respondent Macaya was using and cultivating the land free from any
G.R. No. L-62626 Case Digest
G.R. No. L-62626, July 18, 1984
Spouses Cayetano and Patricia Tiongson, etc.
vs CA and Teodoro Macaya
Ponente: Gutierrez
Facts:
1946, Severino Manotok donated and transferred to his 8 children and
2 grandchildren a 34 hectare land in Quezon City. Severino Manotok
was appointed judicial guardian of his minor children. There was no
tenant occupying the property at the time of the donation.
Later, Teodoro Macaya accompanied Vicente Herrera, the overseer of
the property, went to the Manotok and pleaded that he be allowed to
live in the property to prevent theft and to guard the property. Manotok
allowed Macaya but imposed the condition that any time the owners
needed to take the property, Macaya and his family must vacate, and
that he could raise animals and plant according to his needs, and that
the owners have no responsibility to Macaya and he will use only 3
hectares. These conditions were not put in writing.
In 1950, the property owners organized themselves as a corporation
and transferred the 34 hectare land a capital contribution to the capital
stock of the corporation. Later, when the owners demanded for
payment of taxes, Macaya agreed to help pay the taxes by remitting 10
cavans of palay every year as his contribution. Later, owners requested
Macaya to increase his contribution to 20 cavans, Macaya agreed.
Later, Macaya pleaded that he will contribute 10 cavans only, the
owners said the "he might as well not deliver anymore". Macaya did
not deliver palays from then on.
1974, the owners executed a Unilateral Deed of Conveyance of the
property to Patricia Tiongson, etc. Macaya was informed that the land
is needed for house construction of the owners and was asked to vacate,
Macaya pleaded that he may be allowed to harvest first before
vacating. However, after harvest, Macaya did not vacate and even
expand his cultivation to 6 hectares without the consent of the owners.
Issue: Whether there is tenancy relationship between the parties.
Ruling:
Real estate taxes of the property declare the land as residential. The
physical view of the property also shows that the land was a rolling
forestal land without any flat portion except the one tilled by Macaya.
As to the sharing, the decision of the petitioners not to ask for anymore
contributions from Macaya reveals that there was no tenancy
relationship ever agreed upon by the parties. Neither can such
relationship be implied from the facts as there was no agreed system
of sharing the produce of the property. Moreover, from 1946 to 1956
at which time, Macaya was also planting rice, there was no payment
whatsoever. At the most and during the limited period when it was in
force, the arrangement was a civil lease where the lessee for a fixed
price leases the property while the lessor has no responsibility
whatsoever for the problems of production and enters into no
agreement as to the sharing of the costs of fertilizers, irrigation,
seedlings, and other items.
As to consent, the lot was taxed as residential land in a metropolitan
area. There was clearly no intention on the part of the owners to devote
the property for agricultural production but only for residential
purposes. Thus, together with the third requisite, the fourth requisite
which is the purpose was also not present.
There was no agreement as to any system of sharing the produce of the
land. The petitioners did not get anything from the harvest and private
charge or expense.
FIRST DIVISION
G.R. No. L-62626 July 18, 1984
SPOUSES CAYETANO and PATRICIA TIONGSON,
SPOUSES EDWARD and PACITA GO, SPOUSES ROBERTO
and MYRNA LAPERAL III, ELISA R. MANOTOK, SPOUSES
IGNACIO and PACITA MANOTOK, SEVERINO MANOTOK,
JR., SPOUSES FAUSTO and MILAGROS MANOTOK, ROSA
R. MANOTOK, Minors MIGUEL A. B. SISON and MA.
CRISTINA E. SISON, represented by their judicial guardian
FILOMENA M. SISON, SPOUSES MAMERTO and
PERPETUA M. BOCANEGRA, GEORGE M. BOCANEGRA,
represented by his judicial guardian MAMERTO
BOCANEGRA, SPOUSES FRANCISCO and FILOMENA
SISON, JOSE CLEMENTE MANOTOK, SPOUSES JESUS and
THELMA MANOTOK, Minors PHILIP MANOTOK, MARIA
TERESA MANOTOK and RAMON SEVERINO MANOTOK,
represented by their judicial guardian SEVERINO MANOTOK,
JR., Minors JESUS JUDE MANOTOK, JR. and JOSE MARIA
MANOTOK, represented by their judicial guardian JESUS
MANOTOK, petitioners,
vs.
HONORABLE COURT OF APPEALS and TEODORO S.
MACAYA, respondents.
Romeo J. Callejo and Gil Venerando R. Racho for petitioners.
David Advincula Jr. and Jose J. Francisco for respondents.
GUTIERREZ, JR., J.:
In this petition for review on certiorari of the decision of the Court of,
Appeal declaring the existence of a landholder-tenant relationship
and ordering the private respondent's reinstatement, the petitioners
contend that the appellate court committed an error of law in:
1. Disregarding the findings of fact of the Court
of Agrarian Relations which are supported by
substantial evidence; and
2. Substituting the findings of fact of the Court of
Agrarian Relations with its own findings.
Briefly, the facts of the case as found by the Court of Agrarian
Relations, Seventh Regional District, Branch 1 at Pasig, Metro
Manila are as follows: Sometime in 1946, the late Severino Manotok
donated and transferred to his eight (8) children and two (2)
grandchildren namely: Purificacion Manotok, Eliza Manotok,
Perpetua manotok, Filomena Manotok, Severino Manotok, Jr., Jesus
Manotok, Rahula Ignacio Manotok, Severino Manotok III, Fausto
Manotok and Rosa Manotok, a thirty-four-hectare lot located in
Payong, Old Balara, Quezon City covered by a certificate of title.
Severino Manotok who was appointed judicial guardian of his minor
children 'accepted on their behalf the aforesaid donation. At that time,
there were no tenants or other persons occupying the said property.
In that same year, Teodoro Macaya accompanied by Vicente Herrera,
the overseer of the property, went to the house of Manotok in Manila
and pleaded that he be allowed to live on the Balara property so that
he could at the same time guard the property and prevent the entry of
squatters and the theft of the fruits and produce of the fruit trees
planted by the owner. Manotok allowed Macaya to stay in the
property as a guard (bantay) but imposed the conditions that at any
time that the owners of the property needed or wanted to take over
the property, Macaya and his family should vacate the property
immediately; that while he could raise animals and plant on the
property, he could do so only for his personal needs; that he alone
could plant and raise animals on the property; and that the owners
would have no responsibility or liability for said activities of Macaya.
Macaya was allowed to use only three (3) hectares. These conditions,
however, were not put in writing.
On December 5, 1950, the property-owners organized themselves
into a corporation engaged primarily in the real estate business
known as the Manotok Realty, Inc. The owners transferred the 34-
hectare lot to the corporation as part of their capital contribution or
subscription to the capital stock of the corporation.
From 1946 to 1956, Macaya did not pay, as he was not required to
pay anything to the owners or corporation whether in cash or in kind
for his occupancy or use of the property. However, the corporation
noted that the realty taxes on the property had increased considerably
and found it very burdensome to pay the said taxes while on the other
hand, Macaya had contributed nothing nor even helped in the
payment of the taxes. Thus, Macaya upon the request of the owners
agreed to help by remitting ten (10) cavans of palay every year as his
contribution for the payment of the realty taxes beginning 1957.
On June 5, 1964, the corporation requested Macaya to increase his
contribution from ten (10) cavans to twenty (20) cavans of palay
effective 1963 because the assessed value of the property had
increased considerably. Macaya] agreed.
In 1967, Macaya informed the corporation that he could not afford
anymore to deliver any palay because the palay dried up. He further
requested that in the ensuring years, he be allowed to contribute only
ten (10) cavans of palay. The corporation said that if that was the
case, he might as well not deliver anymore. Thus, from 1967 up to
1976, Macaya did not deliver any palay.
On January 31, 1974, Manotok Realty, Inc. executed a "Unilateral
Deed of Conveyance" of the property in favor of Patricia Tiongson,
Pacita Go, Roberto Laperal III, Elisa Manotok, Rosa Manotok,
Perpetua M. Bocanegra, Filomena M. Sison, Severino Manotok, Jr.,
Jesus Manotok, Ignacio S. Manotok, Severino Manotok III and
Fausto Manotok.
Sometime in 1974, Macaya was informed by the Manotoks that they
needed the property to construct their houses thereon. Macaya agreed
but pleaded that he be allowed to harvest first the planted rice before
vacating the property.
However, he did not vacate the property as verbally promised and
instead expanded the area he was working on.
In 1976, the Manotoks once more told Macaya to vacate the entire
property including those portions tilled by him. At this point, Macaya
had increased his area from three (3) hectares to six (6) hectares
without the knowledge and consent of the owners. As he was being
compelled to vacate the property, Macaya brought the matter to the
Department (now Ministry) of Agrarian Reforms. The Manotoks,
during the conference before the officials of the Department insisted
that Macaya and his family vacate the property. They threatened to
bulldoze Macaya's landholding including his house, thus prompting
Macaya to file an action for peaceful possession, injunction, and
damages with preliminary injunction before the Court of Agrarian
Relations.
The sole issue to be resolved in the present petition is whether or not
a tenancy relationship exists between the parties. The Court of
Agrarian Relations found that Macaya is not and has never been a
share or leasehold tenant of Severino Manotok nor of his successors-
in-interest over the property or any portion or portions thereof but has
only been hired as a watchman or guard (bantay) over the same. On
Macaya's appeal from the said decision, the respondent appellate
court declared the existence of an agricultural tenancy relationship
and ordered Macaya's reinstatement to his landholding.
Since what is involved ed is agricultural tenancy, we refer to
Republic Act No. 1199 as amended by Republic Act No. 2263.
Section 3 thereof defines agricultural tenancy as:
xxx xxx xxx
... the physical possession by a person of land
devoted to agriculture belonging to, or legally
possessed by, another for the purpose of
production through the labor of the former and of
the members of his immediate farm household, in
consideration of which the former agrees to share
the harvest with the latter, or to pay a price
certain, either in produce or in money, or in both.
Thus, the essential requisites of tenancy relationship are: 1) the
parties are the landholder and the tenant; 2) the subject is agricultural
land; 3) there is consent; 4) the purpose is agricultural production;
and 5) there is consideration (Agustin, Code of Agrarian Reforms of
the Philippines, 1981, p. 19). As
xxx xxx xxx
All these requisites are necessary in order to
create tenancy relationship between the parties
and the absence of one or more requisites do not
make the alleged tenant a de facto tenant, as
contra-distinguished from a de jure tenant, This is
so because unless a person has established his
status as a de jure tenant, he is not entitled to
security of tenure nor is he covered by the Land
Reform Program of the Government under
existing tenancy laws. ...
The key factor in ascertaining whether or not there is a landowner-
tenant relationship in this case is the nature of the disputed property.
Is the thirty-four (34) hectare lot, of which the six (6) hectares
occupied by the private respondent form a part, against agricultural
land? If not, the rules on agrarian reform do not apply.
From the year 1948 up to the present, the tax declarations of real
property and the annual receipts for real estate taxes paid have always
classified the land as "residential". The property is in Balara, Quezon
City, Metro Manila, not far from the correctly held by the trial court:
University of the Philippines and near some fast growing residential
subdivisions. The Manotok family is engaged in the business of
developing subdivisions in Metro Manila, not in farming.
The trial court observed that a panoramic view of the property shows
that the entire 34 hectares is rolling forestal land without any flat
portions except the small area which could be planted to palay. The
photographs of the disputed area show that flush to the plantings of
the private respondent are adobe walls separating expensive looking
houses and residential lots from the palay and newly plowed soil.
Alongside the plowed or narrowed soil are concrete culverts for the
drainage of residential subdivisions. The much bigger portions of the
property are not suitable for palay or even vegetable crops.
The trial court noted that in a letter dated April 12, 1977, the City
Engineer of Quezon City certified on the basis of records in his office
that the property in question falls within the category of "Residential
I Zone."
The respondent court ignored all the above considerations and noted
instead that the appellees never presented the tax declarations for the
previous year, particularly for 1946, the year when Macaya began
cultivating the property. It held that while the petitioners at that time
might have envisioned a panoramic residential area of the disputed
property, then cogonal with some forest, that vision could not
materialize due to the snail pace of urban development to the
peripheral areas of Quezon City where the disputed property is also
located and pending the consequent rise of land values. As a matter
of fact, it found that the houses found thereon were constructed only
in the 70's.
Whatever "visions" the owners may have had in 1946, the fact
remains that the land has always been officially classified as
"residential" since 1948. The areas surrounding the disputed six
hectares are now dotted with residences and, apparently, only this
case has kept the property in question from being developed together
with the rest of the lot to which it belongs. The fact that a caretaker
plants rice or corn on a residential lot in the middle of a residential
subdivision in the heart of a metropolitan area cannot by any strained
interpretation of law convert it into agricultural land and subject it to
the agrarian reform program.
On this score alone, the decision of the respondent court deserves to
be reversed.
Another requisite is that the parties must be landholder and tenant.
Rep. Act No. 11 99 as amended defines a landholder —
Sec. 5(b) A landholder shall mean a person,
natural or juridical, who, either as owner, lessee,
usufructuary, or legal possessor, lets or grants to
another the use or cultivation of his land for a
consideration either in shares under the share
tenancy system, or a price certain under the
leasehold tenancy system.
On the other hand, a tenant is defined as —
Sec. 5(a) A tenant shall mean a person who,
himself and with the aid available from within his
immediate farm household, cultivates the land
belonging to, or possessed by, another with the
latter's consent for purposes of production,
sharing the produce with the landholder under the
share tenancy system or paying to the landholder
a price certain in produce or in money or both,
under the leasehold tenancy system.
Under these definitions, may Macaya be considered as a tenant and
Manotok as a landholder? Significant, as the trial court noted, is that
the parties have not agreed as to their contributions of the several
items of productions such as expenses for transplanting, fertilizers,
weeding and application of insecticides, etc. In the absence of an
agreement as to the respective contributions of the parties or other
terms and conditions of their tenancy agreement, the lower court
concluded that no tenancy relationship was entered into between
them as tenant and landholder.
On this matter, the respondent Appellate Court disagreed. It held that:
... Whether the appellant was instituted as tenant
therein or as bantay, as the appellees preferred to
call him, the inevitable fact is that appellant
cleared, cultivated and developed the once
unproductive and Idle property for agricultural
production. Appellant and Don Severino have
agreed and followed a system of sharing the
produce of the land whereby, the former takes
care of all expenses for cultivation and
production, and the latter is only entitled to 10
cavans of rice per harvest. This is the essense of
leasehold tenancy.
It should be noted, however, that from 1967 to the present, Macaya
did not deliver any cavans of palay to the petitioners as the latter felt
that if Macaya could no longer deliver the twenty (20) cavans of
palay, he might as well not deliver any. The decision of the
petitioners not to ask for anymore contributions from Macaya reveals
that there was no tenancy relationship ever agreed upon by the
parties. Neither can such relationship be implied from the facts as
there was no agreed system of sharing the produce of the property.
Moreover, from 1946 to 1956 at which time, Macaya was also
planting rice, there was no payment whatsoever. At the most and
during the limited period when it was in force, the arrangement was a
civil lease where the lessee for a fixed price leases the property while
the lessor has no responsibility whatsoever for the problems of
production and enters into no agreement as to the sharing of the costs
of fertilizers, irrigation, seedlings, and other items. The private
respondent, however, has long stopped in paying the annual rents and
violated the agreement when he expanded the area he was allowed to
use. Moreover, the duration of the temporary arrangement had
expired by its very terms.
Going over the third requisite which is consent, the trial court
observed that the property in question previous to 1946 had never
been tenanted. During that year, Vicente Herrera was the overseer.
Under these circumstances, coupled by the fact that the land is
forested and rolling, the lower court could not see its way clear to
sustain Macaya's contention that Manotok had given his consent to
enter into a verbal tenancy contract with him. The lower court further
considered the fact that the amount of ten (10) cavans of palay given
by Macaya to the owners from 1957 to 1964 which was later
increased to twenty (20) cavans of palay from 1964 to 1966 was
grossly disproportionate to the amount of taxes paid by the owners.
The lot was taxed as residential land in a metropolitan area. There
was clearly no intention on the part of the owners to devote the
property for agricultural production but only for residential purposes.
Thus, together with the third requisite, the fourth requisite which is Manotok Realty, Inc. na nasa
the purpose was also not present. Payong, Quezon City, na
kanyang binabantayan
The last requisite is consideration. This is the produce to be divided samantalang hindi pa
between the landholder and tenant in proportion to their respective ginagawang SUBDIVISION
contributions. We agree with the trial court that this was also absent. PANGTIRAHAN.

As earlier stated, the main thrust of petitioners' argument is that the c) Exhibit "10" adopted and marked as Exhibit
law makes it mandatory upon the respondent Court of Appeals to "N" for plaintiff (Macaya):
affirm the decision of the Court of Agrarian Relations if the findings
of fact in said decision are supported by substantial evidence, and the Tinanggap namin kay
conclusions stated therein are not clearly against the law and Ginoong Teodoro Macaya
jurisprudence. On the other hand, private respondent contends that ang DALAWAMPUNG (20)
the findings of the Court of Agrarian Relations are based not on kabang palay na kanyang
substantial evidence alone but also on a misconstrued or tulong sa pagbabayad ng
misinterpreted evidence, which as a result thereof, make the amillaramiento para sa taong
conclusions of the Court of Agrarian Relations clearly contrary to law 1964 ng lupang ari ng
and jurisprudence. Manotok Realty Inc., na nasa
Payong, Quezon City, na
After painstakingly going over the records of the case, we find no kanyang binabantayan
valid and cogent reason which justifies the appellate court's deviation samantalang hindi pa
from the findings and conclusions of the lower court. It is quite clear ginagawang SUBDIVISION
from the 44-page decision of the trial court, that the latter has taken PANG TAHANAN.
extra care and effort in weighing the evidence of both parties of the
case. We find the conclusions of the respondent appellate court to be d) Exhibit "11" adopted and marked as Exhibit
speculative and conjectural. "M" for plaintiff (Macaya):

It bears re-emphasizing that from 1946 to 1956, there was no
agreement as to any system of sharing the produce of the land. The
petitioners did not get anything from the harvest and private
respondent Macaya was using and cultivating the land free from any
charge or expense. The situation was rather strange had there been a
tenancy agreement between Don Severino and Macaya.
From 1957 to 1964, Macaya was requested to contribute ten (10)
cavans a year for the payment of the realty taxes. The receipts of
these contributions are evidenced by the following exhibits quoted
below:
(a) Exhibit "4" adopted and marked as Exhibit
"K" for plaintiff (Macaya):
Ukol sa taon 1961
Tinanggap naniin kay G.
Teodoro Macaya ang
sampung (10) cavan na palay
bilang tulong niya sa
pagbabayad ng
amillaramiento sa lupa ng
corporation na nasa Payong,
Q.C. na kaniyang
binabantayan.
(b) Exhibit "9" adopted and marked as Exhibit
"L" for plaintiff (Macaya):
Tinanggap namin kay
Ginoong Teodoro Macaya
ang TATLONG (3) kabang
palay bilang kapupunan sa
DALAWAMPUNG (20)
kabang palay na kanyang
tulong sa pagbabayad ng
amillaramiento para sa taong
1963 ng lupang ari ng
Tinanggap namin kay
Ginoong Teodoro Macaya
ang DALAWAMPUNG (20)
kabang ng palay na kanyang
tulong sa pagbabayad ng
amillaramiento para sa taong
1965 ng lupang ari ng
Manotok Realty, Inc., na nasa
Payong, Quezon City, na
kanyang binabantayan
samantalang hindi pa
ginagawang SUBDIVISION
PANG TAHANAN.
From the above-quoted exhibits, it clearly appears that the payment
of the cavans of palay was Macaya's contribution for the payment of
the real estate taxes; that the nature of the work of Macaya is that of a
watchman or guard (bantay); and, that the services of Macaya as such
watchman or guard (bantay) shall continue until the property shall be
converted into a subdivision for residential purposes.
The respondent appellate court disregarded the receipts as self-
serving. While it is true that the receipts were prepared by petitioner
Perpetua M. Bocanegra, Macaya nevertheless signed them
voluntarily. Besides, the receipts were written in the vernacular and
do not require knowledge of the law to fully grasp their implications.
Furthermore, the conclusion of the respondent appellate court to the
effect that the receipts having been prepared by one of the petitioners
who happens to be a lawyer must have been so worded so as to
conceal the real import of the transaction is highly speculative. There
was nothing to conceal in the first place since the primary objective
of the petitioners in allowing Macaya to live on the property was for
security purposes. The presence of Macaya would serve to protect the
property from squatters. In return, the request of Macaya to raise food
on the property and cultivate a three-hectare portion while it was not
being developed for housing purposes was granted.
We can understand the sympathy and compassion which courts of
justice must feel for people in the same plight as Mr. Macaya and his
family. However, the petitioners have been overly generous and
understanding of Macaya's problems. For ten years from 1946 to
1956, he lived on the property, raising animals and planting crops for
personal use, with only his services as "bantay" compensating for the
use of another's property. From 1967 to the present, he did not
contribute to the real estate taxes even as he dealt with the land as if it
were his own. He abused the generosity of the petitioners when he
expanded the permitted area for cultivation from three hectares to six
or eight hectares. Mr. Macaya has refused to vacate extremely
valuable residential land contrary to the clear agreement when he was
allowed to enter it. The facts of the case show that even Mr. Macaya
did not consider himself as a true and lawful tenant and did not hold
himself out as one until he was asked to vacate the property.
WHEREFORE, the petition is GRANTED. The decision of the
respondent Court of Appeals is hereby REVERSED and SET ASIDE
and the decision of the Court of Agrarian Relations is AFFIRMED.
SO ORDERED.
SECOND DIVISION
STANFILCO EMPLOYEES AGRARIAN G.R. No. 154048
REFORM BENEFICIARIES MULTI-PURPOSE
COOPERATIVE, Present:
Petitioner,
CARPIO, J., Chairperson, SEARBEMCO bound and obliged itself, inter alia, to do the
LEONARDO-DE CASTRO,
following:
- versus - BRION,
DEL CASTILLO, and
ABAD, JJ.
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.
V. SPECIFIC OBLIGATIONS OF THE
SELLER

DOLE PHILIPPINES, INC. (STANFILCO xxx

DIVISION), ORIBANEX SERVICES, INC. and Promulgated:
SPOUSES ELLY AND MYRNA ABUJOS, p.) Sell exclusively to the BUYER all bananas
Respondents. November 27, 2009 produced from the subject plantation, except those
x ------------------------------------------------------------------------------------------x rejected by the BUYER for failure to meet the
specifications and conditions contained in Exhibit
A hereof. In the case of any such rejected
DECISION 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
BRION, J.: 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:
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: IX. ARBITRATION OF DISPUTE

(a) the decision[2] of the Court of Appeals (CA) in CA-G.R. All disputes arising in connection with this
SP No. 66148 dated November 27, 2001; and Agreement shall be finally settled under the Rules
of Conciliation and Arbitration of the International
(b) the CAs resolution[3] of June 13, 2002 in the same case, Chamber of Commerce by three (3) Arbitrators
denying SEARBEMCOs motion for reconsideration. 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]
and Section 10 of DAR AO No. 2-99[37] which provide that as a rule,
voluntary methods such as mediation or conciliation, shall be preferred
in resolving disputes involving joint economic enterprises.
SEARBEMCO also cites Section IX of the BPPA which provides that
all disputes arising out of or in connection with their agreement shall
be finally settled through arbitration.
Following our conclusion that agrarian laws find no application in the
present case, we find as the CA did that SEARBEMCOs arguments
anchored on these laws are completely baseless. Furthermore, the cited
DAR AO No. 2-99, on its face, only mentions a preference, not a strict
requirement of referral to arbitration. The BPPA-based argument
deserves more and closer consideration.
We agree with the CA ruling that the BPPA arbitration
clause does not apply to the present case since third parties are
involved. Any judgment or ruling to be rendered by the panel of
arbitrators will be useless if third parties are included in the case, since
the arbitral ruling will not bind them; they are not parties to the
arbitration agreement. In the present case, DOLE included as parties
the spouses Abujos and Oribanex since they are necessary parties, i.e.,
they were directly involved in the BPPA violation DOLE alleged, and
their participation are indispensable for a complete resolution of the
dispute. To require the spouses Abujos and Oribanex to submit
themselves to arbitration and to abide by whatever judgment or ruling
the panel of arbitrators shall make is legally untenable; no law and no
agreement made with their participation can compel them to submit to
arbitration.
In support of its position, SEARBEMCO cites the case of Toyota
Motor Philippines Corp. v. Court of Appeals[38] which holds that, the
contention that the arbitration clause has become dysfunctional
because of the presence of third parties is untenable. Contracts are
respected as the law between the contracting parties. As such, the
parties are thereby expected to abide with good faith in their
contractual commitments. SEARBEMCO argues that the presence of
third parties in the complaint does not affect the validity of the
provisions on arbitration.
Unfortunately, the ruling in the Toyota case has been superseded by
the more recent cases of Heirs of Augusto L. Salas, Jr. v. Laperal
Realty 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, Panabo City, is hereby directed to proceed with the case in
accordance with this Decision. Costs against petitioner
SEARBEMCO.
SO ORDERED.
THIRD DIVISION
JOSE MENDOZA,* G.R. No. 16
Petitioner,
Present:
CORONA, C.J
CARPIO MORA
BRION,
- versus - VILLARAMA,
SERENO, JJ.
Promulgated:
NARCISO GERMINO and BENIGNO GERMINO, November 22, 2
Respondents.
x-----------------------------------------------------------------------------------------x
DECISION
BRION, J.:
Before us is the petition for review on certiorari[1] filed by
petitioner Jose Mendoza to challenge the decision[2] and the
resolution[3] of the Court of Appeals (CA) in CA-G.R. SP No. 48642.[4]
FACTUAL BACKGROUND
 The facts of the case, gathered from the records, are briefly
summarized below.
On June 27, 1988, the petitioner and Aurora C.
Mendoza[5] (plaintiffs) filed a complaint with the Municipal Trial
Court (MTC) of Sta. Rosa, Nueva Ecija against respondent Narciso
Germino for forcible entry.[6]
The plaintiffs claimed that they were the registered owners
of a five-hectare parcel of land in Soledad, Sta. Rosa, Nueva Ecija
(subject property) under Transfer Certificate of Title No.
34267. Sometime in 1988, respondent Narciso unlawfully entered the
subject property by means of strategy and stealth, and without their
knowledge or consent.Despite the plaintiffs repeated demands,
respondent Narciso refused to vacate the subject property.[7]
On August 9, 1988, respondent Narciso filed his answer,
claiming, among others, that his brother, respondent Benigno
Germino, was the plaintiffs agricultural lessee and he merely helped
the latter in the cultivation as a member of the immediate farm
household.[8]
After several postponements, the plaintiffs filed a motion to
remand the case to the Department of Agrarian Reform Adjudication
Board (DARAB), in view of the tenancy issue raised by respondent
Narciso.
Without conducting a hearing, and despite respondent
Narcisos objection, the MTC issued an order on October 27, 1995,
remanding the case to the DARAB, Cabanatuan City for further
proceedings.[9]
On December 14, 1995, the plaintiffs[10] filed an amended
complaint with the Provincial Agrarian Reform Adjudicator (PARAD),
impleading respondent Benigno as additional defendant.
The plaintiffs alleged that Efren Bernardo was the
agricultural lessee of the subject property. Respondent Benigno
unlawfully entered the subject property in 1982 or 1983 through
strategy and stealth, and without their knowledge or consent. He
withheld possession of the subject property up to 1987, and
appropriated for himself its produce, despite repeated demands from
the plaintiffs for the return of the property. In 1987, they discovered
that respondent Benigno had transferred possession of the subject
property to respondent Narciso, who refused to return the possession
of the subject property to the plaintiffs and appropriated the lands
produce for himself. The subject property was fully irrigated and was
capable of harvest for 2 cropping seasons. Since the subject property
could produce 100 cavans of palay per hectare for each cropping
season, or a total of 500 cavans per cropping season for the five-hectare
land, the plaintiffs alleged that the respondents were able to harvest a
total of 13,000 cavans of palay from the time they unlawfully withheld
possession of the subject property in 1982 until the plaintiffs filed the
complaint. Thus, they prayed that the respondents be ordered to jointly
and severally pay 13,000 cavans of palay, or its monetary equivalent,
as actual damages, to return possession of the subject property, and to
pay P15,000.00 as attorneys fees.[11]
On January 9, 1996, the respondents filed their answer
denying the allegations in the complaint, claiming, among others, that
the plaintiffs had no right over the subject property as they agreed to
sell it to respondent Benigno for P87,000.00. As a matter of fact,
respondent Benigno had already made a P50,000.00 partial payment,
but the plaintiffs refused to receive the balance and execute the deed
of conveyance, despite repeated demands. The respondents also
asserted that jurisdiction over the complaint lies with the Regional
Trial Court since ownership and possession are the issues.[12]
THE PARAD RULING
In a March 19, 1996 decision, PARAD Romeo Bello found
that the respondents were mere usurpers of the subject property, noting
that they failed to prove that respondent Benigno was the
plaintiffs bona fide agricultural lessee. The PARAD ordered the
respondents to vacate the subject property, and pay the plaintiffs 500
cavans of palay as actual damages.[13]
Not satisfied, the respondents filed a notice of appeal with
the DARAB, arguing that the case should have been dismissed because
the MTCs referral to the DARAB was void with the enactment of
Republic Act (R.A.) No. 6657,[14] which repealed the rule on referral
under Presidential Decree (P.D.) No. 316.[15]
THE DARAB RULING
The DARAB decided the appeal on July 22, 1998. It held
that it acquired jurisdiction because of the amended complaint that
sufficiently alleged an agrarian dispute, not the MTCs referral of the
case. Thus, it affirmed the PARAD decision.[16]
The respondents elevated the case to the CA via a petition
for review under Rule 43 of the Rules of Court.[17]
THE CA RULING
The CA decided the appeal on October 6, 2003.[18] It found
that the MTC erred in transferring the case to the DARAB since the
material allegations of the complaint and the relief sought show a case
for forcible entry, not an agrarian dispute. It noted that the subsequent
filing of the amended complaint did not confer jurisdiction upon the
DARAB.Thus, the CA set aside the DARAB decision and remanded
the case to the MTC for further proceedings.
When the CA denied[19] the subsequent motion for
reconsideration,[20] the petitioner filed the present petition.[21]
THE PETITION
The petitioner insists that the jurisdiction lies with the
DARAB since the nature of the action and the allegations of the
complaint show an agrarian dispute.
THE CASE FOR THE RESPONDENTS
The respondents submit that R.A. No. 6657 abrogated the
rule on referral previously provided in P.D. No. 316. Moreover, neither
the Rules of Court nor the Revised Rules on Summary Procedure
(RRSP) provides that forcible entry cases can be referred to the
DARAB.
THE ISSUE
The core issue is whether the MTC or the DARAB has
jurisdiction over the case.
OUR RULING
We deny the petition.
Jurisdiction is determined by the allegations in the complaint
It is a basic rule that jurisdiction over the subject matter is
determined by the allegations in the complaint.[22] It is determined
exclusively by the Constitution and the law. It cannot be conferred by
the voluntary act or agreement of the parties, or acquired through or
waived, enlarged or diminished by their act or omission, nor conferred
by the acquiescence of the court. Well to emphasize, it is neither for
the court nor the parties to violate or disregard the rule, this matter
being legislative in character.[23]
 Under Batas Pambansa Blg. 129,[24] as amended by R.A. No.
7691,[25]the MTC shall have exclusive original jurisdiction over cases
of forcible entry and unlawful detainer. The RRSP[26] governs the
remedial aspects of these suits.[27]
Under Section 50[28] of R.A. No. 6657, as well as Section
34 of Executive Order No. 129-A,[30] the DARAB has primary and
[29]
exclusive jurisdiction, both original and appellate, to determine and
adjudicate all agrarian disputes involving the implementation of the
Comprehensive Agrarian Reform Program, and other agrarian laws
and their implementing rules and regulations.
An agrarian dispute refers to any controversy relating to,
among others, tenancy over lands devoted to agriculture.[31] For a case
to involve an agrarian dispute, the following essential requisites of an
agricultural tenancy relationship must be present: (1) the parties are the
landowner and the tenant; (2) the subject is agricultural land; (3) there
is consent; (4) the purpose is agricultural production; (5) there is
personal cultivation; and (6) there is sharing of harvest or payment of
rental.[32]
In the present case, the petitioner, as one of the plaintiffs in
the MTC, made the following allegations and prayer in the complaint:
3. Plaintiffs are the registered owners of
a parcel of land covered by and described in
Transfer Certificate of Title Numbered 34267,
with an area of five (5) hectares, more or less
situated at Bo. Soledad, Sta. Rosa, Nueva Ecija.
x x x;
4. That so defendant thru stealth,
strategy and without the knowledge, or consent of
administrator x x x much more of the herein
plaintiffs, unlawfully entered and occupied said
parcel of land;
5. Inspite of x x x demands, defendant
Germino, refused and up to the filing of this
complaint, still refused to vacate the same;
6. The continuos (sic) and unabated
occupancy of the land by the defendant would
work and cause prejudice and irreparable damage
and injury to the plaintiffs unless a writ of
preliminary injunction is issued;
7. This prejudice, damage or injury
consist of disturbance of property rights
tantamount to deprivation of ownership or any of
its attributes without due process of law, a
diminution of plaintiffs property rights or
dominion over the parcel of land subject of this
dispute, since they are deprived of freely entering
or possessing the same;
8. The plaintiffs are entitled to the relief
demanded or prayed for, and the whole or part of
such relief/s consist of immediately or
permanently RESTRAINING, ENJOINING or
STOPPING the defendant or any person/s acting
in his behalf, from entering, occupying, or in any
manner committing, performing or suffering to be
committed or performed for him, any act
indicative of, or tending to show any color of
possession in or about the tenement, premises or
subject of this suit, such as described in par. 3 of
this complaint;
9. Plaintiffs are ready and willing to post
a bond answerable to any damage/s should the
issuance of the writ x x x;
10. As a consequence of defendants
malevolent refusal to vacate the premises of the
land in dispute, plaintiffs incurred litigation
expenses of P1,500.00, availing for the purpose
the assistance of a counsel at an agreed
honorarium of P5,000.00 and P250.00 per
appearance/ not to mention the moral damages
incurred due to sleepless nights and mental
anxiety, including exemplary damages, the award
and amount of which are left to the sound
discretion of this Honorable Court.
PRAYER
WHEREFORE, it is respectfully prayed
of this Honorable Court that pending the
resolution of the issue in this case, a restraining
order be issued RESTRAINING, ENJOINING, or
STOPPING the defendant or any person/s acting
in his behalf, from ENTERING OR OCCUPYING
the parcel of land, or any portion thereof,
described in paragraph 3 of this complaint, nor in
any manner committing, performing or suffering
to be committed or, performed for him, by himself
or thru another, any act indicative of, or tending to
show any color of possession in or about the
premises subject of this suit;
THEREAFTER, making said writ of
preliminary injunction PERMANENT; and on
plaintiffs damages, judgment be rendered ordering
the defendant to pay to the plaintiffs the sum
alleged in paragraph 10 above.
GENERAL RELIEFS ARE LIKEWISE
PRAYED FOR.[33]
Based on these allegations and reliefs prayed, it is clear that
the action in the MTC was for forcible entry.
Allegation of tenancy does not divest the MTC of jurisdiction
Although respondent Narciso averred tenancy as an
affirmative and/or special defense in his answer, this did not
automatically divest the MTC of jurisdiction over the complaint. It
continued to have the authority to hear the case precisely to determine
whether it had jurisdiction to dispose of the ejectment suit on its
merits.[34] After all, jurisdiction is not affected by the pleas or the
theories set up by the defendant in an answer or a motion to dismiss.
Otherwise, jurisdiction would become dependent almost entirely upon
the whims of the defendant.[35]
Under the RRSP, the MTC is duty-bound to conduct a
preliminary conference[36] and, if necessary, to receive evidence to
determine if such tenancy relationship had, in fact, been shown to be
the real issue.[37] The MTC may even opt to conduct a hearing on the
special and affirmative defense of the defendant, although under the
RRSP, such a hearing is not a matter of right.[38] If it is shown during
the hearing or conference that, indeed, tenancy is the issue, the MTC
should dismiss the case for lack of jurisdiction.[39]
 In the present case, instead of conducting a preliminary Issue: Whether or not certain provisions of RA 6657 is
conference, the MTC immediately referred the case to the DARAB. unconstitutional for including in its definition of “Agriculture” the
This was contrary to the rules. Besides, Section 2[40] of P.D. No. 316, livestock and poultyr industry?
which required the referral of a land dispute case to the Department of
Agrarian Reform for the preliminary determination of the existence of Ruling:
an agricultural tenancy relationship, has indeed been repealed by
Section 76[41] of R.A. No. 6657 in 1988. The Court held YES.
Amended complaint did confer jurisdiction on the DARAB
Looking into the transcript of the Constitutional Commission on the
meaning of the word “agriculture”, it showed that the framers never
Neither did the amendment of the complaint confer
intended to include livestock and poultry industry in the coverage of
jurisdiction on the DARAB. The plaintiffs alleged in the amended
the constitutionally mandated agrarian reform program of the
complaint that the subject property was previously tilled by Efren
government.
Bernardo, and the respondents took possession by strategy and stealth,
without their knowledge and consent. In the absence of any allegation
of a tenancy relationship between the parties, the action was for Further, Commissioner Tadeo pointed out that the reasin why they
recovery of possession of real property that was within the jurisdiction used the term “farmworkers” rather than “agricultural workers” in the
of the regular courts.[42] said law is because “agricultural workers” includes the livestock and
poultry industry, hence, since they do not intend to include the latter,
The CA, therefore, committed no reversible error in setting they used “farmworkers” to have distinction.
aside the DARAB decision. While we lament the lapse of time this
forcible entry case has been pending resolution, we are not in a position Hence, there is merit on the petitioner’s argument that the product-
to resolve the dispute between the parties since the evidence required sharing plan applied to “corporate farms” in the contested provisions
in courts is different from that of administrative agencies.[43] is unreasonable for being consficatory and violative of the due
process of aw.
WHEREFORE, the petition is DENIED. The October 6,
2003 Decision and October 12, 2004 Resolution of the Court of
Appeals in CA-G.R. SP No. 48642 are AFFIRMED. No
pronouncement as to costs.

SO ORDERED.

EN BANC
[G.R. No. 86889 : December 4, 1990.]
192 SCRA 51
LUZ FARMS, Petitioner, vs. THE HONORABLE SECRETARY
OF THE DEPARTMENT OF AGRARIAN REFORM,
Luz Farms v. Secretary of DAR
Respondent.
G.R. No. 86889 December 4, 1990

Facts:
DECISION
On 10 June 1988, RA 6657 was approved by the President of the
Philippines, which includes, among others, the raising of livestock,
PARAS, J.:
poultry and swine in its coverage.

Petitioner Luz Farms, a corporation engaged in the livestock and

poultry business, avers that it would be adversely affected by the
enforcement of sections 3(b), 11, 13, 16 (d), 17 and 32 of the said
law. Hence, it prayed that the said law be declared unconstitutional.
The mentioned sections of the law provies, among others, the
product-sharing plan, including those engaged in livestock and
poultry business.
Luz Farms further argued that livestock or poultry raising is not
similar with crop or tree farming. That the land is not the primary
resource in this undertaking and represents no more than 5% of the
total investments of commercial livestock and poultry raisers. That
the land is incidental but not the principal factor or consideration in
their industry. Hence, it argued that it should not be included in the
coverage of RA 6657 which covers “agricultural lands”.
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 Regulations
Implementing Section 11 thereof as promulgated by the 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.
thereafter until his actual
reinstatement. (CA Decision,
p. 2; Rollo, p. 16)
The facts pertinent to the case at bar are as follows:
On July 10, 1984, an action for recovery of possession was instituted
by the private respondent against the petitioners over a parcel of
agricultural land with an area of 21,081 square meters located at
Brgy. Sto. Domingo 11, Sitio Tambo, Capas, Tarlac.

The complaint alleged, among others, that respondent Laxamana had

THIRD DIVISION
G.R. No. 77830 February 27, 1990
VICTOR TALAVERA and VISITACION AGUSTIN
TALAVERA, petitioners,
vs.
HON. COURT OF APPEALS and JOSE
LAXAMANA, respondents.
Wilfredo I. Untalan counsel for petitioners.
Bureau of Agrarian Legal Assistance for private respondent.
GUTIERREZ, JR., J.:
The Court is asked to examine whether or not the Court of Appeals
committed reversible error in its finding that there was no voluntary
surrender of the landholding in question on the part of respondent
Laxamana as tenant.
This petition for review on certiorari assails the decision of the
respondent appellate court which affirmed in toto the judgment
rendered by the Regional Trial Court of the Third Judicial Region,
Branch LXVI, Capas, Tarlac on July 21, 1986.
The dispositive portion of the trial court's decision reads:
WHEREFORE, judgment is hereby rendered in
favor of the plaintiff and ordering the defendants:
(1) To reinstate Jose
Laxamana as their tenant on
the landholding in question;
been a bonafide tenant of the aforesaid parcel of land since 1958 until
the petitioners took possession thereof sometime in 1984; that
respondent Laxamana had been in continuous possession and
cultivation of the said landholding since 1958 but the petitioners, for
unknown reasons and without the knowledge of respondent
Laxamana, planted palay thereon in 1984 through force and
intimidation after plowing and harrowing were done by respondent
Laxamana; and that due to the petitioners' illegal actions, respondent
Laxamana suffered damages in the amount of P500.00 and the price
equivalent to sixty-five (65) cavans of palay per agricultural year
from the time of his dispossession until his reinstatement as tenant
over the landholding in question.
In their answer, the petitioners counter-alleged, among others, that
their tenancy relationship with respondent Laxamana was terminated
pursuant to a document captioned "Casunduan" executed on March
30, 1973 whereby the latter sold his rights and interests over the
agricultural landholding under litigation for a consideration of
P1,000.00; that respondent Laxamana was not actually a tenant of the
petitioners and whatever tenancy rights the former had exercised over
the landholding in question were voluntarily surrendered by him
upon the execution of the aforesaid document; that respondent
Laxamana had only himself to blame for the litigation expenses
resulting from his baseless and patently frivolous complaint; and that
respondent Laxamana was no longer entitled to the amount
equivalent to 65 cavans of palay per agricultural year as claimed
since he was no longer a tenant of the petitioners.
After trial, the private respondent obtained a favorable judgment from
which the petitioners appealed to the respondent Court.
In a decision promulgated on March 3, 1987, the Court of Appeals
affirmed the lower court's holding that the Casunduan even if
assumed to be valid did not constitute "voluntary surrender" as
contemplated by law, hence, respondent Laxamana ought to be
reinstated as tenant of the petitioners' landholding.
Consequently, this petition was filed to seek a reversal of the decision
of the appellate court. According to the petitioners, the Court of
Appeals erred:
I

(2) To pay him the sum of IN HOLDING THAT PRIVATE RESPONDENT DID NOT
FIVE THOUSAND PESOS VOLUNTARILY SURRENDER THE LANDHOLDING IN
(P5,000.00) value of 50 QUESTION.
cavans of palay at the rate of
P100.00 per cavan as his
II
share for the agricultural year
1984-85;
IN OVERLOOKING THE PROBATIVE VALUE OF A WRITTEN
INSTRUMENT ENTITLED 'CASUNDUAN' WHICH SHOWS
(3) To continue paying him
VOLUNTARY SURRENDER. (Rollo, p. 4)
the same amount as damages,
every agricultural year
The petitioners bolster their claim that respondent Laxamana is no
longer their tenant over the landholding in question by invoking the
rule on parol evidence with respect to the probative value of the
"Casunduan" executed by respondent Laxamana on March 30, 1973.
They further argue that the execution of the "Casunduan" clearly
showed the intention of respondent Laxamana to surrender whatever
rights he had as tenant over the said landholding. Hence, we are
presented with the issue of whether or not by virtue of the
"Casunduan" dated March 30, 1973, respondent Laxamana as tenant
is deemed to have surrendered voluntarily the subject landholding to
its owners — the petitioners.
The evidence on record and the petitioners' arguments are not enough
to overcome the rights of the private respondent provided in the
Constitution and agrarian statutes which have been upheld by this
Court.
The very essence of agricultural tenancy lies in the cardinal rule that
an agricultural tenant enjoys security of tenurial status. The Code of
Agrarian Reforms of the Philippines (Republic Act No. 3844, as
amended) specifically enumerates the grounds for the extinguishment
of agricultural leasehold relations. Section 8 of the said Code
provides:
Extinguishment of agricultural leasehold
relation. — The agricultural leasehold relation
established under this Code shall be extinguished
by:
(1) Abandonment of the
landholding without the
knowledge of the agricultural
lessor;
(2) Voluntary surrender of
the land holding by the
agricultural lessee, written
notice of which shall be
served three months in
advance; or
(3) Absence of the persons
under Section rune to succeed
to the lessee, in the event of
death or permanent
incapacity of the lessee.
The petitioners invoke voluntary surrender under Paragraph 2 of
Section 8 as the reason for the end of the tenancy relationship.
Voluntary surrender, as a mode of extinguishment of tenancy
relations, does not require any court authorization considering that it
involves the tenant's own volition. (see Jacinto v. Court of Appeals,
87 SCRA 263 [1978]). To protect the tenant's right to security of
tenure, voluntary surrender, as contemplated by law, must be
convincingly and sufficiently proved by competent evidence. The
tenant's intention to surrender the landholding cannot be presumed,
much less determined by mere implication. Otherwise, the right of a
tenant to security of tenure becomes an illusory one.
Standing by itself, the March 30, 1973 Casunduan indicates, as
contended by the petitioners, a voluntary relinquishment of tenancy
rights. It states that on his own initiative, Jose Laxamana went to the
Talaveras and requested that he be allowed to sell his "puesto cung
asican" or "the plot I am farming" to the couple. A subscribing
witness, Ermela Lumanlan testified on the voluntary sale of tenancy
rights for P1,000.00, her signing as a witness at the bottom of the
contract, and Laxamana's signing the document.
The argument of the private respondent that under Section 28 of the
Agrarian Reform Code, a voluntary surrender to be valid must be
"due to circumstances more advantageous to him and his family" is
double-edged. There appears no question that Laxamana needed
money to pay for the expenses incident to the illness of his wife
which led to her death. The money was to his advantage.
The basic issue in this case is-what did Laxamana give up in return
for the P1,000.00? The case is marked by poor handling at the trial
stage and it is not clear whether or not the P1,000.00 was a result of
the usual paternalistic arrangements between landlords and tenants
where the latter meekly approach the landlords in their hours of need
or something else.
In the first place, the agreement was prepared by petitioner Visitacion
A. Talavera. Laxamana could hardly sign his own name. He was
clearly at a disadvantage in the execution of the contract and the
wording of the agreement. The intention to give up the landholding
must be gleaned from evidence in addition to the document which
was signed by an ignorant and illiterate peasant in an hour of
emotional stress and financial need.
Second, and most important, Laxamana continued to work on the
farm from 1973 up to 1984 when the petitioners ejected him. As
stated by the appellate court, why did it take the petitioners more than
ten years to enforce the Casunduan?
The Talaveras claim that they cultivated the land themselves from
1973 to 1984 when the complaint was filed. This claim is belied by
Exhibits A and B. In Exhibit A, barangay captain Francisco
Manayang reports to the team leader of the Ministry of Agrarian
Reform that, per his own personal knowledge, Jose Laxamana has
been tilling the disputed land since 1958. Exhibit B is an affidavit to
the same effect by Manayang, Mr. Porfirio Manabat who is president
of the Agrarian Reform Beneficiaries Association, and a certain
Romeo dela Cruz all of whom are residents of the barangay where the
land is located. Significantly, Laxamana is a resident of Sitio Tambo,
Barangay Sto. Domingo II where the disputed land is situated while
the Talaveras reside in another barangay, Arangureng, of Capas,
Tarlac. We see no reason why the factual findings of the trial court
and the appellate court should be reversed insofar as the continuous
cultivation from 1973 to 1984 is concerned.
Third, it is not shown why Laxamana should voluntarily give up his
sole source of livelihood even if he needed money to pay off his
debts. Or what he did from 1973 to 1984 if the claim of the Talaveras
that they worked the land themselves is correct. We are more inclined
to believe that Laxamana was forced by circumstances to sign
something he did not fully understand and then went right back to the
farm and continued to work on it until 1984.
It is true that Cristobal Gamido, Jr., officer-in-charge of the Agrarian
Reform Team issued on May 8, 1986 a certification that the contested
land is not tenanted. However, the basis for the certification whether
or not Mr. Gamido merely read the Casunduan literally is not shown.
It cannot overcome the more convincing evidence of persons actually
residing where the land is located.
Tenancy relations cannot be bargained away except for the strong
reasons provided by law which must be convincingly shown by
evidence in line with the State's policy of achieving a dignified
existence for the small farmers free from pernicious institutional
restraints and practices (Sec. 2 [2], Code of Agrarian Reforms).
We, therefore, rule that except for compelling reasons clearly proved
the determination that a person is a tenant-farmer, a factual
conclusion made by the trial court on the basis of evidence directly
available to it, will not be reversed on appeal and will be binding on
us. (see Macaraeg v. Court of Appeals, G.R. No. 48008, January 20,
1989; Co v. Intermediate Appellate Court, 162 SCRA 390 [1988]).
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is
hereby DISMISSED. The decision of the Court of Appeals dated
March 3, 1987 is AFFIRMED.
SO ORDERED.
SECOND DIVISION
[G.R. No. 135999. April 19, 2002]
MILESTONE REALTY and CO., INC. and WILLIAM L.
PEREZ, petitioners, vs. HON. COURT OF APPEALS,
DELIA RAZON PEA and RAYMUNDO
EUGENIO, respondents.
DECISION
QUISUMBING, J.:
Petitioners Milestone Realty & Co., Inc. (Milestone for brevity)
and William Perez seek the reversal of the decision [1] dated May 29,
1998 of the Court of Appeals in CA-G.R. SP NO. 39987. Said decision
affirmed that of the Department of Agrarian Reform Adjudication
Board (DARAB),[2] which had declared respondent Delia Razon Pea
as the bona fide tenant of a lot in Bulacan, and voided the sale of said
lot thereby reversing the decision of the Provincial Agrarian Reform
Adjudicator (PARAD).[3]
The facts as culled from the records are as follows:
Spouses Alfonso Olympia and Carolina Zacarias and Spouses
Claro Zacarias and Cristina Lorenzo were the co-owners of an
agricultural land identified as Lot 616 of the Malinta Estate. Said lot
has an area of 23,703 square meters, covered by Transfer Certificate
of Title (TCT) No. 26019, located at Karuhatan, Valenzuela, Bulacan,
now Valenzuela City. Eventually, Carolina became the owner of the
property by virtue of a Deed of Extrajudicial Settlement executed on
October 17, 1976 by the heirs of Alfonso Olympia, one of whom is
Francisco Olympia, on their respective shares after Alfonsos death and
by an Affidavit of Settlement executed on June 24, 1992 by the spouses
Claro and Cristina Zacarias on their shares in the property.
Meanwhile, Anacleto Pea who was a tenant of the property and
a holder of a Certificate of Agricultural Leasehold issued on February
23, 1982, had a house constructed on the lot. He had several children
on the first marriage, among whom are Emilio Pea and Celia Segovia,
who also had their houses constructed on the property. On February 4,
1986, Anacleto, who was already 78 years old and a widower, married
Delia Razon, then only 29 years old. On February 17, 1990, Anacleto
died intestate and was survived by Delia and his children in his first
marriage, including Emilio.
Emilio and Delia, the latter with the help of respondent
Raymundo Eugenio, her son-in-law, continued tilling and cultivating
the property. On January 22, 1992, Emilio signed a handwritten
declaration that he was the tenant in the land and he was returning the
landholding to Carolina Zacarias in consideration of the sum of
P1,500,000 as disturbance compensation. He initially opted for a 1,000
square meter homelot but later changed his mind. After receipt of the
money, he executed a Katibayang Paglilipat ng Pag-mamay-ari.
In the meantime, petitioner William Perez, Joseph Lim, Willy
Lim, Winston Lim, Edgar Lim, and Jaime Lim established Milestone
as incorporators, in order to acquire and develop the aforesaid property
and the adjacent parcel, Lot No. 617 of the Malinta Estate.
On July 30, 1992, Carolina Zacarias executed a deed of sale
transfering the Lot No. 616 to petitioner Milestone for
P7,110,000. TCT No. 26019 was cancelled and in lieu thereof, TCT
No. 25433 was issued in the name of Milestone. On the same date, the
adjoining Lot No. 617 covered by TCT No. V-25431 was issued under
the name of petitioner William Perez who subsequently sold the same
to Milestone on the basis of which TCT No. V-26481 was issued to
it. Thus, Milestone became the owner of the adjoining lots, Lot Nos.
616 and 617 of the Malinta Estate with a total area of three (3)
hectares.Development of the property then commenced.
On October 13, 1992, private respondents Delia Razon Pea and
Raymundo Eugenio filed a complaint against Emilio Pea, Carolina
Zacarias and her brother Francisco Olympia, and William Perez with
the PARAD, which was amended on January 6, 1993 to implead
Milestone as respondent, praying inter alia to declare as null and void
the sale by Carolina to Perez and by the latter to Milestone, and to
recognize and respect the tenancy of private respondents Delia and
Raymundo.
In her answer, Carolina Zacarias declared that she chose Emilio
Pea as her tenant-beneficiary on the said property within 30 days after
the death of Anacleto, conformably with Section 9 of Republic Act No.
3844.[4] On July 28, 1993, the PARAD rendered a decision dismissing
the complaint as follows:[5]
WHEREFORE, upon the foregoing premises, judgment is hereby
rendered:
1. Dismissing the instant complaint;
2. Dissolving the writ of Preliminary Injunction issued on
May 24, 1993;
3. Directing the Cashier of the DAR Regional Office at
Pasig, Metro Manila to release to the Petitioners or
their duly authorized representative, the cash bond
posted in the amount of Fifteen Thousand Pesos
[P15,000.00].
4. No pronouncement as to costs.
SO ORDERED.
In the decision, the PARAD ruled that the order of preference
cited in Section 9 of Republic Act 3844 is not absolute and may be
disregarded for valid cause.[6] It also took note that Emilios two
siblings have openly recognized Emilio as the legitimate successor to
Anacletos tenancy rights.[7]
Delia Razon Pea and Raymundo Eugenio appealed from the
PARADs decision to the DARAB. On September 5, 1995, the
DARAB reversed the decision of PARAD, the dispositive portion of
which reads as follows:

WHEREFORE, premises considered, the instant appeal is hereby

GRANTED. The Decision dated July 28, 1993 is REVERSED.
EN BANC
Judgment is issued:
G.R. No. L-19760 April 30, 1964
1. Declaring Delia Razon Pea the bona-fide tenant over the
landholding in question;
MARCELO VILLAVIZA, ET AL., petitioners,
2. Declaring the series of purchase and sale of the vs.
landholding in question as illegal, hence, null and JUDGE TOMAS PANGANIBAN, ET AL., respondents.
void;
Alejandro C. Villaviza for petitioners.
3. Directing the Register of Deeds to cancel TCT No. V-
Ipac and Fajardo for respondent Judge Tomas Panganiban.
26485 and all subsequent titles obtained thereafter
Manuel Cordero for other respondents.
over the landholding named under William L. Perez
and Milestone Realty and Co., Inc.;
REYES, J.B.L., J.:
4. Allowing Delia Razon Pea to exercise her right of
redemption over the land within the prescribed period
Review of the decision of the Court of Agrarian Relations,
granted by law;
Cabanatuan City, in its Case No. 2088-NE-60, the dispositive portion
5. Enjoining all Respondents-Appellees to desist from of which reads:
further disturbing Delia Razon Pea in the peaceful
possession and cultivation of the land; WHEREFORE, judgment is hereby rendered ordering
respondent Quirino Capalad to pay the petitioners as
6. Directing the DAR-DOJ Task Force on Illegal
follows:
Conversion to file appropriate charges before the
Special Agrarian Court as regards the criminal aspect
of this case. 1. Jose Aguilar P297.00
2. Agapito Neuda 264.75
SO ORDERED. [8] 3. Sixto Malarulat 264.25
4. Rafael Alamon 164.00
In reversing the PARADs decision, the DARAB noted that
5. Petronilo Aguilar 335.25
Carolinas affidavit did not show any categorical admission that she
made her choice within the one (1) month period except to state that 6. Eulogio Samaniego 219.00
when Anacleto died, the right of the deceased was inherited by Emilio 7. Castor Rufino 234.00
Pea which could only mean that she recognized Emilio Pea by force of
circumstance under a nebulous time frame.[9]
The following respondents are hereby ordered to vacate
In a petition for review to the Court of Appeals, the latter their respective landholdings in favor of the petitioners,
affirmed the DARABs decision, thus: subject to the provisions of pars. 3 and 4, Sec. 22, R.A. No.
1199, as amended, the indemnity in the aforestated
We are convinced, beyond cavil, in the present recourse, that the paragraphs, supra, shall be paid by respondent Quirino
Petitioners Carolina Olympia and Francisco Olympia failed to Capalad:
choose, within the statutory period therefor, any tenant in substitution
of Anacleto Pea, the erstwhile deceased tenant on the landholding,
Respondents Petitioners
and that, without prior or simultaneous notice to Private Respondent
Delia Pea, the Petitioners made their choice of Petitioner Emilio Pea 1. Alejo Pramel 1. Jose Aguilar
as substitute tenant only in January, 1992, after they had agreed to
sell the property to the Petitioner Milestone Realty & Co., Inc. 2. Severino Padilla 2. Agapito Neuda

IN SUM, then, We find no reversible error committed by the 3. Domingo Villaviza 3. Rafael Alamon
DARAB under its oppunged Decision.
4. Marcelo Villaviza 4. Petronilo Aguilar

IN THE LIGHT OF ALL THE FOREGOING, the Petition is denied 5. Cirilo Ramos 5. Eulogio Samaniego
due course and is hereby dismissed. The appealed Decision is hereby
AFFIRMED. With costs against the Petitioners. 6. Ciriaco Pizaro 6. Castor Rufino

7. Cesario Villaviza ) 7. Sixto Malarulat

SO ORDERED
Ben Morelos )

Juan Morelos )

SO ORDERED.
The lower court found that the above-named respondents (petitioners
below) were tenants since 1944 in a riceland situated in Aliaga,
Nueva Ecija, and owned by Domingo Fajardo. Fajardo gave out the
land for lease (civil lease) to the petitioner, Quirino Capalad, starting
with the crop year 1955-56. The said lessee, in June, 1955, plowed
the land by machinery, and installed, as his tenants his above-named
in this Court, so that when the respondents went back to their
respective landholdings to prepare them for planting they found the
land already cultivated. The respondents-tenants demanded their
reinstatement, but everytime they did, which they did yearly until the
present suit was filed, Quirino Capalad promised but never fulfilled,
to reinstate them for the agricultural year following said demands.
As grounds for the petition for review, the petitioners claim grave
abuse of discretion by the Agrarian Court and a lack of substantive
evidence to support its findings.
The above claim is wild and reckless and definitely without merit,
since the decision itself contains the recitals of the testimonies of the
witnesses upon which the court based its findings, and the petitioners
do not question the existence and adequacy of these testimonies. That
the court believed the evidence for the respondents rather than those
for the petitioners is the tenancy court's prerogative, and, as a
reviewing court, the Supreme Court will not weigh anew the
evidence; all that this Court is called upon to do, insofar as the
evidence is concerned is to find out if the conclusion of the lower
court is supported by substantive evidence; and the present case is, as
hereinbefore explained.
A tenant's right to be respected in his tenure under Republic Act
1199, as amended, is an obligation of the landholder created by law,
and an action for violation thereof prescribes in ten years under No. 2
of Article 1144 of the Civil Code. The respondents were ousted from
their landholdings in June, 1955, they filed the present action on 31
March 1960; therefore, the period of limitation had not expired.
The tenancy court found that the ejected tenants-respondents have
engaged in gainful occupations since their illegal ejectment and had
delayed the filing of the case, and for these reasons the court made an
award for damages against Quirino Capalad equivalent to only two
harvests based on the landholder's share for the crop year 1954-
1955. 1äwphï1.ñët
The premises for the award are erroneous. Under section 27(1) of
Republic Act 1199, as amended, a tenant's earnings may not be
deducted from the damages because the said section positively
provides that the tenant's freedom to earn elsewhere is to be added
("in addition") to his right to damages in case of illegal ejectment
(Lustre, et al. vs. CAR, et al., L-19654, March 21, 1964). Nor can it
be said that the respondents-tenants are guilty of laches for having
unnecessarily delayed to Capalad's promises to reinstate them.
The amount of the award to each respondent should not, however, be
disturbed because the respondents' non-appeal from the decision
indicates their satisfaction therewith and a waiver of any amounts
other than those indicated in the decision (David V. de la Cruz, et al.,
L-11656, 18 April 1958; Dy, et al. vs. Kuizon, L-16654, 30 Nov.
1961).
FOR THE FOREGOING CONSIDERATIONS, the decision under
review is hereby affirmed, with costs against the petitioners.
EN BANC
[G.R. No. 127876. December 17, 1999]
ROXAS & CO., INC., petitioner, vs. THE HONORABLE COURT
OF APPEALS, DEPARTMENT OF AGRARIAN
REFORM, SECRETARY OF AGRARIAN REFORM,
DAR REGIONAL DIRECTOR FOR REGION IV,
MUNICIPAL AGRARIAN REFORM OFFICER OF
NASUGBU, BATANGAS and DEPARTMENT OF
AGRARIAN REFORM ADJUDICATION
BOARD, respondents.
DECISION
PUNO, J.:
This case involves three (3) haciendas in Nasugbu, Batangas
owned by petitioner and the validity of the acquisition of these
haciendas by the government under Republic Act No. 6657, the
Comprehensive Agrarian Reform Law of 1988.
Petitioner Roxas & Co. is a domestic corporation and is the
registered owner of three haciendas, namely, Haciendas Palico,
Banilad and Caylaway, all located in the Municipality of Nasugbu,
Batangas.Hacienda Palico is 1,024 hectares in area and is registered
under Transfer Certificate of Title (TCT) No. 985. This land is covered
by Tax Declaration Nos. 0465, 0466, 0468, 0470, 0234 and
0354. Hacienda Banilad is 1,050 hectares in area, registered under
TCT No. 924 and covered by Tax Declaration Nos. 0236, 0237 and
0390. Hacienda Caylaway is 867.4571 hectares in area and is
registered under TCT Nos. T-44662, T-44663, T-44664 and T-44665.
The events of this case occurred during the incumbency of then
President Corazon C. Aquino. In February 1986, President Aquino
issued Proclamation No. 3 promulgating a Provisional Constitution.
As head of the provisional government, the President exercised
legislative power until a legislature is elected and convened under a
new Constitution.[1] In the exercise of this legislative power, the
President signed on July 22, 1987, Proclamation No. 131 instituting a
Comprehensive Agrarian Reform Program and Executive Order No.
229 providing the mechanisms necessary to initially implement the
program.
On July 27, 1987, the Congress of the Philippines formally
convened and took over legislative power from the President.[2] This
Congress passed Republic Act No. 6657, the Comprehensive Agrarian
Reform Law (CARL) of 1988. The Act was signed by the President on
June 10, 1988 and took effect on June 15, 1988.
Before the laws effectivity, on May 6, 1988, petitioner filed with
respondent DAR a voluntary offer to sell Hacienda Caylaway pursuant
to the provisions of E.O. No. 229. Haciendas Palico and Banilad were
later placed under compulsory acquisition by respondent DAR in
accordance with the CARL.
Hacienda Palico
On September 29, 1989, respondent DAR, through respondent
Municipal Agrarian Reform Officer (MARO) of Nasugbu, Batangas,
sent a notice entitled Invitation to Parties to petitioner. The Invitation
was addressed to Jaime Pimentel, Hda. Administrator, Hda.
Palico.[3] Therein, the MARO invited petitioner to a conference on
October 6, 1989 at the DAR office in Nasugbu to discuss the results of
the DAR investigation of Hacienda Palico, which was scheduled for
compulsory acquisition this year under the Comprehensive Agrarian
Reform Program.[4]
On October 25, 1989, the MARO completed three (3)
Investigation Reports after investigation and ocular inspection of the
Hacienda. In the first Report, the MARO found that 270 hectares under
Tax Declaration Nos. 465, 466, 468 and 470 were flat to undulating
(0-8% slope) and actually occupied and cultivated by 34 tillers of
sugarcane.[5] In the second Report, the MARO identified as flat to
undulating approximately 339 hectares under Tax Declaration No.
0234 which also had several actual occupants and tillers of
sugarcane;[6] while in the third Report, the MARO found
approximately 75 hectares under Tax Declaration No. 0354 as flat to
undulating with 33 actual occupants and tillers also of sugarcane. [7]
On October 27, 1989, a Summary Investigation Report was
submitted and signed jointly by the MARO, representatives of the
Barangay Agrarian Reform Committee (BARC) and Land Bank of the
Philippines (LBP), and by the Provincial Agrarian Reform Officer
(PARO). The Report recommended that 333.0800 hectares of
Hacienda Palico be subject to compulsory acquisition at a value of
P6,807,622.20.[8] The following day, October 28, 1989, two (2) more
Summary Investigation Reports were submitted by the same officers
and representatives. They recommended that 270.0876 hectares and
75.3800 hectares be placed under compulsory acquisition at a
compensation of P8,109,739.00 and P2,188,195.47, respectively. [9]
On December 12, 1989, respondent DAR through then
Department Secretary Miriam D. Santiago sent a Notice of Acquisition
to petitioner. The Notice was addressed as follows:
Roxas y Cia, Limited
Soriano Bldg., Plaza Cervantes
Manila, Metro Manila.[10]
Petitioner was informed that 1,023.999 hectares of its land in
Hacienda Palico were subject to immediate acquisition and distribution
by the government under the CARL; that based on the DARs valuation
criteria, the government was offering compensation of P3.4 million for
333.0800 hectares; that whether this offer was to be accepted or
rejected, petitioner was to inform the Bureau of Land Acquisition and
Distribution (BLAD) of the DAR; that in case of petitioners rejection
or failure to reply within thirty days, respondent DAR shall conduct
summary administrative proceedings with notice to petitioner to
determine just compensation for the land; that if petitioner accepts
respondent DARs offer, or upon deposit of the compensation with an
accessible bank if it rejects the same, the DAR shall take immediate
possession of the land.[11]
Almost two years later, on September 26, 1991, the DAR
Regional Director sent to the LBP Land Valuation Manager three (3)
separate Memoranda entitled Request to Open Trust Account. Each
Memoranda requested that a trust account representing the valuation
of three portions of Hacienda Palico be opened in favor of the
petitioner in view of the latters rejection of its offered value. [12]
Meanwhile in a letter dated May 4, 1993, petitioner applied with
the DAR for conversion of Haciendas Palico and Banilad from
agricultural to non-agricultural lands under the provisions of the
CARL.[13] On July 14, 1993, petitioner sent a letter to the DAR
Regional Director reiterating its request for conversion of the two
haciendas.[14]
Despite petitioners application for conversion, respondent DAR
proceeded with the acquisition of the two Haciendas. The LBP trust
accounts as compensation for Hacienda Palico were replaced by
respondent DAR with cash and LBP bonds.[15] On October 22, 1993,
from the mother title of TCT No. 985 of the Hacienda, respondent
DAR registered Certificate of Land Ownership Award (CLOA) No.
6654. On October 30, 1993, CLOAs were distributed to farmer
beneficiaries.[16]
Hacienda Banilad
On August 23, 1989, respondent DAR, through respondent
MARO of Nasugbu, Batangas, sent a notice to petitioner addressed as
follows:
Mr. Jaime Pimentel
Hacienda Administrator
Hacienda Banilad
Nasugbu, Batangas[17]
The MARO informed Pimentel that Hacienda Banilad was
subject to compulsory acquisition under the CARL; that should
petitioner wish to avail of the other schemes such as Voluntary Offer
to Sell or Voluntary Land Transfer, respondent DAR was willing to
provide assistance thereto.[18]
On September 18, 1989, the MARO sent an Invitation to Parties
again to Pimentel inviting the latter to attend a conference on
September 21, 1989 at the MARO Office in Nasugbu to discuss the
results of the MAROs investigation over Hacienda Banilad.[19]
On September 21, 1989, the same day the conference was held,
the MARO submitted two (2) Reports. In his first Report, he found that
approximately 709 hectares of land under Tax Declaration Nos. 0237
and 0236 were flat to undulating (0-8% slope). On this area were
discovered 162 actual occupants and tillers of sugarcane.[20] In the
second Report, it was found that approximately 235 hectares under Tax
Declaration No. 0390 were flat to undulating, on which were 92 actual
occupants and tillers of sugarcane.[21]
The results of these Reports were discussed at the
conference. Present in the conference were representatives of the
prospective farmer beneficiaries, the BARC, the LBP, and Jaime
Pimentel on behalf of the landowner.[22] After the meeting, on the same
day, September 21, 1989, a Summary Investigation Report was
submitted jointly by the MARO, representatives of the BARC, LBP,
and the PARO. They recommended that after ocular inspection of the
property, 234.6498 hectares under Tax Declaration No. 0390 be
subject to compulsory acquisition and distribution by CLOA. [23] The
following day, September 22, 1989, a second Summary Investigation
was submitted by the same officers. They recommended that 737.2590
hectares under Tax Declaration Nos. 0236 and 0237 be likewise placed
under compulsory acquisition for distribution.[24]
On December 12, 1989, respondent DAR, through the
Department Secretary, sent to petitioner two (2) separate Notices of
Acquisition over Hacienda Banilad. These Notices were sent on the
same day as the Notice of Acquisition over Hacienda Palico. Unlike
the Notice over Hacienda Palico, however, the Notices over Hacienda
Banilad were addressed to:
Roxas y Cia. Limited
7th Floor, Cacho-Gonzales Bldg. 101 Aguirre St., Leg.
Makati, Metro Manila.[25]
Respondent DAR offered petitioner compensation of P15,108,995.52
for 729.4190 hectares and P4,428,496.00 for 234.6498 hectares.[26]
On September 26, 1991, the DAR Regional Director sent to the
LBP Land Valuation Manager a Request to Open Trust Account in
petitioners name as compensation for 234.6493 hectares of Hacienda
Banilad.[27] A second Request to Open Trust Account was sent on
November 18, 1991 over 723.4130 hectares of said Hacienda.[28]
On December 18, 1991, the LBP certified that the amounts
of P4,428,496.40 and P21,234,468.78 in cash and LBP bonds had been
earmarked as compensation for petitioners land in Hacienda
Banilad.[29]
 On May 4, 1993, petitioner applied for conversion of both
Haciendas Palico and Banilad.
Hacienda Caylaway
Hacienda Caylaway was voluntarily offered for sale to the
government on May 6, 1988 before the effectivity of the CARL. The
Hacienda has a total area of 867.4571 hectares and is covered by four
(4) titlesTCT Nos. T-44662, T-44663, T-44664 and T-44665. On
January 12, 1989, respondent DAR, through the Regional Director for
Region IV, sent to petitioner two (2) separate Resolutions accepting
petitioners voluntary offer to sell Hacienda Caylaway, particularly
TCT Nos. T-44664 and T-44663.[30] The Resolutions were addressed
to:
Roxas & Company, Inc.
7th Flr. Cacho- Gonzales Bldg.
Aguirre, Legaspi Village
Makati, M. M.[31]
On September 4, 1990, the DAR Regional Director issued two
separate Memoranda to the LBP Regional Manager requesting for the
valuation of the land under TCT Nos. T-44664 and T-44663.[32] On the
same day, respondent DAR, through the Regional Director, sent to
petitioner a Notice of Acquisition over 241.6777 hectares under TCT
No. T-44664 and 533.8180 hectares under TCT No. T-44663.[33]Like
the Resolutions of Acceptance, the Notice of Acquisition was
addressed to petitioner at its office in Makati, Metro Manila.
Nevertheless, on August 6, 1992, petitioner, through its
President, Eduardo J. Roxas, sent a letter to the Secretary of respondent
DAR withdrawing its VOS of Hacienda Caylaway. The Sangguniang
Bayan of Nasugbu, Batangas allegedly authorized the reclassification
of Hacienda Caylaway from agricultural to non-agricultural. As a
result, petitioner informed respondent DAR that it was applying for
conversion of Hacienda Caylaway from agricultural to other uses. [34]
In a letter dated September 28, 1992, respondent DAR Secretary
informed petitioner that a reclassification of the land would not exempt
it from agrarian reform. Respondent Secretary also denied petitioners
withdrawal of the VOS on the ground that withdrawal could only be
based on specific grounds such as unsuitability of the soil for
agriculture, or if the slope of the land is over 18 degrees and that the
land is undeveloped.[35]
Despite the denial of the VOS withdrawal of Hacienda
Caylaway, on May 11, 1993, petitioner filed its application for
conversion of both Haciendas Palico and Banilad.[36] On July 14, 1993,
petitioner, through its President, Eduardo Roxas, reiterated its request
to withdraw the VOS over Hacienda Caylaway in light of the
following:
1) Certification issued by Conrado I. Gonzales, Officer-in-Charge,
Department of Agriculture, Region 4, 4th Floor, ATI (BA) Bldg.,
Diliman, Quezon City dated March 1, 1993 stating that the lands
subject of referenced titles are not feasible and economically sound
for further agricultural development.
2) Resolution No. 19 of the Sangguniang Bayan of Nasugbu,
Batangas approving the Zoning Ordinance reclassifying areas
covered by the referenced titles to non-agricultural which was
enacted after extensive consultation with government agencies,
including [the Department of Agrarian Reform], and the requisite
public hearings.
3) Resolution No. 106 of the Sangguniang Panlalawigan of Batangas
dated March 8, 1993 approving the Zoning Ordinance enacted by the
Municipality of Nasugbu.
4) Letter dated December 15, 1992 issued by Reynaldo U. Garcia of
the Municipal Planning & Development, Coordinator and Deputized
Zoning Administrator addressed to Mrs. Alicia P. Logarta advising
that the Municipality of Nasugbu, Batangas has no objection to the
conversion of the lands subject of referenced titles to non-
agricultural.[37]
On August 24, 1993, petitioner instituted Case No. N-0017-96-
46 (BA) with respondent DAR Adjudication Board (DARAB) praying
for the cancellation of the CLOAs issued by respondent DAR in the
name of several persons. Petitioner alleged that the Municipality of
Nasugbu, where the haciendas are located, had been declared a tourist
zone, that the land is not suitable for agricultural production, and that
the Sangguniang Bayan of Nasugbu had reclassified the land to non-
agricultural.
In a Resolution dated October 14, 1993, respondent DARAB
held that the case involved the prejudicial question of whether the
property was subject to agrarian reform, hence, this question should be
submitted to the Office of the Secretary of Agrarian Reform for
determination.[38]
On October 29, 1993, petitioner filed with the Court of Appeals
CA-G.R. SP No. 32484. It questioned the expropriation of its
properties under the CARL and the denial of due process in the
acquisition of its landholdings.
Meanwhile, the petition for conversion of the three haciendas
was denied by the MARO on November 8, 1993.
Petitioners petition was dismissed by the Court of Appeals on
April 28, 1994.[39] Petitioner moved for reconsideration but the motion
was denied on January 17, 1997 by respondent court. [40]
Hence, this recourse. Petitioner assigns the following errors:
A. RESPONDENT COURT OF APPEALS GRAVELY ERRED IN
HOLDING THAT PETITIONERS CAUSE OF ACTION IS
PREMATURE FOR FAILURE TO EXHAUST
ADMINISTRATIVE REMEDIES IN VIEW OF THE PATENT
ILLEGALITY OF THE RESPONDENTS ACTS, THE
IRREPARABLE DAMAGE CAUSED BY SAID ILLEGAL ACTS,
AND THE ABSENCE OF A PLAIN, SPEEDY AND ADEQUATE
REMEDY IN THE ORDINARY COURSE OF LAWALL OF
WHICH ARE EXCEPTIONS TO THE SAID DOCTRINE.
B. RESPONDENT COURT OF APPEALS GRAVELY ERRED IN
HOLDING THAT PETITIONERS LANDHOLDINGS ARE
SUBJECT TO COVERAGE UNDER THE COMPREHENSIVE
AGRARIAN REFORM LAW, IN VIEW OF THE UNDISPUTED
FACT THAT PETITIONERS LANDHOLDINGS HAVE BEEN
CONVERTED TO NON-AGRICULTURAL USES BY
PRESIDENTIAL PROCLAMATION NO. 1520 WHICH
DECLARED THE MUNICIPALITY OF NASUGBU, BATANGAS
AS A TOURIST ZONE, AND THE ZONING ORDINANCE OF
THE MUNICIPALITY OF NASUGBU RE-CLASSIFYING
CERTAIN PORTIONS OF PETITIONERS LANDHOLDINGS AS
NON-AGRICULTURAL, BOTH OF WHICH PLACE SAID
LANDHOLDINGS OUTSIDE THE SCOPE OF AGRARIAN
REFORM, OR AT THE VERY LEAST ENTITLE PETITIONER
TO APPLY FOR CONVERSION AS CONCEDED BY
RESPONDENT DAR.
C. RESPONDENT COURT OF APPEALS GRAVELY ERRED
WHEN IT FAILED TO DECLARE THE PROCEEDINGS BEFORE
RESPONDENT DAR VOID FOR FAILURE TO OBSERVE DUE
PROCESS, CONSIDERING THAT RESPONDENTS
BLATANTLY DISREGARDED THE PROCEDURE FOR THE
ACQUISITION OF PRIVATE LANDS UNDER R.A. 6657, MORE
PARTICULARLY, IN FAILING TO GIVE DUE NOTICE TO THE
PETITIONER AND TO PROPERLY IDENTIFY THE SPECIFIC
AREAS SOUGHT TO BE ACQUIRED.
D. RESPONDENT COURT OF APPEALS GRAVELY ERRED
WHEN IT FAILED TO RECOGNIZE THAT PETITIONER WAS
BRAZENLY AND ILLEGALLY DEPRIVED OF ITS PROPERTY
WITHOUT JUST COMPENSATION, CONSIDERING THAT
PETITIONER WAS NOT PAID JUST COMPENSATION BEFORE
IT WAS UNCEREMONIOUSLY STRIPPED OF ITS
LANDHOLDINGS THROUGH THE ISSUANCE OF CLOAS TO
ALLEGED FARMER BENEFICIARIES, IN VIOLATION OF R.A.
6657.[41]
The assigned errors involve three (3) principal issues: (1)
whether this Court can take cognizance of this petition despite
petitioners failure to exhaust administrative remedies; (2) whether the
acquisition proceedings over the three haciendas were valid and in
accordance with law; and (3) assuming the haciendas may be
reclassified from agricultural to non-agricultural, whether this court
has the power to rule on this issue.
I. Exhaustion of Administrative Remedies.
In its first assigned error, petitioner claims that respondent Court
of Appeals gravely erred in finding that petitioner failed to exhaust
administrative remedies. As a general rule, before a party may be
allowed to invoke the jurisdiction of the courts of justice, he is
expected to have exhausted all means of administrative redress. This
is not absolute, however. There are instances when judicial action may
be resorted to immediately. Among these exceptions are: (1) when the
question raised is purely legal; (2) when the administrative body is in
estoppel; (3) when the act complained of is patently illegal; (4) when
there is urgent need for judicial intervention; (5) when the respondent
acted in disregard of due process; (6) when the respondent is a
department secretary whose acts, as an alter ego of the President, bear
the implied or assumed approval of the latter; (7) when irreparable
damage will be suffered; (8) when there is no other plain, speedy and
adequate remedy; (9) when strong public interest is involved; (10)
when the subject of the controversy is private land; and (11)
in quo warranto proceedings.[42]
Petitioner rightly sought immediate redress in the courts. There
was a violation of its rights and to require it to exhaust administrative
remedies before the DAR itself was not a plain, speedy and adequate
remedy.
Respondent DAR issued Certificates of Land Ownership Award
(CLOAs) to farmer beneficiaries over portions of petitioners land
without just compensation to petitioner. A Certificate of Land
Ownership Award (CLOA) is evidence of ownership of land by a
beneficiary under R.A. 6657, the Comprehensive Agrarian Reform
Law of 1988.[43] Before this may be awarded to a farmer beneficiary,
the land must first be acquired by the State from the landowner and
ownership transferred to the former. The transfer of possession and
ownership of the land to the government are conditioned upon
the receiptby the landowner of the corresponding payment or deposit
by the DAR of the compensation with an accessible bank. Until then,
title remains with the landowner.[44] There was no receipt by petitioner
of any compensation for any of the lands acquired by the government.
The kind of compensation to be paid the landowner is also
specific. The law provides that the deposit must be made only in cash
or LBP bonds.[45] Respondent DARs opening of trust account deposits
in petitioners name with the Land Bank of the Philippines does not
constitute payment under the law. Trust account deposits are not cash
or LBP bonds. The replacement of the trust account with cash or LBP
bonds did not ipso facto cure the lack of compensation; for essentially,
the determination of this compensation was marred by lack of due
process. In fact, in the entire acquisition proceedings, respondent DAR
disregarded the basic requirements of administrative due
process. Under these circumstances, the issuance of the CLOAs to
farmer beneficiaries necessitated immediate judicial action on the part
of the petitioner.
II. The Validity of the Acquisition Proceedings Over the Haciendas.
Petititioners allegation of lack of due process goes into the
validity of the acquisition proceedings themselves. Before we rule on
this matter, however, there is need to lay down the procedure in the
acquisition of private lands under the provisions of the law.
A. Modes of Acquisition of Land under R. A. 6657
Republic Act No. 6657, the Comprehensive Agrarian Reform
Law of 1988 (CARL), provides for two (2) modes of acquisition of
private land: compulsory and voluntary. The procedure for the
compulsory acquisition of private lands is set forth in Section 16 of
R.A. 6657, viz:
Sec. 16. Procedure for Acquisition of Private Lands. --. For purposes
of acquisition of private lands, the following procedures shall be
followed:
a) After having identified the land, the landowners and the
beneficiaries, the DAR shall send its notice to acquire the land to
the owners thereof, by personal delivery or registered mail, and
post the same in a conspicuous place in the municipal building and
barangay hall of the place where the property is located. Said notice
shall contain the offer of the DAR to pay a corresponding value in
accordance with the valuation set forth in Sections 17, 18, and other
pertinent provisions hereof.
b) Within thirty (30) days from the date of receipt of written notice
by personal delivery or registered mail, the landowner, his
administrator or representative shall inform the DAR of his
acceptance or rejection of the offer.
c) If the landowner accepts the offer of the DAR, the LBP shall pay
the landowner the purchase price of the land within thirty (30) days
after he executes and delivers a deed of transfer in favor of the
Government and surrenders the Certificate of Title and other
muniments of title.
d) In case of rejection or failure to reply, the DAR shall conduct
summary administrative proceedings to determine the compensation
for the land requiring the landowner, the LBP and other interested
parties to submit evidence as to the just compensation for the land,
within fifteen (15) days from receipt of the notice. After the
expiration of the above period, the matter is deemed submitted for
decision. The DAR shall decide the case within thirty (30) days after
it is submitted for decision.
e) Upon receipt by the landowner of the corresponding payment, or,
in case of rejection or no response from the landowner, upon the
deposit with an accessible bank designated by the DAR of the
compensation in cash or in LBP bonds in accordance with this Act,
the DAR shall take immediate possession of the land and shall
request the proper Register of Deeds to issue a Transfer Certificate of
Title (TCT) in the name of the Republic of the Philippines. The DAR
shall thereafter proceed with the redistribution of the land to the
qualified beneficiaries.
f) Any party who disagrees with the decision may bring the matter to
the court of proper jurisdiction for final determination of just
compensation.
In the compulsory acquisition of private lands, the landholding,
the landowners and the farmer beneficiaries must first be
identified. After identification, the DAR shall send a Notice of
Acquisition to the landowner, by personal delivery or registered mail,
and post it in a conspicuous place in the municipal building and
barangay hall of the place where the property is located. Within thirty
days from receipt of the Notice of Acquisition, the landowner, his
administrator or representative shall inform the DAR of his acceptance
or rejection of the offer. If the landowner accepts, he executes and
delivers a deed of transfer in favor of the government and surrenders
the certificate of title. Within thirty days from the execution of the deed
of transfer, the Land Bank of the Philippines (LBP) pays the owner the
purchase price. If the landowner rejects the DARs offer or fails to make
a reply, the DAR conducts summary administrative proceedings to
determine just compensation for the land. The landowner, the LBP
representative and other interested parties may submit evidence on just
compensation within fifteen days from notice. Within thirty days from
submission, the DAR shall decide the case and inform the owner of its
decision and the amount of just compensation. Upon receipt by the
owner of the corresponding payment, or, in case of rejection or lack of
response from the latter, the DAR shall deposit the compensation in
cash or in LBP bonds with an accessible bank. The DAR shall
immediately take possession of the land and cause the issuance of a
transfer certificate of title in the name of the Republic of the
Philippines. The land shall then be redistributed to the farmer
beneficiaries. Any party may question the decision of the DAR in the
regular courts for final determination of just compensation.
The DAR has made compulsory acquisition the priority mode of
land acquisition to hasten the implementation of the Comprehensive
Agrarian Reform Program (CARP).[46] Under Section 16 of the CARL,
the first step in compulsory acquisition is the identification of the land,
the landowners and the beneficiaries. However, the law is silent on
how the identification process must be made. To fill in this gap, the
DAR issued on July 26, 1989 Administrative Order No. 12, Series
of 1989, which set the operating procedure in the identification of
such lands. The procedure is as follows:
II. OPERATING PROCEDURE
A. The Municipal Agrarian Reform Officer, with the assistance
of the pertinent Barangay Agrarian Reform Committee (BARC),
shall:
1. Update the masterlist of all agricultural lands covered
under the CARP in his area of responsibility. The
masterlist shall include such information as required
under the attached CARP Masterlist Form which shall
include the name of the landowner, landholding area,
TCT/OCT number, and tax declaration number.
2. Prepare a Compulsory Acquisition Case Folder (CACF)
for each title (OCT/TCT) or landholding covered
under Phase I and II of the CARP except those for
which the landowners have already filed applications
to avail of other modes of land acquisition. A case
folder shall contain the following duly accomplished
forms:
a) CARP CA Form 1MARO Investigation Report
b) CARP CA Form 2-- Summary Investigation Report
of Findings and Evaluation
c) CARP CA Form 3Applicants Information Sheet
d) CARP CA Form 4Beneficiaries Undertaking
e) CARP CA Form 5Transmittal Report to the PARO
The MARO/ BARC shall certify that all information contained in the
above-mentioned forms have been examined and verified by him and
that the same are true and correct.
3. Send a Notice of Coverage and a letter of
invitation to a conference/ meeting to the
landowner covered by the Compulsory Case
Acquisition Folder. Invitations to the said
conference/ meeting shall also be sent to the
prospective farmer-beneficiaries, the BARC
representative(s), the Land Bank of the Philippines
(LBP) representative, and other interested parties
to discuss the inputs to the valuation of the
property. He shall discuss the MARO/ BARC
investigation report and solicit the views, objection,
agreements or suggestions of the participants
thereon. The landowner shall also be asked to
indicate his retention area. The minutes of the
meeting shall be signed by all participants in the
conference and shall form an integral part of the
CACF.
4. Submit all completed case folders to the Provincial
Agrarian Reform Officer (PARO).
B. The PARO shall:
1. Ensure that the individual case folders are forwarded to
him by his MAROs.
2. Immediately upon receipt of a case folder, compute the
valuation of the land in accordance with A.O. No. 6,
Series of 1988.[47] The valuation worksheet and the
related CACF valuation forms shall be duly certified
correct by the PARO and all the personnel who
participated in the accomplishment of these forms.
3. In all cases, the PARO may validate the report of the
MARO through ocular inspection and verification of
the property. This ocular inspection and verification
shall be mandatory when the computed value
exceeds500,000 per estate.
4. Upon determination of the valuation, forward the case
folder, together with the duly accomplished valuation
forms and his recommendations, to the Central
Office. The LBP representative and the MARO
concerned shall be furnished a copy each of his report.
C. DAR Central Office, specifically through the
Bureau of Land Acquisition and Distribution
(BLAD), shall:
1. Within three days from receipt of the case folder from
the PARO, review, evaluate and determine the final
land valuation of the property covered by the case
folder. A summary review and evaluation report shall
be prepared and duly certified by the BLAD Director
and the personnel directly participating in the review
and final valuation.
 2. Prepare, for the signature of the Secretary or her duly
authorized representative, a Notice of Acquisition
(CARP CA Form 8) for the subject property. Serve the
Notice to the landowner personally or through
registered mail within three days from its
approval. The Notice shall include, among others, the
area subject of compulsory acquisition, and the
amount of just compensation offered by DAR.
3. Should the landowner accept the DARs offered value,
the BLAD shall prepare and submit to the Secretary
for approval the Order of Acquisition. However, in
case of rejection or non-reply, the DAR Adjudication
Board (DARAB) shall conduct a summary
administrative hearing to determine just
compensation, in accordance with the procedures
provided under Administrative Order No. 13, Series of
1989. Immediately upon receipt of the DARABs
decision on just compensation, the BLAD shall
prepare and submit to the Secretary for approval the
required Order of Acquisition.
4. Upon the landowners receipt of payment, in case of
acceptance, or upon deposit of payment in the
designated bank, in case of rejection or non-response,
the Secretary shall immediately direct the pertinent
Register of Deeds to issue the corresponding Transfer
Certificate of Title (TCT) in the name of the Republic
of the Philippines. Once the property is transferred, the
DAR, through the PARO, shall take possession of the
land for redistribution to qualified beneficiaries.
Administrative Order No. 12, Series of 1989 requires that the
Municipal Agrarian Reform Officer (MARO) keep an updated master
list of all agricultural lands under the CARP in his area of
responsibility containing all the required information. The MARO
prepares a Compulsory Acquisition Case Folder (CACF) for each title
covered by CARP. The MARO then sends the landowner a Notice of
Coverage and a letter of invitation to a conference/ meeting over the
land covered by the CACF. He also sends invitations to the prospective
farmer-beneficiaries, the representatives of the Barangay Agrarian
Reform Committee (BARC), the Land Bank of the Philippines (LBP)
and other interested parties to discuss the inputs to the valuation of the
property and solicit views, suggestions, objections or agreements of
the parties. At the meeting, the landowner is asked to indicate his
retention area.
The MARO shall make a report of the case to the Provincial
Agrarian Reform Officer (PARO) who shall complete the valuation of
the land. Ocular inspection and verification of the property by the
PARO shall be mandatory when the computed value of the estate
exceeds P500,000.00. Upon determination of the valuation, the PARO
shall forward all papers together with his recommendation to the
Central Office of the DAR. The DAR Central Office, specifically, the
Bureau of Land Acquisition and Distribution (BLAD), shall review,
evaluate and determine the final land valuation of the property. The
BLAD shall prepare, on the signature of the Secretary or his duly
authorized representative, a Notice of Acquisition for the subject
property.[48] From this point, the provisions of Section 16 of R.A. 6657
then apply.[49]
For a valid implementation of the CAR Program, two notices are
required: (1) the Notice of Coverage and letter of invitation to a
preliminary conference sent to the landowner, the representatives of
the BARC, LBP, farmer beneficiaries and other interested parties
pursuant to DAR A. O. No. 12, Series of 1989; and (2) the Notice of
Acquisition sent to the landowner under Section 16 of the CARL.
The importance of the first notice, i.e., the Notice of Coverage
and the letter of invitation to the conference, and its actual conduct
cannot be understated. They are steps designed to comply with the
requirements of administrative due process. The implementation of the
CARL is an exercise of the States police power and the power of
eminent domain. To the extent that the CARL prescribes retention
limits to the landowners, there is an exercise of police power for the
regulation of private property in accordance with the
Constitution.[50] But where, to carry out such regulation, the owners are
deprived of lands they own in excess of the maximum area allowed,
there is also a taking under the power of eminent domain. The taking
contemplated is not a mere limitation of the use of the land. What is
required is the surrender of the title to and physical possession of the
said excess and all beneficial rights accruing to the owner in favor of
the farmer beneficiary.[51] The Bill of Rights provides that [n]o person
shall be deprived of life, liberty or property without due process of
law.[52] The CARL was not intended to take away property without due
process of law.[53] The exercise of the power of eminent domain
requires that due process be observed in the taking of private property.
DAR A. O. No. 12, Series of 1989, from whence the Notice of
Coverage first sprung, was amended in 1990 by DAR A.O. No. 9,
Series of 1990 and in 1993 by DAR A.O. No. 1, Series of 1993. The
Notice of Coverage and letter of invitation to the conference
meeting were expanded and amplified in said amendments.
DAR A. O. No. 9, Series of 1990 entitled Revised Rules
Governing the Acquisition of Agricultural Lands Subject of Voluntary
Offer to Sell and Compulsory Acquisition Pursuant to R. A. 6657,
requires that:
B. MARO
1. Receives the duly accomplished CARP Form Nos. 1 &
1.1 including supporting documents.
2. Gathers basic ownership documents listed under 1.a or
1.b above and prepares corresponding VOCF/ CACF
by landowner/ landholding.
3. Notifies/ invites the landowner and representatives of
the LBP, DENR, BARC and prospective beneficiaries
of the schedule of ocular inspection of the property at
least one week in advance.
4. MARO/ LAND BANK FIELD OFFICE/ BARC
a) Identify the land and landowner, and determine
the suitability for agriculture and
productivity of the land and jointly
prepare Field Investigation Report
(CARP Form No. 2), including the
Land Use Map of the property.
b) Interview applicants and assist them in the
preparation of the Application For
Potential CARP Beneficiary (CARP
Form No. 3).
c) Screen prospective farmer-beneficiaries and for
those found qualified, cause the signing
of the respective Application to
Purchase and Farmers Undertaking
(CARP Form No. 4).
d) Complete the Field Investigation Report based
on the result of the ocular inspection/
investigation of the property and
documents submitted. See to it that
Field Investigation Report is duly
 accomplished and signed by all
concerned.
5. MARO
a) Assists the DENR Survey Party in the conduct of
a boundary/ subdivision survey
delineating areas covered by OLT,
retention, subject of VOS, CA (by
phases, if possible), infrastructures,
etc., whichever is applicable.
b) Sends Notice of Coverage (CARP Form No. 5)
to landowner concerned or his duly
authorized representative inviting him
for a conference.
c) Sends Invitation Letter (CARP Form No. 6) for a
conference/ public hearing to
prospective farmer-beneficiaries,
landowner, representatives of BARC,
LBP, DENR, DA, NGOs, farmers
organizations and other interested
parties to discuss the following matters:
Result of Field Investigation
Inputs to valuation
Issues raised
Comments/ recommendations by all parties
concerned.
d) Prepares Summary of Minutes of the conference/
public hearing to be guided by CARP
Form No. 7.
e) Forwards the completed VOCF/CACF to the
Provincial Agrarian Reform Office
(PARO) using CARP Form No. 8
(Transmittal Memo to PARO).
x x x.
DAR A. O. No. 9, Series of 1990 lays down the rules on both
Voluntary Offer to Sell (VOS) and Compulsory Acquisition (CA)
transactions involving lands enumerated under Section 7 of the
CARL.[54]In both VOS and CA transactions, the MARO prepares the
Voluntary Offer to Sell Case Folder (VOCF) and the Compulsory
Acquisition Case Folder (CACF), as the case may be, over a particular
landholding. The MARO notifies the landowner as well as
representatives of the LBP, BARC and prospective beneficiaries of the
date of the ocular inspection of the property at least one week before
the scheduled date and invites them to attend the same. The MARO,
LBP or BARC conducts the ocular inspection and investigation by
identifying the land and landowner, determining the suitability of the
land for agriculture and productivity, interviewing and screening
prospective farmer beneficiaries. Based on its investigation, the
MARO, LBP or BARC prepares the Field Investigation Report which
shall be signed by all parties concerned. In addition to the field
investigation, a boundary or subdivision survey of the land may also
be conducted by a Survey Party of the Department of Environment and
Natural Resources (DENR) to be assisted by the MARO.[55] This
survey shall delineate the areas covered by Operation Land Transfer
(OLT), areas retained by the landowner, areas with infrastructure, and
the areas subject to VOS and CA. After the survey and field
investigation, the MARO sends a Notice of Coverage to the landowner
or his duly authorized representative inviting him to a conference or
public hearing with the farmer beneficiaries, representatives of the
BARC, LBP, DENR, Department of Agriculture (DA), non-
government organizations, farmers organizations and other interested
parties. At the public hearing, the parties shall discuss the results of the
field investigation, issues that may be raised in relation thereto, inputs
to the valuation of the subject landholding, and other comments and
recommendations by all parties concerned. The Minutes of the
conference/ public hearing shall form part of the VOCF or CACF
which files shall be forwarded by the MARO to the PARO. The PARO
reviews, evaluates and validates the Field Investigation Report and
other documents in the VOCF/ CACF. He then forwards the records to
the RARO for another review.
DAR A. O. No. 9, Series of 1990 was amended by DAR A. O.
No. 1, Series of 1993. DAR A. O. No. 1, Series of 1993 provided,
among others, that:
IV. OPERATING PROCEDURES:
"Steps Responsible Activity Forms/
Agency/Unit Document
(Requirements)
A. Identification and
Documentation
xxx
5 DARMO Issues Notice of Coverage to LO CARP
by personal delivery with proof of Form No.2
service, or by registered mail with
return card, informing him that his
property is now under CARP cover-
age and for LO to select his retention
area, if he desires to avail of his right
of retention; and at the same time in-
vites him to join the field investigation
to be conducted on his property which
should be scheduled at least two weeks
in advance of said notice.
A copy of said Notice CARP
shall be posted for at least Form No.17
one week on the bulletin
board of the municipal and barangay
halls where the property is located.
LGU office concerned notifies DAR
about compliance with posting requirement
thru return indorsement on CARP Form
No. 17.
6 DARMO Sends notice to the LBP, CARP
BARC, DENR Form No.3
representatives and
prospective ARBs of the schedule of
the field investigation to be conducted
on the subject property.
7 DARMO With the participation of CARP
BARC the LO, representatives of Form No.4
LBP the LBP, BARC, DENR Land Use
DENR and prospective ARBs, Map
Local Office conducts the investigation
on subject property to identify the landholding,
determines its suitability and productivity;
and jointly prepares the Field Investigation
Report (FIR) and Land Use Map. However,
the field investigation shall proceed even if the
LO, the representatives of the DENR and
prospective ARBs are not available provided,
they were given due notice of the time and date
of the investigation to be conducted. Similarly,
if the LBP representative is not available or could
not come on the scheduled date, the field
investigation shall also be conducted, after which
the duly accomplished Part I of CARP Form No. 4
shall be forwarded to the LBP representative for
validation. If he agrees to the ocular inspection report
of DAR, he signs the FIR (Part I) and accomplishes
Part II thereof.
In the event that there is a difference or variance
between the findings of the DAR and the LBP as
to the propriety of covering the land under CARP,
whether in whole or in part, on the issue of suitability
to agriculture, degree of development or slope, and
on issues affecting idle lands, the conflict shall be
resolved by a composite team of DAR, LBP, DENR
and DA which shall jointly conduct further investigation
thereon. The team shall submit its report of findings
which shall be binding to both DAR and LBP, pursuant
to Joint Memorandum Circular of the DAR, LBP, DENR
and DA dated 27 January 1992.
8 DARMO Screens prospective ARBS CARP
BARC and causes the signing of Form No. 5
the Application of
Purchase and Farmers' Undertaking (APFU).
9 DARMO Furnishes a copy of the CARP
duly accomplished FIR to Form No.
the landowner by personal 4
delivery with proof of service or registered
mail with return card and posts a copy thereof
for at least one week on the bulletin board of the
municipal and barangay halls where the property
is located.
LGU office concerned CARP
Notifies DAR about Form No.
compliance with posting 17
requirement thru return endorsement on
CARP Form No. 17.
B. Land Survey
10 DARMO Conducts perimeter or Perimeter
And/or segregation survey or
DENR delineating areas covered Segregation
Local Office by OLT, "uncarpable Survey Plan
areas such as 18% slope and above,
unproductive/ unsuitable to agriculture,
retention, infrastructure. In case of
segregation or subdivision survey, the
plan shall be approved by DENR-LMS.
C. Review and Completion of Documents.
11 DARMO Forwards VOCF/CACF CARP
to DARPO. Form No.
6
x x x."
DAR A. O. No. 1, Series of 1993, modified the identification
process and increased the number of government agencies involved in
the identification and delineation of the land subject to
acquisition.[56]This time, the Notice of Coverage is sent to the
landowner before the conduct of the field investigation and the sending
must comply with specific requirements. Representatives of the DAR
Municipal Office (DARMO) must send the Notice of Coverage to the
landowner by personal delivery with proof of service, or by registered
mail with return card, informing him that his property is under CARP
coverage and that if he desires to avail of his right of retention, he may
choose which area he shall retain. The Notice of Coverage shall also
invite the landowner to attend the field investigation to be scheduled
at least two weeks from notice. The field investigation is for the
purpose of identifying the landholding and determining its suitability
for agriculture and its productivity. A copy of the Notice of Coverage
shall be posted for at least one week on the bulletin board of the
municipal and barangay halls where the property is located. The date
of the field investigation shall also be sent by the DAR Municipal
Office to representatives of the LBP, BARC, DENR and prospective
farmer beneficiaries. The field investigation shall be conducted on the
date set with the participation of the landowner and the various
representatives. If the landowner and other representatives are absent,
the field investigation shall proceed, provided they were duly notified
thereof. Should there be a variance between the findings of the DAR
and the LBP as to whether the land be placed under agrarian reform,
the lands suitability to agriculture, the degree or development of the
slope, etc., the conflict shall be resolved by a composite team of the
DAR, LBP, DENR and DA which shall jointly conduct further
investigation. The teams findings shall be binding on both DAR and
LBP. After the field investigation, the DAR Municipal Office shall
prepare the Field Investigation Report and Land Use Map, a copy of
which shall be furnished the landowner by personal delivery with proof
of service or registered mail with return card. Another copy of the
Report and Map shall likewise be posted for at least one week in the
municipal or barangay halls where the property is located.
Clearly then, the notice requirements under the CARL are not
confined to the Notice of Acquisition set forth in Section 16 of the
law. They also include the Notice of Coverage first laid down in DAR
A. O. No. 12, Series of 1989 and subsequently amended in DAR A. O.
No. 9, Series of 1990 and DAR A. O. No. 1, Series of 1993. This
Notice of Coverage does not merely notify the landowner that his
property shall be placed under CARP and that he is entitled to exercise
his retention right; it also notifies him, pursuant to DAR A. O. No. 9,
Series of 1990, that a public hearing shall be conducted where he and
representatives of the concerned sectors of society may attend to
discuss the results of the field investigation, the land valuation and
other pertinent matters. Under DAR A. O. No. 1, Series of 1993, the
Notice of Coverage also informs the landowner that a field
investigation of his landholding shall be conducted where he and the
other representatives may be present.
B. The Compulsory Acquisition of Haciendas Palico and Banilad
In the case at bar, respondent DAR claims that it, through
MARO Leopoldo C. Lejano, sent a letter of invitation entitled
Invitation to Parties dated September 29, 1989 to petitioner
corporation, through Jaime Pimentel, the administrator of Hacienda
Palico.[57] The invitation was received on the same day it was sent as
indicated by a signature and the date received at the bottom left corner
of said invitation.With regard to Hacienda Banilad, respondent DAR
claims that Jaime Pimentel, administrator also of Hacienda Banilad,
was notified and sent an invitation to the conference. Pimentel actually
attended the conference on September 21, 1989 and signed the Minutes
of the meeting on behalf of petitioner corporation.[58] The Minutes was
also signed by the representatives of the BARC, the LBP and farmer
beneficiaries.[59] No letter of invitation was sent or conference meeting
held with respect to Hacienda Caylaway because it was subject to a
Voluntary Offer to Sell to respondent DAR.[60]
When respondent DAR, through the Municipal Agrarian Reform
Officer (MARO), sent to the various parties the Notice of Coverage
and invitation to the conference, DAR A. O. No. 12, Series of 1989
was already in effect more than a month earlier. The Operating
Procedure in DAR Administrative Order No. 12 does not specify how
notices or letters of invitation shall be sent to the landowner, the
representatives of the BARC, the LBP, the farmer beneficiaries and
other interested parties. The procedure in the sending of these
notices is important to comply with the requisites of due process
especially when the owner, as in this case, is a juridical
entity. Petitioner is a domestic corporation,[61] and therefore, has a
personality separate and distinct from its shareholders, officers and
employees.
 The Notice of Acquisition in Section 16 of the CARL is required
to be sent to the landowner by personal delivery or registered
mail. Whether the landowner be a natural or juridical person to
whose address the Notice may be sent by personal delivery or
registered mail, the law does not distinguish. The DAR
Administrative Orders also do not distinguish. In the proceedings
before the DAR, the distinction between natural and juridical persons
in the sending of notices may be found in the Revised Rules of
Procedure of the DAR Adjudication Board (DARAB). Service of
pleadings before the DARAB is governed by Section 6, Rule V of the
DARAB Revised Rules of Procedure. Notices and pleadings are
served on private domestic corporations or partnerships in the
following manner:
Sec. 6. Service upon Private Domestic Corporation or Partnership.-
- If the defendant is a corporation organized under the laws of the
Philippines or a partnership duly registered, service may be made on
the president, manager, secretary, cashier, agent, or any of its
directors or partners.
Similarly, the Revised Rules of Court of the Philippines, in
Section 13, Rule 14 provides:
Sec. 13. Service upon private domestic corporation or partnership.If
the defendant is a corporation organized under the laws of the
Philippines or a partnership duly registered, service may be made on
the president, manager, secretary, cashier, agent, or any of its
directors.
Summonses, pleadings and notices in cases against a private
domestic corporation before the DARAB and the regular courts are
served on the president, manager, secretary, cashier, agent or any of its
directors. These persons are those through whom the private domestic
corporation or partnership is capable of action.[62]
Jaime Pimentel is not the president, manager, secretary, cashier
or director of petitioner corporation. Is he, as administrator of the two
Haciendas, considered an agent of the corporation?
The purpose of all rules for service of process on a corporation
is to make it reasonably certain that the corporation will receive prompt
and proper notice in an action against it.[63] Service must be made on a
representative so integrated with the corporation as to make it a
priori supposable that he will realize his responsibilities and know
what he should do with any legal papers served on him,[64] and bring
home to the corporation notice of the filing of the action.[65] Petitioners
evidence does not show the official duties of Jaime Pimentel as
administrator of petitioners haciendas. The evidence does not indicate
whether Pimentels duties is so integrated with the corporation that he
would immediately realize his responsibilities and know what he
should do with any legal papers served on him. At the time the notices
were sent and the preliminary conference conducted, petitioners
principal place of business was listed in respondent DARs records as
Soriano Bldg., Plaza Cervantes, Manila,[66] and 7th Flr. Cacho-
Gonzales Bldg., 101 Aguirre St., Makati, Metro Manila.[67] Pimentel
did not hold office at the principal place of business of petitioner.
Neither did he exercise his functions in Plaza Cervantes, Manila nor in
Cacho-Gonzales Bldg., Makati, Metro Manila. He performed his
official functions and actually resided in the haciendas in Nasugbu,
Batangas, a place over two hundred kilometers away from Metro
Manila.
Curiously, respondent DAR had information of the address of
petitioners principal place of business. The Notices of Acquisition over
Haciendas Palico and Banilad were addressed to petitioner at its offices
in Manila and Makati. These Notices were sent barely three to four
months after Pimentel was notified of the preliminary
conference. [68] Why respondent DAR chose to notify Pimentel instead
of the officers of the corporation was not explained by the said
respondent.
Nevertheless, assuming that Pimentel was an agent of petitioner
corporation, and the notices and letters of invitation were validly
served on petitioner through him, there is no showing that Pimentel
himself was duly authorized to attend the conference meeting with the
MARO, BARC and LBP representatives and farmer beneficiaries for
purposes of compulsory acquisition of petitioners landholdings.Even
respondent DARs evidence does not indicate this authority. On the
contrary, petitioner claims that it had no knowledge of the letter-
invitation, hence, could not have given Pimentel the authority to bind
it to whatever matters were discussed or agreed upon by the parties at
the preliminary conference or public hearing. Notably, one year after
Pimentel was informed of the preliminary conference, DAR A.O. No.
9, Series of 1990 was issued and this required that the Notice of
Coverage must be sent to the landowner concerned or his duly
authorized representative.[69]
Assuming further that petitioner was duly notified of the CARP
coverage of its haciendas, the areas found actually subject to CARP
were not properly identified before they were taken over by respondent
DAR. Respondents insist that the lands were identified because they
are all registered property and the technical description in their
respective titles specifies their metes and bounds. Respondents admit
at the same time, however, that not all areas in the haciendas were
placed under the comprehensive agrarian reform program invariably
by reason of elevation or character or use of the land.[70] The
acquisition of the landholdings did not cover the entire expanse of the
two haciendas, but only portions thereof. Hacienda Palico has an area
of 1,024 hectares and only 688.7576 hectares were targetted for
acquisition. Hacienda Banilad has an area of 1,050 hectares but only
964.0688 hectares were subject to CARP. The haciendas are not
entirely agricultural lands. In fact, the various tax declarations over the
haciendas describe the landholdings as sugarland, and forest,
sugarland, pasture land, horticulture and woodland.[71]
Under Section 16 of the CARL, the sending of the Notice of
Acquisition specifically requires that the land subject to land reform
be first identified. The two haciendas in the instant case cover vast
tracts of land. Before Notices of Acquisition were sent to petitioner,
however, the exact areas of the landholdings were not properly
segregated and delineated. Upon receipt of this notice, therefore,
petitioner corporation had no idea which portions of its estate were
subject to compulsory acquisition, which portions it could
rightfully retain, whether these retained portions were compact or
contiguous, and which portions were excluded from CARP
coverage. Even respondent DARs evidence does not show that
petitioner, through its duly authorized representative, was notified of
any ocular inspection and investigation that was to be conducted by
respondent DAR. Neither is there proof that petitioner was given the
opportunity to at least choose and identify its retention area in those
portions to be acquired compulsorily. The right of retention and how
this right is exercised, is guaranteed in Section 6 of the CARL, viz:
Section 6. Retention Limits.x x x.
The right to choose the area to be retained, which shall be compact or
contiguous, shall pertain to the landowner; Provided, however, That
in case the area selected for retention by the landowner is tenanted,
the tenant shall have the option to choose whether to remain therein
or be a beneficiary in the same or another agricultural land with
similar or comparable features. In case the tenant chooses to remain
in the retained area, he shall be considered a leaseholder and shall
lose his right to be a beneficiary under this Act. In case the tenant
chooses to be a beneficiary in another agricultural land, he loses his
right as a leaseholder to the land retained by the landowner. The
tenant must exercise this option within a period of one (1) year from
the time the landowner manifests his choice of the area for retention.
 Under the law, a landowner may retain not more than five
hectares out of the total area of his agricultural land subject to
CARP. The right to choose the area to be retained, which shall be
compact or contiguous, pertains to the landowner. If the area chosen
for retention is tenanted, the tenant shall have the option to choose
whether to remain on the portion or be a beneficiary in the same or
another agricultural land with similar or comparable features.
C. The Voluntary Acquisition of Hacienda Caylaway
Petitioner was also left in the dark with respect to Hacienda
Caylaway, which was the subject of a Voluntary Offer to Sell
(VOS). The VOS in the instant case was made on May 6,
1988,[72] before the effectivity of R.A. 6657 on June 15, 1988. VOS
transactions were first governed by DAR Administrative Order No. 19,
series of 1989,[73] and under this order, all VOS filed before June 15,
1988 shall be heard and processed in accordance with the procedure
provided for in Executive Order No. 229, thus:
III. All VOS transactions which are now pending before the DAR and
for which no payment has been made shall be subject to the notice
and hearing requirements provided in Administrative Order No. 12,
Series of 1989, dated 26 July 1989, Section II, Subsection A,
paragraph 3.
All VOS filed before 15 June 1988, the date of effectivity of the
CARL, shall be heard and processed in accordance with the
procedure provided for in Executive Order No. 229.
"x x x."
Section 9 of E.O. 229 provides:
Sec. 9. Voluntary Offer to Sell. The government shall purchase all
agricultural lands it deems productive and suitable to farmer
cultivation voluntarily offered for sale to it at a valuation determined
in accordance with Section 6. Such transaction shall be exempt from
the payment of capital gains tax and other taxes and fees.
Executive Order 229 does not contain the procedure for the
identification of private land as set forth in DAR A. O. No. 12, Series
of 1989. Section 5 of E.O. 229 merely reiterates the procedure
of acquisition in Section 16, R.A. 6657. In other words, the E.O. is
silent as to the procedure for the identification of the land, the notice
of coverage and the preliminary conference with the landowner,
representatives of the BARC, the LBP and farmer beneficiaries. Does
this mean that these requirements may be dispensed with regard to
VOS filed before June 15, 1988? The answer is no.
First of all, the same E.O. 229, like Section 16 of the CARL,
requires that the land, landowner and beneficiaries of the land subject
to agrarian reform be identified before the notice of acquisition should
be issued.[74] Hacienda Caylaway was voluntarily offered for sale in
1989. The Hacienda has a total area of 867.4571 hectares and is
covered by four (4) titles. In two separate Resolutions both dated
January 12, 1989, respondent DAR, through the Regional Director,
formally accepted the VOS over two of these four titles.[75] The land
covered by the two titles has an area of 855.5257 hectares, but only
648.8544 hectares thereof fell within the coverage of R.A.
6657.[76] Petitioner claims it does not know where these portions are
located.
Respondent DAR, on the other hand, avers that surveys on the
land covered by the four titles were conducted in 1989, and that
petitioner, as landowner, was not denied participation therein. The
results of the survey and the land valuation summary report, however,
do not indicate whether notices to attend the same were actually sent
to and received by petitioner or its duly authorized
representative.[77] To reiterate, Executive Order No. 229 does not lay
down the operating procedure, much less the notice requirements,
before the VOS is accepted by respondent DAR. Notice to the
landowner, however, cannot be dispensed with. It is part of
administrative due process and is an essential requisite to enable the
landowner himself to exercise, at the very least, his right of retention
guaranteed under the CARL.
III. The Conversion of the three Haciendas.
It is petitioners claim that the three haciendas are not subject to
agrarian reform because they have been declared for tourism, not
agricultural purposes.[78] In 1975, then President Marcos issued
Proclamation No. 1520 declaring the municipality of Nasugbu,
Batangas a tourist zone. Lands in Nasugbu, including the subject
haciendas, were allegedly reclassified as non-agricultural 13 years
before the effectivity of R. A. No. 6657.[79] In 1993, the Regional
Director for Region IV of the Department of Agriculture certified that
the haciendas are not feasible and sound for agricultural
development.[80] On March 20, 1992, pursuant to Proclamation No.
1520, the Sangguniang Bayan of Nasugbu, Batangas adopted
Resolution No. 19 reclassifying certain areas of Nasugbu as non-
agricultural.[81] This Resolution approved Municipal Ordinance No.
19, Series of 1992, the Revised Zoning Ordinance of
Nasugbu[82] which zoning ordinance was based on a Land Use Plan for
Planning Areas for New Development allegedly prepared by the
University of the Philippines.[83] Resolution No. 19 of the Sangguniang
Bayan was approved by the Sangguniang Panlalawigan of Batangas on
March 8, 1993.[84]
Petitioner claims that Proclamation No. 1520 was also upheld by
respondent DAR in 1991 when it approved conversion of 1,827
hectares in Nasugbu into a tourist area known as the Batulao Resort
Complex, and 13.52 hectares in Barangay Caylaway as within the
potential tourist belt. [85] Petitioner presents evidence before us that
these areas are adjacent to the haciendas subject of this petition, hence,
the haciendas should likewise be converted. Petitioner urges this Court
to take cognizance of the conversion proceedings and rule
accordingly.[86]
We do not agree. Respondent DARs failure to observe due
process in the acquisition of petitioners landholdings does not ipso
facto give this Court the power to adjudicate over petitioners
application for conversion of its haciendas from agricultural to
non-agricultural. The agency charged with the mandate of
approving or disapproving applications for conversion is the DAR.
At the time petitioner filed its application for conversion, the
Rules of Procedure governing the processing and approval of
applications for land use conversion was the DAR A. O. No. 2, Series
of 1990.Under this A. O., the application for conversion is filed with
the MARO where the property is located. The MARO reviews the
application and its supporting documents and conducts field
investigation and ocular inspection of the property. The findings of the
MARO are subject to review and evaluation by the Provincial Agrarian
Reform Officer (PARO). The PARO may conduct further field
investigation and submit a supplemental report together with his
recommendation to the Regional Agrarian Reform Officer (RARO)
who shall review the same. For lands less than five hectares, the RARO
shall approve or disapprove applications for conversion. For lands
exceeding five hectares, the RARO shall evaluate the PARO Report
and forward the records and his report to the Undersecretary for Legal
Affairs.Applications over areas exceeding fifty hectares are approved
or disapproved by the Secretary of Agrarian Reform.
 The DARs mandate over applications for conversion was first
laid down in Section 4 (j) and Section 5 (1) of Executive Order No.
129-A, Series of 1987 and reiterated in the CARL and Memorandum
Circular No. 54, Series of 1993 of the Office of the President. The
DARs jurisdiction over applications for conversion is provided as
follows:
"A. The Department of Agrarian Reform (DAR) is
mandated to approve or disapprove applications for
conversion, restructuring or readjustment of
agricultural lands into non-agricultural uses, pursuant
to Section 4 (j) of Executive Order No. 129-A, Series
of 1987.
"B. Section 5 (1) of E.O. 129-A, Series of 1987, vests in
the DAR, exclusive authority to approve or disapprove
applications for conversion of agricultural lands for
residential, commercial, industrial and other land uses.
"C Section 65 of R. A. No. 6657, otherwise known as the
Comprehensive Agrarian Reform Law of 1988,
likewise empowers the DAR to authorize under certain
conditions, the conversion of agricultural lands.
"D. Section 4 of Memorandum Circular No. 54, Series of
1993 of the Office of the President, provides that
action on applications for land use conversion on
individual landholdings shall remain as the
responsibility of the DAR, which shall utilize as its
primary reference, documents on the comprehensive
land use plans and accompanying ordinances passed
upon and approved by the local government units
concerned, together with the National Land Use
Policy, pursuant to R. A. No. 6657 and E. O. No. 129-
A.[87]
Applications for conversion were initially governed by DAR A.
O. No. 1, Series of 1990 entitled Revised Rules and Regulations
Governing Conversion of Private Agricultural Lands and Non-
Agricultural Uses, and DAR A. O. No. 2, Series of 1990 entitled Rules
of Procedure Governing the Processing and Approval of Applications
for Land Use Conversion. These A.O.s and other implementing
guidelines, including Presidential issuances and national policies
related to land use conversion have been consolidated in DAR A. O.
No. 07, Series of 1997. Under this recent issuance, the guiding
principle in land use conversion is:
to preserve prime agricultural lands for food production while, at the
same time, recognizing the need of the other sectors of society
(housing, industry and commerce) for land, when coinciding with the
objectives of the Comprehensive Agrarian Reform Law to promote
social justice, industrialization and the optimum use of land as a
national resource for public welfare.[88]
Land Use refers to the manner of utilization of land, including
its allocation, development and management. Land Use Conversion
refers to the act or process of changing the current use of a piece of
agricultural land into some other use as approved by the DAR.[89] The
conversion of agricultural land to uses other than agricultural requires
field investigation and conferences with the occupants of the
land. They involve factual findings and highly technical matters within
the special training and expertise of the DAR. DAR A. O. No. 7, Series
of 1997 lays down with specificity how the DAR must go about its
task. This time, the field investigation is not conducted by the MARO
but by a special task force, known as the Center for Land Use Policy
Planning and Implementation (CLUPPI- DAR Central Office). The
procedure is that once an application for conversion is filed, the
CLUPPI prepares the Notice of Posting.The MARO only posts the
notice and thereafter issues a certificate to the fact of posting. The
CLUPPI conducts the field investigation and dialogues with the
applicants and the farmer beneficiaries to ascertain the information
necessary for the processing of the application. The Chairman of the
CLUPPI deliberates on the merits of the investigation report and
recommends the appropriate action. This recommendation is
transmitted to the Regional Director, thru the Undersecretary, or
Secretary of Agrarian Reform. Applications involving more than fifty
hectares are approved or disapproved by the Secretary. The procedure
does not end with the Secretary, however. The Order provides that the
decision of the Secretary may be appealed to the Office of the President
or the Court of Appeals, as the case may be, viz:
Appeal from the decision of the Undersecretary shall be made to the
Secretary, and from the Secretary to the Office of the President or the
Court of Appeals as the case may be. The mode of appeal/ motion for
reconsideration, and the appeal fee, from Undersecretary to the
Office of the Secretary shall be the same as that of the Regional
Director to the Office of the Secretary.[90]
Indeed, the doctrine of primary jurisdiction does not
warrant a court to arrogate unto itself authority to resolve a
controversy the jurisdiction over which is initially lodged with an
administrative body of special competence.[91] Respondent DAR is
in a better position to resolve petitioners 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
CLOAs 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.
Hacienda Luisita Inc. (HLI) v. Presidential Agrarian Reform Council
(PARC), et al., G.R. No. 171101, November 22, 2011
RESOLUTION
VELASCO, JR., J.:
 I. THE FACTS
On July 5, 2011, the Supreme Court en banc voted
unanimously (11-0) to DISMISS/DENY the petition filed by HLI and
AFFIRM with MODIFICATIONS the resolutions of the PARC
revoking HLI’s Stock Distribution Plan (SDP) and placing the subject
lands in Hacienda Luisita under compulsory coverage of the
Comprehensive Agrarian Reform Program (CARP) of the
government.
The Court however did not order outright land distribution.
Voting 6-5, the Court noted that there are operative facts that occurred
in the interim and which the Court cannot validly ignore. Thus, the
Court declared that the revocation of the SDP must, by application of
the operative fact principle, give way to the right of the original 6,296
qualified farmworkers-beneficiaries (FWBs) to choose whether they
want to remain as HLI stockholders or [choose actual land
distribution]. It thus ordered the Department of Agrarian Reform
(DAR) to “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.”
The parties thereafter filed their respective motions for
reconsideration of the Court decision.
II. THE ISSUES
(1) Is the operative fact doctrine available in this case?
(2) Is Sec. 31 of RA 6657 unconstitutional?
(3) Can’t the Court order that DAR’s compulsory acquisition of Hacienda
Lusita cover the full 6,443 hectares allegedly covered by RA 6657 and
previously held by Tarlac Development Corporation (Tadeco), and not
just the 4,915.75 hectares covered by HLI’s SDP?
(4) Is the date of the “taking” (for purposes of determining the just
compensation payable to HLI) November 21, 1989, when PARC
approved HLI’s SDP?
(5) Has the 10-year period prohibition on the transfer of awarded lands
under RA 6657 lapsed on May 10, 1999 (since Hacienda Luisita were
placed under CARP coverage through the SDOA scheme on May 11,
1989), and thus the qualified FWBs should now be allowed to sell their
land interests in Hacienda Luisita to third parties, whether they have
fully paid for the lands or not?
(6) THE CRUCIAL ISSUE: Should the ruling in the July 5, 2011
Decision that the qualified FWBs be given an option to remain as
stockholders of HLI be reconsidered?
III. THE RULING
[The Court PARTIALLY GRANTED the motions for
reconsideration of respondents PARC, et al. with respect to the option
granted to the original farmworkers-beneficiaries (FWBs) of
Hacienda Luisita to remain with petitioner HLI, which option the
Court thereby RECALLED and SET ASIDE. It reconsidered its
earlier decision that the qualified FWBs should be given an option to
remain as stockholders of HLI, and UNANIMOUSLY directed
immediate land distribution to the qualified FWBs.]
1. YES, the operative fact doctrine is applicable in this case.
[The Court maintained its stance that the operative fact
doctrine is applicable in this case since, contrary to the suggestion of
the minority, the doctrine is not limited only to invalid or
unconstitutional laws but also applies to decisions made by the
President or the administrative agencies that have the force and effect
of laws. Prior to the nullification or recall of said decisions, they may
have produced acts and consequences that must be respected. It is on
this score that the operative fact doctrine should be applied to acts and
consequences that resulted from the implementation of the PARC
Resolution approving the SDP of HLI. The majority stressed that the
application of the operative fact doctrine by the Court in its July 5,
2011 decision was in fact favorable to the FWBs because not only were
they allowed to retain the benefits and homelots they received under
the stock distribution scheme, they were also given the option to choose
for themselves whether they want to remain as stockholders of HLI or
not.]
2. NO, Sec. 31 of RA 6657 NOT unconstitutional.
[The Court maintained that the Court is NOT compelled to
rule on the constitutionality of Sec. 31 of RA 6657, reiterating that it
was not raised at the earliest opportunity and that the resolution
thereof is not the lis mota of the case. Moreover, the issue has been
rendered moot and academic since SDO is no longer one of the modes
of acquisition under RA 9700. The majority clarified that in its July 5,
2011 decision, it made no ruling in favor of the constitutionality of Sec.
31 of RA 6657, but found nonetheless that there was no apparent grave
violation of the Constitution that may justify the resolution of the issue
of constitutionality.]
3. NO, the Court CANNOT order that DAR’s compulsory acquisition of
Hacienda Lusita cover the full 6,443 hectares and not just the
4,915.75 hectares covered by HLI’s SDP.
[Since what is put in issue before the Court is the propriety
of the revocation of the SDP, which only involves 4,915.75 has. of
agricultural land and not 6,443 has., then the Court is constrained to
rule only as regards the 4,915.75 has. of agricultural
land.Nonetheless, this should not prevent the DAR, under its mandate
under the agrarian reform law, from subsequently subjecting to
agrarian reform other agricultural lands originally held by Tadeco
that were allegedly not transferred to HLI but were supposedly
covered by RA 6657.
However since the area to be awarded to each FWB in the
July 5, 2011 Decision appears too restrictive – considering that there
are roads, irrigation canals, and other portions of the land that are
considered commonly-owned by farmworkers, and these may
necessarily result in the decrease of the area size that may be awarded
per FWB – the Court reconsiders its Decision and resolves to give the
DAR leeway in adjusting the area that may be awarded per FWB in
case the number of actual qualified FWBs decreases. In order to
ensure the proper distribution of the agricultural lands of Hacienda
Luisita per qualified FWB, and considering that matters involving
strictly the administrative implementation and enforcement of
agrarian reform laws are within the jurisdiction of the DAR, it is the
latter which shall determine the area with which each qualified FWB
will be awarded.
On the other hand, the majority likewise reiterated its
holding that the 500-hectare portion of Hacienda Luisita that have
been validly converted to industrial use and have been acquired by
intervenors Rizal Commercial Banking Corporation (RCBC) and
Luisita Industrial Park Corporation (LIPCO), as well as the separate
80.51-hectare SCTEX lot acquired by the government, should be
excluded from the coverage of the assailed PARC resolution. The
Court however ordered that the unused balance of the proceeds of the
sale of the 500-hectare converted land and of the 80.51-hectare land
used for the SCTEX be distributed to the FWBs.]
4. YES, the date of “taking” is November 21, 1989, when PARC
approved HLI’s SDP.
[For the purpose of determining just compensation, the date
of “taking” is November 21, 1989 (the date when PARC approved
HLI’s SDP) since this is the time that the FWBs were considered to
 own and possess the agricultural lands in Hacienda Luisita. To be HACIENDA LUISITA, INCORPORATED, G.R. No. 17
precise, these lands became subject of the agrarian reform coverage Petitioner,
through the stock distribution scheme only upon the approval of the Present:
SDP, that is, on November 21, 1989. Such approval is akin to a notice LUISITA INDUSTRIAL PARK CORPORATION and
of coverage ordinarily issued under compulsory acquisition. On the RIZAL COMMERCIAL BANKING CORPORATION, CORONA,
contention of the minority (Justice Sereno) that the date of the notice Petitioners-in-Intervention, CARPIO,
of coverage [after PARC’s revocation of the SDP], that is, January 2, VELASCO,
2006, is determinative of the just compensation that HLI is entitled to - versus - LEONARD
receive, the Court majority noted that none of the cases cited to justify BRION,
this position involved the stock distribution scheme. Thus, said cases PRESIDENTIAL AGRARIAN REFORM COUNCIL; PERALTA,
do not squarely apply to the instant case. The foregoing SECRETARY NASSER PANGANDAMAN OF THE BERSAMIN
notwithstanding, it bears stressing that the DAR's land valuation is DEPARTMENT OF AGRARIAN REFORM; ALYANSA DEL CAST
only preliminary and is not, by any means, final and conclusive upon NG MGA MANGGAGAWANG BUKID NG HACIENDA ABAD,
the landowner. The landowner can file an original action with the RTC LUISITA, RENE GALANG, NOEL MALLARI, and JULIO VILLARAM
acting as a special agrarian court to determine just compensation. The SUNIGA[1] and his SUPERVISORY GROUP OF THE PEREZ,
court has the right to review with finality the determination in the HACIENDA LUISITA, INC. and WINDSOR ANDAYA, MENDOZA
exercise of what is admittedly a judicial function.] Respondents. SERENO,
REYES,
5. NO, the 10-year period prohibition on the transfer of awarded lands PERLAS-B
under RA 6657 has NOT lapsed on May 10, 1999; thus, the qualified
FWBs should NOT yet be allowed to sell their land interests in
Hacienda Luisita to third parties.

[Under RA 6657 and DAO 1, the awarded lands may only Promulgated
be transferred or conveyed after 10 years from November 2
the issuance and registration of the emancipation patent (EP) or
certificate of land ownership award (CLOA). Considering that the EPs
or CLOAs have not yet been issued to the qualified FWBs in the instant
case, the 10-year prohibitive period has not even started. Significantly,
the reckoning point is the issuance of the EP or CLOA, and not the
placing of the agricultural lands under CARP coverage. Moreover,
should the FWBs be immediately allowed the option to sell or convey
their interest in the subject lands, then all efforts at agrarian reform
would be rendered nugatory, since, at the end of the day, these lands
will just be transferred to persons not entitled to land distribution
under CARP.]

6. YES, the ruling in the July 5, 2011 Decision that the qualified FWBs
be given an option to remain as stockholders of HLI should be
reconsidered.

[The Court reconsidered its earlier decision that the x----------------------------------------------------------------------------------

qualified FWBs should be given an option to remain as stockholders
of HLI, inasmuch as these qualified FWBs will never gain control
[over the subject lands] given the present proportion of shareholdings
in HLI. The Court noted that the share of the FWBs in the HLI capital
stock is [just] 33.296%. Thus, even if all the holders of this 33.296%
unanimously vote to remain as HLI stockholders, which is unlikely,
control will never be in the hands of the FWBs. Control means the
majority of [sic] 50% plus at least one share of the common shares
and other voting shares. Applying the formula to the HLI
stockholdings, the number of shares that will constitute the majority is
295,112,101 shares (590,554,220 total HLI capital shares divided by
2 plus one [1] HLI share). The 118,391,976.85 shares subject to the
SDP approved by PARC substantially fall short of the 295,112,101
shares needed by the FWBs to acquire control over HLI.]
-------x
RESOLUTION
VELASCO, JR., J.:
For resolution are the (1) Motion for Clarification and
Partial Reconsideration dated July 21, 2011 filed by petitioner
Hacienda Luisita, Inc. (HLI); (2) Motion for Partial
Reconsideration dated July 20, 2011 filed by public respondents
Presidential Agrarian Reform Council (PARC) and Department of
Agrarian Reform (DAR); (3) Motion for Reconsideration dated July
19, 2011 filed by private respondent Alyansa ng mga Manggagawang
Bukid sa Hacienda Luisita (AMBALA); (4) Motion for
Reconsideration dated July 21, 2011 filed by respondent-intervenor
Farmworkers Agrarian Reform Movement, Inc. (FARM); (5) Motion
for Reconsideration dated July 21, 2011 filed by private respondents
Noel Mallari, Julio Suniga, Supervisory Group of Hacienda Luisita,
Inc. (Supervisory Group) and Windsor Andaya (collectively referred
to as Mallari, et al.); and (6) Motion for Reconsideration dated July 22,
2011 filed by private respondents Rene Galang and AMBALA.[2]

EN BANC
On July 5, 2011, this Court promulgated a Decision[3] in the
above-captioned case, denying the petition filed by HLI and affirming
Presidential Agrarian Reform Council (PARC) Resolution No. 2005-
32-01 dated December 22, 2005 and PARC Resolution No. 2006-34-
01 dated May 3, 2006 with the modification that the original 6,296
qualified farmworker-beneficiaries of Hacienda Luisita (FWBs) shall
have the option to remain as stockholders of HLI.
In its Motion for Clarification and Partial
Reconsideration dated July 21, 2011, HLI raises the following issues
for Our consideration:
A the Solicitor General (OSG), raise the following issues in their Motion
IT IS NOT PROPER, EITHER IN LAW OR IN
EQUITY, TO DISTRIBUTE TO THE
ORIGINAL FWBs OF 6,296 THE UNSPENT OR
UNUSED BALANCE OF THE PROCEEDS OF
THE SALE OF THE 500 HECTARES AND
80.51 HECTARES OF THE HLI LAND,
BECAUSE:
(1) THE PROCEEDS OF THE SALE BELONG
TO THE CORPORATION, HLI, AS
CORPORATE CAPITAL AND ASSETS IN
SUBSTITUTION FOR THE PORTIONS OF ITS
LAND ASSET WHICH WERE SOLD TO
THIRD PARTY;
(2) TO DISTRIBUTE THE CASH SALES
PROCEEDS OF THE PORTIONS OF THE
LAND ASSET TO THE FWBs, WHO ARE
STOCKHOLDERS OF HLI, IS TO DISSOLVE
THE CORPORATION AND DISTRIBUTE THE
PROCEEDS AS LIQUIDATING DIVIDENDS
WITHOUT EVEN PAYING THE CREDITORS
OF THE CORPORATION;
(3) THE DOING OF SAID ACTS WOULD
VIOLATE THE STRINGENT PROVISIONS OF
THE CORPORATION CODE AND
CORPORATE PRACTICE.
B
IT IS NOT PROPER, EITHER IN LAW OR IN
EQUITY, TO RECKON THE PAYMENT OF
JUST COMPENSATION FROM NOVEMBER
21, 1989 WHEN THE PARC, THEN UNDER
THE CHAIRMANSHIP OF DAR SECRETARY
MIRIAM DEFENSOR-SANTIAGO,
APPROVED THE STOCK DISTRIBUTION
PLAN (SDP) PROPOSED BY TADECO/HLI,
BECAUSE:
(1) THAT PARC RESOLUTION NO. 89-12-2
DATED NOVEMBER 21, 1989 WAS NOT THE
ACTUAL TAKING OF THE TADECOs/HLIs
AGRICULTURAL LAND;
(2) THE RECALL OR REVOCATION UNDER
RESOLUTION NO. 2005-32-01 OF THAT SDP
BY THE NEW PARC UNDER THE
CHAIRMANSHIP OF DAR SECRETARY
NASSER PANGANDAMAN ON DECEMBER
22, 2005 OR 16 YEARS EARLIER WHEN THE
SDP WAS APPROVED DID NOT RESULT IN
ACTUAL TAKING ON NOVEMBER 21, 1989;
(3) TO PAY THE JUST COMPENSATION AS
OF NOVEMBER 21, 1989 OR 22 YEARS BACK
WOULD BE ARBITRARY, UNJUST, AND
OPPRESSIVE, CONSIDERING THE
IMPROVEMENTS, EXPENSES IN THE
MAINTENANCE AND PRESERVATION OF
THE LAND, AND RISE IN LAND PRICES OR
VALUE OF THE PROPERTY.
On the other hand, PARC and DAR, through the Office of
for Partial Reconsideration dated July 20, 2011:
THE DOCTRINE OF OPERATIVE FACT DOES
NOT APPLY TO THIS CASE FOR THE
FOLLOWING REASONS:
I
THERE IS NO LAW OR RULE WHICH HAS
BEEN INVALIDATED ON THE GROUND OF
UNCONSTITUTIONALITY; AND
II
THIS DOCTRINE IS A RULE OF EQUITY
WHICH MAY BE APPLIED ONLY IN THE
ABSENCE OF A LAW. IN THIS CASE, THERE
IS A POSITIVE LAW WHICH MANDATES
THE DISTRIBUTION OF THE LAND AS A
RESULT OF THE REVOCATION OF THE
STOCK DISTRIBUTION PLAN (SDP).
For its part, AMBALA poses the following issues in
its Motion for Reconsideration dated July 19, 2011:
I
THE MAJORITY OF THE MEMBERS OF THE
HONORABLE COURT, WITH DUE RESPECT,
ERRED IN HOLDING THAT SECTION 31 OF
REPUBLIC ACT 6657 (RA 6657) IS
CONSTITUTIONAL.
II
THE MAJORITY OF THE MEMBERS OF THE
HONORABLE COURT, WITH DUE RESPECT,
ERRED IN HOLDING THAT ONLY THE
[PARCS] APPROVAL OF HLIs PROPOSAL
FOR STOCK DISTRIBUTION UNDER CARP
AND THE [SDP] WERE REVOKED AND NOT
THE STOCK DISTRIBUTION OPTION
AGREEMENT (SDOA).
III
THE MAJORITY OF THE MEMBERS OF THE
HONORABLE COURT, WITH DUE RESPECT,
ERRED IN APPLYING THE DOCTRINE OF
OPERATIVE FACTS AND IN MAKING THE
[FWBs] CHOOSE TO OPT FOR ACTUAL
 LAND DISTRIBUTION OR TO REMAIN AS
STOCKHOLDERS OF [HLI].
IV
THE MAJORITY OF THE MEMBERS OF THE
HONORABLE COURT, WITH DUE RESPECT,
ERRED IN HOLDING THAT IMPROVING
THE ECONOMIC STATUS OF FWBs IS NOT
AMONG THE LEGAL OBLIGATIONS OF HLI
UNDER THE SDP AND AN IMPERATIVE
IMPOSITION BY [RA 6657] AND
DEPARTMENT OF AGRARIAN REFORM
ADMINISTRATIVE ORDER NO. 10 (DAO 10).
V AND [RCBC] AS INNOCENT PURCHASERS
THE HONORABLE COURT, WITH DUE
RESPECT, ERRED IN HOLDING THAT THE
CONVERSION OF THE AGRICULTURAL
LANDS DID NOT VIOLATE THE
CONDITIONS OF RA 6657 AND DAO 10.
VI
THE HONORABLE COURT, WITH DUE
RESPECT, ERRED IN HOLDING THAT
PETITIONER IS ENTITLED TO PAYMENT OF
JUST COMPENSATION. SHOULD THE
HONORABLE COURT AFFIRM THE
ENTITLEMENT OF THE PETITIONER TO
JUST COMPENSATION, THE SAME SHOULD
BE PEGGED TO FORTY THOUSAND PESOS
(PhP 40,000.00) PER HECTARE.
VII
THE HONORABLE COURT, WITH DUE
RESPECT, ERRED IN HOLDING THAT
LUISITA INDUSTRIAL PARK CORP. (LIPCO)
AND RIZAL COMMERCIAL BANKING
CORPORATION (RCBC) ARE INNOCENT
PURCHASERS FOR VALUE.
In its Motion for Reconsideration dated July 21, 2011,
FARM similarly puts forth the following issues:
I IN LIGHT OF SECTION 10 OF EXECUTIVE
THE HONORABLE SUPREME COURT
SHOULD HAVE STRUCK DOWN SECTION
31 OF [RA 6657] FOR BEING
UNCONSTITUTIONAL. THE
CONSTITUTIONALITY ISSUE THAT WAS
RAISED BY THE RESPONDENTS-
INTERVENORS IS THE LIS MOTA OF THE
CASE.
II
THE HONORABLE SUPREME COURT
SHOULD NOT HAVE APPLIED THE
DOCTRINE OF OPERATIVE FACT TO THE
CASE. THE OPTION GIVEN TO THE
FARMERS TO REMAIN AS STOCKHOLDERS
OF HACIENDA LUISITA IS EQUIVALENT TO
AN OPTION FOR HACIENDA LUISITA TO
RETAIN LAND IN DIRECT VIOLATION OF
THE COMPREHENSIVE AGRARIAN
REFORM LAW. THE DECEPTIVE STOCK
DISTRIBUTION OPTION / STOCK
DISTRIBUTION PLAN CANNOT JUSTIFY
SUCH RESULT, ESPECIALLY AFTER THE
SUPREME COURT HAS AFFIRMED ITS
REVOCATION.
III
THE HONORABLE SUPREME COURT
SHOULD NOT HAVE CONSIDERED [LIPCO]
FOR VALUE IN THE INSTANT CASE.
Mallari, et al., on the other hand, advance the following
grounds in support of their Motion for Reconsideration dated July 21,
2011:
(1) THE HOMELOTS REQUIRED TO BE
DISTRIBUTED HAVE ALL BEEN
DISTRIBUTED PURSUANT TO THE
MEMORANDUM OF AGREEMENT. WHAT
REMAINS MERELY IS THE RELEASE OF
TITLE FROM THE REGISTER OF DEEDS.
(2) THERE HAS BEEN NO DILUTION OF
SHARES. CORPORATE RECORDS WOULD
SHOW THAT IF EVER NOT ALL OF THE
18,804.32 SHARES WERE GIVEN TO THE
ACTUAL ORIGINAL FARMWORKER
BENEFICIARY, THE RECIPIENT OF THE
DIFFERENCE IS THE NEXT OF KIN OR
CHILDREN OF SAID ORIGINAL [FWBs].
HENCE, WE RESPECTFULLY SUBMIT THAT
SINCE THE SHARES WERE GIVEN TO THE
SAME FAMILY BENEFICIARY, THIS
SHOULD BE DEEMED AS SUBSTANTIAL
COMPLIANCE WITH THE PROVISIONS OF
SECTION 4 OF DAO 10.
(3) THERE HAS BEEN NO VIOLATION OF THE
3-MONTH PERIOD TO IMPLEMENT THE
[SDP] AS PROVIDED FOR BY SECTION 11 OF
DAO 10 AS THIS PROVISION MUST BE READ
ORDER NO. 229, THE PERTINENT PORTION
OF WHICH READS, THE APPROVAL BY THE
PARC OF A PLAN FOR SUCH STOCK
DISTRIBUTION, AND ITS INITIAL
IMPLEMENTATION, SHALL BE DEEMED
COMPLIANCE WITH THE LAND
DISTRIBUTION REQUIREMENT OF THE
CARP.
(4) THE VALUATION OF THE LAND CANNOT
BE BASED AS OF NOVEMBER 21, 1989, THE
DATE OF APPROVAL OF THE STOCK
DISTRIBUTION OPTION. INSTEAD, WE
RESPECTFULLY SUBMIT THAT THE TIME
OF TAKING FOR VALUATION PURPOSES IS
A FACTUAL ISSUE BEST LEFT FOR THE
TRIAL COURTS TO DECIDE.
 (5) TO THOSE WHO WILL CHOOSE LAND,
THEY MUST RETURN WHAT WAS GIVEN TO
THEM UNDER THE SDP. IT WOULD BE
UNFAIR IF THEY ARE ALLOWED TO GET
THE LAND AND AT THE SAME TIME HOLD
ON TO THE BENEFITS THEY RECEIVED
PURSUANT TO THE SDP IN THE SAME WAY
AS THOSE WHO WILL CHOOSE TO STAY
WITH THE SDO.
In their motion for partial reconsideration, DAR and PARC
argue that the doctrine of operative fact does not apply to the instant
case since: (1) there is no law or rule which has been invalidated on
the ground of unconstitutionality;[4] (2) the doctrine of operative fact is
a rule of equity which may be applied only in the absence of a law, and
in this case, they maintain that there is a positive law which mandates
the distribution of the land as a result of the revocation of the stock
distribution plan (SDP).[5]

Echoing the stance of DAR and PARC, AMBALA submits

Lastly, Rene Galang and AMBALA, through the Public
Interest Law Center (PILC), submit the following grounds in support
of their Motion for Reconsideration dated July 22, 2011:
I choose whether to remain as stockholders of HLI or to opt for land
THE HONORABLE COURT, WITH DUE
RESPECT, GRAVELY ERRED IN ORDERING
THE HOLDING OF A VOTING OPTION
INSTEAD OF TOTALLY REDISTRIBUTING
THE SUBJECT LANDS TO [FWBs] in [HLI].
that the operative fact doctrine should only be made to apply in the
extreme case in which equity demands it, which allegedly is not in the
instant case.[6] It further argues that there would be no undue harshness
or injury to HLI in case lands are actually distributed to the
farmworkers, and that the decision which orders the farmworkers to
distribution would result in inequity and prejudice to the
farmworkers.[7] The foregoing views are also similarly shared by Rene
Galang and AMBALA, through the PILC.[8] In addition, FARM posits
that the option given to the FWBs is equivalent to an option for HLI to
retain land in direct violation of RA 6657.[9]

A. THE HOLDING OF A VOTING OPTION (a) Operative Fact Doctrine Not Limited to
HAS NO LEGAL BASIS. THE REVOCATION Invalid or Unconstitutional Laws
OF THE [SDP] CARRIES WITH IT THE
REVOCATION OF THE [SDOA].
Contrary to the stance of respondents, the operative fact
doctrine does not only apply to laws subsequently declared
B. GIVING THE [FWBs] THE OPTION TO
unconstitutional or unlawful, as it also applies to executive acts
REMAIN AS STOCKHOLDERS OF HLI
subsequently declared as invalid. As We have discussed in Our July 5,
WITHOUT MAKING THE NECESSARY
2011 Decision:
CHANGES IN THE CORPORATE
STRUCTURE WOULD ONLY SUBJECT
THEM TO FURTHER MANIPULATION AND
HARDSHIP. That the operative fact doctrine squarely
applies to executive actsin this case, the approval
C. OTHER VIOLATIONS COMMITTED BY by PARC of the HLI proposal for stock
HLI UNDER THE [SDOA] AND PERTINENT distributionis well-settled in our
LAWS JUSTIFY TOTAL LAND jurisprudence. In Chavez v. National Housing
REDISTRIBUTION OF HACIENDA LUISITA. Authority, We held:

Petitioner
II
postulates that the operative
fact doctrine is inapplicable to
THE HONORABLE COURT, WITH DUE the present case because it is
RESPECT, GRAVELY ERRED IN HOLDING an equitable doctrine which
THAT THE [RCBC] AND [LIPCO] ARE could not be used to
INNOCENT PURCHASERS FOR VALUE OF countenance an inequitable
THE 300-HECTARE PROPERTY IN result that is contrary to its
HACIENDA LUISITA THAT WAS SOLD TO proper office.
THEM PRIOR TO THE INCEPTION OF THE
PRESENT CONTROVERSY. On the other hand,
the petitioner Solicitor
General argues that the
Ultimately, the issues for Our consideration are the existence of the various
following: (1) applicability of the operative fact doctrine; (2) agreements implementing the
constitutionality of Sec. 31 of RA 6657 or the Comprehensive SMDRP is an operative fact
Agrarian Reform Law of 1988; (3) coverage of compulsory that can no longer be
acquisition; (4) just compensation; (5) sale to third parties; (6) the disturbed or simply ignored,
violations of HLI; and (7) control over agricultural lands. citing Rieta v. People of
the Philippines.

We shall discuss these issues accordingly. The argument of the

Solicitor General is
meritorious.
I. Applicability of the Operative Fact Doctrine
 The operative fact declaration of the invalidity of
doctrine is embodied in De various presidential
Agbayani v. Court of Appeals, issuances. Discussing therein
wherein it is stated that a how such a declaration might
legislative or executive act, affect acts done on a
prior to its being declared as presumption of their validity,
unconstitutional by the courts, the Court said:
is valid and must be complied
with, thus: .
. .. In
xxx xxx xxx similar
situations
This doctrine was in the past
reiterated in the more recent this Court
case of City of Makati v. Civil had taken
Service Commission, wherein the
we ruled that: pragmatic
and
Moreover, we realistic
certainly cannot nullify the course set
City Government's order of forth
suspension, as we have no in Chicot
reason to do so, much less County
retroactively apply such Drainage
nullification to deprive District
private respondent of a vs. Baxter
compelling and valid reason Bank to
for not filing the leave wit:
application. For as we have
held, a void act though in T
law a mere scrap of paper he courts
nonetheless confers below
legitimacy upon past acts or have
omissions done in reliance proceede
thereof. Consequently, the d on the
existence of a statute theory
or executive order prior to its that the
being adjudged void is an Act of
operative fact to which legal Congress,
consequences are attached. It having
would indeed be ghastly been
unfair to prevent private found to
respondent from relying upon be
the order of suspension in lieu unconstit
of a formal leave application. utional,
was not a
The applicability of the operative fact law; that
doctrine to executive acts was further explicated it was
by this Court in Rieta v. People, thus: inoperati
ve,
Petitioner contends conferrin
that his arrest by virtue of g no
Arrest Search and Seizure rights and
Order (ASSO) No. 4754 was imposing
invalid, as the law upon which no duties,
it was predicated General and hence
Order No. 60, issued by then affording
President Ferdinand E. no basis
Marcos was subsequently for the
declared by the Court, challenge
in Taada v. Tuvera, 33 to have d decree. .
no force and effect. Thus, he . . It is
asserts, any evidence obtained quite
pursuant thereto is clear,
inadmissible in evidence. however,
that such
We do not agree. broad
In Taada, the Court addressed statement
the possible effects of its s as to the
effect of a and acted
determina upon
tion of according
unconstit ly, of
utionality public
must be policy in
taken the light
with of the
qualificat nature
ions. The both of
actual the
existence statute
of a and of its
statute, previous
prior to applicatio
[the n,
determina demand
tion of its examinati
invalidity on. These
], is an questions
operative are
fact and among
may have the most
conseque difficult
nces of those
which which
cannot have
justly be engaged
ignored. the
The past attention
cannot of courts,
always be state and
erased by federal,
a new and it is
judicial manifest
declaratio from
n. The numerous
effect of decisions
the that an
subseque all-
nt ruling inclusive
as to statement
invalidity of a
may have principle
to be of
considere absolute
d in retroactiv
various e
aspects invalidity
with cannot be
respect to justified.
particular
conduct, xxx xxx xxx
private
and S
official. imilarly,
Questions the
of rights implemen
claimed tation/
to have enforcem
become ent of
vested, of presidenti
status, of al decrees
prior prior to
determina their
tions publicatio
deemed n in the
to have Official
finality Gazette is
 an executive act used in the case of De Agbayani v. Philippine National
operative Bank[11] refers only to acts, orders, and rules and regulations that have
fact the force and effect of law. The minority also made mention of the
which Concurring Opinion of Justice Enrique Fernando in Municipality of
may have Malabang v. Benito,[12] where it was supposedly made explicit that the
conseque operative fact doctrine applies to executive acts, which are ultimately
nces quasi-legislative in nature.
which
cannot be
justly We disagree. For one, neither the De Agbayani case nor
ignored. the Municipality of Malabang case elaborates what executive act
The past mean. Moreover, while orders, rules and regulations issued by the
cannot President or the executive branch have fixed definitions and meaning
always be in the Administrative Code and jurisprudence, the phrase executive act
erased by does not have such specific definition under existing laws. It should be
a new noted that in the cases cited by the minority, nowhere can it be found
judicial that the term executive act is confined to the foregoing. Contrarily, the
declaratio term executive act is broad enough to encompass decisions of
n . . . that administrative bodies and agencies under the executive department
an all- which are subsequently revoked by the agency in question or nullified
inclusive by the Court.
statement
of a
principle
of A case in point is the concurrent appointment of Magdangal
absolute B. Elma (Elma) as Chairman of the Presidential Commission on Good
retroactiv Government (PCGG) and as Chief Presidential Legal Counsel (CPLC)
e which was declared unconstitutional by this Court in Public Interest
invalidity Center, Inc. v. Elma.[13] In said case, this Court ruled that the
cannot be concurrent appointment of Elma to these offices is in violation of
justified. Section 7, par. 2, Article IX-B of the 1987 Constitution, since these are
incompatible offices. Notably, the appointment of Elma as Chairman
The Chicot doctrine of the PCGG and as CPLC is, without a question, an executive act.
cited in Taada advocates that, Prior to the declaration of unconstitutionality of the said executive act,
prior to the nullification of a certain acts or transactions were made in good faith and in reliance of
statute, there is an imperative the appointment of Elma which cannot just be set aside or invalidated
necessity of taking into by its subsequent invalidation.
account its actual existence as
an operative fact negating the
acceptance of a principle of In Tan v. Barrios,[14] this Court, in applying the operative
absolute retroactive fact doctrine, held that despite the invalidity of the jurisdiction of the
invalidity. Whatever was military courts over civilians, certain operative facts must be
done while the legislative or acknowledged to have existed so as not to trample upon the rights of
the executive act was in the accused therein. Relevant thereto, in Olaguer v. Military
operation should be duly Commission No. 34,[15]it was ruled that military tribunals pertain to the
recognized and presumed to Executive Department of the Government and are simply
be valid in all respects. The instrumentalities of the executive power, provided by the legislature
ASSO that was issued in for the President as Commander-in-Chief to aid him in properly
1979 under General Order commanding the army and navy and enforcing discipline therein, and
No. 60 long before our utilized under his orders or those of his authorized military
Decision in Taada and the representatives.[16]
arrest of petitioner is an
operative fact that can no
longer be disturbed or Evidently, the operative fact doctrine is not confined to
simply ignored. (Citations statutes and rules and regulations issued by the executive department
omitted; emphasis in the that are accorded the same status as that of a statute or those which are
original.) quasi-legislative in nature.

Bearing in mind that PARC Resolution No. 89-12-2[10]an
executive actwas declared invalid in the instant case, the operative fact
doctrine is clearly applicable.
Nonetheless, the minority is of the persistent view that the
applicability of the operative fact doctrine should be limited to statutes
and rules and regulations issued by the executive department that are
accorded the same status as that of a statute or those which are quasi-
legislative in nature. Thus, the minority concludes that the phrase
Even assuming that De Agbayani initially applied the
operative fact doctrine only to executive issuances like orders and rules
and regulations, said principle can nonetheless be applied, by analogy,
to decisions made by the President or the agencies under the executive
department. This doctrine, in the interest of justice and equity, can be
applied liberally and in a broad sense to encompass said decisions of
the executive branch. In keeping with the demands of equity, the Court
can apply the operative fact doctrine to acts and consequences that
resulted from the reliance not only on a law or executive act which is
quasi-legislative in nature but also on decisions or orders of the
executive branch which were later nullified. This Court is not
unmindful that such acts and consequences must be recognized in the
higher interest of justice, equity and fairness.
Significantly, a decision made by the President or the
administrative agencies has to be complied with because it has the
force and effect of law, springing from the powers of the President
under the Constitution and existing laws. Prior to the nullification or
recall of said decision, it may have produced acts and consequences in
conformity to and in reliance of said decision, which must be
respected. It is on this score that the operative fact doctrine should be
applied to acts and consequences that resulted from the
implementation of the PARC Resolution approving the SDP of HLI.
More importantly, respondents, and even the minority, failed
to clearly explain how the option to remain in HLI granted to
individual farmers would result in inequity and prejudice. We can only
surmise that respondents misinterpreted the option as a referendum
where all the FWBs will be bound by a majority vote favoring the
retention of all the 6,296 FWBs as HLI stockholders. Respondents are
definitely mistaken. The fallo of Our July 5, 2011 Decision is
unequivocal that only those FWBs who signified their desire to remain
as HLI stockholders are entitled to 18,804.32 shares each, while those
who opted not to remain as HLI stockholders will be given land by
DAR. Thus, referendum was not required but only individual options
were granted to each FWB whether or not they will remain in HLI.
The application of the operative fact doctrine to the FWBs is
not iniquitous and prejudicial to their interests but is actually beneficial
and fair to them. First, they are granted the right to remain in HLI as
stockholders and they acquired said shares without paying their value
to the corporation. On the other hand, the qualified FWBs are required
to pay the value of the land to the Land Bank of the Philippines (LBP)
if land is awarded to them by DAR pursuant to RA 6657. If the
qualified FWBs really want agricultural land, then they can simply say
no to the option. And second, if the operative fact doctrine is not
applied to them, then the FWBs will be required to return to HLI the
3% production share, the 3% share in the proceeds of the sale of the
500-hectare converted land, and the 80.51-hectare Subic-Clark-Tarlac
Expressway (SCTEX) lot, the homelots and other benefits received by
the FWBs from HLI. With the application of the operative fact
doctrine, said benefits, homelots and the 3% production share and 3%
share from the sale of the 500-hectare and SCTEX lots shall be
respected with no obligation to refund or return them. The receipt of
these things is an operative fact that can no longer be disturbed or
simply ignored.
(b) The Operative Fact Doctrine as Recourse in Equity
As mentioned above, respondents contend that the operative
fact doctrine is a rule of equity which may be applied only in the
absence of a law, and that in the instant case, there is a positive law
which mandates the distribution of the land as a result of the revocation
of the SDP.
Undeniably, the operative fact doctrine is a rule of
equity.[17] As a complement of legal jurisdiction, equity seeks to reach
and complete justice where courts of law, through the inflexibility of
their rules and want of power to adapt their judgments to the special
circumstances of cases, are incompetent to do so. Equity regards the
spirit and not the letter, the intent and not the form, the substance rather
than the circumstance, as it is variously expressed by different
courts.[18] Remarkably, it is applied only in the absence of statutory law
and never in contravention of said law.[19]
In the instant case, respondents argue that the operative fact
doctrine should not be applied since there is a positive law,
particularly, Sec. 31 of RA 6657, which directs the distribution of the
land as a result of the revocation of the SDP. Pertinently, the last
paragraph of Sec. 31 of RA 6657 states:
If within two (2) years from the approval
of this Act, the 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
supplied.)
Markedly, the use of the word or under the last paragraph of
Sec. 31 of RA 6657 connotes that the law gives the corporate
landowner an option to avail of the stock distribution option or to have
the SDP approved within two (2) years from the approval of RA 6657.
This interpretation is consistent with the well-established principle in
statutory construction that [t]he word or is a disjunctive term signifying
disassociation and independence of one thing from the other things
enumerated; it should, as a rule, be construed in the sense in which it
ordinarily implies, as a disjunctive word.[20] In PCI Leasing and
Finance, Inc. v. Giraffe-X Creative Imaging, Inc.,[21] this Court held:
Evidently, the letter did not make a
demand for the payment of the
P8,248,657.47 AND the return of the equipment;
only either one of the two was required. The
demand letter was prepared and signed by Atty.
Florecita R. Gonzales, presumably petitioners
counsel. As such, the use of or instead of and in
the letter could hardly be treated as a simple
typographical error, bearing in mind the nature of
the demand, the amount involved, and the fact that
it was made by a lawyer. Certainly Atty. Gonzales
would have known that a world of difference
exists between and and or in the manner that the
word was employed in the letter.
A rule in statutory
construction is that the word
or is a disjunctive term
signifying dissociation and
independence of one thing
from other things enumerated
unless the context requires a
different interpretation.[22]
In its elementary
sense, or, as used in a
statute, is a disjunctive
article indicating an
alternative. It often connects
a series of words or
propositions indicating a
choice of either. When or is
 used, the various members
of the enumeration are to be
taken separately.[23]
The word or is a
disjunctive term signifying
disassociation and
independence of one thing
from each of the other things
enumerated.[24] (Emphasis in
the original.)
Given that HLI secured approval of its SDP in November
1989, well within the two-year period reckoned from June 1988 when
RA 6657 took effect, then HLI did not violate the last paragraph of
Sec. 31 of RA 6657. Pertinently, said provision does not bar Us from
applying the operative fact doctrine.
Besides, it should be recognized that this Court, in its July 5,
2011 Decision, affirmed the revocation of Resolution No. 89-12-2 and
ruled for the compulsory coverage of the agricultural lands of
Hacienda Luisita in view of HLIs violation of the SDP and DAO 10.
By applying the operative fact doctrine, this Court merely gave the
qualified FWBs the option to remain as stockholders of HLI and ruled
that they will retain the homelots and other benefits which they
received from HLI by virtue of the SDP.
It bears stressing that the application of the operative fact
doctrine by the Court in its July 5, 2011 Decision is favorable to the
FWBs because not only were the FWBs allowed to retain the benefits
and homelots they received under the stock distribution scheme, they
were also given the option to choose for themselves whether they want
to remain as stockholders of HLI or not. This is in recognition of the
fact that despite the claims of certain farmer groups that they represent
the qualified FWBs in Hacienda Luisita, none of them can show that
they are duly authorized to speak on their behalf. As We have
mentioned, 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.
II. Constitutionality of Sec. 31, RA 6657
FARM insists that the issue of constitutionality of Sec. 31 of
RA 6657 is the lis mota of the case, raised at the earliest opportunity,
and not to be considered as moot and academic.[25]
This contention is unmeritorious. As We have succinctly
discussed in Our July 5, 2011 Decision:
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. 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.
If some other grounds exist by which judgment
can be made without touching the constitutionality
of a law, such recourse is favored. 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.
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, 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. (Citations omitted; emphasis in the
original.)
Based on the foregoing disquisitions, We maintain that this
Court is NOT compelled to rule on the constitutionality of Sec. 31 of
RA 6657. In this regard, We clarify that this Court, in its July 5, 2011
Decision, made no ruling in favor of the constitutionality of Sec. 31 of
RA 6657. There was, however, a determination of the existence of an
apparent grave violation of the Constitution that may justify the
resolution of the issue of constitutionality, to which this Court ruled in
the negative. Having clarified this matter, all other points raised by
both FARM and AMBALA concerning the constitutionality of RA
6657 deserve scant consideration.
III. Coverage of Compulsory Acquisition
FARM argues that this Court ignored certain material facts
when it limited the maximum area to be covered to 4,915.75 hectares,
whereas the area that should, at the least, be covered is 6,443
hectares,[26] which is the agricultural land allegedly covered by RA
6657 and previously held by Tarlac Development Corporation
(Tadeco).[27]
We cannot subscribe to this view. Since what is put in issue
before the Court is the propriety of the revocation of the SDP, which
only involves 4,915.75 has. of agricultural land and not 6,443 has.,
then We are constrained to rule only as regards the 4,915.75 has. of
agricultural land.
Moreover, as admitted by FARM itself, this issue was raised
for the first time by FARM in its Memorandum dated September 24,
2010 filed before this Court.[28] In this regard, it should be noted that
[a]s a legal recourse, the special civil action of certiorari is a limited
form of review.[29] The certiorari jurisdiction of this Court is narrow in
scope as it is restricted to resolving errors of jurisdiction and grave
abuse of discretion, and not errors of judgment.[30] To allow additional
issues at this stage of the proceedings is violative of fair play, justice
and due process.[31]
Nonetheless, it should be taken into account that this should
not prevent the DAR, under its mandate under the agrarian reform law,
from subsequently subjecting to agrarian reform other agricultural
lands originally held by Tadeco that were allegedly not transferred to
HLI but were supposedly covered by RA 6657.
DAR, however, contends that the declaration of the
area[32] to be awarded to each FWB is too restrictive. It stresses that in
agricultural landholdings like Hacienda Luisita, there are roads,
irrigation canals, and other portions of the land that are considered
commonly-owned by farmworkers, and this may necessarily result in
the decrease of the area size that may be awarded per FWB.[33] DAR
also argues that the July 5, 2011 Decision of this Court does not give
it any leeway in adjusting the area that may be awarded per FWB in
case the number of actual qualified FWBs decreases.[34]
The argument is meritorious. In order to ensure the proper
distribution of the agricultural lands of Hacienda Luisita per qualified
FWB, and considering that matters involving strictly the
administrative implementation and enforcement of agrarian reform
laws are within the jurisdiction of the DAR,[35] it is the latter which
shall determine the area with which each qualified FWB will be
awarded.
(a) Conversion of Agricultural Lands
AMBALA insists that the conversion of the agricultural
lands violated the conditions of RA 6657 and DAO 10, stating that
keeping the land intact and unfragmented is one of the essential
conditions of [the] SD[P], RA 6657 and DAO 10.[36] It asserts that this
provision or conditionality is not mere decoration and is intended to
ensure that the farmers can continue with the tillage of the soil
especially since it is the only occupation that majority of them
knows.[37]
We disagree. As We amply discussed in Our July 5, 2011
Decision:
 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.[38]
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
Moreover, it is worth noting that the application for
conversion had the backing of 5,000 or so FWBs, including
respondents Rene Galang, and Jose Julio Suniga, then leaders of the
AMBALA and the Supervisory Group, respectively, as evidenced by
the Manifesto of Support they signed and which was submitted to the
DAR.[39] If at all, this means that AMBALA should be estopped from
questioning the conversion of a portion of Hacienda Luisita, which its
leader has fully supported.
(b) LIPCO and RCBC as Innocent Purchasers for
Value
The AMBALA, Rene Galang and the FARM are in accord
that Rizal Commercial Banking Corporation (RCBC) and Luisita
Industrial Park Corporation (LIPCO) are not innocent purchasers for
value. The AMBALA, in particular, argues that LIPCO, being a
wholly-owned subsidiary of HLI, is conclusively presumed to have
knowledge of the agrarian dispute on the subject land and could not
feign ignorance of this fact, especially since they have the same
directors and stockholders.[40] This is seconded by Rene Galang and
AMBALA, through the PILC, which intimate that a look at the General
Information Sheets of the companies involved in the transfers of the
300-hectare portion of Hacienda Luisita, specifically, Centennary
Holdings, Inc. (Centennary), LIPCO and RCBC, would readily reveal
that their directors are interlocked and connected to Tadeco and
HLI.[41] Rene Galang and AMBALA, through the PILC, also allege
that with the clear-cut involvement of the leadership of all the
corporations concerned, LIPCO and RCBC cannot feign ignorance
that the parcels of land they bought are under the coverage of the
comprehensive agrarian reform program [CARP] and that the
conditions of the respective sales are imbued with public interest where
normal property relations in the Civil Law sense do not apply. [42]
Avowing that the land subject of conversion still remains
undeveloped, Rene Galang and AMBALA, through the PILC, further
insist that the condition that [t]he development of the land should be
completed within the period of five [5] years from the issuance of this
Order was not complied with. AMBALA also argues that since RCBC
and LIPCO merely stepped into the shoes of HLI, then they must
comply with the conditions imposed in the conversion order.[43]
In addition, FARM avers that among the conditions attached
to the conversion order, which RCBC and LIPCO necessarily have
knowledge of, are (a) that its approval shall in no way amend, diminish,
or alter the undertaking and obligations of HLI as contained in the
[SDP] approved on November 21, 1989; and (b) that the benefits,
wages and the like, received by the FWBs shall not in any way be
reduced or adversely affected, among others.[44]
The contentions of respondents are wanting. In the first
place, there is no denying that RCBC and LIPCO knew that the
converted lands they bought were under the coverage of CARP.
Nevertheless, as We have mentioned in Our July 5, 2011 Decision, this
does not necessarily mean that both LIPCO and RCBC already acted
in bad faith in purchasing the converted lands. As this Court explained:
 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. 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. (Emphasis
supplied.)
In the second place, the allegation that the converted lands
remain undeveloped is contradicted by the evidence on record,
particularly, Annex X of LIPCOs Memorandum dated September 23,
2010,[45] which has photographs showing that the land has been partly
developed.[46] Certainly, it is a general rule that the factual findings of
administrative agencies are conclusive and binding on the Court when
supported by substantial evidence.[47] However, this rule admits of
certain exceptions, one of which is when the findings of fact are
premised on the supposed absence of evidence and contradicted by the
evidence on record.[48]
In the third place, by arguing that the companies involved in
the transfers of the 300-hectare portion of Hacienda Luisita have
interlocking directors and, thus, knowledge of one may already be
imputed upon all the other companies, AMBALA and Rene Galang, in
effect, want this Court to pierce the veil of corporate fiction. However,
piercing the veil of corporate fiction is warranted only in cases when
the separate legal entity is used to defeat public convenience, justify
wrong, protect fraud, or defend crime, such that in the case of two
corporations, the law will regard the corporations as merged into
one.[49] As succinctly discussed by the Court in Velarde v. Lopez,
Inc.:[50]
Petitioner argues nevertheless that
jurisdiction over the subsidiary is justified by
piercing the veil of corporate fiction. Piercing the
veil of corporate fiction is warranted, however,
only in cases when the separate legal entity is used
to defeat public convenience, justify wrong,
protect fraud, or defend crime, such that in the case
of two corporations, the law will regard the
corporations as merged into one. The rationale
behind piercing a corporations identity is to
remove the barrier between the corporation from
the persons comprising it to thwart the fraudulent
and illegal schemes of those who use the corporate
personality as a shield for undertaking certain
proscribed activities.
In applying the doctrine of piercing the
veil of corporate fiction, the following requisites
must be established: (1) control, not merely
majority or complete stock control; (2) such
control must have been used by the defendant to
commit fraud or wrong, to perpetuate the violation
of a statutory or other positive legal duty, or
dishonest acts in contravention of plaintiffs legal
rights; and (3) the aforesaid control and breach of
duty must proximately cause the injury or unjust
loss complained of. (Citations omitted.)
Nowhere, however, in the pleadings and
other records of the case can it be gathered that
respondent has complete control over Sky Vision,
not only of finances but of policy and business
practice in respect to the transaction attacked, so
that Sky Vision had at the time of the transaction
no separate mind, will or existence of its own. The
existence of interlocking directors, corporate
officers and shareholders is not enough
justification to pierce the veil of corporate fiction
in the absence of fraud or other public policy
considerations.
Absent any allegation or proof of fraud or other public policy
considerations, the existence of interlocking directors, officers and
stockholders is not enough justification to pierce the veil of corporate
fiction as in the instant case.
And in the fourth place, the fact that this Court, in its July 5,
2011 Decision, ordered the payment of the proceeds of the sale of the
converted land, and even of the 80.51-hectare land sold to the
government, through the Bases Conversion Development Authority, to
the qualified FWBs, effectively fulfils the conditions in the conversion
order, to wit: (1) that its approval shall in no way amend, diminish, or
alter the undertaking and obligations of HLI as contained in the SDP
approved on November 21, 1989; and (2) that the benefits, wages and
the like, received by the FWBs shall not in any way be reduced or
adversely affected, among others.
A view has also been advanced that the 200-hectare lot
transferred to Luisita Realty Corporation (LRC) should be included in
the compulsory coverage because the corporation did not intervene.
We disagree. Since the 200-hectare lot formed part of the
SDP that was nullified by PARC Resolution 2005-32-01, this Court is
constrained to make a ruling on the rights of LRC over the said lot.
Moreover, the 500-hectare portion of Hacienda Luisita, of which the
200-hectare portion sold to LRC and the 300-hectare portion
subsequently acquired by LIPCO and RCBC were part of, was already
the subject of the August 14, 1996 DAR Conversion Order. By virtue
of the said conversion order, the land was already reclassified as
industrial/commercial land not subject to compulsory coverage. Thus,
if We place the 200-hectare lot sold to LRC under compulsory
coverage, this Court would, in effect, be disregarding the DAR
Conversion Order, which has long attained its finality. And as this
Court held in Berboso v. CA,[51] Once final and executory, the
Conversion Order can no longer be questioned. Besides, to disregard
the Conversion Order through the revocation of the approval of the
SDP would create undue prejudice to LRC, which is not even a party
to the proceedings below, and would be tantamount to deprivation of
property without due process of law.
Nonethess, the minority is of the adamant view that since
LRC failed to intervene in the instant case and was, therefore, unable
to present evidence supporting its good faith purchase of the 200-
hectare converted land, then LRC should be given full opportunity to
present its case before the DAR. This minority view is a contradiction
in itself. Given that LRC did not intervene and is, therefore, not a party
to the instant case, then it would be incongruous to order them to
present evidence before the DAR. Such an order, if issued by this
Court, would not be binding upon the LRC.
Moreover, LRC may be considered to have waived its right
to participate in the instant petition since it did not intervene in the
DAR proceedings for the nullification of the PARC Resolution No. 89-
12-2 which approved the SDP.
(c) Proceeds of the sale of the 500-hectare converted
land
and of the 80.51-hectare land used for the SCTEX
As previously mentioned, We ruled in Our July 5, 2011
Decision that 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 compulsory coverage, then HLI
and its subsidiary, Centennary, should be liable to the FWBs for the
price received for said lots. Thus:
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.
HLI, however, takes exception to the above-mentioned
ruling and contends that it is not proper to distribute the unspent or
unused balance of the proceeds of the sale of the 500-hectare converted
land and 80.51-hectare SCTEX lot to the qualified FWBs for the
following reasons: (1) the proceeds of the sale belong to the
corporation, HLI, as corporate capital and assets in substitution for the
portions of its land asset which were sold to third parties; (2) to
distribute the cash sales proceeds of the portions of the land asset to
the FWBs, who are stockholders of HLI, is to dissolve the corporation
and distribute the proceeds as liquidating dividends without even
paying the creditors of the corporation; and (3) the doing of said acts
would violate the stringent provisions of the Corporation Code and
corporate practice.[52]
Apparently, HLI seeks recourse to the Corporation Code in
order to avoid its liability to the FWBs for the price received for
the 500-hectare converted lot and the 80.51-hectare SCTEX lot.
However, as We have established in Our July 5, 2011 Decision, the
rights, obligations and remedies of the parties in the instant case are
primarily governed by RA 6657 and HLI cannot shield itself from the
CARP coverage merely under the convenience of being a corporate
entity. In this regard, it should be underscored that the agricultural
lands held by HLI by virtue of the SDP are no ordinary assets. These
are special assets, because, originally, these should have been
distributed to the FWBs were it not for the approval of the SDP by
PARC. Thus, the government cannot renege on its responsibility over
these assets. Likewise, HLI is no ordinary corporation as it was formed
and organized precisely to make use of these agricultural lands actually
intended for distribution to the FWBs. Thus, it cannot shield itself from
the coverage of CARP by invoking the Corporation Code. As
explained by the Court:
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.[53] 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.[54] 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.
(Emphasis supplied.)
Considering that the 500-hectare converted land, as well as
the 80.51-hectare SCTEX lot, should have been included in the
compulsory coverage were it not for their conversion and valid
transfers, then it is only but proper that the price received for the sale
of these lots should be given to the qualified FWBs. In effect, the
proceeds from the sale shall take the place of the lots.
The Court, in its July 5, 2011 Decision, however, takes into
account, inter alia, the payment of taxes and expenses relating to the
transfer of the land, as well as HLIs statement that most, if not all, of
the proceeds were used for legitimate corporate purposes.
Accordingly, We ordered the deduction of the taxes and expenses
relating to the transfer of titles to the transferees, and the expenditures
incurred by HLI and Centennary for legitimate corporate purposes,
among others.
On this note, DAR claims that the [l]egitimate corporate
expenses should not be deducted as there is no basis for it, especially
since only the auditing to be conducted on the financial records of HLI
will reveal the amounts to be offset between HLI and the FWBs.[55]
The contention is unmeritorious. The possibility of an
offsetting should not prevent Us from deducting the legitimate
corporate expenses incurred by HLI and Centennary. After all, the
Court has ordered for a proper auditing [i]n order to determine once
and for all whether or not all the proceeds were properly utilized by
HLI and its subsidiary, Centennary. In this regard, DAR is tasked to
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. Also, it
should be noted that it is HLI which shall shoulder the cost of audit to
reduce the burden on the part of the FWBs. Concomitantly, the
legitimate corporate expenses incurred by HLI and Centennary, as will
be determined by a reputable accounting firm to be engaged by DAR,
shall be among the allowable deductions from the proceeds of the sale
of the 500-hectare land and the 80.51-hectare SCTEX lot.
We, however, find that the 3% production share should not
be deducted from the proceeds of the sale of the 500-hectare converted
land and the 80.51-hectare SCTEX lot. The 3% production share, like
the homelots, was among the benefits received by the FWBs as
farmhands in the agricultural enterprise of HLI and, thus, should not
be taken away from the FWBs.
Contrarily, the minority is of the view that as a consequence
of the revocation of the SDP, the parties should be restored to their
respective conditions prior to its execution and approval, subject to the
application of the principle of set-off or compensation. Such view is
patently misplaced.
The law on contracts, i.e. mutual restitution, does not apply
to the case at bar. To reiterate, what was actually revoked by this Court,
in its July 5, 2011 Decision, is PARC Resolution No. 89-12-2
approving the SDP. To elucidate, it was the SDP, not the SDOA, which
was presented for approval by Tadeco to DAR.[56] The SDP explained
the mechanics of the stock distribution but did not make any reference
nor correlation to the SDOA. The pertinent portions of the proposal
read:
MECHANICS OF STOCK
DISTRIBUTION PLAN
Under Section 31 of Republic Act No.
6657, a corporation owning agricultural land may
distribute among the qualified beneficiaries such
proportion or percentage of its capital stock that
the value of the agricultural land actually devoted
to agricultural activities, bears in relation to the
corporations total assets. Conformably with this
legal provision, Tarlac Development
Corporation hereby submits for approval a
 stock distribution plan that envisions the
following:[57] (Terms and conditions omitted;
emphasis supplied)
xxxx
The above stock distribution plan is
hereby submitted on the basis of all these
benefits that the farmworker-beneficiaries of
Hacienda Luisita will receive under its provisions
in addition to their regular compensation as
farmhands in the agricultural enterprise and the
fringe benefits granted to them by their collective
bargaining agreement with management.[58]
Also, PARC Resolution No. 89-12-2 reads as follows:
RESOLUTION APPROVING THE
STOCK DISTRIBUTION PLAN OF TARLAC
DEVELOPMENT COMPANY/HACIENDA
LUISITA INCORPORATED (TDC/HLI)
NOW THEREFORE, on motion duly
seconded,
RESOLVED, as it is hereby resolved,
to approve the stock distribution plan of
TDC/HLI.
UNANIMOUSLY
APPROVED.[59] (Emphasis supplied)
Clearly, what was approved by PARC is the SDP and not the
SDOA. There is, therefore, no basis for this Court to apply the law on
contracts to the revocation of the said PARC Resolution.
IV. Just Compensation
In Our July 5, 2011 Decision, We stated that HLI shall be
paid just compensation for the remaining agricultural land that will be
transferred to DAR for land distribution to the FWBs. We also ruled
that the date of the taking is November 21, 1989, when PARC
approved HLIs SDP per PARC Resolution No. 89-12-2.
In its Motion for Clarification and Partial Reconsideration,
HLI disagrees with the foregoing ruling and contends that the taking
should be reckoned from finality of the Decision of this Court, or at
the very least, the reckoning period may be tacked to January 2, 2006,
the date when the Notice of Coverage was issued by the DAR pursuant
to PARC Resolution No. 2006-34-01 recalling/revoking the approval
of the SDP.[60]
For their part, Mallari, et al. argue that the valuation of the
land cannot be based on November 21, 1989, the date of approval of
the SDP. Instead, they aver that the date of taking for valuation
purposes is a factual issue best left to the determination of the trial
courts.[61]
At the other end of the spectrum, AMBALA alleges that HLI
should no longer be paid just compensation for the agricultural land
that will be distributed to the FWBs, since the Manila Regional Trial
Court (RTC) already rendered a decision ordering the Cojuangcos to
transfer the control of Hacienda Luisita to the Ministry of Agrarian
Reform, which will distribute the land to small farmers after
compensating the landowners P3.988 million.[62] In the event,
however, that this Court will rule that HLI is indeed entitled to
compensation, AMBALA contends that it should be pegged at forty
thousand pesos (PhP 40,000) per hectare, since this was the same value
that Tadeco declared in 1989 to make sure that the farmers will not
own the majority of its stocks.[63]
Despite the above propositions, We maintain that the date of
taking is November 21, 1989, the date when PARC approved HLIs
SDP per PARC Resolution No. 89-12-2, in view of the fact that this is
the time that the FWBs were considered to own and possess the
agricultural lands in Hacienda Luisita. To be precise, these lands
became subject of the agrarian reform coverage through the stock
distribution scheme only upon the approval of the SDP, that is,
November 21, 1989. Thus, such approval is akin to a notice of
coverage ordinarily issued under compulsory acquisition. Further, any
doubt should be resolved in favor of the FWBs. As this Court held
in Perez-Rosario v. CA:[64]
It is an established social and economic
fact that the escalation of poverty is the driving
force behind the political disturbances that have in
the past compromised the peace and security of the
people as well as the continuity of the national
order. To subdue these acute disturbances, the
legislature over the course of the history of the
nation passed a series of laws calculated to
accelerate agrarian reform, ultimately to raise the
material standards of living and eliminate
discontent. Agrarian reform is a perceived solution
to social instability. The edicts of social justice
found in the Constitution and the public
policies that underwrite them, the
extraordinary national experience, and the
prevailing national consciousness, all command
the great departments of government to tilt the
balance in favor of the poor and
underprivileged whenever reasonable doubt
arises in the interpretation of the law. But
annexed to the great and sacred charge of
protecting the weak is the diametric function to put
every effort to arrive at an equitable solution for
all parties concerned: the jural postulates of social
justice cannot shield illegal acts, nor do they
sanction false sympathy towards a certain class,
nor yet should they deny justice to the landowner
whenever truth and justice happen to be on her
side. In the occupation of the legal questions in all
agrarian disputes whose outcomes can
significantly affect societal harmony, the
considerations of social advantage must be
weighed, an inquiry into the prevailing social
interests is necessary in the adjustment of
conflicting demands and expectations of the
people, and the social interdependence of these
interests, recognized. (Emphasis supplied.)
The minority contends that it is the date of the notice of
coverage, that is, January 2, 2006, which is determinative of the just
compensation HLI is entitled to for its expropriated lands. To support
its contention, it cited numerous cases where the time of the taking was
reckoned on the date of the issuance of the notice of coverage.
However, a perusal of the cases cited by the minority would
reveal that none of them involved the stock distribution scheme. Thus,
said cases do not squarely apply to the instant case. Moreover, it should
be noted that it is precisely because the stock distribution option is a
distinctive mechanism under RA 6657 that it cannot be treated
similarly with that of compulsory land acquisition as these are two (2)
different modalities under the agrarian reform program. As We have
stated in Our July 5, 2011 Decision, RA 6657 provides two (2)
alternative modalities, i.e., land or stock transfer, pursuant to either of
which the corporate landowner can comply with CARP.
In this regard, it should be noted that when HLI submitted
the SDP to DAR for approval, it cannot be gainsaid that the stock
distribution scheme is clearly HLIs preferred modality in order to
comply with CARP. And when the SDP was approved, stocks were
given to the FWBs in lieu of land distribution. As aptly observed by
the minority itself, [i]nstead of expropriating lands, what the
government took and distributed to the FWBs were shares of stock of
petitioner HLI in proportion to the value of the agricultural lands that
should have been expropriated and turned over to the FWBs. It cannot,
therefore, be denied that upon the approval of the SDP submitted by
HLI, the agricultural lands of Hacienda Luisita became subject of
CARP coverage. Evidently, the approval of the SDP took the place of
a notice of coverage issued under compulsory acquisition.
Also, it is surprising that while the minority opines that
under the stock distribution option, title to the property remains with
the corporate landowner, which should presumably be dominated by
farmers with majority stockholdings in the corporation, it still insists
that the just compensation that should be given to HLI is to be reckoned
on January 2, 2006, the date of the issuance of the notice of coverage,
even after it found that the FWBs did not have the majority
stockholdings in HLI contrary to the supposed avowed policy of the
law. In effect, what the minority wants is to prejudice the FWBs twice.
Given that the FWBs should have had majority stockholdings in HLI
but did not, the minority still wants the government to pay higher just
compensation to HLI. Even if it is the government which will pay the
just compensation to HLI, this will also affect the FWBs as they will
be paying higher amortizations to the government if the taking will be
considered to have taken place only on January 2, 2006.
The foregoing notwithstanding, it bears stressing that the
DAR's land valuation is only preliminary and is not, by any means,
final and conclusive upon the landowner. The landowner can file an
original action with the RTC acting as a special agrarian court to
determine just compensation. The court has the right to review with
finality the determination in the exercise of what is admittedly a
judicial function.[65]
A view has also been advanced that HLI should pay the
qualified FWBs rental for the use and possession of the land up to the
time it surrenders possession and control over these lands. What this
view fails to consider is the fact that the FWBs are also stockholders
of HLI prior to the revocation of PARC Resolution No. 89-12-2. Also,
the income earned by the corporation from its possession and use of
the land ultimately redounded to the benefit of the FWBs based on its
business operations in the form of salaries, benefits voluntarily granted
by HLI and other fringe benefits under their Collective Bargaining
Agreement. That being so, there would be unjust enrichment on the
part of the FWBs if HLI will still be required to pay rent for the use of
the land in question.
V. Sale to
Third Parties
There is a view that since the agricultural lands in Hacienda
Luisita were placed under CARP coverage through the SDOA scheme
on May 11, 1989, then the 10-year period prohibition on the transfer
of awarded lands under RA 6657 lapsed on May 10, 1999, and,
consequently, the qualified FWBs should already be allowed to sell
these lands with respect to their land interests to third parties, including
HLI, regardless of whether they have fully paid for the lands or not.
The proposition is erroneous. Sec. 27 of RA 6657 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.
If the land has not yet been fully paid
by the beneficiary, the right 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.
In the event of such transfer to the LBP,
the latter shall compensate the beneficiary in one
lump sum for the amounts the latter has already
paid, together with the value of improvements he
has made on the land. (Emphasis supplied.)
To implement the above-quoted provision, inter alia, DAR
issued Administrative Order No. 1, Series of 1989 (DAO 1)
entitled Rules and Procedures Governing Land Transactions. Said
Rules set forth the rules on validity of land transactions, to wit:
II. RULES ON VALIDITY OF LAND
TRANSACTIONS
A. The following transactions are valid:
1. Those executed by the original
landowner in favor of the qualified
beneficiary from among those certified
by DAR.
2. Those in favor of the government, DAR
or the Land Bank of the Philippines.
3. Those covering lands retained by the
landowner under Section 6 of R.A. 6657
duly certified by the designated DAR
Provincial Agrarian Reform Officer
(PARO) as a retention area, executed in
favor of transferees whose total
landholdings inclusive of the land to be
acquired do not exceed five (5) hectares;
subject, however, to the right of pre-
emption and/or redemption of
tenant/lessee under Section 11 and 12 of
R.A. 3844, as amended.
xxxx
4. Those executed by beneficiaries
covering lands acquired under any
agrarian reform law in favor of the
government, DAR, LBP or other
qualified beneficiaries certified by
DAR.
5. Those executed after ten (10) years
from the issuance and registration of
the Emancipation Patent or
Certificate of Land Ownership
Award.
B. The following transactions are not valid:
1. Sale, disposition, lease management
contract or transfer of possession of
private lands executed by the original
landowner prior to June 15, 1988, which
are registered on or before September
13, 1988, or those executed after June
15, 1988, covering an area in excess of
the five-hectare retention limit in
violation of R.A. 6657.
2. Those covering lands acquired by the
beneficiary under R.A. 6657 and
executed within ten (10) years from the
issuance and registration of an
Emancipation Patent or Certificate of
Land Ownership Award.
3. Those executed in favor of a person or
persons not qualified to acquire land
under R.A. 6657.
4. Sale, transfer, conveyance or change of
nature of the land outside of urban
centers and city limits either in whole or
in part as of June 15, 1988, when R.A.
6657 took effect, except as provided for
under DAR Administrative Order No.
15, series of 1988.
5. Sale, transfer or conveyance by
beneficiary of the right to use or any
other usufructuary right over the land he
acquired by virtue of being a
beneficiary, in order to circumvent the
law.
x x x x (Emphasis supplied.)
Without a doubt, under RA 6657 and DAO 1, the awarded
lands may only be transferred or conveyed after ten (10) years from
the issuance and registration of the emancipation patent (EP) or
certificate of land ownership award (CLOA). Considering that the EPs
or CLOAs have not yet been issued to the qualified FWBs in the instant
case, the 10-year prohibitive period has not even started. Significantly,
the reckoning point is the issuance of the EP or CLOA, and not the
placing of the agricultural lands under CARP coverage.
Moreover, if We maintain the position that the qualified
FWBs should be immediately allowed the option to sell or convey the
agricultural lands in Hacienda Luisita, then all efforts at agrarian
reform would be rendered nugatory by this Court, since, at the end of
the day, these lands will just be transferred to persons not entitled to
land distribution under CARP. As aptly noted by the late Senator
Neptali Gonzales during the Joint Congressional Conference
Committee on the Comprehensive Agrarian Reform Program Bills:
SEN. GONZALES. My point is, as
much as possible let the said lands be
distributed under CARP remain with the
beneficiaries and their heirs because that is the
lesson that we have to learn from PD No. 27. If
you will talk with the Congressmen representing
Nueva Ecija, Pampanga and Central Luzon
provinces, law or no law, you will find out that
more than one-third of the original, of the lands
distributed under PD 27 are no longer owned,
possessed or being worked by the grantees or
the awardees of the same, something which we
ought to avoid under the CARP bill that we are
going to enact.[66] (Emphasis supplied.)
Worse, by raising that the qualified beneficiaries may sell
their interest back to HLI, this smacks of outright indifference to the
provision on retention limits[67] under RA 6657, as this Court, in effect,
would be allowing HLI, the previous landowner, to own more than five
(5) hectares of agricultural land, which We cannot countenance. There
is a big difference between the ownership of agricultural lands by HLI
under the stock distribution scheme and its eventual acquisition of the
agricultural lands from the qualified FWBs under the proposed buy-
back scheme. The rule on retention limits does not apply to the former
but only to the latter in view of the fact that the stock distribution
scheme is sanctioned by Sec. 31 of RA 6657, which specifically allows
corporations to divest a proportion of their capital stock that the
agricultural land, actually devoted to agricultural activities, bears in
relation to the companys total assets. On the other hand, no special
rules exist under RA 6657 concerning the proposed buy-back scheme;
hence, the general rules on retention limits should apply.
 Further, the position that the qualified FWBs are now free to
transact with third parties concerning their land interests, regardless of
whether they have fully paid for the lands or not, also transgresses the
second paragraph of Sec. 27 of RA 6657, which plainly states that [i]f
the land has not yet been fully paid by the beneficiary, the right 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 x x x. When the words and phrases in the statute are clear and
unequivocal, the law is applied according to its express
terms.[68] Verba legis non est recedendum, or from the words of a
statute there should be no departure.[69]
SDP and is an imperative imposition by RA 6657 and DAO
10.[73] FARM further asserts that [i]f that minimum threshold is not
met, why allow [stock distribution option] at all, unless the purpose is
not social justice but a political accommodation to the powerful. [74]
Contrary to the assertions of AMBALA and FARM,
nowhere in the SDP, RA 6657 and DAO 10 can it be inferred that
improving the economic status of the FWBs is among the legal
obligations of HLI under the SDP or is an imperative imposition by
RA 6657 and DAO 10, a violation of which would justify discarding
the stock distribution option. As We have painstakingly explained in
Our July 5, 2011 Decision:

The minority, however, posits that [t]o insist that the FWBs
rights sleep for a period of ten years is unrealistic, and may seriously
deprive them of real opportunities to capitalize and maximize the
victory of direct land distribution. By insisting that We disregard the
ten-year restriction under the law in the case at bar, the minority, in
effect, wants this Court to engage in judicial legislation, which is
violative of the principle of separation of powers.[70] The discourse by
Ruben E. Agpalo, in his book on statutory construction, is
enlightening:
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
Where the law is clear and 2. Declaration of Principles
unambiguous, it must be taken to mean exactly and Policies.It is the policy of
what it says and the court has no choice but to see the State to pursue a
to it that its mandate is obeyed. Where the law is Comprehensive Agrarian
clear and free from doubt or ambiguity, there is no Reform Program (CARP).
room for construction or interpretation. Thus, The welfare of the landless
where what is not clearly provided in the law is farmers and farm workers will
read into the law by construction because it is receive the highest
more logical and wise, it would be to encroach consideration to promote
upon legislative prerogative to define the social justice and to move the
wisdom of the law, which is judicial legislation. nation towards sound rural
For whether a statute is wise or expedient is not development and
for the courts to determine. Courts must industrialization, and the
administer the law, not as they think it ought to establishment of owner
be but as they find it and without regard to cultivatorship of economic-
consequences.[71] (Emphasis supplied.) sized farms as the basis of
Philippine agriculture.

And as aptly stated by Chief Justice Renato Corona in his

Dissenting Opinion in Ang Ladlad LGBT Party v. COMELEC:[72]
To this end, a more
equitable distribution and
Regardless of the personal beliefs and ownership of land, with due
biases of its individual members, this Court can regard to the rights of
only apply and interpret the Constitution and the landowners to just
laws. Its power is not to create policy but to compensation and to the
recognize, review or reverse the policy crafted by ecological needs of the nation,
the political departments if and when a proper case shall be undertaken to provide
is brought before it. Otherwise, it will tread on the farmers and farm
dangerous grounds of judicial legislation. workers with the
opportunity to enhance
their dignity and improve
Considerably, this Court is left with no other recourse but to the quality of their lives
respect and apply the law. through greater
productivity of agricultural
lands.
VI. Grounds for Revocation of the SDP
The agrarian reform
program is founded on the
right of farmers and regular
AMBALA and FARM reiterate that improving the economic farm workers, who are
status of the FWBs is among the legal obligations of HLI under the 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.
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. 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. 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.
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.
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.[75] 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. (Citations omitted; emphasis
in the original.)
This Court, despite the above holding, still affirmed the
revocation by PARC of its approval of the SDP based on the following
grounds: (1) failure of HLI to fully comply with its undertaking to
distribute homelots to the FWBs under the SDP; (2) distribution of
shares of stock to the FWBs based on the number of man days or
number of days worked by the FWB in a years time; and (3) 30-year
timeframe for the implementation or distribution of the shares of stock
to the FWBs.
Just the same, Mallari, et al. posit that the homelots required
to be distributed have all been distributed pursuant to the SDOA, and
that what merely remains to be done is the release of title from the
Register of Deeds.[76] They further assert that there has been no
dilution of shares as the corporate records would show that if ever not
all of the 18,804.32 shares were given to the actual original FWB, the
recipient of the difference is the next of kin or children of said original
FWB.[77] Thus, they submit that since the shares were given to the
same family beneficiary, this should be deemed as substantial
compliance with the provisions of Sec. 4 of DAO 10. [78] Also, they
argue that there has been no violation of the three-month period to
implement the SDP as mandated by Sec. 11 of DAO, since this
provision must be read in light of Sec. 10 of Executive Order No. 229, former and the previous
the pertinent portion of which reads, The approval by the PARC of a landowner shall be respected
plan for such stock distribution, and its initial implementation, shall be by both the workers
deemed compliance with the land distribution requirement of the cooperative or association and
CARP.[79] the corporation or business
association.

Again, the matters raised by Mallari, et al. have been Noticeably, the foregoing provisions do
extensively discussed by the Court in its July 5, 2011 Decision. As not make reference to corporations which opted
stated: 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.
On Titles to Homelots
Under the SDP, HLI undertook to
Under RA 6657, the distribution of
subdivide and allocate for free and without charge
homelots is required only for corporations or
among the qualified family-beneficiaries x x x
business associations owning or operating farms
residential or homelots of not more than 240 sq.
which opted for land distribution. Sec. 30 of RA
m. each, with each family beneficiary being
6657 states:
assured of receiving and owning a homelot in the
barrio or barangay where it actually resides, within
SEC. 30. Homelots a reasonable time.
and Farmlots for Members of
Cooperatives.The individual
More than sixteen (16) years have
members of the cooperatives
elapsed from the time the SDP was approved by
or corporations mentioned in
PARC, and yet, it is still the contention of the
the preceding section shall be
FWBs that not all was given the 240-square meter
provided with homelots and
homelots and, of those who were already given,
small farmlots for their family
some still do not have the corresponding titles.
use, to be taken from the land
owned by the cooperative or
corporation. During the oral arguments, HLI was
afforded the chance to refute the foregoing
allegation by submitting proof that the FWBs were
The preceding section referred to in the
already given the said homelots:
above-quoted provision is as follows:
Justice Velasco: x x
SEC. 29. Farms
x There is also an allegation
Owned or Operated by
that the farmer beneficiaries,
Corporations or Other
the qualified family
Business Associations.In the
beneficiaries were not given
case of farms owned or
the 240 square meters each.
operated by corporations or
So, can you also [prove] that
other business associations,
the qualified family
the following rules shall be
beneficiaries were already
observed by the PARC.
provided the 240 square meter
homelots.
In general, lands
shall be distributed directly to
Atty. Asuncion: We
the individual worker-
will, your Honor please.
beneficiaries.
Other than the financial report, however,
In case it is not
no other substantial proof showing that all the
economically feasible and
qualified beneficiaries have received homelots
sound to divide the land, then
was submitted by HLI. Hence, this Court is
it shall be owned collectively
constrained to rule that HLI has not yet fully
by the worker-beneficiaries
complied with its undertaking to distribute
who shall form a workers
homelots to the FWBs under the SDP.
cooperative or association
which will deal with the
corporation or business On Man Days and the Mechanics of
association. Until a new Stock Distribution
agreement is entered into by
and between the workers In our review and analysis of par. 3 of
cooperative or association and the SDOA on the mechanics and timelines of stock
the corporation or business distribution, We find that it violates two (2)
association, any agreement provisions of DAO 10. Par. 3 of the SDOA states:
existing at the time this Act
takes effect between the
 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.
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. 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.
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. 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?
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/Monitori
ng 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.
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. 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.
(Citations omitted; emphasis in the original.)
Based on the foregoing ruling, the contentions of Mallari, et
al. are either not supported by the evidence on record or are utterly
misplaced. There is, therefore, no basis for the Court to reverse its
ruling affirming PARC Resolution No. 2005-32-01 and PARC
Resolution No. 2006-34-01, revoking the previous approval of the
SDP by PARC.
VII. Control
over
Agri
cult
ural
Lan
ds
After having discussed and considered the different
contentions raised by the parties in their respective motions, We are
now left to contend with one crucial issue in the case at bar, that is,
control over the agricultural lands by the qualified FWBs.
 Upon a review of the facts and circumstances, We realize
that the FWBs will never have control over these agricultural lands for
as long as they remain as stockholders of HLI. In Our July 5, 2011
Decision, this Court made the following observations:
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. (Emphasis supplied.)
In line with Our finding that control over agricultural lands
must always be in the hands of the farmers, We reconsider our ruling
that the qualified FWBs should be given an option to remain as
stockholders of HLI, inasmuch as these qualified FWBs will never
gain control given the present proportion of shareholdings in HLI.
A revisit of HLIs Proposal for Stock Distribution under
CARP and the Stock Distribution Option Agreement (SDOA) upon
which the proposal was based reveals that the total assets of HLI is PhP
590,554,220, while the value of the 4,915.7466 hectares is PhP
196,630,000. Consequently, the share of the farmer-beneficiaries in
the HLI capital stock is 33.296% (196,630,000 divided by
590,554.220); 118,391,976.85 HLI shares represent 33.296%. Thus,
even if all the holders of the 118,391,976.85 HLI shares unanimously
vote to remain as HLI stockholders, which is unlikely, control will
never be placed in the hands of the farmer-beneficiaries. Control, of
course, means the majority of 50% plus at least one share of the
common shares and other voting shares. Applying the formula to the
HLI stockholdings, the number of shares that will constitute the
majority is 295,112,101 shares (590,554,220 divided by 2 plus one [1]
HLI share). The 118,391,976.85 shares subject to the SDP approved
by PARC substantially fall short of the 295,112,101 shares needed by
the FWBs to acquire control over HLI. Hence, control can NEVER be
attained by the FWBs. There is even no assurance that 100% of the
118,391,976.85 shares issued to the FWBs will all be voted in favor of
staying in HLI, taking into account the previous referendum among the
farmers where said shares were not voted unanimously in favor of
retaining the SDP. In light of the foregoing consideration, the option
to remain in HLI granted to the individual FWBs will have to be
recalled and revoked.
Moreover, bearing in mind that with the revocation of the
approval of the SDP, HLI will no longer be operating under SDP and
will only be treated as an ordinary private corporation; the FWBs who
remain as stockholders of HLI will be treated as ordinary stockholders
and will no longer be under the protective mantle of RA 6657.
In addition to the foregoing, in view of the operative fact
doctrine, all the benefits and homelots[80] received by all the FWBs
shall be respected with no obligation to refund or return them, since,
as We have mentioned in our July 5, 2011 Decision, the benefits x x x
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.
One last point, the HLI land shall be distributed only to the
6,296 original FWBs. The remaining 4,206 FWBs are not entitled to
any portion of the HLI land, because the rights to said land were vested
only in the 6,296 original FWBs pursuant to Sec. 22 of RA 6657.
In this regard, DAR shall verify the identities of the 6,296
original FWBs, consistent with its administrative prerogative to
identify and select the agrarian reform beneficiaries under RA 6657.[81]
WHEREFORE, the Motion for Partial
Reconsideration dated July 20, 2011 filed by public respondents
Presidential Agrarian Reform Council and Department of Agrarian
Reform, the Motion for Reconsideration dated July 19, 2011 filed by
private respondent Alyansa ng mga Manggagawang Bukid sa
Hacienda Luisita, the Motion for Reconsideration dated July 21, 2011
filed by respondent-intervenor Farmworkers Agrarian Reform
Movement, Inc., and the Motion for Reconsideration dated July 22,
2011 filed by private respondents Rene Galang and AMBALA
are PARTIALLY GRANTED with respect to the option granted to
the original farmworker-beneficiaries of Hacienda Luisita to
remain with Hacienda Luisita, Inc., which is
hereby RECALLED and SET ASIDE. The Motion for Clarification
and Partial Reconsideration dated July 21, 2011 filed by petitioner
HLI and the Motion for Reconsideration dated July 21, 2011 filed by
private respondents Noel Mallari, Julio Suniga, Supervisory Group of
Hacienda Luisita, Inc. and Windsor Andaya are DENIED.
The fallo of the Courts July 5, 2011 Decision is hereby
amended and shall read:
 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
following modifications:
All salaries, benefits, the 3% of the gross sales of the production of the
agricultural lands, the 3% share in the proceeds of the sale of the 500-
hectare converted land and the 80.51-hectare SCTEX lot and the
homelots already received by the 10,502 FWBs composed of 6,296
original FWBs and the 4,206 non-qualified FWBs shall be respected
with no obligation to refund or return them. The 6,296 original FWBs
shall forfeit and relinquish their rights over the HLI shares of stock
issued to them in favor of HLI. The HLI Corporate Secretary shall
cancel the shares issued to the said FWBs and transfer them to HLI in
the stocks and transfer book, which transfers shall be exempt from
taxes, fees and charges. The 4,206 non-qualified FWBs shall remain
as stockholders of HLI.
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 500-hectare lot subject of the August 14, l996
Conversion Order and the 80.51-hectare lot sold to, or acquired by, the
government as part of the SCTEX complex. After the segregation
process, as indicated, is done, the remaining area shall be turned over
to DAR for immediate land distribution to the original 6,296 FWBs or
their successors-in-interest which will be identified by the DAR. The
4,206 non-qualified FWBs are not entitled to any share in the land to
be distributed by DAR.
HLI is directed to pay the original 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 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 actually used or spent
for legitimate corporate purposes. Any unspent or unused balance and
any disallowed expenditures 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 which
is the date of issuance of 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
within the first 15 days after the end of each quarter, until fully
implemented.
The temporary restraining order is lifted.
SO ORDERED.
The Hacienda Luisita Case Part I : How the Supreme Court Decided
on July 15, 2011
In its Decision in Hacienda Luisita Inc. (HLI) vs.
Presidential Agrarian Reform Council (PARC), G.R.
No. 171101, promulgated last July 5, 2011, the Supreme Court en
banc DENIED the petition filed by HLI andAFFIRMED the
resolutions of the PARC revoking HLI’s Stock Distribution Plan
(SDP) and placing the subject lands under compulsory coverage of the
Comprehensive Agrarian Reform Program (CARP) of the
government.
[To read the FACTS of the case and a digest of the main
opinion, please click here.]
The Court however MODIFIED the PARC’s resolutions
and did not order outright land distribution. Noting that there are
operative facts that occurred in the interim and which the Court cannot
validly ignore, the Court declared that the revocation of the SDP must,
by application of the operative fact principle, give way to the right of
the original 6,296 qualified farmworkers-beneficiaries (FWBs) to
choose whether they want to remain as HLI stockholders or [choose
actual land distribution]. The Court said it cannot turn a blind eye to
the fact that in 1989, 93% of the FWBs agreed to the Stock Distribution
Option Agreement (SDOA), which became the basis of the SDP
approved by PARC. It thus ordered the Department of Agrarian
Reform (DAR) to “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.”
The Court refused to pass upon the question on the
constitutionality of Sec. 31 of RA 6657, the legal basis for the stock
distribution option exercised by Tadeco/HLI, because it was not
raised at the earliest opportunity and because the resolution thereof
is not the lis mota of the case. Moreover, the issue has been
rendered moot and academic since SDO is no longer one of the
modes of acquisition under RA 9700. The Court also held that those
portions of Hacienda Luisita that have been validly converted to
industrial use and have been acquired by intervenors Rizal
Commercial Banking Corporation (RCBC) and Luisita Industrial Park
Corporation (LIPCO) should be excluded from the coverage of the
assailed PARC resolution since the said intervenors are innocent
purchasers for value. Finally, the Court held that in determining the
just compensation to be paid to HLI, the date of the “taking” was
November 21, 1989, the time when PARC approved HLI’s SDP.
Justice Presbitero Velasco wrote the majority opinion. Fully
concurring with him were Justices Teresita Leonardo-De Castro,
Lucas Bersamin, Mariano Del Castillo, Roberto Abad, and Jose
Portugal Perez. Chief Justice Renato Corona wrote what he styled
as “Dissenting Opinion.”Justice Arturo Brion, with whom Justice
Martin Villarama fully concurred, wrote a “Separate Concurring
and Dissenting Opinion.” Justice Jose Mendoza wrote a “Separate
Opinion.” Finally, Justice Sereno wrote her own “Dissenting
Opinion.”
The dissents in the July 5, 2011 decision
The dissents of the minority justices were on the other fine
points of the decision.
 Chief Justice Corona dissented insofar as the majority
refused to declare Sec. 31 of RA 6657 unconstitutional. The provision
grants to corporate landowners the option to give qualified FWBs the
right to own capital stock of the corporation in lieu of actual land
distribution. The Chief Justice was of the view that by allowing the
distribution of capital stock, and not land, as “compliance” with
agrarian reform, Sec. 31 of RA 6657 contravenes Sec. 4, Article XIII
of the Constitution, which, he argued, requires that the law
implementing the agrarian reform program should employ [actual]
land redistribution mechanism. Under Sec. 31 of RA 6657, he noted,
the corporate landowner remains to be the owner of the agricultural
land. Qualified beneficiaries are given ownership only of shares of
stock, not [of] the lands they till. He concluded that since an
unconstitutional provision cannot be the basis of a constitutional act,
the SDP of petitioner HLI based on Section 31 of RA 6657 is also
unconstitutional.
Justice Mendoza fully concurred with Chief Justice
Corona’s position that Sec. 31 of RA 6657 is unconstitutional. He
however agreed with the majority that the FWBs be given the option
to remain as shareholders of HLI. He also joined Justice Brion’s
proposal that that the reckoning date for purposes of just compensation
should be May 11, 1989, when the SDOA was executed by Tadeco,
HLI and the FWBs. Finally, he averred that considering that more than
10 years have elapsed from May 11, 1989, the qualified FWBs, who
can validly dispose of their due shares, may do so, in favor of LBP or
other qualified beneficiaries. The 10-year period need not be counted
from the issuance of the Emancipation Title (EP) or Certificate of
Land Ownership Award CLOA) because, under the SDOA, shares, not
land, were to be awarded and distributed.
Justice Brion’s dissent centered on the consequences of the
revocation of HLI’s SDP/SDOA. He argued that that the operative fact
doctrine only applies in considering the effects of a declaration of
unconstitutionality of a statute or a rule issued by the Executive
Department that is accorded the status of a statute. The SDOA/SDP is
neither a statute nor an executive issuance but a contract between the
FWBs and the landowners; hence, the operative fact doctrine is not
applicable. A contract stands on a different plane than a statute or an
executive issuance. When a contract is contrary to law, it is deemed
void ab initio. It produces no legal effects whatsoever. Thus, Justice
Brion questioned the option given by the majority to the FWBs to
remain as stockholders in an almost-bankrupt corporation like HLI. He
argued that the nullity of HLI’s SDP/SDOA goes into its very
existence, and the parties to it must generally revert to their respective
situations prior to its execution. Restitution, he said, is therefore in
order. With the SDP being void, the FWBs should return everything
they are proven to have received pursuant to the terms of the
SDOA/SDP. Justice Brion then proposed that all aspects of the
implementation of the mandatory CARP coverage be determined by
the DAR by starting with a clean slatefrom [May 11,] 1989, the point
in time when the compulsory CARP coverage should start, and
proceeding to adjust the relations of the parties with due regard to the
events that intervened [thereafter]. He also held that the time of the
taking (when the computation of just compensation shall be reckoned)
shall be May 11, 1989, when the SDOA was executed by Tadeco, HLI
and the FWBs.
Justice Sereno dissented with respect to how the majority
modified the questioned PARC Resolutions (i.e., no immediate land
distribution, give first the original qualified FWBs the option to either
remain as stockholders of HLI or choose actual land distribution) and
the applicability of the operative fact doctrine. She would instead order
the DAR to forthwith determine the area of Hacienda Luisita that must
be covered by the compulsory coverage and monitor the land
distribution to the qualified FWBs.
Erroneous interpretation of the Court’s decision
The High Tribunal actually voted unanimously (11-0) to
DISMISS/DENY the petition of HLI and to AFFIRM the PARC
resolutions. This is contrary to media reports that the Court “voted 6-
4” to dismiss the HLI petition. The five (not four) minority justices
(Chief Justice Corona, and Justices Brion, Villarama, Mendoza, and
Sereno) only partially dissentedfrom the decision of the majority of
six (Justice Velasco Jr., Leonardo-De Castro, Bersamin, Del Castillo,
Abad, and Perez). Justice Antonio Carpio took no part in the
deliberations and in the voting, while Justice Diosdado Peralta was on
official leave. The 14th and 15th seats in the Court were earlier vacated
by the retirements of Justices Eduardo Antonio Nachura (June 13,
2011) and Conchita Carpio-Morales (June 19, 2011).
Another misinterpretation came from no less than the
Supreme Court administrator and spokesperson, Atty. Midas Marquez.
In a press conference called after the promulgation of the Court’s
decision, Marquez initially used the term “referendum” in explaining
the High Court’s ruling. This created confusion among the parties and
the interested public since a “referendum” implies that the FWBs will
have to vote on a common mode by which to pursue their claims over
Hacienda Luisita. The decision was thus met with cries of
condemnation by the misinformed farmers and the various people’s
organizations and militant groups supportive of their cause.
Marquez would later correct himself in a subsequent press
briefing. But since by then the parties had already filed their respective
motions for reconsideration, he called upon everyone to just “wait for
the final resolution of the motion[s], which is forthcoming anyway.”
The resolution of the consolidated motions for reconsideration came
relatively early on November 22, 2011, or less than five months from
the promulgation of the decision.
The Hacienda Luisita Case Part II : The November 22, 2011 Supreme
Court Resolution
Less than five months from the promulgation of its July 5,
2011 Decision, the Court en banc promulgated on November 22, 2011
its Resolution on the various motions for reconsideration filed
in Hacienda Luisita Inc. (HLI) vs. Presidential Agrarian Reform
Council (PARC), G.R. No. 171101.
[To read the FACTS of the case and the digest of
the decision, please click here. To read a summary of the opinions in
the July 5, 2011 decision, please click here.]
In its Resolution, the Court PARTIALLY GRANTED the
motions for reconsideration of respondents PARC, et al. with respect
to the option granted to the original farmworkers-beneficiaries (FWBs)
of Hacienda Luisita to remain with petitioner HLI, which option the
Court thereby RECALLED and SET ASIDE. It reconsidered its
earlier decision that the qualified FWBs should be given an option to
remain as stockholders of HLI, inasmuch as these qualified FWBs will
never gain control [over the subject lands] given the present proportion
of shareholdings in HLI. The Court noted that the share of the FWBs
in the HLI capital stock is [just] 33.296%. Thus, even if all the holders
of this 33.296% unanimously vote to remain as HLI stockholders,
which is unlikely, control will never be in the hands of the
FWBs. Control means the majority of [sic] 50% plus at least one share
of the common shares and other voting shares. Applying the formula
to the HLI stockholdings, the number of shares that will constitute the
majority is 295,112,101 shares (590,554,220 total HLI capital shares
divided by 2 plus one [1] HLI share). The 118,391,976.85 shares
subject to the SDP approved by PARC substantially fall short of the
295,112,101 shares needed by the FWBs to acquire control over HLI.
Thus, the Court – unanimously this time – directed
immediate land distribution to the qualified FWBs. On the fine points,
however, again the Court failed to have one voice.
The majority maintained its argument that the operative fact
doctrine applies in this case since, contrary to the suggestion of the
minority, the doctrine is not limited only to invalid or unconstitutional
laws but also applies to decisions made by the President or the
administrative agencies that have the force and effect of laws. Prior to
the nullification or recall of said decisions, they may have produced
acts and consequences that must be respected. It is on this score that
the operative fact doctrine should be applied to acts and consequences
that resulted from the implementation of the PARC Resolution
approving the SDP of HLI. The majority stressed that the application
of the operative fact doctrine by the Court in its July 5, 2011 decision
was in fact favorable to the FWBs because not only were they allowed
to retain the benefits and homelots they received under the stock
distribution scheme, they were also given the option to choose for
themselves whether they want to remain as stockholders of HLI or not.
The majority also maintained that the Court is NOT
compelled to rule on the constitutionality of Sec. 31 of RA 6657,
reiterating that it was not raised at the earliest opportunity and that
the resolution thereof is not the lis mota of the case. Moreover, the
issue has been rendered moot and academic since SDO is no longer
one of the modes of acquisition under RA 9700. The majority clarified
that in its July 5, 2011 decision, it made no ruling in favor of the
constitutionality of Sec. 31 of RA 6657, but found nonetheless that
there was no apparent grave violation of the Constitution that may
justify the resolution of the issue of constitutionality. On the other
hand, the majority likewise reiterated its holding that those portions of
Hacienda Luisita that have been validly converted to industrial use and
have been acquired by intervenors Rizal Commercial Banking
Corporation (RCBC) and Luisita Industrial Park Corporation (LIPCO)
should be excluded from the coverage of the assailed PARC resolution
since the said intervenors are innocent purchasers for value.
Finally, the majority maintained that for the purpose of
determining just compensation, the date of “taking” is November 21,
1989 (the date when PARC approved HLI’s SDP) since this is the time
that the FWBs were considered to own and possess the agricultural
lands in Hacienda Luisita. To be precise, these lands became subject
of the agrarian reform coverage through the stock distribution scheme
only upon the approval of the SDP, that is, on November 21, 1989.
Such approval is akin to a notice of coverage ordinarily issued under
compulsory acquisition. On the contention of the minority (Justice
Sereno) that the date of the notice of coverage [after PARC’s
revocation of the SDP], that is, January 2, 2006, is determinative of the
just compensation that HLI is entitled to receive, the majority noted
that none of the cases cited to justify this position involved the stock
distribution scheme. Thus, said cases do not squarely apply to the
instant case. The foregoing notwithstanding, it bears stressing that the
DAR's land valuation is only preliminary and is not, by any means,
final and conclusive upon the landowner. The landowner can file an
original action with the RTC acting as a special agrarian court to
determine just compensation. The court has the right to review with
finality the determination in the exercise of what is admittedly a
judicial function.
The separate opinions in the resolution
While the Court is unanimous on the matter of the distribution
of Hacienda Luisita to the FWBs, the minority still disagreed with
several aspects of the resolution of the majority.
Thus, Chief Justice Corona reiterated in his “Dissenting
Opinion”that Section 31 of RA 6657 is invalid and
unconstitutional. Agrarian reform’s underlying principle is the
recognition of the rights of farmers who are landless to own, directly
or collectively, the lands they till. Under the Constitution, actual land
distribution to qualified agrarian reform beneficiaries is mandatory.
Anything that promises something other than land, such the stock
distribution option in Sec. 31, must be struck down for being
unconstitutional.
Justice Bersamin, who fully concurred in the July 15, 2011
decision, wrote a “Concurring and Dissenting Opinion.” He opined
that (1) the reckoning date for purposes of determining just
compensation should be left to the DAR and Land Bank, and,
ultimately, to the Special Agrarian Court (SAC) to determine; and (2)
the landowner should be compensated for the value of the homelots
granted to the farmworkers-beneficiaries (FWBs) pursuant to the
discredited stock distribution plan (SDP). According to Justice
Bersamin, the determination of when the taking occurred is an integral
part of the determinationof just compensation. The nature and
character of land at the time of its taking are the principal criteria to
determine just compensation to the landowner; thus, the factual issue
of when the taking had taken place should not be separated from the
determination of just compensation by DAR, Land Bank and SAC. On
the other hand, it appeared that the homelots granted to the FWBs
under the SDP do not form part of the total area of the agricultural
lands to be turned over to DAR for distribution to the qualified FWBs
for which the landowner will be justly compensated. Should the
landowner not be justly compensated for the value of the homelots, the
taking will be confiscatory and unconstitutional.
Justice Sereno this time wrote a “Concurring and
Dissenting Opinion.” She disagreed with the majority’s choice of
November 21, 1989 as the reckoning date of the “taking” of the lands
ordered to be distributed for the purpose of eventually determining just
compensation. Her thesis: The taking of private lands under the
agrarian reform program partakes of the nature of an expropriation
proceeding. For purposes of taking under the agrarian reform program,
the owners of the land should not receive less than the market value
for their expropriated properties. There is taking of private property by
the State in expropriation proceedings when the owner is ousted from
his property and deprived of his beneficial enjoyment thereof. The
“time of taking” is the moment when landowners are deprived of the
use and benefit of the property. No taking of agricultural lands can thus
be considered either at the time the SDOA was signed (May 11, 1989,
as proposed by Justice Brion) or at the time PARC approved it
(November 21, 1989, as held by the majority) since petitioner HLI
retained full ownership and use of the lands thereafter. Despite the
change in stockholders, petitioner was never ousted from or deprived
of the beneficial enjoyment of the agricultural lands in Hacienda
Luisita. Citing the rulings of the Court in agrarian reform cases,
Justice Sereno noted that the notice of coverage commences the
process of acquiring private agricultural lands covered by the CARP.
The date of the notice of coverage – January 2, 2006 – is therefore
determinative of the just compensation that petitioner HLI is entitled
to.
 Hacienda Luisita vs PARC
Case Digest GR 171101 July 5 2011 Nov 22 2011
Facts:
In 1988, RA 6657 or the CARP law was passed. It is a program
aimed at redistributing public and private agricultural lands to
farmers and farmworkers who are landless. One of the lands covered
by this law is the Hacienda Luisita, a 6,443-hectare mixed
agricultural-industrial-residential expanse straddling several
municipalities of Tarlac. Hacienda Luisita was bought in 1958 from
the Spanish owners by the Tarlac Development Corporation
(TADECO), which is owned and/or controlled by Jose Cojuanco Sr.,
Group. Back in 1980, the Martial Law administration filed an
expropriation suit against TADECO to surrender the Hacienda to the
then Ministry of Agrarian Reform (now DAR) so that the land can be
distributed to the farmers at cost. The RTC rendered judgment
ordering TADECO to surrender Hacienda Luisita to the MAR.
In 1988, the OSG moved to dismiss the government’s case against
TADECO. The CA dismissed it, but the dismissal was subject to the
condition that TADECO shall obtain the approval of FWB (farm
worker beneficiaries) to the SDP (Stock Distribution Plan) and to
ensure its implementation.
Sec 31 of the CARP Law allows either land transfer or stock transfer
as two alternative modes in distributing land ownership to the FWBs.
Since the stock distribution scheme is the preferred option of
TADECO, it organized a spin-off corporation, the Hacienda Luisita
Inc. (HLI), as vehicle to facilitate stock acquisition by the farmers.
After conducting a follow-up referendum and revision of terms of the
Stock Distribution Option Agreement (SDOA) proposed by
TADECO, the Presidential Agrarian Reform Council (PARC), led by
then DAR Secretary Miriam Santiago, approved the SDP of
TADECO/HLI through Resolution 89-12-2 dated Nov 21, 1989.
From 1989 to 2005, the HLI claimed to have extended those benefits
to the farmworkers. Such claim was subsequently contested by two
groups representing the interests of the farmers – the HLI
Supervisory Group and the AMBALA. In 2003, each of them wrote
letter petitions before the DAR asking for the renegotiation of terms
and/or revocation of the SDOA. They claimed that they haven’t
actually received those benefits in full, that HLI violated the terms,
and that their lives haven’t really improved contrary to the promise
and rationale of the SDOA.
The DAR created a Special Task Force to attend to the issues and to
review the terms of the SDOA and the Resolution 89-12-2. Adopting
the report and the recommendations of the Task Force, the DAR Sec
recommended to the PARC (1) the revocation of Resolution 89-12-
2 and (2) the acquisition of Hacienda Luisita through compulsory
acquisition scheme. Consequently, the PARC revoked the SDP of
TADECO/HLI and subjected those lands covered by the SDP to the
mandated land acquisition scheme under the CARP law. These acts
of the PARC was assailed by HLI via Rule 65.
On the other hand, FARM, an intervenor, 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 transfer in lieu of outright
agricultural land transfer. 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.
Administrative Law
Hide
Issue 1: W/N PARC has the authority to revoke the Stock
Distribution Plan or SDP
Yes. 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. It may be 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, but such
power or authority 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.
Following this doctrine, 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.
Constitutional Law
Hide
Issue 2: W/N the Court may exercise its power of judicial review
over the constitutionality of Sec 31 of RA 6657
No. First, the intervenor FARM failed to challenged the
constitutionality of RA 6657, Sec 31 at the earliest possible
opportunity. It should have been raised as early as Nov 21, 1989,
when PARC approved the SDP of HLI or at least within a reasonable
time thereafter.
Second, the constitutionality of RA 6657 is not the very lis mota of
this case. Before the SC, the lis mota of the petitions filed by the HLI
is whether or not the PARC acted with grave abuse of discretion in
revoking the SDP of HLI. With regards to the original positions of
the groups representing the interests of the farmers, their very lis
mota is the non-compliance of the HLI with the SDP so that the the
SDP may be revoked. Such issues can be resolved without delving
into the constitutionality of RA 6657.
Hence, the essential requirements in passing upon the
constitutionality of acts of the executive or legislative departments
have not been met in this case.
Statutory Construction
Hide
Issue 3: W/N Sec 31 of RA 6657 is consistent with the Constitution’s
concept of agrarian reform
Yes. The wording of the Art XIII, Sec 4 of the Constitution is
unequivocal: the 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. 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, while
collectively is defined as in a collective sense or manner; in a mass or
body. 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.
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, the
Court emphasized 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.
* The SC, through a resolution dated Nov 21 2011 of the motion for
reconsideration filed by HLI, affirmed the revocation of HLI’s SDP
and the placing of Hacienda Luisita under the compulsory land
distribution scheme of the CARP law. It was also held that the date of
taking was Nov 21 1989, when the PARC, by Resolution 89-12-2,
approved the SDP of HLI. ##
EN BANC
G.R. No. 171101 July 5, 2011
HACIENDA LUISITA, INCORPORATED, Petitioner,
LUISITA INDUSTRIAL PARK CORPORATION and RIZAL
COMMERCIAL BANKING CORPORATION,Petitioners-in-
Intervention,
vs.
PRESIDENTIAL AGRARIAN REFORM COUNCIL;
SECRETARY NASSER PANGANDAMAN OF THE
DEPARTMENT OF AGRARIAN REFORM; ALYANSA NG
MGA MANGGAGAWANG BUKID NG HACIENDA LUISITA,
RENE GALANG, NOEL MALLARI, and JULIO SUNIGA1 and
his SUPERVISORY GROUP OF THE HACIENDA LUISITA,
INC. and WINDSOR ANDAYA, Respondents.
DECISION
VELASCO, JR., J.:
"Land for the landless," a shibboleth the landed gentry doubtless has
received with much misgiving, if not resistance, even if only the
number of agrarian suits filed serves to be the norm. Through the
years, this battle cry and root of discord continues to reflect the
seemingly ceaseless discourse on, and great disparity in, the
distribution of land among the people, "dramatizing the increasingly
urgent demand of the dispossessed x x x for a plot of earth as their
place in the sun."2 As administrations and political alignments
change, policies advanced, and agrarian reform laws enacted, the
latest being what is considered a comprehensive piece, the face of
land reform varies and is masked in myriads of ways. The stated goal,
however, remains the same: clear the way for the true freedom of the
farmer.3
Land reform, or the broader term "agrarian reform," has been a
government policy even before the Commonwealth era. In fact, at the
onset of the American regime, initial steps toward land reform were
already taken to address social unrest.4 Then, under the 1935
Constitution, specific provisions on social justice and expropriation
of landed estates for distribution to tenants as a solution to land
ownership and tenancy issues were incorporated.
In 1955, the Land Reform Act (Republic Act No. [RA] 1400) was
passed, setting in motion the expropriation of all tenanted estates. 5
On August 8, 1963, the Agricultural Land Reform Code (RA 3844)
was enacted,6 abolishing share tenancy and converting all instances
of share tenancy into leasehold tenancy.7 RA 3844 created the Land
Bank of the Philippines (LBP) to provide support in all phases of
agrarian reform.
As its major thrust, RA 3844 aimed to create a system of owner-
cultivatorship in rice and corn, supposedly to be accomplished by
expropriating lands in excess of 75 hectares for their eventual resale
to tenants. The law, however, had this restricting feature: its
operations were confined mainly to areas in Central Luzon, and its
implementation at any level of intensity limited to the pilot project in
Nueva Ecija.8
Subsequently, Congress passed the Code of Agrarian Reform (RA
6389) declaring the entire country a land reform area, and providing
for the automatic conversion of tenancy to leasehold tenancy in all
areas. From 75 hectares, the retention limit was cut down to seven
hectares.9
Barely a month after declaring martial law in September 1972, then
President Ferdinand Marcos issued Presidential Decree No. 27 (PD
27) for the "emancipation of the tiller from the bondage of the
soil."10 Based on this issuance, tenant-farmers, depending on the size
of the landholding worked on, can either purchase the land they tilled
or shift from share to fixed-rent leasehold tenancy.11 While touted as
"revolutionary," the scope of the agrarian reform program PD 27
enunciated covered only tenanted, privately-owned rice and corn
lands.12
Then came the revolutionary government of then President Corazon
C. Aquino and the drafting and eventual ratification of the 1987
Constitution. Its provisions foreshadowed the establishment of a legal
framework for the formulation of an expansive approach to land
reform, affecting all agricultural lands and covering both tenant-
farmers and regular farmworkers.13
So it was that Proclamation No. 131, Series of 1987, was issued
instituting a comprehensive agrarian reform program (CARP) to
cover all agricultural lands, regardless of tenurial arrangement and
commodity produced, as provided in the Constitution.
On July 22, 1987, Executive Order No. 229 (EO 229) was issued
providing, as its title14 indicates, the mechanisms for CARP
implementation. It created the Presidential Agrarian Reform Council
(PARC) as the highest policy-making body that formulates all
policies, rules, and regulations necessary for the implementation of
CARP.
On June 15, 1988, RA 6657 or the Comprehensive Agrarian Reform
Law of 1988, also known as CARL or the CARP Law, took effect,
ushering in a new process of land classification, acquisition, and
distribution. As to be expected, RA 6657 met stiff opposition, its
validity or some of its provisions challenged at every possible
turn. Association of Small Landowners in the Philippines, Inc. v.
Secretary of Agrarian Reform 15 stated the observation that the assault
was inevitable, the CARP being an untried and untested project, "an
experiment [even], as all life is an experiment," the Court said,
borrowing from Justice Holmes.
The Case
In this Petition for Certiorari and Prohibition under Rule 65 with
prayer for preliminary injunctive relief, petitioner Hacienda Luisita,
Inc. (HLI) assails and seeks to set aside PARC Resolution No. 2005-
32-0116 and Resolution No. 2006-34-0117 issued on December 22,
2005 and May 3, 2006, respectively, as well as the implementing
Notice of Coverage dated January 2, 2006 (Notice of Coverage).18
The Facts
At the core of the case is Hacienda Luisita de Tarlac (Hacienda
Luisita), once a 6,443-hectare mixed agricultural-industrial-
residential expanse straddling several municipalities of Tarlac and
owned by Compañia 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 Tabacalera’s 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 lands––of which the hacienda
consisted––are 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 government’s 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 PARC’s 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 latter’s 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.¾Corporate 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 company’s 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-à-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 Tadeco’s
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 Commission’s (SEC’s) 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 HLI’s 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.¾After 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 HLI’s 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, HLI’s Transfer Certificate of Title (TCT) No.
28791047 was canceled and TCT No. 29209148 was issued in the
name of Centennary. HLI transferred the remaining 200 hectares
covered by TCT No. 287909 to Luisita Realty Corporation
(LRC)49 in two separate transactions in 1997 and 1998, both
uniformly involving 100 hectares for PhP 250 million each. 50
Centennary, a corporation with an authorized capital stock of PhP
12,100,000 divided into 12,100,000 shares and wholly-owned by
HLI, had the following incorporators: Pedro Cojuangco, Josephine C.
Reyes, Teresita C. Lopa, Ernesto G. Teopaco, and Bernardo R.
Lahoz.
Subsequently, Centennary 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, Centennary’s 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 LIPCO’s PhP
431,695,732.10 loan obligations. LIPCO’s 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
SDOA’s 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 AMBALA’s 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, HLI’s 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 HLI’s SDP;
evaluate HLI’s 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 Force’s
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 HLI’s
SDP; and (b) the acquisition of Hacienda Luisita through the
compulsory acquisition scheme. Following review, the PARC
Validation Committee favorably endorsed the DAR Secretary’s
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 DAR’s 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 HLI’s motion for reconsideration via
Resolution No. 2006-34-01 dated May 3, 2006.
By Resolution of June 14, 2006,74 the Court, acting on HLI’s 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.
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:

Prior to the oral arguments, however, HLI; AMBALA, represented I.

by Mallari; the Supervisory Group, represented by Suniga and
Andaya; and the United Luisita Workers Union, represented by RESPONDENT PARC COMMITTED GRAVE ABUSE
Eldifonso Pingol, filed with the Court a joint submission and motion OF DISCRETION AMOUNTING TO LACK OR
for approval of a Compromise Agreement (English and Tagalog EXCESS OF JURISDICTION WHEN IT DID NOT
versions) dated August 6, 2010. EXCLUDE THE SUBJECT PROPERTY FROM THE
COVERAGE OF THE CARP DESPITE THE FACT
On August 31, 2010, the Court, in a bid to resolve the dispute through THAT PETITIONER-INTERVENOR RCBC HAS
an amicable settlement, issued a Resolution84 creating a Mediation ACQUIRED VESTED RIGHTS AND INDEFEASIBLE
Panel composed of then Associate Justice Ma. Alicia Austria- TITLE OVER THE SUBJECT PROPERTY AS AN
Martinez, as chairperson, and former CA Justices Hector Hofileña INNOCENT PURCHASER FOR VALUE.
and Teresita Dy-Liacco Flores, as members. Meetings on five (5)
separate dates, i.e., September 8, 9, 14, 20, and 27, 2010, were A. THE ASSAILED RESOLUTION NO. 2005-
conducted. Despite persevering and painstaking efforts on the part of 32-01 AND THE NOTICE OF COVERAGE
the panel, mediation had to be discontinued when no acceptable DATED 02 JANUARY 2006 HAVE THE
agreement could be reached. EFFECT OF NULLIFYING TCT NOS. 391051
AND 391052 IN THE NAME OF PETITIONER-
The Issues INTERVENOR RCBC.

HLI raises the following issues for our consideration: B. AS AN INNOCENT PURCHASER FOR
VALUE, PETITIONER-INTERVENOR RCBC
CANNOT BE PREJUDICED BY A
I. SUBSEQUENT REVOCATION OR
RESCISSION OF THE SDOA.
WHETHER OR NOT PUBLIC RESPONDENTS PARC
AND SECRETARY PANGANDAMAN HAVE II.
JURISDICTION, POWER AND/OR AUTHORITY TO
NULLIFY, RECALL, REVOKE OR RESCIND THE
SDOA.
 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 HLI’s 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
PARC’s 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 HLI’s 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.¾x 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.
PARC’s 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 HLI’s 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 HLI’s 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-à-vis HLI’s 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, PARC’s approval. And the fact that the certificate of
compliance103––to be issued by agrarian authorities upon completion
of the distribution of stocks––is 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 prevail—generalia
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 HLI’s 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 HLI’s 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 land’s 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 HLI’s 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-à-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 unequivocal––the 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
company’s 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 farmers––DIRECT
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-executoryand 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 State’s 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 owner’s interest in the
corporate property."119 A share of stock typifies an aliquot part of the
corporation’s 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
company’s 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 HLI’s 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 CARP’s compulsory acquisition and distribution
scheme.
The findings, analysis and recommendation of the DAR’s 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 PARC’s revocatory or recall
action:
(1) Despite the lapse of 16 years from the approval of
HLI’s 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 worked––or the so-called "man days"––is
grossly onerous to the FWBs, as HLI, in the guise of
rotation, can unilaterally deny work to anyone. In
elaboration of this ground, PARC’s Resolution No. 2006-
34-01, denying HLI’s 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 HLI’s 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.¾It is the policy
of the State to pursue a Comprehensive Agrarian Reform Program
(CARP). The welfare of the landless farmers and farm workers will
receive the highest consideration to promote social justice and to
move the nation towards sound rural development and
industrialization, and the establishment of owner cultivatorship of
economic-sized farms as the basis of Philippine agriculture.
To this end, a more equitable distribution and ownership of land, with
due regard to the rights of landowners to just compensation and to the
ecological needs of the nation, shall be undertaken to provide farmers
and farm workers with the opportunity to enhance their dignity and
improve the quality of their lives through greater productivity of
agricultural lands.
The agrarian reform program is founded on the right of farmers and
regular farm workers, who are landless, to own directly or
collectively the lands they till or, in the case of other farm workers, to
receive a share of the fruits thereof. To this end, the State shall
encourage the just distribution of all agricultural lands, subject to the
priorities and retention limits set forth in this Act, having taken into
account ecological, developmental, and equity considerations, and
subject to the payment of just compensation. The State shall respect
the right of small landowners and shall provide incentives for
voluntary land-sharing. (Emphasis supplied.)
Paragraph 2 of the above-quoted provision specifically mentions that
"a more equitable distribution and ownership of land x x x shall be
undertaken to provide farmers and farm workers with the opportunity
to enhance their dignity and improve the quality of their lives through
greater productivity of agricultural lands." Of note is the term
"opportunity" which is defined as a favorable chance or opening
offered by circumstances.127 Considering this, by no stretch of
imagination can said provision be construed as a guarantee in
improving the lives of the FWBs. At best, it merely provides for a
possibility or favorable chance of uplifting the economic status of the
FWBs, which may or may not be attained.
Pertinently, improving the economic status of the FWBs is neither
among the legal obligations of HLI under the SDP nor an imperative
imposition by RA 6657 and DAO 10, a violation of which would
justify discarding the stock distribution option. Nothing in that option
agreement, law or department order indicates otherwise.
Significantly, HLI draws particular attention to its having paid its
FWBs, during the regime of the SDP (1989-2005), some PhP 3
billion by way of salaries/wages and higher benefits exclusive of free
hospital and medical benefits to their immediate family. And attached
as Annex "G" to HLI’s 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 plan’s revocation.
Neither does HLI’s 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 HLI’s 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.¾Corporate 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 company’s 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 company’s 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 HLI’s other assets is PhP 393,924,220. The total value of HLI’s
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 HLI’s 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
HLI’s 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
beneficiaries––is 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
HLI’s 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 Luisita’s 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.¾After 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 HLI’s 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.¾The
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.¾In 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.¾The [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 company’s 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 HLI’s SDP, HLI recognized 6,296individuals 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: That’s 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 year’s 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.¾The 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.
HLI’s 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.¾Lands 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
HLI’s 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
Centennary’s name was canceled and a new one issued in LIPCO’s
name. Thereafter, said land was subdivided into two (2) more parcels
of land. Later on, LIPCO transferred about 184 hectares to RCBC by
way of dacion en pago, by virtue of which TCTs in the name of
RCBC were subsequently issued.
Under Sec. 44 of PD 1529 or the Property Registration Decree,
"every registered owner receiving a certificate of title in pursuance of
a decree of registration and every subsequent purchaser of registered
land taking a certificate of title for value and in good faith shall hold
the same free from all encumbrances except those noted on the
certificate and enumerated therein."145
It is settled doctrine that one who deals with property registered
under the Torrens system need not go beyond the four corners of, but
can rely on what appears on, the title. He is charged with notice only
of such burdens and claims as are annotated on the title. This
principle admits of certain exceptions, such as when the party has
actual knowledge of facts and circumstances that would impel a
reasonably cautious man to make such inquiry, or when the purchaser
has knowledge of a defect or the lack of title in his vendor or of
sufficient facts to induce a reasonably prudent man to inquire into the
status of the title of the property in litigation.146 A higher level of care
and diligence is of course expected from banks, their business being
impressed with public interest.147
Millena v. Court of Appeals describes a purchaser in good faith in
this wise:
x x x A purchaser in good faith is one who buys property of another,
without notice that some other person has a right to, or interest in,
such property at the time of such purchase, or before he has notice of
the claim or interest of some other persons in the property. Good
faith, or the lack of it, is in the final analysis a question of intention;
but in ascertaining the intention by which one is actuated on a given
occasion, we are necessarily controlled by the evidence as to the
conduct and outward acts by which alone the inward motive may,
with safety, be determined. Truly, good faith is not a visible, tangible
fact that can be seen or touched, but rather a state or condition of
mind which can only be judged by actual or fancied tokens or signs.
Otherwise stated, good faith x x x refers to the state of mind which is
manifested by the acts of the individual concerned.148 (Emphasis
supplied.)
In fine, there are two (2) requirements before one may be considered
a purchaser in good faith, namely: (1) that the purchaser buys the
property of another without notice that some other person has a right
to or interest in such property; and (2) that the purchaser pays a full
and fair price for the property at the time of such purchase or before
he or she has notice of the claim of another.
It can rightfully be said that both LIPCO and RCBC are––based on
the above requirements and with respect to the adverted transactions
of the converted land in question––purchasers in good faith for value
entitled to the benefits arising from such status.
First, at the time LIPCO purchased the entire three hundred (300)
hectares of industrial land, there was no notice of any supposed
defect in the title of its transferor, Centennary, or that any other
person has a right to or interest in such property. In fact, at the time
LIPCO acquired said parcels of land, only the following annotations
appeared on the TCT in the name of Centennary: the Secretary’s
Certificate in favor of Teresita Lopa, the Secretary’s 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 Secretary’s 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 possessor’s 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 LIPCO’s 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 LIPCO’s and RCBC’s 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 government’s 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 PARC’s approval of the HLI’s 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 PARC’s approval of the HLI’s 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.
Pangandaman’s recommendation to the PARC Excom, what he
proposed is the recall/revocation of PARC Resolution No. 89-12-2
approving HLI’s SDP, and not the revocation of the SDOA. Sec.
Pangandaman’s 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 acts––in
this case, the approval by PARC of the HLI proposal for stock
distribution––is 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
Tañada 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 Tañada, 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 Tañada 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 Tañada 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 PARC’s 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 land’s 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 HLI’s 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 HLI’s 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 HLI’s 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
PARC’s 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.
SECOND DIVISION
[G.R. No. 127198. May 16, 2005]
LAND BANK OF THE PHILIPPINES, petitioner, vs. HON. ELI
G. C. NATIVIDAD, Presiding Judge of the Regional
Trial Court, Branch 48, San Fernando, Pampanga, and
JOSE R. CAGUIAT represented by Attorneys-in-fact
JOSE T. BARTOLOME and VICTORIO
MANGALINDAN, respondents.
DECISION
TINGA, J.:
This is a Petition for Review[1] dated December 6, 1996 assailing
the Decision[2] of the Regional Trial Court[3] dated July 5, 1996 which
ordered the Department of Agrarian Reform (DAR) and petitioner
Land Bank of the Philippines (Land Bank) to pay private respondents
the amount of P30.00 per square meter as just compensation for the
States acquisition of private respondents properties under the land
reform program.
The facts follow.
On May 14, 1993, private respondents filed a petition before the
trial court for the determination of just compensation for their
agricultural lands situated in Arayat, Pampanga, which were acquired
by the government pursuant to Presidential Decree No. 27 (PD 27).
The petition named as respondents the DAR and Land Bank. With
leave of court, the petition was amended to implead as co-respondents
the registered tenants of the land.
After trial, the court rendered the assailed Decision the
dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of petitioners
and against respondents, ordering respondents, particularly,
respondents Department of Agrarian Reform and the Land Bank of
the Philippines, to pay these lands owned by petitioners and which
are the subject of acquisition by the State under its land reform
program, the amount of THIRTY PESOS (P30.00) per square meter,
as the just compensation due for payment for same lands of
petitioners located at San Vicente (or Camba), Arayat, Pampanga.
Respondent Department of Agrarian Reform is also ordered to pay
petitioners the amount of FIFTY THOUSAND PESOS (P50,000.00)
as Attorneys Fee, and to pay the cost of suit.
SO ORDERED.[4]
DAR and Land Bank filed separate motions for reconsideration
which were denied by the trial court in its Order[5] dated July 30, 1996
for being pro forma as the same did not contain a notice of
hearing. Thus, the prescriptive period for filing an appeal was not
tolled. Land Bank consequently failed to file a timely appeal and the
assailed Decision became final and executory.
Land Bank then filed a Petition for Relief from Order Dated 30
July 1996,[6] citing excusable negligence as its ground for relief.
Attached to the petition for relief were two affidavits of merit claiming
that the failure to include in the motion for reconsideration a notice of
hearing was due to accident and/or mistake.[7] The affidavit of Land
Banks counsel of record notably states that he simply scanned and
signed the Motion for Reconsideration for Agrarian Case No. 2005,
Regional Trial Court of Pampanga, Branch 48, not knowing, or
unmindful that it had no notice of hearing[8] due to his heavy workload.
The trial court, in its Order[9] of November 18, 1996, denied the
petition for relief because Land Bank lost a remedy in law due to its
own negligence.
 In the instant petition for review, Land Bank argues that the
failure of its counsel to include a notice of hearing due to pressure of
work constitutes excusable negligence and does not make the motion
for reconsideration pro forma considering its allegedly meritorious
defenses. Hence, the denial of its petition for relief from judgment was
erroneous.
According to Land Bank, private respondents should have
sought the reconsideration of the DARs valuation of their properties.
Private respondents thus failed to exhaust administrative remedies
when they filed a petition for the determination of just compensation
directly with the trial court. Land Bank also insists that the trial court
erred in declaring that PD 27 and Executive Order No. 228 (EO 228)
are mere guidelines in the determination of just compensation, and in
relying on private respondents evidence of the valuation of the
properties at the time of possession in 1993 and not on Land Banks
evidence of the value thereof as of the time of acquisition in 1972.
Private respondents filed a Comment[10] dated February 22,
1997, averring that Land Banks failure to include a notice of hearing
in its motion for reconsideration due merely to counsels heavy
workload, which resulted in the motion being declared pro forma, does
not constitute excusable negligence, especially in light of the
admission of Land Banks counsel that he has been a lawyer since 1973
and has mastered the intricate art and technique of pleading.
Land Bank filed a Reply[11] dated March 12, 1997 insisting that
equity considerations demand that it be heard on substantive issues
raised in its motion for reconsideration.
The Court gave due course to the petition and required the
parties to submit their respective memoranda.[12] Both parties
complied.[13]
The petition is unmeritorious.
At issue is whether counsels failure to include a notice of hearing
constitutes excusable negligence entitling Land Bank to a relief from
judgment.
Section 1, Rule 38 of the 1997 Rules of Civil Procedure
provides:
Sec. 1. Petition for relief from judgment, order, or other
proceedings.When a judgment or final order is entered, or any other
proceeding is thereafter taken against a party in any court through
fraud, accident, mistake, or excusable negligence, he may file a
petition in such court and in the same case praying that the judgment,
order or proceeding be set aside.
As can clearly be gleaned from the foregoing provision, the
remedy of relief from judgment can only be resorted to on grounds of
fraud, accident, mistake or excusable negligence. Negligence to be
excusable must be one which ordinary diligence and prudence could
not have guarded against.[14]
Measured against this standard, the reason profferred by Land
Banks counsel, i.e., that his heavy workload prevented him from
ensuring that the motion for reconsideration included a notice of
hearing, was by no means excusable.
Indeed, counsels admission that he simply scanned and signed
the Motion for Reconsideration for Agrarian Case No. 2005, Regional
Trial Court of Pampanga, Branch 48, not knowing, or unmindful that
it had no notice of hearing speaks volumes of his arrant negligence,
and cannot in any manner be deemed to constitute excusable
negligence.
The failure to attach a notice of hearing would have been less
odious if committed by a greenhorn but not by a lawyer who claims to
have mastered the intricate art and technique of pleading.[15]
Indeed, a motion that does not contain the requisite notice of
hearing is nothing but a mere scrap of paper. The clerk of court does
not even have the duty to accept it, much less to bring it to the attention
of the presiding judge.[16] The trial court therefore correctly considered
the motion for reconsideration pro forma. Thus, it cannot be faulted
for denying Land Banks motion for reconsideration and petition for
relief from judgment.
It should be emphasized at this point that procedural rules are
designed to facilitate the adjudication of cases. Courts and litigants
alike are enjoined to abide strictly by the rules. While in certain
instances, we allow a relaxation in the application of the rules, we
never intend to forge a weapon for erring litigants to violate the rules
with impunity. The liberal interpretation and application of rules apply
only in proper cases of demonstrable merit and under justifiable causes
and circumstances. While it is true that litigation is not a game of
technicalities, it is equally true that every case must be prosecuted in
accordance with the prescribed procedure to ensure an orderly and
speedy administration of justice. Party litigants and their counsel are
well advised to abide by, rather than flaunt, procedural rules for these
rules illumine the path of the law and rationalize the pursuit of
justice.[17]
Aside from ruling on this procedural issue, the Court shall also
resolve the other issues presented by Land Bank, specifically as
regards private respondents alleged failure to exhaust administrative
remedies and the question of just compensation.
Land Bank avers that private respondents should have sought the
reconsideration of the DARs valuation instead of filing a petition to fix
just compensation with the trial court.
The records reveal that Land Banks contention is not entirely
true. In fact, private respondents did write a letter[18] to the DAR
Secretary objecting to the land valuation summary submitted by the
Municipal Agrarian Reform Office and requesting a conference for the
purpose of fixing just compensation. The letter, however, was left
unanswered prompting private respondents to file a petition directly
with the trial court.
At any rate, in Philippine Veterans Bank v. Court of
Appeals,[19] we declared that there is nothing contradictory between the
DARs primary jurisdiction to determine and adjudicate agrarian
reform matters and exclusive original jurisdiction over all matters
involving the implementation of agrarian reform, which includes the
determination of questions of just compensation, and the original and
exclusive jurisdiction of regional trial courts over all petitions for the
determination of just compensation. The first refers to administrative
proceedings, while the second refers to judicial proceedings.
In accordance with settled principles of administrative law,
primary jurisdiction is vested in the DAR to determine in a preliminary
manner the just compensation for the lands taken under the agrarian
reform program, but such determination is subject to challenge before
the courts. The resolution of just compensation cases for the taking of
lands under agrarian reform is, after all, essentially a judicial
function.[20]
Thus, the trial did not err in taking cognizance of the case as the
determination of just compensation is a function addressed to the
courts of justice.
Land Banks contention that the property was acquired for
purposes of agrarian reform on October 21, 1972, the time of the
effectivity of PD 27, ergo just compensation should be based on the
value of the property as of that time and not at the time of possession
in 1993, is likewise erroneous. In Office of the President, Malacaang,
Manila v. Court of Appeals,[21] we ruled that the seizure of the
landholding did not take place on the date of effectivity of PD 27 but
would take effect on the payment of just compensation.
 Under the factual circumstances of this case, the agrarian reform
process is still incomplete as the just compensation to be paid private
respondents has yet to be settled. Considering the passage of Republic
Act No. 6657 (RA 6657)[22] before the completion of this process, the
just compensation should be determined and the process concluded
under the said law. Indeed, RA 6657 is the applicable law, with PD 27
and EO 228 having only suppletory effect, conformably with our
ruling in Paris v. Alfeche.[23]
Section 17 of RA 6657 which is particularly relevant, providing
as it does the guideposts for the determination of just compensation,
reads as follows:
Sec. 17. Determination of Just Compensation.In determining just
compensation, the cost of acquisition of the land, the current value of
like properties, its nature, actual use and income, the sworn valuation
by the owner, the tax declarations, and the assessment made by
government assessors shall be considered. The social and economic
benefits contributed by the farmers and the farm-workers and by the
Government to the property as well as the non-payment of taxes or
loans secured from any government financing institution on the said
land shall be considered as additional factors to determine its
valuation.
It would certainly be inequitable to determine just compensation
based on the guideline provided by PD 27 and EO 228 considering the
DARs failure to determine the just compensation for a considerable
length of time. That just compensation should be determined in
accordance with RA 6657, and not PD 27 or EO 228, is especially
imperative considering that just compensation should be the full and
fair equivalent of the property taken from its owner by the
expropriator, the equivalent being real, substantial, full and ample. [24]
In this case, the trial court arrived at the just compensation due
private respondents for their property, taking into account its nature as
irrigated land, location along the highway, market value, assessors
value and the volume and value of its produce. This Court is convinced
that the trial court correctly determined the amount of just
compensation due private respondents in accordance with, and guided
by, RA 6657 and existing jurisprudence.
WHEREFORE, the petition is DENIED. Costs against
petitioner.
SO ORDERED.
FIRST DIVISION
JOSEFINA S. LUBRICA, in her G.R. No. 170220
capacity as Assignee of FEDERICO
C. SUNTAY, NENITA SUNTAY
TAEDO and EMILIO A.M.
SUNTAY III,
Petitioners, Present:
Panganiban, C.J. (Chairperson),
- versus - Ynares-Santiago,
Austria-Martinez,
C of the Provincial Agrarian Reform Adjudicator (PARAD) conducted
a summary administrative proceedings for determination of just
l
l
e
j
o
,
S
r
.
,
a
n
d
C
hico-
Nazario,
JJ.
LAND BANK OF THE PHILIPPINES,
Respondent. Promulgated:
November 20, 2006
x ----------------------------------------------------------------------------------
------ x
DECISION
YNARES-SANTIAGO, J.:
This Petition for Review on Certiorari under Rule 45 of the Rules of
Court assails the October 27, 2005 Amended Decision [1] of the Court
of Appeals in CA-G.R. SP No. 77530, which vacated its May 26, 2004
Decision affirming (a) the Order of the Regional Trial Court of San
Jose, Occidental Mindoro, Branch 46, acting as Special Agrarian
Court, in Agrarian Case Nos. R-1339 and R-1340, dated March 31,
2003 directing respondent Land Bank of the Philippines (LBP) to
deposit the provisional compensation as determined by the Provincial
Agrarian Reform Adjudicator (PARAD); (b) the May 26, 2003
Resolution denying LBPs motion for reconsideration; and (c) the May
27, 2003 Order requiring Teresita V. Tengco, LBPs Land
Compensation Department Manager, to comply with the March 31,
2003 Order.
The facts of the case are as follows:
Petitioner Josefina S. Lubrica is the assignee[2] of Federico C. Suntay
over certain parcels of agricultural land located at Sta. Lucia, Sablayan,
Occidental Mindoro, with an area of 3,682.0285 hectares covered by
Transfer Certificate of Title (TCT) No. T-31 (T-1326)[3] of the
Registry of Deeds of Occidental Mindoro. In 1972, a portion of the
said property with an area of 311.7682 hectares, was placed under the
land reform program pursuant to Presidential Decree No. 27
(1972)[4] and Executive Order No. 228 (1987).[5]The land was
thereafter subdivided and distributed to farmer beneficiaries. The
Department of Agrarian Reform (DAR) and the LBP fixed the value
of the land at P5,056,833.54 which amount was deposited in cash and
bonds in favor of Lubrica.
On the other hand, petitioners Nenita Suntay-Taedo and Emilio A.M.
Suntay III inherited from Federico Suntay a parcel of agricultural land
located at Balansay, Mamburao, Occidental Mindoro covered by TCT
No. T-128[6] of the Register of Deeds of Occidental Mindoro,
consisting of two lots, namely, Lot 1 with an area of 45.0760 hectares
and Lot 2 containing an area of 165.1571 hectares or a total of
210.2331 hectares. Lot 2 was placed under the coverage of P.D. No.
27 but only 128.7161 hectares was considered by LBP and valued the
same at P1,512,575.05.
Petitioners rejected the valuation of their properties, hence the Office
compensation. On January 29, 2003, the PARAD fixed the
preliminary just compensation at P51,800,286.43 for the 311.7682
hectares (TCT No. T-31) and P21,608,215.28 for the 128.7161
hectares (TCT No. T-128).[7]
Not satisfied with the valuation, LBP filed on February 17, 2003, two
separate petitions[8] for judicial determination of just compensation
before the Regional Trial Court of San Jose, Occidental Mindoro,
acting as a Special Agrarian Court, docketed as Agrarian Case No. R-
1339 for TCT No. T-31 and Agrarian Case No. R-1340 for TCT No.
T-128, and raffled to Branch 46 thereof.
Petitioners filed separate Motions to Deposit the Preliminary Valuation
Under Section 16(e) of Republic Act (R.A.) No. 6657 (1988)[9] and Ad
Cautelam Answer praying among others that LBP deposit the
preliminary compensation determined by the PARAD.
On March 31, 2003, the trial court issued an Order[10] granting
petitioners motion, the dispositive portion of which reads:
WHEREFORE, Ms. Teresita V. Tengco, of the
Land Compensation Department I (LCD I), Land
Bank of the Philippines, is hereby ordered
pursuant to Section 16 (e) of RA 6657 in relation
to Section 2, Administrative Order No. 8, Series of
1991, to deposit the provisional compensation as
determined by the PARAD in cash and bonds, as
follows:
1. In Agrarian Case No. R-1339, the amount of P
51,800,286.43, minus the amount
received by the Landowner;
2. In Agrarian Case No. R-1340, the amount of P
21,608,215.28, less the amount of P
1,512,575.16, the amount already
deposited.
Such deposit must be made with the Land Bank of
the Philippines, Manila within five (5) days from
receipt of a copy of this order and to notify this
court of her compliance within such period.
Let this order be served by the Sheriff of this Court
at the expense of the movants.
SO ORDERED.[11]
LBPs motion for reconsideration was denied in a
Resolution[12] dated May 26, 2003. The following day, May 27, 2003,
the trial court issued an Order[13] directing Ms. Teresita V. Tengco,
LBPs Land Compensation Department Manager, to deposit the
amounts.
Thus, on June 17, 2003, LBP filed with the Court of Appeals a Petition
for Certiorari and Prohibition under Rule 65 of the Rules of Court with
application for the issuance of a Temporary Restraining Order and
Writ of Preliminary Injunction docketed as CA-G.R. SP No. 77530.[14]
On June 27, 2003, the appellate court issued a 60-day temporary
restraining order[15] and on October 6, 2003, a writ of preliminary
injunction.[16]
On May 26, 2004, the Court of Appeals rendered a Decision [17] in
favor of the petitioners, the dispositive portion of which reads:
WHEREFORE, premises considered, there being
no grave abuse of discretion, the instant Petition
for Certiorari and Prohibition is DENIED.
Accordingly, the Order dated March 31, 2003,
Resolution dated May 26, 2003, and Order
dated May 27, 2003 are hereby AFFIRMED. The
preliminary injunction We previously issued is
hereby LIFTED and DISSOLVED.
SO ORDERED.[18]
The Court of Appeals held that the trial court correctly ordered LBP to
deposit the amounts provisionally determined by the PARAD as there
is no law which prohibits LBP to make a deposit pending the fixing of
the final amount of just compensation. It also noted that there is no
reason for LBP to further delay the deposit considering that the DAR
already took possession of the properties and distributed the same to
farmer-beneficiaries as early as 1972.
LBP moved for reconsideration which was granted. On October 27,
2005, the appellate court rendered the assailed Amended
Decision,[19] the dispositive portion of which reads:
Wherefore, in view of the prescription of a
different formula in the case of Gabatin which We
hold as cogent and compelling justification
necessitating Us to effect the reversal of Our
judgment herein sought to be reconsidered, the
instant Motion for Reconsideration is GRANTED,
and Our May 26, 2004 Decision is hereby
VACATED and ABANDONED with the end in
view of giving way to and acting in harmony and
in congruence with the tenor of the ruling in the
case of Gabatin. Accordingly, the assailed rulings
of the Special Agrarian Court is (sic) commanded
to compute and fix the just compensation for the
expropriated agricultural lands strictly in
accordance with the mode of computation
prescribed (sic) Our May 26, 2004 judgment in the
case of Gabatin.
SO ORDERED.[20]
In the Amended Decision, the Court of Appeals held that the
immediate deposit of the preliminary value of the expropriated
properties is improper because it was erroneously
computed. Citing Gabatin v. Land Bank of the Philippines,[21] it held
that the formula to compute the just compensation should be: Land
Value = 2.5 x Average Gross Production x Government Support
Price. Specifically, it held that the value of the government support
price for the corresponding agricultural produce (rice and corn) should
be computed at the time of the legal taking of the subject agricultural
land, that is, on October 21, 1972 when landowners were effectively
deprived of ownership over their properties by virtue of P.D. No.
27. According to the Court of Appeals, the PARAD incorrectly used
the amounts of P500 and P300 which are the prevailing government
support price for palay and corn, respectively, at the time of payment,
instead of P35 and P31, the prevailing government support price at the
time of the taking in 1972.
Hence, this petition raising the following issues:
A. THE COURT A QUO HAS DECIDED
THE CASE IN A WAY NOT IN ACCORD
WITH THE LATEST DECISION OF THE
SUPREME COURT IN THE CASE OF LAND
BANK OF THE PHILIPPINES VS. HON. ELI
G.C. NATIVIDAD, ET AL., G.R. NO. 127198,
PROM. MAY 16, 2005; and[22]
B. THE COURT A QUO HAS, WITH GRAVE
GRAVE ABUSE OF DISCRETION, SO FAR
DEPARTED FROM THE ACCEPTED AND
 USUAL COURSE OF JUDICIAL
PROCEEDINGS, DECIDING ISSUES THAT
HAVE NOT BEEN RAISED, AS TO CALL FOR
AN EXERCISE OF THE POWER OF
SUPERVISION.[23]
Petitioners insist that the determination of just compensation should be
based on the value of the expropriated properties at the time of
payment. Respondent LBP, on the other hand, claims that the value of
the realties should be computed as of October 21, 1972 when P.D. No.
27 took effect.
The petition is impressed with merit.
In the case of Land Bank of the Philippines v. Natividad,[24] the Court
ruled thus:
Land Banks contention that the property
was acquired for purposes of agrarian reform on
October 21, 1972, the time of the effectivity of PD
27, ergo just compensation should be based on the
value of the property as of that time and not at the
time of possession in 1993, is likewise
erroneous. In Office of the President,
Malacaang, Manila v. Court of Appeals, we ruled
that the seizure of the landholding did not take
place on the date of effectivity of PD 27 but would
take effect on the payment of just compensation.
The Natividad case reiterated the Courts ruling in Office of
the President v. Court of Appeals[25] that the expropriation of the
landholding did not take place on the effectivity of P.D. No. 27
on October 21, 1972 but seizure would take effect on the payment of
just compensation judicially determined.
Likewise, in the recent case of Heirs of Francisco R.
Tantoco, Sr. v. Court of Appeals,[26] we held that expropriation of
landholdings covered by R.A. No. 6657 take place, not on the
effectivity of the Act on June 15, 1988, but on the payment of just
compensation.
In the instant case, petitioners were deprived of their
properties in 1972 but have yet to receive the just compensation
therefor. The parcels of land were already subdivided and distributed
to the farmer-beneficiaries thereby immediately depriving petitioners
of their use. Under the circumstances, it would be highly inequitable
on the part of the petitioners to compute the just compensation using
the values at the time of the taking in 1972, and not at the time of the
payment, considering that the government and the farmer-beneficiaries
have already benefited from the land although ownership thereof have
not yet been transferred in their names. Petitioners were deprived of
their properties without payment of just compensation which, under
the law, is a prerequisite before the property can be taken away from
its owners.[27] 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.[28]
Our ruling in Association of Small Landowners in the
Philippines, Inc. v. Secretary of Agrarian Reform[29] is instructive,
thus:
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. x x x
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. No outright
change of ownership is contemplated either.
We also note that the expropriation proceedings in the
instant case was initiated under P.D. No. 27 but the agrarian reform
process is still incomplete considering that the just compensation to be
paid to petitioners has yet to be settled. Considering the passage of
R.A. No. 6657 before the completion of this process, the just
compensation should be determined and the process concluded under
the said law. Indeed, R.A. No. 6657 is the applicable law, with P.D.
No. 27 and E.O. No. 228 having only suppletory effect. [30]
In Land Bank of the Philippines v. Court of Appeals,[31] we
held 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.
Section 18 of R.A. No. 6657 mandates that the LBP shall
compensate the landowner in such amount as may be agreed upon by
the landowner and the DAR and the LBP or as may be finally
determined by the court as the just compensation for the land. In
determining just compensation, the cost of the acquisition of the land,
the current value of like properties, its nature, actual use and income,
the sworn valuation by the owner, the tax declarations, and the
assessment made by government assessors shall be considered. The
social and economic benefits contributed by the farmers and the
farmworkers and by the government to the property as well as the
nonpayment of taxes or loans secured from any government financing
institution on the said land shall be considered as additional factors to
determine its valuation.[32]
Corollarily, we held in Land Bank of the Philippines v.
Celada[33] that the above provision was converted into a formula by the
DAR through Administrative Order No. 05, S. 1998, to wit:
Land Value (LV) = (Capitalized Net Income x 0.6) +
(Comparable Sales x 0.3)
 + (Market Value per Tax
Declaration x 0.1)
Petitioners were deprived of their properties way back in 1972, yet to
date, they have not yet received just compensation. Thus, it would
certainly be inequitable to determine just compensation based on the
guideline provided by P.D. No. 227 and E.O. No. 228 considering the
failure to determine just compensation for a considerable length of
time. That just compensation should be determined in accordance with
R.A. No. 6657 and not P.D. No. 227 or E.O. No. 228, is important
considering that just compensation should be the full and fair
equivalent of the property taken from its owner by the expropriator,
the equivalent being real, substantial, full and ample.[34]
WHEREFORE, premises considered, the petition
is GRANTED. The assailed Amended Decision dated October 27,
2005 of the Court of Appeals in CA-G.R. SP No. 77530
is REVERSED and SET ASIDE. The Decision dated May 26, 2004
of the Court of Appeals affirming (a) the March 31, 2003 Order of the
Special Agrarian Court ordering the respondent Land Bank of the
Philippines to deposit the just compensation provisionally determined
by the PARAD; (b) the May 26, 2003 Resolution denying respondents
Motion for Reconsideration; and (c) the May 27, 2003 Order directing
Teresita V. Tengco, respondents Land Compensation Department
Manager to comply with the March 31, 2003 Order,
is REINSTATED. The Regional Trial Court of San Jose, Occidental
Mindoro, Branch 46, acting as Special Agrarian
Court is ORDERED to proceed with dispatch in the trial of Agrarian
Case Nos. R-1339 and R-1340, and to compute the final valuation of
the subject properties based on the aforementioned formula.
SO ORDERED.
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
deny justice to the landowner whenever truth and justice happen to be
on his side.1 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, 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 reject 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.2
In this agrarian dispute, it is once more imperative that the aforestated
principles be applied in its resolution.
Separate petitions for review were filed by petitioners Department of
Agrarian Reform (DAR) (G.R. No. 118745) and Land Bank of the
Philippines (G.R. No. 118712) following the adverse ruling by the
Court of Appeals in CA-G.R. SP No. 33465. However, upon motion
filed by private respondents, the petitions were ordered consolidated. 3
Petitioners assail the decision of the Court of Appeals promulgated
on October 20, 1994, which granted private respondents' Petition
for Certiorari and Mandamus and ruled as follows:

WHEREFORE, premises considered, the Petition

for Certiorari and Mandamus is hereby
GRANTED:

a) DAR Administrative Order

No. 9, Series of 1990 is
declared null and void insofar
as it provides for the opening
SECOND DIVISION of trust accounts in lieu of
deposits in cash or bonds;

b) Respondent Landbank is
ordered
G.R. No. 118712 October 6, 1995 to immediately deposit — not
merely "earmark", "reserve"
LAND BANK OF THE PHILIPPINES, petitioner, or "deposit in trust" — with
vs. an accessible bank designated
COURT OF APPEALS, PEDRO L. YAP, HEIRS OF by respondent DAR in the
EMILIANO F. SANTIAGO, AGRICULTURAL names of the following
MANAGEMENT & DEVELOPMENT CORP., respondents. petitioners the following
amounts in cash and in
G.R. No. 118745 October 6, 1995 government financial
instruments — within the
parameters of Sec. 18 (1) of
DEPARTMENT OF AGRARIAN REFORM, represented by the RA 6657:
Secretary of Agrarian Reform, petitioner,
vs.
COURT OF APPEALS, PEDRO L. YAP, HEIRS OF P 1,455,207.31 Pedro L. Yap
EMILIANO F. SANTIAGO, AGRICULTURAL
MANAGEMENT & DEVELOPMENT CORP., ET P 135,482.12 Heirs of
AL., respondents. Emiliano Santiago

P 15,914,127.77
AMADCOR;
FRANCISCO, R., J.:
 c) The DAR-designated bank
is ordered to allow the
petitioners to withdraw the
above-deposited amounts
without prejudice to the final
determination of just
compensation by the proper
authorities; and
d) Respondent DAR is
ordered to
1) immediately conduct summ
ary administrative
proceedings to determine the
just compensation for the
lands of the petitioners giving
the petitioners 15 days from
notice within which to submit
evidence and to 2) decide the
cases within 30 days after
they are submitted for
decision.4
Likewise, petitioners seek the reversal of the Resolution
dated January 18, 1995,5 denying their motion for
reconsideration.
Private respondents are landowners whose landholdings were
acquired by the DAR and subjected to transfer schemes to qualified
beneficiaries under the Comprehensive Agrarian Reform Law
(CARL, Republic Act No. 6657).
Aggrieved by the alleged lapses of the DAR and the
Landbank with respect to the valuation and payment of
compensation for their land pursuant to the provisions of
RA 6657, private respondents filed with this Court a
Petition for Certiorari and Mandamus with prayer for
preliminary mandatory injunction. Private respondents
questioned the validity of DAR Administrative Order No.
6, Series of 19926 and DAR Administrative Order No. 9,
Series of 1990,7 and sought to compel the DAR to expedite
the pending summary administrative proceedings to finally
determine the just compensation of their properties, and the
Landbank to deposit in cash and bonds the amounts
respectively "earmarked", "reserved" and "deposited in
trust accounts" for private respondents, and to allow them
to withdraw the same.
Through a Resolution of the Second Division dated February 9, 1994,
this Court referred the petition to respondent Court of Appeals for
proper determination and disposition.
As found by respondent court , the following are undisputed:
Petitioner Pedro Yap alleges that "(o)n 4
September 1992 the transfer certificates of title
(TCTs) of petitioner Yap were totally cancelled
by the Registrar of Deeds of Leyte and were
transferred in the names of farmer beneficiaries
collectively, based on the request of the DAR
together with a certification of the Landbank that
the sum of P735,337.77 and P719,869.54 have
been earmarked for Landowner Pedro L. Yap for
the parcels of lands covered by TCT Nos. 6282
and 6283, respectively, and issued in lieu thereof
TC-563 and TC-562, respectively, in the names
of listed beneficiaries (ANNEXES "C" & "D")
without notice to petitioner Yap and without
complying with the requirement of Section 16 (e)
of RA 6657 to deposit the compensation in cash
and Landbank bonds in an accessible bank.
(Rollo, p. 6).
The above allegations are not disputed by any of
the respondents.
Petitioner Heirs of Emiliano Santiago allege that
the heirs of Emiliano F. Santiago are the owners
of a parcel of land located at Laur, NUEVA
ECIJA with an area of 18.5615 hectares covered
by TCT No. NT-60359 of the registry of Deeds
of Nueva Ecija, registered in the name of the late
Emiliano F. Santiago; that in November and
December 1990, without notice to the petitioners,
the Landbank required and the beneficiaries
executed Actual tillers Deed of Undertaking
(ANNEX "B") to pay rentals to the LandBank for
the use of their farmlots equivalent to at least
25% of the net harvest; that on 24 October 1991
the DAR Regional Director issued an order
directing the Landbank to pay the landowner
directly or through the establishment of a trust
fund in the amount of P135,482.12, that on 24
February 1992, the Landbank reserved in trust
P135,482.12 in the name of Emiliano F.
Santiago. (ANNEX "E"; Rollo,
p. 7); that the beneficiaries stopped paying rentals
to the landowners after they signed the Actual
Tiller's Deed of Undertaking committing
themselves to pay rentals to the LandBank (Rollo,
p. 133).
The above allegations are not disputed by the
respondents except that respondent Landbank
claims 1) that it was respondent DAR, not
Landbank which required the execution of Actual
Tillers Deed of Undertaking (ATDU, for
brevity); and 2) that respondent Landbank,
although armed with the ATDU, did not collect
any amount as rental from the substituting
beneficiaries (Rollo, p. 99).
Petitioner Agricultural Management and
Development Corporation (AMADCOR, for
brevity) alleges — with respect to its properties
located in San Francisco, Quezon — that the
properties of AMADCOR in San Francisco,
Quezon consist of a parcel of land covered by
TCT No. 34314 with an area of 209.9215
hectares and another parcel covered by TCT No.
10832 with an area of 163.6189 hectares; that a
summary administrative proceeding to determine
compensation of the property covered by TCT
No. 34314 was conducted by the DARAB in
Quezon City without notice to the landowner;
that a decision was rendered on 24 November
1992 (ANNEX "F") fixing the compensation for
the parcel of land covered by TCT No. 34314
with an area of 209.9215 hectares at
P2,768,326.34 and ordering the Landbank to pay
or establish a trust account for said amount in the
name of AMADCOR; and that the trust account
in the amount of P2,768,326.34 fixed in the
decision was established by adding
P1,986,489.73 to the first trust account
 established on 19 December 1991 (ANNEX
"G"). With respect to petitioner AMADCOR's
property in Tabaco, Albay, it is alleged that the
property of AMADCOR in Tabaco, Albay is
covered by TCT No. T-2466 of the Register of
Deeds of Albay with an area of 1,629.4578
hectares'; that emancipation patents were issued
covering an area of 701.8999 hectares which
were registered on 15 February 1988 but no
action was taken thereafter by the DAR to fix the
compensation for said land; that on 21 April
1993, a trust account in the name of AMADCOR
was established in the amount of
P12,247,217.83', three notices of acquisition
having been previously rejected by AMADCOR.
(Rollo, pp. 8-9)
The above allegations are not disputed by the
respondents except that respondent Landbank
claims that petitioner failed to participate in the
DARAB proceedings (land valuation case)
despite due notice to it (Rollo, p. 100).8
Private respondents argued that Administrative Order No. 9, Series of
1990 was issued without jurisdiction and with grave abuse of
discretion because it permits the opening of trust accounts by the
Landbank, in lieu of depositing in cash or bonds in an accessible
bank designated by the DAR, the compensation for the land before it
is taken and the titles are cancelled as provided under Section 16(e)
of RA 6657.9 Private respondents also assail the fact that the DAR
and the Landbank merely "earmarked", "deposited in trust" or
"reserved" the compensation in their names as landowners despite the
clear mandate that before taking possession of the property, the
compensation must be deposited in cash or in bonds. 10
Petitioner DAR, however, maintained that Administrative Order No.
9 is a valid exercise of its rule-making power pursuant to Section 49
of RA 6657.11 Moreover, the DAR maintained that the issuance of
the "Certificate of Deposit" by the Landbank was a substantial
compliance with Section 16(e) of RA 6657 and the ruling in the case
of Association of Small Landowners in the Philippines, Inc., et
al. vs. Hon. Secretary of Agrarian Reform, G.R. No. 78742, July 14,
1989 (175 SCRA 343).12
For its part, petitioner Landbank declared that the issuance of the
Certificates of Deposits was in consonance with Circular Nos. 29, 29-
A and 54 of the Land Registration Authority where the words
"reserved/deposited" were also used.13
On October 20, 1994, the respondent court rendered the assailed
decision in favor of private respondents.14Petitioners filed a motion
for reconsideration but respondent court denied the same. 15
Hence, the instant petitions.
On March 20, 1995, private respondents filed a motion to dismiss the
petition in G.R. No. 118745 alleging that the appeal has no merit and
is merely intended to delay the finality of the appealed
decision.16 The Court, however, denied the motion and instead
required the respondents to file their comments.17
Petitioners submit that respondent court erred in (1) declaring as null
and void DAR Administrative Order No. 9, Series of 1990, insofar as
it provides for the opening of trust accounts in lieu of deposit in cash
or in bonds, and (2) in holding that private respondents are entitled as
a matter of right to the immediate and provisional release of the
amounts deposited in trust pending the final resolution of the cases it
has filed for just compensation.
Anent the first assignment of error, petitioners maintain that the word
"deposit" as used in Section 16(e) of RA 6657 referred merely to the
act of depositing and in no way excluded the opening of a trust
account as a form of deposit. Thus, in opting for the opening of a
trust account as the acceptable form of deposit through
Administrative Circular No. 9, petitioner DAR did not commit any
grave abuse of discretion since it merely exercised its power to
promulgate rules and regulations in implementing the declared
policies of RA 6657.
The contention is untenable. Section 16(e) of RA 6657 provides as
follows:
Sec. 16. Procedure for Acquisition of Private
Lands —
xxx xxx xxx
(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. . . . (emphasis
supplied)
It is very explicit therefrom 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".
The conclusive effect of administrative construction is not absolute.
Action of an administrative agency may be disturbed or set aside by
the judicial department if there is an error of law, a grave abuse of
power or lack of jurisdiction or grave abuse of discretion clearly
conflicting with either the letter or the spirit of a legislative
enactment.18 In this regard, it must be stressed that the function of
promulgating rules and regulations may be legitimately exercised
only for the purpose of carrying the provisions of the law into effect.
The power of administrative agencies is thus confined to
implementing the law or putting it into effect. Corollary to this is that
administrative regulations cannot extend
the law and amend a legislative enactment,19 for settled is the rule
that administrative regulations must be in harmony with the
provisions of the law. And in case there is a discrepancy between the
basic law and an implementing rule or regulation, it is the former that
prevails.20
In the present suit, the DAR clearly overstepped the limits of its
power 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.
Proceeding to the crucial issue of whether or not private respondents
are entitled to withdraw the amounts deposited in trust in their behalf
pending the final resolution of the cases involving the final valuation
of their properties, petitioners assert the negative.
The contention is premised on the alleged distinction between the
deposit of compensation under Section 16(e) of RA 6657 and
payment of final compensation as provided under Section 1821 of the
same law. According to petitioners, the right of the landowner to
withdraw the amount deposited in his behalf pertains only to the final
valuation as agreed upon by the landowner, the DAR and the LBP or
that adjudged by the court. It has no reference to amount deposited in
the trust account pursuant to Section 16(e) in case of rejection by the
landowner because the latter amount is only provisional and intended
merely to secure possession of the property pending final valuation.
To further bolster the contention petitioners cite the following
pronouncements in the case of "Association of Small Landowners in
the Phil. Inc. vs. Secretary of Agrarian Reform".22
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.
xxx xxx xxx
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. No outright change
of ownership is contemplated either.
xxx xxx xxx
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.
Notably, however, the aforecited case was used by respondent court
in discarding petitioners' assertion as it found that:
. . . despite the "revolutionary" character of the
expropriation envisioned under RA 6657 which
led the Supreme Court, in the case of Association
of Small Landowners in the Phil. Inc. vs.
Secretary of Agrarian Reform (175 SCRA 343),
to conclude that "payments of the just
compensation is not always required to be made
fully in money" — even as the Supreme Court
admits in the same case "that the traditional
medium for the payment of just compensation is
money and no other" — the Supreme Court in
said case did not abandon the "recognized rule . .
. that title to the property expropriated shall pass
from the owner to the expropriator only upon full
payment of the just compensation." 23 (Emphasis
supplied)
We agree with the observations of respondent court. The ruling in the
"Association" case merely recognized the extraordinary nature of the
expropriation to be undertaken under RA 6657 thereby allowing a
deviation from the traditional mode of payment of compensation and
recognized payment other than in cash. It did not, however, dispense
with the settled rule that there must be full payment of just
compensation before the title to the expropriated property is
transferred.
The attempt to make a distinction between the deposit of
compensation under Section 16(e) of RA 6657 and determination of
just compensation under Section 18 is unacceptable. To withhold the
right of the landowners to appropriate the amounts already deposited
in their behalf as compensation for their properties simply because
they rejected the DAR's valuation, and notwithstanding that they
have already been deprived of the possession and use of such
properties, is an oppressive exercise of eminent domain. The
irresistible expropriation of private respondents' properties was
painful enough for them. But petitioner DAR rubbed it in all the more
by withholding that which rightfully belongs to private respondents
in exchange for the taking, under an authority (the "Association"
case) that is, however, misplaced. This is misery twice bestowed on
private respondents, which the Court must rectify.
Hence, we find it unnecessary to distinguish between provisional
compensation under Section 16(e) and final compensation under
Section 18 for purposes of exercising the landowners' right to
appropriate the same. The immediate effect in both situations is the
same, the landowner is deprived of the use and possession of his
property for which he should be fairly and immediately compensated.
Fittingly, we reiterate the cardinal rule that:
. . . within the context of the State's inherent
power of eminent domain, just compensation
means not only the correct determination of the
amount to be paid to the owner of the land but
also the payment of the land within a reasonable
time from its taking. Without prompt
payment, compensation cannot be considered
"just" for the property owner is made to suffer the
consequence of being immediately deprived of his
land while being made to wait for a decade or
more before actually receiving the amount
necessary to cope with his loss. 24 (Emphasis
supplied)
The promulgation of the "Association" decision endeavored to
remove all legal obstacles in the implementation of the
Comprehensive Agrarian Reform Program and clear the way for the
true freedom of the farmer.25 But despite this, cases involving its
implementation continue to multiply and clog the courts' dockets.
Nevertheless, we are still optimistic that the goal of totally
emancipating the farmers from their bondage will be attained in due
time. It must be stressed, however, that in the pursuit of this
objective, vigilance over the rights of the landowners is equally
important because social justice cannot be invoked to trample on the
rights of property owners, who under our Constitution and laws are
also entitled to protection.26
WHEREFORE, the foregoing premises considered, the petition is
hereby DENIED for lack of merit and the appealed decision is
AFFIRMED in toto.
SO ORDERED.
 10. RUBEN A. IBOJO TCT No. T-

11. SAMUEL JAMANDRE TCT No. T-

12. HILARION V. LANTIZA TCT No. T-

TCT No. T-

13. ANSELMO LOPEZ TCT No. T-

14. TERESITA NACION TCT No. T-

FIRST DIVISION
15. CHARIE E. NASTOR TCT No. T-
G.R. No. 159674 June 30, 2006
16. NELSON L. NULLAS TCT No. T-
SAMUEL ESTRIBILLO, CALIXTO P. ABAYATO, JR., 17. CARLITO S. OLIA TCT No. T-
RONGIE D. AGUILAR, TACIANA D. AGUILAR, ARTEMIO
G. DE JUAN, ESTANISLAO DELA CRUZ, SR., EDGAR 18. ROBERTO T.PATIÑO TCT No. T-
DUENAS, MARIO ERIBAL, REYNALDO C. ESENCIA,
EMMA GONZAGA, RUBEN A. IBOJO, SAMUEL 19. ANTONIO P. ROCHA TCT No. T-
JAMANDRE, HILARION V. LANTIZA, ANSELMO LOPEZ,
TERESITA NACION, CHARIE E. NASTOR, NELSON L. 20. FERNANDO C. RUFINO TCT No. T-
NULLAS, CARLITO S. OLIA, ANA PATIÑO, ROBERTO T.
PATIÑO, ANTONIO P. ROCHA, FERNANDO C. RUFINO, 21. PATERNO P. SAIN TCT No. T-
PATERNO P. SAIN, CLAUDIO S. SAYSON, and JOEMARIE
VIBO, Petitioners, 22. CLAUDIO S. SAYSON, and TCT No. T-
vs.
DEPARTMENT OF AGRARIAN REFORM and HACIENDA 23. JOEMARIE VIBO TCT No. T-
MARIA, INC., Respondents.
The two other petitioners, Emma Gonzaga and Ana Patiño, are the
DECISION surviving spouses of deceased recipients of EPs over parcels of land
also located at Barangay Angas, Sta. Josefa, Agusan del Sur, with
CHICO-NAZARIO, J.: their corresponding TCT and EP numbers identified as follows:

This is a Petition for Review on Certiorari under Rule 45 of the Rules

of Court, seeking the review and reversal of the Resolutions1 of the (Deceased) Registered Owners
Court of Appeals dated 27 January 2003 and 28 August 2003,
respectively. 1. MANUEL S. GONZAGA TCT No. T-920/E

The factual and procedural antecedents are as follows: 2. RAFAEL PATIÑO TCT No. T-929/E

The petitioners, with the exception of two, are the recipients of
Emancipation Patents (EPs) over parcels of land located at Barangay
Angas, Sta. Josefa, Agusan del Sur, with their respective Transfer
Certificate of Title (TCT) and EP numbers presented below:
Petitioners
The parcels of land described above, the subject matters in this
Petition, were formerly part of a forested area which have been
denuded as a result of the logging operations of respondent Hacienda
Maria, Inc. (HMI). Petitioners, together with other persons, occupied
and tilled these areas believing that the same were public lands. HMI
never disturbed petitioners and the other occupants in their peaceful
cultivation thereof. Areas
TCT/EP Nos.
(has.)

1. SAMUEL ESTRIBILLO HMI acquired

TCT No. T-287/EP such forested area from the1.7833
No. A-037675 Republic of the Philippines
through Sales Patent No. 2683 in 1956 by virtue of which it was
2. CALIXTO P. ABAYATO, JR. issued OCT
TCT No. T-297/EP No. No. P-3077-1661. The title covered
A-037814 2.0000 three parcels of land
with a total
TCT No. T-829/EP No.area of 527.8308 hectares, to wit:
A-027293 0.1565

3. RONGIE D. AGUILAR TCT No. T-913/EP No. A-027295 3.1441

Area
4. TACIANA D. AGUILAR Lot No.
TCT No. T-944/EP No. A-027296 4.2405
(in hectares)

5. ARTEMIO G. DE JUAN TCT No. T-302/EP No.Lot No. 1620, Pls – 4

A-037809 3.3082
28.52

6. ESTANISLAO DELA CRUZ, SR. TCT No. T-290/EP No.Lot No. 1621, Pls – 4
A-035676 3.1437
11.64

7. EDGAR DUENAS TCT No. T-949/EP No.Lot No. 1622, Pls – 4

A-037658 4.0128
487.47

8. MARIO P. ERIBAL TCT No. T-952/EP No.TOTAL

A-037836 2.3087
527.83 4

9. REYNALDO C. ESENCIA TCT No. T-950/EP No. A-037844 2.0950

On 21 October 1972, Presidential Decree No. 275 was issued
mandating that tenanted rice and corn lands be brought under
Operation Land Transfer and awarded to farmer-beneficiaries.
HMI, through a certain Joaquin Colmenares, requested that 527.8308
hectares of its landholdings be placed under the coverage of
Operation Land Transfer. Receiving compensation therefor, HMI
allowed petitioners and other occupants to cultivate the landholdings
so that the same may be covered under said law.
In 1973, the Department of Agrarian Reform (DAR) conducted a
parcellary mapping of the entire landholdings of 527.8308 hectares
covered by OCT No. P-3077-1661. In 1975 and 1976, the DAR
approved the Parcellary Map Sketching (PMS) and the Amended
PMS covering the entire landholdings.
HMI, through its representatives, actively participated in all relevant
proceedings, including the determination of the Average Gross
Production per hectare at the Barangay Committee on Land
Production, and was a signatory of an undated Landowner and
Tenant Production Agreement (LTPA), covering the 527.8308
hectares. The LTPA was submitted to the Land Bank of the
Philippines (LBP) in 1977.
Also in 1977, HMI executed a Deed of Assignment of Rights in favor
of petitioners, among other persons, which was registered with the
Register of Deeds and annotated at the back of OCT No. P-3077-
1661. The annotation in the OCT showed that the entire 527.8308
hectares was the subject of the Deed of Assignment.
In 1982, a final survey over the entire area was conducted and
approved. From 1984 to 1988, the corresponding TCTs and EPs
covering the entire 527.8308 hectares were issued to petitioners,
among other persons.
In December 1997, HMI filed with the Regional Agrarian Reform
Adjudicator (RARAD) of CARAGA, Region XIII, 17 petitions
seeking the declaration of erroneous coverage under Presidential
Decree No. 27 of 277.5008 hectares of its former landholdings
covered by OCT No. P-3077-1661. HMI claimed that said area was
not devoted to either rice or corn, that the area was untenanted, and
that no compensation was paid therefor. The 17 petitions, which were
later consolidated, sought for the cancellation of the EPs covering the
disputed 277.5008 hectares which had been awarded to petitioners.
HMI did not question the coverage of the other 250.3300 hectares
under Presidential Decree No. 27 despite claiming that the entire
landholdings were untenanted and not devoted to rice and corn.
On 27 November 1998, after petitioners failed to submit a Position
Paper, the RARAD rendered a Decision declaring as void the TCTs
and EPs awarded to petitioners because the land covered was not
devoted to rice and corn, and neither was there any established
tenancy relations between HMI and petitioners when Presidential
Decree No. 27 took effect on 21 October 1972. The Decision was
based on a 26 March 1998 report submitted by the Hacienda Maria
Action Team. Petitioners’ TCTs and EPs were ordered cancelled.
Petitioners filed a Motion for Reconsideration, but the same was
denied. Petitioners appealed to the Department of Agrarian Reform
Adjudication Board (DARAB) which affirmed the RARAD Decision.
After the DARAB denied petitioners’ Motion for Reconsideration,
the latter proceeded to the Court of Appeals with their Petition for
Review on Certiorari. The Court of Appeals issued the following
assailed Resolution:
A perusal of the petition reveals that the Verification and
Certification of Non-Forum Shopping was executed by Samuel A.
Estribillo who is one of the petitioners, without the corresponding
Special Power of Attorneys executed by the other petitioners
authorizing him to sign for their behalf in violation of Section 5, Rule
7 of the 1997 Rules of Civil Procedure, as amended.
WHEREFORE, the petition is DENIED DUE COURSE and
necessarily DISMISSED.6
Petitioners filed a "Motion for Reconsideration With Alternative
Prayer with Leave of Court for the Admission of Special Power of
Attorney (SPA) Granted to Petitioner Samuel Estribillo by his Co-
Petitioners." The Court of Appeals denied the motion by issuing the
following assailed Resolution:
Petitioners seek the reconsideration of Our Resolution promulgated
on January 27, 2003 which dismissed the petition for certiorari.
We find no reason to reverse, alter or modify the resolution sought to
be reconsidered, since petitioners have failed to show that their
belated submission of the special power of attorney can be justified
as against the unequivocal requirements set forth by Sec. 5, Rule 7 of
the 1997 Rules of Civil Procedure, as amended.
While it is true that the Supreme Court has recognized special
circumstances that justify the relaxation of the rules on non-forum
shopping, such circumstances, however, are not present in the case at
bar.
More importantly, said Rules cannot be relaxed in view of the
Supreme Court’s ruling in Loquias vs. Ombudsman, 338 SCRA 62,
which stated that, substantial compliance will not suffice in a matter
involving strict observance by the rules. The attestation contained in
the certification [on] non-forum shopping requires personal
knowledge by the party who executed the same.
Since the Verification and Certification on Non-Forum shopping was
executed without the proper authorization from all the petitioners,
such personal knowledge cannot be presumed to exist thereby
rendering the petition fatally defective.
Par. 2, Sec. 5 of Rule 7 of the 1997 Rules of Civil Procedure, as
amended states:
"Failure to comply with the foregoing requirements shall not be
curable by mere amendment of the complaint or other initiatory
pleading but shall be cause for the dismissal of the case without
prejudice x x x"
It is, thus, clear that the Motion for Reconsideration has no legal basis
to support it and should be dismissed forthwith. Moreover, granting
arguendo that a special power of attorney belatedly filed could cure
the petition’s defect, the requirement of personal knowledge of all the
petitioners still has not been met since some of the other petitioners
failed to sign the same.
WHEREFORE, in view of the foregoing, the Motion for
Reconsideration is hereby DENIED.7
Petitioners now file this present Petition contending that there had
been compliance with Rule 7, Section 5 of the 1997 Rules of Civil
Procedure. They further reiterate their argument that the EPs are
ordinary titles which become indefeasible one year after their
registration.
The petition is impressed with merit.1awphil.net
Petitioners have sufficiently complied with Rule 7, Section 5 of the
1997 Rules of Civil Procedure concerning the Certification Against
Forum shopping
Rule 7, Section 5 of the 1997 Rules of Civil Procedure was preceded
by Revised Circular No. 28-91 and Administrative Circular No. 04-
94, which required a certification against forum shopping to avoid the
filing of multiple petitions and complaints involving the same issues
in the Supreme Court, the Court of Appeals, and other tribunals and
agencies. Stated differently, the rule was designed to avoid a situation
where said courts, tribunals and agencies would have to resolve the
same issues. Rule 7, Section 5, now provides:
Sec. 5. Certification against forum shopping. – The plaintiff or
principal party shall certify under oath in the complaint or other
initiatory pleading asserting a claim for relief, or in a sworn
certification annexed thereto and simultaneously filed therewith: (a)
that he has not theretofore commenced any action or filed any claim
involving the same issues in any court, tribunal or quasi-judicial
agency and, to the best of his knowledge, no such other action or
claim is pending therein; (b) if there is such other pending action or
claim, a complete statement of the present status thereof; and (c) if he
should thereafter learn that the same or similar action or claim has
been filed or is pending, he shall report that fact within five (5) days
therefrom to the court wherein his aforesaid complaint or initiatory
pleading has been filed.
Failure to comply with the foregoing requirements shall not be
curable by mere amendment of the complaint or other initiatory
pleading but shall be cause for the dismissal of the case without
prejudice, unless otherwise provided, upon motion and after hearing.
The submission of a false certification or non-compliance with any of
the undertakings therein shall constitute indirect contempt of court,
without prejudice to the corresponding administrative and criminal
actions. If the acts of the party or his counsel clearly constitute willful
and deliberate forum shopping, the same shall be ground for
summary dismissal with prejudice and shall constitute direct
contempt as well as a cause for administrative sanctions.
Revised Circular No. 28-91 "was designed x x x to promote and
facilitate the orderly administration of justice and should not be
interpreted with such absolute literalness as to subvert its own
ultimate and legitimate objective or the goal of all rules of procedure
– which is to achieve substantial justice as expeditiously as
possible."8 Technical rules of procedure should be used to promote,
not frustrate, justice.9 The same guidelines should still apply in
interpreting what is now Rule 7, Section 5 of the 1997 Rules of Civil
Procedure.
Petitioner Samuel A. Estribillo, in signing the Verification and
Certification Against Forum Shopping, falls within the phrase
"plaintiff or principal party" who is required to certify under oath the
matters mentioned in Rule 7, Section 5 of the 1997 Rules of Civil
Procedure. Such was given emphasis by this Court when we held in
Mendigorin v. Cabantog10 and Escorpizo v. University of
Baguio11 that the certification of non-forum shopping must be signed
by the plaintiff or any of the principal parties and not only by the
legal counsel. In Condo Suite Club Travel, Inc. v. National Labor
Relations Commission,12 we likewise held that:
The certification in this petition was improperly executed by the
external legal counsel of petitioner. For a certification of non-forum
shopping must be by the petitioner, or any of the principal parties and
not by counsel unless clothed with a special power of attorney to do
so. This procedural lapse on the part of petitioner is also a cause for
the dismissal of this action. (Emphasis supplied)
The Court of Appeals heavily relied on the seemingly conflicting
case of Loquias v. Office of the Ombudsman,13where this Court ruled
that:
At the outset, it is noted that the Verification and Certification was
signed by Antonio Din, Jr., one of the petitioners in the instant case.
We agree with the Solicitor General that the petition is defective.
Section 5, Rule 7 expressly provides that it is the plaintiff or principal
party who shall certify under oath that he has not commenced any
action involving the same issues in any court, etc. Only petitioner
Din, the Vice-Mayor of San Miguel, Zamboanga del Sur, signed the
certification. There is no showing that he was authorized by his co-
petitioners to represent the latter and to sign the certification. It
cannot likewise be presumed that petitioner Din knew, to the best of
his knowledge, whether his co-petitioners had the same or similar
actions or claims filed or pending. We find that substantial
compliance will not suffice in a matter involving strict observance by
the rules. The attestation contained in the certification on non-forum
shopping requires personal knowledge by the party who executed the
same. Petitioners must show reasonable cause for failure to
personally sign the certification. Utter disregard of the rules cannot
justly be rationalized by harking on the policy of liberal construction.
(Emphasis supplied)
Loquias, however, was a case involving only five petitioners seeking
relief from the Resolution of the Ombudsman charging them with
violation of Republic Act No. 3019, where the above declaration "at
the outset" was made together with a determination on the lack of
jurisdiction on our part to decide the Petition.14 There being only five
petitioners in Loquias, the unreasonableness of the failure to obtain
the signatures of Antonio Din, Jr.’s four co-accused is immediately
apparent, hence the remark by this Court that "[p]etitioners must
show reasonable cause for failure to personally sign the certification."
In the present petition, petitioners allege that they are farmer-
beneficiaries who reside in a very remote barangay in Agusan del
Sur. While they reside in the same barangay, they allegedly have to
walk for hours on rough terrain to reach their neighbors due to the
absence of convenient means of transportation. Their houses are
located far apart from each other and the mode of transportation,
habal-habal, is scarce and difficult. Majority of them are also nearing
old age. On the other hand, their lawyers (who are members of a non-
government organization engaged in development work) are based in
Quezon City who started assisting them at the latter part of the
RARAD level litigation in 1998, and became their counsel of record
only at the DARAB level. The petitioner who signed the initiatory
pleading, Samuel Estribillo, was the only petitioner who was able to
travel to Manila at the time of the preparation of the Petition due to
very meager resources of their farmers’ organization, the Kahiusahan
sa Malahutayong mga Mag-uugma Para sa Ekonomikanhong
Kalambuan (KAMMPE). When the Petition a quo was dismissed,
petitioners’ counsel went to Agusan del Sur and tried earnestly to
secure all the signatures for the SPA. In fact, when the SPA was
being circulated for their signatures, 24 of the named petitioners
therein failed to sign for various reasons – some could not be found
within the area and were said to be temporarily residing in other
towns, while some already died because of old age.15 Be that as it
may, those who did not sign the SPA did not participate, and are not
parties to this petition.
The Court of Appeals merely said that the special circumstances
recognized by this Court that justify the relaxation of the rules on the
certification against forum shopping are not present in the case at
bar,16 without discussing the circumstances adduced by the
petitioners in their Motion for Reconsideration. Thus, assuming for
the sake of argument that the actuation of petitioners was not strictly
in consonance with Rule 7, Section 5 of the 1997 Rules of Civil
Procedure, it should still be determined whether there are special
circumstances that would justify the suspension or relaxation of the
rule concerning verification and certification against forum shopping,
such as those which we appreciated in the ensuing cases.
In General Milling Corporation v. National Labor Relations
Commission,17 the appeal to the Court of Appeals had a certificate
against forum shopping, but was dismissed as it did not contain a
board resolution authorizing the signatory of the Certificate.
Petitioners therein attached the board resolution in their Motion for
Reconsideration but the Court of Appeals, as in this case, denied the
same. In granting the Petition therein, we explained that:
[P]etitioner complied with this procedural requirement except that it
was not accompanied by a board resolution or a secretary’s certificate
that the person who signed it was duly authorized by petitioner to
represent it in the case. It would appear that the signatory of the
certification was, in fact, duly authorized as so evidenced by a board
resolution attached to petitioner’s motion for reconsideration before
the appellate court. It could thus be said that there was at least
substantial compliance with, and that there was no attempt to ignore,
the prescribed procedural requirements.
The rules of procedure are intended to promote, rather than frustrate,
the ends of justice, and while the swift unclogging of court dockets is
a laudable objective, it, nevertheless, must not be met at the expense
of substantial justice. Technical and procedural rules are intended to
help secure, not suppress, the cause of justice and a deviation from
the rigid enforcement of the rules may be allowed to attain that prime
objective for, after all, the dispensation of justice is the core reason
for the existence of courts. [Acme Shoe, Rubber and Plastic Corp. vs.
Court of Appeals; BA Savings Bank vs. Sia, 336 SCRA 484].
In Shipside Incorporated v. Court of Appeals,18 the authority of
petitioner’s resident manager to sign the certification against forum
shopping was submitted to the Court of Appeals only after the latter
dismissed the Petition. It turned out, in the Motion for
Reconsideration, that he already had board authority ten days before
the filing of the Petition. We ratiocinated therein that:
On the other hand, the lack of certification against forum shopping is
generally not curable by the submission thereof after the filing of the
petition. Section 5, Rule 45 of the 1997 Rules of Civil Procedure
provides that the failure of the petitioner to submit the required
documents that should accompany the petition, including the
certification against forum shopping, shall be sufficient ground for
the dismissal thereof. The same rule applies to certifications against
forum shopping signed by a person on behalf of a corporation which
are unaccompanied by proof that said signatory is authorized to file a
petition on behalf of the corporation.
In certain exceptional circumstances, however, the Court has allowed
the belated filing of the certification. In Loyola v. Court of Appeals,
et al. (245 SCRA 477 [1995]), the Court considered the filing of the
certification one day after the filing of an election protest as
substantial compliance with the requirement. In Roadway Express,
Inc. v. Court of Appeals, et al. (264 SCRA 696 [1996]), the Court
allowed the filing of the certification 14 days before the dismissal of
the petition. In Uy v. Landbank, supra, the Court had dismissed Uy’s
petition for lack of verification and certification against non-forum
shopping. However, it subsequently reinstated the petition after Uy
submitted a motion to admit certification and non-forum shopping
certification. In all these cases, there were special circumstances or
compelling reasons that justified the relaxation of the rule requiring
verification and certification on non-forum shopping.
In the instant case, the merits of petitioner’s case should be
considered special circumstances or compelling reasons that justify
tempering the requirement in regard to the certificate of non-forum
shopping. Moreover, in Loyola, Roadway, and Uy, the Court excused
non-compliance with the requirement as to the certificate of non-
forum shopping. With more reason should we allow the instant
petition since petitioner herein did submit a certification on non-
forum shopping, failing only to show proof that the signatory was
authorized to do so. That petitioner subsequently submitted a
secretary’s certificate attesting that Balbin was authorized to file an
action on behalf of petitioner likewise mitigates this oversight.
It must also be kept in mind that while the requirement of the
certificate of non-forum shopping is mandatory, nonetheless the
requirements must not be interpreted too literally and thus defeat the
objective of preventing the undesirable practice of forum-shopping.
Lastly, technical rules of procedure should be used to promote, not
frustrate justice. While the swift unclogging of court dockets is a
laudable objective, the granting of substantial justice is an even more
urgent ideal.
In Uy v. Land Bank of the Philippines,19 we, likewise, considered the
apparent merits of the substantive aspect of the case as a special
circumstance or compelling reason for the reinstatement of the case,
and invoked our power to suspend our rules to serve the ends of
justice. Thus:
The admission of the petition after the belated filing of the
certification, therefore, is not unprecedented. In those cases where the
Court excused non-compliance with the requirements, there were
special circumstances or compelling reasons making the strict
application of the rule clearly unjustified. In the case at bar, the
apparent merits of the substantive aspects of the case should be
deemed as a "special circumstance" or "compelling reason" for the
reinstatement of the petition. x x x
There were even cases where we held that there was complete non-
compliance with the rule on certification against forum shopping, but
we still proceeded to decide the case on the merits. In De Guia v. De
Guia,20 petitioners raised in their Petition for Review the allowance
of respondents’ Appeal Brief which did not contain a certificate
against forum shopping. We held therein that:
With regard to the absence of a certification of non-forum shopping,
substantial justice behooves us to agree with the disquisition of the
appellate court. We do not condone the shortcomings of respondents’
counsel, but we simply cannot ignore the merits of their claim.
Indeed, it has been held that "[i]t is within the inherent power of the
Court to suspend its own rules in a particular case in order to do
justice."
In Damasco v. National Labor Relations Commission,21 the non-
compliance was disregarded because of the principle of social justice,
which is equally applicable to the case at bar:
We note that both petitioners did not comply with the rule on
certification against forum shopping. The certifications in their
respective petitions were executed by their lawyers, which is not
correct. The certification of non-forum shopping must be by the
petitioner or a principal party and not the attorney. This procedural
lapse on the part of petitioners could have warranted the outright
dismissal of their actions.
But, the court recognizes the need to resolve these two petitions on
their merits as a matter of social justice involving labor and capital.
After all, technicality should not be allowed to stand in the way of
equitably and completely resolving herein the rights and obligations
of these parties. Moreover, we must stress that technical rules of
procedure in labor cases are not to be strictly applied if the result
would be detrimental to the working woman.
The foregoing cases show that, even if we assume for the sake of
argument that there was violation of Rule 7, Section 5 of the 1997
Rules of Civil Procedure, a relaxation of such rule would be justified
for two compelling reasons: social justice considerations and the
apparent merit of the Petition, as shall be heretofore discussed.
Certificates of Title issued pursuant to Emancipation Patents are as
indefeasible as TCTs issued in registration proceedings.
Petitioners claim that the EPs have become indefeasible upon the
expiration of one year from the date of its issuance. The DARAB,
however, ruled that the EP "is a title issued through the agrarian
reform program of the government. Its issuance, correction and
cancellation is governed by the rules and regulations issued by the
Secretary of the Department of Agrarian Reform (DAR). Hence, it is
not the same as or in the same category of a Torrens title."
The DARAB is grossly mistaken.
Ybañez v. Intermediate Appellate Court,22 provides that certificates
of title issued in administrative proceedings are as indefeasible as
certificates of title issued in judicial proceedings:
It must be emphasized that a certificate of title issued under an
administrative proceeding pursuant to a homestead patent, as in the
instant case, is as indefeasible as a certificate of title issued under a
judicial registration proceeding, provided the land covered by said
certificate is a disposable public land within the contemplation of the
Public Land Law.
There is no specific provision in the Public Land Law (C.A. No. 141,
as amended) or the Land Registration Act (Act 496), now P.D. 1529,
fixing the one (1) year period within which the public land patent is
open to review on the ground of actual fraud as in Section 38 of the
Land Registration Act, now Section 32 of P.D. 1529, and clothing a
public land patent certificate of title with indefeasibility.
Nevertheless, the pertinent pronouncements in the aforecited cases
clearly reveal that Section 38 of the Land Registration Act, now
Section 32 of P.D. 1529 was applied by implication by this Court to
the patent issued by the Director of Lands duly approved by the
Secretary of Natural Resources, under the signature of the President
of the Philippines in accordance with law. The date of issuance of the
patent, therefore, corresponds to the date of the issuance of the decree
in ordinary registration cases because the decree finally awards the
land applied for registration to the party entitled to it, and the patent
issued by the Director of Lands equally and finally grants, awards,
and conveys the land applied for to the applicant. This, to our mind,
is in consonance with the intent and spirit of the homestead laws, i.e.
conservation of a family home, and to encourage the settlement,
residence and cultivation and improvement of the lands of the public
domain. If the title to the land grant in favor of the homesteader
would be subjected to inquiry, contest and decision after it has been
given by the Government through the process of proceedings in
accordance with the Public Land Law, there would arise uncertainty,
confusion and suspicion on the government’s system of distributing
public agricultural lands pursuant to the "Land for the Landless"
policy of the State.
The same confusion, uncertainty and suspicion on the distribution of
government-acquired lands to the landless would arise if the
possession of the grantee of an EP would still be subject to contest,
just because his certificate of title was issued in an administrative
proceeding. The silence of Presidential Decree No. 27 as to the
indefeasibility of titles issued pursuant thereto is the same as that in
the Public Land Act where Prof. Antonio Noblejas commented:
Inasmuch as there is no positive statement of the Public Land Law,
regarding the titles granted thereunder, such silence should be
construed and interpreted in favor of the homesteader who come into
the possession of his homestead after complying with the
requirements thereof. Section 38 of the Land Registration Law should
be interpreted to apply by implication to the patent issued by the
Director of Lands, duly approved by the Minister of Natural
Resources, under the signature of the President of the Philippines, in
accordance with law.23
After complying with the procedure, therefore, in Section 105 of
Presidential Decree No. 1529, otherwise known as the Property
Registration Decree (where the DAR is required to issue the
corresponding certificate of title after granting an EP to tenant-
farmers who have complied with Presidential Decree No. 27), 24 the
TCTs issued to petitioners pursuant to their EPs acquire the same
protection accorded to other TCTs. "The certificate of title becomes
indefeasible and incontrovertible upon the expiration of one year
from the date of the issuance of the order for the issuance of the
patent, x x x. Lands covered by such title may no longer be the
subject matter of a cadastral proceeding, nor can it be decreed to
another person."25
As we held through Justice J.B.L. Reyes in Lahora v. Dayanghirang,
Jr.26 :
The rule in this jurisdiction, regarding public land patents and the
character of the certificate of title that may be issued by virtue
thereof, is that where land is granted by the government to a private
individual, the corresponding patent therefor is recorded, and the
certificate of title is issued to the grantee; thereafter, the land is
automatically brought within the operation of the Land Registration
Act, the title issued to the grantee becoming entitled to all the
safeguards provided in Section 38 of the said Act. In other
words, upon expiration of one year from its issuance, the certificate
of title shall become irrevocable and indefeasible like a certificate
issued in a registration proceeding. (Emphasis supplied.)
The EPs themselves, like the Certificates of Land Ownership Award
(CLOAs) in Republic Act No. 6657 (the Comprehensive Agrarian
Reform Law of 1988), are enrolled in the Torrens system of
registration. The Property Registration Decree in fact devotes
Chapter IX27 on the subject of EPs. Indeed, such EPs and CLOAs are,
in themselves, entitled to be as indefeasible as certificates of title
issued in registration proceedings.
The only defense of respondents, that the issue of indefeasibility of
title was raised for the first time on appeal with the DARAB, does not
hold water because said issue was already raised before the
RARAD.28
The recommendation of the Hacienda Maria Action Team to have the
EPs cancelled and the lots covered under the Republic Act No.
6657,29 with the farmer-beneficiaries later on being issued with
CLOAs, would only delay the application of agrarian reform laws to
the disputed 277.5008 hectares, leading to the expenditure of more
time and resources of the government.
The unreasonable delay of HMI in filing the Petition for cancellation
more than 20 years after the alleged wrongful annotation of the Deed
of Assignment in OCT No. P-3077-1661, and more than ten years
after the issuance of the TCTs to the farmers, is apparently motivated
19. ANTONIO P. ROCHA TCT No. T-914
by its desire to receive a substantially higher valuation and just
compensation should the disputed 277.5008 hectares be covered 20. FERNANDO C. RUFINO TCT No. T-923
under Republic Act No. 6657 instead of Presidential Decree No.
27.30 This is further proved by the following uncontested allegations 21. PATERNO P. SAIN TCT No. T-954
by petitioners:
22. CLAUSIO S. SAYSON TCT No. T-891
(i) HMI neither asked for rentals nor brought any action to
oust petitioners from the farm they were cultivating; 23. JOEMARIE VIBO TCT No. T-893

24. MANUEL S. GONZAGA TCT No. T-920

(ii) HMI had not paid realty taxes on the disputed property
from 1972 onwards and never protested petitioners’ act of 25. RAFAEL PATIÑO TCT No. T-297
declaring the same for realty taxation;

Costs against respondent Hacienda Maria, Inc.

(iii) HMI, represented by a certain Angela Colmenares,
signed the LTPA covering the entire landholdings or the
area of 527.8308 hectares, which was then represented to SO ORDERED.
be rice and corn lands;

(iv) HMI abandoned the entire landholdings after executing

the Deed of Assignment of Rights in 1977.

WHEREFORE, the Resolutions of the Court of Appeals in CA-G.R.

SP No. 73902 are REVERSED and SET ASIDE. The following EPs
and the corresponding TCTs issued to petitioners or to their
successors-in-interest are hereby declared VALID and
SUBSISTING:
Original Grantees
1. SAMUEL ESTRIBILLO
FIRST DIVISION
[UDK No. 9864 : December 3, 1990.]
RUFINA VDA. DE TANGUB, Petitioner, vs. COURT OF
APPEALS,
TCT/EP Nos.PRESIDING JUDGE of the [CAR] RTC, Branch 4,
Iligan City, and SPOUSES DOMINGO and EUGENIA
TCT No. T-287/EP No. A-037675 MARTIL, Respondents.

2. CALIXTO P. ABAYATO, JR. TCT No. T-297/EP No. A-037814

TCT No. T-829/EP No. A-027293 DECISION
3. RONGIE D. AGUILAR TCT No. T-913/EP No. A-027295

4. TACIANA D. AGUILAR TCT No. T-944/EP No. A-027296 NARVASA, J.:

5. ARTEMIO G. DE JUAN, TCT No. T-302/EP No. A-037809

The jurisdiction of the Regional Trial Court, acting as a special
6. ESTANISLAO DELA CRUZ, SR. TCT No. T-290/EP No.court,
agrarian A-035676
in the light of Executive Orders Numbered 129-A and
229 and Republic Act No. 6657, is what is at issue in the proceeding
7. EDGAR DUENAS TCT No. T-949/EP
at bar.No. A-037658
8. MARIO P. ERIBAL TCT No. T-952/EP No.
Rufina A-037836
Tangub and her husband, Andres, now deceased, filed with the
Regional Trial Court of Lanao del Norte in March, 1988, "an agrarian
9. REYNALDO C. ESENCIA TCT No. T-950/EP No.damages
case for A-037844by reason of the(ir) unlawful dispossession . . .was
tenants from the landholding" owned by the Spouses Domingo and
10. RUBEN A. IBOJO TCT No. T-928/EP No.Martil.
Eugenia A-037873
1 Several persons were also impleaded as defendants,
including the Philippine National Bank, it being alleged by the plaintiff
11. SAMUEL JAMANDRE TCT No. T-909/EP No.that
spouses A-159348
said bank, holder of a mortgage on the land involved, had
caused foreclosure thereof, resulting in the acquisition of the property
12. HILARION V. LANTIZA TCT No. T-288/EP No. A-037674
by the bank as the highest bidder at the foreclosure sale, and in the sale
TCT No. T-401/EP No. A-037825
by the latter, some time later, of portions of the land to the other
13. ANSELMO LOPEZ persons
TCT No. T-973/EP No.named as its co-defendants (all employees of the National
A-037840
Steel Corporation), and it being prayed that mortgage and the
14. TERESITA NACION transactions
TCT No. T-900/EP thereafter made in relation thereto be annulled and voided.
No. A-037849
2
15. CHARIE E. NASTOR TCT No. T-825/EP No. A-037829
In an Order rendered on August 24, 1988, respondent Judge Felipe G.
16. NELSON L. NULLAS Javier,No.
TCT No. T-396/EP Jr.A-037826
dismissed the complaint. 3 He opined that by virtue of
Executive Order No. 229 "providing the mechanisms for the
17. CARLITO S. OLIA implementation
TCT No. T-910/EP No. A-037673 of the Comprehensive Agrarian Reform Program
approved on July 24, 1987" — Executive No. 129-A approved on July
18. ROBERTO T.PATIÑO 26, 1987,
TCT No. T-912/EP as well as the Rules of the Adjudication Board of the
No. A-037860
Department of Agrarian Reform, jurisdiction of the Regional Trial
Court over agrarian cases had been transferred to the Department of
Agrarian Reform.:-cralaw
The Tangub Spouses filed a petition for Certiorari with this Court,
docketed as UDK-8867, assigned to the Second Division. Discerning
however no special and important reason for taking cognizance of the
action, this Court referred the same to the Court of Appeals, that
tribunal having concurrent jurisdiction to act thereon.: nad
The Court of Appeals, by Decision promulgated on October 23, 1989,
4 dismissed the petition, finding that the jurisdictional question had
been correctly resolved by the Trial Court. The Court of Appeals,
adverted to a case earlier decided by it, on August 30, 1989, Estanislao
Casinillo v. Hon. Felipe G. Javier, Jr., et al., in which it was
"emphatically ruled that agrarian cases no longer fall under the
jurisdiction of Regional Trial Courts but rather under the jurisdiction
of the DAR Adjudication Board." 5 The ruling was grounded on the
provisions of Executive Orders Numbered 229, approved on July 22,
1987, and 129-A, issued on July 26, 1987, in relation to Republic Act
No. 6657, effective on June 15, 1988. Said executive orders, it was
pointed out, were issued by President Corazon C. Aquino undoubtedly
in the exercise of her revolutionary powers in accordance with Section
6, Article XVIII [Transitory Provisions] of the 1986 Constitution
providing that the "incumbent President shall continue to exercise
legislative powers until the first Congress is convened."
The petitioner Rufina Vda. de Tangub, now widowed, is once again
before this Court, contending that the Trial Court's "order of dismissal
of August 26, 1988, and the decision of the Honorable Court of
Appeals affirming it, are patently illegal and unconstitutional" because
they deprive "a poor tenant access to courts and directly violate R.A.
6657, PD 946, and Batas Bilang 129."
The petition is without merit.
Section 1 of Executive Order No. 229 sets out the scope of the
Comprehensive Agrarian Reform Program (CARP). It states that the
program —
". . . shall cover, regardless of tenurial arrangement and
commodity produce, all public and private agricultural land
as provided in Proclamation No. 131 dated July 22, 1987,
including whenever applicable in accordance with law, other
lands of the public domain suitable to agriculture."
Section 17 thereof.
1) vested the Department of Agrarian Reform with "quasi-
judicial powers to determine and adjudicate agrarian reform
matters," and
2) granted it "jurisdiction over all matters involving
implementation of agrarian reform, except those falling
under the exclusive original jurisdiction of the DENR and
the Department of Agriculture [DA], as well as "powers to
punish for contempt and to issue subpoena, subpoena duces
tecum and writs to enforce its orders or decisions."
Section 4 of Executive Order No. 129-A made the Department of
Agrarian Reform "responsible for implementing the Comprehensive
Agrarian Reform Program, and, for such purpose," authorized it,
among others, to —
"(g) Provide free legal services to agrarian reform beneficiaries and
resolve agrarian conflicts and land tenure problems; . . (and)
x x x
(j) Approve or disapprove the conversion, restructuring or
readjustment of agricultural lands into non-agricultural uses: . ."
And Section 5 of the same Executive Order No. 129-A specified the
powers and functions of the Department of Agrarian Reform, including
the following::- nad
"(b) Implement all agrarian laws, and for this purpose, punish for
contempt and issue subpoena, subpoena duces tecum, writ of execution
of its decision, and other legal processes to ensure successful and
expeditious program implementation; the decisions of the Department
may in proper cases, be appealed to the Regional Trial Courts but shall
be immediately executory notwithstanding such appeal;
x x x
(h) Provide free legal service to agrarian reform beneficiaries and
resolve agrarian conflicts and land tenure related problems as may be
provided for by laws;
(i) Have exclusive authority to approve or disapprove conversion of
agricultural lands for residential, commercial, industrial, and other
land uses as may be provided . . ."
The jurisdiction thus conferred on the Department of Agrarian Reform,
i.e.:
(a) adjudication of all matters involving implementation of agrarian
reform;
(b) resolution of agrarian conflicts and land tenure related problems;
and
(c) approval or disapproval of the conversion, restructuring or
readjustment of agricultural lands into residential, commercial,
industrial, and other non-agricultural uses,
is evidently quite as extensive as that theretofore vested in the Regional
Trial Court by Presidential Decree No. 946, which extended to the
rights and obligations of persons in the cultivation and use of
agricultural land, and other matters affecting tenant-farmers,
agricultural lessees, settlers, owner-cultivators, farms' cooperatives or
organizations under laws, Presidential Decrees, Orders, instructions,
Rules and Regulations in relation to the agrarian reform program. 6
Clearly, the latter must be deemed to have been eliminated by its being
subsumed in the broad jurisdiction conferred on the Department of
Agrarian Reform. The intention evidently was to transfer original
jurisdiction to the Department of Agrarian Reform, a proposition
stressed by the rules formulated and promulgated by the Department
for the implementation of the executive orders just quoted. 7 The rules
included the creation of the Agrarian Reform Adjudication Board
designed to exercise the adjudicatory functions of the Department, and
the allocation to it of —
". . . original and exclusive jurisdiction over the subject matter vested
upon it by law, and all cases, disputes, controversies and matters or
incidents involving the implementation of the Comprehensive
Agrarian Reform Program under Executive Order No. 229, Executive
Order No. 129-A, Republic Act No. 3844, as amended by Republic
Act No. 6289, Presidential Decree No. 27 and other agrarian laws and
their implementing rules and regulations."
The implementing rules also declare that "(s)pecifically, such
jurisdiction shall extend over but not be limited to . . (that theretofore
vested in the Regional Trial Courts, i.e.) (c)ases involving the rights
and obligations of persons engaged in the cultivation and use of
agricultural land covered by the Comprehensive Agrarian Reform
Program (CARP) and other agrarian laws . . ."
The matter has since been further and definitively clarified by Republic
Act No. 6657, which was signed into law by President Aquino on June
10, 1988 and became effective immediately after its "publication in
two (2) national newspapers of general circulation" on June 15, 1988.
The Act makes references to and explicitly recognizes the effectivity
and applicability of Presidential Decree No. 229. 8 More particularly,
the Act echoes the provisions of Section 17 of Presidential Decree No.
229, supra, investing the Department of Agrarian Reform with original
jurisdiction, generally, over all cases involving agrarian laws,
although, as shall shortly be pointed out, it restores to the Regional
Trial Court, limited jurisdiction over two groups of cases. Section 50
reads as follows:
"SEC. 50. Quasi-Judicial Powers of the DAR. — The DAR is hereby contention is on its face utterly without merit. It may profit her and her
vested with primary jurisdiction to determine and adjudicate agrarian counsel to realize that apart from granting all concerned parties access
reform matters and shall have exclusive original jurisdiction over all to a quasi-judicial forum (the Adjudication Board of the Department
matters involving the implementation of agrarian reform, except those of Agrarian Reform), the law strives to make resolution of
falling under the exclusive jurisdiction of the Department of controversies therein more expeditious and inexpensive, by providing
Agriculture [DA] and the Department of Environment and Natural not only that the Board "shall not be bound by technical rules of
Resources [DENR]. procedure and evidence," supra, but also that, as explicitly stated by
the penultimate paragraph of Section 50 of the Act::-cralaw
It shall not be bound by technical rules of procedure and evidence but
shall proceed to hear and decide all cases, disputes or controversies in "Responsible farmer leaders shall be allowed to represent themselves,
a most expeditious manner, employing all reasonable means to their fellow farmers, or their organizations in any proceedings before
ascertain the facts of every case in accordance with justice and equity the DAR: Provided, however, That when there are two or more
and the merits of the case. Toward this end, it shall adopt a uniform representatives for any individual or group, the representatives should
rule of procedure to achieve a just, expeditious and inexpensive choose only one among themselves to represent such party or group
determination of every action or proceeding before it. before any DAR proceedings."
It shall have the power to summon witnesses, administer oaths, take WHEREFORE, for lack of merit, the petition is DISMISSED, and the
testimony, require submission of reports, compel the production of Decision of the Court of Appeals in CA-G.R. SP. No. 16725 dated
books and documents and answers to interrogatories and issue October 23, 1989, AFFIRMED, without pronouncement as to costs.
subpoena and subpoena duces tecum and to enforce its writs through
sheriffs or other duly deputized officers. It shall likewise have the SO ORDERED.
power to punish direct and indirect contempts in the same manner and
subject to the same penalties as provided in the Rules of Court.
x x x
Notwithstanding an appeal to the court of appeals, the decision of the
DAR shall be immediately executory." 9
The Regional Trial Courts have not, however, been completely
divested of jurisdiction over agrarian reform matters. Section 56 of RA
6657, on the other hand, confers "special jurisdiction" on "Special
Agrarian Courts," which are Regional Trial Courts designated by the
Supreme Court — at least one (1) branch within each province — to
act as such. These Regional Trial Courts qua Special Agrarian Courts
have, according to Section 57 of the same law, original and exclusive
jurisdiction over:
1) "all petitions for the determination of just compensation
to land-owners," and
2) "the prosecution of all criminal offenses under . . [the]
Act."
In these cases, "(t)he Rules of Court shall apply . . unless modified by
. . . (the) Act."
It is relevant to mention in this connection that —
(1) appeals from decisions of the Special Agrarian Courts
"may be taken by filing a petition for review with the Court
of Appeals within fifteen (15) days from receipt or notice of
the decision, . ." 10 and
(2) appeals from any "decision, order, award or ruling of the
DAR on any agrarian dispute or on any matter pertaining to
the application, implementation, enforcement, or
interpretation of this Act and other pertinent laws on agrarian
reform may be brought to the Court of Appeals
by Certiorari11 except as otherwise provided . . . within
fifteen (15) days from receipt of a copy thereof," the
"findings of fact of the DAR [being] final and conclusive if
based on substantial evidence." 12
The Regional Trial Court of Iligan City was therefore correct in
dismissing Agrarian Case No. 1094. It being a case concerning the
rights of the plaintiffs as tenants on agricultural land, not involving the
"special jurisdiction" of said Trial Court acting as a Special Agrarian
Court, it clearly came within the exclusive original jurisdiction of the
Department of Agrarian Reform, or more particularly, the Agrarian
Reform Adjudication Board, established precisely to wield the
adjudicatory powers of the Department, supra.
The petitioner had not bothered to substantiate her contention that she
has been denied access to the courts, which is just as well. The