Agrarian Cases First List.docx

EN BANC [G.R. No. 86889 : December 4, 1990.] 192 SCRA 51 LUZ FARMS, Petitioner, vs. THE HONORABLE SECRETARY OF THE DEPARTMENT OF AGRARIAN REFORM, Respondent. DECISION PARAS, J.: This is a petition for prohibition with prayer for restraining order and/or preliminary and permanent injunction against the Honorable Secretary of the Department of Agrarian Reform for acting without jurisdiction in enforcing the assailed provisions of R.A. No. 6657, otherwise known as the Comprehensive Agrarian Reform Law of 1988 and in promulgating the Guidelines and Procedure Implementing Production and Profit Sharing under R.A. No. 6657, insofar as the same apply to herein petitioner, and further from performing an act in violation of the constitutional rights of the petitioner. As gathered from the records, the factual background of this case, is as follows: On June 10, 1988, the President of the Philippines approved R.A. No. 6657, which includes the raising of livestock, poultry and swine in its coverage (Rollo, p. 80). On January 2, 1989, the Secretary of Agrarian Reform promulgated the Guidelines and Procedures Implementing Production and Profit Sharing as embodied in Sections 13 and 32 of R.A. No. 6657 (Rollo, p. 80). On January 9, 1989, the Secretary of Agrarian Reform promulgated its Rules and Regulations implementing Section 11 of R.A. No. 6657 (Commercial Farms). (Rollo, p. 81). Luz Farms, petitioner in this case, is a corporation engaged in the livestock and poultry business and together with others in the same business allegedly stands to be adversely affected by the enforcement of Section 3(b), Section 11, Section 13, Section 16(d) and 17 and Section 32 of R.A. No. 6657 otherwise known as Comprehensive Agrarian Reform Law and of the Guidelines and Procedures Implementing Production and Profit Sharing under R.A. No. 6657 promulgated on January 2, 1989 and the Rules and Regulations Implementing Section 11 thereof as promulgated by the DAR on January 9, 1989 (Rollo, pp. 2-36). : rd

Hence, this petition praying that aforesaid laws, guidelines and rules be declared unconstitutional. Meanwhile, it is also prayed that a writ of preliminary injunction or restraining order be issued enjoining public respondents from enforcing the same, insofar as they are made to apply to Luz Farms and other livestock and poultry raisers. This Court in its Resolution dated July 4, 1939 resolved to deny, among others, Luz Farms' prayer for the issuance of a preliminary injunction in its Manifestation dated May 26, and 31, 1989. (Rollo, p. 98). Later, however, this Court in its Resolution dated August 24, 1989 resolved to grant said Motion for Reconsideration regarding the injunctive relief, after the filing and approval by this Court of an injunction bond in the amount of P100,000.00. This Court also gave due

course to the petition and required the parties to file their respective memoranda (Rollo, p. 119). The petitioner filed its Memorandum on September 6, 1989 (Rollo, pp. 131-168). On December 22, 1989, the Solicitor General adopted his Comment to the petition as his Memorandum (Rollo, pp. 186-187). Luz Farms questions the following provisions of R.A. 6657, insofar as they are made to apply to it: (a) Section 3(b) which includes the "raising of livestock (and poultry)" in the definition of "Agricultural, Agricultural Enterprise or Agricultural Activity." (b) Section 11 which defines "commercial farms" as "private agricultural lands devoted to commercial, livestock, poultry and swine raising . . ." (c) Section 13 which calls upon petitioner to execute a production-sharing plan. (d) Section 16(d) and 17 which vest on the Department of Agrarian Reform the authority to summarily determine the just compensation to be paid for lands covered by the Comprehensive Agrarian Reform Law. (e) Section 32 which spells out the production-sharing plan mentioned in Section 13 — ". . . (W)hereby three percent (3%) of the gross sales from the production of such lands are distributed within sixty (60) days of the end of the fiscal year as compensation to regular and other farmworkers in such lands over and above the compensation they currently receive: Provided, That these individuals or entities realize gross sales in excess of five million pesos per annum unless the DAR, upon proper application, determine a lower ceiling. In the event that the individual or entity realizes a profit, an additional ten (10%) of the net profit after tax shall be distributed to said regular and other farmworkers within ninety (90) days of the end of the fiscal year . . ." The main issue in this petition is the constitutionality of Sections 3(b), 11, 13 and 32 of R.A. No. 6657 (the Comprehensive Agrarian Reform Law of 1988), insofar as the said law includes the raising of livestock, poultry and swine in its coverage as well as the Implementing Rules and Guidelines promulgated in accordance therewith. :-cralaw

The constitutional provision under consideration reads as follows: ARTICLE XIII x x x AGRARIAN AND NATURAL RESOURCES REFORM Section 4. The State shall, by law, undertake an agrarian reform program founded on the right of farmers and regular farmworkers, who are landless, to own directly or collectively the lands they till or, in the case of other farmworkers, to receive a just share of the fruits thereof. To this end, the State shall encourage and undertake the just distribution of all agricultural lands, subject to such priorities and reasonable retention limits as the Congress may prescribe, taking into account ecological, developmental, or equity considerations, and subject to the payment of just compensation. In determining retention limits, the State shall respect the rights of small landowners. The State shall further provide incentives for voluntary landsharing.

x x x" Luz Farms contended that it does not seek the nullification of R.A. 6657 in its entirety. In fact, it acknowledges the correctness of the decision of this Court in the case of the Association of Small Landowners in the Philippines, Inc. vs. Secretary of Agrarian Reform (G.R. 78742, 14 July 1989) affirming the constitutionality of the Comprehensive Agrarian Reform Law. It, however, argued that Congress in enacting the said law has transcended the mandate of the Constitution, in including land devoted to the raising of livestock, poultry and swine in its coverage (Rollo, p. 131). Livestock or poultry raising is not similar to crop or tree farming. Land is not the primary resource in this undertaking and represents no more than five percent (5%) of the total investment of commercial livestock and poultry raisers. Indeed, there are many owners of residential lands all over the country who use available space in their residence for commercial livestock and raising purposes, under "contractgrowing arrangements," whereby processing corporations and other commercial livestock and poultry raisers (Rollo, p. 10). Lands support the buildings and other amenities attendant to the raising of animals and birds. The use of land is incidental to but not the principal factor or consideration in productivity in this industry. Including backyard raisers, about 80% of those in commercial livestock and poultry production occupy five hectares or less. The remaining 20% are mostly corporate farms (Rollo, p. 11). On the other hand, the public respondent argued that livestock and poultry raising is embraced in the term "agriculture" and the inclusion of such enterprise under Section 3(b) of R.A. 6657 is proper. He cited that Webster's International Dictionary, Second Edition (1954), defines the following words: "Agriculture — the art or science of cultivating the ground and raising and harvesting crops, often, including also, feeding, breeding and management of livestock, tillage, husbandry, farming. It includes farming, horticulture, forestry, dairying, sugarmaking . . . Livestock — domestic animals used or raised on a farm, especially for profit. Farm — a plot or tract of land devoted to the raising of domestic or other animals." (Rollo, pp. 82-83). The petition is impressed with merit. The question raised is one of constitutional construction. The primary task in constitutional construction is to ascertain and thereafter assure the realization of the purpose of the framers in the adoption of the Constitution (J.M. Tuazon & Co. vs. Land Tenure Administration, 31 SCRA 413 [1970]). : rd

Ascertainment of the meaning of the provision of Constitution begins with the language of the document itself. The words used in the Constitution are to be given their ordinary meaning except where technical terms are employed in which case the significance thus attached to them prevails (J.M. Tuazon & Co. vs. Land Tenure Administration, 31 SCRA 413 [1970]). It is generally held that, in construing constitutional provisions which are ambiguous or of doubtful meaning, the courts may consider the debates in the constitutional convention as throwing light on the intent of the framers of the Constitution. It is true that the intent of the convention is not controlling by itself, but as its proceeding was preliminary to the adoption by the people of the Constitution the understanding of the convention as to what was meant by the terms of the constitutional provision which was the subject of the

deliberation, goes a long way toward explaining the understanding of the people when they ratified it (Aquino, Jr. v. Enrile, 59 SCRA 183 [1974]). The transcripts of the deliberations of the Constitutional Commission of 1986 on the meaning of the word "agricultural," clearly show that it was never the intention of the framers of the Constitution to include livestock and poultry industry in the coverage of the constitutionally-mandated agrarian reform program of the Government. The Committee adopted the definition of "agricultural land" as defined under Section 166 of R.A. 3844, as laud devoted to any growth, including but not limited to crop lands, saltbeds, fishponds, idle and abandoned land (Record, CONCOM, August 7, 1986, Vol. III, p. 11). The intention of the Committee is to limit the application of the word "agriculture." Commissioner Jamir proposed to insert the word "ARABLE" to distinguish this kind of agricultural land from such lands as commercial and industrial lands and residential properties because all of them fall under the general classification of the word "agricultural". This proposal, however, was not considered because the Committee contemplated that agricultural lands are limited to arable and suitable agricultural lands and therefore, do not include commercial, industrial and residential lands (Record, CONCOM, August 7, 1986, Vol. III, p. 30). In the interpellation, then Commissioner Regalado (now a Supreme Court Justice), posed several questions, among others, quoted as follows: x x x "Line 19 refers to genuine reform program founded on the primary right of farmers and farmworkers. I wonder if it means that leasehold tenancy is thereby proscribed under this provision because it speaks of the primary right of farmers and farmworkers to own directly or collectively the lands they till. As also mentioned by Commissioner Tadeo, farmworkers include those who work in piggeries and poultry projects. I was wondering whether I am wrong in my appreciation that if somebody puts up a piggery or a poultry project and for that purpose hires farmworkers therein, these farmworkers will automatically have the right to own eventually, directly or ultimately or collectively, the land on which the piggeries and poultry projects were constructed. (Record, CONCOM, August 2, 1986, p. 618). x x x The questions were answered and explained in the statement of then Commissioner Tadeo, quoted as follows: x x x "Sa pangalawang katanungan ng Ginoo ay medyo hindi kami nagkaunawaan. Ipinaaalam ko kay Commissioner Regalado na hindi namin inilagay ang agricultural worker sa kadahilanang kasama rito ang piggery, poultry at livestock workers. Ang inilagay namin dito ay farm worker kaya hindi kasama ang piggery, poultry at livestock workers (Record, CONCOM, August 2, 1986, Vol. II, p. 621). It is evident from the foregoing discussion that Section II of R.A. 6657 which includes "private agricultural lands devoted to commercial livestock, poultry and swine raising" in the definition of "commercial farms" is invalid, to the extent that the aforecited agro-industrial activities are made to be covered by the agrarian reform program of the State. There is simply no reason to include livestock and poultry lands in the coverage of agrarian reform. (Rollo, p. 21).

Hence, there is merit in Luz Farms' argument that the requirement in Sections 13 and 32 of R.A. 6657 directing "corporate farms" which include livestock and poultry raisers to execute and implement "production-sharing plans" (pending final redistribution of their landholdings) whereby they are called upon to distribute from three percent (3%) of their gross sales and ten percent (10%) of their net profits to their workers as additional compensation is unreasonable for being confiscatory, and therefore violative of due process (Rollo, p. 21). :-cralaw

It has been established that this Court will assume jurisdiction over a constitutional question only if it is shown that the essential requisites of a judicial inquiry into such a question are first satisfied. Thus, there must be an actual case or controversy involving a conflict of legal rights susceptible of judicial determination, the constitutional question must have been opportunely raised by the proper party, and the resolution of the question is unavoidably necessary to the decision of the case itself (Association of Small Landowners of the Philippines, Inc. v. Secretary of Agrarian Reform, G.R. 78742; Acuna v. Arroyo, G.R. 79310; Pabico v. Juico, G.R. 79744; Manaay v. Juico, G.R. 79777, 14 July 1989, 175 SCRA 343). However, despite the inhibitions pressing upon the Court when confronted with constitutional issues, it will not hesitate to declare a law or act invalid when it is convinced that this must be done. In arriving at this conclusion, its only criterion will be the Constitution and God as its conscience gives it in the light to probe its meaning and discover its purpose. Personal motives and political considerations are irrelevancies that cannot influence its decisions. Blandishment is as ineffectual as intimidation, for all the awesome power of the Congress and Executive, the Court will not hesitate "to make the hammer fall heavily," where the acts of these departments, or of any official, betray the people's will as expressed in the Constitution (Association of Small Landowners of the Philippines, Inc. v. Secretary of Agrarian Reform, G.R. 78742; Acuna v. Arroyo, G.R. 79310; Pabico v. Juico, G.R. 79744; Manaay v. Juico, G.R. 79777, 14 July 1989). Thus, where the legislature or the executive acts beyond the scope of its constitutional powers, it becomes the duty of the judiciary to declare what the other branches of the government had assumed to do, as void. This is the essence of judicial power conferred by the Constitution "(I)n one Supreme Court and in such lower courts as may be established by law" (Art. VIII, Section 1 of the 1935 Constitution; Article X, Section I of the 1973 Constitution and which was adopted as part of the Freedom Constitution, and Article VIII, Section 1 of the 1987 Constitution) and which power this Court has exercised in many instances (Demetria v. Alba, 148 SCRA 208 [1987]). PREMISES CONSIDERED, the instant petition is hereby GRANTED. Sections 3(b), 11, 13 and 32 of R.A. No. 6657 insofar as the inclusion of the raising of livestock, poultry and swine in its coverage as well as the Implementing Rules and Guidelines promulgated in accordance therewith, are hereby DECLARED null and void for being unconstitutional and the writ of preliminary injunction issued is hereby MADE permanent. SO ORDERED. Fernan (C.J.), Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Gancayco, Padilla, Bidin, Griño-Aquino, Medialdea and Regalado, JJ., concur. Feliciano, J., is on leave. Separate Opinions SARMIENTO, J., concurring: I agree that the petition be granted.

It is my opinion however that the main issue on the validity of the assailed provisions of R.A. 6657 (the Comprehensive Agrarian Reform Law of 1988) and its Implementing Rules and Guidelines insofar as they include the raising of livestock, poultry, and swine in their coverage cannot be simplistically reduced to a question of constitutional construction. It is a well-settled rule that construction and interpretation come only after it has been demonstrated that application is impossible or inadequate without them. A close reading however of the constitutional text in point, specifically, Sec. 4, Art. XIII, particularly the phrase, ". . . in case of other farmworkers, to receive a just share of the fruits thereof," provides a basis for the clear and possible coverage of livestock, poultry, and swine raising within the ambit of the comprehensive agrarian reform program. This accords with the principle that every presumption should be indulged in favor of the constitutionality of a statute and the court in considering the validity of a statute should give it such reasonable construction as can be reached to bring it within the fundamental law. 1 The presumption against unconstitutionality, I must say, assumes greater weight when a ruling to the contrary would, in effect, defeat the laudable and noble purpose of the law, i.e., the welfare of the landless farmers and farmworkers in the promotion of social justice, by the expedient conversion of agricultural lands into livestock, poultry, and swine raising by scheming landowners, thus, rendering the comprehensive nature of the agrarian program merely illusory. The instant controversy, I submit, boils down to the question of whether or not the assailed provisions violate the equal protection clause of the Constitution (Article II, section 1) which teaches simply that all persons or things similarly situated should be treated alike, both as to rights conferred and responsibilities imposed. 2 There is merit in the contention of the petitioner that substantial distinctions exist between land directed purely to cultivation and harvesting of fruits or crops and land exclusively used for livestock, poultry and swine raising, that make real differences, to wit: x x x No land is tilled and no crop is harvested in livestock and poultry farming. There are no tenants nor landlords, only employers and employees. Livestock and poultry do not sprout from land nor are they "fruits of the land." Land is not even a primary resource in this industry. The land input is inconsequential that all the commercial hog and poultry farms combined occupy less than one percent (1%) (0.4% for piggery, 0.2% for poultry) of the 5.45 million hectares of land supposedly covered by the CARP. And most farms utilize only 2 to 5 hectares of land. : nad

In every respect livestock and poultry production is an industrial activity. Its use of an inconsequential portion of land is a mere incident of its operation, as in any other undertaking, business or otherwise. The fallacy of defining livestock and poultry production as an agricultural enterprise is nowhere more evident when one considers that at least 95% of total investment in these farms is in the form of fixed assets which are industrial in nature. These include (1) animal housing structures and facilities complete with drainage, waterers, blowers, misters and in some cases even piped-in music; (2) feedmills complete with grinders, mixers, conveyors, exhausts, generators, etc.; (3) extensive warehousing facilities for feeds and other supplies; (4) anti-pollution equipment such as bio-gas and digester plants augmented by lagoons and concrete ponds; (5) deepwells, elevated water tanks, pumphouses and accessory facilities; (6) modern equipment such as sprayers, pregnancy

testers, etc.; (7) laboratory facilities complete with expensive tools and equipment; and a myriad other such technologically advanced appurtances. How then can livestock and poultry farmlands be arable when such are almost totally occupied by these structures? The fallacy of equating the status of livestock and poultry farmworkers with that of agricultural tenants surfaces when one considers contribution to output. Labor cost of livestock and poultry farms is no more than 4% of total operating cost. The 98% balance represents inputs not obtained from the land nor provided by the farmworkers — inputs such as feeds and biochemicals (80% of the total cost), power cost, cost of money and several others. Moreover, livestock and poultry farmworkers are covered by minimum wage law rather than by tenancy law. They are entitled to social security benefits where tenant-farmers are not. They are paid fixed wages rather than crop shares. And as in any other industry, they receive additional benefits such as allowances, bonuses, and other incentives such as free housing privileges, light and water. Equating livestock and poultry farming with other agricultural activities is also fallacious in the sense that like the manufacturing sector, it is a market for, rather than a source of agricultural output. At least 60% of the entire domestic supply of corn is absorbed by livestock and poultry farms. So are the by-products of rice (rice-bran), coconut (copra meal), banana (banana pulp meal), and fish (fish meal). 3 x x x In view of the foregoing, it is clear that both kinds of lands are not similarly situated and hence, cannot be treated alike. Therefore, the assailed provisions which allow for the inclusion of livestock and poultry industry within the coverage of the agrarian reform program constitute invalid classification and must accordingly be struck down as repugnant to the equal protection clause of the Constitution. chanrobles virtual law library

Endnotes SARMIENTO, J., concurring:

THIRD DIVISION G.R. No. 156965

October 12, 2006

FROILAN DE GUZMAN, ANGEL MARCELO and NICASIO MAGBITANG, petitioners, vs. THE COURT OF APPEALS, OFFICE OF THE PRESIDENT, and the MUNICIPALITY OF BALIUAG, BULACAN,respondents.

DECISION

Tinga, J.: On appeal via a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure are the Decision1 and Resolution2 of the Court of Appeals in CA-G.R. SP No. 55710. The Decision affirmed the Resolution dated 4 October 1999 of the Office of the President dismissing petitioners' appeal from the Order of the Secretary of Agrarian Reform declaring that the disputed property cannot be placed under the coverage of the agrarian reform program or the Operation Land Transfer. The following factual antecedents are matters of record. Petitioners Froilan De Guzman, Angel Marcelo and Nicasio Magbitang were among the tenants of a parcel of land situated at Barangay Pagala, Baliuag, Bulacan. The land, measuring six (6) hectares, was formerly owned by the Vergel De Dios family. Sometime in 1979, respondent Municipality of Baliuag, Bulacan (municipality) sought the expropriation of the land before the now defunct Court of Agrarian Relations. During the pendency of the expropriation proceedings, the municipality and petitioners entered into a compromise agreement, whereby petitioners irrevocably withdrew their opposition to the expropriation of the land in consideration of the payment of a disturbance compensation of P25,000.00 per hectare or P2.50 per square meter. Petitioners also waived "all claims and demands" against the municipality. The Court of Agrarian Relations approved said compromise agreement in its decisions dated 16 April 1979 and 9 August 1979. 3 From the records, it can be gathered that the municipality eventually acquired ownership of the land through expropriation but allowed petitioners to continue cultivating their lots pending the construction of the Baliuag Wholesale Complex Market. For this arrangement, petitioners remitted rentals to the municipal treasurer. Despite the lapse of several years, construction of the market did not push through. This prompted petitioners, who had continually occupied and cultivated the land, to file in 1996 a petition with the Municipal Agrarian Reform Office (MARO) of Baliuag, praying that the land be placed under the Operation Land Transfer (OLT) in accordance with Presidential Decree (P.D.) No. 27.4 Following the filing of their petition for CARP coverage before the MARO, petitioners filed a complaint on 13 May 1997 with the Department of Agrarian Reform Adjudication Board (DARAB) against the municipality. In their complaint docketed as DARAB Case No. 03-02-5054'97, petitioners prayed for the issuance of a preliminary injunction or temporary restraining order to secure their peaceful possession over the land. The Provincial Adjudicator rendered judgment in favor of petitioners on 17 July 1997. The dispositive portion of the decision reads: WHEREFORE, premises considered, the Board finds the plaintiffs a [sic] bona-fide farmer[-]beneficiaries of agrarian reform[.] [A]ccordingly, judgment is hereby rendered as follows: 1. Directing the the [sic] respondent, Municipality of Baliuag, Bulacan[,] represented by Honorable Mayor Edilberto Tengco and all other persons acting in their behalf to permanently cease and desist from dumping garbage in the premises in question; 2. Directing the respondent to maintain petitioners in peaceful possession over the disputed property. SO ORDERED.5

On 6 January 1997, the Regional Director of the Department of Agrarian Reform (DAR) issued an order granting the petition and declaring the land as covered by OLT.6 The municipality moved for its reconsideration in vain. Following the denial of its motion for reconsideration, the municipality elevated the matter to the DAR Secretary who, in his Order dated 8 August 1997, reversed the Order of 6 January 1997 of the Regional Director.7 Petitioners, aggrieved this time, filed an appeal with the Office of the President. On 1 July 1999, Executive Secretary Ronaldo B. Zamora, by authority of the President, dismissed petitioners' appeal and affirmed the order of the DAR Secretary. 8 Undaunted, petitioners filed a petition for review with the Court of Appeals, which prayed for the reversal of the Order of 1 July 1999 issued by the Office of the President on the grounds that the land remained agricultural and that the Office of the President erred in relying upon the certification issued by the Housing and Land Use Regulatory Board (HLURB) classifying the land as commercial. They also argued that under the provisions of Administrative Order (A.O.) No. 20, series of 1992, the conversion of the land for non-agricultural purposes was disallowed. On 30 January, 2002, the Court of Appeals rendered the assailed Decision, dismissing petitioners' appeal. Upholding the non-agricultural classification of the land, the Court of Appeals ruled that the land could no longer be subject of the comprehensive agrarian reform law (CARL). The Court of Appeals also denied petitioners' motion for reconsideration in the assailed Resolution dated January 20, 2003. Hence, the instant petition, imputing the following errors to the Court of Appeals: I. WITH ALL DUE RESPECT, THE COURT OF APPEALS COMMITTED GRAVE AND MANIFEST ERROR IN LAW WHEN IT FAILED TO CONSIDER THAT THE SUBJECT LANDHOLDING SHOULD HAVE BEEN COVERED BY OPERATION LAND TRANSFER PURSUANT TO P.D. NO. 27 DUE TO THE FAILURE OF THE LANDOWNER TO CARRY OUT ITS CONVERSION FROM AGRICULTURAL LAND FOR A LONG PERIOD OF TIME. II. THE COURT OF APPEALS COMMITTED SERIOUS ERROR WHEN IT UPHOLD (sic) THE RECLASSIFICATION OF THE SUBJECT LANDHOLDING. III. THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT DISREGARDED THE PROVISIONS OF THE O.P. ADMINISTRATIVE ORDER NO. 20 SERIES OF 1992 WHICH CLEARLY PROVIDES THE NON NEGOTIABILITY OF IRRIGATED PRIME AGRICULTURAL LANDS TO NON-AGRICULTURAL PURPOSES. 9 Essentially, the main issue to be resolved is whether the subject land can be reclassified to agricultural after the purpose of its conversion to a non-agricultural land had not materialized. Petitioners contend that despite the conversion of the land for a commercial purpose, they have remained tenants of the land devoting it for agricultural production. Though the earlier tenancy relationship had been terminated upon the payment of disturbance compensation pursuant to the 1979 compromise agreement, petitioners posit that a tenancy relationship was created anew

between them and the municipality when the latter allowed petitioners to cultivate the land after the expropriation proceeding. The petition has no merit. Under Section 3(c) of Republic Act (R.A.) No. 6657, otherwise known as the Comprehensive Agrarian Reform Law (CARL), an agricultural land refers to land devoted to agricultural activity as defined therein and not classified as mineral, forest, residential, commercial or industrial land. The deliberations of the Constitutional Commission confirm this limitation. "Agricultural lands" are only those lands which are "arable and suitable agricultural lands" and "do not include commercial, industrial and residential lands."10 In Natalia Realty, Inc. vs. Department of Agrarian Reform,11 it was held that lands not devoted to agricultural activity are outside the coverage of CARL including lands previously converted to nonagricultural uses prior to the effectivity of CARL by government agencies other than the DAR. This rule has been reiterated in a number of subsequent cases. Despite claims that the areas have been devoted for agricultural production, the Court has upheld the "non-agricultural" classification made by the NHA over housing and resettlements projects,12 zoning ordinances passed by local government units classifying residential areas,13 and certifications over watershed areas issued by the Department of Environment and Natural Resources (DENR).14 The DAR itself has recognized the prospective application of R.A. No. 6657, insofar as it provides under Section 3(c) thereof that lands classified as non-agricultural prior to the effectivity of the CARL are not covered by the CARL. Thus, DAR Administrative Order No. 1, series of 1990 provides: Agricultural land refers to those devoted to agricultural activity as defined in R.A. [No.] 6657 and not classified as mineral or forest by the Department of Environment and Natural Resources (DENR) and its predecessor agencies, and not classified in town plans and zoning ordinances as approved by the Housing Land Use Regulatory Board (HLURB) and its preceding competent authorities prior to 15 June 1988 for residential, commercial or industrial use. (Emphasis supplied.} That the subject land had been reclassified from agricultural to non-agricultural is not disputed. The records reveal that as early as 1980, the municipality had passed a zoning ordinance which identified the subject land as the site of the wholesale market complex. As per certification issued by the HLURB, the land is within the zoning plan approved by the National Coordinating Council for Town Planning, Housing and Zoning. Petitioners also theorize that they earned a vested right over the land when a tenancy relationship was established anew between them and the municipality subsequent to the latter's acquisition of the land. In support of this theory, petitioners cite minutes of meetings and resolutions passed by the municipality's Sanggunian, purportedly indicating the municipality's recognition of their status as tenants of the subject landholding. Petitioners' theory does not persuade the Court. A segment of the minutes of the meeting of the municipality's Sanggunian dated 27 May 1988, which petitioners cite to bolster their theory, is quoted below: Tumindig din at namahayag ang ating Punong Bayan Kgg. Reynaldo S. del Rosario at sinabing sa kasulukuyan ay hindi pa naman kailangan ng Pamahalaang Bayan ang

nasabing lupa ngunit kung ito ay kakailangan na ay kinakailangang umalis sila dito ng mahinusay, walang pasubali at maluwag sa kanilang kalooban, kung kaya't iminungkahi niya na gumawa ng isang nakasulat na kasunduan na ang nakasaad ay kusang-loob silang aalis sa nasabing lupa pagdating ng panahon na ito ay kailanganin na ng Pamahalaang Bayan. 15 The aforequoted minutes clearly show that petitioners' use and possession of the land was by mere tolerance of the municipality and subject to the condition that petitioners would voluntarily vacate the land when the need would arise. In the same minutes, the Sanggunian resolved to authorize then Mayor Reynaldo S. del Rosario to enter into an agreement in writing with petitioners concerning the latter's temporary cultivation of the land as hired labor. As discussed earlier, the land had ceased to be classified as agricultural when the municipality extended petitioners' occupation of the land. After the municipality acquired ownership over the land through expropriation and passed the ordinance converting said land into a commercial area, any transaction entered into by the municipality involving the land was governed by the applicable civil law in relation to laws on local government. At this point, agrarian laws no longer governed the relationship between petitioners and the municipality. While it was not established whether the relationship between petitioners and the municipality was that of a lessor and lessee or that of an employer and laborer, as the supposed written agreement was not offered in evidence, the fact remains that the subject land had already been identified as commercial in the zoning ordinance. Certainly, petitioners' occupation of the land, made possible as it was by the tolerance of the municipality, was subject to its peremptory right to terminate. As absolute owner of the land, the municipality is entitled to devote the land for purposes it deems appropriate. It is noteworthy that even prior to its expropriation and reclassification, the land was never placed under the coverage of the agrarian reform program. Although it appears that petitioners had been tilling the land as tenants of the Vergel De Dios family, the municipality's predecessor-in-interest, the records do not show that petitioners had applied for coverage of the land under the agrarian reform program. Before a claimant becomes a qualified beneficiary of agrarian reform, the administrative process for coverage under the CARP must be initiated. The mere fact of cultivating an agricultural land does not ipso jure vest ownership right in favor of the tiller. Since petitioners had not applied for CARP coverage prior to the reclassification of the land to commercial, their occupation by mere tolerance cannot ripen into absolute ownership. Petitioners further argue that the municipality's failure to realize the commercial project operates to reinstate the original status of the land as agricultural. In support of this theory, petitioners cite Section 36 (1) of R.A. No. 3844, or the Agriculture Land Reform Code, unaware that the provision had been amended by R.A. 6389, entitled, "An Act Amending Republic Act Numbered Thirty Eight Hundred and Forty Four, As Amended, Otherwise Known As the Agricultural Land Reform Code and For Other Purposes." Before its amendment, Section 36 (1), R.A. No. 3844 provided: Sec. 36. Possession of Landholding; Exceptions.—Notwithstanding any agreement as to the period or future surrender, of the land, an agricultural lessee shall continue in the enjoyment and possession of his landholding except when his dispossession has been authorized by the Court in a judgment that is final and executory if after due hearing it is shown that: (1) The agricultural lessor-owner or a member of his immediate family will personally cultivate the landholding or will convert the landholding, if suitably located, into residential, factory, hospital or school site or other useful non-agricultural purposes: Provided, That the

agricultural lessee shall be entitled to disturbance compensation equivalent to five years rental on his landholding in addition to his rights under Sections twenty-five and thirty-four, except when the land owned and leased by the agricultural lessor, is not more than five hectares, in which case instead of disturbance compensation the lessee may be entitled to an advanced notice of at least one agricultural year before ejectment proceedings are filed against him: Provided, further, That should the landholder not cultivate the land himself for three years or fail to substantially carry out such conversion within one year after the dispossession of the tenant, it shall be presumed that he acted in bad faith and the tenant shall have the right to demand possession of the land and recover damages for any loss incurred by him because of said dispossessions. With the enactment of the amendatory law, the condition imposed on the landowner to implement the conversion of the agricultural land to a non-agricultural purpose within a certain period was deleted. Section 36 (1), R.A. No. 3844, as amended, now reads: Sec. 36. Possession of Landholding; Exceptions.– Notwithstanding any agreement as to the period or future surrender, of the land, an agricultural lessee shall continue in the enjoyment and possession of his landholding except when his dispossession has been authorized by the Court in a judgment that is final and executory if after due hearing it is shown that: (1) The landholding is declared by the department head upon recommendation of the National Planning Commission to be suited for residential, commercial, industrial or some other urban purposes: Provided, That the agricultural lessee shall be entitled to disturbance compensation equivalent to five times the average of gross harvests on his landholding during the last five preceding calendar years; x x x x16 The amendment is the Legislature's recognition that the optimal use of some lands may not necessarily be for agriculture. Thus, discretion is vested on the appropriate government agencies to determine the suitability of a land for residential, commercial, industrial or other purposes. With the passage of the CARL, the conversion of agricultural lands to non-agricultural uses was retained and the imposition on the landowner to implement within a time frame the proposed non-agricultural use of the land was done away with. Moreover, in Pasong Bayabas Farmers Association, Inc. v. Court of Appeals,17 the Court declared categorically that the failure of the landowner therein to complete the housing project did not have the effect of reverting the property to its classification as agricultural land, although the order of conversion issued by the then Minister of Agrarian Reform obliged the landowner to commence the physical development of the housing project within one year from receipt of the order of conversion.18 In said case, a vast tract of land claimed to be cultivated by its tenants formed part of the subdivision plan of a housing project approved by the National Planning Commission and Municipal Council of Carmona and subsequently declared by the Provincial Board of Cavite as composite of the industrial areas of Carmona, Dasmariñas, Silang and Trece Martirez. Because the reclassification of the property by the Municipal Council of Carmona to non-agricultural land took place before the effectivity of the CARL, the Court held that Section 65 of R.A. No. 6657 cannot be applied retroactively.19 More importantly, the Court in Pasong Bayabas recognized the power of local government units to adopt zoning ordinances, citing Section 3 of R.A. No. 2264, 20 to wit:

Section 3 of Rep. Act No. 2264, amending the Local Government Code, specifically empowers municipal and/or city councils to adopt zoning and subdivision ordinances or regulations in consultation with the National Planning Commission. A zoning ordinance prescribes, defines, and apportions a given political subdivision into specific land uses as present and future projection of needs. The power of the local government to convert or reclassify lands to residential lands to non-agricultural lands reclassified is not subject to the approval of the Department of Agrarian Reform. Section 65 of Rep. Act No. 6657 relied upon by the petitioner applies only to applications by the landlord or the beneficiary for the conversion of lands previously placed under agrarian reform law after the lapse of five years from its award. It does not apply to agricultural lands already converted as residential lands prior to the passage of Rep. Act No. 6657.21 Thus, the zoning ordinance passed by the municipality sometime in 1980 reclassifying the subject land as commercial and future site of a market complex operated to take away the "agricultural" status of the subject property. Subsequent events cited by petitioners such as their continuous tillage of the land and the non-commencement of the construction of the market complex did not strip the land of its classification as commercial. Petitioners' reliance on the provisions of A.O. No. 20, series of 1992, issued by then President Fidel Ramos is misplaced. A.O. No. 20, which sets forth the guidelines to be observed by local government units and government agencies on agricultural land use conversion, cannot be applied to the subject land for the reason that the land had already been classified as commercial long before its issuance. Indeed, A.O. No. 20 cannot be applied retroactively. WHEREFORE, the instant petition for review on certiorari is DENIED. The Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 55710 are AFFIRMED. Costs against petitioners. SO ORDERED. Quisumbing, J., Chairperson, Carpio, Carpio Morales, and Velasco, Jr., JJ., concur. EN BANC G.R. No. 78742 July 14, 1989 ASSOCIATION OF SMALL LANDOWNERS IN THE PHILIPPINES, INC., JUANITO D. GOMEZ, GERARDO B. ALARCIO, FELIPE A. GUICO, JR., BERNARDO M. ALMONTE, CANUTO RAMIR B. CABRITO, ISIDRO T. GUICO, FELISA I. LLAMIDO, FAUSTO J. SALVA, REYNALDO G. ESTRADA, FELISA C. BAUTISTA, ESMENIA J. CABE, TEODORO B. MADRIAGA, AUREA J. PRESTOSA, EMERENCIANA J. ISLA, FELICISIMA C. ARRESTO, CONSUELO M. MORALES, BENJAMIN R. SEGISMUNDO, CIRILA A. JOSE & NAPOLEON S. FERRER, petitioners, vs. HONORABLE SECRETARY OF AGRARIAN REFORM, respondent. G.R. No. 79310 July 14, 1989 ARSENIO AL. ACUNA, NEWTON JISON, VICTORINO FERRARIS, DENNIS JEREZA, HERMINIGILDO GUSTILO, PAULINO D. TOLENTINO and PLANTERS' COMMITTEE, INC., Victorias Mill District, Victorias, Negros Occidental, petitioners, vs.

JOKER ARROYO, PHILIP E. JUICO and PRESIDENTIAL AGRARIAN REFORM COUNCIL, respondents. G.R. No. 79744 July 14, 1989 INOCENTES PABICO, petitioner, vs. HON. PHILIP E. JUICO, SECRETARY OF THE DEPARTMENT OF AGRARIAN REFORM, HON. JOKER ARROYO, EXECUTIVE SECRETARY OF THE OFFICE OF THE PRESIDENT, and Messrs. SALVADOR TALENTO, JAIME ABOGADO, CONRADO AVANCENA and ROBERTO TAAY, respondents. G.R. No. 79777 July 14, 1989 NICOLAS S. MANAAY and AGUSTIN HERMANO, JR., petitioners, vs. HON. PHILIP ELLA JUICO, as Secretary of Agrarian Reform, and LAND BANK OF THE PHILIPPINES, respondents.

CRUZ, J.: In ancient mythology, Antaeus was a terrible giant who blocked and challenged Hercules for his life on his way to Mycenae after performing his eleventh labor. The two wrestled mightily and Hercules flung his adversary to the ground thinking him dead, but Antaeus rose even stronger to resume their struggle. This happened several times to Hercules' increasing amazement. Finally, as they continued grappling, it dawned on Hercules that Antaeus was the son of Gaea and could never die as long as any part of his body was touching his Mother Earth. Thus forewarned, Hercules then held Antaeus up in the air, beyond the reach of the sustaining soil, and crushed him to death. Mother Earth. The sustaining soil. The giver of life, without whose invigorating touch even the powerful Antaeus weakened and died. The cases before us are not as fanciful as the foregoing tale. But they also tell of the elemental forces of life and death, of men and women who, like Antaeus need the sustaining strength of the precious earth to stay alive. "Land for the Landless" is a slogan that underscores the acute imbalance in the distribution of this precious resource among our people. But it is more than a slogan. Through the brooding centuries, it has become a battle-cry dramatizing the increasingly urgent demand of the dispossessed among us for a plot of earth as their place in the sun. Recognizing this need, the Constitution in 1935 mandated the policy of social justice to "insure the well-being and economic security of all the people," especially the less privileged. In 1973, the new Constitution affirmed this goal adding specifically that "the State shall regulate the acquisition, ownership, use, enjoyment and disposition of private property and equitably diffuse property ownership and profits." Significantly, there was also the specific injunction to "formulate and implement an agrarian reform program aimed at emancipating the tenant from the bondage of the soil." 1

2

3

The Constitution of 1987 was not to be outdone. Besides echoing these sentiments, it also adopted one whole and separate Article XIII on Social Justice and Human Rights, containing grandiose but undoubtedly sincere provisions for the uplift of the common people. These include a call in the following words for the adoption by the State of an agrarian reform program: SEC. 4. The State shall, by law, undertake an agrarian reform program founded on the right of farmers and regular farmworkers, who are landless, to own directly or collectively the lands they till or, in the case of other farmworkers, to receive a just share of the fruits thereof. To this end, the State shall encourage and undertake the just distribution of all agricultural lands, subject to such priorities and reasonable retention limits as the Congress may prescribe, taking into account ecological, developmental, or equity considerations and subject to the payment of just compensation. In determining retention limits, the State shall respect the right of small landowners. The State shall further provide incentives for voluntary landsharing. Earlier, in fact, R.A. No. 3844, otherwise known as the Agricultural Land Reform Code, had already been enacted by the Congress of the Philippines on August 8, 1963, in line with the above-stated principles. This was substantially superseded almost a decade later by P.D. No. 27, which was promulgated on October 21, 1972, along with martial law, to provide for the compulsory acquisition of private lands for distribution among tenant-farmers and to specify maximum retention limits for landowners. The people power revolution of 1986 did not change and indeed even energized the thrust for agrarian reform. Thus, on July 17, 1987, President Corazon C. Aquino issued E.O. No. 228, declaring full land ownership in favor of the beneficiaries of P.D. No. 27 and providing for the valuation of still unvalued lands covered by the decree as well as the manner of their payment. This was followed on July 22, 1987 by Presidential Proclamation No. 131, instituting a comprehensive agrarian reform program (CARP), and E.O. No. 229, providing the mechanics for its implementation. Subsequently, with its formal organization, the revived Congress of the Philippines took over legislative power from the President and started its own deliberations, including extensive public hearings, on the improvement of the interests of farmers. The result, after almost a year of spirited debate, was the enactment of R.A. No. 6657, otherwise known as the Comprehensive Agrarian Reform Law of 1988, which President Aquino signed on June 10, 1988. This law, while considerably changing the earlier mentioned enactments, nevertheless gives them suppletory effect insofar as they are not inconsistent with its provisions. 4

The above-captioned cases have been consolidated because they involve common legal questions, including serious challenges to the constitutionality of the several measures mentioned above. They will be the subject of one common discussion and resolution, The different antecedents of each case will require separate treatment, however, and will first be explained hereunder. G.R. No. 79777 Squarely raised in this petition is the constitutionality of P.D. No. 27, E.O. Nos. 228 and 229, and R.A. No. 6657. The subjects of this petition are a 9-hectare riceland worked by four tenants and owned by petitioner Nicolas Manaay and his wife and a 5-hectare riceland worked by four tenants and owned by petitioner Augustin Hermano, Jr. The tenants were declared full owners of these lands by E.O. No. 228 as qualified farmers under P.D. No. 27.

The petitioners are questioning P.D. No. 27 and E.O. Nos. 228 and 229 on grounds inter alia of separation of powers, due process, equal protection and the constitutional limitation that no private property shall be taken for public use without just compensation. They contend that President Aquino usurped legislative power when she promulgated E.O. No. 228. The said measure is invalid also for violation of Article XIII, Section 4, of the Constitution, for failure to provide for retention limits for small landowners. Moreover, it does not conform to Article VI, Section 25(4) and the other requisites of a valid appropriation. In connection with the determination of just compensation, the petitioners argue that the same may be made only by a court of justice and not by the President of the Philippines. They invoke the recent cases of EPZA v. Dulay andManotok v. National Food Authority. Moreover, the just compensation contemplated by the Bill of Rights is payable in money or in cash and not in the form of bonds or other things of value. 5

6

In considering the rentals as advance payment on the land, the executive order also deprives the petitioners of their property rights as protected by due process. The equal protection clause is also violated because the order places the burden of solving the agrarian problems on the owners only of agricultural lands. No similar obligation is imposed on the owners of other properties. The petitioners also maintain that in declaring the beneficiaries under P.D. No. 27 to be the owners of the lands occupied by them, E.O. No. 228 ignored judicial prerogatives and so violated due process. Worse, the measure would not solve the agrarian problem because even the small farmers are deprived of their lands and the retention rights guaranteed by the Constitution. In his Comment, the Solicitor General stresses that P.D. No. 27 has already been upheld in the earlier cases ofChavez v. Zobel, Gonzales v. Estrella, and Association of Rice and Corn Producers of the Philippines, Inc. v. The National Land Reform Council. The determination of just compensation by the executive authorities conformably to the formula prescribed under the questioned order is at best initial or preliminary only. It does not foreclose judicial intervention whenever sought or warranted. At any rate, the challenge to the order is premature because no valuation of their property has as yet been made by the Department of Agrarian Reform. The petitioners are also not proper parties because the lands owned by them do not exceed the maximum retention limit of 7 hectares. 7

8

9

Replying, the petitioners insist they are proper parties because P.D. No. 27 does not provide for retention limits on tenanted lands and that in any event their petition is a class suit brought in behalf of landowners with landholdings below 24 hectares. They maintain that the determination of just compensation by the administrative authorities is a final ascertainment. As for the cases invoked by the public respondent, the constitutionality of P.D. No. 27 was merely assumed in Chavez, while what was decided in Gonzales was the validity of the imposition of martial law. In the amended petition dated November 22, 1588, it is contended that P.D. No. 27, E.O. Nos. 228 and 229 (except Sections 20 and 21) have been impliedly repealed by R.A. No. 6657. Nevertheless, this statute should itself also be declared unconstitutional because it suffers from substantially the same infirmities as the earlier measures. A petition for intervention was filed with leave of court on June 1, 1988 by Vicente Cruz, owner of a 1. 83- hectare land, who complained that the DAR was insisting on the implementation of P.D. No. 27 and E.O. No. 228 despite a compromise agreement he had reached with his tenant on the payment of rentals. In a subsequent motion dated April 10, 1989, he adopted the allegations in the

basic amended petition that the above- mentioned enactments have been impliedly repealed by R.A. No. 6657. G.R. No. 79310 The petitioners herein are landowners and sugar planters in the Victorias Mill District, Victorias, Negros Occidental. Co-petitioner Planters' Committee, Inc. is an organization composed of 1,400 planter-members. This petition seeks to prohibit the implementation of Proc. No. 131 and E.O. No. 229. The petitioners claim that the power to provide for a Comprehensive Agrarian Reform Program as decreed by the Constitution belongs to Congress and not the President. Although they agree that the President could exercise legislative power until the Congress was convened, she could do so only to enact emergency measures during the transition period. At that, even assuming that the interim legislative power of the President was properly exercised, Proc. No. 131 and E.O. No. 229 would still have to be annulled for violating the constitutional provisions on just compensation, due process, and equal protection. They also argue that under Section 2 of Proc. No. 131 which provides: Agrarian Reform Fund.-There is hereby created a special fund, to be known as the Agrarian Reform Fund, an initial amount of FIFTY BILLION PESOS (P50,000,000,000.00) to cover the estimated cost of the Comprehensive Agrarian Reform Program from 1987 to 1992 which shall be sourced from the receipts of the sale of the assets of the Asset Privatization Trust and Receipts of sale of ill-gotten wealth received through the Presidential Commission on Good Government and such other sources as government may deem appropriate. The amounts collected and accruing to this special fund shall be considered automatically appropriated for the purpose authorized in this Proclamation the amount appropriated is in futuro, not in esse. The money needed to cover the cost of the contemplated expropriation has yet to be raised and cannot be appropriated at this time. Furthermore, they contend that taking must be simultaneous with payment of just compensation as it is traditionally understood, i.e., with money and in full, but no such payment is contemplated in Section 5 of the E.O. No. 229. On the contrary, Section 6, thereof provides that the Land Bank of the Philippines "shall compensate the landowner in an amount to be established by the government, which shall be based on the owner's declaration of current fair market value as provided in Section 4 hereof, but subject to certain controls to be defined and promulgated by the Presidential Agrarian Reform Council." This compensation may not be paid fully in money but in any of several modes that may consist of part cash and part bond, with interest, maturing periodically, or direct payment in cash or bond as may be mutually agreed upon by the beneficiary and the landowner or as may be prescribed or approved by the PARC. The petitioners also argue that in the issuance of the two measures, no effort was made to make a careful study of the sugar planters' situation. There is no tenancy problem in the sugar areas that can justify the application of the CARP to them. To the extent that the sugar planters have been lumped in the same legislation with other farmers, although they are a separate group with problems exclusively their own, their right to equal protection has been violated. A motion for intervention was filed on August 27,1987 by the National Federation of Sugarcane Planters (NASP) which claims a membership of at least 20,000 individual sugar planters all over the country. On September 10, 1987, another motion for intervention was filed, this time by Manuel Barcelona, et al., representing coconut and riceland owners. Both motions were granted by the Court.

NASP alleges that President Aquino had no authority to fund the Agrarian Reform Program and that, in any event, the appropriation is invalid because of uncertainty in the amount appropriated. Section 2 of Proc. No. 131 and Sections 20 and 21 of E.O. No. 229 provide for an initial appropriation of fifty billion pesos and thus specifies the minimum rather than the maximum authorized amount. This is not allowed. Furthermore, the stated initial amount has not been certified to by the National Treasurer as actually available. Two additional arguments are made by Barcelona, to wit, the failure to establish by clear and convincing evidence the necessity for the exercise of the powers of eminent domain, and the violation of the fundamental right to own property. The petitioners also decry the penalty for non-registration of the lands, which is the expropriation of the said land for an amount equal to the government assessor's valuation of the land for tax purposes. On the other hand, if the landowner declares his own valuation he is unjustly required to immediately pay the corresponding taxes on the land, in violation of the uniformity rule. In his consolidated Comment, the Solicitor General first invokes the presumption of constitutionality in favor of Proc. No. 131 and E.O. No. 229. He also justifies the necessity for the expropriation as explained in the "whereas" clauses of the Proclamation and submits that, contrary to the petitioner's contention, a pilot project to determine the feasibility of CARP and a general survey on the people's opinion thereon are not indispensable prerequisites to its promulgation. On the alleged violation of the equal protection clause, the sugar planters have failed to show that they belong to a different class and should be differently treated. The Comment also suggests the possibility of Congress first distributing public agricultural lands and scheduling the expropriation of private agricultural lands later. From this viewpoint, the petition for prohibition would be premature. The public respondent also points out that the constitutional prohibition is against the payment of public money without the corresponding appropriation. There is no rule that only money already in existence can be the subject of an appropriation law. Finally, the earmarking of fifty billion pesos as Agrarian Reform Fund, although denominated as an initial amount, is actually the maximum sum appropriated. The word "initial" simply means that additional amounts may be appropriated later when necessary. On April 11, 1988, Prudencio Serrano, a coconut planter, filed a petition on his own behalf, assailing the constitutionality of E.O. No. 229. In addition to the arguments already raised, Serrano contends that the measure is unconstitutional because: (1) Only public lands should be included in the CARP; (2) E.O. No. 229 embraces more than one subject which is not expressed in the title; (3) The power of the President to legislate was terminated on July 2, 1987; and (4) The appropriation of a P50 billion special fund from the National Treasury did not originate from the House of Representatives. G.R. No. 79744 The petitioner alleges that the then Secretary of Department of Agrarian Reform, in violation of due process and the requirement for just compensation, placed his landholding under the coverage of

Operation Land Transfer. Certificates of Land Transfer were subsequently issued to the private respondents, who then refused payment of lease rentals to him. On September 3, 1986, the petitioner protested the erroneous inclusion of his small landholding under Operation Land transfer and asked for the recall and cancellation of the Certificates of Land Transfer in the name of the private respondents. He claims that on December 24, 1986, his petition was denied without hearing. On February 17, 1987, he filed a motion for reconsideration, which had not been acted upon when E.O. Nos. 228 and 229 were issued. These orders rendered his motion moot and academic because they directly effected the transfer of his land to the private respondents. The petitioner now argues that: (1) E.O. Nos. 228 and 229 were invalidly issued by the President of the Philippines. (2) The said executive orders are violative of the constitutional provision that no private property shall be taken without due process or just compensation. (3) The petitioner is denied the right of maximum retention provided for under the 1987 Constitution. The petitioner contends that the issuance of E.0. Nos. 228 and 229 shortly before Congress convened is anomalous and arbitrary, besides violating the doctrine of separation of powers. The legislative power granted to the President under the Transitory Provisions refers only to emergency measures that may be promulgated in the proper exercise of the police power. The petitioner also invokes his rights not to be deprived of his property without due process of law and to the retention of his small parcels of riceholding as guaranteed under Article XIII, Section 4 of the Constitution. He likewise argues that, besides denying him just compensation for his land, the provisions of E.O. No. 228 declaring that: Lease rentals paid to the landowner by the farmer-beneficiary after October 21, 1972 shall be considered as advance payment for the land. is an unconstitutional taking of a vested property right. It is also his contention that the inclusion of even small landowners in the program along with other landowners with lands consisting of seven hectares or more is undemocratic. In his Comment, the Solicitor General submits that the petition is premature because the motion for reconsideration filed with the Minister of Agrarian Reform is still unresolved. As for the validity of the issuance of E.O. Nos. 228 and 229, he argues that they were enacted pursuant to Section 6, Article XVIII of the Transitory Provisions of the 1987 Constitution which reads: The incumbent president shall continue to exercise legislative powers until the first Congress is convened. On the issue of just compensation, his position is that when P.D. No. 27 was promulgated on October 21. 1972, the tenant-farmer of agricultural land was deemed the owner of the land he was tilling. The leasehold rentals paid after that date should therefore be considered amortization payments.

In his Reply to the public respondents, the petitioner maintains that the motion he filed was resolved on December 14, 1987. An appeal to the Office of the President would be useless with the promulgation of E.O. Nos. 228 and 229, which in effect sanctioned the validity of the public respondent's acts. G.R. No. 78742 The petitioners in this case invoke the right of retention granted by P.D. No. 27 to owners of rice and corn lands not exceeding seven hectares as long as they are cultivating or intend to cultivate the same. Their respective lands do not exceed the statutory limit but are occupied by tenants who are actually cultivating such lands. According to P.D. No. 316, which was promulgated in implementation of P.D. No. 27: No tenant-farmer in agricultural lands primarily devoted to rice and corn shall be ejected or removed from his farmholding until such time as the respective rights of the tenant- farmers and the landowner shall have been determined in accordance with the rules and regulations implementing P.D. No. 27. The petitioners claim they cannot eject their tenants and so are unable to enjoy their right of retention because the Department of Agrarian Reform has so far not issued the implementing rules required under the above-quoted decree. They therefore ask the Court for a writ of mandamus to compel the respondent to issue the said rules. In his Comment, the public respondent argues that P.D. No. 27 has been amended by LOI 474 removing any right of retention from persons who own other agricultural lands of more than 7 hectares in aggregate area or lands used for residential, commercial, industrial or other purposes from which they derive adequate income for their family. And even assuming that the petitioners do not fall under its terms, the regulations implementing P.D. No. 27 have already been issued, to wit, the Memorandum dated July 10, 1975 (Interim Guidelines on Retention by Small Landowners, with an accompanying Retention Guide Table), Memorandum Circular No. 11 dated April 21, 1978, (Implementation Guidelines of LOI No. 474), Memorandum Circular No. 18-81 dated December 29,1981 (Clarificatory Guidelines on Coverage of P.D. No. 27 and Retention by Small Landowners), and DAR Administrative Order No. 1, series of 1985 (Providing for a Cut-off Date for Landowners to Apply for Retention and/or to Protest the Coverage of their Landholdings under Operation Land Transfer pursuant to P.D. No. 27). For failure to file the corresponding applications for retention under these measures, the petitioners are now barred from invoking this right. The public respondent also stresses that the petitioners have prematurely initiated this case notwithstanding the pendency of their appeal to the President of the Philippines. Moreover, the issuance of the implementing rules, assuming this has not yet been done, involves the exercise of discretion which cannot be controlled through the writ of mandamus. This is especially true if this function is entrusted, as in this case, to a separate department of the government. In their Reply, the petitioners insist that the above-cited measures are not applicable to them because they do not own more than seven hectares of agricultural land. Moreover, assuming arguendo that the rules were intended to cover them also, the said measures are nevertheless not in force because they have not been published as required by law and the ruling of this Court in Tanada v. Tuvera. As for LOI 474, the same is ineffective for the additional reason that a mere letter of instruction could not have repealed the presidential decree. 10

I

Although holding neither purse nor sword and so regarded as the weakest of the three departments of the government, the judiciary is nonetheless vested with the power to annul the acts of either the legislative or the executive or of both when not conformable to the fundamental law. This is the reason for what some quarters call the doctrine of judicial supremacy. Even so, this power is not lightly assumed or readily exercised. The doctrine of separation of powers imposes upon the courts a proper restraint, born of the nature of their functions and of their respect for the other departments, in striking down the acts of the legislative and the executive as unconstitutional. The policy, indeed, is a blend of courtesy and caution. To doubt is to sustain. The theory is that before the act was done or the law was enacted, earnest studies were made by Congress or the President, or both, to insure that the Constitution would not be breached. In addition, the Constitution itself lays down stringent conditions for a declaration of unconstitutionality, requiring therefor the concurrence of a majority of the members of the Supreme Court who took part in the deliberations and voted on the issue during their session en banc. And as established by judge made doctrine, the Court will assume jurisdiction over a constitutional question only if it is shown that the essential requisites of a judicial inquiry into such a question are first satisfied. Thus, there must be an actual case or controversy involving a conflict of legal rights susceptible of judicial determination, the constitutional question must have been opportunely raised by the proper party, and the resolution of the question is unavoidably necessary to the decision of the case itself. 11

12

With particular regard to the requirement of proper party as applied in the cases before us, we hold that the same is satisfied by the petitioners and intervenors because each of them has sustained or is in danger of sustaining an immediate injury as a result of the acts or measures complained of. And even if, strictly speaking, they are not covered by the definition, it is still within the wide discretion of the Court to waive the requirement and so remove the impediment to its addressing and resolving the serious constitutional questions raised. 13

In the first Emergency Powers Cases, ordinary citizens and taxpayers were allowed to question the constitutionality of several executive orders issued by President Quirino although they were invoking only an indirect and general interest shared in common with the public. The Court dismissed the objection that they were not proper parties and ruled that "the transcendental importance to the public of these cases demands that they be settled promptly and definitely, brushing aside, if we must, technicalities of procedure." We have since then applied this exception in many other cases. 14

15

The other above-mentioned requisites have also been met in the present petitions. In must be stressed that despite the inhibitions pressing upon the Court when confronted with constitutional issues like the ones now before it, it will not hesitate to declare a law or act invalid when it is convinced that this must be done. In arriving at this conclusion, its only criterion will be the Constitution as God and its conscience give it the light to probe its meaning and discover its purpose. Personal motives and political considerations are irrelevancies that cannot influence its decision. Blandishment is as ineffectual as intimidation. For all the awesome power of the Congress and the Executive, the Court will not hesitate to "make the hammer fall, and heavily," to use Justice Laurel's pithy language, where the acts of these departments, or of any public official, betray the people's will as expressed in the Constitution. It need only be added, to borrow again the words of Justice Laurel, that — ... when the judiciary mediates to allocate constitutional boundaries, it does not assert any superiority over the other departments; it does not in reality nullify or

invalidate an act of the Legislature, but only asserts the solemn and sacred obligation assigned to it by the Constitution to determine conflicting claims of authority under the Constitution and to establish for the parties in an actual controversy the rights which that instrument secures and guarantees to them. This is in truth all that is involved in what is termed "judicial supremacy" which properly is the power of judicial review under the Constitution. 16

The cases before us categorically raise constitutional questions that this Court must categorically resolve. And so we shall. II We proceed first to the examination of the preliminary issues before resolving the more serious challenges to the constitutionality of the several measures involved in these petitions. The promulgation of P.D. No. 27 by President Marcos in the exercise of his powers under martial law has already been sustained in Gonzales v. Estrella and we find no reason to modify or reverse it on that issue. As for the power of President Aquino to promulgate Proc. No. 131 and E.O. Nos. 228 and 229, the same was authorized under Section 6 of the Transitory Provisions of the 1987 Constitution, quoted above. The said measures were issued by President Aquino before July 27, 1987, when the Congress of the Philippines was formally convened and took over legislative power from her. They are not "midnight" enactments intended to pre-empt the legislature because E.O. No. 228 was issued on July 17, 1987, and the other measures, i.e., Proc. No. 131 and E.O. No. 229, were both issued on July 22, 1987. Neither is it correct to say that these measures ceased to be valid when she lost her legislative power for, like any statute, they continue to be in force unless modified or repealed by subsequent law or declared invalid by the courts. A statute does not ipso facto become inoperative simply because of the dissolution of the legislature that enacted it. By the same token, President Aquino's loss of legislative power did not have the effect of invalidating all the measures enacted by her when and as long as she possessed it. Significantly, the Congress she is alleged to have undercut has not rejected but in fact substantially affirmed the challenged measures and has specifically provided that they shall be suppletory to R.A. No. 6657 whenever not inconsistent with its provisions. Indeed, some portions of the said measures, like the creation of the P50 billion fund in Section 2 of Proc. No. 131, and Sections 20 and 21 of E.O. No. 229, have been incorporated by reference in the CARP Law. 17

18

That fund, as earlier noted, is itself being questioned on the ground that it does not conform to the requirements of a valid appropriation as specified in the Constitution. Clearly, however, Proc. No. 131 is not an appropriation measure even if it does provide for the creation of said fund, for that is not its principal purpose. An appropriation law is one the primary and specific purpose of which is to authorize the release of public funds from the treasury. The creation of the fund is only incidental to the main objective of the proclamation, which is agrarian reform. 19

It should follow that the specific constitutional provisions invoked, to wit, Section 24 and Section 25(4) of Article VI, are not applicable. With particular reference to Section 24, this obviously could not have been complied with for the simple reason that the House of Representatives, which now has the exclusive power to initiate appropriation measures, had not yet been convened when the proclamation was issued. The legislative power was then solely vested in the President of the Philippines, who embodied, as it were, both houses of Congress.

The argument of some of the petitioners that Proc. No. 131 and E.O. No. 229 should be invalidated because they do not provide for retention limits as required by Article XIII, Section 4 of the Constitution is no longer tenable. R.A. No. 6657 does provide for such limits now in Section 6 of the law, which in fact is one of its most controversial provisions. This section declares: Retention Limits. — Except as otherwise provided in this Act, no person may own or retain, directly or indirectly, any public or private agricultural land, the size of which shall vary according to factors governing a viable family-sized farm, such as commodity produced, terrain, infrastructure, and soil fertility as determined by the Presidential Agrarian Reform Council (PARC) created hereunder, but in no case shall retention by the landowner exceed five (5) hectares. Three (3) hectares may be awarded to each child of the landowner, subject to the following qualifications: (1) that he is at least fifteen (15) years of age; and (2) that he is actually tilling the land or directly managing the farm; Provided, That landowners whose lands have been covered by Presidential Decree No. 27 shall be allowed to keep the area originally retained by them thereunder, further, That original homestead grantees or direct compulsory heirs who still own the original homestead at the time of the approval of this Act shall retain the same areas as long as they continue to cultivate said homestead. The argument that E.O. No. 229 violates the constitutional requirement that a bill shall have only one subject, to be expressed in its title, deserves only short attention. It is settled that the title of the bill does not have to be a catalogue of its contents and will suffice if the matters embodied in the text are relevant to each other and may be inferred from the title. 20

The Court wryly observes that during the past dictatorship, every presidential issuance, by whatever name it was called, had the force and effect of law because it came from President Marcos. Such are the ways of despots. Hence, it is futile to argue, as the petitioners do in G.R. No. 79744, that LOI 474 could not have repealed P.D. No. 27 because the former was only a letter of instruction. The important thing is that it was issued by President Marcos, whose word was law during that time. But for all their peremptoriness, these issuances from the President Marcos still had to comply with the requirement for publication as this Court held in Tanada v. Tuvera. Hence, unless published in the Official Gazette in accordance with Article 2 of the Civil Code, they could not have any force and effect if they were among those enactments successfully challenged in that case. LOI 474 was published, though, in the Official Gazette dated November 29,1976.) 21

Finally, there is the contention of the public respondent in G.R. No. 78742 that the writ of mandamus cannot issue to compel the performance of a discretionary act, especially by a specific department of the government. That is true as a general proposition but is subject to one important qualification. Correctly and categorically stated, the rule is that mandamus will lie to compel the discharge of the discretionary duty itself but not to control the discretion to be exercised. In other words, mandamus can issue to require action only but not specific action. Whenever a duty is imposed upon a public official and an unnecessary and unreasonable delay in the exercise of such duty occurs, if it is a clear duty imposed by law, the courts will intervene by the extraordinary legal remedy of mandamus to compel action. If the duty is purely ministerial, the courts will require specific action. If the duty is purely discretionary, the courts by mandamus will require action only. For example, if an inferior court, public official, or board should, for an unreasonable length of time, fail to decide a particular question to the great detriment of all parties concerned, or a court should refuse to take jurisdiction of a cause when the law

clearly gave it jurisdiction mandamus will issue, in the first case to require a decision, and in the second to require that jurisdiction be taken of the cause. 22

And while it is true that as a rule the writ will not be proper as long as there is still a plain, speedy and adequate remedy available from the administrative authorities, resort to the courts may still be permitted if the issue raised is a question of law. 23

III There are traditional distinctions between the police power and the power of eminent domain that logically preclude the application of both powers at the same time on the same subject. In the case of City of Baguio v. NAWASA, for example, where a law required the transfer of all municipal waterworks systems to the NAWASA in exchange for its assets of equivalent value, the Court held that the power being exercised was eminent domain because the property involved was wholesome and intended for a public use. Property condemned under the police power is noxious or intended for a noxious purpose, such as a building on the verge of collapse, which should be demolished for the public safety, or obscene materials, which should be destroyed in the interest of public morals. The confiscation of such property is not compensable, unlike the taking of property under the power of expropriation, which requires the payment of just compensation to the owner. 24

In the case of Pennsylvania Coal Co. v. Mahon, Justice Holmes laid down the limits of the police power in a famous aphorism: "The general rule at least is that while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking." The regulation that went "too far" was a law prohibiting mining which might cause the subsidence of structures for human habitation constructed on the land surface. This was resisted by a coal company which had earlier granted a deed to the land over its mine but reserved all mining rights thereunder, with the grantee assuming all risks and waiving any damage claim. The Court held the law could not be sustained without compensating the grantor. Justice Brandeis filed a lone dissent in which he argued that there was a valid exercise of the police power. He said: 25

Every restriction upon the use of property imposed in the exercise of the police power deprives the owner of some right theretofore enjoyed, and is, in that sense, an abridgment by the State of rights in property without making compensation. But restriction imposed to protect the public health, safety or morals from dangers threatened is not a taking. The restriction here in question is merely the prohibition of a noxious use. The property so restricted remains in the possession of its owner. The state does not appropriate it or make any use of it. The state merely prevents the owner from making a use which interferes with paramount rights of the public. Whenever the use prohibited ceases to be noxious — as it may because of further changes in local or social conditions — the restriction will have to be removed and the owner will again be free to enjoy his property as heretofore. Recent trends, however, would indicate not a polarization but a mingling of the police power and the power of eminent domain, with the latter being used as an implement of the former like the power of taxation. The employment of the taxing power to achieve a police purpose has long been accepted. As for the power of expropriation, Prof. John J. Costonis of the University of Illinois College of Law (referring to the earlier case of Euclid v. Ambler Realty Co., 272 US 365, which sustained a zoning law under the police power) makes the following significant remarks: 26

Euclid, moreover, was decided in an era when judges located the Police and eminent domain powers on different planets. Generally speaking, they viewed eminent domain as encompassing public acquisition of private property for improvements that

would be available for public use," literally construed. To the police power, on the other hand, they assigned the less intrusive task of preventing harmful externalities a point reflected in the Euclid opinion's reliance on an analogy to nuisance law to bolster its support of zoning. So long as suppression of a privately authored harm bore a plausible relation to some legitimate "public purpose," the pertinent measure need have afforded no compensation whatever. With the progressive growth of government's involvement in land use, the distance between the two powers has contracted considerably. Today government often employs eminent domain interchangeably with or as a useful complement to the police power-- a trend expressly approved in the Supreme Court's 1954 decision in Berman v. Parker, which broadened the reach of eminent domain's "public use" test to match that of the police power's standard of "public purpose." 27

The Berman case sustained a redevelopment project and the improvement of blighted areas in the District of Columbia as a proper exercise of the police power. On the role of eminent domain in the attainment of this purpose, Justice Douglas declared: If those who govern the District of Columbia decide that the Nation's Capital should be beautiful as well as sanitary, there is nothing in the Fifth Amendment that stands in the way. Once the object is within the authority of Congress, the right to realize it through the exercise of eminent domain is clear. For the power of eminent domain is merely the means to the end.

28

In Penn Central Transportation Co. v. New York City, decided by a 6-3 vote in 1978, the U.S Supreme Court sustained the respondent's Landmarks Preservation Law under which the owners of the Grand Central Terminal had not been allowed to construct a multi-story office building over the Terminal, which had been designated a historic landmark. Preservation of the landmark was held to be a valid objective of the police power. The problem, however, was that the owners of the Terminal would be deprived of the right to use the airspace above it although other landowners in the area could do so over their respective properties. While insisting that there was here no taking, the Court nonetheless recognized certain compensatory rights accruing to Grand Central Terminal which it said would "undoubtedly mitigate" the loss caused by the regulation. This "fair compensation," as he called it, was explained by Prof. Costonis in this wise: 29

In return for retaining the Terminal site in its pristine landmark status, Penn Central was authorized to transfer to neighboring properties the authorized but unused rights accruing to the site prior to the Terminal's designation as a landmark — the rights which would have been exhausted by the 59-story building that the city refused to countenance atop the Terminal. Prevailing bulk restrictions on neighboring sites were proportionately relaxed, theoretically enabling Penn Central to recoup its losses at the Terminal site by constructing or selling to others the right to construct larger, hence more profitable buildings on the transferee sites. 30

The cases before us present no knotty complication insofar as the question of compensable taking is concerned. To the extent that the measures under challenge merely prescribe retention limits for landowners, there is an exercise of the police power for the regulation of private property in accordance with the Constitution. But where, to carry out such regulation, it becomes necessary to deprive such owners of whatever lands they may own in excess of the maximum area allowed, there is definitely a taking under the power of eminent domain for which payment of just compensation is imperative. The taking contemplated is not a mere limitation of the use of the land. What is required

is the surrender of the title to and the physical possession of the said excess and all beneficial rights accruing to the owner in favor of the farmer-beneficiary. This is definitely an exercise not of the police power but of the power of eminent domain. Whether as an exercise of the police power or of the power of eminent domain, the several measures before us are challenged as violative of the due process and equal protection clauses. The challenge to Proc. No. 131 and E.O. Nos. 228 and 299 on the ground that no retention limits are prescribed has already been discussed and dismissed. It is noted that although they excited many bitter exchanges during the deliberation of the CARP Law in Congress, the retention limits finally agreed upon are, curiously enough, not being questioned in these petitions. We therefore do not discuss them here. The Court will come to the other claimed violations of due process in connection with our examination of the adequacy of just compensation as required under the power of expropriation. The argument of the small farmers that they have been denied equal protection because of the absence of retention limits has also become academic under Section 6 of R.A. No. 6657. Significantly, they too have not questioned the area of such limits. There is also the complaint that they should not be made to share the burden of agrarian reform, an objection also made by the sugar planters on the ground that they belong to a particular class with particular interests of their own. However, no evidence has been submitted to the Court that the requisites of a valid classification have been violated. Classification has been defined as the grouping of persons or things similar to each other in certain particulars and different from each other in these same particulars. To be valid, it must conform to the following requirements: (1) it must be based on substantial distinctions; (2) it must be germane to the purposes of the law; (3) it must not be limited to existing conditions only; and (4) it must apply equally to all the members of the class. The Court finds that all these requisites have been met by the measures here challenged as arbitrary and discriminatory. 31

32

Equal protection simply means that all persons or things similarly situated must be treated alike both as to the rights conferred and the liabilities imposed. The petitioners have not shown that they belong to a different class and entitled to a different treatment. The argument that not only landowners but also owners of other properties must be made to share the burden of implementing land reform must be rejected. There is a substantial distinction between these two classes of owners that is clearly visible except to those who will not see. There is no need to elaborate on this matter. In any event, the Congress is allowed a wide leeway in providing for a valid classification. Its decision is accorded recognition and respect by the courts of justice except only where its discretion is abused to the detriment of the Bill of Rights. 33

It is worth remarking at this juncture that a statute may be sustained under the police power only if there is a concurrence of the lawful subject and the lawful method. Put otherwise, the interests of the public generally as distinguished from those of a particular class require the interference of the State and, no less important, the means employed are reasonably necessary for the attainment of the purpose sought to be achieved and not unduly oppressive upon individuals. As the subject and purpose of agrarian reform have been laid down by the Constitution itself, we may say that the first requirement has been satisfied. What remains to be examined is the validity of the method employed to achieve the constitutional goal. 34

One of the basic principles of the democratic system is that where the rights of the individual are concerned, the end does not justify the means. It is not enough that there be a valid objective; it is also necessary that the means employed to pursue it be in keeping with the Constitution. Mere

expediency will not excuse constitutional shortcuts. There is no question that not even the strongest moral conviction or the most urgent public need, subject only to a few notable exceptions, will excuse the bypassing of an individual's rights. It is no exaggeration to say that a, person invoking a right guaranteed under Article III of the Constitution is a majority of one even as against the rest of the nation who would deny him that right. That right covers the person's life, his liberty and his property under Section 1 of Article III of the Constitution. With regard to his property, the owner enjoys the added protection of Section 9, which reaffirms the familiar rule that private property shall not be taken for public use without just compensation. This brings us now to the power of eminent domain. IV Eminent domain is an inherent power of the State that enables it to forcibly acquire private lands intended for public use upon payment of just compensation to the owner. Obviously, there is no need to expropriate where the owner is willing to sell under terms also acceptable to the purchaser, in which case an ordinary deed of sale may be agreed upon by the parties. It is only where the owner is unwilling to sell, or cannot accept the price or other conditions offered by the vendee, that the power of eminent domain will come into play to assert the paramount authority of the State over the interests of the property owner. Private rights must then yield to the irresistible demands of the public interest on the time-honored justification, as in the case of the police power, that the welfare of the people is the supreme law. 35

But for all its primacy and urgency, the power of expropriation is by no means absolute (as indeed no power is absolute). The limitation is found in the constitutional injunction that "private property shall not be taken for public use without just compensation" and in the abundant jurisprudence that has evolved from the interpretation of this principle. Basically, the requirements for a proper exercise of the power are: (1) public use and (2) just compensation. Let us dispose first of the argument raised by the petitioners in G.R. No. 79310 that the State should first distribute public agricultural lands in the pursuit of agrarian reform instead of immediately disturbing property rights by forcibly acquiring private agricultural lands. Parenthetically, it is not correct to say that only public agricultural lands may be covered by the CARP as the Constitution calls for "the just distribution of all agricultural lands." In any event, the decision to redistribute private agricultural lands in the manner prescribed by the CARP was made by the legislative and executive departments in the exercise of their discretion. We are not justified in reviewing that discretion in the absence of a clear showing that it has been abused. A becoming courtesy admonishes us to respect the decisions of the political departments when they decide what is known as the political question. As explained by Chief Justice Concepcion in the case of Tañada v. Cuenco: 36

The term "political question" connotes what it means in ordinary parlance, namely, a question of policy. It refers to "those questions which, under the Constitution, are to be decided by the people in their sovereign capacity; or in regard to which full discretionary authority has been delegated to the legislative or executive branch of the government." It is concerned with issues dependent upon the wisdom, not legality, of a particular measure.

It is true that the concept of the political question has been constricted with the enlargement of judicial power, which now includes the authority of the courts "to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government." Even so, this should not be construed as a license for us to reverse the other departments simply because their views may not coincide with ours. 37

The legislature and the executive have been seen fit, in their wisdom, to include in the CARP the redistribution of private landholdings (even as the distribution of public agricultural lands is first provided for, while also continuing apace under the Public Land Act and other cognate laws). The Court sees no justification to interpose its authority, which we may assert only if we believe that the political decision is not unwise, but illegal. We do not find it to be so. In U.S. v. Chandler-Dunbar Water Power Company, it was held: 38

Congress having determined, as it did by the Act of March 3,1909 that the entire St. Mary's river between the American bank and the international line, as well as all of the upland north of the present ship canal, throughout its entire length, was "necessary for the purpose of navigation of said waters, and the waters connected therewith," that determination is conclusive in condemnation proceedings instituted by the United States under that Act, and there is no room for judicial review of the judgment of Congress ... . As earlier observed, the requirement for public use has already been settled for us by the Constitution itself No less than the 1987 Charter calls for agrarian reform, which is the reason why private agricultural lands are to be taken from their owners, subject to the prescribed maximum retention limits. The purposes specified in P.D. No. 27, Proc. No. 131 and R.A. No. 6657 are only an elaboration of the constitutional injunction that the State adopt the necessary measures "to encourage and undertake the just distribution of all agricultural lands to enable farmers who are landless to own directly or collectively the lands they till." That public use, as pronounced by the fundamental law itself, must be binding on us. The second requirement, i.e., the payment of just compensation, needs a longer and more thoughtful examination. Just compensation is defined as the full and fair equivalent of the property taken from its owner by the expropriator. It has been repeatedly stressed by this Court that the measure is not the taker's gain but the owner's loss. The word "just" is used to intensify the meaning of the word "compensation" to convey the idea that the equivalent to be rendered for the property to be taken shall be real, substantial, full, ample. 39

40

41

It bears repeating that the measures challenged in these petitions contemplate more than a mere regulation of the use of private lands under the police power. We deal here with an actual taking of private agricultural lands that has dispossessed the owners of their property and deprived them of all its beneficial use and enjoyment, to entitle them to the just compensation mandated by the Constitution. As held in Republic of the Philippines v. Castellvi, there is compensable taking when the following conditions concur: (1) the expropriator must enter a private property; (2) the entry must be for more than a momentary period; (3) the entry must be under warrant or color of legal authority; (4) the property must be devoted to public use or otherwise informally appropriated or injuriously affected; and (5) the utilization of the property for public use must be in such a way as to oust the owner and 42

deprive him of beneficial enjoyment of the property. All these requisites are envisioned in the measures before us. Where the State itself is the expropriator, it is not necessary for it to make a deposit upon its taking possession of the condemned property, as "the compensation is a public charge, the good faith of the public is pledged for its payment, and all the resources of taxation may be employed in raising the amount." Nevertheless, Section 16(e) of the CARP Law provides that: 43

Upon receipt by the landowner of the corresponding payment or, in case of rejection or no response from the landowner, upon the deposit with an accessible bank designated by the DAR of the compensation in cash or in LBP bonds in accordance with this Act, the DAR shall take immediate possession of the land and shall request the proper Register of Deeds to issue a Transfer Certificate of Title (TCT) in the name of the Republic of the Philippines. The DAR shall thereafter proceed with the redistribution of the land to the qualified beneficiaries. Objection is raised, however, to the manner of fixing the just compensation, which it is claimed is entrusted to the administrative authorities in violation of judicial prerogatives. Specific reference is made to Section 16(d), which provides that in case of the rejection or disregard by the owner of the offer of the government to buy his land... the DAR shall conduct summary administrative proceedings to determine the compensation for the land by requiring the landowner, the LBP and other interested parties to submit evidence as to the just compensation for the land, within fifteen (15) days from the receipt of the notice. After the expiration of the above period, the matter is deemed submitted for decision. The DAR shall decide the case within thirty (30) days after it is submitted for decision. To be sure, the determination of just compensation is a function addressed to the courts of justice and may not be usurped by any other branch or official of the government. EPZA v. Dulay resolved a challenge to several decrees promulgated by President Marcos providing that the just compensation for property under expropriation should be either the assessment of the property by the government or the sworn valuation thereof by the owner, whichever was lower. In declaring these decrees unconstitutional, the Court held through Mr. Justice Hugo E. Gutierrez, Jr.: 44

The method of ascertaining just compensation under the aforecited decrees constitutes impermissible encroachment on judicial prerogatives. It tends to render this Court inutile in a matter which under this Constitution is reserved to it for final determination. Thus, although in an expropriation proceeding the court technically would still have the power to determine the just compensation for the property, following the applicable decrees, its task would be relegated to simply stating the lower value of the property as declared either by the owner or the assessor. As a necessary consequence, it would be useless for the court to appoint commissioners under Rule 67 of the Rules of Court. Moreover, the need to satisfy the due process clause in the taking of private property is seemingly fulfilled since it cannot be said that a judicial proceeding was not had before the actual taking. However, the strict application of the decrees during the proceedings would be nothing short of a mere formality or charade as the court has only to choose between the valuation of the owner and that of the assessor, and its choice is always limited to the lower of the two. The court cannot exercise its discretion or independence in determining what is just or fair.

Even a grade school pupil could substitute for the judge insofar as the determination of constitutional just compensation is concerned. xxx In the present petition, we are once again confronted with the same question of whether the courts under P.D. No. 1533, which contains the same provision on just compensation as its predecessor decrees, still have the power and authority to determine just compensation, independent of what is stated by the decree and to this effect, to appoint commissioners for such purpose. This time, we answer in the affirmative. xxx It is violative of due process to deny the owner the opportunity to prove that the valuation in the tax documents is unfair or wrong. And it is repulsive to the basic concepts of justice and fairness to allow the haphazard work of a minor bureaucrat or clerk to absolutely prevail over the judgment of a court promulgated only after expert commissioners have actually viewed the property, after evidence and arguments pro and con have been presented, and after all factors and considerations essential to a fair and just determination have been judiciously evaluated. A reading of the aforecited Section 16(d) will readily show that it does not suffer from the arbitrariness that rendered the challenged decrees constitutionally objectionable. Although the proceedings are described as summary, the landowner and other interested parties are nevertheless allowed an opportunity to submit evidence on the real value of the property. But more importantly, the determination of the just compensation by the DAR is not by any means final and conclusive upon the landowner or any other interested party, for Section 16(f) clearly provides: Any party who disagrees with the decision may bring the matter to the court of proper jurisdiction for final determination of just compensation. The determination made by the DAR is only preliminary unless accepted by all parties concerned. Otherwise, the courts of justice will still have the right to review with finality the said determination in the exercise of what is admittedly a judicial function. The second and more serious objection to the provisions on just compensation is not as easily resolved. This refers to Section 18 of the CARP Law providing in full as follows: SEC. 18. Valuation and Mode of Compensation. — The LBP shall compensate the landowner in such amount as may be agreed upon by the landowner and the DAR and the LBP, in accordance with the criteria provided for in Sections 16 and 17, and other pertinent provisions hereof, or as may be finally determined by the court, as the just compensation for the land. The compensation shall be paid in one of the following modes, at the option of the landowner:

(1) Cash payment, under the following terms and conditions: (a) For lands above fifty (50) hectares, insofar as the excess hectarage is concerned — Twenty-five percent (25%) cash, the balance to be paid in government financial instruments negotiable at any time. (b) For lands above twenty-four (24) hectares and up to fifty (50) hectares — Thirty percent (30%) cash, the balance to be paid in government financial instruments negotiable at any time. (c) For lands twenty-four (24) hectares and below — Thirty-five percent (35%) cash, the balance to be paid in government financial instruments negotiable at any time. (2) Shares of stock in government-owned or controlled corporations, LBP preferred shares, physical assets or other qualified investments in accordance with guidelines set by the PARC; (3) Tax credits which can be used against any tax liability; (4) LBP bonds, which shall have the following features: (a) Market interest rates aligned with 91-day treasury bill rates. Ten percent (10%) of the face value of the bonds shall mature every year from the date of issuance until the tenth (10th) year: Provided, That should the landowner choose to forego the cash portion, whether in full or in part, he shall be paid correspondingly in LBP bonds; (b) Transferability and negotiability. Such LBP bonds may be used by the landowner, his successors-ininterest or his assigns, up to the amount of their face value, for any of the following: (i) Acquisition of land or other real properties of the government, including assets under the Asset Privatization Program and other assets foreclosed by government financial institutions in the same province or region where the lands for which the bonds were paid are situated; (ii) Acquisition of shares of stock of governmentowned or controlled corporations or shares of stock owned by the government in private corporations;

(iii) Substitution for surety or bail bonds for the provisional release of accused persons, or for performance bonds; (iv) Security for loans with any government financial institution, provided the proceeds of the loans shall be invested in an economic enterprise, preferably in a small and medium- scale industry, in the same province or region as the land for which the bonds are paid; (v) Payment for various taxes and fees to government: Provided, That the use of these bonds for these purposes will be limited to a certain percentage of the outstanding balance of the financial instruments; Provided, further, That the PARC shall determine the percentages mentioned above; (vi) Payment for tuition fees of the immediate family of the original bondholder in government universities, colleges, trade schools, and other institutions; (vii) Payment for fees of the immediate family of the original bondholder in government hospitals; and (viii) Such other uses as the PARC may from time to time allow. The contention of the petitioners in G.R. No. 79777 is that the above provision is unconstitutional insofar as it requires the owners of the expropriated properties to accept just compensation therefor in less than money, which is the only medium of payment allowed. In support of this contention, they cite jurisprudence holding that: The fundamental rule in expropriation matters is that the owner of the property expropriated is entitled to a just compensation, which should be neither more nor less, whenever it is possible to make the assessment, than the money equivalent of said property. Just compensation has always been understood to be the just and complete equivalent of the loss which the owner of the thing expropriated has to suffer by reason of the expropriation . (Emphasis supplied.) 45

In J.M. Tuazon Co. v. Land Tenure Administration,

46

this Court held:

It is well-settled that just compensation means the equivalent for the value of the property at the time of its taking. Anything beyond that is more, and anything short of that is less, than just compensation. It means a fair and full equivalent for the loss sustained, which is the measure of the indemnity, not whatever gain would accrue to the expropriating entity. The market value of the land taken is the just compensation to which the owner of condemned property is entitled, the market value being that sum of money which a person desirous, but not compelled to buy, and an owner, willing, but not compelled to sell, would agree on as a price to be given and received for such property. (Emphasis supplied.)

In the United States, where much of our jurisprudence on the subject has been derived, the weight of authority is also to the effect that just compensation for property expropriated is payable only in money and not otherwise. Thus — The medium of payment of compensation is ready money or cash. The condemnor cannot compel the owner to accept anything but money, nor can the owner compel or require the condemnor to pay him on any other basis than the value of the property in money at the time and in the manner prescribed by the Constitution and the statutes. When the power of eminent domain is resorted to, there must be a standard medium of payment, binding upon both parties, and the law has fixed that standard as money in cash. (Emphasis supplied.) 47

Part cash and deferred payments are not and cannot, in the nature of things, be regarded as a reliable and constant standard of compensation. 48

"Just compensation" for property taken by condemnation means a fair equivalent in money, which must be paid at least within a reasonable time after the taking, and it is not within the power of the Legislature to substitute for such payment future obligations, bonds, or other valuable advantage. (Emphasis supplied.) 49

It cannot be denied from these cases that the traditional medium for the payment of just compensation is money and no other. And so, conformably, has just compensation been paid in the past solely in that medium. However, we do not deal here with the traditional excercise of the power of eminent domain. This is not an ordinary expropriation where only a specific property of relatively limited area is sought to be taken by the State from its owner for a specific and perhaps local purpose. What we deal with here is a revolutionary kind of expropriation. The expropriation before us affects all private agricultural lands whenever found and of whatever kind as long as they are in excess of the maximum retention limits allowed their owners. This kind of expropriation is intended for the benefit not only of a particular community or of a small segment of the population but of the entire Filipino nation, from all levels of our society, from the impoverished farmer to the land-glutted owner. Its purpose does not cover only the whole territory of this country but goes beyond in time to the foreseeable future, which it hopes to secure and edify with the vision and the sacrifice of the present generation of Filipinos. Generations yet to come are as involved in this program as we are today, although hopefully only as beneficiaries of a richer and more fulfilling life we will guarantee to them tomorrow through our thoughtfulness today. And, finally, let it not be forgotten that it is no less than the Constitution itself that has ordained this revolution in the farms, calling for "a just distribution" among the farmers of lands that have heretofore been the prison of their dreams but can now become the key at least to their deliverance. Such a program will involve not mere millions of pesos. The cost will be tremendous. Considering the vast areas of land subject to expropriation under the laws before us, we estimate that hundreds of billions of pesos will be needed, far more indeed than the amount of P50 billion initially appropriated, which is already staggering as it is by our present standards. Such amount is in fact not even fully available at this time. We assume that the framers of the Constitution were aware of this difficulty when they called for agrarian reform as a top priority project of the government. It is a part of this assumption that when they envisioned the expropriation that would be needed, they also intended that the just compensation would have to be paid not in the orthodox way but a less conventional if more

practical method. There can be no doubt that they were aware of the financial limitations of the government and had no illusions that there would be enough money to pay in cash and in full for the lands they wanted to be distributed among the farmers. We may therefore assume that their intention was to allow such manner of payment as is now provided for by the CARP Law, particularly the payment of the balance (if the owner cannot be paid fully with money), or indeed of the entire amount of the just compensation, with other things of value. We may also suppose that what they had in mind was a similar scheme of payment as that prescribed in P.D. No. 27, which was the law in force at the time they deliberated on the new Charter and with which they presumably agreed in principle. The Court has not found in the records of the Constitutional Commission any categorical agreement among the members regarding the meaning to be given the concept of just compensation as applied to the comprehensive agrarian reform program being contemplated. There was the suggestion to "fine tune" the requirement to suit the demands of the project even as it was also felt that they should "leave it to Congress" to determine how payment should be made to the landowner and reimbursement required from the farmer-beneficiaries. Such innovations as "progressive compensation" and "State-subsidized compensation" were also proposed. In the end, however, no special definition of the just compensation for the lands to be expropriated was reached by the Commission. 50

On the other hand, there is nothing in the records either that militates against the assumptions we are making of the general sentiments and intention of the members on the content and manner of the payment to be made to the landowner in the light of the magnitude of the expenditure and the limitations of the expropriator. With these assumptions, the Court hereby declares that the content and manner of the just compensation provided for in the afore- quoted Section 18 of the CARP Law is not violative of the Constitution. We do not mind admitting that a certain degree of pragmatism has influenced our decision on this issue, but after all this Court is not a cloistered institution removed from the realities and demands of society or oblivious to the need for its enhancement. The Court is as acutely anxious as the rest of our people to see the goal of agrarian reform achieved at last after the frustrations and deprivations of our peasant masses during all these disappointing decades. We are aware that invalidation of the said section will result in the nullification of the entire program, killing the farmer's hopes even as they approach realization and resurrecting the spectre of discontent and dissent in the restless countryside. That is not in our view the intention of the Constitution, and that is not what we shall decree today. Accepting the theory that payment of the just compensation is not always required to be made fully in money, we find further that the proportion of cash payment to the other things of value constituting the total payment, as determined on the basis of the areas of the lands expropriated, is not unduly oppressive upon the landowner. It is noted that the smaller the land, the bigger the payment in money, primarily because the small landowner will be needing it more than the big landowners, who can afford a bigger balance in bonds and other things of value. No less importantly, the government financial instruments making up the balance of the payment are "negotiable at any time." The other modes, which are likewise available to the landowner at his option, are also not unreasonable because payment is made in shares of stock, LBP bonds, other properties or assets, tax credits, and other things of value equivalent to the amount of just compensation. Admittedly, the compensation contemplated in the law will cause the landowners, big and small, not a little inconvenience. As already remarked, this cannot be avoided. Nevertheless, it is devoutly hoped that these countrymen of ours, conscious as we know they are of the need for their forebearance and even sacrifice, will not begrudge us their indispensable share in the attainment of

the ideal of agrarian reform. Otherwise, our pursuit of this elusive goal will be like the quest for the Holy Grail. The complaint against the effects of non-registration of the land under E.O. No. 229 does not seem to be viable any more as it appears that Section 4 of the said Order has been superseded by Section 14 of the CARP Law. This repeats the requisites of registration as embodied in the earlier measure but does not provide, as the latter did, that in case of failure or refusal to register the land, the valuation thereof shall be that given by the provincial or city assessor for tax purposes. On the contrary, the CARP Law says that the just compensation shall be ascertained on the basis of the factors mentioned in its Section 17 and in the manner provided for in Section 16. The last major challenge to CARP is that the landowner is divested of his property even before actual payment to him in full of just compensation, in contravention of a well- accepted principle of eminent domain. The recognized rule, indeed, is that title to the property expropriated shall pass from the owner to the expropriator only upon full payment of the just compensation. Jurisprudence on this settled principle is consistent both here and in other democratic jurisdictions. Thus: Title to property which is the subject of condemnation proceedings does not vest the condemnor until the judgment fixing just compensation is entered and paid, but the condemnor's title relates back to the date on which the petition under the Eminent Domain Act, or the commissioner's report under the Local Improvement Act, is filed. 51

... although the right to appropriate and use land taken for a canal is complete at the time of entry, title to the property taken remains in the owner until payment is actually made. (Emphasis supplied.) 52

In Kennedy v. Indianapolis, the US Supreme Court cited several cases holding that title to property does not pass to the condemnor until just compensation had actually been made. In fact, the decisions appear to be uniformly to this effect. As early as 1838, in Rubottom v. McLure, it was held that "actual payment to the owner of the condemned property was a condition precedent to the investment of the title to the property in the State" albeit "not to the appropriation of it to public use." In Rexford v. Knight, the Court of Appeals of New York said that the construction upon the statutes was that the fee did not vest in the State until the payment of the compensation although the authority to enter upon and appropriate the land was complete prior to the payment. Kennedy further said that "both on principle and authority the rule is ... that the right to enter on and use the property is complete, as soon as the property is actually appropriated under the authority of law for a public use, but that the title does not pass from the owner without his consent, until just compensation has been made to him." 53

54

55

Our own Supreme Court has held in Visayan Refining Co. v. Camus and Paredes, that: 56

If the laws which we have exhibited or cited in the preceding discussion are attentively examined it will be apparent that the method of expropriation adopted in this jurisdiction is such as to afford absolute reassurance that no piece of land can be finally and irrevocably taken from an unwilling owner until compensation is paid ... . (Emphasis supplied.) It is true that P.D. No. 27 expressly ordered the emancipation of tenant-farmer as October 21, 1972 and declared that he shall "be deemed the owner" of a portion of land consisting of a family-sized farm except that "no title to the land owned by him was to be actually issued to him unless and until

he had become a full-fledged member of a duly recognized farmers' cooperative." It was understood, however, that full payment of the just compensation also had to be made first, conformably to the constitutional requirement. When E.O. No. 228, categorically stated in its Section 1 that: All qualified farmer-beneficiaries are now deemed full owners as of October 21, 1972 of the land they acquired by virtue of Presidential Decree No. 27. (Emphasis supplied.) it was obviously referring to lands already validly acquired under the said decree, after proof of fullfledged membership in the farmers' cooperatives and full payment of just compensation. Hence, it was also perfectly proper for the Order to also provide in its Section 2 that the "lease rentals paid to the landowner by the farmer- beneficiary after October 21, 1972 (pending transfer of ownership after full payment of just compensation), shall be considered as advance payment for the land." The CARP Law, for its part, conditions the transfer of possession and ownership of the land to the government on receipt by the landowner of the corresponding payment or the deposit by the DAR of the compensation in cash or LBP bonds with an accessible bank. Until then, title also remains with the landowner. No outright change of ownership is contemplated either. 57

Hence, the argument that the assailed measures violate due process by arbitrarily transferring title before the land is fully paid for must also be rejected. It is worth stressing at this point that all rights acquired by the tenant-farmer under P.D. No. 27, as recognized under E.O. No. 228, are retained by him even now under R.A. No. 6657. This should counter-balance the express provision in Section 6 of the said law that "the landowners whose lands have been covered by Presidential Decree No. 27 shall be allowed to keep the area originally retained by them thereunder, further, That original homestead grantees or direct compulsory heirs who still own the original homestead at the time of the approval of this Act shall retain the same areas as long as they continue to cultivate said homestead." In connection with these retained rights, it does not appear in G.R. No. 78742 that the appeal filed by the petitioners with the Office of the President has already been resolved. Although we have said that the doctrine of exhaustion of administrative remedies need not preclude immediate resort to judicial action, there are factual issues that have yet to be examined on the administrative level, especially the claim that the petitioners are not covered by LOI 474 because they do not own other agricultural lands than the subjects of their petition. Obviously, the Court cannot resolve these issues. In any event, assuming that the petitioners have not yet exercised their retention rights, if any, under P.D. No. 27, the Court holds that they are entitled to the new retention rights provided for by R.A. No. 6657, which in fact are on the whole more liberal than those granted by the decree. V The CARP Law and the other enactments also involved in these cases have been the subject of bitter attack from those who point to the shortcomings of these measures and ask that they be scrapped entirely. To be sure, these enactments are less than perfect; indeed, they should be continuously re-examined and rehoned, that they may be sharper instruments for the better protection of the farmer's rights. But we have to start somewhere. In the pursuit of agrarian reform,

we do not tread on familiar ground but grope on terrain fraught with pitfalls and expected difficulties. This is inevitable. The CARP Law is not a tried and tested project. On the contrary, to use Justice Holmes's words, "it is an experiment, as all life is an experiment," and so we learn as we venture forward, and, if necessary, by our own mistakes. We cannot expect perfection although we should strive for it by all means. Meantime, we struggle as best we can in freeing the farmer from the iron shackles that have unconscionably, and for so long, fettered his soul to the soil. By the decision we reach today, all major legal obstacles to the comprehensive agrarian reform program are removed, to clear the way for the true freedom of the farmer. We may now glimpse the day he will be released not only from want but also from the exploitation and disdain of the past and from his own feelings of inadequacy and helplessness. At last his servitude will be ended forever. At last the farm on which he toils will be his farm. It will be his portion of the Mother Earth that will give him not only the staff of life but also the joy of living. And where once it bred for him only deep despair, now can he see in it the fruition of his hopes for a more fulfilling future. Now at last can he banish from his small plot of earth his insecurities and dark resentments and "rebuild in it the music and the dream." WHEREFORE, the Court holds as follows: 1. R.A. No. 6657, P.D. No. 27, Proc. No. 131, and E.O. Nos. 228 and 229 are SUSTAINED against all the constitutional objections raised in the herein petitions. 2. Title to all expropriated properties shall be transferred to the State only upon full payment of compensation to their respective owners. 3. All rights previously acquired by the tenant- farmers under P.D. No. 27 are retained and recognized. 4. Landowners who were unable to exercise their rights of retention under P.D. No. 27 shall enjoy the retention rights granted by R.A. No. 6657 under the conditions therein prescribed. 5. Subject to the above-mentioned rulings all the petitions are DISMISSED, without pronouncement as to costs. SO ORDERED. Fernan, (C.J.), Narvasa, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Gancayco, Padilla, Bidin, Sarmiento, Cortes, Griño-Aquino, Medialdea and Regalado, JJ., concur. EN BANC G.R. No. 171101

July 5, 2011

HACIENDA LUISITA, INCORPORATED, Petitioner, LUISITA INDUSTRIAL PARK CORPORATION and RIZAL COMMERCIAL BANKING CORPORATION,Petitioners-in-Intervention, vs. PRESIDENTIAL AGRARIAN REFORM COUNCIL; SECRETARY NASSER PANGANDAMAN OF THE DEPARTMENT OF AGRARIAN REFORM; ALYANSA NG MGA MANGGAGAWANG BUKID NG HACIENDA LUISITA, RENE GALANG, NOEL MALLARI, and JULIO SUNIGA 1 and his

SUPERVISORY GROUP OF THE HACIENDA LUISITA, INC. and WINDSOR ANDAYA, Respondents. DECISION VELASCO, JR., J.: "Land for the landless," a shibboleth the landed gentry doubtless has received with much misgiving, if not resistance, even if only the number of agrarian suits filed serves to be the norm. Through the years, this battle cry and root of discord continues to reflect the seemingly ceaseless discourse on, and great disparity in, the distribution of land among the people, "dramatizing the increasingly urgent demand of the dispossessed x x x for a plot of earth as their place in the sun." 2 As administrations and political alignments change, policies advanced, and agrarian reform laws enacted, the latest being what is considered a comprehensive piece, the face of land reform varies and is masked in myriads of ways. The stated goal, however, remains the same: clear the way for the true freedom of the farmer.3 Land reform, or the broader term "agrarian reform," has been a government policy even before the Commonwealth era. In fact, at the onset of the American regime, initial steps toward land reform were already taken to address social unrest.4 Then, under the 1935 Constitution, specific provisions on social justice and expropriation of landed estates for distribution to tenants as a solution to land ownership and tenancy issues were incorporated. In 1955, the Land Reform Act (Republic Act No. [RA] 1400) was passed, setting in motion the expropriation of all tenanted estates.5 On August 8, 1963, the Agricultural Land Reform Code (RA 3844) was enacted, 6 abolishing share tenancy and converting all instances of share tenancy into leasehold tenancy. 7 RA 3844 created the Land Bank of the Philippines (LBP) to provide support in all phases of agrarian reform. As its major thrust, RA 3844 aimed to create a system of owner-cultivatorship in rice and corn, supposedly to be accomplished by expropriating lands in excess of 75 hectares for their eventual resale to tenants. The law, however, had this restricting feature: its operations were confined mainly to areas in Central Luzon, and its implementation at any level of intensity limited to the pilot project in Nueva Ecija.8 Subsequently, Congress passed the Code of Agrarian Reform (RA 6389) declaring the entire country a land reform area, and providing for the automatic conversion of tenancy to leasehold tenancy in all areas. From 75 hectares, the retention limit was cut down to seven hectares. 9 Barely a month after declaring martial law in September 1972, then President Ferdinand Marcos issued Presidential Decree No. 27 (PD 27) for the "emancipation of the tiller from the bondage of the soil."10 Based on this issuance, tenant-farmers, depending on the size of the landholding worked on, can either purchase the land they tilled or shift from share to fixed-rent leasehold tenancy. 11 While touted as "revolutionary," the scope of the agrarian reform program PD 27 enunciated covered only tenanted, privately-owned rice and corn lands.12 Then came the revolutionary government of then President Corazon C. Aquino and the drafting and eventual ratification of the 1987 Constitution. Its provisions foreshadowed the establishment of a legal framework for the formulation of an expansive approach to land reform, affecting all agricultural lands and covering both tenant-farmers and regular farmworkers.13

So it was that Proclamation No. 131, Series of 1987, was issued instituting a comprehensive agrarian reform program (CARP) to cover all agricultural lands, regardless of tenurial arrangement and commodity produced, as provided in the Constitution. On July 22, 1987, Executive Order No. 229 (EO 229) was issued providing, as its title 14 indicates, the mechanisms for CARP implementation. It created the Presidential Agrarian Reform Council (PARC) as the highest policy-making body that formulates all policies, rules, and regulations necessary for the implementation of CARP. On June 15, 1988, RA 6657 or the Comprehensive Agrarian Reform Law of 1988, also known as CARL or the CARP Law, took effect, ushering in a new process of land classification, acquisition, and distribution. As to be expected, RA 6657 met stiff opposition, its validity or some of its provisions challenged at every possible turn. Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform 15 stated the observation that the assault was inevitable, the CARP being an untried and untested project, "an experiment [even], as all life is an experiment," the Court said, borrowing from Justice Holmes. The Case In this Petition for Certiorari and Prohibition under Rule 65 with prayer for preliminary injunctive relief, petitioner Hacienda Luisita, Inc. (HLI) assails and seeks to set aside PARC Resolution No. 2005-32-0116 and Resolution No. 2006-34-0117 issued on December 22, 2005 and May 3, 2006, respectively, as well as the implementing Notice of Coverage dated January 2, 2006 (Notice of Coverage).18 The Facts At the core of the case is Hacienda Luisita de Tarlac (Hacienda Luisita), once a 6,443-hectare mixed agricultural-industrial-residential expanse straddling several municipalities of Tarlac and owned by Compañia General de Tabacos de Filipinas (Tabacalera). In 1957, the Spanish owners of Tabacalera offered to sell Hacienda Luisita as well as their controlling interest in the sugar mill within the hacienda, the Central Azucarera de Tarlac (CAT), as an indivisible transaction. The Tarlac Development Corporation (Tadeco), then owned and/or controlled by the Jose Cojuangco, Sr. Group, was willing to buy. As agreed upon, Tadeco undertook to pay the purchase price for Hacienda Luisita in pesos, while that for the controlling interest in CAT, in US dollars. 19 To facilitate the adverted sale-and-purchase package, the Philippine government, through the then Central Bank of the Philippines, assisted the buyer to obtain a dollar loan from a US bank. 20 Also, the Government Service Insurance System (GSIS) Board of Trustees extended on November 27, 1957 a PhP 5.911 million loan in favor of Tadeco to pay the peso price component of the sale. One of the conditions contained in the approving GSIS Resolution No. 3203, as later amended by Resolution No. 356, Series of 1958, reads as follows: That the lots comprising the Hacienda Luisita shall be subdivided by the applicant-corporation and sold at cost to the tenants, should there be any, and whenever conditions should exist warranting such action under the provisions of the Land Tenure Act;21 As of March 31, 1958, Tadeco had fully paid the purchase price for the acquisition of Hacienda Luisita and Tabacalera’s interest in CAT.22

The details of the events that happened next involving the hacienda and the political color some of the parties embossed are of minimal significance to this narration and need no belaboring. Suffice it to state that on May 7, 1980, the martial law administration filed a suit before the Manila Regional Trial Court (RTC) against Tadeco, et al., for them to surrender Hacienda Luisita to the then Ministry of Agrarian Reform (MAR, now the Department of Agrarian Reform [DAR]) so that the land can be distributed to farmers at cost. Responding, Tadeco or its owners alleged that Hacienda Luisita does not have tenants, besides which sugar lands––of which the hacienda consisted––are not covered by existing agrarian reform legislations. As perceived then, the government commenced the case against Tadeco as a political message to the family of the late Benigno Aquino, Jr. 23 Eventually, the Manila RTC rendered judgment ordering Tadeco to surrender Hacienda Luisita to the MAR. Therefrom, Tadeco appealed to the Court of Appeals (CA). On March 17, 1988, the Office of the Solicitor General (OSG) moved to withdraw the government’s case against Tadeco, et al. By Resolution of May 18, 1988, the CA dismissed the case the Marcos government initially instituted and won against Tadeco, et al. The dismissal action was, however, made subject to the obtention by Tadeco of the PARC’s approval of a stock distribution plan (SDP) that must initially be implemented after such approval shall have been secured. 24 The appellate court wrote: The defendants-appellants x x x filed a motion on April 13, 1988 joining the x x x governmental agencies concerned in moving for the dismissal of the case subject, however, to the following conditions embodied in the letter dated April 8, 1988 (Annex 2) of the Secretary of the [DAR] quoted, as follows: 1. Should TADECO fail to obtain approval of the stock distribution plan for failure to comply with all the requirements for corporate landowners set forth in the guidelines issued by the [PARC]: or 2. If such stock distribution plan is approved by PARC, but TADECO fails to initially implement it. xxxx WHEREFORE, the present case on appeal is hereby dismissed without prejudice, and should be revived if any of the conditions as above set forth is not duly complied with by the TADECO. 25 Markedly, Section 10 of EO 22926 allows corporate landowners, as an alternative to the actual land transfer scheme of CARP, to give qualified beneficiaries the right to purchase shares of stocks of the corporation under a stock ownership arrangement and/or land-to-share ratio. Like EO 229, RA 6657, under the latter’s Sec. 31, also provides two (2) alternative modalities, i.e., land or stock transfer, pursuant to either of which the corporate landowner can comply with CARP, but subject to well-defined conditions and timeline requirements. Sec. 31 of RA 6657 provides: SEC. 31. Corporate Landowners.¾Corporate landowners may voluntarily transfer ownership over their agricultural landholdings to the Republic of the Philippines pursuant to Section 20 hereof or to qualified beneficiaries x x x. Upon certification by the DAR, corporations owning agricultural lands may give their qualified beneficiaries the right to purchase such proportion of the capital stock of the corporation

that the agricultural land, actually devoted to agricultural activities, bears in relation to the company’s total assets, under such terms and conditions as may be agreed upon by them. In no case shall the compensation received by the workers at the time the shares of stocks are distributed be reduced. x x x Corporations or associations which voluntarily divest a proportion of their capital stock, equity or participation in favor of their workers or other qualified beneficiaries under this section shall be deemed to have complied with the provisions of this Act: Provided, That the following conditions are complied with: (a) In order to safeguard the right of beneficiaries who own shares of stocks to dividends and other financial benefits, the books of the corporation or association shall be subject to periodic audit by certified public accountants chosen by the beneficiaries; (b) Irrespective of the value of their equity in the corporation or association, the beneficiaries shall be assured of at least one (1) representative in the board of directors, or in a management or executive committee, if one exists, of the corporation or association; (c) Any shares acquired by such workers and beneficiaries shall have the same rights and features as all other shares; and (d) Any transfer of shares of stocks by the original beneficiaries shall be void ab initio unless said transaction is in favor of a qualified and registered beneficiary within the same corporation. If within two (2) years from the approval of this Act, the [voluntary] land or stock transfer envisioned above is not made or realized or the plan for such stock distribution approved by the PARC within the same period, the agricultural land of the corporate owners or corporation shall be subject to the compulsory coverage of this Act. (Emphasis added.) Vis-à-vis the stock distribution aspect of the aforequoted Sec. 31, DAR issued Administrative Order No. 10, Series of 1988 (DAO 10),27 entitled Guidelines and Procedures for Corporate Landowners Desiring to Avail Themselves of the Stock Distribution Plan under Section 31 of RA 6657. From the start, the stock distribution scheme appeared to be Tadeco’s preferred option, for, on August 23, 1988,28 it organized a spin-off corporation, HLI, as vehicle to facilitate stock acquisition by the farmworkers. For this purpose, Tadeco assigned and conveyed to HLI the agricultural land portion (4,915.75 hectares) and other farm-related properties of Hacienda Luisita in exchange for HLI shares of stock.29 Pedro Cojuangco, Josephine C. Reyes, Teresita C. Lopa, Jose Cojuangco, Jr., and Paz C. Teopaco were the incorporators of HLI.30 To accommodate the assets transfer from Tadeco to HLI, the latter, with the Securities and Exchange Commission’s (SEC’s) approval, increased its capital stock on May 10, 1989 from PhP 1,500,000 divided into 1,500,000 shares with a par value of PhP 1/share to PhP 400,000,000 divided into 400,000,000 shares also with par value of PhP 1/share, 150,000,000 of which were to be issued only to qualified and registered beneficiaries of the CARP, and the remaining 250,000,000 to any stockholder of the corporation.31

As appearing in its proposed SDP, the properties and assets of Tadeco contributed to the capital stock of HLI, as appraised and approved by the SEC, have an aggregate value of PhP 590,554,220, or after deducting the total liabilities of the farm amounting to PhP 235,422,758, a net value of PhP 355,531,462. This translated to 355,531,462 shares with a par value of PhP 1/share. 32 On May 9, 1989, some 93% of the then farmworker-beneficiaries (FWBs) complement of Hacienda Luisita signified in a referendum their acceptance of the proposed HLI’s Stock Distribution Option Plan. On May 11, 1989, the Stock Distribution Option Agreement (SDOA), styled as a Memorandum of Agreement (MOA),33 was entered into by Tadeco, HLI, and the 5,848 qualified FWBs 34 and attested to by then DAR Secretary Philip Juico. The SDOA embodied the basis and mechanics of the SDP, which would eventually be submitted to the PARC for approval. In the SDOA, the parties agreed to the following: 1. The percentage of the value of the agricultural land of Hacienda Luisita (P196,630,000.00) in relation to the total assets (P590,554,220.00) transferred and conveyed to the SECOND PARTY [HLI] is 33.296% that, under the law, is the proportion of the outstanding capital stock of the SECOND PARTY, which is P355,531,462.00 or 355,531,462 shares with a par value of P1.00 per share, that has to be distributed to the THIRD PARTY [FWBs] under the stock distribution plan, the said 33.296% thereof being P118,391,976.85 or 118,391,976.85 shares. 2. The qualified beneficiaries of the stock distribution plan shall be the farmworkers who appear in the annual payroll, inclusive of the permanent and seasonal employees, who are regularly or periodically employed by the SECOND PARTY. 3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY shall arrange with the FIRST PARTY [Tadeco] the acquisition and distribution to the THIRD PARTY on the basis of number of days worked and at no cost to them of one-thirtieth (1/30) of 118,391,976.85 shares of the capital stock of the SECOND PARTY that are presently owned and held by the FIRST PARTY, until such time as the entire block of 118,391,976.85 shares shall have been completely acquired and distributed to the THIRD PARTY. 4.The SECOND PARTY shall guarantee to the qualified beneficiaries of the [SDP] that every year they will receive on top of their regular compensation, an amount that approximates the equivalent of three (3%) of the total gross sales from the production of the agricultural land, whether it be in the form of cash dividends or incentive bonuses or both. 5. Even if only a part or fraction of the shares earmarked for distribution will have been acquired from the FIRST PARTY and distributed to the THIRD PARTY, FIRST PARTY shall execute at the beginning of each fiscal year an irrevocable proxy, valid and effective for one (1) year, in favor of the farmworkers appearing as shareholders of the SECOND PARTY at the start of said year which will empower the THIRD PARTY or their representative to vote in stockholders’ and board of directors’ meetings of the SECOND PARTY convened during the year the entire 33.296% of the outstanding capital stock of the SECOND PARTY earmarked for distribution and thus be able to gain such number of seats in the board of directors of the SECOND PARTY that the whole 33.296% of the shares subject to distribution will be entitled to. 6. In addition, the SECOND PARTY shall within a reasonable time subdivide and allocate for free and without charge among the qualified family-beneficiaries residing in the place where the agricultural land is situated, residential or homelots of not more than 240 sq.m. each, with

each family-beneficiary being assured of receiving and owning a homelot in the barangay where it actually resides on the date of the execution of this Agreement. 7. This Agreement is entered into by the parties in the spirit of the (C.A.R.P.) of the government and with the supervision of the [DAR], with the end in view of improving the lot of the qualified beneficiaries of the [SDP] and obtaining for them greater benefits. (Emphasis added.) As may be gleaned from the SDOA, included as part of the distribution plan are: (a) productionsharing equivalent to three percent (3%) of gross sales from the production of the agricultural land payable to the FWBs in cash dividends or incentive bonus; and (b) distribution of free homelots of not more than 240 square meters each to family-beneficiaries. The production-sharing, as the SDP indicated, is payable "irrespective of whether [HLI] makes money or not," implying that the benefits do not partake the nature of dividends, as the term is ordinarily understood under corporation law. While a little bit hard to follow, given that, during the period material, the assigned value of the agricultural land in the hacienda was PhP 196.63 million, while the total assets of HLI was PhP 590.55 million with net assets of PhP 355.53 million, Tadeco/HLI would admit that the ratio of the land-to-shares of stock corresponds to 33.3% of the outstanding capital stock of the HLI equivalent to 118,391,976.85 shares of stock with a par value of PhP 1/share. Subsequently, HLI submitted to DAR its SDP, designated as "Proposal for Stock Distribution under C.A.R.P.,"35which was substantially based on the SDOA. Notably, in a follow-up referendum the DAR conducted on October 14, 1989, 5,117 FWBs, out of 5,315 who participated, opted to receive shares in HLI. 36 One hundred thirty-two (132) chose actual land distribution.37 After a review of the SDP, then DAR Secretary Miriam Defensor-Santiago (Sec. Defensor-Santiago) addressed a letter dated November 6, 198938 to Pedro S. Cojuangco (Cojuangco), then Tadeco president, proposing that the SDP be revised, along the following lines: 1. That over the implementation period of the [SDP], [Tadeco]/HLI shall ensure that there will be no dilution in the shares of stocks of individual [FWBs]; 2. That a safeguard shall be provided by [Tadeco]/HLI against the dilution of the percentage shareholdings of the [FWBs], i.e., that the 33% shareholdings of the [FWBs] will be maintained at any given time; 3. That the mechanics for distributing the stocks be explicitly stated in the [MOA] signed between the [Tadeco], HLI and its [FWBs] prior to the implementation of the stock plan; 4. That the stock distribution plan provide for clear and definite terms for determining the actual number of seats to be allocated for the [FWBs] in the HLI Board; 5. That HLI provide guidelines and a timetable for the distribution of homelots to qualified [FWBs]; and 6. That the 3% cash dividends mentioned in the [SDP] be expressly provided for [in] the MOA.

In a letter-reply of November 14, 1989 to Sec. Defensor-Santiago, Tadeco/HLI explained that the proposed revisions of the SDP are already embodied in both the SDP and MOA. 39 Following that exchange, the PARC, under then Sec. Defensor-Santiago, by Resolution No. 89-12-240 dated November 21, 1989, approved the SDP of Tadeco/HLI. 41 At the time of the SDP approval, HLI had a pool of farmworkers, numbering 6,296, more or less, composed of permanent, seasonal and casual master list/payroll and non-master list members. From 1989 to 2005, HLI claimed to have extended the following benefits to the FWBs: (a) 3 billion pesos (P3,000,000,000) worth of salaries, wages and fringe benefits (b) 59 million shares of stock distributed for free to the FWBs; (c) 150 million pesos (P150,000,000) representing 3% of the gross produce; (d) 37.5 million pesos (P37,500,000) representing 3% from the sale of 500 hectares of converted agricultural land of Hacienda Luisita; (e) 240-square meter homelots distributed for free; (f) 2.4 million pesos (P2,400,000) representing 3% from the sale of 80 hectares at 80 million pesos (P80,000,000) for the SCTEX; (g) Social service benefits, such as but not limited to free hospitalization/medical/maternity services, old age/death benefits and no interest bearing salary/educational loans and rice sugar accounts. 42 Two separate groups subsequently contested this claim of HLI. On August 15, 1995, HLI applied for the conversion of 500 hectares of land of the hacienda from agricultural to industrial use,43 pursuant to Sec. 65 of RA 6657, providing: SEC. 65. Conversion of Lands.¾After the lapse of five (5) years from its award, when the land ceases to be economically feasible and sound for agricultural purposes, or the locality has become urbanized and the land will have a greater economic value for residential, commercial or industrial purposes, the DAR, upon application of the beneficiary or the landowner, with due notice to the affected parties, and subject to existing laws, may authorize the reclassification, or conversion of the land and its disposition: Provided, That the beneficiary shall have fully paid its obligation. The application, according to HLI, had the backing of 5,000 or so FWBs, including respondent Rene Galang, and Jose Julio Suniga, as evidenced by the Manifesto of Support they signed and which was submitted to the DAR.44After the usual processing, the DAR, thru then Sec. Ernesto Garilao, approved the application on August 14, 1996, per DAR Conversion Order No. 030601074-764-(95), Series of 1996,45 subject to payment of three percent (3%) of the gross selling price to the FWBs and to HLI’s continued compliance with its undertakings under the SDP, among other conditions. On December 13, 1996, HLI, in exchange for subscription of 12,000,000 shares of stocks of Centennary Holdings, Inc. (Centennary), ceded 300 hectares of the converted area to the latter.46 Consequently, HLI’s Transfer Certificate of Title (TCT) No. 287910 47 was canceled and TCT No. 29209148 was issued in the name of Centennary. HLI transferred the remaining 200 hectares

covered by TCT No. 287909 to Luisita Realty Corporation (LRC)49 in two separate transactions in 1997 and 1998, both uniformly involving 100 hectares for PhP 250 million each. 50 Centennary, a corporation with an authorized capital stock of PhP 12,100,000 divided into 12,100,000 shares and wholly-owned by HLI, had the following incorporators: Pedro Cojuangco, Josephine C. Reyes, Teresita C. Lopa, Ernesto G. Teopaco, and Bernardo R. Lahoz. Subsequently, Centennary sold51 the entire 300 hectares to Luisita Industrial Park Corporation (LIPCO) for PhP 750 million. The latter acquired it for the purpose of developing an industrial complex.52 As a result, Centennary’s TCT No. 292091 was canceled to be replaced by TCT No. 31098653 in the name of LIPCO. From the area covered by TCT No. 310986 was carved out two (2) parcels, for which two (2) separate titles were issued in the name of LIPCO, specifically: (a) TCT No. 365800 54 and (b) TCT No. 365801,55 covering 180 and four hectares, respectively. TCT No. 310986 was, accordingly, partially canceled. Later on, in a Deed of Absolute Assignment dated November 25, 2004, LIPCO transferred the parcels covered by its TCT Nos. 365800 and 365801 to the Rizal Commercial Banking Corporation (RCBC) by way of dacion en pago in payment of LIPCO’s PhP 431,695,732.10 loan obligations. LIPCO’s titles were canceled and new ones, TCT Nos. 391051 and 391052, were issued to RCBC. Apart from the 500 hectares alluded to, another 80.51 hectares were later detached from the area coverage of Hacienda Luisita which had been acquired by the government as part of the SubicClark-Tarlac Expressway (SCTEX) complex. In absolute terms, 4,335.75 hectares remained of the original 4,915 hectares Tadeco ceded to HLI.56 Such, in short, was the state of things when two separate petitions, both undated, reached the DAR in the latter part of 2003. In the first, denominated as Petition/Protest,57 respondents Jose Julio Suniga and Windsor Andaya, identifying themselves as head of the Supervisory Group of HLI (Supervisory Group), and 60 other supervisors sought to revoke the SDOA, alleging that HLI had failed to give them their dividends and the one percent (1%) share in gross sales, as well as the thirty-three percent (33%) share in the proceeds of the sale of the converted 500 hectares of land. They further claimed that their lives have not improved contrary to the promise and rationale for the adoption of the SDOA. They also cited violations by HLI of the SDOA’s terms. 58 They prayed for a renegotiation of the SDOA, or, in the alternative, its revocation. Revocation and nullification of the SDOA and the distribution of the lands in the hacienda were the call in the second petition, styled as Petisyon (Petition).59 The Petisyon was ostensibly filed on December 4, 2003 by Alyansa ng mga Manggagawang Bukid ng Hacienda Luisita (AMBALA), where the handwritten name of respondents Rene Galang as "Pangulo AMBALA" and Noel Mallari as "SecGen. AMBALA"60 appeared. As alleged, the petition was filed on behalf of AMBALA’s members purportedly composing about 80% of the 5,339 FWBs of Hacienda Luisita. HLI would eventually answer61 the petition/protest of the Supervisory Group. On the other hand, HLI’s answer62 to the AMBALA petition was contained in its letter dated January 21, 2005 also filed with DAR. Meanwhile, the DAR constituted a Special Task Force to attend to issues relating to the SDP of HLI. Among other duties, the Special Task Force was mandated to review the terms and conditions of the SDOA and PARC Resolution No. 89-12-2 relative to HLI’s SDP; evaluate HLI’s compliance reports;

evaluate the merits of the petitions for the revocation of the SDP; conduct ocular inspections or field investigations; and recommend appropriate remedial measures for approval of the Secretary. 63 After investigation and evaluation, the Special Task Force submitted its "Terminal Report: Hacienda Luisita, Incorporated (HLI) Stock Distribution Plan (SDP) Conflict" 64 dated September 22, 2005 (Terminal Report), finding that HLI has not complied with its obligations under RA 6657 despite the implementation of the SDP.65 The Terminal Report and the Special Task Force’s recommendations were adopted by then DAR Sec. Nasser Pangandaman (Sec. Pangandaman). 66 Subsequently, Sec. Pangandaman recommended to the PARC Executive Committee (Excom) (a) the recall/revocation of PARC Resolution No. 89-12-2 dated November 21, 1989 approving HLI’s SDP; and (b) the acquisition of Hacienda Luisita through the compulsory acquisition scheme. Following review, the PARC Validation Committee favorably endorsed the DAR Secretary’s recommendation afore-stated.67 On December 22, 2005, the PARC issued the assailed Resolution No. 2005-32-01, disposing as follows: NOW, THEREFORE, on motion duly seconded, RESOLVED, as it is HEREBY RESOLVED, to approve and confirm the recommendation of the PARC Executive Committee adopting in toto the report of the PARC ExCom Validation Committee affirming the recommendation of the DAR to recall/revoke the SDO plan of Tarlac Development Corporation/Hacienda Luisita Incorporated. RESOLVED, further, that the lands subject of the recalled/revoked TDC/HLI SDO plan be forthwith placed under the compulsory coverage or mandated land acquisition scheme of the [CARP]. APPROVED.68 A copy of Resolution No. 2005-32-01 was served on HLI the following day, December 23, without any copy of the documents adverted to in the resolution attached. A letter-request dated December 28, 200569 for certified copies of said documents was sent to, but was not acted upon by, the PARC secretariat. Therefrom, HLI, on January 2, 2006, sought reconsideration.70 On the same day, the DAR Tarlac provincial office issued the Notice of Coverage71 which HLI received on January 4, 2006. Its motion notwithstanding, HLI has filed the instant recourse in light of what it considers as the DAR’s hasty placing of Hacienda Luisita under CARP even before PARC could rule or even read the motion for reconsideration.72 As HLI later rued, it "can not know from the above-quoted resolution the facts and the law upon which it is based."73 PARC would eventually deny HLI’s motion for reconsideration via Resolution No. 2006-34-01 dated May 3, 2006. By Resolution of June 14, 2006,74 the Court, acting on HLI’s motion, issued a temporary restraining order,75enjoining the implementation of Resolution No. 2005-32-01 and the notice of coverage. On July 13, 2006, the OSG, for public respondents PARC and the DAR, filed its Comment 76 on the petition.

On December 2, 2006, Noel Mallari, impleaded by HLI as respondent in his capacity as "Sec-Gen. AMBALA," filed his Manifestation and Motion with Comment Attached dated December 4, 2006 (Manifestation and Motion).77 In it, Mallari stated that he has broken away from AMBALA with other AMBALA ex-members and formed Farmworkers Agrarian Reform Movement, Inc. (FARM). 78 Should this shift in alliance deny him standing, Mallari also prayed that FARM be allowed to intervene. As events would later develop, Mallari had a parting of ways with other FARM members, particularly would-be intervenors Renato Lalic, et al. As things stand, Mallari returned to the AMBALA fold, creating the AMBALA-Noel Mallari faction and leaving Renato Lalic, et al. as the remaining members of FARM who sought to intervene. On January 10, 2007, the Supervisory Group79 and the AMBALA-Rene Galang faction submitted their Comment/Opposition dated December 17, 2006.80 On October 30, 2007, RCBC filed a Motion for Leave to Intervene and to File and Admit Attached Petition-In-Intervention dated October 18, 2007. 81 LIPCO later followed with a similar motion.82 In both motions, RCBC and LIPCO contended that the assailed resolution effectively nullified the TCTs under their respective names as the properties covered in the TCTs were veritably included in the January 2, 2006 notice of coverage. In the main, they claimed that the revocation of the SDP cannot legally affect their rights as innocent purchasers for value. Both motions for leave to intervene were granted and the corresponding petitions-in-intervention admitted. On August 18, 2010, the Court heard the main and intervening petitioners on oral arguments. On the other hand, the Court, on August 24, 2010, heard public respondents as well as the respective counsels of the AMBALA-Mallari-Supervisory Group, the AMBALA-Galang faction, and the FARM and its 27 members83 argue their case. Prior to the oral arguments, however, HLI; AMBALA, represented by Mallari; the Supervisory Group, represented by Suniga and Andaya; and the United Luisita Workers Union, represented by Eldifonso Pingol, filed with the Court a joint submission and motion for approval of a Compromise Agreement (English and Tagalog versions) dated August 6, 2010. On August 31, 2010, the Court, in a bid to resolve the dispute through an amicable settlement, issued a Resolution84 creating a Mediation Panel composed of then Associate Justice Ma. Alicia Austria-Martinez, as chairperson, and former CA Justices Hector Hofileña and Teresita Dy-Liacco Flores, as members. Meetings on five (5) separate dates, i.e., September 8, 9, 14, 20, and 27, 2010, were conducted. Despite persevering and painstaking efforts on the part of the panel, mediation had to be discontinued when no acceptable agreement could be reached. The Issues HLI raises the following issues for our consideration: I. WHETHER OR NOT PUBLIC RESPONDENTS PARC AND SECRETARY PANGANDAMAN HAVE JURISDICTION, POWER AND/OR AUTHORITY TO NULLIFY, RECALL, REVOKE OR RESCIND THE SDOA. II.

[IF SO], x x x CAN THEY STILL EXERCISE SUCH JURISDICTION, POWER AND/OR AUTHORITY AT THIS TIME, I.E., AFTER SIXTEEN (16) YEARS FROM THE EXECUTION OF THE SDOA AND ITS IMPLEMENTATION WITHOUT VIOLATING SECTIONS 1 AND 10 OF ARTICLE III (BILL OF RIGHTS) OF THE CONSTITUTION AGAINST DEPRIVATION OF PROPERTY WITHOUT DUE PROCESS OF LAW AND THE IMPAIRMENT OF CONTRACTUAL RIGHTS AND OBLIGATIONS? MOREOVER, ARE THERE LEGAL GROUNDS UNDER THE CIVIL CODE, viz, ARTICLE 1191 x x x, ARTICLES 1380, 1381 AND 1382 x x x ARTICLE 1390 x x x AND ARTICLE 1409 x x x THAT CAN BE INVOKED TO NULLIFY, RECALL, REVOKE, OR RESCIND THE SDOA? III. WHETHER THE PETITIONS TO NULLIFY, RECALL, REVOKE OR RESCIND THE SDOA HAVE ANY LEGAL BASIS OR GROUNDS AND WHETHER THE PETITIONERS THEREIN ARE THE REAL PARTIES-IN-INTEREST TO FILE SAID PETITIONS. IV. WHETHER THE RIGHTS, OBLIGATIONS AND REMEDIES OF THE PARTIES TO THE SDOA ARE NOW GOVERNED BY THE CORPORATION CODE (BATAS PAMBANSA BLG. 68) AND NOT BY THE x x x [CARL] x x x. On the other hand, RCBC submits the following issues: I. RESPONDENT PARC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT DID NOT EXCLUDE THE SUBJECT PROPERTY FROM THE COVERAGE OF THE CARP DESPITE THE FACT THAT PETITIONER-INTERVENOR RCBC HAS ACQUIRED VESTED RIGHTS AND INDEFEASIBLE TITLE OVER THE SUBJECT PROPERTY AS AN INNOCENT PURCHASER FOR VALUE. A. THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE NOTICE OF COVERAGE DATED 02 JANUARY 2006 HAVE THE EFFECT OF NULLIFYING TCT NOS. 391051 AND 391052 IN THE NAME OF PETITIONER-INTERVENOR RCBC. B. AS AN INNOCENT PURCHASER FOR VALUE, PETITIONER-INTERVENOR RCBC CANNOT BE PREJUDICED BY A SUBSEQUENT REVOCATION OR RESCISSION OF THE SDOA. II. THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE NOTICE OF COVERAGE DATED 02 JANUARY 2006 WERE ISSUED WITHOUT AFFORDING PETITIONERINTERVENOR RCBC ITS RIGHT TO DUE PROCESS AS AN INNOCENT PURCHASER FOR VALUE. LIPCO, like RCBC, asserts having acquired vested and indefeasible rights over certain portions of the converted property, and, hence, would ascribe on PARC the commission of grave abuse of discretion when it included those portions in the notice of coverage. And apart from raising issues

identical with those of HLI, such as but not limited to the absence of valid grounds to warrant the rescission and/or revocation of the SDP, LIPCO would allege that the assailed resolution and the notice of coverage were issued without affording it the right to due process as an innocent purchaser for value. The government, LIPCO also argues, is estopped from recovering properties which have since passed to innocent parties. Simply formulated, the principal determinative issues tendered in the main petition and to which all other related questions must yield boil down to the following: (1) matters of standing; (2) the constitutionality of Sec. 31 of RA 6657; (3) the jurisdiction of PARC to recall or revoke HLI’s SDP; (4) the validity or propriety of such recall or revocatory action; and (5) corollary to (4), the validity of the terms and conditions of the SDP, as embodied in the SDOA. Our Ruling I. We first proceed to the examination of the preliminary issues before delving on the more serious challenges bearing on the validity of PARC’s assailed issuance and the grounds for it. Supervisory Group, AMBALA and their respective leaders are real parties-in-interest HLI would deny real party-in-interest status to the purported leaders of the Supervisory Group and AMBALA, i.e., Julio Suniga, Windsor Andaya, and Rene Galang, who filed the revocatory petitions before the DAR. As HLI would have it, Galang, the self-styled head of AMBALA, gained HLI employment in June 1990 and, thus, could not have been a party to the SDOA executed a year earlier.85 As regards the Supervisory Group, HLI alleges that supervisors are not regular farmworkers, but the company nonetheless considered them FWBs under the SDOA as a mere concession to enable them to enjoy the same benefits given qualified regular farmworkers. However, if the SDOA would be canceled and land distribution effected, so HLI claims, citing Fortich v. Corona,86 the supervisors would be excluded from receiving lands as farmworkers other than the regular farmworkers who are merely entitled to the "fruits of the land."87 The SDOA no less identifies "the SDP qualified beneficiaries" as "the farmworkers who appear in the annual payroll, inclusive of the permanent and seasonal employees, who are regularly or periodically employed by [HLI]."88 Galang, per HLI’s own admission, is employed by HLI, and is, thus, a qualified beneficiary of the SDP; he comes within the definition of a real party-in-interest under Sec. 2, Rule 3 of the Rules of Court, meaning, one who stands to be benefited or injured by the judgment in the suit or is the party entitled to the avails of the suit. The same holds true with respect to the Supervisory Group whose members were admittedly employed by HLI and whose names and signatures even appeared in the annex of the SDOA. Being qualified beneficiaries of the SDP, Suniga and the other 61 supervisors are certainly parties who would benefit or be prejudiced by the judgment recalling the SDP or replacing it with some other modality to comply with RA 6657. Even assuming that members of the Supervisory Group are not regular farmworkers, but are in the category of "other farmworkers" mentioned in Sec. 4, Article XIII of the Constitution, 89 thus only entitled to a share of the fruits of the land, as indeed Fortich teaches, this does not detract from the fact that they are still identified as being among the "SDP qualified beneficiaries." As such, they are, thus, entitled to bring an action upon the SDP.90 At any rate, the following admission made by Atty.

Gener Asuncion, counsel of HLI, during the oral arguments should put to rest any lingering doubt as to the status of protesters Galang, Suniga, and Andaya: Justice Bersamin: x x x I heard you a while ago that you were conceding the qualified farmer beneficiaries of Hacienda Luisita were real parties in interest? Atty. Asuncion: Yes, Your Honor please, real party in interest which that question refers to the complaints of protest initiated before the DAR and the real party in interest there be considered as possessed by the farmer beneficiaries who initiated the protest. 91 Further, under Sec. 50, paragraph 4 of RA 6657, farmer-leaders are expressly allowed to represent themselves, their fellow farmers or their organizations in any proceedings before the DAR. Specifically: SEC. 50. Quasi-Judicial Powers of the DAR.¾x x x xxxx Responsible farmer leaders shall be allowed to represent themselves, their fellow farmers or their organizations in any proceedings before the DAR: Provided, however, that when there are two or more representatives for any individual or group, the representatives should choose only one among themselves to represent such party or group before any DAR proceedings. (Emphasis supplied.) Clearly, the respective leaders of the Supervisory Group and AMBALA are contextually real partiesin-interest allowed by law to file a petition before the DAR or PARC. This is not necessarily to say, however, that Galang represents AMBALA, for as records show and as HLI aptly noted,92 his "petisyon" filed with DAR did not carry the usual authorization of the individuals in whose behalf it was supposed to have been instituted. To date, such authorization document, which would logically include a list of the names of the authorizing FWBs, has yet to be submitted to be part of the records. PARC’s Authority to Revoke a Stock Distribution Plan On the postulate that the subject jurisdiction is conferred by law, HLI maintains that PARC is without authority to revoke an SDP, for neither RA 6657 nor EO 229 expressly vests PARC with such authority. While, as HLI argued, EO 229 empowers PARC to approve the plan for stock distribution in appropriate cases, the empowerment only includes the power to disapprove, but not to recall its previous approval of the SDP after it has been implemented by the parties. 93 To HLI, it is the court which has jurisdiction and authority to order the revocation or rescission of the PARC-approved SDP. We disagree. Under Sec. 31 of RA 6657, as implemented by DAO 10, the authority to approve the plan for stock distribution of the corporate landowner belongs to PARC. However, contrary to petitioner HLI’s posture, PARC also has the power to revoke the SDP which it previously approved. It may be, as urged, that RA 6657 or other executive issuances on agrarian reform do not explicitly vest the PARC with the power to revoke/recall an approved SDP. Such power or authority, however, is deemed possessed by PARC under the principle of necessary implication, a basic postulate that what is implied in a statute is as much a part of it as that which is expressed.94

We have explained that "every statute is understood, by implication, to contain all such provisions as may be necessary to effectuate its object and purpose, or to make effective rights, powers, privileges or jurisdiction which it grants, including all such collateral and subsidiary consequences as may be fairly and logically inferred from its terms."95 Further, "every statutory grant of power, right or privilege is deemed to include all incidental power, right or privilege. 96 Gordon v. Veridiano II is instructive: The power to approve a license includes by implication, even if not expressly granted, the power to revoke it. By extension, the power to revoke is limited by the authority to grant the license, from which it is derived in the first place. Thus, if the FDA grants a license upon its finding that the applicant drug store has complied with the requirements of the general laws and the implementing administrative rules and regulations, it is only for their violation that the FDA may revoke the said license. By the same token, having granted the permit upon his ascertainment that the conditions thereof as applied x x x have been complied with, it is only for the violation of such conditions that the mayor may revoke the said permit.97 (Emphasis supplied.) Following the doctrine of necessary implication, it may be stated that the conferment of express power to approve a plan for stock distribution of the agricultural land of corporate owners necessarily includes the power to revoke or recall the approval of the plan. As public respondents aptly observe, to deny PARC such revocatory power would reduce it into a toothless agency of CARP, because the very same agency tasked to ensure compliance by the corporate landowner with the approved SDP would be without authority to impose sanctions for noncompliance with it.98 With the view We take of the case, only PARC can effect such revocation. The DAR Secretary, by his own authority as such, cannot plausibly do so, as the acceptance and/or approval of the SDP sought to be taken back or undone is the act of PARC whose official composition includes, no less, the President as chair, the DAR Secretary as vice-chair, and at least eleven (11) other department heads.99 On another but related issue, the HLI foists on the Court the argument that subjecting its landholdings to compulsory distribution after its approved SDP has been implemented would impair the contractual obligations created under the SDOA. The broad sweep of HLI’s argument ignores certain established legal precepts and must, therefore, be rejected. A law authorizing interference, when appropriate, in the contractual relations between or among parties is deemed read into the contract and its implementation cannot successfully be resisted by force of the non-impairment guarantee. There is, in that instance, no impingement of the impairment clause, the non-impairment protection being applicable only to laws that derogate prior acts or contracts by enlarging, abridging or in any manner changing the intention of the parties. Impairment, in fine, obtains if a subsequent law changes the terms of a contract between the parties, imposes new conditions, dispenses with those agreed upon or withdraws existing remedies for the enforcement of the rights of the parties.100 Necessarily, the constitutional proscription would not apply to laws already in effect at the time of contract execution, as in the case of RA 6657, in relation to DAO 10, vis-à-vis HLI’s SDOA. As held in Serrano v. Gallant Maritime Services, Inc.: The prohibition [against impairment of the obligation of contracts] is aligned with the general principle that laws newly enacted have only a prospective operation, and cannot affect acts or contracts already perfected; however, as to laws already in existence, their provisions are read into contracts and deemed a part thereof. Thus, the non-impairment clause under Section 10, Article II [of the

Constitution] is limited in application to laws about to be enacted that would in any way derogate from existing acts or contracts by enlarging, abridging or in any manner changing the intention of the parties thereto.101 (Emphasis supplied.) Needless to stress, the assailed Resolution No. 2005-32-01 is not the kind of issuance within the ambit of Sec. 10, Art. III of the Constitution providing that "[n]o law impairing the obligation of contracts shall be passed." Parenthetically, HLI tags the SDOA as an ordinary civil law contract and, as such, a breach of its terms and conditions is not a PARC administrative matter, but one that gives rise to a cause of action cognizable by regular courts.102 This contention has little to commend itself. The SDOA is a special contract imbued with public interest, entered into and crafted pursuant to the provisions of RA 6657. It embodies the SDP, which requires for its validity, or at least its enforceability, PARC’s approval. And the fact that the certificate of compliance103––to be issued by agrarian authorities upon completion of the distribution of stocks––is revocable by the same issuing authority supports the idea that everything about the implementation of the SDP is, at the first instance, subject to administrative adjudication. HLI also parlays the notion that the parties to the SDOA should now look to the Corporation Code, instead of to RA 6657, in determining their rights, obligations and remedies. The Code, it adds, should be the applicable law on the disposition of the agricultural land of HLI. Contrary to the view of HLI, the rights, obligations and remedies of the parties to the SDOA embodying the SDP are primarily governed by RA 6657. It should abundantly be made clear that HLI was precisely created in order to comply with RA 6657, which the OSG aptly described as the "mother law" of the SDOA and the SDP.104 It is, thus, paradoxical for HLI to shield itself from the coverage of CARP by invoking exclusive applicability of the Corporation Code under the guise of being a corporate entity. Without in any way minimizing the relevance of the Corporation Code since the FWBs of HLI are also stockholders, its applicability is limited as the rights of the parties arising from the SDP should not be made to supplant or circumvent the agrarian reform program. Without doubt, the Corporation Code is the general law providing for the formation, organization and regulation of private corporations. On the other hand, RA 6657 is the special law on agrarian reform. As between a general and special law, the latter shall prevail—generalia specialibus non derogant.105 Besides, the present impasse between HLI and the private respondents is not an intracorporate dispute which necessitates the application of the Corporation Code. What private respondents questioned before the DAR is the proper implementation of the SDP and HLI’s compliance with RA 6657. Evidently, RA 6657 should be the applicable law to the instant case. HLI further contends that the inclusion of the agricultural land of Hacienda Luisita under the coverage of CARP and the eventual distribution of the land to the FWBs would amount to a disposition of all or practically all of the corporate assets of HLI. HLI would add that this contingency, if ever it comes to pass, requires the applicability of the Corporation Code provisions on corporate dissolution. We are not persuaded. Indeed, the provisions of the Corporation Code on corporate dissolution would apply insofar as the winding up of HLI’s affairs or liquidation of the assets is concerned. However, the mere inclusion of the agricultural land of Hacienda Luisita under the coverage of CARP and the land’s eventual

distribution to the FWBs will not, without more, automatically trigger the dissolution of HLI. As stated in the SDOA itself, the percentage of the value of the agricultural land of Hacienda Luisita in relation to the total assets transferred and conveyed by Tadeco to HLI comprises only 33.296%, following this equation: value of the agricultural lands divided by total corporate assets. By no stretch of imagination would said percentage amount to a disposition of all or practically all of HLI’s corporate assets should compulsory land acquisition and distribution ensue. This brings us to the validity of the revocation of the approval of the SDP sixteen (16) years after its execution pursuant to Sec. 31 of RA 6657 for the reasons set forth in the Terminal Report of the Special Task Force, as endorsed by PARC Excom. But first, the matter of the constitutionality of said section. Constitutional Issue FARM asks for the invalidation of Sec. 31 of RA 6657, insofar as it affords the corporation, as a mode of CARP compliance, to resort to stock distribution, an arrangement which, to FARM, impairs the fundamental right of farmers and farmworkers under Sec. 4, Art. XIII of the Constitution. 106 To a more specific, but direct point, FARM argues that Sec. 31 of RA 6657 permits stock transfer in lieu of outright agricultural land transfer; in fine, there is stock certificate ownership of the farmers or farmworkers instead of them owning the land, as envisaged in the Constitution. For FARM, this modality of distribution is an anomaly to be annulled for being inconsistent with the basic concept of agrarian reform ingrained in Sec. 4, Art. XIII of the Constitution. 107 Reacting, HLI insists that agrarian reform is not only about transfer of land ownership to farmers and other qualified beneficiaries. It draws attention in this regard to Sec. 3(a) of RA 6657 on the concept and scope of the term "agrarian reform." The constitutionality of a law, HLI added, cannot, as here, be attacked collaterally. The instant challenge on the constitutionality of Sec. 31 of RA 6657 and necessarily its counterpart provision in EO 229 must fail as explained below. When the Court is called upon to exercise its power of judicial review over, and pass upon the constitutionality of, acts of the executive or legislative departments, it does so only when the following essential requirements are first met, to wit: (1) there is an actual case or controversy; (2) that the constitutional question is raised at the earliest possible opportunity by a proper party or one with locus standi; and (3) the issue of constitutionality must be the very lis mota of the case. 108 Not all the foregoing requirements are satisfied in the case at bar. While there is indeed an actual case or controversy, intervenor FARM, composed of a small minority of 27 farmers, has yet to explain its failure to challenge the constitutionality of Sec. 3l of RA 6657, since as early as November 21, l989 when PARC approved the SDP of Hacienda Luisita or at least within a reasonable time thereafter and why its members received benefits from the SDP without so much of a protest. It was only on December 4, 2003 or 14 years after approval of the SDP via PARC Resolution No. 89-12-2 dated November 21, 1989 that said plan and approving resolution were

sought to be revoked, but not, to stress, by FARM or any of its members, but by petitioner AMBALA. Furthermore, the AMBALA petition did NOT question the constitutionality of Sec. 31 of RA 6657, but concentrated on the purported flaws and gaps in the subsequent implementation of the SDP. Even the public respondents, as represented by the Solicitor General, did not question the constitutionality of the provision. On the other hand, FARM, whose 27 members formerly belonged to AMBALA, raised the constitutionality of Sec. 31 only on May 3, 2007 when it filed its Supplemental Comment with the Court. Thus, it took FARM some eighteen (18) years from November 21, 1989 before it challenged the constitutionality of Sec. 31 of RA 6657 which is quite too late in the day. The FARM members slept on their rights and even accepted benefits from the SDP with nary a complaint on the alleged unconstitutionality of Sec. 31 upon which the benefits were derived. The Court cannot now be goaded into resolving a constitutional issue that FARM failed to assail after the lapse of a long period of time and the occurrence of numerous events and activities which resulted from the application of an alleged unconstitutional legal provision. It has been emphasized in a number of cases that the question of constitutionality will not be passed upon by the Court unless it is properly raised and presented in an appropriate case at the first opportunity.109 FARM is, therefore, remiss in belatedly questioning the constitutionality of Sec. 31 of RA 6657. The second requirement that the constitutional question should be raised at the earliest possible opportunity is clearly wanting. The last but the most important requisite that the constitutional issue must be the very lis mota of the case does not likewise obtain. The lis mota aspect is not present, the constitutional issue tendered not being critical to the resolution of the case. The unyielding rule has been to avoid, whenever plausible, an issue assailing the constitutionality of a statute or governmental act. 110 If some other grounds exist by which judgment can be made without touching the constitutionality of a law, such recourse is favored.111 Garcia v. Executive Secretary explains why: Lis Mota — the fourth requirement to satisfy before this Court will undertake judicial review — means that the Court will not pass upon a question of unconstitutionality, although properly presented, if the case can be disposed of on some other ground, such as the application of the statute or the general law. The petitioner must be able to show that the case cannot be legally resolved unless the constitutional question raised is determined. This requirement is based on the rule that every law has in its favor the presumption of constitutionality; to justify its nullification, there must be a clear and unequivocal breach of the Constitution, and not one that is doubtful, speculative, or argumentative.112 (Italics in the original.) The lis mota in this case, proceeding from the basic positions originally taken by AMBALA (to which the FARM members previously belonged) and the Supervisory Group, is the alleged non-compliance by HLI with the conditions of the SDP to support a plea for its revocation. And before the Court, the lis mota is whether or not PARC acted in grave abuse of discretion when it ordered the recall of the SDP for such non-compliance and the fact that the SDP, as couched and implemented, offends certain constitutional and statutory provisions. To be sure, any of these key issues may be resolved without plunging into the constitutionality of Sec. 31 of RA 6657. Moreover, looking deeply into the underlying petitions of AMBALA, et al., it is not the said section per se that is invalid, but rather it is the alleged application of the said provision in the SDP that is flawed. It may be well to note at this juncture that Sec. 5 of RA 9700, 113 amending Sec. 7 of RA 6657, has all but superseded Sec. 31 of RA 6657 vis-à-vis the stock distribution component of said Sec. 31. In its pertinent part, Sec. 5 of RA 9700 provides: "[T]hat after June 30, 2009, the modes of acquisition shall be limited to voluntary offer to sell and compulsory acquisition." Thus, for all intents and purposes, the stock distribution scheme under Sec. 31 of RA 6657 is no longer an available option under existing law. The question of whether or not it is unconstitutional should be a moot issue.

It is true that the Court, in some cases, has proceeded to resolve constitutional issues otherwise already moot and academic114 provided the following requisites are present: x x x first, there is a grave violation of the Constitution; second, the exceptional character of the situation and the paramount public interest is involved; third, when the constitutional issue raised requires formulation of controlling principles to guide the bench, the bar, and the public; fourth, the case is capable of repetition yet evading review. These requisites do not obtain in the case at bar. For one, there appears to be no breach of the fundamental law. Sec. 4, Article XIII of the Constitution reads: The State shall, by law, undertake an agrarian reform program founded on the right of the farmers and regular farmworkers, who are landless, to OWN directly or COLLECTIVELY THE LANDS THEY TILL or, in the case of other farmworkers, to receive a just share of the fruits thereof. To this end, the State shall encourage and undertake the just distribution of all agricultural lands, subject to such priorities and reasonable retention limits as the Congress may prescribe, taking into account ecological, developmental, or equity considerations, and subject to the payment of just compensation. In determining retention limits, the State shall respect the right of small landowners. The State shall further provide incentives for voluntary land-sharing. (Emphasis supplied.) The wording of the provision is unequivocal––the farmers and regular farmworkers have a right TO OWN DIRECTLY OR COLLECTIVELY THE LANDS THEY TILL. The basic law allows two (2) modes of land distribution—direct and indirect ownership. Direct transfer to individual farmers is the most commonly used method by DAR and widely accepted. Indirect transfer through collective ownership of the agricultural land is the alternative to direct ownership of agricultural land by individual farmers. The aforequoted Sec. 4 EXPRESSLY authorizes collective ownership by farmers. No language can be found in the 1987 Constitution that disqualifies or prohibits corporations or cooperatives of farmers from being the legal entity through which collective ownership can be exercised. The word "collective" is defined as "indicating a number of persons or things considered as constituting one group or aggregate,"115 while "collectively" is defined as "in a collective sense or manner; in a mass or body."116 By using the word "collectively," the Constitution allows for indirect ownership of land and not just outright agricultural land transfer. This is in recognition of the fact that land reform may become successful even if it is done through the medium of juridical entities composed of farmers. Collective ownership is permitted in two (2) provisions of RA 6657. Its Sec. 29 allows workers’ cooperatives or associations to collectively own the land, while the second paragraph of Sec. 31 allows corporations or associations to own agricultural land with the farmers becoming stockholders or members. Said provisions read: SEC. 29. Farms owned or operated by corporations or other business associations.—In the case of farms owned or operated by corporations or other business associations, the following rules shall be observed by the PARC. In general, lands shall be distributed directly to the individual worker-beneficiaries. In case it is not economically feasible and sound to divide the land, then it shall be owned collectively by the worker beneficiaries who shall form a workers’ cooperative or association which will deal with the corporation or business association. x x x (Emphasis supplied.)

SEC. 31. Corporate Landowners.— x x x xxxx Upon certification by the DAR, corporations owning agricultural lands may give their qualified beneficiaries the right to purchase such proportion of the capital stock of the corporation that the agricultural land, actually devoted to agricultural activities, bears in relation to the company’s total assets, under such terms and conditions as may be agreed upon by them. In no case shall the compensation received by the workers at the time the shares of stocks are distributed be reduced. The same principle shall be applied to associations, with respect to their equity or participation. x x x (Emphasis supplied.) Clearly, workers’ cooperatives or associations under Sec. 29 of RA 6657 and corporations or associations under the succeeding Sec. 31, as differentiated from individual farmers, are authorized vehicles for the collective ownership of agricultural land. Cooperatives can be registered with the Cooperative Development Authority and acquire legal personality of their own, while corporations are juridical persons under the Corporation Code. Thus, Sec. 31 is constitutional as it simply implements Sec. 4 of Art. XIII of the Constitution that land can be owned COLLECTIVELY by farmers. Even the framers of the l987 Constitution are in unison with respect to the two (2) modes of ownership of agricultural lands tilled by farmers––DIRECT and COLLECTIVE, thus: MR. NOLLEDO. And when we talk of the phrase "to own directly," we mean the principle of direct ownership by the tiller? MR. MONSOD. Yes. MR. NOLLEDO. And when we talk of "collectively," we mean communal ownership, stewardship or State ownership? MS. NIEVA. In this section, we conceive of cooperatives; that is farmers’ cooperatives owning the land, not the State. MR. NOLLEDO. And when we talk of "collectively," referring to farmers’ cooperatives, do the farmers own specific areas of land where they only unite in their efforts? MS. NIEVA. That is one way. MR. NOLLEDO. Because I understand that there are two basic systems involved: the "moshave" type of agriculture and the "kibbutz." So are both contemplated in the report? MR. TADEO. Ang dalawa kasing pamamaraan ng pagpapatupad ng tunay na reporma sa lupa ay ang pagmamay-ari ng lupa na hahatiin sa individual na pagmamay-ari – directly – at ang tinatawag na sama-samang gagawin ng mga magbubukid. Tulad sa Negros, ang gusto ng mga magbubukid ay gawin nila itong "cooperative or collective farm." Ang ibig sabihin ay sama-sama nilang sasakahin. xxxx MR. TINGSON. x x x When we speak here of "to own directly or collectively the lands they till," is this land for the tillers rather than land for the landless? Before, we used to hear "land for the landless," but now the slogan is "land for the tillers." Is that right?

MR. TADEO. Ang prinsipyong umiiral dito ay iyong land for the tillers. Ang ibig sabihin ng "directly" ay tulad sa implementasyon sa rice and corn lands kung saan inaari na ng mga magsasaka ang lupang binubungkal nila. Ang ibig sabihin naman ng "collectively" ay sama-samang paggawa sa isang lupain o isang bukid, katulad ng sitwasyon sa Negros.117 (Emphasis supplied.) As Commissioner Tadeo explained, the farmers will work on the agricultural land "sama-sama" or collectively. Thus, the main requisite for collective ownership of land is collective or group work by farmers of the agricultural land. Irrespective of whether the landowner is a cooperative, association or corporation composed of farmers, as long as concerted group work by the farmers on the land is present, then it falls within the ambit of collective ownership scheme. Likewise, Sec. 4, Art. XIII of the Constitution makes mention of a commitment on the part of the State to pursue, by law, an agrarian reform program founded on the policy of land for the landless, but subject to such priorities as Congress may prescribe, taking into account such abstract variable as "equity considerations." The textual reference to a law and Congress necessarily implies that the above constitutional provision is not self-executoryand that legislation is needed to implement the urgently needed program of agrarian reform. And RA 6657 has been enacted precisely pursuant to and as a mechanism to carry out the constitutional directives. This piece of legislation, in fact, restates118 the agrarian reform policy established in the aforementioned provision of the Constitution of promoting the welfare of landless farmers and farmworkers. RA 6657 thus defines "agrarian reform" as "the redistribution of lands … to farmers and regular farmworkers who are landless … to lift the economic status of the beneficiaries and all other arrangements alternative to the physical redistribution of lands, such as production or profit sharing, labor administration and the distribution of shares of stock which will allow beneficiaries to receive a just share of the fruits of the lands they work." With the view We take of this case, the stock distribution option devised under Sec. 31 of RA 6657 hews with the agrarian reform policy, as instrument of social justice under Sec. 4 of Article XIII of the Constitution. Albeit land ownership for the landless appears to be the dominant theme of that policy, We emphasize that Sec. 4, Article XIII of the Constitution, as couched, does not constrict Congress to passing an agrarian reform law planted on direct land transfer to and ownership by farmers and no other, or else the enactment suffers from the vice of unconstitutionality. If the intention were otherwise, the framers of the Constitution would have worded said section in a manner mandatory in character. For this Court, Sec. 31 of RA 6657, with its direct and indirect transfer features, is not inconsistent with the State’s commitment to farmers and farmworkers to advance their interests under the policy of social justice. The legislature, thru Sec. 31 of RA 6657, has chosen a modality for collective ownership by which the imperatives of social justice may, in its estimation, be approximated, if not achieved. The Court should be bound by such policy choice. FARM contends that the farmers in the stock distribution scheme under Sec. 31 do not own the agricultural land but are merely given stock certificates. Thus, the farmers lose control over the land to the board of directors and executive officials of the corporation who actually manage the land. They conclude that such arrangement runs counter to the mandate of the Constitution that any agrarian reform must preserve the control over the land in the hands of the tiller. This contention has no merit. While it is true that the farmer is issued stock certificates and does not directly own the land, still, the Corporation Code is clear that the FWB becomes a stockholder who acquires an equitable interest in the assets of the corporation, which include the agricultural lands. It was explained that the

"equitable interest of the shareholder in the property of the corporation is represented by the term stock, and the extent of his interest is described by the term shares. The expression shares of stock when qualified by words indicating number and ownership expresses the extent of the owner’s interest in the corporate property."119 A share of stock typifies an aliquot part of the corporation’s property, or the right to share in its proceeds to that extent when distributed according to law and equity and that its holder is not the owner of any part of the capital of the corporation. 120 However, the FWBs will ultimately own the agricultural lands owned by the corporation when the corporation is eventually dissolved and liquidated. Anent the alleged loss of control of the farmers over the agricultural land operated and managed by the corporation, a reading of the second paragraph of Sec. 31 shows otherwise. Said provision provides that qualified beneficiaries have "the right to purchase such proportion of the capital stock of the corporation that the agricultural land, actually devoted to agricultural activities, bears in relation to the company’s total assets." The wording of the formula in the computation of the number of shares that can be bought by the farmers does not mean loss of control on the part of the farmers. It must be remembered that the determination of the percentage of the capital stock that can be bought by the farmers depends on the value of the agricultural land and the value of the total assets of the corporation. There is, thus, nothing unconstitutional in the formula prescribed by RA 6657. The policy on agrarian reform is that control over the agricultural land must always be in the hands of the farmers. Then it falls on the shoulders of DAR and PARC to see to it the farmers should always own majority of the common shares entitled to elect the members of the board of directors to ensure that the farmers will have a clear majority in the board. Before the SDP is approved, strict scrutiny of the proposed SDP must always be undertaken by the DAR and PARC, such that the value of the agricultural land contributed to the corporation must always be more than 50% of the total assets of the corporation to ensure that the majority of the members of the board of directors are composed of the farmers. The PARC composed of the President of the Philippines and cabinet secretaries must see to it that control over the board of directors rests with the farmers by rejecting the inclusion of non-agricultural assets which will yield the majority in the board of directors to non-farmers. Any deviation, however, by PARC or DAR from the correct application of the formula prescribed by the second paragraph of Sec. 31 of RA 6675 does not make said provision constitutionally infirm. Rather, it is the application of said provision that can be challenged. Ergo, Sec. 31 of RA 6657 does not trench on the constitutional policy of ensuring control by the farmers. A view has been advanced that there can be no agrarian reform unless there is land distribution and that actual land distribution is the essential characteristic of a constitutional agrarian reform program. On the contrary, there have been so many instances where, despite actual land distribution, the implementation of agrarian reform was still unsuccessful. As a matter of fact, this Court may take judicial notice of cases where FWBs sold the awarded land even to non-qualified persons and in violation of the prohibition period provided under the law. This only proves to show that the mere fact that there is land distribution does not guarantee a successful implementation of agrarian reform. As it were, the principle of "land to the tiller" and the old pastoral model of land ownership where non-human juridical persons, such as corporations, were prohibited from owning agricultural lands are no longer realistic under existing conditions. Practically, an individual farmer will often face greater disadvantages and difficulties than those who exercise ownership in a collective manner through a cooperative or corporation. The former is too often left to his own devices when faced with failing crops and bad weather, or compelled to obtain usurious loans in order to purchase costly fertilizers or farming equipment. The experiences learned from failed land reform activities in various parts of the country are lack of financing, lack of farm equipment, lack of fertilizers, lack of

guaranteed buyers of produce, lack of farm-to-market roads, among others. Thus, at the end of the day, there is still no successful implementation of agrarian reform to speak of in such a case. Although success is not guaranteed, a cooperative or a corporation stands in a better position to secure funding and competently maintain the agri-business than the individual farmer. While direct singular ownership over farmland does offer advantages, such as the ability to make quick decisions unhampered by interference from others, yet at best, these advantages only but offset the disadvantages that are often associated with such ownership arrangement. Thus, government must be flexible and creative in its mode of implementation to better its chances of success. One such option is collective ownership through juridical persons composed of farmers. Aside from the fact that there appears to be no violation of the Constitution, the requirement that the instant case be capable of repetition yet evading review is also wanting. It would be speculative for this Court to assume that the legislature will enact another law providing for a similar stock option. As a matter of sound practice, the Court will not interfere inordinately with the exercise by Congress of its official functions, the heavy presumption being that a law is the product of earnest studies by Congress to ensure that no constitutional prescription or concept is infringed. 121 Corollarily, courts will not pass upon questions of wisdom, expediency and justice of legislation or its provisions. Towards this end, all reasonable doubts should be resolved in favor of the constitutionality of a law and the validity of the acts and processes taken pursuant thereof. 122 Consequently, before a statute or its provisions duly challenged are voided, an unequivocal breach of, or a clear conflict with the Constitution, not merely a doubtful or argumentative one, must be demonstrated in such a manner as to leave no doubt in the mind of the Court. In other words, the grounds for nullity must be beyond reasonable doubt. 123 FARM has not presented compelling arguments to overcome the presumption of constitutionality of Sec. 31 of RA 6657. The wisdom of Congress in allowing an SDP through a corporation as an alternative mode of implementing agrarian reform is not for judicial determination. Established jurisprudence tells us that it is not within the province of the Court to inquire into the wisdom of the law, for, indeed, We are bound by words of the statute.124 II. The stage is now set for the determination of the propriety under the premises of the revocation or recall of HLI’s SDP. Or to be more precise, the inquiry should be: whether or not PARC gravely abused its discretion in revoking or recalling the subject SDP and placing the hacienda under CARP’s compulsory acquisition and distribution scheme. The findings, analysis and recommendation of the DAR’s Special Task Force contained and summarized in its Terminal Report provided the bases for the assailed PARC revocatory/recalling Resolution. The findings may be grouped into two: (1) the SDP is contrary to either the policy on agrarian reform, Sec. 31 of RA 6657, or DAO 10; and (2) the alleged violation by HLI of the conditions/terms of the SDP. In more particular terms, the following are essentially the reasons underpinning PARC’s revocatory or recall action: (1) Despite the lapse of 16 years from the approval of HLI’s SDP, the lives of the FWBs have hardly improved and the promised increased income has not materialized; (2) HLI has failed to keep Hacienda Luisita intact and unfragmented;

(3) The issuance of HLI shares of stock on the basis of number of hours worked––or the socalled "man days"––is grossly onerous to the FWBs, as HLI, in the guise of rotation, can unilaterally deny work to anyone. In elaboration of this ground, PARC’s Resolution No. 200634-01, denying HLI’s motion for reconsideration of Resolution No. 2005-32-01, stated that the man days criterion worked to dilute the entitlement of the original share beneficiaries; 125 (4) The distribution/transfer of shares was not in accordance with the timelines fixed by law; (5) HLI has failed to comply with its obligations to grant 3% of the gross sales every year as production-sharing benefit on top of the workers’ salary; and (6) Several homelot awardees have yet to receive their individual titles. Petitioner HLI claims having complied with, at least substantially, all its obligations under the SDP, as approved by PARC itself, and tags the reasons given for the revocation of the SDP as unfounded. Public respondents, on the other hand, aver that the assailed resolution rests on solid grounds set forth in the Terminal Report, a position shared by AMBALA, which, in some pleadings, is represented by the same counsel as that appearing for the Supervisory Group. FARM, for its part, posits the view that legal bases obtain for the revocation of the SDP, because it does not conform to Sec. 31 of RA 6657 and DAO 10. And training its sight on the resulting dilution of the equity of the FWBs appearing in HLI’s masterlist, FARM would state that the SDP, as couched and implemented, spawned disparity when there should be none; parity when there should have been differentiation.126 The petition is not impressed with merit. In the Terminal Report adopted by PARC, it is stated that the SDP violates the agrarian reform policy under Sec. 2 of RA 6657, as the said plan failed to enhance the dignity and improve the quality of lives of the FWBs through greater productivity of agricultural lands. We disagree. Sec. 2 of RA 6657 states: SECTION 2. Declaration of Principles and Policies.¾It is the policy of the State to pursue a Comprehensive Agrarian Reform Program (CARP). The welfare of the landless farmers and farm workers will receive the highest consideration to promote social justice and to move the nation towards sound rural development and industrialization, and the establishment of owner cultivatorship of economic-sized farms as the basis of Philippine agriculture. To this end, a more equitable distribution and ownership of land, with due regard to the rights of landowners to just compensation and to the ecological needs of the nation, shall be undertaken to provide farmers and farm workers with the opportunity to enhance their dignity and improve the quality of their lives through greater productivity of agricultural lands. The agrarian reform program is founded on the right of farmers and regular farm workers, who are landless, to own directly or collectively the lands they till or, in the case of other farm workers, to receive a share of the fruits thereof. To this end, the State shall encourage the just distribution of all agricultural lands, subject to the priorities and retention limits set forth in this Act, having taken into account ecological, developmental, and equity considerations, and subject to the payment of just

compensation. The State shall respect the right of small landowners and shall provide incentives for voluntary land-sharing. (Emphasis supplied.) Paragraph 2 of the above-quoted provision specifically mentions that "a more equitable distribution and ownership of land x x x shall be undertaken to provide farmers and farm workers with the opportunity to enhance their dignity and improve the quality of their lives through greater productivity of agricultural lands." Of note is the term "opportunity" which is defined as a favorable chance or opening offered by circumstances.127 Considering this, by no stretch of imagination can said provision be construed as a guarantee in improving the lives of the FWBs. At best, it merely provides for a possibility or favorable chance of uplifting the economic status of the FWBs, which may or may not be attained. Pertinently, improving the economic status of the FWBs is neither among the legal obligations of HLI under the SDP nor an imperative imposition by RA 6657 and DAO 10, a violation of which would justify discarding the stock distribution option. Nothing in that option agreement, law or department order indicates otherwise. Significantly, HLI draws particular attention to its having paid its FWBs, during the regime of the SDP (1989-2005), some PhP 3 billion by way of salaries/wages and higher benefits exclusive of free hospital and medical benefits to their immediate family. And attached as Annex "G" to HLI’s Memorandum is the certified true report of the finance manager of Jose Cojuangco & Sons Organizations-Tarlac Operations, captioned as "HACIENDA LUISITA, INC. Salaries, Benefits and Credit Privileges (in Thousand Pesos) Since the Stock Option was Approved by PARC/CARP," detailing what HLI gave their workers from 1989 to 2005. The sum total, as added up by the Court, yields the following numbers: Total Direct Cash Out (Salaries/Wages & Cash Benefits) = PhP 2,927,848; Total Non-Direct Cash Out (Hospital/Medical Benefits) = PhP 303,040. The cash out figures, as stated in the report, include the cost of homelots; the PhP 150 million or so representing 3% of the gross produce of the hacienda; and the PhP 37.5 million representing 3% from the proceeds of the sale of the 500-hectare converted lands. While not included in the report, HLI manifests having given the FWBs 3% of the PhP 80 million paid for the 80 hectares of land traversed by the SCTEX.128 On top of these, it is worth remembering that the shares of stocks were given by HLI to the FWBs for free. Verily, the FWBs have benefited from the SDP. To address urgings that the FWBs be allowed to disengage from the SDP as HLI has not anyway earned profits through the years, it cannot be over-emphasized that, as a matter of common business sense, no corporation could guarantee a profitable run all the time. As has been suggested, one of the key features of an SDP of a corporate landowner is the likelihood of the corporate vehicle not earning, or, worse still, losing money. 129 The Court is fully aware that one of the criteria under DAO 10 for the PARC to consider the advisability of approving a stock distribution plan is the likelihood that the plan "would result in increased income and greater benefits to [qualified beneficiaries] than if the lands were divided and distributed to them individually."130 But as aptly noted during the oral arguments, DAO 10 ought to have not, as it cannot, actually exact assurance of success on something that is subject to the will of man, the forces of nature or the inherent risky nature of business.131 Just like in actual land distribution, an SDP cannot guarantee, as indeed the SDOA does not guarantee, a comfortable life for the FWBs. The Court can take judicial notice of the fact that there were many instances wherein after a farmworker beneficiary has been awarded with an agricultural land, he just subsequently sells it and is eventually left with nothing in the end.

In all then, the onerous condition of the FWBs’ economic status, their life of hardship, if that really be the case, can hardly be attributed to HLI and its SDP and provide a valid ground for the plan’s revocation. Neither does HLI’s SDP, whence the DAR-attested SDOA/MOA is based, infringe Sec. 31 of RA 6657, albeit public respondents erroneously submit otherwise. The provisions of the first paragraph of the adverted Sec. 31 are without relevance to the issue on the propriety of the assailed order revoking HLI’s SDP, for the paragraph deals with the transfer of agricultural lands to the government, as a mode of CARP compliance, thus: SEC. 31. Corporate Landowners.¾Corporate landowners may voluntarily transfer ownership over their agricultural landholdings to the Republic of the Philippines pursuant to Section 20 hereof or to qualified beneficiaries under such terms and conditions, consistent with this Act, as they may agree, subject to confirmation by the DAR. The second and third paragraphs, with their sub-paragraphs, of Sec. 31 provide as follows: Upon certification by the DAR, corporations owning agricultural lands may give their qualified beneficiaries the right to purchase such proportion of the capital stock of the corporation that the agricultural land, actually devoted to agricultural activities, bears in relation to the company’s total assets, under such terms and conditions as may be agreed upon by them. In no case shall the compensation received by the workers at the time the shares of stocks are distributed be reduced. x x x Corporations or associations which voluntarily divest a proportion of their capital stock, equity or participation in favor of their workers or other qualified beneficiaries under this section shall be deemed to have complied with the provisions of this Act: Provided, That the following conditions are complied with: (a) In order to safeguard the right of beneficiaries who own shares of stocks to dividends and other financial benefits, the books of the corporation or association shall be subject to periodic audit by certified public accountants chosen by the beneficiaries; (b) Irrespective of the value of their equity in the corporation or association, the beneficiaries shall be assured of at least one (1) representative in the board of directors, or in a management or executive committee, if one exists, of the corporation or association; (c) Any shares acquired by such workers and beneficiaries shall have the same rights and features as all other shares; and (d) Any transfer of shares of stocks by the original beneficiaries shall be void ab initio unless said transaction is in favor of a qualified and registered beneficiary within the same corporation. The mandatory minimum ratio of land-to-shares of stock supposed to be distributed or allocated to qualified beneficiaries, adverting to what Sec. 31 of RA 6657 refers to as that "proportion of the capital stock of the corporation that the agricultural land, actually devoted to agricultural activities, bears in relation to the company’s total assets" had been observed.

Paragraph one (1) of the SDOA, which was based on the SDP, conforms to Sec. 31 of RA 6657. The stipulation reads: 1. The percentage of the value of the agricultural land of Hacienda Luisita (P196,630,000.00) in relation to the total assets (P590,554,220.00) transferred and conveyed to the SECOND PARTY is 33.296% that, under the law, is the proportion of the outstanding capital stock of the SECOND PARTY, which is P355,531,462.00 or 355,531,462 shares with a par value of P1.00 per share, that has to be distributed to the THIRD PARTY under the stock distribution plan, the said 33.296% thereof being P118,391,976.85 or 118,391,976.85 shares. The appraised value of the agricultural land is PhP 196,630,000 and of HLI’s other assets is PhP 393,924,220. The total value of HLI’s assets is, therefore, PhP 590,554,220. 132 The percentage of the value of the agricultural lands (PhP 196,630,000) in relation to the total assets (PhP 590,554,220) is 33.296%, which represents the stockholdings of the 6,296 original qualified farmworker-beneficiaries (FWBs) in HLI. The total number of shares to be distributed to said qualified FWBs is 118,391,976.85 HLI shares. This was arrived at by getting 33.296% of the 355,531,462 shares which is the outstanding capital stock of HLI with a value of PhP 355,531,462. Thus, if we divide the 118,391,976.85 HLI shares by 6,296 FWBs, then each FWB is entitled to 18,804.32 HLI shares. These shares under the SDP are to be given to FWBs for free. The Court finds that the determination of the shares to be distributed to the 6,296 FWBs strictly adheres to the formula prescribed by Sec. 31(b) of RA 6657. Anent the requirement under Sec. 31(b) of the third paragraph, that the FWBs shall be assured of at least one (1) representative in the board of directors or in a management or executive committee irrespective of the value of the equity of the FWBs in HLI, the Court finds that the SDOA contained provisions making certain the FWBs’ representation in HLI’s governing board, thus: 5. Even if only a part or fraction of the shares earmarked for distribution will have been acquired from the FIRST PARTY and distributed to the THIRD PARTY, FIRST PARTY shall execute at the beginning of each fiscal year an irrevocable proxy, valid and effective for one (1) year, in favor of the farmworkers appearing as shareholders of the SECOND PARTY at the start of said year which will empower the THIRD PARTY or their representative to vote in stockholders’ and board of directors’ meetings of the SECOND PARTY convened during the year the entire 33.296% of the outstanding capital stock of the SECOND PARTY earmarked for distribution and thus be able to gain such number of seats in the board of directors of the SECOND PARTY that the whole 33.296% of the shares subject to distribution will be entitled to. Also, no allegations have been made against HLI restricting the inspection of its books by accountants chosen by the FWBs; hence, the assumption may be made that there has been no violation of the statutory prescription under sub-paragraph (a) on the auditing of HLI’s accounts. Public respondents, however, submit that the distribution of the mandatory minimum ratio of land-toshares of stock, referring to the 118,391,976.85 shares with par value of PhP 1 each, should have been made in full within two (2) years from the approval of RA 6657, in line with the last paragraph of Sec. 31 of said law.133 Public respondents’ submission is palpably erroneous. We have closely examined the last paragraph alluded to, with particular focus on the two-year period mentioned, and nothing in it remotely supports the public respondents’ posture. In its pertinent part, said Sec. 31 provides: SEC. 31. Corporate Landowners x x x

If within two (2) years from the approval of this Act, the [voluntary] land or stock transfer envisioned above is not made or realized or the plan for such stock distribution approved by the PARC within the same period, the agricultural land of the corporate owners or corporation shall be subject to the compulsory coverage of this Act. (Word in bracket and emphasis added.) Properly viewed, the words "two (2) years" clearly refer to the period within which the corporate landowner, to avoid land transfer as a mode of CARP coverage under RA 6657, is to avail of the stock distribution option or to have the SDP approved. The HLI secured approval of its SDP in November 1989, well within the two-year period reckoned from June 1988 when RA 6657 took effect. Having hurdled the alleged breach of the agrarian reform policy under Sec. 2 of RA 6657 as well as the statutory issues, We shall now delve into what PARC and respondents deem to be other instances of violation of DAO 10 and the SDP. On the Conversion of Lands Contrary to the almost parallel stance of the respondents, keeping Hacienda Luisita unfragmented is also not among the imperative impositions by the SDP, RA 6657, and DAO 10. The Terminal Report states that the proposed distribution plan submitted in 1989 to the PARC effectively assured the intended stock beneficiaries that the physical integrity of the farm shall remain inviolate. Accordingly, the Terminal Report and the PARC-assailed resolution would take HLI to task for securing approval of the conversion to non-agricultural uses of 500 hectares of the hacienda. In not too many words, the Report and the resolution view the conversion as an infringement of Sec. 5(a) of DAO 10 which reads: "a. that the continued operation of the corporation with its agricultural land intact and unfragmented is viable with potential for growth and increased profitability." The PARC is wrong. In the first place, Sec. 5(a)––just like the succeeding Sec. 5(b) of DAO 10 on increased income and greater benefits to qualified beneficiaries––is but one of the stated criteria to guide PARC in deciding on whether or not to accept an SDP. Said Sec. 5(a) does not exact from the corporate landownerapplicant the undertaking to keep the farm intact and unfragmented ad infinitum. And there is logic to HLI’s stated observation that the key phrase in the provision of Sec. 5(a) is "viability of corporate operations": "[w]hat is thus required is not the agricultural land remaining intact x x x but the viability of the corporate operations with its agricultural land being intact and unfragmented. Corporate operation may be viable even if the corporate agricultural land does not remain intact or [un]fragmented."134 It is, of course, anti-climactic to mention that DAR viewed the conversion as not violative of any issuance, let alone undermining the viability of Hacienda Luisita’s operation, as the DAR Secretary approved the land conversion applied for and its disposition via his Conversion Order dated August 14, 1996 pursuant to Sec. 65 of RA 6657 which reads: Sec. 65. Conversion of Lands.¾After the lapse of five years from its award when the land ceases to be economically feasible and sound for agricultural purposes, or the locality has become urbanized and the land will have a greater economic value for residential, commercial or industrial purposes, the DAR upon application of the beneficiary or landowner with due notice to the affected parties, and subject to existing laws, may authorize the x x x conversion of the land and its dispositions. x x x

On the 3% Production Share On the matter of the alleged failure of HLI to comply with sharing the 3% of the gross production sales of the hacienda and pay dividends from profit, the entries in its financial books tend to indicate compliance by HLI of the profit-sharing equivalent to 3% of the gross sales from the production of the agricultural land on top of (a) the salaries and wages due FWBs as employees of the company and (b) the 3% of the gross selling price of the converted land and that portion used for the SCTEX. A plausible evidence of compliance or non-compliance, as the case may be, could be the books of account of HLI. Evidently, the cry of some groups of not having received their share from the gross production sales has not adequately been validated on the ground by the Special Task Force. Indeed, factual findings of administrative agencies are conclusive when supported by substantial evidence and are accorded due respect and weight, especially when they are affirmed by the CA.135 However, such rule is not absolute. One such exception is when the findings of an administrative agency are conclusions without citation of specific evidence on which they are based,136 such as in this particular instance. As culled from its Terminal Report, it would appear that the Special Task Force rejected HLI’s claim of compliance on the basis of this ratiocination: 

The Task Force position: Though, allegedly, the Supervisory Group receives the 3% gross production share and that others alleged that they received 30 million pesos still others maintain that they have not received anything yet. Item No. 4 of the MOA is clear and must be followed. There is a distinction between the total gross sales from the production of the land and the proceeds from the sale of the land. The former refers to the fruits/yield of the agricultural land while the latter is the land itself. The phrase "the beneficiaries are entitled every year to an amount approximately equivalent to 3% would only be feasible if the subject is the produce since there is at least one harvest per year, while such is not the case in the sale of the agricultural land. This negates then the claim of HLI that, all that the FWBs can be entitled to, if any, is only 3% of the purchase price of the converted land.



Besides, the Conversion Order dated 14 August 1996 provides that "the benefits, wages and the like, presently received by the FWBs shall not in any way be reduced or adversely affected. Three percent of the gross selling price of the sale of the converted land shall be awarded to the beneficiaries of the SDO." The 3% gross production share then is different from the 3% proceeds of the sale of the converted land and, with more reason, the 33% share being claimed by the FWBs as part owners of the Hacienda, should have been given the FWBs, as stockholders, and to which they could have been entitled if only the land were acquired and redistributed to them under the CARP. xxxx



The FWBs do not receive any other benefits under the MOA except the aforementioned [(viz: shares of stocks (partial), 3% gross production sale (not all) and homelots (not all)].

Judging from the above statements, the Special Task Force is at best silent on whether HLI has failed to comply with the 3% production-sharing obligation or the 3% of the gross selling price of the converted land and the SCTEX lot. In fact, it admits that the FWBs, though not all, have received their share of the gross production sales and in the sale of the lot to SCTEX. At most, then, HLI had complied substantially with this SDP undertaking and the conversion order. To be sure, this slight breach would not justify the setting to naught by PARC of the approval action of the earlier PARC. Even in contract law, rescission, predicated on violation of reciprocity, will not be permitted for a slight or casual breach of contract; rescission may be had only for such breaches that are substantial and fundamental as to defeat the object of the parties in making the agreement. 137

Despite the foregoing findings, the revocation of the approval of the SDP is not without basis as shown below. On Titles to Homelots Under RA 6657, the distribution of homelots is required only for corporations or business associations owning or operating farms which opted for land distribution. Sec. 30 of RA 6657 states: SEC. 30. Homelots and Farmlots for Members of Cooperatives.¾The individual members of the cooperatives or corporations mentioned in the preceding section shall be provided with homelots and small farmlots for their family use, to be taken from the land owned by the cooperative or corporation. The "preceding section" referred to in the above-quoted provision is as follows: SEC. 29. Farms Owned or Operated by Corporations or Other Business Associations.¾In the case of farms owned or operated by corporations or other business associations, the following rules shall be observed by the PARC. In general, lands shall be distributed directly to the individual worker-beneficiaries. In case it is not economically feasible and sound to divide the land, then it shall be owned collectively by the worker-beneficiaries who shall form a workers’ cooperative or association which will deal with the corporation or business association. Until a new agreement is entered into by and between the workers’ cooperative or association and the corporation or business association, any agreement existing at the time this Act takes effect between the former and the previous landowner shall be respected by both the workers’ cooperative or association and the corporation or business association. Noticeably, the foregoing provisions do not make reference to corporations which opted for stock distribution under Sec. 31 of RA 6657. Concomitantly, said corporations are not obliged to provide for it except by stipulation, as in this case. Under the SDP, HLI undertook to "subdivide and allocate for free and without charge among the qualified family-beneficiaries x x x residential or homelots of not more than 240 sq. m. each, with each family beneficiary being assured of receiving and owning a homelot in the barrio or barangay where it actually resides," "within a reasonable time." More than sixteen (16) years have elapsed from the time the SDP was approved by PARC, and yet, it is still the contention of the FWBs that not all was given the 240-square meter homelots and, of those who were already given, some still do not have the corresponding titles. During the oral arguments, HLI was afforded the chance to refute the foregoing allegation by submitting proof that the FWBs were already given the said homelots: Justice Velasco: x x x There is also an allegation that the farmer beneficiaries, the qualified family beneficiaries were not given the 240 square meters each. So, can you also [prove] that the qualified family beneficiaries were already provided the 240 square meter homelots. Atty. Asuncion: We will, your Honor please.138

Other than the financial report, however, no other substantial proof showing that all the qualified beneficiaries have received homelots was submitted by HLI. Hence, this Court is constrained to rule that HLI has not yet fully complied with its undertaking to distribute homelots to the FWBs under the SDP. On "Man Days" and the Mechanics of Stock Distribution In our review and analysis of par. 3 of the SDOA on the mechanics and timelines of stock distribution, We find that it violates two (2) provisions of DAO 10. Par. 3 of the SDOA states: 3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY [HLI] shall arrange with the FIRST PARTY [TDC] the acquisition and distribution to the THIRD PARTY [FWBs] on the basis of number of days worked and at no cost to them of one-thirtieth (1/30) of 118,391,976.85 shares of the capital stock of the SECOND PARTY that are presently owned and held by the FIRST PARTY, until such time as the entire block of 118,391,976.85 shares shall have been completely acquired and distributed to the THIRD PARTY. Based on the above-quoted provision, the distribution of the shares of stock to the FWBs, albeit not entailing a cash out from them, is contingent on the number of "man days," that is, the number of days that the FWBs have worked during the year. This formula deviates from Sec. 1 of DAO 10, which decrees the distribution of equal number of shares to the FWBs as the minimum ratio of shares of stock for purposes of compliance with Sec. 31 of RA 6657. As stated in Sec. 4 of DAO 10: Section 4. Stock Distribution Plan.¾The [SDP] submitted by the corporate landowner-applicant shall provide for the distribution of an equal number of shares of the same class and value, with the same rights and features as all other shares, to each of the qualified beneficiaries. This distribution plan in all cases, shall be at least the minimum ratio for purposes of compliance with Section 31 of R.A. No. 6657. On top of the minimum ratio provided under Section 3 of this Implementing Guideline, the corporate landowner-applicant may adopt additional stock distribution schemes taking into account factors such as rank, seniority, salary, position and other circumstances which may be deemed desirable as a matter of sound company policy. (Emphasis supplied.) The above proviso gives two (2) sets or categories of shares of stock which a qualified beneficiary can acquire from the corporation under the SDP. The first pertains, as earlier explained, to the mandatory minimum ratio of shares of stock to be distributed to the FWBs in compliance with Sec. 31 of RA 6657. This minimum ratio contemplates of that "proportion of the capital stock of the corporation that the agricultural land, actually devoted to agricultural activities, bears in relation to the company’s total assets."139 It is this set of shares of stock which, in line with Sec. 4 of DAO 10, is supposed to be allocated "for the distribution of an equal number of shares of stock of the same class and value, with the same rights and features as all other shares, to each of the qualified beneficiaries." On the other hand, the second set or category of shares partakes of a gratuitous extra grant, meaning that this set or category constitutes an augmentation share/s that the corporate landowner may give under an additional stock distribution scheme, taking into account such variables as rank, seniority, salary, position and like factors which the management, in the exercise of its sound discretion, may deem desirable.140 Before anything else, it should be stressed that, at the time PARC approved HLI’s SDP, HLI recognized 6,296individuals as qualified FWBs. And under the 30-year stock distribution program

envisaged under the plan, FWBs who came in after 1989, new FWBs in fine, may be accommodated, as they appear to have in fact been accommodated as evidenced by their receipt of HLI shares. Now then, by providing that the number of shares of the original 1989 FWBs shall depend on the number of "man days," HLI violated the afore-quoted rule on stock distribution and effectively deprived the FWBs of equal shares of stock in the corporation, for, in net effect, these 6,296 qualified FWBs, who theoretically had given up their rights to the land that could have been distributed to them, suffered a dilution of their due share entitlement. As has been observed during the oral arguments, HLI has chosen to use the shares earmarked for farmworkers as reward system chips to water down the shares of the original 6,296 FWBs.141 Particularly: Justice Abad: If the SDOA did not take place, the other thing that would have happened is that there would be CARP? Atty. Dela Merced: Yes, Your Honor. Justice Abad: That’s the only point I want to know x x x. Now, but they chose to enter SDOA instead of placing the land under CARP. And for that reason those who would have gotten their shares of the land actually gave up their rights to this land in place of the shares of the stock, is that correct? Atty. Dela Merced: It would be that way, Your Honor. Justice Abad: Right now, also the government, in a way, gave up its right to own the land because that way the government takes own [sic] the land and distribute it to the farmers and pay for the land, is that correct? Atty. Dela Merced: Yes, Your Honor. Justice Abad: And then you gave thirty-three percent (33%) of the shares of HLI to the farmers at that time that numbered x x x those who signed five thousand four hundred ninety eight (5,498) beneficiaries, is that correct? Atty. Dela Merced: Yes, Your Honor. Justice Abad: But later on, after assigning them their shares, some workers came in from 1989, 1990, 1991, 1992 and the rest of the years that you gave additional shares who were not in the original list of owners? Atty. Dela Merced: Yes, Your Honor. Justice Abad: Did those new workers give up any right that would have belong to them in 1989 when the land was supposed to have been placed under CARP? Atty. Dela Merced: If you are talking or referring… (interrupted) Justice Abad: None! You tell me. None. They gave up no rights to land? Atty. Dela Merced: They did not do the same thing as we did in 1989, Your Honor.

Justice Abad: No, if they were not workers in 1989 what land did they give up? None, if they become workers later on. Atty. Dela Merced: None, Your Honor, I was referring, Your Honor, to the original… (interrupted) Justice Abad: So why is it that the rights of those who gave up their lands would be diluted, because the company has chosen to use the shares as reward system for new workers who come in? It is not that the new workers, in effect, become just workers of the corporation whose stockholders were already fixed. The TADECO who has shares there about sixty six percent (66%) and the five thousand four hundred ninety eight (5,498) farmers at the time of the SDOA? Explain to me. Why, why will you x x x what right or where did you get that right to use this shares, to water down the shares of those who should have been benefited, and to use it as a reward system decided by the company?142 From the above discourse, it is clear as day that the original 6,296 FWBs, who were qualified beneficiaries at the time of the approval of the SDP, suffered from watering down of shares. As determined earlier, each original FWB is entitled to 18,804.32 HLI shares. The original FWBs got less than the guaranteed 18,804.32 HLI shares per beneficiary, because the acquisition and distribution of the HLI shares were based on "man days" or "number of days worked" by the FWB in a year’s time. As explained by HLI, a beneficiary needs to work for at least 37 days in a fiscal year before he or she becomes entitled to HLI shares. If it falls below 37 days, the FWB, unfortunately, does not get any share at year end. The number of HLI shares distributed varies depending on the number of days the FWBs were allowed to work in one year. Worse, HLI hired farmworkers in addition to the original 6,296 FWBs, such that, as indicated in the Compliance dated August 2, 2010 submitted by HLI to the Court, the total number of farmworkers of HLI as of said date stood at 10,502. All these farmworkers, which include the original 6,296 FWBs, were given shares out of the 118,931,976.85 HLI shares representing the 33.296% of the total outstanding capital stock of HLI. Clearly, the minimum individual allocation of each original FWB of 18,804.32 shares was diluted as a result of the use of "man days" and the hiring of additional farmworkers. Going into another but related matter, par. 3 of the SDOA expressly providing for a 30-year timeframe for HLI-to-FWBs stock transfer is an arrangement contrary to what Sec. 11 of DAO 10 prescribes. Said Sec. 11 provides for the implementation of the approved stock distribution plan within three (3) months from receipt by the corporate landowner of the approval of the plan by PARC. In fact, based on the said provision, the transfer of the shares of stock in the names of the qualified FWBs should be recorded in the stock and transfer books and must be submitted to the SEC within sixty (60) days from implementation. As stated: Section 11. Implementation/Monitoring of Plan.¾The approved stock distribution plan shall be implemented within three (3) months from receipt by the corporate landowner-applicant of the approval thereof by the PARC, and the transfer of the shares of stocks in the names of the qualified beneficiaries shall be recorded in stock and transfer books and submitted to the Securities and Exchange Commission (SEC) within sixty (60) days from the said implementation of the stock distribution plan. (Emphasis supplied.) It is evident from the foregoing provision that the implementation, that is, the distribution of the shares of stock to the FWBs, must be made within three (3) months from receipt by HLI of the approval of the stock distribution plan by PARC. While neither of the clashing parties has made a compelling case of the thrust of this provision, the Court is of the view and so holds that the intent is to compel the corporate landowner to complete, not merely initiate, the transfer process of shares within that three-month timeframe. Reinforcing this conclusion is the 60-day stock transfer recording (with the SEC) requirement reckoned from the implementation of the SDP.

To the Court, there is a purpose, which is at once discernible as it is practical, for the three-month threshold. Remove this timeline and the corporate landowner can veritably evade compliance with agrarian reform by simply deferring to absurd limits the implementation of the stock distribution scheme. The argument is urged that the thirty (30)-year distribution program is justified by the fact that, under Sec. 26 of RA 6657, payment by beneficiaries of land distribution under CARP shall be made in thirty (30) annual amortizations. To HLI, said section provides a justifying dimension to its 30-year stock distribution program. HLI’s reliance on Sec. 26 of RA 6657, quoted in part below, is obviously misplaced as the said provision clearly deals with land distribution. SEC. 26. Payment by Beneficiaries.¾Lands awarded pursuant to this Act shall be paid for by the beneficiaries to the LBP in thirty (30) annual amortizations x x x. Then, too, the ones obliged to pay the LBP under the said provision are the beneficiaries. On the other hand, in the instant case, aside from the fact that what is involved is stock distribution, it is the corporate landowner who has the obligation to distribute the shares of stock among the FWBs. Evidently, the land transfer beneficiaries are given thirty (30) years within which to pay the cost of the land thus awarded them to make it less cumbersome for them to pay the government. To be sure, the reason underpinning the 30-year accommodation does not apply to corporate landowners in distributing shares of stock to the qualified beneficiaries, as the shares may be issued in a much shorter period of time. Taking into account the above discussion, the revocation of the SDP by PARC should be upheld for violating DAO 10. It bears stressing that under Sec. 49 of RA 6657, the PARC and the DAR have the power to issue rules and regulations, substantive or procedural. Being a product of such rule-making power, DAO 10 has the force and effect of law and must be duly complied with. 143 The PARC is, therefore, correct in revoking the SDP. Consequently, the PARC Resolution No. 89-12-2 dated November 21, l989 approving the HLI’s SDP is nullified and voided. III. We now resolve the petitions-in-intervention which, at bottom, uniformly pray for the exclusion from the coverage of the assailed PARC resolution those portions of the converted land within Hacienda Luisita which RCBC and LIPCO acquired by purchase. Both contend that they are innocent purchasers for value of portions of the converted farm land. Thus, their plea for the exclusion of that portion from PARC Resolution 2005-32-01, as implemented by a DAR-issued Notice of Coverage dated January 2, 2006, which called for mandatory CARP acquisition coverage of lands subject of the SDP. To restate the antecedents, after the conversion of the 500 hectares of land in Hacienda Luisita, HLI transferred the 300 hectares to Centennary, while ceding the remaining 200-hectare portion to LRC. Subsequently, LIPCO purchased the entire three hundred (300) hectares of land from Centennary for the purpose of developing the land into an industrial complex.144 Accordingly, the TCT in Centennary’s name was canceled and a new one issued in LIPCO’s name. Thereafter, said land was subdivided into two (2) more parcels of land. Later on, LIPCO transferred about 184 hectares to

RCBC by way of dacion en pago, by virtue of which TCTs in the name of RCBC were subsequently issued. Under Sec. 44 of PD 1529 or the Property Registration Decree, "every registered owner receiving a certificate of title in pursuance of a decree of registration and every subsequent purchaser of registered land taking a certificate of title for value and in good faith shall hold the same free from all encumbrances except those noted on the certificate and enumerated therein." 145 It is settled doctrine that one who deals with property registered under the Torrens system need not go beyond the four corners of, but can rely on what appears on, the title. He is charged with notice only of such burdens and claims as are annotated on the title. This principle admits of certain exceptions, such as when the party has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry, or when the purchaser has knowledge of a defect or the lack of title in his vendor or of sufficient facts to induce a reasonably prudent man to inquire into the status of the title of the property in litigation.146 A higher level of care and diligence is of course expected from banks, their business being impressed with public interest. 147 Millena v. Court of Appeals describes a purchaser in good faith in this wise: x x x A purchaser in good faith is one who buys property of another, without notice that some other person has a right to, or interest in, such property at the time of such purchase, or before he has notice of the claim or interest of some other persons in the property. Good faith, or the lack of it, is in the final analysis a question of intention; but in ascertaining the intention by which one is actuated on a given occasion, we are necessarily controlled by the evidence as to the conduct and outward acts by which alone the inward motive may, with safety, be determined. Truly, good faith is not a visible, tangible fact that can be seen or touched, but rather a state or condition of mind which can only be judged by actual or fancied tokens or signs. Otherwise stated, good faith x x x refers to the state of mind which is manifested by the acts of the individual concerned.148 (Emphasis supplied.) In fine, there are two (2) requirements before one may be considered a purchaser in good faith, namely: (1) that the purchaser buys the property of another without notice that some other person has a right to or interest in such property; and (2) that the purchaser pays a full and fair price for the property at the time of such purchase or before he or she has notice of the claim of another. It can rightfully be said that both LIPCO and RCBC are––based on the above requirements and with respect to the adverted transactions of the converted land in question––purchasers in good faith for value entitled to the benefits arising from such status. First, at the time LIPCO purchased the entire three hundred (300) hectares of industrial land, there was no notice of any supposed defect in the title of its transferor, Centennary, or that any other person has a right to or interest in such property. In fact, at the time LIPCO acquired said parcels of land, only the following annotations appeared on the TCT in the name of Centennary: the Secretary’s Certificate in favor of Teresita Lopa, the Secretary’s Certificate in favor of Shintaro Murai, and the conversion of the property from agricultural to industrial and residential use. 149 The same is true with respect to RCBC. At the time it acquired portions of Hacienda Luisita, only the following general annotations appeared on the TCTs of LIPCO: the Deed of Restrictions, limiting its use solely as an industrial estate; the Secretary’s Certificate in favor of Koji Komai and Kyosuke Hori; and the Real Estate Mortgage in favor of RCBC to guarantee the payment of PhP 300 million. It cannot be claimed that RCBC and LIPCO acted in bad faith in acquiring the lots that were previously covered by the SDP. Good faith "consists in the possessor’s belief that the person from

whom he received it was the owner of the same and could convey his title. Good faith requires a well-founded belief that the person from whom title was received was himself the owner of the land, with the right to convey it. There is good faith where there is an honest intention to abstain from taking any unconscientious advantage from another."150 It is the opposite of fraud. To be sure, intervenor RCBC and LIPCO knew that the lots they bought were subjected to CARP coverage by means of a stock distribution plan, as the DAR conversion order was annotated at the back of the titles of the lots they acquired. However, they are of the honest belief that the subject lots were validly converted to commercial or industrial purposes and for which said lots were taken out of the CARP coverage subject of PARC Resolution No. 89-12-2 and, hence, can be legally and validly acquired by them. After all, Sec. 65 of RA 6657 explicitly allows conversion and disposition of agricultural lands previously covered by CARP land acquisition "after the lapse of five (5) years from its award when the land ceases to be economically feasible and sound for agricultural purposes or the locality has become urbanized and the land will have a greater economic value for residential, commercial or industrial purposes." Moreover, DAR notified all the affected parties, more particularly the FWBs, and gave them the opportunity to comment or oppose the proposed conversion. DAR, after going through the necessary processes, granted the conversion of 500 hectares of Hacienda Luisita pursuant to its primary jurisdiction under Sec. 50 of RA 6657 to determine and adjudicate agrarian reform matters and its original exclusive jurisdiction over all matters involving the implementation of agrarian reform. The DAR conversion order became final and executory after none of the FWBs interposed an appeal to the CA. In this factual setting, RCBC and LIPCO purchased the lots in question on their honest and well-founded belief that the previous registered owners could legally sell and convey the lots though these were previously subject of CARP coverage. Ergo, RCBC and LIPCO acted in good faith in acquiring the subject lots. And second, both LIPCO and RCBC purchased portions of Hacienda Luisita for value. Undeniably, LIPCO acquired 300 hectares of land from Centennary for the amount of PhP 750 million pursuant to a Deed of Sale dated July 30, 1998.151 On the other hand, in a Deed of Absolute Assignment dated November 25, 2004, LIPCO conveyed portions of Hacienda Luisita in favor of RCBC by way of dacion en pago to pay for a loan of PhP 431,695,732.10. As bona fide purchasers for value, both LIPCO and RCBC have acquired rights which cannot just be disregarded by DAR, PARC or even by this Court. As held in Spouses Chua v. Soriano: With the property in question having already passed to the hands of purchasers in good faith, it is now of no moment that some irregularity attended the issuance of the SPA, consistent with our pronouncement in Heirs of Spouses Benito Gavino and Juana Euste v. Court of Appeals, to wit: x x x the general rule that the direct result of a previous void contract cannot be valid, is inapplicable in this case as it will directly contravene the Torrens system of registration. Where innocent third persons, relying on the correctness of the certificate of title thus issued, acquire rights over the property, the court cannot disregard such rights and order the cancellation of the certificate. The effect of such outright cancellation will be to impair public confidence in the certificate of title. The sanctity of the Torrens system must be preserved; otherwise, everyone dealing with the property registered under the system will have to inquire in every instance as to whether the title had been regularly or irregularly issued, contrary to the evident purpose of the law. Being purchasers in good faith, the Chuas already acquired valid title to the property. A purchaser in good faith holds an indefeasible title to the property and he is entitled to the protection of the law.152 x x x (Emphasis supplied.)

To be sure, the practicalities of the situation have to a point influenced Our disposition on the fate of RCBC and LIPCO. After all, the Court, to borrow from Association of Small Landowners in the Philippines, Inc.,153 is not a "cloistered institution removed" from the realities on the ground. To note, the approval and issuances of both the national and local governments showing that certain portions of Hacienda Luisita have effectively ceased, legally and physically, to be agricultural and, therefore, no longer CARPable are a matter of fact which cannot just be ignored by the Court and the DAR. Among the approving/endorsing issuances:154 (a) Resolution No. 392 dated 11 December 1996 of the Sangguniang Bayan of Tarlac favorably endorsing the 300-hectare industrial estate project of LIPCO; (b) BOI Certificate of Registration No. 96-020 dated 20 December 1996 issued in accordance with the Omnibus Investments Code of 1987; (c) PEZA Certificate of Board Resolution No. 97-202 dated 27 June 1997, approving LIPCO’s application for a mixed ecozone and proclaiming the three hundred (300) hectares of the industrial land as a Special Economic Zone; (d) Resolution No. 234 dated 08 August 1997 of the Sangguniang Bayan of Tarlac, approving the Final Development Permit for the Luisita Industrial Park II Project; (e) Development Permit dated 13 August 1997 for the proposed Luisita Industrial Park II Project issued by the Office of the Sangguniang Bayan of Tarlac;155 (f) DENR Environmental Compliance Certificate dated 01 October 1997 issued for the proposed project of building an industrial complex on three hundred (300) hectares of industrial land;156 (g) Certificate of Registration No. 00794 dated 26 December 1997 issued by the HLURB on the project of Luisita Industrial Park II with an area of three million (3,000,000) square meters;157 (h) License to Sell No. 0076 dated 26 December 1997 issued by the HLURB authorizing the sale of lots in the Luisita Industrial Park II; (i) Proclamation No. 1207 dated 22 April 1998 entitled "Declaring Certain Parcels of Private Land in Barangay San Miguel, Municipality of Tarlac, Province of Tarlac, as a Special Economic Zone pursuant to Republic Act No. 7916," designating the Luisita Industrial Park II consisting of three hundred hectares (300 has.) of industrial land as a Special Economic Zone; and (j) Certificate of Registration No. EZ-98-05 dated 07 May 1998 issued by the PEZA, stating that pursuant to Presidential Proclamation No. 1207 dated 22 April 1998 and Republic Act No. 7916, LIPCO has been registered as an Ecozone Developer/Operator of Luisita Industrial Park II located in San Miguel, Tarlac, Tarlac. While a mere reclassification of a covered agricultural land or its inclusion in an economic zone does not automatically allow the corporate or individual landowner to change its use, 158 the reclassification process is a prima facie indicium that the land has ceased to be economically feasible and sound for agricultural uses. And if only to stress, DAR Conversion Order No. 030601074-764-(95) issued in

1996 by then DAR Secretary Garilao had effectively converted 500 hectares of hacienda land from agricultural to industrial/commercial use and authorized their disposition. In relying upon the above-mentioned approvals, proclamation and conversion order, both RCBC and LIPCO cannot be considered at fault for believing that certain portions of Hacienda Luisita are industrial/commercial lands and are, thus, outside the ambit of CARP. The PARC, and consequently DAR, gravely abused its discretion when it placed LIPCO’s and RCBC’s property which once formed part of Hacienda Luisita under the CARP compulsory acquisition scheme via the assailed Notice of Coverage. As regards the 80.51-hectare land transferred to the government for use as part of the SCTEX, this should also be excluded from the compulsory agrarian reform coverage considering that the transfer was consistent with the government’s exercise of the power of eminent domain 159 and none of the parties actually questioned the transfer. While We affirm the revocation of the SDP on Hacienda Luisita subject of PARC Resolution Nos. 2005-32-01 and 2006-34-01, the Court cannot close its eyes to certain "operative facts" that had occurred in the interim. Pertinently, the "operative fact" doctrine realizes that, in declaring a law or executive action null and void, or, by extension, no longer without force and effect, undue harshness and resulting unfairness must be avoided. This is as it should realistically be, since rights might have accrued in favor of natural or juridical persons and obligations justly incurred in the meantime.160 The actual existence of a statute or executive act is, prior to such a determination, an operative fact and may have consequences which cannot justly be ignored; the past cannot always be erased by a new judicial declaration.161 The oft-cited De Agbayani v. Philippine National Bank162 discussed the effect to be given to a legislative or executive act subsequently declared invalid: x x x It does not admit of doubt that prior to the declaration of nullity such challenged legislative or executive act must have been in force and had to be complied with. This is so as until after the judiciary, in an appropriate case, declares its invalidity, it is entitled to obedience and respect. Parties may have acted under it and may have changed their positions. What could be more fitting than that in a subsequent litigation regard be had to what has been done while such legislative or executive act was in operation and presumed to be valid in all respects. It is now accepted as a doctrine that prior to its being nullified, its existence as a fact must be reckoned with. This is merely to reflect awareness that precisely because the judiciary is the government organ which has the final say on whether or not a legislative or executive measure is valid, a period of time may have elapsed before it can exercise the power of judicial review that may lead to a declaration of nullity. It would be to deprive the law of its quality of fairness and justice then, if there be no recognition of what had transpired prior to such adjudication. In the language of an American Supreme Court decision: "The actual existence of a statute, prior to such a determination of [unconstitutionality], is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects,––with respect to particular relations, individual and corporate, and particular conduct, private and official." x x x Given the above perspective and considering that more than two decades had passed since the PARC’s approval of the HLI’s SDP, in conjunction with numerous activities performed in good faith by HLI, and the reliance by the FWBs on the legality and validity of the PARC-approved SDP, perforce, certain rights of the parties, more particularly the FWBs, have to be respected pursuant to the application in a general way of the operative fact doctrine.

A view, however, has been advanced that the operative fact doctrine is of minimal or altogether without relevance to the instant case as it applies only in considering the effects of a declaration of unconstitutionality of a statute, and not of a declaration of nullity of a contract. This is incorrect, for this view failed to consider is that it is NOT the SDOA dated May 11, 1989 which was revoked in the instant case. Rather, it is PARC’s approval of the HLI’s Proposal for Stock Distribution under CARP which embodied the SDP that was nullified. A recall of the antecedent events would show that on May 11, 1989, Tadeco, HLI, and the qualified FWBs executed the SDOA. This agreement provided the basis and mechanics of the SDP that was subsequently proposed and submitted to DAR for approval. It was only after its review that the PARC, through then Sec. Defensor-Santiago, issued the assailed Resolution No. 89-12-2 approving the SDP. Considerably, it is not the SDOA which gave legal force and effect to the stock distribution scheme but instead, it is the approval of the SDP under the PARC Resolution No. 89-12-2 that gave it its validity. The above conclusion is bolstered by the fact that in Sec. Pangandaman’s recommendation to the PARC Excom, what he proposed is the recall/revocation of PARC Resolution No. 89-12-2 approving HLI’s SDP, and not the revocation of the SDOA. Sec. Pangandaman’s recommendation was favorably endorsed by the PARC Validation Committee to the PARC Excom, and these recommendations were referred to in the assailed Resolution No. 2005-32-01. Clearly, it is not the SDOA which was made the basis for the implementation of the stock distribution scheme. That the operative fact doctrine squarely applies to executive acts––in this case, the approval by PARC of the HLI proposal for stock distribution––is well-settled in our jurisprudence. In Chavez v. National Housing Authority,163 We held: Petitioner postulates that the "operative fact" doctrine is inapplicable to the present case because it is an equitable doctrine which could not be used to countenance an inequitable result that is contrary to its proper office. On the other hand, the petitioner Solicitor General argues that the existence of the various agreements implementing the SMDRP is an operative fact that can no longer be disturbed or simply ignored, citing Rieta v. People of the Philippines. The argument of the Solicitor General is meritorious. The "operative fact" doctrine is embodied in De Agbayani v. Court of Appeals, wherein it is stated that a legislative or executive act, prior to its being declared as unconstitutional by the courts, is valid and must be complied with, thus: xxx

xxx

xxx

This doctrine was reiterated in the more recent case of City of Makati v. Civil Service Commission, wherein we ruled that: Moreover, we certainly cannot nullify the City Government's order of suspension, as we have no reason to do so, much less retroactively apply such nullification to deprive private respondent of a compelling and valid reason for not filing the leave application. For as we have held, a void act though in law a mere scrap of paper nonetheless confers legitimacy upon past acts or omissions done in reliance thereof. Consequently, the existence of a statute or executive order prior to its being adjudged void is an operative fact to which legal consequences are attached. It would indeed be

ghastly unfair to prevent private respondent from relying upon the order of suspension in lieu of a formal leave application. (Citations omitted; Emphasis supplied.) The applicability of the operative fact doctrine to executive acts was further explicated by this Court in Rieta v. People,164 thus: Petitioner contends that his arrest by virtue of Arrest Search and Seizure Order (ASSO) No. 4754 was invalid, as the law upon which it was predicated — General Order No. 60, issued by then President Ferdinand E. Marcos — was subsequently declared by the Court, in Tañada v. Tuvera, 33 to have no force and effect. Thus, he asserts, any evidence obtained pursuant thereto is inadmissible in evidence. We do not agree. In Tañada, the Court addressed the possible effects of its declaration of the invalidity of various presidential issuances. Discussing therein how such a declaration might affect acts done on a presumption of their validity, the Court said: ". . .. In similar situations in the past this Court had taken the pragmatic and realistic course set forth in Chicot County Drainage District vs. Baxter Bank to wit: ‘The courts below have proceeded on the theory that the Act of Congress, having been found to be unconstitutional, was not a law; that it was inoperative, conferring no rights and imposing no duties, and hence affording no basis for the challenged decree. . . . It is quite clear, however, that such broad statements as to the effect of a determination of unconstitutionality must be taken with qualifications. The actual existence of a statute, prior to [the determination of its invalidity], is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects — with respect to particular conduct, private and official. Questions of rights claimed to have become vested, of status, of prior determinations deemed to have finality and acted upon accordingly, of public policy in the light of the nature both of the statute and of its previous application, demand examination. These questions are among the most difficult of those which have engaged the attention of courts, state and federal, and it is manifest from numerous decisions that an all-inclusive statement of a principle of absolute retroactive invalidity cannot be justified.’ xxx

xxx

xxx

"Similarly, the implementation/enforcement of presidential decrees prior to their publication in the Official Gazette is ‘an operative fact which may have consequences which cannot be justly ignored. The past cannot always be erased by a new judicial declaration . . . that an all-inclusive statement of a principle of absolute retroactive invalidity cannot be justified.’" The Chicot doctrine cited in Tañada advocates that, prior to the nullification of a statute, there is an imperative necessity of taking into account its actual existence as an operative fact negating the acceptance of "a principle of absolute retroactive invalidity." Whatever was done while the legislative or the executive act was in operation should be duly recognized and presumed to be valid in all respects. The ASSO that was issued in 1979 under General Order No. 60 — long before our Decision in Tañada and the arrest of petitioner — is an operative fact that can no longer be disturbed or simply ignored. (Citations omitted; Emphasis supplied.) To reiterate, although the assailed Resolution No. 2005-32-01 states that it revokes or recalls the SDP, what it actually revoked or recalled was the PARC’s approval of the SDP embodied in Resolution No. 89-12-2. Consequently, what was actually declared null and void was an executive

act, PARC Resolution No. 89-12-2,165and not a contract (SDOA). It is, therefore, wrong to say that it was the SDOA which was annulled in the instant case. Evidently, the operative fact doctrine is applicable. IV. While the assailed PARC resolutions effectively nullifying the Hacienda Luisita SDP are upheld, the revocation must, by application of the operative fact principle, give way to the right of the original 6,296 qualified FWBs to choose whether they want to remain as HLI stockholders or not. The Court cannot turn a blind eye to the fact that in 1989, 93% of the FWBs agreed to the SDOA (or the MOA), which became the basis of the SDP approved by PARC per its Resolution No. 89-12-2 dated November 21, 1989. From 1989 to 2005, the FWBs were said to have received from HLI salaries and cash benefits, hospital and medical benefits, 240-square meter homelots, 3% of the gross produce from agricultural lands, and 3% of the proceeds of the sale of the 500-hectare converted land and the 80.51-hectare lot sold to SCTEX. HLI shares totaling 118,391,976.85 were distributed as of April 22, 2005.166 On August 6, 20l0, HLI and private respondents submitted a Compromise Agreement, in which HLI gave the FWBs the option of acquiring a piece of agricultural land or remain as HLI stockholders, and as a matter of fact, most FWBs indicated their choice of remaining as stockholders. These facts and circumstances tend to indicate that some, if not all, of the FWBs may actually desire to continue as HLI shareholders. A matter best left to their own discretion. With respect to the other FWBs who were not listed as qualified beneficiaries as of November 21, 1989 when the SDP was approved, they are not accorded the right to acquire land but shall, however, continue as HLI stockholders. All the benefits and homelots 167 received by the 10,502 FWBs (6,296 original FWBs and 4,206 non-qualified FWBs) listed as HLI stockholders as of August 2, 2010 shall be respected with no obligation to refund or return them since the benefits (except the homelots) were received by the FWBs as farmhands in the agricultural enterprise of HLI and other fringe benefits were granted to them pursuant to the existing collective bargaining agreement with Tadeco. If the number of HLI shares in the names of the original FWBs who opt to remain as HLI stockholders falls below the guaranteed allocation of 18,804.32 HLI shares per FWB, the HLI shall assign additional shares to said FWBs to complete said minimum number of shares at no cost to said FWBs. With regard to the homelots already awarded or earmarked, the FWBs are not obliged to return the same to HLI or pay for its value since this is a benefit granted under the SDP. The homelots do not form part of the 4,915.75 hectares covered by the SDP but were taken from the 120.9234 hectare residential lot owned by Tadeco. Those who did not receive the homelots as of the revocation of the SDP on December 22, 2005 when PARC Resolution No. 2005-32-01 was issued, will no longer be entitled to homelots. Thus, in the determination of the ultimate agricultural land that will be subjected to land distribution, the aggregate area of the homelots will no longer be deducted. There is a claim that, since the sale and transfer of the 500 hectares of land subject of the August 14, 1996 Conversion Order and the 80.51-hectare SCTEX lot came after compulsory coverage has taken place, the FWBs should have their corresponding share of the land’s value. There is merit in the claim. Since the SDP approved by PARC Resolution No. 89-12-2 has been nullified, then all the lands subject of the SDP will automatically be subject of compulsory coverage under Sec. 31 of RA 6657. Since the Court excluded the 500-hectare lot subject of the August 14, 1996 Conversion Order and the 80.51-hectare SCTEX lot acquired by the government from the area covered by SDP, then HLI and its subsidiary, Centennary, shall be liable to the FWBs for the price received for said lots. HLI shall be liable for the value received for the sale of the 200-hectare land to LRC in the amount of PhP 500,000,000 and the equivalent value of the 12,000,000 shares of its subsidiary, Centennary,

for the 300-hectare lot sold to LIPCO for the consideration of PhP 750,000,000. Likewise, HLI shall be liable for PhP 80,511,500 as consideration for the sale of the 80.51-hectare SCTEX lot. We, however, note that HLI has allegedly paid 3% of the proceeds of the sale of the 500-hectare land and 80.51-hectare SCTEX lot to the FWBs. We also take into account the payment of taxes and expenses relating to the transfer of the land and HLI’s statement that most, if not all, of the proceeds were used for legitimate corporate purposes. In order to determine once and for all whether or not all the proceeds were properly utilized by HLI and its subsidiary, Centennary, DAR will engage the services of a reputable accounting firm to be approved by the parties to audit the books of HLI to determine if the proceeds of the sale of the 500-hectare land and the 80.51-hectare SCTEX lot were actually used for legitimate corporate purposes, titling expenses and in compliance with the August 14, 1996 Conversion Order. The cost of the audit will be shouldered by HLI. If after such audit, it is determined that there remains a balance from the proceeds of the sale, then the balance shall be distributed to the qualified FWBs. A view has been advanced that HLI must pay the FWBs yearly rent for use of the land from 1989. We disagree. It should not be forgotten that the FWBs are also stockholders of HLI, and the benefits acquired by the corporation from its possession and use of the land ultimately redounded to the FWBs’ benefit based on its business operations in the form of salaries, and other fringe benefits under the CBA. To still require HLI to pay rent to the FWBs will result in double compensation. For sure, HLI will still exist as a corporation even after the revocation of the SDP although it will no longer be operating under the SDP, but pursuant to the Corporation Code as a private stock corporation. The non-agricultural assets amounting to PhP 393,924,220 shall remain with HLI, while the agricultural lands valued at PhP 196,630,000 with an original area of 4,915.75 hectares shall be turned over to DAR for distribution to the FWBs. To be deducted from said area are the 500-hectare lot subject of the August 14, 1996 Conversion Order, the 80.51-hectare SCTEX lot, and the total area of 6,886.5 square meters of individual lots that should have been distributed to FWBs by DAR had they not opted to stay in HLI. HLI shall be paid just compensation for the remaining agricultural land that will be transferred to DAR for land distribution to the FWBs. We find that the date of the "taking" is November 21, 1989, when PARC approved HLI’s SDP per PARC Resolution No. 89-12-2. DAR shall coordinate with LBP for the determination of just compensation. We cannot use May 11, 1989 when the SDOA was executed, since it was the SDP, not the SDOA, that was approved by PARC. The instant petition is treated pro hac vice in view of the peculiar facts and circumstances of the case. WHEREFORE, the instant petition is DENIED. PARC Resolution No. 2005-32-01 dated December 22, 2005 and Resolution No. 2006-34-01 dated May 3, 2006, placing the lands subject of HLI’s SDP under compulsory coverage on mandated land acquisition scheme of the CARP, are hereby AFFIRMED with the MODIFICATION that the original 6,296 qualified FWBs shall have the option to remain as stockholders of HLI. DAR shall immediately schedule meetings with the said 6,296 FWBs and explain to them the effects, consequences and legal or practical implications of their choice, after which the FWBs will be asked to manifest, in secret voting, their choices in the ballot, signing their signatures or placing their thumbmarks, as the case may be, over their printed names. Of the 6,296 FWBs, he or she who wishes to continue as an HLI stockholder is entitled to 18,804.32 HLI shares, and, in case the HLI shares already given to him or her is less than 18,804.32 shares, the HLI is ordered to issue or distribute additional shares to complete said prescribed number of shares at no cost to the FWB within thirty (30) days from finality of this Decision. Other FWBs who

do not belong to the original 6,296 qualified beneficiaries are not entitled to land distribution and shall remain as HLI shareholders. All salaries, benefits, 3% production share and 3% share in the proceeds of the sale of the 500-hectare converted land and the 80.51-hectare SCTEX lot and homelots already received by the 10,502 FWBs, composed of 6,296 original FWBs and 4,206 nonqualified FWBs, shall be respected with no obligation to refund or return them. Within thirty (30) days after determining who from among the original FWBs will stay as stockholders, DAR shall segregate from the HLI agricultural land with an area of 4,915.75 hectares subject of PARC’s SDP-approving Resolution No. 89-12-2 the following: (a) the 500-hectare lot subject of the August 14, l996 Conversion Order; (b) the 80.51-hectare lot sold to, or acquired by, the government as part of the SCTEX complex; and (c) the aggregate area of 6,886.5 square meters of individual lots that each FWB is entitled to under the CARP had he or she not opted to stay in HLI as a stockholder. After the segregation process, as indicated, is done, the remaining area shall be turned over to DAR for immediate land distribution to the original qualified FWBs who opted not to remain as HLI stockholders. The aforementioned area composed of 6,886.5-square meter lots allotted to the FWBs who stayed with the corporation shall form part of the HLI assets. HLI is directed to pay the 6,296 FWBs the consideration of PhP 500,000,000 received by it from Luisita Realty, Inc. for the sale to the latter of 200 hectares out of the 500 hectares covered by the August 14, 1996 Conversion Order, the consideration of PhP 750,000,000 received by its owned subsidiary, Centennary Holdings, Inc. for the sale of the remaining 300 hectares of the aforementioned 500-hectare lot to Luisita Industrial Park Corporation, and the price of PhP 80,511,500 paid by the government through the Bases Conversion Development Authority for the sale of the 80.51-hectare lot used for the construction of the SCTEX road network. From the total amount of PhP 1,330,511,500 (PhP 500,000,000 + PhP 750,000,000 + PhP 80,511,500 = PhP 1,330,511,500) shall be deducted the 3% of the total gross sales from the production of the agricultural land and the 3% of the proceeds of said transfers that were paid to the FWBs, the taxes and expenses relating to the transfer of titles to the transferees, and the expenditures incurred by HLI and Centennary Holdings, Inc. for legitimate corporate purposes. For this purpose, DAR is ordered to engage the services of a reputable accounting firm approved by the parties to audit the books of HLI and Centennary Holdings, Inc. to determine if the PhP 1,330,511,500 proceeds of the sale of the three (3) aforementioned lots were used or spent for legitimate corporate purposes. Any unspent or unused balance as determined by the audit shall be distributed to the 6,296 original FWBs. HLI is entitled to just compensation for the agricultural land that will be transferred to DAR to be reckoned from November 21, 1989 per PARC Resolution No. 89-12-2. DAR and LBP are ordered to determine the compensation due to HLI. DAR shall submit a compliance report after six (6) months from finality of this judgment. It shall also submit, after submission of the compliance report, quarterly reports on the execution of this judgment to be submitted within the first 15 days at the end of each quarter, until fully implemented. The temporary restraining order is lifted. SO ORDERED. PRESBITERO J. VELASCO, JR. Associate Justice

WE CONCUR: RENATO C. CORONA Chief Justice ANTONIO T. CARPIO Associate Justice

TERESITA J. LEONARDO-DE CASTRO Associate Justice

ARTURO D. BRION Associate Justice

(On official leave) DIOSDADO M. PERALTA* Associate Justice

LUCAS P. BERSAMIN Associate Justice

MARIANO C. DEL CASTILLO Associate Justice

ROBERTO A. ABAD Associate Justice

MARTIN S. VILLARAMA, JR. Associate Justice

JOSE PORTUGAL PEREZ Associate Justice

JOSE CATRAL MENDOZA Associate Justice

MARIA LOURDES P. A. SERENO Associate Justice C E RTI F I CATI O N Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court. RENATO C. CORONA Chief Justice

Footnotes * On official leave. 1

"Jose Julio Zuniga" in some parts of the records.

Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform, G.R. No 78742, July 14, 1989, 175 SCRA 343, 352. 2

3

Id. at 392.

Yujiro Hayami, et al., Toward an Alternative Land Reform Paradigm: A Philippine Perspective 53 (1990). 4

5

Id.

Bureau of Agrarian Reform Information and Education (BARIE) & Communications Development Division (CDD), Agrarian Reform History 19 (2006). 6

7

Salmorin v. Zaldivar, G.R. No. 169691, July 23, 2008, 559 SCRA 564, 572.

8

Yujiro Hayami, et al., supra note 4, at 57.

9

Id.

10

Id.

11

Id. at 60; BARIE & CDD, supra note 6, at 21.

12

BARIE & CDD, supra note 6, at 22.

13

Yujiro Hayami, et al., supra note 4, at 71.

Providing the Mechanism for the Implementation of the Comprehensive Agrarian Reform Program. 14

15

Supra note 2.

16

Rollo, pp. 100-101.

17

Id. at 782-800.

18

Id. at 103-106.

19

Id. at 3644, Memorandum of HLI.

20

Id. at 3809, Memorandum of Farmworkers Agrarian Reform Movement, Inc. (FARM).

21

Id. at 3645-3646, Memorandum of HLI.

22

Id. at 3645.

23

Id. at 3810, Memorandum of FARM.

24

Id. at 3811.

25

Id. at 3651, Memorandum of HLI.

SECTION 10. Corporate Landowners. Corporate landowners may give their workers and other qualified beneficiaries the right to purchase such proportion of the capital stock of the corporation that the land assets bear in relation to the corporation’s total assets, and grant additional compensation which may be used for this purposes. The approval by the PARC of a plan for such stock distribution, and its initial implementation, shall be deemed compliance with the land distribution requirements of the CARP. 26

27

Section 1.

1a.) Qualified Corporate Landowner-Applicant¾All bona fide stock corporations owning agricultural land utilized for agricultural production and existing as such as of June 15, 1988, the date of effectivity of R.A. No. 6657, may apply for and avail of the voluntary stock distribution plan [SDP] provided in Section 31 thereof. New corporations incorporated after the effectivity of R.A. No. 6657 may also apply, provided that they are subsidiaries of or spin-offs from their mother corporation x x x. 1b.) Qualified Beneficiaries¾The qualified beneficiaries in the [SDP] are all those identified beneficiaries of land transfer enumerated under Section 22 of RA 6657. The [SDP] shall be agreed upon by both the corporate landowner-applicant and the qualified beneficiaries and subject to approval by PARC. x x x Section 2. Applicant and Time of Filing¾The corporate landowner-applicant shall file the [SDP] in a form to be prescribed by DAR and obtain approval within two (2) years from the effectivity of RA 6657 but prior to DAR’s notice of compulsory acquisition of said property under the same law. Section 3. Proportion of Distribution¾The [SDP] of corporate landowner-applicant must give the qualified beneficiaries the right to purchase at least such proportion of the capital stock of the corporation that the agricultural land, actually devoted to agricultural activities, bears in relation to the corporation’s total assets under such terms and conditions as may be agreed upon by them. Section 4. Stock Distribution Plan¾The [SDP] submitted by the corporate landownerapplicant shall provide for the distribution of an equal number of shares of stock of the same class and value, with the same rights and features as all other shares, to each of the qualified beneficiaries. This distribution plan in all cases, shall be at least the minimum ratio for purposes of compliance with Section 31 of RA 6657. On top of the minimum ratio provided under Section 3 of this Implementing Guideline, corporate landowner-applicant may adopt additional stock distribution schemes taking into account factors such as rank, seniority, salary, position and other circumstances which may be deemed desirable as a matter of sound company policy. Section 5. Criteria for Evaluation of Proposal¾The [SDP] submitted by the corporate landowner-applicant shall meet the following minimum criteria: a. that the continued operation of the corporation with its agricultural land intact and unfragmented is viable with potential for growth and increased profitability; b. that the plan for stock distribution to qualified beneficiaries would result in increased income and greater benefits to them, than if the lands were divided and distributed to them individually; c. that the stock distribution plan is acceptable to a majority, defined as 50% plus 1, of all the qualified beneficiaries;

d. that the plan shall include a provision that the books of the corporation shall be subject to periodic audit by certified public accountants chosen by the beneficiaries; e. that irrespective of the value of the beneficiaries equity in the corporation, they shall be assured of at least one (1) representative in the Board of Directors or in a management or executive committee, if one exists x x x; f. that a beneficiary who avails of a stock option must first execute the necessary waiver from being a beneficiary in another stock distribution plan x x x; g. other criteria that the DAR may prescribe x x x. Section 6. Valuation and Compensation¾The valuation of corporate assets submitted by the corporate landowner-applicant in this proposal shall be subject to verification and audit examination by DAR. The determination of the value of the agricultural land shall be based on the land valuation guidelines promulgated by DAR. Section 7. Modes of Stock Distribution¾The [SDP] x x x may be effected through divestment of the existing equity holdings by stockholders or other modes of stock distribution acceptable to both parties and duly approved by DAR. Section 8. Limited Transferability of Beneficiaries Stocks x x x. Section 9. Payment of Shares – The payment of the purchase price of the shares shall be under such terms and conditions agreed upon by the corporate landownerapplicant and the beneficiaries, provided that in no case shall the compensation received by the workers, at the time the shares of stock are distributed, be reduced. Section 10. Disposition of Proposal¾After the evaluation of the [SDP] submitted by the corporate landowner-applicant to the [DAR] Secretary, he shall forward the same with all the supporting documents to the Presidential Agrarian Reform Council (PARC), through its Executive Committee, with his recommendation for final action. Section 11. Implementation / Monitoring of Plan¾The approved [SDP] shall be implemented within three (3) months from receipt by the corporate landownerapplicant of the approval thereof by the PARC and the transfer of the shares of stocks in the names of the qualified beneficiaries shall be recorded in the stock and transfer books and submitted to the Securities and Exchange Commission (SEC) within sixty (60) days from the said implementation of the [SDP]. Upon completion, the corporate landowner-applicant shall be issued a Certificate of Compliance. The [DAR] Secretary x x x shall strictly monitor the implementation to determine whether or not there has been compliance with the approved [SDP] as well as the requirements of the CARP. For this purpose, the corporate landownerapplicant shall make available its premises for ocular inspection, its personnel for interview, and its records for examination at normal business hours.

Section 12. Non-compliance with any of the requirements of Section 31 of RA 6675, as implemented by this Implementing Guidelines shall be grounds for the revocation of the Certificate of Compliance issued to the corporate landowner-applicant. Section 13. Nothing herein shall be construed as precluding the PARC from making its own independent evaluation and assessment of the stock distribution plan x x x and in prescribing other requirements. 28

Rollo, p. 386.

29

Id. at 148.

30

Id. at 3767.

31

Id. at 1318-1319.

32

Id. at 3736-3740.

33

Id. at 147-150.

Id. at 3746. The figure is lifted from "A Proposal for Stock Distribution under CARP"; Memorandum of HLI, Annex "A." 34

35

Id. at 3730-3748. A PROPOSAL FOR STOCK DISTRIBUTION UNDER C.A.R.P. Tarlac Development Corporation, [Tadeco] engaged principally in agricultural pursuits, proposes to comply with the Comprehensive Agrarian Reform Program (C.A.R.P.) x x x with [regard] to its farm x x x "Hacienda Luisita" by availing of Section 31 of [RA] 6657 which allows a corporate landowner to choose between physically dividing its agricultural land subject to agrarian reform among its farmworkers and adopting a plan of distribution to the same beneficiaries of the shares of the capital stock of the corporation owning the agricultural land. In view of the fact that the portions of Hacienda Luisita devoted to agriculture, consisting of approximately 4,915.75 hectares, if divided and distributed among more or less 7,000 farmworkers as potential beneficiaries, would not be adequate to give the said farmhands a decent means of livelihood, [Tadeco] has decided to resort to the distribution of shares to the qualified beneficiaries as the better and more equitable mode of compliance with the C.A.R.P. One of the important businesses of [Tadeco] was to operate Hacienda Luisita which is a sugarcane farm, the agricultural parts of which x x x have an aggregate area of about 4,915.75 hectares. Prior to 1981, [Tadeco] operated the said farm x x x manually. The only mechanized portion of the operation then was the preparation of the land. Under this system of cultivation, production was so exiguous that the yield per hectare was even below the break-even point. To survive the crippling economic crisis begotten by the depressed price of sugar [Tadeco] began introducing in Hacienda Luisita in 1981 new

technology in sugarcane farming by way of mechanization. The size and contiguous nature of the land made the mechanized approach ideal. Its intention was not to cut cost thru labor displacement but to take advantage of the better productivity level accruing to this type of operation. In no time at all, x x x the yield per hectare almost doubled and went up to 80 tons. And what was before a marginal operation became a viable one. FARMWORKER-BENEFICIARIES Hacienda Luisita, as an agricultural enterprise, employs at the moment 6,296 farmworkers, excluding those whose names have been dropped from the list for not having worked in the farm for the past two years. Its labor complement consists of 337 permanent farmworkers, 275 seasonal, 3,807 casuals who are master list members and 1,877 casuals who are non-master list members, although it actually needs only 4,047 of them to run the farm. Since its acquisition of Hacienda Luisita in 1958, [Tadeco] has never resorted to retrenchment in personnel even during extremely difficult times x x x, which saw the sugar industry on the brink of collapse. It has promptly complied with increases in the minimum wage law. There has been no collective bargaining negotiation that did not produce an across-the-board increase in wages for labor, so that a Hacienda Luisita worker received compensation much higher than the floor wage prescribed for the sugar industry. For Crop Year 1987-88, [Tadeco] paid a total of P48,040,000.00 in terms of salaries and wages and fringe benefits of its employees and farmworkers in Hacienda Luisita. Among the fringe benefits presently enjoyed by its personnel, under their existing collective bargaining agreement [CBA] with management, are the following: 1.) 100% free hospitalization and medical plan for all employees and workers, and their spouses, children and parents; 2.) Service and amelioration bonuses; 3.) Interest-free loans on education, rice and sugar, and salary and special loans; 4.) Bus fare subsidy for students who are children of employees and workers in the farm, and 5.) Retirement plan that is fully funded and non-contributory. To be entitled to the above-mentioned benefits, a qualified worker has only to work for 37 days in one crop year. SPIN-OFF CORPORATION To expedite compliance with the requirements of the [CARP] on stock distribution and at the same time assure the farmworker-beneficiaries of the farm of receiving greater benefits than if the agricultural land were to be divided among them instead,

[Tadeco] conceived of separating the agricultural portions of Hacienda Luisita from the rest of its business and transferring and conveying the said agricultural land and such properties, assets, equipment, rights, interests and accounts related to its operation, including liabilities, obligations and encumbrances incurred thereby, to another corporation separate and distinct, and for that purpose caused, thru its controlling stockholders, the registration and incorporation of [HLI] on August 23, 1988, as the entity to serve as the spin-off vehicle in whose favor the said properties and assets were later on to be transferred and conveyed. Capital Structure. – To accommodate such transfer of assets, [HLI], with the approval of the [SEC], increased its authorized capital stock on May 10, 1989, from P1,500,000.00, divided into 1,500,000 shares with a par value of P1.00 per share, to P400,000,000.00, divided into 400,000,000 shares also with a par value of P1.00 per share, 150,000,000 of which issuable only to qualified and registered beneficiaries of the (C.A.R.P.) and 250,000,000, to any stockholder or stockholders of the corporation. Valuation of Assets Transferred. – By virtue of a Deed of Assignment and Conveyance executed on March 22, 1989, [Tadeco] subscribed to P355,131,462.00 worth of shares in the increase in authorized capital stock of the spin-off corporation, [HLI], and in payment of its subscription transferred and conveyed to the latter the agricultural portions of Hacienda Luisita x x x having a total area of 4,915.7466 hectares, which are covered x x x together with such other properties, assets, equipment, rights, interests and accounts as are necessary in the operation of the agricultural land. Such properties and assets contributed by [Tadeco] to the capital stock of [HLI], as appraised and approved by the [SEC], have an aggregate value of P590,554,220.00, but inasmuch as the conveyance of assets also involved the transfer of liabilities to the spin-off corporation, the net value left, after deducting the total liabilities of the farm amounting to P235,422,758.99, is P355,131,462.00 which is precisely the amount of [Tadeco’s] subscription to the increase in capital stock of [HLI]. The total value of the properties and assets transferred and conveyed by [Tadeco] to [HLI] amounting to P590,554,220.00 may be broken down as follows: 1.) Agricultural land, x x x totaling 4,915.7466 hectares at their fair market value of P40,000.00 per hectare ………………………

P196,630,000.00

2.) Machinery and Equipment, x x x consisting of heavy equipment, [etc.] ……………………...

43,932,600.00

3.) Current Assets x x x ……………………………

162,638,993.00

4.) Land Improvements, in the nature of roads, culverts, bridges, [etc.] …………………..

31,886,300.00

5.) Unappraised Assets, such as railroad system and equipment, x x x and construction in progress………………………………………

8,805,910.00

6.) Long Term Note Receivable …………………...

28,063,417.00

7.) Residential Land, with a total

60,462,000.00

area of 120.9234 hectares at their appraisal value of P50.00 per sq. m. …………… 8.) Land, consisting of 187 lots used for roads, railway, canals, lagoons, x x x having an aggregate area of 265.7495 hectares ……………………………

58,135,000.00

The break down of the liabilities and obligations contracted in operating the farm land of Hacienda Luisita [totaling P235,422,758.00] and that have to be deducted from the total value of the properties and assets transferred to arrive at their net value, is hereinbelow indicated: xxxx The above valuations of both assets and liabilities have been given the imprimatur of the [SEC] by reason of its approval of the increase in the authorized capital stock of [HLI], the subscription to such increase of [Tadeco], and the payment by [Tadeco] of its subscription thru transfer of assets and liabilities. Consequently, the net value of the assets and properties transferred to [HLI] of P355,131,462.00, if added to the subscription of the incorporators [HLI] to the original authorized capital stock of the said corporation amounting to P400,000.00, would give us the total capital stock subscribed and outstanding of [HLI] of P355,531,462.00 which, as will be seen later on, plays an important role in determining what amount of shares of the capital stock of [HLI] may be distributed among its farmworker-beneficiaries pursuant to Section 31 of Republic Act No. 6657. MECHANICS OF STOCK DISTRIBUTION PLAN Under Section 31 of [RA] 6657, a corporation owning agricultural land may distribute among the qualified beneficiaries such proportion or percentage of its capital stock that the value of the agricultural land actually devoted to agricultural activities, bears in relation to the corporation’s total assets. Conformably with this legal provision, [Tadeco] hereby submits for approval a stock distribution plan that envisions the following: 1.) The percentage of the value of the agricultural portions of Hacienda Luisita (P196,630,000.00) in relation to the total assets (P590,554,220.00) transferred and conveyed to the spin-off corporation, x x x is 33.3%, or to be exact, 33.296%, that in accordance with law, is the proportion of the outstanding capital stock of the corporation owning the agricultural land, which is P355,531,462.00 or 355,531,462 shares with a par value of P1.00 per share, that is proposed to be distributed to the qualified beneficiaries of the plan. 2.) The said 33.3% of the outstanding capital stock of [HLI] is P118,391,976.85 or 118,391,976.85 shares with a par value of P1.00 per share. 3.) The qualified beneficiaries of the [SDP] shall be the farmworkers who appear in the annual payroll, inclusive of the permanent and seasonal employees, who are regularly or periodically employed by [HLI] x x x.

4.) [HLI] shall arrange with [Tadeco] at the end of each fiscal year, for a period of 30 years, the acquisition and distribution to the farmworkerbeneficiaries, on the basis of number of days worked during the year and at no cost to them, of one-thirtieth (1/30) of 118,391,976.85 shares of the capital stock of [HLI], equivalent to P118,391,976.85, that are presently owned and held by [Tadeco], until such time as the entire block of P118,391,976.85 shares shall have been completely acquired and distributed among the farmworker-beneficiaries. 5.) [HLI] guarantees to the qualified beneficiaries of the stock distribution plan that every year they will receive, on top of their regular compensation, an amount that approximates three (3%) percent of the total gross sales from the production of the agricultural land, whether it be in the form of cash dividends or incentive bonuses or both. 6.) Even if only a part or fraction of the shares earmarked for distribution will have been acquired from [Tadeco] and distributed among the farmworkerbeneficiaries, [Tadeco] shall execute at the beginning of each fiscal year an irrevocable proxy, valid and effective for one (1) year, in favor of the farmworkers appearing as shareholders of [HLI] at the start of the said year which will empower the said farmworkers or their representative to vote in stockholders’ meetings of [HLI] convened during the year the entire 33.3% of the outstanding capital stock of [HLI] earmarked for distribution and thus be able from the very beginning to gain such number of seats in the board of directors of [HLI] that the whole 33.3% of the shares subject to distribution will be entitled to. 7.) In addition, [HLI] shall within a reasonable time subdivide and allocate for free and without charge among the qualified family-beneficiaries residing in the place where the agricultural land is situated, residential or homelots of not more than 240 sq. m. each, with each family-beneficiary being assured of receiving and owning a homelot in the barrio or barangay where it actually resides. STOCK RIGHTS AND RESTRICTIONS As previously explained, the amendment of the articles of incorporation of [HLI] increasing its capital stock provided for the classification of its shares of stock into two types: Class "A" and Class "B" shares. Shares of stock representing the proportion of the outstanding capital stock of the said corporation to be distributed among its farmworker-beneficiaries shall constitute the Class "A" shares, while the rest of the capital stock shall become Class "B" shares or shares sans any restrictions and can be issued to any stockholder. Class "A" shares have the same rights as the x x x Class "B" shares. But their issuance being limited to farmworker-beneficiaries only, Class "A" shares are subject to the restriction that for a period of 10 years from and after their distribution, no sale, transfer or conveyance of such shares x x x shall be valid unless it be by hereditary succession or in favor of qualified and registered beneficiaries within the same corporation. This limitation on the transferability appears x x x in the amended articles of incorporation of [HLI] and in due time will be printed on the corresponding certificates of stock of that type of shares.

Limiting the effectivity of the restriction to 10 years finds support in Section 27 of the Republic Act No. 6657 which makes land distributed among beneficiaries under the [CARP] non-transferable for only 10 years, and since stock distribution is a lawful alternative to the fragmentation of land, the said legal provision should equally apply to a case where stock option is the choice. ADVANTAGES OF STOCK PLAN OVER LAND DISTRIBUTION There are puissant reasons behind [Tadeco’s] preference for stock distribution to land apportionment, and they are the following: 1.) The physical fragmentation and distribution of the agricultural segments of Hacienda Luisita, among potential farmworker-beneficiaries who number approximately 7,000 would result in each individual farmhand receiving less than a hectare of land that in no way could produce enough to enable him to lead a comfortable life; 2.) As the recipient of a parcel of agricultural land, the farmworker has to take care of injecting the necessary inputs needed by the land and shoulder the cost of production, and 3.) The farmworker incurs the obligation of paying to the government for his share of the agricultural land, although the law allows him 30 years within which to do it. On the other hand, the stock distribution plan envisaged by [Tadeco] contemplates of: A. Distributing the shares of stock over a number of years among the qualified beneficiaries at no cost to them; B. Allowing the farmworker to continue to work on the land as such and receive the wages and other benefits provided for by his [CBA] with the corporate landowner; C. Entitling him to receive dividends, whether in cash or in stock, on the shares already distributed to him and benefit from whatever appreciation in value that the said shares may gain as the corporation becomes profitable; D. Qualifying him to become the recipient of whatever income-augmenting and benefit-improving schemes that the spin-off corporation may establish, such as the payment of the guaranteed three (3%) percent of gross sales every year and the free residential or homelots to be allotted to family beneficiaries of the plan, and E. Keeping the agricultural land intact and unfragmented, to maintain the viability of the sugar operation involving the farm as a single unit and thus warrant to the acknowledged farmworker-beneficiaries, hand-in-hand with their acquisition of the shares of the capital stock of the corporation owning the land, a continuing and stable source of income.

Indeed, the stock distribution plan of [Tadeco] x x x has many strong points and adherence to the law is one of them. For instance, in arranging for the acquisition by the farmworker-beneficiaries of shares of the capital stock of the corporation owning the land gratis, the corporate landowner upholds Section 9 of the Guidelines and Procedures promulgated to implement Section 31 of [RA] 6657, which prohibits the use of government funds in paying for the shares. Moreover, the plan for the free dispersal of shares will not in any way diminish the regular compensation being received by the farmworkerbeneficiaries at the time of share distribution, which is proscribed by Section 31 of [RA] 6657. IMPORTANCE TO ECONOMIC DEVELOPMENT Hacienda Luisita at present is the principal source of sugarcane needed by a sugar mill owned and operated by [CAT] in the area. It supplies 50% of the sugarcane requirement of the mill that has 1,850 employees and workers in its employ. Any disruption in the present operation of Hacienda Luisita which would affect its present productivity level would therefore automatically influence the operational viability of the sugar factory x x x and which, in turn, would have repercussions on the livelihood of the present employees and workers of the mill as well as the livelihood of the thousands of sugarcane planters and their families within the Tarlac sugar district being serviced by the sugar mill. On the other hand, the well-being of the sugar mill has to be the prime concern also of the corporate owner of Hacienda Luisita, simply because it is the entity that mills and converts the sugarcane produce of the latter to a finished product. Not only that. By milling with [CAT] which has the most efficient sugar mill in the region, the corporate owner of Hacienda Luisita in effect guarantees to itself maximum recovery from its farm’s sugarcane – something that is essential to its financial capability. In other words, the relationship between farm and mill is one of absolute reciprocity and interdependence. One cannot exist without the other. The importance of the agricultural land of Hacienda Luisita staying undivided cannot be gainsaid. For it to remain lucrative, it has to be operated as a unit x x x. And on its successful operation rests the well-being of so many businesses and undertakings in the province, or in a wider perspective, in the region, that are largely dependent upon it for existence. CONFORMITY OF FARMWORKER-BENEFICIARIES On May 11, 1989, a historic event took place in Hacienda Luisita when the representatives of [Tadeco] and [HLI] and 5,848 farmworker-beneficiaries inked their accord, in the presence of officials of the [DAR], to a [MOA] that embodies the stock distribution plan subject of this proposal. The said 5,848 farmworker-beneficiaries who gave their conformity to the agreement represent 92.9% of their entire complement which is much more than the majority (50% plus one) that the law requires. CONCLUSION

Here is a stock distribution plan that calls for the acquisition and distribution every year, for the next 30 years, of 3,946,399.23 shares, worth P3,946,399.23, of the capital stock of the corporation owning the agricultural land among its qualified farmworker-beneficiaries at no costto them. It also guarantees to pay to them each year the equivalent of three (3%) percent of the gross sales of the production of the land, which is about P7,320,000.00 yearly, irrespective of whether the said corporation makes money or not. It contemplates of allowing the farmworkerbeneficiaries from the very start to occupy such number of seats in the board of directors of the corporate landowner as the whole number of shares of stock set aside for distribution may entitle them, so that they could have a say in forging their own destiny. And last but not least, it intends to help give the same farmworkerbeneficiaries, who are qualified, adequate shelter by providing residential or homelots not exceeding 240 sq.m. each for free which they can call their own. The above stock distribution plan is hereby submitted on the basis of all these benefits that the farmworker-beneficiaries of Hacienda Luisita will receive under its provisions in addition to their regular compensation as farmhands in the agricultural enterprise and the fringe benefits granted to them by their [CBA] with management. x xx Under DAO 10, Sec. 1b.), par. 2, "the acceptance of the [SDP] by the majority of all the qualified beneficiaries shall be binding upon all the said qualified beneficiaries within the applicant corporation." 36

37

Rollo, p. 14.

38

Id. at 1308-1309.

39

Id. at 1310-1313.

40

Entitled "Resolution Approving the Stock Distribution Plan of [Tadeco]/HLI."

41

Rollo, p. 151.

42

Id. at 3667-3668.

43

Id. at 647-650.

44

Id. at 80, Petition of HLI; id. at 944, Consolidated Reply of HLI; id. at 1327-1328.

45

Id. at 651-664.

46

Id. at 1485-1487.

47

Id. at 1483-1484.

48

Id. at 1492-1493.

49

Id. at 1362.

50

Id. at 3669.

51

Id. at 1499-1509, via a Deed of Sale dated July 30, 1998.

52

Id. at 1362.

53

Id. at 1514-1518.

54

Id. at 1519-1520.

55

Id. at 1521-1522.

56

TSN, August 18, 2010, pp. 153-155.

57

Rollo, pp. 153-158, signed by 62 individuals.

58

Id. at 546.

59

Id. at 175-183.

Id. at 442, Mallari’s Comment to Petition. Mallari would, per his account, breakaway from AMBALA to form, with ex-AMBALA members, Farmers Agrarian Reform Movement, Inc. or FARM. 60

61

Id. at 159-174.

62

Id. at 184-192.

63

Id. at 679-680.

Id. at 386-405. The following are the pertinent findings of the Special Task Force as stated in its Terminal Report: 64

IV. IDENTIFICATION OF THE PROBLEMS/ISSUES/CONCERNS: Matrix on the Comparative Views of the Farmer Groups vis-à-vis those of HLI Management, Along With the Corresponding FGD/OCI. Results was prepared and the compliance reports submitted, the petitions of the FWBs, particularly the AMBALA and the Supervisory Group, together with the respective responses to said petitions by HLI management and the FGD/OCI results were utilized to make a comparative summary, exemplified hereunder. 1. INDIVIDUAL ISSUES RAISED BY THE SUPERVISORY GROUP OF HACIENDA LUISITA INCORPORATED VIS-Á-VIS REJOINDER OF HLI AND OBSERVATION OF TF. 1.1. Issue: Non-enjoyment of the rights and privileges that were supposed to be given to the FWBs as stated in the [MOA] prompted the supervisory group to claim for the "one percent (1%)" share from the HLI representing their share as supervisors during the transition period.



HLI management: Such claim is a total misapprehension of Section 32 of R.A. No. 6657, the last paragraph of which requires the payment of 1% of the gross sale to managerial, supervisory and technical workers at the time of the effectivity of R.A. No. 6657. There were no such managerial employees and supervisors engaged in temporarily managing and supervising the operation of the land until its final turnover to the farmworkers since there was no land to transfer in the first place.



The Task Force position: That Section 32 of R.A. No. 6657 may not directly apply to the instant case but the non-realization of the said 1% share of expectation in the gross sale is a cause of disenchantment. The claim for the 1% share is not included in the MOA. x x x

1.2. Issue: Non-receipt of the 10% dividend 

HLI contends that the distribution of said dividend does not apply to corporate farms like HLI which opted for the SD Plan.



Task force finding: The FWBs do not receive such financial return despite the stipulation on the matter.

1.3. Issue: On the three percent (3%) out of the thirty three percent (33%) representing the equity shares given from the proceeds of the sale of the 500 hectares (converted to non-agricultural use). 

The HLI management argues that the corporation, banking on the legal fiction of separate corporate existence, is not obliged to give 33% of the gross selling price of the land since the legal owner is the corporation itself and not the stockholders. And the 3% was given by the HLI merely as a bonus for the FWBs.



The Task Force position: Though, allegedly, the supervisory group receives the 3% gross production share and that others alleged that they received 30 million pesos still others maintain that they have not received anything yet. Item No. 4 of the MOA is clear and must be followed. There is a distinction between the total gross sales from the production of the land and the proceeds from the sale of the land. The former refers to the fruits/yield of the agricultural land while the latter is the land itself. The phrase "the beneficiaries are entitled every year to an amount approximately equivalent to 3% would only be feasible if the subject is the produce since there is at least one harvest per year, while such is not the case in the sale of the agricultural land. This negates then the claim of HLI that, all that the FWBs can be entitled to, if any, is only 3% of the purchase price of the converted land.



Besides, the Conversion Order dated 14 August 1996 provides that "the benefits, wages and the like, presently received by the FWBs shall not in any way be reduced or adversely affected. Three percent

of the gross selling price of the sale of the converted land shall be awarded to the beneficiaries of the SDO." The 3% gross production share then is different from the 3% proceeds of the sale of the converted land and, with more reason, the 33% share being claimed by the FWBs as part owners of the Hacienda, should have been given the FWBs, as stockholders, and to which they could have been entitled if only the land were acquired and redistributed to them under the CARP. 1.4. Issue: Illegal conversion and financial incapability of HLI to proceed with the proposed development, thereby leaving the areas unproductive. 

The HLI management contends that the Petition for Conversion was duly approved by the DAR on 14 August 1996 and it had the conformity of more than 5,000 FWBs who signed a manifesto of support.



In the Petitions and/during the OCI/FGD [Ocular Inspection/Focused Group Discussion] the 500 hectares subject of conversion appear to still remain undeveloped. A clear example is the Central Techno Park which has a landscaped entrance and concrete roads but the only things which can be seen inside the premises are cogon grasslands. The FWBs further maintained that they were either not given any monetary benefit from the conversion of the 500 hectares or that they were only partially given.

2. CONCERNS MANIFESTED IN THE PETITION FILED BY THE ALYANSA NG MGA MANGGAGAWANG BUKID NG HACIENDA LUISITA (AMBALA) LED BY MR. RENE GALANG 2.1. Issue: That DAR Administrative Order No. 10, series of 1988, guidelines in the corporate availment of SDO, should observe Section 31 of R.A. No. 6657 qualified beneficiaries and provide that they (FWBs) be allowed to buy the land from the company. The HLI management posits the proposition that Section 31 is very clear and unambiguous. It grants to the FWBs the right to purchase shares of stocks in the corporation that owns the agricultural land itself and not the land. HLI is correct in this unless the SDP is disregarded. 2.2. Issue: Cancellation of the SDO and immediate coverage of the area are requested as the agreements in the implementation of the SDO were allegedly not followed/complied with. 

The HLI management warranted that subject SD Plan is the most feasible scheme/alternative vis-à-vis physical distribution of the landholding under compulsory acquisition.



During the FGD/OCI, it was represented that the terms, conditions and benefits provided for in the MOA/commitment appear not to have

been substantially followed. Hereunder, is a more detailed discussion of the issues: 2.2.1. On the issue of non compliance with the MOA * FWBs are supposed to receive P700-800 dividends annually. * P800-1000 production sharing per year. The Hacienda is operating continuously which only proves that the Hacienda is earning. 

HLI, however, claims that it is not incurring profits, thus, there are no dividends to be distributed. But the shares of stocks and 3% production share have been given.



FGD/OCI finding shows that the number of shares of stocks to be received by the FWBs, depends on their designation (i.e., permanent, casual or seasonal) and on the number of man days. Retired and retrenched workers are not given shares of stocks and cease as share holders. Undisputedly, the setup under the MOA is one-sided in favor the HLI. The work schedule, upon which the extent of entitlement to be granted shares of stock is wholly within the prerogative and discretion of HLI management that a FWB can still be denied thereof by the simple expediency of not giving him any working hours/days. And this is made possible by the fact that [there] are more farmers/farmworkers in its employ than what is, according to HLI, necessary to make it operational.

2.2.2. On the issue of representation 

It was verified that the Board of Directors election is annually conducted. However, majority of the FWBs are no longer interested and, in fact, have boycotted the elections because of the minority representation of the FWBs (4 as against 7). They claim that they are always outnumbered and some claim that the representatives elected are pro management. x x x [N]o fruitful and harmonious corporate activities can be expected as any resistance will be counterproductive, that to continue the operation under the SDP that is challenged herein will only be an empty exercise. The farmers and farmworkers will not, under the circumstances, be able to realize the contemplated receipt of benefits under the Program.

2.2.3. On the issue of the 240-square meter homelot 

As to the 240 square meter homelots, not all of the FWBs were given homelots. Of those given, they complain that they still do not have the corresponding titles. And, those already given titles maintain that said documents are useless as such, for they cannot even be used as bank collaterals, despite even the lapse of the 5-year prescriptive period, because banks and other financial institutions refuse to honor the same without clearance from the HLI management. x x x

2.2.4. On the issue of coverage of the Hacienda 

The HLI contends that dividing the 4,915.75 hectares among 6,296 beneficiaries would result to a farm lot of 0.78 hectare per individual FWB, which is not an economic size farm. Differences in the physical conditions of the landholding must be considered such as soil fertility and accessibility. The question of who would get the fertile or accessible part of the land and who would receive less would result/culminate in a "battle royale" among the FWBs.

DAR has established guidelines on the matter of such allocations and no problem has been encountered in its implementation of the CARP. By and large for a whole scale cultivation and production, formation of cooperatives has proven to be an effective mechanism to address the problem. The law even encourages the use of such combination [cf. Section 29, (3rd par.), Rep. Act No. 6657]. lawphi1

2.2.5. On the agreement that other benefits will be given other than those provided for in the MOA 

It was stipulated that the SDO would provide the FWBs other benefits x x x a less than a hectare-farm would not be able to provide, like the 3% of the gross production sales, to be shared with the FWBs, on top of their regular compensation.



The FWBs do not receive any other benefits under the MOA except the aforementioned [(viz: shares of stocks (partial), 3% gross production sale (not all) and homelots (not all)].

V. PRELIMINARY CONSIDERATIONS 1. The common issues raised by the petitioners are focused on the revocation of the existing SDO that was proposed by HLI and approved by the PARC on ground, among others that the provisions of Section 31 of R.A. No. 6657, upon which the SDO/SDP was based is contrary to the basic policy of the agrarian reform program on Land Acquisition and Redistribution, as may be gleaned from the second paragraph of Section 2 of R.A. No. 6657, which reads: "To this end, a more equitable distribution and ownership of land, with due regard to the rights of landowners to just compensation and to the ecological needs of the nation, shall be undertaken to provide farmers and farmworkers with the opportunity to enhance their dignity and to improve the quality of their lives through greater productivity of agricultural lands." (underscoring supplied). Envisioned in the foregoing provision is the physical land transfer to prospective beneficiaries as reiterated in Section 5 thereof, as follows:

"Schedule of Implementation. The distribution of all lands covered by this Act shall be implemented immediately and completed within ten (10) years from the effectivity thereof". 2. While SDO/SDP is an alternative arrangement to the physical distribution of lands pursuant to Section 31 of R.A. No. 6657, logic and reason dictate that such agreement must materialize within a specific period during the lifetime of CARP, stating clearly therein when such arrangement must end. The aforementioned provision may be considered as the provision of the law on "suspended coverage", parallel to the provisions of Section 11 on Commercial Farming where coverage of CARP is deferred for ten (10) years after the effectivity of Republic Act No. 6657. Stated simply, owners of commercial farms are given a chance to recoup their investment for ten (10) years before same is finally subjected to coverage under the CARP. VI. FINDINGS, ANALYSIS AND RECOMMENDATION: 1. Providing for the quintessence and spirit of the agrarian reform program, Republic Act No. 6657 explicitly provides: "SECTION 2. Declaration of Principles and Policies.¾It is the policy of the State to pursue a Comprehensive Agrarian Reform Program (CARP). The welfare of the landless farmers and farmworkers will receive the highest consideration to promote social justice and to move the nation toward sound rural development and industrialization, and the establishment of owner cultivatorship of economic-size farms as the basis of Philippine agriculture. To this end, a more equitable distribution and ownership of land, with due regard to the rights of landowners to just compensation and to the ecological needs of the nation, shall be undertaken to provide farmers and farmworkers with the opportunity to enhance their dignity and improve the quality of their lives through greater productivity of agricultural lands" (underscoring added).

1avvphil

Within the context of the foregoing policy/objective, the farmer/farmworker beneficiaries (FWBs) in agricultural land owned and operated by corporations may be granted option by the latter, with the intervention and prior certification of DAR, "x x x the right to purchase such proportion of the capital stock of the corporation that the agricultural land, actually devoted to agricultural activities, bears in relation to the company’s total asset x x x" (Section 31, Rep. Act NO. 6657). Toward this end, DAR issued Administrative Order No. 10, series of 1988, copy of which is attached as Annex "K" and made an integral part hereof, which requires that the stock distribution option (SDO) shall meet the following criteria, reading, inter alia: "a. that the continued operation of the corporation with its agricultural land intact and unfragmented is viable, with potential for growth and increased profitability; "b. that the plan for stock distribution to qualified beneficiaries would result in increased income and greater benefits to them, than if the lands were divided and distributed to them individually;

xxxx And to ensure, effective and fair implementation of the contemplated Stock Distribution Plan (SDP), the said AO also provides: "SECTION 12. Revocation of Certificate of Compliance¾Non-compliance with any of the requirements of Section 31 of RA 6657, as implemented by these Implementing Guidelines shall be grounds for the revocation of the Certificate of Compliance issued to the corporate landowner-applicant. SECTION 13. Reservation Clause¾Nothing herein shall be construed as precluding the PARC from making its own independent evaluation and assessment of the stock distribution plan of the corporate landownerapplicant and from prescribing other requirements." Herein, however, there is yet no Certificate of Compliance issued. The reason is simple. Despite the lapse of sixteen (16) years, from the time the SDP was approved in November 1989, by resolution of the x x x (PARC), the objective and policy of CARP, i.e., acquisition and distribution (herein under the [SDP], only shares of stocks) is yet to be fully completed; the FWBs, instead of the promised/envisioned better life under the CARP (therein, as corporate owner), do still live in want, in abject poverty, highlighted by the resulting loss of lives in their vain/futile attempt to be financially restored at least to where they were before the CARP (SDP) was implemented. While they were then able to make both ends meet, with the SDP, their lives became miserable. 2. For the foregoing considerations, as further dramatized by the following violations/noncompliance with the guidelines prescribed, which are legally presumed as integrated in the agreements/accords/stipulations arrived at thereunder like the HLI SDP, namely: 2.1. Noncompliance with Section 11 of Administrative Order No. 10, Series of 1988, which provides: "The approved stock distribution plan shall be implemented within three (3) months from receipt by the corporate landowner-applicant of the approval thereof by the PARC and the transfer of the shares of stocks in the names of the qualified beneficiaries shall be recorded in the stock and transfer books and submitted to the Securities and Exchange Commission (SEC) within sixty (60) days from the said implementation plan." The [SDP], however, submitted a 30-year implementation period in terms of the transfer of shares of stocks to the farmworkers beneficiaries (FWBs). The MOA provides: "At the end of each fiscal year: for a period of 30 years, SECOND PARTY shall arrange with the FIRST PARTY the acquisition and distribution to the THIRD PARTY on the basis of the number of days worked and at no cost to them of one-thirtieth (1/30) of …"

Plainly, pending the issuance of the corresponding shares of stocks, the FWBs remain ordinary farmers and/or farmworker and the land remain under the full ownership and control of the original owner, the HLI/TADECO. To date the issuance and transfer of the shares of stocks, together with the recording of the transfer, are yet to be complied with. 2.2. Noncompliance with the representations/warranties made under Section 5 (a) and (b) of said Administrative Order No. 10. As claimed by HLI itself, the corporate activity has already stopped that the contemplated profitability, increased income and greater benefits enumerated in the SDP have remained mere illusions. 2.3. The agricultural land involved was not maintained "unfragmented". At least, 500 hectares hereof have been carved out after its land use has been converted to non-agricultural uses. The recall of said SDP/SDO of HLI is recommended. More so, since: 1. It is contrary to Public Policy Section 2 of [RA] 6657 provides that the welfare of landless farmworkers will receive the highest consideration to promote social justice. As such, the State undertake a more equitable distribution and ownership of land that shall provide farmworkers with the opportunity to enhance their dignity and improve the quality of their lives through greater productivity of agricultural lands. In the case of Hacienda Luisita, the farmworkers alleged that the quality of their lives has not improved. In fact it even deteriorated especially with the HLI Management declaration that the company has not gained profits, in the last 15 years, that there could be no declaration and distribution of dividends. 2. The matter of issuance/distribution shares of stocks in lieu of actual distribution of the agricultural land involved, was made totally dependent on the discretion/caprice of HLI. Under the setup, the agreement is grossly onerous to the FWBs as their man days of work cannot depart from whatever management of HLI unilaterally directs. They can be denied the opportunity to be granted a share of stock by just not allowing them to work altogether under the guise of rotation. Meanwhile, within the 30-year period of bondage, they may already reach retirement or, worse, get retrenched for any reason, then, they forever lose whatever benefit he could have received as regular agrarian beneficiary under the CARP if only the SDP of HLI were not authorized and approved. Incidentally, the FWBs did not have participation in the valuation of the agricultural land for the purpose of determining its proportionate equity in relation to the total assets of the corporation. Apparently, the sugarlands were undervalued.

3. The FWBs were misled into believing by the HLI, through its carefully worded Proposal that "x x x the stock distribution plan envisaged by [Tadeco], in effect, assured of: "A. Distributing the shares of stock over a numbers of years among the qualified beneficiaries at no cost to them; B. Allowing the farmworker to continue to work on the land as such and receive the wages and other benefits provided for by his collective bargaining agreement with the corporate landowner; C. Entitling him to receive dividends, whether in cash or in stock, on the shares already distributed to him and benefit from whatever appreciation in value that the said shares may gain as the corporation becomes profitable; D. Qualifying him to become the recipient of whatever income-augmenting and benefit-improving schemes that the spin-off corporation may establish, such as the payment of the guaranteed three (3%) percent of gross sales every year and the free residential or homelots to be allotted to family beneficiaries of the plan; and E. Keeping the agricultural land intact and unfragmented, to maintain the viability of the sugar operation involving the farm as a single unit and thus warrant to the acknowledged farmworker-beneficiaries, hand-in-[hand] with their acquisition of the shares of the capital stock of the corporation owing the land, a continuing and stable source of income." (Annex "A", supra). At the expense of being repetitive, the be sugar-coated assurances were, more than enough to made them fall for the SDO as they made them feel rich as "stock holder" of a rich and famous corporation despite the dirt in their hands and the tatters, they use; given the feeling of security of tenure in their work when there is none; expectation to receive dividends when the corporation has already suspended operations allegedly due to loses; and a stable sugar production by maintaining the agricultural lands when a substantial portion thereof of, almost 1/8 of the total area, has already been converted to non-agricultural uses. 65

Id. at 694-699.

66

Id. at 339-342.

67

Id. at 100.

68

Id. at 101.

69

Id. at 146.

70

Id. at 107-140.

71

Id. at 103-106.

72

Id. at 19.

73

Id. at 52

74

Id. at 255-256.

75

Id. at 257-259.

76

Id. at 334-367.

77

Id. at 436-459.

Attys. Edgar Bernal and Florisa Almodiel signed the motion/manifestation as counsel of Mallari and/or FARM. 78

The Supervisory Group later teamed up with the AMBALA-Mallari faction. For brevity, they are referred to herein as the "AMBALA-Mallari-Supervisory Group." 79

80

Rollo, pp. 530-641.

81

Id. at 1350-1359.

82

Id. at 1535-1544.

83

TSN, August 24, 2010, p. 229.

84

Rollo, pp. 3060-3062.

85

Id. at 81.

86

G.R. No. 131457, August 19, 1999, 312 SCRA 751.

87

Rollo, p. 82.

88

Id. at 149.

Sec. 4. The State shall, by law, undertake an agrarian reform program founded on the right of farmers and regular farm workers, who are landless, to own directly or collectively the lands they till or, in the case of other farm workers, to receive a just share of the fruits thereof. To this end, the State shall encourage and undertake the just distribution of all agricultural lands, subject to such priorities and reasonable retention limits as the Congress may prescribe, taking into account ecological, developmental, or equity considerations, and subject to the payment of just compensation. In determining retention limits the State shall respect the right of small landowners. The State shall further provide incentives forvoluntary land-sharing. 89

90

Consumido v. Ros, G.R. No. 166875, July 31, 2007, 528 SCRA 696, 702.

91

TSN, August 18, 2010, p. 141.

92

Rollo, p. 871.

93

Id. at 38.

Atienza v. Villarosa, G.R. No. 161081, May 10, 2005, 458 SCRA 385, 403; citing Chua v. Civil Service Commission, G.R. No. 88979, February 7, 1992, 206 SCRA 65. 94

95

Id.

96

Id.

97

No. L-55230, November 8, 1988, 167 SCRA 51, 59-60.

98

Public respondents’ Memorandum, p. 24

99

EO 229, Sec. 18.

100

BANAT Party-list v. COMELEC, G.R. No. 177508, August 7, 2009, 595 SCRA 477, 498.

101

G.R. No. 167614, March 24, 2009, 582 SCRA 254, 275-276.

102

Rollo, p. 40; TSN August 18, 2010, p. 74.

DAO 10, Section 11. Implementation / Monitoring of Plan¾The approved [SDP] shall be implemented within three (3) months x x x. 103

Upon completion [of the stock distribution], the corporate landowner-applicant shall be issued a Certificate of Compliance. x x x Section 12. Non-compliance with any of the requirements of Section 31 of RA 6675, as implemented by this Implementing Guidelines shall be grounds for the revocation of the Certificate of Compliance issued to the corporate landowner-applicant. x x x 104

TSN, August 24, 2010, p. 13.

Koruga v. Arcenas, G.R. Nos. 168332 and 169053, June 19, 2009, 590 SCRA 49, 68; citing In Re: Petition for Assistance in the Liquidation of the Rural Bank of Bokod (Benguet), Inc., PDIC v. Bureau of Internal Revenue, G.R. No. 158261, December 18, 2006, 511 SCRA 123, 141. 105

106

TSN, August 24, 2010, p. 205.

107

Id.

Garcia v. Executive Secretary, G.R. No. 157584, April 2, 2009, 583 SCRA 119, 129; citing Franciso, Jr. v. House of Representatives, G.R. No. 160261, November 10, 2003, 415 SCRA 44. 108

ABS-CBN Broadcasting Corporation v. Philippine Multi-Media System, Inc., G.R. Nos. 175769-70, January 19, 2009, 576 SCRA 262, 289 citing Philippine Veterans Bank v. Court of Appeals, G.R. No. 132561, June 30, 2005, 462 SCRA 336; Apex Mining Co., Inc. v. 109

Southeast Mindanao Gold Mining Corp., G.R. Nos. 152613, 152628, 162619-20 and 152870-71. 110

Franciso, Jr. v. House of Representatives, supra note 108.

Alvarez v. PICOP Resources, Inc., G.R. Nos. 162243, etc., November 29, 2006, 508 SCRA 498, 552. 111

112

Supra note 108, at 138-139.

An Act Strengthening the CARP, Extending the Acquisition and Distribution of all Agricultural Lands, Instituting Necessary Reforms, Amending for the Purpose Certain Provisions of RA 6657, as Amended and Appropriating Funds therefor. 113

114

Quizon v. Comelec, 545 SCRA 635; Mattel, Inc. v. Francisco, 560 SCRA 506.

115

Webster’s Third New International Dictionary Unabridged 444-445 (1993).

116

Id. at 445.

117

Records of the Constitutional Commission, Vol. II, p. 678.

Sec. 2, 3rd paragraph , of RA 6657 states: The agrarian reform program is founded on the right of farmers and regular farmers who are landless, to own land directly or collectively the lands they till or, in the case of other farmworkers to receive a share of the fruits thereof. To this end, the State shall encourage and undertake the just distribution of all agricultural lands, subject to priorities and retention limits set forth in this Act x x x. 118

119

11 Fletcher, Cyc. Corps. (1971 Rev. Vol.) Sec. 5083.

120

Mobilia Products, Inc. v. Umezawa, G.R. Nos. 149357 and 149403, March 4, 2005.

121

Cawaling v. COMELEC, G.R. No. 146319, October 26, 2001, 368 SCRA 453.

122

Basco v. PAGCOR, G.R. No. 138298, November 29, 2000, 346 SCRA 485

Angara v. Electoral Commission, 63 Phil. 139 (1936); Cawaling v. COMELEC, supra, citing Alvarez v. Guingona, 252 SCRA 695 (1996). 123

124

National Food Authority v. Masda Security Agency, Inc., G.R. No. 163448, March 8, 2005.

125

Rollo, p. 794. The PARC resolution also states: HLI’s implementation of the distribution of the mandatory minimum ratio of land-toshares of stock to the ARBs [Agrarian Reform Beneficiaries] was based on man days, within its policy of no-work no-shares of stock, and not to equal number of shares depending upon their rightful share, as required in the rules, and therefore practically divested the ARBs, as to their qualification/entitlement, as ARBs at HLI’s whims, to their disadvantage and prejudice in the form of diminution in the minimum ration of shares. Having increased x x x the number of workers (contractual), the

equity share of each permanent employee, as of 1989, naturally had to be, as in fact, reduced. Further x x x, HLI took it upon itself, or usurped, the duty or mandate of DAR to qualify the recipient ARBs and imposed its own criteria and discretion in the allocation of the mandatory minimum ratio of land-to share by basing the distribution on the number of days worked. Still worse, HLI made allocation to recipients who are not in the ARBs original masterlist as admittedly, it distributed to about 11,955 stockholders of record 59,362,611 shares representing the second half of the total number of shares earmarked for distribution when in fact there were only 6,296 farm workers or less, at the time when the land was placed under CARP under the SDP/SDO scheme. (Emphasis added.) 126

Memorandum of Renato Lalic, et al., p. 14.

127

Little Oxford Dictionary 442 (7th ed.).

128

Rollo, p. 3676.

The SGV & Co.’s Independent Auditors Report on HLI for years ended 2009, 2008 and 2007 contains the following entries: "[T]he Company has suffered recurring losses from operations and has substantial negative working capital deficiency. The Company has continued to have no operations and experienced financial difficulties as a result of a strike staged by the labor union on November 6, 2004." Rollo, p. 3779, Annex "I" of HLI’s Memorandum. 129

130

Sec. 5(2).

131

TSN, August 24, 2010, p. 125.

132

MOA, 4th Whereas clause.

133

Memorandum of public respondents, p. 41.

134

HLI Consolidated Reply and Opposition, p. 65.

Herida v. F&C Pawnshop and Jewelry Store, G.R. No. 172601, April 16, 2009, 585 SCRA 395, 401. 135

136

Bascos, Jr. v. Taganahan, G.R. No. 180666, February 18, 2009, 579 SCRA 653, 674-675.

Cannu v. Galang, G.R. No. 139523, May 26, 2005, 459 SCRA 80, 93-94; Ang v. Court of Appeals, G.R. No.80058, February 13, 1989, 170 SCRA 286. 137

138

TSN, August 18, 2010, p. 58.

139

RA 6657, Sec. 31.

140

DAO 10, s. 1988, Sec. 1.

141

TSN, August 18, 2010, p. 106.

142

Id. at 103-106.

See Abakada Guro Party List v. Purisima, G.R. No. 166715, August 14, 2008, 562 SCRA 251, 288-289. 143

144

Rollo, p. 1362.

145

Lu v. Manipon, G.R. No. 147072, May 7, 2002, 381 SCRA 788, 796.

146

Sandoval v. Court of Appeals, G.R. No. 106657, August 1, 1996, 260 SCRA 283, 295.

Cavite Development Bank v. Lim, G.R. No. 131679, February 1, 2000, 324 SCRA 346, 359.. 147

148

G.R. No. 127797, January 31, 2000, 324 SCRA 126, 136-137.

149

Rollo, p. 1568.

Duran v. Intermediate Appellate Court, No. L-64159, September 10, 1985, 138 SCRA 489, 494. 150

151

Rollo, pp. 1499-1509.

152

G.R. No. 150066, April 13, 2007, 521 SCRA 68, 82-83.

153

Supra note 2.

154

Memorandum of RCBC, p. 52.

155

Id.

156

Id. at 52-53.

157

Id at 53.

Roxas & Company, Inc. v. DAMBA-NFSW, G.R. Nos. 149548, etc., December 4, 2009, 607 SCRA 33, 56. 158

159

RA, 8974, Sec. 6.

See (last visited June 23, 2011). 160

Manila Motor Co., Inc. v. Flores, 99 Phil. 738, 739 (1956).

Fernandez v. P. Cuerva & Co., No. L-21114, November 28, 1967, 21 SCRA 1095, 1104; citing Chicot County Drainage Dist. V. Baxter States Bank (1940) 308 US 371. 161

162

No. L-23127, April 29, 1971, 38 SCRA 429, 434-435.

163

G.R. No. 164527, August 15, 2007, 530 SCRA 235.

164

G.R. No. 147817, August 12, 2004, 436 SCRA 273.

See Province of North Cotabato v. GRP Peace Panel on Ancestral Domain, G.R. Nos. 183591, 183752, 183893, 183951 and 183962, October 14, 2008, 568 SCRA 402. 165

166

Rollo, p. 193.

Id. at 3738. These homelots do not form part of the 4,915.75 hectares of agricultural land in Hacienda Luisita. These are part of the residential land with a total area of 120.9234 hectares, as indicated in the SDP. 167

The Lawphil Project - Arellano Law Foundation

DISSENTING OPINION CORONA, C.J.: MR. OPLE. xxxx But when the Constitution directs Congress to the effect that the State shall encourage and undertake distribution of all agricultural lands, subject to limitations put by law especially on retention limits, does this contemplate — this question I address to the Committee and particularly to Commissioner Tadeo — a blanket approach to all agricultural lands so that we do not distinguish between, let us say, the owners of Hacienda Luisita, the biggest plantation in Luzon with 6,000 hectares[,] and this chap in Laguna or Quezon who has only 10 hectares of coconut plantation? Sa inyo bang masid at wari ay masasagasaan ng land distribution ang dalawang ito: ang may-ari ng pinakamalaking hasyenda dito sa Luzon at isang hindi naman mayaman, ni hindi mariwasa, pangkaraniwang tao lamang na nagmamay-ari ng isang sukat ng lupang tinatamnan ng niyog na hindi hihigit sa sampung ektarya? MR. TADEO. Pareho. xxx

xxx

xxx

MR. OPLE. xxxx With respect to just a few enormous landed estates, I have already given examples: Hacienda Luisita, the biggest in Luzon, with 6,000 hectares of rice and corn land and sugar land and with 6,000 tenants and workers; the Canlubang Sugar Estate, just across the city in Laguna; and in the West Visayas alone with about 30,000 sugar planters or hacenderos — the aggregate for the nation escapes me for the moment. In the ultimate stage of the land reform program as now envisioned, will all of these estates be redistributed to their tenants, and if they have no tenants to whom will they be redistributed? MR. TADEO. The principle is agrarian land for the tillers and land for the landless. x x x 1

Agrarian reform is an essential element of social justice under the 1987 Constitution. It "mandates that farmers and farmworkers have the right to own the lands they till, individually or collectively, through cooperatives or similar organizations."2 It aims to liberate farmers and farmworkers from bondage to the soil, to ensure that they do not remain slaves of the land but stewards thereof. The decision of the Court in this case today should promote the constitutional intent of social justice through genuine and meaningful agrarian reform. This is imperative because the framers of the 1987 Constitution themselves recognized the importance of Hacienda Luisita in the implementation of agrarian reform in the Philippines. Thus, this case is of transcendental importance as it is a test of the Court’s fidelity to agrarian reform, social justice and the Constitution. History of Agrarian Reform in the Philippines Agrarian reform has been envisioned to be liberating for a major but marginalized sector of Philippine society, the landless farmers and farmworkers. History, too, has been said to be liberating. A quick review of the long and tortuous story "of the toiling masses to till the land as freemen and not as slaves chained in bondage to a feudalistic system of land ownership" 3 should enlighten us better on the significance of the Court’s decision in this case. By Royal Decree of November 7, 1751 the King of Spain acknowledged that the revolts which broke out among peasants in the provinces of Cavite, Bulacan, Laguna and Morong (now, Rizal) stemmed from "injuries which the [Filipinos] received from the managers of the estates which are owned by the religious of St. Dominic and those of St. Augustine – usurping the lands of the [Filipinos], without leaving them the freedom of the rivers for their fishing, or allowing them to cut woods for their necessary use, or even collect the wild fruits xxx."4 The King approved the pacification measures adopted by Don Pedro Calderon Enriquez of the Royal Audiencia who "demanded from the aforesaid religious the titles of ownership of the lands which they possessed; and notwithstanding the resistance that they made to him xxx distributed to the villages the lands which the [religious] orders had usurped, and all which they held without legitimate cause [he] declared to be crown lands."5 It has been two centuries and three scores since the first recorded attempt at compulsory land redistribution in the Philippines. It proved to be ineffectual though for by the end of the Spanish period and the beginning of the American era the same religious orders still controlled vast tracts of land commonly known as "friar lands."6 In his Special Reports to the U.S. President in 1908, Governor General William Howard Taft placed friar landholdings at 171,991 hectares tilled by about 70,000 landless tenants. 7 Noting that such situation was "[a] most potential source of disorder in the islands," Taft negotiated with Rome for the purchase of the friar lands for $7 Million with sinking funds.8 The "lands were to be disposed of to the tenants as rapidly as the public interest will permit" 9 even at a net pecuniary loss to the colonial government.10 However, in a sudden shift of policy, the U.S. sold friar lands on terms most advantageous to it 11 – large tracts12were sold for close to $7 Million to corporate and individual investors. 13 Most tenants in possession were said to have been disinterested to purchase the lands. 14 They were extended assistance though in the form of better sharing and credit arrangements to ameliorate agrarian relations.15 Soon after the Philippines was plunged into a series of peasant uprisings led by the Sakdalista in the 1930’s and the Hukbalahap in the 1950’s. Appeasement came in the form of RA 1199 (Agricultural

Tenancy Act of 1954) and RA 1400 (Land Reform Act of 1955). RA 1199 allowed tenants to become leaseholders while RA 1400 mandated compulsory land redistribution. However, RA 1400 set unreasonable retention limits at 300 hectares for private rice lands and 600 hectares for corporate lands.16 As peasant unrest continued to fester, RA 3844 (Land Reform Code of 1963) was enacted instituting the "operation land transfer" program but allowing a maximum retention area of 75 hectares. 17 This was followed in 1971 by RAs 6389 and 6390 (Code of Agrarian Reforms) which created the Department of Agrarian Reform, reinforced the position of farmers 18 and expanded the scope of agrarian reform by reducing the retention limit to 24 hectares.19 In 1972, President Ferdinand E. Marcos issued PD 2 proclaiming the entire Philippines as a land reform area. However, PD 27 subsequently restricted the scope of land reform to the compulsory redistribution of tenanted rice and corn lands exceeding seven hectares. Thus, more than two and a half centuries after compulsory land redistribution was first attempted in the Philippines, there remained so much unfinished business. It is this which the social justice provisions of the 1987 Constitution were intended to finish. Section 4, Article XIII thereof commands: Section 4. The State shall, by law, undertake an agrarian reform program founded on the right of farmers and regular farmworkers who are landless, to own directly or collectively the lands they till or, in the case of other farmworkers, to receive a just share of the fruits thereof. To this end, the State shall encourage and undertake the just distribution of all agricultural lands, subject to such priorities and reasonable retention limits as the Congress may prescribe, taking into account ecological, developmental, or equity considerations, and subject to the payment of just compensation. In determining retention limits, the State shall respect the right of small landowners. The State shall further provide incentives for voluntary land-sharing. (Emphasis supplied) By its plain language, it requires that the law implementing the agrarian reform program envisioned by the Constitution should employ a land redistribution mechanism. Subject only to retention limits as may be prescribed by Congress and to payment of just compensation, ownership of all agricultural lands are to be distributed and transferred to the farmers and farmworkers who till the land. There is absolutely no doubt in my mind that the Constitution has ordained land redistribution as the mechanism of agrarian reform. First, it recognizes the right of farmers and regular farmworkers who are landless to own directly or collectively the lands they till. Second, it affirms the primacy20 of this right which is enshrined as the centerpiece of agrarian reform, thereby guaranteeing its enforcement. Third, in the same breath, it directs that, to such end, the State shall undertake the just distribution of all agricultural lands,21 subject only to retention limits and just compensation. Pursuant to the mandate of Section 4, Article XIII of the Constitution, Congress enacted RA 6657 (Comprehensive Agrarian Reform Law of 1988). It was supposed to be a revolutionary law, introducing innovative approaches to agrarian reform. Among its novel provisions (and relevant to this case) is Section 31 which provides: SEC. 31. Corporate Landowners. - Corporate landowners may voluntarily transfer ownership over their agricultural landholdings to the Republic of the Philippines pursuant to Section 20 hereof or to qualified beneficiaries, under such terms and conditions consistent with this Act, as they may agree upon, subject to confirmation by the DAR.

Upon certification by the DAR, corporations owning agricultural lands may give their qualified beneficiaries the right to purchase such proportion of the capital stock of the corporation that the agricultural land, actually devoted to agricultural activities, bears in relation to the company’s total assets, under such terms and conditions as may be agreed upon by them. In no case shall the compensation received by the workers at the time the shares of stocks are distributed be reduced. The same principle shall be applied to associations, with respect to their equity or participation. Corporations or associations which voluntarily divest a proportion of their capital stock, equity or participation in favor of their workers or other qualified beneficiaries under this section shall be deemed to have complied with the provisions of this Act: Provided, That the following conditions are complied with: a) In order to safeguard the right of beneficiaries who own shares of stocks to dividends and other financial benefits, the books of the corporation or association shall be subject to periodic audit by certified public accountants chosen by the beneficiaries; b) Irrespective of the value of their equity in the corporation or association, the beneficiaries shall be assured of at least one (1) representative in the board of directors, or in a management or executive committee, if one exists, of the corporation or association; c) Any shares acquired by such workers and beneficiaries shall have the same rights and features as all other shares; and d) Any transfer of shares of stocks by the original beneficiaries shall be void ab initio unless said transaction is in favor of a qualified and registered beneficiary within the same corporation. If within two (2) years from the approval of this Act, the land or stock transfer envisioned above is not made or realized or the plan for such stock distribution approved by the PARC within the same period, the agricultural land of the corporate owners or corporation shall be subject to the compulsory coverage of this Act. Section 31 of RA 6657 grants corporate landowners like petitioner Hacienda Luisita, Inc. (HLI) the option to give qualified agrarian reform beneficiaries the right to purchase capital stock of the corporation proportionate to how much the agricultural land actually devoted to agricultural activities bears in relation to the company’s total assets, under such terms and conditions as may be agreed upon by them. Such voluntary divestment of a portion of the corporate landowner’s capital stock to qualified agrarian reform beneficiaries is considered compliance with the agrarian reform law (RA 6657), subject to certain conditions. The Fundamental Issue Section 31 of RA 6657 is at the center of this controversy as it is the basis of the assailed stock distribution plan executed by petitioner HLI with farmworker-beneficiaries. On the Constitutionality Of Section 31 of RA 6657 The Constitution has vested this Court with the power and duty to determine and declare whether the scales of constitutionality have been kept in balance or unduly tipped, whether an official action is constitutional or not. As the fundamental and supreme law of the land, the Constitution also serves

as the counterweight against which the validity of all actions of the government is weighed. With it, the Court ascertains whether the action of a department, agency or public officer preserves the constitutional equilibrium or disturbs it. In this case, respondents argue that Section 31 of RA 6657 has been weighed and found wanting.22 In particular, its constitutionality is assailed insofar as it provides petitioner HLI the choice to resort to stock distribution in order to comply with the agrarian reform program. Respondents assert that the stock distribution arrangement is fundamentally infirm as it impairs the right of farmers and farmworkers under Section 4, Article XIII of the Constitution to own the land they till. 23 For its part, petitioner HLI points out that the constitutional issue has been raised collaterally and is therefore proscribed. The ponencia opines that the challenge on the constitutionality of Section 31 of RA 6657 and its counterpart provision in EO 229 must fail because such issue is not the lis mota of the case.24 Moreover, it has become moot and academic.25 I strongly disagree. While the sword of judicial review must be unsheathed with restraint, the Court must not hesitate to wield it to strike down laws that unduly impair basic rights and constitutional values. Moreover, jurisprudence dictates: It is a well-established rule that a court should not pass upon a constitutional question and decide a law to be unconstitutional or invalid unless such question is raised by the parties and that when it is raised, if the record also presents some other ground upon which the court may raise its judgment, that course will be adopted and the constitutional question will be left for consideration until such question will be unavoidable.26 In this case, the question of constitutionality has been raised by the parties-in-interest to the case.27 In addition, any discussion of petitioner HLI’s stock distribution plan necessarily and inescapably involves a discussion of its legal basis, Section 31 of RA 6657. More importantly, public interest and a grave constitutional violation render the issue of the constitutionality of Section 31 of RA 6657 unavoidable. Agrarian reform is historically imbued with public interest and, as the records of the Constitutional Commission show, Hacienda Luisita has always been viewed as a litmus test of genuine agrarian reform. Furthermore, the framers emphasized the primacy of the right of farmers and farmworkers to directly or collectively own the lands they till. The dilution of this right not only weakens the right but also debases the constitutional intent thereby presenting a serious assault on the Constitution. It is also noteworthy that while the ponencia evades the issue of constitutionality, it adverts to the doctrine of operative facts in its attempt to come up with what it deems to be a just and equitable resolution of this case. This is significant. The ponencia itself declares that the doctrine of operative facts is applied in order to avoid undue harshness and resulting unfairness when a law or executive action is declared null and void,28 therefore unconstitutional. As the Court explained the doctrine: Under the operative fact doctrine, the law is recognized as unconstitutional but the effects of the unconstitutional law, prior to its declaration of nullity, may be left undisturbed as a matter of equity and fair play. In fact, the invocation of the operative fact doctrine is an admission that the law is unconstitutional.29

Assuming for the sake of argument that the constitutionality of Section 31 of RA 6657 has been superseded and rendered moot by Section 5 of RA 9700 vis-a-vis stock distribution as a form of compliance with agrarian reform, the issue does not thereby become totally untouchable. Courts will still decide cases, otherwise moot and academic, if: xxx first, there is a grave violation of the Constitution; second, the exceptional character of the situation and the paramount public interest is involved; third, when the constitutional issue raised requires formulation of controlling principles to guide the bench, the bar, and the public; and fourth, the case is capable of repetition yet evading review...30 In this case, all the above-mentioned requisites are present: First, a grave violation of the Constitution exists. Section 31 of RA 6657 runs roughshod over the language and spirit of Section 4, Article XIII of the Constitution. The first sentence of Section 4 is plain and unmistakeable. It grounds the mandate for agrarian reform on the right of farmers and regular farmworkers, who are landless, to own directly or collectively the land they till. The express language of the provision is clear and unequivocal – agrarian reform means that farmers and regular farmworkers who are landless should be given direct or collective ownership of the land they till. That is their right. Unless there is land distribution, there can be no agrarian reform. Any program that gives farmers or farmworkers anything less than ownership of land fails to conform to the mandate of the Constitution. In other words, a program that gives qualified beneficiaries stock certificates instead of land is not agrarian reform. Actual land distribution is the essential characteristic of a constitutional agrarian reform program. The polar star, when we speak of land reform, is that the farmer has a right to the land he tills. 31 Indeed, a reading of the framers’ intent clearly shows that the philosophy behind agrarian reform is the distribution of land to farmers, nothing less. MR. NOLLEDO. And when we talk of the phrase "to own directly," we mean the principle of direct ownership by the tiller? MR. MONSOD. Yes. MR. NOLLEDO. And when we talk of "collectively," we mean communal ownership, stewardship or State ownership? MS. NIEVA. In this section, we conceive of cooperatives; that is farmers’ cooperatives owning the land, not the State. MR. NOLLEDO. And when we talk of "collectively," referring to farmers’ cooperatives, do the farmers own specific areas of land where they only unite in their efforts? MS. NIEVA. That is one way. MR. NOLLEDO. Because I understand that there are two basic systems involved: the "moshave" type of agriculture and the "kibbutz." So are both contemplated in the report?

MR. TADEO. Ang dalawa kasing pamamaraan ng pagpapatupad ng tunay na reporma sa lupa ay ang pagmamay-ari ng lupa na hahatiin sa individual na pagmamay-ari – directly – at ang tinatawag na sama-samang gagawin ng mga magbubukid. Tulad sa Negros, ang gusto ng mga magbubukid ay gawin nila itong "cooperative or collective farm." Ang ibig sabihin ay sama-sama nilang sasakahin. MR. BENNAGEN. Madam President, nais ko lang dagdagan iyong sagot ni Ginoong Tadeo. xxxx Kasi, doon sa "collective ownership," kasali din iyong "communal ownership" ng mga minorya. Halimbawa sa Tanay, noong gumawa kami ng isang pananaliksik doon, nagtaka sila kung bakit kailangan pang magkaroon ng "land reform" na kung saan ay bibigyan sila ng tig-iisang titulo. At sila nga ay nagpunta sa Ministry of Agrarian Reform at sinabi nila na hindi ito ang gusto nila; kasi sila naman ay magkakamag-anak. Ang gusto nila ay lupa at hindi na kailangan ang tig-iisang titulo. Maraming ganitong kaso mula sa Cordillera hanggang Zambales, Mindoro at Mindanao, kayat kasali ito sa konsepto ng "collective ownership." xxx

xxx

xxx

MR. VILLACORTA. xxx Section 532 gives the opportunity for tillers of the soil to own the land that they till; xxx xxx

xxx

xxx

MR. TADEO. xxx Ang dahilan ng kahirapan natin sa Pilipinas ngayon ay ang pagtitipon-tipon ng vast tracts of land sa kamay ng iilan. Lupa ang nagbibigay ng buhay sa magbubukid at sa iba pang manggagawa sa bukid. Kapag inalis sa kanila ang lupa, parang inalisan na rin sila ng buhay. Kaya kinakailangan talagang magkaroon ng tinatawag na just distribution. xxx xxx

xxx

xxx

MR. TADEO. Kasi ganito iyan. Dapat muna nating makita ang prinsipyo ng agrarian reform, iyong maging may-ari siya ng lupa na kaniyang binubungkal. Iyon ang kauna-unahang prinsipyo nito. xxx xxx

xxx

xxx

MR. TINGSON. xxx When we speak here of "to own directly or collectively the lands they till," is this land for the tillers rather than land for the landless? Before, we used to hear "land for the landless," but now the slogan is "land for the tillers." Is that right? MR. TADEO. Ang prinsipyong umiiral dito ay iyong land for the tillers. Ang ibig sabihin ng "directly" ay tulad sa implementasyon sa rice and corn lands kung saan inaari na ng mga magsasaka ang lupang binubungkal nila. Ang ibig sabihin naman ng "collectively" ay sama-samang paggawa sa isang lupain o isang bukid, katulad ng sitwasyon sa Negros. xxx

xxx

xxx

MR. BENNAGEN. Maaari kayang magdagdag sa pagpapaliwanag ng "primacy"? Kasi may cultural background ito. Dahil agrarian society pa ang lipunang Pilipino, maigting talaga ang ugnayan ng mga magsasaka sa kanilang lupa. Halimbawa, sinasabi nila na ang lupa ay pinagbuhusan na ng dugo, pawis at luha. So land acquires a symbolic content that is not simply negated by growth, by productivity, etc. The primacy should be seen in relation to an agrarian program that leads to a later

stage of social development which at some point in time may already negate this kind of attachment. The assumption is that there are already certain options available to the farmers. Marahil ang primacy ay ang pagkilala sa pangangailangan ng magsasaka – ang pag-aari ng lupa. Ang assumption ay ang pag-aari mismo ng lupa becomes the basis for the farmers to enjoy the benefits, the fruits of labor. xxx (678) xxx

xxx

xxx

MR. TADEO. xxx Kung sinasabi nating si Kristo ay liberating dahil ang api ay lalaya at ang mga bihag ay mangaliligtas, sinabi rin ni Commissioner Felicitas Aquino na kung ang history ay liberating, dapat ding maging liberating ang Saligang Batas. Ang magpapalaya sa atin ay ang agrarian and natural resources reform. The primary, foremost and paramount principles and objectives are contained [i]n lines 19 to 22: "primacy of the rights and of farmers and farmworkers to own directly or collectively the lands they till." Ito ang kauna-unahan at pinakamahalagang prinsipyo at layunin ng isang tunay na reporma sa lupa – na ang nagbubungkal ng lupa ay maging may-ari nito. xxx (695-696) The essential thrust of agrarian reform is land-to-the-tiller. Thus, to satisfy the mandate of the constitution, any implementation of agrarian reform should always preserve the control over the land in the hands of its tiller or tillers, whether individually or collectively. Consequently, any law that goes against this constitutional mandate of the actual grant of land to farmers and regular farmworkers must be nullified. If the Constitution, as it is now worded and as it was intended by the framers envisaged an alternative to actual land distribution (e.g., stock distribution) such option could have been easily and explicitly provided for in its text or even conceptualized in the intent of the framers. Absolutely no such alternative was provided for. Section 4, Article XIII on agrarian reform, in no uncertain terms, speaks of land to be owned directly or collectively by farmers and regular farm workers. By allowing the distribution of capital stock, not land, as "compliance" with agrarian reform, Section 31 of RA 6657 directly and explicitly contravenes Section 4, Article XIII of the Constitution. The corporate landowner remains to be the owner of the agricultural land. Qualified beneficiaries are given ownership only of shares of stock, not the lands they till. Landless farmers and farmworkers become landless stockholders but still tilling the land of the corporate owner, thereby perpetuating their status as landless farmers and farmworkers. Second, this case is of exceptional character and involves paramount public interest. In La BugalB’Laan Tribal Association, Inc.,33 the Court reminded itself of the need to recognize the extraordinary character of the situation and the overriding public interest involved in a case. Here, there is a necessity for a categorical ruling to end the uncertainties plaguing agrarian reform caused by serious constitutional doubts on Section 31 of RA 6657. While the ponencia would have the doubts linger, strong reasons of fundamental public policy demand that the issue of constitutionality be resolved now,34 before the stormy cloud of doubt can cause a social cataclysm. At the risk of being repetitive, agrarian reform is fundamentally imbued with public interest and the implementation of agrarian reform at Hacienda Luisita has always been of paramount interest. Indeed, it was specifically and unequivocally targeted when agrarian reform was being discussed in the Constitutional Commission. Moreover, the Court should take judicial cognizance of the violent incidents that intermittently occur at Hacienda Luisita, solely because of the agrarian problem there. Indeed, Hacienda Luisita proves that, for landless farmers and farmworkers, the land they till is their life.

The Constitution does not only bestow the landless farmers and farmworkers the right to own the land they till but also concedes that right to them and makes it a duty of the State to respect that right through genuine and authentic agrarian reform. To subvert this right through a mechanism that allows stock distribution in lieu of land distribution as mandated by the Constitution strikes at the very heart of social justice. As a grave injustice, it must be struck down through the invalidation of the statutory provision that permits it. To leave this issue unresolved is to allow the further creation of laws, rules or orders that permit policies creating, unintentionally or otherwise, means to avoid compliance with the foremost objective of agrarian reform – to give the humble farmer and farmworker the right to own the land he tills. To leave this matter unsettled is to encourage future subversion or frustration of agrarian reform, social justice and the Constitution. Third, the constitutional issue raised requires the formulation of controlling principles to guide the bench, the bar and the public.35 Fundamental principles of agrarian reform must be established in order that its aim may be truly attained. One such principle that must be etched in stone is that no law, rule or policy can subvert the ultimate goal of agrarian reform, the actual distribution of land to farmers and farmworkers who are landless. Agrarian reform requires that such landless farmers and farmworkers be given direct or collective ownership of the land they till, subject only to the retention limits and the payment of just compensation. There is no valid substitute to actual distribution of land because the right of landless farmers and farmworkers expressly and specifically refers to a right to own the land they till. Fourth, this case is capable of repetition, yet evading review. As previously mentioned, if the subject provision is not struck down today as unconstitutional, the possibility of passing future laws providing for a similar option is ominously present. Indeed, what will stop our legislators from providing artificial alternatives to actual land distribution if this Court, in the face of an opportunity to do so, does not declare that such alternatives are completely against the Constitution? We would be woefully remiss in our duty of safeguarding the Constitution and the constitutionally guaranteed right of a historically marginalized sector if we allowed a substantial deviation from its language and intent. The following findings of the Special Task Force as stated in its Terminal Report 36 are worth reiterating: ... sugar-coated assurances were more than enough to make them fall for the SDO as they made them feel rich as "stock holder" of a rich and famous corporation despite the dirt in their hands and the tatters they use; given the feeling of security of tenure in their work when there is none; expectation to receive dividends when the corporation has already suspended operations allegedly due to losses; and a stable sugar production by maintaining the agricultural lands when a substantial portion thereof, of almost 1/8 of the total areas, has already been converted to non-agricultural uses. Truly, the pitiful consequences of a convoluted agrarian reform policy, such as those reported above, can be avoided if laws were made to truly fulfill the aim of the constitutional provisions on agrarian reform. As the Constitution sought to make the farmers and farmworkers masters of their own land, the Court should not hesitate to state, without mincing word, that qualified agrarian reform beneficiaries deserve no less than ownership of land.

The river cannot rise higher than its source. An unconstitutional provision cannot be the basis of a constitutional act. As the stock distribution plan of petitioner HLI is based on Section 31 of RA 6657 which is unconstitutional, the stock distribution plan must perforce also be unconstitutional. On Petitioner’s Long Due Obligation to Distribute Hacienda Luisita to Farmers Another compelling reason exists for ordering petitioner HLI to distribute the lands of Hacienda Luisita to farmworker beneficiaries -- the National Government, in 1957, aided petitioner HLI’s predecessor-in-interest in acquiring Hacienda Luisita with the condition that the acquisition of Hacienda Luisita should be made "with a view to distributing this hacienda to small farmers in line with the [government]37’s social justice program."38 The distribution of land to the farmers should have been made within ten years. That was a sine qua non condition. It could have not been done away with for mere expediency. Petitioner HLI is bound by that condition. 39 Indeed, the National Government sought to enforce the condition when it filed a case on May 7, 1980 against Tarlac Development Corporation (TADECO), petitioner HLI’s predecessor-in-interest, in the Regional Trial Court of Manila, Branch 43.40 The case, docketed as Civil Case No. 131654 entitled "Republic of the Philippines vs. TADECO," sought the surrender by TADECO of Hacienda Luisita to the Ministry of Agrarian Reform for distribution to qualified farmworker-beneficiaries. 41 In a decision dated December 2, 1985, the trial court upheld the position of the National Government and ordered TADECO to transfer control of Hacienda Luisita to the Ministry of Agrarian Reform, which will distribute the land to small farmers after paying TADECO P3.988 Million. 42 The trial court’s decision was appealed to the Court of Appeals where it was docketed as CA-G.R. CV No. 08364. The appellate court, in a resolution dated May 18, 1988, dismissed the appeal without prejudice: WHEREFORE, the present case on appeal is hereby dismissed without prejudice, and should be revived if any of the conditions as above set forth is not duly complied with by TADECO. The conditions referred to are the following: (a) should TADECO fail to obtain approval of the stock distribution plan for failure to comply with all the requirements for corporate landowners set forth in the guidelines issued by the PARC or (b) if such stock distribution plan is approved by PARC, but TADECO fails to initially implement it.43 In this case, the stock distribution plan of petitioner HLI, TADECO’s successor-in-interest, could not have been validly approved by the PARC as it was null and void for being contrary to law. Its essential terms, particularly the "man days" method for computing the number of shares to which a farmworker-beneficiary is entitled and the extended period for the complete distribution of shares to qualified farmworker-beneficiaries are against the letter and spirit of Section 31 of RA 6657, assuming that provision is valid, and DAO No. 10-1988. Even assuming that the approval could have been validly made by the PARC, the subsequent revocation of such approval meant that there was no more approval to speak of, that the approval has already been withdrawn. Thus, in any case, the decision of the trial court should be revived,

albeit on appeal. Such revival means that petitioner HLI cannot now evade its obligation which has long be overdue, Hacienda Luisita should be distributed to qualified farmworker-beneficiaries. On the Equities of the Case And its Qualifications Agrarian reform’s underlying principle is the recognition of the rights of farmers and farmworkers who are landless to own, directly or collectively, the lands they till. Actual land distribution to qualified agrarian reform beneficiaries is mandatory. Anything that promises something other than land must be struck down for being unconstitutional. Be that as it may and regardless of the constitutionality of Section 31 of RA 6657, the lifting of the temporary restraining order in this case coupled with the affirmation of PARC Resolution No. 200532-01 dated December 22, 2005 removes all barriers to the compulsory acquisition of Hacienda Luisita for actual land distribution to qualified farmworker-beneficiaries. The said PARC resolution directed that Hacienda Luisita "be forthwith placed under compulsory coverage or mandated land acquisition scheme"44 and, pursuant thereto, a notice of coverage45 was issued. Hence, the overall effect of the lifting of the temporary restraining order in this case should be the implementation of the "compulsory coverage or mandatory acquisition scheme" on the lands of Hacienda Luisita. This notwithstanding and despite the nullity of Section 31 of RA 6657 and its illegitimate offspring, petitioner HLI’s stock distribution plan, I am willing to concede that the equities of the case might possibly call for the application of the doctrine of operative facts. The Court cannot with a single stroke of the pen undo everything that has transpired in Hacienda Luisita vis-à-vis the relations between petitioner HLI and the farmworker-beneficiaries resulting from the execution of the stock distribution plan more than two decades ago. A simplistic declaration that no legal effect whatsoever may be given to any action taken pursuant to the stock distribution plan by virtue of its nullification will only result in unreasonable and unfair consequences in view of previous benefits enjoyed and obligations incurred by the parties under the said stock distribution plan. Let me emphasize, however, that this tenuous concession is not without significant qualifications. First, while operative facts and considerations of fairness and equity might be considered in disposing of this case, the question of constitutionality of Section 31 of RA 6657 and, corollarily, of petitioner HLI’s stock distribution plan, should be addressed squarely. As the said provision goes against both the letter and spirit of the Constitution, the Court must categorically say in no uncertain terms that it is null and void. The same principle applies to petitioner HLI’s stock distribution plan. Second, pursuant to both the express mandate and the intent of the Constitution, the qualified farmer-beneficiaries should be given ownership of the land they till. That is their right and entitlement, which is subject only to the prescribed retention limits and the payment of just compensation, as already explained. Due to considerations of fairness and equity, however, those who wish to waive their right to actually own land and instead decide to hold on to their shares of stock may opt to stay as stockholders of petitioner HLI. Nonetheless, this scheme should apply in this case only. Third, the proper action on the instant petition should be to dismiss it. For how can we grant it when it invites us to rule against the constitutional right of landless farmworker-beneficiaries to actually own the land they till? How can we sustain petitioner HLI’s claim that its stock distribution plan should be upheld when we are in fact declaring that it is violative of the law and of the Constitution? Indeed, to affirm the correctness of PARC Resolution No. 2005-32-01 dated December 22, 2005

revoking the stock distribution plan and directing the compulsory distribution of Hacienda Luisita lands to the farmworker-beneficiaries and, at the same time, grant petitioner HLI’s prayer for the nullification of the said PARC Resolution is an exercise in self-contradiction. To say that we are partially granting the petition is to say that there is rightness in petitioner HLI’s position that it can validly frustrate the actual distribution of Hacienda Luisita to the farmworkerbeneficiaries. That is fundamentally and morally wrong. A Final Word Our action here today is not simply about Hacienda Luisita or a particular stock distribution plan. Our recognition of the right under the Constitution of those who till the land to steward it is the Court’s marching order to dismantle the feudal tenurial relations that for centuries have shackled them to the soil in exchange for a pitiful share in the fruits, and install them as the direct or collective masters of the domain of their labor. It is not legal, nor moral, to replace their shackles with mere stock certificates or any other superficial alternative. We take action in these cases today to promote social justice, champion the cause of the poor and distribute wealth more equitably. By applying the agrarian reform provision of the Constitution, we seek to empower the farmers, enhance their dignity and improve their lives by freeing them from their bondage to the land they till and making them owner-stewards thereof. We express iron-clad fealty to Section 4, Article XIII of the Constitution to dismantle the concentration of land in the hands of the privileged few. Thus, we direct the implementation of a genuine agrarian reform as envisioned by the Constitution by ordering the just distribution of land for the democratization of productive resources. History will be the unforgiving judge of this Court. We cannot correct a historical anomaly and prevent the eruption of a social volcano by fancy legal arguments and impressively crafted devices for corporate control. WHEREFORE, I vote that the petition be DISMISSED. Section 31 of RA 6657 should be declared NULL and VOID for being unconstitutional. Consequently, the stock distribution plan of petitioner HLI should likewise be declared NULL and VOID for being unconstitutional. Accordingly, PARC Resolution Nos. 2005-32-01 dated December 22, 2005 and 2006-34-01 dated May 3, 2006 should be AFFIRMED in so far as they direct the implementation of compulsory coverage or mandated land acquisition scheme in Hacienda Luisita with the MODIFICATION that, pro hac vice due to considerations of fairness and equity, qualified farmworker-beneficiaries may waive their right to actually own the lands they till and stay as stockholders of petitioner HLI. RENATO C. CORONA Chief Justice THIRD DIVISION G.R. No. 178895

January 10, 2011

REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF AGRARIAN REFORM, through the HON. SECRETARY NASSER C. PANGANDAMAN, Petitioner, vs.

SALVADOR N. LOPEZ AGRI-BUSINESS CORP., represented by SALVADOR N. LOPEZ, JR., President and General Manager, Respondent. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 179071 SALVADOR N. LOPEZ AGRI-BUSINESS CORP., represented by SALVADOR N. LOPEZ, JR., President and General Manager, Petitioner, vs. DEPARTMENT OF AGRARIAN REFORM, through the Honorable Secretary, Respondent. DECISION SERENO, J.: Before us are two Rule 45 Petitions1 filed separately by the Department of Agrarian Reform (DAR), through the Office of the Solicitor General, and by the Salvador N. Lopez Agri-Business Corp. (SNLABC). Each Petition partially assails the Court of Appeals Decision dated 30 June 2006 2 with respect to the application for exemption of four parcels of land - located in Mati, Davao Oriental and owned by SNLABC - from Republic Act No. 6657, otherwise known as the Comprehensive Agrarian Reform Law (CARL). There is little dispute as to the facts of the case, as succinctly discussed by the Court of Appeals and adopted herein by the Court, to wit: Subject of this petition are four (4) parcels of land with an aggregate area of 160.1161 hectares registered in the name of Salvador N. Lopez Agri-Business Corporation. Said parcels of land are hereinafter described as follows: 1avvphi1

Title No.

Area

Location

TCT No. T-12635 (Lot 1454-A & 1296) 49.5706 has. Bo. Limot, Mati, Davao Oriental TCT No. T-12637 (Lot 1298)

42.6822 has. Bo. Don Enrique Lopez, Mati, Dvo. Or.

TCT No. T-12639 (Lot 1293-B)

67.8633 has. Bo. Don Enrique Lopez, Mati, Dvo. Or.

On August 2, 1991, Municipal Agrarian Reform Officer (MARO) Socorro C. Salga issued a Notice of Coverage to petitioner with regards (sic) to the aforementioned landholdings which were subsequently placed under Compulsory Acquisition pursuant to R.A. 6657 (Comprehensive Agrarian Reform Law). On December 10, 1992, petitioner filed with the Provincial Agrarian Reform Office (PARO), Davao Oriental, an Application for Exemption of the lots covered by TCT No. T-12637 and T-12639 from CARP coverage. It alleged that pursuant to the case of Luz Farms v. DAR Secretary said parcels of land are exempted from coverage as the said parcels of land with a total area of 110.5455 hectares are used for grazing and habitat of petitioner’s 105 heads of cattle, 5 carabaos, 11 horses, 9 heads of goats and 18 heads of swine, prior to the effectivity of the Comprehensive Agrarian Reform Law (CARL).

On December 13, 1992 and March 1, 1993, the MARO conducted an onsite investigation on the two parcels of land confirming the presence of the livestock as enumerated. The Investigation Report dated March 9, 1993 stated: That there are at least 2[5] to 30 heads of cows that farrow every year and if the trend of farrowing persist (sic), then the cattle shall become overcrowded and will result to scarcity of grasses for the cattle to graze; That during the week cycle, the herds are being moved to the different adjacent lots owned by the corporation. It even reached Lot 1454-A and Lot 1296. Thereafter, the herds are returned to their respective night chute corrals which are constructed under Lot 1293-B and Lot 1298. xxx That the age of coconut trees planted in the area are already 40 to 50 years and have been affected by the recent drought that hit the locality. That the presence of livestocks (sic) have already existed in the area prior to the Supreme Court decision on LUZ FARMS vs. Secretary of Agrarian Reform. We were surprised however, why the management of the corporation did not apply for Commercial Farm Deferment (CFD) before, when the two years reglamentary (sic) period which the landowner was given the chance to file their application pursuant to R.A. 6657, implementing Administrative Order No. 16, Series of 1989; However, with regards to what venture comes (sic) first, coconut or livestocks (sic), majority of the farmworkers including the overseer affirmed that the coconut trees and livestocks (sic) were (sic) simultaneously and all of these were inherited by his (applicant) parent. In addition, the financial statement showed 80% of its annual income is derived from the livestocks (sic) and only 20% from the coconut industry. Cognitive thereto, we are favorably recommending for the exemption from the coverage of CARP based on LUZ FARMS as enunciated by the Supreme Court the herein Lot No. 1293-B Psd-65835 under TCT No. T-12639 except Lot No. 1298, Cad. 286 of TCT No. T-12637 which is already covered under the Compulsory Acquisition (CA) Scheme and had already been valued by the Land Valuation Office, Land Bank of the Philippines. On June 24, 1993, TCT No. T-12635 covering Lots 1454-A & 1296 was cancelled and a new one issued in the name of the Republic of the Philippines under RP T-16356. On February 7, 1994, petitioner through its President, Salvador N. Lopez, Jr., executed a letter-affidavit addressed to the respondent-Secretary requesting for the exclusion from CARP coverage of Lots 1454-A and 1296 on the ground that they needed the additional area for its livestock business. On March 28, 1995, petitioner filed before the DAR Regional Director of Davao City an application for the exemption from CARP coverage of Lots 1454-A and 1296 stating that it has been operating grazing lands even prior to June 15, 1988 and that the said two (2) lots form an integral part of its grazing land. The DAR Regional Director, after inspecting the properties, issued an Order dated March 5, 1997 denying the application for exemption of Lots 1454-A and 1296 on the ground that it was not clearly shown that the same were actually, directly and exclusively used for livestock raising since in its application, petitioner itself admitted that it needs the lots for additional grazing area. The application for exemption, however of the other two (2) parcels of land was approved.

On its partial motion for reconsideration, petitioner argued that Lots 1454-A & 1296 were taken beyond the operation of the CARP pursuant to its reclassification to a Pollutive Industrial District (Heavy Industry) per Resolution No. 39 of the Sangguniang Bayan of Mati, Davao Oriental, enacted on April 7, 1992. The DAR Regional Director denied the Motion through an Order dated September 4, 1997, ratiocinating that the reclassification does not affect agricultural lands already issued a Notice of Coverage as provided in Memorandum Circular No. 54-93: Prescribing the Guidelines Governing Section 20 of R.A. 7160. Undaunted, petitioner appealed the Regional Director’s Orders to respondent DAR. On June 10, 1998, the latter issued its assailed Order affirming the Regional Director’s ruling on Lots 1454-A & 1296 and further declared Lots 1298 and 1293-B as covered by the CARP. Respondent ruled in this wise considering the documentary evidence presented by petitioner such as the Business Permit to engage in livestock, the certification of ownership of large cattle and the Corporate Income Tax Returns, which were issued during the effectivity of the Agrarian Reform Law thereby debunking petitioner’s claim that it has been engaged in livestock farming since the 1960s. Respondent further ruled that the incorporation by the Lopez family on February 12, 1988 or four (4) months before the effectivity of R.A. 6657 was an attempt to evade the noble purposes of the said law. On October 17, 2002, petitioner’s Motion for Reconsideration was denied by respondent prompting the former to file the instant petition.3 In the assailed Decision dated 30 June 2006,4 the Court of Appeals partially granted the SNLABC Petition and excluded the two (2) parcels of land (Transfer Certificate of Title [TCT] Nos. T-12637 and T-12639) located in Barrio Don Enrique Lopez (the "Lopez lands") from coverage of the CARL. However, it upheld the Decisions of the Regional Director5 and the DAR6 Secretary denying the application for exemption with respect to Lots 1454-A and 1296 (previously under TCT No. T-12635) in Barrio Limot (the "Limot lands"). These lots were already covered by a new title under the name of the Republic of the Philippines (RP T-16356). The DAR and SNLABC separately sought a partial reconsideration of the assailed Decision of the Court of Appeals, but their motions for reconsideration were subsequently denied in the Court of Appeals Resolution dated 08 June 2007.7 The DAR and SNLABC elevated the matter to this Court by filing separate Rule 45 Petitions (docketed as G.R. No. 1788958 and 179071,9 respectively), which were subsequently ordered consolidated by the Court. The main issue for resolution by the Court is whether the Lopez and Limot lands of SNLABC can be considered grazing lands for its livestock business and are thus exempted from the coverage of the CARL under the Court’s ruling in Luz Farms v. DAR.10 The DAR questions the disposition of the Court of Appeals, insofar as the latter allowed the exemption of the Lopez lands, while SNLABC assails the inclusion of the Limot lands within the coverage of the CARL. The Court finds no reversible error in the Decision of the Court of Appeals and dismisses the Petitions of DAR and SNLABC. Preliminarily, in a petition for review on certiorari filed under Rule 45, the issues that can be raised are, as a general rule, limited to questions of law.11 However, as pointed out by both the DAR and SNLABC, there are several recognized exceptions wherein the Court has found it appropriate to reexamine the evidence presented.12 In this case, the factual findings of the DAR Regional Director, the DAR Secretary and the CA are contrary to one another with respect to the following issue: whether the Lopez lands were actually, directly and exclusively used for SNLABC’s livestock

business; and whether there was intent to evade coverage from the Comprehensive Agrarian Reform Program (CARP) based on the documentary evidence. On the other hand, SNLABC argues that these authorities misapprehended and overlooked certain relevant and undisputed facts as regards the inclusion of the Limot lands under the CARL. These circumstances fall within the recognized exceptions and, thus, the Court is persuaded to review the facts and evidence on record in the disposition of these present Petitions. The Lopez lands of SNLABC are actually and directly being used for livestock and are thus exempted from the coverage of the CARL. Briefly stated, the DAR questions the object or autoptic evidence relied upon by the DAR Regional Director in concluding that the Lopez lands were actually, directly and exclusively being used for SNLABC’s livestock business prior to the enactment of the CARL. In Luz Farms v. Secretary of the Department of Agrarian Reform,13 the Court declared unconstitutional the CARL provisions14 that included lands devoted to livestock under the coverage of the CARP. The transcripts of the deliberations of the Constitutional Commission of 1986 on the meaning of the word "agricultural" showed that it was never the intention of the framers of the Constitution to include the livestock and poultry industry in the coverage of the constitutionally mandated agrarian reform program of the government. 15 Thus, lands devoted to the raising of livestock, poultry and swine have been classified as industrial, not agricultural, and thus exempt from agrarian reform.16 Under the rules then prevailing, it was the Municipal Agrarian Reform Officer (MARO) who was primarily responsible for investigating the legal status, type and areas of the land sought to be excluded;17 and for ascertaining whether the area subject of the application for exemption had been devoted to livestock-raising as of 15 June 1988. 18 The MARO’s authority to investigate has subsequently been replicated in the current DAR guidelines regarding lands that are actually, directly and exclusively used for livestock raising.19 As the primary official in charge of investigating the land sought to be exempted as livestock land, the MARO’s findings on the use and nature of the land, if supported by substantial evidence on record, are to be accorded greater weight, if not finality. Verily, factual findings of administrative officials and agencies that have acquired expertise in the performance of their official duties and the exercise of their primary jurisdiction are generally accorded not only respect but, at times, even finality if such findings are supported by substantial evidence.20 The Court generally accords great respect, if not finality, to factual findings of administrative agencies because of their special knowledge and expertise over matters falling under their jurisdiction.21 In the instant case, the MARO in its ocular inspection22 found on the Lopez lands several heads of cattle, carabaos, horses, goats and pigs, some of which were covered by several certificates of ownership. There were likewise structures on the Lopez lands used for its livestock business, structures consisting of two chutes where the livestock were kept during nighttime. The existence of the cattle prior to the enactment of the CARL was positively affirmed by the farm workers and the overseer who were interviewed by the MARO. Considering these factual findings and the fact that the lands were in fact being used for SNLABC’s livestock business even prior to 15 June 1988, the DAR Regional Director ordered the exemption of the Lopez lands from CARP coverage. The Court gives great probative value to the actual, on-site investigation made by the MARO as affirmed by the DAR Regional Director. The Court finds that the Lopez lands were in fact actually, directly and exclusively being used as industrial lands for livestock-raising.

Simply because the on-site investigation was belatedly conducted three or four years after the effectivity of the CARL does not perforce make it unworthy of belief or unfit to be offered as substantial evidence in this case. Contrary to DAR’s claims, the lack of information as regards the initial breeders and the specific date when the cattle were first introduced in the MARO’s Report does not conclusively demonstrate that there was no livestock-raising on the Lopez lands prior to the CARL. Although information as to these facts are significant, their non-appearance in the reports does not leave the MARO without any other means to ascertain the duration of livestock-raising on the Lopez lands, such as interviews with farm workers, the presence of livestock infrastructure, and evidence of sales of cattle – all of which should have formed part of the MARO’s Investigation Report. Hence, the Court looks with favor on the expertise of the MARO in determining whether livestockraising on the Lopez lands has only been recently conducted or has been a going concern for several years already. Absent any clear showing of grave abuse of discretion or bias, the findings of the MARO - as affirmed by the DAR Regional Director - are to be accorded great probative value, owing to the presumption of regularity in the performance of his official duties. 23 The DAR, however, insisted in its Petition24 on giving greater weight to the inconsistencies appearing in the documentary evidence presented, and noted by the DAR Secretary, in order to defeat SNLABC’s claim of exemption over the Lopez lands. The Court is not so persuaded. In the Petition, the DAR argued that that the tax declarations covering the Lopez lands characterized them as agricultural lands and, thus, detracted from the claim that they were used for livestock purposes. The Court has since held that "there is no law or jurisprudence that holds that the land classification embodied in the tax declarations is conclusive and final nor would proscribe any further inquiry"; hence, "tax declarations are clearly not the sole basis of the classification of a land."25 Applying the foregoing principles, the tax declarations of the Lopez lands as agricultural lands are not conclusive or final, so as to prevent their exclusion from CARP coverage as lands devoted to livestock-raising. Indeed, the MARO’s on-site inspection and actual investigation showing that the Lopez lands were being used for livestock-grazing are more convincing in the determination of the nature of those lands. lavvphil

Neither can the DAR in the instant case assail the timing of the incorporation of SNLABC and the latter’s operation shortly before the enactment of the CARL. That persons employ tactics to precipitously convert their lands from agricultural use to industrial livestock is not unheard of; they even exploit the creation of a new corporate vehicle to operate the livestock business to substantiate the deceitful conversion in the hopes of evading CARP coverage. Exemption from CARP, however, is directly a function of the land’s usage, and not of the identity of the entity operating it. Otherwise stated, lands actually, directly and exclusively used for livestock are exempt from CARP coverage, regardless of the change of owner.26 In the instant case, whether SNLABC was incorporated prior to the CARL is immaterial, since the Lopez lands were already being used for livestock-grazing purposes prior to the enactment of the CARL, as found by the MARO. Although the managing entity had been changed, the business interest of raising livestock on the Lopez lands still remained without any indication that it was initiated after the effectivity of the CARL. As stated by SNLABC, the Lopez lands were the legacy of Don Salvador Lopez, Sr. The ownership of these lands was passed from Don Salvador Lopez, Sr., to Salvador N. Lopez, Jr., and subsequently to the latter’s children before being registered under the name of SNLABC. Significantly, SNLABC was incorporated by the same members of the Lopez family, which had previously owned the lands and managed the livestock business. 27 In all these past years, despite the change in ownership, the Lopez lands have been used for purposes of grazing and pasturing cattle, horses, carabaos and goats. Simply put, SNLABC was chosen as the entity to take over the

reins of the livestock business of the Lopez family. Absent any other compelling evidence, the inopportune timing of the incorporation of the SNLABC prior to the enactment of the CARL was not by itself a categorical manifestation of an intent to avoid CARP coverage. Furthermore, the presence of coconut trees, although an indicia that the lands may be agricultural, must be placed within the context of how they figure in the actual, direct and exclusive use of the subject lands. The DAR failed to demonstrate that the Lopez lands were actually and primarily agricultural lands planted with coconut trees. This is in fact contradicted by the findings of its own official, the MARO. Indeed, the DAR did not adduce any proof to show that the coconut trees on the Lopez lands were used for agricultural business, as required by the Court in DAR v. Uy, 28 wherein we ruled thus: It is not uncommon for an enormous landholding to be intermittently planted with trees, and this would not necessarily detract it from the purpose of livestock farming and be immediately considered as an agricultural land. It would be surprising if there were no trees on the land. Also, petitioner did not adduce any proof to show that the coconut trees were planted by respondent and used for agricultural business or were already existing when the land was purchased in 1979. In the present case, the area planted with coconut trees bears an insignificant value to the area used for the cattle and other livestock-raising, including the infrastructure needed for the business. There can be no presumption, other than that the "coconut area" is indeed used for shade and to augment the supply of fodder during the warm months; any other use would be only be incidental to livestock farming. The substantial quantity of livestock heads could only mean that respondent is engaged in farming for this purpose. The single conclusion gathered here is that the land is entirely devoted to livestock farming and exempted from the CARP. On the assumption that five thousand five hundred forty-eight (5,548) coconut trees were existing on the Lopez land (TCT No. T-12637), the DAR did not refute the findings of the MARO that these coconut trees were merely incidental. Given the number of livestock heads of SNLABC, it is not surprising that the areas planted with coconut trees on the Lopez lands where forage grass grew were being used as grazing areas for the livestock. It was never sufficiently adduced that SNLABC was primarily engaged in agricultural business on the Lopez lands, specifically, coconut-harvesting. Indeed, the substantial quantity of SNLABC’s livestock amounting to a little over one hundred forty (140) livestock heads, if measured against the combined 110.5455 hectares of land and applying the DAR-formulated ratio, leads to no other conclusion than that the Lopez lands were exclusively devoted to livestock farming.29 In any case, the inconsistencies appearing in the documentation presented (albeit sufficiently explained) pale in comparison to the positive assertion made by the MARO in its on-site, actual investigation - that the Lopez lands were being used actually, directly and exclusively for its livestock-raising business. The Court affirms the findings of the DAR Regional Director and the Court of Appeals that the Lopez lands were actually, directly and exclusively being used for SNLABC’s livestock business and, thus, are exempt from CARP coverage. The Limot lands of SNLABC are not actually and directly being used for livestock and should thus be covered by the CARL. In contrast, the Limot lands were found to be agricultural lands devoted to coconut trees and rubber and are thus not subject to exemption from CARP coverage. In the Report dated 06 April 1994, the team that conducted the inspection found that the entire Limot lands were devoted to coconuts (41.5706 hectares) and rubber (8.000 hectares) and recommended the denial of the application for exemption.30 Verily, the Limot lands were actually, directly and

exclusively used for agricultural activities, a fact that necessarily makes them subject to the CARP. These findings of the inspection team were given credence by the DAR Regional Director who denied the application, and were even subsequently affirmed by the DAR Secretary and the Court of Appeals. SNLABC argues that the Court of Appeals misapprehended the factual circumstances and overlooked certain relevant facts, which deserve a second look. SNLABC’s arguments fail to convince the Court to reverse the rulings of the Court of Appeals. In the 07 February 1994 Letter-Affidavit addressed to the DAR Secretary, SNLABC requested the exemption of the Limot lands on the ground that the corporation needed the additional area for its livestock business. As pointed out by the DAR Regional Director, this Letter-Affidavit is a clear indication that the Limot lands were not directly, actually and exclusively used for livestock raising. SNLABC casually dismisses the clear import of their Letter-Affidavit as a "poor choice of words." Unfortunately, the semantics of the declarations of SNLABC in its application for exemption are corroborated by the other attendant factual circumstances and indicate its treatment of the subject properties as non-livestock. Verily, the MARO itself, in the Investigation Report cited by no less than SNLABC, found that the livestock were only moved to the Limot lands sporadically and were not permanently designated there. The DAR Secretary even described SNLABC’s use of the area as a "seasonal extension of the applicant’s ‘grazing lands’ during the summer." Therefore, the Limot lands cannot be claimed to have been actually, directly and exclusively used for SNLABC’s livestock business, especially since these were only intermittently and secondarily used as grazing areas. The said lands are more suitable -- and are in fact actually, directly and exclusively being used -- for agricultural purposes. SNLABC’s treatment of the land for non-livestock purposes is highlighted by its undue delay in filing the application for exemption of the Limot lands. SNLABC filed the application only on 07 February 1994, or three years after the Notice of Coverage was issued; two years after it filed the first application for the Lopez lands; and a year after the titles to the Limot lands were transferred to the Republic. The SNLABC slept on its rights and delayed asking for exemption of the Limot lands. The lands were undoubtedly being used for agricultural purposes, not for its livestock business; thus, these lands are subject to CARP coverage. Had SNLABC indeed utilized the Limot lands in conjunction with the livestock business it was conducting on the adjacent Lopez lands, there was nothing that would have prevented it from simultaneously applying for a total exemption of all the lands necessary for its livestock. The defense of SNLABC that it wanted to "save" first the Lopez lands where the corrals and chutes were located, before acting to save the other properties does not help its cause. The piecemeal application for exemption of SNLABC speaks of the value or importance of the Lopez lands, compared with the Limot lands, with respect to its livestock business. If the Lopez and the Limot lands were equally significant to its operations and were actually being used for its livestock business, it would have been more reasonable for it to apply for exemption for the entire lands. Indeed, the belated filing of the application for exemption was a mere afterthought on the part of SNLABC, which wanted to increase the area of its landholdings to be exempted from CARP on the ground that these were being used for its livestock business. In any case, SNLABC admits that the title to the Limot lands has already been transferred to the Republic and subsequently awarded to SNLABC’s farm workers.31 This fact only demonstrates that the land is indeed being used for agricultural activities and not for livestock grazing.

The confluence of these factual circumstances leads to the logical conclusion that the Limot lands were not being used for livestock grazing and, thus, do not qualify for exemption from CARP coverage. SNLABC’s belated filing of the application for exemption of the Limot lands was a ruse to increase its retention of its landholdings and an attempt to "save" these from compulsory acquisition. WHEREFORE, the Petitions of the Department of Agrarian Reform and the Salvador N. Lopez AgriBusiness Corp. are DISMISSED, and the rulings of the Court of Appeals and the DAR Regional Director are hereby AFFIRMED. SO ORDERED. MARIA LOURDES P. A. SERENO EN BANC G.R. No. 162070 October 19, 2005 DEPARTMENT OF AGRARIAN REFORM, represented by SECRETARY JOSE MARI B. PONCE (OIC), Petitioner vs. DELIA T. SUTTON, ELLA T. SUTTON-SOLIMAN and HARRY T. SUTTON, Respondents. DECISION PUNO, J.: This is a petition for review filed by the Department of Agrarian Reform (DAR) of the Decision and Resolution of the Court of Appeals, dated September 19, 2003 and February 4, 2004, respectively, which declared DAR Administrative Order (A.O.) No. 9, series of 1993, null and void for being violative of the Constitution. The case at bar involves a land in Aroroy, Masbate, inherited by respondents which has been devoted exclusively to cow and calf breeding. On October 26, 1987, pursuant to the then existing agrarian reform program of the government, respondents made a voluntary offer to sell (VOS) 1 their landholdings to petitioner DAR to avail of certain incentives under the law. On June 10, 1988, a new agrarian law, Republic Act (R.A.) No. 6657, also known as the Comprehensive Agrarian Reform Law (CARL) of 1988, took effect. It included in its coverage farms used for raising livestock, poultry and swine. On December 4, 1990, in an en banc decision in the case of Luz Farms v. Secretary of DAR,2 this Court ruled that lands devoted to livestock and poultry-raising are not included in the definition of agricultural land. Hence, we declared as unconstitutional certain provisions of the CARL insofar as they included livestock farms in the coverage of agrarian reform. In view of the Luz Farms ruling, respondents filed with petitioner DAR a formal request to withdraw their VOS as their landholding was devoted exclusively to cattle-raising and thus exempted from the coverage of the CARL.3

On December 21, 1992, the Municipal Agrarian Reform Officer of Aroroy, Masbate, inspected respondents’ land and found that it was devoted solely to cattle-raising and breeding. He recommended to the DAR Secretary that it be exempted from the coverage of the CARL. On April 27, 1993, respondents reiterated to petitioner DAR the withdrawal of their VOS and requested the return of the supporting papers they submitted in connection therewith. 4 Petitioner ignored their request. On December 27, 1993, DAR issued A.O. No. 9, series of 1993,5 which provided that only portions of private agricultural lands used for the raising of livestock, poultry and swine as of June 15, 1988 shall be excluded from the coverage of the CARL. In determining the area of land to be excluded, the A.O. fixed the following retention limits, viz: 1:1 animal-land ratio (i.e., 1 hectare of land per 1 head of animal shall be retained by the landowner), and a ratio of 1.7815 hectares for livestock infrastructure for every 21 heads of cattle shall likewise be excluded from the operations of the CARL. On February 4, 1994, respondents wrote the DAR Secretary and advised him to consider as final and irrevocable the withdrawal of their VOS as, under the Luz Farms doctrine, their entire landholding is exempted from the CARL.6 On September 14, 1995, then DAR Secretary Ernesto D. Garilao issued an Order 7 partially granting the application of respondents for exemption from the coverage of CARL. Applying the retention limits outlined in the DAR A.O. No. 9, petitioner exempted 1,209 hectares of respondents’ land for grazing purposes, and a maximum of 102.5635 hectares for infrastructure. Petitioner ordered the rest of respondents’ landholding to be segregated and placed under Compulsory Acquisition. Respondents moved for reconsideration. They contend that their entire landholding should be exempted as it is devoted exclusively to cattle-raising. Their motion was denied. 8 They filed a notice of appeal9 with the Office of the President assailing: (1) the reasonableness and validity of DAR A.O. No. 9, s. 1993, which provided for a ratio between land and livestock in determining the land area qualified for exclusion from the CARL, and (2) the constitutionality of DAR A.O. No. 9, s. 1993, in view of the Luz Farms case which declared cattle-raising lands excluded from the coverage of agrarian reform. On October 9, 2001, the Office of the President affirmed the impugned Order of petitioner DAR. 10 It ruled that DAR A.O. No. 9, s. 1993, does not run counter to the Luz Farms case as the A.O. provided the guidelines to determine whether a certain parcel of land is being used for cattle-raising. However, the issue on the constitutionality of the assailed A.O. was left for the determination of the courts as the sole arbiters of such issue. On appeal, the Court of Appeals ruled in favor of the respondents. It declared DAR A.O. No. 9, s. 1993, void for being contrary to the intent of the 1987 Constitutional Commission to exclude livestock farms from the land reform program of the government. The dispositive portion reads: WHEREFORE, premises considered, DAR Administrative Order No. 09, Series of 1993 is hereby DECLARED null and void. The assailed order of the Office of the President dated 09 October 2001 in so far as it affirmed the Department of Agrarian Reform’s ruling that petitioners’ landholding is covered by the agrarian reform program of the government is REVERSED and SET ASIDE. SO ORDERED.11

Hence, this petition. The main issue in the case at bar is the constitutionality of DAR A.O. No. 9, series of 1993, which prescribes a maximum retention limit for owners of lands devoted to livestock raising. Invoking its rule-making power under Section 49 of the CARL, petitioner submits that it issued DAR A.O. No. 9 to limit the area of livestock farm that may be retained by a landowner pursuant to its mandate to place all public and private agricultural lands under the coverage of agrarian reform. Petitioner also contends that the A.O. seeks to remedy reports that some unscrupulous landowners have converted their agricultural farms to livestock farms in order to evade their coverage in the agrarian reform program. Petitioner’s arguments fail to impress. Administrative agencies are endowed with powers legislative in nature, i.e., the power to make rules and regulations. They have been granted by Congress with the authority to issue rules to regulate the implementation of a law entrusted to them. Delegated rule-making has become a practical necessity in modern governance due to the increasing complexity and variety of public functions. However, while administrative rules and regulations have the force and effect of law, they are not immune from judicial review.12 They may be properly challenged before the courts to ensure that they do not violate the Constitution and no grave abuse of administrative discretion is committed by the administrative body concerned. The fundamental rule in administrative law is that, to be valid, administrative rules and regulations must be issued by authority of a law and must not contravene the provisions of the Constitution.13 The rule-making power of an administrative agency may not be used to abridge the authority given to it by Congress or by the Constitution. Nor can it be used to enlarge the power of the administrative agency beyond the scope intended. Constitutional and statutory provisions control with respect to what rules and regulations may be promulgated by administrative agencies and the scope of their regulations.14 In the case at bar, we find that the impugned A.O. is invalid as it contravenes the Constitution. The A.O. sought to regulate livestock farms by including them in the coverage of agrarian reform and prescribing a maximum retention limit for their ownership. However, the deliberations of the 1987 Constitutional Commission show a clear intent to exclude, inter alia, all lands exclusively devoted to livestock, swine and poultry- raising. The Court clarified in the Luz Farms case that livestock, swine and poultry-raising are industrial activities and do not fall within the definition of "agriculture" or "agricultural activity." The raising of livestock, swine and poultry is different from crop or tree farming. It is an industrial, not an agricultural, activity. A great portion of the investment in this enterprise is in the form of industrial fixed assets, such as: animal housing structures and facilities, drainage, waterers and blowers, feedmill with grinders, mixers, conveyors, exhausts and generators, extensive warehousing facilities for feeds and other supplies, anti-pollution equipment like bio-gas and digester plants augmented by lagoons and concrete ponds, deepwells, elevated water tanks, pumphouses, sprayers, and other technological appurtenances.15 Clearly, petitioner DAR has no power to regulate livestock farms which have been exempted by the Constitution from the coverage of agrarian reform. It has exceeded its power in issuing the assailed A.O. The subsequent case of Natalia Realty, Inc. v. DAR16 reiterated our ruling in the Luz Farms case. In Natalia Realty, the Court held that industrial, commercial and residential lands are not covered by the CARL.17 We stressed anew that while Section 4 of R.A. No. 6657 provides that the CARL

shall cover all public and private agricultural lands, the term "agricultural land" does not include lands classified as mineral, forest, residential, commercial or industrial. Thus, in Natalia Realty, even portions of the Antipolo Hills Subdivision, which are arable yet still undeveloped, could not be considered as agricultural lands subject to agrarian reform as these lots were already classified as residential lands. A similar logical deduction should be followed in the case at bar. Lands devoted to raising of livestock, poultry and swine have been classified as industrial, not agricultural, lands and thus exempt from agrarian reform. Petitioner DAR argues that, in issuing the impugned A.O., it was seeking to address the reports it has received that some unscrupulous landowners have been converting their agricultural lands to livestock farms to avoid their coverage by the agrarian reform. Again, we find neither merit nor logic in this contention. The undesirable scenario which petitioner seeks to prevent with the issuance of the A.O. clearly does not apply in this case. Respondents’ family acquired their landholdings as early as 1948. They have long been in the business of breeding cattle in Masbate which is popularly known as the cattle-breeding capital of the Philippines.18 Petitioner DAR does not dispute this fact. Indeed, there is no evidence on record that respondents have just recently engaged in or converted to the business of breeding cattle after the enactment of the CARL that may lead one to suspect that respondents intended to evade its coverage. It must be stressed that what the CARL prohibits is the conversion of agricultural lands for non-agricultural purposes after the effectivity of the CARL. There has been no change of business interest in the case of respondents. Moreover, it is a fundamental rule of statutory construction that the reenactment of a statute by Congress without substantial change is an implied legislative approval and adoption of the previous law. On the other hand, by making a new law, Congress seeks to supersede an earlier one. 19 In the case at bar, after the passage of the 1988 CARL, Congress enacted R.A. No. 7881 20 which amended certain provisions of the CARL. Specifically, the new law changed the definition of the terms "agricultural activity" and "commercial farming" by dropping from its coverage lands that are devoted to commercial livestock, poultry and swine-raising.21 With this significant modification, Congress clearly sought to align the provisions of our agrarian laws with the intent of the 1987 Constitutional Commission to exclude livestock farms from the coverage of agrarian reform. In sum, it is doctrinal that rules of administrative bodies must be in harmony with the provisions of the Constitution. They cannot amend or extend the Constitution. To be valid, they must conform to and be consistent with the Constitution. In case of conflict between an administrative order and the provisions of the Constitution, the latter prevails.22 The assailed A.O. of petitioner DAR was properly stricken down as unconstitutional as it enlarges the coverage of agrarian reform beyond the scope intended by the 1987 Constitution. IN VIEW WHEREOF, the petition is DISMISSED. The assailed Decision and Resolution of the Court of Appeals, dated September 19, 2003 and February 4, 2004, respectively, are AFFIRMED. No pronouncement as to costs. SO ORDERED. REYNATO S. PUNO SECOND DIVISION G.R. No. 133507

February 17, 2000

EUDOSIA DAEZ AND/OR HER HEIRS, REP. BY ADRIANO D. DAEZ, petitioners, vs. THE HON. COURT OF APPEALS MACARIO SORIENTES, APOLONIO MEDIANA, ROGELIO MACATULAD and MANUEL UMALI, respondents. DE LEON, JR., J.: Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals2 dated January 28, 1998 which denied the application of petitioner heirs of Eudosia Daez for the retention of a 4.1685-hectare riceland pursuant to Republic Act (R.A.) No. 6657, otherwise known as the Comprehensive Agrarian Reform Law3, thereby reversing the Decision4 of then Executive Secretary Ruben D. Torres and the Order5 of then Deputy Executive Secretary Renato C. Corona, both of which had earlier set aside the Resolution6 and Order7 of then Department of Agrarian Reform (DAR) Secretary Ernesto D. Garilao denying exemption of the same riceland from coverage under Presidential Decree (P.D.) No. 27. The pertinent facts are: Eudosia Daez, now deceased, was the owner of a 4.1685-hectare riceland in Barangay Lawa, Meycauayan, Bulacan which was being cultivated by respondents Macario Soriente, Rogelio Macatulad, Apolonio Mediana and Manuel Umali under a system of share-tenancy. The said land was subjected to the Operation Land Transfer (OLT) Program under Presidential Decree (P.D.) No. 278 as amended by Letter of Instruction (LOI) No. 4749. Thus, the then Ministry of Agrarian Reform acquired the subject land and issued Certificates of Land Transfer (CLT) on December 9, 1980 to private respondents as beneficiaries. However, on May 31, 1981, private respondents signed an affidavit, allegedly under duress, stating that they are not share tenants but hired laborers10. Armed with such document, Eudosia Daez applied for the exemption of said riceland from coverage of P.D. No. 27 due to non-tenancy as well as for the cancellation of the CLTs issued to private respondents. 1âwphi1.nêt

In their Affidavit dated October 2, 1983, Eudosia Daez and her husband, Lope, declared ownership over 41.8064 hectares of agricultural lands located in Meycauayan, Bulacan and fourteen (14) hectares of riceland, sixteen (16) hectares of forestland, ten (10) hectares of "batuhan" and 1.8064 hectares of residential lands11 in Penaranda, Nueva Ecija. Included in their 41.8064-hectare landholding in Bulacan, was the subject 4,1685-hectare riceland in Meycauayan. On July 27, 1987, DAR Undersecretary Jose C. Medina issued an Order denying Eudosia Daez's application for exemption upon finding that her subject land is covered under LOI No. 474, petitioner being owner of the aforesaid agricultural lands exceeding seven (7) hectares 12. On June 29, 1989, Eudosia Daez wrote a letter to DAR Secretary Benjamin T. Leong requesting for reconsideration of Undersecretary Medina's order. But on January 16, 1992 13 Secretary Leong affirmed the assailed order upon finding private respondents to be bonafide tenants of the subject land. Secretary Leong disregarded private respondents' May 31, 1981 affidavit for having been executed under duress because he found that Eudosia's son, Adriano, who was then the incumbent Vice-Mayor of Meycauayan, pressured private respondents into signing the same. Undaunted, Eudosia Daez brought her case on February 20, 1992 to the Court of Appeals via a petition for certiorari. The Court of Appeals, however, sustained the order of Secretary Leong in a decision dated April 29, 1992. Eudosia pursued her petition before this court but we denied it in a

minute resolution dated September 18, 1992. We also denied her motion for reconsideration on November 9, 1992. Meantime, on August 6 and 12, 1992, the DAR issued Emancipation Patents (EPs) to private respondents. Thereafter, the Register of Deeds of Bulacan issued the corresponding Transfer Certificates of Title (TCTs). Exemption of the 4.1685 riceland from coverage by P.D. No. 27 having been finally denied her, Eudosia Daez next filed an application for retention of the same riceland, this time under R.A. No. 6657. In an order dated March 22, 1994, DAR Region III OIC-Director Eugenio B. Bernardo allowed Eudosia Daez to retain the subject riceland but he denied the application of her eight (8) children to retain three (3) hectares each for their failure to prove actual tillage of the land or direct management thereof as required by law14. Aggrieved, they appealed to the DAR. On August 26, 1994, then DAR Secretary Ernesto D. Garilao, set aside the order of Regional Director Bernardo in a Resolution,15 the decretal portion of which reads, viz.: WHEREFORE, premises considered, this Resolution is hereby issued setting aside with FINALITY the Order dated March 22, 1994 of the Regional Director of DAR Region III. The records of this case is remanded to the Regional Office for immediate implementation of the Order dated January 16, 1992 of this office as affirmed by the Court of Appeals and the Supreme Court. SO ORDERED. Eudosia Daez filed a Motion for Reconsideration but it was denied on January 19, 1995 16. She appealed Secretary Garilao's decision to the Office of the President which ruled in her favor. The dispositive portion of the Decision17 of then Executive Secretary reads: WHEREFORE, the resolution and order appealed from are hereby SET ASIDE and judgment is rendered authorizing the retention by Eudosia Daez or her heirs of the 4.1685-hectare landholding subject thereof. SO ORDERED.18 Aggrieved, private respondents sought from the Court of Appeals, a review of the decision of the Office of the President. On January 28, 1999, the said Decision of the Office of the President was reversed. The Court of Appeals ordered, thus: WHEREFORE, the assailed decision of July 5, 1996 and Order dated October 23, 1996 of the public respondents are REVERSED AND SET ASIDE, and the Resolution and Order of DAR Secretary Ernesto D. Garilao respectively dated August 26, 1994 and January 19, 1995 are REINSTATED. SO ORDERED.

Hence, this petition which assigns the following errors: I. THE HONORABLE COURT OF APPEALS ERRED WHEN IT RULED THAT DISTINCTION BETWEEN EXEMPTION FROM AGRARIAN REFORM COVERAGE AND THE RIGHT OF RETENTION OF LANDOWNERS IS ONLY A MATTER OF SEMANTICS THAT AN ADVERSE DECISION IN THE FORMER WILL FORECLOSE FURTHER ACTION TO ENFORCE THE LATTER CONSIDERING THAT THEY CONSTITUTE SEPARATE AND DISTINCT CAUSES OF ACTION AND, THEREFORE, ENFORCEABLE SEPARATELY AND IN SEQUEL. II. THE HONORABLE COURT OF APPEALS ERRED WHEN IT APPLIED THE PRINCIPLE OF RES JUDICATA DESPITE THE FACT THAT THE PREVIOUS CASE CITED (EXEMPTION FROM COVERAGE DUE TO NON-TENANCY) AND THE PRESENT CASE (RETENTION RIGHT) ARE OF DIFFERENT CAUSES OF ACTION. III. THE HONORABLE COURT OF APPEALS ERRED WHEN IT RULED/OPINED THAT THERE WAS A CUT-OFF DATE (AUGUST 27, 1985) FOR LANDOWNERS TO APPLY FOR EXEMPTION OR RETENTION UNDER PD 27 AND THOSE WHO FAILED TO FILE THEIR APPLICATIONS/PETITIONS ARE DEEMED TO HAVE WAIVED THEIR RIGHTS. IV. THE HONORABLE COURT OF APPEALS ERRED IN DECLARING THAT PETITIONERS (RESPONDENTS THEREIN) ARE GUILTY OF ESTOPPEL. V. THE HONORABLE COURT OF APPEALS ERRED WHEN IT RULED THAT THE LAND SUBJECT OF THIS CASE IS NO LONGER OWNED BY PETITIONERS SINCE PRIVATE RESPONDENTS HAVE ALREADY BEEN ISSUED NOT ONLY THEIR RESPECTIVE CERTIFICATES OF LAND TRANSFER BUT ALSO THEIR INDIVIDUAL CERTIFICATES OF TITLE OVER THE DISPUTED AREA.19 We grant the petition. First. Exemption and retention in agrarian reform are two (2) distinct concepts. P.D. No. 27, which implemented the Operation Land Transfer (OLT) Program, covers tenanted rice or corn lands. The requisites for coverage under the OLT program are the following: (1) the land must be devoted to rice or corn crops; and (2) there must be a system of share-crop or leasetenancy obtaining therein. If either requisite is absent, a landowner may apply for exemption. If either of these requisites is absent, the land is not covered under OLT. Hence, a landowner need not apply for retention where his ownership over the entire landholding is intact and undisturbed. P.D. No. 27 grants each tenant of covered lands a five (5)-hectare lot, or in case the land is irrigated, a three (3)-hectare lot constituting a family size farm. However, said law allows a covered landowner to retain not more than seven (7) hectares of his land if his aggregate landholding does not exceed twenty-four (24) hectares. Otherwise, his entire landholding is covered without him being entitled to any retention right20. Consequently, a landowner may keep his entire covered landholding if its aggregate size does not exceed the retention limit of seven (7) hectares. In effect, his land will not be covered at all by the OLT program although all requisites for coverage are present. LOI No. 474 clarified the effective coverage of OLT to include tenanted rice or corn lands of seven (7) hectares or less, if the landowner owns other agricultural lands of more than seven (7) hectares. The term "other agricultural lands"

refers to lands other than tenanted rice or corn lands from which the landowner derives adequate income to support his family. Thus, on one hand, exemption from coverage of OLT lies if: (1) the land is not devoted to rice or corn crops even if it is tenanted; or (2) the land is untenanted even though it is devoted to rice or corn crops. On the other hand, the requisites for the exercise by the landowner of his right of retention are the following: (1) the land must be devoted to rice or corn crops; (2) there must be a system of sharecrop or lease-tenancy obtaining therein; and (3) the size of the landholding must not exceed twentyfour (24) hectares, or it could be more than twenty-four (24) hectares provided that at least seven (7) hectares thereof are covered lands and more than seven (7) hectares of it consist of "other agricultural lands". Clearly, then, the requisites for the grant of an application for exemption from coverage of OLT and those for the grant of an application for the exercise of a landowner's right of retention, are different. Hence, it is incorrect to posit that an application for exemption and an application for retention are one and the same thing. Being distinct remedies, finality of judgment in one does not preclude the subsequent institution of the other. There was, thus, no procedural impediment to the application filed by Eudosia Daez for the retention of the subject 4.1865-hectare riceland, even after her appeal for exemption of the same land was denied in a decision that became final and executory. Second. Petitioner heirs of Eudosia Daez may exercise their right of retention over the subject 4.1685 riceland. The right of retention is a constitutionally guaranteed right, which is subject to qualification by the legislature21. It serves to mitigate the effects of compulsory land acquisition by balancing the rights of the landowner and the tenant and by implementing the doctrine that social justice was not meant to perpetrate an injustice against the landowner 22. A retained area, as its name denotes, is land which is not supposed to anymore leave the landowner's dominion, thus sparing the government from the inconvenience of taking land only to return it to the landowner afterwards, which would be a pointless process. In the landmark case of Association of Small Landowners in the Phil., Inc. v. Secretary of Agrarian Reform23, we held that landowners who have not yet exercised their retention rights under P.D. No. 27 are entitled to the new retention rights under R.A. No. 665724. We disregarded the August 27, 1985 deadline imposed by DAR Administrative Order No. 1, series of 1985 on landowners covered by OLT. However, if a landowner filed his application for retention after August 27, 1985 but he had previously filed the sworn statements required by LOI Nos. 41, 45 and 52, he is still entitled to the retention limit of seven (7) hectares under P.D. No. 2725. Otherwise, he is only entitled to retain five (5) hectares under R.A. No. 6657. Sec. 6 of R.A. No. 6657, which provides, viz.: Sec. 6. Retention Limits — Except as otherwise provided in this Act, no person may own or retain, directly or indirectly, any public or private agricultural land, the size of which shall vary according to factors governing a viable family-size, such as commodity produced, terrain, infrastructure, and soil fertility as determined by the Presidential Agrarian Reform Council (PARC) created hereunder, but in no case shall retention by the landowner exceed five (5) hectares. Three (3) hectares may be awarded to each child of the landowner, subject to the following qualifications: (1) that he is at least fifteen (15) years of age; and (2) that he is

actually tilling the land or directly managing the farm; Provided, That landowners whose land have been covered by Presidential Decree No. 27 shall be allowed to keep the area originally retained by them thereunder, further, That original homestead grantees or direct compulsory heirs who still own the original homestead at the time of the approval of this Act shall retain the same areas as long as they continue to cultivate said homestead. The right to choose the area to be retained, which shall be compact or contiguous, shall pertain to the landowner. Provided, however, That in case the area selected for retention by the landowner is tenanted, the tenant shall have the option to choose whether to remain therein or be a beneficiary in the same or another agricultural land with similar or comparable features. In case the tenant chooses to remain in the retained area, he shall be considered a leaseholder and shall lose his right to be a beneficiary under this Act. In case the tenant chooses to be a beneficiary in another agricultural land, he loses his right as a lease-holder to the land retained by the landowner. The tenant must exercise this option within a period of one (1) year from the time the landowner manifests his choice of the area for retention. In all cases, the security of tenure of the farmers or farmworkers on the land prior to the approval of this Act shall be respected. Upon the effectivity of this Act, any sale, disposition, lease, management contract or transfer of possession of private lands executed by the original landowner in violation of this Act shall be null and void; Provided, however, That those executed prior to this Act shall be valid only when registered with the Register of Deeds within a period of three (3) months after the effectivity of this Act. Thereafter, all Register of Deeds shall inform the DAR within thirty (3) days of any transaction involving agricultural lands in excess of five (5) hectares 26. defines the nature and incidents of a landowner's right of retention. For as long as the area to be retained is compact or contiguous and it does not exceed the retention ceiling of five (5) hectares, a landowner's choice of the area to be retained, must prevail. Moreover, Administrative Order No. 4, series of 1991,27 which supplies the details for the exercise of a landowner's retention rights, likewise recognizes no limit to the prerogative of the landowner, although he is persuaded to retain other lands instead to avoid dislocation of farmers. Without doubt, this right of retention may be exercised over tenanted land despite even the issuance of Certificate of Land Transfer (CLT) to farmer-beneficiaries.28 What must be protected, however, is the right of the tenants to opt to either stay on the land chosen to be retained by the landowner or be a beneficiary in another agricultural land with similar or comparable features. 29 Finally. Land awards made pursuant to the government's agrarian reform program are subject to the exercise by a landowner, who is so qualified, of his right of retention. Under P.D. No. 27, beneficiaries are issued CLTs to entitle them to possess lands. Thereafter, they are issued Emancipation Patents (EPs) after compliance with all necessary conditions. Such EPs, upon their presentation to the Register of Deeds, result in the issuance of the corresponding transfer certificates of title (TCT) in favor of the beneficiaries mentioned therein30. Under R.A. No. 6657, the procedure has been simplified 31. Only Certificates of Land Ownership Award (CLOAs) are issued, in lieu of EPs, after compliance with all prerequisites. Thereafter, upon presentation of the CLOAs to the Register of Deeds, TCTs are issued to the designated beneficiaries. CLTs are no longer issued.

The issuance of EPs or CLOAs to beneficiaries does not absolutely bar the landowner from retaining the area covered thereby. Under Administrative Order No. 2, series of 199432, an EP or CLOA may be cancelled if the land covered is later found to be part of the landowner's retained area. A certificate of title accumulates in one document a comprehensive statement of the status of the fee held by the owner of a parcel of land.33 As such, it is a mere evidence of ownership and it does not constitute the title to the land itself. It cannot confer title where no title has been acquired by any of the means provided by law34. Thus, we had, in the past, sustained the nullification of a certificate of title issued pursuant to a homestead patent because the land covered was not part of the public domain and as a result, the government had no authority to issue such patent in the first place35. Fraud in the issuance of the patent, is also a ground for impugning the validity of a certificate of title36. In other words, the invalidity of the patent or title is sufficient basis for nullifying the certificate of title since the latter is merely an evidence of the former. In the instant case, the CLTs of private respondents over the subject 4.1685-hectare riceland were issued without Eudosia Daez having been accorded her right of choice as to what to retain among her landholdings. The transfer certificates of title thus issued on the basis of those CLTs cannot operate to defeat the right of the heirs of deceased Eudosia Daez to retain the said 4.1685 hectares of riceland. WHEREFORE, the instant petition is hereby GRANTED. The Decision of the Court of Appeals, dated January 28, 1998, is REVERSED and SET ASIDE and the Decision of the Office of the President, dated July 5, 1996, is hereby REINSTATED. In the implementation of said decision, however, the Department of Agrarian Reform is hereby ORDERED to fully accord to private respondents their rights under Section 6 of R.A. No. 6657. 1âwphi1.nêt

No costs. SO ORDERED. FIRST DIVISION G.R. No. 171972

June 8, 2011

LUCIA RODRIGUEZ AND PRUDENCIA RODRIGUEZ, Petitioners, vs. TERESITA V. SALVADOR, Respondent. DECISION DEL CASTILLO, J.: Agricultural tenancy is not presumed but must be proven by the person alleging it. This Petition for Certiorari1 under Rule 65 of the Rules of Court assails the August 24, 2005 Decision2 and the February 20, 2006 Resolution3 of the Court of Appeals (CA) in CA G.R. SP No. 86599. However, per Resolution4 of this Court dated August 30, 2006, the instant petition shall be treated as a Petition for Review on Certiorari under Rule 45 of the same Rules.

Factual Antecedents On May 22, 2003, respondent Teresita V. Salvador filed a Complaint for Unlawful Detainer, 5 docketed as Civil Case No. 330, against petitioners Lucia (Lucia) and Prudencia Rodriguez, mother and daughter, respectively before the Municipal Trial Court (MTC) of Dalaguete, Cebu. 6 Respondent alleged that she is the absolute owner of a parcel of land covered by Original Certificate of Title (OCT) No. P-271407 issued by virtue of Free Patent No. (VII-5) 2646 in the name of the Heirs of Cristino Salvador represented by Teresita Salvador; 8 that petitioners acquired possession of the subject land by mere tolerance of her predecessors-in-interest;9 and that despite several verbal and written demands made by her, petitioners refused to vacate the subject land. 10 In their Answer,11 petitioners interposed the defense of agricultural tenancy. Lucia claimed that she and her deceased husband, Serapio, entered the subject land with the consent and permission of respondent’s predecessors-in-interest, siblings Cristino and Sana Salvador, under the agreement that Lucia and Serapio would devote the property to agricultural production and share the produce with the Salvador siblings.12 Since there is a tenancy relationship between the parties, petitioners argued that it is the Department of Agrarian Reform Adjudication Board (DARAB) which has jurisdiction over the case and not the MTC.13 On July 10, 2003, the preliminary conference was terminated and the parties were ordered to submit their respective position papers together with the affidavits of their witnesses and other evidence to support their respective claims.14 Ruling of the Municipal Trial Court On September 10, 2003, the MTC promulgated a Decision15 finding the existence of an agricultural tenancy relationship between the parties, and thereby, dismissing the complaint for lack of jurisdiction. Pertinent portions of the Decision read: Based on the facts presented, it is established that defendant Lucia Rodriguez and her husband Serapio Rodriguez were instituted as agricultural tenants on the lot in question by the original owner who was the predecessor-in-interest of herein plaintiff Teresita Salvador. The consent given by [the]original owner to constitute [defendants] as agricultural tenants of subject landholdings binds plaintiff who as successor-in-interest of the original owner Cristino Salvador steps into the latter’s shoes acquiring not only his rights but also his obligations towards the herein defendants. In the instant case, the consent to tenurial arrangement between the parties is inferred from the fact that the plaintiff and her successors-in-interest had received their share of the harvests of the property in dispute from the defendants. Moreover, dispossession of agricultural tenants can only be ordered by the Court for causes expressly provided under Sec. 36 of R.A. 3844. However, this Court has no jurisdiction over detainer case involving agricultural tenants as ejectment and dispossession of said tenants is within the primary and exclusive jurisdiction of the Department of Agrarian Reform and Agricultural Board (DARAB). ([S]ee Sec. 1(1.4) DARAB 2003 Rules of Procedure[.]) WHEREFORE, in view of the foregoing, the instant complaint is hereby ordered DISMISSED for lack of jurisdiction. SO ORDERED.16

Aggrieved, respondent filed an appeal, docketed as Civil Case No. AV-1237, with the Regional Trial Court (RTC) of Argao, Cebu, Branch 26.17 Ruling of the Regional Trial Court On January 12, 2004, the RTC rendered a Decision18 remanding the case to the MTC for preliminary hearing to determine whether tenancy relationship exists between the parties. Petitioners moved for reconsideration19 arguing that the purpose of a preliminary hearing was served by the parties’ submission of their respective position papers and other supporting evidence. On June 23, 2004, the RTC granted the reconsideration and affirmed the MTC Decision dated September 10, 2003. The fallo of the new Decision20 reads: WHEREFORE, the motion for reconsideration is GRANTED. The Decision dated September 10, 2003 of the Municipal Trial Court of Dalaguete, Cebu, is hereby AFFIRMED. IT IS SO DECIDED.21 Respondent sought reconsideration22 but it was denied by the RTC in an Order23 dated August 18, 2004. Thus, respondent filed a Petition for Review24 with the CA, docketed as CA G.R. SP No. 86599. Ruling of the Court of Appeals On August 24, 2005, the CA rendered judgment in favor of respondent. It ruled that no tenancy relationship exists between the parties because petitioners failed to prove that respondent or her predecessors-in-interest consented to the tenancy relationship.25 The CA likewise gave no probative value to the affidavits of petitioners’ witnesses as it found their statements insufficient to establish petitioners’ status as agricultural tenants.26 If at all, the affidavits merely showed that petitioners occupied the subject land with the consent of the original owners.27 And since petitioners are occupying the subject land by mere tolerance, they are bound by an implied promise to vacate the same upon demand by the respondent.28 Failing to do so, petitioners are liable to pay damages. 29 Thus, the CA disposed of the case in this manner: WHEREFORE, in view of all the foregoing premises, judgment is hereby rendered by us SETTING ASIDE, as we hereby set aside, the decision rendered by the RTC of Argao, Cebu on June 23, 2004 in Civil Case No. AV-1237 and ORDERING the remand of this case to the MTC of Dalaguete, Cebu for the purpose of determining the amount of actual damages suffered by the [respondent] by reason of the [petitioners’] refusal and failure to turn over to [respondent] the possession and enjoyment of the land and, then, to make such award of damages to the [respondent]. SO ORDERED.30 Issues

Hence, this petition raising the following issues: I. WHETHER X X X THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION IN RULING THAT PETITIONERSDEFENDANTS ARE NOT TENANTS OF THE SUBJECT LAND. II. WHETHER X X X SUCH RULING OF THE COURT OF APPEALS HAS FACTUAL AND LEGAL BASIS AND IS SUPPORTED WITH SUBSTANTIAL EVIDENCE.31 Petitioners’ Arguments Petitioners contend that under Section 532 of Republic Act No. 3844, otherwise known as the Agricultural Land Reform Code, tenancy may be constituted by agreement of the parties either orally or in writing, expressly or impliedly.33 In this case, there was an implied consent to constitute a tenancy relationship as respondent and her predecessors-in-interest allowed petitioners to cultivate the land and share the harvest with the landowners for more than 40 years. 34 Petitioners further argue that the CA erred in disregarding the affidavits executed by their witnesses as these are sufficient to prove the existence of a tenancy relationship. 35 Petitioners claim that their witnesses had personal knowledge of the cultivation and the sharing of harvest. 36 Respondent’s Arguments Respondent, on the other hand, maintains that petitioners are not agricultural tenants because mere cultivation of an agricultural land does not make the tiller an agricultural tenant. 37 Respondent insists that her predecessors-in-interest merely tolerated petitioners’ occupation of the subject land. 38 Our Ruling The petition lacks merit. Agricultural tenancy relationship does not exist in the instant case. Agricultural tenancy exists when all the following requisites are present: 1) the parties are the landowner and the tenant or agricultural lessee; 2) the subject matter of the relationship is an agricultural land; 3) there is consent between the parties to the relationship; 4) the purpose of the relationship is to bring about agricultural production; 5) there is personal cultivation on the part of the tenant or agricultural lessee; and 6) the harvest is shared between landowner and tenant or agricultural lessee.39 In this case, to prove that an agricultural tenancy relationship exists between the parties, petitioners submitted as evidence the affidavits of petitioner Lucia and their neighbors. In her affidavit,40 petitioner Lucia declared that she and her late husband occupied the subject land with the consent and permission of the original owners and that their agreement was that she and her late husband would cultivate the subject land, devote it to agricultural production, share the harvest with the landowners on a 50-50 basis, and at the same time watch over the land. Witness Alejandro Arias attested in his affidavit41 that petitioner Lucia and her husband, Serapio, have been cultivating the

subject land since 1960; that after the demise of Serapio, petitioner Lucia and her children continued to cultivate the subject land; and that when respondent’s predecessors-in-interest were still alive, he would often see them and respondent get some of the harvest. The affidavit 42 of witness Conseso Muñoz stated, in essence, that petitioner Lucia has been in peaceful possession and cultivation of the subject property since 1960 and that the harvest was divided into two parts, ½ for the landowner and ½ for petitioner Lucia. The statements in the affidavits presented by the petitioners are not sufficient to prove the existence of an agricultural tenancy. As correctly found by the CA, the element of consent is lacking.43 Except for the self-serving affidavit of Lucia, no other evidence was submitted to show that respondent’s predecessors-in-interest consented to a tenancy relationship with petitioners. Self-serving statements, however, will not suffice to prove consent of the landowner; independent evidence is necessary. 44 Aside from consent, petitioners also failed to prove sharing of harvest. The affidavits of petitioners’ neighbors declaring that respondent and her predecessors-in-interest received their share in the harvest are not sufficient. Petitioners should have presented receipts or any other evidence to show that there was sharing of harvest45 and that there was an agreed system of sharing between them and the landowners.46 1avvphil

As we have often said, mere occupation or cultivation of an agricultural land will not ipso facto make the tiller an agricultural tenant.47 It is incumbent upon a person who claims to be an agricultural tenant to prove by substantial evidence all the requisites of agricultural tenancy. 48 In the instant case, petitioners failed to prove consent and sharing of harvest between the parties. Consequently, their defense of agricultural tenancy must fail. The MTC has jurisdiction over the instant case. No error can therefore be attributed to the CA in reversing and setting aside the dismissal of respondent’s complaint for lack of jurisdiction. Accordingly, the remand of the case to the MTC for the determination of the amount of damages due respondent is proper. Respondent is entitled to the fair rental value or the reasonable compensation for the use and occupation of the subject land. We must, however, clarify that "the only damage that can be recovered [by respondent] is the fair rental value or the reasonable compensation for the use and occupation of the leased property. The reason for this is that [in forcible entry or unlawful detainer cases], the only issue raised in ejectment cases is that of rightful possession; hence, the damages which could be recovered are those which the [respondent] could have sustained as a mere possessor, or those caused by the loss of the use and occupation of the property, and not the damages which [she] may have suffered but which have no direct relation to [her] loss of material possession."49 WHEREFORE, the petition is DENIED. The assailed August 24, 2005 Decision and the February 20, 2006 Resolution of the Court of Appeals in CA G.R. SP No. 86599 are AFFIRMED. This case is ordered REMANDED to the Municipal Trial Court of Dalaguete, Cebu, to determine the amount of damages suffered by respondent by reason of the refusal and failure of petitioners to turn over the possession of the subject land, with utmost dispatch consistent with the above disquisition. SO ORDERED. MARIANO C. DEL CASTILLO

THIRD DIVISION G.R. No. 139592

October 5, 2000

REPUBLIC OF THE PHILIPPINES rep. by the DEPARTMENT OF AGRARIAN REFORM, petitioner, vs. HON. COURT OF APPEALS and GREEN CITY ESTATE & DEVELOPMENT CORPORATION, respondents. DECISION GONZAGA-REYES, J.: This is a petition for review by certiorari of the Decision of the Court of Appeals dated December 9, 1998 that reversed the Order of petitioner, the Department of Agrarian Reform (petitioner DAR), by exempting the parcels of land of private respondent Green City Estate and Development Corporation (private respondent) from agrarian reform. Also assailed in this instant petition is the Resolution dated May 11, 1998 issued by the same court that denied the Motion for Reconsideration of petitioner DAR. 1

The five parcels of land in issue has a combined area of approximately 112.0577 hectares situated at Barangay Punta, Municipality of Jala-Jala, Province of Rizal, covered by Transfer Certificates of Title Nos. M-45856, M-45857, M-45858, M-45859 and M-45860 of the Register of Deeds of Rizal. Private respondent acquired the land by purchase on May 26, 1994 from Marcela Borja vda. De Torres. The tax declarations classified the properties as agricultural. On June 16, 1994, petitioner DAR issued a Notice of Coverage of the subject parcels of land under compulsory acquisition pursuant to Section 7, Chapter II of R.A. 6657 or the Comprehensive Land Reform Law of 1998 (CARL). On July 21, 1994, private respondent filed with the DAR Regional Office an application for exemption of the land from agrarian reform, pursuant to DAR Administrative Order No. 6, series of 1994 and DOJ Opinion No. 44, series of 1990. Administrative Order No. 6 provides the guidelines for exemption from the Comprehensive Agrarian Reform Program (CARP) coverage while DOJ Opinion No. 44, Series of 1990, authorizes the DAR to approve conversion of agricultural lands covered by RA 6651 to non-agricultural uses effective June 15 1988. 2

In support of its application for exemption, private respondent submitted the following documents: 1. Certified photocopies of the titles and tax declarations. 2. Vicinity and location plans. 3. Certification of the Municipal Planning and Development Coordinator of the Office of the Mayor of Jala-Jala. 4. Resolution No. R-36, series of 1981 of the HLURB. 5. Certification from the National Irrigation Administration.

On October 12, 1994, the DAR Regional Director recommended a denial of the said petition, on the ground that private respondent "failed to substantiate their (sic) allegation that the properties are indeed in the municipality’s residential and forest conservation zone and that portions of the properties are not irrigated nor irrigable". On February 15, 1995, private respondent filed an Amended Petition for Exemption/Exclusion from CARP coverage. This time, private respondent alleged that the property should be exempted since it is within the residential and forest conservation zones of the town plan/zoning ordinance of JalaJala. The amended petition for exemption showed that a portion of about 15 hectares of the land is irrigated riceland which private respondent offered to sell to the farmer beneficiaries or to the DAR. In support of its amended petition, private respondent submitted the following additional documents: 1. Certification letter from the HLURB that the specific properties are within the residential and forest conservation zone. 2. Certification from the HLURB that the town plan/zoning ordinance of Jala-Jala was approved on December 2, 1981 by the Human Settlements Commission. 3. Undertaking that the landowner is ready and willing to pay disturbance compensation to the tenants for such amount as may be agreed upon or directed by the DAR. 4. Vicinity plan. 5. Amended survey plan which indicates the irrigated riceland that is now excluded from the application. 6. Certification of the Jala-Jala Municipal Planning and Development Coordinator to the effect that the properties covered are within the residential and forest conservation areas pursuant to the zoning ordinance of Jala-Jala. On October 19, 1995, the DAR Secretary issued an Order denying the application for exemption of private respondent, on the grounds that the land use plan of Jala-Jala, which differs from its land use map, intends to develop 73% of Barangay Punta into an agricultural zone; that the certification issued by the Housing and Land Use Regulatory Board (HLURB) is not definite and specific; and that the certification issued by the National Irrigation Authority (NIA) that the area is not irrigated nor programmed for irrigation, is not conclusive on the DAR, since big areas in the municipality are recipients of JICA-funded Integrated Jala-Jala Rural Development Projects. The motion for reconsideration filed by private respondent was likewise denied by the DAR Secretary. Private respondent then appealed to the Court of Appeals. During the course of the appeal, said court created a commission composed of three (3) members tasked to conduct an ocular inspection and survey of the subject parcels of land and to submit a report on the result of such inspection and survey. To verify the report of the commission, the DAR constituted its own team to inspect and report on the property in question. The verification report of the DAR, duly filed with the Court of Appeals, objected to the report of the commission mainly due to the lack of specific boundaries delineating the surveyed areas. On December 9, 1998, the Court of Appeals issued its Decision that reversed the assailed DAR orders, the dispositive portion of which reads:

"WHEREFORE, the Orders of the respondent Secretary dated October 19, 1995 and November 15, 1995 are hereby REVERSED, and judgement is hereby rendered declaring those portions of the land of the petitioner which are mountainous and residential, as found by the Courts (sic) commissioners, to be exempt from the Comprehensive Agrarian Reform Program, subject to their delineation. The records of this case are hereby ordered remanded to the respondent Secretary for further proceedings in the determination of the boundaries of the said areas." 3

Hence this petition for review wherein petitioner DAR seeks the reversal of the foregoing decision on the ground that the honorable Court of Appeals erred: 1. WHEN IT RULED THAT THERE WAS NO DEFINITE CLASSIFICATION OF THE PROPERTIES INVOLVED WHEN, PER THE CORRESPONDING TAX DECLARATIONS, THEY ARE GENERALLY CLASSIFIED AS AGRICULTURAL. 2. WHEN IT RULED THAT THE PHYSICAL FEATURES OF THE LAND AS OF 1980 OR BEFORE AS APPEARING IN TABLE 3-3 OF THE ZONING ORDINANCE IS THE PRESENT CLASSIFICATION OF THE LANDHOLDINGS INVOLVED; and 3. WHEN IT MADE A RULING ON HOW SUBJECT LANDHOLDING BE CLASSIFIED (WHETHER COVERED BY AGRARIAN REFORM FOR BEING AGRICULTURAL LAND OR NOT) AND DISPOSED OF SOLELY ON THE BASIS OF THE PHYSICAL CONDITION OF THE LAND IRRESPECTIVE OF THE LEGAL ISSUE RAISED ON THEIR LEGAL CLASSIFICATION, A FUNCTION THAT IS VESTED IN CONGRESS. 4

The petition has no merit. Republic Act No. 6657 otherwise known as the Comprehensive Agrarian Reform Law (CARL) of 1998 covers all public and private agricultural lands. The same law defines agricultural as "land devoted to agricultural activity as defined in this Act and not classified as mineral, forest, residential, commercial or industrial land". 5

Private respondent sought exemption from the coverage of CARL on the ground that its five parcels of land are not wholly agricultural. The land use map of the municipality, certified by the Office of the Municipal Planning and Development Coordinator (MPDC) of Jala-Jala and the report of the commission constituted by the Court of Appeals established that the properties lie mostly within the residential and forest conservation zone. Petitioner DAR maintains that the subject properties have already been classified as agricultural based on the tax declarations. The Office of the Solicitor General (OSG) and petitioner DAR are one in contending that the classification of lands once determined by law may not be varied or altered by the results of a mere ocular or aerial inspection. 6

7

We are unable to sustain petitioner’s contention. There is no law or jurisprudence that holds that the land classification embodied in the tax declarations is conclusive and final nor would proscribe any further inquiry. Furthermore, the tax declarations are clearly not the sole basis of the classification of a land. In fact, DAR Administrative Order No. 6 lists other documents, aside from tax declarations, that must be submitted when applying for exemption from CARP. In Halili vs. Court of Appeals , we sustained the trial court when it ruled that the classification made by the Land Regulatory Board of the land in question outweighed the classification stated in the tax declaration. The classification of the Board in said case was more recent than that of the tax declaration and was based on the present condition of the property and the community thereat. 8

10

9

In this case, the Court of Appeals was constrained to resort to an ocular inspection of said properties through the commission it created considering that the opinion of petitioner DAR conflicted with the land use map submitted in evidence by private respondent. Respondent court also noted that even from the beginning the properties of private respondent had no definite delineation and classification. Hence, the survey of the properties through the court appointed commissioners was the judicious and equitable solution to finally resolve the issue of land classification and delineation. 11

The OSG stresses that to be exempt from CARP under DOJ Opinion No. 44, the land must have been classified as industrial/residential before June 15, 1988. Based on this premise, the OSG points out that no such classification was presented except the municipality’s alleged land use map in 1980 showing that subject parcels of land fall within the municipality’s forest conservation zone. The OSG further argues that assuming that a change in the use of the subject properties in 1980 may justify their exemption from CARP under DOJ Opinion No. 44, such land use of 1980 was, nevertheless, repealed/amended when the HLURB approved the municipality’s Comprehensive Development Plan for Barangay Punta for the years 1980 to 2000 in its Resolution No. 33, series of 1981. The plan for Barangay Punta, where the parcels of land in issue are located, allegedly envision the development of the barangay into a progressive agricultural community with the limited allocation of only 51 hectares for residential use and none for commercial and forest conservation zone use. 12

13

14

15

The foregoing arguments are untenable. We are in full agreement with respondent Court when it rationalized that the land use map is the more appropriate document to consider, thus: "The petitioner (herein private respondent) presented a development plan of the Municipality of JalaJala, which was approved by the Housing and Land Use Regulatory Board (HLURB) on December 2, 1981. It also presented certifications from the HLURB and the Municipal Planning and Development Coordinator of Jala-Jala that the subject properties fall within the Residential and Forest Conservation zones of the municipality. Extant on the record is a color-coded land use map of Jala-Jala, showing that the petitioner’s land falls mostly within the Residential and Forest Conservation zones. This notwithstanding, the respondent Secretary of Agrarian Reform denied the petitioner’s application on the ground that the town plan of the municipality, particularly Table 4-4 thereof, shows that Barangay Punta is intended to remain and to become a progressive agricultural community in view of the abundance of fertile agricultural areas in the barangay, and that there is a discrepancy between the land use mapwhich identifies a huge forest conservation zone and the land use plan which has no area classified as forest conservation. 1âwphi1

However, a closer look at the development plan for the municipality of Jala-Jala shows that Table 4-4 does not represent the present classification of land in that municipality, but the proposed land use to be achieved. The existing land use as of 1980 is shown by Table 3-3, wherein Barangay Punta is shown to have a forest area of 35 hectares and open grassland (which was formerly forested area) of 56 hectares. The land use map is consistent with this." 16

Moreover, the commissioner’s report on the actual condition of the properties confirms the fact that the properties are not wholly agricultural. In essence, the report of the commission showed that the land of private respondent consists of a mountainous area with an average 28 degree slope containing 66.5 hectares; a level, unirrigated area of 34 hectares of which 5 to 6 hectares are planted to palay; and a residential area of 8 hectares. The finding that 66.5 hectares of the 112.0577 hectares of land of private respondent have an average slope of 28 degrees provides another cogent reason to exempt these portions of the properties from the CARL. Section 10 of the CARL is clear on this point when it provides that "all lands with eighteen percent (18%) slope and over, except those already developed shall be exempt from the coverage of this Act". 17

Petitioner DAR and the OSG contest the finding of the Court of Appeals that the subject parcels of land have a mountainous slope on the ground that this conclusion was allegedly arrived at in a manner not in accord with established surveying procedures. They also bewail the consideration given by the Court of Appeals to the "slope" issue since this matter was allegedly never raised before the DAR and the Court of Appeals. Petitioner DAR and the OSG thus claim that laches had already set in. 18

19

20

As pointed out earlier, the crux of the controversy is whether the subject parcels of land in issue are exempt from the coverage of the CARL. The determination of the classification and physical condition of the lands is therefore material in the disposition of this case, for which purpose the Court of Appeals constituted the commission to inspect and survey said properties. Petitioner DAR did not object to the creation of a team of commissioners when it very well knew that the survey and ocular inspection would eventually involve the determination of the slope of the subject parcels of land. It is the protestation of petitioner that comes at a belated hour. The team of commissioners appointed by respondent court was composed persons who were mutually acceptable to the parties. Thus, in the absence of any irregularity in the survey and inspection of the subject properties, and none is alleged, the report of the commissioners deserves full faith and credit and we find no reversible error in the reliance by the appellate court upon said report. 21

22

WHEREFORE, the petition is hereby DENIED. The challenged Decision is AFFIRMED. SO ORDERED. Melo, (Chairman), Vitug, Panganiban, and Purisima, JJ., concur. EN BANC

G.R. No. 103302 August 12, 1993 NATALIA REALTY, INC., AND ESTATE DEVELOPERS AND INVESTORS CORP., petitioners, vs. DEPARTMENT OF AGRARIAN REFORM, SEC. BENJAMIN T. LEONG and DIR. WILFREDO LEANO, DAR REGION IV, respondents. Lino M. Patajo for petitioners. The Solicitor General for respondents.

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

2

3

Petitioner Natalia Realty, Inc. (NATALIA, for brevity) is the owner of three (3) contiguous parcels of land located in Banaba, Antipolo, Rizal, with areas of 120.9793 hectares, 1.3205 hectares and 2.7080 hectares, or a total of 125.0078 hectares, and embraced in Transfer Certificate of Title No. 31527 of the Register of Deeds of the Province of Rizal. On 18 April 1979, Presidential Proclamation No. 1637 set aside 20,312 hectares of land located in the Municipalities of Antipolo, San Mateo and Montalban as townsite areas to absorb the population overspill in the metropolis which were designated as the Lungsod Silangan Townsite. The NATALIA properties are situated within the areas proclaimed as townsite reservation. Since private landowners were allowed to develop their properties into low-cost housing subdivisions within the reservation, petitioner Estate Developers and Investors Corporation (EDIC, for brevity), as developer of NATALIA properties, applied for and was granted preliminary approval and locational clearances by the Human Settlements Regulatory Commission. The necessary permit for Phase I of the subdivision project, which consisted of 13.2371 hectares, was issued sometime in 1982; for Phase II, with an area of 80,000 hectares, on 13 October 1983; and for Phase III, which consisted of the remaining 31.7707 hectares, on 25 April 1986. Petitioner were likewise issued development permits after complying with the requirements. Thus the NATALIA properties later became the Antipolo Hills Subdivision. 4

5

6

7

On 15 June 1988, R.A. 6657, otherwise known as the "Comprehensive Agrarian Reform Law of 1988" (CARL, for brevity), went into effect. Conformably therewith, respondent Department of Agrarian Reform (DAR, for brevity), through its Municipal Agrarian Reform Officer, issued on 22 November 1990 a Notice of Coverage on the undeveloped portions of the Antipolo Hills Subdivision which consisted of roughly 90.3307 hectares. NATALIA immediately registered its objection to the notice of Coverage. EDIC also protested to respondent Director Wilfredo Leano of the DAR Region IV Office and twice wrote him requesting the cancellation of the Notice of Coverage. On 17 January 1991, members of the Samahan ng Magsasaka sa Bundok Antipolo, Inc. (SAMBA, for the brevity), filed a complaint against NATALIA and EDIC before the DAR Regional Adjudicator to restrain petitioners from developing areas under cultivation by SAMBA members. The Regional Adjudicator temporarily restrained petitioners from proceeding with the development of the subdivision. Petitioners then moved to dismiss the complaint; it was denied. Instead, the Regional Adjudicator issued on 5 March 1991 a Writ of Preliminary Injunction. 8

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

In the interim, NATALIA wrote respondent Secretary of Agrarian Reform reiterating its request to set aside the Notice of Coverage. Neither respondent Secretary nor respondent Director took action on the protest-letters, thus compelling petitioners to institute this proceeding more than a year thereafter. NATALIA and EDIC both impute grave abuse of discretion to respondent DAR for including undedeveloped portions of the Antipolo Hills Subdivision within the coverage of the CARL. They argue that NATALIA properties already ceased to be agricultural lands when they were included in the areas reserved by presidential fiat for the townsite reservation.

Public respondents through the Office of the Solicitor General dispute this contention. They maintain that the permits granted petitioners were not valid and binding because they did not comply with the implementing Standards, Rules and Regulations of P.D. 957, otherwise known as "The Subdivision and Condominium Buyers Protective Decree," in that no application for conversion of the NATALIA lands from agricultural residential was ever filed with the DAR. In other words, there was no valid conversion. Moreover, public respondents allege that the instant petition was prematurely filed because the case instituted by SAMBA against petitioners before the DAR Regional Adjudicator has not yet terminated. Respondents conclude, as a consequence, that petitioners failed to fully exhaust administrative remedies available to them before coming to court. The petition is impressed with merit. A cursory reading of the Preliminary Approval and Locational Clearances as well as the Development Permits granted petitioners for Phases I, II and III of the Antipolo Hills Subdivision reveals that contrary to the claim of public respondents, petitioners NATALIA and EDIC did in fact comply with all the requirements of law. Petitioners first secured favorable recommendations from the Lungsod Silangan Development Corporation, the agency tasked to oversee the implementation of the development of the townsite reservation, before applying for the necessary permits from the Human Settlements Regulatory Commission. And, in all permits granted to petitioners, the Commission stated invariably therein that the applications were in "conformance" or "conformity" or "conforming" with the implementing Standards, Rules and Regulations of P.D. 957. Hence, the argument of public respondents that not all of the requirements were complied with cannot be sustained. 10

11

12

13

As a matter of fact, there was even no need for petitioners to secure a clearance or prior approval from DAR. The NATALIA properties were within the areas set aside for the Lungsod Silangan Reservation. Since Presidential Proclamation No. 1637 created the townsite reservation for the purpose of providing additional housing to the burgeoning population of Metro Manila, it in effect converted for residential use what were erstwhile agricultural lands provided all requisites were met. And, in the case at bar, there was compliance with all relevant rules and requirements. Even in their applications for the development of the Antipolo Hills Subdivision, the predecessor agency of HLURB noted that petitioners NATALIA and EDIC complied with all the requirements prescribed by P.D. 957. The implementing Standards, Rules and Regulations of P.D. 957 applied to all subdivisions and condominiums in general. On the other hand, Presidential Proclamation No. 1637 referred only to the Lungsod Silangan Reservation, which makes it a special law. It is a basic tenet in statutory construction that between a general law and a special law, the latter prevails. 14

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

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

17

Based on the foregoing, it is clear that the undeveloped portions of the Antipolo Hills Subdivision cannot in any language be considered as "agricultural lands." These lots were intended for residential use. They ceased to be agricultural lands upon approval of their inclusion in the Lungsod Silangan Reservation. Even today, the areas in question continued to be developed as a low-cost housing subdivision, albeit at a snail's pace. This can readily be gleaned from the fact that SAMBA members even instituted an action to restrain petitioners from continuing with such development. The enormity of the resources needed for developing a subdivision may have delayed its completion but this does not detract from the fact that these lands are still residential lands and outside the ambit of the CARL. Indeed, lands not devoted to agricultural activity are outside the coverage of CARL. These include lands previously converted to non-agricultural uses prior to the effectivity of CARL by government agencies other than respondent DAR. In its Revised Rules and Regulations Governing Conversion of Private Agricultural Lands to Non-Agricultural Uses, DAR itself defined "agricultural land" thus — 18

. . . Agricultural lands refers to those devoted to agricultural activity as defined in R.A. 6657 and not classified as mineral or forest by the Department of Environment and Natural Resources (DENR) and its predecessor agencies, and not classified in town plans and zoning ordinances as approved by the Housing and Land Use Regulatory Board (HLURB) and its preceding competent authorities prior to 15 June 1988 for residential, commercial or industrial use. Since the NATALIA lands were converted prior to 15 June 1988, respondent DAR is bound by such conversion. It was therefore error to include the undeveloped portions of the Antipolo Hills Subdivision within the coverage of CARL. Be that as it may, the Secretary of Justice, responding to a query by the Secretary of Agrarian Reform, noted in an Opinion that lands covered by Presidential Proclamation No. 1637, inter alia, of which the NATALIA lands are part, having been reserved for townsite purposes "to be developed as human settlements by the proper land and housing agency," are "not deemed 'agricultural lands' within the meaning and intent of Section 3 (c) of R.A. No. 6657. " Not being deemed "agricultural lands," they are outside the coverage of CARL. 19

Anent the argument that there was failure to exhaust administrative remedies in the instant petition, suffice it to say that the issues raised in the case filed by SAMBA members differ from those of petitioners. The former involve possession; the latter, the propriety of including under the operation of CARL lands already converted for residential use prior to its effectivity. Besides, petitioners were not supposed to wait until public respondents acted on their letter-protests, this after sitting it out for almost a year. Given the official indifference, which under the circumstances could have continued forever, petitioners had to act to assert and protect their interests. 20

In fine, we rule for petitioners and hold that public respondents gravely abused their discretion in issuing the assailed Notice of Coverage of 22 November 1990 by of lands over which they no longer have jurisdiction. WHEREFORE, the petition for Certiorari is GRANTED. The Notice of Coverage of 22 November 1990 by virtue of which undeveloped portions of the Antipolo Hills Subdivision were placed under CARL coverage is hereby SET ASIDE. SO ORDERED.

EN BANC

G.R. No. 100091 October 22, 1992 CENTRAL MINDANAO UNIVERSITY REPRESENTED ITS PRESIDENT DR. LEONARDO A. CHUA, petitioner, vs. THE DEPARTMENT OF AGRARIAN REFORM ADJUDICATION BOARD, THE COURT OF APPEALS and ALVIN OBRIQUE, REPRESENTING BUKIDNON FREE FARMERS AGRICULTURAL LABORERS ORGANIZATION (BUFFALO), respondents.

CAMPOS, JR., J.: This is a Petition for Review on Certiorari under Rule 65 of the Rules of Court to nullify the proceedings and decision of the Department of Agrarian Reform Adjudication Board (DARAB for brevity) dated September 4, 1989 and to set aside the decision the decision * of the Court of Appeals dated August 20, 1990, affirming the decision of the DARAB which ordered the segregation of 400 hectares of suitable, compact and contiguous portions of the Central Mindanao University (CMU for brevity) land and their inclusion in the Comprehensive Agrarian Reform Program (CARP for brevity) for distribution to qualified beneficiaries, on the ground of lack of jurisdiction. This case originated in a complaint filed by complainants calling themselves as the Bukidnon Free Farmers and Agricultural Laborers Organization (BUFFALO for brevity) under the leadership of Alvin Obrique and Luis Hermoso against the CMU, before the Department of Agrarian Reform for Declaration of Status as Tenants, under the CARP. From the records, the following facts are evident. The petitioner, the CMU, is an agricultural educational institution owned and run by the state located in the town of Musuan, Bukidnon province. It started as a farm school at Marilang, Bukidnon in early 1910, in response to the public demand for an agricultural school in Mindanao. It expanded into the Bukidnon National Agricultural High School and was transferred to its new site in Managok near Malaybalay, the provincial capital of Bukidnon. In the early 1960's, it was converted into a college with campus at Musuan, until it became what is now known as the CMU, but still primarily an agricultural university. From its beginning, the school was the answer to the crying need for training people in order to develop the agricultural potential of the island of Mindanao. Those who planned and established the school had a vision as to the future development of that part of the Philippines. On January 16, 1958 the President of the Republic of the Philippines, the late Carlos P. Garcia, "upon the recommendation of the Secretary of Agriculture and Natural Resources, and pursuant to the provisions of Section 53, of Commonwealth Act No. 141, as amended", issued Proclamation No. 476, withdrawing from sale or settlement and reserving for the Mindanao Agricultural College, a site which would be the future campus of what is now the CMU. A total land area comprising 3,080 hectares was surveyed and registered and titled in the name of the petitioner under OCT Nos. 160, 161 and 162. 1 In the course of the cadastral hearing of the school's petition for registration of the aforementioned grant of agricultural land, several tribes belonging to cultural communities, opposed the petition claiming ownership of certain ancestral lands forming part of the tribal reservations. Some of the claims were granted so that what was titled to the present petitioner school was reduced from 3,401 hectares to 3,080 hectares. In the early 1960's, the student population of the school was less than 3,000. By 1988, the student population had expanded to some 13,000 students, so that the school community has an academic population (student, faculty and non-academic staff) of almost 15,000. To cope with the increase in its enrollment, it has expanded and improved its educational facilities partly from government appropriation and partly by selfhelp measures. True to the concept of a land grant college, the school embarked on self-help measures to carry out its educational objectives, train its students, and maintain various activities which the government appropriation could not adequately support or sustain. In 1984, the CMU approved Resolution No. 160, adopting a livelihood program called "Kilusang Sariling Sikap Program" under which the land resources of the University were leased to its faculty and employees. This arrangement was covered by a written contract. Under this program the faculty and staff combine themselves to groups of five members each, and the CMU provided technical know-how, practical training and all kinds of assistance, to enable each group to cultivate 4 to 5 hectares of land for the lowland rice project. Each group pays the CMU a service fee and also a land use participant's fee. The contract prohibits participants and their hired workers to establish houses or live in the project area and to use the cultivated land as a collateral for any kind of loan. It was expressly stipulated that no landlord-tenant relationship existed between the CMU and the faculty and/or employees. This particular program was conceived as a multi-disciplinary applied research extension and productivity program to utilize available land, train people in modern agricultural technology and at the same time give the faculty and staff opportunities within the confines of the CMU reservation to earn additional income to augment their salaries. The location of the CMU at Musuan, Bukidnon, which is quite a distance from the nearest town, was the proper setting for the adoption of such a program. Among the participants in this program were Alvin Obrique, Felix Guinanao, Joven Caballero, Nestor Pulao, Danilo Vasquez, Aronio Pelayo and other complainants. Obrique was a Physics Instructor at the CMU while the others were employees in the lowland rice project. The other complainants who were not members of the faculty or non-academic staff CMU, were hired workers or laborers of the participants in this program. When petitioner Dr. Leonardo Chua became President of the CMU in July 1986, he discontinued the agri-business project for the production of rice, corn and sugar cane known as Agri-Business Management and Training Project, due to losses incurred while carrying on the said project. Some CMU personnel, among whom were the complainants, were laid-off when this project was discontinued. As Assistant

Director of this agri-business project, Obrique was found guilty of mishandling the CMU funds and was separated from service by virtue of Executive Order No. 17, the re-organization law of the CMU. Sometime in 1986, under Dr. Chua as President, the CMU launched a self-help project called CMU-Income Enhancement Program (CMUIEP) to develop unutilized land resources, mobilize and promote the spirit of self-reliance, provide socio-economic and technical training in actual field project implementation and augment the income of the faculty and the staff. Under the terms of a 3-party Memorandum of Agreement 2 among the CMU, the CMU-Integrated Development Foundation (CMU-IDF) and groups or "seldas" of 5 CMU employees, the CMU would provide the use of 4 to 5 hectares of land to a selda for one (1) calendar year. The CMU-IDF would provide researchers and specialists to assist in the preparation of project proposals and to monitor and analyze project implementation. The selda in turn would pay to the CMU P100 as service fee and P1,000 per hectare as participant's land rental fee. In addition, 400 kilograms of the produce per year would be turned over or donated to the CMU-IDF. The participants agreed not to allow their hired laborers or member of their family to establish any house or live within vicinity of the project area and not to use the allocated lot as collateral for a loan. It was expressly provided that no tenant-landlord relationship would exist as a result of the Agreement. Initially, participation in the CMU-IEP was extended only to workers and staff members who were still employed with the CMU and was not made available to former workers or employees. In the middle of 1987, to cushion the impact of the discontinuance of the rice, corn and sugar cane project on the lives of its former workers, the CMU allowed them to participate in the CMU-IEP as special participants. Under the terms of a contract called Addendum To Existing Memorandum of Agreement Concerning Participation To the CMU-Income Enhancement Program, 3 a former employee would be grouped with an existing selda of his choice and provided one (1) hectare for a lowland rice project for one (1) calendar year. He would pay the land rental participant's fee of P1,000.00 per hectare but on a charge-to-crop basis. He would also be subject to the same prohibitions as those imposed on the CMU employees. It was also expressly provided that no tenant-landlord relationship would exist as a result of the Agreement. The one-year contracts expired on June 30, 1988. Some contracts were renewed. Those whose contracts were not renewed were served with notices to vacate. The non-renewal of the contracts, the discontinuance of the rice, corn and sugar cane project, the loss of jobs due to termination or separation from the service and the alleged harassment by school authorities, all contributed to, and precipitated the filing of the complaint. On the basis of the above facts, the DARAB found that the private respondents were not tenants and cannot therefore be beneficiaries under the CARP. At the same time, the DARAB ordered the segregation of 400 hectares of suitable, compact and contiguous portions of the CMU land and their inclusion in the CARP for distribution to qualified beneficiaries. The petitioner CMU, in seeking a review of the decisions of the respondents DARAB and the Court of Appeals, raised the following issues: 1.) Whether or not the DARAB has jurisdiction to hear and decide Case No. 005 for Declaration of Status of Tenants and coverage of land under the CARP. 2.) Whether or not respondent Court of Appeals committed serious errors and grave abuse of discretion amounting to lack of jurisdiction in dismissing the Petition for Review on Certiorari and affirming the decision of DARAB. In their complaint, docketed as DAR Case No. 5, filed with the DARAB, complainants Obrique, et al. claimed that they are tenants of the CMU and/or landless peasants claiming/occupying a part or portion of the CMU situated at Sinalayan, Valencia, Bukidnon and Musuan, Bukidnon, consisting of about 1,200 hectares. We agree with the DARAB's finding that Obrique, et. al. are not tenants. Under the terms of the written agreement signed by Obrique, et. al., pursuant to the livelihood program called "Kilusang Sariling Sikap Program", it was expressly stipulated that no landlord-tenant relationship existed between the CMU and the faculty and staff (participants in the project). The CMU did not receive any share from the harvest/fruits of the land tilled by the participants. What the CMU collected was a nominal service fee and land use participant's fee in consideration of all the kinds of assistance given to the participants by the CMU. Again, the agreement signed by the participants under the CMU-IEP clearly stipulated that no landlord-tenant relationship existed, and that the participants are not share croppers nor lessees, and the CMU did not share in the produce of the participants' labor. In the same paragraph of their complaint, complainants claim that they are landless peasants. This allegation requires proof and should not be accepted as factually true. Obrique is not a landless peasant. The facts showed he was Physics Instructor at CMU holding a very responsible position was separated from the service on account of certain irregularities he committed while Assistant Director of the AgriBusiness Project of cultivating lowland rice. Others may, at the moment, own no land in Bukidnon but they may not necessarily be so destitute in their places of origin. No proof whatsoever appears in the record to show that they are landless peasants. The evidence on record establish without doubt that the complainants were originally authorized or given permission to occupy certain areas of the CMU property for a definite purpose — to carry out certain university projects as part of the CMU's program of activities pursuant to its avowed purpose of giving training and instruction in agricultural and other related technologies, using the land and other resources of the institution as a laboratory for these projects. Their entry into the land of the CMU was with the permission and written consent of the owner, the CMU, for a limited period and for a specific purpose. After the expiration of their privilege to occupy and cultivate the land of the CMU, their continued stay was unauthorized and their settlement on the CMU's land was without legal authority. A person entering upon lands of another, not claiming in good faith the right to do so by virtue of any title of his own, or by virtue of some agreement with the owner or with

one whom he believes holds title to the land, is a squatter. 4 Squatters cannot enter the land of another surreptitiously or by stealth, and under the umbrella of the CARP, claim rights to said property as landless peasants. Under Section 73 of R.A. 6657, persons guilty of committing prohibited acts of forcible entry or illegal detainer do not qualify as beneficiaries and may not avail themselves of the rights and benefits of agrarian reform. Any such person who knowingly and wilfully violates the above provision of the Act shall be punished with imprisonment or fine at the discretion of the Court. In view of the above, the private respondents, not being tenants nor proven to be landless peasants, cannot qualify as beneficiaries under the CARP. The questioned decision of the Adjudication Board, affirmed in toto by the Court of Appeals, segregating 400 hectares from the CMU land is primarily based on the alleged fact that the land subject hereof is "not directly, actually and exclusively used for school sites, because the same was leased to Philippine Packing Corporation (now Del Monte Philippines)". In support of this view, the Board held that the "respondent University failed to show that it is using actually, really, truly and in fact, the questioned area to the exclusion of others, nor did it show that the same is directly used without any intervening agency or person", 5 and "there is no definite and concrete showing that the use of said lands are essentially indispensable for educational purposes". 6 The reliance by the respondents Board and Appellate Tribunal on the technical or literal definition from Moreno's Philippine Law Dictionary and Black's Law Dictionary, may give the ordinary reader a classroom meaning of the phrase "is actually directly and exclusively", but in so doing they missed the true meaning of Section 10, R.A. 6657, as to what lands are exempted or excluded from the coverage of the CARP. The pertinent provisions of R.A. 6657, otherwise known as the Comprehensive Agrarian Reform Law of 1988, are as follows: Sec. 4. SCOPE. — The Comprehensive Agrarian Reform Law of 1988 shall cover, regardless of tenurial arrangement and commodity produced, all public and private agricultural lands as provided in Proclamation No. 131 and Executive Order No. 229 including other lands of the public domain suitable for agriculture. More specifically, the following lands are covered by the Comprehensive Agrarian Reform Program: (a) All alienable and disposable lands of the public domain devoted to or suitable for agriculture. No reclassification of forest of mineral lands to agricultural lands shall be undertaken after the approval of this Act until Congress, taking into account ecological, developmental and equity considerations, shall have determined by law, the specific limits of the public domain; (b) All lands of the public domain in excess of the specific limits ad determined by Congress in the preceding paragraph; (c) All other lands owned by the Government devoted to or suitable for agriculture; and (d) All private lands devoted to or suitable for agriculture regardless of the agricultural products raised or that can be raised thereon. Sec. 10 EXEMPTIONS AND EXCLUSIONS. — Lands actually, directly and exclusively used and found to be necessary for parks, wildlife, forest reserves, reforestration, fish sanctuaries and breeding grounds, watersheds and mangroves, national defense, school sites and campuses including experimental farm stations operated by public or private schools for educational purposes, seeds and seedlings research and pilot production centers, church sites and convents appurtenant thereto, mosque sites and Islamic centers appurtenant thereto, communal burial grounds and cemeteries, penal colonies and penal farms actually worked by the inmates, government and private research and quarantine centers and all lands with eighteen percent (18%) slope and over, except those already developed shall be exempt from the coverage of this Act. (Emphasis supplied). The construction given by the DARAB to Section 10 restricts the land area of the CMU to its present needs or to a land area presently, actively exploited and utilized by the university in carrying out its present educational program with its present student population and academic facility — overlooking the very significant factor of growth of the university in the years to come. By the nature of the CMU, which is a school established to promote agriculture and industry, the need for a vast tract of agricultural land and for future programs of expansion is obvious. At the outset, the CMU was conceived in the same manner as land grant colleges in America, a type of educational institution which blazed the trail for the development of vast tracts of unexplored and undeveloped agricultural lands in the Mid-West. What we now know as Michigan State University, Penn State University and Illinois State University, started as small land grant colleges, with meager funding to support their ever increasing educational programs. They were given extensive tracts of agricultural and forest lands to be developed to support their numerous expanding activities in the fields of agricultural technology and scientific research. Funds for the support of the educational programs of land grant colleges came from government appropriation, tuition and other student fees, private endowments and gifts, and earnings from miscellaneous sources. 7 It was in this same spirit that President Garcia issued Proclamation No. 476, withdrawing from sale or settlement and reserving for the Mindanao Agricultural College (forerunner of the CMU) a land reservation of 3,080 hectares as its future campus. It was set up in Bukidnon, in the hinterlands of Mindanao, in order that it can have enough resources and wide open spaces to grow as an agricultural educational institution, to develop and train future farmers of Mindanao and help attract settlers to that part of the country.

In line with its avowed purpose as an agricultural and technical school, the University adopted a land utilization program to develop and exploit its 3080-hectare land reservation as follows: 8 No. of Hectares Percentage a. Livestock and Pasture 1,016.40 33 b. Upland Crops 616 20 c. Campus and Residential sites 462 15 d. Irrigated rice 400.40 13 e. Watershed and forest reservation 308 10 f. Fruit and Trees Crops 154 5 g. Agricultural Experimental stations 123.20 4 3,080.00 100% The first land use plan of the CARP was prepared in 1975 and since then it has undergone several revisions in line with changing economic conditions, national economic policies and financial limitations and availability of resources. The CMU, through Resolution No. 160 S. 1984, pursuant to its development plan, adopted a multi-disciplinary applied research extension and productivity program called the "Kilusang Sariling Sikap Project" (CMU-KSSP). The objectives 9 of this program were: 1. Provide researches who shall assist in (a) preparation of proposal; (b) monitor project implementation; and (c) collect and analyze all data and information relevant to the processes and results of project implementation; 2. Provide the use of land within the University reservation for the purpose of establishing a lowland rice project for the party of the Second Part for a period of one calendar year subject to discretionary renewal by the Party of the First Part; 3. Provide practical training to the Party of the Second Part on the management and operation of their lowland project upon request of Party of the Second Part; and 4. Provide technical assistance in the form of relevant livelihood project specialists who shall extend expertise on scientific methods of crop production upon request by Party of the Second Part. In return for the technical assistance extended by the CMU, the participants in a project pay a nominal amount as service fee. The selfreliance program was adjunct to the CMU's lowland rice project. The portion of the CMU land leased to the Philippine Packing Corporation (now Del Monte Phils., Inc.) was leased long before the CARP was passed. The agreement with the Philippine Packing Corporation was not a lease but a Management and Development Agreement, a joint undertaking where use by the Philippine Packing Corporation of the land was part of the CMU research program, with the direct participation of faculty and students. Said contracts with the Philippine Packing Corporation and others of a similar nature (like MM-Agraplex) were made prior to the enactment of R.A. 6657 and were directly connected to the purpose and objectives of the CMU as an educational institution. As soon as the objectives of the agreement for the joint use of the CMU land were achieved as of June 1988, the CMU adopted a blue print for the exclusive use and utilization of said areas to carry out its own research and agricultural experiments. As to the determination of when and what lands are found to be necessary for use by the CMU, the school is in the best position to resolve and answer the question and pass upon the problem of its needs in relation to its avowed objectives for which the land was given to it by the State. Neither the DARAB nor the Court of Appeals has the right to substitute its judgment or discretion on this matter, unless the evidentiary facts are so manifest as to show that the CMU has no real for the land. It is our opinion that the 400 hectares ordered segregated by the DARAB and affirmed by the Court of Appeals in its Decision dated August 20, 1990, is not covered by the CARP because: (1) It is not alienable and disposable land of the public domain; (2) The CMU land reservation is not in excess of specific limits as determined by Congress;

(3) It is private land registered and titled in the name of its lawful owner, the CMU; (4) It is exempt from coverage under Section 10 of R.A. 6657 because the lands are actually, directly and exclusively used and found to be necessary for school site and campus, including experimental farm stations for educational purposes, and for establishing seed and seedling research and pilot production centers. (Emphasis supplied). Under Section 4 and Section 10 of R.A. 6657, it is crystal clear that the jurisdiction of the DARAB is limited only to matters involving the implementation of the CARP. More specifically, it is restricted to agrarian cases and controversies involving lands falling within the coverage of the aforementioned program. It does not include those which are actually, directly and exclusively used and found to be necessary for, among such purposes, school sites and campuses for setting up experimental farm stations, research and pilot production centers, etc. Consequently, the DARAB has no power to try, hear and adjudicate the case pending before it involving a portion of the CMU's titled school site, as the portion of the CMU land reservation ordered segregated is actually, directly and exclusively used and found by the school to be necessary for its purposes. The CMU has constantly raised the issue of the DARAB's lack of jurisdiction and has questioned the respondent's authority to hear, try and adjudicate the case at bar. Despite the law and the evidence on record tending to establish that the fact that the DARAB had no jurisdiction, it made the adjudication now subject of review. Whether the DARAB has the authority to order the segregation of a portion of a private property titled in the name of its lawful owner, even if the claimant is not entitled as a beneficiary, is an issue we feel we must resolve. The quasi-judicial powers of DARAB are provided in Executive Order No. 129-A, quoted hereunder in so far as pertinent to the issue at bar: Sec. 13. –– AGRARIAN REFORM ADJUDICATION BOARD — There is hereby created an Agrarian Reform Adjudication Board under the office of the Secretary. . . . The Board shall assume the powers and functions with respect to adjudication of agrarian reform cases under Executive Order 229 and this Executive Order . . . Sec. 17. –– QUASI JUDICIAL POWERS OF THE DAR. — The DAR is hereby vested with quasi-judicial powers to determine and adjudicate agrarian reform matters and shall have exclusive original jurisdiction over all matters including implementation of Agrarian Reform. Section 50 of R.A. 6658 confers on the DAR quasi-judicial powers as follows: The DAR is hereby vested with primary jurisdiction to determine and adjudicate agrarian reform matters and shall have original jurisdiction over all matters involving the implementation of agrarian reform. . . . Section 17 of Executive Order No. 129-A is merely a repetition of Section 50, R.A. 6657. There is no doubt that the DARAB has jurisdiction to try and decide any agrarian dispute in the implementation of the CARP. An agrarian dispute is defined by the same law as any controversy relating to tenurial rights whether leasehold, tenancy stewardship or otherwise over lands devoted to agriculture. 10 In the case at bar, the DARAB found that the complainants are not share tenants or lease holders of the CMU, yet it ordered the "segregation of a suitable compact and contiguous area of Four Hundred hectares, more or less", from the CMU land reservation, and directed the DAR Regional Director to implement its order of segregation. Having found that the complainants in this agrarian dispute for Declaration of Tenancy Status are not entitled to claim as beneficiaries of the CARP because they are not share tenants or leaseholders, its order for the segregation of 400 hectares of the CMU land was without legal authority. w do not believe that the quasi-judicial function of the DARAB carries with it greater authority than ordinary courts to make an award beyond what was demanded by the complainants/petitioners, even in an agrarian dispute. Where the quasi-judicial body finds that the complainants/petitioners are not entitled to the rights they are demanding, it is an erroneous interpretation of authority for that quasi-judicial body to order private property to be awarded to future beneficiaries. The order segregation 400 hectares of the CMU land was issued on a finding that the complainants are not entitled as beneficiaries, and on an erroneous assumption that the CMU land which is excluded or exempted under the law is subject to the coverage of the CARP. Going beyond what was asked by the complainants who were not entitled to the relief prayed the complainants who were not entitled to the relief prayed for, constitutes a grave abuse of discretion because it implies such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction. The education of the youth and agrarian reform are admittedly among the highest priorities in the government socio-economic programs. In this case, neither need give way to the other. Certainly, there must still be vast tracts of agricultural land in Mindanao outside the CMU land reservation which can be made available to landless peasants, assuming the claimants here, or some of them, can qualify as CARP beneficiaries. To our mind, the taking of the CMU land which had been segregated for educational purposes for distribution to yet uncertain beneficiaries is a gross misinterpretation of the authority and jurisdiction granted by law to the DARAB. The decision in this case is of far-reaching significance as far as it concerns state colleges and universities whose resources and research facilities may be gradually eroded by misconstruing the exemptions from the CARP. These state colleges and universities are the main vehicles for our scientific and technological advancement in the field of agriculture, so vital to the existence, growth and development of this country. It is the opinion of this Court, in the light of the foregoing analysis and for the reasons indicated, that the evidence is sufficient to sustain a finding of grave abuse of discretion by respondents Court of Appeals and DAR Adjudication Board. We hereby declare the decision of the

DARAB dated September 4, 1989 and the decision of the Court of Appeals dated August 20, 1990, affirming the decision of the quasi-judicial body, as null and void and hereby order that they be set aside, with costs against the private respondents. SO ORDERED Gutierrez, Jr., Cruz, Feliciano, Padilla, Bidin, Griño-Aquino, Medialdea, Regalado, Davide, Jr., Romero, Nocon, and Melo, JJ., concur. Bellosillo, J., took no part. Narvasa, C.J., is on leave.

SECOND DIVISION G.R. No. 182332

February 23, 2011

MILESTONE FARMS, INC., Petitioner, vs. OFFICE OF THE PRESIDENT, Respondent. DECISION NACHURA, J.: Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Civil Procedure, seeking the reversal of the Court of Appeals (CA) Amended Decision 2 dated October 4, 2006 and its Resolution3 dated March 27, 2008. The Facts Petitioner Milestone Farms, Inc. (petitioner) was incorporated with the Securities and Exchange Commission on January 8, 1960.4 Among its pertinent secondary purposes are: (1) to engage in the raising of cattle, pigs, and other livestock; to acquire lands by purchase or lease, which may be needed for this purpose; and to sell and otherwise dispose of said cattle, pigs, and other livestock and their produce when advisable and beneficial to the corporation; (2) to breed, raise, and sell poultry; to purchase or acquire and sell, or otherwise dispose of the supplies, stocks, equipment, accessories, appurtenances, products, and by-products of said business; and (3) to import cattle, pigs, and other livestock, and animal food necessary for the raising of said cattle, pigs, and other livestock as may be authorized by law.5 On June 10, 1988, a new agrarian reform law, Republic Act (R.A.) No. 6657, otherwise known as the Comprehensive Agrarian Reform Law (CARL), took effect, which included the raising of livestock, poultry, and swine in its coverage. However, on December 4, 1990, this Court, sitting en banc, ruled in Luz Farms v. Secretary of the Department of Agrarian Reform6 that agricultural lands devoted to livestock, poultry, and/or swine raising are excluded from the Comprehensive Agrarian Reform Program (CARP). Thus, in May 1993, petitioner applied for the exemption/exclusion of its 316.0422-hectare property, covered by Transfer Certificate of Title Nos. (T-410434) M-15750, (T-486101) M-7307, (T-486102) M-7308, (T-274129) M-15751, (T-486103) M-7309, (T-486104) M-7310, (T-332694) M-15755, (T486105) M-7311, (T-486106) M-7312, M-8791, (T-486107) M-7313, (T-486108) M-7314, M-8796, (T486109) M-7315, (T-486110) M-9508, and M-6013, and located in Pinugay, Baras, Rizal, from the coverage of the CARL, pursuant to the aforementioned ruling of this Court in Luz Farms.

Meanwhile, on December 27, 1993, the Department of Agrarian Reform (DAR) issued Administrative Order No. 9, Series of 1993 (DAR A.O. No. 9), setting forth rules and regulations to govern the exclusion of agricultural lands used for livestock, poultry, and swine raising from CARP coverage. Thus, on January 10, 1994, petitioner re-documented its application pursuant to DAR A.O. No. 9. 7 Acting on the said application, the DAR’s Land Use Conversion and Exemption Committee (LUCEC) of Region IV conducted an ocular inspection on petitioner’s property and arrived at the following findings: [T]he actual land utilization for livestock, swine and poultry is 258.8422 hectares; the area which served as infrastructure is 42.0000 hectares; ten (10) hectares are planted to corn and the remaining five (5) hectares are devoted to fish culture; that the livestock population are 371 heads of cow, 20 heads of horses, 5,678 heads of swine and 788 heads of cocks; that the area being applied for exclusion is far below the required or ideal area which is 563 hectares for the total livestock population; that the approximate area not directly used for livestock purposes with an area of 15 hectares, more or less, is likewise far below the allowable 10% variance; and, though not directly used for livestock purposes, the ten (10) hectares planted to sweet corn and the five (5) hectares devoted to fishpond could be considered supportive to livestock production. The LUCEC, thus, recommended the exemption of petitioner’s 316.0422-hectare property from the coverage of CARP. Adopting the LUCEC’s findings and recommendation, DAR Regional Director Percival Dalugdug (Director Dalugdug) issued an Order dated June 27, 1994, exempting petitioner’s 316.0422-hectare property from CARP.8 The Southern Pinugay Farmers Multi-Purpose Cooperative, Inc. (Pinugay Farmers), represented by Timiano Balajadia, Sr. (Balajadia), moved for the reconsideration of the said Order, but the same was denied by Director Dalugdug in his Order dated November 24, 1994. 9 Subsequently, the Pinugay Farmers filed a letter-appeal with the DAR Secretary. Correlatively, on June 4, 1994, petitioner filed a complaint for Forcible Entry against Balajadia and company before the Municipal Circuit Trial Court (MCTC) of Teresa-Baras, Rizal, docketed as Civil Case No. 781-T.10 The MCTC ruled in favor of petitioner, but the decision was later reversed by the Regional Trial Court, Branch 80, of Tanay, Rizal. Ultimately, the case reached the CA, which, in its Decision11 dated October 8, 1999, reinstated the MCTC’s ruling, ordering Balajadia and all defendants therein to vacate portions of the property covered by TCT Nos. M-6013, M-8796, and M8791. In its Resolution12 dated July 31, 2000, the CA held that the defendants therein failed to timely file a motion for reconsideration, given the fact that their counsel of record received its October 8, 1999 Decision; hence, the same became final and executory. In the meantime, R.A. No. 6657 was amended by R.A. No. 7881,13 which was approved on February 20, 1995. Private agricultural lands devoted to livestock, poultry, and swine raising were excluded from the coverage of the CARL. On October 22, 1996, the fact-finding team formed by the DAR Undersecretary for Field Operations and Support Services conducted an actual headcount of the livestock population on the property. The headcount showed that there were 448 heads of cattle and more than 5,000 heads of swine. The DAR Secretary’s Ruling On January 21, 1997, then DAR Secretary Ernesto D. Garilao (Secretary Garilao) issued an Order exempting from CARP only 240.9776 hectares of the 316.0422 hectares previously exempted by Director Dalugdug, and declaring 75.0646 hectares of the property to be covered by CARP. 14

Secretary Garilao opined that, for private agricultural lands to be excluded from CARP, they must already be devoted to livestock, poultry, and swine raising as of June 15, 1988, when the CARL took effect. He found that the Certificates of Ownership of Large Cattle submitted by petitioner showed that only 86 heads of cattle were registered in the name of petitioner’s president, Misael Vera, Jr., prior to June 15, 1988; 133 were subsequently bought in 1990, while 204 were registered from 1992 to 1995. Secretary Garilao gave more weight to the certificates rather than to the headcount because "the same explicitly provide for the number of cattle owned by petitioner as of June 15, 1988." Applying the animal-land ratio (1 hectare for grazing for every head of cattle/carabao/horse) and the infrastructure-animal ratio (1.7815 hectares for 21 heads of cattle/carabao/horse, and 0.5126 hectare for 21 heads of hogs) under DAR A.O. No. 9, Secretary Garilao exempted 240.9776 hectares of the property, as follows: 1. 86 hectares for the 86 heads of cattle existing as of 15 June 1988; 2. 8 hectares for infrastructure following the ratio of 1.7815 hectares for every 21 heads of cattle; 3. 8 hectares for the 8 horses; 4. 0.3809 square meters of infrastructure for the 8 horses; [and] 5. 138.5967 hectares for the 5,678 heads of swine. 15 Petitioner filed a Motion for Reconsideration,16 submitting therewith copies of Certificates of Transfer of Large Cattle and additional Certificates of Ownership of Large Cattle issued to petitioner prior to June 15, 1988, as additional proof that it had met the required animal-land ratio. Petitioner also submitted a copy of a Disbursement Voucher dated December 17, 1986, showing the purchase of 100 heads of cattle by the Bureau of Animal Industry from petitioner, as further proof that it had been actively operating a livestock farm even before June 15, 1988. However, in his Order dated April 15, 1997, Secretary Garilao denied petitioner’s Motion for Reconsideration. 17 Aggrieved, petitioner filed its Memorandum on Appeal18 before the Office of the President (OP). The OP’s Ruling On February 4, 2000, the OP rendered a decision19 reinstating Director Dalugdug’s Order dated June 27, 1994 and declared the entire 316.0422-hectare property exempt from the coverage of CARP. However, on separate motions for reconsideration of the aforesaid decision filed by farmer-groups Samahang Anak-Pawis ng Lagundi (SAPLAG) and Pinugay Farmers, and the Bureau of Agrarian Legal Assistance of DAR, the OP issued a resolution20 dated September 16, 2002, setting aside its previous decision. The dispositive portion of the OP resolution reads: WHEREFORE, the Decision subject of the instant separate motions for reconsideration is hereby SET ASIDE and a new one entered REINSTATING the Order dated 21 January 1997 of then DAR Secretary Ernesto D. Garilao, as reiterated in another Order of 15 April 1997, without prejudice to the outcome of the continuing review and verification proceedings that DAR, thru the appropriate Municipal Agrarian Reform Officer, may undertake pursuant to Rule III (D) of DAR Administrative Order No. 09, series of 1993.

SO ORDERED.21 The OP held that, when it comes to proof of ownership, the reference is the Certificate of Ownership of Large Cattle. Certificates of cattle ownership, which are readily available – being issued by the appropriate government office – ought to match the number of heads of cattle counted as existing during the actual headcount. The presence of large cattle on the land, without sufficient proof of ownership thereof, only proves such presence. Taking note of Secretary Garilao’s observations, the OP also held that, before an ocular investigation is conducted on the property, the landowners are notified in advance; hence, mere reliance on the physical headcount is dangerous because there is a possibility that the landowners would increase the number of their cattle for headcount purposes only. The OP observed that there was a big variance between the actual headcount of 448 heads of cattle and only 86 certificates of ownership of large cattle. Consequently, petitioner sought recourse from the CA.22 The Proceedings Before the CA and Its Rulings On April 29, 2005, the CA found that, based on the documentary evidence presented, the property subject of the application for exclusion had more than satisfied the animal-land and infrastructureanimal ratios under DAR A.O. No. 9. The CA also found that petitioner applied for exclusion long before the effectivity of DAR A.O. No. 9, thus, negating the claim that petitioner merely converted the property for livestock, poultry, and swine raising in order to exclude it from CARP coverage. Petitioner was held to have actually engaged in the said business on the property even before June 15, 1988. The CA disposed of the case in this wise: WHEREFORE, the instant petition is hereby GRANTED. The assailed Resolution of the Office of the President dated September 16, 2002 is hereby SET ASIDE, and its Decision dated February 4, 2000 declaring the entire 316.0422 hectares exempt from the coverage of the Comprehensive Agrarian Reform Program is hereby REINSTATED without prejudice to the outcome of the continuing review and verification proceedings which the Department of Agrarian Reform, through the proper Municipal Agrarian Reform Officer, may undertake pursuant to Policy Statement (D) of DAR Administrative Order No. 9, Series of 1993. SO ORDERED.23 Meanwhile, six months earlier, or on November 4, 2004, without the knowledge of the CA – as the parties did not inform the appellate court – then DAR Secretary Rene C. Villa (Secretary Villa) issued DAR Conversion Order No. CON-0410-001624 (Conversion Order), granting petitioner’s application to convert portions of the 316.0422-hectare property from agricultural to residential and golf courses use. The portions converted – with a total area of 153.3049 hectares – were covered by TCT Nos. M-15755 (T-332694), M-15751 (T-274129), and M-15750 (T-410434). With this Conversion Order, the area of the property subject of the controversy was effectively reduced to 162.7373 hectares. On the CA’s decision of April 29, 2005, Motions for Reconsideration were filed by farmer-groups, namely: the farmers represented by Miguel Espinas25 (Espinas group), the Pinugay Farmers,26 and the SAPLAG.27 The farmer-groups all claimed that the CA should have accorded respect to the factual findings of the OP. Moreover, the farmer-groups unanimously intimated that petitioner already converted and developed a portion of the property into a leisure-residential-commercial estate known as the Palo Alto Leisure and Sports Complex (Palo Alto).

Subsequently, in a Supplement to the Motion for Reconsideration on Newly Secured Evidence pursuant to DAR Administrative Order No. 9, Series of 1993 28 (Supplement) dated June 15, 2005, the Espinas group submitted the following as evidence: 1) Conversion Order29 dated November 4, 2004, issued by Secretary Villa, converting portions of the property from agricultural to residential and golf courses use, with a total area of 153.3049 hectares; thus, the Espinas group prayed that the remaining 162.7373 hectares (subject property) be covered by the CARP; 2) Letter30 dated June 7, 2005 of both incoming Municipal Agrarian Reform Officer (MARO) Bismark M. Elma (MARO Elma) and outgoing MARO Cesar C. Celi (MARO Celi) of Baras, Rizal, addressed to Provincial Agrarian Reform Officer (PARO) II of Rizal, Felixberto Q. Kagahastian, (MARO Report), informing the latter, among others, that Palo Alto was already under development and the lots therein were being offered for sale; that there were actual tillers on the subject property; that there were agricultural improvements thereon, including an irrigation system and road projects funded by the Government; that there was no existing livestock farm on the subject property; and that the same was not in the possession and/or control of petitioner; and 3) Certification31 dated June 8, 2005, issued by both MARO Elma and MARO Celi, manifesting that the subject property was in the possession and cultivation of actual occupants and tillers, and that, upon inspection, petitioner maintained no livestock farm thereon. Four months later, the Espinas group and the DAR filed their respective Manifestations. 32 In its Manifestation dated November 29, 2005, the DAR confirmed that the subject property was no longer devoted to cattle raising. Hence, in its Resolution33 dated December 21, 2005, the CA directed petitioner to file its comment on the Supplement and the aforementioned Manifestations. Employing the services of a new counsel, petitioner filed a Motion to Admit Rejoinder, 34 and prayed that the MARO Report be disregarded and expunged from the records for lack of factual and legal basis. With the CA now made aware of these developments, particularly Secretary Villa’s Conversion Order of November 4, 2004, the appellate court had to acknowledge that the property subject of the controversy would now be limited to the remaining 162.7373 hectares. In the same token, the Espinas group prayed that this remaining area be covered by the CARP. 35 On October 4, 2006, the CA amended its earlier Decision. It held that its April 29, 2005 Decision was theoretically not final because DAR A.O. No. 9 required the MARO to make a continuing review and verification of the subject property. While the CA was cognizant of our ruling in Department of Agrarian Reform v. Sutton,36 wherein we declared DAR A.O. No. 9 as unconstitutional, it still resolved to lift the exemption of the subject property from the CARP, not on the basis of DAR A.O. No. 9, but on the strength of evidence such as the MARO Report and Certification, and the Katunayan 37 issued by the Punong Barangay, Alfredo Ruba (Chairman Ruba), of Pinugay, Baras, Rizal, showing that the subject property was no longer operated as a livestock farm. Moreover, the CA held that the lease agreements,38 which petitioner submitted to prove that it was compelled to lease a ranch as temporary shelter for its cattle, only reinforced the DAR’s finding that there was indeed no existing livestock farm on the subject property. While petitioner claimed that it was merely forced to do so to prevent further slaughtering of its cattle allegedly committed by the occupants, the CA found the claim unsubstantiated. Furthermore, the CA opined that petitioner should have asserted its rights when the irrigation and road projects were introduced by the Government within its property. Finally, the CA accorded the findings of MARO Elma and MARO Celi the presumption of regularity in the

performance of official functions in the absence of evidence proving misconduct and/or dishonesty when they inspected the subject property and rendered their report. Thus, the CA disposed: WHEREFORE, this Court’s Decision dated April 29, 2005 is hereby amended in that the exemption of the subject landholding from the coverage of the Comprehensive Agrarian Reform Program is hereby lifted, and the 162.7373 hectare-agricultural portion thereof is hereby declared covered by the Comprehensive Agrarian Reform Program. SO ORDERED.39 Unperturbed, petitioner filed a Motion for Reconsideration. 40 On January 8, 2007, MARO Elma, in compliance with the Memorandum of DAR Regional Director Dominador B. Andres, tendered another Report41 reiterating that, upon inspection of the subject property, together with petitioner’s counsel-turned witness, Atty. Grace Eloisa J. Que (Atty. Que), PARO Danilo M. Obarse, Chairman Ruba, and several occupants thereof, he, among others, found no livestock farm within the subject property. About 43 heads of cattle were shown, but MARO Elma observed that the same were inside an area adjacent to Palo Alto. Subsequently, upon Atty. Que’s request for reinvestigation, designated personnel of the DAR Provincial and Regional Offices (Investigating Team) conducted another ocular inspection on the subject property on February 20, 2007. The Investigating Team, in its Report42 dated February 21, 2007, found that, per testimony of petitioner’s caretaker, Rogelio Ludivices (Roger),43 petitioner has 43 heads of cattle taken care of by the following individuals: i) Josefino Custodio (Josefino) – 18 heads; ii) Andy Amahit – 15 heads; and iii) Bert Pangan – 2 heads; that these individuals pastured the herd of cattle outside the subject property, while Roger took care of 8 heads of cattle inside the Palo Alto area; that 21 heads of cattle owned by petitioner were seen in the area adjacent to Palo Alto; that Josefino confirmed to the Investigating Team that he takes care of 18 heads of cattle owned by petitioner; that the said Investigating Team saw 9 heads of cattle in the Palo Alto area, 2 of which bore "MFI" marks; and that the 9 heads of cattle appear to have matched the Certificates of Ownership of Large Cattle submitted by petitioner. Because of the contentious factual issues and the conflicting averments of the parties, the CA set the case for hearing and reception of evidence on April 24, 2007.44 Thereafter, as narrated by the CA, the following events transpired: On May 17, 2007, [petitioner] presented the Judicial Affidavits of its witnesses, namely, [petitioner’s] counsel, [Atty. Que], and the alleged caretaker of [petitioner’s] farm, [Roger], who were both crossexamined by counsel for farmers-movants and SAPLAG. [Petitioner] and SAPLAG then marked their documentary exhibits. On May 24, 2007, [petitioner’s] security guard and third witness, Rodolfo G. Febrada, submitted his Judicial Affidavit and was cross-examined by counsel for fa[r]mers-movants and SAPLAG. Farmersmovants also marked their documentary exhibits. Thereafter, the parties submitted their respective Formal Offers of Evidence. Farmers-movants and SAPLAG filed their objections to [petitioner’s] Formal Offer of Evidence. Later, [petitioner] and farmers-movants filed their respective Memoranda. In December 2007, this Court issued a Resolution on the parties’ offer of evidence and considered [petitioner’s] Motion for Reconsideration submitted for resolution. 45 Finally, petitioner’s motion for reconsideration was denied by the CA in its Resolution 46 dated March 27, 2008. The CA discarded petitioner’s reliance on Sutton. It ratiocinated that the MARO Reports and the DAR’s Manifestation could not be disregarded simply because DAR A.O. No. 9 was declared

unconstitutional. The Sutton ruling was premised on the fact that the Sutton property continued to operate as a livestock farm. The CA also reasoned that, in Sutton, this Court did not remove from the DAR the power to implement the CARP, pursuant to the latter’s authority to oversee the implementation of agrarian reform laws under Section 5047 of the CARL. Moreover, the CA found: Petitioner-appellant claimed that they had 43 heads of cattle which are being cared for and pastured by 4 individuals. To prove its ownership of the said cattle, petitioner-appellant offered in evidence 43 Certificates of Ownership of Large Cattle. Significantly, however, the said Certificates were all dated and issued on November 24, 2006, nearly 2 months after this Court rendered its Amended Decision lifting the exemption of the 162-hectare portion of the subject landholding. The acquisition of such cattle after the lifting of the exemption clearly reveals that petitioner-appellant was no longer operating a livestock farm, and suggests an effort to create a semblance of livestock-raising for the purpose of its Motion for Reconsideration.48 On petitioner’s assertion that between MARO Elma’s Report dated January 8, 2007 and the Investigating Team’s Report, the latter should be given credence, the CA held that there were no material inconsistencies between the two reports because both showed that the 43 heads of cattle were found outside the subject property. Hence, this Petition assigning the following errors: I. THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT HELD THAT LANDS DEVOTED TO LIVESTOCK FARMING WITHIN THE MEANING OF LUZ FARMS AND SUTTON, AND WHICH ARE THEREBY EXEMPT FROM CARL COVERAGE, ARE NEVERTHELESS SUBJECT TO DAR’S CONTINUING VERIFICATION AS TO USE, AND, ON THE BASIS OF SUCH VERIFICATION, MAY BE ORDERED REVERTED TO AGRICULTURAL CLASSIFICATION AND COMPULSORY ACQUISITION[;] II. GRANTING THAT THE EXEMPT LANDS AFORESAID MAY BE SO REVERTED TO AGRICULTURAL CLASSIFICATION, STILL THE PROCEEDINGS FOR SUCH PURPOSE BELONGS TO THE EXCLUSIVE ORIGINAL JURISDICTION OF THE DAR, BEFORE WHICH THE CONTENDING PARTIES MAY VENTILATE FACTUAL ISSUES, AND AVAIL THEMSELVES OF USUAL REVIEW PROCESSES, AND NOT TO THE COURT OF APPEALS EXERCISING APPELLATE JURISDICTION OVER ISSUES COMPLETELY UNRELATED TO REVERSION [; AND] III. IN ANY CASE, THE COURT OF APPEALS GRAVELY ERRED AND COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT HELD THAT THE PROPERTY IN DISPUTE IS NO LONGER BEING USED FOR LIVESTOCK FARMING.49 Petitioner asseverates that lands devoted to livestock farming as of June 15, 1988 are classified as industrial lands, hence, outside the ambit of the CARP; that Luz Farms, Sutton, and R.A. No. 7881 clearly excluded such lands on constitutional grounds; that petitioner’s lands were actually devoted to livestock even before the enactment of the CARL; that livestock farms are exempt from the CARL, not by reason of any act of the DAR, but because of their nature as industrial lands; that petitioner’s

property was admittedly devoted to livestock farming as of June 1988 and the only issue before was whether or not petitioner’s pieces of evidence comply with the ratios provided under DAR A.O. No. 9; and that DAR A.O. No. 9 having been declared as unconstitutional, DAR had no more legal basis to conduct a continuing review and verification proceedings over livestock farms. Petitioner argues that, in cases where reversion of properties to agricultural use is proper, only the DAR has the exclusive original jurisdiction to hear and decide the same; hence, the CA, in this case, committed serious errors when it ordered the reversion of the property and when it considered pieces of evidence not existing as of June 15, 1988, despite its lack of jurisdiction; that the CA should have remanded the case to the DAR due to conflicting factual claims; that the CA cannot ventilate allegations of fact that were introduced for the first time on appeal as a supplement to a motion for reconsideration of its first decision, use the same to deviate from the issues pending review, and, on the basis thereof, declare exempt lands reverted to agricultural use and compulsorily covered by the CARP; that the "newly discovered [pieces of] evidence" were not introduced in the proceedings before the DAR, hence, it was erroneous for the CA to consider them; and that piecemeal presentation of evidence is not in accord with orderly justice. Finally, petitioner submits that, in any case, the CA gravely erred and committed grave abuse of discretion when it held that the subject property was no longer used for livestock farming as shown by the Report of the Investigating Team. Petitioner relies on the 1997 LUCEC and DAR findings that the subject property was devoted to livestock farming, and on the 1999 CA Decision which held that the occupants of the property were squatters, bereft of any authority to stay and possess the property.50 On one hand, the farmer-groups, represented by the Espinas group, contend that they have been planting rice and fruit-bearing trees on the subject property, and helped the National Irrigation Administration in setting up an irrigation system therein in 1997, with a produce of 1,500 to 1,600 sacks of palay each year; that petitioner came to court with unclean hands because, while it sought the exemption and exclusion of the entire property, unknown to the CA, petitioner surreptitiously filed for conversion of the property now known as Palo Alto, which was actually granted by the DAR Secretary; that petitioner’s bad faith is more apparent since, despite the conversion of the 153.3049hectare portion of the property, it still seeks to exempt the entire property in this case; and that the fact that petitioner applied for conversion is an admission that indeed the property is agricultural. The farmer-groups also contend that petitioner’s reliance on Luz Farms and Sutton is unavailing because in these cases there was actually no cessation of the business of raising cattle; that what is being exempted is the activity of raising cattle and not the property itself; that exemptions due to cattle raising are not permanent; that the declaration of DAR A.O. No. 9 as unconstitutional does not at all diminish the mandated duty of the DAR, as the lead agency of the Government, to implement the CARL; that the DAR, vested with the power to identify lands subject to CARP, logically also has the power to identify lands which are excluded and/or exempted therefrom; that to disregard DAR’s authority on the matter would open the floodgates to abuse and fraud by unscrupulous landowners; that the factual finding of the CA that the subject property is no longer a livestock farm may not be disturbed on appeal, as enunciated by this Court; that DAR conducted a review and monitoring of the subject property by virtue of its powers under the CARL; and that the CA has sufficient discretion to admit evidence in order that it could arrive at a fair, just, and equitable ruling in this case. 51 On the other hand, respondent OP, through the Office of the Solicitor General (OSG), claims that the CA correctly held that the subject property is not exempt from the coverage of the CARP, as substantial pieces of evidence show that the said property is not exclusively devoted to livestock, swine, and/or poultry raising; that the issues presented by petitioner are factual in nature and not proper in this case; that under Rule 43 of the 1997 Rules of Civil Procedure, questions of fact may be raised by the parties and resolved by the CA; that due to the divergence in the factual findings of the DAR and the OP, the CA was duty bound to review and ascertain which of the said findings are duly supported by substantial evidence; that the subject property was subject to continuing review and verification proceedings due to the then prevailing DAR A.O. No. 9; that there is no question that the power to determine if a property is subject to CARP coverage lies with the DAR Secretary; that

pursuant to such power, the MARO rendered the assailed reports and certification, and the DAR itself manifested before the CA that the subject property is no longer devoted to livestock farming; and that, while it is true that this Court’s ruling in Luz Farms declared that agricultural lands devoted to livestock, poultry, and/or swine raising are excluded from the CARP, the said ruling is not without any qualification.52 In its Reply53 to the farmer-groups’ and to the OSG’s comment, petitioner counters that the farmergroups have no legal basis to their claims as they admitted that they entered the subject property without the consent of petitioner; that the rice plots actually found in the subject property, which were subsequently taken over by squatters, were, in fact, planted by petitioner in compliance with the directive of then President Ferdinand Marcos for the employer to provide rice to its employees; that when a land is declared exempt from the CARP on the ground that it is not agricultural as of the time the CARL took effect, the use and disposition of that land is entirely and forever beyond DAR’s jurisdiction; and that, inasmuch as the subject property was not agricultural from the very beginning, DAR has no power to regulate the same. Petitioner also asserts that the CA cannot uncharacteristically assume the role of trier of facts and resolve factual questions not previously adjudicated by the lower tribunals; that MARO Elma rendered the assailed MARO reports with bias against petitioner, and the same were contradicted by the Investigating Team’s Report, which confirmed that the subject property is still devoted to livestock farming; and that there has been no change in petitioner’s business interest as an entity engaged in livestock farming since its inception in 1960, though there was admittedly a decline in the scale of its operations due to the illegal acts of the squatter-occupants. Our Ruling The Petition is bereft of merit. Let it be stressed that when the CA provided in its first Decision that continuing review and verification may be conducted by the DAR pursuant to DAR A.O. No. 9, the latter was not yet declared unconstitutional by this Court. The first CA Decision was promulgated on April 29, 2005, while this Court struck down as unconstitutional DAR A.O. No. 9, by way of Sutton, on October 19, 2005. Likewise, let it be emphasized that the Espinas group filed the Supplement and submitted the assailed MARO reports and certification on June 15, 2005, which proved to be adverse to petitioner’s case. Thus, it could not be said that the CA erred or gravely abused its discretion in respecting the mandate of DAR A.O. No. 9, which was then subsisting and in full force and effect. While it is true that an issue which was neither alleged in the complaint nor raised during the trial cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play, justice, and due process,54 the same is not without exception,55 such as this case. The CA, under Section 3,56 Rule 43 of the Rules of Civil Procedure, can, in the interest of justice, entertain and resolve factual issues. After all, technical and procedural rules are intended to help secure, and not suppress, substantial justice. A deviation from a rigid enforcement of the rules may thus be allowed to attain the prime objective of dispensing justice, for dispensation of justice is the core reason for the existence of courts.57 Moreover, petitioner cannot validly claim that it was deprived of due process because the CA afforded it all the opportunity to be heard. 58 The CA even directed petitioner to file its comment on the Supplement, and to prove and establish its claim that the subject property was excluded from the coverage of the CARP. Petitioner actively participated in the proceedings before the CA by submitting pleadings and pieces of documentary evidence, such as the Investigating Team’s Report and judicial affidavits. The CA also went further by setting the case for hearing. In all these proceedings, all the parties’ rights to due process were amply protected and recognized.

With the procedural issue disposed of, we find that petitioner’s arguments fail to persuade. Its invocation of Sutton is unavailing. In Sutton, we held: In the case at bar, we find that the impugned A.O. is invalid as it contravenes the Constitution. The A.O. sought to regulate livestock farms by including them in the coverage of agrarian reform and prescribing a maximum retention limit for their ownership. However, the deliberations of the 1987 Constitutional Commission show a clear intent to exclude, inter alia, all lands exclusively devoted to livestock, swine and poultry-raising. The Court clarified in the Luz Farms case that livestock, swine and poultry-raising are industrial activities and do not fall within the definition of "agriculture" or "agricultural activity." The raising of livestock, swine and poultry is different from crop or tree farming. It is an industrial, not an agricultural, activity. A great portion of the investment in this enterprise is in the form of industrial fixed assets, such as: animal housing structures and facilities, drainage, waterers and blowers, feedmill with grinders, mixers, conveyors, exhausts and generators, extensive warehousing facilities for feeds and other supplies, anti-pollution equipment like bio-gas and digester plants augmented by lagoons and concrete ponds, deepwells, elevated water tanks, pumphouses, sprayers, and other technological appurtenances. Clearly, petitioner DAR has no power to regulate livestock farms which have been exempted by the Constitution from the coverage of agrarian reform. It has exceeded its power in issuing the assailed A.O.59 Indeed, as pointed out by the CA, the instant case does not rest on facts parallel to those of Sutton because, in Sutton, the subject property remained a livestock farm. We even highlighted therein the fact that "there has been no change of business interest in the case of respondents." 60 Similarly, in Department of Agrarian Reform v. Uy,61 we excluded a parcel of land from CARP coverage due to the factual findings of the MARO, which were confirmed by the DAR, that the property was entirely devoted to livestock farming. However, in A.Z. Arnaiz Realty, Inc., represented by Carmen Z. Arnaiz v. Office of the President; Department of Agrarian Reform; Regional Director, DAR Region V, Legaspi City; Provincial Agrarian Reform Officer, DAR Provincial Office, Masbate, Masbate; and Municipal Agrarian Reform Officer, DAR Municipal Office, Masbate, Masbate,62 we denied a similar petition for exemption and/or exclusion, by according respect to the CA’s factual findings and its reliance on the findings of the DAR and the OP that the subject parcels of land were not directly, actually, and exclusively used for pasture. 63 Petitioner’s admission that, since 2001, it leased another ranch for its own livestock is fatal to its cause.64 While petitioner advances a defense that it leased this ranch because the occupants of the subject property harmed its cattle, like the CA, we find it surprising that not even a single police and/or barangay report was filed by petitioner to amplify its indignation over these alleged illegal acts. Moreover, we accord respect to the CA’s keen observation that the assailed MARO reports and the Investigating Team’s Report do not actually contradict one another, finding that the 43 cows, while owned by petitioner, were actually pastured outside the subject property. Finally, it is established that issues of Exclusion and/or Exemption are characterized as Agrarian Law Implementation (ALI) cases which are well within the DAR Secretary’s competence and jurisdiction.65 Section 3, Rule II of the 2003 Department of Agrarian Reform Adjudication Board Rules of Procedure provides: Section 3. Agrarian Law Implementation Cases. The Adjudicator or the Board shall have no jurisdiction over matters involving the administrative implementation of RA No. 6657, otherwise known as the Comprehensive Agrarian Reform Law

(CARL) of 1988 and other agrarian laws as enunciated by pertinent rules and administrative orders, which shall be under the exclusive prerogative of and cognizable by the Office of the Secretary of the DAR in accordance with his issuances, to wit: xxxx 3.8 Exclusion from CARP coverage of agricultural land used for livestock, swine, and poultry raising. Thus, we cannot, without going against the law, arbitrarily strip the DAR Secretary of his legal mandate to exercise jurisdiction and authority over all ALI cases. To succumb to petitioner’s contention that "when a land is declared exempt from the CARP on the ground that it is not agricultural as of the time the CARL took effect, the use and disposition of that land is entirely and forever beyond DAR’s jurisdiction" is dangerous, suggestive of self-regulation. Precisely, it is the DAR Secretary who is vested with such jurisdiction and authority to exempt and/or exclude a property from CARP coverage based on the factual circumstances of each case and in accordance with law and applicable jurisprudence. In addition, albeit parenthetically, Secretary Villa had already granted the conversion into residential and golf courses use of nearly one-half of the entire area originally claimed as exempt from CARP coverage because it was allegedly devoted to livestock production. lawphil1

In sum, we find no reversible error in the assailed Amended Decision and Resolution of the CA which would warrant the modification, much less the reversal, thereof. WHEREFORE, the Petition is DENIED and the Court of Appeals Amended Decision dated October 4, 2006 and Resolution dated March 27, 2008 are AFFIRMED. No costs. SO ORDERED. SPECIAL FIRST DIVISION G.R. No. 112526

March 16, 2005

STA. ROSA REALTY DEVELOPMENT CORPORATION, Petitioner, vs. JUAN B. AMANTE, FRANCISCO L. ANDAL, LUCIA ANDAL, ANDREA P. AYENDE, LETICIA P. BALAT, FILOMENA B. BATINO, ANICETO A. BURGOS, JAIME A. BURGOS, FLORENCIA CANUBAS, LORETO A. CANUBAS, MAXIMO A. CANUBAS, REYNALDO CARINGAL, QUIRINO C. CASALME, BENIGNO A. CRUZAT, ELINO A. CRUZAT, GREGORIO F. CRUZAT, RUFINO C. CRUZAT, SERGIO CRUZAT, SEVERINO F. CRUZAT, VICTORIA DE SAGUN, SEVERINO DE SAGUN, FELICISIMO A. GONZALES, FRANCISCO A. GONZALES, GREGORIO A. GONZALES, LEODEGARIO N. GONZALES, PASCUAL P. GONZALES, ROLANDO A. GONZALES, FRANCISCO A. JUANGCO, GERVACIO A. JUANGCO, LOURDES U. LUNA, ANSELMO M. MANDANAS, CRISANTO MANDANAS, EMILIO M. MANDANAS, GREGORIO A. MANDANAS, MARIO G. MANDANAS, TEODORO MANDANAS, CONSTANCIO B. MARQUEZ, EUGENIO B. MARQUEZ, ARMANDO P. MATIENZO, DANIEL D. MATIENZO, MAXIMINO MATIENZO, PACENCIA P. MATIENZO, DOROTEA L. PANGANIBAN, JUANITO T. PEREZ, MARIANITO T. PEREZ, SEVERO M. PEREZ, INOCENCIA S. PASQUIZA, BIENVENIDO F. PETATE, IGNACIO F. PETATE, JUANITO PETATE, PABLO A. PLATON, PRECILLO V. PLATON, AQUILINO B. SUBOL, CASIANO T. VILLA, DOMINGO VILLA, JUAN T. VILLA, MARIO C. VILLA, NATIVIDAD B. VILLA, JACINTA S. ALVARADO, RODOLFO ANGELES, DOMINGO A. CANUBAS, EDGARDO L. CASALME, QUIRINO DE LEON, LEONILO M. ENRIQUEZ, CLAUDIA P. GONZALES, FELISA R. LANGUE, QUINTILLANO LANGUE, REYNALDO LANGUE, ROMEO S. LANGUE, MARIANITO T.

PEREZ, INOCENCIA S. PASQUIZA, AQUILINO B. SUBOL, BONIFACIO VILLA, ROGELIO AYENDE, ANTONIO B. FERNANDEZ, ZACARIAS HERRERA, REYNARIO U. LAZO, AGAPITO MATIENZO, DIONISIO F. PETATE, LITO G. REYES, JOSE M. SUBOL, CELESTINO G. TOPI NO, ROSA C. AMANTE, SOTERA CASALME, REMIGIO M. SILVERIO, THE COURT OF APPEALS, THE SECRETARY OF AGRARIAN REFORM, DEPARTMENT OF AGRARIAN REFORM ADJUDICATION BOARD, LAND BANK OF THE PHILIPPINES, REGISTER OF DEEDS OF LAGUNA, DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES REGIONAL EXECUTIVE DIRECTOR FOR REGION IV and REGIONAL AGRARIAN REFORM OFFICER FOR REGION IV., Respondents. x-------------------x G.R. No. 118838

March 16, 2005

JUAN B. AMANTE, IGNACIO PETATE, DOMINGO CANUBAS, FLORENCIO CANUBAS, CRESENCIO AMANTE, QUIRINO CASALME, LEODEGARIO GONZALES, DOMINGO VILLA, JAIME BURGOS, NICOMEDES PETATE, MAXIMINO MATIENZO, MAXIMO CANUBAS, ELINO CRUZAT, RUFINO CRUZAT, FELICISIMO GONZALES, QUINTILLANO LANGUE, TEODORO MANDANAS, SERGIO CRUZAT, AGAPITO MATIENZO and SEVERINO DE SAGUM, Petitioner, vs. LUIS YULO, JESUS MIGUEL YULO, C-J YULO & SONS, INC., STA. ROSA REALTY DEVELOPMENT CORPORATION, JOSE LAMBATIN, LAUREANO LAUREL, GALICANO MAILOM, JR., REYNALDO OPENA, AGAPITO PRECILLA, DANILO SUMADSAD, ALFREDO SUMADSAD, JUAN CANTAL, INIGO MENDOZA, ALEJANDRO SANCHEZ, SENADOR RODRIGUEZ, VICTOR MOLINAR, DANILO CANLOBO, RESTING CARAAN, IGNACIO VERGARA, HANDO MERCADO, FAUSTINO MAILOM, CONRADO BARRIENTOS, RENATO VISAYA, DANTE BATHAN, SERAPIO NATIVIDAD, HONESTO TENORIO, NESTOR MERCADO, BIENVENIDO OLFATO, RENE LIRAZAN, RUDY CANLOBO, BASIOLIO MULINGTAPANG, ITO GONZALES, RENATO RINO, TINOY MABAGA, PACIO PADILLA, JOHNNY REAMILLO, ROLANDO CARINGAL, IGNOY VILLAMAYOR, ROMEO TANTENGCO, LODRING CARAAN, FREDO MERCADO, TOMMY MENDOZA, RAFAEL ONTE, REY MANAIG, DICK GASPAR, ANTONIO MALLARI, ALFREDO ANIEL, BARIT, ALBERTO MANGUE, AGATON LUCIDO, ONYONG CANTAL, BAYANI LACSON, ISKO CABILION, MANGUIAT, IGME OPINA, VILARETE, PEDRO BENEDICTO, HECTOR BICO, RUFO SANCHEZ, LARRY DE LEON, BARIVAR SAMSON and ROMEO NAVARRO, Respondents. DECISION AUSTRIA-MARTINEZ, J.: By virtue of the En Banc Resolution issued on January 13, 2004, the Court authorized the Special First Division to suspend the Rules so as to allow it to consider and resolve the second Motion for Reconsideration of respondents,1after the motion was heard on oral arguments on August 13, 2003. On July 9, 2004,2 the Court resolved to submit for resolution the second Motion for Reconsideration in G.R. No. 112526 together with G.R. No. 118338 in view of the Resolution of the Court dated January 15, 2001 issued in G.R. No. 118838,3 consolidating the latter case with G.R. No. 112526, the issues therein being interrelated.4 Hence, the herein Amended Decision. The factual background of the two cases is as follows: The Canlubang Estate in Laguna is a vast landholding previously titled in the name of the late Speaker and Chief Justice Jose Yulo, Sr. Within this estate are two parcels of land (hereinafter

referred to as the "subject property") covered by TCT Nos. 81949 and 84891 measuring 254.766 hectares and part of Barangay Casile, subsequently titled in the name of Sta. Rosa Realty Development Corporation (SRRDC), the majority stockholder of which is C.J. Yulo and Sons, Inc. The subject property was involved in civil suits and administrative proceedings that led to the filing of G.R. Nos. 112526 and 118838, thus: Injunction Case Filed by Amante, et al. On December 6, 1985, Amante, et al., who are the private respondents in G.R. No. 112526 and petitioners in G.R. No. 118838, instituted an action for injunction with damages in the Regional Trial Court of Laguna (Branch 24) against Luis Yulo, SRRDC, and several SRRDC security personnel, docketed as Civil Case No. B-2333. Amante, et al. alleged that: they are residents of Barangay Casile, Cabuyao, Laguna, which covers an area of around 300 hectares; in 1910, their ancestors started occupying the area, built their houses and planted fruit-bearing trees thereon, and since then, have been peacefully occupying the land; some time in June 3, 1985, SRRDC’s security people illegally entered Bgy. Casile and fenced the area; SRRDC’s men also entered the barangay on November 4, 1985, cut down the trees, burned their huts, and barred the lone jeepney from entering the Canlubang Sugar Estate; as a result of these acts, Amante, et al. were deprived of possession and cultivation of their lands. Thus, they claimed damages, sought the issuance of permanent injunction and proposed that a right of way be declared. 5 In their Answer, the defendants denied the allegations and disclaimed any control and supervision over its security personnel. Defendant SRRDC also alleged that as the real owner of the property, it was the one that suffered damages due to the encroachment on the property. 6 A writ of preliminary injunction was issued by the trial court on August 17, 1987, 7 but this was subsequently dissolved by the Court of Appeals (CA) on April 22, 1988 in its decision in CA-G.R. SP No. 13908.8 After trial on the merits, the trial court, on January 20, 1992, rendered a decision ordering Amante, et al. to vacate the property, the dispositive portion of which reads: WHEREFORE, premises considered, judgment is hereby rendered in favor of the defendants and against the plaintiffs hereby dismissing the complaint and amended complaint. The plaintiffs are hereby ordered to vacate the parcels of land belonging to the defendants Luis Yulo and Sta. Rosa Realty. They are likewise enjoined from entering the subject parcels of land. Although attorney’s fees and expenses of litigation are recoverable in case of a clearly unfounded civil action against the plaintiff (Enervida vs. De la Torre, 55 SCRA 339), this Court resolves not to award attorney’s fees etc. in favor of the defendants because the plaintiffs appear to have acted in good faith in filing the present civil action (Salao vs. Salao, 70 SCRA 65) and that it would not be just and equitable to award the same in the case at bar. (Liwanag vs. Court of Appeals, 121 SCRA 354) Accordingly, the other reliefs prayed for by the defendants are hereby dismissed. SO ORDERED.9 Amante, et al. appealed the aforesaid decision to the CA, docketed as CA-G.R. CV No. 38182.

On June 28, 1994, the CA affirmed with modification the decision of the trial court in the injunction case. The dispositive portion of the appellate court’s decision 10 reads as follows: WHEREFORE, the judgment herein appealed from is hereby AFFIRMED, with the modification that the defendants-appellees are hereby ordered, jointly and severally, to pay the plaintiffs-appellants nominal damages in the amount of P5,000.00 per plaintiff. No pronouncement as to costs. SO ORDERED.11 Nominal damages were awarded by the CA because it found that SRRDC violated Amante, et al.’s rights as possessors of the subject property.12 Amante, et al. filed a motion for reconsideration thereof, pointing out the DARAB’s decision placing the property under compulsory acquisition, and the CA decision in CA-G.R. SP No. 27234, affirming the same.13 The CA, however, denied the motion, with the modification that only SRRDC and the defendants-security guards should be held jointly and severally liable for the nominal damages awarded. It also made the clarification that the decision should not preempt any judgment or prejudice the right of any party in the agrarian reform case pending before the Supreme Court (G.R. No. 112526).14 Thus, Amante, et al. filed on March 2, 1995, herein petition, docketed as G.R. No. 118838 on the following grounds: 4.1. The Court of Appeals decided the case contrary to law or applicable Supreme Court decisions because: 4.1.1 First, petitioners may not be lawfully evicted from their landholdings considering that: -- (a) Petitioners are already the registered owners under the torrens system of the properties in question since February 26, 1992 by virtue of RA 6657 or the Comprehensive Agrarian Reform Law; -- (b) The Court of Appeals has affirmed the Regional Trial Court of Laguna’s dismissal of the ejectment cases filed by respondent SRRDC against petitionerS; and -- (c) Assuming for the sake of argument only that petitioners are not yet the registered owners of the properties in question, respondents may not raise the issue of ownership in this case for injunction with damages, the same to be ventilated in a separate action, not in this case brought to prevent respondents from committing further acts of dispossession [Bacar v. del Rosario et al., 171 SCRA 451 (1989)]. 4.1.2 Second, petitioners are entitled to moral, exemplary damages and attorney’s fees, instead of mere nominal damages, considering that the Court of Appeals found respondents to have unlawfully and illegally disturbed petitioners’ peaceful and continuous possession. 15 Ejectment Cases Filed by SRRDC Between October 1986 and August 1987, after the injunction case was filed by Amante, et al., SRRDC filed with the Municipal Trial Court (MTC) of Cabuyao, Laguna, several complaints for

forcible entry with preliminary injunction and damages against Amante, et al., docketed as Civil Cases Nos. 250, 258, 260, 262 and 266. SRRDC alleged that some time in July 1987, they learned that Amante, et al., without their authority and through stealth and strategy, were clearing, cultivating and planting on the subject property; and that despite requests from SRRDC’s counsel, Amante, et al. refused to vacate the property, prompting them to file the ejectment cases. 16 Amante, et al. denied that SRRDC are the absolute owners of the property, stating that they have been in peaceful possession thereof, through their predecessors-in-interest, since 1910. 17 On May 24, 1991, the MTC-Cabuyao rendered its decision in favor of SRRDC. Amante, et al. were ordered to surrender possession and vacate the subject property. The decision was appealed to the Regional Trial Court of Biñan, Laguna (Assisting Court). On February 18, 1992, the RTC dismissed the ejectment cases on the ground that the subject property is an agricultural land being tilled by Amante, et al., hence it is the Department of Agrarian Reform (DAR), which has jurisdiction over the dispute. 18 The RTC’s dismissal of the complaints was brought to the CA via a petition for review, docketed as CA-G.R. SP No. 33382.19 In turn, the CA dismissed the petition per its Decision dated January 17, 1995 on the ground that SRRDC failed to show any prior physical possession of the subject property that would have justified the filing of the ejectment cases.20 Also, the CA did not sustain the RTC’s finding that the subject properties are agricultural lands and Amante, et al. are tenant/farmers thereof, as the evidence on record does not support such finding. The parties did not file any motion for reconsideration from the Court of Appeals’ dismissal, hence, it became final and executory.21 Administrative Proceedings While the injunction and ejectment cases were still in process, it appears that in August, 1989, the Municipal Agrarian Reform Office (MARO) issued a Notice of Coverage to SRRDC, informing petitioners that the property covered by TCT Nos. T-81949, T-84891 and T-92014 is scheduled for compulsory acquisition under the Comprehensive Agrarian Reform Program (CARP). 22 SRRDC filed its "Protest and Objection" with the MARO on the grounds that the area was not appropriate for agricultural purposes, as it was rugged in terrain with slopes of 18% and above, and that the occupants of the land were squatters, who were not entitled to any land as beneficiaries.23 Thereafter, as narrated in the Decision of the Court dated October 12, 2001 in G.R. No. 112526, the following proceedings ensued: On August 29, 1989, the farmer beneficiaries together with the BARC chairman answered the protest and objection stating that the slope of the land is not 18% but only 5-10% and that the land is suitable and economically viable for agricultural purposes, as evidenced by the Certification of the Department of Agriculture, municipality of Cabuyao, Laguna. On September 8, 1989, MARO Belen dela Torre made a summary investigation report and forwarded the Compulsory Acquisition Folder Indorsement (CAFI) to the Provincial Agrarian Reform Officer (hereafter, PARO). On September 21, 1989, PARO Durante Ubeda forwarded his endorsement of the compulsory acquisition to the Secretary of Agrarian Reform. On November 23, 1989, Acting Director Eduardo C. Visperas of the Bureau of Land Acquisition and Development, DAR forwarded two (2) Compulsory Acquisition Claim Folders covering the landholding of SRRDC, covered by TCT Nos. T-81949 and T-84891 to the President, Land Bank of the Philippines for further review and evaluation.

On December 12, 1989, Secretary of Agrarian Reform Miriam Defensor Santiago sent two (2) notices of acquisition to petitioner, stating that petitioner’s landholdings covered by TCT Nos. T-81949 and T-84891, containing an area of 188.2858 and 58.5800 hectares, valued at P4,417,735.65 and P1,220,229.93, respectively, had been placed under the Comprehensive Agrarian Reform Program. On February 6, 1990, petitioner SRRDC in two letters separately addressed to Secretary Florencio B. Abad and the Director, Bureau of Land Acquisition and Distribution, sent its formal protest, protesting not only the amount of compensation offered by DAR for the property but also the two (2) notices of acquisition. On March 17, 1990, Secretary Abad referred the case to the DARAB for summary proceedings to determine just compensation under R.A. No. 6657, Section 16. On March 23, 1990, the LBP returned the two (2) claim folders previously referred for review and evaluation to the Director of BLAD mentioning its inability to value the SRRDC landholding due to some deficiencies. On March 28, 1990, Executive Director Emmanuel S. Galvez wrote the Land Bank President Deogracias Vistan to forward the two (2) claim folders involving the property of SRRDC to the DARAB for it to conduct summary proceedings to determine the just compensation for the land. On April 6, 1990, petitioner sent a letter to the Land Bank of the Philippines stating that its property under the aforesaid land titles were exempt from CARP coverage because they had been classified as watershed area and were the subject of a pending petition for land conversion. On May 10, 1990, Director Narciso Villapando of BLAD turned over the two (2) claim folders (CACF’s) to the Executive Director of the DAR Adjudication Board for proper administrative valuation. Acting on the CACF’s, on September 10, 1990, the Board promulgated a resolution asking the office of the Secretary of Agrarian Reform (DAR) to first resolve two (2) issues before it proceeds with the summary land valuation proceedings. The issues that need to be threshed out were as follows: (1) whether the subject parcels of land fall within the coverage of the Compulsory Acquisition Program of the CARP; and (2) whether the petition for land conversion of the parcels of land may be granted. On December 7, 1990, the Office of the Secretary, DAR, through the Undersecretary for Operations (Assistant Secretary for Luzon Operations) and the Regional Director of Region IV, submitted a report answering the two issues raised. According to them, firstly, by virtue of the issuance of the notice of coverage on August 11, 1989, and notice of acquisition on December 12, 1989, the property is covered under compulsory acquisition. Secondly, Administrative Order No. 1, Series of 1990, Section IV D also supports the DAR position on the coverage of the said property. During the consideration of the case by the Board, there was no pending petition for land conversion specifically concerning the parcels of land in question. On February 19, 1991, the Board sent a notice of hearing to all the parties interested, setting the hearing for the administrative valuation of the subject parcels of land on March 6, 1991. However, on February 22, 1991, Atty. Ma. Elena P. Hernandez-Cueva, counsel for SRRDC, wrote the Board requesting for its assistance in the reconstruction of the records of the case

because the records could not be found as her co-counsel, Atty. Ricardo Blancaflor, who originally handled the case for SRRDC and had possession of all the records of the case was on indefinite leave and could not be contacted. The Board granted counsel’s request and moved the hearing on April 4, 1991. On March 18, 1991, SRRDC submitted a petition to the Board for the latter to resolve SRRDC’s petition for exemption from CARP coverage before any administrative valuation of their landholding could be had by the Board. On April 4, 1991, the initial DARAB hearing of the case was held and subsequently, different dates of hearing were set without objection from counsel of SRRDC. During the April 15, 1991 hearing, the subdivision plan of subject property at Casile, Cabuyao, Laguna was submitted and marked as Exhibit "5" for SRRDC. At the hearing on April 23, 1991, the Land Bank asked for a period of one month to value the land in dispute. At the hearing on April 23, 1991, certification from Deputy Zoning Administrator Generoso B. Opina was presented. The certification issued on September 8, 1989, stated that the parcels of land subject of the case were classified as "Industrial Park" per Sangguniang Bayan Resolution No. 45-89 dated March 29, 1989. To avert any opportunity that the DARAB might distribute the lands to the farmer beneficiaries, on April 30, 1991, petitioner filed a petition with DARAB to disqualify private respondents as beneficiaries. However, DARAB refused to address the issue of beneficiaries.24 ... On December 19, 1991, the DARAB promulgated a decision, affirming the dismissal of the protest of SRRDC against the compulsory coverage of the property covered by TCT Nos. 81949 and 84891. The decretal portion of the decision reads: WHEREFORE, based on the foregoing premises, the Board hereby orders: 1. The dismissal for lack of merit of the protest against the compulsory coverage of the landholdings of Sta. Rosa Realty Development Corporation (Transfer Certificates of Title Nos. 81949 and 84891 with an area of 254.766 hectares) in Barangay Casile, Municipality of Cabuyao, Province of Laguna under the Comprehensive Agrarian Reform Program is hereby affirmed; 2. The Land Bank of the Philippines (LBP) to pay Sta. Rosa Realty Development Corporation the amount of Seven Million Eight Hundred Forty-One Thousand, Nine Hundred Ninety Seven Pesos and Sixty-Four centavos (P7,841,997.64) for its landholdings covered by the two (2) Transfer Certificates of Title mentioned above. Should there be a rejection of the payment tendered, to open, if none has yet been made, a trust account for said amount in the name of Sta. Rosa Realty Development Corporation; 3. The Register of Deeds of the Province of Laguna to cancel with dispatch Transfer Certificate of Title Nos. 84891 and 81949 and new one be issued in the name of the Republic of the Philippines, free from liens and encumbrances;

4. The Department of Environment and Natural Resources either through its Provincial Office in Laguna or the Regional Office, Region IV, to conduct a final segregation survey on the lands covered by Transfer Certificate of Title Nos. 84891 and 81949 so the same can be transferred by the Register of Deeds to the name of the Republic of the Philippines; 5. The Regional Office of the Department of Agrarian Reform through its Municipal and Provincial Agrarian Reform Office to take immediate possession on the said landholding after Title shall have been transferred to the name of the Republic of the Philippines, and distribute the same to the immediate issuance of Emancipation Patents to the farmerbeneficiaries as determined by the Municipal Agrarian Reform Office of Cabuyao, Laguna. 25 On July 11, 1991, DAR Secretary Benjamin T. Leong issued a memorandum directing the Land Bank of the Philippines (LBP) to open a trust account in favor of SRRDC, for P5,637,965.55, as valuation for the SRRDC property. The titles in the name of SRRDC were cancelled and corresponding TCTs were issued in the name of the Republic of the Philippines on February 11, 1992,26 after which Certificates of Land Ownership Award (CLOA) were issued in the name of the farmers-beneficiaries on February 26, 1992.27 In the meantime, SRRDC had filed with the CA a petition for review of the DARAB’s decision, docketed as CA-G.R. SP No. 27234. On November 5, 1993, the CA affirmed the decision of DARAB, to wit: WHEREFORE, premises considered, the DARAB decision dated December 19, 1991 is AFFIRMED, without prejudice to petitioner Sta. Rosa Realty Development Corporation ventilating its case with the Special Agrarian Court on the issue of just compensation. 28 Hence, SRRDC filed on November 24, 1993, herein petition, docketed as G.R. No. 112526 on the following grounds: I THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF ITS JURISDICTION IN RULING THAT THE SRRDC PROPERTIES, DESPITE THE UNDISPUTED FACT OF THEIR NONAGRICULTURAL CLASSIFICATION PRIOR TO RA 6657, ARE COVERED BY THE CARP CONTRARY TO THE NATALIA REALTY DECISION OF THIS HONORABLE COURT. i. The SRRDC properties have been zoned and approved as ‘PARK’ since 1979. ii. The SRRDC properties form part of a watershed area. II THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF ITS JURISDICTION IN DISREGARDING ECOLOGICAL CONSIDERATIONS AS MANDATED BY LAW. III

THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF ITS JURISDICTION IN AFFIRMING THE DISTRIBUTION OF THE SRRDC PROPERTIES TO PRIVATE RESPONDENTS WHO HAVE BEEN JUDICIALLY DECLARED AS SQUATTERS AND THEREFORE ARE NOT QUALIFIED BENEFICIARIES PURSUANT TO THE CENTRAL MINDANAO UNIVERSITY DECISION OF THIS HONORABLE COURT. i. The acquisition of the SRRDC properties cannot be valid for future beneficiaries. ii. Section 22 of RA 6657 insofar as it expands the coverage of the CARP to ‘landless residents’ is unconstitutional. IV THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF ITS JURISDICTION IN HOLDING THAT THE DARAB HAS JURISDICTION TO PASS UPON THE ISSUE OF WHETHER THE SRRDC PROPERTIES ARE SUBJECT TO CARP COVERAGE.29 On October 12, 2001, the Court rendered its Decision in G.R. No. 112526 only, setting aside the decision of the CA in CA-G.R. SP No. 27234 and ordering the remand of the case to the DARAB for re-evaluation and determination of the nature of the land. The dispositive portion of the Decision reads as follows: IN VIEW WHEREOF, the Court SETS ASIDE the decision of the Court of Appeals in CA-G.R. SP No. 27234. In lieu thereof, the Court REMANDS the case to the DARAB for re-evaluation and determination of the nature of the parcels of land involved to resolve the issue of its coverage by the Comprehensive Land Reform Program. In the meantime, the effects of the CLOAs issued by the DAR to supposed farmer beneficiaries shall continue to be stayed by the temporary restraining order issued on December 15, 1993, which shall remain in effect until final decision on the case. No costs. SO ORDERED.30 It is the opinion of the Court in G.R. No. 112526, that the property is part of a watershed, and that during the hearing at the DARAB, "there was proof that the land may be excluded from the coverage of the CARP because of its high slopes."31 Thus, the Court concluded that a remand of the case to the DARAB for re-evaluation of the issue of coverage is appropriate in order to resolve the true nature of the subject property.32 In their Memorandum, Amante, et al. argues that there exist compelling reasons to grant the second motion for reconsideration of the assailed decision of the Court, to wit: 2.1 Only QUESTIONS OF LAW are admittedly and undeniably at issue; yet the Honorable Court reviewed the findings of facts of the Court of Appeals and the DARAB although the case does not fall into any of the well-recognized exceptions to conduct a factual review.

Worse, the 12 October 2001 Decision assumed facts not proven before any administrative, quasi-judicial or judicial bodies; 2.2 The DARAB and the Court of Appeals already found the land to be CARPable; yet the Honorable Court remanded the case to DARAB to re-evaluate if the land is CARPable; 2.3 The Decision did not express clearly and distinctly the facts and the law on which it is based; 2.4 The Decision renewed the Temporary Restraining Order issued on 15 December 1993, issuance of which is barred by Sec. 55 of R.A. 6657; and 2.5 This Honorable Court denied private respondents’ Motion for Reconsideration although issues raised therein were never passed upon in the 12 October 2001 Decision or elsewhere.33 The DAR and the DARAB, through the Office of the Solicitor General, did not interpose any objection to the second motion for reconsideration. It also maintained that if SRRDC’s claim that the property is watershed is true, then it is the DENR that should exercise control and supervision in the disposition, utilization, management, renewal and conservation of the property. 34 SRRDC meanwhile insists that there are no compelling reasons to give due course to the second motion for reconsideration.35 At the outset, the Court notes that petitioner designated its petition in G.R. No. 112526 as one for review on certiorari of the decision of the CA. In the same breath, it likewise averred that it was also being filed as a special civil action for certiorari as public respondents committed grave abuse of discretion.36 Petitioner should not have been allowed, in the first place, to pursue such remedies simultaneously as these are mutually exclusive. 37 It is SRRDC’s claim that the CA committed grave abuse of discretion in holding that the subject property is agricultural in nature. In support of its contention, it argued, among others, that the subject property had already been classified as "park" since 1979 under the Zoning Ordinance of Cabuyao, as approved by the Housing and Land Use Regulatory Board (HLURB); that it forms part of a watershed; and that the CA disregarded ecological considerations. 38 SRRDC also claimed that Amante, et al. are not qualified beneficiaries.39 Clearly, these issues are factual in nature, which the Court, as a rule, should not have considered in this case. However, there are recognized exceptions, e.g., when the factual inferences of the appellate court are manifestly mistaken; the judgment is based on a misapprehension of facts; or the CA manifestly overlooked certain relevant and undisputed facts that, if properly considered, would justify a different legal conclusion.40 The present cases fall under the above exceptions. Thus, in order to finally set these cases to rest, the Court shall resolve the substantive matters raised, which in effect comes down to the issue of the validity of the acquisition of the subject property by the Government under Republic Act (R.A.) No. 6657, or the Comprehensive Agrarian Reform Law of 1988 (CARL). As noted earlier, the DARAB made its finding regarding the nature of the property in question, i.e., the parcels of land are agricultural and may be the subject of compulsory acquisition for distribution to farmer-beneficiaries, thus:

Ocular inspections conducted by the Board show that the subject landholdings have been under the possession and tillage of the DAR identified potential beneficiaries which they inherited from their forebears (workers of the Yulo Estate). They are bonafide residents and registered voters (DARAB Exhibits "C" and "J") of Barangay Casile, Cabuyao, Laguna. There is a barangay road leading toward the barangay school and sites and the settlement has a barangay hall, church, elementary school buildings (DARAB Exhibit "Q"), Comelec precincts (DARAB Exhibits "J-1" and J-2"), and other structures extant in progressive communities. The barangay progressive development agencies, like the DECS, DA, COMELEC, DAR and Support Services of Land Bank, DPWH, DTI and the Cooperative Development Authority have extended support services to the community (DARAB Exhibits "I", "K" to "K-3", "L", "M", "N", "O", "P" to "P-6"). More importantly, subject landholdings are suitable for agriculture. Their topography is flat to undulating 3-15% slope. (Testimony of Rosalina Jumaquio, Agricultural Engineer, DAR, TSN, June 21, 1991, DARAB Exhibits "F" and "H"). Though some portions are over 18% slope, nevertheless, clearly visible thereat are fruit-bearing trees, like coconut, coffee, and pineapple plantations, etc. (see Petitioners Exhibits "A" to "YYY" and DARAB Exhibits "A" to "S", Records). In other words, they are already productive and fully developed. ... As the landholdings of SRRDC subject of the instant proceedings are already developed not only as a community but also as an agricultural farm capable of sustaining daily existence and growth, We find no infirmity in placing said parcels of land under compulsory coverage. They do not belong to the exempt class of lands. The claim that the landholding of SRRDC is a watershed; hence, belonging to the exempt class of lands is literally "throwing punches at the moon" because the DENR certified that "the only declared watershed in Laguna Province and San Pablo City is the Caliraya-Lumot Rivers (Petitioner’s Exhibit "A"). A sensu contrario, the landholdings subject herein are not.41 (Emphasis supplied) The evidence on record supports these findings, to wit: 1. Certification dated January 16, 1989 by the OIC Provincial Environment and Natural Resources Office of Laguna that the only declared watershed in the Laguna province and San Pablo City is the Caliraya-Lumot Rivers No. 1570 dated September 1, 1976; 42 2. Map prepared by Agricultural Engineer Rosalina H. Jumaquio showing that: a) the topography of the property covered by TCT No. T-84891 topography is flat to undulating with a 5 to 10% slope; (b) it is suitable to agricultural crops; and (c) the land is presently planted with diversified crops;43 3. Certification dated August 28, 1989 by APT Felicito Buban of the Department of Agriculture of Laguna that, per his ocular inspection, the subject property is an agricultural area, and that the inhabitants’ main occupation is farming; 44 4. Pictures taken by MARO Belen La Torre of Cabuyao, Laguna, showing that the property is cultivated and inhabited by the farmer-beneficiaries; 45 SRRDC however, insists that the property has already been classified as a "municipal park" and beyond the scope of CARP. To prove this, SRRDC submitted the following:

1. Certification dated March 1, 1991 by the Municipality of Cabuyao, Laguna that the entire barangay of Casile is delineated as Municipal Park;46 2. Certification dated March 11, 1991 by the Housing and Land Use Regulatory Board that the parcels of land located in Barangay Casile are within the Municipal Park, based on the municipality’s approved General Land Use Plan ratified by the Housing and Land Use Regulatory Board as per Resolution No. 38-2 dated June 25, 1980; 47 3. Photocopies of pictures taken by Mr. Ernesto Garcia, Officer-in-Charge of the Special Project Section of CJ Yulo and Sons, Inc., of portions of Barangay Casile; 48 The Court recognizes the power of a local government to reclassify and convert lands through local ordinance, especially if said ordinance is approved by the HLURB.49 Municipal Ordinance No. 110-54 dated November 3, 1979, enacted by the Municipality of Cabuyao, divided the municipality into residential, commercial, industrial, agricultural and institutional districts, and districts and parks for open spaces.50 It did not convert, however, existing agricultural lands into residential, commercial, industrial, or institutional. While it classified Barangay Casile into a municipal park, as shown in its permitted uses of land map, the ordinance did not provide for the retroactivity of its classification. In Co vs. Intermediate Appellate Court,51 it was held that an ordinance converting agricultural lands into residential or light industrial should be given prospective application only, and should not change the nature of existing agricultural lands in the area or the legal relationships existing over such lands. Thus, it was stated: A reading of Metro Manila Zoning Ordinance No. 81-01, series of 1981, does not disclose any provision converting existing agricultural lands in the covered area into residential or light industrial. While it declared that after the passage of the measure, the subject area shall be used only for residential or light industrial purposes, it is not provided therein that it shall have retroactive effect so as to discontinue all rights previously acquired over lands located within the zone which are neither residential nor light industrial in nature. This simply means that, if we apply the general rule, as we must, the ordinance should be given prospective operation only. The further implication is that it should not change the nature of existing agricultural lands in the area or the legal relationships existing over such lands …52 (Emphasis supplied) Under Section 3 (c) of R.A. No. 6657, agricultural land is defined as land devoted to agricultural activity and not classified as mineral, forest, residential, commercial or industrial land. Section 3 (b) meanwhile defines agricultural activity as the cultivation of the soil, planting of crops, growing of fruit trees, raising of livestock, poultry or fish, including the harvesting of such products, and other farm activities, and practices performed by a farmer in conjunction with such farming operations done by persons whether natural or juridical. Before Barangay Casile was classified into a municipal park by the local government of Cabuyao, Laguna in November 1979, it was part of a vast property popularly known as the Canlubang Sugar Estate. SRRDC claimed that in May 1979, "the late Miguel Yulo … allowed the employees of the Yulo group of companies to cultivate a maximum area of one hectare each subject to the condition that they should not plant crops being grown by the Canlubang Sugar Estate, like coconuts and coffee, to avoid confusion as to ownership of crops."53 The consolidation and subdivision plan surveyed for SRRDC on March 10-15, 198454 also show that the subject property is sugar land. Evidently, the subject property is already agricultural at the time the municipality of Cabuyao enacted the zoning ordinance, and such ordinance should not affect the nature of the land. More so since the municipality of Cabuyao did not even take any step to utilize the property as a park.

SRRDC cites the case of Natalia Realty, Inc. vs. DAR,55 wherein it was ruled that lands not devoted to agricultural activity and not classified as mineral or forest by the DENR and its predecessor agencies, and not classified in town plans and zoning ordinances as approved by the HLURB and its preceding competent authorities prior to the enactment of R.A. No. 6657 on June 15, 1988, are outside the coverage of the CARP. Said ruling, however, finds no application in the present case. As previously stated, Municipal Ordinance No. 110-54 of the Municipality of Cabuyao did not provide for any retroactive application nor did it convert existing agricultural lands into residential, commercial, industrial, or institutional. Consequently, the subject property remains agricultural in nature and therefore within the coverage of the CARP. Only on March 9, 2004, SRRDC filed with the Court a Manifestation pointing out DAR Order No. (E)4-03-507-309 dated February 17, 2004, exempting from CARP coverage two parcels of land owned by SRRDC and covered by TCT Nos. T-85573 and T-92014.56 The DAR found that these properties have been re-classified into Municipal Parks by the Municipal Ordinance of Cabuyao, Laguna, and are part of the Kabangaan-Casile watershed, as certified by the DENR. 57 The Court notes however that the said DAR Order has absolutely no bearing on these cases. The herein subject property is covered by TCT Nos. 81949 and 34891, totally different, although adjacent, from the property referred to in said DAR Order. SRRDC also contends that the property has an 18% slope and over and therefore exempt from acquisition and distribution under Section 10 of R.A. No. 6657. What SRRDC opted to ignore is that Section 10, as implemented by DAR Administrative Order No. 13 dated August 30, 1990, also provides that those with 18% slope and over but already developed for agricultural purposes as of June 15, 1988, may be allocated to qualified occupants.58Hence, even assuming that the property has an 18% slope and above, since it is already developed for agricultural purposes, then it cannot be exempt from acquisition and distribution. Moreover, the topography maps prepared by Agricultural Engineer Rosalina H. Jumaquio show that the property to be acquired has a 5-10% flat to undulating scope;59 that it is suitable to agricultural crops;60 and it is in fact already planted with diversified crops.61 Also, the Certification dated July 1, 1991 by Geodetic Engineer Conrado R. Rigor that the top portion of Barangay Casile has a 0 to 18% slope while the side of the hill has a 19 to 75% slope, 62 was presented by SRRDC only during the proceedings before the CA which had no probative value in a petition for review proceedings. The Court notes that SRRDC had been given ample time and opportunity by the DARAB to prove the grounds for its protest and objection but miserably failed to take advantage of such time and opportunity63 in the DARAB proceedings. SRRDC also contends that the property is part of a watershed, citing as evidence, the Certification dated June 26, 1991 by the Laguna Lake Development Authority that Barangay Casile is part of the watershed area of the Laguna Lake Basin,64 and the Final Report for Watershed Area Assessment Study for the Canlubang Estate dated July 1991 undertaken by the Engineering & Development Corporation of the Philippines.65 It must be noted, however, that these pieces of evidence were likewise brought to record only when petitioner filed its petition for review with the CA. The DARAB never had the opportunity to assess these pieces of evidence. The DARAB stated: Noting the absence of evidence which, in the nature of things, should have been submitted by landowner SRRDC and to avoid any claim of deprivation of its right to prove its claim to just compensation (Uy v. Genato, 57 SCRA 123). We practically directed its counsel in not only one instance, during the series of hearings conducted, to do so. We even granted

continuances to give it enough time to prepare and be ready with the proof and documents. To Our dismay, none was submitted and this constrained Us to take the failure/refusal of SRRDC to present evidence as a waiver or, at least, an implied acceptance of the valuation made by the DAR.66 The same goes with the CA, which did not have the discretion to consider evidence in a petition for certiorari or petition for review on certiorari outside than that submitted before the DARAB. The CA noted petitioner’s failure to present evidence in behalf of its arguments, thus: . . . It must be recalled that petitioner Sta. Rosa Realty itself had asked the DARAB in a petition dated March 18, 1991 to allow it ‘to adduce evidence in support of its position that the subject parcels of land are not covered by the CARP beginning on the scheduled hearing dated April 4, 1991.’ And DARAB obliged as in fact the petitioner commenced to introduce evidence. If petitioner failed to complete the presentation of evidence to support its claim of exemption from CARP coverage, it has only itself to blame for which DARAB cannot be accused of not being impartial.67 Consequently, there is no need to order the remand of the case to the DARAB "for re-evaluation and determination of the nature of the parcels of land involved." It runs contrary to orderly administration of justice and would give petitioner undue opportunity to present evidence in support of its stance, an opportunity it already had during the DARAB proceedings, and which opportunity it regrettably failed to take advantage of. More significantly however, it is the DAR Secretary that originally declared the subject property as falling under the coverage of the CARP. Moreover, DAR Administrative Order No. 13, Series of 1990 (Rules and Procedure Governing Exemption of Lands from CARP Coverage under Section 10, R.A. No. 6657) provides: I. LEGAL MANDATE The general policy under CARP is to cover as much lands suitable for agriculture as possible. However, Section 10, RA 6657 excludes and exempts certain types of lands from the coverage of CARP, to wit: A. Lands actually, directly and exclusively used and found to be necessary for parks, wildlife, forest reserves, reforestation, fish sanctuaries and breeding grounds, watersheds and mangroves, national defense, school sites and campuses including experimental farm stations operated by public or private schools for educational purposes, seeds and seedlings research and pilot production centers, church sites and convents appurtenant thereto, mosque sites and Islamic centers appurtenant thereof, communal burial grounds and cemeteries, penal colonies and penal farms actually worked by the inmates, government and private research and quarantine centers; and ... II. POLICIES In the application of the aforecited provision of law, the following guidelines shall be observed:

A. For an area in I.A to be exempted from CARP coverage, it must be "actually, directly and exclusively used and found to be necessary" for the purpose so stated. ... C. Lands which have been classified or proclaimed, and/or actually directly and exclusively used and found to be necessary for parks, wildlife, forest reserves, fish sanctuaries and breeding grounds, and watersheds and mangroves shall be exempted from the coverage of CARP until Congress, taking into account ecological, developmental and equity considerations, shall have determined by law, the specific limits of public domain, as provided for under Sec. 4(a) of RA 6657, and a reclassification of the said areas or portions thereof as alienable and disposable has been approved. (Emphasis supplied) In order to be exempt from coverage, the land must have been classified or proclaimed and actually, directly and exclusively used and found to be necessary for watershed purposes.68 In this case, at the time the DAR issued the Notices of Coverage up to the time the DARAB rendered its decision on the dispute, the subject property is yet to be officially classified or proclaimed as a watershed and has in fact long been used for agricultural purposes. SRRDC relies on the case of Central Mindanao University (CMU) vs. DARAB,69 wherein the Court ruled that CMU is in the best position to determine what property is found necessary for its use. SRRDC claims that it is in the best position to determine whether its properties are "necessary" for development as park and watershed area. 70 But SRRDC’s reliance on the CMU case is flawed. In the CMU case, the subject property from the very beginning was not alienable and disposable because Proclamation No. 476 issued by the late President Carlos P. Garcia already reserved the property for the use of the school. Besides, the subject property in the CMU case was actually, directly and exclusively used and found to be necessary for educational purposes. In the present case, the property is agricultural and was not actually and exclusively used for watershed purposes. As records show, the subject property was first utilized for the purposes of the Canlubang Sugar Estate.71 Later, petitioner claimed that the occupants were allowed to cultivate the area so long as they do not plant crops being grown by the Canlubang Sugar Estate in order to avoid confusion as to ownership thereof.72 Thus, based on its own assertions, it appears that it had benefited from the fruits of the land as agricultural land. Now, in a complete turnaround, it is claiming that the property is part of a watershed. Furthermore, in a belated attempt to prove that the subject property is part of a watershed that must be environmentally protected, SRRDC submitted before the Court a Final Report dated February 1994 undertaken by the Ecosystems Research and Development Bureau (ERDB) of the DENR entitled, "Environmental Assessment of the Casile and Kabanga-an River Watersheds." 73 The study, according to SRRDC, was made pursuant to a handwritten instruction issued by then President Fidel V. Ramos. The study noted that, "the continuing threat of widespread deforestation and unwise land use practices have resulted in the deteriorating condition of the watersheds." 74 But the Court also notes the Memorandum for the President dated September 1993 by then DENR Secretary Angel C. Alcala that, after a field inspection conducted by the DENR’s Regional Executive Director and the Provincial and Community Natural Resource Officers, it was found that: ... 2. Many bankal trees were found growing in the watershed/CARP areas, including some which have been coppiced, and that water conduits for domestic and industrial uses were found installed at the watershed area claimed by the Yulos. Records further show that in the

1970s, a Private Land Timber Permit was issued to Canlubang Sugar Estate thru its marketing arm, the Sta. Rosa Realty Devpt. Corp. 3. Resident farmers denied that they have been cutting bankal trees and volunteered the information that one of the Estates’ security guards was dismissed for cutting and transporting bankal trees. The trees cut by the dismissed security guard were found stacked adjacent to the Canlubang Security Agency’s headquarters.75 Evidently, SRRDC had a hand in the degradation of the area, and now wants to put the entire blame on the farmer-beneficiaries. It is reasonable to conclude that SRRDC is merely using "ecological considerations" to avert any disposition of the property adverse to it. SRRDC also objects to the identification of Amante, et al. as beneficiaries of the subject property. Suffice it to say that under Section 15 of R.A. No. 6657, the identification of beneficiaries is a matter involving strictly the administrative implementation of the CARP, a matter which is exclusively vested in the Secretary of Agrarian Reform, through its authorized offices. Section 15 reads: SECTION 15. Registration of Beneficiaries. — The DAR in coordination with the Barangay Agrarian Reform Committee (BARC) as organized in this Act, shall register all agricultural lessees, tenants and farmworkers who are qualified to be beneficiaries of the CARP. These potential beneficiaries with the assistance of the BARC and the DAR shall provide the following data: (a) names and members of their immediate farm household; (b) owners or administrators of the lands they work on and the length of tenurial relationship; (c) location and area of the land they work; (d) crops planted; and (e) their share in the harvest or amount of rental paid or wages received. A copy of the registry or list of all potential CARP beneficiaries in the barangay shall be posted in the barangay hall, school or other public buildings in the barangay where it shall be open to inspection by the public at all reasonable hours. Meanwhile, Administrative Order No. 10 (Rules and Procedures Governing the Registration of Beneficiaries), Series of 1989, provides: SUBJECT: I. PREFATORY STATEMENT Pursuant to Section 15, Chapter IV, of the Comprehensive Agrarian Reform Law of 1988, the DAR, in coordination with the Barangay Agrarian Reform Committee (BARC), as organized pursuant to RA 6657, shall register all agricultural lessees, tenants and farmworkers who are qualified beneficiaries of the CARP. This Administrative Order provides the Implementing Rules and Procedures for the said registration. ...

B. Specific 1. Identify the actual and potential farmer-beneficiaries of the CARP. In Lercana vs. Jalandoni,76 the Court categorically stated that: … the identification and selection of CARP beneficiaries are matters involving strictly the administrative implementation of the CARP, a matter exclusively cognizable by the Secretary of the Department of Agrarian Reform, and beyond the jurisdiction of the DARAB. 77 The farmer-beneficiaries have already been identified in this case. Also, the DAR Secretary has already issued Notices of Coverage and Notices of Acquisition pertaining to the subject property. It behooves the courts to exercise great caution in substituting its own determination of the issue, unless there is grave abuse of discretion committed by the administrative agency, 78 which in these cases the Court finds none. SRRDC questions the constitutionality of Section 22 of R.A. No. 6657, which reads in part: SECTION 22. Qualified Beneficiaries. The lands covered by the CARP shall be distributed as much as possible to landless residents of the same barangay, or in the absence thereof, landless residents of the same municipality in the following order of priority. (a) agricultural lessees and share tenants; (b) regular farmworkers; (c) seasonal farmworkers; (d) other farmworkers; (e) actual tillers or occupants of public lands; (f) collectives or cooperatives of the above beneficiaries; and (g) others directly working on the land. ... SRRDC argues that Section 22 "sweepingly declares landless residents as beneficiaries of the CARP (to mean also squatters)," in violation of Article XIII, Section 4 of the Constitution, which aims to benefit only the landless farmers and regular farmworkers.79 The Court cannot entertain such constitutional challenge. The requirements before a litigant can challenge the constitutionality of a law are well-delineated, viz.: (1) The existence of an actual and appropriate case; (2) A personal and substantial interest of the party raising the constitutional question; (3) The exercise of judicial review is pleaded at the earliest opportunity; and

(4) The constitutional question is the lis mota of the case.80 (Emphasis supplied) Earliest opportunity means that the question of unconstitutionality of the act in question should have been immediately raised in the proceedings in the court below, 81 in this case, the DAR Secretary. It must be pointed out that all controversies on the implementation of the CARP fall under the jurisdiction of the DAR, even though they raise questions that are also legal or constitutional in nature.82 The earliest opportunity to raise a constitutional issue is to raise it in the pleadings before a competent court that can resolve the same, such that, "if it is not raised in the pleadings, it cannot be considered at the trial, and, if not considered at the trial, it cannot be considered on appeal."83 Records show that SRRDC raised such constitutional challenge only before this Court despite the fact that it had the opportunity to do so before the DAR Secretary. The DARAB correctly refused to deal on this issue as it is the DAR Secretary who, under the law, has the authority to determine the beneficiaries of the CARP. This Court will not entertain questions on the invalidity of a statute where that issue was not specifically raised, insisted upon, and adequately argued 84 in the DAR. Likewise, the constitutional question raised by SRRDC is not the very lis mota in the present case. Basic is the rule that every law has in its favor the presumption of constitutionality, and to justify its nullification, there must be a clear and unequivocal breach of the Constitution, and not one that is doubtful, speculative or argumentative.85 The controversy at hand is principally anchored on the coverage of the subject property under the CARP, an issue that can be determined without delving into the constitutionality of Section 22 of R.A. No. 6657. While the identification of Amante, et al. as farmer-beneficiaries is a corollary matter, yet, the same may be resolved by the DAR. SRRDC questions the DARAB’s jurisdiction to entertain the question of whether the subject property is subject to CARP coverage. According to SRRDC, such authority is vested with the DAR Secretary who has the exclusive prerogative to resolve matters involving the administrative implementation of the CARP and agrarian laws and regulations.86 There is no question that the power to determine whether a property is subject to CARP coverage lies with the DAR Secretary. Section 50 of R.A. No. 6657 provides that: SEC. 50. Quasi-Judicial Powers of the DAR. - The DAR is hereby vested with primary jurisdiction to determine and adjudicate agrarian reform matters and shall have exclusive original jurisdiction over all matters involving the implementation of agrarian reform, except those falling under the exclusive jurisdiction of the Department of Agriculture (DA) and the Department of Environment and Natural Resources (DENR). ... The DAR’s jurisdiction under Section 50 of R.A. No. 6657 is two-fold. The first is essentially executive and pertains to the enforcement and administration of the laws, carrying them into practical operation and enforcing their due observance, while the second is judicial and involves the determination of rights and obligations of the parties.87 Pursuant to its judicial mandate of achieving a just, expeditious and inexpensive determination of every action or proceeding before it,88 the DAR adopted the DARAB Revised Rules, Rule II (Jurisdiction of the Adjudication Board) of which provides:

SECTION 1. Primary, Original and Appellate Jurisdiction. – The Agrarian Reform Adjudication Board shall have primary jurisdiction, both original and appellate, to determine and adjudicate all agrarian disputes, cases, controversies, and matters or incidents involving the implementation of the Comprehensive Agrarian Reform Program under Republic Act No. 6657, Executive Order Nos. 229, 228 and 129-A, Republic Act No. 3844 as amended by Republic Act No. 6389, Presidential Decree No. 27 and other agrarian laws and their implementing rules and regulations. Specifically, such jurisdiction shall extend over but not be limited to the following: a) Cases involving the rights and obligations of persons engaged in the cultivation and use of agricultural land covered by the Comprehensive Agrarian Reform Program (CARP) and other agrarian laws; b) Cases involving the valuation of land, and determination and payment of just compensation, fixing and collection of lease rentals, disturbance compensation, amortization payments, and similar disputes concerning the functions of the Land Bank; c) Cases involving the annulment or cancellation of orders or decisions of DAR officials other than the Secretary, lease contracts or deeds of sale or their amendments under the administration and disposition of the DAR and LBP; d) Cases arising from, or connected with membership or representation in compact farms, farmers’ cooperatives and other registered farmers’ associations or organizations, related to land covered by the CARP and other agrarian laws; e) Cases involving the sale, alienation, mortgage, foreclosure, pre-emption and redemption of agricultural lands under the coverage of the CARP or other agrarian laws; f) Cases involving the issuance of Certificate of Land Transfer (CLT), Certificate of Land Ownership Award (CLOA) and Emancipation Patent (EP) and the administrative correction thereof; g) And such other agrarian cases, disputes, matters or concerns referred to it by the Secretary of the DAR. Provided, however, that matters involving strictly the administrative implementation of the CARP and other agrarian laws and regulations, shall be the exclusive prerogative of and cognizable by the Secretary of the DAR. (Emphasis supplied) On the other hand, Administrative Order No. 06-00,89 which provides for the Rules of Procedure for Agrarian Law Implementation (ALI) Cases, govern the administrative function of the DAR. Under said Rules of Procedure, the DAR Secretary has exclusive jurisdiction over classification and identification of landholdings for coverage under the CARP, including protests or oppositions thereto and petitions for lifting of coverage. Section 2 of the said Rules specifically provides, inter alia, that: SECTION 2. Cases Covered. - These Rules shall govern cases falling within the exclusive jurisdiction of the DAR Secretary which shall include the following:

(a) Classification and identification of landholdings for coverage under the Comprehensive Agrarian Reform Program (CARP), including protests or oppositions thereto and petitions for lifting of coverage; (b) Identification, qualification or disqualification of potential farmer-beneficiaries; (c) Subdivision surveys of lands under CARP; (d) Issuance, recall or cancellation of Certificates of Land Transfer (CLTs) and CARP Beneficiary Certificates (CBCs) in cases outside the purview of Presidential Decree (PD) No. 816, including the issuance, recall or cancellation of Emancipation Patents (EPs) or Certificates of Land Ownership Awards (CLOAs) not yet registered with the Register of Deeds; (e) Exercise of the right of retention by landowner; . . . (Emphasis supplied) Thus, the power to determine whether a property is agricultural and subject to CARP coverage together with the identification, qualification or disqualification of farmer-beneficiaries lies with the DAR Secretary.90 Significantly, the DAR had already determined that the properties are subject to expropriation under the CARP and has distributed the same to the farmer-beneficiaries. Initially, the LBP forwarded the two Compulsory Acquisition Claim Folders (CACF) covering the subject properties to the DARAB for summary proceedings for the sole purpose of determining just compensation. SRRDC then sent a letter to the LBP claiming that the subject properties were exempt from CARP coverage and subject of a pending petition for land conversion. As a consequence, the DARAB asked the DAR Secretary to first resolve the issues raised by SRRDC before it can proceed with the land valuation proceedings. In response, the DAR, through the Undersecretary for Operations and the Regional Director of Region IV, submitted its report stating that: (1) the property is subject to compulsory acquisition by virtue of the Notice of Coverage issued on August 11, 1989, and Notice of Acquisition issued on December 12, 1989, and that it was subject to CARP coverage per Section IV D of DAR Administrative Order No. 1, Series of 1990; and (2) there was no pending petition for land conversion involving the subject property. When SRRDC petitioned the DARAB to resolve the issue of exemption from coverage, it was only then that the DARAB took cognizance of said issue.91 As the DARAB succinctly pointed out, it was SRRDC that initiated and invoked the DARAB’s jurisdiction to pass upon the question of CARP coverage. As stated by the DARAB: 4.5.2.2. The ISSUE ON CARP COVERAGE was initiated and incorporated in said proceeding, at the instance of petitioner itself, by filing a petition dated March 18, 1991, … Prayed therein were that DARAB: 1. Take cognizance and assume jurisdiction over the question of CARP coverage of the subject parcels of land; 2. Defer or hold in abeyance the proceedings for administrative valuation of the subject properties pending determination of the question of CARP coverage;

3. Allow respondent SRRDC to adduce evidence in support of its position that the subject parcels of land are not covered by the CARP beginning on the scheduled hearing date of April 4, 1991" (p.3; emphasis and underscoring supplied). Upon persistent request of petitioner SRRDC, it was accommodated by DARAB and a counsel of SRRDC even took the witness stand. Its lawyers were always in attendance during the scheduled hearings until it was time for SRRDC to present its own evidence. 4.5.2.3. But, as earlier stated, despite the open session proddings by DARAB for SRRDC to submit evidence and the rescheduling for, allegedly, they are still collating the evidence, nay, the request that it be allowed to adduce evidence, none was adduced and this constrained public respondent to declare SRRDC as having waived its right to present evidence. And, after the remaining parties were heard, the hearing was formally terminated. ... 4.5.3. Needless to state, the jurisdictional objection (CARP coverage), now being raised herein was not one of the original matters in issue. Principally, DARAB was called upon under Section 16 of Republic Act No. 6657 to resolve a land valuation case. But SRRDC itself insisted that DARAB should take cognizance thereof in the same land valuation proceeding. And, SRRDC, through its lawyers, actively participated in the hearings conducted. 4.5.4. It was only when an adverse decision was rendered by DARAB that the jurisdictional issue was raised in the petition for review it filed with the Honorable Court of Appeals. It was also only then that petitioner presented proof/evidence. ... 4.5.6. Public respondents (DAR/DARAB) are not unmindful of the rule that matter of jurisdiction may be raised at any stage of the proceeding. But for two serious considerations, the applicability thereof in the case at bar should not be allowed. 4.5.6.1. The fact [part (municipal/industrial) and/or watershed] upon which the jurisdictional issue interchangeably hinges were not established during the hearing of the case. No proof was adduced. That the matter of CARP coverage is strictly administrative implementation of CARP and, therefore, beyond the competence of DARAB, belonging, as it does, to the DAR Secretary, was not even alleged, either before DARAB or the Honorable Court of Appeals, the numerous petitions/incidents filed notwithstanding. Be it that as it may, the records of the case show that initially DARAB refused to take cognizance thereof and, in fact, forwarded the issue of CARP coverage to the office of the DAR Secretary. It was only when it was returned to DARAB by said office that proceedings thereon commenced pursuant to Section 1(g) of Rule II of the DARAB Revised Rules of Procedure. 4.5.6.2. Petitioner is now estopped from assailing the jurisdiction of DARAB. First, it expressly acknowledged the same, in fact invoked it, when it filed its petition (Annex "4"); and, second, during the scheduled hearings, SRRDC, through its counsel, actively participated, one of its counsel (sic) even testifying. It may not now be allowed to impugn the jurisdiction of public respondent …92(Emphasis supplied)

In CA-G.R. SP No. 27234, the CA likewise found that it was SRRDC that called upon the DARAB to determine the issue and it, in fact, actively participated in the proceedings before it. 93 It was SRRDC’s own act of summoning the DARAB’s authority that cured whatever jurisdictional defect it now raises. It is elementary that the active participation of a party in a case pending against him before a court or a quasi-judicial body, is tantamount to a recognition of that court’s or body’s jurisdiction and a willingness to abide by the resolution of the case and will bar said party from later on impugning the court’s or body’s jurisdiction.94 Moreover, the issue of jurisdiction was raised by SRRDC only before the CA. It was never presented or discussed before the DARAB for obvious reasons, i.e., it was SRRDC itself that invoked the latter’s jurisdiction. As a rule, when a party adopts a certain theory, and the case is tried and decided upon that theory in the court below, he will not be permitted to change his theory on appeal. 95 Points of law, theories, issues and arguments not brought to the attention of the lower court need not be, and ordinarily will not be, considered by a reviewing court, as these cannot be raised for the first time at such late stage.96 To permit SRRDC to change its theory on appeal would not only be unfair to Amante, et al. but would also be offensive to the basic scales of fair play, justice and due process. 97 Finally, the Court notes that then DAR Secretary Benjamin T. Leong issued a Memorandum on July 11, 1991, ordering the opening of a trust account in favor of SRRDC. In Land Bank of the Philippines vs. Court of Appeals, this Court struck down as void DAR Administrative Circular No. 9, Series of 1990, providing for the opening of trust accounts in lieu of the deposit in cash or in bonds contemplated in Section 16 (e) of R.A. No. 6657. As a result, the DAR issued Administrative Order No. 2, Series of 1996, converting trust accounts in the name of landowners into deposit accounts.98 Thus, the trust account opened by the LBP per instructions of DAR Secretary Benjamin T. Leong should be converted to a deposit account, to be retroactive in application in order to rectify the error committed by the DAR in opening a trust account and to grant the landowners the benefits concomitant to payment in cash or LBP bonds prior to the ruling of the Court in Land Bank of the Philippines vs. Court of Appeals. The account shall earn a 12% interest per annum from the time the LBP opened a trust account up to the time said account was actually converted into cash and LBP bonds deposit accounts. Given the foregoing conclusions, the petition filed in G.R. No. 118838, which primarily rests on G.R. No. 112526, should be granted. The judgments of the trial court in the injunction case (Civil Case No. B-2333) and the CA in CAG.R. SP No. 38182were premised on SRRDC’s transfer certificates of title over the subject property. The trial court and the CA cannot be faulted for denying the writ of injunction prayed for by Amante, et al. since at the time the trial court rendered its decision in the injunction case on January 20, 1992, SRRDC was still the holder of the titles covering the subject property. The titles in its name were cancelled and corresponding TCTs were issued in the name of the Republic of the Philippines on February 11, 1992, and CLOAs were issued to the farmer-beneficiaries on February 26, 1992. When Amante, et al., in their motion for reconsideration filed in CA-G.R. SP No. 38182, brought to the CA’s attention the issuance of the CLOAs, the CA, per Resolution dated January 19, 1995, reiterated its ruling that "whether or not the subject property is covered by the Comprehensive Agrarian Reform Law (R.A. No. 6657) is the subject matter of a separate case, and we cannot interfere with the same at the present time." The CA further stated that "(O)ur present decision is, therefore, not intended to preempt any judgment or prejudice the right of any party in the said case."99 It must be noted that at that juncture, the DARAB Decision and the CA decision in CA-G.R. SP No. 27234, finding the subject property covered by the CARP Law, is yet to be finally resolved by this Court in G.R. No. 112526and in fact, a temporary restraining order was issued by the Court on December 15, 1993, enjoining the DARAB from enforcing the effects of the CLOAs. Amante, et al.

was likewise restrained from further clearing the subject property.100 Hence, the decision of the trial court and the CA denying the writ of injunction was warranted. Nevertheless, considering that the subject property is agricultural and may be acquired for distribution to farmer-beneficiaries identified by the DAR under the CARP, the transfer certificates of title issued in the name of the Republic of the Philippines and the CLOAs issued by the DAR in the names of Amante, et al.,101 are valid titles and therefore must be upheld. By virtue thereof, Amante, et al. who have been issued CLOAs are now the owners of the subject property. Consequently, the decisions of the trial court in the injunction case and the CA in CA-G.R. SP No. 38182 must now be set aside, insofar as it orders Amante, et al. to vacate and/or enjoins them from entering the subject property. The Court, however, agrees with the CA that Amante, et al. is not entitled to actual, moral and exemplary damages, as well as attorney’s fees. SRRDC’s right of possession over the subject property was predicated on its claim of ownership, and it cannot be sanctioned in exercising its rights or protecting its interests thereon. As was ruled by the CA, Amante, et al. is merely entitled to nominal damages as a result of SRRDC’s acts.102 All is not lost in this case. In its Memorandum dated September 29, 1993, to the DAR Secretary, the DENR manifested that: . . . the farmers themselves could be tapped to undertake watershed management and protection. This community-based approach in natural resource management, is in fact, being used in numerous watershed management projects nationwide. Adopting the same approach in the area is deemed the best possible solution to the case since it will not prejudice the CLOAs issued to the farmer-beneficiaries. They should, however, be required to undertake the necessary reforestation and other watershed management/rehabilitation measures in the area. In view of the foregoing, we recommend that a watershed management plan for the area espousing the community-based approach be drawn-up jointly by the DAR and DENR. . . . 103 If SRRDC sincerely wants to preserve the property for ecological considerations, it can be done regardless of who owns it. After all, we are all stewards of this earth, and it rests on all of us to tend to it. WHEREFORE, the Second Motion for Reconsideration is GRANTED. The Court’s Decision dated October 12, 2001 in G.R. No. 112526 is SET ASIDE and the Decision of the Court of Appeals dated November 5, 1993 in CA-G.R. SP No. 27234 is AFFIRMED with MODIFICATION, in that the Land Bank of the Philippines is ordered to convert the trust account in the name of Sta. Rosa Realty Development Corporation to a deposit account, subject to a 12% interest per annum from the time the LBP opened a trust account up to the time said account was actually converted into cash and LBP bonds deposit accounts. The temporary restraining order issued by the Court on December 15, 1993, is LIFTED. The petition filed by Amante, et al. in G.R. No. 118838 is GRANTED in that Sta. Rosa Realty Development Corporation is hereby ENJOINED from disturbing the peaceful possession of the farmer-beneficiaries with CLOAs. The Decision of the Court of Appeals dated June 28, 1994 in CAG.R. CV No. 38182 is AFFIRMED insofar as the award of nominal damages is concerned.

The Department of Environment and Natural Resources and the Department of Agrarian Reform, in coordination with the farmer-beneficiaries identified by the DAR, are URGED to formulate a community-based watershed plan for the management and rehabilitation of Barangay Casile. SO ORDERED. EN BANC

G.R. No. 127876 December 17, 1999 ROXAS & CO., INC., petitioner, vs. THE HONORABLE COURT OF APPEALS, DEPARTMENT OF AGRARIAN REFORM, SECRETARY OF AGRARIAN REFORM, DAR REGIONAL DIRECTOR FOR REGION IV, MUNICIPAL AGRARIAN REFORM OFFICER OF NASUGBU, BATANGAS and DEPARTMENT OF AGRARIAN REFORM ADJUDICATION BOARD, respondents.

PUNO, J.: This case involves three (3) haciendas in Nasugbu, Batangas owned by petitioner and the validity of the acquisition of these haciendas by the government under Republic Act No. 6657, the Comprehensive Agrarian Reform Law of 1988. Petitioner Roxas & Co. is a domestic corporation and is the registered owner of three haciendas, namely, Haciendas Palico, Banilad and Caylaway, all located in the Municipality of Nasugbu, Batangas. Hacienda Palico is 1,024 hectares in area and is registered under Transfer Certificate of Title (TCT) No. 985. This land is covered by Tax Declaration Nos. 0465, 0466, 0468, 0470, 0234 and 0354. Hacienda Banilad is 1,050 hectares in area, registered under TCT No. 924 and covered by Tax Declaration Nos. 0236, 0237 and 0390. Hacienda Caylaway is 867.4571 hectares in area and is registered under TCT Nos. T-44662, T-44663, T-44664 and T-44665. The events of this case occurred during the incumbency of then President Corazon C. Aquino. In February 1986, President Aquino issued Proclamation No. 3 promulgating a Provisional Constitution. As head of the provisional government, the President exercised legislative power "until a legislature is elected and convened under a new Constitution." In the exercise of this legislative power, the President signed on July 22, 1987, Proclamation No. 131 instituting a Comprehensive Agrarian Reform Program and Executive Order No. 229 providing the mechanisms necessary to initially implement the program. 1

On July 27, 1987, the Congress of the Philippines formally convened and took over legislative power from the President. This Congress passed Republic Act No. 6657, the Comprehensive Agrarian Reform Law (CARL) of 1988. The Act was signed by the President on June 10, 1988 and took effect on June 15, 1988. 2

Before the law's effectivity, on May 6, 1988, petitioner filed with respondent DAR a voluntary offer to sell Hacienda Caylaway pursuant to the provisions of E.O. No. 229. Haciendas Palico and Banilad were later placed under compulsory acquisition by respondent DAR in accordance with the CARL.

Hacienda Palico On September 29, 1989, respondent DAR, through respondent Municipal Agrarian Reform Officer (MARO) of Nasugbu, Batangas, sent a notice entitled "Invitation to Parties" to petitioner. The Invitation was addressed to "Jaime Pimentel, Hda. Administrator, Hda. Palico." Therein, the MARO invited petitioner to a conference on October 6, 1989 at the DAR office in Nasugbu to discuss the results of the DAR investigation of Hacienda Palico, which was "scheduled for compulsory acquisition this year under the Comprehensive Agrarian Reform Program." 3

4

On October 25, 1989, the MARO completed three (3) Investigation Reports after investigation and ocular inspection of the Hacienda. In the first Report, the MARO found that 270 hectares under Tax Declaration Nos. 465, 466, 468 and 470 were "flat to undulating (0-8% slope)" and actually occupied and cultivated by 34 tillers of sugarcane. In the second Report, the MARO identified as "flat to undulating" approximately 339 hectares under Tax Declaration No. 0234 which also had several actual occupants and tillers of sugarcane; while in the third Report, the MARO found approximately 75 hectare under Tax Declaration No. 0354 as "flat to undulating" with 33 actual occupants and tillers also of sugarcane. 5

6

7

On October 27, 1989, a "Summary Investigation Report" was submitted and signed jointly by the MARO, representatives of the Barangay Agrarian Reform Committee (BARC) and Land Bank of the Philippines (LBP), and by the Provincial Agrarian Reform Officer (PARO). The Report recommended that 333.0800 hectares of Hacienda Palico be subject to compulsory acquisition at a value of P6,807,622.20. The following day, October 28, 1989, two (2) more Summary Investigation Reports were submitted by the same officers and representatives. They recommended that 270.0876 hectares and 75.3800 hectares be placed under compulsory acquisition at a compensation of P8,109,739.00 and P2,188,195.47, respectively. 8

9

On December 12, 1989, respondent DAR through then Department Secretary Miriam D. Santiago sent a "Notice of Acquisition" to petitioner. The Notice was addressed as follows: Roxas y Cia, Limited Soriano Bldg., Plaza Cervantes Manila, Metro Manila.

10

Petitioner was informed that 1,023.999 hectares of its land in Hacienda Palico were subject to immediate acquisition and distribution by the government under the CARL; that based on the DAR's valuation criteria, the government was offering compensation of P3.4 million for 333.0800 hectares; that whether this offer was to be accepted or rejected, petitioner was to inform the Bureau of Land Acquisition and Distribution (BLAD) of the DAR; that in case of petitioner's rejection or failure to reply within thirty days, respondent DAR shall conduct summary administrative proceedings with notice to petitioner to determine just compensation for the land; that if petitioner accepts respondent DAR's offer, or upon deposit of the compensation with an accessible bank if it rejects the same, the DAR shall take immediate possession of the land. 11

Almost two years later, on September 26, 1991, the DAR Regional Director sent to the LBP Land Valuation Manager three (3) separate Memoranda entitled "Request to Open Trust Account." Each Memoranda requested that a trust account representing the valuation of three portions of Hacienda Palico be opened in favor of the petitioner in view of the latter's rejection of its offered value. 12

Meanwhile in a letter dated May 4, 1993, petitioner applied with the DAR for conversion of Haciendas Palico and Banilad from agricultural to non-agricultural lands under the provisions of the CARL. On July 14, 1993, petitioner sent a letter to the DAR Regional Director reiterating its request for conversion of the two haciendas. 13

14

Despite petitioner's application for conversion, respondent DAR proceeded with the acquisition of the two Haciendas. The LBP trust accounts as compensation for Hacienda Palico were replaced by respondent DAR with cash and LBP bonds. On October 22, 1993, from the mother title of TCT No. 985 of the Hacienda, respondent DAR registered Certificate of Land Ownership Award (CLOA) No. 6654. On October 30, 1993, CLOA's were distributed to farmer beneficiaries. 15

16

Hacienda Banilad On August 23, 1989, respondent DAR, through respondent MARO of Nasugbu, Batangas, sent a notice to petitioner addressed as follows: Mr. Jaime Pimentel Hacienda Administrator Hacienda Banilad Nasugbu, Batangas

17

The MARO informed Pimentel that Hacienda Banilad was subject to compulsory acquisition under the CARL; that should petitioner wish to avail of the other schemes such as Voluntary Offer to Sell or Voluntary Land Transfer, respondent DAR was willing to provide assistance thereto. 18

On September 18, 1989, the MARO sent an "Invitation to Parties" again to Pimentel inviting the latter to attend a conference on September 21, 1989 at the MARO Office in Nasugbu to discuss the results of the MARO's investigation over Hacienda Banilad. 19

On September 21, 1989, the same day the conference was held, the MARO submitted two (2) Reports. In his first Report, he found that approximately 709 hectares of land under Tax Declaration Nos. 0237 and 0236 were "flat to undulating (0-8% slope)." On this area were discovered 162 actual occupants and tillers of sugarcane. In the second Report, it was found that approximately 235 hectares under Tax Declaration No. 0390 were "flat to undulating," on which were 92 actual occupants and tillers of sugarcane. 20

21

The results of these Reports were discussed at the conference. Present in the conference were representatives of the prospective farmer beneficiaries, the BARC, the LBP, and Jaime Pimentel on behalf of the landowner. After the meeting, on the same day, September 21, 1989, a Summary Investigation Report was submitted jointly by the MARO, representatives of the BARC, LBP, and the PARO. They recommended that after ocular inspection of the property, 234.6498 hectares under Tax Declaration No. 0390 be subject to compulsory acquisition and distribution by CLOA. The following day, September 22, 1989, a second Summary Investigation was submitted by the same officers. They recommended that 737.2590 hectares under Tax Declaration Nos. 0236 and 0237 be likewise placed under compulsory acquisition for distribution. 22

23

24

On December 12, 1989, respondent DAR, through the Department Secretary, sent to petitioner two (2) separate "Notices of Acquisition" over Hacienda Banilad. These Notices were sent on the same day as the Notice of Acquisition over Hacienda Palico. Unlike the Notice over Hacienda Palico, however, the Notices over Hacienda Banilad were addressed to: Roxas y Cia. Limited 7th Floor, Cacho-Gonzales Bldg. 101 Aguirre St., Leg. Makati, Metro Manila.

25

Respondent DAR offered petitioner compensation of P15,108,995.52 for 729.4190 hectares and P4,428,496.00 for 234.6498 hectares. 26

On September 26, 1991, the DAR Regional Director sent to the LBP Land Valuation Manager a "Request to Open Trust Account" in petitioner's name as compensation for 234.6493 hectares of Hacienda Banilad. A second "Request to Open Trust Account" was sent on November 18, 1991 over 723.4130 hectares of said Hacienda. 27

28

On December 18, 1991, the LBP certified that the amounts of P4,428,496.40 and P21,234,468.78 in cash and LBP bonds had been earmarked as compensation for petitioner's land in Hacienda Banilad. 29

On May 4, 1993, petitioner applied for conversion of both Haciendas Palico and Banilad. Hacienda Caylaway Hacienda Caylaway was voluntarily offered for sale to the government on May 6, 1988 before the effectivity of the CARL. The Hacienda has a total area of 867.4571 hectares and is covered by four (4) titles — TCT Nos. T-44662, T-44663, T-44664 and T-44665. On January 12, 1989, respondent DAR, through the Regional Director for Region IV, sent to petitioner two (2) separate Resolutions accepting petitioner's voluntary offer to sell Hacienda Caylaway, particularly TCT Nos. T-44664 and T-44663. The Resolutions were addressed to: 30

Roxas & Company, Inc. 7th Flr. Cacho-Gonzales Bldg. Aguirre, Legaspi Village Makati, M. M

31

On September 4, 1990, the DAR Regional Director issued two separate Memoranda to the LBP Regional Manager requesting for the valuation of the land under TCT Nos. T-44664 and T44663. On the same day, respondent DAR, through the Regional Director, sent to petitioner a "Notice of Acquisition" over 241.6777 hectares under TCT No. T-44664 and 533.8180 hectares under TCT No. T-44663. Like the Resolutions of Acceptance, the Notice of Acquisition was addressed to petitioner at its office in Makati, Metro Manila. 32

33

Nevertheless, on August 6, 1992, petitioner, through its President, Eduardo J. Roxas, sent a letter to the Secretary of respondent DAR withdrawing its VOS of Hacienda Caylaway. The Sangguniang

Bayan of Nasugbu, Batangas allegedly authorized the reclassification of Hacienda Caylaway from agricultural to non-agricultural. As a result, petitioner informed respondent DAR that it was applying for conversion of Hacienda Caylaway from agricultural to other uses. 34

In a letter dated September 28, 1992, respondent DAR Secretary informed petitioner that a reclassification of the land would not exempt it from agrarian reform. Respondent Secretary also denied petitioner's withdrawal of the VOS on the ground that withdrawal could only be based on specific grounds such as unsuitability of the soil for agriculture, or if the slope of the land is over 18 degrees and that the land is undeveloped. 35

Despite the denial of the VOS withdrawal of Hacienda Caylaway, on May 11, 1993, petitioner filed its application for conversion of both Haciendas Palico and Banilad. On July 14, 1993, petitioner, through its President, Eduardo Roxas, reiterated its request to withdraw the VOS over Hacienda Caylaway in light of the following: 36

1) Certification issued by Conrado I. Gonzales, Officer-in-Charge, Department of Agriculture, Region 4, 4th Floor, ATI (BA) Bldg., Diliman, Quezon City dated March 1, 1993 stating that the lands subject of referenced titles "are not feasible and economically sound for further agricultural development. 2) Resolution No. 19 of the Sangguniang Bayan of Nasugbu, Batangas approving the Zoning Ordinance reclassifying areas covered by the referenced titles to nonagricultural which was enacted after extensive consultation with government agencies, including [the Department of Agrarian Reform], and the requisite public hearings. 3) Resolution No. 106 of the Sangguniang Panlalawigan of Batangas dated March 8, 1993 approving the Zoning Ordinance enacted by the Municipality of Nasugbu. 4) Letter dated December 15, 1992 issued by Reynaldo U. Garcia of the Municipal Planning & Development, Coordinator and Deputized Zoning Administrator addressed to Mrs. Alicia P. Logarta advising that the Municipality of Nasugbu, Batangas has no objection to the conversion of the lands subject of referenced titles to non-agricultural. 37

On August 24, 1993 petitioner instituted Case No. N-0017-96-46 (BA) with respondent DAR Adjudication Board (DARAB) praying for the cancellation of the CLOA's issued by respondent DAR in the name of several persons. Petitioner alleged that the Municipality of Nasugbu, where the haciendas are located, had been declared a tourist zone, that the land is not suitable for agricultural production, and that the Sangguniang Bayan of Nasugbu had reclassified the land to nonagricultural. In a Resolution dated October 14, 1993, respondent DARAB held that the case involved the prejudicial question of whether the property was subject to agrarian reform, hence, this question should be submitted to the Office of the Secretary of Agrarian Reform for determination. 38

On October 29, 1993, petitioner filed with the Court of Appeals CA-G.R. SP No. 32484. It questioned the expropriation of its properties under the CARL and the denial of due process in the acquisition of its landholdings.

Meanwhile, the petition for conversion of the three haciendas was denied by the MARO on November 8, 1993. Petitioner's petition was dismissed by the Court of Appeals on April 28, 1994. Petitioner moved for reconsideration but the motion was denied on January 17, 1997 by respondent court. 39

40

Hence, this recourse. Petitioner assigns the following errors: A. RESPONDENT COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT PETITIONER'S CAUSE OF ACTION IS PREMATURE FOR FAILURE TO EXHAUST ADMINISTRATIVE REMEDIES IN VIEW OF THE PATENT ILLEGALITY OF THE RESPONDENTS' ACTS, THE IRREPARABLE DAMAGE CAUSED BY SAID ILLEGAL ACTS, AND THE ABSENCE OF A PLAIN, SPEEDY AND ADEQUATE REMEDY IN THE ORDINARY COURSE OF LAW — ALL OF WHICH ARE EXCEPTIONS TO THE SAID DOCTRINE. B. RESPONDENT COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT PETITIONER'S LANDHOLDINGS ARE SUBJECT TO COVERAGE UNDER THE COMPREHENSIVE AGRARIAN REFORM LAW, IN VIEW OF THE UNDISPUTED FACT THAT PETITIONER'S LANDHOLDINGS HAVE BEEN CONVERTED TO NONAGRICULTURAL USES BY PRESIDENTIAL PROCLAMATION NO. 1520 WHICH DECLARED THE MUNICIPALITY NASUGBU, BATANGAS AS A TOURIST ZONE, AND THE ZONING ORDINANCE OF THE MUNICIPALITY OF NASUGBU RECLASSIFYING CERTAIN PORTIONS OF PETITIONER'S LANDHOLDINGS AS NON-AGRICULTURAL, BOTH OF WHICH PLACE SAID LANDHOLDINGS OUTSIDE THE SCOPE OF AGRARIAN REFORM, OR AT THE VERY LEAST ENTITLE PETITIONER TO APPLY FOR CONVERSION AS CONCEDED BY RESPONDENT DAR. C. RESPONDENT COURT OF APPEALS GRAVELY ERRED WHEN IT FAILED TO DECLARE THE PROCEEDINGS BEFORE RESPONDENT DAR VOID FOR FAILURE TO OBSERVE DUE PROCESS, CONSIDERING THAT RESPONDENTS BLATANTLY DISREGARDED THE PROCEDURE FOR THE ACQUISITION OF PRIVATE LANDS UNDER R.A. 6657, MORE PARTICULARLY, IN FAILING TO GIVE DUE NOTICE TO THE PETITIONER AND TO PROPERLY IDENTIFY THE SPECIFIC AREAS SOUGHT TO BE ACQUIRED. D. RESPONDENT COURT OF APPEALS GRAVELY ERRED WHEN IT FAILED TO RECOGNIZE THAT PETITIONER WAS BRAZENLY AND ILLEGALLY DEPRIVED OF ITS PROPERTY WITHOUT JUST COMPENSATION, CONSIDERING THAT PETITIONER WAS NOT PAID JUST COMPENSATION BEFORE IT WAS UNCEREMONIOUSLY STRIPPED OF ITS LANDHOLDINGS THROUGH THE ISSUANCE OF CLOA'S TO ALLEGED FARMER BENEFICIARIES, IN VIOLATION OF R.A. 6657. 41

The assigned errors involve three (3) principal issues: (1) whether this Court can take cognizance of this petition despite petitioner's failure to exhaust administrative remedies; (2) whether the acquisition proceedings over the three haciendas were valid and in accordance with law; and (3) assuming the haciendas may be reclassified from agricultural to non-agricultural, whether this court has the power to rule on this issue. I. Exhaustion of Administrative Remedies.

In its first assigned error, petitioner claims that respondent Court of Appeals gravely erred in finding that petitioner failed to exhaust administrative remedies. As a general rule, before a party may be allowed to invoke the jurisdiction of the courts of justice, he is expected to have exhausted all means of administrative redress. This is not absolute, however. There are instances when judicial action may be resorted to immediately. Among these exceptions are: (1) when the question raised is purely legal; (2) when the administrative body is in estoppel; (3) when the act complained of is patently illegal; (4) when there is urgent need for judicial intervention; (5) when the respondent acted in disregard of due process; (6) when the respondent is a department secretary whose acts, as an alter ego of the President, bear the implied or assumed approval of the latter; (7) when irreparable damage will be suffered; (8) when there is no other plain, speedy and adequate remedy; (9) when strong public interest is involved; (10) when the subject of the controversy is private land; and (11) in quo warranto proceedings. 42

Petitioner rightly sought immediate redress in the courts. There was a violation of its rights and to require it to exhaust administrative remedies before the DAR itself was not a plain, speedy and adequate remedy. Respondent DAR issued Certificates of Land Ownership Award (CLOA's) to farmer beneficiaries over portions of petitioner's land without just compensation to petitioner. A Certificate of Land Ownership Award (CLOA) is evidence of ownership of land by a beneficiary under R.A. 6657, the Comprehensive Agrarian Reform Law of 1988. Before this may be awarded to a farmer beneficiary, the land must first be acquired by the State from the landowner and ownership transferred to the former. The transfer of possession and ownership of the land to the government are conditioned upon the receipt by the landowner of the corresponding payment or deposit by the DAR of the compensation with an accessible bank. Until then, title remains with the landowner. There was no receipt by petitioner of any compensation for any of the lands acquired by the government. 43

44

The kind of compensation to be paid the landowner is also specific. The law provides that the deposit must be made only in "cash" or "LBP bonds." Respondent DAR's opening of trust account deposits in petitioner' s name with the Land Bank of the Philippines does not constitute payment under the law. Trust account deposits are not cash or LBP bonds. The replacement of the trust account with cash or LBP bonds did not ipso facto cure the lack of compensation; for essentially, the determination of this compensation was marred by lack of due process. In fact, in the entire acquisition proceedings, respondent DAR disregarded the basic requirements of administrative due process. Under these circumstances, the issuance of the CLOA's to farmer beneficiaries necessitated immediate judicial action on the part of the petitioner. 45

II. The Validity of the Acquisition Proceedings Over the Haciendas. Petitioner's allegation of lack of due process goes into the validity of the acquisition proceedings themselves. Before we rule on this matter, however, there is need to lay down the procedure in the acquisition of private lands under the provisions of the law. A. Modes of Acquisition of Land under R. A. 6657 Republic Act No. 6657, the Comprehensive Agrarian Reform Law of 1988 (CARL), provides for two (2) modes of acquisition of private land: compulsory and voluntary. The procedure for the compulsory acquisition of private lands is set forth in Section 16 of R.A. 6657, viz: Sec. 16. Procedure for Acquisition of Private Lands. — For purposes of acquisition of private lands, the following procedures shall be followed:

a). After having identified the land, the landowners and the beneficiaries, the DAR shall send its notice to acquire the land to the owners thereof, by personal delivery or registered mail, and post the same in a conspicuous place in the municipal building and barangay hall of the place where the property is located. Said notice shall contain the offer of the DAR to pay a corresponding value in accordance with the valuation set forth in Sections 17, 18, and other pertinent provisions hereof. b) Within thirty (30) days from the date of receipt of written notice by personal delivery or registered mail, the landowner, his administrator or representative shall inform the DAR of his acceptance or rejection of the offer. c) If the landowner accepts the offer of the DAR, the LBP shall pay the landowner the purchase price of the land within thirty (30) days after he executes and delivers a deed of transfer in favor of the Government and surrenders the Certificate of Title and other muniments of title. d) In case of rejection or failure to reply, the DAR shall conduct summary administrative proceedings to determine the compensation for the land requiring the landowner, the LBP and other interested parties to submit evidence as to the just compensation for the land, within fifteen (15) days from receipt of the notice. After the expiration of the above period, the matter is deemed submitted for decision. The DAR shall decide the case within thirty (30) days after it is submitted for decision. e) Upon receipt by the landowner of the corresponding payment, or, in case of rejection or no response from the landowner, upon the deposit with an accessible bank designated by the DAR of the compensation in cash or in LBP bonds in accordance with this Act, the DAR shall take immediate possession of the land and shall request the proper Register of Deeds to issue a Transfer Certificate of Title (TCT) in the name of the Republic of the Philippines. The DAR shall thereafter proceed with the redistribution of the land to the qualified beneficiaries. f) Any party who disagrees with the decision may bring the matter to the court of proper jurisdiction for final determination of just compensation. In the compulsory acquisition of private lands, the landholding, the landowners and the farmer beneficiaries must first be identified. After identification, the DAR shall send a Notice of Acquisition to the landowner, by personal delivery or registered mail, and post it in a conspicuous place in the municipal building and barangay hall of the place where the property is located. Within thirty days from receipt of the Notice of Acquisition, the landowner, his administrator or representative shall inform the DAR of his acceptance or rejection of the offer. If the landowner accepts, he executes and delivers a deed of transfer in favor of the government and surrenders the certificate of title. Within thirty days from the execution of the deed of transfer, the Land Bank of the Philippines (LBP) pays the owner the purchase price. If the landowner rejects the DAR's offer or fails to make a reply, the

DAR conducts summary administrative proceedings to determine just compensation for the land. The landowner, the LBP representative and other interested parties may submit evidence on just compensation within fifteen days from notice. Within thirty days from submission, the DAR shall decide the case and inform the owner of its decision and the amount of just compensation. Upon receipt by the owner of the corresponding payment, or, in case of rejection or lack of response from the latter, the DAR shall deposit the compensation in cash or in LBP bonds with an accessible bank. The DAR shall immediately take possession of the land and cause the issuance of a transfer certificate of title in the name of the Republic of the Philippines. The land shall then be redistributed to the farmer beneficiaries. Any party may question the decision of the DAR in the regular courts for final determination of just compensation. The DAR has made compulsory acquisition the priority mode of the land acquisition to hasten the implementation of the Comprehensive Agrarian Reform Program (CARP). Under Section 16 of the CARL, the first step in compulsory acquisition is the identification of the land, the landowners and the beneficiaries. However, the law is silent on how the identification process must be made. To fill in this gap, the DAR issued on July 26, 1989 Administrative Order No. 12, Series or 1989, which set the operating procedure in the identification of such lands. The procedure is as follows: 46

II. OPERATING PROCEDURE A. The Municipal Agrarian Reform Officer, with the assistance of the pertinent Barangay Agrarian Reform Committee (BARC), shall: 1. Update the masterlist of all agricultural lands covered under the CARP in his area of responsibility. The masterlist shall include such information as required under the attached CARP Masterlist Form which shall include the name of the landowner, landholding area, TCT/OCT number, and tax declaration number. 2. Prepare a Compulsory Acquisition Case Folder (CACF) for each title (OCT/TCT) or landholding covered under Phase I and II of the CARP except those for which the landowners have already filed applications to avail of other modes of land acquisition. A case folder shall contain the following duly accomplished forms: a) CARP CA Form 1 — MARO Investigation Report b) CARP CA Form 2 — Summary Investigation Report of Findings and Evaluation c) CARP CA Form 3 — Applicant's Information Sheet d) CARP CA Form 4 — Beneficiaries Undertaking e) CARP CA Form 5 — Transmittal Report to the PARO The MARO/BARC shall certify that all information contained in the above-mentioned forms have been examined and verified by him and that the same are true and correct.

3. Send a Notice of Coverage and a letter of invitation to a conference/meeting to the landowner covered by the Compulsory Case Acquisition Folder. Invitations to the said conference/meeting shall also be sent to the prospective farmer-beneficiaries, the BARC representative(s), the Land Bank of the Philippines (LBP) representative, and other interested parties to discuss the inputs to the valuation of the property. He shall discuss the MARO/BARC investigation report and solicit the views, objection, agreements or suggestions of the participants thereon. The landowner shall also be asked to indicate his retention area. The minutes of the meeting shall be signed by all participants in the conference and shall form an integral part of the CACF. 4. Submit all completed case folders to the Provincial Agrarian Reform Officer (PARO). B. The PARO shall: 1. Ensure that the individual case folders are forwarded to him by his MAROs. 2. Immediately upon receipt of a case folder, compute the valuation of the land in accordance with A.O. No. 6, Series of 1988. The valuation worksheet and the related CACF valuation forms shall be duly certified correct by the PARO and all the personnel who participated in the accomplishment of these forms. 47

3. In all cases, the PARO may validate the report of the MARO through ocular inspection and verification of the property. This ocular inspection and verification shall be mandatory when the computed value exceeds = 500,000 per estate. 4. Upon determination of the valuation, forward the case folder, together with the duly accomplished valuation forms and his recommendations, to the Central Office. The LBP representative and the MARO concerned shall be furnished a copy each of his report. C. DAR Central Office, specifically through the Bureau of Land Acquisition and Distribution (BLAD), shall: 1. Within three days from receipt of the case folder from the PARO, review, evaluate and determine the final land valuation of the property covered by the case folder. A summary review and evaluation report shall be prepared and duly certified by the BLAD Director and the personnel directly participating in the review and final valuation. 2. Prepare, for the signature of the Secretary or her duly authorized representative, a Notice of Acquisition (CARP CA Form 8) for the subject property. Serve the Notice to the landowner personally or through registered mail within three days from its approval. The Notice shall include, among others, the area subject of compulsory acquisition, and the amount of just compensation offered by DAR.

3. Should the landowner accept the DAR's offered value, the BLAD shall prepare and submit to the Secretary for approval the Order of Acquisition. However, in case of rejection or non-reply, the DAR Adjudication Board (DARAB) shall conduct a summary administrative hearing to determine just compensation, in accordance with the procedures provided under Administrative Order No. 13, Series of 1989. Immediately upon receipt of the DARAB's decision on just compensation, the BLAD shall prepare and submit to the Secretary for approval the required Order of Acquisition. 4. Upon the landowner's receipt of payment, in case of acceptance, or upon deposit of payment in the designated bank, in case of rejection or non-response, the Secretary shall immediately direct the pertinent Register of Deeds to issue the corresponding Transfer Certificate of Title (TCT) in the name of the Republic of the Philippines. Once the property is transferred, the DAR, through the PARO, shall take possession of the land for redistribution to qualified beneficiaries. Administrative Order No. 12, Series of 1989 requires that the Municipal Agrarian Reform Officer (MARO) keep an updated master list of all agricultural lands under the CARP in his area of responsibility containing all the required information. The MARO prepares a Compulsory Acquisition Case Folder (CACF) for each title covered by CARP. The MARO then sends the landowner a "Notice of Coverage" and a "letter of invitation" to a "conference/meeting" over the land covered by the CACF. He also sends invitations to the prospective farmer-beneficiaries the representatives of the Barangay Agrarian Reform Committee (BARC), the Land Bank of the Philippines (LBP) and other interested parties to discuss the inputs to the valuation of the property and solicit views, suggestions, objections or agreements of the parties. At the meeting, the landowner is asked to indicate his retention area. The MARO shall make a report of the case to the Provincial Agrarian Reform Officer (PARO) who shall complete the valuation of the land. Ocular inspection and verification of the property by the PARO shall be mandatory when the computed value of the estate exceeds P500,000.00. Upon determination of the valuation, the PARO shall forward all papers together with his recommendation to the Central Office of the DAR. The DAR Central Office, specifically, the Bureau of Land Acquisition and Distribution (BLAD), shall review, evaluate and determine the final land valuation of the property. The BLAD shall prepare, on the signature of the Secretary or his duly authorized representative, a Notice of Acquisition for the subject property. From this point, the provisions of Section 16 of R.A. 6657 then apply. 48

49

For a valid implementation of the CAR program, two notices are required: (1) the Notice of Coverage and letter of invitation to a preliminary conference sent to the landowner, the representatives of the BARC, LBP, farmer beneficiaries and other interested parties pursuant to DAR A.O. No. 12, Series of 1989; and (2) the Notice of Acquisition sent to the landowner under Section 16 of the CARL. The importance of the first notice, i.e., the Notice of Coverage and the letter of invitation to the conference, and its actual conduct cannot be understated. They are steps designed to comply with the requirements of administrative due process. The implementation of the CARL is an exercise of the State's police power and the power of eminent domain. To the extent that the CARL prescribes retention limits to the landowners, there is an exercise of police power for the regulation of private property in accordance with the Constitution. But where, to carry out such regulation, the owners are deprived of lands they own in excess of the maximum area allowed, there is also a taking under 50

the power of eminent domain. The taking contemplated is not a mere limitation of the use of the land. What is required is the surrender of the title to and physical possession of the said excess and all beneficial rights accruing to the owner in favor of the farmer beneficiary. The Bill of Rights provides that "[n]o person shall be deprived of life, liberty or property without due process of law." The CARL was not intended to take away property without due process of law. The exercise of the power of eminent domain requires that due process be observed in the taking of private property. 51

52

53

DAR A.O. No. 12, Series of 1989, from whence the Notice of Coverage first sprung, was amended in 1990 by DAR A.O. No. 9, Series of 1990 and in 1993 by DAR A.O. No. 1, Series of 1993. The Notice of Coverage and letter of invitation to the conference meeting were expanded and amplified in said amendments. DAR A.O. No. 9, Series of 1990 entitled "Revised Rules Governing the Acquisition of Agricultural Lands Subject of Voluntary Offer to Sell and Compulsory Acquisition Pursuant to R.A. 6657," requires that: B. MARO 1. Receives the duly accomplished CARP Form Nos. 1 & 1.1 including supporting documents. 2. Gathers basic ownership documents listed under 1.a or 1.b above and prepares corresponding VOCF/CACF by landowner/landholding. 3. Notifies/invites the landowner and representatives of the LBP, DENR, BARC and prospective beneficiaries of the schedule of ocular inspection of the property at least one week in advance. 4. MARO/LAND BANK FIELD OFFICE/BARC a) Identify the land and landowner, and determine the suitability for agriculture and productivity of the land and jointly prepare Field Investigation Report (CARP Form No. 2), including the Land Use Map of the property. b) Interview applicants and assist them in the preparation of the Application For Potential CARP Beneficiary (CARP Form No. 3). c) Screen prospective farmerbeneficiaries and for those found qualified, cause the signing of the respective Application to Purchase and Farmer's Undertaking (CARP Form No. 4).

d) Complete the Field Investigation Report based on the result of the ocular inspection/investigation of the property and documents submitted. See to it that Field Investigation Report is duly accomplished and signed by all concerned. 5. MARO a) Assists the DENR Survey Party in the conduct of a boundary/ subdivision survey delineating areas covered by OLT, retention, subject of VOS, CA (by phases, if possible), infrastructures, etc., whichever is applicable. b) Sends Notice of Coverage (CARP Form No. 5) to landowner concerned or his duly authorized representative inviting him for a conference. c) Sends Invitation Letter (CARP Form No. 6) for a conference/public hearing to prospective farmer-beneficiaries, landowner, representatives of BARC, LBP, DENR, DA, NGO's, farmers' organizations and other interested parties to discuss the following matters: Result of Field Investigation Inputs to valuation Issues raised Comments/recommen dations by all parties concerned. d) Prepares Summary of Minutes of the conference/public hearing to be guided by CARP Form No. 7. e) Forwards the completed VOCF/CACF to the Provincial Agrarian Reform Office (PARO) using CARP Form No. 8 (Transmittal Memo to PARO).

xxx

xxx

xxx

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

55

DAR A.O. No. 9, Series of 1990 was amended by DAR A.O. No. 1, Series of 1993. DAR A.O. No. 1, Series of 1993 provided, among others, that: IV. OPERATING PROCEDURES: Steps Responsible Activity Forms/ Agency/Unit Document (requirements) A. Identification and Documentation xxx

xxx

5 DARMO Issue Notice of Coverage CARP to LO by personal delivery Form No. 2 with proof of service, or

xxx

registered mail with return card, informing him that his property is now under CARP coverage and for LO to select his retention area, if he desires to avail of his right of retention; and at the same time invites him to join the field investigation to be conducted on his property which should be scheduled at least two weeks in advance of said notice. A copy of said Notice shall CARP be posted for at least one Form No. 17 week on the bulletin board of the municipal and barangay halls where the property is located. LGU office concerned notifies DAR about compliance with posting requirements thru return indorsement on CARP Form No. 17. 6 DARMO Send notice to the LBP, CARP BARC, DENR representatives Form No. 3 and prospective ARBs of the schedule of the field investigation

to be conducted on the subject property. 7 DARMO With the participation of CARP BARC the LO, representatives of Form No. 4 LBP the LBP, BARC, DENR Land Use DENR and prospective ARBs, Map Local Office conducts the investigation on subject property to identify the landholding, determines its suitability and productivity; and jointly prepares the Field Investigation Report (FIR) and Land Use Map. However, the field investigation shall proceed even if the LO, the representatives of the DENR and prospective ARBs are not available provided, they were given due notice of the time and date of investigation to be conducted. Similarly, if the LBP representative is not available or could not come on the scheduled date, the field investigation shall also be conducted, after which the duly accomplished

Part I of CARP Form No. 4 shall be forwarded to the LBP representative for validation. If he agrees to the ocular inspection report of DAR, he signs the FIR (Part I) and accomplishes Part II thereof. In the event that there is a difference or variance between the findings of the DAR and the LBP as to the propriety of covering the land under CARP, whether in whole or in part, on the issue of suitability to agriculture, degree of development or slope, and on issues affecting idle lands, the conflict shall be resolved by a composite team of DAR, LBP, DENR and DA which shall jointly conduct further investigation thereon. The team shall submit its report of findings which shall be binding to both DAR and LBP, pursuant to Joint Memorandum Circular of the DAR, LBP, DENR and DA dated 27 January 1992.

8 DARMO Screen prospective ARBs BARC and causes the signing of CARP the Application of Purchase Form No. 5 and Farmer's Undertaking (APFU). 9 DARMO Furnishes a copy of the CARP duly accomplished FIR to Form No. 4 the landowner by personal delivery with proof of service or registered mail will return card and posts a copy thereof for at least one week on the bulletin board of the municipal and barangay halls where the property is located. LGU office concerned CARP notifies DAR about Form No. 17 compliance with posting requirement thru return endorsement on CARP Form No. 17. B. Land Survey 10 DARMO Conducts perimeter or Perimeter And/or segregation survey or

DENR delineating areas covered Segregation Local Office by OLT, "uncarpable Survey Plan areas such as 18% slope and above, unproductive/ unsuitable to agriculture, retention, infrastructure. In case of segregation or subdivision survey, the plan shall be approved by DENR-LMS. C. Review and Completion of Documents 11. DARMO Forward VOCF/CACF CARP to DARPO. Form No. 6 xxx xxx xxx. DAR A.O. No. 1, Series of 1993, modified the identification process and increased the number of government agencies involved in the identification and delineation of the land subject to acquisition. This time, the Notice of Coverage is sent to the landowner before the conduct of the field investigation and the sending must comply with specific requirements. Representatives of the DAR Municipal Office (DARMO) must send the Notice of Coverage to the landowner by "personal delivery with proof of service, or by registered mail with return card," informing him that his property is under CARP coverage and that if he desires to avail of his right of retention, he may choose which area he shall retain. The Notice of Coverage shall also invite the landowner to attend the field investigation to be scheduled at least two weeks from notice. The field investigation is for the purpose of identifying the landholding and determining its suitability for agriculture and its productivity. A copy of the Notice of Coverage shall be posted for at least one week on the bulletin board of the municipal and barangay halls where the property is located. The date of the field investigation shall also be sent by the DAR Municipal Office to representatives of the LBP, BARC, DENR and prospective farmer beneficiaries. The field investigation shall be conducted on the date set with the participation of the landowner and the various representatives. If the landowner and other representatives are absent, the field investigation shall proceed, provided they were duly notified thereof. Should there be a variance between the findings of the DAR and the LBP as to whether the land be placed under agrarian reform, the land's suitability to agriculture, the degree or development of the slope, etc., the conflict shall be resolved by a composite team of the DAR, LBP, DENR and DA which shall jointly conduct further investigation. The team's findings shall be binding on both DAR and LBP. After the field investigation, the DAR Municipal Office shall prepare the Field 56

Investigation Report and Land Use Map, a copy of which shall be furnished the landowner "by personal delivery with proof of service or registered mail with return card." Another copy of the Report and Map shall likewise be posted for at least one week in the municipal or barangay halls where the property is located. Clearly then, the notice requirements under the CARL are not confined to the Notice of Acquisition set forth in Section 16 of the law. They also include the Notice of Coverage first laid down in DAR A.O. No. 12, Series of 1989 and subsequently amended in DAR A.O. No. 9, Series of 1990 and DAR A.O. No. 1, Series of 1993. This Notice of Coverage does not merely notify the landowner that his property shall be placed under CARP and that he is entitled to exercise his retention right; it also notifies him, pursuant to DAR A.O. No. 9, Series of 1990, that a public hearing, shall be conducted where he and representatives of the concerned sectors of society may attend to discuss the results of the field investigation, the land valuation and other pertinent matters. Under DAR A.O. No. 1, Series of 1993, the Notice of Coverage also informs the landowner that a field investigation of his landholding shall be conducted where he and the other representatives may be present. B. The Compulsory Acquisition of Haciendas Palico and Banilad In the case at bar, respondent DAR claims that it, through MARO Leopoldo C. Lejano, sent a letter of invitation entitled "Invitation to Parties" dated September 29, 1989 to petitioner corporation, through Jaime Pimentel, the administrator of Hacienda Palico. The invitation was received on the same day it was sent as indicated by a signature and the date received at the bottom left corner of said invitation. With regard to Hacienda Banilad, respondent DAR claims that Jaime Pimentel, administrator also of Hacienda Banilad, was notified and sent an invitation to the conference. Pimentel actually attended the conference on September 21, 1989 and signed the Minutes of the meeting on behalf of petitioner corporation. The Minutes was also signed by the representatives of the BARC, the LBP and farmer beneficiaries. No letter of invitation was sent or conference meeting held with respect to Hacienda Caylaway because it was subject to a Voluntary Offer to Sell to respondent DAR. 57

58

59

60

When respondent DAR, through the Municipal Agrarian Reform Officer (MARO), sent to the various parties the Notice of Coverage and invitation to the conference, DAR A.O. No. 12, Series of 1989 was already in effect more than a month earlier. The Operating Procedure in DAR Administrative Order No. 12 does not specify how notices or letters of invitation shall be sent to the landowner, the representatives of the BARC, the LBP, the farmer beneficiaries and other interested parties. The procedure in the sending of these notices is important to comply with the requisites of due process especially when the owner, as in this case, is a juridical entity. Petitioner is a domestic corporation, and therefore, has a personality separate and distinct from its shareholders, officers and employees. 61

The Notice of Acquisition in Section 16 of the CARL is required to be sent to the landowner by "personal delivery or registered mail." Whether the landowner be a natural or juridical person to whose address the Notice may be sent by personal delivery or registered mail, the law does not distinguish. The DAR Administrative Orders also do not distinguish. In the proceedings before the DAR, the distinction between natural and juridical persons in the sending of notices may be found in the Revised Rules of Procedure of the DAR Adjudication Board (DARAB). Service of pleadings before the DARAB is governed by Section 6, Rule V of the DARAB Revised Rules of Procedure. Notices and pleadings are served on private domestic corporations or partnerships in the following manner: Sec. 6. Service upon Private Domestic Corporation or Partnership. — If the defendant is a corporation organized under the laws of the Philippines or a

partnership duly registered, service may be made on the president, manager, secretary, cashier, agent, or any of its directors or partners. Similarly, the Revised Rules of Court of the Philippines, in Section 13, Rule 14 provides: Sec. 13. Service upon private domestic corporation or partnership. — If the defendant is a corporation organized under the laws of the Philippines or a partnership duly registered, service may be made on the president, manager, secretary, cashier, agent, or any of its directors. Summonses, pleadings and notices in cases against a private domestic corporation before the DARAB and the regular courts are served on the president, manager, secretary, cashier, agent or any of its directors. These persons are those through whom the private domestic corporation or partnership is capable of action. 62

Jaime Pimentel is not the president, manager, secretary, cashier or director of petitioner corporation. Is he, as administrator of the two Haciendas, considered an agent of the corporation? The purpose of all rules for service of process on a corporation is to make it reasonably certain that the corporation will receive prompt and proper notice in an action against it. Service must be made on a representative so integrated with the corporation as to make it a priori supposable that he will realize his responsibilities and know what he should do with any legal papers served on him, and bring home to the corporation notice of the filing of the action. Petitioner's evidence does not show the official duties of Jaime Pimentel as administrator of petitioner's haciendas. The evidence does not indicate whether Pimentel's duties is so integrated with the corporation that he would immediately realize his responsibilities and know what he should do with any legal papers served on him. At the time the notices were sent and the preliminary conference conducted, petitioner's principal place of business was listed in respondent DAR's records as "Soriano Bldg., Plaza Cervantes, Manila," and "7th Flr. Cacho-Gonzales Bldg., 101 Aguirre St., Makati, Metro Manila." Pimentel did not hold office at the principal place of business of petitioner. Neither did he exercise his functions in Plaza Cervantes, Manila nor in Cacho-Gonzales Bldg., Makati, Metro Manila. He performed his official functions and actually resided in the haciendas in Nasugbu, Batangas, a place over two hundred kilometers away from Metro Manila. 63

64

65

66

67

Curiously, respondent DAR had information of the address of petitioner's principal place of business. The Notices of Acquisition over Haciendas Palico and Banilad were addressed to petitioner at its offices in Manila and Makati. These Notices were sent barely three to four months after Pimentel was notified of the preliminary conference. Why respondent DAR chose to notify Pimentel instead of the officers of the corporation was not explained by the said respondent. 68

Nevertheless, assuming that Pimentel was an agent of petitioner corporation, and the notices and letters of invitation were validly served on petitioner through him, there is no showing that Pimentel himself was duly authorized to attend the conference meeting with the MARO, BARC and LBP representatives and farmer beneficiaries for purposes of compulsory acquisition of petitioner's landholdings. Even respondent DAR's evidence does not indicate this authority. On the contrary, petitioner claims that it had no knowledge of the letter-invitation, hence, could not have given Pimentel the authority to bind it to whatever matters were discussed or agreed upon by the parties at the preliminary conference or public hearing. Notably, one year after Pimentel was informed of the preliminary conference, DAR A.O. No. 9, Series of 1990 was issued and this required that the Notice of Coverage must be sent "to the landowner concerned or his duly authorized representative." 69

Assuming further that petitioner was duly notified of the CARP coverage of its haciendas, the areas found actually subject to CARP were not properly identified before they were taken over by respondent DAR. Respondents insist that the lands were identified because they are all registered property and the technical description in their respective titles specifies their metes and bounds. Respondents admit at the same time, however, that not all areas in the haciendas were placed under the comprehensive agrarian reform program invariably by reason of elevation or character or use of the land. 70

The acquisition of the landholdings did not cover the entire expanse of the two haciendas, but only portions thereof. Hacienda Palico has an area of 1,024 hectares and only 688.7576 hectares were targetted for acquisition. Hacienda Banilad has an area of 1,050 hectares but only 964.0688 hectares were subject to CARP. The haciendas are not entirely agricultural lands. In fact, the various tax declarations over the haciendas describe the landholdings as "sugarland," and "forest, sugarland, pasture land, horticulture and woodland." 71

Under Section 16 of the CARL, the sending of the Notice of Acquisition specifically requires that the land subject to land reform be first identified. The two haciendas in the instant case cover vast tracts of land. Before Notices of Acquisition were sent to petitioner, however, the exact areas of the landholdings were not properly segregated and delineated. Upon receipt of this notice, therefore, petitioner corporation had no idea which portions of its estate were subject to compulsory acquisition, which portions it could rightfully retain, whether these retained portions were compact or contiguous, and which portions were excluded from CARP coverage. Even respondent DAR's evidence does not show that petitioner, through its duly authorized representative, was notified of any ocular inspection and investigation that was to be conducted by respondent DAR. Neither is there proof that petitioner was given the opportunity to at least choose and identify its retention area in those portions to be acquired compulsorily. The right of retention and how this right is exercised, is guaranteed in Section 6 of the CARL, viz: Sec. 6. Retention Limits. — . . . . The right to choose the area to be retained, which shall be compact or contiguous, shall pertain to the landowner; Provided, however, That in case the area selected for retention by the landowner is tenanted, the tenant shall have the option to choose whether to remain therein or be a beneficiary in the same or another agricultural land with similar or comparable features. In case the tenant chooses to remain in the retained area, he shall be considered a leaseholder and shall lose his right to be a beneficiary under this Act. In case the tenant chooses to be a beneficiary in another agricultural land, he loses his right as a leaseholder to the land retained by the landowner. The tenant must exercise this option within a period of one (1) year from the time the landowner manifests his choice of the area for retention. Under the law, a landowner may retain not more than five hectares out of the total area of his agricultural land subject to CARP. The right to choose the area to be retained, which shall be compact or contiguous, pertains to the landowner. If the area chosen for retention is tenanted, the tenant shall have the option to choose whether to remain on the portion or be a beneficiary in the same or another agricultural land with similar or comparable features. C. The Voluntary Acquisition of Hacienda Caylaway Petitioner was also left in the dark with respect to Hacienda Caylaway, which was the subject of a Voluntary Offer to Sell (VOS). The VOS in the instant case was made on May 6, 1988, before the effectivity of R.A. 6657 on June 15, 1988. VOS transactions were first governed by DAR 72

Administrative Order No. 19, series of 1989, and under this order, all VOS filed before June 15, 1988 shall be heard and processed in accordance with the procedure provided for in Executive Order No. 229, thus: 73

III. All VOS transactions which are now pending before the DAR and for which no payment has been made shall be subject to the notice and hearing requirements provided in Administrative Order No. 12, Series of 1989, dated 26 July 1989, Section II, Subsection A, paragraph 3. All VOS filed before 15 June 1988, the date of effectivity of the CARL, shall be heard and processed in accordance with the procedure provided for in Executive Order No. 229. xxx xxx xxx. Sec. 9 of E.O. 229 provides: Sec. 9. Voluntary Offer to Sell. — The government shall purchase all agricultural lands it deems productive and suitable to farmer cultivation voluntarily offered for sale to it at a valuation determined in accordance with Section 6. Such transaction shall be exempt from the payment of capital gains tax and other taxes and fees. Executive Order 229 does not contain the procedure for the identification of private land as set forth in DAR A.O. No. 12, Series of 1989. Section 5 of E.O. 229 merely reiterates the procedure of acquisition in Section 16, R.A. 6657. In other words, the E.O. is silent as to the procedure for the identification of the land, the notice of coverage and the preliminary conference with the landowner, representatives of the BARC, the LBP and farmer beneficiaries. Does this mean that these requirements may be dispensed with regard to VOS filed before June 15, 1988? The answer is no. First of all, the same E.O. 229, like Section 16 of the CARL, requires that the land, landowner and beneficiaries of the land subject to agrarian reform be identified before the notice of acquisition should be issued. Hacienda Caylaway was voluntarily offered for sale in 1989. The Hacienda has a total area of 867.4571 hectares and is covered by four (4) titles. In two separate Resolutions both dated January 12, 1989, respondent DAR, through the Regional Director, formally accepted the VOS over the two of these four titles. The land covered by two titles has an area of 855.5257 hectares, but only 648.8544 hectares thereof fell within the coverage of R.A. 6657. Petitioner claims it does not know where these portions are located. 74

75

76

Respondent DAR, on the other hand, avers that surveys on the land covered by the four titles were conducted in 1989, and that petitioner, as landowner, was not denied participation therein, The results of the survey and the land valuation summary report, however, do not indicate whether notices to attend the same were actually sent to and received by petitioner or its duly authorized representative. To reiterate, Executive Order No. 229 does not lay down the operating procedure, much less the notice requirements, before the VOS is accepted by respondent DAR. Notice to the landowner, however, cannot be dispensed with. It is part of administrative due process and is an essential requisite to enable the landowner himself to exercise, at the very least, his right of retention guaranteed under the CARL. 77

III. The Conversion of the three Haciendas.

It is petitioner's claim that the three haciendas are not subject to agrarian reform because they have been declared for tourism, not agricultural purposes. In 1975, then President Marcos issued Proclamation No. 1520 declaring the municipality of Nasugbu, Batangas a tourist zone. Lands in Nasugbu, including the subject haciendas, were allegedly reclassified as non-agricultural 13 years before the effectivity of R. A. No. 6657. In 1993, the Regional Director for Region IV of the Department of Agriculture certified that the haciendas are not feasible and sound for agricultural development. On March 20, 1992, pursuant to Proclamation No. 1520, the Sangguniang Bayan of Nasugbu, Batangas adopted Resolution No. 19 reclassifying certain areas of Nasugbu as non-agricultural. This Resolution approved Municipal Ordinance No. 19, Series of 1992, the Revised Zoning Ordinance of Nasugbu which zoning ordinance was based on a Land Use Plan for Planning Areas for New Development allegedly prepared by the University of the Philippines. Resolution No. 19 of the Sangguniang Bayan was approved by the Sangguniang Panlalawigan of Batangas on March 8, 1993. 78

79

80

81

82

83

84

Petitioner claims that proclamation No. 1520 was also upheld by respondent DAR in 1991 when it approved conversion of 1,827 hectares in Nasugbu into a tourist area known as the Batulao Resort Complex, and 13.52 hectares in Barangay Caylaway as within the potential tourist belt. Petitioner present evidence before us that these areas are adjacent to the haciendas subject of this petition, hence, the haciendas should likewise be converted. Petitioner urges this Court to take cognizance of the conversion proceedings and rule accordingly. 85

6

We do not agree. Respondent DAR's failure to observe due process in the acquisition of petitioner's landholdings does not ipso facto give this Court the power to adjudicate over petitioner's application for conversion of its haciendas from agricultural to non-agricultural. The agency charged with the mandate of approving or disapproving applications for conversion is the DAR. At the time petitioner filed its application for conversion, the Rules of Procedure governing the processing and approval of applications for land use conversion was the DAR A.O. No. 2, Series of 1990. Under this A.O., the application for conversion is filed with the MARO where the property is located. The MARO reviews the application and its supporting documents and conducts field investigation and ocular inspection of the property. The findings of the MARO are subject to review and evaluation by the Provincial Agrarian Reform Officer (PARO). The PARO may conduct further field investigation and submit a supplemental report together with his recommendation to the Regional Agrarian Reform Officer (RARO) who shall review the same. For lands less than five hectares, the RARO shall approve or disapprove applications for conversion. For lands exceeding five hectares, the RARO shall evaluate the PARO Report and forward the records and his report to the Undersecretary for Legal Affairs. Applications over areas exceeding fifty hectares are approved or disapproved by the Secretary of Agrarian Reform. The DAR's mandate over applications for conversion was first laid down in Section 4 (j) and Section 5 (l) of Executive Order No. 129-A, Series of 1987 and reiterated in the CARL and Memorandum Circular No. 54, Series of 1993 of the Office of the President. The DAR's jurisdiction over applications for conversion is provided as follows: A. The Department of Agrarian Reform (DAR) is mandated to "approve or disapprove applications for conversion, restructuring or readjustment of agricultural lands into non-agricultural uses," pursuant to Section 4 (j) of Executive Order No. 129-A, Series of 1987. B. Sec. 5 (l) of E.O. 129-A, Series of 1987, vests in the DAR, exclusive authority to approve or disapprove applications for

conversion of agricultural lands for residential, commercial, industrial and other land uses. C. Sec. 65 of R.A. No. 6657, otherwise known as the Comprehensive Agrarian Reform Law of 1988, likewise empowers the DAR to authorize under certain conditions, the conversion of agricultural lands. D. Sec. 4 of Memorandum Circular No. 54, Series of 1993 of the Office of the President, provides that "action on applications for land use conversion on individual landholdings shall remain as the responsibility of the DAR, which shall utilize as its primary reference, documents on the comprehensive land use plans and accompanying ordinances passed upon and approved by the local government units concerned, together with the National Land Use Policy, pursuant to R.A. No. 6657 and E.O. No. 129-A. 87

Applications for conversion were initially governed by DAR A.O. No. 1, Series of 1990 entitled "Revised Rules and Regulations Governing Conversion of Private Agricultural Lands and NonAgricultural Uses," and DAR A.O. No. 2, Series of 1990 entitled "Rules of Procedure Governing the Processing and Approval of Applications for Land Use Conversion." These A.O.'s and other implementing guidelines, including Presidential issuances and national policies related to land use conversion have been consolidated in DAR A.O. No. 07, Series of 1997. Under this recent issuance, the guiding principle in land use conversion is: to preserve prime agricultural lands for food production while, at the same time, recognizing the need of the other sectors of society (housing, industry and commerce) for land, when coinciding with the objectives of the Comprehensive Agrarian Reform Law to promote social justice, industrialization and the optimum use of land as a national resource for public welfare. 88

"Land Use" refers to the manner of utilization of land, including its allocation, development and management. "Land Use Conversion" refers to the act or process of changing the current use of a piece of agricultural land into some other use as approved by the DAR. The conversion of agricultural land to uses other than agricultural requires field investigation and conferences with the occupants of the land. They involve factual findings and highly technical matters within the special training and expertise of the DAR. DAR A.O. No. 7, Series of 1997 lays down with specificity how the DAR must go about its task. This time, the field investigation is not conducted by the MARO but by a special task force, known as the Center for Land Use Policy Planning and Implementation (CLUPPIDAR Central Office). The procedure is that once an application for conversion is filed, the CLUPPI prepares the Notice of Posting. The MARO only posts the notice and thereafter issues a certificate to the fact of posting. The CLUPPI conducts the field investigation and dialogues with the applicants and the farmer beneficiaries to ascertain the information necessary for the processing of the application. The Chairman of the CLUPPI deliberates on the merits of the investigation report and recommends the appropriate action. This recommendation is transmitted to the Regional Director, thru the Undersecretary, or Secretary of Agrarian Reform. Applications involving more than fifty hectares are approved or disapproved by the Secretary. The procedure does not end with the Secretary, however. The Order provides that the decision of the Secretary may be appealed to the Office of the President or the Court of Appeals, as the case may be, viz: 89

Appeal from the decision of the Undersecretary shall be made to the Secretary, and from the Secretary to the Office of the President or the Court of Appeals as the case

may be. The mode of appeal/motion for reconsideration, and the appeal fee, from Undersecretary to the Office of the Secretary shall be the same as that of the Regional Director to the Office of the Secretary. 90

Indeed, the doctrine of primary jurisdiction does not warrant a court to arrogate unto itself authority to resolve a controversy the jurisdiction over which is initially lodged with an administrative body of special competence. Respondent DAR is in a better position to resolve petitioner's application for conversion, being primarily the agency possessing the necessary expertise on the matter. The power to determine whether Haciendas Palico, Banilad and Caylaway are non-agricultural, hence, exempt from the coverage of the CARL lies with the DAR, not with this Court. 91

Finally, we stress that the failure of respondent DAR to comply with the requisites of due process in the acquisition proceedings does not give this Court the power to nullify the CLOA's already issued to the farmer beneficiaries. To assume the power is to short-circuit the administrative process, which has yet to run its regular course. Respondent DAR must be given the chance to correct its procedural lapses in the acquisition proceedings. In Hacienda Palico alone, CLOA's were issued to 177 farmer beneficiaries in 1993. Since then until the present, these farmers have been cultivating their lands. It goes against the basic precepts of justice, fairness and equity to deprive these people, through no fault of their own, of the land they till. Anyhow, the farmer beneficiaries hold the property in trust for the rightful owner of the land. 92

93

IN VIEW WHEREOF, the petition is granted in part and the acquisition proceedings over the three haciendas are nullified for respondent DAR's failure to observe due process therein. In accordance with the guidelines set forth in this decision and the applicable administrative procedure, the case is hereby remanded to respondent DAR for proper acquisition proceedings and determination of petitioner's application for conversion. SO ORDERED. Davide, Jr., C.J., Bellosillo, Vitug, Mendoza, Panganiban, Purisima, Buena, Gonzaga-Reyes and De Leon, Jr., JJ., concur. Melo, J., please see concurring and dissenting opinion. Ynares-Santiago, J., concurring and dissenting opinion. Kapunan, J., I join in the concurring and dissenting opinion of Justice C. Y. Santiago. Quisumbing, J., I join the in the concurring and dissenting opinion of J. Santiago. Pardo, J., I join the concurring and dissenting opinion of J. Santiago. Separate Opinions

MELO, J., concurring and dissenting opinion; I concur in the ponencia of Justice Ynares-Santiago, broad and exhaustive as it is in its treatment of the issues. However, I would like to call attention to two or three points which I believe are deserving of special emphasis.

The apparent incongruity or shortcoming in the petition is DAR's disregard of a law which settled the non-agricultural nature of the property as early as 1975. Related to this are the inexplicable contradictions between DAR's own official issuances and its challenged actuations in this particular case. Presidential Proclamation No. 1520 has the force and effect of law unless repealed. This law declared Nasugbu, Batangas as a tourist zone. Considering the new and pioneering stage of the tourist industry in 1975, it can safely be assumed that Proclamation 1520 was the result of empirical study and careful determination, not political or extraneous pressures. It cannot be disregarded by DAR or any other department of Government. In Province of Camarines Sur, et al. vs. Court of Appeals, et al. (222 SCRA 173, 182 [1993]), we ruled that local governments need not obtain the approval of DAR to reclassify lands from agricultural to non-agricultural use. In the present case, more than the exercise of that power, the local governments were merely putting into effect a law when they enacted the zoning ordinances in question. Any doubts as to the factual correctness of the zoning reclassifications are answered by the February 2, 1993 certification of the Department of Agriculture that the subject landed estates are not feasible and economically viable for agriculture, based on the examination of their slope, terrain, depth, irrigability, fertility, acidity, and erosion considerations. I agree with the ponencia's rejection of respondent's argument that agriculture is not incompatible and may be enforced in an area declared by law as a tourist zone. Agriculture may contribute to the scenic views and variety of countryside profiles but the issue in this case is not the beauty of ricefields, cornfields, or coconut groves. May land found to be non-agricultural and declared as a tourist zone by law, be withheld from the owner's efforts to develop it as such? There are also plots of land within Clark Field and other commercial-industrial zones capable of cultivation but this does not subject them to compulsory land reform. It is the best use of the land for tourist purposes, free trade zones, export processing or the function to which it is dedicated that is the determining factor. Any cultivation is temporary and voluntary. The other point I wish to emphasize is DAR's failure to follow its own administrative orders and regulations in this case. The contradictions between DAR administrative orders and its actions in the present case may be summarized: 1. DAR Administrative Order No. 6, Series of 1994, subscribes to Department of Justice Opinion No. 44, Series of 1990 that lands classified as non-agricultural prior to June 15, 1988 when the CARP Law was passed are exempt from its coverage. By what right can DAR now ignore its own Guidelines in this case of land declared as forming a tourism zone since 1975? 2. DAR Order dated January 22, 1991 granted the conversion of the adjacent and contiguous property of Group Developers and Financiers, Inc. (GDFI) into the Batulao Tourist Resort. Why should DAR have a contradictory stance in the adjoining property of Roxas and Co., Inc. found to be similar in nature and declared as such? 3. DAR Exemption Order, Case No. H-9999-050-97 dated May 17, 1999 only recently exempted 13.5 hectares of petitioner's property also found in Caylaway together, and similarly situated, with the

bigger parcel (Hacienda Caylaway) subject of this petition from CARL coverage. To that extent, it admits that its earlier blanket objections are unfounded. 4. DAR Administrative Order No. 3, Series of 1996 identifies the land outside of CARP coverage as: (a) Land found by DAR as no longer suitable for agriculture and which cannot be given appropriate valuation by the Land Bank; (b) Land where DAR has already issued a conversion order; (c) Land determined as exempt under DOJ Opinions Nos. 44 and 181; or (d) Land declared for non-agricultural use by Presidential Proclamation. It is readily apparent that the land in this case falls under all the above categories except the second one. DAR is acting contrary to its own rules and regulations. I should add that DAR has affirmed in a Rejoinder (August 20, 1999) the issuance and effectivity of the above administrative orders. DAR Administrative Order No. 3, Series of 1996, Paragraph 2 of Part II, Part III and Part IV outlines the procedure for reconveyance of land where CLOAs have been improperly issued. The procedure is administrative, detailed, simple, and speedy. Reconveyance is implemented by DAR which treats the procedure as "enshrined . . . in Section 50 of Republic Act No. 6657" (Respondent's Rejoinder). Administrative Order No. 3, Series of 1996 shows there are no impediments to administrative or judicial cancellations of CLOA's improperly issued over exempt property. Petitioner further submits, and this respondent does not refute, that 25 CLOAs covering 3,338 hectares of land owned by the Manila Southcoast Development Corporation also found in Nasugbu, Batangas, have been cancelled on similar grounds as those in the case at bar. The CLOAs in the instant case were issued over land declared as non-agricultural by a presidential proclamation and confirmed as such by actions of the Department of Agriculture and the local government units concerned. The CLOAs were issued over adjoining lands similarly situated and of like nature as those declared by DAR as exempt from CARP coverage. The CLOAs were surprisingly issued over property which were the subject of pending cases still undecided by DAR. There should be no question over the CLOAs having been improperly issued, for which reason, their cancellation is warranted.

YNARES-SANTIAGO, J., concurring and dissenting opinion; I concur in the basic premises of the majority opinion. However, I dissent in its final conclusions and the dispositive portion. With all due respect, the majority opinion centers on procedure but unfortunately ignores the substantive merits which this procedure should unavoidably sustain.

The assailed decision of the Court of Appeals had only one basic reason for its denial of the petition, i.e., the application of the doctrine of non-exhaustion of administrative remedies. This Court's majority ponencia correctly reverses the Court of Appeals on this issue. The ponencia now states that the issuance of CLOA's to farmer beneficiaries deprived petitioner Roxas & Co. of its property without just compensation. It rules that the acts of the Department of Agrarian Reform are patently illegal. It concludes that petitioner's rights were violated, and thus to require it to exhaust administrative remedies before DAR was not a plain, speedy, and adequate remedy. Correctly, petitioner sought immediate redress from the Court of Appeals to this Court. However, I respectfully dissent from the judgment which remands the case to the DAR. If the acts of DAR are patently illegal and the rights of Roxas & Co. violated, the wrong decisions of DAR should be reversed and set aside. It follows that the fruits of the wrongful acts, in this case the illegally issued CLOAs, must be declared null and void. Petitioner Roxas & Co. Inc. is the registered owner of three (3) haciendas located in Nasugbu, Batangas, namely: Hacienda Palico comprising of an area of 1,024 hectares more or less, covered by Transfer Certificate of Title No. 985 (Petition, Annex "G"; Rollo, p. 203); Hacienda Banilad comprising an area of 1,050 hectares and covered by TCT No. 924 (Petition, Annex "I"; Rollo, p. 205); and Hacienda Caylaway comprising an area of 867.4571 hectares and covered by TCT Nos. T-44655 (Petition, Annex "O"; Rollo, p. 216), T-44662 (Petition, Annex "P"; Rollo, p. 217), T-44663 (Petition, Annex "Q"; Rollo, p. 210) and T-44664 (Petition, Annex "R"; Rollo, p. 221). Sometime in 1992 and 1993, petitioner filed applications for conversion with DAR. Instead of either denying or approving the applications, DAR ignored and sat on them for seven (7) years. In the meantime and in acts of deceptive lip-service, DAR excluded some small and scattered lots in Palico and Caylaway from CARP coverage. The majority of the properties were parceled out to alleged farmer-beneficiaries, one at a time, even as petitioner's applications were pending and unacted upon. The majority ponencia cites Section 16 of Republic Act No. 6657 on the procedure for acquisition of private lands. The ponencia cites the detailed procedures found in DAR Administrative Order No. 12, Series of 1989 for the identification of the land to be acquired. DAR did not follow its own prescribed procedures. There was no valid issuance of a Notice of Coverage and a Notice of Acquisition. The procedure on the evaluation and determination of land valuation, the duties of the Municipal Agrarian Reform Officer (MARO), the Barangay Agrarian Reform Committee (BARC), Provincial Agrarian Reform Officer (PARO) and the Bureau of Land Acquisition and Distribution (BLAD), the documentation and reports on the step-by-step process, the screening of prospective Agrarian Reform Beneficiaries (ARBs), the land survey and segregation survey plan, and other mandatory procedures were not followed. The landowner was not properly informed of anything going on. Equally important, there was no payment of just compensation. I agree with the ponencia that due process was not observed in the taking of petitioner's properties. Since the DAR did not validly acquire ownership over the lands, there was no acquired property to validly convey to any beneficiary. The CLOAs were null and void from the start. Petitioner states that the notices of acquisition were sent by respondents by ordinary mail only, thereby disregarding the procedural requirement that notices be served personally or by registered mail. This is not disputed by respondents, but they allege that petitioner changed its address without notifying the DAR. Notably, the procedure prescribed speaks of only two modes of service of notices

of acquisition — personal service and service by registered mail. The non-inclusion of other modes of service can only mean that the legislature intentionally omitted them. In other words, service of a notice of acquisition other than personally or by registered mail is not valid. Casus omissus pro omisso habendus est. The reason is obvious. Personal service and service by registered mail are methods that ensure the receipt by the addressee, whereas service by ordinary mail affords no reliable proof of receipt. Since it governs the extraordinary method of expropriating private property, the CARL should be strictly construed. Consequently, faithful compliance with its provisions, especially those which relate to the procedure for acquisition of expropriated lands, should be observed. Therefore, the service by respondent DAR of the notices of acquisition to petitioner by ordinary mail, not being in conformity with the mandate of R.A. 6657, is invalid and ineffective. With more reason, the compulsory acquisition of portions of Hacienda Palico, for which no notices of acquisition were issued by the DAR, should be declared invalid. The entire ponencia, save for the last six (6) pages, deals with the mandatory procedures promulgated by law and DAR and how they have not been complied with. There can be no debate over the procedures and their violation. However, I respectfully dissent in the conclusions reached in the last six pages. Inspite of all the violations, the deprivation of petitioner's rights, the non-payment of just compensation, and the consequent nullity of the CLOAs, the Court is remanding the case to the DAR for it to act on the petitioner's pending applications for conversion which have been unacted upon for seven (7) years. Petitioner had applications for conversion pending with DAR. Instead of deciding them one way or the other, DAR sat on the applications for seven (7) years. At that same time it rendered the applications inutile by distributing CLOAs to alleged tenants. This action is even worse than a denial of the applications because DAR had effectively denied the application against the applicant without rendering a formal decision. This kind of action preempted any other kind of decision except denial. Formal denial was even unnecessary. In the case of Hacienda Palico, the application was in fact denied on November 8, 1993. There are indisputable and established factors which call for a more definite and clearer judgment. The basic issue in this case is whether or not the disputed property is agricultural in nature and covered by CARP. That petitioner's lands are non-agricultural in character is clearly shown by the evidence presented by petitioner, all of which were not disputed by respondents. The disputed property is definitely not subject to CARP. The nature of the land as non-agricultural has been resolved by the agencies with primary jurisdiction and competence to decide the issue, namely — (1) a Presidential Proclamation in 1975; (2) Certifications from the Department of Agriculture; (3) a Zoning Ordinance of the Municipality of Nasugbu, approved by the Province of Batangas; and (4) by clear inference and admissions, Administrative Orders and Guidelines promulgated by DAR itself. The records show that on November 20, 1975 even before the enactment of the CARP law, the Municipality of Nasugbu, Batangas was declared a "tourist zone" in the exercise of lawmaking power by then President Ferdinand E. Marcos under Proclamation No. 1520 (Rollo, pp. 122-123). This Presidential Proclamation is indubitably part of the law of the land. On 20 March 1992 the Sangguniang Bayan of Nasugbu promulgated its Resolution No. 19, a zonification ordinance (Rollo, pp. 124-200), pursuant to its powers under Republic Act No. 7160, i.e.,

the Local Government Code of 1991. The municipal ordinance was approved by the Sangguniang Panlalawigan of Batangas (Rollo, p. 201). Under this enactment, portions of the petitioner's properties within the municipality were re-zonified as intended and appropriate for non-agricultural uses. These two issuances, together with Proclamation 1520, should be sufficient to determine the nature of the land as non-agricultural. But there is more. The records also contain a certification dated March 1, 1993 from the Director of Region IV of the Department of Agriculture that the disputed lands are no longer economically feasible and sound for agricultural purposes (Rollo, p. 213). DAR itself impliedly accepted and determined that the municipality of Nasugbu is non-agricultural when it affirmed the force and effect of Presidential Proclamation 1520. In an Order dated January 22, 1991, DAR granted the conversion of the adjoining and contiguous landholdings owned by Group Developer and Financiers, Inc. in Nasugbu pursuant to the Presidential Proclamation. The property alongside the disputed properties is now known as "Batulao Resort Complex". As will be shown later, the conversion of various other properties in Nasugbu has been ordered by DAR, including a property disputed in this petition, Hacienda Caylaway. Inspite of all the above, the Court of Appeals concluded that the lands comprising petitioner's haciendas are agricultural, citing, among other things, petitioner's acts of voluntarily offering Hacienda Caylaway for sale and applying for conversion its lands from agricultural to nonagricultural. Respondents, on the other hand, did not only ignore the administrative and executive decisions. It also contended that the subject land should be deemed agricultural because it is neither residential, commercial, industrial or timber. The character of a parcel of land, however, is not determined merely by a process of elimination. The actual use which the land is capable of should be the primordial factor. RA 6657 explicitly limits its coverage thus: The Comprehensive Agrarian Reform Law of 1998 shall cover, regardless of tenurial arrangement and commodity produced, all public and private agricultural lands as provided in Proclamation No. 131 and Executive Order No. 229, including other lands of the public domain suitable for agriculture. More specifically, the following lands are covered by the Comprehensive Agrarian Reform Program: (a) All alienable and disposable lands of the public domain devoted to or suitable for agriculture. No reclassification of forest or mineral lands to agricultural lands shall be undertaken after the approval of this Act until Congress, taking into account, ecological, developmental and equity considerations, shall have determined by law, the specific limits of the public domain; (b) All lands of the public domain in excess of the specific limits as determined by Congress in the preceding paragraph; (c) All other lands owned by the Government devoted to or suitable for agriculture; and

(d) All private lands devoted to or suitable for a agriculture regardless of the agricultural products raised or that can be raised thereon." (RA 6657, Sec. 4; emphasis provided) In Luz Farms v. Secretary of the Department of Agrarian Reform and Natalia Realty, Inc. v. Department of Agrarian Reform, this Court had occasion to rule that agricultural lands are only those which are arable and suitable. It is at once noticeable that the common factor that classifies land use as agricultural, whether it be public or private land, is its suitability for agriculture. In this connection, RA 6657 defines "agriculture" as follows: Agriculture, Agricultural Enterprises or Agricultural Activity means the cultivation of the soil, planting of crops, growing of fruit trees, raising of livestock, poultry or fish, including the harvesting of such farm products, and other farm activities, and practices performed by a farmer in conjunction with such farming operations done by persons whether natural or juridical. (RA 6657, sec. 3[b]) In the case at bar, petitioner has presented certifications issued by the Department of Agriculture to the effect that Haciendas Palico, Banilad and Caylaway are not feasible and economically viable for agricultural development due to marginal productivity of the soil, based on an examination of their slope, terrain, depth, irrigability, fertility, acidity, and erosion factors (Petition, Annex "L", Rollo, p. 213; Annex "U", Rollo, p. 228). This finding should be accorded respect considering that it came from competent authority, said Department being the agency possessed with the necessary expertise to determine suitability of lands to agriculture. The DAR Order dated January 22, 1991 issued by respondent itself stated that the adjacent land now known as the Batulao Resort Complex is hilly, mountainous, and with long and narrow ridges and deep gorges. No permanent sites are planted. Cultivation is by kaingin method. This confirms the findings of the Department of Agriculture. Parenthetically, the foregoing finding of the Department of Agriculture also explains the validity of the reclassification of petitioner's lands by the Sangguniang Bayan of Nasugbu, Batangas, pursuant to Section 20 of the Local Government Code of 1991. It shows that the condition imposed by respondent Secretary of Agrarian Reform on petitioner for withdrawing its voluntary offer to sell Hacienda Caylaway, i.e., that the soil be unsuitable for agriculture, has been adequately met. In fact, the DAR in its Order in Case No. A-9999-050-97, involving a piece of land also owned by petitioner and likewise located in Caylaway, exempted it from the coverage of CARL (Order dated May 17, 1999; Annex "D" of Petitioner's Manifestation), on these grounds. Furthermore, and perhaps more importantly, the subject lands are within an area declared in 1975 by Presidential Proclamation No. 1520 to be part of a tourist zone. This determination was made when the tourism prospects of the area were still for the future. The studies which led to the land classification were relatively freer from pressures and, therefore, more objective and open-minded. Respondent, however, contends that agriculture is not incompatible with the lands' being part of a tourist zone since "agricultural production, by itself, is a natural asset and, if properly set, can command tremendous aesthetic value in the form of scenic views and variety of countryside profiles." (Comment, Rollo, 579). The contention is untenable. Tourist attractions are not limited to scenic landscapes and lush greeneries. Verily, tourism is enhanced by structures and facilities such as hotels, resorts, rest houses, sports clubs and golf courses, all of which bind the land and render it unavailable for cultivation. As aptly described by petitioner:

The development of resorts, golf courses, and commercial centers is inconsistent with agricultural development. True, there can be limited agricultural production within the context of tourism development. However, such small scale farming activities will be dictated by, and subordinate to the needs or tourism development. In fact, agricultural use of land within Nasugbu may cease entirely if deemed necessary by the Department of Tourism (Reply, Rollo, p. 400). The lands subject hereof, therefore, are non-agricultural. Hence, the voluntary offer to sell Hacienda Caylaway should not be deemed an admission that the land is agricultural. Rather, the offer was made by petitioner in good faith, believing at the time that the land could still be developed for agricultural production. Notably, the offer to sell was made as early as May 6, 1988, before the soil thereon was found by the Department of Agriculture to be unsuitable for agricultural development (the Certifications were issued on 2 February 1993 and 1 March 1993). Petitioner's withdrawal of its voluntary offer to sell, therefore, was not borne out of a whimsical or capricious change of heart. Quite simply, the land turned out to be outside of the coverage of the CARL, which by express provision of RA 6657, Section 4, affects only public and private agricultural lands. As earlier stated, only on May 17, 1999, DAR Secretary Horacio Morales, Jr. approved the application for a lot in Caylaway, also owned by petitioner, and confirmed the seven (7) documentary evidences proving the Caylaway area to be non-agricultural (DAR Order dated 17 May 1999, in Case No. A-9999-05097, Annex "D" Manifestation). The DAR itself has issued administrative circulars governing lands which are outside of CARP and may not be subjected to land reform. Administrative Order No. 3, Series of 1996 declares in its policy statement what landholdings are outside the coverage of CARP. The AO is explicit in providing that such non-covered properties shall be reconveyed to the original transferors or owners. These non-covered lands are: a. Land, or portions thereof, found to be no longer suitable for agriculture and, therefore, could not be given appropriate valuation by the Land Bank of the Philippines (LBP); b. Those were a Conversion Order has already been issued by the DAR allowing the use of the landholding other than for agricultural purposes in accordance with Section 65 of R.A. No. 6657 and Administrative Order No. 12, Series of 1994; c. Property determined to be exempted from CARP coverage pursuant to Department of Justice Opinion Nos. 44 and 181; or d. Where a Presidential Proclamation has been issued declaring the subject property for certain uses other than agricultural. (Annex "F", Manifestation dated July 23, 1999) The properties subject of this Petition are covered by the first, third, and fourth categories of the Administrative Order. The DAR has disregarded its own issuances which implement the law. To make the picture clearer, I would like to summarize the law, regulations, ordinances, and official acts which show beyond question that the disputed property is non-agricultural, namely:

(a) The Law. Proclamation 1520 dated November 20, 1975 is part of the law of the land. It declares the area in and around Nasugbu, Batangas, as a Tourist Zone. It has not been repealed, and has in fact been used by DAR to justify conversion of other contiguous and nearby properties of other parties. (b) Ordinances of Local Governments. Zoning ordinance of the Sangguniang Bayan of Nasugbu, affirmed by the Sangguniang Panlalawigan of Batangas, expressly defines the property as tourist, not agricultural. The power to classify its territory is given by law to the local governments. (c) Certification of the Department of Agriculture that the property is not suitable and viable for agriculture. The factual nature of the land, its marginal productivity and non-economic feasibility for cultivation, are described in detail. (d) Acts of DAR itself which approved conversion of contiguous or adjacent land into the Batulao Resorts Complex. DAR described at length the non-agricultural nature of Batulao and of portion of the disputed property, particularly Hacienda Caylaway. (e) DAR Circulars and Regulations. DAR Administrative Order No. 6, Series of 1994 subscribes to the Department of Justice opinion that the lands classified as nonagricultural before the CARP Law, June 15, 1988, are exempt from CARP. DAR Order dated January 22, 1991 led to the Batulao Tourist Area. DAR Order in Case No. H-9999-050-97, May 17, 1999, exempted 13.5 hectares of Caylaway, similarly situated and of the same nature as Batulao, from coverage. DAR Administrative Order No. 3, Series of 1996, if followed, would clearly exclude subject property from coverage. As earlier shown, DAR has, in this case, violated its own circulars, rules and regulations. In addition to the DAR circulars and orders which DAR itself has not observed, the petitioner has submitted a municipal map of Nasugbu, Batangas (Annex "E", Manifestation dated July 23, 1999). The geographical location of Palico, Banilad, and Caylaway in relation to the GDFI property, now Batulao Tourist Resort, shows that the properties subject of this case are equally, if not more so, appropriate for conversion as the GDFI resort. Petitioner's application for the conversion of its lands from agricultural to non-agricultural was meant to stop the DAR from proceeding with the compulsory acquisition of the lands and to seek a clear and authoritative declaration that said lands are outside of the coverage of the CARL and can not be subjected to agrarian reform. Petitioner assails respondent's refusal to convert its lands to non-agricultural use and to recognize Presidential Proclamation No. 1520, stating that respondent DAR has not been consistent in its treatment of applications of this nature. It points out that in the other case involving adjoining lands in Nasugbu, Batangas, respondent DAR ordered the conversion of the lands upon application of Group Developers and Financiers, Inc. Respondent DAR, in that case, issued an Order dated January 22, 1991 denying the motion for reconsideration filed by the farmers thereon and finding that: In fine, on November 27, 1975, or before the movants filed their instant motion for reconsideration, then President Ferdinand E. Marcos issued Proclamation No. 1520, declaring the municipalities of Maragondon and Ternate in the province of Cavite and the municipality of Nasugbu in the province of Batangas as tourist zone. Precisely, the landholdings in question are included in such proclamation. Up to now, this office

is not aware that said issuance has been repealed or amended (Petition, Annex "W"; Rollo, p. 238). The DAR Orders submitted by petitioner, and admitted by DAR in its Rejoinder (Rejoinder of DAR dated August 20, 1999), show that DAR has been inconsistent to the extent of being arbitrary. Apart from the DAR Orders approving the conversion of the adjoining property now called Batulao Resort Complex and the DAR Order declaring parcels of the Caylaway property as not covered by CARL, a major Administrative Order of DAR may also be mentioned. The Department of Justice in DOJ Opinion No. 44 dated March 16, 1990 (Annex "A" of Petitioner's Manifestation) stated that DAR was given authority to approve land conversions only after June 15, 1988 when RA 6657, the CARP Law, became effective. Following the DOJ Opinion, DAR issued its AO No. 06, Series of 1994 providing for the Guidelines on Exemption Orders (Annex "B", Id.). The DAR Guidelines state that lands already classified as non-agricultural before the enactment of CARL are exempt from its coverage. Significantly, the disputed properties in this case were classified as tourist zone by no less than a Presidential Proclamation as early as 1975, long before 1988. The above, petitioner maintains, constitute unequal protection of the laws. Indeed, the Constitution guarantees that "(n)o person shall be deprived of life, liberty or property without due process of law, nor shall any person be denied the equal protection of the laws" (Constitution, Art. III, Sec. 1). Respondent DAR, therefore, has no alternative but to abide by the declaration in Presidential Proclamation 1520, just as it did in the case of Group Developers and Financiers, Inc., and to treat petitioners' properties in the same way it did the lands of Group Developers, i.e., as part of a tourist zone not suitable for agriculture. On the issue of non-payment of just compensation which results in a taking of property in violation of the Constitution, petitioner argues that the opening of a trust account in its favor did not operate as payment of the compensation within the meaning of Section 16 (e) of RA 6657. In Land Bank of the Philippines v. Court of Appeals(249 SCRA 149, at 157 [1995]), this Court struck down as null and void DAR Administrative Circular No. 9, Series of 1990, which provides for the opening of trust accounts in lieu of the deposit in cash or in bonds contemplated in Section 16 (e) of RA 6657. It is very explicit therefrom (Section 16 [e]) that the deposit must be made only in "cash" or in "LBP bonds." Nowhere does it appear nor can it be inferred that the deposit can be made in any other form. If it were the intention to include a "trust account" among the valid modes of deposit, that should have been made express, or at least, qualifying words ought to have appeared from which it can be fairly deduced that a "trust account" is allowed. In sum, there is no ambiguity in Section 16(e) of RA 6657 to warrant an expanded construction of the term "deposit." xxx

xxx

xxx

In the present suit, the DAR clearly overstepped the limits of its powers to enact rules and regulations when it issued Administrative Circular No. 9. There is no basis in allowing the opening of a trust account in behalf of the landowner as compensation for his property because, as heretofore discussed, section 16(e) of RA 6657 is very specific that the deposit must be made only in "cash" or in "LBP bonds." In the same vein, petitioners cannot invoke LRA Circular Nos. 29, 29-A and 54 because these implementing regulations cannot outweigh the clear provision of the law. Respondent court therefore did not commit any error in striking down Administrative Circular No. 9 for being null and void.

There being no valid payment of just compensation, title to petitioner's landholdings cannot be validly transferred to the Government. A close scrutiny of the procedure laid down in Section 16 of RA 6657 shows the clear legislative intent that there must first be payment of the fair value of the land subject to agrarian reform, either directly to the affected landowner or by deposit of cash or LBP bonds in the DAR-designated bank, before the DAR can take possession of the land and request the register of deeds to issue a transfer certificate of title in the name of the Republic of the Philippines. This is only proper inasmuch as title to private property can only be acquired by the government after payment of just compensation In Association of Small Landowners in the Philippines v. Secretary of Agrarian Reform (175 SCRA 343, 391 [1989]), this Court held: The CARP Law, for its part, conditions the transfer of possession and ownership of the land to the government on receipt of the landowner of the corresponding payment or the deposit by the DAR of the compensation in cash or LBP bonds with an accessible bank. Until then, title also remains with the landowner. No outright change of ownership is contemplated either. Necessarily, the issuance of the CLOAs by respondent DAR on October 30, 1993 and their distribution to farmer-beneficiaries were illegal inasmuch as no valid payment of compensation for the lands was as yet effected. By law, Certificates of Land Ownership Award are issued only to the beneficiaries after the DAR takes actual possession of the land (RA 6657, Sec. 24), which in turn should only be after the receipt by the landowner of payment or, in case of rejection or no response from the landowner, after the deposit of the compensation for the land in cash or in LBP bonds (RA 6657, Sec. 16[e]). Respondents argue that the Land Bank ruling should not be made to apply to the compulsory acquisition of petitioner's landholdings in 1993, because it occurred prior to the promulgation of the said decision (October 6, 1995). This is untenable. Laws may be given retroactive effect on constitutional considerations, where the prospective application would result in a violation of a constitutional right. In the case at bar, the expropriation of petitioner's lands was effected without a valid payment of just compensation, thus violating the Constitutional mandate that "(p)rivate property shall not be taken for public use without just compensation" (Constitution, Art. III, Sec. 9). Hence, to deprive petitioner of the benefit of the Land Bank ruling on the mere expedient that it came later than the actual expropriation would be repugnant to petitioner's fundamental rights. The controlling last two (2) pages of the ponencia state: Finally, we stress that the failure of respondent DAR to comply with the requisites of due process in the acquisition proceedings does not give this Court the power to nullify the CLOA's already issued to the farmer beneficiaries. To assume the power is to short-circuit the administrative process, which has yet to run its regular course. Respondent DAR must be given the chance to correct its procedural lapses in the acquisition proceedings. In Hacienda Palico alone, CLOA's were issued to 177 farmer beneficiaries in 1993. Since then until the present, these farmers have been cultivating their lands. It goes against the basic precepts of justice, fairness and equity to deprive these people, through no fault of their own, of the land they till. Anyhow, the farmer beneficiaries hold the property in trust for the rightful owner of the land. I disagree with the view that this Court cannot nullify illegally issued CLOA's but must ask the DAR to first reverse and correct itself.

Given the established facts, there was no valid transfer of petitioner's title to the Government. This being so, there was also no valid title to transfer to third persons; no basis for the issuance of CLOAs. Equally important, CLOAs do not have the nature of Torrens Title. Administrative cancellation of title is sufficient to invalidate them. The Court of Appeals said so in its Resolution in this case. It stated: Contrary to the petitioner's argument that issuance of CLOAs to the beneficiaries prior to the deposit of the offered price constitutes violation of due process, it must be stressed that the mere issuance of the CLOAs does not vest in the farmer/grantee ownership of the land described therein. At most the certificate merely evidences the government's recognition of the grantee as the party qualified to avail of the statutory mechanisms for the acquisition of ownership of the land. Thus failure on the part of the farmer/grantee to comply with his obligations is a ground for forfeiture of his certificate of transfer. Moreover, where there is a finding that the property is indeed not covered by CARP, then reversion to the landowner shall consequently be made, despite issuance of CLOAs to the beneficiaries. (Resolution dated January 17, 1997, p. 6) DAR Administrative Order 03, Series of 1996 (issued on August 8, 1996; Annex "F" of Petitioner's Manifestation) outlines the procedure for the reconveyance to landowners of properties found to be outside the coverage of CARP. DAR itself acknowledges that they can administratively cancel CLOAs if found to be erroneous. From the detailed provisions of the Administrative Order, it is apparent that there are no impediments to the administrative cancellation of CLOAs improperly issued over exempt properties. The procedure is followed all over the country. The DAR Order spells out that CLOAs are not Torrens Titles. More so if they affect land which is not covered by the law under which they were issued. In its Rejoinder, respondent DAR states: 3.2. And, finally, on the authority of DAR/DARAB to cancel erroneously issued Emancipation Patents (EPs) or Certificate of Landownership Awards (CLOAs), same is enshrined, it is respectfully submitted, in Section 50 of Republic Act No. 6657. In its Supplemental Manifestation, petitioner points out, and this has not been disputed by respondents, that DAR has also administratively cancelled twenty five (25) CLOAs covering Nasugbu properties owned by the Manila Southcoast Development Corporation near subject Roxas landholdings. These lands were found not suitable for agricultural purposes because of soil and topographical characteristics similar to those of the disputed properties in this case. The former DAR Secretary, Benjamin T. Leong, issued DAR Order dated January 22, 1991 approving the development of property adjacent and contiguous to the subject properties of this case into the Batulao Tourist Resort. Petitioner points out that Secretary Leong, in this Order, has decided that the land — 1. Is, as contended by the petitioner GDFI "hilly, mountainous, and characterized by poor soil condition and nomadic method of cultivation, hence not suitable to agriculture."

2. Has as contiguous properties two haciendas of Roxas y Cia and found by Agrarian Reform Team Leader Benito Viray to be "generally rolling, hilly and mountainous and strudded (sic) with long and narrow ridges and deep gorges. Ravines are steep grade ending in low dry creeks." 3. Is found in an. area where "it is quite difficult to provide statistics on rice and corn yields because there are no permanent sites planted. Cultivation is by Kaingin Method." 4. Is contiguous to Roxas Properties in the same area where "the people entered the property surreptitiously and were difficult to stop because of the wide area of the two haciendas and that the principal crop of the area is sugar . . .." (emphasis supplied). I agree with petitioner that under DAR AO No. 03, Series of 1996, and unlike lands covered by Torrens Titles, the properties falling under improperly issued CLOAs are cancelled by mere administrative procedure which the Supreme Court can declare in cases properly and adversarially submitted for its decision. If CLOAs can under the DAR's own order be cancelled administratively, with more reason can the courts, especially the Supreme Court, do so when the matter is clearly in issue. With due respect, there is no factual basis for the allegation in the motion for intervention that farmers have been cultivating the disputed property. The property has been officially certified as not fit for agriculture based on slope, terrain, depth, irrigability, fertility, acidity, and erosion. DAR, in its Order dated January 22, 1991, stated that "it is quite difficult to provide statistics on rice and corn yields (in the adjacent property) because there are no permanent sites planted. Cultivation is by kaingin method." Any allegations of cultivation, feasible and viable, are therefore falsehoods. The DAR Order on the adjacent and contiguous GDFI property states that "(T)he people entered the property surreptitiously and were difficult to stop . . .." The observations of Court of Appeals Justices Verzola and Magtolis in this regard, found in their dissenting opinion (Rollo, p. 116), are relevant: 2.9 The enhanced value of land in Nasugbu, Batangas, has attracted unscrupulous individuals who distort the spirit of the Agrarian Reform Program in order to turn out quick profits. Petitioner has submitted copies of CLOAs that have been issued to persons other than those who were identified in the Emancipation Patent Survey Profile as legitimate Agrarian Reform beneficiaries for particular portions of petitioner's lands. These persons to whom the CLOAs were awarded, according to petitioner, are not and have never been workers in petitioner's lands. Petitioners say they are not even from Batangas but come all the way from Tarlac. DAR itself is not unaware of the mischief in the implementation of the CARL in some areas of the country, including Nasugbu. In fact, DAR published a "WARNING TO THE PUBLIC" which appeared in the Philippine Daily Inquirer of April 15, 1994 regarding this malpractice. 2.10 Agrarian Reform does not mean taking the agricultural property of one and giving it to another and for the latter to unduly benefit therefrom by subsequently "converting" the same property into non-agricultural purposes.

2.11 The law should not be interpreted to grant power to the State, thru the DAR, to choose who should benefit from multi-million peso deals involving lands awarded to supposed agrarian reform beneficiaries who then apply for conversion, and thereafter sell the lands as non-agricultural land. Respondents, in trying to make light of this problem, merely emphasize that CLOAs are not titles. They state that "rampant selling of rights", should this occur, could be remedied by the cancellation or recall by DAR. In the recent case of "Hon. Carlos O. Fortich, et. al. vs. Hon. Renato C. Corona, et. al." (G.R. No. 131457, April 24, 1998), this Court found the CLOAs given to the respondent farmers to be improperly issued and declared them invalid. Herein petitioner Roxas and Co., Inc. has presented a stronger case than petitioners in the aforementioned case. The procedural problems especially the need for referral to the Court of Appeals are not present. The instant petition questions the Court of Appeals decision which acted on the administrative decisions. The disputed properties in the present case have been declared non-agricultural not so much because of local government action but by Presidential Proclamation. They were found to be non-agricultural by the Department of Agriculture, and through unmistakable implication, by DAR itself. The zonification by the municipal government, approved by the provincial government, is not the only basis. On a final note, it may not be amiss to stress that laws which have for their object the preservation and maintenance of social justice are not only meant to favor the poor and underprivileged. They apply with equal force to those who, notwithstanding their more comfortable position in life, are equally deserving of protection from the courts. Social justice is not a license to trample on the rights of the rich in the guise of defending the poor, where no act of injustice or abuse is being committed against them. As we held in Land Bank (supra.): It has been declared that the duty of the court to protect the weak and the underprivileged should not be carried out to such an extent as to deny justice to the landowner whenever truth and justice happen to be on his side. As eloquently stated by Justice Isagani Cruz: . . . social justice — or any justice for that matter — is for the deserving, whether he be a millionaire in his mansion or a pauper in his hovel. It is true that, in case of reasonable doubt, we are called upon to tilt the balance in favor of the poor simply because they are poor, to whom the Constitution fittingly extends its sympathy and compassion. But never is it justified to prefer the poor simply because they are poor, or to eject the rich simply because they are rich, for justice must always be served, for poor and rich alike, according to the mandate of the law. IN THE LIGHT OF THE FOREGOING, I vote to grant the petition for certiorari; and to declare Haciendas Palico, Banilad and Caylaway, all situated in Nasugbu, Batangas, to be non-agricultural and outside the scope of Republic Act No. 6657. I further vote to declare the Certificates of Land Ownership Award issued by respondent Department of Agrarian Reform null and void and to enjoin respondents from proceeding with the compulsory acquisition of the lands within the subject properties. I finally vote to DENY the motion for intervention. THIRD DIVISION G.R. No. 170346

March 12, 2007

HEIRS OF NICOLAS JUGALBOT, Represented by LEONILA B. JUGALBOT, Petitioners, vs. COURT OF APPEALS and HEIRS OF VIRGINIA A. ROA, Represented by LOLITA R. GOROSPE, Administratrix, Respondents. DECISION YNARES-SANTIAGO, J.: Petitioners, Heirs of Nicolas Jugalbot, represented by their attorney-in-fact Leonila Jugalbot, assail the Decision1 of the Court of Appeals dated October 19, 2005 in CA-G.R. SP No. 81823 where the petitioners’ title to the disputed property, as evidenced by Transfer Certificate of Title (TCT) No. E103, was cancelled and the previous title, TCT No. T-11543, was reinstated in the name of Virginia A. Roa. The appellate court reversed the Decision2 and Resolution3 of the Department of Agrarian Reform Adjudication Board (DARAB) Central Office in DARAB Case No. 7966, affirming the Decision4 of the Provincial Adjudicator and the Order5 denying the motion for reconsideration in DARAB Case No. X (06-1358) filed in Misamis Oriental, for Cancellation of TCT No. E-103, Recovery of Possession and Damages. On September 28, 1997, an Emancipation Patent (EP) was issued to Nicolas Jugalbot based on the latter’s claim that he was the tenant of Lot 2180-C of the Subdivision plan (LRC) TSD-10465, subject property of the case at bar, with an area of 6,229 square meters, located at Barangay Lapasan, Cagayan de Oro City. The subject property was registered in the name of Virginia A. Roa under Transfer Certificate of Title (TCT) No. T-11543, the same being issued on April 1, 1970 in the name of "Virginia A. Roa married to Pedro N. Roa." The property was originally registered in the name of Marcelino Cabili from whom Virginia A. Roa purchased the same sometime in 1966. 6 Nicolas Jugalbot alleged that he was a tenant of the property continuously since the 1950s. On a Certification dated January 8, 1988 and issued by Department of Agrarian Reform (DAR) Team Leader Eduardo Maandig, the subject property was declared to be tenanted as of October 21, 1972 and primarily devoted to rice and corn. On March 1, 1988, the Emancipation Patent was registered with the Register of Deeds and Nicolas Jugalbot was issued TCT No. E-103. 7 On August 10, 1998, the heirs of Virginia A. Roa, herein private respondents, filed before the DARAB Provincial Office of Misamis Oriental a Complaint for Cancellation of Title (TCT No. E-103), Recovery of Possession and Damages against Nicolas Jugalbot, docketed as DARAB Case No. X (06-1358). 8 On October 23, 1998, a Decision was rendered by the DARAB Provincial Adjudicator dismissing private respondents’ complaint and upholding the validity of the Emancipation Patent. Private respondents’ motion for reconsideration was denied. 9 On appeal, the DARAB Central Office affirmed the Provincial Adjudicator’s decision on the sole ground that private respondents’ right to contest the validity of Nicolas Jugalbot’s title was barred by prescription. It held that an action to invalidate a certificate of title on the ground of fraud prescribes after the expiration of one year from the decree of registration.10 On November 10, 2003, the DARAB denied private respondents’ motion for reconsideration, 11 hence they filed a petition for review before the Court of Appeals which was granted. The appellate court reversed the Decision and Resolution of the DARAB Central Office on four grounds: (1) the absence of a tenancy relationship; (2) lack of notice to Virginia Roa by the DAR; (3) the area of the property which was less than one hectare and deemed swampy, rainfed and kangkong-producing; and (4) the

classification of the subject property as residential, which is outside the coverage of Presidential Decree No. 27. Hence, this petition for review on certiorari under Rule 45. The sole issue for determination is whether a tenancy relationship exists between petitioners Heirs of Nicolas Jugalbot, and private respondents, Heirs of Virginia A. Roa, under Presidential Decree No. 27. Simply stated, are petitioners de jure tenants of private respondents? As clearly laid down in Qua v. Court of Appeals12 and subsequently in Benavidez v. Court of Appeals,13 the doctrine is well-settled that the allegation that an agricultural tenant tilled the land in question does not automatically make the case an agrarian dispute. It is necessary to first establish the existence of a tenancy relationship between the party litigants. The following essential requisites must concur in order to establish a tenancy relationship: (a) the parties are the landowner and the tenant; (b) the subject matter is agricultural land; (c) there is consent; (d) the purpose is agricultural production; (e) there is personal cultivation by the tenant; and (f) there is a sharing of harvests between the parties.14 Valencia v. Court of Appeals15 further affirms the doctrine that a tenancy relationship cannot be presumed. Claims that one is a tenant do not automatically give rise to security of tenure. The elements of tenancy must first be proved in order to entitle the claimant to security of tenure. There must be evidence to prove the allegation that an agricultural tenant tilled the land in question. Hence, a perusal of the records and documents is in order to determine whether there is substantial evidence to prove the allegation that a tenancy relationship does exist between petitioner and private respondents. The principal factor in determining whether a tenancy relationship exists is intent. 16 Tenancy is not a purely factual relationship dependent on what the alleged tenant does upon the land. It is also a legal relationship, as ruled in Isidro v. Court of Appeals.17 The intent of the parties, the understanding when the farmer is installed, and their written agreements, provided these are complied with and are not contrary to law, are even more important.18 Petitioners allege that they are bona fide tenants of private respondents under Presidential Decree No. 27. Private respondents deny this, citing inter alia, that Virginia A. Roa was not given a notice of coverage of the property subject matter of this case; that Virginia A. Roa and the private respondents did not have any tenant on the same property; that the property allegedly covered by Presidential Decree No. 27 was residential land; that the lot was paraphernal property of Virginia A. Roa; and the landholding was less than seven (7) hectares. The petition is devoid of merit. The petitioners are not de jure tenants of private respondents under Presidential Decree No. 27 due to the absence of the essential requisites that establish a tenancy relationship between them. Firstly, the taking of subject property was done in violation of constitutional due process. The Court of Appeals was correct in pointing out that Virginia A. Roa was denied due process because the DAR failed to send notice of the impending land reform coverage to the proper party. The records show that notices were erroneously addressed and sent in the name of Pedro N. Roa who was not the owner, hence, not the proper party in the instant case. The ownership of the property, as can be gleaned from the records, pertains to Virginia A. Roa. Notice should have been therefore served on her, and not Pedro N. Roa.

Spouses Estonina v. Court of Appeals19 held that the presumption under civil law that all property of the marriage belongs to the conjugal partnership applies only when there is proof that the property was acquired during the marriage. Otherwise stated, proof of acquisition during the marriage is a condition sine qua non for the operation of the presumption in favor of the conjugal partnership.20 In Spouses Estonina, petitioners were unable to present any proof that the property in question was acquired during the marriage of Santiago and Consuelo Garcia. The fact that when the title over the land in question was issued, Santiago Garcia was already married to Consuelo as evidenced by the registration in the name of "Santiago Garcia married to Consuelo Gaza," does not suffice to establish the conjugal nature of the property. 21 In the instant case, the Court of Appeals correctly held that the phrase "married to" appearing in certificates of title is no proof that the properties were acquired during the spouses’ coverture and are merely descriptive of the marital status of the person indicated therein. The clear import from the certificate of title is that Virginia is the owner of the property, the same having been registered in her name alone, and being "married to Pedro N. Roa" was merely descriptive of her civil status. 22 Since no proof was adduced that the property was acquired during the marriage of Pedro and Virginia Roa, the fact that when the title over the land in question was issued, Virginia Roa was already married to Pedro N. Roa as evidenced by the registration in the name of "Virginia A. Roa married to Pedro N. Roa," does not suffice to establish the conjugal nature of the property. In addition, the defective notice sent to Pedro N. Roa was followed by a DAR certification signed by team leader Eduardo Maandig on January 8, 1988 stating that the subject property was tenanted as of October 21, 1972 and primarily devoted to rice and corn despite the fact that there was no ocular inspection or any on-site fact-finding investigation and report to verify the truth of the allegations of Nicolas Jugalbot that he was a tenant of the property. The absence of such ocular inspection or onsite fact-finding investigation and report likewise deprives Virginia A. Roa of her right to property through the denial of due process. By analogy, Roxas & Co., Inc. v. Court of Appeals23 applies to the case at bar since there was likewise a violation of due process in the implementation of the Comprehensive Agrarian Reform Law when the petitioner was not notified of any ocular inspection and investigation to be conducted by the DAR before acquisition of the property was to be undertaken. Neither was there proof that petitioner was given the opportunity to at least choose and identify its retention area in those portions to be acquired.24 Both in the Comprehensive Agrarian Reform Law and Presidential Decree No. 27, the right of retention and how this right is exercised, is guaranteed by law. Since land acquisition under either Presidential Decree No. 27 and the Comprehensive Agrarian Reform Law govern the extraordinary method of expropriating private property, the law must be strictly construed. Faithful compliance with legal provisions, especially those which relate to the procedure for acquisition of expropriated lands should therefore be observed. In the instant case, no proper notice was given to Virginia A. Roa by the DAR. Neither did the DAR conduct an ocular inspection and investigation. Hence, any act committed by the DAR or any of its agencies that results from its failure to comply with the proper procedure for expropriation of land is a violation of constitutional due process and should be deemed arbitrary, capricious, whimsical and tainted with grave abuse of discretion. Secondly, there is no concrete evidence on record sufficient to establish that Nicolas Jugalbot or the petitioners personally cultivated the property under question or that there was sharing of harvests, except for their self-serving statements. Clearly, there is no showing that Nicolas Jugalbot or any of his farm household cultivated the land in question. No proof was presented except for their selfserving statements that they were tenants of Virginia A. Roa. Independent evidence, aside from their

self-serving statements, is needed to prove personal cultivation, sharing of harvests, or consent of the landowner, and establish a tenancy relationship. Furthermore, in the findings of fact of the Court of Appeals, it was undisputed that Nicolas Jugalbot was a soldier in the United States Army from June 15, 1946 to April 27, 1949 25 and upon retirement, migrated to the United States and returned to the Philippines sometime in 1998. 26 It was established that Jugalbot’s wife Miguela and daughter Lilia P. Jugalbot are residents of 17623 Grayland Avenue, Artesia, California, U.S.A., where Nicolas Jugalbot spent his retirement. 27 Thus, the DAR, in particular its team leader Eduardo Maandig, haphazardly issued a certification dated January 8, 1988 that the subject property was tenanted as of October 21, 1972 by Nicolas Jugalbot and primarily devoted to rice and corn without the benefit of any on-site fact-finding investigation and report. This certification became the basis of the emancipation patent and subsequently, TCT No. E103 issued on March 1, 1988, which was less than two months from the issuance of the unsubstantiated DAR certification. Coincidentally, October 21, 1972 is the date Presidential Decree No. 27 was signed into law. Neither was there any evidence that the landowner, Virginia A. Roa, freely gave her consent, whether expressly or impliedly, to establish a tenancy relationship over her paraphernal property. As declared in Castillo v. Court of Appeals,28 absent the element of personal cultivation, one cannot be a tenant even if he is so designated in the written agreement of the parties. 29 In Berenguer, Jr. v. Court of Appeals,30 we ruled that the respondents’ self-serving statements regarding their tenancy relations could not establish the claimed relationship. The fact alone of working on another’s landholding does not raise a presumption of the existence of agricultural tenancy. Substantial evidence does not only entail the presence of a mere scintilla of evidence in order that the fact of sharing can be established; there must be concrete evidence on record adequate enough to prove the element of sharing.31 We further observed in Berenguer, Jr.: With respect to the assertion made by respondent Mamerto Venasquez that he is not only a tenant of a portion of the petitioner’s landholding but also an overseer of the entire property subject of this controversy, there is no evidence on record except his own claim in support thereof. The witnesses who were presented in court in an effort to bolster Mamerto’s claim merely testified that they saw him working on the petitioner’s landholding. More importantly, his own witnesses even categorically stated that they did not know the relationship of Mamerto and the petitioner in relation to the said landholding. x x x The fact alone of working on another’s landholding does not raise a presumption of the existence of agricultural tenancy. Other factors must be taken into consideration like compensation in the form of lease rentals or a share in the produce of the landholding involved. (Underscoring supplied) xxxx In the absence of any substantial evidence from which it can be satisfactorily inferred that a sharing arrangement is present between the contending parties, we, as a court of last resort, are duty-bound to correct inferences made by the courts below which are manifestly mistaken or absurd. x x x Without the essential elements of consent and sharing, no tenancy relationship can exist between the petitioner and the private respondents. (Underscoring supplied)32 Bejasa v. Court of Appeals33 likewise held that to prove sharing of harvests, a receipt or any other evidence must be presented as self-serving statements are deemed inadequate. Proof must always be adduced.34 In addition –

The Bejasas admit that prior to 1984, they had no contact with Candelaria. They acknowledge that Candelaria could argue that she did not know of Malabanan’s arrangement with them. True enough Candelaria disavowed any knowledge that the Bejasas during Malabanan’s lease possessed the land. However, the Bejasas claim that this defect was cured when Candelaria agreed to lease the land to the Bejasas for ₱20,000.00 per annum, when Malabanan died in 1983. We do not agree. In a tenancy agreement, consideration should be in the form of harvest sharing. Even assuming that Candelaria agreed to lease it out to the Bejasas for ₱20,000 per year, such agreement did not create a tenancy relationship, but a mere civil law lease. 35 Thirdly, the fact of sharing alone is not sufficient to establish a tenancy relationship. In Caballes v. Department of Agrarian Reform,36 we restated the well-settled rule that all the requisites must concur in order to create a tenancy relationship between the parties and the absence of one or more requisites does not make the alleged tenant a de facto tenant as contradistinguished from a de jure tenant. This is so because unless a person has established his status as a de jure tenant he is not entitled to security of tenure nor is he covered by the Land Reform Program of the Government under existing tenancy laws.37 The security of tenure guaranteed by our tenancy laws may be invoked only by tenants de jure, not by those who are not true and lawful tenants.38 As reiterated in Qua,39 the fact that the source of livelihood of the alleged tenants is not derived from the lots they are allegedly tenanting is indicative of non-agricultural tenancy relationship. 40 Finally, it is readily apparent in this case that the property under dispute is residential property and not agricultural property. Zoning Certification No. 98-084 issued on September 3, 1998 clearly shows that the subject property Lot 2180-C covered by TCT No. T-11543 with an area of 6,229 square meters and owned by Virginia A. Roa is located within the Residential 2 District in accordance with paragraph (b), Section 9, Article IV of Zoning Ordinance No. 880, Series of 1979 issued by the City Planning and Development Office of Cagayan de Oro City.41 To bolster the residential nature of the property, it must also be noted that no Barangay Agrarian Reform Council was organized or appointed by the DAR existed in Barangay Lapasan, Cagayan de Oro City, as all lands have been classified as residential or commercial, as certified by Barangay Captain of Lapasan. 42 In Gonzales v. Court of Appeals,43 we held that an agricultural leasehold cannot be established on land which has ceased to be devoted to cultivation or farming because of its conversion into a residential subdivision. Petitioners were not agricultural lessees or tenants of the land before its conversion into a residential subdivision in 1955. Not having been dispossessed by the conversion of the land into a residential subdivision, they may not claim a right to reinstatement. 44 This Court in Spouses Tiongson v. Court of Appeals45 succinctly ruled that the land surrounded by a residential zone is always classified as residential. The areas surrounding the disputed six hectares are now dotted with residences and, apparently, only this case has kept the property in question from being developed together with the rest of the lot to which it belongs. The fact that a caretaker plants rice or corn on a residential lot in the middle of a residential subdivision in the heart of a metropolitan area cannot by any strained interpretation of law convert it into agricultural land and subject it to the agrarian reform program.46 Despite the apparent lack of evidence establishing a tenancy relationship between petitioners and private respondents, the DARAB improperly recognized the existence of such a relationship in complete disregard of the essential requisites under Presidential Decree No. 27. DARAB committed grave abuse of discretion amounting to lack of jurisdiction in issuing an Emancipation Patent to Nicolas Jugalbot.

Once again, Benavidez v. Court of Appeals47 is illustrative in its pronouncement that an alleged agricultural tenant tilling the land does not automatically make the case an agrarian dispute which calls for the application of the Agricultural Tenancy Act and the assumption of jurisdiction by the DARAB. It is absolutely necessary to first establish the existence of a tenancy relationship between the party litigants. In Benavidez, there was no showing that there existed any tenancy relationship between petitioner and private respondent. Thus, the case fell outside the coverage of the Agricultural Tenancy Act; consequently, it was the Municipal Trial Court and not the DARAB which had jurisdiction over the controversy between petitioner and private respondent. 48 Verily, Morta, Sr. v. Occidental49 ruled that for DARAB to have jurisdiction over a case, there must exist a tenancy relationship between the parties. In order for a tenancy agreement to take hold over a dispute, it would be essential to establish all the indispensable elements of a landlord-tenant relationship: The regional trial court ruled that the issue involved is tenancy-related that falls within the exclusive jurisdiction of the DARAB. It relied on the findings in DARAB Case No. 2413 that Josefina OpianaBaraclan appears to be the lawful owner of the land and Jaime Occidental was her recognized tenant. However, petitioner Morta claimed that he is the owner of the land. Thus, there is even a dispute as to who is the rightful owner of the land, Josefina Opiana-Baraclan or petitioner Morta. The issue of ownership cannot be settled by the DARAB since it is definitely outside its jurisdiction. Whatever findings made by the DARAB regarding the ownership of the land are not conclusive to settle the matter. The issue of ownership shall be resolved in a separate proceeding before the appropriate trial court between the claimants thereof.50 At any rate, whoever is declared to be the rightful owner of the land, the case cannot be considered as tenancy-related for it still fails to comply with the other requirements. Assuming arguendo that Josefina Opiana-Baraclan is the owner, then the case is not between the landowner and tenant. If, however, Morta is the landowner, Occidental cannot claim that there is consent to a landownertenant relationship between him and Morta. Thus, for failure to comply with the above requisites, we conclude that the issue involved is not tenancy-related cognizable by the DARAB. 51 In Vda. de Tangub v. Court of Appeals,52 the jurisdiction of the Department of Agrarian Reform is limited to the following: (a) adjudication of all matters involving implementation of agrarian reform; (b) resolution of agrarian conflicts and land tenure related problems; and (c) approval and disapproval of the conversion, restructuring or readjustment of agricultural lands into residential, commercial, industrial and other non-agricultural uses.53 To recapitulate, petitioners are not de jure tenants of Virginia A. Roa, to which Presidential Decree No. 27 is found to be inapplicable; hence, the DARAB has no jurisdiction over this case. The DARAB not only committed a serious error in judgment, which the Court of Appeals properly corrected, but the former likewise committed a palpable error in jurisdiction which is contrary to law and jurisprudence. For all the foregoing reasons, we affirm the appellate court decision and likewise hold that the DARAB gravely abused its discretion amounting to lack of jurisdiction on the grounds that the subject matter of the present action is residential, and not agricultural, land, and that all the essential requisites of a tenancy relationship were sorely lacking in the case at bar. On one final note, it may not be amiss to stress that laws which have for their object the preservation and maintenance of social justice are not only meant to favor the poor and underprivileged. They apply with equal force to those who, notwithstanding their more comfortable position in life, are equally deserving of protection from the courts. Social justice is not a license to trample on the rights of the rich in the guise of defending the poor, where no act of injustice or abuse is being committed against them.54

As the court of last resort, our bounden duty to protect the less privileged should not be carried out to such an extent as to deny justice to landowners whenever truth and justice happen to be on their side. For in the eyes of the Constitution and the statutes, EQUAL JUSTICE UNDER THE LAW remains the bedrock principle by which our Republic abides. WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 81823 promulgated on October 19, 2005 is AFFIRMED. The Register of Deeds of Cagayan de Oro City is ordered to CANCEL Transfer Certificate of Title No. E-103 for having been issued without factual and legal basis, and REINSTATE Transfer Certificate of Title No. T-11543 in the name of Virginia A. Roa. The city Assessor’s Office of Cagayan de Oro is likewise directed to CANCEL Tax Declaration No. 80551 issued to Nicolas Jugalbot and RESTORE Tax Declaration No. 270922 in the name of Virginia Angcod Roa. The heirs of Nicolas Jugalbot, represented by Leonila B. Jugalbot or any other person claiming a right or interest to the disputed lot through the latter’s title are directed to VACATEthe premises thereof and peaceably turn over its possession to petitioners Heirs of Virginia A. Roa, represented by Lolita R. Gorospe. No pronouncement as to costs. SO ORDERED. CONSUELO YNARES-SANTIAGO