All disputes arising in connection with this Agreement shall

Purchase Agreement [4] (BPPA). The BPPA provided that SEARBEMCO shall sell be finally settled under the Rules of Conciliation and
SECOND DIVISION Arbitration of the International Chamber of Commerce by
exclusively to DOLE, and the latter shall buy from the former, all Cavendish three (3) Arbitrators appointed in accordance with said
Rules. The Arbitration shall be held in a venue to be agreed
bananas of required specifications to be planted on the land owned by
by the parties. Judgment upon the award rendered may be
STANFILCO EMPLOYEES AGRARIAN REFORM G.R. No. 154048
SEARBEMCO. The BPPA states: entered in any Philippine Court having jurisdiction or
BENEFICIARIES MULTI-PURPOSE
application may be made to such court for judicial
COOPERATIVE, Present:
The SELLER agrees to sell exclusively to the BUYER, and acceptance of the award and as order of enforcement, as the
Petitioner,
the BUYER agrees to buy all Cavendish Banana of the case may be.
CARPIO, J., Chairperson,
LEONARDO-DE CASTRO, Specifications and Quality described in EXHIBIT A hereof
- versus - BRION, produced on the SELLERS plantation covering an area of
DEL CASTILLO, and 351.6367 hectares, more or less, and which is planted and
ABAD, JJ. authorized under letter of instruction no. 790 as amended on On December 11, 2000, DOLE filed a complaint with the Regional Trial
November 6, 1999 under the terms and conditions herein
DOLE PHILIPPINES, INC. (STANFILCO DIVISION), stipulated. The SELLER shall not increase or decrease the Court[5] (RTC) against SEARBEMCO, the spouses Elly and Myrna Abujos
ORIBANEX SERVICES, INC. and SPOUSES ELLY Promulgated: area(s) stated above without the prior written approval of the
AND MYRNA ABUJOS, BUYER. However, the SELLER may reduce said area(s) (spouses Abujos), and Oribanex Services, Inc. (Oribanex) for specific performance
Respondents. November 27, 2009 provided that if the SELLER replaces the reduction by
x ------------------------------------------------------------------------------------------x planting bananas on an equivalent area(s) elsewhere, it is and damages, with a prayer for the issuance of a writ of preliminary injunction and
agreed that such replacement area(s) shall be deemed
covered by the Agreement. If the SELLER plants an area(s) of a temporary restraining order. DOLE alleged that SEARBEMCO sold and
in excess of said 351.6367 hectares, the parties may enter
DECISION into a separate agreement regarding the production of said delivered to Oribanex, through the spouses Abujos, the bananas rejected by DOLE,
additional acreage. SELLER will produce banana to the in violation of paragraph 5(p), Article V of the BPPA which limited the sale of
maximum capacity of the plantation, as much as practicable,
consistent with good agricultural practices designed to rejected bananas for domestic non-export consumption. DOLE further alleged that
produce banana of quality having the standards hereinafter
BRION, J.: set forth for the duration of this Banana Production and Oribanex is likewise an exporter of bananas and is its direct competitor.
Purchase Agreement.

Before this Court is the petition for review on certiorari[1] filed by petitioner
Stanfilco Employees Agrarian Reform Beneficiaries Multi-Purpose Cooperative
(SEARBEMCO). It assails:
(a) the decision[2] of the Court of Appeals (CA) in CA-G.R. SP No.
66148 dated November 27, 2001; and
(b) the CAs resolution [3] of June 13, 2002 in the same case, denying
SEARBEMCOs motion for reconsideration.
THE FACTUAL ANTECEDENTS
SEARBEMCO bound and obliged itself, inter alia, to do the following:
V. SPECIFIC OBLIGATIONS OF THE SELLER
xxx
p.) Sell exclusively to the BUYER all bananas produced
from the subject plantation, except those rejected by the
BUYER for failure to meet the specifications and conditions
contained in Exhibit A hereof. In the case of any such
rejected bananas, the SELLER shall have the right to
sell such rejected bananas to third parties, for domestic
non-export consumption. The SELLER shall only sell
bananas produced from the plantation and not from any
other source. [Emphasis supplied.]
Any dispute arising from or in connection with the BPPA between the parties shall
be finally settled through arbitration. To quote the BPPA:
DOLE narrated in its complaint how SEARBEMCO sold and delivered the
rejected bananas to Oribanex through the spouses Abujos:
9.) That, however, on April 12, 2000 at about 5:00 oclock in
the afternoon, [DOLE] through its authorized security
personnel discovered that defendant SEARBEMCO, in
violation of Section 5(p) Article V of the Banana Production
and Purchase Agreement, packed the bananas rejected by
[DOLE] in boxes marked CONSUL in Packing Plant 32 in
DAPCO Panabo and sold and delivered them to defendant
Abujos;
10.) That about 373 CONSUL marked boxes were packed
and knowingly sold by defendant SEARBEMCO to
ORIBANEX SERVICES, INC. through defendants Abujos
who carried and loaded the same on board a blue Isuzu
Canter bearing plate no. LDM 976 and delivered to
defendant ORIBANEX for export at the TEFASCO Wharf
covered by Abujos Delivery Receipt, a copy of which is
hereto attached as Annex B;

IX. ARBITRATION OF DISPUTE 11.) That the following day, April 13, 2000, again the same
On January 29, 1998, SEARBEMCO, as seller, and respondent DOLE Philippines,
security found that defendant SEARBEMCO continued to
Inc. (Stanfilco Division) (DOLE), as buyer, entered into a Banana Production and pack the bananas rejected by plaintiff in boxes marked as
 CONSUL and, in violation of paragraph 5(p) Article V of
the Banana Production and Purchase Agreement, sold and BPPA and Article V, Sec. 30(g) [9] of AO No. 9-98 of the SEARBEMCO moved for the reconsideration of the RTC Order. [14] The RTC
delivered them to defendant ORIBANEX SERVICES, INC.,
for export, through defendants Abujos; DAR; denied the motion for lack of merit in its Order of July 12, 2001.[15]

3) it did not violate Section 5(p), Article V of the BPPA, since

12.) That about 648 CONSUL marked boxes were packed
and knowingly sold by defendant SEARBEMCO to the rejected bananas were sold to the spouses Abujos who THE CA RULING
ORIBANEX SERVICES, INC., through defendants Abujos
who carried and loaded the same on board a red Isuzu were third-party buyers and not exporters of bananas; and
Forwarder, bearing plate no. LCV 918, and delivered to
defendant ORIBANEX for export at the TEFASCO Wharf 4) the complaint is fatally defective as the Board of Directors of On July 26, 2001, SEARBEMCO filed a special civil action for certiorari[16] with
covered by Abujos Delivery Receipt, a copy of which is
hereto attached and marked as Annex C; DOLE did not approve any resolution authorizing Atty. the CA alleging grave abuse of discretion on the part of the RTC for denying its

13.) That the sale of a total of 712 boxes of rejected bananas Reynaldo Echavez to execute the requisite Verification and motion to dismiss and the subsequent motion for reconsideration.
covering April 12 and 13, 2000, or any other dates prior
Certification Against Forum Shopping and, therefore, the SEARBEMCO argued that the BPPA the parties executed is an agri-business
thereto or made thereafter by defendant SEARBEMCO to
defendant ORIBANEX SERVICES, INC. through defendant same is fatally defective. venture agreement contemplated by DARs AO No. 9-98. Thus, any dispute arising
Abujos is in utter violation of the Agreement between
plaintiff [DOLE] and defendant SEARBEMCO that from the interpretation and implementation of the BPPA is an agrarian dispute
SEARBEMCO may sell bananas rejected by plaintiff to
parties for domestic non-export consumption only. DOLE opposed SEARBEMCOs motion to dismiss alleging, among within the exclusive jurisdiction of the DARAB.

others, that:

SEARBEMCO responded with a motion to dismiss on the grounds of lack of 1) the dispute between the parties is not an agrarian dispute within the In a decision dated November 27, 2001,[17] the CA found that the RTC did not

jurisdiction over the subject matter of the claim, lack of cause of action, failure to exclusive jurisdiction of the DARAB under Republic Act No. gravely abuse its discretion in denying SEARBEMCOs motion to dismiss and

submit to arbitration which is a condition precedent to the filing of a complaint, 6657[10] (RA No. 6657); and motion for reconsideration.

and the complaints defective verification and certification of non-forum shopping. 2) the Arbitration Clause of the BPPA is not applicable as, aside from
[6]
SEARBEMCO argued that: SEARBEMCO, DOLE impleaded other parties (i.e., the spouses The CA ruled that the [DAR] has no jurisdiction, under said [AO No. 9-

Abujos and Oribanex who are not parties to the BPPA) as 98], over actions between [SEARBEMCO] and [DOLE] for enforcement of the

1) the Department of Agrarian Reform Adjudication Board defendants.[11] said Agreement when one commits a breach thereof and for redress by way of

(DARAB) has exclusive jurisdiction over the action filed by specific performance and damages inclusive of injunctive relief. [18] It held that the

DOLE, pursuant to Sections 1 and 3(e) of Administrative Subsequently, DOLE filed on February 2, 2001 an amended complaint,[12] the case is not an agrarian dispute within the purview of Section 3(d) of RA No. 6657,
[19]
Order amendment consisting of the Verification and Certification against forum shopping but is an action to compel SEARBEMCO to comply with its obligations under
[7]
No. 09, Series of 1998 (AO No. 9-98) and Section 5(a) and for DOLE executed by Danilo C. Quinto, DOLEs Zone Manager. the BPPA; it called for the application of the provisions of the Civil Code, not RA

(c) of Administrative Order No. 02, Series of 1999[8](AO No. No. 6657.

2-99) of the Department of Agrarian Reform (DAR), since THE RTC RULING

the dispute between the parties is an agrarian dispute within The CA likewise disregarded SEARBEMCOs emphatic argument that DOLEs

the exclusive competence of the DARAB to resolve; The RTC denied SEARBEMCOs motion to dismiss in an Order dated May 16, complaint was prematurely filed because of its failure to first resort to
[13]
2) the filing of the complaint is premature, as the dispute 2001. The trial court stated that the case does not involve an agrarian conflict arbitration. The arbitration clause under the BPPA, said the CA, applies only when

between DOLE and SEARBEMCO has not been referred to and is a judicial matter that it can resolve. the parties involved are parties to the agreement; in its complaint, DOLE included

and resolved by arbitration, contrary to Article IX of the the spouses Abujos and Oribanex as defendants. According to the CA, if [DOLE]

referred its dispute with [SEARBEMCO] to a Panel of Arbitrators, any judgment
thejurisdiction of the regular courts, not
rendered by the latter, whether for or against [DOLE] will not be binding on the
the DARAB.
[spouses Abujos] and [Oribanex], as case law has it that only the parties to a suit,
as well as their successors-in-interest, are bound by the judgment of the Court or
quasi-judicial bodies.[20]
On SEARBEMCOs argument that the Verification and Certification Against
Forum Shopping under DOLEs amended complaint is defective for failure to state
that this was based on personal knowledge, the CA ruled that the omission of the
word personal did not render the Verification and Certification defective.
SEARBEMCO moved for reconsideration of the decision, but the CA denied the
motion for lack of merit in its resolution of June 13, 2002. [21]
ASSIGNMENT OF ERRORS
In the present petition, SEARBEMCO submits that the CA erred in ruling that:
1.) the RTC has jurisdiction over the subject matter of the complaint of
DOLE, considering that the case involves an agrarian dispute
within the exclusive jurisdiction of the DARAB;
2.) the complaint of DOLE states a cause of action, despite the fact that
SEARBEMCO has not violated any provision of the BPPA; and
3.) the filing of the complaint is not premature, despite DOLEs failure
to submit its claim to arbitration a condition precedent to any
juridical recourse.
THE COURTS RULING
We do not find the petition meritorious.
DOLEs complaint falls within
SEARBEMCO mainly relies on Section 50 [22] of RA No. 6657 and the
characterization of the controversy as an agrarian dispute or as an agrarian reform
matter in contending that the present controversy falls within the competence of
the DARAB and not of the regular courts. The BPPA, SEARBEMCO claims, is a
joint venture and a production, processing and marketing agreement, as defined
[23]
under Section 5 (c) (i) and (ii) of DAR AO No. 2-99; hence, any dispute arising
from the BPPA is within the exclusive jurisdiction of the DARAB. SEARBEMCO
also asserts that the parties relationship in the present case is not only that of buyer
and seller, but also that of supplier of land covered by the CARP and of manpower
on the part of SEARBEMCO, and supplier of agricultural inputs, financing and
technological expertise on the part of DOLE. Therefore, SEARBEMCO concludes
that the BPPA is not an ordinary contract, but one that involves an agrarian element
and, as such, is imbued with public interest.
We clarify at the outset that what we are reviewing in this petition is
the legal question of whether the CA correctly ruled that the RTC committed no
grave abuse discretion in denying SEARBEMCOs motion to dismiss. In ruling for
legal correctness, we have to view the CA decision in the same context that the
petition for certiorari it ruled upon was presented to the appellate court; we have
to examine the CA decision from the prism of whether it correctly determined the
presence or absence of grave abuse of discretion in the RTC ruling before it, not on
the basis of whether the RTC ruling on the merits of the case was correct. In other
words, we have to be keenly aware that the CA undertook a Rule 65 review, not a
review on appeal, of the challenged RTC ruling. A court acts with grave abuse of
discretion amounting to lack or excess of jurisdiction when its action was
performed in a capricious and whimsical exercise of judgment equivalent to lack
of discretion. The abuse of discretion must be so patent and gross as to amount to
an evasion of a positive duty or to a virtual refusal to perform a duty enjoined by
law, or to act at all in contemplation of the law, as where the power is exercised in
an arbitrary and despotic manner by reason or passion or personal hostility.[24]
As the CA found, the RTCs action was not attended by any grave abuse of
discretion and the RTC correctly ruled in denying SEARBEMCOs motion to
dismiss. We fully agree with the CA.
Section 3(d) of RA No. 6657 is clear in defining an agrarian dispute:
any controversy relating to tenurial arrangements, whether leasehold, tenancy,
stewardship or otherwise, over lands devoted to agriculture, including dispute
concerning farm-workers associations or representations of persons in negotiating,
fixing, maintaining, changing or seeking to arrange terms or conditions of such
tenurial arrangements. It includes any controversy relating to compensation of
lands acquired under this Act and other terms and conditions of transfer of
ownership from landowners to farmworkers, tenants and other agrarian reform
beneficiaries, whether the disputants stand in the proximate relation of farm
operator and beneficiary, landowner and tenant, or lessor and lessee.[25]
RA No. 6657 is procedurally implemented through the 2003 DARAB Rules of
Procedure where Section 1, Rule II [26] enumerates the instances where the DARAB
shall have primary and exclusive jurisdiction. A notable feature of RA No. 6657
and its implementing rules is the focus on agricultural lands and the relationship
over this land that serves as the basis in the determination of whether a matter falls
under DARAB jurisdiction.
In Heirs of the Late Hernan Rey Santos v. Court of Appeals,[27] we held that:
For DARAB to have jurisdiction over a case, there must
exist a tenancy relationship between the parties. x x x.
In Vda. De Tangub v. Court of Appeals (191 SCRA 885), we
held that the jurisdiction of the Department of Agrarian
Reform is limited to the following: a.) adjudication of all
matters involving implementation of agrarian reform; b.)
resolution of agrarian conflicts and land tenure related
problems; and c.) approval and disapproval of the
 conversion, restructuring or readjustment of agricultural
lands into residential, commercial, industrial, and other non-
agricultural uses. [Emphasis supplied].
The case of Pasong Bayabas Farmers Association, Inc. v. Court of
Appeals[28] lists down the indispensable elements for a tenancy relationship to
exist: (1) the parties are the landowner and the tenant or agricultural lessee; (2) the
subject matter of the relationship is an agricultural land; (3) there is consent
between the parties to the relationship; (4) the purpose of the relationship is to
bring about agricultural production; (5) there is personal cultivation on the part of
the tenant or agricultural lessee; and (6) the harvest is shared between the
landowner and the tenant or the agricultural lessee.
The parties in the present case have no tenurial, leasehold, or any other
agrarian relationship that could bring their controversy within the ambit of agrarian
reform laws and within the jurisdiction of the DARAB. In fact, SEARBEMCO has
no allegation whatsoever in its motion to dismiss regarding any tenancy
relationship between it and DOLE that gave the present dispute the character of an
agrarian dispute.
We have always held that tenancy relations cannot be presumed. The
elements of tenancy must first be proved by substantial evidence which can be
shown through records, documents, and written agreements between the parties. A
principal factor, too, to consider in determining whether a tenancy relationship
exists is the intent of the parties.[29]
SEARBEMCO has not shown that the above-mentioned indispensable
elements of tenancy relations are present between it and DOLE. It also cannot be
gleaned from the intention of the parties that they intended to form a tenancy
relationship between them. In the absence of any such intent and resulting
relationship, the DARAB cannot have jurisdiction. Instead, the present petition is
properly cognizable by the regular courts, as the CA and the RTC correctly ruled.
obligations of persons engaged in the management, cultivation, and use of
Notably, the requirement of the existence of tenurial relationship has an agricultural land covered by CARP, the case falls squarely within the
been relaxed in the cases of Islanders CARP-Farmers Beneficiaries Muti-Purpose jurisdictional ambit of the DAR.
[30]
Cooperative, Inc. v. Lapanday Agricultural and Devt. Corporation and Cubero
[31]
v. Laguna West Multi-Purpose Cooperative, Inc. The Court, speaking through Carefully analyzed, the principal issue raised
former Chief Justice Panganiban, declared in Islanders that: in Islanders and Cubero referred to the management, cultivation, and use of the
[The definition of agrarian dispute in RA No. 6657 is] broad CARP-covered agricultural land; the issue of the nullity of the joint economic
enough to include disputes arising from any tenurial
arrangement beyond the traditional landowner-tenant or enterprise agreements in Islanders and Cubero would directly affect the
lessor-lessee relationship. xxx [A]grarian reform extends
agricultural land covered by CARP. Those cases significantly did not pertain
beyond the mere acquisition and redistribution of land, the
law acknowledges other modes of tenurial arrangements to to post-harvest transactions involving the produce from CARP-covered
effect the implementation of CARP.[32]
agricultural lands, as the case before us does now.
While Islanders and Cubero may seem to serve as precedents to the
Moreover, the resolution of the issue raised
present case, a close analysis of these cases, however, leads us to conclude that
in Islanders and Cubero required the interpretation and application of the
significant differences exist in the factual circumstances between those cases and
provisions of RA No. 6657, considering that the farmer-beneficiaries claimed that
the present case, thus rendering the rulings in these cited cases inapplicable.
the agreements contravened specific provisions of that law. In the present case,
DOLEs complaint for specific performance and damages before the RTC did not
Islanders questioned (through a petition for declaration of nullity filed
question the validity of the BPPA that would require the application of the
before the RTC of Tagum City) the lack of authority of the farmer-beneficiaries
provisions of RA No. 6657; neither did SEARBEMCOs motion to dismiss nor its
alleged representative to enter into a Joint Production Agreement with
other pleadings assail the validity of the BPPA on the ground that its provisions
Lapanday. The farmers-beneficiaries assailed the validity of the agreement by
violate RA No. 6657. The resolution of the present case would therefore involve,
additionally claiming that its terms contravened RA No. 6657.
more than anything else, the application of civil law provisions on breaches of
contract, rather than agrarian reform principles. Indeed, in support of their
Cubero likewise involved a petition to declare the nullity of a Joint
arguments, the parties have capitalized and focused on their relationship as buyer
Venture Agreement between the farmer-beneficiaries and Laguna West Multi-
and seller. DOLE, the buyer, filed a complaint against SEARBEMCO, the seller, to
Purpose Cooporative, Inc. The successors of the farmer-beneficiaries assailed the
enforce the BPPA between them and to compel the latter to comply with its
agreement before the RTC of Tanauan, Batangas for having been executed within
obligations. The CA is thus legally correct in its declaration that the action before
the 10-year prohibitory period under Section 27 of RA No. 6657.
the RTC does not involve an agrarian dispute, nor does it call for the application of
Agrarian Reform laws. x x x. The action of [DOLE] involves and calls for the
In both cases, the Court ruled that the RTC lacked jurisdiction to hear
application of the New Civil Code, in tandem with the terms and conditions of
the complaint and declared the DARAB as the competent body to resolve the
the [BPPA] of [SEARBEMCO] and [DOLE].[33]
dispute. The Court declared that when the question involves the rights and

We find SEARBEMCOs reliance on DAR AO No. 9-98 and AO No. 2-
99 as bases for DARABs alleged expanded jurisdiction over all disputes arising
from the interpretation of agribusiness ventures to be misplaced. DARABs
jurisdiction under Section 50 of RA No. 6657 should be read in conjunction with
the coverage of agrarian reform laws; administrative issuances like DAR AO Nos.
9-98 and 2-99 cannot validly extend the scope of the jurisdiction set by law. In so
ruling, however, we do not pass upon the validity of these administrative
issuances. We do recognize the possibility that disputes may exist between parties
to joint economic enterprises that directly pertain to the management, cultivation,
and use of CARP-covered agricultural land. Based on our above discussion, these
disputes will fall within DARABs jurisdiction.
Even assuming that the present case can be classified as an agrarian
dispute involving the interpretation or implementation of agribusiness venture
agreements, DARAB still cannot validly acquire jurisdiction, at least insofar as
DOLEs cause of action against the third parties the spouses Abujos and Oribanex
is concerned. To prevent multiple actions, we hold that the present case is best
resolved by the trial court.
DOLEs complaint validly states a
cause of action
SEARBEMCO asserts that the pleading containing DOLEs claim against it states
no cause of action. It contends that it did not violate any of the provisions of the
BPPA, since the bananas rejected by DOLE were sold to the spouses Abujos who
are third-party buyers and are not exporters of bananas transactions that the BPPA
allows. Since the sole basis of DOLEs complaint was SEARBEMCOs alleged
violation of the BPPA, which SEARBEMCO insists did not take place, the
complaint therefore did not state a cause of action.
Due consideration of the basic rules on lack of cause of action as a ground for a
motion to dismiss weighs against SEARBEMCOs argument.
In the case of Jimenez, Jr. v. Jordana,[34] this Court had the opportunity to discuss
the sufficiency of the allegations of the complaint to uphold a valid cause of action,
as follows:
In a motion to dismiss, a defendant hypothetically admits
the truth of the material allegations of the plaintiffs
complaint. This hypothetical admission extends to the
relevant and material facts pleaded in, and the inferences
fairly deductible from, the complaint. Hence, to determine
whether the sufficiency of the facts alleged in the complaint
constitutes a cause of action, the test is as follows: admitting
the truth of the facts alleged, can the court render a valid
judgment in accordance with the prayer?
To sustain a motion to dismiss, the movant needs
to show that the plaintiffs claim for relief does not exist at
all. On the contrary, the complaint is sufficient if it contains
sufficient notice of the cause of action even though the
allegations may be vague or indefinite, in which event, the
proper recourse would be, not a motion to dismiss, but a
motion for a bill of particulars.[35]
In applying this authoritative test, we must hypothetically assume the
truth of DOLEs allegations, and determine whether the RTC can render a valid
judgment in accordance with its prayer.
We find the allegations in DOLEs complaint to be sufficient basis for the judgment
prayed for. Hypothetically admitting the allegations in DOLEs complaint
that SEARBEMCO sold the rejected bananas to Oribanex, a competitor of DOLE
and also an exporter of bananas, through the spouses Abujos, a valid judgment
may be rendered by the RTC holding SEARBEMCO liable for breach of contract.
That the sale had been to the spouses Abujos who are not exporters is essentially a
denial of DOLEs allegations and is not therefore a material consideration in
weighing the merits of the alleged lack of cause of action. What SEARBEMCO
stated is a counter-statement of fact and conclusion, and is a defense that it will
have to prove at the trial. At this point, the material consideration is merely what
the complaint expressly alleged. Hypothetically assuming DOLEs allegations of
ultimate sale to Oribanex, through the spouses Abujos, to be true, we hold
following the test of sufficiency in Jordana that DOLEs prayer for specific
performance and damages may be validly granted; hence, a cause of action exists.
The filing of the complaint is not
premature since arbitration
proceedings are not necessary in the
present case
SEARBEMCO argues that DOLE failed to comply with a condition precedent
before the filing of its complaint with the RTC, i.e.,DOLE did not attempt to settle
their controversy through arbitration proceedings. SEARBEMCO relies on Article
V, Section 30(g) of DAR AO No. 9-98 [36]
and Section 10 of DAR AO No. 2-99 [37] which provide that as a rule, voluntary
methods such as mediation or conciliation, shall be preferred in resolving disputes
involving joint economic enterprises. SEARBEMCO also cites Section IX of the
BPPA which provides that all disputes arising out of or in connection with their
agreement shall be finally settled through arbitration.
Following our conclusion that agrarian laws find no application in the present case,
we find as the CA did that SEARBEMCOs arguments anchored on these laws are
completely baseless. Furthermore, the cited DAR AO No. 2-99, on its face, only
mentions a preference, not a strict requirement of referral to arbitration. The
BPPA-based argument deserves more and closer consideration.
We agree with the CA ruling that the BPPA arbitration clause does not
apply to the present case since third parties are involved. Any judgment or ruling to
be rendered by the panel of arbitrators will be useless if third parties are included
in the case, since the arbitral ruling will not bind them; they are not parties to the
arbitration agreement. In the present case, DOLE included as parties the spouses
Abujos and Oribanex since they are necessary parties, i.e., they were directly
involved in the BPPA violation DOLE alleged, and their participation are
indispensable for a complete resolution of the dispute. To require the spouses
Abujos and Oribanex to submit themselves to arbitration and to abide by whatever
judgment or ruling the panel of arbitrators shall make is legally untenable; no law
and no agreement made with their participation can compel them to submit to
arbitration.
In support of its position, SEARBEMCO cites the case of Toyota Motor
Philippines Corp. v. Court of Appeals [38] which holds that, the contention that the
arbitration clause has become dysfunctional because of the presence of third
parties is untenable. Contracts are respected as the law between the contracting
parties. As such, the parties are thereby expected to abide with good faith in their
contractual commitments. SEARBEMCO argues that the presence of third parties
in the complaint does not affect the validity of the provisions on arbitration.
Unfortunately, the ruling in the Toyota case has been superseded by the more
recent cases of Heirs of Augusto L. Salas, Jr. v. Laperal Realty
[39] [40]
Corporation and Del Monte Corporation-USA v. Court of Appeals.
Heirs of Salas involved the same issue now before us: whether or not the
complaint of petitioners-heirs in that case should be dismissed for their failure to
submit the matter to arbitration before filing their complaint. The petitioners-heirs
included as respondents third persons who were not parties to the original
agreement between the petitioners-heirs and respondent Laperal Realty. In ruling
that prior resort to arbitration is not necessary, this Court held:
Respondent Laperal Realty, as a contracting
party to the Agreement, has the right to compel petitioners to
first arbitrate before seeking judicial relief. However, to split
the proceedings into arbitration for respondent Laperal
Realty and trial for the respondent lot buyers, or to hold trial
in abeyance pending arbitration between petitioners and
respondent Laperal Realty, would in effect result in
multiplicity of suits, duplicitous procedure and unnecessary
delay. On the other hand, it would be in the interest of
justice if the trial court hears the complaint against all herein
respondents and adjudicates petitioners rights as against
theirs in a single and complete proceeding.[41]
The case of Del Monte is more direct in stating that the doctrine held in Additionally, the inclusion of third parties in the complaint supports our
the Toyota case has already been abandoned: declaration that the present case does not fall under DARABs
The Agreement between petitioner DMC-USA jurisdiction. DARABs quasi-judicial powers under Section 50 of RA No. 6657
and private respondent MMI is a contract. The
provision to submit to arbitration any dispute arising may be invoked only when there is prior certification from the Barangay Agrarian
therefrom and the relationship of the parties is part of
Reform Committee (or BARC) that the dispute has been submitted to it for
that contract and is itself a contract. As a rule,
contracts are respected as the law between the mediation and conciliation, without any success of settlement. [43] Since the present
contracting parties and produce effect as between
them, their assigns and heirs. Clearly, only parties to dispute need not be referred to arbitration (including mediation or conciliation)
the Agreement, i.e., petitioners DMC-USA and its
Managing Director for Export Sales Paul E. Derby, because of the inclusion of third parties, neither SEARBEMCO nor DOLE will be
and private respondents MMI and its Managing
Director Lily Sy are bound by the Agreement and able to present the requisite BARC certification that is necessary to invoke
its arbitration clause as they are the only
signatories thereto. Petitioners Daniel Collins and DARABs jurisdiction; hence, there will be no compliance with Section 53 of RA
Luis Hidalgo, and private respondent SFI, not parties
No. 6657.
to the Agreement and cannot even be considered
assigns or heirs of the parties, are not bound by the
Agreement and the arbitration clause therein.
Consequently, referral to arbitration in the State of WHEREFORE, premises considered, we hereby DENY the petition
California pursuant to the arbitration clause and the
suspension of the proceedings in Civil Case No. 2637- for certiorari for lack of merit. The Regional Trial Court, Branch 34, Panabo City,
MN pending the return of the arbitral award could be
called for but only as to petitioners DMC-USA and is hereby directed to proceed with the case in accordance with this Decision. Costs
Paul E. Derby, Jr., and private respondents MMI and
Lily Sy, and not as to other parties in this case, in against petitioner SEARBEMCO.
accordance with the recent case of Heirs of Augusto L.
SO ORDERED.
Salas, Jr. v. Laperal Realty Corporation, which
superseded that of [sic] Toyota Motor Philippines ANTONIO T. CARPIO
Corp. v. Court of Appeals. Associate Justice
Chairperson
xxxx
MARIANO C. DEL CASTILLO
The object of arbitration is to allow the expeditious TERESITA J. LEONARDO-DE Associate Justice
determination of a dispute. Clearly, the issue before us CASTRO
could not be speedily and efficiently resolved in its Associate Justice
entirety if we allow simultaneous arbitration ARTURO D. BRION
proceedings and trial, or suspension of trial pending Associate Justice
arbitration. Accordingly, the interest of justice would
only be served if the trial court hears and adjudicates WE CONCUR:
the case in a single and complete proceeding.[42]
ROBERTO A. ABAD
Associate Justice
Following these precedents, the CA was therefore correct in its conclusion that the
parties agreement to refer their dispute to arbitration applies only where the ATTESTATION
parties to the BPPA are solely the disputing parties. I attest that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.
ANTONIO T. CARPIO
Associate Justice
 [16]
Chairperson Docketed as CA-G.R. SP No. 66148; id. at 79-100. 1.5. Those cases involving the sale, alienation, pre-emption, and
[17]
Supra note 2. redemption of agricultural lands under the coverage of the
[18]
CERTIFICATION Id. at p. 54. CARL or other agrarian laws;
[19]
Agrarian dispute as referring to any controversy relating to tenurial agreements, 1.6. Those involving the correction, partition, cancellation,
Pursuant to Section 13, Article VIII of the Constitution, and the whether leasehold, tenancy, stewardship or otherwise, over lands devoted to secondary and subsequent issuances of Certificates of Land
Division Chairpersons Attestation, it is hereby certified that the conclusions in the agriculture, including dispute concerning farmworkers association or Ownership Award (CLOAs) and Emancipation Patents (EPs)
above Decision were reached in consultation before the case was assigned to the representations of persons in negotiating, fixing, maintaining, changing or which are registered with the Land Registration Authority;
writer of the opinion of the Courts Division. seeking to arrange terms or conditions of such tenurial agreements. 1.7. Those cases involving the review of leasehold rentals;
It includes any controversy relating to compensation of lands acquired 1.8. Those cases involving the collection of amortizations on
REYNATO S. PUNO under this Act and other terms and conditions of transfer of ownership from payments for lands awarded under PD No. 27, as amended,
Chief Justice landowners to farmworkers, tenants and other agrarian reform beneficiaries, RA No. 3844, as amended, and RA No. 6657, as amended,
whether the disputants stand in the proximate relation of farm operator and and other related laws, decrees, orders, instructions, rules,
[1]
Under Rule 45 of the Rules of Court; rollo, pp. 4-44. beneficiary, landowner and tenant, lessor and lessee. and regulations, as well as payment for residential,
[20]
[2]
Penned by Associate Justice Romeo J. Callejo (retired Member of this Court), Supra note 2, p. 58. commercial, and industrial lots within the settlement and
[21]
and concurred in by Associate Justice Remedios Salazar-Fernando and Associate Supra note 3. resettlement areas under the administration and disposition
[22]
Justice Josefina Guevara-Salonga; id. at 45-64. Section 50. Quasi-Judicial Powers of the DAR. The DAR is hereby vested with of the DAR;
[3]
Id. at 65. primary jurisdiction to determine and adjudicate agrarian reform matters and 1.9. Those cases involving the annulment or rescission of lease
[4]
Id. at 106-123. shall have exclusive original jurisdiction over all matters involving the contracts and deeds of sale, and the cancellation or
[5]
RTC, Branch 34, Panabo City. implementation of agrarian reform, except those falling under the exclusive amendment of titles pertaining to agricultural lands under
[6]
Dated December 15, 2000; rollo, pp. 147-157. jurisdiction of the Department of Agriculture (DA) and the Department of the administration and disposition of the DAR and LBP; as
[7]
Section 1. Coverage This administrative order shall apply to all commercial Environment and Natural Resources. well as EPs issued under PD 266, Homestead Patents, Free
[23]
farms defined under Section 11 of RA 6657, as amended by Section 3 of RA Sec. 5. Definition of Terms x x x (c) Joint Economic Enterprises x x x Patents, and miscellaneous sales patents to settlers in
7881. (i) Joint venture whereby the beneficiaries contribute use of the land held settlement and resettlement areas under the administration
xxxx individually or in common and the facilities and improvements, if any. On and disposition of the DAR;
Section 3. Definition of Terms As used in this Order, the following terms shall be the other hand, the investor furnishes capital and technology for production, 1.10. Those cases involving boundary disputes over
defined as follows: processing and marketing of agricultural goods, or construction, lands under the administration and disposition of the DAR
xxxx rehabilitation, upgrading and operation of agricultural capital assets, and the LBP, which are transferred, distributed, and/or sold
(e) Contract Growing/Growership Agreement is an agribusiness infrastructure, and facilities. It has a personality separate and distinct from its to tenant-beneficiaries and are covered by deeds of sale,
arrangement where the ARBs own the land and commit, either components; patents and certificates of title;
collectively through their cooperative or individually, to produce certain (ii) Production, Processing and Marketing Agreement whereby the beneficiaries 1.11. Those cases involving the determination of
crops for an investor or agribusiness firm that contracts to buy the engage in the production and processing of agricultural products and directly title to agricultural lands where this issue is raised in an
produce at pre-arranged terms. sell the same to the investor who provides loans and technology. agrarian dispute by any of the parties or a third person in
[24]
[8]
Section 5. Definition of Terms The terms and concepts used in this Order shall United Coconut Planters Bank v. Looyuko, G.R. No. 156337, September 28, connection with the possession thereof for the purpose of
mean as follows: 2007, 534 SCRA 322, 331; Marohomsalic v. Cole, G.R. No. 169918, February preserving the tenure of the agricultural lessee or actual
(a) Agrarian Reform Beneficiaries (ARBs) or Beneficiaries refer to 28, 2008, 547 SCRA 98, 105-106; Rimbunan Hijau Group of Companies v. tenant-farmer or farmer-beneficiaries and effecting the
individual beneficiaries under PD 27 or RA 6657, or their cooperative, Oriental Wood Processing Corporation, G.R. No. 152228, September 23, 2005, ouster of the interloper or intruder in one and the same
association, or federation, duly registered with the Securities and 470 SCRA 650. proceeding;
[25]
Exchange Commission (SEC) or the Cooperative Development Supra note 19. 1.12. Those cases previously falling under the
[26]
Authority (CDA); Section 1. Primary and Exclusive Original Jurisdiction. The Adjudicator shall original and exclusive jurisdiction of the defunct Court of
xxxx have primary and exclusive original jurisdiction to determine and adjudicate the Agrarian Relations under Section 12 of PD No. 946 except
(c) Joint Economic Enterprises generally refer to partnerships or following cases: those cases falling under the proper courts or other quasi-
arrangements between beneficiaries and investors to implement an 1.1. The rights and obligations of persons, whether natural or judicial bodies; and
agribusiness enterprise in agrarian reform areas xxx. juridical, engaged in the management, cultivation, and use 1.13. Such other agrarian cases, disputes, matters or
[9]
(g) Arbitration Clause - Agribusiness venture agreements shall include of all agricultural lands, covered by Republic Act (RA) No. concerns referred to it by the Secretary of the DAR.
[27]
provisions for mediation/conciliation and arbitration as a means of resolving 6657, otherwise known as the Comprehensive Agrarian 384 Phil. 26, 33 (2000).
[28]
disputes arising from the interpretation or enforcement thereof. Reform Law (CARL), and other related agrarian laws; 473 Phil. 64, 98 (2004), citing Almuete v. Andres, 421 Phil. 522, 530 (2001)
[29]
Mediation/conciliation may be undertaken by duly trained DAR mediators or 1.2. The preliminary administrative determination of reasonable Heirs of Nicolas Jugalbot v. Court of Appeals, G.R. No. 170346, March 12,
conciliators acceptable to both parties. Arbitration shall be conducted and just compensation of lands acquired under Presidential 2007, 518 SCRA 202, 210.
[30]
pursuant to RA 876 otherwise known as the Philippine Arbitration Law. Decree (PD) No. 27 and the Comprehensive Agrarian G.R. No. 159089, May 3, 2006, 489 SCRA 80.
[31]
These alternative dispute resolution strategies shall first be availed of before Reform Program (CARP); G.R. No. 166833, November 30, 2006, 509 SCRA 410.
[32]
the parties may seek judicial relief. The costs of arbitration shall be 1.3. The annulment or cancellation of lease contracts or deeds of Supra note 30, p. 88.
[33]
shouldered by the contracting parties. sale or their amendments involving lands under the Supra note 2, p. 56.
[34]
[10]
Otherwise known as The Comprehensive Agrarian Reform Law. administration and disposition of the DAR or Land Bank of 486 Phil. 452 (2004).
[35]
[11]
Opposition dated January 10, 2001. the Philippines (LBP); Id. at 465-466.
[36]
[12]
Rollo, pp. 112-122. 1.4. Those cases involving the ejectment and dispossession of Supra note 9.
[37]
[13]
Issued by Judge Gregorio A. Palabrica; id. at 66. tenants and/or leaseholders; Section 10. Resolution of Disputes. As a rule, voluntary methods, such as
[14]
Id. at 101-111. mediation or conciliation and arbitration, shall be preferred in resolving
[15]
Id. at 78. disputes involving joint economic enterprises. The specific modes of
 resolving disputes shall be stipulated in the contract, and should the parties
fail to do so, the procedures herein shall apply.

The aggrieved party shall first request the other party to submit the matter to
mediation or conciliation by trained mediators or conciliators from DAR,
non-government organizations (NGOs), or the private sector chosen by them.

Where the dispute cannot be resolved through mediation or conciliation, it may be

submitted to arbitration by the parties in accordance with RA 876, as
amended, also known as the Arbitration Law, unless otherwise specified by
the parties. The decision of the arbitrators shall be binding upon them as
agreed by the parties. They may opt to submit the dispute directly to
arbitration without going through mediation or conciliation xxx.
[38]
G.R. No. 102881, December 7, 1992, 216 SCRA 236, 246.
[39]
378 Phil. 369 (1999).
[40]
404 Phil. 192 (2001).
[41]
Supra note 37, p. 376.
[42]
Supra note 38, pp. 201-202.
[43]
RA No. 6657, Section 53.
G.R. No. 171107 September 5, 2012
ANITA C. VIANZON, Heir of the Late Lucila Candelaria
Gonzales, Petitioner,
vs.
MINOPLE MACARAEG, Respondents.
DECISION
MENDOZA, J.:
This is a Petition for Review on Certiorari under Rule 45 seeking to reverse and set
aside the October 19, 2005 Decision1 of the Court of Appeals (CA), in CA-G.R. SP
No. 88816, reversing the August 18, 2004 Resolution 2 of the Office of the
President (OP) which declared the late Lucila Candelaria Gonzales (Lucila) as the
"legitimate and lawful purchaser/beneficiary" 3 of
x x x Lot No. 1222, Psd-78000 of the Dinalupihan Landed Estate administered by
the Department of Agrarian Reform, containing an area of 3.1671 hectares located
at Barangay Saguing, Dinalupihan, Bataan.4
The Factual and Procedural Antecedents:
The subject land formed part of the 10-hectare Lot No. 657 earlier awarded to the
late Pedro Candelaria (Pedro), the father of Lucila. In 1950, Pedro hired
respondent Minople Macaraeg (Minople) to work on Lot 657. In 1956, Pedro
divided Lot 657 among his four children, including Lucila. Eventually, Lucilas
undivided share became Lot No. 1222, the subject landholding. 5
On August 17, 1960, Lucila and the Land Tenure Administration (LTA, now the
Department of Agrarian Reform) entered into a contract denominated as
"Agreement to Sell No. 5216" involving Lot No. 1222.6
After almost 30 years, or on May 8, 1989, Lucilas representative, petitioner
Anita C. Vianzon (Anita), executed a deed of absolute sale in favor of her
daughter, Redenita Vianzon (Redenita), conveying a 2.5- hectare portion of the
subject land. In connection with this, Minople also affixed his signature on a
document denominated as "Waiver of Right" purportedly relinquishing all his
rights as well as his interest over the same property in favor of Redenita.7
Soon thereafter, Anita filed two applications to purchase the subject property
one in 1990 and the other on August 7, 1996. Minople, however, also filed his own
application to purchase the same land on September 9, 1996. These conflicting
claims were brought before the Department of Agrarian Reform (DAR). On
November 6, 1996, the Chief of the Legal Division of the DAR Provincial Office
recommended that the subject land be "divided equally" between the two
applicants since both had been in some way "remiss in their obligations under the
agrarian rules."8 Based on the recommendation, the Officer-in-Charge Municipal
Agrarian Reform Officer (MARO) referred the matter to the Provincial Agrarian
Reform Officer (PARO) of Bataan. In his First Endorsement, dated November 14,
1996, the PARO concurred with the findings and recommendation of the Legal
Division Chief and forwarded its concurrence to the DAR Regional Director. The
Officer-in-Charge Regional Director (RD) issued a corresponding order dividing
the subject property equally between the parties. According to him, the parties
were "in pari delicto, the most equitable solution is to award the property to both of
them."9
Minople sought reconsideration but this was treated as an appeal by the RD and
was elevated to the DAR Secretary, who, on November 10, 1997, set aside the
order and upheld Minoples right over the property. 10 In setting aside the RD
order, the DAR Secretary found that it was Minople who was the "actual
possessor/ cultivator of the lot in consideration." 11 He pointed out that Lucilas act
of "hiring" Minople to render service pertaining to all the aspects of farming did
not only violate the old LTA Administrative Order (A.O.) but it also contravened
the very undertaking made by Lucilas representative and heir, Anita, in her latest
sales application warranting its rejection.
Aggrieved, Anita appealed to the OP. On June 18, 2003, the OP issued a minute
decision12 affirming in toto the November 10, 1997 Order of the DAR Secretary.
According to the OP,
After a careful and thorough evaluation of the records of the case, this Office
hereby adopts by reference the findings of fact and conclusions of law contained in
the DAR Decision dated 10 November 1997.13
Anita then moved for reconsideration. On August 18, 2004, the OP, giving weight
to the "Agreement to Sell No. 5216" between Lucila and the DARs predecessor
(the LTA), issued a resolution reversing and setting aside its minute decision and
declaring Lucila as "the legitimate and lawful purchaser/ beneficiary of the
landholding in question."14 The OP stated that the subject lot had been paid for as
early as 1971 and that the same had been declared in the name of the late Lucila
for tax purposes. In addition, according to the OP, the "personal cultivation aspect
of the said Agreement to Sell" was achieved or carried out by Lucila "with
Minople Macaraeg as her hired farmworker." 15 The OP also took note that neither
the LTA nor the DAR failed to give the necessary notice of cancellation to Lucila
or Anita.16
Lastly, the OP opined that when the Agreement to Sell was executed back in 1960,
Minople was merely hired as a farmworker; ergo, his actual possession and
cultivation were not in the concept of owner which explained why the LTA (now
DAR) contracted with Lucila and not with Minople.17
Not in conformity, Minople elevated the matter to the CA via a petition for review
under Rule 43. In upholding Minoples right to the subject land, the CA anchored
its Decision on Section 22 of Republic Act (R.A.) No. 6657, or the Comprehensive
Agrarian Reform Law (CARL). According to the CA, Minople had been working
on the contested lot since 1950, as a tenant and performing all aspects of farming
and sharing in the harvest of the land, in conformity with DARs A.O. No. 3,
Series of 1990, pursuant to the CARL. 18
Undaunted, Anita is now before this Court via this petition for review
on certiorari presenting the following
STATEMENT OF ISSUES
I. WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED IN
PASSING OVER THE MERITS OF THE PETITION FOR REVIEW FILED BY
THE RESPONDENT BEFORE THE SAID COURT DESPITE THE FACT THAT
RESPONDENT THEREIN FILED THE SAME BEYOND THE
REGLEMENTARY PERIOD FOR FILING THE SAME.
II. WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED IN
RULING THAT THE RESPONDENT, AS TENANT, HAS LEGAL STANDING
IN IMPUGNING THE OWNERSHIP OF THE PETITIONER, HIS LANDLORD,
IN CONTRAVENTION OF THE PROVISIONS OF ARTICLE 1436 OF THE
CIVIL CODE OF THE PHILIPPINES AS WELL AS SECTION 3(B), RULE 131
OF THE RULES OF COURT AND OTHER JURISPRUDENCE ON THE
MATTER.
III. WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED IN
DEPRIVING THE PETITIONER OF HER PROPERTY IN VIOLATION OF
DUE PROCESS OF LAW AS WELL AS THE NON-IMPAIRMENT CLAUSE OF
THE CONSTITUTION IN VIEW OF THE LACK OF NOTICE OF
CANCELLATION OF THE AGREEMENT TO SELL.
IV. WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING
THAT PETITIONER VIOLATED THE CONDITIONS CONTAINED IN THE
AGREEMENT TO SELL.
V. WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT
THE AWARD OF THE LAND TO THE RESPONDENT WAS EQUIVALENT TO
A NOTICE OF CANCELLATION OF THE AGREEMENT TO SELL. 19
The Court finds no merit in the petition.
On the procedural issue
Indeed, the perfection of an appeal in the manner and the period prescribed by law
is mandatory and jurisdictional. Necessarily, the failure to conform to the rules will
render the judgment for review final and unappealable. By way of exception,
however, minor lapses are at times disregarded in order to give due course to
appeals filed beyond the reglementary period on the basis of strong and compelling
reasons, such as serving the ends of justice and preventing a grave miscarriage
thereof. The period for appeal is set in order to avoid or prevent undue delay in the
administration of justice and to put an end to controversies. It is there not to hinder
the very ends of justice itself. The Court cannot have purely technical and
procedural imperfections as the basis of its decisions. In several cases, the Court
held that "cases should be decided only after giving all parties the chance to argue
their causes and defenses."20
In Philippine National Bank, et al. v. Court of Appeals, we allowed, in the higher
interest of justice, an appeal filed three days late.
In Republic v. Court of Appeals, we ordered the Court of Appeals to entertain an
appeal filed six days after the expiration of the reglementary period; while in
Siguenza v. Court of Appeals, we accepted an appeal filed thirteen days late.
Likewise, in Olacao v. NLRC, we affirmed the respondent Commission's order
giving due course to a tardy appeal "to forestall the grant of separation pay twice"
since the issue of separation pay had been judicially settled with finality in another
case. All of the aforequoted rulings were reiterated in our 2001 decision in the case
of Equitable PCI Bank v. Ku. (previous citations omitted) 21
There is no denying that the controversy between the parties involves the very
right over a considerable spread of land. In fact, it is Anitas position that the
opposing parties in this case "have equal substantive rights over the lot in
question."22 It was, therefore, correct on the part of the CA not to permit a mere
procedural lapse to determine the outcome of this all too important case. It must be
noted that the CA was the first level of judicial review, and coming from the OPs
vacillating stance over the controversy, it was but correct to afford the parties every
chance to ventilate their cause. Considering further that the party who failed to
meet the exacting limits of an appeal by a mere seven days was an old farmer who
was not only unlearned and unskilled in the ways of the law but was actually an
illiterate who only knew how to affix his signature, 23 certainly, to rule based on
technicality would not only be unwise, but would be inequitable and unjust. All
told, the Court sanctions the CA ruling allowing the petition for review of Minople.
On the substantive issue
The Court now proceeds with the crux of the case, that is, who between the
opposing parties has a rightful claim to the subject landholding? In resolving the
second and the fourth issues, this Court finds it inevitable to resolve the third and
the fifth issues as well. Thus, the Court will discuss them jointly.
The beacon that will serve as our guide in settling the present controversy is found
in the Constitution, more particularly Articles II and XIII:
Article II
SEC.21. The State shall promote comprehensive rural development and agrarian
reform.
xxx
Article XIII
SEC. 4. The State shall, by law, undertake an agrarian reform program 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 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 land owners. The State shall further provide incentives for voluntary land-
sharing. (Underscoring supplied)
In this regard, the Court finds the elucidation of Framer Jaime Tadeo, in one of the
deliberations of the Constitutional Commission, enlightening.
MR. TADEO.
. . . Ang dahilan ng kahirapan natin sa Pilipinas ngayon ay ang pagtitipon-tipon ng
vast tracts of land sa kamay ng iilan. Lupa ang nagbibigay ng buhay sa
magbubukid at sa iba pang manggagawa sa bukid. Kapag inalis sa kanila ang lupa,
parang inalisan na rin sila ng buhay. Kaya kinakailangan talagang magkaroon ng
tinatawag na just distribution. . . .
xxx
MR. TADEO.
Kasi ganito iyan. Dapat muna nating makita ang prinsipyo ng agrarian reform,
iyong maging may-ari siya ng lupa na kaniyang binubungkal. Iyon ang kauna-
unahang prinsipyo nito. . . .
x x x.24
Picking up from there, Congress enacted R.A. No. 6657, or the CARL of 1988.
Section 22 of this law enumerates those who should benefit from the CARL.
SEC. 22. Qualified Beneficiaries. The lands covered by the CARP shall be
distributed as much as possible to landless residents of the same barangay, or in the
absence thereof, landless residents of the same municipality in the following order
of priority:
(a) agricultural lessees and share tenants;
(b) regular farmworkers;
(c) seasonal farmworkers;
(d) other farmworkers;
(e) actual tillers or occupants of public lands;
(f) collectives or cooperatives of the above beneficiaries;
and
(g) others directly working on the land.
x x x.
A basic qualification of a beneficiary shall be his willingness, aptitude and ability
to cultivate and make the land as productive as possible. The DAR shall adopt a
system of monitoring the record or performance of each beneficiary, so that any
beneficiary guilty of negligence or misuse of the land or any support extended to
him shall forfeit his right to continue as beneficiary. The DAR shall submit
periodic reports on the performance of the beneficiaries to the PARC.
x x x.
Pursuant to this, the DAR issued A.O. No. 3, Series of 1990. The foremost policy
in said A.O.s Statement of Policies states,
Land has a social function, hence, there is a concomitant social responsibility in its
ownership and should, therefore, be distributed to the actual tillers/occupants. 25
Thus, A.O. No. 3 lays down the qualifications of a beneficiary in landed estates 26 in
this wise: he or she should be (1) landless; (2) Filipino citizen; (3) actual
occupant/tiller who is at least 15 years of age or head of the family at the time of
filing of application; and (4) has the willingness, ability and aptitude to cultivate
and make the land productive.27
The significance of the allocatee/awardee being the actual tiller is made even
clearer in the "Operating Procedures" of A.O. No. 3 itself, where the MARO is
required to make a determination as to who the actual tiller is, for it is to him that
the land should be awarded. In fact, item 2.1.3, states that if it is found that the
allocatee or awardee employs others to till the land, the MARO should cancel the
Order of Award (OA) or Certificate of Land Transfer (CLT) and issue a new one in
favor of the "qualified actual cultivator/occupant." 28
In this case, Anita questions the existence of a tenancy relationship between
her/Lucila and Minople, pointing out the purported DAR Directors finding that
Minople deliberately failed to deliver the harvest for four years. 29 She argues that
this negates any tenancy relationship between them and insists that Minople was
only a farm worker initially engaged by the late Pedro Candelaria. To this, she adds
that LTA would not have entered into an agreement to sell with Lucila in 1960 if it
was Minople who was the actual possessor and cultivator back then. 30Anita
continues that even if tenancy existed, Minople could not controvert the title of
Lucila/Anita being his purported landlord.31
Anitas argument, however, is misplaced. The cases she relied on referred to
possession of leased premises in general. In this case, the issue is farm or
agricultural tenancy and, inescapably, the applicable law is the CARL and its
implementing rules. After all, the law was well in effect when Minople and Anita
filed their respective applications to purchase the subject land.
Anita argues that the earlier sale made by LTA to her predecessor was never
questioned, hence, it remains valid. 32 In fact, Anita claims, the late Lucila had
already paid the purchase price sometime in 1971. 33 She then proceeds to argue
that "personal cultivation" may be "with the aid of labor from within his immediate
household."34 Finally, Anita cries out for fairness. According to her:
It would be unfair and unjust if the subject lot which was originally cultivated by
the Petitioners father, Pedro Candelaria, would only go to another who was just a
mere helper of the said Pedro Candelaria, thereby rendering into naught the
hardships of the petitioner and her father in occupying and nourishing the subject
land which they have occupied even before the 50s decade. Respondent would
not have been there in Dinalupihan were it not for the Petitioners father who
secured his services as boy or mere household helper.35
While Anita insists that "Agreement to Sell No. 5216" executed back in 1960
remains effective, her act of filing the above-mentioned applications to purchase
after three decades of waiting for its fruition only reveals her skepticism in that
very same instrument. Anita herself filed not one, but two subsequent applications.
It was her application on August 7, 1996 together with that of Minople which gave paid from the produce or harvest of the land in the amount of 20 cavans of palay JOSE PORTUGAL PEREZ*
rise to the present controversy. These conflicting applications were brought before every harvest. The claim of Lucila Candelaria Gonzales that Minople Macaraeg is Associate Justice
the DAR, all the way up to the Secretary, and then to the OP. At this point, only a hired farm worker will not hold water, considering the fact that he (Minople
therefore, Anita had effectively abandoned her, or rather Lucilas "Agreement to Macaraeg) was not hired to work on just a branch of farming, but performed work
AT T E S T AT I O N
Sell No. 5216" of 1960 with the then LTA. She cannot later on deny this and pertaining to all the branches thereof, on the basis of sharing the harvest not on a
conveniently hide behind the feeble position of the OP that it was unnecessary for fixed salary wage.38
Anita/ Lucila to file her application because the said agreement remained valid. I attest that the conclusions in the above Decision had b en reached in consultation
before the case was assigned to the writer of the opinion of the Court's Division.
With Minople continuously performing every aspect of farming on the subject
The fact remains, however, that there were two applications subsequently filed by landholding, neither Anita nor Lucila personally cultivated the subject
Anita and acted upon by the DAR, the same office charged with executing the land.1wphi1 While Anita continues to question the existence of a tenancy PRESBITERO J. VELASCO, JR.
earlier "Agreement to Sell No. 5216," where Anita would have gone to in order to relationship, she did admit that her predecessors had hired Minople to till the land Associate Justice
implement her all important agreement. decades earlier. This clearly violated then LTA A.O. No. 2, Series of 1956 as well Chairperson, Third Division
as the DARs AO No. 3 series of 1990. This also contravened her own
undertaking in her April 7, 1996 "Application to Purchase Lot."
This is the same agency, acting through its Secretary, which found that as early as C E R T I F I C AT I O N
the time of Lucila, there had been violations of "Agreement to Sell No. 5216" and
the existing laws and rules upon which it was based. This is the same agency "2.that I vvill not 1 subdivide, sold (sic) or in any manner transfer or encumber
Pursuant to Section 13, Article VIII of the Constitution and the Division
which eventually awarded the subject landholding to Minople. The CA found, to said land without the proper consent of the DAR subject further to the terms and
Chairperson's Attestation, I certify that the conclusions in the above Decision had
which the Court agrees, that this was "equivalent to a notice of cancellation of the conditions provided for under Republic Act No. 6657 and other Operating laws not
been reached in consultation before the case was assigned to the writer of the
earlier Agreement to Sell No. 5216." 36 inconsistent thereon; 3.That I shall not employ or use tenants whatever form in the
opinion of the Court's Division.
occupation or cultivation of the land or shall not be subject of share tenancy
pursuant to the provision of PD No. 132 dated March 13, 1973, x x x." 39 (Emphasis
As regards Anitas claim that the land had been paid for, the provision that she
supplied) MARIA LOURDES P. A. SERENO
relies on does not only speak of payment of the purchase price but also requires the
Chief Justice
performance of all the conditions found in the said agreement. Thus, if the Court is
to assume the agreement to be valid, the LTA or the DAR may still not be R.A. No. 6657 or the CARL "is a social justice and pove1iy alleviation program
compelled to issue a deed of sale in her favor because of violations of the which seeks to empower the lives of agrarian reform beneficiaries through
agreement. equitable distribution and ownership of the land based on the principle of land to
the tiller." 40 Footnotes
*
Designated additional member, per Special Order No. 1299 dated
Agreement to Sell No. 5216
August 28, 2012.
Given all the laws in place together with the undisputed fact that Minople worked 1
Rollo, pp. 113-129; penned by Associate Justice Renato C. Dacudao
on the subject landholding for more than half a century, the inescapable conclusion
Section 10. Upon full payment of the purchase price as herein stipulated including with Associate Justice Lucas P. Bersamin (now an Associate Justice of
is that l'v1inople as the actual tiller of the land 1s entitled to the land mandated by
all interest thereon and the performance by the PROMISSEE of all the conditions the Supreme Court) and Associate Justice Celia C. Librea-Leagogo,
our Constitution and R.A. No. 6657.
herein required, the Administration shall execute a Deed of Sale conveying the concurring.
property subject of this Agreement to the PROMISSEE." 37 (Underscoring 2
Id. at 161-165.
supplied) WHEREFORE, the petition is DENIED, the October 19, 2005 Decision and 3
Id. at 165.
January 10, 2006 Resolution of the Court of Appeals, in CA-G.R. SP No. 88816, 4
Id. at 113.
arc hereby AFFIRMED. This is without prejudice on the part of petitioner to 5
Id. at 114.
Even if the Court assumes that there were no violations, why did Anita or her
recover her payments from the government, if warranted. 6
Id. at 119.
predecessor Lucila not compel the DAR to issue a deed of sale? Why did Anita 7
Id. at 114.
choose to file the applications to purchase in the 1990s? 8
Id. at 115.
SO ORDERED. 9
Id. at 115-116.
10
For Minoples part, there is no denying that he had been tilling the subject land Id. at 116.
11
since the 1950s. According to then DAR Secretary Ernesto D. Garilao: JOSE CATRAL MENDOZA Id. at 155.
12
Associate Justice Id. at 159.
13
Id.
After a thorough evaluation of the records of the case, together with its supporting 14
Id. at 165.
documents, this Office finds the appeal to be impressed with merit, considering the WE CONCUR: 15
Id. at 163.
fact that Minople Macaraeg is the actual possessor/cultivator of the lot in 16
Id.
consideration as contained in the Report and Recommendation dated November 6, 17
PRESBITERO J. VELASCO, JR. Id. at 162-164.
1996 of Atty. Judita C. Montemayor, Chief, Legal Division of DAR Region III and 18
Associate Justice Id. at 126-127.
the Certification dated April 23, 1997 issued by the BARC Chairman (Punong 19
Chairperson Id. at 330-331.
Barangay) of Dinalupihan Bataan. 20
Republic Cement Corp. v. Guinmapang, G.R. No. 168910, August 21,
2009, 596 SCRA 688, 695; Gana v. NLRC, G.R. No. 164640, June 13,
The act of Lucila Candelaria Gonzales in allowing Minople Macaraeg to perform DIOSDADO M. PERALTA ROBERTO A. ABAD 2008, 554 SCRA 471, 481.
all the farming activities in the subject lot established a tenancy relationship Associate Justice Associate Justice 21
Gana v. NLRC, G.R. No. 164680, June 13, 2008, 554 SCRA 471,
between the former and the latter because the latter is doing the farm chores and is 481.
22
Rollo, p. 52.
23
Id. at 405.
24
Records of the Constitutional Commission, Vol. II, pp. 663-664.
25
DAR A.O. No. 3, series of 1990, www.dar.gov.ph.
26
Landed Estates is defined in Administrative Order No. 3, Series of
1990 as the "former haciendas or landholdings of private individuals or
corporations which have been acquired by the Government under
different laws for redistribution and resale to deserving tenants and land
less farmers."
27
DAR A.O. No. 3, series of 1990, www.dar.gov.ph.
28
Id.
29
Rollo, p. 344.
30
Id. at 345-346 and 364-365.
31
Id. at 347- 353.
32
Id. at 364.
33
Id. at 356.
34
Id. at 366.
35
Id. at 368.
36
Id. at 128.
37
Id. at 357.
38
Id. at 155.
39
Id. at 156.
40
Heirs of Aurelio Reyes v. Garilao, G.R. No. 136466, November 25,
2009, 605 SCRA 294, 310.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 78517 February 27, 1989
GABINO ALITA, JESUS JULIAN, JR., JESUS JULIAN, SR., PEDRO
RICALDE, VICENTE RICALDE and ROLANDO SALAMAR, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, ENRIQUE M. REYES, PAZ M.
REYES and FE M. REYES, respondents.
Bureau of Agrarian Legal Assistance for petitioners.
Leonardo N. Zulueta for Enrique Reyes, et al. Adolfo S. Azcuna for private
respondents.
PARAS, J.:
Before us is a petition seeking the reversal of the decision rendered by the
respondent Court of Appeals**on March 3, 1987 affirming the judgment of the
court a quo dated April 29, 1986, the dispositive portion of the trial court's decision
reading as follows;
WHEREFORE, the decision rendered by this Court on
November 5, 1982 is hereby reconsidered and a new
judgment is hereby rendered:
1. Declaring that Presidential Decree No. 27 is inapplicable
to lands obtained thru the homestead law,
2. Declaring that the four registered co-owners will cultivate
and operate the farmholding themselves as owners thereof;
and
3. Ejecting from the land the so-called tenants, namely;
Gabino Alita, Jesus Julian, Sr., Jesus Julian, Jr., Pedro
Ricalde, Vicente Ricalde and Rolando Salamar, as the
owners would want to cultivate the farmholding themselves.
No pronouncement as to costs.
SO ORDERED. (p. 31, Rollo)
The facts are undisputed. The subject matter of the case consists of two (2) parcels
of land, acquired by private respondents' predecessors-in-interest through
homestead patent under the provisions of Commonwealth Act No. 141. Said lands
are situated at Guilinan, Tungawan, Zamboanga del Sur.
Private respondents herein are desirous of personally cultivating these lands, but
petitioners refuse to vacate, relying on the provisions of P.D. 27 and P.D. 316 and
appurtenant regulations issued by the then Ministry of Agrarian Reform (DAR for
short), now Department of Agrarian Reform (MAR for short).
On June 18, 1981, private respondents (then plaintiffs), instituted a complaint
against Hon. Conrado Estrella as then Minister of Agrarian Reform, P.D.
Macarambon as Regional Director of MAR Region IX, and herein petitioners (then
defendants) for the declaration of P.D. 27 and all other Decrees, Letters of
Instructions and General Orders issued in connection therewith as inapplicable to
homestead lands.
Defendants filed their answer with special and affirmative defenses of July 8,
1981.
Subsequently, on July 19, 1982, plaintiffs filed an urgent motion to enjoin the
defendants from declaring the lands in litigation under Operation Land Transfer
and from being issued land transfer certificates to which the defendants filed their
opposition dated August 4, 1982.
On November 5, 1982, the then Court of Agrarian Relations 16th Regional
District, Branch IV, Pagadian City (now Regional Trial Court, 9th Judicial Region,
Branch XVIII) rendered its decision dismissing the said complaint and the motion
to enjoin the defendants was denied.
On January 4, 1983, plaintiffs moved to reconsider the Order of dismissal, to
which defendants filed their opposition on January 10, 1983.
Thus, on April 29, 1986, the Regional Trial Court issued the aforequoted decision
prompting defendants to move for a reconsideration but the same was denied in its
Order dated June 6, 1986.
On appeal to the respondent Court of Appeals, the same was sustained in its
judgment rendered on March 3, 1987, thus:
WHEREFORE, finding no reversible error thereof, the
decision appealed from is hereby AFFIRMED.
SO ORDERED. (p. 34, Rollo)
Hence, the present petition for review on certiorari.
The pivotal issue is whether or not lands obtained through homestead patent are
covered by the Agrarian Reform under P.D. 27.
The question certainly calls for a negative answer.
We agree with the petitioners in saying that P.D. 27 decreeing the emancipation of
tenants from the bondage of the soil and transferring to them ownership of the land
they till is a sweeping social legislation, a remedial measure promulgated pursuant
to the social justice precepts of the Constitution. However, such contention cannot
be invoked to defeat the very purpose of the enactment of the Public Land Act or
Commonwealth Act No. 141. Thus,
The Homestead Act has been enacted for the welfare and
protection of the poor. The law gives a needy citizen a piece
of land where he may build a modest house for himself and
family and plant what is necessary for subsistence and for
the satisfaction of life's other needs. The right of the citizens
to their homes and to the things necessary for their
subsistence is as vital as the right to life itself. They have a
right to live with a certain degree of comfort as become
human beings, and the State which looks after the welfare of
the people's happiness is under a duty to safeguard the
satisfaction of this vital right. (Patricio v. Bayog, 112 SCRA
45)
In this regard, the Philippine Constitution likewise respects the superiority of the
homesteaders' rights over the rights of the tenants guaranteed by the Agrarian
Reform statute. In point is Section 6 of Article XIII of the 1987 Philippine
Constitution which provides:
Section 6. The State shall apply the principles of agrarian
reform or stewardship, whenever applicable in accordance
with law, in the disposition or utilization of other natural
resources, including lands of public domain under lease or
concession suitable to agriculture, subject to prior rights,
homestead rights of small settlers, and the rights of
indigenous communities to their ancestral lands.
Additionally, it is worthy of note that the newly promulgated Comprehensive
Agrarian Reform Law of 1988 or Republic Act No. 6657 likewise contains a
proviso supporting the inapplicability of P.D. 27 to lands covered by homestead
patents like those of the property in question, reading,
Section 6. Retention Limits. ...
... Provided further, That original homestead grantees or
their direct compulsory heirs who still own the original
homestead at the time of the approval of this Act shall retain
the same areas as long as they continue to cultivate said
homestead.'
WHEREFORE, premises considered, the decision of the respondent Court of
Appeals sustaining the decision of the Regional Trial Court is hereby AFFIRMED.
SO ORDERED.
Melencio-Herrera, (Chairperson), Padilla, Sarmiento and Regalado, JJ., concur.
Footnotes
** Penned by Justice Jorge R. Coquia and concurred in by
Justices Josue N. Bellosillo and Venancio D. Aldecoa, Jr. of
the Fourth Division.

THIRD DIVISION
[G.R. No. 139083. August 30, 2001] Petitioner is the registered owner of a parcel of land situated at Paitan, Quezon, The Adjudicator a quo conducted a hearing and afforded the parties their day in
Bukidnon with an area of 10.6146 hectares, more or less, covered by Transfer court and the opportunity to present their evidence. On August 13, 1991, the
FLORENCIA PARIS, petitioner, vs. DIONISIO A. ALFECHE, JUAN L. Certificate of Title No. T-8275 and another property with an area of 13.2614 Adjudicator a quo issued an Order for the parties to submit their respective
ALFECHE, MAXIMO N. PADILLA, DIONISIO Q. MATILOS, hectares covered by Original Certificate of Title No. P-4985, also located at Paitan, position papers with evidence to buttress their allegations. On March 10, 1992, the
Heirs of GREG A. ALFECHE, DIONISIO W. MATILO, Quezon, Bukidnon; the said parcels are fully tenanted by private respondents Adjudicator a quo rendered the decision, thus:
SIMPLICIO L. ADAYA, TEOFILO M. DE GUZMAN, herein who are recipients of Emancipation Patents in their names pursuant to
FRANCISCO B. DINGLE and MARIFE NAVARO, respondents. Operation Land Transfer under P.D. 27 (Annexes A, A-1 to A-18) notwithstanding
WHEREFORE, in the light of the foregoing, this Adjudicator declares the
the fact that neither the tenants nor the Land Bank of the Philippines (LBP) [has]
following:
paid a single centavo for the said land. Petitioner and the tenants have not signed
DECISION any Land Transfer Production Agreement.Petitioner and her children have been
PANGANIBAN, J.: deprived of their property without due process of law and without just 1. That all the Emancipation Patents issued to tenants-respondents
compensation, especially so that the tenants have already stopped paying rentals as shall be cancelled and recalled;
of December 1988 to the damage and prejudice of petitioner.
Homesteads are not exempt from the operation of the Land Reform 2. That the Register of Deeds of Malaybalay, Bukidnon shall cancel
Law. The right to retain seven hectares of land is subject to the condition that the all Emancipation Patents registered under the names of the
landowner is actually cultivating that area or will cultivate it upon the effectivity of Petitioner contends that since she is entitled to a retention of seven (7) hectares herein tenants-respondents; and
the said law. under P.D. 27 and/or 5 hectares and 3 hectares each for her children under the
Comprehensive Agrarian Reform Law (CARL), the tenants are not supposed to 3. That back rentals due to the petitioners, which were given to the
acquire the subject land and the Emancipation Patents precipitately issued to them LBP as amortizations, shall be given to the said petitioner.[4]
are null and void for being contrary to law. Petitioner further alleged that she owns
the subject property covered by OCT No. P-4985 as original homestead grantee On appeal, the DARAB reversed the adjudicator.
The Case
who still owned the same when Republic Act No. 6657 was approved, thus she is
entitled to retain the area to the exclusion of her tenants. As regards TCT No. 8275,
petitioner has applied for retention of seven hectares per Letter of Retention
The Petition for Review before us assails the June 4, 1999 Decision of the attached as Annex B, that the lands subject of the instant petition are covered by Ruling of the Court of Appeals
Court of Appeals[1] (CA), in CA-GR SP No. 45738, which affirmed the ruling of Homestead Patents, and as decided by the Supreme Court in the cases of Patricio
the Department of Agrarian Reform Adjudication Board (DARAB). The decretal vs. Bayug (112 SCRA 41) and Alita vs. Court of Appeals (170 SCRA 706), the
portion of the CA Decision reads: homesteaders and their heirs have the right to cultivate their homesteads The CA rejected the claim of petitioner. It ruled that she could not retain her
personally, which is a superior right over that of tenant-farmers. homesteads, since she was not the actual cultivator thereof. It also held that she
WHEREFORE, [there being] no grave abuse of discretion x x x committed by and her heirs had not been deprived of their right to retain the area mandated by
DARAB, the instant petition is hereby DENIED DUE Petitioner moved for the cancellation and recall of the Emancipation Patents issued law, because the records showed that they had other agricultural
COURSE andDISMISSED. Costs against the petitioner.[2] to private respondents-farmers and to restore to petitioner and her children the landholdings. Finally, it ruled that she had not been deprived of her properties
ownership and cultivation of the subject lots plus payment of back rentals from the without just compensation, since Section 2 of Executive Order 228 declared that
time they stopped paying the same until ejected therefrom. tenant-farmers of agricultural lands under P.D. 27 are deemed owners of the land
The Decision of the DARAB, which was affirmed by the CA, had disposed they till and the lease rentals paid by them shall be considered as amortization
as follows: payments.[5]
Respondents filed their answer dated May 29, 1991 and admitted the generation
WHEREFORE, premises considered, the assailed Decision dated March 19, 1992 and issuance of Emancipation Patents to private respondents as tenant-farmers Hence, this Petition.[6]
is hereby REVERSED and SET ASIDE, and a new one is entered: thereof and the Supreme Court rulings on the Bayug and Alita cases relative to
homestead patents, but denied the rest of the material allegations for want of
knowledge or information as to the truth relative thereto. Respondents alleged that
1. Declaring the private respondents to be full owners of the land they till pursuant when the subject lands were covered under P.D. 27, the petitioner was repeatedly The Issues
to Presidential Decree No. 27 and Executive Order No. 228; informed and invited by the DAR Office at Valencia, Bukidnon to thresh out the
matter; that petitioners right to retain seven (7) hectares is not absolute since she
owns other agricultural landholdings, thus disqualifying her to retain the area,
2. Declaring the validity of the Emancipation Patents issued to private respondents; In her Memorandum, petitioner submits the following issues for our
aside from the fact that she has other properties sufficient to support her family as
and consideration:
shown in the Certification of the Provincial Assessors Office listing down the
petitioners landholdings (Annex 2). By way of special affirmative defenses,
3. Dismissing the case.[3] respondents averred that the criteria set forth under P.D. 27 were observed before I. Whether or not the original homesteads issued under the public land act [are]
the generation of the Emancipation Patents; that under Executive Order No. 228, exempted from the operation of land reform.
the tenant-farmers under P.D. 27 are deemed full owners of the lands they till and
the lease rentals paid by them should be considered as amortization payments; that
under LOI 474, petitioner who owns more than seven (7) hectares of lands are not II. Granting arguendo that homesteads are not exempt, whether or not the
The Facts
entitled to retention. Respondents prayed for the dismissal of the case. They Emancipation Patents issued to the respondents are valid notwithstanding lack of
likewise prayed that the Emancipation Patents issued to private respondents and payment of just compensation.
their peaceful possession of their farm lots be respected.
The Court of Appeals narrates the facts thus:
III. On the assumption that homesteads are exempt from land reform and/or the
emancipation patents are illegally issued hence, void, can the respondents be
ejected from the premises in question? [7]
The Courts Ruling
The Petition is partly meritorious. Respondents are entitled to the lands they
till, subject to the determination and payment of just compensation to petitioner.
First Issue: Petitioners Homesteads Not Exempt from Land Reform
Petitioner contends that because the subject properties are covered by
homestead patents, they are exempt from the operation of land reform. In support
of her position, she cites the cases Alita v. CA[8] and Patricio v. Bayug,[9] in which
the Court ruled that homesteaders had a superior right to cultivate their homesteads
as against their tenants.
Petitioners contention is without legal basis. Presidential Decree (PD) No.
27, under which the Emancipation Patents sought to be cancelled here were issued
to respondents, applies to all tenanted private agricultural lands primarily devoted
to rice and corn under a system of share-crop or lease-tenancy, whether classified
as landed estate or not. [10] The law makes no exceptions whatsoever in its
coverage. Nowhere therein does it appear that lots obtained by homestead patents
are exempt from its operation.
The matter is made even clearer by Department Memorandum Circular No.
2, Series of 1978, which states: Tenanted private agricultural lands primarily
devoted to rice and/or corn which have been acquired under the provisions of
Commonwealth Act 141, as amended, shall also be covered by Operation Land
Transfer. Unquestionably, petitioners parcels of land, though obtained by
homestead patents under Commonwealth Act 141, are covered by land reform
under PD 27.
Petitioners claimed entitlement to retain seven (7) hectares is also
untenable. PD 27, which provides the retention limit, states:
In all cases, the landowner may retain an area of not more than seven (7) hectares
if such landowner is cultivating such area or will now cultivate it.
Clearly, the right to retain an area of seven hectares is not absolute. It is
premised on the condition that the landowner is cultivating the area sought to be
retained or will actually cultivate it upon effectivity of the law.
In the case at bar, neither of the conditions for retention is present. As
admitted by petitioner herself, the subject parcels are fully tenanted; thus, she is
clearly not cultivating them, nor will she personally cultivate any part
thereof. Undoubtedly, therefore, she has no right to retain any portion of her
landholdings.
Even under the current primary law on agrarian reform, Republic Act (RA)
No. 6657, to which the application of PD 27 is suppletory, petitioners lands are
subject to land reform. The said Act lays down the rights of homestead grantees as
follows:
SEC. 6. Retention Limits. Except as otherwise provided in this Act, no person may
own or retain, directly or indirectly, any public or private agricultural land, the size
of which shall vary according to factors governing a viable family-sized farm, such
as commodity produced, terrain, infrastructure, and soil fertility as determined by
the Presidential Agrarian Reform Council (PARC) created hereunder, but in no
case shall retention by the landowner exceed five (5) hectares. Three (3) hectares
may be awarded to each child of the landowner, subject to the following
qualifications: (1) that he is at least fifteen (15) years of age; and (2) that he is
actually tilling the land or directly managing the farm; Provided, That landowners
whose lands have been covered by PD 27 shall be allowed to keep the area
originally retained by them thereunder; Provided, further, That original homestead
grantees or their direct compulsory heirs who still own the original homestead at
the time of the approval of this Act shall retain the same areas as long as they
continue to cultivate said homestead. (italics supplied)
Indisputably, homestead grantees or their direct compulsory heirs can own
and retain the original homesteads, only for as long as they continue to
cultivate them. That parcels of land are covered by homestead patents will not
automatically exempt them from the operation of land reform. It is the fact of
continued cultivation by the original grantees or their direct compulsory heirs that
shall exempt their lands from land reform coverage.
In the present case, as previously pointed out, neither petitioner nor her heirs
are personally cultivating the subject homesteads. The DAR and the CA found that
respondents were the ones who had been cultivating their respective portions of the
disputed properties.
However, petitioner can retain five (5) hectares in accordance with Section
6 of RA 6657, which requires no qualifying condition for the landowner to be
entitled to retain such area. This ruling is in line with Association of Small
Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform, from which
we quote:
x x x. In any event, assuming that the petitioners have not yet exercised their
retention rights, if any, under PD No. 27, the Court holds that they are entitled to
the new retention rights provided for by RA No. 6657, which in fact are on the
whole more liberal than those granted by the decree.
Petitioners heirs, however, are not entitled to awards of three (3) hectares
each, since they are not actually tilling the parcels or directly managing the farm.
Patricio v. Bayug and Alita v. CA
Not Applicable
Petitioner insists that the appellate court ignored the ruling of the Court
in Patricio v. Bayug[11] and Alita v. CA.[12] She relies on the following
pronouncement in Patricio: We hold that the more paramount and superior policy
consideration is to uphold the right of the homesteader and his heirs to own and
cultivate personally the land acquired from the State without being encumbered by
tenancy relations. [13] She also cites the statement in Alita that the inapplicability of
P.D. 27 to lands covered by homestead patents like those of the property in
question finds support in the aforecited Section 6 of RA 6657.[14] A closer look at
these cases shows that they are not applicable to the issues in the present case.
In Patricio, the owner and his heirs had previously cultivated the
homestead, which was later sold but subsequently reconveyed to the former. After
the reconveyance, the owners heirs wanted to resume their cultivation of the
homestead, but the previous buyers tenants did not want to leave it. In Alita, the
owner was also desirous of personally cultivating the homestead; but the tenants,
not wanting to relinquish it, were asserting their own right to continue cultivating
it. Thus, under these circumstances, the Court upheld the right of the homestead
owners over that of the tenants.
In the case at bar, petitioner herself has not personally cultivated the parcels
of land. Neither has she or her heirs expressed, at any time, any desire to cultivate
them personally. She is invoking, yet is clearly not intending to ever actually
exercise, her alleged right as homesteader to own and personally cultivate them.
Thus, the rulings in both Patricio and Alita, which are in line with the state
objective of fostering owner cultivatorship [15] and of abolishing tenancy,[16] would
be inapplicable to the present case. Since petitioner and her heirs have evinced no
intention of actually cultivating the lands or even directly managing the farm, they
will undoubtedly continue to be absentee landlords. Therefore, to blindly and
indiscriminately apply the ruling in the cited cases would be tantamount to
encouraging feudalistic practices and going against the very essence of agrarian
reform. This we cannot sanction.
Second Issue: Just Compensation
It is undisputed that the subject parcels were covered by Operation Land
Transfer under PD 27, and that private respondents were identified as
beneficiaries. In fact, Emancipation Patents have already been issued to them.
Petitioner, however, claims that she was not paid just compensation and,
thus, prays for the cancellation of the Emancipation Patents issued to respondents
under PD 27. She contends that it is illegal for the DAR to take property without
full payment of just compensation[;] until full payment is done the title and
ownership remain with the landholder.[17]
Petitioners contention has merit. Section 2 of PD 266 states:
After the tenant-farmer shall have fully complied with the requirements for a grant
of title under Presidential Decree No. 27, an Emancipation Patent and/or Grant
shall be issued by the Department of Agrarian Reform on the basis of a duly
approved survey plan.
On the other hand, paragraphs 8 and 9 of PD 27 reads as follows:
For the purpose of determining the cost of the land to be transferred to the tenant-
farmer pursuant to this Decree, the value of the land shall be equivalent to two and
one-half (2 ) times the average harvest of three normal crop years immediately
preceding the promulgation of this Decree;
The total cost of the land, including interest at the rate of six (6) per centum per
annum, shall be paid by the tenant in fifteen (15) years of fifteen (15) equal annual
amortizations[.]
 Although, under the law, tenant farmers are already deemed owners of the
land they till, they are still required to pay the cost of the land, including interest,
within fifteen years before the title is transferred to them. Thus, the Court held
in Association of Small Landowners in the Philippines v. Secretary of Agrarian
Reform:[18]
It is true that PD 27 expressly ordered the emancipation of tenant-farmers as of
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.
In the case at bar, there is no showing that respondents complied with the
requirement of full payment of the cost of the parcels of land. As they themselves
admitted,[19] their value had not even been determined yet. In the absence of such
determination, the Court cannot rule that just compensation has already been fully
paid.
Presidential Decree 27 and subsequently Executive Order (EO) 228, which
recognized the rights acquired by tenant-farmers under PD 27, provide in detail the
computation to be used in arriving at the exact total cost of the parcels of
land. Evidently, therefore, the law recognizes that their exact value, or the just
compensation to be given to the landowner, cannot just be assumed; it must be
determined with certainty before the land titles are transferred.
Although EO 228 provides that the total lease rentals paid for the lands from
October 21, 1972 shall be considered as advance payment, it does not sanction the
assumption that such rentals are automatically considered as equivalent to just
compensation for the land. The provision significantly designates the lease rentals
as advance, not full, payment. The determination of the exact value of the lands
cannot simply be brushed aside, as it is fundamental to the determination of
whether full payment has been made.
Necessarily, the lease rentals admittedly paid by respondents until
December 1988 cannot, at this point, be considered as full settlement of the value
of the lands or as just compensation for them. The value of the subject lands was
never determined; thus, there is no amount that can be used as basis for applying
the lease rentals.
Under the circumstances, actual title to the subject lands remains with
petitioner. Clearly then, under PD 27 and EO 228, the application of the process of
agrarian reform to the subject lands is still incomplete.
Considering the passage of RA 6657 before the completion of the
application of the agrarian reform process to the subject lands, the same should
now be completed under the said law, with PD 27 and EO 228 having only
suppletory effect. This ruling finds support in Land Bank of the Philippines v. CA,
[20]
wherein the Court stated:
We cannot see why Sec. 18 of RA 6657 should not apply to rice and corn lands
under PD 27. Section 75 of RA 6657 clearly states that the provisions of PD 27 and
EO 228 shall only have a suppletory effect. Section 7 of the Act also provides ---
Sec. 7. Priorities. The DAR, in coordination with the PARC shall plan and
program the acquisition and distribution of all agricultural lands through a period
of (10) years from the effectivity of this Act. Lands shall be acquired and The current provision on retention removes the necessity, present under PD
distributed as follows: 27, of ejecting actual tillers. Under the current law, landowners who do not
personally cultivate their lands are no longer required to do so in order to qualify
for the retention of an area not exceeding five hectares. Instead, they are now
Phase One: Rice and Corn lands under P.D. 27; all idle or abandoned lands; all
required to maintain the actual tiller of the area retained, should the latter choose to
private lands voluntarily offered by the owners for agrarian reform; x x x and all
remain therein.
other lands owned by the government devoted to or suitable for agriculture, which
shall be acquired and distributed immediately upon the effectivity of this Act, with WHEREFORE, the Petition is partially GRANTED. The assailed Decision
the implementation to be completed within a period of not more than four (4) years of the Court of Appeals is hereby SET ASIDE. The Decision of the provincial
emphasis supplied). agrarian reform adjudicator is REINSTATED with the modification that the lease
rentals, which respondents have already paid to petitioner after October 21, 1972,
are to be considered part of the purchase price for the subject parcels of land.
This eloquently demonstrates that RA 6657 includes PD 27 lands among the
properties which the DAR shall acquire and distribute to the landless. And to
SO ORDERED.
facilitate the acquisition and distribution thereof, Secs. 16, 17 and 18 of the Act
should be adhered to. In Association of Small Landowners of the Philippines v. Melo, (Chairman), Vitug, Gonzaga-Reyes, and Sandoval-Gutierrez,
Secretary of Agrarian Reform this Court applied the provisions (of) RA 6657 to JJ., concur.
rice and corn lands when it upheld the constitutionality of the payment of just
compensation for PD 27 lands through the different modes stated in Sec. 18.
In determining the amount to be paid petitioner, all lease rentals paid by [1]
Fourteenth Division. The Decision was written by J. Demetrio G. Demetria with
respondents to her after October 21, 1972 should be deducted therefrom. This
the concurrence of JJ Ramon A. Barcelona (Division chairman) and Mariano M.
formula is intended to put into effect the provision of Section 2 of EO 228.
Umali (member).
[2]
CA Decision, p. 6; rollo, p. 22.
[3]
Third Issue: Tenants Cannot Be Ejected Rollo, p. 38.
[4]
CA Decision, pp. 2-4; rollo, pp. 18-20.
Petitioner submits that aside from cancelling the Emancipation Patents [5]
CA Decision, p. 6; rollo, p. 22.
issued to respondents, the ejectment of the latter from the premises should be
[6]
ordered by the Court, in accordance with the doctrine in Patricio. The case was deemed submitted for resolution on November 17, 2000, upon
receipt by this Court of the Office of Solicitor Generals Memorandum/Comment
Petitioners position is unfounded. As earlier explained, Patricio finds no signed by Sol. Gen. Ricardo P. Galvez, Asst. Sol. Gen. Roman G. Del Rosario and
application to the case at bar. Thus, there is no justification for ejecting Sol. Ma. Theresa Dolores C. Gomez-Estoesta. Respondents Memorandum, signed
respondents. Besides, Section 22 of RA 6657 expressly states that actual tenant- by Atty. Francisco H. Albarracin Jr. of the Department of Agrarian Reform Legal
tillers in the landholding shall not be ejected or removed therefrom.Furthermore, Services Division, was received on February 7, 2000.
there is no reason for ejecting the tillers with respect to the area of five hectares,
[7]
which petitioner may choose to retain. Section 6 of RA 6657 further states: Petitioners Memorandum, p. 6; rollo, p. 41.
[8]
170 SCRA 706, February 27, 1989.
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 [9]
112 SCRA 41, February 16, 1982.
for retention by the land owner is tenanted, the tenant shall have the option to
[10]
choose whether to remain therein or be a beneficiary in the same or another Ministry Memorandum Circular No. 18-81.
agricultural land with similar or comparable features. In case the tenant chooses to [11]
remain in the retained area, he shall be considered a lease holder and shall lose his 112 SCRA 41, February 16, 1982.
right to be a beneficiary under this Act. In case the tenant chooses to be a [12]
170 SCRA 706, February 27, 1989.
beneficiary in another agricultural land, he loses his right as a lease-holder to the
land retained by the landowner. The tenant must exercise this option within a [13]
Supra, p. 45, per Aquino, J.
period of one (1) year from the time the landowner manifests his choice of the area
[14]
for retention. Supra, p. 710; per Paras, J.
[15]
RA 6657.
In all cases, the security of tenure of the farmers or farm workers on the land prior
to the approval of this Act shall be respected. [16]
PD 152.
[17]
Petitioners Memorandum, p. 9; rollo, p. 44.
[18]
175 SCRA 343,390, July 14, 1989; per Cruz, J.
[19]
Comment, p. 5; rollo, p. 31.
[20]
321 SCRA 629, 641, December 29, 1999; per Bellosillo, J.

EN BANC
[G.R. No. 127876. December 17, 1999]
ROXAS & CO., INC., petitioner, vs. THE HONORABLE COURT OF
APPEALS, DEPARTMENT OF AGRARIAN REFORM,
SECRETARY OF AGRARIAN REFORM, DAR REGIONAL
DIRECTOR FOR REGION IV, MUNICIPAL AGRARIAN
REFORM OFFICER OF NASUGBU, BATANGAS and
DEPARTMENT OF AGRARIAN REFORM ADJUDICATION
BOARD, respondents.
DECISION
PUNO, J.:
This case involves three (3) haciendas in Nasugbu, Batangas owned by
petitioner and the validity of the acquisition of these haciendas by the government
under Republic Act No. 6657, the Comprehensive Agrarian Reform Law of 1988.
Petitioner Roxas & Co. is a domestic corporation and is the registered
owner of three haciendas, namely, Haciendas Palico, Banilad and Caylaway, all
located in the Municipality of Nasugbu, Batangas. Hacienda Palico is 1,024
hectares in area and is registered under Transfer Certificate of Title (TCT) No.
985. This land is covered by Tax Declaration Nos. 0465, 0466, 0468, 0470, 0234
and 0354. Hacienda Banilad is 1,050 hectares in area, registered under TCT No.
924 and covered by Tax Declaration Nos. 0236, 0237 and 0390. Hacienda
Caylaway is 867.4571 hectares in area and is registered under TCT Nos. T-44662,
T-44663, T-44664 and T-44665.
The events of this case occurred during the incumbency of then President
Corazon C. Aquino. In February 1986, President Aquino issued Proclamation No.
3 promulgating a Provisional Constitution. As head of the provisional government,
the President exercised legislative power until a legislature is elected and convened
under a new Constitution. [1] In the exercise of this legislative power, the President
signed on July 22, 1987, Proclamation No. 131 instituting a Comprehensive
Agrarian Reform Program and Executive Order No. 229 providing the mechanisms
necessary to initially implement the program.
On July 27, 1987, the Congress of the Philippines formally convened and
took over legislative power from the President. [2] This Congress passed Republic
Act No. 6657, the Comprehensive Agrarian Reform Law (CARL) of 1988. The Act
was signed by the President on June 10, 1988 and took effect on June 15, 1988.
Before the laws effectivity, on May 6, 1988, petitioner filed with respondent
DAR a voluntary offer to sell Hacienda Caylaway pursuant to the provisions
of E.O. No. 229. Haciendas Palico and Banilad were later placed under
compulsory acquisition by respondent DAR in accordance with the CARL.
Hacienda Palico
On September 29, 1989, respondent DAR, through respondent Municipal
Agrarian Reform Officer (MARO) of Nasugbu, Batangas, sent a notice entitled
Invitation to Parties to petitioner. The Invitation was addressed to Jaime Pimentel,
Hda. Administrator, Hda. Palico.[3] Therein, the MARO invited petitioner to a
conference on October 6, 1989 at the DAR office in Nasugbu to discuss the results
of the DAR investigation of Hacienda Palico, which was scheduled for compulsory
acquisition this year under the Comprehensive Agrarian Reform Program. [4]
On October 25, 1989, the MARO completed three (3) Investigation Reports
after investigation and ocular inspection of the Hacienda. In the first Report, the
MARO found that 270 hectares under Tax Declaration Nos. 465, 466, 468 and 470
were flat to undulating (0-8% slope) and actually occupied and cultivated by 34
tillers of sugarcane.[5] In the second Report, the MARO identified as flat to
undulating approximately 339 hectares under Tax Declaration No. 0234 which also
had several actual occupants and tillers of sugarcane; [6] while in the third Report,
the MARO found approximately 75 hectares under Tax Declaration No. 0354 as
flat to undulating with 33 actual occupants and tillers also of sugarcane.[7]
On October 27, 1989, a Summary Investigation Report was submitted and
signed jointly by the MARO, representatives of the Barangay Agrarian Reform
Committee (BARC) and Land Bank of the Philippines (LBP), and by the
Provincial Agrarian Reform Officer (PARO). The Report recommended that
333.0800 hectares of Hacienda Palico be subject to compulsory acquisition at a
value of P6,807,622.20.[8] The following day, October 28, 1989, two (2) more
Summary Investigation Reports were submitted by the same officers and
representatives. They recommended that 270.0876 hectares and 75.3800 hectares
be placed under compulsory acquisition at a compensation of P8,109,739.00 and
P2,188,195.47, respectively.[9]
On December 12, 1989, respondent DAR through then Department
Secretary Miriam D. Santiago sent a Notice of Acquisition to petitioner. The
Notice was addressed as follows:
Roxas y Cia, Limited
Soriano Bldg., Plaza Cervantes
Manila, Metro Manila.[10]
Petitioner was informed that 1,023.999 hectares of its land in Hacienda
Palico were subject to immediate acquisition and distribution by the government
under the CARL; that based on the DARs valuation criteria, the government was
offering compensation of P3.4 million for 333.0800 hectares; that whether this
offer was to be accepted or rejected, petitioner was to inform the Bureau of Land
Acquisition and Distribution (BLAD) of the DAR; that in case of petitioners
rejection or failure to reply within thirty days, respondent DAR shall conduct
summary administrative proceedings with notice to petitioner to determine just
compensation for the land; that if petitioner accepts respondent DARs offer, or
upon deposit of the compensation with an accessible bank if it rejects the same, the
DAR shall take immediate possession of the land.[11]
Almost two years later, on September 26, 1991, the DAR Regional Director
sent to the LBP Land Valuation Manager three (3) separate Memoranda entitled
Request to Open Trust Account. Each Memoranda requested that a trust account
representing the valuation of three portions of Hacienda Palico be opened in favor
of the petitioner in view of the latters rejection of its offered value. [12]
Meanwhile in a letter dated May 4, 1993, petitioner applied with the DAR
for conversion of Haciendas Palico and Banilad from agricultural to non-
agricultural lands under the provisions of the CARL. [13] On July 14, 1993,
petitioner sent a letter to the DAR Regional Director reiterating its request for
conversion of the two haciendas.[14]
Despite petitioners application for conversion, respondent DAR proceeded
with the acquisition of the two Haciendas. The LBP trust accounts as
compensation for Hacienda Palico were replaced by respondent DAR with cash
and LBP bonds. [15] On October 22, 1993, from the mother title of TCT No. 985
of the Hacienda, respondent DAR registered Certificate of Land Ownership Award
(CLOA) No. 6654. On October 30, 1993, CLOAs were distributed to farmer
beneficiaries.[16]
Hacienda Banilad
On August 23, 1989, respondent DAR, through respondent MARO of
Nasugbu, Batangas, sent a notice to petitioner addressed as follows:
Mr. Jaime Pimentel
Hacienda Administrator
Hacienda Banilad
Nasugbu, Batangas[17]
The MARO informed Pimentel that Hacienda Banilad was subject to
compulsory acquisition under the CARL; that should petitioner wish to avail of the
other schemes such as Voluntary Offer to Sell or Voluntary Land Transfer,
respondent DAR was willing to provide assistance thereto. [18]
On September 18, 1989, the MARO sent an Invitation to Parties again to
Pimentel inviting the latter to attend a conference on September 21, 1989 at the
MARO Office in Nasugbu to discuss the results of the MAROs investigation over
Hacienda Banilad.[19]
On September 21, 1989, the same day the conference was held, the MARO
submitted two (2) Reports. In his first Report, he found that approximately 709
hectares of land under Tax Declaration Nos. 0237 and 0236 were flat to undulating
(0-8% slope). On this area were discovered 162 actual occupants and tillers of
sugarcane.[20] In the second Report, it was found that approximately 235 hectares
under Tax Declaration No. 0390 were flat to undulating, on which were 92 actual
occupants and tillers of sugarcane.[21]
The results of these Reports were discussed at the conference. Present in the
conference were representatives of the prospective farmer beneficiaries, the
BARC, the LBP, and Jaime Pimentel on behalf of the landowner.[22] After the
meeting, on the same day, September 21, 1989, a Summary Investigation Report
was submitted jointly by the MARO, representatives of the BARC, LBP, and the
PARO. They recommended that after ocular inspection of the property, 234.6498
hectares under Tax Declaration No. 0390 be subject to compulsory acquisition and
distribution by CLOA.[23] The following day, September 22, 1989, a second
Summary Investigation was submitted by the same officers. They recommended
that 737.2590 hectares under Tax Declaration Nos. 0236 and 0237 be likewise
placed under compulsory acquisition for distribution. [24]
On December 12, 1989, respondent DAR, through the Department
Secretary, sent to petitioner two (2) separate Notices of Acquisition over Hacienda
Banilad. These Notices were sent on the same day as the Notice of Acquisition
over Hacienda Palico. Unlike the Notice over Hacienda Palico, however, the
Notices over Hacienda Banilad were addressed to:
Roxas y Cia. Limited
7th Floor, Cacho-Gonzales Bldg. 101 Aguirre St., Leg.
Makati, Metro Manila.[25]
Respondent DAR offered petitioner compensation of P15,108,995.52 for 729.4190
hectares and P4,428,496.00 for 234.6498 hectares.[26]
On September 26, 1991, the DAR Regional Director sent to the LBP Land
Valuation Manager a Request to Open Trust Account in petitioners name as
compensation for 234.6493 hectares of Hacienda Banilad. [27] A second Request to
Open Trust Account was sent on November 18, 1991 over 723.4130 hectares of
said Hacienda.[28]
On December 18, 1991, the LBP certified that the amounts
of P4,428,496.40 and P21,234,468.78 in cash and LBP bonds had been earmarked
as compensation for petitioners land in Hacienda Banilad.[29]
On May 4, 1993, petitioner applied for conversion of both Haciendas Palico
and Banilad.
Hacienda Caylaway
Hacienda Caylaway was voluntarily offered for sale to the government on
May 6, 1988 before the effectivity of the CARL. The Hacienda has a total area of
867.4571 hectares and is covered by four (4) titlesTCT Nos. T-44662, T-44663, T-
44664 and T-44665. On January 12, 1989, respondent DAR, through the Regional
Director for Region IV, sent to petitioner two (2) separate Resolutions accepting
petitioners voluntary offer to sell Hacienda Caylaway, particularly TCT Nos. T-
44664 and T-44663.[30] The Resolutions were addressed to:
Roxas & Company, Inc.
7th Flr. Cacho- Gonzales Bldg.
Aguirre, Legaspi Village
Makati, M. M.[31]
On September 4, 1990, the DAR Regional Director issued two separate
Memoranda to the LBP Regional Manager requesting for the valuation of the land
under TCT Nos. T-44664 and T-44663. [32] On the same day, respondent DAR,
through the Regional Director, sent to petitioner a Notice of Acquisition over
241.6777 hectares under TCT No. T-44664 and 533.8180 hectares under TCT No.
T-44663.[33] Like the Resolutions of Acceptance, the Notice of Acquisition was
addressed to petitioner at its office in Makati, Metro Manila.
Nevertheless, on August 6, 1992, petitioner, through its President, Eduardo
J. Roxas, sent a letter to the Secretary of respondent DAR withdrawing its VOS of
Hacienda Caylaway. The Sangguniang Bayan of Nasugbu, Batangas allegedly
authorized the reclassification of Hacienda Caylaway from agricultural to non-
agricultural. As a result, petitioner informed respondent DAR that it was applying
for conversion of Hacienda Caylaway from agricultural to other uses.[34]
In a letter dated September 28, 1992, respondent DAR Secretary informed
petitioner that a reclassification of the land would not exempt it from agrarian
reform. Respondent Secretary also denied petitioners withdrawal of the VOS on
the ground that withdrawal could only be based on specific grounds such as
unsuitability of the soil for agriculture, or if the slope of the land is over 18 degrees
and that the land is undeveloped.[35]
Despite the denial of the VOS withdrawal of Hacienda Caylaway, on May
11, 1993, petitioner filed its application for conversion of both Haciendas Palico
and Banilad.[36] On July 14, 1993, petitioner, through its President, Eduardo Roxas,
reiterated its request to withdraw the VOS over Hacienda Caylaway in light of the
following:
1) Certification issued by Conrado I. Gonzales, Officer-in-Charge, Department of
Agriculture, Region 4, 4th Floor, ATI (BA) Bldg., Diliman, Quezon City dated
March 1, 1993 stating that the lands subject of referenced titles are not feasible and
economically sound for further agricultural development.
2) Resolution No. 19 of the Sangguniang Bayan of Nasugbu, Batangas approving
the Zoning Ordinance reclassifying areas covered by the referenced titles to 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-0017-96-46 (BA) with
respondent DAR Adjudication Board (DARAB) praying for the cancellation of the
CLOAs issued by respondent DAR in the name of several persons. Petitioner
alleged that the Municipality of Nasugbu, where the haciendas are located, had
been declared a tourist zone, that the land is not suitable for agricultural
production, and that the Sangguniang Bayan of Nasugbu had reclassified the land
to 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.
Petitioners petition was dismissed by the Court of Appeals on April 28,
1994.[39] Petitioner moved for reconsideration but the motion was denied on
January 17, 1997 by respondent court.[40]
Hence, this recourse. Petitioner assigns the following errors:
A. RESPONDENT COURT OF APPEALS GRAVELY ERRED IN HOLDING
THAT PETITIONERS CAUSE OF ACTION IS PREMATURE FOR FAILURE
TO EXHAUST ADMINISTRATIVE REMEDIES IN VIEW OF THE PATENT
ILLEGALITY OF THE RESPONDENTS ACTS, THE IRREPARABLE
DAMAGE CAUSED BY SAID ILLEGAL ACTS, AND THE ABSENCE OF A
PLAIN, SPEEDY AND ADEQUATE REMEDY IN THE ORDINARY COURSE
OF LAWALL OF WHICH ARE EXCEPTIONS TO THE SAID DOCTRINE.
B. RESPONDENT COURT OF APPEALS GRAVELY ERRED IN HOLDING
THAT PETITIONERS LANDHOLDINGS ARE SUBJECT TO COVERAGE
UNDER THE COMPREHENSIVE AGRARIAN REFORM LAW, IN VIEW OF
THE UNDISPUTED FACT THAT PETITIONERS LANDHOLDINGS HAVE
BEEN CONVERTED TO NON-AGRICULTURAL USES BY PRESIDENTIAL
PROCLAMATION NO. 1520 WHICH DECLARED THE MUNICIPALITY OF
NASUGBU, BATANGAS AS A TOURIST ZONE, AND THE ZONING
ORDINANCE OF THE MUNICIPALITY OF NASUGBU RE-CLASSIFYING
CERTAIN PORTIONS OF PETITIONERS LANDHOLDINGS AS NON-
AGRICULTURAL, BOTH OF WHICH PLACE SAID LANDHOLDINGS
OUTSIDE THE SCOPE OF AGRARIAN REFORM, OR AT THE VERY LEAST
ENTITLE PETITIONER TO APPLY FOR CONVERSION AS CONCEDED BY
RESPONDENT DAR.
C. RESPONDENT COURT OF APPEALS GRAVELY ERRED WHEN IT
FAILED TO DECLARE THE PROCEEDINGS BEFORE RESPONDENT DAR
VOID FOR FAILURE TO OBSERVE DUE PROCESS, CONSIDERING THAT
RESPONDENTS BLATANTLY DISREGARDED THE PROCEDURE FOR THE
ACQUISITION OF PRIVATE LANDS UNDER R.A. 6657, MORE
PARTICULARLY, IN FAILING TO GIVE DUE NOTICE TO THE PETITIONER
AND TO PROPERLY IDENTIFY THE SPECIFIC AREAS SOUGHT TO BE
ACQUIRED.
D. RESPONDENT COURT OF APPEALS GRAVELY ERRED WHEN IT
FAILED TO RECOGNIZE THAT PETITIONER WAS BRAZENLY AND
ILLEGALLY DEPRIVED OF ITS PROPERTY WITHOUT JUST
COMPENSATION, CONSIDERING THAT PETITIONER WAS NOT PAID
JUST COMPENSATION BEFORE IT WAS UNCEREMONIOUSLY STRIPPED
OF ITS LANDHOLDINGS THROUGH THE ISSUANCE OF CLOAS TO
ALLEGED FARMER BENEFICIARIES, IN VIOLATION OF R.A. 6657.[41]
The assigned errors involve three (3) principal issues: (1) whether this Court
can take cognizance of this petition despite petitioners failure to exhaust
administrative remedies; (2) whether the acquisition proceedings over the three
haciendas were valid and in accordance with law; and (3) assuming the haciendas
may be reclassified from agricultural to non-agricultural, whether this court has the
power to rule on this issue.
I. Exhaustion of Administrative Remedies.
In its first assigned error, petitioner claims that respondent Court of Appeals
gravely erred in finding that petitioner failed to exhaust administrative
remedies. As a general rule, before a party may be allowed to invoke the
jurisdiction of the courts of justice, he is expected to have exhausted all means of
administrative redress. This is not absolute, however. There are instances when
judicial action may be resorted to immediately. Among these exceptions are: (1)
when the question raised is purely legal; (2) when the administrative body is in
estoppel; (3) when the act complained of is patently illegal; (4) when there is
urgent need for judicial intervention; (5) when the respondent acted in disregard of
due process; (6) when the respondent is a department secretary whose acts, as an
alter ego of the President, bear the implied or assumed approval of the latter ; (7)
when irreparable damage will be suffered; (8) when there is no other plain, speedy
and adequate remedy; (9) when strong public interest is involved; (10) when the
subject of the controversy is private land; and (11) in quo warranto proceedings.[42]
 Petitioner rightly sought immediate redress in the courts. There was a
violation of its rights and to require it to exhaust administrative remedies before
the DAR itself was not a plain, speedy and adequate remedy.
Respondent DAR issued Certificates of Land Ownership Award
(CLOAs) to farmer beneficiaries over portions of petitioners land without just
compensation to petitioner. A Certificate of Land Ownership Award (CLOA) is
evidence of ownership of land by a beneficiary under R.A. 6657, the
Comprehensive Agrarian Reform Law of 1988.[43] Before this may be awarded to a
farmer beneficiary, the land must first be acquired by the State from the landowner
and ownership transferred to the former. The transfer of possession and ownership
of the land to the government are conditioned upon the receipt by the landowner
of the corresponding payment or deposit by the DAR of the compensation with an
accessible bank. Until then, title remains with the landowner.[44] There was no
receipt by petitioner of any compensation for any of the lands acquired by the
government.
The kind of compensation to be paid the landowner is also specific. The law
provides that the deposit must be made only in cash or LBP bonds .
[45]
Respondent DARs opening of trust account deposits in petitioners name with the
Land Bank of the Philippines does not constitute payment under the law.Trust
account deposits are not cash or LBP bonds. The replacement of the trust
account with cash or LBP bonds did not ipso facto cure the lack of
compensation; for essentially, the determination of this compensation was marred
by lack of due process. In fact, in the entire acquisition proceedings, respondent
DAR disregarded the basic requirements of administrative due process. Under
these circumstances, the issuance of the CLOAs to farmer beneficiaries
necessitated immediate judicial action on the part of the petitioner.
II. The Validity of the Acquisition Proceedings Over the Haciendas.
Petititioners allegation of lack of due process goes into the validity of the
acquisition proceedings themselves. Before we rule on this matter, however, there
is need to lay down the procedure in the acquisition of private lands under the
provisions of the law.
A. Modes of Acquisition of Land under R. A. 6657
Republic Act No. 6657, the Comprehensive Agrarian Reform Law of 1988
(CARL), provides for two (2) modes of acquisition of private land: compulsory
and voluntary. The procedure for the compulsory acquisition of private lands is set
forth in Section 16 of R.A. 6657, viz:
Sec. 16. Procedure for Acquisition of Private Lands. --. For purposes of acquisition
of private lands, the following procedures shall be followed:
a) After having identified the land, the landowners and the beneficiaries, the
DAR shall send its notice to acquire the land to the owners thereof, by
personal delivery or registered mail, and post the same in a conspicuous
place in the municipal building and barangay hall of the place where the property
is located. Said notice shall contain the offer of the DAR to pay a corresponding
value in accordance with the valuation set forth in Sections 17, 18, and other
pertinent provisions hereof.
b) Within thirty (30) days from the date of receipt of written notice by personal
delivery or registered mail, the landowner, his administrator or representative shall
inform the DAR of his acceptance or rejection of the offer.
c) If the landowner accepts the offer of the DAR, the LBP shall pay the landowner
the purchase price of the land within thirty (30) days after he executes and delivers
a deed of transfer in favor of the Government and surrenders the Certificate of
Title and other muniments of title.
d) In case of rejection or failure to reply, the DAR shall conduct summary
administrative proceedings to determine the compensation for the land requiring
the landowner, the LBP and other interested parties to submit evidence as to the
just compensation for the land, within fifteen (15) days from receipt of the
notice. After the expiration of the above period, the matter is deemed submitted for
decision. The DAR shall decide the case within thirty (30) days after it is
submitted for decision.
e) Upon receipt by the landowner of the corresponding payment, or, in case of
rejection or no response from the landowner, upon the deposit with an accessible
bank designated by the DAR of the compensation in cash or in LBP bonds in
accordance with this Act, the DAR shall take immediate possession of the land and
shall request the proper Register of Deeds to issue a Transfer Certificate of Title
(TCT) in the name of the Republic of the Philippines. The DAR shall thereafter
proceed with the redistribution of the land to the qualified beneficiaries.
f) Any party who disagrees with the decision may bring the matter to the court of
proper jurisdiction for final determination of just compensation.
In the compulsory acquisition of private lands, the landholding, the
landowners and the farmer beneficiaries must first be identified. After
identification, the DAR shall send a Notice of Acquisition to the landowner, by
personal delivery or registered mail, and post it in a conspicuous place in the
municipal building and barangay hall of the place where the property is
located. Within thirty days from receipt of the Notice of Acquisition, the
landowner, his administrator or representative shall inform the DAR of his
acceptance or rejection of the offer. If the landowner accepts, he executes and
delivers a deed of transfer in favor of the government and surrenders the certificate
of title. Within thirty days from the execution of the deed of transfer, the Land
Bank of the Philippines (LBP) pays the owner the purchase price. If the landowner
rejects the DARs offer or fails to make a reply, the DAR conducts summary
administrative proceedings to determine just compensation for the land. The
landowner, the LBP representative and other interested parties may submit
evidence on just compensation within fifteen days from notice. Within thirty days
from submission, the DAR shall decide the case and inform the owner of its
decision and the amount of just compensation. Upon receipt by the owner of the
corresponding payment, or, in case of rejection or lack of response from the latter,
the DAR shall deposit the compensation in cash or in LBP bonds with an
accessible bank. The DAR shall immediately take possession of the land and cause
the issuance of a transfer certificate of title in the name of the Republic of the
Philippines. The land shall then be redistributed to the farmer beneficiaries. Any
party may question the decision of the DAR in the regular courts for final
determination of just compensation.
The DAR has made compulsory acquisition the priority mode of land
acquisition to hasten the implementation of the Comprehensive Agrarian Reform
Program (CARP).[46] Under Section 16 of the CARL, the first step in compulsory
acquisition is the identification of the land, the landowners and the
beneficiaries. However, the law is silent on how the identification process must
be made. To fill in this gap, the DAR issued on July 26, 1989 Administrative
Order No. 12, Series of 1989, which set the operating procedure in the
identification of such lands. The procedure is as follows:
II. OPERATING PROCEDURE
A. The Municipal Agrarian Reform Officer, with the assistance of the
pertinent Barangay Agrarian Reform Committee (BARC), shall:
1. Update the masterlist of all agricultural lands covered under the
CARP in his area of responsibility. The masterlist shall include
such information as required under the attached CARP Masterlist
Form which shall include the name of the landowner,
landholding area, TCT/OCT number, and tax declaration
number.
2. Prepare a Compulsory Acquisition Case Folder (CACF) for each
title (OCT/TCT) or landholding covered under Phase I and II of
the CARP except those for which the landowners have already
filed applications to avail of other modes of land acquisition. A
case folder shall contain the following duly accomplished forms:
a) CARP CA Form 1MARO Investigation Report
b) CARP CA Form 2-- Summary Investigation Report of
Findings and Evaluation
c) CARP CA Form 3Applicants Information Sheet
d) CARP CA Form 4Beneficiaries Undertaking
e) CARP CA Form 5Transmittal Report to the PARO
The MARO/ BARC shall certify that all information contained in the above-
mentioned forms have been examined and verified by him and that the same are
true and correct.
3. Send a Notice of Coverage and a letter of invitation to
a conference/ meeting to the landowner covered by the
Compulsory Case Acquisition Folder. Invitations to the said
conference/ meeting shall also be sent to the prospective
farmer-beneficiaries, the BARC representative(s), the Land
Bank of the Philippines (LBP) representative, and other
interested parties to discuss the inputs to the valuation of the
property. He shall discuss the MARO/ BARC investigation
report and solicit the views, objection, agreements or
suggestions of the participants thereon. The landowner shall
also be asked to indicate his retention area. The minutes of
 the meeting shall be signed by all participants in the
conference and shall form an integral part of the CACF.
4. Submit all completed case folders to the Provincial Agrarian
Reform Officer (PARO).
B. The PARO shall:
1. Ensure that the individual case folders are forwarded to him by his
MAROs.
2. Immediately upon receipt of a case folder, compute the valuation
of the land in accordance with A.O. No. 6, Series of 1988. [47] The
valuation worksheet and the related CACF valuation forms shall
be duly certified correct by the PARO and all the personnel who
participated in the accomplishment of these forms.
3. In all cases, the PARO may validate the report of the MARO
through ocular inspection and verification of the property. This
ocular inspection and verification shall be mandatory when the
computed value exceeds 500,000 per estate.
4. Upon determination of the valuation, forward the case folder,
together with the duly accomplished valuation forms and his
recommendations, to the Central Office. The LBP representative
and the MARO concerned shall be furnished a copy each of his
report.
C. DAR Central Office, specifically through the Bureau of Land
Acquisition and Distribution (BLAD), shall:
1. Within three days from receipt of the case folder from the PARO,
review, evaluate and determine the final land valuation of the
property covered by the case folder. A summary review and
evaluation report shall be prepared and duly certified by the
BLAD Director and the personnel directly participating in the
review and final valuation.
2. Prepare, for the signature of the Secretary or her duly authorized
representative, a Notice of Acquisition (CARP CA Form 8) for
the subject property.Serve the Notice to the landowner
personally or through registered mail within three days from its
approval. The Notice shall include, among others, the area
subject of compulsory acquisition, and the amount of just
compensation offered by DAR.
3. Should the landowner accept the DARs offered value, the BLAD
shall prepare and submit to the Secretary for approval the Order
of Acquisition.However, in case of rejection or non-reply, the
DAR Adjudication Board (DARAB) shall conduct a summary
administrative hearing to determine just compensation, in
accordance with the procedures provided under Administrative
Order No. 13, Series of 1989. Immediately upon receipt of the
DARABs decision on just compensation, the BLAD shall
prepare and submit to the Secretary for approval the required
Order of Acquisition.
4. Upon the landowners receipt of payment, in case of acceptance, or
upon deposit of payment in the designated bank, in case of
rejection or non-response, the Secretary shall immediately direct
the pertinent Register of Deeds to issue the corresponding
Transfer Certificate of Title (TCT) in the name of the Republic
of the Philippines. Once the property is transferred, the DAR,
through the PARO, shall take possession of the land for
redistribution to qualified beneficiaries.
Administrative Order No. 12, Series of 1989 requires that the Municipal
Agrarian Reform Officer (MARO) keep an updated master list of all agricultural
lands under the CARP in his area of responsibility containing all the required
information. The MARO prepares a Compulsory Acquisition Case Folder (CACF)
for each title covered by CARP. The MARO then sends the landowner a Notice of
Coverage and a letter of invitation to a conference/ meeting over the land covered
by the CACF. He also sends invitations to the prospective farmer-beneficiaries, the
representatives of the Barangay Agrarian Reform Committee (BARC), the Land
Bank of the Philippines (LBP) and other interested parties to discuss the inputs to
the valuation of the property and solicit views, suggestions, objections or
agreements of the parties. At the meeting, the landowner is asked to indicate his
retention area.
The MARO shall make a report of the case to the Provincial Agrarian
Reform Officer (PARO) who shall complete the valuation of the land. Ocular
inspection and verification of the property by the PARO shall be mandatory when
the computed value of the estate exceeds P500,000.00. Upon determination of the
valuation, the PARO shall forward all papers together with his recommendation to
the Central Office of the DAR. The DAR Central Office, specifically, the Bureau
of Land Acquisition and Distribution (BLAD), shall review, evaluate and
determine the final land valuation of the property. The BLAD shall prepare, on the
signature of the Secretary or his duly authorized representative, a Notice of
Acquisition for the subject property.[48] From this point, the provisions of Section
16 of R.A. 6657 then apply.[49]
For a valid implementation of the CAR Program, two notices are
required: (1) the Notice of Coverage and letter of invitation to a preliminary
conference sent to the landowner, the representatives of the BARC, LBP, farmer
beneficiaries and other interested parties pursuant to DAR A. O. No. 12, Series of
1989; and (2) the Notice of Acquisition sent to the landowner under Section 16 of
the CARL.
The importance of the first notice, i.e., the Notice of Coverage and the letter
of invitation to the conference, and its actual conduct cannot be understated. They
are steps designed to comply with the requirements of administrative due
process. The implementation of the CARL is an exercise of the States police power
and the power of eminent domain. To the extent that the CARL prescribes
retention limits to the landowners, there is an exercise of police power for the
regulation of private property in accordance with the Constitution. [50] But where, to
carry out such regulation, the owners are deprived of lands they own in excess of
the maximum area allowed, there is also a taking under the power of eminent
domain. The taking contemplated is not a mere limitation of the use of the
land. What is required is the surrender of the title to and physical possession of the
said excess and all beneficial rights accruing to the owner in favor of the farmer
beneficiary.[51] The Bill of Rights provides that [n]o person shall be deprived of
life, liberty or property without due process of law.[52] The CARL was not intended
to take away property without due process of law. [53] The exercise of the power of
eminent domain requires that due process be observed in the taking of private
property.
DAR A. O. No. 12, Series of 1989, from whence the Notice of Coverage
first sprung, was amended in 1990 by DAR A.O. No. 9, Series of 1990 and in 1993
by DAR A.O. No. 1, Series of 1993. The Notice of Coverage and letter of
invitation to the conference meeting were expanded and amplified in said
amendments.
DAR A. O. No. 9, Series of 1990 entitled Revised Rules Governing the
Acquisition of Agricultural Lands Subject of Voluntary Offer to Sell and
Compulsory Acquisition Pursuant to R. A. 6657, requires that:
B. MARO
1. Receives the duly accomplished CARP Form Nos. 1 & 1.1
including supporting documents.
2. Gathers basic ownership documents listed under 1.a or 1.b above
and prepares corresponding VOCF/ CACF by landowner/
landholding.
3. Notifies/ invites the landowner and representatives of the LBP,
DENR, BARC and prospective beneficiaries of the schedule of
ocular inspection of the property at least one week in advance.
4. MARO/ LAND BANK FIELD OFFICE/ BARC
a) Identify the land and landowner, and determine the
suitability for agriculture and productivity of the
land and jointly prepare Field Investigation
Report (CARP Form No. 2), including the Land
Use Map of the property.
b) Interview applicants and assist them in the preparation of
the Application For Potential CARP Beneficiary
(CARP Form No. 3).
c) Screen prospective farmer-beneficiaries and for those found
qualified, cause the signing of the respective
Application to Purchase and Farmers
Undertaking (CARP Form No. 4).
d) Complete the Field Investigation Report based on the result
of the ocular inspection/ investigation of the
property and documents submitted. See to it that
Field Investigation Report is duly accomplished
and signed by all concerned.
5. MARO
a) Assists the DENR Survey Party in the conduct of a
boundary/ subdivision survey delineating areas
covered by OLT, retention, subject of VOS, CA
(by phases, if possible), infrastructures, etc.,
whichever is applicable.
b) Sends Notice of Coverage (CARP Form No. 5) to
landowner concerned or his duly authorized
representative inviting him for a conference.
 c) Sends Invitation Letter (CARP Form No. 6) for a DAR A. O. No. 9, Series of 1990 was amended by DAR A. O. No. 1, Series
conference/ public hearing to prospective farmer- of 1993. DAR A. O. No. 1, Series of 1993 provided, among others, that:
beneficiaries, landowner, representatives of
BARC, LBP, DENR, DA, NGOs, farmers IV. OPERATING PROCEDURES:
organizations and other interested parties to "Steps Responsible Activity Forms/
discuss the following matters: Agency/Unit Document
(Requirements)
A. Identification and
Result of Field Investigation Documentation
xxx
Inputs to valuation 5 DARMO Issues Notice of Coverage to LO CARP
by personal delivery with proof of Form No.2
service, or by registered mail with
Issues raised return card, informing him that his
property is now under CARP cover-
Comments/ recommendations by all parties concerned. age and for LO to select his retention
area, if he desires to avail of his right
of retention; and at the same time in-
d) Prepares Summary of Minutes of the conference/ public vites him to join the field investigation
hearing to be guided by CARP Form No. 7. to be conducted on his property which
should be scheduled at least two weeks
e) Forwards the completed VOCF/CACF to the Provincial in advance of said notice.
Agrarian Reform Office (PARO) using CARP A copy of said Notice CARP
Form No. 8 (Transmittal Memo to PARO). shall be posted for at least Form No.17
one week on the bulletin
board of the municipal and barangay
x x x. halls where the property is located.
LGU office concerned notifies DAR
DAR A. O. No. 9, Series of 1990 lays down the rules on both Voluntary about compliance with posting requirement
Offer to Sell (VOS) and Compulsory Acquisition (CA) transactions involving thru return indorsement on CARP Form
lands enumerated under Section 7 of the CARL. [54] In both VOS and CA No. 17.
transactions, the MARO prepares the Voluntary Offer to Sell Case Folder (VOCF) 6 DARMO Sends notice to the LBP, CARP
and the Compulsory Acquisition Case Folder (CACF), as the case may be, over a BARC, DENR Form No.3
particular landholding. The MARO notifies the landowner as well as representatives and
representatives of the LBP, BARC and prospective beneficiaries of the date of the prospective ARBs of the schedule of
ocular inspection of the property at least one week before the scheduled date and the field investigation to be conducted
invites them to attend the same. The MARO, LBP or BARC conducts the ocular on the subject property.
inspection and investigation by identifying the land and landowner, determining 7 DARMO With the participation of CARP
the suitability of the land for agriculture and productivity, interviewing and BARC the LO, representatives of Form No.4
screening prospective farmer beneficiaries. Based on its investigation, the MARO, LBP the LBP, BARC, DENR Land Use
LBP or BARC prepares the Field Investigation Report which shall be signed by all DENR and prospective ARBs, Map
parties concerned. In addition to the field investigation, a boundary or subdivision Local Office conducts the investigation
survey of the land may also be conducted by a Survey Party of the Department of on subject property to identify the landholding,
Environment and Natural Resources (DENR) to be assisted by the MARO. [55] This determines its suitability and productivity;
survey shall delineate the areas covered by Operation Land Transfer (OLT), areas and jointly prepares the Field Investigation
retained by the landowner, areas with infrastructure, and the areas subject to VOS Report (FIR) and Land Use Map. However,
and CA. After the survey and field investigation, the MARO sends a Notice of the field investigation shall proceed even if the
Coverage to the landowner or his duly authorized representative inviting him to a LO, the representatives of the DENR and
conference or public hearing with the farmer beneficiaries, representatives of the prospective ARBs are not available provided,
BARC, LBP, DENR, Department of Agriculture (DA), non-government they were given due notice of the time and date
organizations, farmers organizations and other interested parties. At the public of the investigation to be conducted. Similarly,
hearing, the parties shall discuss the results of the field investigation, issues that if the LBP representative is not available or could
may be raised in relation thereto, inputs to the valuation of the subject landholding, not come on the scheduled date, the field
and other comments and recommendations by all parties concerned. The Minutes investigation shall also be conducted, after which
of the conference/ public hearing shall form part of the VOCF or CACF which the duly accomplished Part I of CARP Form No. 4
files shall be forwarded by the MARO to the PARO. The PARO reviews, evaluates shall be forwarded to the LBP representative for
and validates the Field Investigation Report and other documents in the VOCF/ validation. If he agrees to the ocular inspection report
CACF. He then forwards the records to the RARO for another review. of DAR, he signs the FIR (Part I) and accomplishes
Part II thereof.
In the event that there is a difference or variance
between the findings of the DAR and the LBP as
to the propriety of covering the land under CARP,
whether in whole or in part, on the issue of suitability
to agriculture, degree of development or slope, and
on issues affecting idle lands, the conflict shall be
resolved by a composite team of DAR, LBP, DENR
and DA which shall jointly conduct further investigation
thereon. The team shall submit its report of findings
which shall be binding to both DAR and LBP, pursuant
to Joint Memorandum Circular of the DAR, LBP, DENR
and DA dated 27 January 1992.
8 DARMO Screens prospective ARBS CARP
BARC and causes the signing of Form No. 5
the Application of
Purchase and Farmers' Undertaking (APFU).
9 DARMO Furnishes a copy of the CARP
duly accomplished FIR to Form No.
the landowner by personal 4
delivery with proof of service or registered
mail with return card and posts a copy thereof
for at least one week on the bulletin board of the
municipal and barangay halls where the property
is located.
LGU office concerned CARP
Notifies DAR about Form No.
compliance with posting 17
requirement thru return endorsement on
CARP Form No. 17.
B. Land Survey
10 DARMO Conducts perimeter or Perimeter
And/or segregation survey or
DENR delineating areas covered Segregation
Local Office by OLT, "uncarpable Survey Plan
areas such as 18% slope and above,
unproductive/ unsuitable to agriculture,
retention, infrastructure. In case of
segregation or subdivision survey, the
plan shall be approved by DENR-LMS.
C. Review and Completion of Documents.
11 DARMO Forwards VOCF/CACF CARP
to DARPO. Form No.
6
x x x."
DAR A. O. No. 1, Series of 1993, modified the identification process and
increased 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 andthe various representatives. If the landowner
and other representatives are absent, the field investigation shall proceed, provided
they were duly notified thereof. Should there be a variance between the findings of
the DAR and the LBP as to whether the land be placed under agrarian reform, the
lands suitability to agriculture, the degree or development of the slope, etc., the
conflict shall be resolved by a composite team of the DAR, LBP, DENR and DA
which shall jointly conduct further investigation. The teams findings shall be
binding on both DAR and LBP. After the field investigation, the DAR Municipal
Office shall prepare the Field Investigation Report and Land Use Map, a copy of
which shall be furnished the landowner by personal delivery with proof of service
or registered mail with return card. Another copy of the Report and Map shall
likewise be posted for at least one week in the municipal or barangay halls where
the property is located.
Clearly then, the notice requirements under the CARL are not confined to
the Notice of Acquisition set forth in Section 16 of the law. They also include the
Notice of Coverage first laid down in DAR A. O. No. 12, Series of 1989 and
subsequently amended in DAR A. O. No. 9, Series of 1990 and DAR A. O. No. 1,
Series of 1993. This Notice of Coverage does not merely notify the landowner that
his property shall be placed under CARP and that he is entitled to exercise his
retention right; it also notifies him, pursuant to DAR A. O. No. 9, Series of 1990,
that a public hearing shall be conducted where he and representatives of the
concerned sectors of society may attend to discuss the results of the field
investigation, the land valuation and other pertinent matters. Under DAR A. O. No.
1, Series of 1993, the Notice of Coverage also informs the landowner that a field
investigation of his landholding shall be conducted where he and the other
representatives may be present.
B. The Compulsory Acquisition of Haciendas Palico and Banilad
In the case at bar, respondent DAR claims that it, through MARO Leopoldo
C. Lejano, sent a letter of invitation entitled Invitation to Parties dated September
29, 1989 to petitioner corporation, through Jaime Pimentel, the administrator of
Hacienda Palico.[57] The invitation was received on the same day it was sent as
indicated by a signature and the date received at the bottom left corner of said
invitation. With regard to Hacienda Banilad, respondent DAR claims that Jaime
Pimentel, administrator also of Hacienda Banilad, was notified and sent an
invitation to the conference. Pimentel actually attended the conference on
September 21, 1989 and signed the Minutes of the meeting on behalf of petitioner
corporation.[58] The 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] Petitioners evidence
does not show the official duties of Jaime Pimentel as administrator of petitioners
haciendas. The evidence does not indicate whether Pimentels duties is so
integrated with the corporation that he would immediately realize his
responsibilities and know what he should do with any legal papers served on
him. At the time the notices were sent and the preliminary conference conducted,
petitioners principal place of business was listed in respondent DARs records as
Soriano Bldg., Plaza Cervantes, Manila,[66] and 7th Flr. Cacho-Gonzales Bldg., 101
Aguirre St., Makati, Metro Manila.[67] Pimentel did not hold office at the principal
place of business of petitioner. Neither did he exercise his functions in Plaza
Cervantes, Manila nor in Cacho-Gonzales Bldg., Makati, Metro Manila. He
performed his official functions and actually resided in the haciendas in Nasugbu,
Batangas, a place over two hundred kilometers away from Metro Manila.
Curiously, respondent DAR had information of the address of petitioners
principal place of business. The Notices of Acquisition over Haciendas Palico and
Banilad were addressed to petitioner at its offices in Manila and Makati. These
Notices were sent barely three to four months after Pimentel was notified of the
preliminary conference. [68] Why respondent DAR chose to notify Pimentel instead
of the officers of the corporation was not explained by the said respondent.
Nevertheless, assuming that Pimentel was an agent of petitioner
corporation, and the notices and letters of invitation were validly served on
petitioner through him, there is no showing that Pimentel himself was duly
authorized to attend the conference meeting with the MARO, BARC and LBP
representatives and farmer beneficiaries for purposes of compulsory acquisition of
petitioners landholdings. Even respondent DARs evidence does not indicate this
authority. On the contrary, petitioner claims that it had no knowledge of the letter-
invitation, hence, could not have given Pimentel the authority to bind it to
whatever matters were discussed or agreed upon by the parties at the preliminary
conference or public hearing. Notably, one year after Pimentel was informed of the
preliminary conference, DAR A.O. No. 9, Series of 1990 was issued and this
required that the Notice of Coverage must be sent to the landowner concerned
or his duly authorized representative.[69]
Assuming further that petitioner was duly notified of the CARP coverage of
its haciendas, the areas found actually subject to CARP were not properly
identified before they were taken over by respondent DAR. Respondents insist that
the lands were identified because they are all registered property and the technical
description in their respective titles specifies their metes and bounds. Respondents
admit at the same time, however, that not all areas in the haciendas were placed
under the comprehensive agrarian reform program invariably by reason of
elevation or character or use of the land. [70]The acquisition of the landholdings did
not cover the entire expanse of the two haciendas, but only portions
thereof. Hacienda Palico has an area of 1,024 hectares and only 688.7576 hectares
were targetted for acquisition. Hacienda Banilad has an area of 1,050 hectares but
only 964.0688 hectares were subject to CARP. The haciendas are not entirely
agricultural lands. In fact, the various tax declarations over the haciendas describe
the landholdings as sugarland, and forest, sugarland, pasture land, horticulture and
woodland.[71]
Under Section 16 of the CARL, the sending of the Notice of Acquisition
specifically requires that the land subject to land reform be first identified.The two
haciendas in the instant case cover vast tracts of land. Before Notices of
Acquisition were sent to petitioner, however, the exact areas of the landholdings
were not properly segregated and delineated. Upon receipt of this notice,
therefore, petitioner corporation had no idea which portions of its estate were
subject to compulsory acquisition, which portions it could rightfully retain,
whether these retained portions were compact or contiguous, and which
portions were excluded from CARP coverage. Even respondent DARs evidence
does not show that petitioner, through its duly authorized representative, was
notified of any ocular inspection and investigation that was to be conducted by
respondent DAR. Neither is there proof that petitioner was given the opportunity to
at least choose and identify its retention area in those portions to be acquired
compulsorily. The right of retention and how this right is exercised, is guaranteed
in Section 6 of the CARL, viz:
Section 6. Retention Limits.x x x.
The right to choose the area to be retained, which shall be compact or contiguous,
shall pertain to the landowner; Provided, however, That in case the area selected
for retention by the landowner is tenanted, the tenant shall have the option to
choose whether to remain therein or be a beneficiary in the same or another
agricultural land with similar or comparable features. In case the tenant chooses to
remain in the retained area, he shall be considered a leaseholder and shall lose his
right to be a beneficiary under this Act. In case the tenant chooses to be a
beneficiary in another agricultural land, he loses his right as a leaseholder to the
land retained by the landowner. The tenant must exercise this option within a
period of one (1) year from the time the landowner manifests his choice of the area
for retention.
Under the law, a landowner may retain not more than five hectares out of
the total area of his agricultural land subject to CARP. The right to choose the area
to be retained, which shall be compact or contiguous, pertains to the landowner. If
the area chosen for retention is tenanted, the tenant shall have the option to choose
whether to remain on the portion or be a beneficiary in the same or another
agricultural land with similar or comparable features.
C. The Voluntary Acquisition of Hacienda Caylaway
Petitioner was also left in the dark with respect to Hacienda Caylaway,
which was the subject of a Voluntary Offer to Sell (VOS). The VOS in the instant
case was made on May 6, 1988,[72] before the effectivity of R.A. 6657 on June 15,
1988. VOS transactions were first governed by DAR Administrative Order No. 19,
series of 1989,[73] and under this order, all VOS filed before June 15, 1988 shall be
heard and processed in accordance with the procedure provided for in Executive
Order No. 229, thus:
III. All VOS transactions which are now pending before the DAR and for which no
payment has been made shall be subject to the notice and hearing requirements
provided in Administrative Order No. 12, Series of 1989, dated 26 July 1989,
Section II, Subsection A, paragraph 3.
All VOS filed before 15 June 1988, the date of effectivity of the CARL, shall be
heard and processed in accordance with the procedure provided for in Executive
Order No. 229.
"x x x."
Section 9 of E.O. 229 provides:
Sec. 9. Voluntary Offer to Sell. The government shall purchase all agricultural
lands it deems productive and suitable to farmer cultivation voluntarily offered for
sale to it at a valuation determined in accordance with Section 6. Such transaction
shall be exempt from the payment of capital gains tax and other taxes and fees.
Executive Order 229 does not contain the procedure for the identification of
private land as set forth in DAR A. O. No. 12, Series of 1989. Section 5 of E.O.
229 merely reiterates the procedure of acquisition in Section 16, R.A. 6657. In
other words, the E.O. is silent as to the procedure for the identification of the land,
the notice of coverage and the preliminary conference with the landowner,
representatives of the BARC, the LBP and farmer beneficiaries. Does this mean
that these requirements may be dispensed with regard to VOS filed before June 15,
1988? The answer is no.
First of all, the same E.O. 229, like Section 16 of the CARL, requires that
the land, landowner and beneficiaries of the land subject to agrarian reform
be identified before the notice of acquisition should be issued. [74] Hacienda
Caylaway was voluntarily offered for sale in 1989. The Hacienda has a total area
of 867.4571 hectares and is covered by four (4) titles. In two separate Resolutions
both dated January 12, 1989, respondent DAR, through the Regional Director,
formally accepted the VOS over two of these four titles.[75] The land covered by the
two titles has an area of 855.5257 hectares, but only 648.8544 hectares thereof fell
within the coverage of R.A. 6657.[76] Petitioner claims it does not know where
these portions are located.
Respondent DAR, on the other hand, avers that surveys on the land covered
by the four titles were conducted in 1989, and that petitioner, as landowner, was
not denied participation therein. The results of the survey and the land valuation
summary report, however, do not indicate whether notices to attend the same were
actually sent to and received by petitioner or its duly authorized representative.
[77]
To reiterate, Executive Order No. 229 does not lay down the operating
procedure, much less the notice requirements, before the VOS is accepted by
respondent DAR. Notice to the landowner, however, cannot be dispensed with. It is
part of administrative due process and is an essential requisite to enable the
landowner himself to exercise, at the very least, his right of retention guaranteed
under the CARL.
III. The Conversion of the three Haciendas.
It is petitioners claim that the three haciendas are not subject to agrarian
reform because they have been declared for tourism, not agricultural purposes.
[78]
In 1975, then President Marcos issued Proclamation No. 1520 declaring the
municipality of Nasugbu, Batangas a tourist zone. Lands in Nasugbu, including the
subject haciendas, were allegedly reclassified as non-agricultural 13 years before
the effectivity of R. A. No. 6657.[79] In 1993, the Regional Director for Region IV
of the Department of Agriculture certified that the haciendas are not feasible and
sound for agricultural development. [80]On March 20, 1992, pursuant to
Proclamation No. 1520, the Sangguniang Bayan of Nasugbu, Batangas adopted
Resolution No. 19 reclassifying certain areas of Nasugbu as non-agricultural.
[81]
This Resolution approved Municipal Ordinance No. 19, Series of 1992, the
Revised Zoning Ordinance of Nasugbu [82] which zoning ordinance was based on a
Land Use Plan for Planning Areas for New Development allegedly prepared by the
University of the Philippines.[83] Resolution No. 19 of the Sangguniang Bayan was
approved by the Sangguniang Panlalawigan of Batangas on March 8, 1993.[84]
Petitioner claims that Proclamation No. 1520 was also upheld by respondent
DAR in 1991 when it approved conversion of 1,827 hectares in Nasugbu into a
tourist area known as the Batulao Resort Complex, and 13.52 hectares in Barangay
Caylaway as within the potential tourist belt. [85] Petitioner presents evidence before
us that these areas are adjacent to the haciendas subject of this petition, hence, the
haciendas should likewise be converted.Petitioner urges this Court to take
cognizance of the conversion proceedings and rule accordingly.[86]
We do not agree. Respondent DARs failure to observe due process in
the acquisition of petitioners landholdings does not ipso facto give this Court
the power to adjudicate over petitioners application for conversion of its
haciendas from agricultural to non-agricultural. The agency charged with the
mandate of approving or disapproving applications for conversion is the
DAR.
At the time petitioner filed its application for conversion, the Rules of
Procedure governing the processing and approval of applications for land use
conversion was the DAR A. O. No. 2, Series of 1990. Under this A. O., the
application for conversion is filed with the MARO where the property is located.
The MARO reviews the application and its supporting documents and conducts
field investigation and ocular inspection of the property. The findings of the
MARO are subject to review and evaluation by the Provincial Agrarian Reform
Officer (PARO). The PARO may conduct further field investigation and submit a
supplemental report together with his recommendation to the Regional Agrarian
Reform Officer (RARO) who shall review the same. For lands less than five
hectares, the RARO shall approve or disapprove applications for conversion. For
lands exceeding five hectares, the RARO shall evaluate the PARO Report and
forward the records and his report to the Undersecretary for Legal
Affairs. Applications over areas exceeding fifty hectares are approved or
disapproved by the Secretary of Agrarian Reform.
The DARs mandate over applications for conversion was first laid down in
Section 4 (j) and Section 5 (1) of Executive Order No. 129-A, Series of 1987 and
reiterated in the CARL and Memorandum Circular No. 54, Series of 1993 of the
Office of the President. The DARs jurisdiction over applications for conversion is
provided as follows:
"A. The Department of Agrarian Reform (DAR) is mandated to
approve or disapprove applications for conversion, restructuring
or readjustment of agricultural lands into non-agricultural uses,
pursuant to Section 4 (j) of Executive Order No. 129-A, Series of
1987.
"B. Section 5 (1) of E.O. 129-A, Series of 1987, vests in the DAR,
exclusive authority to approve or disapprove applications for
conversion of agricultural lands for residential, commercial,
industrial and other land uses.
"C Section 65 of R. A. No. 6657, otherwise known as the
Comprehensive Agrarian Reform Law of 1988, likewise
empowers the DAR to authorize under certain conditions, the
conversion of agricultural lands.
"D. Section 4 of Memorandum Circular No. 54, Series of 1993 of the
Office of the President, provides that action on applications for
land use conversion on individual landholdings shall remain as
the responsibility of the DAR, which shall utilize as its primary
reference, documents on the comprehensive land use plans and
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 cultivating their lands.[93] It goes against the basic precepts of justice, fairness [20]
Annex 23 to Comment, Rollo, pp. 337-344.
use conversion have been consolidated in DAR A. O. No. 07, Series of 1997. and equity to deprive these people, through no fault of their own, of the land [21]
Under this recent issuance, the guiding principle in land use conversion is: they till. Anyhow, the farmer beneficiaries hold the property in trust for the Annex 24 to Comment, Rollo, pp. 346-354.
rightful owner of the land. [22]
Minutes of the Conference/Meeting, Annex 27 to Comment, Rollo, p. 357.
to preserve prime agricultural lands for food production while, at the same time, IN VIEW WHEREOF, the petition is granted in part and the acquisition [23]
recognizing the need of the other sectors of society (housing, industry and Annex 26 to Comment, Rollo, p. 356.
proceedings over the three haciendas are nullified for respondent DAR's failure to
commerce) for land, when coinciding with the objectives of the Comprehensive observe due process therein. In accordance with the guidelines set forth in this [24]
Agrarian Reform Law to promote social justice, industrialization and the optimum Annex 25 to Comment, Rollo, p. 355.
decision and the applicable administrative procedure, the case is hereby remanded [25]
Annexes 21 and 22 to Comment, Rollo, pp. 332, 333.
use of land as a national resource for public welfare.[88] to respondent DAR for proper acquisition proceedings and determination of
petitioner's application for conversion. [26]
Id.
Land Use refers to the manner of utilization of land, including its allocation,
SO ORDERED. [27]
Annex 34 to Comment, Rollo, p. 364.
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 Davide, Jr., C.J., Bellosillo, Vitug, Mendoza, Panganiban, Purisima, Buena, [28]
Annex 35 to Comment, Rollo, p. 365.
approved by the DAR.[89] The conversion of agricultural land to uses other than Gonzaga-Reyes, and De Leon, Jr., JJ., concur.
agricultural requires field investigation and conferences with the occupants of the Melo, J., see concurring and dissenting opinion. [29]
Annexes 37 and 38 to Comment, Rollo, pp. 367368.
land. They involve factual findings and highly technical matters within the special Kapunan, Quisumbing, and Pardo, JJ., concur in the dissenting opinion of J. [30]
training and expertise of the DAR. DAR A. O. No. 7, Series of 1997 lays down Santiago. Annexes 42 and 43 to Comment, Rollo, pp. 372-374. In its Comment before
with specificity how the DAR must go about its task. This time, the field Ynares-Santiago, J., see concurring and dissenting opinion. this Court, respondent DAR states that valuation of the land under TCT No. T-
investigation is not conducted by the MARO but by a special task force, known as 44662 had not been completed, while the land under TCT No. T-44665 was not
the Center for Land Use Policy Planning and Implementation (CLUPPI- DAR distributed due to errors in the qualifications of the farmer beneficiariesComment,
Central Office). The procedure is that once an application for conversion is filed, p. 16, Rollo, p. 587.
[31]
the CLUPPI prepares the Notice of Posting. The MARO only posts the notice and Id.
thereafter issues a certificate to the fact of posting. The CLUPPI conducts the field [1]
Article II, Section 1, Proclamation No. 3. [32]
investigation and dialogues with the applicants and the farmer beneficiaries to Annexes 44 and 45 to Comment, Rollo, pp. 374, 375.
[2]
ascertain the information necessary for the processing of the application. The Association of Small Landowners in the Philippines v. Secretary of Agrarian [33]
Reform, 175 SCRA 343, 366 [1989]. Annexes 46 and 47 to Comment, Rollo, pp. 376, 377.
Chairman of the CLUPPI deliberates on the merits of the investigation report and
recommends the appropriate action. This recommendation is transmitted to the [3]
[34]
Annex S to Petition, Rollo, pp. 223-224.
Regional Director, thru the Undersecretary, or Secretary of Agrarian Reform. Annex 2 to Comment, Rollo, p. 309.
Applications involving more than fifty hectares are approved or disapproved by the [4]
[35]
Petition, p. 24, Rollo, p. 34.
Id.
Secretary. The procedure does not end with the Secretary, however. The Order
[36]
provides that the decision of the Secretary may be appealed to the Office of the [5]
Annex 3 to Comment, Rollo, pp. 310-314. Annexes K and N to Petition, Rollo, pp. 211-212, 215.
President or the Court of Appeals, as the case may be, viz: [37]
[6]
Annex 4 to Comment, Rollo, pp. 315-315C. Unlike Annexes 3 and 5, the list of Annex V to Petition, Rollo, pp. 229-230.
actual occupants was not attached to the MARO Report. [38]
Appeal from the decision of the Undersecretary shall be made to the Secretary, and Petition, p. 27, Rollo, p. 37.
from the Secretary to the Office of the President or the Court of Appeals as the [7]
Annex 5 to Comment, Rollo, pp. 316-316E. [39]
case may be. The mode of appeal/ motion for reconsideration, and the appeal fee, The CA decision was penned by Justice Gloria C. Paras and concurred in by
from Undersecretary to the Office of the Secretary shall be the same as that of the [8]
Annex 7 to Comment, Rollo, p. 317. Justices Serafin Guingona and Eubulo Verzola.
Regional Director to the Office of the Secretary.[90] [40]
[9]
Annexes 7 and 8 to Comment, Rollo, pp. 317, 319. The Resolution was penned by Justice Paras and concurred in by Justices Jainal
[10]
Annex 1 to Comment, Rollo, p. 308. Rasul (vice J. Guingona who retired) and Portia Hormachuelos. Justice Verzola
Indeed, the doctrine of primary jurisdiction does not warrant a court to wrote a dissenting opinion which Justice Delilah Magtolis joined.
arrogate unto itself authority to resolve a controversy the jurisdiction over [11]
Id. [41]
which is initially lodged with an administrative body of special competence. Petition, pp. 28-29, Rollo, pp. 38-39.
[12]
[91]
Respondent DAR is in a better position to resolve petitioners application Annexes 9, 10 and 11 to Comment, Rollo, pp. 320-322. [42]
Corona v. Court of Appeals, 214 SCRA 378, 393 [1992]; Sunville Timber
for conversion, being primarily the agency possessing the necessary expertise [13]
Annexes K and N to Petition, Rollo, pp. 211-212, 215. Products, Inc. v. Abad, 206 SCRA 482, 487 [1992]; Quisumbing v. Gumban, 193
on the matter. The power to determine whether Haciendas Palico, Banilad
SCRA 520, 523-524 [1991].
and Caylaway are non-agricultural, hence, exempt from the coverage of the [14]
Petition, p. 20, Rollo, p. 30.
CARL lies with the DAR, not with this Court. [43]
Section 24, R.A. 6657.
[15]
Annexes 16, 17, 18, and 19 to Comment, Rollo, pp. 327-330.
Finally, we stress that the failure of respondent DAR to comply with the [44]
Association of Small Landowners of the Philippines v. DAR Secretary, 175
requisites of due process in the acquisition proceedings does not give this [16]
Annex 20 to Comment, Rollo, p. 331. SCRA 343, 391 [1989].
Court the power to nullify the CLOAs already issued to the farmer [17]
Annex 30 to Comment, Rollo, p. 360.
beneficiaries. To assume the power is to short-circuit the administrative [45]
Land Bank of the Philippines v. Court of Appeals, 249 SCRA 149, 157 [1995].
[18]
process, which has yet to run its regular course. Respondent DAR must be Id.
[46]
given the chance to correct its procedural lapses in the acquisition Prefatory Statement, DAR Administrative Order No. 12, Series of 1989.
[19]
proceedings. In Hacienda Palico alone, CLOA's were issued to 177 farmer Annex 29 to Comment, Rollo, p. 359.
[47]
beneficiaries in 1993.[92] Since then until the present, these farmers have been Now repealed by Administrative Order No. 17, Series of 1989.
[48] [72]
Id., at 174- 175. Petition, p. 23, Rollo, p. 33.
[49] [73]
Id., at 175-177. VOS transactions were later governed by A .O. No. 9, Series of 1990, and A. O.
No. 1, Series of 1993both also covering lands subject to Compulsory Acquisition.
[50]
Association of Small Landowners in the Philippines v. Secretary of Agrarian
[74]
Reform, 175 SCRA 343, 373-374 [1989]. Section 5, E.O. 229.
[51] [75]
Id. Annexes 42 and 43 to Comment, Rollo, pp. 372-374.
[52] [76]
Section 1, Article III, 1987 Constitution. Sur-rejoinder, p. 3.
[53] [77]
Development Bank of the Philippines v. Court of Appeals, 262 SCRA 245, 253 Annexes 39 and 40 to Comment, Rollo, pp. 369-370.
[1996]. [78]
Petition, p. 37, Rollo, p. 47.
[54]
Prior to DAR A.O. No. 9, Series of 1990, VOS transactions were governed by [79]
A.O. No. 3, Series of 1989 and A. O. No. 19, Series of 1989 while CA Petition, pp. 38-39, Rollo, pp. 48-49; Supplemental Manifestation, p. 3.
transactions were governed by A. O. No. 12, Series of 1989. [80]
Petition, p. 25, Rollo, p. 35; Annex U to the Petition, Rollo, p. 228.
[55]
The DENR's participation was added by DAR A.O. No. 9, Series of 1990. [81]
Annex E to Petition, Rollo, p. 124.
[56]
The Department of Agriculture became part of the field investigation team. [82]
Attached to Annex E, Rollo, pp. 125-200.
Under A. O. No. 9, Series of 1990, a representative of the DA was merely invited
to attend the conference or public hearing. [83]
Id.83 Annex F to Petition, Rollo, p. 201.
[57]
Annex 2 to Comment, Rollo, p. 309. [84]
Annex F to Petition, Rollo, p. 201.
[58]
Id. [85] Manifestation, pp. 3-4; Supplemental Manifestation, p. 4.

[59]
Annex 27 to Comment, Rollo, p. 357. [86]
Manifestation, p. 4; Supplemental Manifestation, p. 5.
[60]
Comment, p. 16, Rollo, p. 587. [87]
Part II, DAR A. O. No. 7, Series of 1997.
[61]
Petition, p. 5, Rollo, p. 15. [88]
Prefatory Statement, DAR A. O. No. 7, Series of 1997.
[62]
R. Martin, Civil Procedure, p. 461 [1989]. [89]
Part III, E, F, DAR A.O. No. 7, Series of 1997.
[63]
Delta Motors Sales Corp. vs. Mangosing, 70 SCRA 598, 603 [1976]. [90]
Par. 3, C, Part VIII; Part XIV, DAR A. O. No. 7, Series of 1997.
[64]
Lee v. Court of Appeals, 205 SCRA 752, 765 [1992]; G & G Trading [91]
First Lepanto Ceramics, Inc. v. Court of Appeals, 253 SRA 552, 558 [1996];
Corp. v. Court of Appeals, 158 SCRA 466, 468 [1988]; Villa Rey Transit, Machete v. Court of Appeals, 250 SCRA 176, 182 [1995]; Vidad v. Regional Trial
Inc. v. Far East Motor Corp., 81SCRA 298, 303 [1978]. Court of Negros Oriental, 227 SCRA 271, 276 [1990].
[65]
Delta Motors Sales Corp. vs. Mangosing, supra, at 603; Rebollido v. Court of [92]
Motion for Intervention, pp. 1-5, Rollo, pp. 452-456.
Appeals, 170 SCRA 800, 809-810, [1989].
[93]
[66]
Id.
See Notice of Acquisition for Hacienda Palico, Annex 1 to Comment, Rollo, p.
308; see also MARO Investigation Reports, Annexes "3", "4", "5" to Respondent's
Comment, Rollo pp. 310, 315, 316; Annexes "6", "7", "8" to Respondents'
Comment, Rollo pp. 317-319.
[67]
See Notices of Acquisition for Hacienda Banilad, Annexes 21 and 22 to
Comment, Rollo, pp. 332, 333.
[68] See Notice of Acquisition for Hacienda Palico, Annex 1 to Comment, Rollo, p. 308; Notices of Acquisition for Hacienda Banilad, Annexes

21 and 22 to Comment, Rollo, pp. 332, 333.

[69]
Paragraph 5 (b), Part IV-B, A. O. 9, Series of 1990.
[70]
Rejoinder of Respondents, pp. 3-4 , Rollo, pp. 434-435.
[71]
Annexes 12 to 15 to Respondents' Comment, Rollo, pp. 361-363; Annexes 31
to 33" to Respondents Comment, Rollo, pp. 324-326.
SECOND DIVISION Zoning Ordinance No. 13, Series of 1978, Housing and Land Use Regulatory WHEREFORE, premises considered, the PETITION is GRANTED. The
Board Resolution No. 705, Series of 2001, and Angeles City Council Resolution assailed Decision dated 07 May 2009, and the Order dated 15 June 2006 are
No. 3300, Series of 2001, the landholdings were classified as agricultural, not hereby SET ASIDE. Perforce, with the nullity of the said Decision and Order,
G.R. No. 204964, October 15, 2014
industrial.12 They argued that as per certifications by the Housing and Land Use the Pagdanganan Order granting exemption to petitioner's land
Regulatory Board dated June 1, 2001, May 28, 2001, and November 24, 2003, the is REINSTATED.
REMIGIO D. ESPIRITU AND NOELAGUSTIN, Petitioners, v. LUTGARDA landholdings were within the agricultural zone, and there was no zoning ordinance
TORRES DEL ROSARIO REPRESENTED BY SYLVIA R. passed that reclassified the area into other land uses. 13 SO ORDERED.29chanRoblesvirtualLawlibrary
ASPERILLA, Respondents.
The motion was given due course by the Department of Agrarian Reform, this time Their motion for reconsideration having been denied, 30 petitioners, namely
headed by Secretary Nasser C. Pangandaman (Secretary Pangandaman). Hence, on Remigio Espiritu and Noel Agustin, now come before this court via a petition for
DECISION June 15, 2006, then Secretary Pangandaman issued an order 14 granting the motion review on certiorari, seeking to set aside the ruling of the Court of Appeals.
for reconsideration and revoking the earlier order of then Secretary of Agrarian
LEONEN, J.: Reform Pagdanganan. In particular, petitioners argue that respondent was not denied due process as she
was able to actively participate in the proceedings before the Department of
Del Rosario contended that this order was sent to her through Clarita Montgomery Agrarian Reform and the Office of the President.31 They also argue that respondent
Lands classified as non-agricultural in zoning ordinances approved by the Housing in Barangay Margot, Sapang Bato, Angeles City, and not at Asperilla's address in was not able to present proof that Deputy Executive Secretary Gaite was not
and Land Use Regulatory Board or its predecessors prior to June 15, 1998 are Cubao, Quezon City, which was her address on record. Del Rosario alleged that authorized to sign the decision and, hence, his action is presumed to have been
outside the coverage of the compulsory acquisition program of the Comprehensive she only came to know of the order on January 26, 2007, when the Provincial done in the regular performance of duty.32
Agrarian Reform Law. However, there has to be substantial evidence to prove that Agrarian Reform Officer of Pampanga handed her a copy of the order. 15She then
lands sought to be exempted fall within the non-agricultural classification. filed her motion for reconsideration of the order dated June 15, 2006. The motion Respondent, on the other hand, argues that the Court of Appeals did not commit
1 2
was dated February 9, 2007. 16 any reversible error in its decision. She argues that she was deprived of due
This is a petition for review on certiorari seeking to set aside the decision dated process when Secretary Pangandaman's order was sent to the wrong address. She
September 28, 2012 and resolution 3 dated November 29, 2012 of the Court of Acting on del Rosario's motion for reconsideration, Secretary Pangandaman found also argues that the Deputy Executive Secretary Gaite's decision was void since he
Appeals. These orders reinstated the order4 dated February 19, 2004 of then that the certifications issued by the Housing and Land Use Regulatory Board had' already been appointed to the Securities and Exchange Commission two
Secretary of Agrarian Reform Roberto M. Pagdanganan approving petitioner's classified the landholdings as agricultural before June 15, 1988.17 Based on the months prior.33
application for exemption. ocular inspections conducted by the Center for Land Use Policy, Planning and
Implementation (CLUPPI), the land remained agricultural and was planted with The issue, therefore, before this court is whether the Court of Appeals correctly set
The pertinent facts are as follows: sugar cane and corn.18 Accordingly, Secretary Pangandaman denied del Rosario's aside the order of Secretary Pangandaman and the decision of Deputy Secretary
motion in the order19 dated March 3, 2008. Gaite and reinstated the order of Secretary Pagdanganan.
In 1978, the City Council of Angeles City, Pampanga, enacted Zoning Ordinance
No. 13, Series of 1978, classifying areas in Barangay Margot and Barangay Del Rosario filed a notice of appeal 20 before the Office of the President on March This petition should be granted.
Sapang Bato, Angeles City, as agricultural land.5 27, 2008.
Respondent was not deprived of
Pursuant to this ordinance, Lutgarda Torres del Rosario (del Rosario) allegedly On May 7, 2009, the Office of the President, through then Deputy Executive due process
requested the City Zoning Administrator to exempt from the zoning classification Secretary for Legal Affairs Manuel B. Gaite (Deputy Executive Secretary Gaite),
Lot Nos. 854 and 855 located in Barangay Margot and Barangay Sapang Bato, rendered the decision21 dismissing the appeal for lack of merit. The Court of Appeals, in finding for respondent, stated
Angeles City.6 The land is covered by Transfer Certificate of Title No. T-11809 that:ChanRoblesVirtualawlibrary
with an area of 164.7605 hectares. 7 The request was allegedly approved on March Del Rosario filed a motion for extension of 10 days to file her motion for
7, 1980 by Engineer Roque L. Dungca, Angeles City Development reconsideration.22 Citing Administrative Order No. 18, Series of 1987,
Coordinator/Zoning Administrator, and the lots were allegedly reclassified as non- Since she was not notified, [del Rosario] was not able to participate in the
and Habaluyas Enterprises, Inc. v. Japzon,23 the Office of the President, through proceedings leading to the issuance of the Pangandaman Order. The absence of
agricultural or industrial lots. 8 then Deputy Executive Secretary Natividad G. Dizon, denied the motion in the notice that resulted in the inability of [del Rosario] to be heard indubitably
order24 dated July 14, 2009. confirms her claim of lack of due process. [Del Rosario] indeed was denied her
On June 10, 1988, the Comprehensive Agrarian Reform Law (Republic Act No.
6657) was enacted. day in the administrative proceedings below. And considering that [del Rosario]
Aggrieved, del Rosario filed a petition for review before the Court of Appeals was not accorded due process, the Pangandaman Order is void for lack of
arguing (1) that she was denied due process when the order of Secretary jurisdiction. Hence, contrary to respondents' submission, it could not attain
On October 10, 2000, del Rosario, through her representative Sylvia R. Asperilla Pangandaman was "erroneously sent to another address"25cralawred and (2) that
(Asperilla), filed an application for exemption with the Department of Agrarian finality.34chanRoblesvirtualLawlibrary
the decision of.then Deputy Executive Secretary Gaite was void since he had been
Reform, seeking to exempt Lot Nos. 854 and 855 from the Comprehensive appointed to the Securities and Exchange Commission two months prior to the
Agrarian Reform Program (CARP) coverage. 9 The Court of Appeals, however, did not take into consideration that respondent
rendering of the decision.26 was still able to file a motion for reconsideration of Secretary Pangandaman's
On February 19, 2004, then Secretary of Agrarian Reform Roberto M. order, albeit beyond the allowable period to file. In Department of Agrarian
On September 28, 2012, the Court of Appeals rendered a decision granting the Reform Administrative Order No. 06,35 Series of
Pagdanganan (Secretary Pagdanganan) issued an order granting the application for petition. The Court of Appeals stated that del Rosario was indeed prevented from
exemption. Citing Department of Justice Opinion No. 44, Series of 1990, Secretary 2000:ChanRoblesVirtualawlibrary
participating in the proceedings that led to the issuance of Secretary
Pagdanganan stated that lands classified as non-agricultural before the enactment Pangandaman's order when the notices were sent to her other address on
of CARP are beyond its coverage. 10 record.27 It also found that the decision issued by then Deputy Executive Secretary RULE III
Gaite was void since it violated Article VII, Section 13 of the Constitution. 28 The Commencement, Investigation and Resolution of Cases
On March 26, 2004, farmers in del Rosario's landholdings, led by Remigio Espiritu dispositive portion of the decision states:ChanRoblesVirtualawlibrary
(Espiritu), filed a motion for reconsideration 11 of the order. They argued that under . . . .

SECTION 21. Motion for Reconsideration. In case any of the parties disagrees
with the decision or resolution, the affected party may file a written motion for
reconsideration within fifteen (15) days from receipt of the order, furnishing a
copy thereof to the adverse party. The filing of the motion for reconsideration shall
suspend the running of the period to appeal.
Any party shall be allowed only one (1) motion for reconsideration. Thereafter, the
RD or approving authority shall rule on the said motion within fifteen (15) days
from receipt thereof. In the event that the motion is denied, the adverse party has
the right to perfect his appeal within the remainder of the period to appeal,
reckoned from receipt of the resolution of denial. If the decision is reversed on
reconsideration, the aggrieved party shall have fifteen (15) days from receipt of
the resolution of reversal within which to perfect his appeal. (Emphasis
supplied)chanroblesvirtuallawlibrary
Despite being filed late, Secretary Pangandaman still gave due course to the
motion and resolved it on its merits. This is clear from his order dated March 3,
2008, which reads:ChanRoblesVirtualawlibrary
During the 50th Special CLUPPI Committee-B Meeting, held on 18 December
2007, the Motion for Reconsideration filed by Sylvia Espirilla [sic] was
deliberated upon and the Committee recommended the DENIAL of the Motion for
Reconsideration based on the following grounds:
The certifications issued by the HLURB shows that the subject
properties were classified as agricultural before 15 June 1986 [sic]; and
Based on the ocular inspection conducted by the CLUPPI Inspection
Team, it was found out that the area remained agricultural. In fact, it [is]
still dominantly planted with sugar cane and corn.36(Emphasis supplied)
While it may be true that respondent was prevented from filing a timely motion for
reconsideration of Secretary Pangandaman's order, it would be erroneous to
conclude that she had been completely denied her opportunity to be heard.
In Department of Agrarian Reform v. Samson:37
. . . . In administrative proceedings, a fair and reasonable opportunity to explain
one's side suffices to meet the requirements of due process. In Casimiro v. Tandog,
the Court held:
The essence of procedural due process is embodied in the basic requirement of
notice and a real opportunity to be heard. In administrative proceedings, such as in
the case at bar, procedural due process simply means the opportunity to explain
one's side or the opportunity to seek a reconsideration of the action or ruling
complained of. "To be heard" does not mean only verbal arguments in court; one
may be heard also thru pleadings. Where opportunity to be heard, either through
oral arguments or pleadings, is accorded, there is no denial of procedural due
process.
In administrative proceedings, procedural due process has been recognized to
include the following: (1) the right to actual or constructive notice of the institution
of proceedings which may affect a respondent's legal rights; (2) a real opportunity
to be heard personally or with the assistance of counsel, to present witnesses and
evidence in one's favor, and to defend one's rights; (3) a tribunal vested with
competent jurisdiction and so constituted as to afford a person charged
administratively a reasonable guarantee of honesty 'as well as impartiality; and (4)
a finding by said tribunal which is supported by substantial evidence submitted for
consideration during the hearing or contained in the records or made known to the
parties affected.38(Emphasis supplied)
When respondent filed her motion for reconsideration assailing Secretary
Pangandaman's order, she was able to completely and exhaustively present her
arguments. The denial of her motion was on the basis of the merits of her
arguments and any other evidence she was able to present. She was given a fair
and reasonable opportunity to present her side; hence, there was no deprivation of
due process.
It was also erroneous to conclude that respondent was "denied her day in the
administrative proceedings below." 39 Respondent was able to actively participate
not only in the proceedings before the Department of Agrarian Reform, but also on
appeal to the Office of the President and the Court of Appeals.
Deputy Executive Secretary Gaite's
decision is presumed valid, effective,
and binding
Article VII, Section 13 of the Constitution states:ChanRoblesVirtualawlibrary
Section 13. The President, Vice-President, the Members of the Cabinet; and their
deputies or assistants shall not, unless otherwise provided in this Constitution,
hold any other office or employment during their tenure. They shall not, during
said tenure, directly or indirectly, practice any other profession, participate in any
business, or be financially interested in any contract with, or in any franchise, or
special privilege granted by the Government or any subdivision, agency, or
instrumentality thereof, including government-owned or controlled corporations or
their subsidiaries. They shall strictly avoid conflict of interest in the conduct of
their office.
. . . . (Emphasis supplied)chanroblesvirtuallawlibrary
It is alleged that Gaite was appointed Commissioner to the Securities and
Exchange Commission on March 16, 2009.40 It is also alleged that he has already
lost his authority as Deputy Executive Secretary for Legal Affairs when he
rendered the decision dated May 7, 2009 since he is constitutionally prohibited
from holding two offices during his tenure. This, however, is not conclusive since
no evidence was presented as to when he accepted the appointment, took his oath
of office, or assumed the position.
Assuming that Gaite's appointment became effective on March 16, 2009, he can be
considered a de facto officer at the time he rendered the decision dated May 7,
2009.
In Funa v. Agra,41 a petition was filed against Alberto Agra for holding concurrent
positions as the acting Secretary of justice and as Solicitor General. This court,
while ruling that the appointment of Alberto Agra as acting Secretary of Justice
violated Article VII, Section 13 of the Constitution, held that he was a de
facto officer during his tenure in the Department of
Justice:ChanRoblesVirtualawlibrary
A de facto officer is one who derives his appointment from one having colorable
authority to appoint, if the office is an appointive office, and whose appointment is
valid on its face. He may also be one who is in possession of an office, and is
discharging its duties under color of authority, by which is meant authority derived
from an appointment, however irregular or informal, so that the incumbent is not a
mere volunteer. Consequently, the acts of the de facto officer are just as valid for
all purposes as those of a dejure officer, in so far as the public or third persons
who are interested therein are concerned.
In order to be clear, therefore, the Court holds that all official actions of Agra as a
de facto Acting Secretary of Justice, assuming that was his later designation, were
presumed valid, binding and effective as if he was the officer legally appointed and
qualified for the office. This clarification is necessary in order to protect the
sanctity of the dealings by the public with persons whose ostensible authority
emanates from the State. Agra's official actions covered by this clarification extend
to but are not limited to the promulgation of resolutions on petitions for review
filed in the Department of Justice, and the issuance of department orders,
memoranda and circulars relative to the prosecution of criminal cases. 42 (Emphasis
supplied)chanroblesvirtuallawlibrary
Assuming that Gaite was a de facto officer of the Office of the President after his
appointment to the Securities and Exchange Commission, any decision he renders
during this time is presumed to be valid, binding, and effective.
With Gaite being a public officer, his acts also enjoy the presumption of regularity,
thus:ChanRoblesVirtualawlibrary
The presumption of regularity of official acts may be rebutted by affirmative
evidence of irregularity or failure to perform a duty. The presumption, however,
prevails until it is overcome by no less than clear and convincing evidence to the
contrary. Thus, unless the presumption in [sic] rebutted, it becomes conclusive.
Every reasonable intendment will be made in support of the presumption and in
case of doubt as to an officer's act being lawful or unlawful, construction should be
in favor of its lawfulness.43 (Fimphasis supplied)chanroblesvirtuallawlibrary
Respondent has not presented evidence showing that the decision was
rendered ultra vires, other than her allegation that Gaite had already been
appointed to another office. Unless there is clear and convincing evidence o the
contrary, the decision dated May 7, 2009 is conclusively presumed to lave been
rendered in the regular course of business.
Respondent's landholdings were
agricultural, not industrial
Prior to the enactment of Republic Act No. 6657, lands were classified into
agricultural, residential, or industrial by law or by zoning ordinances enacted by
local government units. In Heirs of Luna v. Afable:44
It is undeniable that local governments have the power to reclassify agricultural
into non-agricultural lands. Section 3 of RA No. 2264 (The Local Autonomy Act of
1959) specifically empowers municipal and/or city councils to adopt zoning and
subdivision ordinances or regulations in consultation with the National Planning
Commission. By virtue of a zoning ordinance, the local legislature may arrange,
prescribe, define, and apportion the land within its political jurisdiction into
specific uses based not only on the present, but also on the future projection of
needs. It may, therefore, be reasonably presumed that when city and municipal
boards and councils approved an ordinance delineating an area or district in their
cities or municipalities as residential, commercial, or industrial zone pursuant to
the power granted to them under Section 3 of the Local Autonomy Act of 1959,
they were, at the same time, reclassifying any agricultural lands within the zone for
non-agricultural use; hence, ensuring the implementation of and compliance with
their zoning ordinances.45 (Emphasis supplied)chanroblesvirtuallawlibrary
Republic Act No. 6657 became effective on June 15, 1988, and it covered all
public and private lands, including lands of the public domain suited for
agriculture.46 Upon its enactment, questions arose as to the authority of the
Department of Agrarian Reform to approve or disapprove applications for
conversion of agricultural land to non-agricultural. Then Agrarian Reform
Secretary Florencio B. Abad (Secretary Abad) was of the opinion that laws prior to
Republic Act No. 6657 authorized the Department of Agrarian Reform, together
with the Department of Local Government and Community Development and the
Human Settlements Commission, to allow or disallow conversions. In response to
Secretary Abad's query, the Department of Justice issued Opinion No. 44 on March
16, 1990, written by then Secretary of Justice Franklin M. Drilon. The opinion,
reproduced in full, states:ChanRoblesVirtualawlibrary
S i r:
This refers to your letter of the 13th instant stating your "position that prior to the
passage of R.A. 6657, the Department of Agrarian Reform had the authority to
classify and declare which agricultural lands are suitable for non-agricultural
purposes, and to approve or disapprove applications for conversion from
agricultural to non-agricultural uses."
In support of the foregoing view, you contend that under R.A. No. 3844, as
amended, the Department of Agrarian Reform (DAR) is empowered to "determine
and declare an agricultural land to be suited for residential, commercial, industrial
or some other urban purpose" and to "convert agricultural land from agricultural to
non-agricultural purposes"; that P.D. No. 583, as amended by P.D. No. 815
"affirms that the conversion of agricultural lands shall be allowed only upon
previous authorization of the [DAR]; with respect to tenanted rice and corn lands";
that a Memorandum of Agreement dated May 13, 1977 between the DAR, the
Department of Local Government and Community Development and the then
Human Settlements Commission "further affirms the authority of the [DAR] to
allow or disallow conversion of agricultural lands"; that E.O. No. 129-A expressly
invests the DAR with exclusive authority to approve or disapprove conversion of
agricultural lands for residential, commercial, industrial and other land uses'; and
that while in the final version of House Bill 400, Section 9 thereof provided that
lands devoted to "residential, housing, commercial and industrial sites classified as
such by the municipal and city development councils as already approved by the
Housing and Land Use Regulatory Board, in their respective zoning development
plans" be exempted from the coverage of the Agrarian Reform program, this clause
was deleted from Section 10 of the final version of the consolidated bill stating the
exemptions from the coverage of the Comprehensive Agrarian Reform Program.
We take it that your query has been prompted by the study previously made by this
Department for Executive Secretary Catalino Macaraig Jr. and Secretary Vicente
Jayme (Memorandum dated February 14, 1990) which upheld the authority of the
DAR to authorize conversions of agricultural lands to non-agricultural uses as of
June 15, 1988, the date of effectivity of the Comprehensive Agrarian Reform Law
(R.A. No. 6657). [I]t is your position that the authority of DAR to authorize such
conversion existed even prior to June 15, 1988 or as early as 1963 under the
Agricultural Land Reform Code (R.A. No. 3844; as amended).
It should be made clear at the outset that the aforementioned study of this
Department was based on facts and issues arising from the implementation of the
Comprehensive Agrarian Reform Program (CARP). While there is no specific and
express authority given to DAR in the CARP law to approve or disapprove
conversion of agricultural lands to non-agricultural uses, because Section 65 only
refers to conversions effected after five years from date of the award, we opined
that the authority of the DAR to approve or disapprove conversions of agricultural
lands to non-agricultural uses applies only to conversions made on or after June
15, 1988, the date of effectivity of R.A. No. 6657, solely on the basis of our
interpretation of DAR's mandate and the comprehensive coverage of the land
reform program. Thus, we said:
"Being vested with exclusive original jurisdiction over all matters involving the
implementation of agrarian reform, it is believed to be the agrarian reform law's
intention that any conversion of a private agricultural land to non-agricultural
uses should be cleared beforehand by the DAR. True, the DAR's express power
over land use conversion is limited to cases in which agricultural lands already
awarded have, after five years, ceased 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. But
to suggest that these are the only instances when the DAR can require conversion
clearances would open a loophole in the R.A. No. 6657, which every landowner
may use to evade compliance with the agrarian reform program. Hence, it should
logically follow from the said, department's express duty and function to execute
and enforce the said statute that any reclassification of a private land as a
residential, commercial or industrial property should first be cleared by the DAR."
It is conceded that under the laws in force prior to the enactment and effective date
of R.A. No. 6657, the DAR had likewise the authority, to authorize conversions of
agricultural lands to other uses, but always in coordination with other concerned
agencies. Under R.A. No. 3344, as amended by R.A. No. 6389, an agricultural
lessee may, by order of the court, be dispossessed of his landholding if after due
hearing, it is shown that the "landholding is declared by the [DAR] upon the
recommendation of the National Planning Commission to be suited for residential,
commercial, industrial or some other urban purposes."
Likewise, under various Presidential Decrees (P.D. Nos. 583, 815 and 946) which
were issued to give teeth to the implementation of the agrarian reform program
decreed in P.D. No. 27, the DAR was empowered to authorize conversions of
tenanted agricultural lands, specifically those planted to rice and/or com, to other
agricultural or to non-agricultural uses, "subject to studies on zoning of the Human
Settlements Commissions" (HSC). This non-exclusive authority of the DAR under
the aforesaid laws was, as you have correctly pointed out, recognized and
reaffirmed by other concerned agencies, such as the Department of Local
Government and Community Development (DLGCD) and the then Human
Settlements Commission (HSC) in a Memorandum of Agreement executed by the
DAR and these two agencies on May 13, 1977, which is an admission that with
respect to land use planning and conversions, the authority is not exclusive to any
particular agency but is a coordinated effort of all concerned agencies.
It is significant to mention that in 1978, the then Ministry of Human Settlements
was granted authority to review and ratify land use plans and zoning ordinance of
local governments and to approve development proposals which include land use
conversions (see LOI No. 729 [1978]). This was followed by P.D. No. 648 (1981)
which conferred upon the Human Settlements Regulatory Commission (the
predecessors of the Housing and Land Use Regulatory Board [HLURB] [)] the
authority to promulgate zoning and other land use control standards and guidelines
which shall govern land use plans and zoning ordinances of local governments,
subdivision or estate development projects of both the public and private sector
and urban renewal plans, programs and projects; as well as to review, evaluate and
approve or disapprove comprehensive land use development plans and zoning
components of civil works and infrastructure projects, of national, regional and
local governments, subdivisions, condominiums or estate development projects
including industrial estates.
P.D. No. 583, as amended by P.D. No. 815, and the 1977 Memorandum of
Agreement, abovementioned, cannot therefore, be construed as sources of
authority of the' DAR; these issuances merely affirmed whatever power DAR had
at the time of their adoption.
With respect to your observation that E.O. No. 129-A also empowered the DAR to
approve or disapprove conversions of agricultural lands into non-agricultural uses
as of July 22, 1987, it is our view that E.O. No. 129-A likewise did not provide a
new source of power of DAR with respect to conversion but it merely recognized
and reaffirmed the existence of such power as granted under existing laws. This is
clearly inferrable from the following provision of E.O. No. 129-A to wit:
"Sec. 5. Powers and Functions. Pursuant to the mandate of the Department, and in
order to ensure the successful implementation of the Comprehensive Agrarian
Reform Program, the Department is hereby authorized to:
1) Have exclusive authority to approve or disapprove conversion of agricultural
lands for residential, commercial, industrial and other land uses as may be
provided by -law"
Anent the observation regarding the alleged deletion of residential, housing,
commercial and industrial sites classified by the HLURB in the final version of the
CARP bill, we fail to see how this [sic] circumstances could substantiate your
position that DAR's authority to reclassify or approve conversions of agricultural
lands to non-agricultural uses already existed prior to June 15, 1988. Surely, it is
clear that the alleged deletion was necessary to avoid a redundancy in the CARP
law whose coverage is expressly limited to "all public and private agricultural
lands" and "other lands of the public domain suitable for agriculture" (Sec. 4, R.A.
No. 6657). Section 3(c) of R.A. No. 6657 defines "agricultural land" as that
"devoted to agricultural activity as defined in the Act and not classified as mineral
forest, residential, commercial or industrial land."
Based on the foregoing premises, we reiterate the view that with respect to
conversions of agricultural lands covered by R.A. No. 6657 to non-agricultural
uses, the authority of DAR to approve such conversions may be exercised from the
date of the law's effectivity on June 15, 1988. This conclusion is based on a liberal
interpretation of R.A. No. 6657 in the light of DAR's mandate and the extensive
coverage of the agrarian reform program.47 (Emphasis
supplied)chanroblesvirtuallawlibrary
Department of Justice Opinion No. 44 became the basis of subsequent issuances by
the Department of Agrarian Reform, stating in clear terms that parties need not
seek prior conversion clearance from the Department of Agrarian Reform for lands
that were classified as non-agricultural prior to Republic Act No. 6657. The
subsequent rulings are outlined in Junio v. Secretary Garilao:48
Following the opinion of the Department of Justice (DOJ), the DAR issued
Administrative Order (AO) No. 6, Series of 1994, stating that conversion
clearances were no longer needed for lands already classified as non-agricultural
before the enactment of Republic Act 6657. Designed to "streamline the issuance
of exemption clearances, based on DOJ Opinion No. 44," the AO provided
guidelines and procedures for the issuance of exemption clearances.
Thereafter, DAR issued AO 12, Series of 1994, entitled "Consolidated and Revised
Rules and Procedures Governing Conversion of Agricultural Lands to Non-
Agricultural Uses." It provided that the guidelines on how to secure an exemption
clearance under DAR AO No. 6, Series of 1994, shall apply to agricultural lands
classified or zoned for non-agricultural uses by local government units (LGUs); The certifications submitted by the [respondents] which is the Certification dated
3
and approved by the Housing and Land Use Regulatory Board (HLURB) before 18 November 2003, of Mr. David D. David, Planning Officer IV and Zoning Id. at 44. The resolution was penned by Associate Justice Ricardo R. Rosario and
June 15, 1988. Under this AO, the DAR secretary had the ultimate authority to Administrator of the City of Angeles states that the City Planning Development concurred in by Associate Justices Rosmari D. Carandang (Chairperson) and
issue orders granting or denying applications for exemption filed by landowners Office, Zoning Administration Unit (CPDO-ZAU) certifies that the subject Leoncia Real-Dimagiba of the Fifth Division.
whose lands were covered by DOJ Opinion No. 44.49(Citations properties covered by TCT No. T-11804 is classified as agricultural based on the
4
omitted)chanroblesvirtuallawlibrary certified photocopy of Zoning Ordinance, Ordinance No. 13[,] Series of 1978 Id. at 47-52.
issued by the Housing and Land Use Regulatory Board, Regional Office No. 3
5
Accordingly, lands are considered exempt from the coverage of Republic Act No. (HLURB-Region III) on 03 September 2001. Id. at 27 and 77.
6657 if the following requisites are present:
6
Such certification was corroborated by a certification issued by the HLURB Id. at 27.
Regional Director, Region III, Ms. Edithat [sic] Barrameda in its certification
1. Lands were zoned for non-agricultural use by the local government 7
dated 28 May 2001 and 24 November 2003. It was stated in the said certification Id. at 47.
unit; and
that the subject landholding is within the agricultural zone based on
8
Comprehensive Land Use Plan and Zoning Ordinance of the City Council of Id. at 27.
2. The zoning ordinance was approved by the Housing and Land Use Angeles City approved 'through HLURB Resolution No. 705 dated 17 October
Regulatory Board before June 15, 1998. 2001. Also a certification was issued by Director Barrameda on 01 June 2001, 9
Id. at 45.
stating therein that, "Duplicate copies of the Certification issued by this Board to
10
Ms. Lutgarda Torres on 18 December 1991 and 8 July 1998, respectively are not Id. at 49-50.
In revoking the prior order of exemption, Secretary Pangandaman took note of the among the files for safekeeping when she assumed as Regional Officer on 03 July
following considerations:ChanRoblesVirtualawlibrary 2000.["]52 (Emphasis supplied)chanroblesvirtuallawlibrary 11
Id. at 53-57.
12
These findings were sustained on appeal by the Office of the President, stating Id. at 54.
The Certification dated 18 November 2003, of Mr. David D. David, Planning that:ChanRoblesVirtualawlibrary
Officer IV and Zoning Administrator of the City of Angeles states that the City 13
Id. at 54-55.
Planning and Development Office, Zoning Administration Unit (CPDO-
ZAU) certifies that subject property covered by TCI No. 11804 is classified as [Respondents'] argument that the land has ceased to be agricultural by virtue of 14
reclassification under Ordinance No. 13, series of 1978 cannot be sustained since Id. at 58-63.
agricultural based on the certified photocopy of Zoning Ordinance, Ordinance No.
13, Series of 1978, issued by the Housing and Land Use Regulatory Board, the records of the case or the evidence presented thereto are bereft of any 15
indication showing the same. In fact, nowhere was it shown that a certified true Id. at 30-31.
Regional Office No. 3 (HLURB-Region III) on 03 September 2001;chanrobleslaw
copy of the said Ordinance was presented before this Office or the office a 16
quo.53chanRoblesvirtualLawlibrary Id. at 65.
Also, upon verification with HLURB-Region III, -we were informed that as per
copy of the approved Zoning Plan of 1978, the subject properties were classified 17
Id. at 70-71.
as agricultural. The said Zoning Plan of 1978 was approved under NCC Plan The factual findings of administrative agencies are generally given great respect
dated 24 September 1980; and and finality by the courts as it is presumed that these agencies have the knowledge 18
and expertise over matters under their jurisdiction.5 Both the Department of Id. at 70.
Based on the ocular inspection conducted by the CLUPPI Inspection Team, it was Agrarian Reform and the Office of the President found respondent's lands to be 19
agricultural. We see no reason to disturb these findings. Id. at 65-73.
found that the area remained agricultural. In fact, it is still dominantly planted with
sugar cane and corn.50 (Emphasis supplied)chanroblesvirtuallawlibrary 20
Id. at 74-75.
WHEREFORE, the petition is GRANTED. The decision dated September 28,
Upon respondent's motion for reconsideration, Secretary Pangandaman also took 2012 and resolution dated November 29, 2012 of the Court of Appeals are SET 21
ASIDE. The order dated June 15, 2006 of the Department of Agrarian Reform and Id. at 76-80.
into consideration the recommendations of the Center for Land Use Policy,
Planning, and Implementation Committee, thus: the decision dated May 7, 2009 of the Office of the President are REINSTATED. 22
Id. at 81.
During the 50th Special CLUPPI Committee-B Meeting, held on 18 December SO ORDERED.cralawlawlibrary 23
222 Phil. 365 (1985) [Per J. Aquino, Second Division].
2007, the Motion for Reconsideration filed by Sylvia Espirilla [sic] was
deliberated upon and the Committee recommended the DENIAL of the Motion for Carpio, (Chairperson), Del Castillo, Mendoza, and Reyes,* JJ., concur. 24
Rollo, pp. 81-82.
Reconsideration based on the following grounds:
The certifications issued by the HLURB shows that the subject Endnotes: 25
cralawred Id. at 31.
properties were classified as agricultural before 15 June 1986 [sic];
26
and Id. at 33.
Based on the ocular inspection conducted by the CLUPPI Inspection *
Designated acting member per Special Order No. 1844 dated October 14, 2014. 27
Id. at 31 and 37.
Team, it was found out that the area remained agricultural. In fact, it
1
[is] still dominantly planted with sugar cane and corn. 51 (Emphasis Rollo, pp. 8-21. 28
Id. at 38-39. CONST., art. VII, sec. 13 provides:
supplied)
2
Id. at 26-42. The decision was penned by Associate Justice Ricardo R. Rosario
and concurred in by Associate Justice Rosmari D. Carandang (Chairperson) and Section 13. The President, Vice-President, the Members of the Cabinet, and their
Leonica Real-Dimagiba of the Fifth Division. deputies or assistants shall not, unless otherwise provided in this Constitution, hold
Secretary Pangandaman also found that:ChanRoblesVirtualawlibrary any other office or employment during their tenure. They shall not, during said
tenure, directly or indirectly, practice any other profession, participate in any nang Magbubukid sa Lupaing Ramos, Inc. v. EM. Ramos and Sons, Inc., G.R. No.
business, or be financially interested in any contract with, or in any franchise, or 131481, March 16, 2011, 645 SCRA 401, 432 [Per J. Leonardo-De Castro, First
special privilege granted by the Government or any subdivision, agency, or Division],
instrumentality thereof, including government-owned or controlled corporations or
46
their subsidiaries. They shall strictly avoid conflict of interest in the conduct of Rep. Act No. 6657 (1988), sec. 4.
their office.
47
Department of Justice Opinion No. 44 (1990).
. . . .
48
503 Phil. 154 (2005) [Per J. Panganiban, Third Division].
29
Id. at 41-42.
49
Id. at 165.
30 50
Id. at 44. Rollo, p. 67.
31 51
Id. at 19. Id. at 70.
32 52
Id. at 20. Id. at 70-71.
33 53
Id. at 106-108. Id. at 79.
34 54
Id. at 37. See Junio v. Secretary Garilao, 503 Phil. 154, 167 (2005) [Per J. Panganiban,
Third Division].
35
Rules of Procedure for Agrarian Law Implementation (ALI) cases.
36
Rollo, p. 70.
37
577 Phil. 370 (2008) [Per J. Ynares-Santiago, Third Division].
38
Id. at 380, citing Autencio v. City Administrator Mahara and the City of
Cotabato, 489 Phil. 752, 760 (2005) [Per J. Panganiban, Third Division]
and Casimiro v. Tandog, 498 Phil. 660, 666-667 (2005) [Per J. Chico-Nazario,
Second Division].
39
Rollo, p. 37.
40
See Meet the Management, (visited September 15,2014).
41
G.R. No. 191644, February 19, 2013, 691 SCRA 196 [Per J. Bersamin, En
Banc].
42
Id. at 224, citing Dimaandal v. Commission on Audit, 353 Phil. 525, 533-534
(1998) [Per J. Martinez, En Banc]; Civil Service Commission v. Joson, Jr., G.R.
No. 154674, May 27, 2004, 429 SCRA 773, 786 [Per J. Callejo, Sr., En
Banc]; Topacio v. Ong, 595 Phil. 491, 506 (2008) [Per J. Carpio Morales, En
Banc]; Seneres v. Commission on Elections, 603 Phil. 552, 569 (2009) [Per J.
Velasco, Jr., En Banc].
43
Bustillo v. People, G.R. No. 160718, May 12, 2010, 620 SCRA 483, 492 [Per J.
Del Castillo, Second Division], citing People v. De Guzman, G.R. No. 106025,
February 9, 1994, 229 SCRA 795, 799 [Per J. Puno, Second Division].
44
G.R. No. 188299, January 23, 2013, 689 SCRA207 [Per J. Perez, Second
Division].
45
Id. at 226-227, citing Heirs of Dr. Jose Delestev. Land Bank of the
Philippines, G.R. No. 169913, June 8, 2011, 651 SCRA 352, 376 [Per J. Velasco,
Jr., First Division]; Pasong Bay abas Farmers Association, Inc. v. Court of
Appeals, 413 Phil. 64, 94 (2004) [Per J. Callejo, Sr., Second Division]; Buklod
Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION
G.R. No. 163026 August 29, 2012
HEIRS OF ARCADIO CASTRO,*SR., represented by ARCADIO CASTRO,
JR., Petitioners,
vs.
RENA TO LOZADA, FELIPE CRUZ, ONOFRE INONCILLO, ALFREDO
FRANCISCO, LIBERATO FRANCISCO, FELIPE DE LA CRUZ,
HERNANDO HERRERA, GERARDO MIRANDA, FELIX INOVERO,
ARCADIO IDAGO and RESTITUTO DE LA CRUZ, Respondents.
DECISION
VILLARAMA, JR., J.:
Assailed in this petition for review on certiorari under Rule 45 is the
Decision1 dated March 30, 2004 of the Court of Appeals (CA) in CA-G.R. SP No.
56257 affirming the Decision 2 dated August 4, 1999 of the Office of the President
(OP) which upheld the ruling of the Department of Agrarian Reform (DAR) giving
due course to the applications to purchase of respondents as occupants/tillers of
lands under the provisions of Commonwealth Act (C.A.) No. 539.
Respondents are the occupants/tillers of a rice land situated at Upig, San Ildefonso,
Bulacan, designated as Lot No. 546, Cad 320-D with an aggregate area of 274,180
square meters, which is part of the Buenavista Estate. In April 1977, respondents
filed their respective applications to purchase Lot No. 546 with the DAR-Bulacan
Provincial Office. Since the 1940s, respondents recognized Arcadio Castro, Sr. as
their landlord who claimed to be the original tenant of the land. However, records
of the DAR Region III Office showed that the registered claimant of Lot No. 546 is
one "Arcadio Cruz." Consequently, Land Inspector Rogelio I. Estrella reported to
the Ministry of Agrarian Reform (MAR) District Officer that Lot No. 546 applied
for by the respondents is disposable and recommended the issuance of
corresponding clearance in favor of the applicants. 3
The processing of respondents applications was stalled due to the opposition of
Arcadio Castro, Sr. who submitted photocopies of certainofficial receipts and the
Affidavit executed by his sister-in-law, Jacobe** Galvez. In the said affidavit,
Jacobe Galvez attested that upon the instruction of her brother-in-law, she paid on
September 27, 1944 the "cost and rental" of Lot No. 546 in the amount
of P 5,091.80. Additional payments were supposedly made in 1961 in the amounts
of P 1,181.77 and P 530.52. Jacobe Galvez further explained that while the receipts
were issued in her name, her payments were made for and in behalf of her brother-
in-law who actually owns the land and is the one receiving rentals or share in the
harvest from the tenants.4 Arcadio Castro, Sr. also submitted a Certification dated
March 29, 1983 issued by MAR Bulacan District Office in Baliuag, Bulacan
stating that per their records, Jacobe Galvez paid cost and rental of P 5,091.80
under Official Receipt (OR) No. 5429266 dated September 27, 1944. 5 On
November 25, 1982, respondents applications and supporting documents were
forwarded to Cesar C. Jimenez, Acting District Officer, BaliuagBulacan. 6
On April 22, 1983, Benjamin M. Yambao, Trial Attorney II of the Bureau of
Agrarian Legal Assistance in Baliuag, Bulacan issued a Report 7 upholding the right
of Arcadio Castro, Sr. over Lot No. 546 subject to compliance with further
requirements of the MAR.
In 1989, it appears that Arcadio Castro, Sr. has voluntarily offered to sell his
properties situated in the Buenavista Estate.8 At this time also, respondents, who
began doubting the ownership of Arcadio Castro, Sr., stopped paying rentals.
On June 19, 1990, Municipal Agrarian Reform Officer (MARO) Jose S. Danganan
forwarded to Erlinda Pearl V. Armada, Provincial Agrarian Reform Officer
(PARO) of Bulacan, the documents pertaining to the conflicting claims over the
subject landholding. In his letter MARODanganan stated
The undersigned upon review and evaluation of the documents submitted by Mr.
Castro, has noted the following:
1. That, per certification of payment it appears that only the
excess area of 31,300 square meters was paid by Jacobe
Galvez sister of deceased Arcadio Castro Sr. sometime in
1961;
2. That, the total area of lot 546 is 274,180 square meters;
3. That, the xerox copy of official receipt submitted (O.R.
No. 3664086) was blard[sic] and unreadable;
4. That, the report of Atty. Benjamin Yambao dated April 22,
1983 was based only on the certification of Mr. Oscar M.
Trinidad wherein, the actual payment made by Jacobe
Galvez is only P 1,181.77 representing 31,300 square meters
only;
5. That, no application nor any documents (Order of Award,
Application to Purchase) to support the claim of Mr. Castro
was submitted;
6. That, no receipt of payment on the remaining area of lot
546 was presented/submitted.
In view of the above facts, the undersign [sic] honestly believe that the Legal
Affairs Division is more in a position to review and resolve the said conflict. 9
On December 20, 1990, Atty. Yambao, as directed by PARO Armada, reported on
his findings, maintaining his earlier finding that Arcadio Castro, Sr. has already
acquired a vested right over Lot 546 by paying for the same in 1944 and 1961, the
latter payment having been made for the increase in area of 31,300 square meters
after the final survey. Citing the letter of OIC Trinidad, Atty. Yambao stated that
Lot 546 was listed in the name of "Arcadio Cruz" instead of "Arcadio Castro, Sr." 10
On November 14, 1990, Legal Officer II Jose R. Joven of the Legal Assistance
Division of the PARO rendered a legal opinion stating that: (1) there is no evidence
or public document to show that registrant "Arcadio Cruz" and claimant Arcadio
Castro, Sr. are one and the same person, and no legal action was taken to correct
the discrepancy in name as to vest unto the claimant legal personality to be the
proper party-in-interest; (2) the recognition and giving of rentals by tenant-
applicants to Arcadio Castro, Sr. and subsequently to his heirs for several years, do
not constitute estoppel; (3) granting without admitting that "Arcadio Cruz" and
Arcadio Castro, Sr. are one and the same person, the latter was more than
compensated by the payments made by the tenants who are still immersed in
poverty; (4) payments made by Jacobe Galvez did not specify the lot for which
these were intended, considering that Jacobe Galvez, Nieves Castro and Arcadio
Castro, Sr. were all registrants over several lots, and also because from the
payment for "excess area" made by Jacobe Galvez it cannot be presumed that it is
one for the main parcel absent any documentary evidence; and (5) in case of doubt,
it is more in keeping with justice and equity to resolve the issue in favor of the
actual tenants of the land. Said office thus recommended that respondents
application over Lot 546 may be processed subject to guidelines provided in
Administrative Order (AO) No. 3, series of 1990.11
On May 16, 1991, DAR Regional Director Antonio M. Nuesa issued the following
Order12:
WHEREFORE, premises considered, Order is hereby issued:
1. Declaring Lot No. 546, Cad 320-D, Case I, Buenavista Estate vacant;
2. Rejecting the claims of the heirs of Arcadio Castro, Sr., to the lot;
3. Giving due course to the applications of Renato Lozada and his co-applicants.
SO ORDERED.13
The Regional Director noted that the records do not show that efforts were exerted
by Arcadio Castro, Sr. or his heirs to rectify what they claimed was an error in the
listing of Arcadio Cruz as tenant of the land. While the tenant-applicants
recognized Arcadio Castro, Sr. as their landlord, such acquiescence does not bind
the DAR. Regarding the payments made by Jacobe Galvez in her name but which
she later disclaimed in favor of her brother-in-law, the Regional Director found it
not credible. Arcadio Castro, Sr.s hiring of tenants was also found to be in
contravention of AO No. 3, series of 1990, which is applicable to all landed
estates. It was further noted that Arcadio Castro, Sr. appears in the records of the
Municipal Assessor of San Rafael, Bulacanas declared owner of five other parcels
of land.
The heirs of Arcadio Castro, Sr. represented by Arcadio Castro, Jr., filed a motion
for reconsideration which was treated as an appeal by the Office of the DAR
Secretary.
In his Order14 dated August 12, 1996, Secretary Ernesto D. Garilao affirmed the
Regional Directors ruling. Secretary Garilao concurred with the Regional
Directors finding that Arcadio Castro, Sr., assuming him to be the bona fide
tenant of Lot 546, had violated Land Tenure Administration (LTA) AO No. 2,
series of 1956 when he leased the subject landholding already allocated to him
without prior consent of the DAR. Citing the investigation report of Land
Inspector-Designate Rogelio I. Estrella, the SinumpaangSalaysay of the tenants-
applicants and the Joint SinumpaangSalaysay of barangay kagawads Renato
Inovero and LuisitoSabarriaga confirming that it is the tenants-applicants who are
in possession and actual cultivators of Lot 546, Secretary Garilaoruled thatArcadio
Castro, Sr. failed to comply with the requirement of personal cultivation under LTA
AO No. 2, series of 1956. The arguments on non-retroactivity of administrative
rules and regulations, as well as Arcadio Castro, Sr.s alleged vested right to
acquire Lot 546, were rejected by Secretary Garilao who ruled that the tenant-
applicants have the right of preference to purchase their respective portions of the
said landholding.
Dissatisfied, the heirs of Arcadio Castro, Sr. appealed to the OP which dismissed
their appeal. The OP declared that the assailed ruling is in accord with the policy of
giving preference to the landless under C.A. No. 539 which is a social legislation.
Considering that Arcadio Castro, Sr., as found by the DAR officials, is already the
registered owner of several other real properties, Lot 546, applied for by the
tenants-tillers who are landless, should therefore be awarded to the latter.15
The OP likewise denied the motion for reconsideration filed by the heirs of
Arcadio Castro, Sr. who then elevated the case to the CA in a petition for review
under Rule 43 of the 1997 Rules of Civil Procedure, as amended.
By Decision dated March 30, 2004, the CA concurred with the finding of the OP
and DAR that Arcadio Castro, Sr. and his heirs failed to show that they personally
cultivated the subject landholding. Neither did Arcadio Castro, Sr. acquire a vested
right over Lot 546 by payments allegedly made on his behalf by Jacobe Galvez,
the amount of which was found by DAR to be insufficient and no document or
application whatsoever supports the claim of Arcadio Castro, Sr. The CA also
sustained the OP and DAR in ruling that Arcadio Castro, Sr. should be disqualified
from claiming Lot 546 as he already is the declared owner of several other
properties. Finally, the CA held that the award of Lot 546 to the tenants-applicants
is consistent with the policy under the 1987 Constitution upholding the right of
landless farmers and farm workers to own directly or collectively the lands they
till, and the States duty to undertake the just distribution of all agricultural lands,
subject to such priorities and reasonable retention limits as Congress may
prescribe.16
Before this Court, petitioners assail the CA in affirming the ruling of the OP and
DAR that Arcadio Castro, Sr. has not acquired a vested right over Lot 546, which
is erroneous and illegal being based on the report of MARO Jose S. Danganan
which is incomplete and defective. Petitioners averred that the fact that
MARODanganan at the time had no record of legal opinions concerning the
subject landholding was admitted by him during the September 11, 1990 meeting.
Petitioners thus contend that the DAR Secretarys reliance on the baseless report
by the MARO violated their constitutional right to due process as laid down in the
case of AngTibay v. CIR17 declaring that the tribunal must consider the evidence
presented and that the decision rendered must be on the evidence presented at the
hearing and to use authorized legal methods of securing evidence and informing
itself of facts material and relevant to the controversy. They claim that the DAR
Secretary ignored vital documentary evidence showing that Arcadio Castro, Sr.
was really the listed claimant of Lot 546 and that he had made payments for it.
Petitioners argue that contrary to the conclusions of the DAR Secretary and OP,
Arcadio Castro, Sr. had the legal and equitable title to Lot 546 since the receipt by
the government of payments made by him resulted in a perfected contract of sale
between them over the said lot. Further, petitioners contend that independent of
such contract of sale, Arcadio Castro, Sr. obtained legal title over Lot 546 by virtue
of acquisitive prescription from the time he paid for it in 1944 and has since
possessed it adversely, openly and publicly. In any event, petitioners impute bad
faith on the part of respondents who, after all the years of having a tenancy
agreement with Arcadio Castro, Sr. and subsequently his heirs, would later
repudiate the same and question the title of the landowner. They stress that under
Section 2 (b), Rule 131 of the Rules of Court, a tenant is not permitted to deny the
title of his landlord at the time of the commencement of the relation of tenant and
landlord between them.
As to the qualifications of Arcadio Castro, Sr. as the original tenant under C.A. No.
539, petitioners argue that assuming LTA AO No. 2, series of 1956 has retroactive
application, it must be presumed that official duty had been regularly performed so
that by the governments acceptance of payments, it may be presumed that they
found him to possess all qualifications set by law for the purchase of Lot 546.
Hence, it is a clear blunder on the part of the CA to uphold the erroneous findings
of the DAR Secretary that Arcadio Castro, Sr. violated Section 21 of LTA AO No.
2, series of 1956. Petitioners assert that at the time respondents applied for Lot 546
in 1977, the said rule applies to them but not to Arcadio Castro, Sr. because the
latter was no longer a "claimant" or "applicant" but rather the legal or equitable
owner of the land.
Petitioners also stress that C.A. No. 539 does not impose any restrictions on the
exercise of the rights and attributes of ownership of tenants who purchase and
acquire land under Section 1 thereof. It was therefore erroneous for the DAR
Secretary to conclude that Arcadio Castro, Sr.s act of leasing the subject
landholding allocated to him without the prior consent of the DAR is a violation of
LTA AO No. 2, series of 1956, with the effect of cancellation of the agreement to
sell executed by the government in favor of the transferor or assignor, the reversion
of the lot covered thereby and the forfeiture of all payments made to the
government. Such conclusion is based on the erroneous assumption that LTA AO
No. 2 is applicable to tenants who have already purchased and acquired lands
under C.A. No. 539.
From the facts established, the Court is presented with the following issues for
resolution: (1) whether Arcadio Castro, Sr. acquired a vested or preferential right
over Lot 546; (2) whether LTA AO No. 2, series of 1956 was retroactively applied
in this case; and (3) whether the DAR and OP erred in giving due course to the
applications of respondents.
We deny the petition.
A vested right is defined as one which is absolute, complete and unconditional, to
the exercise of which no obstacle exists, and which is immediate and perfect in
itself and not dependent upon a contingency. 18 The term "vested right" expresses
the concept of present fixed interest which, in right reason and natural justice,
should be protected against arbitrary State action, or an innately just and
imperative right which enlightened free society, sensitive to inherent and
irrefragable individual rights, cannot deny. To be vested, a right must have become
a titlelegal or equitableto the present or future enjoyment of property.19
In this case, the DAR and OP rejected petitioners claim of a vested right
anchored on the payments made in 1944 and 1961 by Jacobe Galvez allegedly for
Lot 546 and in behalf of Arcadio Castro, Sr. The DAR Secretarys finding that
petitioners failed to prove that the registered claimant of said land, "Arcadio Cruz"
and Arcadio Castro, Sr. are one and the same person is based on the fact that
Arcadio Castro, Sr. and his heirs never exerted efforts to correct the supposed error
in the LTA/DAR files, and the absence of any document to show that Arcadio
Castro, Sr. filed an application to purchase Lot 546. These findings of fact are
binding upon the courts and may not now be disturbed unless it can be shown that
the official concerned acted arbitrarily or with grave abuse of discretion. 20
Perusing the records, we find that the photocopies of OR Nos. 3664087 and
3664088 are unreadable,21 the Certification22 dated March 15, 1976 issued by Cesar
C. Jimenez of Agrarian Reform Team II No. 03-11-092-A based on said receipts
indicated payment of only P 1,181.77 in the name of Jacobe Galvez, the
letter23 dated March 8, 1983 of Oscar M. Trinidad indicated payments
of P 1,712.29 also based on the same receipts, and the Certification 24 dated March
29, 1983 issued by Corazon P. del Rosario (Accountant I, MAR Bulacan District
Office) stated only that Jacobe Galvez paid in 1944 the amount of P 5,091.80 as
cost and rental under OR No. 5429266 without any reference to Lot 546 of the
Buenavista Estate and without any copy of such receipt attached to it. Were it true,
indeed, as petitioners claimed, that MARODanganan simply did not have complete
records before him, petitioners could have submitted those documents to the DAR
Secretary or attached them to their petition for review before the OP. But except
for their bare allegation of violation of due process with the non consideration of
documentary evidence, petitioners have not adduced competent proof that Arcadio
Castro, Sr. or his heirs had made full payment for Lot 546. As it is, petitioners
failed to present any document to show that Arcadio Castro, Sr. filed an application
to purchase or have a contract to sell executed by the government in his favor.
From the MARO, to PARO and DAR Secretary, petitioners evidence were duly
considered and evaluated by said officials and all were one in concluding that
Arcadio Castro, Sr. has not acquired any vested right over the subject land.
A party claiming a right granted or created by law must prove his claim by
competent evidence. He must rely on the strength of his evidence and not on the
weakness of that of his opponent.25
The petitioners having failed to prove their right to acquire Lot 546 under C.A. No.
539, they cannot compel the DAR to convey the lot to them. Hence, no reversible
error was committed by the CA in sustaining the DAR Secretarys findings and
conclusions as affirmed by the OP.
We likewise find no arbitrariness in the CAs affirmance of the DAR and OPs
ruling that the requirement of personal cultivation under LTA AO No. 2, series of
1956 applies to Arcadio Castro, Sr. Indeed, even assuming that Arcadio Castro, Sr.
was actually the registered claimant on Lot 546, his act of entering into tenancy
contracts with respondents prior to the award of the land to him without the prior
consent of LTA/DAR violated the said AO.
Contrary to petitioners submission, there was no retroactive application as
regards to personal cultivation which requirement is embodied in the law itself.
Section 1 of C.A. No. 539 explicitly provides that:
SECTION 1. The President of the Philippines is authorized to acquire private lands
or any interest therein, through purchase or expropriation, and to subdivide the
same into home lots or small farms for resale at reasonable prices and under such
conditions as he may fix to their bona fide tenants or occupants or to private
individuals who will work the lands themselves and who are qualified to acquire
and own lands in the Philippines. (Emphasis supplied.)
Thus, LTA AO No. 2, series of 1956 merely reiterated or amplified the foregoing
primary condition in the award of lots comprising private landed estates acquired
by the Government for resale to qualified beneficiaries. The pertinent provisions of
said AO are herein reproduced:
SECTION 14. Persons Qualified to Purchase: Number of Lots Granted. Subject
to the provisions of Section 16 hereof, any private individual who is qualified to
acquire and own lands in the Philippines and who will personally cultivate and/or
occupy the lot or lots which may be sold to him, may be allowed to purchase not
more than one (1) home lot and/or farm lot except that in case of farm lots with
areas less than six (6) hectares, more than one (1) lot may be purchased provided,
however, that the total area of the lots which may be sold to one person shall not
exceed six (6) hectares.
x xxx
SECTION 21. Transfer of Encumbrance of Rights. A person having a right of
preference to purchase a subdivision lot shall not be allowed to transfer, assign,
alienate or encumber said right and any transfer, assignment, alienation or
encumbrance made in violation of this prohibition shall be null and void. A bona-
fide tenant, however, may transfer, assign, alienate or encumber his leasehold
rights over a subdivision lot to persons who will personally cultivate and/or occupy
said lot and are qualified to acquired and own lands in the Philippines with the
prior written consent of the Chairman of the Land Tenure Administration;xxx
xxxx Any transfer, assignment, alienation or encumbrance made without the
approval of the Chairman of the Land Tenure Administration, as herein provided,
is null and void and shall be sufficient ground for the Chairman of the Land Tenure
Administration to cancel the agreement to sell executed in favor of the transferor
or assignor, and to order the reversion of the lot covered thereby and the forfeiture
of all payments made on account thereof to the government. Said payments shall
be considered as rentals for the occupation of said lot by the transferor and as
payment for administration expenses.
xxxx
SECTION 24. Conditions in Agreements to Sell, Deeds of Sale and Torrens
Title. It shall be a condition inall agreements to sell and deeds of sale covering
lots acquired under these rules and regulations that said lots shall be personally
occupied and/or cultivated by the purchasers thereof.x xx A purchaser of a farm lot
who shall fail to start cultivation of said lot within six (6) months after the
execution of his agreements to sell or deed of sale therefor shall be deemed not to
have complied with said condition.
xxxx
SECTION 25. Violation of Any of the Conditions in the Preceding Section; Its
Effect. The violation of any of the conditions set forth in the preceding section
shall be sufficient ground for the Chairman of the Land Tenure Administration to
cancel an agreement to sell or deed of sale, and to order the reversion of the lot
covered thereby and the forfeiture of all payments made on account thereof to the
government. In case, however, a transfer certificate of title has already been issued,
the violation of any of said conditions shall be sufficient ground for the Chairman
of the Land Tenure Administration to initiate and prosecute the proper action in
court for the cancellation of said title and for the reversion of the lot involved to
the government. (Emphases supplied.)
On the other hand, DAR AO No. 03-90 on the "Revised Rules and Procedures
Governing Distribution and/or Titling of Lots in Landed Estates Administered by
DAR" directs the MARO to review and evaluate the list of allocatees/awardees and
conduct lot verification to determine whether they are still occupying and tilling
the lots subject of Orders of Awards (OAs)/Certificate of Land Transfer
(CLT).26 An awardee or allocatee who is not the cultivator/occupant, such as when
he employs tenants prior to full payment of the cost of the lot, the MARO shall
cancel the OA/CLT and issue a Certificate of Land Ownership Award (CLOA) to
qualified actual cultivator/occupant. DAR AO No. 03-90 also laid down the
following qualifications of a beneficiary in these landed estates:
V. Qualifications of a beneficiary are as follows:
1. Landless;
2. Filipino citizen;
3. Actual occupant/tiller who is at least 15 years of age or
head of the family at the time of filing of application; and
4. Has the willingness, ability and aptitude to cultivate and
make the land productive. (Emphasis supplied.)
Since Arcadio Castro, Sr. and his heirs (petitioners) were not the actual occupants
or tillers of Lot 546 and merely employed tenants (respondents) to work on said
land, the CA did not err in sustaining the ruling of the DAR and OP. Thus, even
assuming Arcadio Castro, Sr. to be the legitimate claimant of Lot 546, petitioners
have no right of preference in the acquisition of said land as they failed to comply
with the requirement of personal cultivation. As correctly observed by the OP,
from the admission by petitioners that they leased the lands to the respondents in
1955, petitioners continued the lease even after LTA AO No. 2 already took effect.
The OP likewise found no impairment of rights in applying retroactively the
implementing rules because these are merely enforcing C.A. No. 539 which was
already in effect in 1940.1wphi1
It must also be mentioned that this case does not fall under the exceptional
circumstances when the hiring of laborers and employment of tenants will not
result in the cancellation of agreements to sell or orders of award under C.A. No.
539. Assuming Arcadio Castro, Sr. was indeed the original listed claimant/tenant of
the land and the real "Arcadio Cruz," evidence on record clearly established that
Arcadio Castro, Sr. had never been an awardee or allocatee. In fact, investigation
by DAR officials revealed that there was not even any application to purchase filed
by Arcadio Castro, Sr. while the supposed official receipts issued in 1944 to Jacobe
Galvez did not indicate the payments as intended for Lot 546 and which payments
are insufficient for the entire area of said land.
There being no agreement to sell or order of award yet issued over Lot 546, DAR
officials declared them available for disposition to qualified beneficiaries. Since
Arcadio Castro, Sr. was not an awardee or allocatee, this case clearly falls under
the general rule of personal cultivation as requirement to qualify for award of lots
under C.A. No. 539. As we held in Vitalista v. Perez27:
In this case, the general rule requires personal cultivation in accordance with LTA
Administrative Order No. 2 and DAR Administrative Order No. 3, Series of 1990.
However, Land Authority Circular No. 1, Series of 1971 clearly makes three
exceptions on the personal cultivation requirement in cases where land is acquired
under C.A. No. 539: (1) when the awardee or promisee dies; or (2) when the
awardee or promisee is physically incapacitated; or (3) when the land is fully paid
for but the government fails to issue the corresponding deed of sale. By specifying
these excepted cases and limiting them to three, the said circular recognizes that
outside these exceptions, any deed of sale or agreement to sell involving lands
acquired under C.A. No. 539 should be cancelled in cases where the awardee fails
to comply with the requirement of personal cultivation.(Emphasis and
underscoring supplied.)
Finally, the Court holds that no reversible error was committed by the CA when it
ruled that the order of DAR Regional Director giving due course to the application
of respondents is consistent with the agrarian reform policy under the 1987
Constitution. Whereas C.A. No. 539 enacted in 1940 authorized the Government to
acquire private lands and to subdivide the same into home lots or small farms for
resale to bona fide tenants, occupants or private individuals who will work the
lands themselves, the social mandate under the 1987 Constitution is even more
encompassing as it commands "the Congress to give the highest priority to the
enactment of measures that protect and enhance the right of all the people to
human dignity, reduce social, economic, and political inequalities, xxx".28
To achieve such goal, "the State shall, by law, undertake an agrarian reform
program founded on the right of farmers and regular farm workers, who are
landless, to own directly and collectively the land they till or, in the case of other
farm workers, to receive a just share of the fruits thereof." A just distribution of all
agricultural lands was undertaken by the State through Republic Act No. 6657,
otherwise known as the Comprehensive Agrarian Reform Law (CARL), which was
passed by Congress in 1988. It can thus be said that the 1987 Constitution has "a
much more expanded treatment of the subject of land reform than was contained in
past Constitutions."29
Moreover, C.A. No. 539 being a social legislation, this Court has previously
declared that"in the construction of laws that find its origin in the social justice
mandate of the Constitution," the constant policy is " to assure that its beneficient
effects be enjoyed by thosewho have less in life." 30 And in the words of former
Chief Justice Ricardo M. Paras, Jr., "C.A. No. 539 was conceived to solve a social
problem, not merely as a direct or indirect means of allowing accumulation of land
holdings." 31 In this sense, the law discourages absentee "tenants" or lessees. So it is
in this case, the DAR found it more in keeping with the policy of the law to give
preference to respondents who are landless tenants (or sub-lessees) of Arcadio
Castro, Sr. and later his heirs, and actual tillers of Lot 546 in Buenavista Estate,
over Arcadio Castro, Sr. who may have been the original "tenant" but an absentee
one and who has other parcels of land declared in his name.
That the respondents are actual tillers and qualified beneficiaries under C.A. No.
539 and its implementing rules -- to the extent of the portions of Lot 546 they
respectively occupy and cultivate for decades already -- who should be given
preference in the distribution of said land, is a factual question beyond the scope of
this petition. The rule is that in a petition for review, only questions of law may be
raised for the reason that already -- who should be given preference in the
distribution of said land, is a factual question beyond the scope of this petition. The
rule is that in a petition for review, only questions of law may be raised for the
 3
reason that the Supreme Court is not a trier of facts and generally does not weigh DAR records, pp. 115-126 and 160.
anew the evidence already passed upon by the Court of Appeals. 32 **
Spelled as Jacove in some parts of the records.
4
DAR records, p. 154.
5
Id. at 173.
Finally, it is well settled that factual findings of administrative agencies are 6
Id. at 162.
generally accorded respect and even finality by this Court, if such findings are 7
Id. at 171-172.
supported by, substantial evidence.33 The factual findings of the DAR Secretary, 8
Id. at 163-165.
who, by reason of his official position, has acquired expertise in specific matters 9
Id. at 150.
within his jurisdiction, deserve full respect and, without justifiable reason, ought 10
Id. at 178, 180.
not to be altered, modified, or reversed. 34 In this case, petitioners utterly failed to 11
Id. at 138-139.
show justifiable reason to warrant the reversal of the decision of the DAR 12
CA rollo, pp. 79-80.
Secretary, as affirmed by the OP and the CA. 13
Id. at 80.
14
Id. at 72-78.
15
WHEREFORE, the petition for review on certiorari is DENIED. The Decision Id. at 64-71.
16
dated March 30, 2004 of the Court of Appeals in CA-G.R. SP No. 56257 is Rollo, pp. 44-50-A.
17
AFFIRMED. 69 Phil. 635 (1940).
18
Bernabe v. Alejo, G.R. No. 140500, January 21, 2002, 374 SCRA
180, 186.
No pronouncement as to costs. 19
Go, Jr. v. Court of Appeals, G.R. No. 172027, July 29, 2010, 626
SCRA 180, 199.
20
SO ORDERED. Galvez v. Vda.deKangleon, No. L-17197, September 29, 1962, 6
SCRA 162, 169.
21
DAR records, p. 169.
MARTIN S. VILLARAMA, JR. 22
Id. at 170.
Associate Justice 23
Id. at 141.
24
Id. at 173.
25
WE CONCUR: Pornellosa v. Land Tenure Administration, No.L-14040, January 31,
1961, 1 SCRA 375, 379.
26
DAR AO No. 03-90, VII (Operating Procedures), A, 1.2.
MARIA LOURDES P. A. SERENO 27
G.R. No. 164147, June 16, 2006, 491 SCRA 127, 146.
Chief Justice 28
CONSTITUTION, Art. XIII, Section 1.
Chairperson 29
Joaquin G. Bernas, S.J., The 1987 Constitution of the Republic of the
Philippines: A Commentary, 2003 ed., p. 1198.
TERESITA J. LEONARDO-DE Sec. 4, Art. XIII reads in part:
LUCAS P. BERSAMIN "The State shall, by law, undertake an agrarian reform
CASTRO
Associate Justice program founded on the right of farmers and regular farm
Associate Justice
workers, who are landless, to own directly or collectively
the lands they till or, in the case of other farm workers, to
BIENVENIDO L. REYES receive a just share of the fruits thereof. To this end, the
Associate Justice State shall encourage and undertake the just distribution of
all agricultural lands, subject to such priorities and
C E R T I F I C AT I O N reasonable retention limits as the Congress may prescribe,
taking into account ecological, developmental, or equity
considerations, and subject to the payment of just
Pursuant to Section 13, Article VIII of the Constitution, I certify that the compensation. x xx"
conclusions in the above Decision had been reached in consultation before the case 30
Taag v. The Executive Secretary, No. L-30223, February 27, 1971,
was assigned to the writer of the opinion of the Court's Division. 37 SCRA 806, 811, cited in Rosario v. Court of Appeals, G.R. No.
89554, July 10, 1992, 211 SCRA 384, 388.
31
MARIA LOURDES P. A. SERENO See Dissenting Opinion of CJ Paras in Bernardo, et al. v. Bernardo, et
Chief Justice al., 96 Phil. 202, 215 (1954).
32
National Power Corporation v. Court of Appeals, G.R. No. 124378,
March 8, 2005,453 SCRA 47, 53-54.
Footnotes 33
Alangilan Realty & Development Corporation v. Office of the
*
Also referred to as Arcadia de Castro in some parts of the records. President, G.R. No. 180471, March 26, 2010, 616 SCRA 633, 644,
1
Rollo, pp. 40-50-A. Penned by Associate Justice Edgardo F. Sundiam citing Department of Agrarian Reform v. Samson, G.R. Nos. 161910 &
(deceased) with Associate Justices Eubulo G. Verzola and Remedios 161930, June 17, 2008, 554 SCRA 500, 511.
Salazar-Fernando concurring. 34
ld.
2
Id. at 60-67. The decision was rendered in O.P. Case No. 96-K-6651.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 171101 July 5, 2011
HACIENDA LUISITA, INCORPORATED, Petitioner,
LUISITA INDUSTRIAL PARK CORPORATION and RIZAL
COMMERCIAL BANKING CORPORATION,Petitioners-in-Intervention,
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 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
The Facts
At the core of the case is Hacienda Luisita de Tarlac (Hacienda Luisita), once a
6,443-hectare mixed agricultural-industrial-residential 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).
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 22926 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 farmworker-beneficiaries (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 FWBs 34 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
As may be gleaned from the SDOA, included as part of the distribution plan are:
outstanding capital stock of the SECOND PARTY, which is
(a) production-sharing equivalent to three percent (3%) of gross sales from the
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.)
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.,"35which 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, 1989 38 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. Defensor-Santiago, 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 non-master 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. 44After 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. 29209148 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 wholly-owned by HLI, had the following
incorporators: Pedro Cojuangco, Josephine C. Reyes, Teresita C. Lopa, Ernesto G.
Teopaco, and Bernardo R. Lahoz.
Subsequently, Centennary sold 51 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 answer 61 the petition/protest of the Supervisory Group. On
the other hand, HLIs answer62to 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.
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].
APPROVED.68
A copy of Resolution No. 2005-32-01 was served on HLI the following day,
December 23, without any copy of the documents adverted to in the resolution
attached. A letter-request dated December 28, 2005 69 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, Prior to the oral arguments, however, HLI; AMBALA, represented by Mallari; the
the DAR Tarlac provincial office issued the Notice of Coverage 71 which HLI Supervisory Group, represented by Suniga and Andaya; and the United Luisita
received on January 4, 2006. 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.
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 On August 31, 2010, the Court, in a bid to resolve the dispute through an amicable
rued, it "can not know from the above-quoted resolution the facts and the law upon settlement, issued a Resolution 84 creating a Mediation Panel composed of then
which it is based."73 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.
PARC would eventually deny HLIs motion for reconsideration via Resolution
Despite persevering and painstaking efforts on the part of the panel, mediation had
No. 2006-34-01 dated May 3, 2006.
to be discontinued when no acceptable agreement could be reached.
By Resolution of June 14, 2006,74 the Court, acting on HLIs motion, issued a
The Issues
temporary restraining order,75enjoining the implementation of Resolution No.
2005-32-01 and the notice of coverage.
HLI raises the following issues for our consideration:
On July 13, 2006, the OSG, for public respondents PARC and the DAR, filed its
Comment76 on the petition. I.
On December 2, 2006, Noel Mallari, impleaded by HLI as respondent in his WHETHER OR NOT PUBLIC RESPONDENTS PARC AND
capacity as "Sec-Gen. AMBALA," filed his Manifestation and Motion with SECRETARY PANGANDAMAN HAVE JURISDICTION, POWER
Comment Attached dated December 4, 2006 (Manifestation and Motion). 77 In it, AND/OR AUTHORITY TO NULLIFY, RECALL, REVOKE OR
Mallari stated that he has broken away from AMBALA with other AMBALA ex- RESCIND THE SDOA.
members and formed Farmworkers Agrarian Reform Movement, Inc.
(FARM).78 Should this shift in alliance deny him standing, Mallari also prayed that
II.
FARM be allowed to intervene.
[IF SO], x x x CAN THEY STILL EXERCISE SUCH
As events would later develop, Mallari had a parting of ways with other FARM
JURISDICTION, POWER AND/OR AUTHORITY AT THIS TIME,
members, particularly would-be intervenors Renato Lalic, et al. As things stand,
I.E., AFTER SIXTEEN (16) YEARS FROM THE EXECUTION OF
Mallari returned to the AMBALA fold, creating the AMBALA-Noel Mallari
THE SDOA AND ITS IMPLEMENTATION WITHOUT VIOLATING
faction and leaving Renato Lalic, et al. as the remaining members of FARM who
SECTIONS 1 AND 10 OF ARTICLE III (BILL OF RIGHTS) OF THE
sought to intervene.
CONSTITUTION AGAINST DEPRIVATION OF PROPERTY
WITHOUT DUE PROCESS OF LAW AND THE IMPAIRMENT OF
On January 10, 2007, the Supervisory Group79 and the AMBALA-Rene Galang CONTRACTUAL RIGHTS AND OBLIGATIONS? MOREOVER,
faction submitted their Comment/Opposition dated December 17, 2006.80 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
On October 30, 2007, RCBC filed a Motion for Leave to Intervene and to File and
INVOKED TO NULLIFY, RECALL, REVOKE, OR RESCIND THE
Admit Attached Petition-In-Intervention dated October 18, 2007.81 LIPCO later
SDOA?
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 III.
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
WHETHER THE PETITIONS TO NULLIFY, RECALL, REVOKE
motions for leave to intervene were granted and the corresponding petitions-in-
OR RESCIND THE SDOA HAVE ANY LEGAL BASIS OR
intervention admitted.
GROUNDS AND WHETHER THE PETITIONERS THEREIN ARE
THE REAL PARTIES-IN-INTEREST TO FILE SAID PETITIONS.
On August 18, 2010, the Court heard the main and intervening petitioners on oral
arguments. On the other hand, the Court, on August 24, 2010, heard public
IV.
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. WHETHER THE RIGHTS, OBLIGATIONS AND REMEDIES OF
THE PARTIES TO THE SDOA ARE NOW GOVERNED BY THE
 CORPORATION CODE (BATAS PAMBANSA BLG. 68) AND
NOT BY THE x x x [CARL] x x x.
On the other hand, RCBC submits the following issues:
I.
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
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, farmer-leaders are expressly
allowed to represent themselves, their fellow farmers or their organizations in any
proceedings before the DAR. Specifically:
their
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 (Emphasis supplied.)
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 non-compliance 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 The wording of the provision is unequivocalthe farmers and regular
some other ground, such as the application of the statute or the general law. The farmworkers have a right TO OWN DIRECTLY OR COLLECTIVELY THE
petitioner must be able to show that the case cannot be legally resolved unless the LANDS THEY TILL. The basic law allows two (2) modes of land
constitutional question raised is determined. This requirement is based on the rule distributiondirect and indirect ownership. Direct transfer to individual farmers is
that every law has in its favor the presumption of constitutionality; to justify its the most commonly used method by DAR and widely accepted. Indirect transfer
nullification, there must be a clear and unequivocal breach of the Constitution, and through collective ownership of the agricultural land is the alternative to direct
not one that is doubtful, speculative, or argumentative. 112 (Italics in the original.) 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
The lis mota in this case, proceeding from the basic positions originally taken by
cooperatives of farmers from being the legal entity through which collective
AMBALA (to which the FARM members previously belonged) and the
ownership can be exercised. The word "collective" is defined as "indicating a
Supervisory Group, is the alleged non-compliance by HLI with the conditions of
number of persons or things considered as constituting one group or
the SDP to support a plea for its revocation. And before the Court, the lis mota is
aggregate,"115 while "collectively" is defined as "in a collective sense or manner; in
whether or not PARC acted in grave abuse of discretion when it ordered the recall
a mass or body." 116 By using the word "collectively," the Constitution allows for
of the SDP for such non-compliance and the fact that the SDP, as couched and
indirect ownership of land and not just outright agricultural land transfer. This is in
implemented, offends certain constitutional and statutory provisions. To be sure,
recognition of the fact that land reform may become successful even if it is done
any of these key issues may be resolved without plunging into the constitutionality
through the medium of juridical entities composed of farmers.
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. 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
It may be well to note at this juncture that Sec. 5 of RA 9700, 113 amending Sec. 7
agricultural land with the farmers becoming stockholders or members. Said
of RA 6657, has all but superseded Sec. 31 of RA 6657 vis--vis the stock
provisions read:
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 SEC. 29. Farms owned or operated by corporations or other business
purposes, the stock distribution scheme under Sec. 31 of RA 6657 is no longer an associations.In the case of farms owned or operated by corporations or other
available option under existing law. The question of whether or not it is business associations, the following rules shall be observed by the PARC.
unconstitutional should be a moot issue.
In general, lands shall be distributed directly to the individual worker-beneficiaries.
It is true that the Court, in some cases, has proceeded to resolve constitutional
issues otherwise already moot and academic 114 provided the following requisites
In case it is not economically feasible and sound to divide the land, then it shall be
are present:
owned collectively by the worker beneficiaries who shall form a workers
cooperative or association which will deal with the corporation or business
x x x first, there is a grave violation of the Constitution; second, the exceptional association. x x x (Emphasis supplied.)
character of the situation and the paramount public interest is involved; third, when
the constitutional issue raised requires formulation of controlling principles to
SEC. 31. Corporate Landowners. x x x
guide the bench, the bar, and the public; fourth, the case is capable of repetition yet
evading review.
xxxx
These requisites do not obtain in the case at bar.
Upon certification by the DAR, corporations owning agricultural lands may give
their qualified beneficiaries the right to purchase such proportion of the capital
For one, there appears to be no breach of the fundamental law. Sec. 4, Article XIII
stock of the corporation that the agricultural land, actually devoted to agricultural
of the Constitution reads:
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
The State shall, by law, undertake an agrarian reform program founded on the right received by the workers at the time the shares of stocks are distributed be reduced.
of the farmers and regular farmworkers, who are landless, to OWN directly or The same principle shall be applied to associations, with respect to their equity or
COLLECTIVELY THE LANDS THEY TILL or, in the case of other farmworkers, participation. x x x (Emphasis supplied.)
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
Clearly, workers cooperatives or associations under Sec. 29 of RA 6657 and
priorities and reasonable retention limits as the Congress may prescribe, taking
corporations or associations under the succeeding Sec. 31, as differentiated from
into account ecological, developmental, or equity considerations, and subject to the
individual farmers, are authorized vehicles for the collective ownership of
payment of just compensation. In determining retention limits, the State shall
agricultural land. Cooperatives can be registered with the Cooperative
respect the right of small landowners. The State shall further provide incentives for
Development Authority and acquire legal personality of their own, while
voluntary land-sharing. (Emphasis supplied.)
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
pagmamay-ari 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 (Emphasis supplied.)
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 FWBs will ultimately own the agricultural lands owned by the corporation
the part of the State to pursue, by law, an agrarian reform program founded on the when the corporation is eventually dissolved and liquidated.
policy of land for the landless, but subject to such priorities as Congress may
prescribe, taking into account such abstract variable as "equity considerations."
Anent the alleged loss of control of the farmers over the agricultural land operated
The textual reference to a law and Congress necessarily implies that the above
and managed by the corporation, a reading of the second paragraph of Sec. 31
constitutional provision is not self-executory and that legislation is needed to
shows otherwise. Said provision provides that qualified beneficiaries have "the
implement the urgently needed program of agrarian reform. And RA 6657 has been
right to purchase such proportion of the capital stock of the corporation that the
enacted precisely pursuant to and as a mechanism to carry out the constitutional
agricultural land, actually devoted to agricultural activities, bears in relation to the
directives. This piece of legislation, in fact, restates 118 the agrarian reform policy
companys total assets." The wording of the formula in the computation of the
established in the aforementioned provision of the Constitution of promoting the
number of shares that can be bought by the farmers does not mean loss of control
welfare of landless farmers and farmworkers. RA 6657 thus defines "agrarian
on the part of the farmers. It must be remembered that the determination of the
reform" as "the redistribution of lands to farmers and regular farmworkers who
percentage of the capital stock that can be bought by the farmers depends on the
are landless to lift the economic status of the beneficiaries and all other
value of the agricultural land and the value of the total assets of the corporation.
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 There is, thus, nothing unconstitutional in the formula prescribed by RA 6657. The
they work." 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
With the view We take of this case, the stock distribution option devised under Sec.
elect the members of the board of directors to ensure that the farmers will have a
31 of RA 6657 hews with the agrarian reform policy, as instrument of social
clear majority in the board. Before the SDP is approved, strict scrutiny of the
justice under Sec. 4 of Article XIII of the Constitution. Albeit land ownership
proposed SDP must always be undertaken by the DAR and PARC, such that the
for the landless appears to be the dominant theme of that policy, We emphasize that
value of the agricultural land contributed to the corporation must always be more
Sec. 4, Article XIII of the Constitution, as couched, does not constrict Congress to
than 50% of the total assets of the corporation to ensure that the majority of the
passing an agrarian reform law planted on direct land transfer to and ownership by
members of the board of directors are composed of the farmers. The PARC
farmers and no other, or else the enactment suffers from the vice of
composed of the President of the Philippines and cabinet secretaries must see to it
unconstitutionality. If the intention were otherwise, the framers of the Constitution
that control over the board of directors rests with the farmers by rejecting the
would have worded said section in a manner mandatory in character.
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
For this Court, Sec. 31 of RA 6657, with its direct and indirect transfer features, is correct application of the formula prescribed by the second paragraph of Sec. 31 of
not inconsistent with the States commitment to farmers and farmworkers to RA 6675 does not make said provision constitutionally infirm. Rather, it is the
advance their interests under the policy of social justice. The legislature, thru Sec. application of said provision that can be challenged. Ergo, Sec. 31 of RA 6657
31 of RA 6657, has chosen a modality for collective ownership by which the does not trench on the constitutional policy of ensuring control by the farmers.
imperatives of social justice may, in its estimation, be approximated, if not
achieved. The Court should be bound by such policy choice.
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
FARM contends that the farmers in the stock distribution scheme under Sec. 31 do constitutional agrarian reform program. On the contrary, there have been so many
not own the agricultural land but are merely given stock certificates. Thus, the instances where, despite actual land distribution, the implementation of agrarian
farmers lose control over the land to the board of directors and executive officials reform was still unsuccessful. As a matter of fact, this Court may take judicial
of the corporation who actually manage the land. They conclude that such notice of cases where FWBs sold the awarded land even to non-qualified persons
arrangement runs counter to the mandate of the Constitution that any agrarian and in violation of the prohibition period provided under the law. This only proves
reform must preserve the control over the land in the hands of the tiller. to show that the mere fact that there is land distribution does not guarantee a
successful implementation of agrarian reform.
This contention has no merit.
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
While it is true that the farmer is issued stock certificates and does not directly own
prohibited from owning agricultural lands are no longer realistic under existing
the land, still, the Corporation Code is clear that the FWB becomes a stockholder
conditions. Practically, an individual farmer will often face greater disadvantages
who acquires an equitable interest in the assets of the corporation, which include
and difficulties than those who exercise ownership in a collective manner through
the agricultural lands. It was explained that the "equitable interest of the
a cooperative or corporation. The former is too often left to his own devices when
shareholder in the property of the corporation is represented by the term stock, and
faced with failing crops and bad weather, or compelled to obtain usurious loans in
the extent of his interest is described by the term shares. The expression shares of
order to purchase costly fertilizers or farming equipment. The experiences learned
stock when qualified by words indicating number and ownership expresses the
from failed land reform activities in various parts of the country are lack of
extent of the owners interest in the corporate property." 119 A share of stock
financing, lack of farm equipment, lack of fertilizers, lack of guaranteed buyers of
typifies an aliquot part of the corporations property, or the right to share in its
produce, lack of farm-to-market roads, among others. Thus, at the end of the day,
proceeds to that extent when distributed according to law and equity and that its
there is still no successful implementation of agrarian reform to speak of in such a
holder is not the owner of any part of the capital of the corporation. 120 However,
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.
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
II.
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 PARC itself, and tags the reasons given
for the revocation of the SDP as unfounded.
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.
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
The petition is not impressed with merit.
In the Terminal Report adopted by PARC, it is stated that the SDP violates the
agrarian reform policy under Sec. 2 of RA 6657, as the said plan failed to enhance
the dignity and improve the quality of lives of the FWBs through greater
productivity of agricultural lands. We disagree.
Sec. 2 of RA 6657 states:
SECTION 2. Declaration of Principles and Policies.It is the policy of the State
to pursue a Comprehensive Agrarian Reform Program (CARP). The welfare of the
landless farmers and farm workers will receive the highest consideration to
promote social justice and to move the nation towards sound rural development
and industrialization, and the establishment of owner cultivatorship of economic-
sized farms as the basis of Philippine agriculture.
To this end, a more equitable distribution and ownership of land, with due regard
to the rights of landowners to just compensation and to the ecological needs of the
nation, shall be undertaken to provide farmers and farm workers with the
opportunity to enhance their dignity and improve the quality of their lives through
greater productivity of agricultural lands.
The agrarian reform program is founded on the right of farmers and regular farm
workers, who are landless, to own directly or collectively the lands they till or, in
the case of other farm workers, to receive a share of the fruits thereof. To this end,
the State shall encourage the just distribution of all agricultural lands, subject to
the priorities and retention limits set forth in this Act, having taken into account
ecological, developmental, and equity considerations, and subject to the payment
of just compensation. The State shall respect the right of small landowners and
shall provide incentives for voluntary land-sharing. (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.
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.
Significantly, HLI draws particular attention to its having paid its FWBs, during
the regime of the SDP (1989-2005), some PhP 3 billion by way of salaries/wages
and higher benefits exclusive of free hospital and medical benefits to their
immediate family. And attached as Annex "G" to HLIs Memorandum is the
certified true report of the finance manager of Jose Cojuangco & Sons
Organizations-Tarlac Operations, captioned as "HACIENDA LUISITA, INC.
Salaries, Benefits and Credit Privileges (in Thousand Pesos) Since the Stock
Option was Approved by PARC/CARP," detailing what HLI gave their workers
from 1989 to 2005. The sum total, as added up by the Court, yields the following
numbers: Total Direct Cash Out (Salaries/Wages & Cash Benefits) = PhP
2,927,848; Total Non-Direct Cash Out (Hospital/Medical Benefits) = PhP 303,040.
The cash out figures, as stated in the report, include the cost of homelots; the PhP
150 million or so representing 3% of the gross produce of the hacienda; and the
PhP 37.5 million representing 3% from the proceeds of the sale of the 500-hectare
converted lands. While not included in the report, HLI manifests having given the
FWBs 3% of the PhP 80 million paid for the 80 hectares of land traversed by the
SCTEX.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.
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.
Neither does HLIs SDP, whence the DAR-attested SDOA/MOA is based,
infringe Sec. 31 of RA 6657, albeit public respondents erroneously submit
otherwise.
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:
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.
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 sub-paragraph
(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 landowner-applicant the undertaking to
keep the farm intact and unfragmented ad infinitum. And there is logic to HLIs
stated observation that the key phrase in the provision of Sec. 5(a) is "viability of
corporate operations": "[w]hat is thus required is not the agricultural land
remaining intact x x x but the viability of the corporate operations with its
agricultural land being intact and unfragmented. Corporate operation may be
viable even if the corporate agricultural land does not remain intact or
[un]fragmented."134
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 non-compliance, 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 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.
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 worker-beneficiaries who shall form a workers
cooperative or association which will deal with the corporation or business
association. Until a new agreement is entered into by and between the workers
cooperative or association and the corporation or business association, any
agreement existing at the time this Act takes effect between the former and the
previous landowner shall be respected by both the workers cooperative or
association and the corporation or business association.
Noticeably, the foregoing provisions do not make reference to corporations which
opted for stock distribution under Sec. 31 of RA 6657. Concomitantly, said
corporations are not obliged to provide for it except by stipulation, as in this case.
Under the SDP, HLI undertook to "subdivide and allocate for free and without
charge among the qualified family-beneficiaries x x x residential or homelots of
not more than 240 sq. m. each, with each family beneficiary being assured of
receiving and owning a homelot in the barrio or barangay where it actually
resides," "within a reasonable time."
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?
Atty. Dela Merced: Yes, Your Honor.
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: Yes, Your Honor.
Justice Abad: But later on, after assigning them their shares, some workers came in
from 1989, 1990, 1991, 1992 and the rest of the years that you gave additional
shares who were not in the original list of owners?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: Did those new workers give up any right that would have belong to
them in 1989 when the land was supposed to have been placed under CARP?
Atty. Dela Merced: If you are talking or referring (interrupted)
Justice Abad: None! You tell me. None. They gave up no rights to land?
Atty. Dela Merced: They did not do the same thing as we did in 1989, Your Honor.
Justice Abad: No, if they were not workers in 1989 what land did they give up?
None, if they become workers later on.
Atty. Dela Merced: None, Your Honor, I was referring, Your Honor, to the
original (interrupted)
Justice Abad: So why is it that the rights of those who gave up their lands would be
diluted, because the company has chosen to use the shares as reward system for
new workers who come in? It is not that the new workers, in effect, become just
workers of the corporation whose stockholders were already fixed. The TADECO
who has shares there about sixty six percent (66%) and the five thousand four
hundred ninety eight (5,498) farmers at the time of the SDOA? Explain to me.
Why, why will you x x x what right or where did you get that right to use this
shares, to water down the shares of those who should have been benefited, and to
use it as a reward system decided by the company? 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.
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.
89-12-2 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 200-hectare 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 arebased on the above
requirements and with respect to the adverted transactions of the converted land in
questionpurchasers 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
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.
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.
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 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:
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:
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.
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 300-hectare 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 domain 159 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
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.
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,163We held:
Petitioner postulates that the "operative fact" doctrine is inapplicable to the present
case because it is an equitable doctrine which could not be used to countenance an
inequitable result that is contrary to its proper office.
On the other hand, the petitioner Solicitor General argues that the existence of the
various agreements implementing the SMDRP is an operative fact that can no
longer be disturbed or simply ignored, citing Rieta v. People of the Philippines.
The argument of the Solicitor General is meritorious.
The "operative fact" doctrine is embodied in De Agbayani v. Court of Appeals,
wherein it is stated that a legislative or executive act, prior to its being declared as
unconstitutional by the courts, is valid and must be complied with, thus:
xxx xxx xxx
This doctrine was reiterated in the more recent case of City of Makati v. Civil
Service Commission, wherein we ruled that:
Moreover, we certainly cannot nullify the City Government's order of suspension,
as we have no reason to do so, much less retroactively apply such nullification to
deprive private respondent of a compelling and valid reason for not filing the leave
application. For as we have held, a void act though in law a mere scrap of paper
nonetheless confers legitimacy upon past acts or omissions done in reliance
thereof. Consequently, the existence of a statute or executive order prior to its
being adjudged void is an operative fact to which legal consequences are attached.
It would indeed be ghastly unfair to prevent private respondent from relying upon
the order of suspension in lieu of a formal leave application. (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, 165and
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. 89-12-2 has been nullified, then all the
lands subject of the SDP will automatically be subject of compulsory coverage
under Sec. 31 of RA 6657. Since the Court excluded the 500-hectare lot subject of
the August 14, 1996 Conversion Order and the 80.51-hectare SCTEX lot acquired
by the government from the area covered by SDP, then HLI and its subsidiary,
Centennary, shall be liable to the FWBs for the price received for said lots. HLI
shall be liable for the value received for the sale of the 200-hectare land to LRC in
the amount of PhP 500,000,000 and the equivalent value of the 12,000,000 shares
of its subsidiary, Centennary, for the 300-hectare lot sold to LIPCO for the
consideration of PhP 750,000,000. Likewise, HLI shall be liable for PhP
80,511,500 as consideration for the sale of the 80.51-hectare SCTEX lot.
We, however, note that HLI has allegedly paid 3% of the proceeds of the sale of
the 500-hectare land and 80.51-hectare SCTEX lot to the FWBs. We also take into
account the payment of taxes and expenses relating to the transfer of the land and
HLIs statement that most, if not all, of the proceeds were used for legitimate
corporate purposes. In order to determine once and for all whether or not all the
proceeds were properly utilized by HLI and its subsidiary, Centennary, DAR will
engage the services of a reputable accounting firm to be approved by the parties to
audit the books of HLI to determine if the proceeds of the sale of the 500-hectare
land and the 80.51-hectare SCTEX lot were actually used for legitimate corporate
purposes, titling expenses and in compliance with the August 14, 1996 Conversion
Order. The cost of the audit will be shouldered by HLI. If after such audit, it is
determined that there remains a balance from the proceeds of the sale, then the
balance shall be distributed to the qualified FWBs.
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 Authority for the sale of the 80.51-hectare lot used for the construction of the
transferred to DAR for land distribution to the FWBs. We find that the date of the SCTEX road network. From the total amount of PhP 1,330,511,500 (PhP
"taking" is November 21, 1989, when PARC approved HLIs SDP per PARC 500,000,000 + PhP 750,000,000 + PhP 80,511,500 = PhP 1,330,511,500) shall be
Resolution No. 89-12-2. DAR shall coordinate with LBP for the determination of deducted the 3% of the total gross sales from the production of the agricultural
just compensation. We cannot use May 11, 1989 when the SDOA was executed, land and the 3% of the proceeds of said transfers that were paid to the FWBs, the
since it was the SDP, not the SDOA, that was approved by PARC. 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
The instant petition is treated pro hac vice in view of the peculiar facts and
reputable accounting firm approved by the parties to audit the books of HLI and
circumstances of the case.
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
WHEREFORE, the instant petition is DENIED. PARC Resolution No. 2005-32-01 corporate purposes. Any unspent or unused balance as determined by the audit
dated December 22, 2005 and Resolution No. 2006-34-01 dated May 3, 2006, shall be distributed to the 6,296 original FWBs.
placing the lands subject of HLIs SDP under compulsory coverage on mandated
land acquisition scheme of the CARP, are hereby AFFIRMED with the
HLI is entitled to just compensation for the agricultural land that will be
MODIFICATION that the original 6,296 qualified FWBs shall have the option to
transferred to DAR to be reckoned from November 21, 1989 per PARC Resolution
remain as stockholders of HLI. DAR shall immediately schedule meetings with the
No. 89-12-2. DAR and LBP are ordered to determine the compensation due to
said 6,296 FWBs and explain to them the effects, consequences and legal or
HLI.
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. 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
Of the 6,296 FWBs, he or she who wishes to continue as an HLI stockholder is
the end of each quarter, until fully implemented.
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 The temporary restraining order is lifted.
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
SO ORDERED.
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 80.51-hectare SCTEX lot and homelots already received by PRESBITERO J. VELASCO, JR.
the 10,502 FWBs, composed of 6,296 original FWBs and 4,206 non-qualified Associate Justice
FWBs, shall be respected with no obligation to refund or return them.
WE CONCUR:
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
RENATO C. CORONA
area of 4,915.75 hectares subject of PARCs SDP-approving Resolution No. 89-
Chief Justice
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
TERESITA J. LEONARDO-DE
of individual lots that each FWB is entitled to under the CARP had he or she not ANTONIO T. CARPIO
CASTRO
opted to stay in HLI as a stockholder. After the segregation process, as indicated, is Associate Justice
Associate Justice
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.
(On official leave)
ARTURO D. BRION
DIOSDADO M. PERALTA*
Associate Justice
The aforementioned area composed of 6,886.5-square meter lots allotted to the Associate Justice
FWBs who stayed with the corporation shall form part of the HLI assets.
LUCAS P. BERSAMIN MARIANO C. DEL CASTILLO
HLI is directed to pay the 6,296 FWBs the consideration of PhP 500,000,000 Associate Justice Associate Justice
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 ROBERTO A. ABAD MARTIN S. VILLARAMA, JR.
Holdings, Inc. for the sale of the remaining 300 hectares of the aforementioned Associate Justice Associate Justice
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
 JOSE PORTUGAL PEREZ JOSE CATRAL MENDOZA
Associate Justice Associate Justice

MARIA LOURDES P. A. SERENO

Associate Justice

C E R T I F I C AT I O N

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that
the conclusions in the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Court.

RENATO C. CORONA
Chief Justice

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 181370 March 9, 2011
JULIAN S. LEBRUDO and REYNALDO L. LEBRUDO, Petitioners,
vs.
REMEDIOS LOYOLA, Respondent.
DECISION
CARPIO, J.:
The Case
Before the Court is a petition 1 for review on certiorari assailing the
Resolution2 dated 4 January 2008 and Decision 3 dated 17 August 2007 of the Court
of Appeals (CA) in CA-G.R. SP No. 90048.
The Facts
Respondent Remedios Loyola (Loyola) owns a 240-square meter parcel of land
located in Barangay Milagrosa, Carmona, Cavite, known as Lot No. 723-6, Block
1, Psd-73149 (lot), awarded by the Department of Agrarian Reform (DAR) under
Republic Act No. 66574 (RA 6657) or the Comprehensive Agrarian Reform Law of
1988. This lot is covered by Certificate of Land Ownership 5 (CLOA) No. 20210
issued in favor of Loyola on 27 December 1990 and duly registered on 14 March
1991 under Transfer of Certificate of Title (TCT)/CLOA No. 998.
On 27 June 1995, petitioner Julian S. Lebrudo (Lebrudo), now deceased and
represented by his son, petitioner Reynaldo L. Lebrudo, filed with the Office of the
Provincial Agrarian Reform Adjudicator (PARAD) of Trece Martires City, Cavite,
an action6 for the cancellation of the TCT/CLOA in the name of Loyola and the
issuance of another for the one-half portion of the lot in Lebrudos favor.
In a Decision 7 dated 18 December 1995, the PARAD dismissed the case without
prejudice on the ground that the case was filed prematurely. On 11 March 1996,
Lebrudo re-filed the same action.8
Lebrudo alleged that he was approached by Loyola sometime in 1989 to redeem
the lot, which was mortgaged by Loyolas mother, Cristina Hugo, to Trinidad
Barreto. After Lebrudo redeemed the lot for P250.00 and a cavan of palay, Loyola
again sought Lebrudos help in obtaining title to the lot in her name by
shouldering all the expenses for the transfer of the title of the lot from her mother,
Cristina Hugo. In exchange, Loyola promised to give Lebrudo the one-half portion
of the lot. Thereafter, TCT/CLOA No. 998 was issued in favor of Loyola. Loyola
then allegedly executed a Sinumpaang Salaysay9 dated 28 December 1989,
waiving and transferring her rights over the one-half portion of the lot in favor of
Lebrudo. To reiterate her commitment, Loyola allegedly executed two
more Sinumpaang Salaysay10 dated 1 December 1992 and 3 December 1992,
committing herself to remove her house constructed on the corresponding one-half
portion to be allotted to Lebrudo.
Thereafter, Lebrudo asked Loyola to comply with her promise. However, Loyola
refused. Lebrudo sought the assistance of the Sangguniang Barangay of
Milagrosa, Carmona, Cavite; the Philippine National Police (PNP) of Carmona,
Cavite; and the Department of Agrarian Reform to mediate. However, despite steps
taken to amicably settle the issue, as evidenced by certifications from the PNP and
the barangay, there was no amicable settlement. Thus, Lebrudo filed an action
against Loyola.
In her Answer, Loyola maintained that Lebrudo was the one who approached her
and offered to redeem the lot and the release of the CLOA. Loyola denied
promising one-half portion of the lot as payment for the transfer, titling and
registration of the lot. Loyola explained that the lot was her only property and it
was already being occupied by her children and their families. Loyola also denied
the genuineness and due execution of the two Sinumpaang Salaysay dated 28
December 1989 and 3 December 1992. The records do not show whether Loyola
renounced the Sinumpaang Salaysay dated 1 December 1992.
11
In a Decision dated 13 February 2002, the PARAD of Trece Martires City, Cavite
decided the case in Lebrudos favor. The dispositive portion of the decision states:
WHEREFORE, in view of the foregoing, JUDGMENT is hereby rendered:
a) Declaring Respondent Remedios Loyola disqualified as farmer
beneficiary of the subject land identified as Lot 723-6, Block 1, under
TCT/CLOA No. 998;
b) Declaring the Deed of sales over the subject lot illegal and ordered
the same set aside;
c) Declaring Plaintiff JULIAN LEBRUDO entitled to one half () of
the subject property under TCT/CLOA No. 998 in the name of
Remedios Loyola;
d) Ordering the other one half () of the subject lot ready for allocation
to qualified beneficiary;
e) Ordering the DAR PARO Office thru the Operations Division to
cancel TCT/CLOA No. 998 and in lieu thereof, to generate and issue
another title over the 120 square meters in the name of JULIAN
LEBRUDO;
f) Ordering the survey of the subject lot at the expense of the petitioner
so that title be issued to plaintiff herein;
g) Ordering the Register of Deeds, Trece Martires City to cancel
TCT/CLOA No. 998 in the name of Remedios Loyola;
h) Ordering the Register of Deeds, Trece Martires City to register the
title in the name [of] Julian Lebrudo as presented by the DAR or its
representative over the lot in question;
No pronouncement as to costs and damages.
SO ORDERED.12
Loyola appealed to the Department of Agrarian Reform Adjudication Board
(DARAB).13 In a Decision14 dated 24 August 2004, the DARAB reversed the
decision of the PARAD and ruled in Loyolas favor. The dispositive portion
states:
WHEREFORE, premises considered, the appealed decision is hereby REVERSED
and SET ASIDE and a new judgment rendered as follows:
1. Upholding and maintaining the validity and effectivity of
TCT/CLOA No. 998 in the name of the respondent;
2. Declaring the Sinumpaang Salaysay dated December 28, 1989 and
December 3, 1992 attached to the petition as Annex C and F, null and
void without legal force and effect;
3. Directing the Register of Deeds of Trece Martires City, Cavite to
reinstate TCT/CLOA No. 998 in the name of the respondent.
The status quo ante order issued by this Board on November 3, 2003 is hereby
LIFTED.
SO ORDERED.15
Lebrudo filed a motion for reconsideration which the DARAB denied in a
Resolution16 dated 12 April 2005. Lebrudo then filed a petition 17 for review with
the CA.
In a Decision 18 dated 17 August 2007, the CA affirmed the decision of the
DARAB. Lebrudo filed a motion for reconsideration which the CA denied in a
Resolution19 dated 4 January 2008.
Hence, this petition.
The Issue
The main issue is whether Lebrudo is entitled to the one-half portion of the lot
covered by RA 6657 on the basis of the waiver and transfer of rights embodied in
the two Sinumpaang Salaysay dated 28 December 1989 and 3 December 1992
allegedly executed by Loyola in his favor.
The Courts Ruling
The petition lacks merit.
A Certificate of Land Ownership or CLOA is a document evidencing ownership of
the land granted or awarded to the beneficiary by DAR, and contains the
restrictions and conditions provided for in RA 6657 and other applicable laws.
Section 27 of RA 6657, as amended by RA 9700,20 which provides for the
transferability of awarded lands, states:
SEC. 27. Transferability of Awarded Lands. Lands acquired by beneficiaries
under this ACT may not be sold, transferred or conveyed except through
hereditary succession, or to the government, or to the LBP, or to other qualified
beneficiaries for a period of ten (10) years: Provided, however, That the children
or the spouse of the transferor shall have a right to repurchase the land from the
government or LBP within a period of two (2) years. Due notice of the availability
of the land shall be given by the LBP to the Barangay Agrarian Reform Committee
(BARC) of the barangay where the land is situated. The Provincial Agrarian
Coordinating Committee (PARCCOM), as herein provided, shall, in turn, be given
due notice thereof by the BARC.
The title of the land awarded under the agrarian reform must indicate that it is an
emancipation patent or a certificate of land ownership award and the subsequent
transfer title must also indicate that it is an emancipation patent or a certificate of
land ownership award.
If the land has not yet been fully paid by the beneficiary, the rights to the land may
be transferred or conveyed, with prior approval of the DAR, to any heir of the
beneficiary or to any other beneficiary who, as a condition for such transfer or
conveyance, shall cultivate the land himself. Failing compliance herewith, the land
shall be transferred to the LBP which shall give due notice of the availability of the
land in the manner specified in the immediately preceding paragraph. x x x
(Emphasis supplied)
It is clear from the provision that lands awarded to beneficiaries under the
Comprehensive Agrarian Reform Program (CARP) may not be sold, transferred or
conveyed for a period of 10 years. The law enumerated four exceptions: (1)
through hereditary succession; (2) to the government; (3) to the Land Bank of the
Philippines (LBP); or (4) to other qualified beneficiaries. In short, during the
prohibitory 10-year period, any sale, transfer or conveyance of land reform rights
is void, except as allowed by law, in order to prevent a circumvention of agrarian
reform laws.
In the present case, Lebrudo insists that he is entitled to one-half portion of the lot
awarded to Loyola under the CARP as payment for shouldering all the expenses
for the transfer of the title of the lot from Loyolas mother, Cristina Hugo, to
Loyolas name. Lebrudo used the two Sinumpaang Salaysay executed by Loyola
alloting to him the one-half portion of the lot as basis for his claim.
Lebrudos assertion must fail. The law expressly prohibits any sale, transfer or The certificate of title serves as evidence of an indefeasible title to the property in
conveyance by farmer-beneficiaries of their land reform rights within 10 years favor of the person whose name appears therein. After the expiration of the one-
from the grant by the DAR. The law provides for four exceptions and Lebrudo year period from the issuance of the decree of registration upon which it is based,
does not fall under any of the exceptions. In Maylem v. Ellano,21 we held that the the title becomes incontrovertible.
waiver of rights and interests over landholdings awarded by the government is
invalid for being violative of agrarian reform laws. Clearly, the waiver and transfer
Accordingly, by the time when original petitioner Julian Lebrudo filed on June 27,
of rights to the lot as embodied in the Sinumpaang Salaysay executed by Loyola is
1995 the first case (seeking the cancellation of the respondents CLOA), the
void for falling under the 10-year prohibitory period specified in RA 6657.
respondents certificate of title had already become incontrovertible. That
consequence was inevitable, for as the DARAB correctly observed, an original
Lebrudo asserts that he is a qualified farmer beneficiary who is entitled to the lot certificate of title issued by the Register of Deeds under an administrative
under the CARP. DAR Administrative Order No. 3, 22 series of 1990, enumerated proceeding was as indefeasible as a certificate of title issued under a judicial
the qualifications of a beneficiary: registration proceeding. Clearly, the respondent, as registered property owner, was
entitled to the protection given to every holder of a Torrens title.1avvphi1
1. Landless;
The issue of whether or not the respondent was bound by her waiver and transfer
in favor of Julian Lebrudo, as contained in the several sinumpaang salaysay, was
2. Filipino citizen;
irrelevant. Worse for the petitioner, the DARAB properly held that the undertaking
of the respondent to Julian Lebrudo under the sinumpaang salaysay dated
3. Actual occupant/tiller who is at least 15 years of age or head of the December 28, 1989 and December 3, 1992 whereby she promised to give him
family at the time of filing application; and portion of the homelot in consideration of his helping her work on the release of
the CLOA to her and shouldering all the expenses for the purpose was "clearly
illegal and void ab initio" for being patently intended to circumvent and violate the
4. Has the willingness, ability and aptitude to cultivate and make the
conditions imposed by the agrarian laws and their implementing rules. He could
land productive.
not, therefore, have his supposed right enforced. x x x24
Lebrudo does not qualify as a beneficiary because of (1) and (3). First, Lebrudo is We see no reason to disturb the findings of the CA. The main purpose of the
not landless. According to the records, 23 Municipal Agrarian Reform Officer agrarian reform law is to ensure the farmer-beneficiarys continued possession,
Amelia Sangalang issued a certification dated 28 February 1996 attesting that
cultivation and enjoyment of the land he tills.25 To do otherwise is to revert back to
Lebrudo was awarded by the DAR with a homelot consisting of an area of 236
the old feudal system whereby the landowners reacquired vast tracts of land and
square meters situated at Japtinchay Estate, Bo. Milagrosa, Carmona, Cavite. Next,
thus circumvent the governments program of freeing the tenant-farmers from the
Lebrudo is not the actual occupant or tiller of the lot at the time of the filing of the
bondage of the soil.26
application. Loyola and her family were the actual occupants of the lot at the time
Loyola applied to be a beneficiary under the CARP.
WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 17
August 2007 and Resolution dated 4 January 2008 of the Court of Appeals in CA-
Further, the CA, in its Decision dated 17 August 2007, correctly observed that a
G.R. SP No. 90048.
certificate of title serves as evidence of an indefeasible title and after the expiration
of the one-year period from the issuance of the registration decree upon which it is
based, the title becomes incontrovertible. The CA also declared that the basis of SO ORDERED.
Lebrudos claim, the two Sinumpaang Salaysay dated 28 December 1989 and 3
December 1992, were illegal and void ab initio for being patently intended to
ANTONIO T. CARPIO
circumvent and violate the conditions imposed by the agrarian law. The relevant
Associate Justice
portions of the decision provide:
WE CONCUR:
x x x It is undisputed that CLOA 20210 was issued to the respondent on December
27, 1990 and was registered by the Register of Deeds of Cavite on March 14,
1991, resulting in the issuance of TCT/CLOA No. 998 in her name. PRESBITERO J. VELASCO, JR.*
Associate Justice
Under Sec. 43, P.D. 1529, the certificate of title that may be issued by the Register
of Deeds pursuant to any voluntary or involuntary instrument relating to the land DIOSDADO M. PERALTA ROBERTO A. ABAD
shall be the transfer certificate of title, which shall show the number of the next Associate Justice Associate Justice
previous certificate covering the same land and also the fact that it was previously
registered, giving the record number of the original certificate of title and the
JOSE C. MENDOZA
volume and page of the registration book in which the original certificate of title is
Associate Justice
found.
AT T E S T AT I O N Comprehensive Agrarian Reform Law of 1988, as Amended, and
Appropriating Funds Therefor. Took effect on 1 July 2009.
21
G.R. No. 162721, 13 July 2009, 592 SCRA 440, 452, citing Lapanday
I attest that the conclusions in the above Decision had been reached in consultation
Agricultural & Development Corporation v. Estita, 490 Phil. 137, 152
before the case was assigned to the writer of the opinion of the Courts Division.
(2005).
22
Revised Rules and Procedure Governing Distribution and/or Titling of
ANTONIO T. CARPIO Lots in Landed Estates Administered by DAR. Issued on May 1990.
23
Associate Justice Rollo, p. 50.
24
Chairperson Id. at 27-29.
25
Corpuz v. Sps. Grospe, 388 Phil. 1100, 1110 (2000). See also Torres v.
Ventura, G.R. No. 86044, 2 July 1990, 187 SCRA 96.
C E R T I F I C AT I O N 26
Corpuz v. Sps. Grospe, supra.

Pursuant to Section 13, Article VIII of the Constitution, and the Division
Chairpersons Attestation, I certify that the conclusions in the above Decision had
been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

RENATO C. CORONA
Chief Justice

Footnotes
*
Designated additional member per Special Order No. 933 dated 24
January 2011.
1
Under Rule 45 of the 1997 Revised Rules of Civil Procedure.
2
Rollo, p. 19. Penned by Justice Lucas P. Bersamin (now a member of
this Court) with Justices Portia Alio Hormachuelos and Estela M.
Perlas-Bernabe, concurring.
3
Id. at 20-29.
4
An Act Instituting a Comprehensive Agrarian Reform Program to
Promote Social Justice and Industrialization, Providing the Mechanism
for its Implementation, and for Other Purposes. Approved on 10 June
1988.
5
Document evidencing ownership of the land granted or awarded to the
beneficiary by DAR, and contains the restrictions and conditions
provided for in R.A. 6657 and other applicable laws.
6
Docketed as DARAB Case No. 269-95.
7
Rollo, p. 32.
8
Docketed as DARAB Case No. 0357-96.
9
Rollo, p. 73.
10
Id. at 74-75.
11
Id. at 31-39.
12
Id. at 38-39.
13
Docketed as DARAB Case No. 11565 (Reg. Case No. 0357-96).
14
Rollo, pp. 44-53.
15
Id. at 52.
16
Id. at 56-57.
17
Docketed as CA-G.R. SP No. 90048.
18
Supra note 3.
19
Supra note 2.
20
An Act Strengthening the Comprehensive Agrarian Reform Program
(CARP), Extending the Acquisition and Distribution of All Agricultural
Lands, Instituting Necessary Reforms, Amending for the Purpose
Certain Provisions of Republic Act No. 6657, Otherwise Known as the

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 7749 September 9, 1913
THE CITY OF MANILA, plaintiff-appellant,
vs.
BALBINA ESTRADA Y SARMIENTO, minor and only heiress of Concepcion
Sarmiento, deceased, and ARISTON ESTRADA, personally, and as
administrator, defendants-appellants.
City Attorney Adams for plaintiff-appellant.
Ariston Estrada for defendants-appellants.
TRENT, J.:
After a careful examination of the entire record in this case and the law applicable
to the questions raised therein, we are of the opinion that P10 per square meter is a
just compensation for the land taken. Without prejudice to filing a more extended
opinion in which our reasons will be set forth in full, judgment will be entered
accordingly, without costs. So ordered.
A short opinion was handed down in this case on February 18, 1913, and in
accordance with the reservation made therein, the court now proceeds to write an
extended opinion setting forth the reasons for its judgment in the case.
The city of Manila sought to expropriate an entire parcel of land with its
improvements for use in connection with a new market at that time being erected
in the district of Paco. A complaint was filed setting forth the necessary allegations,
answer joined, and commissioners were appointed, who, after viewing the
premises and receiving evidence, and being unable to agree, submitted two reports
to the court. The court duly rendered its decision, confirming the majority report as
to the improvements, but reducing the price of the land from P20 per square meter,
as fixed by the majority report, to P15 per square meter. Motions for a new trial
having been made by both parties and denied by the court, both parties appealed
from that part of the decision fixing the value of the land at P15 per square meter.
The record was therefore elevated to this court for a review of the evidence and
assigned errors of the parties. This court held that P10 per square meter was just
compensation for the land, and rendered its decision accordingly.
The court justifies such action, first, upon the ground that the great preponderance
of the evidence submitted to the commissioners showed that P10 per square meter
was just compensation for the land taken, and, second, upon the power of the court
to revise the report of the commissioners when the amount awarded is grossly
inadequate or grossly excessive.
A brief resume of the evidence in regard to the value of the land will first be made.
The land was bounded by Calle Herran, the Paco Estero, the market site, and Calle
Looban.
The several sessions of the commissioners at which evidence was heard took place
between September 19 and October 3, 1911.
George C. Sellner, a real estate agent, testified that he was familiar with real estate
values in the city of Manila. He stated that the land in question, fronting as it did
on Calles Herran and Looban and the Paco Estero, was worth 60 per cent more
than other land near by, and placed its value at P10 per square meter. He stated that
he had carried on negotiations with regard to a parcel of land situated on the
opposite side of the estero and fronting Herran; that he was offering this land for
sale at P5.50 per square meter, but that the owner succeeded in obtaining P6 per
square meter, and that the sale had been consummated only about thirty days prior
to the date of the hearing. The witness stated that this land was of about the same
elevation as the parcel sought to be expropriated, but that it had no improvements,
being used for the storage of coal.
Enrique Brias, another real estate man, testified that P10 was a good price for the
land. He stated that he was the owner of the land on the opposite side of the estero
which had been sold for P6 per square meter about one month prior to the hearing,
but that this land was not in such a good commercial location.
Mr. Powell, of the Internal Revenue Bureau, testified that the Estrada land was
appraised for taxation at P6 per square meter; that prior to 1911 it had been
appraised at about P4 per square meter.
The president of the Municipal Board of the city of Manila testified that a parcel of
land on the opposite side of Calle Herran but on the same side of the Paco Estero,
owned by one Clarke, had been expropriated by the city in 1908. He stated that
commissioners were appointed who duly rendered their report to the court, but as it
was accepted by both parties, no further litigation was necessary. In this case it
seems that the land desired by the city was part of a parcel fronting on Calle
Herran, whose other boundaries were the Paco Estero, some private property, and a
small callejon. The portion desired by the city compromised the entire Herran
frontage of the owner. The commissioners appraised the total area, consisting of
1,399.03 square meters at P6.50 per square meter. The city desired only 353.21
square meters facing on Calle Herran, and the commissioners therefore found
consequential damages to the remained, due to depriving it of its Herran frontage,
to be P4.50 per square meter. These consequential damages were included in the
price paid by the city for the land taken, making the apparent price of the 353.21
square meters P7,002.05, or P19.85 per square meter.
To the same effect was the testimony of Judge Camus of the municipal court, who
at the time of the Clarke transaction was city attorney.
Ariston Estrada, one of the defendants, testified as follows:
As to the market value of the land (the subject of the present case),
whatever may be its price on the market, in my opinion, by comparing
previous sales of land in the same or similar conditions and
circumstances, and having in mind the only sale which has been made
in twenty years of land equally or similarly situated to this, I believe
that it is all that can serve as a standard to ascertain the value in the
market of the land in question.
xxx xxx xxx
With reference to the land, I believe I am as well as informed as the
witnesses for the plaintiff who have testified, and I estimate that the
land in question should be worth on the market at this time P25 per
square meter for the reason that about P19.85 per square was paid for
Mr. Clarke's land and this was three years ago; and, on the one hand,
property values have increased in the last three years, and, on other
hand, with the opening of the market, property values along Calles
Herran and Looban have increased.
From the record it appears that the improvements on the land consisted of
a camarin in fairly good condition, appraised at P4,500; a dwelling house in very
bad condition, appraised at P1,500; the former being occupied by tenants and the
latter by the defendants Estrada and his family. The remaining improvements
consisted of a stone wall surrounding the lot, appraised at P1,020, and some trees,
appraised at P150.
The majority report of the committee, fixing the value of the land at P20 per square
meter, states:
And lastly, with respect to the value of the land, the evidence is very
contradictory. While the evidence of the plaintiff tends to show that the
value of the land does not exceed P10 per square meter, that of the
defendants, on the contrary, maintains that the value of the land is more
than P19.85 per square meter, and it is contended by the defendants that
the true market value of the land in question is P25 per square meter.
The lower court, in arriving at its decision to reduce the price of the land to P15,
discussed the Clarke transaction at some length and concluded as follows:
The court therefore understands that the price which the plaintiff
accepted three years ago for a piece of land less suited for commercial
purposes than that in question, without proof that since then the price of
land in the place where the tract here considered is situated has fallen,
ought to serve as criterion for fixing the value of the land that is the
subject matter of the present expropriation.
xxx xxx xxx
So, the court holds it just and equitable to take as a compromise
between the two conflicting majority and minority opinions of the three
commissioners the average of the two prices they have fixed per square
meter for the land in question, P20 and P10, respectively, fixing upon
P15 per square meter.
From this review of the evidence it appears that two disinterested witnesses for the
plaintiff corporation testified that the land was worth P10 per square meter, their
statements being based upon the prices obtained for land in the open market in the
vicinity. The defendant Estrada testified that it was worth P25 per square meter,
basing his statement on the price obtained three years previously by the owner of
the parcel on the opposite side of Calle Herran of P19.85 per square meter. It also
clearly appears that the price fixed in the majority report of the commissioners was
based principally upon this same transaction, and that the compromise price fixed
by the court was based upon the evidence of this sale and the testimony of the two
witnesses for the plaintiff who fixed the price of P10 per square meter.
Attorney for the plaintiff corporation objected to the introduction of all evidence
with reference to the Clarke transaction, and so much depending upon it, it is
proper to inquire as to its competency and relevancy.
The general rule that the market value of the land taken is the just compensation to
which the owner of condemned property is entitled under the law meets with our
unqualified approval. Such was our holding in Manila R. Co. vs. Fabie (17 Phil.
Rep., 206). But as stated in Packard vs. Bergen Neck Ry. Co. (54 N. J. L., 553; 25
A., 506):
The difficulty is not with the rule, but with its application. For the
determination of the market value of land, which is 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 therefore, is beyond doubt difficult. The test is logically and
legally correct, but it cannot be applied to land with the accuracy with
which it can be applied to stocks, bonds, and personal property
generally. Still, it is this test which admittedly must be applied, even
when the value of the land and the damages are found in separate sums.
It is a very difficult matter to limit the scope of the inquiry as to what the market
value of condemned property is. The market value of a piece of land is attained by
a consideration of all those facts which make it commercial valuable. Whether
evidence considered by those whose duty it is to appraise the land is of that nature
is often a very difficult matter to decide. The Supreme Court of the United States,
in a carefully worded statement, marks out the scope of the inquiry as follows:
In determining the value of land appropriated for public purposes, the
same considerations are to be regarded as in a sale of property between
private parties. The inquiry in such cases must be what is the property
worth in the market, viewed not merely with reference to the uses to
which it is at that time applied, but with reference to the uses to which
it is plainly adapted; that is to say, what is it worth from its availability
for valuable uses? . . . As a general thing, we should say that the
compensation to the owner is to be estimated by reference to the uses
for which the property is suitable, having regard to the existing business
or wants of the community, or such as may be reasonably expected in
the immediate future. (98 U.S. 403; 25 L. ed., 206.)
This passage is quoted with approval in the late case of St. Louis I. M. & S. R. Co.
vs. Theodore Maxfield Co. (94 Ark., 135; 26 L.R.A. (N. S.), 111; 126 S. W., 83)
a very well considered case.
The supreme court of Missouri has also formulated an exceedingly clear statement footing from bids made at auction sales. The reception of this class of
of the matter in the Stock Yards case (120 Mo., 541): evidence would multiply the issues upon questions of damages to an
extent not to be tolerated by court aiming to practically administer
justice between litigants. (As quoted with approval in Yellowstone Park
The market value of the property means its actual value, independent of
R. R. Co. vs. Bridger Coal Co., 34 Mont., 545.)
the location of plaintiff's road thereon, that is, the fair value of the
property as between one who wants to purchase and one who wants to
sell it; not what could be obtained for it in peculiar circumstances when In the present case, the defendant Estrada testified that upon learning that the
greater than its fair price could be obtained; not its speculative value; property which was the subject of the present litigation was to be condemned, he
not the value obtained through the necessities of another. Nor, on the offered to pay a real estate agent P15 per square meter for a piece of land situated
other hand, is it to be limited to that price which the property would in the locality with relatively similar commercial location. This was improper
bring when forced off at auction under the hammer. The question is, if evidence and should not have been considered by the commissioners. (See also
the defendant wanted to sell its property, what could be obtained for it Sherlock vs. Chicago B & Q. R. Co., 130 Ill., 403; 22 N. E., 844; Winnisimmet
upon the market from the parties who wanted to buy and would give its Co. vs. Grueby, 111 Mass., 543; Montclair Ry Co. vs. Benson, 36 N. J. L., 557.)
full value. (Approved in Met. Street Ry. Co. vs. Walsh, 197 Mo., 392,
418; 94 S. W., 860.)
The second point raised by the evidence taken in the present case is the admission
of testimony relative to real estate transaction in the vicinity of the land desired.
These views are practically in accord with Lewis on Eminent Domain (2d ed.), The rule which admits such evidence meets with universal approval, but with
paragraph 478, who state the rule as follows: certain reservations.
The market value of property is the price which it will bring when it is In Aledo Terminal Ry. Co. vs. Butler (246 Ill., 406; 92 N. E., 909) the court said:
offered for sale by one who desires, but is not obliged to sell it, and is
brought by one who is under no necessity of having it. In estimating its
Evidence of voluntary sales of other lands in the vicinity and similarly
value all the capabilities of the property, and all the uses to which it
situated is admissible in evidence to aid in estimating the value of the
may be applied or for which it is adapted, are to be considered, and not
tract sought to be condemned, but the value of such testimony depends
merely the condition is it an at the time and the use to which it is then
upon the similarity of the land to that in question and the time when
applied by the owner. It is not a question of the value of the property to
such sales were made and the distance such lands are from those the
the owner. Nor can the damages be enhanced by his unwillingness to
value of which is the subject of inquiry.
sell. On the other hand, the damages cannot be measured by the value
of the property to the party condemning it, nor by its need of the
particular property. All the facts as to the condition of the property and The supreme court of Massachusetts, in Fourth National Bank vs. Com. (212
its surrounding, its improvements and capabilities, may be shown and Mass., 66; 98 N.E., 86), affirms the rule as follows:
considered in estimating its value. (Approved in Seaboard Air
Line vs. Chamblin, 108 Va., 42.)
It long has been settled, that in the assessment of damages where lands
are acquired by eminent domain evidence is admissible of the price
In the practical application of this doctrine, the courts have been obliged to reject received from sale of land similar in character, and situated in the
various kinds of evidence which the partisan zeal of the one side has attempted to vicinity, if the transactions are not so remote in point of time that a fair
introduce in order to swell the measure of damages, and to approve evidence comparison practically is impossible.
which the other side has attempted to discredit in order to reduce the amount to be
realized. Three such questions present themselves in this case.
In Hewitt vs. Price (204 Mo., 31) it was said:
First, testimony as to mere offers for the property desired or for contiguous
It is sufficient to say upon this proposition that the law is well settled in
property is not admissible. Upon this point we quote from the case of Keller vs.
this State upon that subject, and while the value of selling price of
Paine (34 Hun, 167):
similar property may be taken into consideration in determining the
value of the piece of property in litigation, it is equally true that the
Its value depends upon too many circumstances. If evidence of offers is location and character of such property should be similar and the sales
to be received it will be important to know whether the offer was made of such other property should at least be reasonably near in point of
in good faith, by a man of good judgment, acquainted with the value of time to the at which the inquiry of the value of the property in dispute is
the article and of sufficient ability to pay; also whether the offer was directed.
cash, for credit, in exchange, and whether made with reference to the
market value of the article; or to supply a particular need or to gratify a
In Laing vs. United New Jersey R. R. & C. Co. (54 N. J. L., 576; 33 Am. St. Rep.,
fancy. Private offers can be multiplied to any extent for the purposes of
682; 25 A., 409) it was said:
a cause, and the bad faith in which they were made would be difficult to
prove. The reception of evidence of private offers to sell or purchase
stands upon an entirely different footing from evidence of actual sales
between individuals or by public auction, and also upon a different
 Generally in this and other States evidence of sale of land in the
neighborhood is competent on an inquiry as to the value of land, and if
the purchases or sales were made by the party against whom the
evidence was offered it might stand as an admission. But such
testimony is received only upon the idea that there is substantial
similarity between the properties. The practice does not extend, and the
rule should not be applied, to cases where the conditions are so
dissimilar as not easily to admit of reasonable comparison, and much
must be left to the discretion of the trial judge in the determination of
the preliminary question conditions are fairly comparable.
In an early case, and which will be referred to again upon another question, the
supreme court of Illinois stated the rule as follows:
The theory upon which evidence of sale of other similar property in the
neighborhood at about the same time, is held to be admissible is that it
tends to show the fair market value of the property sought to be
condemned. And it cannot be doubted that such sales, when made in a
free and open market, where a fair opportunity for competition has
existed, become material and often very important factors in
determining the value of the particular property in question. (Peoria Gas
Light Co. vs. Peoria Term. Ry. Co., 146 Ill., 372; 21 L. R. A., 373; 34
N. E., 550.)
Even in those States where direct evidence of particular sales is not allowed, such
questions may be directed to witnesses on cross-examination to test their
credibility. This is the position taken by the supreme court of Pennsylvania in the
late cases of Rea vs. Pittsburg, etc., R. R. Co. (229 Pa., 106) and Brown vs. City of
Scranton (231 Pa., 593; 80 A., 113). See also Oregon R. & N. Co. vs. Eastlack (54
Ore., 196; 102 Pac., 1011) where this somewhat technical differences is set forth.
Evidence of other sales is competent if the character of such parcels as sites for
business purposes, dwellings, or for whatever other use which enhances the
pecuniary value of the condemned land is sufficiently similar to the latter that it
may be reasonably assumed that the price of the condemned land would be
approximately near the price brought by the parcels sold. The value of such
evidence, of course, diminishes as the differences between the property sold and
the condemned land increase. The property must be in the immediate
neighborhood, that is, in the zone of commercial activity with which the
condemned property is identified, and the sales must be sufficiently coeval with
the date of the condemnation proceedings as to exclude general increases or
decreases in property values due to changed commercial conditions in the vicinity.
No two estates are ever exactly alike, and as the differences between parcels sold
and the land condemned must necessarily be taken into consideration in comparing
values, we think it much better that those differences should be shown as part of
the evidence of such sales, as is the practice in Iowa. (Town of Cherokee vs. S. C.
& I. F. Town Lot and Land Co., 52 Iowa, 279, 3 N. W., 42.) And where these
differences are so great that the sales in question can form no reliable standard for
comparison, such evidence should not be admitted. (Presbrey vs. Old Colony &
Newport R. Co., 103 Mass., 1.)
The testimony as to the sale of a parcel of land on the opposite side of the stereo
from the condemned land at P6 per square meter we think was properly admitted,
and should have been given much greater weight by the commissioners and the
court below. This was a sale in the open market, just one month prior to the time of
the hearing before the commissioners. It was located on the same street, Calle
Herran, and on the same estero. The differences between the two parcels as to
location was that the condemned property also had a frontage on Calle Looban and
was on the same side of the estero and immediately in front of the market site. It is
true that the condemned land had improvements upon it while the parcel was
vacant land. But it is also true that the values of these improvements were
estimated as separate and distinct items, and the value of the land was estimated
without regard to the improvements upon it. A sale of vacant land is evidence of
the value of neighboring land. (O'Malley vs. Com., 182 Mass., 196; 65 N.E., 30.)
Basing their estimate of the value of the condemned land upon the price obtained
for the parcel mentioned, and estimating the more favored location of the
condemned land as being worth 60 per cent more than the land on the opposite side
of the estero, Sellner and Brias arrived at the conclusion that P10 per square meter
(a difference of more than 66 per cent) was a fair price for the land condemned.
These witnesses were professional real estate agents, both had been active in the
vicinity at about the time they testified before the commissioners, and were
therefore peculiarly qualified to appraise the land in question. We are inclined to
agree with the opinion expressed in the case of I. I. & M. R. Co. vs. Humiston (208
Ill., 100; 69 N. E., 880), where it is said:
The fact of salaries is not always the only factor in determining the
weight of the testimony of a witness as to value. A witness may, in
forming his opinion, consider the uses and capabilities of the property,
as well as the prices at which like property in the neighborhood has
been sold. He may also base his opinion of value upon his knowledge
or observation of the growth and development of towns and cities, a
general knowledge of trade and business, rental value, the interests
which the land would pay upon an investment, its productiveness, ease
of cultivation, its situation in a particular community, and other
elements.
These parcels were in the same neighborhood and their respective locations and
surroundings were, with the differences above named, practically the same. The
price which the parcel sold by Brias brought was therefore of great importance as a
basis for estimating the value of the condemned land.
The next question of evidence, and the most important to this case, is the
admissibility of evidence showing prices paid for neighboring land under eminent
domain proceedings. Is this class of evidence admissible? The authorities almost
with one accord reply emphatically, No. The rule is so universal that it seems
sufficient to quote from only one or two authorities. Lewis on Eminent Domain
(par. 447) says:
What the party condemning has paid for other property is incompetent.
Such sales are not a fair criterion of value, for the reason that they are
in the nature of a compromise. . . . The fear of one party or the other to
take the risk of legal; proceedings ordinarily results in the one party
paying more or the other party taking less than is considered to be the
fair market value of the property. For these reasons, such sales would
not seem to be competent evidence of value in any case, whether in a
proceeding by the same condemning party or otherwise.
In the case of Peoria Gas Light Co. vs. Peoria Term. Ry Co. (146 Ill., 372), from
which we quoted above sustaining the rule that sales of property in the vicinity are
admissible as evidence, it was said:
But it seems very clear that to have that tendency, they (sales of
adjacent land) must have been made under circumstances where they
are not compulsory, and where the vendor is not compelled to sell at all
events, but is at liberty to invite competition among those desiring to
become purchasers. Accordingly among the various decisions in this
and other States to which our attention has been called or which our
own researches have discovered, we find none in which the price paid
at a forced or compulsory sale has been admitted as competent evidence
of value.
This case is particularly valuable for its review of the authorities upon this point.
Other late cases sustaining the rule are: U.S. vs. Beaty (198 Fed. Rep., 284); City
of San Luis Obispo vs. Brizzolara (100 Cal., 434; 34 P. 1083); C.& W. I. R. R.
Co. vs. Heidenreich (254 Ill., 231; 98 N.E., 567); Howe vs. Howard (158 Mass.,
278); Seaboard Air Line vs. Chamblin (108 Va., 42); O'Day vs. Meyers (147 Wis.,
549; 133 N.W., 605).
It is to be observed that this rule excluding evidence of prices obtained for
neighboring land under eminent domain proceedings is in the nature of an
exception to the rule that sales of such land may be offered in evidence, and that,
speaking briefly, the underlying reason is that they are not prices obtained "by one
who desires but is not obliged to sell it, and is bought by one who is under no
necessity for having it."
The objection of the plaintiff to the introduction of evidence showing that Clarke
had obtained for his land condemned by the city on 1908 was well taken. The
testimony of Estrada, based, as he himself admits (see except of his testimony
above), upon that transaction, was valueless, and the commissioners and the lower
court erred in issuing it as a basis for estimating the value of the condemned land.
But, carrying this discussion perhaps one step further than is really necessary, we
desire to say that even were evidence of the Clarke transaction admissible in the
present case, the use made of the facts of that case by the witness Estrada, the
commissioners, and the court itself, was clearly erroneous. As was stated above,
the apparent price of P19.85 for the land taken by the city was in reality made up
of P6.50 per square meter for the land itself and consequential damages to the
remaining portion of Clarke's and at the rate of P4.50 per square meter.
The damage or injury to the remainder of the land on account of the
construction of the railroad is in effect the actual taking of that much of
the remainder of the land, for the diminished market value of which the
owner is entitled to full compensation. (St. Louis I. M. & S. R.
Co. vs. Theodore Maxfield Co., 94 Ark., 135; 26 L. R. A. (N. S.), 1111;
126 S. W., 83.)
The value of the property taken and the damages to the remainder of the
property are two distinct and separate things. (Louisiana Ry. & Nav.
Co. vs. Morere, 116 La., 997; 41 So., 236.)
There were no consequential damages to the defendant in the present case for the
reason that his entire holding was taken. The market value of the land taken from
Clarke did not include the consequential damages to the remainder. The deed of
transfer (Exhibit 1) was obviously ambiguous when it stated "that in consideration
of the sum of P7,002.05 which the city of Manila has offered to pay me for the said
parcel of land for a sewer pumping station." This sum included the market value of
the land taken and something more the consequential damages to 1,045.82
square meters of land remaining at P4.50 per square meter. The deed so read
merely for convenience and brevity. It was written for the purpose or transferring
the land taken and was not intended to be a record of the expropriation proceedings
which culminated in its execution. It was satisfactorily proven in the present case
that the figures shown in the deed were made up in the manner we have already
described, and manifestly P19,85 is merely a fictitious value for the land taken, far
beyond its true value.
We have now eliminated the testimony of the defendant Estrada of his offer to pay
P15 per square meter for other land as well situated as that condemned; and all
evidence of the Clarke transaction in 1908. This leaves as the only evidence of
record as to the value of the condemned land the testimony of Sellner and Brias,
based upon the sale of an adjacent parcel of land, which evidence we have
approved as being relevant, and the testimony of Mr. Powell to the effect that the
land was appraised for taxation at P6 per square meter, which was also relevant.
The next question which it is necessary to consider is the view of the premises
made by the commissioners. What is the purpose of this view? An exhaustive
search of the authorities has been made upon this point, and we have come to the
conclusion that some of the statements made in the earlier decisions upon the
subject are not sound law.
They view the premises, and are supposed to exercise their own
judgment to some extent, irrespective of evidence. (Virginia and
Truckee R. Co. vs. Henry, 8 Nev., 165.)
The testimony of witnesses as to value . . . although entitled to due
consideration, is not controlling. (City of St. Louis vs. Lanigan, 97 Mo.,
175; 10 S. W., 475.)
They are to be guided largely by their own judgment as they view the
premises. (City of Kingston vs. Terry, 53 N. Y. S., 652.)
They may go and view the premises and upon the knowledge thus
acquired base their award. (Stevens vs. Railroad Co., 8 N. Y. S., 707.)
That the commissioners had a right to act upon information derived in
part from a personal view of the premises cannot be questioned. (In
re certain lands in the Twelfth Ward, 68 N. Y. S., 965.)
They are not bound by the testimony of their of these experts, and may
act upon their own personal view. (In re opening Trinity Ave., 71 N. Y.
S., 24.)
Doubtless, in a proceeding of this kind, the commissioners may act
upon their own judgment, disregarding oral testimony. (Waterford E.
Light, Heat & Power Co. vs. Reed, 94 N. Y. S., 551.)
All of these statements, while made in cases where there was a conflict of
evidence, and wherein the commissioners or jury found damages within the
estimates made by witnesses, if taken at their face value would allow examined as other witnesses." (Approved in the late case of Guinn vs. Railway
commissioners or special juries to assess damages at any sum they pleased. The Co., 131 Iowa, 680; 109 N. W., 209.)
true rule, as laid down in the more recent cases is that the view of the premises is
made for the purpose of better enabling the appraisers to understand the evidence
The doctrine finds favor in Kansas. In C. K. & W. R. Co. vs. Mouriquand (45 Kan.,
presented by the parties, and giving it its proper weight. The supreme court of
170), the court approved of the practice of instructing the jury that their view of the
Colorado is substance supports this principle in Denver Co. vs. Howe (49 Colo.,
premises was to be sued in determining the value of conflicting testimony, saying:
256;112 P., 779):
"Had the jury disregarded all the sworn evidence, and returned a verdict upon their
own view of the premises, then it might be said that the evidence which the jurors
The jury viewed the premises and were better able to judge of the acquired from making the view had been elevated to the character of exclusive and
number of acres in each, as well as other conditions affecting the land. predominating evidence. This is not allowable. The evidence of the witnesses
The facts ascertained by the view of the premises are not in the record, introduced in the court on the part of the landowner supports fully the verdict. If
whether they were regarded as so much additional evidence, or were the verdict was not supported by substantial testimony given by witnesses sworn
used to better understand and apply the evidence adduced at the trial. upon the trial, we would set aside, but as the jury only took into consideration the
Keeping in view the evidence relating to the special value of the result of their view of the premises, in connection with the sworn evidence
building site, the value of improvements and of the ground, it will be produced before the to connection with the sworn evidence produced before them,
found that the verdict is within and supported by the values as testified to determine between conflicting evidence, the instruction was not so erroneous as
to, and these values, as fixed by the several witnesses, represented to to require a new trial."
each the market value, as conceded by appellants. The verdict is
supported by the evidence of market value and on that ground would
A very clear statement of it is made by Dyer, J., charging a jury, in Laflin vs.
have to be sustained if the matter complained of in the instruction had
Chicago W. & N. R. Co. (33 Fed. Rep., 415): "You have been permitted to view the
been entirely omitted.
premises in question. The object of this view was to acquaint you with the physical
situation, condition, and surroundings of the premises, and to enable you better to
In a clear statement of the rule, the supreme court of Pennsylvania says understand the evidence on the trial. The knowledge which you acquired by the
(Gorgas vs. Railroad Co., 144 Pa., 1;22 A., 715): "A view may view may be used by you in determining the weight of conflicting testimony
sometimes be of the highest importance, where there is a conflict of respecting value and damage, but no farther. Your final conclusion must rest on the
testimony. It may enable the jurors to see on which side the truth lies. evidence here adduced."
And if the witnesses on the one side of the other have testified to a state
of facts which exists only in their imagination, as to the location of the
In Postal Telegraph-Cable Co. vs. Peyton (124 Ga., 746; 52 S. E., 803; 3 L. R. A.
property, the manner in which it is cut by the road, the character of the
(N. S.), 333) it was said: "A jury cannot be left to roam without any evidence in the
improvements, or any other physical fact bearing upon the case, they
ascertainment and assessment of damages. The damages which the law allows to
surely cannot be expected to ignore the evidence of their senses, and
be assessed in favor of landowners whose property has been taken or damaged
give weight to testimony which their view shows to be false. . . . The
under the right of eminent domain are purely compensatory. The land actually
true rule, in such cases, is believed to be that the jury in estimating the
appropriated by the telegraph company amounted to only a fraction of an acre; and
damages shall consider the testimony as given by the witnesses, in
while it appeared that the construction and maintenance of the telegraph line would
connection with the facts as they appear upon the view; and upon the
cause consequential damages to the plaintiff, no proof was offered from which any
whole case, as thus presented, ascertain the difference between the
fair and reasonable estimate of the amount of damages thereby sustained could be
market value of the property immediately before and immediately after
made. The jury should have been supplied with the data necessary in arriving at
the land was taken. This difference is the proper measure of the
such an estimate in the absence of this essential proof, a verdict many times in
damages.
excess of the highest proved value of the land actually taken must necessarily be
deemed excessive."
In Close vs. Samm (27 Iowa, 503) it was said: "The question then arises as to the
purpose and intent of this statute. It seems to us that it was to enable the jury, by
The question has often been up in the State of Illinois, and the rule has been clearly
the view of the premises or place, to better understand and comprehended the
stated there in number of cases. In Sexton vs. Union Stock Yard Co. (200 Ill.,
testimony of the witnesses respecting the same, and thereby the more intelligently
244;65 N. E., 638), a leading case, it was said: "The evidence consisted most
to apply the testimony to the issues on trial before them, and not to make them
largely of opinions of values entertained by the different witnesses. Their judgment
silent witnesses in the case, burdened with testimony unknown to both parties, and
varied widely and their opinions were likewise variant. The amount allowed,
in respect to which no opportunity for cross-examination or correction of error, if
though much less than the estimates of the witnesses produced in appellant's
any, could be afforded either party. If they are thus permitted to include their
behalf, is larger than that of the witnesses produced by the appellate company. We
personal examination, how could a court ever properly set side their verdict as
cannot know the effect which was produced on the minds of the jurors by the
being against the evidence, or even refuse to set aside without knowing the facts
actual inspection of the premises. The rule in such cases as not to disturb a verdict,
ascertained by such personal examination by the jury? It is a general rule, certainly,
if it is within the range of the testimony, unless we can clearly see that injustice has
if not universal, that the jury must base their verdict upon the evidence delivered to
been done and that passion and prejudice influenced the action of the jury."
them in open court, and they may not take into consideration facts known to them
personally, but outside of the evidence produced before them in court. If a party
would avail himself of the facts known to a juror, he must have him sworn and In the very recent case of South Park Comrs. vs. Ayer (245 Ill., 402; 92 N. E., 274)
it was said: "The jury view the premises, and the law is well settled in this State
that in a condemnation proceeding, where the jury have viewed the premises and
where the evidence is conflicting, and where the amount is within the range of
value as testified to on the trial, and does not appear to have been the result of
prejudice, passion, undue influence, or other improper cause, the verdict will not
be disturbed. (Citing cases.) It is clear the amount fixed by the jury in this case was
well within the range of the evidence, which was conflicting, and the verdict
should not be set aside unless it appears it was brought about by some improper
ruling of the court upon the trial."
The rule is also stated in Lanquist vs. City of Chicago (200 Ill., 69; 65 N. E., 681);
in I. I. & M. R. Co. vs. Humiston (208 Ill., 100; 69 N. E., 880); and in G. & S. R. R.
R. Co. vs. Herman (206 Ill., 34; 69 N. E., 36).
In New York, where the question has doubtless been raised more often than
anywhere else, the late cases illustrate the rule perhaps the most clearly.
The appellate division, supreme court, In re Titus Street in City of New York (123
N. Y. S., 10018), where it appeared that the city's witnesses testified that the
property was worth $9,531 and the commissioners awarded $2,000 less said: "We
do not think this is meeting the requirements of the law; we do not believe that it is
within the province of the commissioners to arbitrarily set up their own opinion
against that of the witnesses called by the city, and to award damages largely
below the figure at which the moving party is committed, without something
appearing in the record to justify such action. When a party comes into court and
makes an admission against his interest, no court or judicial tribunal is justified in
assuming that the admission is not true, without at least pointing out the reason for
discrediting it; it carries within the presumption of truth, and this presumption is
not to be overcome by the mere fact that the commissioners might themselves have
reached a different conclusion upon the viewing of the premises. . . . This view of
the commissioners, it seems to us, is for the purpose of enabling the commissioners
to give proper weight and effect to the evidence before them, and it might justify
them in giving larger damages than some of the witnesses thought proper; or even
less than some of them declared to be sustained. But where the evidence produced
by the moving party in a proceeding for taking property for public purposes fixes a
sum, without any disagreement in the testimony on that side, we are of the opinion
that the cases do not justify a holding that the commissioners are authorized to
ignore such testimony and to substitute their own opinion in such manner as to
preclude the supreme court from reviewing the determination. That is not in
harmony with that due process of law which is always demanded where rights of
property are involved, and would make it possible for a corrupt commission to
entirely disregard the rights of the individual to the undisturbed enjoyment of his
property or its equivalent."
From these authorizes, and keeping in mind the local law on the subject, we think
the correct rule to be that, if the testimony of value and damages is conflicting, the
commissioners may resort to their knowledge of the elements which affect the
assessment and which were obtained from a view of the premises, in order to
determine the relative weight of conflicting testimony, but their award must be
supported by the evidence adduced at their hearings and made of record or it
cannot stand; or, in other words, the view is intended solely for the purposes of
better understanding the evidence submitted. To allow the commissioners to make
up their judgment on their own individual knowledge of disputed facts material to
the case, or upon their private opinions, would be most dangerous and unjust. It
would deprive the losing party of the right of cross-examination and the benefit of
all the tests of credibility which the law affords. It would make each
commissioners the absolute judge of the accuracy and value of his own knowledge
or opinions and compel the court to affirm the report on the facts when all of such the right of flowage in respect to the property in question and that the defendants,
facts were not before it. The evidence of such knowledge or of the grounds of such by reason of the execution of a deed, had lost all but a nominal interest in the
opinions could not be preserved on a bill of exceptions or questioned upon appeal. question of damages, both of which theories were untrue, and which resulted in
only nominal damages being awarded to the defendants. In the matter of Gilroy
(85 Hun, 424; 32 N. Y. S., 891) it appeared that the commissioners erroneously
It those cases where the testimony as to value and damages is conflicting, the
refused to take into consideration the fact that the property was available for use in
commissioners should always set forth in full their reasons for accepting the
connection with the water supply of the city of New York, in estimating the value
testimony of certain witnesses and rejecting that of others, especially in those cases
of the property, and the report was for that reason set aside as allowing insufficient
where a view of the premises has been made.
damages. No allowances having been made for consequential damages, the report
of the commissioners was set aside. (Williamson vs. Read, 106 Va., 453; 56 S. E.,
The commissioners, being disinterested landowners of the province, selected by 174.) And where a deed was so construed as embracing more land than it actually
the court for their ability to arrive at a judicious decision in the assessment of did embrace, resulting in excessive damages being awarded, the report was set
damages, their report is entitled to greater weight than that of an ordinary trier of aside. (Morris & Essex R. Co. vs. Bonnell, 34 N. J. L., 474.) The report has also
facts. A mere numerical superiority of the witnesses on the one side or the other been set aside for refusal to consider competent evidence. (State vs. Shuffield &
should not be sufficient to overturn the decision arrived at by the commissioners, Thompsonville Bridge Co., 82 Conn., 460; 74 A., 775.)
as such witnesses are not required to be either landowners on judicious and
disinterested parties, as are the commissioners. The weight to be given to the
We come now to a consideration of the amount fixed upon by this court of P10 per
testimony of a witness might be considerable or it might be almost negligible,
square meter for the condemned lane. We have already referred to the testimony of
according to his standing in the community and his ability and experience in real
the two real estate agents, Brias and Sellner, which was based upon a sale of
estate values. But where experts fixed the value of the property, the lowest estimate
similarly situated land made only thirty days previous to the date of the hearing;
being $5,533 and the highest $16,000, and the commissioners allowed only $750,
and the assessment of the property for taxation, at P6 per square meter. This was
the court held that the award was inadequate. (In re Metropolitan El. Ry. Co., 27 N.
the evidence upon which the dissenting commissioner predicated his appraisement
Y. S., 756.) And where a lessee of a building was allowed damages in an
of the land, arriving at the same figure as did this Supreme Court of P10 per square
extravagant sum for his unexpired lease, when compared with the allowance made
meter. There is a considerable difference between this valuation and P25 per square
to the owner of the property, the award was set aside. (In re Manhattan Loop No. 1,
meter, as fixed by Estrada, or of the price fixed by the majority report of the
135 N. Y. S., 153). In Palmer vs. Harris Country (29 Tex. Civ. App., 340, 69S. W.,
commissioners of P20 per square meter. It is to be noted that no witnesses other
229) the court said:
than Estrada were called who could confirm the higher valuation or even testify to
an intermediate price. The price of P10 per square meter is 66 per cent greater than
It may be that jury were influenced by the idea that it might not have that obtained for land on the opposite side of the estero, and this difference would
been necessary to use all of the tract sought to be condemned for the seem amply sufficient to compensate for the more favored location of the
construction of the ditch, but the proceeding was to condemn the entire condemned land. That P10 per square meter is a just compensation is shown by a
tract, and so far as presented by the record the value of the land might great preponderance of the evidence.
be so affected by the construction of the ditch as to destroy its use by
the appellant for any purpose. . . . The verdict is so manifestly against
"Compensation" means an equivalent for the value of the land (property) taken.
the great preponderance of the evidence that we deem it our duty to set
Anything beyond that is more and anything short of that is less than compensation.
it aside.
To compensate is to render something which is equal to that taken or received. The
word "just" is used to intensify the meaning of the word "compensation;" to
Calor Oil & Gas Co. vs. Withers (141 Ky., 489; 133 S. W., 210) was an action to convey the idea that the equivalent to be rendered for the property taken shall be
condemn a strip of land 27 feet wide and 434 feet long for a pipe line, the said strip real, substantial, full, ample. "Just compensation," therefore, as used in section 246
lying wholly within a railroad right of way. The commissioners appointed to assess of the Code of Civil Procedure, means a fair and full equivalent for the loss
the damages fixed them at $16.51. Upon appeal, the damages were assessed at sustained."
$750, which was held aside. In Mutual Union Telegraph Co. vs. Katkamp (103 Ill.,
420) it appeared that telegraph poles were to be set along the line of a railroad right
The exercise of the power being necessary for the public good, and all
way, 1 foot from such right of way line, so that there would be eleven poles on
property being held subject to its exercise when, and as the public good
defendant's land. The defendant himself testified that his land was worth $60 per
requires it, it would be unjust to the public that it should be required to
acre, and that the damage done would be about $10 per pole. Two other witnesses
pay the owner more than a fair indemnity for such loss. To arrive at this
testified that $10 per pole would be the amount of defendant's damage. Of three
fair indemnity, the interests of the public and of the owner and all the
witnesses for the plaintiff, one testified that the damage would be 50 cents and two
circumstance of the particular appropriation should be taken into
that it would be $1 per pole. As only a very small fraction of an acre of defendant's
consideration. (2 Lewis on Em. Do., 562.)
land would be taken, a verdict of $38.50 was held to be manifestly against the
weight of evidence and the judgment was reversed.
The compensation must be just to the public as well as to the owners.
(Searl vs. School District, 133 U.S., 553; 33 L. ed., 740.) Section 2 44 of our code
The report of the commissioners has also been set a side because a wrong principle
says that:
of assessing the damages was used. Thus, in Waterford E. Light, Heat & Power
Co. vs. Reed (94 N. Y. S., 551), the award was set aside because counsel for the
plaintiff had presented to the commissioners that the plaintiff was only acquiring
 The commissioners shall assess the value of property taken and used,
and shall also assess the consequential damages to the property not
taken and deduct from such consequential damages the consequential
benefits to be derived by the owners.
"To assess" is to perform a judicial act. The commissioners' power is limited to
assessing the value and to determining the amount of the damages. There it stops;
they can go no further. The value and damages awarded must be a just
compensation and no more and no less. But in fixing these amounts, the
commissioners are not to act ad libitum. They are to discharge the trust reposed in
them according to well established rules and form their judgment upon correct
legal principles. To deny this is to place them where no one else in this country is
placed: Above the law and beyond accountability.
This court, after an examination of the evidence, found that the awards as fixed by
the majority of the commissioners and the trial court were grossly excessive; that a
just compensation for the land taken was P10 per square meter, and, in a short
opinion, rendered judgment accordingly. It was insisted that to so decide this case
would be an conflict with former adjudicated cases by this court. It now becomes
necessary to review these cases.
In City of Manila vs. Tuason, et al. (R. G. No. 3367), decided March 23, 1907
(unreported), the court of First Instance modified the report of the commissioners
as to some to the items and confirmed it as to others. On appeal, the Supreme
Court remanded the cause, apparently for the reason that the evidence taken by the
commissioners and the lower court was not before it, and perhaps also because the
commissioners adopted a wrong principle of assessing damages.
In Manila Railroad Co. vs. Fabie (17 Phil. Rep., 206) the majority report of the
commissioners appraised the land at P56,337.18, while a dissenting commissioner
estimated it at P27,415.92. The Court of First Instance, after taking additional
evidence upon the consequential benefits to the remainder of defendant's land by
the construction of the railroad, and also as to the rental value of various pieces of
land in the locality, fixed the value of the land at the sum estimated by the
dissenting commissioner. The defendants appealed to this court. This court
remarked that the only evidence tending to support the majority report of the
commissioners consisted of deeds of transfer of real estate between parties in that
community showing the prices paid by the vendees in such conveyances. It was
held that without its being shown that such transfer had been made in the ordinary
course of business and competition, and that the prices therein stated were not
fictitious, such deeds were incompetent as evidence of the value of the condemned
land. As to the action of the court in fixing the price of the land at P27,415.92, the
court said:
Conceding, without deciding, that he also had the right to formulate an
opinion his own as to the value of the land in question, nevertheless, if
he formulate such an opinion, he must be base it upon competent
evidence. The difficulty with the case is that it affirmatively appears
from the record on appeal that there is an entire absence of competent
evidence to support the finding either of the commissioners or of the
court, even if the court had a right to make a finding of his own at all
under the circumstances.
In Manila Railroad Co. vs. Attorney-General (22 Phil. Rep., 192) the only question
raised was the value of certain improvements on the condemned portion of an
hacienda, such improvements consisting mainly of plants and trees and belonging which would be more than "just compensation" under all the evidence
to a lessee of the premises. The total damages claimed were P24,126.50. The of the case.
majority report of the commission allowed P19,478, which amount was reduced by
the Court of First Instance to P16,778. The plaintiff company, upon appeal to this
The judgment is reversed and the cause remanded, with instructions to
court, alleged that the damages allowed were grossly excessive and that the
the lower court to appoint a new commission and to proceed from that
amount allowed by the commissioners should have been reduced by at least
point de novo.
P17,000; while the defendant urged that the damages as shown by the record were
much greater than those allowed, either by the commissioners or by the court.
We will know examine the case (Philippine Railway Co. vs. Solon, 13 Phil. Rep.,
34) relied upon to support the proposition that the courts should not interfere with
The only ground upon which the plaintiff company bases its contention
the report of the commissioners to correct the amount of damages except in cases
that the valuations are excessive is the minority report of one of the
of gross error, showing prejudice or corruption.
commissioners. The values assigned to some of the improvements may
be excessive but we are not prepared to say that such is the case.
Certainly there is no evidence in the record which would justify us in In that case the property belonging to the appellant which the company sought to
holding these values to be grossly excessive. The commissioners in appropriate was his interest as tenant in a tract of land belonging to the
their report go into rather minute detail as to the reasons for the Government, together with a house standing thereon and other property belonging
conclusions reached and the valuations fixed for the various items to him. He asked that he be awarded for all the property taken P19,398.42. The
included therein. There was sufficient evidence before the commissioners allowed him P10,745.25. At the hearing had upon the report, the
commissioners to support the valuations fixed by them except only court reduced this amount and allowed the appellant P9,637.75. The
those later modified by the court below. The trial court was of opinion commissioners took a large amount of evidence relative to the amount of damages.
that the price of P2 each which was fixed for the orange trees The testimony was conflicting as to the value of the house, two witnesses fixing it
(naranjitos) was excessive, and this was reduced to P1.50 for each tree; at over P12,000; another at over P14,000.00; one at P8,750; another at P6,250; and
this on the ground that the evidence discloses that these trees were another at P7,050.95. The commissioners fixed the value of the house alone at
comparatively young at the time of the expropriation, and that the value P9,500, and the court at P8,792.50. This court said:
fixed by the majority report of the commissioners was that of full-
grown or nearly full-grown trees. We are of opinion that this reduction
Nor do we decide, whether, in a case where the damages awarded by
was just and reasonable. Aside from the evidence taken into
the commissioners are grossly excessive or grossly insufficient, the
consideration by the trial judge we find no evidence in the record in
court can, upon the same evidence presented before the commissioners,
support of the contention of the railroad plaintiff that the valuations
itself change the award. We restrict ourselves to deciding the precise
fixed in the majority report of the commissioners and by the trial court
question presented by this case, in which it is apparent that, in the
are grossly excessive, and plaintiff company having wholly failed to
opinion of the court below, the damages were not grossly excessive, for
offer evidence in support of its allegations in this regard when the
its own allowance was only P10,000 less than the amount allowed by
opportunity so to do was provided in accordance with law, it has no
the commissioners, and the question is whether in such a case the court
standing in this court to demand a new trial based on its unsupported
can substitute its own opinion upon the evidence presented before the
allegations of grossly excessive valuation of the property by the
commissioners for the opinion which the commissioners themselves
commissioners and the court below.
formed, not only from the evidence but also from a view of the
premises which by law they were required to make.
This court affirmed the findings of damages made by the trial court with the
exception of an item for damages caused by fire to improvements on lands
Referring to the manner in which the trial court arrived at its valuation of the
adjoining those condemned, which was held not to be a proper matter to be
various items, including the house, this court said:
considered in condemnation proceedings. The court here approved of the action of
the Court of First Instance in reducing the amount of damages fixed by the
commissioners as to the value of the young orange trees on the strength of the Without considering the correctness of the rule adopted by the court for
evidence of record. determining the value of the property, it is sufficient to say that the
evidence before the commissioners as to the value of the property taken
was contradictory and that their award was not palpably excessive or
In Manila Railroad Company vs. Caligsihan (R.G. No. 7932), decided March 25,
inadequate. Under such circumstances, we are of the opinion of the
1913 (unreported), it appears that the lower court approved in toto the report of the
court had no right to interfere with it.
commissioners. On appeal, this Supreme Court reversed the lower court and
remanded the case with orders to appoint new commissioners, saying:
From the foregoing it is clear that (1) the testimony was conflicting; (2) that the
award as allowed by the commissioners was well within the amounts fixed by the
Under the evidence in this case the award is excessive. Section 246 of
witnesses; (3) that the award was not grossly excessive. That it was not grossly
the Code of Civil Procedure giving to the court the power to "make
excessive is shown by the difference between the amount fixed by the
such final order and judgment as shall secure to the party the property
commissioners and that fixed by the court, this difference being P1,117.50, a
essential to the exercise of his rights under the law, and to the defendant
reduction of a little over 10 per cent.
just compensation for the land so take", we exercise that right in this
case for the purpose of preventing the defendants from obtaining that
From the above review of the cases, it will be seen that this court has not only not
decided that the courts cannot interfere with the report of the commissioners unless
prejudice or fraud has been shown, but the decisions tend to show the contrary;
that is, an award which is grossly excessive or grossly insufficient cannot stand,
although there be nothing which even tends to indicate prejudice or fraud on the
part of the commissioners. The case at bar is the first one wherein the court
changed the award and rendered a final judgment upon the record. Had the court
the power to thus dispose of the case?
Section 246 of the Code of Civil Procedure reads as follows: "Upon the filing of
such report in court, the court shall, upon hearing, accept the same and render
judgment in accordance therewith; or for cause shown, it may recommit the report
to the commissioners for further report of facts; or it may set aside the report and
appoint new commissioners; or it may accept the report in part and reject it in part,
and may make such final order and judgment as shall secure to the plaintiff the
property essential to the exercise of his rights under the law, and to the defendant
just compensation for the land so taken; and the judgment shall require payment of
the sum awarded as provided in the next section before the plaintiff can enter upon
the ground and appropriate it to the public use."
From this section it clearly appears that the report of the commissioners is not
final. The judgment of the court is necessary to give to the proceedings. Nor is the
report of the commissioners conclusive, under any circumstance, so that the
judgment of the court is a mere detail or formality requisite to the proceedings. The
judgment of the court is rendered after a consideration of the commissioners' report
and the exceptions thereto submitted upon the hearing of the report. By this
judgment the court may accept the commissioners' report unreservedly; it may
return the report for additional facts or it may set the report aside and appoint new
commissioners; or it may accept the report in part and reject it in part, and "make
such final order and judgment as shall secure to the plaintiff the property essential
to the exercise of his rights under the law, and to the defendant just compensation
for the land so taken." Any one of these methods of disposing of the report is
available to and may be adopted by the court according as they are deemed suited
to secure to the plaintiff the necessary property and to the defendant just
compensation therefor. But can the latter method produce a different result in
reference to any part of the report from that recommended by the commissioners?
The purpose of this discussion is solely to determine this question.
Section 246 expressly authorizes the court to "accept the report in part and reject it
in part." If this phrase stood alone, it might be said that the court is only
empowered to accept as a whole certain parts of the report and reject as a whole
other parts. That is, if the commissioners fixed the value of the land taken at
P5,000, the improvements at P1,000, and the consequential damages at P500, the
court could accept the report in full as to any one item and reject it as to any other
item, but could not accept or reject a part of the report in such a way as to change
any one of the amounts. But the court is also empowered "to make such final order
and judgment as shall secure to the plaintiff the property essential to the exercise
of his rights under the law, and to the defendant just compensation for the land so
taken." The court is here expressly authorizes to issue such orders and render such
judgment as will produce these results. If individual items which make up the total
amount of the award in the commissioners' report could only be accepted or
rejected in their entirety, it would be necessary to return to the case, so far as the
rejected portions of the report were concerned, for further consideration before the
same or new commissioners, and the court could not make a "final order and
judgment" in the cause until the rejected portions of the report had been re-
reported to it. Thus, in order to give the italicized quotation from section 246 any
meaning at all, it is obvious that the court may, in its discretion, correct the In Louisiana, where the procedural law on this point is similar to our own, the
commissioners' report in any manner deemed suitable to the occasion so that final supreme court has used its powers in this respect quite frequently. And in this
judgment may be rendered and thus end the litigation. The "final order and connection, we think it proper to quote from a case which, in some respects, is
judgment" are reviewable by this court by means of a bill of exceptions in the similar to the one at bar:
same way as any ordinary action. Section 496 provides that the Supreme Court
may, in the exercise of its appellate jurisdiction, affirm, reverse, or modify any
On the question of the value of the land, 8.34 acres, the commissioners
final judgment, order, or decree of the Court of First Instance, and section 497, as
have allowed $2,500 or $300 per acre. The defendant has put in the
amended by Act No. 1596, provides that if the excepting party filed a motion in the
record the testimony of witnesses claimed to support the allowance.
Court of First Instance for a new trial upon the ground that the evidence was
Without disregarding this testimony, it is sufficient to say that the
insufficient to justify the decision and the judge overruled said motion and due
opinions of the witnesses do not seem to be based on any fact
exception was taken to his ruling, the Supreme Court may review the evidence and
calculated to show the value of the land. . . . On the other hand the
make such findings upon the facts by a preponderance of the evidence and render
plaintiff has placed before us the titles of defendant of recent date
such final judgment as justice and equity may require. So it is clear from these
showing the price paid by him (the defendant) for the entire body of
provisions that this court, in those cases where the right of eminent domain has
land of which the 8 acres are a part; the acts of sale of land in the same
been exercised and where the provisions of the above section have been complied
neighborhood, and of the same quality; the assessment of defendant's
with, may examine the testimony and decide the case by a preponderance of the
property, and other testimony on this issue of value. . . . Giving all
evidence; or, in other words, retry the case upon the merits and render such order
possible weight, or rather restricting the testimony of the plaintiff's
or judgment as justice and equity may require. The result is that, in our opinion,
witnesses to its due influence and giving, we think, necessary effect to
there is ample authority in the statute to authorize the courts to change or modify
the acts by which defendant purchased, the acts of sale of other land,
the report of the commissioners by increasing or decreasing the amount of the
the assessment of value, with due allowance for underassessment, and
award, if the facts of the case will justify such change or modification.
the other testimony of record, we reach the conclusion that the award
gives two-thirds more than the value of the land. We fix the value of the
The question now arises, when may the court, with propriety, overrule the award of land at $833.33. (Morgan's Louisiana & Texas R. R. Co. vs. Barton, 51
the commissioners in whole or in part and substitute its own valuation of the La. Ann., 1338.)
condemned property? From a mere reading of section 246 and the remarks just
made, it should be clear that the court is permitted to act upon the commissioners'
See also T. & P. R. R. Co. vs. Southern Develop. Co. (52 La. Ann., 53), where the
report in one of several ways, at its own discretion. The whole duty of the court in
court held that appraisement made by the jury too low and after discussing the
considering the commissioners' report is to satisfy itself that just compensation will
evidence, increased the amount of the award accordingly. A similar case is Abney
be made to the defendant by its final judgment in the matter, and in order to fulfill
vs. Railroad Company (105 La., 446). See also T. & P. R. R. Co. vs. Wilson (108
its duty in this respect the court will be obliged to exercise its discretion in dealing
La., 1; 32 So., 173); and Louisiana Western R. Co. vs. Crossman's Heirs (111 La.,
with the report as the particular circumstances of the case may require. But
611; 35 So., 784), where the points is touched upon.
generally speaking, when the commissioners' report cannot with justice be
approved by the court, one of three or four circumstances will usually present
itself, each of which has for its antidote one of the methods of dealing with the In Missouri the statute (1 Mo. Ann. Stat., 1268) directs that "the court shall make
report placed at the disposal of the court by section 246. Thus, if it be successfully such order therein as right and justice may require, and may order a new
established that the commissioners refused to hear competent evidence, then all the appraisement, upon good cause shown." Owing to a constitutional restriction, this
evidence in the case would not be before the court; the court could not, with provision has been construed to apply only to damages and benefits resulting to
reason, attempt to either approve or change the report, as it stood, for the reason landowners in consequence of proposed improvements, the cash value of property
that all the evidence of the case would not be before it; and the remedy in this case expropriated being an issue triable, at the instance of either party, by a jury
would be to "recommit the report to the commissioners for further report of facts." subsequent to the findings of the commissioners. Subject to this restriction,
Again, if improper conduct, fraud, or prejudice be charged against the however, it has been held that the above provisions of law gives the court the right
commissioners, and this charge be sustained, it would be safer to set aside the to increase or decrees the amount awarded by the commissioners. In the late case
award thus vitiated and "appoint new commissioners" who could render a report of Tarkio Drainage District vs. Richardson (237 Mo., 49) the court presents a
not tainted by these things. But it is to be observed again that this discussion is lengthy review of its decisions on this subject.
confined to a case were no competent evidence was refused by the commissioners
and no suspicion rests upon the motives of the commissioners in making the
We are clearly of the opinion that our holding on this branch of the case is
award. When the only error of the commissioners is that they have applied illegal
supported not only by reason but by the interpretation of similar provisions of law
principles to the evidence submitted to them; or that they have disregarded a clear
in other jurisdictions, so far as we have had the opportunity to examine the
preponderance of the evidence; or that they have used an improper rule of
question.
assessment in arriving at the amount of the award, then, in such a case, if the
evidence be clear and convincing, the court should be able, by the use of those
correct legal principles which govern the case, to determine upon the amount This opinion will be substitute for the short opinion rendered in the cause near the
which should be awarded without remanding the cause. When the matter stands in close of last term.
this light, it becomes the duty of the court to make "final order and judgment" in
which the proper award will be made and thus end the litigation between the
parties. Johnson and Carson, JJ., concur.
Arellano, C.J. and Moreland, J., dissent.
Separate Opinions

TORRES, J., dissenting:

I am of the opinion that, for the reasons stated in the appealed judgment of January
4, 1912, and those expressed in the latter part of the majority opinion, the judgment
should be affirmed with the costs against the appellant.

THIRD DIVISION
[G.R. No. 143276. July 20, 2004]
LANDBANK OF THE PHILIPPINES, petitioner, vs. SPOUSES VICENTE
BANAL and LEONIDAS ARENAS-BANAL, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
Spouses Vicente and Leonidas Banal, respondents, are the registered owners
of 19.3422 hectares of agricultural land situated in San Felipe, Basud, Camarines
Norte covered by Transfer Certificate of Title No. T-6296. A portion of the land
consisting of 6.2330 hectares (5.4730 of which is planted to coconut and 0.7600
planted to palay) was compulsorily acquired by the Department of Agrarian
Reform (DAR) pursuant to Republic Act (R.A.) No. 6657, [1] as amended, otherwise
known as the Comprehensive Agrarian Reform Law of 1988.
In accordance with the formula prescribed in DAR Administrative Order
No. 6, Series of 1992, [2] as amended by DAR Administrative Order No. 11, Series
of 1994,[3] the Land Bank of the Philippines[4] (Landbank), petitioner, made the
following valuation of the property:
Acquired property Area in hectares Value
Coconut land 5.4730 P148,675.19
Riceland 0.7600 25,243.36
==========
P173,918.55
Respondents rejected the above valuation. Thus, pursuant to Section 16(d)
of R.A. 6657, as amended, a summary administrative proceeding was conducted
before the Provincial Agrarian Reform Adjudicator (PARAD) to determine the
valuation of the land. Eventually, the PARAD rendered its Decision affirming the
Landbanks valuation.
Dissatisfied with the Decision of the PARAD, respondents filed with the
Regional Trial Court (RTC), Branch 40, Daet, Camarines Norte, designated as
a Special Agrarian Court, a petition for determination of just compensation,
docketed as Civil Case No. 6806. Impleaded as respondents were the DAR and the
Landbank. Petitioners therein prayed for a compensation of P100,000.00 per
hectare for both coconut land and riceland, or an aggregate amount
of P623,000.00.
During the pre-trial on September 23, 1998, the parties submitted to the
RTC the following admissions of facts: (1) the subject property is governed by the
provisions of R.A. 6657, as amended; (2) it was distributed to the farmers-
beneficiaries; and (3) the Landbank deposited the provisional compensation based
on the valuation made by the DAR.[5]
On the same day after the pre-trial, the court issued an Order dispensing
with the hearing and directing the parties to submit their respective memoranda. [6]
In its Decision dated February 5, 1999, the trial court computed the just
compensation for the coconut land at P657,137.00 and for the riceland
at P46,000.00, or a total of P703,137.00, which is beyond respondents valuation
of P623,000.00. The court further awarded compounded interest at P79,732.00 in
cash. The dispositive portion of the Decision reads:
WHEREFORE, judgment is hereby rendered as follows:
1. Ordering respondent Landbank to pay the petitioners, the spouses
Dr. Vicente Banal and Leonidas Arenas-Banal, for the
5.4730 hectares of coconut land the sum of SIX HUNDRED
FIFTY-SEVEN THOUSAND ONE HUNDRED THIRTY-
SEVEN PESOS (P657,137.00) in cash and in bonds in the
proportion provided by law;
2. Ordering respondent Landbank to pay the petitioners for the .7600
hectares of riceland the sum of FORTY-SIX THOUSAND
PESOS (P46,000.00) in cash and in bonds in the proportion
provided by law; and
3. Ordering respondent Landbank to pay the petitioners the sum of
SEVENTY-NINE THOUSAND SEVEN HUNDRED
THIRTY-TWO PESOS (P79,732.00) as the compounded
interest in cash.
IT IS SO ORDERED.[7]
In determining the valuation of the land, the trial court based the same on
the facts established in another case pending before it (Civil Case No. 6679, Luz
Rodriguez vs. DAR, et al.), using the following formula:
For the coconut land
1. Average Gross Production (AGP) x .70 x 9.70 (price per kilo of
coconut) = Net Income (NI)
2. NI / 6% = Price Per Hectare (PPH) (applying the capitalization
formula under Republic Act No. 3844[8])
For the riceland
1. 2.5 x AGP x Government Support Price (GSP) = Land Value (LV)
or PPH (using the formula under Executive Order No.
228[9])
2. AGP x 6% compounded annually for 26 years x GSP = Interest
(pursuant to DAR AO No. 13, Series of 1994)
Forthwith, the Landbank filed with the Court of Appeals a petition for
review, docketed as CA-G.R. SP No. 52163.
On March 20, 2000, the Appellate Court rendered a Decision [10] affirming in
toto the judgment of the trial court. The Landbanks motion for reconsideration was
likewise denied.[11]
Hence, this petition for review on certiorari.
The fundamental issue for our resolution is whether the Court of Appeals
erred in sustaining the trial courts valuation of the land. As earlier mentioned, there
was no trial on the merits.
To begin with, under Section 1 of Executive Order No. 405 (1990), the
Landbank is charged primarily with the determination of the land valuation and
compensation for all private lands suitable for agriculture under the Voluntary
Offer to Sell or Compulsory Acquisition arrangement For its part, the DAR relies
on the determination of the land valuation and compensation by the Landbank. [12]
Based on the Landbanks valuation of the land, the DAR makes an offer to
the landowner.[13] If the landowner accepts the offer, the Landbank shall pay him
the purchase price of the land after he executes and delivers a deed of transfer and
surrenders the certificate of title in favor of the government. [14] In case the
landowner rejects the offer or fails to reply thereto, the DAR
adjudicator[15] conducts summary administrative proceedings to determine the
compensation for the land by requiring the landowner, the Landbank and other
interested parties to submit evidence as to the just compensation for the land.
[16]
These functions by the DAR are in accordance with its quasi-judicial powers
under Section 50 of R.A. 6657, as amended, which provides:
SEC. 50. Quasi-Judicial Powers of the DAR. The DAR is hereby vested with
primary jurisdiction to determine and adjudicate agrarian reform matters and shall
have exclusive original jurisdiction over all matters involving the implementation
of agrarian reform, except those falling under the exclusive jurisdiction of the
Department of Agriculture (DA) and the Department of Environment and Natural
Resources (DENR).
x x x.
A party who disagrees with the decision of the DAR adjudicator may bring
the matter to the RTC designated as a Special Agrarian Court [17] for final
determination of just compensation. [18]
In the proceedings before the RTC, it is mandated to apply the Rules of
Court[19] and, on its own initiative or at the instance of any of the parties, appoint
one or more commissioners to examine, investigate and ascertain facts relevant to
the dispute, including the valuation of properties, and to file a written report
thereof x x x.[20] In determining just compensation, the RTC is required to consider
several factors enumerated in Section 17 of R.A. 6657, as amended, thus:
Sec. 17. Determination of Just Compensation. In determining just compensation,
the cost of acquisition of the land, the current value of like properties, its nature,
actual use and income, the sworn valuation by the owner, the tax declarations, and
the assessment made by government assessors shall be considered. The social and
economic benefits contributed by the farmers and the farmworkers and by the
Government to the property, as well as the non-payment of taxes or loans secured
from any government financing institution on the said land, shall be considered as
additional factors to determine its valuation.
These factors have been translated into a basic formula in DAR
Administrative Order No. 6, Series of 1992, as amended by DAR Administrative
Order No. 11, Series of 1994, issued pursuant to the DARs rule-making power to
carry out the object and purposes of R.A. 6657, as amended.[21]
The formula stated in DAR Administrative Order No. 6, as amended, is as
follows:
LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1)
LV = Land Value
CNI = Capitalized Net Income
CS = Comparable Sales
MV = Market Value per Tax Declaration
The above formula shall be used if all the three factors are present, relevant and
applicable.
A.1 When the CS factor is not present and CNI and MV are applicable, the
formula shall be:
LV = (CNI x 0.9) + (MV x 0.1)
A.2 When the CNI factor is not present, and CS and MV are applicable, the
formula shall be:
LV = (CS x 0.9) + (MV x 0.1)
A.3 When both the CS and CNI are not present and only MV is applicable, the
formula shall be:
LV = MV x 2
Here, the RTC failed to observe the basic rules of procedure and the
fundamental requirements in determining just compensation for the
property. Firstly, it dispensed with the hearing and merely ordered the parties to
submit their respective memoranda. Such action is grossly erroneous since the
determination of just compensation involves the examination of the following
factors specified in Section 17 of R.A. 6657, as amended:
1. the cost of the acquisition of the land;
2. the current value of like properties;
3. its nature, actual use and income;
4. the sworn valuation by the owner; the tax declarations;
5. the assessment made by government assessors;
6. the social and economic benefits contributed by the farmers and
the farmworkers and by the government to the property; and
7. the non-payment of taxes or loans secured from any government
financing institution on the said land, if any.
Obviously, these factors involve factual matters which can be established
only during a hearing wherein the contending parties present their respective
evidence. In fact, to underscore the intricate nature of determining the valuation of
the land, Section 58 of the same law even authorizes the Special Agrarian Courts to
appoint commissioners for such purpose.
Secondly, the RTC, in concluding that the valuation of respondents property
is P703,137.00, merely took judicial notice of the average production figures in
the Rodriguez case pending before it and applied the same to this case without
conducting a hearing and worse, without the knowledge or consent of the parties,
thus:
x x x. In the case x x x of the coconut portion of the land 5.4730 hectares,
defendants determined the average gross production per year at 506.95 kilos
only, but in the very recent case of Luz Rodriguez vs. DAR, et al., filed and
decided by this court in Civil Case No. 6679 also for just compensation for
coconut lands and Riceland situated at Basud, Camarines Norte wherein also the
lands in the above-entitled case are situated, the value fixed therein was 1,061.52
kilos per annum per hectare for coconut land and the price per kilo is P8.82,
but in the instant case the price per kilo is P9.70. In the present case, we
consider 506.95 kilos average gross production per year per hectare to be very low
considering that farm practice for coconut lands is harvest every forty-five
days. We cannot also comprehended why in the Rodriguez case and in this case
there is a great variance in average production per year when in the two cases the
lands are both coconut lands and in the same place of Basud, Camarines Norte. We
believe that it is more fair to adapt the 1,061.52 kilos per hectare per year as
average gross production. In the Rodriguez case, the defendants fixed the average
gross production of palay at 3,000 kilos or 60 cavans per year. The court is also
constrained to apply this yearly palay production in the Rodriguez case to the
case at bar.
xxxxxxxxx
As shown in the Memorandum of Landbank in this case, the area of the coconut
land taken under CARP is 5.4730 hectares. But as already noted, the average
gross production a year of 506.96 kilos per hectare fixed by Landbank is too
low as compared to the Rodriguez case which was 1,061 kilos when the
coconut land in both cases are in the same town of Basud, Camarines Norte,
compelling this court then to adapt 1,061 kilos as the average gross
production a year of the coconut land in this case. We have to apply also the
price of P9.70 per kilo as this is the value that Landbank fixed for this case.
The net income of the coconut land is equal to 70% of the gross income. So, the
net income of the coconut land is 1,061 x .70 x 9.70 equals P7,204.19 per
hectare. Applying the capitalization formula of R.A. 3844 to the net income
of P7,204.19 divided by 6%, the legal rate of interest, equals P120,069.00 per
hectare. Therefore, the just compensation for the 5.4730 hectares is P657,137.00.
The Riceland taken under Presidential Decree No. 27 as of October 21, 1972 has
an area of .7600 hectare. If in the Rodriguez case the Landbank fixed the average
gross production of 3000 kilos or 60 cavans of palay per year, then the .7600
hectare in this case would be 46 cavans. The value of the riceland therefore in this
case is 46 cavans x 2.5 x P400.00 equals P46,000.00.[22]
PARC Resolution 94-24-1 of 25 October 1994, implemented by DAR AO 13,
granted interest on the compensation at 6% compounded annually. The
compounded interest on the 46 cavans for 26 years is 199.33 cavans. At P400.00
per cavan, the value of the compounded interest is P79,732.00.[23](emphasis added)
Well-settled is the rule that courts are not authorized to take judicial notice
of the contents of the records of other cases even when said cases have been tried
or are pending in the same court or before the same judge. [24] They may only do so
in the absence of objection and with the knowledge of the opposing party, [25] which
are not obtaining here.
Furthermore, as earlier stated, the Rules of Court shall apply to all
proceedings before the Special Agrarian Courts. In this regard, Section 3, Rule 129
of the Revised Rules on Evidence is explicit on the necessity of a hearing before a
court takes judicial notice of a certain matter, thus:
SEC. 3. Judicial notice, when hearing necessary. During the trial, the court, on its
own initiative, or on request of a party, may announce its intention to take
judicial notice of any matter and allow the parties to be heard thereon.
After the trial, and before judgment or on appeal, the proper court, on its own
initiative or on request of a party, may take judicial notice of any matter and allow
the parties to be heard thereon if such matter is decisive of a material issue in the
case. (emphasis added)
The RTC failed to observe the above provisions.
Lastly, the RTC erred in applying the formula prescribed under Executive
Order (EO) No. 228[26] and R.A. No. 3844,[27] as amended, in determining the
valuation of the property; and in granting compounded interest pursuant to DAR
Administrative Order No. 13, Series of 1994. [28] It must be stressed that EO No.
228 covers private agricultural lands primarily devoted to rice and corn, while
R.A. 3844 governs agricultural leasehold relation between the person who
furnishes the landholding, either as owner, civil law lessee, usufructuary, or legal
possessor, and the person who personally cultivates the same. [29] Here, the land is
planted to coconut and rice and does not involve agricultural leasehold
relation. What the trial court should have applied is the formula in DAR
Administrative Order No. 6, as amended by DAR Administrative Order No. 11
discussed earlier.
As regards the award of compounded interest, suffice it to state that DAR
Administrative Order No. 13, Series of 1994 does not apply to the subject land but
to those lands taken under Presidential Decree No. 27 [30] and Executive Order No.
228 whose owners have not been compensated. In this case, the property is
covered by R.A. 6657, as amended, and respondents have been paid the
provisional compensation thereof, as stipulated during the pre-trial.
 [26]
While the determination of just compensation involves the exercise of Providing for the Manner of Payment by the Farmer Beneficiary and Supra.
judicial discretion, however, such discretion must be discharged within the bounds Mode of Compensation to the Landowner, dated July 17, 1987. [27]
of the law. Here, the RTC wantonly disregarded R.A. 6657, as amended, and its Supra.
[10]
implementing rules and regulations. (DAR Administrative Order No. 6, as Penned by Associate Justice Rodrigo V. Cosico and concurred by Associate [28]
Justices Ramon Mabutas, Jr. and Delilah Vidallon-Magtolis. Rules and Regulations Governing the Grant of Increment of Six Percent (6%)
amended by DAR Administrative Order No.11).
Yearly Interest Compounded Annually on Lands Covered by
[11]
In sum, we find that the Court of Appeals and the RTC erred in determining Resolution dated May 16, 2000, Rollo at 60. Presidential Decree No. 27 and Executive Order No. 228.
the valuation of the subject land. Thus, we deem it proper to remand this case to [12] [29]
Sec. 1, Executive Order No. 405 (1990); Republic vs. Court of Appeals, G.R. Sec. 6, RA 3844, as amended.
the RTC for trial on the merits wherein the parties may present their respective
No. 122256, October 30, 1996, 263 SCRA 758 and Philippine Veterans
evidence. In determining the valuation of the subject property, the trial court shall [30]
Entitled Decreeing the Emancipation of Tenants from the Bondage of the Soil
Bank vs. Court of Appeals, supra.
consider the factors provided under Section 17 of R.A. 6657, as amended, Transferring To Them The Ownership of the Land They Till and
mentioned earlier. The formula prescribed by the DAR in Administrative Order [13]
Sec. 16(a) of R.A. 6657, as amended. Providing the Instruments and Mechanism Therefor, dated October 21,
No. 6, Series of 1992, as amended by DAR Administrative Order No. 11, Series of 1972.
1994, shall be used in the valuation of the land. Furthermore, upon its own [14]
Sec. 16(c), id.
initiative, or at the instance of any of the parties, the trial court may appoint one or
[15]
more commissioners to examine, investigate and ascertain facts relevant to the The Provincial Agrarian Reform Adjudicator (PARAD) and the Regional
dispute. Agrarian Reform Adjudicator (RARAD), depending on the value of the
land within their respective territorial jurisdiction (Rule II, Sec. 2,
WHEREFORE, the petition is GRANTED. The assailed Decision of the DARAB Rules of Procedure).
Court of Appeals dated March 20, 2000 in CA-G.R. SP No. 52163 is
[16]
REVERSED. Civil Case No. 6806 is REMANDED to the RTC, Branch 40, Daet, Sec. 16(d) of R.A. 6657, as amended; Philippine Veterans Bank vs. Court of
Camarines Norte, for trial on the merits with dispatch. The trial judge is directed to Appeals, supra.
observe strictly the procedures specified above in determining the proper valuation [17]
of the subject property. Sec. 56, id.
[18]
SO ORDERED. Sec. 16(f), in relation to Sec. 57, id.
[19]
Panganiban, (Chairman), and Carpio-Morales, JJ., concur. Sec. 57, id.
Corona, J., on leave. [20]
Sec. 58, id.
[21]
Sec. 49. Rules and Regulations. The PARC and the DAR shall have the power
to issue rules and regulations, whether substantive or procedural, to
[1] carry out the object and purposes of this Act. Said rules shall take effect
Effective June 15, 1988.
ten (10) days after publication in two (2) national newspapers of
[2]
Rules and Regulations Amending the Valuation of Lands Voluntarily Offered general circulation.
and Compulsorily Acquired As Provided For Under Administrative [22]
The formula used by the trial court in its valuation of the Riceland is taken from
Order No. 17, Series of 1989, As Amended, Issued Pursuant to
Executive Order No. 228. Section 2 of the said EO states that (t)he
Republic Act No. 6657.
average gross production per hectare shall be multiplied by two and
[3]
Revising the Rules and Regulations Covering the Valuation of Lands Voluntarily half (2.5), the product of which shall be multiplied by Thirty-Five Pesos
Offered or Compulsorily Acquired as Embodied in Administrative (P35.00), the government support price for one cavan of 50 kilos of
Order No. 6, Series of 1992. corn on October 21, 1972, and the amount arrived at shall be the value
of the rice and corn land, as the case may be, for the purpose of
[4]
Executive Order No. 405, dated June 14, 1990, vests the Land Bank of the determining its cost to the farmer and compensation to the landowner.
Philippines the primary responsibility to determine the land valuation However, instead of using the government support price of P35.00, the
and compensation for all private lands covered by R.A. 6657, as trial court used P400.00, the then current price per cavan of palay (RTC
amended. See Philippine Veterans Bank vs. Court of Appeals, G.R. No. Decision, p. 3, Rollo, p. 64).
132767, January 18, 2000, 322 SCRA 139, 145. [23]
Rollo at 67.
[5]
Pre-trial Order, Rollo at 76-77. [24]
BPI-Family Savings Bank, Inc. vs. Court of Appeals , G.R. No. 122480, April
[6]
Rollo at 25, 82. 12, 2000, 330 SCRA 507, 517; People vs. Kulais, G.R. Nos. 100901-
08, July 16, 1998, 292 SCRA 551, 565; Occidental Land
[7]
RTC Decision at 7, id. at 68. Transportation Co., Inc. vs. Court of Appeals, G.R. No. 96721, March
[8]
19, 1993, 220 SCRA 167, 175.
Code of Agrarian Reforms of the Philippines.
[25]
[9]
People vs. Hernandez, 328 Phil. 1123, 1146 (1996), citing Tabuena vs. Court of
Entitled Declaring Full Land Ownership to Qualified Farmer Beneficiaries Appeals, G.R. No. 85423, May 6, 1991, 196 SCRA 650 and U.S. vs.
Covered by Presidential Decree No. 27, Determining the Value of Claveria, 29 Phil. 527 (1969).
Remaining Unvalued Rice and Corn Lands Subject of P.D. No. 27, and

FIRST DIVISION
LAND BANK OF THE PHILIPPINES, G.R. No. 164876
Petitioner,
Present:
Panganiban, C.J. (Chairman),
- versus - Ynares-Santiago,
Austria-Martinez,
Call
ejo,
Sr.,
and
Chi
co-Nazario, JJ.
LEONILA P. CELADA,
Respondent. Promulgated:
January 23, 2006
x ---------------------------------------------------------------------------------------- x
DECISION
YNARES-SANTIAGO, J.:
Respondent Leonila P. Celada owns 22.3167 hectares of agricultural land situated
in Calatrava, Carmen, Bohol registered under TCT No. 16436, [1] of which 14.1939
hectares was identified in 1998 by the Department of Agrarian Reform (DAR) as
suitable for compulsory acquisition under the Comprehensive Agrarian Reform
Program (CARP). The matter was then indorsed to petitioner Land Bank of the
Philippines (LBP) for field investigation and land valuation.
In due course, LBP valued respondents land at P2.1105517 per square meter for an
aggregate value of P299,569.61.[2] The DAR offered the same amount to
respondent as just compensation, but it was rejected. Nonetheless, on August 27,
1999, LBP deposited the said sum in cash and bonds in the name of respondent. [3]
Pursuant to Section 16(d) of Republic Act (RA) No. 6657 or the Comprehensive
Agrarian Reform Law of 1988, the matter was referred to the DAR Adjudication
Board (DARAB), Region VII-Cebu City, for summary administrative hearing on
determination of just compensation. The case was docketed as DARAB Case No.
VII-4767-B-990.
While the DARAB case was pending, respondent filed, on February 10, 2000, a
petition[4] for judicial determination of just compensation against LBP, the DAR
and the Municipal Agrarian Reform Officer (MARO) of Carmen, Bohol, before the
Regional Trial Court of Tagbilaran City. The same was docketed as Civil Case No.
6462 and raffled to Branch 3, the designated Special Agrarian Court (SAC).
Respondent alleged that the current market value of her land is at least
P150,000.00 per hectare based on the following factors:
14.1. The land in question has been mortgaged to the
defunct Rural Bank of San Miguel (Bohol), Inc., for
P1,220,000.00 on July 23, 1998 since it was appraised at
P15.00 per square meter;
14.2. Agricultural lands in said barangay are priced ranging
from P140,000.00 to P150,000.00 per hectare and current
land transactions reveal said price range;
14.3. The land in question is titled or registered property,
cultivated and fully developed with rice [5] and corn
occupying the greater portion thereof;
14.4. The topography of the land, its soil condition, climate
and productivity of surrounding lots justify the just
compensation requested or asked for;
14.5. Even the class and base unit market value for
agricultural lands in Bohol is about thirty (30) times higher
than the price offered per hectare by DAR/LBP.[6]
On April 27, 2000, LBP filed its Answer [7] raising non-exhaustion of administrative
remedies as well as forum-shopping as affirmative defense. According to
petitioner, respondent must first await the outcome of the DARAB case before
taking any judicial recourse; that its valuation was arrived at by applying the
formula prescribed by law whereas respondents was based only on the current
value of like properties.
The DAR and the MARO likewise filed an Answer [8] averring that the
determination of just compensation rests exclusively with the LBP. Thus, they are
not liable to respondent and are merely nominal parties in the case.
Meanwhile, the DARAB Provincial Adjudicator (PARAD) issued an Order [9] dated
April 12, 2000 affirming the valuation made by LBP. Respondent failed to appear
in the DARAB case despite due notice.
On June 4, 2001, the SAC issued an order resolving petitioners affirmative defense
in this wise:
WHEREFORE, the Affirmative Defense of x x x Land Bank
is hereby denied. Besides, in the mind of the court, the
recourse to the DARAB is x x x of no moment since it is
only conciliatory to the parties.
Upon agreement of the parties, the pre-trial is reset to June
11, 2001 at 9:00 in the morning.
SO ORDERED.[10]
Thereafter, a pre-trial conference was conducted [11] and trial on the merits ensued.
On March 1, 2003, the SAC rendered judgment as follows:
WHEREFORE, in view of all the foregoing, the Court
hereby fixes the compensation of the land of petitioner at
P2.50 per square meter or a total of P354,847.50 for the
portion of 14.1939 hectares subject of compulsory
acquisition under the CARP which it believes just, fair and
equitable under the present circumstances and which shall
earn legal interest of twelve percent (12%) per annum from
the time of its taking by the DAR. Furthermore, respondent
Land Bank is hereby ordered to indemnify petitioner the
amount of P10,000.00 for attorneys fee and incidental
expenses of P5,000.00 and costs.
SO ORDERED.[12]
LBP elevated the matter to the Court of Appeals which, however, dismissed the
appeal outright on the following grounds:
1. The petition is not accompanied with an affidavit of
service, although there is an explanation that respondent,
respondents counsel and Judge Venancio J. Amila were
furnished with copies of the petition by registered mail x x
x.
2. Petitioners counsel indicated his IBP and PTR but not his
Roll of Attorneys Number x x x.
3. Copies of (a) PARAD Decision x x x adverted to in the
petition which fixed the land valuation for just
compensation at P299,569.11 and (b) petitioners Petition for
Judicial Determination of Just Compensation filed with the
Regional Trial Court of Tagbilaran City, Branch 3, were not
attached as annexes, x x x.[13]
Upon denial of its motion for reconsideration, [14] LBP filed the instant petition
under Rule 45 of the Rules of Court, alleging that:
A
THE COURT OF APPEALS ERRED IN X X X
RIGIDLY OR STRICTLY APPLYING PROCEDURAL
LAW AT THE EXPENSE OF SUBSTANTIAL JUSTICE
AND THE RIGHT TO APPEAL.
B
THE SAC A QUO ERRED IN ASSUMING
JURISDICTION OVER THE PETITION FOR
DETERMINATION OF JUST COMPENSATION WHILE
ADMINISTRATIVE PROCEEDINGS IS ON-GOING
BEFORE THE DARAB, REGION VII, CEBU CITY.
C
THE SAC A QUO ERRED IN FIXING THE
JUST COMPENSATION OF THE LAND BASED NOT
ON ITS ACTUAL LAND USE BUT ON THE
VALUATION OF NEIGHBORING LANDS.
D
THE SAC A QUO ERRED IN AWARDING
ATTORNEYS FEES AND INCIDENTAL EXPENSES X X
X.[15]
On the first assigned error, petitioner asserts that the Court of Appeals
should have liberally construed the rules of procedure and not dismissed its appeal
on technical grounds.
We agree with petitioner.
The Court of Appeals dismissed petitioners appeal on three technical
grounds, namely: (a) lack of affidavit of service; (b) failure of counsel to indicate
his Roll of Attorneys number; and (c) failure to attach material portions of the
records. However, the lack of affidavit of service is not deemed fatal where the
petition filed below is accompanied by the original registry receipts showing that
the petition and its annexes were served upon the parties. [16] On the other hand, the
failure of counsel to indicate his Roll of Attorneys number would not affect
respondents substantive rights, such that petitioners counsel could have been
directed to comply with the latter requirement rather than dismiss the petition on
purely technical grounds. As for petitioners failure to attach material portions of
the records, we held in Donato v. Court of Appeals[17] that:
[T]he failure of the petitioner to x x x append to his petition
copies of the pleadings and other material portions of the
records as would support the petition, does not justify the
outright dismissal of the petition. It must be emphasized that
the RIRCA (Revised Internal Rules of the Court of Appeals)
gives the appellate court a certain leeway to require parties
to submit additional documents as may be necessary in the
interest of substantial justice. Under Section 3, paragraph d
of Rule 3 of the RIRCA, the CA may require the parties to
complete the annexes as the court deems necessary, and if
the petition is given due course, the CA may require the
elevation of a complete record of the case as provided for
under Section 3(d)(5) of Rule 6 of the RIRCA x x x.[18]
An examination of the records and pleadings filed before the Court of
Appeals reveals that there was substantial compliance with procedural
requirements. Moreover, we have held time and again that cases should, as much
as possible, be determined on the merits after the parties have been given full
opportunity to ventilate their causes and defenses, rather than on technicality or
some procedural imperfection.[19] After all, technical rules of procedure are not
ends in themselves but are primarily devised to help in the proper and expedient
dispensation of justice. In appropriate cases, therefore, the rules may be construed
liberally in order to meet and advance the cause of substantial justice.[20]
While a remand of the case to the appellate court would seem to be in
order, we deem it proper to resolve the case on the merits if only to write finis to
the present controversy.
We do not agree with petitioners submission that the SAC erred in
assuming jurisdiction over respondents petition for determination of just
compensation despite the pendency of the administrative proceedings before the
DARAB. In Land Bank of the Philippines v. Court of Appeals,[21] the landowner
filed an action for determination of just compensation without waiting for the
completion of the DARABs re-evaluation of the land. The Court nonetheless held
therein that the SAC acquired jurisdiction over the action for the following reason:
It is clear from Sec. 57 that the RTC, sitting as a Special
Agrarian Court, has original and exclusive jurisdiction over
all petitions for the determination of just compensation to
landowners. This original and exclusive jurisdiction of the
RTC would be undermined if the DAR would vest in
administrative officials original jurisdiction in compensation
cases and make the RTC an appellate court for the review of
administrative decision. Thus, although the new rules speak
of directly appealing the decision of adjudicators to the
RTCs sitting as Special Agrarian Courts, it is clear from Sec.
57 that the original and exclusive jurisdiction to determine
such cases is in the RTCs. Any effort to transfer such
jurisdiction to the adjudicators and to convert the original
jurisdiction of the RTCs into appellate jurisdiction would be
contrary to Sec. 57 and therefore would be void. Thus, direct
resort to the SAC by private respondent is valid.[22]
It would be well to emphasize that the taking of property under RA No. 6657 is an
exercise of the power of eminent domain by the State. [23] The valuation of property
or determination of just compensation in eminent domain proceedings is
essentially a judicial function which is vested with the courts and not with
administrative agencies.[24] Consequently, the SAC properly took cognizance of
respondents petition for determination of just compensation.
In the same vein, there is no merit to petitioners contention that
respondent failed to exhaust administrative remedies when she directly filed the
petition for determination of just compensation with the SAC even before the
DARAB case could be resolved. The issue is now moot considering that the
valuation made by petitioner had long been affirmed by the DARAB in its order
dated April 12, 2000. As held in Land Bank of the Philippines v. Wycoco,[25] the
doctrine of exhaustion of administrative remedies is inapplicable when the issue is
rendered moot and academic, as in the instant case.
With regard to the third assigned error, however, we agree with
petitioner that the SAC erred in setting aside petitioners valuation of respondents
land on the sole basis of the higher valuation given for neighboring properties. In
this regard, the SAC held:
It appears from the evidence of petitioner that the
neighboring lands of similar classification were paid higher
than what was quoted to her land by respondent Land Bank
as the value per square meter to her land was only quoted at
P2.1105517 while the others which were of the same
classification were paid by respondent Bank at P2.42 more
or less, per square meter referring to the land of Consuelito
Borja (Exh. D) and Cesar Borja (Exh. F). Furthermore, the
land of petitioner was allegedly mortgaged for a loan of
P1,200,000.00 before the Rural Bank of San Miguel, Bohol
and that it was purchased by her from a certain Felipe
Dungog for P450,000.00 although no documents therefor
were shown to support her claim. Nevertheless, the Court
finds a patent disparity in the price quotations by respondent
Land Bank for the land of petitioner and that of the other
landowners brought under CARP which could be caused by
deficient or erroneous references due to the petitioners
indifference and stubborn attitude in not cooperating with
respondent bank in submitting the data needed for the
evaluation of the property. x x x At any rate, the price
quotation by respondent Land Bank on the land of the
petitioner is low more so that it was done some four years
ago, particularly, on June 22, 1998 (Exh. 1) and the same
has become irrelevant in the course of time due to the
devaluation of the peso brought about by our staggering
economy.[26]
As can be gleaned from above ruling, the SAC based its valuation
solely on the observation that there was a patent disparity between the price given
to respondent and the other landowners. We note that it did not apply the DAR
valuation formula since according to the SAC, it is Section 17 of RA No. 6657 that
should be the principal basis of computation as it is the law governing the matter.
[27]
The SAC further held that said Section 17 cannot be superseded by any
administrative order of a government agency,[28] thereby implying that the
valuation formula under DAR Administrative Order No. 5, Series of 1998 (DAR
AO No. 5, s. of 1998),[29] is invalid and of no effect.
While SAC is required to consider the acquisition cost of the land, the
current value of like properties, its nature, actual use and income, the sworn
valuation by the owner, the tax declaration and the assessments made by the
government assessors[30] to determine just compensation, it is equally true that
these factors have been translated into a basic formula by the DAR pursuant to its
rule-making power under Section 49 of RA No. 6657. [31] As the government
agency principally tasked to implement the agrarian reform program, it is the
DARs duty to issue rules and regulations to carry out the object of the law. DAR
AO No. 5, s. of 1998 precisely filled in the details of Section 17, RA No. 6657 by
providing a basic formula by which the factors mentioned therein may be taken
into account. The SAC was at no liberty to disregard the formula which was
devised to implement the said provision.
It is elementary that rules and regulations issued by administrative
bodies to interpret the law which they are entrusted to enforce, have the force of
law, and are entitled to great respect. [32] Administrative issuances partake of the
nature of a statute[33]and have in their favor a presumption of legality. [34] As such,
courts cannot ignore administrative issuances especially when, as in this case, its
validity was not put in issue. Unless an administrative order is declared invalid,
courts have no option but to apply the same.
Thus, Section 17 of RA No. 6657 states:
SEC. 17. Determination of Just Compensation. In
determining just compensation, the cost of acquisition of the
land, the current value of like properties, its nature, actual
use and income, the sworn valuation by the owner, the tax
declarations, and the assessment made by government
assessors, shall be considered. The social and economic
benefits contributed by the farmers and the farmworkers and
by the Government to the property as well as the
nonpayment of taxes or loans secured from any government
financing institution on the said land shall be considered as
additional factors to determine its valuation.
As stated earlier, the above provision is implemented through DAR AO
No. 5, s. of 1998, which provides that:
A. There shall be one basic formula for the valuation of
lands covered by VOS or CA:
LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1)
Where: LV = Land Value
CNI = Capitalized Net Income
CS = Comparable Sales
MV = Market Value per Tax Declaration
The above formula shall be used if all three factors are
present, relevant, and applicable.
A1. When the CS factor is not present and CNI and MV are
applicable, the formula shall be:
LV = (CNI x 0.9) + (MV x 0.1)
 A2. When the CNI factor is not present, and CS and MV are
applicable, the formula shall be:
LV = (CS x 0.9) + (MV x 0.1)
A3. When both the CS and CNI are not present and only
MV is applicable, the formula shall be:
LV = MV x 2
In no case shall the value of idle land using the formula MV
x 2 exceed the lowest value of land within the same estate
under consideration or within the same barangay or
municipality (in that order) approved by LBP within one (1)
year from receipt of claimfolder.
Accordingly, petitioner applied the formula under A1 above since the
comparable sales factor (CS factor) was not present. As observed by the SAC
itself, respondent refused to cooperate with the local valuation office of petitioner
and did not provide the necessary data to arrive at a proper CS factor. DAR AO
No. 5, s. of 1998 defines CS factor as follows:
C. CS shall refer to any one or the average of all the
applicable sub-factors, namely ST, AC and MVM:
Where: ST = Peso Value of Sales Transactions as defined
under Item C.2
AC = Acquisition Cost as defined
under Item C.3
MVM = Market Value Based on
Mortgage as defined under Item C.4
xxxx
C.2. The criteria in the selection of the comparable sales
transaction (ST) shall be as follows:
a. When the required number of STs is not available at the
barangay level, additional STs may be secured from the
municipality where the land being offered/covered is
situated to complete the required three comparable STs. In
case there are more STs available than what is required at
the municipal level, the most recent transactions shall be
considered. The same rule shall apply at the provincial level
when no STs are available at the municipal level. In all
cases, the combination of STs sourced from the barangay,
municipality and province shall not exceed three
transactions.
b. The land subject of acquisition as well as those subject of
comparable sales transactions should be similar in
topography, land use, i.e., planted to the same crop.
Furthermore, in case of permanent crops, the subject
properties should be more or less comparable in terms of
their stages of productivity and plant density.
c. The comparable sales transactions should have been
executed within the period January 1, 1985 to June 15, 1988,
and registered within the period January 1, 1985, to
September 13, 1988.
xxxx
C.3. Acquisition Cost (AC) AC shall be deemed relevant
when the property subject of acquisition was acquired
through purchase or exchange with another property within
the period January 1, 1985 to June 15, 1988 and registered
within the period January 1, 1985 to September 13, 1988,
and the condition of said property is still substantially
similar from the date of purchase or exchange to the date of
FI.
xxxx
C.4. Market Value Based on Mortgage (MVM) For MVM to
be relevant or applicable, the property subject of acquisition
should have been mortgaged as of June 15, 1988 and the
condition of the property is still substantially similar up to
the date of FI. MVM shall refer to the latest available
appraised value of the property.
In the case at bar, while respondent attempted to prove during the
hearings before the SAC, comparable sales transactions, the acquisition cost of the
property as well as its mortgage value, she failed to submit adequate documentary
evidence to support the same. Consequently, there was nothing from which the CS
factor could be determined.
In contrast, petitioner arrived at its valuation by using available factors
culled from the Department of Agriculture and Philippine Coconut Authority,
[35]
and by computing the same in accordance with the formula provided, thus
COMPUTATION (Applicable Formula) : LV = 0.90 CNI + 0.10 MV
Comparable Land Transactions (P x x x x ____ ) = P x-x-x
Capitalized Net Income: Cassava 16,666.67 x 0.90 = 15,000.00
Corn/Coco 26,571.70 = 23,914.53
Market Value Cassava 8,963.78 x 0.10 = 896.38
per Tax Declaration: Corn/Coco 10,053.93 = 1,005.39
Computed Value per Hectare: Cassava 15,896.38; Corn/Coco 24,919.92
xxx
Value per hectare used: Cassava 15,896.38 x 6.0000 has. = 95,378.28
Corn/Coco 24,919.92 x 8.1939 has. = 204,191.33
Payment due to LO : P299, 569.61
The above computation was explained by Antero M. Gablines, Chief of
the Claims, Processing, Valuation and Payment Division of the Agrarian
Operations Center of the Land Bank, to wit:
ATTY. CABANGBANG: (On direct):
xxxx
q. What are the items needed for the Land Bank to compute?
a. In accordance with Administrative Order No. 5, series of
1998, the value of the land should be computed
using the capitalized net income plus the market
value. We need the gross production of the land
and its output and the net income of the property.
q. You said gross production. How would you fix the gross
production of the property?
a. In that Administrative Order No. 5, if the owner of the
land is cooperative, he is required to submit the
net income. Without submitting all his sworn
statements, we will get the data from the DA
(Agriculture) or from the coconut authorities.
xxxx
q. In this recommended amount which you approved, how
did you arrive at this figure?
a. We used the data from the Philippine (Coconut) Authority
and the Agriculture and the data stated that
Cassava production was only 10,000 kilos per
hectare; corn, 2,000 kilos; and coconuts, 15.38
kilos per hectare. The data stated that in the first
cropping of 1986, the price of cassava was P1.00
per kilo; corn was sold at P7.75 per kilo; and the
Philippine Coconut Authority stated that during
that time, the selling price of coconuts was P8.23
per kilo.
q. After these Production data and selling price, there is here
a cost of operation, what is this?
a. It is the expenses of the land owner or farmer. From day
one of the cultivation until production. Without
the land owners submission of the sworn
statement of the income, production and the cost,
x x x Administrative Order No. 5 states that x x x
we will use 20% as the net income, meaning
80% of the production in peso. This is the cost of
valuation.
q. 80 % for what crops?
a. All crops except for coconuts where the cost of expenses
is only 20%.
q. Summing all these data, what is the value per hectare of
the cassava?
a. The cassava is P15,896.38.
q. How about the corn x x x intercropped with coconuts?
a. P24,919.92.[36]
Under the circumstances, we find the explanation and computation of
petitioner to be sufficient and in accordance with applicable laws. Petitioners
valuation must thus be upheld.
 [2]
Finally, there is no basis for the SACs award of 12% interest per annum Id. at 70-74.
[3]
in favor of respondent. Although in some expropriation cases, the Court allowed Id. at 135.
the imposition of said interest, the same was in the nature of damages for delay in [4]
Id. at 76-80.
payment which in effect makes the obligation on the part of the government one of [5]
LBP determined that the land is planted to cassava, corn and coconuts.
forbearance.[37] In this case, there is no delay that would justify the payment of [6]
Rollo, pp. 78-79.
interest since the just compensation due to respondent has been promptly and [7]
Id. at 81-84.
validly deposited in her name in cash and LBP bonds. Neither is there factual or [8]
Id. at 85-86.
legal justification for the award of attorneys fees and costs of litigation in favor of [9]
Id. at 96.
respondent. [10]
Id. at 94. Per Judge Venancio T. Amila.
[11]
Id. at 95.
WHEREFORE, the instant petition is GRANTED. The Decision of [12]
Id. at 113.
the Regional Trial Court, Tagbilaran City, Branch 3 in Civil Case No. 6462 dated [13]
Id. at 63. Penned by Associate Justice Hakim S. Abdulwahid and concurred in
March 1, 2003 is REVERSED and SET ASIDE. A new judgment is entered by Associate Justices B.A. Adefuin-De la Cruz and Andres B. Reyes, Jr.
fixing the just compensation for respondents land at P2.1105517 per square meter [14]
Id. at 66.
or a total of P299,569.61. [15]
Id. at 34-35.
[16]
See Gutierrez v. Secretary of the Department of Labor and Employment, G.R.
SO ORDERED. No. 142248, December 16, 2004, 447 SCRA 107, 118; and CA rollo, p. 14.
[17]
G.R. No. 129638, December 8, 2003, 417 SCRA 216.
[18]
Id. at 225-226.
CONSUELO YNARES- [19]
See Al-Amanah Islamic Investment Bank of the Philippines v. Celebrity Travel
SANTIAGO and Tours, Incorporated, G.R. No. 155524, August 12, 2004, 436 SCRA 356, 366,
Associate Justice citing Van Melle Phils., Inc. v. Endaya, G.R. No. 143132, September 23, 2003, 411
SCRA 528.
[20]
See Lao v. Court of Appeals, 382 Phil. 583, 603 (2000), quoting Rep. of the
WE CONCUR: Phils. v. CA, 343 Phil. 428 (1997).
[21]
376 Phil. 252 (1999).
[22]
Id. at 262-263, citing Republic of the Philippines v. CA, 331 Phil. 1070 (1996).
[23]
See Association of Small Landowners in the Philippines, Inc. v. Secretary of
ARTEMIO V. PANGANIBAN
Agrarian Reform, G.R. No. 78742, July 14, 1989, 175 SCRA 343, 373-374.
Chief Justice [24]
See Republic of the Philippines v. CA, supra at 1075, citing Export Processing
Zone Authority v. Dulay, G.R. No. L-59603, April 29, 1987, 149 SCRA 305
and Sumulong v. Guerrero, G.R. No. L-48685, September 30, 1987, 154 SCRA
MA. ALICIA AUSTRIA-MARTINEZ ROMEO J. CALLEJO, SR.
461.
Associate Justice Associate Justice [25]
G.R. No. 140160, January 13, 2004, 419 SCRA 67, 77, citing Land Bank of the
Philippines v. Court of Appeals, supra.
[26]
Rollo, pp. 112-113.
[27]
MINITA V. CHICO-NAZARIO Id. at 112.
[28]
Associate Justice Id.
[29]
Revised Rules and Regulations Governing the Valuation of Lands Voluntarily
Offered or Compulsorily Acquired Pursuant to Republic Act No. 6657 (Effective
May 11, 1998).
[30]
CERTIFICATION See Section 17, RA No. 6657.
[31]
See Land Bank of the Philippines v. Banal, G.R. No. 143276, July 20, 2004,
434 SCRA 543, 549-550.
[32]
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that See Philippine Administrative Law (1991 Ed.), Carlo L. Cruz, pp. 17-18,
the conclusions in the above Decision were reached in consultation before the case citing Rizal Empire Insurance Group v. NLRC, G.R. No. L-73140, May 29, 1987,
was assigned to the writer of the opinion of the Courts Division. 150 SCRA 565.
[33]
See Commissioner of Internal Revenue v. Solidbank Corporation, G.R. No.
148191, November 25, 2003, 416 SCRA 436, 448, citing Victorias Milling Co.,
Inc. v. Social Security Commission, 114 Phil. 555 (1962).
[34]
ARTEMIO V. PANGANIBAN Philippine Administrative Law, supra at 29, citing Espaol v. Chairman,
Chief Justice Philippine Veterans Administration, G.R. No. L-44616, June 29, 1985, 137 SCRA
314.
[35]
TSN, November 11, 2002, pp. 1 & 2.
[36]
Id.
[37]
Land Bank of the Philippines v. Wycoco, supra at 80, citing Reyes v. National
[1]
Rollo, pp. 101-102. Housing Authority, G.R. No. 147511, January 20, 2003, 395 SCRA 494.
 By Report submitted on December 9, 1998, Commissioner Florencio C. reasonable nor just considering the evidence presented with
EN BANC Dino II, respondents nominee, valued the property at P1,548,000.[10] Commissioner respect to sales in the surrounding nearby areas and the trial
Jesus D. Empleo, petitioners nominee, submitted his own report on February 8, court did not even consider other factors such as location,
LAND BANK OF THE PHILIPPINES, G.R. No. 171941 1999, valuing the property at P947,956.68.[11] neighborhood, utility, size and time element. The
Petitioner, compensation should have been higher but the plaintiffs-
Present: By September 14, 2001 Decision,[12] Branch 52 of appellees chose no longer to appeal because they alleged
the Sorsogon RTC adopted the valuation submitted by respondents commissioner that they were too old to further any appeals and they
PUNO, C.J., (P1,548,000). Both parties moved for reconsideration, and by December 21, 2001 wanted the money as soon as possible and they wanted an
QUISUMBING, Order,[13] the RTC reconsidered its earlier decision and increased the valuation end to the litigation as soon as possible a wish thwarted by
- versus - YNARES-SANTIAGO, to P2,232,868.40, ratiocinating as follows: the appeal by the Land Bank.
SANDOVAL-
GUTIERREZ, The ground relied upon by the Plaintiff[s] is that xxxx
CARPIO, the Award was based on the Report only of [Commissioner
AUSTRIA-MARTINEZ, Dino] premised on taxation purposes and it did not consider When the evidence pointed preponderantly to the
LUZ LIM and PURITA LIM CABOCHAN, CORONA, the fact that in 1986 the same land or part of it was paid by fact that the trial courts computation of just compensation
Respondents. CARPIO MORALES, the defendant Land Bank the amount of P68,549.00 per had already been regarded by the parties as drastically low,
AZCUNA, hectare when the rate of exchange between the peso and a any appeal by the Land Bank to such already drastically low
TINGA, dollar was only 22 pesos per dollar. figures would be suspect.(Underscoring supplied)
GARCIA,
CHICO-NAZARIO, xxxx
VELASCO, JR., and The appellate court in fact ordered petitioner to pay legal interest of
NACHURA, JJ. x x x [T]his Court finds that indeed the decision 12% on the P2,232,868.40 from the time of the taking of the property until actual
x x x did not take into consideration the comparable selling payment, and double costs.
price of the adjoining land, which according to the plaintiff
Promulgated: during Pre-trial, it was admitted by the defendants Land Petitioners Motion for Reconsideration was denied by Resolution
Bank and the DAR and the same was already stated in the of March 13, 2006,[15] hence, this petition, [16] petitioner contending that:
findings of fact of the Court in its decision x x x, that the
August 2, 2007 property subject of the acquisition is situated A. The amount of P2,232,868.40 which the Court
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x at Patag, Irosin, Sorsogon like the property of Roger Lim, of Appeals fixed as the just compensation of the acquired
DECISION brother of the plaintiff and the same was acquired by the property consisting of 32.8363 hectares, is in clear violation
CARPIO MORALES, J.: defendant Land Bank and paid as just compensation in the of Section 17 of RA 6657, DAR AO No. 11, series of 1994,
Assailed by petition for review on certiorari are the Court of Appeals amount of P68,549.01 per hectare. These facts were and the Supreme Court ruling in Land Bank of the
Decision of November 11, 2005 [1] affirming the December 21, 2001 Order of the admitted by the defendants Land Bank and DAR x x x. Philippines vs. Spouses Vicente Banal and Leonidas Arenas-
Regional Trial Court (RTC) of Sorsogon, Branch 52 fixing the valuation for Banal.[17]
purposes of just compensation of respondents property, and Resolution of March xxxx
13, 2006[2] denying petitioners motion for reconsideration of said decision. B. The Court of Appeals seriously erred in
After due consideration of the Motion for ordering the payment of interest on the compensation,
Pursuant to the Comprehensive Agrarian Reform Law of 1988 (RA Reconsideration, and taking into consideration the Plaintiffs at 12% per annum reckoned from the time of taking up to
6657, as amended), the Department of Agrarian Reform (DAR) compulsorily [sic] Commissioners Report submitted to the Court as well the time of actual payment. [18]
acquired 32.8363 hectares of agricultural land situated as his testimony and the admission of the defendants x x x,
in Patag, Irosin, Sorsogon (the property) owned by respondents Luz Lim and also other factors such as location, neighborhood, utility, C. The Court of Appeals likewise erred in
and Purita Lim Cabochan.[3] Petitioner Land Bank of the Philippines (LBP) size and the time element involved, the price paid by the ordering LBP to pay double costs.[19] (Underscoring
[4]
computed the value of the property at P725,804.21.[5] defendant Land Bank of the property of Roger Lim, brother supplied)
of the herein plaintiffs in the amount of P68,000.00 per
Respondents rejected petitioners valuation. Thus, pursuant to Section hectare is adopted which should be the basis for the full and
16(d) of RA 6657, as amended, a summary administrative proceeding was fair equivalent of the property taken from the owner, so that The threshold issue is whether the RTC erred in simply adopting the
conducted before the Provincial Agrarian Reform Adjudicator (PARAD) to for the area of 32.8363 hectares subject of acquisition, the price previously paid by petitioner for the land of respondents brother, and
determine the valuation of the property.[6] The PARAD initially valued it Court hereby fixes the total price in the amount dispensing with the formula prescribed by DAR Administrative Order No. 6,
at P1,174,659.60 but later reduced the amount to P725,804.21 upon motion of of P2,232,868.40. (Underscoring supplied) series of 1992 (DAR AO 6-92), as amended by DAR Administrative Order No.
petitioner.[7] 11, series of 1994 (DAR AO 11-94).

Dissatisfied with the PARADs decision, respondents filed on January
26, 1998 a petition for determination of just compensation with the RTC
of Sorsogon where they prayed for a compensation of at least P150,000 per
hectare, or an aggregate amount of P4,925,445.[8] The case proceeded to trial, with
the RTC appointing each partys nominee as commissioner.[9]
By Decision[14] of November 11, 2005, the Court of Appeals denied
petitioners appeal and ruled that:
The decision of the trial court should be affirmed
because the appeal of the defendant appellant Land Bank is
frivolous. The compensation fixed at P68,000 per hectare or
Php2,232,868.40 for the entire 32.8363 hectares is not
Petitioner answers the issue in the affirmative, contending that
consideration of the valuation factors under Section 17 of RA 6657 and the
formula under DAR AO 11-94 is mandatory insofar as lands acquired under RA
6657 are concerned.[20] On the other hand, respondents opine otherwise, contending
that Section 17 is merely a guide, the courts having recourse to other means of
determining just compensation, it being a judicial function. [21]
 Petitioners position impresses.
In Land Bank of the Philippines v. Spouses Banal,[22] this Court
underscored the mandatory nature of Section 17 of RA 6657 and DAR AO 6-
92, as amended by DAR AO 11-94, viz:
In determining just compensation, the RTC
is required to consider several factors enumerated in Section
17 of R.A. 6657, as amended, thus:
Sec. 17. Determination of
Just Compensation. In determining
just compensation, the cost of
acquisition of the land, the current
value of like properties, its nature,
actual use and income, the sworn
valuation by the owner, the tax
declarations, and the assessment made
by government assessors shall be
considered. The social and economic
benefits contributed by the farmers
and the farmworkersand by the
Government to the property, as well
as the non-payment of taxes or loans
secured from any government
financing institution on the said land,
shall be considered as additional
factors to determine its valuation.
These factors have been translated into a basic
formula in [DAR AO 6-92], as amended by [DAR AO 11-
94], issued pursuant to the DAR's rule-making power to
carry out the object and purposes of R.A. 6657, as amended.
The formula stated in [DAR AO 6-92], as
amended, is as follows:
LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1)
LV = Land Value
CNI = Capitalized Net Income
CS = Comparable Sales
MV = Market Value per Tax
Declaration
The above formula shall be used if all the three
factors are present, relevant and applicable.
A.1 When the CS factor is not present and CNI
and MV are applicable, the
formula shall be:
LV = (CNI x 0.9) + (MV x 0.1)
xxxx
While the determination of just compensation
involves the exercise of judicial discretion, however, such
discretion must be discharged within the bounds of the Commissioner Empleo is based on DAR AO 6-92, as amended by DAR AO 11-94,
law. Here, the RTC wantonly disregarded R.A. 6657, as and should, therefore, be upheld.[24] On this score, the petition fails.
amended, and its implementing rules and regulations.
([DAR AO 6-92], as amended by [DAR AO 11-94]). The pertinent portions of Item II of DAR AO 6-92, as amended by
DAR AO 11-94, provide:
xxxx
A. There shall be one basic formula for the valuation of
WHEREFORE, x x x. Civil Case No. 6806 is lands covered by [Voluntary Offer to Sell] or
REMANDED to the RTC x x x. The trial judge is directed [Compulsory Acquisition] regardless of the date
to observe strictly the procedures specified above in of offer or coverage of the claim:
determining the proper valuation of the subject
property. (Emphasis and underscoring supplied; citations LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1)
omitted) Where: LV = Land Value
CNI = Capitalized Net
Income
And in LBP v. Celada,[23] this Court set aside the valuation fixed by the CS = Comparable Sales
RTC of Tagbilaran, which was based solely on the valuation of neighboring MV = Market Value per
properties, because it did not apply the DAR valuation formula. The Court Tax Declaration
explained: The above formula shall be used if all the three
factors are present, relevant and applicable.
While [the RTC] is required to consider the
acquisition cost of the land, the current value of like A.1 When the CS factor is not present [25] and
properties, its nature, actual use and income, the sworn CNI and MV are applicable, the
valuation by the owner, the tax declaration and the formula shall be:
assessments made by the government assessors to determine
just compensation, it is equally true that these factors have LV = (CNI x 0.9) + (MV x
been translated into a basic formula by the DAR pursuant to 0.1)
its rule-making power under Section 49 of R.A. No. xxxx
6657. As the government agency principally tasked to
implement the agrarian reform program, it is the DAR's duty A.5 For purposes of this Administrative Order,
to issue rules and regulations to carry out the object of the the date of receipt of claimfolder by
law. [The] DAR [Administrative Order] precisely "filled in LBP from DAR shall mean the date
the details" of Section 17, R.A. No. 6657 by providing a when the claimfolder is determined
basic formula by which the factors mentioned therein may by the LBP to be complete with all
be taken into account. The [RTC] was at no liberty to the required documents and valuation
disregard the formula which was devised to implement inputs duly verified and validated,
the said provision. and is ready for final
computation/processing.
It is elementary that rules and regulations issued
by administrative bodies to interpret the law which they are A.6 The basic formula in the grossing-up of
entrusted to enforce, have the force of law, and are entitled valuation inputs such as x x x Market
to great respect. Administrative issuances partake of the Value per Tax Declaration (MV) shall
nature of a statute and have in their favor a presumption of be:
legality. As such, courts cannot ignore administrative Valuation input x
issuances especially when, as in this case, its validity was Grossed-up Regional
not put in issue. Unless an administrative order is Valuation = Consumer Price
declared invalid, courts have no option but to apply the Input Index (RCPI)
same. (Emphasis and underscoring supplied; citations Adjustment Factor
omitted) The RCPI Adjustment Factor shall
refer to the ratio of RCPI for the
month issued by the National
Consequently, as the amount of P2,232,868 adopted by the RTC in its Statistics Office as of the date when
December 21, 2001 Order was not based on any of the mandatory formulas the claimfolder (CF) was received by
prescribed in DAR AO 6-92, as amended by DAR AO 11-94, the Court of Appeals LBP from DAR for processing or, in
erred when it affirmed the valuation adopted by the RTC. its absence, the most recent available
RCPI for the month issued prior to the
The second and more important issue is the correct valuation of the date of receipt of CF from DAR and
property. Petitioner asserts that the valuation of P947,956.68 computed by the RCPI for the month as of the
 date/effectivity/registration of the Department of xxxx
valuation input. Expressed in equation Agriculture
form: (DA) and other D. In the computation of Market Value per Tax Declaration
appropriate (MV), the most recent Tax Declaration (TD)
RCPI for the regulatory and Schedule of Unit Market Value (SMV)
Month as of the bodies or, in issued prior to receipt of claimfolder by LBP
Date of Receipt their absence, shall be considered. The Unit Market Value
of Claimfolder by from the (UMV) shall be grossed up from the date of
LBP from DAR or Bureau of its effectivity up to the date of receipt
the Most recent Agricultural of claimfolder by LBP from DAR for processing,
RCPI for the Statistics. If in accordance with item II.A.A.6. (Emphasis and
RCPI Month Issued possible, SP underscoring supplied)
Adjustme = Prior to the Date of data shall be
nt Factor Receipt of CF gathered from Thus, in computing Capitalized Net Income (CNI), the Average Gross
RCPI for the the barangay or Production (AGP) of the latest available 12 months immediately preceding the date
Month Issued municipality of notice of coverage, and the average Selling Price (SP) of the latest available 12
as of the where the months prior to the date of receipt of the claimfolder by LBP for processing,
Date / Effectivit property is should be used.
y / Registration located. In the
of the Valuation absence While both dates are not indicated in the records, the date of notice of coverage
Input thereof, SP would have to be sometime prior to February 1994, which is the date of the Field
may be secured Investigation Report,[26] because under DAR Administrative Order No. 9, series of
B. Capitalized Net Income (CNI) This shall refer to the within the 1990,[27] as amended by DAR Administrative Order No. 1, series of 1993, the field
difference between the gross sales (AGP x SP) province or investigation is conducted after the notice of coverage is issued to the
and total cost of operations (CO) capitalized at region. landowner. Also, the claimfolder would have been received by LBP on or before
12%. 1996, the year the property was distributed to the agrarian reform beneficiaries,
[28]
CO = Cost of Operations because land distribution is the last step in the procedure prescribed by the said
Expressed in equation form: administrative orders. Thus, the data for the AGP should pertain to a period prior to
Whenever the cost of February 1994, while the data for the SP should pertain to 1996 or earlier.
CNI = (AGP x SP) CO operations
.12 could not be However, Commissioner Empleo instead used the available data prior
obtained or to [January 1999, the] date of [his ocular inspection] [29] for the AGP, and the
Where: CNI = Capitalized Net Income verified, an [a]verage selling price for the period January 1998 to December 1998[30] for the SP,
assumed net contrary to DAR AO 6-92, as amended by DAR AO 11-94.
AGP = Latest available income rate
12-months gros (NIR) of 20% Secondly, the Regional Consumer Price Index (RCPI) Adjustment Factor, which is
s production shall be used in computing the market value of the property, is the ratio of the RCPI for the
immediately used. Landhold month when the claimfolder was received by LBP, to the RCPI for the month of
preceding ings planted to the registration of the most recent Tax Declaration and Schedule of Unit Market
the date of coconut which Value[31] issued prior to receipt of claimfolder by LBP.Consistent with the earlier
offer in case of are productive discussion, the applicable RCPIs should therefore be dated on or before 1996.
VOS or date of at the time of
notice of offer/coverage However, Commissioner Empleo instead used the RCPIs for December
coverage in shall continue 1998 and January 1997 in computing the RCPI Adjustment Factor, [32] again,
case of CA. to use the 70% contrary to DAR AO 6-92, as amended by DAR AO 11-94.
NIR. DAR and
SP = The average of the LBP shall Parenthetically, Commissioner Empleo testified[33] that his computation
latest available continue to s were based on DAR Administrative Order No. 5, series of 1998. [34] However, as
12-months selli conduct joint this administrative order took effect only on May 11, 1998, the applicable
ng prices prior industry studies valuation rules in this case remain to be those prescribed by DAR AO 6-92, as
to the date of to establish the amended by DAR AO 11-94.
receipt of applicable NIR
the claimfolde for each crop In any event, even if the 1998 valuation rules were applied, the data for
r by LBP for covered under the AGP would still pertain to a period prior to February 1994, [35] the revised
processing, CARP. reference date being the date of the field investigation, while the data for the SP
such prices to and the RCPIswould still pertain to 1996 or earlier, there being no substantial
be secured .12 = Capitalization Rate revisions in their reference dates.
from the
 Finally, while the Field Investigation Report[36] shows that the
representatives of petitioner, the DAR, and the Barangay Agrarian Reform LEONARDO A. QUISUMBING CONSUELO YNARES- SANTIAGO
Committee, all observed that, except for seven hectares, the whole area of the Associate Justice
property was planted with coconut intercropped with abaca or vice-versa,
Commissioner Empleo did not take this into account in his computation, contrary
[1]
to DAR AO 6-92, as amended by DAR AO 11-94 which provides that the CA rollo, pp. 98 to 107. Penned by Justice Vicente Q. Roxas with the
[t]otal income shall be computed from the combination of crops actually produced concurrence of Justices Conrado M. Vasquez, Jr. and Juan Q. Enriquez, Jr.
on the covered land whether seasonal or permanent.[37] [2]
Id. at 159-160. Also penned by Justice Vicente Q. Roxas with the concurrence of
ANGELINA SANDOVAL-GUTIERREZ ANTONIO T.Justices
CARPIO Conrado M. Vasquez, Jr. and Juan Q. Enriquez, Jr.
[3]
For all the above reasons, the valuation asserted by petitioner must be Associate Justice Records, pp. 1-2.
[4]
rejected. Executive Order No. 405, dated June 14, 1990, vests the Land Bank of the
Philippines the primary responsibility to determine the land valuation and
The Court notes that this case has been pending for almost a decade, compensation for all private lands covered by R.A. 6657, as
and commiserates with respondents. However, while the Court wants to amended. Vide Philippine Veterans Bank v. Court of Appeals, G.R. No.
write finis to this case by computing the just compensation due to respondents, the 132767, January 18, 2000, 322 SCRA 139, 145.
[5]
evidence on record is not sufficient for the Court to do so in accordance with DAR MA. ALICIA AUSTRIA-MARTINEZ RENATO Rollo,
C. CORONA
p. 15.
[6]
AO 6-92, as amended by DAR AO 11-94. Associate Justice Id. at 16.
[7]
Records, p. 2.
[8]
The Court is thus compelled to remand the case for determination of the Id. at 1-4. Docketed as Civil Case No. 98-6432.
[9]
valuation of the property by the RTC which is mandated to consider the factors Id. at 31.
[10]
provided under above quoted Section 17 of RA 6657, as amended, as translated Id. at 47-50.
into the formula prescribed in DAR AO 6-92, as amended by DAR AO 11-94.[38] [11]
Id. at 57-59.
[12]
Id. at 141-46-a.
[13]
Furthermore, upon its own initiative, or at the instance of any of the Id. at 155-157.
[14]
parties, the RTC may again appoint one or more commissioners to examine, ADOLFO S. AZCUNA DANTE CA
O. TINGA
rollo, pp. 98-107. Penned by Justice Vicente Q. Roxas with the concurrence
investigate and ascertain facts relevant to the dispute including the valuation of Associate Justice of Justices Conrado M. Vasquez, Jr. and Juan Q. Enriquez, Jr.
properties, and to file a written report thereof with the RTC.[39] [15]
Id. at 159-160. Also penned by Justice Vicente Q. Roxas with the concurrence
of Justices Conrado M. Vasquez, Jr. and Juan Q. Enriquez, Jr.
[16]
The amount determined by the RTC would be the basis of the interest Rollo, pp. 9-41.
[17]
income on the cash and bond deposits due respondents from the time of the taking Id. at 20.
of the property up to the time of actual payment of just compensation. [40] [18]
Id. at 31.
[19]
MINITA V. CHICO-NAZARIO CANCIO Id.
C. at
GARCIA
36.
[20]
WHEREFORE, the November 11, 2005 Decision and March 13, 2006 Associate Justice Id. at 20-31.
[21]
Resolution of the Court of Appeals in CA-G.R. CV No. Id. at 136-137.
[22]
73881 are REVERSED and SET ASIDE. G.R. No. 143276, July 20, 2004, 434 SCRA 543, 549-554.
[23]
G.R. No. 164876, January 23, 2006, 479 SCRA 495, 505-507, citing LBP v.
Civil Case No. 98-6432 is REMANDED to the court of origin, Branch Spouses Banal, G.R. No. 143276, July 20, 2004, 434 SCRA 543.
[24]
52 of the Regional Trial Court of Sorsogon, Sorsogon, which is directed to Rollo, p. 27.
[25]
determine with dispatch the just compensation due respondents strictly in PRESBITERO J. VELASCO, JR. ANTONIO None
EDUARDO
of the sales transactions proffered by respondents as Comparable Sales
accordance with the procedures specified above. Associate Justice qualify as such under DAR AO 6-92, as amended by DAR AO 11-94, which
requires, inter alia, that such sales transactions: (a) be executed and registered
SO ORDERED. within the period of January 1, 1985 to June 15, 1988; (b) involve land with
similar topography and use; and (c) involve land whose area is at least ten
CONCHITA CARPIO MORALES percent (10%) of the area being acquired.
[26]
Associate Justice Records, p. 123.
[27]
Revised Rules Governing the Acquisition of Agricultural Lands Subject of
Voluntary Offer to Sell and Compulsory Acquisition Pursuant to RA 6657.
[28]
WE CONCUR: CERTIFICATION TSN, March 15, 2000, p. 3.
[29]
Records, p. 57. Vide also TSN February 14, 2001, p. 4.
[30]
Id. at 57, 59.
[31]
Pursuant to Section 13, Article VIII of the Constitution, I certify that the The Tax Declaration and Schedule of Unit Market Value being the relevant
conclusions in the above decision had been reached in consultation before the case valuation inputs with respect to market value.
[32]
REYNATO S. PUNO was assigned to the writer of the opinion of the Court. Records, pp. 57, 58.
[33]
Chief Justice TSN, February 14, 2001, p. 7.
[34]
Which superseded DAR AO 6-92, as amended by DAR AO 11-94.
[35]
Records, p. 123. The date of the Field Investigation Report.
[36]
REYNATO S. PUNO Ibid.
[37]
Chief Justice Item II B.5.
[38]
Supra note 22 at 554.
[39]
Section 58, RA 6657, as amended.
[40]
Land Bank of the Philippines v. Wycoco, G.R. No. 140160, January 13, 2004,
419 SCRA 67, 81.

THIRD DIVISION

LAND BANK OF THE PHILIPPINES, G.R. No. 161834

Petitioner,
Present:

CARPIO MORALES, J.,

- versus - Chairperson,
BRION,
 BERSAMIN, Thereafter, the DAR Adjudication Board (DARAB), resolution dated February 17, 2003, denying petitioner LBPs
ABAD,* and through the Regional Adjudicator (RARAD) for Region XI motion for reconsideration.
VILLARAMA, JR., JJ., conducted summary administrative proceedings under
HEIR OF TRINIDAD S. VDA. DE DARAB Case No. LV-XI-0330-DN-2002 to fix the just Petitioner LBP filed a motion to admit a second
ARIETA, represented by the sole and Promulgated: compensation. motion for reconsideration which still remains unacted upon
only heir, ALICIA ARIETA TAN, by public respondent.
Respondent. August 11, 2010 On June 26, 2002, the DARAB rendered a decision
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x fixing the compensation of the property at P10,294,721.00 Hence, this petition based on the following grounds:
or P686,319.36 per hectare.
DECISION I. THE SAC ORDER TO
Petitioner LBP filed a motion for reconsideration of DEPOSIT HAD NO
VILLARAMA, JR., J.: the above decision but the same was denied on September 4, LEGAL BASIS,
2002. CONSIDERING THAT
THE REQUIREMENT
Petitioner LBP filed a petition against private FOR THE PROMPT
Before us is a petition for review on certiorari filed by petitioner under respondent for judicial determination of just compensation PAYMENT OF JUST
before the Special Agrarian Court, Regional Trial Court, COMPENSATION TO
Branch 2, Tagum City, docketed as DAR Case No. 78-2002, THE PRIVATE
Rule 45 of the 1997 Rules of Civil Procedure, as amended, to reverse and set aside which is the subject of this petition. RESPONDENT WAS
SATISFIED BY THE
the Decision[1] dated August 8, 2003 of the Court of Appeals (CA) in CA-G.R. SP Private respondent, on the other hand, filed a DEPOSIT OF THE
similar petition against DAR before the same Special PROVISIONAL
No. 76572 denying its petition for certiorari and sustaining the Orders dated Agrarian Court docketed as DAR Case No. 79-2002, to COMPENSATION OF
which petitioner LBP filed its answer and moved for the P1,145,806.06
dismissal of the petition for being filed out of time. REQUIRED UNDER
December 12, 2002 and February 17, 2003 of the Regional Trial Court (RTC)
SECTION 16 (E) OF
Private respondent filed a Motion for Delivery of RA 6657 AND THE
(Special Agrarian Court [SAC]) of Tagum City, Davao del Norte, Branch 2 in DAR the Initial Valuation praying that petitioner LBP be ordered RULING IN THE
to deposit the DARAB determined amount CASE OF LAND
Case No. 79-2002. of P10,294,721.00 in accordance with the Supreme Court BANK OF THE
ruling in Land Bank of the Philippines vs. Court of Appeals, PHILIPPINES V.
Pedro L. Yap, Et Al., G.R. No. 118712, October 6, 1995. COURT OF APPEALS,
PEDRO L. YAP, ET
The antecedents are set forth in the CA Decision: Petitioner LBP filed a Manifestation praying that AL., G.R. NO.
the amount of the deposit should only be the initial valuation 118712, OCTOBER 6,
of the DAR/LBP in the amount of P1,145,806.06 and 1995 AND JULY 5,
Private respondent is the registered owner of a 1996.
parcel of agricultural land situated in Sampao, Kapalong, not P10,294,721.00 as determined by the DARAB.
Davao del Norte with an approximate area of 37.1010
On December 12, 2002, public respondent rendered II. THE SPECIAL AGRARIAN
hectares covered by Transfer Certificate of Title No. T-
the assailed resolution ordering petitioner LBP to deposit for COURT IS NOT AN
49200, 14.999 hectares of which was covered by RA No.
release to the private respondent the DARAB determined APPELLATE COURT
6657 through the Voluntary Offer to Sell (VOS) scheme of
just compensation of P10,294,721.00. FOR DARAB
the Comprehensive Agrarian Reform Program (CARP). DECISIONS ON
On December 13, 2002, petitioner LBP filed a COMPENSATION
Private respondent offered to the Department of AND HAS NO
Agrarian Reform (DAR) the price of P2,000,000.00 per motion for reconsideration of the said order to deposit.
JURISDICTION TO
hectare for said portion of the land covered by CARP. REVIEW, ADOPT, OR
On December 17, 2002, private respondent filed a
ORDER THE
Petitioner Land Bank of the Philippines (LBP) motion to cite Romeo Fernando Y. Cabanal and Atty. Isagani
EXECUTION OF
valued and offered as just compensation for said 14.999 Cembrano, manager of petitioner LBPs Agrarian Operations
DARAB DECISIONS
hectares the amount of P1,145,806.06 or P76,387.57 per Office in Region XI and its handling lawyer, respectively,
ON COMPENSATION
hectare. The offer was rejected by private respondent. for contempt for failure to comply with the order to deposit.
PENDING FINAL
DETERMINATION OF
In accordance with Section 16 of RA No. 6657, After the filing of private respondents comment to
JUST
petitioner LBP deposited for the account of private the motion for reconsideration and petitioner LBPs
COMPENSATION OR
respondent P1,145,806.06 in cash and in bonds as explanation and memorandum to the motion for
TO PREJUDGE THE
provisional compensation for the acquisition of the property. reconsideration, public respondent rendered the assailed
CASE IN VIOLATION
 OF PETITIONERS
RIGHT TO DUE
PROCESS OF LAW.[2]
On August 8, 2003, the CA dismissed the petition holding that the assailed orders
of the SAC are correct and within the parameters of Republic Act (R.A.) No. 6657,
thus:
Section 16 (a) refers to an offer of the DAR to pay a
corresponding value of the land. Facts of the case show
that P1,145,806.06 was the offered price which was rejected
by the private respondent.
In cases of rejection of the offer, Section
16(d) states that there shall be a summary administrative
proceedings to determine the compensation for the
land. Hence, the proceedings before the DARAB, through
the RARAD for Region XI as in this case.
Note that in Sections 16(a) to (d), or, during the
offer until its rejection, there was no reference to a deposit
of the compensation.
The reference to a deposit of the compensation
appears only in Section 16(e) or after the DAR, in a
summary administrative proceedings, had determined or
decided the case relative to the compensation of the land.
If it had been the intention of the law to require the
deposit of the compensation based on the offer or in the
amount of P1,145,806.06, the law should have stated such.
The reference to the deposit right after [the]
decision of the DARAB shall have been rendered, obviously
means that the amount of the deposit should be based on the
DARAB decision. Otherwise, there would be no need to
institute an administrative proceeding before the DARAB,
before a deposit shall be required.
In the case of Association of Small Landowners in
the Philippines, Inc. vs. Secretary of Agrarian Reform, the
Supreme Court held that the determination made by the
DAR is only preliminary unless accepted by all parties
concerned.
Apropos, it was held in the case of Land Bank of
the Philippines vs. Court of Appeals and Jose Pascual that it
is the DARAB which has the authority to determine the
initial valuation of lands involving agrarian reform although
such valuation may only be considered preliminary as the
final determination of just compensation is vested in the
courts. attach connotation to the word rejection in sub-paragraph (e) in relation to the
Therefore, the deposit of the initial valuation decisions of the DARAB/RARAD, or the word deposit in relation to the
referred to in Section 16 of RA No. 6657 is the DAR-
determined amount or in this case, the amount
of P10,294,721.00. compensation award of the DARAB/RARAD, sub-paragraph (e) should have
stated it plain and clear.[6]
The assailed orders of the SAC are correct and
within the parameters of RA No. 6657. [3] [ITALICS
SUPPLIED.]
Petitioner points out that the amount it deposited as provisional
compensation is the starting point for the cancellation of the title of the landowner
Petitioner LBP filed a motion for reconsideration but the same was
in favor of the Government, while the administrative proceeding for the
denied by the CA on January 21, 2004.[4]
determination of just compensation is ongoing with the DARAB. Thus, if the
In this recourse from the appellate courts ruling, petitioner alleges that: amount to be deposited is the amount as determined by the PARAD, RARAD or
THE COURT OF APPEALS GRAVELY ERRED DARAB, then the implementation of the CARP will be adversely affected since
ON A QUESTION OF LAW IN DENYING AND/OR
DISMISSING THE PETITION FOR CERTIORARI FILED
the cancellation of the landowners title will now depend on how fast the decision
BY LBP, THEREBY AFFIRMING THE ORDER OF THE
SAC A QUO THAT THE DEPOSIT OF THE INITIAL
VALUATION REFERRED TO IN SECTION 16 OF RA would be rendered by said quasi-judicial bodies. Logic, therefore, dictates that the
6657 IS THE NON-FINAL DAR ADJUDICATION
BOARD (DARAB)-DETERMINED AMOUNT OR IN amount that should be deposited is the amount initially offered by the DAR and not
THIS CASE, THE AMOUNT OF P10,294,721.00.[5]
the amount as determined by a quasi-judicial body like the PARAD, RARAD or
DARAB.[7]
Petitioner argues that a reading of Section 16 shows that the rejection
by the landowner refers to the offer of the DAR as compensation for the land as
Citing DAR Administrative Order (AO) No. 02, series of 1996, which
initially valued by LBP pursuant to Executive Order (EO) No. 405, and not the
converted all existing trust deposits and instituted a new procedure on the direct
compensation award contained in the decision of the DARAB/RARAD. It
deposit in cash and bonds, petitioner asserts that the provisional compensation
contends that the CAs interpretation would only inject obscurity and vagueness in
consists of the original DAR/LBP valuation offered to the landowner, following
the law, which is otherwise clear and unambiguous. The over-stretching of the
the correct interpretation of Section 16 (e) of R.A. No. 6657. This deposit is done
connotation and meaning of rejection as relating to the decision of the
only once, that is, after the landowner rejects the original valuation offered by
DARAB/RARAD, as the CA would have it, is utterly wrong and not within the
DAR/LBP. It must also be noted from the procedure provided in DAR AO No. 02,
intendment of Section 16. Obviously, sub-paragraph (e) does not make any
the request by the DAR to the DARAB/RARAD/PARAD to conduct
reference at all to the decisions of quasi-judicial bodies. If the law so intended to

administrative proceedings is done only after a request to deposit the
initial/original compensation proceeds had been made by the DAR to LBP; the
amount to be deposited is that offered initially by the DAR based on the valuation
made by LBP pursuant to EO No. 405.[8]
Petitioner further points out that with thousands of cases involving
compensation of lands, if LBP were to implement the SAC order that the
PARAD/RARAD valuation is the one (1) to be deposited but thereafter the
valuation by LBP is finally upheld by the Court as the just compensation due to the
landowner, petitioner will be faced with an enormous responsibility of filing
recovery suits against thousands of landowners. It stressed that once deposited, the
inordinately high valuation would be under the complete disposal of the
landowner, the withdrawal thereof, pending final determination by the Court of
just compensation, is only made subject to compliance with payment release
requirements of petitioner. Indeed, the SAC misinterpreted the law and if its
erroneous order is implemented, it will create financial havoc to the already scarce
Agrarian Reform Fund (ARF) because every victorious party before the
RARAD/PARAD/DARAB will surely move for a similar order to deposit their
compensation award even if the cases for judicial determination of just
[9]
compensation are still pending before the SAC.
On the other hand, respondent points out that petitioner did not appeal
the decision of the RARAD to the Board, and hence, the administrative proceeding
for determination of just compensation is over. The proceeding before the SAC is
not an appeal from the decision of the RARAD. Consequently, what is to be
deposited is not the initial valuation by petitioner but that of the
RARAD.Moreover, if petitioners interpretation of Section 16 is upheld, it will
render the proceedings before the DARAB useless, for after all it is the LBPs
valuation which will be followed.[10]
The lone issue in this controversy is the correct amount of provisional
compensation which the LBP is required to deposit in the name of the landowner if
the latter rejects the DAR/LBPs offer. Petitioner maintains it should be its initial
valuation of the land subject of Voluntary Offer to Sell (VOS) while respondent
claims it pertains to the sum awarded by the PARAD/RARAD/DARAB in a
summary administrative proceeding pending final determination by the courts.
The petition is meritorious.
Section 16 of R.A. No. 6657 reads:
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
landowners, 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 by requiring
the landowner, the LBP and other interested parties to
submit evidence as to the just compensation for the land,
within fifteen (15) days from the receipt of the notice. After
the expiration of the above period, the matter is deemed
submitted for decision. The DAR shall decide the case
within thirty (30) days after it is submitted for decision.
(e) Upon receipt by the landowner of the
corresponding payment or in case of rejection or no
response from the landowner, upon the deposit with an
accessible bank designated by the DAR of the
compensation in cash or in LBP bonds in accordance
with this Act, the DAR shall take immediate possession of
the land and shall request the proper Register of Deeds to
issue a Transfer Certificate of Title (TCT) in the name of the
Republic of the Philippines. The DAR shall thereafter
proceed with the redistribution of the land to the qualified
beneficiaries.
(f) Any party who disagrees with the decision may
bring the matter to the court of proper jurisdiction for final
determination of just compensation. [EMPHASIS
SUPPLIED.]
According to the CA, the deposit of provisional compensation mentioned in sub-
paragraph (e) pertains to that amount awarded by the DAR in the summary
administrative proceeding under the preceding sub-paragraph (d). It noted that the
word deposit was not mentioned until after sub-paragraph (d), when the DAR is
tasked to conduct a summary administrative proceeding. Otherwise, said the
appellate court, there would be no need to institute an administrative proceeding
before the DARAB, before a deposit is required.
We find the foregoing as a strained interpretation of a simple and clear
enough provision on the procedure governing acquisition of lands under CARP,
whether under the compulsory acquisition or VOS scheme. Indeed, it would make
no sense to mention anything about the provisional deposit in sub-paragraphs (a)
and (b) the landowner is sent a notice of valuation to which he should reply within
a specified time, and in sub-paragraph (c) when the landowner accepts the offer of
the DAR/LBP as compensation for his land. Sub-paragraph (d) provides for the
consequence of the landowners rejection of the initial valuation of his land, that is,
the conduct of a summary administrative proceeding for a preliminary
determination by the DARAB through the PARAD or RARAD, during which the
LBP, landowner and other interested parties are required to submit evidence to aid
the DARAB/RARAD/PARAD in the valuation of the subject land. Sub-paragraph
(e), on the other hand, states the precondition for the States taking of possession of
the landowners property and the cancellation of the landowners title, thus paving
the way for the eventual redistribution of the land to qualified
beneficiaries: payment of the compensation (if the landowner already accepts the
offer of the DAR/LBP) or deposit of the provisional compensation (if the
landowner rejects or fails to respond to the offer of the DAR/LBP). Indeed, the
CARP Law 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 of the compensation in cash or LBP bonds with an accessible bank. [11]
It was thus erroneous for the CA to conclude that the provisional
compensation required to be deposited as provided in Section 16 (e) is the sum
determined by the DARAB/PARAD/RARAD in a summary administrative
proceeding merely because the word deposit appeared for the first time in the sub-
paragraph immediately succeeding that sub-paragraph where the administrative
proceeding is mentioned (sub-paragraph d). On the contrary, sub-paragraph (e)
should be related to sub-paragraphs (a), (b) and (c) considering that the taking of
possession by the State of the private agricultural land placed under the CARP is
the next step afterthe DAR/LBP has complied with notice requirements which
include the offer of just compensation based on the initial valuation by LBP. To
construe sub-paragraph (e) as the appellate court did would hamper the land
redistribution process because the government still has to wait for the termination
of the summary administrative proceeding before it can take possession of the
lands. Contrary to the CAs view, the deposit of provisional compensation is made
even before the summary administrative proceeding commences, or at least
simultaneously with it, once the landowner rejects the initial valuation (offer) by
the LBP. Such deposit results from his rejection of the DAR offer (based on the
LBPs initial valuation). Both the conduct of summary administrative proceeding
and deposit of provisional compensation follow as a consequence of the
landowners rejection under both the compulsory acquisition and VOS. This
explains why the words rejection or failure to reply and rejection or no response
from the landowner are found in sub-paragraphs (d) and (e). Such rejection/no
response from the landowner could not possibly refer to the award of just
compensation in the summary administrative proceeding considering that the
succeeding sub-paragraph (f) states that the landowner who disagreeswith the
same is granted the right to petition in court for final determination of just
compensation. As it is, the CAs interpretation would have loosely interchanged the
terms rejected the offer and disagrees with the decision, which is far from what the
entire provision plainly conveys.
We also find the CAs conclusion that petitioners interpretation of Section
16 (e) would render unnecessary the filing of an administrative proceeding before the
deposit is made, as untenable. Said court raised a perceived inconsistency or
contradiction not found in the law. Precisely, the deposit of provisional compensation
is required to be made because the landowner has rejected the initial valuation or
amount offered by the DAR, which is then mandated to conduct a summary
administrative proceeding for preliminary determination of just compensation. It may
be that the confusion in reading the provision stems from the words offer of the
DAR/rejection or acceptance of the offer used in Section 16 (b) and (c), which
seemingly leaves out the active role of the LBP at the early stage of the land
acquisition procedure, whether under compulsory acquisition or VOS.
Section 18 of R.A. No. 6657 provides:
SECTION 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.
xxxx
Under the law, the LBP is charged with the initial responsibility of
determining the value of lands placed under land reform and the compensation to
be paid for their taking. [12] Once an expropriation proceeding or the acquisition of
private agricultural lands is commenced by the DAR, the indispensable role of
LBP begins. EO No. 405, issued on June 14, 1990, provides that the DAR is
required to make use of the determination of the land valuation and compensation
 Valuation and 10(Notice of Land
by the LBP as the latter is primarily responsible for the determination of the land compensation deposit. The following procedural steps on Valuation and Acquisition to LO by Valuation and
personal delivery with Acquisition)
proof of service or by
valuation and compensation. In fact, the LBP can disagree with the decision of the Compensation under DAR AO No. 02 clearly show that such deposit of provisional registered mail with
return card, attaching
DAR in the determination of just compensation, and bring the matter to the RTC compensation is to be made by LBP either before or simultaneously with the conduct copy of MOV-CFPVS
and inviting LOs
designated as SAC for final determination of just compensation. [13] of the summary administrative proceedings, without awaiting the termination of the attention to the
submission of documents
required for payment of
proceedings or rendition of judgment/decision by the
claim.
The amount of offer which the DAR gives to the landowner as DARAB/RARAD/PARAD. Consequently, the amount of just compensation
DARPO Posts a copy of the CARP Form No.
compensation for his land, as mentioned in Section 16 (b) and (c), is based on the determined by the DARAB/RARAD/PARAD cannot be the deposit contemplated in Notice of Land Valuation 11(Certification of
18 (NLVA) for at least seven Posting
initial valuation by the LBP.[14] This then is the amount which may be accepted or Section 16 (e). (7) working days on the Compliance)
bulletin board of the
rejected by the landowner under the procedure established in Section 16. Perforce, provincial capitol,
Steps Responsible Activity Forms/Documents municipal and barangay
Agency/Unit (Requirements) halls where the property
such initial valuation by the LBP also becomes the basis of the deposit of is located and issues a
D. Land Valuation and Certification of Posting
provisional compensation pending final determination of just compensation, in Compensation Compliance.
13 LBP-LVLCO Receives and evaluates 19 LO Replies to Notice of
accordance with sub-paragraph (e).
the CF for Land Valuation and
completeness, Acquisition and submits
consistency and documents required for
The procedure for the determination of
document sufficiency. payment of
compensation cases under Republic Act No. 6657, as
Gathers additional compensation claim.
devised by this Court, commences with the valuation by the
valuation documents.
LBP of the lands taken by the State from private owners
under the land reform program. Based on the valuation of If LO accepts, proceed to
14 LBP-LVLCO Determine land Claims Valuation D.1.
the land by the LBP, the DAR makes an offer to the
valuation based on and Processing
landowner through a written notice. In case the
valuation inputs Form (CVPF) If LO rejects or fails to
landowner rejects the offer, a summary administrative
proceeding is held and, afterwards, depending on the value reply, proceed to D.2.
Note: CFs where the
of the land, the Provincial Agrarian Reform Adjudicator
land valuation amounts xxxx
(PARAD), the Regional Agrarian Reform Adjudicator
to more than P3
(RARAD), or the DARAB, fixes the price to be paid for the
million shall be D.2. Where LO rejects the
said land. If the landowner still does not agree with the price
forwarded to LBP-HO. Land Valuation
so fixed, he may bring the matter to the RTC, acting
as Special Agrarian Court.[15][EMPHASIS SUPPLIED.]
15 LBP-LVLCO Prepares and sends CARP Form No. 20 DARPO If the LO rejects the CARP Form No.
Memo of Valuation, 9(Memorandum of offered price or fails to 10.a (LOs Reply to
Claim Folder Profile Valuation and reply within thirty (30) NLVA)
and Valuation ClaimFolder Profile days from receipt of the
DAR AO No. 02, series of 1996, Revised Rules and Procedures Summary (MOV- and Valuation Notice of Land Valuation CARP Form No.
CFPVS) to PARO Summary) and Acquisition, forwards 15(Request for
Governing the Acquisition of Agricultural Lands Subject of Voluntary Offer to Sell to LBP the Request to Deposit)
16 DARPO Receives LBPs MOV- Deposit the compensation
CFPVS and ascertains proceeds in cash and in
and Compulsory Acquisition Pursuant to Republic Act No. 6657 reinforces the view the completeness of the bonds in the name of the
data and information LO
that it is the initial valuation of the LBP which becomes the basis of the provisional therein.
21 DARPO Requests the CARP Form No. 14
17 DARPO Sends Notice of Land CARP Form No. DARAB/RARAD/ Advice to DARAB/
 PARAD to conduct RARAD/PARAD RARAD/PARAD
administrative proceedings conducts summary administration, involving overvalued private haciendas voluntarily offered by big
pursuant to DARAB administrative
guidelines, as the case proceedings, renders
maybe, furnishing therein decision and informs landowners in collusion with DAR officers and employees. The most notorious of
a copy each of the LOs parties concerned of the
Letter of Rejection, Notice same. these land scams even became the subject of a joint inquiry conducted by the
of Land Valuation and
Acquisition and LBPs 26 DARPO Upon receipt of the CARP Form No. 17.c Senate and House of Representatives committees on agrarian reform. With
Memorandum of Certificate of Finality of (Confirmation of
Valuation. the DARAB Order, Coverage and
government acquisition of large landholdings at inflated prices, the farmers are at a
requests LBP to pay the Transfer For Claims
22 LBP-LVO Deposits the CARP Form No. 17 LO in accordance with of Individual LOs
LBP-HO compensation proceeds (Certification of the DARAB decision; Already decided by losing end, as they can hardly afford the overpriced land.[17]
in the name of the Deposit) requests LBP to prepare DARAB)
LO and issues Confirmation of Coverage
Certification of Deposit to and Transfer for LO to CARP Form No. 17.d
DAR through the PARO, accomplish. Thereafter, (Confirmation of Against this backdrop of exposed irregularities and to ensure the
copy furnished the LO. CARP Form No. 17.a LBP follows Activity Nos. Coverage and
(Confirmation of 25-26 under D.1. In case Transfer) For Claims success of the CARP, former President Corazon C. Aquino issued EO No. 405
The entire deposit may be Coverage and Transfer the LO still rejects of Corporate LOs
withdrawn by the LO; For Claims of DARAB decision, he may Already decided by
however, actual release of Individual LOs Still go to the Special Agrarian DARAB) which transferred the primary responsibility of determining land valuation and
same shall be subject to Pending with Reform Court (SAC) for
LOs submission of all DARAB) the final determination of compensation for all lands covered under CARP from the DAR to the LBP, a
requirements for payment just compensation.
and execution of CARP Form No. 17.b specialized government bank. The intent is to accelerate program implementation
Confirmation of Coverage (Confirmation of
and Transfer. Coverage and Transfer It must also be noted that under the DARAB 2003 Rules of Procedure,
by tapping the LBPs professional expertise, as expressed in the EOs whereas
For Claims of
Corporate LOs Still there is no requirement of delivery or deposit of provisional compensation based
Pending with clause:
DARAB)
on the judgment or award by the PARAD/RARAD or DARAB. Section 10, Rule WHEREAS, the Land Bank of
23 DARPO Upon receipt of the CARP Form No. 18 the Philippines employs commercial banking personnel
Certification of Deposit (Request to Issue TCT XIX of the DARAB 2003 Rules only allows execution of judgments for whose professional expertise includes appraisal of
from LBP, transmits the in the name of RP) agricultural properties for purposes of granting loans;
same to the Register of compensation which have become final and executory. [16] This only underscores
Deeds concerned, WHEREAS, the implementation of the
including the approved Comprehensive Agrarian Reform Program, particularly on
the primary responsibility of the LBP to submit an initial valuation at which DAR the matter of acquisition and distribution of private
segregation/subdivision
plan of subject property, if agricultural lands, may be accelerated by streamlining
partially covered and would offer to purchase the land, and to deposit said amount after the landowner certain administrative procedures in land valuation and
simultaneously requests compensation;
the ROD to issue TCT in has rejected the offer. NOW, THEREFORE, I, CORAZON C. AQUINO,
the name of RP. President of the Philippines, by virtue of the powers vested
in me by law, do hereby order:
24 ROD Issues new TCT in the New TCT in the name SECTION 1. The Land Bank of
name of RP and forwards of RP and owners the Philippines shall be primarily responsible for the
There is still another reason why we cannot agree with the appellate courts
owners duplicate duplicate copy of title determination of the land valuation and compensation for all
certificate of title in the in the name of RP. private lands suitable for agriculture under either the
interpretation of Section 16, R.A. No. 6657. Petitioner had assumed a more Voluntary Offer to Sell (VOS) or Compulsory Acquisition
name of RP to LBP-LVO
which furnishes the PARO (CA) arrangements as governed by Republic Act No.
a certified xerox copy of significant role as financial intermediary for the CARP after 1989, primarily due to 6657. The Department of Agrarian Reform shall make
the same. use of the determination of the land valuation and
25 DARAB/ Simultaneously with scandals and anomalies, which stalled its implementation during the Aquino compensation by the Land Bank of the Philippines, in
RARAD/ Activity Nos. 22-24 the performance of [its] functions.
PARAD above, the DARAB/
The objective of the procedures on land valuation provided by the Comprehensive
Agrarian Reform Law (CARL) as amplified by the issuances of the DAR/DARAB
is to enforce the constitutional guarantee of just compensation for the taking of
private agricultural lands placed under the CARP. It must be stressed that the
DARs authority to determine just compensation is merely preliminary. On the
other hand, under Section 1 of EO No. 405, series of 1990, the LBP is charged
with the initial responsibility of determining the value of lands placed under land
reform and the just compensation to be paid for their taking.
In both voluntary and compulsory acquisitions, wherein the landowner
rejects the offer, the DAR opens an account in the name of the landowner and
conducts a summary administrative proceeding. If the landowner disagrees with
the valuation, the matter may be brought to the RTC, acting as a special agrarian
court. But as with the DAR-awarded compensation, LBPs valuation of lands
covered by CARL is considered only as an initial determination, which is not
conclusive, as it is the RTC, sitting as a Special Agrarian Court, that should make
the final determination of just compensation, taking into consideration the factors
enumerated in Section 17 of R.A. No. 6657 and the applicable DAR regulations.
[18]
It is now settled that the valuation of property in eminent domain is essentially a
judicial function which is vested with the RTC acting as Special Agrarian
Court. The same cannot be lodged with administrative agencies and may not be
usurped by any other branch or official of the government. [19]
Although under the CARL of 1988, the landowners are entitled to
withdraw the amount deposited in their behalf pending the final resolution of the
case involving the final valuation of his property, [20] the SAC may not, as in this
case, order the petitioner to deposit or deliver the much higher amount adjudged by
the RARAD considering that it already complied with the deposit of provisional
compensation by depositing the amount of its initial valuation which was rejected
by the respondent. And while the DARAB Rules of Procedure provides for
execution pending appeal upon meritorious grounds, [21] respondent has not
established such meritorious reasons for allowing execution of the RARAD
decision pending final determination of just compensation by the court.
As the Court had previously declared, the LBP is primarily responsible
for the valuation and determination of compensation for all private lands. It has the
discretion to approve or reject the land valuation and just compensation for a
private agricultural land placed under the CARP. In case the LBP disagrees with
the valuation of land and determination of just compensation by a party, the DAR,
or even the courts, the LBP not only has the right, but the duty, to challenge the
same, by appeal to the CA or to this Court, if appropriate. [22] Both LBP and
respondent filed petitions before the SAC disputing the RARAD judgment
awarding compensation in the amount of P10,294,721.00. In view of the
substantial difference in the valuations -- the initial valuation by the LBP being
only P1,145,806.06 -- the more prudent course is to await the final resolution of
the issue of just compensation already filed with said court.
Lastly, the Court finds no merit in the contention of respondent that the
RARADs decision had already become final due to failure of the petitioner to
appeal the same to the Board, in accordance with Section 5, Rule XIX of the 2003
DARAB Rules of Procedure. It must be noted that said Rules was adopted only
on January 17, 2003. Section 1, Rule XXIV of the 2003 DARAB Rules explicitly
states that:
SECTION 1. Transitory Provisions. These rules
shall govern all cases filed on or after its effectivity. All
cases pending with the Board and the Adjudicators, prior to
the date of effectivity of these Rules, shall be governed by
the DARAB Rules prevailing at the time of their filing.
The applicable rule is Section 2, Rule XIV (Judicial Review) of the Revised Rules
of the Department of Agrarian Reform Adjudication Board which provides:
Section 2. Just Compensation Cases to the Special
Agrarian Courts. -- The decision, resolution or order of the
Adjudicator or the Board on land valuation or determination
of just compensation, may be brought to the proper Special
Agrarian Court for final judicial determination.
WHEREFORE, the petition is GRANTED. The assailed
Decision dated August 8, 2003 of the Court of Appeals in CA-G.R. SP No. 76572
is hereby REVERSED and SET ASIDE. The Land Bank of the Philippines is
hereby declared to have duly complied with the requirement of deposit of
provisional compensation under Section 16 (e) of R.A. No. 6657 and DAR AO No.
02, series of 1996.
No costs.
SO ORDERED.
MAR
 been reached in consultation before the case was assigned to the writer of the Program posted by Emergency Network at <http://www.fian.org/cases/letter-
opinion of the Courts Division. campaigns/ philippines-over-valuation-of-land-awarded-under-agrarian-
reform-program?set_language=en>; Not the biggest distribution in history
by Albert M. Lagliva, published in the July 2002 issue of the Intersect, article
posted at <http://www.jesuits.ph/ignaciana/Ministries/FINAL%20ICSI
%20WEB/agri-cont.htm>; and Land Reform for the Elite: Voluntary Offers to
Sell by David Wurfel, University of Windsor, posted at
WE CONCUR: <http://davidwurfel.ca/philippines/land-reform-for-the-elite-voluntary-offers-
to-sell-under-carp>.
[18]
See Land Bank of the Philippines v. Luciano, G.R. No. 165428, November 25,
2009, 605 SCRA 426, 439.
[19]
Apo Fruits Corporation v. Court of Appeals, G.R. No. 164195, February 6,
CONCHITA CARPIO MORALES 2007, 514 SCRA 537, 560, citing Land Bank of the Phils. v. Wycoco, 464
Associate Justice Phil. 83, 94 (2004); Export Processing Zone Authority v. Dulay, No. L-
Chairperson 59603, April 29, 1987, 149 SCRA 305, 316; Belen v. Court of Appeals, No.
L-45390, April 15, 1988, 160 SCRA 291, 295; Land Bank of the Philippines
v. Natividad, G.R. No. 127198, May 16, 2005, 458 SCRA 441, 451; Phil.
Veterans Bank v. Court of Appeals, 379 Phil. 141, 147 (2000)
and Association of Small Landowners in the Philippines, Inc. v. Secretary of
*
Designated additional member per Special Order No. 843 dated May 17, 2010. Agrarian Reform, G.R. Nos. 78742, 79310, 79744 & 79777, July 14, 1989,
[1]
Rollo, pp. 52-61. Penned by Associate Justice Remedios A. Salazar-Fernando 175 SCRA 343, 376.
and concurred in by Associate Justices Godardo A. Jacinto and Edgardo F. [20]
See Land Bank of the Philippines v. Court of Appeals, G.R. Nos. 118712 &
Sundiam. 118745, October 6, 1995, 249 SCRA 149, 160.
[2]
ARTURO D. BRION Id. at 53-56. [21]
Sec. 2, Rule XX, 2003 DARAB Rules of Procedure.
[3]
Associate Justice Id. at 59-60. [22]
Land Bank of the Philippines v. AMS Farming Corporation, G.R. No.
[4]
Id. at 64. 174971, October 15, 2008, 569 SCRA 154, 177.
[5]
Id. at 32.
[6]
Id. at 33-36.
[7]
Id. at 37-38.
[8]
Id. at 41-43.
[9]
Id. at 43-45.
[10]
Id. at 94-98.
ROBERTO A. ABAD [11]
See Association of Small Landowners in the Philippines, Inc. v. Secretary of
Associate Justice Agrarian Reform, G.R. Nos. 78742, 79310, 79744 & 79777, July 14, 1989,
175 SCRA 343, 391.
[12]
Republic v. Court of Appeals, G.R. No. 122256, October 30, 1996, 263 SCRA
758, 764.
[13]
AT T E S TAT I O N Gabatin v. Land Bank of the Philippines, G.R. No. 148223, November 25, 2004,
444 SCRA 176, 187, citing Landbank of the Philippines v. Banal, G.R. No.
143276, July 20, 2004, 434 SCRA 543, 548-549; Land Bank of the
I attest that the conclusions in the above Decision had been reached in consultation Philippines v. Wycoco, G.R. Nos. 140160 and 146733, January 13, 2004, 419
before the case was assigned to the writer of the opinion of the Courts Division. SCRA 67, 76; and Republic v. Court of Appeals, supra at 764.
[14]
See Landbank of the Philippines v. Banal, supra at 548.
[15]
Land Bank of the Philippines v. Kumassie Plantation Company,
Incorporated, G.R. Nos. 177404 & 178097, June 25, 2009, 591 SCRA 1, 9.
[16]
SECTION 10. Execution of Judgments for Just Compensation which have
become Final and Executory. The Sheriff shall enforce a writ of execution of
CONCHITA CARPIO a final judgment for compensation by demanding for the payment of the
MORALES
amount stated in the writ of execution in cash and bonds against the Agrarian
Associate Justice
Chairperson, ThirdReform Fund in the custody of the LBP in accordance with RA 6657, and the
Division
LBP shall pay the same in accordance with the final judgment and the writ of
execution within five (5) days from the time the landowner accordingly
executes and submits to the LBP the corresponding deed/s or transfer in favor
of the government and surrenders the muniments of title to the property in
C E R T I FI C AT I O N accordance with Section 16 (c) of R.A. 6657.
[17]
See The Garchitorena Land Scam by GMA NewsTV at
Pursuant to Section 13, Article VIII of the 1987 Constitution and the Division <http://www.gmanews.tv/story/182211/the-garchitorena-land-scam>. See
Chairpersons Attestation, I certify that the conclusions in the above Decision had also Philippines: Over-valuation of Land Awarded Under Agrarian Reform
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 192999 July 18, 2012

DIAMOND FARMS, INC., Petitioner,

vs.
DIAMOND FARM WORKERS MULTI-PURPOSE COOPERATIVE,
ELlSEO EMANEL, VOLTAIRE LOPEZ, RUEL ROMERO, PATRICIO
CAPRICIO, ERNESTO FATALLO, ZOSIMO GOMEZ AND 100 JOHN
DOES, Respondents.

DECISION

VILLARAMA, JR., J.:

Petitioner Diamond Farms, Inc. appeals the Decision 1 dated December 17, 2009
and Resolution 2 dated July 15, 2010 of the Court of Appeals (CA) in CA-G.R. SP
No. 101384.

The facts of the case are as follows:

Petitioner is a corporation engaged m commercial farming of bananas.3 It owned

1,023.8574 hectares of land in Carmen, Davao. A big portion of this land
measuring 958.8574 hectares (958-hectare land) was initially deferred for
acquisition and distribution under the Comprehensive Agrarian Reform Program
(CARP).4 On November 3, 1992, Secretary Ernesto D. Garilao of the Department
of Agrarian Reform (DAR) likewise approved the Production and Profit Sharing
(PPS) Scheme proposed by the Philippine Banana Growers and Exporters
Association as the mode of compliance with the required production sharing under
Section 32 of Republic Act No. 6657, otherwise known as the Comprehensive
Agrarian Reform Law (CARL).5
Later, on February 14, 1995, the Deferment Order was lifted and the aforesaid 958-
hectare land was placed under CARP coverage. Thereafter, 698.8897 hectares of
the 958-hectare land were awarded to members of the Diamond Agrarian Reform
Beneficiaries Multi-Purpose Cooperative (DARBMUPCO). Petitioner, however,
maintained management and control of 277.44 hectares of land, including a portion
measuring 109.625 hectares (109-hectare land).
On November 23, 1999, petitioners certificates of title over the 109-hectare land
were cancelled. In lieu thereof, Transfer Certificates of Title (TCT) Nos. T-154155
to T-154160 were issued in the name of the Republic of the Philippines. On August
5, 2000, the DAR identified 278 CARP beneficiaries of the 109-hectare land,
majority of whom are members of respondent Diamond Farm Workers Multi-
Purpose Cooperative (DFWMPC). On October 26, 2000, the DAR issued six
Certificates of Land Ownership Award (CLOAs) collectively in favor of the 278
CARP beneficiaries.6
Subsequently, on July 2, 2002, petitioner filed a complaint 7 for unlawful
occupation, damages and attorneys fees against respondents. Petitioner alleged
that as of November 1995, it was the holder of TCT Nos. 112068 and 112073
covering two parcels of land within the 109-hectare land. It alleged that it had been
in possession for a long time of the two lands, which had a total area of 74.3393
hectares (74-hectare land), and grew thereon export-quality banana, producing on
average 11,000 boxes per week worth P1.46 million. It alleged that the DARs
August 5, 2000
Order distributing the 109-hectare land to 278 CARP beneficiaries was not yet
final on account of appeals, and therefore petitioner remains the lawful possessor
of the subject land (109-hectare land) and owner of the improvements thereon. But
while the CARP beneficiaries have not been finally designated and installed,
respondents its farm workers refused to do their work from June 10, 2002,
forcibly entered and occupied the 74-hectare land, and prevented petitioner from
harvesting and introducing agricultural inputs. Thus, petitioner prayed that
respondents be ordered to vacate the subject land; that it be allowed to harvest on
the 74-hectare land; and that respondents be ordered to pay it lost income of P1.46
million per week from June 10, 2002 until farm operation normalizes, exemplary
damages of P200,000, attorneys fees of P200,000, appearance fees, incidental
expenses of P100,000 and costs.
In their answer with compulsory counterclaim,8 respondents admitted that
petitioner was the holder of TCT Nos. 112068 and 112073, covering the 74-hectare
land and that the said land produces 11,000 boxes of export-quality bananas per
week. Respondents added that besides the 74-hectare land, petitioner owned four
other parcels of land covered by TCT Nos. 112058, 112059, 112062 and 112063
having a total area of 35.2857 hectares (35-hectare land). These six parcels, which
altogether have a total area of 109.625 hectares (109-hectare land), were acquired
by the government upon the issuance of TCTs in the name of the Republic of the
Philippines. But even after CLOAs were issued to the 278 CARP beneficiaries, that the appeals from the Distribution Order concern distribution and will not
petitioner continued to manage the 109-hectare land, paying wages to respondents restore petitioners ownership; that the 278 CARP beneficiaries can now exercise
as farm workers. Since 1995 they had been demanding from petitioner payment of their rights of ownership and possession; and that petitioner should have delivered
their production share to no avail. possession of the 109-hectare land to the CARP beneficiaries on August 5, 2000
instead of remaining in possession and in control of farm operations.
Respondents further claimed that petitioner conspired with 67 CARP beneficiaries
to occupy and cultivate the 35-hectare land. Petitioner tried to allow alleged In awarding production and profit share, the DARAB held that Section 32 of the
beneficiaries to occupy portions of the 74-hectare land, but respondents guarded it CARL requires petitioner to distribute said share to respondents. The DARAB
to protect their own rights, so the intruders were able to occupy only the pumping computed the production and profit share based on the PPS Scheme proposed by
structure. Thereafter, petitioner stopped farm operation on the 74-hectare land and the Philippine Banana Growers and
refused their request to resume farm operation. By way of relief, respondents
prayed that their rights as CARP beneficiaries of the 109-hectare land be
Exporters Association and approved by DAR Secretary Ernesto D. Garilao. The
recognized and that their counterclaims for production share, profit share, accrued
dispositive portion of the DARABs December 11, 2006 Decision reads:
income and interest be granted.
WHEREFORE, premises considered, the Appeal is hereby DENIED for lack of
Petitioner filed a reply9 and alleged that respondents initiated the commission of
merit.
premature and unlawful entry into the 35-hectare land and did nothing to curb the
unlawful entry of other parties. Petitioner also admitted that respondents recently
allowed it to harvest and perform essential farm operations. The assailed Decision is hereby MODIFIED to read as follows:
In their rejoinder,10 respondents denied that they illegally entered the 35-hectare 1. DENYING the reliefs prayed for in the complaint;
land. They averred that petitioner promoted the entry of third parties and cited
petitioners agreements with third parties for the harvest of fruits thereon.
2. ORDERING the [petitioner] to turn over to the respondents the
possession of the subject landholding and respect the respondents
During the proceedings before the Office of the Regional Adjudicator, petitioner peaceful possession thereof;
submitted its computation of respondents production and profit share from the
109-hectare land for the years 1995 to 1999 and accordingly deposited the amount
3. ORDERING the [petitioner] to pay the respondents the following
of P2.51 million. Respondents were required to submit a project of distribution,
amount:
and the parties were ordered to submit position papers. Upon compliance by
respondents with the order to submit a project of distribution, the Office of the
Regional Adjudicator ordered the release of the amount deposited by petitioner to a. P27,553,703.25 less P2,511,786.00 as Production and
respondents.11 Respondents thereafter submitted their position paper,12 wherein Profit Share (PPS) from 15 February 1995 to 31 December
they reiterated that they had to guard the land to protect their rights. They 2005;
confirmed petitioners acceptance of their request to resume normal farm
operation, and manifested that a precarious peace and harmony thereafter reigned
on the 109-hectare land. They also repeated their prayers in their answer. b. P17,796,473.43 as lease rental for the use of the land of
Petitioner, on the other hand, failed to file its position paper despite several petitioner from 26 October 2000 up to 31 December 2005;
requests for extension of time to file the same.13
c. P6,205,011.89 as accrued interest on the unpaid PPS from
01 March 1996 to 01 March 2006; and d. P2,241,930.90 as
In his Decision,14 the Regional Agrarian Reform Adjudicator ruled that petitioner
accrued interest on the unpaid lease rental from 01 January
lost its ownership of the subject land when the government acquired it and CLOAs
2001 to 01 January 2006.
were issued in favor of the 278 CARP beneficiaries. The appeals from the
Distribution Order will not alter the fact that petitioner is no longer the owner of
the subject land. Also, respondents have been identified as CARP beneficiaries; 4. ENCOURAGING the parties to enter into an agribusiness venture
hence, they are not unlawfully occupying the land. The Adjudicator added that over the subject landholding, if feasible.
petitioner is unlawfully occupying the land since it has no contract with the CARP
beneficiaries. Thus, the Adjudicator denied petitioners prayers in its complaint
and granted respondents counterclaims. SO ORDERED.16
Its motion for reconsideration having been denied, petitioner appealed to the CA
Aggrieved, petitioner appealed to the DARAB, but the DARAB denied
raising the following arguments: (1) respondents are not the lawful possessors of
petitioners appeal in a Decision 15 dated December 11, 2006. The DARAB ruled
the subject land as well as the valuable improvements thereon, prior to receipt by
that petitioner is unlawfully occupying the subject land; hence, its complaint
petitioner of the corresponding payment for the land from the government, or upon
against respondents for unlawful occupation lacks merit. It also ruled that
deposit in favor of petitioner of the compensation for the same in cash or in Land
petitioner is no longer entitled to possess the subject land; that petitioner lost its
Bank of the Philippines (LBP) bonds; (2) not being lawful possessors of the
ownership thereof; that ownership was transferred to the 278 CARP beneficiaries;
subject land, respondents are not entitled to production share in the amount of
P25.04 million and interest thereon in the amount of P6.21 million; and (3) not
being lawful possessors of the subject land, respondents are not entitled to lease
rentals as well as accrued interest thereon.17
As afore-stated, the CA in the assailed Decision affirmed the DARAB decision.
The CA, however, deleted the award of lease rentals and interest thereon, to wit:
WHEREFORE, the assailed December 11, 2006 Decision and August 29, 2007
Resolution are MODIFIED to delete the DARABs award of lease rentals and
interests thereon in favor of respondents. The rest is AFFIRMED in toto.
18
SO ORDERED.
The CA agreed with the DARAB in rejecting petitioners bare and belated
allegation that it has not received just compensation. The alleged nonpayment of
just compensation is also a collateral attack against the TCTs issued in the name of
the Republic of the Philippines. The CA found that petitioner has never sought the
nullification of the Republics TCTs. Further, the CA found no credible evidence
relating to proceedings for payment of just compensation. The CA held that the
issuance of the Republics TCTs and CLOAs in favor of the 278 CARP
beneficiaries implies the deposit in cash or LBP bonds of the amount initially
determined as compensation for petitioners land or the actual payment of just
compensation due to petitioner. Additionally, the appeals over the Distribution
Order cannot justify petitioners continued possession since the appeals concern
only the manner of distribution.
The CA held that petitioner became liable for respondents production share when
the Deferment Order was lifted. The CA noted that the DARAB computed the
production share based on the approved PPS Scheme. The CA also noted
petitioners deposit of P2.51 million as petitioners recognition of respondents
right to production share.
Aggrieved, petitioner filed a motion for partial reconsideration contending that the
CA erred when it affirmed the DARAB in ordering petitioner to (1) turn over
possession of the subject land to respondents and respect their possession thereof
and (2) pay respondents production and profit share of P25.04 million and interest
of P6.21 million.19 The CA, however, denied petitioners motion for partial
reconsideration.
Hence, petitioner filed the present appeal. Respondents, on the other hand, no
longer appealed the CA Decision and Resolution.
In its petition, petitioner argues that
I.
WITH ALL DUE RESPECT, THE HONORABLE COURT OF
APPEALS, IN COMPLETE DEROGATION OF THE
PETITIONERS CONSTITUTIONAL RIGHT TO RECEIVE JUST
COMPENSATION FOR THE TAKING OF ITS PROPERTY,
COMMITTED A SERIOUS
ERROR OF LAW WHEN IT AFFIRMED THE PORTION OF THE 4. [TCT Nos.] T-112058, T-112059, T-112062, T-112063, T-112073 and
DECISION OF THE DARAB BASED ON ITS REASONING THAT T-112068 of petitioner which show that LBP Certificates of Deposit and
THE ISSUE OF NON-PAYMENT OF JUST COMPENSATION TO DAR Memorandum-Request were duly annotated at the back thereof,
THE PETITIONER IS AN ISSUE RAISED ONLY AT THE DARAB and that the same were cancelled on 23 November 1999 upon issuance
LEVEL; THIS RULING IS SIMPLY NOT IN ACCORD WITH LAW of TCTs in favor [of] the Republic of the Philippines;
AND PERTINENT JURISPRUDENCE
5. [TCT Nos.] T-154159, T-154160, T-154157, T-154156, T-154155
II. issued in favor of the Republic of the Philippines showing that the same
were cancelled on 30 October 2000 upon issuance of TCT[s] in favor of
herein respondents;
WITH ALL DUE RESPECT, THE HONORABLE COURT OF
APPEALS COMMITTED SERIOUS ERROR OF LAW IN
CONSIDERING THE PETITIONERS ASSERTION OF ITS 6. [TCT Nos.] C-14005, C-14006, C-15311, C-15526, C-15527, C-
CONSTITUTIONAL RIGHT TO JUST COMPENSATION AS A 14007, C-14004 issued infavor of herein respondents showing THAT
COLLATERAL ATTACK ON THE REPUBLICS TITLE20 THE FARM/HOMELOT DESCRIBED IN THIS CERTIFICATE OF
LANDOWNERSHIP AWARD IS ENCUMBERED IN FAVOR OF
THE LAND BANK OF THE PHILIPPINES TO SECURE FULL
Essentially, the issues for our resolution are: (1) whether respondents
PAYMENT OF ITS VALUE UNDER [THE CARL] BY THE
are guilty of unlawful occupation and liable to petitioner for damages
FARMER-BENEFICIARY NAMED HEREIN, and that the same
and attorneys fees, (2) whether petitioner should turn over possession
were already cancelled on April 30, 2009 upon issuance of TCTs in
of the subject land to respondents and respect their possession thereof,
favor of herein respondent cooperative now Davao Farms Agrarian
and (3) whether the award of production share and interest was proper.
Reform Beneficiaries Multi-Purpose Cooperative DFARBEMPCO. 24
Petitioner insists that prior to its receipt of the corresponding payment
In its reply, petitioner states that to "set the record straight, the documents
for the land from the government or deposit in its favor of the
presented by respondents refer to the deposit of the initial valuation of the land" as
compensation for the land in cash or in LBP bonds, respondents cannot
determined by the LBP. This is not the just compensation for the land which is
be deemed lawful possessors of the subject land and the valuable
required to be determined by a court of justice.25 According to petitioner, Sections
improvements thereon, citing Section 16 (e) of the CARL. According to
56 and 57 of the CARL provides that the Regional Trial Court (RTC), acting as a
petitioner, "it has yet to receive any compensation for the lands
Special Agrarian Court (SAC), has the original and exclusive jurisdiction over all
acquired by the government."21 Petitioner also contends that the CA
petitions for the determination of just compensation to landowners. Petitioner also
erred in ruling that the issue of nonpayment of just compensation was
states that the issue of just compensation may be easily gleaned at least from the
raised only at the DARAB level, such being an unavoidable issue
submissions of the parties in their pleadings and one that had therefore been tried
intertwined with its cause of action. Petitioner further avers that the CA
under the parties implicit agreement. We find petitioners contentions bereft of
erred in ruling that petitioners assertion of its constitutional right to
merit. On the first issue, we agree that respondents are not guilty of unlawful
just compensation is a collateral attack on the TCTs of the Republic of
occupation and that there exists no basis to award damages and attorneys fees to
the Philippines. Petitioner maintains that the Republics TCTs which
petitioner as respondents are agrarian reform beneficiaries who have been
are derived from its TCTs pursuant to the CARL are neither attacked
identified as such, and in whose favor CLOAs have been issued. We thus uphold
nor assailed in this case. Petitioner thus prays that it be declared as the
the ruling denying petitioners prayers in its complaint for unlawful occupation,
lawful owner and possessor of the subject land until its actual receipt of
damages and attorneys fees. However, we note significant facts which dispute
just compensation.
some findings of the Adjudicator, DARAB and CA, and make the necessary
clarification or correction as appropriate.
In their comment, respondents claim that petitioner is just trying to
mislead this Court that it has not been paid compensation for its
It is beyond doubt that petitioner is the farm operator and manager while
property. Respondents cite two Certifications 22 of Deposit (CARP Form
respondents are the farm workers. Both parties enjoyed possession of the land.
No. 17) showing that the LBP deposited P9.92 million in cash and
Together, they worked thereon. Before CARP, petitioner was the landowner, farm
agrarian reform bonds as compensation for 91.3925 hectares of land
operator and manager. Respondents are its farm workers. After the deferment
and another 18.2325 hectares of land, or for 109.625 hectares of land
period, CARP finally dawned. Petitioner lost its status as landowner, but not as
(109-hectare land), owned by petitioner and covered by TCT Nos. T-
farm operator and manager. Respondents remained as petitioners farm workers
112058, 112059, 112062, 112063, 112068, and 112073. Respondents
and received wages from petitioner.
also cite a DAR Memorandum23 dated November 22, 1999 (CARP
Form No. 18) requesting the Register of Deeds to issue TCTs in the
name of the Republic of the Philippines. Respondents then summarized Now, the unrebutted claim of respondents in their answer and position paper is that
the consequent cancellations of the TCTs by attaching certified true they guarded the 74-hectare land to protect their rights as farm workers and CARP
copies of: beneficiaries. They were compelled to do so when petitioner attempted to install
other workers thereon, after it conspired with 67 CARP beneficiaries to occupy the
35-hectare land. They were fairly successful since the intruders were able to
xxxx
occupy the pumping structure. The government, including this Court, cannot
condone petitioners act to thwart the CARPs implementation. Installing
workers on a CARP-covered land when the DAR has already identified the CARP
beneficiaries of the land and has already ordered the distribution of the land to
them serves no other purpose than to create an impermissible roadblock to
installing the legitimate beneficiaries on the land.
We also find the action taken by respondents to guard the land as reasonable and
necessary to protect their legitimate possession and prevent precisely what
petitioner attempted to do. Such course was justified under Article 429 of the Civil
Code which reads:
ART. 429. The owner or lawful possessor of a thing has the right to exclude any
person from the enjoyment and disposal thereof. For this purpose, he may use such
force as may be reasonably necessary to repel or prevent an actual or threatened
unlawful physical invasion or usurpation of his property.
Being legitimate possessors of the land and having exercised lawful means to
protect their possession, respondents were not guilty of unlawful occupation.
As to the immediate resumption of farm operations, petitioner admitted that
respondents have already allowed it to harvest and perform essential activities.
Respondents have confirmed that petitioner accepted their request to resume
normal farm operations such that a precarious peace and harmony reigned on the
109-hectare land. That farm operations resumed is evident from petitioners claim
of lost income amounting to P1.46 million a week for four weeks, from June 10,
2002 to July 7, 2002.26 Due to the parties quick and voluntary agreement, farm
operation and the parties relationship normalized within five days from the filing
of the complaint on July 2, 2002. We thus agree that petitioner must respect
respondents possession.
However, we disagree with the finding of the Adjudicator and DARAB that
petitioner is guilty of unlawful occupation. Since respondents themselves have
asked petitioner to resume its farm operation, petitioners possession cannot be
said to be illegal and unjustified.
This notwithstanding, we sustain the order for petitioner to turn over possession of
the 109-hectare land. The DARAB and the DAR shall ensure that possession of the
land is turned over to qualified CARP beneficiaries.
The procedure for acquisition of private lands under Section 16 (e) of the CARL is
that upon receipt by the landowner of the corresponding payment or, in case of
rejection or no response from the landowner, upon deposit with an accessible bank
designated by the DAR of the compensation in cash or in LBP bonds, the DAR
shall take immediate possession of the land and request the proper Register of
Deeds to issue a TCT in the name of the Republic of the Philippines. Thereafter,
the DAR shall proceed with the redistribution of the land to the qualified
beneficiaries, to wit:
SEC. 16. Procedure for Acquisition of Private Lands. For purposes of
acquisition of private lands, the following procedures shall be followed:
xxxx
(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.
xxxx
Petitioner eventually acknowledged that there was indeed a deposit of the initial
valuation of the land. There were two deposits of cash and agrarian reform bonds
as compensation for the 109-hectare land owned by petitioner and covered by TCT
Nos. T-112058, 112059, 112062, 112063, 112068 and 112073. Notably, petitioner
also manifested that the Republics TCTs which are derived from its TCTs
pursuant to the CARL are neither attacked nor assailed in this case. Petitioner even
argued that the transfer of possession and ownership of the land to the government
is conditioned upon the receipt by the landowner of the corresponding payment or
deposit by the DAR of the compensation with an accessible bank. 27 Following
petitioners own reasoning, petitioner has already lost its possession and
ownership when the condition was fulfilled. Likewise undisputed is that in 2000,
CLOAs had been issued collectively in favor of the 278 CARP beneficiaries of the
109-hectare land. These CLOAs constitute evidence of ownership by the
beneficiaries under the then provisions of Section 2428 of the CARL, to wit:
SEC. 24. Award to Beneficiaries. The rights and responsibilities of the
beneficiary shall commence from the time the DAR makes an award of the land to
him, which award shall be completed within one hundred eighty (180) days from
the time the DAR takes actual possession of the land. Ownership of the beneficiary
shall be evidenced by a Certificate of Land Ownership Award, x x x.
(Underscoring ours.)
In the light of the foregoing, this Court cannot grant petitioners plea that it be
declared as the lawful owner of the 109-hectare land. It is also to be noted that in
its complaint, petitioner did not even claim ownership of the 109-hectare land.
Petitioner could only state that as of November 1995, it was the holder of the TCTs
covering the 74-hectare land and that pending resolution of the appeals from the
distribution orders, it remains in the meantime as the lawful possessor of the 109-
hectare land. Nothing therefore supports petitioners claim that it is the lawful
owner of the 109-hectare land.
To reiterate, petitioner had lost its ownership of the 109-hectare land and
ownership thereof had been transferred to the CARP beneficiaries. Respondents
themselves have requested petitioner to resume its farm operations and this fact
has given petitioner a temporary right to enjoy possession of the land as farm
operator and manager.
We, however, agree that petitioner must now turn over possession of the 109-
hectare land.
The matter has already been settled in Hacienda Luisita, Incorporated, etc. v.
Presidential Agrarian Reform Council, et al.,29 when we ruled that the Constitution
and the CARL intended the farmers, individually or collectively, to have control
over agricultural lands, otherwise all rhetoric about agrarian reform will be for
naught. We stressed that under Section 4, Article XIII of the 1987 Constitution and
Section 2 of the CARL, 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. The policy on agrarian reform is that control over the
agricultural land must always be in the hands of the farmers.
Under Section 16 (e) of the CARL, the DAR is mandated to proceed with the
redistribution of the land to the qualified beneficiaries after taking possession of
the land and requesting the proper Register of Deeds to issue a TCT in the name of
the Republic of the Philippines. Section 24 of the CARL is yet another mandate to
complete the award of the land to the beneficiary within 180 days from the time
the DAR takes actual possession of the land.30 And under Section 20 of DAR
Administrative Order No. 9, Series of 1998, also known as the Rules and
Regulations on the Acquisition, Valuation, Compensation and Distribution of
Deferred Commercial Farms, CLOAs shall be registered immediately upon
generation, and the Provincial Agrarian Reform Officer (PARO) shall install or
cause the installation of the beneficiaries in the commercial farm within seven days
from registration of the CLOA. Section 20 of the Rules provides:
SEC. 20. Registration of CLOAs and Installation of Beneficiaries CLOAs shall
be registered immediately upon generation. The PARO shall install or cause the
installation of the beneficiaries in the commercial farm within seven (7) days from
registration of the CLOA.
We hold that the 109-hectare land must be distributed to qualified CARP
beneficiaries. They must be installed on the land and have possession and control
thereof.
A problem that emerged in this case is the identification of qualified CARP
beneficiaries. Respondents own evidence does not definitively show who are the
legitimate CARP beneficiaries in the 109-hectare land. TCT Nos. 112058, 112059,
112062, 112063, 112068, and 112073, issued in the name of petitioner, were
cancelled by TCT Nos. 154155 to 154160 issued in the name of the Republic of
the Philippines. The Republics TCTs were cancelled by TCT Nos. C-14002 to C-
14007.31 Notably, TCT Nos. C-14004,32 C-14006,33 and C-1400734 show that they
were respectively cancelled by TCT Nos. C-27342, C-27344, and C-27345, all in
favor of DFARBEMPCO. It must be verified however if DFARBEMPCO is the
legitimate successor of DFWMPC, herein respondent cooperative. As regards TCT
No. C-14005,35 there was a partial cancellation by TCT No. C-27110 in favor of
DARBMUPCO and total cancellation by TCT No. C-27343 in favor of
DFARBEMPCO. Nothing is shown about TCT Nos. C-14002 to C-14003.
Neither can TCT Nos. C-15311,36 C-15526,37 and C-1552738 provide clarity. These
TCTs cited by respondents contain entries of partial or total cancellation by TCT
Nos. C-27346, C-27115 and C-27114, in favor of DFARBEMPCO or
DARBMUPCO. The areas covered by TCT Nos. C-15311, C-15526, and C-15527
also appear to be different than those covered by the cancelled TCTs in the name of
petitioner and the Republic of the Philippines. Hence, it is imperative that the DAR
and PARO assist the DARAB so that the 109-hectare land may be properly turned
over to qualified CARP beneficiaries, whether individuals or cooperatives.
Needless to stress, the DAR and PARO have been given the mandate to distribute
the land to qualified beneficiaries and to install them thereon.
To fully address petitioners allegations, we move on to its claim that the issue of
just compensation is an issue that may easily be gleaned at least from the
submissions of the parties in their pleadings and one that had therefore been tried
under the parties implicit agreement.
Petitioners claim is unfounded. Even the instant appeal39 is silent on the factors
to be considered40 in determining just compensation. These factors are enumerated
in Section 1741 of the CARL which reads:
SECTION 17. Determination of Just Compensation. In determining just
compensation, the cost of acquisition of the land, the current value of like
properties, its nature, actual use and income, the sworn valuation by the owner, the
tax declarations, and the assessment made by government assessors shall be
considered. The social and economic benefits contributed by the farmers and the
farmworkers and by the Government to the property as well as the nonpayment of
taxes or loans secured from any government financing institution on the said land
shall be considered as additional factors to determine its valuation.
What petitioner stressed before us and before the CA to assail respondents
possession is its less-than-candid claim that it has yet to receive any compensation
for the lands acquired by the government. 42 Petitioners cause of action in its
complaint for unlawful occupation with prayer that respondents be ordered to
vacate and pay damages and attorneys fees cannot also be mistaken as one for
determination of just compensation. Thus, just compensation was never an issue in
this case.
Sections 56 and 57 of the CARL likewise provides that the RTC, acting as SAC,
has original and exclusive jurisdiction over all petitions for the determination of
just compensation to landowners, to wit:
SEC. 56. Special Agrarian Court. - The Supreme Court shall designate at least one
(1) branch of the Regional Trial Court (RTC) within each province to act as a
Special Agrarian Court.
xxxx
SEC. 57. Special Jurisdiction. The Special Agrarian Courts shall have original
and exclusive jurisdiction over all petitions for the determination of just
compensation to landowners, x x x.
We said that the DARs land valuation is only preliminary and is not, by any
means, final and conclusive upon the landowner. The landowner can file an
original action with the RTC acting as SAC to determine just compensation. The
court has the right to review with finality the determination in the exercise of what
is admittedly a judicial function.43
This case however was not brought before the SAC on determination of just
compensation. No reversible error was therefore committed by the CA when it did
not rule on just compensation.
On the third issue, petitioner contends that respondents are not entitled to
production share as well as interest since they are not lawful possessors of the
subject land. Petitioner asserts that the 3% production share under Section 32 of
the CARL may only be given if there are sales from the production of the land.
Petitioner however claims that it has incurred losses and that respondents admitted SO ORDERED.
that farm operations in the subject land have not normalized. Petitioner thus
submits that there is no factual basis in the production share from the sale of
MARTIN S. VILLARAMA, JR.
agricultural products in the subject land.
Associate Justice
The contention has no merit.
WE CONCUR:
We have already ruled that respondents possession is legitimate. On petitioners
LUCAS P. BERSAMIN*
claim that it incurred losses, Section 32 of the CARL clearly states that the 3%
Associate Justice
production share of the farm workers is based on "gross sales from the production
Acting Chairperson
of such lands," to wit:
MARIANO C. DEL CASTILLO ROBERTO A. ABAD**
SEC. 32. Production-Sharing. Pending final land transfer, individuals or entities
Associate Justice Associate Justice
owning, or operating under lease or management contract, agricultural lands are
hereby mandated to execute a production-sharing plan with their farmworkers or
farmworkers organization, if any, whereby three percent (3%) of the gross sales ESTELA M. PERLAS-BERNABE***
from the production of such lands are distributed within sixty (60) days of the end Associate Justice
of the fiscal year as compensation to regular and other farmworkers in such lands
over and above the compensation they currently receive: Provided, That these
individuals or entities realize gross sales in excess of five million pesos per annum AT T E S T AT I O N
unless the DAR, upon proper application, determines a lower ceiling.
(Underscoring ours.) I attest that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court's Division.
Petitioner cites its net losses, computed after deductions were made on the amount
of its sales.1wphi1 These losses however, have no bearing in computing the LUCAS P. BERSAMIN
production share which is based on gross sales. And petitioners own allegation of Associate Justice
weekly production worth P1.46 million the same amount used by petitioner as Acting Chairperson
basis of its claim for damages debunks its claim that no basis exists that there
were sales from agricultural products of the subject land. Likewise supporting the
C E R T I F I C AT I O N
existence of sales is petitioners own computation of respondents production
share and its deposit of the amount of P2.51 million before the Office of the
Regional Adjudicator. It must be noted also that farm operations normalized within Pursuant to Section 13, Article VIII of the Constitution and the Division Acting
five days from the filing of the complaint. Chairperson's Attestation, r certify that the conclusions in the above Decision had
been reached in consultation before the case was assigned to the writer of the
In sum, petitioner failed to show any reversible error committed by the CA in opinion of the Court's Division.
affirming the DARABs computation of respondents production share based on
the approved PPS Scheme. Notably, petitioner has admitted the fact of approval of ANTONIO T. CARPIO
the PPS Scheme.44 Senior Associate Justice
(Per Section 12, R.A. 296, The Judiciary Act of 1948, as amended)
WHEREFORE, we DENY the petition for lack of merit and AFFIRM the Decision
dated December 17, 2009 and Resolution dated July 15, 2010 of the Court of
Appeals in CA-G.R. SP No. 101384.
We also DIRECT the Department of Agrarian Reform and the Provincial Agrarian Footnotes
Reform Officer to assist the Department of Agrarian Reform Adjudication Board in
the distribution of the I 09-hectare land to the qualified agrarian reform
*
beneficiaries, whether individuals or cooperatives. Designated Acting Chairperson of the first Division per Special Order
No. 1251 dated July 12, 2012.
Let a copy of this Decision be served upon the Department of Agrarian Reform.
**
Designated Acting Member of the First Division per Special Order
No. 1252 dated July 12, 2012.
With costs against the petitioner.
*** 22
Designated Acting Member of the First Division per Special Order Id. at 401-402. All cases involving the cancellation of registered
No. 1227 dated May 30, 2012. emancipation patents, certificates of land ownership award,
23 and other titles issued under any agrarian reform program
Id. at 403.
1 are within the exclusive and original jurisdiction of the
Rollo, pp. 39-56. Penned by Associate Justice Rebecca De Guia-
Secretary of the DAR.
Salvador with the concurrence of Associate Justices Apolinario D. 24
Id. at 391-392.
Bruselas, Jr. and Mario V. Lopez.
29
G.R. No. 171101, April 24, 2012, pp. 17-22.
25
2 Id. at 544.
Id. at 78-79.
30
Under the amended provisions of Section 24, such award shall be
3
26
Id. at 31. completed in not more than 180 days from the date of registration of the
Id. at 9, 40.
title in the name of the Republic of the Philippines.
27
4 Id. at 26.
Id. at 11, 40-41. 31
Rollo, pp. 405-448.
28
5 Section 24, as amended by Republic Act No. 9700 (published in the
Id. at 11, 41. 32
Manila Bulletin and Philippine Star on August 24, 2009), now reads: Id. at 515-524.
6
Id. at 11-12, 41-42. 33
SECTION 24. Award to Beneficiaries. The rights and Id. at 459-468.
responsibilities of the beneficiaries shall commence from
7
Id. at 80-84. their receipt of a duly registered emancipation patent or 34
Id. at 505-514.
certificate of land ownership award and their actual physical
8 possession of the awarded land. Such award shall be
Id. at 86-100. 35
completed in not more than one hundred eighty (180) days Id. at 449-458.
from date of registration of the title in the name of the
9
Id. at 131-133. Republic of the Philippines: Provided, That the 36
Id. at 469-480.
emancipation patents, the certificates of land ownership
10 award, and other titles issued under any agrarian reform
Id. at 134-137. program shall be indefeasible and imprescriptible after one 37
Id. at 481-492.
(1) year from its registration with the Office of the Registry
11
Id. at 155-156. of Deeds, subject to the conditions, limitations and 38
Id. at 493-504.
qualifications of this Act, the property registration decree,
12
and other pertinent laws. The emancipation patents or the
Id. at 138-148. certificates of land ownership award being titles brought 39
Id. at 9-33.
under the operation of the torrens system, are conferred with
13
Id. at 156-157. the same indefeasibility and security afforded to all titles 40
under the said system, as provided for by Presidential See Land Bank of the Philippines v. Livioco, G.R. No. 170685,
Decree No. 1529, as amended by Republic Act No. 6732. September 22, 2010, 631 SCRA 86, 108.
14
Id. at 149-166.
41
It is the ministerial duty of the Registry of Deeds to register Section 17, as amended by Republic Act No. 9700 (August 7, 2009),
15
Id. at 276-299. the title of the land in the name of the Republic of the now reads: SECTION 17. Determination of Just Compensation. In
Philippines, after the Land Bank of the Philippines (LBP) determining just compensation, the cost of acquisition of the land, the
16 has certified that the necessary deposit in the name of the value of the standing crop, the current value of the like properties, its
Id. at 297-298.
landowner constituting full payment in cash or in bond with nature, actual use and income, the sworn valuation by the owner, the tax
due notice to the landowner and the registration of the declarations, the assessment made by government assessors, and
17
Id. at 47-49. certificate of land ownership award issued to the seventy percent (70%) of the zonal valuation of the Bureau of Internal
beneficiaries, and to cancel previous titles pertaining thereto. Revenue (BIR), translated into a basic formula by the DAR shall be
18
considered, subject to the final decision of the proper court. The social
Id. at 56. and economic benefits contributed by the farmers and the farmworkers
Identified and qualified agrarian reform beneficiaries, based and by the Government to the property as well as the non-payment of
19
Id. at 58. on Section 22 of Republic Act No. 6657, as amended, shall taxes or loans secured from any government financing institution on the
have usufructure rights over the awarded land as soon as the said land shall be considered as additional factors to determine its
20
DAR takes possession of such land, and such right shall not valuation.
Id. at 18. be diminished even pending the awarding of the
emancipation patent or the certificate of land ownership 42
21 award. Rollo, pp. 26, 339.
Id. at 26.
43
Hacienda Luisita Inc., supra note 29 at 14.

44
Rollo, p. 11.