SECTION 10.

Exemptions and Exclusions (a) Lands actually, directly and exclusively used for parks, wildlife, forest reserves, reforestation, fish sanctuaries and breeding grounds, watersheds and mangroves shall be exempt from the coverage of this Act. (b) Private lands actually, directly and exclusively used for prawn farms and fishponds shall be exempt from the coverage of this Act Provided, !hat said prawn farms and fishponds have not been distributed and "ertificate of Land #wnership Award ("L#A) issued under the Agrarian $eform Program. %n cases where the fishponds or prawn farms have been sub&ected to the "omprehensive Agrarian $eform Law, by voluntary offer to sell, or commercial farms deferment or notices of compulsory ac'uisition, a simple and absolute ma&ority of the actual regular workers or tenants must consent to the exemption within one (() year from the effectivity of this Act. )hen the workers or tenants do not agree to this exemption, the fishponds or prawn farms shall be distributed collectively to the worker* beneficiaries or tenants who shall form cooperative or association to manage the same. %n cases where the fishponds or prawn farms have not been sub&ected to the "omprehensive Agrarian $eform Law, the consent of the farmworkers shall no longer be necessary+ however, the provision of ,ection -.*A hereof on incentives shall apply. (c) Lands actually, directly and exclusively used and found to be necessary for national defense, school sites and campuses, including experimental farm stations operated by public or private schools for educational purposes, seeds and seedlings research and pilot production center, church sites and convents appurtenant thereto, mos'ue sites and %slamic centers appurtenant thereto, communal burial grounds and cemeteries, penal colonies and penal farms actually worked by the inmates, government and private research and 'uarantine centers and all lands with eighteen percent ((/0) slope and over, except those already developed, shall be exempt from the coverage of this Act.(As amended by $. A. 1//() %n addition to the exclusion provided for in section (2, it has been held that also Lands devoted to raising of livestock, swine and poultry are excluded from the coverage of "A$P. 3efore its amendment by $A 1//(, ,ec. -(b) of $A 4451 included in its definition of agricultural activity the 6raising of livestock, poultry or fish6. Likewise, the original ,ec. (( of $A 4451on commercial farming provided that 6lands devoted to commercial livestock, poultry and swine raising shall be sub&ect to compulsory ac'uisition within ten ((2) years from the effectivity of the Act.6

7owever, the ,upreme "ourt in Lu8 9arms vs. ,ecretary of Agrarian $eform, supra, held that ,ec. - (b) and ,ec. (( of $A 4451(along with ,ec. (-and -.) are unconstitutional in far as they include the raising of livestock and swine in the coverage of "A$P. L:; 9A$<, "A,= 9acts Petitioner Lu8 9arms is a corporation engaged in livestock and poultry business. %t seeks to nullify ,ec. - (b) and ,ec. (( of $A4451 in so far as they apply to livestock and poultry business. 7eld ,ec. - (b) and ,ec. (( of $A 4451 are unconstitutional in so far as they include lands devoted to raising livestock, swine and poultry within its coverage. !he use of land is incidental to but not the principal factor or consideration of productivity in this industry. !he ,upreme "ourt held that !he transcripts of deliberations of the "onstitutional "ommission of (>/4 on the meaning of the word 6agricultural,6 clearly show that it was never the intention of the framers of the "onstitution to include livestock and poultry industry in the coverage of the constitutionally*mandated agrarian reform program of the government. !he "ommittee adopted the definition of 6agricultural land6 as defined under ,ection (44 of $A -/??, as land devoted to any growth, including but not limited to crop lands, saltbeds, fishponds,idle and abandoned land ($ecord, "#@"#<, August 1, (>/4, Aol.%%%, p. ((). !he ,upreme "ourt noted that the intention of the "ommittee to limit the application of the word 6agriculture6 is further shown by the proposal of "ommissioner Bamir to insert the word 6arable6 to distinguish this kind of agricultural land from such lands as commercial and industrial lands and residential properties. !he proposal, however, was not considered because the "ommittee contemplated that agricultural lands are limited to arable and suitable agricultural lands and therefore, do not include commercial, industrial and residential lands ($ecord, "#@"#<, 1 August (>/4,Aol. %%%, p. -2).<oreover, in his answer to "ommissioner $egaladoCs interpellation, "ommissioner !adeo clarified that the term 6farmworker6 was used instead of 6agricultural worker6 in order to exclude therein piggery, poultry and livestock workers ($ecord, "#@"#<, August ., (>/4,Aol. %%, p. 4.(). DAR AO 9 (1993 imposes two (.) conditions in order that these lands may be exempted (a) that the land or portion thereof is exclusively, directly, or actually used for livestock, poultry and swine raising as of (5 Bune (>//+ and(b) the farm must satisfy the ratios of land, livestock, poultry and swine As !o" pa"a#"ap$ % o! section 10& 'is$ponds and p"a(n ponds

)ith the amendment of ,ec. - (c), (2 and (( of $A 4451 by $A 1//(,fishponds and prawn ponds are also exempted from the coverage of "A$P, provided that said lands have not been distributed to A$3s and no "L#A shave been issued. !o be exempted, the agricultural land must have been actually, directly and exclusively used for prawn farms and fishponds as of (. <arch (>>5, the date of effectivity of $A 1//(. !o avail of the exemption, a landowner or his authori8ed representative still has to file a written application for land exemptionDexclusion with the EA$ Provincial #ffice (EA$ Adm. #. @o. -F(>>5G). %n cases where the fishponds or prawn farms have been sub&ected to "A$P, by voluntary offer to sell, commercial farms deferment or notice of compulsory ac'uisition, they can be exempt from "A$P if a simple and absolute ma&ority of the actual regular workers or tenants consent to the exemption within one (() year from the effectivity of $A 1//(or on (. <arch (>>5. %n cases where the fishponds or prawn ponds have not been sub&ected to "A$P, the consent of the farm workers shall no longer be necessary ($ep. Act @o. 4451F(>//G, sec.(2FbG, as amended). ,ec. ? of $A 1//(also amended $A 4451by introducing a new provision mandating the introduction of an incentive plan for employees of all fishponds and prawn farms. #perators and entities owning or operating fishponds and prawn farms are directed to execute within six (4) months from its effectivity an incentive plan with their regular fishpond or prawn farm workerCs organi8ation, if any, whereby seven point five percent (1.50) of net profits before tax from the operation of the fishpond or prawn farms are distributed within sixty (42) days at the end of the fiscal year as compensation to regular and other pond workers over and above their current compensation. !his incentive plan re'uirement, however, does not apply to agricultural lands subse'uently converted to fishponds or prawn farms provided that the si8e of the land converted does not exceed the retention limit of the landowner. As !o" pa"a#"ap$ C o! section 10& H )*ESTIONS+

1.. <ay a state college claim that part of its property being cultivated by farmers cannot be covered under "A$P because it is reserved for the future expansion of the campusI Jes, that area being cultivated by farmers can still be exempted from the "A$P coverage. %t has been held in "entral <indanao :niversity vs. EA$A3, the university has the prerogative to determine whether a particular part of the school property is necessary for educational purposes. Central Mindanao University vs. Department of Agrarian Reform Adjudication Board 2 ! "CRA #$ % &&2'

9acts #n (4 Banuary (>5/, President "arlos Karcia issued Proclamation @o. ?41 reserving for the <indanao Agricultural "ollege, now the "<:, a piece of land to be used as its future campus. %n (>/?, "<: embarked on a pro&ect titled 6Lilusang ,ariling ,ikap6 wherein parcels of land were leased to its faculty members and employees. :nder the terms of the program, "<: will assist faculty members and employee groups through the extension of technical know*how, training and other kinds of assistance. %n turn, they paid the "<: a service fee for use of the land. !he agreement explicitly provided that there will be no tenancy relationship between the lessees and the "<:. )hen the program was terminated, a case was filed by the participants of the 6Lilusang ,ariling ,ikap6 for declaration of status as tenants under the "A$P. %n its resolution, EA$A3, ordered, among others, the segregation of ?22 hectares of the land for distribution under "A$P. !he land was sub&ected to coverage on the basis of EA$Cs determination that the lands do not meet the condition for exemption, that is, it is not 6actually, directly, and exclusively used6 for educational purposes. %ssue %s the "<: land covered by "A$PI )ho determines whether lands reserved for public use by presidential proclamation is no longer actually, directly and exclusively used and necessary for the purposefor which they are reservedI 7eld !he land is exempted from "A$P. "<: is in the best position to resolve and answer the 'uestion of when and what lands are found necessary for its use. !he "ourt also chided the EA$A3 for resolving this issue of exemption on the basis of 6"<:Cs present needs.6 !he "ourt stated that the EA$A3 decision stating that for the land to be exempt it must be 6presently, actively exploited and utili8ed by the university in carrying out its present educational program with its present student population and academic faculty6 overlooked the very significant factor of growth of the university in the years to come. %s application of exemption the same as an application for retentionI @o, there are different in the sense that they have different re'uisites. %n the case of EA=; vs. "A. it stated that under PE .1, which implemented that operation land transfer program covers tenanted rice or corn lands. !he re'uisites for coverage under #L! are () land must be a system of share crop or lease tenancy obtaining therein. %f either re'uisite is absent , a landowner may apply for exemption . %f either of these re'uisite , the land %s not covered under #L! . 7ence, a landowner need not apply for retention where his ownership over the entire landholding is intact and undisturbed. PE .1 grants each tenant of covered land 5 hectares lot or in case the land is irrigated, a - hectare lot

constituting a family si8e farm, however, said law allows a covered landowner to retain not more than 1 hectares of his land if his aggregate landholding does not exceed .? hectares. #therwise, his entire landholding is covered without him being entitled to any retention right. #n the other hand, the re'uisites for the exercise by the landowner of his right of retention are () the land must de voted to rice or corn crops. !here must be a system of share crop or lease tenancy obtaining therein..and -) the si8e of the landholding must not exceed .? hectares or it could be more than .? hectares provided that atleast 1 hectares thereof are covered lands and more than 1 hectares of it consists of other agricultural lands SEC. 11. Commercial Farming. ( "ommercial farms which are private agricultural lands devoted to salt beds, fruit farms, orchards, vegetable and cut*flower farms, and cacao, coffee and rubber plantations, shall be sub&ect to immediate compulsory ac'uisition and distribution after ten ((2) years from the effectivity of this Act. %n the case of new farms, the ten*year period shall begin from the first year of commercial production and operation, as determined by the EA$. Euring the ten*year period, the Kovernment shall initiate steps necessary to ac'uire these lands, upon payment of &ust compensation for the land and the improvements thereon, preferably in favor of organi8ed cooperatives or associations, which shall thereafter manage the said lands for the workers*beneficiaries.(As amended by $. A. 1//() !his definition excludes private agricultural lands devoted to commercial livestock, poultry, and swine raising. ,uch lands are not covered by the agrarian reform law (Lu8 9arms vs. ,ecretary of EA$) !here are alternative methods available to commercial farms other than distributions of land most commercial farms are the most modern mechani8ed farms with processing plants. ,uch farms pay the highest wages. 7ence, !he workers themselves prefer to remain as employees as it would be uneconomic to dismantle the farming operation. !hus, the EA$, under its A# @o.> series of (>>/, allows commercial farms certain options sub&ect to approval by EA$ and workers. ,uch as () ,oint -entu"e, .) lease./ac0, -) #"o(e"s$ip a""an#ements and ?) di"ect pa1ment sc$eme. !hese are aside from the usual voluntary offer sale and compulsory coverage. %n general, therefore, the EA$ encourages the workers or farmer*beneficiaries to keep intact the commercial farm by organi8ing themselves into cooperatives which will hold the collective "L#A to the land. 9urther, it will finance and operate the commercial farm. 7owever, if it is economically viable or feasible as determined by EA$DEA, they will allow partition of the commercial farm if a ma&ority of the workers prefer physical partition. %n case of portion, the EA$ re'uires a minimum of ( hectare and maximum of - hectares for each worker.

AE<%,!$A!%A= P#L%"%=, "#A=$%@K =MP%$A!%#@ #9 E=9=$<=@!, #9 "#<<=$"%AL 9A$<,

N all commercial farms whose deferment expired last Bune (5, (>>/ are sub&ect to immediate ac'uisition and distribution under the "A$P. N Eeferments have yet to expire will be ac'uired and distributed only upon expiration of their respective deferment periods. 2ENERA3 R*3E+ Ac'uired commercial farms shall be distributed to 'ualified beneficiaries based on the order of priority prescribed under section .. of $A 4451. !hose who have worked longest on the land shall be given preference. N landowner, whether individual or corporate, shall have the right to retention pursuant to section 4 of $A 4451. all infrastructure facilities and improvements including buildings, roads, machinery receptacles, instruments or implements permanently attached to the land, which are necessary and beneficial to the operations of the farm as determined by the EA$, shall be sub&ect to ac'uisition upon the recommendation of the agrarian reform beneficiaries Portion of lands devoted to livestock covered by EA$Os compulsory ac'uisition are not include in the definition of agricultural lands. %n the case of EA$ vs. ,:!!#@, it was held that the constitutionality of EA$ A# @o.>, series of (>>-, which prescribes a maximum retention limit for owners of land devoted to livestock raising was raised. Pursuant to such A#, EA$ exempted (,.22 hectares for gra8ing and a maximum of (2., 54-5 hectares for infrastructures while the rest was sub&ect to compulsory ac'uisition. !he ,upreme "ourt said that EA$ has no power to regulate livestock farms which have been exempted by the constitution from the coverage of agrarian reform. <oreover, lands devoted to livestock, poultry and swine have been classified as industrial and not agricultural lands and thus exempt from agrarian reform.

4ODES AC)*ISITION O' CO44ERCIA3 'AR4S NAoluntary offer to sell*in order that ac'uisition of deferred commercial farm through voluntary offer to sell may be allowed, the offer to sell must have been submitted before the expiration of the deferment period, otherwise, the property shall be placed under compulsory ac'uisition. N "ompulsory Ac'uisition N Eirect Payment ,cheme*upon mutual agreement of both the land owner and the ma&ority of all 'ualified agrarian reform beneficiaries and approved by the EA$

direct payment of deferred commercial farms placed under "A$P coverage may be allowed. Likewise, the area of the land to be transferred to the beneficiaries shall not be less than the area which the government would otherwise ac'uire for redistribution through "A or A#,. !he terms and conditions of the EP, shall include the immediate transfer of possession and ownership of the land in favor of the identified beneficiaries. !he "L#As shall be issued to the individual A$3s, or their cooperative or association, as may be appropriate, with proper annotations. T56ES O' A2I%*SINESS 7ENT*RES A33O8ED %5 DAR N Boint Aenture Arrangement* agribusiness venture whereby a company is organi8ed and co*owned by an investor and the agrarian reform beneficiaries through their cooperatives through their associations. !he investor may provide the management and marketing skills, technology infrastructure and capital while the A$3sO contributionDparticipation in the &oint venture includes labor, the usufructuary rights to the land, and capital infusion, if available.(!extbook on Agrarian and !axation, Ee Leon,.222 =dition) N Lease Arrangement* agribusiness scheme whereby the A$3sO through their cooperatives of farmworkersO association, enter into a contract of lease with the landownerDinvestor. !he lessee shall have farm control and operations within an agreed period of time but not to exceed (2 years, sub&ect to extension upon mutual agreement of both parties. !he lease rental shall not be less than the amorti8ation to be paid by the A$3s to the Land 3ank of the Philippines pursuant to EA$ A# @o.4, series of (>>/, and other pertinent laws, rules and regulation. .(!extbook on Agrarian and !axation, Ee Leon,.222 =dition) N "ontract KrowingDKrowership Arrangement* A$3s own the land and commit, either collectively through their cooperative or individually, to produce certain crops for an investor or agribusiness firm that contracts to buy the produce at pre*arranged terms. .(!extbook on Agrarian and !axation, Ee Leon,.222 =dition) N <anagement "ontract* arrangement whereby the A$3s, or their cooperativeDorgani8ation, hire the services of the landowner or an investor to manage and operate the farm in exchange for fixed wages or commission.(!extbook on Agrarian and !axation, Ee Leon,.222 =dition). N 3uild*#perate*!ransfer ,cheme* contractual agreement entered into pursuant to $.A @o.4>51, as amended, whereby the pro&ect proponent undertakes the

construction, including financing of a given infrastructure facility and the operation and maintenance thereof for an agreed period of time but not to exceed .5 years, sub&ect to extension. .(!extbook on Agrarian and !axation, Ee Leon,.222 =dition) Pualified A$3s or their cooperativeDassociation may also opt for the combination of two or more of the above schemes they may choose in collaboration with the proposed investor. Lease arrangement shall be the least preferred scheme. ESSENTIA3 E3E4ENTS O' A2RI%*SINESS 7ENT*RE ARRAN2E4ENTS N only 'ualified A$3s who have been awarded title to distribute area sub&ect of the agribusiness venture arrangement. N any 'ualified investor or former landowner may enter into an agribusiness venture provided, that they are able to prove their financial and technical capacity to meet ties and obligations under the proposed arrangement as evidenced by the relevant financial and income statements and further that the former landowner of the commercial farm shall be given priority. N 'ualified investor may be any individual, partnership, or corporation with established financial and technical capabilities duly registered with the ,=". N in &oint ventures, the contract shall provide only for the usufructuary rights on the land but not the transfer of ownership of the land itself, valued at the prevailing market rates, but not lower than the amorti8ation cost thereof.

'OR4*3AS 'OR 9OINT 7ENT*RES& 2RO8ERS;I6 ARRAN2E4ENTS

3EASE

%AC:

AND

CONTRACT

N Boint Aenture agreement scheme must be approved by the EA$ and by the ma&ority farmer*beneficiaries. %n this case, it is re'uired that the title be ultimately be transferred to the workers. N Lease*back arrangements shall be approved only when after the issuance of the "L#As to the workers either individually or collectively to a cooperative. Lease may not exceed (2 years sub&ect to extension by mutual agreement and rental should not be less than the amorti8ation to be paid by the workers. N "ontract Krowership shall be approved after the issuance of the "L#As and the workers farm the land and agree to pre*sell their produce, individually or collectively to any party including the former landowner who may have all the e'uipment and processing plant.

N %n direct payment scheme, EA$ allows the landowner and workers to negotiate the sale of the land andDor e'uipment. !he contract must be approved by the EA$ and ma&ority of its workers. Also, EA$ re'uires that the "L#As be issued collectively.