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Republic of the Philippines establishment of a legal framework for the formulation of an expansive approach to land

SUPREME COURT reform, affecting all agricultural lands and covering both tenant-farmers and regular
Manila farmworkers.13
EN BANC So it was that Proclamation No. 131, Series of 1987, was issued instituting a comprehensive
G.R. No. 171101 July 5, 2011 agrarian reform program (CARP) to cover all agricultural lands, regardless of tenurial
HACIENDA LUISITA, INCORPORATED, Petitioner, arrangement and commodity produced, as provided in the Constitution.
LUISITA INDUSTRIAL PARK CORPORATION and RIZAL COMMERCIAL On July 22, 1987, Executive Order No. 229 (EO 229) was issued providing, as its
BANKING CORPORATION,Petitioners-in-Intervention, title14 indicates, the mechanisms for CARP implementation. It created the Presidential
vs. Agrarian Reform Council (PARC) as the highest policy-making body that formulates all
PRESIDENTIAL AGRARIAN REFORM COUNCIL; SECRETARY NASSER policies, rules, and regulations necessary for the implementation of CARP.
PANGANDAMAN OF THE DEPARTMENT OF AGRARIAN REFORM; ALYANSA On June 15, 1988, RA 6657 or the Comprehensive Agrarian Reform Law of 1988, also known
NG MGA MANGGAGAWANG BUKID NG HACIENDA LUISITA, RENE GALANG, as CARL or the CARP Law, took effect, ushering in a new process of land classification,
NOEL MALLARI, and JULIO SUNIGA1 and his SUPERVISORY GROUP OF THE acquisition, and distribution. As to be expected, RA 6657 met stiff opposition, its validity or
HACIENDA LUISITA, INC. and WINDSOR ANDAYA, Respondents. some of its provisions challenged at every possible turn. Association of Small Landowners in
DECISION the Philippines, Inc. v. Secretary of Agrarian Reform 15 stated the observation that the assault
VELASCO, JR., J.: was inevitable, the CARP being an untried and untested project, "an experiment [even], as all
"Land for the landless," a shibboleth the landed gentry doubtless has received with much life is an experiment," the Court said, borrowing from Justice Holmes.
misgiving, if not resistance, even if only the number of agrarian suits filed serves to be the The Case
norm. Through the years, this battle cry and root of discord continues to reflect the seemingly In this Petition for Certiorari and Prohibition under Rule 65 with prayer for preliminary
ceaseless discourse on, and great disparity in, the distribution of land among the people, injunctive relief, petitioner Hacienda Luisita, Inc. (HLI) assails and seeks to set aside PARC
"dramatizing the increasingly urgent demand of the dispossessed x x x for a plot of earth as Resolution No. 2005-32-0116 and Resolution No. 2006-34-0117 issued on December 22, 2005
their place in the sun."2 As administrations and political alignments change, policies advanced, and May 3, 2006, respectively, as well as the implementing Notice of Coverage dated January
and agrarian reform laws enacted, the latest being what is considered a comprehensive piece, 2, 2006 (Notice of Coverage).18
the face of land reform varies and is masked in myriads of ways. The stated goal, however, The Facts
remains the same: clear the way for the true freedom of the farmer. 3 At the core of the case is Hacienda Luisita de Tarlac (Hacienda Luisita), once a 6,443-hectare
Land reform, or the broader term "agrarian reform," has been a government policy even before mixed agricultural-industrial-residential expanse straddling several municipalities of Tarlac
the Commonwealth era. In fact, at the onset of the American regime, initial steps toward land and owned by Compañia General de Tabacos de Filipinas (Tabacalera). In 1957, the Spanish
reform were already taken to address social unrest.4 Then, under the 1935 Constitution, owners of Tabacalera offered to sell Hacienda Luisita as well as their controlling interest in the
specific provisions on social justice and expropriation of landed estates for distribution to sugar mill within the hacienda, the Central Azucarera de Tarlac (CAT), as an indivisible
tenants as a solution to land ownership and tenancy issues were incorporated. transaction. The Tarlac Development Corporation (Tadeco), then owned and/or controlled by
In 1955, the Land Reform Act (Republic Act No. [RA] 1400) was passed, setting in motion the Jose Cojuangco, Sr. Group, was willing to buy. As agreed upon, Tadeco undertook to pay
the expropriation of all tenanted estates.5 the purchase price for Hacienda Luisita in pesos, while that for the controlling interest in CAT,
On August 8, 1963, the Agricultural Land Reform Code (RA 3844) was enacted, 6 abolishing in US dollars.19
share tenancy and converting all instances of share tenancy into leasehold tenancy. 7 RA 3844 To facilitate the adverted sale-and-purchase package, the Philippine government, through the
created the Land Bank of the Philippines (LBP) to provide support in all phases of agrarian then Central Bank of the Philippines, assisted the buyer to obtain a dollar loan from a US
reform. bank.20 Also, the Government Service Insurance System (GSIS) Board of Trustees extended
As its major thrust, RA 3844 aimed to create a system of owner-cultivatorship in rice and on November 27, 1957 a PhP 5.911 million loan in favor of Tadeco to pay the peso price
corn, supposedly to be accomplished by expropriating lands in excess of 75 hectares for their component of the sale. One of the conditions contained in the approving GSIS Resolution No.
eventual resale to tenants. The law, however, had this restricting feature: its operations were 3203, as later amended by Resolution No. 356, Series of 1958, reads as follows:
confined mainly to areas in Central Luzon, and its implementation at any level of intensity That the lots comprising the Hacienda Luisita shall be subdivided by the applicant-corporation
limited to the pilot project in Nueva Ecija.8 and sold at cost to the tenants, should there be any, and whenever conditions should exist
Subsequently, Congress passed the Code of Agrarian Reform (RA 6389) declaring the entire warranting such action under the provisions of the Land Tenure Act;21
country a land reform area, and providing for the automatic conversion of tenancy to leasehold As of March 31, 1958, Tadeco had fully paid the purchase price for the acquisition of
tenancy in all areas. From 75 hectares, the retention limit was cut down to seven hectares. 9 Hacienda Luisita and Tabacalera’s interest in CAT.22
Barely a month after declaring martial law in September 1972, then President Ferdinand The details of the events that happened next involving the hacienda and the political color
Marcos issued Presidential Decree No. 27 (PD 27) for the "emancipation of the tiller from the some of the parties embossed are of minimal significance to this narration and need no
bondage of the soil."10 Based on this issuance, tenant-farmers, depending on the size of the belaboring. Suffice it to state that on May 7, 1980, the martial law administration filed a suit
landholding worked on, can either purchase the land they tilled or shift from share to fixed- before the Manila Regional Trial Court (RTC) against Tadeco, et al., for them to surrender
rent leasehold tenancy.11 While touted as "revolutionary," the scope of the agrarian reform Hacienda Luisita to the then Ministry of Agrarian Reform (MAR, now the Department of
program PD 27 enunciated covered only tenanted, privately-owned rice and corn lands.12 Agrarian Reform [DAR]) so that the land can be distributed to farmers at cost. Responding,
Then came the revolutionary government of then President Corazon C. Aquino and the Tadeco or its owners alleged that Hacienda Luisita does not have tenants, besides which sugar
drafting and eventual ratification of the 1987 Constitution. Its provisions foreshadowed the 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 (c) Any shares acquired by such workers and beneficiaries shall have the same rights
political message to the family of the late Benigno Aquino, Jr. 23 and features as all other shares; and
Eventually, the Manila RTC rendered judgment ordering Tadeco to surrender Hacienda (d) Any transfer of shares of stocks by the original beneficiaries shall be void ab
Luisita to the MAR. Therefrom, Tadeco appealed to the Court of Appeals (CA). initio unless said transaction is in favor of a qualified and registered beneficiary
On March 17, 1988, the Office of the Solicitor General (OSG) moved to withdraw the within the same corporation.
government’s case against Tadeco, et al. By Resolution of May 18, 1988, the CA dismissed If within two (2) years from the approval of this Act, the [voluntary] land or stock transfer
the case the Marcos government initially instituted and won against Tadeco, et al. The envisioned above is not made or realized or the plan for such stock distribution approved by
dismissal action was, however, made subject to the obtention by Tadeco of the PARC’s the PARC within the same period, the agricultural land of the corporate owners or corporation
approval of a stock distribution plan (SDP) that must initially be implemented after such shall be subject to the compulsory coverage of this Act. (Emphasis added.)
approval shall have been secured.24 The appellate court wrote: Vis-à-vis the stock distribution aspect of the aforequoted Sec. 31, DAR issued Administrative
The defendants-appellants x x x filed a motion on April 13, 1988 joining the x x x Order No. 10, Series of 1988 (DAO 10),27 entitled Guidelines and Procedures for Corporate
governmental agencies concerned in moving for the dismissal of the case subject, however, to Landowners Desiring to Avail Themselves of the Stock Distribution Plan under Section 31 of
the following conditions embodied in the letter dated April 8, 1988 (Annex 2) of the Secretary RA 6657.
of the [DAR] quoted, as follows: From the start, the stock distribution scheme appeared to be Tadeco’s preferred option, for, on
1. Should TADECO fail to obtain approval of the stock distribution plan for failure August 23, 1988,28 it organized a spin-off corporation, HLI, as vehicle to facilitate stock
to comply with all the requirements for corporate landowners set forth in the acquisition by the farmworkers. For this purpose, Tadeco assigned and conveyed to HLI the
guidelines issued by the [PARC]: or agricultural land portion (4,915.75 hectares) and other farm-related properties of Hacienda
2. If such stock distribution plan is approved by PARC, but TADECO fails to Luisita in exchange for HLI shares of stock.29
initially implement it. Pedro Cojuangco, Josephine C. Reyes, Teresita C. Lopa, Jose Cojuangco, Jr., and Paz C.
xxxx Teopaco were the incorporators of HLI.30
WHEREFORE, the present case on appeal is hereby dismissed without prejudice, and should To accommodate the assets transfer from Tadeco to HLI, the latter, with the Securities and
be revived if any of the conditions as above set forth is not duly complied with by the Exchange Commission’s (SEC’s) approval, increased its capital stock on May 10, 1989 from
TADECO.25 PhP 1,500,000 divided into 1,500,000 shares with a par value of PhP 1/share to PhP
Markedly, Section 10 of EO 22926 allows corporate landowners, as an alternative to the actual 400,000,000 divided into 400,000,000 shares also with par value of PhP 1/share, 150,000,000
land transfer scheme of CARP, to give qualified beneficiaries the right to purchase shares of of which were to be issued only to qualified and registered beneficiaries of the CARP, and the
stocks of the corporation under a stock ownership arrangement and/or land-to-share ratio. remaining 250,000,000 to any stockholder of the corporation. 31
Like EO 229, RA 6657, under the latter’s Sec. 31, also provides two (2) alternative modalities, As appearing in its proposed SDP, the properties and assets of Tadeco contributed to the
i.e., land or stock transfer, pursuant to either of which the corporate landowner can comply capital stock of HLI, as appraised and approved by the SEC, have an aggregate value of PhP
with CARP, but subject to well-defined conditions and timeline requirements. Sec. 31 of RA 590,554,220, or after deducting the total liabilities of the farm amounting to PhP 235,422,758,
6657 provides: a net value of PhP 355,531,462. This translated to 355,531,462 shares with a par value of PhP
SEC. 31. Corporate Landowners.¾Corporate landowners may voluntarily transfer ownership 1/share.32
over their agricultural landholdings to the Republic of the Philippines pursuant to Section 20 On May 9, 1989, some 93% of the then farmworker-beneficiaries (FWBs) complement of
hereof or to qualified beneficiaries x x x. Hacienda Luisita signified in a referendum their acceptance of the proposed HLI’s Stock
Upon certification by the DAR, corporations owning agricultural lands may give their Distribution Option Plan. On May 11, 1989, the Stock Distribution Option Agreement
qualified beneficiaries the right to purchase such proportion of the capital stock of the (SDOA), styled as a Memorandum of Agreement (MOA),33 was entered into by Tadeco, HLI,
corporation that the agricultural land, actually devoted to agricultural activities, bears in and the 5,848 qualified FWBs34 and attested to by then DAR Secretary Philip Juico. The
relation to the company’s total assets, under such terms and conditions as may be agreed SDOA embodied the basis and mechanics of the SDP, which would eventually be submitted to
upon by them. In no case shall the compensation received by the workers at the time the shares the PARC for approval. In the SDOA, the parties agreed to the following:
of stocks are distributed be reduced. x x x 1. The percentage of the value of the agricultural land of Hacienda Luisita
Corporations or associations which voluntarily divest a proportion of their capital stock, equity (P196,630,000.00) in relation to the total assets (P590,554,220.00) transferred and
or participation in favor of their workers or other qualified beneficiaries under this section conveyed to the SECOND PARTY [HLI] is 33.296% that, under the law, is the
shall be deemed to have complied with the provisions of this Act: Provided, That the proportion of the outstanding capital stock of the SECOND PARTY, which is
following conditions are complied with: P355,531,462.00 or 355,531,462 shares with a par value of P1.00 per share, that has
(a) In order to safeguard the right of beneficiaries who own shares of stocks to to be distributed to the THIRD PARTY [FWBs] under the stock distribution plan,
dividends and other financial benefits, the books of the corporation or association the said 33.296% thereof being P118,391,976.85 or 118,391,976.85 shares.
shall be subject to periodic audit by certified public accountants chosen by the 2. The qualified beneficiaries of the stock distribution plan shall be the farmworkers
beneficiaries; who appear in the annual payroll, inclusive of the permanent and seasonal
(b) Irrespective of the value of their equity in the corporation or association, the employees, who are regularly or periodically employed by the SECOND PARTY.
beneficiaries shall be assured of at least one (1) representative in the board of 3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY
directors, or in a management or executive committee, if one exists, of the shall arrange with the FIRST PARTY [Tadeco] the acquisition and distribution to
corporation or association; 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 2. That a safeguard shall be provided by [Tadeco]/HLI against the dilution of the
the entire block of 118,391,976.85 shares shall have been completely acquired and percentage shareholdings of the [FWBs], i.e., that the 33% shareholdings of the
distributed to the THIRD PARTY. [FWBs] will be maintained at any given time;
4.The SECOND PARTY shall guarantee to the qualified beneficiaries of the [SDP] 3. That the mechanics for distributing the stocks be explicitly stated in the [MOA]
that every year they will receive on top of their regular compensation, an amount signed between the [Tadeco], HLI and its [FWBs] prior to the implementation of the
that approximates the equivalent of three (3%) of the total gross sales from the stock plan;
production of the agricultural land, whether it be in the form of cash dividends or 4. That the stock distribution plan provide for clear and definite terms for
incentive bonuses or both. determining the actual number of seats to be allocated for the [FWBs] in the HLI
5. Even if only a part or fraction of the shares earmarked for distribution will have Board;
been acquired from the FIRST PARTY and distributed to the THIRD PARTY, 5. That HLI provide guidelines and a timetable for the distribution of homelots to
FIRST PARTY shall execute at the beginning of each fiscal year an irrevocable qualified [FWBs]; and
proxy, valid and effective for one (1) year, in favor of the farmworkers appearing as 6. That the 3% cash dividends mentioned in the [SDP] be expressly provided for [in]
shareholders of the SECOND PARTY at the start of said year which will empower the MOA.
the THIRD PARTY or their representative to vote in stockholders’ and board of In a letter-reply of November 14, 1989 to Sec. Defensor-Santiago, Tadeco/HLI explained that
directors’ meetings of the SECOND PARTY convened during the year the entire the proposed revisions of the SDP are already embodied in both the SDP and
33.296% of the outstanding capital stock of the SECOND PARTY earmarked for MOA.39 Following that exchange, the PARC, under then Sec. Defensor-Santiago,
distribution and thus be able to gain such number of seats in the board of directors of by Resolution No. 89-12-240 dated November 21, 1989, approved the SDP of Tadeco/HLI. 41
the SECOND PARTY that the whole 33.296% of the shares subject to distribution At the time of the SDP approval, HLI had a pool of farmworkers, numbering 6,296, more or
will be entitled to. less, composed of permanent, seasonal and casual master list/payroll and non-master list
6. In addition, the SECOND PARTY shall within a reasonable time subdivide and members.
allocate for free and without charge among the qualified family-beneficiaries From 1989 to 2005, HLI claimed to have extended the following benefits to the FWBs:
residing in the place where the agricultural land is situated, residential or homelots (a) 3 billion pesos (P3,000,000,000) worth of salaries, wages and fringe benefits
of not more than 240 sq.m. each, with each family-beneficiary being assured of (b) 59 million shares of stock distributed for free to the FWBs;
receiving and owning a homelot in the barangay where it actually resides on the date (c) 150 million pesos (P150,000,000) representing 3% of the gross produce;
of the execution of this Agreement. (d) 37.5 million pesos (P37,500,000) representing 3% from the sale of 500 hectares
7. This Agreement is entered into by the parties in the spirit of the (C.A.R.P.) of the of converted agricultural land of Hacienda Luisita;
government and with the supervision of the [DAR], with the end in view of (e) 240-square meter homelots distributed for free;
improving the lot of the qualified beneficiaries of the [SDP] and obtaining for them (f) 2.4 million pesos (P2,400,000) representing 3% from the sale of 80 hectares at 80
greater benefits. (Emphasis added.) million pesos (P80,000,000) for the SCTEX;
As may be gleaned from the SDOA, included as part of the distribution plan are: (a) (g) Social service benefits, such as but not limited to free
production-sharing equivalent to three percent (3%) of gross sales from the production of the hospitalization/medical/maternity services, old age/death benefits and no interest
agricultural land payable to the FWBs in cash dividends or incentive bonus; and (b) bearing salary/educational loans and rice sugar accounts. 42
distribution of free homelots of not more than 240 square meters each to family-beneficiaries. Two separate groups subsequently contested this claim of HLI.
The production-sharing, as the SDP indicated, is payable "irrespective of whether [HLI] makes On August 15, 1995, HLI applied for the conversion of 500 hectares of land of the hacienda
money or not," implying that the benefits do not partake the nature of dividends, as the term is from agricultural to industrial use,43 pursuant to Sec. 65 of RA 6657, providing:
ordinarily understood under corporation law. SEC. 65. Conversion of Lands.¾After the lapse of five (5) years from its award, when the land
While a little bit hard to follow, given that, during the period material, the assigned value of ceases to be economically feasible and sound for agricultural purposes, or the locality has
the agricultural land in the hacienda was PhP 196.63 million, while the total assets of HLI was become urbanized and the land will have a greater economic value for residential, commercial
PhP 590.55 million with net assets of PhP 355.53 million, Tadeco/HLI would admit that the or industrial purposes, the DAR, upon application of the beneficiary or the landowner, with
ratio of the land-to-shares of stock corresponds to 33.3% of the outstanding capital stock of the due notice to the affected parties, and subject to existing laws, may authorize the
HLI equivalent to 118,391,976.85 shares of stock with a par value of PhP 1/share. reclassification, or conversion of the land and its disposition: Provided, That the beneficiary
Subsequently, HLI submitted to DAR its SDP, designated as "Proposal for Stock Distribution shall have fully paid its obligation.
under C.A.R.P.,"35which was substantially based on the SDOA. The application, according to HLI, had the backing of 5,000 or so FWBs, including respondent
Notably, in a follow-up referendum the DAR conducted on October 14, 1989, 5,117 FWBs, Rene Galang, and Jose Julio Suniga, as evidenced by the Manifesto of Support they signed and
out of 5,315 who participated, opted to receive shares in HLI. 36 One hundred thirty-two (132) which was submitted to the DAR.44After the usual processing, the DAR, thru then Sec.
chose actual land distribution.37 Ernesto Garilao, approved the application on August 14, 1996, per DAR Conversion Order
After a review of the SDP, then DAR Secretary Miriam Defensor-Santiago (Sec. Defensor- No. 030601074-764-(95), Series of 1996,45 subject to payment of three percent (3%) of the
Santiago) addressed a letter dated November 6, 198938 to Pedro S. Cojuangco (Cojuangco), gross selling price to the FWBs and to HLI’s continued compliance with its undertakings
then Tadeco president, proposing that the SDP be revised, along the following lines: under the SDP, among other conditions.
1. That over the implementation period of the [SDP], [Tadeco]/HLI shall ensure that On December 13, 1996, HLI, in exchange for subscription of 12,000,000 shares of stocks of
there will be no dilution in the shares of stocks of individual [FWBs]; Centennary Holdings, Inc. (Centennary), ceded 300 hectares of the converted area to the
latter.46 Consequently, HLI’s Transfer Certificate of Title (TCT) No. 287910 47 was canceled
and TCT No. 29209148 was issued in the name of Centennary. HLI transferred the remaining After investigation and evaluation, the Special Task Force submitted its "Terminal Report:
200 hectares covered by TCT No. 287909 to Luisita Realty Corporation (LRC) 49 in two Hacienda Luisita, Incorporated (HLI) Stock Distribution Plan (SDP) Conflict"64 dated
separate transactions in 1997 and 1998, both uniformly involving 100 hectares for PhP 250 September 22, 2005 (Terminal Report), finding that HLI has not complied with its obligations
million each.50 under RA 6657 despite the implementation of the SDP.65 The Terminal Report and the Special
Centennary, a corporation with an authorized capital stock of PhP 12,100,000 divided into Task Force’s recommendations were adopted by then DAR Sec. Nasser Pangandaman (Sec.
12,100,000 shares and wholly-owned by HLI, had the following incorporators: Pedro Pangandaman).66
Cojuangco, Josephine C. Reyes, Teresita C. Lopa, Ernesto G. Teopaco, and Bernardo R. Subsequently, Sec. Pangandaman recommended to the PARC Executive Committee (Excom)
Lahoz. (a) the recall/revocation of PARC Resolution No. 89-12-2 dated November 21, 1989
Subsequently, Centennary sold51 the entire 300 hectares to Luisita Industrial Park Corporation approving HLI’s SDP; and (b) the acquisition of Hacienda Luisita through the compulsory
(LIPCO) for PhP 750 million. The latter acquired it for the purpose of developing an industrial acquisition scheme. Following review, the PARC Validation Committee favorably endorsed
complex.52 As a result, Centennary’s TCT No. 292091 was canceled to be replaced by TCT the DAR Secretary’s recommendation afore-stated.67
No. 31098653 in the name of LIPCO. On December 22, 2005, the PARC issued the assailed Resolution No. 2005-32-01, disposing
From the area covered by TCT No. 310986 was carved out two (2) parcels, for which two (2) as follows:
separate titles were issued in the name of LIPCO, specifically: (a) TCT No. 36580054 and (b) NOW, THEREFORE, on motion duly seconded, RESOLVED, as it is HEREBY RESOLVED,
TCT No. 365801,55 covering 180 and four hectares, respectively. TCT No. 310986 was, to approve and confirm the recommendation of the PARC Executive Committee adopting in
accordingly, partially canceled. toto the report of the PARC ExCom Validation Committee affirming the recommendation of
Later on, in a Deed of Absolute Assignment dated November 25, 2004, LIPCO transferred the the DAR to recall/revoke the SDO plan of Tarlac Development Corporation/Hacienda Luisita
parcels covered by its TCT Nos. 365800 and 365801 to the Rizal Commercial Banking Incorporated.
Corporation (RCBC) by way of dacion en pago in payment of LIPCO’s PhP 431,695,732.10 RESOLVED, further, that the lands subject of the recalled/revoked TDC/HLI SDO plan be
loan obligations. LIPCO’s titles were canceled and new ones, TCT Nos. 391051 and 391052, forthwith placed under the compulsory coverage or mandated land acquisition scheme of the
were issued to RCBC. [CARP].
Apart from the 500 hectares alluded to, another 80.51 hectares were later detached from the APPROVED.68
area coverage of Hacienda Luisita which had been acquired by the government as part of the A copy of Resolution No. 2005-32-01 was served on HLI the following day, December 23,
Subic-Clark-Tarlac Expressway (SCTEX) complex. In absolute terms, 4,335.75 hectares without any copy of the documents adverted to in the resolution attached. A letter-request
remained of the original 4,915 hectares Tadeco ceded to HLI.56 dated December 28, 200569 for certified copies of said documents was sent to, but was not
Such, in short, was the state of things when two separate petitions, both undated, reached the acted upon by, the PARC secretariat.
DAR in the latter part of 2003. In the first, denominated as Petition/Protest,57 respondents Jose Therefrom, HLI, on January 2, 2006, sought reconsideration. 70 On the same day, the DAR
Julio Suniga and Windsor Andaya, identifying themselves as head of the Supervisory Group Tarlac provincial office issued the Notice of Coverage71 which HLI received on January 4,
of HLI (Supervisory Group), and 60 other supervisors sought to revoke the SDOA, alleging 2006.
that HLI had failed to give them their dividends and the one percent (1%) share in gross sales, Its motion notwithstanding, HLI has filed the instant recourse in light of what it considers as
as well as the thirty-three percent (33%) share in the proceeds of the sale of the converted 500 the DAR’s hasty placing of Hacienda Luisita under CARP even before PARC could rule or
hectares of land. They further claimed that their lives have not improved contrary to the even read the motion for reconsideration.72 As HLI later rued, it "can not know from the
promise and rationale for the adoption of the SDOA. They also cited violations by HLI of the above-quoted resolution the facts and the law upon which it is based."73
SDOA’s terms.58 They prayed for a renegotiation of the SDOA, or, in the alternative, its PARC would eventually deny HLI’s motion for reconsideration via Resolution No. 2006-34-
revocation. 01 dated May 3, 2006.
Revocation and nullification of the SDOA and the distribution of the lands in the hacienda By Resolution of June 14, 2006,74 the Court, acting on HLI’s motion, issued a temporary
were the call in the second petition, styled as Petisyon (Petition).59 The Petisyon was restraining order,75enjoining the implementation of Resolution No. 2005-32-01 and the notice
ostensibly filed on December 4, 2003 by Alyansa ng mga Manggagawang Bukid ng Hacienda of coverage.
Luisita (AMBALA), where the handwritten name of respondents Rene Galang as "Pangulo On July 13, 2006, the OSG, for public respondents PARC and the DAR, filed its
AMBALA" and Noel Mallari as "Sec-Gen. AMBALA"60 appeared. As alleged, the petition Comment76 on the petition.
was filed on behalf of AMBALA’s members purportedly composing about 80% of the 5,339 On December 2, 2006, Noel Mallari, impleaded by HLI as respondent in his capacity as "Sec-
FWBs of Hacienda Luisita. Gen. AMBALA," filed his Manifestation and Motion with Comment Attached dated
HLI would eventually answer61 the petition/protest of the Supervisory Group. On the other December 4, 2006 (Manifestation and Motion).77 In it, Mallari stated that he has broken away
hand, HLI’s answer62 to the AMBALA petition was contained in its letter dated January 21, from AMBALA with other AMBALA ex-members and formed Farmworkers Agrarian
2005 also filed with DAR. Reform Movement, Inc. (FARM).78 Should this shift in alliance deny him standing, Mallari
Meanwhile, the DAR constituted a Special Task Force to attend to issues relating to the SDP also prayed that FARM be allowed to intervene.
of HLI. Among other duties, the Special Task Force was mandated to review the terms and As events would later develop, Mallari had a parting of ways with other FARM members,
conditions of the SDOA and PARC Resolution No. 89-12-2 relative to HLI’s SDP; evaluate particularly would-be intervenors Renato Lalic, et al. As things stand, Mallari returned to the
HLI’s compliance reports; evaluate the merits of the petitions for the revocation of the SDP; AMBALA fold, creating the AMBALA-Noel Mallari faction and leaving Renato Lalic, et al.
conduct ocular inspections or field investigations; and recommend appropriate remedial as the remaining members of FARM who sought to intervene.
measures for approval of the Secretary.63 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 RESPONDENT PARC COMMITTED GRAVE ABUSE OF DISCRETION
Attached Petition-In-Intervention dated October 18, 2007.81 LIPCO later followed with a AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT DID NOT
similar motion.82 In both motions, RCBC and LIPCO contended that the assailed resolution EXCLUDE THE SUBJECT PROPERTY FROM THE COVERAGE OF THE
effectively nullified the TCTs under their respective names as the properties covered in the CARP DESPITE THE FACT THAT PETITIONER-INTERVENOR RCBC HAS
TCTs were veritably included in the January 2, 2006 notice of coverage. In the main, they ACQUIRED VESTED RIGHTS AND INDEFEASIBLE TITLE OVER THE
claimed that the revocation of the SDP cannot legally affect their rights as innocent purchasers SUBJECT PROPERTY AS AN INNOCENT PURCHASER FOR VALUE.
for value. Both motions for leave to intervene were granted and the corresponding petitions-in- A. THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE
intervention admitted. NOTICE OF COVERAGE DATED 02 JANUARY 2006 HAVE THE
On August 18, 2010, the Court heard the main and intervening petitioners on oral arguments. EFFECT OF NULLIFYING TCT NOS. 391051 AND 391052 IN THE
On the other hand, the Court, on August 24, 2010, heard public respondents as well as the NAME OF PETITIONER-INTERVENOR RCBC.
respective counsels of the AMBALA-Mallari-Supervisory Group, the AMBALA-Galang B. AS AN INNOCENT PURCHASER FOR VALUE, PETITIONER-
faction, and the FARM and its 27 members83 argue their case. INTERVENOR RCBC CANNOT BE PREJUDICED BY A
Prior to the oral arguments, however, HLI; AMBALA, represented by Mallari; the SUBSEQUENT REVOCATION OR RESCISSION OF THE SDOA.
Supervisory Group, represented by Suniga and Andaya; and the United Luisita Workers II.
Union, represented by Eldifonso Pingol, filed with the Court a joint submission and motion for THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE NOTICE OF
approval of a Compromise Agreement (English and Tagalog versions) dated August 6, 2010. COVERAGE DATED 02 JANUARY 2006 WERE ISSUED WITHOUT
On August 31, 2010, the Court, in a bid to resolve the dispute through an amicable settlement, AFFORDING PETITIONER-INTERVENOR RCBC ITS RIGHT TO DUE
issued a Resolution84 creating a Mediation Panel composed of then Associate Justice Ma. PROCESS AS AN INNOCENT PURCHASER FOR VALUE.
Alicia Austria-Martinez, as chairperson, and former CA Justices Hector Hofileña and Teresita LIPCO, like RCBC, asserts having acquired vested and indefeasible rights over certain
Dy-Liacco Flores, as members. Meetings on five (5) separate dates, i.e., September 8, 9, 14, portions of the converted property, and, hence, would ascribe on PARC the commission of
20, and 27, 2010, were conducted. Despite persevering and painstaking efforts on the part of grave abuse of discretion when it included those portions in the notice of coverage. And apart
the panel, mediation had to be discontinued when no acceptable agreement could be reached. from raising issues identical with those of HLI, such as but not limited to the absence of valid
The Issues grounds to warrant the rescission and/or revocation of the SDP, LIPCO would allege that the
HLI raises the following issues for our consideration: assailed resolution and the notice of coverage were issued without affording it the right to due
I. process as an innocent purchaser for value. The government, LIPCO also argues, is estopped
WHETHER OR NOT PUBLIC RESPONDENTS PARC AND SECRETARY from recovering properties which have since passed to innocent parties.
PANGANDAMAN HAVE JURISDICTION, POWER AND/OR AUTHORITY TO Simply formulated, the principal determinative issues tendered in the main petition and to
NULLIFY, RECALL, REVOKE OR RESCIND THE SDOA. which all other related questions must yield boil down to the following: (1) matters of
II. standing; (2) the constitutionality of Sec. 31 of RA 6657; (3) the jurisdiction of PARC to recall
[IF SO], x x x CAN THEY STILL EXERCISE SUCH JURISDICTION, POWER or revoke HLI’s SDP; (4) the validity or propriety of such recall or revocatory action; and (5)
AND/OR AUTHORITY AT THIS TIME, I.E., AFTER SIXTEEN (16) YEARS corollary to (4), the validity of the terms and conditions of the SDP, as embodied in the
FROM THE EXECUTION OF THE SDOA AND ITS IMPLEMENTATION SDOA.
WITHOUT VIOLATING SECTIONS 1 AND 10 OF ARTICLE III (BILL OF Our Ruling
RIGHTS) OF THE CONSTITUTION AGAINST DEPRIVATION OF PROPERTY I.
WITHOUT DUE PROCESS OF LAW AND THE IMPAIRMENT OF We first proceed to the examination of the preliminary issues before delving on the more
CONTRACTUAL RIGHTS AND OBLIGATIONS? MOREOVER, ARE THERE serious challenges bearing on the validity of PARC’s assailed issuance and the grounds for it.
LEGAL GROUNDS UNDER THE CIVIL CODE, viz, ARTICLE 1191 x x x, Supervisory Group, AMBALA and their
ARTICLES 1380, 1381 AND 1382 x x x ARTICLE 1390 x x x AND ARTICLE respective leaders are real parties-in-interest
1409 x x x THAT CAN BE INVOKED TO NULLIFY, RECALL, REVOKE, OR HLI would deny real party-in-interest status to the purported leaders of the Supervisory Group
RESCIND THE SDOA? and AMBALA, i.e., Julio Suniga, Windsor Andaya, and Rene Galang, who filed the
III. revocatory petitions before the DAR. As HLI would have it, Galang, the self-styled head of
WHETHER THE PETITIONS TO NULLIFY, RECALL, REVOKE OR RESCIND AMBALA, gained HLI employment in June 1990 and, thus, could not have been a party to the
THE SDOA HAVE ANY LEGAL BASIS OR GROUNDS AND WHETHER THE SDOA executed a year earlier.85 As regards the Supervisory Group, HLI alleges that
PETITIONERS THEREIN ARE THE REAL PARTIES-IN-INTEREST TO FILE supervisors are not regular farmworkers, but the company nonetheless considered them FWBs
SAID PETITIONS. under the SDOA as a mere concession to enable them to enjoy the same benefits given
IV. qualified regular farmworkers. However, if the SDOA would be canceled and land distribution
WHETHER THE RIGHTS, OBLIGATIONS AND REMEDIES OF THE effected, so HLI claims, citing Fortich v. Corona,86 the supervisors would be excluded from
PARTIES TO THE SDOA ARE NOW GOVERNED BY THE receiving lands as farmworkers other than the regular farmworkers who are merely entitled to
CORPORATION CODE (BATAS PAMBANSA BLG. 68) AND NOT BY THE the "fruits of the land."87
x x x [CARL] x x x. The SDOA no less identifies "the SDP qualified beneficiaries" as "the farmworkers who
On the other hand, RCBC submits the following issues: appear in the annual payroll, inclusive of the permanent and seasonal employees, who are
I. 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 do not explicitly vest the PARC with the power to revoke/recall an approved SDP. Such power
definition of a real party-in-interest under Sec. 2, Rule 3 of the Rules of Court, meaning, one or authority, however, is deemed possessed by PARC under the principle of necessary
who stands to be benefited or injured by the judgment in the suit or is the party entitled to the implication, a basic postulate that what is implied in a statute is as much a part of it as that
avails of the suit. which is expressed.94
The same holds true with respect to the Supervisory Group whose members were admittedly We have explained that "every statute is understood, by implication, to contain all such
employed by HLI and whose names and signatures even appeared in the annex of the SDOA. provisions as may be necessary to effectuate its object and purpose, or to make effective
Being qualified beneficiaries of the SDP, Suniga and the other 61 supervisors are certainly rights, powers, privileges or jurisdiction which it grants, including all such collateral and
parties who would benefit or be prejudiced by the judgment recalling the SDP or replacing it subsidiary consequences as may be fairly and logically inferred from its terms."95 Further,
with some other modality to comply with RA 6657. "every statutory grant of power, right or privilege is deemed to include all incidental power,
Even assuming that members of the Supervisory Group are not regular farmworkers, but are in right or privilege.96
the category of "other farmworkers" mentioned in Sec. 4, Article XIII of the Gordon v. Veridiano II is instructive:
Constitution,89 thus only entitled to a share of the fruits of the land, as indeed Fortich teaches, The power to approve a license includes by implication, even if not expressly granted, the
this does not detract from the fact that they are still identified as being among the "SDP power to revoke it. By extension, the power to revoke is limited by the authority to grant the
qualified beneficiaries." As such, they are, thus, entitled to bring an action upon the SDP. 90 At license, from which it is derived in the first place. Thus, if the FDA grants a license upon its
any rate, the following admission made by Atty. Gener Asuncion, counsel of HLI, during the finding that the applicant drug store has complied with the requirements of the general laws
oral arguments should put to rest any lingering doubt as to the status of protesters Galang, and the implementing administrative rules and regulations, it is only for their violation that the
Suniga, and Andaya: FDA may revoke the said license. By the same token, having granted the permit upon his
Justice Bersamin: x x x I heard you a while ago that you were conceding the qualified farmer ascertainment that the conditions thereof as applied x x x have been complied with, it is only
beneficiaries of Hacienda Luisita were real parties in interest? for the violation of such conditions that the mayor may revoke the said permit. 97 (Emphasis
Atty. Asuncion: Yes, Your Honor please, real party in interest which that question refers to the supplied.)
complaints of protest initiated before the DAR and the real party in interest there be Following the doctrine of necessary implication, it may be stated that the conferment of
considered as possessed by the farmer beneficiaries who initiated the protest. 91 express power to approve a plan for stock distribution of the agricultural land of corporate
Further, under Sec. 50, paragraph 4 of RA 6657, farmer-leaders are expressly allowed to owners necessarily includes the power to revoke or recall the approval of the plan.
represent themselves, their fellow farmers or their organizations in any proceedings before the As public respondents aptly observe, to deny PARC such revocatory power would reduce it
DAR. Specifically: into a toothless agency of CARP, because the very same agency tasked to ensure compliance
SEC. 50. Quasi-Judicial Powers of the DAR.¾x x x by the corporate landowner with the approved SDP would be without authority to impose
xxxx sanctions for non-compliance with it.98 With the view We take of the case, only PARC can
Responsible farmer leaders shall be allowed to represent themselves, their fellow farmers effect such revocation. The DAR Secretary, by his own authority as such, cannot plausibly do
or their organizations in any proceedings before the DAR: Provided, however, that when so, as the acceptance and/or approval of the SDP sought to be taken back or undone is the act
there are two or more representatives for any individual or group, the representatives should of PARC whose official composition includes, no less, the President as chair, the DAR
choose only one among themselves to represent such party or group before any DAR Secretary as vice-chair, and at least eleven (11) other department heads.99
proceedings. (Emphasis supplied.) On another but related issue, the HLI foists on the Court the argument that subjecting its
Clearly, the respective leaders of the Supervisory Group and AMBALA are contextually real landholdings to compulsory distribution after its approved SDP has been implemented would
parties-in-interest allowed by law to file a petition before the DAR or PARC. impair the contractual obligations created under the SDOA.
This is not necessarily to say, however, that Galang represents AMBALA, for as records show The broad sweep of HLI’s argument ignores certain established legal precepts and must,
and as HLI aptly noted,92 his "petisyon" filed with DAR did not carry the usual authorization therefore, be rejected.
of the individuals in whose behalf it was supposed to have been instituted. To date, such A law authorizing interference, when appropriate, in the contractual relations between or
authorization document, which would logically include a list of the names of the authorizing among parties is deemed read into the contract and its implementation cannot successfully be
FWBs, has yet to be submitted to be part of the records. resisted by force of the non-impairment guarantee. There is, in that instance, no impingement
PARC’s Authority to Revoke a Stock Distribution Plan of the impairment clause, the non-impairment protection being applicable only to laws that
On the postulate that the subject jurisdiction is conferred by law, HLI maintains that PARC is derogate prior acts or contracts by enlarging, abridging or in any manner changing the
without authority to revoke an SDP, for neither RA 6657 nor EO 229 expressly vests PARC intention of the parties. Impairment, in fine, obtains if a subsequent law changes the terms of a
with such authority. While, as HLI argued, EO 229 empowers PARC to approve the plan for contract between the parties, imposes new conditions, dispenses with those agreed upon or
stock distribution in appropriate cases, the empowerment only includes the power to withdraws existing remedies for the enforcement of the rights of the parties. 100 Necessarily, the
disapprove, but not to recall its previous approval of the SDP after it has been implemented by constitutional proscription would not apply to laws already in effect at the time of contract
the parties.93 To HLI, it is the court which has jurisdiction and authority to order the execution, as in the case of RA 6657, in relation to DAO 10, vis-à-vis HLI’s SDOA. As held
revocation or rescission of the PARC-approved SDP. in Serrano v. Gallant Maritime Services, Inc.:
We disagree. The prohibition [against impairment of the obligation of contracts] is aligned with the general
Under Sec. 31 of RA 6657, as implemented by DAO 10, the authority to approve the plan for principle that laws newly enacted have only a prospective operation, and cannot affect acts or
stock distribution of the corporate landowner belongs to PARC. However, contrary to contracts already perfected; however, as to laws already in existence, their provisions are read
petitioner HLI’s posture, PARC also has the power to revoke the SDP which it previously into contracts and deemed a part thereof. Thus, the non-impairment clause under Section 10,
approved. It may be, as urged, that RA 6657 or other executive issuances on agrarian reform 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 Report of the Special Task Force, as endorsed by PARC Excom. But first, the matter of the
changing the intention of the parties thereto.101 (Emphasis supplied.) constitutionality of said section.
Needless to stress, the assailed Resolution No. 2005-32-01 is not the kind of issuance within Constitutional Issue
the ambit of Sec. 10, Art. III of the Constitution providing that "[n]o law impairing the FARM asks for the invalidation of Sec. 31 of RA 6657, insofar as it affords the corporation, as
obligation of contracts shall be passed." a mode of CARP compliance, to resort to stock distribution, an arrangement which, to FARM,
Parenthetically, HLI tags the SDOA as an ordinary civil law contract and, as such, a breach of impairs the fundamental right of farmers and farmworkers under Sec. 4, Art. XIII of the
its terms and conditions is not a PARC administrative matter, but one that gives rise to a cause Constitution.106
of action cognizable by regular courts.102 This contention has little to commend itself. The To a more specific, but direct point, FARM argues that Sec. 31 of RA 6657 permits stock
SDOA is a special contract imbued with public interest, entered into and crafted pursuant to transfer in lieu of outright agricultural land transfer; in fine, there is stock certificate ownership
the provisions of RA 6657. It embodies the SDP, which requires for its validity, or at least its of the farmers or farmworkers instead of them owning the land, as envisaged in the
enforceability, PARC’s approval. And the fact that the certificate of compliance 103––to be Constitution. For FARM, this modality of distribution is an anomaly to be annulled for being
issued by agrarian authorities upon completion of the distribution of stocks––is revocable by inconsistent with the basic concept of agrarian reform ingrained in Sec. 4, Art. XIII of the
the same issuing authority supports the idea that everything about the implementation of the Constitution.107
SDP is, at the first instance, subject to administrative adjudication. Reacting, HLI insists that agrarian reform is not only about transfer of land ownership to
HLI also parlays the notion that the parties to the SDOA should now look to the Corporation farmers and other qualified beneficiaries. It draws attention in this regard to Sec. 3(a) of RA
Code, instead of to RA 6657, in determining their rights, obligations and remedies. The Code, 6657 on the concept and scope of the term "agrarian reform." The constitutionality of a law,
it adds, should be the applicable law on the disposition of the agricultural land of HLI. HLI added, cannot, as here, be attacked collaterally.
Contrary to the view of HLI, the rights, obligations and remedies of the parties to the SDOA The instant challenge on the constitutionality of Sec. 31 of RA 6657 and necessarily its
embodying the SDP are primarily governed by RA 6657. It should abundantly be made clear counterpart provision in EO 229 must fail as explained below.
that HLI was precisely created in order to comply with RA 6657, which the OSG aptly When the Court is called upon to exercise its power of judicial review over, and pass upon the
described as the "mother law" of the SDOA and the SDP.104 It is, thus, paradoxical for HLI to constitutionality of, acts of the executive or legislative departments, it does so only when the
shield itself from the coverage of CARP by invoking exclusive applicability of the following essential requirements are first met, to wit:
Corporation Code under the guise of being a corporate entity. (1) there is an actual case or controversy;
Without in any way minimizing the relevance of the Corporation Code since the FWBs of HLI (2) that the constitutional question is raised at the earliest possible opportunity by a
are also stockholders, its applicability is limited as the rights of the parties arising from the proper party or one with locus standi; and
SDP should not be made to supplant or circumvent the agrarian reform program. (3) the issue of constitutionality must be the very lis mota of the case.108
Without doubt, the Corporation Code is the general law providing for the formation, Not all the foregoing requirements are satisfied in the case at bar.
organization and regulation of private corporations. On the other hand, RA 6657 is the special While there is indeed an actual case or controversy, intervenor FARM, composed of a small
law on agrarian reform. As between a general and special law, the latter shall prevail— minority of 27 farmers, has yet to explain its failure to challenge the constitutionality of Sec.
generalia specialibus non derogant.105 Besides, the present impasse between HLI and the 3l of RA 6657, since as early as November 21, l989 when PARC approved the SDP of
private respondents is not an intra-corporate dispute which necessitates the application of the Hacienda Luisita or at least within a reasonable time thereafter and why its members received
Corporation Code. What private respondents questioned before the DAR is the proper benefits from the SDP without so much of a protest. It was only on December 4, 2003 or 14
implementation of the SDP and HLI’s compliance with RA 6657. Evidently, RA 6657 should years after approval of the SDP via PARC Resolution No. 89-12-2 dated November 21, 1989
be the applicable law to the instant case. that said plan and approving resolution were sought to be revoked, but not, to stress, by FARM
HLI further contends that the inclusion of the agricultural land of Hacienda Luisita under the or any of its members, but by petitioner AMBALA. Furthermore, the AMBALA petition did
coverage of CARP and the eventual distribution of the land to the FWBs would amount to a NOT question the constitutionality of Sec. 31 of RA 6657, but concentrated on the purported
disposition of all or practically all of the corporate assets of HLI. HLI would add that this flaws and gaps in the subsequent implementation of the SDP. Even the public respondents, as
contingency, if ever it comes to pass, requires the applicability of the Corporation Code represented by the Solicitor General, did not question the constitutionality of the provision. On
provisions on corporate dissolution. the other hand, FARM, whose 27 members formerly belonged to AMBALA, raised the
We are not persuaded. constitutionality of Sec. 31 only on May 3, 2007 when it filed its Supplemental Comment with
Indeed, the provisions of the Corporation Code on corporate dissolution would apply insofar the Court. Thus, it took FARM some eighteen (18) years from November 21, 1989 before it
as the winding up of HLI’s affairs or liquidation of the assets is concerned. However, the mere challenged the constitutionality of Sec. 31 of RA 6657 which is quite too late in the day. The
inclusion of the agricultural land of Hacienda Luisita under the coverage of CARP and the FARM members slept on their rights and even accepted benefits from the SDP with nary a
land’s eventual distribution to the FWBs will not, without more, automatically trigger the complaint on the alleged unconstitutionality of Sec. 31 upon which the benefits were derived.
dissolution of HLI. As stated in the SDOA itself, the percentage of the value of the agricultural The Court cannot now be goaded into resolving a constitutional issue that FARM failed to
land of Hacienda Luisita in relation to the total assets transferred and conveyed by Tadeco to assail after the lapse of a long period of time and the occurrence of numerous events and
HLI comprises only 33.296%, following this equation: value of the agricultural lands divided activities which resulted from the application of an alleged unconstitutional legal provision.
by total corporate assets. By no stretch of imagination would said percentage amount to a It has been emphasized in a number of cases that the question of constitutionality will not be
disposition of all or practically all of HLI’s corporate assets should compulsory land passed upon by the Court unless it is properly raised and presented in an appropriate case at
acquisition and distribution ensue. the first opportunity.109 FARM is, therefore, remiss in belatedly questioning the
This brings us to the validity of the revocation of the approval of the SDP sixteen (16) years constitutionality of Sec. 31 of RA 6657. The second requirement that the constitutional
after its execution pursuant to Sec. 31 of RA 6657 for the reasons set forth in the Terminal 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 allows two (2) modes of land distribution—direct and indirect ownership. Direct transfer to
of the case does not likewise obtain. The lis mota aspect is not present, the constitutional issue individual farmers is the most commonly used method by DAR and widely accepted. Indirect
tendered not being critical to the resolution of the case. The unyielding rule has been to avoid, transfer through collective ownership of the agricultural land is the alternative to direct
whenever plausible, an issue assailing the constitutionality of a statute or governmental ownership of agricultural land by individual farmers. The aforequoted Sec. 4 EXPRESSLY
act.110 If some other grounds exist by which judgment can be made without touching the authorizes collective ownership by farmers. No language can be found in the 1987
constitutionality of a law, such recourse is favored.111 Garcia v. Executive Secretary explains Constitution that disqualifies or prohibits corporations or cooperatives of farmers from being
why: the legal entity through which collective ownership can be exercised. The word "collective" is
Lis Mota — the fourth requirement to satisfy before this Court will undertake judicial review defined as "indicating a number of persons or things considered as constituting one group or
— means that the Court will not pass upon a question of unconstitutionality, although properly aggregate,"115 while "collectively" is defined as "in a collective sense or manner; in a mass or
presented, if the case can be disposed of on some other ground, such as the application of the body."116 By using the word "collectively," the Constitution allows for indirect ownership of
statute or the general law. The petitioner must be able to show that the case cannot be legally land and not just outright agricultural land transfer. This is in recognition of the fact that land
resolved unless the constitutional question raised is determined. This requirement is based on reform may become successful even if it is done through the medium of juridical entities
the rule that every law has in its favor the presumption of constitutionality; to justify its composed of farmers.
nullification, there must be a clear and unequivocal breach of the Constitution, and not one Collective ownership is permitted in two (2) provisions of RA 6657. Its Sec. 29 allows
that is doubtful, speculative, or argumentative.112 (Italics in the original.) workers’ cooperatives or associations to collectively own the land, while the second paragraph
The lis mota in this case, proceeding from the basic positions originally taken by AMBALA of Sec. 31 allows corporations or associations to own agricultural land with the farmers
(to which the FARM members previously belonged) and the Supervisory Group, is the alleged becoming stockholders or members. Said provisions read:
non-compliance by HLI with the conditions of the SDP to support a plea for its revocation. SEC. 29. Farms owned or operated by corporations or other business associations.—In the
And before the Court, the lis mota is whether or not PARC acted in grave abuse of discretion case of farms owned or operated by corporations or other business associations, the following
when it ordered the recall of the SDP for such non-compliance and the fact that the SDP, as rules shall be observed by the PARC.
couched and implemented, offends certain constitutional and statutory provisions. To be sure, In general, lands shall be distributed directly to the individual worker-beneficiaries.
any of these key issues may be resolved without plunging into the constitutionality of Sec. 31 In case it is not economically feasible and sound to divide the land, then it shall be owned
of RA 6657. Moreover, looking deeply into the underlying petitions of AMBALA, et al., it is collectively by the worker beneficiaries who shall form a workers’ cooperative or association
not the said section per se that is invalid, but rather it is the alleged application of the said which will deal with the corporation or business association. x x x (Emphasis supplied.)
provision in the SDP that is flawed. SEC. 31. Corporate Landowners.— x x x
It may be well to note at this juncture that Sec. 5 of RA 9700, 113 amending Sec. 7 of RA 6657, xxxx
has all but superseded Sec. 31 of RA 6657 vis-à-vis the stock distribution component of said Upon certification by the DAR, corporations owning agricultural lands may give their
Sec. 31. In its pertinent part, Sec. 5 of RA 9700 provides: "[T]hat after June 30, 2009, the qualified beneficiaries the right to purchase such proportion of the capital stock of the
modes of acquisition shall be limited to voluntary offer to sell and compulsory acquisition." corporation that the agricultural land, actually devoted to agricultural activities, bears in
Thus, for all intents and purposes, the stock distribution scheme under Sec. 31 of RA 6657 is relation to the company’s total assets, under such terms and conditions as may be agreed upon
no longer an available option under existing law. The question of whether or not it is by them. In no case shall the compensation received by the workers at the time the shares of
unconstitutional should be a moot issue. stocks are distributed be reduced. The same principle shall be applied to associations, with
It is true that the Court, in some cases, has proceeded to resolve constitutional issues otherwise respect to their equity or participation. x x x (Emphasis supplied.)
already moot and academic114 provided the following requisites are present: Clearly, workers’ cooperatives or associations under Sec. 29 of RA 6657 and corporations or
x x x first, there is a grave violation of the Constitution; second, the exceptional character of associations under the succeeding Sec. 31, as differentiated from individual farmers, are
the situation and the paramount public interest is involved; third, when the constitutional issue authorized vehicles for the collective ownership of agricultural land. Cooperatives can be
raised requires formulation of controlling principles to guide the bench, the bar, and the registered with the Cooperative Development Authority and acquire legal personality of their
public; fourth, the case is capable of repetition yet evading review. own, while corporations are juridical persons under the Corporation Code. Thus, Sec. 31 is
These requisites do not obtain in the case at bar. constitutional as it simply implements Sec. 4 of Art. XIII of the Constitution that land can be
For one, there appears to be no breach of the fundamental law. Sec. 4, Article XIII of the owned COLLECTIVELY by farmers. Even the framers of the l987 Constitution are in unison
Constitution reads: with respect to the two (2) modes of ownership of agricultural lands tilled by farmers––
The State shall, by law, undertake an agrarian reform program founded on the right of the DIRECT and COLLECTIVE, thus:
farmers and regular farmworkers, who are landless, to OWN directly or COLLECTIVELY MR. NOLLEDO. And when we talk of the phrase "to own directly," we mean the principle of
THE LANDS THEY TILL or, in the case of other farmworkers, to receive a just share of the direct ownership by the tiller?
fruits thereof. To this end, the State shall encourage and undertake the just distribution of all MR. MONSOD. Yes.
agricultural lands, subject to such priorities and reasonable retention limits as the Congress MR. NOLLEDO. And when we talk of "collectively," we mean communal ownership,
may prescribe, taking into account ecological, developmental, or equity considerations, and stewardship or State ownership?
subject to the payment of just compensation. In determining retention limits, the State shall MS. NIEVA. In this section, we conceive of cooperatives; that is farmers’ cooperatives
respect the right of small landowners. The State shall further provide incentives for voluntary owning the land, not the State.
land-sharing. (Emphasis supplied.) MR. NOLLEDO. And when we talk of "collectively," referring to farmers’ cooperatives, do
The wording of the provision is unequivocal––the farmers and regular farmworkers have a the farmers own specific areas of land where they only unite in their efforts?
right TO OWN DIRECTLY OR COLLECTIVELY THE LANDS THEY TILL. The basic law MS. NIEVA. That is one way.
MR. NOLLEDO. Because I understand that there are two basic systems involved: the FARM contends that the farmers in the stock distribution scheme under Sec. 31 do not own
"moshave" type of agriculture and the "kibbutz." So are both contemplated in the report? the agricultural land but are merely given stock certificates. Thus, the farmers lose control
MR. TADEO. Ang dalawa kasing pamamaraan ng pagpapatupad ng tunay na reporma sa lupa over the land to the board of directors and executive officials of the corporation who actually
ay ang pagmamay-ari ng lupa na hahatiin sa individual na pagmamay-ari – directly – at ang manage the land. They conclude that such arrangement runs counter to the mandate of the
tinatawag na sama-samang gagawin ng mga magbubukid. Tulad sa Negros, ang gusto ng mga Constitution that any agrarian reform must preserve the control over the land in the hands of
magbubukid ay gawin nila itong "cooperative or collective farm." Ang ibig sabihin ay sama- the tiller.
sama nilang sasakahin. This contention has no merit.
xxxx While it is true that the farmer is issued stock certificates and does not directly own the land,
MR. TINGSON. x x x When we speak here of "to own directly or collectively the lands they still, the Corporation Code is clear that the FWB becomes a stockholder who acquires an
till," is this land for the tillers rather than land for the landless? Before, we used to hear "land equitable interest in the assets of the corporation, which include the agricultural lands. It was
for the landless," but now the slogan is "land for the tillers." Is that right? explained that the "equitable interest of the shareholder in the property of the corporation is
MR. TADEO. Ang prinsipyong umiiral dito ay iyong land for the tillers. Ang ibig sabihin ng represented by the term stock, and the extent of his interest is described by the term shares.
"directly" ay tulad sa implementasyon sa rice and corn lands kung saan inaari na ng mga The expression shares of stock when qualified by words indicating number and ownership
magsasaka ang lupang binubungkal nila. Ang ibig sabihin naman ng "collectively" ay sama- expresses the extent of the owner’s interest in the corporate property."119 A share of stock
samang paggawa sa isang lupain o isang bukid, katulad ng sitwasyon sa Negros.117 (Emphasis typifies an aliquot part of the corporation’s property, or the right to share in its proceeds to that
supplied.) extent when distributed according to law and equity and that its holder is not the owner of any
As Commissioner Tadeo explained, the farmers will work on the agricultural land "sama- part of the capital of the corporation.120 However, the FWBs will ultimately own the
sama" or collectively. Thus, the main requisite for collective ownership of land is collective or agricultural lands owned by the corporation when the corporation is eventually dissolved and
group work by farmers of the agricultural land. Irrespective of whether the landowner is a liquidated.
cooperative, association or corporation composed of farmers, as long as concerted group work Anent the alleged loss of control of the farmers over the agricultural land operated and
by the farmers on the land is present, then it falls within the ambit of collective ownership managed by the corporation, a reading of the second paragraph of Sec. 31 shows otherwise.
scheme. Said provision provides that qualified beneficiaries have "the right to purchase such proportion
Likewise, Sec. 4, Art. XIII of the Constitution makes mention of a commitment on the part of of the capital stock of the corporation that the agricultural land, actually devoted to agricultural
the State to pursue, by law, an agrarian reform program founded on the policy of land for the activities, bears in relation to the company’s total assets." The wording of the formula in the
landless, but subject to such priorities as Congress may prescribe, taking into account such computation of the number of shares that can be bought by the farmers does not mean loss of
abstract variable as "equity considerations." The textual reference to a law and Congress control on the part of the farmers. It must be remembered that the determination of the
necessarily implies that the above constitutional provision is not self-executoryand that percentage of the capital stock that can be bought by the farmers depends on the value of the
legislation is needed to implement the urgently needed program of agrarian reform. And RA agricultural land and the value of the total assets of the corporation.
6657 has been enacted precisely pursuant to and as a mechanism to carry out the constitutional There is, thus, nothing unconstitutional in the formula prescribed by RA 6657. The policy on
directives. This piece of legislation, in fact, restates118 the agrarian reform policy established in agrarian reform is that control over the agricultural land must always be in the hands of the
the aforementioned provision of the Constitution of promoting the welfare of landless farmers farmers. Then it falls on the shoulders of DAR and PARC to see to it the farmers should
and farmworkers. RA 6657 thus defines "agrarian reform" as "the redistribution of lands … to always own majority of the common shares entitled to elect the members of the board of
farmers and regular farmworkers who are landless … to lift the economic status of the directors to ensure that the farmers will have a clear majority in the board. Before the SDP is
beneficiaries and all other arrangements alternative to the physical redistribution of approved, strict scrutiny of the proposed SDP must always be undertaken by the DAR and
lands, such as production or profit sharing, labor administration and the distribution of PARC, such that the value of the agricultural land contributed to the corporation must always
shares of stock which will allow beneficiaries to receive a just share of the fruits of the lands be more than 50% of the total assets of the corporation to ensure that the majority of the
they work." members of the board of directors are composed of the farmers. The PARC composed of the
With the view We take of this case, the stock distribution option devised under Sec. 31 of RA President of the Philippines and cabinet secretaries must see to it that control over the board of
6657 hews with the agrarian reform policy, as instrument of social justice under Sec. 4 of directors rests with the farmers by rejecting the inclusion of non-agricultural assets which will
Article XIII of the Constitution. Albeit land ownership for the landless appears to be the yield the majority in the board of directors to non-farmers. Any deviation, however, by PARC
dominant theme of that policy, We emphasize that Sec. 4, Article XIII of the Constitution, as or DAR from the correct application of the formula prescribed by the second paragraph of Sec.
couched, does not constrict Congress to passing an agrarian reform law planted on direct land 31 of RA 6675 does not make said provision constitutionally infirm. Rather, it is the
transfer to and ownership by farmers and no other, or else the enactment suffers from the vice application of said provision that can be challenged. Ergo, Sec. 31 of RA 6657 does not trench
of unconstitutionality. If the intention were otherwise, the framers of the Constitution would on the constitutional policy of ensuring control by the farmers.
have worded said section in a manner mandatory in character. A view has been advanced that there can be no agrarian reform unless there is land distribution
For this Court, Sec. 31 of RA 6657, with its direct and indirect transfer features, is not and that actual land distribution is the essential characteristic of a constitutional agrarian
inconsistent with the State’s commitment to farmers and farmworkers to advance their reform program. On the contrary, there have been so many instances where, despite actual
interests under the policy of social justice. The legislature, thru Sec. 31 of RA 6657, has land distribution, the implementation of agrarian reform was still unsuccessful. As a matter of
chosen a modality for collective ownership by which the imperatives of social justice may, in fact, this Court may take judicial notice of cases where FWBs sold the awarded land even to
its estimation, be approximated, if not achieved. The Court should be bound by such policy non-qualified persons and in violation of the prohibition period provided under the law. This
choice. 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 (1) Despite the lapse of 16 years from the approval of HLI’s SDP, the lives of the
where non-human juridical persons, such as corporations, were prohibited from owning FWBs have hardly improved and the promised increased income has not
agricultural lands are no longer realistic under existing conditions. Practically, an individual materialized;
farmer will often face greater disadvantages and difficulties than those who exercise (2) HLI has failed to keep Hacienda Luisita intact and unfragmented;
ownership in a collective manner through a cooperative or corporation. The former is too often (3) The issuance of HLI shares of stock on the basis of number of hours worked––or
left to his own devices when faced with failing crops and bad weather, or compelled to obtain the so-called "man days"––is grossly onerous to the FWBs, as HLI, in the guise of
usurious loans in order to purchase costly fertilizers or farming equipment. The experiences rotation, can unilaterally deny work to anyone. In elaboration of this ground,
learned from failed land reform activities in various parts of the country are lack of financing, PARC’s Resolution No. 2006-34-01, denying HLI’s motion for reconsideration of
lack of farm equipment, lack of fertilizers, lack of guaranteed buyers of produce, lack of farm- Resolution No. 2005-32-01, stated that the man days criterion worked to dilute the
to-market roads, among others. Thus, at the end of the day, there is still no successful entitlement of the original share beneficiaries;125
implementation of agrarian reform to speak of in such a case. (4) The distribution/transfer of shares was not in accordance with the timelines fixed
Although success is not guaranteed, a cooperative or a corporation stands in a better position by law;
to secure funding and competently maintain the agri-business than the individual farmer. (5) HLI has failed to comply with its obligations to grant 3% of the gross sales every
While direct singular ownership over farmland does offer advantages, such as the ability to year as production-sharing benefit on top of the workers’ salary; and
make quick decisions unhampered by interference from others, yet at best, these advantages (6) Several homelot awardees have yet to receive their individual titles.
only but offset the disadvantages that are often associated with such ownership arrangement. Petitioner HLI claims having complied with, at least substantially, all its obligations under the
Thus, government must be flexible and creative in its mode of implementation to better its SDP, as approved by PARC itself, and tags the reasons given for the revocation of the SDP as
chances of success. One such option is collective ownership through juridical persons unfounded.
composed of farmers. Public respondents, on the other hand, aver that the assailed resolution rests on solid grounds
Aside from the fact that there appears to be no violation of the Constitution, the requirement set forth in the Terminal Report, a position shared by AMBALA, which, in some pleadings, is
that the instant case be capable of repetition yet evading review is also wanting. It would be represented by the same counsel as that appearing for the Supervisory Group.
speculative for this Court to assume that the legislature will enact another law providing for a FARM, for its part, posits the view that legal bases obtain for the revocation of the SDP,
similar stock option. because it does not conform to Sec. 31 of RA 6657 and DAO 10. And training its sight on the
As a matter of sound practice, the Court will not interfere inordinately with the exercise by resulting dilution of the equity of the FWBs appearing in HLI’s masterlist, FARM would state
Congress of its official functions, the heavy presumption being that a law is the product of that the SDP, as couched and implemented, spawned disparity when there should be none;
earnest studies by Congress to ensure that no constitutional prescription or concept is parity when there should have been differentiation.126
infringed.121 Corollarily, courts will not pass upon questions of wisdom, expediency and The petition is not impressed with merit.
justice of legislation or its provisions. Towards this end, all reasonable doubts should be In the Terminal Report adopted by PARC, it is stated that the SDP violates the agrarian reform
resolved in favor of the constitutionality of a law and the validity of the acts and processes policy under Sec. 2 of RA 6657, as the said plan failed to enhance the dignity and improve the
taken pursuant thereof.122 quality of lives of the FWBs through greater productivity of agricultural lands. We disagree.
Consequently, before a statute or its provisions duly challenged are voided, an unequivocal Sec. 2 of RA 6657 states:
breach of, or a clear conflict with the Constitution, not merely a doubtful or argumentative SECTION 2. Declaration of Principles and Policies.¾It is the policy of the State to pursue a
one, must be demonstrated in such a manner as to leave no doubt in the mind of the Court. In Comprehensive Agrarian Reform Program (CARP). The welfare of the landless farmers and
other words, the grounds for nullity must be beyond reasonable doubt.123 FARM has not farm workers will receive the highest consideration to promote social justice and to move the
presented compelling arguments to overcome the presumption of constitutionality of Sec. 31 nation towards sound rural development and industrialization, and the establishment of owner
of RA 6657. cultivatorship of economic-sized farms as the basis of Philippine agriculture.
The wisdom of Congress in allowing an SDP through a corporation as an alternative mode of To this end, a more equitable distribution and ownership of land, with due regard to the rights
implementing agrarian reform is not for judicial determination. Established jurisprudence tells of landowners to just compensation and to the ecological needs of the nation, shall be
us that it is not within the province of the Court to inquire into the wisdom of the law, for, undertaken to provide farmers and farm workers with the opportunity to enhance their dignity
indeed, We are bound by words of the statute.124 and improve the quality of their lives through greater productivity of agricultural lands.
II. The agrarian reform program is founded on the right of farmers and regular farm workers, who
The stage is now set for the determination of the propriety under the premises of the are landless, to own directly or collectively the lands they till or, in the case of other farm
revocation or recall of HLI’s SDP. Or to be more precise, the inquiry should be: whether or workers, to receive a share of the fruits thereof. To this end, the State shall encourage the just
not PARC gravely abused its discretion in revoking or recalling the subject SDP and placing distribution of all agricultural lands, subject to the priorities and retention limits set forth in
the hacienda under CARP’s compulsory acquisition and distribution scheme. this Act, having taken into account ecological, developmental, and equity considerations, and
The findings, analysis and recommendation of the DAR’s Special Task Force contained and subject to the payment of just compensation. The State shall respect the right of small
summarized in its Terminal Report provided the bases for the assailed PARC landowners and shall provide incentives for voluntary land-sharing. (Emphasis supplied.)
revocatory/recalling Resolution. The findings may be grouped into two: (1) the SDP is Paragraph 2 of the above-quoted provision specifically mentions that "a more equitable
contrary to either the policy on agrarian reform, Sec. 31 of RA 6657, or DAO 10; and (2) the distribution and ownership of land x x x shall be undertaken to provide farmers and farm
alleged violation by HLI of the conditions/terms of the SDP. In more particular terms, the workers with the opportunity to enhance their dignity and improve the quality of their lives
following are essentially the reasons underpinning PARC’s revocatory or recall action: 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 Upon certification by the DAR, corporations owning agricultural lands may give their
the FWBs. At best, it merely provides for a possibility or favorable chance of uplifting the qualified beneficiaries the right to purchase such proportion of the capital stock of the
economic status of the FWBs, which may or may not be attained. corporation that the agricultural land, actually devoted to agricultural activities, bears in
Pertinently, improving the economic status of the FWBs is neither among the legal obligations relation to the company’s total assets, under such terms and conditions as may be agreed
of HLI under the SDP nor an imperative imposition by RA 6657 and DAO 10, a violation of upon by them. In no case shall the compensation received by the workers at the time the shares
which would justify discarding the stock distribution option. Nothing in that option agreement, of stocks are distributed be reduced. x x x
law or department order indicates otherwise. Corporations or associations which voluntarily divest a proportion of their capital stock, equity
Significantly, HLI draws particular attention to its having paid its FWBs, during the regime of or participation in favor of their workers or other qualified beneficiaries under this section
the SDP (1989-2005), some PhP 3 billion by way of salaries/wages and higher benefits shall be deemed to have complied with the provisions of this Act: Provided, That the
exclusive of free hospital and medical benefits to their immediate family. And attached as following conditions are complied with:
Annex "G" to HLI’s Memorandum is the certified true report of the finance manager of Jose (a) In order to safeguard the right of beneficiaries who own shares of stocks to
Cojuangco & Sons Organizations-Tarlac Operations, captioned as "HACIENDA LUISITA, dividends and other financial benefits, the books of the corporation or association
INC. Salaries, Benefits and Credit Privileges (in Thousand Pesos) Since the Stock Option was shall be subject to periodic audit by certified public accountants chosen by the
Approved by PARC/CARP," detailing what HLI gave their workers from 1989 to 2005. The beneficiaries;
sum total, as added up by the Court, yields the following numbers: Total Direct Cash Out (b) Irrespective of the value of their equity in the corporation or association, the
(Salaries/Wages & Cash Benefits) = PhP 2,927,848; Total Non-Direct Cash Out beneficiaries shall be assured of at least one (1) representative in the board of
(Hospital/Medical Benefits) = PhP 303,040. The cash out figures, as stated in the report, directors, or in a management or executive committee, if one exists, of the
include the cost of homelots; the PhP 150 million or so representing 3% of the gross produce corporation or association;
of the hacienda; and the PhP 37.5 million representing 3% from the proceeds of the sale of the (c) Any shares acquired by such workers and beneficiaries shall have the same rights
500-hectare converted lands. While not included in the report, HLI manifests having given the and features as all other shares; and
FWBs 3% of the PhP 80 million paid for the 80 hectares of land traversed by the (d) Any transfer of shares of stocks by the original beneficiaries shall be void ab
SCTEX.128 On top of these, it is worth remembering that the shares of stocks were given by initio unless said transaction is in favor of a qualified and registered beneficiary
HLI to the FWBs for free. Verily, the FWBs have benefited from the SDP. within the same corporation.
To address urgings that the FWBs be allowed to disengage from the SDP as HLI has not The mandatory minimum ratio of land-to-shares of stock supposed to be distributed or
anyway earned profits through the years, it cannot be over-emphasized that, as a matter of allocated to qualified beneficiaries, adverting to what Sec. 31 of RA 6657 refers to as that
common business sense, no corporation could guarantee a profitable run all the time. As has "proportion of the capital stock of the corporation that the agricultural land, actually devoted
been suggested, one of the key features of an SDP of a corporate landowner is the likelihood to agricultural activities, bears in relation to the company’s total assets" had been observed.
of the corporate vehicle not earning, or, worse still, losing money. 129 Paragraph one (1) of the SDOA, which was based on the SDP, conforms to Sec. 31 of RA
The Court is fully aware that one of the criteria under DAO 10 for the PARC to consider the 6657. The stipulation reads:
advisability of approving a stock distribution plan is the likelihood that the plan "would result 1. The percentage of the value of the agricultural land of Hacienda Luisita (P196,630,000.00)
in increased income and greater benefits to [qualified beneficiaries] than if the lands were in relation to the total assets (P590,554,220.00) transferred and conveyed to the SECOND
divided and distributed to them individually."130 But as aptly noted during the oral arguments, PARTY is 33.296% that, under the law, is the proportion of the outstanding capital stock of
DAO 10 ought to have not, as it cannot, actually exact assurance of success on something that the SECOND PARTY, which is P355,531,462.00 or 355,531,462 shares with a par value of
is subject to the will of man, the forces of nature or the inherent risky nature of P1.00 per share, that has to be distributed to the THIRD PARTY under the stock distribution
business.131 Just like in actual land distribution, an SDP cannot guarantee, as indeed the SDOA plan, the said 33.296% thereof being P118,391,976.85 or 118,391,976.85 shares.
does not guarantee, a comfortable life for the FWBs. The Court can take judicial notice of the The appraised value of the agricultural land is PhP 196,630,000 and of HLI’s other assets is
fact that there were many instances wherein after a farmworker beneficiary has been awarded PhP 393,924,220. The total value of HLI’s assets is, therefore, PhP 590,554,220. 132 The
with an agricultural land, he just subsequently sells it and is eventually left with nothing in the percentage of the value of the agricultural lands (PhP 196,630,000) in relation to the total
end. assets (PhP 590,554,220) is 33.296%, which represents the stockholdings of the 6,296 original
In all then, the onerous condition of the FWBs’ economic status, their life of hardship, if that qualified farmworker-beneficiaries (FWBs) in HLI. The total number of shares to be
really be the case, can hardly be attributed to HLI and its SDP and provide a valid ground for distributed to said qualified FWBs is 118,391,976.85 HLI shares. This was arrived at by
the plan’s revocation. getting 33.296% of the 355,531,462 shares which is the outstanding capital stock of HLI with
Neither does HLI’s SDP, whence the DAR-attested SDOA/MOA is based, infringe Sec. 31 of a value of PhP 355,531,462. Thus, if we divide the 118,391,976.85 HLI shares by 6,296
RA 6657, albeit public respondents erroneously submit otherwise. FWBs, then each FWB is entitled to 18,804.32 HLI shares. These shares under the SDP are to
The provisions of the first paragraph of the adverted Sec. 31 are without relevance to the issue be given to FWBs for free.
on the propriety of the assailed order revoking HLI’s SDP, for the paragraph deals with the The Court finds that the determination of the shares to be distributed to the 6,296 FWBs
transfer of agricultural lands to the government, as a mode of CARP compliance, thus: strictly adheres to the formula prescribed by Sec. 31(b) of RA 6657.
SEC. 31. Corporate Landowners.¾Corporate landowners may voluntarily transfer ownership Anent the requirement under Sec. 31(b) of the third paragraph, that the FWBs shall be assured
over their agricultural landholdings to the Republic of the Philippines pursuant to Section 20 of at least one (1) representative in the board of directors or in a management or executive
hereof or to qualified beneficiaries under such terms and conditions, consistent with this Act, committee irrespective of the value of the equity of the FWBs in HLI, the Court finds that the
as they may agree, subject to confirmation by the DAR. SDOA contained provisions making certain the FWBs’ representation in HLI’s governing
The second and third paragraphs, with their sub-paragraphs, of Sec. 31 provide as follows: board, thus:
5. Even if only a part or fraction of the shares earmarked for distribution will have been infinitum. And there is logic to HLI’s stated observation that the key phrase in the provision of
acquired from the FIRST PARTY and distributed to the THIRD PARTY, FIRST PARTY Sec. 5(a) is "viability of corporate operations": "[w]hat is thus required is not the agricultural
shall execute at the beginning of each fiscal year an irrevocable proxy, valid and effective for land remaining intact x x x but the viability of the corporate operations with its agricultural
one (1) year, in favor of the farmworkers appearing as shareholders of the SECOND PARTY land being intact and unfragmented. Corporate operation may be viable even if the corporate
at the start of said year which will empower the THIRD PARTY or their representative to vote agricultural land does not remain intact or [un]fragmented."134
in stockholders’ and board of directors’ meetings of the SECOND PARTY convened during It is, of course, anti-climactic to mention that DAR viewed the conversion as not violative of
the year the entire 33.296% of the outstanding capital stock of the SECOND PARTY any issuance, let alone undermining the viability of Hacienda Luisita’s operation, as the DAR
earmarked for distribution and thus be able to gain such number of seats in the board of Secretary approved the land conversion applied for and its disposition via his Conversion
directors of the SECOND PARTY that the whole 33.296% of the shares subject to distribution Order dated August 14, 1996 pursuant to Sec. 65 of RA 6657 which reads:
will be entitled to. Sec. 65. Conversion of Lands.¾After the lapse of five years from its award when the land
Also, no allegations have been made against HLI restricting the inspection of its books by ceases to be economically feasible and sound for agricultural purposes, or the locality has
accountants chosen by the FWBs; hence, the assumption may be made that there has been no become urbanized and the land will have a greater economic value for residential, commercial
violation of the statutory prescription under sub-paragraph (a) on the auditing of HLI’s or industrial purposes, the DAR upon application of the beneficiary or landowner with due
accounts. notice to the affected parties, and subject to existing laws, may authorize the x x x conversion
Public respondents, however, submit that the distribution of the mandatory minimum ratio of of the land and its dispositions. x x x
land-to-shares of stock, referring to the 118,391,976.85 shares with par value of PhP 1 each, On the 3% Production Share
should have been made in full within two (2) years from the approval of RA 6657, in line with On the matter of the alleged failure of HLI to comply with sharing the 3% of the gross
the last paragraph of Sec. 31 of said law.133 production sales of the hacienda and pay dividends from profit, the entries in its financial
Public respondents’ submission is palpably erroneous. We have closely examined the last books tend to indicate compliance by HLI of the profit-sharing equivalent to 3% of the gross
paragraph alluded to, with particular focus on the two-year period mentioned, and nothing in it sales from the production of the agricultural land on top of (a) the salaries and wages due
remotely supports the public respondents’ posture. In its pertinent part, said Sec. 31 provides: FWBs as employees of the company and (b) the 3% of the gross selling price of the converted
SEC. 31. Corporate Landowners x x x land and that portion used for the SCTEX. A plausible evidence of compliance or non-
If within two (2) years from the approval of this Act, the [voluntary] land or stock transfer compliance, as the case may be, could be the books of account of HLI. Evidently, the cry of
envisioned above is not made or realized or the plan for such stock distribution approved by some groups of not having received their share from the gross production sales has not
the PARC within the same period, the agricultural land of the corporate owners or corporation adequately been validated on the ground by the Special Task Force.
shall be subject to the compulsory coverage of this Act. (Word in bracket and emphasis Indeed, factual findings of administrative agencies are conclusive when supported by
added.) substantial evidence and are accorded due respect and weight, especially when they are
Properly viewed, the words "two (2) years" clearly refer to the period within which the affirmed by the CA.135 However, such rule is not absolute. One such exception is when the
corporate landowner, to avoid land transfer as a mode of CARP coverage under RA 6657, is to findings of an administrative agency are conclusions without citation of specific evidence on
avail of the stock distribution option or to have the SDP approved. The HLI secured approval which they are based,136 such as in this particular instance. As culled from its Terminal Report,
of its SDP in November 1989, well within the two-year period reckoned from June 1988 when it would appear that the Special Task Force rejected HLI’s claim of compliance on the basis of
RA 6657 took effect. this ratiocination:
Having hurdled the alleged breach of the agrarian reform policy under Sec. 2 of RA 6657 as  The Task Force position: Though, allegedly, the Supervisory Group receives the 3%
well as the statutory issues, We shall now delve into what PARC and respondents deem to be gross production share and that others alleged that they received 30 million pesos
other instances of violation of DAO 10 and the SDP. still others maintain that they have not received anything yet. Item No. 4 of the
On the Conversion of Lands MOA is clear and must be followed. There is a distinction between the total gross
Contrary to the almost parallel stance of the respondents, keeping Hacienda Luisita sales from the production of the land and the proceeds from the sale of the land. The
unfragmented is also not among the imperative impositions by the SDP, RA 6657, and DAO former refers to the fruits/yield of the agricultural land while the latter is the land
10. itself. The phrase "the beneficiaries are entitled every year to an amount
The Terminal Report states that the proposed distribution plan submitted in 1989 to the PARC approximately equivalent to 3% would only be feasible if the subject is the produce
effectively assured the intended stock beneficiaries that the physical integrity of the farm shall since there is at least one harvest per year, while such is not the case in the sale of
remain inviolate. Accordingly, the Terminal Report and the PARC-assailed resolution would the agricultural land. This negates then the claim of HLI that, all that the FWBs can
take HLI to task for securing approval of the conversion to non-agricultural uses of 500 be entitled to, if any, is only 3% of the purchase price of the converted land.
hectares of the hacienda. In not too many words, the Report and the resolution view the  Besides, the Conversion Order dated 14 August 1996 provides that "the benefits,
conversion as an infringement of Sec. 5(a) of DAO 10 which reads: "a. that the continued wages and the like, presently received by the FWBs shall not in any way be reduced
operation of the corporation with its agricultural land intact and unfragmented is viable with or adversely affected. Three percent of the gross selling price of the sale of the
potential for growth and increased profitability." converted land shall be awarded to the beneficiaries of the SDO." The 3% gross
The PARC is wrong. production share then is different from the 3% proceeds of the sale of the converted
In the first place, Sec. 5(a)––just like the succeeding Sec. 5(b) of DAO 10 on increased income land and, with more reason, the 33% share being claimed by the FWBs as part
and greater benefits to qualified beneficiaries––is but one of the stated criteria to guide PARC owners of the Hacienda, should have been given the FWBs, as stockholders, and to
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
which they could have been entitled if only the land were acquired and redistributed Justice Velasco: x x x There is also an allegation that the farmer beneficiaries, the qualified
to them under the CARP. family beneficiaries were not given the 240 square meters each. So, can you also [prove] that
xxxx the qualified family beneficiaries were already provided the 240 square meter homelots.
 The FWBs do not receive any other benefits under the MOA except the Atty. Asuncion: We will, your Honor please.138
aforementioned [(viz: shares of stocks (partial), 3% gross production sale (not all) Other than the financial report, however, no other substantial proof showing that all the
and homelots (not all)]. qualified beneficiaries have received homelots was submitted by HLI. Hence, this Court is
Judging from the above statements, the Special Task Force is at best silent on whether HLI has constrained to rule that HLI has not yet fully complied with its undertaking to distribute
failed to comply with the 3% production-sharing obligation or the 3% of the gross selling price homelots to the FWBs under the SDP.
of the converted land and the SCTEX lot. In fact, it admits that the FWBs, though not all, have On "Man Days" and the Mechanics of Stock Distribution
received their share of the gross production sales and in the sale of the lot to SCTEX. At most, In our review and analysis of par. 3 of the SDOA on the mechanics and timelines of stock
then, HLI had complied substantially with this SDP undertaking and the conversion order. To distribution, We find that it violates two (2) provisions of DAO 10. Par. 3 of the SDOA states:
be sure, this slight breach would not justify the setting to naught by PARC of the approval 3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY [HLI] shall
action of the earlier PARC. Even in contract law, rescission, predicated on violation of arrange with the FIRST PARTY [TDC] the acquisition and distribution to the THIRD PARTY
reciprocity, will not be permitted for a slight or casual breach of contract; rescission may be [FWBs] on the basis of number of days worked and at no cost to them of one-thirtieth (1/30)
had only for such breaches that are substantial and fundamental as to defeat the object of the of 118,391,976.85 shares of the capital stock of the SECOND PARTY that are presently
parties in making the agreement.137 owned and held by the FIRST PARTY, until such time as the entire block of 118,391,976.85
Despite the foregoing findings, the revocation of the approval of the SDP is not without basis shares shall have been completely acquired and distributed to the THIRD PARTY.
as shown below. Based on the above-quoted provision, the distribution of the shares of stock to the FWBs,
On Titles to Homelots albeit not entailing a cash out from them, is contingent on the number of "man days," that is,
Under RA 6657, the distribution of homelots is required only for corporations or business the number of days that the FWBs have worked during the year. This formula deviates from
associations owning or operating farms which opted for land distribution. Sec. 30 of RA 6657 Sec. 1 of DAO 10, which decrees the distribution of equal number of shares to the FWBs as
states: the minimum ratio of shares of stock for purposes of compliance with Sec. 31 of RA 6657. As
SEC. 30. Homelots and Farmlots for Members of Cooperatives.¾The individual members of stated in Sec. 4 of DAO 10:
the cooperatives or corporations mentioned in the preceding section shall be provided with Section 4. Stock Distribution Plan.¾The [SDP] submitted by the corporate landowner-
homelots and small farmlots for their family use, to be taken from the land owned by the applicant shall provide for the distribution of an equal number of shares of the same class and
cooperative or corporation. value, with the same rights and features as all other shares, to each of the qualified
The "preceding section" referred to in the above-quoted provision is as follows: beneficiaries. This distribution plan in all cases, shall be at least the minimum ratio for
SEC. 29. Farms Owned or Operated by Corporations or Other Business Associations.¾In the purposes of compliance with Section 31 of R.A. No. 6657.
case of farms owned or operated by corporations or other business associations, the following On top of the minimum ratio provided under Section 3 of this Implementing Guideline, the
rules shall be observed by the PARC. corporate landowner-applicant may adopt additional stock distribution schemes taking into
In general, lands shall be distributed directly to the individual worker-beneficiaries. account factors such as rank, seniority, salary, position and other circumstances which may be
In case it is not economically feasible and sound to divide the land, then it shall be owned deemed desirable as a matter of sound company policy. (Emphasis supplied.)
collectively by the worker-beneficiaries who shall form a workers’ cooperative or association The above proviso gives two (2) sets or categories of shares of stock which a qualified
which will deal with the corporation or business association. Until a new agreement is entered beneficiary can acquire from the corporation under the SDP. The first pertains, as earlier
into by and between the workers’ cooperative or association and the corporation or business explained, to the mandatory minimum ratio of shares of stock to be distributed to the FWBs in
association, any agreement existing at the time this Act takes effect between the former and compliance with Sec. 31 of RA 6657. This minimum ratio contemplates of that "proportion of
the previous landowner shall be respected by both the workers’ cooperative or association and the capital stock of the corporation that the agricultural land, actually devoted to agricultural
the corporation or business association. activities, bears in relation to the company’s total assets."139 It is this set of shares of stock
Noticeably, the foregoing provisions do not make reference to corporations which opted for which, in line with Sec. 4 of DAO 10, is supposed to be allocated "for the distribution of an
stock distribution under Sec. 31 of RA 6657. Concomitantly, said corporations are not obliged equal number of shares of stock of the same class and value, with the same rights and features
to provide for it except by stipulation, as in this case. as all other shares, to each of the qualified beneficiaries."
Under the SDP, HLI undertook to "subdivide and allocate for free and without charge among On the other hand, the second set or category of shares partakes of a gratuitous extra grant,
the qualified family-beneficiaries x x x residential or homelots of not more than 240 sq. m. meaning that this set or category constitutes an augmentation share/s that the corporate
each, with each family beneficiary being assured of receiving and owning a homelot in the landowner may give under an additional stock distribution scheme, taking into account such
barrio or barangay where it actually resides," "within a reasonable time." variables as rank, seniority, salary, position and like factors which the management, in the
More than sixteen (16) years have elapsed from the time the SDP was approved by PARC, and exercise of its sound discretion, may deem desirable.140
yet, it is still the contention of the FWBs that not all was given the 240-square meter homelots Before anything else, it should be stressed that, at the time PARC approved HLI’s SDP, HLI
and, of those who were already given, some still do not have the corresponding titles. recognized 6,296individuals as qualified FWBs. And under the 30-year stock distribution
During the oral arguments, HLI was afforded the chance to refute the foregoing allegation by program envisaged under the plan, FWBs who came in after 1989, new FWBs in fine, may be
submitting proof that the FWBs were already given the said homelots: 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 37 days, the FWB, unfortunately, does not get any share at year end. The number of HLI
the number of "man days," HLI violated the afore-quoted rule on stock distribution and shares distributed varies depending on the number of days the FWBs were allowed to work in
effectively deprived the FWBs of equal shares of stock in the corporation, for, in net effect, one year. Worse, HLI hired farmworkers in addition to the original 6,296 FWBs, such that, as
these 6,296 qualified FWBs, who theoretically had given up their rights to the land that could indicated in the Compliance dated August 2, 2010 submitted by HLI to the Court, the total
have been distributed to them, suffered a dilution of their due share entitlement. As has been number of farmworkers of HLI as of said date stood at 10,502. All these farmworkers, which
observed during the oral arguments, HLI has chosen to use the shares earmarked for include the original 6,296 FWBs, were given shares out of the 118,931,976.85 HLI shares
farmworkers as reward system chips to water down the shares of the original 6,296 representing the 33.296% of the total outstanding capital stock of HLI. Clearly, the minimum
FWBs.141 Particularly: individual allocation of each original FWB of 18,804.32 shares was diluted as a result of the
Justice Abad: If the SDOA did not take place, the other thing that would have happened is that use of "man days" and the hiring of additional farmworkers.
there would be CARP? Going into another but related matter, par. 3 of the SDOA expressly providing for a 30-year
Atty. Dela Merced: Yes, Your Honor. timeframe for HLI-to-FWBs stock transfer is an arrangement contrary to what Sec. 11 of DAO
Justice Abad: That’s the only point I want to know x x x. Now, but they chose to enter SDOA 10 prescribes. Said Sec. 11 provides for the implementation of the approved stock distribution
instead of placing the land under CARP. And for that reason those who would have gotten plan within three (3) months from receipt by the corporate landowner of the approval of the
their shares of the land actually gave up their rights to this land in place of the shares of the plan by PARC. In fact, based on the said provision, the transfer of the shares of stock in the
stock, is that correct? names of the qualified FWBs should be recorded in the stock and transfer books and must be
Atty. Dela Merced: It would be that way, Your Honor. submitted to the SEC within sixty (60) days from implementation. As stated:
Justice Abad: Right now, also the government, in a way, gave up its right to own the land Section 11. Implementation/Monitoring of Plan.¾The approved stock distribution plan shall
because that way the government takes own [sic] the land and distribute it to the farmers and be implemented within three (3) months from receipt by the corporate landowner-applicant of
pay for the land, is that correct? the approval thereof by the PARC, and the transfer of the shares of stocks in the names of the
Atty. Dela Merced: Yes, Your Honor. qualified beneficiaries shall be recorded in stock and transfer books and submitted to the
Justice Abad: And then you gave thirty-three percent (33%) of the shares of HLI to the Securities and Exchange Commission (SEC) within sixty (60) days from the said
farmers at that time that numbered x x x those who signed five thousand four hundred ninety implementation of the stock distribution plan. (Emphasis supplied.)
eight (5,498) beneficiaries, is that correct? It is evident from the foregoing provision that the implementation, that is, the distribution of
Atty. Dela Merced: Yes, Your Honor. the shares of stock to the FWBs, must be made within three (3) months from receipt by HLI of
Justice Abad: But later on, after assigning them their shares, some workers came in from 1989, the approval of the stock distribution plan by PARC. While neither of the clashing parties has
1990, 1991, 1992 and the rest of the years that you gave additional shares who were not in the made a compelling case of the thrust of this provision, the Court is of the view and so holds
original list of owners? that the intent is to compel the corporate landowner to complete, not merely initiate, the
Atty. Dela Merced: Yes, Your Honor. transfer process of shares within that three-month timeframe. Reinforcing this conclusion is
Justice Abad: Did those new workers give up any right that would have belong to them in the 60-day stock transfer recording (with the SEC) requirement reckoned from the
1989 when the land was supposed to have been placed under CARP? implementation of the SDP.
Atty. Dela Merced: If you are talking or referring… (interrupted) To the Court, there is a purpose, which is at once discernible as it is practical, for the three-
Justice Abad: None! You tell me. None. They gave up no rights to land? month threshold. Remove this timeline and the corporate landowner can veritably evade
Atty. Dela Merced: They did not do the same thing as we did in 1989, Your Honor. compliance with agrarian reform by simply deferring to absurd limits the implementation of
Justice Abad: No, if they were not workers in 1989 what land did they give up? None, if they the stock distribution scheme.
become workers later on. The argument is urged that the thirty (30)-year distribution program is justified by the fact
Atty. Dela Merced: None, Your Honor, I was referring, Your Honor, to the original… that, under Sec. 26 of RA 6657, payment by beneficiaries of land distribution under CARP
(interrupted) shall be made in thirty (30) annual amortizations. To HLI, said section provides a justifying
Justice Abad: So why is it that the rights of those who gave up their lands would be diluted, dimension to its 30-year stock distribution program.
because the company has chosen to use the shares as reward system for new workers who HLI’s reliance on Sec. 26 of RA 6657, quoted in part below, is obviously misplaced as the
come in? It is not that the new workers, in effect, become just workers of the corporation said provision clearly deals with land distribution.
whose stockholders were already fixed. The TADECO who has shares there about sixty six SEC. 26. Payment by Beneficiaries.¾Lands awarded pursuant to this Act shall be paid for by
percent (66%) and the five thousand four hundred ninety eight (5,498) farmers at the time of the beneficiaries to the LBP in thirty (30) annual amortizations x x x.
the SDOA? Explain to me. Why, why will you x x x what right or where did you get that right Then, too, the ones obliged to pay the LBP under the said provision are the beneficiaries. On
to use this shares, to water down the shares of those who should have been benefited, and to the other hand, in the instant case, aside from the fact that what is involved is stock
use it as a reward system decided by the company?142 distribution, it is the corporate landowner who has the obligation to distribute the shares of
From the above discourse, it is clear as day that the original 6,296 FWBs, who were qualified stock among the FWBs.
beneficiaries at the time of the approval of the SDP, suffered from watering down of shares. Evidently, the land transfer beneficiaries are given thirty (30) years within which to pay the
As determined earlier, each original FWB is entitled to 18,804.32 HLI shares. The original cost of the land thus awarded them to make it less cumbersome for them to pay the
FWBs got less than the guaranteed 18,804.32 HLI shares per beneficiary, because the government. To be sure, the reason underpinning the 30-year accommodation does not apply
acquisition and distribution of the HLI shares were based on "man days" or "number of days to corporate landowners in distributing shares of stock to the qualified beneficiaries, as the
worked" by the FWB in a year’s time. As explained by HLI, a beneficiary needs to work for at shares may be issued in a much shorter period of time.
least 37 days in a fiscal year before he or she becomes entitled to HLI shares. If it falls below
Taking into account the above discussion, the revocation of the SDP by PARC should be price for the property at the time of such purchase or before he or she has notice of the claim
upheld for violating DAO 10. It bears stressing that under Sec. 49 of RA 6657, the PARC and of another.
the DAR have the power to issue rules and regulations, substantive or procedural. Being a It can rightfully be said that both LIPCO and RCBC are––based on the above requirements
product of such rule-making power, DAO 10 has the force and effect of law and must be duly and with respect to the adverted transactions of the converted land in question––purchasers in
complied with.143 The PARC is, therefore, correct in revoking the SDP. Consequently, the good faith for value entitled to the benefits arising from such status.
PARC Resolution No. 89-12-2 dated November 21, l989 approving the HLI’s SDP is nullified First, at the time LIPCO purchased the entire three hundred (300) hectares of industrial land,
and voided. there was no notice of any supposed defect in the title of its transferor, Centennary, or that any
III. other person has a right to or interest in such property. In fact, at the time LIPCO acquired said
We now resolve the petitions-in-intervention which, at bottom, uniformly pray for the parcels of land, only the following annotations appeared on the TCT in the name of
exclusion from the coverage of the assailed PARC resolution those portions of the converted Centennary: the Secretary’s Certificate in favor of Teresita Lopa, the Secretary’s Certificate in
land within Hacienda Luisita which RCBC and LIPCO acquired by purchase. favor of Shintaro Murai, and the conversion of the property from agricultural to industrial and
Both contend that they are innocent purchasers for value of portions of the converted farm residential use.149
land. Thus, their plea for the exclusion of that portion from PARC Resolution 2005-32-01, as The same is true with respect to RCBC. At the time it acquired portions of Hacienda Luisita,
implemented by a DAR-issued Notice of Coverage dated January 2, 2006, which called for only the following general annotations appeared on the TCTs of LIPCO: the Deed of
mandatory CARP acquisition coverage of lands subject of the SDP. Restrictions, limiting its use solely as an industrial estate; the Secretary’s Certificate in favor
To restate the antecedents, after the conversion of the 500 hectares of land in Hacienda Luisita, of Koji Komai and Kyosuke Hori; and the Real Estate Mortgage in favor of RCBC to
HLI transferred the 300 hectares to Centennary, while ceding the remaining 200-hectare guarantee the payment of PhP 300 million.
portion to LRC. Subsequently, LIPCO purchased the entire three hundred (300) hectares of It cannot be claimed that RCBC and LIPCO acted in bad faith in acquiring the lots that were
land from Centennary for the purpose of developing the land into an industrial previously covered by the SDP. Good faith "consists in the possessor’s belief that the person
complex.144 Accordingly, the TCT in Centennary’s name was canceled and a new one issued from whom he received it was the owner of the same and could convey his title. Good faith
in LIPCO’s name. Thereafter, said land was subdivided into two (2) more parcels of land. requires a well-founded belief that the person from whom title was received was himself the
Later on, LIPCO transferred about 184 hectares to RCBC by way of dacion en pago, by virtue owner of the land, with the right to convey it. There is good faith where there is an honest
of which TCTs in the name of RCBC were subsequently issued. intention to abstain from taking any unconscientious advantage from another."150 It is the
Under Sec. 44 of PD 1529 or the Property Registration Decree, "every registered owner opposite of fraud.
receiving a certificate of title in pursuance of a decree of registration and every subsequent To be sure, intervenor RCBC and LIPCO knew that the lots they bought were subjected to
purchaser of registered land taking a certificate of title for value and in good faith shall hold CARP coverage by means of a stock distribution plan, as the DAR conversion order was
the same free from all encumbrances except those noted on the certificate and enumerated annotated at the back of the titles of the lots they acquired. However, they are of the honest
therein."145 belief that the subject lots were validly converted to commercial or industrial purposes and for
It is settled doctrine that one who deals with property registered under the Torrens system need which said lots were taken out of the CARP coverage subject of PARC Resolution No. 89-12-
not go beyond the four corners of, but can rely on what appears on, the title. He is charged 2 and, hence, can be legally and validly acquired by them. After all, Sec. 65 of RA 6657
with notice only of such burdens and claims as are annotated on the title. This principle admits explicitly allows conversion and disposition of agricultural lands previously covered by CARP
of certain exceptions, such as when the party has actual knowledge of facts and circumstances land acquisition "after the lapse of five (5) years from its award when the land ceases to be
that would impel a reasonably cautious man to make such inquiry, or when the purchaser has economically feasible and sound for agricultural purposes or the locality has become
knowledge of a defect or the lack of title in his vendor or of sufficient facts to induce a urbanized and the land will have a greater economic value for residential, commercial or
reasonably prudent man to inquire into the status of the title of the property in litigation.146 A industrial purposes." Moreover, DAR notified all the affected parties, more particularly the
higher level of care and diligence is of course expected from banks, their business being FWBs, and gave them the opportunity to comment or oppose the proposed conversion. DAR,
impressed with public interest.147 after going through the necessary processes, granted the conversion of 500 hectares of
Millena v. Court of Appeals describes a purchaser in good faith in this wise: Hacienda Luisita pursuant to its primary jurisdiction under Sec. 50 of RA 6657 to determine
x x x A purchaser in good faith is one who buys property of another, without notice that some and adjudicate agrarian reform matters and its original exclusive jurisdiction over all matters
other person has a right to, or interest in, such property at the time of such purchase, or before involving the implementation of agrarian reform. The DAR conversion order became final and
he has notice of the claim or interest of some other persons in the property. Good faith, or the executory after none of the FWBs interposed an appeal to the CA. In this factual setting,
lack of it, is in the final analysis a question of intention; but in ascertaining the intention by RCBC and LIPCO purchased the lots in question on their honest and well-founded belief that
which one is actuated on a given occasion, we are necessarily controlled by the evidence as to the previous registered owners could legally sell and convey the lots though these were
the conduct and outward acts by which alone the inward motive may, with safety, be previously subject of CARP coverage. Ergo, RCBC and LIPCO acted in good faith in
determined. Truly, good faith is not a visible, tangible fact that can be seen or touched, but acquiring the subject lots.
rather a state or condition of mind which can only be judged by actual or fancied tokens or And second, both LIPCO and RCBC purchased portions of Hacienda Luisita for value.
signs. Otherwise stated, good faith x x x refers to the state of mind which is manifested by the Undeniably, LIPCO acquired 300 hectares of land from Centennary for the amount of PhP 750
acts of the individual concerned.148 (Emphasis supplied.) million pursuant to a Deed of Sale dated July 30, 1998. 151 On the other hand, in a Deed of
In fine, there are two (2) requirements before one may be considered a purchaser in good faith, Absolute Assignment dated November 25, 2004, LIPCO conveyed portions of Hacienda
namely: (1) that the purchaser buys the property of another without notice that some other Luisita in favor of RCBC by way of dacion en pago to pay for a loan of PhP 431,695,732.10.
person has a right to or interest in such property; and (2) that the purchaser pays a full and fair
As bona fide purchasers for value, both LIPCO and RCBC have acquired rights which cannot (j) Certificate of Registration No. EZ-98-05 dated 07 May 1998 issued by the PEZA,
just be disregarded by DAR, PARC or even by this Court. As held in Spouses Chua v. stating that pursuant to Presidential Proclamation No. 1207 dated 22 April 1998 and
Soriano: Republic Act No. 7916, LIPCO has been registered as an Ecozone
With the property in question having already passed to the hands of purchasers in good faith, it Developer/Operator of Luisita Industrial Park II located in San Miguel, Tarlac,
is now of no moment that some irregularity attended the issuance of the SPA, consistent with Tarlac.
our pronouncement in Heirs of Spouses Benito Gavino and Juana Euste v. Court of Appeals, While a mere reclassification of a covered agricultural land or its inclusion in an economic
to wit: zone does not automatically allow the corporate or individual landowner to change its
x x x the general rule that the direct result of a previous void contract cannot be valid, is use,158 the reclassification process is a prima facie indicium that the land has ceased to be
inapplicable in this case as it will directly contravene the Torrens system of economically feasible and sound for agricultural uses. And if only to stress, DAR Conversion
registration. Where innocent third persons, relying on the correctness of the certificate of Order No. 030601074-764-(95) issued in 1996 by then DAR Secretary Garilao had effectively
title thus issued, acquire rights over the property, the court cannot disregard such rights converted 500 hectares of hacienda land from agricultural to industrial/commercial use and
and order the cancellation of the certificate. The effect of such outright cancellation will be authorized their disposition.
to impair public confidence in the certificate of title. The sanctity of the Torrens system must In relying upon the above-mentioned approvals, proclamation and conversion order, both
be preserved; otherwise, everyone dealing with the property registered under the system will RCBC and LIPCO cannot be considered at fault for believing that certain portions of Hacienda
have to inquire in every instance as to whether the title had been regularly or irregularly Luisita are industrial/commercial lands and are, thus, outside the ambit of CARP. The PARC,
issued, contrary to the evident purpose of the law. and consequently DAR, gravely abused its discretion when it placed LIPCO’s and RCBC’s
Being purchasers in good faith, the Chuas already acquired valid title to the property. A property which once formed part of Hacienda Luisita under the CARP compulsory acquisition
purchaser in good faith holds an indefeasible title to the property and he is entitled to the scheme via the assailed Notice of Coverage.
protection of the law.152 x x x (Emphasis supplied.) As regards the 80.51-hectare land transferred to the government for use as part of the SCTEX,
To be sure, the practicalities of the situation have to a point influenced Our disposition on the this should also be excluded from the compulsory agrarian reform coverage considering that
fate of RCBC and LIPCO. After all, the Court, to borrow from Association of Small the transfer was consistent with the government’s exercise of the power of eminent
Landowners in the Philippines, Inc.,153 is not a "cloistered institution removed" from the domain159 and none of the parties actually questioned the transfer.
realities on the ground. To note, the approval and issuances of both the national and local While We affirm the revocation of the SDP on Hacienda Luisita subject of PARC Resolution
governments showing that certain portions of Hacienda Luisita have effectively ceased, legally Nos. 2005-32-01 and 2006-34-01, the Court cannot close its eyes to certain "operative facts"
and physically, to be agricultural and, therefore, no longer CARPable are a matter of fact that had occurred in the interim. Pertinently, the "operative fact" doctrine realizes that, in
which cannot just be ignored by the Court and the DAR. Among the approving/endorsing declaring a law or executive action null and void, or, by extension, no longer without force
issuances:154 and effect, undue harshness and resulting unfairness must be avoided. This is as it should
(a) Resolution No. 392 dated 11 December 1996 of the Sangguniang Bayan of realistically be, since rights might have accrued in favor of natural or juridical persons and
Tarlac favorably endorsing the 300-hectare industrial estate project of LIPCO; obligations justly incurred in the meantime.160 The actual existence of a statute or executive
(b) BOI Certificate of Registration No. 96-020 dated 20 December 1996 issued in act is, prior to such a determination, an operative fact and may have consequences which
accordance with the Omnibus Investments Code of 1987; cannot justly be ignored; the past cannot always be erased by a new judicial declaration. 161
(c) PEZA Certificate of Board Resolution No. 97-202 dated 27 June 1997, The oft-cited De Agbayani v. Philippine National Bank162 discussed the effect to be given to a
approving LIPCO’s application for a mixed ecozone and proclaiming the three legislative or executive act subsequently declared invalid:
hundred (300) hectares of the industrial land as a Special Economic Zone; x x x It does not admit of doubt that prior to the declaration of nullity such challenged
(d) Resolution No. 234 dated 08 August 1997 of the Sangguniang Bayan of Tarlac, legislative or executive act must have been in force and had to be complied with. This is so as
approving the Final Development Permit for the Luisita Industrial Park II Project; until after the judiciary, in an appropriate case, declares its invalidity, it is entitled to
(e) Development Permit dated 13 August 1997 for the proposed Luisita Industrial obedience and respect. Parties may have acted under it and may have changed their positions.
Park II Project issued by the Office of the Sangguniang Bayan of Tarlac;155 What could be more fitting than that in a subsequent litigation regard be had to what has been
(f) DENR Environmental Compliance Certificate dated 01 October 1997 issued for done while such legislative or executive act was in operation and presumed to be valid in all
the proposed project of building an industrial complex on three hundred (300) respects. It is now accepted as a doctrine that prior to its being nullified, its existence as a fact
hectares of industrial land;156 must be reckoned with. This is merely to reflect awareness that precisely because the judiciary
(g) Certificate of Registration No. 00794 dated 26 December 1997 issued by the is the government organ which has the final say on whether or not a legislative or executive
HLURB on the project of Luisita Industrial Park II with an area of three million measure is valid, a period of time may have elapsed before it can exercise the power of
(3,000,000) square meters;157 judicial review that may lead to a declaration of nullity. It would be to deprive the law of its
(h) License to Sell No. 0076 dated 26 December 1997 issued by the HLURB quality of fairness and justice then, if there be no recognition of what had transpired prior to
authorizing the sale of lots in the Luisita Industrial Park II; such adjudication.
(i) Proclamation No. 1207 dated 22 April 1998 entitled "Declaring Certain Parcels In the language of an American Supreme Court decision: "The actual existence of a statute,
of Private Land in Barangay San Miguel, Municipality of Tarlac, Province of Tarlac, prior to such a determination of [unconstitutionality], is an operative fact and may have
as a Special Economic Zone pursuant to Republic Act No. 7916," designating the consequences which cannot justly be ignored. The past cannot always be erased by a new
Luisita Industrial Park II consisting of three hundred hectares (300 has.) of industrial judicial declaration. The effect of the subsequent ruling as to invalidity may have to be
land as a Special Economic Zone; and 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 Petitioner contends that his arrest by virtue of Arrest Search and Seizure Order (ASSO) No.
PARC’s approval of the HLI’s SDP, in conjunction with numerous activities performed in 4754 was invalid, as the law upon which it was predicated — General Order No. 60, issued by
good faith by HLI, and the reliance by the FWBs on the legality and validity of the PARC- then President Ferdinand E. Marcos — was subsequently declared by the Court, in Tañada v.
approved SDP, perforce, certain rights of the parties, more particularly the FWBs, have to be Tuvera, 33 to have no force and effect. Thus, he asserts, any evidence obtained pursuant
respected pursuant to the application in a general way of the operative fact doctrine. thereto is inadmissible in evidence.
A view, however, has been advanced that the operative fact doctrine is of minimal or We do not agree. In Tañada, the Court addressed the possible effects of its declaration of the
altogether without relevance to the instant case as it applies only in considering the effects of a invalidity of various presidential issuances. Discussing therein how such a declaration might
declaration of unconstitutionality of a statute, and not of a declaration of nullity of a contract. affect acts done on a presumption of their validity, the Court said:
This is incorrect, for this view failed to consider is that it is NOT the SDOA dated May 11, ". . .. In similar situations in the past this Court had taken the pragmatic and realistic course set
1989 which was revoked in the instant case. Rather, it is PARC’s approval of the HLI’s forth in Chicot County Drainage District vs. Baxter Bank to wit:
Proposal for Stock Distribution under CARP which embodied the SDP that was nullified. ‘The courts below have proceeded on the theory that the Act of Congress, having been found
A recall of the antecedent events would show that on May 11, 1989, Tadeco, HLI, and the to be unconstitutional, was not a law; that it was inoperative, conferring no rights and
qualified FWBs executed the SDOA. This agreement provided the basis and mechanics of the imposing no duties, and hence affording no basis for the challenged decree. . . . It is quite
SDP that was subsequently proposed and submitted to DAR for approval. It was only after its clear, however, that such broad statements as to the effect of a determination of
review that the PARC, through then Sec. Defensor-Santiago, issued the assailed Resolution unconstitutionality must be taken with qualifications. The actual existence of a statute, prior to
No. 89-12-2 approving the SDP. Considerably, it is not the SDOA which gave legal force and [the determination of its invalidity], is an operative fact and may have consequences which
effect to the stock distribution scheme but instead, it is the approval of the SDP under the cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The
PARC Resolution No. 89-12-2 that gave it its validity. effect of the subsequent ruling as to invalidity may have to be considered in various aspects —
The above conclusion is bolstered by the fact that in Sec. Pangandaman’s recommendation to with respect to particular conduct, private and official. Questions of rights claimed to have
the PARC Excom, what he proposed is the recall/revocation of PARC Resolution No. 89-12-2 become vested, of status, of prior determinations deemed to have finality and acted upon
approving HLI’s SDP, and not the revocation of the SDOA. Sec. Pangandaman’s accordingly, of public policy in the light of the nature both of the statute and of its previous
recommendation was favorably endorsed by the PARC Validation Committee to the PARC application, demand examination. These questions are among the most difficult of those which
Excom, and these recommendations were referred to in the assailed Resolution No. 2005-32- have engaged the attention of courts, state and federal, and it is manifest from numerous
01. Clearly, it is not the SDOA which was made the basis for the implementation of the stock decisions that an all-inclusive statement of a principle of absolute retroactive invalidity cannot
distribution scheme. be justified.’
That the operative fact doctrine squarely applies to executive acts––in this case, the approval xxx xxx xxx
by PARC of the HLI proposal for stock distribution––is well-settled in our jurisprudence. In "Similarly, the implementation/enforcement of presidential decrees prior to their publication in
Chavez v. National Housing Authority,163 We held: the Official Gazette is ‘an operative fact which may have consequences which cannot be justly
Petitioner postulates that the "operative fact" doctrine is inapplicable to the present case ignored. The past cannot always be erased by a new judicial declaration . . . that an all-
because it is an equitable doctrine which could not be used to countenance an inequitable inclusive statement of a principle of absolute retroactive invalidity cannot be justified.’"
result that is contrary to its proper office. The Chicot doctrine cited in Tañada advocates that, prior to the nullification of a statute, there
On the other hand, the petitioner Solicitor General argues that the existence of the various is an imperative necessity of taking into account its actual existence as an operative fact
agreements implementing the SMDRP is an operative fact that can no longer be disturbed or negating the acceptance of "a principle of absolute retroactive invalidity." Whatever was done
simply ignored, citing Rieta v. People of the Philippines. while the legislative or the executive act was in operation should be duly recognized and
The argument of the Solicitor General is meritorious. presumed to be valid in all respects. The ASSO that was issued in 1979 under General Order
The "operative fact" doctrine is embodied in De Agbayani v. Court of Appeals, wherein it is No. 60 — long before our Decision in Tañada and the arrest of petitioner — is an operative
stated that a legislative or executive act, prior to its being declared as unconstitutional by the fact that can no longer be disturbed or simply ignored. (Citations omitted; Emphasis supplied.)
courts, is valid and must be complied with, thus: To reiterate, although the assailed Resolution No. 2005-32-01 states that it revokes or recalls
xxx xxx xxx the SDP, what it actually revoked or recalled was the PARC’s approval of the SDP embodied
This doctrine was reiterated in the more recent case of City of Makati v. Civil Service in Resolution No. 89-12-2. Consequently, what was actually declared null and void was an
Commission, wherein we ruled that: executive act, PARC Resolution No. 89-12-2,165and not a contract (SDOA). It is, therefore,
Moreover, we certainly cannot nullify the City Government's order of suspension, as we have wrong to say that it was the SDOA which was annulled in the instant case. Evidently, the
no reason to do so, much less retroactively apply such nullification to deprive private operative fact doctrine is applicable.
respondent of a compelling and valid reason for not filing the leave application. For as we IV.
have held, a void act though in law a mere scrap of paper nonetheless confers legitimacy upon While the assailed PARC resolutions effectively nullifying the Hacienda Luisita SDP are
past acts or omissions done in reliance thereof. Consequently, the existence of a statute or upheld, the revocation must, by application of the operative fact principle, give way to the
executive order prior to its being adjudged void is an operative fact to which legal right of the original 6,296 qualified FWBs to choose whether they want to remain as HLI
consequences are attached. It would indeed be ghastly unfair to prevent private respondent stockholders or not. The Court cannot turn a blind eye to the fact that in 1989, 93% of the
from relying upon the order of suspension in lieu of a formal leave application. (Citations FWBs agreed to the SDOA (or the MOA), which became the basis of the SDP approved by
omitted; Emphasis supplied.) PARC per its Resolution No. 89-12-2 dated November 21, 1989. From 1989 to 2005, the
The applicability of the operative fact doctrine to executive acts was further explicated by this FWBs were said to have received from HLI salaries and cash benefits, hospital and medical
Court in Rieta v. People,164 thus: 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 A view has been advanced that HLI must pay the FWBs yearly rent for use of the land from
SCTEX. HLI shares totaling 118,391,976.85 were distributed as of April 22, 2005.166 On 1989. We disagree. It should not be forgotten that the FWBs are also stockholders of HLI, and
August 6, 20l0, HLI and private respondents submitted a Compromise Agreement, in which the benefits acquired by the corporation from its possession and use of the land ultimately
HLI gave the FWBs the option of acquiring a piece of agricultural land or remain as HLI redounded to the FWBs’ benefit based on its business operations in the form of salaries, and
stockholders, and as a matter of fact, most FWBs indicated their choice of remaining as other fringe benefits under the CBA. To still require HLI to pay rent to the FWBs will result in
stockholders. These facts and circumstances tend to indicate that some, if not all, of the FWBs double compensation.
may actually desire to continue as HLI shareholders. A matter best left to their own discretion. For sure, HLI will still exist as a corporation even after the revocation of the SDP although it
With respect to the other FWBs who were not listed as qualified beneficiaries as of November will no longer be operating under the SDP, but pursuant to the Corporation Code as a private
21, 1989 when the SDP was approved, they are not accorded the right to acquire land but stock corporation. The non-agricultural assets amounting to PhP 393,924,220 shall remain
shall, however, continue as HLI stockholders. All the benefits and homelots 167 received by the with HLI, while the agricultural lands valued at PhP 196,630,000 with an original area of
10,502 FWBs (6,296 original FWBs and 4,206 non-qualified FWBs) listed as HLI 4,915.75 hectares shall be turned over to DAR for distribution to the FWBs. To be deducted
stockholders as of August 2, 2010 shall be respected with no obligation to refund or return from said area are the 500-hectare lot subject of the August 14, 1996 Conversion Order, the
them since the benefits (except the homelots) were received by the FWBs as farmhands in the 80.51-hectare SCTEX lot, and the total area of 6,886.5 square meters of individual lots that
agricultural enterprise of HLI and other fringe benefits were granted to them pursuant to the should have been distributed to FWBs by DAR had they not opted to stay in HLI.
existing collective bargaining agreement with Tadeco. If the number of HLI shares in the HLI shall be paid just compensation for the remaining agricultural land that will be transferred
names of the original FWBs who opt to remain as HLI stockholders falls below the guaranteed to DAR for land distribution to the FWBs. We find that the date of the "taking" is November
allocation of 18,804.32 HLI shares per FWB, the HLI shall assign additional shares to said 21, 1989, when PARC approved HLI’s SDP per PARC Resolution No. 89-12-2. DAR shall
FWBs to complete said minimum number of shares at no cost to said FWBs. coordinate with LBP for the determination of just compensation. We cannot use May 11, 1989
With regard to the homelots already awarded or earmarked, the FWBs are not obliged to when the SDOA was executed, since it was the SDP, not the SDOA, that was approved by
return the same to HLI or pay for its value since this is a benefit granted under the SDP. The PARC.
homelots do not form part of the 4,915.75 hectares covered by the SDP but were taken from The instant petition is treated pro hac vice in view of the peculiar facts and circumstances of
the 120.9234 hectare residential lot owned by Tadeco. Those who did not receive the homelots the case.
as of the revocation of the SDP on December 22, 2005 when PARC Resolution No. 2005-32- WHEREFORE, the instant petition is DENIED. PARC Resolution No. 2005-32-01 dated
01 was issued, will no longer be entitled to homelots. Thus, in the determination of the December 22, 2005 and Resolution No. 2006-34-01 dated May 3, 2006, placing the lands
ultimate agricultural land that will be subjected to land distribution, the aggregate area of the subject of HLI’s SDP under compulsory coverage on mandated land acquisition scheme of the
homelots will no longer be deducted. CARP, are hereby AFFIRMED with the MODIFICATION that the original 6,296 qualified
There is a claim that, since the sale and transfer of the 500 hectares of land subject of the FWBs shall have the option to remain as stockholders of HLI. DAR shall immediately
August 14, 1996 Conversion Order and the 80.51-hectare SCTEX lot came after compulsory schedule meetings with the said 6,296 FWBs and explain to them the effects, consequences
coverage has taken place, the FWBs should have their corresponding share of the land’s value. and legal or practical implications of their choice, after which the FWBs will be asked to
There is merit in the claim. Since the SDP approved by PARC Resolution No. 89-12-2 has manifest, in secret voting, their choices in the ballot, signing their signatures or placing their
been nullified, then all the lands subject of the SDP will automatically be subject of thumbmarks, as the case may be, over their printed names.
compulsory coverage under Sec. 31 of RA 6657. Since the Court excluded the 500-hectare lot Of the 6,296 FWBs, he or she who wishes to continue as an HLI stockholder is entitled to
subject of the August 14, 1996 Conversion Order and the 80.51-hectare SCTEX lot acquired 18,804.32 HLI shares, and, in case the HLI shares already given to him or her is less than
by the government from the area covered by SDP, then HLI and its subsidiary, Centennary, 18,804.32 shares, the HLI is ordered to issue or distribute additional shares to complete said
shall be liable to the FWBs for the price received for said lots. HLI shall be liable for the value prescribed number of shares at no cost to the FWB within thirty (30) days from finality of this
received for the sale of the 200-hectare land to LRC in the amount of PhP 500,000,000 and the Decision. Other FWBs who do not belong to the original 6,296 qualified beneficiaries are not
equivalent value of the 12,000,000 shares of its subsidiary, Centennary, for the 300-hectare lot entitled to land distribution and shall remain as HLI shareholders. All salaries, benefits, 3%
sold to LIPCO for the consideration of PhP 750,000,000. Likewise, HLI shall be liable for PhP production share and 3% share in the proceeds of the sale of the 500-hectare converted land
80,511,500 as consideration for the sale of the 80.51-hectare SCTEX lot. and the 80.51-hectare SCTEX lot and homelots already received by the 10,502 FWBs,
We, however, note that HLI has allegedly paid 3% of the proceeds of the sale of the 500- composed of 6,296 original FWBs and 4,206 non-qualified FWBs, shall be respected with no
hectare land and 80.51-hectare SCTEX lot to the FWBs. We also take into account the obligation to refund or return them.
payment of taxes and expenses relating to the transfer of the land and HLI’s statement that Within thirty (30) days after determining who from among the original FWBs will stay as
most, if not all, of the proceeds were used for legitimate corporate purposes. In order to stockholders, DAR shall segregate from the HLI agricultural land with an area of 4,915.75
determine once and for all whether or not all the proceeds were properly utilized by HLI and hectares subject of PARC’s SDP-approving Resolution No. 89-12-2 the following: (a) the 500-
its subsidiary, Centennary, DAR will engage the services of a reputable accounting firm to be hectare lot subject of the August 14, l996 Conversion Order; (b) the 80.51-hectare lot sold to,
approved by the parties to audit the books of HLI to determine if the proceeds of the sale of or acquired by, the government as part of the SCTEX complex; and (c) the aggregate area of
the 500-hectare land and the 80.51-hectare SCTEX lot were actually used for legitimate 6,886.5 square meters of individual lots that each FWB is entitled to under the CARP had he
corporate purposes, titling expenses and in compliance with the August 14, 1996 Conversion or she not opted to stay in HLI as a stockholder. After the segregation process, as indicated, is
Order. The cost of the audit will be shouldered by HLI. If after such audit, it is determined that done, the remaining area shall be turned over to DAR for immediate land distribution to the
there remains a balance from the proceeds of the sale, then the balance shall be distributed to original qualified FWBs who opted not to remain as HLI stockholders.
the qualified FWBs. 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.
Republic of the Philippines the motion was denied. The defendant thereafter filed his answer with
SUPREME COURT counterclaim alleging, inter alia, that the land in question was originally
Manila leased to him, also verbally, by the plaintiff's father, Potenciano Gabriel in
SECOND DIVISION 1923 for as long as the defendant wanted subject to the condition that he
G.R. No. L-27797 August 26, 1974 would convert the major portion into a fishpond and the part which was
TRINIDAD GABRIEL, plaintiff-appellee, already a fishpond be improved at his expense which would be reimbursed
vs. by Potenciano Gabriel or his heirs at the termination of the lease for
EUSEBIO PANGILINAN, defendant-appellant. whatever cause; that when the plaintiff became the owner of the property
Mariano Manahan, Jr. for plaintiff-appellee. through inheritance, she told the defendant that she would honor her
Virgilio M. Pablo for defendant-appellant. father's contract with the defendant, and likewise assured him that he
Armando M. Laki for movant. could continue leasing the property, whose original rental of P400.00 a
year had been progressively increased to P1,200.00, for as long as he
ZALDIVAR, J.:p wanted since she was not in a position to attend to it personally. As a
This appeal from the decision, dated December 26, 1963, of the Court of First Instance of special defense, the defendant reiterated the alleged lack of jurisdiction of
Pampanga in its Civil Case No. 1823, was certified to this Court by the Court of Appeals for the trial court to take cognizance of the case.
the reason that the jurisdiction of an inferior court is involved. On February 12, 1962 the trial court issued an order herein below quoted
During the pendency of this case before this Court, under date of April 29, 1972, Atty. Virgilio in full:
M. Pablo, counsel for the appellant Eusebio Pangilinan, gave notice to this Court that said The plaintiff sinks to eject the defendant from the fishpond described in
appellant died on April 3, 1964, and was survived by his children, who are his legal heirs, the complaint which is under lease to the said defendant, who, however,
namely: Salvador Pangilinan, Santos Pangilinan, Mariano Pangilinan, Carlos Pangilinan and refuses to vacate. Instead, he has impugned the jurisdiction of this Court
Pilar Pangilinan de Avante. For the purposes of this case the appellant Eusebio Pangilinan, contending that the action should have been filed with the Court of
therefore, is substituted by his heirs herein named. Agrarian Relations, which has original and exclusive jurisdiction, as their
Under date of November 20, 1973, Atty. Amando M. Laki filed a motion with this Court relationship is one of leasehold tenancy.
advising that appellee Trinidad Gabriel died on June 14, 1967, and was survived by her heirs After the motion to dismiss was denied on the basis of the allegations of
and successors-in-interest, namely: Corazon O. Gabriel, married to Lamberto Ignacio; Ernesto the complaint, the parties were ordered to adduce evidence for the purpose
O. Gabriel; Ester O. Gabriel, married to Emmanuel Padua; Generoso O. Gabriel, Marciano O. of determining which Court shall take cognizance of the case.
Gabriel and Pablo O. Gabriel, and prayed that appellee Trinidad Gabriel be substituted by her It appears that the fishpond is presently in the possession of the defendant,
heirs herein named. By order of this Court of December 4, 1973 the prayer for substitution who originally leased it from the father of the plaintiff. Upon the death of
was granted. the said father, the fishpond was inherited by the plaintiff. It is now
In its resolution dated April 19, 1967 certifying the case to this Court, the Court of Appeals covered by T.C.T. No. 1634 and is registered in her name. It contains an
made the following findings, which We adopt: area of 169,507.00 square meters. The rental is on a yearly basis.
On June 18, 1960 Trinidad Gabriel filed a complaint in the Court of First It also appears that the defendant has ceased to work personally with the
Instance of Pampanga against Eusebio Pangilinan alleging that she is the aid of helpers the aforecited fishpond since 1956 he became ill and
owner of a fishpond situated in barrio Sta. Ursula, Betis, Pampanga and incapacitated. His daughter, Pilar Pangilinan, took over. She testified that
measuring about 169,507 square meters; that sometime during the last war she helps her father in administering the leased property, conveying his
she entered into an oral contract of lease thereof with the defendant on a instructions to the workers, Urbano Maninang, Isidro Bernal and Marciano
year to year basis, i.e., from January 1 to December 31, at a rental of Maninang. The names of Ire, Juan and Aguedo Viada have been
P1,200, plus the amount of real estate taxes, payable in advance in the mentioned as the laborers who were paid for the repair of the dikes.
month of January; that desiring to develop and cultivate the fishpond by Bernardo Cayanan, a nephew of the defendant, acts as the watcher. He has
herself, she notified the defendant in a letter dated June 26, 1957 that she lived separately since he got married. Excepting Pilar Pangilinan. who is
was terminating the contract as of December 31, 1957; that upon request residing near the fishpond, the other children of the defendant are all
of the defendant, she extended the lease for another year; that on professions; a lawyer, an engineer, and a priest all residing in Manila.
November 19, 1958 she again wrote the defendant that he should None of these persons has been seen working on the fishpond.
surrender possession of the fishpond on January 1, 1959, which demand he The above are the material and pertinent facts upon which we enter this
however ignored. Plaintiff accordingly prayed that the defendant be order.
ordered to restore the possession of the fishpond to her and to pay her After a study of the facts and in the light of the provisions of the Tenancy
P1,200, plus the amount of real estate taxes, a year from 1959, attorney's Law, Republic Act No. 1199, particularly Sections 4 and 9, as amended. it
fees and costs. seems clear that his case does not fall within the purview of said Act. The
The defendant moved for the dismissal of the complaint on the ground that lease contract is manifestly a civil lease governed by the New Civil Code.
the trial court had no jurisdiction over the case which properly pertains to Considering the area of the fishpond, 16 hectares, more or less, the fact
the Court of Agrarian Relations, there being an agricultural leasehold that neither the defendant, who is physically incapacitated, or his daughter
tenancy relationship between the parties. Upon opposition by the plaintiff, is Personally cultivating the fishpond or through the employment of
mechanical farm implements, and the further fact that the persons named It does appear that the controversy on the issue of jurisdiction calls for the interpretation of
above are not members of the immediate farm household of the defendant, cultivating or working the land by the tenant personally or with the aid of the members of his
the conclusion is that no tenancy relationship exists between the plaintiff immediate farm household.1
and the defendant as defined by Republic Act No. 1199, as amended. Those are the findings and conclusions of facts made by the Court of Appeals which, as a
We are, therefore, of the opinion and so hold that this Court is vested with general rule, bind this Court.2
jurisdiction to try and decide this case. After this order has become final, 1. Let Us now discuss the issues raised in this appeal. First, was the relationship between the
the plaintiff may request for the setting of the initial trial. appellee and appellant a leasehold tenancy or a civil law lease?
The defendant does not contest the findings of facts therein made by the There are important differences between a leasehold tenancy and a civil law lease. The subject
trial court. matter of leasehold tenancy is limited to agricultural land; that of civil law lease may be either
After the parties adduced their respective evidence on the merits, decision rural or urban property. As to attention and cultivation, the law requires the leasehold tenant to
was rendered wherein the trial court Pursuant to Article 1197 of the Civil personally attend to, and cultivate the agricultural land, whereas the civil law lessee need not
Code, fixed the period of the low up to June 30, 1964, the defendant on personally cultivate or work the thing leased. As to purpose, the landholding in leasehold
said date to surrender possession of the fishpond to the plaintiff and to pay tenancy is devoted to agriculture, whereas in civil law lease, the purpose may be for any other
the rentals due the latter. The plaintiff, on her part, was required upon lawful pursuits. As to the law that governs, the civil law lease is governed by the Civil Code,
surrender of on to her, to pay the defendant the sum of P1,000.00 as whereas leasehold tenancy is governed by special laws.3
reimbursement of the expenses he incurred in improving the fishpond, and In order that leasehold tenancy under the Agricultural Tenancy Act may exist, the following
upon failure by either party to pay the amount due the other, the same requisites must concur.
would bear interest at the legal rate until full payment is made. 1. That the land worked by the tenant is an agricultural land;
A reconsideration by the defendant having been denied, he appealed to 2. That the land is susceptible of cultivation by a single person together with members of his
this Court and assigned the following errors: immediate farm household;
1. The lower court erred in considering the relationship of appellee and 3. That the land must be cultivated by the tenant either personally or with the aid of labor
appellant as that of a civil lease, in accordance with the Civil Code of the available from members of his immediate farm household;
Philippines and not a leasehold tenancy under Rep. Act No. 1199 as 4. That the land belongs to another; and
amended. 5. That the use of the land by the tenant is for a consideration of a fixed amount in money or in
2. The lower court erred in not holding that the Court of First Instance is produce or in both.4
without jurisdiction, the cue being that of an agrarian relation in nature Were the foregoing requisites present in the instant case?
pursuant to Rep Act. NO. 1199 as amended. There is no doubt that the land in question is agricultural land. It is a fishpond and the
3. The lower court erred in appreciating the evidence of the appellant Agricultural Tenancy Act, which refers to "agricultural land", specifically mentions fishponds
particularly the basis for the expenditure for the development of the and prescribes the consideration for the use thereof. Thus Section 46(c) of said Act provides
fishpond in question. that "the consideration for the use of sugar lands, fishponds, salt beds and of lands devoted to
4. The lower court erred in rendering judgment in favor of the appellant in the raising of livestock shall be governed by stipulation between the parties". This Court has
them easily amount of one thousand pesos for reimbursement and for already ruled that "land in which fish is produced is classified as agricultural land."5 The mere
seven hundred pesos for the cost of the floodgate. fact, however, that a person works an agricultural land does not necessarily make him a
Anent the question of jurisdiction, it is an admitted fact that plaintiff leased the fishpond to the leasehold tenant within the purview of section 4 of Republic Act No. 1199. He may still be a
defendant in 1943 without a fixed term, the annual rental payable at the end of the year civil law lessee unless the other requisites as above enumerated are complied with.
(Exhibit C, Deposition of plaintiff, Dec. 13, 1962, pp. 2 and 3). It is likewise undisputed that Regarding the second requisite, it is to be noted that the land in question has an area of
the work in the fishpond consisted in letting out the water so algae (lumut) would grow or if 169,507 square meters, or roughly 17 hectares of fishpond. The question of whether such a big
algae would not grow, getting some from the river and putting them in the fishpond, changing parcel of land is susceptible of being worked by the appellant's family or not has not been
the dirty water with fresh water, repairing leaks in the dikes, and planting of fingerlings and raised, and We see no need of tarrying on this point. So, We pass to the third requisite, to wit,
attending to them; that these were done by defendant, with some help; that he personally whether the tenant himself personally or with the aid of his immediate family worked the land.
attended to the fishpond until 1956 when he became ill; that thereafter his nephew Bernardo Assuming that appellant had previously entered in 1923 into an agreement of leasehold
Cayanan, who was living with him, helped in the work to be done in the fishpond and his tenancy with Potenciano Gabriel, appellee's father, such tenancy agreement was severed in
daughter Pilar Pangilinan helped in the management, conveying his instructions to the workers 1956 when he ceased to work the fishpond personally because he became ill and incapacitated.
(t.s.n., pp. 4-8, Magat). Not even did the members of appellant's immediate farm household work the land in question.
Upon the foregoing facts, the defendant insists that the relationship between the parties is an Only the members of the family of the tenant and such other persons, whether related to the
agricultural leasehold tenancy governed by Republic Act No. 1199, as amended, pursuant to tenant or not, who are dependent upon him for support and who usually help him to operate
section 35 of Republic Act No. 3844, and the present case is therefore within the original and the farm enterprise are included in the term "immediate farm household"6 The record shows
exclusive jurisdiction of the Court of Agrarian Relations. Plaintiff, on the other hand, who helped work the land in question, and We quote:
maintains in effect that since defendant has ceased to work the fishpond personally or with the It also appears that the defendant has ceased to work personally with the
aid of the members of his immediate farm household (Section 4, Republic Act No. 1199) the aid of helpers the aforecited fishpond since 1956 when he became ill and
tenancy relationship between the parties has been extinguished (Section 9, id.) and become of incapacitated. His daughter, Pilar Pangilinan took over. She testified that
civil lease and therefore the trial court properly assumed jurisdiction over the case. she helps her father in administering the leased property, conveying his
instructions to the workers, Urbano Maninang, Isidro Bernal and Marciano
Maninang. The names of Ire, Juan and Aguedo Viada have been
mentioned as the laborers who were paid for the repair of the dikes.
Bernardo Cayanan, a nephew of the defendant, acts as the watcher. He has
lived separately since he got married. Excepting Pilar Pangilinan, who is
residing near the fishpond, the other children of the defendant are all
professionals: a lawyer, an engineer, and a priest — all residing in Manila.
None of these persons has been seen working on the fishpond. 7
The law is explicit in requiring the tenant and his immediate family to work the land. Thus
Section 5 (a) of Republic Act No. 1199, as amended, defines a "tenant" as 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. Section 8 of the same Act limits the relation of landholder and tenant to the person
who furnishes the land and to the person who actually works the land himself with the aid of
labor available from within his immediate farm household. Finally, Section 4 of the same Act
requires for the existence of leasehold tenancy that the tenant and his immediate farm
household work the land. It provides that leasehold tenancy exists when a person, who either
personally or with the aid of labor available from members of his immediate farm household,
undertakes to cultivate a piece of agricultural land susceptible of cultivation by a single person
together with members of his immediate farm household, belonging to, or legally possessed
by, another in consideration of a fixed amount in money or in produce or in both.
A person, in order to be considered a tenant, must himself and with the aid available from his
immediate farm household cultivate the land. Persons, therefore, who do not actually work the
land cannot be considered tenants;8and he who hires others whom he pays for doing the
cultivation of the land, ceases to hold, and is considered as having abandoned the land as
tenant within the meaning of sections 5 and 8 of Republic Act. No. 1199, and ceases to enjoy
the status, rights, and privileges of one.
We are, therefore, constrained to agree with the court a quo that the relationship between the
appellee Trinidad Gabriel and appellant Eusebio Pangilinan was not a leasehold tenancy under
Republic Act No. 1199. Hence, this case was not within the original and exclusive jurisdiction
of the Court of Agrarian Relations.9
2. Regarding the second assignment of error, We accordingly rule that the Court of First
Instance correctly assumed jurisdiction over the case at bar, this being a case of civil law lease.
3. We deem it unnecessary to discuss the third and fourth assigned errors as these are issues
involving findings of facts which have been settled by the lower court, and unless there is
grave abuse of discretion, which we do not find in the record of the case, We shall not venture
to discuss the merits of the factual findings of the court a quo.
IN VIEW OF THE FOREGOING, the decision of the Court of First Instance of Pampanga in
its Civil Case No. 1823, appealed from, is affirmed, with costs against the appellants.
This decision should apply to the heirs and successors-in-interest of the original parties, as
named in this decision. In consonance with the decision of the lower court, the heirs and
successors-in-interest of appellant Eusebio Pangilinan should deliver the possession of the
fishpond in question to the heirs and successors-in-interest of appellee Trinidad Gabriel; and
said heirs and successors-in-interest of appellant Eusebio Pangilinan should pay the heirs and
successors-in-interest of appellee Trinidad Gabriel the accrued rentals. From January 1, 1960,
at the rate of P1,200.00 a year, until the actual delivery of the possession of the fishpond as
herein ordered, with interest at the legal rate until full payment is made.
IT IS SO ORDERED.
TCT No. T-829/EP No. A-
FIRST DIVISION 027293
3. RONGIE D. AGUILAR TCT No. T-913/EP No. A- 3.1441
SAMUEL ESTRIBILLO, CALIXTO P. G.R. No. 159674 027295
ABAYATO, JR., RONGIE D. AGUILAR, 4. TACIANA D. AGUILAR TCT No. T-944/EP No. A- 4.2405
TACIANA D. AGUILAR, ARTEMIO G. DE 027296
JUAN, ESTANISLAO DELA CRUZ, SR., 5. ARTEMIO G. DE JUAN TCT No. T-302/EP No. A- 3.3082
EDGAR DUENAS, MARIO ERIBAL, Present: 037809
REYNALDO C. ESENCIA, EMMA 6. ESTANISLAO DELA CRUZ, SR. TCT No. T-290/EP No. A- 3.1437
GONZAGA, RUBEN A. IBOJO, SAMUEL PANGANIBAN, C.J.* 035676
JAMANDRE, HILARION V. LANTIZA, Chairperson,
7. EDGAR DUENAS TCT No. T-949/EP No. A- 4.0128
ANSELMO LOPEZ, TERESITA NACION, YNARES-SANTIAGO,**
037658
CHARIE E. NASTOR, NELSON L. AUSTRIA-MARTINEZ,
CALLEJO, SR., and 8. MARIO P. ERIBAL TCT No. T-952/EP No. A- 2.3087
NULLAS, CARLITO S. OLIA, ANA
CHICO-NAZARIO, JJ. 037836
PATIO, ROBERTO T. PATIO, ANTONIO
P. ROCHA, FERNANDO C. RUFINO, 9. REYNALDO C. ESENCIA TCT No. T-950/EP No. A- 2.0950
PATERNO P. SAIN, CLAUDIO S. 037844
SAYSON, and JOEMARIE VIBO, 10. RUBEN A. IBOJO TCT No. T-928/EP No. A- 1.5737
Petitioners, 037873
11. SAMUEL JAMANDRE TCT No. T-909/EP No. A- 2.2670
- versus - 159348
12. HILARION V. LANTIZA TCT No. T-288/EP No. A- 4.5526
DEPARTMENT OF AGRARIAN 037674 0.4579
REFORM and HACIENDA MARIA, INC., Promulgated: TCT No. T-401/EP No. A-
Respondents. 037825
13. ANSELMO LOPEZ TCT No. T-973/EP No. A- 4.4939
June 30, 2006 037840
x--------------------------------------------------x 14. TERESITA NACION TCT No. T-900/EP No. A- 2.2140
037849
15. CHARIE E. NASTOR TCT No. T-825/EP No. A- 3.9291
DECISION 037829
16. NELSON L. NULLAS TCT No. T-396/EP No. A- 2.7491
037826
CHICO-NAZARIO, J.:
17. CARLITO S. OLIA TCT No. T-910/EP No. A- 1.7954
037673
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
18. ROBERTO T.PATIO TCT No. T-912/EP No. A- 6.4266
seeking the review and reversal of the Resolutions[1] of the Court of Appeals dated 27 January
037860
2003 and 28 August 2003, respectively.
19. ANTONIO P. ROCHA TCT No. T-914/EP No. A- 2.2143
The factual and procedural antecedents are as follows: 037830
20. FERNANDO C. RUFINO TCT No. T-923/EP No. A- 4.5322
The petitioners, with the exception of two, are the recipients of Emancipation Patents 037848
(EPs) over parcels of land located at Barangay Angas, Sta. Josefa, Agusan del Sur, with their 21. PATERNO P. SAIN TCT No. T-954/EP No. A- 4.3223
respective Transfer Certificate of Title (TCT) and EP numbers presented below: 037813
22. CLAUDIO S. SAYSON, and TCT No. T-891/EP No. A- 3.7151
Petitioners TCT/EP Nos. Areas 037880
(has.) 23. JOEMARIE VIBO TCT No. T-893/EP No. A- 1.3185[2]
1. SAMUEL ESTRIBILLO TCT No. T-287/EP No. A- 1.7833 037827
037675
2. CALIXTO P. ABAYATO, JR. TCT No. T-297/EP No. A- 2.0000 The two other petitioners, Emma Gonzaga and Ana Patio, are the surviving spouses
037814 0.1565 of deceased recipients of EPs over parcels of land also located at Barangay Angas,
Sta. Josefa, Agusan del Sur, with their corresponding TCT and EP numbers identified as of OCT No. P-3077-1661. The annotation in the OCT showed that the entire 527.8308 hectares
follows: was the subject of the Deed of Assignment.

(Deceased) Registered Owners TCT/EP Nos. Areas In 1982, a final survey over the entire area was conducted and approved. From 1984
(has.) to 1988, the corresponding TCTs and EPs covering the entire 527.8308 hectares were issued to
1. MANUEL S. GONZAGA TCT No. T-920/EP No. A- 4.1953 petitioners, among other persons.
037832
2. RAFAEL PATIO TCT No. T-929/EP No. A- 3.0078[3] In December 1997, HMI filed with the Regional Agrarian Reform Adjudicator
037861 (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
The parcels of land described above, the subject matters in this Petition, were formerly corn, that the area was untenanted, and that no compensation was paid therefor. The 17 petitions,
part of a forested area which have been denuded as a result of the logging operations of which were later consolidated, sought for the cancellation of the EPs covering the disputed
respondent Hacienda Maria, Inc. (HMI). Petitioners, together with other persons, occupied and 277.5008 hectares which had been awarded to petitioners. HMI did not question the coverage
tilled these areas believing that the same were public lands. HMI never disturbed petitioners and of the other 250.3300 hectares under Presidential Decree No. 27 despite claiming that the entire
the other occupants in their peaceful cultivation thereof. landholdings were untenanted and not devoted to rice and corn.

HMI acquired such forested area from the Republic of the Philippines through Sales On 27 November 1998, after petitioners failed to submit a Position Paper, the RARAD
Patent No. 2683 in 1956 by virtue of which it was issued OCT No. P-3077-1661. The title rendered a Decision declaring as void the TCTs and EPs awarded to petitioners because the land
covered three parcels of land with a total area of 527.8308 hectares, to wit: 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
Lot No. Area
Action Team. Petitioners TCTs and EPs were ordered cancelled. Petitioners filed a Motion for
(in hectares)
Reconsideration, but the same was denied. Petitioners appealed to the Department of Agrarian
Lot No. 1620, Pls 4 28.52 Reform Adjudication Board (DARAB) which affirmed the RARAD Decision.
Lot No. 1621, Pls 4 11.64
Lot No. 1622, Pls 4 487.47 After the DARAB denied petitioners Motion for Reconsideration, the latter proceeded
TOTAL 527.83[4] to the Court of Appeals with their Petition for Review on Certiorari. The Court of Appeals
issued the following assailed Resolution:
On 21 October 1972, Presidential Decree No. 27[5] was issued mandating that tenanted
rice and corn lands be brought under Operation Land Transfer and awarded to farmer- A perusal of the petition reveals that the Verification and
beneficiaries. Certification of Non-Forum Shopping was executed by Samuel
A. Estribillo who is one of the petitioners, without the corresponding
HMI, through a certain Joaquin Colmenares, requested that 527.8308 hectares of its Special Power of Attorneys executed by the other petitioners authorizing
landholdings be placed under the coverage of Operation Land Transfer. Receiving him to sign for their behalf in violation of Section 5, Rule 7 of the 1997
compensation therefor, HMI allowed petitioners and other occupants to cultivate the Rules of Civil Procedure, as amended.
landholdings so that the same may be covered under said law.
WHEREFORE, the petition is DENIED DUE COURSE and
In 1973, the Department of Agrarian Reform (DAR) conducted a parcellary mapping necessarily DISMISSED.[6]
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. 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
HMI, through its representatives, actively participated in all relevant proceedings, Samuel Estribillo by his Co-Petitioners. The Court of Appeals denied the motion by issuing the
including the determination of the Average Gross Production per hectare at following assailed Resolution:
the BarangayCommittee on Land Production, and was a signatory of an undated Landowner and
Tenant Production Agreement (LTPA), covering the 527.8308 hectares. The LTPA was Petitioners seek the reconsideration of Our Resolution
submitted to the Land Bank of the Philippines (LBP) in 1977. promulgated on January 27, 2003 which dismissed the petition for
certiorari.
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 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 Certification Against Forum
unequivocal requirements set forth by Sec. 5, Rule 7 of the 1997 Rules of shopping
Civil Procedure, as amended.

While it is true that the Supreme Court has recognized special Rule 7, Section 5 of the 1997 Rules of Civil Procedure was preceded by Revised
circumstances that justify the relaxation of the rules on non-forum shopping, Circular No. 28-91 and Administrative Circular No. 04-94, which required a certification against
such circumstances, however, are not present in the case at bar. 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
More importantly, said Rules cannot be relaxed in view of the differently, the rule was designed to avoid a situation where said courts, tribunals and agencies
Supreme Courts ruling in Loquias vs. Ombudsman, 338 SCRA 62, which would have to resolve the same issues. Rule 7, Section 5, now provides:
stated that, substantial compliance will not suffice in a matter involving
strict observance by the rules. The attestation contained in the certification Sec. 5. Certification against forum shopping. The plaintiff or
[on] non-forum shopping requires personal knowledge by the party who principal party shall certify under oath in the complaint or other initiatory
executed the same. pleading asserting a claim for relief, or in a sworn certification annexed
thereto and simultaneously filed therewith: (a) that he has not theretofore
Since the Verification and Certification on Non-Forum shopping commenced any action or filed any claim involving the same issues in any
was executed without the proper authorization from all the petitioners, such court, tribunal or quasi-judicial agency and, to the best of his knowledge, no
personal knowledge cannot be presumed to exist thereby rendering the such other action or claim is pending therein; (b) if there is such other
petition fatally defective. 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
Par. 2, Sec. 5 of Rule 7 of the 1997 Rules of Civil Procedure, as has been filed or is pending, he shall report that fact within five (5)
amended states: 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 Failure to comply with the foregoing requirements shall not be
of the complaint or other initiatory pleading but shall be curable by mere amendment of the complaint or other initiatory pleading
cause for the dismissal of the case without prejudice but shall be cause for the dismissal of the case without prejudice, unless
xxx otherwise provided, upon motion and after hearing. The submission of a
false certification or non-compliance with any of the undertakings therein
It is, thus, clear that the Motion for Reconsideration has no legal shall constitute indirect contempt of court, without prejudice to the
basis to support it and should be dismissed forthwith. Moreover, corresponding administrative and criminal actions. If the acts of the party
granting arguendo that a special power of attorney belatedly filed could cure or his counsel clearly constitute willful and deliberate forum shopping, the
the petitions defect, the requirement of personal knowledge of all the same shall be ground for summary dismissal with prejudice and shall
petitioners still has not been met since some of the other petitioners failed constitute direct contempt as well as a cause for administrative sanctions.
to sign the same.
Revised Circular No. 28-91 was designed x x x to promote and facilitate the orderly
WHEREFORE, in view of the foregoing, the Motion for administration of justice and should not be interpreted with such absolute literalness as to
Reconsideration is hereby DENIED.[7] 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
Petitioners now file this present Petition contending that there had been compliance what is now Rule 7, Section 5 of the 1997 Rules of Civil Procedure.
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 Petitioner Samuel A. Estribillo, in signing the Verification and
registration. 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
The petition is impressed with merit. Civil Procedure. Such was given emphasis by this Court when we held
in Mendigorin v. Cabantog[10] and Escorpizo v. University of Baguio[11] that the certification of
Petitioners have sufficiently non-forum shopping must be signed by the plaintiff or any of the principal parties and not only
complied with Rule 7, Section 5 by the legal counsel. In Condo Suite Club Travel, Inc. v. National Labor Relations
of the 1997 Rules of Civil Commission,[12] we likewise held that:
Procedure concerning the
The certification in this petition was improperly executed by the external the area and were said to be temporarily residing in other towns, while some already died
legal counsel of petitioner. For a certification of non-forum shopping must because of old age.[15] Be that as it may, those who did not sign the SPA did not participate, and
be by the petitioner, or any of the principal parties and not by counsel unless are not parties to this petition.
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. The Court of Appeals merely said that the special circumstances recognized by this
(Emphasis supplied) 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
The Court of Appeals heavily relied on the seemingly conflicting case of Loquias v. petitioners was not strictly in consonance with Rule 7, Section 5 of the 1997 Rules of Civil
Office of the Ombudsman,[13] where this Court ruled that: 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
At the outset, it is noted that the Verification and Certification was forum shopping, such as those which we appreciated in the ensuing cases.
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, In General Milling Corporation v. National Labor Relations Commission,[17] the
Rule 7 expressly provides that it is the plaintiff or principal party who shall appeal to the Court of Appeals had a certificate against forum shopping, but was dismissed as it
certify under oath that he has not commenced any action involving the same did not contain a board resolution authorizing the signatory of the Certificate. Petitioners therein
issues in any court, etc. Only petitioner Din, the Vice-Mayor of San attached the board resolution in their Motion for Reconsideration but the Court of Appeals, as
Miguel, Zamboanga del Sur, signed the certification. There is no showing in this case, denied the same. In granting the Petition therein, we explained that:
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 [P]etitioner complied with this procedural requirement except that it was
knew, to the best of his knowledge, whether his co-petitioners had the same not accompanied by a board resolution or a secretarys certificate that the
or similar actions or claims filed or pending. We find that substantial person who signed it was duly authorized by petitioner to represent it in the
compliance will not suffice in a matter involving strict observance by the case. It would appear that the signatory of the certification was, in fact, duly
rules. The attestation contained in the certification on non-forum shopping authorized as so evidenced by a board resolution attached to petitioners
requires personal knowledge by the party who executed the motion for reconsideration before the appellate court. It could thus be said
same. Petitioners must show reasonable cause for failure to personally sign that there was at least substantial compliance with, and that there was no
the certification. Utter disregard of the rules cannot justly be rationalized by attempt to ignore, the prescribed procedural requirements.
harking on the policy of liberal construction. (Emphasis supplied)

Loquias, however, was a case involving only five petitioners seeking relief from the The rules of procedure are intended to promote, rather than
Resolution of the Ombudsman charging them with violation of Republic Act No. 3019, where frustrate, the ends of justice, and while the swift unclogging of court dockets
the above declaration at the outset was made together with a determination on the lack of is a laudable objective, it, nevertheless, must not be met at the expense of
jurisdiction on our part to decide the Petition.[14] There being only five petitioners in Loquias, substantial justice. Technical and procedural rules are intended to help
the unreasonableness of the failure to obtain the signatures of Antonio Din, Jr.s four co-accused secure, not suppress, the cause of justice and a deviation from the rigid
is immediately apparent, hence the remark by this Court that [p]etitioners must show reasonable enforcement of the rules may be allowed to attain that prime objective for,
cause for failure to personally sign the certification. In the present petition, petitioners allege after all, the dispensation of justice is the core reason for the existence of
that they are farmer-beneficiaries who reside in a very courts. [Acme Shoe, Rubber and Plastic Corp. vs. Court of Appeals; BA
remote barangay in Agusan del Sur. While they reside in the same barangay, they allegedly Savings Bank vs. Sia, 336 SCRA 484].
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 In Shipside Incorporated v. Court of Appeals,[18] the authority of petitioners resident
age. On the other hand, their lawyers (who are members of a non-government organization manager to sign the certification against forum shopping was submitted to the Court of Appeals
engaged in development work) are based in Quezon Citywho started assisting them at the latter only after the latter dismissed the Petition. It turned out, in the Motion for Reconsideration, that
part of the RARAD level litigation in 1998, and became their counsel of record only at the he already had board authority ten days before the filing of the Petition. We ratiocinated therein
DARAB level. The petitioner who signed the initiatory pleading, Samuel Estribillo, was the that:
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, On the other hand, the lack of certification against forum
the Kahiusahan sa Malahutayong mga Mag- shopping is generally not curable by the submission thereof after the filing
uugma Para sa Ekonomikanhong Kalambuan (KAMMPE). When the Petition a quo was of the petition. Section 5, Rule 45 of the 1997 Rules of Civil Procedure
dismissed, petitioners counsel went to Agusan del Sur and tried earnestly to secure all the provides that the failure of the petitioner to submit the required documents
signatures for the SPA. In fact, when the SPA was being circulated for their signatures, 24 of that should accompany the petition, including the certification against
the named petitioners therein failed to sign for various reasons some could not be found within forum shopping, shall be sufficient ground for the dismissal thereof. The
same rule applies to certifications against forum shopping signed by a There were even cases where we held that there was complete non-compliance with
person on behalf of a corporation which are unaccompanied by proof that the rule on certification against forum shopping, but we still proceeded to decide the case on the
said signatory is authorized to file a petition on behalf of the corporation. 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
In certain exceptional circumstances, however, the Court has held therein that:
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 With regard to the absence of a certification of non-forum
the certification one day after the filing of an election protest as substantial shopping, substantial justice behooves us to agree with the disquisition of
compliance with the requirement. In Roadway Express, Inc. v. Court of the appellate court. We do not condone the shortcomings of respondents
Appeals, et al. (264 SCRA 696 [1996]), the Court allowed the filing of the counsel, but we simply cannot ignore the merits of their claim. Indeed, it
certification 14 days before the dismissal of the petition. In Uy v. Landbank, has been held that [i]t is within the inherent power of the Court to suspend
supra, the Court had dismissed Uys petition for lack of verification and its own rules in a particular case in order to do justice.
certification against non-forum shopping. However, it subsequently
reinstated the petition after Uy submitted a motion to admit certification and In Damasco v. National Labor Relations Commission,[21] the non-compliance was
non-forum shopping certification. In all these cases, there were special disregarded because of the principle of social justice, which is equally applicable to the
circumstances or compelling reasons that justified the relaxation of the rule case at bar:
requiring verification and certification on non-forum shopping.
We note that both petitioners did not comply with the rule on
In the instant case, the merits of petitioners case should be certification against forum shopping. The certifications in their respective
considered special circumstances or compelling reasons that justify petitions were executed by their lawyers, which is not correct. The
tempering the requirement in regard to the certificate of non-forum certification of non-forum shopping must be by the petitioner or a principal
shopping. Moreover, in Loyola, Roadway, and Uy, the Court excused non- party and not the attorney. This procedural lapse on the part of petitioners
compliance with the requirement as to the certificate of non-forum could have warranted the outright dismissal of their actions.
shopping. With more reason should we allow the instant petition since
petitioner herein did submit a certification on non-forum shopping, failing But, the court recognizes the need to resolve these two petitions
only to show proof that the signatory was authorized to do so. That on their merits as a matter of social justice involving labor and capital. After
petitioner subsequently submitted a secretarys certificate attesting that all, technicality should not be allowed to stand in the way of equitably and
Balbin was authorized to file an action on behalf of petitioner likewise completely resolving herein the rights and obligations of these
mitigates this oversight. 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
It must also be kept in mind that while the requirement of the working woman.
certificate of non-forum shopping is mandatory, nonetheless the
requirements must not be interpreted too literally and thus defeat the The foregoing cases show that, even if we assume for the sake of argument that there
objective of preventing the undesirable practice of forum-shopping. Lastly, was violation of Rule 7, Section 5 of the 1997 Rules of Civil Procedure, a relaxation of such
technical rules of procedure should be used to promote, not frustrate rule would be justified for two compelling reasons: social justice considerations and the apparent
justice. While the swift unclogging of court dockets is a laudable objective, merit of the Petition, as shall be heretofore discussed.
the granting of substantial justice is an even more urgent ideal.
Certificates of Title issued
pursuant to Emancipation
In Uy v. Land Bank of the Philippines,[19] we, likewise, considered the apparent merits Patents are as indefeasible
of the substantive aspect of the case as a special circumstance or compelling reason for the as TCTs issued in registration
reinstatement of the case, and invoked our power to suspend our rules to serve the ends of proceedings.
justice. Thus:

The admission of the petition after the belated filing of the Petitioners claim that the EPs have become indefeasible upon the expiration of one
certification, therefore, is not unprecedented. In those cases where the Court year from the date of its issuance. The DARAB, however, ruled that the EP is a title issued
excused non-compliance with the requirements, there were special through the agrarian reform program of the government. Its issuance, correction and
circumstances or compelling reasons making the strict application of the cancellation is governed by the rules and regulations issued by the Secretary of the Department
rule clearly unjustified. In the case at bar, the apparent merits of the of Agrarian Reform (DAR). Hence, it is not the same as or in the same category of
substantive aspects of the case should be deemed as a special circumstance a Torrens title.
or compelling reason for the reinstatement of the petition. x x x
The DARAB is grossly mistaken.
Ybaez v. Intermediate Appellate Court,[22] provides that certificates of title issued in After complying with the procedure, therefore, in Section 105 of Presidential Decree
administrative proceedings are as indefeasible as certificates of title issued in judicial No. 1529, otherwise known as the Property Registration Decree (where the DAR is required to
proceedings: 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
It must be emphasized that a certificate of title issued under an EPs acquire the same protection accorded to other TCTs. The certificate of title becomes
administrative proceeding pursuant to a homestead patent, as in the instant indefeasible and incontrovertible upon the expiration of one year from the date of the issuance
case, is as indefeasible as a certificate of title issued under a judicial of the order for the issuance of the patent, x x x. Lands covered by such title may no longer be
registration proceeding, provided the land covered by said certificate is a the subject matter of a cadastral proceeding, nor can it be decreed to another person.[25]
disposable public land within the contemplation of the Public Land Law.
As we held through Justice J.B.L. Reyes in Lahora v. Dayanghirang, Jr.[26]:
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, The rule in this jurisdiction, regarding public land patents and the
fixing the one (1) year period within which the public land patent is open to character of the certificate of title that may be issued by virtue thereof, is
review on the ground of actual fraud as in Section 38 of the Land that where land is granted by the government to a private individual, the
Registration Act, now Section 32 of P.D. 1529, and clothing a public land corresponding patent therefor is recorded, and the certificate of title is
patent certificate of title with indefeasibility. Nevertheless, the pertinent issued to the grantee; thereafter, the land is automatically brought within
pronouncements in the aforecited cases clearly reveal that Section 38 of the the operation of the Land Registration Act, the title issued to the grantee
Land Registration Act, now Section 32 of P.D. 1529 was applied by becoming entitled to all the safeguards provided in Section 38 of the said
implication by this Court to the patent issued by the Director of Lands duly Act. In other words, upon expiration of one year from its issuance, the
approved by the Secretary of Natural Resources, under the signature of the certificate of title shall become irrevocable and indefeasible like a
President of the Philippines in accordance with law. The date of issuance of certificate issued in a registration proceeding. (Emphasis supplied.)
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 EPs themselves, like the Certificates of Land Ownership Award (CLOAs) in
the Director of Lands equally and finally grants, awards, and conveys the Republic Act No. 6657 (the Comprehensive Agrarian Reform Law of 1988), are enrolled in
land applied for to the applicant. This, to our mind, is in consonance with the Torrens system of registration. The Property Registration Decree in fact devotes Chapter
the intent and spirit of the homestead laws, i.e. conservation of a family IX[27] on the subject of EPs. Indeed, such EPs and CLOAs are, in themselves, entitled to be as
home, and to encourage the settlement, residence and cultivation and indefeasible as certificates of title issued in registration proceedings.
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 The only defense of respondents, that the issue of indefeasibility of title was raised for
decision after it has been given by the Government through the process of the first time on appeal with the DARAB, does not hold water because said issue was already
proceedings in accordance with the Public Land Law, there would arise raised before the RARAD.[28]
uncertainty, confusion and suspicion on the governments system of The recommendation of the Hacienda Maria Action Team to have the EPs cancelled
distributing public agricultural lands pursuant to the Land for the Landless and the lots covered under the Republic Act No. 6657, [29] with the farmer-beneficiaries later on
policy of the State. 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
The same confusion, uncertainty and suspicion on the distribution of government- 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 The unreasonable delay of HMI in filing the Petition for cancellation more than 20
proceeding. The silence of Presidential Decree No. 27 as to the indefeasibility of titles issued years after the alleged wrongful annotation of the Deed of Assignment in OCT No. P-3077-
pursuant thereto is the same as that in the Public Land Act where Prof. 1661, and more than ten years after the issuance of the TCTs to the farmers, is apparently
Antonio Noblejas commented: motivated by its desire to receive a substantially higher valuation and just compensation should
the disputed 277.5008 hectares be covered under Republic Act No. 6657 instead of Presidential
Inasmuch as there is no positive statement of the Public Land Decree No. 27.[30] This is further proved by the following uncontested allegations by petitioners:
Law, regarding the titles granted thereunder, such silence should be
construed and interpreted in favor of the homesteader who come into the (i) HMI neither asked for rentals nor brought any action to oust petitioners
possession of his homestead after complying with the requirements from the farm they were cultivating;
thereof. Section 38 of the Land Registration Law should be interpreted to (ii) HMI had not paid realty taxes on the disputed property from 1972 onwards
apply by implication to the patent issued by the Director of Lands, duly and never protested petitioners act of declaring the same for realty taxation;
approved by the Minister of Natural Resources, under the signature of
the President of the Philippines, in accordance with law.[23]
(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 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 TCTsissued to
petitioners or to their successors-in-interest are hereby declared VALID and SUBSISTING:

Original Grantees TCT/EP Nos.


1. SAMUEL ESTRIBILLO TCT No. T-287/EP No. A-037675
2. CALIXTO P. ABAYATO, JR. TCT No. T-297/EP No. A-037814
TCT No. T-829/EP No. A-027293
3. RONGIE D. AGUILAR TCT No. T-913/EP No. A-027295
4. TACIANA D. AGUILAR TCT No. T-944/EP No. A-027296
5. ARTEMIO G. DE JUAN, TCT No. T-302/EP No. A-037809
6. ESTANISLAO DELA CRUZ, SR. TCT No. T-290/EP No. A-035676
7. EDGAR DUENAS TCT No. T-949/EP No. A-037658
8. MARIO P. ERIBAL TCT No. T-952/EP No. A-037836
9. REYNALDO C. ESENCIA TCT No. T-950/EP No. A-037844
10. RUBEN A. IBOJO TCT No. T-928/EP No. A-037873
11. SAMUEL JAMANDRE TCT No. T-909/EP No. A-159348
12. HILARION V. LANTIZA TCT No. T-288/EP No. A-037674
TCT No. T-401/EP No. A-037825
13. ANSELMO LOPEZ TCT No. T-973/EP No. A-037840
14. TERESITA NACION TCT No. T-900/EP No. A-037849
15. CHARIE E. NASTOR TCT No. T-825/EP No. A-037829
16. NELSON L. NULLAS TCT No. T-396/EP No. A-037826
17. CARLITO S. OLIA TCT No. T-910/EP No. A-037673
18. ROBERTO T.PATIO TCT No. T-912/EP No. A-037860
19. ANTONIO P. ROCHA TCT No. T-914/EP No. A-037830
20. FERNANDO C. RUFINO TCT No. T-923/EP No. A-037848
21. PATERNO P. SAIN TCT No. T-954/EP No. A-037813
22. CLAUSIO S. SAYSON TCT No. T-891/EP No. A-037880
23. JOEMARIE VIBO TCT No. T-893/EP No. A-037827
24. MANUEL S. GONZAGA TCT No. T-920/EP No. A-037832
25. RAFAEL PATIO TCT No. T-297/EP No. A-037861

Costs against respondent Hacienda Maria, Inc.

SO ORDERED.
Republic of the Philippines became final and the same was partially executed with the restoration of Lot No. 68 in the
Supreme Court possession of Dela Cruz, et al..[4]
Manila However, during the pendency of the appeal before the OP, Cruz executed an
Affidavit of Waiver over his interest in Lot No. 90 on the basis of which DAR Regional Office
III issued an Order dated December 7, 1987 cancelling the CLT of Cruz and declaring Lot No.
THIRD DIVISION 90 open for disposition.[5] On November 7, 1989, then DAR Secretary Miriam Defensor
Santiago issued an Order awarding Lot No. 90 to herein petitioner Roberto Padua (Padua) who
had been occupying said property and paying the amortization thereon to the Land Bank of the
ROBERTO PADUA, G.R. No. 153456 Philippines (LBP).
Petitioner, Aggrieved, Dela Cruz, et al., acting thru Anao Mayor Clemente Apuan, filed with the
Present: DAR Secretary a Letter-Petition for Cancellation (Letter-Petition) of the December 7, 1987
DAR Regional Office III Order and the November 7, 1989 DAR Order. [6]
- versus - YNARES-SANTIAGO, J.,
Chairperson, DAR Secretary Garilao granted the Letter-Petition in an Order dated July 2,
AUSTRIA-MARTINEZ, 1995 (Garilao Order), to wit:
THE HON. COURT OF APPEALS, CALLEJO, SR.,
ATTY. DELFIN B. SAMSON, CHICO-NAZARIO, and WHEREFORE, premises considered, Order is hereby issued granting the
DEPARTMENT OF AGRARIAN NACHURA, JJ. petition, thereby cancelling the Order of Award dated November 7,
REFORM, and MR. TEOFILO 1989 issued in favor of Roberto Padua involving Lot No. 90, Psd-185539,
INOCENCIO,* Promulgated: Ongsiako Estate and directing the Regional Director to cause the restoration
Respondents. March 2, 2007 of possession of said lot in favor of the petitioners. All payments made by
x------------------------------------------------x Roberto Padua on account of said lot as rentals for the use thereof are
forfeited in favor of the government.

DECISION SO ORDERED.[7]

Accordingly, DAR Regional Director Nestor Acosta (Director Acosta) issued a


AUSTRIA-MARTINEZ, J.: Memorandum[8] dated May 9, 2000, directing herein public respondent Provincial Agrarian
Reform Officer Teofilo Inocencio (PARO Inocencio) to implement the Garilao Order. In turn,
PARO Inocencio instructed Municipal Agrarian Reform Officer Lino Mabborang (MARO
Herein Petition for Review on Certiorari under Rule 45 of the Rules of Court assails Mabborang) to issue the necessary documents to award Lot No. 90 to Dela Cruz, et al..[9]
the December 18, 2001 Decision and May 7, 2002 Resolution[1] of the Court of Appeals (CA)
which dismissed the Petition for Annulment of a Final and Executory Order of the Secretary of Upon being informed by MARO Mabborang of the implementation of the Garilao
Agrarian Reform, docketed as CA- G.R. SP No. 59366.[2] Order, Padua filed with the CA a Petition for Annulment of a Final and Executory Order of the
Secretary of Agrarian Reform with Prayer for Temporary Restraining Order and/or Preliminary
The CA summarized the facts as follows: Injunction.[10] In justifying his recourse to a Petition for Annulment, Padua claims that the DAR
Private respondents Pepito Dela Cruz, et al. (Dela Cruz, et al.) were tenants of Lot under Sec. 50 of Comprehensive Agrarian Reform Law (CARL) cannot take cognizance of the
Nos. 68 and 90 of the Dolores Ongsiako Estate in Anao, Tarlac. In 1966, upon the request of petition for cancellation because the matter involved is a civil law issue relating to the validity
Anao Mayor Catalino Cruz (Mayor Cruz), Dela Cruz, et al. agreed to donate said properties to of a contract of sale executed by LBP and petitioner, not an agrarian reform matter; that
the municipality on the condition that these be used as school sites. The project did not cancellation can only be ordered by a court of justice, not by an administrative agency exercising
materialize and, in 1977, Dela Cruz, et al. asked that the properties be returned to only quasi-judicial powers, more so if it is considered that plaintiff was a purchaser for value
them. However, they found out that Mayor Cruz had distributed Lot No. 68 to Flor Labagnoy and was not a party to the controversy between farmers/tenants and the grantees of the certificate
(Labagnoy) and Lot No. 90 to Edwin Cruz (Cruz) who were each issued a Certificate of Land of land transfer; that Sec. 50 of CARL falls under the heading of Administrative Adjudication
Transfer (CLT).[3] under Chapter XII, hence, this administrative adjudication cannot be the mechanism for
resolutions of a contract; and, that this was in fact the stand of PARO Inocencio in his
Upon Petition for Cancellation of CLT filed by Dela Cruz, et al., Department of 2nd Indorsement dated February 15, 1994.[11]
Agrarian Reform (DAR) Secretary Condrado Estrella issued an Order dated April 19, 1982
(Estrella Order), cancelling the CLT issued to Labagnoy and Cruz. The latter filed a Petition for Padua also claimed lack of due process in that he was allegedly never impleaded as a
Relief from Judgment for lack of due process but the same was denied by Secretary Estrella in party to the Petition for Cancellation of CLT nor furnished a copy of the Letter-Petition but that
his Order dated September 19, 1984. Labagnoy and Cruz appealed to the Office of the President he became aware of the Garilao Order only when it was about to be implemented. [12]
(OP) which dismissed the same in an Order dated May 9, 1990. Said May 9, 1990 OP Order
On December 18, 2001, the CA issued the herein assailed Decision, dismissing the Petition for
Annulment for being the wrong mode of questioning the Garilao Order. It held that Rule 47 Section 50. Quasi-Judicial Powers of the DAR. The DAR is
applies only to final judgments and orders of Regional Trial Courts (RTCs) in civil cases and hereby vested with the primary jurisdiction to determine and adjudicate
not to orders issued by the DAR Secretary.[13] The CA also affirmed the Garilao Order, holding agrarian reform matters and shall have exclusive original jurisdiction over
that then DAR Secretary Garilao had authority to resolve the Letter-Petition as it involved an all matters involving the implementation of agrarian reform except those
agrarian dispute.[14] The CA also rejected the contention of Padua that he was not accorded due falling under the exclusive jurisdiction of the Department of Agriculture
process in view of evidence on record that he was notified of the proceedings on the Letter- (DA) and the Department of Environment and Natural Resources (DENR).
Petition but he chose not to participate therein.[15]
Padua filed a Motion for Reconsideration[16] which the CA denied in its It shall not be bound by technical rules of procedure and evidence but shall
May 7, 2002 Resolution.[17] proceed to hear and decide all cases, disputes, or controversies in a most
expeditious manner, employing all reasonable means to ascertain the facts
Hence, the present Petition on the following grounds: of every case in accordance with justice and equity and the merits of the
case. Towards this end, it shall adopt a uniform rule of procedure to achieve
The Court of Appeals committed a grave and reversible error when it held a just, expeditious and inexpensive determination for every action or
that Rule 47 of the Rules of Civil Procedure may not be availed of for proceeding before it.
assailing an Order of the Secretary of Agrarian Reform.[18]
On August 30, 2000, DAR adopted Administrative Order No. 06-00[34] or the Rules
The Court of Appeals committed reversible error in not holding that the of Procedure for Agrarian Law Implementation Cases. Section 2 thereof states:
Department of Agrarian Reform acted without jurisdiction.[19] Section 2. Cases Covered. These Rules shall govern cases falling
within the exclusive jurisdiction of the DAR Secretary which shall include
We find that the CA correctly dismissed the Petition for Annulment and affirmed the the following:
Garilao Order.
(a) Classification and identification of landholdings for coverage under the
We reiterate that a petition for annulment of judment under Rule 47 of the Rules of Comprehensive Agrarian Reform Program (CARP), including protests or
Court may be availed of against final judgments and orders rendered by either RTCs in civil opposition thereto and petitions for lifting of coverage;
actions[20] or Municipal Trial Courts[21] (MTCs).[22] Final judgments or orders of quasi-judicial
tribunals such as the National Labor Relations Commission,[23] the Ombudsman,[24] the Civil (b) Identification, qualification or disqualification of potential
Service Commission,[25] and the OP[26] are beyond the reach of a petition for annulment under farmer-beneficiaries;
Rule 47. An order of the DAR Secretary issued in the exercise of his quasi-judicial powers is
also outside its scope. Justice Jose C. Vitug, in Macalalag v. Ombudsman,[27] explained the (c) Subdivision surveys of lands under CARP;
rationale behind the limited application of Rule 47, to wit:
(d) Issuance, recall or cancellation of Certificates of Land
The right to appeal is a mere statutory privilege and may be Transfer (CLTs) and CARP Beneficiary Certificates (CBCs) in cases
exercised only in the manner prescribed by, and in accordance with, the outside the purview of Presidential Decreee No. 816, including the
provisions of law. There must then be a law expressly granting such issuance, recall or cancellation of Emancipation Patents (EPs) or
right. This legal axiom is also applicable and even more true in actions for Certificates of Land Ownership Awards (CLOAs) not yet registered
annulment of judgments which is an exception to the rule on finality of with the Register of Deeds;
judgments. [28]
x x x x (Emphasis ours)
In the present case, neither Republic Act (R.A.) No. 6657[29] nor R.A. No. 7902[30] allows a
petition for annulment of a final DAR decision or order. Section 61[31] of R.A. No. 6657 In the disputed July 2, 1995 Order, then DAR Secretary Garilao cancelled the award to Padua
provides that a DAR decision or order be reviewable by the CA in accordance with the Rules of of Lot No. 90, thereby declaring the latter not qualified to acquire the property as an agrarian
Court. In turn, the Rules of Court, consistent with Supreme Court Administrative Circular No. reform beneficiary.[35] Said Order was therefore issued by Sec. Garilao in the exercise of his
1-95 and R.A. No. 7902, prescribes under Rule 43[32] that the mode of appeal from decisions or power under Section 50 of R.A. No. 6657 and Section 2 (b) of Administrative Order No. 06-00.
orders of DAR as a quasi-judicial agency is by petition for review to the CA.[33] Paduas recourse
to a Petition for Annulment of the Garilao Order, rather than a petition for review, was therefore Padua insists, however, that his status in relation to Lot No. 90 was no longer that of
fatally infirm. a mere potential agrarian reform farmer-beneficiary but a civil law vendor dealing directly with
the LBP in the payment of amortizations on the property.[36] That view is incorrect. The statutory
Even if Paduas Petition for Annulment had been treated by the CA as a petition for mechanism for the acquisition of land through agrarian reform requires full payment of
review, it would still have failed. amortization before a farmer-beneficiary may be issued a CLOA or EP, which, in turn, can
become the basis for issuance in his name of an original or a transfer certificate of title. [37] As
Section 50 of R.A. No. 6657 vests in DAR the following quasi-judicial power: Padua himself admitted that he is still paying amortization on Lot No. 90 to LBP, his status in
relation to said property remains that of a mere potential farmer-beneficiary whose eligibilities
DAR may either confirm or reject. In fact, under Section 2 (d) of Administrative Order No. 06-
00, DAR has authority to issue, recall, or cancel a CLT, CBC, EP, or CLOA issued to potential
farmer-beneficiaries but not yet registered with the Register of Deeds.[38]

As to the claim of Padua that he was not accorded due process in the cancellation of the Santiago
Order which awarded Lot No. 90 in his favor, this is belied by his own Annex A in support of
his Urgent Reiteration of Application for Restraining Order or for Observance of Judicial
Courtesy as Mandated by Eternal Gardens versus Court of Appeals.[39]Annex A[40] is the letter
of MARO Mabborang informing Padua of the implementation of the Garilao Order. Attached
to Annex A is the May 9, 2000 Memorandum of Director Acosta, which reads:

We are transmitting herewith the Order dated July 2, 1995 issued by the
Office of the DAR Secretary, in the above entitled case.

A Motion for Reconsideration was filed but it was denied on August 12,
1996. [The] appeal taken to the Office of the President was dismissed May
25, 1998, and the motion for reconsideration thereof was denied
on January 22, 1999.

Considering per available records, that no further action was taken, hence,
it has already become final and executory and may be [sic] now be
implemented.

x x x x[41] (Emphasis added)

Thus, any defect in due process was cured by the fact that Padua had filed a Motion for
Reconsideration and an Appeal to the OP from the Garilao Order.[42]

WHEREFORE, the petition is DENIED for lack of merit. The Decision dated December 18,
2001 and Resolution dated May 7, 2002 of the Court of Appeals are AFFIRMED

No costs.
THIRD DIVISION In a Decision[9] dated 30 January 1997, the PARAD denied the petition for lack of merit. The
PARAD found that in her petition for retention and exemption from the coverage of the
PEDRO MAGO (deceased), represented by his G.R. No. 173923 Operation Land Transfer, and cancellation of Certificates of Land Transfer, filed before the
spouse SOLEDAD MAGO, AUGUSTO DAR, respondent admitted that aside from the 6.7434 hectares of riceland, she also owns other
MAGO (deceased), represented by his spouse Present: agricultural lands with an aggregate of 16.8826 hectares consisting of cocolands. The PARAD
NATIVIDAD MAGO, and ERNESTO MAGO, held that the subject landholding is clearly covered by the Operation Land Transfer under Letter
represented by LEVI MAGO, CARPIO, J., Chairperson, of Instruction No. 474 (LOI 474).[10] Under LOI 474, then President Ferdinand E. Marcos
Petitioners, CHICO-NAZARIO, directed the Secretary of Agrarian Reform to place under the Land Transfer Program of the
VELASCO, JR., government pursuant to PD 27 all tenanted rice/corn lands with areas of seven hectares or less
NACHURA, and belonging to landowners who own other agricultural lands of more than seven hectares in
- versus - PERALTA, JJ. aggregate areas or lands used for residential, commercial, industrial or other urban purposes
from which they derive adequate income to support themselves and their families.
JUANA Z. BARBIN,
Respondent. The PARAD further held that pursuant to DAR Memorandum Circular No. 6, series of 1978,
payment of lease rentals to landowners covered by the Operation Land Transfer shall terminate
Promulgated: on the date the value of the land is established. Thus, the PARAD held that the proper recourse
October 12, 2009 of respondent is to file a claim for just compensation.
x----------------------------------------------------x
On appeal, the Department of Agrarian Reform Adjudication Board (DARAB) reversed and set
DECISION aside the PARAD Decision. The dispositive portion of the DARAB Decision dated 18 June
2004 reads:
CARPIO, J.:
WHEREFORE, premises considered, the Decision dated 30 January 1997
The Case is hereby REVERSED and SET ASIDE and a new judgment is hereby
entered:
This is a petition for review[1] of the Decision[2] dated 20 October 2005 and the Resolution dated
13 July 2006 of the Court of Appeals in CA-G.R. SP No. 87370. 1. ORDERING the Register of Deeds of Camarines Norte to cancel EP Nos. 745, 747, and 749
issued in the name of Augusto Mago, Ernesto Mago, and Pedro Mago respectively, and
The Facts 2. DIRECTING the Municipal Agrarian Reform Officer of Vinzons, Camarines Norte, to
reallocate the subject lands to qualified beneficiaries.
On 11 November 1994, respondent Juana Z. Barbin filed with the Provincial Agrarian
Reform Adjudicator (PARAD) of Camarines Norte an action for Cancellation of Emancipation SO ORDERED.[11]
Patents, Disqualification of Tenant-Beneficiary, Repossession and Damages. Respondent The DARAB held that when the subject landholding was placed under the Operation Land
alleged that she is the owner in fee simple of an irrigated riceland located in Barangay Transfer, the tenancy relationship between the parties ceased and the tenant-beneficiaries were
Guinacutan, Vinzons, Camarines Norte, with an area of 4.7823 hectares, and that Augusto no longer required to pay lease rentals to the landowner. However, when petitioners entered into
Mago, Crispin Mago, Ernesto Mago, and Pedro Mago were tenants of the subject landholding. an agreement with respondent for a direct payment scheme embodied in the Deeds of Transfer,
Respondent further alleged that petitioners violated the terms of their leasehold contracts when petitioners obligated themselves to pay their amortizations to respondent who is the landowner.
they failed to pay lease rentals for more than two years, which is a ground for their dispossession The DARAB found that except for Crispin Mago, who had fully paid his tillage, petitioners
of the landholding. defaulted in their obligation to pay their amortization for more than three consecutive years from
the execution of the Deeds of Transfer in July 1991. Under DAR Administrative Order No. 2,
On the other hand, petitioners alleged that the subject landholding was placed under the series of 1994, one of the grounds for cancellation of registered Emancipation Patents is when
Operation Land Transfer program of the government pursuant to Presidential Decree No. 27 there is default in the obligation to pay an aggregate of three consecutive amortizations in case
(PD 27).[3] Respondents title, OCT No. P-4672, was then cancelled and the subject landholding of direct payment schemes. Thus, the DARAB ruled that the cancellation of the Emancipation
was transferred to Augusto Mago,[4] Crispin Mago,[5] Ernesto Mago,[6] and Pedro Mago,[7] who Patents issued to petitioners is warranted in this case.
were issued Emancipation Patents on 20 February 1987 by the Department of Agrarian Reform
(DAR). The Transfer Certificates of Title issued to petitioners[8] emanating from the Petitioners filed a motion for reconsideration, which the DARAB denied for lack of merit.
Emancipation Patents were registered with the Registry of Deeds on 9 February 1989. Petitioners then appealed to the Court of Appeals, which affirmed the DARAB Decision and
Petitioners averred that prior to the issuance of the Emancipation Patents, they already delivered thereafter denied petitioners motion for reconsideration. Hence, this petition.
their lease rentals to respondent. They further alleged that after the issuance of the Emancipation
Patents, the subject landholding ceased to be covered by any leasehold contract.
The Court of Appeals Ruling
The Court of Appeals held that the mere issuance of an Emancipation Patent to a qualified Petitioners argue that the Emancipation Patents and Transfer Certificates of Title issued to them
farmer-beneficiary is not absolute and can be attacked anytime upon showing of any irregularity which were already registered with the Register of Deeds have already become indefeasible and
in its issuance or non-compliance with the conditions attached to it. The Emancipation Patent is can no longer be cancelled.
subject to the condition that amortization payments be remitted promptly to the landowner and
that failure to comply with this condition is a ground for cancellation under DAR Administrative We do not adhere to petitioners view. This Court has already ruled that the mere issuance of an
Order No. 02, series of 1994. The Court of Appeals found that petitioners failed to comply with emancipation patent does not put the ownership of the agrarian reform beneficiary beyond attack
this condition since petitioners failed to prove that they have remitted the amortizations due to and scrutiny.[13] Emancipation patents issued to agrarian reform beneficiaries may be corrected
the landowner in accordance with their agreed direct payment scheme embodied in the Deeds and cancelled for violations of agrarian laws, rules and regulations. In fact, DAR Administrative
of Transfer. Order No. 02, series of 1994, which was issued in March 1994, enumerates the grounds for
cancellation of registered Emancipation Patents or Certificates of Landownership Award:
The Issues
Grounds for the cancellation of registered EPs [Emancipation Patents] or
Petitioners contend that: CLOAs [Certificates of Landownership Award] may include but not be
limited to the following:
1. THE HONORABLE COURT OF APPEALS ERRED IN
FINDING THE PETITIONERS LIABLE FOR 1. Misuse or diversion of financial and support services extended to the ARB [Agrarian Reform
VIOLATING DAR ADMINISTRATIVE ORDER NO. 02, Beneficiaries]; (Section 37 of R.A. No. 6657)
SERIES OF 1994; 2. Misuse of the land; (Section 22 of R.A. No. 6657)
3. Material misrepresentation of the ARBs basic qualifications as provided under Section 22 of
2. THE HONORABLE COURT OF APPEALS ERRED IN R.A. No. 6657, P.D. No. 27, and other agrarian laws;
AFFIRMING THE DECISION OF THE HONORABLE 4. Illegal conversion by the ARB; (Cf. Section 73, Paragraphs C and E of R.A. No. 6657)
DAR ADJUDICATOR IN ORDERING THE 5. Sale, transfer, lease or other forms of conveyance by a beneficiary of the
CANCELLATION OF THE EMANCIPATION TITLES right to use or any other usufructuary right over the land acquired by virtue
ISSUED TO THE PETITIONERS-FARMER of being a beneficiary, in order to circumvent the provisions of Section 73
BENEFICIARIES DESPITE THE LAPSE OF ONE (1) of R.A. No. 6657, P.D. No. 27, and other agrarian laws. However, if the land
YEAR WHICH RENDERS THE SAID TITLES has been acquired under P.D. No. 27/E.O. No. 228, ownership may be
INDEFEASIBLE PURSUANT TO THE LAW AND transferred after full payment of amortization by the beneficiary; (Sec. 6 of
JURISPRUDENCE; E.O. No. 228)
6. Default in the obligation to pay an aggregate of three (3) consecutive amortizations in
case of voluntary land transfer/direct payment scheme, except in cases of fortuitous events
and force majeure;
7. Failure of the ARBs to pay for at least three (3) annual amortizations to
the LBP, except in cases of fortuitous events and force majeure; (Section 26
of RA 6657)
8. Neglect or abandonment of the awarded land continuously for a period of two (2) calendar
years as determined by the Secretary or his authorized representative; (Section 22 of RA 6657)
3. THE HONORABLE COURT OF APPEALS ERRED IN 9. The land is found to be exempt/excluded from P.D. No. 27/E.O. No. 228 or CARP coverage
NOT CONSIDERING THE RECEIPTS EVIDENCING or to be part of the landowners retained area as determined by the Secretary or his authorized
PAYMENTS OF THE DISPUTED AMORTIZATION representative; and
WHICH WERE FORMALLY OFFERED AND 10. Other grounds that will circumvent laws related to the implementation
CONSIDERED BY THE HONORABLE DAR of agrarian reform program. (Emphasis supplied)
PROVINCIAL ADJUDICATOR OF CAMARINES
NORTE (PARAD) IN DECIDING THE CASE AS SHOWN Under Section 3 of Executive Order No. 228 (EO 228),[14] one of the modes of paying
IN THE DECISION DATED JANUARY 30, 1997.[12] compensation to the landowner is by direct payment in cash or kind by the farmer-beneficiaries.
In this case, petitioners entered into an agreement with respondent for a direct payment scheme
embodied in the Deeds of Transfer. However, petitioners failed to pay the amortizations
The Ruling of the Court to respondent landowner in accordance with their agreed direct payment scheme. As found by
the Court of Appeals:
We find the petition without merit.
There is no substantial evidence on record that the petitioners had remitted
the amortizations due to the landowner in accordance with their agreed
direct payment scheme embodied in their deeds of transfer. In view thereof,
We have no recourse but to sustain the findings of fact of the agency below.
xxx WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 20 October 2005
and the Resolution dated 13 July 2006 of the Court of Appeals in CA-G.R. SP No. 87370.
Indeed, We have scrutinized the evidentiary records but found no valid SO ORDERED.
reason to depart from the challenged decision. Petitioner Pedro Magos
supposed receipts of payment to prove that he paid the amortizations due
were not even attached to the records of this case. In the case of Augusto
Mago, his payment of P3,500.00 does not clearly show that the payment
was intended for the subject land. Granting that it was so, it appeared to be
for initial payment only. In Ernesto Magos case, his heirs relied on a MARO
Certification stating that Juana Barbin had refused to accept their payment.
It was, however, issued only on October 1, 2003 long after the filing of the
complaint. While P.D. 27 aims to emancipate landless farmers, it does not
also allow unjust treatment of landowners by depriving the latter of the just
compensation due.[15]

Petitioners contend that the Court of Appeals erred in finding them liable for violating DAR
Administrative Order No. 02, series of 1994. Well-settled is the rule that only questions of law
can be raised in a petition for review under Rule 45 of the Rules of Civil Procedure. [16] The
factual findings of the Court of Appeals are conclusive and cannot be reviewed on appeal,
provided they are based on substantial evidence.[17] More so in this case where the findings of
the Court of Appeals coincide with those of the DARAB, an administrative body with expertise
on matters within its specific and specialized jurisdiction.[18]

In the first place, the Emancipation Patents and the Transfer Certificates of Title should not have
been issued to petitioners without full payment of the just compensation.[19]Under Section 2 of
Presidential Decree No. 266,[20] the DAR will issue the Emancipation Patents only after the
tenant-farmers have fully complied with the requirements for a grant of title under PD 27.
Although PD 27 states that the tenant-farmers are already deemed owners of the land they till,
it is understood that full payment of the just compensation has to be made first before title is
transferred to them.[21] Thus, Section 6 of EO 228 provides that ownership of lands acquired
under PD 27 may be transferred only after the agrarian reform beneficiary has fully paid the
amortizations. In Corua v. Cinamin,[22] the Court held:
As discussed above, the laws mandate the full compensation for the lands
acquired under Pres. Decree No. 27 prior to the issuance of emancipation
patents. This is understandable particularly since the emancipation patent
presupposes that the grantee thereof has already complied with all the
requirements prescribed by Pres. Decree No. 27. x x x

While this Court commiserates with respondents in their plight, we are constrained by the
explicit requirements of the laws and jurisprudence on the matter to annul the emancipation
patents issued to respondents in the absence of any proof that they or the LBP has already fully
paid the value of the lands put under the coverage of Pres. Decree No. 27. The requirement is
unequivocal in that the values of the lands awarded to respondents must, prior to the
issuance of emancipation patents be paid in full.[23] (Emphasis supplied)

In this case, both the Court of Appeals and the DARAB found that petitioners have not fully
paid the amortizations for the land granted to them. The PARAD had a similar finding when it
recommended that the proper recourse of respondent is to file a claim for just compensation.
Clearly, the cancellation of the Emancipation Patents issued to petitioners is proper under the
circumstances.
SECOND DIVISION who issued the assailed recommendation, failed to appear at the trial. Only private respondent
[G.R. No. 128557. December 29, 1999] Jose Pascual and Atty. Eduard Javier of petitioner LBP were present. [8] Thereafter private
LAND BANK OF THE PHILIPPINES, petitioner vs. COURT OF APPEALS and JOSE respondent was allowed to present evidence ex-parte.
PASCUAL, respondents. At the hearings conducted by the PARAD private respondent presented as evidence
DECISION another "Accomplished OLT Valuation Form No. 1," for Parcel 3 dated 22 June 1976 to support
BELLOSILLO, J.: his claim that the "OLT Valuation Form" issued by PARO Francisco Baculi extremely
The lofty effort of the Government to implement an effective agrarian reform program has undervalued the AGP of his lands. In the "1976 OLT Valuation Form" the AGP based on "(3)
resulted in the massive distribution of huge tracks of land to tenant farmers. But it divested many Normal Crop Year" was 80 cavans per hectare for lowland rice unirrigated, 28 cavans per
landowners of their property, and although the Constitution assures them of just compensation hectare for corn lands and 100 cavans per hectare for lowland rice irrigated.[9]
its determination may involve a tedious litigation in the end. More often, land appraisal becomes Private respondent also presented Tax Declarations for Parcels 1 and 2 stating that the
a prolonged legal battle among the contending parties - the landowner, the tenant and the AGP was 80 cavans for unirrigated rice lands and 28 cavans for corn lands.
Government. At times the confrontation is confounded by the numerous laws on agrarian reform On 11 June 1992 the PARAD ruled in favor of private respondent nullifying the 2
which although intended to ensure the effective implementation of the program have only given December 1989 AGP recommended by the PARO.[10] Instead, the PARAD applied the 22
rise to needless confusion which we are called upon to resolve, as the case before us. June 1976 AGP and the AGP stated in private respondents Tax Declarations to determine the
Private respondent Jose Pascual owned three (3) parcels of land located in Guttaran, correct compensation. The PARAD also used the "Government Support Price" (GSP) of P300
Cagayan. Parcel 1 covered by TCT No. 16655 contains an area of 149,852 square meters as for each cavan of palay and P250 for each cavan of corn.[11] He then ordered petitioner LBP to
surveyed by the DAR but the actual land area transferred is estimated at 102,229 square meters pay private respondent P613,200.00 for Parcel 1, P148,750.00 for Parcel 2, and P1,200,000.00
and classified as unirrigated lowland rice; Parcel 2 covered by TCT No. 16654 contains an area for Parcel 3, or a total amount of P1,961,950.00.[12]
of 123,043 square meters as surveyed by the DAR but the actual land area transferred is After receiving notice of the decision of the PARAD, private respondent accepted the
estimated at 85,381 square meters and classified as cornland; and, Parcel 3 covered by TCT No. valuation. However, when the judgment became final and executory, petitioner LBP as the
16653 contains an area of 192,590 square meters but the actual land area transferred is estimated financing arm in the operation of PD 27 and EO 228 refused to pay thus forcing private
at 161,338 square meters and classified as irrigated lowland rice.[1] Pursuant to the Land Reform respondent to apply for a Writ of Execution with the PARAD which the latter issued on 24
Program of the Government under PD 27[2] and EO 228,[3] the Department of Agrarian Reform December 1992.[13] Still, petitioner LBP declined to comply with the order.
(DAR) placed these lands under its Operation Land Transfer (OLT).[4] On 29 June 1994 Secretary Ernesto Garilao Jr. of the DAR wrote a letter to petitioner LBP
Under EO 228 the value of rice and corn lands is determined thus - requiring the latter to pay the amount stated in the judgment of the PARAD.[14] Again, petitioner
Sec. 2. Henceforth, the valuation of rice and corn lands covered by P.D. 27 shall be based on LBP rejected the directive of Secretary Garilao. Petitioners Executive Vice President, Jesus
the average gross production determined by the Barangay Committee on Land Production in Diaz, then sent a letter to Secretary Garilao arguing that (a) the valuation of just compensation
accordance with Department Memorandum Circular No. 26, series of 1973 and related should be determined by the courts; (b) PARAD could not reverse a previous order of the
issuances and regulations of the Department of Agrarian Reform. The average gross Secretary of the DAR;[15] and, (c) the valuation of lands under EO 228 falls within the exclusive
production shall be multiplied by two and a half (2.5), the product of which shall be jurisdiction of the Secretary of the DAR and not of the DARAB.[16]
multiplied by Thirty-Five Pesos (P35), the government support price for one cavan of 50 kilos On 23 January 1995 the Secretary of Agrarian Reform replied to petitioner -
of palay on October 21, 1972, or Thirty-One Pesos (P31), the government support price for We agree with your contention that the matter of valuation of lands covered by P.D. 27 is a
one cavan of 50 kilos of corn on October 21, 1972, and the amount arrived at shall be the matter within the administrative implementation of agrarian reform, hence, cognizable
value of the rice and corn land, as the case may be, for the purpose of determining its cost to exclusively by the Secretary.
the farmer and compensation to the landowner (emphasis supplied). However, in this particular case, there is another operative principle which is the finality of
Hence, the formula for computing the Land Value (LV) or Price Per Hectare (PPH) of rice decisions of the Adjudication Board. Since the matter has been properly threshed out in the
and corn lands is 2.5 x AGP x GSP = LV or PPH. quasi-judicial proceeding and the decision has already become final and executory, we cannot
In compliance with EO 228, the Provincial Agrarian Reform Officer (PARO) of the DAR make an exception in this case and allow the non-payment of the valuation unless we are
in an "Accomplished OLT Valuation Form No. 1" dated 2 December 1989 recommended that enjoined by a higher authority like the courts.
the "Average Gross Productivity" (AGP) based on "[3] Normal Crop Year" for Parcels 1 and 2 Therefore at the risk of occasional error, we maintain that payment should be made in this
should be 25 cavans per hectare for unirrigated lowland rice and 10 cavans per hectare for corn case. However we believe situations like this would be lessened tremendously through the
land.[5] issuance of the attached memorandum circular[17]to the Field Offices.[18]
Meanwhile, the Office of the Secretary of Agrarian Reform (SAR) also conducted its own Despite the letter of Secretary G. Garilao, petitioner LBP remained adamant in its refusal
valuation proceedings apart from the PARO. On 10 October 1990 Secretary Benjamin T. Leong to pay private respondent. It reiterated its stand that the PARAD had no jurisdiction to value
of the DAR using the AGP of 25.66 cavans for unirrigated rice lands[6] issued an order valuing lands covered by PD 27.[19]
Parcel 1 at P22,952.97[7] and requiring herein petitioner Land Bank of the Philippines (LBP) to On 17 June 1995 counsel for private respondent also wrote petitioner LBP demanding
pay the amount. On 1 February 1991 petitioner LBP approved the valuation. payment. On 20 June 1995 petitioner replied -
In 1991 private respondent Jose Pascual, opposing the recommended AGP of the PARO, x x x x Although we disagree with the foregoing view that the PARAD decision on the land
filed a petition for the annulment of the recommendation on the productivity and valuation of valuation of a PD 27 landholding has become final for numerous legal reasons, in deference
the land covered by OLT, subject matter hereof, with the Department of Agrarian Reform to the DAR Secretary, we informed him that we will pay the amount decided by the PARAD
Adjudication Board (DARAB). Oscar Dimacali, Provincial Agrarian Reform Adjudicator of Cagayan provided the tenant beneficiaries of Mr. Pascual be consulted first and the land
(PARAD) of Cagayan heard the case. Despite due notice however Francisco Baculi, the PARO transfer claim be redocumented to the effect that said beneficiaries re-execute the
Landowner Tenant Production Agreement-Farmers Undertaking to show their willingness Second, petitioner LBP contends that the Court of Appeals cannot issue the Writ of
to the PARAD valuation and to amortize the same to this bank. This is in consonance with Mandamus because it cannot be compelled to perform an act which is beyond its legal
the legal mandate of this bank as the financing arm of PD 27/EO 228 landholdings. In other duty.[32] Petitioner cites Sec. 2 of PD 251,[33] which amended Sec. 75 of RA 3844,[34] which
words, the beneficiaries must agree to the amount being financed, otherwise, financing may provides that it is the duty of petitioner bank "(t)o finance and/or guarantee the acquisition, under
not be possible pursuant to this banks legal mandate (emphasis supplied).[20] Presidential Decree No. 85 dated December 25, 1972, of farm lands transferred to the tenant
Petitioner LBP having consistently refused to comply with its obligation despite the farmers pursuant to Presidential Decree No. 27 (P.D. 27) dated October 21, 1972." Section 7 of
directive of the Secretary of the DAR and the various demand letters of private respondent Jose PD 251 also provides that "(w)henever the Bank pays the whole or a portion of the total costs
Pascual, the latter finally filed an action for Mandamus in the Court of Appeals to compel of farm lots, the Bank shall be subrogated by reason thereof, to the right of the landowner
petitioner to pay the valuation determined by the PARAD. On 15 July 1996 the appellate court to collect and receive the yearly amortizations on farm lots or the amount paid including
granted the Writ now being assailed. The appellate court also required petitioner LBP to pay a interest thereon, from tenant-farmers in whose favor said farm lot has been transferred
compounded interest of 6% per annum in compliance with DAR Administrative Order No. 13, pursuant to Presidential Decree No. 27, dated October 21, 1972" (emphasis supplied).
series of 1994.[21] On 11 March 1997 petitioner's Motion for Reconsideration was Petitioner further argues that for a financing or guarantee agreement to exist there must be
denied;[22] hence, this petition. at least three (3) parties: the creditor, the debtor and the financier or the guarantor. Since
Petitioner LBP avers that the Court of Appeals erred in issuing the Writ of Mandamus in petitioner merely guarantees or finances the payment of the value of the land, the farmer-
favor of private respondent and argues that the appellate court cannot impose a 6% compounded beneficiarys consent, being the principal debtor, is indispensable and that the only time
interest on the value of Jose Pascual's land since Administrative Order No. 13 does not apply to petitioner becomes legally bound to finance the transaction is when the farmer-beneficiary
his case. Three (3) reasons are given by petitioner why the Court of Appeals cannot issue the approves the appraised land value. Petitioner fears that if it is forced to pay the value as
writ: determined by the DARAB, the government will suffer losses as the farmer-beneficiary, who
First, it cannot enforce PARADs valuation since it cannot make such determination for does not agree to the appraised land value, will surely refuse to reimburse the amounts that
want of jurisdiction hence void. Section 12, par. (b), of PD 946[23] provides that the valuation of petitioner had disbursed. Thus, it asserts, that the landowner, the DAR, the Land Bank and the
lands covered by PD 27 is under the exclusive jurisdiction of the Secretary of Agrarian farmer-beneficiary must all agree to the value of the land as determined by them.
Reform. Petitioner asserts that Sec. 17 of EO 229[24] and Sec. 50 of RA No. 6657,[25] which A perusal of the law however shows that the consent of the farmer-beneficiary is not
granted DAR the exclusive jurisdiction over all agrarian reform matters thereby divesting the required in establishing the vinculum juris for the proper compensation of the
Court of Agrarian Relations of such power, did not repeal Sec. 12, par. (b), of PD 946. Petitioner landowner. Section 18 of RA 6657 states -
now attempts to reconcile the pertinent laws by saying that only the Secretary of Agrarian Sec. 18. Valuation and Mode of Compensation. - The LBP shall compensate the landowner in
Reform can determine the value of rice and corn lands under Operation Land Transfer of PD such amount as may be agreed upon by the landowner and the DAR and the LBP in
27, while on the other hand, all other lands covered by RA 6657 (CARL) shall be valued by the accordance with the criteria provided for in Sections 16 and 17 and other pertinent provisions
DARAB, hence, the DARAB of the DAR has no jurisdiction to determine the value of the lands hereof, or as may be finally determined by the court as the just compensation for the
covered by OLT under PD 27. land (emphasis supplied).
To bolster its contention that Sec. 12, par. (b), of PD 946 was not repealed, petitioner LBP As may be gleaned from the aforementioned section, the landowner, the DAR and the
cites Sec. 76 of RA 6657.[26] It argues that since Sec. 76 of RA 6657 only repealed the last two Land Bank are the only parties involved. The law does not mention the participation of the
(2) paragraphs of Sec. 12 of PD 946, it is obvious that Congress had no intention of repealing farmer-beneficiary.However, petitioner insists that Sec. 18 of RA 6657[35] does not apply in this
par. (b). Thus, it remains valid and effective. As a matter of fact, even the Secretary of Agrarian case as it involves lands covered by PD 27. It argues that in appraising PD 27 lands the consent
Reform agreed that Sec. 12, par. (b), of PD 946 still holds. Based on this assumption, the of the farmer-beneficiary is necessary to arrive at a final valuation. Without such concurrence,
Secretary of the DAR has opined that the valuation of rice and corn lands is under his exclusive the financing scheme under PD 251 cannot be satisfied.[36]
jurisdiction and has directed all DARAB officials to refrain from valuing lands covered by PD We cannot see why Sec. 18 of RA 6657 should not apply to rice and corn lands under PD
27.[27] Petitioner maintains that the Secretary of the DAR should conduct his own proceedings 27. Section 75 of RA 6657[37] clearly states that the provisions of PD 27 and EO 228 shall only
to determine the value of Parcels 2 and 3 and that his valuation of Parcel 1[28]should be upheld. have a suppletory effect. Section 7 of the Act also provides -
We do not agree. In Machete v. Court of Appeals[29] this Court discussed the effects on Sec. 7. Priorities.- The DAR, in coordination with the PARC shall plan and program the
PD 946 of Sec. 17 of EO 229 and Sec. 50 of RA 6657 when it held - acquisition and distribution of all agricultural lands through a period of (10) years from the
The above quoted provision (Sec. 17) should be deemed to have repealed Sec. 12 (a) and (b) effectivity of this Act. Lands shall be acquired and distributed as follows:
of Presidential Decree No. 946 which invested the then courts of agrarian relations with Phase One: Rice and Corn lands under P.D. 27; all idle or abandoned lands; all private
original exclusive jurisdiction over cases and questions involving rights granted and lands voluntarily offered by the owners for agrarian reform;xxx and all other lands owned by
obligations imposed by presidential issuances promulgated in relation to the agrarian reform the government devoted to or suitable for agriculture, which shall be acquired and distributed
program (emphasis supplied). immediately upon the effectivity of this Act, with the implementation to be completed within a
Thus, petitioners contention that Sec. 12, par. (b), of PD 946 is still in effect cannot be period of not more than four (4) years (emphasis supplied).
sustained. It seems that the Secretary of Agrarian Reform erred in issuing Memorandum This eloquently demonstrates that RA 6657 includes PD 27 lands among the properties
Circular No. I, Series of 1995, directing the DARAB to refrain from hearing valuation cases which the DAR shall acquire and distribute to the landless. And to facilitate the acquisition and
involving PD 27 lands. For on the contrary, it is the DARAB which has the authority to distribution thereof, Secs. 16, 17 and 18 of the Act should be adhered to. In Association of Small
determine the initial valuation of lands involving agrarian reform[30] although such valuation Landowners of the Philippines v. Secretary of Agrarian Reform[38] this Court of Appeals applied
may only be considered preliminary as the final determination of just compensation is vested in the provisions RA 6657 to rice and corn lands when it upheld the constitutionality of the
the courts.[31] payment of just compensation for PD 27 lands through the different modes stated in Sec. 18.
Having established that under Sec. 18 of RA 6657 the consent of the farmer-beneficiary that petitioner would not satisfy the writ of execution issued by the PARAD, he sought the
is unnecessary in the appraisal of land value, it must now be determined if petitioner had agreed assistance of the Secretary of Agrarian Reform who then wrote to petitioner to pay the amount
to the amount of compensation declared by the PARAD. If it did, then we can now apply the in accordance with the decision of PARAD.[47] Still, petitioner refused. The Secretary then sent
doctrine in Sharp International Marketing v. Court of Appeals.[39] In that case, the Land Bank another letter to petitioner telling the latter to pay private respondent.[48] Obviously, the stand of
refused to comply with the Writ of Mandamus issued by the Court of Appeals on the ground the Secretary was that petitioner should pay private respondent in accordance with the PARAD
that it was not obliged to follow the order of the Secretary of Agrarian Reform to pay the valuation which had already become final. It would have been redundant for private respondent
landowner. This Court concurred with the Land Bank saying that the latter could not be to still ask for a final resolution from the DAR.
compelled to obey the Secretary of Agrarian Reform since the bank did not merely exercise a The allegation of petitioner that private respondent should have filed a case with the
ministerial function. Instead, it had an independent discretionary role in land valuation and that Special Agrarian Court is also without merit. Although it is true that Sec. 57 of RA 6657
the only time a writ of mandamus could be issued against the Land Bank was when it agreed to provides that the Special Agrarian Courts shall have jurisdiction over the final determination of
the amount of compensation determined by the DAR - just compensation cases, it must be noted that petitioner never contested the valuation of the
It needs no exceptional intelligence to understand the implication of this transmittal. It simply PARAD.[49] Thus, the land valuation stated in its decision became final and executory.[50] There
means that if LBP agrees on the amount stated in the DAS, [40] after its review and evaluation, was therefore no need for private respondent Pascual to file a case in the Special Agrarian Court.
it becomes its duty to sign the deed. But not until then. For, it is only in that event that the With regard to the decision of the Court of Appeals imposing an interest based on
amount to be compensated shall have been established according to law. Administrative Order No. 13, Series of 1994, the Order should be examined to ascertain if
Although the case at bar pertains to an involuntary sale of land, the same principle should private respondent can avail of the 6% compounded interest prescribed for unpaid
apply. Once the Land Bank agrees with the appraisal of the DAR, which bears the approval of landowners. As to its coverage, the Order states: These rules and regulations shall apply to
the landowner, it becomes its legal duty to finance the transaction. In the instant case, petitioner landowners: (1) whose lands are actually tenanted as of 21 October 1972 or thereafter and
participated in the valuation proceedings held in the office of the PARAD through its counsel, covered by OLT; (2) who opted for government financing through Land Bank of the Philippines
Atty. Eduard Javier.[41] It did not appeal the decision of PARAD which became final and as mode of compensation; and, (3) who have not yet been paid for the value of their land.
executory.[42] As a matter of fact, petitioner even stated in its Petition that "it is willing to pay At first glance it would seem that private respondents lands are indeed covered by AO No.
the value determined by the PARAD PROVIDED that the farmer beneficiaries concur 13. However, Part IV shows that AO No. 13 provides a fixed formula for determining the Land
thereto."[43] These facts sufficiently prove that petitioner LBP agreed with the valuation of the Value (LV) and the additional interests it would have earned. The formula utilizes the
land. The only thing that hindered it from paying the amount was the non-concurrence of the Government Support Price (GSP) of 1972, which is P35.00/cavan of palay and P31.00/cavan of
farmer-beneficiary. But as we have already stated, there is no need for such corn. For its Increment Formula AO No. 13 states: The following formula shall apply -
concurrence. Without such obstacle, petitioner can now be compelled to perform its legal duty For palay: LV= (2.5 x AGP x P35) x (1.06)n
through the issuance of a writ of mandamus. For corn: LV= (2.5 x AGP x P31) x (1.06)n.[51]
Anent petitioners argument that the government will lose money should the farmer- In the decision of PARAD, however, the Land Value (LV) of private respondents property
beneficiary be unwilling to pay, we believe such apprehension is baseless. In the event that the was computed by using the GSP for 1992, which is P300.00 per cavan of palay and P250.00 per
farmer-beneficiary refuses to pay the amount disbursed by petitioner, the latter can foreclose on cavan of corn.[52] PARAD Dimacali used the following equations:
the land as provided for in Secs. 8 to 11 of EO 228. Petitioner LBP would then be reimbursed For palay: LV = (2.5 x AGP x 300 )
of the amount it paid to the landowner. For corn: LV = (2.5 x AGP x 250)
Third, petitioner LBP asserts that a writ of mandamus cannot be issued where there is Hence, the formula in AO No. 13 could no longer be applied since the PARAD already
another plain, adequate and complete remedy in the ordinary course of law. Petitioner claims used a higher GSP.
that private respondent had three (3) remedies. The first remedy was to ask the sheriff of the The purpose of AO No. 13 is to compensate the landowners for unearned interests.[53] Had
DARAB to execute the ruling of PARAD by levying against the Agrarian Reform Fund for so they been paid in 1972 when the GSP for rice and corn was valued at P35.00 and P31.00,
much of the amount as would satisfy the judgment. Another remedy was to file a motion with respectively, and such amounts were deposited in a bank, they would have earned a compounded
the DAR asking for a final resolution with regard to the financing of the land valuation. Lastly, interest of 6% per annum. Thus, if the PARAD used the 1972 GSP, then the product of (2.5 x
private respondent could have filed a case in the Special Agrarian Court for the final AGP x P35 or P31) could be multiplied by (1.06)n to determine the value of the land plus the
determination of just compensation.[44] additional 6% compounded interest it would have earned from 1972. However, since the
We hold that as to private respondent the suggested remedies are far from plain, adequate PARAD already increased the GSP from P35.00 to P300.00/cavan of palay and from P31.00
and complete. After the judgment of PARAD became final and executory, private respondent to P250.00/cavan of corn, there is no more need to add any interest thereon, muchless compound
applied for a writ of execution which was eventually granted. However, the sheriff was unable it. To the extent that it granted 6% compounded interest to private respondent Jose Pascual, the
to implement it since petitioner LBP was unwilling to pay. The PARAD even issued an order Court of Appeals erred.
requiring petitioners manager to explain why he should not be held in contempt. [45] Two (2) WHEREFORE, the assailed Decision of the Court of Appeals granting the Writ
years elapsed from the time of the PARAD ruling but private respondents claim has remained of Mandamus directing petitioner Land Bank of the Philippines to pay private respondent Jose
unsatisfied. This shows that petitioner has no intention to comply with the judgment of Pascual the total amount of P1,961,950.00 stated in the Decision dated 11 June 1992 of the
PARAD. How then can petitioner still expect private respondent to ask the DARABs sheriff to Provincial Agrarian Reform Adjudicator (PARAD) of Cagayan is AFFIRMED, with the
levy on the Agrarian Reform Fund when petitioner bank which had control of the fund[46]firmly modification that the 6% compounded interest per annum provided under DAR Administrative
reiterated its stand that the DARAB had no jurisdiction? Order No. 13, Series of 1994 is DELETED, the same being no longer applicable.
Petitioners contention that private respondent should have asked for a final resolution from SO ORDERED.
the DAR as an alternative remedy does not impress us either. When private respondent sensed
FIRST DIVISION 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 of the Provincial Agrarian
JOSEFINA S. LUBRICA, in her G.R. No. 170220 Reform Adjudicator (PARAD) conducted summary administrative proceedings for
capacity as Assignee of FEDERICO determination of just compensation. On January 29, 2003, the PARAD fixed the preliminary
C. SUNTAY, NENITA SUNTAY just compensation at P51,800,286.43 for the 311.7682 hectares (TCT No. T-31) and
TAEDO and EMILIO A.M. P21,608,215.28 for the 128.7161 hectares (TCT No. T-128).[7]
SUNTAY III,
Petitioners, Present: Not satisfied with the valuation, LBP filed on February 17, 2003, two separate petitions[8] for
Panganiban, C.J. (Chairperson), judicial determination of just compensation before the Regional Trial Court of San Jose,
- versus - Ynares-Santiago, Occidental Mindoro, acting as a Special Agrarian Court, docketed as Agrarian Case No. R-1339
Austria-Martinez, for TCT No. T-31 and Agrarian Case No. R-1340 for TCT No. T-128, and raffled to Branch 46
Callejo, Sr., and thereof.
Chico-Nazario, JJ.
LAND BANK OF THE PHILIPPINES, Petitioners filed separate Motions to Deposit the Preliminary Valuation Under Section 16(e) of
Respondent. Promulgated: 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.
November 20, 2006
x ---------------------------------------------------------------------------------------- x On March 31, 2003, the trial court issued an Order[10] granting petitioners motion, the
dispositive portion of which reads:
DECISION
WHEREFORE, Ms. Teresita V. Tengco, of the Land Compensation
YNARES-SANTIAGO, J.: 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
This Petition for Review on Certiorari under Rule 45 of the Rules of Court assails the October compensation as determined by the PARAD in cash and bonds, as follows:
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, 1. In Agrarian Case No. R-1339, the amount of P 51,800,286.43, minus the
Occidental Mindoro, Branch 46, acting as Special Agrarian Court, in Agrarian Case Nos. R- amount received by the Landowner;
1339 and R-1340, dated March 31, 2003 directing respondent Land Bank of the Philippines 2. In Agrarian Case No. R-1340, the amount of P 21,608,215.28, less the
(LBP) to deposit the provisional compensation as determined by the Provincial Agrarian Reform amount of P 1,512,575.16, the amount already deposited.
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 Such deposit must be made with the Land Bank of
Compensation Department Manager, to comply with the March 31, 2003 Order. the Philippines, Manila within five (5) days from receipt of a copy of this
The facts of the case are as follows: order and to notify this court of her compliance within such period.

Petitioner Josefina S. Lubrica is the assignee[2] of Federico C. Suntay over certain parcels of Let this order be served by the Sheriff of this Court at the expense of the
agricultural land located at Sta. Lucia, Sablayan, Occidental Mindoro, with an area of movants.
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 SO ORDERED.[11]
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 LBPs motion for reconsideration was denied in a Resolution[12] dated May 26,
distributed to farmer beneficiaries. The Department of Agrarian Reform (DAR) and the LBP 2003. The following day, May 27, 2003, the trial court issued an Order[13] directing Ms. Teresita
fixed the value of the land at P5,056,833.54 which amount was deposited in cash and bonds in V. Tengco, LBPs Land Compensation Department Manager, to deposit the amounts.
favor of Lubrica.
Thus, on June 17, 2003, LBP filed with the Court of Appeals a Petition for Certiorari and
On the other hand, petitioners Nenita Suntay-Taedo and Emilio A.M. Suntay III inherited from Prohibition under Rule 65 of the Rules of Court with application for the issuance of a Temporary
Federico Suntay a parcel of agricultural land located at Balansay, Mamburao, Occidental Restraining Order and Writ of Preliminary Injunction docketed as CA-G.R. SP No. 77530.[14]
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 On June 27, 2003, the appellate court issued a 60-day temporary restraining order[15] and
area of 165.1571 hectares or a total of 210.2331 hectares. Lot 2 was placed under the coverage 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 COURT IN THE CASE OF LAND BANK OF THE PHILIPPINES VS.
dispositive portion of which reads: HON. ELI G.C. NATIVIDAD, ET AL., G.R. NO. 127198, PROM. MAY
16, 2005; and[22]
WHEREFORE, premises considered, there being no grave abuse of
discretion, the instant Petition for Certiorari and Prohibition is DENIED. B. THE COURT A QUO HAS, WITH GRAVE GRAVE ABUSE OF
Accordingly, the Order dated March 31, 2003, Resolution dated May 26, DISCRETION, SO FAR DEPARTED FROM THE ACCEPTED AND
2003, and Order dated May 27, 2003 are hereby AFFIRMED. The USUAL COURSE OF JUDICIAL PROCEEDINGS, DECIDING ISSUES
preliminary injunction We previously issued is hereby LIFTED and THAT HAVE NOT BEEN RAISED, AS TO CALL FOR AN EXERCISE
DISSOLVED. OF THE POWER OF SUPERVISION.[23]

SO ORDERED.[18] 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
The Court of Appeals held that the trial court correctly ordered LBP to deposit the amounts that the value of the realties should be computed as of October 21, 1972 when P.D. No. 27 took
provisionally determined by the PARAD as there is no law which prohibits LBP to make a effect.
deposit pending the fixing of the final amount of just compensation. It also noted that there is The petition is impressed with merit.
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. In the case of Land Bank of the Philippines v. Natividad,[24] the Court ruled thus:

LBP moved for reconsideration which was granted. On October 27, 2005, the appellate court Land Banks contention that the property was acquired for
rendered the assailed Amended Decision,[19] the dispositive portion of which reads: 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
Wherefore, in view of the prescription of a different formula in the case of property as of that time and not at the time of possession in 1993, is likewise
Gabatin which We hold as cogent and compelling justification necessitating erroneous. In Office of the President, Malacaang, Manila v. Court of
Us to effect the reversal of Our judgment herein sought to be reconsidered, Appeals, we ruled that the seizure of the landholding did not take place on
the instant Motion for Reconsideration is GRANTED, and Our May 26, the date of effectivity of PD 27 but would take effect on the payment of just
2004 Decision is hereby VACATED and ABANDONED with the end in compensation.
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 The Natividad case reiterated the Courts ruling in Office of the President v. Court of
of the Special Agrarian Court is (sic) commanded to compute and fix the Appeals[25] that the expropriation of the landholding did not take place on the effectivity of P.D.
just compensation for the expropriated agricultural lands strictly in No. 27 on October 21, 1972 but seizure would take effect on the payment of just compensation
accordance with the mode of computation prescribed (sic) Our May 26, judicially determined.
2004 judgment in the case of Gabatin.
Likewise, in the recent case of Heirs of Francisco R. Tantoco, Sr. v. Court of
SO ORDERED.[20] 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 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 In the instant case, petitioners were deprived of their properties in 1972 but have yet
computed. Citing Gabatin v. Land Bank of the Philippines,[21] it held that the formula to to receive the just compensation therefor. The parcels of land were already subdivided and
compute the just compensation should be: Land Value = 2.5 x Average Gross Production x distributed to the farmer-beneficiaries thereby immediately depriving petitioners of their
Government Support Price. Specifically, it held that the value of the government support price use. Under the circumstances, it would be highly inequitable on the part of the petitioners to
for the corresponding agricultural produce (rice and corn) should be computed at the time of the compute the just compensation using the values at the time of the taking in 1972, and not at the
legal taking of the subject agricultural land, that is, on October 21, 1972 when landowners were time of the payment, considering that the government and the farmer-beneficiaries have already
effectively deprived of ownership over their properties by virtue of P.D. No. 27. According to benefited from the land although ownership thereof have not yet been transferred in their
the Court of Appeals, the PARAD incorrectly used the amounts of P500 and P300 which are the names. Petitioners were deprived of their properties without payment of just compensation
prevailing government support price for palay and corn, respectively, at the time of payment, which, under the law, is a prerequisite before the property can be taken away from its
instead of P35 and P31, the prevailing government support price at the time of the taking in owners.[27] The transfer of possession and ownership of the land to the government are
1972. 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
Hence, this petition raising the following issues: landowner.[28]

A. THE COURT A QUO HAS DECIDED THE CASE IN A WAY NOT Our ruling in Association of Small Landowners in the Philippines, Inc. v. Secretary of
IN ACCORD WITH THE LATEST DECISION OF THE SUPREME Agrarian Reform[29] is instructive, thus:
Corollarily, we held in Land Bank of the Philippines v. Celada[33] that the above
It is true that P.D. No. 27 expressly ordered the emancipation of provision was converted into a formula by the DAR through Administrative Order No. 05, S.
tenant-farmer as October 21, 1972 and declared that he shall be deemed the 1998, to wit:
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 Land Value (LV) = (Capitalized Net Income x 0.6) + (Comparable Sales x 0.3) +
until he had become a full-fledged member of a duly recognized farmers (Market Value per Tax Declaration x 0.1)
cooperative.It was understood, however, that full payment of the just
compensation also had to be made first, conformably to the constitutional Petitioners were deprived of their properties way back in 1972, yet to date, they have not yet
requirement. 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
When E.O. No. 228, categorically stated in its Section 1 that: 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
All qualified farmer-beneficiaries are now deemed full E.O. No. 228, is important considering that just compensation should be the full and fair
owners as of October 21, 1972 of the land equivalent of the property taken from its owner by the expropriator, the equivalent being real,
they acquired by virtue of Presidential Decree No. 27 substantial, full and ample.[34]
(Emphasis supplied.)
WHEREFORE, premises considered, the petition is GRANTED. The assailed Amended
it was obviously referring to lands already validly acquired under the said Decision dated October 27, 2005 of the Court of Appeals in CA-G.R. SP No. 77530
decree, after proof of full-fledged membership in the farmers cooperatives is REVERSED and SET ASIDE. The Decision dated May 26, 2004 of the Court of Appeals
and full payment of just compensation. x x x 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
The CARP Law, for its part, conditions the transfer of possession PARAD; (b) the May 26, 2003 Resolution denying respondents Motion for Reconsideration;
and ownership of the land to the government on receipt by the landowner of and (c) the May 27, 2003 Order directing Teresita V. Tengco, respondents Land Compensation
the corresponding payment or the deposit by the DAR of the compensation Department Manager to comply with the March 31, 2003 Order, is REINSTATED. The
in cash or LBP bonds with an accessible bank. Until then, title also remains Regional Trial Court of San Jose, Occidental Mindoro, Branch 46, acting as Special Agrarian
with the landowner. No outright change of ownership is contemplated Court is ORDERED to proceed with dispatch in the trial of Agrarian Case Nos. R-1339 and R-
either. 1340, and to compute the final valuation of the subject properties based on the aforementioned
formula.
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 SO ORDERED.
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]
Republic of the Philippines During pre-trial, LBP manifested that the subject properties may be reassessed and revaluated
SUPREME COURT based on the new guidelines set forth in DAR A.O. No. 11, Series of 1994. Intent on finding a
Manila common ground between petitioner and respondent and to amicably settle the case, the SAC
SECOND DIVISION ordered the revaluation. The new valuations of the LBP were:
G.R. No. 176410 September 1, 2010 TCT No. Old Valuation New
LAND BANK OF THE PHILIPPINES, Petitioner,
vs. T-86402 ₱ 46,045.60 ₱51
CONRADO O. COLARINA, Respondent. ₱7,8
DECISION
NACHURA, J.: T-86448 ₱208,144.33 ₱25
Before us is a petition for review on certiorari assailing the Decision of the Court of Appeals ₱9,
(CA) in CA-G.R. CV No. 68476,1 which affirmed the decision of the Regional Trial Court
T-86449 ₱154,394.22 ₱21
(RTC), Branch 3, Legazpi City, Albay, sitting as a Special Agrarian Court (SAC) in Agrarian
₱9,7
Case No. 95-01.2
The facts are simple. The foregoing valuation was still rejected by respondent. Hence, trial ensued. To support his
Respondent Conrado O. Colarina is the registered owner of three (3) parcels of agricultural Complaint and valuation of the subject properties, respondent presented in evidence his own
land which he acquired from their former owner, Damiana Arcega. The parcels of land have a testimony and that of Carlito M. Oliva (Oliva), then Assistant Provincial Assessor of
total area of 972,047 square meters with the following description: Camarines Sur and President of the Camarines Chapter of the National Real Estate
Association.
TRANSFER CERTIFICATE OF TITLE (TCT) No. AREA (hectares) LOCATION
As for petitioner, it presented the testimonies of Armel Alcantara (Alcantara), Chief of the
T-86402 12.5718 Landowners Assistance
Herrera, Ligao, AlbayDivision of the LBP, and Melchor Balmaceda, officer of LBP, Sipocot
Branch.
T-86448 48.3062 TheHerrera, Ligao, Albay
SAC summarized the testimonies of the witnesses as follows:
Second witness Carlito M. Oliva, x x x testified that in several instances, he was deputized by
T-86449 36.3267 Amtic, Ligao,
the Honorable CourtAlbay
under RTC BR. 26 to chair the commission in the determination of the
Upon acquisition thereof, respondent manifested his voluntary offer to sell the properties to fair market value of properties subject for payment by the government. That the properties
the Department of Agrarian Reform (DAR) for coverage under Republic Act (R.A.) No. 6657, involved in this case is composed of three parcels. [T-86402] is situated at Barangay Herrera,
the Comprehensive Agrarian Reform Law (CARL). Respondent’s assessment value of the Ligao, Albay which contains an area of 12.5718 has.; [T-86449] is also situated in the same
properties was ₱45,000.00 per hectare. Barangay with an area of 36.3267 has.; [a]nd [T-86448] is situated at Barangay Amtic, Ligao,
The DAR, through petitioner Land Bank of the Philippines (LBP), assessed the properties and Albay with an area of 48.3062 has or a total of 97.2047 has. Upon Mr. Colarina’s request, he
offered to purchase only 57.2047 hectares out of the 97.2047 hectares voluntarily offered for conducted an investigation and ocular inspection on the subject properties and made a
sale by respondent. The excluded area (40 hectares) fell under the exemptions and exclusions narrative report relative thereto. That his recommendation as the reasonable market value of
provided in Section 103 of the CARL, i.e., all lands with eighteen percent (18%) slope and the properties is at ₱49,201.148/ha or a total of ₱4,788,415.20 using the productivity approach
over. In addition, the LBP assigned the following values to the properties: since the subject property is mostly agricultural. That the actual area planted to coconuts is
TCT No. Covered Area Excluded Area about 43.84%;
Valuebanana plants is 7.79%; corn land is 1.14%; homelots is 0.50% and 4.97%
cogonal, while 5% is non-arable.
T-86402 6.5718 6 ₱ 46,045.60 xxxx
Armel Alcantara testified that x x x before, he was the Division Chief of the Claim, Processing
T-86448 28.3062 20 ₱ 208,144.33
and Payment Division (CPPD) [of the LBP]. As such, he conducts review of claim folders
covered by P.D. No. 27, E.O. No. 228 and R.A. No. 6657, most specifically the claim folders
T-86449 22.3267 14 ₱ 154,394.22
under voluntary offer to sell and compulsory acquisition claim folders. That he valued the
As the LBP’s assessment and valuation of the properties was unacceptable to, and rejected by, subject lands owned by [respondent] based on AO No. 11 S. of 1996. Pursuant to the Hon.
respondent, he elevated the determination of just compensation of the properties to the Court’s order dated November 14, 1996. For TCT No. 86448, the area covered is 28.3062 has.
Provincial Agrarian Reform Adjudicator (PARAD). Unfortunately for respondent, the [o]ut of 48.3062 has. Because some portion of the property is hilly and mountainous and
PARAD affirmed the valuation set forth by the LBP. underdeveloped which exceeded the 18% limit set forth under Sec. 10 of RA 6657. This lot is
Disappointed with the low valuation by petitioner and the DAR, respondent filed a planted to corn, peanut and cogonal. The corn land is 13 has., peanut land is .25 has., cogonal
Complaint4 before the RTC, Branch 3, Legazpi, Albay, for the judicial determination of just is 15.0562 has.; the excluded portion which is mountainous and about 25% slope totals 20 has.
compensation. The factor considered by Land Bank is under Formula No. 2 which is the Capitalized Net
In refutation, petitioner filed its Answer,5 denied the material allegations in the Complaint, and Income (CNI) x 90% and the market value per Tax declaration wherein they get the remaining
alleged that it had correctly assessed and valuated the subject properties consistent with R.A. 10%. The CNI was taken from the average gross production based on the field investigation
No. 6657 and DAR Administrative Order (AO) No. 6, Series of 1992. report multiplied by the selling price from the Department of Agriculture municipal data,
arriving at a total CNI of ₱10,291.67 per ha. The market value per Tax declaration was based
on the third classification as furnished to Land Bank by the Municipal Assessor’s office. The Area = 13.0000 has.
total MVPT as computed by Land Bank is ₱14,193.22, so, 10% of which is ₱1,419.32. After Value/Ha = ₱52,700/has (Per Appraisal Report)
computing the CNI and the MVPT, he applied the applicable formula which is CNI x 90% and Computation:
the MVPT x 10%. The CNI total is ₱9,262.5 and the MV is ₱1,419.32. Summing up the total ₱52,700/ha x 13.0000 has = ₱685,100.00
amount of the two factors, the value per ha. Arrived at for corn land is ₱10,681.82 per ha. B) Peanut
Multiply it by 13 has. For corn land, the total amount is ₱3,535.66. For peanut land, the total Area = .2500
amount is ₱3,535.66 and for cogonal where they used the market value per tax declaration Value/Ha = ₱60,000/has (Per Appraisal Report)
multiplied by 2. the total is ₱117,126.09. Therefore, the total valuation of this 28.3062 has. Computation:
portion of the property acquired by the government is ₱259,525.41. ₱60,000.00/has x .2500 has = ₱15,000.00
For Title No. 86449, 22.3267 has. out of 36.3267 has. [i]s carpable. The 14 has. [w]as C) Cogonal
excluded because this falls under the hilly and mountainous portion which is about 18% slope. Area = 15.0562 has.
Applying the same rules and regulations, the total valuation for this property is ₱217,223.60. Value/Ha = ₱5,270 (Per Appraisal Report)
For Title No. 86402, the area covered is 6.5718 has. [o]ut of 12.5718 has. The area of 6 has. is Computation:
excluded for it falls above 18% slope. Applying again the same rules and regulations, the total ₱5,270.00/has x 15.0562 has = ₱79,346.17
valuation for the 6.5718 has. [a]cquired by the government is ₱51,762.90. Total:
That there are several valuations/formulas provided for under RA 6657 and the Land Bank
Corn land - ₱685,100.00
follows the applicable formula as reflected in the field investigation report. Therefore, their
basis in determining which factors will be applied are the result of the field investigation Peanut - 15,000.00
report. After determining the existence of the property, the DAR, Land Bank and the other
agencies concerned conducted an ocular inspection of the property being offered for sale under Cogonal - 79,346.17
CARP or covered by the CARP. The data in-put were gathered in the field including the
number of fruit bearing trees also determined. The production data was also taken and a
survey was being conducted in the field on adjacent properties. Said data were compared with ₱779,446.17
the record of the Municipal agriculturist and other officers. That the valuation of the property
was based under AO No. 11 existing at the time of the valuation of the property as of 2) TCT No. T-86449 – carpable area – 22.3267 has.
November 19, 1996. Land Use:
Melchor Balmaceda testified that at present he is an officer of Land Bank of the Philippines, A) Corn land
Sipocot Branch but before, he was connected with Land Bank VO, Legazpi City Branch as Value/Ha = ₱52,700.00/ha (Per Appraisal Report)
Agrarian Affairs Specialist. As such, he conducts ocular inspection on the properties covered Area = 15.000 has
by the CARP, and gathers information relative to land valuation. That sometime in 1991, he Computation:
together with DAR personnel and BARC Chairman and caretakers of the property conducted ₱52,700.00/has. x 15.0000 has =
an ocular inspection in question in the name of Damian Arcega, the former owner of the ₱790,500.00
property, which property consisted of 3 parcels. That in connection thereto, they made a B) Cogon:
written report that the property is generally mountainous and majority is planted to coconut. A Value/ha = ₱5,270/ha (Per Appraisal Report)
portion is planted to corn and minimal portion is planted to peanut and there is also a portion Area = 7.3267 has
which is cogonal where there is no product. That all the areas are carpable. That they gather Computation:
data information from government agencies and they compute the net income of the properties ₱5,270/ha x 7.3267 has = ₱38,611.7
based on the produce.7 Total:
Thereafter, the SAC rendered a decision reconciling the conflicting evidence of the parties. Corn land - ₱790,500.00
The SAC followed the formula of the LBP and its land use classification of the subject
properties; the appraisal report on the valuation thereof. It disposed of the case, to wit: Cogon - 38,611.70
To reconcile the conflicting figures both prayed for by [respondent] and [petitioner] Land
Bank as the computation of the value of the properties to be paid to the [respondent], taking ₱829,111.70
into account all the factors in determining just compensation and considering that the taking of 3) TCT No. T-86402 – carpable area – 6.5718 has
private agricultural properties under Agrarian Reform Law is a special kind of eminent domain Land Use:
which is revolutionary in character, the primary goal of which is to grant land to the landless A) Corn land
and the need for high production, the just compensation for the lots subject matter of this case, Value/ha = ₱52,700/ha (Per Appraisal Report)
using the value in the [respondent’s] appraisal report and the land use of the properties as Area = 3.0000 has
classified by the Land Bank, are as follows: Computation:
1) TCT No. T-86448 – carpable area – 28.3062 has. ₱52,700/has x 3.0000 has = ₱158,100
Land Use: B) Cogonal
A) Corn land
Value/ha = ₱5,270/ha (Per Appraisal Report) WHEN IT TREATED THE TAKING OF AGRICULTURAL LANDS FOR AGRARIAN
Area = 3.5718 has REFORM PURPOSES AS AN ORDINARY EXPROPRIATION OF PRIVATE PROPERTY
Computation: FOR PUBLIC USE.10
₱5,270/ha x 3.5718 has = ₱18,823.28 We impale the foregoing into the singular issue of whether the lower courts’ computation of
Total: just compensation for the subject properties is correct.
We answer in the negative and find the petition impressed with merit.
Corn land = ₱158,100.00
As pointed out by petitioner, our ruling in Land Bank of the Philippines v. Sps. Banal11 is
Cogonal = 18,823.38 definitive on the factors to be considered, and the formula utilized, for the determination of
just compensation:
To begin with, under Section 1 of Executive Order No. 405 (1990), the Landbank is charged
Total = ₱176,923.38 "primarily" with "the determination of the land valuation and compensation for all private
lands suitable for agriculture under the Voluntary Offer to Sell or Compulsory Acquisition
Based on the foregoing computation, the just compensation for 1) TCT No. T-86448 with a arrangement…" For its part, the DAR relies on the determination of the land valuation and
carpable area of 28.3062 has. is fixed at ₱779,446.17; 2) TCT No. T-86449 with a carpable compensation by the Landbank.
area of 22.3267 has. is fixed at ₱829,111.70; and for 3) TCT No. T-86402 with a carpable area xxxx
of 6.5718 has. is fixed at ₱18,823.38. A party who disagrees with the decision of the DAR adjudicator may bring the matter to the
Thus, the overall valuation of the property is as follows: RTC designated as a Special Agrarian Court "for final determination of just compensation."
TCT No. T-86648 ₱ 779,446.17 In the proceedings before the RTC, it is mandated to apply the Rules of Court and, on its own
initiative or at the instance of any of the parties, "appoint one or more commissioners to
TCT No. T-86649 829,111.70 examine, investigate and ascertain facts relevant to the dispute, including the valuation of
properties, and to file a written report thereof x x x." In determining just compensation, the
TCT No. T-86402 176,923.38 RTC is required to consider several factors enumerated in Section 17 of R.A. 6657, as
amended, thus:
"Sec. 17. Determination of Just Compensation. – In determining just compensation, the cost of
TOTAL ₱1,785,481.25 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
WHEREFORE, [petitioner LBP] is ordered to pay [respondent] Conrado Colarina the total government assessors shall be considered. The social and economic benefits contributed by the
sum of ONE MILLION SEVEN HUNDRED EIGHTY FIVE THOUSAND FOUR farmers and the farmworkers and by the Government to the property, as well as the non-
HUNDRED EIGHTY ONE PESOS AND TWENTY FIVE CENTAVOS (₱1,785,481.25) in payment of taxes or loans secured from any government financing institution on the said land,
case or in bond or in any other mode of payment under Section 18 of RA 6657 otherwise shall be considered as additional factors to determine its valuation."
known as the Comprehensive Agrarian Reform Law, at the option of the landowner. These factors have been translated into a basic formula in DAR Administrative Order No. 6,
SO ORDERED.8 Series of 1992, as amended by DAR Administrative Order No. 11, Series of 1994, issued
Still dissatisfied with the valuation of just compensation for the subject properties, both parties pursuant to the DAR’s rule-making power to carry out the object and purposes of R.A. 6657,
appealed to the CA. The appellate court affirmed the ruling of the SAC, to wit: as amended.
WHEREFORE, premises considered, the August 7, 2000 Decision of the Regional Trial Court Subsequent rulings of the Court uniformly parleyed that Section 17 of R.A. No. 6657 has been
of Lega[z]pi City, Albay, Branch 3, in Agrarian Case No. 95-01, is hereby AFFIRMED. translated into a formula by the DAR through A.O. No. 6, Series of 1992, as amended by A.O.
SO ORDERED.9 No. 11, Series of 1994:12
Adamant on the accuracy of its computation, petitioner appeals to this Court, positing the A. There shall be one basic formula for the valuation of lands covered by [Voluntary
following issues: Offer to Sell] or [Compulsory Acquisition] regardless of the date of offer or
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERRORS OF LAW coverage of the claim:
IN THE FOLLOWING INSTANCES: LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1)
I. Where: LV = Land Value
WHEN IT AFFIRMED THE REGIONAL TRIAL COURT OF LEGA[Z]PI CITY, BRANCH
3 DECISION DATED AUGUST 7, 2000 WHICH AWARDED ₱1,785,481.25 AS JUST CNI = Capitalized Net Income
COMPENSATION FOR THE FIFTY-SEVEN-HECTARE PROPERTY, AS THE SAID
DECISION FAILED TO CONFORM TO THIS HONORABLE COURT’S RULING IN CS = Comparable Sales
"LAND BANK OF THE PHILIPPINES V. SPOUSES VICENTE BANAL AND LEONIDES
ARENAS-BANAL" (G.R. NO. 143276). MV = Market Value per Tax Declaration
II. The above formula shall be used if all the three factors are present,
relevant, and applicable.
A.1 When the CS factor is not present and CNI and MV are
SP = The average of the latest available 12-month’s selling
applicable, the formula shall be:
prices prior to the date of receipt of the claimfolder by
LV = (CNI x 0.9) + (MV x 0.1)
LBP for processing, such prices to be secured from
A.2 When the CNI factor is not present, and CS and MV are the Department of Agriculture (DA) and other
applicable, the formula shall be: appropriate regulatory bodies or, in their absence,
LV = (CS x 0.9) + (MV x 0.1)
from the Bureau of Agricultural Statistics. If possible,
A.3 When both the CS and CNI are not present and only MV is
SP data shall be gathered from the barangay or
applicable, the formula shall be: municipality where the property is located. In the
LV = MV x 2 absence thereof, SP may be secured within the
In no case shall the value of the land using the formula MV x 2 exceed the
province or region.
lowest value of land within the same estate under consideration or within
the same barangay or municipality (in that order) approved by LBP within CO Cost of Operations
one (1) year from receipt of claimfolder. = Whenever the cost of operations could not be obtained
xxxx or verified, an assumed net income rate (NIR) of 20%
A.6 The basic formula in the grossing-up of valuation inputs such as LO’s shall be used. Landholdings planted to coconut which
Offer, Sales Transaction (ST), Acquisition Cost (AC), Market Value are productive at the time of offer/coverage shall
Based on Mortgage (MVM) and Market Value per Tax Declaration (MV) continue to use the 70% NIR. DAR and LBP shall
shall be: continue to conduct joint industry studies to establish
Grossed-up = Valuation input x Regional Consumer the applicable NIR for each crop covered under
Valuation Input Price Index (RCPI) Adjustment Factor CARP.
The RCPI Adjustment Factor shall refer to the ratio of RCPI for the month .12 = Capitalization Rate
issued by the National Statistics Office as of the date when the claimfolder
(CF) was received by LBP from DAR for processing or, in its absence, the xxxx
most recent available RCPI for the month issued prior to the date of C. CS shall refer to any one or the average of all the applicable sub-factors, namely,
receipt of CF from DAR and the RCPI for the month as of the ST, AC and MVM:
date/effectivity/registration of the valuation input. Expressed in equation Where: ST = Sales Transactions as defined under Item C.2
form:
AC = Acquisition Cost as defined under Item C.3
for the Month as of the Date of Receipt
of Claimfolder by LBP from DAR or MVM Market Value Based on Mortgage as defined under
the Most recent RCPI for the Month = Item C.4
RCPI Issued Prior to the Date of RCPI
Adjustment = Receipt of CF xxxx
Factor D. In the computation of Market Value per Tax Declaration (MV), the most recent
RCPI for the Month Issued as of the Tax Declaration (TD) and Schedule of Unit Market Value (SMV) issued prior to
Date/Effectivity/Registration of the receipt of claimfolder by LBP shall be considered. The Unit Market Value (UMV)
Valuation Input shall be grossed up from the date of its effectivity up to the date of receipt of
claimfolder by LBP from DAR for processing, in accordance with item II.A.A.6.
B. Capitalized Net Income (CNI) — This shall refer to the difference between the In Land Bank of the Philippines v. Celada,13 we declared:
gross sales (AGP x SP) and total cost of operations (CO) capitalized at 12%. While SAC is required to consider the acquisition cost of the land, the current value of like
Expressed in equation form: properties, its nature, actual use and income, the sworn valuation by the owner, the tax
CNI = (AGP x SP) - CO declaration and the assessments made by the government assessors to determine just
compensation, it is equally true that these factors have been translated into a basic formula by
.12 the DAR pursuant to its rule-making power under Section 49 of RA No. 6657. As the
government agency principally tasked to implement the agrarian reform program, it is the
Where: CNI Capitalized Net Income DAR’s duty to issue rules and regulations to carry out the object of the law. DAR AO No. 5, s.
= of 1998 precisely "filled in the details" of Section 17, RA No. 6657 by providing a basic
formula by which the factors mentioned therein may be taken into account. The SAC was at
AGP Latest available 12-month's gross production no liberty to disregard the formula which was devised to implement the said provision.
= immediately preceding the date of offer in case of It is elementary that rules and regulations issued by administrative bodies to interpret the law
VOS or date of notice of coverage in case of CA. which they are entrusted to enforce, have the force of law, and are entitled to great respect.
Administrative issuances partake of the nature of a statute and have in their favor a substantiated during an appropriate hearing before it could be considered sufficient in
presumption of legality. As such, courts cannot ignore administrative issuances especially accordance with Section 17 of RA 6657 and the DAR regulations.
when, as in this case, its validity was not put in issue. Unless an administrative order is In Land Bank of the Philippines v. Celada, the Court ruled that the factors enumerated under
declared invalid, courts have no option but to apply the same. Section 17 of RA 6657 had already been translated into a basic formula by the DAR pursuant
In the same vein, Land Bank of the Philippines v. Lim14 did not depart from the previous to its rule-making power under Section 49 of RA 6657. Thus, the Court held that the formula
rulings and explicitly affirmed the mandatory nature of Section 17 of RA No. 6657 and DAR outlined in DAR AO No. 5, series of 1998, should be applied in computing just compensation.
A.O. No. 6092, as amended by DAR A.O. No. 11-94: DAR AO No. 5, series of 1998, provides:
In Land Bank of the Philippines v. Spouses Banal, this Court underscored the mandatory A. There shall be one basic formula for the valuation of lands covered by VOS or
nature of Section 17 of RA 6657 and DAR AO 6-92, as amended by DAR AO 11-94, viz.: CA:
"In determining just compensation, the RTC is required to consider several factors enumerated LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1)
in Section 17 of R.A. 6657, as amended, thus: Where:
"Sec. 17. Determination of Just Compensation. – In determining just compensation, the cost of LV = Land Value
acquisition of the land, the current value of like properties, its nature, actual use and income, CNI = Capitalized Net Income
the sworn valuation by the owner, the tax declarations, and the assessment made by CS = Comparable Sales
government assessors shall be considered. The social and economic benefits contributed by the MV = Market Value per Tax Declaration
farmers and the farmworkers and by the Government to the property, as well as the non- The above formula shall be used if all three factors are present, relevant
payment of taxes or loans secured from any government financing institution on the said land, and applicable.
shall be considered as additional factors to determine its valuation." A1. When the CS factor is not present and CNI and MV are
These factors have been translated into a basic formula in [DAR AO 6-92], as amended by applicable, the formula shall be:
[DAR AO 11-94], issued pursuant to the DAR’s rule-making power to carry out the object and LV = (CNI x 0.9) + (MV x 0.1)
purposes of R.A. 6657, as amended. A2. When the CNI factor is not present, and CS and MV are
The formula stated in [DAR AO 6-92], as amended, is as follows: applicable, the formula shall be:
LV = (CS x 0.9) + (MV x 0.1)
"LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1)
A3. When both the CS and CNI are not present and only MV is
LV = Land Value applicable, the formula shall be:
LV = MV x 2
CNI = Capitalized Net Income In no case shall the value of idle land using the formula MV x 2 exceed
the lowest value of land within the same estate under consideration or
CS = Comparable Sales within the same barangay or municipality (in that order) approved by LBP
within one (1) year from receipt of claimfolder.
MV = Market Value per Tax Declaration In Land Bank of the Philippines v. Spouses Banal, we remanded the case to the SAC
for further reception of evidence because the trial court based its valuation upon a
The above formula shall be used if all the three factors are present, relevant and applicable.
different formula and did not conduct any hearing for the reception of evidence.
A.1 When the CS factor is not present and CNI and MV are applicable, the formula
The mandatory application of the aforementioned guidelines in determining just
shall be:
compensation has been reiterated recently in Land Bank of the Philippines v.
LV = (CNI x 0.9) + (MV x 0.1)
Lim and Land Bank of the Philippines v. Heirs of Eleuterio Cruz, where we also
xxxx
ordered the remand of the cases to the SAC for the determination of just
While the determination of just compensation involves the exercise of judicial
compensation strictly in accordance with the applicable DAR regulations.16
discretion, however, such discretion must be discharged within the bounds of the
The factors for the determination of just compensation in Section 17 of R.A. No. 6657, and
law. Here, the RTC wantonly disregarded R.A. 6657, as amended, and its
consequently converted into a formula in A.O. No. 6, Series of 1992, as amended by A.O. No.
implementing rules and regulations. ([DAR AO 6-92], as amended by [DAR AO 11-
11, Series of 1994, is mandatory. Land Bank of the Philippines v. Sps. Banal,17 as affirmed by
94]).
our subsequent rulings, did not equivocate.
xxxx
We note that A.O. No. 6, Series of 1992 (as amended by A.O. No. 11, Series of 1994) has
WHEREFORE, x x x. Civil Case No. 6806 is REMANDED to the RTC x x x. The
been superseded by A.O. No. 5, Series of 1998. However, A.O. No. 5, Series of 1998, is not
trial judge is directed to observe strictly the procedures specified above in
applicable to the present case as the subject properties were assessed and valued prior to its
determining the proper valuation of the subject property.
effectivity.
The recent case of Heirs of Lorenzo and Carmen Vidad and Agvid Construction Co., Inc. v.
A perusal of the records of this case readily reveals the Claims Valuation and Processing
Land Bank of the Philippines15 is most propinquity on the same point:
Form18 accomplished by petitioner when it reassessed and revaluated the subject properties.
LBP’s valuation of lands covered by the CARP Law is considered only as an initial
The document follows the required formula for valuation of properties under A.O. No. 6,
determination, which is not conclusive, as it is the RTC, sitting as a SAC, that could make the
Series of 1992, as amended by A.O. No. 11, Series of 1994. In fact, even the RTC used the
final determination of just compensation, taking into consideration the factors enumerated in
formula of petitioner to compute just compensation based on petitioner’s findings on land use
Section 17 of RA 6657 and the applicable DAR regulations. LBP’s valuation has to be
of the subject properties. However, the RTC, as well as the CA, was gravely mistaken in using
respondent’s valuation of the properties contained in Oliva’s appraisal report, i.e., A That was the result of my actual interview with the farmers and traders.
₱52,700.00/ha.1avvphi1 xxxx
We note that Oliva’s appraisal report did not attach pertinent documents thereto, considering Q How much is the valuation you gave to this rootcrops area?
that, as he had testified, he used the productivity approach: A The subject portion was classified by me as a 3rd class rootcrop land and so I
Q Mr. Witness [Oliva] you said that you gave the valuation of the coconut land in valued it at ₱60,000.00 per hectare, sir.
that property of Mr. Colarina. What is your valuation to the coconut land per Q Do you mean to tell this honorable court that this rootcrops land, the banana land
hectare? and corn land are distinct areas separate from each other?
WITNESS: A I apprised this honorable court that I appraised this property not exactly on what is
A For the coconut land, the valuation I arrived at for the coconut land is the amount being produced in the area. I considered the land itself, the classification of the land,
of ₱45,300.00 per hectare. That is the market value of the 4th class coconut land and the boundaries there but some are "ogacon" (lazy) to cultivate this property. Because
the improvements already, sir. I am also an agriculturist and I also have a lot which is planted to this kind of plants
Q What about the banana lands? and I know what will be the actual produce of the CROPS [inserted in the TSN] with
A The valuation is ₱70,800.00 per hectare, that is the valuation of the land, 4th class a certain kind of land. If we consider the actual produce, it is very low. Because we
banana land including already the improvements. are "ogacon" (lazy). What I am very much concerned is the kind of the land and then
Q Why did you conclude this high valuation of banana lands? I asked them if we will have to cultivate the property properly, how much are we
A Considering that I have compressed all these banana in every hectare, I have a going to expect.
reason to believe that it is a 4th class banana land. And in a 4th class banana land, Q Do you mean to impress to us that while you conducted the ocular inspection,
the price per kilo is only ₱15.00 to ₱30.00 per kilo. The effective number of bananas there were area which were not cultivated?
per hectare is only 600 clusters considering that this is the productivity for a 4th A When I conducted the ocular inspection, I was able to classify an area of around
class banana land. The produce annually of 4,000 kilos is very minimal. So at 4.8 hectares which has no value at all, sir.
₱15.00 per kilo, I arrived at a valuation of ₱60,000.00 per hectare. The appraisal, on xxxx
the other hand, for taxation purposes, we just state there the area actually being Q So you had the ocular inspection without anybody from the government or from
planted to bananas not considering the clusters of bananas in one hectare. Banana the barangay going with you?
plantation with this kind of clusters will cost more than this if it will be properly A Nobody but I told the barangay captain of the place that we will be going there for
fertilized by the owner. So this banana land is only a 4th class banana land and is an ocular inspection and from the barangay captain, we have learned that that there
about 7.5764 hectares of the subject property with only 4,000 to 8,000 kilos of is a subdivision for sale which is adjoining the subject properties for that much
banana fruits annually. amount also.
[Counsel of defendant DAR] xxxx
Q What about the corn land area? [On questioning by the SAC]
A I valued it at ₱52,700.00 per hectare, sir. A (Perusing the report submitted by the Land Bank of the Philippines). This is a
Q What is your basis? very low valuation, your honor.
A I have also here on page 5 of my report. I have classified the subject portion as a Q Why?
second class corn land. With a production of 101 to 150 cavans per hectare per year A Considering that I did not take into consideration the valuation that was done by
and the price of corn which is ₱420.00 per cavan, I arrived at a valuation of ₱52,700 the Assessor’s Office to the schedule of value because as an assessor, in gathering
per hectare, sir. data, we have to base the valuation of every kind of property. It takes us a hard time
xxxx to consolidate all these things because, first of all, one, the comparative sales
Q But that is not the data established by the [DAR]? approach, for example, your honor, we seldom find the consideration in a certain
A That is why I made a separate actual investigation. I made personal interviews sale that is the true and actual selling price perhaps because of the implementation of
with the farmers and so we arrived at this production. the capital gains tax of the Bureau of Internal Revenue. Most of them are under
Q So your basis is the information which you gathered from the farmers? valued. Now, that is why I based my valuation from the actual procedure. First of all
A Considering the kind of soil of the property planted by the farmers to corn, we I considered the kind of land thereon and thereby considered also the different kinds
will have to arrive at this productivity, sir. of perennial trees or plants and based on the actual interviews I conducted with the
Q Did you inquire about the government support price of corn per kilo? farmers, I arrived at the actual produce where I based my computation not really
A The government support price is at ₱7.00 or ₱8.00 per kilo, sir. considering the assessor’s value because it is only for taxation purposes. Nowhere in
Q Did you get that from the National Food Authority? the Philippines that the government assessments are reliable.19
A I got this from the [C]hinese traders because I want to arrive at the open market In stark contrast is the valuation made by witness Alcantara:
valuation. I am not prone to adopt the government price as I was deputized by Mr. Q Mr. Witness, what rule is followed by Land Bank in arriving at the valuation as
Colarina [respondent] to appraise his property independently, not as an assessor but contained in this exhibit?
as a private appraiser from the open market. And I know that this is still subject for A The guidelines followed by Land Bank: properties valued under Administrative
review by the honorable court. Order No. 11 Series of 1996 based on the Honorable Court’s Order dated November
xxxx 14, 1996.
Q So do you have the data where you based the valuation?
Q In Exh. "1," how many hectares were valued for the contemplated acquisition of A Yes.
the property? Q What is the total?
A The area for acquisition under Title No. 86448 is 28.3062 hectares. A The total valuation for this property [TCT No. 86449] is ₱217,223.60.
Q x x x Will you please explain why only a total of 28.3062 [hectares] was xxxx
computed in the valuation of the property? Q Lastly, in Exh. "3", will you please tell us what is the area acquired for coverage
A Some portion of the property is hilly and mountainous which exceeded the 18% under CARP?
limit set forth under Section 10 of R.A. 6657. Said portions of land were A The area acquired is 6.5718 hectares out of 12.5718 has.
mountainous and undeveloped and therefore excluded from acquisition under Q What is the area excluded for valuation?
existing guidelines. A The area excluded for valuation falling above 18% slope is 6 hectares.
Q What is the basis of said exclusion from coverage? Q x x x [D]id you still adopt the same rules and regulations in computing the
A Section 10 of R.A. 6657. valuation?
Q Will you please explain to us the character, land use and condition of this A The same.
particular land as described in Exh. "1"? Q What is the total valuation [for TCT No. 86402]?
A The property which contains an area of 48.3062 hectares per title is planted to A The total valuation for Title No. 86402 for the 6.5718 hectares acquired by the
corn, peanut and a large portion is cogonal. The corn land is 13 hectares, peanut land government is ₱51,762.90.
is .25 hectares and the cogonal is 15.0562 hectares. A hilly portion which is about xxxx
18% slope and a mountainous portion which is about 25% slope totals 20 hectares. Q Are there any guidelines under the law which limits or defines what can be used
This portion is the excluded one. in the valuation of the property under the CARP?
Q Will you please tell this Honorable Court what factors were considered by Land A There are several valuations/formulas provided for under R.A. 6657 and Land
Bank in arriving at the valuation of the property? Bank follows the applicable formula as reflected in the field investigation report.
A The factor considered by Land Bank is under Formula No. 2 which is the Therefore, our basis in determining which factors will be applied are the result of the
capitalized net income (CNI) x 90% and the market value per tax declaration field investigation report.
wherein we get the remaining 10%. Q Will you please tell this Honorable Court what particular activities are to be taken
Q There appears a computation for the CNI. Will you please explain how the total for the purpose of being able to value the property?
value was arrived at? A After determining the existence of the property, the DAR, Land Bank and other
A CNI for corn was taken from the average gross production based on the field agencies concerned conduct an ocular inspection of the property being offered for
investigation report multiplied by the selling price from the Department of sale under CARP or covered by the CARP. The data in-put were gathered in the
Agriculture municipal data, arriving at a total CNI of ₱10,291.67 per hectare. field including the number of fruit bearing trees, they were also determined. The
Q What about the computation for the market value per tax declaration (MVPT)? production data is also taken and a survey is being conducted in the field on adjacent
Will you explain how the total valuation for the MVPT was arrived at? properties. Said data were being compared with the record of the Municipal
A The market value per tax declaration was based on the third classification as agriculturist and other officers.
furnished to Land Bank by the Municipal Assessor’s Office. The total MVPT as Q Last question Mr. Witness, the total valuation of the subject property is as of what
computed by Land Bank is ₱14,193.22, so, 10% of which is ₱1,419.32. point of time?
Q Now, after computing the CNI and the MVPT, what steps did you undertake to A The valuation of the property was based under Administrative Order No. 11
arrive at the total valuation of the property? existing at the time of the valuation of the property.
A We applied the applicable formula which is the CNI x 90% and the MVPT x 10%. xxxx
The CNI total is ₱9,262.5 and the market value is ₱1,419.32. Summing up the total COURT:
amount of the two factors, the value per hectare arrived at for corn land is When was that?
₱10,681.82 per hectare. So, if we will apply the amount arrived at for the value per WINTNESS:
hectare of corn, ₱10,681.82 x 13 has. for corn land, the total is ₱138,863.66. The for November 19, 1996.20
peanut land, the total amount is ₱3,535.66 and for the cogonal land where we used Clearly from the foregoing, the valuation of the subject properties by petitioner was based on
the market value per tax declaration multiplied by 2, the total is ₱117,126.09. data gathered by DAR and contained in its Field Investigation Report.21 The data correctly
Therefore, the total valuation of this 28.3062 portion of the property acquired by the reflected actual use and produce of the subject properties and did not factor in potential use as
government is ₱259,525.41. what respondent’s appraiser did. In fact, we note that the data obtained by Oliva was based on
xxxx his unofficial surveys of farmers and Chinese traders. Oliva readily dismisses government
A The total area acquired for Title No. 86449 is 22.3267 hectares out of 36.267 valuation as unreliable without proffering evidence to support his statement. This explains the
hectares per title. big discrepancy in Oliva’s Appraisal Report and petitioner’s valuation.
Q What is the basis of your exclusion of the 14 hectares? While we commend respondent in readily participating in the government’s agrarian reform
A This 14 hectares fall also under the hilly and mountainous portion which is about program, our previous rulings preclude us from validating the valuation of the subject
18% slope. properties proffered to, and affirmed by, the SAC. The government cannot be forced to
Q x x x [D]id you apply the same rules and regulations covered by such valuation? purchase land which it finds no need for, regardless of Oliva’s unschooled opinion.
Did you apply the same factors? Considering respondent’s belief that the properties are worth more than the
valuation made by the DAR, he can proceed to develop the land excluded by the DAR from 3) TCT No. T-86402 – carpable area – 6.5718 has
expropriation into its potential use as assessed by Oliva. Land Use:
Thus, replacing the valuation of the subject properties pursuant to the determination of A) Corn land
petitioner where the LV was pegged using the formula {CNI x 90%} + {MV x 2}, we arrive at Value/ha = ₱7,992.31/ha
a different amount: Area = 3.0000 has
1) TCT No. T-86448 – carpable area – 28.3062 has. Computation
Land Use: ₱7,992.31/ha x 3.0000 has = ₱23,976.94
A) Corn land B) Cogonal
Area = 13.0000 has. Value/ha = ₱7,779.26/ha
Value/Ha = ₱10,681.82/ha Area = 3.5718 has
Computation: Computation:
₱10,681.82/ha x 13.0000 has = ₱138,863.66 ₱7,779.26/ha x 3.5718 has = ₱27,785.96
B) Peanut Total:
Area = .2500
Corn land - ₱ 23,976.94
Value/Ha = ₱14,142.65/ha
Computation: Cogonal = 27,785.96
₱14,142.65/ha x .2500 has = ₱3,535.66
C) Cogonal
Area = 15.0562 has. Total =
₱ 51,762.90
Value/Ha = ₱7,779.26/ha
Computation: TCT No. T-86448 - ₱259,525.41
₱7,779.26/ha x 15.0562 has = ₱117,126.09
Total: TCT No. T-86449 217,223.60
Corn land - ₱138,863.66
TCT No. T-86402 51,762.90
Peanut - 3,535.66

Cogonal - 117,126.09 TOTAL ₱528,511.91


===========
WHEREFORE, the petition is hereby GRANTED. The Decision of the Court of Appeals in
₱259,525.41 CA-G.R. CV No. 68476 and the decision of the Regional Trial Court, Branch 3, Legazpi City,
2) TCT No. T-86449 – carpable area – 22.3267 has. Albay, in Agrarian Case No. 95-01 are REVERSED and SET ASIDE. Petitioner Land Bank of
Land Use: the Philippines is hereby ordered to pay respondent Conrado O. Colarina the following
A) Corn land amounts:
Value/Ha = ₱10,681.82/ha 1. ₱259,525.41 for 28.3062 hectares of TCT No. 86448;
Area = 15.00 has 2. ₱217,223.60 for 22.3267 hectares of TCT No. 86449; and
Computation: 3. ₱51,762.90 for 6.5718 hectares of TCT No. 86402.
₱10,681.82/ha x 15.0000 has = ₱160,227.30 Petitioner shall pay twelve percent (12%) interest per annum from finality of this judgment
B) Cogon: until complete satisfaction thereof.
Value/ha = ₱7,779.26/ha SO ORDERED.
Area = 7.3267 has
Computation:
₱7,779.26/ha x 7.3267 has = ₱56,996.30
Total:
Corn land - ₱160,227.30

Cogon - 56,996.30

₱217,223.60
Republic of the Philippines the motion was denied. The defendant thereafter filed his answer with
SUPREME COURT counterclaim alleging, inter alia, that the land in question was originally
Manila leased to him, also verbally, by the plaintiff's father, Potenciano Gabriel in
SECOND DIVISION 1923 for as long as the defendant wanted subject to the condition that he
G.R. No. L-27797 August 26, 1974 would convert the major portion into a fishpond and the part which was
TRINIDAD GABRIEL, plaintiff-appellee, already a fishpond be improved at his expense which would be reimbursed
vs. by Potenciano Gabriel or his heirs at the termination of the lease for
EUSEBIO PANGILINAN, defendant-appellant. whatever cause; that when the plaintiff became the owner of the property
Mariano Manahan, Jr. for plaintiff-appellee. through inheritance, she told the defendant that she would honor her
Virgilio M. Pablo for defendant-appellant. father's contract with the defendant, and likewise assured him that he
Armando M. Laki for movant. could continue leasing the property, whose original rental of P400.00 a
year had been progressively increased to P1,200.00, for as long as he
ZALDIVAR, J.:p wanted since she was not in a position to attend to it personally. As a
This appeal from the decision, dated December 26, 1963, of the Court of First Instance of special defense, the defendant reiterated the alleged lack of jurisdiction of
Pampanga in its Civil Case No. 1823, was certified to this Court by the Court of Appeals for the trial court to take cognizance of the case.
the reason that the jurisdiction of an inferior court is involved. On February 12, 1962 the trial court issued an order herein below quoted
During the pendency of this case before this Court, under date of April 29, 1972, Atty. Virgilio in full:
M. Pablo, counsel for the appellant Eusebio Pangilinan, gave notice to this Court that said The plaintiff sinks to eject the defendant from the fishpond described in
appellant died on April 3, 1964, and was survived by his children, who are his legal heirs, the complaint which is under lease to the said defendant, who, however,
namely: Salvador Pangilinan, Santos Pangilinan, Mariano Pangilinan, Carlos Pangilinan and refuses to vacate. Instead, he has impugned the jurisdiction of this Court
Pilar Pangilinan de Avante. For the purposes of this case the appellant Eusebio Pangilinan, contending that the action should have been filed with the Court of
therefore, is substituted by his heirs herein named. Agrarian Relations, which has original and exclusive jurisdiction, as their
Under date of November 20, 1973, Atty. Amando M. Laki filed a motion with this Court relationship is one of leasehold tenancy.
advising that appellee Trinidad Gabriel died on June 14, 1967, and was survived by her heirs After the motion to dismiss was denied on the basis of the allegations of
and successors-in-interest, namely: Corazon O. Gabriel, married to Lamberto Ignacio; Ernesto the complaint, the parties were ordered to adduce evidence for the purpose
O. Gabriel; Ester O. Gabriel, married to Emmanuel Padua; Generoso O. Gabriel, Marciano O. of determining which Court shall take cognizance of the case.
Gabriel and Pablo O. Gabriel, and prayed that appellee Trinidad Gabriel be substituted by her It appears that the fishpond is presently in the possession of the defendant,
heirs herein named. By order of this Court of December 4, 1973 the prayer for substitution who originally leased it from the father of the plaintiff. Upon the death of
was granted. the said father, the fishpond was inherited by the plaintiff. It is now
In its resolution dated April 19, 1967 certifying the case to this Court, the Court of Appeals covered by T.C.T. No. 1634 and is registered in her name. It contains an
made the following findings, which We adopt: area of 169,507.00 square meters. The rental is on a yearly basis.
On June 18, 1960 Trinidad Gabriel filed a complaint in the Court of First It also appears that the defendant has ceased to work personally with the
Instance of Pampanga against Eusebio Pangilinan alleging that she is the aid of helpers the aforecited fishpond since 1956 he became ill and
owner of a fishpond situated in barrio Sta. Ursula, Betis, Pampanga and incapacitated. His daughter, Pilar Pangilinan, took over. She testified that
measuring about 169,507 square meters; that sometime during the last war she helps her father in administering the leased property, conveying his
she entered into an oral contract of lease thereof with the defendant on a instructions to the workers, Urbano Maninang, Isidro Bernal and Marciano
year to year basis, i.e., from January 1 to December 31, at a rental of Maninang. The names of Ire, Juan and Aguedo Viada have been
P1,200, plus the amount of real estate taxes, payable in advance in the mentioned as the laborers who were paid for the repair of the dikes.
month of January; that desiring to develop and cultivate the fishpond by Bernardo Cayanan, a nephew of the defendant, acts as the watcher. He has
herself, she notified the defendant in a letter dated June 26, 1957 that she lived separately since he got married. Excepting Pilar Pangilinan. who is
was terminating the contract as of December 31, 1957; that upon request residing near the fishpond, the other children of the defendant are all
of the defendant, she extended the lease for another year; that on professions; a lawyer, an engineer, and a priest all residing in Manila.
November 19, 1958 she again wrote the defendant that he should None of these persons has been seen working on the fishpond.
surrender possession of the fishpond on January 1, 1959, which demand he The above are the material and pertinent facts upon which we enter this
however ignored. Plaintiff accordingly prayed that the defendant be order.
ordered to restore the possession of the fishpond to her and to pay her After a study of the facts and in the light of the provisions of the Tenancy
P1,200, plus the amount of real estate taxes, a year from 1959, attorney's Law, Republic Act No. 1199, particularly Sections 4 and 9, as amended. it
fees and costs. seems clear that his case does not fall within the purview of said Act. The
The defendant moved for the dismissal of the complaint on the ground that lease contract is manifestly a civil lease governed by the New Civil Code.
the trial court had no jurisdiction over the case which properly pertains to Considering the area of the fishpond, 16 hectares, more or less, the fact
the Court of Agrarian Relations, there being an agricultural leasehold that neither the defendant, who is physically incapacitated, or his daughter
tenancy relationship between the parties. Upon opposition by the plaintiff, is Personally cultivating the fishpond or through the employment of
mechanical farm implements, and the further fact that the persons named It does appear that the controversy on the issue of jurisdiction calls for the interpretation of
above are not members of the immediate farm household of the defendant, cultivating or working the land by the tenant personally or with the aid of the members of his
the conclusion is that no tenancy relationship exists between the plaintiff immediate farm household.1
and the defendant as defined by Republic Act No. 1199, as amended. Those are the findings and conclusions of facts made by the Court of Appeals which, as a
We are, therefore, of the opinion and so hold that this Court is vested with general rule, bind this Court.2
jurisdiction to try and decide this case. After this order has become final, 1. Let Us now discuss the issues raised in this appeal. First, was the relationship between the
the plaintiff may request for the setting of the initial trial. appellee and appellant a leasehold tenancy or a civil law lease?
The defendant does not contest the findings of facts therein made by the There are important differences between a leasehold tenancy and a civil law lease. The subject
trial court. matter of leasehold tenancy is limited to agricultural land; that of civil law lease may be either
After the parties adduced their respective evidence on the merits, decision rural or urban property. As to attention and cultivation, the law requires the leasehold tenant to
was rendered wherein the trial court Pursuant to Article 1197 of the Civil personally attend to, and cultivate the agricultural land, whereas the civil law lessee need not
Code, fixed the period of the low up to June 30, 1964, the defendant on personally cultivate or work the thing leased. As to purpose, the landholding in leasehold
said date to surrender possession of the fishpond to the plaintiff and to pay tenancy is devoted to agriculture, whereas in civil law lease, the purpose may be for any other
the rentals due the latter. The plaintiff, on her part, was required upon lawful pursuits. As to the law that governs, the civil law lease is governed by the Civil Code,
surrender of on to her, to pay the defendant the sum of P1,000.00 as whereas leasehold tenancy is governed by special laws.3
reimbursement of the expenses he incurred in improving the fishpond, and In order that leasehold tenancy under the Agricultural Tenancy Act may exist, the following
upon failure by either party to pay the amount due the other, the same requisites must concur.
would bear interest at the legal rate until full payment is made. 1. That the land worked by the tenant is an agricultural land;
A reconsideration by the defendant having been denied, he appealed to 2. That the land is susceptible of cultivation by a single person together with members of his
this Court and assigned the following errors: immediate farm household;
1. The lower court erred in considering the relationship of appellee and 3. That the land must be cultivated by the tenant either personally or with the aid of labor
appellant as that of a civil lease, in accordance with the Civil Code of the available from members of his immediate farm household;
Philippines and not a leasehold tenancy under Rep. Act No. 1199 as 4. That the land belongs to another; and
amended. 5. That the use of the land by the tenant is for a consideration of a fixed amount in money or in
2. The lower court erred in not holding that the Court of First Instance is produce or in both.4
without jurisdiction, the cue being that of an agrarian relation in nature Were the foregoing requisites present in the instant case?
pursuant to Rep Act. NO. 1199 as amended. There is no doubt that the land in question is agricultural land. It is a fishpond and the
3. The lower court erred in appreciating the evidence of the appellant Agricultural Tenancy Act, which refers to "agricultural land", specifically mentions fishponds
particularly the basis for the expenditure for the development of the and prescribes the consideration for the use thereof. Thus Section 46(c) of said Act provides
fishpond in question. that "the consideration for the use of sugar lands, fishponds, salt beds and of lands devoted to
4. The lower court erred in rendering judgment in favor of the appellant in the raising of livestock shall be governed by stipulation between the parties". This Court has
them easily amount of one thousand pesos for reimbursement and for already ruled that "land in which fish is produced is classified as agricultural land."5 The mere
seven hundred pesos for the cost of the floodgate. fact, however, that a person works an agricultural land does not necessarily make him a
Anent the question of jurisdiction, it is an admitted fact that plaintiff leased the fishpond to the leasehold tenant within the purview of section 4 of Republic Act No. 1199. He may still be a
defendant in 1943 without a fixed term, the annual rental payable at the end of the year civil law lessee unless the other requisites as above enumerated are complied with.
(Exhibit C, Deposition of plaintiff, Dec. 13, 1962, pp. 2 and 3). It is likewise undisputed that Regarding the second requisite, it is to be noted that the land in question has an area of
the work in the fishpond consisted in letting out the water so algae (lumut) would grow or if 169,507 square meters, or roughly 17 hectares of fishpond. The question of whether such a big
algae would not grow, getting some from the river and putting them in the fishpond, changing parcel of land is susceptible of being worked by the appellant's family or not has not been
the dirty water with fresh water, repairing leaks in the dikes, and planting of fingerlings and raised, and We see no need of tarrying on this point. So, We pass to the third requisite, to wit,
attending to them; that these were done by defendant, with some help; that he personally whether the tenant himself personally or with the aid of his immediate family worked the land.
attended to the fishpond until 1956 when he became ill; that thereafter his nephew Bernardo Assuming that appellant had previously entered in 1923 into an agreement of leasehold
Cayanan, who was living with him, helped in the work to be done in the fishpond and his tenancy with Potenciano Gabriel, appellee's father, such tenancy agreement was severed in
daughter Pilar Pangilinan helped in the management, conveying his instructions to the workers 1956 when he ceased to work the fishpond personally because he became ill and incapacitated.
(t.s.n., pp. 4-8, Magat). Not even did the members of appellant's immediate farm household work the land in question.
Upon the foregoing facts, the defendant insists that the relationship between the parties is an Only the members of the family of the tenant and such other persons, whether related to the
agricultural leasehold tenancy governed by Republic Act No. 1199, as amended, pursuant to tenant or not, who are dependent upon him for support and who usually help him to operate
section 35 of Republic Act No. 3844, and the present case is therefore within the original and the farm enterprise are included in the term "immediate farm household"6 The record shows
exclusive jurisdiction of the Court of Agrarian Relations. Plaintiff, on the other hand, who helped work the land in question, and We quote:
maintains in effect that since defendant has ceased to work the fishpond personally or with the It also appears that the defendant has ceased to work personally with the
aid of the members of his immediate farm household (Section 4, Republic Act No. 1199) the aid of helpers the aforecited fishpond since 1956 when he became ill and
tenancy relationship between the parties has been extinguished (Section 9, id.) and become of incapacitated. His daughter, Pilar Pangilinan took over. She testified that
civil lease and therefore the trial court properly assumed jurisdiction over the case. she helps her father in administering the leased property, conveying his
instructions to the workers, Urbano Maninang, Isidro Bernal and Marciano
Maninang. The names of Ire, Juan and Aguedo Viada have been
mentioned as the laborers who were paid for the repair of the dikes.
Bernardo Cayanan, a nephew of the defendant, acts as the watcher. He has
lived separately since he got married. Excepting Pilar Pangilinan, who is
residing near the fishpond, the other children of the defendant are all
professionals: a lawyer, an engineer, and a priest — all residing in Manila.
None of these persons has been seen working on the fishpond. 7
The law is explicit in requiring the tenant and his immediate family to work the land. Thus
Section 5 (a) of Republic Act No. 1199, as amended, defines a "tenant" as 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. Section 8 of the same Act limits the relation of landholder and tenant to the person
who furnishes the land and to the person who actually works the land himself with the aid of
labor available from within his immediate farm household. Finally, Section 4 of the same Act
requires for the existence of leasehold tenancy that the tenant and his immediate farm
household work the land. It provides that leasehold tenancy exists when a person, who either
personally or with the aid of labor available from members of his immediate farm household,
undertakes to cultivate a piece of agricultural land susceptible of cultivation by a single person
together with members of his immediate farm household, belonging to, or legally possessed
by, another in consideration of a fixed amount in money or in produce or in both.
A person, in order to be considered a tenant, must himself and with the aid available from his
immediate farm household cultivate the land. Persons, therefore, who do not actually work the
land cannot be considered tenants;8and he who hires others whom he pays for doing the
cultivation of the land, ceases to hold, and is considered as having abandoned the land as
tenant within the meaning of sections 5 and 8 of Republic Act. No. 1199, and ceases to enjoy
the status, rights, and privileges of one.
We are, therefore, constrained to agree with the court a quo that the relationship between the
appellee Trinidad Gabriel and appellant Eusebio Pangilinan was not a leasehold tenancy under
Republic Act No. 1199. Hence, this case was not within the original and exclusive jurisdiction
of the Court of Agrarian Relations.9
2. Regarding the second assignment of error, We accordingly rule that the Court of First
Instance correctly assumed jurisdiction over the case at bar, this being a case of civil law lease.
3. We deem it unnecessary to discuss the third and fourth assigned errors as these are issues
involving findings of facts which have been settled by the lower court, and unless there is
grave abuse of discretion, which we do not find in the record of the case, We shall not venture
to discuss the merits of the factual findings of the court a quo.
IN VIEW OF THE FOREGOING, the decision of the Court of First Instance of Pampanga in
its Civil Case No. 1823, appealed from, is affirmed, with costs against the appellants.
This decision should apply to the heirs and successors-in-interest of the original parties, as
named in this decision. In consonance with the decision of the lower court, the heirs and
successors-in-interest of appellant Eusebio Pangilinan should deliver the possession of the
fishpond in question to the heirs and successors-in-interest of appellee Trinidad Gabriel; and
said heirs and successors-in-interest of appellant Eusebio Pangilinan should pay the heirs and
successors-in-interest of appellee Trinidad Gabriel the accrued rentals. From January 1, 1960,
at the rate of P1,200.00 a year, until the actual delivery of the possession of the fishpond as
herein ordered, with interest at the legal rate until full payment is made.
IT IS SO ORDERED.

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