G.R. No. 112526.

October 12, 2001]

STA. ROSA REALTY DEVELOPMENT CORPORATION, petitioner, vs. COURT OF APPEALS

PARDO, J.:

The case before the Court is a petition for review on certiorari of the decision of the Court of Appeals[1] affirming the decision of the
Department of Agrarian Reform Adjudication Board[2] (hereafter DARAB) ordering the compulsory acquisition of petitioners property
under the Comprehensive Agrarian Reform Program (CARP).

Petitioner Sta. Rosa Realty Development Corporation (hereafter, SRRDC) was the registered owner of two parcels of land, situated
at Barangay Casile, Cabuyao, Laguna covered by TCT Nos. 81949 and 84891, with a total area of 254.6 hectares. According to
petitioner, the parcels of land are watersheds, which provide clean potable water to the Canlubang community, and that ninety (90)
light industries are now located in the area.[3]

Petitioner alleged that respondents usurped its rights over the property, thereby destroying the ecosystem. Sometime in December
1985, respondents filed a civil case[4] with the Regional Trial Court, Laguna, seeking an easement of a right of way to and from
Barangay Casile. By way of counterclaim, however, petitioner sought the ejectment of private respondents.

In October 1986 to August 1987, petitioner filed with the Municipal Trial Court, Cabuyao, Laguna separate complaints for forcible entry
against respondents.[5]

After the filing of the ejectment cases, respondents petitioned the Department of Agrarian Reform (DAR) for the compulsory acquisition
of the SRRDC property under the CARP.

On August 11, 1989, the Municipal Agrarian Reform Officer (MARO) of Cabuyao, Laguna issued a notice of coverage to petitioner
and invited its officials or representatives to a conference on August 18, 1989.[6] During the meeting, the following were present:
representatives of petitioner, the Land Bank of the Philippines, PARCCOM, PARO of Laguna, MARO of Laguna, the BARC Chairman
of Barangay Casile and some potential farmer beneficiaries, who are residents of Barangay Casile, Cabuyao, Laguna. It was the
consensus and recommendation of the assembly that the landholding of SRRDC be placed under compulsory acquisition.

On August 17, 1989, petitioner filed with the Municipal Agrarian Reform Office (MARO), Cabuyao, Laguna a Protest and Objection to
the compulsory acquisition of the property on the ground that the area was not appropriate for agricultural purposes. The area was
rugged in terrain with slopes of 18% and above and that the occupants of the land were squatters, who were not entitled to any land
as beneficiaries.[7]

On August 29, 1989, the farmer beneficiaries together with the BARC chairman answered the protest and objection stating that the
slope of the land is not 18% but only 5-10% and that the land is suitable and economically viable for agricultural purposes, as evidenced
by the Certification of the Department of Agriculture, municipality of Cabuyao, Laguna.[8]

On September 8, 1989, MARO Belen dela Torre made a summary investigation report and forwarded the Compulsory Acquisition
Folder Indorsement (CAFI) to the Provincial Agrarian Reform Officer (hereafter, PARO).[9]

On September 21, 1989, PARO Durante Ubeda forwarded his endorsement of the compulsory acquisition to the Secretary of Agrarian
Reform.

On November 23, 1989, Acting Director Eduardo C. Visperas of the Bureau of Land Acquisition and Development, DAR forwarded
two (2) Compulsory Acquisition Claim Folders covering the landholding of SRRDC, covered by TCT Nos. T-81949 and T-84891 to the
President, Land Bank of the Philippines for further review and evaluation.[10]

On December 12, 1989, Secretary of Agrarian Reform Miriam Defensor Santiago sent two (2) notices of acquisition[11] to petitioner,
stating that petitioners landholdings covered by TCT Nos. 81949 and 84891, containing an area of 188.2858 and 58.5800 hectares,
valued at P4,417,735.65 and P1,220,229.93, respectively, had been placed under the Comprehensive Agrarian Reform Program.

On February 6, 1990, petitioner SRRDC in two letters[12] separately addressed to Secretary Florencio B. Abad and the Director,
Bureau of Land Acquisition and Distribution, sent its formal protest, protesting not only the amount of compensation offered by DAR
for the property but also the two (2) notices of acquisition.

On March 17, 1990, Secretary Abad referred the case to the DARAB for summary proceedings to determine just compensation under
R. A. No. 6657, Section 16.

On March 23, 1990, the LBP returned the two (2) claim folders previously referred for review and evaluation to the Director of BLAD
mentioning its inability to value the SRRDC landholding due to some deficiencies.

On March 28, 1990, Executive Director Emmanuel S. Galvez wrote Land Bank President Deogracias Vistan to forward the two (2)
claim folders involving the property of SRRDC to the DARAB for it to conduct summary proceedings to determine the just
compensation for the land.

On April 6, 1990, petitioner sent a letter to the Land Bank of the Philippines stating that its property under the aforesaid land titles
were exempt from CARP coverage because they had been classified as watershed area and were the subject of a pending petition
for land conversion.

On May 10, 1990, Director Narciso Villapando of BLAD turned over the two (2) claim folders (CACFs) to the Executive Director of the
DAR Adjudication Board for proper administrative valuation. Acting on the CACFs, on September 10, 1990, the Board promulgated a
resolution asking the office of the Secretary of Agrarian Reform (DAR) to first resolve two (2) issues before it proceeds with the
summary land valuation proceedings.[13]

The issues that need to be threshed out were as follows: (1) whether the subject parcels of land fall within the coverage of the
Compulsory Acquisition Program of the CARP; and (2) whether the petition for land conversion of the parcels of land may be granted.
On December 7, 1990, the Office of the Secretary, DAR, through the Undersecretary for Operations (Assistant Secretary for Luzon
Operations) and the Regional Director of Region IV, submitted a report answering the two issues raised. According to them, firstly, by
virtue of the issuance of the notice of coverage on August 11, 1989, and notice of acquisition on December 12, 1989, the property is
covered under compulsory acquisition. Secondly, Administrative Order No. 1, Series of 1990, Section IV D also supports the DAR
position on the coverage of the said property. During the consideration of the case by the Board, there was no pending petition for
land conversion specifically concerning the parcels of land in question.

On February 19, 1991, the Board sent a notice of hearing to all the parties interested, setting the hearing for the administrative valuation
of the subject parcels of land on March 6, 1991. However, on February 22, 1991, Atty. Ma. Elena P. Hernandez-Cueva, counsel for
SRRDC, wrote the Board requesting for its assistance in the reconstruction of the records of the case because the records could not
be found as her co-counsel, Atty. Ricardo Blancaflor, who originally handled the case for SRRDC and had possession of all the records
of the case was on indefinite leave and could not be contacted. The Board granted counsels request and moved the hearing to April
4, 1991.

On March 18, 1991, SRRDC submitted a petition to the Board for the latter to resolve SRRDCs petition for exemption from CARP
coverage before any administrative valuation of their landholding could be had by the Board.

On April 4, 1991, the initial DARAB hearing of the case was held and subsequently, different dates of hearing were set without objection
from counsel of SRRDC. During the April 15, 1991 hearing, the subdivision plan of subject property at Casile, Cabuyao, Laguna was
submitted and marked as Exhibit 5 for SRRDC. At the hearing on April 23, 1991, the Land Bank asked for a period of one month to
value the land in dispute.

At the hearing on April 23, 1991, certification from Deputy Zoning Administrator Generoso B. Opina was presented. The certification
issued on September 8, 1989, stated that the parcels of land subject of the case were classified as industrial Park per Sanguniang
Bayan Resolution No. 45-89 dated March 29, 1989.[14]

To avert any opportunity that the DARAB might distribute the lands to the farmer beneficiaries, on April 30, 1991, petitioner filed a
petition[15] with DARAB to disqualify private respondents as beneficiaries. However, DARAB refused to address the issue of
beneficiaries.

In the meantime, on January 20, 1992, the Regional Trial Court, Laguna, Branch 24, rendered a decision,[16] finding that private
respondents illegally entered the SRRDC property, and ordered them evicted.

On July 11, 1991, DAR Secretary Benjamin T. Leong issued a memorandum directing the Land Bank of the Philippines to open a trust
account in favor of SRRDC, for P5,637,965.55, as valuation for the SRRDC property.

On December 19, 1991, DARAB promulgated a decision, the decretal portion of which reads:

WHEREFORE, based on the foregoing premises, the Board hereby orders:

1. The dismissal for lack of merit of the protest against the compulsory coverage of the landholdings of Sta. Rosa Realty Development
Corporation (Transfer Certificates of Title Nos. 81949 and 84891 with an area of 254.766 hectares) in Barangay Casile, Municipality
of Cabuyao, Province of Laguna under the Comprehensive Agrarian Reform Program is hereby affirmed;

2. The Land Bank of the Philippines (LBP) to pay Sta. Rosa Realty Development Corporation the amount of Seven Million Eight
Hundred Forty-One Thousand, Nine Hundred Ninety Seven Pesos and Sixty-Four centavos (P7,841,997.64) for its landholdings
covered by the two (2) Transfer Certificates of Title mentioned above. Should there be a rejection of the payment tendered, to open,
if none has yet been made, a trust account for said amount in the name of Sta. Rosa Realty Development Corporation;

3. The Register of Deeds of the Province of Laguna to cancel with dispatch Transfer certificate of Title Nos. 84891 and 81949 and
new one be issued in the name of the Republic of the Philippines, free from liens and encumbrances;

4 The Department of Environment and Natural Resources either through its Provincial Office in Laguna or the Regional Office, Region
IV, to conduct a final segregation survey on the lands covered by Transfer certificate of Title Nos. 84891 and 81949 so the same can
be transferred by the Register of Deeds to the name of the Republic of the Philippines;

5. The Regional Office of the Department of Agrarian Reform through its Municipal and Provincial Agrarian Reform Office to take
immediate possession on the said landholding after Title shall have been transferred to the name of the Republic of the Philippines,
and distribute the same to the immediate issuance of Emancipation Patents to the farmer-beneficiaries as determined by the Municipal
Agrarian Reform Office of Cabuyao, Laguna.[17]

On January 20, 1992, the Regional Trial Court, Laguna, Branch 24, rendered a decision in Civil Case No. B-2333[18] ruling that
respondents were builders in bad faith.

On February 6, 1992, petitioner filed with the Court of Appeals a petition for review of the DARAB decision.[19] On November 5, 1993,
the Court of Appeals promulgated a decision affirming the decision of DARAB. The decretal portion of the Court of Appeals decision
reads:

WHEREFORE, premises considered, the DARAB decision dated September 19, 1991 is AFFIRMED, without prejudice to petitioner
Sta. Rosa Realty Development Corporation ventilating its case with the Special Agrarian Court on the issue of just compensation.[20]

Hence, this petition.[21]

On December 15, 1993, the Court issued a Resolution which reads:

G. R. Nos. 112526 (Sta. Rosa Realty Development Corporation vs. Court of Appeals, et. al.) Considering the compliance, dated
December 13, 1993, filed by counsel for petitioner, with the resolution of December 8, 1993 which required petitioner to post a cash
bond or surety bond in the amount of P1,500,000.00 Pesos before issuing a temporary restraining order prayed for, manifesting that
it has posted a CASH BOND in the same amount with the Cashier of the Court as evidenced by the attached official receipt no.
315519, the Court resolved to ISSUE the Temporary Retraining Order prayed for.

The Court therefore, resolved to restrain: (a) the Department of Agrarian Reform Adjudication Board from enforcing its decision dated
December 19, 1991 in DARAB Case No. JC-R-IV-LAG-0001, which was affirmed by the Court of Appeals in a Decision dated
November 5, 1993, and which ordered, among others, the Regional Office of the Department of Agrarian Reform through its Municipal
and Provincial Reform Office to take immediate possession of the landholding in dispute after title shall have been transferred to the
name of the Republic of the Philippines and to distribute the same through the immediate issuance of Emancipation Patents to the
farmer-beneficiaries as determined by the Municipal Agrarian Officer of Cabuyao, Laguna, (b) The Department of Agrarian Reform
and/or the Department of Agrarian Reform Adjudication Board, and all persons acting for and in their behalf and under their authority
from entering the properties involved in this case and from introducing permanent infrastructures thereon; and (c) the private
respondents from further clearing the said properties of their green cover by the cutting or burning of trees and other vegetation,
effective today until further orders from this Court.[22]

The main issue raised is whether the property in question is covered by CARP despite the fact that the entire property formed part of
a watershed area prior to the enactment of R. A. No. 6657.

Under Republic Act No. 6657, there are two modes of acquisition of private land: compulsory and voluntary. In the case at bar, the
Department of Agrarian Reform sought the compulsory acquisition of subject property under R. A. No. 6657, Section 16, to wit:

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 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 the 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 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 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 make immediate possession of the land and shall request the proper Register of Deeds to issue Transfer Certificate of
Titles (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[23] of proper jurisdiction for final determination of just
compensation.

In compulsory acquisition of private lands, the landholding, the landowners and 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 (30) 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 (30) 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 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 special agrarian courts (provisionally the Supreme
Court designated branches of the regional trial court as special agrarian 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). Under Sec. 16 of the CARL, the first step in compulsory acquisition is the identification of the land,
the landowners and the farmer beneficiaries. However, the law is silent on how the identification process shall be made. To fill this
gap, on July 26, 1989, the DAR issued Administrative Order No. 12, series of 1989, which set the operating procedure in the
identification of such lands. The procedure is as follows:

A. The Municipal Agrarian Reform Officer (MARO), 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 should 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 the 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 No 2 Summary investigation report findings and evaluation

c) CARP CA Form 3Applicants Information sheet

d) CARP CA Form 4 Beneficiaries undertaking

e) CARP CA Form 5 Transmittal report to the PARO

The MARO/BARC shall certify that all information contained in the above-mentioned forms have been examined and verified by him
and that the same are true and correct.

3. Send 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
representatives, the Land Bank of the Philippines (LBP) representative, and the 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 ask 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 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. 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 P500,000 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 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
prepare, on the signature of the Secretary or his duly authorized representative, a notice of acquisition of the subject property. From
this point, the provisions of R. A. No. 6657, Section 16 shall apply.

For a valid implementation of the CARP Program, two notices are required: (1) the notice of coverage and letter of invitation to a
preliminary conference sent to the landowner, the representative 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, that is, the notice of coverage and the letter of invitation to a 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. 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 mere limitation of the use of the
land. What is required is the surrender of the title to and physical possession of the excess and all beneficial rights accruing to the
owner in favor of the farmer beneficiary.

In the case at bar, DAR has executed the taking of the property in question. However, payment of just compensation was not in
accordance with the procedural requirement. The law required payment in cash or LBP bonds, not by trust account as was done by
DAR.

In Association of Small Landowners in the Philippines v. Secretary of Agrarian Reform, we held that The CARP Law, for its part,
conditions the transfer of possession and ownership of the land to the government on receipt of the landowner of the corresponding
payment or the deposit by the DAR of the compensation in cash or LBP bonds with an accessible bank. Until then, title also remains
with the landowner. No outright change of ownership is contemplated either.[24]

Consequently, petitioner questioned before the Court of Appeals DARABs decision ordering the compulsory acquisition of petitioners
property.[25] Here, petitioner pressed the question of whether the property was a watershed, not covered by CARP.

Article 67 of the Water Code of the Philippines (P. D. No. 1067) provides:

Art. 67. Any watershed or any area of land adjacent to any surface water or overlying any ground water may be declared by the
Department of Natural resources as a protected area. Rules and Regulations may be promulgated by such Department to prohibit or
control such activities by the owners or occupants thereof within the protected area which may damage or cause the deterioration of
the surface water or ground water or interfere with the investigation, use, control, protection, management or administration of such
waters.

Watersheds may be defined as an area drained by a river and its tributaries and enclosed by a boundary or divide which separates it
from adjacent watersheds. Watersheds generally are outside the commerce of man, so why was the Casile property titled in the name
of SRRDC? The answer is simple. At the time of the titling, the Department of Agriculture and Natural Resources had not declared
the property as watershed area. The parcels of land in Barangay Casile were declared as PARK by a Zoning Ordinance adopted by
the municipality of Cabuyao in 1979, as certified by the Housing and Land Use Regulatory Board. On January 5, 1994, the
Sangguniang Bayan of Cabuyao, Laguna issued a Resolution[26] voiding the zoning classification of the land at Barangay Casile as
Park and declaring that the land is now classified as agricultural land.

The authority of the municipality of Cabuyao, Laguna to issue zoning classification is an exercise of its police power, not the power of
eminent domain. A zoning ordinance is defined as a local city or municipal legislation which logically arranges, prescribes, defines
and apportions a given political subdivision into specific land uses as present and future projection of needs.[27]

In Natalia Realty, Inc. v. Department of Agrarian Reform[28] we held that lands classified as non-agricultural prior to the effectivity of
the CARL may not be compulsorily acquired for distribution to farmer beneficiaries.

However, more than the classification of the subject land as PARK is the fact that subsequent studies and survey showed that the
parcels of land in question form a vital part of a watershed area.[29]

Now, petitioner has offered to prove that the land in dispute is a watershed or part of the protected area for watershed purposes.
Ecological balances and environmental disasters in our day and age seem to be interconnected. Property developers and tillers of
the land must be aware of this deadly combination. In the case at bar, DAR included the disputed parcels of land for compulsory
acquisition simply because the land was allegedly devoted to agriculture and was titled to SRRDC, hence, private and alienable land
that may be subject to CARP.

However, the scenario has changed, after an in-depth study, survey and reassessment. We cannot ignore the fact that the disputed
parcels of land form a vital part of an area that need to be protected for watershed purposes. In a report of the Ecosystems Research
and Development Bureau (ERDB), a research arm of the DENR, regarding the environmental assessment of the Casile and Kabanga-
an river watersheds, they concluded that:

The Casile barangay covered by CLOA in question is situated in the heartland of both watersheds. Considering the barangays
proximity to the Matangtubig waterworks, the activities of the farmers which are in conflict with proper soil and water conservation
practices jeopardize and endanger the vital waterworks. Degradation of the land would have double edge detrimental effects. On the
Casile side this would mean direct siltation of the Mangumit river which drains to the water impounding reservoir below. On the
Kabanga-an side, this would mean destruction of forest covers which acts as recharged areas of the Matang Tubig springs.
Considering that the people have little if no direct interest in the protection of the Matang Tubig structures they couldnt care less even
if it would be destroyed.

The Casile and Kabanga-an watersheds can be considered a most vital life support system to thousands of inhabitants directly and
indirectly affected by it. From these watersheds come the natural God-given precious resource water. x x x x x
Clearing and tilling of the lands are totally inconsistent with sound watershed management. More so, the introduction of earth disturbing
activities like road building and erection of permanent infrastructures. Unless the pernicious agricultural activities of the Casile farmers
are immediately stopped, it would not be long before these watersheds would cease to be of value. The impact of watershed
degredation threatens the livelihood of thousands of people dependent upon it. Toward this, we hope that an acceptable
comprehensive watershed development policy and program be immediately formulated and implemented before the irreversible
damage finally happens.

Hence, the following are recommended:

7.2 The Casile farmers should be relocated and given financial assistance.

7.3 Declaration of the two watersheds as critical and in need of immediate rehabilitation.

7.4 A comprehensive and detailed watershed management plan and program be formulated and implemented by the Canlubang
Estate in coordination with pertinent government agencies.[30]

The ERDB report was prepared by a composite team headed by Dr. Emilio Rosario, the ERDB Director, who holds a doctorate degree
in water resources from U.P. Los Banos in 1987; Dr. Medel Limsuan, who obtained his doctorate degree in watershed management
from Colorado University (US) in 1989; and Dr. Antonio M. Dano, who obtained his doctorate degree in Soil and Water management
Conservation from U.P. Los Banos in 1993.

Also, DENR Secretary Angel Alcala submitted a Memorandum for the President dated September 7, 1993 (Subject: PFVR HWI Ref.:
933103 Presidential Instructions on the Protection of Watersheds of the Canlubang Estates at Barrio Casile, Cabuyao, Laguna) which
reads:

It is the opinion of this office that the area in question must be maintained for watershed purposes for ecological and environmental
considerations, among others. Although the 88 families who are the proposed CARP beneficiaries will be affected, it is important that
a larger view of the situation be taken as one should also consider the adverse effect on thousands of residents downstream if the
watershed will not be protected and maintained for watershed purposes.

The foregoing considered, it is recommended that if possible, an alternate area be allocated for the affected farmers, and that the
Canlubang Estates be mandated to protect and maintain the area in question as a permanent watershed reserved.[31]

The definition does not exactly depict the complexities of a watershed. The most important product of a watershed is water which is
one of the most important human necessity. The protection of watersheds ensures an adequate supply of water for future generations
and the control of flashfloods that not only damage property but cause loss of lives. Protection of watersheds is an intergenerational
responsibility that needs to be answered now.

Another factor that needs to be mentioned is the fact that during the DARAB hearing, petitioner presented proof that the Casile property
has slopes of 18% and over, which exempted the land from the coverage of CARL. R. A. No. 6657, Section 10, provides:

Section 10. Exemptions and Exclusions. Lands actually, directly and exclusively used and found to be necessary for parks, wildlife,
forest reserves, reforestration, fish sanctuaries and breeding grounds, watersheds and mangroves, national defense, school sites and
campuses including experimental farm stations operated by public or private schools for educational purposes, seeds and seedlings
research and pilot production centers, church sites and convents appurtenent thereto, communal burial grounds and cemeteries,
penal colonies and penal farms actually worked by the inmates, government and private research and quarantine centers, and all
lands with eighteen percent (18%) slope and over, except those already developed shall be exempt from coverage of this Act.

Hence, during the hearing at DARAB, there was proof showing that the disputed parcels of land may be excluded from the compulsory
acquisition coverage of CARP because of its very high slopes.

To resolve the issue as to the true nature of the parcels of land involved in the case at bar, the Court directs the DARAB to conduct a
re-evaluation of the issue.

IN VIEW WHEREOF, the Court SETS ASIDE the decision of the Court of Appeals in CA-G. R. SP No. 27234.

In lieu thereof, the Court REMANDS the case to the DARAB for re-evaluation and determination of the nature of the parcels of land
involved to resolve the issue of its coverage by the Comprehensive Land Reform Program.

In the meantime, the effects of the CLOAs issued by the DAR to supposed farmer beneficiaries shall continue to be stayed by the
temporary restraining order issued on December 15, 1993, which shall remain in effect until final decision on the case.

No costs.