ROMAN CATHOLIC ARCHBISHOP OF CACERES, Petitioner, vs.

SECRETARY OF AGRARIAN REFORM

and DAR REGIONAL DIRECTOR (Region V), Respondents.

DECISION

VELASCO, JR., J.:

The Comprehensive Agrarian Reform Law (CARL) has truly noble goals, and these noble goals should not
be stymied by the creation of exemptions or exceptions not contemplated by the law.

The Case

In this Petition for Review on Certiorari under Rule 45, petitioner Roman Catholic Archbishop of Caceres
(Archbishop) questions the February 4, 1999 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No.
48282, which upheld the December 8, 1997 and June 10, 1998 Orders of the Department of Agrarian Reform
(DAR).

The Facts

Archbishop is the registered owner of several properties in Camarines Sur, with a total area of 268.5668
hectares. Of that land, 249.0236 hectares are planted with rice and corn, while the remaining 19.5432
hectares are planted with coconut trees.

In 1985, Archbishop filed with the Municipal Agrarian Reform District Office No. 19, Naga City, Camarines
Sur several petitions for exemption of certain properties located in various towns of Camarines Sur from the
coverage of Operation Land Transfer (OLT) under Presidential Decree No. (PD) 27.2 Two of these petitions
were denied in an Order dated November 6, 1986, issued by the Regional Director of DAR, Region V, Juanito
L. Lorena.3

Archbishop appealed from the order of the Regional Director, and sought exemption from OLT coverage of
all lands planted with rice and corn which were registered in the name of the Roman Catholic Archdiocese
of Caceres. In his appeal, Archbishop cited the following grounds:

a) That said properties are all covered by conditional donations subject to the prohibitions of the
donors to SELL, EXCHANGE, LEASE, TRANSFER, ENCUMBER OR MORTGAGE the properties;

b) That they are used for charitable and religious purposes;

c) That the parishes located in depressed areas badly need them for the furtherance of their mission
work, propagation of the faith, maintenance and support of their chapels, churches and educational
religious institutions like the Holy Rosary Major and Minor Seminaries for the promotion of the
priesthood vocation;

d) For the preservation of good relationship between church and state thru non-infringement of the
right to exercise religious profession and worship;

e) For the maintenance of the Cathedral and Peñafrancia Shrine, which now include the Basilica
Minore Housing our venerable image of Our Lady of Peñafrancia and the venerable portrait of Divine
Rostro;

f) That the petitioner (church) is amenable to continue the leasehold system with the present
cultivators or tenants.4

This appeal was denied by then DAR Secretary Ernesto D. Garilao in an Order dated December 8, 1997. 5 A
subsequent motion for reconsideration was denied in an Order dated June 10, 1998. 6
The matter was then raised to the CA via Petition for Review on Certiorari. Archbishop argued that even if
the lands in question are registered in his name, he holds the lands in trust for the benefit of his followers
as cestui que trust. Archbishop further argued that the deeds of donation by which the lands were transferred
to him imposed numerous fiduciary obligations, such that he cannot sell, exchange, lease, transfer,
encumber, or mortgage the subject lands. By this reasoning, Archbishop concluded that he is not the
"landowner" contemplated by PD 27 and Republic Act No. (RA) 6657, the CARL of 1988. He then prayed
that the assailed orders of the DAR be reversed, or in the alternative, that the alleged beneficiaries of the
trust be each allowed to exercise rights of retention over the landholdings.7

The petition was dismissed by the CA in its February 4, 1999 Decision. 8 Archbishop filed a motion for
reconsideration, but was denied in the June 18, 1999 CA Resolution. 9

Archbishop now brings the matter before us through this petition.

The Issues

Archbishop raises issues he had raised previously, which, he contends, the CA failed to properly address.
He claims that the CA erred in holding that he is only entitled to assert one right of retention as the subject
properties are registered in his name. He further claims that an express trust had been created wherein he
only held naked title to the subject properties on behalf of the beneficiaries. He argues that it is not the
"landowner" contemplated by the law, but merely a trustee, and as such is entitled to as many rights of
retention on behalf of the beneficiaries of each particular property. He then raises the question of the
applicability of the ruling in The Roman Catholic Apostolic Administrator of Davao, Inc. v. The Land
Registration Commission and the Register of Deeds of Davao City, 10 which, he cites, ruled that properties
held by the Church are held by it as a mere administrator for the benefit of the members of that particular
religion. As Archbishop claims to be merely an administrator of the subject properties, he argues that these
subject properties should have been exempt from the OLT.

The Court’s Ruling

The petition has no merit.

Archbishop’s arguments, while novel, must fail in the face of the law and the dictates of the 1987
Constitution.

The laws simply speak of the "landowner" without qualification as to under what title the land is held or
what rights to the land the landowner may exercise. There is no distinction made whether the landowner
holds "naked title" only or can exercise all the rights of ownership. Archbishop would have us read deeper
into the law, to create exceptions that are not stated in PD 27 and RA 6657, and to do so would be to
frustrate the revolutionary intent of the law, which is the redistribution of agricultural land for the benefit of
landless farmers and farmworkers.

Archbishop was found to be the registered owner of the lands in question, and does not contest that fact.
For the purposes of the law, this makes him the landowner, without the necessity of going beyond the
registered titles. He cannot demand a deeper examination of the registered titles and demand further that
the intent of the original owners be ascertained and followed. To adopt his reasoning would create means
of sidestepping the law, wherein the mere act of donation places lands beyond the reach of agrarian reform.

There can be no claim of more than one right of retention per landowner. Neither PD 27 nor RA 6657 has a
provision for a landowner to exercise more than one right of retention. The law is simple and clear as to the
retention limits per landowner. PD 27 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"; while RA 6657
states:

SEC. 6. Retention Limits.––Except as otherwise provided in this Act, no person may own or retain, directly,
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 the retention by
the landowner exceed five (5) hectares. Three (3) hectares may be awarded to each child of the landowner,
subject to the following qualifications: (1) that he is at least fifteen (15) years of age; and (2) that he is
actually tilling the land or directly managing the farm: Provided, That landowners whose lands have been
covered by Presidential Decree No. 27 shall be allowed to keep the area originally retained by them
thereunder; Provided, further, That original homestead grantees or direct compulsory heirs who still own
the original homestead at the time of the approval of this Act shall retain the same areas as long as they
continue to cultivate said homestead.

Nothing in either law supports Archbishop’s claim to more than one right of retention on behalf of each
cestui que trust. The provisions of PD 27 and RA 6657 are plain and require no further interpretation––there
is only one right of retention per landowner, and no multiple rights of retention can be held by a single
party. Furthermore, the scheme proposed by Archbishop would create as many rights of retention as there
are beneficiaries, which could in effect protect the entire available land area from agrarian reform. Under
Archbishop’s reasoning, there is not even a definite landowner to claim separate rights of retention, and no
specific number of rights of retention to be claimed by the landowners. There is simply no basis in the law
or jurisprudence for his argument that it is the "beneficial ownership" that should be used to determine
which party would have the right of retention.

Archbishop makes much of the conditional donation, that he does not have the power to sell, exchange,
lease, transfer, encumber or mortgage the transferred properties. He claims that these conditions do not
make him the landowner as contemplated by the law. This matter has already been answered in Hospicio
de San Jose de Barili, Cebu City (Hospicio) v. Department of Agrarian Reform. 11 In that case, wherein Act
No. 3239 prohibited the sale under any consideration of lands donated to the Hospicio, a charitable
organization, the Court found that the lands of the Hospicio were not exempt from the coverage of agrarian
reform. In characterizing the sale of land under agrarian reform, we stated:

Generally, sale arises out of contractual obligation. Thus, it must meet the first essential requisite of every
contract that is the presence of consent. Consent implies an act of volition in entering into the agreement.
The absence or vitiation of consent renders the sale either void or voidable.

In this case, the deprivation of the Hospicio’s property did not arise as a consequence of the Hospicio’s
consent to the transfer. There was no meeting of minds between the Hospicio, on one hand, and the DAR
or the tenants, on the other, on the properties and the cause which are to constitute the contract that is to
serve ultimately as the basis for the transfer of ownership of the subject lands. Instead, the obligation to
transfer arises by compulsion of law, particularly P.D. No. 27.12

We discussed further:

The twin process of expropriation under agrarian reform and the payment of just compensation is akin to a
forced sale, which has been aptly described in common law jurisdictions as "sale made under the process
of the court and in the mode prescribed by law," and "which is not the voluntary act of the owner, such as
to satisfy a debt, whether of a mortgage, judgment, tax lien, etc." The term has not been precisely defined
in this jurisdiction, but reference to the phrase itself is made in Articles 223, 242, 237 and 243 of the Civil
Code, which uniformly exempt the family home "from execution, forced sale, or attachment." Yet a forced
sale is clearly different from the sales described under Book V of the Civil Code which are conventional sales,
as it does not arise from the consensual agreement of the vendor and vendee, but by compulsion of law.
Still, since law is recognized as one of the sources of obligation, there can be no dispute on the efficacy of
a forced sale, so long as it is authorized by law.13

Archbishop’s claim that he does not have jus disponendi over the subject properties is unavailing. The very
nature of the compulsory sale under PD 27 and RA 6657 defeats such a claim. Other less scrupulous parties
may even attempt creating trusts to prevent their lands from coming under agrarian reform, and say that
the trustee has no power to dispose of the properties. The disposition under PD 27 and RA 6657 is of a
different character than what is contemplated by jus disponendi, wherein under these laws, voluntariness
is not an issue, and the disposition is necessary for the laws to be effective.
Under PD 27 and RA 6657, Archbishop cannot claim that the alleged conditions of the donations would have
primacy over the application of the law. This forced sale is not even a violation of the conditions of the
donation, since it is by application of law and beyond Archbishop’s control. The application of the law cannot
and should not be defeated by the conditions laid down by the donors of the land. If such were allowed, it
would be a simple matter for other landowners to place their lands without limit under the protection of
religious organizations or create trusts by the mere act of donation, rendering agrarian reform but a pipe
dream.

Archbishop’s contention that he is merely an administrator of the donated properties will not serve to remove
these lands from the coverage of agrarian reform. Under PD 27, the coverage is lands devoted to rice and
corn. Section 4 of RA 6657 states, "The Comprehensive Agrarian Reform Law of 1988 shall cover, regardless
of tenurial arrangement and commodity produced, all public and private agricultural lands as provided in
Proclamation No. 131 and Executive Order No. 229, including other lands of the public domain suitable for
agriculture." The lands in Archbishop’s name are agricultural lands that fall within the scope of the law, and
do not fall under the exemptions.

The exemptions under RA 6657 form an exclusive list, as follows:

SEC. 10. Exemptions and Exclusions.––

(a) Lands actually, directly and exclusively used for parks, wildlife, forest reserves, reforestation, fish
sanctuaries and breeding grounds, watersheds and mangroves shall be exempt from the coverage
of this Act.

(b) Private lands actually, directly and exclusively used for prawn farms and fishponds shall be
exempt from the coverage of this Act: Provided, That said prawn farms and fishponds have not been
distributed and Certificate of Land Ownership Award (CLOA) issued under the Agrarian Reform
Program.

In cases where the fishponds or prawn farms have been subjected to the Comprehensive Agrarian
Reform Law, by voluntary offer to sell, or commercial farms deferment or notices of compulsory
acquisition, a simple and absolute majority of the actual regular workers or tenants must consent to
the exemption within one (1) year from the effectivity of this Act. When the workers or tenants do
not agree to this exemption, the fishponds or prawn farms shall be distributed collectively to the
worker-beneficiaries or tenants who shall form cooperative or association to manage the same.

In cases where the fishponds or prawn farms have not been subjected to the Comprehensive Agrarian
Reform Law, the consent of the farmworkers shall no longer be necessary; however, the provision
of Section 32-A hereof on incentives shall apply.

(c) Lands actually, directly and exclusively used and found to be necessary for 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 center, church sites and
convents appurtenant thereto, mosque sites and Islamic centers appurtenant 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 the coverage of this Act. (As
amended by R. A. 7881)

Archbishop would claim exemption from the coverage of agrarian reform by stating that he is a mere
administrator, but his position does not appear under the list of exemptions under RA 6657. His claimed
status as administrator does not create another class of lands exempt from the coverage of PD 27 or RA
6657, and The Roman Catholic Apostolic Administrator of Davao, Inc.14 does not create another definition
for the term "landowner."

We explained in Hospicio:
It is axiomatic that where a general rule is established by a statute with exceptions, the Court will not curtail
nor add to the latter by implication, and it is a rule that an express exception excludes all others. We cannot
simply impute into a statute an exception which the Congress did not incorporate. Moreover general welfare
legislation such as land reform laws is to be construed in favor of the promotion of social justice to ensure
the well-being and economic security of the people. Since a broad construction of the provision listing the
properties exempted under the CARL would tend to denigrate the aims of agrarian reform, a strict application
of these exceptions is in order.15

Archbishop cannot claim exemption in behalf of the millions of Filipino faithful, as the lands are clearly not
exempt under the law. He should not fear that his followers are simply being deprived of land, as under
both PD 27 and RA 6657, he is entitled to just compensation, which he may then use for the benefit of his
followers. His situation is no different from other landowners affected by agrarian reform––they are
somewhat deprived of their land, but it is all for a greater good.

As Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform 16 recognized the
revolutionary character of the expropriation under the agrarian reform law, we follow such lofty ideal for the
resolution of this case. This grand purpose under the CARL must not be hindered by the simple expedient
of appending conditions to a donation of land, or by donating land to a church. This is not to cast aspersions
on religious organizations, but it is not fitting for them to be used as vehicles for keeping land out of the
hands of the landless. The law is indubitably in line with the charitable ideals of religious organizations to
ensure that the land they own falls into the hands of able caretakers and owners. As a religious leader,
Archbishop can take solace in the fact that his lands are going to be awarded to those who need and can
utilize them to the fullest.

WHEREFORE, we DENY the petition, and AFFIRM the February 4, 1999 Decision in CA-G.R. SP No. 48282.

SO ORDERED.

NATALIA REALTY, INC., AND ESTATE DEVELOPERS AND INVESTORS CORP., petitioners, vs.
DEPARTMENT OF AGRARIAN REFORM, SEC. BENJAMIN T. LEONG and DIR. WILFREDO LEANO,
DAR REGION IV, respondents.

BELLOSILLO, J.:

Are lands already classified for residential, commercial or industrial use, as approved by the Housing and
Land Use Regulatory Board and its precursor agencies 1 prior to 15 June 1988,2 covered by R.A. 6657,
otherwise known as the Comprehensive Agrarian Reform Law of 1988? This is the pivotal issue in this
petition for certiorari assailing the Notice of Coverage3 of the Department of Agrarian Reform over parcels
of land already reserved as townsite areas before the enactment of the law.

Petitioner Natalia Realty, Inc. (NATALIA, for brevity) is the owner of three (3) contiguous parcels of land
located in Banaba, Antipolo, Rizal, with areas of 120.9793 hectares, 1.3205 hectares and 2.7080 hectares,
or a total of 125.0078 hectares, and embraced in Transfer Certificate of Title No. 31527 of the Register of
Deeds of the Province of Rizal.

On 18 April 1979, Presidential Proclamation No. 1637 set aside 20,312 hectares of land located in the
Municipalities of Antipolo, San Mateo and Montalban as townsite areas to absorb the population overspill in
the metropolis which were designated as the Lungsod Silangan Townsite. The NATALIA properties are
situated within the areas proclaimed as townsite reservation.

Since private landowners were allowed to develop their properties into low-cost housing subdivisions within
the reservation, petitioner Estate Developers and Investors Corporation (EDIC, for brevity), as developer of
NATALIA properties, applied for and was granted preliminary approval and locational clearances by the
Human Settlements Regulatory Commission. The necessary permit for Phase I of the subdivision project,
which consisted of 13.2371 hectares, was issued sometime in 1982; 4 for Phase II, with an area of 80,000
hectares, on 13 October 1983;5 and for Phase III, which consisted of the remaining 31.7707 hectares, on
25 April 1986.6 Petitioner were likewise issued development permits7 after complying with the requirements.
Thus the NATALIA properties later became the Antipolo Hills Subdivision.

On 15 June 1988, R.A. 6657, otherwise known as the "Comprehensive Agrarian Reform Law of 1988" (CARL,
for brevity), went into effect. Conformably therewith, respondent Department of Agrarian Reform (DAR, for
brevity), through its Municipal Agrarian Reform Officer, issued on 22 November 1990 a Notice of Coverage
on the undeveloped portions of the Antipolo Hills Subdivision which consisted of roughly 90.3307 hectares.
NATALIA immediately registered its objection to the notice of Coverage.

EDIC also protested to respondent Director Wilfredo Leano of the DAR Region IV Office and twice wrote him
requesting the cancellation of the Notice of Coverage.

On 17 January 1991, members of the Samahan ng Magsasaka sa Bundok Antipolo, Inc. (SAMBA, for the
brevity), filed a complaint against NATALIA and EDIC before the DAR Regional Adjudicator to restrain
petitioners from developing areas under cultivation by SAMBA members.8 The Regional Adjudicator
temporarily restrained petitioners from proceeding with the development of the subdivision. Petitioners then
moved to dismiss the complaint; it was denied. Instead, the Regional Adjudicator issued on 5 March 1991
a Writ of Preliminary Injunction.

Petitioners NATALIA and EDIC elevated their cause to the DAR Adjudication Board (DARAB); however, on
16 December 1991 the DARAB merely remanded the case to the Regional Adjudicator for further
proceedings.9

In the interim, NATALIA wrote respondent Secretary of Agrarian Reform reiterating its request to set aside
the Notice of Coverage. Neither respondent Secretary nor respondent Director took action on the protest-
letters, thus compelling petitioners to institute this proceeding more than a year thereafter.

NATALIA and EDIC both impute grave abuse of discretion to respondent DAR for including undedeveloped
portions of the Antipolo Hills Subdivision within the coverage of the CARL. They argue that NATALIA
properties already ceased to be agricultural lands when they were included in the areas reserved by
presidential fiat for the townsite reservation.

Public respondents through the Office of the Solicitor General dispute this contention. They maintain that
the permits granted petitioners were not valid and binding because they did not comply with the
implementing Standards, Rules and Regulations of P.D. 957, otherwise known as "The Subdivision and
Condominium Buyers Protective Decree," in that no application for conversion of the NATALIA lands from
agricultural residential was ever filed with the DAR. In other words, there was no valid conversion. Moreover,
public respondents allege that the instant petition was prematurely filed because the case instituted by
SAMBA against petitioners before the DAR Regional Adjudicator has not yet terminated. Respondents
conclude, as a consequence, that petitioners failed to fully exhaust administrative remedies available to
them before coming to court.

The petition is impressed with merit. A cursory reading of the Preliminary Approval and Locational Clearances
as well as the Development Permits granted petitioners for Phases I, II and III of the Antipolo Hills
Subdivision reveals that contrary to the claim of public respondents, petitioners NATALIA and EDIC did in
fact comply with all the requirements of law.

Petitioners first secured favorable recommendations from the Lungsod Silangan Development Corporation,
the agency tasked to oversee the implementation of the development of the townsite reservation, before
applying for the necessary permits from the Human Settlements Regulatory
Commission. 10 And, in all permits granted to petitioners, the Commission
stated invariably therein that the applications were in "conformance" 11 or "conformity" 12 or
"conforming" 13 with the implementing Standards, Rules and Regulations of P.D. 957. Hence, the argument
of public respondents that not all of the requirements were complied with cannot be sustained.

As a matter of fact, there was even no need for petitioners to secure a clearance or prior approval from
DAR. The NATALIA properties were within the areas set aside for the Lungsod Silangan Reservation. Since
Presidential Proclamation No. 1637 created the townsite reservation for the purpose of providing additional
housing to the burgeoning population of Metro Manila, it in effect converted for residential use what were
erstwhile agricultural lands provided all requisites were met. And, in the case at bar, there was compliance
with all relevant rules and requirements. Even in their applications for the development of the Antipolo Hills
Subdivision, the predecessor agency of HLURB noted that petitioners NATALIA and EDIC complied with all
the requirements prescribed by P.D. 957.

The implementing Standards, Rules and Regulations of P.D. 957 applied to all subdivisions and
condominiums in general. On the other hand, Presidential Proclamation No. 1637 referred only to the
Lungsod Silangan Reservation, which makes it a special law. It is a basic tenet in statutory construction that
between a general law and a special law, the latter prevails. 14

Interestingly, the Office of the Solicitor General does not contest the conversion of portions of the Antipolo
Hills Subdivision which have already been developed. 15 Of course, this is contrary to its earlier position that
there was no valid conversion. The applications for the developed and undeveloped portions of subject
subdivision were similarly situated. Consequently, both did not need prior DAR approval.

We now determine whether such lands are covered by the CARL. Section 4 of R.A. 6657 provides that the
CARL shall "cover, regardless of tenurial arrangement and commodity produced, all public and private
agricultural lands." As to what constitutes "agricultural land," it is referred to as "land devoted to agricultural
activity as defined in this Act and not classified as mineral, forest, residential, commercial or industrial
land." 16 The deliberations of the Constitutional Commission confirm this limitation. "Agricultural lands" are
only those lands which are "arable and suitable agricultural lands" and "do not include commercial, industrial
and residential lands." 17

Based on the foregoing, it is clear that the undeveloped portions of the Antipolo Hills Subdivision cannot in
any language be considered as "agricultural lands." These lots were intended for residential use. They ceased
to be agricultural lands upon approval of their inclusion in the Lungsod Silangan Reservation. Even today,
the areas in question continued to be developed as a low-cost housing subdivision, albeit at a snail's pace.
This can readily be gleaned from the fact that SAMBA members even instituted an action to restrain
petitioners from continuing with such development. The enormity of the resources needed for developing a
subdivision may have delayed its completion but this does not detract from the fact that these lands are still
residential lands and outside the ambit of the CARL.

Indeed, lands not devoted to agricultural activity are outside the coverage of CARL. These include lands
previously converted to non-agricultural uses prior to the effectivity of CARL by government agencies other
than respondent DAR. In its Revised Rules and Regulations Governing Conversion of Private Agricultural
Lands to Non-Agricultural Uses, 18 DAR itself defined "agricultural land" thus —

. . . Agricultural lands refers to those devoted to agricultural activity as defined in R.A. 6657
and not classified as mineral or forest by the Department of Environment and Natural
Resources (DENR) and its predecessor agencies, and not classified in town plans and zoning
ordinances as approved by the Housing and Land Use Regulatory Board (HLURB) and its
preceding competent authorities prior to 15 June 1988 for residential, commercial or industrial
use.

Since the NATALIA lands were converted prior to 15 June 1988, respondent DAR is bound by such
conversion. It was therefore error to include the undeveloped portions of the Antipolo Hills Subdivision within
the coverage of CARL.

Be that as it may, the Secretary of Justice, responding to a query by the Secretary of Agrarian Reform,
noted in an Opinion 19 that lands covered by Presidential Proclamation No. 1637, inter alia, of which the
NATALIA lands are part, having been reserved for townsite purposes "to be developed as human settlements
by the proper land and housing agency," are "not deemed 'agricultural lands' within the meaning and intent
of Section 3 (c) of R.A. No. 6657. " Not being deemed "agricultural lands," they are outside the coverage of
CARL.
Anent the argument that there was failure to exhaust administrative remedies in the instant petition, suffice
it to say that the issues raised in the case filed by SAMBA members differ from those of petitioners. The
former involve possession; the latter, the propriety of including under the operation of CARL lands already
converted for residential use prior to its effectivity.

Besides, petitioners were not supposed to wait until public respondents acted on their letter-protests, this
after sitting it out for almost a year. Given the official indifference, which under the circumstances could
have continued forever, petitioners had to act to assert and protect their interests. 20

In fine, we rule for petitioners and hold that public respondents gravely abused their discretion in issuing
the assailed Notice of Coverage of 22 November 1990 by of lands over which they no longer have
jurisdiction.

WHEREFORE, the petition for Certiorari is GRANTED. The Notice of Coverage of 22 November 1990 by virtue
of which undeveloped portions of the Antipolo Hills Subdivision were placed under CARL coverage is hereby
SET ASIDE.

SO ORDERED.

DEPARTMENT OF AGRARIAN REFORM, represented by SECRETARY JOSE MARI B. PONCE

(OIC), Petitioner vs. DELIA T. SUTTON, ELLA T. SUTTON-SOLIMAN and HARRY T.
SUTTON, Respondents.

DECISION

PUNO, J.:

This is a petition for review filed by the Department of Agrarian Reform (DAR) of the Decision and Resolution
of the Court of Appeals, dated September 19, 2003 and February 4, 2004, respectively, which declared DAR
Administrative Order (A.O.) No. 9, series of 1993, null and void for being violative of the Constitution.

The case at bar involves a land in Aroroy, Masbate, inherited by respondents which has been devoted
exclusively to cow and calf breeding. On October 26, 1987, pursuant to the then existing agrarian reform
program of the government, respondents made a voluntary offer to sell (VOS) 1 their landholdings to
petitioner DAR to avail of certain incentives under the law.

On June 10, 1988, a new agrarian law, Republic Act (R.A.) No. 6657, also known as the Comprehensive
Agrarian Reform Law (CARL) of 1988, took effect. It included in its coverage farms used for raising livestock,
poultry and swine.

On December 4, 1990, in an en banc decision in the case of Luz Farms v. Secretary of DAR,2 this Court
ruled that lands devoted to livestock and poultry-raising are not included in the definition of agricultural
land. Hence, we declared as unconstitutional certain provisions of the CARL insofar as they included livestock
farms in the coverage of agrarian reform.

In view of the Luz Farms ruling, respondents filed with petitioner DAR a formal request to withdraw their
VOS as their landholding was devoted exclusively to cattle-raising and thus exempted from the coverage of
the CARL.3

On December 21, 1992, the Municipal Agrarian Reform Officer of Aroroy, Masbate, inspected respondents’
land and found that it was devoted solely to cattle-raising and breeding. He recommended to the DAR
Secretary that it be exempted from the coverage of the CARL.

On April 27, 1993, respondents reiterated to petitioner DAR the withdrawal of their VOS and requested the
return of the supporting papers they submitted in connection therewith.4 Petitioner ignored their request.
On December 27, 1993, DAR issued A.O. No. 9, series of 1993,5 which provided that only portions of
private agricultural lands used for the raising of livestock, poultry and swine as of June 15, 1988 shall be
excluded from the coverage of the CARL. In determining the area of land to be excluded, the A.O. fixed the
following retention limits, viz: 1:1 animal-land ratio (i.e., 1 hectare of land per 1 head of animal shall be
retained by the landowner), and a ratio of 1.7815 hectares for livestock infrastructure for every 21 heads
of cattle shall likewise be excluded from the operations of the CARL.

On February 4, 1994, respondents wrote the DAR Secretary and advised him to consider as final and
irrevocable the withdrawal of their VOS as, under the Luz Farms doctrine, their entire landholding is
exempted from the CARL.6

On September 14, 1995, then DAR Secretary Ernesto D. Garilao issued an Order 7 partially granting the
application of respondents for exemption from the coverage of CARL. Applying the retention limits outlined
in the DAR A.O. No. 9, petitioner exempted 1,209 hectares of respondents’ land for grazing purposes, and
a maximum of 102.5635 hectares for infrastructure. Petitioner ordered the rest of respondents’ landholding
to be segregated and placed under Compulsory Acquisition.

Respondents moved for reconsideration. They contend that their entire landholding should be exempted as
it is devoted exclusively to cattle-raising. Their motion was denied.8 They filed a notice of appeal 9 with the
Office of the President assailing: (1) the reasonableness and validity of DAR A.O. No. 9, s. 1993, which
provided for a ratio between land and livestock in determining the land area qualified for exclusion from the
CARL, and (2) the constitutionality of DAR A.O. No. 9, s. 1993, in view of the Luz Farms case which
declared cattle-raising lands excluded from the coverage of agrarian reform.

On October 9, 2001, the Office of the President affirmed the impugned Order of petitioner DAR. 10 It ruled
that DAR A.O. No. 9, s. 1993, does not run counter to the Luz Farms case as the A.O. provided the
guidelines to determine whether a certain parcel of land is being used for cattle-raising. However, the issue
on the constitutionality of the assailed A.O. was left for the determination of the courts as the
sole arbiters of such issue.

On appeal, the Court of Appeals ruled in favor of the respondents. It declared DAR A.O. No. 9, s. 1993, void
for being contrary to the intent of the 1987 Constitutional Commission to exclude livestock farms from the
land reform program of the government. The dispositive portion reads:

WHEREFORE, premises considered, DAR Administrative Order No. 09, Series of 1993 is
hereby DECLARED null and void. The assailed order of the Office of the President dated 09 October 2001
in so far as it affirmed the Department of Agrarian Reform’s ruling that petitioners’ landholding is covered
by the agrarian reform program of the government is REVERSED and SET ASIDE.

SO ORDERED.11

Hence, this petition.

The main issue in the case at bar is the constitutionality of DAR A.O. No. 9, series of 1993, which prescribes
a maximum retention limit for owners of lands devoted to livestock raising.

Invoking its rule-making power under Section 49 of the CARL, petitioner submits that it issued DAR A.O.
No. 9 to limit the area of livestock farm that may be retained by a landowner pursuant to its mandate to
place all public and private agricultural lands under the coverage of agrarian reform. Petitioner also contends
that the A.O. seeks to remedy reports that some unscrupulous landowners have converted their agricultural
farms to livestock farms in order to evade their coverage in the agrarian reform program.

Petitioner’s arguments fail to impress.

Administrative agencies are endowed with powers legislative in nature, i.e., the power to make rules and
regulations. They have been granted by Congress with the authority to issue rules to regulate the
implementation of a law entrusted to them. Delegated rule-making has become a practical necessity in
modern governance due to the increasing complexity and variety of public functions. However, while
administrative rules and regulations have the force and effect of law, they are not immune from judicial
review.12 They may be properly challenged before the courts to ensure that they do not violate the
Constitution and no grave abuse of administrative discretion is committed by the administrative body
concerned.

The fundamental rule in administrative law is that, to be valid, administrative rules and
regulations must be issued by authority of a law and must not contravene the provisions of the
Constitution.13 The rule-making power of an administrative agency may not be used to abridge the
authority given to it by Congress or by the Constitution. Nor can it be used to enlarge the power of the
administrative agency beyond the scope intended. Constitutional and statutory provisions
control with respect to what rules and regulations may be promulgated by administrative
agencies and the scope of their regulations.14

In the case at bar, we find that the impugned A.O. is invalid as it contravenes the Constitution. The A.O.
sought to regulate livestock farms by including them in the coverage of agrarian reform and prescribing a
maximum retention limit for their ownership. However, the deliberations of the 1987 Constitutional
Commission show a clear intent to exclude, inter alia, all lands exclusively devoted to livestock,
swine and poultry- raising. The Court clarified in the Luz Farms case that livestock, swine and poultry-
raising are industrial activities and do not fall within the definition of "agriculture" or "agricultural activity."
The raising of livestock, swine and poultry is different from crop or tree farming. It is an industrial, not an
agricultural, activity. A great portion of the investment in this enterprise is in the form of industrial fixed
assets, such as: animal housing structures and facilities, drainage, waterers and blowers, feedmill with
grinders, mixers, conveyors, exhausts and generators, extensive warehousing facilities for feeds and other
supplies, anti-pollution equipment like bio-gas and digester plants augmented by lagoons and concrete
ponds, deepwells, elevated water tanks, pumphouses, sprayers, and other technological appurtenances.15

Clearly, petitioner DAR has no power to regulate livestock farms which have been exempted by the
Constitution from the coverage of agrarian reform. It has exceeded its power in issuing the assailed
A.O.

The subsequent case of Natalia Realty, Inc. v. DAR16 reiterated our ruling in the Luz Farms case.
In Natalia Realty, the Court held that industrial, commercial and residential lands are not covered by the
CARL.17 We stressed anew that while Section 4 of R.A. No. 6657 provides that the CARL shall cover
all public and private agricultural lands, the term "agricultural land" does not include lands
classified as mineral, forest, residential, commercial or industrial. Thus, in Natalia Realty, even
portions of the Antipolo Hills Subdivision, which are arable yet still undeveloped, could not be considered
as agricultural lands subject to agrarian reform as these lots were already classified as residential lands.

A similar logical deduction should be followed in the case at bar. Lands devoted to raising of livestock,
poultry and swine have been classified as industrial, not agricultural, lands and thus exempt from agrarian
reform. Petitioner DAR argues that, in issuing the impugned A.O., it was seeking to address the reports it
has received that some unscrupulous landowners have been converting their agricultural lands to livestock
farms to avoid their coverage by the agrarian reform. Again, we find neither merit nor logic in this
contention. The undesirable scenario which petitioner seeks to prevent with the issuance of the
A.O. clearly does not apply in this case. Respondents’ family acquired their landholdings as early as
1948. They have long been in the business of breeding cattle in Masbate which is popularly known as the
cattle-breeding capital of the Philippines.18 Petitioner DAR does not dispute this fact. Indeed, there is no
evidence on record that respondents have just recently engaged in or converted to the business of breeding
cattle after the enactment of the CARL that may lead one to suspect that respondents intended to evade its
coverage. It must be stressed that what the CARL prohibits is the conversion of agricultural lands for
non-agricultural purposes after the effectivity of the CARL. There has been no change of business
interest in the case of respondents.

Moreover, it is a fundamental rule of statutory construction that the reenactment of a statute by Congress
without substantial change is an implied legislative approval and adoption of the previous law. On the other
hand, by making a new law, Congress seeks to supersede an earlier one. 19 In the case at bar, after the
passage of the 1988 CARL, Congress enacted R.A. No. 7881 20 which amended certain provisions of the
CARL. Specifically, the new law changed the definition of the terms "agricultural activity" and
"commercial farming" by dropping from its coverage lands that are devoted to commercial
livestock, poultry and swine-raising.21 With this significant modification, Congress clearly sought
to align the provisions of our agrarian laws with the intent of the 1987 Constitutional Commission
to exclude livestock farms from the coverage of agrarian reform.

In sum, it is doctrinal that rules of administrative bodies must be in harmony with the provisions of the
Constitution. They cannot amend or extend the Constitution. To be valid, they must conform to and be
consistent with the Constitution. In case of conflict between an administrative order and the provisions of
the Constitution, the latter prevails.22 The assailed A.O. of petitioner DAR was properly stricken down as
unconstitutional as it enlarges the coverage of agrarian reform beyond the scope intended by the 1987
Constitution.

IN VIEW WHEREOF, the petition is DISMISSED. The assailed Decision and Resolution of the Court of
Appeals, dated September 19, 2003 and February 4, 2004, respectively, are AFFIRMED. No pronouncement
as to costs.

SO ORDERED.

MILESTONE FARMS, INC., Petitioner, vs. OFFICE OF THE PRESIDENT, Respondent.

DECISION

NACHURA, J.:

Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Civil Procedure, seeking
the reversal of the Court of Appeals (CA) Amended Decision2 dated October 4, 2006 and its
Resolution3 dated March 27, 2008.

The Facts

Petitioner Milestone Farms, Inc. (petitioner) was incorporated with the Securities and Exchange Commission
on January 8, 1960.4 Among its pertinent secondary purposes are: (1) to engage in the raising of cattle,
pigs, and other livestock; to acquire lands by purchase or lease, which may be needed for this purpose; and
to sell and otherwise dispose of said cattle, pigs, and other livestock and their produce when advisable and
beneficial to the corporation; (2) to breed, raise, and sell poultry; to purchase or acquire and sell, or
otherwise dispose of the supplies, stocks, equipment, accessories, appurtenances, products, and by-
products of said business; and (3) to import cattle, pigs, and other livestock, and animal food necessary for
the raising of said cattle, pigs, and other livestock as may be authorized by law. 5

On June 10, 1988, a new agrarian reform law, Republic Act (R.A.) No. 6657, otherwise known as the
Comprehensive Agrarian Reform Law (CARL), took effect, which included the raising of livestock, poultry,
and swine in its coverage. However, on December 4, 1990, this Court, sitting en banc, ruled in Luz Farms
v. Secretary of the Department of Agrarian Reform 6 that agricultural lands devoted to livestock, poultry,
and/or swine raising are excluded from the Comprehensive Agrarian Reform Program (CARP).

Thus, in May 1993, petitioner applied for the exemption/exclusion of its 316.0422-hectare property, covered
by Transfer Certificate of Title Nos. (T-410434) M-15750, (T-486101) M-7307, (T-486102) M-7308, (T-
274129) M-15751, (T-486103) M-7309, (T-486104) M-7310, (T-332694) M-15755, (T-486105) M-7311,
(T-486106) M-7312, M-8791, (T-486107) M-7313, (T-486108) M-7314, M-8796, (T-486109) M-7315, (T-
486110) M-9508, and M-6013, and located in Pinugay, Baras, Rizal, from the coverage of the CARL, pursuant
to the aforementioned ruling of this Court in Luz Farms.

Meanwhile, on December 27, 1993, the Department of Agrarian Reform (DAR) issued Administrative Order
No. 9, Series of 1993 (DAR A.O. No. 9), setting forth rules and regulations to govern the exclusion of
agricultural lands used for livestock, poultry, and swine raising from CARP coverage. Thus, on January 10,
1994, petitioner re-documented its application pursuant to DAR A.O. No. 9.7
Acting on the said application, the DAR’s Land Use Conversion and Exemption Committee (LUCEC) of Region
IV conducted an ocular inspection on petitioner’s property and arrived at the following findings:

[T]he actual land utilization for livestock, swine and poultry is 258.8422 hectares; the area which served as
infrastructure is 42.0000 hectares; ten (10) hectares are planted to corn and the remaining five (5) hectares
are devoted to fish culture; that the livestock population are 371 heads of cow, 20 heads of horses, 5,678
heads of swine and 788 heads of cocks; that the area being applied for exclusion is far below the required
or ideal area which is 563 hectares for the total livestock population; that the approximate area not directly
used for livestock purposes with an area of 15 hectares, more or less, is likewise far below the allowable
10% variance; and, though not directly used for livestock purposes, the ten (10) hectares planted to sweet
corn and the five (5) hectares devoted to fishpond could be considered supportive to livestock production.

The LUCEC, thus, recommended the exemption of petitioner’s 316.0422-hectare property from the coverage
of CARP. Adopting the LUCEC’s findings and recommendation, DAR Regional Director Percival Dalugdug
(Director Dalugdug) issued an Order dated June 27, 1994, exempting petitioner’s 316.0422-hectare
property from CARP.8

The Southern Pinugay Farmers Multi-Purpose Cooperative, Inc. (Pinugay Farmers), represented by Timiano
Balajadia, Sr. (Balajadia), moved for the reconsideration of the said Order, but the same was denied by
Director Dalugdug in his Order dated November 24, 1994. 9 Subsequently, the Pinugay Farmers filed a letter-
appeal with the DAR Secretary.

Correlatively, on June 4, 1994, petitioner filed a complaint for Forcible Entry against Balajadia and company
before the Municipal Circuit Trial Court (MCTC) of Teresa-Baras, Rizal, docketed as Civil Case No. 781-
T.10 The MCTC ruled in favor of petitioner, but the decision was later reversed by the Regional Trial Court,
Branch 80, of Tanay, Rizal. Ultimately, the case reached the CA, which, in its Decision 11 dated October 8,
1999, reinstated the MCTC’s ruling, ordering Balajadia and all defendants therein to vacate portions of the
property covered by TCT Nos. M-6013, M-8796, and M-8791. In its Resolution12 dated July 31, 2000, the
CA held that the defendants therein failed to timely file a motion for reconsideration, given the fact that
their counsel of record received its October 8, 1999 Decision; hence, the same became final and executory.

In the meantime, R.A. No. 6657 was amended by R.A. No. 7881, 13 which was approved on February 20,
1995. Private agricultural lands devoted to livestock, poultry, and swine raising were excluded from the
coverage of the CARL. On October 22, 1996, the fact-finding team formed by the DAR Undersecretary for
Field Operations and Support Services conducted an actual headcount of the livestock population on the
property. The headcount showed that there were 448 heads of cattle and more than 5,000 heads of swine.

The DAR Secretary’s Ruling

On January 21, 1997, then DAR Secretary Ernesto D. Garilao (Secretary Garilao) issued an Order exempting
from CARP only 240.9776 hectares of the 316.0422 hectares previously exempted by Director Dalugdug,
and declaring 75.0646 hectares of the property to be covered by CARP. 14

Secretary Garilao opined that, for private agricultural lands to be excluded from CARP, they must already
be devoted to livestock, poultry, and swine raising as of June 15, 1988, when the CARL took effect. He found
that the Certificates of Ownership of Large Cattle submitted by petitioner showed that only 86 heads of
cattle were registered in the name of petitioner’s president, Misael Vera, Jr., prior to June 15, 1988; 133
were subsequently bought in 1990, while 204 were registered from 1992 to 1995. Secretary Garilao gave
more weight to the certificates rather than to the headcount because "the same explicitly provide for the
number of cattle owned by petitioner as of June 15, 1988."

Applying the animal-land ratio (1 hectare for grazing for every head of cattle/carabao/horse) and the
infrastructure-animal ratio (1.7815 hectares for 21 heads of cattle/carabao/horse, and 0.5126 hectare for
21 heads of hogs) under DAR A.O. No. 9, Secretary Garilao exempted 240.9776 hectares of the property,
as follows:

1. 86 hectares for the 86 heads of cattle existing as of 15 June 1988;

 2. 8 hectares for infrastructure following the ratio of 1.7815 hectares for every 21 heads of cattle;

3. 8 hectares for the 8 horses;

4. 0.3809 square meters of infrastructure for the 8 horses; [and]

5. 138.5967 hectares for the 5,678 heads of swine.15

Petitioner filed a Motion for Reconsideration,16 submitting therewith copies of Certificates of Transfer of
Large Cattle and additional Certificates of Ownership of Large Cattle issued to petitioner prior to June 15,
1988, as additional proof that it had met the required animal-land ratio. Petitioner also submitted a copy of
a Disbursement Voucher dated December 17, 1986, showing the purchase of 100 heads of cattle by the
Bureau of Animal Industry from petitioner, as further proof that it had been actively operating a livestock
farm even before June 15, 1988. However, in his Order dated April 15, 1997, Secretary Garilao denied
petitioner’s Motion for Reconsideration.17

Aggrieved, petitioner filed its Memorandum on Appeal 18 before the Office of the President (OP).

The OP’s Ruling

On February 4, 2000, the OP rendered a decision 19 reinstating Director Dalugdug’s Order dated June 27,
1994 and declared the entire 316.0422-hectare property exempt from the coverage of CARP.

However, on separate motions for reconsideration of the aforesaid decision filed by farmer-groups
Samahang Anak-Pawis ng Lagundi (SAPLAG) and Pinugay Farmers, and the Bureau of Agrarian Legal
Assistance of DAR, the OP issued a resolution 20 dated September 16, 2002, setting aside its previous
decision. The dispositive portion of the OP resolution reads:

WHEREFORE, the Decision subject of the instant separate motions for reconsideration is hereby SET ASIDE
and a new one entered REINSTATING the Order dated 21 January 1997 of then DAR Secretary Ernesto D.
Garilao, as reiterated in another Order of 15 April 1997, without prejudice to the outcome of the continuing
review and verification proceedings that DAR, thru the appropriate Municipal Agrarian Reform Officer, may
undertake pursuant to Rule III (D) of DAR Administrative Order No. 09, series of 1993.

SO ORDERED.21

The OP held that, when it comes to proof of ownership, the reference is the Certificate of Ownership of Large
Cattle. Certificates of cattle ownership, which are readily available – being issued by the appropriate
government office – ought to match the number of heads of cattle counted as existing during the actual
headcount. The presence of large cattle on the land, without sufficient proof of ownership thereof, only
proves such presence.

Taking note of Secretary Garilao’s observations, the OP also held that, before an ocular investigation is
conducted on the property, the landowners are notified in advance; hence, mere reliance on the physical
headcount is dangerous because there is a possibility that the landowners would increase the number of
their cattle for headcount purposes only. The OP observed that there was a big variance between the actual
headcount of 448 heads of cattle and only 86 certificates of ownership of large cattle.

Consequently, petitioner sought recourse from the CA.22

The Proceedings Before the CA and Its Rulings

On April 29, 2005, the CA found that, based on the documentary evidence presented, the property subject
of the application for exclusion had more than satisfied the animal-land and infrastructure-animal ratios
under DAR A.O. No. 9. The CA also found that petitioner applied for exclusion long before the effectivity of
DAR A.O. No. 9, thus, negating the claim that petitioner merely converted the property for livestock, poultry,
and swine raising in order to exclude it from CARP coverage. Petitioner was held to have actually engaged
in the said business on the property even before June 15, 1988. The CA disposed of the case in this wise:

WHEREFORE, the instant petition is hereby GRANTED. The assailed Resolution of the Office of the President
dated September 16, 2002 is hereby SET ASIDE, and its Decision dated February 4, 2000 declaring the
entire 316.0422 hectares exempt from the coverage of the Comprehensive Agrarian Reform Program is
hereby REINSTATED without prejudice to the outcome of the continuing review and verification proceedings
which the Department of Agrarian Reform, through the proper Municipal Agrarian Reform Officer, may
undertake pursuant to Policy Statement (D) of DAR Administrative Order No. 9, Series of 1993.

SO ORDERED.23

Meanwhile, six months earlier, or on November 4, 2004, without the knowledge of the CA – as the parties
did not inform the appellate court – then DAR Secretary Rene C. Villa (Secretary Villa) issued DAR
Conversion Order No. CON-0410-001624 (Conversion Order), granting petitioner’s application to convert
portions of the 316.0422-hectare property from agricultural to residential and golf courses use. The portions
converted – with a total area of 153.3049 hectares – were covered by TCT Nos. M-15755 (T-332694), M-
15751 (T-274129), and M-15750 (T-410434). With this Conversion Order, the area of the property subject
of the controversy was effectively reduced to 162.7373 hectares.

On the CA’s decision of April 29, 2005, Motions for Reconsideration were filed by farmer-groups, namely:
the farmers represented by Miguel Espinas25 (Espinas group), the Pinugay Farmers,26 and the SAPLAG.27 The
farmer-groups all claimed that the CA should have accorded respect to the factual findings of the OP.
Moreover, the farmer-groups unanimously intimated that petitioner already converted and developed a
portion of the property into a leisure-residential-commercial estate known as the Palo Alto Leisure and
Sports Complex (Palo Alto).

Subsequently, in a Supplement to the Motion for Reconsideration on Newly Secured Evidence pursuant to
DAR Administrative Order No. 9, Series of 199328 (Supplement) dated June 15, 2005, the Espinas group
submitted the following as evidence:

1) Conversion Order29 dated November 4, 2004, issued by Secretary Villa, converting portions of the
property from agricultural to residential and golf courses use, with a total area of 153.3049 hectares;
thus, the Espinas group prayed that the remaining 162.7373 hectares (subject property) be covered
by the CARP;

2) Letter30 dated June 7, 2005 of both incoming Municipal Agrarian Reform Officer (MARO) Bismark
M. Elma (MARO Elma) and outgoing MARO Cesar C. Celi (MARO Celi) of Baras, Rizal, addressed to
Provincial Agrarian Reform Officer (PARO) II of Rizal, Felixberto Q. Kagahastian, (MARO Report),
informing the latter, among others, that Palo Alto was already under development and the lots therein
were being offered for sale; that there were actual tillers on the subject property; that there were
agricultural improvements thereon, including an irrigation system and road projects funded by the
Government; that there was no existing livestock farm on the subject property; and that the same
was not in the possession and/or control of petitioner; and

3) Certification31 dated June 8, 2005, issued by both MARO Elma and MARO Celi, manifesting that
the subject property was in the possession and cultivation of actual occupants and tillers, and that,
upon inspection, petitioner maintained no livestock farm thereon.

Four months later, the Espinas group and the DAR filed their respective Manifestations. 32 In its Manifestation
dated November 29, 2005, the DAR confirmed that the subject property was no longer devoted to cattle
raising. Hence, in its Resolution33 dated December 21, 2005, the CA directed petitioner to file its comment
on the Supplement and the aforementioned Manifestations. Employing the services of a new counsel,
petitioner filed a Motion to Admit Rejoinder, 34 and prayed that the MARO Report be disregarded and
expunged from the records for lack of factual and legal basis.
With the CA now made aware of these developments, particularly Secretary Villa’s Conversion Order of
November 4, 2004, the appellate court had to acknowledge that the property subject of the controversy
would now be limited to the remaining 162.7373 hectares. In the same token, the Espinas group prayed
that this remaining area be covered by the CARP.35

On October 4, 2006, the CA amended its earlier Decision. It held that its April 29, 2005 Decision was
theoretically not final because DAR A.O. No. 9 required the MARO to make a continuing review and
verification of the subject property. While the CA was cognizant of our ruling in Department of Agrarian
Reform v. Sutton,36 wherein we declared DAR A.O. No. 9 as unconstitutional, it still resolved to lift the
exemption of the subject property from the CARP, not on the basis of DAR A.O. No. 9, but on the strength
of evidence such as the MARO Report and Certification, and the Katunayan 37 issued by the Punong Barangay,
Alfredo Ruba (Chairman Ruba), of Pinugay, Baras, Rizal, showing that the subject property was no longer
operated as a livestock farm. Moreover, the CA held that the lease agreements,38 which petitioner submitted
to prove that it was compelled to lease a ranch as temporary shelter for its cattle, only reinforced the DAR’s
finding that there was indeed no existing livestock farm on the subject property. While petitioner claimed
that it was merely forced to do so to prevent further slaughtering of its cattle allegedly committed by the
occupants, the CA found the claim unsubstantiated. Furthermore, the CA opined that petitioner should have
asserted its rights when the irrigation and road projects were introduced by the Government within its
property. Finally, the CA accorded the findings of MARO Elma and MARO Celi the presumption of regularity
in the performance of official functions in the absence of evidence proving misconduct and/or dishonesty
when they inspected the subject property and rendered their report. Thus, the CA disposed:

WHEREFORE, this Court’s Decision dated April 29, 2005 is hereby amended in that the exemption of the
subject landholding from the coverage of the Comprehensive Agrarian Reform Program is hereby lifted, and
the 162.7373 hectare-agricultural portion thereof is hereby declared covered by the Comprehensive
Agrarian Reform Program.

SO ORDERED.39

Unperturbed, petitioner filed a Motion for Reconsideration. 40 On January 8, 2007, MARO Elma, in compliance
with the Memorandum of DAR Regional Director Dominador B. Andres, tendered another Report 41 reiterating
that, upon inspection of the subject property, together with petitioner’s counsel-turned witness, Atty. Grace
Eloisa J. Que (Atty. Que), PARO Danilo M. Obarse, Chairman Ruba, and several occupants thereof, he,
among others, found no livestock farm within the subject property. About 43 heads of cattle were shown,
but MARO Elma observed that the same were inside an area adjacent to Palo Alto. Subsequently, upon Atty.
Que’s request for reinvestigation, designated personnel of the DAR Provincial and Regional Offices
(Investigating Team) conducted another ocular inspection on the subject property on February 20, 2007.
The Investigating Team, in its Report42 dated February 21, 2007, found that, per testimony of petitioner’s
caretaker, Rogelio Ludivices (Roger),43 petitioner has 43 heads of cattle taken care of by the following
individuals: i) Josefino Custodio (Josefino) – 18 heads; ii) Andy Amahit – 15 heads; and iii) Bert Pangan –
2 heads; that these individuals pastured the herd of cattle outside the subject property, while Roger took
care of 8 heads of cattle inside the Palo Alto area; that 21 heads of cattle owned by petitioner were seen in
the area adjacent to Palo Alto; that Josefino confirmed to the Investigating Team that he takes care of 18
heads of cattle owned by petitioner; that the said Investigating Team saw 9 heads of cattle in the Palo Alto
area, 2 of which bore "MFI" marks; and that the 9 heads of cattle appear to have matched the Certificates
of Ownership of Large Cattle submitted by petitioner.

Because of the contentious factual issues and the conflicting averments of the parties, the CA set the case
for hearing and reception of evidence on April 24, 2007. 44 Thereafter, as narrated by the CA, the following
events transpired:

On May 17, 2007, [petitioner] presented the Judicial Affidavits of its witnesses, namely, [petitioner’s]
counsel, [Atty. Que], and the alleged caretaker of [petitioner’s] farm, [Roger], who were both cross-
examined by counsel for farmers-movants and SAPLAG. [Petitioner] and SAPLAG then marked their
documentary exhibits.
On May 24, 2007, [petitioner’s] security guard and third witness, Rodolfo G. Febrada, submitted his Judicial
Affidavit and was cross-examined by counsel for fa[r]mers-movants and SAPLAG. Farmers-movants also
marked their documentary exhibits.

Thereafter, the parties submitted their respective Formal Offers of Evidence. Farmers-movants and SAPLAG
filed their objections to [petitioner’s] Formal Offer of Evidence. Later, [petitioner] and farmers-movants filed
their respective Memoranda.

In December 2007, this Court issued a Resolution on the parties’ offer of evidence and considered
[petitioner’s] Motion for Reconsideration submitted for resolution. 45

Finally, petitioner’s motion for reconsideration was denied by the CA in its Resolution 46 dated March 27,
2008. The CA discarded petitioner’s reliance on Sutton. It ratiocinated that the MARO Reports and the DAR’s
Manifestation could not be disregarded simply because DAR A.O. No. 9 was declared unconstitutional. The
Sutton ruling was premised on the fact that the Sutton property continued to operate as a livestock farm.
The CA also reasoned that, in Sutton, this Court did not remove from the DAR the power to implement the
CARP, pursuant to the latter’s authority to oversee the implementation of agrarian reform laws under Section
5047 of the CARL. Moreover, the CA found:

Petitioner-appellant claimed that they had 43 heads of cattle which are being cared for and pastured by 4
individuals. To prove its ownership of the said cattle, petitioner-appellant offered in evidence 43 Certificates
of Ownership of Large Cattle. Significantly, however, the said Certificates were all dated and issued on
November 24, 2006, nearly 2 months after this Court rendered its Amended Decision lifting the exemption
of the 162-hectare portion of the subject landholding. The acquisition of such cattle after the lifting of the
exemption clearly reveals that petitioner-appellant was no longer operating a livestock farm, and suggests
an effort to create a semblance of livestock-raising for the purpose of its Motion for Reconsideration.48

On petitioner’s assertion that between MARO Elma’s Report dated January 8, 2007 and the Investigating
Team’s Report, the latter should be given credence, the CA held that there were no material inconsistencies
between the two reports because both showed that the 43 heads of cattle were found outside the subject
property.

Hence, this Petition assigning the following errors:

I.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT HELD THAT LANDS DEVOTED TO
LIVESTOCK FARMING WITHIN THE MEANING OF LUZ FARMS AND SUTTON, AND WHICH ARE
THEREBY EXEMPT FROM CARL COVERAGE, ARE NEVERTHELESS SUBJECT TO DAR’S CONTINUING
VERIFICATION AS TO USE, AND, ON THE BASIS OF SUCH VERIFICATION, MAY BE ORDERED
REVERTED TO AGRICULTURAL CLASSIFICATION AND COMPULSORY ACQUISITION[;]

II.

GRANTING THAT THE EXEMPT LANDS AFORESAID MAY BE SO REVERTED TO AGRICULTURAL

CLASSIFICATION, STILL THE PROCEEDINGS FOR SUCH PURPOSE BELONGS TO THE EXCLUSIVE
ORIGINAL JURISDICTION OF THE DAR, BEFORE WHICH THE CONTENDING PARTIES MAY VENTILATE
FACTUAL ISSUES, AND AVAIL THEMSELVES OF USUAL REVIEW PROCESSES, AND NOT TO THE
COURT OF APPEALS EXERCISING APPELLATE JURISDICTION OVER ISSUES COMPLETELY UNRELATED
TO REVERSION [; AND]

III.

IN ANY CASE, THE COURT OF APPEALS GRAVELY ERRED AND COMMITTED GRAVE ABUSE OF
DISCRETION WHEN IT HELD THAT THE PROPERTY IN DISPUTE IS NO LONGER BEING USED FOR
LIVESTOCK FARMING.49
Petitioner asseverates that lands devoted to livestock farming as of June 15, 1988 are classified as industrial
lands, hence, outside the ambit of the CARP; that Luz Farms, Sutton, and R.A. No. 7881 clearly excluded
such lands on constitutional grounds; that petitioner’s lands were actually devoted to livestock even before
the enactment of the CARL; that livestock farms are exempt from the CARL, not by reason of any act of the
DAR, but because of their nature as industrial lands; that petitioner’s property was admittedly devoted to
livestock farming as of June 1988 and the only issue before was whether or not petitioner’s pieces of
evidence comply with the ratios provided under DAR A.O. No. 9; and that DAR A.O. No. 9 having been
declared as unconstitutional, DAR had no more legal basis to conduct a continuing review and verification
proceedings over livestock farms. Petitioner argues that, in cases where reversion of properties to
agricultural use is proper, only the DAR has the exclusive original jurisdiction to hear and decide the same;
hence, the CA, in this case, committed serious errors when it ordered the reversion of the property and
when it considered pieces of evidence not existing as of June 15, 1988, despite its lack of jurisdiction; that
the CA should have remanded the case to the DAR due to conflicting factual claims; that the CA cannot
ventilate allegations of fact that were introduced for the first time on appeal as a supplement to a motion
for reconsideration of its first decision, use the same to deviate from the issues pending review, and, on the
basis thereof, declare exempt lands reverted to agricultural use and compulsorily covered by the CARP; that
the "newly discovered [pieces of] evidence" were not introduced in the proceedings before the DAR, hence,
it was erroneous for the CA to consider them; and that piecemeal presentation of evidence is not in accord
with orderly justice. Finally, petitioner submits that, in any case, the CA gravely erred and committed grave
abuse of discretion when it held that the subject property was no longer used for livestock farming as shown
by the Report of the Investigating Team. Petitioner relies on the 1997 LUCEC and DAR findings that the
subject property was devoted to livestock farming, and on the 1999 CA Decision which held that the
occupants of the property were squatters, bereft of any authority to stay and possess the property.50

On one hand, the farmer-groups, represented by the Espinas group, contend that they have been planting
rice and fruit-bearing trees on the subject property, and helped the National Irrigation Administration in
setting up an irrigation system therein in 1997, with a produce of 1,500 to 1,600 sacks of palay each year;
that petitioner came to court with unclean hands because, while it sought the exemption and exclusion of
the entire property, unknown to the CA, petitioner surreptitiously filed for conversion of the property now
known as Palo Alto, which was actually granted by the DAR Secretary; that petitioner’s bad faith is more
apparent since, despite the conversion of the 153.3049-hectare portion of the property, it still seeks to
exempt the entire property in this case; and that the fact that petitioner applied for conversion is an
admission that indeed the property is agricultural. The farmer-groups also contend that petitioner’s reliance
on Luz Farms and Sutton is unavailing because in these cases there was actually no cessation of the business
of raising cattle; that what is being exempted is the activity of raising cattle and not the property itself; that
exemptions due to cattle raising are not permanent; that the declaration of DAR A.O. No. 9 as
unconstitutional does not at all diminish the mandated duty of the DAR, as the lead agency of the
Government, to implement the CARL; that the DAR, vested with the power to identify lands subject to CARP,
logically also has the power to identify lands which are excluded and/or exempted therefrom; that to
disregard DAR’s authority on the matter would open the floodgates to abuse and fraud by unscrupulous
landowners; that the factual finding of the CA that the subject property is no longer a livestock farm may
not be disturbed on appeal, as enunciated by this Court; that DAR conducted a review and monitoring of
the subject property by virtue of its powers under the CARL; and that the CA has sufficient discretion to
admit evidence in order that it could arrive at a fair, just, and equitable ruling in this case. 51

On the other hand, respondent OP, through the Office of the Solicitor General (OSG), claims that the CA
correctly held that the subject property is not exempt from the coverage of the CARP, as substantial pieces
of evidence show that the said property is not exclusively devoted to livestock, swine, and/or poultry raising;
that the issues presented by petitioner are factual in nature and not proper in this case; that under Rule 43
of the 1997 Rules of Civil Procedure, questions of fact may be raised by the parties and resolved by the CA;
that due to the divergence in the factual findings of the DAR and the OP, the CA was duty bound to review
and ascertain which of the said findings are duly supported by substantial evidence; that the subject property
was subject to continuing review and verification proceedings due to the then prevailing DAR A.O. No. 9;
that there is no question that the power to determine if a property is subject to CARP coverage lies with the
DAR Secretary; that pursuant to such power, the MARO rendered the assailed reports and certification, and
the DAR itself manifested before the CA that the subject property is no longer devoted to livestock farming;
and that, while it is true that this Court’s ruling in Luz Farms declared that agricultural lands devoted to
livestock, poultry, and/or swine raising are excluded from the CARP, the said ruling is not without any
qualification.52

In its Reply53 to the farmer-groups’ and to the OSG’s comment, petitioner counters that the farmer-groups
have no legal basis to their claims as they admitted that they entered the subject property without the
consent of petitioner; that the rice plots actually found in the subject property, which were subsequently
taken over by squatters, were, in fact, planted by petitioner in compliance with the directive of then President
Ferdinand Marcos for the employer to provide rice to its employees; that when a land is declared exempt
from the CARP on the ground that it is not agricultural as of the time the CARL took effect, the use and
disposition of that land is entirely and forever beyond DAR’s jurisdiction; and that, inasmuch as the subject
property was not agricultural from the very beginning, DAR has no power to regulate the same. Petitioner
also asserts that the CA cannot uncharacteristically assume the role of trier of facts and resolve factual
questions not previously adjudicated by the lower tribunals; that MARO Elma rendered the assailed MARO
reports with bias against petitioner, and the same were contradicted by the Investigating Team’s Report,
which confirmed that the subject property is still devoted to livestock farming; and that there has been no
change in petitioner’s business interest as an entity engaged in livestock farming since its inception in 1960,
though there was admittedly a decline in the scale of its operations due to the illegal acts of the squatter-
occupants.

Our Ruling

The Petition is bereft of merit.

Let it be stressed that when the CA provided in its first Decision that continuing review and verification may
be conducted by the DAR pursuant to DAR A.O. No. 9, the latter was not yet declared unconstitutional by
this Court. The first CA Decision was promulgated on April 29, 2005, while this Court struck down as
unconstitutional DAR A.O. No. 9, by way of Sutton, on October 19, 2005. Likewise, let it be emphasized that
the Espinas group filed the Supplement and submitted the assailed MARO reports and certification on June
15, 2005, which proved to be adverse to petitioner’s case. Thus, it could not be said that the CA erred or
gravely abused its discretion in respecting the mandate of DAR A.O. No. 9, which was then subsisting and
in full force and effect.

While it is true that an issue which was neither alleged in the complaint nor raised during the trial cannot
be raised for the first time on appeal as it would be offensive to the basic rules of fair play, justice, and due
process,54 the same is not without exception,55 such as this case. The CA, under Section 3,56 Rule 43 of the
Rules of Civil Procedure, can, in the interest of justice, entertain and resolve factual issues. After all, technical
and procedural rules are intended to help secure, and not suppress, substantial justice. A deviation from a
rigid enforcement of the rules may thus be allowed to attain the prime objective of dispensing justice, for
dispensation of justice is the core reason for the existence of courts. 57 Moreover, petitioner cannot validly
claim that it was deprived of due process because the CA afforded it all the opportunity to be heard. 58 The
CA even directed petitioner to file its comment on the Supplement, and to prove and establish its claim that
the subject property was excluded from the coverage of the CARP. Petitioner actively participated in the
proceedings before the CA by submitting pleadings and pieces of documentary evidence, such as the
Investigating Team’s Report and judicial affidavits. The CA also went further by setting the case for hearing.
In all these proceedings, all the parties’ rights to due process were amply protected and recognized.

With the procedural issue disposed of, we find that petitioner’s arguments fail to persuade. Its invocation of
Sutton is unavailing. In Sutton, we held:

In the case at bar, we find that the impugned A.O. is invalid as it contravenes the Constitution. The A.O.
sought to regulate livestock farms by including them in the coverage of agrarian reform and prescribing a
maximum retention limit for their ownership. However, the deliberations of the 1987 Constitutional
Commission show a clear intent to exclude, inter alia, all lands exclusively devoted to livestock, swine
and poultry-raising. The Court clarified in the Luz Farms case that livestock, swine and poultry-raising are
industrial activities and do not fall within the definition of "agriculture" or "agricultural activity." The raising
of livestock, swine and poultry is different from crop or tree farming. It is an industrial, not an agricultural,
activity. A great portion of the investment in this enterprise is in the form of industrial fixed assets, such
as: animal housing structures and facilities, drainage, waterers and blowers, feedmill with grinders, mixers,
conveyors, exhausts and generators, extensive warehousing facilities for feeds and other supplies, anti-
pollution equipment like bio-gas and digester plants augmented by lagoons and concrete ponds, deepwells,
elevated water tanks, pumphouses, sprayers, and other technological appurtenances.

Clearly, petitioner DAR has no power to regulate livestock farms which have been exempted by the
Constitution from the coverage of agrarian reform. It has exceeded its power in issuing the assailed A.O.59

Indeed, as pointed out by the CA, the instant case does not rest on facts parallel to those of Sutton because,
in Sutton, the subject property remained a livestock farm. We even highlighted therein the fact that "there
has been no change of business interest in the case of respondents." 60 Similarly, in Department of Agrarian
Reform v. Uy,61 we excluded a parcel of land from CARP coverage due to the factual findings of the MARO,
which were confirmed by the DAR, that the property was entirely devoted to livestock farming. However, in
A.Z. Arnaiz Realty, Inc., represented by Carmen Z. Arnaiz v. Office of the President; Department of Agrarian
Reform; Regional Director, DAR Region V, Legaspi City; Provincial Agrarian Reform Officer, DAR Provincial
Office, Masbate, Masbate; and Municipal Agrarian Reform Officer, DAR Municipal Office, Masbate,
Masbate,62 we denied a similar petition for exemption and/or exclusion, by according respect to the CA’s
factual findings and its reliance on the findings of the DAR and the OP that

the subject parcels of land were not directly, actually, and exclusively used for pasture. 63

Petitioner’s admission that, since 2001, it leased another ranch for its own livestock is fatal to its
cause.64 While petitioner advances a defense that it leased this ranch because the occupants of the subject
property harmed its cattle, like the CA, we find it surprising that not even a single police and/or barangay
report was filed by petitioner to amplify its indignation over these alleged illegal acts. Moreover, we accord
respect to the CA’s keen observation that the assailed MARO reports and the Investigating Team’s Report
do not actually contradict one another, finding that the 43 cows, while owned by petitioner, were actually
pastured outside the subject property.

Finally, it is established that issues of Exclusion and/or Exemption are characterized as Agrarian Law
Implementation (ALI) cases which are well within the DAR Secretary’s competence and
jurisdiction.65 Section 3, Rule II of the 2003 Department of Agrarian Reform Adjudication Board Rules of
Procedure provides:

Section 3. Agrarian Law Implementation Cases.

The Adjudicator or the Board shall have no jurisdiction over matters involving the administrative
implementation of RA No. 6657, otherwise known as the Comprehensive Agrarian Reform Law (CARL) of
1988 and other agrarian laws as enunciated by pertinent rules and administrative orders, which shall be
under the exclusive prerogative of and cognizable by the Office of the Secretary of the DAR in accordance
with his issuances, to wit:

xxxx

3.8 Exclusion from CARP coverage of agricultural land used for livestock, swine, and poultry raising.

Thus, we cannot, without going against the law, arbitrarily strip the DAR Secretary of his legal mandate to
exercise jurisdiction and authority over all ALI cases. To succumb to petitioner’s contention that "when a
land is declared exempt from the CARP on the ground that it is not agricultural as of the time the CARL took
effect, the use and disposition of that land is entirely and forever beyond DAR’s jurisdiction" is dangerous,
suggestive of self-regulation. Precisely, it is the DAR Secretary who is vested with such jurisdiction and
authority to exempt and/or exclude a property from CARP coverage based on the factual circumstances of
each case and in accordance with law and applicable jurisprudence. In addition, albeit parenthetically,
Secretary Villa had already granted the conversion into residential and golf courses use of nearly one-half
of the entire area originally claimed as exempt from CARP coverage because it was allegedly devoted to
livestock production.lawphil1
In sum, we find no reversible error in the assailed Amended Decision and Resolution of the CA which would
warrant the modification, much less the reversal, thereof.

WHEREFORE, the Petition is DENIED and the Court of Appeals Amended Decision dated October 4, 2006
and Resolution dated March 27, 2008 are AFFIRMED. No costs.

SO ORDERED

CENTRAL MINDANAO UNIVERSITY REPRESENTED ITS PRESIDENT DR. LEONARDO A.

CHUA, petitioner, vs. THE DEPARTMENT OF AGRARIAN REFORM ADJUDICATION BOARD, THE
COURT OF APPEALS and ALVIN OBRIQUE, REPRESENTING BUKIDNON FREE FARMERS
AGRICULTURAL LABORERS ORGANIZATION (BUFFALO), respondents.

CAMPOS, JR., J.

This is a Petition for Review on Certiorari under Rule 65 of the Rules of Court to nullify the proceedings and
decision of the Department of Agrarian Reform Adjudication Board (DARAB for brevity) dated September 4,
1989 and to set aside the decision the decision * of the Court of Appeals dated August 20, 1990, affirming
the decision of the DARAB which ordered the segregation of 400 hectares of suitable, compact and
contiguous portions of the Central Mindanao University (CMU for brevity) land and their inclusion in the
Comprehensive Agrarian Reform Program (CARP for brevity) for distribution to qualified beneficiaries, on
the ground of lack of jurisdiction.

This case originated in a complaint filed by complainants calling themselves as the Bukidnon Free Farmers
and Agricultural Laborers Organization (BUFFALO for brevity) under the leadership of Alvin Obrique and Luis
Hermoso against the CMU, before the Department of Agrarian Reform for Declaration of Status as Tenants,
under the CARP.

From the records, the following facts are evident. The petitioner, the CMU, is an agricultural educational
institution owned and run by the state located in the town of Musuan, Bukidnon province. It started as a
farm school at Marilang, Bukidnon in early 1910, in response to the public demand for an agricultural school
in Mindanao. It expanded into the Bukidnon National Agricultural High School and was transferred to its new
site in Managok near Malaybalay, the provincial capital of Bukidnon.

In the early 1960's, it was converted into a college with campus at Musuan, until it became what is now
known as the CMU, but still primarily an agricultural university. From its beginning, the school was the
answer to the crying need for training people in order to develop the agricultural potential of the island of
Mindanao. Those who planned and established the school had a vision as to the future development of that
part of the Philippines. On January 16, 1958 the President of the Republic of the Philippines, the late Carlos
P. Garcia, "upon the recommendation of the Secretary of Agriculture and Natural Resources, and pursuant
to the provisions of Section 53, of Commonwealth Act No. 141, as amended", issued Proclamation No. 476,
withdrawing from sale or settlement and reserving for the Mindanao Agricultural College, a site which would
be the future campus of what is now the CMU. A total land area comprising 3,080 hectares was surveyed
and registered and titled in the name of the petitioner under OCT Nos. 160, 161 and 162. 1

In the course of the cadastral hearing of the school's petition for registration of the aforementioned grant
of agricultural land, several tribes belonging to cultural communities, opposed the petition claiming
ownership of certain ancestral lands forming part of the tribal reservations. Some of the claims were granted
so that what was titled to the present petitioner school was reduced from 3,401 hectares to 3,080 hectares.

In the early 1960's, the student population of the school was less than 3,000. By 1988, the student
population had expanded to some 13,000 students, so that the school community has an academic
population (student, faculty and non-academic staff) of almost 15,000. To cope with the increase in its
enrollment, it has expanded and improved its educational facilities partly from government appropriation
and partly by self-help measures.
True to the concept of a land grant college, the school embarked on self-help measures to carry out its
educational objectives, train its students, and maintain various activities which the government
appropriation could not adequately support or sustain. In 1984, the CMU approved Resolution No. 160,
adopting a livelihood program called "Kilusang Sariling Sikap Program" under which the land resources of
the University were leased to its faculty and employees. This arrangement was covered by a written contract.
Under this program the faculty and staff combine themselves to groups of five members each, and the CMU
provided technical know-how, practical training and all kinds of assistance, to enable each group to cultivate
4 to 5 hectares of land for the lowland rice project. Each group pays the CMU a service fee and also a land
use participant's fee. The contract prohibits participants and their hired workers to establish houses or live
in the project area and to use the cultivated land as a collateral for any kind of loan. It was expressly
stipulated that no landlord-tenant relationship existed between the CMU and the faculty and/or employees.
This particular program was conceived as a multi-disciplinary applied research extension and productivity
program to utilize available land, train people in modern agricultural technology and at the same time give
the faculty and staff opportunities within the confines of the CMU reservation to earn additional income to
augment their salaries. The location of the CMU at Musuan, Bukidnon, which is quite a distance from the
nearest town, was the proper setting for the adoption of such a program. Among the participants in this
program were Alvin Obrique, Felix Guinanao, Joven Caballero, Nestor Pulao, Danilo Vasquez, Aronio Pelayo
and other complainants. Obrique was a Physics Instructor at the CMU while the others were employees in
the lowland rice project. The other complainants who were not members of the faculty or non-academic
staff CMU, were hired workers or laborers of the participants in this program. When petitioner Dr. Leonardo
Chua became President of the CMU in July 1986, he discontinued the agri-business project for the production
of rice, corn and sugar cane known as Agri-Business Management and Training Project, due to losses
incurred while carrying on the said project. Some CMU personnel, among whom were the complainants,
were laid-off when this project was discontinued. As Assistant Director of this agri-business project, Obrique
was found guilty of mishandling the CMU funds and was separated from service by virtue of Executive Order
No. 17, the re-organization law of the CMU.

Sometime in 1986, under Dr. Chua as President, the CMU launched a self-help project called CMU-Income
Enhancement Program (CMU-IEP) to develop unutilized land resources, mobilize and promote the spirit of
self-reliance, provide socio-economic and technical training in actual field project implementation and
augment the income of the faculty and the staff.

Under the terms of a 3-party Memorandum of Agreement 2 among the CMU, the CMU-Integrated
Development Foundation (CMU-IDF) and groups or "seldas" of 5 CMU employees, the CMU would provide
the use of 4 to 5 hectares of land to a selda for one (1) calendar year. The CMU-IDF would provide
researchers and specialists to assist in the preparation of project proposals and to monitor and analyze
project implementation. The selda in turn would pay to the CMU P100 as service fee and P1,000 per hectare
as participant's land rental fee. In addition, 400 kilograms of the produce per year would be turned over or
donated to the CMU-IDF. The participants agreed not to allow their hired laborers or member of their family
to establish any house or live within vicinity of the project area and not to use the allocated lot as collateral
for a loan. It was expressly provided that no tenant-landlord relationship would exist as a result of the
Agreement.

Initially, participation in the CMU-IEP was extended only to workers and staff members who were still
employed with the CMU and was not made available to former workers or employees. In the middle of 1987,
to cushion the impact of the discontinuance of the rice, corn and sugar cane project on the lives of its former
workers, the CMU allowed them to participate in the CMU-IEP as special participants.

Under the terms of a contract called Addendum To Existing Memorandum of Agreement Concerning
Participation To the CMU-Income Enhancement Program, 3 a former employee would be grouped with an
existing selda of his choice and provided one (1) hectare for a lowland rice project for one (1) calendar year.
He would pay the land rental participant's fee of P1,000.00 per hectare but on a charge-to-crop basis. He
would also be subject to the same prohibitions as those imposed on the CMU employees. It was also
expressly provided that no tenant-landlord relationship would exist as a result of the Agreement.

The one-year contracts expired on June 30, 1988. Some contracts were renewed. Those whose contracts
were not renewed were served with notices to vacate.
The non-renewal of the contracts, the discontinuance of the rice, corn and sugar cane project, the loss of
jobs due to termination or separation from the service and the alleged harassment by school authorities, all
contributed to, and precipitated the filing of the complaint.

On the basis of the above facts, the DARAB found that the private respondents were not tenants and cannot
therefore be beneficiaries under the CARP. At the same time, the DARAB ordered the segregation of 400
hectares of suitable, compact and contiguous portions of the CMU land and their inclusion in the CARP for
distribution to qualified beneficiaries.

The petitioner CMU, in seeking a review of the decisions of the respondents DARAB and the Court of Appeals,
raised the following issues:

1.) Whether or not the DARAB has jurisdiction to hear and decide Case No. 005 for Declaration of Status of
Tenants and coverage of land under the CARP.

2.) Whether or not respondent Court of Appeals committed serious errors and grave abuse of discretion
amounting to lack of jurisdiction in dismissing the Petition for Review on Certiorari and affirming the decision
of DARAB.

In their complaint, docketed as DAR Case No. 5, filed with the DARAB, complainants Obrique, et al. claimed
that they are tenants of the CMU and/or landless peasants claiming/occupying a part or portion of the CMU
situated at Sinalayan, Valencia, Bukidnon and Musuan, Bukidnon, consisting of about 1,200 hectares. We
agree with the DARAB's finding that Obrique, et. al. are not tenants. Under the terms of the written
agreement signed by Obrique, et. al., pursuant to the livelihood program called "Kilusang Sariling Sikap
Program", it was expressly stipulated that no landlord-tenant relationship existed between the CMU and the
faculty and staff (participants in the project). The CMU did not receive any share from the harvest/fruits of
the land tilled by the participants. What the CMU collected was a nominal service fee and land use
participant's fee in consideration of all the kinds of assistance given to the participants by the CMU. Again,
the agreement signed by the participants under the CMU-IEP clearly stipulated that no landlord-tenant
relationship existed, and that the participants are not share croppers nor lessees, and the CMU did not share
in the produce of the participants' labor.

In the same paragraph of their complaint, complainants claim that they are landless peasants. This allegation
requires proof and should not be accepted as factually true. Obrique is not a landless peasant. The facts
showed he was Physics Instructor at CMU holding a very responsible position was separated from the service
on account of certain irregularities he committed while Assistant Director of the Agri-Business Project of
cultivating lowland rice. Others may, at the moment, own no land in Bukidnon but they may not necessarily
be so destitute in their places of origin. No proof whatsoever appears in the record to show that they are
landless peasants.

The evidence on record establish without doubt that the complainants were originally authorized or given
permission to occupy certain areas of the CMU property for a definite purpose — to carry out certain
university projects as part of the CMU's program of activities pursuant to its avowed purpose of giving
training and instruction in agricultural and other related technologies, using the land and other resources of
the institution as a laboratory for these projects. Their entry into the land of the CMU was with the permission
and written consent of the owner, the CMU, for a limited period and for a specific purpose. After the
expiration of their privilege to occupy and cultivate the land of the CMU, their continued stay was
unauthorized and their settlement on the CMU's land was without legal authority. A person entering upon
lands of another, not claiming in good faith the right to do so by virtue of any title of his own, or by virtue
of some agreement with the owner or with one whom he believes holds title to the land, is a
squatter. 4 Squatters cannot enter the land of another surreptitiously or by stealth, and under the umbrella
of the CARP, claim rights to said property as landless peasants. Under Section 73 of R.A. 6657, persons
guilty of committing prohibited acts of forcible entry or illegal detainer do not qualify as beneficiaries and
may not avail themselves of the rights and benefits of agrarian reform. Any such person who knowingly and
wilfully violates the above provision of the Act shall be punished with imprisonment or fine at the discretion
of the Court.
In view of the above, the private respondents, not being tenants nor proven to be landless peasants, cannot
qualify as beneficiaries under the CARP.

The questioned decision of the Adjudication Board, affirmed in toto by the Court of Appeals, segregating
400 hectares from the CMU land is primarily based on the alleged fact that the land subject hereof is "not
directly, actually and exclusively used for school sites, because the same was leased to Philippine Packing
Corporation (now Del Monte Philippines)".

In support of this view, the Board held that the "respondent University failed to show that it is using actually,
really, truly and in fact, the questioned area to the exclusion of others, nor did it show that the same is
directly used without any intervening agency or person", 5 and "there is no definite and concrete showing
that the use of said lands are essentially indispensable for educational purposes". 6 The reliance by the
respondents Board and Appellate Tribunal on the technical or literal definition from Moreno's Philippine Law
Dictionary and Black's Law Dictionary, may give the ordinary reader a classroom meaning of the phrase "is
actually directly and exclusively", but in so doing they missed the true meaning of Section 10, R.A. 6657,
as to what lands are exempted or excluded from the coverage of the CARP.

The pertinent provisions of R.A. 6657, otherwise known as the Comprehensive Agrarian Reform Law of
1988, are as follows:

Sec. 4. SCOPE. — The Comprehensive Agrarian Reform Law of 1988 shall cover, regardless
of tenurial arrangement and commodity produced, all public and private agricultural lands as
provided in Proclamation No. 131 and Executive Order No. 229 including other lands of the
public domain suitable for agriculture.

More specifically, the following lands are covered by the Comprehensive Agrarian Reform
Program:

(a) All alienable and disposable lands of the public domain devoted to or suitable for
agriculture. No reclassification of forest of mineral lands to agricultural lands shall be
undertaken after the approval of this Act until Congress, taking into account ecological,
developmental and equity considerations, shall have determined by law, the specific limits of
the public domain;

(b) All lands of the public domain in excess of the specific limits ad determined by Congress
in the preceding paragraph;

(c) All other lands owned by the Government devoted to or suitable for agriculture; and

(d) All private lands devoted to or suitable for agriculture regardless of the agricultural
products raised or that can be raised thereon.

Sec. 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 appurtenant thereto, mosque sites and Islamic centers appurtenant 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
the coverage of this Act. (Emphasis supplied).

The construction given by the DARAB to Section 10 restricts the land area of the CMU to its present needs
or to a land area presently, actively exploited and utilized by the university in carrying out its present
educational program with its present student population and academic facility — overlooking the very
significant factor of growth of the university in the years to come. By the nature of the CMU, which is a
school established to promote agriculture and industry, the need for a vast tract of agricultural land and for
future programs of expansion is obvious. At the outset, the CMU was conceived in the same manner as land
grant colleges in America, a type of educational institution which blazed the trail for the development of
vast tracts of unexplored and undeveloped agricultural lands in the Mid-West. What we now know as
Michigan State University, Penn State University and Illinois State University, started as small land grant
colleges, with meager funding to support their ever increasing educational programs. They were given
extensive tracts of agricultural and forest lands to be developed to support their numerous expanding
activities in the fields of agricultural technology and scientific research. Funds for the support of the
educational programs of land grant colleges came from government appropriation, tuition and other student
fees, private endowments and gifts, and earnings from miscellaneous sources. 7 It was in this same spirit
that President Garcia issued Proclamation No. 476, withdrawing from sale or settlement and reserving for
the Mindanao Agricultural College (forerunner of the CMU) a land reservation of 3,080 hectares as its future
campus. It was set up in Bukidnon, in the hinterlands of Mindanao, in order that it can have enough
resources and wide open spaces to grow as an agricultural educational institution, to develop and train
future farmers of Mindanao and help attract settlers to that part of the country.

In line with its avowed purpose as an agricultural and technical school, the University adopted a land
utilization program to develop and exploit its 3080-hectare land reservation as follows: 8

No. of Hectares Percentage

a. Livestock and Pasture 1,016.40 33

b. Upland Crops 616 20

c. Campus and Residential sites 462 15

d. Irrigated rice 400.40 13

e. Watershed and forest reservation 308 10

f. Fruit and Trees Crops 154 5

g. Agricultural
Experimental stations 123.20 4

3,080.00 100%

The first land use plan of the CARP was prepared in 1975 and since then it has undergone several revisions
in line with changing economic conditions, national economic policies and financial limitations and availability
of resources. The CMU, through Resolution No. 160 S. 1984, pursuant to its development plan, adopted a
multi-disciplinary applied research extension and productivity program called the "Kilusang Sariling Sikap
Project" (CMU-KSSP). The objectives 9 of this program were:

1. Provide researches who shall assist in (a) preparation of proposal; (b) monitor project
implementation; and (c) collect and analyze all data and information relevant to the processes
and results of project implementation;

2. Provide the use of land within the University reservation for the purpose of establishing a
lowland rice project for the party of the Second Part for a period of one calendar year subject
to discretionary renewal by the Party of the First Part;

3. Provide practical training to the Party of the Second Part on the management and operation
of their lowland project upon request of Party of the Second Part; and
 4. Provide technical assistance in the form of relevant livelihood project specialists who shall
extend expertise on scientific methods of crop production upon request by Party of the Second
Part.

In return for the technical assistance extended by the CMU, the participants in a project pay a nominal
amount as service fee. The self-reliance program was adjunct to the CMU's lowland rice project.

The portion of the CMU land leased to the Philippine Packing Corporation (now Del Monte Phils., Inc.) was
leased long before the CARP was passed. The agreement with the Philippine Packing Corporation was not a
lease but a Management and Development Agreement, a joint undertaking where use by the Philippine
Packing Corporation of the land was part of the CMU research program, with the direct participation of
faculty and students. Said contracts with the Philippine Packing Corporation and others of a similar nature
(like MM-Agraplex) were made prior to the enactment of R.A. 6657 and were directly connected to the
purpose and objectives of the CMU as an educational institution. As soon as the objectives of the agreement
for the joint use of the CMU land were achieved as of June 1988, the CMU adopted a blue print for the
exclusive use and utilization of said areas to carry out its own research and agricultural experiments.

As to the determination of when and what lands are found to be necessary for use by the CMU, the school
is in the best position to resolve and answer the question and pass upon the problem of its needs in relation
to its avowed objectives for which the land was given to it by the State. Neither the DARAB nor the Court
of Appeals has the right to substitute its judgment or discretion on this matter, unless the evidentiary facts
are so manifest as to show that the CMU has no real for the land.

It is our opinion that the 400 hectares ordered segregated by the DARAB and affirmed by the Court of
Appeals in its Decision dated August 20, 1990, is not covered by the CARP because:

(1) It is not alienable and disposable land of the public domain;

(2) The CMU land reservation is not in excess of specific limits as determined by Congress;

(3) It is private land registered and titled in the name of its lawful owner, the CMU;

(4) It is exempt from coverage under Section 10 of R.A. 6657 because the lands are actually,
directly and exclusively used and found to be necessary for school site and campus, including
experimental farm stations for educational purposes, and for establishing seed and seedling
research and pilot production centers. (Emphasis supplied).

Under Section 4 and Section 10 of R.A. 6657, it is crystal clear that the jurisdiction of the DARAB is limited
only to matters involving the implementation of the CARP. More specifically, it is restricted to agrarian cases
and controversies involving lands falling within the coverage of the aforementioned program. It does not
include those which are actually, directly and exclusively used and found to be necessary for, among such
purposes, school sites and campuses for setting up experimental farm stations, research and pilot production
centers, etc.

Consequently, the DARAB has no power to try, hear and adjudicate the case pending before it involving a
portion of the CMU's titled school site, as the portion of the CMU land reservation ordered segregated is
actually, directly and exclusively used and found by the school to be necessary for its purposes. The CMU
has constantly raised the issue of the DARAB's lack of jurisdiction and has questioned the respondent's
authority to hear, try and adjudicate the case at bar. Despite the law and the evidence on record tending to
establish that the fact that the DARAB had no jurisdiction, it made the adjudication now subject of review.

Whether the DARAB has the authority to order the segregation of a portion of a private property titled in
the name of its lawful owner, even if the claimant is not entitled as a beneficiary, is an issue we feel we
must resolve. The quasi-judicial powers of DARAB are provided in Executive Order No. 129-A, quoted
hereunder in so far as pertinent to the issue at bar:
 Sec. 13. –– AGRARIAN REFORM ADJUDICATION BOARD — There is hereby created an
Agrarian Reform Adjudication Board under the office of the Secretary. . . . The Board shall
assume the powers and functions with respect to adjudication of agrarian reform cases under
Executive Order 229 and this Executive Order . . .

Sec. 17. –– QUASI JUDICIAL POWERS OF THE DAR. — The DAR is hereby vested with quasi-
judicial powers to determine and adjudicate agrarian reform matters and shall have exclusive
original jurisdiction over all matters including implementation of Agrarian Reform.

Section 50 of R.A. 6658 confers on the DAR quasi-judicial powers as follows:

The DAR is hereby vested with primary jurisdiction to determine and adjudicate agrarian
reform matters and shall have original jurisdiction over all matters involving the
implementation of agrarian reform. . . .

Section 17 of Executive Order No. 129-A is merely a repetition of Section 50, R.A. 6657. There is no
doubt that the DARAB has jurisdiction to try and decide any agrarian dispute in the implementation
of the CARP. An agrarian dispute is defined by the same law as any controversy relating to tenurial
rights whether leasehold, tenancy stewardship or otherwise over lands devoted to
agriculture. 10

In the case at bar, the DARAB found that the complainants are not share tenants or lease holders of the
CMU, yet it ordered the "segregation of a suitable compact and contiguous area of Four Hundred hectares,
more or less", from the CMU land reservation, and directed the DAR Regional Director to implement its order
of segregation. Having found that the complainants in this agrarian dispute for Declaration of Tenancy Status
are not entitled to claim as beneficiaries of the CARP because they are not share tenants or leaseholders,
its order for the segregation of 400 hectares of the CMU land was without legal authority. w do not believe
that the quasi-judicial function of the DARAB carries with it greater authority than ordinary courts to make
an award beyond what was demanded by the complainants/petitioners, even in an agrarian dispute. Where
the quasi-judicial body finds that the complainants/petitioners are not entitled to the rights they are
demanding, it is an erroneous interpretation of authority for that quasi-judicial body to order private
property to be awarded to future beneficiaries. The order segregation 400 hectares of the CMU land was
issued on a finding that the complainants are not entitled as beneficiaries, and on an erroneous assumption
that the CMU land which is excluded or exempted under the law is subject to the coverage of the CARP.
Going beyond what was asked by the complainants who were not entitled to the relief prayed the
complainants who were not entitled to the relief prayed for, constitutes a grave abuse of discretion because
it implies such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction.

The education of the youth and agrarian reform are admittedly among the highest priorities in the
government socio-economic programs. In this case, neither need give way to the other. Certainly, there
must still be vast tracts of agricultural land in Mindanao outside the CMU land reservation which can be
made available to landless peasants, assuming the claimants here, or some of them, can qualify as CARP
beneficiaries. To our mind, the taking of the CMU land which had been segregated for educational purposes
for distribution to yet uncertain beneficiaries is a gross misinterpretation of the authority and jurisdiction
granted by law to the DARAB.

The decision in this case is of far-reaching significance as far as it concerns state colleges and universities
whose resources and research facilities may be gradually eroded by misconstruing the exemptions from the
CARP. These state colleges and universities are the main vehicles for our scientific and technological
advancement in the field of agriculture, so vital to the existence, growth and development of this country.

It is the opinion of this Court, in the light of the foregoing analysis and for the reasons indicated, that the
evidence is sufficient to sustain a finding of grave abuse of discretion by respondents Court of Appeals and
DAR Adjudication Board. We hereby declare the decision of the DARAB dated September 4, 1989 and the
decision of the Court of Appeals dated August 20, 1990, affirming the decision of the quasi-judicial body, as
null and void and hereby order that they be set aside, with costs against the private respondents.
SO ORDERED

DEPARTMENT OF AGRARIAN REFORM, as represented by its Secretary, ROBERTO M.

PAGDANGANAN, petitioner, vs. DEPARTMENT OF EDUCATION, CULTURE AND SPORTS
(DECS), respondent.

DECISION

YNARES-SANTIAGO, J.:

This petition for review on certiorari seeks to set aside the decision1 of the Court of Appeals dated October
29, 2002 in CA-G.R. SP No. 64378, which reversed the August 30, 2000 decision of the Secretary of Agrarian
Reform, as well as the Resolution dated May 7, 2003, which denied petitioner’s motion for reconsideration.

In controversy are Lot No. 2509 and Lot No. 817-D consisting of an aggregate area of 189.2462 hectares
located at Hacienda Fe, Escalante, Negros Occidental and Brgy. Gen. Luna, Sagay, Negros Occidental,
respectively. On October 21, 1921, these lands were donated by the late Esteban Jalandoni to respondent
DECS (formerly Bureau of Education).2 Consequently, titles thereto were transferred in the name of
respondent DECS under Transfer Certificate of Title No. 167175. 3

On July 15, 1985, respondent DECS leased the lands to Anglo Agricultural Corporation for 10 agricultural
crop years, commencing from crop year 1984-1985 to crop year 1993-1994. The contract of lease was
subsequently renewed for another 10 agricultural crop years, commencing from crop year 1995-1996 to
crop year 2004-2005.4

On June 10, 1993, Eugenio Alpar and several others, claiming to be permanent and regular farm workers
of the subject lands, filed a petition for Compulsory Agrarian Reform Program (CARP) coverage with the
Municipal Agrarian Reform Office (MARO) of Escalante.5

After investigation, MARO Jacinto R. Piñosa, sent a "Notice of Coverage" to respondent DECS, stating that
the subject lands are now covered by CARP and inviting its representatives for a conference with the farmer
beneficiaries.6 Then, MARO Piñosa submitted his report to OIC-PARO Stephen M. Leonidas, who
recommended to the DAR Regional Director the approval of the coverage of the landholdings.

On August 7, 1998, DAR Regional Director Dominador B. Andres approved the recommendation, the
dispositive portion of which reads:

WHEREFORE, all the foregoing premises considered, the petition is granted. Order is hereby issued:

1. Placing under CARP coverage Lot 2509 with an area of 111.4791 hectares situated at Had. Fe,
Escalante, Negros Occidental and Lot 817-D with an area of 77.7671 hectares situated at Brgy. Gen.
Luna, Sagay, Negros Occidental;

2. Affirming the notice of coverage sent by the DAR Provincial Office, Negros Occidental dated
November 23, 1994;

3. Directing the Provincial Agrarian Reform Office of Negros Occidental and the Municipal Agrarian
Reform Officers of Sagay and Escalante to facilitate the acquisition of the subject landholdings and
the distribution of the same qualified beneficiaries.

SO ORDERED.7

Respondent DECS appealed the case to the Secretary of Agrarian Reform which affirmed the Order of the
Regional Director. 8
Aggrieved, respondent DECS filed a petition for certiorari with the Court of Appeals, which set aside the
decision of the Secretary of Agrarian Reform.9

Hence, the instant petition for review.

The pivotal issue to be resolved in this case is whether or not the subject properties are exempt from the
coverage of Republic Act No. 6657, otherwise known as the Comprehensive Agrarian Reform Law of 1998
(CARL).

The general policy under CARL is to cover as much lands suitable for agriculture as possible. 10 Section 4 of
R.A. No. 6657 sets out the coverage of CARP. It states that the program shall:

"… cover, regardless of tenurial arrangement and commodity produced, all public and private agricultural
lands as provided in Proclamation No. 131 and Executive Order No. 229, including other lands of the public
domain suitable for agriculture."

More specifically, the following lands are covered by the Comprehensive Agrarian Reform Program:

(a) All alienable and disposable lands of the public domain devoted to or suitable for agriculture. No
reclassification of forest or mineral lands to agricultural lands shall be undertaken after the approval
of this Act until Congress, taking into account, ecological, developmental and equity considerations,
shall have determined by law, the specific limits of the public domain;

(b) All lands of the public domain in excess of the specific limits as determined by Congress in the
preceding paragraph;

(c) All other lands owned by the Government devoted to or suitable for agriculture; and

(d) All private lands devoted to or suitable for agriculture regardless of the agricultural products
raised or that can be raised thereon.

Section 3(c) thereof defines "agricultural land," as "land devoted to agricultural activity as defined in this
Act and not classified as mineral, forest, residential, commercial or industrial land." The term "agriculture"
or "agricultural activity" is also defined by the same law as follows:

Agriculture, Agricultural Enterprises or Agricultural Activity means the cultivation of the soil, planting of
crops, growing of fruit trees, raising of livestock, poultry or fish, including the harvesting of such farm
products, and other farm activities, and practices performed by a farmer in conjunction with such farming
operations done by persons whether natural or juridical.11

The records of the case show that the subject properties were formerly private agricultural lands owned by
the late Esteban Jalandoni, and were donated to respondent DECS. From that time until they were leased
to Anglo Agricultural Corporation, the lands continued to be agricultural primarily planted to sugarcane,
albeit part of the public domain being owned by an agency of the government. 12 Moreover, there is no
legislative or presidential act, before and after the enactment of R.A. No. 6657, classifying the said lands as
mineral, forest, residential, commercial or industrial land. Indubitably, the subject lands fall under the
classification of lands of the public domain devoted to or suitable for agriculture.

Respondent DECS sought exemption from CARP coverage on the ground that all the income derived from
its contract of lease with Anglo Agricultural Corporation were actually, directly and exclusively used for
educational purposes, such as for the repairs and renovations of schools in the nearby locality.

Petitioner DAR, on the other hand, argued that the lands subject hereof are not exempt from the CARP
coverage because the same are not actually, directly and exclusively used as school sites or campuses, as
they are in fact leased to Anglo Agricultural Corporation. Further, to be exempt from the coverage, it is the
land per se, not the income derived therefrom, that must be actually, directly and exclusively used for
educational purposes.
We agree with the petitioner.

Section 10 of R.A. No. 6657 enumerates the types of lands which are exempted from the coverage of CARP
as well as the purposes of their exemption, viz:

xxxxxxxxx

c) Lands actually, directly and exclusively used and found to be necessary for national defense, school sites
and campuses, including experimental farm stations operated by public or private schools for educational
purposes, … , shall be exempt from the coverage of this Act.13

xxxxxxxxx

Clearly, a reading of the paragraph shows that, in order to be exempt from the coverage: 1) the land must
be "actually, directly, and exclusively used and found to be necessary;" and 2) the purpose is "for school
sites and campuses, including experimental farm stations operated by public or private schools for
educational purposes."

The importance of the phrase "actually, directly, and exclusively used and found to be necessary" cannot
be understated, as what respondent DECS would want us to do by not taking the words in their literal and
technical definitions. The words of the law are clear and unambiguous. Thus, the "plain meaning rule"
or verba legis in statutory construction is applicable in this case. Where the words of a statute are clear,
plain and free from ambiguity, it must be given its literal meaning and applied without attempted
interpretation.14

We are not unaware of our ruling in the case of Central Mindanao University v. Department of Agrarian
Reform Adjudication Board,15 wherein we declared the land subject thereof exempt from CARP coverage.
However, respondent DECS’ reliance thereon is misplaced because the factual circumstances are different
in the case at bar.

Firstly, in the CMU case, the land involved was not alienable and disposable land of the public domain
because it was reserved by the late President Carlos P. Garcia under Proclamation No. 476 for the use of
Mindanao Agricultural College (now CMU).16 In this case, however, the lands fall under the category of
alienable and disposable lands of the public domain suitable for agriculture.

Secondly, in the CMU case, the land was actually, directly and exclusively used and found to be necessary
for school sites and campuses. Although a portion of it was being used by the Philippine Packing Corporation
(now Del Monte Phils., Inc.) under a "Management and Development Agreement", the undertaking was that
the land shall be used by the Philippine Packing Corporation as part of the CMU research program, with
direct participation of faculty and students. Moreover, the land was part of the land utilization program
developed by the CMU for its "Kilusang Sariling Sikap Project" (CMU-KSSP), a multi-disciplinary applied
research extension and productivity program.17 Hence, the retention of the land was found to be necessary
for the present and future educational needs of the CMU. On the other hand, the lands in this case were
not actually and exclusively utilized as school sites and campuses, as they were leased to Anglo Agricultural
Corporation, not for educational purposes but for the furtherance of its business. Also, as conceded by
respondent DECS, it was the income from the contract of lease and not the subject lands that was directly
used for the repairs and renovations of the schools in the locality.

Anent the issue of whether the farmers are qualified beneficiaries of CARP, we disagree with the Court of
Appeals’ finding that they were not.

At the outset, it should be pointed out that the identification of actual and potential beneficiaries under CARP
is vested in the Secretary of Agrarian Reform pursuant to Section 15, R.A. No. 6657, which states:

SECTION 15. Registration of Beneficiaries. — The DAR in coordination with the Barangay Agrarian Reform
Committee (BARC) as organized in this Act, shall register all agricultural lessees, tenants and farmworkers
who are qualified to be beneficiaries of the CARP. These potential beneficiaries with the assistance of the
BARC and the DAR shall provide the following data:

(a) names and members of their immediate farm household;

(b) owners or administrators of the lands they work on and the length of tenurial relationship;

(c) location and area of the land they work;

(d) crops planted; and

(e) their share in the harvest or amount of rental paid or wages received.

A copy of the registry or list of all potential CARP beneficiaries in the barangay shall be posted in the
barangay hall, school or other public buildings in the barangay where it shall be open to inspection by the
public at all reasonable hours.

In the case at bar, the BARC certified that herein farmers were potential CARP beneficiaries of the subject
properties.18 Further, on November 23, 1994, the Secretary of Agrarian Reform through the Municipal
Agrarian Reform Office (MARO) issued a Notice of Coverage placing the subject properties under CARP.
Since the identification and selection of CARP beneficiaries are matters involving strictly the administrative
implementation of the CARP,19 it behooves the courts to exercise great caution in substituting its own
determination of the issue, unless there is grave abuse of discretion committed by the administrative
agency. In this case, there was none.

The Comprehensive Agrarian Reform Program (CARP) is the bastion of social justice of poor landless farmers,
the mechanism designed to redistribute to the underprivileged the natural right to toil the earth, and to
liberate them from oppressive tenancy. To those who seek its benefit, it is the means towards a viable
livelihood and, ultimately, a decent life. The objective of the State is no less certain: "landless farmers and
farmworkers will receive the highest consideration to promote social justice and to move the nation toward
sound rural development and industrialization."20

WHEREFORE, in view of the foregoing, the petition is GRANTED. The decision of the Court of Appeals dated
October 29, 2002, in CA-G.R. SP No. 64378 is REVERSED and SET ASIDE. The decision dated August 30,
2000 of the Secretary of Agrarian Reform placing the subject lands under CARP coverage, is REINSTATED.

SO ORDERED.

PROVINCE OF CAMARINES SUR, represented by GOV. LUIS R. VILLAFUERTE and HON. BENJAMIN
V. PANGA as Presiding Judge of RTC Branch 33 at Pili, Camarines Sur, petitioners, vs. THE COURT
OF APPEALS (THIRD DIVISION), ERNESTO SAN JOAQUIN and EFREN SAN JOAQUIN, respondents.

QUIASON, J.:

In this appeal by certiorari from the decision of the Court of Appeals in AC-G.R. SP No. 20551 entitled
"Ernesto N. San Joaquin, et al., v. Hon. Benjamin V. Panga, et al.," this Court is asked to decide whether
the expropriation of agricultural lands by local government units is subject, to the prior approval of the
Secretary of the Agrarian Reform, as the implementator of the agrarian reform program.

On December 22, 1988, the Sangguniang Panlalawigan of the Province of Camarines Sur passed Resolution
No. 129, Series of 1988, authorizing the Provincial Governor to purchase or expropriate property contiguous
to the provincial capitol site, in order to establish a pilot farm for non-food and non-traditional agricultural
crops and a housing project for provincial government employees.

The "WHEREAS" clause o:f the Resolution states:

 WHEREAS, the province of Camarines Sur has adopted a five-year Comprehensive
Development plan, some of the vital components of which includes the establishment of model
and pilot farm for non-food and non-traditional agricultural crops, soil testing and tissue
culture laboratory centers, 15 small scale technology soap making, small scale products of
plaster of paris, marine biological and sea farming research center,and other progressive
feasibility concepts objective of which is to provide the necessary scientific and technology
know-how to farmers and fishermen in Camarines Sur and to establish a housing project for
provincial government employees;

WHEREAS, the province would need additional land to be acquired either by purchase or
expropriation to implement the above program component;

WHEREAS, there are contiguous/adjacent properties to be (sic) present Provincial Capitol Site
ideally suitable to establish the same pilot development center;

WHEREFORE . . . .

Pursuant to the Resolution, the Province of Camarines Sur, through its Governor, Hon. Luis R.Villafuerte,
filed two separate cases for expropriation against Ernesto N. San Joaquin and Efren N. San Joaquin, docketed
as Special Civil Action Nos. P-17-89 and P-19-89 of the Regional Trial Court, Pili, Camarines Sur, presided
by the Hon. Benjamin V. Panga.

Forthwith, the Province of Camarines Sur filed a motion for the issuance of writ of possession. The San
Joaquins failed to appear at the hearing of the motion.

The San Joaquins moved to dismiss the complaints on the ground of inadequacy of the price offered for their
property. In an order dated December 6, 1989, the trial court denied the motion to dismiss and authorized
the Province of Camarines Sur to take possession of the property upon the deposit with the Clerk of Court
of the amount of P5,714.00, the amount provisionally fixed by the trial court to answer for damages that
private respondents may suffer in the event that the expropriation cases do not prosper. The trial court
issued a writ of possession in an order dated January18, 1990.

The San Joaquins filed a motion for relief from the order, authorizing the Province of Camarines Sur to take
possession of their property and a motion to admit an amended motion to dismiss. Both motions were
denied in the order dated February 1990.

In their petition before the Court of Appeals, the San Joaquins asked: (a) that Resolution No. 129, Series of
1988 of the Sangguniang Panlalawigan be declared null and void; (b) that the complaints for expropriation
be dismissed; and (c) that the order dated December 6, 1989 (i) denying the motion to dismiss and (ii)
allowing the Province of Camarines Sur to take possession of the property subject of the expropriation and
the order dated February 26, 1990, denying the motion to admit the amended motion to dismiss, be set
aside. They also asked that an order be issued to restrain the trial court from enforcing the writ of
possession, and thereafter to issue a writ of injunction.

In its answer to the petition, the Province of Camarines Sur claimed that it has the authority to initiate the
expropriation proceedings under Sections 4 and 7 of Local Government Code (B.P. Blg. 337) and that the
expropriations are for a public purpose.

Asked by the Court of Appeals to give his Comment to the petition, the Solicitor General stated that under
Section 9 of the Local Government Code (B.P. Blg. 337), there was no need for the approval by the Office
of the President of the exercise by the Sangguniang Panlalawigan of the right of eminent domain. However,
the Solicitor General expressed the view that the Province of Camarines Sur must first secure the approval
of the Department of Agrarian Reform of the plan to expropriate the lands of petitioners for use as a housing
project.

The Court of Appeals set aside the order of the trial court, allowing the Province of Camarines Sur to take
possession of private respondents' lands and the order denying the admission of the amended motion to
dismiss. It also ordered the trial court to suspend the expropriation proceedings until after the Province of
Camarines Sur shall have submitted the requisite approval of the Department of Agrarian Reform to convert
the classification of the property of the private respondents from agricultural to non-agricultural land.

Hence this petition.

It must be noted that in the Court of Appeals, the San Joaquins asked for: (i) the dismissal of the complaints
for expropriation on the ground of the inadequacy of the compensation offered for the property and (ii) the
nullification of Resolution No. 129, Series of 1988 of the Sangguniang Panlalawigan of the Province of
Camarines Sur.

The Court of Appeals did not rule on the validity of the questioned resolution; neither did it dismiss the
complaints. However, when the Court of Appeals ordered the suspension of the proceedings until the
Province of Camarines Sur shall have obtained the authority of the Department of Agrarian Reform to change
the classification of the lands sought to be expropriated from agricultural to non-agricultural use, it assumed
that the resolution is valid and that the expropriation is for a public purpose or public use.

Modernly, there has been a shift from the literal to a broader interpretation of "public purpose" or "public
use" for which the power of eminent domain may be exercised. The old concept was that the condemned
property must actually be used by the general public (e.g. roads, bridges, public plazas, etc.) before the
taking thereof could satisfy the constitutional requirement of "public use". Under the new concept, "public
use" means public advantage, convenience or benefit, which tends to contribute to the general welfare and
the prosperity of the whole community, like a resort complex for tourists or housing project (Heirs of Juancho
Ardano v. Reyes, 125 SCRA 220 [1983]; Sumulong v. Guerrero, 154 SC.RA 461 [1987]).

The expropriation of the property authorized by the questioned resolution is for a public purpose. The
establishment of a pilot development center would inure to the direct benefit and advantage of the people
of the Province of Camarines Sur. Once operational, the center would make available to the community
invaluable information and technology on agriculture, fishery and the cottage industry. Ultimately, the
livelihood of the farmers, fishermen and craftsmen would be enhanced. The housing project also satisfies
the public purpose requirement of the Constitution. As held in Sumulong v. Guerrero, 154 SCRA 461,
"Housing is a basic human need. Shortage in housing is a matter of state concern since it directly and
significantly affects public health, safety, the environment and in sum the general welfare."

It is the submission of the Province of Camarines Sur that its exercise of the power of eminent domain
cannot be restricted by the provisions of the Comprehensive Agrarian Reform Law (R.A. No. 6657),
particularly Section 65 thereof, which requires the approval of the Department of Agrarian Reform before a
parcel of land can be reclassified from an agricultural to a non-agricultural land.

The Court of Appeals, following the recommendation of the Solicitor General, held that the Province of
Camarines Sur must comply with the provision of Section 65 of the Comprehensive Agrarian Reform Law
and must first secure the approval of the Department of Agrarian Reform of the plan to expropriate the
lands of the San Joaquins.

In Heirs of Juancho Ardana v. Reyes, 125 SCRA 220, petitioners raised the issue of whether the Philippine
Tourism Authority can expropriate lands covered by the "Operation Land Transfer" for use of a tourist resort
complex. There was a finding that of the 282 hectares sought to be expropriated, only an area of 8,970
square meters or less than one hectare was affected by the land reform program and covered by
emancipation patents issued by the Ministry of Agrarian Reform. While the Court said that there was "no
need under the facts of this petition to rule on whether the public purpose is superior or inferior to another
purpose or engage in a balancing of competing public interest," it upheld the expropriation after noting that
petitioners had failed to overcome the showing that the taking of 8,970 square meters formed part of the
resort complex. A fair and reasonable reading of the decision is that this Court viewed the power of
expropriation as superior to the power to distribute lands under the land reform program.
The Solicitor General denigrated the power to expropriate by the Province of Camarines Sur by stressing
the fact that local government units exercise such power only by delegation. (Comment, pp. 14-15; Rollo,
pp. 128-129)

It is true that local government units have no inherent power of eminent domain and can exercise it only
when expressly authorized by the legislature (City of Cincinnati v. Vester, 28l US 439, 74 L.ed. 950, 50 SCt.
360). It is also true that in delegating the power to expropriate, the legislature may retain certain control
or impose certain restraints on the exercise thereof by the local governments (Joslin Mfg. Co. v. Providence,
262 US 668 67 L. ed. 1167, 43 S Ct. 684). While such delegated power may be a limited authority, it is
complete within its limits. Moreover, the limitations on the exercise of the delegated power must be clearly
expressed, either in the law conferring the power or in other legislations.

Resolution No. 129, Series of 1988, was promulgated pursuant to Section 9 of B.P. Blg. 337, the Local
Government Code, which provides:

A local government unit may, through its head and acting pursuant to a resolution of its
sanggunian exercise the right of eminent domain and institute condemnation proceedings for
public use or purpose.

Section 9 of B.P. Blg. 337 does not intimate in the least that local government, units must first secure the
approval of the Department of Land Reform for the conversion of lands from agricultural to non-agricultural
use, before they can institute the necessary expropriation proceedings. Likewise, there is no provision in
the Comprehensive Agrarian Reform Law which expressly subjects the expropriation of agricultural lands by
local government units to the control of the Department of Agrarian Reform. The closest provision of law
that the Court of Appeals could cite to justify the intervention of the Department of Agrarian Reform in
expropriation matters is Section 65 of the Comprehensive Agrarian Reform Law, which reads:

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 his obligation.

The opening, adverbial phrase of the provision sends signals that it applies to lands previously placed under
the agrarian reform program as it speaks of "the lapse of five (5) years from its award."

The rules on conversion of agricultural lands found in Section 4 (k) and 5 (1) of Executive Order No. 129-A,
Series of 1987, cannot be the source of the authority of the Department of Agrarian Reform to determine
the suitability of a parcel of agricultural land for the purpose to which it would be devoted by the
expropriating authority. While those rules vest on the Department of Agrarian Reform the exclusive authority
to approve or disapprove conversions of agricultural lands for residential, commercial or industrial uses,
such authority is limited to the applications for reclassification submitted by the land owners or tenant
beneficiaries.

Statutes conferring the power of eminent domain to political subdivisions cannot be broadened or constricted
by implication (Schulman v. People, 10 N.Y. 2d. 249, 176 N.E. 2d. 817, 219 NYS 2d. 241).

To sustain the Court of Appeals would mean that the local government units can no longer expropriate
agricultural lands needed for the construction of roads, bridges, schools, hospitals, etc, without first applying
for conversion of the use of the lands with the Department of Agrarian Reform, because all of these projects
would naturally involve a change in the land use. In effect, it would then be the Department of Agrarian
Reform to scrutinize whether the expropriation is for a public purpose or public use.

Ordinarily, it is the legislative branch of the local government unit that shall determine whether the use of
the property sought to be expropriated shall be public, the same being an expression of legislative policy.
The courts defer to such legislative determination and will intervene only when a particular undertaking has
no real or substantial relation to the public use (United States Ex Rel Tennessee Valley Authority v. Welch,
327 US 546, 90 L. ed. 843, 66 S Ct 715; State ex rel Twin City Bldg. and Invest. Co. v. Houghton, 144 Minn.
1, 174 NW 885, 8 ALR 585).

There is also an ancient rule that restrictive statutes, no matter how broad their terms are, do not embrace
the sovereign unless the sovereign is specially mentioned as subject thereto (Alliance of Government
Workers v. Minister of Labor and Employment, 124 SCRA 1 [1983]). The Republic of the Philippines, as
sovereign, or its political subdivisions, as holders of delegated sovereign powers, cannot be bound by
provisions of law couched in general term.

The fears of private respondents that they will be paid on the basis of the valuation declared in the tax
declarations of their property, are unfounded. This Court has declared as unconstitutional the Presidential
Decrees fixing the just compensation in expropriation cases to be the value given to the condemned property
either by the owners or the assessor, whichever was lower ([Export Processing Zone Authority v. Dulay,
149 SCRA 305 [1987]). As held in Municipality of Talisay v. Ramirez, 183 SCRA 528 [1990], the rules for
determining just compensation are those laid down in Rule 67 of the Rules of Court, which allow private
respondents to submit evidence on what they consider shall be the just compensation for their property.

WHEREFORE, the petition is GRANTED and the questioned decision of the Court of Appeals is set aside
insofar as it (a) nullifies the trial court's order allowing the Province of Camarines Sur to take possession of
private respondents' property; (b) orders the trial court to suspend the expropriation proceedings; and (c)
requires the Province of Camarines Sur to obtain the approval of the Department of Agrarian Reform to
convert or reclassify private respondents' property from agricultural to non-agricultural use.

The decision of the Court of Appeals is AFFIRMED insofar as it sets aside the order of the trial court, denying
the amended motion to dismiss of the private respondents.

SO ORDERED.

SAMAHAN NG MAGSASAKA SA SAN JOSEP, represented by DOMINADOR MAGLALANG, petitioner,

vs. MARIETTA VALISNO, ADELA, AQUILES, LEANDRO, HONORIO, LUMEN, NICOLAS, all surnamed
VALISNO; RANDY V. WAGNER, MARIA MARTA B. VALISNO, NOELITO VALISNO, MARY ANN L.
VALISNO, PHILIP V. BRANZUELA and BRENDON V. YUJUICO; MA. CRISTINA VALISNO,
BENEDICTO V. YUJUICO, GREGORIO V. YUJUICO and LEONORA V. YUJUICO, respondents.

DECISION

YNARES-SANTIAGO, J.:

The sole issue in this petition for review on certiorari is whether or not the grandchildren of the late Dr.
Nicolas Valisno Sr. are entitled to retention rights as landowners under Republic Act No. 6657, or the
Comprehensive Agrarian Reform Law (hereafter, "CARL").

The original 57-hectare property, situated in La Fuente, Sta. Rosa, Nueva Ecija, was formerly registered in
the name of Dr. Nicolas Valisno, Sr. under Transfer Certificate of Title No. NT-38406. Before the effectivity
of Presidential Decree No. 27,1 the land was the subject of a judicial ejectment suit, whereby in 1971, the
Valisnos’ tenants were ejected from the property.2 Among these tenants was Dominador Maglalang, who
represents the SMSJ in the instant proceedings.

Meanwhile, on October 20 and 21, 1972, Dr. Valisno mortgaged 12 hectares of his property to Renato and
Angelito Banting.3 Thereafter, the property was subdivided into ten lots and on November 8, 1972, individual
titles were issued in the name of the eight children of Nicolas, Angelito Banting, and Renato Banting. 4

After the mortgage on the 12 hectare portion was foreclosed and the property sold at public auction, four
grandchildren of Dr. Nicolas Valisno, namely: Maria Cristina F. Valisno, daughter of Romulo D. Valisno; and
Leonora Valisno Yujuico, Benedicto Valisno Yujuico and Gregorio Valisno Yujuico, children of Marietta Valisno
redeemed the same from the mortgagees. 5 At the time of the redemption, Maria Cristina, Leonora and
Gregorio were all minors; only Benedicto was of legal age, being then 26 years old. 6 The redemption was
made on October 25, 1973, but the titles to the land were not transferred to the redemptioners until
November 26, 1998.7

Subsequently, the entire 57-hectare property became the subject of expropriation proceedings before the
Department of Agrarian Reform ("DAR"). In 1994, Dominador Maglalang, in behalf of the SMSP, filed a
petition for coverage of the subject landholding under the CARL, which petition was dismissed for want of
jurisdiction.8 On June 14, 1995, Rogelio Chaves, DAR Provincial Agrarian Reform Officer ("PARO"), issued a
Memorandum stating that the property had been subdivided among the heirs of Dr. Nicolas Valisno Sr.
before the issuance of PD 27 into tracts of approximately six hectares each. 9 Nevertheless, PARO Chaves
added that the excess over the five-hectare retention limit could still be covered under RA 6657. 10

On appeal, the Office of the Regional Director issued an Order dated January 2, 1996, declaring the Valisno
property exempt from the coverage of PD 27 and RA 6657. 11 This was reversed by then Secretary Garilao,
who held that the property is covered by the Comprehensive Agrarian Reform Program, subject to the
retention rights of the heirs of Nicolas, Sr. The Valisno heirs filed a motion for reconsideration of the said
order, but the same was denied.

On September 25, 1997, the Valisno heirs filed a Consolidated Application for Retention and Award under
RA 6657. Specifically, the petition was filed by (1) Adela, Aquiles, Leandro, Honorio, Lumen, Nicolas and
Marietta Valisno, seven children of Nicolas Valisno, Sr., who applied for retention rights as landowners; (2)
Randy V. Wagner, Maria Marta B. Valisno, Noelito Valisno, Mary Ann L. Valisno, Philip V. Branzuela and
Brendon V. Yujuico, grandchildren of Nicolas Sr. (hereafter collectively the "Grandchildren-Awardees"), who
applied to be considered qualified child-awardees; and (3) Ma. Cristina Valisno, Benedicto V. Yujuico,
Gregorio V. Yujuico and Leonora V. Yujuico, likewise grandchildren of Nicolas Sr. (hereafter collectively the
"Redemptioner-Grandchildren"), who applied for retention rights as landowners over the 12-hectare portion
of the property alleged to have been mortgaged by Nicolas Sr. in 1972 to Angelito and Renato Banting.

The SMSJ, through Dominador Maglalang, opposed the Consolidated Application for Retention, specifically
objecting to the award in favor of the Grandchildren-Awardees because they are not actually tilling nor
directly managing the land in question as required by law.

On November 4, 1998, Regional Director Renato F. Herrera issued an Order which pertinently reads:

WHEREFORE, premises considered, an ORDER is hereby issued as follows:

1. GRANTING the application for retention of the heirs of Dr. Nicolas Valisno, Sr., namely:
Marietta Valisno; Honorio Valisno; Leandro Valisno; Adela Valisno; Nicolas Valisno, Jr.; Aquiles
Valisno; and Lumen Valisno of not more than five (5) hectares each or a total of 35 hectares
covered by Title Nos. 118446, 118443, 118442, 118440, 118445, 118441 and 118444,
respectively, all located at La Fuente, Sta. Rosa, Nueva Ecija;

2. PLACING the excess of 19.0 hectares, more or less, under RA 6657 and acquiring the same
thru Compulsory Acquisition for distribution to qualified farmer-beneficiaries taking into
consideration the basic qualifications set forth by law;

3. DENYING the request for the award to children of the applicants for utter lack of merit; and

4. DIRECTING the applicants-heirs to cause the segregation and survey of the retained area
at their own expense and to submit within thirty (30) days the final approved survey plan to
this Office.

SO ORDERED.12

On appeal, the DAR Secretary affirmed the Order of the Regional Director with the following relevant
ratiocination:
 In the second assignment of error, appellants faulted the Regional Director for not giving due
consideration to the two (2) mortgages constituted by the original owner over a portion of his
landholding in 1972 and redeemed by the latter’s grandchildren in 1973, when the 12-hectare land
subject of the mortgages were ordered to be distributed to CARP beneficiaries.

xxx xxx xxx

The alleged redemption of the mortgaged property by the four (4) grandchildren of Nicolas Valisno,
Sr., namely Ma. Cristina, Leonora, Gregorio and Benedicto, is not likewise worthy of any credence.
The mortgaged property was allegedly redeemed on October 25, 1973. From the evidence on record,
three (3) of the alleged redemptioners represented to be of legal age in the Discharge of Mortgage
were still minors, hence, without any legal capacity at the time the redemption was made. 13

On June 23, 2000, the motion for reconsideration filed by the heirs of Dr. Valisno was denied. 14

Respondent heirs filed a petition for review with the Court of Appeals, arguing that the Secretary of Agrarian
Reform erred (1) in disallowing the award of one hectare to each of the seven Grandchildren-Awardees of
Dr. Nicolas Valisno, as qualified children-awardees under the CARL; and (2) in not recognizing the
redemption made by the four grandchildren of Dr. Nicolas Valisno over the 12-hectare riceland mortgaged
to Renato and Angelito Banting.15

On March 26, 2002, the Court of Appeals reversed the Orders of the DAR Secretary, granted the award of
one hectare each for the seven Grandchildren-Awardees, and affirmed the retention rights of the
Redemptioner-Grandchildren over three hectares each, or a total of 12 hectares.16

Petitioners filed a partial motion for reconsideration, assailing the right of retention of the four
Redemptioner-Grandchildren over the 12-hectare property, and praying that an amended decision be
rendered placing the 12 hectares under the coverage of the CARP. 17 This motion was denied on March 25,
2003.18

Hence, this appeal, on the sole assignment of error:

THE HONORABLE COURT OF APPEALS ERRED WHEN, IN EFFECT, IT RULED THAT THE
REDEMPTIONERS (GRANDCHILDREN OF THE DECEASED NICOLAS VALISNO, SR.) WERE ENTITLED
TO RETENTION RIGHTS AS LANDOWNERS UNDER THE AGRARIAN REFORM LAW DESPITE THE FACT
THAT THE REDEMPTION WAS DONE BY THEIR PARENTS (CHILDREN OF THE DECEASED) ONLY IN
THEIR NAME AND FOR THEIR BENEFIT.19

The appeal lacks merit.

The Court of Appeals found the following facts relevant: First, that the mortgages were constituted over a
12-hectare portion of Dr. Valisno’s estate in 1972. Second, that the titles to the property were transferred
to the names of the mortgagees in 1972, viz., TCT No. NT-118447, covering a 6-hectare property in La
Fuente, Sta. Rosa, Nueva Ecija, issued in the name of Angelito Banting; and TCT No. NT-118448, likewise
covering a 6-hectare property in La Fuente, Sta. Rosa, Nueva Ecija, issued in the name of Renato
Banting. Third, these properties were redeemed by the Redemptioner-Grandchildren on October 25, 1973,
at the time of which redemption three of the four Redemptioner-Grandchildren were minors.

It is a well-settled rule that only questions of law may be reviewed by the Supreme Court in an appeal
by certiorari.20 Findings of fact by the Court of Appeals are final and conclusive and cannot be reviewed on
appeal to the Supreme Court.21 The only time this Court will disregard the factual findings of the Court of
Appeals (which are ordinarily accorded great respect) is when these are based on speculation, surmises or
conjectures or when these are not based on substantial evidence.22

In the case at bar, no reason exists for us to disregard the findings of fact of the Court of Appeals. The
factual findings are borne out by the record and are supported by substantial evidence.
Given these settled facts, the resolution of the sole issue in this case hinges on (1) the validity of the
redemption in 1973, made when three of the Redemptioner-Grandchildren were minors; and (2) if the
redemption was valid, the determination of the retention rights of the Redemptioner-Grandchildren, if any,
under RA 6557.

The relevant laws governing the minors’ redemption in 1973 are the general Civil Code provisions on legal
capacity to enter into contractual relations. Article 1327 of the Civil Code provides that minors are incapable
of giving consent to a contract. Article 1390 provides that a contract where one of the parties is incapable
of giving consent is voidable or annullable. Thus, the redemption made by the minors in 1973 was
merely voidable or annullable, and was not void ab initio, as petitioners argue.

Any action for the annulment of the contracts thus entered into by the minors would require that: (1) the
plaintiff must have an interest in the contract; and (2) the action must be brought by the victim and not the
party responsible for the defect.23 Thus, Article 1397 of the Civil Code provides in part that "[t]he action for
the annulment of contracts may be instituted by all who are thereby obliged principally or subsidiarily.
However, persons who are capable cannot allege the incapacity of those with whom they contracted." The
action to annul the minors’ redemption in 1973, therefore, was one that could only have been initiated by
the minors themselves, as the victims or the aggrieved parties in whom the law itself vests the right to file
suit. This action was never initiated by the minors. We thus quote with approval the ratiocination of the
Court of Appeals:

Respondents contend that the redemption made by the petitioners was simulated, calculated to avoid
the effects of agrarian reform considering that at the time of redemption the latter were still minors
and could not have resources, in their own right, to pay the price thereof.

We are not persuaded. While it is true that a transaction entered into by a party who is incapable of
consent is voidable, however such transaction is valid until annulled. The redemption made by the
four petitioners has never been annulled, thus, it is valid.24

The transfer of the titles to the two 6-hectare properties in 1972 removed the parcels of land from the entire
Valisno estate. The evidence clearly demonstrates that Renato Banting and Angelito Banting became the
registered owners of the property in 1972. These two separate properties were then transferred to the
Redemptioner-Grandchildren in 1973. Regardless of the source of their funds, and regardless of their
minority, they became the legal owners of the property in 1973.

Moreover, although Maria Cristina, Leonora and Gregorio were all minors in 1973, they were undoubtedly
of legal age in 1994, when SMSP initiated the petition for coverage of the subject landholding under the
CARL, and of course were likewise of legal age in 1997, when all the Valisno heirs filed their Consolidated
Application for Retention and Award under RA 6657.

As owners in their own right of the questioned properties, Redemptioner-Grandchildren enjoyed the right of
retention granted to all landowners. This right of retention is a constitutionally guaranteed right, which is
subject to qualification by the legislature.25 It serves to mitigate the effects of compulsory land acquisition
by balancing the rights of the landowner and the tenant and by implementing the doctrine that social justice
was not meant to perpetrate an injustice against the landowner. 26 A retained area, as its name denotes, is
land which is not supposed to leave the landowner’s dominion, thus sparing the government from the
inconvenience of taking land only to return it to the landowner afterwards, which would be a pointless
process.

In the landmark case of Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian
Reform,27 we held that landowners who have not yet exercised their retention rights under PD 27 are entitled
to the new retention rights under RA 6657.28 The retention rights of landowners are provided in Sec. 6 of
RA 6657, which reads in relevant part:

SECTION 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-size, 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 land have been covered by Presidential Decree
No. 27 shall be allowed to keep the area originally retained by them thereunder, Provided further,
That original homestead grantees or direct compulsory heirs who still own the original homestead at
the time of the approval of this Act shall retain the same areas as long as they continue to cultivate
said homestead.

The 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 lease-
holder 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.

This section defines the nature and incidents of a landowner’s right of retention. For as long as the area to
be retained is compact or contiguous and it does not exceed the retention ceiling of five hectares, a
landowner’s choice of the area to be retained must prevail.

Each of the four Redemptioner-Grandchildren is thus entitled to retain a parcel of land with a ceiling of five
hectares, for a total of 20 hectares. The parcels of land in question total only 12 hectares, or only three
hectares each, which is well within the statutory retention limits.

WHEREFORE, premises considered, the Decision of the Court of Appeals in CA-G.R. SP No. 59752 dated
March 26, 2002, and Resolution of the Court of Appeals dated March 25, 2003, which upheld the retention
rights of respondents Ma. Cristina Valisno, Benedicto V. Yujuico, Gregorio V. Yujuico and Leonora V. Yujuico,
are AFFIRMED.

SO ORDERED.