it the light to probe its meaning
and discover its purpose. Personal motives and political
considerations are irrelevancies that cannot influence its
decision. Blandishment is as ineffectual as intimidation.
For all the awesome power of the Congress and the Executive,
the Court will not hesitate to "make the hammer fall, and
heavily," to use Justice Laurel's pithy language, where the acts
of these departments, or of any public official, betray the
people's will as expressed in the Constitution.
It need only be added, to borrow again the words of Justice
Laurel, that
... when the judiciary mediates to allocate constitutional
boundaries, it does not assert any superiority over the other
departments; it does not in reality nullify or invalidate an act of
the Legislature, but only asserts the solemn and sacred
obligation assigned to it by the Constitution to determine
conflicting claims of authority under the Constitution and to
establish for the parties in an actual controversy the rights
which that instrument secures and guarantees to them. This is
in truth all that is involved in what is termed "judicial
supremacy" which properly is the power of judicial review
under the Constitution. 16
The cases before us categorically raise constitutional
questions that this Court must categorically resolve. And so we
shall.
II
We proceed first to the examination of the preliminary issues
before resolving the more serious challenges to the
constitutionality of the several measures involved in these
petitions.
The promulgation of P.D. No. 27 by President Marcos in the
exercise of his powers under martial law has already been

sustained in Gonzales v. Estrella and we find no reason to
modify or reverse it on that issue. As for the power of President
Aquino to promulgate Proc. No. 131 and E.O. Nos. 228 and
229, the same was authorized under Section 6 of the
Transitory Provisions of the 1987 Constitution, quoted above.
The said measures were issued by President Aquino before
July 27, 1987, when the Congress of the Philippines was
formally convened and took over legislative power from her.
They are not "midnight" enactments intended to pre-empt the
legislature because E.O. No. 228 was issued on July 17, 1987,
and the other measures, i.e., Proc. No. 131 and E.O. No. 229,
were both issued on July 22, 1987. Neither is it correct to say
that these measures ceased to be valid when she lost her
legislative power for, like any statute, they continue to be in
force unless modified or repealed by subsequent law or
declared invalid by the courts. A statute does not ipso facto
become inoperative simply because of the dissolution of the
legislature that enacted it. By the same token, President
Aquino's loss of legislative power did not have the effect of
invalidating all the measures enacted by her when and as long
as she possessed it.
Significantly, the Congress she is alleged to have undercut has
not rejected but in fact substantially affirmed the challenged
measures and has specifically provided that they shall be
suppletory to R.A. No. 6657 whenever not inconsistent with its
provisions. 17 Indeed, some portions of the said measures, like
the creation of the P50 billion fund in Section 2 of Proc. No.
131, and Sections 20 and 21 of E.O. No. 229, have been
incorporated by reference in the CARP Law. 18
That fund, as earlier noted, is itself being questioned on the
ground that it does not conform to the requirements of a valid
appropriation as specified in the Constitution. Clearly, however,
Proc. No. 131 is not an appropriation measure even if it does
provide for the creation of said fund, for that is not its principal
purpose. An appropriation law is one the primary and specific
purpose of which is to authorize the release of public funds
from the treasury. 19 The creation of the fund is only incidental
to the main objective of the proclamation, which is agrarian
reform.
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.)
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.
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.
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:
Whenever a duty is imposed upon a public official and an

unnecessary and unreasonable delay in the exercise of such
duty occurs, if it is a clear duty imposed by law, the courts will
intervene by the extraordinary legal remedy of mandamus to
compel action. If the duty is purely ministerial, the courts will
require specific action. If the duty is purely discretionary, the
courts by mandamus will require action only. For example, if an
inferior court, public official, or board should, for an
unreasonable length of time, fail to decide a particular question
to the great detriment of all parties concerned, or a court
Retention Limits. Except as otherwise provided in this Act,

no person may own or retain, directly or indirectly, any public or

should refuse to take jurisdiction of a cause when the law
clearly gave it jurisdiction mandamus will issue, in the first case
to require a decision, and in the second to require that
jurisdiction be taken of the cause. 22
And while it is true that as a rule the writ will not be proper as
long as there is still a plain, speedy and adequate remedy
available from the administrative authorities, resort to the
courts may still be permitted if the issue raised is a question of
law. 23
III
There are traditional distinctions between the police power and
the power of eminent domain that logically preclude the
application of both powers at the same time on the same
subject. In the case of City of Baguio v. NAWASA, 24 for
example, where a law required the transfer of all municipal
waterworks systems to the NAWASA in exchange for its assets
of equivalent value, the Court held that the power being
exercised was eminent domain because the property involved
was wholesome and intended for a public use. Property
condemned under the police power is noxious or intended for a
noxious purpose, such as a building on the verge of collapse,
which should be demolished for the public safety, or obscene
materials, which should be destroyed in the interest of public
morals. The confiscation of such property is not compensable,
unlike the taking of property under the power of expropriation,
which requires the payment of just compensation to the owner.
In the case of Pennsylvania Coal Co. v. Mahon, 25 Justice
Holmes laid down the limits of the police power in a famous
aphorism: "The general rule at least is that while property may
be regulated to a certain extent, if regulation goes too far it will
be recognized as a taking." The regulation that went "too far"
was a law prohibiting mining which might cause the
subsidence of structures for human habitation constructed on
the land surface. This was resisted by a coal company which
had earlier granted a deed to the land over its mine but
reserved all mining rights thereunder, with the grantee
assuming all risks and waiving any damage claim. The Court
held the law could not be sustained without compensating the
grantor. Justice Brandeis filed a lone dissent in which he
argued that there was a valid exercise of the police power. He
said:
Every restriction upon the use of property imposed in the
exercise of the police power deprives the owner of some right
theretofore enjoyed, and is, in that sense, an abridgment by
the State of rights in property without making compensation.
But restriction imposed to protect the public health, safety or
morals from dangers threatened is not a taking. The restriction
here in question is merely the prohibition of a noxious use. The
property so restricted remains in the possession of its owner.
The state does not appropriate it or make any use of it. The
state merely prevents the owner from making a use which
interferes with paramount rights of the public. Whenever the
use prohibited ceases to be noxious as it may because of
further changes in local or social conditions the restriction
will have to be removed and the owner will again be free to
enjoy his property as heretofore.
Recent trends, however, would indicate not a polarization but a
mingling of the police power and the power of eminent domain,
with the latter being used as an implement of the former like

the power of taxation. The employment of the taxing power to
achieve a police purpose has long been accepted. 26 As for the
power of expropriation, Prof. John J. Costonis of the University
of Illinois College of Law (referring to the earlier case of Euclid
v. Ambler Realty Co., 272 US 365, which sustained a zoning
law under the police power) makes the following significant
remarks:
Euclid, moreover, was decided in an era when judges located
the Police and eminent domain powers on different planets.
Generally speaking, they viewed eminent domain as
encompassing public acquisition of private property for
improvements that would be available for public use," literally
construed. To the police power, on the other hand, they
assigned the less intrusive task of preventing harmful
externalities a point reflected in the Euclid opinion's reliance on
an analogy to nuisance law to bolster its support of zoning. So
long as suppression of a privately authored harm bore a
plausible relation to some legitimate "public purpose," the
pertinent measure need have afforded no compensation
whatever. With the progressive growth of government's
involvement in land use, the distance between the two powers
has contracted considerably. Today government often employs
eminent domain interchangeably with or as a useful
complement to the police power-- a trend expressly approved
in the Supreme Court's 1954 decision in Berman v. Parker,
which broadened the reach of eminent domain's "public use"
test to match that of the police power's standard of "public
purpose." 27
The Berman case sustained a redevelopment project and the
improvement of blighted areas in the District of Columbia as a
proper exercise of the police power. On the role of eminent
domain in the attainment of this purpose, Justice Douglas
declared:
If those who govern the District of Columbia decide that the
Nation's Capital should be beautiful as well as sanitary, there is
nothing in the Fifth Amendment that stands in the way.
Once the object is within the authority of Congress, the right to
realize it through the exercise of eminent domain is clear.
For the power of eminent domain is merely the means to the
end. 28
In Penn Central Transportation Co. v. New York City, 29 decided
by a 6-3 vote in 1978, the U.S Supreme Court sustained the
respondent's Landmarks Preservation Law under which the
owners of the Grand Central Terminal had not been allowed to
construct a multi-story office building over the Terminal, which
had been designated a historic landmark. Preservation of the
landmark was held to be a valid objective of the police power.
The problem, however, was that the owners of the Terminal
would be deprived of the right to use the airspace above it
although other landowners in the area could do so over their
respective properties. While insisting that there was here no
taking,
the
Court
nonetheless
recognized
certain
compensatory rights accruing to Grand Central Terminal which
it said would "undoubtedly mitigate" the loss caused by the
regulation. This "fair compensation," as he called it, was
explained by Prof. Costonis in this wise:

In return for retaining the Terminal site in its pristine landmark
status, Penn Central was authorized to transfer to neighboring
properties the authorized but unused rights accruing to the site
prior to the Terminal's designation as a landmark the rights
which would have been exhausted by the 59-story building that
the city refused to countenance atop the Terminal. Prevailing
bulk restrictions on neighboring sites were proportionately
relaxed, theoretically enabling Penn Central to recoup its
losses at the Terminal site by constructing or selling to others
the right to construct larger, hence more profitable buildings on
the transferee sites. 30
The cases before us present no knotty complication insofar as
the question of compensable taking is concerned. To the extent
that the measures under challenge merely prescribe retention
limits for landowners, there is an exercise of the police power
for the regulation of private property in accordance with the
Constitution. But where, to carry out such regulation, it
becomes necessary to deprive such owners of whatever lands
they may own in excess of the maximum area allowed, there is
definitely a taking under the power of eminent domain for
which payment of just compensation is imperative. The taking
contemplated is not a mere limitation of the use of the land.
What is required is the surrender of the title to and the physical
possession of the said excess and all beneficial rights accruing
to the owner in favor of the farmer-beneficiary. This is definitely
an exercise not of the police power but of the power of eminent
domain.
Whether as an exercise of the police power or of the power of
eminent domain, the several measures before us are
challenged as violative of the due process and equal protection
clauses.
The challenge to Proc. No. 131 and E.O. Nos. 228 and 299 on
the ground that no retention limits are prescribed has already
been discussed and dismissed. It is noted that although they
excited many bitter exchanges during the deliberation of the
CARP Law in Congress, the retention limits finally agreed upon
are, curiously enough, not being questioned in these petitions.
We therefore do not discuss them here. The Court will come to
the other claimed violations of due process in connection with
our examination of the adequacy of just compensation as
required under the power of expropriation.
The argument of the small farmers that they have been denied
equal protection because of the absence of retention limits has
also become academic under Section 6 of R.A. No. 6657.
Significantly, they too have not questioned the area of such
limits. There is also the complaint that they should not be made
to share the burden of agrarian reform, an objection also made
by the sugar planters on the ground that they belong to a
particular class with particular interests of their own. However,
no evidence has been submitted to the Court that the
requisites of a valid classification have been violated.
Classification has been defined as the grouping of persons or
things similar to each other in certain particulars and different
from each other in these same particulars. 31 To be valid, it
must conform to the following requirements: (1) it must be
based on substantial distinctions; (2) it must be germane to the
purposes of the law; (3) it must not be limited to existing
conditions only; and (4) it must apply equally to all the
members of the class. 32 The Court finds that all these
requisites have been met by the measures here challenged as

arbitrary and discriminatory.
Equal protection simply means that all persons or things
similarly situated must be treated alike both as to the rights
conferred and the liabilities imposed. 33 The petitioners have
not shown that they belong to a different class and entitled to a
different treatment. The argument that not only landowners but
also owners of other properties must be made to share the
burden of implementing land reform must be rejected. There is
a substantial distinction between these two classes of owners
that is clearly visible except to those who will not see. There is
no need to elaborate on this matter. In any event, the Congress
is allowed a wide leeway in providing for a valid classification.
Its decision is accorded recognition and respect by the courts
of justice except only where its discretion is abused to the
detriment of the Bill of Rights.
It is worth remarking at this juncture that a statute may be
sustained under the police power only if there is a concurrence
of the lawful subject and the lawful method. Put otherwise, the
interests of the public generally as distinguished from those of
a particular class require the interference of the State and, no
less important, the means employed are reasonably necessary
for the attainment of the purpose sought to be achieved and
not unduly oppressive upon individuals. 34 As the subject and
purpose of agrarian reform have been laid down by the
Constitution itself, we may say that the first requirement has
been satisfied. What remains to be examined is the validity of
the method employed to achieve the constitutional goal.
One of the basic principles of the democratic system is that
where the rights of the individual are concerned, the end does
not justify the means. It is not enough that there be a valid
objective; it is also necessary that the means employed to
pursue it be in keeping with the Constitution. Mere expediency
will not excuse constitutional shortcuts. There is no question
that not even the strongest moral conviction or the most urgent
public need, subject only to a few notable exceptions, will
excuse the bypassing of an individual's rights. It is no
exaggeration to say that a, person invoking a right guaranteed
under Article III of the Constitution is a majority of one even as
against the rest of the nation who would deny him that right.
That right covers the person's life, his liberty and his property
under Section 1 of Article III of the Constitution. With regard to
his property, the owner enjoys the added protection of Section
9, which reaffirms the familiar rule that private property shall
not be taken for public use without just compensation.
This brings us now to the power of eminent domain.
IV
Eminent domain is an inherent power of the State that enables
it to forcibly acquire private lands intended for public use upon
payment of just compensation to the owner. Obviously, there is
no need to expropriate where the owner is willing to sell under
terms also acceptable to the purchaser, in which case an
ordinary deed of sale may be agreed upon by the parties. 35 It
is only where the owner is unwilling to sell, or cannot accept
the price or other conditions offered by the vendee, that the
power of eminent domain will come into play to assert the
paramount authority of the State over the interests of the

property owner. Private rights must then yield to the irresistible
demands of the public interest on the time-honored
justification, as in the case of the police power, that the welfare
of the people is the supreme law.
But for all its primacy and urgency, the power of expropriation
is by no means absolute (as indeed no power is absolute). The
limitation is found in the constitutional injunction that "private
property shall not be taken for public use without just
compensation" and in the abundant jurisprudence that has
evolved from the interpretation of this principle. Basically, the
requirements for a proper exercise of the power are: (1) public
use and (2) just compensation.
Let us dispose first of the argument raised by the petitioners in
G.R. No. 79310 that the State should first distribute public
agricultural lands in the pursuit of agrarian reform instead of
immediately disturbing property rights by forcibly acquiring
private agricultural lands. Parenthetically, it is not correct to say
that only public agricultural lands may be covered by the CARP
as the Constitution calls for "the just distribution of all
agricultural lands." In any event, the decision to redistribute
private agricultural lands in the manner prescribed by the
CARP was made by the legislative and executive departments
in the exercise of their discretion. We are not justified in
reviewing that discretion in the absence of a clear showing that
it has been abused.
A becoming courtesy admonishes us to respect the decisions
of the political departments when they decide what is known as
the political question. As explained by Chief Justice
Concepcion in the case of 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,
held:
38
Congress having determined, as it did by the Act of March

3,1909 that the entire St. Mary's river between the American
bank and the international line, as well as all of the upland
north of the present ship canal, throughout its entire length,
was "necessary for the purpose of navigation of said waters,
and the waters connected therewith," that determination is
conclusive in condemnation proceedings instituted by the
United States under that Act, and there is no room for judicial
review of the judgment of Congress ... .
As earlier observed, the requirement for public use has already
been settled for us by the Constitution itself No less than the
1987 Charter calls for agrarian reform, which is the reason why
private agricultural lands are to be taken from their owners,
subject to the prescribed maximum retention limits. The
purposes specified in P.D. No. 27, Proc. No. 131 and R.A. No.
6657 are only an elaboration of the constitutional injunction
that the State adopt the necessary measures "to encourage
and undertake the just distribution of all agricultural lands to
enable farmers who are landless to own directly or collectively
the lands they till." That public use, as pronounced by the
fundamental law itself, must be binding on us.
The second requirement, i.e., the payment of just
compensation, needs a longer and more thoughtful
examination.
Just compensation is defined as the full and fair equivalent of
the property taken from its owner by the expropriator. 39 It has
been repeatedly stressed by this Court that the measure is not
the taker's gain but the owner's loss. 40 The word "just" is used
to intensify the meaning of the word "compensation" to convey
the idea that the equivalent to be rendered for the property to
be taken shall be real, substantial, full, ample. 41
It bears repeating that the measures challenged in these
petitions contemplate more than a mere regulation of the use
of private lands under the police power. We deal here with an
actual taking of private agricultural lands that has
dispossessed the owners of their property and deprived them
of all its beneficial use and enjoyment, to entitle them to the
just compensation mandated by the Constitution.
As held in Republic of the Philippines v. Castellvi, 42 there is
compensable taking when the following conditions concur: (1)
the expropriator must enter a private property; (2) the entry
must be for more than a momentary period; (3) the entry must
be under warrant or color of legal authority; (4) the property
must be devoted to public use or otherwise informally
appropriated or injuriously affected; and (5) the utilization of the
property for public use must be in such a way as to oust the
owner and deprive him of beneficial enjoyment of the property.
All these requisites are envisioned in the measures before us.
Where the State itself is the expropriator, it is not necessary for
it to make a deposit upon its taking possession of the
condemned property, as "the compensation is a public charge,
the good faith of the public is pledged for its payment, and all
the resources of taxation may be employed in raising the
amount." 43 Nevertheless, Section 16(e) of the CARP Law
provides that:
it was
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.
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.
Objection is raised, however, to the manner of fixing the just

compensation, which it is claimed is entrusted to the
administrative authorities in violation of judicial prerogatives.
Specific reference is made to Section 16(d), which provides
that in case of the rejection or disregard by the owner of the
offer of the government to buy his land... the DAR shall conduct summary administrative proceedings
to determine the compensation for the land by requiring the
landowner, the LBP and other interested parties to submit
evidence as to the just compensation for the land, within fifteen
(15) days from the receipt of the notice. After the expiration of
the above period, the matter is deemed submitted for decision.
The DAR shall decide the case within thirty (30) days after it is
submitted for decision.
To be sure, the determination of just compensation is a
function addressed to the courts of justice and may not be
usurped by any other branch or official of the government.
EPZA v. Dulay 44 resolved a challenge to several decrees
promulgated by President Marcos providing that the just
compensation for property under expropriation should be either
the assessment of the property by the government or the
sworn valuation thereof by the owner, whichever was lower. In
declaring these decrees unconstitutional, the Court held
through Mr. Justice Hugo E. Gutierrez, Jr.:
The method of ascertaining just compensation under the
aforecited decrees constitutes impermissible encroachment on
judicial prerogatives. It tends to render this Court inutile in a
matter which under this Constitution is reserved to it for final
determination.
Thus, although in an expropriation proceeding the court
technically would still have the power to determine the just
compensation for the property, following the applicable
decrees, its task would be relegated to simply stating the lower
value of the property as declared either by the owner or the
assessor. As a necessary consequence, it would be useless for
the court to appoint commissioners under Rule 67 of the Rules
of Court. Moreover, the need to satisfy the due process clause
in the taking of private property is seemingly fulfilled since it
cannot be said that a judicial proceeding was not had before
the actual taking. However, the strict application of the decrees
during the proceedings would be nothing short of a mere
formality or charade as the court has only to choose between
the valuation of the owner and that of the assessor, and its
choice is always limited to the lower of the two. The court
cannot exercise its discretion or independence in determining
what is just or fair. Even a grade school pupil could substitute
for the judge insofar as the determination of constitutional just
compensation is concerned.
xxx
xxx
It is violative of due process to deny the owner the opportunity
to prove that the valuation in the tax documents is unfair or
wrong. And it is repulsive to the basic concepts of justice and
fairness to allow the haphazard work of a minor bureaucrat or
clerk to absolutely prevail over the judgment of a court
promulgated only after expert commissioners have actually
viewed the property, after evidence and arguments pro and
con have been presented, and after all factors and
considerations essential to a fair and just determination have
been judiciously evaluated.
A reading of the aforecited Section 16(d) will readily show that
it does not suffer from the arbitrariness that rendered the
challenged decrees constitutionally objectionable. Although the
proceedings are described as summary, the landowner and
other interested parties are nevertheless allowed an
opportunity to submit evidence on the real value of the
property. But more importantly, the determination of the just
compensation by the DAR is not by any means final and
conclusive upon the landowner or any other interested party,
for Section 16(f) clearly provides:
Any party who disagrees with the decision may bring the
matter to the court of proper jurisdiction for final determination
of just compensation.
The determination made by the DAR is only preliminary unless
accepted by all parties concerned. Otherwise, the courts of
justice will still have the right to review with finality the said
determination in the exercise of what is admittedly a judicial
function.
The second and more serious objection to the provisions on
just compensation is not as easily resolved.
This refers to Section 18 of the CARP Law providing in full as
follows:
SEC. 18. Valuation and Mode of Compensation. The LBP
shall compensate the landowner in such amount as may be
agreed upon by the landowner and the DAR and the LBP, in
accordance with the criteria provided for in Sections 16 and 17,
and other pertinent provisions hereof, or as may be finally
determined by the court, as the just compensation for the land.
The compensation shall be paid in one of the following modes,
at the option of the landowner:
(1) Cash payment, under the following terms and conditions:

(a) For lands above fifty (50) hectares, insofar as the excess
hectarage is concerned Twenty-five percent (25%) cash, the
balance to be paid in government financial instruments
negotiable at any time.
(b) For lands above twenty-four (24) hectares and up to fifty
(50) hectares Thirty percent (30%) cash, the balance to be
paid in government financial instruments negotiable at any
time.
(c) For lands twenty-four (24) hectares and below Thirty-five
percent (35%) cash, the balance to be paid in government
financial instruments negotiable at any time.
(2) Shares of stock in government-owned or controlled
corporations, LBP preferred shares, physical assets or other
qualified investments in accordance with guidelines set by the
PARC;
(3) Tax credits which can be used against any tax liability;
(4) LBP bonds, which shall have the following features:
(a) Market interest rates aligned with 91-day treasury bill rates.
Ten percent (10%) of the face value of the bonds shall mature
every year from the date of issuance until the tenth (10th) year:
Provided, That should the landowner choose to forego the
cash portion, whether in full or in part, he shall be paid
correspondingly in LBP bonds;
(b) Transferability and negotiability. Such LBP bonds may be
used by the landowner, his successors-in- interest or his
assigns, up to the amount of their face value, for any of the
following:
(i) Acquisition of land or other real properties of the
government, including assets under the Asset Privatization
Program and other assets foreclosed by government financial
institutions in the same province or region where the lands for
which the bonds were paid are situated;
(ii) Acquisition of shares of stock of government-owned or
controlled corporations or shares of stock owned by the
government in private corporations;
(iii) Substitution for surety or bail bonds for the provisional
release of accused persons, or for performance bonds;
(iv) Security for loans with any government financial institution,
provided the proceeds of the loans shall be invested in an
economic enterprise, preferably in a small and medium- scale
industry, in the same province or region as the land for which
the bonds are paid;
(v) Payment for various taxes and fees to government:
Provided, That the use of these bonds for these purposes will
be limited to a certain percentage of the outstanding balance of
the financial instruments; Provided, further, That the PARC
shall determine the percentages mentioned above;
(vi) Payment for tuition fees of the immediate family of the

original bondholder in government universities, colleges, trade
schools, and other institutions;
(vii) Payment for fees of the immediate family of the original
bondholder in government hospitals; and
(viii) Such other uses as the PARC may from time to time
allow.
The contention of the petitioners in G.R. No. 79777 is that the
above provision is unconstitutional insofar as it requires the
owners of the expropriated properties to accept just
compensation therefor in less than money, which is the only
medium of payment allowed. In support of this contention, they
cite jurisprudence holding that:
The fundamental rule in expropriation matters is that the owner
of the property expropriated is entitled to a just compensation,
which should be neither more nor less, whenever it is possible
to make the assessment, than the money equivalent of said
property. Just compensation has always been understood to
be the just and complete equivalent of the loss which the
owner of the thing expropriated has to suffer by reason of the
expropriation . 45 (Emphasis supplied.)
In J.M. Tuazon Co. v. Land Tenure Administration,
held:
46
this Court
It is well-settled that just compensation means the equivalent

for the value of the property at the time of its taking. Anything
beyond that is more, and anything short of that is less, than
just compensation. It means a fair and full equivalent for the
loss sustained, which is the measure of the indemnity, not
whatever gain would accrue to the expropriating entity. The
market value of the land taken is the just compensation to
which the owner of condemned property is entitled, the market
value being that sum of money which a person desirous, but
not compelled to buy, and an owner, willing, but not compelled
to sell, would agree on as a price to be given and received for
such property. (Emphasis supplied.)
In the United States, where much of our jurisprudence on the
subject has been derived, the weight of authority is also to the
effect that just compensation for property expropriated is
payable only in money and not otherwise. Thus
The medium of payment of compensation is ready money or
cash. The condemnor cannot compel the owner to accept
anything but money, nor can the owner compel or require the
condemnor to pay him on any other basis than the value of the
property in money at the time and in the manner prescribed by
the Constitution and the statutes. When the power of eminent
domain is resorted to, there must be a standard medium of
payment, binding upon both parties, and the law has fixed that
standard as money in cash. 47 (Emphasis supplied.)
Part cash and deferred payments are not and cannot, in the
nature of things, be regarded as a reliable and constant
standard of compensation. 48
"Just compensation" for property taken by condemnation
means a fair equivalent in money, which must be paid at least

within a reasonable time after the taking, and it is not within the
power of the Legislature to substitute for such payment future
obligations, bonds, or other valuable advantage. 49 (Emphasis
supplied.)
It cannot be denied from these cases that the traditional
medium for the payment of just compensation is money and no
other. And so, conformably, has just compensation been paid
in the past solely in that medium. However, we do not deal
here with the traditional excercise of the power of eminent
domain. This is not an ordinary expropriation where only a
specific property of relatively limited area is sought to be taken
by the State from its owner for a specific and perhaps local
purpose.
What we deal with here is a revolutionary kind of expropriation.
The expropriation before us affects all private agricultural lands
whenever found and of whatever kind as long as they are in
excess of the maximum retention limits allowed their owners.
This kind of expropriation is intended for the benefit not only of
a particular community or of a small segment of the population
but of the entire Filipino nation, from all levels of our society,
from the impoverished farmer to the land-glutted owner. Its
purpose does not cover only the whole territory of this country
but goes beyond in time to the foreseeable future, which it
hopes to secure and edify with the vision and the sacrifice of
the present generation of Filipinos. Generations yet to come
are as involved in this program as we are today, although
hopefully only as beneficiaries of a richer and more fulfilling life
we will guarantee to them tomorrow through our thoughtfulness
today. And, finally, let it not be forgotten that it is no less than
the Constitution itself that has ordained this revolution in the
farms, calling for "a just distribution" among the farmers of
lands that have heretofore been the prison of their dreams but
can now become the key at least to their deliverance.
Such a program will involve not mere millions of pesos. The
cost will be tremendous. Considering the vast areas of land
subject to expropriation under the laws before us, we estimate
that hundreds of billions of pesos will be needed, far more
indeed than the amount of P50 billion initially appropriated,
which is already staggering as it is by our present standards.
Such amount is in fact not even fully available at this time.
We assume that the framers of the Constitution were aware of
this difficulty when they called for agrarian reform as a top
priority project of the government. It is a part of this assumption
that when they envisioned the expropriation that would be
needed, they also intended that the just compensation would
have to be paid not in the orthodox way but a less conventional
if more practical method. There can be no doubt that they were
aware of the financial limitations of the government and had no
illusions that there would be enough money to pay in cash and
in full for the lands they wanted to be distributed among the
farmers. We may therefore assume that their intention was to
allow such manner of payment as is now provided for by the
CARP Law, particularly the payment of the balance (if the
owner cannot be paid fully with money), or indeed of the entire
amount of the just compensation, with other things of value.
We may also suppose that what they had in mind was a similar
scheme of payment as that prescribed in P.D. No. 27, which
was the law in force at the time they deliberated on the new
Charter and with which they presumably agreed in principle.
The Court has not found in the records of the Constitutional

Commission any categorical agreement among the members
regarding the meaning to be given the concept of just
compensation as applied to the comprehensive agrarian
reform program being contemplated. There was the suggestion
to "fine tune" the requirement to suit the demands of the
project even as it was also felt that they should "leave it to
Congress" to determine how payment should be made to the
landowner and reimbursement required from the farmerbeneficiaries. 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 aforequoted Section 18 of the CARP Law is not violative
of the Constitution. We do not mind admitting that a certain
degree of pragmatism has influenced our decision on this
issue, but after all this Court is not a cloistered institution
removed from the realities and demands of society or oblivious
to the need for its enhancement. The Court is as acutely
anxious as the rest of our people to see the goal of agrarian
reform achieved at last after the frustrations and deprivations
of our peasant masses during all these disappointing decades.
We are aware that invalidation of the said section will result in
the nullification of the entire program, killing the farmer's hopes
even as they approach realization and resurrecting the spectre
of discontent and dissent in the restless countryside. That is
not in our view the intention of the Constitution, and that is not
what we shall decree today.
Accepting the theory that payment of the just compensation is
not always required to be made fully in money, we find further
that the proportion of cash payment to the other things of value
constituting the total payment, as determined on the basis of
the areas of the lands expropriated, is not unduly oppressive
upon the landowner. It is noted that the smaller the land, the
bigger the payment in money, primarily because the small
landowner will be needing it more than the big landowners,
who can afford a bigger balance in bonds and other things of
value. No less importantly, the government financial
instruments making up the balance of the payment are
"negotiable at any time." The other modes, which are likewise
available to the landowner at his option, are also not
unreasonable because payment is made in shares of stock,
LBP bonds, other properties or assets, tax credits, and other
things of value equivalent to the amount of just compensation.
Admittedly, the compensation contemplated in the law will
cause the landowners, big and small, not a little inconvenience.
As already remarked, this cannot be avoided. Nevertheless, it
is devoutly hoped that these countrymen of ours, conscious as
we know they are of the need for their forebearance and even
sacrifice, will not begrudge us their indispensable share in the
attainment of the ideal of agrarian reform. Otherwise, our

pursuit of this elusive goal will be like the quest for the Holy
Grail.
The complaint against the effects of non-registration of the land
under E.O. No. 229 does not seem to be viable any more as it
appears that Section 4 of the said Order has been superseded
by Section 14 of the CARP Law. This repeats the requisites of
registration as embodied in the earlier measure but does not
provide, as the latter did, that in case of failure or refusal to
register the land, the valuation thereof shall be that given by
the provincial or city assessor for tax purposes. On the
contrary, the CARP Law says that the just compensation shall
be ascertained on the basis of the factors mentioned in its
Section 17 and in the manner provided for in Section 16.
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:
The last major challenge to CARP is that the landowner is

divested of his property even before actual payment to him in
full of just compensation, in contravention of a well- accepted
principle of eminent domain.
The recognized rule, indeed, is that title to the property
expropriated shall pass from the owner to the expropriator only
upon full payment of the just compensation. Jurisprudence on
this settled principle is consistent both here and in other
democratic jurisdictions. Thus:
Title to property which is the subject of condemnation
proceedings does not vest the condemnor until the judgment
fixing just compensation is entered and paid, but the
condemnor's title relates back to the date on which the petition
under the Eminent Domain Act, or the commissioner's report
under the Local Improvement Act, is filed. 51
... although the right to appropriate and use land taken for a
canal is complete at the time of entry, title to the property taken
remains in the owner until payment is actually made. 52
(Emphasis supplied.)
In Kennedy v. Indianapolis, 53 the US Supreme Court cited
several cases holding that title to property does not pass to the
condemnor until just compensation had actually been made. In
fact, the decisions appear to be uniformly to this effect. As
early as 1838, in Rubottom v. McLure, 54 it was held that
"actual payment to the owner of the condemned property was
a condition precedent to the investment of the title to the
property in the State" albeit "not to the appropriation of it to
public use." In Rexford v. Knight, 55 the Court of Appeals of
New York said that the construction upon the statutes was that
the fee did not vest in the State until the payment of the
compensation although the authority to enter upon and
appropriate the land was complete prior to the payment.
Kennedy further said that "both on principle and authority the
rule is ... that the right to enter on and use the property is
complete, as soon as the property is actually appropriated
under the authority of law for a public use, but that the title
does not pass from the owner without his consent, until just
compensation has been made to him."
Our own Supreme Court has held in Visayan Refining Co. v.
Camus and Paredes, 56 that:
If the laws which we have exhibited or cited in the preceding
discussion are attentively examined it will be apparent that the
method of expropriation adopted in this jurisdiction is such as
All qualified farmer-beneficiaries are now deemed full owners

as of October 21, 1972 of the land they acquired by virtue of
Presidential Decree No. 27. (Emphasis supplied.)
it was obviously referring to lands already validly acquired
under the said decree, after proof of full-fledged membership in
the farmers' cooperatives and full payment of just
compensation. Hence, it was also perfectly proper for the
Order to also provide in its Section 2 that the "lease rentals
paid to the landowner by the farmer- beneficiary after October
21, 1972 (pending transfer of ownership after full payment of
just compensation), shall be considered as advance payment
for the land."
The CARP Law, for its part, conditions the transfer of
possession and ownership of the land to the government on
receipt by the landowner of the corresponding payment or the
deposit by the DAR of the compensation in cash or LBP bonds
with an accessible bank. Until then, title also remains with the
landowner. 57 No outright change of ownership is contemplated
either.
Hence, the argument that the assailed measures violate due
process by arbitrarily transferring title before the land is fully
paid for must also be rejected.
It is worth stressing at this point that all rights acquired by the
tenant-farmer under P.D. No. 27, as recognized under E.O. No.
228, are retained by him even now under R.A. No. 6657. This
should counter-balance the express provision in Section 6 of
the said law that "the landowners whose lands have been
covered by Presidential Decree No. 27 shall be allowed to
keep the area originally retained by them thereunder, further,
That original homestead grantees or direct compulsory heirs
who still own the original homestead at the time of the approval
of this Act shall retain the same areas as long as they continue
to cultivate said homestead."
In connection with these retained rights, it does not appear in
G.R. No. 78742 that the appeal filed by the petitioners with the
Office of the President has already been resolved. Although we
have said that the doctrine of exhaustion of administrative
remedies need not preclude immediate resort to judicial action,
there are factual issues that have yet to be examined on the
administrative level, especially the claim that the petitioners are
not covered by LOI 474 because they do not own other
agricultural lands than the subjects of their petition.

Obviously, the Court cannot resolve these issues. In any event,
assuming that the petitioners have not yet exercised their
retention rights, if any, under P.D. No. 27, the Court holds that
they are entitled to the new retention rights provided for by
R.A. No. 6657, which in fact are on the whole more liberal than
those granted by the decree.
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 reexamined and rehoned, that they may be sharper instruments
for the better protection of the farmer's rights. But we have to
start somewhere. In the pursuit of agrarian reform, we do not
tread on familiar ground but grope on terrain fraught with
pitfalls and expected difficulties. This is inevitable. The CARP
Law is not a tried and tested project. On the contrary, to use
Justice Holmes's words, "it is an experiment, as all life is an
experiment," and so we learn as we venture forward, and, if
necessary, by our own mistakes. We cannot expect perfection
although we should strive for it by all means. Meantime, we
struggle as best we can in freeing the farmer from the iron
shackles that have unconscionably, and for so long, fettered
his soul to the soil.
By the decision we reach today, all major legal obstacles to the
comprehensive agrarian reform program are removed, to clear
the way for the true freedom of the farmer. We may now
glimpse the day he will be released not only from want but also
from the exploitation and disdain of the past and from his own
feelings of inadequacy and helplessness. At last his servitude
will be ended forever. At last the farm on which he toils will be
his farm. It will be his portion of the Mother Earth that will give
him not only the staff of life but also the joy of living. And where
once it bred for him only deep despair, now can he see in it the
fruition of his hopes for a more fulfilling future. Now at last can
he banish from his small plot of earth his insecurities and dark
resentments and "rebuild in it the music and the dream."
WHEREFORE, the Court holds as follows:
1. R.A. No. 6657, P.D. No. 27, Proc. No. 131, and E.O. Nos.
228 and 229 are SUSTAINED against all the constitutional
objections raised in the herein petitions.
2. Title to all expropriated properties shall be transferred to the
State only upon full payment of compensation to their
respective owners.
3. All rights previously acquired by the tenant- farmers under
P.D. No. 27 are retained and recognized.
4. Landowners who were unable to exercise their rights of
retention under P.D. No. 27 shall enjoy the retention rights
granted by R.A. No. 6657 under the conditions therein
prescribed.
5. Subject to the above-mentioned rulings all the petitions are
DISMISSED, without pronouncement as to costs.
SO ORDERED.
G.R. No. 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.
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 law's 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 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 hectare 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 DAR's 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 petitioner's 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 DAR's 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 latter's
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 petitioner's application for conversion, respondent
DAR proceeded with the 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,
CLOA's 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 MARO's 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
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 T44663. 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
7th Floor, Cacho-Gonzales Bldg. 101 Aguirre St., Leg.

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 petitioner's 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 petitioner's 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) titles TCT Nos. T-44662, T-44663, T44664 and T-44665. On January 12, 1989, respondent DAR,
through the Regional Director for Region IV, sent to petitioner
two (2) separate Resolutions accepting petitioner's voluntary
offer to sell Hacienda Caylaway, particularly TCT Nos. T-44664
and T-44663. 30 The Resolutions were addressed to:
Roxas & Company, Inc.
7th Flr. Cacho-Gonzales Bldg.
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 petitioner's 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
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-inCharge, 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 non-agricultural 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-0017-9646 (BA) with respondent DAR Adjudication Board (DARAB)
praying for the cancellation of the CLOA's 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
non-agricultural.
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.
Petitioner's 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 PETITIONER'S CAUSE OF ACTION IS
PREMATURE
FOR
FAILURE
TO
EXHAUST
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 LAW ALL OF
WHICH ARE EXCEPTIONS TO THE SAID DOCTRINE.
B. RESPONDENT COURT OF APPEALS GRAVELY ERRED
IN HOLDING THAT PETITIONER'S LANDHOLDINGS ARE
SUBJECT TO COVERAGE UNDER THE COMPREHENSIVE
AGRARIAN REFORM LAW, IN VIEW OF THE UNDISPUTED
FACT THAT PETITIONER'S LANDHOLDINGS HAVE BEEN
CONVERTED
TO
NON-AGRICULTURAL
USES
BY
PRESIDENTIAL PROCLAMATION NO. 1520 WHICH
DECLARED THE MUNICIPALITY NASUGBU, BATANGAS AS
A TOURIST ZONE, AND THE ZONING ORDINANCE OF THE
MUNICIPALITY OF NASUGBU RE-CLASSIFYING CERTAIN
PORTIONS OF PETITIONER'S LANDHOLDINGS AS NONAGRICULTURAL, 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 CLOA'S
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
petitioner's 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 nonagricultural, 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 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
(CLOA's) to farmer beneficiaries over portions of petitioner's
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 DAR's opening of
trust account deposits in petitioner' s 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 CLOA's to farmer beneficiaries necessitated
immediate judicial action on the part of the petitioner.
II. The Validity of the Acquisition Proceedings Over the
Haciendas.
Petitioner's 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.
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
DAR's offer or fails to make a reply, the DAR conducts
summary administrative proceedings to determine just
compensation for the land. The landowner, the LBP
representative and other interested parties may submit
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.
The DAR has made compulsory acquisition the priority mode
of the 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 or 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 1 MARO Investigation Report
b) CARP CA Form 2 Summary Investigation Report of
Findings and Evaluation
c) CARP CA Form 3 Applicant's Information Sheet
d) CARP CA Form 4 Beneficiaries Undertaking
e) CARP CA Form 5 Transmittal Report to the PARO
The MARO/BARC shall certify that all information contained in
the above-mentioned forms have been examined and verified
by him and that the same are true and correct.
3. Send 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.
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 DAR's offered value, the
BLAD shall prepare and submit to the Secretary for approval
the Order of Acquisition. However, in case of rejection or nonreply, 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 DARAB's decision on just
compensation, the BLAD shall prepare and submit to the
Secretary for approval the required Order of Acquisition.
4. Upon the landowner's receipt of payment, in case of
acceptance, or upon deposit of payment in the designated
bank, in case of rejection or non-response, the Secretary shall
immediately direct the pertinent Register of Deeds to issue the
corresponding Transfer 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 farmerbeneficiaries the representatives of the Barangay Agrarian
Reform Committee (BARC), the Land Bank of the Philippines
(LBP) and other interested parties to discuss the inputs to the
valuation of the property and solicit views, suggestions,
objections or agreements of the parties. At the meeting, the
landowner is asked to indicate his retention area.

The MARO shall make a report of the case to the Provincial
Agrarian Reform 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 State's
police power and the power of eminent domain. To the extent
that the CARL prescribes retention limits to the landowners,
there is an exercise of police power for the regulation of private
property in accordance with the Constitution. 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.
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 Farmer's 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, NGO's,
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).

xxx xxx xxx
to LO by personal delivery Form No. 2
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, farmer's
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.
with proof of service, or
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:
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 shall CARP
be posted for at least one Form No. 17
week on the bulletin board of
the municipal and barangay
halls where the property is
located. LGU office concerned
notifies DAR about compliance
IV. OPERATING PROCEDURES:
with posting requirements thru
Steps Responsible Activity Forms/
return indorsement on CARP
Agency/Unit Document
Form No. 17.
(requirements)
6 DARMO Send notice to the LBP, CARP
A. Identification and
BARC, DENR representatives Form No. 3
Documentation
and prospective ARBs of the schedule of the field investigation
xxx xxx xxx
to be conducted on the subject
5 DARMO Issue Notice of Coverage CARP
property.

7 DARMO With the participation of CARP
In the event that there is a
BARC the LO, representatives of Form No. 4
difference or variance between
LBP the LBP, BARC, DENR Land Use
the findings of the DAR and the
DENR and prospective ARBs, Map
LBP as to the propriety of
Local Office conducts the investigation on
covering the land under CARP,
subject property to identify
whether in whole or in part, on
the landholding, determines
the issue of suitability to agriculture,
its suitability and productivity;
degree of development or slope,
and jointly prepares the Field
and on issues affecting idle lands,
Investigation Report (FIR)
the conflict shall be resolved by
and Land Use Map. However,
a composite team of DAR, LBP,
the field investigation shall
DENR and DA which shall jointly
proceed even if the LO, the
conduct further investigation
representatives of the DENR and
thereon. The team shall submit its
prospective ARBs are not available
report of findings which shall be
provided, they were given due
binding to both DAR and LBP,
notice of the time and date of
pursuant to Joint Memorandum
investigation to be conducted.
Circular of the DAR, LBP, DENR
Similarly, if the LBP representative
and DA dated 27 January 1992.
is not available or could not come
8 DARMO Screen prospective ARBs
on the scheduled date, the field
BARC and causes the signing of CARP
investigation shall also be conducted,
the Application of Purchase Form No. 5
after which the duly accomplished
and Farmer's Undertaking
Part I of CARP Form No. 4 shall
(APFU).
be forwarded to the LBP
9 DARMO Furnishes a copy of the CARP
representative for validation. If he agrees
duly accomplished FIR to Form No. 4
to the ocular inspection report of DAR,
the landowner by personal
he signs the FIR (Part I) and
delivery with proof of
accomplishes Part II thereof.
service or registered mail

will return card and posts
xxx xxx xxx.
a copy thereof for at least
DAR A.O. No. 1, Series of 1993, modified the identification

process and increased 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 land's 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 team's 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.
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. 17
compliance with posting
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 Forward VOCF/CACF CARP
to DARPO. Form No. 6
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 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 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 Petitioner's evidence does
not show the official duties of Jaime Pimentel as administrator
of petitioner's haciendas. The evidence does not indicate
whether Pimentel's 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, petitioner's principal place of business was listed in
respondent DAR's 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 CachoGonzales 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
petitioner's 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 petitioner's landholdings. Even
respondent DAR's 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 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 DAR's
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:
Sec. 6. Retention Limits. . . . .
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.
xxx xxx xxx.
Sec. 9 of E.O. 229 provides:
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 the two of these four
titles. 75 The land covered by 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 petitioner's 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 nonagricultural 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 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
present 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. 6
We do not agree. Respondent DAR's failure to observe due
process in the acquisition of petitioner's landholdings does not
ipso facto give this Court the power to adjudicate over
petitioner's 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 DAR's mandate over applications for conversion was first
laid down in Section 4 (j) and Section 5 (l) 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 DAR's 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 nonagricultural uses," pursuant to Section 4 (j) of Executive Order
No. 129-A, Series of 1987.
B. Sec. 5 (l) 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. Sec. 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. Sec. 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 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 petitioner's application for
conversion, being primarily the agency possessing the
necessary expertise on the matter. The power to determine
whether Haciendas Palico, Banilad and Caylaway are nonagricultural, 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
CLOA's 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.
G.R. No. 171101
July 5, 2011
HACIENDA LUISITA, INCORPORATED, Petitioner,

LUISITA INDUSTRIAL PARK CORPORATION and RIZAL
COMMERCIAL BANKING CORPORATION, Petitioners-inIntervention,
vs.
PRESIDENTIAL AGRARIAN REFORM COUNCIL;
SECRETARY NASSER PANGANDAMAN OF THE
DEPARTMENT OF AGRARIAN REFORM; ALYANSA NG
MGA MANGGAGAWANG BUKID NG HACIENDA LUISITA,
RENE GALANG, NOEL MALLARI, and JULIO SUNIGA1 and
his SUPERVISORY GROUP OF THE HACIENDA LUISITA,
INC. and WINDSOR ANDAYA, Respondents.
DECISION
VELASCO, JR., J.:
"Land for the landless," a shibboleth the landed gentry
doubtless has received with much misgiving, if not resistance,
even if only the number of agrarian suits filed serves to be the
norm. Through the years, this battle cry and root of discord
continues to reflect the seemingly ceaseless discourse on, and
great disparity in, the distribution of land among the people,
"dramatizing the increasingly urgent demand of the
dispossessed x x x for a plot of earth as their place in the
sun."2 As administrations and political alignments change,
policies advanced, and agrarian reform laws enacted, the
latest being what is considered a comprehensive piece, the
face of land reform varies and is masked in myriads of ways.
The stated goal, however, remains the same: clear the way for
the true freedom of the farmer.3
Land reform, or the broader term "agrarian reform," has been a
government policy even before the Commonwealth era. In fact,
at the onset of the American regime, initial steps toward land
reform were already taken to address social unrest. 4 Then,
under the 1935 Constitution, specific provisions on social
justice and expropriation of landed estates for distribution to
tenants as a solution to land ownership and tenancy issues
were incorporated.
In 1955, the Land Reform Act (Republic Act No. [RA] 1400)
was passed, setting in motion the expropriation of all tenanted
estates.5
On August 8, 1963, the Agricultural Land Reform Code (RA
3844) was enacted,6 abolishing share tenancy and converting
all instances of share tenancy into leasehold tenancy.7 RA
3844 created the Land Bank of the Philippines (LBP) to provide
support in all phases of agrarian reform.
As its major thrust, RA 3844 aimed to create a system of
owner-cultivatorship in rice and corn, supposedly to be

accomplished by expropriating lands in excess of 75 hectares
for their eventual resale to tenants. The law, however, had this
restricting feature: its operations were confined mainly to areas
in Central Luzon, and its implementation at any level of
intensity limited to the pilot project in Nueva Ecija.8
Subsequently, Congress passed the Code of Agrarian Reform
(RA 6389) declaring the entire country a land reform area, and
providing for the automatic conversion of tenancy to leasehold
tenancy in all areas. From 75 hectares, the retention limit was
cut down to seven hectares.9
Barely a month after declaring martial law in September 1972,
then President Ferdinand Marcos issued Presidential Decree
No. 27 (PD 27) for the "emancipation of the tiller from the
bondage of the soil."10 Based on this issuance, tenant-farmers,
depending on the size of the landholding worked on, can either
purchase the land they tilled or shift from share to fixed-rent
leasehold tenancy.11 While touted as "revolutionary," the scope
of the agrarian reform program PD 27 enunciated covered only
tenanted, privately-owned rice and corn lands.12
Then came the revolutionary government of then President
Corazon C. Aquino and the drafting and eventual ratification of
the 1987 Constitution. Its provisions foreshadowed the
establishment of a legal framework for the formulation of an
expansive approach to land reform, affecting all agricultural
lands and covering both tenant-farmers and regular
farmworkers.13
So it was that Proclamation No. 131, Series of 1987, was
issued instituting a comprehensive agrarian reform program
(CARP) to cover all agricultural lands, regardless of tenurial
arrangement and commodity produced, as provided in the
Constitution.
On July 22, 1987, Executive Order No. 229 (EO 229) was
issued providing, as its title14 indicates, the mechanisms for
CARP implementation. It created the Presidential Agrarian
Reform Council (PARC) as the highest policy-making body that
formulates all policies, rules, and regulations necessary for the
implementation of CARP.
On June 15, 1988, RA 6657 or the Comprehensive Agrarian
Reform Law of 1988, also known as CARL or the CARP Law,
took effect, ushering in a new process of land classification,
acquisition, and distribution. As to be expected, RA 6657 met
stiff opposition, its validity or some of its provisions challenged
at every possible turn. Association of Small Landowners in the
Philippines, Inc. v. Secretary of Agrarian Reform 15 stated the
observation that the assault was inevitable, the CARP being an
untried and untested project, "an experiment [even], as all life
is an experiment," the Court said, borrowing from Justice
Holmes.
The Facts
At the core of the case is Hacienda Luisita de Tarlac (Hacienda
Luisita), once a 6,443-hectare mixed agricultural-industrialresidential expanse straddling several municipalities of Tarlac
and owned by Compaia General de Tabacos de Filipinas
(Tabacalera). In 1957, the Spanish owners of Tabacalera
offered to sell Hacienda Luisita as well as their controlling
interest in the sugar mill within the hacienda, the Central
Azucarera de Tarlac (CAT), as an indivisible transaction. The
Tarlac Development Corporation (Tadeco), then owned and/or
controlled by the Jose Cojuangco, Sr. Group, was willing to
buy. As agreed upon, Tadeco undertook to pay the purchase
price for Hacienda Luisita in pesos, while that for the
controlling interest in CAT, in US dollars.19
To facilitate the adverted sale-and-purchase package, the
Philippine government, through the then Central Bank of the
Philippines, assisted the buyer to obtain a dollar loan from a
US bank.20 Also, the Government Service Insurance System
(GSIS) Board of Trustees extended on November 27, 1957 a
PhP 5.911 million loan in favor of Tadeco to pay the peso price
component of the sale. One of the conditions contained in the
approving GSIS Resolution No. 3203, as later amended by
Resolution No. 356, Series of 1958, reads as follows:
That the lots comprising the Hacienda Luisita shall be
subdivided by the applicant-corporation and sold at cost to the
tenants, should there be any, and whenever conditions should
exist warranting such action under the provisions of the Land
Tenure Act;21
As of March 31, 1958, Tadeco had fully paid the purchase price
for the acquisition of Hacienda Luisita and Tabacaleras interest
in CAT.22
The details of the events that happened next involving the
hacienda and the political color some of the parties embossed
are of minimal significance to this narration and need no
belaboring. Suffice it to state that on May 7, 1980, the martial
law administration filed a suit before the Manila Regional Trial
Court (RTC) against Tadeco, et al., for them to surrender
Hacienda Luisita to the then Ministry of Agrarian Reform (MAR,
now the Department of Agrarian Reform [DAR]) so that the
land can be distributed to farmers at cost. Responding, Tadeco
or its owners alleged that Hacienda Luisita does not have
tenants, besides which sugar landsof which the hacienda
consistedare not covered by existing agrarian reform
legislations. As perceived then, the government commenced
the case against Tadeco as a political message to the family of
the late Benigno Aquino, Jr.23
Eventually, the Manila RTC rendered judgment ordering
Tadeco to surrender Hacienda Luisita to the MAR. Therefrom,
Tadeco appealed to the Court of Appeals (CA).
The Case
In this Petition for Certiorari and Prohibition under Rule 65 with
prayer for preliminary injunctive relief, petitioner Hacienda
Luisita, Inc. (HLI) assails and seeks to set aside PARC
Resolution No. 2005-32-0116 and Resolution No. 2006-34-0117
issued on December 22, 2005 and May 3, 2006, respectively,
as well as the implementing Notice of Coverage dated January
2, 2006 (Notice of Coverage).18
On March 17, 1988, the Office of the Solicitor General (OSG)

moved to withdraw the governments case against Tadeco, et
al. By Resolution of May 18, 1988, the CA dismissed the case
the Marcos government initially instituted and won against
Tadeco, et al. The dismissal action was, however, made
subject to the obtention by Tadeco of the PARCs approval of a
stock distribution plan (SDP) that must initially be implemented

after such approval shall have been secured.24 The appellate
court wrote:
The defendants-appellants x x x filed a motion on April 13,
1988 joining the x x x governmental agencies concerned in
moving for the dismissal of the case subject, however, to the
following conditions embodied in the letter dated April 8, 1988
(Annex 2) of the Secretary of the [DAR] quoted, as follows:
1. Should TADECO fail to obtain approval of the stock
distribution plan for failure to comply with all the requirements
for corporate landowners set forth in the guidelines issued by
the [PARC]: or
2. If such stock distribution plan is approved by PARC, but
TADECO fails to initially implement it.
xxxx
WHEREFORE, the present case on appeal is hereby
dismissed without prejudice, and should be revived if any of
the conditions as above set forth is not duly complied with by
the TADECO.25
Markedly, Section 10 of EO 229 26 allows corporate landowners,
as an alternative to the actual land transfer scheme of CARP,
to give qualified beneficiaries the right to purchase shares of
stocks of the corporation under a stock ownership arrangement
and/or land-to-share ratio.
Like EO 229, RA 6657, under the latters Sec. 31, also
provides two (2) alternative modalities, i.e., land or stock
transfer, pursuant to either of which the corporate landowner
can comply with CARP, but subject to well-defined conditions
and timeline requirements. Sec. 31 of RA 6657 provides:
SEC. 31. Corporate Landowners.Corporate landowners may
voluntarily transfer ownership over their agricultural
landholdings to the Republic of the Philippines pursuant to
Section 20 hereof or to qualified beneficiaries x x x.
Upon certification by the DAR, corporations owning agricultural
lands may give their qualified beneficiaries the right to
purchase such proportion of the capital stock of the
corporation that the agricultural land, actually devoted to
agricultural activities, bears in relation to the companys
total assets, under such terms and conditions as may be
agreed upon by them. In no case shall the compensation
received by the workers at the time the shares of stocks are
distributed be reduced. x x x
Corporations or associations which voluntarily divest a
proportion of their capital stock, equity or participation in favor
of their workers or other qualified beneficiaries under this
section shall be deemed to have complied with the provisions
of this Act: Provided, That the following conditions are
complied with:
(a) In order to safeguard the right of beneficiaries who own
shares of stocks to dividends and other financial benefits, the
books of the corporation or association shall be subject to
periodic audit by certified public accountants chosen by the
beneficiaries;
(b) Irrespective of the value of their equity in the corporation or

association, the beneficiaries shall be assured of at least one
(1) representative in the board of directors, or in a
management or executive committee, if one exists, of the
corporation or association;
(c) Any shares acquired by such workers and beneficiaries
shall have the same rights and features as all other shares;
and
(d) Any transfer of shares of stocks by the original beneficiaries
shall be void ab initio unless said transaction is in favor of a
qualified and registered beneficiary within the same
corporation.
If within two (2) years from the approval of this Act, the
[voluntary] land or stock transfer envisioned above is not made
or realized or the plan for such stock distribution approved by
the PARC within the same period, the agricultural land of the
corporate owners or corporation shall be subject to the
compulsory coverage of this Act. (Emphasis added.)
Vis--vis the stock distribution aspect of the aforequoted Sec.
31, DAR issued Administrative Order No. 10, Series of 1988
(DAO 10),27 entitled Guidelines and Procedures for Corporate
Landowners Desiring to Avail Themselves of the Stock
Distribution Plan under Section 31 of RA 6657.
From the start, the stock distribution scheme appeared to be
Tadecos preferred option, for, on August 23, 1988,28 it
organized a spin-off corporation, HLI, as vehicle to facilitate
stock acquisition by the farmworkers. For this purpose, Tadeco
assigned and conveyed to HLI the agricultural land portion
(4,915.75 hectares) and other farm-related properties of
Hacienda Luisita in exchange for HLI shares of stock.29
Pedro Cojuangco, Josephine C. Reyes, Teresita C. Lopa, Jose
Cojuangco, Jr., and Paz C. Teopaco were the incorporators of
HLI.30
To accommodate the assets transfer from Tadeco to HLI, the
latter, with the Securities and Exchange Commissions (SECs)
approval, increased its capital stock on May 10, 1989 from PhP
1,500,000 divided into 1,500,000 shares with a par value of
PhP 1/share to PhP 400,000,000 divided into 400,000,000
shares also with par value of PhP 1/share, 150,000,000 of
which were to be issued only to qualified and registered
beneficiaries of the CARP, and the remaining 250,000,000 to
any stockholder of the corporation.31
As appearing in its proposed SDP, the properties and assets of
Tadeco contributed to the capital stock of HLI, as appraised
and approved by the SEC, have an aggregate value of PhP
590,554,220, or after deducting the total liabilities of the farm
amounting to PhP 235,422,758, a net value of PhP
355,531,462. This translated to 355,531,462 shares with a par
value of PhP 1/share.32
On May 9, 1989, some 93% of the then farmworkerbeneficiaries (FWBs) complement of Hacienda Luisita signified
in a referendum their acceptance of the proposed HLIs Stock
Distribution Option Plan. On May 11, 1989, the Stock
Distribution Option Agreement (SDOA), styled as a

Memorandum of Agreement (MOA),33 was entered into by
Tadeco, HLI, and the 5,848 qualified FWBs34 and attested to by
then DAR Secretary Philip Juico. The SDOA embodied the
basis and mechanics of the SDP, which would eventually be
submitted to the PARC for approval. In the SDOA, the parties
agreed to the following:
1. The percentage of the value of the agricultural land of
Hacienda Luisita (P196,630,000.00) in relation to the total
assets (P590,554,220.00) transferred and conveyed to the
SECOND PARTY [HLI] is 33.296% that, under the law, is the
proportion of the outstanding capital stock of the SECOND
PARTY, which is P355,531,462.00 or 355,531,462 shares with
a par value of P1.00 per share, that has to be distributed to the
THIRD PARTY [FWBs] under the stock distribution plan, the
said
33.296%
thereof
being
P118,391,976.85
or
118,391,976.85 shares.
2. The qualified beneficiaries of the stock distribution plan shall
be the farmworkers who appear in the annual payroll, inclusive
of the permanent and seasonal employees, who are regularly
or periodically employed by the SECOND PARTY.
3. At the end of each fiscal year, for a period of 30 years, the
SECOND PARTY shall arrange with the FIRST PARTY
[Tadeco] the acquisition and distribution to the THIRD
PARTY on the basis of number of days worked and at no cost
to them of one-thirtieth (1/30) of 118,391,976.85 shares of the
capital stock of the SECOND PARTY that are presently owned
and held by the FIRST PARTY, until such time as the entire
block of 118,391,976.85 shares shall have been completely
acquired and distributed to the THIRD PARTY.
4.The SECOND PARTY shall guarantee to the qualified
beneficiaries of the [SDP] that every year they will receive on
top of their regular compensation, an amount that
approximates the equivalent of three (3%) of the total gross
sales from the production of the agricultural land, whether it be
in the form of cash dividends or incentive bonuses or both.
5. Even if only a part or fraction of the shares earmarked for
distribution will have been acquired from the FIRST PARTY
and distributed to the THIRD PARTY, FIRST PARTY shall
execute at the beginning of each fiscal year an irrevocable
proxy, valid and effective for one (1) year, in favor of the
farmworkers appearing as shareholders of the SECOND
PARTY at the start of said year which will empower the THIRD
PARTY or their representative to vote in stockholders and
board of directors meetings of the SECOND PARTY convened
during the year the entire 33.296% of the outstanding capital
stock of the SECOND PARTY earmarked for distribution and
thus be able to gain such number of seats in the board of
directors of the SECOND PARTY that the whole 33.296% of
the shares subject to distribution will be entitled to.
6. In addition, the SECOND PARTY shall within a reasonable
time subdivide and allocate for free and without charge among
the qualified family-beneficiaries residing in the place where
the agricultural land is situated, residential or homelots of not
more than 240 sq.m. each, with each family-beneficiary being
assured of receiving and owning a homelot in the barangay
where it actually resides on the date of the execution of this
Agreement.
7. This Agreement is entered into by the parties in the spirit of

the (C.A.R.P.) of the government and with the supervision of
the [DAR], with the end in view of improving the lot of the
qualified beneficiaries of the [SDP] and obtaining for them
greater benefits. (Emphasis added.)
As may be gleaned from the SDOA, included as part of the
distribution plan are: (a) production-sharing equivalent to three
percent (3%) of gross sales from the production of the
agricultural land payable to the FWBs in cash dividends or
incentive bonus; and (b) distribution of free homelots of not
more than 240 square meters each to family-beneficiaries. The
production-sharing, as the SDP indicated, is payable
"irrespective of whether [HLI] makes money or not," implying
that the benefits do not partake the nature of dividends, as the
term is ordinarily understood under corporation law.
While a little bit hard to follow, given that, during the period
material, the assigned value of the agricultural land in the
hacienda was PhP 196.63 million, while the total assets of HLI
was PhP 590.55 million with net assets of PhP 355.53 million,
Tadeco/HLI would admit that the ratio of the land-to-shares of
stock corresponds to 33.3% of the outstanding capital stock of
the HLI equivalent to 118,391,976.85 shares of stock with a par
value of PhP 1/share.
Subsequently, HLI submitted to DAR its SDP, designated as
"Proposal for Stock Distribution under C.A.R.P.," 35 which was
substantially based on the SDOA.
Notably, in a follow-up referendum the DAR conducted on
October 14, 1989, 5,117 FWBs, out of 5,315 who participated,
opted to receive shares in HLI.36 One hundred thirty-two (132)
chose actual land distribution.37
After a review of the SDP, then DAR Secretary Miriam
Defensor-Santiago (Sec. Defensor-Santiago) addressed a
letter dated November 6, 198938 to Pedro S. Cojuangco
(Cojuangco), then Tadeco president, proposing that the SDP
be revised, along the following lines:
1. That over the implementation period of the [SDP],
[Tadeco]/HLI shall ensure that there will be no dilution in the
shares of stocks of individual [FWBs];
2. That a safeguard shall be provided by [Tadeco]/HLI against
the dilution of the percentage shareholdings of the [FWBs], i.e.,
that the 33% shareholdings of the [FWBs] will be maintained at
any given time;
3. That the mechanics for distributing the stocks be explicitly
stated in the [MOA] signed between the [Tadeco], HLI and its
[FWBs] prior to the implementation of the stock plan;
4. That the stock distribution plan provide for clear and definite
terms for determining the actual number of seats to be
allocated for the [FWBs] in the HLI Board;
5. That HLI provide guidelines and a timetable for the
distribution of homelots to qualified [FWBs]; and
6. That the 3% cash dividends mentioned in the [SDP] be
expressly provided for [in] the MOA.

In a letter-reply of November 14, 1989 to Sec. DefensorSantiago, Tadeco/HLI explained that the proposed revisions of
the SDP are already embodied in both the SDP and MOA. 39
Following that exchange, the PARC, under then Sec.
Defensor-Santiago, by Resolution No. 89-12-240 dated
November 21, 1989, approved the SDP of Tadeco/HLI.41
At the time of the SDP approval, HLI had a pool of
farmworkers, numbering 6,296, more or less, composed of
permanent, seasonal and casual master list/payroll and nonmaster list members.
From 1989 to 2005, HLI claimed to have extended the
following benefits to the FWBs:
(a) 3 billion pesos (P3,000,000,000) worth of salaries, wages
and fringe benefits
(b) 59 million shares of stock distributed for free to the FWBs;
(c) 150 million pesos (P150,000,000) representing 3% of the
gross produce;
(d) 37.5 million pesos (P37,500,000) representing 3% from the
sale of 500 hectares of converted agricultural land of Hacienda
Luisita;
(e) 240-square meter homelots distributed for free;
(f) 2.4 million pesos (P2,400,000) representing 3% from the
sale of 80 hectares at 80 million pesos (P80,000,000) for the
SCTEX;
(g) Social service benefits, such as but not limited to free
hospitalization/medical/maternity services, old age/death
benefits and no interest bearing salary/educational loans and
rice sugar accounts. 42
Two separate groups subsequently contested this claim of HLI.
On August 15, 1995, HLI applied for the conversion of 500
hectares of land of the hacienda from agricultural to industrial
use,43 pursuant to Sec. 65 of RA 6657, providing:
SEC. 65. Conversion of Lands.After the lapse of five (5)
years from its award, when the land ceases to be economically
feasible and sound for agricultural purposes, or the locality has
become urbanized and the land will have a greater economic
value for residential, commercial or industrial purposes, the
DAR, upon application of the beneficiary or the landowner, with
due notice to the affected parties, and subject to existing laws,
may authorize the reclassification, or conversion of the land
and its disposition: Provided, That the beneficiary shall have
fully paid its obligation.
The application, according to HLI, had the backing of 5,000 or
so FWBs, including respondent Rene Galang, and Jose Julio
Suniga, as evidenced by the Manifesto of Support they signed
and which was submitted to the DAR.44 After the usual
processing, the DAR, thru then Sec. Ernesto Garilao, approved
the application on August 14, 1996, per DAR Conversion Order
No. 030601074-764-(95), Series of 1996,45 subject to payment
of three percent (3%) of the gross selling price to the FWBs

and to HLIs continued compliance with its undertakings under
the SDP, among other conditions.
On December 13, 1996, HLI, in exchange for subscription of
12,000,000 shares of stocks of Centennary Holdings, Inc.
(Centennary), ceded 300 hectares of the converted area to the
latter.46 Consequently, HLIs Transfer Certificate of Title (TCT)
No. 28791047 was canceled and TCT No. 292091 48 was issued
in the name of Centennary. HLI transferred the remaining 200
hectares covered by TCT No. 287909 to Luisita Realty
Corporation (LRC)49 in two separate transactions in 1997 and
1998, both uniformly involving 100 hectares for PhP 250 million
each.50
Centennary, a corporation with an authorized capital stock of
PhP 12,100,000 divided into 12,100,000 shares and whollyowned by HLI, had the following incorporators: Pedro
Cojuangco, Josephine C. Reyes, Teresita C. Lopa, Ernesto G.
Teopaco, and Bernardo R. Lahoz.
Subsequently, Centennary sold51 the entire 300 hectares to
Luisita Industrial Park Corporation (LIPCO) for PhP 750 million.
The latter acquired it for the purpose of developing an
industrial complex.52 As a result, Centennarys TCT No. 292091
was canceled to be replaced by TCT No. 31098653 in the name
of LIPCO.
From the area covered by TCT No. 310986 was carved out two
(2) parcels, for which two (2) separate titles were issued in the
name of LIPCO, specifically: (a) TCT No. 36580054 and (b) TCT
No. 365801,55 covering 180 and four hectares, respectively.
TCT No. 310986 was, accordingly, partially canceled.
Later on, in a Deed of Absolute Assignment dated November
25, 2004, LIPCO transferred the parcels covered by its TCT
Nos. 365800 and 365801 to the Rizal Commercial Banking
Corporation (RCBC) by way of dacion en pago in payment of
LIPCOs PhP 431,695,732.10 loan obligations. LIPCOs titles
were canceled and new ones, TCT Nos. 391051 and 391052,
were issued to RCBC.
Apart from the 500 hectares alluded to, another 80.51 hectares
were later detached from the area coverage of Hacienda
Luisita which had been acquired by the government as part of
the Subic-Clark-Tarlac Expressway (SCTEX) complex. In
absolute terms, 4,335.75 hectares remained of the original
4,915 hectares Tadeco ceded to HLI.56
Such, in short, was the state of things when two separate
petitions, both undated, reached the DAR in the latter part of
2003. In the first, denominated as Petition/Protest,57
respondents Jose Julio Suniga and Windsor Andaya,
identifying themselves as head of the Supervisory Group of
HLI (Supervisory Group), and 60 other supervisors sought to
revoke the SDOA, alleging that HLI had failed to give them
their dividends and the one percent (1%) share in gross sales,
as well as the thirty-three percent (33%) share in the proceeds
of the sale of the converted 500 hectares of land. They further
claimed that their lives have not improved contrary to the
promise and rationale for the adoption of the SDOA. They also
cited violations by HLI of the SDOAs terms.58 They prayed for
a renegotiation of the SDOA, or, in the alternative, its
revocation.

Revocation and nullification of the SDOA and the distribution of
the lands in the hacienda were the call in the second petition,
styled as Petisyon (Petition).59 The Petisyon was ostensibly
filed on December 4, 2003 by Alyansa ng mga Manggagawang
Bukid ng Hacienda Luisita (AMBALA), where the handwritten
name of respondents Rene Galang as "Pangulo AMBALA" and
Noel Mallari as "Sec-Gen. AMBALA"60 appeared. As alleged,
the petition was filed on behalf of AMBALAs members
purportedly composing about 80% of the 5,339 FWBs of
Hacienda Luisita.
HLI would eventually answer61 the petition/protest of the
Supervisory Group. On the other hand, HLIs answer62 to the
AMBALA petition was contained in its letter dated January 21,
2005 also filed with DAR.
Meanwhile, the DAR constituted a Special Task Force to attend
to issues relating to the SDP of HLI. Among other duties, the
Special Task Force was mandated to review the terms and
conditions of the SDOA and PARC Resolution No. 89-12-2
relative to HLIs SDP; evaluate HLIs compliance reports;
evaluate the merits of the petitions for the revocation of the
SDP; conduct ocular inspections or field investigations; and
recommend appropriate remedial measures for approval of the
Secretary.63
After investigation and evaluation, the Special Task Force
submitted its "Terminal Report: Hacienda Luisita, Incorporated
(HLI) Stock Distribution Plan (SDP) Conflict"64 dated
September 22, 2005 (Terminal Report), finding that HLI has not
complied with its obligations under RA 6657 despite the
implementation of the SDP.65 The Terminal Report and the
Special Task Forces recommendations were adopted by then
DAR Sec. Nasser Pangandaman (Sec. Pangandaman).66
Subsequently, Sec. Pangandaman recommended to the PARC
Executive Committee (Excom) (a) the recall/revocation of
PARC Resolution No. 89-12-2 dated November 21, 1989
approving HLIs SDP; and (b) the acquisition of Hacienda
Luisita through the compulsory acquisition scheme. Following
review, the PARC Validation Committee favorably endorsed the
DAR Secretarys recommendation afore-stated.67
On December 22, 2005, the PARC issued the assailed
Resolution No. 2005-32-01, disposing as follows:
NOW, THEREFORE, on motion duly seconded, RESOLVED,
as it is HEREBY RESOLVED, to approve and confirm the
recommendation of the PARC Executive Committee adopting
in toto the report of the PARC ExCom Validation Committee
affirming the recommendation of the DAR to recall/revoke the
SDO plan of Tarlac Development Corporation/Hacienda Luisita
Incorporated.
documents adverted to in the resolution attached. A letterrequest dated December 28, 200569 for certified copies of said
documents was sent to, but was not acted upon by, the PARC
secretariat.
Therefrom, HLI, on January 2, 2006, sought reconsideration.70
On the same day, the DAR Tarlac provincial office issued the
Notice of Coverage71 which HLI received on January 4, 2006.
Its motion notwithstanding, HLI has filed the instant recourse in
light of what it considers as the DARs hasty placing of
Hacienda Luisita under CARP even before PARC could rule or
even read the motion for reconsideration.72 As HLI later rued, it
"can not know from the above-quoted resolution the facts and
the law upon which it is based."73
PARC would eventually deny HLIs motion for reconsideration
via Resolution No. 2006-34-01 dated May 3, 2006.
By Resolution of June 14, 2006,74 the Court, acting on HLIs
motion, issued a temporary restraining order,75 enjoining the
implementation of Resolution No. 2005-32-01 and the notice of
coverage.
On July 13, 2006, the OSG, for public respondents PARC and
the DAR, filed its Comment76 on the petition.
On December 2, 2006, Noel Mallari, impleaded by HLI as
respondent in his capacity as "Sec-Gen. AMBALA," filed his
Manifestation and Motion with Comment Attached dated
December 4, 2006 (Manifestation and Motion).77 In it, Mallari
stated that he has broken away from AMBALA with other
AMBALA ex-members and formed Farmworkers Agrarian
Reform Movement, Inc. (FARM).78 Should this shift in alliance
deny him standing, Mallari also prayed that FARM be allowed
to intervene.
As events would later develop, Mallari had a parting of ways
with other FARM members, particularly would-be intervenors
Renato Lalic, et al. As things stand, Mallari returned to the
AMBALA fold, creating the AMBALA-Noel Mallari faction and
leaving Renato Lalic, et al. as the remaining members of
FARM who sought to intervene.
On January 10, 2007, the Supervisory Group79 and the
AMBALA-Rene
Galang
faction
submitted
their
Comment/Opposition dated December 17, 2006.80
APPROVED.68
On October 30, 2007, RCBC filed a Motion for Leave to

Intervene and to File and Admit Attached Petition-InIntervention dated October 18, 2007.81 LIPCO later followed
with a similar motion.82 In both motions, RCBC and LIPCO
contended that the assailed resolution effectively nullified the
TCTs under their respective names as the properties covered
in the TCTs were veritably included in the January 2, 2006
notice of coverage. In the main, they claimed that the
revocation of the SDP cannot legally affect their rights as
innocent purchasers for value. Both motions for leave to
intervene were granted and the corresponding petitions-inintervention admitted.
A copy of Resolution No. 2005-32-01 was served on HLI the

following day, December 23, without any copy of the
On August 18, 2010, the Court heard the main and intervening
petitioners on oral arguments. On the other hand, the Court, on
RESOLVED, further, that the lands subject of the

recalled/revoked TDC/HLI SDO plan be forthwith placed under
the compulsory coverage or mandated land acquisition
scheme of the [CARP].

August 24, 2010, heard public respondents as well as the
respective counsels of the AMBALA-Mallari-Supervisory
Group, the AMBALA-Galang faction, and the FARM and its 27
members83 argue their case.
THE CORPORATION CODE (BATAS PAMBANSA BLG. 68)

AND NOT BY THE x x x [CARL] x x x.
Prior to the oral arguments, however, HLI; AMBALA,

represented by Mallari; the Supervisory Group, represented by
Suniga and Andaya; and the United Luisita Workers Union,
represented by Eldifonso Pingol, filed with the Court a joint
submission and motion for approval of a Compromise
Agreement (English and Tagalog versions) dated August 6,
2010.
I.
On August 31, 2010, the Court, in a bid to resolve the dispute

through an amicable settlement, issued a Resolution84 creating
a Mediation Panel composed of then Associate Justice Ma.
Alicia Austria-Martinez, as chairperson, and former CA Justices
Hector Hofilea and Teresita Dy-Liacco Flores, as members.
Meetings on five (5) separate dates, i.e., September 8, 9, 14,
20, and 27, 2010, were conducted. Despite persevering and
painstaking efforts on the part of the panel, mediation had to
be discontinued when no acceptable agreement could be
reached.
The Issues
HLI raises the following issues for our consideration:
I.
WHETHER OR NOT PUBLIC RESPONDENTS PARC AND
SECRETARY PANGANDAMAN HAVE JURISDICTION,
POWER AND/OR AUTHORITY TO NULLIFY, RECALL,
REVOKE OR RESCIND THE SDOA.
II.
[IF SO], x x x CAN THEY STILL EXERCISE SUCH
JURISDICTION, POWER AND/OR AUTHORITY AT THIS
TIME, I.E., AFTER SIXTEEN (16) YEARS FROM THE
EXECUTION OF THE SDOA AND ITS IMPLEMENTATION
WITHOUT VIOLATING SECTIONS 1 AND 10 OF ARTICLE III
(BILL OF RIGHTS) OF THE CONSTITUTION AGAINST
DEPRIVATION OF PROPERTY WITHOUT DUE PROCESS
OF LAW AND THE IMPAIRMENT OF CONTRACTUAL
RIGHTS AND OBLIGATIONS? MOREOVER, ARE THERE
LEGAL GROUNDS UNDER THE CIVIL CODE, viz, ARTICLE
1191 x x x, ARTICLES 1380, 1381 AND 1382 x x x ARTICLE
1390 x x x AND ARTICLE 1409 x x x THAT CAN BE INVOKED
TO NULLIFY, RECALL, REVOKE, OR RESCIND THE SDOA?
III.
WHETHER THE PETITIONS TO NULLIFY, RECALL, REVOKE
OR RESCIND THE SDOA HAVE ANY LEGAL BASIS OR
GROUNDS AND WHETHER THE PETITIONERS THEREIN
ARE THE REAL PARTIES-IN-INTEREST TO FILE SAID
PETITIONS.
IV.
WHETHER THE RIGHTS, OBLIGATIONS AND REMEDIES
OF THE PARTIES TO THE SDOA ARE NOW GOVERNED BY
On the other hand, RCBC submits the following issues:
RESPONDENT PARC COMMITTED GRAVE ABUSE OF

DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION WHEN IT DID NOT EXCLUDE THE SUBJECT
PROPERTY FROM THE COVERAGE OF THE CARP
DESPITE THE FACT THAT PETITIONER-INTERVENOR
RCBC
HAS
ACQUIRED
VESTED
RIGHTS
AND
INDEFEASIBLE TITLE OVER THE SUBJECT PROPERTY AS
AN INNOCENT PURCHASER FOR VALUE.
A. THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE
NOTICE OF COVERAGE DATED 02 JANUARY 2006 HAVE
THE EFFECT OF NULLIFYING TCT NOS. 391051 AND
391052 IN THE NAME OF PETITIONER-INTERVENOR
RCBC.
B. AS AN INNOCENT PURCHASER FOR VALUE,
PETITIONER-INTERVENOR
RCBC
CANNOT
BE
PREJUDICED BY A SUBSEQUENT REVOCATION OR
RESCISSION OF THE SDOA.
II.
THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE
NOTICE OF COVERAGE DATED 02 JANUARY 2006 WERE
ISSUED WITHOUT AFFORDING PETITIONER-INTERVENOR
RCBC ITS RIGHT TO DUE PROCESS AS AN INNOCENT
PURCHASER FOR VALUE.
LIPCO, like RCBC, asserts having acquired vested and
indefeasible rights over certain portions of the converted
property, and, hence, would ascribe on PARC the commission
of grave abuse of discretion when it included those portions in
the notice of coverage. And apart from raising issues identical
with those of HLI, such as but not limited to the absence of
valid grounds to warrant the rescission and/or revocation of the
SDP, LIPCO would allege that the assailed resolution and the
notice of coverage were issued without affording it the right to
due process as an innocent purchaser for value. The
government, LIPCO also argues, is estopped from recovering
properties which have since passed to innocent parties.
Simply formulated, the principal determinative issues tendered
in the main petition and to which all other related questions
must yield boil down to the following: (1) matters of standing;
(2) the constitutionality of Sec. 31 of RA 6657; (3) the
jurisdiction of PARC to recall or revoke HLIs SDP; (4) the
validity or propriety of such recall or revocatory action; and (5)
corollary to (4), the validity of the terms and conditions of the
SDP, as embodied in the SDOA.
Our Ruling
I.

We first proceed to the examination of the preliminary issues
before delving on the more serious challenges bearing on the
validity of PARCs assailed issuance and the grounds for it.
Supervisory
Group,
AMBALA
and
respective leaders are real parties-in-interest
their
HLI would deny real party-in-interest status to the purported

leaders of the Supervisory Group and AMBALA, i.e., Julio
Suniga, Windsor Andaya, and Rene Galang, who filed the
revocatory petitions before the DAR. As HLI would have it,
Galang, the self-styled head of AMBALA, gained HLI
employment in June 1990 and, thus, could not have been a
party to the SDOA executed a year earlier.85 As regards the
Supervisory Group, HLI alleges that supervisors are not
regular farmworkers, but the company nonetheless considered
them FWBs under the SDOA as a mere concession to enable
them to enjoy the same benefits given qualified regular
farmworkers. However, if the SDOA would be canceled and
land distribution effected, so HLI claims, citing Fortich v.
Corona,86 the supervisors would be excluded from receiving
lands as farmworkers other than the regular farmworkers who
are merely entitled to the "fruits of the land."87
The SDOA no less identifies "the SDP qualified beneficiaries"
as "the farmworkers who appear in the annual payroll, inclusive
of the permanent and seasonal employees, who are regularly
or periodically employed by [HLI]."88 Galang, per HLIs own
admission, is employed by HLI, and is, thus, a qualified
beneficiary of the SDP; he comes within the definition of a real
party-in-interest under Sec. 2, Rule 3 of the Rules of Court,
meaning, one who stands to be benefited or injured by the
judgment in the suit or is the party entitled to the avails of the
suit.
The same holds true with respect to the Supervisory Group
whose members were admittedly employed by HLI and whose
names and signatures even appeared in the annex of the
SDOA. Being qualified beneficiaries of the SDP, Suniga and
the other 61 supervisors are certainly parties who would
benefit or be prejudiced by the judgment recalling the SDP or
replacing it with some other modality to comply with RA 6657.
Even assuming that members of the Supervisory Group are
not regular farmworkers, but are in the category of "other
farmworkers" mentioned in Sec. 4, Article XIII of the
Constitution,89 thus only entitled to a share of the fruits of the
land, as indeed Fortich teaches, this does not detract from the
fact that they are still identified as being among the "SDP
qualified beneficiaries." As such, they are, thus, entitled to
bring an action upon the SDP.90 At any rate, the following
admission made by Atty. Gener Asuncion, counsel of HLI,
during the oral arguments should put to rest any lingering
doubt as to the status of protesters Galang, Suniga, and
Andaya:
Justice Bersamin: x x x I heard you a while ago that you were
conceding the qualified farmer beneficiaries of Hacienda
Luisita were real parties in interest?
Atty. Asuncion: Yes, Your Honor please, real party in interest
which that question refers to the complaints of protest initiated
before the DAR and the real party in interest there be
considered as possessed by the farmer beneficiaries who

initiated the protest.91
Further, under Sec. 50, paragraph 4 of RA 6657, farmerleaders are expressly allowed to represent themselves, their
fellow farmers or their organizations in any proceedings before
the DAR. Specifically:
SEC. 50. Quasi-Judicial Powers of the DAR.x x x
xxxx
Responsible farmer leaders shall be allowed to represent
themselves, their fellow farmers or their organizations in
any proceedings before the DAR: Provided, however, that
when there are two or more representatives for any individual
or group, the representatives should choose only one among
themselves to represent such party or group before any DAR
proceedings. (Emphasis supplied.)
Clearly, the respective leaders of the Supervisory Group and
AMBALA are contextually real parties-in-interest allowed by
law to file a petition before the DAR or PARC.
This is not necessarily to say, however, that Galang represents
AMBALA, for as records show and as HLI aptly noted,92 his
"petisyon" filed with DAR did not carry the usual authorization
of the individuals in whose behalf it was supposed to have
been instituted. To date, such authorization document, which
would logically include a list of the names of the authorizing
FWBs, has yet to be submitted to be part of the records.
PARCs Authority to Revoke a Stock Distribution Plan
On the postulate that the subject jurisdiction is conferred by
law, HLI maintains that PARC is without authority to revoke an
SDP, for neither RA 6657 nor EO 229 expressly vests PARC
with such authority. While, as HLI argued, EO 229 empowers
PARC to approve the plan for stock distribution in appropriate
cases, the empowerment only includes the power to
disapprove, but not to recall its previous approval of the SDP
after it has been implemented by the parties.93 To HLI, it is the
court which has jurisdiction and authority to order the
revocation or rescission of the PARC-approved SDP.
We disagree.
Under Sec. 31 of RA 6657, as implemented by DAO 10, the
authority to approve the plan for stock distribution of the
corporate landowner belongs to PARC. However, contrary to
petitioner HLIs posture, PARC also has the power to revoke
the SDP which it previously approved. It may be, as urged, that
RA 6657 or other executive issuances on agrarian reform do
not explicitly vest the PARC with the power to revoke/recall an
approved SDP. Such power or authority, however, is deemed
possessed by PARC under the principle of necessary
implication, a basic postulate that what is implied in a statute is
as much a part of it as that which is expressed.94
We have explained that "every statute is understood, by
implication, to contain all such provisions as may be necessary
to effectuate its object and purpose, or to make effective rights,
powers, privileges or jurisdiction which it grants, including all

such collateral and subsidiary consequences as may be fairly
and logically inferred from its terms."95 Further, "every statutory
grant of power, right or privilege is deemed to include all
incidental power, right or privilege.96
Gordon v. Veridiano II is instructive:
The power to approve a license includes by implication, even if
not expressly granted, the power to revoke it. By extension, the
power to revoke is limited by the authority to grant the license,
from which it is derived in the first place. Thus, if the FDA
grants a license upon its finding that the applicant drug store
has complied with the requirements of the general laws and
the implementing administrative rules and regulations, it is only
for their violation that the FDA may revoke the said license. By
the same token, having granted the permit upon his
ascertainment that the conditions thereof as applied x x x have
been complied with, it is only for the violation of such
conditions that the mayor may revoke the said permit. 97
Following the doctrine of necessary implication, it may be
stated that the conferment of express power to approve a plan
for stock distribution of the agricultural land of corporate
owners necessarily includes the power to revoke or recall the
approval of the plan.
As public respondents aptly observe, to deny PARC such
revocatory power would reduce it into a toothless agency of
CARP, because the very same agency tasked to ensure
compliance by the corporate landowner with the approved SDP
would be without authority to impose sanctions for noncompliance with it.98 With the view We take of the case, only
PARC can effect such revocation. The DAR Secretary, by his
own authority as such, cannot plausibly do so, as the
acceptance and/or approval of the SDP sought to be taken
back or undone is the act of PARC whose official composition
includes, no less, the President as chair, the DAR Secretary as
vice-chair, and at least eleven (11) other department heads.99
On another but related issue, the HLI foists on the Court the
argument that subjecting its landholdings to compulsory
distribution after its approved SDP has been implemented
would impair the contractual obligations created under the
SDOA.
The broad sweep of HLIs argument ignores certain
established legal precepts and must, therefore, be rejected.
A law authorizing interference, when appropriate, in the
contractual relations between or among parties is deemed read
into the contract and its implementation cannot successfully be
resisted by force of the non-impairment guarantee. There is, in
that instance, no impingement of the impairment clause, the
non-impairment protection being applicable only to laws that
derogate prior acts or contracts by enlarging, abridging or in
any manner changing the intention of the parties. Impairment,
in fine, obtains if a subsequent law changes the terms of a
contract between the parties, imposes new conditions,
dispenses with those agreed upon or withdraws existing
remedies for the enforcement of the rights of the parties. 100
Necessarily, the constitutional proscription would not apply to
laws already in effect at the time of contract execution, as in
the case of RA 6657, in relation to DAO 10, vis--vis HLIs

SDOA. As held in Serrano v. Gallant Maritime Services, Inc.:
The prohibition [against impairment of the obligation of
contracts] is aligned with the general principle that laws newly
enacted have only a prospective operation, and cannot affect
acts or contracts already perfected; however, as to laws
already in existence, their provisions are read into contracts
and deemed a part thereof. Thus, the non-impairment clause
under Section 10, Article II [of the Constitution] is limited in
application to laws about to be enacted that would in any way
derogate from existing acts or contracts by enlarging, abridging
or in any manner changing the intention of the parties
thereto.101 (Emphasis supplied.)
Needless to stress, the assailed Resolution No. 2005-32-01 is
not the kind of issuance within the ambit of Sec. 10, Art. III of
the Constitution providing that "[n]o law impairing the obligation
of contracts shall be passed."
Parenthetically, HLI tags the SDOA as an ordinary civil law
contract and, as such, a breach of its terms and conditions is
not a PARC administrative matter, but one that gives rise to a
cause of action cognizable by regular courts.102 This contention
has little to commend itself. The SDOA is a special contract
imbued with public interest, entered into and crafted pursuant
to the provisions of RA 6657. It embodies the SDP, which
requires for its validity, or at least its enforceability, PARCs
approval. And the fact that the certificate of compliance 103to
be issued by agrarian authorities upon completion of the
distribution of stocksis revocable by the same issuing
authority supports the idea that everything about the
implementation of the SDP is, at the first instance, subject to
administrative adjudication.
HLI also parlays the notion that the parties to the SDOA should
now look to the Corporation Code, instead of to RA 6657, in
determining their rights, obligations and remedies. The Code, it
adds, should be the applicable law on the disposition of the
agricultural land of HLI.
Contrary to the view of HLI, the rights, obligations and
remedies of the parties to the SDOA embodying the SDP are
primarily governed by RA 6657. It should abundantly be made
clear that HLI was precisely created in order to comply with RA
6657, which the OSG aptly described as the "mother law" of
the SDOA and the SDP.104 It is, thus, paradoxical for HLI to
shield itself from the coverage of CARP by invoking exclusive
applicability of the Corporation Code under the guise of being a
corporate entity.
Without in any way minimizing the relevance of the Corporation
Code since the FWBs of HLI are also stockholders, its
applicability is limited as the rights of the parties arising from
the SDP should not be made to supplant or circumvent the
agrarian reform program.
Without doubt, the Corporation Code is the general law
providing for the formation, organization and regulation of
private corporations. On the other hand, RA 6657 is the special
law on agrarian reform. As between a general and special law,
the latter shall prevailgeneralia specialibus non derogant. 105
Besides, the present impasse between HLI and the private
respondents is not an intra-corporate dispute which

necessitates the application of the Corporation Code. What
private respondents questioned before the DAR is the proper
implementation of the SDP and HLIs compliance with RA
6657. Evidently, RA 6657 should be the applicable law to the
instant case.
HLI further contends that the inclusion of the agricultural land
of Hacienda Luisita under the coverage of CARP and the
eventual distribution of the land to the FWBs would amount to
a disposition of all or practically all of the corporate assets of
HLI. HLI would add that this contingency, if ever it comes to
pass, requires the applicability of the Corporation Code
provisions on corporate dissolution.
We are not persuaded.
Indeed, the provisions of the Corporation Code on corporate
dissolution would apply insofar as the winding up of HLIs
affairs or liquidation of the assets is concerned. However, the
mere inclusion of the agricultural land of Hacienda Luisita
under the coverage of CARP and the lands eventual
distribution to the FWBs will not, without more, automatically
trigger the dissolution of HLI. As stated in the SDOA itself, the
percentage of the value of the agricultural land of Hacienda
Luisita in relation to the total assets transferred and conveyed
by Tadeco to HLI comprises only 33.296%, following this
equation: value of the agricultural lands divided by total
corporate assets. By no stretch of imagination would said
percentage amount to a disposition of all or practically all of
HLIs corporate assets should compulsory land acquisition and
distribution ensue.
This brings us to the validity of the revocation of the approval
of the SDP sixteen (16) years after its execution pursuant to
Sec. 31 of RA 6657 for the reasons set forth in the Terminal
Report of the Special Task Force, as endorsed by PARC
Excom. But first, the matter of the constitutionality of said
section.
Constitutional Issue
FARM asks for the invalidation of Sec. 31 of RA 6657, insofar
as it affords the corporation, as a mode of CARP compliance,
to resort to stock distribution, an arrangement which, to FARM,
impairs the fundamental right of farmers and farmworkers
under Sec. 4, Art. XIII of the Constitution.106
To a more specific, but direct point, FARM argues that Sec. 31
of RA 6657 permits stock transfer in lieu of outright agricultural
land transfer; in fine, there is stock certificate ownership of the
farmers or farmworkers instead of them owning the land, as
envisaged in the Constitution. For FARM, this modality of
distribution is an anomaly to be annulled for being inconsistent
with the basic concept of agrarian reform ingrained in Sec. 4,
Art. XIII of the Constitution.107
Reacting, HLI insists that agrarian reform is not only about
transfer of land ownership to farmers and other qualified
beneficiaries. It draws attention in this regard to Sec. 3(a) of
RA 6657 on the concept and scope of the term "agrarian
reform." The constitutionality of a law, HLI added, cannot, as
here, be attacked collaterally.
The instant challenge on the constitutionality of Sec. 31 of RA

6657 and necessarily its counterpart provision in EO 229 must
fail as explained below.
When the Court is called upon to exercise its power of judicial
review over, and pass upon the constitutionality of, acts of the
executive or legislative departments, it does so only when the
following essential requirements are first met, to wit:
(1) there is an actual case or controversy;
(2) that the constitutional question is raised at the earliest
possible opportunity by a proper party or one with locus standi;
and
(3) the issue of constitutionality must be the very lis mota of the
case.108
Not all the foregoing requirements are satisfied in the case at
bar.
While there is indeed an actual case or controversy, intervenor
FARM, composed of a small minority of 27 farmers, has yet to
explain its failure to challenge the constitutionality of Sec. 3l of
RA 6657, since as early as November 21, l989 when PARC
approved the SDP of Hacienda Luisita or at least within a
reasonable time thereafter and why its members received
benefits from the SDP without so much of a protest. It was only
on December 4, 2003 or 14 years after approval of the SDP via
PARC Resolution No. 89-12-2 dated November 21, 1989 that
said plan and approving resolution were sought to be revoked,
but not, to stress, by FARM or any of its members, but by
petitioner AMBALA. Furthermore, the AMBALA petition did
NOT question the constitutionality of Sec. 31 of RA 6657, but
concentrated on the purported flaws and gaps in the
subsequent implementation of the SDP. Even the public
respondents, as represented by the Solicitor General, did not
question the constitutionality of the provision. On the other
hand, FARM, whose 27 members formerly belonged to
AMBALA, raised the constitutionality of Sec. 31 only on May 3,
2007 when it filed its Supplemental Comment with the Court.
Thus, it took FARM some eighteen (18) years from November
21, 1989 before it challenged the constitutionality of Sec. 31 of
RA 6657 which is quite too late in the day. The FARM members
slept on their rights and even accepted benefits from the SDP
with nary a complaint on the alleged unconstitutionality of Sec.
31 upon which the benefits were derived. The Court cannot
now be goaded into resolving a constitutional issue that FARM
failed to assail after the lapse of a long period of time and the
occurrence of numerous events and activities which resulted
from the application of an alleged unconstitutional legal
provision.
It has been emphasized in a number of cases that the question
of constitutionality will not be passed upon by the Court unless
it is properly raised and presented in an appropriate case at
the first opportunity.109 FARM is, therefore, remiss in belatedly
questioning the constitutionality of Sec. 31 of RA 6657. The
second requirement that the constitutional question should be
raised at the earliest possible opportunity is clearly wanting.
The last but the most important requisite that the constitutional
issue must be the very lis mota of the case does not likewise
obtain. The lis mota aspect is not present, the constitutional

issue tendered not being critical to the resolution of the case.
The unyielding rule has been to avoid, whenever plausible, an
issue assailing the constitutionality of a statute or
governmental act.110 If some other grounds exist by which
judgment can be made without touching the constitutionality of
a law, such recourse is favored. 111 Garcia v. Executive
Secretary explains why:
Lis Mota the fourth requirement to satisfy before this Court
will undertake judicial review means that the Court will not
pass upon a question of unconstitutionality, although properly
presented, if the case can be disposed of on some other
ground, such as the application of the statute or the general
law. The petitioner must be able to show that the case cannot
be legally resolved unless the constitutional question raised is
determined. This requirement is based on the rule that every
law has in its favor the presumption of constitutionality; to
justify its nullification, there must be a clear and unequivocal
breach of the Constitution, and not one that is doubtful,
speculative, or argumentative.112 (Italics in the original.)
The lis mota in this case, proceeding from the basic positions
originally taken by AMBALA (to which the FARM members
previously belonged) and the Supervisory Group, is the alleged
non-compliance by HLI with the conditions of the SDP to
support a plea for its revocation. And before the Court, the lis
mota is whether or not PARC acted in grave abuse of
discretion when it ordered the recall of the SDP for such noncompliance and the fact that the SDP, as couched and
implemented, offends certain constitutional and statutory
provisions. To be sure, any of these key issues may be
resolved without plunging into the constitutionality of Sec. 31 of
RA 6657. Moreover, looking deeply into the underlying petitions
of AMBALA, et al., it is not the said section per se that is
invalid, but rather it is the alleged application of the said
provision in the SDP that is flawed.
It may be well to note at this juncture that Sec. 5 of RA 9700, 113
amending Sec. 7 of RA 6657, has all but superseded Sec. 31
of RA 6657 vis--vis the stock distribution component of said
Sec. 31. In its pertinent part, Sec. 5 of RA 9700 provides:
"[T]hat after June 30, 2009, the modes of acquisition shall
be limited to voluntary offer to sell and compulsory acquisition."
Thus, for all intents and purposes, the stock distribution
scheme under Sec. 31 of RA 6657 is no longer an available
option under existing law. The question of whether or not it is
unconstitutional should be a moot issue.
It is true that the Court, in some cases, has proceeded to
resolve constitutional issues otherwise already moot and
academic114 provided the following requisites are present:
x x x first, there is a grave violation of the Constitution; second,
the exceptional character of the situation and the paramount
public interest is involved; third, when the constitutional issue
raised requires formulation of controlling principles to guide the
bench, the bar, and the public; fourth, the case is capable of
repetition yet evading review.
The State shall, by law, undertake an agrarian reform program

founded on the right of the farmers and regular farmworkers,
who are landless, to OWN directly or COLLECTIVELY THE
LANDS THEY TILL or, in the case of other farmworkers, to
receive a just share of the fruits thereof. To this end, the State
shall encourage and undertake the just distribution of all
agricultural lands, subject to such priorities and reasonable
retention limits as the Congress may prescribe, taking into
account ecological, developmental, or equity considerations,
and subject to the payment of just compensation. In
determining retention limits, the State shall respect the right of
small landowners. The State shall further provide incentives for
voluntary land-sharing. (Emphasis supplied.)
The wording of the provision is unequivocalthe farmers and
regular farmworkers have a right TO OWN DIRECTLY OR
COLLECTIVELY THE LANDS THEY TILL. The basic law
allows two (2) modes of land distributiondirect and indirect
ownership. Direct transfer to individual farmers is the most
commonly used method by DAR and widely accepted. Indirect
transfer through collective ownership of the agricultural land is
the alternative to direct ownership of agricultural land by
individual farmers. The aforequoted Sec. 4 EXPRESSLY
authorizes collective ownership by farmers. No language can
be found in the 1987 Constitution that disqualifies or prohibits
corporations or cooperatives of farmers from being the legal
entity through which collective ownership can be exercised.
The word "collective" is defined as "indicating a number of
persons or things considered as constituting one group or
aggregate,"115 while "collectively" is defined as "in a collective
sense or manner; in a mass or body."116 By using the word
"collectively," the Constitution allows for indirect ownership of
land and not just outright agricultural land transfer. This is in
recognition of the fact that land reform may become successful
even if it is done through the medium of juridical entities
composed of farmers.
Collective ownership is permitted in two (2) provisions of RA
6657. Its Sec. 29 allows workers cooperatives or associations
to collectively own the land, while the second paragraph of
Sec. 31 allows corporations or associations to own agricultural
land with the farmers becoming stockholders or members. Said
provisions read:
SEC. 29. Farms owned or operated by corporations or other
business associations.In the case of farms owned or
operated by corporations or other business associations, the
following rules shall be observed by the PARC.
In general, lands shall be distributed directly to the individual
worker-beneficiaries.
In case it is not economically feasible and sound to divide the
land, then it shall be owned collectively by the worker
beneficiaries who shall form a workers cooperative or
association which will deal with the corporation or business
association. x x x (Emphasis supplied.)
SEC. 31. Corporate Landowners. x x x
These requisites do not obtain in the case at bar.

xxxx
For one, there appears to be no breach of the fundamental law.
Sec. 4, Article XIII of the Constitution reads:


purchase such 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, under
such terms and conditions as may be agreed upon by them. In
no case shall the compensation received by the workers at the
time the shares of stocks are distributed be reduced. The same
principle shall be applied to associations, with respect to their
equity or participation. x x x (Emphasis supplied.)
Clearly, workers cooperatives or associations under Sec. 29 of
RA 6657 and corporations or associations under the
succeeding Sec. 31, as differentiated from individual farmers,
are authorized vehicles for the collective ownership of
agricultural land. Cooperatives can be registered with the
Cooperative Development Authority and acquire legal
personality of their own, while corporations are juridical
persons under the Corporation Code. Thus, Sec. 31 is
constitutional as it simply implements Sec. 4 of Art. XIII of the
Constitution that land can be owned COLLECTIVELY by
farmers. Even the framers of the l987 Constitution are in
unison with respect to the two (2) modes of ownership of
agricultural
lands
tilled
by
farmersDIRECT
and
COLLECTIVE, thus:
MR. NOLLEDO. And when we talk of the phrase "to own
directly," we mean the principle of direct ownership by the
tiller?
MR. MONSOD. Yes.
MR. NOLLEDO. And when we talk of "collectively," we mean
communal ownership, stewardship or State ownership?
MS. NIEVA. In this section, we conceive of cooperatives; that is
farmers cooperatives owning the land, not the State.
MR. NOLLEDO. And when we talk of "collectively," referring to
farmers cooperatives, do the farmers own specific areas of
land where they only unite in their efforts?
MS. NIEVA. That is one way.
MR. NOLLEDO. Because I understand that there are two basic
systems involved: the "moshave" type of agriculture and the
"kibbutz." So are both contemplated in the report?
MR. TADEO. Ang dalawa kasing pamamaraan ng
pagpapatupad ng tunay na reporma sa lupa ay ang
pagmamay-ari ng lupa na hahatiin sa individual na pagmamayari directly at ang tinatawag na sama-samang gagawin ng
mga magbubukid. Tulad sa Negros, ang gusto ng mga
magbubukid ay gawin nila itong "cooperative or collective
farm." Ang ibig sabihin ay sama-sama nilang sasakahin.
xxxx
MR. TINGSON. x x x When we speak here of "to own directly
or collectively the lands they till," is this land for the tillers rather
than land for the landless? Before, we used to hear "land for
the landless," but now the slogan is "land for the tillers." Is that
right?
MR. TADEO. Ang prinsipyong umiiral dito ay iyong land for the
tillers. Ang ibig sabihin ng "directly" ay tulad sa
implementasyon sa rice and corn lands kung saan inaari na ng
mga magsasaka ang lupang binubungkal nila. Ang ibig sabihin
naman ng "collectively" ay sama-samang paggawa sa isang
lupain o isang bukid, katulad ng sitwasyon sa Negros. 117
As Commissioner Tadeo explained, the farmers will work on
the agricultural land "sama-sama" or collectively. Thus, the
main requisite for collective ownership of land is collective or
group work by farmers of the agricultural land. Irrespective of
whether the landowner is a cooperative, association or
corporation composed of farmers, as long as concerted group
work by the farmers on the land is present, then it falls within
the ambit of collective ownership scheme.
Likewise, Sec. 4, Art. XIII of the Constitution makes mention of
a commitment on the part of the State to pursue, by law, an
agrarian reform program founded on the policy of land for the
landless, but subject to such priorities as Congress may
prescribe, taking into account such abstract variable as "equity
considerations." The textual reference to a law and Congress
necessarily implies that the above constitutional provision is
not self-executory and that legislation is needed to implement
the urgently needed program of agrarian reform. And RA 6657
has been enacted precisely pursuant to and as a mechanism
to carry out the constitutional directives. This piece of
legislation, in fact, restates118 the agrarian reform policy
established in the aforementioned provision of the Constitution
of promoting the welfare of landless farmers and farmworkers.
RA 6657 thus defines "agrarian reform" as "the redistribution of
lands to farmers and regular farmworkers who are landless
to lift the economic status of the beneficiaries and all other
arrangements alternative to the physical redistribution of
lands, such as production or profit sharing, labor
administration and the distribution of shares of stock which
will allow beneficiaries to receive a just share of the fruits of the
lands they work."
With the view We take of this case, the stock distribution option
devised under Sec. 31 of RA 6657 hews with the agrarian
reform policy, as instrument of social justice under Sec. 4 of
Article XIII of the Constitution. Albeit land ownership for the
landless appears to be the dominant theme of that policy, We
emphasize that Sec. 4, Article XIII of the Constitution, as
couched, does not constrict Congress to passing an agrarian
reform law planted on direct land transfer to and ownership by
farmers and no other, or else the enactment suffers from the
vice of unconstitutionality. If the intention were otherwise, the
framers of the Constitution would have worded said section in
a manner mandatory in character.
For this Court, Sec. 31 of RA 6657, with its direct and indirect
transfer features, is not inconsistent with the States
commitment to farmers and farmworkers to advance their
interests under the policy of social justice. The legislature, thru
Sec. 31 of RA 6657, has chosen a modality for collective
ownership by which the imperatives of social justice may, in its
estimation, be approximated, if not achieved. The Court should
be bound by such policy choice.
FARM contends that the farmers in the stock distribution
scheme under Sec. 31 do not own the agricultural land but are

merely given stock certificates. Thus, the farmers lose control
over the land to the board of directors and executive officials of
the corporation who actually manage the land. They conclude
that such arrangement runs counter to the mandate of the
Constitution that any agrarian reform must preserve the control
over the land in the hands of the tiller.
This contention has no merit.
While it is true that the farmer is issued stock certificates and
does not directly own the land, still, the Corporation Code is
clear that the FWB becomes a stockholder who acquires an
equitable interest in the assets of the corporation, which
include the agricultural lands. It was explained that the
"equitable interest of the shareholder in the property of the
corporation is represented by the term stock, and the extent of
his interest is described by the term shares. The expression
shares of stock when qualified by words indicating number and
ownership expresses the extent of the owners interest in the
corporate property."119 A share of stock typifies an aliquot part
of the corporations property, or the right to share in its
proceeds to that extent when distributed according to law and
equity and that its holder is not the owner of any part of the
capital of the corporation.120 However, the FWBs will ultimately
own the agricultural lands owned by the corporation when the
corporation is eventually dissolved and liquidated.
Anent the alleged loss of control of the farmers over the
agricultural land operated and managed by the corporation, a
reading of the second paragraph of Sec. 31 shows otherwise.
Said provision provides that qualified beneficiaries have "the
right to purchase such proportion of the capital stock of the
agricultural activities, bears in relation to the companys total
assets." The wording of the formula in the computation of the
number of shares that can be bought by the farmers does not
mean loss of control on the part of the farmers. It must be
remembered that the determination of the percentage of the
capital stock that can be bought by the farmers depends on the
value of the agricultural land and the value of the total assets
of the corporation.
There is, thus, nothing unconstitutional in the formula
prescribed by RA 6657. The policy on agrarian reform is that
control over the agricultural land must always be in the hands
of the farmers. Then it falls on the shoulders of DAR and PARC
to see to it the farmers should always own majority of the
common shares entitled to elect the members of the board of
directors to ensure that the farmers will have a clear majority in
the board. Before the SDP is approved, strict scrutiny of the
proposed SDP must always be undertaken by the DAR and
PARC, such that the value of the agricultural land contributed
to the corporation must always be more than 50% of the total
assets of the corporation to ensure that the majority of the
members of the board of directors are composed of the
farmers. The PARC composed of the President of the
Philippines and cabinet secretaries must see to it that control
over the board of directors rests with the farmers by rejecting
the inclusion of non-agricultural assets which will yield the
majority in the board of directors to non-farmers. Any deviation,
however, by PARC or DAR from the correct application of the
formula prescribed by the second paragraph of Sec. 31 of RA
6675 does not make said provision constitutionally infirm.
Rather, it is the application of said provision that can be
challenged. Ergo, Sec. 31 of RA 6657 does not trench on the

constitutional policy of ensuring control by the farmers.
A view has been advanced that there can be no agrarian
reform unless there is land distribution and that actual land
distribution is the essential characteristic of a constitutional
agrarian reform program. On the contrary, there have been so
many instances where, despite actual land distribution, the
implementation of agrarian reform was still unsuccessful. As a
matter of fact, this Court may take judicial notice of cases
where FWBs sold the awarded land even to non-qualified
persons and in violation of the prohibition period provided
under the law. This only proves to show that the mere fact that
there is land distribution does not guarantee a successful
implementation of agrarian reform.
As it were, the principle of "land to the tiller" and the old
pastoral model of land ownership where non-human juridical
persons, such as corporations, were prohibited from owning
agricultural lands are no longer realistic under existing
conditions. Practically, an individual farmer will often face
greater disadvantages and difficulties than those who exercise
ownership in a collective manner through a cooperative or
corporation. The former is too often left to his own devices
when faced with failing crops and bad weather, or compelled to
obtain usurious loans in order to purchase costly fertilizers or
farming equipment. The experiences learned from failed land
reform activities in various parts of the country are lack of
financing, lack of farm equipment, lack of fertilizers, lack of
guaranteed buyers of produce, lack of farm-to-market roads,
among others. Thus, at the end of the day, there is still no
successful implementation of agrarian reform to speak of in
such a case.
Although success is not guaranteed, a cooperative or a
corporation stands in a better position to secure funding and
competently maintain the agri-business than the individual
farmer. While direct singular ownership over farmland does
offer advantages, such as the ability to make quick decisions
unhampered by interference from others, yet at best, these
advantages only but offset the disadvantages that are often
associated with such ownership arrangement. Thus,
government must be flexible and creative in its mode of
implementation to better its chances of success. One such
option is collective ownership through juridical persons
composed of farmers.
Aside from the fact that there appears to be no violation of the
Constitution, the requirement that the instant case be capable
of repetition yet evading review is also wanting. It would be
speculative for this Court to assume that the legislature will
enact another law providing for a similar stock option.
As a matter of sound practice, the Court will not interfere
inordinately with the exercise by Congress of its official
functions, the heavy presumption being that a law is the
product of earnest studies by Congress to ensure that no
constitutional prescription or concept is infringed.121 Corollarily,
courts will not pass upon questions of wisdom, expediency and
justice of legislation or its provisions. Towards this end, all
reasonable doubts should be resolved in favor of the
constitutionality of a law and the validity of the acts and
processes taken pursuant thereof.122

Consequently, before a statute or its provisions duly
challenged are voided, an unequivocal breach of, or a clear
conflict with the Constitution, not merely a doubtful or
argumentative one, must be demonstrated in such a manner
as to leave no doubt in the mind of the Court. In other words,
the grounds for nullity must be beyond reasonable doubt.123
FARM has not presented compelling arguments to overcome
the presumption of constitutionality of Sec. 31 of RA 6657.
PARC itself, and tags the reasons given for the revocation of
the SDP as unfounded.
The wisdom of Congress in allowing an SDP through a

corporation as an alternative mode of implementing agrarian
reform is not for judicial determination. Established
jurisprudence tells us that it is not within the province of the
Court to inquire into the wisdom of the law, for, indeed, We are
bound by words of the statute.124
FARM, for its part, posits the view that legal bases obtain for
the revocation of the SDP, because it does not conform to Sec.
31 of RA 6657 and DAO 10. And training its sight on the
resulting dilution of the equity of the FWBs appearing in HLIs
masterlist, FARM would state that the SDP, as couched and
implemented, spawned disparity when there should be none;
parity when there should have been differentiation.126
Public respondents, on the other hand, aver that the assailed

resolution rests on solid grounds set forth in the Terminal
Report, a position shared by AMBALA, which, in some
pleadings, is represented by the same counsel as that
appearing for the Supervisory Group.
II.
The petition is not impressed with merit.
The stage is now set for the determination of the propriety
under the premises of the revocation or recall of HLIs SDP. Or
to be more precise, the inquiry should be: whether or not
PARC gravely abused its discretion in revoking or recalling the
subject SDP and placing the hacienda under CARPs
compulsory acquisition and distribution scheme.
The findings, analysis and recommendation of the DARs
Special Task Force contained and summarized in its Terminal
Report provided the bases for the assailed PARC
revocatory/recalling Resolution. The findings may be grouped
into two: (1) the SDP is contrary to either the policy on agrarian
reform, Sec. 31 of RA 6657, or DAO 10; and (2) the alleged
violation by HLI of the conditions/terms of the SDP. In more
particular terms, the following are essentially the reasons
underpinning PARCs revocatory or recall action:
(1) Despite the lapse of 16 years from the approval of HLIs
SDP, the lives of the FWBs have hardly improved and the
promised increased income has not materialized;
(2) HLI has failed to keep Hacienda Luisita intact and
unfragmented;
(3) The issuance of HLI shares of stock on the basis of number
of hours workedor the so-called "man days"is grossly
onerous to the FWBs, as HLI, in the guise of rotation, can
unilaterally deny work to anyone. In elaboration of this ground,
PARCs Resolution No. 2006-34-01, denying HLIs motion for
reconsideration of Resolution No. 2005-32-01, stated that the
man days criterion worked to dilute the entitlement of the
original share beneficiaries;125
(4) The distribution/transfer of shares was not in accordance
with the timelines fixed by law;
(5) HLI has failed to comply with its obligations to grant 3% of
the gross sales every year as production-sharing benefit on top
of the workers salary; and
(6) Several homelot awardees have yet to receive their
individual titles.
Petitioner HLI claims having complied with, at least
substantially, all its obligations under the SDP, as approved by
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 landsharing. (Emphasis supplied.)
Paragraph 2 of the above-quoted provision specifically
mentions that "a more equitable distribution and ownership of
land x x x shall be undertaken to provide farmers and farm
workers with the opportunity to enhance their dignity and
improve the quality of their lives through greater productivity of
agricultural lands." Of note is the term "opportunity" which is
defined as a favorable chance or opening offered by
circumstances.127 Considering this, by no stretch of imagination

can said provision be construed as a guarantee in improving
the lives of the FWBs. At best, it merely provides for a
possibility or favorable chance of uplifting the economic status
of the FWBs, which may or may not be attained.
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.
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.
Neither does HLIs SDP, whence the DAR-attested

SDOA/MOA is based, infringe Sec. 31 of RA 6657, albeit public
respondents erroneously submit otherwise.
Significantly, HLI draws particular attention to its having paid its

FWBs, during the regime of the SDP (1989-2005), some PhP 3
billion by way of salaries/wages and higher benefits exclusive
of free hospital and medical benefits to their immediate family.
And attached as Annex "G" to 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 NonDirect 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 500hectare converted lands. While not included in the report, HLI
manifests having given the FWBs 3% of the PhP 80 million
paid for the 80 hectares of land traversed by the SCTEX. 128 On
top of these, it is worth remembering that the shares of stocks
were given by HLI to the FWBs for free. Verily, the FWBs have
benefited from the SDP.
To address urgings that the FWBs be allowed to disengage
from the SDP as HLI has not anyway earned profits through
the years, it cannot be over-emphasized that, as a matter of
common business sense, no corporation could guarantee a
profitable run all the time. As has been suggested, one of the
key features of an SDP of a corporate landowner is the
likelihood of the corporate vehicle not earning, or, worse still,
losing money.129
The Court is fully aware that one of the criteria under DAO 10
for the PARC to consider the advisability of approving a stock
distribution plan is the likelihood that the plan "would result in
increased income and greater benefits to [qualified
beneficiaries] than if the lands were divided and distributed to
them individually."130 But as aptly noted during the oral
arguments, DAO 10 ought to have not, as it cannot, actually
exact assurance of success on something that is subject to the
will of man, the forces of nature or the inherent risky nature of
business.131 Just like in actual land distribution, an SDP cannot
guarantee, as indeed the SDOA does not guarantee, a
comfortable life for the FWBs. The Court can take judicial
notice of the fact that there were many instances wherein after
a farmworker beneficiary has been awarded with an
agricultural land, he just subsequently sells it and is eventually
left with nothing in the end.
The provisions of the first paragraph of the adverted Sec. 31

are without relevance to the issue on the propriety of the
assailed order revoking HLIs SDP, for the paragraph deals
with the transfer of agricultural lands to the government, as a
mode of CARP compliance, thus:
SEC. 31. Corporate Landowners.Corporate landowners may
voluntarily transfer ownership over their agricultural
landholdings to the Republic of the Philippines pursuant to
Section 20 hereof or to qualified beneficiaries under such
terms and conditions, consistent with this Act, as they may
agree, subject to confirmation by the DAR.
The second and third paragraphs, with their sub-paragraphs, of
Sec. 31 provide as follows:
purchase such proportion of the capital stock of the
agricultural activities, bears in relation to the companys
total assets, under such terms and conditions as may be
agreed upon by them. In no case shall the compensation
received by the workers at the time the shares of stocks are
distributed be reduced. x x x
Corporations or associations which voluntarily divest a
proportion of their capital stock, equity or participation in favor
of their workers or other qualified beneficiaries under this
section shall be deemed to have complied with the provisions
of this Act: Provided, That the following conditions are
complied with:
(a) In order to safeguard the right of beneficiaries who own
shares of stocks to dividends and other financial benefits, the
books of the corporation or association shall be subject to
periodic audit by certified public accountants chosen by the
beneficiaries;
(b) Irrespective of the value of their equity in the corporation or
association, the beneficiaries shall be assured of at least one
(1) representative in the board of directors, or in a
management or executive committee, if one exists, of the
corporation or association;
(c) Any shares acquired by such workers and beneficiaries
shall have the same rights and features as all other shares;
and
(d) Any transfer of shares of stocks by the original beneficiaries
shall be void ab initio unless said transaction is in favor of a
qualified and registered beneficiary within the same
corporation.

The mandatory minimum ratio of land-to-shares of stock
supposed to be distributed or allocated to qualified
beneficiaries, adverting to what Sec. 31 of RA 6657 refers to as
that "proportion of the capital stock of the corporation that the
agricultural land, actually devoted to agricultural activities,
bears in relation to the companys total assets" had been
observed.
Paragraph one (1) of the SDOA, which was based on the SDP,
conforms to Sec. 31 of RA 6657. The stipulation reads:
1. The percentage of the value of the agricultural land of
Hacienda Luisita (P196,630,000.00) in relation to the total
assets (P590,554,220.00) transferred and conveyed to the
SECOND PARTY is 33.296% that, under the law, is the
proportion of the outstanding capital stock of the SECOND
PARTY, which is P355,531,462.00 or 355,531,462 shares with
a par value of P1.00 per share, that has to be distributed to the
THIRD PARTY under the stock distribution plan, the said
33.296% thereof being P118,391,976.85 or 118,391,976.85
shares.
The appraised value of the agricultural land is PhP
196,630,000 and of HLIs other assets is PhP 393,924,220.
The total value of HLIs assets is, therefore, PhP
590,554,220.132 The percentage of the value of the agricultural
lands (PhP 196,630,000) in relation to the total assets (PhP
590,554,220) is 33.296%, which represents the stockholdings
of the 6,296 original qualified farmworker-beneficiaries (FWBs)
in HLI. The total number of shares to be distributed to said
qualified FWBs is 118,391,976.85 HLI shares. This was arrived
at by getting 33.296% of the 355,531,462 shares which is the
outstanding capital stock of HLI with a value of PhP
355,531,462. Thus, if we divide the 118,391,976.85 HLI shares
by 6,296 FWBs, then each FWB is entitled to 18,804.32 HLI
shares. These shares under the SDP are to be given to FWBs
for free.
The Court finds that the determination of the shares to be
distributed to the 6,296 FWBs strictly adheres to the formula
prescribed by Sec. 31(b) of RA 6657.
Anent the requirement under Sec. 31(b) of the third paragraph,
that the FWBs shall be assured of at least one (1)
representative in the board of directors or in a management or
executive committee irrespective of the value of the equity of
the FWBs in HLI, the Court finds that the SDOA contained
provisions making certain the FWBs representation in HLIs
governing board, thus:
5. Even if only a part or fraction of the shares earmarked for
distribution will have been acquired from the FIRST PARTY
and distributed to the THIRD PARTY, FIRST PARTY shall
execute at the beginning of each fiscal year an irrevocable
proxy, valid and effective for one (1) year, in favor of the
farmworkers appearing as shareholders of the SECOND
PARTY at the start of said year which will empower the THIRD
PARTY or their representative to vote in stockholders and
board of directors meetings of the SECOND PARTY convened
during the year the entire 33.296% of the outstanding capital
stock of the SECOND PARTY earmarked for distribution and
thus be able to gain such number of seats in the board of
directors of the SECOND PARTY that the whole 33.296% of
the shares subject to distribution will be entitled to.
Also, no allegations have been made against HLI restricting

the inspection of its books by accountants chosen by the
FWBs; hence, the assumption may be made that there has
been no violation of the statutory prescription under subparagraph (a) on the auditing of HLIs accounts.
Public respondents, however, submit that the distribution of the
mandatory minimum ratio of land-to-shares of stock, referring
to the 118,391,976.85 shares with par value of PhP 1 each,
should have been made in full within two (2) years from the
approval of RA 6657, in line with the last paragraph of Sec. 31
of said law.133
Public respondents submission is palpably erroneous. We
have closely examined the last paragraph alluded to, with
particular focus on the two-year period mentioned, and nothing
in it remotely supports the public respondents posture. In its
pertinent part, said Sec. 31 provides:
SEC. 31. Corporate Landowners x x x
If within two (2) years from the approval of this Act, the
[voluntary] land or stock transfer envisioned above is not made
or realized or the plan for such stock distribution approved by
the PARC within the same period, the agricultural land of the
corporate owners or corporation shall be subject to the
compulsory coverage of this Act. (Word in bracket and
emphasis added.)
Properly viewed, the words "two (2) years" clearly refer to the
period within which the corporate landowner, to avoid land
transfer as a mode of CARP coverage under RA 6657, is to
avail of the stock distribution option or to have the SDP
approved. The HLI secured approval of its SDP in November
1989, well within the two-year period reckoned from June 1988
when RA 6657 took effect.
Having hurdled the alleged breach of the agrarian reform policy
under Sec. 2 of RA 6657 as well as the statutory issues, We
shall now delve into what PARC and respondents deem to be
other instances of violation of DAO 10 and the SDP.
On the Conversion of Lands
Contrary to the almost parallel stance of the respondents,
keeping Hacienda Luisita unfragmented is also not among the
imperative impositions by the SDP, RA 6657, and DAO 10.
The Terminal Report states that the proposed distribution plan
submitted in 1989 to the PARC effectively assured the intended
stock beneficiaries that the physical integrity of the farm shall
remain inviolate. Accordingly, the Terminal Report and the
PARC-assailed resolution would take HLI to task for securing
approval of the conversion to non-agricultural uses of 500
hectares of the hacienda. In not too many words, the Report
and the resolution view the conversion as an infringement of
Sec. 5(a) of DAO 10 which reads: "a. that the continued
operation of the corporation with its agricultural land intact and
unfragmented is viable with potential for growth and increased
profitability."
The PARC is wrong.

In the first place, Sec. 5(a)just like the succeeding Sec. 5(b)
of DAO 10 on increased income and greater benefits to
qualified 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 landownerapplicant 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."134
No. 4 of the MOA is clear and must be followed. There is a

distinction between the total gross sales from the production of
the land and the proceeds from the sale of the land. The
former refers to the fruits/yield of the agricultural land while the
latter is the land itself. The phrase "the beneficiaries are
entitled every year to an amount approximately equivalent to
3% would only be feasible if the subject is the produce since
there is at least one harvest per year, while such is not the
case in the sale of the agricultural land. This negates then the
claim of HLI that, all that the FWBs can be entitled to, if any, is
only 3% of the purchase price of the converted land.
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
On the 3% Production Share
On the matter of the alleged failure of HLI to comply with
sharing the 3% of the gross production sales of the hacienda
and pay dividends from profit, the entries in its financial books
tend to indicate compliance by HLI of the profit-sharing
equivalent to 3% of the gross sales from the production of the
agricultural land on top of (a) the salaries and wages due
FWBs as employees of the company and (b) the 3% of the
gross selling price of the converted land and that portion used
for the SCTEX. A plausible evidence of compliance or noncompliance, as the case may be, could be the books of
account of HLI. Evidently, the cry of some groups of not having
received their share from the gross production sales has not
adequately been validated on the ground by the Special Task
Force.
Indeed, factual findings of administrative agencies are
conclusive when supported by substantial evidence and are
accorded due respect and weight, especially when they are
affirmed by the CA.135 However, such rule is not absolute. One
such exception is when the findings of an administrative
agency are conclusions without citation of specific evidence on
which they are based,136 such as in this particular instance. As
culled from its Terminal Report, it would appear that the
Special Task Force rejected HLIs claim of compliance on the
basis of this ratiocination:
The Task Force position: Though, allegedly, the

Supervisory Group receives the 3% gross production share
and that others alleged that they received 30 million pesos still
others maintain that they have not received anything yet. Item
Besides, the Conversion Order dated 14 August 1996

provides that "the benefits, wages and the like, presently
received by the FWBs shall not in any way be reduced or
adversely affected. Three percent of the gross selling price of
the sale of the converted land shall be awarded to the
beneficiaries of the SDO." The 3% gross production share then
is different from the 3% proceeds of the sale of the converted
land and, with more reason, the 33% share being claimed by
the FWBs as part owners of the Hacienda, should have been
given the FWBs, as stockholders, and to which they could
have been entitled if only the land were acquired and
redistributed to them under the CARP.
xxxx
The FWBs do not receive any other benefits under

the MOA except the aforementioned [(viz: shares of stocks
(partial), 3% gross production sale (not all) and homelots (not
all)].
Judging from the above statements, the Special Task Force is
at best silent on whether HLI has failed to comply with the 3%
production-sharing obligation or the 3% of the gross selling
price of the converted land and the SCTEX lot. In fact, it admits
that the FWBs, though not all, have received their share of the
gross production sales and in the sale of the lot to SCTEX. At
most, then, HLI had complied substantially with this SDP
undertaking and the conversion order. To be sure, this slight
breach would not justify the setting to naught by PARC of the
approval action of the earlier PARC. Even in contract law,
rescission, predicated on violation of reciprocity, will not be
permitted for a slight or casual breach of contract; rescission
may be had only for such breaches that are substantial and
fundamental as to defeat the object of the parties in making the
agreement.137
Despite the foregoing findings, the revocation of the approval
of the SDP is not without basis as shown below.
On Titles to Homelots
Under RA 6657, the distribution of homelots is required only for
corporations or business associations owning or operating
farms which opted for land distribution. Sec. 30 of RA 6657
states:
SEC. 30. Homelots and Farmlots for Members of
Cooperatives.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 workerbeneficiaries 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 familybeneficiaries x x x residential or homelots of not more than 240
sq. m. each, with each family beneficiary being assured of
receiving and owning a homelot in the barrio or barangay
where it actually resides," "within a reasonable time."
More than sixteen (16) years have elapsed from the time the
SDP was approved by PARC, and yet, it is still the contention
of the FWBs that not all was given the 240-square meter
homelots and, of those who were already given, some still do
not have the corresponding titles.
During the oral arguments, HLI was afforded the chance to
refute the foregoing allegation by submitting proof that the
FWBs were already given the said homelots:
Justice Velasco: x x x There is also an allegation that the
farmer beneficiaries, the qualified family beneficiaries were not
given the 240 square meters each. So, can you also [prove]
that the qualified family beneficiaries were already provided the
240 square meter homelots.
Atty. Asuncion: We will, your Honor please.138
Other than the financial report, however, no other substantial
proof showing that all the qualified beneficiaries have received
homelots was submitted by HLI. Hence, this Court is
constrained to rule that HLI has not yet fully complied with its
undertaking to distribute homelots to the FWBs under the SDP.
On "Man Days" and the Mechanics of Stock Distribution
In our review and analysis of par. 3 of the SDOA on the

mechanics and timelines of stock distribution, We find that it
violates two (2) provisions of DAO 10. Par. 3 of the SDOA
states:
3. At the end of each fiscal year, for a period of 30 years, the
SECOND PARTY [HLI] shall arrange with the FIRST PARTY
[TDC] the acquisition and distribution to the THIRD PARTY
[FWBs] on the basis of number of days worked and at no cost
to them of one-thirtieth (1/30) of 118,391,976.85 shares of the
capital stock of the SECOND PARTY that are presently owned
and held by the FIRST PARTY, until such time as the entire
block of 118,391,976.85 shares shall have been completely
acquired and distributed to the THIRD PARTY.
Based on the above-quoted provision, the distribution of the
shares of stock to the FWBs, albeit not entailing a cash out
from them, is contingent on the number of "man days," that is,
the number of days that the FWBs have worked during the
year. This formula deviates from Sec. 1 of DAO 10, which
decrees the distribution of equal number of shares to the
FWBs as the minimum ratio of shares of stock for purposes of
compliance with Sec. 31 of RA 6657. As stated in Sec. 4 of
DAO 10:
Section 4. Stock Distribution Plan.The [SDP] submitted by
the corporate landowner-applicant shall provide for the
distribution of an equal number of shares of the same class
and value, with the same rights and features as all other
shares, to each of the qualified beneficiaries. This distribution
plan in all cases, shall be at least the minimum ratio for
purposes of compliance with Section 31 of R.A. No. 6657.
On top of the minimum ratio provided under Section 3 of this
Implementing Guideline, the corporate landowner-applicant
may adopt additional stock distribution schemes taking into
account factors such as rank, seniority, salary, position and
other circumstances which may be deemed desirable as a
matter of sound company policy. (Emphasis supplied.)
The above proviso gives two (2) sets or categories of shares of
stock which a qualified beneficiary can acquire from the
corporation under the SDP. The first pertains, as earlier
explained, to the mandatory minimum ratio of shares of stock
to be distributed to the FWBs in compliance with Sec. 31 of RA
6657. This minimum ratio contemplates of that "proportion of
the capital stock of the corporation that the agricultural land,
actually devoted to agricultural activities, bears in relation to
the companys total assets."139 It is this set of shares of stock
which, in line with Sec. 4 of DAO 10, is supposed to be
allocated "for the distribution of an equal number of shares of
stock of the same class and value, with the same rights and
features as all other shares, to each of the qualified
beneficiaries."
On the other hand, the second set or category of shares
partakes of a gratuitous extra grant, meaning that this set or
category constitutes an augmentation share/s that the
corporate landowner may give under an additional stock
distribution scheme, taking into account such variables as
rank, seniority, salary, position and like factors which the
management, in the exercise of its sound discretion, may
deem desirable.140

Before anything else, it should be stressed that, at the time
PARC approved 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.141 Particularly:
Justice Abad: If the SDOA did not take place, the other thing
that would have happened is that there would be CARP?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: 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?
Justice Abad: And then you gave thirty-three percent (33%) of
the shares of HLI to the farmers at that time that numbered x x
x those who signed five thousand four hundred ninety eight
(5,498) beneficiaries, is that correct?
Atty. Dela Merced: They did not do the same thing as we did in
1989, Your Honor.
Justice Abad: No, if they were not workers in 1989 what land
did they give up? None, if they become workers later on.
Atty. Dela Merced: None, Your Honor, I was referring, Your
Honor, to the original (interrupted)
Justice Abad: So why is it that the rights of those who gave up
their lands would be diluted, because the company has chosen
to use the shares as reward system for new workers who come
in? It is not that the new workers, in effect, become just
workers of the corporation whose stockholders were already
fixed. The TADECO who has shares there about sixty six
percent (66%) and the five thousand four hundred ninety eight
(5,498) farmers at the time of the SDOA? Explain to me. Why,
why will you x x x what right or where did you get that right to
use this shares, to water down the shares of those who should
have been benefited, and to use it as a reward system decided
by the company?142
From the above discourse, it is clear as day that the original
6,296 FWBs, who were qualified beneficiaries at the time of the
approval of the SDP, suffered from watering down of shares.
As determined earlier, each original FWB is entitled to
18,804.32 HLI shares. The original FWBs got less than the
guaranteed 18,804.32 HLI shares per beneficiary, because the
acquisition and distribution of the HLI shares were based on
"man days" or "number of days worked" by the FWB in a 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 additional farmworkers.

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?
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?
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. (Emphasis supplied.)
It is evident from the foregoing provision that the
implementation, that is, the distribution of the shares of stock to
the FWBs, must be made within three (3) months from receipt
by HLI of the approval of the stock distribution plan by PARC.
While neither of the clashing parties has made a compelling
case of the thrust of this provision, the Court is of the view and
so holds that the intent is to compel the corporate landowner to
complete, not merely initiate, the transfer process of shares
within that three-month timeframe. Reinforcing this conclusion
is the 60-day stock transfer recording (with the SEC)
requirement reckoned from the implementation of the SDP.
To the Court, there is a purpose, which is at once discernible
as it is practical, for the three-month threshold. Remove this
timeline and the corporate landowner can veritably evade
compliance with agrarian reform by simply deferring to absurd
limits the implementation of the stock distribution scheme.
The argument is urged that the thirty (30)-year distribution
program is justified by the fact that, under Sec. 26 of RA 6657,
payment by beneficiaries of land distribution under CARP shall
be made in thirty (30) annual amortizations. To HLI, said
section provides a justifying dimension to its 30-year stock
distribution program.
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 pay the
government. To be sure, the reason underpinning the 30-year
accommodation does not apply to corporate landowners in
distributing shares of stock to the qualified beneficiaries, as the
shares may be issued in a much shorter period of time.
Taking into account the above discussion, the revocation of the
SDP by PARC should be upheld for violating DAO 10. It bears
stressing that under Sec. 49 of RA 6657, the PARC and the
DAR have the power to issue rules and regulations,
substantive or procedural. Being a product of such rule-making
power, DAO 10 has the force and effect of law and must be
duly complied with.143 The PARC is, therefore, correct in
revoking the SDP. Consequently, the PARC Resolution No. 8912-2 dated November 21, l989 approving the HLIs SDP is
nullified and voided.
III.
We now resolve the petitions-in-intervention which, at bottom,
uniformly pray for the exclusion from the coverage of the
assailed PARC resolution those portions of the converted land
within Hacienda Luisita which RCBC and LIPCO acquired by
purchase.
Both contend that they are innocent purchasers for value of
portions of the converted farm land. Thus, their plea for the
exclusion of that portion from PARC Resolution 2005-32-01, as
implemented by a DAR-issued Notice of Coverage dated
January 2, 2006, which called for mandatory CARP acquisition
coverage of lands subject of the SDP.
To restate the antecedents, after the conversion of the 500
hectares of land in Hacienda Luisita, HLI transferred the 300
hectares to Centennary, while ceding the remaining 200hectare portion to LRC. Subsequently, LIPCO purchased the
entire three hundred (300) hectares of land from Centennary
for the purpose of developing the land into an industrial
complex.144 Accordingly, the TCT in Centennarys name was
canceled and a new one issued in LIPCOs name. Thereafter,
said land was subdivided into two (2) more parcels of land.
Later on, LIPCO transferred about 184 hectares to RCBC by
way of dacion en pago, by virtue of which TCTs in the name of
RCBC were subsequently issued.
Under Sec. 44 of PD 1529 or the Property Registration Decree,
"every registered owner receiving a certificate of title in
pursuance of a decree of registration and every subsequent
purchaser of registered land taking a certificate of title for value
and in good faith shall hold the same free from all
encumbrances except those noted on the certificate and
enumerated therein."145
It is settled doctrine that one who deals with property
registered under the Torrens system need not go beyond the
four corners of, but can rely on what appears on, the title. He is
charged with notice only of such burdens and claims as are
annotated on the title. This principle admits of certain
exceptions, such as when the party has actual knowledge of
facts and circumstances that would impel a reasonably
cautious man to make such inquiry, or when the purchaser has
knowledge of a defect or the lack of title in his vendor or of
sufficient facts to induce a reasonably prudent man to inquire
into the status of the title of the property in litigation. 146 A higher
level of care and diligence is of course expected from banks,
their business being impressed with public interest.147
Millena v. Court of Appeals describes a purchaser in good faith
in this wise:
x x x A purchaser in good faith is one who buys property of
another, without notice that some other person has a right to,
or interest in, such property at the time of such purchase, or
before he has notice of the claim or interest of some other
persons in the property. Good faith, or the lack of it, is in the
final analysis a question of intention; but in ascertaining the
intention by which one is actuated on a given occasion, we are
necessarily controlled by the evidence as to the conduct and
outward acts by which alone the inward motive may, with
safety, be determined. Truly, good faith is not a visible, tangible
fact that can be seen or touched, but rather a state or condition

of mind which can only be judged by actual or fancied tokens
or signs. Otherwise stated, good faith x x x refers to the state
of mind which is manifested by the acts of the individual
concerned.148 (Emphasis supplied.)
In fine, there are two (2) requirements before one may be
considered a purchaser in good faith, namely: (1) that the
purchaser buys the property of another without notice that
some other person has a right to or interest in such property;
and (2) that the purchaser pays a full and fair price for the
property at the time of such purchase or before he or she has
notice of the claim of another.
It can rightfully be said that both LIPCO and RCBC are
based on the above requirements and with respect to the
adverted transactions of the converted land in question
purchasers in good faith for value entitled to the benefits
arising from such status.
First, at the time LIPCO purchased the entire three hundred
(300) hectares of industrial land, there was no notice of any
supposed defect in the title of its transferor, Centennary, or that
any other person has a right to or interest in such property. In
fact, at the time LIPCO acquired said parcels of land, only the
following annotations appeared on the TCT in the name of
Centennary: the Secretarys Certificate in favor of Teresita
Lopa, the Secretarys Certificate in favor of Shintaro Murai, and
the conversion of the property from agricultural to industrial
and residential use.149
purposes." Moreover, DAR notified all the affected parties,

more particularly the FWBs, and gave them the opportunity to
comment or oppose the proposed conversion. DAR, after
going through the necessary processes, granted the
conversion of 500 hectares of Hacienda Luisita pursuant to its
primary jurisdiction under Sec. 50 of RA 6657 to determine and
adjudicate agrarian reform matters and its original exclusive
jurisdiction over all matters involving the implementation of
agrarian reform. The DAR conversion order became final and
executory after none of the FWBs interposed an appeal to the
CA. In this factual setting, RCBC and LIPCO purchased the
lots in question on their honest and well-founded belief that the
previous registered owners could legally sell and convey the
lots though these were previously subject of CARP coverage.
Ergo, RCBC and LIPCO acted in good faith in acquiring the
subject lots.
And second, both LIPCO and RCBC purchased portions of
Hacienda Luisita for value. Undeniably, LIPCO acquired 300
hectares of land from Centennary for the amount of PhP 750
million pursuant to a Deed of Sale dated July 30, 1998. 151 On
the other hand, in a Deed of Absolute Assignment dated
November 25, 2004, LIPCO conveyed portions of Hacienda
Luisita in favor of RCBC by way of dacion en pago to pay for a
loan of PhP 431,695,732.10.
As bona fide purchasers for value, both LIPCO and RCBC
have acquired rights which cannot just be disregarded by DAR,
PARC or even by this Court. As held in Spouses Chua v.
Soriano:
The same is true with respect to RCBC. At the time it acquired

portions of Hacienda Luisita, only the following general
annotations appeared on the TCTs of LIPCO: the Deed of
Restrictions, limiting its use solely as an industrial estate; the
Secretarys Certificate in favor of Koji Komai and Kyosuke Hori;
and the Real Estate Mortgage in favor of RCBC to guarantee
the payment of PhP 300 million.
With the property in question having already passed to the

hands of purchasers in good faith, it is now of no moment that
some irregularity attended the issuance of the SPA, consistent
with our pronouncement in Heirs of Spouses Benito Gavino
and Juana Euste v. Court of Appeals, to wit:
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."150 It is the
opposite of fraud.
x x x the general rule that the direct result of a previous void

contract cannot be valid, is inapplicable in this case as it will
directly contravene the Torrens system of registration. Where
innocent third persons, relying on the correctness of the
certificate of title thus issued, acquire rights over the
property, the court cannot disregard such rights and order
the cancellation of the certificate. The effect of such outright
cancellation will be to impair public confidence in the certificate
of title. The sanctity of the Torrens system must be preserved;
otherwise, everyone dealing with the property registered under
the system will have to inquire in every instance as to whether
the title had been regularly or irregularly issued, contrary to the
evident purpose of the law.
To be sure, intervenor RCBC and LIPCO knew that the lots

they bought were subjected to CARP coverage by means of a
stock distribution plan, as the DAR conversion order was
annotated at the back of the titles of the lots they acquired.
However, they are of the honest belief that the subject lots
were validly converted to commercial or industrial purposes
and for which said lots were taken out of the CARP coverage
subject of PARC Resolution No. 89-12-2 and, hence, can be
legally and validly acquired by them. After all, Sec. 65 of RA
6657 explicitly allows conversion and disposition of agricultural
lands previously covered by CARP land acquisition "after the
lapse of five (5) years from its award when the land ceases to
be economically feasible and sound for agricultural purposes
or the locality has become urbanized and the land will have a
greater economic value for residential, commercial or industrial
Being purchasers in good faith, the Chuas already

acquired valid title to the property. A purchaser in good
faith holds an indefeasible title to the property and he is
entitled to the protection of the law.152 x x x (Emphasis
supplied.)
To be sure, the practicalities of the situation have to a point
influenced Our disposition on the fate of RCBC and LIPCO.
After all, the Court, to borrow from Association of Small
Landowners in the Philippines, Inc.,153 is not a "cloistered
institution removed" from the realities on the ground. To note,
the approval and issuances of both the national and local
governments showing that certain portions of Hacienda Luisita

have effectively ceased, legally and physically, to be
agricultural and, therefore, no longer CARPable are a matter of
fact which cannot just be ignored by the Court and the DAR.
Among the approving/endorsing issuances:154
(a) Resolution No. 392 dated 11 December 1996 of the
Sangguniang Bayan of Tarlac favorably endorsing the 300hectare industrial estate project of LIPCO;
(b) BOI Certificate of Registration No. 96-020 dated 20
December 1996 issued in accordance with the Omnibus
Investments Code of 1987;
(c) PEZA Certificate of Board Resolution No. 97-202 dated 27
June 1997, approving LIPCOs application for a mixed ecozone
and proclaiming the three hundred (300) hectares of the
industrial land as a Special Economic Zone;
(d) Resolution No. 234 dated 08 August 1997 of the
Sangguniang Bayan of Tarlac, approving the Final
Development Permit for the Luisita Industrial Park II Project;
(e) Development Permit dated 13 August 1997 for the
proposed Luisita Industrial Park II Project issued by the Office
of the Sangguniang Bayan of Tarlac;155
(f) DENR Environmental Compliance Certificate dated 01
October 1997 issued for the proposed project of building an
industrial complex on three hundred (300) hectares of
industrial land;156
(g) Certificate of Registration No. 00794 dated 26 December
1997 issued by the HLURB on the project of Luisita Industrial
Park II with an area of three million (3,000,000) square
meters;157
(h) License to Sell No. 0076 dated 26 December 1997 issued
by the HLURB authorizing the sale of lots in the Luisita
Industrial Park II;
(i) Proclamation No. 1207 dated 22 April 1998 entitled
"Declaring Certain Parcels of Private Land in Barangay San
Miguel, Municipality of Tarlac, Province of Tarlac, as a Special
Economic Zone pursuant to Republic Act No. 7916,"
designating the Luisita Industrial Park II consisting of three
hundred hectares (300 has.) of industrial land as a Special
Economic Zone; and
(j) Certificate of Registration No. EZ-98-05 dated 07 May 1998
issued by the PEZA, stating that pursuant to Presidential
Proclamation No. 1207 dated 22 April 1998 and Republic Act
No. 7916, LIPCO has been registered as an Ecozone
Developer/Operator of Luisita Industrial Park II located in San
Miguel, Tarlac, Tarlac.
While a mere reclassification of a covered agricultural land or
its inclusion in an economic zone does not automatically allow
the corporate or individual landowner to change its use, 158 the
reclassification process is a prima facie indicium that the land
has ceased to be economically feasible and sound for
agricultural uses. And if only to stress, DAR Conversion Order
No. 030601074-764-(95) issued in 1996 by then DAR
Secretary Garilao had effectively converted 500 hectares of
hacienda land from agricultural to industrial/commercial use

and authorized their disposition.
In relying upon the above-mentioned approvals, proclamation
and conversion order, both RCBC and LIPCO cannot be
considered at fault for believing that certain portions of
Hacienda Luisita are industrial/commercial lands and are, thus,
outside the ambit of CARP. The PARC, and consequently DAR,
gravely abused its discretion when it placed LIPCOs and
RCBCs property which once formed part of Hacienda Luisita
under the CARP compulsory acquisition scheme via the
assailed Notice of Coverage.
As regards the 80.51-hectare land transferred to the
government for use as part of the SCTEX, this should also be
excluded from the compulsory agrarian reform coverage
considering that the transfer was consistent with the
governments exercise of the power of eminent domain159 and
none of the parties actually questioned the transfer.
While We affirm the revocation of the SDP on Hacienda Luisita
subject of PARC Resolution Nos. 2005-32-01 and 2006-34-01,
the Court cannot close its eyes to certain "operative facts" that
had occurred in the interim. Pertinently, the "operative fact"
doctrine realizes that, in declaring a law or executive action
null and void, or, by extension, no longer without force and
effect, undue harshness and resulting unfairness must be
avoided. This is as it should realistically be, since rights might
have accrued in favor of natural or juridical persons and
obligations justly incurred in the meantime.160 The actual
existence of a statute or executive act is, prior to such a
determination, an operative fact and may have consequences
which cannot justly be ignored; the past cannot always be
erased by a new judicial declaration.161
The oft-cited De Agbayani v. Philippine National Bank162
discussed the effect to be given to a legislative or executive act
subsequently declared invalid:
x x x It does not admit of doubt that prior to the declaration of
nullity such challenged legislative or executive act must have
been in force and had to be complied with. This is so as until
after the judiciary, in an appropriate case, declares its invalidity,
it is entitled to obedience and respect. Parties may have acted
under it and may have changed their positions. What could be
more fitting than that in a subsequent litigation regard be had
to what has been done while such legislative or executive act
was in operation and presumed to be valid in all respects. It is
now accepted as a doctrine that prior to its being nullified, its
existence as a fact must be reckoned with. This is merely to
reflect awareness that precisely because the judiciary is the
government organ which has the final say on whether or not a
legislative or executive measure is valid, a period of time may
have elapsed before it can exercise the power of judicial
review that may lead to a declaration of nullity. It would be to
deprive the law of its quality of fairness and justice then, if
there be no recognition of what had transpired prior to such
adjudication.
In the language of an American Supreme Court decision: "The
actual existence of a statute, prior to such a determination of
[unconstitutionality], is an operative fact and may have
consequences which cannot justly be ignored. The past cannot
always be erased by a new judicial declaration. The effect of

the subsequent ruling as to invalidity may have to be
considered in various aspects,with respect to particular
relations, individual and corporate, and particular conduct,
private and official." x x x
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:
Given the above perspective and considering that more than

two decades had passed since the PARCs approval of the
HLIs SDP, in conjunction with numerous activities performed in
good faith by HLI, and the reliance by the FWBs on the legality
and validity of the PARC-approved SDP, perforce, certain rights
of the parties, more particularly the FWBs, have to be
respected pursuant to the application in a general way of the
operative fact doctrine.
xxx
A view, however, has been advanced that the operative fact

doctrine is of minimal or altogether without relevance to the
instant case as it applies only in considering the effects of a
declaration of unconstitutionality of a statute, and not of a
declaration of nullity of a contract. This is incorrect, for this view
failed to consider is that it is NOT the SDOA dated May 11,
1989 which was revoked in the instant case. Rather, it is
PARCs approval of the HLIs Proposal for Stock Distribution
under CARP which embodied the SDP that was nullified.
A recall of the antecedent events would show that on May 11,
1989, Tadeco, HLI, and the qualified FWBs executed the
SDOA. This agreement provided the basis and mechanics of
the SDP that was subsequently proposed and submitted to
DAR for approval. It was only after its review that the PARC,
through then Sec. Defensor-Santiago, issued the assailed
Resolution No. 89-12-2 approving the SDP. Considerably, it is
not the SDOA which gave legal force and effect to the stock
distribution scheme but instead, it is the approval of the SDP
under the PARC Resolution No. 89-12-2 that gave it its validity.
The above conclusion is bolstered by the fact that in Sec.
Pangandamans recommendation to the PARC Excom, what
he proposed is the recall/revocation of PARC Resolution No.
89-12-2 approving HLIs SDP, and not the revocation of the
SDOA. Sec. Pangandamans recommendation was favorably
endorsed by the PARC Validation Committee to the PARC
Excom, and these recommendations were referred to in the
assailed Resolution No. 2005-32-01. Clearly, it is not the SDOA
which was made the basis for the implementation of the stock
distribution scheme.
That the operative fact doctrine squarely applies to executive
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,163 We held:
Petitioner postulates that the "operative fact" doctrine is
inapplicable to the present case because it is an equitable
doctrine which could not be used to countenance an
inequitable result that is contrary to its proper office.
On the other hand, the petitioner Solicitor General argues that
the existence of the various agreements implementing the
SMDRP is an operative fact that can no longer be disturbed or
simply ignored, citing Rieta v. People of the Philippines.
The argument of the Solicitor General is meritorious.
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.
(Citations omitted; Emphasis supplied.)
The applicability of the operative fact doctrine to executive acts
was further explicated by this Court in Rieta v. People,164 thus:
Petitioner contends that his arrest by virtue of Arrest Search
and Seizure Order (ASSO) No. 4754 was invalid, as the law
upon which it was predicated General Order No. 60, issued
by then President Ferdinand E. Marcos was subsequently
declared by the Court, in 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 supplied.)
To reiterate, although the assailed Resolution No. 2005-32-01
states that it revokes or recalls the SDP, what it actually
revoked or recalled was the PARCs approval of the SDP
embodied in Resolution No. 89-12-2. Consequently, what was
actually declared null and void was an executive act, PARC
Resolution No. 89-12-2,165 and not a contract (SDOA). It is,
therefore, wrong to say that it was the SDOA which was
annulled in the instant case. Evidently, the operative fact
doctrine is applicable.
IV.
While the assailed PARC resolutions effectively nullifying the
Hacienda Luisita SDP are upheld, the revocation must, by
application of the operative fact principle, give way to the right
of the original 6,296 qualified FWBs to choose whether they
want to remain as HLI stockholders or not. The Court cannot
turn a blind eye to the fact that in 1989, 93% of the FWBs
agreed to the SDOA (or the MOA), which became the basis of
the SDP approved by PARC per its Resolution No. 89-12-2
dated November 21, 1989. From 1989 to 2005, the FWBs were
said to have received from HLI salaries and cash benefits,
hospital and medical benefits, 240-square meter homelots, 3%
of the gross produce from agricultural lands, and 3% of the
proceeds of the sale of the 500-hectare converted land and the
80.51-hectare lot sold to SCTEX. HLI shares totaling
118,391,976.85 were distributed as of April 22, 2005.166 On
August 6, 20l0, HLI and private respondents submitted a
Compromise Agreement, in which HLI gave the FWBs the
option of acquiring a piece of agricultural land or remain as HLI
stockholders, and as a matter of fact, most FWBs indicated
their choice of remaining as stockholders. These facts and
circumstances tend to indicate that some, if not all, of the
FWBs may actually desire to continue as HLI shareholders. A
matter best left to their own discretion.
With respect to the other FWBs who were not listed as
qualified beneficiaries as of November 21, 1989 when the SDP
was approved, they are not accorded the right to acquire land
but shall, however, continue as HLI stockholders. All the

benefits and homelots167 received by the 10,502 FWBs (6,296
original FWBs and 4,206 non-qualified FWBs) listed as HLI
stockholders as of August 2, 2010 shall be respected with no
obligation to refund or return them since the benefits (except
the homelots) were received by the FWBs as farmhands in the
agricultural enterprise of HLI and other fringe benefits were
granted to them pursuant to the existing collective bargaining
agreement with Tadeco. If the number of HLI shares in the
names of the original FWBs who opt to remain as HLI
stockholders falls below the guaranteed allocation of 18,804.32
HLI shares per FWB, the HLI shall assign additional shares to
said FWBs to complete said minimum number of shares at no
cost to said FWBs.
With regard to the homelots already awarded or earmarked,
the FWBs are not obliged to return the same to HLI or pay for
its value since this is a benefit granted under the SDP. The
homelots do not form part of the 4,915.75 hectares covered by
the SDP but were taken from the 120.9234 hectare residential
lot owned by Tadeco. Those who did not receive the homelots
as of the revocation of the SDP on December 22, 2005 when
PARC Resolution No. 2005-32-01 was issued, will no longer be
entitled to homelots. Thus, in the determination of the ultimate
agricultural land that will be subjected to land distribution, the
aggregate area of the homelots will no longer be deducted.
There is a claim that, since the sale and transfer of the 500
hectares of land subject of the August 14, 1996 Conversion
Order and the 80.51-hectare SCTEX lot came after compulsory
coverage has taken place, the FWBs should have their
corresponding share of the lands value. There is merit in the
claim. Since the SDP approved by PARC Resolution No. 8912-2 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.
A view has been advanced that HLI must pay the FWBs yearly
rent for use of the land from 1989. We disagree. It should not
be forgotten that the FWBs are also stockholders of HLI, and
the benefits acquired by the corporation from its possession
and use of the land ultimately redounded to the FWBs benefit
based on its business operations in the form of salaries, and
other fringe benefits under the CBA. To still require HLI to pay
rent to the FWBs will result in double compensation.
For sure, HLI will still exist as a corporation even after the
revocation of the SDP although it will no longer be operating
under the SDP, but pursuant to the Corporation Code as a
private stock corporation. The non-agricultural assets
amounting to PhP 393,924,220 shall remain with HLI, while the
agricultural lands valued at PhP 196,630,000 with an original
area of 4,915.75 hectares shall be turned over to DAR for
distribution to the FWBs. To be deducted from said area are
the 500-hectare lot subject of the August 14, 1996 Conversion
Order, the 80.51-hectare SCTEX lot, and the total area of
6,886.5 square meters of individual lots that should have been
distributed to FWBs by DAR had they not opted to stay in HLI.
HLI shall be paid just compensation for the remaining
agricultural land that will be transferred to DAR for land
distribution to the FWBs. We find that the date of the "taking" is
November 21, 1989, when PARC approved HLIs SDP per
PARC Resolution No. 89-12-2. DAR shall coordinate with LBP
for the determination of just compensation. We cannot use
May 11, 1989 when the SDOA was executed, since it was the
SDP, not the SDOA, that was approved by PARC.
The instant petition is treated pro hac vice in view of the
peculiar facts and circumstances of the case.
WHEREFORE, the instant petition is DENIED. PARC

Resolution No. 2005-32-01 dated December 22, 2005 and
Resolution No. 2006-34-01 dated May 3, 2006, placing the
lands subject of HLIs SDP under compulsory coverage on
mandated land acquisition scheme of the CARP, are hereby
AFFIRMED with the MODIFICATION that the original 6,296
qualified FWBs shall have the option to remain as stockholders
of HLI. DAR shall immediately schedule meetings with the said
6,296 FWBs and explain to them the effects, consequences
and legal or practical implications of their choice, after which
the FWBs will be asked to manifest, in secret voting, their
choices in the ballot, signing their signatures or placing their
thumbmarks, as the case may be, over their printed names.
Of the 6,296 FWBs, he or she who wishes to continue as an
HLI stockholder is entitled to 18,804.32 HLI shares, and, in
case the HLI shares already given to him or her is less than
18,804.32 shares, the HLI is ordered to issue or distribute
additional shares to complete said prescribed number of
shares at no cost to the FWB within thirty (30) days from
finality of this Decision. Other FWBs who do not belong to the
original 6,296 qualified beneficiaries are not entitled to land
distribution and shall remain as HLI shareholders. All salaries,
benefits, 3% production share and 3% share in the proceeds of
the sale of the 500-hectare converted land and the 80.51hectare SCTEX lot and homelots already received by the
10,502 FWBs, composed of 6,296 original FWBs and 4,206
non-qualified FWBs, shall be respected with no obligation to
refund or return them.
Within thirty (30) days after determining who from among the
original FWBs will stay as stockholders, DAR shall segregate
from the HLI agricultural land with an area of 4,915.75 hectares
subject of PARCs SDP-approving Resolution No. 89-12-2 the
following: (a) the 500-hectare lot subject of the August 14, l996
Conversion Order; (b) the 80.51-hectare lot sold to, or acquired
by, the government as part of the SCTEX complex; and (c) the
aggregate area of 6,886.5 square meters of individual lots that
each FWB is entitled to under the CARP had he or she not
opted to stay in HLI as a stockholder. After the segregation
process, as indicated, is done, the remaining area shall be
turned over to DAR for immediate land distribution to the
original qualified FWBs who opted not to remain as HLI
stockholders.
The aforementioned area composed of 6,886.5-square meter
lots allotted to the FWBs who stayed with the corporation shall
form part of the HLI assets.
HLI is directed to pay the 6,296 FWBs the consideration of
PhP 500,000,000 received by it from Luisita Realty, Inc. for the
sale to the latter of 200 hectares out of the 500 hectares
covered by the August 14, 1996 Conversion Order, the
consideration of PhP 750,000,000 received by its owned
subsidiary, Centennary Holdings, Inc. for the sale of the
remaining 300 hectares of the aforementioned 500-hectare lot
to Luisita Industrial Park Corporation, and the price of PhP
80,511,500 paid by the government through the Bases
Conversion Development Authority for the sale of the 80.51hectare lot used for the construction of the SCTEX road
network. From the total amount of PhP 1,330,511,500 (PhP
500,000,000 + PhP 750,000,000 + PhP 80,511,500 = PhP
1,330,511,500) shall be deducted the 3% of the total gross
sales from the production of the agricultural land and the 3% of
the proceeds of said transfers that were paid to the FWBs, the

taxes and expenses relating to the transfer of titles to the
transferees, and the expenditures incurred by HLI and
Centennary Holdings, Inc. for legitimate corporate purposes.
For this purpose, DAR is ordered to engage the services of a
reputable accounting firm approved by the parties to audit the
books of HLI and Centennary Holdings, Inc. to determine if the
PhP 1,330,511,500 proceeds of the sale of the three (3)
aforementioned lots were used or spent for legitimate
corporate purposes. Any unspent or unused balance as
determined by the audit shall be distributed to the 6,296
original FWBs.
HLI is entitled to just compensation for the agricultural land that
will be transferred to DAR to be reckoned from November 21,
1989 per PARC Resolution No. 89-12-2. DAR and LBP are
ordered to determine the compensation due to HLI.
DAR shall submit a compliance report after six (6) months from
finality of this judgment. It shall also submit, after submission of
the compliance report, quarterly reports on the execution of
this judgment to be submitted within the first 15 days at the end
of each quarter, until fully implemented.
The temporary restraining order is lifted.
SO ORDERED.

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Page 1 of 52 | Agrarian Law & Social Legislation Week 2 | amgisidro

G.R. No. 78742 July 14, 1989

Earlier, in fact, R.A. No. 3844, otherwise known as the

Page 2 of 52 | Agrarian Law & Social Legislation Week 2 | amgisidro

They contend that President Aquino usurped legislative power

In considering the rentals as advance payment on the land, the

Page 3 of 52 | Agrarian Law & Social Legislation Week 2 | amgisidro

motion for intervention was filed, this time by Manuel

The petitioners claim that the power to provide for a

NASP alleges that President Aquino had no authority to fund

Two additional arguments are made by Barcelona, to wit, the

Agrarian Reform Fund.-There is hereby created a special fund,

The petitioners also decry the penalty for non-registration of

Page 4 of 52 | Agrarian Law & Social Legislation Week 2 | amgisidro

In his Comment, the Solicitor General submits that the petition

G.R. No. 79744

The incumbent president shall continue to exercise legislative

The petitioner alleges that the then Secretary of Department of

On the issue of just compensation, his position is that when

On September 3, 1986, the petitioner protested the erroneous

In his Reply to the public respondents, the petitioner maintains

Page 5 of 52 | Agrarian Law & Social Legislation Week 2 | amgisidro

Page 6 of 52 | Agrarian Law & Social Legislation Week 2 | amgisidro

private agricultural land, the size of which shall vary according

It should follow that the specific constitutional provisions

Finally, there is the contention of the public respondent in G.R.

The argument of some of the petitioners that Proc. No. 131

Whenever a duty is imposed upon a public official and an

Retention Limits. Except as otherwise provided in this Act,

Page 7 of 52 | Agrarian Law & Social Legislation Week 2 | amgisidro

with the latter being used as an implement of the former like

Page 8 of 52 | Agrarian Law & Social Legislation Week 2 | amgisidro

requisites have been met by the measures here challenged as

Page 9 of 52 | Agrarian Law & Social Legislation Week 2 | amgisidro

Congress having determined, as it did by the Act of March

Page 10 of 52 | Agrarian Law & Social Legislation Week 2 | amgisidro

In the present petition, we are once again confronted with the

Objection is raised, however, to the manner of fixing the just

Page 11 of 52 | Agrarian Law & Social Legislation Week 2 | amgisidro

(vi) Payment for tuition fees of the immediate family of the

It is well-settled that just compensation means the equivalent

Page 12 of 52 | Agrarian Law & Social Legislation Week 2 | amgisidro

The Court has not found in the records of the Constitutional

Page 13 of 52 | Agrarian Law & Social Legislation Week 2 | amgisidro

to afford absolute reassurance that no piece of land can be

The last major challenge to CARP is that the landowner is

All qualified farmer-beneficiaries are now deemed full owners

Page 14 of 52 | Agrarian Law & Social Legislation Week 2 | amgisidro

Page 15 of 52 | Agrarian Law & Social Legislation Week 2 | amgisidro

Almost two years later, on September 26, 1991, the DAR

Page 16 of 52 | Agrarian Law & Social Legislation Week 2 | amgisidro

Aguirre, Legaspi Village

7th Floor, Cacho-Gonzales Bldg. 101 Aguirre St., Leg.

In a letter dated September 28, 1992, respondent DAR

Page 17 of 52 | Agrarian Law & Social Legislation Week 2 | amgisidro

Hence, this recourse. Petitioner assigns the following errors:

UNDER R.A. 6657, MORE PARTICULARLY, IN FAILING TO

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2. Gathers basic ownership documents listed under 1.a or 1.b

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to LO by personal delivery Form No. 2

with proof of service, or