Regulations Implementing Section 11 thereof as promulgated by the
LUZ FARMS, Petitioner, vs. THE HONORABLE SECRETARY OF
THE DEPARTMENT OF AGRARIAN REFORM, Respondent.
DECISION
PARAS, J.:
This is a petition for prohibition with prayer for restraining order
and/or preliminary and permanent injunction against the Honorable
Secretary of the Department of Agrarian Reform for acting without
jurisdiction in enforcing the assailed provisions of R.A. No. 6657,
otherwise known as the Comprehensive Agrarian Reform Law of
1988 and in promulgating the Guidelines and Procedure
Implementing Production and Profit Sharing under R.A. No. 6657,
insofar as the same apply to herein petitioner, and further from
performing an act in violation of the constitutional rights of the
petitioner.
As gathered from the records, the factual background of this case,
is as follows:
On June 10, 1988, the President of the Philippines approved R.A. No.
6657, which includes the raising of livestock, poultry and swine in its
coverage (Rollo, p. 80).
On January 2, 1989, the Secretary of Agrarian Reform promulgated
the Guidelines and Procedures Implementing Production and Profit
Sharing as embodied in Sections 13 and 32 of R.A. No. 6657 (Rollo,
p. 80).
On January 9, 1989, the Secretary of Agrarian Reform promulgated
its Rules and Regulations implementing Section 11 of R.A. No. 6657
(Commercial Farms). (Rollo, p. 81).
Luz Farms, petitioner in this case, is a corporation engaged in the
livestock and poultry business and together with others in the same
business allegedly stands to be adversely affected by the
enforcement of Section 3(b), Section 11, Section 13, Section 16(d)
and 17 and Section 32 of R.A. No. 6657 otherwise known as
Comprehensive Agrarian Reform Law and of the Guidelines and
Procedures Implementing Production and Profit Sharing under R.A.
No. 6657 promulgated on January 2, 1989 and the Rules and
DAR on January 9, 1989 (Rollo, pp. 2-36).: rd
Hence, this petition praying that aforesaid laws, guidelines and rules
be declared unconstitutional. Meanwhile, it is also prayed that a writ
of preliminary injunction or restraining order be issued enjoining
public respondents from enforcing the same, insofar as they are
made to apply to Luz Farms and other livestock and poultry raisers.
This Court in its Resolution dated July 4, 1939 resolved to deny,
among others, Luz Farms' prayer for the issuance of a preliminary
injunction in its Manifestation dated May 26, and 31, 1989. (Rollo,
p. 98).
Later, however, this Court in its Resolution dated August 24, 1989
resolved to grant said Motion for Reconsideration regarding the
injunctive relief, after the filing and approval by this Court of an
injunction bond in the amount of P100,000.00. This Court also gave
due course to the petition and required the parties to file their
respective memoranda (Rollo, p. 119).
The petitioner filed its Memorandum on September 6, 1989 (Rollo,
pp. 131-168).
On December 22, 1989, the Solicitor General adopted his Comment
to the petition as his Memorandum (Rollo, pp. 186-187).
Luz Farms questions the following provisions of R.A. 6657, insofar
as they are made to apply to it:
(a) Section 3(b) which includes the "raising of livestock (and
poultry)" in the definition of "Agricultural, Agricultural
Enterprise or Agricultural Activity."
(b) Section 11 which defines "commercial farms" as "private
agricultural lands devoted to commercial, livestock, poultry
and swine raising . . ."
(c) Section 13 which calls upon petitioner to execute a
production-sharing plan.
(d) Section 16(d) and 17 which vest on the Department of
Agrarian Reform the authority to summarily determine the
just compensation to be paid for lands covered by the
Comprehensive Agrarian Reform Law.
(e) Section 32 which spells out the production-sharing plan
mentioned in Section 13
 ". . . (W)hereby three percent (3%) of the gross sales from
the production of such lands are distributed within sixty (60)
days of the end of the fiscal year as compensation to regular
and other farmworkers in such lands over and above the
compensation they currently receive: Provided, That these
individuals or entities realize gross sales in excess of five
million pesos per annum unless the DAR, upon proper
application, determine a lower ceiling.
In the event that the individual or entity realizes a profit, an
additional ten (10%) of the net profit after tax shall be
distributed to said regular and other farmworkers within
ninety (90) days of the end of the fiscal year . . ."
The main issue in this petition is the constitutionality of Sections
3(b), 11, 13 and 32 of R.A. No. 6657 (the Comprehensive Agrarian
Reform Law of 1988), insofar as the said law includes the raising of
livestock, poultry and swine in its coverage as well as the
Implementing Rules and Guidelines promulgated in accordance
therewith.:-cralaw
The constitutional provision under consideration reads as follows:
ARTICLE XIII
x x x
AGRARIAN AND NATURAL RESOURCES REFORM
Section 4. The State shall, by law, undertake an agrarian
reform program founded on the right of farmers and regular
farmworkers, who are landless, to own directly or collectively
the lands they till or, in the case of other farmworkers, to
receive a just share of the fruits thereof. To this end, the
State shall encourage and undertake the just distribution of
all agricultural lands, subject to such priorities and
reasonable retention limits as the Congress may prescribe,
taking into account ecological, developmental, or equity
considerations, and subject to the payment of just
compensation. In determining retention limits, the State shall
respect the rights of small landowners. The State shall further
provide incentives for voluntary land-sharing.
x x x"
Luz Farms contended that it does not seek the nullification of
R.A. 6657 in its entirety. In fact, it acknowledges the
correctness of the decision of this Court in the case of the
Association of Small Landowners in the Philippines, Inc.
vs. Secretary of Agrarian Reform (G.R. 78742, 14 July 1989)
affirming the constitutionality of the Comprehensive Agrarian
Reform Law. It, however, argued that Congress in enacting
the said law has transcended the mandate of the
Constitution, in including land devoted to the raising of
livestock, poultry and swine in its coverage (Rollo, p. 131).
Livestock or poultry raising is not similar to crop or tree
farming. Land is not the primary resource in this undertaking
and represents no more than five percent (5%) of the total
investment of commercial livestock and poultry raisers.
Indeed, there are many owners of residential lands all over
the country who use available space in their residence for
commercial livestock and raising purposes, under "contract-
growing arrangements," whereby processing corporations
and other commercial livestock and poultry raisers (Rollo, p.
10). Lands support the buildings and other amenities
attendant to the raising of animals and birds. The use of land
is incidental to but not the principal factor or consideration in
productivity in this industry. Including backyard raisers,
about 80% of those in commercial livestock and poultry
production occupy five hectares or less. The remaining 20%
are mostly corporate farms (Rollo, p. 11).
On the other hand, the public respondent argued that livestock and
poultry raising is embraced in the term "agriculture" and the
inclusion of such enterprise under Section 3(b) of R.A. 6657 is
proper. He cited that Webster's International Dictionary, Second
Edition (1954), defines the following words:
"Agriculture the art or science of cultivating the ground and
raising and harvesting crops, often, including also, feeding,
breeding and management of livestock, tillage, husbandry,
farming.
It includes farming, horticulture, forestry, dairying, sugarmaking . .
.
Livestock domestic animals used or raised on a farm, especially
for profit.
Farm a plot or tract of land devoted to the raising of domestic or
other animals." (Rollo, pp. 82-83).
The petition is impressed with merit.
The question raised is one of constitutional construction. The primary
task in constitutional construction is to ascertain and thereafter
assure the realization of the purpose of the framers in the adoption
of the Constitution (J.M. Tuazon & Co. vs. Land Tenure
Administration, 31 SCRA 413 [1970]).: rd
Ascertainment of the meaning of the provision of Constitution begins
with the language of the document itself. The words used in the
Constitution are to be given their ordinary meaning except where
technical terms are employed in which case the significance thus
attached to them prevails (J.M. Tuazon & Co. vs. Land Tenure
Administration, 31 SCRA 413 [1970]).
It is generally held that, in construing constitutional provisions which
are ambiguous or of doubtful meaning, the courts may consider the
debates in the constitutional convention as throwing light on the
intent of the framers of the Constitution. It is true that the intent of
the convention is not controlling by itself, but as its proceeding was
preliminary to the adoption by the people of the Constitution the
understanding of the convention as to what was meant by the terms
of the constitutional provision which was the subject of the
deliberation, goes a long way toward explaining the understanding
of the people when they ratified it (Aquino, Jr. v. Enrile, 59 SCRA
183 [1974]).
The transcripts of the deliberations of the Constitutional Commission
of 1986 on the meaning of the word "agricultural," clearly show that
it was never the intention of the framers of the Constitution to
include livestock and poultry industry in the coverage of the
constitutionally-mandated agrarian reform program of the
Government.
The Committee adopted the definition of "agricultural land" as
defined under Section 166 of R.A. 3844, as laud devoted to any
growth, including but not limited to crop lands, saltbeds, fishponds,
idle and abandoned land (Record, CONCOM, August 7, 1986, Vol.
III, p. 11).
The intention of the Committee is to limit the application of the word
"agriculture." Commissioner Jamir proposed to insert the word
"ARABLE" to distinguish this kind of agricultural land from such lands
as commercial and industrial lands and residential properties
because all of them fall under the general classification of the word
"agricultural". This proposal, however, was not considered because
the Committee contemplated that agricultural lands are limited to
arable and suitable agricultural lands and therefore, do not include
commercial, industrial and residential lands (Record, CONCOM,
August 7, 1986, Vol. III, p. 30).
In the interpellation, then Commissioner Regalado (now a Supreme
Court Justice), posed several questions, among others, quoted as
follows:
x x x
"Line 19 refers to genuine reform program founded on the
primary right of farmers and farmworkers. I wonder if it
means that leasehold tenancy is thereby proscribed under
this provision because it speaks of the primary right of
farmers and farmworkers to own directly or collectively the
lands they till. As also mentioned by Commissioner Tadeo,
farmworkers include those who work in piggeries and poultry
projects.
I was wondering whether I am wrong in my appreciation that
if somebody puts up a piggery or a poultry project and for
that purpose hires farmworkers therein, these farmworkers
will automatically have the right to own eventually, directly
or ultimately or collectively, the land on which the piggeries
and poultry projects were constructed. (Record, CONCOM,
August 2, 1986, p. 618).
x x x
The questions were answered and explained in the statement
of then Commissioner Tadeo, quoted as follows:
x x x
"Sa pangalawang katanungan ng Ginoo ay medyo hindi kami
nagkaunawaan. Ipinaaalam ko kay Commissioner Regalado
na hindi namin inilagay ang agricultural worker sa
kadahilanang kasama rito ang piggery, poultry at livestock
workers. Ang inilagay namin dito ay farm worker kaya hindi
kasama ang piggery, poultry at livestock workers (Record,
CONCOM, August 2, 1986, Vol. II, p. 621).
It is evident from the foregoing discussion that Section II of R.A.
6657 which includes "private agricultural lands devoted to
commercial livestock, poultry and swine raising" in the definition of
"commercial farms" is invalid, to the extent that the aforecited agro-
industrial activities are made to be covered by the agrarian reform
program of the State. There is simply no reason to include livestock
and poultry lands in the coverage of agrarian reform. (Rollo, p. 21).
Hence, there is merit in Luz Farms' argument that the requirement
in Sections 13 and 32 of R.A. 6657 directing "corporate farms" which
include livestock and poultry raisers to execute and implement
"production-sharing plans" (pending final redistribution of their
landholdings) whereby they are called upon to distribute from three
percent (3%) of their gross sales and ten percent (10%) of their net
profits to their workers as additional compensation is unreasonable
for being confiscatory, and therefore violative of due process (Rollo,
p. 21).:-cralaw
It has been established that this Court will assume jurisdiction over
a constitutional question only if it is shown that the essential
requisites of a judicial inquiry into such a question are first satisfied.
Thus, there must be an actual case or controversy involving a conflict
of legal rights susceptible of judicial determination, the constitutional
question must have been opportunely raised by the proper party,
and the resolution of the question is unavoidably necessary to the
decision of the case itself (Association of Small Landowners of the
Philippines, Inc. v. Secretary of Agrarian Reform, G.R. 78742; Acuna
v. Arroyo, G.R. 79310; Pabico v. Juico, G.R. 79744; Manaay v. Juico,
G.R. 79777, 14 July 1989, 175 SCRA 343).
However, despite the inhibitions pressing upon the Court when
confronted with constitutional issues, it will not hesitate to declare a
law or act invalid when it is convinced that this must be done. In
arriving at this conclusion, its only criterion will be the Constitution
and God as its conscience gives it in the light to probe its meaning
and discover its purpose. Personal motives and political
considerations are irrelevancies that cannot influence its decisions.
Blandishment is as ineffectual as intimidation, for all the awesome
power of the Congress and Executive, the Court will not hesitate "to
make the hammer fall heavily," where the acts of these
departments, or of any official, betray the people's will as expressed
in the Constitution (Association of Small Landowners of the
Philippines, Inc. v. Secretary of Agrarian Reform, G.R. 78742; Acuna
v. Arroyo, G.R. 79310; Pabico v. Juico, G.R. 79744; Manaay v. Juico,
G.R. 79777, 14 July 1989).
Thus, where the legislature or the executive acts beyond the scope
of its constitutional powers, it becomes the duty of the judiciary to
declare what the other branches of the government had assumed to
do, as void. This is the essence of judicial power conferred by the
Constitution "(I)n one Supreme Court and in such lower courts as
may be established by law" (Art. VIII, Section 1 of the 1935
Constitution; Article X, Section I of the 1973 Constitution and which
was adopted as part of the Freedom Constitution, and Article VIII,
Section 1 of the 1987 Constitution) and which power this Court has
exercised in many instances (Demetria v. Alba, 148 SCRA 208
[1987]).
PREMISES CONSIDERED, the instant petition is hereby GRANTED.
Sections 3(b), 11, 13 and 32 of R.A. No. 6657 insofar as the inclusion
of the raising of livestock, poultry and swine in its coverage as well
as the Implementing Rules and Guidelines promulgated in
accordance therewith, are hereby DECLARED null and void for being
unconstitutional and the writ of preliminary injunction issued is
hereby MADE permanent.
SO ORDERED.
Fernan (C.J.), Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz,
Gancayco, Padilla, Bidin, Grio-Aquino, Medialdea and
Regalado, JJ., concur.
Feliciano, J., is on leave.
Separate Opinions
SARMIENTO, J., concurring:
I agree that the petition be granted.
It is my opinion however that the main issue on the validity of the
assailed provisions of R.A. 6657 (the Comprehensive Agrarian
Reform Law of 1988) and its Implementing Rules and Guidelines
insofar as they include the raising of livestock, poultry, and swine in
their coverage cannot be simplistically reduced to a question of
constitutional construction.
It is a well-settled rule that construction and interpretation come
only after it has been demonstrated that application is impossible or
inadequate without them. A close reading however of the
constitutional text in point, specifically, Sec. 4, Art. XIII, particularly
the phrase, ". . . in case of other farmworkers, to receive a just share
of the fruits thereof," provides a basis for the clear and possible
coverage of livestock, poultry, and swine raising within the ambit of
the comprehensive agrarian reform program. This accords with the
principle that every presumption should be indulged in favor of the
constitutionality of a statute and the court in considering the validity
of a statute should give it such reasonable construction as can be
reached to bring it within the fundamental law. 1
The presumption against unconstitutionality, I must say, assumes
greater weight when a ruling to the contrary would, in effect, defeat
the laudable and noble purpose of the law, i.e., the welfare of the
landless farmers and farmworkers in the promotion of social justice,
by the expedient conversion of agricultural lands into livestock,
poultry, and swine raising by scheming landowners, thus, rendering
the comprehensive nature of the agrarian program merely illusory.
The instant controversy, I submit, boils down to the question of
whether or not the assailed provisions violate the equal protection
clause of the Constitution (Article II, section 1) which teaches simply
that all persons or things similarly situated should be treated alike,
both as to rights conferred and responsibilities imposed. 2
There is merit in the contention of the petitioner that substantial
distinctions exist between land directed purely to cultivation and
harvesting of fruits or crops and land exclusively used for livestock,
poultry and swine raising, that make real differences, to wit:
x x x
No land is tilled and no crop is harvested in livestock and poultry
farming. There are no tenants nor landlords, only employers and
employees.
Livestock and poultry do not sprout from land nor are they "fruits of
the land."
Land is not even a primary resource in this industry. The land input
is inconsequential that all the commercial hog and poultry farms
combined occupy less than one percent (1%) (0.4% for piggery,
0.2% for poultry) of the 5.45 million hectares of land supposedly
covered by the CARP. And most farms utilize only 2 to 5 hectares of
land.: nad
In every respect livestock and poultry production is an industrial
activity. Its use of an inconsequential portion of land is a mere
incident of its operation, as in any other undertaking, business or
otherwise.
The fallacy of defining livestock and poultry production as an
agricultural enterprise is nowhere more evident when one considers
that at least 95% of total investment in these farms is in the form of
fixed assets which are industrial in nature.
These include (1) animal housing structures and facilities complete
with drainage, waterers, blowers, misters and in some cases even
piped-in music; (2) feedmills complete with grinders, mixers,
conveyors, exhausts, generators, etc.; (3) extensive warehousing
facilities for feeds and other supplies; (4) anti-pollution equipment
such as bio-gas and digester plants augmented by lagoons and
concrete ponds; (5) deepwells, elevated water tanks, pumphouses
and accessory facilities; (6) modern equipment such as sprayers,
pregnancy testers, etc.; (7) laboratory facilities complete with
expensive tools and equipment; and a myriad other such
technologically advanced appurtances.
How then can livestock and poultry farmlands be arable when such
are almost totally occupied by these structures?
The fallacy of equating the status of livestock and poultry
farmworkers with that of agricultural tenants surfaces when one
considers contribution to output. Labor cost of livestock and poultry
farms is no more than 4% of total operating cost. The 98% balance
represents inputs not obtained from the land nor provided by the
farmworkers inputs such as feeds and biochemicals (80% of the
total cost), power cost, cost of money and several others.
Moreover, livestock and poultry farmworkers are covered by
minimum wage law rather than by tenancy law. They are entitled to
social security benefits where tenant-farmers are not. They are paid
fixed wages rather than crop shares. And as in any other industry,
they receive additional benefits such as allowances, bonuses, and
other incentives such as free housing privileges, light and water.
Equating livestock and poultry farming with other agricultural
activities is also fallacious in the sense that like the manufacturing
sector, it is a market for, rather than a source of agricultural output.
At least 60% of the entire domestic supply of corn is absorbed by
livestock and poultry farms. So are the by-products of rice (rice-
bran), coconut (copra meal), banana (banana pulp meal), and fish
(fish meal). 3
x x x
In view of the foregoing, it is clear that both kinds of lands are not
similarly situated and hence, cannot be treated alike. Therefore, the
assailed provisions which allow for the inclusion of livestock and
poultry industry within the coverage of the agrarian reform program
constitute invalid classification and must accordingly be struck down
as repugnant to the equal protection clause of the
Constitution.chanrobles
STANFILCO V DOLE
BRION, J.:
Before this Court is the petition for review on certiorari[1] filed by petitioner Stanfilco
Employees Agrarian Reform Beneficiaries Multi-Purpose Cooperative
(SEARBEMCO). It assails:
(a) the decision[2] of the Court of Appeals (CA) in CA-G.R. SP No. 66148
dated November 27, 2001; and
(b) the CAs resolution[3] of June 13, 2002 in the same case, denying
SEARBEMCOs motion for reconsideration.
THE FACTUAL ANTECEDENTS
On January 29, 1998, SEARBEMCO, as seller, and respondent DOLE Philippines,
Inc. (Stanfilco Division) (DOLE), as buyer, entered into a Banana Production and
Purchase Agreement[4] (BPPA). The BPPA provided that SEARBEMCO shall sell
exclusively to DOLE, and the latter shall buy from the former, all Cavendish bananas
of required specifications to be planted on the land owned by SEARBEMCO. The
BPPA states:
The SELLER agrees to sell exclusively to the BUYER, and the
BUYER agrees to buy all Cavendish Banana of the Specifications
and Quality described in EXHIBIT A hereof produced on the
SELLERS plantation covering an area of 351.6367 hectares, more
or less, and which is planted and authorized under letter of
instruction no. 790 as amended on November 6, 1999 under the
terms and conditions herein stipulated. The SELLER shall not
increase or decrease the area(s) stated above without the prior
written approval of the BUYER. However, the SELLER may reduce
said area(s) provided that if the SELLER replaces the reduction by
planting bananas on an equivalent area(s) elsewhere, it is agreed that
such replacement area(s) shall be deemed covered by the
Agreement. If the SELLER plants an area(s) in excess of said
351.6367 hectares, the parties may enter into a separate agreement
regarding the production of said additional acreage. SELLER will
produce banana to the maximum capacity of the plantation, as much
as practicable, consistent with good agricultural practices designed
to produce banana of quality having the standards hereinafter set
forth for the duration of this Banana Production and Purchase
Agreement.
SEARBEMCO bound and obliged itself, inter alia, to do the following:
V. SPECIFIC OBLIGATIONS OF THE SELLER
xxx
p.) Sell exclusively to the BUYER all bananas produced from the
subject plantation, except those rejected by the BUYER for failure
to meet the specifications and conditions contained in Exhibit A
hereof. In the case of any such rejected bananas, the SELLER
shall have the right to sell such rejected bananas to third parties,
for domestic non-export consumption. The SELLER shall only
sell bananas produced from the plantation and not from any other
source. [Emphasis supplied.]
Any dispute arising from or in connection with the BPPA between the parties shall be
finally settled through arbitration. To quote the BPPA:
IX. ARBITRATION OF DISPUTE
All disputes arising in connection with this Agreement shall be
finally settled under the Rules of Conciliation and Arbitration of the
International Chamber of Commerce by three (3) Arbitrators
appointed in accordance with said Rules. The Arbitration shall be
held in a venue to be agreed by the parties. Judgment upon the award
rendered may be entered in any Philippine Court having jurisdiction
or application may be made to such court for judicial acceptance of
the award and as order of enforcement, as the case may be.
On December 11, 2000, DOLE filed a complaint with the Regional Trial
Court[5] (RTC) against SEARBEMCO, the spouses Elly and Myrna Abujos (spouses
Abujos), and Oribanex Services, Inc. (Oribanex) for specific performance and
damages, with a prayer for the issuance of a writ of preliminary injunction and of a
temporary restraining order. DOLE alleged that SEARBEMCO sold and delivered to
Oribanex, through the spouses Abujos, the bananas rejected by DOLE, in violation of
paragraph 5(p), Article V of the BPPA which limited the sale of rejected bananas for
domestic non-export consumption. DOLE further alleged that Oribanex is likewise an
exporter of bananas and is its direct competitor.
DOLE narrated in its complaint how SEARBEMCO sold and delivered the rejected
bananas to Oribanex through the spouses Abujos:
9.) That, however, on April 12, 2000 at about 5:00 oclock in the
afternoon, [DOLE] through its authorized security personnel
discovered that defendant SEARBEMCO, in violation of Section
 5(p) Article V of the Banana Production and Purchase Agreement,
packed the bananas rejected by [DOLE] in boxes marked CONSUL
in Packing Plant 32 in DAPCO Panabo and sold and delivered them
to defendant Abujos;
10.) That about 373 CONSUL marked boxes were packed and
knowingly sold by defendant SEARBEMCO to ORIBANEX
SERVICES, INC. through defendants Abujos who carried and
loaded the same on board a blue Isuzu Canter bearing plate no. LDM
976 and delivered to defendant ORIBANEX for export at the
TEFASCO Wharf covered by Abujos Delivery Receipt, a copy of
which is hereto attached as Annex B;
11.) That the following day, April 13, 2000, again the same security
found that defendant SEARBEMCO continued to pack the bananas
rejected by plaintiff in boxes marked as CONSUL and, in violation
of paragraph 5(p) Article V of the Banana Production and Purchase
Agreement, sold and delivered them to defendant ORIBANEX
SERVICES, INC., for export, through defendants Abujos;
12.) That about 648 CONSUL marked boxes were packed and
knowingly sold by defendant SEARBEMCO to ORIBANEX
SERVICES, INC., through defendants Abujos who carried and
loaded the same on board a red Isuzu Forwarder, bearing plate no.
LCV 918, and delivered to defendant ORIBANEX for export at the
TEFASCO Wharf covered by Abujos Delivery Receipt, a copy of
which is hereto attached and marked as Annex C;
13.) That the sale of a total of 712 boxes of rejected bananas
covering April 12 and 13, 2000, or any other dates prior thereto or
made thereafter by defendant SEARBEMCO to defendant
ORIBANEX SERVICES, INC. through defendant Abujos is in utter
violation of the Agreement between plaintiff [DOLE] and defendant
SEARBEMCO that SEARBEMCO may sell bananas rejected by
plaintiff to parties for domestic non-export consumption only.
SEARBEMCO responded with a motion to dismiss on the grounds of lack of
jurisdiction over the subject matter of the claim, lack of cause of action, failure to
submit to arbitration which is a condition precedent to the filing of a complaint, and
the complaints defective verification and certification of non-forum
shopping.[6] SEARBEMCO argued that:
1) the Department of Agrarian Reform Adjudication Board (DARAB)
has exclusive jurisdiction over the action filed by DOLE, pursuant
to Sections 1 and 3(e) of Administrative Order
No. 09, Series of 1998[7] (AO No. 9-98) and Section 5(a) and (c) of
Administrative Order No. 02, Series of 1999[8] (AO No. 2-99) of the
Department of Agrarian Reform (DAR), since the dispute between
the parties is an agrarian dispute within the exclusive competence of
the DARAB to resolve;
2) the filing of the complaint is premature, as the dispute between
DOLE and SEARBEMCO has not been referred to and resolved by
arbitration, contrary to Article IX of the BPPA and Article V, Sec.
30(g)[9] of AO No. 9-98 of the DAR;
3) it did not violate Section 5(p), Article V of the BPPA, since the
rejected bananas were sold to the spouses Abujos who were third-
party buyers and not exporters of bananas; and
4) the complaint is fatally defective as the Board of Directors of DOLE
did not approve any resolution authorizing Atty. Reynaldo Echavez
to execute the requisite Verification and Certification Against
Forum Shopping and, therefore, the same is fatally defective.
DOLE opposed SEARBEMCOs motion to dismiss alleging, among others,
that:
1) the dispute between the parties is not an agrarian dispute within the
exclusive jurisdiction of the DARAB under Republic Act No.
6657[10] (RA No. 6657); and
2) the Arbitration Clause of the BPPA is not applicable as, aside from
SEARBEMCO, DOLE impleaded other parties (i.e., the spouses Abujos
and Oribanex who are not parties to the BPPA) as defendants.[11]
Subsequently, DOLE filed on February 2, 2001 an amended complaint,[12] the
amendment consisting of the Verification and Certification against forum shopping for
DOLE executed by Danilo C. Quinto, DOLEs Zone Manager.
THE RTC RULING
The RTC denied SEARBEMCOs motion to dismiss in an Order dated May 16,
2001.[13] The trial court stated that the case does not involve an agrarian conflict and
is a judicial matter that it can resolve.
SEARBEMCO moved for the reconsideration of the RTC Order. [14] The RTC denied
the motion for lack of merit in its Order of July 12, 2001.[15]
THE CA RULING
On July 26, 2001, SEARBEMCO filed a special civil action for certiorari[16] with the
CA alleging grave abuse of discretion on the part of the RTC for denying its motion
to dismiss and the subsequent motion for reconsideration.
SEARBEMCO argued that the BPPA the parties executed is an agri-business venture
agreement contemplated by DARs AO No. 9-98. Thus, any dispute arising from the
interpretation and implementation of the BPPA is an agrarian dispute within the
exclusive jurisdiction of the DARAB.
In a decision dated November 27, 2001,[17] the CA found that the RTC did not gravely
abuse its discretion in denying SEARBEMCOs motion to dismiss and motion for
reconsideration.
The CA ruled that the [DAR] has no jurisdiction, under said [AO No. 9-98],
over actions between [SEARBEMCO] and [DOLE] for enforcement of the said
Agreement when one commits a breach thereof and for redress by way of specific
performance and damages inclusive of injunctive relief. [18] It held that the case is not
an agrarian dispute within the purview of Section 3(d) of RA No. 6657, [19] but is an
action to compel SEARBEMCO to comply with its obligations under the BPPA; it
called for the application of the provisions of the Civil Code, not RA No. 6657.
The CA likewise disregarded SEARBEMCOs emphatic argument that DOLEs
complaint was prematurely filed because of its failure to first resort to arbitration. The
arbitration clause under the BPPA, said the CA, applies only when the parties involved
are parties to the agreement; in its complaint, DOLE included the spouses Abujos and
Oribanex as defendants. According to the CA, if [DOLE] referred its dispute with
[SEARBEMCO] to a Panel of Arbitrators, any judgment rendered by the latter,
whether for or against [DOLE] will not be binding on the [spouses Abujos] and
[Oribanex], as case law has it that only the parties to a suit, as well as their successors-
in-interest, are bound by the judgment of the Court or quasi-judicial bodies.[20]
On SEARBEMCOs argument that the Verification and Certification Against Forum
Shopping under DOLEs amended complaint is defective for failure to state that this
was based on personal knowledge, the CA ruled that the omission of the word personal
did not render the Verification and Certification defective.
SEARBEMCO moved for reconsideration of the decision, but the CA denied the
motion for lack of merit in its resolution of June 13, 2002.[21]
ASSIGNMENT OF ERRORS
In the present petition, SEARBEMCO submits that the CA erred in ruling that:
1.) the RTC has jurisdiction over the subject matter of the complaint of
DOLE, considering that the case involves an agrarian dispute within the
exclusive jurisdiction of the DARAB;
2.) the complaint of DOLE states a cause of action, despite the fact that
SEARBEMCO has not violated any provision of the BPPA; and
3.) the filing of the complaint is not premature, despite DOLEs failure to
submit its claim to arbitration a condition precedent to any juridical
recourse.
THE COURTS RULING
We do not find the petition meritorious.
DOLEs complaint falls within
thejurisdiction of the regular courts, not
the DARAB.
SEARBEMCO mainly relies on Section 50[22] of RA No. 6657 and the characterization
of the controversy as an agrarian dispute or as an agrarian reform matter in contending
that the present controversy falls within the competence of the DARAB and not of the
regular courts. The BPPA, SEARBEMCO claims, is a joint venture and a production,
processing and marketing agreement, as defined under Section 5 (c) (i) and (ii) of DAR
AO No. 2-99;[23] hence, any dispute arising from the BPPA is within the exclusive
jurisdiction of the DARAB. SEARBEMCO also asserts that the parties relationship in
the present case is not only that of buyer and seller, but also that of supplier of land
covered by the CARP and of manpower on the part of SEARBEMCO, and supplier of
agricultural inputs, financing and technological expertise on the part of DOLE.
Therefore, SEARBEMCO concludes that the BPPA is not an ordinary contract, but
one that involves an agrarian element and, as such, is imbued with public interest.
We clarify at the outset that what we are reviewing in this petition is
the legal question of whether the CA correctly ruled that the RTC committed no grave
abuse discretion in denying SEARBEMCOs motion to dismiss. In ruling for legal
correctness, we have to view the CA decision in the same context that the petition
for certiorari it ruled upon was presented to the appellate court; we have to examine
the CA decision from the prism of whether it correctly determined the presence or
absence of grave abuse of discretion in the RTC ruling before it, not on the basis of
whether the RTC ruling on the merits of the case was correct. In other words, we have
to be keenly aware that the CA undertook a Rule 65 review, not a review on appeal,
of the challenged RTC ruling. A court acts with grave abuse of discretion amounting
to lack or excess of jurisdiction when its action was performed in a capricious and
whimsical exercise of judgment equivalent to lack of discretion. The abuse of
discretion must be so patent and gross as to amount to an evasion of a positive duty or
to a virtual refusal to perform a duty enjoined by law, or to act at all in contemplation
of the law, as where the power is exercised in an arbitrary and despotic manner by
reason or passion or personal hostility.[24]
As the CA found, the RTCs action was not attended by any grave abuse of
discretion and the RTC correctly ruled in denying SEARBEMCOs motion to
dismiss. We fully agree with the CA.
Section 3(d) of RA No. 6657 is clear in defining an agrarian dispute: any
controversy relating to tenurial arrangements, whether leasehold, tenancy, stewardship
or otherwise, over lands devoted to agriculture, including dispute concerning farm-
workers associations or representations of persons in negotiating, fixing, maintaining,
changing or seeking to arrange terms or conditions of such tenurial arrangements. It
includes any controversy relating to compensation of lands acquired under this Act
and other terms and conditions of transfer of ownership from landowners to
farmworkers, tenants and other agrarian reform beneficiaries, whether the disputants
stand in the proximate relation of farm operator and beneficiary, landowner and tenant,
or lessor and lessee.[25]
RA No. 6657 is procedurally implemented through the 2003 DARAB Rules of
Procedure where Section 1, Rule II[26] enumerates the instances where the DARAB
shall have primary and exclusive jurisdiction. A notable feature of RA No. 6657 and
its implementing rules is the focus on agricultural lands and the relationship over this
land that serves as the basis in the determination of whether a matter falls under
DARAB jurisdiction.
In Heirs of the Late Hernan Rey Santos v. Court of Appeals,[27] we held that:
For DARAB to have jurisdiction over a case, there must exist a
tenancy relationship between the parties. x x x. In Vda. De
Tangub v. Court of Appeals(191 SCRA 885), we held that the
jurisdiction of the Department of Agrarian Reform is limited to the
following: a.) adjudication of all matters involving implementation
of agrarian reform; b.) resolution of agrarian conflicts and land
tenure related problems; and c.) approval and disapproval of the
conversion, restructuring or readjustment of agricultural lands into
residential, commercial, industrial, and other non-agricultural uses.
[Emphasis supplied].
The case of Pasong Bayabas Farmers Association, Inc. v. Court of
Appeals[28] lists down the indispensable elements for a tenancy relationship to exist:
(1) the parties are the landowner and the tenant or agricultural lessee; (2) the subject
matter of the relationship is an agricultural land; (3) there is consent between the
parties to the relationship; (4) the purpose of the relationship is to bring about
agricultural production; (5) there is personal cultivation on the part of the tenant or
agricultural lessee; and (6) the harvest is shared between the landowner and the tenant
or the agricultural lessee.
The parties in the present case have no tenurial, leasehold, or any other
agrarian relationship that could bring their controversy within the ambit of agrarian
reform laws and within the jurisdiction of the DARAB. In fact, SEARBEMCO has no
allegation whatsoever in its motion to dismiss regarding any tenancy relationship
between it and DOLE that gave the present dispute the character of an agrarian dispute.
We have always held that tenancy relations cannot be presumed. The
elements of tenancy must first be proved by substantial evidence which can be shown
through records, documents, and written agreements between the parties. A principal
factor, too, to consider in determining whether a tenancy relationship exists is the
intent of the parties.[29]
SEARBEMCO has not shown that the above-mentioned indispensable
elements of tenancy relations are present between it and DOLE. It also cannot be
gleaned from the intention of the parties that they intended to form a tenancy
relationship between them. In the absence of any such intent and resulting relationship,
the DARAB cannot have jurisdiction. Instead, the present petition is properly
cognizable by the regular courts, as the CA and the RTC correctly ruled.
Notably, the requirement of the existence of tenurial relationship has been
relaxed in the cases of Islanders CARP-Farmers Beneficiaries Muti-Purpose
Cooperative, Inc. v. Lapanday Agricultural and Devt. Corporation [30] and Cubero v.
Laguna West Multi-Purpose Cooperative, Inc.[31] The Court, speaking through former
Chief Justice Panganiban, declared in Islanders that:
[The definition of agrarian dispute in RA No. 6657 is] broad enough
to include disputes arising from any tenurial arrangement beyond
the traditional landowner-tenant or lessor-lessee relationship. xxx
[A]grarian reform extends beyond the mere acquisition and
redistribution of land, the law acknowledges other modes of tenurial
arrangements to effect the implementation of CARP.[32]
While Islanders and Cubero may seem to serve as precedents to the present
case, a close analysis of these cases, however, leads us to conclude that significant
differences exist in the factual circumstances between those cases and the present case,
thus rendering the rulings in these cited cases inapplicable.
Islanders questioned (through a petition for declaration of nullity filed before
the RTC of Tagum City) the lack of authority of the farmer-beneficiaries alleged
representative to enter into a Joint Production Agreement with Lapanday. The farmers-
beneficiaries assailed the validity of the agreement by additionally claiming that its
terms contravened RA No. 6657.
Cubero likewise involved a petition to declare the nullity of a Joint Venture
Agreement between the farmer-beneficiaries and Laguna West Multi-Purpose
Cooporative, Inc. The successors of the farmer-beneficiaries assailed the agreement
before the RTC of Tanauan, Batangas for having been executed within the 10-year
prohibitory period under Section 27 of RA No. 6657.
In both cases, the Court ruled that the RTC lacked jurisdiction to hear the
complaint and declared the DARAB as the competent body to resolve the dispute. The
Court declared that when the question involves the rights and obligations of persons
engaged in the management, cultivation, and use of an agricultural land covered by
CARP, the case falls squarely within the jurisdictional ambit of the DAR.
 Carefully analyzed, the principal issue raised
in Islanders and Cubero referred to the management, cultivation, and use of the
CARP-covered agricultural land; the issue of the nullity of the joint economic
enterprise agreements in Islanders and Cubero would directly affect the agricultural
land covered by CARP. Those cases significantly did not pertain to post-
harvest transactions involving the produce from CARP-covered agricultural lands, as
the case before us does now.
Moreover, the resolution of the issue raised in Islanders and Cubero required
the interpretation and application of the provisions of RA No. 6657, considering that
the farmer-beneficiaries claimed that the agreements contravened specific provisions
of that law. In the present case, DOLEs complaint for specific performance and
damages before the RTC did not question the validity of the BPPA that would require
the application of the provisions of RA No. 6657; neither did SEARBEMCOs motion
to dismiss nor its other pleadings assail the validity of the BPPA on the ground that its
provisions violate RA No. 6657. The resolution of the present case would therefore
involve, more than anything else, the application of civil law provisions on breaches
of contract, rather than agrarian reform principles. Indeed, in support of their
arguments, the parties have capitalized and focused on their relationship as buyer and
seller. DOLE, the buyer, filed a complaint against SEARBEMCO, the seller, to
enforce the BPPA between them and to compel the latter to comply with its
obligations. The CA is thus legally correct in its declaration that the action before the
RTC does not involve an agrarian dispute, nor does it call for the application of
Agrarian Reform laws. x x x. The action of [DOLE] involves and calls for the
application of the New Civil Code, in tandem with the terms and conditions of the
[BPPA] of [SEARBEMCO] and [DOLE].[33]
We find SEARBEMCOs reliance on DAR AO No. 9-98 and AO No. 2-99 as
bases for DARABs alleged expanded jurisdiction over all disputes arising from the
interpretation of agribusiness ventures to be misplaced. DARABs jurisdiction under
Section 50 of RA No. 6657 should be read in conjunction with the coverage of agrarian
reform laws; administrative issuances like DAR AO Nos. 9-98 and 2-99 cannot validly
extend the scope of the jurisdiction set by law. In so ruling, however, we do not pass
upon the validity of these administrative issuances. We do recognize the possibility
that disputes may exist between parties to joint economic enterprises
that directly pertain to the management, cultivation, and use of CARP-covered
agricultural land. Based on our above discussion, these disputes will fall within
DARABs jurisdiction.
Even assuming that the present case can be classified as an agrarian dispute
involving the interpretation or implementation of agribusiness venture agreements,
DARAB still cannot validly acquire jurisdiction, at least insofar as DOLEs cause of
action against the third parties the spouses Abujos and Oribanex is concerned. To
prevent multiple actions, we hold that the present case is best resolved by the trial
court.
DOLEs complaint validly states a
cause of action
SEARBEMCO asserts that the pleading containing DOLEs claim against it states no
cause of action. It contends that it did not violate any of the provisions of the BPPA,
since the bananas rejected by DOLE were sold to the spouses Abujos who are third-
party buyers and are not exporters of bananas transactions that the BPPA allows. Since
the sole basis of DOLEs complaint was SEARBEMCOs alleged violation of the
BPPA, which SEARBEMCO insists did not take place, the complaint therefore did
not state a cause of action.
Due consideration of the basic rules on lack of cause of action as a ground for a motion
to dismiss weighs against SEARBEMCOs argument.
In the case of Jimenez, Jr. v. Jordana,[34] this Court had the opportunity to discuss the
sufficiency of the allegations of the complaint to uphold a valid cause of action, as
follows:
In a motion to dismiss, a defendant hypothetically admits the truth
of the material allegations of the plaintiffs complaint. This
hypothetical admission extends to the relevant and material facts
pleaded in, and the inferences fairly deductible from, the complaint.
Hence, to determine whether the sufficiency of the facts alleged in
the complaint constitutes a cause of action, the test is as follows:
admitting the truth of the facts alleged, can the court render a valid
judgment in accordance with the prayer?
To sustain a motion to dismiss, the movant needs to show
that the plaintiffs claim for relief does not exist at all. On the
contrary, the complaint is sufficient if it contains sufficient notice of
the cause of action even though the allegations may be vague or
indefinite, in which event, the proper recourse would be, not a
motion to dismiss, but a motion for a bill of particulars. [35]
In applying this authoritative test, we must hypothetically assume the
truth of DOLEs allegations, and determine whether the RTC can render a valid
judgment in accordance with its prayer.
We find the allegations in DOLEs complaint to be sufficient basis for the judgment
prayed for. Hypothetically admitting the allegations in DOLEs complaint
that SEARBEMCO sold the rejected bananas to Oribanex, a competitor of DOLE and
also an exporter of bananas, through the spouses Abujos, a valid judgment may be
rendered by the RTC holding SEARBEMCO liable for breach of contract. That the
sale had been to the spouses Abujos who are not exporters is essentially a denial of
DOLEs allegations and is not therefore a material consideration in weighing the merits
of the alleged lack of cause of action. What SEARBEMCO stated is a counter-
statement of fact and conclusion, and is a defense that it will have to prove at the
trial. At this point, the material consideration is merely what the complaint expressly
alleged. Hypothetically assuming DOLEs allegations of ultimate sale to Oribanex,
through the spouses Abujos, to be true, we hold following the test of sufficiency
in Jordana that DOLEs prayer for specific performance and damages may be validly
granted; hence, a cause of action exists.
The filing of the complaint is not
premature since arbitration
proceedings are not necessary in the
present case
SEARBEMCO argues that DOLE failed to comply with a condition precedent before
the filing of its complaint with the RTC, i.e., DOLE did not attempt to settle their
controversy through arbitration proceedings. SEARBEMCO relies on Article V,
Section 30(g) of DAR AO No. 9-98[36]
[37]
and Section 10 of DAR AO No. 2-99 which provide that as a rule, voluntary
methods such as mediation or conciliation, shall be preferred in resolving disputes
involving joint economic enterprises. SEARBEMCO also cites Section IX of the
BPPA which provides that all disputes arising out of or in connection with their
agreement shall be finally settled through arbitration.
Following our conclusion that agrarian laws find no application in the present case, we
find as the CA did that SEARBEMCOs arguments anchored on these laws are
completely baseless. Furthermore, the cited DAR AO No. 2-99, on its face, only
mentions a preference, not a strict requirement of referral to arbitration. The BPPA-
based argument deserves more and closer consideration.
We agree with the CA ruling that the BPPA arbitration clause does not apply
to the present case since third parties are involved. Any judgment or ruling to be
rendered by the panel of arbitrators will be useless if third parties are included in the
case, since the arbitral ruling will not bind them; they are not parties to the arbitration
agreement. In the present case, DOLE included as parties the spouses Abujos and
Oribanex since they are necessary parties, i.e., they were directly involved in the
BPPA violation DOLE alleged, and their participation are indispensable for a complete
resolution of the dispute. To require the spouses Abujos and Oribanex to submit
themselves to arbitration and to abide by whatever judgment or ruling the panel of
arbitrators shall make is legally untenable; no law and no agreement made with their
participation can compel them to submit to arbitration.
In support of its position, SEARBEMCO cites the case of Toyota Motor Philippines
Corp. v. Court of Appeals[38] which holds that, the contention that the arbitration clause
has become dysfunctional because of the presence of third parties is untenable.
Contracts are respected as the law between the contracting parties. As such, the parties
are thereby expected to abide with good faith in their contractual commitments.
SEARBEMCO argues that the presence of third parties in the complaint does not affect
the validity of the provisions on arbitration.
Unfortunately, the ruling in the Toyota case has been superseded by the more recent
cases of Heirs of Augusto L. Salas, Jr. v. Laperal Realty Corporation [39] and Del
Monte Corporation-USA v. Court of Appeals.[40]
Heirs of Salas involved the same issue now before us: whether or not the complaint of
petitioners-heirs in that case should be dismissed for their failure to submit the matter
to arbitration before filing their complaint. The petitioners-heirs included as
respondents third persons who were not parties to the original agreement between the
petitioners-heirs and respondent Laperal Realty. In ruling that prior resort to
arbitration is not necessary, this Court held:
Respondent Laperal Realty, as a contracting party to the
Agreement, has the right to compel petitioners to first arbitrate
before seeking judicial relief. However, to split the proceedings into
arbitration for respondent Laperal Realty and trial for the respondent
lot buyers, or to hold trial in abeyance pending arbitration between
petitioners and respondent Laperal Realty, would in effect result in
multiplicity of suits, duplicitous procedure and unnecessary delay.
On the other hand, it would be in the interest of justice if the trial
court hears the complaint against all herein respondents and
adjudicates petitioners rights as against theirs in a single and
complete proceeding.[41]
The case of Del Monte is more direct in stating that the doctrine held in the Toyota case
has already been abandoned:
The Agreement between petitioner DMC-USA and
private respondent MMI is a contract. The provision to submit
to arbitration any dispute arising therefrom and the relationship
of the parties is part of that contract and is itself a contract. As
a rule, contracts are respected as the law between the
contracting parties and produce effect as between them, their
assigns and heirs. Clearly, only parties to the Agreement, i.e.,
petitioners DMC-USA and its Managing Director for
Export Sales Paul E. Derby, and private respondents MMI
and its Managing Director Lily Sy are bound by the
Agreement and its arbitration clause as they are the only
signatories thereto. Petitioners Daniel Collins and Luis
Hidalgo, and private respondent SFI, not parties to the
Agreement and cannot even be considered assigns or heirs of
the parties, are not bound by the Agreement and the arbitration
clause therein. Consequently, referral to arbitration in the State
of California pursuant to the arbitration clause and the
 suspension of the proceedings in Civil Case No. 2637-MN
pending the return of the arbitral award could be called for but
only as to petitioners DMC-USA and Paul E. Derby, Jr., and
private respondents MMI and Lily Sy, and not as to other
parties in this case, in accordance with the recent case of Heirs
of Augusto L. Salas, Jr. v. Laperal Realty Corporation, which
superseded that of [sic] Toyota Motor Philippines Corp. v.
Court of Appeals.
xxxx
The object of arbitration is to allow the expeditious
determination of a dispute. Clearly, the issue before us could
not be speedily and efficiently resolved in its entirety if we
allow simultaneous arbitration proceedings and trial, or
suspension of trial pending arbitration. Accordingly, the
interest of justice would only be served if the trial court hears
and adjudicates the case in a single and complete proceeding.[42]
Following these precedents, the CA was therefore correct in its conclusion that the
parties agreement to refer their dispute to arbitration applies only where the
parties to the BPPA are solely the disputing parties.
Additionally, the inclusion of third parties in the complaint supports our
declaration that the present case does not fall under DARABs jurisdiction. DARABs
quasi-judicial powers under Section 50 of RA No. 6657 may be invoked only when
there is prior certification from the Barangay Agrarian Reform Committee (or BARC)
that the dispute has been submitted to it for mediation and conciliation, without any
success of settlement.[43] Since the present dispute need not be referred to arbitration
(including mediation or conciliation) because of the inclusion of third parties, neither
SEARBEMCO nor DOLE will be able to present the requisite BARC certification that
is necessary to invoke DARABs jurisdiction; hence, there will be no compliance with
Section 53 of RA No. 6657.
WHEREFORE, premises considered, we hereby DENY the petition
for certiorari for lack of merit. The Regional Trial Court, Branch 34, PanaboCity, is
hereby directed to proceed with the case in accordance with this Decision. Costs
against petitioner SEARBEMCO.
SO ORDERED.
GABINO ALITA, JESUS JULIAN, JR., JESUS JULIAN, SR., PEDRO
RICALDE, VICENTE RICALDE and ROLANDO SALAMAR, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, ENRIQUE M. REYES, PAZ M.
REYES and FE M. REYES, respondents.
Bureau of Agrarian Legal Assistance for petitioners.
Leonardo N. Zulueta for Enrique Reyes, et al. Adolfo S. Azcuna for private
respondents.
PARAS, J.:
Before us is a petition seeking the reversal of the decision rendered by the
respondent Court of Appeals**on March 3, 1987 affirming the judgment of the
court a quo dated April 29, 1986, the dispositive portion of the trial court's
decision reading as follows;
WHEREFORE, the decision rendered by this Court on
November 5, 1982 is hereby reconsidered and a new
judgment is hereby rendered:
1. Declaring that Presidential Decree No. 27 is inapplicable to
lands obtained thru the homestead law,
2. Declaring that the four registered co-owners will cultivate
and operate the farmholding themselves as owners thereof;
and
3. Ejecting from the land the so-called tenants, namely;
Gabino Alita, Jesus Julian, Sr., Jesus Julian, Jr., Pedro
Ricalde, Vicente Ricalde and Rolando Salamar, as the owners
would want to cultivate the farmholding themselves.
No pronouncement as to costs.
SO ORDERED. (p. 31, Rollo)
The facts are undisputed. The subject matter of the case consists of two (2)
parcels of land, acquired by private respondents' predecessors-in-interest
through homestead patent under the provisions of Commonwealth Act No.
141. Said lands are situated at Guilinan, Tungawan, Zamboanga del Sur.
Private respondents herein are desirous of personally cultivating these lands,
but petitioners refuse to vacate, relying on the provisions of P.D. 27 and P.D.
316 and appurtenant regulations issued by the then Ministry of Agrarian
Reform (DAR for short), now Department of Agrarian Reform (MAR for short).
On June 18, 1981, private respondents (then plaintiffs), instituted a complaint
against Hon. Conrado Estrella as then Minister of Agrarian Reform, P.D.
Macarambon as Regional Director of MAR Region IX, and herein petitioners
(then defendants) for the declaration of P.D. 27 and all other Decrees, Letters
of Instructions and General Orders issued in connection therewith as
inapplicable to homestead lands.
Defendants filed their answer with special and affirmative defenses of July 8,
1981.
Subsequently, on July 19, 1982, plaintiffs filed an urgent motion to enjoin the
defendants from declaring the lands in litigation under Operation Land Transfer
and from being issued land transfer certificates to which the defendants filed
their opposition dated August 4, 1982.
On November 5, 1982, the then Court of Agrarian Relations 16th Regional
District, Branch IV, Pagadian City (now Regional Trial Court, 9th Judicial
Region, Branch XVIII) rendered its decision dismissing the said complaint and
the motion to enjoin the defendants was denied.
On January 4, 1983, plaintiffs moved to reconsider the Order of dismissal, to
which defendants filed their opposition on January 10, 1983.
Thus, on April 29, 1986, the Regional Trial Court issued the aforequoted
decision prompting defendants to move for a reconsideration but the same
was denied in its Order dated June 6, 1986.
On appeal to the respondent Court of Appeals, the same was sustained in its
judgment rendered on March 3, 1987, thus:
WHEREFORE, finding no reversible error thereof, the
decision appealed from is hereby AFFIRMED.
SO ORDERED. (p. 34, Rollo)
Hence, the present petition for review on certiorari.
The pivotal issue is whether or not lands obtained through homestead patent
are covered by the Agrarian Reform under P.D. 27.
The question certainly calls for a negative answer.
We agree with the petitioners in saying that P.D. 27 decreeing the
emancipation of tenants from the bondage of the soil and transferring to them
ownership of the land they till is a sweeping social legislation, a remedial
measure promulgated pursuant to the social justice precepts of the
Constitution. However, such contention cannot be invoked to defeat the very
purpose of the enactment of the Public Land Act or Commonwealth Act No.
141. Thus,
The Homestead Act has been enacted for the welfare and
protection of the poor. The law gives a needy citizen a piece
of land where he may build a modest house for himself and
family and plant what is necessary for subsistence and for the
satisfaction of life's other needs. The right of the citizens to
their homes and to the things necessary for their subsistence
is as vital as the right to life itself. They have a right to live with
a certain degree of comfort as become human beings, and the
State which looks after the welfare of the people's happiness
is under a duty to safeguard the satisfaction of this vital right.
(Patricio v. Bayog, 112 SCRA 45)
In this regard, the Philippine Constitution likewise respects the superiority of
the homesteaders' rights over the rights of the tenants guaranteed by the
Agrarian Reform statute. In point is Section 6 of Article XIII of the 1987
Philippine Constitution which provides:
Section 6. The State shall apply the principles of agrarian
reform or stewardship, whenever applicable in accordance
with law, in the disposition or utilization of other natural
resources, including lands of public domain under lease or
concession suitable to agriculture, subject to prior rights,
homestead rights of small settlers, and the rights of
indigenous communities to their ancestral lands.
Additionally, it is worthy of note that the newly promulgated Comprehensive
Agrarian Reform Law of 1988 or Republic Act No. 6657 likewise contains a
proviso supporting the inapplicability of P.D. 27 to lands covered by homestead
patents like those of the property in question, reading,
Section 6. Retention Limits. ...
... Provided further, That original homestead grantees or their
direct compulsory heirs who still own the original homestead
 at the time of the approval of this Act shall retain the same
areas as long as they continue to cultivate said homestead.'
WHEREFORE, premises considered, the decision of the respondent Court of
Appeals sustaining the decision of the Regional Trial Court is hereby
AFFIRMED.
SO ORDERED.
FLORENCIA PARIS, petitioner, vs. DIONISIO A. ALFECHE, JUAN L.
ALFECHE, MAXIMO N. PADILLA, DIONISIO Q. MATILOS, Heirs
of GREG A. ALFECHE, DIONISIO W. MATILO, SIMPLICIO L.
ADAYA, TEOFILO M. DE GUZMAN, FRANCISCO B. DINGLE and
MARIFE NAVARO, respondents.
DECISION
PANGANIBAN, J.:
Homesteads are not exempt from the operation of the Land Reform Law. The
right to retain seven hectares of land is subject to the condition that the landowner is
actually cultivating that area or will cultivate it upon the effectivity of the said law.
The Case
The Petition for Review before us assails the June 4, 1999 Decision of the Court
of Appeals[1] (CA), in CA-GR SP No. 45738, which affirmed the ruling of the
Department of Agrarian Reform Adjudication Board (DARAB). The decretal portion
of the CA Decision reads:
WHEREFORE, [there being] no grave abuse of discretion x x x committed by
DARAB, the instant petition is hereby DENIED DUE
COURSE and DISMISSED. Costs against the petitioner.[2]
The Decision of the DARAB, which was affirmed by the CA, had disposed as
follows:
WHEREFORE, premises considered, the assailed Decision dated March 19, 1992 is
hereby REVERSED and SET ASIDE, and a new one is entered:
1. Declaring the private respondents to be full owners of the land they till pursuant to
Presidential Decree No. 27 and Executive Order No. 228;
2. Declaring the validity of the Emancipation Patents issued to private respondents;
and
3. Dismissing the case.[3]
The Facts
The Court of Appeals narrates the facts thus:
Petitioner is the registered owner of a parcel of land situated at Paitan, Quezon,
Bukidnon with an area of 10.6146 hectares, more or less, covered by Transfer
Certificate of Title No. T-8275 and another property with an area of 13.2614 hectares
covered by Original Certificate of Title No. P-4985, also located at Paitan, Quezon,
Bukidnon; the said parcels are fully tenanted by private respondents herein who are
recipients of Emancipation Patents in their names pursuant to Operation Land Transfer
under P.D. 27 (Annexes A, A-1 to A-18) notwithstanding the fact that neither the
tenants nor the Land Bank of the Philippines (LBP) [has] paid a single centavo for the
said land. Petitioner and the tenants have not signed any Land Transfer Production
Agreement. Petitioner and her children have been deprived of their property without
due process of law and without just compensation, especially so that the tenants have
already stopped paying rentals as of December 1988 to the damage and prejudice of
petitioner.
Petitioner contends that since she is entitled to a retention of seven (7) hectares under
P.D. 27 and/or 5 hectares and 3 hectares each for her children under the
Comprehensive Agrarian Reform Law (CARL), the tenants are not supposed to
acquire the subject land and the Emancipation Patents precipitately issued to them are
null and void for being contrary to law.Petitioner further alleged that she owns the
subject property covered by OCT No. P-4985 as original homestead grantee who still
owned the same when Republic Act No. 6657 was approved, thus she is entitled to
retain the area to the exclusion of her tenants. As regards TCT No. 8275, petitioner has
applied for retention of seven hectares per Letter of Retention attached as Annex B,
that the lands subject of the instant petition are covered by Homestead Patents, and as
decided by the Supreme Court in the cases of Patricio vs. Bayug (112 SCRA 41) and
Alita vs. Court of Appeals (170 SCRA 706), the homesteaders and their heirs have the
right to cultivate their homesteads personally, which is a superior right over that of
tenant-farmers.
Petitioner moved for the cancellation and recall of the Emancipation Patents issued to
private respondents-farmers and to restore to petitioner and her children the ownership
and cultivation of the subject lots plus payment of back rentals from the time they
stopped paying the same until ejected therefrom.
Respondents filed their answer dated May 29, 1991 and admitted the generation and
issuance of Emancipation Patents to private respondents as tenant-farmers thereof and
the Supreme Court rulings on the Bayug and Alita cases relative to homestead patents,
but denied the rest of the material allegations for want of knowledge or information as
to the truth relative thereto. Respondents alleged that when the subject lands were
covered under P.D. 27, the petitioner was repeatedly informed and invited by the DAR
Office at Valencia, Bukidnon to thresh out the matter; that petitioners right to retain
seven (7) hectares is not absolute since she owns other agricultural landholdings, thus
disqualifying her to retain the area, aside from the fact that she has other properties
sufficient to support her family as shown in the Certification of the Provincial
Assessors Office listing down the petitioners landholdings (Annex 2). By way of
special affirmative defenses, respondents averred that the criteria set forth under P.D.
27 were observed before the generation of the Emancipation Patents; that under
Executive Order No. 228, the tenant-farmers under P.D. 27 are deemed full owners of
the lands they till and the lease rentals paid by them should be considered as
amortization payments; that under LOI 474, petitioner who owns more than seven (7)
hectares of lands are not entitled to retention. Respondents prayed for the dismissal of
the case.They likewise prayed that the Emancipation Patents issued to private
respondents and their peaceful possession of their farm lots be respected.
The Adjudicator a quo conducted a hearing and afforded the parties their day in court
and the opportunity to present their evidence. On August 13, 1991, the
Adjudicator a quo issued an Order for the parties to submit their respective position
papers with evidence to buttress their allegations. On March 10, 1992, the
Adjudicator a quo rendered the decision, thus:
WHEREFORE, in the light of the foregoing, this Adjudicator declares the following:
1. That all the Emancipation Patents issued to tenants-respondents shall be
cancelled and recalled;
2. That the Register of Deeds of Malaybalay, Bukidnon shall cancel all
Emancipation Patents registered under the names of the herein tenants-
respondents; and
3. That back rentals due to the petitioners, which were given to the LBP as
amortizations, shall be given to the said petitioner.[4]
On appeal, the DARAB reversed the adjudicator.
Ruling of the Court of Appeals
The CA rejected the claim of petitioner. It ruled that she could not retain her
homesteads, since she was not the actual cultivator thereof. It also held that she and
her heirs had not been deprived of their right to retain the area mandated by law,
because the records showed that they had other agricultural landholdings. Finally, it
ruled that she had not been deprived of her properties without just compensation, since
Section 2 of Executive Order 228 declared that tenant-farmers of agricultural lands
under P.D. 27 are deemed owners of the land they till and the lease rentals paid by
them shall be considered as amortization payments.[5]
Hence, this Petition.[6]
The Issues
In her Memorandum, petitioner submits the following issues for our
consideration:
I. Whether or not the original homesteads issued under the public land act [are]
exempted from the operation of land reform.
II. Granting arguendo that homesteads are not exempt, whether or not the
Emancipation Patents issued to the respondents are valid notwithstanding lack of
payment of just compensation.
III. On the assumption that homesteads are exempt from land reform and/or the
emancipation patents are illegally issued hence, void, can the respondents be ejected
from the premises in question?[7]
The Courts Ruling
The Petition is partly meritorious. Respondents are entitled to the lands they till,
subject to the determination and payment of just compensation to petitioner.
First Issue: Petitioners Homesteads Not Exempt from Land Reform
Petitioner contends that because the subject properties are covered by homestead
patents, they are exempt from the operation of land reform. In support of her position,
she cites the cases Alita v. CA[8] and Patricio v. Bayug,[9] in which the Court ruled that
homesteaders had a superior right to cultivate their homesteads as against their tenants.
 Petitioners contention is without legal basis. Presidential Decree (PD) No. 27,
under which the Emancipation Patents sought to be cancelled here were issued to
respondents, applies to all tenanted private agricultural lands primarily devoted to rice
and corn under a system of share-crop or lease-tenancy, whether classified as landed
estate or not.[10] The law makes no exceptions whatsoever in its coverage. Nowhere
therein does it appear that lots obtained by homestead patents are exempt from its
operation.
The matter is made even clearer by Department Memorandum Circular No. 2,
Series of 1978, which states: Tenanted private agricultural lands primarily devoted to
rice and/or corn which have been acquired under the provisions of Commonwealth Act
141, as amended, shall also be covered by Operation Land Transfer.Unquestionably,
petitioners parcels of land, though obtained by homestead patents under
Commonwealth Act 141, are covered by land reform under PD 27.
Petitioners claimed entitlement to retain seven (7) hectares is also untenable. PD
27, which provides the retention limit, states:
In all cases, the landowner may retain an area of not more than seven (7) hectares if
such landowner is cultivating such area or will now cultivate it.
Clearly, the right to retain an area of seven hectares is not absolute. It is premised
on the condition that the landowner is cultivating the area sought to be retained or will
actually cultivate it upon effectivity of the law.
In the case at bar, neither of the conditions for retention is present. As admitted
by petitioner herself, the subject parcels are fully tenanted; thus, she is clearly not
cultivating them, nor will she personally cultivate any part thereof. Undoubtedly,
therefore, she has no right to retain any portion of her landholdings.
Even under the current primary law on agrarian reform, Republic Act (RA) No.
6657, to which the application of PD 27 is suppletory, petitioners lands are subject to
land reform. The said Act lays down the rights of homestead grantees as follows:
SEC. 6. Retention Limits. Except as otherwise provided in this Act, no person may
own or retain, directly or indirectly, any public or private agricultural land, the size of
which shall vary according to factors governing a viable family-sized farm, such as
commodity produced, terrain, infrastructure, and soil fertility as determined by the
Presidential Agrarian Reform Council (PARC) created hereunder, but in no case shall
retention by the landowner exceed five (5) hectares. Three (3) hectares may be
awarded to each child of the landowner, subject to the following qualifications: (1)
that he is at least fifteen (15) years of age; and (2) that he is actually tilling the land or
directly managing the farm; Provided, That landowners whose lands have been
covered by PD 27 shall be allowed to keep the area originally retained by them
thereunder; Provided, further, That original homestead grantees or their direct
compulsory heirs who still own the original homestead at the time of the approval of
this Act shall retain the same areas as long as they continue to cultivate said
homestead. (italics supplied)
Indisputably, homestead grantees or their direct compulsory heirs can own and
retain the original homesteads, only for as long as they continue to
cultivate them. That parcels of land are covered by homestead patents will not
automatically exempt them from the operation of land reform. It is the fact of
continued cultivation by the original grantees or their direct compulsory heirs that shall
exempt their lands from land reform coverage.
In the present case, as previously pointed out, neither petitioner nor her heirs are
personally cultivating the subject homesteads. The DAR and the CA found that
respondents were the ones who had been cultivating their respective portions of the
disputed properties.
However, petitioner can retain five (5) hectares in accordance with Section 6 of
RA 6657, which requires no qualifying condition for the landowner to be entitled to
retain such area. This ruling is in line with Association of Small Landowners in the
Philippines, Inc. v. Secretary of Agrarian Reform, from which we quote:
x x x. In any event, assuming that the petitioners have not yet exercised their retention
rights, if any, under PD No. 27, the Court holds that they are entitled to the new
retention rights provided for by RA No. 6657, which in fact are on the whole more
liberal than those granted by the decree.
Petitioners heirs, however, are not entitled to awards of three (3) hectares each,
since they are not actually tilling the parcels or directly managing the farm.
Patricio v. Bayug and Alita v. CA
Not Applicable
Petitioner insists that the appellate court ignored the ruling of the Court
in Patricio v. Bayug[11] and Alita v. CA.[12] She relies on the following pronouncement
in Patricio: We hold that the more paramount and superior policy consideration is to
uphold the right of the homesteader and his heirs to own and cultivate personally the
land acquired from the State without being encumbered by tenancy relations. [13] She
also cites the statement in Alita that the inapplicability of P.D. 27 to lands covered by
homestead patents like those of the property in question finds support in the aforecited
Section 6 of RA 6657.[14] A closer look at these cases shows that they are not applicable
to the issues in the present case.
In Patricio, the owner and his heirs had previously cultivated the homestead,
which was later sold but subsequently reconveyed to the former. After the
reconveyance, the owners heirs wanted to resume their cultivation of the homestead,
but the previous buyers tenants did not want to leave it. In Alita, the owner was also
desirous of personally cultivating the homestead; but the tenants, not wanting to
relinquish it, were asserting their own right to continue cultivating it. Thus, under these
circumstances, the Court upheld the right of the homestead owners over that of the
tenants.
In the case at bar, petitioner herself has not personally cultivated the parcels of
land. Neither has she or her heirs expressed, at any time, any desire to cultivate them
personally. She is invoking, yet is clearly not intending to ever actually exercise, her
alleged right as homesteader to own and personally cultivate them.
Thus, the rulings in both Patricio and Alita, which are in line with the state
objective of fostering owner cultivatorship[15] and of abolishing tenancy,[16] would be
inapplicable to the present case. Since petitioner and her heirs have evinced no
intention of actually cultivating the lands or even directly managing the farm, they will
undoubtedly continue to be absentee landlords. Therefore, to blindly and
indiscriminately apply the ruling in the cited cases would be tantamount to
encouraging feudalistic practices and going against the very essence of agrarian
reform. This we cannot sanction.
Second Issue: Just Compensation
It is undisputed that the subject parcels were covered by Operation Land Transfer
under PD 27, and that private respondents were identified as beneficiaries. In fact,
Emancipation Patents have already been issued to them.
Petitioner, however, claims that she was not paid just compensation and, thus,
prays for the cancellation of the Emancipation Patents issued to respondents under PD
27. She contends that it is illegal for the DAR to take property without full payment of
just compensation[;] until full payment is done the title and ownership remain with the
landholder.[17]
Petitioners contention has merit. Section 2 of PD 266 states:
After the tenant-farmer shall have fully complied with the requirements for a grant of
title under Presidential Decree No. 27, an Emancipation Patent and/or Grant shall be
issued by the Department of Agrarian Reform on the basis of a duly approved survey
plan.
On the other hand, paragraphs 8 and 9 of PD 27 reads as follows:
For the purpose of determining the cost of the land to be transferred to the tenant-
farmer pursuant to this Decree, the value of the land shall be equivalent to two and
one-half (2 ) times the average harvest of three normal crop years immediately
preceding the promulgation of this Decree;
The total cost of the land, including interest at the rate of six (6) per centum per annum,
shall be paid by the tenant in fifteen (15) years of fifteen (15) equal annual
amortizations[.]
Although, under the law, tenant farmers are already deemed owners of the land
they till, they are still required to pay the cost of the land, including interest, within
fifteen years before the title is transferred to them. Thus, the Court held in Association
of Small Landowners in the Philippines v. Secretary of Agrarian Reform:[18]
It is true that PD 27 expressly ordered the emancipation of tenant-farmers as of October
21, 1972 and declared that he shall be deemed the owner of a portion of land consisting
of a family-sized farm except that no title to the land owned by him was to be actually
issued to him unless and until he had become a full-fledged member of a duly
recognized farmers cooperative. It was understood, however, that full payment of the
just compensation also had to be made first, conformably to the constitutional
requirement.
In the case at bar, there is no showing that respondents complied with the
requirement of full payment of the cost of the parcels of land. As they themselves
admitted,[19] their value had not even been determined yet. In the absence of such
determination, the Court cannot rule that just compensation has already been fully
paid.
Presidential Decree 27 and subsequently Executive Order (EO) 228, which
recognized the rights acquired by tenant-farmers under PD 27, provide in detail the
computation to be used in arriving at the exact total cost of the parcels of
land. Evidently, therefore, the law recognizes that their exact value, or the just
compensation to be given to the landowner, cannot just be assumed; it must be
determined with certainty before the land titles are transferred.
Although EO 228 provides that the total lease rentals paid for the lands from
October 21, 1972 shall be considered as advance payment, it does not sanction the
assumption that such rentals are automatically considered as equivalent to just
compensation for the land. The provision significantly designates the lease rentals as
advance, not full, payment. The determination of the exact value of the lands cannot
simply be brushed aside, as it is fundamental to the determination of whether full
payment has been made.
Necessarily, the lease rentals admittedly paid by respondents until December
1988 cannot, at this point, be considered as full settlement of the value of the lands or
as just compensation for them. The value of the subject lands was never determined;
thus, there is no amount that can be used as basis for applying the lease rentals.
Under the circumstances, actual title to the subject lands remains with
petitioner. Clearly then, under PD 27 and EO 228, the application of the process of
agrarian reform to the subject lands is still incomplete.
 Considering the passage of RA 6657 before the completion of the application of
the agrarian reform process to the subject lands, the same should now be completed
under the said law, with PD 27 and EO 228 having only suppletory effect. This ruling
finds support in Land Bank of the Philippines v. CA,[20] wherein the Court stated:
We cannot see why Sec. 18 of RA 6657 should not apply to rice and corn lands under
PD 27. Section 75 of RA 6657 clearly states that the provisions of PD 27 and EO 228
shall only have a suppletory effect. Section 7 of the Act also provides ---
Sec. 7. Priorities. The DAR, in coordination with the PARC shall plan and program
the acquisition and distribution of all agricultural lands through a period of (10) years
from the effectivity of this Act. Lands shall be acquired and distributed as follows:
Phase One: Rice and Corn lands under P.D. 27; all idle or abandoned lands; all private
lands voluntarily offered by the owners for agrarian reform; x x x and all other lands
owned by the government devoted to or suitable for agriculture, which shall be
acquired and distributed immediately upon the effectivity of this Act, with the
implementation to be completed within a period of not more than four (4) years
emphasis supplied).
This eloquently demonstrates that RA 6657 includes PD 27 lands among the properties
which the DAR shall acquire and distribute to the landless. And to facilitate the
acquisition and distribution thereof, Secs. 16, 17 and 18 of the Act should be adhered
to. In Association of Small Landowners of the Philippines v. Secretary of Agrarian
Reform this Court applied the provisions (of) RA 6657 to rice and corn lands when it
upheld the constitutionality of the payment of just compensation for PD 27 lands
through the different modes stated in Sec. 18.
In determining the amount to be paid petitioner, all lease rentals paid by
respondents to her after October 21, 1972 should be deducted therefrom. This formula
is intended to put into effect the provision of Section 2 of EO 228.
Third Issue: Tenants Cannot Be Ejected
Petitioner submits that aside from cancelling the Emancipation Patents issued to
respondents, the ejectment of the latter from the premises should be ordered by the
Court, in accordance with the doctrine in Patricio.
Petitioners position is unfounded. As earlier explained, Patricio finds no
application to the case at bar. Thus, there is no justification for ejecting
respondents. Besides, Section 22 of RA 6657 expressly states that actual tenant-tillers
in the landholding shall not be ejected or removed therefrom. Furthermore, there is no
reason for ejecting the tillers with respect to the area of five hectares, which petitioner
may choose to retain. Section 6 of RA 6657 further states:
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 land owner 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 lease holder 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.
In all cases, the security of tenure of the farmers or farm workers on the land prior to
the approval of this Act shall be respected.
The current provision on retention removes the necessity, present under PD 27,
of ejecting actual tillers. Under the current law, landowners who do not personally
cultivate their lands are no longer required to do so in order to qualify for the retention
of an area not exceeding five hectares. Instead, they are now required to maintain the
actual tiller of the area retained, should the latter choose to remain therein.
WHEREFORE, the Petition is partially GRANTED. The assailed Decision of
the Court of Appeals is hereby SET ASIDE. The Decision of the provincial agrarian
reform adjudicator is REINSTATED with the modification that the lease rentals, which
respondents have already paid to petitioner after October 21, 1972, are to be considered
part of the purchase price for the subject parcels of land.
SO ORDERED.
G.R. No. 78742 July 14, 1989
ASSOCIATION OF SMALL LANDOWNERS IN THE PHILIPPINES, INC.,
JUANITO D. GOMEZ, GERARDO B. ALARCIO, FELIPE A. GUICO, JR.,
BERNARDO M. ALMONTE, CANUTO RAMIR B. CABRITO, ISIDRO T.
GUICO, FELISA I. LLAMIDO, FAUSTO J. SALVA, REYNALDO G.
ESTRADA, FELISA C. BAUTISTA, ESMENIA J. CABE, TEODORO B.
MADRIAGA, AUREA J. PRESTOSA, EMERENCIANA J. ISLA, FELICISIMA
C. ARRESTO, CONSUELO M. MORALES, BENJAMIN R. SEGISMUNDO,
CIRILA A. JOSE & NAPOLEON S. FERRER, petitioners,
vs.
HONORABLE SECRETARY OF AGRARIAN REFORM, respondent.
In ancient mythology, Antaeus was a terrible giant who blocked and challenged
Hercules for his life on his way to Mycenae after performing his eleventh labor.
The two wrestled mightily and Hercules flung his adversary to the ground
thinking him dead, but Antaeus rose even stronger to resume their struggle.
This happened several times to Hercules' increasing amazement. Finally, as
they continued grappling, it dawned on Hercules that Antaeus was the son of
Gaea and could never die as long as any part of his body was touching his
Mother Earth. Thus forewarned, Hercules then held Antaeus up in the air,
beyond the reach of the sustaining soil, and crushed him to death.
Mother Earth. The sustaining soil. The giver of life, without whose invigorating
touch even the powerful Antaeus weakened and died.

G.R. No. 79310 July 14, 1989
ARSENIO AL. ACUNA, NEWTON JISON, VICTORINO FERRARIS, DENNIS
JEREZA, HERMINIGILDO GUSTILO, PAULINO D. TOLENTINO and
PLANTERS' COMMITTEE, INC., Victorias Mill District, Victorias, Negros
Occidental, petitioners,
vs.
JOKER ARROYO, PHILIP E. JUICO and PRESIDENTIAL AGRARIAN
REFORM COUNCIL, respondents.
The cases before us are not as fanciful as the foregoing tale. But they also tell
of the elemental forces of life and death, of men and women who, like Antaeus
need the sustaining strength of the precious earth to stay alive.
"Land for the Landless" is a slogan that underscores the acute imbalance in
the distribution of this precious resource among our people. But it is more than
a slogan. Through the brooding centuries, it has become a battle-cry
dramatizing the increasingly urgent demand of the dispossessed among us for
a plot of earth as their place in the sun.

G.R. No. 79744 July 14, 1989 Recognizing this need, the Constitution in 1935 mandated the policy of social
justice to "insure the well-being and economic security of all the
INOCENTES PABICO, petitioner, people," 1 especially the less privileged. In 1973, the new Constitution affirmed
vs. this goal adding specifically that "the State shall regulate the acquisition,
HON. PHILIP E. JUICO, SECRETARY OF THE DEPARTMENT OF ownership, use, enjoyment and disposition of private property and equitably
AGRARIAN REFORM, HON. JOKER ARROYO, EXECUTIVE SECRETARY diffuse property ownership and profits." 2 Significantly, there was also the
OF THE OFFICE OF THE PRESIDENT, and Messrs. SALVADOR specific injunction to "formulate and implement an agrarian reform program
TALENTO, JAIME ABOGADO, CONRADO AVANCENA and ROBERTO aimed at emancipating the tenant from the bondage of the soil." 3
TAAY, respondents.
The Constitution of 1987 was not to be outdone. Besides echoing these
G.R. No. 79777 July 14, 1989 sentiments, it also adopted one whole and separate Article XIII on Social
Justice and Human Rights, containing grandiose but undoubtedly sincere
NICOLAS S. MANAAY and AGUSTIN HERMANO, JR., petitioners, provisions for the uplift of the common people. These include a call in the
following words for the adoption by the State of an agrarian reform program:
vs.
HON. PHILIP ELLA JUICO, as Secretary of Agrarian Reform, and LAND
BANK OF THE PHILIPPINES, respondents. SEC. 4. The State shall, by law, undertake an agrarian reform
program founded on the right of farmers and regular
farmworkers, who are landless, to own directly or collectively
the lands they till or, in the case of other farmworkers, to
receive a just share of the fruits thereof. To this end, the State
CRUZ, J.: shall encourage and undertake the just distribution of all
agricultural lands, subject to such priorities and reasonable
 retention limits as the Congress may prescribe, taking into
account ecological, developmental, or equity considerations
and subject to the payment of just compensation. In
determining retention limits, the State shall respect the right of
small landowners. The State shall further provide incentives
for voluntary land-sharing.
Earlier, in fact, R.A. No. 3844, otherwise known as the Agricultural Land
Reform Code, had already been enacted by the Congress of the Philippines
on August 8, 1963, in line with the above-stated principles. This was
substantially superseded almost a decade later by P.D. No. 27, which was
promulgated on October 21, 1972, along with martial law, to provide for the
compulsory acquisition of private lands for distribution among tenant-farmers
and to specify maximum retention limits for landowners.
The people power revolution of 1986 did not change and indeed even
energized the thrust for agrarian reform. Thus, on July 17, 1987, President
Corazon C. Aquino issued E.O. No. 228, declaring full land ownership in favor
of the beneficiaries of P.D. No. 27 and providing for the valuation of still
unvalued lands covered by the decree as well as the manner of their payment.
This was followed on July 22, 1987 by Presidential Proclamation No. 131,
instituting a comprehensive agrarian reform program (CARP), and E.O. No.
229, providing the mechanics for its implementation.
Subsequently, with its formal organization, the revived Congress of the
Philippines took over legislative power from the President and started its own
deliberations, including extensive public hearings, on the improvement of the
interests of farmers. The result, after almost a year of spirited debate, was the
enactment of R.A. No. 6657, otherwise known as the Comprehensive Agrarian
Reform Law of 1988, which President Aquino signed on June 10, 1988. This
law, while considerably changing the earlier mentioned enactments,
nevertheless gives them suppletory effect insofar as they are not inconsistent
with its provisions. 4
The above-captioned cases have been consolidated because they involve
common legal questions, including serious challenges to the constitutionality
of the several measures mentioned above. They will be the subject of one
common discussion and resolution, The different antecedents of each case
will require separate treatment, however, and will first be explained hereunder.
G.R. No. 79777
Squarely raised in this petition is the constitutionality of P.D. No. 27, E.O. Nos.
228 and 229, and R.A. No. 6657.
The subjects of this petition are a 9-hectare riceland worked by four tenants
and owned by petitioner Nicolas Manaay and his wife and a 5-hectare riceland
worked by four tenants and owned by petitioner Augustin Hermano, Jr. The
tenants were declared full owners of these lands by E.O. No. 228 as qualified
farmers under P.D. No. 27.
The petitioners are questioning P.D. No. 27 and E.O. Nos. 228 and 229 on
grounds inter alia of separation of powers, due process, equal protection and
the constitutional limitation that no private property shall be taken for public
use without just compensation.
They contend that President Aquino usurped legislative power when she
promulgated E.O. No. 228. The said measure is invalid also for violation of
Article XIII, Section 4, of the Constitution, for failure to provide for retention
limits for small landowners. Moreover, it does not conform to Article VI, Section
25(4) and the other requisites of a valid appropriation.
In connection with the determination of just compensation, the petitioners
argue that the same may be made only by a court of justice and not by the
President of the Philippines. They invoke the recent cases of EPZA v.
Dulay 5 and Manotok v. National Food Authority. 6 Moreover, the just
compensation contemplated by the Bill of Rights is payable in money or in
cash and not in the form of bonds or other things of value.
In considering the rentals as advance payment on the land, the executive order
also deprives the petitioners of their property rights as protected by due
process. The equal protection clause is also violated because the order places
the burden of solving the agrarian problems on the owners only of agricultural
lands. No similar obligation is imposed on the owners of other properties.
The petitioners also maintain that in declaring the beneficiaries under P.D. No.
27 to be the owners of the lands occupied by them, E.O. No. 228 ignored
judicial prerogatives and so violated due process. Worse, the measure would
not solve the agrarian problem because even the small farmers are deprived
of their lands and the retention rights guaranteed by the Constitution.
In his Comment, the Solicitor General stresses that P.D. No. 27 has already
been upheld in the earlier cases of Chavez v. Zobel, 7 Gonzales v.
Estrella, 8 and Association of Rice and Corn Producers of the Philippines, Inc.
v. The National Land Reform Council. 9 The determination of just
compensation by the executive authorities conformably to the formula
prescribed under the questioned order is at best initial or preliminary only. It
does not foreclose judicial intervention whenever sought or warranted. At any
rate, the challenge to the order is premature because no valuation of their
property has as yet been made by the Department of Agrarian Reform. The
petitioners are also not proper parties because the lands owned by them do
not exceed the maximum retention limit of 7 hectares.
Replying, the petitioners insist they are proper parties because P.D. No. 27
does not provide for retention limits on tenanted lands and that in any event
their petition is a class suit brought in behalf of landowners with landholdings
below 24 hectares. They maintain that the determination of just compensation
by the administrative authorities is a final ascertainment. As for the cases
invoked by the public respondent, the constitutionality of P.D. No. 27 was
merely assumed in Chavez, while what was decided in Gonzales was the
validity of the imposition of martial law.
In the amended petition dated November 22, 1588, it is contended that P.D.
No. 27, E.O. Nos. 228 and 229 (except Sections 20 and 21) have been
impliedly repealed by R.A. No. 6657. Nevertheless, this statute should itself
also be declared unconstitutional because it suffers from substantially the
same infirmities as the earlier measures.
A petition for intervention was filed with leave of court on June 1, 1988 by
Vicente Cruz, owner of a 1. 83- hectare land, who complained that the DAR
was insisting on the implementation of P.D. No. 27 and E.O. No. 228 despite
a compromise agreement he had reached with his tenant on the payment of
rentals. In a subsequent motion dated April 10, 1989, he adopted the
allegations in the basic amended petition that the above- mentioned
enactments have been impliedly repealed by R.A. No. 6657.
G.R. No. 79310
The petitioners herein are landowners and sugar planters in the Victorias Mill
District, Victorias, Negros Occidental. Co-petitioner Planters' Committee, Inc.
is an organization composed of 1,400 planter-members. This petition seeks to
prohibit the implementation of Proc. No. 131 and E.O. No. 229.
The petitioners claim that the power to provide for a Comprehensive Agrarian
Reform Program as decreed by the Constitution belongs to Congress and not
the President. Although they agree that the President could exercise legislative
power until the Congress was convened, she could do so only to enact
emergency measures during the transition period. At that, even assuming that
the interim legislative power of the President was properly exercised, Proc. No.
131 and E.O. No. 229 would still have to be annulled for violating the
constitutional provisions on just compensation, due process, and equal
protection.
They also argue that under Section 2 of Proc. No. 131 which provides:
Agrarian Reform Fund.-There is hereby created a special fund, to be known
as the Agrarian Reform Fund, an initial amount of FIFTY BILLION PESOS
(P50,000,000,000.00) to cover the estimated cost of the Comprehensive
Agrarian Reform Program from 1987 to 1992 which shall be sourced from the
receipts of the sale of the assets of the Asset Privatization Trust and Receipts
of sale of ill-gotten wealth received through the Presidential Commission on
Good Government and such other sources as government may deem
appropriate. The amounts collected and accruing to this special fund shall be
considered automatically appropriated for the purpose authorized in this
Proclamation the amount appropriated is in futuro, not in esse. The money
needed to cover the cost of the contemplated expropriation has yet to be raised
and cannot be appropriated at this time.
Furthermore, they contend that taking must be simultaneous with payment of
just compensation as it is traditionally understood, i.e., with money and in full,
but no such payment is contemplated in Section 5 of the E.O. No. 229. On the
contrary, Section 6, thereof provides that the Land Bank of the Philippines
"shall compensate the landowner in an amount to be established by the
government, which shall be based on the owner's declaration of current fair
market value as provided in Section 4 hereof, but subject to certain controls to
be defined and promulgated by the Presidential Agrarian Reform Council."
This compensation may not be paid fully in money but in any of several modes
that may consist of part cash and part bond, with interest, maturing
periodically, or direct payment in cash or bond as may be mutually agreed
upon by the beneficiary and the landowner or as may be prescribed or
approved by the PARC.
The petitioners also argue that in the issuance of the two measures, no effort
was made to make a careful study of the sugar planters' situation. There is no
tenancy problem in the sugar areas that can justify the application of the CARP
to them. To the extent that the sugar planters have been lumped in the same
legislation with other farmers, although they are a separate group with
problems exclusively their own, their right to equal protection has been
violated.
A motion for intervention was filed on August 27,1987 by the National
Federation of Sugarcane Planters (NASP) which claims a membership of at
least 20,000 individual sugar planters all over the country. On September 10,
1987, another motion for intervention was filed, this time by Manuel Barcelona,
et al., representing coconut and riceland owners. Both motions were granted
by the Court.
NASP alleges that President Aquino had no authority to fund the Agrarian
Reform Program and that, in any event, the appropriation is invalid because of
uncertainty in the amount appropriated. Section 2 of Proc. No. 131 and
Sections 20 and 21 of E.O. No. 229 provide for an initial appropriation of fifty
billion pesos and thus specifies the minimum rather than the maximum
authorized amount. This is not allowed. Furthermore, the stated initial amount
has not been certified to by the National Treasurer as actually available.
Two additional arguments are made by Barcelona, to wit, the failure to
establish by clear and convincing evidence the necessity for the exercise of
the powers of eminent domain, and the violation of the fundamental right to
own property.
The petitioners also decry the penalty for non-registration of the lands, which
is the expropriation of the said land for an amount equal to the government
assessor's valuation of the land for tax purposes. On the other hand, if the
landowner declares his own valuation he is unjustly required to immediately
pay the corresponding taxes on the land, in violation of the uniformity rule.
In his consolidated Comment, the Solicitor General first invokes the
presumption of constitutionality in favor of Proc. No. 131 and E.O. No. 229. He
also justifies the necessity for the expropriation as explained in the "whereas"
clauses of the Proclamation and submits that, contrary to the petitioner's
contention, a pilot project to determine the feasibility of CARP and a general
survey on the people's opinion thereon are not indispensable prerequisites to
its promulgation.
On the alleged violation of the equal protection clause, the sugar planters have
failed to show that they belong to a different class and should be differently
treated. The Comment also suggests the possibility of Congress first
distributing public agricultural lands and scheduling the expropriation of private
agricultural lands later. From this viewpoint, the petition for prohibition would
be premature.
The public respondent also points out that the constitutional prohibition is
against the payment of public money without the corresponding appropriation.
There is no rule that only money already in existence can be the subject of an
appropriation law. Finally, the earmarking of fifty billion pesos as Agrarian
Reform Fund, although denominated as an initial amount, is actually the
maximum sum appropriated. The word "initial" simply means that additional
amounts may be appropriated later when necessary.
On April 11, 1988, Prudencio Serrano, a coconut planter, filed a petition on his
own behalf, assailing the constitutionality of E.O. No. 229. In addition to the
arguments already raised, Serrano contends that the measure is
unconstitutional because:
(1) Only public lands should be included in the CARP;
(2) E.O. No. 229 embraces more than one subject which is
not expressed in the title;
(3) The power of the President to legislate was terminated on
July 2, 1987; and
(4) The appropriation of a P50 billion special fund from the
National Treasury did not originate from the House of
Representatives.
G.R. No. 79744
The petitioner alleges that the then Secretary of Department of Agrarian
Reform, in violation of due process and the requirement for just compensation,
placed his landholding under the coverage of Operation Land Transfer.
Certificates of Land Transfer were subsequently issued to the private
respondents, who then refused payment of lease rentals to him.
On September 3, 1986, the petitioner protested the erroneous inclusion of his
small landholding under Operation Land transfer and asked for the recall and
cancellation of the Certificates of Land Transfer in the name of the private
respondents. He claims that on December 24, 1986, his petition was denied
without hearing. On February 17, 1987, he filed a motion for reconsideration,
which had not been acted upon when E.O. Nos. 228 and 229 were issued.
These orders rendered his motion moot and academic because they directly
effected the transfer of his land to the private respondents.
The petitioner now argues that:
(1) E.O. Nos. 228 and 229 were invalidly issued by the
President of the Philippines.
(2) The said executive orders are violative of the constitutional
provision that no private property shall be taken without due
process or just compensation.
(3) The petitioner is denied the right of maximum retention
provided for under the 1987 Constitution.
The petitioner contends that the issuance of E.0. Nos. 228 and 229 shortly
before Congress convened is anomalous and arbitrary, besides violating the
doctrine of separation of powers. The legislative power granted to the
President under the Transitory Provisions refers only to emergency measures
that may be promulgated in the proper exercise of the police power.
The petitioner also invokes his rights not to be deprived of his property without
due process of law and to the retention of his small parcels of riceholding as
guaranteed under Article XIII, Section 4 of the Constitution. He likewise argues
that, besides denying him just compensation for his land, the provisions of E.O.
No. 228 declaring that:
Lease rentals paid to the landowner by the farmer-beneficiary
after October 21, 1972 shall be considered as advance
payment for the land.
is an unconstitutional taking of a vested property right. It is also his contention
that the inclusion of even small landowners in the program along with other
landowners with lands consisting of seven hectares or more is undemocratic.
In his Comment, the Solicitor General submits that the petition is premature
because the motion for reconsideration filed with the Minister of Agrarian
Reform is still unresolved. As for the validity of the issuance of E.O. Nos. 228
and 229, he argues that they were enacted pursuant to Section 6, Article XVIII
of the Transitory Provisions of the 1987 Constitution which reads:
The incumbent president shall continue to exercise legislative powers until the
first Congress is convened.
On the issue of just compensation, his position is that when P.D. No. 27 was
promulgated on October 21. 1972, the tenant-farmer of agricultural land was
deemed the owner of the land he was tilling. The leasehold rentals paid after
that date should therefore be considered amortization payments.
In his Reply to the public respondents, the petitioner maintains that the motion
he filed was resolved on December 14, 1987. An appeal to the Office of the
President would be useless with the promulgation of E.O. Nos. 228 and 229,
which in effect sanctioned the validity of the public respondent's acts.
G.R. No. 78742
The petitioners in this case invoke the right of retention granted by P.D. No. 27
to owners of rice and corn lands not exceeding seven hectares as long as they
are cultivating or intend to cultivate the same. Their respective lands do not
exceed the statutory limit but are occupied by tenants who are actually
cultivating such lands.
According to P.D. No. 316, which was promulgated in implementation of P.D.
No. 27:
No tenant-farmer in agricultural lands primarily devoted to rice
and corn shall be ejected or removed from his farmholding
until such time as the respective rights of the tenant- farmers
and the landowner shall have been determined in accordance
with the rules and regulations implementing P.D. No. 27.
The petitioners claim they cannot eject their tenants and so are unable to enjoy
their right of retention because the Department of Agrarian Reform has so far
not issued the implementing rules required under the above-quoted decree.
They therefore ask the Court for a writ of mandamus to compel the respondent
to issue the said rules.
In his Comment, the public respondent argues that P.D. No. 27 has been
amended by LOI 474 removing any right of retention from persons who own
other agricultural lands of more than 7 hectares in aggregate area or lands
used for residential, commercial, industrial or other purposes from which they
derive adequate income for their family. And even assuming that the
petitioners do not fall under its terms, the regulations implementing P.D. No.
27 have already been issued, to wit, the Memorandum dated July 10, 1975
(Interim Guidelines on Retention by Small Landowners, with an accompanying
Retention Guide Table), Memorandum Circular No. 11 dated April 21, 1978,
(Implementation Guidelines of LOI No. 474), Memorandum Circular No. 18-81
dated December 29,1981 (Clarificatory Guidelines on Coverage of P.D. No.
27 and Retention by Small Landowners), and DAR Administrative Order No.
1, series of 1985 (Providing for a Cut-off Date for Landowners to Apply for
Retention and/or to Protest the Coverage of their Landholdings under
Operation Land Transfer pursuant to P.D. No. 27). For failure to file the
corresponding applications for retention under these measures, the petitioners
are now barred from invoking this right.
The public respondent also stresses that the petitioners have prematurely
initiated this case notwithstanding the pendency of their appeal to the
President of the Philippines. Moreover, the issuance of the implementing rules,
assuming this has not yet been done, involves the exercise of discretion which
cannot be controlled through the writ of mandamus. This is especially true if
this function is entrusted, as in this case, to a separate department of the
government.
In their Reply, the petitioners insist that the above-cited measures are not
applicable to them because they do not own more than seven hectares of
agricultural land. Moreover, assuming arguendo that the rules were intended
to cover them also, the said measures are nevertheless not in force because
they have not been published as required by law and the ruling of this Court
in Tanada v. Tuvera. 10 As for LOI 474, the same is ineffective for the additional
reason that a mere letter of instruction could not have repealed the presidential
decree.
I The other above-mentioned requisites have also been met in the present
Although holding neither purse nor sword and so regarded as the weakest of
the three departments of the government, the judiciary is nonetheless vested
with the power to annul the acts of either the legislative or the executive or of
both when not conformable to the fundamental law. This is the reason for what
some quarters call the doctrine of judicial supremacy. Even so, this power is
not lightly assumed or readily exercised. The doctrine of separation of powers
imposes upon the courts a proper restraint, born of the nature of their functions
and of their respect for the other departments, in striking down the acts of the
legislative and the executive as unconstitutional. The policy, indeed, is a blend
of courtesy and caution. To doubt is to sustain. The theory is that before the
act was done or the law was enacted, earnest studies were made by Congress
or the President, or both, to insure that the Constitution would not be breached.
In addition, the Constitution itself lays down stringent conditions for a
declaration of unconstitutionality, requiring therefor the concurrence of a
majority of the members of the Supreme Court who took part in the
deliberations and voted on the issue during their session en banc. 11 And as
established by judge made doctrine, the Court will assume jurisdiction over a
constitutional question only if it is shown that the essential requisites of a
judicial inquiry into such a question are first satisfied. Thus, there must be an
actual case or controversy involving a conflict of legal rights susceptible of
judicial determination, the constitutional question must have been opportunely
raised by the proper party, and the resolution of the question is unavoidably
necessary to the decision of the case itself. 12
With particular regard to the requirement of proper party as applied in the
cases before us, we hold that the same is satisfied by the petitioners and
intervenors because each of them has sustained or is in danger of sustaining
an immediate injury as a result of the acts or measures complained of. 13 And
even if, strictly speaking, they are not covered by the definition, it is still within
the wide discretion of the Court to waive the requirement and so remove the
impediment to its addressing and resolving the serious constitutional questions
raised.
In the first Emergency Powers Cases, 14 ordinary citizens and taxpayers were
allowed to question the constitutionality of several executive orders issued by
President Quirino although they were invoking only an indirect and general
interest shared in common with the public. The Court dismissed the objection
that they were not proper parties and ruled that "the transcendental importance
to the public of these cases demands that they be settled promptly and
definitely, brushing aside, if we must, technicalities of procedure." We have
since then applied this exception in many other cases. 15
petitions.
In must be stressed that despite the inhibitions pressing upon the Court when
confronted with constitutional issues like the ones now before it, it will not
hesitate to declare a law or act invalid when it is convinced that this must be
done. In arriving at this conclusion, its only criterion will be the Constitution as
God and its conscience give it the light to probe its meaning and discover its
purpose. Personal motives and political considerations are irrelevancies that
cannot influence its decision. Blandishment is as ineffectual as intimidation.
For all the awesome power of the Congress and the Executive, the Court will
not hesitate to "make the hammer fall, and heavily," to use Justice Laurel's
pithy language, where the acts of these departments, or of any public official,
betray the people's will as expressed in the Constitution.
It need only be added, to borrow again the words of Justice Laurel, that
... when the judiciary mediates to allocate constitutional
boundaries, it does not assert any superiority over the other
departments; it does not in reality nullify or invalidate an act of
the Legislature, but only asserts the solemn and sacred
obligation assigned to it by the Constitution to determine
conflicting claims of authority under the Constitution and to
establish for the parties in an actual controversy the rights
which that instrument secures and guarantees to them. This
is in truth all that is involved in what is termed "judicial
supremacy" which properly is the power of judicial review
under the Constitution. 16
The cases before us categorically raise constitutional questions that this Court
must categorically resolve. And so we shall.
II
We proceed first to the examination of the preliminary issues before resolving
the more serious challenges to the constitutionality of the several measures
involved in these petitions.
The promulgation of P.D. No. 27 by President Marcos in the exercise of his
powers under martial law has already been sustained in Gonzales v.
Estrella and we find no reason to modify or reverse it on that issue. As for the
power of President Aquino to promulgate Proc. No. 131 and E.O. Nos. 228
and 229, the same was authorized under Section 6 of the Transitory Provisions
of the 1987 Constitution, quoted above.
The said measures were issued by President Aquino before July 27, 1987,
when the Congress of the Philippines was formally convened and took over
legislative power from her. They are not "midnight" enactments intended to
pre-empt the legislature because E.O. No. 228 was issued on July 17, 1987,
and the other measures, i.e., Proc. No. 131 and E.O. No. 229, were both
issued on July 22, 1987. Neither is it correct to say that these measures ceased
to be valid when she lost her legislative power for, like any statute, they
continue to be in force unless modified or repealed by subsequent law or
declared invalid by the courts. A statute does not ipso facto become
inoperative simply because of the dissolution of the legislature that enacted it.
By the same token, President Aquino's loss of legislative power did not have
the effect of invalidating all the measures enacted by her when and as long as
she possessed it.
Significantly, the Congress she is alleged to have undercut has not rejected
but in fact substantially affirmed the challenged measures and has specifically
provided that they shall be suppletory to R.A. No. 6657 whenever not
inconsistent with its provisions. 17 Indeed, some portions of the said measures,
like the creation of the P50 billion fund in Section 2 of Proc. No. 131, and
Sections 20 and 21 of E.O. No. 229, have been incorporated by reference in
the CARP Law. 18
That fund, as earlier noted, is itself being questioned on the ground that it does
not conform to the requirements of a valid appropriation as specified in the
Constitution. Clearly, however, Proc. No. 131 is not an appropriation measure
even if it does provide for the creation of said fund, for that is not its principal
purpose. An appropriation law is one the primary and specific purpose of which
is to authorize the release of public funds from the treasury. 19 The creation of
the fund is only incidental to the main objective of the proclamation, which is
agrarian reform.
It should follow that the specific constitutional provisions invoked, to wit,
Section 24 and Section 25(4) of Article VI, are not applicable. With particular
reference to Section 24, this obviously could not have been complied with for
the simple reason that the House of Representatives, which now has the
exclusive power to initiate appropriation measures, had not yet been convened
when the proclamation was issued. The legislative power was then solely
vested in the President of the Philippines, who embodied, as it were, both
houses of Congress.
The argument of some of the petitioners that Proc. No. 131 and E.O. No. 229
should be invalidated because they do not provide for retention limits as
required by Article XIII, Section 4 of the Constitution is no longer tenable. R.A.
No. 6657 does provide for such limits now in Section 6 of the law, which in fact
is one of its most controversial provisions. This section declares:
Retention Limits. Except as otherwise provided in this Act,
no person may own or retain, directly or indirectly, any public
or private agricultural land, the size of which shall vary
according to factors governing a viable family-sized farm,
such as commodity produced, terrain, infrastructure, and soil
fertility as determined by the Presidential Agrarian Reform
Council (PARC) created hereunder, but in no case shall
retention by the landowner exceed five (5) hectares. Three (3)
hectares may be awarded to each child of the landowner,
subject to the following qualifications: (1) that he is at least
fifteen (15) years of age; and (2) that he is actually tilling the
land or directly managing the farm; Provided, That landowners
whose lands have been covered by Presidential Decree No.
27 shall be allowed to keep the area originally retained by
them thereunder, further, That original homestead grantees or
direct compulsory heirs who still own the original homestead
at the time of the approval of this Act shall retain the same
areas as long as they continue to cultivate said homestead.
The argument that E.O. No. 229 violates the constitutional requirement that a
bill shall have only one subject, to be expressed in its title, deserves only short
attention. It is settled that the title of the bill does not have to be a catalogue of
its contents and will suffice if the matters embodied in the text are relevant to
each other and may be inferred from the title. 20
The Court wryly observes that during the past dictatorship, every presidential
issuance, by whatever name it was called, had the force and effect of law
because it came from President Marcos. Such are the ways of despots. Hence,
it is futile to argue, as the petitioners do in G.R. No. 79744, that LOI 474 could
not have repealed P.D. No. 27 because the former was only a letter of
instruction. The important thing is that it was issued by President Marcos,
whose word was law during that time.
But for all their peremptoriness, these issuances from the President Marcos
still had to comply with the requirement for publication as this Court held
in Tanada v. Tuvera. 21 Hence, unless published in the Official Gazette in
accordance with Article 2 of the Civil Code, they could not have any force and
effect if they were among those enactments successfully challenged in that
case. LOI 474 was published, though, in the Official Gazette dated November
29,1976.)
Finally, there is the contention of the public respondent in G.R. No. 78742 that
the writ of mandamus cannot issue to compel the performance of a
discretionary act, especially by a specific department of the government. That
is true as a general proposition but is subject to one important qualification.
Correctly and categorically stated, the rule is that mandamus will lie to compel
the discharge of the discretionary duty itself but not to control the discretion to
be exercised. In other words, mandamus can issue to require action only but
not specific action.
Whenever a duty is imposed upon a public official and an
unnecessary and unreasonable delay in the exercise of such
duty occurs, if it is a clear duty imposed by law, the courts will
intervene by the extraordinary legal remedy of mandamus to
compel action. If the duty is purely ministerial, the courts will
require specific action. If the duty is purely discretionary, the
courts by mandamus will require action only. For example, if
an inferior court, public official, or board should, for an
unreasonable length of time, fail to decide a particular
question to the great detriment of all parties concerned, or a
court should refuse to take jurisdiction of a cause when the
law clearly gave it jurisdiction mandamus will issue, in the first
case to require a decision, and in the second to require that
jurisdiction be taken of the cause. 22
And while it is true that as a rule the writ will not be proper as long as there is
still a plain, speedy and adequate remedy available from the administrative
authorities, resort to the courts may still be permitted if the issue raised is a
question of law. 23
III
There are traditional distinctions between the police power and the power of
eminent domain that logically preclude the application of both powers at the
same time on the same subject. In the case of City of Baguio v. NAWASA, 24for
example, where a law required the transfer of all municipal waterworks
systems to the NAWASA in exchange for its assets of equivalent value, the
Court held that the power being exercised was eminent domain because the
property involved was wholesome and intended for a public use. Property
condemned under the police power is noxious or intended for a noxious
purpose, such as a building on the verge of collapse, which should be
demolished for the public safety, or obscene materials, which should be
destroyed in the interest of public morals. The confiscation of such property is
not compensable, unlike the taking of property under the power of
expropriation, which requires the payment of just compensation to the owner.
In the case of Pennsylvania Coal Co. v. Mahon, 25 Justice Holmes laid down
the limits of the police power in a famous aphorism: "The general rule at least
is that while property may be regulated to a certain extent, if regulation goes
too far it will be recognized as a taking." The regulation that went "too far" was
a law prohibiting mining which might cause the subsidence of structures for
human habitation constructed on the land surface. This was resisted by a coal
company which had earlier granted a deed to the land over its mine but
reserved all mining rights thereunder, with the grantee assuming all risks and
waiving any damage claim. The Court held the law could not be sustained
without compensating the grantor. Justice Brandeis filed a lone dissent in
which he argued that there was a valid exercise of the police power. He said:
Every restriction upon the use of property imposed in the
exercise of the police power deprives the owner of some right
theretofore enjoyed, and is, in that sense, an abridgment by
the State of rights in property without making compensation.
But restriction imposed to protect the public health, safety or
morals from dangers threatened is not a taking. The restriction
here in question is merely the prohibition of a noxious use.
The property so restricted remains in the possession of its
owner. The state does not appropriate it or make any use of
it. The state merely prevents the owner from making a use
which interferes with paramount rights of the public.
Whenever the use prohibited ceases to be noxious as it
may because of further changes in local or social conditions
the restriction will have to be removed and the owner will
again be free to enjoy his property as heretofore.
Recent trends, however, would indicate not a polarization but a mingling of the
police power and the power of eminent domain, with the latter being used as
an implement of the former like the power of taxation. The employment of the
taxing power to achieve a police purpose has long been accepted. 26 As for
the power of expropriation, Prof. John J. Costonis of the University of Illinois
College of Law (referring to the earlier case of Euclid v. Ambler Realty Co.,
272 US 365, which sustained a zoning law under the police power) makes the
following significant remarks:
Euclid, moreover, was decided in an era when judges located
the Police and eminent domain powers on different planets.
Generally speaking, they viewed eminent domain as
encompassing public acquisition of private property for
improvements that would be available for public use," literally
construed. To the police power, on the other hand, they
assigned the less intrusive task of preventing harmful
externalities a point reflected in the Euclid opinion's reliance
on an analogy to nuisance law to bolster its support of zoning.
So long as suppression of a privately authored harm bore a
plausible relation to some legitimate "public purpose," the
pertinent measure need have afforded no compensation
whatever. With the progressive growth of government's
involvement in land use, the distance between the two powers
 has contracted considerably. Today government often
employs eminent domain interchangeably with or as a useful
complement to the police power-- a trend expressly approved
in the Supreme Court's 1954 decision in Berman v. Parker,
which broadened the reach of eminent domain's "public use"
test to match that of the police power's standard of "public
purpose." 27
The Berman case sustained a redevelopment project and the improvement of
blighted areas in the District of Columbia as a proper exercise of the police
power. On the role of eminent domain in the attainment of this purpose, Justice
Douglas declared:
If those who govern the District of Columbia decide that the
Nation's Capital should be beautiful as well as sanitary, there
is nothing in the Fifth Amendment that stands in the way.
Once the object is within the authority of Congress, the right
to realize it through the exercise of eminent domain is clear.
For the power of eminent domain is merely the means to the
end. 28
In Penn Central Transportation Co. v. New York City, 29 decided by a 6-3 vote
in 1978, the U.S Supreme Court sustained the respondent's Landmarks
Preservation Law under which the owners of the Grand Central Terminal had
not been allowed to construct a multi-story office building over the Terminal,
which had been designated a historic landmark. Preservation of the landmark
was held to be a valid objective of the police power. The problem, however,
was that the owners of the Terminal would be deprived of the right to use the
airspace above it although other landowners in the area could do so over their
respective properties. While insisting that there was here no taking, the Court
nonetheless recognized certain compensatory rights accruing to Grand
Central Terminal which it said would "undoubtedly mitigate" the loss caused
by the regulation. This "fair compensation," as he called it, was explained by
Prof. Costonis in this wise:
In return for retaining the Terminal site in its pristine landmark status, Penn
Central was authorized to transfer to neighboring properties the authorized but
unused rights accruing to the site prior to the Terminal's designation as a
landmark the rights which would have been exhausted by the 59-story
building that the city refused to countenance atop the Terminal. Prevailing bulk
restrictions on neighboring sites were proportionately relaxed, theoretically
enabling Penn Central to recoup its losses at the Terminal site by constructing
or selling to others the right to construct larger, hence more profitable buildings
on the transferee sites. 30
The cases before us present no knotty complication insofar as the question of
compensable taking is concerned. To the extent that the measures under
challenge merely prescribe retention limits for landowners, there is an exercise
of the police power for the regulation of private property in accordance with the
Constitution. But where, to carry out such regulation, it becomes necessary to
deprive such owners of whatever lands they may own in excess of the
maximum area allowed, there is definitely a taking under the power of eminent
domain for which payment of just compensation is imperative. The taking
contemplated is not a mere limitation of the use of the land. What is required
is the surrender of the title to and the physical possession of the said excess
and all beneficial rights accruing to the owner in favor of the farmer-beneficiary.
This is definitely an exercise not of the police power but of the power of eminent
domain.
Whether as an exercise of the police power or of the power of eminent domain,
the several measures before us are challenged as violative of the due process
and equal protection clauses.
The challenge to Proc. No. 131 and E.O. Nos. 228 and 299 on the ground that
no retention limits are prescribed has already been discussed and dismissed.
It is noted that although they excited many bitter exchanges during the
deliberation of the CARP Law in Congress, the retention limits finally agreed
upon are, curiously enough, not being questioned in these petitions. We
therefore do not discuss them here. The Court will come to the other claimed
violations of due process in connection with our examination of the adequacy
of just compensation as required under the power of expropriation.
The argument of the small farmers that they have been denied equal protection
because of the absence of retention limits has also become academic under
Section 6 of R.A. No. 6657. Significantly, they too have not questioned the
area of such limits. There is also the complaint that they should not be made
to share the burden of agrarian reform, an objection also made by the sugar
planters on the ground that they belong to a particular class with particular
interests of their own. However, no evidence has been submitted to the Court
that the requisites of a valid classification have been violated.
Classification has been defined as the grouping of persons or things similar to
each other in certain particulars and different from each other in these same
particulars. 31 To be valid, it must conform to the following requirements: (1) it
must be based on substantial distinctions; (2) it must be germane to the
purposes of the law; (3) it must not be limited to existing conditions only; and
(4) it must apply equally to all the members of the class. 32 The Court finds that
all these requisites have been met by the measures here challenged as
arbitrary and discriminatory.
Equal protection simply means that all persons or things similarly situated must
be treated alike both as to the rights conferred and the liabilities
imposed. 33 The petitioners have not shown that they belong to a different
class and entitled to a different treatment. The argument that not only
landowners but also owners of other properties must be made to share the
burden of implementing land reform must be rejected. There is a substantial
distinction between these two classes of owners that is clearly visible except
to those who will not see. There is no need to elaborate on this matter. In any
event, the Congress is allowed a wide leeway in providing for a valid
classification. Its decision is accorded recognition and respect by the courts of
justice except only where its discretion is abused to the detriment of the Bill of
Rights.
It is worth remarking at this juncture that a statute may be sustained under the
police power only if there is a concurrence of the lawful subject and the lawful
method. Put otherwise, the interests of the public generally as distinguished
from those of a particular class require the interference of the State and, no
less important, the means employed are reasonably necessary for the
attainment of the purpose sought to be achieved and not unduly oppressive
upon individuals. 34 As the subject and purpose of agrarian reform have been
laid down by the Constitution itself, we may say that the first requirement has
been satisfied. What remains to be examined is the validity of the method
employed to achieve the constitutional goal.
One of the basic principles of the democratic system is that where the rights
of the individual are concerned, the end does not justify the means. It is not
enough that there be a valid objective; it is also necessary that the means
employed to pursue it be in keeping with the Constitution. Mere expediency
will not excuse constitutional shortcuts. There is no question that not even the
strongest moral conviction or the most urgent public need, subject only to a
few notable exceptions, will excuse the bypassing of an individual's rights. It is
no exaggeration to say that a, person invoking a right guaranteed under Article
III of the Constitution is a majority of one even as against the rest of the nation
who would deny him that right.
That right covers the person's life, his liberty and his property under Section 1
of Article III of the Constitution. With regard to his property, the owner enjoys
the added protection of Section 9, which reaffirms the familiar rule that private
property shall not be taken for public use without just compensation.
This brings us now to the power of eminent domain.
IV
Eminent domain is an inherent power of the State that enables
it to forcibly acquire private lands intended for public use upon
payment of just compensation to the owner. Obviously, there
is no need to expropriate where the owner is willing to sell
under terms also acceptable to the purchaser, in which case
an ordinary deed of sale may be agreed upon by the
parties. 35 It is only where the owner is unwilling to sell, or
cannot accept the price or other conditions offered by the
vendee, that the power of eminent domain will come into play
to assert the paramount authority of the State over the
interests of the property owner. Private rights must then yield
to the irresistible demands of the public interest on the time-
honored justification, as in the case of the police power, that
the welfare of the people is the supreme law.
But for all its primacy and urgency, the power of expropriation is by no means
absolute (as indeed no power is absolute). The limitation is found in the
constitutional injunction that "private property shall not be taken for public use
without just compensation" and in the abundant jurisprudence that has evolved
from the interpretation of this principle. Basically, the requirements for a proper
exercise of the power are: (1) public use and (2) just compensation.
Let us dispose first of the argument raised by the petitioners in G.R. No. 79310
that the State should first distribute public agricultural lands in the pursuit of
agrarian reform instead of immediately disturbing property rights by forcibly
acquiring private agricultural lands. Parenthetically, it is not correct to say that
only public agricultural lands may be covered by the CARP as the Constitution
calls for "the just distribution of all agricultural lands." In any event, the decision
to redistribute private agricultural lands in the manner prescribed by the CARP
was made by the legislative and executive departments in the exercise of their
discretion. We are not justified in reviewing that discretion in the absence of a
clear showing that it has been abused.
A becoming courtesy admonishes us to respect the decisions of the political
departments when they decide what is known as the political question. As
explained by Chief Justice Concepcion in the case of Taada v. Cuenco: 36
The term "political question" connotes what it means in
ordinary parlance, namely, a question of policy. It refers to
"those questions which, under the Constitution, are to be
decided by the people in their sovereign capacity; or in regard
to which full discretionary authority has been delegated to the
legislative or executive branch of the government." It is
 concerned with issues dependent upon the wisdom, not
legality, of a particular measure.
It is true that the concept of the political question has been constricted with the
enlargement of judicial power, which now includes the authority of the courts
"to determine whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government." 37 Even so, this should not be construed
as a license for us to reverse the other departments simply because their views
may not coincide with ours.
The legislature and the executive have been seen fit, in their wisdom, to
include in the CARP the redistribution of private landholdings (even as the
distribution of public agricultural lands is first provided for, while also continuing
apace under the Public Land Act and other cognate laws). The Court sees no
justification to interpose its authority, which we may assert only if we believe
that the political decision is not unwise, but illegal. We do not find it to be so.
In U.S. v. Chandler-Dunbar Water Power Company, 38 it was held:
Congress having determined, as it did by the Act of March
3,1909 that the entire St. Mary's river between the American
bank and the international line, as well as all of the upland
north of the present ship canal, throughout its entire length,
was "necessary for the purpose of navigation of said waters,
and the waters connected therewith," that determination is
conclusive in condemnation proceedings instituted by the
United States under that Act, and there is no room for judicial
review of the judgment of Congress ... .
As earlier observed, the requirement for public use has already been settled
for us by the Constitution itself No less than the 1987 Charter calls for agrarian
reform, which is the reason why private agricultural lands are to be taken from
their owners, subject to the prescribed maximum retention limits. The purposes
specified in P.D. No. 27, Proc. No. 131 and R.A. No. 6657 are only an
elaboration of the constitutional injunction that the State adopt the necessary
measures "to encourage and undertake the just distribution of all agricultural
lands to enable farmers who are landless to own directly or collectively the
lands they till." That public use, as pronounced by the fundamental law itself,
must be binding on us.
The second requirement, i.e., the payment of just compensation, needs a
longer and more thoughtful examination.
Just compensation is defined as the full and fair equivalent of the property
taken from its owner by the expropriator. 39 It has been repeatedly stressed by
this Court that the measure is not the taker's gain but the owner's loss. 40 The
word "just" is used to intensify the meaning of the word "compensation" to
convey the idea that the equivalent to be rendered for the property to be taken
shall be real, substantial, full, ample. 41
It bears repeating that the measures challenged in these petitions contemplate
more than a mere regulation of the use of private lands under the police power.
We deal here with an actual taking of private agricultural lands that has
dispossessed the owners of their property and deprived them of all its
beneficial use and enjoyment, to entitle them to the just compensation
mandated by the Constitution.
As held in Republic of the Philippines v. Castellvi, 42 there is compensable
taking when the following conditions concur: (1) the expropriator must enter a
private property; (2) the entry must be for more than a momentary period; (3)
the entry must be under warrant or color of legal authority; (4) the property
must be devoted to public use or otherwise informally appropriated or
injuriously affected; and (5) the utilization of the property for public use must
be in such a way as to oust the owner and deprive him of beneficial enjoyment
of the property. All these requisites are envisioned in the measures before us.
Where the State itself is the expropriator, it is not necessary for it to make a
deposit upon its taking possession of the condemned property, as "the
compensation is a public charge, the good faith of the public is pledged for its
payment, and all the resources of taxation may be employed in raising the
amount." 43 Nevertheless, Section 16(e) of the CARP Law provides that:
Upon receipt by the landowner of the corresponding payment
or, in case of rejection or no response from the landowner,
upon the deposit with an accessible bank designated by the
DAR of the compensation in cash or in LBP bonds in
accordance with this Act, the DAR shall take immediate
possession of the land and shall request the proper Register
of Deeds to issue a Transfer Certificate of Title (TCT) in the
name of the Republic of the Philippines. The DAR shall
thereafter proceed with the redistribution of the land to the
qualified beneficiaries.
Objection is raised, however, to the manner of fixing the just compensation,
which it is claimed is entrusted to the administrative authorities in violation of
judicial prerogatives. Specific reference is made to Section 16(d), which
provides that in case of the rejection or disregard by the owner of the offer of
the government to buy his land-
 ... the DAR shall conduct summary administrative
proceedings to determine the compensation for the land by
requiring the landowner, the LBP and other interested parties
to submit evidence as to the just compensation for the land,
within fifteen (15) days from the receipt of the notice. After the
expiration of the above period, the matter is deemed
submitted for decision. The DAR shall decide the case within
thirty (30) days after it is submitted for decision.
To be sure, the determination of just compensation is a function addressed to
the courts of justice and may not be usurped by any other branch or official of
the government. EPZA v. Dulay 44 resolved a challenge to several decrees
promulgated by President Marcos providing that the just compensation for
property under expropriation should be either the assessment of the property
by the government or the sworn valuation thereof by the owner, whichever was
lower. In declaring these decrees unconstitutional, the Court held through Mr.
Justice Hugo E. Gutierrez, Jr.:
The method of ascertaining just compensation under the
aforecited decrees constitutes impermissible encroachment
on judicial prerogatives. It tends to render this Court inutile in
a matter which under this Constitution is reserved to it for final
determination.
Thus, although in an expropriation proceeding the court
technically would still have the power to determine the just
compensation for the property, following the applicable
decrees, its task would be relegated to simply stating the
lower value of the property as declared either by the owner or
the assessor. As a necessary consequence, it would be
useless for the court to appoint commissioners under Rule 67
of the Rules of Court. Moreover, the need to satisfy the due
process clause in the taking of private property is seemingly
fulfilled since it cannot be said that a judicial proceeding was
not had before the actual taking. However, the strict
application of the decrees during the proceedings would be
nothing short of a mere formality or charade as the court has
only to choose between the valuation of the owner and that of
the assessor, and its choice is always limited to the lower of
the two. The court cannot exercise its discretion or
independence in determining what is just or fair. Even a grade
school pupil could substitute for the judge insofar as the
determination of constitutional just compensation is
concerned.
xxx
In the present petition, we are once again confronted with the
same question of whether the courts under P.D. No. 1533,
which contains the same provision on just compensation as
its predecessor decrees, still have the power and authority to
determine just compensation, independent of what is stated
by the decree and to this effect, to appoint commissioners for
such purpose.
This time, we answer in the affirmative.
xxx
It is violative of due process to deny the owner the opportunity
to prove that the valuation in the tax documents is unfair or
wrong. And it is repulsive to the basic concepts of justice and
fairness to allow the haphazard work of a minor bureaucrat or
clerk to absolutely prevail over the judgment of a court
promulgated only after expert commissioners have actually
viewed the property, after evidence and arguments pro and
con have been presented, and after all factors and
considerations essential to a fair and just determination have
been judiciously evaluated.
A reading of the aforecited Section 16(d) will readily show that it does not suffer
from the arbitrariness that rendered the challenged decrees constitutionally
objectionable. Although the proceedings are described as summary, the
landowner and other interested parties are nevertheless allowed an
opportunity to submit evidence on the real value of the property. But more
importantly, the determination of the just compensation by the DAR is not by
any means final and conclusive upon the landowner or any other interested
party, for Section 16(f) clearly provides:
Any party who disagrees with the decision may bring the
matter to the court of proper jurisdiction for final determination
of just compensation.
The determination made by the DAR is only preliminary unless accepted by all
parties concerned. Otherwise, the courts of justice will still have the right to
review with finality the said determination in the exercise of what is admittedly
a judicial function.
The second and more serious objection to the provisions on just compensation
is not as easily resolved.
This refers to Section 18 of the CARP Law providing in full as follows:
SEC. 18. Valuation and Mode of Compensation. The LBP
shall compensate the landowner in such amount as may be
agreed upon by the landowner and the DAR and the LBP, in
accordance with the criteria provided for in Sections 16 and
17, and other pertinent provisions hereof, or as may be finally
determined by the court, as the just compensation for the land.
The compensation shall be paid in one of the following modes,
at the option of the landowner:
(1) Cash payment, under the following terms and conditions:
(a) For lands above fifty (50)
hectares, insofar as the
excess hectarage is
concerned Twenty-five
percent (25%) cash, the
balance to be paid in
government financial
instruments negotiable at
any time.
(b) For lands above twenty-
four (24) hectares and up to
fifty (50) hectares Thirty
percent (30%) cash, the
balance to be paid in
government financial
instruments negotiable at
any time.
(c) For lands twenty-four (24)
hectares and below
Thirty-five percent (35%)
cash, the balance to be paid
in government financial
instruments negotiable at
any time.
(2) Shares of stock in government-owned or controlled
corporations, LBP preferred shares, physical assets or other
qualified investments in accordance with guidelines set by the
PARC;
(3) Tax credits which can be used against any tax liability;
(4) LBP bonds, which shall have the following features:
(a) Market interest rates
aligned with 91-day treasury
bill rates. Ten percent (10%)
of the face value of the
bonds shall mature every
year from the date of
issuance until the tenth
(10th) year: Provided, That
should the landowner
choose to forego the cash
portion, whether in full or in
part, he shall be paid
correspondingly in LBP
bonds;
(b) Transferability and
negotiability. Such LBP
bonds may be used by the
landowner, his successors-
in- interest or his assigns, up
to the amount of their face
value, for any of the
following:
(i) Acquisition of land or
other real properties of the
government, including
assets under the Asset
Privatization Program and
other assets foreclosed by
government financial
institutions in the same
province or region where the
lands for which the bonds
were paid are situated;
(ii) Acquisition of shares of
stock of government-owned
or controlled corporations or
shares of stock owned by the
government in private
corporations;
(iii) Substitution for surety or
bail bonds for the provisional
release of accused persons,
or for performance bonds;
(iv) Security for loans with
any government financial
institution, provided the
proceeds of the loans shall
be invested in an economic
enterprise, preferably in a
small and medium- scale
industry, in the same
province or region as the
land for which the bonds are
paid;
(v) Payment for various
taxes and fees to
government: Provided, That
the use of these bonds for
these purposes will be
limited to a certain
percentage of the
outstanding balance of the
financial instruments;
Provided, further, That the
PARC shall determine the
percentages mentioned
above;
(vi) Payment for tuition fees
of the immediate family of
the original bondholder in
government universities,
colleges, trade schools, and
other institutions;
(vii) Payment for fees of the
immediate family of the
original bondholder in
government hospitals; and
(viii) Such other uses as the
PARC may from time to time
allow.
The contention of the petitioners in G.R. No. 79777 is that the above provision
is unconstitutional insofar as it requires the owners of the expropriated
properties to accept just compensation therefor in less than money, which is
the only medium of payment allowed. In support of this contention, they cite
jurisprudence holding that:
The fundamental rule in expropriation matters is that the
owner of the property expropriated is entitled to a just
compensation, which should be neither more nor less,
whenever it is possible to make the assessment, than the
money equivalent of said property. Just compensation has
always been understood to be the just and complete
equivalent of the loss which the owner of the thing
expropriated has to suffer by reason of the expropriation
. 45 (Emphasis supplied.)
In J.M. Tuazon Co. v. Land Tenure Administration, 46 this Court held:
It is well-settled that just compensation means the equivalent
for the value of the property at the time of its taking. Anything
beyond that is more, and anything short of that is less, than
just compensation. It means a fair and full equivalent for the
loss sustained, which is the measure of the indemnity, not
whatever gain would accrue to the expropriating entity. The
market value of the land taken is the just compensation to
which the owner of condemned property is entitled, the market
value being that sum of money which a person desirous, but
not compelled to buy, and an owner, willing, but not compelled
to sell, would agree on as a price to be given and received for
such property. (Emphasis supplied.)
In the United States, where much of our jurisprudence on the subject has been
derived, the weight of authority is also to the effect that just compensation for
property expropriated is payable only in money and not otherwise. Thus
The medium of payment of compensation is ready money or
cash. The condemnor cannot compel the owner to accept
anything but money, nor can the owner compel or require the
condemnor to pay him on any other basis than the value of
the property in money at the time and in the manner
prescribed by the Constitution and the statutes. When the
 power of eminent domain is resorted to, there must be a
standard medium of payment, binding upon both parties, and
the law has fixed that standard as money in
cash. 47 (Emphasis supplied.)
Part cash and deferred payments are not and cannot, in the
nature of things, be regarded as a reliable and constant
standard of compensation. 48
"Just compensation" for property taken by condemnation
means a fair equivalent in money, which must be paid at least
within a reasonable time after the taking, and it is not within
the power of the Legislature to substitute for such payment
future obligations, bonds, or other valuable
advantage. 49 (Emphasis supplied.)
It cannot be denied from these cases that the traditional medium for the
payment of just compensation is money and no other. And so, conformably,
has just compensation been paid in the past solely in that medium. However,
we do not deal here with the traditional excercise of the power of eminent
domain. This is not an ordinary expropriation where only a specific property of
relatively limited area is sought to be taken by the State from its owner for a
specific and perhaps local purpose.
What we deal with here is a revolutionary kind of expropriation.
The expropriation before us affects all private agricultural lands whenever
found and of whatever kind as long as they are in excess of the maximum
retention limits allowed their owners. This kind of expropriation is intended for
the benefit not only of a particular community or of a small segment of the
population but of the entire Filipino nation, from all levels of our society, from
the impoverished farmer to the land-glutted owner. Its purpose does not cover
only the whole territory of this country but goes beyond in time to the
foreseeable future, which it hopes to secure and edify with the vision and the
sacrifice of the present generation of Filipinos. Generations yet to come are as
involved in this program as we are today, although hopefully only as
beneficiaries of a richer and more fulfilling life we will guarantee to them
tomorrow through our thoughtfulness today. And, finally, let it not be forgotten
that it is no less than the Constitution itself that has ordained this revolution in
the farms, calling for "a just distribution" among the farmers of lands that have
heretofore been the prison of their dreams but can now become the key at
least to their deliverance.
Such a program will involve not mere millions of pesos. The cost will be
tremendous. Considering the vast areas of land subject to expropriation under
the laws before us, we estimate that hundreds of billions of pesos will be
needed, far more indeed than the amount of P50 billion initially appropriated,
which is already staggering as it is by our present standards. Such amount is
in fact not even fully available at this time.
We assume that the framers of the Constitution were aware of this difficulty
when they called for agrarian reform as a top priority project of the government.
It is a part of this assumption that when they envisioned the expropriation that
would be needed, they also intended that the just compensation would have
to be paid not in the orthodox way but a less conventional if more practical
method. There can be no doubt that they were aware of the financial limitations
of the government and had no illusions that there would be enough money to
pay in cash and in full for the lands they wanted to be distributed among the
farmers. We may therefore assume that their intention was to allow such
manner of payment as is now provided for by the CARP Law, particularly the
payment of the balance (if the owner cannot be paid fully with money), or
indeed of the entire amount of the just compensation, with other things of
value. We may also suppose that what they had in mind was a similar scheme
of payment as that prescribed in P.D. No. 27, which was the law in force at the
time they deliberated on the new Charter and with which they presumably
agreed in principle.
The Court has not found in the records of the Constitutional Commission any
categorical agreement among the members regarding the meaning to be given
the concept of just compensation as applied to the comprehensive agrarian
reform program being contemplated. There was the suggestion to "fine tune"
the requirement to suit the demands of the project even as it was also felt that
they should "leave it to Congress" to determine how payment should be made
to the landowner and reimbursement required from the farmer-beneficiaries.
Such innovations as "progressive compensation" and "State-subsidized
compensation" were also proposed. In the end, however, no special definition
of the just compensation for the lands to be expropriated was reached by the
Commission. 50
On the other hand, there is nothing in the records either that militates against
the assumptions we are making of the general sentiments and intention of the
members on the content and manner of the payment to be made to the
landowner in the light of the magnitude of the expenditure and the limitations
of the expropriator.
With these assumptions, the Court hereby declares that the content and
manner of the just compensation provided for in the afore- quoted Section 18
of the CARP Law is not violative of the Constitution. We do not mind admitting
that a certain degree of pragmatism has influenced our decision on this issue,
but after all this Court is not a cloistered institution removed from the realities
and demands of society or oblivious to the need for its enhancement. The
Court is as acutely anxious as the rest of our people to see the goal of agrarian
reform achieved at last after the frustrations and deprivations of our peasant
masses during all these disappointing decades. We are aware that invalidation
of the said section will result in the nullification of the entire program, killing the
farmer's hopes even as they approach realization and resurrecting the spectre
of discontent and dissent in the restless countryside. That is not in our view
the intention of the Constitution, and that is not what we shall decree today.
Accepting the theory that payment of the just compensation is not always
required to be made fully in money, we find further that the proportion of cash
payment to the other things of value constituting the total payment, as
determined on the basis of the areas of the lands expropriated, is not unduly
oppressive upon the landowner. It is noted that the smaller the land, the bigger
the payment in money, primarily because the small landowner will be needing
it more than the big landowners, who can afford a bigger balance in bonds and
other things of value. No less importantly, the government financial
instruments making up the balance of the payment are "negotiable at any
time." The other modes, which are likewise available to the landowner at his
option, are also not unreasonable because payment is made in shares of
stock, LBP bonds, other properties or assets, tax credits, and other things of
value equivalent to the amount of just compensation.
Admittedly, the compensation contemplated in the law will cause the
landowners, big and small, not a little inconvenience. As already remarked,
this cannot be avoided. Nevertheless, it is devoutly hoped that these
countrymen of ours, conscious as we know they are of the need for their
forebearance and even sacrifice, will not begrudge us their indispensable
share in the attainment of the ideal of agrarian reform. Otherwise, our pursuit
of this elusive goal will be like the quest for the Holy Grail.
The complaint against the effects of non-registration of the land under E.O.
No. 229 does not seem to be viable any more as it appears that Section 4 of
the said Order has been superseded by Section 14 of the CARP Law. This
repeats the requisites of registration as embodied in the earlier measure but
does not provide, as the latter did, that in case of failure or refusal to register
the land, the valuation thereof shall be that given by the provincial or city
assessor for tax purposes. On the contrary, the CARP Law says that the just
compensation shall be ascertained on the basis of the factors mentioned in its
Section 17 and in the manner provided for in Section 16.
The last major challenge to CARP is that the landowner is divested of his
property even before actual payment to him in full of just compensation, in
contravention of a well- accepted principle of eminent domain.
The recognized rule, indeed, is that title to the property expropriated shall pass
from the owner to the expropriator only upon full payment of the just
compensation. Jurisprudence on this settled principle is consistent both here
and in other democratic jurisdictions. Thus:
Title to property which is the subject of condemnation proceedings does not
vest the condemnor until the judgment fixing just compensation is entered and
paid, but the condemnor's title relates back to the date on which the petition
under the Eminent Domain Act, or the commissioner's report under the Local
Improvement Act, is filed. 51
... although the right to appropriate and use land taken for a canal is complete
at the time of entry, title to the property taken remains in the owner until
payment is actually made. 52 (Emphasis supplied.)
In Kennedy v. Indianapolis, 53 the US Supreme Court cited several cases
holding that title to property does not pass to the condemnor until just
compensation had actually been made. In fact, the decisions appear to be
uniformly to this effect. As early as 1838, in Rubottom v. McLure, 54 it was held
that "actual payment to the owner of the condemned property was a condition
precedent to the investment of the title to the property in the State" albeit "not
to the appropriation of it to public use." In Rexford v. Knight, 55 the Court of
Appeals of New York said that the construction upon the statutes was that the
fee did not vest in the State until the payment of the compensation although
the authority to enter upon and appropriate the land was complete prior to the
payment. Kennedy further said that "both on principle and authority the rule is
... that the right to enter on and use the property is complete, as soon as the
property is actually appropriated under the authority of law for a public use, but
that the title does not pass from the owner without his consent, until just
compensation has been made to him."
Our own Supreme Court has held in Visayan Refining Co. v. Camus and
Paredes, 56 that:
If the laws which we have exhibited or cited in the preceding
discussion are attentively examined it will be apparent that the
method of expropriation adopted in this jurisdiction is such as
to afford absolute reassurance that no piece of land can be
finally and irrevocably taken from an unwilling owner until
compensation is paid ... . (Emphasis supplied.)
It is true that P.D. No. 27 expressly ordered the emancipation of tenant-farmer
as October 21, 1972 and declared that he shall "be deemed the owner" of a
portion of land consisting of a family-sized farm except that "no title to the land
owned by him was to be actually issued to him unless and until he had become
a full-fledged member of a duly recognized farmers' cooperative." It was
understood, however, that full payment of the just compensation also had to
be made first, conformably to the constitutional requirement.
When E.O. No. 228, categorically stated in its Section 1 that:
All qualified farmer-beneficiaries are now deemed full owners
as of October 21, 1972 of the land they acquired by virtue of
Presidential Decree No. 27. (Emphasis supplied.)
it was obviously referring to lands already validly acquired under the said
decree, after proof of full-fledged membership in the farmers' cooperatives and
full payment of just compensation. Hence, it was also perfectly proper for the
Order to also provide in its Section 2 that the "lease rentals paid to the
landowner by the farmer- beneficiary after October 21, 1972 (pending transfer
of ownership after full payment of just compensation), shall be considered as
advance payment for the land."
The CARP Law, for its part, conditions the transfer of possession and
ownership of the land to the government on receipt by the landowner of the
corresponding payment or the deposit by the DAR of the compensation in cash
or LBP bonds with an accessible bank. Until then, title also remains with the
landowner. 57 No outright change of ownership is contemplated either.
Hence, the argument that the assailed measures violate due process by
arbitrarily transferring title before the land is fully paid for must also be rejected.
It is worth stressing at this point that all rights acquired by the tenant-farmer
under P.D. No. 27, as recognized under E.O. No. 228, are retained by him
even now under R.A. No. 6657. This should counter-balance the express
provision in Section 6 of the said law that "the landowners whose lands have
been covered by Presidential Decree No. 27 shall be allowed to keep the area
originally retained by them thereunder, further, That original homestead
grantees or direct compulsory heirs who still own the original homestead at the
time of the approval of this Act shall retain the same areas as long as they
continue to cultivate said homestead."
In connection with these retained rights, it does not appear in G.R. No. 78742
that the appeal filed by the petitioners with the Office of the President has
already been resolved. Although we have said that the doctrine of exhaustion
of administrative remedies need not preclude immediate resort to judicial
action, there are factual issues that have yet to be examined on the
administrative level, especially the claim that the petitioners are not covered
by LOI 474 because they do not own other agricultural lands than the subjects
of their petition.
Obviously, the Court cannot resolve these issues. In any event, assuming that
the petitioners have not yet exercised their retention rights, if any, under P.D.
No. 27, the Court holds that they are entitled to the new retention rights
provided for by R.A. No. 6657, which in fact are on the whole more liberal than
those granted by the decree.
V
The CARP Law and the other enactments also involved in these cases have
been the subject of bitter attack from those who point to the shortcomings of
these measures and ask that they be scrapped entirely. To be sure, these
enactments are less than perfect; indeed, they should be continuously re-
examined and rehoned, that they may be sharper instruments for the better
protection of the farmer's rights. But we have to start somewhere. In the pursuit
of agrarian reform, we do not tread on familiar ground but grope on terrain
fraught with pitfalls and expected difficulties. This is inevitable. The CARP Law
is not a tried and tested project. On the contrary, to use Justice Holmes's
words, "it is an experiment, as all life is an experiment," and so we learn as we
venture forward, and, if necessary, by our own mistakes. We cannot expect
perfection although we should strive for it by all means. Meantime, we struggle
as best we can in freeing the farmer from the iron shackles that have
unconscionably, and for so long, fettered his soul to the soil.
By the decision we reach today, all major legal obstacles to the comprehensive
agrarian reform program are removed, to clear the way for the true freedom of
the farmer. We may now glimpse the day he will be released not only from
want but also from the exploitation and disdain of the past and from his own
feelings of inadequacy and helplessness. At last his servitude will be ended
forever. At last the farm on which he toils will be his farm. It will be his portion
of the Mother Earth that will give him not only the staff of life but also the joy of
living. And where once it bred for him only deep despair, now can he see in it
the fruition of his hopes for a more fulfilling future. Now at last can he banish
from his small plot of earth his insecurities and dark resentments and "rebuild
in it the music and the dream."
WHEREFORE, the Court holds as follows:
1. R.A. No. 6657, P.D. No. 27, Proc. No. 131, and E.O. Nos.
228 and 229 are SUSTAINED against all the constitutional
objections raised in the herein petitions.
2. Title to all expropriated properties shall be transferred to the
State only upon full payment of compensation to their
respective owners.
 3. All rights previously acquired by the tenant- farmers under
P.D. No. 27 are retained and recognized.
4. Landowners who were unable to exercise their rights of
retention under P.D. No. 27 shall enjoy the retention rights
granted by R.A. No. 6657 under the conditions therein
prescribed.
5. Subject to the above-mentioned rulings all the petitions are
DISMISSED, without pronouncement as to costs.
SO ORDERED.
ROXAS & CO., INC., petitioner,
vs.
THE HONORABLE COURT OF APPEALS, DEPARTMENT OF AGRARIAN
REFORM, SECRETARY OF AGRARIAN REFORM, DAR REGIONAL
DIRECTOR FOR REGION IV, MUNICIPAL AGRARIAN REFORM OFFICER
OF NASUGBU, BATANGAS and DEPARTMENT OF AGRARIAN REFORM
ADJUDICATION BOARD, respondents.
PUNO, J.:
This case involves three (3) haciendas in Nasugbu, Batangas owned by
petitioner and the validity of the acquisition of these haciendas by the
government under Republic Act No. 6657, the Comprehensive Agrarian
Reform Law of 1988.
Petitioner Roxas & Co. is a domestic corporation and is the registered owner
of three haciendas, namely, Haciendas Palico, Banilad and Caylaway, all
located in the Municipality of Nasugbu, Batangas. Hacienda Palico is 1,024
hectares in area and is registered under Transfer Certificate of Title (TCT) No.
985. This land is covered by Tax Declaration Nos. 0465, 0466, 0468, 0470,
0234 and 0354. Hacienda Banilad is 1,050 hectares in area, registered under
TCT No. 924 and covered by Tax Declaration Nos. 0236, 0237 and 0390.
Hacienda Caylaway is 867.4571 hectares in area and is registered under TCT
Nos. T-44662, T-44663, T-44664 and T-44665.
The events of this case occurred during the incumbency of then President
Corazon C. Aquino. In February 1986, President Aquino issued Proclamation
No. 3 promulgating a Provisional Constitution. As head of the provisional
government, the President exercised legislative power "until a legislature is
elected and convened under a new Constitution." 1 In the exercise of this
legislative power, the President signed on July 22, 1987, Proclamation No. 131
instituting a Comprehensive Agrarian Reform Program and Executive Order
No. 229 providing the mechanisms necessary to initially implement the
program.
On July 27, 1987, the Congress of the Philippines formally convened and took
over legislative power from the President. 2 This Congress passed Republic
Act No. 6657, the Comprehensive Agrarian Reform Law (CARL) of 1988. The
Act was signed by the President on June 10, 1988 and took effect on June 15,
1988.
Before the law's effectivity, on May 6, 1988, petitioner filed with respondent
DAR a voluntary offer to sell Hacienda Caylaway pursuant to the provisions of
E.O. No. 229. Haciendas Palico and Banilad were later placed under
compulsory acquisition by respondent DAR in accordance with the CARL.
Hacienda Palico
On September 29, 1989, respondent DAR, through respondent Municipal
Agrarian Reform Officer (MARO) of Nasugbu, Batangas, sent a notice entitled
"Invitation to Parties" to petitioner. The Invitation was addressed to "Jaime
Pimentel, Hda. Administrator, Hda. Palico." 3 Therein, the MARO invited
petitioner to a conference on October 6, 1989 at the DAR office in Nasugbu to
discuss the results of the DAR investigation of Hacienda Palico, which was
"scheduled for compulsory acquisition this year under the Comprehensive
Agrarian Reform Program." 4
On October 25, 1989, the MARO completed three (3) Investigation Reports
after investigation and ocular inspection of the Hacienda. In the first Report,
the MARO found that 270 hectares under Tax Declaration Nos. 465, 466, 468
and 470 were "flat to undulating (0-8% slope)" and actually occupied and
cultivated by 34 tillers of sugarcane. 5 In the second Report, the MARO
identified as "flat to undulating" approximately 339 hectares under Tax
Declaration No. 0234 which also had several actual occupants and tillers of
sugarcane; 6 while in the third Report, the MARO found approximately 75
hectare under Tax Declaration No. 0354 as "flat to undulating" with 33 actual
occupants and tillers also of sugarcane. 7
On October 27, 1989, a "Summary Investigation Report" was submitted and
signed jointly by the MARO, representatives of the Barangay Agrarian Reform
Committee (BARC) and Land Bank of the Philippines (LBP), and by the
Provincial Agrarian Reform Officer (PARO). The Report recommended that
333.0800 hectares of Hacienda Palico be subject to compulsory acquisition at
a value of P6,807,622.20. 8 The following day, October 28, 1989, two (2) more
Summary Investigation Reports were submitted by the same officers and
representatives. They recommended that 270.0876 hectares and 75.3800
hectares be placed under compulsory acquisition at a compensation of
P8,109,739.00 and P2,188,195.47, respectively. 9
On December 12, 1989, respondent DAR through then Department Secretary
Miriam D. Santiago sent a "Notice of Acquisition" to petitioner. The Notice was
addressed as follows:
Roxas y Cia, Limited
Soriano Bldg., Plaza Cervantes
Manila, Metro Manila. 10
Petitioner was informed that 1,023.999 hectares of its land in Hacienda Palico
were subject to immediate acquisition and distribution by the government
under the CARL; that based on the DAR's valuation criteria, the government
was offering compensation of P3.4 million for 333.0800 hectares; that whether
this offer was to be accepted or rejected, petitioner was to inform the Bureau
of Land Acquisition and Distribution (BLAD) of the DAR; that in case of
petitioner's rejection or failure to reply within thirty days, respondent DAR shall
conduct summary administrative proceedings with notice to petitioner to
determine just compensation for the land; that if petitioner accepts respondent
DAR's offer, or upon deposit of the compensation with an accessible bank if it
rejects the same, the DAR shall take immediate possession of the land. 11
Almost two years later, on September 26, 1991, the DAR Regional Director
sent to the LBP Land Valuation Manager three (3) separate Memoranda
entitled "Request to Open Trust Account." Each Memoranda requested that a
trust account representing the valuation of three portions of Hacienda Palico
be opened in favor of the petitioner in view of the latter's rejection of its offered
value. 12
Meanwhile in a letter dated May 4, 1993, petitioner applied with the DAR for
conversion of Haciendas Palico and Banilad from agricultural to non-
agricultural lands under the provisions of the CARL. 13 On July 14, 1993,
petitioner sent a letter to the DAR Regional Director reiterating its request for
conversion of the two haciendas. 14
Despite petitioner's application for conversion, respondent DAR proceeded
with the acquisition of the two Haciendas. The LBP trust accounts as
compensation for Hacienda Palico were replaced by respondent DAR with
cash and LBP bonds. 15 On October 22, 1993, from the mother title of TCT No.
985 of the Hacienda, respondent DAR registered Certificate of Land
Ownership Award (CLOA) No. 6654. On October 30, 1993, CLOA's were
distributed to farmer beneficiaries. 16
Hacienda Banilad
On August 23, 1989, respondent DAR, through respondent MARO of
Nasugbu, Batangas, sent a notice to petitioner addressed as follows:
Mr. Jaime Pimentel
Hacienda Administrator
Hacienda Banilad
Nasugbu, Batangas 17
The MARO informed Pimentel that Hacienda Banilad was subject to
compulsory acquisition under the CARL; that should petitioner wish to
avail of the other schemes such as Voluntary Offer to Sell or Voluntary
Land Transfer, respondent DAR was willing to provide assistance
thereto. 18
On September 18, 1989, the MARO sent an "Invitation to Parties" again to
Pimentel inviting the latter to attend a conference on September 21, 1989 at
the MARO Office in Nasugbu to discuss the results of the MARO's
investigation over Hacienda Banilad. 19
On September 21, 1989, the same day the conference was held, the MARO
submitted two (2) Reports. In his first Report, he found that approximately 709
hectares of land under Tax Declaration Nos. 0237 and 0236 were "flat to
undulating (0-8% slope)." On this area were discovered 162 actual occupants
and tillers of sugarcane. 20 In the second Report, it was found that
approximately 235 hectares under Tax Declaration No. 0390 were "flat to
undulating," on which were 92 actual occupants and tillers of sugarcane. 21
The results of these Reports were discussed at the conference. Present in the
conference were representatives of the prospective farmer beneficiaries, the
BARC, the LBP, and Jaime Pimentel on behalf of the landowner. 22 After the
meeting, on the same day, September 21, 1989, a Summary Investigation
Report was submitted jointly by the MARO, representatives of the BARC, LBP,
and the PARO. They recommended that after ocular inspection of the property,
234.6498 hectares under Tax Declaration No. 0390 be subject to compulsory
acquisition and distribution by CLOA. 23 The following day, September 22,
1989, a second Summary Investigation was submitted by the same officers.
They recommended that 737.2590 hectares under Tax Declaration Nos. 0236
and 0237 be likewise placed under compulsory acquisition for distribution. 24
On December 12, 1989, respondent DAR, through the Department Secretary,
sent to petitioner two (2) separate "Notices of Acquisition" over Hacienda
Banilad. These Notices were sent on the same day as the Notice of Acquisition
over Hacienda Palico. Unlike the Notice over Hacienda Palico, however, the
Notices over Hacienda Banilad were addressed to:
Roxas y Cia. Limited
7th Floor, Cacho-Gonzales Bldg. 101 Aguirre St., Leg.
Makati, Metro Manila. 25
Respondent DAR offered petitioner compensation of P15,108,995.52
for 729.4190 hectares and P4,428,496.00 for 234.6498 hectares. 26
On September 26, 1991, the DAR Regional Director sent to the LBP Land
Valuation Manager a "Request to Open Trust Account" in petitioner's name as
compensation for 234.6493 hectares of Hacienda Banilad. 27 A second
"Request to Open Trust Account" was sent on November 18, 1991 over
723.4130 hectares of said Hacienda. 28
On December 18, 1991, the LBP certified that the amounts of P4,428,496.40
and P21,234,468.78 in cash and LBP bonds had been earmarked as
compensation for petitioner's land in Hacienda Banilad. 29
On May 4, 1993, petitioner applied for conversion of both Haciendas Palico
and Banilad.
Hacienda Caylaway
Hacienda Caylaway was voluntarily offered for sale to the government on May
6, 1988 before the effectivity of the CARL. The Hacienda has a total area of
867.4571 hectares and is covered by four (4) titles TCT Nos. T-44662, T-
44663, T-44664 and T-44665. On January 12, 1989, respondent DAR, through
the Regional Director for Region IV, sent to petitioner two (2) separate
Resolutions accepting petitioner's voluntary offer to sell Hacienda Caylaway,
particularly TCT Nos. T-44664 and T-44663. 30 The Resolutions were
addressed to:
Roxas & Company, Inc.
7th Flr. Cacho-Gonzales Bldg.
Aguirre, Legaspi Village
Makati, M. M 31
On September 4, 1990, the DAR Regional Director issued two separate
Memoranda to the LBP Regional Manager requesting for the valuation of the
land under TCT Nos. T-44664 and T-44663. 32 On the same day, respondent
DAR, through the Regional Director, sent to petitioner a "Notice of Acquisition"
over 241.6777 hectares under TCT No. T-44664 and 533.8180 hectares under
TCT No. T-44663. 33 Like the Resolutions of Acceptance, the Notice of
Acquisition was addressed to petitioner at its office in Makati, Metro Manila.
Nevertheless, on August 6, 1992, petitioner, through its President, Eduardo J.
Roxas, sent a letter to the Secretary of respondent DAR withdrawing its VOS
of Hacienda Caylaway. The Sangguniang Bayan of Nasugbu, Batangas
allegedly authorized the reclassification of Hacienda Caylaway from
agricultural to non-agricultural. As a result, petitioner informed respondent
DAR that it was applying for conversion of Hacienda Caylaway from
agricultural to other
uses. 34
In a letter dated September 28, 1992, respondent DAR Secretary informed
petitioner that a reclassification of the land would not exempt it from agrarian
reform. Respondent Secretary also denied petitioner's withdrawal of the VOS
on the ground that withdrawal could only be based on specific grounds such
as unsuitability of the soil for agriculture, or if the slope of the land is over 18
degrees and that the land is undeveloped. 35
Despite the denial of the VOS withdrawal of Hacienda Caylaway, on May 11,
1993, petitioner filed its application for conversion of both Haciendas Palico
and Banilad. 36 On July 14, 1993, petitioner, through its President, Eduardo
Roxas, reiterated its request to withdraw the VOS over Hacienda Caylaway in
light of the following:
1) Certification issued by Conrado I. Gonzales, Officer-in-
Charge, Department of Agriculture, Region 4, 4th Floor, ATI
(BA) Bldg., Diliman, Quezon City dated March 1, 1993 stating
that the lands subject of referenced titles "are not feasible and
economically sound for further agricultural development.
 2) Resolution No. 19 of the Sangguniang Bayan of Nasugbu,
Batangas approving the Zoning Ordinance reclassifying areas
covered by the referenced titles to non-agricultural which was
enacted after extensive consultation with government
agencies, including [the Department of Agrarian Reform], and
the requisite public hearings.
3) Resolution No. 106 of the Sangguniang Panlalawigan of
Batangas dated March 8, 1993 approving the Zoning
Ordinance enacted by the Municipality of Nasugbu.
4) Letter dated December 15, 1992 issued by Reynaldo U.
Garcia of the Municipal Planning & Development, Coordinator
and Deputized Zoning Administrator addressed to Mrs. Alicia
P. Logarta advising that the Municipality of Nasugbu,
Batangas has no objection to the conversion of the lands
subject of referenced titles to non-agricultural. 37
On August 24, 1993 petitioner instituted Case No. N-0017-96-46 (BA) with
respondent DAR Adjudication Board (DARAB) praying for the cancellation of
the CLOA's issued by respondent DAR in the name of several persons.
Petitioner alleged that the Municipality of Nasugbu, where the haciendas are
located, had been declared a tourist zone, that the land is not suitable for
agricultural production, and that the Sangguniang Bayan of Nasugbu had
reclassified the land to non-agricultural.
In a Resolution dated October 14, 1993, respondent DARAB held that the case
involved the prejudicial question of whether the property was subject to
agrarian reform, hence, this question should be submitted to the Office of the
Secretary of Agrarian Reform for determination. 38
On October 29, 1993, petitioner filed with the Court of Appeals CA-G.R. SP
No. 32484. It questioned the expropriation of its properties under the CARL
and the denial of due process in the acquisition of its landholdings.
Meanwhile, the petition for conversion of the three haciendas was denied by
the MARO on November 8, 1993.
Petitioner's petition was dismissed by the Court of Appeals on April 28,
1994. 39 Petitioner moved for reconsideration but the motion was denied on
January 17, 1997 by respondent court. 40
Hence, this recourse. Petitioner assigns the following errors:
A. RESPONDENT COURT OF APPEALS GRAVELY ERRED
IN HOLDING THAT PETITIONER'S CAUSE OF ACTION IS
PREMATURE FOR FAILURE TO EXHAUST
ADMINISTRATIVE REMEDIES IN VIEW OF THE PATENT
ILLEGALITY OF THE RESPONDENTS' ACTS, THE
IRREPARABLE DAMAGE CAUSED BY SAID ILLEGAL
ACTS, AND THE ABSENCE OF A PLAIN, SPEEDY AND
ADEQUATE REMEDY IN THE ORDINARY COURSE OF
LAW ALL OF WHICH ARE EXCEPTIONS TO THE SAID
DOCTRINE.
B. RESPONDENT COURT OF APPEALS GRAVELY ERRED
IN HOLDING THAT PETITIONER'S LANDHOLDINGS ARE
SUBJECT TO COVERAGE UNDER THE COMPREHENSIVE
AGRARIAN REFORM LAW, IN VIEW OF THE UNDISPUTED
FACT THAT PETITIONER'S LANDHOLDINGS HAVE BEEN
CONVERTED TO NON-AGRICULTURAL USES BY
PRESIDENTIAL PROCLAMATION NO. 1520 WHICH
DECLARED THE MUNICIPALITY NASUGBU, BATANGAS
AS A TOURIST ZONE, AND THE ZONING ORDINANCE OF
THE MUNICIPALITY OF NASUGBU RE-CLASSIFYING
CERTAIN PORTIONS OF PETITIONER'S LANDHOLDINGS
AS NON-AGRICULTURAL, BOTH OF WHICH PLACE SAID
LANDHOLDINGS OUTSIDE THE SCOPE OF AGRARIAN
REFORM, OR AT THE VERY LEAST ENTITLE PETITIONER
TO APPLY FOR CONVERSION AS CONCEDED BY
RESPONDENT DAR.
C. RESPONDENT COURT OF APPEALS GRAVELY ERRED
WHEN IT FAILED TO DECLARE THE PROCEEDINGS
BEFORE RESPONDENT DAR VOID FOR FAILURE TO
OBSERVE DUE PROCESS, CONSIDERING THAT
RESPONDENTS BLATANTLY DISREGARDED THE
PROCEDURE FOR THE ACQUISITION OF PRIVATE
LANDS UNDER R.A. 6657, MORE PARTICULARLY, IN
FAILING TO GIVE DUE NOTICE TO THE PETITIONER AND
TO PROPERLY IDENTIFY THE SPECIFIC AREAS SOUGHT
TO BE ACQUIRED.
D. RESPONDENT COURT OF APPEALS GRAVELY ERRED
WHEN IT FAILED TO RECOGNIZE THAT PETITIONER
WAS BRAZENLY AND ILLEGALLY DEPRIVED OF ITS
PROPERTY WITHOUT JUST COMPENSATION,
CONSIDERING THAT PETITIONER WAS NOT PAID JUST
COMPENSATION BEFORE IT WAS UNCEREMONIOUSLY
STRIPPED OF ITS LANDHOLDINGS THROUGH THE
 ISSUANCE OF CLOA'S TO ALLEGED FARMER
BENEFICIARIES, IN VIOLATION OF R.A. 6657. 41
The assigned errors involve three (3) principal issues: (1) whether this Court
can take cognizance of this petition despite petitioner's failure to exhaust
administrative remedies; (2) whether the acquisition proceedings over the
three haciendas were valid and in accordance with law; and (3) assuming the
haciendas may be reclassified from agricultural to non-agricultural, whether
this court has the power to rule on this issue.
I. Exhaustion of Administrative Remedies.
In its first assigned error, petitioner claims that respondent Court of Appeals
gravely erred in finding that petitioner failed to exhaust administrative
remedies. As a general rule, before a party may be allowed to invoke the
jurisdiction of the courts of justice, he is expected to have exhausted all means
of administrative redress. This is not absolute, however. There are instances
when judicial action may be resorted to immediately. Among these exceptions
are: (1) when the question raised is purely legal; (2) when the administrative
body is in estoppel; (3) when the act complained of is patently illegal; (4) when
there is urgent need for judicial intervention; (5) when the respondent acted in
disregard of due process; (6) when the respondent is a department secretary
whose acts, as an alter ego of the President, bear the implied or assumed
approval of the latter; (7) when irreparable damage will be suffered; (8) when
there is no other plain, speedy and adequate remedy; (9) when strong public
interest is involved; (10) when the subject of the controversy is private land;
and (11) in quo warranto proceedings. 42
Petitioner rightly sought immediate redress in the courts. There was a violation
of its rights and to require it to exhaust administrative remedies before the DAR
itself was not a plain, speedy and adequate remedy.
Respondent DAR issued Certificates of Land Ownership Award (CLOA's) to
farmer beneficiaries over portions of petitioner's land without just
compensation to petitioner. A Certificate of Land Ownership Award (CLOA) is
evidence of ownership of land by a beneficiary under R.A. 6657, the
Comprehensive Agrarian Reform Law of 1988. 43 Before this may be awarded
to a farmer beneficiary, the land must first be acquired by the State from the
landowner and ownership transferred to the former. The transfer of possession
and ownership of the land to the government are conditioned upon
the receipt by the landowner of the corresponding payment or deposit by the
DAR of the compensation with an accessible bank. Until then, title remains
with the landowner. 44 There was no receipt by petitioner of any compensation
for any of the lands acquired by the government.
The kind of compensation to be paid the landowner is also specific. The law
provides that the deposit must be made only in "cash" or "LBP
bonds." 45 Respondent DAR's opening of trust account deposits in petitioner' s
name with the Land Bank of the Philippines does not constitute payment under
the law. Trust account deposits are not cash or LBP bonds. The replacement
of the trust account with cash or LBP bonds did not ipso facto cure the lack of
compensation; for essentially, the determination of this compensation was
marred by lack of due process. In fact, in the entire acquisition proceedings,
respondent DAR disregarded the basic requirements of administrative due
process. Under these circumstances, the issuance of the CLOA's to farmer
beneficiaries necessitated immediate judicial action on the part of the
petitioner.
II. The Validity of the Acquisition Proceedings Over the Haciendas.
Petitioner's allegation of lack of due process goes into the validity of the
acquisition proceedings themselves. Before we rule on this matter, however,
there is need to lay down the procedure in the acquisition of private lands under
the provisions of the law.
A. Modes of Acquisition of Land under R. A. 6657
Republic Act No. 6657, the Comprehensive Agrarian Reform Law of 1988
(CARL), provides for two (2) modes of acquisition of private land: compulsory
and voluntary. The procedure for the compulsory acquisition of private lands
is set forth in Section 16 of R.A. 6657, viz:
Sec. 16. Procedure for Acquisition of Private Lands. For
purposes of acquisition of private lands, the following
procedures shall be followed:
a). After having identified the land, the
landowners and the beneficiaries, the DAR
shall send its notice to acquire the land to the
owners thereof, by personal delivery or
registered mail, and post the same in a
conspicuous place in the municipal building
and barangay hall of the place where the
property is located. Said notice shall contain
the offer of the DAR to pay a corresponding
value in accordance with the valuation set
forth in Sections 17, 18, and other pertinent
provisions hereof.
b) Within thirty (30) days from the date of
receipt of written notice by personal delivery
or registered mail, the landowner, his
administrator or representative shall inform
the DAR of his acceptance or rejection of the
offer.
c) If the landowner accepts the offer of the
DAR, the LBP shall pay the landowner the
purchase price of the land within thirty (30)
days after he executes and delivers a deed of
transfer in favor of the Government and
surrenders the Certificate of Title and other
muniments of title.
d) In case of rejection or failure to reply, the
DAR shall conduct summary administrative
proceedings to determine the compensation
for the land requiring the landowner, the LBP
and other interested parties to submit
evidence as to the just compensation for the
land, within fifteen (15) days from receipt of
the notice. After the expiration of the above
period, the matter is deemed submitted for
decision. The DAR shall decide the case
within thirty (30) days after it is submitted for
decision.
e) Upon receipt by the landowner of the
corresponding payment, or, in case of
rejection or no response from the landowner,
upon the deposit with an accessible bank
designated by the DAR of the compensation
in cash or in LBP bonds in accordance with
this Act, the DAR shall take immediate
possession of the land and shall request the
proper Register of Deeds to issue a Transfer
Certificate of Title (TCT) in the name of the
Republic of the Philippines. The DAR shall
thereafter proceed with the redistribution of
the land to the qualified beneficiaries.
f) Any party who disagrees with the decision
may bring the matter to the court of proper
jurisdiction for final determination of just
compensation.
In the compulsory acquisition of private lands, the landholding, the landowners
and the farmer beneficiaries must first be identified. After identification, the
DAR shall send a Notice of Acquisition to the landowner, by personal delivery
or registered mail, and post it in a conspicuous place in the municipal building
and barangay hall of the place where the property is located. Within thirty days
from receipt of the Notice of Acquisition, the landowner, his administrator or
representative shall inform the DAR of his acceptance or rejection of the offer.
If the landowner accepts, he executes and delivers a deed of transfer in favor
of the government and surrenders the certificate of title. Within thirty days from
the execution of the deed of transfer, the Land Bank of the Philippines (LBP)
pays the owner the purchase price. If the landowner rejects the DAR's offer or
fails to make a reply, the DAR conducts summary administrative proceedings
to determine just compensation for the land. The landowner, the LBP
representative and other interested parties may submit evidence on just
compensation within fifteen days from notice. Within thirty days from
submission, the DAR shall decide the case and inform the owner of its decision
and the amount of just compensation. Upon receipt by the owner of the
corresponding payment, or, in case of rejection or lack of response from the
latter, the DAR shall deposit the compensation in cash or in LBP bonds with
an accessible bank. The DAR shall immediately take possession of the land
and cause the issuance of a transfer certificate of title in the name of the
Republic of the Philippines. The land shall then be redistributed to the farmer
beneficiaries. Any party may question the decision of the DAR in the regular
courts for final determination of just compensation.
The DAR has made compulsory acquisition the priority mode of the land
acquisition to hasten the implementation of the Comprehensive Agrarian
Reform Program (CARP). 46 Under Section 16 of the CARL, the first step in
compulsory acquisition is the identification of the land, the landowners and the
beneficiaries. However, the law is silent on how the identification process must
be made. To fill in this gap, the DAR issued on July 26, 1989 Administrative
Order No. 12, Series or 1989, which set the operating procedure in the
identification of such lands. The procedure is as follows:
II. OPERATING PROCEDURE
A. The Municipal Agrarian Reform Officer, with the assistance
of the pertinent Barangay Agrarian Reform Committee
(BARC), shall:
1. Update the masterlist of all agricultural
lands covered under the CARP in his area of
responsibility. The masterlist shall include
such information as required under the
attached CARP Masterlist Form which shall
include the name of the landowner,
landholding area, TCT/OCT number, and tax
declaration number.
2. Prepare a Compulsory Acquisition Case
Folder (CACF) for each title (OCT/TCT) or
landholding covered under Phase I and II of
the CARP except those for which the
landowners have already filed applications to
avail of other modes of land acquisition. A
case folder shall contain the following duly
accomplished forms:
a) CARP CA Form 1
MARO Investigation Report
b) CARP CA Form 2
Summary Investigation
Report of Findings and
Evaluation
c) CARP CA Form 3
Applicant's Information
Sheet
d) CARP CA Form 4
Beneficiaries Undertaking
e) CARP CA Form 5
Transmittal Report to the
PARO
The MARO/BARC shall certify that all
information contained in the above-
mentioned forms have been examined and
verified by him and that the same are true and
correct.
3. Send a Notice of Coverage and a letter of
invitation to a conference/meeting to the
landowner covered by the Compulsory Case
Acquisition Folder. Invitations to the said
conference/meeting shall also be sent to the
prospective farmer-beneficiaries, the BARC
representative(s), the Land Bank of the
Philippines (LBP) representative, and other
interested parties to discuss the inputs to the
valuation of the property. He shall discuss the
MARO/BARC investigation report and solicit
the views, objection, agreements or
suggestions of the participants thereon. The
landowner shall also be asked to indicate his
retention area. The minutes of the meeting
shall be signed by all participants in the
conference and shall form an integral part of
the CACF.
4. Submit all completed case folders to the
Provincial Agrarian Reform Officer (PARO).
B. The PARO shall:
1. Ensure that the individual case folders are
forwarded to him by his MAROs.
2. Immediately upon receipt of a case folder,
compute the valuation of the land in
accordance with A.O. No. 6, Series of
1988. 47 The valuation worksheet and the
related CACF valuation forms shall be duly
certified correct by the PARO and all the
personnel who participated in the
accomplishment of these forms.
3. In all cases, the PARO may validate the
report of the MARO through ocular inspection
and verification of the property. This ocular
inspection and verification shall be
mandatory when the computed value
exceeds = 500,000 per estate.
4. Upon determination of the valuation,
forward the case folder, together with the duly
accomplished valuation forms and his
recommendations, to the Central Office. The
LBP representative and the MARO
concerned shall be furnished a copy each of
his report.
C. DAR Central Office, specifically through
the Bureau of Land Acquisition and
Distribution (BLAD), shall:
1. Within three days from receipt of the case
folder from the PARO, review, evaluate and
determine the final land valuation of the
property covered by the case folder. A
summary review and evaluation report shall
be prepared and duly certified by the BLAD
Director and the personnel directly
participating in the review and final valuation.
2. Prepare, for the signature of the Secretary
or her duly authorized representative, a
Notice of Acquisition (CARP CA Form 8) for
the subject property. Serve the Notice to the
landowner personally or through registered
mail within three days from its approval. The
Notice shall include, among others, the area
subject of compulsory acquisition, and the
amount of just compensation offered by DAR.
3. Should the landowner accept the DAR's
offered value, the BLAD shall prepare and
submit to the Secretary for approval the
Order of Acquisition. However, in case of
rejection or non-reply, the DAR Adjudication
Board (DARAB) shall conduct a summary
administrative hearing to determine just
compensation, in accordance with the
procedures provided under Administrative
Order No. 13, Series of 1989. Immediately
upon receipt of the DARAB's decision on just
compensation, the BLAD shall prepare and
submit to the Secretary for approval the
required Order of Acquisition.
4. Upon the landowner's receipt of payment,
in case of acceptance, or upon deposit of
payment in the designated bank, in case of
rejection or non-response, the Secretary shall
immediately direct the pertinent Register of
Deeds to issue the corresponding Transfer
Certificate of Title (TCT) in the name of the
Republic of the Philippines. Once the
property is transferred, the DAR, through the
PARO, shall take possession of the land for
redistribution to qualified beneficiaries.
Administrative Order No. 12, Series of 1989 requires that the Municipal
Agrarian Reform Officer (MARO) keep an updated master list of all agricultural
lands under the CARP in his area of responsibility containing all the required
information. The MARO prepares a Compulsory Acquisition Case Folder
(CACF) for each title covered by CARP. The MARO then sends the landowner
a "Notice of Coverage" and a "letter of invitation" to a "conference/meeting"
over the land covered by the CACF. He also sends invitations to the
prospective farmer-beneficiaries the representatives of the Barangay Agrarian
Reform Committee (BARC), the Land Bank of the Philippines (LBP) and other
interested parties to discuss the inputs to the valuation of the property and
solicit views, suggestions, objections or agreements of the parties. At the
meeting, the landowner is asked to indicate his retention area.
The MARO shall make a report of the case to the Provincial Agrarian Reform
Officer (PARO) who shall complete the valuation of the land. Ocular inspection
and verification of the property by the PARO shall be mandatory when the
computed value of the estate exceeds P500,000.00. Upon determination of
the valuation, the PARO shall forward all papers together with his
recommendation to the Central Office of the DAR. The DAR Central Office,
specifically, the Bureau of Land Acquisition and Distribution (BLAD), shall
review, evaluate and determine the final land valuation of the property. The
BLAD shall prepare, on the signature of the Secretary or his duly authorized
representative, a Notice of Acquisition for the subject property. 48 From this
point, the provisions of Section 16 of R.A. 6657 then apply. 49
For a valid implementation of the CAR program, two notices are required:
(1) the Notice of Coverage and letter of invitation to a preliminary conference
sent to the landowner, the representatives of the BARC, LBP, farmer
beneficiaries and other interested parties pursuant to DAR A.O. No. 12, Series
of 1989; and (2) the Notice of Acquisition sent to the landowner under Section
16 of the CARL.
The importance of the first notice, i.e., the Notice of Coverage and the letter of
invitation to the conference, and its actual conduct cannot be understated.
They are steps designed to comply with the requirements of administrative due
process. The implementation of the CARL is an exercise of the State's police
power and the power of eminent domain. To the extent that the CARL
prescribes retention limits to the landowners, there is an exercise of police
power for the regulation of private property in accordance with the
Constitution. 50 But where, to carry out such regulation, the owners are
deprived of lands they own in excess of the maximum area allowed, there is
also a taking under the power of eminent domain. The taking contemplated is
not a mere limitation of the use of the land. What is required is the surrender a) Assists the DENR Survey Party in the conduct of a boundary/ subdivision
of the title to and physical possession of the said excess and all beneficial survey delineating areas covered by OLT, retention, subject of VOS, CA (by
rights accruing to the owner in favor of the farmer beneficiary. 51 The Bill of phases, if possible), infrastructures, etc., whichever is applicable.b) Sends
Rights provides that "[n]o person shall be deprived of life, liberty or property Notice of Coverage (CARP Form No. 5) to landowner concerned or his duly
without due process of law." 52 The CARL was not intended to take away authorized representative inviting him for a conference.c) Sends Invitation
property without due process of law. 53 The exercise of the power of eminent Letter (CARP Form No. 6) for a conference/public hearing to prospective
domain requires that due process be observed in the taking of private property. farmer-beneficiaries, landowner, representatives of BARC, LBP, DENR, DA,
NGO's, farmers' organizations and other interested parties to discuss the
DAR A.O. No. 12, Series of 1989, from whence the Notice of Coverage first following matter
sprung, was amended in 1990 by DAR A.O. No. 9, Series of 1990 and in 1993
by DAR A.O. No. 1, Series of 1993. The Notice of Coverage and letter of R
invitation to the conference meeting were expanded and amplified in said e
amendments. s
u
DAR A.O. No. 9, Series of 1990 entitled "Revised Rules Governing the l
Acquisition of Agricultural Lands Subject of Voluntary Offer to Sell and t
Compulsory Acquisition Pursuant to R.A. 6657," requires that: o
f
B. MARO F
i
e
1. Receives the duly accomplished CARP Form Nos. 1 & 1.1 including l
supporting documents. d
I
2. Gathers basic ownership documents listed under 1.a or 1.b above and n
prepares corresponding VOCF/CACF by landowner/landholding. v
e
3. Notifies/invites the landowner and representatives of the LBP, DENR, BARC s
and prospective beneficiaries of the schedule of ocular inspection of the t
property at least one week in advance. i
g
4. MARO/LAND BANK FIELD OFFICE/BARC a
t
i
a) Identify the land and landowner, and determine the suitability for agriculture
o
and productivity of the land and jointly prepare Field Investigation Report
n
(CARP Form No. 2), including the Land Use Map of the property. b) Interview
applicants and assist them in the preparation of the Application For Potential
CARP Beneficiary (CARP Form No. 3).c) Screen prospective farmer- I
beneficiaries and for those found qualified, cause the signing of the respective n
Application to Purchase and Farmer's Undertaking (CARP Form No. 4).d) p
Complete the Field Investigation Report based on the result of the ocular u
inspection/investigation of the propert and documents submitted. See to it that t
Field Investigation Report is duly accomplished and signed by all concerned. s
t
o
5. MARO
v
a b
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a l
t l
i p
o a
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t
I i
s e
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.
C
o d) Prepares
m Summary of
m Minutes of
e the
n conference/
t public
s hearing to
/ be guided
r by CARP
e Form No. 7.
c
o e) Forwards
m the
m completed
e VOCF/CAC
n F to the
d Provincial
a Agrarian
t Reform
i Office
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n using CARP
s Form No. 8
 (Transmittal Agency/Unit Document
Memo to
PARO). (requirements)

xxx xxx xxx A. Identification and

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

DAR A.O. No. 9, Series of 1990 was amended by DAR A.O. No. 1, Series of least two weeks in advance of
1993. DAR A.O. No. 1, Series of 1993 provided, among others, that:
said notice.
IV. OPERATING PROCEDURES:
A copy of said Notice shall CARP
Steps Responsible Activity Forms/
be posted for at least one Form No. 17 its suitability and productivity;

week on the bulletin board of and jointly prepares the Field

the municipal and barangay Investigation Report (FIR)

halls where the property is and Land Use Map. However,

located. LGU office concerned the field investigation shall

notifies DAR about compliance proceed even if the LO, the

with posting requirements thru representatives of the DENR and

return indorsement on CARP prospective ARBs are not available

Form No. 17. provided, they were given due

6 DARMO Send notice to the LBP, CARP notice of the time and date of

BARC, DENR representatives Form No. 3 investigation to be conducted.

and prospective ARBs of the schedule of the field Similarly, if the LBP representative
investigation
is not available or could not come
to be conducted on the subject
on the scheduled date, the field
property.
investigation shall also be conducted,
7 DARMO With the participation of CARP
after which the duly accomplished
BARC the LO, representatives of Form No. 4
Part I of CARP Form No. 4 shall
LBP the LBP, BARC, DENR Land Use
be forwarded to the LBP
DENR and prospective ARBs, Map
representative for validation. If he agrees
Local Office conducts the investigation on
to the ocular inspection report of DAR,
subject property to identify
he signs the FIR (Part I) and
the landholding, determines
accomplishes Part II thereof. BARC and causes the signing of CARP

In the event that there is a the Application of Purchase Form No. 5

difference or variance between and Farmer's Undertaking

the findings of the DAR and the (APFU).

LBP as to the propriety of 9 DARMO Furnishes a copy of the CARP

covering the land under CARP, duly accomplished FIR to Form No. 4

whether in whole or in part, on the landowner by personal

the issue of suitability to agriculture, delivery with proof of

degree of development or slope, service or registered mail

and on issues affecting idle lands, will return card and posts

the conflict shall be resolved by a copy thereof for at least

a composite team of DAR, LBP, one week on the bulletin

DENR and DA which shall jointly board of the municipal

conduct further investigation and barangay halls where

thereon. The team shall submit its the property is located.

report of findings which shall be LGU office concerned CARP

binding to both DAR and LBP, notifies DAR about Form No. 17

pursuant to Joint Memorandum compliance with posting

Circular of the DAR, LBP, DENR requirement thru return

and DA dated 27 January 1992. endorsement on CARP

8 DARMO Screen prospective ARBs Form No. 17.

 B. Land Survey with return card," informing him that his property is under CARP coverage and
that if he desires to avail of his right of retention, he may choose which area
10 DARMO Conducts perimeter or Perimeter he shall retain. The Notice of Coverage shall also invite the landowner to attend
the field investigation to be scheduled at least two weeks from notice. The field
investigation is for the purpose of identifying the landholding and determining
And/or segregation survey or
its suitability for agriculture and its productivity. A copy of the Notice of
Coverage shall be posted for at least one week on the bulletin board of the
DENR delineating areas covered Segregation municipal and barangay halls where the property is located. The date of the
field investigation shall also be sent by the DAR Municipal Office to
Local Office by OLT, "uncarpable Survey Plan representatives of the LBP, BARC, DENR and prospective farmer
beneficiaries. The field investigation shall be conducted on the date set with
areas such as 18% slope the participation of the landowner and the various representatives. If the
landowner and other representatives are absent, the field investigation shall
and above, unproductive/ proceed, provided they were duly notified thereof. Should there be a variance
between the findings of the DAR and the LBP as to whether the land be placed
under agrarian reform, the land's suitability to agriculture, the degree or
unsuitable to agriculture,
development of the slope, etc., the conflict shall be resolved by a composite
team of the DAR, LBP, DENR and DA which shall jointly conduct further
retention, infrastructure. investigation. The team's findings shall be binding on both DAR and LBP. After
the field investigation, the DAR Municipal Office shall prepare the Field
In case of segregation or Investigation Report and Land Use Map, a copy of which shall be furnished
the landowner "by personal delivery with proof of service or registered mail
subdivision survey, the with return card." Another copy of the Report and Map shall likewise be posted
for at least one week in the municipal or barangay halls where the property is
plan shall be approved located.

by DENR-LMS.
C. Review and Completion
of Documents
11. DARMO Forward VOCF/CACF CARP
to DARPO. Form No. 6
xxx xxx xxx.
DAR A.O. No. 1, Series of 1993, modified the identification process and
increased the number of government agencies involved in the identification
and delineation of the land subject to acquisition. 56 This time, the Notice of
Coverage is sent to the landowner before the conduct of the field investigation
and the sending must comply with specific requirements. Representatives of
the DAR Municipal Office (DARMO) must send the Notice of Coverage to the
landowner by "personal delivery with proof of service, or by registered mail
Clearly then, the notice requirements under the CARL are not confined to the
Notice of Acquisition set forth in Section 16 of the law. They also include the
Notice of Coverage first laid down in DAR A.O. No. 12, Series of 1989 and
subsequently amended in DAR A.O. No. 9, Series of 1990 and DAR A.O. No.
1, Series of 1993. This Notice of Coverage does not merely notify the
landowner that his property shall be placed under CARP and that he is entitled
to exercise his retention right; it also notifies him, pursuant to DAR A.O. No. 9,
Series of 1990, that a public hearing, shall be conducted where he and
representatives of the concerned sectors of society may attend to discuss the
results of the field investigation, the land valuation and other pertinent matters.
Under DAR A.O. No. 1, Series of 1993, the Notice of Coverage also informs
the landowner that a field investigation of his landholding shall be conducted
where he and the other representatives may be present.
B. The Compulsory Acquisition of Haciendas Palico and Banilad
In the case at bar, respondent DAR claims that it, through MARO Leopoldo C.
Lejano, sent a letter of invitation entitled "Invitation to Parties" dated
September 29, 1989 to petitioner corporation, through Jaime Pimentel, the
administrator of Hacienda Palico. 57 The invitation was received on the same
day it was sent as indicated by a signature and the date received at the bottom
left corner of said invitation. With regard to Hacienda Banilad, respondent DAR
claims that Jaime Pimentel, administrator also of Hacienda Banilad, was
notified and sent an invitation to the conference. Pimentel actually attended
the conference on September 21, 1989 and signed the Minutes of the meeting
on behalf of petitioner corporation. 58 The Minutes was also signed by the
representatives of the BARC, the LBP and farmer beneficiaries. 59 No letter of
invitation was sent or conference meeting held with respect to Hacienda
Caylaway because it was subject to a Voluntary Offer to Sell to respondent
DAR. 60
When respondent DAR, through the Municipal Agrarian Reform Officer
(MARO), sent to the various parties the Notice of Coverage and invitation to
the conference, DAR A.O. No. 12, Series of 1989 was already in effect more
than a month earlier. The Operating Procedure in DAR Administrative Order
No. 12 does not specify how notices or letters of invitation shall be sent to the
landowner, the representatives of the BARC, the LBP, the farmer beneficiaries
and other interested parties. The procedure in the sending of these notices is
important to comply with the requisites of due process especially when the
owner, as in this case, is a juridical entity. Petitioner is a domestic
corporation, 61 and therefore, has a personality separate and distinct from its
shareholders, officers and employees.
The Notice of Acquisition in Section 16 of the CARL is required to be sent to
the landowner by "personal delivery or registered mail." Whether the
landowner be a natural or juridical person to whose address the Notice may
be sent by personal delivery or registered mail, the law does not distinguish.
The DAR Administrative Orders also do not distinguish. In the proceedings
before the DAR, the distinction between natural and juridical persons in the
sending of notices may be found in the Revised Rules of Procedure of the DAR
Adjudication Board (DARAB). Service of pleadings before the DARAB is
governed by Section 6, Rule V of the DARAB Revised Rules of Procedure.
Notices and pleadings are served on private domestic corporations or
partnerships in the following manner:
Sec. 6. Service upon Private Domestic Corporation or
Partnership. If the defendant is a corporation organized
under the laws of the Philippines or a partnership duly
registered, service may be made on the president, manager,
secretary, cashier, agent, or any of its directors or partners.
Similarly, the Revised Rules of Court of the Philippines, in Section 13, Rule 14
provides:
Sec. 13. Service upon private domestic corporation or
partnership. If the defendant is a corporation organized
under the laws of the Philippines or a partnership duly
registered, service may be made on the president, manager,
secretary, cashier, agent, or any of its directors.
Summonses, pleadings and notices in cases against a private domestic
corporation before the DARAB and the regular courts are served on the
president, manager, secretary, cashier, agent or any of its directors. These
persons are those through whom the private domestic corporation or
partnership is capable of action. 62
Jaime Pimentel is not the president, manager, secretary, cashier or director of
petitioner corporation. Is he, as administrator of the two
Haciendas, considered an agent of the corporation?
The purpose of all rules for service of process on a corporation is to make it
reasonably certain that the corporation will receive prompt and proper notice
in an action against it. 63 Service must be made on a representative so
integrated with the corporation as to make it a priori supposable that he will
realize his responsibilities and know what he should do with any legal papers
served on him, 64 and bring home to the corporation notice of the filing of the
action. 65 Petitioner's evidence does not show the official duties of Jaime
Pimentel as administrator of petitioner's haciendas. The evidence does not
indicate whether Pimentel's duties is so integrated with the corporation that he
would immediately realize his responsibilities and know what he should do with
any legal papers served on him. At the time the notices were sent and the
preliminary conference conducted, petitioner's principal place of business was
listed in respondent DAR's records as "Soriano Bldg., Plaza Cervantes,
Manila," 66 and "7th Flr. Cacho-Gonzales Bldg., 101 Aguirre St., Makati, Metro
Manila." 67 Pimentel did not hold office at the principal place of business of
petitioner. Neither did he exercise his functions in Plaza Cervantes, Manila nor
in Cacho-Gonzales Bldg., Makati, Metro Manila. He performed his official
functions and actually resided in the haciendas in Nasugbu, Batangas, a place
over two hundred kilometers away from Metro Manila.
Curiously, respondent DAR had information of the address of petitioner's
principal place of business. The Notices of Acquisition over Haciendas Palico
and Banilad were addressed to petitioner at its offices in Manila and Makati.
These Notices were sent barely three to four months after Pimentel was
notified of the preliminary conference. 68Why respondent DAR chose to notify
Pimentel instead of the officers of the corporation was not explained by the
said respondent.
Nevertheless, assuming that Pimentel was an agent of petitioner corporation,
and the notices and letters of invitation were validly served on petitioner
through him, there is no showing that Pimentel himself was duly authorized to
attend the conference meeting with the MARO, BARC and LBP
representatives and farmer beneficiaries for purposes of compulsory
acquisition of petitioner's landholdings. Even respondent DAR's evidence does
not indicate this authority. On the contrary, petitioner claims that it had no
knowledge of the letter-invitation, hence, could not have given Pimentel the
authority to bind it to whatever matters were discussed or agreed upon by the
parties at the preliminary conference or public hearing. Notably, one year after
Pimentel was informed of the preliminary conference, DAR A.O. No. 9, Series
of 1990 was issued and this required that the Notice of Coverage must be sent
"to the landowner concerned or his duly authorized representative." 69
Assuming further that petitioner was duly notified of the CARP coverage of its
haciendas, the areas found actually subject to CARP were not properly
identified before they were taken over by respondent DAR. Respondents insist
that the lands were identified because they are all registered property and the
technical description in their respective titles specifies their metes and bounds.
Respondents admit at the same time, however, that not all areas in the
haciendas were placed under the comprehensive agrarian reform program
invariably by reason of elevation or character or use of the land. 70
The acquisition of the landholdings did not cover the entire expanse of the two
haciendas, but only portions thereof. Hacienda Palico has an area of 1,024
hectares and only 688.7576 hectares were targetted for acquisition. Hacienda
Banilad has an area of 1,050 hectares but only 964.0688 hectares were
subject to CARP. The haciendas are not entirely agricultural lands. In fact, the
various tax declarations over the haciendas describe the landholdings as
"sugarland," and "forest, sugarland, pasture land, horticulture and
woodland." 71
Under Section 16 of the CARL, the sending of the Notice of Acquisition
specifically requires that the land subject to land reform be first identified. The
two haciendas in the instant case cover vast tracts of land. Before Notices of
Acquisition were sent to petitioner, however, the exact areas of the
landholdings were not properly segregated and delineated. Upon receipt of
this notice, therefore, petitioner corporation had no idea which portions of its
estate were subject to compulsory acquisition, which portions it could rightfully
retain, whether these retained portions were compact or contiguous, and
which portions were excluded from CARP coverage. Even respondent DAR's
evidence does not show that petitioner, through its duly authorized
representative, was notified of any ocular inspection and investigation that was
to be conducted by respondent DAR. Neither is there proof that petitioner was
given the opportunity to at least choose and identify its retention area in those
portions to be acquired compulsorily. The right of retention and how this right
is exercised, is guaranteed in Section 6 of the CARL, viz:
Sec. 6. Retention Limits. . . . .
The right to choose the area to be retained, which shall be
compact or contiguous, shall pertain to the
landowner; Provided, however, That in case the area selected
for retention by the landowner is tenanted, the tenant shall
have the option to choose whether to remain therein or be a
beneficiary in the same or another agricultural land with
similar or comparable features. In case the tenant chooses to
remain in the retained area, he shall be considered a
leaseholder and shall lose his right to be a beneficiary under
this Act. In case the tenant chooses to be a beneficiary in
another agricultural land, he loses his right as a leaseholder
to the land retained by the landowner. The tenant must
exercise this option within a period of one (1) year from the
time the landowner manifests his choice of the area for
retention.
Under the law, a landowner may retain not more than five hectares out of the
total area of his agricultural land subject to CARP. The right to choose the area
to be retained, which shall be compact or contiguous, pertains to the
landowner. If the area chosen for retention is tenanted, the tenant shall have
the option to choose whether to remain on the portion or be a beneficiary in
the same or another agricultural land with similar or comparable features.
C. The Voluntary Acquisition of Hacienda Caylaway
Petitioner was also left in the dark with respect to Hacienda Caylaway, which
was the subject of a Voluntary Offer to Sell (VOS). The VOS in the instant case
was made on May 6, 1988, 72 before the effectivity of R.A. 6657 on June 15,
1988. VOS transactions were first governed by DAR Administrative Order No.
19, series of 1989, 73 and under this order, all VOS filed before June 15, 1988
shall be heard and processed in accordance with the procedure provided for
in Executive Order No. 229, thus:
III. All VOS transactions which are now pending before the
DAR and for which no payment has been made shall be
subject to the notice and hearing requirements provided in
Administrative Order No. 12, Series of 1989, dated 26 July
1989, Section II, Subsection A, paragraph 3.
 All VOS filed before 15 June 1988, the date of effectivity of the
CARL, shall be heard and processed in accordance with the
procedure provided for in Executive Order No. 229.
xxx xxx xxx.
Sec. 9 of E.O. 229 provides:
Sec. 9. Voluntary Offer to Sell. The government shall
purchase all agricultural lands it deems productive and
suitable to farmer cultivation voluntarily offered for sale to it at
a valuation determined in accordance with Section 6. Such
transaction shall be exempt from the payment of capital gains
tax and other taxes and fees.
Executive Order 229 does not contain the procedure for the identification of
private land as set forth in DAR A.O. No. 12, Series of 1989. Section 5 of E.O.
229 merely reiterates the procedure of acquisition in Section 16, R.A. 6657. In
other words, the E.O. is silent as to the procedure for the identification of the
land, the notice of coverage and the preliminary conference with the
landowner, representatives of the BARC, the LBP and farmer beneficiaries.
Does this mean that these requirements may be dispensed with regard to VOS
filed before June 15, 1988? The answer is no.
First of all, the same E.O. 229, like Section 16 of the CARL, requires that the
land, landowner and beneficiaries of the land subject to agrarian reform
be identified before the notice of acquisition should be issued. 74 Hacienda
Caylaway was voluntarily offered for sale in 1989. The Hacienda has a total
area of 867.4571 hectares and is covered by four (4) titles. In two separate
Resolutions both dated January 12, 1989, respondent DAR, through the
Regional Director, formally accepted the VOS over the two of these four
titles. 75 The land covered by two titles has an area of 855.5257 hectares, but
only 648.8544 hectares thereof fell within the coverage of R.A.
6657. 76 Petitioner claims it does not know where these portions are located.
Respondent DAR, on the other hand, avers that surveys on the land covered
by the four titles were conducted in 1989, and that petitioner, as landowner,
was not denied participation therein, The results of the survey and the land
valuation summary report, however, do not indicate whether notices to attend
the same were actually sent to and received by petitioner or its duly authorized
representative. 77 To reiterate, Executive Order No. 229 does not lay down the
operating procedure, much less the notice requirements, before the VOS is
accepted by respondent DAR. Notice to the landowner, however, cannot be
dispensed with. It is part of administrative due process and is an essential
requisite to enable the landowner himself to exercise, at the very least, his right
of retention guaranteed under the CARL.
III. The Conversion of the three Haciendas.
It is petitioner's claim that the three haciendas are not subject to agrarian
reform because they have been declared for tourism, not agricultural
purposes. 78 In 1975, then President Marcos issued Proclamation No. 1520
declaring the municipality of Nasugbu, Batangas a tourist zone. Lands in
Nasugbu, including the subject haciendas, were allegedly reclassified as non-
agricultural 13 years before the effectivity of R. A. No. 6657. 79 In 1993, the
Regional Director for Region IV of the Department of Agriculture certified that
the haciendas are not feasible and sound for agricultural development. 80 On
March 20, 1992, pursuant to Proclamation No. 1520, the Sangguniang Bayan
of Nasugbu, Batangas adopted Resolution No. 19 reclassifying certain areas
of Nasugbu as non-agricultural. 81 This Resolution approved Municipal
Ordinance No. 19, Series of 1992, the Revised Zoning Ordinance of
Nasugbu 82 which zoning ordinance was based on a Land Use Plan for
Planning Areas for New Development allegedly prepared by the University of
the Philippines. 83 Resolution No. 19 of the Sangguniang Bayan was approved
by the Sangguniang Panlalawigan of Batangas on March 8, 1993. 84
Petitioner claims that proclamation No. 1520 was also upheld by respondent
DAR in 1991 when it approved conversion of 1,827 hectares in Nasugbu into
a tourist area known as the Batulao Resort Complex, and 13.52 hectares in
Barangay Caylaway as within the potential tourist belt. 85 Petitioner present
evidence before us that these areas are adjacent to the haciendas subject of
this petition, hence, the haciendas should likewise be converted. Petitioner
urges this Court to take cognizance of the conversion proceedings and rule
accordingly. 6
We do not agree. Respondent DAR's failure to observe due process in the
acquisition of petitioner's landholdings does not ipso facto give this Court the
power to adjudicate over petitioner's application for conversion of its haciendas
from agricultural to non-agricultural. The agency charged with the mandate of
approving or disapproving applications for conversion is the DAR.
At the time petitioner filed its application for conversion, the Rules of Procedure
governing the processing and approval of applications for land use conversion
was the DAR A.O. No. 2, Series of 1990. Under this A.O., the application for
conversion is filed with the MARO where the property is located. The MARO
reviews the application and its supporting documents and conducts field
investigation and ocular inspection of the property. The findings of the MARO
are subject to review and evaluation by the Provincial Agrarian Reform Officer
(PARO). The PARO may conduct further field investigation and submit a
supplemental report together with his recommendation to the Regional
Agrarian Reform Officer (RARO) who shall review the same. For lands less
than five hectares, the RARO shall approve or disapprove applications for
conversion. For lands exceeding five hectares, the RARO shall evaluate the
PARO Report and forward the records and his report to the Undersecretary for
Legal Affairs. Applications over areas exceeding fifty hectares are approved or
disapproved by the Secretary of Agrarian Reform.
The DAR's mandate over applications for conversion was first laid down in
Section 4 (j) and Section 5 (l) of Executive Order No. 129-A, Series of 1987
and reiterated in the CARL and Memorandum Circular No. 54, Series of 1993
of the Office of the President. The DAR's jurisdiction over applications for
conversion is provided as follows:
A. The Department of Agrarian Reform (DAR)
is mandated to "approve or disapprove
applications for conversion, restructuring or
readjustment of agricultural lands into non-
agricultural uses," pursuant to Section 4 (j) of
Executive Order No. 129-A, Series of 1987.
B. Sec. 5 (l) of E.O. 129-A, Series of 1987,
vests in the DAR, exclusive authority to
approve or disapprove applications for
conversion of agricultural lands for
residential, commercial, industrial and other
land uses.
C. Sec. 65 of R.A. No. 6657, otherwise known
as the Comprehensive Agrarian Reform Law
of 1988, likewise empowers the DAR to
authorize under certain conditions, the
conversion of agricultural lands.
D. Sec. 4 of Memorandum Circular No. 54,
Series of 1993 of the Office of the President,
provides that "action on applications for land
use conversion on individual landholdings
shall remain as the responsibility of the DAR,
which shall utilize as its primary reference,
documents on the comprehensive land use
plans and accompanying ordinances passed
upon and approved by the local government
units concerned, together with the National
Land Use Policy, pursuant to R.A. No. 6657
and E.O. No. 129-A. 87
Applications for conversion were initially governed by DAR A.O. No. 1, Series
of 1990 entitled "Revised Rules and Regulations Governing Conversion of
Private Agricultural Lands and Non-Agricultural Uses," and DAR A.O. No. 2,
Series of 1990 entitled "Rules of Procedure Governing the Processing and
Approval of Applications for Land Use Conversion." These A.O.'s and other
implementing guidelines, including Presidential issuances and national
policies related to land use conversion have been consolidated in DAR A.O.
No. 07, Series of 1997. Under this recent issuance, the guiding principle in
land use conversion is:
to preserve prime agricultural lands for food production while,
at the same time, recognizing the need of the other sectors of
society (housing, industry and commerce) for land, when
coinciding with the objectives of the Comprehensive Agrarian
Reform Law to promote social justice, industrialization and the
optimum use of land as a national resource for public
welfare. 88
"Land Use" refers to the manner of utilization of land, including its allocation,
development and management. "Land Use Conversion" refers to the act or
process of changing the current use of a piece of agricultural land into some
other use as approved by the DAR. 89 The conversion of agricultural land to
uses other than agricultural requires field investigation and conferences with
the occupants of the land. They involve factual findings and highly technical
matters within the special training and expertise of the DAR. DAR A.O. No. 7,
Series of 1997 lays down with specificity how the DAR must go about its task.
This time, the field investigation is not conducted by the MARO but by a special
task force, known as the Center for Land Use Policy Planning and
Implementation (CLUPPI-DAR Central Office). The procedure is that once an
application for conversion is filed, the CLUPPI prepares the Notice of Posting.
The MARO only posts the notice and thereafter issues a certificate to the fact
of posting. The CLUPPI conducts the field investigation and dialogues with the
applicants and the farmer beneficiaries to ascertain the information necessary
for the processing of the application. The Chairman of the CLUPPI deliberates
on the merits of the investigation report and recommends the appropriate
action. This recommendation is transmitted to the Regional Director, thru the
Undersecretary, or Secretary of Agrarian Reform. Applications involving more
than fifty hectares are approved or disapproved by the Secretary. The
procedure does not end with the Secretary, however. The Order provides that
the decision of the Secretary may be appealed to the Office of the President
or the Court of Appeals, as the case may be, viz:
 Appeal from the decision of the Undersecretary shall be made
to the Secretary, and from the Secretary to the Office of the
President or the Court of Appeals as the case may be. The
mode of appeal/motion for reconsideration, and the appeal
fee, from Undersecretary to the Office of the Secretary shall
be the same as that of the Regional Director to the Office of
the Secretary. 90
Indeed, the doctrine of primary jurisdiction does not warrant a court to arrogate
unto itself authority to resolve a controversy the jurisdiction over which is
initially lodged with an administrative body of special
competence. 91Respondent DAR is in a better position to resolve petitioner's
application for conversion, being primarily the agency possessing the
necessary expertise on the matter. The power to determine whether
Haciendas Palico, Banilad and Caylaway are non-agricultural, hence, exempt
from the coverage of the CARL lies with the DAR, not with this Court.
Finally, we stress that the failure of respondent DAR to comply with the
requisites of due process in the acquisition proceedings does not give this
Court the power to nullify the CLOA's already issued to the farmer
beneficiaries. To assume the power is to short-circuit the administrative
process, which has yet to run its regular course. Respondent DAR must be
given the chance to correct its procedural lapses in the acquisition
proceedings. In Hacienda Palico alone, CLOA's were issued to 177 farmer
beneficiaries in 1993. 92 Since then until the present, these farmers have been
cultivating their lands. 93 It goes against the basic precepts of justice, fairness
and equity to deprive these people, through no fault of their own, of the land
they till. Anyhow, the farmer beneficiaries hold the property in trust for the
rightful owner of the land.
IN VIEW WHEREOF, the petition is granted in part and the acquisition
proceedings over the three haciendas are nullified for respondent DAR's
failure to observe due process therein. In accordance with the guidelines set
forth in this decision and the applicable administrative procedure, the case is
hereby remanded to respondent DAR for proper acquisition proceedings and
determination of petitioner's application for conversion.
SO ORDERED.
Davide, Jr., C.J., Bellosillo, Vitug, Mendoza, Panganiban, Purisima, Buena,
Gonzaga-Reyes and De Leon, Jr., JJ., concur.
Melo, J., please see concurring and dissenting opinion.
Ynares-Santiago, J., concurring and dissenting opinion.
Kapunan, J., I join in the concurring and dissenting opinion of Justice C. Y.
Santiago.
Quisumbing, J., I join the in the concurring and dissenting opinion of J.
Santiago.
Pardo, J., I join the concurring and dissenting opinion of J. Santiago.
Separate Opinions
MELO, J., concurring and dissenting opinion;
I concur in the ponencia of Justice Ynares-Santiago, broad and exhaustive as
it is in its treatment of the issues. However, I would like to call attention to two
or three points which I believe are deserving of special emphasis.
The apparent incongruity or shortcoming in the petition is DAR's disregard of
a law which settled the non-agricultural nature of the property as early as 1975.
Related to this are the inexplicable contradictions between DAR's own official
issuances and its challenged actuations in this particular case.
Presidential Proclamation No. 1520 has the force and effect of law unless
repealed. This law declared Nasugbu, Batangas as a tourist zone.
Considering the new and pioneering stage of the tourist industry in 1975, it can
safely be assumed that Proclamation 1520 was the result of empirical study
and careful determination, not political or extraneous pressures. It cannot be
disregarded by DAR or any other department of Government.
In Province of Camarines Sur, et al. vs. Court of Appeals, et al. (222 SCRA
173, 182 [1993]), we ruled that local governments need not obtain the approval
of DAR to reclassify lands from agricultural to non-agricultural use. In the
present case, more than the exercise of that power, the local governments
were merely putting into effect a law when they enacted the zoning ordinances
in question.
Any doubts as to the factual correctness of the zoning reclassifications are
answered by the February 2, 1993 certification of the Department of
Agriculture that the subject landed estates are not feasible and economically
viable for agriculture, based on the examination of their slope, terrain, depth,
irrigability, fertility, acidity, and erosion considerations.
I agree with the ponencia's rejection of respondent's argument that agriculture
is not incompatible and may be enforced in an area declared by law as a tourist
zone. Agriculture may contribute to the scenic views and variety of countryside
profiles but the issue in this case is not the beauty of ricefields, cornfields, or
coconut groves. May land found to be non-agricultural and declared as a
tourist zone by law, be withheld from the owner's efforts to develop it as such?
There are also plots of land within Clark Field and other commercial-industrial
zones capable of cultivation but this does not subject them to compulsory land
reform. It is the best use of the land for tourist purposes, free trade zones,
export processing or the function to which it is dedicated that is the determining
factor. Any cultivation is temporary and voluntary.
The other point I wish to emphasize is DAR's failure to follow its own
administrative orders and regulations in this case.
The contradictions between DAR administrative orders and its actions in the
present case may be summarized:
1. DAR Administrative Order No. 6, Series of 1994, subscribes to Department
of Justice Opinion No. 44, Series of 1990 that lands classified as non-
agricultural prior to June 15, 1988 when the CARP Law was passed are
exempt from its coverage. By what right can DAR now ignore its own
Guidelines in this case of land declared as forming a tourism zone since 1975?
2. DAR Order dated January 22, 1991 granted the conversion of the adjacent
and contiguous property of Group Developers and Financiers, Inc. (GDFI) into
the Batulao Tourist Resort. Why should DAR have a contradictory stance in
the adjoining property of Roxas and Co., Inc. found to be similar in nature and
declared as such?
3. DAR Exemption Order, Case No. H-9999-050-97 dated May 17, 1999 only
recently exempted 13.5 hectares of petitioner's property also found in
Caylaway together, and similarly situated, with the bigger parcel (Hacienda
Caylaway) subject of this petition from CARL coverage. To that extent, it
admits that its earlier blanket objections are unfounded.
4. DAR Administrative Order No. 3, Series of 1996 identifies the land outside
of CARP coverage as:
(a) Land found by DAR as no longer suitable
for agriculture and which cannot be given
appropriate valuation by the Land Bank;
(b) Land where DAR has already issued a
conversion order;
(c) Land determined as exempt under DOJ
Opinions Nos. 44 and 181; or
(d) Land declared for non-agricultural use by
Presidential Proclamation.
It is readily apparent that the land in this case falls under all the above
categories except the second one. DAR is acting contrary to its own rules and
regulations.
I should add that DAR has affirmed in a Rejoinder (August 20, 1999) the
issuance and effectivity of the above administrative orders.
DAR Administrative Order No. 3, Series of 1996, Paragraph 2 of Part II, Part
III and Part IV outlines the procedure for reconveyance of land where CLOAs
have been improperly issued. The procedure is administrative, detailed,
simple, and speedy. Reconveyance is implemented by DAR which treats the
procedure as "enshrined . . . in Section 50 of Republic Act No. 6657"
(Respondent's Rejoinder). Administrative Order No. 3, Series of 1996 shows
there are no impediments to administrative or judicial cancellations of CLOA's
improperly issued over exempt property. Petitioner further submits, and this
respondent does not refute, that 25 CLOAs covering 3,338 hectares of land
owned by the Manila Southcoast Development Corporation also found in
Nasugbu, Batangas, have been cancelled on similar grounds as those in the
case at bar.
The CLOAs in the instant case were issued over land declared as non-
agricultural by a presidential proclamation and confirmed as such by actions
of the Department of Agriculture and the local government units concerned.
The CLOAs were issued over adjoining lands similarly situated and of like
nature as those declared by DAR as exempt from CARP coverage. The
CLOAs were surprisingly issued over property which were the subject of
pending cases still undecided by DAR. There should be no question over the
CLOAs having been improperly issued, for which reason, their cancellation is
warranted.
YNARES-SANTIAGO, J., concurring and dissenting opinion;
I concur in the basic premises of the majority opinion. However, I dissent in its
final conclusions and the dispositive portion.
With all due respect, the majority opinion centers on procedure but
unfortunately ignores the substantive merits which this procedure should
unavoidably sustain.
The assailed decision of the Court of Appeals had only one basic reason for
its denial of the petition, i.e., the application of the doctrine of non-exhaustion
of administrative remedies. This Court's majority ponencia correctly reverses
the Court of Appeals on this issue. The ponencia now states that the issuance
of CLOA's to farmer beneficiaries deprived petitioner Roxas & Co. of its
property without just compensation. It rules that the acts of the Department of
Agrarian Reform are patently illegal. It concludes that petitioner's rights were
violated, and thus to require it to exhaust administrative remedies before DAR
was not a plain, speedy, and adequate remedy. Correctly, petitioner sought
immediate redress from the Court of Appeals to this Court.
However, I respectfully dissent from the judgment which remands the case to
the DAR. If the acts of DAR are patently illegal and the rights of Roxas & Co.
violated, the wrong decisions of DAR should be reversed and set aside. It
follows that the fruits of the wrongful acts, in this case the illegally issued
CLOAs, must be declared null and void.
Petitioner Roxas & Co. Inc. is the registered owner of three (3) haciendas
located in Nasugbu, Batangas, namely: Hacienda Palico comprising of an area
of 1,024 hectares more or less, covered by Transfer Certificate of Title No. 985
(Petition, Annex "G"; Rollo, p. 203); Hacienda Banilad comprising an area of
1,050 hectares and covered by TCT No. 924 (Petition, Annex "I"; Rollo, p.
205); and Hacienda Caylaway comprising an area of 867.4571 hectares and
covered by TCT Nos. T-44655 (Petition, Annex "O"; Rollo, p. 216), T-44662
(Petition, Annex "P"; Rollo, p. 217), T-44663 (Petition, Annex "Q"; Rollo, p.
210) and T-44664 (Petition, Annex "R"; Rollo, p. 221).
Sometime in 1992 and 1993, petitioner filed applications for conversion with
DAR. Instead of either denying or approving the applications, DAR ignored and
sat on them for seven (7) years. In the meantime and in acts of deceptive lip-
service, DAR excluded some small and scattered lots in Palico and Caylaway
from CARP coverage. The majority of the properties were parceled out to
alleged farmer-beneficiaries, one at a time, even as petitioner's applications
were pending and unacted upon.
The majority ponencia cites Section 16 of Republic Act No. 6657 on the
procedure for acquisition of private lands.
The ponencia cites the detailed procedures found in DAR Administrative Order
No. 12, Series of 1989 for the identification of the land to be acquired. DAR did
not follow its own prescribed procedures. There was no valid issuance of a
Notice of Coverage and a Notice of Acquisition.
The procedure on the evaluation and determination of land valuation, the
duties of the Municipal Agrarian Reform Officer (MARO), the Barangay
Agrarian Reform Committee (BARC), Provincial Agrarian Reform Officer
(PARO) and the Bureau of Land Acquisition and Distribution (BLAD), the
documentation and reports on the step-by-step process, the screening of
prospective Agrarian Reform Beneficiaries (ARBs), the land survey and
segregation survey plan, and other mandatory procedures were not followed.
The landowner was not properly informed of anything going on.
Equally important, there was no payment of just compensation. I agree with
the ponencia that due process was not observed in the taking of petitioner's
properties. Since the DAR did not validly acquire ownership over the lands,
there was no acquired property to validly convey to any beneficiary. The
CLOAs were null and void from the start.
Petitioner states that the notices of acquisition were sent by respondents by
ordinary mail only, thereby disregarding the procedural requirement that
notices be served personally or by registered mail. This is not disputed by
respondents, but they allege that petitioner changed its address without
notifying the DAR. Notably, the procedure prescribed speaks of only two
modes of service of notices of acquisition personal service and service by
registered mail. The non-inclusion of other modes of service can only mean
that the legislature intentionally omitted them. In other words, service of a
notice of acquisition other than personally or by registered mail is not
valid. Casus omissus pro omisso habendus est. The reason is obvious.
Personal service and service by registered mail are methods that ensure the
receipt by the addressee, whereas service by ordinary mail affords no reliable
proof of receipt.
Since it governs the extraordinary method of expropriating private property,
the CARL should be strictly construed. Consequently, faithful compliance with
its provisions, especially those which relate to the procedure for acquisition of
expropriated lands, should be observed. Therefore, the service by respondent
DAR of the notices of acquisition to petitioner by ordinary mail, not being in
conformity with the mandate of R.A. 6657, is invalid and ineffective.
With more reason, the compulsory acquisition of portions of Hacienda Palico,
for which no notices of acquisition were issued by the DAR, should be declared
invalid.
The entire ponencia, save for the last six (6) pages, deals with the mandatory
procedures promulgated by law and DAR and how they have not been
complied with. There can be no debate over the procedures and their violation.
However, I respectfully dissent in the conclusions reached in the last six pages.
Inspite of all the violations, the deprivation of petitioner's rights, the non-
payment of just compensation, and the consequent nullity of the CLOAs, the
Court is remanding the case to the DAR for it to act on the petitioner's pending
applications for conversion which have been unacted upon for seven (7) years.
Petitioner had applications for conversion pending with DAR. Instead of
deciding them one way or the other, DAR sat on the applications for seven (7)
years. At that same time it rendered the applications inutile by distributing
CLOAs to alleged tenants. This action is even worse than a denial of the
applications because DAR had effectively denied the application against the
applicant without rendering a formal decision. This kind of action preempted
any other kind of decision except denial. Formal denial was even unnecessary.
In the case of Hacienda Palico, the application was in fact denied on November
8, 1993.
There are indisputable and established factors which call for a more definite
and clearer judgment.
The basic issue in this case is whether or not the disputed property is
agricultural in nature and covered by CARP. That petitioner's lands are non-
agricultural in character is clearly shown by the evidence presented by
petitioner, all of which were not disputed by respondents. The disputed
property is definitely not subject to CARP.
The nature of the land as non-agricultural has been resolved by the agencies
with primary jurisdiction and competence to decide the issue, namely (1) a
Presidential Proclamation in 1975; (2) Certifications from the Department of
Agriculture; (3) a Zoning Ordinance of the Municipality of Nasugbu, approved
by the Province of Batangas; and (4) by clear inference and admissions,
Administrative Orders and Guidelines promulgated by DAR itself.
The records show that on November 20, 1975 even before the enactment of
the CARP law, the Municipality of Nasugbu, Batangas was declared a "tourist
zone" in the exercise of lawmaking power by then President Ferdinand E.
Marcos under Proclamation No. 1520 (Rollo, pp. 122-123). This Presidential
Proclamation is indubitably part of the law of the land.
On 20 March 1992 the Sangguniang Bayan of Nasugbu promulgated its
Resolution No. 19, a zonification ordinance (Rollo, pp. 124-200), pursuant to
its powers under Republic Act No. 7160, i.e., the Local Government Code of
1991. The municipal ordinance was approved by the Sangguniang
Panlalawigan of Batangas (Rollo, p. 201). Under this enactment, portions of
the petitioner's properties within the municipality were re-zonified as intended
and appropriate for non-agricultural uses. These two issuances, together with
Proclamation 1520, should be sufficient to determine the nature of the land as
non-agricultural. But there is more.
The records also contain a certification dated March 1, 1993 from the Director
of Region IV of the Department of Agriculture that the disputed lands are no
longer economically feasible and sound for agricultural purposes (Rollo, p.
213).
DAR itself impliedly accepted and determined that the municipality of Nasugbu
is non-agricultural when it affirmed the force and effect of Presidential
Proclamation 1520. In an Order dated January 22, 1991, DAR granted the
conversion of the adjoining and contiguous landholdings owned by Group
Developer and Financiers, Inc. in Nasugbu pursuant to the Presidential
Proclamation. The property alongside the disputed properties is now known as
"Batulao Resort Complex". As will be shown later, the conversion of various
other properties in Nasugbu has been ordered by DAR, including a property
disputed in this petition, Hacienda Caylaway.
Inspite of all the above, the Court of Appeals concluded that the lands
comprising petitioner's haciendas are agricultural, citing, among other things,
petitioner's acts of voluntarily offering Hacienda Caylaway for sale and
applying for conversion its lands from agricultural to non-agricultural.
Respondents, on the other hand, did not only ignore the administrative and
executive decisions. It also contended that the subject land should be deemed
agricultural because it is neither residential, commercial, industrial or timber.
The character of a parcel of land, however, is not determined merely by a
process of elimination. The actual use which the land is capable of should be
the primordial factor.
RA 6657 explicitly limits its coverage thus:
The Comprehensive Agrarian Reform Law of 1998 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 a
agriculture regardless of the agricultural products raised or
that can be raised thereon." (RA 6657, Sec. 4; emphasis
provided)
In Luz Farms v. Secretary of the Department of Agrarian Reform and Natalia
Realty, Inc. v. Department of Agrarian Reform, this Court had occasion to rule
that agricultural lands are only those which are arable and suitable.
It is at once noticeable that the common factor that classifies land use as
agricultural, whether it be public or private land, is its suitability for agriculture.
In this connection, RA 6657 defines "agriculture" 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. (RA 6657, sec. 3[b])
In the case at bar, petitioner has presented certifications issued by the
Department of Agriculture to the effect that Haciendas Palico, Banilad and
Caylaway are not feasible and economically viable for agricultural
development due to marginal productivity of the soil, based on an examination
of their slope, terrain, depth, irrigability, fertility, acidity, and erosion factors
(Petition, Annex "L", Rollo, p. 213; Annex "U", Rollo, p. 228). This finding
should be accorded respect considering that it came from competent authority,
said Department being the agency possessed with the necessary expertise to
determine suitability of lands to agriculture. The DAR Order dated January 22,
1991 issued by respondent itself stated that the adjacent land now known as
the Batulao Resort Complex is hilly, mountainous, and with long and narrow
ridges and deep gorges. No permanent sites are planted. Cultivation is
by kaingin method. This confirms the findings of the Department of Agriculture.
Parenthetically, the foregoing finding of the Department of Agriculture also
explains the validity of the reclassification of petitioner's lands by the
Sangguniang Bayan of Nasugbu, Batangas, pursuant to Section 20 of the
Local Government Code of 1991. It shows that the condition imposed by
respondent Secretary of Agrarian Reform on petitioner for withdrawing its
voluntary offer to sell Hacienda Caylaway, i.e., that the soil be unsuitable for
agriculture, has been adequately met. In fact, the DAR in its Order in Case No.
A-9999-050-97, involving a piece of land also owned by petitioner and likewise
located in Caylaway, exempted it from the coverage of CARL (Order dated
May 17, 1999; Annex "D" of Petitioner's Manifestation), on these grounds.
Furthermore, and perhaps more importantly, the subject lands are within an
area declared in 1975 by Presidential Proclamation No. 1520 to be part of a
tourist zone. This determination was made when the tourism prospects of the
area were still for the future. The studies which led to the land classification
were relatively freer from pressures and, therefore, more objective and open-
minded. Respondent, however, contends that agriculture is not incompatible
with the lands' being part of a tourist zone since "agricultural production, by
itself, is a natural asset and, if properly set, can command tremendous
aesthetic value in the form of scenic views and variety of countryside profiles."
(Comment, Rollo, 579).
The contention is untenable. Tourist attractions are not limited to scenic
landscapes and lush greeneries. Verily, tourism is enhanced by structures and
facilities such as hotels, resorts, rest houses, sports clubs and golf courses, all
of which bind the land and render it unavailable for cultivation. As aptly
described by petitioner:
The development of resorts, golf courses, and commercial
centers is inconsistent with agricultural development. True,
there can be limited agricultural production within the context
of tourism development. However, such small scale farming
activities will be dictated by, and subordinate to the needs or
tourism development. In fact, agricultural use of land within
Nasugbu may cease entirely if deemed necessary by the
Department of Tourism (Reply, Rollo, p. 400).
The lands subject hereof, therefore, are non-agricultural. Hence, the voluntary
offer to sell Hacienda Caylaway should not be deemed an admission that the
land is agricultural. Rather, the offer was made by petitioner in good faith,
believing at the time that the land could still be developed for agricultural
production. Notably, the offer to sell was made as early as May 6, 1988, before
the soil thereon was found by the Department of Agriculture to be unsuitable
for agricultural development (the Certifications were issued on 2 February
1993 and 1 March 1993). Petitioner's withdrawal of its voluntary offer to sell,
therefore, was not borne out of a whimsical or capricious change of heart.
Quite simply, the land turned out to be outside of the coverage of the CARL,
which by express provision of RA 6657, Section 4, affects only public and
private agricultural lands. As earlier stated, only on May 17, 1999, DAR
Secretary Horacio Morales, Jr. approved the application for a lot in Caylaway,
also owned by petitioner, and confirmed the seven (7) documentary evidences
proving the Caylaway area to be non-agricultural (DAR Order dated 17 May
1999, in Case No. A-9999-050-97, Annex "D" Manifestation).
The DAR itself has issued administrative circulars governing lands which are
outside of CARP and may not be subjected to land reform. Administrative
Order No. 3, Series of 1996 declares in its policy statement what landholdings
are outside the coverage of CARP. The AO is explicit in providing that such
non-covered properties shall be reconveyed to the original transferors or
owners.
These non-covered lands are:
a. Land, or portions thereof, found to be no
longer suitable for agriculture and, therefore,
could not be given appropriate valuation by
the Land Bank of the Philippines (LBP);
b. Those were a Conversion Order has
already been issued by the DAR allowing the
use of the landholding other than for
agricultural purposes in accordance with
Section 65 of R.A. No. 6657 and
Administrative Order No. 12, Series of 1994;
c. Property determined to be exempted from
CARP coverage pursuant to Department of
Justice Opinion Nos. 44 and 181; or
d. Where a Presidential Proclamation has
been issued declaring the subject property for
certain uses other than agricultural. (Annex
"F", Manifestation dated July 23, 1999)
The properties subject of this Petition are covered by the first, third, and fourth
categories of the Administrative Order. The DAR has disregarded its own
issuances which implement the law.
To make the picture clearer, I would like to summarize the law, regulations,
ordinances, and official acts which show beyond question that the disputed
property is non-agricultural, namely:
(a) The Law. Proclamation 1520 dated November 20, 1975 is
part of the law of the land. It declares the area in and around
Nasugbu, Batangas, as a Tourist Zone. It has not been
repealed, and has in fact been used by DAR to justify
conversion of other contiguous and nearby properties of other
parties.
(b) Ordinances of Local Governments. Zoning ordinance of
the Sangguniang Bayan of Nasugbu, affirmed by the
Sangguniang Panlalawigan of Batangas, expressly defines
the property as tourist, not agricultural. The power to classify
its territory is given by law to the local governments.
(c) Certification of the Department of Agriculture that the
property is not suitable and viable for agriculture. The factual
nature of the land, its marginal productivity and non-economic
feasibility for cultivation, are described in detail.
(d) Acts of DAR itself which approved conversion of
contiguous or adjacent land into the Batulao Resorts
Complex. DAR described at length the non-agricultural nature
of Batulao and of portion of the disputed property, particularly
Hacienda Caylaway.
(e) DAR Circulars and Regulations. DAR Administrative Order
No. 6, Series of 1994 subscribes to the Department of Justice
opinion that the lands classified as non-agricultural before the
CARP Law, June 15, 1988, are exempt from CARP. DAR
Order dated January 22, 1991 led to the Batulao Tourist Area.
DAR Order in Case No. H-9999-050-97, May 17, 1999,
exempted 13.5 hectares of Caylaway, similarly situated and
of the same nature as Batulao, from coverage. DAR
Administrative Order No. 3, Series of 1996, if followed, would
clearly exclude subject property from coverage.
As earlier shown, DAR has, in this case, violated its own circulars, rules and
regulations.
In addition to the DAR circulars and orders which DAR itself has not observed,
the petitioner has submitted a municipal map of Nasugbu, Batangas (Annex
"E", Manifestation dated July 23, 1999). The geographical location of Palico,
Banilad, and Caylaway in relation to the GDFI property, now Batulao Tourist
Resort, shows that the properties subject of this case are equally, if not more
so, appropriate for conversion as the GDFI resort.
Petitioner's application for the conversion of its lands from agricultural to non-
agricultural was meant to stop the DAR from proceeding with the compulsory
acquisition of the lands and to seek a clear and authoritative declaration that
said lands are outside of the coverage of the CARL and can not be subjected
to agrarian reform.
Petitioner assails respondent's refusal to convert its lands to non-agricultural
use and to recognize Presidential Proclamation No. 1520, stating that
respondent DAR has not been consistent in its treatment of applications of this
nature. It points out that in the other case involving adjoining lands in Nasugbu,
Batangas, respondent DAR ordered the conversion of the lands upon
application of Group Developers and Financiers, Inc. Respondent DAR, in that
case, issued an Order dated January 22, 1991 denying the motion for
reconsideration filed by the farmers thereon and finding that:
In fine, on November 27, 1975, or before the movants filed
their instant motion for reconsideration, then President
Ferdinand E. Marcos issued Proclamation No. 1520, declaring
the municipalities of Maragondon and Ternate in the province
of Cavite and the municipality of Nasugbu in the province of
Batangas as tourist zone. Precisely, the landholdings in
question are included in such proclamation. Up to now, this
office is not aware that said issuance has been repealed or
amended (Petition, Annex "W"; Rollo, p. 238).
The DAR Orders submitted by petitioner, and admitted by DAR in its Rejoinder
(Rejoinder of DAR dated August 20, 1999), show that DAR has been
inconsistent to the extent of being arbitrary.
Apart from the DAR Orders approving the conversion of the adjoining property
now called Batulao Resort Complex and the DAR Order declaring parcels of
the Caylaway property as not covered by CARL, a major Administrative Order
of DAR may also be mentioned.
The Department of Justice in DOJ Opinion No. 44 dated March 16, 1990
(Annex "A" of Petitioner's Manifestation) stated that DAR was given authority
to approve land conversions only after June 15, 1988 when RA 6657, the
CARP Law, became effective. Following the DOJ Opinion, DAR issued its AO
No. 06, Series of 1994 providing for the Guidelines on Exemption Orders
(Annex "B", Id.). The DAR Guidelines state that lands already classified as
non-agricultural before the enactment of CARL are exempt from its coverage.
Significantly, the disputed properties in this case were classified as tourist zone
by no less than a Presidential Proclamation as early as 1975, long before 1988.
The above, petitioner maintains, constitute unequal protection of the laws.
Indeed, the Constitution guarantees that "(n)o person shall be deprived of life,
liberty or property without due process of law, nor shall any person be denied
the equal protection of the laws" (Constitution, Art. III, Sec. 1). Respondent
DAR, therefore, has no alternative but to abide by the declaration in
Presidential Proclamation 1520, just as it did in the case of Group Developers
and Financiers, Inc., and to treat petitioners' properties in the same way it did
the lands of Group Developers, i.e., as part of a tourist zone not suitable for
agriculture.
On the issue of non-payment of just compensation which results in a taking of
property in violation of the Constitution, petitioner argues that the opening of a
trust account in its favor did not operate as payment of the compensation within
the meaning of Section 16 (e) of RA 6657. In Land Bank of the Philippines
v. Court of Appeals (249 SCRA 149, at 157 [1995]), this Court struck down as
null and void DAR Administrative Circular No. 9, Series of 1990, which
provides for the opening of trust accounts in lieu of the deposit in cash or in
bonds contemplated in Section 16 (e) of RA 6657.
It is very explicit therefrom (Section 16 [e]) that the deposit
must be made only in "cash" or in "LBP bonds." Nowhere does
it appear nor can it be inferred that the deposit can be made
in any other form. If it were the intention to include a "trust
account" among the valid modes of deposit, that should have
been made express, or at least, qualifying words ought to
have appeared from which it can be fairly deduced that a "trust
account" is allowed. In sum, there is no ambiguity in Section
16(e) of RA 6657 to warrant an expanded construction of the
term "deposit."
xxx xxx xxx
In the present suit, the DAR clearly overstepped the limits of
its powers to enact rules and regulations when it issued
Administrative Circular No. 9. There is no basis in allowing the
opening of a trust account in behalf of the landowner as
compensation for his property because, as heretofore
discussed, section 16(e) of RA 6657 is very specific that the
deposit must be made only in "cash" or in "LBP bonds." In the
same vein, petitioners cannot invoke LRA Circular Nos. 29,
29-A and 54 because these implementing regulations cannot
outweigh the clear provision of the law. Respondent court
 therefore did not commit any error in striking down
Administrative Circular No. 9 for being null and void.
There being no valid payment of just compensation, title to petitioner's
landholdings cannot be validly transferred to the Government. A close scrutiny
of the procedure laid down in Section 16 of RA 6657 shows the clear legislative
intent that there must first be payment of the fair value of the land subject to
agrarian reform, either directly to the affected landowner or by deposit of cash
or LBP bonds in the DAR-designated bank, before the DAR can take
possession of the land and request the register of deeds to issue a transfer
certificate of title in the name of the Republic of the Philippines. This is only
proper inasmuch as title to private property can only be acquired by the
government after payment of just compensation In Association of Small
Landowners in the Philippines v. Secretary of Agrarian Reform (175 SCRA
343, 391 [1989]), this Court held:
The CARP Law, for its part, conditions the transfer of
possession and ownership of the land to the government on
receipt of the landowner of the corresponding payment or the
deposit by the DAR of the compensation in cash or LBP bonds
with an accessible bank. Until then, title also remains with the
landowner. No outright change of ownership is contemplated
either.
Necessarily, the issuance of the CLOAs by respondent DAR on October 30,
1993 and their distribution to farmer-beneficiaries were illegal inasmuch as no
valid payment of compensation for the lands was as yet effected. By law,
Certificates of Land Ownership Award are issued only to the beneficiaries after
the DAR takes actual possession of the land (RA 6657, Sec. 24), which in turn
should only be after the receipt by the landowner of payment or, in case of
rejection or no response from the landowner, after the deposit of the
compensation for the land in cash or in LBP bonds (RA 6657, Sec. 16[e]).
Respondents argue that the Land Bank ruling should not be made to apply to
the compulsory acquisition of petitioner's landholdings in 1993, because it
occurred prior to the promulgation of the said decision (October 6, 1995). This
is untenable. Laws may be given retroactive effect on constitutional
considerations, where the prospective application would result in a violation of
a constitutional right. In the case at bar, the expropriation of petitioner's lands
was effected without a valid payment of just compensation, thus violating the
Constitutional mandate that "(p)rivate property shall not be taken for public use
without just compensation" (Constitution, Art. III, Sec. 9). Hence, to deprive
petitioner of the benefit of the Land Bank ruling on the mere expedient that it
came later than the actual expropriation would be repugnant to petitioner's
fundamental rights.
The controlling last two (2) pages of the ponencia state:
Finally, we stress that the failure of respondent DAR to comply
with the requisites of due process in the acquisition
proceedings does not give this Court the power to nullify the
CLOA's already issued to the farmer beneficiaries. To assume
the power is to short-circuit the administrative process, which
has yet to run its regular course. Respondent DAR must be
given the chance to correct its procedural lapses in the
acquisition proceedings. In Hacienda Palico alone, CLOA's
were issued to 177 farmer beneficiaries in 1993. Since then
until the present, these farmers have been cultivating their
lands. It goes against the basic precepts of justice, fairness
and equity to deprive these people, through no fault of their
own, of the land they till. Anyhow, the farmer beneficiaries
hold the property in trust for the rightful owner of the land.
I disagree with the view that this Court cannot nullify illegally issued CLOA's
but must ask the DAR to first reverse and correct itself.
Given the established facts, there was no valid transfer of petitioner's title to
the Government. This being so, there was also no valid title to transfer to third
persons; no basis for the issuance of CLOAs.
Equally important, CLOAs do not have the nature of Torrens Title.
Administrative cancellation of title is sufficient to invalidate them.
The Court of Appeals said so in its Resolution in this case. It stated:
Contrary to the petitioner's argument that issuance of CLOAs
to the beneficiaries prior to the deposit of the offered price
constitutes violation of due process, it must be stressed that
the mere issuance of the CLOAs does not vest in the
farmer/grantee ownership of the land described therein.
At most the certificate merely evidences the government's
recognition of the grantee as the party qualified to avail of the
statutory mechanisms for the acquisition of ownership of the
land. Thus failure on the part of the farmer/grantee to comply
with his obligations is a ground for forfeiture of his certificate
of transfer. Moreover, where there is a finding that the
property is indeed not covered by CARP, then reversion to the
landowner shall consequently be made, despite issuance of
CLOAs to the beneficiaries. (Resolution dated January 17,
1997, p. 6)
DAR Administrative Order 03, Series of 1996 (issued on August 8, 1996;
Annex "F" of Petitioner's Manifestation) outlines the procedure for the
reconveyance to landowners of properties found to be outside the coverage of
CARP. DAR itself acknowledges that they can administratively cancel CLOAs
if found to be erroneous. From the detailed provisions of the Administrative
Order, it is apparent that there are no impediments to the administrative
cancellation of CLOAs improperly issued over exempt properties. The
procedure is followed all over the country. The DAR Order spells out that
CLOAs are not Torrens Titles. More so if they affect land which is not covered
by the law under which they were issued. In its Rejoinder, respondent DAR
states:
3.2. And, finally, on the authority of DAR/DARAB to cancel
erroneously issued Emancipation Patents (EPs) or Certificate
of Landownership Awards (CLOAs), same is enshrined, it is
respectfully submitted, in Section 50 of Republic Act No. 6657.
In its Supplemental Manifestation, petitioner points out, and this has not been
disputed by respondents, that DAR has also administratively cancelled twenty
five (25) CLOAs covering Nasugbu properties owned by the Manila Southcoast
Development Corporation near subject Roxas landholdings. These lands were
found not suitable for agricultural purposes because of soil and topographical
characteristics similar to those of the disputed properties in this case.
The former DAR Secretary, Benjamin T. Leong, issued DAR Order dated
January 22, 1991 approving the development of property adjacent and
contiguous to the subject properties of this case into the Batulao Tourist
Resort. Petitioner points out that Secretary Leong, in this Order, has decided
that the land
1. Is, as contended by the petitioner GDFI "hilly, mountainous,
and characterized by poor soil condition and nomadic method
of cultivation, hence not suitable to agriculture."
2. Has as contiguous properties two haciendas of Roxas y
Cia and found by Agrarian Reform Team Leader Benito Viray
to be "generally rolling, hilly and mountainous and strudded
(sic) with long and narrow ridges and deep gorges. Ravines
are steep grade ending in low dry creeks."
3. Is found in an. area where "it is quite difficult to provide
statistics on rice and corn yields because there are no
permanent sites planted. Cultivation is by Kaingin Method."
4. Is contiguous to Roxas Properties in the same area where
"the people entered the property surreptitiously and were
difficult to stop because of the wide area of the two haciendas
and that the principal crop of the area is sugar . . .." (emphasis
supplied).
I agree with petitioner that under DAR AO No. 03, Series of 1996, and unlike
lands covered by Torrens Titles, the properties falling under improperly issued
CLOAs are cancelled by mere administrative procedure which the Supreme
Court can declare in cases properly and adversarially submitted for its
decision. If CLOAs can under the DAR's own order be cancelled
administratively, with more reason can the courts, especially the Supreme
Court, do so when the matter is clearly in issue.
With due respect, there is no factual basis for the allegation in the motion for
intervention that farmers have been cultivating the disputed property.
The property has been officially certified as not fit for agriculture based on
slope, terrain, depth, irrigability, fertility, acidity, and erosion. DAR, in its Order
dated January 22, 1991, stated that "it is quite difficult to provide statistics on
rice and corn yields (in the adjacent property) because there are no permanent
sites planted. Cultivation is by kaingin method." Any allegations of cultivation,
feasible and viable, are therefore falsehoods.
The DAR Order on the adjacent and contiguous GDFI property states that
"(T)he people entered the property surreptitiously and were difficult to stop . .
.."
The observations of Court of Appeals Justices Verzola and Magtolis in this
regard, found in their dissenting opinion (Rollo, p. 116), are relevant:
2.9 The enhanced value of land in Nasugbu, Batangas, has
attracted unscrupulous individuals who distort the spirit of the
Agrarian Reform Program in order to turn out quick profits.
Petitioner has submitted copies of CLOAs that have been
issued to persons other than those who were identified in the
Emancipation Patent Survey Profile as legitimate Agrarian
Reform beneficiaries for particular portions of petitioner's
lands. These persons to whom the CLOAs were awarded,
according to petitioner, are not and have never been workers
in petitioner's lands. Petitioners say they are not even from
Batangas but come all the way from Tarlac. DAR itself is not
unaware of the mischief in the implementation of the CARL in
some areas of the country, including Nasugbu. In fact, DAR
published a "WARNING TO THE PUBLIC" which appeared in
 the Philippine Daily Inquirer of April 15, 1994 regarding this
malpractice.
2.10 Agrarian Reform does not mean taking the agricultural
property of one and giving it to another and for the latter to
unduly benefit therefrom by subsequently "converting" the
same property into non-agricultural purposes.
2.11 The law should not be interpreted to grant power to the
State, thru the DAR, to choose who should benefit from multi-
million peso deals involving lands awarded to supposed
agrarian reform beneficiaries who then apply for conversion,
and thereafter sell the lands as non-agricultural land.
Respondents, in trying to make light of this problem, merely emphasize that
CLOAs are not titles. They state that "rampant selling of rights", should this
occur, could be remedied by the cancellation or recall by DAR.
In the recent case of "Hon. Carlos O. Fortich, et. al. vs. Hon. Renato
C. Corona, et. al." (G.R. No. 131457, April 24, 1998), this Court found the
CLOAs given to the respondent farmers to be improperly issued and declared
them invalid. Herein petitioner Roxas and Co., Inc. has presented a stronger
case than petitioners in the aforementioned case. The procedural problems
especially the need for referral to the Court of Appeals are not present. The
instant petition questions the Court of Appeals decision which acted on the
administrative decisions. The disputed properties in the present case have
been declared non-agricultural not so much because of local government
action but by Presidential Proclamation. They were found to be non-
agricultural by the Department of Agriculture, and through unmistakable
implication, by DAR itself. The zonification by the municipal government,
approved by the provincial government, is not the only basis.
On a final note, it may not be amiss to stress that laws which have for their
object the preservation and maintenance of social justice are not only meant
to favor the poor and underprivileged. They apply with equal force to those
who, notwithstanding their more comfortable position in life, are equally
deserving of protection from the courts. Social justice is not a license to trample
on the rights of the rich in the guise of defending the poor, where no act of
injustice or abuse is being committed against them. As we held in Land
Bank (supra.):
It has been declared that the duty of the court to protect the
weak and the underprivileged should not be carried out to
such an extent as to deny justice to the landowner whenever
truth and justice happen to be on his side. As eloquently
stated by Justice Isagani Cruz:
. . . social justice or any justice for that
matter is for the deserving, whether he be
a millionaire in his mansion or a pauper in his
hovel. It is true that, in case of reasonable
doubt, we are called upon to tilt the balance
in favor of the poor simply because they are
poor, to whom the Constitution fittingly
extends its sympathy and compassion. But
never is it justified to prefer the poor simply
because they are poor, or to eject the rich
simply because they are rich, for justice must
always be served, for poor and rich alike,
according to the mandate of the law.
IN THE LIGHT OF THE FOREGOING, I vote to grant the petition for certiorari;
and to declare Haciendas Palico, Banilad and Caylaway, all situated in
Nasugbu, Batangas, to be non-agricultural and outside the scope of Republic
Act No. 6657. I further vote to declare the Certificates of Land Ownership
Award issued by respondent Department of Agrarian Reform null and void and
to enjoin respondents from proceeding with the compulsory acquisition of the
lands within the subject properties. I finally vote to DENY the motion for
intervention.
REMIGIO D. ESPIRITU AND
NOELAGUSTIN, Petitioners, v. LUTGARDA TORRES DEL
ROSARIO REPRESENTED BY SYLVIA R.
ASPERILLA, Respondents.
DECISION
LEONEN, J.:
Lands classified as non-agricultural in zoning ordinances approved
by the Housing and Land Use Regulatory Board or its predecessors
prior to June 15, 1998 are outside the coverage of the compulsory
acquisition program of the Comprehensive Agrarian Reform Law.
However, there has to be substantial evidence to prove that lands
sought to be exempted fall within the non-agricultural classification.
This is a petition for review on certiorari 1 seeking to set aside the
decision2 dated September 28, 2012 and resolution 3 dated
November 29, 2012 of the Court of Appeals. These orders reinstated
the order4dated February 19, 2004 of then Secretary of Agrarian
Reform Roberto M. Pagdanganan approving petitioner's application
for exemption.
The pertinent facts are as follows:
In 1978, the City Council of Angeles City, Pampanga, enacted Zoning
Ordinance No. 13, Series of 1978, classifying areas in Barangay
Margot and Barangay Sapang Bato, Angeles City, as agricultural
land.5
Pursuant to this ordinance, Lutgarda Torres del Rosario (del Rosario)
allegedly requested the City Zoning Administrator to exempt from
the zoning classification Lot Nos. 854 and 855 located in Barangay
Margot and Barangay Sapang Bato, Angeles City.6 The land is
covered by Transfer Certificate of Title No. T-11809 with an area of
164.7605 hectares.7 The request was allegedly approved on March
7, 1980 by Engineer Roque L. Dungca, Angeles City Development
Coordinator/Zoning Administrator, and the lots were allegedly
reclassified as non-agricultural or industrial lots.8
On June 10, 1988, the Comprehensive Agrarian Reform Law
(Republic Act No. 6657) was enacted.
On October 10, 2000, del Rosario, through her representative Sylvia
R. Asperilla (Asperilla), filed an application for exemption with the
Department of Agrarian Reform, seeking to exempt Lot Nos. 854 and
855 from the Comprehensive Agrarian Reform Program (CARP)
coverage.9
On February 19, 2004, then Secretary of Agrarian Reform Roberto
M. Pagdanganan (Secretary Pagdanganan) issued an order granting
the application for exemption. Citing Department of Justice Opinion
No. 44, Series of 1990, Secretary Pagdanganan stated that lands
classified as non-agricultural before the enactment of CARP are
beyond its coverage.10
On March 26, 2004, farmers in del Rosario's landholdings, led by
Remigio Espiritu (Espiritu), filed a motion for reconsideration 11 of the
order. They argued that under Zoning Ordinance No. 13, Series of
1978, Housing and Land Use Regulatory Board Resolution No. 705,
Series of 2001, and Angeles City Council Resolution No. 3300, Series
of 2001, the landholdings were classified as agricultural, not
industrial.12 They argued that as per certifications by the Housing
and Land Use Regulatory Board dated June 1, 2001, May 28, 2001,
and November 24, 2003, the landholdings were within the
agricultural zone, and there was no zoning ordinance passed that
reclassified the area into other land uses.13
The motion was given due course by the Department of Agrarian
Reform, this time headed by Secretary Nasser C. Pangandaman
(Secretary Pangandaman). Hence, on June 15, 2006, then Secretary
Pangandaman issued an order14 granting the motion for
reconsideration and revoking the earlier order of then Secretary of
Agrarian Reform Pagdanganan.
Del Rosario contended that this order was sent to her through Clarita
Montgomery in Barangay Margot, Sapang Bato, Angeles City, and
not at Asperilla's address in Cubao, Quezon City, which was her
address on record. Del Rosario alleged that she only came to know
of the order on January 26, 2007, when the Provincial Agrarian
Reform Officer of Pampanga handed her a copy of the order. 15 She
then filed her motion for reconsideration of the order dated June 15,
2006. The motion was dated February 9, 2007. 16
Acting on del Rosario's motion for reconsideration, Secretary
Pangandaman found that the certifications issued by the Housing
and Land Use Regulatory Board classified the landholdings as
agricultural before June 15, 1988.17 Based on the ocular inspections
conducted by the Center for Land Use Policy, Planning and
Implementation (CLUPPI), the land remained agricultural and was
planted with sugar cane and corn.18 Accordingly, Secretary
Pangandaman denied del Rosario's motion in the order 19 dated
March 3, 2008.
Del Rosario filed a notice of appeal 20 before the Office of the
President on March 27, 2008.
On May 7, 2009, the Office of the President, through then Deputy
Executive Secretary for Legal Affairs Manuel B. Gaite (Deputy
Executive Secretary Gaite), rendered the decision 21 dismissing the
appeal for lack of merit.
Del Rosario filed a motion for extension of 10 days to file her motion
for reconsideration.22 Citing Administrative Order No. 18, Series of
1987, and Habaluyas Enterprises, Inc. v. Japzon,23 the Office of the was deprived of due process when Secretary Pangandaman's order
President, through then Deputy Executive Secretary Natividad G. was sent to the wrong address. She also argues that the Deputy
Dizon, denied the motion in the order24 dated July 14, 2009. Executive Secretary Gaite's decision was void since he had' already
been appointed to the Securities and Exchange Commission two
Aggrieved, del Rosario filed a petition for review before the Court of months prior.33
Appeals arguing (1) that she was denied due process when the order
of Secretary Pangandaman was "erroneously sent to another The issue, therefore, before this court is whether the Court of
address"25cralawred and (2) that the decision of.then Deputy Appeals correctly set aside the order of Secretary Pangandaman and
Executive Secretary Gaite was void since he had been appointed to the decision of Deputy Secretary Gaite and reinstated the order of
the Securities and Exchange Commission two months prior to the Secretary Pagdanganan.
rendering of the decision.26
This petition should be granted.
On September 28, 2012, the Court of Appeals rendered a decision
granting the petition. The Court of Appeals stated that del Rosario Respondent was not deprived of
was indeed prevented from participating in the proceedings that led due process
to the issuance of Secretary Pangandaman's order when the notices
were sent to her other address on record. 27 It also found that the The Court of Appeals, in finding for respondent, stated
decision issued by then Deputy Executive Secretary Gaite was void that:ChanRoblesVirtualawlibrary
since it violated Article VII, Section 13 of the Constitution. 28 The
dispositive portion of the decision states:ChanRoblesVirtualawlibrary Since she was not notified, [del Rosario] was not able to participate
in the proceedings leading to the issuance of the Pangandaman
WHEREFORE, premises considered, the PETITION is GRANTED. Order. The absence of notice that resulted in the inability of [del
The assailed Decision dated 07 May 2009, and the Order dated 15 Rosario] to be heard indubitably confirms her claim of lack of due
June 2006 are hereby SET ASIDE. Perforce, with the nullity of the process. [Del Rosario] indeed was denied her day in the
said Decision and Order, the Pagdanganan Order granting administrative proceedings below. And considering that [del Rosario]
exemption to petitioner's land is REINSTATED. was not accorded due process, the Pangandaman Order is void for
lack of jurisdiction. Hence, contrary to respondents' submission, it
SO ORDERED.29chanRoblesvirtualLawlibrary could not attain finality.34chanRoblesvirtualLawlibrary

Their motion for reconsideration having been denied,30 petitioners, The Court of Appeals, however, did not take into consideration that
namely Remigio Espiritu and Noel Agustin, now come before this respondent was still able to file a motion for reconsideration of
court via a petition for review on certiorari, seeking to set aside the Secretary Pangandaman's order, albeit beyond the allowable period
ruling of the Court of Appeals. to file. In Department of Agrarian Reform Administrative Order No.
06,35 Series of 2000:ChanRoblesVirtualawlibrary
In particular, petitioners argue that respondent was not denied due
process as she was able to actively participate in the proceedings RULE III
before the Department of Agrarian Reform and the Office of the Commencement, Investigation and Resolution of Cases
President.31 They also argue that respondent was not able to present
proof that Deputy Executive Secretary Gaite was not authorized to . . . .
sign the decision and, hence, his action is presumed to have been
done in the regular performance of duty. 32 SECTION 21. Motion for Reconsideration. In case any of the
parties disagrees with the decision or resolution, the affected party
Respondent, on the other hand, argues that the Court of Appeals did may file a written motion for reconsideration within fifteen (15) days
not commit any reversible error in its decision. She argues that she from receipt of the order, furnishing a copy thereof to the adverse
party. The filing of the motion for reconsideration shall suspend the The essence of procedural due process is embodied in the basic
running of the period to appeal. requirement of notice and a real opportunity to be heard. In
administrative proceedings, such as in the case at bar, procedural
Any party shall be allowed only one (1) motion for reconsideration. due process simply means the opportunity to explain one's side or
Thereafter, the RD or approving authority shall rule on the said the opportunity to seek a reconsideration of the action or ruling
motion within fifteen (15) days from receipt thereof. In the event complained of. "To be heard" does not mean only verbal arguments
that the motion is denied, the adverse party has the right to perfect in court; one may be heard also thru pleadings. Where opportunity
his appeal within the remainder of the period to appeal, reckoned to be heard, either through oral arguments or pleadings, is accorded,
from receipt of the resolution of denial. If the decision is reversed on there is no denial of procedural due process.
reconsideration, the aggrieved party shall have fifteen (15) days
from receipt of the resolution of reversal within which to perfect his In administrative proceedings, procedural due process has been
appeal. (Emphasis supplied)chanroblesvirtuallawlibrary recognized to include the following: (1) the right to actual or
constructive notice of the institution of proceedings which may affect
Despite being filed late, Secretary Pangandaman still gave due a respondent's legal rights; (2) a real opportunity to be heard
course to the motion and resolved it on its merits. This is clear from personally or with the assistance of counsel, to present witnesses
his order dated March 3, 2008, which and evidence in one's favor, and to defend one's rights; (3) a tribunal
reads:ChanRoblesVirtualawlibrary vested with competent jurisdiction and so constituted as to afford a
person charged administratively a reasonable guarantee of honesty
During the 50th Special CLUPPI Committee-B Meeting, held on 18 'as well as impartiality; and (4) a finding by said tribunal which is
December 2007, the Motion for Reconsideration filed by Sylvia supported by substantial evidence submitted for consideration
Espirilla [sic] was deliberated upon and the Committee during the hearing or contained in the records or made known to the
recommended the DENIAL of the Motion for Reconsideration based parties affected.38 (Emphasis supplied)
on the following grounds:
When respondent filed her motion for reconsideration
The certifications issued by the HLURB shows that the assailing Secretary Pangandaman's order, she was able to
subject properties were classified as agricultural completely and exhaustively present her arguments. The
before 15 June 1986 [sic]; and denial of her motion was on the basis of the merits of her arguments
and any other evidence she was able to present. She was given a
Based on the ocular inspection conducted by the fair and reasonable opportunity to present her side; hence, there
CLUPPI Inspection Team, it was found out that the was no deprivation of due process.
area remained agricultural. In fact, it [is] still
dominantly planted with sugar cane and It was also erroneous to conclude that respondent was "denied her
corn.36(Emphasis supplied) day in the administrative proceedings below."39 Respondent was
able to actively participate not only in the proceedings before the
Department of Agrarian Reform, but also on appeal to the Office of
While it may be true that respondent was prevented from filing the President and the Court of Appeals.
a timely motion for reconsideration of Secretary Pangandaman's
order, it would be erroneous to conclude that she had been Deputy Executive Secretary Gaite's
completely denied her opportunity to be heard. In Department of decision is presumed valid, effective,
Agrarian Reform v. Samson:37 and binding

. . . . In administrative proceedings, a fair and reasonable Article VII, Section 13 of the Constitution
opportunity to explain one's side suffices to meet the requirements states:ChanRoblesVirtualawlibrary
of due process. In Casimiro v. Tandog, the Court held:
Section 13. The President, Vice-President, the Members of the
Cabinet; and their deputies or assistants shall not, unless otherwise
provided in this Constitution, hold any other office or employment
during their tenure. They shall not, during said tenure, directly or
indirectly, practice any other profession, participate in any business,
or be financially interested in any contract with, or in any franchise,
or special privilege granted by the Government or any subdivision,
agency, or instrumentality thereof, including government-owned or
controlled corporations or their subsidiaries. They shall strictly avoid
conflict of interest in the conduct of their office.
. . . . (Emphasis supplied)chanroblesvirtuallawlibrary
It is alleged that Gaite was appointed Commissioner to the Securities
and Exchange Commission on March 16, 2009. 40 It is also alleged
that he has already lost his authority as Deputy Executive Secretary
for Legal Affairs when he rendered the decision dated May 7, 2009
since he is constitutionally prohibited from holding two offices during
his tenure. This, however, is not conclusive since no evidence was
presented as to when he accepted the appointment, took his oath of
office, or assumed the position.
Assuming that Gaite's appointment became effective on March 16,
2009, he can be considered a de facto officer at the time he rendered
the decision dated May 7, 2009.
In Funa v. Agra,41 a petition was filed against Alberto Agra for
holding concurrent positions as the acting Secretary of justice and
as Solicitor General. This court, while ruling that the appointment of
Alberto Agra as acting Secretary of Justice violated Article VII,
Section 13 of the Constitution, held that he was a de facto officer
during his tenure in the Department of
Justice:ChanRoblesVirtualawlibrary
A de facto officer is one who derives his appointment from one
having colorable authority to appoint, if the office is an appointive
office, and whose appointment is valid on its face. He may also be
one who is in possession of an office, and is discharging its duties
under color of authority, by which is meant authority derived from
an appointment, however irregular or informal, so that the
incumbent is not a mere volunteer. Consequently, the acts of the de
facto officer are just as valid for all purposes as those of a dejure
officer, in so far as the public or third persons who are interested
therein are concerned.
In order to be clear, therefore, the Court holds that all official actions
of Agra as a de facto Acting Secretary of Justice, assuming that was
his later designation, were presumed valid, binding and effective as
if he was the officer legally appointed and qualified for the office.
This clarification is necessary in order to protect the sanctity of the
dealings by the public with persons whose ostensible authority
emanates from the State. Agra's official actions covered by this
clarification extend to but are not limited to the promulgation of
resolutions on petitions for review filed in the Department of Justice,
and the issuance of department orders, memoranda and circulars
relative to the prosecution of criminal cases. 42 (Emphasis
supplied)chanroblesvirtuallawlibrary
Assuming that Gaite was a de facto officer of the Office of the
President after his appointment to the Securities and Exchange
Commission, any decision he renders during this time is presumed
to be valid, binding, and effective.
With Gaite being a public officer, his acts also enjoy the presumption
of regularity, thus:ChanRoblesVirtualawlibrary
The presumption of regularity of official acts may be rebutted by
affirmative evidence of irregularity or failure to perform a duty. The
presumption, however, prevails until it is overcome by no less than
clear and convincing evidence to the contrary. Thus, unless the
presumption in [sic] rebutted, it becomes conclusive. Every
reasonable intendment will be made in support of the presumption
and in case of doubt as to an officer's act being lawful or unlawful,
construction should be in favor of its lawfulness.43 (Fimphasis
supplied)chanroblesvirtuallawlibrary
Respondent has not presented evidence showing that the decision
was rendered ultra vires, other than her allegation that Gaite had
already been appointed to another office. Unless there is clear and
convincing evidence o the contrary, the decision dated May 7, 2009
is conclusively presumed to lave been rendered in the regular course
of business.
Respondent's landholdings were
agricultural, not industrial
Prior to the enactment of Republic Act No. 6657, lands were
classified into agricultural, residential, or industrial by law or by
zoning ordinances enacted by local government units. In Heirs of
Luna v. Afable:44
It is undeniable that local governments have the power to reclassify
agricultural into non-agricultural lands. Section 3 of RA No. 2264
(The Local Autonomy Act of 1959) specifically empowers municipal
and/or city councils to adopt zoning and subdivision ordinances or
regulations in consultation with the National Planning Commission.
By virtue of a zoning ordinance, the local legislature may arrange,
prescribe, define, and apportion the land within its political
jurisdiction into specific uses based not only on the present, but also
on the future projection of needs. It may, therefore, be reasonably
presumed that when city and municipal boards and councils
approved an ordinance delineating an area or district in their cities
or municipalities as residential, commercial, or industrial zone
pursuant to the power granted to them under Section 3 of the Local
Autonomy Act of 1959, they were, at the same time, reclassifying
any agricultural lands within the zone for non-agricultural use;
hence, ensuring the implementation of and compliance with their
zoning ordinances.45 (Emphasis supplied)chanroblesvirtuallawlibrary
Republic Act No. 6657 became effective on June 15, 1988, and it
covered all public and private lands, including lands of the public
domain suited for agriculture.46 Upon its enactment, questions arose
as to the authority of the Department of Agrarian Reform to approve
or disapprove applications for conversion of agricultural land to non-
agricultural. Then Agrarian Reform Secretary Florencio B. Abad
(Secretary Abad) was of the opinion that laws prior to Republic Act
No. 6657 authorized the Department of Agrarian Reform, together
with the Department of Local Government and Community
Development and the Human Settlements Commission, to allow or
disallow conversions. In response to Secretary Abad's query, the
Department of Justice issued Opinion No. 44 on March 16, 1990,
written by then Secretary of Justice Franklin M. Drilon. The opinion,
reproduced in full, states:ChanRoblesVirtualawlibrary
S i r:
This refers to your letter of the 13th instant stating your "position
that prior to the passage of R.A. 6657, the Department of Agrarian
Reform had the authority to classify and declare which agricultural
lands are suitable for non-agricultural purposes, and to approve or
disapprove applications for conversion from agricultural to non-
agricultural uses."
In support of the foregoing view, you contend that under R.A. No.
3844, as amended, the Department of Agrarian Reform (DAR) is
empowered to "determine and declare an agricultural land to be
suited for residential, commercial, industrial or some other urban
purpose" and to "convert agricultural land from agricultural to non-
agricultural purposes"; that P.D. No. 583, as amended by P.D. No.
815 "affirms that the conversion of agricultural lands shall be allowed
only upon previous authorization of the [DAR]; with respect to
tenanted rice and corn lands"; that a Memorandum of Agreement
dated May 13, 1977 between the DAR, the Department of Local
Government and Community Development and the then Human
Settlements Commission "further affirms the authority of the [DAR]
to allow or disallow conversion of agricultural lands"; that E.O. No.
129-A expressly invests the DAR with exclusive authority to approve
or disapprove conversion of agricultural lands for residential,
commercial, industrial and other land uses'; and that while in the
final version of House Bill 400, Section 9 thereof provided that lands
devoted to "residential, housing, commercial and industrial sites
classified as such by the municipal and city development councils as
already approved by the Housing and Land Use Regulatory Board, in
their respective zoning development plans" be exempted from the
coverage of the Agrarian Reform program, this clause was deleted
from Section 10 of the final version of the consolidated bill stating
the exemptions from the coverage of the Comprehensive Agrarian
Reform Program.
We take it that your query has been prompted by the study
previously made by this Department for Executive Secretary Catalino
Macaraig Jr. and Secretary Vicente Jayme (Memorandum dated
February 14, 1990) which upheld the authority of the DAR to
authorize conversions of agricultural lands to non-agricultural uses
as of June 15, 1988, the date of effectivity of the Comprehensive
Agrarian Reform Law (R.A. No. 6657). [I]t is your position that the
authority of DAR to authorize such conversion existed even prior to
June 15, 1988 or as early as 1963 under the Agricultural Land
Reform Code (R.A. No. 3844; as amended).
It should be made clear at the outset that the aforementioned study
of this Department was based on facts and issues arising from the
implementation of the Comprehensive Agrarian Reform Program
(CARP). While there is no specific and express authority given to DAR
in the CARP law to approve or disapprove conversion of agricultural
lands to non-agricultural uses, because Section 65 only refers to
conversions effected after five years from date of the award, we
opined that the authority of the DAR to approve or disapprove
conversions of agricultural lands to non-agricultural uses applies only
to conversions made on or after June 15, 1988, the date of effectivity
of R.A. No. 6657, solely on the basis of our interpretation of DAR's
mandate and the comprehensive coverage of the land reform
program. Thus, we said:
"Being vested with exclusive original jurisdiction over all matters
involving the implementation of agrarian reform, it is believed to be
the agrarian reform law's intention that any conversion of a private
agricultural land to non-agricultural uses should be cleared
beforehand by the DAR. True, the DAR's express power over land
use conversion is limited to cases in which agricultural lands already
awarded have, after five years, ceased to be economically feasible
and sound for agricultural purposes, or the locality has become
urbanized and the land will have a greater economic value for
residential, commercial or industrial purposes. But to suggest that
these are the only instances when the DAR can require conversion
clearances would open a loophole in the R.A. No. 6657, which every
landowner may use to evade compliance with the agrarian reform
program. Hence, it should logically follow from the said,
department's express duty and function to execute and enforce the
said statute that any reclassification of a private land as a residential,
commercial or industrial property should first be cleared by the
DAR."
It is conceded that under the laws in force prior to the enactment
and effective date of R.A. No. 6657, the DAR had likewise the
authority, to authorize conversions of agricultural lands to other
uses, but always in coordination with other concerned agencies.
Under R.A. No. 3344, as amended by R.A. No. 6389, an agricultural
lessee may, by order of the court, be dispossessed of his landholding
if after due hearing, it is shown that the "landholding is declared by
the [DAR] upon the recommendation of the National Planning
Commission to be suited for residential, commercial, industrial or
some other urban purposes."
Likewise, under various Presidential Decrees (P.D. Nos. 583, 815 and
946) which were issued to give teeth to the implementation of the
agrarian reform program decreed in P.D. No. 27, the DAR was
empowered to authorize conversions of tenanted agricultural lands,
specifically those planted to rice and/or com, to other agricultural or
to non-agricultural uses, "subject to studies on zoning of the Human
Settlements Commissions" (HSC). This non-exclusive authority of
the DAR under the aforesaid laws was, as you have correctly pointed
out, recognized and reaffirmed by other concerned agencies, such
as the Department of Local Government and Community
Development (DLGCD) and the then Human Settlements
Commission (HSC) in a Memorandum of Agreement executed by the
DAR and these two agencies on May 13, 1977, which is an admission
that with respect to land use planning and conversions, the authority
is not exclusive to any particular agency but is a coordinated effort
of all concerned agencies.
It is significant to mention that in 1978, the then Ministry of Human
Settlements was granted authority to review and ratify land use
plans and zoning ordinance of local governments and to approve
development proposals which include land use conversions (see LOI
No. 729 [1978]). This was followed by P.D. No. 648 (1981) which
conferred upon the Human Settlements Regulatory Commission (the
predecessors of the Housing and Land Use Regulatory Board
[HLURB] [)] the authority to promulgate zoning and other land use
control standards and guidelines which shall govern land use plans
and zoning ordinances of local governments, subdivision or estate
development projects of both the public and private sector and urban
renewal plans, programs and projects; as well as to review, evaluate
and approve or disapprove comprehensive land use development
plans and zoning components of civil works and infrastructure
projects, of national, regional and local governments, subdivisions,
condominiums or estate development projects including industrial
estates.
P.D. No. 583, as amended by P.D. No. 815, and the 1977
Memorandum of Agreement, abovementioned, cannot therefore, be
construed as sources of authority of the' DAR; these issuances
merely affirmed whatever power DAR had at the time of their
adoption.
With respect to your observation that E.O. No. 129-A also
empowered the DAR to approve or disapprove conversions of
agricultural lands into non-agricultural uses as of July 22, 1987, it is
our view that E.O. No. 129-A likewise did not provide a new source
of power of DAR with respect to conversion but it merely recognized
and reaffirmed the existence of such power as granted under existing
laws. This is clearly inferrable from the following provision of E.O.
No. 129-A to wit:
"Sec. 5. Powers and Functions. Pursuant to the mandate of the
Department, and in order to ensure the successful implementation
of the Comprehensive Agrarian Reform Program, the Department is
hereby authorized to:
1) Have exclusive authority to approve or disapprove conversion of
agricultural lands for residential, commercial, industrial and other
land uses as may be provided by -law"
Anent the observation regarding the alleged deletion of residential,
housing, commercial and industrial sites classified by the HLURB in
the final version of the CARP bill, we fail to see how this [sic]
circumstances could substantiate your position that DAR's authority
to reclassify or approve conversions of agricultural lands to non-
agricultural uses already existed prior to June 15, 1988. Surely, it is
clear that the alleged deletion was necessary to avoid a redundancy
in the CARP law whose coverage is expressly limited to "all public
and private agricultural lands" and "other lands of the public domain
suitable for agriculture" (Sec. 4, R.A. No. 6657). Section 3(c) of R.A.
No. 6657 defines "agricultural land" as that "devoted to agricultural
activity as defined in the Act and not classified as mineral forest,
residential, commercial or industrial land."
Based on the foregoing premises, we reiterate the view that with
respect to conversions of agricultural lands covered by R.A. No. 6657
to non-agricultural uses, the authority of DAR to approve such
conversions may be exercised from the date of the law's effectivity
on June 15, 1988. This conclusion is based on a liberal interpretation
of R.A. No. 6657 in the light of DAR's mandate and the extensive
coverage of the agrarian reform program.47(Emphasis
supplied)chanroblesvirtuallawlibrary
Department of Justice Opinion No. 44 became the basis of
subsequent issuances by the Department of Agrarian Reform, stating
in clear terms that parties need not seek prior conversion clearance
from the Department of Agrarian Reform for lands that were
classified as non-agricultural prior to Republic Act No. 6657. The
subsequent rulings are outlined in Junio v. Secretary Garilao:48
Following the opinion of the Department of Justice (DOJ), the DAR
issued Administrative Order (AO) No. 6, Series of 1994, stating that
conversion clearances were no longer needed for lands already
classified as non-agricultural before the enactment of Republic Act
6657. Designed to "streamline the issuance of exemption clearances,
based on DOJ Opinion No. 44," the AO provided guidelines and
procedures for the issuance of exemption clearances.
Thereafter, DAR issued AO 12, Series of 1994, entitled "Consolidated
and Revised Rules and Procedures Governing Conversion of
Agricultural Lands to Non-Agricultural Uses." It provided that the
guidelines on how to secure an exemption clearance under DAR AO
No. 6, Series of 1994, shall apply to agricultural lands classified or
zoned for non-agricultural uses by local government units (LGUs);
and approved by the Housing and Land Use Regulatory Board
(HLURB) before June 15, 1988. Under this AO, the DAR secretary
had the ultimate authority to issue orders granting or denying
applications for exemption filed by landowners whose lands were
covered by DOJ Opinion No. 44.49 (Citations
omitted)chanroblesvirtuallawlibrary
Accordingly, lands are considered exempt from the coverage of
Republic Act No. 6657 if the following requisites are present:
1. Lands were zoned for non-agricultural use by the local
government unit; and
2. The zoning ordinance was approved by the Housing and Land
Use Regulatory Board before June 15, 1998.
In revoking the prior order of exemption, Secretary Pangandaman
took note of the following
considerations:ChanRoblesVirtualawlibrary
The Certification dated 18 November 2003, of Mr. David D. David,
Planning Officer IV and Zoning Administrator of the City of Angeles
states that the City Planning and Development Office, Zoning
Administration Unit (CPDO-ZAU) certifies that subject property
covered by TCI No. 11804 is classified as agricultural based on the
certified photocopy of Zoning Ordinance, Ordinance No. 13, Series
of 1978, issued by the Housing and Land Use Regulatory Board,
Regional Office No. 3 (HLURB-Region III) on 03 September
2001;chanrobleslaw
Also, upon verification with HLURB-Region III, -we were informed
that as per copy of the approved Zoning Plan of 1978, the subject
properties were classified as agricultural. The said Zoning Plan of
1978 was approved under NCC Plan dated 24 September 1980; and
Based on the ocular inspection conducted by the CLUPPI Inspection
Team, it was found that the area remained agricultural. In fact, it is
still dominantly planted with sugar cane and corn.50 (Emphasis
supplied)chanroblesvirtuallawlibrary
Upon respondent's motion for reconsideration, Secretary
Pangandaman also took into consideration the recommendations of
the Center for Land Use Policy, Planning, and Implementation
Committee, thus:
During the 50th Special CLUPPI Committee-B Meeting, held on 18
December 2007, the Motion for Reconsideration filed by Sylvia
Espirilla [sic] was deliberated upon and the Committee
recommended the DENIAL of the Motion for Reconsideration based
on the following grounds:
The certifications issued by the HLURB shows that the
subject properties were classified as agricultural
before 15 June 1986 [sic]; and
Based on the ocular inspection conducted by the
CLUPPI Inspection Team, it was found out that the
area remained agricultural. In fact, it [is] still
dominantly planted with sugar cane and
corn.51 (Emphasis supplied)
Secretary Pangandaman also found that:ChanRoblesVirtualawlibrary
The certifications submitted by the [respondents] which is the
Certification dated 18 November 2003, of Mr. David D. David,
Planning Officer IV and Zoning Administrator of the City of Angeles
states that the City Planning Development Office, Zoning
Administration Unit (CPDO-ZAU) certifies that the subject properties
covered by TCT No. T-11804 is classified as agricultural based on the
certified photocopy of Zoning Ordinance, Ordinance No. 13[,] Series
of 1978 issued by the Housing and Land Use Regulatory Board,
Regional Office No. 3 (HLURB-Region III) on 03 September 2001.
Such certification was corroborated by a certification issued by the
HLURB Regional Director, Region III, Ms. Edithat [sic] Barrameda in
its certification dated 28 May 2001 and 24 November 2003. It was
stated in the said certification that the subject landholding is within
the agricultural zone based on Comprehensive Land Use Plan and
Zoning Ordinance of the City Council of Angeles City approved
'through HLURB Resolution No. 705 dated 17 October 2001. Also a
certification was issued by Director Barrameda on 01 June 2001,
stating therein that, "Duplicate copies of the Certification issued by
this Board to Ms. Lutgarda Torres on 18 December 1991 and 8 July
1998, respectively are not among the files for safekeeping when she
assumed as Regional Officer on 03 July 2000.["] 52 (Emphasis
supplied)chanroblesvirtuallawlibrary
These findings were sustained on appeal by the Office of the
President, stating that:ChanRoblesVirtualawlibrary
[Respondents'] argument that the land has ceased to be agricultural
by virtue of reclassification under Ordinance No. 13, series of 1978
cannot be sustained since the records of the case or the evidence
presented thereto are bereft of any indication showing the same. In
fact, nowhere was it shown that a certified true copy of the said
Ordinance was presented before this Office or the office a
quo.53chanRoblesvirtualLawlibrary
The factual findings of administrative agencies are generally given
great respect and finality by the courts as it is presumed that these
agencies have the knowledge and expertise over matters under their
jurisdiction.5 Both the Department of Agrarian Reform and the Office
of the President found respondent's lands to be agricultural. We see
no reason to disturb these findings.
WHEREFORE, the petition is GRANTED. The decision dated
September 28, 2012 and resolution dated November 29, 2012 of the
Court of Appeals are SET ASIDE. The order dated June 15, 2006 of
the Department of Agrarian Reform and the decision dated May 7,
2009 of the Office of the President are REINSTATED.
SO ORDERED.cralawlawlibrary
HACIENDA LUISITA, INCORPORATED, Petitioner,
LUISITA INDUSTRIAL PARK CORPORATION and RIZAL COMMERCIAL
BANKING CORPORATION,Petitioners-in-Intervention,
vs.
PRESIDENTIAL AGRARIAN REFORM COUNCIL; SECRETARY NASSER
PANGANDAMAN OF THE DEPARTMENT OF AGRARIAN REFORM;
ALYANSA NG MGA MANGGAGAWANG BUKID NG HACIENDA LUISITA,
RENE GALANG, NOEL MALLARI, and JULIO SUNIGA1 and his
SUPERVISORY GROUP OF THE HACIENDA LUISITA, INC. and WINDSOR
ANDAYA, Respondents.
DECISION
VELASCO, JR., J.:
"Land for the landless," a shibboleth the landed gentry doubtless has received
with much misgiving, if not resistance, even if only the number of agrarian suits
filed serves to be the norm. Through the years, this battle cry and root of
discord continues to reflect the seemingly ceaseless discourse on, and great
disparity in, the distribution of land among the people, "dramatizing the
increasingly urgent demand of the dispossessed x x x for a plot of earth as
their place in the sun."2 As administrations and political alignments change,
policies advanced, and agrarian reform laws enacted, the latest being what is
considered a comprehensive piece, the face of land reform varies and is
masked in myriads of ways. The stated goal, however, remains the same: clear
the way for the true freedom of the farmer.3
Land reform, or the broader term "agrarian reform," has been a government
policy even before the Commonwealth era. In fact, at the onset of the American
regime, initial steps toward land reform were already taken to address social
unrest.4 Then, under the 1935 Constitution, specific provisions on social justice
and expropriation of landed estates for distribution to tenants as a solution to
land ownership and tenancy issues were incorporated.
In 1955, the Land Reform Act (Republic Act No. [RA] 1400) was passed,
setting in motion the expropriation of all tenanted estates.5
On August 8, 1963, the Agricultural Land Reform Code (RA 3844) was
enacted,6 abolishing share tenancy and converting all instances of share
tenancy into leasehold tenancy.7 RA 3844 created the Land Bank of the
Philippines (LBP) to provide support in all phases of agrarian reform.
As its major thrust, RA 3844 aimed to create a system of owner-cultivatorship
in rice and corn, supposedly to be accomplished by expropriating lands in
excess of 75 hectares for their eventual resale to tenants. The law, however,
had this restricting feature: its operations were confined mainly to areas in
Central Luzon, and its implementation at any level of intensity limited to the
pilot project in Nueva Ecija.8
Subsequently, Congress passed the Code of Agrarian Reform (RA 6389)
declaring the entire country a land reform area, and providing for the automatic
conversion of tenancy to leasehold tenancy in all areas. From 75 hectares, the
retention limit was cut down to seven hectares.9
Barely a month after declaring martial law in September 1972, then President
Ferdinand Marcos issued Presidential Decree No. 27 (PD 27) for the
"emancipation of the tiller from the bondage of the soil."10 Based on this
issuance, tenant-farmers, depending on the size of the landholding worked on,
can either purchase the land they tilled or shift from share to fixed-rent
leasehold tenancy.11 While touted as "revolutionary," the scope of the agrarian
reform program PD 27 enunciated covered only tenanted, privately-owned rice
and corn lands.12
Then came the revolutionary government of then President Corazon C. Aquino
and the drafting and eventual ratification of the 1987 Constitution. Its
provisions foreshadowed the establishment of a legal framework for the
formulation of an expansive approach to land reform, affecting all agricultural
lands and covering both tenant-farmers and regular farmworkers.13
So it was that Proclamation No. 131, Series of 1987, was issued instituting a
comprehensive agrarian reform program (CARP) to cover all agricultural lands,
regardless of tenurial arrangement and commodity produced, as provided in
the Constitution.
On July 22, 1987, Executive Order No. 229 (EO 229) was issued providing, as
its title14 indicates, the mechanisms for CARP implementation. It created the
Presidential Agrarian Reform Council (PARC) as the highest policy-making
body that formulates all policies, rules, and regulations necessary for the
implementation of CARP.
On June 15, 1988, RA 6657 or the Comprehensive Agrarian Reform Law of
1988, also known as CARL or the CARP Law, took effect, ushering in a new
process of land classification, acquisition, and distribution. As to be expected,
RA 6657 met stiff opposition, its validity or some of its provisions challenged
at every possible turn. Association of Small Landowners in the Philippines, Inc.
v. Secretary of Agrarian Reform 15 stated the observation that the assault was
inevitable, the CARP being an untried and untested project, "an experiment
[even], as all life is an experiment," the Court said, borrowing from Justice
Holmes.
The Case
In this Petition for Certiorari and Prohibition under Rule 65 with prayer for
preliminary injunctive relief, petitioner Hacienda Luisita, Inc. (HLI) assails and
seeks to set aside PARC Resolution No. 2005-32-0116 and Resolution No.
2006-34-0117 issued on December 22, 2005 and May 3, 2006, respectively, as
well as the implementing Notice of Coverage dated January 2, 2006 (Notice of
Coverage).18
The Facts
At the core of the case is Hacienda Luisita de Tarlac (Hacienda Luisita), once
a 6,443-hectare mixed agricultural-industrial-residential expanse straddling
several municipalities of Tarlac and owned by Compaia General de Tabacos
de Filipinas (Tabacalera). In 1957, the Spanish owners of Tabacalera offered
to sell Hacienda Luisita as well as their controlling interest in the sugar mill
within the hacienda, the Central Azucarera de Tarlac (CAT), as an indivisible
transaction. The Tarlac Development Corporation (Tadeco), then owned
and/or controlled by the Jose Cojuangco, Sr. Group, was willing to buy. As
agreed upon, Tadeco undertook to pay the purchase price for Hacienda Luisita
in pesos, while that for the controlling interest in CAT, in US dollars.19
To facilitate the adverted sale-and-purchase package, the Philippine
government, through the then Central Bank of the Philippines, assisted the
buyer to obtain a dollar loan from a US bank.20 Also, the Government Service
Insurance System (GSIS) Board of Trustees extended on November 27, 1957
a PhP 5.911 million loan in favor of Tadeco to pay the peso price component
of the sale. One of the conditions contained in the approving GSIS Resolution
No. 3203, as later amended by Resolution No. 356, Series of 1958, reads as
follows:
That the lots comprising the Hacienda Luisita shall be subdivided by the
applicant-corporation and sold at cost to the tenants, should there be any, and
whenever conditions should exist warranting such action under the provisions
of the Land Tenure Act;21
As of March 31, 1958, Tadeco had fully paid the purchase price for the
acquisition of Hacienda Luisita and Tabacaleras interest in CAT.22
The details of the events that happened next involving the hacienda and the
political color some of the parties embossed are of minimal significance to this
narration and need no belaboring. Suffice it to state that on May 7, 1980, the
martial law administration filed a suit before the Manila Regional Trial Court
(RTC) against Tadeco, et al., for them to surrender Hacienda Luisita to the
then Ministry of Agrarian Reform (MAR, now the Department of Agrarian
Reform [DAR]) so that the land can be distributed to farmers at cost.
Responding, Tadeco or its owners alleged that Hacienda Luisita does not have
tenants, besides which sugar landsof which the hacienda consistedare
not covered by existing agrarian reform legislations. As perceived then, the
government commenced the case against Tadeco as a political message to
the family of the late Benigno Aquino, Jr.23
Eventually, the Manila RTC rendered judgment ordering Tadeco to surrender
Hacienda Luisita to the MAR. Therefrom, Tadeco appealed to the Court of
Appeals (CA).
On March 17, 1988, the Office of the Solicitor General (OSG) moved to
withdraw the governments case against Tadeco, et al. By Resolution of May
18, 1988, the CA dismissed the case the Marcos government initially instituted
and won against Tadeco, et al. The dismissal action was, however, made
subject to the obtention by Tadeco of the PARCs approval of a stock
distribution plan (SDP) that must initially be implemented after such approval
shall have been secured.24 The appellate court wrote:
The defendants-appellants x x x filed a motion on April 13, 1988 joining the x
x x governmental agencies concerned in moving for the dismissal of the case
subject, however, to the following conditions embodied in the letter dated April
8, 1988 (Annex 2) of the Secretary of the [DAR] quoted, as follows:
1. Should TADECO fail to obtain approval of the stock distribution plan
for failure to comply with all the requirements for corporate landowners
set forth in the guidelines issued by the [PARC]: or
2. If such stock distribution plan is approved by PARC, but TADECO
fails to initially implement it.
xxxx
WHEREFORE, the present case on appeal is hereby dismissed without
prejudice, and should be revived if any of the conditions as above set forth is
not duly complied with by the TADECO.25
Markedly, Section 10 of EO 22926 allows corporate landowners, as an
alternative to the actual land transfer scheme of CARP, to give qualified
beneficiaries the right to purchase shares of stocks of the corporation under a
stock ownership arrangement and/or land-to-share ratio.
Like EO 229, RA 6657, under the latters Sec. 31, also provides two (2)
alternative modalities, i.e., land or stock transfer, pursuant to either of which
the corporate landowner can comply with CARP, but subject to well-defined
conditions and timeline requirements. Sec. 31 of RA 6657 provides:
SEC. 31. Corporate Landowners.Corporate landowners may voluntarily
transfer ownership over their agricultural landholdings to the Republic of the
Philippines pursuant to Section 20 hereof or to qualified beneficiaries x x x.
Upon certification by the DAR, corporations owning agricultural lands may
give their qualified beneficiaries the right to purchase such proportion of
the capital stock of the corporation that the agricultural land, actually
devoted to agricultural activities, bears in relation to the companys total
assets, under such terms and conditions as may be agreed upon by them. In
no case shall the compensation received by the workers at the time the shares
of stocks are distributed be reduced. x x x
Corporations or associations which voluntarily divest a proportion of their
capital stock, equity or participation in favor of their workers or other qualified
beneficiaries under this section shall be deemed to have complied with the
provisions of this Act: Provided, That the following conditions are complied
with:
(a) In order to safeguard the right of beneficiaries who own shares of
stocks to dividends and other financial benefits, the books of the
corporation or association shall be subject to periodic audit by certified
public accountants chosen by the beneficiaries;
(b) Irrespective of the value of their equity in the corporation or
association, the beneficiaries shall be assured of at least one (1)
representative in the board of directors, or in a management or
executive committee, if one exists, of the corporation or association;
(c) Any shares acquired by such workers and beneficiaries shall have
the same rights and features as all other shares; and
(d) Any transfer of shares of stocks by the original beneficiaries shall
be void ab initio unless said transaction is in favor of a qualified and
registered beneficiary within the same corporation.
If within two (2) years from the approval of this Act, the [voluntary] land or stock
transfer envisioned above is not made or realized or the plan for such stock
distribution approved by the PARC within the same period, the agricultural land
of the corporate owners or corporation shall be subject to the compulsory
coverage of this Act. (Emphasis added.)
Vis--vis the stock distribution aspect of the aforequoted Sec. 31, DAR issued
Administrative Order No. 10, Series of 1988 (DAO 10), 27 entitled Guidelines
and Procedures for Corporate Landowners Desiring to Avail Themselves of
the Stock Distribution Plan under Section 31 of RA 6657.
From the start, the stock distribution scheme appeared to be Tadecos
preferred option, for, on August 23, 1988,28 it organized a spin-off corporation,
HLI, as vehicle to facilitate stock acquisition by the farmworkers. For this
purpose, Tadeco assigned and conveyed to HLI the agricultural land portion
(4,915.75 hectares) and other farm-related properties of Hacienda Luisita in
exchange for HLI shares of stock.29
Pedro Cojuangco, Josephine C. Reyes, Teresita C. Lopa, Jose Cojuangco,
Jr., and Paz C. Teopaco were the incorporators of HLI.30
To accommodate the assets transfer from Tadeco to HLI, the latter, with the
Securities and Exchange Commissions (SECs) approval, increased its capital
stock on May 10, 1989 from PhP 1,500,000 divided into 1,500,000 shares with
a par value of PhP 1/share to PhP 400,000,000 divided into 400,000,000
shares also with par value of PhP 1/share, 150,000,000 of which were to be
issued only to qualified and registered beneficiaries of the CARP, and the
remaining 250,000,000 to any stockholder of the corporation.31
As appearing in its proposed SDP, the properties and assets of Tadeco
contributed to the capital stock of HLI, as appraised and approved by the SEC,
have an aggregate value of PhP 590,554,220, or after deducting the total
liabilities of the farm amounting to PhP 235,422,758, a net value of PhP
355,531,462. This translated to 355,531,462 shares with a par value of PhP
1/share.32
On May 9, 1989, some 93% of the then farmworker-beneficiaries (FWBs)
complement of Hacienda Luisita signified in a referendum their acceptance of
the proposed HLIs Stock Distribution Option Plan. On May 11, 1989, the Stock
Distribution Option Agreement (SDOA), styled as a Memorandum of
Agreement (MOA),33 was entered into by Tadeco, HLI, and the 5,848 qualified
FWBs34 and attested to by then DAR Secretary Philip Juico. The SDOA
embodied the basis and mechanics of the SDP, which would eventually be
submitted to the PARC for approval. In the SDOA, the parties agreed to the
following:
1. The percentage of the value of the agricultural land of Hacienda
Luisita (P196,630,000.00) in relation to the total assets
(P590,554,220.00) transferred and conveyed to the SECOND PARTY
[HLI] is 33.296% that, under the law, is the proportion of the
outstanding capital stock of the SECOND PARTY, which is
P355,531,462.00 or 355,531,462 shares with a par value of P1.00 per
share, that has to be distributed to the THIRD PARTY [FWBs] under
the stock distribution plan, the said 33.296% thereof being
P118,391,976.85 or 118,391,976.85 shares.
2. The qualified beneficiaries of the stock distribution plan shall be the
farmworkers who appear in the annual payroll, inclusive of the
permanent and seasonal employees, who are regularly or periodically
employed by the SECOND PARTY.
3. At the end of each fiscal year, for a period of 30 years, the
SECOND PARTY shall arrange with the FIRST PARTY [Tadeco]
the acquisition and distribution to the THIRD PARTY on the basis
of number of days worked and at no cost to them of one-thirtieth (1/30)
of 118,391,976.85 shares of the capital stock of the SECOND PARTY
 that are presently owned and held by the FIRST PARTY, until such
time as the entire block of 118,391,976.85 shares shall have been
completely acquired and distributed to the THIRD PARTY.
4.The SECOND PARTY shall guarantee to the qualified beneficiaries
of the [SDP] that every year they will receive on top of their regular
compensation, an amount that approximates the equivalent of three
(3%) of the total gross sales from the production of the agricultural
land, whether it be in the form of cash dividends or incentive bonuses
or both.
5. Even if only a part or fraction of the shares earmarked for distribution
will have been acquired from the FIRST PARTY and distributed to the
THIRD PARTY, FIRST PARTY shall execute at the beginning of each
fiscal year an irrevocable proxy, valid and effective for one (1) year, in
favor of the farmworkers appearing as shareholders of the SECOND
PARTY at the start of said year which will empower the THIRD PARTY
or their representative to vote in stockholders and board of directors
meetings of the SECOND PARTY convened during the year the entire
33.296% of the outstanding capital stock of the SECOND PARTY
earmarked for distribution and thus be able to gain such number of
seats in the board of directors of the SECOND PARTY that the whole
33.296% of the shares subject to distribution will be entitled to.
6. In addition, the SECOND PARTY shall within a reasonable time
subdivide and allocate for free and without charge among the qualified
family-beneficiaries residing in the place where the agricultural land is
situated, residential or homelots of not more than 240 sq.m. each, with
each family-beneficiary being assured of receiving and owning a
homelot in the barangay where it actually resides on the date of the
execution of this Agreement.
7. This Agreement is entered into by the parties in the spirit of the
(C.A.R.P.) of the government and with the supervision of the [DAR],
with the end in view of improving the lot of the qualified beneficiaries
of the [SDP] and obtaining for them greater benefits. (Emphasis
added.)
As may be gleaned from the SDOA, included as part of the distribution plan
are: (a) production-sharing equivalent to three percent (3%) of gross sales
from the production of the agricultural land payable to the FWBs in cash
dividends or incentive bonus; and (b) distribution of free homelots of not more
than 240 square meters each to family-beneficiaries. The production-sharing,
as the SDP indicated, is payable "irrespective of whether [HLI] makes money
or not," implying that the benefits do not partake the nature of dividends, as
the term is ordinarily understood under corporation law.
While a little bit hard to follow, given that, during the period material, the
assigned value of the agricultural land in the hacienda was PhP 196.63 million,
while the total assets of HLI was PhP 590.55 million with net assets of PhP
355.53 million, Tadeco/HLI would admit that the ratio of the land-to-shares of
stock corresponds to 33.3% of the outstanding capital stock of the HLI
equivalent to 118,391,976.85 shares of stock with a par value of PhP 1/share.
Subsequently, HLI submitted to DAR its SDP, designated as "Proposal for
Stock Distribution under C.A.R.P.,"35which was substantially based on the
SDOA.
Notably, in a follow-up referendum the DAR conducted on October 14, 1989,
5,117 FWBs, out of 5,315 who participated, opted to receive shares in
HLI.36 One hundred thirty-two (132) chose actual land distribution.37
After a review of the SDP, then DAR Secretary Miriam Defensor-Santiago
(Sec. Defensor-Santiago) addressed a letter dated November 6, 198938 to
Pedro S. Cojuangco (Cojuangco), then Tadeco president, proposing that the
SDP be revised, along the following lines:
1. That over the implementation period of the [SDP], [Tadeco]/HLI
shall ensure that there will be no dilution in the shares of stocks of
individual [FWBs];
2. That a safeguard shall be provided by [Tadeco]/HLI against the
dilution of the percentage shareholdings of the [FWBs], i.e., that the
33% shareholdings of the [FWBs] will be maintained at any given time;
3. That the mechanics for distributing the stocks be explicitly stated in
the [MOA] signed between the [Tadeco], HLI and its [FWBs] prior to
the implementation of the stock plan;
4. That the stock distribution plan provide for clear and definite terms
for determining the actual number of seats to be allocated for the
[FWBs] in the HLI Board;
5. That HLI provide guidelines and a timetable for the distribution of
homelots to qualified [FWBs]; and
6. That the 3% cash dividends mentioned in the [SDP] be expressly
provided for [in] the MOA.
In a letter-reply of November 14, 1989 to Sec. Defensor-Santiago, Tadeco/HLI
explained that the proposed revisions of the SDP are already embodied in both
the SDP and MOA.39 Following that exchange, the PARC, under then Sec.
Defensor-Santiago, by Resolution No. 89-12-240 dated November 21, 1989,
approved the SDP of Tadeco/HLI.41
At the time of the SDP approval, HLI had a pool of farmworkers, numbering
6,296, more or less, composed of permanent, seasonal and casual master
list/payroll and non-master list members.
From 1989 to 2005, HLI claimed to have extended the following benefits to the
FWBs:
(a) 3 billion pesos (P3,000,000,000) worth of salaries, wages and
fringe benefits
(b) 59 million shares of stock distributed for free to the FWBs;
(c) 150 million pesos (P150,000,000) representing 3% of the gross
produce;
(d) 37.5 million pesos (P37,500,000) representing 3% from the sale of
500 hectares of converted agricultural land of Hacienda Luisita;
(e) 240-square meter homelots distributed for free;
(f) 2.4 million pesos (P2,400,000) representing 3% from the sale of 80
hectares at 80 million pesos (P80,000,000) for the SCTEX;
(g) Social service benefits, such as but not limited to free
hospitalization/medical/maternity services, old age/death benefits and
no interest bearing salary/educational loans and rice sugar
accounts. 42
Two separate groups subsequently contested this claim of HLI.
On August 15, 1995, HLI applied for the conversion of 500 hectares of land of
the hacienda from agricultural to industrial use,43 pursuant to Sec. 65 of RA
6657, providing:
SEC. 65. Conversion of Lands.After the lapse of five (5) years from its award,
when the land ceases to be economically feasible and sound for agricultural
purposes, or the locality has become urbanized and the land will have a greater
economic value for residential, commercial or industrial purposes, the DAR,
upon application of the beneficiary or the landowner, with due notice to the
affected parties, and subject to existing laws, may authorize the
reclassification, or conversion of the land and its disposition: Provided, That
the beneficiary shall have fully paid its obligation.
The application, according to HLI, had the backing of 5,000 or so FWBs,
including respondent Rene Galang, and Jose Julio Suniga, as evidenced by
the Manifesto of Support they signed and which was submitted to the
DAR.44After the usual processing, the DAR, thru then Sec. Ernesto Garilao,
approved the application on August 14, 1996, per DAR Conversion Order No.
030601074-764-(95), Series of 1996,45 subject to payment of three percent
(3%) of the gross selling price to the FWBs and to HLIs continued compliance
with its undertakings under the SDP, among other conditions.
On December 13, 1996, HLI, in exchange for subscription of 12,000,000
shares of stocks of Centennary Holdings, Inc. (Centennary), ceded 300
hectares of the converted area to the latter.46 Consequently, HLIs Transfer
Certificate of Title (TCT) No. 287910 47 was canceled and TCT No.
29209148 was issued in the name of Centennary. HLI transferred the remaining
200 hectares covered by TCT No. 287909 to Luisita Realty Corporation
(LRC)49 in two separate transactions in 1997 and 1998, both uniformly
involving 100 hectares for PhP 250 million each.50
Centennary, a corporation with an authorized capital stock of PhP 12,100,000
divided into 12,100,000 shares and wholly-owned by HLI, had the following
incorporators: Pedro Cojuangco, Josephine C. Reyes, Teresita C. Lopa,
Ernesto G. Teopaco, and Bernardo R. Lahoz.
Subsequently, Centennary sold51 the entire 300 hectares to Luisita Industrial
Park Corporation (LIPCO) for PhP 750 million. The latter acquired it for the
purpose of developing an industrial complex.52 As a result, Centennarys TCT
No. 292091 was canceled to be replaced by TCT No. 31098653 in the name of
LIPCO.
From the area covered by TCT No. 310986 was carved out two (2) parcels, for
which two (2) separate titles were issued in the name of LIPCO, specifically:
(a) TCT No. 36580054 and (b) TCT No. 365801,55 covering 180 and four
hectares, respectively. TCT No. 310986 was, accordingly, partially canceled.
Later on, in a Deed of Absolute Assignment dated November 25, 2004, LIPCO
transferred the parcels covered by its TCT Nos. 365800 and 365801 to the
Rizal Commercial Banking Corporation (RCBC) by way of dacion en pago in
payment of LIPCOs PhP 431,695,732.10 loan obligations. LIPCOs titles were
canceled and new ones, TCT Nos. 391051 and 391052, were issued to RCBC.
Apart from the 500 hectares alluded to, another 80.51 hectares were later
detached from the area coverage of Hacienda Luisita which had been acquired
by the government as part of the Subic-Clark-Tarlac Expressway (SCTEX)
complex. In absolute terms, 4,335.75 hectares remained of the original 4,915
hectares Tadeco ceded to HLI.56
Such, in short, was the state of things when two separate petitions, both
undated, reached the DAR in the latter part of 2003. In the first, denominated
as Petition/Protest,57 respondents Jose Julio Suniga and Windsor Andaya,
identifying themselves as head of the Supervisory Group of HLI (Supervisory
Group), and 60 other supervisors sought to revoke the SDOA, alleging that
HLI had failed to give them their dividends and the one percent (1%) share in
gross sales, as well as the thirty-three percent (33%) share in the proceeds of
the sale of the converted 500 hectares of land. They further claimed that their
lives have not improved contrary to the promise and rationale for the adoption
of the SDOA. They also cited violations by HLI of the SDOAs terms. 58 They
prayed for a renegotiation of the SDOA, or, in the alternative, its revocation.
Revocation and nullification of the SDOA and the distribution of the lands in
the hacienda were the call in the second petition, styled
as Petisyon (Petition).59 The Petisyon was ostensibly filed on December 4,
2003 by Alyansa ng mga Manggagawang Bukid ng Hacienda Luisita
(AMBALA), where the handwritten name of respondents Rene Galang as
"Pangulo AMBALA" and Noel Mallari as "Sec-Gen. AMBALA"60 appeared. As
alleged, the petition was filed on behalf of AMBALAs members purportedly
composing about 80% of the 5,339 FWBs of Hacienda Luisita.
HLI would eventually answer61 the petition/protest of the Supervisory Group.
On the other hand, HLIs answer62 to the AMBALA petition was contained in
its letter dated January 21, 2005 also filed with DAR.
Meanwhile, the DAR constituted a Special Task Force to attend to issues
relating to the SDP of HLI. Among other duties, the Special Task Force was
mandated to review the terms and conditions of the SDOA and PARC
Resolution No. 89-12-2 relative to HLIs SDP; evaluate HLIs compliance
reports; evaluate the merits of the petitions for the revocation of the SDP;
conduct ocular inspections or field investigations; and recommend appropriate
remedial measures for approval of the Secretary. 63
After investigation and evaluation, the Special Task Force submitted its
"Terminal Report: Hacienda Luisita, Incorporated (HLI) Stock Distribution Plan
(SDP) Conflict"64 dated September 22, 2005 (Terminal Report), finding that
HLI has not complied with its obligations under RA 6657 despite the
implementation of the SDP.65 The Terminal Report and the Special Task
Forces recommendations were adopted by then DAR Sec. Nasser
Pangandaman (Sec. Pangandaman).66
Subsequently, Sec. Pangandaman recommended to the PARC Executive
Committee (Excom) (a) the recall/revocation of PARC Resolution No. 89-12-2
dated November 21, 1989 approving HLIs SDP; and (b) the acquisition of
Hacienda Luisita through the compulsory acquisition scheme. Following
review, the PARC Validation Committee favorably endorsed the DAR
Secretarys recommendation afore-stated.67
On December 22, 2005, the PARC issued the assailed Resolution No. 2005-
32-01, disposing as follows:
NOW, THEREFORE, on motion duly seconded, RESOLVED, as it is HEREBY
RESOLVED, to approve and confirm the recommendation of the PARC
Executive Committee adopting in toto the report of the PARC ExCom
Validation Committee affirming the recommendation of the DAR to
recall/revoke the SDO plan of Tarlac Development Corporation/Hacienda
Luisita Incorporated.
RESOLVED, further, that the lands subject of the recalled/revoked TDC/HLI
SDO plan be forthwith placed under the compulsory coverage or mandated
land acquisition scheme of the [CARP].
APPROVED.68
A copy of Resolution No. 2005-32-01 was served on HLI the following day,
December 23, without any copy of the documents adverted to in the resolution
attached. A letter-request dated December 28, 200569 for certified copies of
said documents was sent to, but was not acted upon by, the PARC secretariat.
Therefrom, HLI, on January 2, 2006, sought reconsideration.70 On the same
day, the DAR Tarlac provincial office issued the Notice of Coverage71 which
HLI received on January 4, 2006.
Its motion notwithstanding, HLI has filed the instant recourse in light of what it
considers as the DARs hasty placing of Hacienda Luisita under CARP even
before PARC could rule or even read the motion for reconsideration.72 As HLI
later rued, it "can not know from the above-quoted resolution the facts and the
law upon which it is based."73
PARC would eventually deny HLIs motion for reconsideration via Resolution
No. 2006-34-01 dated May 3, 2006.
By Resolution of June 14, 2006,74 the Court, acting on HLIs motion, issued a
temporary restraining order,75enjoining the implementation of Resolution No.
2005-32-01 and the notice of coverage.
On July 13, 2006, the OSG, for public respondents PARC and the DAR, filed
its Comment76 on the petition.
On December 2, 2006, Noel Mallari, impleaded by HLI as respondent in his
capacity as "Sec-Gen. AMBALA," filed his Manifestation and Motion with
Comment Attached dated December 4, 2006 (Manifestation and Motion). 77 In
it, Mallari stated that he has broken away from AMBALA with other AMBALA
ex-members and formed Farmworkers Agrarian Reform Movement, Inc.
(FARM).78 Should this shift in alliance deny him standing, Mallari also prayed
that FARM be allowed to intervene.
As events would later develop, Mallari had a parting of ways with other FARM
members, particularly would-be intervenors Renato Lalic, et al. As things
stand, Mallari returned to the AMBALA fold, creating the AMBALA-Noel Mallari
faction and leaving Renato Lalic, et al. as the remaining members of FARM
who sought to intervene.
On January 10, 2007, the Supervisory Group79 and the AMBALA-Rene Galang
faction submitted their Comment/Opposition dated December 17, 2006.80
On October 30, 2007, RCBC filed a Motion for Leave to Intervene and to File
and Admit Attached Petition-In-Intervention dated October 18, 2007.81 LIPCO
later followed with a similar motion.82 In both motions, RCBC and LIPCO
contended that the assailed resolution effectively nullified the TCTs under their
respective names as the properties covered in the TCTs were veritably
included in the January 2, 2006 notice of coverage. In the main, they claimed
that the revocation of the SDP cannot legally affect their rights as innocent
purchasers for value. Both motions for leave to intervene were granted and the
corresponding petitions-in-intervention admitted.
On August 18, 2010, the Court heard the main and intervening petitioners on
oral arguments. On the other hand, the Court, on August 24, 2010, heard
public respondents as well as the respective counsels of the AMBALA-Mallari-
Supervisory Group, the AMBALA-Galang faction, and the FARM and its 27
members83 argue their case.
Prior to the oral arguments, however, HLI; AMBALA, represented by Mallari;
the Supervisory Group, represented by Suniga and Andaya; and the United
Luisita Workers Union, represented by Eldifonso Pingol, filed with the Court a
joint submission and motion for approval of a Compromise Agreement (English
and Tagalog versions) dated August 6, 2010.
On August 31, 2010, the Court, in a bid to resolve the dispute through an
amicable settlement, issued a Resolution84 creating a Mediation Panel
composed of then Associate Justice Ma. Alicia Austria-Martinez, as
chairperson, and former CA Justices Hector Hofilea and Teresita Dy-Liacco
Flores, as members. Meetings on five (5) separate dates, i.e., September 8,
9, 14, 20, and 27, 2010, were conducted. Despite persevering and painstaking
efforts on the part of the panel, mediation had to be discontinued when no
acceptable agreement could be reached.
The Issues
HLI raises the following issues for our consideration:
I.
WHETHER OR NOT PUBLIC RESPONDENTS PARC AND
SECRETARY PANGANDAMAN HAVE JURISDICTION, POWER
AND/OR AUTHORITY TO NULLIFY, RECALL, REVOKE OR
RESCIND THE SDOA.
II.
[IF SO], x x x CAN THEY STILL EXERCISE SUCH JURISDICTION,
POWER AND/OR AUTHORITY AT THIS TIME, I.E., AFTER
SIXTEEN (16) YEARS FROM THE EXECUTION OF THE SDOA AND
ITS IMPLEMENTATION WITHOUT VIOLATING SECTIONS 1 AND
10 OF ARTICLE III (BILL OF RIGHTS) OF THE CONSTITUTION
AGAINST DEPRIVATION OF PROPERTY WITHOUT DUE
PROCESS OF LAW AND THE IMPAIRMENT OF CONTRACTUAL
RIGHTS AND OBLIGATIONS? MOREOVER, ARE THERE LEGAL
GROUNDS UNDER THE CIVIL CODE, viz, ARTICLE 1191 x x x,
ARTICLES 1380, 1381 AND 1382 x x x ARTICLE 1390 x x x AND
ARTICLE 1409 x x x THAT CAN BE INVOKED TO NULLIFY,
RECALL, REVOKE, OR RESCIND THE SDOA?
III.
WHETHER THE PETITIONS TO NULLIFY, RECALL, REVOKE OR
RESCIND THE SDOA HAVE ANY LEGAL BASIS OR GROUNDS
AND WHETHER THE PETITIONERS THEREIN ARE THE REAL
PARTIES-IN-INTEREST TO FILE SAID PETITIONS.
IV.
 WHETHER THE RIGHTS, OBLIGATIONS AND REMEDIES OF THE
PARTIES TO THE SDOA ARE NOW GOVERNED BY THE
CORPORATION CODE (BATAS PAMBANSA BLG. 68) AND NOT
BY THE x x x [CARL] x x x.
On the other hand, RCBC submits the following issues:
I.
RESPONDENT PARC COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION WHEN IT DID NOT EXCLUDE THE SUBJECT
PROPERTY FROM THE COVERAGE OF THE CARP DESPITE THE
FACT THAT PETITIONER-INTERVENOR RCBC HAS ACQUIRED
VESTED RIGHTS AND INDEFEASIBLE TITLE OVER THE
SUBJECT PROPERTY AS AN INNOCENT PURCHASER FOR
VALUE.
A. THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE
NOTICE OF COVERAGE DATED 02 JANUARY 2006 HAVE
THE EFFECT OF NULLIFYING TCT NOS. 391051 AND
391052 IN THE NAME OF PETITIONER-INTERVENOR
RCBC.
B. AS AN INNOCENT PURCHASER FOR VALUE,
PETITIONER-INTERVENOR RCBC CANNOT BE
PREJUDICED BY A SUBSEQUENT REVOCATION OR
RESCISSION OF THE SDOA.
II.
THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE NOTICE
OF COVERAGE DATED 02 JANUARY 2006 WERE ISSUED
WITHOUT AFFORDING PETITIONER-INTERVENOR RCBC ITS
RIGHT TO DUE PROCESS AS AN INNOCENT PURCHASER FOR
VALUE.
LIPCO, like RCBC, asserts having acquired vested and indefeasible rights
over certain portions of the converted property, and, hence, would ascribe on
PARC the commission of grave abuse of discretion when it included those
portions in the notice of coverage. And apart from raising issues identical with
those of HLI, such as but not limited to the absence of valid grounds to warrant
the rescission and/or revocation of the SDP, LIPCO would allege that the
assailed resolution and the notice of coverage were issued without affording it
the right to due process as an innocent purchaser for value. The government,
LIPCO also argues, is estopped from recovering properties which have since
passed to innocent parties.
Simply formulated, the principal determinative issues tendered in the main
petition and to which all other related questions must yield boil down to the
following: (1) matters of standing; (2) the constitutionality of Sec. 31 of RA
6657; (3) the jurisdiction of PARC to recall or revoke HLIs SDP; (4) the validity
or propriety of such recall or revocatory action; and (5) corollary to (4), the
validity of the terms and conditions of the SDP, as embodied in the SDOA.
Our Ruling
I.
We first proceed to the examination of the preliminary issues before delving
on the more serious challenges bearing on the validity of PARCs assailed
issuance and the grounds for it.
Supervisory Group, AMBALA and their
respective leaders are real parties-in-interest
HLI would deny real party-in-interest status to the purported leaders of the
Supervisory Group and AMBALA, i.e., Julio Suniga, Windsor Andaya, and
Rene Galang, who filed the revocatory petitions before the DAR. As HLI would
have it, Galang, the self-styled head of AMBALA, gained HLI employment in
June 1990 and, thus, could not have been a party to the SDOA executed a
year earlier.85 As regards the Supervisory Group, HLI alleges that supervisors
are not regular farmworkers, but the company nonetheless considered them
FWBs under the SDOA as a mere concession to enable them to enjoy the
same benefits given qualified regular farmworkers. However, if the SDOA
would be canceled and land distribution effected, so HLI claims, citing Fortich
v. Corona,86 the supervisors would be excluded from receiving lands as
farmworkers other than the regular farmworkers who are merely entitled to the
"fruits of the land."87
The SDOA no less identifies "the SDP qualified beneficiaries" as "the
farmworkers who appear in the annual payroll, inclusive of the permanent and
seasonal employees, who are regularly or periodically employed by
[HLI]."88 Galang, per HLIs own admission, is employed by HLI, and is, thus, a
qualified beneficiary of the SDP; he comes within the definition of a real party-
in-interest under Sec. 2, Rule 3 of the Rules of Court, meaning, one who stands
to be benefited or injured by the judgment in the suit or is the party entitled to
the avails of the suit.
The same holds true with respect to the Supervisory Group whose members
were admittedly employed by HLI and whose names and signatures even
appeared in the annex of the SDOA. Being qualified beneficiaries of the SDP,
Suniga and the other 61 supervisors are certainly parties who would benefit or
be prejudiced by the judgment recalling the SDP or replacing it with some other
modality to comply with RA 6657.
Even assuming that members of the Supervisory Group are not regular
farmworkers, but are in the category of "other farmworkers" mentioned in Sec.
4, Article XIII of the Constitution,89 thus only entitled to a share of the fruits of
the land, as indeed Fortich teaches, this does not detract from the fact that
they are still identified as being among the "SDP qualified beneficiaries." As
such, they are, thus, entitled to bring an action upon the SDP.90 At any rate,
the following admission made by Atty. Gener Asuncion, counsel of HLI, during
the oral arguments should put to rest any lingering doubt as to the status of
protesters Galang, Suniga, and Andaya:
Justice Bersamin: x x x I heard you a while ago that you were conceding the
qualified farmer beneficiaries of Hacienda Luisita were real parties in interest?
Atty. Asuncion: Yes, Your Honor please, real party in interest which that
question refers to the complaints of protest initiated before the DAR and the
real party in interest there be considered as possessed by the farmer
beneficiaries who initiated the protest.91
Further, under Sec. 50, paragraph 4 of RA 6657, farmer-leaders are expressly
allowed to represent themselves, their fellow farmers or their organizations in
any proceedings before the DAR. Specifically:
SEC. 50. Quasi-Judicial Powers of the DAR.x x x
xxxx
Responsible farmer leaders shall be allowed to represent themselves,
their fellow farmers or their organizations in any proceedings before the
DAR: Provided, however, that when there are two or more representatives for
any individual or group, the representatives should choose only one among
themselves to represent such party or group before any DAR proceedings.
(Emphasis supplied.)
Clearly, the respective leaders of the Supervisory Group and AMBALA are
contextually real parties-in-interest allowed by law to file a petition before the
DAR or PARC.
This is not necessarily to say, however, that Galang represents AMBALA, for
as records show and as HLI aptly noted,92 his "petisyon" filed with DAR did not
carry the usual authorization of the individuals in whose behalf it was supposed
to have been instituted. To date, such authorization document, which would
logically include a list of the names of the authorizing FWBs, has yet to be
submitted to be part of the records.
PARCs Authority to Revoke a Stock Distribution Plan
On the postulate that the subject jurisdiction is conferred by law, HLI maintains
that PARC is without authority to revoke an SDP, for neither RA 6657 nor EO
229 expressly vests PARC with such authority. While, as HLI argued, EO 229
empowers PARC to approve the plan for stock distribution in appropriate
cases, the empowerment only includes the power to disapprove, but not to
recall its previous approval of the SDP after it has been implemented by the
parties.93 To HLI, it is the court which has jurisdiction and authority to order the
revocation or rescission of the PARC-approved SDP.
We disagree.
Under Sec. 31 of RA 6657, as implemented by DAO 10, the authority to
approve the plan for stock distribution of the corporate landowner belongs to
PARC. However, contrary to petitioner HLIs posture, PARC also has the
power to revoke the SDP which it previously approved. It may be, as urged,
that RA 6657 or other executive issuances on agrarian reform do not explicitly
vest the PARC with the power to revoke/recall an approved SDP. Such power
or authority, however, is deemed possessed by PARC under the principle of
necessary implication, a basic postulate that what is implied in a statute is as
much a part of it as that which is expressed.94
We have explained that "every statute is understood, by implication, to contain
all such provisions as may be necessary to effectuate its object and purpose,
or to make effective rights, powers, privileges or jurisdiction which it grants,
including all such collateral and subsidiary consequences as may be fairly and
logically inferred from its terms."95 Further, "every statutory grant of power,
right or privilege is deemed to include all incidental power, right or privilege. 96
Gordon v. Veridiano II is instructive:
The power to approve a license includes by implication, even if not expressly
granted, the power to revoke it. By extension, the power to revoke is limited by
the authority to grant the license, from which it is derived in the first place.
Thus, if the FDA grants a license upon its finding that the applicant drug store
has complied with the requirements of the general laws and the implementing
administrative rules and regulations, it is only for their violation that the FDA
may revoke the said license. By the same token, having granted the permit
upon his ascertainment that the conditions thereof as applied x x x have been
complied with, it is only for the violation of such conditions that the mayor may
revoke the said permit.97 (Emphasis supplied.)
Following the doctrine of necessary implication, it may be stated that the
conferment of express power to approve a plan for stock distribution of the
agricultural land of corporate owners necessarily includes the power to revoke
or recall the approval of the plan.
As public respondents aptly observe, to deny PARC such revocatory power
would reduce it into a toothless agency of CARP, because the very same
agency tasked to ensure compliance by the corporate landowner with the
approved SDP would be without authority to impose sanctions for non-
compliance with it.98 With the view We take of the case, only PARC can effect
such revocation. The DAR Secretary, by his own authority as such, cannot
plausibly do so, as the acceptance and/or approval of the SDP sought to be
taken back or undone is the act of PARC whose official composition includes,
no less, the President as chair, the DAR Secretary as vice-chair, and at least
eleven (11) other department heads.99
On another but related issue, the HLI foists on the Court the argument that
subjecting its landholdings to compulsory distribution after its approved SDP
has been implemented would impair the contractual obligations created under
the SDOA.
The broad sweep of HLIs argument ignores certain established legal precepts
and must, therefore, be rejected.
A law authorizing interference, when appropriate, in the contractual relations
between or among parties is deemed read into the contract and its
implementation cannot successfully be resisted by force of the non-impairment
guarantee. There is, in that instance, no impingement of the impairment
clause, the non-impairment protection being applicable only to laws that
derogate prior acts or contracts by enlarging, abridging or in any manner
changing the intention of the parties. Impairment, in fine, obtains if a
subsequent law changes the terms of a contract between the parties, imposes
new conditions, dispenses with those agreed upon or withdraws existing
remedies for the enforcement of the rights of the parties. 100 Necessarily, the
constitutional proscription would not apply to laws already in effect at the time
of contract execution, as in the case of RA 6657, in relation to DAO 10, vis--
vis HLIs SDOA. As held in Serrano v. Gallant Maritime Services, Inc.:
The prohibition [against impairment of the obligation of contracts] is aligned
with the general principle that laws newly enacted have only a prospective
operation, and cannot affect acts or contracts already perfected; however, as
to laws already in existence, their provisions are read into contracts and
deemed a part thereof. Thus, the non-impairment clause under Section 10,
Article II [of the Constitution] is limited in application to laws about to be
enacted that would in any way derogate from existing acts or contracts by
enlarging, abridging or in any manner changing the intention of the parties
thereto.101 (Emphasis supplied.)
Needless to stress, the assailed Resolution No. 2005-32-01 is not the kind of
issuance within the ambit of Sec. 10, Art. III of the Constitution providing that
"[n]o law impairing the obligation of contracts shall be passed."
Parenthetically, HLI tags the SDOA as an ordinary civil law contract and, as
such, a breach of its terms and conditions is not a PARC administrative matter,
but one that gives rise to a cause of action cognizable by regular courts. 102 This
contention has little to commend itself. The SDOA is a special contract imbued
with public interest, entered into and crafted pursuant to the provisions of RA
6657. It embodies the SDP, which requires for its validity, or at least its
enforceability, PARCs approval. And the fact that the certificate of
compliance103to be issued by agrarian authorities upon completion of the
distribution of stocksis revocable by the same issuing authority supports the
idea that everything about the implementation of the SDP is, at the first
instance, subject to administrative adjudication.
HLI also parlays the notion that the parties to the SDOA should now look to
the Corporation Code, instead of to RA 6657, in determining their rights,
obligations and remedies. The Code, it adds, should be the applicable law on
the disposition of the agricultural land of HLI.
Contrary to the view of HLI, the rights, obligations and remedies of the parties
to the SDOA embodying the SDP are primarily governed by RA 6657. It should
abundantly be made clear that HLI was precisely created in order to comply
with RA 6657, which the OSG aptly described as the "mother law" of the SDOA
and the SDP.104 It is, thus, paradoxical for HLI to shield itself from the coverage
of CARP by invoking exclusive applicability of the Corporation Code under the
guise of being a corporate entity.
Without in any way minimizing the relevance of the Corporation Code since
the FWBs of HLI are also stockholders, its applicability is limited as the rights
of the parties arising from the SDP should not be made to supplant or
circumvent the agrarian reform program.
Without doubt, the Corporation Code is the general law providing for the
formation, organization and regulation of private corporations. On the other
hand, RA 6657 is the special law on agrarian reform. As between a general
and special law, the latter shall prevailgeneralia specialibus non
derogant.105 Besides, the present impasse between HLI and the private
respondents is not an intra-corporate dispute which necessitates the
application of the Corporation Code. What private respondents questioned
before the DAR is the proper implementation of the SDP and HLIs compliance
with RA 6657. Evidently, RA 6657 should be the applicable law to the instant
case.
HLI further contends that the inclusion of the agricultural land of Hacienda
Luisita under the coverage of CARP and the eventual distribution of the land
to the FWBs would amount to a disposition of all or practically all of the
corporate assets of HLI. HLI would add that this contingency, if ever it comes
to pass, requires the applicability of the Corporation Code provisions on
corporate dissolution.
We are not persuaded.
Indeed, the provisions of the Corporation Code on corporate dissolution would
apply insofar as the winding up of HLIs affairs or liquidation of the assets is
concerned. However, the mere inclusion of the agricultural land of Hacienda
Luisita under the coverage of CARP and the lands eventual distribution to the
FWBs will not, without more, automatically trigger the dissolution of HLI. As
stated in the SDOA itself, the percentage of the value of the agricultural land
of Hacienda Luisita in relation to the total assets transferred and conveyed by
Tadeco to HLI comprises only 33.296%, following this equation: value of the
agricultural lands divided by total corporate assets. By no stretch of
imagination would said percentage amount to a disposition of all or practically
all of HLIs corporate assets should compulsory land acquisition and
distribution ensue.
This brings us to the validity of the revocation of the approval of the SDP
sixteen (16) years after its execution pursuant to Sec. 31 of RA 6657 for the
reasons set forth in the Terminal Report of the Special Task Force, as
endorsed by PARC Excom. But first, the matter of the constitutionality of said
section.
Constitutional Issue
FARM asks for the invalidation of Sec. 31 of RA 6657, insofar as it affords the
corporation, as a mode of CARP compliance, to resort to stock distribution, an
arrangement which, to FARM, impairs the fundamental right of farmers and
farmworkers under Sec. 4, Art. XIII of the Constitution. 106
To a more specific, but direct point, FARM argues that Sec. 31 of RA 6657
permits stock transfer in lieu of outright agricultural land transfer; in fine, there
is stock certificate ownership of the farmers or farmworkers instead of them
owning the land, as envisaged in the Constitution. For FARM, this modality of
distribution is an anomaly to be annulled for being inconsistent with the basic
concept of agrarian reform ingrained in Sec. 4, Art. XIII of the Constitution. 107
Reacting, HLI insists that agrarian reform is not only about transfer of land
ownership to farmers and other qualified beneficiaries. It draws attention in this
regard to Sec. 3(a) of RA 6657 on the concept and scope of the term "agrarian
reform." The constitutionality of a law, HLI added, cannot, as here, be attacked
collaterally.
The instant challenge on the constitutionality of Sec. 31 of RA 6657 and
necessarily its counterpart provision in EO 229 must fail as explained below.
When the Court is called upon to exercise its power of judicial review over, and
pass upon the constitutionality of, acts of the executive or legislative
departments, it does so only when the following essential requirements are
first met, to wit:
(1) there is an actual case or controversy;
(2) that the constitutional question is raised at the earliest possible
opportunity by a proper party or one with locus standi; and
(3) the issue of constitutionality must be the very lis mota of the
case.108
Not all the foregoing requirements are satisfied in the case at bar.
While there is indeed an actual case or controversy, intervenor FARM,
composed of a small minority of 27 farmers, has yet to explain its failure to
challenge the constitutionality of Sec. 3l of RA 6657, since as early as
November 21, l989 when PARC approved the SDP of Hacienda Luisita or at
least within a reasonable time thereafter and why its members received
benefits from the SDP without so much of a protest. It was only on December
4, 2003 or 14 years after approval of the SDP via PARC Resolution No. 89-
12-2 dated November 21, 1989 that said plan and approving resolution were
sought to be revoked, but not, to stress, by FARM or any of its members, but
by petitioner AMBALA. Furthermore, the AMBALA petition did NOT question
the constitutionality of Sec. 31 of RA 6657, but concentrated on the purported
flaws and gaps in the subsequent implementation of the SDP. Even the public
respondents, as represented by the Solicitor General, did not question the
constitutionality of the provision. On the other hand, FARM, whose 27
members formerly belonged to AMBALA, raised the constitutionality of Sec.
31 only on May 3, 2007 when it filed its Supplemental Comment with the Court.
Thus, it took FARM some eighteen (18) years from November 21, 1989 before
it challenged the constitutionality of Sec. 31 of RA 6657 which is quite too late
in the day. The FARM members slept on their rights and even accepted
benefits from the SDP with nary a complaint on the alleged unconstitutionality
of Sec. 31 upon which the benefits were derived. The Court cannot now be
goaded into resolving a constitutional issue that FARM failed to assail after the
lapse of a long period of time and the occurrence of numerous events and
activities which resulted from the application of an alleged unconstitutional
legal provision.
It has been emphasized in a number of cases that the question of
constitutionality will not be passed upon by the Court unless it is properly raised
and presented in an appropriate case at the first opportunity. 109 FARM is,
therefore, remiss in belatedly questioning the constitutionality of Sec. 31 of RA
6657. The second requirement that the constitutional question should be
raised at the earliest possible opportunity is clearly wanting.
The last but the most important requisite that the constitutional issue must be
the very lis mota of the case does not likewise obtain. The lis mota aspect is
not present, the constitutional issue tendered not being critical to the resolution
of the case. The unyielding rule has been to avoid, whenever plausible, an
issue assailing the constitutionality of a statute or governmental act. 110 If some
other grounds exist by which judgment can be made without touching the
constitutionality of a law, such recourse is favored. 111 Garcia v. Executive
Secretary explains why:
Lis Mota the fourth requirement to satisfy before this Court will undertake
judicial review means that the Court will not pass upon a question of
unconstitutionality, although properly presented, if the case can be disposed
of on some other ground, such as the application of the statute or the general
law. The petitioner must be able to show that the case cannot be legally
resolved unless the constitutional question raised is determined. This
requirement is based on the rule that every law has in its favor the presumption
of constitutionality; to justify its nullification, there must be a clear and
unequivocal breach of the Constitution, and not one that is doubtful,
speculative, or argumentative.112 (Italics in the original.)
The lis mota in this case, proceeding from the basic positions originally taken
by AMBALA (to which the FARM members previously belonged) and the
Supervisory Group, is the alleged non-compliance by HLI with the conditions
of the SDP to support a plea for its revocation. And before the Court, the lis
mota is whether or not PARC acted in grave abuse of discretion when it
ordered the recall of the SDP for such non-compliance and the fact that the
SDP, as couched and implemented, offends certain constitutional and
statutory provisions. To be sure, any of these key issues may be resolved
without plunging into the constitutionality of Sec. 31 of RA 6657. Moreover,
looking deeply into the underlying petitions of AMBALA, et al., it is not the said
section per se that is invalid, but rather it is the alleged application of the said
provision in the SDP that is flawed.
It may be well to note at this juncture that Sec. 5 of RA 9700,113 amending Sec.
7 of RA 6657, has all but superseded Sec. 31 of RA 6657 vis--vis the stock
distribution component of said Sec. 31. In its pertinent part, Sec. 5 of RA 9700
provides: "[T]hat after June 30, 2009, the modes of acquisition shall
be limited to voluntary offer to sell and compulsory acquisition." Thus, for all
intents and purposes, the stock distribution scheme under Sec. 31 of RA 6657
is no longer an available option under existing law. The question of whether or
not it is unconstitutional should be a moot issue.
It is true that the Court, in some cases, has proceeded to resolve constitutional
issues otherwise already moot and academic114 provided the following
requisites are present:
x x x first, there is a grave violation of the Constitution; second, the exceptional
character of the situation and the paramount public interest is involved; third,
when the constitutional issue raised requires formulation of controlling
principles to guide the bench, the bar, and the public; fourth, the case is
capable of repetition yet evading review.
These requisites do not obtain in the case at bar.
For one, there appears to be no breach of the fundamental law. Sec. 4, Article
XIII of the Constitution reads:
The State shall, by law, undertake an agrarian reform program founded on the
right of the farmers and regular farmworkers, who are landless, to OWN
directly or COLLECTIVELY THE LANDS THEY TILL or, in the case of other
farmworkers, to receive a just share of the fruits thereof. To this end, the State
shall encourage and undertake the just distribution of all agricultural lands,
subject to such priorities and reasonable retention limits as the Congress may
prescribe, taking into account ecological, developmental, or equity
considerations, and subject to the payment of just compensation. In
determining retention limits, the State shall respect the right of small
landowners. The State shall further provide incentives for voluntary land-
sharing. (Emphasis supplied.)
The wording of the provision is unequivocalthe farmers and regular
farmworkers have a right TO OWN DIRECTLY OR COLLECTIVELY THE
LANDS THEY TILL. The basic law allows two (2) modes of land distribution
direct and indirect ownership. Direct transfer to individual farmers is the most
commonly used method by DAR and widely accepted. Indirect transfer through
collective ownership of the agricultural land is the alternative to direct
ownership of agricultural land by individual farmers. The aforequoted Sec. 4
EXPRESSLY authorizes collective ownership by farmers. No language can be
found in the 1987 Constitution that disqualifies or prohibits corporations or
cooperatives of farmers from being the legal entity through which collective
ownership can be exercised. The word "collective" is defined as "indicating a
number of persons or things considered as constituting one group or
aggregate,"115 while "collectively" is defined as "in a collective sense or
manner; in a mass or body."116 By using the word "collectively," the
Constitution allows for indirect ownership of land and not just outright
agricultural land transfer. This is in recognition of the fact that land reform may
become successful even if it is done through the medium of juridical entities
composed of farmers.
Collective ownership is permitted in two (2) provisions of RA 6657. Its Sec. 29
allows workers cooperatives or associations to collectively own the land, while
the second paragraph of Sec. 31 allows corporations or associations to own
agricultural land with the farmers becoming stockholders or members. Said
provisions read:
SEC. 29. Farms owned or operated by corporations or other business
associations.In the case of farms owned or operated by corporations or
other business associations, the following rules shall be observed by the
PARC.
In general, lands shall be distributed directly to the individual worker-
beneficiaries.
In case it is not economically feasible and sound to divide the land, then it shall
be owned collectively by the worker beneficiaries who shall form a workers
cooperative or association which will deal with the corporation or business
association. x x x (Emphasis supplied.)
SEC. 31. Corporate Landowners. x x x
xxxx
Upon certification by the DAR, corporations owning agricultural lands may give
their qualified beneficiaries the right to purchase such proportion of the capital
stock of the corporation that the agricultural land, actually devoted to
agricultural activities, bears in relation to the companys total assets, under
such terms and conditions as may be agreed upon by them. In no case shall
the compensation received by the workers at the time the shares of stocks are
distributed be reduced. The same principle shall be applied to associations,
with respect to their equity or participation. x x x (Emphasis supplied.)
Clearly, workers cooperatives or associations under Sec. 29 of RA 6657 and
corporations or associations under the succeeding Sec. 31, as differentiated
from individual farmers, are authorized vehicles for the collective ownership of
agricultural land. Cooperatives can be registered with the Cooperative
Development Authority and acquire legal personality of their own, while
corporations are juridical persons under the Corporation Code. Thus, Sec. 31
is constitutional as it simply implements Sec. 4 of Art. XIII of the Constitution
that land can be owned COLLECTIVELY by farmers. Even the framers of the
l987 Constitution are in unison with respect to the two (2) modes of ownership
of agricultural lands tilled by farmersDIRECT and COLLECTIVE, thus:
MR. NOLLEDO. And when we talk of the phrase "to own directly," we mean
the principle of direct ownership by the tiller?
MR. MONSOD. Yes.
MR. NOLLEDO. And when we talk of "collectively," we mean communal
ownership, stewardship or State ownership?
MS. NIEVA. In this section, we conceive of cooperatives; that is farmers
cooperatives owning the land, not the State.
MR. NOLLEDO. And when we talk of "collectively," referring to farmers
cooperatives, do the farmers own specific areas of land where they only unite
in their efforts?
MS. NIEVA. That is one way.
MR. NOLLEDO. Because I understand that there are two basic systems
involved: the "moshave" type of agriculture and the "kibbutz." So are both
contemplated in the report?
MR. TADEO. Ang dalawa kasing pamamaraan ng pagpapatupad ng tunay na
reporma sa lupa ay ang pagmamay-ari ng lupa na hahatiin sa individual na
pagmamay-ari directly at ang tinatawag na sama-samang gagawin ng mga
magbubukid. Tulad sa Negros, ang gusto ng mga magbubukid ay gawin nila
itong "cooperative or collective farm." Ang ibig sabihin ay sama-sama nilang
sasakahin.
xxxx
MR. TINGSON. x x x When we speak here of "to own directly or collectively
the lands they till," is this land for the tillers rather than land for the landless?
Before, we used to hear "land for the landless," but now the slogan is "land for
the tillers." Is that right?
MR. TADEO. Ang prinsipyong umiiral dito ay iyong land for the tillers. Ang ibig
sabihin ng "directly" ay tulad sa implementasyon sa rice and corn lands kung
saan inaari na ng mga magsasaka ang lupang binubungkal nila. Ang ibig
sabihin naman ng "collectively" ay sama-samang paggawa sa isang lupain o
isang bukid, katulad ng sitwasyon sa Negros.117 (Emphasis supplied.)
As Commissioner Tadeo explained, the farmers will work on the agricultural
land "sama-sama" or collectively. Thus, the main requisite for collective
ownership of land is collective or group work by farmers of the agricultural land.
Irrespective of whether the landowner is a cooperative, association or
corporation composed of farmers, as long as concerted group work by the
farmers on the land is present, then it falls within the ambit of collective
ownership scheme.
Likewise, Sec. 4, Art. XIII of the Constitution makes mention of a commitment
on the part of the State to pursue, by law, an agrarian reform program founded
on the policy of land for the landless, but subject to such priorities as Congress
may prescribe, taking into account such abstract variable as "equity
considerations." The textual reference to a law and Congress necessarily
implies that the above constitutional provision is not self-executory and that
legislation is needed to implement the urgently needed program of agrarian
reform. And RA 6657 has been enacted precisely pursuant to and as a
mechanism to carry out the constitutional directives. This piece of legislation,
in fact, restates118 the agrarian reform policy established in the aforementioned
provision of the Constitution of promoting the welfare of landless farmers and
farmworkers. RA 6657 thus defines "agrarian reform" as "the redistribution of
lands to farmers and regular farmworkers who are landless to lift the
economic status of the beneficiaries and all other arrangements alternative
to the physical redistribution of lands, such as production or profit sharing,
labor administration and the distribution of shares of stock which will allow
beneficiaries to receive a just share of the fruits of the lands they work."
With the view We take of this case, the stock distribution option devised under
Sec. 31 of RA 6657 hews with the agrarian reform policy, as instrument of
social justice under Sec. 4 of Article XIII of the Constitution. Albeit land
ownership for the landless appears to be the dominant theme of that policy,
We emphasize that Sec. 4, Article XIII of the Constitution, as couched, does
not constrict Congress to passing an agrarian reform law planted on direct land
transfer to and ownership by farmers and no other, or else the enactment
suffers from the vice of unconstitutionality. If the intention were otherwise, the
framers of the Constitution would have worded said section in a manner
mandatory in character.
For this Court, Sec. 31 of RA 6657, with its direct and indirect transfer features,
is not inconsistent with the States commitment to farmers and farmworkers to
advance their interests under the policy of social justice. The legislature, thru
Sec. 31 of RA 6657, has chosen a modality for collective ownership by which
the imperatives of social justice may, in its estimation, be approximated, if not
achieved. The Court should be bound by such policy choice.
FARM contends that the farmers in the stock distribution scheme under Sec.
31 do not own the agricultural land but are merely given stock certificates.
Thus, the farmers lose control over the land to the board of directors and
executive officials of the corporation who actually manage the land. They
conclude that such arrangement runs counter to the mandate of the
Constitution that any agrarian reform must preserve the control over the land
in the hands of the tiller.
This contention has no merit.
While it is true that the farmer is issued stock certificates and does not directly
own the land, still, the Corporation Code is clear that the FWB becomes a
stockholder who acquires an equitable interest in the assets of the corporation,
which include the agricultural lands. It was explained that the "equitable
interest of the shareholder in the property of the corporation is represented by
the term stock, and the extent of his interest is described by the term shares.
The expression shares of stock when qualified by words indicating number and
ownership expresses the extent of the owners interest in the corporate
property."119 A share of stock typifies an aliquot part of the corporations
property, or the right to share in its proceeds to that extent when distributed
according to law and equity and that its holder is not the owner of any part of
the capital of the corporation.120 However, the FWBs will ultimately own the
agricultural lands owned by the corporation when the corporation is eventually
dissolved and liquidated.
Anent the alleged loss of control of the farmers over the agricultural land
operated and managed by the corporation, a reading of the second paragraph
of Sec. 31 shows otherwise. Said provision provides that qualified beneficiaries
have "the right to purchase such proportion of the capital stock of the
corporation that the agricultural land, actually devoted to agricultural activities,
bears in relation to the companys total assets." The wording of the formula in
the computation of the number of shares that can be bought by the farmers
does not mean loss of control on the part of the farmers. It must be
remembered that the determination of the percentage of the capital stock that
can be bought by the farmers depends on the value of the agricultural land
and the value of the total assets of the corporation.
There is, thus, nothing unconstitutional in the formula prescribed by RA 6657.
The policy on agrarian reform is that control over the agricultural land must
always be in the hands of the farmers. Then it falls on the shoulders of DAR
and PARC to see to it the farmers should always own majority of the common
shares entitled to elect the members of the board of directors to ensure that
the farmers will have a clear majority in the board. Before the SDP is approved,
strict scrutiny of the proposed SDP must always be undertaken by the DAR
and PARC, such that the value of the agricultural land contributed to the
corporation must always be more than 50% of the total assets of the
corporation to ensure that the majority of the members of the board of directors
are composed of the farmers. The PARC composed of the President of the
Philippines and cabinet secretaries must see to it that control over the board
of directors rests with the farmers by rejecting the inclusion of non-agricultural
assets which will yield the majority in the board of directors to non-farmers.
Any deviation, however, by PARC or DAR from the correct application of the
formula prescribed by the second paragraph of Sec. 31 of RA 6675 does not
make said provision constitutionally infirm. Rather, it is the application of said
provision that can be challenged. Ergo, Sec. 31 of RA 6657 does not trench
on the constitutional policy of ensuring control by the farmers.
A view has been advanced that there can be no agrarian reform unless there
is land distribution and that actual land distribution is the essential
characteristic of a constitutional agrarian reform program. On the contrary,
there have been so many instances where, despite actual land distribution, the
implementation of agrarian reform was still unsuccessful. As a matter of fact,
this Court may take judicial notice of cases where FWBs sold the awarded land
even to non-qualified persons and in violation of the prohibition period provided
under the law. This only proves to show that the mere fact that there is land
distribution does not guarantee a successful implementation of agrarian
reform.
As it were, the principle of "land to the tiller" and the old pastoral model of land
ownership where non-human juridical persons, such as corporations, were
prohibited from owning agricultural lands are no longer realistic under existing
conditions. Practically, an individual farmer will often face greater
disadvantages and difficulties than those who exercise ownership in a
collective manner through a cooperative or corporation. The former is too often
left to his own devices when faced with failing crops and bad weather, or
compelled to obtain usurious loans in order to purchase costly fertilizers or
farming equipment. The experiences learned from failed land reform activities
in various parts of the country are lack of financing, lack of farm equipment,
lack of fertilizers, lack of guaranteed buyers of produce, lack of farm-to-market
roads, among others. Thus, at the end of the day, there is still no successful
implementation of agrarian reform to speak of in such a case.
Although success is not guaranteed, a cooperative or a corporation stands in
a better position to secure funding and competently maintain the agri-business
than the individual farmer. While direct singular ownership over farmland does
offer advantages, such as the ability to make quick decisions unhampered by
interference from others, yet at best, these advantages only but offset the
disadvantages that are often associated with such ownership arrangement.
Thus, government must be flexible and creative in its mode of implementation
to better its chances of success. One such option is collective ownership
through juridical persons composed of farmers.
Aside from the fact that there appears to be no violation of the Constitution,
the requirement that the instant case be capable of repetition yet evading
review is also wanting. It would be speculative for this Court to assume that
the legislature will enact another law providing for a similar stock option.
As a matter of sound practice, the Court will not interfere inordinately with the
exercise by Congress of its official functions, the heavy presumption being that
a law is the product of earnest studies by Congress to ensure that no
constitutional prescription or concept is infringed.121 Corollarily, courts will not
pass upon questions of wisdom, expediency and justice of legislation or its
provisions. Towards this end, all reasonable doubts should be resolved in favor
of the constitutionality of a law and the validity of the acts and processes taken
pursuant thereof.122
Consequently, before a statute or its provisions duly challenged are voided, an
unequivocal breach of, or a clear conflict with the Constitution, not merely a
doubtful or argumentative one, must be demonstrated in such a manner as to
leave no doubt in the mind of the Court. In other words, the grounds for nullity
must be beyond reasonable doubt.123 FARM has not presented compelling
arguments to overcome the presumption of constitutionality of Sec. 31 of RA
6657.
The wisdom of Congress in allowing an SDP through a corporation as an
alternative mode of implementing agrarian reform is not for judicial
determination. Established jurisprudence tells us that it is not within the
province of the Court to inquire into the wisdom of the law, for, indeed, We are
bound by words of the statute.124
II.
The stage is now set for the determination of the propriety under the premises
of the revocation or recall of HLIs SDP. Or to be more precise, the inquiry
should be: whether or not PARC gravely abused its discretion in revoking or
recalling the subject SDP and placing the hacienda under CARPs compulsory
acquisition and distribution scheme.
The findings, analysis and recommendation of the DARs Special Task Force
contained and summarized in its Terminal Report provided the bases for the
assailed PARC revocatory/recalling Resolution. The findings may be grouped
into two: (1) the SDP is contrary to either the policy on agrarian reform, Sec.
31 of RA 6657, or DAO 10; and (2) the alleged violation by HLI of the
conditions/terms of the SDP. In more particular terms, the following are
essentially the reasons underpinning PARCs revocatory or recall action:
(1) Despite the lapse of 16 years from the approval of HLIs SDP, the
lives of the FWBs have hardly improved and the promised increased
income has not materialized;
(2) HLI has failed to keep Hacienda Luisita intact and unfragmented;
(3) The issuance of HLI shares of stock on the basis of number of
hours workedor the so-called "man days"is grossly onerous to the to promote social justice and to move the nation towards sound rural
FWBs, as HLI, in the guise of rotation, can unilaterally deny work to
anyone. In elaboration of this ground, PARCs Resolution No. 2006-
34-01, denying HLIs motion for reconsideration of Resolution No.
2005-32-01, stated that the man days criterion worked to dilute the
entitlement of the original share beneficiaries;125
(4) The distribution/transfer of shares was not in accordance with the
timelines fixed by law;
(5) HLI has failed to comply with its obligations to grant 3% of the gross
sales every year as production-sharing benefit on top of the workers
salary; and
(6) Several homelot awardees have yet to receive their individual titles.
Petitioner HLI claims having complied with, at least substantially, all its
obligations under the SDP, as approved by PARC itself, and tags the reasons
given for the revocation of the SDP as unfounded.
Public respondents, on the other hand, aver that the assailed resolution rests
on solid grounds set forth in the Terminal Report, a position shared by
AMBALA, which, in some pleadings, is represented by the same counsel as
that appearing for the Supervisory Group.
FARM, for its part, posits the view that legal bases obtain for the revocation of
the SDP, because it does not conform to Sec. 31 of RA 6657 and DAO 10.
And training its sight on the resulting dilution of the equity of the FWBs
appearing in HLIs masterlist, FARM would state that the SDP, as couched and
implemented, spawned disparity when there should be none; parity when there
should have been differentiation.126
The petition is not impressed with merit.
In the Terminal Report adopted by PARC, it is stated that the SDP violates the
agrarian reform policy under Sec. 2 of RA 6657, as the said plan failed to
enhance the dignity and improve the quality of lives of the FWBs through
greater productivity of agricultural lands. We disagree.
Sec. 2 of RA 6657 states:
SECTION 2. Declaration of Principles and Policies.It is the policy of the State
to pursue a Comprehensive Agrarian Reform Program (CARP). The welfare of
the landless farmers and farm workers will receive the highest consideration
development and industrialization, and the establishment of owner
cultivatorship of economic-sized farms as the basis of Philippine agriculture.
To this end, a more equitable distribution and ownership of land, with due
regard to the rights of landowners to just compensation and to the ecological
needs of the nation, shall be undertaken to provide farmers and farm workers
with the opportunity to enhance their dignity and improve the quality of their
lives through greater productivity of agricultural lands.
The agrarian reform program is founded on the right of farmers and regular
farm workers, who are landless, to own directly or collectively the lands they
till or, in the case of other farm workers, to receive a share of the fruits thereof.
To this end, the State shall encourage the just distribution of all agricultural
lands, subject to the priorities and retention limits set forth in this Act, having
taken into account ecological, developmental, and equity considerations, and
subject to the payment of just compensation. The State shall respect the right
of small landowners and shall provide incentives for voluntary land-sharing.
(Emphasis supplied.)
Paragraph 2 of the above-quoted provision specifically mentions that "a more
equitable distribution and ownership of land x x x shall be undertaken to
provide farmers and farm workers with the opportunity to enhance their dignity
and improve the quality of their lives through greater productivity of agricultural
lands." Of note is the term "opportunity" which is defined as a favorable chance
or opening offered by circumstances.127 Considering this, by no stretch of
imagination can said provision be construed as a guarantee in improving the
lives of the FWBs. At best, it merely provides for a possibility or favorable
chance of uplifting the economic status of the FWBs, which may or may not be
attained.
Pertinently, improving the economic status of the FWBs is neither among the
legal obligations of HLI under the SDP nor an imperative imposition by RA
6657 and DAO 10, a violation of which would justify discarding the stock
distribution option. Nothing in that option agreement, law or department order
indicates otherwise.
Significantly, HLI draws particular attention to its having paid its FWBs, during
the regime of the SDP (1989-2005), some PhP 3 billion by way of
salaries/wages and higher benefits exclusive of free hospital and medical
benefits to their immediate family. And attached as Annex "G" to HLIs
Memorandum is the certified true report of the finance manager of Jose
Cojuangco & Sons Organizations-Tarlac Operations, captioned as
"HACIENDA LUISITA, INC. Salaries, Benefits and Credit Privileges (in
Thousand Pesos) Since the Stock Option was Approved by PARC/CARP,"
detailing what HLI gave their workers from 1989 to 2005. The sum total, as
added up by the Court, yields the following numbers: Total Direct Cash Out
(Salaries/Wages & Cash Benefits) = PhP 2,927,848; Total Non-Direct Cash
Out (Hospital/Medical Benefits) = PhP 303,040. The cash out figures, as stated
in the report, include the cost of homelots; the PhP 150 million or so
representing 3% of the gross produce of the hacienda; and the PhP 37.5
million representing 3% from the proceeds of the sale of the 500-hectare
converted lands. While not included in the report, HLI manifests having given
the FWBs 3% of the PhP 80 million paid for the 80 hectares of land traversed
by the SCTEX.128 On top of these, it is worth remembering that the shares of
stocks were given by HLI to the FWBs for free. Verily, the FWBs have benefited
from the SDP.
To address urgings that the FWBs be allowed to disengage from the SDP as
HLI has not anyway earned profits through the years, it cannot be over-
emphasized that, as a matter of common business sense, no corporation could
guarantee a profitable run all the time. As has been suggested, one of the key
features of an SDP of a corporate landowner is the likelihood of the corporate
vehicle not earning, or, worse still, losing money.129
The Court is fully aware that one of the criteria under DAO 10 for the PARC to
consider the advisability of approving a stock distribution plan is the likelihood
that the plan "would result in increased income and greater benefits to
[qualified beneficiaries] than if the lands were divided and distributed to them
individually."130 But as aptly noted during the oral arguments, DAO 10 ought to
have not, as it cannot, actually exact assurance of success on something that
is subject to the will of man, the forces of nature or the inherent risky nature of
business.131 Just like in actual land distribution, an SDP cannot guarantee, as
indeed the SDOA does not guarantee, a comfortable life for the FWBs. The
Court can take judicial notice of the fact that there were many instances
wherein after a farmworker beneficiary has been awarded with an agricultural
land, he just subsequently sells it and is eventually left with nothing in the end.
In all then, the onerous condition of the FWBs economic status, their life of
hardship, if that really be the case, can hardly be attributed to HLI and its SDP
and provide a valid ground for the plans revocation.
Neither does HLIs SDP, whence the DAR-attested SDOA/MOA is based,
infringe Sec. 31 of RA 6657, albeit public respondents erroneously submit
otherwise.
The provisions of the first paragraph of the adverted Sec. 31 are without
relevance to the issue on the propriety of the assailed order revoking HLIs
SDP, for the paragraph deals with the transfer of agricultural lands to the
government, as a mode of CARP compliance, thus:
SEC. 31. Corporate Landowners.Corporate landowners may voluntarily
transfer ownership over their agricultural landholdings to the Republic of the
Philippines pursuant to Section 20 hereof or to qualified beneficiaries under
such terms and conditions, consistent with this Act, as they may agree, subject
to confirmation by the DAR.
The second and third paragraphs, with their sub-paragraphs, of Sec. 31
provide as follows:
Upon certification by the DAR, corporations owning agricultural lands may
give their qualified beneficiaries the right to purchase such proportion of
the capital stock of the corporation that the agricultural land, actually
devoted to agricultural activities, bears in relation to the companys total
assets, under such terms and conditions as may be agreed upon by them. In
no case shall the compensation received by the workers at the time the shares
of stocks are distributed be reduced. x x x
Corporations or associations which voluntarily divest a proportion of their
capital stock, equity or participation in favor of their workers or other qualified
beneficiaries under this section shall be deemed to have complied with the
provisions of this Act: Provided, That the following conditions are complied
with:
(a) In order to safeguard the right of beneficiaries who own shares of
stocks to dividends and other financial benefits, the books of the
corporation or association shall be subject to periodic audit by certified
public accountants chosen by the beneficiaries;
(b) Irrespective of the value of their equity in the corporation or
association, the beneficiaries shall be assured of at least one (1)
representative in the board of directors, or in a management or
executive committee, if one exists, of the corporation or association;
 (c) Any shares acquired by such workers and beneficiaries shall have
the same rights and features as all other shares; and
(d) Any transfer of shares of stocks by the original beneficiaries shall
be void ab initio unless said transaction is in favor of a qualified and
registered beneficiary within the same corporation.
The mandatory minimum ratio of land-to-shares of stock supposed to be
distributed or allocated to qualified beneficiaries, adverting to what Sec. 31 of
RA 6657 refers to as that "proportion of the capital stock of the corporation that
the agricultural land, actually devoted to agricultural activities, bears in relation
to the companys total assets" had been observed.
Paragraph one (1) of the SDOA, which was based on the SDP, conforms to
Sec. 31 of RA 6657. The stipulation reads:
1. The percentage of the value of the agricultural land of Hacienda Luisita
(P196,630,000.00) in relation to the total assets (P590,554,220.00) transferred
and conveyed to the SECOND PARTY is 33.296% that, under the law, is the
proportion of the outstanding capital stock of the SECOND PARTY, which is
P355,531,462.00 or 355,531,462 shares with a par value of P1.00 per share,
that has to be distributed to the THIRD PARTY under the stock distribution
plan, the said 33.296% thereof being P118,391,976.85 or 118,391,976.85
shares.
The appraised value of the agricultural land is PhP 196,630,000 and of HLIs
other assets is PhP 393,924,220. The total value of HLIs assets is, therefore,
PhP 590,554,220.132 The percentage of the value of the agricultural lands
(PhP 196,630,000) in relation to the total assets (PhP 590,554,220) is
33.296%, which represents the stockholdings of the 6,296 original qualified
farmworker-beneficiaries (FWBs) in HLI. The total number of shares to be
distributed to said qualified FWBs is 118,391,976.85 HLI shares. This was
arrived at by getting 33.296% of the 355,531,462 shares which is the
outstanding capital stock of HLI with a value of PhP 355,531,462. Thus, if we
divide the 118,391,976.85 HLI shares by 6,296 FWBs, then each FWB is
entitled to 18,804.32 HLI shares. These shares under the SDP are to be given
to FWBs for free.
The Court finds that the determination of the shares to be distributed to the
6,296 FWBs strictly adheres to the formula prescribed by Sec. 31(b) of RA
6657.
Anent the requirement under Sec. 31(b) of the third paragraph, that the FWBs
shall be assured of at least one (1) representative in the board of directors or
in a management or executive committee irrespective of the value of the equity
of the FWBs in HLI, the Court finds that the SDOA contained provisions making
certain the FWBs representation in HLIs governing board, thus:
5. Even if only a part or fraction of the shares earmarked for distribution will
have been acquired from the FIRST PARTY and distributed to the THIRD
PARTY, FIRST PARTY shall execute at the beginning of each fiscal year an
irrevocable proxy, valid and effective for one (1) year, in favor of the
farmworkers appearing as shareholders of the SECOND PARTY at the start
of said year which will empower the THIRD PARTY or their representative to
vote in stockholders and board of directors meetings of the SECOND PARTY
convened during the year the entire 33.296% of the outstanding capital stock
of the SECOND PARTY earmarked for distribution and thus be able to gain
such number of seats in the board of directors of the SECOND PARTY that
the whole 33.296% of the shares subject to distribution will be entitled to.
Also, no allegations have been made against HLI restricting the inspection of
its books by accountants chosen by the FWBs; hence, the assumption may be
made that there has been no violation of the statutory prescription under sub-
paragraph (a) on the auditing of HLIs accounts.
Public respondents, however, submit that the distribution of the mandatory
minimum ratio of land-to-shares of stock, referring to the 118,391,976.85
shares with par value of PhP 1 each, should have been made in full within two
(2) years from the approval of RA 6657, in line with the last paragraph of Sec.
31 of said law.133
Public respondents submission is palpably erroneous. We have closely
examined the last paragraph alluded to, with particular focus on the two-year
period mentioned, and nothing in it remotely supports the public respondents
posture. In its pertinent part, said Sec. 31 provides:
SEC. 31. Corporate Landowners x x x
If within two (2) years from the approval of this Act, the [voluntary] land or stock
transfer envisioned above is not made or realized or the plan for such stock
distribution approved by the PARC within the same period, the agricultural land
of the corporate owners or corporation shall be subject to the compulsory
coverage of this Act. (Word in bracket and emphasis added.)
Properly viewed, the words "two (2) years" clearly refer to the period within
which the corporate landowner, to avoid land transfer as a mode of CARP
coverage under RA 6657, is to avail of the stock distribution option or to have
the SDP approved. The HLI secured approval of its SDP in November 1989,
well within the two-year period reckoned from June 1988 when RA 6657 took
effect.
Having hurdled the alleged breach of the agrarian reform policy under Sec. 2
of RA 6657 as well as the statutory issues, We shall now delve into what PARC
and respondents deem to be other instances of violation of DAO 10 and the
SDP.
On the Conversion of Lands
Contrary to the almost parallel stance of the respondents, keeping Hacienda
Luisita unfragmented is also not among the imperative impositions by the SDP,
RA 6657, and DAO 10.
The Terminal Report states that the proposed distribution plan submitted in
1989 to the PARC effectively assured the intended stock beneficiaries that the
physical integrity of the farm shall remain inviolate. Accordingly, the Terminal
Report and the PARC-assailed resolution would take HLI to task for securing
approval of the conversion to non-agricultural uses of 500 hectares of the
hacienda. In not too many words, the Report and the resolution view the
conversion as an infringement of Sec. 5(a) of DAO 10 which reads: "a. that the
continued operation of the corporation with its agricultural land intact and
unfragmented is viable with potential for growth and increased profitability."
The PARC is wrong.
In the first place, Sec. 5(a)just like the succeeding Sec. 5(b) of DAO 10 on
increased income and greater benefits to qualified beneficiariesis but one of
the stated criteria to guide PARC in deciding on whether or not to accept an
SDP. Said Sec. 5(a) does not exact from the corporate landowner-applicant
the undertaking to keep the farm intact and unfragmented ad infinitum. And
there is logic to HLIs stated observation that the key phrase in the provision
of Sec. 5(a) is "viability of corporate operations": "[w]hat is thus required is not
the agricultural land remaining intact x x x but the viability of the corporate
operations with its agricultural land being intact and unfragmented. Corporate
operation may be viable even if the corporate agricultural land does not remain
intact or [un]fragmented."134
It is, of course, anti-climactic to mention that DAR viewed the conversion as
not violative of any issuance, let alone undermining the viability of Hacienda
Luisitas operation, as the DAR Secretary approved the land conversion
applied for and its disposition via his Conversion Order dated August 14, 1996
pursuant to Sec. 65 of RA 6657 which reads:
Sec. 65. Conversion of Lands.After the lapse of five years from its award
when the land ceases to be economically feasible and sound for agricultural
purposes, or the locality has become urbanized and the land will have a greater
economic value for residential, commercial or industrial purposes, the DAR
upon application of the beneficiary or landowner with due notice to the affected
parties, and subject to existing laws, may authorize the x x x conversion of the
land and its dispositions. x x x
On the 3% Production Share
On the matter of the alleged failure of HLI to comply with sharing the 3% of the
gross production sales of the hacienda and pay dividends from profit, the
entries in its financial books tend to indicate compliance by HLI of the profit-
sharing equivalent to 3% of the gross sales from the production of the
agricultural land on top of (a) the salaries and wages due FWBs as employees
of the company and (b) the 3% of the gross selling price of the converted land
and that portion used for the SCTEX. A plausible evidence of compliance or
non-compliance, as the case may be, could be the books of account of HLI.
Evidently, the cry of some groups of not having received their share from the
gross production sales has not adequately been validated on the ground by
the Special Task Force.
Indeed, factual findings of administrative agencies are conclusive when
supported by substantial evidence and are accorded due respect and weight,
especially when they are affirmed by the CA.135 However, such rule is not
absolute. One such exception is when the findings of an administrative agency
are conclusions without citation of specific evidence on which they are
based,136 such as in this particular instance. As culled from its Terminal Report,
it would appear that the Special Task Force rejected HLIs claim of compliance
on the basis of this ratiocination:
The Task Force position: Though, allegedly, the Supervisory Group
receives the 3% gross production share and that others alleged that
they received 30 million pesos still others maintain that they have not
received anything yet. Item No. 4 of the MOA is clear and must be
followed. There is a distinction between the total gross sales from the
production of the land and the proceeds from the sale of the land. The
former refers to the fruits/yield of the agricultural land while the latter
is the land itself. The phrase "the beneficiaries are entitled every year
to an amount approximately equivalent to 3% would only be feasible
if the subject is the produce since there is at least one harvest per
year, while such is not the case in the sale of the agricultural land. This
negates then the claim of HLI that, all that the FWBs can be entitled
to, if any, is only 3% of the purchase price of the converted land.
Besides, the Conversion Order dated 14 August 1996 provides that
"the benefits, wages and the like, presently received by the FWBs shall
not in any way be reduced or adversely affected. Three percent of the
gross selling price of the sale of the converted land shall be awarded
to the beneficiaries of the SDO." The 3% gross production share then
 is different from the 3% proceeds of the sale of the converted land and,
with more reason, the 33% share being claimed by the FWBs as part
owners of the Hacienda, should have been given the FWBs, as
stockholders, and to which they could have been entitled if only the
land were acquired and redistributed to them under the CARP.
xxxx
The FWBs do not receive any other benefits under the MOA except
the aforementioned [(viz: shares of stocks (partial), 3% gross
production sale (not all) and homelots (not all)].
Judging from the above statements, the Special Task Force is at best silent on
whether HLI has failed to comply with the 3% production-sharing obligation or
the 3% of the gross selling price of the converted land and the SCTEX lot. In
fact, it admits that the FWBs, though not all, have received their share of the
gross production sales and in the sale of the lot to SCTEX. At most, then, HLI
had complied substantially with this SDP undertaking and the conversion
order. To be sure, this slight breach would not justify the setting to naught by
PARC of the approval action of the earlier PARC. Even in contract law,
rescission, predicated on violation of reciprocity, will not be permitted for a
slight or casual breach of contract; rescission may be had only for such
breaches that are substantial and fundamental as to defeat the object of the
parties in making the agreement.137
Despite the foregoing findings, the revocation of the approval of the SDP is not
without basis as shown below.
On Titles to Homelots
Under RA 6657, the distribution of homelots is required only for corporations
or business associations owning or operating farms which opted for land
distribution. Sec. 30 of RA 6657 states:
SEC. 30. Homelots and Farmlots for Members of Cooperatives.The
individual members of the cooperatives or corporations mentioned in the
preceding section shall be provided with homelots and small farmlots for their
family use, to be taken from the land owned by the cooperative or corporation.
The "preceding section" referred to in the above-quoted provision is as follows:
SEC. 29. Farms Owned or Operated by Corporations or Other Business
Associations.In the case of farms owned or operated by corporations or other
business associations, the following rules shall be observed by the PARC.
In general, lands shall be distributed directly to the individual worker-
beneficiaries.
In case it is not economically feasible and sound to divide the land, then it shall
be owned collectively by the worker-beneficiaries who shall form a workers
cooperative or association which will deal with the corporation or business
association. Until a new agreement is entered into by and between the
workers cooperative or association and the corporation or business
association, any agreement existing at the time this Act takes effect between
the former and the previous landowner shall be respected by both the workers
cooperative or association and the corporation or business association.
Noticeably, the foregoing provisions do not make reference to corporations
which opted for stock distribution under Sec. 31 of RA 6657. Concomitantly,
said corporations are not obliged to provide for it except by stipulation, as in
this case.
Under the SDP, HLI undertook to "subdivide and allocate for free and without
charge among the qualified family-beneficiaries x x x residential or homelots
of not more than 240 sq. m. each, with each family beneficiary being assured
of receiving and owning a homelot in the barrio or barangay where it actually
resides," "within a reasonable time."
More than sixteen (16) years have elapsed from the time the SDP was
approved by PARC, and yet, it is still the contention of the FWBs that not all
was given the 240-square meter homelots and, of those who were already
given, some still do not have the corresponding titles.
During the oral arguments, HLI was afforded the chance to refute the foregoing
allegation by submitting proof that the FWBs were already given the said
homelots:
Justice Velasco: x x x There is also an allegation that the farmer beneficiaries,
the qualified family beneficiaries were not given the 240 square meters each.
So, can you also [prove] that the qualified family beneficiaries were already
provided the 240 square meter homelots.
Atty. Asuncion: We will, your Honor please.138
Other than the financial report, however, no other substantial proof showing
that all the qualified beneficiaries have received homelots was submitted by
HLI. Hence, this Court is constrained to rule that HLI has not yet fully complied
with its undertaking to distribute homelots to the FWBs under the SDP.
On "Man Days" and the Mechanics of Stock Distribution
In our review and analysis of par. 3 of the SDOA on the mechanics and
timelines of stock distribution, We find that it violates two (2) provisions of
DAO 10. Par. 3 of the SDOA states:
3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY
[HLI] shall arrange with the FIRST PARTY [TDC] the acquisition and
distribution to the THIRD PARTY [FWBs] on the basis of number of days
worked and at no cost to them of one-thirtieth (1/30) of 118,391,976.85 shares
of the capital stock of the SECOND PARTY that are presently owned and held
by the FIRST PARTY, until such time as the entire block of 118,391,976.85
shares shall have been completely acquired and distributed to the THIRD
PARTY.
Based on the above-quoted provision, the distribution of the shares of stock to
the FWBs, albeit not entailing a cash out from them, is contingent on the
number of "man days," that is, the number of days that the FWBs have worked
during the year. This formula deviates from Sec. 1 of DAO 10, which decrees
the distribution of equal number of shares to the FWBs as the minimum ratio
of shares of stock for purposes of compliance with Sec. 31 of RA 6657. As
stated in Sec. 4 of DAO 10:
Section 4. Stock Distribution Plan.The [SDP] submitted by the corporate
landowner-applicant shall provide for the distribution of an equal number of
shares of the same class and value, with the same rights and features as all
other shares, to each of the qualified beneficiaries. This distribution plan in all
cases, shall be at least the minimum ratio for purposes of compliance with
Section 31 of R.A. No. 6657.
On top of the minimum ratio provided under Section 3 of this Implementing
Guideline, the corporate landowner-applicant may adopt additional stock
distribution schemes taking into account factors such as rank, seniority, salary,
position and other circumstances which may be deemed desirable as a matter
of sound company policy. (Emphasis supplied.)
The above proviso gives two (2) sets or categories of shares of stock which a
qualified beneficiary can acquire from the corporation under the SDP. The first
pertains, as earlier explained, to the mandatory minimum ratio of shares of
stock to be distributed to the FWBs in compliance with Sec. 31 of RA 6657.
This minimum ratio contemplates of that "proportion of the capital stock of the
corporation that the agricultural land, actually devoted to agricultural activities,
bears in relation to the companys total assets."139 It is this set of shares of
stock which, in line with Sec. 4 of DAO 10, is supposed to be allocated "for the
distribution of an equal number of shares of stock of the same class and value,
with the same rights and features as all other shares, to each of the qualified
beneficiaries."
On the other hand, the second set or category of shares partakes of a
gratuitous extra grant, meaning that this set or category constitutes an
augmentation share/s that the corporate landowner may give under an
additional stock distribution scheme, taking into account such variables as
rank, seniority, salary, position and like factors which the management, in the
exercise of its sound discretion, may deem desirable.140
Before anything else, it should be stressed that, at the time PARC approved
HLIs SDP, HLI recognized 6,296 individuals as qualified FWBs. And under the
30-year stock distribution program envisaged under the plan, FWBs who came
in after 1989, new FWBs in fine, may be accommodated, as they appear to
have in fact been accommodated as evidenced by their receipt of HLI shares.
Now then, by providing that the number of shares of the original 1989 FWBs
shall depend on the number of "man days," HLI violated the afore-quoted rule
on stock distribution and effectively deprived the FWBs of equal shares of
stock in the corporation, for, in net effect, these 6,296 qualified FWBs, who
theoretically had given up their rights to the land that could have been
distributed to them, suffered a dilution of their due share entitlement. As has
been observed during the oral arguments, HLI has chosen to use the shares
earmarked for farmworkers as reward system chips to water down the shares
of the original 6,296 FWBs.141 Particularly:
Justice Abad: If the SDOA did not take place, the other thing that would have
happened is that there would be CARP?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: Thats the only point I want to know x x x. Now, but they chose
to enter SDOA instead of placing the land under CARP. And for that reason
those who would have gotten their shares of the land actually gave up their
rights to this land in place of the shares of the stock, is that correct?
Atty. Dela Merced: It would be that way, Your Honor.
Justice Abad: Right now, also the government, in a way, gave up its right to
own the land because that way the government takes own [sic] the land and
distribute it to the farmers and pay for the land, is that correct?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: And then you gave thirty-three percent (33%) of the shares of
HLI to the farmers at that time that numbered x x x those who signed five
thousand four hundred ninety eight (5,498) beneficiaries, is that correct?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: But later on, after assigning them their shares, some workers
came in from 1989, 1990, 1991, 1992 and the rest of the years that you gave
additional shares who were not in the original list of owners?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: Did those new workers give up any right that would have belong
to them in 1989 when the land was supposed to have been placed under
CARP?
Atty. Dela Merced: If you are talking or referring (interrupted)
Justice Abad: None! You tell me. None. They gave up no rights to land?
Atty. Dela Merced: They did not do the same thing as we did in 1989, Your
Honor.
Justice Abad: No, if they were not workers in 1989 what land did they give up?
None, if they become workers later on.
Atty. Dela Merced: None, Your Honor, I was referring, Your Honor, to the
original (interrupted)
Justice Abad: So why is it that the rights of those who gave up their lands
would be diluted, because the company has chosen to use the shares as
reward system for new workers who come in? It is not that the new workers,
in effect, become just workers of the corporation whose stockholders were
already fixed. The TADECO who has shares there about sixty six percent
(66%) and the five thousand four hundred ninety eight (5,498) farmers at the
time of the SDOA? Explain to me. Why, why will you x x x what right or where
did you get that right to use this shares, to water down the shares of those who
should have been benefited, and to use it as a reward system decided by the
company?142
From the above discourse, it is clear as day that the original 6,296 FWBs, who
were qualified beneficiaries at the time of the approval of the SDP, suffered
from watering down of shares. As determined earlier, each original FWB is
entitled to 18,804.32 HLI shares. The original FWBs got less than the
guaranteed 18,804.32 HLI shares per beneficiary, because the acquisition and
distribution of the HLI shares were based on "man days" or "number of days
worked" by the FWB in a years time. As explained by HLI, a beneficiary needs
to work for at least 37 days in a fiscal year before he or she becomes entitled
to HLI shares. If it falls below 37 days, the FWB, unfortunately, does not get
any share at year end. The number of HLI shares distributed varies depending
on the number of days the FWBs were allowed to work in one year. Worse,
HLI hired farmworkers in addition to the original 6,296 FWBs, such that, as
indicated in the Compliance dated August 2, 2010 submitted by HLI to the
Court, the total number of farmworkers of HLI as of said date stood at 10,502.
All these farmworkers, which include the original 6,296 FWBs, were given
shares out of the 118,931,976.85 HLI shares representing the 33.296% of the
total outstanding capital stock of HLI. Clearly, the minimum individual
allocation of each original FWB of 18,804.32 shares was diluted as a result of
the use of "man days" and the hiring of additional farmworkers.
Going into another but related matter, par. 3 of the SDOA expressly providing
for a 30-year timeframe for HLI-to-FWBs stock transfer is an arrangement
contrary to what Sec. 11 of DAO 10 prescribes. Said Sec. 11 provides for the
implementation of the approved stock distribution plan within three (3) months
from receipt by the corporate landowner of the approval of the plan by PARC.
In fact, based on the said provision, the transfer of the shares of stock in the
names of the qualified FWBs should be recorded in the stock and transfer
books and must be submitted to the SEC within sixty (60) days from
implementation. As stated:
Section 11. Implementation/Monitoring of Plan.The approved stock
distribution plan shall be implemented within three (3) months from receipt by
the corporate landowner-applicant of the approval thereof by the PARC, and
the transfer of the shares of stocks in the names of the qualified beneficiaries
shall be recorded in stock and transfer books and submitted to the Securities
and Exchange Commission (SEC) within sixty (60) days from the said
implementation of the stock distribution plan. (Emphasis supplied.)
It is evident from the foregoing provision that the implementation, that is, the
distribution of the shares of stock to the FWBs, must be made within three (3)
months from receipt by HLI of the approval of the stock distribution plan by
PARC. While neither of the clashing parties has made a compelling case of
the thrust of this provision, the Court is of the view and so holds that the intent
is to compel the corporate landowner to complete, not merely initiate, the
transfer process of shares within that three-month timeframe. Reinforcing this
conclusion is the 60-day stock transfer recording (with the SEC) requirement
reckoned from the implementation of the SDP.
To the Court, there is a purpose, which is at once discernible as it is practical,
for the three-month threshold. Remove this timeline and the corporate
landowner can veritably evade compliance with agrarian reform by simply
deferring to absurd limits the implementation of the stock distribution scheme.
The argument is urged that the thirty (30)-year distribution program is justified
by the fact that, under Sec. 26 of RA 6657, payment by beneficiaries of land
distribution under CARP shall be made in thirty (30) annual amortizations. To
HLI, said section provides a justifying dimension to its 30-year stock
distribution program.
HLIs reliance on Sec. 26 of RA 6657, quoted in part below, is obviously
misplaced as the said provision clearly deals with land distribution.
SEC. 26. Payment by Beneficiaries.Lands awarded pursuant to this Act shall
be paid for by the beneficiaries to the LBP in thirty (30) annual amortizations x
x x.
Then, too, the ones obliged to pay the LBP under the said provision are the
beneficiaries. On the other hand, in the instant case, aside from the fact that
what is involved is stock distribution, it is the corporate landowner who has the
obligation to distribute the shares of stock among the FWBs.
Evidently, the land transfer beneficiaries are given thirty (30) years within
which to pay the cost of the land thus awarded them to make it less
cumbersome for them to pay the government. To be sure, the reason
underpinning the 30-year accommodation does not apply to corporate
landowners in distributing shares of stock to the qualified beneficiaries, as the
shares may be issued in a much shorter period of time.
Taking into account the above discussion, the revocation of the SDP by PARC
should be upheld for violating DAO 10. It bears stressing that under Sec. 49 of
RA 6657, the PARC and the DAR have the power to issue rules and
regulations, substantive or procedural. Being a product of such rule-making
power, DAO 10 has the force and effect of law and must be duly complied
with.143 The PARC is, therefore, correct in revoking the SDP. Consequently,
the PARC Resolution No. 89-12-2 dated November 21, l989 approving the
HLIs SDP is nullified and voided.
III.
We now resolve the petitions-in-intervention which, at bottom, uniformly pray
for the exclusion from the coverage of the assailed PARC resolution those
portions of the converted land within Hacienda Luisita which RCBC and LIPCO
acquired by purchase.
Both contend that they are innocent purchasers for value of portions of the
converted farm land. Thus, their plea for the exclusion of that portion from
PARC Resolution 2005-32-01, as implemented by a DAR-issued Notice of
Coverage dated January 2, 2006, which called for mandatory CARP
acquisition coverage of lands subject of the SDP.
To restate the antecedents, after the conversion of the 500 hectares of land in
Hacienda Luisita, HLI transferred the 300 hectares to Centennary, while
ceding the remaining 200-hectare portion to LRC. Subsequently, LIPCO
purchased the entire three hundred (300) hectares of land from Centennary
for the purpose of developing the land into an industrial
complex.144 Accordingly, the TCT in Centennarys name was canceled and a
new one issued in LIPCOs name. Thereafter, said land was subdivided into
two (2) more parcels of land. Later on, LIPCO transferred about 184 hectares
to RCBC by way of dacion en pago, by virtue of which TCTs in the name of
RCBC were subsequently issued.
Under Sec. 44 of PD 1529 or the Property Registration Decree, "every
registered owner receiving a certificate of title in pursuance of a decree of
registration and every subsequent purchaser of registered land taking a
certificate of title for value and in good faith shall hold the same free from all
encumbrances except those noted on the certificate and enumerated
therein."145
It is settled doctrine that one who deals with property registered under the
Torrens system need not go beyond the four corners of, but can rely on what
appears on, the title. He is charged with notice only of such burdens and claims
as are annotated on the title. This principle admits of certain exceptions, such
as when the party has actual knowledge of facts and circumstances that would
impel a reasonably cautious man to make such inquiry, or when the purchaser
has knowledge of a defect or the lack of title in his vendor or of sufficient facts
to induce a reasonably prudent man to inquire into the status of the title of the
property in litigation.146 A higher level of care and diligence is of course
expected from banks, their business being impressed with public interest.147
Millena v. Court of Appeals describes a purchaser in good faith in this wise:
x x x A purchaser in good faith is one who buys property of another, without
notice that some other person has a right to, or interest in, such property at the
time of such purchase, or before he has notice of the claim or interest of some
other persons in the property. Good faith, or the lack of it, is in the final analysis
a question of intention; but in ascertaining the intention by which one is
actuated on a given occasion, we are necessarily controlled by the evidence
as to the conduct and outward acts by which alone the inward motive may,
with safety, be determined. Truly, good faith is not a visible, tangible fact that
can be seen or touched, but rather a state or condition of mind which can only
be judged by actual or fancied tokens or signs. Otherwise stated, good faith x
x x refers to the state of mind which is manifested by the acts of the individual
concerned.148 (Emphasis supplied.)
In fine, there are two (2) requirements before one may be considered a
purchaser in good faith, namely: (1) that the purchaser buys the property of
another without notice that some other person has a right to or interest in such
property; and (2) that the purchaser pays a full and fair price for the property
at the time of such purchase or before he or she has notice of the claim of
another.
It can rightfully be said that both LIPCO and RCBC arebased on the above
requirements and with respect to the adverted transactions of the converted
land in questionpurchasers in good faith for value entitled to the benefits
arising from such status.
First, at the time LIPCO purchased the entire three hundred (300) hectares of
industrial land, there was no notice of any supposed defect in the title of its
transferor, Centennary, or that any other person has a right to or interest in
such property. In fact, at the time LIPCO acquired said parcels of land, only
the following annotations appeared on the TCT in the name of Centennary: the
Secretarys Certificate in favor of Teresita Lopa, the Secretarys Certificate in
favor of Shintaro Murai, and the conversion of the property from agricultural to
industrial and residential use.149
The same is true with respect to RCBC. At the time it acquired portions of
Hacienda Luisita, only the following general annotations appeared on the
TCTs of LIPCO: the Deed of Restrictions, limiting its use solely as an industrial
estate; the Secretarys Certificate in favor of Koji Komai and Kyosuke Hori; and
the Real Estate Mortgage in favor of RCBC to guarantee the payment of PhP
300 million.
It cannot be claimed that RCBC and LIPCO acted in bad faith in acquiring the
lots that were previously covered by the SDP. Good faith "consists in the
possessors belief that the person from whom he received it was the owner of
the same and could convey his title. Good faith requires a well-founded belief
that the person from whom title was received was himself the owner of the
land, with the right to convey it. There is good faith where there is an honest
intention to abstain from taking any unconscientious advantage from
another."150 It is the opposite of fraud.
To be sure, intervenor RCBC and LIPCO knew that the lots they bought were
subjected to CARP coverage by means of a stock distribution plan, as the DAR
conversion order was annotated at the back of the titles of the lots they
acquired. However, they are of the honest belief that the subject lots were
validly converted to commercial or industrial purposes and for which said lots
were taken out of the CARP coverage subject of PARC Resolution No. 89-12-
2 and, hence, can be legally and validly acquired by them. After all, Sec. 65 of
RA 6657 explicitly allows conversion and disposition of agricultural lands
previously covered by CARP land acquisition "after the lapse of five (5) years
from its award when the land ceases to be economically feasible and sound
for agricultural purposes or the locality has become urbanized and the land will
have a greater economic value for residential, commercial or industrial
purposes." Moreover, DAR notified all the affected parties, more particularly
the FWBs, and gave them the opportunity to comment or oppose the proposed
conversion. DAR, after going through the necessary processes, granted the
conversion of 500 hectares of Hacienda Luisita pursuant to its primary
jurisdiction under Sec. 50 of RA 6657 to determine and adjudicate agrarian
reform matters and its original exclusive jurisdiction over all matters involving
the implementation of agrarian reform. The DAR conversion order became
final and executory after none of the FWBs interposed an appeal to the CA. In
this factual setting, RCBC and LIPCO purchased the lots in question on their
honest and well-founded belief that the previous registered owners could
legally sell and convey the lots though these were previously subject of CARP
coverage. Ergo, RCBC and LIPCO acted in good faith in acquiring the subject
lots.
And second, both LIPCO and RCBC purchased portions of Hacienda Luisita
for value. Undeniably, LIPCO acquired 300 hectares of land from Centennary
for the amount of PhP 750 million pursuant to a Deed of Sale dated July 30,
1998.151 On the other hand, in a Deed of Absolute Assignment dated
November 25, 2004, LIPCO conveyed portions of Hacienda Luisita in favor of
RCBC by way of dacion en pago to pay for a loan of PhP 431,695,732.10.
As bona fide purchasers for value, both LIPCO and RCBC have acquired rights
which cannot just be disregarded by DAR, PARC or even by this Court. As
held in Spouses Chua v. Soriano:
With the property in question having already passed to the hands of
purchasers in good faith, it is now of no moment that some irregularity attended
the issuance of the SPA, consistent with our pronouncement in Heirs of
Spouses Benito Gavino and Juana Euste v. Court of Appeals, to wit:
x x x the general rule that the direct result of a previous void contract cannot
be valid, is inapplicable in this case as it will directly contravene the Torrens
system of registration. Where innocent third persons, relying on the
correctness of the certificate of title thus issued, acquire rights over the
property, the court cannot disregard such rights and order the
cancellation of the certificate. The effect of such outright cancellation will be
to impair public confidence in the certificate of title. The sanctity of the Torrens
system must be preserved; otherwise, everyone dealing with the property
registered under the system will have to inquire in every instance as to whether
the title had been regularly or irregularly issued, contrary to the evident
purpose of the law.
Being purchasers in good faith, the Chuas already acquired valid title to
the property. A purchaser in good faith holds an indefeasible title to the
property and he is entitled to the protection of the law. 152 x x x (Emphasis
supplied.)
To be sure, the practicalities of the situation have to a point influenced Our
disposition on the fate of RCBC and LIPCO. After all, the Court, to borrow
from Association of Small Landowners in the Philippines, Inc.,153 is not a
"cloistered institution removed" from the realities on the ground. To note, the
approval and issuances of both the national and local governments showing
that certain portions of Hacienda Luisita have effectively ceased, legally and
physically, to be agricultural and, therefore, no longer CARPable are a matter
of fact which cannot just be ignored by the Court and the DAR. Among the
approving/endorsing issuances:154
(a) Resolution No. 392 dated 11 December 1996 of the Sangguniang
Bayan of Tarlac favorably endorsing the 300-hectare industrial estate
project of LIPCO;
(b) BOI Certificate of Registration No. 96-020 dated 20 December
1996 issued in accordance with the Omnibus Investments Code of
1987;
(c) PEZA Certificate of Board Resolution No. 97-202 dated 27 June
1997, approving LIPCOs application for a mixed ecozone and
proclaiming the three hundred (300) hectares of the industrial land as
a Special Economic Zone;
(d) Resolution No. 234 dated 08 August 1997 of the Sangguniang
Bayan of Tarlac, approving the Final Development Permit for the
Luisita Industrial Park II Project;
(e) Development Permit dated 13 August 1997 for the proposed
Luisita Industrial Park II Project issued by the Office of the
Sangguniang Bayan of Tarlac;155
(f) DENR Environmental Compliance Certificate dated 01 October
1997 issued for the proposed project of building an industrial complex
on three hundred (300) hectares of industrial land; 156
(g) Certificate of Registration No. 00794 dated 26 December 1997
issued by the HLURB on the project of Luisita Industrial Park II with
an area of three million (3,000,000) square meters;157
(h) License to Sell No. 0076 dated 26 December 1997 issued by the
HLURB authorizing the sale of lots in the Luisita Industrial Park II;
(i) Proclamation No. 1207 dated 22 April 1998 entitled "Declaring
Certain Parcels of Private Land in Barangay San Miguel, Municipality
of Tarlac, Province of Tarlac, as a Special Economic Zone pursuant to
Republic Act No. 7916," designating the Luisita Industrial Park II
consisting of three hundred hectares (300 has.) of industrial land as a
Special Economic Zone; and
(j) Certificate of Registration No. EZ-98-05 dated 07 May 1998 issued
by the PEZA, stating that pursuant to Presidential Proclamation No.
1207 dated 22 April 1998 and Republic Act No. 7916, LIPCO has been
registered as an Ecozone Developer/Operator of Luisita Industrial
Park II located in San Miguel, Tarlac, Tarlac.
While a mere reclassification of a covered agricultural land or its inclusion in
an economic zone does not automatically allow the corporate or individual
landowner to change its use,158 the reclassification process is a prima facie
indicium that the land has ceased to be economically feasible and sound for
agricultural uses. And if only to stress, DAR Conversion Order No. 030601074-
764-(95) issued in 1996 by then DAR Secretary Garilao had effectively
converted 500 hectares of hacienda land from agricultural to
industrial/commercial use and authorized their disposition.
In relying upon the above-mentioned approvals, proclamation and conversion
order, both RCBC and LIPCO cannot be considered at fault for believing that
certain portions of Hacienda Luisita are industrial/commercial lands and are,
thus, outside the ambit of CARP. The PARC, and consequently DAR, gravely
abused its discretion when it placed LIPCOs and RCBCs property which once
formed part of Hacienda Luisita under the CARP compulsory acquisition
scheme via the assailed Notice of Coverage.
As regards the 80.51-hectare land transferred to the government for use as
part of the SCTEX, this should also be excluded from the compulsory agrarian
reform coverage considering that the transfer was consistent with the
governments exercise of the power of eminent domain159 and none of the
parties actually questioned the transfer.
While We affirm the revocation of the SDP on Hacienda Luisita subject of
PARC Resolution Nos. 2005-32-01 and 2006-34-01, the Court cannot close
its eyes to certain "operative facts" that had occurred in the interim. Pertinently,
the "operative fact" doctrine realizes that, in declaring a law or executive
action null and void, or, by extension, no longer without force and effect,
undue harshness and resulting unfairness must be avoided. This is as it should
realistically be, since rights might have accrued in favor of natural or juridical
persons and obligations justly incurred in the meantime. 160 The actual
existence of a statute or executive act is, prior to such a determination, an
operative fact and may have consequences which cannot justly be ignored;
the past cannot always be erased by a new judicial declaration.161
The oft-cited De Agbayani v. Philippine National Bank162 discussed the effect
to be given to a legislative or executive act subsequently declared invalid:
x x x It does not admit of doubt that prior to the declaration of nullity such
challenged legislative or executive act must have been in force and had to be
complied with. This is so as until after the judiciary, in an appropriate case,
declares its invalidity, it is entitled to obedience and respect. Parties may have
acted under it and may have changed their positions. What could be more
fitting than that in a subsequent litigation regard be had to what has been done
while such legislative or executive act was in operation and presumed to be
valid in all respects. It is now accepted as a doctrine that prior to its being
nullified, its existence as a fact must be reckoned with. This is merely to reflect
awareness that precisely because the judiciary is the government organ which
has the final say on whether or not a legislative or executive measure is valid,
a period of time may have elapsed before it can exercise the power of judicial
review that may lead to a declaration of nullity. It would be to deprive the law
of its quality of fairness and justice then, if there be no recognition of what had
transpired prior to such adjudication.
In the language of an American Supreme Court decision: "The actual existence
of a statute, prior to such a determination of [unconstitutionality], is an
operative fact and may have consequences which cannot justly be ignored.
The past cannot always be erased by a new judicial declaration. The effect of
the subsequent ruling as to invalidity may have to be considered in various
aspects,with respect to particular relations, individual and corporate, and
particular conduct, private and official." x x x
Given the above perspective and considering that more than two decades had
passed since the PARCs approval of the HLIs SDP, in conjunction with
numerous activities performed in good faith by HLI, and the reliance by the
FWBs on the legality and validity of the PARC-approved SDP, perforce, certain
rights of the parties, more particularly the FWBs, have to be respected
pursuant to the application in a general way of the operative fact doctrine.
A view, however, has been advanced that the operative fact doctrine is of
minimal or altogether without relevance to the instant case as it applies only in
considering the effects of a declaration of unconstitutionality of a statute, and
not of a declaration of nullity of a contract. This is incorrect, for this view failed
to consider is that it is NOT the SDOA dated May 11, 1989 which was revoked
in the instant case. Rather, it is PARCs approval of the HLIs Proposal for
Stock Distribution under CARP which embodied the SDP that was nullified.
A recall of the antecedent events would show that on May 11, 1989, Tadeco,
HLI, and the qualified FWBs executed the SDOA. This agreement provided
the basis and mechanics of the SDP that was subsequently proposed and
submitted to DAR for approval. It was only after its review that the PARC,
through then Sec. Defensor-Santiago, issued the assailed Resolution No. 89-
12-2 approving the SDP. Considerably, it is not the SDOA which gave legal
force and effect to the stock distribution scheme but instead, it is the approval
of the SDP under the PARC Resolution No. 89-12-2 that gave it its validity.
The above conclusion is bolstered by the fact that in Sec. Pangandamans
recommendation to the PARC Excom, what he proposed is the
recall/revocation of PARC Resolution No. 89-12-2 approving HLIs SDP, and
not the revocation of the SDOA. Sec. Pangandamans recommendation was
favorably endorsed by the PARC Validation Committee to the PARC Excom,
and these recommendations were referred to in the assailed Resolution No.
2005-32-01. Clearly, it is not the SDOA which was made the basis for the
implementation of the stock distribution scheme.
That the operative fact doctrine squarely applies to executive actsin this
case, the approval by PARC of the HLI proposal for stock distributionis well-
settled in our jurisprudence. In Chavez v. National Housing Authority,163 We
held:
Petitioner postulates that the "operative fact" doctrine is inapplicable to the
present case because it is an equitable doctrine which could not be used to
countenance an inequitable result that is contrary to its proper office.
On the other hand, the petitioner Solicitor General argues that the existence
of the various agreements implementing the SMDRP is an operative fact that
can no longer be disturbed or simply ignored, citing Rieta v. People of the
Philippines.
The argument of the Solicitor General is meritorious.
The "operative fact" doctrine is embodied in De Agbayani v. Court of Appeals,
wherein it is stated that a legislative or executive act, prior to its being declared
as unconstitutional by the courts, is valid and must be complied with, thus:
xxx xxx xxx
This doctrine was reiterated in the more recent case of City of Makati v. Civil
Service Commission, wherein we ruled that:
Moreover, we certainly cannot nullify the City Government's order of
suspension, as we have no reason to do so, much less retroactively apply such
nullification to deprive private respondent of a compelling and valid reason for
not filing the leave application. For as we have held, a void act though in law
a mere scrap of paper nonetheless confers legitimacy upon past acts or
omissions done in reliance thereof. Consequently, the existence of a statute
or executive order prior to its being adjudged void is an operative fact to which
legal consequences are attached. It would indeed be ghastly unfair to prevent
private respondent from relying upon the order of suspension in lieu of a formal
leave application. (Citations omitted; Emphasis supplied.)
The applicability of the operative fact doctrine to executive acts was further
explicated by this Court in Rieta v. People,164 thus:
Petitioner contends that his arrest by virtue of Arrest Search and Seizure Order
(ASSO) No. 4754 was invalid, as the law upon which it was predicated
General Order No. 60, issued by then President Ferdinand E. Marcos was
subsequently declared by the Court, in Taada v. Tuvera, 33 to have no force
and effect. Thus, he asserts, any evidence obtained pursuant thereto is
inadmissible in evidence.
We do not agree. In Taada, the Court addressed the possible effects of its
declaration of the invalidity of various presidential issuances. Discussing
therein how such a declaration might affect acts done on a presumption of their
validity, the Court said:
". . .. In similar situations in the past this Court had taken the pragmatic and
realistic course set forth in Chicot County Drainage District vs. Baxter Bank to
wit:
The courts below have proceeded on the theory that the Act of Congress,
having been found to be unconstitutional, was not a law; that it was inoperative,
conferring no rights and imposing no duties, and hence affording no basis for
the challenged decree. . . . It is quite clear, however, that such broad
statements as to the effect of a determination of unconstitutionality must be
taken with qualifications. The actual existence of a statute, prior to [the
determination of its invalidity], is an operative fact and may have
consequences which cannot justly be ignored. The past cannot always be
erased by a new judicial declaration. The effect of the subsequent ruling as to
invalidity may have to be considered in various aspects with respect to
particular conduct, private and official. Questions of rights claimed to have
become vested, of status, of prior determinations deemed to have finality and
acted upon accordingly, of public policy in the light of the nature both of the
statute and of its previous application, demand examination. These questions
are among the most difficult of those which have engaged the attention of
courts, state and federal, and it is manifest from numerous decisions that an
all-inclusive statement of a principle of absolute retroactive invalidity cannot be
justified.
xxx xxx xxx
"Similarly, the implementation/enforcement of presidential decrees prior to
their publication in the Official Gazette is an operative fact which may have
consequences which cannot be justly ignored. The past cannot always be
erased by a new judicial declaration . . . that an all-inclusive statement of a
principle of absolute retroactive invalidity cannot be justified."
The Chicot doctrine cited in Taada advocates that, prior to the nullification of
a statute, there is an imperative necessity of taking into account its actual
existence as an operative fact negating the acceptance of "a principle of
absolute retroactive invalidity." Whatever was done while the legislative or the
executive act was in operation should be duly recognized and presumed to be
valid in all respects. The ASSO that was issued in 1979 under General Order
No. 60 long before our Decision in Taada and the arrest of petitioner is
an operative fact that can no longer be disturbed or simply ignored. (Citations
omitted; Emphasis supplied.)
To reiterate, although the assailed Resolution No. 2005-32-01 states that it
revokes or recalls the SDP, what it actually revoked or recalled was the
PARCs approval of the SDP embodied in Resolution No. 89-12-2.
Consequently, what was actually declared null and void was an executive act,
PARC Resolution No. 89-12-2,165and not a contract (SDOA). It is, therefore,
wrong to say that it was the SDOA which was annulled in the instant case.
Evidently, the operative fact doctrine is applicable.
IV.
While the assailed PARC resolutions effectively nullifying the Hacienda Luisita
SDP are upheld, the revocation must, by application of the operative fact
principle, give way to the right of the original 6,296 qualified FWBs to choose
whether they want to remain as HLI stockholders or not. The Court cannot turn
a blind eye to the fact that in 1989, 93% of the FWBs agreed to the SDOA (or
the MOA), which became the basis of the SDP approved by PARC per its
Resolution No. 89-12-2 dated November 21, 1989. From 1989 to 2005, the
FWBs were said to have received from HLI salaries and cash benefits, hospital
and medical benefits, 240-square meter homelots, 3% of the gross produce
from agricultural lands, and 3% of the proceeds of the sale of the 500-hectare
converted land and the 80.51-hectare lot sold to SCTEX. HLI shares totaling
118,391,976.85 were distributed as of April 22, 2005. 166 On August 6, 20l0,
HLI and private respondents submitted a Compromise Agreement, in which
HLI gave the FWBs the option of acquiring a piece of agricultural land or
remain as HLI stockholders, and as a matter of fact, most FWBs indicated their
choice of remaining as stockholders. These facts and circumstances tend to
indicate that some, if not all, of the FWBs may actually desire to continue as
HLI shareholders. A matter best left to their own discretion.
With respect to the other FWBs who were not listed as qualified beneficiaries
as of November 21, 1989 when the SDP was approved, they are not accorded
the right to acquire land but shall, however, continue as HLI stockholders. All
the benefits and homelots167 received by the 10,502 FWBs (6,296 original
FWBs and 4,206 non-qualified FWBs) listed as HLI stockholders as of August
2, 2010 shall be respected with no obligation to refund or return them since the
benefits (except the homelots) were received by the FWBs as farmhands in
the agricultural enterprise of HLI and other fringe benefits were granted to them
pursuant to the existing collective bargaining agreement with Tadeco. If the
number of HLI shares in the names of the original FWBs who opt to remain as
HLI stockholders falls below the guaranteed allocation of 18,804.32 HLI shares
per FWB, the HLI shall assign additional shares to said FWBs to complete said
minimum number of shares at no cost to said FWBs.
With regard to the homelots already awarded or earmarked, the FWBs are not
obliged to return the same to HLI or pay for its value since this is a benefit
granted under the SDP. The homelots do not form part of the 4,915.75
hectares covered by the SDP but were taken from the 120.9234 hectare
residential lot owned by Tadeco. Those who did not receive the homelots as
of the revocation of the SDP on December 22, 2005 when PARC Resolution
No. 2005-32-01 was issued, will no longer be entitled to homelots. Thus, in the
determination of the ultimate agricultural land that will be subjected to land
distribution, the aggregate area of the homelots will no longer be deducted.
There is a claim that, since the sale and transfer of the 500 hectares of land
subject of the August 14, 1996 Conversion Order and the 80.51-hectare
SCTEX lot came after compulsory coverage has taken place, the FWBs should
have their corresponding share of the lands value. There is merit in the claim.
Since the SDP approved by PARC Resolution No. 89-12-2 has been nullified,
then all the lands subject of the SDP will automatically be subject of
compulsory coverage under Sec. 31 of RA 6657. Since the Court excluded the
500-hectare lot subject of the August 14, 1996 Conversion Order and the
80.51-hectare SCTEX lot acquired by the government from the area covered
by SDP, then HLI and its subsidiary, Centennary, shall be liable to the FWBs
for the price received for said lots. HLI shall be liable for the value received for
the sale of the 200-hectare land to LRC in the amount of PhP 500,000,000 and
the equivalent value of the 12,000,000 shares of its subsidiary, Centennary,
for the 300-hectare lot sold to LIPCO for the consideration of PhP 750,000,000.
Likewise, HLI shall be liable for PhP 80,511,500 as consideration for the sale
of the 80.51-hectare SCTEX lot.
We, however, note that HLI has allegedly paid 3% of the proceeds of the sale
of the 500-hectare land and 80.51-hectare SCTEX lot to the FWBs. We also
take into account the payment of taxes and expenses relating to the transfer
of the land and HLIs statement that most, if not all, of the proceeds were used
for legitimate corporate purposes. In order to determine once and for all
whether or not all the proceeds were properly utilized by HLI and its subsidiary,
Centennary, DAR will engage the services of a reputable accounting firm to be
approved by the parties to audit the books of HLI to determine if the proceeds
of the sale of the 500-hectare land and the 80.51-hectare SCTEX lot were
actually used for legitimate corporate purposes, titling expenses and in
compliance with the August 14, 1996 Conversion Order. The cost of the audit
will be shouldered by HLI. If after such audit, it is determined that there remains
a balance from the proceeds of the sale, then the balance shall be distributed
to the qualified FWBs.
A view has been advanced that HLI must pay the FWBs yearly rent for use of
the land from 1989. We disagree. It should not be forgotten that the FWBs are
also stockholders of HLI, and the benefits acquired by the corporation from its
possession and use of the land ultimately redounded to the FWBs benefit
based on its business operations in the form of salaries, and other fringe
benefits under the CBA. To still require HLI to pay rent to the FWBs will result
in double compensation.
For sure, HLI will still exist as a corporation even after the revocation of the
SDP although it will no longer be operating under the SDP, but pursuant to the
Corporation Code as a private stock corporation. The non-agricultural assets
amounting to PhP 393,924,220 shall remain with HLI, while the agricultural
lands valued at PhP 196,630,000 with an original area of 4,915.75 hectares
shall be turned over to DAR for distribution to the FWBs. To be deducted from
said area are the 500-hectare lot subject of the August 14, 1996 Conversion
Order, the 80.51-hectare SCTEX lot, and the total area of 6,886.5 square
meters of individual lots that should have been distributed to FWBs by DAR
had they not opted to stay in HLI.
HLI shall be paid just compensation for the remaining agricultural land that will
be transferred to DAR for land distribution to the FWBs. We find that the date
of the "taking" is November 21, 1989, when PARC approved HLIs SDP per
PARC Resolution No. 89-12-2. DAR shall coordinate with LBP for the
determination of just compensation. We cannot use May 11, 1989 when the
SDOA was executed, since it was the SDP, not the SDOA, that was approved
by PARC.
The instant petition is treated pro hac vice in view of the peculiar facts and
circumstances of the case.
WHEREFORE, the instant petition is DENIED. PARC Resolution No. 2005-32-
01 dated December 22, 2005 and Resolution No. 2006-34-01 dated May 3,
2006, placing the lands subject of HLIs SDP under compulsory coverage on
mandated land acquisition scheme of the CARP, are hereby AFFIRMED with
the MODIFICATION that the original 6,296 qualified FWBs shall have the
option to remain as stockholders of HLI. DAR shall immediately schedule
meetings with the said 6,296 FWBs and explain to them the effects,
consequences and legal or practical implications of their choice, after which
the FWBs will be asked to manifest, in secret voting, their choices in the ballot,
signing their signatures or placing their thumbmarks, as the case may be, over
their printed names.
Of the 6,296 FWBs, he or she who wishes to continue as an HLI stockholder
is entitled to 18,804.32 HLI shares, and, in case the HLI shares already given
to him or her is less than 18,804.32 shares, the HLI is ordered to issue or
distribute additional shares to complete said prescribed number of shares at
no cost to the FWB within thirty (30) days from finality of this Decision. Other
FWBs who do not belong to the original 6,296 qualified beneficiaries are not
entitled to land distribution and shall remain as HLI shareholders. All salaries,
benefits, 3% production share and 3% share in the proceeds of the sale of the
500-hectare converted land and the 80.51-hectare SCTEX lot and homelots
already received by the 10,502 FWBs, composed of 6,296 original FWBs and
4,206 non-qualified FWBs, shall be respected with no obligation to refund or
return them.
Within thirty (30) days after determining who from among the original FWBs
will stay as stockholders, DAR shall segregate from the HLI agricultural land
with an area of 4,915.75 hectares subject of PARCs SDP-approving
Resolution No. 89-12-2 the following: (a) the 500-hectare lot subject of the
August 14, l996 Conversion Order; (b) the 80.51-hectare lot sold to, or
acquired by, the government as part of the SCTEX complex; and (c) the
aggregate area of 6,886.5 square meters of individual lots that each FWB is
entitled to under the CARP had he or she not opted to stay in HLI as a
stockholder. After the segregation process, as indicated, is done, the
remaining area shall be turned over to DAR for immediate land distribution to
the original qualified FWBs who opted not to remain as HLI stockholders.
The aforementioned area composed of 6,886.5-square meter lots allotted to
the FWBs who stayed with the corporation shall form part of the HLI assets.
HLI is directed to pay the 6,296 FWBs the consideration of PhP 500,000,000
received by it from Luisita Realty, Inc. for the sale to the latter of 200 hectares
out of the 500 hectares covered by the August 14, 1996 Conversion Order, the
consideration of PhP 750,000,000 received by its owned subsidiary,
Centennary Holdings, Inc. for the sale of the remaining 300 hectares of the
aforementioned 500-hectare lot to Luisita Industrial Park Corporation, and the
price of PhP 80,511,500 paid by the government through the Bases
Conversion Development Authority for the sale of the 80.51-hectare lot used
for the construction of the SCTEX road network. From the total amount of PhP
1,330,511,500 (PhP 500,000,000 + PhP 750,000,000 + PhP 80,511,500 =
PhP 1,330,511,500) shall be deducted the 3% of the total gross sales from the
production of the agricultural land and the 3% of the proceeds of said transfers
that were paid to the FWBs, the taxes and expenses relating to the transfer of
titles to the transferees, and the expenditures incurred by HLI and Centennary
Holdings, Inc. for legitimate corporate purposes. For this purpose, DAR is
ordered to engage the services of a reputable accounting firm approved by the
parties to audit the books of HLI and Centennary Holdings, Inc. to determine if
the PhP 1,330,511,500 proceeds of the sale of the three (3) aforementioned
lots were used or spent for legitimate corporate purposes. Any unspent or
unused balance as determined by the audit shall be distributed to the 6,296
original FWBs.
HLI is entitled to just compensation for the agricultural land that will be
transferred to DAR to be reckoned from November 21, 1989 per PARC
Resolution No. 89-12-2. DAR and LBP are ordered to determine the
compensation due to HLI.
DAR shall submit a compliance report after six (6) months from finality of this
judgment. It shall also submit, after submission of the compliance report,
quarterly reports on the execution of this judgment to be submitted within the
first 15 days at the end of each quarter, until fully implemented.
The temporary restraining order is lifted.
SO ORDERED.
PRESBITERO J. VELASCO, JR.
Associate Justice
JULIAN S. LEBRUDO and REYNALDO L. LEBRUDO, Petitioners,
vs.
REMEDIOS LOYOLA, Respondent.
DECISION
CARPIO, J.:
The Case
Before the Court is a petition1 for review on certiorari assailing the
Resolution2 dated 4 January 2008 and Decision3dated 17 August 2007 of the
Court of Appeals (CA) in CA-G.R. SP No. 90048.
The Facts
Respondent Remedios Loyola (Loyola) owns a 240-square meter parcel of
land located in Barangay Milagrosa, Carmona, Cavite, known as Lot No. 723-
6, Block 1, Psd-73149 (lot), awarded by the Department of Agrarian Reform
(DAR) under Republic Act No. 66574 (RA 6657) or the Comprehensive
Agrarian Reform Law of 1988. This lot is covered by Certificate of Land
Ownership5 (CLOA) No. 20210 issued in favor of Loyola on 27 December 1990
and duly registered on 14 March 1991 under Transfer of Certificate of Title
(TCT)/CLOA No. 998.
On 27 June 1995, petitioner Julian S. Lebrudo (Lebrudo), now deceased and
represented by his son, petitioner Reynaldo L. Lebrudo, filed with the Office of
the Provincial Agrarian Reform Adjudicator (PARAD) of Trece Martires City,
Cavite, an action6 for the cancellation of the TCT/CLOA in the name of Loyola
and the issuance of another for the one-half portion of the lot in Lebrudos
favor.
In a Decision7 dated 18 December 1995, the PARAD dismissed the case
without prejudice on the ground that the case was filed prematurely. On 11
March 1996, Lebrudo re-filed the same action.8
Lebrudo alleged that he was approached by Loyola sometime in 1989 to
redeem the lot, which was mortgaged by Loyolas mother, Cristina Hugo, to
Trinidad Barreto. After Lebrudo redeemed the lot for P250.00 and a cavan
of palay, Loyola again sought Lebrudos help in obtaining title to the lot in her
name by shouldering all the expenses for the transfer of the title of the lot from
her mother, Cristina Hugo. In exchange, Loyola promised to give Lebrudo the
one-half portion of the lot. Thereafter, TCT/CLOA No. 998 was issued in favor
of Loyola. Loyola then allegedly executed a Sinumpaang Salaysay9 dated 28
December 1989, waiving and transferring her rights over the one-half portion
of the lot in favor of Lebrudo. To reiterate her commitment, Loyola allegedly
executed two more Sinumpaang Salaysay10 dated 1 December 1992 and 3
December 1992, committing herself to remove her house constructed on the
corresponding one-half portion to be allotted to Lebrudo.
Thereafter, Lebrudo asked Loyola to comply with her promise. However,
Loyola refused. Lebrudo sought the assistance of the Sangguniang
Barangay of Milagrosa, Carmona, Cavite; the Philippine National Police (PNP)
of Carmona, Cavite; and the Department of Agrarian Reform to mediate.
However, despite steps taken to amicably settle the issue, as evidenced by
certifications from the PNP and the barangay, there was no amicable
settlement. Thus, Lebrudo filed an action against Loyola.
In her Answer, Loyola maintained that Lebrudo was the one who approached
her and offered to redeem the lot and the release of the CLOA. Loyola denied
promising one-half portion of the lot as payment for the transfer, titling and
registration of the lot. Loyola explained that the lot was her only property and
it was already being occupied by her children and their families. Loyola also
denied the genuineness and due execution of the two Sinumpaang
Salaysay dated 28 December 1989 and 3 December 1992. The records do not
show whether Loyola renounced the Sinumpaang Salaysay dated 1
December 1992.
In a Decision11 dated 13 February 2002, the PARAD of Trece Martires City,
Cavite decided the case in Lebrudos favor. The dispositive portion of the
decision states:
WHEREFORE, in view of the foregoing, JUDGMENT is hereby rendered:
a) Declaring Respondent Remedios Loyola disqualified as farmer
beneficiary of the subject land identified as Lot 723-6, Block 1, under
TCT/CLOA No. 998;
b) Declaring the Deed of sales over the subject lot illegal and ordered
the same set aside;
c) Declaring Plaintiff JULIAN LEBRUDO entitled to one half () of the
subject property under TCT/CLOA No. 998 in the name of Remedios
Loyola;
d) Ordering the other one half () of the subject lot ready for allocation
to qualified beneficiary;
e) Ordering the DAR PARO Office thru the Operations Division to
cancel TCT/CLOA No. 998 and in lieu thereof, to generate and issue
another title over the 120 square meters in the name of JULIAN
LEBRUDO;
f) Ordering the survey of the subject lot at the expense of the petitioner
so that title be issued to plaintiff herein;
 g) Ordering the Register of Deeds, Trece Martires City to cancel
TCT/CLOA No. 998 in the name of Remedios Loyola;
h) Ordering the Register of Deeds, Trece Martires City to register the
title in the name [of] Julian Lebrudo as presented by the DAR or its
representative over the lot in question;
No pronouncement as to costs and damages.
SO ORDERED.12
Loyola appealed to the Department of Agrarian Reform Adjudication Board
(DARAB).13 In a Decision14 dated 24 August 2004, the DARAB reversed the
decision of the PARAD and ruled in Loyolas favor. The dispositive portion
states:
WHEREFORE, premises considered, the appealed decision is hereby
REVERSED and SET ASIDE and a new judgment rendered as follows:
1. Upholding and maintaining the validity and effectivity of TCT/CLOA
No. 998 in the name of the respondent;
2. Declaring the Sinumpaang Salaysay dated December 28, 1989 and
December 3, 1992 attached to the petition as Annex C and F, null and
void without legal force and effect;
3. Directing the Register of Deeds of Trece Martires City, Cavite to
reinstate TCT/CLOA No. 998 in the name of the respondent.
The status quo ante order issued by this Board on November 3, 2003 is hereby
LIFTED.
SO ORDERED.15
Lebrudo filed a motion for reconsideration which the DARAB denied in a
Resolution16 dated 12 April 2005. Lebrudo then filed a petition17 for review with
the CA.
In a Decision18 dated 17 August 2007, the CA affirmed the decision of the
DARAB. Lebrudo filed a motion for reconsideration which the CA denied in a
Resolution19 dated 4 January 2008.
Hence, this petition.
The Issue
The main issue is whether Lebrudo is entitled to the one-half portion of the lot
covered by RA 6657 on the basis of the waiver and transfer of rights embodied
in the two Sinumpaang Salaysay dated 28 December 1989 and 3 December
1992 allegedly executed by Loyola in his favor.
The Courts Ruling
The petition lacks merit.
A Certificate of Land Ownership or CLOA is a document evidencing ownership
of the land granted or awarded to the beneficiary by DAR, and contains the
restrictions and conditions provided for in RA 6657 and other applicable laws.
Section 27 of RA 6657, as amended by RA 9700,20 which provides for the
transferability of awarded lands, states:
SEC. 27. Transferability of Awarded Lands. Lands acquired by
beneficiaries under this ACT may not be sold, transferred or conveyed
except through hereditary succession, or to the government, or to the
LBP, or to other qualified beneficiaries for a period of ten (10) years:
Provided, however, That the children or the spouse of the transferor shall have
a right to repurchase the land from the government or LBP within a period of
two (2) years. Due notice of the availability of the land shall be given by the
LBP to the Barangay Agrarian Reform Committee (BARC) of the barangay
where the land is situated. The Provincial Agrarian Coordinating Committee
(PARCCOM), as herein provided, shall, in turn, be given due notice thereof by
the BARC.
The title of the land awarded under the agrarian reform must indicate that it is
an emancipation patent or a certificate of land ownership award and the
subsequent transfer title must also indicate that it is an emancipation patent or
a certificate of land ownership award.
If the land has not yet been fully paid by the beneficiary, the rights to the land
may be transferred or conveyed, with prior approval of the DAR, to any heir of
the beneficiary or to any other beneficiary who, as a condition for such transfer
or conveyance, shall cultivate the land himself. Failing compliance herewith,
the land shall be transferred to the LBP which shall give due notice of the
availability of the land in the manner specified in the immediately preceding
paragraph. x x x (Emphasis supplied)
It is clear from the provision that lands awarded to beneficiaries under the
Comprehensive Agrarian Reform Program (CARP) may not be sold,
transferred or conveyed for a period of 10 years. The law enumerated four
exceptions: (1) through hereditary succession; (2) to the government; (3) to
the Land Bank of the Philippines (LBP); or (4) to other qualified beneficiaries.
In short, during the prohibitory 10-year period, any sale, transfer or
conveyance of land reform rights is void, except as allowed by law, in order to
prevent a circumvention of agrarian reform laws.
In the present case, Lebrudo insists that he is entitled to one-half portion of the
lot awarded to Loyola under the CARP as payment for shouldering all the
expenses for the transfer of the title of the lot from Loyolas mother, Cristina
Hugo, to Loyolas name. Lebrudo used the two Sinumpaang
Salaysay executed by Loyola alloting to him the one-half portion of the lot as
basis for his claim.
Lebrudos assertion must fail. The law expressly prohibits any sale, transfer or
conveyance by farmer-beneficiaries of their land reform rights within 10 years
from the grant by the DAR. The law provides for four exceptions and Lebrudo
does not fall under any of the exceptions. In Maylem v. Ellano,21 we held that
the waiver of rights and interests over landholdings awarded by the
government is invalid for being violative of agrarian reform laws. Clearly, the
waiver and transfer of rights to the lot as embodied in the Sinumpaang
Salaysay executed by Loyola is void for falling under the 10-year prohibitory
period specified in RA 6657.
Lebrudo asserts that he is a qualified farmer beneficiary who is entitled to the
lot under the CARP. DAR Administrative Order No. 3, 22 series of 1990,
enumerated the qualifications of a beneficiary:
1. Landless;
2. Filipino citizen;
3. Actual occupant/tiller who is at least 15 years of age or head of the
family at the time of filing application; and
4. Has the willingness, ability and aptitude to cultivate and make the
land productive.
Lebrudo does not qualify as a beneficiary because of (1) and (3). First, Lebrudo
is not landless. According to the records,23 Municipal Agrarian Reform Officer
Amelia Sangalang issued a certification dated 28 February 1996 attesting that
Lebrudo was awarded by the DAR with a homelot consisting of an area of 236
square meters situated at Japtinchay Estate, Bo. Milagrosa, Carmona, Cavite.
Next, Lebrudo is not the actual occupant or tiller of the lot at the time of the
filing of the application. Loyola and her family were the actual occupants of the
lot at the time Loyola applied to be a beneficiary under the CARP.
Further, the CA, in its Decision dated 17 August 2007, correctly observed that
a certificate of title serves as evidence of an indefeasible title and after the
expiration of the one-year period from the issuance of the registration decree
upon which it is based, the title becomes incontrovertible. The CA also
declared that the basis of Lebrudos claim, the two Sinumpaang
Salaysay dated 28 December 1989 and 3 December 1992, were illegal and
void ab initio for being patently intended to circumvent and violate the
conditions imposed by the agrarian law. The relevant portions of the decision
provide:
x x x It is undisputed that CLOA 20210 was issued to the respondent on
December 27, 1990 and was registered by the Register of Deeds of Cavite on
March 14, 1991, resulting in the issuance of TCT/CLOA No. 998 in her name.
Under Sec. 43, P.D. 1529, the certificate of title that may be issued by the
Register of Deeds pursuant to any voluntary or involuntary instrument relating
to the land shall be the transfer certificate of title, which shall show the number
of the next previous certificate covering the same land and also the fact that it
was previously registered, giving the record number of the original certificate
of title and the volume and page of the registration book in which the original
certificate of title is found.
The certificate of title serves as evidence of an indefeasible title to the property
in favor of the person whose name appears therein. After the expiration of the
one-year period from the issuance of the decree of registration upon which it
is based, the title becomes incontrovertible.
Accordingly, by the time when original petitioner Julian Lebrudo filed on June
27, 1995 the first case (seeking the cancellation of the respondents CLOA),
the respondents certificate of title had already become incontrovertible. That
consequence was inevitable, for as the DARAB correctly observed, an original
certificate of title issued by the Register of Deeds under an administrative
proceeding was as indefeasible as a certificate of title issued under a judicial
registration proceeding. Clearly, the respondent, as registered property owner,
was entitled to the protection given to every holder of a Torrens title.1avvphi1
The issue of whether or not the respondent was bound by her waiver and
transfer in favor of Julian Lebrudo, as contained in the several sinumpaang
salaysay, was irrelevant. Worse for the petitioner, the DARAB properly held
that the undertaking of the respondent to Julian Lebrudo under
the sinumpaang salaysay dated December 28, 1989 and December 3, 1992
whereby she promised to give him portion of the homelot in consideration
of his helping her work on the release of the CLOA to her and shouldering all
the expenses for the purpose was "clearly illegal and void ab initio" for being
patently intended to circumvent and violate the conditions imposed by the
agrarian laws and their implementing rules. He could not, therefore, have his
supposed right enforced. x x x24

We see no reason to disturb the findings of the CA. The main purpose of the
agrarian reform law is to ensure the farmer-beneficiarys continued
possession, cultivation and enjoyment of the land he tills.25 To do otherwise is
to revert back to the old feudal system whereby the landowners reacquired
vast tracts of land and thus circumvent the governments program of freeing
the tenant-farmers from the bondage of the soil.26

WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 17

August 2007 and Resolution dated 4 January 2008 of the Court of Appeals in
CA-G.R. SP No. 90048.

SO ORDERED.
DEPARTMENT OF AGRARIAN REFORM, through its PROVINCIAL
AGRARIAN REFORM OFFICER OF DAVAO CITY, and THE MUNICIPAL
AGRARIAN REFORM OFFICER OF CALINAN, DAVAO CITY, Petitioners,
vs.
WOODLAND AGRO-DEVELOPMENT, INC., Respondent.
DECISION
SERENO, CJ:
This Petition for Review under Rule 45 seeks the nullification of the
Decision1 dated 2 February 2009 issued by the Regional Trial Court of Davao
City Branch 14 (RTC) and its Order2 dated 8 May 2009 in Special Civil Case
No. 30855-2005. The RTC nullified the Notice of Coverage (NOC) dated 11
December 2003 and Notice of Acquisition (NOA) dated 5 October 2004 issued
by petitioner Department of Agrarian Reform (DAR) over a portion of a parcel
of land owned by respondent Woodland Agro Development. Inc. (Woodland).
The court also denied DAR's Motion for Reconsideration.3
The issue before this Court is whether Republic Act No. 8532 (R.A. 8532)
authorized the DAR to issue Notices of Coverage and Acquisition after 15 June
1998, or beyond the 10-year implementation period provided or in Section 5 of
Republic Act No. 6657 (R.A. 6657) or the
Comprehensive Agrarian Reform Law (CARL), which states:
SECTION 5. Schedule of Implementation. - The distribution of all lands,
covered by this Act shall be implemented immediately and completed within
ten (10) years from the effectivity thereof.
The Court rules that R.A. 8532 extended the term of the implementation of the
Comprehensive Agrarian Reform Program (CARP) under the CARL.
Consequently, the NOC dated 11 December 2003 and NOA dated 5 October
2004 issued over the portion of respondent's land are valid.
ANTECEDENT FACTS
Woodland is the registered owner of a parcel of agricultural land covered by
Transfer Certificate of Title (TCT) No. T-113207 with an area of 10.0680
hectares located at Subasta, Calinan, Davao City. 4 On 11 December 2003, the
DAR issued an NOC5 placing 5.0680 hectares under the coverage of the
CARL for having exceeded the retention limit6provided by law. TCT No. T-
113207 was canceled, and a new title covering 5.0680 hectares was issued in
the name of the Republic of the Philippines.7 Thereafter, on 14 February 2005,
Certificates of Land Ownership Award (CLOAs) were issued in favor of five
farmer beneficiaries.8
On 3 March 2005, Woodland filed with the RTC a Complaint9 for "Declaratory
Relief, Annulment of the Notice of Coverage under R.A. 6657, with Prayer for
the Issuance of a Temporary Restraining Order and/or Writ of Preliminary
Injunction." Woodland contended that the issuance of the NOC was illegal,
because R.A. 6657 had already expired on 15 June 1998. 10 It argued that
pursuant to Section 5 of the law, the agency had a period of ten (10) years to
implement the CARP from the time of its effectivity on 15 June 1988. It further
argued that the CARL's amendatory law, R.A. 8532, did not extend the DAR's
authority to acquire agrarian lands for distribution. It theorized that the budget
augmentations legislated in R.A. 8532 pertained only to the funding
requirements of the other facets of the CARP implementation and excluded
the acquisition of private agricultural lands.11
The DAR hinged its Answer12 on Department of Justice (DOJ) Opinion No.
009, Series of 1997 issued by then DOJ Secretary Teofisto Guingona, Jr. He
opined that Section 5 was merely directory in character; that the 10-year period
of implementation was only a time frame given to the DAR for the acquisition
and distribution of public and private agricultural lands covered by R.A.
6657.13 The schedule was meant to guide the DAR in setting its priorities, but
it was not by any means a limitation of authority in the absence of more
categorical language to that effect.14
THE RULING OF THE RTC
The RTC ruled that the DAR's act of sending Woodland an NOC was already
a breach of R.A. 6657, since the NOC was issued beyond the 10-year period
prescribed by law.15 The trial court further ruled that R.A. 8532 only amended
the CARL' s provision on the sourcing of funds for the implementation of the
CARP, and not the provision on the period within which the DAR may acquire
lands for distribution. The court held that R.A. 8532 did not extend the 10-year
period of land acquisition.16 Neither did it overstep the DAR's jurisdiction to try
agrarian matters, but only determined Woodland's rights under the CARL.17
The dispositive portion18 of the RTC Decision reads:
Premises considered, this Court rules in favor of the plaintiff and judgment is
rendered as follows:
1. Declaring that Republic Act No. [8532] did not extend the acquisition of
private lands beyond June 15, 1998 and;
2. Nullifying the [Notice] of Coverage dated December 11, 2003 and the Notice
of Acquisition dated October 5, 2004.
After its Motion for Reconsideration was denied, petitioner elevated the case
to this Court via a Petition for Review under Rule 45.
THE ISSUE
The sole issue raised by petitioner is whether it can still issue Notices of
Coverage after 15 June 1998.
THE COURT'S RULING
Article XIII, Section 4 of the 1987 Constitution encapsulates the people's
yearning for genuine agrarian reform. The provision states:
The State shall, by law, undertake an agrarian reform program founded on the
right of farmers and regular farmworkers, who are landless, to own directly or
collectively the lands they till or, in the case of other farmworkers, to receive a
just share of the fruits thereof. To this end, the State shall encourage and
undertake the just distribution of all agricultural lands, subject to such priorities
and reasonable retention limits as the Congress may prescribe, taking into
account ecological, developmental, or equity considerations, and subject to
the payment of just compensation. In determining retention limits, the State
shall respect the right of small landowners. The State shall further provide
incentives for voluntary land-sharing.
Sixteen months after the ratification of the Constitution, Congress enacted the
CARL.19 The policy of the law is to pursue a Comprehensive Agrarian Reform
Program that shall give highest consideration to the welfare of landless farmers
and farmworkers to promote social justice; move the nation toward sound rural
development and industrialization; and establish owner cultivatorship of
economic-size farms as the basis of Philippine agriculture. To this end, a more
equitable distribution and ownership of land shall be undertaken with due
regard for the rights of landowners to just compensation and to the ecological
needs of the nation to provide farmers and farmworkers with the opportunity
to enhance their dignity and improve the quality of their lives through greater
productivity of agricultural lands.20
In Secretary of Agrarian Reform v. Tropical Homes, lnc., 21
we recognized the
CARL as a "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 the law's
benefit, it is the means towards a viable livelihood and ultimately, a decent
life.22
The Court is guided by these principles in the resolution of the present Petition
for Review on Certiorari.
The agrarian reform program, being one of the immutable hallmarks of the
1987 Constitution, must be faithfully implemented to meet the ends of social
justice.1wphi1 The Court cannot subscribe to Woodland's stance that the
DAR's authority to issue notices of coverage and acquisition ceased after the
10-year implementation period mentioned in Section 5 of the CARL. Such a
view runs afoul of the constitutional mandate firmly lodged in Article XIII,
Section 4, which seeks the just distribution of all agricultural lands to qualified
farmers and farm workers to free them from oppressive tenancy agreements.
The success of the CARP depends heavily on the adept implementation by
the DAR. The agency's primordial procedural tool for realizing the law's
objectives is the issuance of Notices of Coverage and Acquisition. For us to
sustain Woodland's theory that the DAR can no longer issue those notices
after 15 June 1998 despite the enactment of R.A. 8532 would thwart the
CARP's purpose. As the Court ruled in Gonzales v. Court of Appeals:23
[O]ur laws on agrarian reform were enacted primarily because of the
realization that there is an urgent need to alleviate the lives of the vast number
of poor farmers in our country. Yet, despite such laws, the majority of these
farmers still live on a hand-to-mouth existence. This can be attributed to the
fact that these agrarian laws have never really been effectively implemented.
Woodland asserts that R.A. 8532 only amended R.A. 6657 insofar as the
funding requirements for the CARP are concerned. It disputes the extension
of the DAR's authority to acquire and distribute private agricultural lands.
The first paragraph of Section 63, as originally worded and as amended, used
the phrase "this Act" to refer to CARL as a whole.
Originally, the first paragraph of Section 63 reads:
SECTION 63. Funding Source. - The initial amount needed to implement this
Act for the period of ten (10) years upon approval hereof shall be funded from
the Agrarian Reform Fund created under Sections 20 and 21 of Executive
Order No. 229. (Emphasis supplied)
As amended by R.A. 8532, the first paragraph of Section 63 stated:
SECTION 63. Funding Source. - The amount needed to implement this Act
until the year 2008 shall be funded from the Agrarian Reform Fund. (Emphasis
supplied)
In 2009, Congress again amended certain provisions of the CARL, including
Section 63.24 The latest revision of the first paragraph recites:

SECTION 63. Funding Source. - The amount needed to further implement the
CARP as provided in this Act, until June 30, 2014, upon expiration of funding
under Republic Act No. 8532 and other pertinent laws, shall be funded from
the Agrarian Reform Fund and other funding sources in the amount of at least
One hundred fifty billion pesos (P150,000,000,000.00). (Emphasis supplied)

Clearly, Section 63 refers to the implementation of the CARL in its entirety, not
just the funding source. Indeed, R.A. 8532 specifically amended Section 63 of
R.A. 6657, but it does not follow that only Section 63 had been affected by the
amendment. The fact that Section 63 falls under the chapter on "Financing"
only emphasizes its general applicability. Hence, the phrase "until the year
2008" used in R.A. 8532 unmistakably extends the DAR's authority to issue
NOCs for purposes of acquiring and distributing private agricultural lands.

Finally, R.A. 9700 extended the acquisition and distribution of all agricultural
lands until 30 June 2014.25 The title alone of R.A. 9700 - An Act Strengthening
the Comprehensive Agrarian Reform Program (CARP), Extending the
Acquisition and Distribution of All Agricultural Lands, Instituting Necessary
Reforms, Amending for the Purpose Certain Provisions of Republic Act No.
6657, Otherwise Known as the Comprehensive Agrarian Reform Law of 1988,
As Amended, and Appropriating Funds Therefor - reveals that the CARP was
indeed extended from 1998 to 2008 via R.A. 8532. Had there been no prior
extension from 1998 to 2008, how else could the CARP have been extended
by R.A. 9700 until 30 June 2014? There could have been an extension only if
the program sought to be extended had not expired.

WHEREFORE, the foregoing Petition is GRANTED. The Decision dated 2

February 2009 and Order dated 8 May 2009 of the Regional Trial Court of
Davao City Branch 14 in Special Civil Case No. 30855-2005 are REVERSED
and SET ASIDE. The DAR's Notice of Coverage dated 11 December 2003 and
Notice of Acquisition dated 5 October 2004 are UPHELD with full effect. SO
ORDERED.

MARIA LOURDES P.A. SERENO

Chief Justice, Chairperson